Explanation:
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The common stock of Buffalo Inc. is currently selling at $113 per share. The directors wish to reduce the share price and increase share volume prior to a new issue. The per share par value is $10; book value is $68 per share. 8.40 million shares are issued and outstanding.
Required:
Prepare the necessary journal entries assuming the following.
a. The board votes a 2-for-l stock split.
b. The board votes a 100% stock dividend. Briefly discuss the accounting and securities market differences between these two methods of increasing the number of shares outstanding.
Answer:
Buffalo Inc.
a. Journal Entry:
No journal entry required except a memorandum to record the split.
b. Journal Entry:
Debit Stock Dividend (Retained Earnings) $84 million
Credit Stock Dividend Distributable $84 million
To record the declaration of a 100% stock dividend.
When issued:
Debit Stock Dividend Distributable $84 million
Credit Common Stock $84 million
To record the issuance of stock dividends.
2. Both methods increase the outstanding number of shares by 100%. However, with a stock split of 2-for-1, there is no journal entry except a memorandum record to state the split.
Secondly, with a stock split or 2-for-1, the market price is also halved. This does not happen with a stock dividend. The market forces will determine and correct the market price to an acceptable level. A stock dividend requires some accounting entries to be made.
Explanation:
a) Data and Calculations:
Current market price of common stock per share = $113
Par value per share = $10
Book value per share = $68
Shares issued and outstanding = 8.40 million
a. The board votes a 2-for-l stock split:
Shares outstanding = 16.80 million shares
Market price = $56.50
Journal Entry:
No journal entry required except a memorandum to record the split. The value of common stock remains the same.
b. The board votes a 100% stock dividend:
Shares outstanding will increase to 16.80 million shares
Market price = $113 and level off based on demand and supply.
Journal Entry:
Stock Dividend (Retained Earnings) $84 million
Common Stock $84 million
For a model economy, the mpc (marginal propensity to consume) is 0.8. Current GDP is $100 million. Potential GDP is $60 million. To reach full employment (reduce inflationary gap), government spending must g
Answer:
To reach full employment (reduce inflationary gap), government spending must fall by $8 million.
Explanation:
Multiplier = 1 / (1 - mpc) = 1 / (1 - 0.8) = 5
Output gap = Current GDP - Potential GDP = $100 - $60 = $40 million
Amount of change in government expenditure needed = Output gap / mpc = $40 / 5 = $8 million
Since the Potential GDP is less than the Current GDP, this implies that the government spending must fall by $8 million to reach full employment.
Therefore, to reach full employment (reduce inflationary gap), government spending must fall by $8 million.
You sold a put contract on EDF stock at an option price of $.50 and an exercise price of $21. Today, EDF stock is selling for $20 a share and your option position was closed out. Ignoring transaction costs and taxes, what is your total profit
Answer:
-$50
Explanation:
Calculation to determine your total profit on this investment
Total profit = 1 × 100 × ($.50 - $21+ $20)
Total profit = 100×(-$0.5)
Total profit = -$50
Therefore your total profit on this investment is -$50
On December 29, 2019, Patel Products, Inc., sells a delivery van that cost $20,000. After recording the entry to bring the accumulated depreciation up-to-date, the delivery van had accumulated depreciation of $18,000. Patel received $2,000 cash from the purchaser of the delivery van.
Required:
Write the necessary Journal entry to record the sale.
Answer:
Date Account titles and Explanation Debit Credit
Dec 29 Cash $2,000
Accumulated depreciation - Delivery van $18,000
Delivery van $20,000
(To record the sale of delivery van)
On January 1, 20X8, Glen Allen Company issued $200,000 in term bonds with a 5-year term. The stated rate of interest was 6% and the effective rate of interest was 7%. What is the amount of interest expense to be recorded on December 31, 20X8?
Answer:
The answer is $13,425.97
Explanation:
The answer is $13,425.97
Using Financial calculator (TEXAS BA II PLUS)
N = 5 years
i = 7 percent
FV = $200,000
PMT = $12,000
PV = $191,799.61
Therefore interest expense is $191,799.61 x 7%
= $13,425.97
The Federal Open Market Committee decides that it must increase the money supply by $50. Committee members tell you the reserve ratio is 0.2. They ask you what directive they should give to the open market desk. You tell them, being as specific as possible, using the money multiplier.
The Fed should _____________$ worth of government bonds.
Answer and Explanation:
As we know that
Multiplier Effect = 1 ÷ Reserve Ratio
So,
Reserve ratio = 1 ÷ 0.2
= 5
Now this means that $1 million deposit result into increased by $5 million in the overall money supply
So the money supply should rise by $50 and it should be $10 of the government securities
The sequence of events that results in a new equilibrium interest rate, after the Fed makes the change you selected, may be described as follows:
Because there is ______________ money in the financial system, the quantity of interest-bearing financial assets such as bonds demanded _____________, which means that bond issuers __________________ sell the bonds. This process continues until the new equilibrium interest rate is achieved.
Answer:
Following are the responses to the given question:
Explanation:
Due to the increased amount of currency in the banking sector, the amount of interest-bearing economic stocks and bonds has reduced, because when interest rates fall and bond demand rises or vice versa, the interplay between bond yields and bond prices grows In this case, bond demand will decline, implying, therefore, corporate bonds must increase interest for issue debt still. It is because, whereas if bond rates increase, the price of the bond will drop, that will lead to an increase in the consumption for bonds.
1. Jupiter Explorers has $9,800 in sales. The profit margin is 5%. There are 4,500 shares of stock outstanding. The market price per share is $1.90.
What is the price-earnings ratio?
2. A firm has a return on equity of 18%. The total asset turnover is 1.7 and the profit margin is 6%. The total equity is $7,200.
What is the amount of the net income?
Answer:
17.43
132.19
Explanation:
Net profit margin is an example of a profitability ratio. It measures he ability of a firm to earn a profit from its assets
Net profit margin = Net income / Revenue
0.05 = x / 9800
net income = 490
net income per share = 490 / 4500 = 0.109
p/e = 1.9 / 0.109 = 17.43
Using the Dupont formula, ROE can be determined using:
ROE = Net profit margin x asset turnover x financial leverage
ROE = (Net income / Sales) x (Sales/Total Assets) x (total asset / common equity)
a. Develop a probability distribution for x
b. Compute the expected value of x
c. Compute the variance and standard deviation for x
d. Comment on what your results imply about wind conditions during boating accidents
a. Answer:The corresponding probabilities are obtained by converting the percentages into probabilities. That is, by dividing each value with 100.
F/N (where F =percentage of accidents and N =100)
Explanation:
X 0 1 2 3 4
f(X) 0.096 0.57 0.238 0.077 0.019
b. The formula for the expected value of a discrete random variable is E(x)= µ=∑xf(x)
X F(X) X.f(X)
0 0.096 0
1 0.57 0.57
2 0.238 0.476
3 0.077 0.231
4 0.019 0.076
Total 1 1.353
Hence, the value for expected value of X is 1.353
The formula for the variance of the discrete random variables is Var(x)= σ² =∑(x-µ)²f(x)
X F(X) (x-µ) (x-µ)² (x-µ)².f(x)
0 0.096 -1.353 1.8306 0.1757
1 0.57 -0.353 0.1246 0.0710
2 0.238 0.647 0.4186 0.0996
3 0.077 1.647 2.7126 0.2089
4 0.019 2.647 7.0066 0.1331
Total 1 3.235 12.0930 0.6884
Hence, the variance of the random variable x is 0.6884
The formula for the standard deviation of the discrete random variables is
σ=√(∑[(x-µ)².f(x)] )
Thus, the standard deviation is σ= √0.6884
=0.8297
Hence, the standard deviation of the random variable x is 0.8297
Sunland Company took a physical inventory on December 31 and determined that goods $198,200 were on hand. Not included in the physical count were $26,200 of goods purchased from Pelzer Corporation, f.o.b. shipping point, and $23,410 of goods sold to Alvarez Company for $28,450, f.o.b. destination. Both the Pelzer purchase and the Alvarez sale were in transit at year-end. What costing amount should Sunland report as its December 31 inventory?
December 31 inventory $___________
Answer:
the amount that should Sunland report as its December 31 inventory is $247,810
Explanation:
The computation of the ending inventory is shown below;
Inventory as per physical count $198,200
Add: Purchased goods in transit $26,200
Add: Sold goods in transit $23,410
Inventory to be reported as on December 31 $247,810
Hence, the amount that should Sunland report as its December 31 inventory is $247,810
Russell Preston delivers parts for several local auto parts stores. He charges clients $0.75 per mile driven. Russell has determined that if he drives 3,000 miles in a month, his average operating cost is $0.55 per mile. If he drives 4,000 miles in a month, his average operating cost is $0.50 per mile. Russell has used the high-low method to determine that his monthly cost equation is total cost = $600 + $0.35 per mile.
Answer:
1. 1,500 miles
2. Profit
3.4,000 miles
Explanation:
1. Calculation to Determine how many miles Russell needs to drive to break even k-Even Miles
First step is to calculate the Unit contribution margin
Using this formula
Let plug in the formula
Unit contribution margin = Sales price – Variable cost per unit
Unit contribution margin= $0.75 per mile – $0.35 per mile
Unit contribution margin= $0.40 per mile
Now let determine the Break-even units using this formula
Break-even units = Total fixed cost / Unit contribution margin
Let plug in the formula
Break-even units= $600 / $0.40
Break-even units= 1,500 miles
Therefore how many miles Russell needs to drive to break even k-Even Miles will be 1,500 miles
2. Calculation to determine whether he earned a profit or a loss last month Assume Russell drove 1,800 miles last month
Profit=1,800 miles – 1,500 miles
Profit=300 miles
Therefore Assume Russell drove 1,800 miles last month he will EARNED A PROFIT last month
3. Calculation to determine how many miles Russell must drive to earn $1,000 in profit.
Using this formula
Target units = (Fixed cost + Target Profit) / Unit contribution margin
Let plug in the formula
Target units = ($600 + $1,000) / $0.40
Target units = 4,000 miles
Therefore how many miles Russell must drive to earn $1,000 in profit will be 4,000 miles
The following information was available for the year ended December 31, 2016
Sales $260,000
Net income 38,340
Average total assets 560,000
Average total stockholders' equity 315,000
Dividends per share 1.23
Earnings per share 3.00
Market price per share at year-end 24.60
Required:
a. Calculate margin, turnover, and ROl for the year ended December 31, 2016.
b. Calculate ROE for the year ended December 31, 2016.
Answer:
A. Margin 14.75%
Turnover 0.46 times
ROI 6.85%
B. ROE 12.17%
Explanation:
A. Calculation to determine the margin, turnover, and ROl for the year ended December 31, 2016.
Calculation for MARGIN
Using this formula
Margin=Net income/Sales
Let plug in the formula
Margin=$38,340/$260,000
Margin=0.1475*100
Margin=14.75%
Calculation for TURNOVER
Using this formula
Turnover=Sales /Average total assets
Let plug in the formula
Turnover=$260,000/$560,000
Turnover=0.46 times
Calculation for ROI
Using this formula
ROI=Net income/Average total assets
Let plug in the formula
ROI=$38,340/$560,000
ROI=0.0685*100
ROI=6.85%
Therefore the margin is 14.75%, turnover is 0.46 times and ROl is 6.85% for the year ended December 31, 2016.
B. Calculation to determine the ROE for the year ended December 31, 2016.
Using this formula
ROE=Net income /Average total stockholders' equity
Let plug in the formula
ROE=$38,340/$315,000
ROE=0.1217*100
ROE=12.17%
Therefore the ROE for the year ended December 31, 2016 is 12.17%
On January 1, 2019, Wasson Company purchased a delivery vehicle costing $36,500. The vehicle has an estimated 6-year life and a $3,500 residual value. What is the vehicle's book value as of December 31, 2020, assuming Wasson uses the straight-line depreciation method
Answer:
Book value= $25,500
Explanation:
Giving the following information:
Purchase price= $36,500
Residual value= $3,500
Useful life= 6 years
First, we need to calculate the annual depreciation:
Annual depreciation= (original cost - salvage value)/estimated life (years)
Annual depreciation= (36,500 - 3,500) / 6
Annual depreciation= $5,500
Now, the accumulated depreciation and book value:
Accumulated depreciation= 5,500*2= $11,000
Book value= 36,500 - 11,000
Book value= $25,500
Prompt
Suppose you have a friend who says she does not need any resources or career experience before selecting a career, be...
Answer:
Could you please be specific with your question?
Explanation:
Thế nào là toàn cầu hóa thị trường, toàn cầu hóa sản xuất?
Answer:
Toàn cầu hóa tiếp thị là một thuật ngữ tổng hợp kết hợp việc xúc tiến và bán hàng hóa và dịch vụ trong một nền kinh tế toàn cầu ngày càng phụ thuộc lẫn nhau và hội nhập. Nó làm cho các công ty không quốc tịch, không tường thành, với Internet trở thành một công cụ tiếp thị và văn hóa không thể thiếu.
Toàn cầu hóa sản xuất là sự hợp nhất các hoạt động kinh tế của các đơn vị tư bản trên phạm vi thế giới. Sản phẩm cuối cùng có thể được lắp ráp từ nhiều đơn vị riêng lẻ, được sản xuất ở một số lượng lớn các quốc gia khác nhau và có thể được sản xuất linh hoạt để đáp ứng nhu cầu thay đổi và để lấp đầy các ngóc ngách thị trường cá nhân.
Explanation:
Answer:
Toàn cầu hóa quá trình sản xuất là quá trình cung ứng hàng hóa và dịch vụ từ các nơi trên toàn cầu để khai thác, tận dụng sự khác biệt quốc gia về chi phí và chất lượng của các yếu tố sản xuất. Ví dụ như lao động, năng lượng, đất đai và vốn.
Toàn cầu hóa thị trường là việc thị trường quốc gia riêng biệt và đặc thù đang hội nhập dần hình thành thị trường toàn cầu. Việc dỡ bỏ các rào cản thương mại qua biên giới đã làm cho việc kinh doanh quốc tế ngày càng trở nên dễ dàng.
Explanation: ...
Brinkley Corporation needs to estimate the profit for a new product. Profit is selling price minus cost. The selling price for the product will be $45/unit. The cost of the new product will comprise procurement, labor, and transportation costs. Probability distributions for the purchase cost, the labor cost, and the transportation cost are estimated as follows:
Procurement Cost ($) Probability Labor Cost ($) Probability Transportation Cost ($) Probability
10 0.25 20 0.10 3 0.75
11 0.45 22 0.25 5 0.25
12 0.30 24 0.35
25 0.30
Required:
Compute profit per unit for the worst case.
Answer:
Brinkley Corporation
Profit per unit for the worst case is:
= $7.05.
Explanation:
a) Data and Calculations:
Selling price for the product = $45 per unit
Cost of the new product =
Procurement Probability Labor Probability Transportation Probability
Cost ($) Cost ($) Cost ($)
10 0.25 20 0.10 3 0.75
11 0.45 22 0.25 5 0.25
12 0.30 24 0.35
25 0.30
Procurement Probability Labor Probability Transportation Probability
Cost ($) Cost ($) Cost ($)
2.50 (10 * 0.25) 2.00 (20 * 0.10) 2.25 (3 * 0.75)
4.95 (11 * 0.45) 5.50 (22 * 0.25) 1.25 (5 * 0.25)
3.60 (12 * 0.30 ) 8.40 (24 * 0.35)
7.50 (25 * 0.30)
11.05 23.40 3.50
Procurement cost = $11.05
Labor cost = 23.40
Transportation cost 3.50
Total cost = $37.95
Selling price per unit = $45.00
Total cost per unit 37.95
Profit per unit = $7.05
The current price of canvas messenger bags is $36 each and sales of the bags equal 400 per week. If the price elasticity of demand is -2.5 and the price changes to $44, how many messenger bags will be sold per week?
Answer:
624
Explanation:
Flexible Budgeting
At the beginning of the period, the Fabricating Department budgeted direct labor of $9,280 and equipment depreciation of $2,300 for 640 hours of production. The department actually completed 600 hours of production. Determine the budget for the department, assuming that it uses flexible budgeting. Round your labor rate to nearest cent.
$
Flexible Budgeting
At the beginning of the period, the Grinding Department budgeted direct labor of $159,600 and property tax of $56,000 for 7,600 hours of production. The department actually completed 9,500 hours of production.
Determine the budget for the department, assuming that it uses flexible budgeting.
$
Answer and Explanation:
The calculation is given below:
Fabricating department
The budgeted cost is
= $9,280 ÷ 640 hours × 600 hours + $2,300
= $8,700 + $2,300
= $11,000
Grinding department
= $159,600 ÷ 7,600 hours × 9,500 hours + $56,000
= $199,500 + $56,000
= $255,500
In this way the budgeted cost should be determined
Kaluzniak Corporation leased equipment to Moeller, Inc. on January 1, 2020. The lease agreement called for annual rental payments of $1,137 at the beginning of each year of the 3-year lease. The equipment has an economic useful life of 7 years, a fair value of $7,000, a book value of $5,000, and Kaluzniak expects a residual value of $4,500 at the end of the lease term. Kaluzniak set the lease payments with the intent of earning a 6% return, though Moeller is unaware of the rate implicit in the lease and has an incremental borrowing rate of 8%. There is no bargain purchase option, ownership of the lease does not transfer at the end of the lease term, and the asset is not of a specialized nature.
Required:
a. Explain (and show calculations) how Kaluzniak arrived at the amound of the rental payments used in the lease agreement.
b. Prepare the entries for Kaluzniak for 2017.
c. How would Kaluzniak's accounting in part (a) change if it incurred legal fees of $700 to execute the lease documents and $500 in advertising expenses for the year in connection with the lease?
Solution :
a). Fair value of the leased asset $ 7000
Less: [tex]\text{Present value}[/tex] of unguaranteed residual $ 3778.29
value [4500 x PV(6,3%)]
Amount to be recovered through lease payment $ 3221.71
Three periodic lease payment $ 1137.05
Rental payments $ 1137.00
b). Journal entries in the books of Kaluzniak.
Date Particulars Debit($) Credit($)
2020 Jan 1 Cash account 1137
To unearned lease revenue 1137
Jan 1 Unearned lease revenue 1137
To lease revenue 1137
Dec 31 Depreciation expense 714.29
To accumulated depreciation equipment 714.29
c).
Date Particulars Debit($) Credit($)
Jan 1, 2020 Legal fee 700
To cash 700
Jan 1 Advertisement 500
To cash 500
Rowan Co. purchases 500 common shares (40%) of JBI Corp. as a long-term investment for $630,000 cash on July 1. JBI Corp. paid $14,750 in total cash dividends on November 1 and reported net income of $295,000 for the year. (1) - (3) Prepare Rowan's entries to record the purchase of JBI shares, the receipt of its share of JBI dividends and the December 31 year-end adjustment for its share of JBI net income.
Answer and Explanation:
The journal entries are shown below;
On Jul 01
Equity method investments $630,000
To Cash $630,000
(Being cash paid is recorded)
On Nov 01
Cash $5,900 (40% of $14,750)
Equity method investments $5,900
(Being cash receipt is recorded)
On Dec 31
Equity method investments $118,000 (40% of $295,000)
To Earnings from equity method investments $118,000
(Being sharing of the net income is recorded)
The Pizza Company is considering a new three-year expansion project. The key data are shown below:
The company hired a consulting firm to help evaluate the project and paid the consulting fee of $60,000. The company owns the space. If company did not invest in the project, it can receive after-tax rental fee for $300,000 per year for 3 years. However, if the
company invested in the project, it will use the space for the project.
The fixed cost to produce pizza is required at $150,000 per year.
It is estimated that 50,000 units will be sold in the first year and that 40,000 units and 30,000 units will be sold in the second and third years respectively.
Each pizza is expected to sell for $25 and the production cost will be $15 per unit.
The sales price and variable cost should increase with inflation. Expected inflation rate per year is 5%.
The project requires an initial investment in working capital of $500,000, which will be required in each year at 10% of revenue in the following year.
The purchase of the machinery at the start of the project is $1,000,000. The shipping and installation cost are $200,000. The machinery will be depreciated straight-line to zero. It is estimated that the machinery can be sold at the end of the project for $250,000.
To finance the project, the company would need to take a one-million dollar loan at 8% interest rate p.a. from HSBC over the life of the project. Annual interest expense is $80,000.
The corporate tax rate is 34%.
The Pizza Company is evaluating its cost of capital under alternative financing arrangements. In consultation with the consulting firm, the Pizza Company expects to be able to issue new Debt at Par with a coupon rate of 8% (coupons paid annually) and to issue new preferred stock with a $4 per share dividend at $32 a share. The common stock of the Pizza Company is currently selling for $22 a share while its book value is $6. The Pizza Company expects to pay a total
dividend of $525,000 for its 200,000 common shares outstanding next year. Market analysts foresee a growth in dividends of the company at the rate of 4% per year. The Pizza Company raises capital using 30% bond, 20% preferred stock, and 50% common stock
a. What is the cost of capital (WACC) of the Pizza Company?
b. Calculate the NPV of the project using the cost of capital calculated in part (a).
Should the project be accepted?
Answer:
dividend of $525,000 for its 200,000 common shares outstanding next year. Market analysts foresee a growth in dividends of the company at the rate of 4% per year. The Pizza Company raises capital using 30% bond, 20% preferred stock, and 50% common stock
a. What is the cost of capital (WACC) of the Pizza Company?
b. Calculate
The theory which states that problems arise in corporations because top management no longer is willing to bear the brunt of their decisions unless they own a substantial amount of stock in the corporation is called
Answer:
Agency theory.
Explanation:
A corporation can be defined as a corporate organization that has facilities and owns or controls assets used for the production of goods and services in at least one country other than its headquarter (home office) located in its home country.
This ultimately implies that, a corporation is a corporate organization that owns or controls its business in two or more countries.
Typically, it is considered to be one of the most complicated and expensive type of organization. Generally, a corporation is considered to be perpetual in nature and it is a body that comprises of a group of people such as directors, shareholders etc., who act as a single entity.
One of the advantage of a corporation is that, owners have limited liability for debt to the extent to which they have invested and as such are not personally liable for some of debt owed by corporation.
The theory which states that problems arise in corporations because top management no longer is willing to bear the brunt of their decisions unless they own a substantial amount of stock in the corporation is called agency theory.
This year, Sigma Inc. generated $639,000 income from its routine business operations. In addition, the corporation sold the following assets, all of which were held for more than 12 months:
Initial Basis Acc. Depr Sale Price
Marketable securities $144,000 0 $64,000
Production equipment 93,000 $76,000 30,000
Business realty:
Land 165,000 0 180,000
Building 200,000 58,300 210,000
Required:
a. Compute Sigma’s taxable income assuming that it used the straight-line method to calculate depreciation on the building and has no nonrecaptured.
b. Recompute taxable income assuming that Sigma sold the securities for $150,000 rather than $64,000.
Answer:
Sigma Inc.
a. Sigma's Taxable Income:
Business income = $639,000
Capital gains = 16,300
Total taxable income $655,300
b. Sigma's Taxable Income:
Business income = $639,000
Capital gains = 102,300
Total taxable income $741,300
Explanation:
a) Data and Calculations:
Business income = $639,000
Capital gains:
Initial Basis Acc. Depr Sale Price Gain/(Loss)
Marketable securities $144,000 0 $64,000 ($80,000)
Production equipment 93,000 $76,000 30,000 13,000
Business realty:
Land 165,000 0 180,000 15,000
Building 200,000 58,300 210,000 68,300
Net capital gains $16,300
Capital gains recomputed:
Initial Basis Acc. Depr Sale Price Gain/(Loss)
Marketable securities $144,000 0 $150,000 $6,000
Production equipment 93,000 $76,000 30,000 13,000
Business realty:
Land 165,000 0 180,000 15,000
Building 200,000 58,300 210,000 68,300
Net capital gains $102,300
An online gardening magazine wants to understand why its subscriber numbers have been increasing. A data analyst discovers that significantly more people subscribe when the magazine has its annual 50%-off sale. This is an example of what
Answer:
Analyzing customer buying behaviors
Explanation:
The consumer buying behavior means the action taken either online or offline by the consumer prior from purchasing the product or service. It includes the consultation made with the search engines, engaged with the post on the social media, etc
Since in the given situation, the data analyst find that when the magazine having 50% off sale so more people has subscribed
So it represent the above answer
ABC Corp. has a market capitalization of $300 million and a beta of 0.75. It has $75 million in outstanding debt and its debt beta is 0.20. The risk-free rate is 3% and the market risk-premium is 5%.
Required:
Calculate ABCâs unlevered cost of capital.
Answer:
6.20000%
Explanation:
The computation of the unlevered cost of capital is shown below;
Asset beta is
= (Debt × Debt beta + Equity × Equity beta) ÷ (Debt + Equity)
= (75 × 0.20 + 300 × 0.75) ÷ (75 + 300)
= 0.6400000
Now
Unlevered cost of capital is
= risk free rate + asset beta × market risk premium
= 3% + 0.6400000 × 5%
= 6.20000%
London Company hired some students to help count inventory during their semester break. Unfortunately, the students added incorrectly and the 2019 ending inventory was overstated by $5,000. What would be the effect of this error in ending inventory
The effect of this error in ending inventory would be decrease in cost of goods sold and increase in increasing ending inventory.
Overstating inventory decreases COGS or cost of goods sold because the surplus stock in accounting records results in a higher closing stock and lower COGS. Current assets, total assets, and retained earnings are all exaggerated as a result of overstated ending inventories.
What is inventory?All the goods, merchandise, and supplies that a company keeps on hand in anticipation of selling them for a profit are referred to as inventory. A crucial corporate asset is inventory. Businesses conduct inventories to determine how much stock they have at a given time. Work-in-process (items in various stages of completion), finished goods, and supplies needed to create new sales items are all included in inventory.
What is COGS or cost of good sold?Cost of goods sold is a value or cost involved in selling goods during a particular period.
Cost of sales or the cost of goods sold (COGS) quantify the costs incurred by a company when producing a good or service. it includes the costs of labor, raw materials, and administrative expenses related to running a production plant.
Formula for cost of goods sold is :
Starting inventory + purchases − ending inventory = cost of goods sold
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The managers at Sonic SmartPhones are currently developing strategies for the company's new products and setting objectives for its business units. These managers are engaging in the management function of:__________.
Answer:
planning.
Explanation:
From the question, we are informed about the managers at Sonic SmartPhones who are currently developing strategies for the company's new products and setting objectives for its business units. These managers are engaging in the management function of planning.
Planning can be regarded as one of
management function which involves
process of thinking as regards the activities needed in achieving a desired goal. It can be regarded as first or foremost activity needed in achieving desired results. It encompass
creation as well as maintenance of a plan, this could be in psychological aspects which requires conceptual skills.
Altuve Co. was incorporated on January 1, 2013, at which time 250,000 shares of $10 par value common stock were authorized, and 110,000 of these shares were issued for $17 per share. Net income for the year ended December 31, 2013, was $1,257,300. Altuve Co.’s board of directors declared dividends of $3 per share of common stock on December 31, 2013, payable on February 7, 2014.Use the horizontal model to show the effects of the following:a. The issuance of common stock on January 1, 2013b. The declaration of dividends on December 31, 2013.c. The payment of dividends on February 7, 2014.
Answer:
Altuve Co.
Horizontal Model and Transaction Effects:
Balance Sheet
a. The issuance of common stock on January 1, 2013
Assets = Liabilities + Equity
Cash $1,870,000 = Common Stock $1,100,000
Additional Paid-in 770,000
b. The declaration of dividends on December 31, 2013.
Assets = Liabilities + Equity
Assets = Liabilities $330,000 + Equity ($330,000)
c. The payment of dividends on February 7, 2014.
Assets ($330,000) = Liabilities ($330,000) + Equity
Explanation:
a) Data and Analysis:
a. The issuance of common stock on January 1, 2013
Jan. 1, 2013: Cash $1,870,000 Common Stock $1,100,000 Additional Paid-in Capital $770,000
b. The declaration of dividends on December 31, 2013.
Dec. 31, 2013: Cash Dividend $330,000 Dividends Payable $330,000
c. The payment of dividends on February 7, 2014.
Feb. 7, 2014: Dividends Payable $330,000 Cash $330,000
For the following purchasing and sales transactions, prepare the appropriate journal entry assuming a perpetual inventory system is in place.
1. On January 1, Cougar Corp. purchased inventory from a supplier for $7,000. The credit terms on the transaction are 1 /10, net 30.
2. On January 2, Cougar Corp. paid a shipping company $150 for freight associated with the January 1 purchase.
3. On January 5, Cougar Corp sold inventory with a cost of $2,400 for $4,100. The credit terms on the transaction are 3/15, net 30.
4. On January 6, Cougar Corp. returned $800 of the inventory purchased on January 1.
5. On January 7, Cougar Corp. paid $240 to ship the goods sold on January 5.
6. On January 9, Cougar Corp. paid for the purchase on January 1. (Don't forget to consider the purchase return on January 6).
7. On January 10, Cougar Corp. received payment for the sale made on January 5.
Answer:
Cougar Corp.
Journal Entries:
1. January 1, Debit Inventory $7,000
Credit Accounts Payable $7,000
To record the purchase of goods on terms 1 /10, net 30.
2. January 2, Debit Freight-in $150
Credit Cash $150
To record the payment for freight-in.
3. January 5, Debit Cost of goods sold $2,400
Credit Inventory $2,400
To record the cost of goods sold.
Debit Accounts Receivable $4,100
Credit Sales Revenue $4,100
To record the sale of goods on account, terms 3/15, net 30.
4. January 6, Debit Accounts Payable $800
Credit Inventory $800
To record the return of goods on account.
5. January 7, Debit Freight-out $240
Credit Cash $240
To record the payment of freight-out.
6. January 9, Debit Accounts Payable $6,200
Credit Cash $6,138
Credit Cash Discounts $62
To record the payment on account, including cash discounts
7. January 10 DebitCash $3,977
Debit Cash Discounts $123
Credit Accounts Receivable $4,100
To record the receipt of cash, including cash discounts.
Explanation:
a) Data and Analysis:
1. January 1, Inventory $7,000 Accounts Payable $7,000
terms 1 /10, net 30.
2. January 2, Freight-in $150 Cash $150
3. January 5, Cost of goods sold $2,400 Inventory $2,400
Accounts Receivable $4,100 Sales Revenue $4,100
terms 3/15, net 30.
4. January 6, Accounts Payable $800 Inventory $800
5. January 7, Freight-out $240 Cash $240
6. Accounts Payable $6,200 Cash $6,138 Cash Discounts $62
7. Cash $3,977 Cash Discounts $123 Accounts Receivable $4,100
why is keystone so bad
Answer:
Keystone XL would be bad for wildlife, especially endangered species. Also without Keystone XL, the same amount of bitumen will be produced and the U.S. will still get all of it through the other pipeline projects. Keystone is not needed!
Explanation:
