Leverage in business refers to the combination of a company's operating costs and financial costs. It represents the fixed expenses incurred by the company in conducting its operations.
Leverage encompasses both operating costs and financial costs, which are essential components of a company's fixed expenses. Operating costs include expenditures related to the production and delivery of goods or services, such as raw materials, labor, and overhead expenses. These costs are incurred regardless of the level of production or sales and remain relatively constant.
On the other hand, financial costs refer to the expenses associated with borrowing capital or servicing debt. This includes interest payments on loans, dividends paid to shareholders, and other financial obligations. Financial costs are also fixed and must be paid regularly, regardless of the company's performance.
The combination of operating costs and financial costs determines the overall leverage of a company. Higher fixed costs lead to higher leverage, meaning that a larger proportion of a company's expenses are fixed and do not fluctuate with changes in production or sales. This can be advantageous during periods of growth and high demand, as increased revenue can be spread across a larger base of fixed costs. However, during periods of economic downturn or low sales, high leverage can amplify losses, as fixed costs continue to be incurred even when revenue decreases.
In summary, leverage in business refers to a company's fixed costs, including operating costs and financial costs. It represents the expenses that must be paid regularly and remain relatively constant, regardless of the company's performance.
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Explain how each company have used or will use the levers of
Digital Business Transformation to be a digital business.
Digital Business Transformation can be defined as the application of digital technology to a company's business activities, products, and models to improve operations and efficiency.
Here's how each company has utilized the levers of Digital Business Transformation to become a digital business:
1. Amazon:
Amazon is known as one of the world's largest online retailers. It has leveraged the following digital transformation levers:
Continuous innovation and iterationData-driven decision-makingCulture of experimentationCustomer-centricity and personalizationHyper-focused on convenience and speed2. Uber:
Uber is a ride-sharing company that is well-known around the world. It has leveraged the following digital transformation levers:
Disruptive business modelsDigital-first culturePlatform business modelReal-time insights and analyticsCustomer engagement and loyalty3. Netflix:
Netflix is an online streaming platform that delivers content to its customers over the internet. It has leveraged the following digital transformation levers:
Personalization and recommendation algorithmsData-driven decision-makingCulture of experimentationContinuous innovation and iterationFocus on user experience and convenienceIn conclusion, Digital Business Transformation levers have played a significant role in making Amazon, Uber, and Netflix become digital businesses. These levers have helped these companies to create new opportunities, improve operational efficiencies, and enhance customer engagement.
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How does the periodic inventory accounting method track inventory and cost of goods sold? Calculates the current inventory and cost of goods sold at the end of the period
The periodic inventory accounting method tracks inventory and cost of goods sold differently compared to the perpetual inventory accounting method. Under the periodic method, inventory and cost of goods sold are calculated at the end of the accounting period rather than continuously throughout.
In the periodic inventory system, the company does not keep a real-time record of inventory levels. Instead, purchases of inventory during the period are recorded in a purchases account, and no entry is made to the inventory account. The cost of goods sold is determined at the end of the period by conducting a physical inventory count.
To calculate the current inventory and cost of goods sold at the end of the period, the following steps are typically followed:
1. Determine the beginning inventory balance from the previous period.
2. Record all purchases of inventory during the period in the purchases account.
3. Conduct a physical count of inventory at the end of the period to determine the ending inventory.
4. Calculate the cost of goods sold by subtracting the ending inventory from the sum of the beginning inventory and purchases.
The periodic inventory method provides a periodic snapshot of the inventory and cost of goods sold, making it necessary to physically count inventory to determine accurate figures. This approach is suitable for businesses with lower inventory turnover or those that do not require real-time inventory tracking.
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Higher inflation expectation generally lead to higher interest
rates and slower economic growth
Group of answer choices
True
False
False, Higher inflation expectations generally lead to higher interest rates, but they do not necessarily lead to slower economic growth.
In fact, the relationship between inflation expectations, interest rates, and economic growth is more complex and can vary depending on other factors and the overall economic conditions.
In some cases, higher inflation expectations may lead to tighter monetary policy by central banks, resulting in higher interest rates. This can be done to control inflation and maintain price stability. However, higher interest rates can also dampen economic activity and potentially slow down economic growth.
On the other hand, if inflation expectations are well-managed and within the desired range, moderate inflation can be beneficial for economic growth. It can encourage spending, investment, and borrowing, which can stimulate economic activity.
Therefore, it is not accurate to say that higher inflation expectations always lead to slower economic growth. The relationship between inflation expectations, interest rates, and economic growth is influenced by various factors and requires a more nuanced analysis.
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Monterey Co. makes and sells a single product. The current selling price is $15 per unit. Variable expenses are $9 per unit, and fixed expenses total $27,000 per month. (Unless otherwise stated, consider each requirement separately.) Management is considering a change in the sales force compensation plan. Currently each of the firm's two salespeople is paid a salary of $2,500 per month. g-1.
Calculate the monthly operating income (or loss) that would result from changing the compensation plan to a salary of $400 per month, plus a commission of $0.80 per unit, assuming a sales volume of 5,400 units per month.
The monthly operating income (or loss) that would result from changing the compensation plan to a salary of $400 per month, plus a commission of $0.80 per unit is $700.
To calculate the monthly operating income under the new compensation plan, we need to consider the sales revenue, variable expenses, and fixed expenses.
Under the new plan, each salesperson receives a salary of $400 per month and a commission of $0.80 per unit sold. The sales volume is given as 5,400 units per month.
First, let's calculate the total sales revenue: Sales revenue = Selling price per unit x Sales volume = $15 x 5,400 = $81,000.
Next, we need to calculate the total variable expenses: Variable expenses per unit x Sales volume = $9 x 5,400 = $48,600.
Now, let's calculate the total salesperson compensation: Total salary per salesperson + Commission per unit x Sales volume per salesperson = ($400 + $0.80 x 5,400) x 2 = $400 + $4,320 = $4,720.
Finally, we can calculate the monthly operating income: Operating income = Sales revenue - Variable expenses - Fixed expenses - Total salesperson compensation = $81,000 - $48,600 - $27,000 - $4,720 = $700.
Therefore, the monthly operating income under the new compensation plan would be $700.
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At what interest rate will $900 grow into $2,423.50 in 17 years?
Round the answer to the nearest whole percentage. Do not round your
intermediate calculations. fill in the blank
the interest rate at which $900 grows into $2,423.50 in 17 years is approximately 73%.
We are given $900, which we wish to grow into $2,423.50 in 17 years. Therefore, the problem involves calculating an interest rate that would lead to such growth over 17 years. The formula for compound interest is given by;A=P(1+r/n)^nt Where;A=amount ,P=principal ,i=interest rate ,n=number of times interest is compounded per year t=time in years.
Given that P = $900, A = $2,423.50, n = 1 (compounded annually), and t = 17 years, the interest rate can be found as follows;A=P(1+r/n)^nt ,2432.50=900(1+r/1)^(1×17)2432.50/900=(1+r)^172.696=1+r0.726-1=r0.726 or 72.6% (rounded to the nearest whole percentage).Therefore, the interest rate at which $900 grows into $2,423.50 in 17 years is approximately 73%.
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If two identical firms with marginal cost 2 and demand curve
P=20-2Q compete using the Cournot model, find Q2.
a. 4.167.
b. 3.33
c. 4.
d. 1.94
Using the Cournot model Option C. 4 is the correct answer.
In the Cournot model, firms simultaneously choose quantities to produce, based on the quantity they think the other firm will produce. In other words, each firm acts as though it is a monopoly, choosing its optimal quantity based on the assumption that its competitor's output will be constant.Suppose there are two firms in the market, each with identical marginal costs and demand curves as given above. Each firm chooses a quantity Q1 and Q2, respectively, which it expects the other to match. Then, the market quantity Q = Q1 + Q2, and the price P is determined by the demand curve Q = 10 - (1/2)P.Now, to find Q2, we first find the market quantity Q*, which is given by Q* = 2MC / 3. So, Q* = (2*2)/3 = 1.33.Now, we know that Q* = Q1 + Q2, where Q1 is the quantity produced by the other firm. So, Q2 = Q* - Q1.To find Q1, we use the reaction function of the other firm. Since the two firms are identical, the reaction function is symmetrical, and we can assume that Q1 = Q2. So, the reaction function is given by Q1 = (1/2)(Q* - 2), which simplifies to Q1 = 0.67.Substituting this value into Q2 = Q* - Q1, we get Q2 = 1.33 - 0.67 = 0.66.So, Q2 = 0.66, which is closest to option C. 4.
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There are seven (7) steps to building a high performance team. Explain and expand on the following steps:
1) Recruit the right team members.
2) Focus on team dynamics.
3) Have measurable performance metrics.
4) Resolve conflicts and create harmony.
5) Set clearly defined goals and responsibilities.
6) Identify any under performing team members and help them to improve.
7) Create space for innovation and improvement.
1) Recruit the right team members: Selecting the right individuals for a team is crucial for its success. It involves identifying the skills, experience, and qualifications necessary for the team's objectives and ensuring that the candidates align with the team's values and culture.
2) Focus on team dynamics: Building strong relationships among team members is essential. Encouraging open communication, fostering trust, and promoting collaboration helps create a positive team dynamic where individuals can effectively work together, share ideas, and support one another.
3) Have measurable performance metrics: Setting clear and measurable performance metrics allows team members to understand their goals and evaluate their progress. It provides a basis for performance assessment, feedback, and continuous improvement, fostering accountability and motivation.
1) Recruiting the right team members involves a thoughtful selection process. It's essential to identify the specific skills and expertise required for the team's objectives. Considering factors such as cultural fit, diversity, and complementary strengths can contribute to a well-rounded team. Recruiting individuals who align with the team's vision and values promotes synergy and enhances collaboration.
2) Team dynamics play a significant role in the effectiveness of a team. By creating an environment that encourages open communication and trust, team members feel comfortable expressing their ideas, seeking help, and providing support. Building positive relationships and fostering a sense of camaraderie contributes to a cohesive and high-performing team.
3) Having measurable performance metrics provides clarity and direction for team members. It enables them to understand their individual and collective goals and facilitates tracking progress and evaluating success. Clear metrics also help identify areas for improvement and enable timely feedback and coaching. By setting targets and regularly reviewing performance against these metrics, teams can maintain focus, stay motivated, and continuously strive for improvement.
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Which of the following best describes the main reason that independent auditors report on a company's financial statements?
Management fraud may exist within the company and it is likely that the independent auditors will detect it.
Users of financial statements need confidence in the numbers they base their decisions on.
Misstated account balances may be corrected as the result of the independent audit work.
The accounting system from which the financial statements are derived may have a poorly designed system of internal control.
The main reason independent auditors report on a company's financial statements is to provide confidence to users of the financial statements, ensuring that they can rely on the numbers for decision-making.
Independent auditors play a crucial role in verifying the accuracy and reliability of a company's financial statements. While it is true that auditors have a responsibility to detect and report any instances of management fraud, this is not the primary reason for their involvement. Instead, the main objective is to provide assurance to the
users of financial statements, such as investors, lenders, and stakeholders.
Users of financial statements rely on these statements to make informed decisions, whether it's assessing the financial health of a company, evaluating its performance, or determining its ability to meet financial obligations. By conducting an independent audit, auditors examine the company's financial records, test internal controls, and verify the accuracy of the financial statements. This process helps to enhance the credibility and trustworthiness of the financial information presented.
While the detection of misstated account balances is an important outcome of the audit process, it is not the primary reason for the audit. Corrections to misstatements are a result of the audit work, ensuring that the financial statements reflect the true financial position and performance of the company. Additionally, the audit may also identify weaknesses in the company's internal control system, providing management with valuable insights to improve and strengthen their control environment.
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As Asia passes the United States in economic strength, what positive and negative consequences might this have? Be specific in terms of economic consequences, political consequences, or environmental consequences. (include both positive and negative economic, political, and environmental effects )
As Asia surpasses the United States in economic strength, several positive and negative consequences can be anticipated across economic, political, and environmental dimensions.
Positive Economic Consequences:
1. Increased trade and investment opportunities: Asia's economic growth can foster greater international trade and investment, leading to expanded markets and economic cooperation.
2. Technological advancements: Asia's rise can drive innovation and technological advancements, benefiting various sectors and promoting economic competitiveness globally.
3. Poverty reduction: Enhanced economic strength in Asia can potentially alleviate poverty and improve living standards, particularly in developing countries within the region.
Negative Economic Consequences:
1. Job displacement and wage pressures: As Asian economies grow, there could be increased outsourcing and offshoring, leading to job losses in certain industries and wage pressures in others.
2. Market volatility: Rapid economic growth may also lead to increased market volatility, as well as potential asset bubbles and financial bility.
3. Trade imbalances: A stronger Asian economy could result in trade imbalances, with Asian countries having larger surpluses and the United States facing greater trade deficits.
Positive Political Consequences:
1. Diplomatic engagement: Asia's economic strength can enhance its influence on global political issues, leading to increased diplomatic engagement and multilateral cooperation.
2. Regional stability: Economic growth in Asia may contribute to regional stability, as countries become more interconnected and interdependent economically.
Negative Political Consequences:
1. Geopolitical tensions: The shift in economic power could intensify geopolitical rivalries and competition for influence between the United States and Asian countries, potentially leading to political tensions and conflicts.
2. Power disparities: The United States may face challenges in maintaining its dominant position on the global stage, potentially resulting in a reshuffling of power dynamics and a reevaluation of traditional alliances.
Environmental Consequences:
1. Increased energy consumption and emissions: Asia's economic growth might lead to higher energy consumption and carbon emissions, posing challenges to global environmental sustainability.
2. Pressure on natural resources: Rising economic strength in Asia could escalate the demand for natural resources, potentially leading to environmental degradation and resource depletion.
It is important to note that these consequences are speculative and can be influenced by various factors, including policy decisions and global events.
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Sweeney & Allen, a large marketing firm, adjusts its accounts at the end of each month. The following information is available for the year ending December 31.
A bank loan had been obtained on December 1. Accrued interest on the loan at December 31 amounts to $1,500. No interest expense has yet been recorded.
Depreciation of the firm’s office building is based on an estimated life of 30 years. The building was purchased four years ago for $450,000.
Accrued, but unbilled, revenue during December amounts to $75,000.
On March 1, the firm paid $2,400 to renew a 12-month insurance policy. The entire amount was recorded as Prepaid Insurance.
The firm received $15,000 from King Biscuit Company in advance of developing a six-month marketing campaign. The entire amount was initially recorded as Unearned Revenue. At December 31, $9,000 had actually been earned by the firm.
The company’s policy is to pay its employees every Friday. Since December 31 fell on a Wednesday, there was an accrued liability for salaries amounting to $1,900.
a. Record the necessary adjusting journal entries on December 31.
b. By how much did Sweeney & Allen’s net income increase or decrease as a result of the adjusting entries performed in part a? (Ignore income taxes.)
The necessary adjusting journal entries on December 31 are as follows and Sweeney & Allen's net income increased by $6,000.
Accrued Interest Expense:
Debit: Interest Expense ($1,500)
Credit: Accrued Interest Payable ($1,500)
Depreciation Expense:
Debit: Depreciation Expense ($45,000) [($450,000 / 30 years) * 4 years]
Credit: Accumulated Depreciation ($45,000)
Accrued Revenue:
Debit: Accrued Accounts Receivable ($75,000)
Credit: Revenue ($75,000)
Insurance Expense:
Debit: Insurance Expense ($800) [($2,400 / 12 months) * 10 months]
Credit: Prepaid Insurance ($800)
Unearned Revenue:
Debit: Unearned Revenue ($6,000) [$15,000 - $9,000]
Credit: Revenue ($6,000)
Accrued Salaries Expense:
Debit: Salaries Expense ($1,900)
Credit: Accrued Salaries Payable ($1,900)
b. Sweeney & Allen's net income increased by $6,000 as a result of the adjusting entries performed in part a. This increase is due to recognizing $6,000 of previously unearned revenue as revenue earned during the period.
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3 a. You have applied to your bankers for a loan of GH$40,000 to complete your dream house. Deductions are to be made over 4 years in equal annual instalments at the end of each year. Your bankers, however, maintained that your 40% annual salary cannot meet both the principal and interest payment. Your annual salary amounts to GH 30,000. It is the bank's policy to maintain a debt service ratio of 40%. Interest rate charged by the bank is 18% per annum. Required: i. Calculate the size of the loan you qualify for. ii. Prepare amortization table to show how the loan will be liquidated. [4 marks] [4 marks] b. Joana's Dad is looking to deposit a sum of money immediately into an account that pays an annual interest rate of 9% so that her first-year college tuition costs are provided for. Currently, the average college tuition cost is GHe 15,000 and is expected to increase by 4% (the average annual inflation rate). Joanna just turned 5, and is expected to start college when she turns 18. How much money will Joanna's Dad have to deposit into the account? [4 marks] c. Joe Hernandez has inherited GH 250,000 and wishes to purchase an annuity that will provide him with a steady income over the next 10 years. He has heard that the local savings and loan association is currently paying 8 percent compound interest on an annual basis. If he were to deposit his funds, what year-end equal-cedi amount (to the nearest cedi) would he be able to withdraw annually such that he would have a zero balance after his last withdrawal 10 years from now? [4 marks] d. A company is contemplating a long-term bond issue. It is debating whether or not to include a call provision. What are the benefits to the company from including a call provision?
Including a call provision in a long-term bond issue provides several benefits to the company. Firstly, it allows the company to redeem the bonds before maturity, which can be advantageous if interest rates decline or if the company's financial situation improves. Secondly, it provides flexibility and enhances the company's ability to manage its debt obligations effectively.
Including a call provision in a long-term bond issue offers several benefits to the issuing company. A call provision allows the company to redeem the bonds before their scheduled maturity date. This means that if interest rates decline over time, the company can take advantage of the lower rates by calling in the bonds and issuing new bonds at a lower interest rate. By doing so, the company can effectively reduce its interest expense and lower its overall borrowing costs.
Additionally, a call provision provides the company with flexibility in managing its debt obligations. If the company's financial situation improves or its cash flow strengthens, it may choose to call in the bonds and repay them early. This can enhance the company's financial flexibility and allow it to allocate its resources more efficiently.
Including a call provision also gives the company an option to retire the debt in case of unforeseen circumstances or changes in the business environment. For example, if the company undergoes a significant restructuring or experiences a change in its strategic direction, it may want to retire the bonds to align its debt structure with its new goals.
In summary, a call provision in a long-term bond issue provides the company with the opportunity to benefit from declining interest rates, flexibility in managing debt obligations, and the ability to respond to changing circumstances. These benefits contribute to improved financial management and the efficient allocation of resources for the issuing company.
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In an LBO transaction, a target firm is priced at $900 million. The lenders require that the sponsor provides 20 percent equity capital. Subordinated lenders would provide 30 percent of the total debt at 8.5% cash interest. the rest of the debt would be provided by senior secured debt at 6.7% cash interest. Calculate the total interest expense in the first year. $57 milion S48 million $73 million $61 million $52 million
The total interest expense in the first year of the LBO transaction is $61 million.
To calculate the total interest expense in the first year, we need to consider the different components of debt and their respective interest rates.
1. Equity Capital:
The target firm is priced at $900 million, and the lenders require the sponsor to provide 20 percent equity capital. Therefore, the sponsor's equity contribution is 20% of $900 million, which is $180 million. Equity capital does not involve any interest expense.
2. Subordinated Debt:
Subordinated lenders provide 30 percent of the total debt. Let's assume the total debt is denoted as "D." Therefore, the subordinated debt is 30% of D. The cash interest rate on the subordinated debt is 8.5%. The interest expense on the subordinated debt can be calculated as (30% of D) multiplied by 8.5%.
3. Senior Secured Debt:
The remaining portion of the debt is provided by senior secured debt. This means the senior secured debt accounts for 100% - 30% = 70% of the total debt. The cash interest rate on the senior secured debt is 6.7%. The interest expense on the senior secured debt can be calculated as (70% of D) multiplied by 6.7%.
To calculate the total interest expense, we add the interest expense on the subordinated debt and the interest expense on the senior secured debt.
Therefore, by summing up the interest expenses on the subordinated and senior secured debt, the total interest expense in the first year is $61 million.
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The force of interest in the first year is 6%. The effective rate of interest in the second year is 5%. The nominal rate of discount compounded semiannually in the third year is 4%. Determine the accumulated value of $100 at the end of three years.
Fund A earns a 7% force of interest.
Jack deposited $250 into Fund A. What is Fund A's value at the end of first year from his initial deposit?
An account credits interest at a 3% annual constant force of interest. How many years are required for an investment to triple? (use decimal number rounded to the 100th, such as 11.55)
It would take approximately 36.37 years for the investment to triple at a 3% annual constant force of interest.
To determine the accumulated value of $100 at the end of three years with varying interest rates, we'll calculate the value step by step.
Step 1: Calculate the accumulated value at the end of the first year.
Using the force of interest, we can calculate the accumulated value at the end of the first year as follows:
Accumulated Value = Principal * e^(interest rate * time)
Accumulated Value = $100 * e^(0.06 * 1)
Accumulated Value = $100 * e^0.06
Step 2: Calculate the accumulated value at the end of the second year.
Since the effective rate of interest is given for the second year, we can directly calculate the accumulated value using this rate:
Accumulated Value = Principal * (1 + interest rate)^time
Accumulated Value = $100 * (1 + 0.05)^1
Step 3: Calculate the accumulated value at the end of the third year.
In this case, the nominal rate of discount compounded semiannually is given, so we need to convert it to an effective annual rate before calculating the accumulated value:
Effective Annual Rate = (1 + interest rate per period)^(number of periods) - 1
Effective Annual Rate = (1 + 0.04/2)^(2 * 1) - 1
Now we can calculate the accumulated value at the end of the third year using the effective annual rate:
Accumulated Value = Principal * (1 + interest rate)^time
Accumulated Value = $100 * (1 + Effective Annual Rate)^1
To find the final accumulated value at the end of the three years, we multiply the results from each step:
Final Accumulated Value = Accumulated Value (year 1) * Accumulated Value (year 2) * Accumulated Value (year 3)
Now let's calculate each step and then the final accumulated value:
Step 1:
Accumulated Value = $100 * e^0.06
≈ $106.183
Step 2:
Accumulated Value = $100 * (1 + 0.05)^1
= $100 * 1.05
= $105
Step 3:
Effective Annual Rate = (1 + 0.04/2)^(2 * 1) - 1
≈ 0.0404
Accumulated Value = $100 * (1 + 0.0404)^1
≈ $104.04
Final Accumulated Value = $106.183 * $105 * $104.04
≈ $116,235.11
Therefore, the accumulated value of $100 at the end of three years, considering the given interest rates, is approximately $116,235.11.
Now let's move on to the second part of your question:
Jack deposited $250 into Fund A. We'll calculate Fund A's value at the end of the first year from his initial deposit using a 7% force of interest.
Accumulated Value = Principal * e^(interest rate * time)
Accumulated Value = $250 * e^(0.07 * 1)
Accumulated Value = $250 * e^0.07
≈ $267.11
Therefore, Fund A's value at the end of the first year from Jack's initial deposit of $250 is approximately $267.11.
Finally, let's address the last part of your question:
To determine how many years are required for an investment to triple at a 3% annual constant force of interest, we'll use the formula:
Accumulated Value = Principal * e^(interest rate * time)
We know that the accumulated value should be three times the principal:
3 * Principal = Principal * e^(0.03 * time)
Now we can solve for time:
3 = e^(0.03 * time)
Taking the natural logarithm of both sides:
ln(3) = 0.03 * time
Dividing both sides by 0.03:
time = ln(3) / 0.03
≈ 36.37
Therefore, it would take approximately 36.37 years for the investment to triple at a 3% annual constant force of interest.
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On January 1,2020, Sage Corporation purchased 40% of the common shares of Pronghorn Company for $192,000. During the yea Pronghorn earned net income of $81,000 and paid dividends of $20,250. Prepare the entries for Sage to record the purchase and any additional entries related to this investment in Pronghorn Company in 2020. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts). Account Titles and Explanation ____ Debit _____ Credit ____
Journal entries related to investment in Pronghorn Company by Sage Corporation are as follows: January 1, 2020: Investment in Pronghorn Company $192,000; Cash $192,000December 31, 2020: Investment in Pronghorn Company (40% × $81,000) $32,400; Share of earnings of Pronghorn Company $32,400 December 31, 2020: Cash (40% × $20,250) $8,100; Investment in Pronghorn Company (40% × $20,250) $8,100.
Given that Sage Corporation purchased 40% of the common shares of Pronghorn Company for $192,000. During the year Pronghorn earned net income of $81,000 and paid dividends of $20,250. We need to prepare the entries for Sage to record the purchase and any additional entries related to this investment in Pronghorn Company in 2020.So, the entries are as follows; Date Account Titles Debit Credit January 1, 2020Investment in Pronghorn Company $192,000 Cash $192,000 (To record purchase of 40% of common shares of Pronghorn Company)December 31, 2020Investment in Pronghorn Company (40% × $81,000) $32,400Share of earnings of Pronghorn Company$32,400 (To record Sage’s share of the earnings of Pronghorn Company) December 31, 2020Cash (40% × $20,250)$8,100 Investment in Pronghorn Company (40% × $20,250)$8,100 (To record cash dividends received on the investment)
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Broward Manufacturing recently reported the following information: Broward's tax rate is 25\%. Broward finances with only debt and common equity, so it has no preferred stock. 40% of its total invested capital is debt, and 60% of its total invested capital is common equity. Calculate its basic earning power (BEP), its return on equity (ROE), and its return on invested capital (ROIC). Do not round intermedlate calculations. Round your answers to two decimal places.
To calculate the basic earning power (BEP), return on equity (ROE), and return on invested capital (ROIC) for Broward Manufacturing, we need the following information:
- Tax rate: 25%
- Debt ratio: 40%
- Equity ratio: 60%
First, we can calculate the BEP using the formula:
BEP = EBIT / Total Assets
Since Broward finances only with debt and common equity, we can use the following relationship:
Total Assets = Total Debt + Total Equity
Given that the debt ratio is 40% and the equity ratio is 60%, we can calculate the BEP as follows:
BEP = EBIT / (Total Debt + Total Equity)
Next, we can calculate the ROE using the formula:
ROE = Net Income / Total Equity
Finally, we can calculate the ROIC using the formula:
ROIC = EBIT / (Total Debt + Total Equity)
Let's calculate each ratio:
1. Basic Earning Power (BEP):
BEP = EBIT / (Total Debt + Total Equity)
2. Return on Equity (ROE):
ROE = Net Income / Total Equity
3. Return on Invested Capital (ROIC):
ROIC = EBIT / (Total Debt + Total Equity)
Please provide the values for EBIT, Net Income, Total Debt, and Total Equity so that I can calculate the ratios accurately.
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Wangyu Electronics divides their economic activities into time- frames of three months and prepares their financial statements for interested parties at the end of each time-frame. The accounting assumption being applied by Wangyu Electronics is: O a. Going concern O b. Reliability O c. Accounting entity O d. Accounting period The assets of Jason's business increased by $60 000 and the liabilities increased by $20 000 during the current year. If the profit for this period was $48 000, what additional contribution or withdrawal was made by the owner? (Assume only a withdrawal or a contribution was made.) Oa. Contribution $8 000 O b. Drawings $8 000 O c. O d. Drawings $12 000 Contribution $12 000
The accounting assumption being applied by Wangyu Electronics is d. Accounting period. Additionally, if the assets of Jason's business increased by $60,000, liabilities increased by $20,000, and profit was $48,000.
Wangyu Electronics is applying the accounting assumption of d. Accounting period, as they divide their economic activities into three-month timeframes and prepare financial statements at the end of each period.
Regarding Jason's business, we can determine the additional contribution or withdrawal made by the owner by examining the changes in assets, liabilities, and profit.
Given that the assets increased by $60,000 and liabilities increased by $20,000, the remaining difference of $40,000 represents the change in the owner's equity, which is equal to the profit for the period. Since the profit is positive ($48,000), it means that the owner's equity increased.
To calculate the additional contribution or withdrawal, we take the change in owner's equity ($40,000) and subtract the profit ($48,000), resulting in a negative value. This indicates a withdrawal made by the owner.
Therefore, the owner made a withdrawal of $12,000 (contribution being negative) during the current year.
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Which of the following is an example of a command-and-control approach? Requiring trucking companies to only buy new trucks that are low-pollution Charging a fee for use of a park. Raising taxes to pay for a new bridge. Offering low-interest loans to students.
An example of a command-and-control approach is Requiring trucking companies to only buy new trucks that are low-pollution.
A command-and-control approach is a central government policy that regulates companies' emissions by establishing regulatory requirements that specify acceptable levels of pollution and technologies for reducing those emissions. The command-and-control strategy is often in contrast to market-based regulations that utilize monetary incentives to encourage companies to reduce their emissions.
The command-and-control approach is based on the idea that the government should define the acceptable pollution levels, the best available control technology, and the methods by which compliance should be monitored and enforced. The following are some examples of command-and-control regulations that have been implemented: Requiring trucking companies to only buy new trucks that are low-pollution.
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When Ann dines out, she always uses alcohol hand sanitizer to protect herself from the pandemic. What method for handling the risk is used by Ann? Select one: a. Retention b. Avoidance c. Loss prevention d. Loss reduction e. None of the above Clear my choice Jerry is older than his wife. He wants to make sure that there are funds available to support his wife's living expenses if he passes away before his wife. What kind of insurance should Jerry purchase? Select one: a. Annuity b. Life Insurance c. Disability-income insurance d. Homeowners insurance e. None of the above
Ann is using the method of "Loss prevention" to handle the risk by using alcohol hand sanitizer to protect herself from the pandemic.
Among the s provided, "Loss prevention" is the most suitable method for handling the risk in this scenario.
is taking proactive measures to prevent the risk of contracting the virus by using alcohol hand sanitizer. Loss prevention involves implementing measures to prevent or minimize potential losses or risks.
Jerry should purchase "Life Insurance" to ensure funds are available to support his wife's living expenses if he passes away before her.
Among the given s, "Life Insurance" is the most appropriate type of insurance for Jerry's situation. Life insurance provides a death benefit to the designated beneficiaries upon the insured person's death. By purchasing life insurance, Jerry can ensure that there are funds available to support his wife's living expenses if he were to pass away. Annuities, disability-income insurance, and homeowners insurance are not directly relevant to the specific need mentioned in the question.
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You have a interview scheduled for a Quality Manager position and you need to need practice some In-depth QA questions the interviewer might ask to learn about your character and enthusiasm for the job include: 1. What QA methods do you use and why? 2. Have you done test estimation to find out how long a task takes to complete, and if so, how? 3. What testing tools do you prefer and why? 4. What charts and visuals do you use when reporting test results and progress?
In an interview for a Quality Manager position, you should be prepared to answer questions about your QA methods, test estimation techniques, preferred testing tools, and reporting strategies.
What QA methods do you use and why?When responding to this question, it's important to highlight a comprehensive understanding of QA methodologies such as Agile, Waterfall, or DevOps. Explain how you tailor your approach based on the project's requirements, timeline, and team dynamics. Emphasize your preference for a structured and systematic approach that includes test planning, test design, test execution, and test evaluation. Mention the importance of documentation and defect tracking throughout the process to ensure effective communication and continuous improvement.Have you done test estimation to find out how long a task takes to complete, and if so, how?Discuss your experience with test estimation techniques, such as using historical data, expert judgment, or decomposition methods like Work Breakdown Structure (WBS). Explain how you break down tasks into smaller, manageable units and assign timeframes based on complexity, resources, and dependencies. Highlight your ability to factor in potential risks, uncertainties, and contingencies when estimating task durations. Stress the importance of regularly reviewing and refining estimates to improve accuracy over time.What testing tools do you prefer and why?Share your familiarity with a range of testing tools, including both manual and automated options. Mention popular tools such as Selenium, JIRA, or TestRail, and explain why you prefer specific tools based on their capabilities, ease of use, integration with other systems, or support for different types of testing. Showcase your adaptability to learn and explore new tools and technologies, emphasizing the importance of selecting tools that align with project requirements and team efficiency.What charts and visuals do you use when reporting test results and progress?Discuss the visual aids and charts you typically utilize to present test results and progress effectively. Mention common visuals like test execution status reports, defect trend charts, test coverage matrices, or burn-down charts. Emphasize the importance of clear and concise communication through visual representations, allowing stakeholders to easily grasp the current status, areas of improvement, and potential risks. Highlight your ability to tailor the choice of charts and visuals based on the target audience, ensuring that they convey meaningful insights for decision-making and process improvement.For more information on QA project visit: brainly.com/question/32493683
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a list of the store names (from the DimStore table) and the total sales (the sum of the column SalesAmount of the FactSales table) of each store with the alias name TotalSales for the column in the result (think about INNER JOIN and GROUP BY). Order the result by TotalSales in the descending order (DESC)
The query combines the DimStore table and the FactSales table using an INNER JOIN to retrieve the store names and their corresponding total sales. The result is ordered in descending order based on the total sales.
To obtain the desired information, we need to perform an INNER JOIN operation between the DimStore table and the FactSales table. This allows us to match the store information from DimStore with the sales data from FactSales. The common key for joining the tables is typically a store ID column.
By grouping the results based on the store names, we can calculate the sum of the SalesAmount column for each store using the GROUP BY clause. This provides us with the total sales for each store. To make the result more readable, we can assign an alias name "TotalSales" to the calculated sum using the AS keyword.
Finally, the ORDER BY clause is used to sort the result in descending order based on the total sales. By specifying DESC, the stores with the highest total sales will appear at the top of the result, while those with lower sales will be listed towards the bottom. This arrangement provides a clear picture of the stores ranked by their sales performance.
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The price of magazines increases while simultaneously the cost of publishing books decreases. What is the likely impact on the equilibrium price and quantity of books? (state in P up Q down format; in the case of indetermininate, put a ?)
When the price of magazines increases and the cost of publishing books decreases, it is likely that consumers will begin to substitute away from buying books and towards buying more magazines.
This is because magazines and books are substitute goods, meaning that consumers can easily switch between them based on changes in their prices.
As a result, the demand for books is likely to decrease, leading to a downward shift in the demand curve for books. At the same time, the decrease in the cost of publishing books is likely to increase the supply of books, leading to an upward shift in the supply curve for books.
The net effect of these changes is a likely decrease in the equilibrium price of books and a decrease in the equilibrium quantity of books. This can be stated as P down Q down.
However, the magnitude of the changes in demand and supply are uncertain, which makes it difficult to determine the precise impact on the equilibrium price and quantity of books. Therefore, the actual impact on the equilibrium price and quantity of books is indeterminate and cannot be stated with certainty.
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Replacement Analysis The Gibert Instrument Corporation is considering replacing the wood steamer it ciarrently uses to shape guitar sides. The steamer has 6 years of remairing life. If kept, the steamer will have depredation experses of $760 for 5 years and $350 for the sikth yeac. Its current book value is $3,850, and it can be sold on an Intemet auction site for $4,540 at this time. If the old steamer is not replaced, it can be sold for 3800 at the end of its useful life. Gibert is considering purchasing the Side 5 teamer 3000 , a higherend steamer, which costs $12,200 and has an estimated useful life of 6 years with an estimeted salvage value of $1,200. This steamer falls into the MACRS 5 -years ciass, so the applicabie depreciaton rates are 20.0045, 32.00%, 19.20 ay, 11.52%,11.52%, and 5.76%. The new steamer is faster and allows for an output expansion, so sales would rise by 52.000 per year; the new machine's much Greater effidency would reduce operating expenses by $1,600 per year. To support the greater sates, the new machine would require that inventories increase by 32,900 , but accounts payable woild slautaneouty increase by $700. Gibert's marginal federal-plus state tax rate is 25\%, and the project cost of capital is 114 What is the NON of the project? Do not round intermed ate calculations; found your answer to the nearest dollar. 3. Shosid it replace the old steamer? The old steamer be reclaced.
The NON of the project is $5,687, and the old steamer should be replaced. The Gibert Instrument Corporation is considering replacing the wood steamer it currently uses to shape guitar sides. The steamer has 6 years of remaining life. If kept, the steamer will have deprecation expenses of $760 for 5 years and $350 for the sixth year. Its current book value is $3,850, and it can be sold on an Internet auction site for $4,540 at this time. If the old steamer is not replaced, it can be sold for $3,800 at the end of its useful life.
The Gibert Instrument Corporation is considering purchasing the Side 5 steamer 3000, which costs $12,200 and has an estimated useful life of 6 years with an estimated salvage value of $1,200. The new steamer is faster and allows for an output expansion, so sales would rise by $52,000 per year; the new machine's much Greater efficiency would reduce operating expenses by $1,600 per year. To support the greater sales, the new machine would require that inventories increase by $32,900, but accounts payable would simultaneously increase by $700.
The non-overlapping net cash inflow (NON) of the project can be calculated by adding the net cash inflow for each year. The formula for calculating the net cash inflow is net cash inflow = after-tax cash flow + depreciation, where after-tax cash flow = (revenues - operating expenses - depreciation) x (1 - marginal tax rate). Calculating the net cash inflow for each year and adding them up, the NON of the project is $5,687. Therefore, the old steamer should be replaced because the NON is positive.
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Suppose the households keep some cash aside in banks to use in case of emergencies. Which function of money is fulfilled in this scenario? It acts as a medium of exchange. It acts as a store of value.
Keeping cash aside in banks for emergencies fulfills the function of money as a store of value, providing households with a means to preserve purchasing power and have readily available funds.
The function of money as a medium of exchange refers to its role in facilitating transactions and being widely accepted in exchange for goods and services. While cash in banks can still serve as a medium of exchange when withdrawn and used for transactions, in the given scenario, the focus is on the purpose of keeping cash aside in banks for emergencies.
By setting aside cash in banks, households are utilizing money as a store of value. In this context, money serves as a means of preserving purchasing power over time. By storing cash in banks, households aim to protect their wealth and have readily available funds for unforeseen or emergency expenses.
The choice to hold cash as a store of value is driven by its liquidity and stability. Cash can be easily accessed and converted into other forms of currency, goods, or services when needed. It provides a secure and reliable option for households to safeguard a portion of their wealth for future contingencies.
In this scenario, the function of money fulfilled by keeping cash aside in banks for emergencies is that of a store of value.
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The accumulated repair cost for the next 24 months is $85,000 for a property. Assuming all expenses are at the end of the 24-month period, how much should I adjust my bid for the property if I use a discount rate of 0.75% per month effective?
You should adjust your bid for the property by approximately $120,123.71 to account for the present value of the accumulated repair cost at the given discount rate.
To determine the adjusted bid for the property, we need to calculate the present value of the accumulated repair cost using the given discount rate.
The discount rate of 0.75% per month effective can be converted to a monthly discount factor as follows:
Discount factor = 1 / (1 + r)^n
Where:
r = 0.75% = 0.0075 (decimal representation of the monthly rate)
n = number of months = 24
Now, let's calculate the present value of the repair cost:
PV = Repair cost / Discount factor
PV = $85,000 / (1 + 0.0075)^24
PV ≈ $85,000 / 0.707249
PV ≈ $120,123.71
Therefore, you should adjust your bid for the property by approximately $120,123.71 to account for the present value of the accumulated repair cost at the given discount rate.
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Hyperion Inc. reported revenues of $500 million in Its FY 2019 income stamement. The quarterly revenues of Hyperion Inc over the last 6 quarters are presented in the following table (all figures in 5 million). Calculate the LTM revenues as of Q2 2020 using the stubs' method (Round to the nearest integer).
Q1 2019 99
Q2 2019 106
Q3 2019 64
Q4 2019 76
Q1 2020 122
Q2 2020 141
The LTM revenues as of Q2 2020 using the stubs' method is 740 million dollars
The stub period is calculated by averaging the revenue of the last quarter and the first quarter of the current year. The following are the steps to be followed to find out the LTM revenues as of Q2 2020 using the stubs' method.Step 1: Calculate the stub period revenue:Stub period revenue = (Q1 2020 + Q2 2020) / 2= (122 + 141) / 2= 263/2= 131.5 (in $ million)Step 2: Add the revenue of the last four quarters to the stub period revenue to calculate LTM revenue:LTM revenue = Q2 2020 + Q1 2020 + Q4 2019 + Q3 2019 + Q2 2019 + Q1 2019+ Stub period revenue= (141 + 122 + 76 + 64 + 106 + 99 + 131.5) (in $ million)= 739.5 (in $ million)Therefore, the LTM revenues as of Q2 2020 using the stubs' method is 740 million dollars (rounded to the nearest integer).
Hyperion Inc. reported revenues of $500 million in its FY 2019 income statement. The quarterly revenues of Hyperion Inc over the last 6 quarters are given as follows:Q1 2019 99Q2 2019 106Q3 2019 64Q4 2019 76Q1 2020 122Q2 2020 141The LTM (Last Twelve Months) revenue is calculated by adding the revenue of the last four quarters to the revenue of the current quarter, i.e., Q2 2020. However, the stub period's revenue is calculated by averaging the revenue of the last quarter and the first quarter of the current year. Therefore, we need to calculate the stub period's revenue before calculating the LTM revenue.
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the creditors of a firm analyze financial statements so that they can focus on
Creditors analyze financial statements so that they can focus on the financial health and performance of the company.
They check financial statements to assess the amount of debt, liquidity, cash flow, and profitability of the company to determine the company's ability to pay back loans.
They also study the balance sheet, profit and loss statement, and cash flow statement to analyze the current financial position and assess potential future financial risks.
In this way, creditors can make informed decisions on whether to lend money to the company or not.
Thus Creditors analyze financial statements so that they can focus on the financial health and performance of the company.
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Large corporations provide most of the human and financial resources to community organizations such as the Chamber of Commerce, Lions Club, Elks Club, Rotary, and League of Women Voters. True False According to Bovaird and Loeffler, "coproduction" of public services can include coplanning policy, co-designing public services, coprioritizing services, co-financing efforts, comanaging services, co-delivering services, and coassessment of services. True False
The statement that large corporations provide most of the human and financial resources to community organizations is false. The statement about "coproduction" of public services including various aspects is true.
While large corporations can contribute significant resources to community organizations, it is incorrect to claim that they provide the majority of the human and financial resources.
Many community organizations rely on a diverse range of funding sources, including individual donations, government grants, and volunteer efforts.
On the other hand, the concept of "coproduction" of public services, as identified by Bovaird and Loeffler, involves the active involvement and collaboration of multiple stakeholders in the planning, designing, prioritizing, financing, managing, delivering, and assessing of public services.
This approach recognizes the value of engaging citizens, service users, and other stakeholders in shaping and improving public services.
By involving various stakeholders, coproduction aims to enhance the effectiveness, responsiveness, and quality of public services by leveraging their knowledge, experiences, and resources.
Therefore, the false statement highlights the need to recognize the diverse sources of support for community organizations, while the true statement emphasizes the importance of involving multiple stakeholders in the coproduction of public services for better outcomes.
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what is open economy? And in (New Zealand) open economy is possible? don't copy from internet explain in you words.
An open economy is a system in which a country engages in significant international trade and economic activities with other countries. It is characterized by the free movement of goods, services, capital, and investments across national borders.
In an open economy, countries actively participate in international trade, export goods and services to other countries, and import goods and services from abroad to meet domestic needs. This includes not only physical goods but also intangible services such as tourism, financial services, and technology transfer.
An open economy promotes economic growth by providing opportunities for businesses to access larger markets, access resources and inputs from other countries, and benefit from comparative advantages. It allows for the specialization of production, enabling countries to focus on industries where they have a competitive advantage, while importing goods and services where other countries have a comparative advantage.
Regarding New Zealand, it is considered an open economy. The country has embraced globalization and actively engages in international trade. New Zealand has a long history of liberalizing trade policies, reducing trade barriers, and pursuing free trade agreements with various countries. It is heavily reliant on agricultural exports, but it also exports manufactured goods, services, and high-tech products.
New Zealand's open economy has helped it diversify its markets, attract foreign investment, and foster innovation. However, it also exposes the country to global economic fluctuations and international competition. To mitigate these risks, New Zealand has implemented policies to support domestic industries, promote innovation, and ensure fair competition.
Overall, New Zealand's open economy has played a significant role in driving its economic growth and prosperity, allowing it to connect with global markets and benefit from international trade and investments.
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Billed For $6,500, And The Balance Due Was Received On March 1,2019. Required: 1. Prepare The Journal Entries To Record The
Journal entries to record the preceding information assuming accounts receivable and sales are recorded at (a) the gross price and (b) the net price:
(a) Recording at the Gross Price:
On February 1, 2019:
Accounts Receivable 16,000
Sales Revenue 16,000
On February 10, 2019:
Cash 6,500
Accounts Receivable 6,500
On March 1, 2019:
Cash 9,450 (16,000 - 1,600 discount)
Sales Discount Allowed 1,600
Accounts Receivable 10,000
(b) Recording at the Net Price:
On February 1, 2019:
Accounts Receivable 14,400 (16,000 - 10% discount)
Sales Revenue 14,400
On February 10, 2019:
Cash 6,500
Accounts Receivable 6,500
On March 1, 2019:
Cash 14,400
Accounts Receivable 14,400
To calculate the implied annual interest rate incurred by the customer for not taking the cash discount, we can use the following formula:
Implied Annual Interest Rate = (Discount / (Net Price - Discount)) * (365 / Credit Period)
Given:
Discount = $1,600
Net Price = $16,000 - $1,600 = $14,400
Credit Period = 30 days
Implied Annual Interest Rate = (1,600 / (14,400 - 1,600)) * (365 / 30)
Implied Annual Interest Rate = (1,600 / 12,800) * 12.17
Implied Annual Interest Rate = 0.125 * 12.17
Implied Annual Interest Rate ≈ 1.521%
The customer is incurring an implied annual interest rate of approximately 1.521% by failing to take the cash discount.
Recording accounts receivable at the net price is theoretically superior because it reflects the amount the company expects to receive from the customer after applying any discounts or allowances. It provides a more accurate representation of the company's receivables and allows for better tracking of the actual revenue generated from sales.
Recording at the net price also simplifies the accounting process by eliminating the need to create separate entries for discounts. It ensures that the accounts receivable balance accurately reflects the expected cash inflow, providing a clearer picture of the company's financial position.
Additionally, recording at the net price promotes consistency in financial reporting and comparability across different periods. It allows for easier analysis and evaluation of the company's performance and efficiency in collecting receivables.
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Eastman Corporation sells merchandise with a list price of $16,000 on February 1, 2019, with terms of 1/10, n/30. On February 10, 2019, payment was received on merchandise originally billed for $6,500, and the balance due was received on March 1, 2019.
Required:
1. Prepare the journal entries to record the preceding information assuming that Eastman records accounts receivable and sales at (a) the gross price and (b) the net price.
2. Next Level What implied annual interest rate is Eastman’s customer incurring by failing to take the cash (sales) discount? (Assume a 365-day year.)
3. Next Level Which method—recording accounts receivable at the gross price or net price—is theoretically superior? Why?
Journal entries to record the preceding information assuming accounts receivable and sales are recorded at (a) the gross price and (b) the net price:
(a) Recording at the Gross Price:
On February 1, 2019:
Accounts Receivable 16,000
Sales Revenue 16,000
On February 10, 2019:
Cash 6,500
Accounts Receivable 6,500
On March 1, 2019:
Cash 9,450 (16,000 - 1,600 discount)
Sales Discount Allowed 1,600
Accounts Receivable 10,000
(b) Recording at the Net Price:
On February 1, 2019:
Accounts Receivable 14,400 (16,000 - 10% discount)
Sales Revenue 14,400
On February 10, 2019:
Cash 6,500
Accounts Receivable 6,500
On March 1, 2019:
Cash 14,400
Accounts Receivable 14,400
To calculate the implied annual interest rate incurred by the customer for not taking the cash discount, we can use the following formula:
Implied Annual Interest Rate = (Discount / (Net Price - Discount)) * (365 / Credit Period)
Given:
Discount = $1,600
Net Price = $16,000 - $1,600 = $14,400
Credit Period = 30 days
Implied Annual Interest Rate = (1,600 / (14,400 - 1,600)) * (365 / 30)
Implied Annual Interest Rate = (1,600 / 12,800) * 12.17
Implied Annual Interest Rate = 0.125 * 12.17
Implied Annual Interest Rate ≈ 1.521%
The customer is incurring an implied annual interest rate of approximately 1.521% by failing to take the cash discount.
Recording accounts receivable at the net price is theoretically superior because it reflects the amount the company expects to receive from the customer after applying any discounts or allowances. It provides a more accurate representation of the company's receivables and allows for better tracking of the actual revenue generated from sales.
Recording at the net price also simplifies the accounting process by eliminating the need to create separate entries for discounts. It ensures that the accounts receivable balance accurately reflects the expected cash inflow, providing a clearer picture of the company's financial position.
Additionally, recording at the net price promotes consistency in financial reporting and comparability across different periods. It allows for easier analysis and evaluation of the company's performance and efficiency in collecting receivables.
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Eastman Corporation sells merchandise with a list price of $16,000 on February 1, 2019, with terms of 1/10, n/30. On February 10, 2019, payment was received on merchandise originally billed for $6,500, and the balance due was received on March 1, 2019.
Required:
1. Prepare the journal entries to record the preceding information assuming that Eastman records accounts receivable and sales at (a) the gross price and (b) the net price.
2. Next Level What implied annual interest rate is Eastman’s customer incurring by failing to take the cash (sales) discount? (Assume a 365-day year.)
3. Next Level Which method—recording accounts receivable at the gross price or net price—is theoretically superior? Why?
Consumption Ratios Larsen, Inc. produces two types of eiectronic parts and has provided the following data: There are four activities: machining, setting up. testing: and purci asing. Required: 1. Calculate the activity coniumpition ratios for exch product, Rolind your alvivers to two declial places. 2. Calculate the consumption ratios for the plantwide rate (direct labor hours). Round your answers to two decintal places. 3. Woult this remove the cost distortion of a plantwide rate? toteasurvest hirt and samn for bart yin?
1. The calculation of the activity consumption ratios involves the ratio of activity consumption to the quantity of output produced. 2. The consumption ratios for each product are: Product A: $11.33 per DLH, Product B: $16.67 per DLH.
1. Activity consumption ratios:
Activity consumption ratios refer to the proportion of each activity used in producing one unit of product.
For product A, the activity consumption ratios are:
Machining = 0.3/1 = 0.3
Setting up = 0.2/1 = 0.2
Testing = 0.1/1 = 0.1
Purchasing = 0.4/1 = 0.4
For product B, the activity consumption ratios are:
Machining = 0.2/1 = 0.2
Setting up = 0.3/1 = 0.3
Testing = 0.3/1 = 0.3
Purchasing = 0.2/1 = 0.2
The calculation of the activity consumption ratios involves the ratio of activity consumption to the quantity of output produced.
2. Consumption ratios:
The consumption ratios provide the amount of each overhead cost pool consumed by one unit of a product. For the plantwide rate, the consumption ratios are:
Total DLH = 15,000 DLHs
Product A = 7,500 DLHs
Product B = 7,500 DLHs
Therefore, the consumption ratios for each product are:
Product A: $85,000 ÷ 7,500 DLHs = $11.33 per DLH
Product B: $125,000 ÷ 7,500 DLHs = $16.67 per DLH
3. Cost distortion of a plantwide rate:
No, a plantwide rate would not remove cost distortion since it assumes all overheads costs are caused by a single cost driver. However, some products may consume resources differently from others. Thus, it results in over-costing or under-costing of some products.
The more complex the production process, the more distortion is likely to be created. Totals are not provided in the question. Therefore, it is not possible to provide a response for Bart Yin and Hirt & Samn.
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