The Professional Air Traffic Controllers Organization (PATCO) strike occurred in 1981 when thousands of air traffic controllers walked off the job, defying federal law which prohibits strikes by government unions.
Ethical Considerations:
Regarding the ethical acceptability of the air traffic controllers' strike, opinions may vary. Some arguments in favor of the PATCO strike highlight concerns about working conditions, safety, and fair treatment of employees. Supporters may argue that the strike was a justified response to address these issues and protect the well-being of the controllers. On the other hand, critics may argue that the strike was unethical because the controllers held essential positions responsible for public safety, and their actions put lives at risk.
As for President Ronald Reagan, who fired the striking controllers, opinions also differ. Some argue that he took a strong stance against the illegal strike to ensure the integrity of the air traffic control system and maintain public safety. Others may criticize Reagan's decision, arguing that he should have pursued alternative means of resolving the labor dispute and addressing the concerns raised by the controllers
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The complete question is: Research and cite a PATCO strike article and briefly summarize.
Do you believe it was ethically acceptable for the air traffic controllers to strike?
Do you believe it was ethically acceptable for President Reagan to fire the air traffic controllers? (These questions do not ask whether these actions were legal or illegal. The question is whether the actions were ethical.)
In the EOQ model,
we assume that "When an order is placed to the supplier, the units are delivered instantly." Now, let us suppose that the delivery time is five weeks. Then, what is the new ordering policy?
The new ordering policy is that the company should order the EOQ every five weeks to meet the inventory demand, considering the lead time of five weeks.
In the EOQ (Economic Order Quantity) model, the assumption is that when an order is placed with the supplier, the units are delivered instantly. If the delivery time is five weeks, then the new ordering policy will be as explained below.
The EOQ is a widely used inventory control method in manufacturing companies. It’s also called the Wilson formula. The EOQ model helps in determining the optimal order quantity for a business by taking into account the carrying costs, ordering costs, and holding costs. One of the assumptions of the EOQ model is that the lead time is zero. But if there is a lead time, then the EOQ model needs to be modified accordingly. The formula used for the modified EOQ model is:
EOQ = √(2DS/ H) * (1 + L/D), where
EOQ = Economic Order Quantity
D = Annual demand
S = Ordering cost
H = Carrying cost
L = Lead time
D/365 = Daily demandL/D = Proportion of lead time to the demand cycle.
The new ordering policy is that the company needs to order the Economic Order Quantity (EOQ) every five weeks to meet the inventory demand, taking into account the five weeks lead time.
The modified EOQ formula should be used to determine the EOQ, as it takes into account the lead time.
Hence, the formula used to calculate the new ordering policy isEOQ = √(2DS/ H) * (1 + 5/365)
In conclusion, the new ordering policy is that the company should order the EOQ every five weeks to meet the inventory demand, considering the lead time of five weeks. The company should use the modified EOQ formula to calculate the EOQ.
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Discuss briefly in about 200 words about FMCG(Fast moving consumer goods) and it's customers?
Fast-moving consumer goods (FMCG) refer to products that are consumed on a daily basis and are typically sold at a relatively low price point. FMCG products include food and beverages, personal care items, cleaning products, and other household items. Here are some key points about FMCG customers:
1. Wide Consumer Base: FMCG products are consumed by people from all walks of life, irrespective of age, gender, income level, or location. They are essential items that cater to the basic needs and preferences of a large consumer base.
2. Regular and Frequent Purchases: FMCG products are characterized by high frequency of purchase. Customers often buy these products regularly as part of their routine shopping trips. For example, groceries, toiletries, and snacks are commonly purchased on a weekly or monthly basis.
3. Price Sensitivity: FMCG customers are typically price-sensitive due to the low-cost nature of these products. They often compare prices, seek discounts, and opt for value-for-money options. Price promotions and deals play a significant role in influencing their purchasing decisions.
4. Brand Loyalty: While price is important, brand loyalty also plays a role in FMCG purchases. Customers often develop preferences for specific brands based on factors such as quality, taste, packaging, and trust. Established brands invest in marketing and advertising to build brand loyalty among consumers.
5. Convenience and Accessibility: FMCG customers value convenience and easy access to products. They prefer stores that offer a wide range of FMCG products and are located nearby. Online shopping and e-commerce platforms have also gained popularity, offering convenience and doorstep delivery.
In conclusion, FMCG products cater to a diverse customer base with varied preferences and purchasing behaviors. Understanding the needs, preferences, and behaviors of FMCG customers is crucial for companies in this sector to effectively market and deliver products that meet consumer expectations.
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Fast-moving consumer goods (FMCG) refer to products that are consumed on a daily basis and are typically sold at a relatively low price point. FMCG products include food and beverages, personal care items, cleaning products, and other household items. Here are some key points about FMCG customers:
1. Wide Consumer Base: FMCG products are consumed by people from all walks of life, irrespective of age, gender, income level, or location. They are essential items that cater to the basic needs and preferences of a large consumer base.
2. Regular and Frequent Purchases: FMCG products are characterized by high frequency of purchase. Customers often buy these products regularly as part of their routine shopping trips. For example, groceries, toiletries, and snacks are commonly purchased on a weekly or monthly basis.
3. Price Sensitivity: FMCG customers are typically price-sensitive due to the low-cost nature of these products. They often compare prices, seek discounts, and opt for value-for-money options. Price promotions and deals play a significant role in influencing their purchasing decisions.
4. Brand Loyalty: While price is important, brand loyalty also plays a role in FMCG purchases. Customers often develop preferences for specific brands based on factors such as quality, taste, packaging, and trust. Established brands invest in marketing and advertising to build brand loyalty among consumers.
5. Convenience and Accessibility: FMCG customers value convenience and easy access to products. They prefer stores that offer a wide range of FMCG products and are located nearby. Online shopping and e-commerce platforms have also gained popularity, offering convenience and doorstep delivery.
In conclusion, FMCG products cater to a diverse customer base with varied preferences and purchasing behaviors. Understanding the needs, preferences, and behaviors of FMCG customers is crucial for companies in this sector to effectively market and deliver products that meet consumer expectations.
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All of the following are factors that influence consumers' price awareness of their purchased items EXCEPT:
a. Price level of the item purchased
b. Price variation over time
c. Price variation between brands
d. Opportunity to learn prices
e. All of the above are factors that influence consumers' price awareness of their purchased items.
All of these factors contribute to consumers' overall price awareness, making e the correct answer.
e. all of the above are factors that influence consumers' price awareness of their purchased items.
all the s listed in a, b, c, and d are factors that can influence consumers' price awareness of their purchased items. the price level of the item purchase is an obvious factor as it directly affects the perceived value and importance of being aware of the price. price variation over time and between brands can also impact consumers' price awareness, as it allows them to compare prices and make informed purchasing decisions. the opportunity to learn prices, such as through advertising, promotions, or online research, is another important factor that affects consumers' price awareness.
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Filer Manufacturing has 7,194,812 shares of common stock outstanding. The current share price is $56.81, and the book value per share is $3.13. Filer Manufacturing also has two bond issues outstanding. The first bond issue has a face value of $61,950,970, has a 0.05 coupon, matures in 10 years and sells for 83 percent of par. The second issue has a face value of $72,338,506, has a 0.06 coupon, matures in 20 years, and sells for 92 percent of par.
The most recent dividend was $2.46 and the dividend growth rate is 0.05. 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 0.35.
What is Filer's aftertax cost of debt? Enter the answer with 4 decimals (e.g. 0.2345)
The calculation of Filer Manufacturing's after-tax cost of debt requires additional data such as the market values of the bond issues.
To calculate Filer Manufacturing's after-tax cost of debt, we need to determine the cost of each bond issue and then calculate the weighted average cost of debt.
For the first bond issue:
Face value = $61,950,970
Coupon rate = 0.05
Selling price = 83% of par = 0.83 * Face value
For the second bond issue:
Face value = $72,338,506
Coupon rate = 0.06
Selling price = 92% of par = 0.92 * Face value
Next, we calculate the cost of debt for each bond issue, taking into account the tax rate of 0.35:
Cost of debt = Coupon rate * (1 - Tax rate)
The weighted average cost of debt = (Market value of Bond 1 / Total market value of bonds) * Cost of debt for Bond 1 + (Market value of Bond 2 / Total market value of bonds) * Cost of debt for Bond 2
Calculating these values will give us Filer Manufacturing's after-tax cost of debt.
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On January 22, Jefferson County Rocks inc., a marble contractor, issued for cash 45,000 shares of $10 par common stock at $34, and on February 27 , it issued for cash 110,000 shares of preferred stock, $8 par at $10. a. Journalize the entries for January 22 and February 27. If an amount box does not require an entry, leave it blank. Jan 22: Cash ______, _______
Common stock ______,_______
Paid-in-capital in excess of par-common stock ____,_____
Feb 27: Cash ______,______
Preferred stock ______,______
Paid-in-capital in excess of par-common stock ____,_____
b. What is the total amount invested (total paid-in capital) by all stockholders as of February 27? $ ______
The total amount invested by all stockholders in the form of preferred stock as of February 27 is $2,630,000.
a. Journal entries for January 22 and February 27 are as follows:
Jan 22:
Cash Dr. $1,530,000 (45,000 shares * $34 per share)
Common stock Cr. $450,000 (45,000 shares * $10 par value per share)
Paid-in-capital in excess of par-common stock Cr. $1,080,000 ([$34 - $10] * 45,000 shares)
Feb 27:
Cash Dr. $1,100,000 (110,000 shares * $10 per share)
Preferred stock Cr. $880,000 (110,000 shares * $8 par value per share)
Paid-in-capital in excess of par-preferred stock Cr. $220,000 ([$10 - $8] * 110,000 shares)
b. To calculate the total amount invested (total paid-in capital) by all stockholders as of February 27, we need to sum up the amounts in the common stock and paid-in-capital accounts for both common and preferred stock.
Total paid-in capital = Common stock + Preferred stock + Paid-in-capital in excess of par-common stock + Paid-in-capital in excess of par-preferred stock
Substituting the given values, the total paid-in capital is $450,000 + $880,000 + $1,080,000 + $220,000 = $2,630,000.
Therefore, the total amount invested by all stockholders as of February 27 is $2,630,000.
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Pharoah Corporation's balance sheet at December 31,2021 , is presented below. During 2022, the following transactions occurred, Pharoah uses a perpetual inventory system. 1. Pharoah paid $2,750 interest on the bonds on January 1,2022. 2. Pharoah purchased $240,100 of inventory on account. 3. Pharoah sold for $451,300 cash inventory which cost $247,700. Pharoah also collected $27,078 sales taxes. 4. Pharoah paid $227,800 on accounts payable. 5. The prepaid insurance ($6,000) expired on July 31. 6. On August 1. Pharoah paid \$12,000 for insurance coverage from August 1, 2022, through July 31.2023. 6. On August 1. Pharoah paid $12,000 for insurance coverage from August 1, 2022, through July 31,2023. 7. Pharoah paid $26,100 sales taxes to the state. 8. Paid other operating expenses, $93,600. 9. Redeemed the bonds on December 31,2022 , by paying $52,800 plus $2,750 interest. 10. Issued $85,800 of 8% bonds on December 31,2022 , at 103 . The bonds pay interest every June 30 and December 31 . Adjustment data: 1. Recorded the insurance expired from item 6. 2. The equipment was acquired on December 31,2021 , and will be depreciated on a straight-line basis over 5 years with a $2,800 salvage value. (a) Prepare journal entries for the transactions listed above. (Credit account titles are automatically indented when the 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. If no entry is required, select "No entry" for the account titles and enter O for the amounts.)
The below journal entries capture the transactions and adjustments for Pharoah Corporation during the year 2022. They reflect the financial activities and events that occurred, ensuring accurate recording of the company's financial position and performance.
Here are the journal entries for the transactions listed above:
On January 1, 2022, Pharoah paid the bonds' interest of $2,750.
Interest Expense 2,750
Cash 2,750
Pharoah purchased $240,100 of inventory on account.
Inventory 240,100
Accounts Payable 240,100
Pharoah sold inventory for $451,300 cash, which cost $247,700. Pharoah also collected $27,078 in sales taxes.
Cash 451,300
Sales Revenue 451,300
Cost of Goods Sold 247,700
Inventory 247,700
Cash 27,078
Sales Taxes Payable 27,078
Pharoah paid $227,800 on accounts payable.
Accounts Payable 227,800
Cash 227,800
The prepaid insurance ($6,000) expired on July 31.
Insurance Expense 6,000
Prepaid Insurance 6,000
For insurance coverage from August 1, 2022, through July 31, 2023, Pharoah paid $12,000 on August 1.
Prepaid Insurance 12,000
Cash 12,000
Pharoah gave the state $26,100 in sales taxes.
Sales Taxes Payable 26,100
Cash 26,100
Paid other operating expenses, $93,600.
Operating Expenses 93,600
Cash 93,600
On December 31, 2022, redeemed the bonds for $52,800 + $2,750 in interest.
Bonds Payable 52,800
Interest Expense 2,750
Cash 55,550
8% bonds worth $85,800 were issued on December 31, 2022, at 103. Interest on the bonds is payable every June 30 and December 31.
Cash 88,074
Bonds Payable 85,800
Premium on Bonds Payable 2,274
Adjustment data:
Recorded the insurance expired from item 6.
Insurance Expense 2,000
Prepaid Insurance 2,000
Since the equipment was bought on December 31, 2021, it will depreciate over a period of five years at a straight-line rate with a salvage value of $2,800.
Depreciation Expense 6,480
Accumulated Depreciation 6,480
These journal entries capture the transactions and adjustments for Pharoah Corporation during the year 2022.
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Allentown Services Inc. is preparing adjusting entries for the year ending December 31, 2019. The following data are available: a. Interest is owed at December 31, 2019, on a 6-month, 8% note. Allentown borrowed $120,000 from NBD on September 1, 2019. b. Allentown provides daily building maintenance services to Mack Trucks for a quarterly fee of $2,700 payable on the fifteenth of the month following the end of each quarter. -No entries have been made for the services provided to Mack Trucks during the quarter ended December 31, and the related bill will not be sent until January 15, 2020. c. At the beginning of 2019, the cost of office supplies on hand was $1,220. During 2019, office supplies with a total cost of $6,480 were purchased from Office Depot and debited to office supplies inventory. On December 31, 2019, Allentown determined the cost of office supplies on hand to be $970. d. On September 23, 2019, Allentown received a $7,650 payment from Bethlehem Steel for 9 months of maintenance services beginning on October 1, 2019. The entire amount was credited to unearned service revenue when received. Required: Prepare the appropriate adjusting entries at December 31, 2019.
The appropriate adjusting entries at December 31, 2019, for Allentown Services Inc. are as follows:
a. Interest Expense 1,600
Interest Payable 1,600
b. Accounts Receivable 2,700
Service Revenue 2,700
c. Office Supplies Expense 5,250
Office Supplies Inventory 5,250
d. Unearned Service Revenue 6,050
Service Revenue 6,050
a. To record the interest owed on the 6-month, 8% note, an adjusting entry is made by debiting Interest Expense and crediting Interest Payable for the accrued interest of $1,600 ($120,000 x 8% x 6/12). b. An adjusting entries is required to recognize the revenue earned but not yet billed for the building maintenance services provided to Mack Trucks. Accounts Receivable is debited for the amount of $2,700, and Service Revenue is credited. c. To adjust the office supplies account, an adjusting entry is made by debiting Office Supplies Expense for the difference between the beginning balance ($1,220) and the ending balance ($970). The credit is made to Office Supplies Inventory.
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DMA Inc. processes corn into corn starch and corn syrup. The company's productivity and cost standards follow: - From every bushel of corn processed, 12 pounds of starch and 7 pounds of syrup should be produced. - Standard direct labor and variable overhead total $0.54 per bushel of corn processed. - Standard fixed overhead (the predetermined fixed overhead application rate) is $0.38 per bushel processed. Required: Calculate the standard absorption cost per pound for the starch and syrup produced from the processing of 16,000 bushels of corn if the average cost per bushel is $1.65.
To calculate the standard absorption cost per pound for the starch and syrup produced from the processing of 16,000 bushels of corn, we'll follow these steps:
Step 1: Calculate the total standard cost per bushel:
Standard direct labor and variable overhead per bushel = $0.54
Standard fixed overhead per bushel = $0.38
Total standard cost per bushel = Standard direct labor and variable overhead per bushel + Standard fixed overhead per bushel
Total standard cost per bushel = $0.54 + $0.38 = $0.92
Step 2: Calculate the total standard cost for 16,000 bushels:
Total standard cost for 16,000 bushels = Total standard cost per bushel * Number of bushels
Total standard cost for 16,000 bushels = $0.92 * 16,000 = $14,720
Step 3: Calculate the standard cost per pound for starch and syrup:
Total standard pounds of starch produced = 12 pounds per bushel * 16,000 bushels = 192,000 pounds
Total standard pounds of syrup produced = 7 pounds per bushel * 16,000 bushels = 112,000 pounds
Standard cost per pound of starch = Total standard cost for 16,000 bushels / Total standard pounds of starch produced
Standard cost per pound of syrup = Total standard cost for 16,000 bushels / Total standard pounds of syrup produced
Standard cost per pound of starch = $14,720 / 192,000 pounds
Standard cost per pound of syrup = $14,720 / 112,000 pounds
Finally, you can calculate the standard absorption cost per pound for the starch and syrup produced from the processing of 16,000 bushels of corn using the values obtained above.
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Southern Rim Parts estimates its manufacturing overhead to be $444,000 and its direct labor costs to be $1,110,000 for year 1 . The first three jobs that Southern Rim worked on had actual direct labor costs of $70,000 for Job 301,$95,000 for Job 302 , and $200,000 for Job 303. For the year, actual manufacturing overhead was $374,000 and total direct labor cost was $829,000. Manufacturing overhead is applied to jobs on the basis of direct labor costs using predetermined rates. Required: a. How much overhead was assigned to each of the three jobs, 301, 302, and 303 ? b. What was the over-or underapplied manufacturing overhead for year 1? Complete this question by entering your answers in the tabs below. How much overhead was assigned to each of the three jobs, 301,302 , and 303 ? What was the over-or underapplied manufacturing overhead for year 1 ?
A. The overhead assigned to each of the three jobs is as follows: $28,000 for Job 301, $38,000 for Job 302, and $80,000 for Job 303. B. The over-manufacturing overhead for year 1 is an overapplication of $70,000.
To calculate the overhead assigned to each job, we use the predetermined overhead rate. The predetermined overhead rate is calculated by dividing the estimated manufacturing overhead by the estimated direct labor costs. In this case, the predetermined overhead rate is $444,000 / $1,110,000 = 40%.
For Job 301, the assigned overhead is calculated by multiplying the actual direct labor cost ($70,000) by the predetermined overhead rate (40%): $70,000 * 40% = $28,000.
Similarly, for Job 302, the assigned overhead is $95,000 * 40% = $38,000.
For Job 303, the assigned overhead is $200,000 * 40% = $80,000.
To determine the over- or underapplied manufacturing overhead, we compare the actual manufacturing overhead ($374,000) with the applied overhead. The total applied overhead is the sum of the overhead assigned to each job: $28,000 + $38,000 + $80,000 = $146,000.
The over- or underapplied manufacturing overhead is the difference between the actual manufacturing overhead and the applied overhead: $374,000 - $146,000 = $228,000. Since the actual overhead is higher than the applied overhead, it is an overapplication of $228,000 or $70,000 after considering the initial estimated manufacturing overhead.
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a) What is a sinking fund? Do investors like bonds that have this feature? Why? (5 marks) b) Suppose Microsoft, Inc. was trading at $27.29 per share. At that time, it paid an annual dividend of $0.32 per share, and analysts have set a 1-year target price around $33.30 per share. What is the expected return on this stock? (2 marks) c) "Though much attention is given on securities markets, particularly the stock market, financial intermediaries are a far more important source of financing for corporations than securities markets are." Identity the importance of financial intermediaries and indirect financing, considering the above statement (5 marks) d) "In theory, the money markets should not be needed. The banking industry should serve the need for short term funds" Do you agree? Why? Why not? (3 marks) Total 15 marks
a) Sinking fund is a way of paying off a loan by setting aside money into a separate account and using it to pay off the loan over time. Bonds that have this feature are more attractive to investors because they feel more secure investing in bonds that have a sinking fund since the fund ensures that there will be money available to pay off the bond's principal when it comes due
.b)Expected return on a stock is calculated using the following formula:Expected Return = (Dividend Yield + Capital Gains Yield)Dividend Yield = Annual Dividend per Share / Market Price per ShareCapital Gains Yield = (Expected Price - Initial Price) / Initial PriceWhere, Annual Dividend per Share = $0.32Market Price per Share = $27.29Expected Price per Share = $33.30Putting values in the above formula we get,Dividend Yield = $0.32 / $27.29 = 0.0117Capital Gains Yield = ($33.30 - $27.29) / $27.29 = 0.221Expected Return = (0.0117 + 0.221) = 0.232 or 23.2%
c) Financial intermediaries such as banks and other lending institutions are crucial sources of financing for corporations. They play an important role in providing funds to businesses that need them for their operations. These intermediaries also provide indirect financing by pooling funds from individual savers and lending them out to businesses in the form of loans or investments in stocks and bonds. This form of financing is important because it helps to bridge the gap between those who have money to invest and those who need money to finance their operations.
d) In theory, the money markets should not be needed because the banking industry should be able to serve the need for short-term funds. However, in practice, the money markets are necessary because the banking industry may not always be able to provide the funds that are needed in a timely manner. Money markets provide a way for businesses and other borrowers to access funds quickly and easily, which can be crucial in times of financial stress. Therefore, money markets serve an important role in the economy even if the banking industry is able to provide short-term funds.
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involve the manager's ability to resolve conflict between people, understand human behaviour, and motivate groups as well as individuals.
A manager's ability to resolve conflicts, understand human behavior, and motivate groups and individuals is crucial for effective leadership.
Conflict resolution is an essential skill for managers as they often encounter disputes and disagreements within their teams. The ability to mediate conflicts, find common ground, and facilitate open communication can help prevent conflicts from escalating and maintain positive working relationships among team members. Managers who excel in conflict resolution can create a supportive and collaborative work environment where differences are acknowledged and resolved constructively.
Understanding human behavior is another critical aspect of effective management. Managers who possess this skill can identify individual strengths, weaknesses, and motivations within their team members. By recognizing the unique needs and characteristics of each employee, managers can tailor their approach to provide appropriate guidance, support, and development opportunities. Understanding human behavior also allows managers to anticipate potential challenges, manage expectations, and promote a positive work culture that values diversity and inclusivity.
Motivating groups and individuals is a key responsibility of managers. By understanding the factors that drive employee motivation, managers can design strategies to enhance engagement, productivity, and job satisfaction. Effective motivation techniques may involve providing meaningful recognition and rewards, fostering a sense of purpose and autonomy, and creating opportunities for growth and advancement. A skilled manager can inspire their team members, align their efforts with organizational goals, and foster a high-performance culture that encourages collaboration and innovation.
In conclusion, a manager's ability to resolve conflicts, understand human behavior, and motivate individuals and groups is vital for successful leadership. These skills contribute to a harmonious work environment, effective communication, and increased employee engagement. Managers who excel in these areas can build strong, cohesive teams, address interpersonal issues proactively, and drive organizational success through empowered and motivated employees.
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Technical training has become increasingly important because of changes in organizational design.
Indicate whether the statement is true or false.
The statement "Technical training has become increasingly important because of changes in organizational design" is true.
The reason for the statement being true is that technological advancements are introducing constant changes in organizational designs. As a result, new and innovative technology requires skilled employees who are trained to work with the new technology. Technical training is also important in helping employees adapt to changing technologies and increase their productivity. Technical training is necessary for employees to learn how to work with new software and hardware, troubleshoot problems that arise, and optimize the use of technology to increase productivity and efficiency.
Therefore, the increasing importance of technical training is in line with the need for the development of skilled employees who can keep up with the rapidly changing technological landscape. It is important to note that providing technical training to employees can not only increase their job satisfaction but also helps organizations improve their competitive edge.
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Question 3 1 pts Assume Merck (MRK) just announced that its next dividend will be $2, paid one year from now (you just missed the prior annual dividend). You expect the dividend will grow (after the $2 dividend) by 3% per year forever. Your required return is 10%. What are you willing to pay for a share of Merck stock?
To determine the value of a share of Merck stock, we can use the dividend discount model (DDM). The DDM calculates the present value of all future expected dividends.
Given the information provided:
Next year's dividend (D1) = $2
Dividend growth rate (g) = 3%
Required return (r) = 10%
The formula for the DDM is:
Stock Price = D1 / (r - g)
Plugging in the values:
Stock Price = $2 / (0.10 - 0.03)
Stock Price = $2 / 0.07
Stock Price ≈ $28.57
Therefore, you would be willing to pay approximately $28.57 for a share of Merck stock based on the given assumptions of future dividend growth and required return.
It's important to note that the DDM is a simplified model and relies on several assumptions. Actual stock prices may be influenced by other factors such as market conditions, company performance, and investor sentiment. Therefore, it's recommended to consider additional analysis and factors when making investment decisions.
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Suppose you are responsible for the design of a new order entry and sales analysis system for a national chain of auto part stores. Each store has a PC that supports office functions. The company also has regional managers who travel from store to store working with the local managers to promote sales. There are four national offices for the regional managers, who each spend about 1 day a week in their office and 4 on the road. Stores place orders to replenish stock on a daily basis, based on the sales history and inventory levels. The company uses the Internet to connect store PCs into the company’s main computer. Each regional manager has a laptop computer to also connect with stores and the main office.
Recommend (briefly describe) a technology architecture for supporting the business activities of the company.
Recommended tech architecture: Distributed client-server model, utilizing Internet for seamless order entry, sales analysis, and communication between store PCs, regional managers' laptops, and main computer.
A distributed client-server model with Internet connectivity offers a scalable and efficient solution. The store PCs would serve as clients, utilizing web-based interfaces or custom software to facilitate order entry and sales analysis. These PCs would connect to the company's main computer through the Internet, enabling real-time data synchronization and centralized data management.
The regional managers' laptops would also connect to the main office and stores, allowing them to access and update information while on the road. This ensures seamless communication and collaboration between regional managers, local managers, and the main office.
This technology architecture enables efficient order processing, accurate sales analysis, and streamlined communication throughout the organization. It leverages the power of the Internet and client-server computing to provide a robust and scalable solution that supports the business activities of the national chain of auto part stores.
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You own a coal mining company and are considering opening a new mine. The mine itself will cost $115.2 million to open. If this money is spent immediately, the mine will generate 20.7 million for the next 10 years. After that, the coal will run out and the site must be cleaned and maintained at environmental standards. The cleaning and maintenance are expected to cost 1.9 million per year in perpetuity. What does the IRR rule say about whether you should accept this opportunity? If the cost of capital is 8.2%, what does the NPV rule say?
The IRR rule states that you should accept the opportunity if the internal rate of return (IRR) is greater than the cost of capital. The NPV rule says to accept the opportunity if the net present value (NPV) is positive.
In this case, we need to calculate the IRR and NPV to evaluate the opportunity. The initial investment is $115.2 million, and the cash flows for the next 10 years are $20.7 million per year. After that, there will be a perpetual cash outflow of $1.9 million per year.
Using the cash flows and the cost of capital of 8.2%, we can calculate the IRR. The IRR is the discount rate at which the present value of the cash inflows equals the initial investment. If the IRR is greater than 8.2%, it would indicate that the project is expected to generate a higher return than the cost of capital.
To calculate the NPV, we discount each cash flow to its present value using the cost of capital. Then we subtract the initial investment from the sum of the present values of all cash flows. If the NPV is positive, it would indicate that the project's present value of cash inflows exceeds the initial investment.
By comparing the calculated IRR to the cost of capital and evaluating the NPV, we can determine whether the opportunity should be accepted or not.
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Why is it important that companies like Enterprise Holdings train, empower, and reward their CSRs (Customer Service Representatives)?
Do you work? If you do, how would you like to be empowered at your organization? If you do not currently work or have never worked, what would empowerment (check the definition if unsure) sound like, feel like, or look like for YOU as an employee?
It is important for companies like Enterprise Holdings to train, empower, and reward their CSRs (Customer Service Representatives) because it enhances customer satisfaction, builds brand loyalty, and improves overall business performance.
Training, empowering, and rewarding CSRs is crucial for companies like Enterprise Holdings due to several reasons. Firstly, well-trained CSRs have the knowledge and skills to provide excellent customer service. They can effectively address customer inquiries, resolve issues, and create positive interactions, resulting in higher customer satisfaction. Satisfied customers are more likely to become repeat customers and recommend the company to others, leading to increased sales and brand loyalty.
Secondly, empowering CSRs gives them a sense of ownership and responsibility in their role. When CSRs are empowered, they have the authority and resources to make decisions and solve problems on their own, without constantly relying on management for guidance. This autonomy boosts their confidence and job satisfaction, leading to higher productivity and better customer experiences.
Lastly, rewarding CSRs for their performance and achievements is essential for motivation and retention. Recognizing and incentivizing their hard work and dedication encourages them to continue delivering exceptional service. Rewards can include financial incentives, performance-based bonuses, career advancement opportunities, and a supportive work environment. This not only attracts top talent but also fosters a positive and motivated workforce, resulting in improved employee engagement and overall business success.
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Vessels continue to increase in size, with the length overall plateauing at a staggering 400m. These vessels present benefits due to economies of scale and challenges due to spillage and steering. Discuss these benefits.
Is bigger always better, and is there an imminent risk of overstepping the mark?
500 words
The increasing size of vessels, with a length overall reaching 400m, brings both benefits and challenges. Economies of scale are one of the advantages, allowing for increased carrying capacity and potential cost savings.
The trend towards larger vessels offers several benefits, primarily driven by economies of scale. Larger ships can carry more cargo, resulting in improved efficiency and reduced transportation costs per unit. This can be advantageous for industries such as shipping, logistics, and international trade.
However, there are challenges associated with the increased size. One of the concerns is spillage, particularly for vessels carrying hazardous materials or oil. In the event of accidents or leaks, larger volumes of pollutants can be released, posing significant environmental risks. Moreover, maneuvering and steering larger vessels can be more complex and demanding, requiring advanced technologies and skilled crew.
Whether bigger is always better depends on various factors. Environmental sustainability is a critical consideration. Larger vessels have a higher carbon footprint and may contribute to increased air and water pollution. Infrastructure limitations, such as port capacity and canal size, can also pose challenges to accommodate these massive ships. Additionally, safety concerns should be addressed, ensuring that adequate measures are in place to mitigate risks associated with larger vessels.
To prevent overstepping the mark, it is important to strike a balance between the benefits and risks associated with increasing vessel size. Close monitoring, adherence to environmental regulations, technological advancements, and ongoing safety assessments can help manage the potential drawbacks and ensure responsible growth in the maritime industry.
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SFS Corporation is considering opening fast food outlets in major metropolitan areas. The target
leverage ratio (D/V) for this enterprise is 0.23. SFS has identified two companies in the fast-food
industry that are comparable to the business it plans to enter. Details about these companies are
provided below:
Comparable Firm WACC D/E ratio Before-tax cost of debt Equity beta
Comparable Firm 1 15.55% 0.3 11% 1.88
Comparable Firm 2 16.65% 0.6 13% 2.31
All companies pay tax at the effective rate of 34%. Additionally, the treasury bond (risk-free) rate is
3% per annum and the expected market return is 11% per annum. Assume that the business risk of
SFS’s fast food operation will be same as average business risk of comparable firms in the industry.
a) If SFS proceeds with setting up the fast-food business (as per information provided above),
what would be cost of equity for this business? Show detailed workings.
b) Now assume that SFS does set up the business, but decides to fund it entirely with equity. What
would be cost of equity for this business under this scenario? Show detailed workings.
If SFS funds the business entirely with equity, the cost of equity for SFS Corporation's fast-food business, considering its target leverage ratio, is approximately 16.6045%.
a) To calculate the cost of equity for SFS Corporation's fast-food business, we need to determine the equity beta. The equity beta can be found using the formula:
Equity Beta = Asset Beta / (1 + (1 - Tax Rate) * (D/E))
Comparable Firm 1 has an equity beta of 1.88, and Comparable Firm 2 has an equity beta of 2.31. Since the business risk of SFS's fast-food operation is assumed to be the same as the average business risk of comparable firms, we can calculate the asset beta by taking the average of the equity betas.
Asset Beta = (1.88 + 2.31) / 2 = 2.095
Next, we can calculate the cost of equity using the Capital Asset Pricing Model (CAPM):
Cost of Equity = Risk-Free Rate + Equity Beta * (Market Return - Risk-Free Rate)
Cost of Equity = 3% + 2.095 * (11% - 3%) = 16.6045%
Therefore, the cost of equity for SFS Corporation's fast-food business, considering its target leverage ratio, is approximately 16.6045%.
b) If SFS decides to fund the business entirely with equity, there would be no debt-related factors to consider. The cost of equity in this scenario can be calculated directly using the CAPM formula:
Cost of Equity = Risk-Free Rate + Equity Beta * (Market Return - Risk-Free Rate)
Cost of Equity = 3% + 2.095 * (11% - 3%) = 16.6045%
The cost of equity remains the same, regardless of whether the business is funded with debt or equity. Therefore, if SFS funds the fast-food business entirely with equity, the cost of equity for the business would still be approximately 16.6045%.
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Required information [The following information applies to the questions displayed below.] Built-Tight is preparing its master budget. Budgeted sales and cash payments follow: Sales to customers are \
The budgeted sales and cash payments provided are necessary for preparing Built-Tight's master budget.
The budgeted sales and cash payments information is crucial in developing Built-Tight's master budget. The sales figures represent the estimated amount of revenue the company expects to generate from its customers. These figures are essential for determining the company's projected income and assessing its financial performance. By accurately forecasting sales, Built-Tight can plan its production levels, manage its inventory, and allocate resources effectively.
On the other hand, the cash payments information is vital for understanding when Built-Tight expects to receive payments from its customers. This data helps in projecting the company's cash inflows and outflows. By analyzing the timing of cash payments, Built-Tight can assess its cash flow position, identify potential cash shortages or surpluses, and plan accordingly. It allows the company to optimize its working capital management and ensure it has sufficient funds to meet its financial obligations.
Overall, the budgeted sales and cash payments information provides key insights into Built-Tight's expected revenue and cash flow patterns. These figures serve as a foundation for developing various components of the master budget, such as the sales budget, production budget, cash budget, and more.
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Intercontinental Chemical Company, located in Buenos Aires, Argentina, recently received an order for a product it does not normally produce. Since the company has excess production capacity, management is considering accepting the order. In analyzing the decision, the assistant controller is compiling the relevant costs of producing the order. Production of the special order would require 8,000 kilograms of theolite. Intercontinental does not use theolite for its regular product, but the firm has 8,000 kilograms of the chemical on hand from the days when it used theolite regularly. The theolite could be sold to a chemical wholesaler for 14,500 p. The book value of the theolite is 2.00 p per kilogram. Intercontinental could buy theolite for 2.40 p per kilogram. (p denotes the peso, Argentina’s national monetary unit. Many countries use the peso as their unit of currency. On the day this exercise was written, Argentina’s peso was worth 0.104 U.S. dollar.)
Required:
1-a. What is the relevant cost of theolite for the purpose of analyzing the special-order decision?
Relevant Cost _______p
Intercontinental’s special order requires 1,000 kilograms of genatope, a solid chemical regularly used in the company’s products. The current stock of genatope is 8,000 kilograms at a book value of 8.10 p per kilogram. If the special order is accepted, the firm will be forced to restock genatope earlier than expected, at a predicted cost of 8.70 p per kilogram. Without the special order, the purchasing manager predicts that the price will be 8.30 p when normal restocking takes place. Any order of genatope must be in the amount of 5,000 kilograms.
Total Relevant Cost ______
For theolite, the relevant cost is the opportunity cost of not selling it to a wholesaler, which is 14,500 p. The incremental cost and the book value yields a total relevant cost of 8,400 p for genatope.
1. Relevant cost of theolite:
The relevant cost of theolite for analyzing the special-order decision is the opportunity cost, which is the value theolite could generate if sold to a wholesaler. Since the company has excess theolite on hand, the relevant cost is the foregone opportunity of selling it, which is 14,500 p.
2. Total relevant cost of genatope:
The total relevant cost of genatope includes both the incremental cost of restocking earlier and the book value of the current stock.
The incremental cost per kilogram for restocking genatope earlier is the difference between the predicted cost of restocking for the special order (8.70 p) and the predicted cost without the special order (8.30 p).
Thus, the incremental cost is 0.40 p per kilogram. Multiplying this by the quantity required (1,000 kilograms) gives an incremental cost of 400 p. Additionally, the book value of the current stock (8,000 kilograms) is relevant and equals 8.10 p per kilogram.
Therefore, the total relevant cost of genatope is the sum of the incremental cost and the book value, which is 8,400 p.
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Which of the following is considered investment by economists?
a) The U.S. government increased military spending in Afghanistan by $120 billion
b) Target purchased new shopping baskets for their new store in Gastonia
c) I purchased a $10,000 Treasury bond from the U.S. government
d) My husband is saving cash in a safe in our basement
e) all of the above
The correct answer is option e) all of the above. According to economists, all of the given options can be considered investment in the context of economics:
a) The U.S. government increasing military spending in Afghanistan by $120 billion is considered investment because it involves the expenditure of resources with the expectation of generating future benefits or returns, such as enhancing national security or promoting economic stability in the region.
b) Target's purchase of new shopping baskets for their new store in Gastonia is considered investment because it involves the acquisition of physical capital (shopping baskets) with the intention of using it to facilitate business operations and generate future revenues.
c) Your purchase of a $10,000 Treasury bond from the U.S. government is considered investment because it involves lending money to the government in exchange for a financial instrument that pays interest over time, providing a return on your investment.
d) Your husband saving cash in a safe in your basement is also considered investment in the sense that it involves setting aside money for future use or investment purposes, such as funding a future project or acquiring assets.
In all the given options, resources are allocated with the expectation of generating future benefits or returns, which aligns with the concept of investment in economics.
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6. Consider a project with initial investment of $50,000. Cash flows are $30,000, $20,000 and $10,000 annually. What is the payback period of this project? (5\%) 7. The first initial investment of a project is $200. The cash inflows in the following 3 years are $100,$100 and $100. What is the Internal Rate of Return for this project? (10%)
To calculate the payback period of the project, we need to determine the time it takes for the cumulative cash inflows to equal or exceed the initial investment.
Year 1: Cash inflow = $30,000
Year 2: Cash inflow = $20,000
Year 3: Cash inflow = $10,000
The cumulative cash inflows are as follows:
Year 1: $30,000
Year 2: $30,000 + $20,000 = $50,000
Year 3: $50,000 + $10,000 = $60,000
Since the cumulative cash inflows exceed the initial investment of $50,000 in Year 3, the payback period is less than 3 years but more than 2 years. To determine the exact payback period, we can calculate the proportion of the initial investment recovered in Year 3:
Proportion recovered = ($60,000 - $50,000) / $10,000 = 1
Therefore, the payback period is 2 years plus the proportion recovered in Year 3, which is 2 + 1 = 3 years.
The Internal Rate of Return (IRR) is the discount rate that makes the net present value (NPV) of cash inflows equal to the initial investment. In this case, the initial investment is $200, and the cash inflows over three years are $100, $100, and $100.
Using the formula for calculating IRR, we can set up the equation:
$200 = $100 / (1 + IRR) + $100 / (1 + IRR)^2 + $100 / (1 + IRR)^3
Simplifying this equation and solving for IRR can be done using trial and error or financial software. The calculated IRR for this project is approximately 7.45%.
The IRR represents the rate of return at which the project breaks even, meaning the NPV is zero. Since the calculated IRR of 7.45% is higher than the required rate of return of 10%, the project is not considered attractive based on the IRR criterion.
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Which Of The Following Statements Is Not Included In The Auditor's Responsibilities For The Audit Of The Financial Statements Section Of The Standard (Unmodified) Report? Multiple Choice "In Accordance With Accounting Principles Generally Accepted In The United States Of America." "Our Objectives Are To Obtain Reasonable Assurance…And To Issue An
Which of the following statements is not included in the Auditor's Responsibilities for the Audit of the Financial Statements Section of the standard (unmodified) report?
Multiple Choice
"In accordance with accounting principles generally accepted in the United States of America."
"Our objectives are to obtain reasonable assurance…and to issue an auditor’s report that includes our opinion"
"…it is not a guarantee that an audit conducted in accordance with GAAS will always detect a material misstatement…"
"Reasonable assurance is a high level of assurance but is not absolute assurance…"
The statement that is not included in the Auditor's Responsibilities for the Audit of the Financial Statements Section of the standard (unmodified) report is:
"Reasonable assurance is a high level of assurance but is not absolute assurance…"
The Auditor's Responsibilities section of the standard (unmodified) report typically includes statements such as:
1. "In accordance with accounting principles generally accepted in the United States of America."
2. "Our objectives are to obtain reasonable assurance…and to issue an auditor's report that includes our opinion."
3. "…it is not a guarantee that an audit conducted in accordance with GAAS will always detect a material misstatement…"
These statements outline the auditor's responsibilities, objectives, and limitations. They emphasize the adherence to accounting principles, the goal of obtaining reasonable assurance, and the recognition that an audit conducted in accordance with generally accepted auditing standards (GAAS) does not provide absolute assurance of detecting all material misstatements.
However, the statement "Reasonable assurance is a high level of assurance but is not absolute assurance…" is not typically included in the Auditor's Responsibilities section of the standard (unmodified) report. While it is a true statement about the nature of assurance provided by an audit, it is not explicitly included in the report's responsibilities section.
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Intertemporal budget constraint. Budget line 1: Y₁ = $900. Y₂ = $600. The interest rate is 12 percent, both for borrowing and saving. Utility = C₁⁵C₂⁷ Draw the budget line, with solved numbers. Solve the optimal consumption levels to choose in time 1 and time 2.
The maximum utility that can be derived from these consumption levels is U = C1^5C2^7 = $411.42^5 x $517.14^7 = $20,961,636.18. Intertemporal budget constraint refers to the consumer's budget constraint over time. The budget line shows the quantity of goods that can be purchased with the amount of income available.
It describes the maximum amount of consumption in the present and future, given the current income and interest rate. Hence, the formula for the budget line is: C1 + C2/ (1+r) = Y1/ (1+r) + Y2. Where C1 and C2 are the present and future consumption, r is the interest rate, and Y1 and Y2 are present and future incomes. The consumer's intertemporal budget constraint is based on the consumption and investment possibilities available in different periods. Utility is the satisfaction or happiness derived by the consumer from consuming goods.
Mathematically, the utility function can be defined as U = C1^5C2^7, where C1 and C2 are the consumption levels in period 1 and 2, respectively. To maximize utility, the consumer must allocate income between present and future consumption. In this problem, the budget line is: C1 + C2/ (1+12%) = $900/ (1+12%) + $600. Simplifying, C1 + C2/ 1.12 = $803.57. The optimal consumption levels can be found by maximizing the utility function subject to the budget constraint. The Lagrangian function is: L = C1^5C2^7 - λ(C1 + C2/ 1.12 - $803.57). Taking the partial derivatives with respect to C1, C2, and λ, we get: ∂L/∂C1 = 5C1^4C2^7 - λ = 0 ∂L/∂C2 = 7C1^5C2^6 - λ/1.12 = 0 ∂L/∂λ = C1 + C2/ 1.12 - $803.57 = 0 Solving the above equations, we get: C1 = $411.42 and C2 = $517.14. Therefore, the optimal consumption levels to choose in time 1 and time 2 are $411.42 and $517.14, respectively. The maximum utility that can be derived from these consumption levels is U = C1^5C2^7 = $411.42^5 x $517.14^7 = $20,961,636.18.
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Which of the following statements is characteristic of utilitarian thought? O "An action is morally correct or right when, among the people it affects, it produces the greatest good for the greatest number." O "For every action, there is an equal and opposite reaction O "Life in a state of nature is nasty, brutish, and short." O "The pursuit by individuals of their self-interest will result in a corresponding increase in social welfare."
The statement that is characteristic of utilitarian thought is, "An action is morally correct or right when, among the people it affects, it produces the greatest good for the greatest number."
Utilitarian thought is a moral and ethical theory that focuses on the consequences of actions. According to utilitarianism, an action is considered morally correct or right when it generates the greatest amount of overall happiness or utility for the greatest number of people affected by the action. This principle is often summarized as "the greatest good for the greatest number."
Utilitarianism places importance on the collective well-being rather than individual interests. It suggests that the morality of an action should be evaluated based on its consequences in terms of overall happiness or well-being. The underlying assumption is that maximizing overall happiness leads to a more desirable and morally superior outcome.
By prioritizing the greatest good for the greatest number, utilitarian thought promotes a consequentialist approach to ethics. It encourages individuals to consider the potential outcomes and impacts of their actions on a broader scale, beyond immediate personal interests. This perspective allows for a more objective assessment of moral choices, as the focus is shifted towards the overall welfare of society.
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4. If you are concerned that the inflation rate is too high, which of the following policies is recommended? (a) A decrease in the money supply. (c) A decrease in income tax rates: (b) An increase in the money supply. (d) An increase in government spending. 5. Suppose an Egyptian car maker manufactures cars in Jordan. If these cars are sold to Jordanian consumers, they will be considered in calculating: (a) Egyptian gross domestic product (GDP). (b) Jordanian gross national product (GNP). (c) Jordanian consumption. (d) All of the above.
4. To address high inflation, a decrease in the money supply is recommended.
5. If the Egyptian car maker sells cars to Jordanian consumers, it will be considered in calculating Jordanian consumption.
4. If you are concerned about high inflation, a decrease in the money supply (option a) is recommended. This is because reducing the amount of money circulating in the economy can help curb inflationary pressures by limiting the availability of money for spending and investment.
5. If the Egyptian car maker sells cars to Jordanian consumers, it will be considered in calculating Jordanian consumption (option c). The calculation of GDP (gross domestic product) focuses on economic activities within a country's borders, while GNP (gross national product) takes into account the economic activities of a country's residents, regardless of where they occur.
Since the cars are sold and consumed in Jordan, they contribute to Jordanian consumption and are not included in the GDP of Egypt. Therefore, option c is the correct answer.
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Mr Lee was retrenched from his company on 1 June 2020. His employment income and benefits for the year ended 31 December 2020 is as follows:
- Salary from 1 Jan 2020 to 31 May 2020 $25,000
- 2019 non-contractual bonus paid on 15 April 2020 $5,000
- Retrenchment benefit $10,000
- Leave pay $3,000
What is the amount taxable to Mr Lee for the Year of Assessment 2021?
Group of answer choices
a) $33,000
b) $30,000
c) $43,000
d) $28,000
The answer is (b) $30,000. To calculate the amount taxable to Mr Lee for the Year of Assessment 2021, we need to first identify which components of his employment income are taxable and which are not.
Taxable employment income:
Salary from 1 Jan 2020 to 31 May 2020: $25,000
2019 non-contractual bonus paid on 15 April 2020: $5,000
Non-taxable employment income:
Retrenchment benefit: $10,000 (under current tax laws, retrenchment benefits are exempt from tax)
Leave pay: $3,000 (as long as the leave pay is paid out in respect of any period of leave that was due and granted to an employee while he was still employed, it is not taxable)
Therefore, the total taxable employment income for Mr Lee for the Year of Assessment 2021 is $30,000 ($25,000 salary + $5,000 bonus).
The answer is (b) $30,000.
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Quatro Company issues bonds dated January 1, 2021, with a par value of $780,000. The bonds' annual contract rate is 13%, and interest is paid semiannually on June 30 and December 31. The bonds mature in three years. The annual market rate at the date of issuance is 12%, and the bonds are sold for $799,207. 1. What is the amount of the premium on these bonds at issuance? 2. How much total bond interest expense will be recognized over the life of these bonds? 3. Prepare an effective interest amortization table for these bonds.
1. Amount of premium on the bonds at issuance The issuance price of the bond is $799,207 and its par value is $780,000. The difference between these two values is the amount of premium on the bond, which is $19,207.
2. Total bond interest expense that will be recognised over the life of the bond The bonds have an annual contract rate of 13%, a par value of $780,000, and semi-annual interest payments. As a result, the semi-annual interest is computed as follows:$780,000 x 13% x 6/12 = $50,700Interest is paid semiannually over a three-year term, resulting in six interest payments. The total bond interest expense is the sum of all of the interest payments over the term of the bond:6 x $50,700 = $304,2003. Effective interest a mortification table for these bonds The effective interest rate must first be calculated before creating the effective interest amortisation table.
The effective interest rate is a weighted average of the interest rates paid on the bond's outstanding balance. As a result, for the initial period, the effective interest rate is:Effective interest rate = Interest expense / Outstanding balance$19,207 / $799,207 = 0.024 (rounded to three decimal places)Period 1:Image credit: CFIImage credit: CFIIn the first period, interest expense is calculated by multiplying the effective interest rate by the outstanding balance at the end of the previous period. In this case, the outstanding balance at the end of the previous period is the issuance price of the bond minus the initial semi-annual interest payment:Outstanding balance at the end of the previous period = $799,207 - $50,700 = $748,507Interest expense = $748,507 x 0.024 = $17,964Image credit: CFIThe bond's unamortized premium is $1,243, which is the difference between the bond's carrying amount of $781,243 ($780,000 plus $1,243) and the bond's par value of $780,000. The bond's carrying amount is the sum of the par value and the unamortized premium at the end of each period.The outstanding balance at the end of the period is the carrying amount of the bond minus the amount of principal paid, which is $15,000 (half of $30,000). As a result, the outstanding balance at the end of the period is $766,243 ($781,243 minus $15,000).Period 2:Image credit: CFIInterest expense is calculated by multiplying the effective interest rate by the outstanding balance at the end of the previous period:Outstanding balance at the end of the previous period = $766,243 - $50,700 = $715,543Interest expense = $715,543 x 0.024 = $17,173Image credit: CFIBond's unamortized premium = $1,505Outstanding balance at the end of the period = $749,748 ($766,243 minus $16,495)Period 3:Image credit: CFIInterest expense is calculated by multiplying the effective interest rate by the outstanding balance at the end of the previous period:Outstanding balance at the end of the previous period = $749,748 - $50,700 = $699,048Interest expense = $699,048 x 0.024 = $16,777Image credit: CFIBond's unamortized premium = $1,775Outstanding balance at the end of the period = $733,348 ($749,748 minus $16,400)Period 4:Image credit: CFIInterest expense is calculated by multiplying the effective interest rate by the outstanding balance at the end of the previous period:Outstanding balance at the end of the previous period = $733,348 - $50,700 = $682,648Interest expense = $682,648 x 0.024 = $16,344 Image credit: CFIBond's unamortized premium = $2,075Outstanding balance at the end of the period = $716,748 ($733,348 minus $16,600)Period 5:Image credit: CFIInterest expense is calculated by multiplying the effective interest rate by the outstanding balance at the end of the previous period:Outstanding balance at the end of the previous period = $716,748 - $50,700 = $666,048 Interest expense = $666,048 x 0.024 = $15,985Image credit: CFIBond's unamortized premium = $2,416 Outstanding balance at the end of the period = $700,448 ($716,748 minus $16,300)Period 6:Image credit: CFIInterest expense is calculated by multiplying the effective interest rate by the outstanding balance at the end of the previous period:Outstanding balance at the end of the previous period = $700,448 - $50,700 = $649,748Interest expense = $649,748 x 0.024 = $15,594Image credit: CFIBond's unamortized premium = $2,798Outstanding balance at the end of the period = $683,448 ($700,448 minus $17,000)This concludes the preparation of the effective interest amortization table for the bonds.
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Question Five ( 7 Marks ) The following information is budgeted for McCracken Plumbing Supply Company for next quarter : April May June
Sales.....$ 110,000 $ 130,000 $ 180,000
Merchandise purchases.....$ 85,000 $ 92,000 $ 105,000
Selling and administrative expenses ..... $ 50,000b $ 50,000 $ 50,000
All sales at McCracken are on credit . Forty percent are collected in the month of sale , 58 % in the month following the sale , and the remaining 2 % are uncollectible . Merchandise purchases are paid in full the month following the month of purchase . The selling and administrative expenses above include $ 8,000 of depreciation on display fixtures and warehouse equipment . All other selling and administrative expenses are paid as incurred . McCracken wants to maintain a cash balance of $ 15,000 . Any amount below this can be borrowed from a local bank as needed in increments of $ 1,000 . All borrowings are made at month end . Required : Prepare McCracken's cash budget for the month of May . Use good form . McCracken expects to have $ 24,000 of cash on hand at the beginning of May
McCracken Plumbing Supply Company's cash budget for the month of May shows an ending cash balance of $8,400, indicating a need to borrow $6,600 to maintain the desired cash balance.
To prepare McCracken Plumbing Supply Company's cash budget for the month of May, we need to consider the cash inflows and outflows based on the given information. Here's the calculation:
Beginning cash balance (May): $24,000
Cash inflows:
Sales collected in May (40% of April sales): $110,000 * 40% = $44,000
Sales collected in May (58% of May sales): $130,000 * 58% = $75,400
Total cash inflows: $44,000 + $75,400 = $119,400
Cash outflows:
Merchandise purchases paid in May (April purchases): $85,000
Selling and administrative expenses (including depreciation): $50,000
Total cash outflows: $85,000 + $50,000 = $135,000
Net cash flow: Cash inflows - Cash outflows
Net cash flow: $119,400 - $135,000 = -$15,600
Ending cash balance (May): Beginning cash balance + Net cash flow
Ending cash balance: $24,000 - $15,600 = $8,400
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A company using the periodic inventory system has the following account balances: Inventory at the beginning of the year, $3,877; Freight-In, $540; Purchases, $16,473; Purchases Returns and Allowances, $2,619; Purchases Discounts, $317. The cost of merchandise purchased is equal to Oa. $14,077 Ob. $23,826 Oc. $16,473 Od. $16,072
The cost of merchandise purchased can be determined by subtracting the total amount of purchases returns and allowances, and purchases discounts from the total purchases. In this case, the cost of merchandise purchased is $14,077.
To calculate the cost of merchandise purchased, we need to consider the relevant account balances. The periodic inventory system records inventory and cost of goods sold at the end of an accounting period based on a physical count.
In this scenario, we start with the inventory at the beginning of the year, which is $3,877. We then consider the purchases made throughout the year, which amount to $16,473. However, we also need to account for any returns and allowances granted by suppliers, which in this case total $2,619. These returns and allowances reduce the total purchases. Additionally, purchases discounts are offered for prompt payment. The purchases discounts in this case amount to $317. These discounts also reduce the total purchases.
To calculate the cost of merchandise purchased, we subtract the purchases returns and allowances ($2,619) and purchases discounts ($317) from the total purchases ($16,473).
Cost of merchandise purchased = Total purchases - Purchases returns and allowances - Purchases discounts
Cost of merchandise purchased = $16,473 - $2,619 - $317
Cost of merchandise purchased = $14,077
Therefore, the correct answer is option Oa. $14,077.
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