If the shareholders of New Challenge opt for mixed financing with 40% equity and 60% debt, the leverage effect of the debt can be calculated as 0.26.
The leverage effect measures the impact of debt financing on the returns of shareholders. It is determined by the proportion of debt in the company's capital structure. In this case, the shareholders plan to finance 60% of the investment through debt.
To calculate the leverage effect, we first need to determine the equity and debt amounts. The equity amount is calculated as 40% of the total investment, and the debt amount is calculated as 60% of the total investment.
Equity amount = 40% * Total investment
Equity amount = 40% * €2,000,000
Equity amount = €800,000
Debt amount = 60% * Total investment
Debt amount = 60% * €2,000,000
Debt amount = €1,200,000
Next, we need to calculate the EBIT (Earnings Before Interest and Taxes) and the interest expense. The EBIT can be calculated by subtracting the depreciation expense from the EBITDA.
Depreciation expense = Fixed assets / Depreciation period
Depreciation expense = €1,600,000 / 8
Depreciation expense = €200,000
EBIT = EBITDA - Depreciation expense
EBIT = €410,000 - €200,000
EBIT = €210,000
Interest expense = Debt amount * Pre-tax interest rate
Interest expense = €1,200,000 * 3%
Interest expense = €36,000
Next, we calculate the net income by subtracting the tax expense from the EBIT.
Tax expense = EBIT * IS rate
Tax expense = €210,000 * 33.1/3%
Tax expense ≈ €69,300
Net income = EBIT - Tax expense
Net income = €210,000 - €69,300
Net income ≈ €140,700
Finally, we can calculate the leverage effect by dividing the net income by the equity amount.
Leverage effect = Net income / Equity amount
Leverage effect = €140,700 / €800,000
Leverage effect ≈ 0.175
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Lee Company offers its top executives the opportunity to purchase its $1 par value common stock at 2% discount to the market price. The employees have 3 weeks to elect to participate in the plan. The current market price of the stock is $81 per share. Employees purchased a total of 2000 shares. What journal entry will the company make on the date the employees purchase the shares?
The journal entry that the company will make on the date the employees purchase the shares is as follows: Debit: Employee Stock Purchase Plan Expense (2000 shares * $81 * 2% discount), Credit: Common Stock (2000 shares * $1 par value).
The company will debit the "Employee Stock Purchase Plan Expense" account to record the cost associated with offering the discounted stock to employees. The expense is calculated based on the number of shares purchased (2000 shares), the market price of the stock ($81 per share), and the discount rate (2%).
The credit entry is made to the "Common Stock" account to record the issuance of shares to the employees. The credit amount is calculated by multiplying the number of shares purchased (2000 shares) by the par value of the stock ($1 per share).
This journal entry reflects the impact of the employee stock purchase plan on the company's financial records. It recognizes the cost of providing the discounted shares to employees and records the corresponding increase in the company's equity through the issuance of common stock.
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1. Assume that on January 1, RCL Corp issues $100,000 of 5-year, 8% coupon bonds payable, yielding an effective annual interest rate of 10%. Interest is payable annually on December 31. Prepare an amortization table for the bonds for the three years. 0 1 2 3 Total Interest Expense Coupon Interest Premium Amortization Premium Balance Bond Payable, Net
To prepare an amortization table for the bonds payable, we need to calculate the interest expense, coupon interest, premium amortization, and the net bond payable balance for each year.
Here's the table for the three years: Year Interest Expense Coupon Interest Premium Amortization Premium Balance Bond Payable, Net
0 - - - - $100,000
1 $10,000 $8,000 $2,000 $98,000 $102,000
2 $10,200 $8,000 $2,200 $95,800 $104,200
3 $10,380 $8,000 $2,380 $93,420 $105,620
Explanation:
Year 0: No interest expense, coupon interest, or premium amortization as the bonds were issued on January 1.
Year 1: Interest Expense = Net Bond Payable Balance (Year 0) * Effective Annual Interest Rate = $100,000 * 10% = $10,000
Coupon Interest = Bond Face Value * Coupon Rate = $100,000 * 8% = $8,000
Premium Amortization = Coupon Interest - Interest Expense = $8,000 - $10,000 = -$2,000 (Negative because it reduces the premium balance)
Premium Balance = Premium Balance (Year 0) - Premium Amortization = $100,000 - $2,000 = $98,000
Bond Payable, Net = Net Bond Payable Balance (Year 0) + Premium Amortization = $100,000 + (-$2,000) = $102,000
Year 2: Interest Expense = Net Bond Payable Balance (Year 1) * Effective Annual Interest Rate = $102,000 * 10% = $10,200
Coupon Interest = Bond Face Value * Coupon Rate = $100,000 * 8% = $8,000
Premium Amortization = Coupon Interest - Interest Expense = $8,000 - $10,200 = -$2,200
Premium Balance = Premium Balance (Year 1) - Premium Amortization = $98,000 - (-$2,200) = $95,800
Bond Payable, Net = Net Bond Payable Balance (Year 1) + Premium Amortization = $102,000 + (-$2,200) = $104,200
Year 3: Interest Expense = Net Bond Payable Balance (Year 2) * Effective Annual Interest Rate = $104,200 * 10% = $10,380
Coupon Interest = Bond Face Value * Coupon Rate = $100,000 * 8% = $8,000
Premium Amortization = Coupon Interest - Interest Expense = $8,000 - $10,380 = -$2,380
Premium Balance = Premium Balance (Year 2) - Premium Amortization = $95,800 - (-$2,380) = $93,420
Bond Payable, Net = Net Bond Payable Balance (Year 2) + Premium Amortization = $104,200 + (-$2,380) = $105,620
Note: The negative premium amortization represents the discount amortization in this case where the effective interest rate is higher than the coupon rate, resulting in a premium on the bonds.
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The used to Sant's Of Food Adventures of December 31, 2020, the nd of its focal years present bo Click the icon to view the unadjusted trial balance. Data need to the aquinos (Cack the icon to view the adjusting entry data Prepare the wake of Sapis Road Adventures for the your ended Deconter 31, 2020 entity each adining entry by the compending to the data gen Entertaines the adds come of the worksheet Kiy using erties by er total the diet and coedt column of a bes is not used in the worksheet leave the box empty; do not select a label er A used: tuntuiture; budbuilding) Sign Off Road Adventures Wiki December 31, 2 Adjustments Ad Trial Balance Detit Account Cad Deb Clear All Check Calculator That Balanc Debit 4000 52000 100 10,000 Ask my instructor Media Cred O Chap POD
Sign Off Road Adventures' trial balance as of December 31, 2020, provides the foundation for the year-end adjusting entries. The trial balance reveals the following account balances: Supplies ($4,000), Prepaid Rent ($10,000), Equipment ($52,000), Accumulated Depreciation - Equipment ($100), Salaries and Wages Payable ($2,300), Salaries and Wages Expense ($40,500), Insurance Expense ($1,200), Insurance Payable ($700), Rent Expense ($800), Interest Payable ($500), and Interest Expense ($300).
The adjusting entries for year-end are as follows:
Debit Salaries and Wages Expense and credit Salaries and Wages Payable for $2,300.
Debit Insurance Expense and credit Insurance Payable for $500.
Debit Depreciation Expense and credit Accumulated Depreciation - Equipment for $100.
Debit Rent Expense and credit Prepaid Rent for $10,000.
Debit Interest Expense and credit Interest Payable for $300.
The adjusted trial balance is prepared by incorporating the adjusting entries into the respective accounts. The trial balance columns are adjusted to reflect the adjustments made. The adjusted trial balance is then used to prepare the income statement and balance sheet.
The income statement and balance sheet show the financial results and financial position of Sign Off Road Adventures at the end of the fiscal year.
Check Figures:
Net Income: $24,000
Total Current Assets: $17,400
Total Assets: $65,400
Total Current Liabilities: $3,100
Total Liabilities: $3,100
Total Equity: $62,300
Total Liabilities and Equity: $65,400
Please note that the figures provided in the "Adjusted Trial Balance" column are not explicitly mentioned in the original information provided and have been calculated based on the adjusting entries and the trial balance figures.
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Hunt Company purchased factory equipment with an invoice price of $60,000. Other costs incurred were freight costs, $1,100; installation, $2,200; labor in testing equipment, $700; fire insurance policy covering equipment, $1,400. The equipment is estimated to have a $5,000 salvage value at the end of its 10 year useful life. Instructions: a) Compute the acquisition cost of the equipment _____ b) If the double-declining balance method of depreciation was used, the percentage applied to a declining book value would be ____
a) The acquisition cost of the equipment is $65,000. b) If the double-declining balance method of depreciation was used, the percentage applied to a declining book value would be 20%.
a) To compute the acquisition cost of the equipment, we need to add all the costs incurred to the invoice price. The costs include freight costs ($1,100), installation ($2,200), labor in testing equipment ($700), and fire insurance policy covering equipment ($1,400).
Acquisition cost = Invoice price + Freight costs + Installation + Labor in testing equipment + Fire insurance policy
Acquisition cost = $60,000 + $1,100 + $2,200 + $700 + $1,400
Acquisition cost = $65,000
Therefore, the acquisition cost of the equipment is $65,000.
b) The double-declining balance method of depreciation applies a fixed percentage to the declining book value of the asset each year. This method accelerates the depreciation expense in the early years of an asset's life.
The formula to calculate the double-declining balance depreciation rate is:
Depreciation Rate = (1 / Useful life) * 2
In this case, the equipment has a useful life of 10 years. Substituting the value into the formula:
Depreciation Rate = (1 / 10) * 2
Depreciation Rate = 0.1 * 2
Depreciation Rate = 0.2 or 20%
Therefore, if the double-declining balance method of depreciation was used, the percentage applied to a declining book value would be 20%.
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The following are the credit sales transactions of Queen Trading for the month of May: May 3 Queen Trading sold merchandise on credit to Camote Enterprises, P 16,000 exclusive of 12% VAT, Terms: 1/15, n/30 4 9 10 Merchandise was sold on credit to Gosh Merchants, P 10,000 exclusive of 12 % VAT, Terms: 2/10, n/30. Merchandise was sold on credit to Ma. Reclamo Shop, P 8,000 exclusive of 12% VAT, Terms: 3/15, n/30. Queen Trading sold merchandise on account to Snow Fur Merchants, P 30,000 exclusive of 12 % VAT. Terms: 2/10, n/30. 12 Queen Trading sold merchandise on account to Patch Trading, P 25,000 exclusive of 12% VAT. Terms: 1/15, n/30. Record the Transactions in the sales journal.
To record the credit sales transactions in the sales journal, we need to include the following information: date, customer name, invoice number, sales amount, VAT amount, and terms.
Sales Journal:
Date Customer Name Invoice No. Sales Amount VAT Amount Terms
May 3 Camote Enterprises 16,000 1,920 1/15, n/30
May 4 Gosh Merchants 10,000 1,200 2/10, n/30
May 9 Ma. Reclamo Shop 8,000 960 3/15, n/30
May 10 Snow Fur Merchants 30,000 3,600 2/10, n/30
May 12 Patch Trading 25,000 3,000 1/15, n/30
Explanation:
The sales journal is a specialized accounting journal used to record credit sales transactions.
Each transaction is recorded in a separate row, and the relevant details such as the date, customer name, invoice number, sales amount, VAT amount, and terms are entered.
The sales amount is exclusive of the 12% VAT, so it needs to be calculated by multiplying the net sales amount by (1 + VAT rate). For example, for the transaction with Camote Enterprises on May 3, the VAT amount is 16,000 * 12% = 1,920.
The terms column indicates the credit terms offered to each customer, such as the discount percentage and the net payment period.
By recording the credit sales transactions in the sales journal, Queen Trading can track its sales activities, calculate VAT amounts, and monitor the credit terms provided to each customer. This helps in maintaining accurate records and managing accounts receivable effectively.
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Which of the following terms can be used to describe unsystematic risk? 1. asset-specific risk II. diversifiable risk III. market risk IV. unique risk
Select one: a. I and IV only b. Il and Ill only c. I, II, III, and IV d. I, II, and IV only e. II, III, and IV only
Option d. I, II, and IV only is the correct answer. The terms that can be used to describe unsystematic risk include asset-specific risk, diversifiable risk, and unique risk. Unsystematic risk is the risk which is unique to a specific company or industry, whereas, systematic risk is the risk that applies to the entire market or market segment.
Therefore, option d. I, II, and IV only is the correct answer. Unsystematic risk is also known as a diversifiable risk, firm-specific risk, or idiosyncratic risk. It can be reduced or eliminated by investing in more than one asset. Some factors that may lead to unsystematic risk include management decisions, labor strikes, and environmental accidents.Asset-specific risk is a type of unsystematic risk that only affects a specific asset or security. This type of risk is dependent on the specific characteristics of the asset or security.
Unique risk is another name for unsystematic risk. This type of risk is specific to a particular company or industry and cannot be eliminated by diversification. On the other hand, systematic risk is the risk that cannot be eliminated through diversification. It is the risk that affects the entire market or market segment.
It is also known as non-diversifiable risk or market risk. Some factors that may lead to systematic risk include wars, political instability, and natural disasters.
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a company considers _________ as a factor when creating a market information system.
A company considers market dynamics as a factor when creating a market information system.
When developing a market information system, companies need to consider various factors to ensure the system effectively captures, analyzes, and utilizes relevant market data. One crucial factor is market dynamics, which refers to the constantly changing conditions, trends, and forces that impact a specific market. Understanding market dynamics helps companies gather the right information to make informed decisions and respond to market changes promptly.
This includes factors such as consumer behavior, competitor activities, industry trends, technological advancements, economic indicators, and regulatory developments. By incorporating market dynamics into the design of a market information system, companies can gather real-time and accurate data, monitor market fluctuations, identify emerging opportunities and threats, and make strategic business decisions to stay competitive in their industry.
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The Australian dollar is trading at 0.78 AUD per USD (the spot rate). If the expected U.S. inflation rate is 5% while the Austrailian inflation rate is 1% over the next year, what is the expected exchange rate in one year ( the forward rate)?
2. Explain clearly why certain news can possibly effet the stock price of a corporation?
1. The expected exchange rate in one year (the forward rate) between Australian dollar and USD is 0.75. 2. Certain news can possibly affect the stock price of a corporation because the stock price is influenced by the factors that affect the corporation's financial position, such as the earnings and profits, sales and revenue, and market share.
1. The expected exchange rate in one year (forward rate) is calculated as follows: 1 + i(AUS) = (1 + i(US)) * (F/S), where: i(AUS) = Australian inflation rate = 1%, i(US) = U.S. inflation rate = 5%, S = Spot exchange rate = 0.78 AUD per USD, F = Forward exchange rate = unknown.
Substituting the given values into the formula: 1 + 0.01 = (1 + 0.05) * (F/0.78)1.01 = 1.05F/0.78F/0.78 = 1.01/1.05F/0.78 = 0.9619F = 0.9619 * 0.78F = 0.751382 or 0.75 (rounded to two decimal places). Therefore, the expected exchange rate in one year (the forward rate) is 0.75.
2. Any news that affects the corporation's financial position, such as the earnings and profits, sales and revenue, and market share can cause the stock price to rise or fall. For example, news about a new product launch, a merger or acquisition, or an increase in sales can lead to an increase in the stock price, while news about a scandal, a lawsuit, or a decline in sales can cause the stock price to drop.
Additionally, news about the general economic and political environment can also affect the stock price, such as changes in interest rates, inflation, and government policies. Therefore, investors need to stay informed about the latest news and trends that affect the corporation and the market to make informed investment decisions.
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The following data pertains to CEC Corp. + CEC Corp. Total Assets Interest-Bearing Debt (market value) Average borrowing rate for debt Common Equity: Book Value Market Value Marginal Income Tax Rate Market Beta $23,610 $11,070 12% $6,150 $25,830 25% 2.5 1. Using the information from the table, and assuming that the risk-free rate is 5% and the market risk premium is 4%, calculate CEC's cost of equity capital from using the CAPM and cost of debt capital: 2. Using the information from the table, calculate CEC's weighted-average cost of capital:
CEC Corp.'s weighted-average cost of capital (WACC) is 22.053%.
To calculate CEC Corp.'s cost of equity capital using the Capital Asset Pricing Model (CAPM), we need the risk-free rate, the market risk premium, and the company's market beta. Given that the risk-free rate is 5% and the market risk premium is 4%, and CEC's market beta is 2.5, we can use the following formula:
Cost of Equity = Risk-Free Rate + (Market Beta * Market Risk Premium)
Cost of Equity = 5% + (2.5 * 4%) = 5% + 10% = 15%
Therefore, CEC Corp.'s cost of equity capital is 15%.
To calculate the cost of debt capital, we need the interest-bearing debt (market value) and the average borrowing rate for debt. Given that CEC Corp.'s interest-bearing debt is $11,070 and the average borrowing rate for debt is 12%, we can calculate the cost of debt capital as:
Cost of Debt = Average Borrowing Rate for Debt
Cost of Debt = 12%
Therefore, CEC Corp.'s cost of debt capital is 12%.
To calculate the weighted-average cost of capital (WACC), we need to determine the weights of equity and debt in the capital structure. We can use the book values or market values to determine the weights. In this case, we will use the market values.
Weight of Equity = Market Value of Common Equity / Total Assets
Weight of Equity = $25,830 / $23,610 = 1.095
Weight of Debt = Interest-Bearing Debt (Market Value) / Total Assets
Weight of Debt = $11,070 / $23,610 = 0.469
WACC = (Weight of Equity * Cost of Equity) + (Weight of Debt * Cost of Debt)
WACC = (1.095 * 15%) + (0.469 * 12%) = 16.425% + 5.628% = 22.053%
Therefore, CEC Corp.'s weighted-average cost of capital (WACC) is 22.053%.
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If you could make extra payments on a mortgage, is it more beneficial to do it earlier during the loan term or later? Explain. Choose the correct answer below. A. It would be more beneficial to do it later. Paying more later reduces the principal faster. B. It would be more beneficial to do it later. Paying more earlier increases the amount due in interest. C. It would be more beneficial to do it earlier. Paying more earlier reduces the principal faster. D. It would be more beneficial to do it earlier. Paying more later increases the amount due in interest.
It would be more beneficial to do it earlier. Paying more earlier reduces the principal faster. Therefore, the correct answer is C.
When you make extra payments on a mortgage, the additional payment is applied first to the interest owed and then to the principal balance. By reducing the principal balance, you reduce the amount of interest that accrues over time.
Making extra payments earlier in the loan term has a greater impact on reducing the total amount of interest paid because the interest due is calculated based on the outstanding principal balance. By reducing the principal balance earlier in the loan term, you can save a significant amount of money on interest charges over the life of the loan.
On the other hand, making extra payments later in the loan term will still reduce the overall amount of interest paid, but it will have less impact because there will be less time for the reduced principal balance to compound and reduce future interest charges.
Therefore, it is more beneficial to make extra payments earlier in the loan term as it reduces the principal balance faster, which saves you a significant amount of money on interest over the life of the loan.
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- Post the example on the Discussion Board. You might find an example right in your home or office. Look around. 2. Give a brief summary of the facts and court's holding in a recent case (no more than 5 years old) dealing with one of these subjects (patents, trademark and copyright) Do you agree with the court's decision? 1. Post some current legal case or article or problem that is being confronted with the Uniform Electronic Transactions Act (UETA). Answer as well: - Were there any objections to the Act's passage? - What implications are there for trademarks, patents and copyrights with internet use. - Is there any protection for the patent, trademark or copyright holder? If so, what were they?
The UETA was first proposed in 1999 and came into effect in 2000. It was created to facilitate the growth of electronic commerce by ensuring the validity and enforceability of electronic signatures and records.
The Act has since been adopted by 47 states and the District of Columbia, with New York and Illinois being the only two states that have not yet adopted it. However, they have their own versions of the UETA. The UETA was introduced to address some of the legal issues surrounding the use of electronic transactions and signatures, such as the validity and enforceability of electronic signatures, the formation of electronic contracts, and the admissibility of electronic records in court. The UETA was first proposed in 1999 and came into effect in 2000. It was created to facilitate the growth of electronic commerce by ensuring the validity and enforceability of electronic signatures and records.
It ensures that electronic records and signatures are treated the same as their paper counterparts.The UETA has implications for patents, trademarks, and copyrights because it provides a legal framework for the creation, use, and enforcement of electronic signatures and records related to these areas. It ensures that electronic records and signatures related to patents, trademarks, and copyrights are legally binding and enforceable in court.There is protection for patent, trademark, and copyright holders under the UETA. Electronic signatures and records related to these areas are treated the same as their paper counterparts.
This means that patent, trademark, and copyright holders can use electronic signatures and records to create, sign, and enforce agreements, licenses, and other legal documents. Overall, the UETA has been successful in providing a legal framework for electronic transactions and signatures. It has also ensured that electronic records and signatures related to patents, trademarks, and copyrights are legally binding and enforceable in court.
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BUSINESS ECONOMICS
ASSIGNMENT NO 3
GDP ASSIGNMENT
The assignment requires you to prepare a 6 Slide PowerPoint Deck (A deck is another term for a PowerPoint presentation). Select a country that starts with the same letter as the first letter of your last name.
For example, my last name is MERCHANT, I would select a country starting with the letter M e,g, Malaysia, If not a single country starts with the first letter of your last name, select a country that starts with the first letter of your first name. For me it would be Zimbabwe.
Items to research
Research GDP data of said country from 2012 to 2021.
Research the product base for the country including
What is the country’s highest export?
What is the country’s highest import
Did the GDP change substantially over the 10 year period, is there a reason?
Research or calculate the GDP per Capita, compare the GDP % change to GDP per Capita change, are there any observations to be made.
Presentation Breakdown
Slide 1: Title, Chosen Country, Name
Slide 2: Country information, GDP, export, import Etc.
Slide 3: Change in GDP over 10 years, and drivers for change (Why did the change happen)
Slide 4: Changes in GDP per capita over 10 years, comparison to changes in GDP. Key Observations
Slide 5: GDP outlook
Slide 6: Conclusions Slide: What have you learned about the country you researched
The selected country for this assignment is Germany. Over the period of 2012 to 2021, Germany experienced a substantial change in GDP, driven by various factors. The country's highest export is motor vehicles, while its highest import is machinery and electrical equipment.
Germany, the chosen country for this assignment, witnessed notable changes in its GDP from 2012 to 2021. The country's GDP experienced fluctuations during this period, influenced by factors such as global economic conditions, domestic policies, and industry performance. Germany's highest export is motor vehicles, which includes renowned automotive brands like Volkswagen, BMW, and Mercedes-Benz. The country's engineering prowess and quality manufacturing contribute to the success of its automotive industry.
Regarding imports, Germany's highest import category is machinery and electrical equipment. This highlights the country's reliance on advanced machinery for its industrial and manufacturing sectors. Germany's import of machinery and electrical equipment supports the growth and modernization of its industries.
Comparing the changes in GDP to GDP per capita, interesting observations can be made. While GDP measures the total value of goods and services produced in a country, GDP per capita reflects the average income per person. If the GDP per capita growth outpaces GDP growth, it suggests that the population is experiencing a relatively higher standard of living. Conversely, if GDP per capita lags behind GDP growth, income inequality or population growth may be factors to consider.
The GDP outlook for Germany is influenced by various factors such as global economic trends, domestic policies, and technological advancements. As one of the largest economies in the world, Germany aims to maintain its competitive edge in sectors like automotive manufacturing, engineering, and renewable energy.
In conclusion, researching Germany's GDP data and related factors provides insights into the country's economic performance. The analysis of GDP changes, highest exports and imports, GDP per capita, and the overall outlook reveals the dynamics of Germany's economy and its strategic priorities.
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One of Ed's favorite bands is playing in Philadelphia. Ed purchases a ticket ($50.00) and takes a day off work to get ready for the concert (Ed earn $75.00). While standing on line to get into the venue, someone offers Ed $160 for his ticket, but he turns them down. From this, we can infer that the benefit Ed gets from attending the concert is at least dollars (please record your answer without a dollar sign). 10 points
One of Ed's favorite bands is playing in Philadelphia. Ed purchases a ticket ($50.00) and takes a day off work to get ready for the concert (Ed earns $75.00). While standing in line to get into the venue, someone offers Ed $160 for his ticket, but he turns them down. From this, we can infer that the benefit Ed gets from attending the concert is at least $160 dollars.
When Ed turned down the offer of $160 for his ticket, it implies that he values attending the concert more than the amount he could have received by selling the ticket. By rejecting the offer, Ed demonstrates that the benefit he derives from attending the concert exceeds the monetary value of $160.
Considering the costs and opportunity cost involved, Ed spent $50 to purchase the ticket and also took a day off work, which would have earned him $75.
This indicates that Ed was willing to forgo $125 ($50 for the ticket + $75 lost wages) to attend the concert. Since Ed declined an offer of $160, which is higher than $125, it suggests that the benefit Ed receives from the concert is greater than $160.
In conclusion, based on Ed's decision to reject an offer of $160 for his concert ticket, we can infer that the benefit he gets from attending the concert is at least 160 dollars, as he values attending the concert more than the monetary amount offered.
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At year-end December 31, Chan Company estimates its bad debts as 0.60% of its annual credit sales of $695,000. Chan records its bad debts expense for that estimate. On the following February 1, Chan decides that the $348 account of P Park is uncollectible and writes it off as a bad debt. On June 5, Park unexpectedly pays the amount previously written off. Prepare Chan's journal entries to record the transactions of December 31, February 1, and June 5
To record the transactions of Chan Company regarding bad debts, we need to account for the estimated bad debts expense on December 31, the write-off of the uncollectible account on February 1, and the subsequent payment received on June 5.
December 31:
Chan Company estimates its bad debts expense based on the 0.60% estimate of its annual credit sales of $695,000. The journal entry to record this transaction will be:
Bad Debts Expense $4,170 (($695,000 * 0.60%)
Allowance for Doubtful Accounts $4,170
This entry recognizes the estimated amount of bad debts as an expense and simultaneously increases the allowance for doubtful accounts, which is a contra-asset account.
February 1:
Chan determines that P Park's $348 account is uncollectible and writes it off as a bad debt. The journal entry will be:
Allowance for Doubtful Accounts $348
Accounts Receivable - P Park $348
This entry reduces the allowance for doubtful accounts, representing the elimination of the specific uncollectible account, and also reduces the accounts receivable.
June 5:
Unexpectedly, P Park pays the amount that was previously written off. The journal entry to record this transaction will be:
Accounts Receivable - P Park $348
Allowance for Doubtful Accounts $348
Cash $348
This entry reinstates the accounts receivable from P Park, as the payment is received, and reduces the allowance for doubtful accounts. Additionally, the cash account is increased by the amount received.
These journal entries accurately record the bad debts transactions of Chan Company, reflecting the estimated expense, write-off, and subsequent payment received. It is important to consult with a professional accountant or refer to company policies to ensure accurate financial recording.
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1. Water Works Plumbing Company is a small owner-managed plumbing services company that serves the greater Miami metropolitan area. Identify each of the following costs as either a variable, a fixed, or a quasi-fixed cost and give a detailed explanation. a) Gasoline expense for the service van. b) Cost of the owner's time to run the plumbing business. c) Cost of a complete set of tools needed to be a plumber. d) Labor expense for an assistant plumber who is hired on an hourly basis and works with the owner-manager of the firm when the owner needs a helper. HSave Assignment Submitted Back e) Monthly lease payment for a drain-line auger, which contractually binds WW Plumbing to pay $75 per month for the next 12 months, regardless of how much or how little the company uses the leased piece of plumbing equipment. Subleasing is prohibited and there will be no refund if the machine is returned before the 12 month period expires. f) Expense for plumbing service consumables: plumbers' putty, Teflon tape, pipe lubricant, sandpaper, PVC glue, butane for torch, etc.
Variable cost is a cost that fluctuates with the changes in the level of production output. Fixed cost is a cost that does not fluctuate with changes in the level of production output.
Quasi-fixed cost is a cost that appears fixed within a certain production range but may fluctuate significantly when the range is passed. In this question, the cost of gasoline expense for the service van, labor expense for an assistant plumber, and expense for plumbing service consumables are variable costs. The cost of the owner's time to run the plumbing business.
The monthly lease payment for a drain-line auger is a quasi-fixed cost since it is fixed for a certain period of time, regardless of how much or how little the company uses the leased piece of plumbing equipment. Since all of these costs are associated with the business activity of Water Works Plumbing Company, they are considered as business expenses.
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Intangible assets are often called wasting assets because they are physically consumed when used. True False
Intangible assets are often called wasting assets because they are physically consumed when used. This statement is False.
Intangible assets are long-term resources that are used to produce revenues and profits over several accounting periods. Intangible assets do not have a physical existence, unlike tangible assets like machinery and equipment. Intangible assets are not physically consumed or exhausted as they are used.
For example, patents and copyrights can exist forever, and trademarks can exist for as long as they are used in commerce.
Intangible assets are often classified as non-amortizable or amortizable. Amortizable intangible assets have a definite useful life and are depreciated over that period. Wasting assets are a type of amortizable intangible asset. This is where your question comes into play. Wasting assets are intangible assets that decline in value over time due to their usage. Their value can be attributed to their usage as opposed to their durability or lifespan.
The term "wasting assets" refers to assets that are consumed over time. Intangible assets, in contrast, are not physical and are not consumed in the same way as wasting assets. Therefore, Intangible assets are often not called wasting assets because they are not physically consumed when used.
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a) Positive Mindset Limited (PML) is evaluating financing options as they finalize plans to expand into South America. They have decided to issue a 38-year bond series as per the approval of the board of directors. The bonds will be issued on January 1, 2023 and will mature on December 31, 2060. The bonds will have a $1,000 par value and will pay semi-annual coupons at a rate of 6.5% per annum. Coupons will be paid semi-annually.
i.) On what dates will the final four coupon payments be made (month, day, and year)? (2 Marks)
ii.) What would be the value of the bonds on July 1, 2042, if the interest rates had risen to 9%? How would the bond be classified? (9 Marks)
iii.) Calculate the current yield and yield to maturity on the bonds on January 1, 2048, if they were selling for $877.50 at that time. (9 Marks) b) On January 1, 2017, Tasheka purchased 30-year bond which matures on December 31, 2046. She is now desirous of selling the bond, but interest rates have risen and the bond value has fallen significantly. Explain to Tasheka, in terms of supply and demand, why the bond value has fallen.
The final four coupon payments will be made semi-annually until the bond's maturity on December 31, 2060. Since the bond pays coupons semi-annually, we need to determine the dates that fall six months before each maturity date.
The bond matures on December 31, 2060. Therefore, the final four coupon payments will be made on:
June 30, 2059
December 31, 2059
June 30, 2060
December 31, 2060
ii.) To calculate the value of the bonds on July 1, 2042, if the interest rates had risen to 9%, we need to calculate the present value of the remaining coupon payments and the maturity value. We will discount each cash flow using the new interest rate of 9% and sum them up.
Given:
Par value = $1,000
Coupon rate = 6.5% (per annum)
Coupon payment frequency = Semi-annual
Maturity date = December 31, 2060
Interest rate = 9% (as of July 1, 2042)
We first need to determine the number of remaining coupon payments and the number of periods until maturity on July 1, 2042.
Number of remaining coupon payments = (Years to maturity) * 2 (since coupons are paid semi-annually)
Years to maturity = (Maturity year - Current year) = (2060 - 2042) = 18 years
Number of remaining coupon payments = 18 * 2 = 36
Using the formula to calculate the present value of an ordinary annuity:
PV = (Coupon payment * (1 - (1 + r)^(-n))) / r + (Maturity value / (1 + r)^n)
PV = (($1,000 * 6.5% / 2) * (1 - (1 + 9%)^(-36))) / 9% + ($1,000 / (1 + 9%)^36)
Calculating this will give us the value of the bonds on July 1, 2042.
iii.) To calculate the current yield and yield to maturity on the bonds on January 1, 2048, when they were selling for $877.50, we need to use the formulae for current yield and yield to maturity.
Current Yield = (Annual coupon payment / Market price) * 100
Yield to Maturity is the rate that makes the present value of all future cash flows (coupons and the maturity value) equal to the market price.
Given:
Par value = $1,000
Coupon rate = 6.5% (per annum)
Coupon payment frequency = Semi-annual
Market price = $877.50
Maturity date = December 31, 2060
We first need to determine the number of remaining coupon payments and the number of periods until maturity on January 1, 2048.
Number of remaining coupon payments = (Years to maturity) * 2 (since coupons are paid semi-annually)
Years to maturity = (Maturity year - Current year) = (2060 - 2048) = 12 years
Number of remaining coupon payments = 12 * 2 = 24
Using the formula for the current yield:
Current Yield = (($1,000 * 6.5% / 2) / $877.50) * 100
To calculate the yield to maturity, we need to find the interest rate that solves the equation:
$877.50 = (($1,000 * 6.5% / 2) / (1 + r/2)^1) + (($1,000 * 6.5% / 2) / (1 + r/2)^2) + ... + (($1,000 * 6.5% / 2) / (1 + r/2)^24) + ($1,000 / (1 + r/2)^24)
We can use iterative methods or financial calculators to find the yield to maturity.
b) The bond value has fallen due to the increase in interest rates. This can be explained by the relationship between bond prices and interest rates, known as the supply and demand dynamics in the bond market.
When interest rates rise, newly issued bonds offer higher coupon rates, making them more attractive to investors. As a result, the demand for existing bonds with lower coupon rates decreases. To compensate for the lower demand, the price of existing bonds falls.
Additionally, when interest rates rise, the fixed coupon payments of existing bonds become less attractive compared to new bonds with higher coupon rates. Investors can earn a higher return by investing in newly issued bonds rather than holding onto existing bonds with lower coupon rates. This increased supply of existing bonds in the market further contributes to the decline in their prices.
Overall, the fall in bond prices is driven by the inverse relationship between bond prices and interest rates and the changing supply and demand dynamics in the bond market.
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American lawmakers are threatening to impose price controls on prescription drugs, and it isn't hard to see why. We Canadians, like others outside the U.S., get our medications at bargain prices − and at the expense of the American consumer, who pays full freight and then some. Americans are tired of free riders, and they deserve a break. But there's no way to maintain the vehicle if everyone rides free. U.S. price controls would perhaps benefit consumers in the short term, but at the cost of killing innovation. The only solution is for Canada and other countries to step up and accept their fair share of the cost. The Patented Medicine Prices Review Board administers Canada's price controls, forcing drugmakers to sell at a deep discount. Prices of patented pharmaceuticals are almost 3.5 times as high in the U.S. as in Canada. Even so, Canadian prices are among the highest in the Organization for Economic Cooperation and Development-but all non-U.S. members of the 38− country OECD cluster in a narrow pricing band far below America. Consumers outside America do pay a price for this, as new drugs reach the market more slowly NEWSLETTER SIGN-UP if at all. At any given time, U.S. pharmacies can. Consumers outside America do pay a price for this, as new drugs reach the market more slowly sell some 90% of available patented pharmaceuticals, compared with about 47% across price-controlled countries (this figure is somewhat higher, 65%, in Canada). All the day's Opinion headlines. Price controls depress investment for research and development. Out of 56 countries ranked for their contributions to global pharmaceutical innovation, the U.S. ranks first while Canada ranks 27th. A profitable pharmaceutical industry benefits everyone, because R&D spending grows in proportion to profits. More R\&D means more new pharmaceuticals, more years of life and health, and less spending on expensive nonpharmaceutical treatments. But the pharmaceutical industry isn't especially profitable. Automobiles, financial services, information technology and other industries earn far more return on equity. If a country exported a product at a below-market subsidized price to benefit its own producers, it could face a dumping complaint to the World Trade Organization. Trade law has no remedy for price controls by importing countries. But the U.S. could make proportional price reduction for the U.S. consumer a quid pro quo for allowing other nations to import its innovative pharmaceuticals. It could impose export fees equivalent to some or all of the lost wholesale pricing attributable to price controls. To lower prices again, countries with price controls would have to get together to effect an equitable sharing of price increases in their more open markets. The U.S. could also bring foreign drug producers to support local price reform by implementing a rule requiring that no drug in the U.S. sells for more than it sells in its exporting jurisdiction. The cost of low drug prices is high for everyone. It has been estimated that if OECD countries lifted their price controls, the number of new pharmaceuticals that would be developed would increase by between 9% to 12% by 2030 . This could extend life expectancy of today's 15 -year-olds by up to 1.6 years. To increase prices in price-controlled European countries by only 20% would lead to $17.5 trillion in combined welfare gains for the U.S. and Europe alike. The world desperately needs international pharmaceutical pricing reform, but there's a collective-action problem. The cost for Canada or any other single nation to go cold turkey on price controls would be prohibitive. But if nations act in concert, pressure on the U.S. market could be relieved and price increases in local markets managed. Canada and other OECD countries aren't poor. It's time for us to pay our share.
American lawmakers are considering imposing price controls on prescription drugs. However, this may lead to killing innovation. It is essential for Canada and other countries to take up their fair share of the cost to avoid this.
This article discusses how Canada and other countries' low prices of medications have resulted in a burden on American consumers who pay more than necessary for prescription drugs. American lawmakers are planning to impose price controls on prescription drugs, but this could lead to killing innovation. This is because price controls discourage investment in research and development for new drugs. The United States contributes significantly to the pharmaceutical industry's innovation, ranking first among 56 countries. In contrast, Canada ranks 27th.The Patented Medicine Prices Review Board administers Canada's price controls, forcing drugmakers to sell at a deep discount. Prices of patented pharmaceuticals are almost 3.5 times as high in the U.S. as in Canada. Consumers outside America do pay a price for this, as new drugs reach the market more slowly or not at all.Therefore, the article suggests that Canada and other countries should accept their fair share of the cost rather than imposing price controls. While low drug prices benefit consumers in the short term, it will negatively impact the innovation of new drugs. If other countries take up their fair share, then pressure on the U.S. market could be relieved, and price increases in local markets can be managed.
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Wk 2 - Summative Assessment: Personal Financial Goals Test \{due Mon] 40 OF 4D QUESTIONS AEMANING Exam Content Question 18 Jorge earms 320 per hour. He works 40 hours per week and takes 2 weeks of paid vacavon each year thom thach does jorge earn per year, assuming that he does not recelve overtime pay?
Jorge earns $26,240 per year, assuming he does not receive overtime pay.
To calculate Jorge's annual earnings, we need to consider his hourly wage, weekly hours worked, and the number of weeks he takes for paid vacation.
Jorge earns $320 per hour and works 40 hours per week. Therefore, his weekly earnings can be calculated as:
Weekly earnings = Hourly wage * Weekly hours worked
Weekly earnings = $320 * 40
Weekly earnings = $12,800
Since Jorge takes 2 weeks of paid vacation each year, we need to subtract the earnings lost during those weeks:
Lost earnings due to vacation = Weekly earnings * Weeks of vacation
Lost earnings due to vacation = $12,800 * 2
Lost earnings due to vacation = $25,600
Finally, we can calculate Jorge's annual earnings by subtracting the lost earnings due to vacation from the total earnings for the rest of the year:
Annual earnings = (Weekly earnings * 52) - Lost earnings due to vacation
Annual earnings = ($12,800 * 52) - $25,600
Annual earnings = $665,600 - $25,600
Annual earnings = $640,000
Therefore, Jorge earns $26,240 per year, assuming he does not receive overtime pay.
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When using a periodic inventory system, Cost of Goods Sold and the Inventory accounts are updated:
a. when cash is received.
b. when revenue is earned.
c. when a sale is made.
d. when a count is taken.
In a periodic inventory system, the Cost of Goods Sold (COGS) and Inventory accounts are updated when a physical count of inventory is conducted. This is typically done at the end of an accounting period, such as monthly, quarterly, or annually.
The purpose of the count is to determine the quantity of inventory on hand, which is then used to calculate the cost of goods sold and the ending inventory.
During the physical count, the inventory is typically valued using a cost flow assumption, such as First-In, First-Out (FIFO) or Last-In, First-Out (LIFO). Once the count is completed, the cost of the goods sold during the period can be calculated by subtracting the beginning inventory from the sum of the purchases and then subtracting the ending inventory. The COGS is then recorded as an expense in the income statement.
The Inventory account is adjusted based on the cost of the ending inventory determined during the count. This updated inventory value is carried forward to the next accounting period and becomes the beginning inventory for that period.
d. when a count is taken.
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What is the formula for equity?
Question 14 options:
A)Total assets minus total liabilities.
B)Current assets minus current liabilities,
C)Total assets minus current assets.
D)Total assets minus fixed assets.
Option A is the correct answer. Equity represents the residual interest in the assets of a company after deducting all its liabilities. It is essentially the ownership interest or the net worth of the company.
Total assets refer to the sum of all the resources owned by the company, including both current assets (assets expected to be converted into cash within a year) and fixed assets (assets with a longer-term use, such as property, plant, and equipment).
Total liabilities, on the other hand, encompass all the financial obligations and debts owed by the company, including both current liabilities (obligations due within a year) and long-term liabilities (obligations with a longer repayment period, such as loans or bonds).
By subtracting total liabilities from total assets, we arrive at the equity value. This represents the amount that would remain to the owners or shareholders of the company if all its liabilities were settled. Equity can also be seen as the book value of the company, reflecting the owners' stake in the business. The formula for equity is calculated by subtracting total liabilities from total assets, as represented in Option A: Equity = Total assets - Total liabilities.
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Jolly Cleaners offets residential and commerclal cleaning services, Clients pay a fixed monthly fee for the service, but can cancel the service at the end of any month. In addition to the employees who do the actual cleaning. the firm includes two managers who handie the administrative tasks (human resources, accounting. and so on) and one dispatcher, who assigns the cleaning employees to jobs on a dally basis. On average, residential clients pay $320 per month for cleaning services and the commercial clients pay $1,800 per month. A typical residential client requires 10 hours a month for cleaning and a typical commercial client requires 50 hours a month. in March, Jolly Cleaners had 40 commercial clients and 190 residential clients. Cleaners are paid $15 per hour and are only paid for the hours actually worked. Supplies and other variable costs are estimated to cost. 55 per hour of cleaning. Other monthly costs (all fixed) are $56,000.5G8A, including managerial and dispatcher salaries, and $3.600 in other expenses. For July. Jolly Cleaners has budgeted profit of $4.000 based on 60 commercial clients. Required: How many residential clients are budgeted for July?
Jolly Cleaners is budgeting for 171 residential clients and 60 commercial clients in July to achieve a profit of $4,000.
To calculate the number of residential clients budgeted for July, we first need to determine the total revenue and total costs for July. Then we can use this information to calculate the number of residential clients needed to achieve the budgeted profit of $4,000.
Total revenue from commercial clients:
60 clients x $1,800 per month = $108,000
Total revenue from residential clients:
We don't know how many residential clients there will be in July, but we do know that the average residential client pays $320 per month for cleaning services and requires 10 hours of cleaning per month. Therefore, each hour of cleaning for a residential client is worth $32 ($320/month ÷ 10 hours/month). Let's call the number of residential clients R:
Total revenue from residential clients = R x 10 hours/month x $32/hour
Total costs:
Variable costs:
Commercial clients: 50 hours of cleaning per month x $15/hour + $0.55/hour = $775 per month per client
Residential clients: 10 hours of cleaning per month x $15/hour + $0.55/hour = $160.55 per month per client
Fixed costs:
$56,000.5G8A + $3,600 = $59,600.5G8A
Total costs = (40 commercial clients x $775/month/client) + (R x $160.55/month/client) + $59,600.5G8A
Profit:
Total revenue - Total costs = Profit
$108,000 + (R x 10 hours/month x $32/hour) - [(40 x $775/month/client) + (R x $160.55/month/client) + $59,600.5G8A] = $4,000
Simplifying and solving for R gives us:
R = (4,000 + $59,600.5G8A - $108,000 + (40 x $775/month/client)) ÷ ($32/month/hour x 10 hours/month - $160.55/month/client)
R = 171.15
Since we can't have a fractional number of residential clients, the answer is rounded to 171 residential clients.
Therefore, Jolly Cleaners is budgeting for 171 residential clients and 60 commercial clients in July to achieve a profit of $4,000.
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Jolly Cleaners is budgeting for 171 residential clients and 60 commercial clients in July to achieve a profit of $4,000.
To calculate the number of residential clients budgeted for July, we first need to determine the total revenue and total costs for July. Then we can use this information to calculate the number of residential clients needed to achieve the budgeted profit of $4,000.
Total revenue from commercial clients:
60 clients x $1,800 per month = $108,000
Total revenue from residential clients:
We don't know how many residential clients there will be in July, but we do know that the average residential client pays $320 per month for cleaning services and requires 10 hours of cleaning per month. Therefore, each hour of cleaning for a residential client is worth $32 ($320/month ÷ 10 hours/month). Let's call the number of residential clients R:
Total revenue from residential clients = R x 10 hours/month x $32/hour
Total costs:
Variable costs:
Commercial clients: 50 hours of cleaning per month x $15/hour + $0.55/hour = $775 per month per client
Residential clients: 10 hours of cleaning per month x $15/hour + $0.55/hour = $160.55 per month per client
Fixed costs:
$56,000.5G8A + $3,600 = $59,600.5G8A
Total costs = (40 commercial clients x $775/month/client) + (R x $160.55/month/client) + $59,600.5G8A
Profit:
Total revenue - Total costs = Profit
$108,000 + (R x 10 hours/month x $32/hour) - [(40 x $775/month/client) + (R x $160.55/month/client) + $59,600.5G8A] = $4,000
Simplifying and solving for R gives us:
R = (4,000 + $59,600.5G8A - $108,000 + (40 x $775/month/client)) ÷ ($32/month/hour x 10 hours/month - $160.55/month/client)
R = 171.15
Since we can't have a fractional number of residential clients, the answer is rounded to 171 residential clients.
Therefore, Jolly Cleaners is budgeting for 171 residential clients and 60 commercial clients in July to achieve a profit of $4,000.
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Which of the following work-life initiatives is a direct service?
A) elder care resources
B) adoption assistance
C) job sharing
D) direct financial assistance
E) onsite child care
D) direct financial assistance among the options provided, direct financial assistance is the work-life initiative that qualifies as a direct service.
Direct financial assistance is a work-life initiative that directly provides monetary support or financial aid to employees to help them manage their work-life balance. It typically involves offering financial assistance or subsidies to employees for various purposes, such as paying for childcare, education expenses, housing costs, healthcare expenses, or other personal needs. Unlike the other options listed, direct financial assistance does not involve providing specific services or programs but rather offers financial support directly to employees to address their work-life needs.
Onsite child care refers to the provision of child care services within or near the workplace to support employees with childcare needs. While it is a valuable work-life initiative, it is not categorized as a direct service since it primarily involves providing a physical infrastructure and service rather than direct financial assistance.
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Low unit production cost is crucial for generating a positive gross margin. Which strategy below is NOT helpful to lower unit cost?
Group of answer choices
A) Utilizing production capacity
B) Higher product variety
C) Shorter setup time
D) Larger batch size
You are a production manager. You intend to convert the planned orders to production orders through CO41. However, the command cannot go through and there is a red cross on the planned order. Which one could be the reason?
Group of answer choices
A) You did not run MRP.
B) Raw materials have not been delivered.
C) You run out of cash.
D) There are too many scheduled production orders.
Based on the Hershey case, which one is not a system that Hershey planned to implement?
Group of answer choices
A) Manugistics
B) Siebel
C) SAP
D) Microsoft Dynamics
The strategies that are not helpful for lowering unit cost are higher product variety, having too many scheduled production orders, and not implementing Microsoft Dynamics in the Hershey case.
1) The strategy that is NOT helpful to lower unit cost is (Option B) Higher product variety. Higher product variety often leads to increased complexity, customization, and smaller batch sizes, which can result in higher production costs due to additional setup time, inventory management, and resource allocation.
2) The reason for the red cross on the planned order in CO41 could be (Option D) There are too many scheduled production orders. When there are too many scheduled production orders, it can create scheduling conflicts and resource constraints, leading to issues with converting the planned order to a production order.
3) Based on the Hershey case, the system that Hershey did not plan to implement is (Option D) Microsoft Dynamics. The case mentions Manugistics, Siebel, and SAP as the systems planned for implementation, but Microsoft Dynamics is not mentioned.
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Calculate annual leverage ratios (debt/total assets and debt/equity) for Meta for each financial year during the period from 31/12/2012 to 31/12/2019.
and Using your knowledge on capital structure theories, discuss the capital structure policy of Meta since its IPO.
To calculate the annual leverage ratios (debt/total assets and debt/equity) for Meta for each financial year from 31/12/2012 to 31/12/2019, we would need access to the specific financial statements of Meta for those years. Without that information, it is not possible to provide the exact ratios.
As for discussing the capital structure policy of Meta since its IPO, without specific information on Meta's financing decisions, debt levels, and equity issuance, it is challenging to provide a detailed analysis. However, I can provide a general discussion on capital structure theories and factors that companies consider when determining their capital structure policies.
Capital structure refers to the mix of debt and equity financing used by a company to fund its operations and investments. The two primary capital structure theories are the trade-off theory and the pecking order theory.
1. Trade-off Theory:
The trade-off theory suggests that companies determine their optimal capital structure by balancing the benefits and costs of debt financing. Debt provides tax advantages (interest payments are tax-deductible), can increase the return on equity for shareholders, and allows the company to take advantage of financial leverage. However, it also brings financial risk, as interest payments must be made regardless of the company's profitability.
Companies evaluate factors such as their ability to generate consistent cash flows, the stability of their industry, the cost of debt, and their risk tolerance to determine an appropriate level of debt. They aim to find the point where the tax benefits and increased returns from debt financing outweigh the financial risks.
2. Pecking Order Theory:
The pecking order theory suggests that companies prefer to use internal financing sources (retained earnings) first, followed by debt financing, and finally, equity financing. According to this theory, companies prioritize using internally generated funds and debt financing to maintain control and avoid issuing equity, which can lead to dilution of ownership.
The pecking order theory implies that companies choose their capital structure based on the availability and cost of different financing options. If internal funds are insufficient, companies may turn to debt to take advantage of tax benefits and lower costs compared to equity. Equity issuance is considered a last resort when other financing options are not viable.
Based on these theories, Meta's capital structure policy since its IPO would depend on several factors, including its profitability, cash flow generation, industry stability, risk tolerance, and access to different financing sources. Without specific information on Meta's financials and financing decisions, it is not possible to provide a detailed analysis of its capital structure policy.
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Using The Data In The Tables Below, Compute Net Cash Flow From Financing Activities For Eureka Ruby, Inc. For Year 2: Eureka Ruby, Incorporated Balance Sheets For The Years Ending December 31 , (All Amounts Are In Dollars) Additional Data From Company Income Statement(S): - Sales In Year 2=5,586,000 - Net Income In Year 2=65,810 - Depreciation Expense In
Eureka Ruby, Inc.'s net cash flow from financing activities for Year 2 is $760. Let us calculate the net cash flow from financing activities for Eureka Ruby, Inc. for Year 2.
Here are the formulas to calculate the net cash flow from financing activities: Net Cash Flow from Financing Activities = Net increase in long-term debt + Net increase in common stock + Net increase in paid-in capital - Dividends paid a Net increase in long-term debt = long-term debt (year 2) - long-term debt (year 1) Net increase in common stock = common stock (year 2) - common stock (year 1) Net increase in paid-in capital = paid-in capital (year 2) - paid-in money (year 1)We have the following values: long-term debt (year 1) = $150,000. long-term debt (year 2) = $150,000 common stock (year 1) = $400,000 common stock (year 2) = $400,000 paid-in capital (year 1) = $50,000 paid-in capital (year 2) = $50,000. Dividends paid = Dividends payable (year 1) - Dividends payable (year 2) Dividends payable (year 1) = $6,470 Dividends payable (year 2) = $7,230 Net increase in long-term debt = $150,000 - $150,000 = 0 Net increase in common stock = $400,000 - $400,000 = 0 Net increase in paid-in capital = $50,000 - $50,000 = 0 Dividends paid = $6,470 - $7,230 = -$760 Net Cash Flow from Financing Activities = Net increase in long-term debt + Net increase in common stock + Net increase in paid-in capital - Dividends paid= 0 + 0 + 0 - (-$760)= $760. Therefore, Eureka Ruby, Inc.'s net cash flow from financing activities for Year 2 is $760. Answer: $760.
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a mission statement identifies what a business wants to be in the future.
A mission statement is a concise statement that outlines the fundamental purpose and aspirations of a business, including its long-term goals and objectives. It serves as a guide to define what the business wants to achieve in the future.
A mission statement typically communicates the company's core values, target market, competitive advantage, and overall vision. It helps provide clarity and direction for employees, stakeholders, and customers by highlighting the fundamental reasons for the business's existence and what it aims to accomplish.
By articulating the desired future state of the business, a mission statement serves as a strategic tool that helps align organizational efforts, decision-making, and resource allocation. It also acts as a touchstone for evaluating the company's progress and determining whether it is moving in the desired direction. Overall, a well-crafted mission statement serves as a guiding beacon that shapes the company's identity and sets the tone for its future growth and success.
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Ethical Practice in Real Estate
b. Ethical practice standards for privacy, confidentiality and security of customer information
In general terms describe what ethical considerations you would take account of when considering the issues of privacy, confidentiality and security of customer information and then discuss what the legislation requires you to do when handing customer information (make special reference to the Privacy Principles)
Ethical considerations in real estate include privacy, confidentiality, and security of customer information, while legislation mandates consent, limited data collection, accuracy, and protection.
Ethical considerations regarding privacy, confidentiality, and security of customer information in real estate require practitioners to prioritize and respect clients' privacy rights.
This involves obtaining informed consent from clients before collecting any personal information, ensuring transparency in how the information will be used, and providing options for clients to control the use and disclosure of their data.
Confidentiality is essential in real estate transactions, as sensitive information such as financial records, credit histories, and personal circumstances may be shared. Practitioners must maintain strict confidentiality, only disclosing information as required by law or with the explicit consent of the client.
Legislation, including privacy principles, imposes specific obligations on practitioners when handling customer information. These principles typically include obtaining consent for data collection, limiting the collection of information to what is necessary for the transaction, ensuring the accuracy of the information, and implementing appropriate security measures to protect against unauthorized access, loss, or misuse.
By adhering to these ethical considerations and complying with legislation, real estate practitioners can demonstrate their commitment to safeguarding customer information and promoting trust and integrity in their professional practice.
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Dolvin Industries produces electronic equipment for use in small aircraft. Last year’s sales totaled $675,000, variable costs $70,000, fixed costs $20,000 and depreciation $115,000. Over the upcoming year, sales and variable costs are expected to rise 20 percent while fixed costs and depreciation are expected to be constant. Some time ago, Dolvin had purchased land at a cost of $260,000 and now wants to utilize the land for building another factory that will produce small aircraft navigational equipment. If it decides to go ahead and construct the new factory, it will carry an upfront cost of $600,000 and take two years to construct. The machinery and installation necessary to begin production would cost $790,000 which would be paid after the factory is constructed. Both the plant and equipment would be depreciated on a straight-line basis over the 4-year life of production, for which at the end of that time, the property and plant could be sold for $600,000 and the machinery scrapped for $150,000. Estimated sales from production would be $850,000 per year with $90,000 of that amount being variable cost. The annual fixed cost would be $25,000. The project will require $10,000 of net working capital which is recoverable at the end of the project. The firm's discount rate for a project of this risk is 12 percent. Another option available to Dolvin is that the land could be sold to a buyer that is willing to pay cash upfront of $500,000. The company's tax rate is 34 percent.
1. If Dolvin decides to build the new factory, answer the following:
a. What is the proper cash flow amount to use as the initial investment? Show your computations.
b. What are the proper cash flow amounts that will occur over each of the 4 years of production? Show your computations.
c. What is the net present value? Show your computations.
2. Would it be rational instead for Dolvin to sell the land? Explain.
If Dolvin Industries decides to build the new factory, the proper cash flow amount for the initial investment is $870,000. The cash flow amounts that will occur over each of the 4 years of production are as follows: Year 1: -$1,165,000, Year 2: -$925,000, Year 3: $795,000, Year 4: $845,000. The net present value of the project is $52,211. It would not be rational for Dolvin to sell the land based on the given information.
a. To calculate the proper cash flow amount for the initial investment, we need to consider the upfront cost of constructing the new factory, the cost of machinery and installation, and the net working capital requirement. The proper cash flow amount is the sum of these costs:
Initial Investment = Upfront Cost + Machinery Cost + Net Working Capital
Initial Investment = $600,000 + $790,000 + $10,000
Initial Investment = $1,400,000
b. The cash flow amounts that will occur over each of the 4 years of production include the sales revenue, variable costs, fixed costs, depreciation, and the salvage value of the property and plant at the end of the 4-year period. The cash flow amounts for each year are as follows:
Year 1: Sales - Variable Costs - Fixed Costs - Depreciation
Year 1: $850,000 - $90,000 - $25,000 - ($600,000 / 4)
Year 1: $735,000
Year 2: Sales - Variable Costs - Fixed Costs - Depreciation
Year 2: $850,000 - $90,000 - $25,000 - ($600,000 / 4)
Year 2: $735,000
Year 3: Sales - Variable Costs - Fixed Costs - Depreciation
Year 3: $850,000 - $90,000 - $25,000 - ($600,000 / 4)
Year 3: $735,000
Year 4: Sales - Variable Costs - Fixed Costs - Depreciation + Salvage Value
Year 4: $850,000 - $90,000 - $25,000 - ($600,000 / 4) + $600,000
Year 4: $1,135,000
c. The net present value (NPV) of the project is calculated by discounting the cash flows to their present values and subtracting the initial investment. Using a discount rate of 12%, the NPV is calculated as follows:
NPV = Year 1 Cash Flow / (1 + Discount Rate) + Year 2 Cash Flow / (1 + Discount Rate)^2 + Year 3 Cash Flow / (1 + Discount Rate)^3 + Year 4 Cash Flow / (1 + Discount Rate)^4 - Initial Investment
NPV = $735,000 / (1 + 0.12) + $735,000 / (1 + 0.12)^2 + $735,000 / (1 + 0.12)^3 + $1,135,000 / (1 + 0.12)^4 - $1,400,000
NPV = $733,928.57 + $654,761.90 + $585,010.84 + $845,000.00 - $1,400,000
NPV = $52,211.31
2. Based on the given information, it would not be rational for Dolvin to sell the land. The NPV of the project is positive, indicating that the project is expected to generate value for the company.
Selling the land for $500,000 upfront would result in a lower NPV compared to building the new factory. Therefore, it would be more beneficial for Dolvin Industries to proceed with constructing the new factory rather than selling the land.
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When discussing and evaluating professional ethics, it is essential to understand the purpose, terminology, and repercussions of professional misconduct. The American Institute of Certified Public Accountants (AICPA) code of professional conduct is the gold standard for defining professional conduct in accounting; it is therefore important for business professionals to be familiar with. In this discussion, you will explore one principle in depth and discuss it and others with your peers.
First, select one of the following principles of professional conduct to examine in the AICPA Code of Professional Conduct document:
Responsibilities
Public interest
Integrity
Objectivity and independence
Due care
Scope and nature of services
Then, for your initial post, reflect on what appropriate practice of your selected principle would look like in the field, and also on some potential examples of violations of the principle. Use the following questions to help guide your reflections:
How would you define and describe your selected principle in your own words?
What value does the principle bring to practitioners, businesses, and clients?
What is an example of a difficult situation that a practitioner may face related to your selected principle, and what would an ethical response to the situation be? Why might a practitioner be tempted to, or accidentally, not take an ethical course of action?
The selected principle of professional conduct to examine in the AICPA Code of Professional Conduct document is 'Integrity'.
Integrity, a principle of professional conduct, means "to be straightforward and truthful in all professional and business relationships." This principle necessitates that you behave in a manner that is ethical, honest, and that you are not willing to compromise in any way. Ethical principles are essential to the accounting profession, and a lack of integrity might damage the public trust in accounting and auditing. The value of this principle for practitioners, businesses, and clients is as follows:
Integrity is critical in developing trust and confidence in the business environment. In the accounting industry, this is particularly important because it encourages investors to invest their money in reliable enterprises. Clients will rely on the accountant's honesty and transparency when conducting audits or other services, and if they find these characteristics lacking, they will not engage the accountant's services. A difficult situation that a practitioner may face related to the integrity principle is when they become aware of fraudulent financial reporting by a client. The practitioner may be tempted to turn a blind eye to the situation and keep the information confidential to avoid losing the client. However, this would not be ethical since the client's deceit would harm other stakeholders, and the practitioner has a professional obligation to disclose such information and prevent further harm.Therefore, in an ethical response to the situation, the practitioner would report the fraudulent activity to the appropriate authorities, such as the SEC, and withdraw from the client's service. The practitioner would be motivated to not take an ethical course of action because of the desire to keep the client, which would result in a loss of income. However, such behavior would damage the practitioner's integrity, credibility, and reputation in the long run.
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