Answer:
Total Stockholders' Equity = $2,031,000
Explanation:
Note: See the attached excel file for the he December 31, 2012, stockholders' equity section of the balance sheet. The excel file contains all the formulae used.
From the attached excel file, we have:
Total Stockholders' Equity = $2,031,000
An investor thought that market interest rates were going to decline. He paid $19,000 for a corporate bond with a face value of $20,000. The bond has an interest rate of 10% per year payable annually. If the investor plans to sell the bond immediately after receiving the 4th interest payment, how much will he have to receive in order to make a return of 14% per year? Solve using:
a. tabulated factors
b. the GOAL SEEK tool on a spreadsheet.
Answer:
Answer is explained in the explanation section below.
Explanation:
a. In this part, we need to calculate the present worth using the formula to calculate the sale price of the bond.
As the coupon rate = 10% per year
So,
The Annual dividend will = 2000 = 10% x 20,000
19000 = 2000 (P/A, 14%,4) + B(P/F,14%,4)
19000 = 2000 (2.9137) + B (0.592)
Solving for B = Desired sales price of the bond
B = [tex]\frac{19000 - 5827.4}{0.592}[/tex]
B = 22251
b. Part b of this question is to solve using GOAL SEEK feature of a spreadsheet so, I have attached it in the attachment. Please refer to the attachment for the solution of part b.
For each example presented in the following table, identify the self-efficacy dimension being illustrated.
Example Magnitude Strength Generality
You believe that you will be able to perform in at least the 70th percentile in sales in the next quarter compared to the rest of your company's sales force.
You are not sure that you will be able to earn employee of the month given how well Peggy is doing.
Although you were one of the top students in your high school, now that you are in college you are not sure if you will continue to perform in the top 20% of your class.
Use your knowledge of the different motivation theories to answer the question.
If your manager assumed that you are motivated by money and offered incentive pay so that you would earn more money if you did more work, what approach to motivation is being illustrated?
A. Expectancy theory
B. Maslow's hierarchy of needs
C. Scientific management
D. The human relations approach
Answer:
1) A) MAGNITUDE
B) STRENGTH
C) GENERALITY
2) Option A: Expectancy Theory
Explanation:
A) The correct self-efficacy dimension in this statement is "MAGNITUDE" because you believe that you can complete the task.
B) The correct self-efficacy dimension in this statement is "STRENGTH" because you are reflecting on your previous confidence you had to claim the employee of the month.
C) The correct self-efficacy dimension in this statement is "GENERALITY" because you are estimating the difference in two tasks which are your performance at the top in high school to the performance at top in college now.
2) Answer is expectancy theory because you are motivated to start working hard because of the extra money the manager is offering as incentive to make you work harder.
Harrelson Company manufactures pizza sauce through two production departments: Cooking and Canning. In each process, materials and conversion costs are incurred evenly throughout the process. For the month of April, the work in process accounts show the following debits.
Cooking Canning
Beginning work in process $0 $4,710
Materials 22,030 10,200
Labor 8,740 8,020
Overhead 32,760 28,340
Costs transferred in 55,850
ournalize the April transactions.
Answer and Explanation:
The journal entries are shown below:
On April 30
WIP-cooking Dr $22,030
WIP- Canning $10,200
To Raw material inventory $32,230
(Being material used is recorded)
WIP-cooking Dr $8,740
WIP- Canning $8,020
To Factory labor $16,760
(Being assigned of factory labor to production is recorded)
WIP-cooking Dr $32,760
WIP- Canning $28,340
To Manufacturing overhead $61,100
(Being assigned of overhead to production is recorded)
WIP Canning $55,850
To WIP cooking $55,850
(being cost transferred in recorded)
Prior to May 1, Fortune Company has never had any treasury stock transactions. A company repurchased 140 shares of its common stock on May 1 for $7,000. On July 1, it reissued 70 of these shares at $52 per share. On August 1, it reissued the remaining treasury shares at $49 per share. What is the balance in the Paid-in Capital, Treasury Stock account on August 2
Answer: $70
Explanation:
First, we need to calculate the purchase price per share and this will be:
= Purchase amount / Number of shares bought
= $7000 / 140
= $50 per share
Therefore, the balance in the Paid-in Capital, Treasury Stock account on August 2 will be:
= [70 × ($52 - $50)] + [70 × ($49 - $50)]
= (70 × $2) + ($70 × $-1)
= $140 - $70
= $70
Castle Corporation conducts business in States 1, 2, and 3. Castle’s $630,000 taxable income consists of $555,000 apportionable income and $75,000 allocable income generated from transactions conducted in State 3. Castle’s sales, property, and payroll are evenly divided among the three states, and the states all employ a three-equal-factors apportionment formula.
Determine how much of Castle’s income is taxable in each of the following states.
a. State 1: $ _________
b. State 2: $ _________
c. State 3: $ _________
Answer and Explanation:
The computation of the taxable income in each states is shown below:
a. For state 1
= Apportionable income ÷ number of states
= $555,000 ÷ 3
= $185,000
b. For state 2
= Apportionable income ÷ number of states
= $555,000 ÷ 3
= $185,000
c. For state 3
= $185,000 + $75,000
= $260,000
A callable bond:
A. Is generally call protected during the entire term of the bond issue,
B. generally will have a call protection period during the final three years prior to maturity.
C. may be structured to pay bondholders the current value of the bond on the date of call.
D. is prohibited from having a sinking fund also.
E. Is frequently called at a price that is less than par value
Answer:
C. may be structured to pay bondholders the current value of the bond on the date of call.
Explanation:
A callable bond is also called a redeemable bond. It a debt instrument that the issuer may decide to call or redeem before the maturity date.
This is used by bond issuers to have a cheaper cost of borrowing funds.
For example when interests are low the issuer can buy back his bonds at a lower cost this reducing his debt burden.
So callable bonds are structured to pay bondholders the current value of the bond on the date of call or redemption.
The following information is available for Keyser Corporation for the current year: Beginning Work in Process Cost of Beginning Work in Process: (75% complete) 14,500 units Material $25,100 Started 75,000 units Conversion 50,000 Ending Work in Process Current Costs: (60% complete) 16,000 units Material $120,000 Abnormal spoilage 2,500 units Conversion 300,000 Normal spoilage (continuous) 5,000 units Transferred out 66,000 units All materials are added at the start of production. Refer to Keyser Corporation. Assume that the cost per EUP for material and conversion are $1.75 and $4.55, respectively. What is the cost assigned to ending Work in Process
Answer:
$71,680
Explanation:
Calculation to determine the cost assigned to ending Work in Process
Equivalent Units * Cost per Equivalent Unit =Total
Work in Process Current Costs 16,000* $1.75 =$28,000
Work in Process Current Costs: (60% complete 9,600*$4.55=$43,680
(16,000*60%=9,600)
Total Cost assigned to ending Work in Process=$28,000+$43,680
Total Cost assigned to ending Work in Process=$71,680
Therefore cost assigned to ending Work in Process is $71,680
Barbara, a product manager at an organic soap manufacturing company, is supposed to interview a candidate for a new job opening in her department. The candidate arrives late to the interview, and therefore Barbara assumes that he will be tardy and uninterested in his job as well. Despite the fact that the candidate meets all the job requirements, Barbara rejects the candidate. Which of the following interview errors has Barbara most likely made?
A. The first-impression error.
B. The similarity error.
C. The contrast error.
D. The non-relevancy error.
Answer:
A. The first-impression error.
Explanation:
It is correct to say that Barbara probably made the first-impression error in the interview, because this error occurs when there are initial judgments about a candidate in the interview, it was what happened when Barbara thought that the candidate would be disinterested at work due to his late to the interview even the candidate meeting all the requirements of the position.
This error can be based on positive and negative judgments and can directly influence a job hiring.
Faux Trees Company produces artificial Christmas trees. A local shopping mall recently made a special order offer; the shopping mall would like to purchase 230 extra-large white trees. Faux Trees Company is currently producing and selling 20,000 trees; the company has the excess capacity to handle this special order. The shopping mall has offered to pay $160 for each tree. An accountant at Faux Trees Company provides an estimate of the unit product cost as follows:
Direct materials $51.61
Direct labor​ (variable) $3.80
Variable manufacturing overhead $1.00
Fixed manufacturing overhead ​$4.00
Total unit cost $60.41
This special order would require an investment of $5,000 for the molds required for the extra−large trees. These molds would have no other purpose and would have no salvage value. The special order trees would also have an additional variable cost of $8.26 per unit associated with having a white tree. This special order would not have any effect on the​ company's other sales. If the special order is​ accepted, the​ company's operating income would increase​ (decrease) by:_______
a. $15679 decrease.
b. $15,679 increase.
c. $16,708 decrease.
d. $10,679 increase.
Answer: $16,925.90 increase
Explanation:
Company already has the excess capacity to handle this order so the fixed costs will not be included as they would have already been incurred.
Cost of manufacturing the trees would be:
= Variable cost + Fixed cost
= ((51.61 + 3.80 + 1.00 + 8.26 for white tree) * 230 trees) + 5,000 for molds
= (64.67 * 230) + 5,000
= $19,874.10
Incremental revenue = 230 trees * 160
= $36,800
Incremental operating income = 36,800 - 19,874.1
= $16,925.90 increase
Note: Options might be for a variant of this question.
What is double-entry accounting?
Answer:
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Double-entry bookkeeping, in, is a system of where every entry to an account requires a corresponding and opposite entry to a different account. The double-entry system has two equal and corresponding sides known as. The left-hand side is debit and the right-hand side is credit. Wikipedia
Inventor
A company pays its employees $3,850 each Friday, which amounts to $770 per day for the five-day workweek that begins on Monday. If the monthly accounting period ends on Thursday and the employees worked through Thursday, the amount of salaries earned but unpaid at the end of the accounting period is:
Answer:
$3080
Explanation:
Calculation to determine what the amount of salaries earned but unpaid at the end of the accounting period is:
Salaries earned but unpaid at the end of the accounting period =3850-$770
Salaries earned but unpaid at the end of the accounting period =$3080
Point Company uses the standard costing method. The company's product normally takes 0.25 hour to produce. Normal annual capacity is 3,000 direct labor hours, and budgeted fixed overhead costs for the year were $6,750. During the year, the company produced and sold 8,000 units. Actual fixed overhead costs were $4,800. Compute the fixed overhead variance.
Answer:
the fixed overhead variance is $1,660 (favorable)
Explanation:
The fixed overhead variance results from Fixed Overhead Expenditure (Spending) variance and Fixed Overhead Volume variance.
Expenditure Variance = Actual Fixed Overheads - Budgeted Fixed Overheads
= $4,800 - $6,750
= $1,950 (favorable)
Volume Variance = Budgeted overhead at actual activity - Budgeted fixed overhead
= ($6,750 ÷ 3,000/0.25) x 8,000 units - $4,800
= $300 (unfavorable)
Total Variance = Expenditure Variance + Volume Variance
= $1,950 (favorable) + $300 (unfavorable)
= $1,660 (favorable)
Conclusion :
the fixed overhead variance is $1,660 (favorable)
The total fixed overhead variance is $1,660 Favorable.
Here, we will calculate the expenditure and volume variance to enable us derive the total fixed overhead variance.
Expenditure Variance = Actual Fixed Overheads - Budgeted Fixed
Expenditure Variance = $4,800 - $6,750
Expenditure Variance = $1,950 Favorable
Volume Variance = Budgeted overhead at actual activity - Budgeted fixed overhead
Volume Variance = ($6,750 / (3,000/0.25)) * 8,000 units - $4,800
Volume Variance = $4500 Favorable - $4,800 Unfavorable
Volume Variance = $300 Unfavorable
Total Variance = Expenditure Variance + Volume Variance
Total Variance = $1,950 Favorable + $300 Unfavorable
Total Variance = $1,660 Favorable
Therefore, the total fixed overhead variance is $1,660 Favorable.
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A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a long-term government and corporate bond fund, and the third is a T-bill money market fund that yields a rate of 5.0%. The probability distribution of the risky funds is as follows: Expected Return Standard Deviation Stock fund (S) 11% 40% Bond fund (B) 6 20 The correlation between the fund returns is 0.16. Solve numerically for the proportions of each asset and for the expected return and standard deviation of the optimal risky portfolio.
Answer:
portfolio invested in stocks = 73.20%
Portfolio invested in Bond = 26.80%
Expected return on optimal risky portfolio [ E(rp) ] = 9.66%
STD on Optimal Risky portfolio = 30.60%
Explanation:
Correlation between the funds return = 0.16
Determine the portfolio invested in each asset ( using excel )
expected risk premium on stock fund [ E(rps)] = 6%
Expected risk premium on Bond fund [ E(rpb) ] = 1%
std of stock rise premium ( бs) = 40%
std on bond rise premium ( бb) = 20%
correlation between funds [ rp(sb) ] = 0.16
Variance of stock fund ( бs^2 ) = 0.16
variance of bond fund ( бb^2 ) = 0.04
Using excel formula ( as seen in the attached screen shot )
First calculate the covariance of stock and Bond fund = 0.0128
portfolio invested in stocks = 73.20%
Portfolio invested in Bond = 26.80%
Expected return on optimal risky portfolio [ E(rp) ] = 9.66%
STD on Optimal Risky portfolio = 30.60%
Ingersoll Company has a bond currently outstanding. The bond has a face value of $1,000 and matures in 10 years. The bond makes no coupon payments for the first three years, then pays $45 every six months over the subsequent four years, and finally pays $100 every six months over the last three years. If the required return on these bonds is 5.8% percent compounded semiannually, what is the current price of the bond
Answer:
$1,196.01
Explanation:
What is the current price of the bond
Face value of Bond = $1000
Term (maturity time) = 10 years
periods = 10 *2 = 20 ( semiannual compound of interest )
Yield = 5.8%. semiannual yield = 5.8% / 2 = 2.9% = 0.029
Next : calculate the value of bond using the relationship below
Discounting factor = 1/(1 + r)^n
n = number of payments
note : payments are made semiannually
attached below is a Table showing the discounting factor and present value starting from the 4th year ( Biannually )i.e. when payment commenced
payments discounting factor present value
45 0.818638898 36.83875
45 0.795567442 35.800535
45 0.773146203 34.791579
45 0.751356854 33.811058
45 0.730181588 32.858171
45 0.709603098 31.932139
45 0.689604566 31.032205
45 0.670169646 30.157634
100 0.651282455 65.128245
100 0.632927556 63.292756
100 0.615089947 61.508995
100 0.597755051 59.775505
100 0.580908698 58.09087
100 0.564537122 56.453712
1000 0.564537122 564.53712
Total of present value = 1196.0093
At the beginning of Year 2, the Redd Company had the following balances in its accounts:
Cash $ 16,800
Inventory 9,000
Land 3,900
Common stock 17,000
Retained earnings 12,700
During Year 2, the company experienced the following events:
Purchased inventory that cost $13,100 on account from Ross Company under terms 2/10, n/30. The merchandise was delivered FOB shipping point. Freight costs of $990 were paid in cash.
Returned $900 of the inventory it had purchased from Ross Company because the inventory was damaged in transit. The seller agreed to pay the return freight cost.
Paid the amount due on its account payable to Ross Company within the cash discount period.
Sold inventory that had cost $12,500 for $21,500 on account, under terms 2/10, n/45.
Received merchandise returned from a customer. The merchandise originally cost $2,150 and was sold to the customer for $3,000 cash. The customer was paid $3,000 cash for the returned merchandise.
Delivered goods FOB destination in Event 4. Freight costs of $880 were paid in cash.
Collected the amount due on the account receivable within the discount period.
Sold the land for $7,300.
Recognized accrued interest income of $650.
Took a physical count indicating that $5,100 of inventory was on hand at the end of the accounting period. (Hint: Determine the current balance in the inventory account before calculating the amount of the inventory write down.)
Record the events in general journal format. Assume that the perpetual inventory method and gross method is used.
Answer:
Redd Company
Journal Entries:
1. Debit Inventory $13,100
Credit Accounts payable (Ross Company) $13,100
To record the purchase of inventory on account, terms 2/10, n/30.
2. Debit Freight-in Expense $990
Credit Cash $990
To record the payment for freight.
3. Debit Accounts payable (Ross Company) $900
Credit Inventory $900
To record the return of goods to supplier.
4. Debit Accounts payable (Ross Company) $12,200
Credit Cash $11,956
Credit Cash Discounts $244
To record the payment on account.
5. Debit Accounts receivable $21,500
Credit Sales Revenue $21,500
To record the sale of goods on account, terms 2/10, n/45
Debit Cost of goods sold $12,500
Credit Inventory $12,500
To record the cost of goods sold.
6. Debit Sales Returns $3,000
Credit Cash $3,000
To record the payment of cash for returned goods.
Debit Inventory $2,150
Credit Cost of goods sold $2,150
To record the cost of goods returned.
7. Debit Freight-out Expense $880
Credit Cash $880
To record the payment of freight.
8. Debit Cash $18,130
Debit Cash Discounts $370
Credit Accounts Receivable $18,500
To record the receipt of cash on account.
9. Debit Cash $7,300
Credit Land $7,300
To record the sale of land for cash.
10. Debit Interest Receivable $650
Credit Interest Revenue $650
To accrue interest income.
11. Debit Cost of goods sold $5,750
Credit Inventory $5,750
To record the cost of inventory write down.
Explanation:
a) Data and Analysis:
1. Inventory $13,100 Accounts payable (Ross Company) $13,100, terms 2/10, n/30.
2. Freight-in Expense $990 Cash $990
3. Accounts payable (Ross Company) $900 Inventory $900
4. Accounts payable (Ross Company) $12,200 Cash $11,956 Cash Discounts $244
5. Accounts receivable $21,500 Sales Revenue $21,500, terms 2/10, n/45
Cost of goods sold $12,500 Inventory $12,500
6. Sales Returns $3,000 Cash $3,000
Inventory $2,150 Cost of goods sold $2,150
7. Freight-out Expense $880 Cash $880
8. Cash $18,130 Cash Discounts $370 Accounts Receivable $18,500
9. Cash $7,300 Land $7,300
10. Interest Receivable $650 Interest Revenue $650
11. Cost of goods sold $5,750 Inventory $5,750
Inventory write down:
Beginning $9,000
Purchase 13,100
Return (900)
Sold (12,500)
Return 2,150
Net $10,850
Ending 5,100
Write down $5,750
(1 point) The manager of a large apartment complex knows from experience that 110 units will be occupied if the rent is 300 dollars per month. A market survey suggests that, on the average, one additional unit will remain vacant for each 2 dollar increase in rent. Similarly, one additional unit will be occupied for each 2 dollar decrease in rent. What rent should the manager charge to maximize revenue
Answer:
$270
Explanation:
If the rent is $300 then 110 units will be occupied. The manager of the apartment complex should set a price which will maximize the revenue. When the rent is increased by $2 then one additional unit will be left vacant. This will reduce the revenue of the apartment manager. The equation to find the best possible rent which maximizes the total revenue is:
Profit = 110 (p - 300)
P = 110p - 330
P = 270.
The rent for the apartment should be 270 so the total revenue will be maximized.
Greater Energy Systems recently reported $9,250 of sales, $5,750 of operating costs other than depreciation, and $700 of depreciation. The company had no amortization charges, it had $3,200 of outstanding bonds that carry a 5% interest rate, and its federal-plus-state income tax rate was 35%. In order to sustain its operations and thus generate sales and cash flows in the future, the firm was required to make $1,250 of capital expenditures on new fixed assets and to invest $300 in net operating working capital. 8. Refer to the data for Greater Energy Systems. What is the firm's free cash flow
Answer:
$970
Explanation:
The computation of the free cash flow is shown below:
As we know that
Free cash flow is
= EBIT (1 - tax rate) + depreciation expense - capital expenditure - net working capital
where
EBIT is
Sales $9,250.00
Less: Operating costs excluding depreciation $5,750.00
Less: Depreciation $700.00
Operating income (EBIT) $2,800.00
Now the free cash flow is
= $2,800 × (1 - 0.35) + $700 - $1,250 - $300
= $1,820 + $700 - $1,250 - $300
= $970
Your job pays you only once a year for all the work you did over the previous 12 months. Today, December 31, you just received your salary of $46,000 and you plan to spend all of it. However, you want to start saving for retirement beginning next year. You have decided that one year from today you will begin depositing 2 percent of your annual salary in an account that will earn 12 percent per year. Your salary will increase at 7 percent per year throughout your career.How much money will you have on the date of your retirement 39 years from today
Answer:
$1,360,173
Explanation:
I prepared an excel spreadsheet
Wesson Company uses the allowance method to record its expected credit losses. It estimates its losses at one percent of credit sales, which were $750,000 during the year. The Accounts Receivable balance was $220,000 and the Allowance for Doubtful Accounts has a credit balance of $1,000 at year-end. What amount is the debit to the Bad Debts Expense
Answer: $7,500
Explanation:
The Bad Debt expense is the amount that might not be paid by the account receivables of a company.
It is calculated by the formula:
= Credit sales * Estimated losses
= 750,000 * 1%
= $7,500
You won the lottery and may choose between Prize 1, which would pay you $50,000 today and $200,000 at the end of 10 years OR receive $50,000 today plus some annuity at the end of each year for 10 years. Using an interest rate of 5%, which of the following comes closest to the annuity that will make the present value of both prizes the same?
a. $172,782.65.
b. $38,431.68.
c. $122,782.65.
d. $15,900.91.
Answer:
Annual payment= $15,900.91
Explanation:
First, we need to calculate the present value of Prize 1:
PV= FV / (1 + i)^n
PV= 50,000 + [200,000 / (1.05^10)]
PV= $172,782.65
Now, we need to determine the annuity that would make equal both prizes:
Difference= 172,782.65 - 50,000= $122,782.65
To calculate the annuity that would have a PV of $122,782.65; we need to use the following formula:
Annual payment= (PV*i) / [1 - (1+i)^(-n)]
Annual payment= (122,782.65*0.05) / [1 - (1.05^-10)]
Annual payment= $15,900.91
Ronnie operates a lawn-care service. On each day, the cost of mowing the first lawn is $15, the cost of mowing the second lawn is $25, and the cost of mowing the third lawn is $40. His producer surplus on the first three lawns of the day is $100. If Ronnie charges all customers the same price for lawn mowing, that price is a. $20. b. $60. c. $80. d. $180.
Answer:
b. $60
Explanation:
Produced surplus = Price producer is able to sell - Price producer would be willing to sell
Price the producer is able to sell = Producer surplus + Price producer would be willing to sell
= $100 + ($15 + $25 + $40)
= $180 for 3 lawn
Therefore, if Ronnie charges are customers the same price for lawn mowing, that price is
= $180 / 3
= $60
On January 1, 2021, Canseco Plumbing Fixtures purchased equipment for $40,000. Residual value at the end of an estimated 7 year service life is expected to be $12,000. The company expects the equipment to operate for 12,500 hours. Required: a. Calculate depreciation expense for 2021 and 2022 using sum-of-the-years’-digits assuming the equipment was purchased on January 1, 2021. b. Calculate depreciation expense for 2021 and 2022 using sum-of-the-years’-digits assuming the equipment was purchased on March 31, 2021.
Answer:
Part a
2021 = $7,000
2022 = $6,000
Part b
2021 = $5,250
Explanation:
Sum of the year`s digit method provide for higher depreciation in early life of the asset with lower depreciation in later years.
Step 1
Some of digits calculation :
Year Digits
2021 7
2022 6
2023 5
2024 4
2025 3
2026 2
2027 1
Total 28
Step 2
Determine the depreciable amount
Depreciable amount = Cost - Residual value
= $40,000 - $12,000
= $28,000
Step 3
Depreciation expense calculations
2021 = 7 / 28 x $28,000 = $7,000
2022 = 6/ 28 x $28,000 = $6,000
assuming the equipment was purchased on March 31, 2021
2021 = $7,000 x 9/12 = $5,250
You want to have $3 million in real dollars in an account when you retire in 40 years. The nominal return on your investment is 10 percent and the inflation rate is 4.8 percent. What real amount must you deposit each year to achieve your goal
Answer:
Annual deposit= $23,647.9
Explanation:
Giving the following information:
Future value (FV)= 3,000,000
Numer of periods (n)= 40 years
Nominal rate= 10%
Inflation rate= 4.8%
To simplify calculations, we will calculate the real interest rate by deducting from the nominal interest rate the inflation rate:
Real interest rate= 0.1 - 0.048
Real interest rate= 0.052
Now, to calculate the annual deposit, we need to use the following formula:
FV= {A*[(1+i)^n-1]}/i
A= annual deposit
Isolating A:
A= (FV*i)/{[(1+i)^n]-1}
A= (3,000,000*0.052) / [(1.052^40) - 1]
A= $23,647.9
Bruin Company received a $100,000 insurance payment on the death of its company president. The company annually paid $1,000 of non-deductible insurance premiums on the policy. Bruin reported the insurance receipt as income and deducted the premium payments on its books. For ASC 740 purposes, the income and deduction are characterized as:
Answer:
The description as per the given scenario is explained in the segment below.
Explanation:
The receipt of benefits would be a mandatory beneficial improvement as well as the premium charge seems to be a permanently undesirable distinction to be made.Besides ASC 740 considerations, the profits earned as initial deposit mostly on the dissolution of the organization's president as well as higher price loss on either the policy shall be defined as a permanent insurance gain as well as a constant unfavorable premium gap.Chen Company's Small Motor Division manufactures a number of small motors used in household and office appliances. The Household Division of Chen then assembles and packages such items as blenders and juicers. Both divisions are free to buy and sell any of their components internally or externally. The following costs relate to small motor LN233 on a per unit basis.
Fixed cost per unit $5.20
Variable cost per unit $10.81
Selling price per unit $34.55
Assuming that the Small Motor Division has excess capacity, compute the minimum acceptable price for the transfer of small motor LN233 to the Household Division. (Round answer to 2 decimal places.)
Minimum transfer price $ per unit
Assuming that the Small Motor Division does not have excess capacity, compute the minimum acceptable price for the transfer of the small motor to the Household Division. (Round answer to 2 decimal places.)
Answer:
See below
Explanation:
1. If the small motor division has excess capacity,
Minimum transfer price = Variable cost + Opportunity cost
Variable cost per unit = $10.81
Add:
Opportunity cost per unit = $0.00 (Because the company has sufficient excess capacity)
Minimum transfer price = $10.81
2. If the small motor division has excess capacity,
Minimum transfer price = Variable cost + Opportunity cost
Variable cost per unit = $10.81
Add:
Opportunity cost per unit = $23.74 (As the company has no excess capacity, contribution lost is the opportunity cost)
Minimum transfer price = $34.55
N.B
Contribution lost = Selling price per unit - Variable cost per unit
= $34,55 - $10.8 = $23.74
Several financial or economic factors are relevant to the rent-or-buy decision. From the following list, identify the financial or economic factors that should be considered when performing this analysis. Check all that apply.
a. The pride that comes from owning your own home
b. Current and expected future housing prices
c. Current and expected future housing-related tax deductions
Answer:
The financial and economic factors that should be considered when performing this analysis are:
b. Current and expected future housing prices
c. Current and expected future housing-related tax deductions
Explanation:
a) A rent-or-buy decision should be based on financial and economic factors. There is the financial implication of making a down payment, closing costs, and maintenance expenses when one decides to own a home instead of renting an apartment. However, for the occupant, renting provides the advantage of known monthly costs. Some advantages of owning a house are building equity and tax benefits. The pride that comes that comes from owning a home is not a financial and economic benefit.
Morganton Company makes one product and it provided the following information to help prepare the master budget for its four months of operations:
(a) The budgeted selling price per unit is $70. Budgeted unit sales for June, July, August, and September are 8,400, 10,000, 12,000, and 13,000 units, respectively. All sales are on credit.
(b) Forty-percent of credit sales are collected in the month of the sale and 60% in the following month.
(c) The ending finished goods inventory equals 20% of the following month
d. The ending raw materials inventory equals 10% of the following month's raw materials production needs. Each unit of finished goods requires 5 pounds of raw materials. The raw materials cost $2.00 per pound.
Required:
1. Discuss some of the major benefits to be gained from budgeting. Support your answer with suitable example?
2. What are the budgeted sales for July?
3. What are the expected cash collections for July?
4. What are the accounts receivable balance at the end of July?
5. According to the production budget, how many units should be produced in July?
Answer:
Morganton Company
1. Budgeting increases effective financial management while ensuring proper allocation of scarce resources. It encourages planning for the future as well as improved business decisions. It helps management to identify problems before they occur and to develop strategies for solving any problems that may arise. With budgeting, the organization is in a better position to monitor its overall performance and ensure the achievement of its goals and objectives. Finally, budgeting increases the motivation to achieve goals for both the management and individual employees.
2. The budgeted sales for July are $10,000.
3. The expected cash collections for July are $9,040.
4. The accounts receivable balance at the end of July are $6,000.
5. According to the production budget, the units produced in July are 1,040 units.
Explanation:
a) Data and Calculations:
Budgeted selling price per unit = $70
June July August September
Budgeted unit sales 8,400 10,000 12,000 13,000
Cash Collections:
40% month of sale 3,360 4,000 4,800 5,200
60% month following 5,040 6,000 7,200
Total cash collections 3,360 9,040 10,800 12,400
Production costs:
June July August September
Ending Inventory 2,000 2,400 2,600
Cost of goods sold 8,400 10,000 12,000 13,000
Goods available 10,400 12,400 14,600
Beginning Inventory 1,680 2,000 2,400 2,600
Production costs 8,720 10,400 12,200
Unit cost of materials $10 $10 $10 ($2 * 5)
Units produced 872 1,040 1,220
Accounts receivable balance at July end:
June credit sales $8,400
June cash collection 3,360
July 1 Beginning bal. 5,040
July credit sales 10,000
Cash collections 9,040
Ending balance 6,000
Quirch Inc. manufactures machine parts for aircraft engines. The CEO, Chucky Valters, was considering an offer from a subcontractor that would provide 2,400 units of product PQ107 for Valters for a price of $150,000. If Quirch does not purchase these parts from the subcontractor it must produce them in-house with the following unit costs: Cost per Unit Direct materials $31 Direct labor 19 Variable overhead 8 In addition to the above costs, if Quirch produces part PQ107, it would have a retooling and design cost of $9,800. The relevant costs of producing 2,400 units of product PQ107 internally are:______.
a. $149,000.
b. $129.800.
c. $150,000.
d. $164,200.
e. $148.300.
Answer:
a. $149,000
Explanation:
Calculation to determine what The relevant costs of producing 2,400 units of product PQ107 internally are
Relevant Costs = (2,400 x $31) + (2,400 x $19) + (2,400 x $8) + $9,800
Relevant Costs=$74,400+$45,600+$19,200+$9,800
Relevant Costs= $149,000
ThereforeThe relevant costs of producing 2,400 units of product PQ107 internally are $149,000
Mt Kinley is a strategy consulting firm that divides its consultants into three classes, associates, managers, and partners. The firm has been stable in size for the last 20 years, ignoring growth opportunities in the 90s, but also not suffering from a need to down-size in the recession. Specifically, there have been – and are expected to be – 200 associates, 60 managers, and 20 partners. The work environment at Mt Kinley is rather competitive. After 4 years of working as an associate, a consultant goes "either up or out", i.e. becomes a manager or is dismissed from the company. Similarly, after 6 years a manager either becomes a partner or is dismissed. The company recruits MBAs as associate consultants, no hires are made at the manager or partner level. A partner stays with the company for another 10 years (total of 20 years with the company). How many new MBA graduates does Mt Kinley have to hire every year? What is the probability that an incoming MBA graduate would make partner at Mt Kinley?
Answer:
1. 50 consultants per year
2. 4%
Explanation:
1. Calculation to determine How many new MBA graduates does Mt Kinley have to hire every year
Using this formula
Flow Rate of associates= Inventory / Flow Time
Let plug in the formula
Flow Rate of associates = 200 consultants / 4 years
Flow Rate of associates= 50 consultants per year
Therefore the numbers of MBA graduates that Mt Kinley have to hire every year is 50 consultants per year
2. Calculation to determine the probability that an incoming MBA graduate would make partner at Mt Kinley
First step is to calculate the Flow Rate of managers using this formula
Flow Rate of manager= Inventory / Flow Time
Let plug in the formula
Flow Rate of manager = 60 consultants / 6 years
Flow Rate of manager =10 consultants per year
Second step is to calculate the flow rate of partner using this formula
Flow rate of partner = Inventory/ Flow time
Let plug in the formula
Flow rate of partner = 20/10
Flow rate of partner = 2 partners per year
Third step is to calculate the probability of becoming a manager
Probability (Manager) = 10/50
Probability (Manager) = 20%
Fourth step is to calculate Probability of becoming a partner
Probability (Partner) = 2/10
Probability (Partner) = 20%
Now let calculate the probability that an incoming MBA graduate would make partner at Mt Kinley
Probability of MBA graduate becoming a partner = 20% x 20%
Probability of MBA graduate becoming a partner = 4%
Therefore the probability that an incoming MBA graduate would make partner at Mt Kinley is 4%
You just won the $114 million ultimate lotto jackpot. Your winnings will be paid as $3,800,000 per year for the next 30 years. If the appropriate interest rate is 7.1% what is the value of your windfall?
Answer:
$46,684,511.77
Explanation:
To determine the value of the windfall, we would first determine the future value of the windfall and then determine the present value
Future value = annuity x annuity factor
Annuity factor = {[(1+r)^n] - 1} / r
FV = P (1 + r) n
FV = Future value
P = Present value
R = interest rate
N = number of years
Annuity factor = [(1.071)^30 - 1] / 0.071 = 96.177470
FV = $3,800,000 x 96.177470 = 365,474,386
Present value = FV x ( 1 +r)^-n
365,474,386 x (1.071)^-30 = $46,684,511.77
