Compute the current ratio, acid-test ratio, and gross margin ratio as of January 31, 2013. (Round your answers to 2 decimal places.)?
Current ratio
Acid-test ratio
Gross margin ratio
NELSON COMPANY
Unadjusted Trial Balance
January 31, 2013
Debit Credit
Cash $ 24,600
Merchandise inventory 12,500
Store supplies 5,900
Prepaid insurance 2,300
Store equipment 42,900
Accumulated depreciation—Store equipment $ 19,950
Accounts payable 13,000
J. Nelson, Capital 39,000
J. Nelson, Withdrawals 2,100
Sales 115,200
Sales discounts 2,000
Sales returns and allowances 2,250
Cost of goods sold 38,000
Depreciation expense—Store equipment 0
Salaries expense 31,300
Insurance expense 0
Rent expense 14,000
Store supplies expense 0
Advertising expense 9,300
Totals $ 187,150 $ 187,150
Rent expense and salaries expense are equally divided between selling activities and the general and administrative activities. Nelson Company uses a perpetual inventory system.
a. Store supplies still available at fiscal year-end amount to $2,800.
b. Expired insurance, an administrative expense, for the fiscal year is $1,500.
c. Depreciation expense on store equipment, a selling expense, is $1,675 for the fiscal year.
d. To estimate shrinkage, a physical count of ending merchandise inventory is taken. It shows $10,300 of inventory is still available at fiscal year-end.

Answers

Answer 1

Answer:

NELSON COMPANY

A. Current Ratio = Current Assets/Current Liabilities

= $38,500/$13,000

= 2.96 : 1

B. Acid-test Ratio = Current Assets - Inventory/Current Liabilities

= $24,600/$13,000

= 1.89 : 1

C. Gross margin ratio = Gross margin/Net Sales x 100

= $70,750/$110,950 x 100

= 63.77%

Explanation:

a) Data and Calculations:

NELSON COMPANY

1. Unadjusted Trial Balance  as of January 31, 2013

                                                       Debit     Credit

Cash                                          $ 24,600

Merchandise inventory                12,500

Store supplies                               5,900

Prepaid insurance                         2,300

Store equipment                        42,900

Accumulated depreciation—

    Store equipment                                  $ 19,950

Accounts payable                                         13,000

J. Nelson, Capital                                        39,000

J. Nelson, Withdrawals                2,100

Sales                                                            115,200

Sales discounts                          2,000

Sales returns and allowances   2,250

Cost of goods sold                  38,000

Depreciation expense—

      Store equipment              0

Salaries expense                     31,300

Insurance expense                 0

Rent expense                         14,000

Store supplies expense         0

Advertising expense              9,300

Totals                                $ 187,150       $ 187,150

2. Adjusted Trial Balance as of January 31, 2013

                                                       Debit     Credit

Cash                                          $ 24,600

Merchandise inventory                10,300

Store supplies                                2,800

Prepaid insurance                             800

Store equipment                         42,900

Accumulated depreciation—

    Store equipment                                  $ 21,625

Accounts payable                                         13,000

J. Nelson, Capital                                        39,000

J. Nelson, Withdrawals                2,100

Sales                                                            115,200

Sales discounts                          2,000

Sales returns and allowances   2,250

Cost of goods sold                  40,200

Depreciation expense—

      Store equipment                 1,675

Salaries expense                     31,300

Insurance expense                   1,500

Rent expense                         14,000

Store supplies expense           3,100

Advertising expense               9,300

Totals                               $ 188,825      $ 188,825

3. NELSON COMPANY

Income Statement for the year ended January 31, 2013:

Sales Revenue                                     $110,950

Cost of goods sold                                40,200

Gross profit                                          $70,750

Depreciation expense—

      Store equipment                 1,675

Salaries expense                     31,300

Insurance expense                   1,500

Rent expense                         14,000

Store supplies expense           3,100

Advertising expense               9,300    60,875  

Net Income                                         $ 9,875

4. Sales Revenue                    $115,200

   Sales discount & allowances (4,250)

  Net Sales Revenue             $110,950

5. NELSON COMPANY

Balance Sheet as of January 31, 2013:

Assets:

Cash                                                         $ 24,600

Merchandise inventory                               10,300

Store supplies                                               2,800

Prepaid insurance                                            800

Current Assets:                                           38,500

Store equipment                         42,900

Accumulated depreciation—

    Store equipment                   (21,625)     21,275

Total Assets                                             $ 59,775

Liabilities + Equity:

Accounts payable                                       $13,000

J. Nelson, Capital                                         39,000

J. Nelson, Withdrawals                                 (2,100 )

Net Income                                                 $ 9,875

Total Liabilities + Equity                         $ 59,775

a) Nelson Company's current ratio is the measure of the company's ability to settle maturing short-term liabilities with short-term financial resources.  It is is measured as the relationship between current assets and current liabilities.

b) Nelson's acid-test ratio takes away the encumbrances that can slow the conversion of current assets into cash for the settlement of current liabilities.  In this case, the inventory, stores supplies, and prepaid insurance are excluded.

c) Nelson has a robust gross margin ratio of more than 60%.  This means that it is able to limit the cost of goods sold to below 40%.  However, management of Nelson Company is unable to control its periodic costs in order to generate reasonable net income, as it can only turn less than 9% of the sales into returns for J. Nelson.

Answer 2

According to the NELSON COMPANY

Current ratio

A. The Current Ratio = Current Assets/Current Liabilities

Then = $38,500/$13,000

now = 2.96 : 1

B. After that Acid-test Ratio = Current Assets - Inventory/Current Liabilities

Then = $24,600/$13,000

Now = 1.89 : 1

C. When the Gross margin ratio = Gross margin/Net Sales x 100

Then = $70,750/$110,950 x 100

Now = 63.77%

1. when Unadjusted Trial Balance  as of January 31, 2013

                                                      Debit     Credit

Cash                                          $ 24,600

Merchandise inventory                12,500

Store supplies                               5,900

Prepaid insurance                         2,300

Store equipment                        42,900

Accumulated depreciation—

   Store equipment                                  $ 19,950

Accounts payable                                         13,000

J. Nelson, Capital                                        39,000

J. Nelson, Withdrawals                2,100

Sales                                                            115,200

Sales discounts                          2,000

Sales returns and allowances   2,250

Cost of goods sold                  38,000

Depreciation expense—

     Store equipment              0

Salaries expense                     31,300

Insurance expense                 0

Rent expense                         14,000

Store supplies expense         0

Advertising expense              9,300

Totals                                $ 187,150       $ 187,150

2. when Adjusted Trial Balance as of January 31, 2013

                                                      Debit     Credit

Cash                                          $ 24,600

Merchandise inventory                10,300

Store supplies                                2,800

Prepaid insurance                             800

Store equipment                         42,900

Accumulated depreciation—

   Store equipment                                  $ 21,625

Accounts payable                                         13,000

J. Nelson, Capital                                        39,000

J. Nelson, Withdrawals                2,100

Sales                                                            115,200

Sales discounts                          2,000

Sales returns and allowances   2,250

Cost of goods sold                  40,200

Depreciation expense—

     Store equipment                 1,675

Salaries expense                     31,300

Insurance expense                   1,500

Rent expense                         14,000

Store supplies expense           3,100

Advertising expense               9,300

Totals                               $ 188,825      $ 188,825

3. NELSON COMPANY

Income Statement for the year ended January 31, 2013:

Sales Revenue                                     $110,950

Cost of goods sold                                40,200

Gross profit                                          $70,750

Depreciation expense—

     Store equipment                 1,675

Salaries expense                     31,300

Insurance expense                   1,500

Rent expense                         14,000

Store supplies expense           3,100

Advertising expense               9,300    60,875  

Net Income                                         $ 9,875

4. Sales Revenue                    $115,200

  Sales discount & allowances (4,250)

 Net Sales Revenue             $110,950

5. NELSON COMPANY

Balance Sheet as of January 31, 2013:

Assets:

Cash                                                         $ 24,600

Merchandise inventory                               10,300

Store supplies                                               2,800

Prepaid insurance                                            800

Current Assets:                                           38,500

Store equipment                         42,900

Accumulated depreciation—

   Store equipment                   (21,625)     21,275

Total Assets                                             $ 59,775

Liabilities + Equity:

Accounts payable                                       $13,000

J. Nelson, Capital                                         39,000

J. Nelson, Withdrawals                                 (2,100 )

Net Income                                                 $ 9,875

Total Liabilities + Equity                         $ 59,775

When the Nelson Company's current ratio is the measure of the company's ability to settle maturing short-term liabilities with short-term financial resources.  also, It is measured as the relationship between current assets and also current liabilities.

Although when Nelson's acid-test ratio takes away the encumbrances that can slow the conversion of current assets into cash for the settlement of current liabilities.  Thus, In this case, the inventory, stores supplies, and also prepaid insurance are excluded.

When Nelson has a robust gross margin ratio of more than 60%. This means that it can limit the cost of goods sold to below 40%. Thus, the management of Nelson Company is unable to control its periodic costs to generate reasonable net income, also as it can only turn less than 9% of the sales into returns for J. Nelson.

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Related Questions

Chapman Company, a major retailer of bicycles and accessories, operates several stores and is a publicly traded company. The comparative balance sheet and income statement for Chapman as of May 31, 2014, are as follows. The company is preparing its statement of cash flows.
CHAPMAN COMPANY
COMPARATIVE BALANCE SHEET
AS OF MAY 31
2014 2013
Current assets
Cash $28,560 $20,820
Accounts receivable 75,850 58,940
Inventory 220,080 250,770
Prepaid expenses 9,148 7,580
Total current assets 333,638 338,110
Plant assets
Plant assets 600,070 502,460
Less: Accumulated depreciation—plant assets
150,060 125,320
Net plant assets 450,010 377,140
Total assets $783,648 $715,250
Current liabilities
Accounts payable $123,190 $115,200
Salaries and wages payable 47,660 72,420
Interest payable 27,980 25,490
Total current liabilities 198,830 213,110
Long-term debt
Bonds payable 70,770 100,640
Total liabilities 269,600 313,750
Stockholders’ equity
Common stock, $10 par 370,460 280,890
Retained earnings 143,588 120,610
Total stockholders’ equity 514,048 401,500
Total liabilities and stockholders’ equity
$783,648 $715,250

CHAPMAN COMPANY
INCOME STATEMENT
FOR THE YEAR ENDED MAY 31, 2014
Sales revenue $1,255,260
Cost of goods sold 722,590
Gross profit 532,670
Expenses
Salaries and wages expense 252,580
Interest expense 75,830
Depreciation expense 24,740
Other expenses 8,980
Total expenses 362,130
Operating income 170,540
Income tax expense 43,250
Net income $127,290
The following is additional information concerning Chapman’s transactions during the year ended May 31, 2014.
1. All sales during the year were made on account.
2. All merchandise was purchased on account, comprising the total accounts payable account.
3. Plant assets costing $97,610 were purchased by paying $17,610 in cash and issuing 8,000 shares of stock.
4. The "other expenses" are related to prepaid items.
5. All income taxes incurred during the year were paid during the year.
6. In order to supplement its cash, Chapman issued 957 shares of common stock at par value.
7. Cash dividends of $104,312 were declared and paid at the end of the fiscal year.
Prepare a statement of cash flows for Chapman Company for the year ended May 31, 2014, using the direct method. (A reconciliation of net income to net cash provided is not required.) (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)

Answers

Answer:

Chapman Company

Statement of Cash Flows for the year ended May 2014:

Operating activities:

Cash from customers     $1,238,350

Cash to suppliers              ($683,910)

Salaries & Wages                (277,340)

Other expenses                    (10,548)

Income Tax                           (43,250)

Net Cash from operating activities       223,302

Investing activities:

Plant                                      (17,610)         (17,610)

Financing activities:

Dividends                           (104,312)

Interest                                (73,340)

Bonds                                  (29,870)

Issue of stock                        9,570

Net cash from financing activities        (197,952)

Net cash flows                                          $7,740

Explanation:

a) Data and Calculations:

1. CHAPMAN COMPANY

COMPARATIVE BALANCE SHEET

AS OF MAY 31

                                                 2014                2013

Current assets

Cash                                     $28,560       $20,820

Accounts receivable              75,850          58,940

Inventory                             220,080        250,770

Prepaid expenses                    9,148             7,580

Total current assets           333,638           338,110

Plant assets

Plant assets                        600,070        502,460

Less: Accumulated depreciation

—plant assets                      150,060         125,320

Net plant assets                 450,010          377,140

Total assets                     $783,648       $715,250

Current liabilities

Accounts payable            $123,190        $115,200

Salaries & wages payable  47,660           72,420

Interest payable                  27,980          25,490

Total current liabilities       198,830          213,110

Long-term debt

Bonds payable                    70,770        100,640

Total liabilities                  269,600        313,750

Stockholders’ equity

Common stock, $10 par  370,460       280,890

Retained earnings            143,588         120,610

Total stockholders’ equity 514,048      401,500

Total liabilities and stockholders’

equity                              $783,648     $715,250

2. CHAPMAN COMPANY

INCOME STATEMENT

FOR THE YEAR ENDED MAY 31, 2014

Sales revenue                    $1,255,260

Cost of goods sold                 722,590

Gross profit                             532,670

Expenses

Salaries and wages expense 252,580

Interest expense                       75,830

Depreciation expense              24,740

Other expenses                         8,980

Total expenses                       362,130

Operating income                  170,540

Income tax expense               43,250

Net income                          $127,290

3) Cash Receipts:

Cash from customers $1,238,350

Issue of stock                       9,570

4) Cash Payments:

Cash to suppliers         $683,910

Plant                                   17,610

Income Tax                      43,250

Dividends                        104,312

Salaries & Wages          277,340

Interest                            73,340

Other expenses              10,548

Bonds                              29,870

5) Prepaid Expenses

Ending balance             $9,148

Expenses                        8,980

Beginning balance         7,580

Cash paid                   $10,548

6) Accounts Receivable:

Beginning balance  $58,940

Sales                     1,255,260

Ending balance         75,850

Cash received   $1,238,350

7) Accounts Payable:

Beginning balance $115,200

Purchases                691,900

Ending balance      $123,190

Cash paid              $693,910

8) Purchases:

Ending inventory    $220,080

Cost of goods sold   722,590

Beginning inventory 250,770

Purchases               $691,900

9) Salaries and Wages Payable

Beginning balance $72,420

Expenses               252,580

Ending balance        47,660

Cash paid            $277,340

10) Interest payable:

Beginning balance $25,490

Expense                    75,830

Ending balance        27,980

Cash paid               $73,340

You purchased a stock at a price of $48.98. The stock paid a dividend of $1.63 per share and the stock price at the end of the year was $54.12. What was the total return for the year? Multiple Choice 13.82% 10.49% 13.17% 12.51% 3.33%

Answers

Answer:

13.82%

Explanation:

The computation of total return for the year is shown below:-

Total return = (End value - Beginning value + Dividend) ÷ Beginning value

= ($54.12 - $48.98 + $1.63) ÷ $48.98

= 6.77 ÷ $48.98

= 0.13821

or

= 13.82%

Therefore for computing the total return we simply applied the above formula by considering all the information given in the question

In its third year, a project is expected to produce earnings before interest and taxes of $671,551 and depreciation expense of $125,193. If the company’s tax rate is 34%, what is the project’s expected operating cash flow?

Answers

Answer:

Operating cash flow= $568,416.66

Explanation:

Giving the following information:

Earnings before interest and taxes= $671,551

Depreciation expense= $125,193.

Tax rate= 34%

To calculate the operating cash flow, we need to use the following structure:

EBIT= 671,551

Tax= (671,551*0.34)= (228,327.34)

Depreciation= 125,193

Operating cash flow= 568,416.66

Green Inc. made no adjusting entry for accrued and unpaid employee wages of $38,000 on December 31. This error would Multiple Choice Understate assets by $38,000. Overstate net income by $38,000. Understate net income by $38,000. Have no effect on net income.

Answers

Answer:

The answer is B. Overstate net income by $38,000.

Explanation:

Accrued expense is an expense that has been enjoyed or incurred but has been paid for. Examples of an accrued expense are unpaid wages/salary, unpaid electricity bill etc.

Usually, the adjusting entry for accrued expense is to debit the expense and debit increases expense while credit decreases it. Since there is no adjusting entry, that means no expense is being recognized on the income statement for this transaction. Hence, the net income increases (overstated). because ordinarily expense reduces net income.

Hannah Co. has 10,000 shares of $10 par common stock outstanding. A 10% stock dividend is declared when the market price is $50 per share.Following the stock dividend, a cash dividend of $4 per share is declared and paid to Hannah Cos' shareholders. The debit to Retained Earnings will be:

Answers

Answer:

Hannah Co.

The debit to Retained Earnings will be:

$44,000

Explanation:

Common Stock outstanding = 10,000 shares of $10 par

With a 10% stock dividend, the outstanding shares increase to 11,000 (10,000 x 1.1).

The cash dividend per share = $4

Total cash dividend equals $44,000 ($4 x 11,000).

So the Retained Earnings will be debited to the sum of $44,000 following the cash dividend to reduce the Retained Earnings account by $44,000.

A car dealership union negotiates a contract that dramatically increases the salaries of all salesmen. If one of the salesmen is thinking of changing careers to be a hardware salesman, his opportunity cost:___________.
a. Would not be affected
b. Of becoming a hardware salesman would decrease
c. Of becoming a hardware salesman would increase
d. None of the above

Answers

Answer:

c. Of becoming a hardware salesman would increase

Explanation:

Opportunity cost defines that when a person gets to benefit from another than he received. So, that person takes another benefit from where he gets more benefit or we can say that he will choose the best alternative.

According to the given situation, A car dealership association is negotiating a contract that significantly increases all salesmen 's wages. Now, the Opportunity cost when one of the salespersons feels that shifting the path to hardware is of becoming a hardware salesperson that would increase.

Hence, the right answer is C

The three conditions that characterize difficult managerial decisions concerning resources, capabilities, and core competencies are

Answers

Answer:

uncertainty, complexity, and intra-organizational conflicts.

Explanation:

Managerial decisions define that any decision that can be taken for the benefit of the organization also these types of decision set targets for the income of the company moreover it decides what type of product should be sell and the hiring of employees who should be into the organization or who should not be in the organization etc.

According to the given situation, Management decisions on capital, expertise, and core competencies are disputes of uncertainty, complexity, and intra-organizational existence.

Stephanie’s company uses a job order cost system. Stephanie just made a $15,000 debit to the Work in Process Inventory account for raw materials assigned to job 1074. Which of the following steps does Stephanie also need to complete?
A. Posting a $15,000 decrease in Direct Labor to the subsidiary ledger for job 1074.B. Posting a $15,000 increase in Direct Materials to the job cost sheet for job 1074.C. Posting a $15,000 increase in Direct Labor to the job cost sheet for job 1074.D. Posting a $15,000 increase in Raw Materials to the subsidiary ledger for job 1074.

Answers

Answer:

B. Posting a $15,000 increase in Direct Materials to the job cost sheet for job 1074

Explanation:

According to the given situation, Materials account of the specific work will be debited as costs are allocated to Jobs. Assigning those costs to operate would reduce the balance of inventories.

Therefore from the above explanation the correct answer is b as it has been posted $15,000 which is rising the direct material to the job cost sheet for job 1074.

The accounts receivable turnover is computed as __________ divided by __________. sales; accounts receivable sales; average accounts receivable sales; net income accounts receivable; net income

Answers

Answer:

sales ; average accounts receivables

Explanation:

Accounts receivable turnover refers to how a business firm manage its assets. Businesses, companies uses accounts receivables to know and quantify how perfectly goods bought on credit by their customers are being paid back. It also measures how business gives credit and collects back it's debt .It is calculated as net sales divided by average accounts receivables.

According to the producer price index database maintained by the Bureau of Labor Statistics, the average cost of computer equipment fell 3.8 percent between January and December 2016. Let's see whether these changes are reflected in the income statement of Computer Tycoon Inc. for the year ended December 31, 2016.
2016 2015
Sales Revenue $ 109,000 $ 133,500
Cost of Goods Sold 64,500 75,100
Gross Profit 44,500 58,400
Selling, General, and Administrative Expenses 36,900 38,800
Interest Expense 590 520
Income before Income Tax Expense 7,010 19,080
Income Tax Expense 1,500 5,900
Net Income $ 5,510 $ 13,180
Required:
1. Compute the times interest earned ratios for 2016 and 2015. (Round your answers to 1 decimal place.) Times Interest Earned 2015 2016
2. Does Computer Tycoon generate sufficient net income in both years before taxes and interest) to cover the cost of debt financing?
a. Yes
b. No

Answers

Answer:

A.

2015 37.7

2016 12.9

B. Yes

Explanation:

Computation of the times interest earned ratios for 2016 and 2015

First step is to find the EBIT

EBIT: 2016 $ 2015 $

Gross profit 44,500 58,400

Less Selling, General and Administrative expenses (36,900) (38,800)

EBIT 7,600 19,600

Second step is to compute the times interest earned ratios for 2016 and 2015 using this formula

Time interest earned = EBIT / Interest expense

Let plug in the formula

Time interest earned 2016 2015

EBIT $7,600 $19,600

÷Interest expense $590 $520

=Time interest earned 12.9 37.7

Therefore the Time interest earned will be :

2015 37.7

2016 12.9

2. Yes Computer Tycoon generate sufficient net income in both 2015 and 2016 before taxes and interest in order to cover the cost of debt financing.

n the _____stage of team development, team members often become intensely loyal to one another and feel mutual accountability for team successes and failures.

Answers

Answer:

Performing.

Explanation:

In other to get to this stage of team development, you must have passed through the certain other three stages where you are been formed as a group and also stormed before performance.

Group seen to have made it to their performing stage are seen to displays a level of competence experience and also trust that is less apparent in the earlier stages of group development. Cohesion is seen to be the vital driver in this stage of team development. Also strong relationships is maintained amongst its members facilitating smooth flow of work; and can certainly work without supervision too.

Jackson Industries uses a standard cost system in which direct materials inventory is carried at standard cost. Jackson has established the following standards for one unit of product: Standard Quantity or Hours Standard Price or Rate Standard Cost Per Unit Direct materials 6 pounds $4.30 per pound $25.80 Direct labor 2.40 hours $5.00 per hour $12.00 During May, Jackson purchased 145,600 pounds of direct material at a total cost of $655,200. The total factory wages for May were $258,800, 90 percent of which were for direct labor. Jackson manufactured 21,000 units of product during May using 122,800 pounds of direct material and 50,900 direct labor-hours. The price variance for the direct material acquired by Jackson Industries during May is:

Answers

Answer:

Direct material price variance= $29,120 unfavorable

Explanation:

Giving the following information:

Standard: Direct materials 6 pounds $4.30 per pound $25.80

Actual= Jackson purchased 145,600 pounds of direct material at a total cost of $655,200.

To calculate the direct material price variance, we need to use the following formula:

Direct material price variance= (standard price - actual price)*actual quantity

Actual price= 655,200/145,600= $4.5

Direct material price variance= (4.3 - 4.5)*145,600

Direct material price variance= $29,120 unfavorable

What is the difference between an optimistic approach and a pessimistic approach to decision making under assumed uncertainty

Answers

Answer:

The optimistic approach examines the best possible outcome in a given situation and chooses the 'best of the best' while the pessimistic approach examines the worst possible outcome in a given situation and chooses the 'best of the worst'.

Explanation:

Decision making under assumed uncertainty is an approach that is taken when the outcomes of future events are not entirely known. The Hurwicz criterion provides a basis on which the pessimistic and optimistic outcomes can be balanced. This criterion allows the person who makes the decision to chose a coefficient of pessimism signified by alpha (α) and it is a decimal that is graded between 0 and 1. This number signifies the worst possible outcome whereas, the number (1-α) signifies the best outcome.

So, the optimistic approach examines the best possible outcome in a given situation and allows the decision-maker to choose the 'best of the best', while the pessimistic approach examines the worst possible outcome in a given situation and the decision-maker to choose the 'best of the worst'

The terms of trade must be higher (graphically to the right) of a nation's own production __________________

Answers

Answer: cost ratio

Explanation: The terms of trade must be higher (graphically to the right) of a nation's own production cost ratio. The production cost ratio allows small-scale manufacturers to determine their cost more accurately as well as control known cost parameters and is a method that can be adapted and applied to any business.

In a multi-product manufacturing firm, the production cost ratio is necessary for accurate compilation and allocation of production costs to each category of product especially when both the Production Time and the Production Runs are not the same and/or when fixed labor, overhead and other costs are drawn from the same pool. When the ratio is not applied results in a skewed allocation of production costs. This in turn can affect the business as it becomes difficult to ascertain the products whose production are more profitable to the business.

You are considering two ways of financing a spring break vacation. You could put it on your credit card, at 17% APR, compounded monthly, or borrow the money from youe parents, who want an interest payment of 6% every six months. which is the lower rate? (Dont round intermediate steps to decimal places)

Answers

Answer: Parent's rate is lower.

Explanation:

The lower rate will be the lower Effective Annual rate, the formula of which is;

[tex]EAR = (1 + interest rate/compounding frequency) ^{compounding frequency} - 1[/tex]

Credit Card

[tex]EAR = (1 + interest rate/compounding frequency) ^{compounding frequency} - 1[/tex]

[tex]EAR = (1 + interest rate/compounding frequency) ^{compounding frequency} - 1\\= ( 1 + \frac{0.17}{12})^{12} - 1\\= 0.184[/tex]

= 18.4%

From your parents

[tex]EAR = (1 + interest rate/compounding frequency) ^{compounding frequency} - 1\\= ( 1 + 0.07) ^{2} - 1\\= 0.1449[/tex]

= 14.5%

Parent's rate is lower.

Parker & Stone, Inc., is looking at setting up a new manufacturing plant in South Park to produce garden tools. The company bought some land six years ago for $4.3 million in anticipation of using it as a warehouse and distribution site, but the company has since decided to rent these facilities from a competitor instead. If the land were sold today, the company would net $4.6 million. The company wants to build its new manufacturing plant on this land; the plant will cost $11.8 million to build, and the site requires $700,000 worth of grading before it is suitable for construction. What is the proper cash flow amount to use as the initial investment in fixed assets when evaluating this project? (Enter your answer as a positive value in dollars, not millions of dollars, e.g., 1,234,567.)

Answers

Answer:

$17.1 million

Explanation:

The proper cash flow amount to use as the initial investment in fixed assets when evaluating this project can be calculated as follows

DATA

Fair value of land = 4.6 million

Cost to build a plant = 11.8 million

Grading cost = 0.7 million

Solution

Initial investment = Fair value of land + Cost to build a plant + Grading cost

Initial investment = $4.6 million + $11.8 million + $0.7 million

Initial investment = $17.1 million

The Berndt Corporation expects to have sales of $12 million. Costs other than depreciation are expected to be 75% of sales, and depreciation is expected to be $1.5 million. All sales revenues will be collected in cash, and costs other than depreciation must be paid for during the year. Berndt’s federal-plus-state tax rate is 40%. Berndt has no debt. a. Set up an income statement. What is Berndt’s expected net income? Its expected net cash flow? b. Suppose Congress changed the tax laws so that Berndt’s depreciation expenses doubled. No changes in operations occurred. What would happen to reported profit and to net cash flow? c. Now suppose that Congress changed the tax laws such that, instead of doubling Berndt’s depreciation, it was reduced by 50%. How would profit and net cash flow be affected? d. If this were your company, would you prefer Congress to cause your depreciation expense to be doubled or halved? Why? Ehrhardt, Michael C.. Corporate Finance: A Focused Approach (p. 93). Cengage Learning. Kindle Edition.

Answers

Answer:

a) Berndt Corporation

Income Statement

Sales revenue                                         $12,000,000

All cost other than depreciation            ($9,000,000)

Depreciation expense                             ($1,500,000)

EBIT                                                            $1,500,000

Income taxes                                             ($600,000)

Net income                                                  $900,000

net cash flow = $900,000 + $1,500,000 = $2,400,000

b) if depreciation doubles, net profit will decrease to $0, but net cash flows will increase to $3,000,000

c) if depreciation decreases by 50%, net profit will increase to $1,350,000, but net cash flows will decrease to $2,100,000

d) Once a company is operating, its value is generally calculated based on its cash flows, therefore, I would select the option that increases the company's net cash flows (Congress doubles depreciation expense).

you are forming a new company that delivers food to residents across college campuses. the primary focus is

Answers

Answer:

your primary focus should be on making sure that your system works

Explanation:

When doing this your primary focus should be on making sure that your system works. Meaning that you need to make sure that you have all of the necessary equipment to get the deliveries out on time and everything worked out so that you can assure customer satisfaction. Otherwise, customers will begin to review your company badly and as dysfunctional, which will destroy your business before it can even get started.

The Jones Company has just completed the third year of a​ five-year MACRS recovery period for a piece of equipment it originally purchased for $302,000. a. What is the book value of the​ equipment? b. If Jones sells the equipment today for $184,000 and its tax rate is 35%​, what is the​ after-tax cash flow from selling​ it? c. Just before it is about to sell the​ equipment, Jones receives a new order. It can take the new order if it keeps the old equipment. Is there a cost to taking the order and if​ so, what is​ it? Explain.​ (Assume the new order will consume the remainder of the​ machine's useful​ life.) Note​: Assume that the equipment is put into use in year 1.

Answers

Answer:

a. What is the book value of the​ equipment?

$86,976

b. If Jones sells the equipment today for $184,000 and its tax rate is 35%​, what is the​ after-tax cash flow from selling​ it?

($184,000 - $86,976) x (1 - 35%) = $97,024 x 65% = $63,065.60

c. Just before it is about to sell the​ equipment, Jones receives a new order. It can take the new order if it keeps the old equipment. Is there a cost to taking the order and if​ so, what is​ it?

the cost to taking the new order is the opportunity cost of selling the equipment, which is $63,065.60.

Explanation:

MACRS depreciation rate:

Year             %              Depreciation expense             Carrying value

1                   20%            $60,400                                  $241,600

2                  32%            $96,640                                  $144,960

3                  19.20%        $57,984                                  $86,976

4                  11.52%         $34,790.40                             $52,185.60

5                  11.52%         $34,790.40                             $17,395.20

6                  5.76%          $17,395.20                              $0

The Clipper Corporation had net operating income of $380,000 and average operating assets of $2,000,000. The corporation requires a return on investment of 18%.
Required ( support your answers with explanations):
a.Calculate the company's return on investment (ROI) and residual income (RI).
b.Clipper Corporation is considering an investment of $70,000 in a project that will generate annual net operating income of $12,950. If the division planning to make the investment currently has a return on investment of 20% and its manager is evaluated based on the division's ROI, will the division manager be inclined to request funds to make this investment?(Note: the decision model for the division manager is self-interested i.e. centers on the decision's effect on his evaluation criteria)
c.Clipper Corporation is considering an investment of $70,000 in a project that will generate annual net operating income of $12,950. If the division planning to make the investment currently has a residual income of $50,000 and its manager is evaluated based on the division's residual income, will the division manager be inclined to request funds to make this investment?(Note: the decision model for the division manager is self-interested i.e. centers on the effect on his evaluation criteria)

Answers

Answer:

The Clipper Corporation

a. The company's return on investment (ROI) and residual income (RI):

ROI = $380,000/$2,000,000 x 100

= 19%

RI = $380,000 - (18% of $2,000,000)

= 380,000 - $360,000

= $20,000

b. Investment = $70,000

Annual operating income = $12,950

Department's current return on investment = 20%

Actual return on investment for this project = $12,950/$70,000 x 100

= 18.5%

The manager of the division will not be inclined to request funds to make this investment that will yield an ROI of 18.5% when the department is already making 20%.  This new investment will dilute his current ROI and adversely affect his performance evaluation.

c. Investment = $70,000

Annual operating income = $12,950

Current divisional residual income = $50,000

Actual residual income from this project,

= $12,950 - (18% of $70,000)

= $12,950 - $12,600

= $350

The division manager will be inclined to request funds for this investment that will increase her Residual Income marginally from $50,000 to $50,350, because her evaluation depends on an absolute figure and not a relative one (ROI).

Explanation:

1. The Clipper Corporation's Residual Income is equal to its operating income minus (minimum required return x operating assets).

2. The Clipper Corporation's Return on Investment is a derivative obtained from dividing the returns of its investment by the cost of the investment.

Here, we are preparing the cpmpany's return on investment (ROI), residual income (RI) etc

a. Computation of the Return on investment (ROI):

Return on investment = (Operating income/Average operating assets) * 100

Return on investment = ($380,000/$2,000,000) * 100

Return on investment = 0.19

Return on investment  = 19%

Computation of the residual income (RI)

Residual income = [(Operating income - (Return on investment *Average operating assets)]

Residual income = $380,000 - (18% * $2,000,000)

Residual income = 380,000 - $360,000

Residual income = $20,000

b. Given Information

Investment = $70,000

Annual operating income = $12,950

Department's current return on investment = 20%

The actual return on investment for this project will equals:

= (Annual operating income / Investment) * 100

= ($12,950/$70,000) * 100

= 0.185

= 18.5%

Therefore, the manager of the division will not be inclined to request funds to make this investment that will yield an ROI of 18.5% because the department is already making 20%.

c. Given Information

Investment = $70,000

Annual operating income = $12,950

Current divisional residual income = $50,000

The actual residual income from this project will be:

= Annual operating income - (Return on investment * Investment)

= $12,950 - (18% * $70,000)

= $12,950 - $12,600

= $350

Therefore, the division manager will be inclined to request funds for this investment that will increase the residual Income marginally from $50,000 to $50,350 because her evaluation depends on an absolute figure and not a relative one (Return on investment).

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In the short run, the quantity of output that firms supply can deviate from the natural level of output if the actual price level in the economy deviates from the expected price level. Several theories explain how this might happen.

Answers

Answer: fall, reducing, fall below

Explanation:

the misperceptions theory asserts that changes in the price level can temporarily mislead firms about what is happening to their output prices. Consider a soybean farmer who expects a price level of 100 in the coming year. If the actual price level turns out to be 90, soybean prices will __________ , and if the farmer mistakenly assumes that the price of soybeans declined relative to other prices of goods and services, she will respond by __________ the quantity of soybeans supplied. If other producers in this economy mistake changes in the price level for changes in their relative prices, the unexpected decrease in the price level causes the quantity of output supplied to __________the natural level of output in the short run.

according to the nist the process of identifying risk, assessing risk, and taking steps to reduce risk to an

Answers

Answer: Risk management

Explanation:

According to the nist, the process of identifying risk, assessing risk, and taking steps to reduce risk to an acceptable level is referred to as the risk management.

Risk management simply has to do with the identification of risks before they occur. In such scenarios, the business owners can either avoid the risk or minimize the impact of the risk.

How much interest is earned in just the third year on a $1,000 deposit that earns 7% interest compounded annually?

Answers

Answer:

Interest earn= $80.14

Explanation:

Giving the following information:

PV= $1,000

i= 7%

n= 3

First, we will calculate the future value at the second year:

FV= PV*(1+i)^n

FV= 1,000*(1.07^2)

FV= 1,144.9

Now, for the third year:

FV= 1,144.9*1.07= 1,225.04

Interest earn= 1,225.04 - 1,144.9= $80.14

Systemic barriers to change occur because of conflicts between departments, conflicts arising from power relationships, and refusal to share information.
a. True
b. False

Answers

Answer:

a. True

Explanation:

This statement is true, as systemic barriers can occur in an organization whose information flow does not occur efficiently and effectively, which causes information noises that prevent departments or teams from receiving organizational information.

This barrier can be eliminated by establishing a more direct and integrated communication with all organizational sectors, in the form of announcements, murals, e-mail, etc.

Another way to solve this problem is by analyzing the design of the organizational structure and making adjustments if it is found that there are flaws that prevent the flow of information to flow normally.

When harvesting a venture, the outright purchase of the going concern by managers, employees, or external buyers is known as going public. Question 2 options:

Answers

Answer:

In simple words, Harvesting seems to be the tool used by traders and investors to get out of business and, preferably, to recover the interest of their investments in the company. It's about more than trying to sell and having to leave a company. It includes collecting interest, risk reduction, and developing opportunities for the future.

Whenever a marketing plan includes a harvest tactic, investment firms and borrowers are convinced that the proprietors aim to establish the market and start selling it to either international shareholders or go to another corporation.

There is strong evidence that many investors suffer from familiarity bias and overconfidence bias. Can you explain why these biases might exist

Answers

Answer:

The bias of most investors suffering from familiarity or overconfidence bias can be attributed to human factor of being comfortable with what the person knows. For example, Investor A knows the owner of Company B, he or she would be comfortable to invest in Company B because he or she is familiarize with the owner or the company.

On the other-hand, when an investor reviews the businesses that he or she has invested in that are doing well, the individual will become overconfident in his or her ability to know and find good prospects to invest. The investor will become laid back in doing his investigation before investing in subsequent businesses.

Explanation:

Milltown Company specializes in selling used cars. During the month, the dealership sold 26 cars at an average price of $15,400 each. The budget for the month was to sell 24 cars at an average price of $16,400. Compute the dealerships sales volume variance for the month.

Answers

Answer:

Sales volume variance = $32,800 favorable

Explanation:

Please refer to the below for Sales Volume Variance formula and calculation.

Sales Volume Variance = (Budgeted sales volume - Actual sales volume) Standard price per unit

= ( 24 units - 26 units) $16,400

= ( 2 units ) $16,400

= $32,800 favorable

Shaw Company engages Maya Company to produce a large machine, install the machine, and train their employees on the machine. The machine, installation, and training are distinct, and Maya determines that the contract includes three separate performance obligations. The machine, installation, and training typically cost $800,000 $100,000, and $100,000 respectively when each is provided in a separate contract. Shaw and Maya agree to a total contract price of $920,000.

Required:
How much of the contract price should Maya allocate to the machine, installation, and training, respectively?

Answers

Answer:

Machine= 736,000

Installation= 92,000

Training= 92,000

Explanation:

Giving the following information:

The machine, installation, and training typically cost $800,000 $100,000, and $100,000 respectively when each is provided in a separate contract.

Shaw and Maya agree to a total contract price of $920,000.

First, we need to determine the proportion of each:

Machine= 800,000/1,000,000= 0.8

Installation= 100,000/1,000,000= 0.1

Training= 100,000/1,000,000= 0.1

Now, we can allocate:

Machine= 0.8*920,000= 736,000

Installation= 0.1*920,000= 92,000

Training= 0.1*920,000= 92,000

A security company offers to provide CCTV coverage for a parking garage for ten years for an initial payment of $45,000 and additional payments of $25,000 per year. What is the equivalent annual annuity of this​ deal, given a cost of capital of 4%​?

Answers

Answer:

Equivalent Annual Annuity =$30,548.09  

Explanation:

The equivalent annuity is the annual cash cash flows that is the same in value to the present value of the total cost associated with providing the CCTV coverage.

Equivalent Annual Annuity = Total PV of cost /Annuity factor

To determine the total prsent value of cost associated with CCTV  would sum the present value of the additional payment for 10 years and the initial cost.

Initial cost - 45,000

Additional payment = 25,000

PV of additional payment = A× 1-(1+r)^(-n)/r

                               = 25,000 × 1- 1.04^(-10)/0.04 =  202,772.39  

Total PV of cost = 202,772.39   + 45,000 =  247,772.39  

Total PV of cost = 247,772.39

Equivalent Annual Annuity = Total PV of cost /Annuity factor

Annuity factor = 1-(1+r)^(-n)/r = ( 1- 1.04^(-10)/0.04) =  8.1109

Equivalent Annual Annuity =247,772.39 /8.1109  = 30,548.09  

Equivalent Annual Annuity =$30,548.09  

Troy Enterprises uses a continuous review inventory control system. The firm operates 50 weeks per year, with an annual demand of 50,000 units, an ordering cost of $35 per order, a holding cost of $1 per unit per year, a lead time of 3 weeks, and a standard deviation of demand during lead time equal to 216.51 units. what is safety stock for the firm if a 94% service level is desired?

Answers

Answer:

Safety Stock is 336.62 units

Explanation:

As per given data

Demand = D = 50,000

Ordering Cost = S = $35

Holding Cost = H = $1 per unit per year

Weekly Demand = Demand / 50 weeks = 50,000 / 50 = 1,000 units per week

Weekly Demand during Lead time of 3 weeks = 1000 x 3 = 3,000 units

Standard Deviation = 216.51 units

Desired Service level = 94%

The Z score at 94% service level is 1.55477  

Safety Stock = Zscore x standard deviation = 1.55477 x 216.51

Safety Stock = 336.62

The Safety Stock for the firm if a 94% service level is desired is 336.62 units

Calculation of the safety stock:

Since

Demand = D = 50,000

Ordering Cost = S = $35

Holding Cost = H = $1 per unit per year

Now

Weekly Demand = Demand / 50 weeks

= 50,000 / 50

= 1,000 units per week

Now

Weekly Demand during Lead time of 3 weeks

= 1000 x 3

= 3,000 units

Standard Deviation = 216.51 units

Desired Service level = 94%

Also, The Z score at 94% service level is 1.55477  

So,

Safety Stock = Zscore x standard deviation

= 1.55477 x 216.51

= 336.62

hence, The Safety Stock for the firm if a 94% service level is desired is 336.62 units

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BankMart Inc. recently issued bonds that mature in 9 years. They have a par value of $1,000 and an annual coupon of 3%. The current market interest rate is 8%.What should be the bond's price? Match the example on the left with the corresponding property on the right.1. 3(x + 3) = 3x + 92. 2 + 3 + 4 = 4 + 3 +2.3. 4(2 x 3) = (4 x 2)34. 6 + (7 + x) = (6 + 7) + xA. Commutative PropertyB. Associative PropertyC. Distributive Property 1. Cases Prudence has a special (cubic) die. The values on its face are the integers from 1 to 6, but they are not arranged ae in a normal die. When Prudence first tosses the die, the sum of the values on the four side faces is 15. In her second toss, the sum of these values is 12. Find what value appears in the face opposite 6 on Prudences special die. (Hint: what are possible values for the top and bottom face when the sum of the side faces is 12). Write the other side of this equation so it's true for all values of x: 1/2(6x-10)-x=? John is considering purchasing a commercial building. His accountant is working with him to determine the propertys value to John. The initial cost of an investment property plus the cost of any additional improvements less qualified deductions represents the: Explain the development of the southern colonies, including but not limited to reasons established, impact of location and place, relations with American Indians and economic development? Let f(x) = 4x - 5 and g(x) = 3x + 7. Find f(x) + g(x) and state its domain. Please I Need Help :( Calculate the real deficit or surplus in the following cases: a. Inflation is 17 percent. Debt is $7 trillion. Nominal deficit is $820 billion. Which statement thanks respondent for their participation, describes how incentives are received, and reassures them of the confidentiality of their responses CAN ANYBODY HELP ME OUT In particular, OLS for the multiple regression model involves selecting parameters that will minimize:___________ Suppose the graph in part A can be represented by the function f(x)=1.5x+750/x . What is the domain of this function? Consider the context of the function in your answer. PLEASE ANSWER QUICKLY ASAP READ QUESTIONS CAREFULLY Elaine takes out a $100,000 mortgage on December 1, 1997. Elaine will repay the mortgage over 20 years with level monthly payments at an effective annual interest rate of 8%. The first payment is due January 1, 1998. After making her 120th payment, Elaine does not make any new payments for the entire next year. Elaine starts making revised monthly payments, of amount P, beginning January 1, 2009. The amount P is such that Elaine will pay off the loan in the original, 20-year termthat is to say, her last payment will be due December 1, 2017. Determine P. the maximum value of 3/5sinx-12cosx+19 Changing the speed of a synchronous generator changes A) the frequency and amplitude of the output voltage. B) only the frequency of the output voltage. C) only the amplitude of the output voltage. D) only the phase of the output voltage. Part 3: Choose a proof method Let x1 represent a quantitative independent variable and x2 represent a dummy variable for a 2-level qualitative independent variable. Which of the following models is the equation that produces two parallel curves, one for each level of your QL variable? A. E(y) = ?0 + ?1x1 + ?2x12 + ?3x2 B. E(y) = ?0 + ?1x1 + ?3x2 C. E(y) = ?0 + ?x11 + ?3x2 + ?4x1x2 D. E(y) = ?0 + ?1x1 + ?2x12 + ?3x2 + ?4x1x2 + ?5x12x2 Are we adding all 4 sides ?