Answer:
Rally must sell 1,080 units of Standard and 720 units of Deluxe
Explanation:
Standard Deluxe Total
Sales price per unit $45 $65
Less: Variable cost ($35) ($45)
Contribution Margin per unit $10 $20
Sales Mix units (A) $3 $2 $5
Contribution margin $30 $40 $70
Weighted average Contribution $14
per unit C= B/A
Appointment of fixed cost between standard and deluxe
Total Fixed cost = 14,700
Break even point = Fixed cost / Weighted average Contribution per unit
= 14,700 / 14
= 1,050
Apportionment of Break even point sales between Standard and deluxe in sales mix ratio (3:2)
Standard = 1,050 * 3/5 = 630
Deluxe = 1,050 * 2/3 = 420
Unit to be sold to get desired profit = Fixed cost + Desired profit / Weighted average Contribution per unit
= (14,700 + 10,500) / 14
= 1,800
Apportionment of Units to be sold to get desired profit between Standard and Deluxe in sales mix ratio (3:2)
Standard = 1,800 * 3/5 = 1,080
Deluxe = 1,800 * 2/5 = 720
To reach target operating income, Rally must sell 1,080 units of Standard and 720 units of Deluxe
Masterson, Inc., has 3.6 million shares of common stock outstanding. The current share price is $85.50, and the book value per share is $9.25. The company also has two bond issues outstanding. The first bond issue has a face value of $73 million, a coupon rate of 5.3 percent, and sells for 95.7 percent of par. The second issue has a face value of $45 million, a coupon rate of 5.9 percent, and sells for 104.9 percent of par. The first issue matures in 23 years, the second in 11 years. The most recent dividend was $4.04 and the dividend growth rate is 4.3 percent. Assume that the overall cost of debt is the weighted average of that implied by the two outstanding debt issues. Both bonds make semiannual payments. The tax rate is 23 percent.
1. What is the company's cost of equity?
2. What is the company's aftertax cost of debt?
3. What is the company's weight of equity?
4. What is the company's weight of debt?
5. What is the company's WACC?
Answer:
1. 9.03 %
2. 7.56 %
3. 72.45 %
4. 27.55 %
5. 8.63 %
Explanation:
Cost of equity is the return that is required by holders of Common Stocks
Cost of equity = Recent year`s dividend / Current Market Price + Expected Growth Rate
= $4.04 / $85.50 + 0.043
= 0.0903 or 9.03 %
1st bond issue
PV = $69,861,000
Pmt = ($73,000,000 × 5.30%) ÷ 2 = - $1,934,500
p/y = 2
n = 23 × 2 = 46
Fv = 0
i = ?
Cost of the 1st Bond Issue, i is : 2.1571 %
After tax cost = 2.1571 % × 77 %
= 1.66%
2nd Bond Issue
PV = $47,205,000
Pmt = ($45,000,000 × 5.90%) ÷ 2 = - $1,327,500
p/y = 2
n = 11 × 2 = 22
Fv = 0
i = ?
Cost of the 2nd Bond Issue, i is : 7,6681 %
After tax cost = 7,6681 % × 77 %
= 5.90%
Total Cost of Debt = 1.66% + 5.90%
= 7.56 %
Market Values :
Market Value of Equity = 3,600,000 shares × $85.50
= $307,800,000
Market Value of Bonds
1st Issues = $69,861,000
2nd Issue = $47,205,000
Total = $117,066,000
Weight of equity = Market Value of Equity ÷ Total Market Value
= $307,800,000 ÷ ($307,800,000 + $117,066,000)
= 72.45 %
Weight of debt = Market Value of Bonds ÷ Total Market Value
= $117,066,000 ÷ ($307,800,000 + $117,066,000)
= 27.55 %
WACC = Weighted Cost of Debt + Weighted Cost of Equity
= 27.55 % × 7.56 % + 72.45 % × 9.03 %
= 8.63 %
Webb, Inc. uses a flexible budget for manufacturing overhead based on machine hours. Variable manufacturing overhead costs per machine hour are as follows: Indirect labor $5.00 Indirect materials 2.50 Maintenance .50 Utilities .30 Fixed overhead costs per month are: Supervision $1,200 Insurance 400 Property taxes 600 Depreciation 1,800 The company believes it will normally operate in a range of 4,000 to 8,000 machine hours per month. During the month of August, 2019, the company incurs the following manufacturing overhead costs: Indirect labor $28,000 Indirect materials 16,200 Maintenance 2,800 Utilities 1,900 Supervision 1,440 Insurance 400 Property taxes 600 Depreciation 1,860 Prepare a flexible budget report, assuming that the company used 6,000 machine hours during August.
Answer:
Variable overhead costs per machine hour:
Indirect labor $5.00 Indirect materials $2.50 Maintenance $0.50 Utilities $0.30Total $8.30Fixed overhead costs:
Supervision $1,200 Insurance $400 Property taxes $600 Depreciation $1,800 Total $4,000Flexible Actual Spending
budget expenses variances
Variable costs:
Indirect labor $30,000 $28,000 $2,000 FIndirect materials $15,000 $16,200 $1,200 UMaintenance $3,000 $2,800 $200 FUtilities $1,800 $1,900 $100 UTotal $49,800 $48,900 $900 FFixed costs:
Supervision $1,200 $1,440 $240 UInsurance $400 $400 $0Property taxes $600 $600 $0Depreciation $1,800 $1,860 $60 UTotal $4,000 $4,300 $300 UTotal costs $53,800 $52,300 $600 F
The Clifford Corporation has announced a rights offer to raise $17 million for a new journal, the Journal of Financial Excess. This journal will review potential articles after the author pays a nonrefundable reviewing fee of $6,000 per page. The stock currently sells for $42 per share, and there are 2.9 million shares outstanding. a. What is the maximum possible subscription price? What is the minimum? (Leave no cells blank - be certain to enter "0" wherever required.) b. If the subscription price is set at $34 per share, how many shares must be sold? How many rights will it take to buy one share? (Do not round intermediate calculations. Round your rights needed answer to 2 decimal places, e.g., 32.16.) c. What is the ex-rights price? What is the value of a right? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) d. A shareholder with 2,000 shares before the offering has no desire (or money) to buy additional shares offered as rights. What is his portfolio value before and after the rights offer? (Do not round intermediate calculations and round your answers to nearest whole number, e.g., 32.)
Answer:
A.Maximum possible subscription price $42 per shares
Minimum price $0
B.Number of new shares $500,000
Numbers of right needed 5.8
C.Ex-rights price $40.82
Value of a right $1.18
D.Portfolio value before the right offer $84,000
Portfolio value after the right offer $84,000
Explanation:
A.
The maximum possible subscription price based on the information given will be $42 per Shares
The minimum price will be anything that is greater or higher that $0
B. Calculation for how many shares must be sold
Using this formula
Number of new shares =Journal of Financial Excess amount /Subscription price per share
Let plug in the formula
Number of new shares=$17,000,000/ $34 per share
Number of new shares=$500,000
Calculation for how many rights will it take to buy one share
Using this formula
Numbers of right needed=Shares Outstanding/Number of new Shares
Let plug in the formula
Numbers of right needed=$2,900,000/$500,000
Numbers of right needed=5.8
C. Calculation for the ex-rights price
Using this formula
Ex-rights price=(Numbers of right needed*Maximum possible subscription price +Subscription price per share)/(Numbers of right needed+ One shares)
Let plug in the formula
Ex-rights price=(5.8*$42+$34)/(5.8+1)
Ex-rights price=$277.6/6.8
Ex-rights price=$40.82
Calculation for the value of a right
Using this formula
Value of a right =maximum possible subscription price-Ex-rights price
Let plug in the formula
Value of a right=$42-$40.82
Value of a right=$1.18
D. Calculation for What is his portfolio value before the right offer
Using this formula
Portfolio value before the right offer= Shareholders Shares *Maximum possible subscription price
Let plug in the formula
Portfolio value before the right offer=2,000*42
Portfolio value before the right offer=$84,000
Calculation for What is his portfolio value after the right offer
Using this formula
Portfolio value after the right offer=(Shareholders Shares*Ex-rights price) +(Shareholders Shares*Value of a right)
Let plug in the formula
Portfolio value after the right offer=(2,000*40.82)+(2,000*1.18)
Portfolio value after the right offer=$81,640+$2,360
Portfolio value after the right offer=$84,000
Best Foods, Inc. has an unlevered cost of capital of 10 percent. The company generates EBIT of $4,250 per year and has a tax rate of 35 percent. If the firm adds $10,000 of debt to its capital structure, what is the value of the levered firm?
Answer:
The value of the levered firm $31,125
Explanation:
Value of Firm is the value of present value of expected future earning. It is calculated by dividing the earning after tax by the cost of capital while considering that the business will operate for the foreseeable future time.
EBIT $4,250.00
Less
Interest $0.00
EBT $4,250.00
Tax 35% x 4250 $1,487.50
EAT $2,762.50
Cost of Capial 10%
Value of firm = EAT / Cost of Capital = $2,762.5 / 10% = $27,625
Debt after tax = $10,000 x ( 1 - 0.35 ) = $6,500
Value of Equity = Value of firm - Debt after tax = $27,625 - $6,500 = $21,125
Value of debt = $10,000
Value of levered Firm = $21,125 + $10,000 = $31,125
"Rihanna Company is considering purchasing new equipment for $379,200. It is expected that the equipment will produce net annual cash flows of $48,000 over its 10-year useful life. Annual depreciation will be $37,920. Compute the cash payback period. (Round answer to 1 decimal place, e.g. 10.5.)"
Answer:
Cash payback period is 7.9 years
Explanation:
Payback period = Initial investment / Cash inflow per period
=$379,200 / $48,000
=7.9 years
Thus, the cash payback period is 7.9 years.
Note: It is assumed that the net annual cash flows are after considering the annual depreciation.
What is the relationship between total surplus and economic efficiency?
Answer: When total surplus gets maximized, then economy meet economic efficiency.
Explanation:
Economic efficiency is described as a thinking that there is one possible way to make situation better by imposing a cost on another.
Total surplus is described as the sum of producer and consumer surplus.
It gets maximized in a perfect competition (hit free-market equilibrium).
i.e. It gets maximized when both consumer and producer surplus is maximum, and then the economy meet economic efficiency.
George Bailey purchased equipment from M. Potter for $450,000, paying $35,000 cash as a down payment and financing the remainder. The correct journal entry to record this event is:
Answer:
Equipment $450,000 (debit)
Cash $35,000 (credit)
Suppliers Loan $415,000 (credit)
Explanation:
George Bailey must recognize the Asset of Equipment, de-recognize the Assets of Cash and recognize the Suppliers Loan as above.
Sue Helms Appliances wants to establish an assembly line to manufacture its new product, the Micro Popcorn Popper. The goal is to produce five poppers per hour. The tasks, task times, and immediate predecessors for producing one Micro Popcorn Popper are as follows:
Task Performance time(minutes) Predecessor
A 8 -
B 10 A
C 8 A,B
D 10 B,C
E 8 C
F 4 D,E
a. The theoretical minimum number of workstations is:___________
b. The assignment of tasks to workstations should be:________
Were you able to assign all the activities to workstations equivalent to the theoretical minimum workstation ?
c. The efficiency of the assembly line is:________
Answer:
Please see explanation below.
Explanation:
a. Cycle time = Production time available per hour / Units required per hour
= 60 / 5
= 12minutes
Minimum number of workstations = Sum of the task time / Cycle time
Sum of task time
= 8 + 10 + 8 + 10 + 8 + 4
= 48
The theoretical minimum number of work stations is
= 48 / 12
= 4
b. In order to assign the tasks to the work station, events that precede the task must be considered together with the time taken to complete each task.
°Task A This task is assigned to work station 1 and no task would further be assigned to work station 1, otherwise it will exceed the cycle time.
°Task B. This next task will be assigned to work station 2, no additional task will be assigned to station 2.
Task C is assigned to workstation 3, hence can no longer accept any other assigned task.
°Task D is the next task and will be assigned to work station 4, and we cannot assign any more task to work station 4.
°Task E and F will not be assigned as there are no more available stations.
Task Time Workstation
A. 8 1
B. 10 2
C. 8 3
D. 10 4
E. 8 -
F. 4 -
Please note that due to the theoretical minimum number of work station, which is 4, it will not be possible to assign task to all the workstations hence task E and F remains unassigned.
C. Efficiency of the assembly line
Efficiency ;
= Sum of task times / Actual number of work stations × cycle time
Although the actual number of required workstation is 5 but we cannot assign task E and F due to the theoretical minimum number of workstation. Therefore, additional work station will be required and there are 5 work stations in total.
= 48 ÷ (5 × 12) × 100
= 80%
The theoretical minimum should be = 4
The efficiency of the assembly line should be 80 percent
The production time = 60
The units that are required per hour = 5
[tex]cycle time = \frac{minutes in one hour}{units needed in a day} \\\\cycle time=\frac{60}{5}[/tex]
= 12
The workstation = 8+10+8+10+8+4
= 48
[tex]The minimum number = \frac{48}{12} \\\\= 4[/tex]
The efficiency of the assembly line
[tex]\frac{48}{5*60} \\\\= 0.8\\\\0.8*100 = \\\\80percent[/tex]
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Slack Inc. borrowed $400,000 on April 1. The note requires interest at 12% and principal to be paid in one year. How much interest is recognized for the period from April 1 to December 31? a. $0. b. $48,000. c. $32,000. d. $36,000
Answer:
D.$36,000
Explanation:
Calculation for How much interest is recognized for the period from April 1 to December 31
First step is to find the 12% of the amount that was borrowed which is $400,000
$400,000×12%
=$48,000
Now let calculate for the amount of interest that is recognized from April 1 to December 31
Interest =$48,000×3/12
Interest =$12,000
Hence,
Interest =$48,000-$12,000
Interest=$36,000
Therefore the amount of interest that is recognized from April 1 to December 31 will be $36,000
5. Suppose that a firm is in an industry which has a very rapid rate of growth (in sales and output), and is characterized by technological change and innovation. Firms attempt to maximize profits causing new firms to enter the industry attracted by profit potential. The result is that profits are competed away, leading to even greater innovation and change. Is there a limit to this continuous change
Answer:
If we use high tech industry as our subject here, I would say that there is no limit to continuous change. We can look at he last 45 years and ever since Steve Jobs developed the Apple I, PCs have continuously evolved into different products and their rate of technological evolution has currently increased. Any modern smartphone is hundreds of times more powerful than the first PCs, they are even more powerful than huge computers that existed back then. Currently high tech companies are trying to develop AI, and who knows what after. The only problem is that project lives tend to be very short, but that is part of the game. The profit margins of the firms that are successful are huge, just look at how Apple became the first company to be worth more than 2 trillions.
The three conditions that characterize difficult managerial decisions concerning resources, capabilities, and core competencies are
Answer:
uncertainty, complexity, and intra-organizational conflicts.
Explanation:
Managerial decisions define that any decision that can be taken for the benefit of the organization also these types of decision set targets for the income of the company moreover it decides what type of product should be sell and the hiring of employees who should be into the organization or who should not be in the organization etc.
According to the given situation, Management decisions on capital, expertise, and core competencies are disputes of uncertainty, complexity, and intra-organizational existence.
If you were given a personality test as part of an employment application process, would you answer the questions honestly or would you attempt to answer the questions based upon your image of "correct" way to answer? what implications does your response has for the validity of personality testing?
Explanation:
Personality tests are sold on the promise that they are valid (they measure what they say they will measure) and reliable (they produce consistent results). “Many studies over the years have proven the validity of the MBTI instrument,” says the Myers & Briggs FoundationPsychologists seek to measure personality through a number of methods, the most common of which are objective tests and projective measures.Objective tests, such as self-report measures, rely on an individual's personal responses and are relatively free of rater bias.Hope it will help you.I would answer some questions honestly but if there are some questions which i can't tell the truth i will tell some lies. because if u really like this job and don't want to loose it, it's ok to give wrong answers just for once! That's my opinion. :p. But be careful u might get in trouble if they find out ur lying!
The HIJ bond has a current price of $800, a maturity value of $1,000, and matures in 5 years. If interest is paid semi-annually and the bond is priced to yield 8%, what is the bond's annual coupon rate
Answer:
Explanation:
The coupon rate is defined as the interest rate paid on a bond by its issuer for the term of the security.
Hence,
Par Value = $800
Face Value = $1,000
N = 5 x 2 = 10
Since the interest is semi annual
i = 8% / 2 = 4%
CF = $15.34
Coupon = $30.68 per year or 3.068%
g An increase in taxes when the economy is above full employment ______ aggregate demand and real GDP, and the price level ______.
Answer:
C. decreases; falls
Explanation:
As we know that
The rise in taxes results in low disposable income for individuals that lowered the spending of the consumer also the consumer spending is an element of the aggregate demand so ultimately it declines that result the curve to shift leftward or downward
Due to this, the real GDP also falls, and the price level too
Hence, the correct option is c.
Akers Company sold bonds on July 1, 2017, with a face value of $100,000. These bonds are due in 10 years. The stated annual interest rate is 6% per year, payable semiannually on June 30 and December 31. These bonds were sold to yield 8%. By July 1, 2018, the market yield on these bonds had risen to 10%.
Required:
What was the bonds' market price on July 1, 2018?
Answer:
Price of bond= $75,075.58
Explanation:
The value of the bond is the present value(PV) of the future cash receipts expected from the bond. The value is equal to present values of interest payment plus the redemption value (RV).
Value of Bond = PV of interest + PV of RV
The value of the bond for Akers Company can be worked out as follows:
Step 1
PV of interest payments
Semi annul interest payment
= 6% × 100,000 × 1/2 = 3000
Semi-annual yield = 10%/2 = 5% per six months
Total period to maturity (in months)
= (2 × 10) = 20 periods
PV of interest =
3000 × (1- (1+0.05)^( -20)/) 0.05 = 37,386.63
Step 2
PV of Redemption Value
= 100,000 × (1.05)^(-20) = 37,688.95
Price of bond
Price of bond = 37,386.63 + 37,688.95 = 75,075.58
Price of bond= $75,075.58
Sunny Day Manufacturing Company is considering investing in a one-year project that requires an initial investment of $450,000. To do so, it will have to issue new common stock and will incur a flotation cost of 2.00%. At the end of the year, the project is expected to produce a cash inflow of $550,000. The rate of return that Sunny Day expects to earn on its project (net of its flotation costs) is:____________
White Lion Homebuilders has a current stock price of $22.35 per share, and is expected to pay a per-share dividend of $2.03 at the end of next year. The company's earnings' and dividends' growth rate are expected to grow at the
constant rate of 8.70% into the foreseeable future. If White Lion expects to incur flotation costs of 5.00% of the value of its newly-raised equity funds, then the flotation-adjusted (net) cost of its new common stock (rounded to two decimal places) should be:_________
Sunny Day Manufacturing Company Co.'s addition to earnings for this year is expected to be $420,000. Its target capital structure consists of 50% debt, 5% preferred, and 45% equity. Determine Sunny Day Manufacturing Company's retained earnings breakpoint: ___________
a. $840,000
b. $980,000
c. $933,333
d. $886,666
Answer:
A lot to read and check but I will get back to you soon
Andy Pearson ran PepsiCo Inc. for nearly 15 years, driving revenues from $1 billion to $8 billion. In 1980, Fortune named him one of the 10 toughest bosses in the United States. Pearson was singled out for the relentless demands that he put on his people. As one employee put it, Pearson's talents were often "brutally abrasive." Every year, without hesitation, he fired the least productive 10% to 20% of his workforce. Pearson used a(n) _____ leadership style.
Answer:
authoritarian leadership style
Explanation:
In simple words, An authoritarian form of leadership relates to the leadership style where a leader determines strategies and practices, defines what objectives are to be accomplished, and manages and monitors all operations without substantive involvement by subordinates. An authoritative style of management can be highly successful in some cases, but also has negative consequences on community participants or staff.
To arrive at an accurate balance on a bank reconciliation statement, a credit memorandum from the bank for the collection of a note and interest should be
Answer:
Must be added to the book balance.
Explanation:
The correct treatment would be to add this value to book balance because the bank has increased our bank balance by the note and interest amount. This must be accounted for as increase in the book balance because we have borrowed money and also that yearly interest income was also added to our bank checking account.
Hence it must be added to cash book balance in order to reconcile with the bank balance.
Cost recovery. Richardses' Tree Farm, Inc. purchased a new aerial tree trimmer for $. It is classified in the property class category of a single-purpose agricultural and horticultural structure. Then the company sold the tree trimmer after four years of service. If a seven-year life and MACRS, LOADING..., was used for the depreciation schedule, what is the after-tax cash flow from the sale of the trimmer (use a % tax rate) if a. the sales price was $? b. the sales price was $? c. the sales price was $? a. If the sales price is $, what is the after-tax cash flow?
Answer:
after tax cash flow = $29,512.32
Explanation:
the numbers are missing in this question:
purchase cost = $82,000
tax rate = 40%
selling price at end of year 4 = $32,000
MACRS 7 year depreciation schedule:
year % depreciation expense carrying value
1 14.29% $11,717.80 $70,282.20
2 24.29% $19,917.80 $50,364.40
3 17.49% $14,341.80 $36,022.60
4 12.49% $10,241.80 $25,780.80
after tax cash flow = $32,000 - [($32,000 - $25,780.80) x 40%] = $32,000 - $2,487.68 = $29,512.32
A sole proprietor owned an office building with a cost of $300,000 and accumulated depreciation of $40,000, using modified accelerated cost recovery system (MACRS) straight-line depreciation. In the current year, she sold the building for $320,000. What is the unrecaptured Section 1250 gain from this sale, if any
Answer:
The Correct Answer:
$40,000
Explanation:
IRC Section 1250 requires that excess depreciation (actual depreciation in excess of straight-line depreciation) be recaptured as ordinary income. Since the property has sold for more than the adjusted basis ($300,000 − $40,000 = $260,000 adjusted basis), the initial gains are recaptured based on the original purchase price of $300,000.
This makes the first $40,000 of the profit subject to the unrecaptured Section 1250 gain while the remaining $20,000 is considered regular long-term capital gains.
The Securities and Exchange Commission requires companies listing on the New York Stock Exchange and the Nasdaq Stock Market to have codes of ethics. A code of ethics is
Answer:
A Code of Ethics are a set of guidelines that helps the member in distinguishing right and wrong and always following the guidelines that protects the interest of profession and stakeholders.
Explanation:
Basically these Ethical codes are set of guidelines that helps the entities and professionals to acknowledge what is expected from them and what are their responsibilities. Usually every reputable profession and organizations adopt code of ethics to encourage and enforce ethical practices in decision making process.
Answer:
Answer:
A Code of Ethics are a set of guidelines that helps the member in distinguishing right and wrong and always following the guidelines that protects the interest of profession and stakeholders.
Explanation:
Basically these Ethical codes are set of guidelines that helps the entities and professionals to acknowledge what is expected from them and what are their responsibilities. Usually every reputable profession and organizations adopt code of ethics to encourage and enforce ethical practices in decision making process.
Explanation:
Vertical Analysis of Income Statement Revenue and expense data for Innovation Quarter Inc. for two recent years are as follows: Current Year Previous Year Sales $4,000,000 $3,600,000 Cost of goods sold 2,280,000 1,872,000 Selling expenses 600,000 648,000 Administrative expenses 520,000 360,000 Income tax expense 240,000 216,000 a. Prepare an income statement in comparative form, stating each item for both years as a percent of sales. Round to the nearest whole percentage. Innovation Quarter Inc. Comparative Income Statement For the Years Ended December 31 Current year Amount Current year Percent Previous year Amount Previous year Percent Sales $4,000,000 % $3,600,000 % Cost of goods sold (2,280,000) % (1,872,000) % $ % $ % Selling expenses $(600,000) % $(648,000) % Administrative expenses (520,000) % (360,000) % $ % $ % $ % $ % Income tax expense (240,000) % (216,000) % $ % $ % b. The vertical analysis indicates that the cost of goods sold as a percent of sales by 5 percentage points, while selling expenses by 3 percentage points, and administrative expenses by 3 percentage points. Thus, net income as a percent of sales by 5 percentage points.
Answer:
Innovation Quarter Inc.
a) Comparative Vertical Analysis of Income Statement
Current Year % Previous Year %
Sales $4,000,000 100% $3,600,000 100%
Cost of goods sold 2,280,000 57% 1,872,000 52%
Gross profit $1,720,000 43% $1,728,000 48%
Selling expenses 600,000 15% 648,000 18%
Administrative expenses 520,000 13% 360,000 10%
Income tax expense 240,000 6% 216,000 6%
After Tax Income $360,000 9% $504,000 14%
b. The vertical analysis indicates that the cost of goods sold as a percent of sales increased by 5 percentage points, while selling expenses decreased by 3 percentage points, and administrative expenses increased by 3 percentage points. Thus, net income as a percent of sales decreased by 5 percentage points.
Explanation:
Data and Calculations:
Vertical Analysis of Income Statement Revenue and expense data for Innovation Quarter Inc. for two recent years are as follows:
Current Year Previous Year
Sales $4,000,000 $3,600,000
Cost of goods sold 2,280,000 1,872,000
Selling expenses 600,000 648,000
Administrative expenses 520,000 360,000
Income tax expense 240,000 216,000
Innovation Quarter Inc. can use this vertical analysis to express the relationship between each line item and the sales revenue. The vertical analysis helps in ascertaining the percentage increases in each variable. With the analysis, the management of Innovation Quarter Inc. can undertake further investigations to learn the causes of the different performances and learn ways to control them.
On January 1, Parson Freight Company issues 9.0%, 10-year bonds with a par value of $3,400,000. The bonds pay interest semiannually. The market rate of interest is 10.0% and the bond selling price was $3,168,967. The bond issuance should be recorded as:
Answer:
January 1
Cash $3168967 Dr
Discount on Bonds Payable $231033
Bonds Payable $3400000 Cr
Explanation:
The issuance of bond on January 1 is at a discount as the coupon rate paid by the bond is less than the market interest rate. In such case the bond is issued at a lower value than its par/face value. The discount on bonds payable is the difference between the face value and the cash received on issuance.
The entry to record the issues include a debit to cash account as cash is received, a debit to the discount on bonds payable account for the amount of discount and a credit to bonds payable account as liability is created as a result of the issuance of the bonds.
Discount = 3400000 - 3168967 = 231033
The following information pertains to J Company's outstanding stock for 2021:
Common stock, $1 par
Shares outstanding, 1/1/2021 10,000
2 for 1 stock split, 4/1/2021 10,000
Shares issued, 7/1/2021 5,000
Preferred stock, $100 par, 7% cumulative
Shares outstanding, 1/1/2021 4,000
What is the number of shares J should use to calculate 2018 basic earnings per share?
a. 20,000.
b. 22,500.
c. 25,000 .
d. 27,000.
Answer: b. 22,500
Explanation:
J should use the total number of outstanding common stock at end of year to calculate 2018 basic earnings.
As a result of the Stock-split, the shares are split into 2 for 1.
There were 10,000 shares split so;
= 10,000 * 2
= 20,000
On the 1st of July, 5,000 shares were issued. This means that up till December 2021, the stock was outstanding for 6 months.
This will reflected by;
= 5,000 * 6/12
= 2,500 shares
Total shares = 20,000 + 2,500
= 22,500 shares
Product V72 sells for $20 per unit as is, but if enhanced it can be sold for $25 per unit. The enhancement process will cost $52,000 for 12,000 units. If the 12,000 units of Product V72 are sold as is without further processing, the company:
Answer:
It will incur an Opportunity cost of $8,000.
Explanation:
It will incur the opportunity cost of $8000 because the additional unit produces by the company then the additional revenue that is generated will be equal to the amount (25 - 20) x 12,000 = 60,000. Since the additional cost, that incurs for the production of 12000 units is 52000. Therefore the profit earned is $8000.
So if the company does not produce it then it will lose the profit of $8000.
Predatory pricing is considered an anti-competitive practice, and is considered illegal under competition laws. Which of the following best describes predatory pricing?
A. Predatory pricing requires one company to aquire the assets of another.
B. One business chooses to put another out of business by pricing its product below the level another competing business must be at to make a profit.
C. Predatory pricing occurs when a firm colludes with one or more firms to fix prices or output.
D. Predatory pricing is when a business sends someone out to change the price of another company's product so it is higher than its own.
Answer:
B
Explanation:
Predatory pricing is when a company sets the price of its goods or services too low with the aim of eliminating the competition. Predatory pricing is illegal and it violates antitrust law.
Predatory pricing occurs when a firm colludes with one or more firms to fix prices or output. This is an example of collusion and they usually occur in an oligopoly
Jay owns Gatsby Islands and wants to convey it to his good friends, Nick and Daisy. Nick lives next door to Jay while Daisy lives across the waters. He conveys an interest in Gatsby Islands "to Nick as tenants by the entirety." Two months later, he makes a corresponding conveyance to Daisy. Jay created the following:_______
a. tenancy in common
b. severalty community property
c. joint tenancy with rights of survivorship
d. tenancy by entirety
Answer:
Correct Answer:
c. joint tenancy with rights of survivorship
Explanation:
The property Jay owes on Gatsby Island belongs to him but he wishes to share th ownership with his 2 good friends. His conveyance of the message to both which reads "tenants by the entirety" shows that he and his friends has equal ownership and rights to the Gatsby Island property.
In the event that either him or one of the friends dies, the full title of the property automatically passes to the surviving person.
Henry Crouch's law office has traditionally ordered ink refills 50 units at a time. The firm estimates that carrying cost is 35% of the $12 unit cost and that annual demand is about 235 units per year. The assumptions of the basic EOQ model are thought to apply. For what value of ordering cost would its action be optimal?
Answer:
ordering costs = $22.34
Explanation:
economic order quantity (EOQ) = √(2SD / H)
D = annual demand = 235H = holding cost = 35% x $12 = $4.20S = cost per order = ?EOQ = 5050 = √[(2 x S x 235) / $4.20]
2,500 = (2 x S x 235) / $4.20
$10,500 = 2 x S x 235
S = $10,500 / (2 x 235) = $10,500 / 470 = $22.34
Joseph contributed $25,000 in cash and equipment with a tax basis of $6,400 and a fair market value of $12,600 to Berry Hill Partnership in exchange for a partnership interest.
a. What is Joseph’s tax basis in his partnership interest?
b. What is Berry Hill’s basis in the equipment?
Answer:
(A) $31,400
(B) $6,400
Explanation:
Joseph contributed $25,000 in cash and equipment
The tax basis is $6,400
The fair market value paid to Bill hill partnership is $12,600
(A) Joseph tax basis in his partnership interest can be calculated as follows
= contribution+tax basis
= $25,000+$6,400
= $31,400
(B) Since Joseph contributed a tax basis of $6,400 to Bill hill partnership in exchange for a partnership interest then, Bill hill's basis in the equipment is $6,400
MicroTech Corporation maintains a capital structure of 40 percent debt and 60 percent common equity. To finance its capital budget for next year, the firm will sell 11% coupon bonds at par value (assume no flotation costs). The firm will finance the rest of its capital expenditures with retained earnings. MicroTech expects next year's dividend to be $1.30 per share. Dividends are expected to grow at 7% per year for the foreseeable future. The current market value of MicroTech's common stock is $30 per share. If the firm has a corporate tax rate of 21%, what is its weighted cost of capital for next year?
Answer:
weighted cost of capital for next year is 10.27 %.
Explanation:
Weighted cost of capital = Ke × (E/V) + Kd × (D/V)
Ke = Cost of Equity
= Dividend Yield + Expected growth rate
= $1.30 / $30.00 + 0.07
= 0.11333 or 11.33 %
Kd = Cost of Debt
= Interest × (1 - tax rate)
= 11% × ( 1 - 0.21)
= 8.69 %
Weighted cost of capital = 11.33 % × 60% + 8.69 % × 40%
= 10.27 %
