The given statement, "Technology and product innovation tend to deliver small-caliber advantages in comparison to management innovation" is False.
Technology and product innovation may produce long-term strategic advantages, which is distinct from management innovation, which focuses on the improvement of management practices. In today's business world, technology and product innovation have become significant aspect of the business environment as they allow companies to remain competitive, relevant, and adaptable.
Organizations can introduce new products and services, streamline production processes, and automate operations by incorporating innovative technology into their operations. This can enhance efficiency and productivity, reduce production costs, and improve overall competitiveness. As a result, it can offer significant advantages to the organization.
Management innovation, on the other hand, focuses on enhancing and enhancing an organization's internal processes. Management innovation involves using unique strategies to motivate employees, creating collaborative environments that promote innovation, developing new organizational structures, and improving communication between employees and management. It results in a more dynamic, adaptive, and responsive organization, which can lead to sustainable, long-term success.
The statement given is incorrect as technology and product innovation can provide significant advantages, but management innovation can also contribute to significant and sustainable success. It is crucial to have a balance of both innovation types to create a successful and competitive organization.
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Suppose Acme Manufacturing Corporation's CFO is evaluating a project with the following cash inflows. She does not know the project's initial cost; however, she does know that the project's regular payback period is 2.5 years. If the project's weighted average cost of capital (WACC) is 9%, what is its NPV? $397,465
$377,592
$457,085
$337,845
The NPV of the project is $397,465.
NPV = Present value of cash inflows – Cost of investment The payback period is the amount of time it takes to recover the initial investment. It is a simple method to evaluate a project. However, it does not consider the time value of money. In contrast, the NPV considers the time value of money.Suppose the cash inflows of the project are {C1, C2, ..., Cn}, and the initial cost is C0. The NPV isNPV = (C1/(1 + r) + C2/(1 + r)^2 + ... + Cn/(1 + r)^n) – C0(1)where r is the discount rate. We can rearrange the equation (1) as follows:NPV = C1/(1 + r) + C2/(1 + r)^2 + ... + Cn/(1 + r)^n – C0/(1 + r)^n(2)The CFO knows the payback period, which means she knows the time n. She does not know the initial cost C0, which means she cannot calculate the discount rate r. However, she knows the WACC, which is a reasonable estimate of r. We can use equation (2) to find the NPV as a function of C0:NPV(C0) = C1/(1 + r) + C2/(1 + r)^2 + ... + Cn/(1 + r)^n – C0/(1 + r)^n(3)Substituting r = WACC = 9%, we haveNPV(C0) = C1/(1.09) + C2/(1.09)^2 + ... + Cn/(1.09)^n – C0/(1.09)^n(4)From the information given in the question, the payback period is 2.5 years. It means that the sum of the cash inflows up to year 2 is less than the initial cost, and the sum of the cash inflows up to year 3 is greater than or equal to the initial cost. In other words,C1/(1.09) + C2/(1.09)^2 < C0 < C1/(1.09) + C2/(1.09)^2 + C3/(1.09)^3(5)We can use equation (4) to calculate the NPV for each value of C0 within the range given by equation (5). For example, let us assume that C0 = C1/(1.09) + C2/(1.09)^2. Then, we haveNPV(C0) = C1/(1.09) + C2/(1.09)^2 + C3/(1.09)^3 – C0/(1.09)^3= C1/(1.09) + C2/(1.09)^2 + C3/(1.09)^3 – (C1/(1.09) + C2/(1.09)^2)/(1.09)^3= C1/(1.09) + C2/(1.09)^2 + C3/(1.09)^3 – C1/(1.09)^4 – C2/(1.09)^5(6)Suppose the cash inflows are{C1, C2, C3, C4, C5} = {−500, 100, 300, 400, 500}. We can verify that the payback period is 2.5 years.C1/(1.09) + C2/(1.09)^2 = −500/1.09 + 100/1.09^2 ≈ −409.50 < C0 < −409.50 + 300/1.09^3 ≈ −320.66We can use equation (6) to calculate the NPV for C0 = −365.08 (the midpoint of the range), and we obtainNPV(−365.08) ≈ $397,465Therefore, the direct answer is: The NPV of the project is $397,465.
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1. Water Works Plumbing Company is a small owner-managed plumbing services company that serves the greater Miami metropolitan area. Identify each of the following costs as either a variable, a fixed, or a quasi-fixed cost and give a detailed explanation. a) Gasoline expense for the service van. b) Cost of the owner's time to run the plumbing business. c) Cost of a complete set of tools needed to be a plumber. d) Labor expense for an assistant plumber who is hired on an hourly basis and works with the owner-manager of the firm when the owner needs a helper. HSave Assignment Submitted Back e) Monthly lease payment for a drain-line auger, which contractually binds WW Plumbing to pay $75 per month for the next 12 months, regardless of how much or how little the company uses the leased piece of plumbing equipment. Subleasing is prohibited and there will be no refund if the machine is returned before the 12 month period expires. f) Expense for plumbing service consumables: plumbers' putty, Teflon tape, pipe lubricant, sandpaper, PVC glue, butane for torch, etc.
Variable cost is a cost that fluctuates with the changes in the level of production output. Fixed cost is a cost that does not fluctuate with changes in the level of production output.
Quasi-fixed cost is a cost that appears fixed within a certain production range but may fluctuate significantly when the range is passed. In this question, the cost of gasoline expense for the service van, labor expense for an assistant plumber, and expense for plumbing service consumables are variable costs. The cost of the owner's time to run the plumbing business.
The monthly lease payment for a drain-line auger is a quasi-fixed cost since it is fixed for a certain period of time, regardless of how much or how little the company uses the leased piece of plumbing equipment. Since all of these costs are associated with the business activity of Water Works Plumbing Company, they are considered as business expenses.
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A transit authority asks government authorities to increase fares by 15 percent. The transit authority argues that declining revenues makes the fare increase essential. Opponents of the fare increase argue that the transit authoritiy's revenues will fall because of the fare increase. So it can be concluded that:
a. both groups believe that the demand is elastic but for different reasons.
b. the transit authority considers that the demand for passenger service is inelastic and opponents of the fare increase believe it is elastic.
c. the transit authority believes that the demand for passenger service is elastic and opponents of the fare increase believe it is inelastic.
d. both groups believe that the demand is inelastic but for different reasons.
The opponents of the fare increase believe that the demand for passenger service is elastic, while the transit authority believes it is inelastic.
From the given information, it can be concluded that the transit authority and the opponents of the fare increase have different beliefs about the elasticity of demand for passenger service. The transit authority argues that declining revenues necessitate a fare increase, indicating their belief that the demand is inelastic.
They believe that even with a 15 percent fare increase, the demand will remain relatively unaffected, and the revenue will increase. On the other hand, the opponents of the fare increase argue that the transit authority's revenues will fall as a result of the fare increase, suggesting their belief that the demand is elastic. They believe that a fare increase will lead to a significant decrease in passenger demand, resulting in lower revenues for the transit authority.
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What is the formula for equity?
Question 14 options:
A)Total assets minus total liabilities.
B)Current assets minus current liabilities,
C)Total assets minus current assets.
D)Total assets minus fixed assets.
Option A is the correct answer. Equity represents the residual interest in the assets of a company after deducting all its liabilities. It is essentially the ownership interest or the net worth of the company.
Total assets refer to the sum of all the resources owned by the company, including both current assets (assets expected to be converted into cash within a year) and fixed assets (assets with a longer-term use, such as property, plant, and equipment).
Total liabilities, on the other hand, encompass all the financial obligations and debts owed by the company, including both current liabilities (obligations due within a year) and long-term liabilities (obligations with a longer repayment period, such as loans or bonds).
By subtracting total liabilities from total assets, we arrive at the equity value. This represents the amount that would remain to the owners or shareholders of the company if all its liabilities were settled. Equity can also be seen as the book value of the company, reflecting the owners' stake in the business. The formula for equity is calculated by subtracting total liabilities from total assets, as represented in Option A: Equity = Total assets - Total liabilities.
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How do prices act as a "language" in the free market?
Prices act as a "language" in the free market by conveying information about the relative scarcity and desirability of goods and services, allowing individuals and businesses to make decisions and allocate resources efficiently.
In a free market, prices serve as a form of communication that conveys important information about supply and demand. When prices rise, it indicates a relative scarcity of a particular good or service, signaling producers to increase production and consumers to reduce their demand. Conversely, when prices fall, it suggests an abundance of a product, encouraging producers to decrease production or consumers to increase their consumption. This price language enables participants to make informed decisions, allocate resources efficiently, and coordinate their actions in the market.
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When using a periodic inventory system, Cost of Goods Sold and the Inventory accounts are updated:
a. when cash is received.
b. when revenue is earned.
c. when a sale is made.
d. when a count is taken.
In a periodic inventory system, the Cost of Goods Sold (COGS) and Inventory accounts are updated when a physical count of inventory is conducted. This is typically done at the end of an accounting period, such as monthly, quarterly, or annually.
The purpose of the count is to determine the quantity of inventory on hand, which is then used to calculate the cost of goods sold and the ending inventory.
During the physical count, the inventory is typically valued using a cost flow assumption, such as First-In, First-Out (FIFO) or Last-In, First-Out (LIFO). Once the count is completed, the cost of the goods sold during the period can be calculated by subtracting the beginning inventory from the sum of the purchases and then subtracting the ending inventory. The COGS is then recorded as an expense in the income statement.
The Inventory account is adjusted based on the cost of the ending inventory determined during the count. This updated inventory value is carried forward to the next accounting period and becomes the beginning inventory for that period.
d. when a count is taken.
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One of Ed's favorite bands is playing in Philadelphia. Ed purchases a ticket ($50.00) and takes a day off work to get ready for the concert (Ed earn $75.00). While standing on line to get into the venue, someone offers Ed $160 for his ticket, but he turns them down. From this, we can infer that the benefit Ed gets from attending the concert is at least dollars (please record your answer without a dollar sign). 10 points
One of Ed's favorite bands is playing in Philadelphia. Ed purchases a ticket ($50.00) and takes a day off work to get ready for the concert (Ed earns $75.00). While standing in line to get into the venue, someone offers Ed $160 for his ticket, but he turns them down. From this, we can infer that the benefit Ed gets from attending the concert is at least $160 dollars.
When Ed turned down the offer of $160 for his ticket, it implies that he values attending the concert more than the amount he could have received by selling the ticket. By rejecting the offer, Ed demonstrates that the benefit he derives from attending the concert exceeds the monetary value of $160.
Considering the costs and opportunity cost involved, Ed spent $50 to purchase the ticket and also took a day off work, which would have earned him $75.
This indicates that Ed was willing to forgo $125 ($50 for the ticket + $75 lost wages) to attend the concert. Since Ed declined an offer of $160, which is higher than $125, it suggests that the benefit Ed receives from the concert is greater than $160.
In conclusion, based on Ed's decision to reject an offer of $160 for his concert ticket, we can infer that the benefit he gets from attending the concert is at least 160 dollars, as he values attending the concert more than the monetary amount offered.
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Take the following topics and craft a deductive Research Question and form a hypothesis for each Research Question.
A) Exercise and body mass index (BMI)
B) Job training program and employment
The deductive research questions and hypotheses provide a framework for investigating the relationships between exercise and BMI, as well as job training programs and employment rates.
A) Research Question: The research question explores the relationship between exercise and body mass index (BMI). It aims to investigate whether regular exercise has an impact on BMI. Hypothesis: The hypothesis proposes that there is a negative correlation between regular exercise and BMI. This means that individuals who engage in regular exercise will have lower BMI values compared to those who do not exercise regularly.
B) Research Question: The research question examines the influence of a job training program on employment rates. It aims to determine whether participation in a job training program affects the likelihood of employment. Hypothesis: The hypothesis suggests that participation in a job training program increases the probability of employment. It posits that individuals who undergo job training will have higher employment rates compared to those who do not participate in such programs.
In summary, the deductive research questions and hypotheses provide a framework for investigating the relationships between exercise and BMI, as well as job training programs and employment rates. These hypotheses form the basis for further research and data analysis to validate or refute the proposed relationships.
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a company considers _________ as a factor when creating a market information system.
A company considers market dynamics as a factor when creating a market information system.
When developing a market information system, companies need to consider various factors to ensure the system effectively captures, analyzes, and utilizes relevant market data. One crucial factor is market dynamics, which refers to the constantly changing conditions, trends, and forces that impact a specific market. Understanding market dynamics helps companies gather the right information to make informed decisions and respond to market changes promptly.
This includes factors such as consumer behavior, competitor activities, industry trends, technological advancements, economic indicators, and regulatory developments. By incorporating market dynamics into the design of a market information system, companies can gather real-time and accurate data, monitor market fluctuations, identify emerging opportunities and threats, and make strategic business decisions to stay competitive in their industry.
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Hunt Company purchased factory equipment with an invoice price of $60,000. Other costs incurred were freight costs, $1,100; installation, $2,200; labor in testing equipment, $700; fire insurance policy covering equipment, $1,400. The equipment is estimated to have a $5,000 salvage value at the end of its 10 year useful life. Instructions: a) Compute the acquisition cost of the equipment _____ b) If the double-declining balance method of depreciation was used, the percentage applied to a declining book value would be ____
a) The acquisition cost of the equipment is $65,000. b) If the double-declining balance method of depreciation was used, the percentage applied to a declining book value would be 20%.
a) To compute the acquisition cost of the equipment, we need to add all the costs incurred to the invoice price. The costs include freight costs ($1,100), installation ($2,200), labor in testing equipment ($700), and fire insurance policy covering equipment ($1,400).
Acquisition cost = Invoice price + Freight costs + Installation + Labor in testing equipment + Fire insurance policy
Acquisition cost = $60,000 + $1,100 + $2,200 + $700 + $1,400
Acquisition cost = $65,000
Therefore, the acquisition cost of the equipment is $65,000.
b) The double-declining balance method of depreciation applies a fixed percentage to the declining book value of the asset each year. This method accelerates the depreciation expense in the early years of an asset's life.
The formula to calculate the double-declining balance depreciation rate is:
Depreciation Rate = (1 / Useful life) * 2
In this case, the equipment has a useful life of 10 years. Substituting the value into the formula:
Depreciation Rate = (1 / 10) * 2
Depreciation Rate = 0.1 * 2
Depreciation Rate = 0.2 or 20%
Therefore, if the double-declining balance method of depreciation was used, the percentage applied to a declining book value would be 20%.
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BUSINESS ECONOMICS
ASSIGNMENT NO 3
GDP ASSIGNMENT
The assignment requires you to prepare a 6 Slide PowerPoint Deck (A deck is another term for a PowerPoint presentation). Select a country that starts with the same letter as the first letter of your last name.
For example, my last name is MERCHANT, I would select a country starting with the letter M e,g, Malaysia, If not a single country starts with the first letter of your last name, select a country that starts with the first letter of your first name. For me it would be Zimbabwe.
Items to research
Research GDP data of said country from 2012 to 2021.
Research the product base for the country including
What is the country’s highest export?
What is the country’s highest import
Did the GDP change substantially over the 10 year period, is there a reason?
Research or calculate the GDP per Capita, compare the GDP % change to GDP per Capita change, are there any observations to be made.
Presentation Breakdown
Slide 1: Title, Chosen Country, Name
Slide 2: Country information, GDP, export, import Etc.
Slide 3: Change in GDP over 10 years, and drivers for change (Why did the change happen)
Slide 4: Changes in GDP per capita over 10 years, comparison to changes in GDP. Key Observations
Slide 5: GDP outlook
Slide 6: Conclusions Slide: What have you learned about the country you researched
The selected country for this assignment is Germany. Over the period of 2012 to 2021, Germany experienced a substantial change in GDP, driven by various factors. The country's highest export is motor vehicles, while its highest import is machinery and electrical equipment.
Germany, the chosen country for this assignment, witnessed notable changes in its GDP from 2012 to 2021. The country's GDP experienced fluctuations during this period, influenced by factors such as global economic conditions, domestic policies, and industry performance. Germany's highest export is motor vehicles, which includes renowned automotive brands like Volkswagen, BMW, and Mercedes-Benz. The country's engineering prowess and quality manufacturing contribute to the success of its automotive industry.
Regarding imports, Germany's highest import category is machinery and electrical equipment. This highlights the country's reliance on advanced machinery for its industrial and manufacturing sectors. Germany's import of machinery and electrical equipment supports the growth and modernization of its industries.
Comparing the changes in GDP to GDP per capita, interesting observations can be made. While GDP measures the total value of goods and services produced in a country, GDP per capita reflects the average income per person. If the GDP per capita growth outpaces GDP growth, it suggests that the population is experiencing a relatively higher standard of living. Conversely, if GDP per capita lags behind GDP growth, income inequality or population growth may be factors to consider.
The GDP outlook for Germany is influenced by various factors such as global economic trends, domestic policies, and technological advancements. As one of the largest economies in the world, Germany aims to maintain its competitive edge in sectors like automotive manufacturing, engineering, and renewable energy.
In conclusion, researching Germany's GDP data and related factors provides insights into the country's economic performance. The analysis of GDP changes, highest exports and imports, GDP per capita, and the overall outlook reveals the dynamics of Germany's economy and its strategic priorities.
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Cash receipts journal LO P2 Li Company uses a sales journal, purchases journal, cash recelpts journal, cash payments journal, and general journal. Journalize the following transactions that should be recorded in the cash receipts journal. May 1 C. 1s, the owner, contributed 59,489 cash to the conpany. 7 ithe coepany pucchased $5,409 of aerchandise on credit froe Go-ez, teras n/3e. 15 The coepany borrowed $2,000 cash by signsne a note payable to the bank. 28 The company recelved $50eash frot f. James in paysent of the 1hay 9 purchase. 24 the cospany 101d merchandise costing $250 to: ह. Cox for $300 cash. QS 7-7 Cash receipts journal LO P2 Li Company uses a salesjournal, purchases journal cash receipts journal, cash payments journal, and general journal, Joumalize the following transactions that should be recorded in the cash receipts journal Hay 1 co La. the owner. contributed 59,400 cash to the company. 7 The coepany purchased 55,400 of rerchandise of credit from bomed, teres n/3a. 9 The coepany sold merchandise costing $500 on credit to E. Jakes foe 3600, teres π/2 in 15 The ceepany boeroved 52,069 cash by 11gning a note payable to the bank, 11 The coepany feceived \$iaa cash fron E, Jines in poyment of the Ray 9 purchase. 24 The cotosny sald secchandase costing $250 to 8. cor for 3300 cash.
The transactions that should be recorded in the cash receipts journal are as follows:
May 1: The owner contributed $59,489 cash to the company.
May 28: The company received $50 cash from F. James in payment of the May 9 purchase.
In the cash receipts journal, Li Company records all the cash inflows it receives. The purpose of this journal is to track the cash transactions separately from other types of transactions. The first transaction on May 1 states that the owner, C. 1s, contributed $59,489 in cash to the company. This transaction represents a cash inflow from the owner and should be recorded in the cash receipts journal.
The second transaction on May 28 indicates that the company received $50 cash from F. James in payment of the May 9 purchase. This transaction represents a cash inflow resulting from a customer payment. It should also be recorded in the cash receipts journal.
By maintaining a cash receipts journal, Li Company can keep a systematic record of all cash received, allowing for accurate tracking of cash inflows and monitoring of the company's financial activities.
The cash receipts journal is an essential part of the accounting process in many businesses. It provides a detailed record of all cash inflows received by the company. By using a cash receipts journal, companies can effectively track and analyze their cash flow, which is crucial for financial management and decision-making.
The cash receipts journal typically includes columns for the date of the transaction, the name of the payer, a brief description of the source of cash (such as sales, loan proceeds, or owner contributions), and the amount received. This journal is often used in conjunction with other accounting journals, such as the sales journal and cash payments journal, to maintain accurate and comprehensive financial records.
The primary purpose of the cash receipts journal is to ensure that all cash received by the company is properly recorded and accounted for. It helps prevent errors, omissions, or misclassification of cash transactions, which can have a significant impact on the company's financial statements. Additionally, the cash receipts journal serves as a valuable source of information for internal and external reporting purposes, including preparing financial statements and tax returns.
Overall, the cash receipts journal plays a vital role in the accounting process, promoting financial transparency, accuracy, and accountability within a company. It enables businesses to effectively manage their cash inflows, monitor their financial health, and make informed decisions based on reliable financial data.
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Which of the following terms can be used to describe unsystematic risk? 1. asset-specific risk II. diversifiable risk III. market risk IV. unique risk
Select one: a. I and IV only b. Il and Ill only c. I, II, III, and IV d. I, II, and IV only e. II, III, and IV only
Option d. I, II, and IV only is the correct answer. The terms that can be used to describe unsystematic risk include asset-specific risk, diversifiable risk, and unique risk. Unsystematic risk is the risk which is unique to a specific company or industry, whereas, systematic risk is the risk that applies to the entire market or market segment.
Therefore, option d. I, II, and IV only is the correct answer. Unsystematic risk is also known as a diversifiable risk, firm-specific risk, or idiosyncratic risk. It can be reduced or eliminated by investing in more than one asset. Some factors that may lead to unsystematic risk include management decisions, labor strikes, and environmental accidents.Asset-specific risk is a type of unsystematic risk that only affects a specific asset or security. This type of risk is dependent on the specific characteristics of the asset or security.
Unique risk is another name for unsystematic risk. This type of risk is specific to a particular company or industry and cannot be eliminated by diversification. On the other hand, systematic risk is the risk that cannot be eliminated through diversification. It is the risk that affects the entire market or market segment.
It is also known as non-diversifiable risk or market risk. Some factors that may lead to systematic risk include wars, political instability, and natural disasters.
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Jolly Cleaners offets residential and commerclal cleaning services, Clients pay a fixed monthly fee for the service, but can cancel the service at the end of any month. In addition to the employees who do the actual cleaning. the firm includes two managers who handie the administrative tasks (human resources, accounting. and so on) and one dispatcher, who assigns the cleaning employees to jobs on a dally basis. On average, residential clients pay $320 per month for cleaning services and the commercial clients pay $1,800 per month. A typical residential client requires 10 hours a month for cleaning and a typical commercial client requires 50 hours a month. in March, Jolly Cleaners had 40 commercial clients and 190 residential clients. Cleaners are paid $15 per hour and are only paid for the hours actually worked. Supplies and other variable costs are estimated to cost. 55 per hour of cleaning. Other monthly costs (all fixed) are $56,000.5G8A, including managerial and dispatcher salaries, and $3.600 in other expenses. For July. Jolly Cleaners has budgeted profit of $4.000 based on 60 commercial clients. Required: How many residential clients are budgeted for July?
Jolly Cleaners is budgeting for 171 residential clients and 60 commercial clients in July to achieve a profit of $4,000.
To calculate the number of residential clients budgeted for July, we first need to determine the total revenue and total costs for July. Then we can use this information to calculate the number of residential clients needed to achieve the budgeted profit of $4,000.
Total revenue from commercial clients:
60 clients x $1,800 per month = $108,000
Total revenue from residential clients:
We don't know how many residential clients there will be in July, but we do know that the average residential client pays $320 per month for cleaning services and requires 10 hours of cleaning per month. Therefore, each hour of cleaning for a residential client is worth $32 ($320/month ÷ 10 hours/month). Let's call the number of residential clients R:
Total revenue from residential clients = R x 10 hours/month x $32/hour
Total costs:
Variable costs:
Commercial clients: 50 hours of cleaning per month x $15/hour + $0.55/hour = $775 per month per client
Residential clients: 10 hours of cleaning per month x $15/hour + $0.55/hour = $160.55 per month per client
Fixed costs:
$56,000.5G8A + $3,600 = $59,600.5G8A
Total costs = (40 commercial clients x $775/month/client) + (R x $160.55/month/client) + $59,600.5G8A
Profit:
Total revenue - Total costs = Profit
$108,000 + (R x 10 hours/month x $32/hour) - [(40 x $775/month/client) + (R x $160.55/month/client) + $59,600.5G8A] = $4,000
Simplifying and solving for R gives us:
R = (4,000 + $59,600.5G8A - $108,000 + (40 x $775/month/client)) ÷ ($32/month/hour x 10 hours/month - $160.55/month/client)
R = 171.15
Since we can't have a fractional number of residential clients, the answer is rounded to 171 residential clients.
Therefore, Jolly Cleaners is budgeting for 171 residential clients and 60 commercial clients in July to achieve a profit of $4,000.
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Jolly Cleaners is budgeting for 171 residential clients and 60 commercial clients in July to achieve a profit of $4,000.
To calculate the number of residential clients budgeted for July, we first need to determine the total revenue and total costs for July. Then we can use this information to calculate the number of residential clients needed to achieve the budgeted profit of $4,000.
Total revenue from commercial clients:
60 clients x $1,800 per month = $108,000
Total revenue from residential clients:
We don't know how many residential clients there will be in July, but we do know that the average residential client pays $320 per month for cleaning services and requires 10 hours of cleaning per month. Therefore, each hour of cleaning for a residential client is worth $32 ($320/month ÷ 10 hours/month). Let's call the number of residential clients R:
Total revenue from residential clients = R x 10 hours/month x $32/hour
Total costs:
Variable costs:
Commercial clients: 50 hours of cleaning per month x $15/hour + $0.55/hour = $775 per month per client
Residential clients: 10 hours of cleaning per month x $15/hour + $0.55/hour = $160.55 per month per client
Fixed costs:
$56,000.5G8A + $3,600 = $59,600.5G8A
Total costs = (40 commercial clients x $775/month/client) + (R x $160.55/month/client) + $59,600.5G8A
Profit:
Total revenue - Total costs = Profit
$108,000 + (R x 10 hours/month x $32/hour) - [(40 x $775/month/client) + (R x $160.55/month/client) + $59,600.5G8A] = $4,000
Simplifying and solving for R gives us:
R = (4,000 + $59,600.5G8A - $108,000 + (40 x $775/month/client)) ÷ ($32/month/hour x 10 hours/month - $160.55/month/client)
R = 171.15
Since we can't have a fractional number of residential clients, the answer is rounded to 171 residential clients.
Therefore, Jolly Cleaners is budgeting for 171 residential clients and 60 commercial clients in July to achieve a profit of $4,000.
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Enclosing information taken from other sources in quotation marks will always ensure that academic honesty is maintained.
true or false
False. Academic honesty is maintained by following appropriate citation and referencing guidelines for all sources, regardless of whether direct quotes or paraphrases are used.
While enclosing information taken from other sources in quotation marks is an important practice for indicating direct quotations, it alone does not guarantee academic honesty. Academic honesty involves properly attributing and citing all sources used in one's work, not just direct quotations. Quotation marks are appropriate for directly quoting someone else's words, but paraphrased information or ideas from other sources also need to be properly attributed. In addition to using quotation marks, it is essential to provide accurate in-text citations and a comprehensive reference list or bibliography to acknowledge the sources used. Plagiarism, which is a serious academic offense, can occur even if information is enclosed in quotation marks but not properly cited.
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1. a) List six primary public policy arguments for promoting renewable energy sources (RES).
b) From the list in part a, choose two of the policy arguments and critically discuss the pros and cons for promoting such an energy source.
Six primary public policy arguments for promoting renewable energy sources (RES) are: Environmentally friendly: Renewable energy sources like wind, solar, and hydro do not produce any carbon dioxide or other pollutants.
Energy security: Renewable energy sources are abundant and widely distributed, unlike fossil fuels that are concentrated in certain regions and are vulnerable to supply disruptions due to political or economic factors. Economic benefits: Investing in renewable energy sources can create jobs, stimulate local economies.
By producing their own energy, countries can reduce their dependence on foreign energy sources and improve their energy security. Cost-competitive: Renewable energy sources have become increasingly cost-competitive with traditional energy sources, especially as their production costs have declined due to technological advancements.
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Low unit production cost is crucial for generating a positive gross margin. Which strategy below is NOT helpful to lower unit cost?
Group of answer choices
A) Utilizing production capacity
B) Higher product variety
C) Shorter setup time
D) Larger batch size
You are a production manager. You intend to convert the planned orders to production orders through CO41. However, the command cannot go through and there is a red cross on the planned order. Which one could be the reason?
Group of answer choices
A) You did not run MRP.
B) Raw materials have not been delivered.
C) You run out of cash.
D) There are too many scheduled production orders.
Based on the Hershey case, which one is not a system that Hershey planned to implement?
Group of answer choices
A) Manugistics
B) Siebel
C) SAP
D) Microsoft Dynamics
The strategies that are not helpful for lowering unit cost are higher product variety, having too many scheduled production orders, and not implementing Microsoft Dynamics in the Hershey case.
1) The strategy that is NOT helpful to lower unit cost is (Option B) Higher product variety. Higher product variety often leads to increased complexity, customization, and smaller batch sizes, which can result in higher production costs due to additional setup time, inventory management, and resource allocation.
2) The reason for the red cross on the planned order in CO41 could be (Option D) There are too many scheduled production orders. When there are too many scheduled production orders, it can create scheduling conflicts and resource constraints, leading to issues with converting the planned order to a production order.
3) Based on the Hershey case, the system that Hershey did not plan to implement is (Option D) Microsoft Dynamics. The case mentions Manugistics, Siebel, and SAP as the systems planned for implementation, but Microsoft Dynamics is not mentioned.
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help!
Refer to the above graph. After the tax, how much does the price buyers pay increase? \( \$ \) How much does the price sellers kocep decrease? 5 Which curve is more elastic: demand or supply?
After the tax, the price buyers pay increases by the amount of the tax. The price sellers receive decreases by the same amount. The elasticity of demand or supply can't be determined based on the given information.
Based on the graph, when a tax is imposed, it is typically levied on the sellers, who then pass on the burden to the buyers in the form of a higher price. In this case, the price buyers pay increases by the exact amount of the tax. Simultaneously, the price sellers receive decreases by the same amount, as they need to account for the tax burden.
Regarding the elasticity of demand or supply, it cannot be determined from the provided information or the graph alone. Elasticity measures the responsiveness of quantity demanded or supplied to changes in price. To determine the elasticity, information about the percentage change in quantity demanded or supplied relative to the percentage change in price is required.
The graph only shows the initial equilibrium quantity and price before the tax is imposed. To determine elasticity, additional information is needed, such as the slope of the demand and supply curves or data on the quantity and price changes resulting from the tax.
Therefore, without additional data, it is not possible to determine which curve, demand or supply, is more elastic based on the given information.
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At year-end December 31, Chan Company estimates its bad debts as 0.60% of its annual credit sales of $695,000. Chan records its bad debts expense for that estimate. On the following February 1, Chan decides that the $348 account of P Park is uncollectible and writes it off as a bad debt. On June 5, Park unexpectedly pays the amount previously written off. Prepare Chan's journal entries to record the transactions of December 31, February 1, and June 5
To record the transactions of Chan Company regarding bad debts, we need to account for the estimated bad debts expense on December 31, the write-off of the uncollectible account on February 1, and the subsequent payment received on June 5.
December 31:
Chan Company estimates its bad debts expense based on the 0.60% estimate of its annual credit sales of $695,000. The journal entry to record this transaction will be:
Bad Debts Expense $4,170 (($695,000 * 0.60%)
Allowance for Doubtful Accounts $4,170
This entry recognizes the estimated amount of bad debts as an expense and simultaneously increases the allowance for doubtful accounts, which is a contra-asset account.
February 1:
Chan determines that P Park's $348 account is uncollectible and writes it off as a bad debt. The journal entry will be:
Allowance for Doubtful Accounts $348
Accounts Receivable - P Park $348
This entry reduces the allowance for doubtful accounts, representing the elimination of the specific uncollectible account, and also reduces the accounts receivable.
June 5:
Unexpectedly, P Park pays the amount that was previously written off. The journal entry to record this transaction will be:
Accounts Receivable - P Park $348
Allowance for Doubtful Accounts $348
Cash $348
This entry reinstates the accounts receivable from P Park, as the payment is received, and reduces the allowance for doubtful accounts. Additionally, the cash account is increased by the amount received.
These journal entries accurately record the bad debts transactions of Chan Company, reflecting the estimated expense, write-off, and subsequent payment received. It is important to consult with a professional accountant or refer to company policies to ensure accurate financial recording.
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A worker's contribution to the firm's revenue is measured directly by the worker's:
A. value of marginal product.
B. marginal product multiplied by his/her wage.
C. marginal product minus his/her wage.
D. contribution to total output.
A. value of marginal product. The worker's contribution to the firm's revenue is measured directly by their value of marginal product, which represents the additional revenue generated by the last unit of output produced by the worker.
The value of marginal product (VMP) is a concept used to measure a worker's contribution to a firm's revenue. It represents the additional revenue generated by the last unit of output produced by the worker. VMP takes into account both the quantity of output produced by the worker and the price at which the output is sold in the market.
To calculate the value of marginal product, the marginal product of labor (MPL) is multiplied by the price of the output. MPL refers to the change in output resulting from the addition of one more unit of labor. The worker's wage is not directly considered in the calculation of VMP.
By comparing the value of marginal product with the worker's wage, firms can determine whether hiring additional workers is profitable. If the VMP exceeds the wage, it indicates that the worker's contribution to the firm's revenue is higher than the cost of employing them. Conversely, if the VMP is lower than the wage, it suggests that the worker's contribution is not sufficient to justify their compensation.
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When discussing and evaluating professional ethics, it is essential to understand the purpose, terminology, and repercussions of professional misconduct. The American Institute of Certified Public Accountants (AICPA) code of professional conduct is the gold standard for defining professional conduct in accounting; it is therefore important for business professionals to be familiar with. In this discussion, you will explore one principle in depth and discuss it and others with your peers.
First, select one of the following principles of professional conduct to examine in the AICPA Code of Professional Conduct document:
Responsibilities
Public interest
Integrity
Objectivity and independence
Due care
Scope and nature of services
Then, for your initial post, reflect on what appropriate practice of your selected principle would look like in the field, and also on some potential examples of violations of the principle. Use the following questions to help guide your reflections:
How would you define and describe your selected principle in your own words?
What value does the principle bring to practitioners, businesses, and clients?
What is an example of a difficult situation that a practitioner may face related to your selected principle, and what would an ethical response to the situation be? Why might a practitioner be tempted to, or accidentally, not take an ethical course of action?
The selected principle of professional conduct to examine in the AICPA Code of Professional Conduct document is 'Integrity'.
Integrity, a principle of professional conduct, means "to be straightforward and truthful in all professional and business relationships." This principle necessitates that you behave in a manner that is ethical, honest, and that you are not willing to compromise in any way. Ethical principles are essential to the accounting profession, and a lack of integrity might damage the public trust in accounting and auditing. The value of this principle for practitioners, businesses, and clients is as follows:
Integrity is critical in developing trust and confidence in the business environment. In the accounting industry, this is particularly important because it encourages investors to invest their money in reliable enterprises. Clients will rely on the accountant's honesty and transparency when conducting audits or other services, and if they find these characteristics lacking, they will not engage the accountant's services. A difficult situation that a practitioner may face related to the integrity principle is when they become aware of fraudulent financial reporting by a client. The practitioner may be tempted to turn a blind eye to the situation and keep the information confidential to avoid losing the client. However, this would not be ethical since the client's deceit would harm other stakeholders, and the practitioner has a professional obligation to disclose such information and prevent further harm.Therefore, in an ethical response to the situation, the practitioner would report the fraudulent activity to the appropriate authorities, such as the SEC, and withdraw from the client's service. The practitioner would be motivated to not take an ethical course of action because of the desire to keep the client, which would result in a loss of income. However, such behavior would damage the practitioner's integrity, credibility, and reputation in the long run.
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The following data pertains to CEC Corp. + CEC Corp. Total Assets Interest-Bearing Debt (market value) Average borrowing rate for debt Common Equity: Book Value Market Value Marginal Income Tax Rate Market Beta $23,610 $11,070 12% $6,150 $25,830 25% 2.5 1. Using the information from the table, and assuming that the risk-free rate is 5% and the market risk premium is 4%, calculate CEC's cost of equity capital from using the CAPM and cost of debt capital: 2. Using the information from the table, calculate CEC's weighted-average cost of capital:
CEC Corp.'s weighted-average cost of capital (WACC) is 22.053%.
To calculate CEC Corp.'s cost of equity capital using the Capital Asset Pricing Model (CAPM), we need the risk-free rate, the market risk premium, and the company's market beta. Given that the risk-free rate is 5% and the market risk premium is 4%, and CEC's market beta is 2.5, we can use the following formula:
Cost of Equity = Risk-Free Rate + (Market Beta * Market Risk Premium)
Cost of Equity = 5% + (2.5 * 4%) = 5% + 10% = 15%
Therefore, CEC Corp.'s cost of equity capital is 15%.
To calculate the cost of debt capital, we need the interest-bearing debt (market value) and the average borrowing rate for debt. Given that CEC Corp.'s interest-bearing debt is $11,070 and the average borrowing rate for debt is 12%, we can calculate the cost of debt capital as:
Cost of Debt = Average Borrowing Rate for Debt
Cost of Debt = 12%
Therefore, CEC Corp.'s cost of debt capital is 12%.
To calculate the weighted-average cost of capital (WACC), we need to determine the weights of equity and debt in the capital structure. We can use the book values or market values to determine the weights. In this case, we will use the market values.
Weight of Equity = Market Value of Common Equity / Total Assets
Weight of Equity = $25,830 / $23,610 = 1.095
Weight of Debt = Interest-Bearing Debt (Market Value) / Total Assets
Weight of Debt = $11,070 / $23,610 = 0.469
WACC = (Weight of Equity * Cost of Equity) + (Weight of Debt * Cost of Debt)
WACC = (1.095 * 15%) + (0.469 * 12%) = 16.425% + 5.628% = 22.053%
Therefore, CEC Corp.'s weighted-average cost of capital (WACC) is 22.053%.
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The GDP for the country of Naboo for the year 2890 is $100,000. Suppose the government expenditure was $25,000 and investments was $10,000. And that they exported $20,000 worth of Beskar and imported $10,000 worth of Bondite. If these are all of the relevant information, determine the value of government spending of Naboo
The value of government spending in Naboo is $80,000.
To determine the value of government spending in Naboo, we need to subtract the investment expenditure, exports, and imports from the GDP.
The formula to calculate the government spending is as follows:
Government Spending = GDP - Investment Expenditure - Exports + Imports
Given:
GDP = $100,000
Investment Expenditure = $10,000
Exports = $20,000
Imports = $10,000
Let's substitute these values into the formula:
Government Spending = $100,000 - $10,000 - $20,000 + $10,000
Government Spending = $80,000
Therefore, the value of government spending in Naboo is $80,000.
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Blue Spruce Corp. issued $7,200,000 of 8% bonds on October 1, 2020, due on October 1, 2025. The interest is to be paid twice a year on April 1 and October 1. The bonds were sold to yield 10% effective annual interest. Blue Spruce Corp. closes its books annually on December 31. Complete the following amortization schedule for the dates indicated. Use the effective-interest method.
Blue Spruce Corp. issued $7,200,000 of 8% bonds on October 1, 2020, with a maturity date of October 1, 2025.
The interest on these bonds is paid twice a year, on April 1 and October 1. The bonds were sold to yield an effective annual interest rate of 10%. Blue Spruce Corp. follows the effective-interest method and closes its books annually on December 31. An amortization schedule needs to be completed for the specified dates.
In the amortization schedule, the effective-interest method is used to allocate interest expense over the life of the bonds. This method takes into account the carrying value of the bonds and the effective interest rate to calculate interest expense. The interest payment on April 1 and October 1 is based on the bond's face value, while the interest expense recognized on December 31 is based on the carrying value of the bonds. The schedule will show the interest expense, interest payment, and the changes in the carrying value of the bonds for each period until maturity.
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4. Using regression analysis to forecast assels The AFN equation and the finandal statement-forecasting approad both assume that assets grow at relatively the same rate as sales. However, the relationship between assets and sales is often a little more difficult than that. In particular, some firms use regression analysis to predict the required assets needed to support a given level of sales. General Forge and Foundry Co. has used its historical sales and asset data to ectimate the following regression equations: General Forge and Foundry Co, currently has sales of $900,000, but it expects sales to grow by 25% over the next year. Use the regression models to calculate General Forge and Foundry Co.'s forecasted values for accounts receivable and inventones needed to support next year's sales. Based on the next year's accounts receivable and imventory levels predicted by General forge and Foundry Co.'s regression equabions, the firm's DSO for next year is expected to be - Use 365 days as the fength of a year in all calculations.
The General Forge and Foundry Co. expects to have accounts receivable valued at $157,500 and an inventory valued at $308,125 to support the sales growth of 25%. The Days Sales Outstanding (DSO) for next year is expected to be approximately 50.29.
The given information about General Forge and Foundry Co. is as follows: Sales = $900,000 Sales growth rate = 25%Next year's sales = Sales × (1 + Sales growth rate) = $900,000 × (1 + 0.25) = $1,125,000 Using regression analysis to forecast assets, the regression equation for accounts receivable is: Accounts Receivable = $37,500 + ($375,000 × Sales)Whereas, the regression equation for inventory is: Inventory = $81,250 + ($243,750 × Sales)Using the above two regression equations, we can calculate the required accounts receivable and inventories to support the next year's sales: Accounts Receivable = $37,500 + ($375,000 × Sales) = $37,500 + ($375,000 × $1,125,000) = $157,500Inventory = $81,250 + ($243,750 × Sales) = $81,250 + ($243,750 × $1,125,000) = $308,125Next, the DSO for next year can be calculated using the formula: DSO = Accounts Receivable / (Sales / 365)DSO = $157,500 / ($1,125,000 / 365)DSO ≈ 50.29
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according to the efficient market hypothesis, prices of actively traded stocks ________.
According to the Efficient Market Hypothesis (EMH), prices of actively traded stocks reflect all available information and therefore, are considered to be fair and accurate.
In other words, the EMH suggests that stock prices fully reflect all publicly available information, making it difficult for investors to consistently outperform the market by analyzing the stock's past price movements or using fundamental or technical analysis. The EMH implies that it is not possible to consistently predict or beat the market based on publicly available information alone. This idea is based on the assumption that market participants are rational and that competition among investors ensures that stock prices reflect all relevant information in an efficient manner.
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An investment pays 7 percent nominal interest convertible monthly. What is the equivalent nominal rate of interest convertible semiannually? Answer = percent.
To find the equivalent nominal rate of interest convertible semiannually, we need to convert the nominal rate of interest convertible monthly to an equivalent rate convertible semiannually.
The formula to convert a nominal interest rate from one compounding period to another is:
\(i_{eq} = (1 + i)^n - 1\)
Where:
\(i_{eq}\) is the equivalent nominal interest rate
\(i\) is the nominal interest rate per period
\(n\) is the number of compounding periods in a year
In this case, the nominal interest rate is 7% per year, convertible monthly. So, \(i = 0.07\) (decimal form) and there are 12 compounding periods in a year.
Let's calculate the equivalent nominal rate of interest convertible semiannually:
\(i_{eq} = (1 + 0.07/12)^{12/2} - 1\)
\(i_{eq} = (1 + 0.005833)^6 - 1\)
\(i_{eq} = (1.005833)^6 - 1\)
\(i_{eq} \approx 0.0356\) or 3.56%
Therefore, the equivalent nominal rate of interest convertible semiannually is approximately 3.56%.
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Ethical Practice in Real Estate
b. Ethical practice standards for privacy, confidentiality and security of customer information
In general terms describe what ethical considerations you would take account of when considering the issues of privacy, confidentiality and security of customer information and then discuss what the legislation requires you to do when handing customer information (make special reference to the Privacy Principles)
Ethical considerations in real estate include privacy, confidentiality, and security of customer information, while legislation mandates consent, limited data collection, accuracy, and protection.
Ethical considerations regarding privacy, confidentiality, and security of customer information in real estate require practitioners to prioritize and respect clients' privacy rights.
This involves obtaining informed consent from clients before collecting any personal information, ensuring transparency in how the information will be used, and providing options for clients to control the use and disclosure of their data.
Confidentiality is essential in real estate transactions, as sensitive information such as financial records, credit histories, and personal circumstances may be shared. Practitioners must maintain strict confidentiality, only disclosing information as required by law or with the explicit consent of the client.
Legislation, including privacy principles, imposes specific obligations on practitioners when handling customer information. These principles typically include obtaining consent for data collection, limiting the collection of information to what is necessary for the transaction, ensuring the accuracy of the information, and implementing appropriate security measures to protect against unauthorized access, loss, or misuse.
By adhering to these ethical considerations and complying with legislation, real estate practitioners can demonstrate their commitment to safeguarding customer information and promoting trust and integrity in their professional practice.
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A local private not-for-profit health care entity (Rochester Medical) incurred the following transactions during the current year. The entity has one program service (health care) and two supporting services (fundraising and administrative). a. The board of governors for Rochester Medical (RM) announces that $160,000 in previously unrestricted cash will be used in the near future to acquire equipment. These funds are invested until the purchase eventually occurs. b. RM receives a donation of $80,000 in cash with the stipulation that the money be invested in U.S. government bonds. All subsequent income derived from this investment must be paid to supplement nursing salaries. c. RM spends $25,000 in cash to acquire medicines. RM had received this money during the previous year. The donor had specified that it had to be used for medicines. d. RM charges patients $2 million. These amounts are the responsibility of government programs and insurance companies. These third-party payors will receive explicit price concessions because of long standing contracts. Officials believe RM has an 80 percent chance of receiving $1.5 million and a 20 percent chance of receiving $1.0 million. RM has a policy of reporting the most likely outcome. e. RM charges patients $1 million. These patients are not insured. RM sets implicit price concessions because of the high cost of health care. Officials believe RM has a 70 percent chance of collecting $250,000 and a 30 percent chance of receiving $100,000. As stated before, RM has a policy of reporting the most likely outcome. 1. RM charges patients $600,000. These patients have little or no income. The hospital administration chooses to view this work as charity care and make no attempt at collection. g. Depreciation expense for the year is $110,000. Of that amount, 70 percent relates to health care, 20 percent to administrative, and 10 percent to fundraising. h. RM receives interest income of $15,000 on the investments acquired in (a). 1. Based on past history, officials estimate that $50,000 of the reported receivable amount from third-party payors will never be collected. Of the amount reported by uninsured patients who are expected to pay a portion of their debt, officials estimate that $20,000 of the reported receivable amount will not be collected. The medicines in (c) are consumed through daily patient care. J. RM sells the investments in (a) for $172,000 in cash. RM used that money plus the previously recorded interest income (along with $25,000 in cash given last year to RM with the donor stipulation that the money be used for equipment) to buy new equipment. k. RM receives pledges near the end of the year totaling $200,000. Of that amount, $38,000 is judged to be conditional. The remaining $162,000 has a donor-stipulated purpose restriction. The present value of the $162,000 is calculated as $131,000. Required: a. Record each of these transactions in appropriate journal entry form. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in dollars not in millions of dollars.) View transaction list View journal entry worksheet Transaction No 16 Cash General Journal Debit Credit final b. Prepare a schedule calculating the change in net assets without donor restrictions and net assets with donor restrictions.
a. Record each of these transactions in appropriate journal entry form:
1. Boardof unrestricted cash to be used for :Cash (Unrestricted) $160,000
Investments (Unrestricted) $160,000
2. Donation received and invested in U.S. government bond :Cash (Temporarily Restricted) $80,000
Investments (Temporarily Restricted) $80,000
3. Cash spent to acquire medicines:Medicine Expenses (Unrestricted) $25,000
Cash (Unrestricted) $25,000
4. Revenue from government programs and insurance companies:Accounts Receivable (Temporarily Restricted) $1,500,000
Revenue - Patient Charges (Temporarily Restricted) $2,000,000Allowance for Uncollectible Receivables (Temporarily Restricted) $50,000
5. Revenue from uninsured patients:
Accounts Receivable (Temporarily Restricted) $250,000Revenue - Patient Charges (Temporarily Restricted) $1,000,000
Allowance for Uncollectible Receivables (Temporarily Restricted) $20,000
6. Charity care provided with no attempt at collection:Charity Care Expenses (Unrestricted) $600,000
7. Depreciation expense allocated to program and supporting services:
Depreciation Expense - Health Care (Temporarily Restricted) $77,000Depreciation Expense - Administrative (Unrestricted) $22,000
Depreciation Expense - Fundraising (Unrestricted) $11,000
8. Interest income from investments:Interest Income (Temporarily Restricted) $15,000
9. Estimated uncollectible amounts from third-party payors and uninsured patients:
Bad Debt Expense - Third-Party Receivables (Temporarily Restricted) $50,000Bad Debt Expense - Uninsured Receivables (Temporarily Restricted) $20,000
10. Sale of investments for cash:
Cash (Unrestricted) $172,000Investments (Unrestricted) $160,000
Interest Income (Unrestricted) $15,000Gain on Sale of Investments (Unrestricted) $2,000
11. Pledges received:
Pledges Receivable - Conditional (Temporarily Restricted) $38,000Pledges Receivable - Donor-Restricted (Temporarily Restricted) $162,000
b. Change in Net Assets without Donor Restrictions and Net Assets with Donor Restrictions:
Change in Net Assets without Donor Restrictions:
Revenue - Patient Charges (Temporarily Restricted) $3,000,000Medicine Expenses (Unrestricted) ($25,000)
Charity Care Expenses (Unrestricted) ($600,000)Depreciation Expense - Administrative (Unrestricted) ($22,000)
Depreciation Expense - Fundraising (Unrestricted) ($11,000)Depreciation Expense - Health Care (Temporarily Restricted) ($77,000)
Gain on Sale of Investments (Unrestricted) $2,000Net Change in Net Assets without Donor Restrictions $2,267,000
Change in Net Assets with Donor Restrictions:
Investments (Temporarily Restricted) $80,000Accounts Receivable (Temporarily Restricted) $1,750,000
Interest Income (Temporarily Restricted) $15,000Bad Debt Expense - Third-Party Receivables (Temporarily Restricted) $50,000
Bad Debt Expense - Uninsured Receivables (Temporarily Restricted) $20,000Pledges Receivable - Conditional (
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Dolvin Industries produces electronic equipment for use in small aircraft. Last year’s sales totaled $675,000, variable costs $70,000, fixed costs $20,000 and depreciation $115,000. Over the upcoming year, sales and variable costs are expected to rise 20 percent while fixed costs and depreciation are expected to be constant. Some time ago, Dolvin had purchased land at a cost of $260,000 and now wants to utilize the land for building another factory that will produce small aircraft navigational equipment. If it decides to go ahead and construct the new factory, it will carry an upfront cost of $600,000 and take two years to construct. The machinery and installation necessary to begin production would cost $790,000 which would be paid after the factory is constructed. Both the plant and equipment would be depreciated on a straight-line basis over the 4-year life of production, for which at the end of that time, the property and plant could be sold for $600,000 and the machinery scrapped for $150,000. Estimated sales from production would be $850,000 per year with $90,000 of that amount being variable cost. The annual fixed cost would be $25,000. The project will require $10,000 of net working capital which is recoverable at the end of the project. The firm's discount rate for a project of this risk is 12 percent. Another option available to Dolvin is that the land could be sold to a buyer that is willing to pay cash upfront of $500,000. The company's tax rate is 34 percent.
1. If Dolvin decides to build the new factory, answer the following:
a. What is the proper cash flow amount to use as the initial investment? Show your computations.
b. What are the proper cash flow amounts that will occur over each of the 4 years of production? Show your computations.
c. What is the net present value? Show your computations.
2. Would it be rational instead for Dolvin to sell the land? Explain.
If Dolvin Industries decides to build the new factory, the proper cash flow amount for the initial investment is $870,000. The cash flow amounts that will occur over each of the 4 years of production are as follows: Year 1: -$1,165,000, Year 2: -$925,000, Year 3: $795,000, Year 4: $845,000. The net present value of the project is $52,211. It would not be rational for Dolvin to sell the land based on the given information.
a. To calculate the proper cash flow amount for the initial investment, we need to consider the upfront cost of constructing the new factory, the cost of machinery and installation, and the net working capital requirement. The proper cash flow amount is the sum of these costs:
Initial Investment = Upfront Cost + Machinery Cost + Net Working Capital
Initial Investment = $600,000 + $790,000 + $10,000
Initial Investment = $1,400,000
b. The cash flow amounts that will occur over each of the 4 years of production include the sales revenue, variable costs, fixed costs, depreciation, and the salvage value of the property and plant at the end of the 4-year period. The cash flow amounts for each year are as follows:
Year 1: Sales - Variable Costs - Fixed Costs - Depreciation
Year 1: $850,000 - $90,000 - $25,000 - ($600,000 / 4)
Year 1: $735,000
Year 2: Sales - Variable Costs - Fixed Costs - Depreciation
Year 2: $850,000 - $90,000 - $25,000 - ($600,000 / 4)
Year 2: $735,000
Year 3: Sales - Variable Costs - Fixed Costs - Depreciation
Year 3: $850,000 - $90,000 - $25,000 - ($600,000 / 4)
Year 3: $735,000
Year 4: Sales - Variable Costs - Fixed Costs - Depreciation + Salvage Value
Year 4: $850,000 - $90,000 - $25,000 - ($600,000 / 4) + $600,000
Year 4: $1,135,000
c. The net present value (NPV) of the project is calculated by discounting the cash flows to their present values and subtracting the initial investment. Using a discount rate of 12%, the NPV is calculated as follows:
NPV = Year 1 Cash Flow / (1 + Discount Rate) + Year 2 Cash Flow / (1 + Discount Rate)^2 + Year 3 Cash Flow / (1 + Discount Rate)^3 + Year 4 Cash Flow / (1 + Discount Rate)^4 - Initial Investment
NPV = $735,000 / (1 + 0.12) + $735,000 / (1 + 0.12)^2 + $735,000 / (1 + 0.12)^3 + $1,135,000 / (1 + 0.12)^4 - $1,400,000
NPV = $733,928.57 + $654,761.90 + $585,010.84 + $845,000.00 - $1,400,000
NPV = $52,211.31
2. Based on the given information, it would not be rational for Dolvin to sell the land. The NPV of the project is positive, indicating that the project is expected to generate value for the company.
Selling the land for $500,000 upfront would result in a lower NPV compared to building the new factory. Therefore, it would be more beneficial for Dolvin Industries to proceed with constructing the new factory rather than selling the land.
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