Answer:
The answer is: The multiplier of public spending is greater than the tax multiplier.
Explanation:
Unemployment is caused by insufficient global demand. Therefore, to combat unemployment, aggregate demand (Da) will have to be increased, and for this, according to Keynes' formula, the following components must be acted on:
-Increase demand for consumer goods (C)
To stimulate consumption, taxes will have to be reduced, thus causing an increase in the disposable income of families.
-Increase the demand for investment goods (I)
This increase will be achieved by reducing the cost of money; in other words, lowering interest rates, thus encouraging companies to invest.
-Increase public sector demand (G)
It comes from the increase in public spending by the State (more roads, more hospitals).
-Increase the demand of international markets (X-M)
To promote exports, the exchange rate will have to be reduced. Increasing exports boosts domestic production.
g Birch Company normally produces and sells 48,000 units of RG-6 each month. The selling price is $26 per unit, variable costs are $17 per unit, fixed manufacturing overhead costs total $180,000 per month, and fixed selling costs total $40,000 per month. Employment-contract strikes in the companies that purchase the bulk of the RG-6 units have caused Birch Company’s sales to temporarily drop to only 9,000 units per month. Birch Company estimates that the strikes will last for two months, after which time sales of RG-6 should return to normal. Due to the current low level of sales, Birch Company is thinking about closing down its own plant during the strike, which would reduce its fixed manufacturing overhead costs by $43,000 per month and its fixed selling costs by 11%. Start-up costs at the end of the shutdown period would total $13,000. Because Birch Company uses Lean Production methods, no inventories are on hand. Required: 1. What is the financial advantage (disadvantage) if Birch closes its own plant for two months? 2. Should Birch close the plant for two months? 3. At what level of unit sales for the two-month period would Birch Company be indifferent between closing the plant or keeping it open?
Answer:
Check the explanation
Explanation:
(1) Product RG-6 yields a contribution margin of $10 per unit ($20 - $10 = $10). If the plant closes, this contribution margin will be lost on the 18,000 units (9,000 units per month * 2 months) that could have been sold during the two-month period. However, the company will be able to avoid certain fixed costs as a result of closing down. The analysis is:
Amount ($) Amount ($)
Contribution margin lost by closing the
plant for two months ($10 * 18,000 units) (180,000)
Costs avoided by closing the plant for two months:
Fixed manufacturing overhead cost ($41,000 * 2 months)82,000
Fixed selling costs ($48,000 * 10% * 2months) 9,600 91,600
Net disadvantage of closing, before start-up cost (88,400)
Add start-up costs 13,000
Disadvantage of closing the plant 101,400
(2) No, the company should not close the plant; it should continue to operate at the reduced level of 9,000 units produced and sold each month. Closing will result in a $101,400 greater loss over the two-month period than if the company continues to operate.
(3)
Amount ($)
Cost avoided by closing the plant for two months 91,600
Less: start-up costs (13,000)
Net avoidable costs 78,600
Units = Net avoidable cost / Contribution margin per unit
= $78,600 / $10 = 7,860 units
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.
The management of Ballard MicroBrew is considering the purchase of an automated bottling machine for $74,000. The machine would replace an old piece of equipment that costs $19,000 per year to operate. The new machine would cost $9,000 per year to operate. The old machine currently in use could be sold now for a salvage value of $31,000. The new machine would have a useful life of 10 years with no salvage value. Required: 1. What is the annual depreciation expense associated with the new bottling machine
Answer:
$7,400 per year
Explanation:
Data provided for computing the annual depreciation expense is here below:-
Automated bottling machine = $74,000
Useful life = 10 years
The calculation of annual depreciation expense is given below:-
Annual depreciation expense = Automated bottling machine ÷ Useful life
= $74,000 ÷ 10
= $7,400 per year
Therefore for computing the annual depreciation expense we simply divide the automated bottling machine by useful life.
Prepare 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
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.
Prepare journal entries to record each of the following four separate issuances of stock. A corporation issued 3,000 shares of $20 par value common stock for $72,000 cash. A corporation issued 1,500 shares of no-par common stock to its promoters in exchange for their efforts, estimated to be worth $22,000. The stock has a $1 per share stated value. A corporation issued 1,500 shares of no-par common stock to its promoters in exchange for their efforts, estimated to be worth $22,000. The stock has no stated value. A corporation issued 750 shares of $100 par value preferred stock for $97,000 cash
Answer and Explanation:
The journal entries are shown below:
1. Cash $72,000
To common stock (3,000 shares × $20) $60,000
To Additional capital paid $12,000
(Being the issuance of the common stock is recorded)
For recording this we debited the cash as it increased the cash and credited the other two accounts as it increased the stockholder equity
2. Organisation expense Dr $22,000
To common stock (1,500 shares × $1) $1,500
To Additional capital paid $20,500
(Being the issuance of the common stock is recorded)
For recording this we debited the expense as it increased the expense and credited the other two accounts as it increased the stockholder equity
3. Organisation expense $22,000
To common stock $22,000
(Being the issuance of the common stock is recorded)
For recording this we debited the expense as it increased the expense and credited the common stock as it increased the stockholder equity
4. Cash $97,000
To preferred stock (750 shares × $100) $75,000
To Additional capital paid $22,000
(Being the issuance of the preferred stock is recorded)
For recording this we debited the cash as it increased the cash and credited the other two accounts as it increased the stockholder equity
Selected information from Arbon Corporation's accounting records and financial statements for 2021 is as follows ($ in millions): Cash paid to acquire machinery $ 36 Reacquired Arbon common stock 50 Proceeds from sale of land 90 Gain from the sale of land 52 Investment revenue received 66 Cash paid to acquire office equipment 80 In its statement of cash flows, Arbon should report net cash outflows from investing activities of:
Answer:
Arbon should report net cash outflows from investing activities of: ($26)
Explanation:
Arbon Corporation
Statement of cash flows (extract)
Purchase of machinery ($36)
Proceeds from sale of land 90
Cash paid to acquire office equipment (80)
Net cash outflows from investing activities ($26)
Therefore, Arbon should report net cash outflows from investing activities of ($26).
Note that reacquired stock affects the financing section of the cash flows, while gain on sale of land and investment revenue received affect the operating section of the cash flows.
Using these data from the comparative balance sheet of Sunta Fe Spice Company, perform horizontal analysis. (Round percentages to 0 decimal place, e.g. 17%.)
Increase or (Decrease)
December 31, 2017 December 31, 2016 Increase or (Decrease) Amount Percentage
Accounts receivable $ 375,000 $ 300,000 $ __________ ___________ %
Inventory 780,000 600,000 ____________ ___________ %
Total assets 3,220,000 2,800,000 __________ __________ %
Answer:
75000,25%;
18000, 30%.
420000, 15%.
Explanation:
From the question above we are given the following parameters Accounts receivable for year 2017 = $ 375,000,
Inventory for the year 2017 = 780,000 and the Total assets for the year 2017 = 3,220,000.
Accounts receivable for year 2016 = $ 300,000, inventory for the year 2016 = 600,000 and the Total assets for the year 2016 = 2,800,000.
Therefore, we have the following simple arithmetic(which is subtraction between the variables in the two years) to determine the solution to the question:
(375,000 - 300,000) = 75,000 = 25%(increase).
(780,000 - 600,000) = 180,000 = 30%(Increase).
(3,220,000 - 2,800,00) = 420,000 = 15%(increase).
Answer:
25%30%15%Explanation:
Accounts receivables
December 31 2017 = $375000
December 31 2016 = $300000
difference = $75000 ( 25%) { increase}
Inventory
December 31 2017 = 780000
December 31 2016 = 600000
difference = 180000 ( 30% ) { increase}
Total assets
December 31 2017 = 3220000
December 31 2016 = 2800000
difference = 420000 ( 15% ) { increase }
Scranton, Inc. reports net income of $232,000 for the year ended December 31. It also reports $88,600 depreciation expense and a $5,100 gain on the sale of equipment. Its comparative balance sheet reveals a $35,900 decrease in accounts receivable, a $15,950 increase in accounts payable, and a $12,650 decrease in wages payable. Calculate the cash provided (used) in operating activities using the indirect method.
Answer:
Cash flow form operating activities $359,800
Explanation:
$
Net income 232,000
Add depreciation expense 88,600
Add Decrease in receivable 35,900
Increase in account payable 15,950
Decrease in wages ( 12,650)
Cash flow form operating activities 359,800
Increase in payable and decrease in receivable represent cash inflow while decrease in payable and increase in receivables represent cash outflow
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%
(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 property appraisal district for Marin County has just installed new software to track residential market values for property tax computations. The manager wants to know the total equivalent cost of all future costs incurred when the three county judges agreed to purchase the software system. The system has an installation cost of $150,000 and an additional cost of $50,000 at year 10. The annual software maintenance cost is $5,000 for the first 4 years and $8,000 thereafter. If the new system will be used for the indefinite future, find the equivalent present value at a discount rate of 5%.
Answer:
Equivalent annual cost = $16,502.89
Explanation:
Equivalent annual cost = Present Value of cost / Annuity factor
Present value of cost:
PV of additional cost =50,000 ×1.05^(-10)=30,695.66
PV of maintenance cost
First four years= 5,000× (1-1.05^(-4))/0.05=17,729.75
From year 5 to infinity = (8,000/0.05)× 1.05^(-4)=131,632.39
PV of maintenance cost = 17,729.75 + 131,632.396= 149,362.14
PV of costs = 150,000 + 30,695.66 + 149,362.14= 330,057.8112
Annuity factor = 1/r = 1/0.05= 20
Equivalent annual cost = 330,057.8112 /20=$16,502.89
Equivalent annual cost = $16,502.89
We learned in class that Starbucks uses its baristas as front line “brand ambassadors”. This is an example of ________________?
A.
top management not doing their jobs
B.
Inverted Organization Structure
C.
Management by Objectives MBO
D.
Giving uneducated employees too much responsibility
Answer:
Inverted Organization Structure
Explanation:
An Inverted Organization Structure is a structure where the employees are given more autonomy. Employees are given more prominent and important roles in the business.
I hope my answer helps you
Option B is correct because it is an example of inverted organization structure.
An Inverted Organization Structure is a organizational structure where employees are given more autonomy in their operation, that is, they are given more prominent and important roles in the company.
This type of structure is beneficial because the top hierarchy have lesser work and employee get more experience because of decision-makings.
In conclusion, the Option B is correct because it is an example of inverted organization structure
Read more about inverted organization structure
brainly.com/question/23840012
Consider the oil-producing countries of A, B, and C. Each has a marginal cost of zero. World demand is given by Q = 1430 - P. Suppose the three countries form a cartel, and that none of them has an incentive to deviate from the cartel. By how many units lower is the total output of oil under the cartel relative to the Cournot solution?
Answer: 357.50
Explanation:
Under Cournot model that has three firms, each firm produces at
q = (1430 – 0)/((3+1)×1)
= 1430/4
= 357.5 units
Total output = 357.5 × 3
= 1072.5 units
Under cartel, the marginal revenue equals to the marginal cost.
MR = MC = 0
1430 – 2Q = 0
Q = 1430/2
Q = 715 units
Difference= 1072.5 units - 715 units
= 357.5 units
Hence the units are 357.50 units lower in cartel compared to Cournot.
In preparation for developing its statement of cash flows for the year just ended, D-Rose Distributors collected the following information: ($ in millions) Purchase of treasury bills (considered a cash equivalent) 6.7 Sale of preferred stock 150.7 Gain on sale of land 4.7 Proceeds from sale of land 25.7 Issuance of bonds payable for cash 140.7 Purchase of equipment for cash 30.7 Purchase of GE stock 35.7 Declaration of cash dividends 134.7 Payment of cash dividends declared in previous year 130.7 Purchase of treasury stock 120.7 Payment for the early extinguishment of long-term notes (carrying (book) value: $100 million) 110.7 Required: 1. Prepare the investing activities section of D-Rose's statement of cash flows. 2. Prepare the financing activities section of D-Rose's statement of cash flows.
Answer and Explanation:
1. The preparation of the investing activities is presented below:
Cash flow from investing activities
Proceeds from sale of land $25.7
Purchase of equipment for cash -$30.7
Purchase of GE stock -$35.7
Net cash used by investing activities -$40.7
2. The preparation of the financing activities is presented below:
Cash flow from financing activities
Sale of preferred stock 150.7
Issuance of bonds payable for cash 140.7
Payment of cash dividends declared in previous year -130
Purchase of treasury stock -120
Payment for the early extinguishment of long-term notes (carrying (book) value: $100 million) -110.7
Net cash used by financing activities -$69.3
The minus sign shows the cash outflow and the positives sign shows the cash inflow
The common stock of Leaning Tower of Pita Inc., a restaurant chain, will generate payoffs to investors next year, which depend on the state of the economy, as follows: Dividend Stock Price Boom $ 10 $ 200 Normal economy 6 90 Recession 0 0 The company goes out of business if a recession hits. Assume for simplicity that the three possible states of the economy are equally likely. The stock is selling today for $80.
a. Calculate the rate of return to Leaning Tower of Pita shareholders for each economic state. (Negative amounts should be indicated by a minus sign. Enter your answers as a percent rounded to 2 decimal places.) Rate of return Boom Normal economy Recession a-2.
b. Calculate the expected rate of return and standard deviation of return to Leaning Tower of Pita shareholders. (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.) Expected return Standard deviation
Answer:
a) Boom = 162.50%
Normal =20.00%
Recession = - 100.00%
b) Expected return = 27.50%
Standard deviation = 107.30%
Explanation:
a) To find the rate of return for each economy state, let's use:
Rate of return = (Dividend +Stock price next year-stock price today)/stock price today
i) For Boom:
[tex] \frac{10 + 200 - 80}{80} = 1.625 [/tex] = 162.50%
ii) Normal:
[tex]\frac{6 + 90- 80}{80} = 0.2 [/tex] = 20.00%
iii) Recession :
[tex]\frac{0 + 0 - 80}{80} = - 1 [/tex] = -100%
b) To calculate the expected rate of return, let's use:
Expected return = Sum of expected return in different scenario / number of economy states
[tex] = \frac{162.5 + 20 - 100}{3} = 27.50[/tex]
Standard deviation:
To find the standard deviation, let's use:
Standard deviation = √[(sum of square of expected return in each scenario -average return)/n]
[tex] = \sqrt{\frac{(162.50-27.50)^2+(20-27.50)^2+(-100-27.50)^2}{3}} [/tex]
[tex] = \sqrt{\frac{(135)^2 + (-7.50)^2 + (-127.50)^2}{3}} [/tex]
[tex] = \sqrt{\frac{18225+56.25+16256.25}{3} [/tex]
= 107.30%
Standard deviation = 107.30%
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.
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.
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.
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
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 selling price of imported olive oil is $20 per case. Your cost is 15 Euros per case, and the exchange rate is currently 1.25, so it takes 1.25 Euros to buy $1. Your largest customer has ordered 15,000 cases of olive oil. How much is the pretax profit for this transaction?
Answer:
$120,000
Explanation:
According to the question, the selling price (S.P) i.e. amount to be sold, of one imported olive oil case is $20 while the cost price (C.P) i.e. amount it was purchased, is €15
Looking at the currencies of both prices, they are different. To make the currencies the same, we need to convert euros (€) to dollars ($).
Based on the exchange rate of €1.25 to $1 given in the question;
€15 will be 15/1.25 = $12.
Therefore, the C.P is $12 and the S.P is $20
A customer ordered 15,000 cases of olive oil. This means that the;
1) The cost price (C.P) will be $12 × 15,000 = $180,000
2) The selling price will be $20 × 15,000 = $300,000
In order to obtain the pretax profit, we subtract the cost price (C.P) from the selling price (S.P). That is, $300,000 - $180,000 = $120,000
Equipment with a book value of $78,000 and an original cost of $168,000 was sold at a loss of $31,000. Paid $106,000 cash for a new truck. Sold land costing $315,000 for $420,000 cash, yielding a gain of $105,000. Long-term investments in stock were sold for $90,000 cash, yielding a gain of $15,500. Use the above information to determine this company's cash flows from investing activities. (Amounts to be deducted should be indicated with a minus sign.)
Answer:
$451,000
Explanation:
The computation of cash flows from investing activities is shown below:-
Sale of equipment $47,000
($78,000 - $31,000)
Purchase of new truck ($106,000)
Sale of land $420,000
Sale of Long-term investments $90,000
Net cash provided by investing activities $451,000
Therefore to reach the cash flows from investing activities we simply added the sale of equipment, sale of land, sale of long term investments and deduct the purchase of new truck.
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
A law firm received $1600 cash for legal services to be rendered in the future. The full amount was credited to the liability account Unearned Service Revenue. If the legal services have been rendered at the end of the accounting period and no adjusting entry is made, this would cause:
Answer and Explanation:
In the first situation, the journal entry is
Cash Dr $1,600
To Unearned revenue $1,600
(Being the unearned revenue is recorded)
For this we debited the cash as it increased the assets and credited the unearned revenue as it also increased the liabilities
The adjusting entry is
Unearned Service Revenue XXXXX
To Service Revenue XXXXX
(Being the adjusting entry is recorded)
If this entry is not recorded than it would leads to understated of revenue and overstated of liabilities
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
Dinklage Corp. has 9 million shares of common stock outstanding. The current share price is $69, and the book value per share is $8. The company also has two bond issues outstanding. The first bond issue has a face value of $70 million, a coupon rate of 6 percent, and sells for 94 percent of par. The second issue has a face value of $55 million, a coupon rate of 5 percent, and sells for 106 percent of par. The first issue matures in 24 years, the second in 9 years.Suppose the most recent dividend was $4.25 and the dividend growth rate is 4.4 percent. Assume that the overall cost of debt is the weighted average of that implied by the two outstanding debt issues. Both bonds make semiannual payments. The tax rate is 25 percent. What is the company’s WACC? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Answer:
10.83%
Explanation:
The simplest way to determine the if we use the Gordon growth model for determining the company's stock price:
stock price = [dividend x (1 + growth rate)] / (WACC - growth rate)
dividend = $4.25g = 4.4%stock price = $69WACC - g = [dividend x (1 + g] / price
WACC = {[dividend x (1 + g] / price} + g
WACC = {[$4.25 x (1 + 4.4%] / $69} + 4.4% = 0.1083 or 10.83%
Misty and John formed the MJ Partnership. Misty contributed $50,000 of cash in exchange for her 50% interest in the partnership capital and profits. During the first year of partnership operations, the following events occurred: the partnership had a net taxable income of $20,000; Misty received a distribution of $12,000 cash from the partnership; and Misty had a 50% share in the partnership's $60,000 of recourse liabilities on the last day of the partnership year. Misty's adjusted basis for her partnership interest at year end is:
Answer:
$78,000
Explanation:
The computation of interest at year end is shown below:-
Interest at year end = Cash contribution + Income of partnership + Share of partnership liabilities - Cash from the partnership
= $50,000 + $20,000 × 50% + $60,000 × 50% - $12,000
= $90,000 + $10,000 + $30,000 - $12,000
= $78,000
Therefore for computing the partnership interest at year end we simply applied the above formula by considering all the items given in the question
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.
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
