Answer:
Explanation:
a)
Date Account Titles and Explanation Debit Credit
January 1, 2020 Land $360,000.00
Discount on notes payable $246,621.00
Notes payable $ 606,621.00
(To record purchase of land by issuing note payable)
PV of $606,621 discounted at 11% =606,621/(1.11)^5 = $ 360,000
2.
Computation of the discount on notes payable:
Maturity value $560,000
Present value of $560,000 due in 8 years at 11% = $560,000 * 0.43393 = $ 243,000
Present value of $39,200 payable annually for 8 years at 11% annually—$39,200 * 5.14612 = $ 201,728
Present value of the note = $ 243,000 + $ 201,728 = $ 444,728
Discount = $ 560,000 - $ 444,728 = $ 115,272
Date Account Titles and Explanation Debit Credit
January 1, 2020 Equipment $444,728.00
Discount on notes payable $115,272.00
Notes payable $ 560,000.00
(To record purchase of equipment by issuing note payable)
b)
1.
Date Account Titles and Explanation Debit Credit
December 31, 2020 Interest expense ($ 360,000*11%) $39,600
Discount on notes payable $39,600
(To record the interest expense recorded and discount amortized)
2.
Date Account Titles and Explanation Debit Credit
December 31, 2020 Interest expense ($444,728 * 11%) $48,920
Discount on notes payable $9,720
Interest Payable ( $ 560,000 * 7%) $39,200
(To record the interest expense recorded)
In preparation for developing its statement of cash flows for the year just ended, D-Rose Distributors collected the following information: ($ in millions) Purchase of treasury bills (considered a cash equivalent) 6.7 Sale of preferred stock 150.7 Gain on sale of land 4.7 Proceeds from sale of land 25.7 Issuance of bonds payable for cash 140.7 Purchase of equipment for cash 30.7 Purchase of GE stock 35.7 Declaration of cash dividends 134.7 Payment of cash dividends declared in previous year 130.7 Purchase of treasury stock 120.7 Payment for the early extinguishment of long-term notes (carrying (book) value: $100 million) 110.7 Required: 1. Prepare the investing activities section of D-Rose's statement of cash flows. 2. Prepare the financing activities section of D-Rose's statement of cash flows.
Answer and Explanation:
1. The preparation of the investing activities is presented below:
Cash flow from investing activities
Proceeds from sale of land $25.7
Purchase of equipment for cash -$30.7
Purchase of GE stock -$35.7
Net cash used by investing activities -$40.7
2. The preparation of the financing activities is presented below:
Cash flow from financing activities
Sale of preferred stock 150.7
Issuance of bonds payable for cash 140.7
Payment of cash dividends declared in previous year -130
Purchase of treasury stock -120
Payment for the early extinguishment of long-term notes (carrying (book) value: $100 million) -110.7
Net cash used by financing activities -$69.3
The minus sign shows the cash outflow and the positives sign shows the cash inflow
The common stock of Leaning Tower of Pita Inc., a restaurant chain, will generate payoffs to investors next year, which depend on the state of the economy, as follows: Dividend Stock Price Boom $ 10 $ 200 Normal economy 6 90 Recession 0 0 The company goes out of business if a recession hits. Assume for simplicity that the three possible states of the economy are equally likely. The stock is selling today for $80.
a. Calculate the rate of return to Leaning Tower of Pita shareholders for each economic state. (Negative amounts should be indicated by a minus sign. Enter your answers as a percent rounded to 2 decimal places.) Rate of return Boom Normal economy Recession a-2.
b. Calculate the expected rate of return and standard deviation of return to Leaning Tower of Pita shareholders. (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.) Expected return Standard deviation
Answer:
a) Boom = 162.50%
Normal =20.00%
Recession = - 100.00%
b) Expected return = 27.50%
Standard deviation = 107.30%
Explanation:
a) To find the rate of return for each economy state, let's use:
Rate of return = (Dividend +Stock price next year-stock price today)/stock price today
i) For Boom:
[tex] \frac{10 + 200 - 80}{80} = 1.625 [/tex] = 162.50%
ii) Normal:
[tex]\frac{6 + 90- 80}{80} = 0.2 [/tex] = 20.00%
iii) Recession :
[tex]\frac{0 + 0 - 80}{80} = - 1 [/tex] = -100%
b) To calculate the expected rate of return, let's use:
Expected return = Sum of expected return in different scenario / number of economy states
[tex] = \frac{162.5 + 20 - 100}{3} = 27.50[/tex]
Standard deviation:
To find the standard deviation, let's use:
Standard deviation = √[(sum of square of expected return in each scenario -average return)/n]
[tex] = \sqrt{\frac{(162.50-27.50)^2+(20-27.50)^2+(-100-27.50)^2}{3}} [/tex]
[tex] = \sqrt{\frac{(135)^2 + (-7.50)^2 + (-127.50)^2}{3}} [/tex]
[tex] = \sqrt{\frac{18225+56.25+16256.25}{3} [/tex]
= 107.30%
Standard deviation = 107.30%
The selling price of imported olive oil is $20 per case. Your cost is 15 Euros per case, and the exchange rate is currently 1.25, so it takes 1.25 Euros to buy $1. Your largest customer has ordered 15,000 cases of olive oil. How much is the pretax profit for this transaction?
Answer:
$120,000
Explanation:
According to the question, the selling price (S.P) i.e. amount to be sold, of one imported olive oil case is $20 while the cost price (C.P) i.e. amount it was purchased, is €15
Looking at the currencies of both prices, they are different. To make the currencies the same, we need to convert euros (€) to dollars ($).
Based on the exchange rate of €1.25 to $1 given in the question;
€15 will be 15/1.25 = $12.
Therefore, the C.P is $12 and the S.P is $20
A customer ordered 15,000 cases of olive oil. This means that the;
1) The cost price (C.P) will be $12 × 15,000 = $180,000
2) The selling price will be $20 × 15,000 = $300,000
In order to obtain the pretax profit, we subtract the cost price (C.P) from the selling price (S.P). That is, $300,000 - $180,000 = $120,000
Prior to September 30, a company has never had any treasury stock transactions. A company repurchased 1,000 shares of its $2 par common stock on September 30 for $20 per share. On October 2, it reissued 400 of these shares at $21 per share. On October 12, it reissued the remaining 600 shares at $19 per share. The journal entry to record the reissuance of the shares on October 2 would be:
Answer: Please refer to Explanation
Explanation:
The following will be the journal entry on October 2nd
October 2
DR Cash $8,400
CR Treasury Stock $8,000
CR Additional Paid-in Capital $400
(To record reissuance of Treasury Stock)
Workings
Cash = 400 * 21
= $8,400
Treasury Stock = 400 * 20 (purchase price)
= $8,000
Additional Paid-in Capital = (21 - 20) * 400
= $400
Wicker Rockers, Inc. is planning to offer a defined contribution plan for its employees. The company would like to incorporate a "cliff" vesting schedule for the employer contributions into the plan. What is the minimum vesting period the company can choose for a "cliff" vesting schedule
Answer:3 years
Explanation:
Cliff vesting is when an employee of a company becomes fully vested on a specified date rather than the employee becoming partially vested in increasing amounts over extended period. Cliff Vesting is a process whereby the employees are entitled to full benefits from their firm’s pension policies and qualified retirement plans on a given date.
Upon the completion of the cliff period, employees receive full benefits. The Pension Protection Act of 2006 deduced a three-year cliff vesting schedule for the designated defined-contribution plans which includes 401Ks.
Kevin, Rajiv, and Yakov are hunters who live next to a recreational wildlife game area that is open to hunting; in other words, anyone is free to use the recreational wildlife game area for hunting. Assume that these men are the only three hunters who hunt in this recreational wildlife game area and that the recreational wildlife game area is large enough for all three hunters to hunt intensively at the same time.
Each year, the hunters choose independently how often to hunt; specifically, they choose whether to hunt intensively (that is, to set several traps and hunt long hours, which hurts the sustainability of the recreational wildlife game area if enough people do it) or to hunt nonintensively (which does not hurt the sustainability of the recreational wildlife game area). None of them has the ability to control how much the others hunt, and each hunter cares only about his own profitability and not the state of the recreational wildlife game area.
Assume that as long as no more than one hunter hunts intensively, there are enough animals to restock the recreational wildlife game area. However, if two or more hunt intensively, the recreational wildlife game area will become useless in the future. Of course, hunting intensively earns a hunter more money and greater profit because he can sell more animals.
The recreational wildlife game area is an example of _____________ because the animals in the recreational wildlife game area are ________ and ___________.
Answer: Common resource ,
Non excludable and Rival in consumption
Explanation:
Common resource is defined as the resource that is usually available to people in open form and people tend to overuse it.This creates shortage of resource and brings scarcity.They are considered rival in nature.Any good is considered rival if consumption of good by one person reduces consumption of that good for another person. It is regarded as subtractable.Non-excludable good is defined as the good that does not stop other people or group of people to consume or use it.There is no certain restriction of using particular good.According to the questions scenario, recreational wildlife game area is common resource because Yakov, Rajiv and Kevin are using that area for hunting openly .Other hunters can also use the area for hunting as it is available commonly for everyone as per their needs.
Animal of wildlife game area can be considered rival and non-excludable in consumption because they are openly available for hunter and there is no restriction on their usage (hunting) particularly.Thus, if a hunter hunts more number of animals using intensive hunting mechanism, it will reduce number of animals for other hunters .
Tom, Dan and Phil work indifferent teams at Springfield Automotive. Tom's team ensures that all the raw materials, machinery, tools and other production equipment are available for the employees around the clock. Any procurement needs have to be addressed to Tom, who also takes part in high-level decisions regarding the number of units to produced, exported and so on. Dan works as part of a team of eight members who concentrate the day-to-day productions; they also ensure that the quality checks are done and inspect each other's work. Phil is the operations manager, who works for 5 hours in the production department and then spends the rest of his time assisting management as an internal consultant on manufacturing issues. His input is crucial in improving the production process. Dan's contribution is toward the __________.
Answer: Work team
Explanation: Dan's contribution is towards the work team whereas Phil works in the parallel team while Tom is part of the management team. a work team which Dan is a member of is defined as a group of workers or employees with different set of skills that work together on a given task such as the day-to-day productions in a business, quality control and inspection, etc. Work teams are most efficient or useful where there is a frequent change in job content and employees with limited skills and a specific set of duties are unable to cope (work teams thus provide expert advice that will increase the ability of employees to participate in planning, problem-solving, and decision-making that are needed to complete a set of work and to better serve customers).
On April 1, a company purchased two units of inventory, A and B. The cost of unit A was $640, and the cost of unit B was $550. On April 30, the company had not sold the inventory. The net realizable value of unit A was now $660 while the net realizable value of unit B was $480. The adjustment associated with the lower of cost and net realizable value on April 30 will be:
Answer: b
Explanation:
Service Department Charges In divisional income statements prepared for Demopolis Company, the Payroll Department costs are charged back to user divisions on the basis of the number of payroll distributions, and the Purchasing Department costs are charged back on the basis of the number of purchase requisitions. The Payroll Department had expenses of $64,560, and the Purchasing Department had expenses of $40,000 for the year. The following annual data for Residential, Commercial, and Government Contract divisions were obtained from corporate records: ResidentialCommercialGovernment Contract Sales$2,000,000 $3,250,000 $2,900,000 Number of employees: Weekly payroll (52 weeks per year)400 250 150 Monthly payroll80 30 10 Number of purchase requisitions per year7,500 3,000 2,000 a. Determine the total amount of payroll checks and purchase requisitions processed per year by the company and each division.
Answer and Explanation:
The computation of the total amount of payroll checks and purchased requisitions processed per year is shown below:
Particulars Residential Commercial Government Contract Total
Number of payroll checks:
Weekly payroll $20,800) $13,000 $7,800 $41,600
(400 × 52 weeks) (250 × 52 weeks ) (150 × 52 weeks)
Monthly payroll $960 $360 $120 $1,440
(80 × 12) (30 × 12) (10 × 12)
Total $21,760 $13,360 $7,920 $43,040
Number of purchase requisitions per year 7,500 3,000 2,000 12,500
The largest national herbal supplement store is running a sale on its excess supply of Vitamin C supplements. With this new price change what do you think will happen to the Vitamin C supplement market? a. There will be a shift if the demand curve as demand increases. b. There will be an increase only in the quantity demanded. c. There will be a decrease in the quantity demanded. d. There will be a shift in the supply curve as supply increases.
Answer:
b. There will be an increase only in the quantity demanded.
Explanation:
The law of demand states that the higher the price, the lower the quantity demanded and the lower the price, the higher the quantity demanded.
So if there's a sale, vitamin c would become cheaper and the quantity demanded would increase. This would lead to a movement along the demand curve and not a shift.
I hope my answer helps you
Enviro Company issues 8%, 10-year bonds with a par value of $300,000 and semiannual interest payments. On the issue date, the annual market rate for these bonds is 10%, which implies a selling price of 87 1/2. The straight-line method is used to allocate interest expense. 1. Using the implied selling price of 87 ½, what are the issuer's cash proceeds from issuance of these bonds? 2. What total amount of bond interest expense will be recognized over the life of these bonds? 3. What is the amount of bond interest expense recorded on the first interest payment date?
Answer:
1. Issuer's cash is $262,500
2. Total amount of bond interest is $277,500
3. The amount of bond interest expense is $13,875.
Explanation:
1. Issuer's cash = Face Value × Selling Price
Issuer's cash = $300,000 × 87.50%
Issuer's cash = $262,500
2. Discount on bond = $300,000 × 12.5% = $37,500
Interest on bond = $300,000 × 8% = $24,000
Period of bonds= 10 years
Total amount of bond interest = Discount on Bond + (Interest on Bond × period)
Total amount of bond interest = $37,500 + ($24,000 × 10)
Total amount of bond interest = $277,500
3. Discount on bond = $300,000 × 12.5% = $37,500
Interest on bond = $300,000 × 8% = $24,000
Period = 0.5 years
The amount of bond interest expense = (Discount of Bond ÷ 20) + Interest
The amount of bond interest expense = ($37,500 ÷ 20) + ($24,000 × 0.5)
The amount of bond interest expense = $1,875 + $12,000
The amount of bond interest expense = $13,875.
Darrin’s Auto Northern Division is currently purchasing a part from an outside supplier. The company's Southern Division, which has no excess capacity, makes and sells this part for external customers at a variable cost of $15 and a selling price of $27. If Southern begins sales to Northern, it (1) will use the general transfer-pricing rule and (2) will be able to reduce variable cost on internal transfers by $3. On the basis of this information, Southern would establish a transfer price of:
Answer:
Transfer price = $24
Explanation:
As per the data given in the question,
The excess capacity of Company's Southern division is nill therefore for transferring the units the division will have to decrease its external sales.The Loss occurred due to reduction in external sales should be from inter divisional transfer price. Therefore,
Transfer price = variable cost + Loss of contribution
= ($15 - $3) + ($27 - $15)
= $24
The pretax financial income (or loss) figures for Whispering Company are as follows. 2015 $164,000 2016 275,000 2017 86,000 2018 (164,000 ) 2019 (390,000 ) 2020 113,000 2021 98,000 Pretax financial income (or loss) and taxable income (loss) were the same for all years involved. Assume a 25% tax rate for 2015 and 2016 and a 20% tax rate for the remaining years. Prepare the journal entries for the years 2017 to 2021 to record income tax expense and the effects of the net operating loss carryforwards. All income and losses relate to normal operations. (In recording the benefits of a loss carryforward, assume that no valuation account is deemed necessary.)
Answer and Explanation:
The journal entries are shown below:
On 2017
Income Tax Expense $17,200 ($86,000 × 20%)
To Income Tax Payable $17,200
(Being the income tax expense is recorded)
On 2018
Income Tax Refund Receivable $32,800 ($164,000 × 20%)
To Income tax refund due to loss carry back $32,800
(Being the refund receivable is recorded)
On 2019
Income Tax Return Receivable $17,200 ($86,000 × 20%)
To Income tax refund $17,200
(Being the refund receivable is recorded)
Deferred Tax Asset $60,800 [(390,000 - $86,000) × 20%]
To income tax refund $60,800
(Being the refund receivable is recorded)
On 2020
Income Tax Expense $22,600 ($113,000 × 20%)
To Deferred Tax Asset $22,600
(Being the income tax expense is recorded)
On 2021
Income Tax Expense $19,600 ($98,000 × 20%)
To Deferred Tax Asset $19,600
(Being the income tax expense is recorded)
A peer-review board for alternative dispute resolution usually consists of: A. an equal number of employee representatives and management appointees B. managers above the level of the supervisor whose decision is being appealed. C. employees at the same level as the appealing employee. D. managers, subordinates, and a number of unbiased third-party participants who do not work for the employer.
Answer:
The answer is option A) A peer-review board for alternative dispute resolution usually consists of: an equal number of employee representatives and management appointees
Explanation:
Alternative dispute resolution is an affordable, less time consuming and less formal way of settling workplace disputes. To achieve this feat, a peer review board is constituted.
A peer review board usually consists of employers and management appointees and it could be a voluntary decision on their art to participate.
The pool of individuals nominated to be part of the peer review board is considered objective and unbiased in their assessment of the issue to be resolved. They are also deemed skillful in the art of listening and arbitration.
A company can sell all the units it can produce of either Product A or Product B but not both. Product A has a unit contribution margin of $16 and takes two machine hours to make and Product B has a unit contribution margin of $30 and takes three machine hours to make. If there are 5,000 machine hours available to manufacture a product, income will be:
a. $10,000 more if Product A is made.
b. $10,000 less if Product B is made.
c. $10,000 less if Product A is made.
d. the same if either product is made.
Answer:
Product B has a net income of $10,000 superior to Product A.
The correct answer is C.
Explanation:
Giving the following information:
Product A:
Unitary contribution margin= $16
Machine-hours required= 2
Product B:
Unitary contribution margin= $30
Machine-hours required= 3
First, we will calculate the total income of both products.
Product A= 16*(5,000/2)= $40,000
Product B= 30*(5,000/3)= $50,000
Product B has a net income of $10,000 superior to Product A.
Which of the following is true of a stock dividend? Multiple Choice It is a liability on the balance sheet. The decision to declare a stock dividend resides with the shareholders. Transfers a portion of equity from retained earnings to a cash reserve account. Does not affect total equity, but transfer amounts between the components of equity. Reduces a corporation's assets and stockholders' equity.
Answer:
Yes it is true that a stock dividend does not affect total equity.
Explanation:
A stock dividend is a non cash payment given to shareholders. Instead of cash, additional shares that is equivalent to the earnings that accrue is given to shareholders.
While this may increase the number of shares held, it does not affect total equity.
One of the benefits of stock dividends tax exemption and retained equity which translates to additional investment.
However, the additional; shares created could dilute the share prices.
Running Co. had an equity investment where it owned less than 20% of an investee, and therefore Running Co. was not able to exercise significant influence. Information about the investment is below: 20X1 20X2 Investment cost 170,000 170,000 Fair value 181,400 155,000 Total unrealized gain (loss) 11,400 (15,000) The company sold the investment during 20X3 for the below price: Sales price 192,400 What is the gain (loss) recorded in the income statement in the year of sale, in 20X3
Answer:
Gain or Loss to be reocrded in Financial Statement: 151600 - 155000= 3400 loss to be booked as Fair value recorded in the books as in year ended 20X2 is 155000.
The predetermined overhead rate for Zane Company is $5, comprised of a variable overhead rate of $3 and a fixed rate of $2. The amount of budgeted overhead costs at normal capacity of $150000 was divided by normal capacity of 30000 direct labor hours, to arrive at the predetermined overhead rate of $5. Actual overhead for June was $9500 variable and $6050 fixed, and standard hours allowed for the product produced in June was 3000 hours. The total overhead variance is
Answer:
Total Overhead Variance= $500 unfavorable
Explanation:
The total overhead variance is the difference between actual overhead and the applied overhead.
Actual Overhead = Variable + Fixed= $9500 + $6050= $ 15,550
Budgeted Overhead for 30000 direct labor hours = $ 150,000
Applied Overhead for 3000 hours = 3000 *$5= $15000
Total Overhead Variance= Actual Overhead Less Applied Overhead
= $15,500- $ 15000= $500 unfavorable
As actual is greater than applied it is unfavorable.
Answer:
$550 unfavorable.
Explanation:
Total actual overhead = $9,500 + $6,050 = $15,550
Total predetermined overhead = Predetermined overhead rate * Standard hours = $5 * 3,000 = $15,000
Total overhead variance = $15,550 - $15,000 = $550 unfavorable.
Note: It is unfavorable because total actual is greater than total predetermined overhead.
(1) Reporting of Capital Assets. Are capital assets reported as a line-item in the government-wide statement of net position? Are nondepreciable capital assets reported on a separate line from depreciable capital assets, or are they separately reported in the notes to the financial statements? Do the notes include capital asset disclosures, such as those for the City and County of Denver shown in Illustration 5–2? Does the disclosure show beginning balances, increases and decreases, and ending balances for each major class of capital assets, as well as the same information for accumulated depreciation for each major class? Are these disclosures presented separately for the capital assets of governmental activities, business-type activities, and discretely presented component units? Do the notes specify capitalization thresholds for all capital assets, including infrastructure? Do the notes show the amounts of depreciation expense assigned to each major function or program for governmental activities at the government-wide level? Are the depreciation policies and estimated lives of major classes of depreciable assets disclosed? Do the notes include the entity’s policies regarding capitalization of collections of works of art and historical treasures? If collections are capitalized, are they depreciated?
Answer:
Principal resources are reported as a line-item within the management wide declaration of net situation. Non-depreciable principal resources are individually reported within the proceedings to the money declarations. The revealing expressions starting equilibriums, will increase and reduces, and finish stabilities for every main category of principal assets, yet because the same info for accrued devaluation for every key category. These revelations are given individually for the wealth assets of administrative actions, occupational sort actions, and unnoticeably given part units. The summaries stipulate capitalization inceptions for all principal assets, together with arrangement. The summaries display the quantities of devaluation expenditure assigned to every major operate or package for administrative actions at the government-wide flat. The decline strategies and calculable lives of main categories of depreciable resources are released. Summaries do reveal the strategies relating to capitalization of assortment of skills and historic materials if some. These collectibles aren't criticized however market price of those art effort is measured to reason gain/ injury at the year finish. Accounting strategies for possessions no inheritable underneath capita tenancy are obviously mere
A company's income statement showed the following: net income, $117,000; depreciation expense, $31,500; and gain on sale of plant assets, $5,500. An examination of the company's current assets and current liabilities showed the following changes as a result of operating activities: accounts receivable decreased $9,700; merchandise inventory increased $19,500; prepaid expenses increased $6,500; accounts payable increased $3,700. Calculate the net cash provided or used by operating activities. Multiple Choice $143,400. $141,400. $148,200. $130,400. $169,400.
Answer:
$130,400
Explanation:
The computation of net cash provided or used by operating activities is shown below:-
Net cash provided or used by operating activities
Net income $117,000
Depreciation expense $31,500
Gain on sale of plant assets ($5,500)
Accounts receivable decreased $9,700
Increase inventory ($19,500)
Prepaid expenses increased ($6,500)
Increase account payable $3,700
Net cash flow from
operating activities $130,400
Therefore the Net cash flow from operating activities is $130,400
Tiki Corporation had net income of $120,000 during the year. Depreciation expense was $6,000. The following information is available: Held- to-Maturity Bonds purchased25,000increase Common Stock issued70,000increase Accounts Receivable10,000decrease Accounts Payable15,000increase Gain on sale of AFS Investment5,000increase What amount should Tiki report as net cash provided by operating activities in its statement of cash flows for the year
Answer:
Tiki should report $101,000 as net cash provided by operating activities in its statement of cash flows for the year.
Explanation:
Tiki Corporation
Statement of cash flows (extract)
Net income $120,000
Add: Depreciation expense 6,000
Less: Increase Accounts Receivable (10,000)
Less: Decrease in Accounts Payable (15,000)
Net cash flows from operating activities $101,000
Donovan company incurred the following costs while producing 2000 units: Direct Materials, $15 per unit; direct labor, $5 per unit; variable manufacturing overhead, $12 per unit; variable selling and administrative costs, $14, per unit; total fixed overhead costs, $20,000; total fixed selling and administrative costs, $10,000. There are no beginning inventories.
What is the unit productive cost using absorption costing?
a. $32 per unit
b. $42 per unit
c. $52 per unit
d. $61 per unit
What is the unit product cost using variable costing?
a. $32 per unit
b. $44 per unit
c. $46 per unit
d. $61 per unit
What is the operating income using absorption costing if 1800 units are sold for $100 each?
a. $104,400
b. $96,000
c. $79,200
d. $69,200
What is the operating income using variable costing if 1900 units are sold for $100 each?
a. $57,400
b. $72,600
c. $80,200
d. $102,600
*Formulas or explanations with each part of the problem.
Answer:
1. b. $42 per unit
2. a. $32 per unit
3. d. $69,200
4. b $72,600
Explanation:
1 and 2 The computation of unit productive cost using absorption costing and unit product cost using variable costing is shown below:-
Absorption Variable
Direct material $15 $15
Direct labor $5 $5
Variable manufacturing
overhead $12 $12
Fixed manufacturing
overhead $10
($20,000 ÷ 2000)
Product cost $42 $32
Therefore for computing the product cost of absorption and variable cost we simply added direct material, direct labor, variable manufacturing overhead and fixed overhead rate
3. The computation of the unit product cost using variable costing is shown below:-
Sales $180,000
Cost of goods manufactured ($756,00)
(1800 × $42)
Difference $104,400
Variable and selling
administrative ($25,200)
(1800 × $14)
Gross profit $79,200
Fixed selling and administrative
expenses ($10,000)
Net operating income $69,200
So, for computing the net operating income we simply deduct the Fixed selling and administrative expenses from gross profit.
4. The computation of operating income using variable costing is shown below:-
Sales $190,000
(1,900 × $100)
Variable cost of goods
manufactured $60,800
(1,900 × $32)
Gross contribution margin $129,200
Variable and selling administrative ($26,600)
(1900 × $14)
Net contribution margin $102,600
Fixed cost ($30,000)
Operating income $72,600
Therefore for computing the operating income using variable costing we simply deduct the fixed cost from net contribution margin.
Prepare the following journal entries in proper journal entry form. 1. Billed a customer for a $2,400 job. 2. Received $4,800 to start an eight-month job, beginning next month. 3. Started a company by contributing equipment worth $5,400, land worth $180,000 and cash of $30,000 into a business checking account.
Answer and Explanation:
The Journal entry is shown below:-
1. Accounts receivable Dr, $2,400
To Service revenue $2,400
(Being services revenue is recorded)
Here we debited the accounts receivable as it increased the assets and we credited the service revenue as it increased the revenue
2. Cash Dr, $4,800
To Unearned revenue $4,800
(Being unearned revenue is recorded)
Here we debited the cash as it increased the assets and we credited the unearned revenue as it increased the liabilities
3. Equipment Dr, $5,400
Land Dr, $180,000
Cash Dr, $30,000
To Capital $215,400
(Being assets investment is recorded)
Here we debited the equipment, land and cash as it increased the assets and we credited the capital as it increased the liabilities
Marle Construction enters into a contract with a customer to build a warehouse for $950,000 on March 30, 2018 with a performance bonus of $50,000 if the building is completed by July 31, 2018. The bonus is reduced by $10,000 each week that completion is delayed. Marle commonly includes these completion bonuses in its contracts and, based on prior experience, estimates the following completion outcomes: Completed by Probability July 31, 2018 65% August 7, 2018 5% August 14, 2018 5% August 21, 2018 The transaction price for this transaction, based on the expected value approach, is:_______.
a. $950,000
b. $995,000
c. $685,000
d. $652,500
Answer:
b. $995,000
Explanation:
The computation of the transaction price based on the expected value approach is shown below:
The formula is
= (Building cost of warehouse + bonus) × probability percentage
Date Calculation Amount
July 31, 2018 ($950,000+$50,000) × 0.65 $650,000
August 7, 2018 ($950,000+$40,000) × 0.25 $247,500
August 14, 2018 ($950,000+$30,000) × 0.05 $49,000
August 21, 2018 ($950,000+$20,000) × 0.05 $48,500
Total $995,000
Since the bonus is reduced $10,000 each week so $10,000 is deducted for every delayed week
Purdum Farms borrowed $16 million by signing a five-year note on December 31, 2017. Repayments of the principal are payable annually in installments of $3.2 million each. Purdum Farms makes the first payment on December 31, 2018 and then prepares its balance sheet. What amount will be reported as current and long-term liabilities, respectively, in connection with the note at December 31, 2018, after the first payment is made?
Answer:
Current liabilities $3.2 million
long-term liabilities =$16 million-$3.2 million-$3.2 million=$9.6 million
Explanation:
The amount classified as current liabilities as at 31st December 2018 is the portion of the loan repayable within a year,that the repayment due at 31st December 2019 which is $3.2 million.
The amount to be classified as long term liabilities is the balance of the loan after having taken out the payment in year 1 as well as the repayment to be made in year 2
Equipment with a book value of $78,000 and an original cost of $168,000 was sold at a loss of $31,000. Paid $106,000 cash for a new truck. Sold land costing $315,000 for $420,000 cash, yielding a gain of $105,000. Long-term investments in stock were sold for $90,000 cash, yielding a gain of $15,500. Use the above information to determine this company's cash flows from investing activities. (Amounts to be deducted should be indicated with a minus sign.)
Answer:
$451,000
Explanation:
The computation of cash flows from investing activities is shown below:-
Sale of equipment $47,000
($78,000 - $31,000)
Purchase of new truck ($106,000)
Sale of land $420,000
Sale of Long-term investments $90,000
Net cash provided by investing activities $451,000
Therefore to reach the cash flows from investing activities we simply added the sale of equipment, sale of land, sale of long term investments and deduct the purchase of new truck.
Red Co. acquired 100% of Green, Inc. on January 1, 2017. On that date, Green had land with a book value of $42,000 and a fair value of $52,000. Also, on the date of acquisition, Green had a building with a book value of $200,000 and a fair value of $390,000. Green had equipment with a book value of $350,000 and a fair value of $280,000. The building had a 10-year remaining useful life and the equipment had a 5-year remaining useful life. In Red’s December 31, 2017 consolidated worksheet, what total amount of excess fair over book value amortization expense adjustments should Red recognize resulting from its 100% acquisition of Green?
Answer:
$5,000
Explanation:
The computation of total amount of excess fair over book value amortization expense adjustments to be recognized by red is shown below:-
Excess of fair value over book value = Land fair value - Land book value
= $52,000 -$42,000
= -$10,000
Here land is not amortized
Excess of fair value over book value = Building fair value - Building book value
= $390,000 - $200,000
= $190,000
Excess fair value over book value amortization expense adjustments to be recognized by red = Excess of fair value over book value of building ÷ Number of Years
= $190,000 ÷ 10
= $19,000
Excess of fair value over book value = Equipment fair value - Equipment book value
= $280,000 - $350,000
= ($70,000)
Excess fair value over book value amortization expense adjustments to be recognized by red for equipment = Excess of fair value over book value of equipment ÷ Number of Years
= ($70,000) ÷ 5
= ($14,000)
Total amount of excess fair over book value amortization expense adjustments to be recognized by red
= $19,000 - $14,000
= $5,000
CSUSM is a zero growth company. It currently has zero debt and its earnings before interest and taxes (EBIT) are $85,000. CSUSM 's current cost of equity is 11%, and its tax rate is 21%. The firm has 15,000 shares of common stock outstanding. Assume that CSUSM is considering changing from its original capital structure to a new capital structure with 39% debt and 61% equity. This results in a weighted average cost of capital equal to 8.7% and a new value of operations of $576,345. Assume CSUSM raises $165,000 in new debt and purchases T-bills to hold until it makes the stock repurchase. What is the stock price per share immediately after issuing the debt but prior to the repurchase?
Answer:
Check the explanation
Explanation:
Calculation of CSUSM 's New value of Operation :
For the purpose of Calculation of New Value of Operation we need to first calculate new WACC
Given :
Debt value ( Wd) = 30% or 0.30
Equity Value ( We)= 70% or 0.70
Cost of Debt ( Kd) =8%
New cost of equity (Ke) =12%
WACC =Kd(1-T) * Wd + Ke* We
WACC =[8%(1-0.40) * 0.30] + [12% * 0.70]
= [4.80% * 0.30 ] + [8.4 %]
= 1.44% + 8.4%
= 9.84 %
Given EBIT = $ 80,000
Tax rate = 40%
Currently the company has no growth. Therefore growth rate is 0 %
Value of New Operation =FCF / WACC
=EBIT (1-T) / WACC
=$80,000 (1-0.40)/ 9.84%
= $ 487,804.88
You are given the following information about 2 accounts: Account 1 Time Account Value before transactions Deposit Withdrawal 0 100 0.25 110 X 0.75 120 3X 1 82 Account 2 Time Account Value before transactions Deposit Withdrawal 0 100 0.5 120 2X 1 140 You are also told that the dollar weighted return over the year on account 1 is i. If the time weighted return over the year on account 2 is also i, what are X and i
Answer:
Check the explanation
Explanation:
For account 1:
Dollar weighted investment = 100 for entire year + X for three fourth of the year - 3X for one fourth of the year = 100 + 3X/4 - 3X/4 = 100
Dollar return = Closing balance - opening balance - (Total deposit - total withdrawal) = 82 - 100 - (X - 3X) = 2X - 18
Hence, dollar weighted return = i = Dollar return / Dollar weighted investment = (2X - 18) / 100
Or, 100i = 2X - 18 Or, 50i = X - 9
For account 2:
Time weighted return: It has two components:
100 growing to 120 in 0.5 year
Immediately after deposit of 2X, the capital becomes 120 + 2X that grows to become 140 in the next 0.5 year
Hence time weighted return = 1 + i = 120 / 100 x 140 / (120 + 2X) = 168 / (120 + 2X) = 84 / (60 + X)
From the first equation, i = (X - 9) / 50
Hence, from second equation, 1 + i = 1 + (X - 9) / 50 = (41 + X) / 50 = 84 / (60 + X)
Hence, (60 + X).(41 + X) = 50 x 84
Hence, X2 + 101X + 2,460 = 4,200
Or, X2 + 101X - 1,740 = 0
It's a quadratic equation that can be factorized as:
(X - 15).(X + 116) = 0
Hence, X = 15
Hence, i = (X - 9) / 50 = (15 - 9) / 50 = 0.12 = 12%
Selected information from Arbon Corporation's accounting records and financial statements for 2021 is as follows ($ in millions): Cash paid to acquire machinery $ 36 Reacquired Arbon common stock 50 Proceeds from sale of land 90 Gain from the sale of land 52 Investment revenue received 66 Cash paid to acquire office equipment 80 In its statement of cash flows, Arbon should report net cash outflows from investing activities of:
Answer:
Arbon should report net cash outflows from investing activities of: ($26)
Explanation:
Arbon Corporation
Statement of cash flows (extract)
Purchase of machinery ($36)
Proceeds from sale of land 90
Cash paid to acquire office equipment (80)
Net cash outflows from investing activities ($26)
Therefore, Arbon should report net cash outflows from investing activities of ($26).
Note that reacquired stock affects the financing section of the cash flows, while gain on sale of land and investment revenue received affect the operating section of the cash flows.
