Answer: 1.09
Explanation:
The variables given are consistent with the use of the Capital Asset Pricing Model to find out the value of the expected return for the stock. The formula is;
Expected Return = Risk free rate + beta ( Market return - risk-free rate)
9.5% = 3.5% + beta ( 9% - 3.5%)
6% = beta * 5.5%
beta = 6%/5.5%
beta = 1.09
This year Burchard Company sold 37,000 units of its only product for $16.40 per unit. Manufacturing and selling the product required $122,000 of fixed manufacturing costs and $182,000 of the fixed selling and administrative costs. It?s per unit variable costs follow.
Material $4.20
Direct labor (paid on the basis of completed units) 3.20
Variable overhead costs 0.42
Variable selling and administrative costs 0.22
Next year the company will use new material, which will reduce material costs by 50% and direct labor costs by 50% and will not affect product quality or marketability. Management is considering an increase in the unit selling price to reduce the number of units sold because the factory's output is nearing its annual output capacity of 42,000 units. Two plans are being considered. Under plan 1, the company will keep the selling price at the current level and sell the same volume as last year. This plan will increase income because of the reduced costs of using the new material. Under plan 2, the company will increase the selling price by 20%. This plan will decrease unit sales volume by 5%. Under both plans 1 and 2, the total fixed costs and the variable costs per unit for overhead and for selling and administrative costs will remain the same.
Required:
1. Compute the break-even point in dollar sales for both (a) plan 1 and (b) plan 2.
Per unit Plan 1 Plan 2
Sales
Variable Costs
Material
Direct labor
Variable overhead costs
Variable S&A costs
Total variable costs
Contribution margin
2. Prepare a forecast contribution margin income statement with two columns showing the expected results of plan1 and plan 2. The statements should reports sales, total variable costs, contribution margin, total fixed costs, income before taxes, income taxes (40% rate), and net income.
Answer:
plan 1:
units sold 37,000
sales price per unit $16.40
materials per unit $2.10
direct labor per unit $1.60
variable overhead costs per unit $0.42
variable selling and administrative costs per unit $0.22
fixed manufacturing $122,000
fixed selling and administrative $182,000
plan 2:
units sold 35,150
sales price per unit $19.68
materials per unit $2.10
direct labor per unit $1.60
variable overhead costs per unit $0.42
variable selling and administrative costs per unit $0.22
fixed manufacturing $122,000
fixed selling and administrative $182,000
1) break even points:
Plan 1 = ($304,000) / ($16.40 - $4.34) = 25,207.30 = 25,208 units
Plan 2 = ($304,000) / ($19.68 - $4.34) = 19,817.47 = 19,818 units
2) contribution income statement
Plan 1 Plan 2
Sales revenue $606,800 $691,752
Variable costs:
Production costs $152,440 $144,818
Selling and adm. costs $8,140 $7,733
Contribution margin $446,220 $539,201
Fixed costs:
Manufacturing costs $122,000 $122,000
Selling and adm. costs $182,000 $182,000
Income before taxes $142,220 $235,201
Income taxes $56,888 $94,080
Net income $85,332 $141,121
"A customer has an existing margin account and wants to write five covered calls against 500 shares of stock in the account. The margin requirement to write the calls is:"
Answer: 0
Explanation: The sale of the stock call, would be covered by the ownership of the stock ( someone who owns the said stock). The required margin needed to sell the stock would be ‘0’ since there is no evidence that points to any available risks on the short calls. as short calls helps to predict of prices would drop or not.
Zhao Co. has fixed costs of $286,200. Its single product sells for $163 per unit, and variable costs are $110 per unit. Compute the level of sales in units needed to produce a target (pretax) income of $106,000.
Answer:
Break-even point in units= 7,400 units
Explanation:
Giving the following information:
Fixed costs= $286,200
Selling price= $163 per unit
Unitary variable costs= $110
Desired profit= $106,000
To calculate the number of units to be sold, we need to use the break-even point formula:
Break-even point in units= (fixed costs + desired profit) / contribution margin per unit
Break-even point in units= (286,200 + 106,000) / (163 - 110)
Break-even point in units= 7,400 units
Emily Corporation purchased all of Ace Company's common stock on January 1, 2020, for $1,000,000 cash. The investee's stockholders' equity amounted to $400,000. The excess of $600,000 was due to an unrecorded patent with a six-year life. In 2020, Ace reported net income of $250,000 and paid dividends of $25,000.
For 2020, what amount of Equity Income will Emily record? How to get the answer of 1,125,000
Answer:
$ 1,125,000
Explanation:
Calculation for the amount of Equity Income that Emily will record
First step is to find the Net equity income using this formula
Net equity income= Net income +Dividends
Let plug in the formula
Net equity income=$250,000+$25,000
Net equity income=$225,000
Second step is to find the balance of investment using this formula
Balance of investment= (Common stock + Net equity income )- Amortization of unrecorded patent
Let plug in the formula
Balance of investment =($1,000,000+$225,000 )-($600,000/6)
Balance of investment=$1,225,000-$100,000
Balance of investment = $ 1,125,000
Therefore the amount of Equity Income that Emily will record will be $ 1,125,000
On January 1, 2020, the Hardin Company budget committee has reached agreement on the following data for the 6 months ending June 30, 2020.
Sales units: First quarter 5,200; second quarter 6,700; third quarter 7,000.
Ending raw materials inventory: 40% of the next quarter’s production requirements.
Ending finished goods inventory: 25% of the next quarter’s expected sales units.
Third-quarter production: 7,380 units.
The ending raw materials and finished goods inventories at December 31, 2019, follow the same percentage relationships to production and sales that occur in 2020. 3 pounds of raw materials are required to make each unit of finished goods. Raw materials purchased are expected to cost $5 per pound.
a) Prepare a production budget by quarters for the 6-month period ended June 30, 2020.
b) Prepare a direct materials budget by quarters for the 6-month period ended June 30, 2020.
Answer:
Hardin Company
Production budget
For the first semester of 2020
First quarter Second quarter Total
Sales units 5,200 6,700 11,900
Planned ending 1,675 1,750 1,750
inventory
Total production 6,875 8,450 13,650
required
- beginning inv. -1,300 -1,675 -1,300
Units to be 5,575 6,775 12,350
produced
Hardin Company
Raw materials budget
For the first semester of 2020
First quarter Second quarter Total
Units to be 5,575 6,775 12,350
produced
Materials required 3 3 3
per unit
Materials needed 16,725 20,325 37,050
for production
Planned ending 8,130 8,856 8,856
inventory
Total materials 24,855 29,181 45,906
needed
- beginning inv. -6,690 -8,130 -6,690
Materials to be 18,165 21,051 39,216
purchased
Cost per unit $5 $5 $5
Total cost of $90,825 $105,255 $196,080
direct materials
El Tapitio purchased restaurant furniture on September 1, 2018, for $30,000. Residual value at the end of an estimated 10-year service life is expected to be $4,500. Calculate depreciation expense for 2018 and 2019, using the straight-line method, and assuming a December 31 year-end.
Answer:
Results are below.
Explanation:
Giving the following information:
Purchase price= $30,000 (September)
Salvage value= $4,500
Useful life= 10
First, we need to determine the annual depreciation using the following formula:
Annual depreciation= (original cost - salvage value)/estimated life (years)
Annual depreciation= (30,000 - 4,500)/10
Annual depreciation= $2,550
2018:
Annual depreciation= (2,550/12)*4= $850
2019:
Annual depreciation= $2,550
The Watts Company uses predetermined overhead rates to apply manufacturing overhead to jobs. The predetermined overhead rate is based on labor cost in Dept. A and on machine-hours in Dept. B. At the beginning of the year, the company made the following estimates:
Department A Department B
Direct labour cost $30,000 $40,000
Manufacturing overhead $60,000 $50,000
Direct labour hours 6,000 8,000
Machine hours 2,000 10,000
What predetermined overhead rates would be used in Departments A and B, respectively?
a. 50% and $8.00.
b. 50% and $5.00.
c. 110% and $15.00.
d. 200% and $5.00.
Answer:
The Watts Company
d. 200% and $5.00.
Explanation:
a) Data and Calculations:
Estimates:
Department A Department B
Direct labour cost $30,000 $40,000
Manufacturing overhead $60,000 LH $50,000 MH
Direct labour hours 6,000 8,000
Machine hours 2,000 10,000
Department A:
Manufacturing overhead rate = $60,000/$30,000 x 100 = 200%
Department B:
Manufacturing overhead rate = $50,000/10,000 = $5.00
The Watts Company Department A will absorb manufacturing overhead at a rate of 200% of direct labor cost in order to arrive at an estimate of $60,000 ($30,000 x 200%). The Department B will absorb manufacturing overhead at a rate of $5 per machine hour to arrive at an estimate of $50,000 (10,000 x $5).
Refer to the following scenario to answer the following questions.
Five fishermen live in a village and have no other employment or income-earning possibilities besides fishing. They each own a boat that is suitable for fishing but does not have any resale value. Fish are worth $5 per pound, and the marginal cost of operating the boat is $500 per month. They all fish a river next to the village. According to the following schedule, they have determined that when there are more of them out on the river fishing, they each catch fewer fish per month.
Boats Fish Caught per
Boat (pounds)
1 200
2 190
3 175
4 155
5 130
How many fishermen will choose to operate their boats?
Answer:
5 fishermen will choose to operate their boats as each of them will earn a profit of $150
Explanation:
Per boat operating cost = $500 per month.
Price of fish = $5 per pound.
There are 5 fishermen and each fishermen has 1 boat.
For 1 boat
Total revenue = Price * quantity = $5 * 200 = $1,000
Cost = $500
Profit = Total revenue - Cost = 1000 - 500
Profit = $500.
For 2 boats
Total Revenue of each boat = $5 * 190 = $950
Cost of each boat = $500
Profit of each boat = Total revenue - Cost = 950 - 500
Profit of each boat = $450.
For 3 boats
Total Revenue of each boat = 5 * 175 = $875
Cost of each boat = $500
Profit of each boat = TR - Cost = 875 - 500
Profit of each boat = $375
For 4 boats
Total Revenue of each boat = 5 * 155 = $775
Cost of each boat = $500
Profit of each boat = TR - Cost = 775 - 500
Profit of each boat = $275
For 5 boats
Total Revenue of each boat = 5 * 130 = $650
Cost of each boat = $500
Profit of each boat = TR - Cost = 650 - 500
Profit of each boat = $150.
Conclusion: As there are 5 fishermen and if all of them out on the river at the same time then each fisherman earns profit of $150. As all fishermen earns profit hence all of them will choose to operate their boats. Therefore, 5 fishermen will be ready to operate their boats.
Due to numerous lawsuits, major chemical manufacturer has recently experienced a market reevaluation. The firm has 15-year, 8% coupon bond, paid semiannually and par value of $1,000. The required nominal rate (yield) on this debt has now risen to 10%. What is the current price of this bond?
Answer:
Bond Price = 846.2754897 rounded off to $846.28
Explanation:
To calculate the price of the bond, we need to first calculate the coupon payment per period. We assume that the interest rate provided is stated in annual terms. As the bond is a semi annual bond, the coupon payment, number of periods and semi annual YTM will be,
Coupon Payment (C) = 0.08 * 1/2 * 1000 = $40
Total periods (n)= 15 * 2 = 30
r or YTM = 10% * 1/2 = 5% or 0.05
The formula to calculate the price of the bonds today is attached.
Bond Price = 40 * [( 1 - (1+0.05)^-30) / 0.05] + 1000 / (1+0.05)^30
Bond Price = 846.2754897 rounded off to $846.28
Firm J has net income of $77,605, sales of $935,000, and average total assets of $467,500. Required: Calculate Firm J’s margin, turnover, and return on investment (ROI).
Answer:
Firm J's margin= 8.3%
Firm J's turnover= 2
Firm J's ROI= 16.6%
Explanation:
Form J has a net income of $77,605
The sales is $935,000
The average total assets is $467,500
Firm J's margin can be calculated as follows
Margin= Net income/sales
= $77,605/$935,000
= 0.083×100
= 8.3%
Firm J's turnover can be calculated as follows
Turnover= Sales/Average Total assets
= $935,000/$467,500
= 2
Firm J's return on investment can be calculated as follows
ROI= Net income/Average Total assets
= $77,605/$467,500
= 0.166×100
= 16.6%
Hence Firm J's margin, turnover and return on investment is 8.3%, 2 and 16.6% respectively.
Suppose that in a competitive output market, firms hire labor from a competitive labor market (so that the profit maximization conditions for hiring labor are as we discussed in class). If the supply of this kind of labor increases, we would expect a(n) _____________.
A. increase in equilibrium wage, W, and increase in equilibrium quantity of labor, L, employed.
B. an increase in W and a decrease in L.
C. A decrease in W and a decrease in L.
D. A decrease in W and no change in L.
E. None of the above.
Answer:
e
Explanation:
When supply of labour increases, the supply curve shifts outward. As a result there would be an increase in equilibrium quantity but a decrease in wages
Jessie, an HR specialist, has been assigned the task of performing a job analysis for a new position created at the firm. What questions is LEAST relevant to the job analysis that Jessie will conduct?
Answer: D) What is the national hourly rate for this job?
Explanation:
Job analysis is done to help an organization ascertain what kind of person would be a right fit for the job. As such, it focuses on what the job entails as well as the requirements of the job and other details like its duration. This will help a company know the kind of person that will work best in the role.
The rate that the job pays is something that the company also analyzes but this is a very secondary aspect of job analysis and so it is the least relevant here.
Mars Inc. has a defined benefit pension plan. On December 31 (the end of the fiscal year), the company received the PB0 report from the actuary. The following information was included in the report: ending PBO, $110,000 benefits paid to retirees. $10,000, interest cost, $7,200. The discount rate applied by the actuary was 8%. What was the beginning PBO?
A) $100,000
B) $112,000.
C) $90,000.
D) $107,200.
Answer:
C) $90,000
Explanation:
Beginning PBO = Interest cost/Discount rate =
Beginning PBO = $7,200/8%
Beginning PBO = $90,000
A company purchased 400 units at $75 per unit. The company sold 385 units. what is the cost of goods sold and ending inventory
Answer:
Cost of goods sold $28,875
Ending inventory $1,125
Explanation:
Calculation for cost of goods sold and ending inventory
Cost of goods sold is calculated using this formula
Cost of goods sold=Sales units *Purchased per units
Let plug in the formula
Cost of goods sold=385 units *$75 per unit
Cost of goods sold=$28,875
Calculation for the ending inventory using this formula
Ending inventory=(Purchased units * purchased per unit) -Cost of goods sold
Let plug in the formula
Ending inventory=(400 units× 75 per unit) -$28,875
Ending inventory=$30,000-$28,875
Ending inventory=$1,125
Therefore the Cost of goods sold will be $28,875 while the Ending inventory will be $1,125
Each year, public schools are rewarded with bigger budgets for achieving a rating of "excellent" or "recommended" and are punished for rating "needs improvement." These ratings are based on meeting thresholds on a broad set of measures such as attendance rates, graduation rates, standardized test scores, SAT scores, and so on. True or False: This funding structure incentivizes schools to seek out and serve lower-performing students. True False
Answer:
Each year, public schools are rewarded with bigger budgets for achieving a rating of "excellent" or "recommended" and are punished for rating "needs improvement." These ratings are based on meeting thresholds on a broad set of measures such as attendance rates, graduation rates, standardized test scores, SAT scores, and so on. True or False
This funding structure incentivizes schools to seek out and serve lower-performing students. True False
Explanation:
The funding structure is meant to encourage public schools for improved performance in all the performance measures. These performance measures are the means to judge whether proper application is being achieved with the funds provided by the government to such schools. They also encourage healthy competition among public schools when followed judiciously. Since they have some internal and external benchmarks, the performance measures are like a balanced scorecard for performance evaluation.
How is one product determined to specialize in between the two
Answer:
Specialization is a method of production whereby an entity focuses on the production of a limited scope of goods to gain a greater degree of efficiency. Many countries, for example, specialize in producing the goods and services that are native to their part of the world, and they trade them for other goods and services.
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If there is a market with the below noted market segmentation, what would the four firm market concentration ratio be?
Distribution of sales: 30%, 3%,10%, 5%,15%, 2%, 35%
a. 10
b. 90
c. 50
d. 40
Answer:
The correct answer is:
90 (b.)
Explanation:
A concentration ratio is the ratio of the combined market shares percentage held by the largest specified number of firms, compared to the given market size. The concentration ratio ranges from 0% to 100%. If the concentration ratio of an industry ranges from 0% to 50%, that industry is said to be perfectly competitive if the top 5 firms have a concentration ratio of 60% or more, oligopoly is said to occur, and if the competition ratio of one company is 100% it shows monopoly.
In our example, the concentration of the largest four market segments are:
35%, 30%, 15% and 10%
Therefore, the four firm market concentration ratio = 35 + 30 + 15 + 10 = 90
Answer:
b. 90
Explanation:
The concentration ratio is a term in business that is measured as the total summation of the market share percentage carried by the largest specified number of companies in an industry. The concentration ratio varies between 0% to 100%, and an industry's concentration ratio is considered to demonstrates the extent of competition in the industry.
However, the four-firm concentration ratio is calculated by summing the market shares—that is, the percentage of total sales—of the four largest companies in the given market.
Hence, in this case, we have 35%, 30%, 15% and 10% as the top four largest market share. There by, summation equals => 35+30+15+10 = 90.
The credit terms 2/10, n/30 are interpreted as: Multiple Choice 2% cash discount if the amount is paid within 10 days, or the balance due in 30 days. 30% discount if paid within 2 days. 2% discount if paid within 30 days. 30% discount if paid within 10 days. 10% cash discount if the amount is paid within 2 days, or the balance due in 30 days.
Answer:
The credit terms 2/10, n/30 are interpreted as:
2% cash discount if the amount is paid within 10 days, or the balance due in 30 days.Explanation:
I will explain using an example:
On January 2, the company sells $1,000 worth of goods with credit terms 2/10, n/30.
January 2
Dr Accounts receivable 1,000
Cr Sales revenue
If the client pays within the discount period:
January 11
Dr Cash 980
Dr Sales discounts 20
Cr Accounts receivable 1,000
If the client pays after the discount period but before 30 days:
January 31
Dr Cash 1,000
Cr Accounts receivable 1,000
The credit terms 2/10, and n/30 are interpreted as a 2% cash discount if the amount is paid within 10 days, or the balance is due in 30 days. Thus, option A is the correct option.
Trade credits like 2/10 net 30 are frequently provided by suppliers to purchasers. It stands for an agreement that if payment is made within 10 days, the buyer would get a 2% reduction on the net invoice amount. Otherwise, you have 30 days to pay the entire invoice amount.
It's a common way to express an early payment discount. In accounting, the discount amount and the window of availability are typically represented using a formula like 2/10, n/30. This implies that if the invoice is paid in full within ten days, a 2% reduction is applied; otherwise, the full amount is owed.
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building that has a market value of $366,000; the partnership assumes responsibility for a $133,000 note secured by a mortgage on the property. Monroe invests $108,000 in cash and equipment that has a market value of $83,000. For the partnership, the amounts recorded for Fontaine's Capital account and for Monroe's Capital account are:\
Answer:
Fontaine - $233,000Monroe - $191,000Explanation:
Fontaine invested a building that had a value of $366,000 but the partnership assumes a $133,000 note secured by a mortgage on the property. This therefore reduces Fontaine's contribution;
= 366,000 - 133,000
= $233,000
Monroe contributed both cash and equipment so that would go to Monroe's capital account as their capital contribution;
= 108,000 + 83,000
= $191,000
Rollins Corporation is estimating its WACC. Its target capital structure is 20% debt, 20% preferred stock, and 60% common equity. Its bonds have a 7.5% coupon, paid semi-annually, a current maturity of 20 years, and sell for $1,105.78. The firm could sell, at par, $100 preferred stock which pays a 8% annual dividend, but flotation costs of 5 percent would be incurred. Rollins' beta is 1.8, the risk-free rate is 2.45%, and the market risk premium is 5%. The firm's marginal tax rate is 40 percent.
A. What is the companyâs cost of preferred equity?
B. What is the companyâs cost of common equity?
C. What is the companyâs WACC?
Answer:
A. What is the company's cost of preferred equity?
8.42%B. What is the company's cost of common equity?
11.45%C. What is the company's WACC?
9.31%Explanation:
20% debt ⇒ after tax cost of debt 3.76%
20% preferred stock ⇒ 8.42%
60% common equity ⇒ 11.45%
in order to determine the after tax cost of debt we must first determine the yield to maturity of debt:
approximate YTM = {37.5 +[(1,000 - 1,150.78)/40]} / [(1,000 + 1,150.78)/2] = 33.7305 / 1,075.39 = 3.3166% x 2 = 6.2732%
after tax cost of debt = 6.2732% x 0.6 = 3.76%
cost of preferred stocks = 8 / (100 x 0.95) = 8 / 95 = 8.42%
cost of equity (Re) = 2.45% + (1.8 x 5%) = 2.45% + 9% = 11.45%
WACC = (60% x 11.45%) + (20% x 8.42%) + (20% x 3.76%) = 6.87% + 1.684% + 0.752% = 9.306% = 9.31%
The Herfindahl-Hirschman Index (HHI) is a mathematical approach to understanding market concentration that provides a single concentration indicator. What is the HHI for an industry characterized by the below noted data?
a. Firm 1 has a market share of 40%
b. Firm 2 has a market share of 20%
c. Firm 3 has a market share of 15%
d. Firm 4 has a market share of 15%
e. Firm 5 has a market share of 10%
HHI=___
Answer: 2,550
Explanation;
The Herfindahl-Hirschman Index (HHI) is used to measure market saturation to see the concentration of a market. It ranges from around 0 to 10,000 and is calculated by squaring the market share of every firm in the market and then adding the squares up.
= 40² + 20² + 15² + 15² + 10²
= 1600 + 400 + 225 + 225 + 100
= 2,550
The federal government has the legal authority to prevent a company from adding products through acquisitions if the acquisition threatens to lessen competition.
A. True
B. False
Answer:
True
Explanation:
One way of determining if acquisitions would lessen competition is through the calculation of the HHI. if the HHI of the industry is more than 1500 before the acquisition and the HHI changes by more than 50 after the acquisition, the government would challenge the merger
On January 1, 2021, Legion Company sold $270,000 of 4% ten-year bonds. Interest is payable semiannually on June 30 and December 31. The bonds were sold for $169,056, priced to yield 10%. Legion records interest at the effective rate. Legion should report bond interest expense for the six months ended June 30, 2021, in the amount of: (Round your answer to the nearest dollar amount.)
Answer:
Interest expense = $8453
Explanation:
We can calculate Bond interest expense by multiplying Carrying value of the bond with the effective interest rate and the period of time,
DATA
Carrying value of bond = $169,056
Effective interest rate = 10%
Period of time = 6 months
Interest expense =?
Calculation
Interest expense = Carrying value x Effective interest rate x Time period
Interest expense = $169,056 x 10% x [tex]\frac{6months}{12months}[/tex]
Interest expense = $8453
Holiday Laboratories purchased a high-speed industrial centrifuge at a cost of $460,000. Shipping costs totaled $11,000. Foundation work to house the centrifuge cost $7,300. An additional water line had to be run to the equipment at a cost of $3,900. Labor and testing costs totaled $5,400. Materials used up in testing cost $3,200. The capitalized cost is:
Answer:
$490,800
Explanation:
In order to arrive at the capitalized cost, we will sum up all the cost in the above question because those costs were incurred by the company - Holiday Laboratories to getting the assets prepared for use.
Therefore, Capitalized cost
= High speed industrial centrifuge + Shipping cost + Foundation work + Additional equipment cost + Labor and testing cost + Material cost
= $460,000 + $11,000 + $7,300 + $3,900 + $5,400 + $3,200
= $490,800
Stock Investment Transactions On September 12, 2,000 shares of Aspen Company were acquired at a price of $50 per share plus a $200 brokerage commission. On October 15, a $0.50-per-share dividend was received on the Aspen stock. On November 10, 1,200 shares of the Aspen stock were sold for $42 per share less a $150 brokerage commission. In your computations, round per share amounts to two decimal places. When required, round final answers to the nearest dollar. For a compound transaction, if an amount box does not require an entry, leave it blank. Journalize the entries to record the original purchase, the dividend, and the sale under the cost method.
Answer: Please see answer in explanation column
Explanation:
1. Journal to record original purchase.
Date Account Debit Credit
Sept 12 Investment- Aspen stock $100,200.
Cash $100,200.
Calculation
Cash = 2,000 shares x $50 per share = 100,000 + brokerage commission of $200
= $100,200.
2.Journal to record dividend received
Date Account Debit Credit
Oct 15 Cash $1000.
Dividend revenue $1000
Calculation
dividend received = $2000 x $0.50-per-share dividend =$1000
3..Journal to record sale of investment
Date Account Debit Credit
Nov 10 Cash $50,250
Loss from sale $9,870
Investment - Aspen stock $60,120
Calculation
Purchase price of 1 Share in Aspen stock = 100,200/2000 = 50.10 per share
Investment = share sold x purchase amount of 1 share in Aspen stock
1,200 x 50.10= $60,120
Cash = 1,200 shares x $42 per share = 100,000 - brokerage commission of $150
= $50,250
Suppose that hypothetically there are only two countries in the world: Japan and South Korea Now suppose that at the end of year 2, Japan has positive net exports of $20 billion against South Korea. In addition, Japan has earned $1 billion in interest from its South Korean assets over the course of year 2. Question: What are the respective balances for the current account, and the financial and capital account for Japan at the end of year 2
Answer:
i) $21 billion
ii) $0
iii) $0
Explanation:
GIVEN DATA : ( two countries )
At the end of year 2
net exports = $20 billion for Japan
Interest earned from assets = $1 billion for Japan
i) The balances for the current account for Japan
export value + interest earned from assets
= $20 billion + $1 billion = $21 billion
ii) Financial account for Japan
Financial account for Japan will be zero because there is no increase or decrease in number of its assets within the given period
iii) capital account for Japan
Capital account of Japan will will have a zero balance. this is because Capital account is used to record foreign investments, local investment and the reserve account as well. and there was no investment captured within the given time that was made by Japan
Pam Erickson Construction Company changed from the completed-contract to the percentage-of-completion method of accounting for long-term construction contracts during 2015. For tax purposes, the company employs the completed-contract method and will continue this approach in the future. (Hint: Adjust all tax consequences through the Deferred Tax Liability account.) The appropriate information related to this change is as follows.
Pretax Income from:
Percentage-of-Completion Completed-Contract Difference
2014 $752,200 $586,700 $165,500
2015 683,500 444,700 238,800
(a) Assuming that the tax rate is 30%, what is the amount of net income that would be reported in 2015?
Net income $
(b) What entry(ies) are necessary to adjust the accounting records for the change in accounting principle?
Answer:
a. $478,450
b.Dr Construction in Process $165,500
Cr Deferred tax liability $49,650
Cr Retained earnings $115,850
Explanation:
A. Calculation for the amount of net income that would be reported in 2015 for Pam Erickson Construction Company
Using this formula
Net income =(Income before income tax ) Income before income tax-Tax rate
Let plug in the formula
Net income= $683,500 - (683,500 × 30%)
Net income= $683,500 - $205,050
Net income= $478,450
B. Preparation of the Journal entry(ies) that are necessary to adjust the accounting records
For Pam Erickson Construction Company
Dr Construction in Process $165,500
Cr Deferred tax liability $49,650
($165,500 × 30%)
Cr Retained earnings $115,850
($165,500 × (100%-30%)
Professional Products Inc., a wholesaler of office products, was organized on February 5 of the current year, with an authorization of 75,000 shares of preferred 1% stock, $70 par and 450,000 shares of $15 par common stock. The following selected transactions were completed during the first year of operations:
Journalize the transactions.
Feb. 5. Issued 95,000 shares of common stock at par for cash.
Feb. 5. Issued 400 shares of common stock at par to an attorney in payment of legal fees for organizing the corporation.
Apr. 9. Issued 15,500 shares of common stock in exchange for land, buildings, and equipment with fair market prices of $42,000, $231,000, and $52,500, respectively
June 14. Issued 23,000 shares of preferred stock at $80 for cash.
Answer and Explanation:
The journal entries are shown below:
On Feb-05
Cash Dr (95,000 shares × $15) $1,425,000
To Common Stock $1,425,000
(Being the issuance of the common stock is recorded)
On Feb-05
Legal Fees (400 shares × $15) $6,000
To Common Stock $6,000
(Being the Issuance of the common share for legal Fees is recorded)
On Apr-09
Land $42,000
Building $231,000
Equipment $52,500
To Common Stock (15,500 shares × $15) $232,500
To Paid in capital excess of par value $93,000
(being the issued of the common stock in exchange of assets is recorded)
On Jun-14
Cash (23,800 shares × $80) $1,904,000
To preferred Stock (23,800 shares × $70) $1,666,000
To Paid in capital excess of par value $238,000
(Being the issuance of the preferred stock is recorded)
,
The following data relate to direct materials costs for February: Materials cost per yard: standard, $1.93; actual, $2.03 Standard yards per unit: standard, 4.68 yards; actual, 4.96 yards Units of production: 9,400 Calculate the direct materials price variance. a.$4,399.20 favorable b.$940.00 unfavorable c.$4,662.40 favorable d.$4,662.40 unfavorable
Answer:
d.$4,662.40 unfavorable
Explanation:
Calculation for direct materials price variance
The first step is to find the Actual quantity variance using the formula
Actual quantity variance =Actual units produced* Actual yard used
Let plug in the formula
Actual quantity variance=9,400*4.96 yards
Actual quantity variance=$46,624
Second step is to calculate for the Direct material price variance using this formula
Direct material price variance= ( Standard price -Actual price)* Actual quantity used
Let plug in the formula
Direct material price variance=($1.93-$2.03)*$46,624
Direct material price variance=(-0.1*46,624)
Direct material price variance=-$4,662.40 Unfavorable
Therefore the Direct material price variance will be $4,662.40 Unfavorable
To judge whether a particular diversification move has good potential for building added shareholder value, the move should pass the following tests:___________.
A) the attractiveness test, the barrier-to-entry test, and the growth test.
B) the strategic fit test, the resource fit test, and the profitability test.
C) the barrier-to-entry test, the growth test, and the shareholder value test.
D) the attractiveness test, the cost-of-entry test, and the better-off test.
E) the resource fit test, the strategic fit test, the profitability test, and the shareholder value test.
Answer:
D) the attractiveness test, the cost-of-entry test, and the better-off test.
Explanation:
To judge a diversification change, an organization needs to pass the attractiveness tests, the entry cost test and the best situation test.
These tests will be decisive to analyze the potential that diversification will have to create added value for the shareholder.
The attractiveness test will list the ability that the market has to ensure that there is a safe return on investments.
The cost-of-entry will aim to ensure that when entering a new sector, the organization does not have higher costs that can influence the generation of profitability.
Finally, the better-off test will analyze whether the planned diversification will be so profitable that it will help to improve the performance of the integration of organizational businesses.
Answer:
OPTION d
Explanation:
