Answer:
a. See the journal entries below.
b. See the journal entries below.
Explanation:
a. Journalize the entry to record the payroll for the week of June 17.
The journal entries will look as follows:
Date Accounts Debit ($) Credit ($)
June 17 Wages Expense 194,000
Social sec. tax payable ($194,000 * 6%) 11,640
Medicare tax payable ($194,000 * 1.5%) 2,910
Employees Federal income tax payable 38,800
Wages Payable (Balancing figure) 140,650
(To record payroll for the week)
b. Journalize the entry to record the payroll tax expense incurred for the week of June 17.
The journal entries will look as follows:
Date Accounts Debit ($) Credit ($)
June 17 Payroll Tax Expense 16,038
Social sec. tax payable ($194,000 * 6%) 11,640
Medicare tax payable ($194,000 * 1.5%) 2,910
State unemp. taxes paybl. ($24,000 * 5.4%) 1,296
Fed. unemp. taxes paybl. ($24,000 * 0.8%) 192
(To record payroll taxes for the week)
The following selected transactions were completed by Interlocking Devices Co., a supplier of zippers for clothing: 20Y7 Dec. 7. Received from Unitarian Clothing and Bags Co., on account, a $96,000, 60-day, 8% note dated December 7. Dec. 31. Recorded an adjusting entry for accrued interest on the note of December 7. Dec. 31. Recorded the closing entry for interest revenue. 20Y8 Feb. 5. Received payment of note and interest from Unitarian Clothing
Answer:
Dec 7
Dr Notes Receivable $96,000
Cr Accounts Receivable-Unitarian Clothing& Bags co. $96,000
Dec 31
Dr Interest Receivable $853
Cr Interest Revenue $853
Dec 31
Dr Interest Revenue $853
Cr Income Summary $843
Feb 5
Dr Cash $97,280
Cr Interest Receivable $853
Cr Interest Revenue $427
Cr Notes Receivable $96,000
Explanation:
Preparation of the journal entries
Dec 7
Dr Notes Receivable $96,000
Cr Accounts Receivable-Unitarian Clothing& Bags co. $96,000
Dec 31
Dr Interest Receivable $853 ($96,000*8%*40/360)
Cr Interest Revenue $853
Dec 31
Dr Interest Revenue $853
Cr Income Summary $843
($96,000*8%*40/360)
Feb 5
Dr Cash $97,280
($96,000+$853+$427)
Cr Interest Receivable $853
($96,000*8%*40/360)
Cr Interest Revenue $427
($96,000*8%*20/360)
Cr Notes Receivable $96,000
The following items are reported on a company's balance sheet: Cash $160,000 Marketable securities 75,000 Accounts receivable (net) 65,000 Inventory 140,000 Accounts payable 200,000 Determine (a) the current ratio and (b) the quick ratio. Round to one decimal place. a. Current ratio fill in the blank 1 b. Quick ratio fill in the blank 2
Answer and Explanation:
a. The current ratio is
We know that
Current ratio = Current Assets ÷ Current Liabilities
= $440,000 ÷ $200,000
= 2.2
Cash $160,000
Marketable Securities $75,000
Account receivable $65,000
Inventory $140,000
Current Assets $440,000
Account Payable $200,000
current liabilities $200,000
b
Quick ratio =( Current assets - inventory ) ÷ Current Liabilities
= ($440,000 - $140,000 ) ÷ $200,000
= 1.5
Question 3 Lara Beal allocates wealth between two periods: youth and old age. Currently (in her youth) she has $8,000 in cash. She can lend and borrow at the bank at 15% (that is, lending $1 in youth will give her $1.15 in old age). Her only investment opportunity other than the bank is a project that costs $5,000 now in her youth and has a payoff of $6,000 in her old age. What is the most she can consume in her old age
Answer:
The correct answer is "$9450".
Explanation:
Given:
Payoff from investment,
= $6000
Lending to bank,
= [tex]8000-5000[/tex]
= [tex]3000[/tex]
Now,
At 15% interest,
The amount to be received from bank will be:
= [tex]3000\times (1+\frac{15}{100} )[/tex]
= [tex]3000(1+0.15)[/tex]
= [tex]3000\times 1.15[/tex]
= [tex]3450[/tex] ($)
hence,
In her old age, most she can assume will be:
= [tex]6000+3450[/tex]
= [tex]9450[/tex] ($)
Brown Cow Dairy uses the aging approach to estimate bad debt expense. The ending balance of each account receivable is aged on the basis of three time periods as follows: (1) not yet due, $14,000; (2) up to 120 days past due, $4,500; and (3) more than 120 days past due, $2,500. Experience has shown that for each age group, the average loss rate on the amount of the receivables at year-end due to uncollectibility is (1) 2 percent, (2) 12 percent, and (3) 30 percent, respectively. At December 31 (end of the current year), the Allowance for Doubtful Accounts balance is $800 (credit) before the end-of-period adjusting entry is made. Data during the current year follow:
a. During December, an Account Receivable (Patty's Bake Shop) of $750 from a prior sale was determined to be uncollectible; therefore, it was written off immediately as a bad debt.
b. On December 31, the appropriate adjusting entry for the year was recorded.
Required:
1. Give the required journal entries for the two items listed above.
2. Show how the amounts related to Accounts Receivable and Bad Debt Expense would be reported on the income statement and balance sheet for the current year. Disregard income tax considerations.
Answer:
Brown Cow Dairy
1. Journal Entries:
a. Debit Allowance for Uncollectibles $750
Credit Accounts Receivable $750
To write-off an uncollectible account.
b. Debit Bad Debts Expense $1,520
Credit Allowance for Doubtful Accounts $1,520
To record bad debts expense for the year.
2. Amounts that would be reported:
Income Statement:
Bad debts expense $1,520
Balance Sheet:
Accounts Receivable $21,000
less Allowance for Doubtful accounts $1,570
Explanation:
a) Data and Calculations:
(1) not yet due, $14,000 * 2% = $280
(2) up to 120 days past due, $4,500 * 12% = 540
(3) more than 120 days past due, $2,500 * 30% = 750
Total $21,000 $1,570
Balance of Allowance for Doubtful Accounts = $800
a. Debit Allowance for Uncollectibles $750
Credit Accounts Receivable $750
To write-off an uncollectible account.
b. Debit Bad Debts Expense $1,520
Credit Allowance for Doubtful Accounts $1,520
To record bad debts expense for the year.
Rex and Kelsey are partners who share income in the ratio of 3:2. Their capital balances are $95,000 and $140,000, respectively. Income Summary has a credit balance of $40,000 after the second closing entry. What is Rex's capital balance after closing Income Summary to the capital accounts? a.$71,000 b.$119,000 c.$146,000 d.$111,000
Answer:
Option B
Closing balance = $119,000
Explanation:
The closing entries in the partners' capital account would be the sum of the opening balance in their capital accounts and their share of profit.
The capital account of Rex after the closing the income would be :
$
Opening balance 95,000
Share of profit (3/5× 40,000) 24,000
Closing balance 119,000
Closing balance = $119,000
Suzette has received an order for 1,500 boxes of nuts per week for the next 3 months. If she expects the trend in the marginal product of labor will continue in the same direction, what do you think she should do
Answer:
18,000 boxes
Explanation:
1500×3×4 or
1500×12
Fill in the blank. Today most large corporations not only accept the necessity of affirmative action but also find that _______________ benefits when they make themselves more diverse?
Today most large corporations not only accept the necessity of affirmative action but also find that compensation benefits when they make themselves more diverse.
What are affirmative action?Affirmative action focuses on demographics with historically low representation in leadership, professional, and academic roles. It is often considered a means of countering discrimination against particular groups.
The affirmative action programs are commonly implemented by businesses and governments by taking individuals' race, gender, religion, or national origin into account when hiring.
These policies often implement hiring quotas, provide grants and scholarships, and may also deny government funding and contracts to institutions that fail to follow policy guidelines.
The criticism of affirmative action emphasizes high program costs, the hiring of fewer qualified candidates, and a lack of historical progress in equal representation.
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Which of the following is an example of physical distractions in
communication?
O Mixed messages.
O Lack of privacy.
O
Loss of meaning through translation.
Language barrier.
Answer:
lack of privacy is the correct answer
Ford Motor Company agreed to pay its workers $37 an hour in 1999 and $37 an hour in 2001. The CPI in 1999 was 166 and in 2001 was 180. Calculate the real wage rate in each year (to the nearest cent). Did these workers really get a pay raise between 1999 and 2001?
Answer:
No, the wage rate did not raise.
Explanation:
Given the nominal wage rate for the year 1999 = $37
CPI for 1999 = 166
The real wage for the year 1999 = [ Nominal wage / CPI ] x 100
The real wage for the year 1999 = [ 37/ 166] x 100 = $22.28
Given the nominal wage rate for the year 2001 = $37
CPI for 2001 = 180
The real wage for the year 2001 = [ Nominal wage / CPI ] x 100
The real wage for the year 2001 = [ 37/ 180] x 100 = $20.55
No the wage rate did not raise.
QUESTION 31 Denzil was one of 50,000 people defrauded of $40 in an advertising scam. His best course of action to recover his money is to a. bring an individual lawsuit in a U.S. District Court. b. bring an individual lawsuit against the advertiser in a state appellate court. c. mediate the claim with the advertiser. d. become part of a class action lawsuit, which might include plaintiffs who are unaware of the lawsuit or are even unaware they were harmed.
Answer: d. become part of a class action lawsuit, which might include plaintiffs who are unaware of the lawsuit or are even unaware they were harmed.
Explanation:
When multiple people are affected by unethical and illegal behavior by a company, they can come together and form a class action lawsuit.
In a class action lawsuit, a group of people are named as the plaintiffs and will be represented by some members of the group. The group can include people who did not even know they were unjustly treated or that they are in a lawsuit but in the interest of justice, their names will be included so as to right the wrong they are facing.
Class action lawsuits are beneficial because they save the individual plaintiffs money and put pressure on the courts to find a favorable outcome.
g Suppose there are 100 consumers with individual demand curves like the one in Question 1 and 10 producers with individual supply curves like the one in Question 1. Find the competitive equilibrium for this marke
Answer:
The correct answer is "16".
Explanation:
The given question seems to be incomplete. Please find the attachment of the full query.
According to the question,
The supply per producer when there are overall 10 producers,
⇒ [tex]P(\frac{Y}{10} )=10+(\frac{Y}{200} )[/tex]
or,
⇒ [tex]Y=200P-2000[/tex]
The consumption per producer when there are overall 100 producers,
⇒ [tex]P(\frac{x}{100} )= 40-(\frac{2x}{100} )[/tex]
or,
⇒ [tex]x = 2000-50 P[/tex]
At equilibrium,
⇒ [tex]200P-2000=2000-50P[/tex]
On adding "2000" both sides, we get
⇒ [tex]200P-2000+2000=2000-50P+2000[/tex]
⇒ [tex]200P=4000-50P[/tex]
[tex]250P=4000[/tex]
[tex]P=\frac{4000}{250}[/tex]
[tex]=16[/tex]
A common size analysis requires the representation of financial statement data in terms of a single financial statement item (or base account or value). What is the most commonly used base item for a common size income statement
Answer:
Net sales
Explanation:
A common size income statement represent the income statement in which each item line wise should be expressed as the sales or revenue percenatge. The motive of preparing this statement is to have the analyse and compare the performance of the company with their various years
So the base item that should be common used for this type of income statement is net sales
1. ABC Company sublet a portion of its warehouse for a one-year period at an annual rental of $75,000, beginning on September 1, 2017. The tenant, XYZ company, paid the entire year's rent in advance, on September 1, 2017, which ABC recorded as a credit to Rent Revenue. Provide the adjusting entry on December 31, 2017 for ABC Company.
Answer and Explanation:
The adjusting entry is given below:
On Dec 31,2017
Unearned Rent Revenue $25,000 ($75,000 × 4 months ÷ 12 months)
To Rent Revenue $25,000
(Being revenue earned is recorded)
Here unearned rent revenue is debited as it decreased the liability and credited the rent revenue as it increased the revenue
We are interested in determining whether or not the variances of the sales at two small grocery stores are equal. A sample of 21 days of sales at Store A and a sample of 16 days of sales at Store B indicated the following. Store A Store B n1 = 21 n2 = 16 = 800 = 400 a. Provide the hypotheses to be tested. b. Compute the test statistic. c. Determine the critical value of F at 95% confidence. d. Compute the p-value and use it to test the above hypotheses.
Answer:
a) Null Hypothesis : H0 : σ1^2 = σ2^2
Alternative Hypothesis: H1 = σ1^2 not equal to σ2^2
b) The test statistics =4
c) 0.03, 2.76
Explanation:
a) Null Hypothesis : H0 : σ1^2 = σ2^2
Alternative Hypothesis: H1 = σ1^2 not equal to σ2^2
b) The test statistics
F=s1^2/s2^2
=800^2/400^2
=4
c) The critical value of F at 95% confidence.
Given a=0.05
The critical value is F(0.025,df1=n1-1=20, df2=n2-1=15)=0.03 from the F tables
F(0.975,df1=20,df2=15)=2.76 from the F tables
Based on the information given, the null Hypothesis will be H0 : σ1² = σ2² and the alternative hypothesis will be H1 = σ1² not equal to σ2².
The test statistics from the information given will be:
F = s1²/s2²
F = 800² /400²
= 4
The critical value of F at 95% confidence will be a = 0.05. Therefore, the critical value is F(0.025,df1=n1-1=20, df2=n2-1=15) = 0.03
Lastly, F(0.975,df1=20,df2=15) = 2.76 from the F tables.
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Scenario 3-2 In country A a worker who works 40 hours can produce 200 pounds of rice or 100 pounds of broccoli. In country B a worker who works 40 hours can produce 160 pounds of rice or 120 pounds of broccoli.
Refer to Scenario 3-2. What is the opportunity cost of producing rice? Refer to Scenario 3-2. What is the opportunity cost of producing broccoli? Refer to Scenario 3-2. Which country, if either, has a comparative advantage producing rice? Refer to Scenario 3-2. Which country, if either, has a comparative advantage producing broccoli? Refer to Scenario 3-2. Give a range of prices in terms of pounds of rice per pound of broccoli at which the two countries would be both be willing to trade.
Answer:
The answer is below
Explanation:
1) Opportunity cost of producing rice:
For country A, opportunity cost of producing rice = 100 pounds of broccoli / 200 pounds of rice = 1/2 pounds of broccoli
For country B, opportunity cost of producing rice = 120 pounds of broccoli / 160 pounds of rice = 3/4 pounds of broccoli
Opportunity cost of producing broccoli:
For country A, opportunity cost of producing broccoli = 200 pounds of rice / 100 pounds of broccoli = 2 pounds of rice
For country B, opportunity cost of producing broccoli = 160 pounds of rice / 120 pounds of broccoli = 4/3 pounds of rice
2) The country with comparative advantage is the country with lower opportunity cost.
Country A has a comparative in producing rice (1/2 pounds of broccoli < 3/4 pounds of broccoli)
Country B has a comparative in producing broccoli (4/3 pounds of rice < 2 pounds of rice)
3) For better off trade, the price should lie between two different opportunity costs.
Therefore, the price per pound of broccoli in terms of pounds of rice should lie between 4/3 and 2 pounds of rice
Consumers have become more vulnerable to privacy infringement and identity theft MOST LIKELY due to which trend? A) consumers' decreasing awareness of investment scams B) the proliferation of automated financial transactions C) the rising rate of mortgage foreclosures during the recession D) the government's increasing regulation of the consumer credit industry
A) consumers’ decreasing awareness of investment scams.
Consumers that have more vulnerable to privacy infringement and identity theft because of this trend so it is option A.
What is privacy infringement?
At the time when the information related to the person that should be obtained against his or her so it should be either by coercion or it should be forced. Here the right to privacy should be violated. So, Consumers that have more vulnerable to privacy infringement and identity theft because of this trend so it is option A.
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You are considering an investment that promises to pay $1,000 per year for the next 10 years. The interest rate associated with investments having similar risk is 6.0%. How much would you be willing to pay for this investment
Answer:
$7360.09
Explanation:
the amount i would be willing to pay can be determined by calculating the present value of the cash flows
Present value is the sum of discounted cash flows
Present value can be calculated using a financial calculator
Cash flow each year from year 1 to 10 = 1000
I = 6%
PV = $7360.09
To determine PV using a financial calculator:
1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.
2. after inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction.
Why does insurance matter? What have you heard about insurance from your parents or the news?
A small business sold an equipment for $30,000 after depreciating the equipment using the MACRS depreciation method. The applicable federal tax rate for the company is 39%. The federal tax liability on this depreciation recapture is $10,200 if the company also had other taxable income of $200,000 in that year.
a. True
b. False
On June 8, Williams Company issued an $82,710, 10%, 120-day note payable to Brown Industries. Assuming a 360-day year for your calculations, what is the maturity value of the note
Answer: $85467
Explanation:
The information given from the question is written below:
Notes payable = $82710
Interest rate = 10%
Then, we will first calculate the interest expense which will be:
= $82710 × 10% × 120/360
= $82710 × 0.1 × 0.3333333
= $2757
Then, the maturity value will be:
= $82710 + $2757
= $85467
Currently, the spot exchange rate is $0.85/A$ and the one-year forward exchange rate is $0.81/A$. One-year interest is 3.5% in the United States and 4.2% in Australia. You may borrow up to $1,000,000 or A$1,176,471, which is equivalent to $1,000,000 at the current spot rate. How much can you realize certain profit in U.S. dollar terms? A) $48,025 B) $42,035 C) $50,625 D) $52,025 E) None of the above
Answer:
B) $42,035
Explanation:
Calculation to determine How much can you realize certain profit in U.S. dollar terms
First step is to calculate the repayment liability after one year
Repayment liability = (A$1,176,471 × 1.042)
Repayment liability = A$1,225,882.78
Second step is to determine the investment yield
Investment yield = $1,000,000 ×(1+.035)
Investment yield = $1,000,000 × 1.035
Investment yield= $1,035,000
Third step is to convert the investment yield into A$ at the forward rate of the amount of $0.81
A $ to yield = $1,035,000 ÷ 0.81
A $ to yield= A$1,277,778.22
Now let determine How much can you realize certain profit in U.S. dollar terms
Arbitrage Profit=(A$1,277,778.22-$1,225,882.78)×0.81
Arbitrage Profit= A $51,895.44 × 0.81
Arbitrage Profit = $42,035
Therefore How much can you realize certain profit in U.S. dollar terms will be $42,035
Suppose eggs are only sold by the dozen and priced in whole dollar amounts. No eggs are demanded at a price above $7 per dozen. At a price equal to $7 per dozen, 10 dozen eggs are demanded. If the price falls to $6 per dozen, then 11 dozen are demanded. At a price of $5 per dozen, 12 dozen are demanded. When the price falls to $4 then 13 dozen are demanded. Suppose also that this market is operating in the short run and the quantity of eggs supplied is fixed at 12 dozen eggs. What are the equilibrium price and quantity in this market?
Answer:
$5
12
Explanation:
Equilibrium price is the price at which quantity demand equal quantity supplied. Above equilibrium price there is a surplus - quantity supplied exceeds quantity demanded.
Below equilibrium price there is a shortage - quantity demanded exceeds quantity supplied
from the question, the following table can be determined
P Qd Qs
$7 10
$6 11
$5 12 12
$4 13
At equilibrium price, quantity demanded equal quantity supplied. this price is $5 and quantity is 12
Suppose you forecast that the standard deviation of the market return will be 20% in the coming year. If the measure of risk aversion in is A = 4: a. What would be a reasonable guess for the expected market risk premium? b. What value of A is consistent with a risk premium of 9%? (Round your answer to 2 decimal places.) c. What will happen to the risk premium if investors become more risk tolerant?
Answer:
a) 16%
b) 2.25
c) Increase in expected market risk premium
Explanation:
Expected standard deviation of market return = 20%
measure of risk aversion ( A ) = 4
a) Determine a reasonable expected market risk premium
= A * ( std ) ^2
= 4 * ( 20%)^2
= 16%
b) determine Value of A
market risk premium = A * ( std )^2
∴ A = 9% / ( 20% ) ^2
= 0.09 / 0.04
= 2.25
c) If investors become more risk tolerant the expected market risk premium will increase
Camelot Company has estimated the following costs for this year for 50,000 units: Manufacturing Selling and Administrative Variable $100,000 $ 25,000 Fixed 150,000 75,000 Total $250,000 $100,000 What is the initial selling price needed to obtain a target profit of $50,000 using the manufacturing cost markup method
Answer:
the initial selling price is $8 per unit
Explanation:
The computation of the initial selling price is shown below;
Total manufacturing costs = $250,000
Now
Markup required is
= $100,000 + $50,000
= $150,000
So, the Initial selling price is
= ($250,000 + $150,000) ÷ 50,000
= $8.00
hence, the initial selling price is $8 per unit
A company with a higher contribution margin ratio is either more or less sensitive to changes in sales revenue, depending on other factors. likely to have a lower breakeven point. less sensitive to changes in sales revenue. more sensitive to changes in sales revenue.
Answer:
more sensitive to changes in sales revenue.
Explanation:
Contribution margin can be defined as the subtraction of variable cost from the sales price.
Mathematically, it given by the formula;
[tex] Contribution \; margin = sales \; price - variable \;cost[/tex]
Variable cost refers to cost which are the same per unit of production but vary directly with level of output.
Generally, a company that has a higher contribution margin ratio is more sensitive to changes in sales revenue because it affects it in the long-run.
You are given the following information on Kaleb's Heavy Equipment: Profit margin 6.5 % Capital intensity ratio .74 Debt-equity ratio .8 Net income $ 78,000 Dividends $ 16,000 Calculate the sustainable growth rate.
Answer: 14.36%
Explanation:
The sustainable growth rate will be calculated thus:
Firstly, we will calculate the return on equity(ROE) which will be:
= Profit margin × (1/Capital intensity ratio) × (1 + Debt equity ratio)
= 6.5% (1/0.74) × (1 + 0.8)
= 0.065 × 1.35 × 1.8
= 0.158
Then, we'll calculate the plowback ratio which will be:
= 1 - (16000/78000)
= 1 - 0.2051
= 0.7949
Therefore, the growth rate will be:
= (ROE × Plowback ratio) / [1 - (ROE × Plowback ratio)]
= (0.158 × 0.7949) / [1 - (0.158 × 0.7949)]
= 0.1256 / 0.8744
= 0.1436
= 14.36%
The sustainable growth rate is 14.36%
10. What is an advantage of using a credit card?
1 point
It will not affect your credit score or credit history
Since it is tied directly to your checking account, it prevents you from spending money
you do not have
If you need to carry a balance, the interest rates are generally quite low (less than 5%)
If you pay off your balances every month in full, it's like getting a short-term interest-
free lom
11. Each of the following financial products will help you build a credit
history EXCEPT
10. The correct advantage of using a credit card is: if you pay off your balances every month in full, it's like getting a short-term interest-free loan.
11. All the mentioned financial products can help build credit history when used responsibly, so none of them should be excluded from the list.
10. Using a credit card responsibly and paying off the balance in full each month offers the advantage of essentially accessing interest-free credit for a short period.
When you make purchases with a credit card and pay the full amount by the due date, you avoid paying any interest charges on those purchases. This can be particularly beneficial if you have a large purchase or unexpected expense that you need to make and would prefer to pay off gradually over a few weeks or months without incurring interest.
11. As for the financial products that help build credit history, all of the following options can contribute to establishing a credit history:
Credit cards: Responsible use, such as making timely payments and keeping credit utilization low, can help build a positive credit history.
Loans (e.g., student loans, auto loans, mortgages): Consistently making payments on time and in full can demonstrate your ability to manage debt responsibly.
Lines of credit: Similar to credit cards, properly managing lines of credit and making timely payments can contribute to a positive credit history.
Secured credit cards: These cards require a security deposit but can still help build credit history if used responsibly.
Therefore, all the mentioned financial products can help build credit history when used responsibly, so none of them should be excluded from the list.
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Kanesha is an entrepreneur and has recently opened her first coffee shop, The Coffee Cat. Kanesha pays $5,000 rent each month, $3,200 for monthly employee payroll, and $2,100 for supplies each month. She was planning on selling several of her own tables and chairs on Craigslist for $900, but instead she brought them to The Coffee Cat. Additionally, Kanesha quit working as an accountant where she was earning $54,000 per year to open up the shop. If the shop earns $150,000 in revenue this year, calculate annual: Instructions: Enter your responses as a whole number. If you are entering any negative numbers be sure to include a negative sign (-) in front of those numbers. Hint: be sure to calculate explicit costs as annual costs. a. Accounting profits. $ b. Economic profits. $
Answer:
$26400
$-28500
Explanation:
Accounting profit= total revenue - explicit cost
Total revenue =price x quantity sold
Explicit cost includes the amount expended in running the business.
They include rent , salary and cost of raw materials
Explicit costs = (5000 x 12) + (3200 x 12) + (2100 x 12)
= 60,000 + 38400 + 25200 = 123600
Accounting profit = 150,000 - 123600 = 26400
Economic profit = accounting profit - implicit cost
Implicit cost is the cost of the next best option forgone when one alternative is chosen over other alternatives
Implicit costs = 54,000 + 900 = 54900
Economic profit = 26400 - 54900 = $-28500
Far Side Corporation is expected to pay the following dividends over the next four years: $13, $12, $6, and $3. Afterward, the company pledges to maintain a constant 0.01 growth rate in dividends forever. If the required return on the stock is 0.12, what is the current share price?
a. $87.60.
b. $94.61.
c. $85.34.
d. $92.52.
e. $89.83.
Answer:
e. $89.83
Explanation:
Calculation to determine the current share price
First step is to calculate the Value after year 4 using this formula
Value after year 4=(D4*Growth rate)/(Required rate-Growth rate)
Let plug in the formula
Value after year 4=(4*1.05)/(0.1-0.05)
Value after year 4=$84
Now let calculate the current share price using this formula
Current share price=Future dividend and value*Present value of discounting factor(rate%,time period)
Let plug in the formula
Current share price=16/1.1+12/1.1^2+7/1.1^3+4/1.1^4+84/1.1^4
Current share price=$89.83(Approximately)
Therefore the current share price is $89.83
Legacy issues $630,000 of 9.0%, four-year bonds dated January 1, 2019, that pay interest semiannually on June 30 and December 31. They are issued at $571,310 when the market rate is 12%.
Required:
a. Prepare the January 1, 2018, journal entry to record the bonds' issuance.
b. Prepare the journal entries to record the first two interest payments.
Solution :
a). Prepare the journal entry to record the bonds' issuance as shown below:
Interest paid = [tex]$\$630,000 \times 9\%\times \frac{1}{2}$[/tex]
= $ 28,350
Date Accounts titles and explanation Debit ($) Credit($)
1 Jan 2018 Cash 571,310
Discount on bonds payable 58,690
($ 630,000 - $ 571,130)
Bonds payable 630,000
b). Preparing the journal entries to record the first two interest payments :
Date Accounts Titles and explanation Debit($) Credit($)
30/6/2018 Interest expense 35,686.25
Discount on bonds payable 7,336.25
Cash 28,350
31/12/2018 Interest expense 35,686.25
Discount on bonds payable 7,336.25
Cash 28,350
