Answer:
Due to historical differences, countries often differ in how quickly a change in actual inflation is incorporated into a change in expected inflation. In a country such as Japan, which has had very little inflation in recent memory, it will take longer for a change in the actual inflation rate to be reflected in a corresponding change in the expected inflation rate. In contrast, in a country such as Zimbabwe, which has recently had very high inflation, a change in the actual inflation rate will immediately be reflected in a corresponding change in the expected inflation rate.
What is the slope of Japan’s short-run Phillips curve?
Option B is the correct answer.
Explanation:
The slope of Japan’s short-run Phillips curve will be a flat downward slope because "it will take longer for a change in the actual inflation rate to be reflected in a corresponding change in the expected inflation rate".
Therefore, option B is the correct answer.
The 12/31/2018 balance sheet of Despot Inc. included the following: Common stock, 25 million shares at $20 par $ 500 million Paid-in capital—excess of par 3,000 million Retained earnings 980 million In January 2018, Despot recorded a transaction with this journal entry: Cash 150 million Common stock 100 million Paid-in capital—excess of par 50 million In February 2018, Despot declared cash dividends of $12 million to be paid in April of that year. What effect did the April transaction have on Despot's accounts? Decreased assets and liabilities. Increased liabilities and decreased shareholders' equity. Decreased assets and shareholders' equity. None of these answer choices are correct
Answer: Decreased assets and liabilities.
Explanation:
Both assets and Liabilities decrease as a result of the April transaction because first, Cash is used to pay the Dividend which reduces the cash account and Cash is an Asset.
Liabilities also decrease because when the dividends were declared in February, Despot Inc had to create a liability in their books to cater for the payment of the dividends. Now that the dividends have been paid, that figure will be removed therefore reducing Liabilities.
Marle Construction enters into a contract with a customer to build a warehouse for $950,000 on March 30, 2018 with a performance bonus of $50,000 if the building is completed by July 31, 2018. The bonus is reduced by $10,000 each week that completion is delayed. Marle commonly includes these completion bonuses in its contracts and, based on prior experience, estimates the following completion outcomes: Completed by Probability July 31, 2018 65% August 7, 2018 5% August 14, 2018 5% August 21, 2018 The transaction price for this transaction, based on the expected value approach, is:_______.
a. $950,000
b. $995,000
c. $685,000
d. $652,500
Answer:
b. $995,000
Explanation:
The computation of the transaction price based on the expected value approach is shown below:
The formula is
= (Building cost of warehouse + bonus) × probability percentage
Date Calculation Amount
July 31, 2018 ($950,000+$50,000) × 0.65 $650,000
August 7, 2018 ($950,000+$40,000) × 0.25 $247,500
August 14, 2018 ($950,000+$30,000) × 0.05 $49,000
August 21, 2018 ($950,000+$20,000) × 0.05 $48,500
Total $995,000
Since the bonus is reduced $10,000 each week so $10,000 is deducted for every delayed week
A company can sell all the units it can produce of either Product A or Product B but not both. Product A has a unit contribution margin of $16 and takes two machine hours to make and Product B has a unit contribution margin of $30 and takes three machine hours to make. If there are 5,000 machine hours available to manufacture a product, income will be:
a. $10,000 more if Product A is made.
b. $10,000 less if Product B is made.
c. $10,000 less if Product A is made.
d. the same if either product is made.
Answer:
Product B has a net income of $10,000 superior to Product A.
The correct answer is C.
Explanation:
Giving the following information:
Product A:
Unitary contribution margin= $16
Machine-hours required= 2
Product B:
Unitary contribution margin= $30
Machine-hours required= 3
First, we will calculate the total income of both products.
Product A= 16*(5,000/2)= $40,000
Product B= 30*(5,000/3)= $50,000
Product B has a net income of $10,000 superior to Product A.
Prior to September 30, a company has never had any treasury stock transactions. A company repurchased 1,000 shares of its $2 par common stock on September 30 for $20 per share. On October 2, it reissued 400 of these shares at $21 per share. On October 12, it reissued the remaining 600 shares at $19 per share. The journal entry to record the reissuance of the shares on October 2 would be:
Answer: Please refer to Explanation
Explanation:
The following will be the journal entry on October 2nd
October 2
DR Cash $8,400
CR Treasury Stock $8,000
CR Additional Paid-in Capital $400
(To record reissuance of Treasury Stock)
Workings
Cash = 400 * 21
= $8,400
Treasury Stock = 400 * 20 (purchase price)
= $8,000
Additional Paid-in Capital = (21 - 20) * 400
= $400
Tiki Corporation had net income of $120,000 during the year. Depreciation expense was $6,000. The following information is available: Held- to-Maturity Bonds purchased25,000increase Common Stock issued70,000increase Accounts Receivable10,000decrease Accounts Payable15,000increase Gain on sale of AFS Investment5,000increase What amount should Tiki report as net cash provided by operating activities in its statement of cash flows for the year
Answer:
Tiki should report $101,000 as net cash provided by operating activities in its statement of cash flows for the year.
Explanation:
Tiki Corporation
Statement of cash flows (extract)
Net income $120,000
Add: Depreciation expense 6,000
Less: Increase Accounts Receivable (10,000)
Less: Decrease in Accounts Payable (15,000)
Net cash flows from operating activities $101,000
Running Co. had an equity investment where it owned less than 20% of an investee, and therefore Running Co. was not able to exercise significant influence. Information about the investment is below: 20X1 20X2 Investment cost 170,000 170,000 Fair value 181,400 155,000 Total unrealized gain (loss) 11,400 (15,000) The company sold the investment during 20X3 for the below price: Sales price 192,400 What is the gain (loss) recorded in the income statement in the year of sale, in 20X3
Answer:
Gain or Loss to be reocrded in Financial Statement: 151600 - 155000= 3400 loss to be booked as Fair value recorded in the books as in year ended 20X2 is 155000.
On April 1, a company purchased two units of inventory, A and B. The cost of unit A was $640, and the cost of unit B was $550. On April 30, the company had not sold the inventory. The net realizable value of unit A was now $660 while the net realizable value of unit B was $480. The adjustment associated with the lower of cost and net realizable value on April 30 will be:
Answer: b
Explanation:
CSUSM is a zero growth company. It currently has zero debt and its earnings before interest and taxes (EBIT) are $85,000. CSUSM 's current cost of equity is 11%, and its tax rate is 21%. The firm has 15,000 shares of common stock outstanding. Assume that CSUSM is considering changing from its original capital structure to a new capital structure with 39% debt and 61% equity. This results in a weighted average cost of capital equal to 8.7% and a new value of operations of $576,345. Assume CSUSM raises $165,000 in new debt and purchases T-bills to hold until it makes the stock repurchase. What is the stock price per share immediately after issuing the debt but prior to the repurchase?
Answer:
Check the explanation
Explanation:
Calculation of CSUSM 's New value of Operation :
For the purpose of Calculation of New Value of Operation we need to first calculate new WACC
Given :
Debt value ( Wd) = 30% or 0.30
Equity Value ( We)= 70% or 0.70
Cost of Debt ( Kd) =8%
New cost of equity (Ke) =12%
WACC =Kd(1-T) * Wd + Ke* We
WACC =[8%(1-0.40) * 0.30] + [12% * 0.70]
= [4.80% * 0.30 ] + [8.4 %]
= 1.44% + 8.4%
= 9.84 %
Given EBIT = $ 80,000
Tax rate = 40%
Currently the company has no growth. Therefore growth rate is 0 %
Value of New Operation =FCF / WACC
=EBIT (1-T) / WACC
=$80,000 (1-0.40)/ 9.84%
= $ 487,804.88
Wicker Rockers, Inc. is planning to offer a defined contribution plan for its employees. The company would like to incorporate a "cliff" vesting schedule for the employer contributions into the plan. What is the minimum vesting period the company can choose for a "cliff" vesting schedule
Answer:3 years
Explanation:
Cliff vesting is when an employee of a company becomes fully vested on a specified date rather than the employee becoming partially vested in increasing amounts over extended period. Cliff Vesting is a process whereby the employees are entitled to full benefits from their firm’s pension policies and qualified retirement plans on a given date.
Upon the completion of the cliff period, employees receive full benefits. The Pension Protection Act of 2006 deduced a three-year cliff vesting schedule for the designated defined-contribution plans which includes 401Ks.
(Working with the balance sheet) The Caraway Seed Company grows heirloom tomatoes and sells their seeds. The heirloom tomato plants are preferred by many growers for their superior flavor. At the end of the most recent year the firm had current assets of $ 48 comma 800, net fixed assets of $ 248 comma 800, current liabilities of $ 28 comma 500, and long-term debt of $ 98 comma 200. a. Calculate Caraway's stockholders' equity. b. What is the firm's net working capital? c. If Caraway's current liabilities consist of $ 18 comma 500 in accounts payable and $ 10 comma 000 in short-term debt (notes payable), what is the firm's net working capital? a. Calculate Caraway's stockholders' equity.
Answer:
A. $170,900
B. $20,300
C. $ 19,800
Explanation:
A. Accounting Equation ;
Assets = Equity + Liabilities
Therefore Equity = Assets - Liabilities
Total Assets - Caraway Seed Company
Current assets $ 48,800
Net fixed assets $ 248,800
Total Assets $ 297,600
Total Liabilities - Caraway Seed Company
current liabilities $ 28,500
long-term debt $ 98,200
Total $126,700
Equity = $ 297,600 - $126,700 = $170,900
B. Net working capital = Current Assets - Current liabilities
= $ 48,800 - $ 28,500
= $20,300
C. Net working capital = Current Assets - Current liabilities
= $ 48,800 - ( $18,500 + 10,500)
= $ 19,800
A company's income statement showed the following: net income, $117,000; depreciation expense, $31,500; and gain on sale of plant assets, $5,500. An examination of the company's current assets and current liabilities showed the following changes as a result of operating activities: accounts receivable decreased $9,700; merchandise inventory increased $19,500; prepaid expenses increased $6,500; accounts payable increased $3,700. Calculate the net cash provided or used by operating activities. Multiple Choice $143,400. $141,400. $148,200. $130,400. $169,400.
Answer:
$130,400
Explanation:
The computation of net cash provided or used by operating activities is shown below:-
Net cash provided or used by operating activities
Net income $117,000
Depreciation expense $31,500
Gain on sale of plant assets ($5,500)
Accounts receivable decreased $9,700
Increase inventory ($19,500)
Prepaid expenses increased ($6,500)
Increase account payable $3,700
Net cash flow from
operating activities $130,400
Therefore the Net cash flow from operating activities is $130,400
Destiny Corporation is preparing its statement of cash flows by the indirect method. Destiny has the following items for you to consider in preparing the statement:
O+ a. Increase in accounts payable
F- b. Payment of dividends
O- c. Decrease in accrued liabilities
F+ d. Issuance of common stock
O- e. Gain on sale of building
O+ f. Loss on sale of land
O+ g. Depreciation expense
O- h. Increase in merchandise inventory
O+ i. Decrease in accounts receivable
I- j. Purchase of equipment
Answer:
O+ a. Increase in accounts payable
F- b. Payment of dividends
O- c. Decrease in accrued liabilities
F+ d. Issuance of common stock
O- e. Gain on sale of building
O+ f. Loss on sale of land
O+ g. Depreciation expense
O- h. Increase in merchandise inventory
O+ i. Decrease in accounts receivable
I- j. Purchase of equipment
Explanation:
The requirement of the question is to indicate whether each of the items is an addition to addition to net income (O+) or subtraction (O-) under operating activities section, investing activity (cash inflow I+), (cash outflow I-),financing activity (cash inflow F+), (cash outflow F-) and activity not used to prepare the cash flows.
All the signs above are correct.
Demand for consumer goods is necessarily variable. Forecasting the demand for consumer goods is an important business activity, as all businesses have to plan ahead. Manufacturer of consumer goods has been studying the demand for one of their products and the level of demand is given in the following stem and leaf plot, where stem unit is 100 and leaf unit is 10. Stem Leaf 1 1, 2, 3, 4.5, 5, 6, 7, 7, 9, 9.5 2 0, 0, 0, 0, 0, 0, 0, 0, 1, 1, 2, 4, 5, 7, 9 3 0, 0, 0, 2, 8 4 5 0 6 7 8 0 9 10 11 12 0 The outer fences are ___________.
Answer:
7.5 to 467.5.
Explanation:
Please note that In order to be fast, I make use of excel during the Calculation.
So, the first thing to do is to make sure that the observation is arranged in an increasing order.
Step one: Calculate the value for J1 and J3.
Know that J1 = J3. Where J3 = 3rd quartile.
Hence, J1 = 1st QUARTILE = QUARTILE. EXC (data, 1) = 18.
Also, J3 = QUARTILE. EXC(data, 3). = 29.5.
Therefore, the difference between the first quartile and the third QUARTILE = 29.5 - 18 = 11.5.
Step two: calculate the value for the higher fence and the lower fence respectively.
Thus, for the higher fence we have;
J3 + 1.5( 11.5).
= 29.5 + 1.5(11.5).
= 46.75.= (46.75 × 10) = 467.5).
Then, for the lower fence;
J1 - 1.5( 11.5).
= 18 - 1.5(11.5).
= 0.75 = (.75 × 10) = 7.5.
Red Co. acquired 100% of Green, Inc. on January 1, 2017. On that date, Green had land with a book value of $42,000 and a fair value of $52,000. Also, on the date of acquisition, Green had a building with a book value of $200,000 and a fair value of $390,000. Green had equipment with a book value of $350,000 and a fair value of $280,000. The building had a 10-year remaining useful life and the equipment had a 5-year remaining useful life. In Red’s December 31, 2017 consolidated worksheet, what total amount of excess fair over book value amortization expense adjustments should Red recognize resulting from its 100% acquisition of Green?
Answer:
$5,000
Explanation:
The computation of total amount of excess fair over book value amortization expense adjustments to be recognized by red is shown below:-
Excess of fair value over book value = Land fair value - Land book value
= $52,000 -$42,000
= -$10,000
Here land is not amortized
Excess of fair value over book value = Building fair value - Building book value
= $390,000 - $200,000
= $190,000
Excess fair value over book value amortization expense adjustments to be recognized by red = Excess of fair value over book value of building ÷ Number of Years
= $190,000 ÷ 10
= $19,000
Excess of fair value over book value = Equipment fair value - Equipment book value
= $280,000 - $350,000
= ($70,000)
Excess fair value over book value amortization expense adjustments to be recognized by red for equipment = Excess of fair value over book value of equipment ÷ Number of Years
= ($70,000) ÷ 5
= ($14,000)
Total amount of excess fair over book value amortization expense adjustments to be recognized by red
= $19,000 - $14,000
= $5,000
At December 31, the unadjusted trial balance of H&R Tacks reports Software of $34,500 and and zero balances in Accumulated Amortization and Amortization Expense. Amortization for the period is estimated to be $6,900. Prepare the adjusting journal entry on December 31. Prepare the T-accounts for each account, enter the unadjusted balances, post the adjusting journal entry, and report the adjusted balance.
Answer:
Dr amortization expense $6,900
Cr Accumulated amortization $6,900
Explanation:
The adjusting journal on 31 December is to reflect the amortization charge of $6,900 in both accumulated amortization and amortization expense accounts.
Find attached t-accounts,note that amortization expense account would not have a closing balance as the amount of amortization is written to income statement
The Brenmar Sales Company had a gross profit margin (gross profitsdivided bysales) of 26 percent and sales of $ 8.3 million last year. 78 percent of the firm's sales are on credit, and the remainder are cash sales. Brenmar's current assets equal $ 1.9 million, its current liabilities equal $ 298 comma 900, and it has $ 108 comma 800 in cash plus marketable securities. a. If Brenmar's accounts receivable equal $ 562 comma 300, what is its average collection period? b. If Brenmar reduces its average collection period to 15 days, what will be its new level of accounts receivable? c. Brenmar's inventory turnover ratio is 9.2 times. What is the level of Brenmar's inventories?
Answer:
a. 31.70 days
b. $266,054.79
c. $667,608.70
Explanation:
a. If Brenmar's accounts receivable equal $ 562 comma 300, what is its average collection period?
Credit sales = $8,300,000 * 78% = $6,474,000
Average collection period = (Accounts receivable / Credit sales) * 365 = ($562,300 / $6,474,000) * 365 = 31.70 days
b. If Brenmar reduces its average collection period to 15 days, what will be its new level of accounts receivable?
Average Collection Period=365*Account Receivables/Credit Sales
New Account Receivables =Average Collection Period * (Credit Sales / 365) = 15 * ($6,474,000 / 365) = $266,054.79
c. Brenmar's inventory turnover ratio is 9.2 times. What is the level of Brenmar's inventories?
Gross Profit = Sales * Gross Profit Margin = $8,300,000 * 26% = $2,158,000
Cost of goods sold = Sales - Gross Profit = $8,300,000 - 2,158,000 = $6,142,000
Inventory = Cost of goods sold / Inventory Turnover Ratio = $6,142,000 / 9.2 = $667,608.70
(1) Reporting of Capital Assets. Are capital assets reported as a line-item in the government-wide statement of net position? Are nondepreciable capital assets reported on a separate line from depreciable capital assets, or are they separately reported in the notes to the financial statements? Do the notes include capital asset disclosures, such as those for the City and County of Denver shown in Illustration 5–2? Does the disclosure show beginning balances, increases and decreases, and ending balances for each major class of capital assets, as well as the same information for accumulated depreciation for each major class? Are these disclosures presented separately for the capital assets of governmental activities, business-type activities, and discretely presented component units? Do the notes specify capitalization thresholds for all capital assets, including infrastructure? Do the notes show the amounts of depreciation expense assigned to each major function or program for governmental activities at the government-wide level? Are the depreciation policies and estimated lives of major classes of depreciable assets disclosed? Do the notes include the entity’s policies regarding capitalization of collections of works of art and historical treasures? If collections are capitalized, are they depreciated?
Answer:
Principal resources are reported as a line-item within the management wide declaration of net situation. Non-depreciable principal resources are individually reported within the proceedings to the money declarations. The revealing expressions starting equilibriums, will increase and reduces, and finish stabilities for every main category of principal assets, yet because the same info for accrued devaluation for every key category. These revelations are given individually for the wealth assets of administrative actions, occupational sort actions, and unnoticeably given part units. The summaries stipulate capitalization inceptions for all principal assets, together with arrangement. The summaries display the quantities of devaluation expenditure assigned to every major operate or package for administrative actions at the government-wide flat. The decline strategies and calculable lives of main categories of depreciable resources are released. Summaries do reveal the strategies relating to capitalization of assortment of skills and historic materials if some. These collectibles aren't criticized however market price of those art effort is measured to reason gain/ injury at the year finish. Accounting strategies for possessions no inheritable underneath capita tenancy are obviously mere
The largest national herbal supplement store is running a sale on its excess supply of Vitamin C supplements. With this new price change what do you think will happen to the Vitamin C supplement market? a. There will be a shift if the demand curve as demand increases. b. There will be an increase only in the quantity demanded. c. There will be a decrease in the quantity demanded. d. There will be a shift in the supply curve as supply increases.
Answer:
b. There will be an increase only in the quantity demanded.
Explanation:
The law of demand states that the higher the price, the lower the quantity demanded and the lower the price, the higher the quantity demanded.
So if there's a sale, vitamin c would become cheaper and the quantity demanded would increase. This would lead to a movement along the demand curve and not a shift.
I hope my answer helps you
Cesar Ruiz was reviewing his company's activities at the end of the year (2017) and decided to prepare a retained earnings statement. At the beginning of the year his assets were $530,000, liabilities were $140,000, and common stock was $120,000. The net income for the year was $250,000. Dividends of $220,000 were paid during the year. Prepare a retained earnings statement in good form. (List items that increase retained earnings first.) CESAR RUIZ COMPANY Retained Earnings Statement $ : : $ Click if you would like to Show Work for this question: Open Show Work
Answer:
Retained earnings is $300,000
Explanation:
The first task here that would aid the preparation of retained earnings statement for the current year is to first of determine the retained earnings for last year based on the information provided.
Retained earnings opening=Assets-liabilities-common stock
=$530,000-$140,000-$120,000=$270,000
Retained earnings statement for the current year
Opening retained earnings $270,000
net income for the year $250,000
Total earnings $520,000
dividends ($220,000)
Closing retained earnings $300,000
Retained earnings are $300,000, and the retained earning statement is given in the image below.
What is retained earning?After paying all direct and indirect costs, income taxes, and dividends to shareholders, a company's retained profits are the amount of profit left over.
This is the portion of the company's equity that can be utilized to invest in new equipment, research and development, and marketing.
Computation of Opening mount of retained earning:
[tex]\text{Ope. Retained Earnings}= \text{Assets - liabilities - Common Stock}\\\text{Ope. Retained Earnings}= \$5,30,000-\$1,40,000-\$1,20,000\\\text{Ope. Retained Earnings}= $270,000[/tex]
Therefore, retained earning statement is given in the image below.
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Suppose the market supply curve is p=5Q at a price of 10 , producer surplus equals
Answer: $10
Explanation:
The market supply curve is an upward sloping curve that depict the positive relationship that exists between the price and quantity supplied. It is derived by summing the quantity that the suppliers are willing to produce when the goods can be sold for a given price.
Suppose the market supply curve is p=5Q at a price of 10 , the producer surplus will be:
Producer surplus= (base × height)/2
Producer surplus = (2 × 10)/2
= 20/2
= $10
Given a supply curve of p = 5q, the producer surplus is equal to $10
From this question we have been given the price to be = p = 10
The formula says p = 5Q
10 = 5Q
Therefore Q= 10/5
Q = 2
Using the formula of area of a triangle,
1/2 * Base * height
We have the base = 2
While the height = 10
1/2*10*2
0.5*20
= 10
Therefore given a supply curve of p = 5q, the producer surplus is equal to $10
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Nicholas Health Systems recently reported an EBITDA of $25.0 million and net income of $15.8 million. It had $2.0 million of interest expense, and its federal tax rate was 21% (ignore any possible state corporate taxes). What was its charge for depreciation and amortization
Answer:
Depreciation and Amortization= $3,000,000
Explanation:
Giving the following information:
Nicholas Health Systems recently reported an EBITDA of $25.0 million and a net income of $15.8 million. It had $2.0 million of interest expense, and its federal tax rate was 21%
We need to reverse engineer the net income calculation to determine the depreciation and amortization:
EBT= net income/(1-t)
EBT= 15,800,000/(1 - 0.21)
EBT= 20,000,000
EBIT= EBT + Interest
EBIT= 20,000,000 + 2,000,000
EBIT= 22,000,000
Now, we can determine D and A:
D and A= EBITDA - EBIT
DA= 25,000,000 - 22,000,000
DA= 3,000,000
You are given the following information about 2 accounts: Account 1 Time Account Value before transactions Deposit Withdrawal 0 100 0.25 110 X 0.75 120 3X 1 82 Account 2 Time Account Value before transactions Deposit Withdrawal 0 100 0.5 120 2X 1 140 You are also told that the dollar weighted return over the year on account 1 is i. If the time weighted return over the year on account 2 is also i, what are X and i
Answer:
Check the explanation
Explanation:
For account 1:
Dollar weighted investment = 100 for entire year + X for three fourth of the year - 3X for one fourth of the year = 100 + 3X/4 - 3X/4 = 100
Dollar return = Closing balance - opening balance - (Total deposit - total withdrawal) = 82 - 100 - (X - 3X) = 2X - 18
Hence, dollar weighted return = i = Dollar return / Dollar weighted investment = (2X - 18) / 100
Or, 100i = 2X - 18 Or, 50i = X - 9
For account 2:
Time weighted return: It has two components:
100 growing to 120 in 0.5 year
Immediately after deposit of 2X, the capital becomes 120 + 2X that grows to become 140 in the next 0.5 year
Hence time weighted return = 1 + i = 120 / 100 x 140 / (120 + 2X) = 168 / (120 + 2X) = 84 / (60 + X)
From the first equation, i = (X - 9) / 50
Hence, from second equation, 1 + i = 1 + (X - 9) / 50 = (41 + X) / 50 = 84 / (60 + X)
Hence, (60 + X).(41 + X) = 50 x 84
Hence, X2 + 101X + 2,460 = 4,200
Or, X2 + 101X - 1,740 = 0
It's a quadratic equation that can be factorized as:
(X - 15).(X + 116) = 0
Hence, X = 15
Hence, i = (X - 9) / 50 = (15 - 9) / 50 = 0.12 = 12%
Pollution Busters Inc. is considering a purchase of 10 additional carbon sequesters for $120,000 apiece. The sequesters last for only 1 year before becoming saturated. Then the carbon is sold to the government. a. Suppose the government guarantees the price of carbon. At this price, the payoff after 1 year is $140,400 for sure. How would you determine the opportunity cost of capital for this investment? b-1. Suppose instead that the sequestered carbon has to be sold on the London Carbon Exchange. Carbon prices have been extremely volatile, but Pollution Busters’ CFO learns that average rates of return from investments on that exchange have been about 22%. She thinks this is a reasonable forecast for the future. What is the opportunity cost of capital in this case? b-2. If the expected return on the investment is still 17%, but instead depends on the price of carbon (so that it is no longer risk-free), then is the purchase of additional sequesters an attractive investment for the firm?
Answer:
(a) 17% (b) the purchase of additional sequesters an attractive investment for the firm is worthwhile investment if no other similar project offers a higher return of over 17%, which in this case here is 17%.
Explanation:
Solution:
(a) Calculate the opportunity cost of capital
Opportunity cost of capital = pay off at one year/Current investment
= $140,400-$120,000/$120,000
=20,400/120,000 = 0.17 or 17%
What it means is that, the project offers a guarantee of 17% return. it should be accepted unless another project offers a higher return of over 17%
(b) The opportunity cost of capital, if the sequestered carbon has to be sold on the London Carbon Exchange which is simply the average rate of return of investment.
Therefore the opportunity cost per capital in this case is 22%
The purchase of additional sequesters an attractive investment for the firm is worthwhile investment if no other similar project offers a higher return of over 17%, which in this case here is 17%.
30. Oriole, Inc. leased equipment from Tower Company under a 4-year lease requiring equal annual payments of $254,152, with the first payment due at lease inception. The lease does not transfer ownership, nor is there a bargain purchase option. The equipment has a 4 year useful life and no salvage value. Oriole, Inc.’s incremental borrowing rate is 11% and the rate implicit in the lease (which is known by Oriole, Inc.) is 9%. Assuming that this lease is properly classified as a finance lease, what is the amount of Lease Liability reduction recorded in first year after the lease inception?
Answer:
$897,484.
Explanation:
Given:
Annual Payment = $254,152
The following company's average loan rate seems to be 11 per cent as well as the implied cost of the contract recognized by the company is 9 per cent.
Thus, the price implied in the contract that is recognized to the company would be 9 per cent although the contract doesn't often shift possession unless there is a negotiating opportunity to buy.
Let the lease year to Y = 4, and I = 9%
So, current value of the annuity is Y=4, I = 9% i.e., 3.53129
So, the cost documented for the contracted asset at the beginning of the contract [tex]=254,152\times3.53129=897,484[/tex]
Amount documented at the beginning of the contract for such contracted asset = $897,484
Enviro Company issues 8%, 10-year bonds with a par value of $300,000 and semiannual interest payments. On the issue date, the annual market rate for these bonds is 10%, which implies a selling price of 87 1/2. The straight-line method is used to allocate interest expense. 1. Using the implied selling price of 87 ½, what are the issuer's cash proceeds from issuance of these bonds? 2. What total amount of bond interest expense will be recognized over the life of these bonds? 3. What is the amount of bond interest expense recorded on the first interest payment date?
Answer:
1. Issuer's cash is $262,500
2. Total amount of bond interest is $277,500
3. The amount of bond interest expense is $13,875.
Explanation:
1. Issuer's cash = Face Value × Selling Price
Issuer's cash = $300,000 × 87.50%
Issuer's cash = $262,500
2. Discount on bond = $300,000 × 12.5% = $37,500
Interest on bond = $300,000 × 8% = $24,000
Period of bonds= 10 years
Total amount of bond interest = Discount on Bond + (Interest on Bond × period)
Total amount of bond interest = $37,500 + ($24,000 × 10)
Total amount of bond interest = $277,500
3. Discount on bond = $300,000 × 12.5% = $37,500
Interest on bond = $300,000 × 8% = $24,000
Period = 0.5 years
The amount of bond interest expense = (Discount of Bond ÷ 20) + Interest
The amount of bond interest expense = ($37,500 ÷ 20) + ($24,000 × 0.5)
The amount of bond interest expense = $1,875 + $12,000
The amount of bond interest expense = $13,875.
During the current year, Sun Electronics, Incorporated, recorded credit sales of $780,000. Based on prior experience, it estimates a 2 percent bad debt rate on credit sales. a. On November 13 of the current year, an account receivable for $380 from a prior year was determined to be uncollectible and was written off. b. At year-end, the appropriate bad debt expense adjustment was recorded for the current year.
Answer and Explanation:
According to the scenario, computation of the given data are as follow:-
Effects on transaction:-
Transactions Assets Amount($) Stockholder’s equity Amount($)
a. Accounts receivable ($380) Bad-debt expense(780,000×2%) ($15,600)
Allowance for doubtful accounts $380
b. Allowance for doubtful accounts = ($780,000 × 2÷100) = ($15,600)
Marks Corporation's balance sheet appears below: Comparative Balance Sheet Ending Balance Beginning Balance Assets: Cash and cash equivalents $ 47 $ 37 Accounts receivable 53 57 Inventory 63 60 Property, plant, and equipment 548 440 Less accumulated depreciation 295 255 Total assets $ 416 $ 339 Liabilities and stockholders' equity: Accounts payable $ 52 $ 50 Bonds payable 260 250 Common stock 51 50 Retained earnings 53 (11 ) Total liabilities and stockholders' equity $ 416 $ 339 Net income for the year was $77. Cash dividends were $13. The company did not dispose of any property, plant, and equipment, retire any bonds payable, or repurchase any of its own common stock during the year. Required: Prepare a statement of cash flows in good form using the indirect method.
Answer:
statement of cash flows using the indirect method.
Cash Flow from Operating Activities
Net income for the year was $77
Adjustment of Non-Cash Items :
Depreciation $40
Adjustment for Working Capital items:
Decrease in Accounts receivable $4
Increase in Inventory ($3)
Increase in Accounts Payable $2
Net Cash From Operating Activities $120
Cash Flow from Investing Activities
Purchases of Property, plant, and equipment ($108)
Net Cash used in Investing Activities ($108)
Cash Flow from Financing Activities
Proceeds from Common Stock Issue $1
Dividends Paid ($13)
Net Cash used in Financing Activities ($12)
Net Cash Inflow/(Outflow) during the period $10
Cash and Cash Equivalents at Beginning of the Period $37
Cash and Cash Equivalents at End of the Period $47
Explanation:
Show the Movement of Cash in the 3 categories of
Cash flow from Operating ActivitiesCash flow from Investing ActivitiesCash flow from Financing ActivitiesPrepare the following journal entries in proper journal entry form. 1. Billed a customer for a $2,400 job. 2. Received $4,800 to start an eight-month job, beginning next month. 3. Started a company by contributing equipment worth $5,400, land worth $180,000 and cash of $30,000 into a business checking account.
Answer and Explanation:
The Journal entry is shown below:-
1. Accounts receivable Dr, $2,400
To Service revenue $2,400
(Being services revenue is recorded)
Here we debited the accounts receivable as it increased the assets and we credited the service revenue as it increased the revenue
2. Cash Dr, $4,800
To Unearned revenue $4,800
(Being unearned revenue is recorded)
Here we debited the cash as it increased the assets and we credited the unearned revenue as it increased the liabilities
3. Equipment Dr, $5,400
Land Dr, $180,000
Cash Dr, $30,000
To Capital $215,400
(Being assets investment is recorded)
Here we debited the equipment, land and cash as it increased the assets and we credited the capital as it increased the liabilities
Service Department Charges In divisional income statements prepared for Demopolis Company, the Payroll Department costs are charged back to user divisions on the basis of the number of payroll distributions, and the Purchasing Department costs are charged back on the basis of the number of purchase requisitions. The Payroll Department had expenses of $64,560, and the Purchasing Department had expenses of $40,000 for the year. The following annual data for Residential, Commercial, and Government Contract divisions were obtained from corporate records: ResidentialCommercialGovernment Contract Sales$2,000,000 $3,250,000 $2,900,000 Number of employees: Weekly payroll (52 weeks per year)400 250 150 Monthly payroll80 30 10 Number of purchase requisitions per year7,500 3,000 2,000 a. Determine the total amount of payroll checks and purchase requisitions processed per year by the company and each division.
Answer and Explanation:
The computation of the total amount of payroll checks and purchased requisitions processed per year is shown below:
Particulars Residential Commercial Government Contract Total
Number of payroll checks:
Weekly payroll $20,800) $13,000 $7,800 $41,600
(400 × 52 weeks) (250 × 52 weeks ) (150 × 52 weeks)
Monthly payroll $960 $360 $120 $1,440
(80 × 12) (30 × 12) (10 × 12)
Total $21,760 $13,360 $7,920 $43,040
Number of purchase requisitions per year 7,500 3,000 2,000 12,500
The predetermined overhead rate for Zane Company is $5, comprised of a variable overhead rate of $3 and a fixed rate of $2. The amount of budgeted overhead costs at normal capacity of $150000 was divided by normal capacity of 30000 direct labor hours, to arrive at the predetermined overhead rate of $5. Actual overhead for June was $9500 variable and $6050 fixed, and standard hours allowed for the product produced in June was 3000 hours. The total overhead variance is
Answer:
Total Overhead Variance= $500 unfavorable
Explanation:
The total overhead variance is the difference between actual overhead and the applied overhead.
Actual Overhead = Variable + Fixed= $9500 + $6050= $ 15,550
Budgeted Overhead for 30000 direct labor hours = $ 150,000
Applied Overhead for 3000 hours = 3000 *$5= $15000
Total Overhead Variance= Actual Overhead Less Applied Overhead
= $15,500- $ 15000= $500 unfavorable
As actual is greater than applied it is unfavorable.
Answer:
$550 unfavorable.
Explanation:
Total actual overhead = $9,500 + $6,050 = $15,550
Total predetermined overhead = Predetermined overhead rate * Standard hours = $5 * 3,000 = $15,000
Total overhead variance = $15,550 - $15,000 = $550 unfavorable.
Note: It is unfavorable because total actual is greater than total predetermined overhead.
