Answer: See explanation
Explanation:
a. Determine the amount of depletion expense for the current year.
First, we've to calculate the depletion rate per unit which will be:
= $67,500,000 / 30,000,000
= $2.25
Then, the depletion expense will be:
= $2.25 × 4,000,000
= $9,000,000
b. Journalize the adjusting entry on December 31 to recognize the depletion expense.
Debit Depletion expense $9,000,000
Credit Accumulated depreciation $9,000,000
(Being depletion of 4,000,000 tons)
Crane, Inc. manufactures two products: missile range instruments and space pressure gauges. During April, 50 range instruments and 200 pressure gauges were produced, and overhead costs of $72,750 were estimated. An analysis of estimated overhead costs reveals the following activities. Activities Cost Drivers Total Cost 1. Materials handling Number of requisitions $30,000 2. Machine setups Number of setups 23,750 3. Quality inspections Number of inspections 19,000 $72,750 The cost driver volume for each product was as follows. Cost Drivers Instruments Gauges Total Number of requisitions 375 625 1,000 Number of setups 175 300 475 Number of inspections 225 250 475
Answer:
Requirement: Determine the overhead rate for each activity "Materials handling, Machine setups, Quality inspections"
Materials handling overhead rate = Total cost / Cost driver volume
Materials handling overhead rate = $30,000 / 1,000
Materials handling overhead rate = $30
Machine setups overhead rate = Total cost / Cost driver volume
Machine setups overhead rate = $23,750 / 475
Machine setups overhead rate = $50
Quality inspections overhead rate = Total cost / Cost driver volume
Quality inspections overhead rate = $19,000 / 475
Quality inspections overhead rate = $40
Required information: Analyzing income effects from eliminating departments.
Suresh Co. expects its five departments to yield the following income for next year.
Dept. M Dept. N Dept. O Dept. P Dept. T Total
Sales $66,000 $38,000 $59,000 $45,000 $31,000 $239,000
Expenses
Avoidable 11,300 38,200 23,300 15,500 40,500 128,800
Unavoidable 53,000 14,400 4,500 31,200 11,900 115,000
Total expenses 64,300 52,600 27,800 46,700 52,400 243,800
Net income (loss) $1,700 $(14,600) $31,200 $(1,700) $(21,400) $(4,800)
Re-compute and prepare the departmental income statements (including a combined total column) for the company under each of the following separate scenarios.
1) Management eliminates departments with sales dollars that are less than avoidable expenses.
2) Management eliminates departments with expected net losses.
Answer and Explanation:
The computation and the preparation is presented below:
1.
Particulars Dept. M Dept. N Dept. O Dept. P Dept. T Total
Sales $66,000 $59,000 $45,000 $170,000
Expenses
Avoidable $11,300 $23,300 $15,500 $50,100
Unavoidable $53,000 $14,400 $4,500 $31,200 $11,900 $115,000
Total expense $64,300 $14,400 $27,800 $46,700 $11,900 $165,100
Net income
or loss $1,700 -$14,400 $31,200 -$1,700 -$11,900 $4,900
2.
Particulars Dept. M Dept. N Dept. O Dept. P Dept. T Total
Sales $66,000 $59,000 $125000
Expenses
Avoidable $11,300 $23,300 $34,600
Unavoidable $53,000 $14,400 $4,500 $31,200 $11,900 $115,000
Total expense $64,300 $14,400 $27,800 $31,200 $11,900 $149,600
Net income
or loss $1,700 -$14,400 $31,200 -$31,200 -$11,900 -$24,600
Oak Corp., a calendar-year corporation, was formed three years ago by its sole shareholder, Glover, and has always operated as a C corporation. However, at the beginning of this year, Glover made a qualifying S election for Oak Corp., effective January 1. Oak Corp. did not have any C corporation earnings and profits on that date. On June 1, Oak Corp. distributed $15,000 to Glover. What are the amount and character of gain Glover must recognize on the distribution, and what is his basis in his Oak Corp. stock in each of the following alternative scenarios?
a. At the time of the distribution, Glover’s basis in his Oak Corp. stock was $35,000.
b. At the time of the distribution, Glover’s basis in his Oak Corp. stock was $8,000.
c. At the time of the distribution, Glover’s basis in his Oak Corp. stock was $0.
Answer:
Oak Corp distributed $15,000 to Glover and we are required to compute the amount and character of gain Glover must recognize under the scenarios as stated in the question:
a. No gain will be recognized by Glover. Rather, his stock basis will be reduced from $35,000 to $20,000 ($35,000 basis - $15,000 cash distribution). So, gain recognized by him is $0.
b. Long term capital gain of $7,000 ($15,000 - $8,000) will be recognized by Glover and his stock basis will be reduced from $8,000 to $0.
c. The entire $15,000 ($15,000-$0) will be recognized as long term capital gain by Glover and his stock basis will remain $0.
The Ring Division of A1d-Y6z Company reported the following information for May: selling price per unit .................... $35 variable costs per unit ................... $12 turnover .................................. 2.50 residual income ........................... $229,600 margin .................................... 22% units sold ................................ 40,000 Calculate the number of units the Ring Division needed to sell in May in order for the residual income in May to be $505,600.
Answer:
52,000 units
Explanation:
Selling price = $35*40,000 = $1,400,000
Variable cost = $12 * 40,000 = $480,000
Contribution margin = $1,400,000 - $480,000 = $920,000
Fixed cost = Residual income + Contribution
Fixed cost = $920,000 - $229,600
Fixed cost = $690,400
Sales to earn residual income = [Fixed cost + Desired profit] / Contribution per unit
Sales to earn residual income = [$690,400 + $505,600] / $35 - $12
Sales to earn residual income = $1,196,000 / $23
Sales to earn residual income = 52,000 units
Wildhorse Co. had the following assets on January 1, 2022. Useful Life (in years) Item Cost Purchase Date Useful Life (in years) Salvage Value Machinery $68,000 Jan. 1, 2012 10 $ 0 Forklift 27,000 Jan. 1, 2019 5 0 Truck 33,400 Jan. 1, 2017 8 3,000 During 2022, each of the assets was removed from service. The machinery was retired on January 1. The forklift was sold on June 30 for $11,700. The truck was discarded on December 31. Journalize all entries required on the above dates, including entries to update depreciation, where applicable, on disposed assets. The company uses straight-line depreciation. All depreciation was up to date as of December 31, 2021. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)
Solution :
Journal Entry
Date Account and Explanation Debit Credit
1 Jan,2022 Accumulated depreciation-machine $ 68,000
Machine $ 68,000
30 June, Depreciation expense, [tex]$\left(\frac{27000}{5} \times \frac{6}{12}\right)$[/tex] $ 2700
2022 Accumulated depreciation- Forklift $ 2700
30 June, Cash $ 11,700
2022 Accumulated depreciation- Forklift, $ 18,900
[tex]$\left(\frac{27000}{5} \times 3.5 \right)$[/tex]
Gain on sale of forklift $ 3600
Forklift $ 27000
31 Dec, Depreciation expense, [tex]$\left( \frac{33400-3000}{8}\right)$[/tex] $ 3800
2022 Accumulated depreciation - Truck $ 3800
31 Dec, Accumulated depreciation - Truck, $ 22800
2022 [tex]$\left( \frac{33400-3000}{8} \times 6\right)$[/tex]
Loss on disposal of truck $ 10600
Truck $ 33400
Bramble Corp. purchased land as a factory site for $1305000. Bramble paid $121000 to tear down two buildings on the land. Salvage was sold for $8400. Legal fees of $5340 were paid for title investigation and making the purchase. Architect's fees were $47000. Title insurance cost $3900, and liability insurance during construction cost $4200. Excavation cost $15480. The contractor was paid $4400000. An assessment made by the city for pavement was $9900. Interest costs during construction were $251000.
1. The cost of the land that should be recorded by Wilson Co. is:_____.
a. $989,880
b. $980,480
c. $996,280
d. $986,880
The cost of the building should be recorded by Wilson Co. is:_____.
a. 2,804,840
b. 2,813,200
c. 2,803,800
d. 3,014,240
Answer:
Part 1
$1,422,940
Part 2
$331,480
Explanation:
cost of the land calculation
Purchase Price $1305000
Cost to tear down building $121000
Sale of Salvages ($8400)
Leagl fees $5340
Total $1,422,940
The cost of the land that should be recorded by Wilson Co. is: $1,422,940
cost of the building calculation
Architect's fees $47000
Insurance $3900
Liability insurance $4200
Excavation cost $15480
city for pavement $9900
Borrowing Costs $251000
Total $331,480
The cost of the building should be recorded by Wilson Co. is $331,480
The following income statements are provided for Li Company's last two years of operation: Year 1 Year 2 Number of units produced and sold 4,500 4,100 Sales revenue $ 69,750 $ 63,550 Cost of goods sold 41,700 38,000 Gross margin 28,050 25,550 General, selling, and administrative expenses 17,500 16,300 Net income $ 10,550 $ 9,250 Assuming that cost behavior did not change over the two-year period, what is Li Company's contribution margin in Year 2?
Answer:
$13,325
Explanation:
Calculation to determine Li Company's contribution margin in Year 2
First step is to calculate the Variable cost per unit
Using this formula
Variable cost per unit = Change in costs ÷ Change in activity Cost of goods sold
Let plug in the formula
Variable cost per unit = (41,700 − 38,000) ÷ (4,500 units − 4,100 units)
Variable cost per unit =3,700/400
Variable cost per unit = $9.25 per unit
Second step is to calculate the Selling and administrative expense
Variable cost per unit = (17,500- 16,300) ÷ (4,500 units − 4,100 units)
Variable cost per unit =1,200/400 units
Variable cost per unit = $3.00 per unit
Now let calculate the Contribution margin in Year 2
Using this formula
Contribution margin = Sales revenue − Variable costs
Let plug in the formula
Contribution margin= $ 63,550 − [4,100 units × ($9.25 per unit + $3.00 per unit)]
Contribution margin=$ 63,550-(4,100 units×$12.25)
Contribution margin=$ 63,550-$50,225
Contribution margin = $13,325
Therefore Li Company's contribution margin in Year 2 is $13,325
Cost of Normal Spoilage
Frieling Company installs granite countertops in customers' homes. First, the customer chooses the particular granite slab, and then Frieling measures the countertop area at the customer's home, cuts the granite to that shape, and installs it. The Tramel job calls for direct materials of $1,900 and direct labor of $500. Overhead is applied at the rate of 140 percent of direct labor cost. Unfortunately, one small countertop breaks during installation and Frieling must cut another piece and install it to properly complete the job. The additional rework required direct materials costing $400 and direct labor costing $100. Assume that the spoilage was due to carelessness by a Frieling worker and it is considered to be normal spoilage.
Required:
1. Calculate the cost of the Tramel job.
2. Make any needed journal entry to the overhead control account.
3. What if the additional rework required $200 of direct labor? What would be the effect on the cost of the Tramel job?
Answer:
See below
Explanation:
1. Cost of the Tramel Job
= Direct material cost + Direct labor cost + Overhead applied
= $1,900 + $500 + (140% × $500)
= $1,900 + $500 + $700
= $3,100
2. Journal entry to record the overhead cost
Overhead cost account Dr $500
To Material account Cr $400
To Labor account Cr $100
3. Effect of additional rework required $200 of direct labor on the cost of Tramel job
= Direct material cost + Direct labor cost + Overhead applied
= $1,900 + ($500 + $200) + (140% × $500)
= $1,900 + $700 + $700
= $3,300
The effect of additional rework required of $200 of direct labor cost is an increase of $200 on the cost of job for Tramel
Walter Company Ltd. publishes a monthly sports magazine, Fishing Preview. Subscriptions to the magazine cost $22 per year. During November 2007, Walter sells 6,000 subscriptions for cash, beginning with the December issue. Walter prepares financial statements quarterly and recognizes subscription revenue earned at the end of the quarter. The company uses the accounts Unearned Subscription Revenue and Subscription Revenue. The company has a December 31 year-end.
Instructions
(a) Prepare the entry in November for the receipt of the subscriptions.
(b) Prepare the adjusting entry at December 31, 2007, to record subscription revenue earned in December 2007.
(c) Prepare the adjusting entry at March 31, 2008, to record subscription revenue earned in the first quarter of 2008.
Answer:
Walter Company Ltd.
Journal Entries:
a. November, 2007:
Debit Cash $132,000
Credit Unearned Subscription Revenue $132,000
To record the receipt of subscriptions for 6,000 at $22 for a year.
b. December, 2007:
Debit Unearned Subscription Revenue $11,000
Credit Subscription Revenue $11,000
To record the subscription revenue for the quarter (Dec. only)
c. March, 2008:
Debit Unearned Subscription Revenue $33,000
Credit Subscription Revenue $33,000
To record the subscription revenue for the quarter.
Explanation:
a) Data and Calculations:
Subscription cost per year = $22
Subscription sold in December 2007 = 6,000
Total revenue received in November = $132,000 (6,000 * $22)
Analysis:
Cash $132,000 Unearned Subscription Revenue $132,000
Unearned Subscription Revenue $11,000 Subscription Revenue $11,000 ($22/12 * 6,000)
Unearned Subscription Revenue $33,000 Subscription Revenue $33,000 ($22/4 * 6,000)
Consider the following statements about the step-down method of service department cost allocation: I. Under the step-down method, all service department costs are eventually allocated to production departments. II. The order in which service department costs are allocated is important. III. After a service department's costs have been allocated to other departments, no costs are re-circulated back to that service department. Which of the above statements is (are) correct?
a. I, II, and III.
b. I only.
c. I and II.
d. II only.
e. I and III.
Answer:
The correct statements under the step-down method are:
a. I, II, and III.
Explanation:
The step-down method of allocating the costs of service departments is one of the three methods in use. The others include the direct method and the reciprocal method. With the direct method, service departments' costs are directly allocated to the production departments without any allocation to a service department. The reciprocal method is much more involved, using formulas and calculations. The step-down method allocates the service departments' costs to all the other service and production departments, except itself. This step is eventually followed until all the service departments' costs have been allocated to the production departments.
Question 9 TEME is a manufacturer of toy construction equipment. If it pays out all of its earnings as dividends, it will have earnings of 0.3 million per quarter in perpetuity. Suppose that the discount rate, expressed as an effective annual rate (EAR), is 16%. TEME pays dividends quarterly. What is the value of TEME if it continues to pay out all of its earnings as dividends
Answer:
8 million
Explanation:
I solved the question a short while ago
Module 4
Fundamentals of Finance
Bonita Industries financed the purchase of a machine by making payments of $29000 at the end of each of five years. The appropriate rate of interest was 8%. The future value of one for five periods at 8% is 1.46933. The future value of an ordinary annuity for five periods at 8% is 5.86660. The present value of an ordinary annuity for five periods at 8% is 3.99271. What was the cost of the machine to Bonita?
Answer:
Cost of Machine today = $115788.59
Explanation:
To calculate the cost of machine to Bonita in today's term, we need to calculate the present value of annuity. We know that the payments made are in form of an ordinary annuity because the amount of payment is fixed (29000) , the payments are made after equal interval of time (at the end of each year) and are made in finite number (5 years).
We will multiply the annuity payment per period by the PV of ordinary annuity factor as provided in the question to calculate the value or price of machine today.
Cost of Machine today = 29000 * 3.99271
Cost of Machine today = $115788.59
Cominsky Company purchased a machine on July 1, 2018, for $28,000. Cominsky paid $200 in title fees and county property tax of $125 on the machine. In addition, Cominsky paid $500 shipping charges for delivery, and $475 was paid to a local contractor to build and wire a platform for the machine on the plant floor. The machine has an estimated useful life of 6 years with a salvage value of $3,000.
Determine the depreciation base of Cominsky’s new machine. Cominsky uses straight-line depreciation.
Depreciation base $
Entry field with incorrect answer now contains modified data
Answer:
$26,300
Explanation:
Depreciation Base is the total amount charged to expenses over an asset's useful life.
In Straight line method of Depreciation:
Depreciation Base = (Cost of Asset - Salvage Value)
Cost of Asset $28,000 + $200 + $125 + $500 + $475
Cost of Asset = $29,300
Depreciable Base = $29,300 - $3,000
Depreciable Base = $26,300
A foreign branch bank operates like a local bank, but legally Group of answer choices a branch bank is subject to only the banking regulations of its home country and not the country in which it operates. it is a part of the parent bank. a branch bank is subject to both the banking regulations of its home country and the country in which it operates. it is a part of the parent bank, and a branch bank is subject to both the banking regulations of its home country and the country in which it operates.
Answer:
Foreign branch
This is usually refered to as legal and operational section (part)of the parent bank. It is said that creditors of the branch have full legal rights on the bank's assets in all and also creditors of the parent bank have hold/claims on its branches' assets.
A foreign branch bank operates like a local bank, but is legally part of the the parent.
A branch bank is subject to both the banking regulations of home country and the country in which it operates (foreign country)
Explanation:
Foreign Branches
A foreign branch bank is a branch of a bank in other country. It usually operates like a local bank even though they are a section or part of the the parent legally. Thehy abide by the rules and regulations of the banking regulations of home country and also that of foreign country which their operating is based (branched)
They are commonly known to give a wide and broad range of services than a representative office. Branch Banks are used by U.S. banks to expand overseas.
Which of the following best describes the type of loss covered by the Spoilage Damage insuring agreement of the ISO Equipment Breakdown Protection Coverage Form? A. The spoilage of perishable goods resulting from breakdown of covered equipment. B. Costs to replace food labels resulting from breakdown of refrigeration equipment.
Answer:
A. The spoilage of perishable goods resulting from breakdown of covered equipment.
Explanation:
The ISO Equipment Breakdown Protection Coverage is used to compensate for losses that occur as a result of equipment breakdown. The cost covered by this type of insurance includes cost of repair of the equipment that failed along with the replacement not any property damaged as a result of equipment failure.
So when perishable goods get damaged because of breakdown of covered equipment, the ISO Equipment Breakdown Protection Coverage will cover for the loss
You are analyzing two assets: collectible LEGO sets, and stock of Apple. In the last 5 years, LEGOs have had an annual volatility of 5%, annual return of 6%, and a CAPM beta (the correlation coefficient between the asset and the market risk-premium) of 1.6. Apple has had an annual volatility of 10%, an annual return of 8%, and a CAPM beta of 1.2. Is the following statement true or false?
According to CAPM, Apple has a higher expected return than LEGO.
Answer:
No, Apple has lower rate of return than LEGOs.
Explanation:
Risk free rate is 2% and Market risk is 9%
Expected return can be calculated by :
E(r) = Rf + beta * (Rm - Rf)
E(r) LEGOs = 2 + 1.6 * (9 - 2)
E(r) LEGOs = 13.2%
E(r) Apple = 2 + 1.2 * (9 - 2)
E(r) Apple = 10.4%
rr Co. adopted the dollar-value LIFO inventory method on December 31, Year 12.Farr's entire inventory constitutes a single pool. On December 31, Year 12, the inventorywas $480,000 under the dollar-value LIFO method. Inventory data for Year 13 are asfollows:12/31/13 inventory at year-end prices$660,000Relevant price index at year end (base year Year 12)110Using dollar value LIFO, Farr's inventory at December 31, Year 13 isa.$528,000.b.$612,000.c.$600,000.d.$660,000
Answer:
b. $612,000
Explanation:
Dec 31, 2013 inventory = $660,000
Value of Dec 31, 2013 inventory at base year (2012) prices = $660,000/110*100 = $600,000
The real-dollar quantity increase in inventory = ($600,000 - $480,000) = $120,000
Value of this real dollar quantity increase in inventory at Dec 31, 2013 prices= $120,000 * 110/100 = $132,000 (LIFO layer to the Dec 31, 2012 inventory)
Value of Dec 31, 2013 inventory = Dec 31, 2012 inventory + The value of LIFO layer formed
Value of Dec 31, 2013 inventory = $480,000 + $132,000
Value of Dec 31, 2013 inventory = $612,000
MatchPoint Racket Company manufactures two types of tennis rackets, the Junior and Pro Striker models. The production budget for March for the two rackets is as follows:
Junior Pro Striker
Production budget 8,100 units 19,500 units
Both rackets are produced in two departments, Forming and Assembly. The direct labor hours required for each racket are estimated as follows:
Forming Department Assembly Department
Junior 0.25 hour per unit 0.50 hour per unit
Pro Striker 0.30 hour per unit 0.70 hour per unit
The direct labor rate for each department is as follows:
Forming Department $17.00 per hour
Assembly Department $9.00 per hour
Required:
Prepare the direct labor cost budget for March.
Answer:
See below
Explanation:
The preparation of direct labor cost budget for March is seen below;
Particulars Foaming department Assembly department
Production 8,100 units 19,500 units
Hours required
Junior 2,025 4,050
Hours required
Pro 5,850 13,650
Total hours
Department Wise (A) 7,875 17,700
Total Hourly rate (B) $17 $19
Total direct labor cost (A × B) $133,875 $336,300
••Workings
For Junior, it would be :
Foaming
= 0.25 hour per unit × 8,100 units
= 2,025
Assembly
= 0.50 hour per unit × 8,100 units
= 4,050
For Pro, it would be:
Foaming
= 0.30 hour per unit × 19,500 units
= 5,850
Assembly
= 0.70 hour per unit × 19,500 units
= 13,650
When bonds are issued at a premium and the effective interest method is used for amortization, at each subsequent interest payment date, the cash paid is:
Answer:
Greater than the interest expense
Explanation:
Based on the information given the CASH PAID is GREATER THAN THE INTEREST EXPENSE reason been that at every subsequent interest payment date the CASH PAYMENT does not change which means that the CASH PAID tend to remains the same but interest expense on the other hand tend to decreases at every interest payment date which inturn means that CASH PAID will be greater than the interest expense as the time passed by.
There are different kinds of bond. When bonds are issued at a premium and the effective interest method is used for amortization, at each subsequent interest payment date, the cash paid is Less than the interest expense.
The effective interest method is often applied or used to discount, or write a bond off.The amount of the bond that is often discounted is said to be amortized to interest expense over the bond's life.
Therefore as a bond's book value increases, the amount of interest expense also increases.
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What does "pivoting" mean in the process of concept development?
Select an answer:
• applying the same concept to a completely different problem
• adapting or modifying a concept to address one of the four enablers (1)
• identifying data required to validate a concept
• ideating to establish the antithesis of the design concept
Answer:
identifying data required to validate a concept
Southern Atlantic Distributors began operations in January 2021 and purchased a delivery truck for $40,000. Southern Atlantic plans to use straight-line depreciation over a four-year expected useful life for financial reporting purposes. For tax purposes, the deduction is 45% of cost in 2021, 30% in 2022, and 25% in 2023. Pretax accounting income for 2021 was $460,000, which includes interest revenue of $68,000 from municipal governmental bonds. The enacted tax rate is 25%.
Assuming no differences between accounting income and taxable income other than those described above:
Required:
1. Complete the following table given below and prepare the journal entry to record income taxes in 2021.
2. What is Southern Atlantic’s 2021 net income?
Answer:
1. Depreciation as per books = Cost of purchase/Useful life
Depreciation as per books = $40,000/4
Depreciation as per books = $10,000
Depreciation as per tax for 2021 = Cost of purchase * Deduction rate
Depreciation as per tax for 2021 = $40,000 * 45%
Depreciation as per tax for 2021 = $18,000
Temporary difference = $18,000 - $10,000
Temporary difference = $8,000
Particulars Amount Tax Rate Tax Recorded as
Pretax accounting income $460,000
Permanent difference -$68,000
Income subject to taxation $392.00 25% $98,000 Income tax expense
Temporary difference -$8,000 25% -$2,000 Deferred tax liability
Income taxable in $384,000 25% $96,000 Income tax payable
current year
Journal Entries - Southern Atlantic Distributors
Date Particulars and Explanation Debit Credit
Income tax expense $98,000
To Income taxes payable $96,000
To Deferred tax liability $2,000
(To record income tax expense)
2. Net income for 2021 = Pretax income - Income tax expense
Net income for 2021 = $460,000 - $98,000
Net income for 2021 = $362,000
Jenny has a $82,500 basis in her 50 percent partnership interest in the JM Partnership before receiving any distributions. This year JM makes a proportionate operating distribution to Jenny of a parcel of land with an $110,000 fair value and a $89,700 basis to JM. The land is encumbered with a $42,850 mortgage (JM's only liability). What is Jenny's basis in the land and her remaining basis in JM after the distribution
Answer:
$89,700 land basis, $14,225 JM basis.
Explanation:
Calculation to determine Jenny's basis in the land and her remaining basis in JM after the distribution
Based on the information given her basis in the land equal to the amount of $89,700 while are remaining basis in JM is the amount of $14,225, Calculated as:
Predistribution basis in JM $82,500
Add deemed contribution $21,425
(50%*$42,850)
Less: basis allocated to land ($89,700)
Remaining basis in JM $14,225
Therefore her basis in the land and her remaining basis in JM after the distribution are:
$89,700 land basis, $14,225 JM basis.
Borges Machine Shop, Inc. has a 1-year contract for the production of 200,000 gear housings for a new off-road vehicle. Owner Luis Borges hopes the contract will be extended and the volume increased next year. Borges has developed costs for three alternatives. They are general-purpose equipment (GPE), flexible manufacturing system (FMS), and expensive, but efficient dedicated machine (DM). The cost data follow:
General Purpose Flexible Manufacturing Dedicated
Equipment System Machine
GPE FMS DM
Annual contracted units 200,000 200,000 200,000
Annual fixed cost $100,000 $200,000 $500,000
Per unit variable cost $15 $14 $13
Which process is best for this contract?
Answer:
FMS
Explanation:
The computation is shown below;
For GPE
Given that
Annual contracted unit(Q) = 200000 units
Fixed cost (FC) = $100000
Variable cost (VC) = $15
Now
Total cost = FC + (Q × VC)
= 100000 + (200000 × 15)
= 100000 + 3000000
= $3100000
For FMS
Given that
Annual contracted unit(Q) = 200000 units
Fixed cost (FC) = $200000
Variable cost (VC) = $14
Total cost = FC + (Q × VC)
= 200000 + (200000 × 14)
= 200000 + 2800000
= $3000000
For DM
Given that
Annual contracted unit(Q) = 200000 units
Fixed cost (FC) = $500000
Variable cost (VC) = $13
Total cost = FC + (Q × VC)
= 500000 + (200000 × 13)
= 500000 + 2600000
= $3100000
So for this type of contract FMS is best as it contains the lowest total cost.
Garcia Co. sells snowboards. Each snowboard requires direct materials of $119, direct labor of $49, and variable overhead of $64. The company expects fixed overhead costs of $673,000 and fixed selling and administrative costs of $160,000 for the next year. It expects to produce and sell 11,900 snowboards in the next year. What will be the selling price per unit if Garcia uses a markup of 15% of total cost
Answer:
$70 per units
Explanation:
Calculation to determine What will be the selling price per unit if Garcia uses a markup of 15% of total cost
First step is to calculate total cost per unit.
Using this formula
Total Cost per unit = Unit Direct materials cost + Unit Direct labor costs + Unit Variable Costs + Unit Fixed Costs
Let plug in the formula
Total Cost per unit = $119 + 49 + 64 + 70
Total Cost per unit = $302
.
Second step is to calculate the Selling Price Per Unit
Selling Price Per Unit = $302 +( 15%*$302)
Selling Price Per Unit = 302 + 45.30
Selling Price Per Unit = $347.30
Third step is to calculate the Total Fixed Costs using this formula
Total Fixed Costs = fixed overhead costs + Fixed selling and administrative costs
Let plug in the formula
Total Fixed Costs=$673,000+$160,000
Total Fixed Costs= $833,000
Now let calculate the Fixed Cost per unit using this formula
Fixed Cost per unit = Total Fixed Costs / Total Units
Let plug in the formula
Fixed Cost per unit =$833,000/11,900
Fixed Cost per unit = $70 per unit
Therefore What will be the selling price per unit if Garcia uses a markup of 15% of total cost is $70 per unit
TB MC Qu. 08-54 Identify the situation below that will... Identify the situation below that will result in a favorable variance. Multiple Choice Actual revenue is higher than budgeted revenue. Actual revenue is lower than budgeted revenue. Actual income is lower than expected income. Actual costs are higher than budgeted costs. Actual expenses are higher than budgeted expenses.
Answer:
Actual revenue is higher than budgeted revenue
Explanation:
A building was constructed last year for Agro Co. for use as a production facility. Construction began on January 1 and was completed on December 31. The payments to the contractor were as follows.
Date Payment
1/1 $300,000
4/1 620,000
8/1 460,000
10/1 300,000
To finance construction of the building, a $750,000, 10% construction loan was taken out on January 1. The loan was repaid on December 31. The firm had two sources of general debt: $400,000 note payable, 9% annual interest, and $500,000 par value bonds, 7.5% annual interest.
Determine the amount of interest to be capitalized.
Answer:
Agro Co.
The amount of interest to be capitalized is:
= $92,850.
Explanation:
a) Data and Calculations:
Date Payment Weight Weighted Average
1/1 $300,000 12/12 $300,000
4/1 620,000 9/12 465,000
8/1 460,000 5/12 191,667
10/1 300,000 3/12 75,000
Weighted-average accumulated expenditure = $1,031,667
Sources debt:
$750,000 construction loan, 10% annual interest = $75,000
$400,000 note payable, 9% annual interest = 36,000
$500,000 par value bonds, 7.5% annual interest = 37,500
Total debt = $1,650,000 Total interest = $148,500
Weighted-average interest rate = $148,500/$1,650,000 * 100 = 9%
Interest to be capitalized = Weighted-average accumulated expenditure * Weighted-average interest rate
= $1,031,667 * 9%
= $92,850
In 2001, HP acquired Compaq. The merger had an impact on two different markets: desktop PCs and servers. Pre-merger market shares in the desktop PC market were as follows: Dell, 13; Compaq, 12; HP, 8; IBM, 6; Gateway, 4. Pre-merger market shares in the servers market were as follows: IBM, 26; Compaq, 16; HP, 14; Dell, 7. Source: Bank of America report, October 2001. Data for 2001Q2.
(a) Determine the value of HHI in each market before the merger.
(b) Assuming market shares of each firm remain constant, determine the value of HHI after the merger.
(c) Considering the values determined above and the DoJ merger guidelines, was the Department of Justice right in allowing the merger to take place?
Answer:
HP and Compaq
Value of HHI Desktop PC Servers
a) Before the merger 429 1,177
b) After the merger 621 1,616
c) Considering the HHI values determined in the various markets above (before and after the merger) and the DoJ merger guidelines, the DoJ seems to be right in allowing the merger to take place with respect to the desktop PC market as the 200 basis point mark was not reached. This is not the same with respect to the servers market, where the combined value of HP Compaq exceeds the 200 basis point mark.
Explanation:
a) Data and Calculations:
Pre-merger market shares in the desktop PC and servers markets:
Desktop PC Servers
Market Market
Dell, 13 7
Compaq, 12 16
HP, 8 14
IBM, 6 26
Gateway, 4 0
HHI in the desktop PC market = 13² + 12² + 8² + 6² + 4²
= 169 + 144 + 64 + 36 + 16
= 429
HHI in the servers market = 7² + 16² + 14² + 26² + 0² =
= 49 + 256 + 196 + 676
= 1,177
After the merger:
Desktop PC Servers
Market Market
Dell, 13 7
HP Compaq 20 30
IBM, 6 26
Gateway, 4 0
HHI in the desktop PC market = 13² + 20² + 6² + 4²
= 169 + 400 + 36 + 16
= 621
HHI in the servers market = 7² + 30² + 26² + 0²
= 40 + 900 + 676
= 1,616
Value of HHI Desktop PC Servers
a) Before the merger 429 1,177
b) After the merger 621 1,616
Market power of Compaq and HP in the desktop PC market before the merger = 208/429 = 48.5% (144 + 64)/429
Market power of HP Compaq in the desktop PC market after the merger = 400/621 = 64.4%
Increase in basis point (HHI) = 192 (621 = 429)
Market power of Compaq and HP in the servers market before the merger = 452/1,177 = 38.4% (256 + 196)/1,177
Market power of HP Compaq in the servers market after the merger = 900/1,616 = 55.7%
Increase in basis point (HHI) = 439 (1,616 - 1,1177)
Locomotive Corporation is planning to repurchase part of its common stock by issuing corporate debt. As a result, the firm’s debt–equity ratio is expected to rise from 30 percent to 50 percent. The firm currently has $3.3 million worth of debt outstanding. The cost of this debt is 9 percent per year. Locomotive expects to have an EBIT of $1.32 million per year in perpetuity. Locomotive pays no taxes.
a. What is the market value of Locomotive Corporation before and after the repurchase announcement?
b. What is the expected return on the firm’s equity before the announcement of the stock repurchase plan?
c. What is the expected return on the equity of an otherwise identical all-equity firm?
d. What is the expected return on the firm’s equity after the announcement of the stock repurchase plan?
Answer: See explanation
Explanation:
a. What is the market value of Locomotive Corporation before and after the repurchase announcement?
Equity value = Debt value / Debt to equity ratio
= 3,300,000/0.3
= 11,000,000
Market value = Debt value + Equity value
= $3,300,000 + $11,000,000
= $14,300,000
b. What is the expected return on the firm’s equity before the announcement of the stock repurchase plan?
To solve this, we need to know the interest payment first which will be:
= $3,300,000 × 9%
= $3,300,000 × 0.09
= $297000
Return on equity will now be:
= (EBIT - interest) / Equity
= (1320000 - 297000) / 11000000
= 9.30%
c. What is the expected return on the equity of an otherwise identical all-equity firm?
This will be:
= Earnings before Interest / Unlevered firm value
= 1320000 / 14300000
= 9.23%
d. What is the expected return on the firm’s equity after the announcement of the stock repurchase plan?
This will be:
= 9.23% + 50% × (9.23% - 9%)
= 9.35%
Jerry is working on a research project about the effectiveness of social media marketing. He found some sources with information relevant to his project, and he’s trying to determine which ones are credible. Which THREE sources should he select to use for his project?
A.
a journal article titled “Marketing Strategies: Social Media” by a university professor
B. an article titled “Tips for Effective Social Media Marketing” on a government agency website
C. a social media post promoting a new product launched by a reputable business
D. a business magazine article titled “Why Social Media Marketing Works” by a journalist
E. a blog post titled “My Social Media Marketing Success” by an unknown author
Answer: A. a journal article titled “Marketing Strategies: Social Media” by a university professor
B. an article titled “Tips for Effective Social Media Marketing” on a government agency website
D. a business magazine article titled “Why Social Media Marketing Works” by a journalist.
Explanation:
When conducting a research, it is important for one to use good and credible sources.
Since Jerry is working on a research project about the effectiveness of social media marketing, the three sources that should be selected are:
A. journal article titled “Marketing Strategies: Social Media” by a university professor
B. an article titled “Tips for Effective Social Media Marketing” on a government agency website
D. A business magazine article titled “Why Social Media Marketing Works” by a journalist.
Option C should not be selected as it's a social media post and isn't regarded as a credible source. Also, option E should not be selected as it's a blog and the post is by an unknown author.
Therefore, the correct options are A, B and D.
Answer:
1,2, and 4
Explanation:
I took the test and got a 100
Assume that Canada imports more goods and services than it exports. Which of the following is true of the Canadian balance of payments accounts?
(A) The current account balance must be negative.
(B) The current account balance must be positive
(C) The trade balance must be negative.
(D) The financial account (formerly called capital account) balance must be negative
(E) The financial account (formerly called capital account) balance must be positive
Answer:
(C) The trade balance must be negative.
Explanation:
The Balance of trade refers to the net amount payable or receivable
In the case when the net amount is receivable so the balance of trade comes in positive and when the net amount payable is high than the balance of trade is negative.
Now
When the country exports greater than imports so it is a positive balance of Trade and on the other hand When the country imports greater than exports then the balance of trade is negative.
