Specter Co. has identified an investment project with the following cash flows. Year Cash Flow 1 $ 810 2 1,110 3 1,370 4 1,500 a. If the discount rate is 11 percent, what is the present value of these cash flows

Answers

Answer 1

Answer:

3620.46

Explanation:

Use basic principles to find the present value of a cash flow

PV(1+i)ⁿ=CF

CF*(1+i)⁻ⁿ=PV

so we would have

[tex]810(1+.11)^{-1}+1110*1.11^{-2}+1370*1.11^{-3}+1500*1.11^{-4}=[/tex]3620.459284

which rounds to 3620.46


Related Questions

Delaware Chemical Company uses oil to produce two types of plastic products, P1 and P2. Delaware budgeted 28,300 barrels of oil for purchase in June for $71 per barrel. Direct labor budgeted in the chemical process was $221,000 for June. Factory overhead was budgeted at $361,700 during June. The inventories on June 1 were estimated to be:

Answers

Question Completion:

The inventories on June 1 were estimated to be:

Oil                        $15,200

P1                            8,500

P2                           8,600  

Work in process  12,900

The desired inventories on June 30 were:

Oil                        $16,100

P1                            9,400

P2                           7,900  

Work in process  13,500

Use the preceding information to prepare a cost of goods sold budget for June 2015

Answer:

Delaware Chemical Company

The Cost of goods sold budgeted for June 2015 is:

= $2,597,500.

Explanation:

a) Data and Calculations:

Budgeted purchase of barrels of oil for June = $2,009,300 (28,300 * $71)

Budgeted direct labor for June                                 221,000

Budgeted factory overhead for June                        361,700

The inventories on June 1 were estimated to be:

Oil                                 $15,200

P1                                     8,500

P2                                    8,600  

Work in process           12,900

Beginning inventory $45,200

The desired inventories on June 30 were:

Oil                           $16,100

P1                               9,400

P2                              7,900  

Work in process      13,500

Ending inventory $39,700

Cost of goods sold:

Beginning inventory             $45,200

Budgeted purchase          2,009,300

Budgeted direct labor          221,000

Budgeted factory overhead 361,700

Ending inventory                  (39,700)

Cost of goods sold =     $2,597,500

Three years ago, Kuley invested $32,200. In 2 years from today, he expects to have $50,300. If Kuley expects to earn the same annual return after 2 years from today as the annual rate implied from the past and expected values given in the problem, then in how many years from today does he expect to have exactly $87,200

Answers

Answer:

8.17 years(closest to 8 years )

Explanation:

The future value of $50,300, would be accumulated after 5 years of having made the investment(3 years+2 years=5 years)

As a result, we can determine the annual rate of return based on the future value in year 5 using the future value formula below:

FV=PV*(1+r)^n

FV=future value=$50,300

PV=amount invested initially=$32,200

r=unknown=annual rate of return

n=5 years

$50,300=$32,200*(1+r)^5

$50,300/$32,200=(1+r)^5

$50,300/$32,200 can be rewritten as ($50,300/$32,200)^1

($50,300/$32,200)^1=(1+r)^5

divide index on both sides by 5

($50,300/$32,200)^(1/5)=1+r

r=($50,300/$32,200)^(1/5)-1

r=9.33%

Our next task is to determine how long( in years) it takes to accumulate a future value of $87,200 from today's point, which means we need to determine the value of the investment today( 3 years after making the investment)

FV=$32,200*(1+9.33%)^3

FV=value of investment today=$42,079.82

Lastly, we can ascertain when $42,079.82 today would become $87,200

$87,200=$42,079.82*(1+9.33%)^n

n=number of years=unknown

$87,200/$42,079.82=(1+9.33%)^n

$87,200/$42,079.82=1.0933^n

take log of both sides

ln ($87,200/$42,079.82)=n ln(1.0933)

n=ln ($87,200/$42,079.82)/ln(1.0933)

n=0.72863604/0.08920065

n=8.17 years( from today, approx 8 years)

Murphy's, Inc., has 45,000 shares of stock outstanding with a par value of $1 per share. The market value is $10 per share. The balance sheet shows $70,500 in the capital in excess of par account, $45,000 in the common stock account, and $133,500 in the retained earnings account. The firm just announced a stock dividend of 12 percent. What will the balance in the capital in excess of par account be after the dividend?

Answers

Answer: $119100

Explanation:

The balance in the capital in excess of par account be after the dividend will be calculated thus:

Firstly, we'll calculate the change in capital in excess of par and this will be:

= Number of shares × dividend rate × (market value - par value)

= 45,000 × 12% × ($10 - $1)

= (45000 × 0.12) × $9

= 5400 × $9

= $48,600

Then, the balance in the capital in excess of par after the dividend will be:

= $70,500 + $48,600

= $119,100

The three categories of manufacturing costs comprising the cost of work in process are direct labor, direct materials, and: __________
a) direct expenses
b) indirect expenses
c) factory overhead
d) sales salaries expense

Answers

Answer:

C)) factory overhead

Explanation:

Manufacturing cost can be regarded as the sum of all the costs resources that is been consumed during the process of making a product. manufacturing cost can be classified as;

✓direct materials cost

✓ manufacturing overhead.

✓direct labor cost

It can be regarded as factor in total delivery cost. Direct Material Cost can be regarded as total cost that is incurred in purchasing of raw material and cost of other components such as packaging, as well as freight and storage costs by the company

It should be noted that The three categories of manufacturing costs comprising the cost of work in process are direct labor, direct materials, and factory overhead.

An educational institution has total direct labor and material costs of $1964 per student. Its fixed costs are $352,800. Total revenues for the year were $1,800,000. It had 800 students in the past year. How many students should they accept in the next year to break even assuming the variable cost margins are equal to this year, and assuming fixed costs are to increase by $19,000 due to increased rent for expansion? (round to the nearest whole number).

Answers

Answer:

1300 students

Explanation:

The computation of the no of students to be accepted for break even is given below:

Fixed cost is

= $352,800 + $19,000

= $371,800

Revenue per student is

= $1,800,000 ÷ 800

= 2250

And,

Variable cost per student = 1964

So,  

Contribution margin = Revenue - Variable cost  

= $2,250 - $1,964

= $286

Break even point is

= Fixed cost ÷ Contribution margin per unit

= 371800÷  286

= 1300 students

You enter into a forward contract to buy a 10-year, zero coupon bond that will be issued in one year. The face value of the bond is $1000 and the one-year and 11-year spot interest rates are 5 and 7 percent respectively. What is the forward price of your contract

Answers

Answer:

$498.94

Explanation:

1 year interest rate = 5%

11 year interest rate = 7%

10 year spot interest rate at end of 1 year = [{(1+0.07)^11 / (1+0.05)}^(0.1) - 1]

10 year spot interest rate at end of 1 year = [(2.104852/1.05)^0.1] - 1

10 year spot interest rate at end of 1 year = 1.07202083615 - 1

10 year spot interest rate at end of 1 year = 0.072021

10 year spot interest rate at end of 1 year = 7.202%

Face value = $1,000

Forward Price of contract = $1000/(1+0.0720)^10

Forward Price of contract = $1000/2.00423136

Forward Price of contract = 498.944392915

Forward Price of contract = $498.94

A department that is capital-intensive most likely would use a predetermined departmental overhead rate based on which of the following activity bases?
a. units of direct material used
b. direct labor hours
c. direct labor cost
d. machine hours

Answers

Answer:

D)machine hours

Explanation:

It should be noted that department that is capital-intensive most likely would use a predetermined departmental overhead rate based on

machine hours.

A machine-hour can be regarded as measurement that is been used in applying factory overhead to manufactured goods. It's application is usually found in machine-intensive environments, environment whereby the amount of time that is expelled on processing by a machine is been regarded as largest activity that overhead allocations can be said to have based upon. Machine hour rate can be gotten by making division of the total running expenses of a machine by estimated number of hours for the machine to work at a specific period

Union Local School District has bonds outstanding with a coupon rate of 3.9 percent paid semiannually and 16 years to maturity. The yield to maturity on these bonds is 4.2 percent and the bonds have a par value of $5,000. What is the price of the bonds

Answers

Answer:

Thx foe tge points lol

Explanation:

✨✋

Pottery Ranch Inc. has been manufacturing its own finials for its curtain rods. The company is currently operating at 100% of capacity, and variable manufacturing overhead is charged to production at the rate of 61% of direct labor cost. The direct materials and direct labor cost per unit to make a pair of finials are $4 and $5, respectively. Normal production is 26,400 curtain rods per year.

A supplier offers to make a pair of finials at a price of $13.30 per unit. If Pottery Ranch accepts the supplier’s offer, all variable manufacturing costs will be eliminated, but the $40,400 of fixed manufacturing overhead currently being charged to the finials will have to be absorbed by other products.

Required:
Prepare the incremental analysis for the decision to make or buy the finials.

Answers

Answer:

Pottery Ranch Inc.

Incremental Analysis

                                                              Make       Buy      Incremental

Production costs:

Variable manufacturing costs per unit:

Direct materials per unit                      $4.00

Direct labor per unit                            $5.00

Variable manufacturing per unit        $3.05

Total variable manufacturing costs  $12.05         $13.30        $1.25

Annual units of curtain rods            26,400        26,400     26,400

Variable manufacturing costs       $318,120     $351,120   $33,000

Explanation:

a) Data and Calculations:

Production capacity = 100%

Variable manufacturing overhead = 61% of direct labor cost

Direct materials per unit = $4

Direct labor per unit = $5

Variable manufacturing per unit = $3.05 (61% of $5)

Total variable manufacturing cost per unit = $12.05

Normal production per year = 26,400 units

Total variable manufacturing costs = $318,120 ($12.05 * 26,400)

Fixed manufacturing overhead = $40,400

On Mar 3, Lyons Company paid dividends of $1,000. Use your knowledge of what a correct journal entry should look like to identify what would be include

Answers

Answer:

Debit : Dividend $1,000

Credit : Cash $1,000

Explanation:

The Journal entry to record dividend payment include a Debit to Dividend Account and a Credit to Cash Account to depict the outflow of cash.

A cash register tape shows cash sales of $3180 and sales taxes of $210. The journal entry to record this information is

Answers

Answer:

Debit cash $3,390

Credit sales revenue $210

Cales tax payable $3,180

Explanation:

Preparation of the journal entry to record the information given.

Journal entry

Debit cash $3,390

($3,180+$210)

Credit sales revenue $210

Cales tax payable $3,180

Big Chill, Inc. sells portable dehumidifier units at the current price of $184. Unit variable costs are $85. Fixed costs, made up primarily of salaries, rent, insurance and advertising, are $3,236,000. Calculate breakeven sales for Big Chill, Inc. Round your answer to the nearest whole number.

Answers

Answer:

$6,014,384

Explanation:

Break even point is the level at which a firm makes neither profit nor a loss. This is the point where Profit = $0.

Break even units = Fixed Costs ÷ Contribution per unit

therefore,

Break even units = $3,236,000 ÷ ($184 x  $85)

                              = 32,687 units

thus,

Breakeven Sales = 32,687 units x $184 =  $6,014,384

The risk free rate currently have a return of 2.5% and the market risk premium is 5.77%. If a firm has a beta of 1.42, what is its cost of equity

Answers

Answer:

10.69%

Explanation:

Market risk premium = 5.77% or 0.0577

The beta = 1.42

Risk free rate = 2.5% or 0.025

Cost of equity = Risk free rate + Beta*Market risk premium

Cost of equity = 0.025 + 1.42*0.0577

Cost of equity = 0.025 + 0.081934

Cost of equity = 0.106934

Cost of equity = 10.69%

Your best friend has an idea for a drive-through bar. Indicate the best explanation for why others have not taken advantage of her idea.
A. Unprofitable.
B. Government intervention.
C. True innovation.
D. Market failure.

Answers

Answer: B. Government intervention.

Explanation:

A Drive-through bar could be very profitable as it involves people simply pulling up to a window, ordering alcohol and driving away with it. It is not very workable though because it is dangerous.

Drinking and driving is one of the highest causes of road accidents and a drive-through bar is literally encouraging people to do that. The government has therefore intervened by enacting laws to limit the trading of liquor in such ways so as to reduce the instance of road accident.

Identify each of the following reconciling items as:

a. an addition to the cash balance according to the bank statement
b. a deduction from the cash balance according to the bank statement
c. an addition to the cash balance according to the company's records
d. a deduction from the cash balance according to the company's records

Item Treatment
1. Bank service charges, $30.
2. Check of a customer returned by bank to company because of insufficient funds, $400.
3. Check for $320 incorrectly recorded by the company as $230.
4. Check for $1,100 incorrectly charged by bank as $110.
5. Deposit in transit, $3,300.
6. Outstanding checks, $7,950.
7. Note collected by bank, $10,500.

Answers

Answer:

Reconciling Items

Item   Treatment

1.    b. a deduction from the cash balance according to the bank statement

2.   b. a deduction from the cash balance according to the bank statement

3.   d. a deduction from the cash balance according to the company's records

4.   a. an addition to the cash balance according to the bank statement

5.   a. an addition to the cash balance according to the bank statement

6.  a. an addition to the cash balance according to the bank statement

7.  a. an addition to the cash balance according to the bank statement

Explanation:

a) Data and Analysis:

1. Bank service charges, $30 Cash $30

2. Accounts Receivable (NSF) $400 Cash $400

3. Accounts Payable $90 Cash $90

4. Cash $990 Bank $990.

5. Bank $3,300 Cash $3,300

6. Cash $7,950 Bank $7,950

7. Cash $10,500 Accounts Receivable $10,500

A young college student on a tight budget is campaigning for an open city council seat. A friend in her economics class estimates that voters are influenced by TV and newspaper ads according to the following function: Votes = 300TV0.6 NP0.2, where TV represents the number of television ads and NP represents the number of newspaper ads. Thus, the marginal product of a newspaper ad is 60TV0.6 NP–0.8 and the marginal product of a TV ad is 180TV–0.4 NP0.2. A local television ad costs $400, and a local newspaper ad costs $250. If the candidate needs 1,800 votes to win, what is the lowest-cost combination of newspaper and TV ads that will bring her victory?

Answers

Answer:

Explanation:

..

Professional Products Inc., a wholesaler of office products, was organized on February 5 of the current year, with an authorization of 100,000 shares of preferred 2% stock, $50 par and 650,000 shares of $25 par common stock. The following selected transactions were completed during the first year of operations:
Feb. 5. Issued 700,000 shares of common stock at par for cash.
Feb. 5. Issued 1,200 shares of common stock at par to an attorney in payment of legal fees for organizing the corporation.
Apr. 9. Issued 40,000 shares of common stock in exchange for land, buildings, and equipment with fair market prices of $120,000, $280,000, and $80.000, respectively.
June 14. Issued 25,000 shares of preferred stock at $82 for cash.
Journalize the transactions.

Answers

Answer:Please find answers below

Explanation:

Being the issue of 700,000 shares of common stock at par for cash

Date             Accounts and explanation             Debit                Credit

5th Feb           Cash (700,000 shares × $25)    $17,500,000

      To Common Stock                                                                 $17,500,000  

 

Being the issue of 1200 shares of common stock at par for legal fees

Date             Accounts and explanation             Debit                Credit

5th Feb      Legal Fees  (1200 shares × $25)     $30,000

                To Common Stock                                                     $30,000

Being the issue of the common stock in exchange of assets

Date             Accounts and explanation             Debit                Credit

9th Apr        Land                                            $120,000

                 Building                                          $280,000

                Equipment                                        $80,000

     To Common Stock  (40,000 shares × $25)                       $1,000,000  

           To Paid in capital excess of par value

(error noticed as the debit and credit balance do not tall after computation the amount of land, building and equipment  $120,000, $280,000, and $80.000,with respect to the common stock of 40,000 shares × $25)

Being the issuance of the preferred stock.

Date             Accounts and explanation             Debit                Credit

14th Jun    Cash  (25,000 shares × $82)           $2,050,000

         To preferred Stock (25,000 shares × $50)                     $1,250,000

         To Paid in capital excess of par value                               $800,000

On January 1, 2013, the balance in Tabor Co.'s Allowance for Bad Debts account was $13,546. During the first 11 months of the year, bad debts expense of $21,399 was recognized. The balance in the Allowance for Bad Debts account at November 30, 2013, was $9,859. Required: (a) What was the total of accounts written off during the first 11 months

Answers

Answer: $25,086

Explanation:

The bad debt written off is calculated by:

= Opening balance in Allowance for bad debts account + Bad debt expense - Closing balance in Allowance for bad debt

= 13,546 + 21,399 - 9,859

= $25,086

describe five ways in which contract management might adds value after the contract award stage of the sourcing process.​

Answers

Answer:

The five ways for contract management are:

1 - how buyer and supplier work after contract has been awarded.

2 - Key decisions made.

3 - Risk of misunderstanding and disagreement.

4 - Identify opportunities and improve performance.

5 - Performance evaluation against KPIs.

Explanation:

Contract management is essential for any business to succeed. There are five ways in which contract management will add value after contract award stage. Usually value addition is achieved by the response of buyer and seller towards the services after the contract has been awarded. There should be right individuals involved in decision making process. The performance should be evaluated against the KPI mentioned in the contract. If both supplier and  buyer work with mutual understanding there is very less chance for disagreement and value will be added to the contract performance.

A corporate bond with a 6% coupon (paid semiannually) has a yield to maturity of 7.5%. The bond matures in 20 years but is callable at $1050 in ten years. The maturity value is par. Calculate the bond’s yield to call. % terms w/o $ sign. (HINT: Find the current price and then solve for YTC.)

Answers

Answer:

Yield to Call = 8.66%

Explanation:

The computation of the yield to call is shown below:

First determine Current Price of Bond,

PV = [FV = 1,000, PMT = 30, N = 40, I = 0.075 ÷2]

PV = $845.87

Callable Price = $1,050

Now

Calculating Yield to Call,

I = [PV = -845.87, FV = 1,050, N = 20, PMT = 30]

I = 8.66%

Yield to Call = 8.66%

A standard cost _____ indicates the amount of direct labor, direct materials and overhead for one unit of product. Multiple choice question. card variance rate report

Answers

Answer:

card

Explanation:

A standard cost card can be regarded as card that encompass all the itemization or list of overhead, labor and standard amounts of materials, which is required in creating one unit of a product. This card can multiplies quantities that is been required to get to the total standard cost of a product and standard cost of each of the items.

It should be noted that standard cost

card indicates the amount of direct labor, direct materials and overhead for one unit of product.

Jones Corp. reported current assets of $193,000 and current liabilities of $137,000 on its most recent balance sheet. The current assets consisted of $62,000 Cash; $43,000 Accounts Receivable; and $88,000 of Inventory. The acid-test (quick) ratio is: [Round your answer to the nearest two decimal places...ex: 3.246

Answers

Answer:

.77

Explanation:

Calculation to determine what The acid-test (quick) ratio is

Using this formula

Quick Assets = Cash+Accounts Receivable/Current liabilities

Let plug in the formula

Quick Assets=$62,000+43,000/$137,000

Quick Assets=$105,000/$137,000

Quick Assets= .77

Therefore The acid-test (quick) ratio is .77

Assume tuition at the University of Virginia cost $2,962 (per semester) in 2004 and $11,584 in 2012. If the price index was 184 in 2004 and 226 in 2012, then we could say tuition has increased more slowly than inflation. tuition has increased much more rapidly than inflation. tuition has increased at about the same rate as inflation. nominal tuition has increased. tuition suffers from menu costs due to inflation.

Answers

Answer:

tuition has increased much more rapidly than inflation.

Explanation:

2.6

18.6

Error costs are costs associated with ______________ by the cost management system and measurement costs are the costs associated with making poor decisions.

Answers

Measure is better than 6.5

3. The USD depreciates 2% versus the JPY. The USD appreciates 1% versus the MXN. What is the approximate appreciation or depreciation we might see in the MXN/JPY cross exchange rate

Answers

Answer:

The approximate appreciation or depreciation we might see in the MXN/JPY cross exchange rate is 3%.

Explanation:

The approximate appreciation or depreciation we might see in the MXN/JPY cross exchange rate can be stated using the folowing 3 steps.

Step 1. State the initial exchange rates of the currency pairs.

Let first assume the initial exchange rates are as follows:

USD1 = JPY1

USD1 = MXN1

Therefore, we have the initial cross rate as follows:

MXN1 = USD1 = JPY1

MXN1 = JPY1

Step 2. Determine the new exchange rates

The new exchange rates can be determined as follows:

When the USD depreciates 2% versus the JPY, this implies that USD1 * (100% + 2%) = USD1.02 has to be exchanged for JPY1. Therefore, we now have:

USD1.02 = JPY1, or

USD1 = JPY1/1.02

USD1 = JPY0.98

Also, when The USD appreciates 1% versus the MXN, this implies that USD1 * (100% - 1%) = USD0.99 has to be exchanged for MXN1. Therefore, we now have:

USD0.99 = MXN1, or

USD1 = MXN1/0.99

USD1 = MXN1.01

Therefore, we have the new cross rate as follows:

MXN1.01 = USD1 = JPY0.98

MXN1.01 = JPY0.98

MXN1.01 / 1.01 = JPY0.98/1.01

MXN1 = JPY0.97, or

MXN1/0.97 = JPY0.97/0.97

MXN1.03 = JPY1

Therefore, the new exchange rates are as follows:

USD1.02 = JPY1

USD0.99 = MXN1

MXN1.03 = JPY1

c. Determination of appreciation or depreciation we might see in the MXN/JPY

Percentage of depreciation of MXN against JPY = ((Initial MXN/JPY - New MXN/JPY) / Initial MXN/YPY) * 100 = ((1.03 - 1) / 1) * 100 = 3%

Since the percentage of depreciation of MXN against JPY is 3%, this also implies that the percentage of appreciation of JPY against MXN is 3%.

Therefore, the approximate appreciation or depreciation we might see in the MXN/JPY cross exchange rate is 3%.

What is the present value of the annual interest payments on a 10-year, $1,000 par value bond with a coupon rate of 10 percent paid annually, if the yield on similar bonds is 9 percent?

Answers

Answer: $641.77

Explanation:

First find the interest payments:

= Coupon rate * par value

= 10% * 1,000

= $100

The constant payment represents an annuity therefore the present value is that of an annuity.

Present value of an annuity = Annuity * Present value interest factor of annuity, 9% , 10 years

= 100 * 6.4177

= $641.77

The short-run cost function of a company is given by the equation TC=10000+50q, where TC is the total cost and q is the total quantity of output.

a. What is the company's fixed cost?
b. If the company produced 2,000 units of goods what would be its average variable cost?
c. What would be its marginal cost of production?
d. What would be its average fixed cost?
e. Suppose the company borrows money and expands its factory. Its fixed cost rises by $5,000 but its variable cost falls to $45/unit. The cost of interest also enters the equation. Each 1 point increase in the interest rate raises costs by $250. Write the new cost equation.

Answers

Answer:

a. 10000

b. 50

c. 50

d. 5

e. TC = 15000+5Q+250r

Explanation:

TC = 10000+50Q

a. the fixed cost Is 10000

b. variable cost, VC = 50Q

at q =2000 units,

average variable cost = [tex]\frac{VC}{Q}[/tex]

= 50Q/Q

= 50

C. Marginsal cost = d(tc)/dq = 50

d. the average fixed cost = 10000/q

= 10000/2000

= 5

e. the final cost would be = 10000+5000= 15000

the variable cost woul be calculated as= (50-45)Q = 5Q

Interest rate = 250r

the new cost equation = TC = 15000+5Q+250r

Suppose the economy is in long-run equilibrium. Concerns about pollution cause the government to significantly restrict the production of electricity. At the same time, the value of the dollar falls. What would we expect to happen in the short run?
a. The price level will rise, and real GDP might rise, fall, or stay the same.
b. The price level will fall, and real GDP might rise, fall, or stay the same.
c. Real GDP will rise, and the price level might rise, fall, or stay the same.
d. Real GDP will fall, and the price level might rise, fall, or stay the same.

Answers

Answer:

the price level will rise, and real GDP might rise, fall, or stay the same.

Explanation:

Short run

In microeconomics, it is simply defined as the timeframe when all resource prices (including wages) are constant not changing.

Long run

This is also known as the period of time when all resource prices (including wages) change/is altered or do not remain the same.

Long-run equilibrium can change with constant long run aggregate supply (LRAS) and potential output thereby leading to changes only in the price level and this can cause inflation. Due to the changing LRAS, causing an increase in potential output leading to economic growth or decreasing potential output leading to negative growth.

Management at Bank ABC is attempting to determine which types of instruments to use for risk management. When comparing exchange-traded instruments to over-the-counter (OTC) instruments, which characteristic should the bank associate with exchange-traded instruments

Answers

Answer:

Options and Swaps.

Explanation:

Hedging is the process of offsetting risk associated with an asset by taking an opposite position in an underlying asset. The hedging may be profitable or it may be in no loss situation. The most common method of hedging is use of derivatives. It is used to minimize foreign exchange and interest rate movement risks. The few common derivatives are futures, swaps and options.

hamilton construction company uses the percentage of completion method of accounting. in 2020. hamilton began work under

Answers

Question Completion:

Hamilton construction company uses the percentage of completion method of accounting.  In 2020, Hamilton began work on the construction of a hospital, which provides for a contract price of $2,195,000.  Other details follow: 202O 2021 Costs incurred during the year 637,600 1,000,000 Total estimated cost 1,594,000 1,637,600 Billings during the year 427,000 2,195,000 Collections during the year 343,000 1,509,000 What portion of the total contract price would be recognized as revenue in 2020?

Answer options: 2,195,000 878,000 1,097,500 427,000 343,000

Answer:

Hamilton Construction Company

The portion of the total contract price would be recognized as revenue in 2020 is:

= $878,000.

Explanation:

a) Data and Calculations:

Contract price = $2,195,000.

                                                          2020           2021

Costs incurred during the year $637,600  $1,000,000

Total estimated cost                  1,594,000     1,637,600

Billings during the year                427,000    2,195,000

Collections during the year         343,000    1,509,000

Percentage of completion= Cost incurred in 2020/Total estimated cost in 2020 * 100

= $637,600/$1,594,000  * 100

= 40%

Revenue to be recognized in 2020  = 40% * Contract Price

= $878,000 ($2,195,000 * 40%)

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