Answer:
Effect on income= $90 increase
Explanation:
Giving the following information:
Costs of meals produced= 4.30
The fixed costs included in this income statement are $3,380
Special offer= $3.30 per meal for 300 meals on April 10.
First, we need to calculate the unitary fixed costs and deduct them from the total unitary cost.
Unitary fixed costs= 3,380/2,600= $1.3
Unitary variable cost= 4.3 - 1.3= 3
Now, we can calculate the effect on income:
Effect on income= 300*(3.3 - 3)
Effect on income= $90 increase
On December 1 of the current year, Rob Elliot invested $35,000 of his cash to form a proprietorship, GGE Enterprises. After all transactions have been entered into the accounting equation, the following are the ending balances for selected items on December 31. On that date, the financial statements were prepared. The statement of owner’s equity for GGE Enterprises reported Rob Elliot’s owner’s equity as of December 31 at $38,000. The balance sheet reported total liabilities and owner’s equity of $55,650. Accounts Accounts Rob Elliot, Rob Elliot, Fees Rent Supplies Utilities Wages Miscellaneous Cash Receivable Land Payable Capital Drawing Earned Expense Expense Expense Expense Expense ? $8,600 $16,500 ? ? $5,750.00 $26,750.00 $6,400.00 ? $4,650.00 $1,265.00 $460.00 Review the following questions. Place an ‘X’ in the box to indicate which financial statement(s) report the desired information. Enter the amount reported on the financial statement. Balance Income Statement of Sheet Statement Owner’s Equity Amount What are the total assets owned by GGE Enterprises? $ How much cash is being held by GGE Enterprises? X $ By what amount did Rob Elliot’s equity increase or decrease during the period? $ What is the amount of profit or loss during December? $ What were the total expenses for December? $ How much expense was reported for supplies? $ How much does GGE Enterprises owe to its creditors? $
Answer and Explanation:
The formula and the computation is shown below:
a. Total Assets = Total Liabilities and Owners’ Equity
Total Assets = $55,650
b. Total Assets = Cash + Accounts Receivable + Land
$55,650 = Cash + $8,600 + $16,500
Cash = $55,650 - $8,600 - $16,500
= $30,550
c. Increase in Owners’ Equity = Rob Elliot Capital on 31 December - Rob Elliot, Capital on 31 December
= $38,000 - $0
= $38,000
d. Increase in Owners’ Equity = Additional Investment during December + Net Income - Rob Elliot Drawing
= $38,000 = $35,000 + Net income - $5,750
Net income = $8,750
e. Net Income = Fees Earned - Total Expenses
$8,750 = $26,750 - Total expenses
Total expenses = $26,750 - $8,750
= $18,000
f. Total Expenses = Rent Expense + Supplies Expense + Utilities Expense + Wages Expense + Miscellaneous Expense
$18,000 = $6,400 + Supplies Expense + $4,650 + $1,265 + $460
Supplies expenses = $18,000 - $12,775
= $5,225
g. Total Liabilities and Owners’ Equity = Total Liabilities + Total Owners’ Equity
$55,650 = Total Liabilities + $38,000
Total liabilities = $17,000
Total Liabilities = Accounts Payable
Accounts Payable = $17,000
Amount owed to Creditors = Accounts Payable
Amount owed to Creditors = $17,000
Major Manuscripts, Inc.
2012 Income Statement
Net sales $7,800
Cost of goods sold 6,865
Depreciation 210
Earnings before interest and taxes $ 725
Interest paid 31
Taxable Income $ 694
Taxes 284
Net income $410
Dividends $ 187
Major Manuscripts, Inc.
2012 Balance Sheet
2012 2012
Cash $ 2,400
Accounts payable $ 1,550
Accounts rec. 880
Long-term debt 300
Inventory 2,700
Common stock $ 3,100
Total $ 5,980
Retained earnings 4,430
Net fixed assets 3,400
Total assets $ 9,380
Total liabilities & equity $ 9,380
Major Manuscripts, Inc., is currently operating at maximum capacity. All costs, assets, and current liabilities vary directly with sales. The tax rate and the dividend payout ratio will remain constant. In 2013, no new equity will be raised and sales are projected to increase by 10 percent. Construct the pro formas for 2013 and answer the following questions (show your work!).
Projected total assets= $______
Projected retained earnings= $______
Additional new debt required= $______
Answer:
Projected total assets = $10,318
Projected retained earnings = $4,675.30
Additional new debt required = $537.70
Explanation:
external financing needed = EFN = [(total assets/total sales) x ($ Δ sales)] - [(total current liabilities/total sales) x ($ Δ sales)] - [profit margin x forecasted sales in $ x (1 - dividend payout ratio)]
total assets = $9,380, projected total assets = $9,380 x 1.1 = $10,318
total sales = $7,800
$ Δ sales = $780
current liabilities = $1,550
profit margin = net income / sales = $410 / $7,800 = 0.052564
forecasted sales = $7,800 x 1.1 = $8,580
dividends payout ratio = dividends / net income = $187 / $410 = 0.4561
EFN = [($9,380/$7,800) x ($780)] - [($1,550/$7,800) x ($780)] - [0.052564 x $8,580 x (1 - 0.4561)]
EFN = $938 - $155 - $245.30 = $537.70
projected retained earnings = current retained earnings - projected net income - projected dividends = $4,430 + $451 - $205.70 = $4,675.30
The market price of a security is $50. Its expected rate of return is 14%. The risk-free rate is 6% and the market risk premium is 8.5%. What will be the market price of the security if its correlation coefficient with the market portfolio doubles (and all other variables remain unchanged)? Assume that the stock is expected to pay a constant dividend in perpetuity
Answer:
The market price of the security is $31.81
Explanation:
In order to calculate the market price of the security if its correlation coefficient with the market portfolio doubles we would have to calculate first the following:
First, calculate the dividend expected after one year with the following formula:
D=P*E(ri)
D=$50*0.14
D=$7
Next, we would have to calculate the beta of the security using the CAAPM Equation:
βi= E(ri)-rf/E(rm)-rf
=0.14-0.06/0.085
=0.9412
Next, we have to calculate the new beta due to the change in the correlation coefficient with the following formula:
β=correlation coefficient/σm*σs
=2*0.941
=1.882
Next, Calculate the new expected return as follows:
E(ri)=rf+βi(E(rm)-rf)
=0.06+(1.882)(0.085)
=0.22
Finally we calculate the new piece of the security as follows:
P=D/E(ri)
=$7/0.22
=$31.81
The market price of the security is $31.81
Buster Industries pays weekly salaries of $30,000 on Friday for a five-day week ending on that day. The adjusting entry necessary at the end of the fiscal period ending on Tuesday is
Answer:
Debit Salary Expenses $12,000, Credit Salary Payable $12,000
Explanation:
5 days salaries = $30,000
2 days salaries = $30,000/5 =$20,000
The adjusting entry would be increasing salary expenses and creating a corresponding liability for the same.
Debit Salary Expenses $12,000, Credit Salary Payable $12,000
The adjusting entry necessary at the end of the fiscal period ending on Tuesday is : Debit Salary Expenses $12,000, Credit Salary Payable $12,000.
A 12-month period known as a "fiscal period" or "fiscal year" is when a business entity is required to account for all transactions and events involving that specific company. The 12-month timeframe does not always correspond to the 365-day period from January 1 to December 31.
The calculation for salary is as follows:
The total of 5days salaries is $30,000.
So, 2 days salaries will be:
[tex]\dfrac{\$30,000}{5} \times 2\\\\=\$12,000[/tex]
The adjusting entry would be increasing salary expenses and creating a corresponding liability for the same.
Therefore, the salaries expense account is debited and salaries payable account is credited for $12000.
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Suppose that you are a member of the Board of Governors of the Federal Reserve System. The economy is experiencing a sharp and prolonged inflationary trend. What changes in (a) the reserve ratio, (b) the discount rate, and (c) open-market operations would you recommend? Explain in each case how the change you advocate would affect commercial bank reserves, the money supply, interest rates, and aggregate demand. g
Answer:
Explanation:
1. Assuming an economy is experiencing a sharp and prolonged inflationary trend, I'll recommend the following changes:
a. Reserve ratio: I will increase the reserve ratio.
b. Discount rate: I will increase the discount rate.
c. Open market operations: I will recommend tightening the money supply through the selling of more government bonds.
2a. The reserve requirement is the central bank regulation which sets the minimum amount of reserves which must be held by a commercial bank. An increase in the reserve ratio will lead to less money in circulation.
b. the money supply: Thhe money supply will contract i.e tighten
c. Interest rates: Interest rates will rise leading to an increase in the investments which keeps money out of circulation and also lead to a decrease in inflation rates.
d. Aggregate demand. Aggregate demand would reduce, and this would lead to a reduction in inflation.
Record the following transactions of Fronke’s Fashions in a general journal:
April 1 Purchased merchandise for cash, $2,310.
2 Returned merchandise for cash purchased on April 1; received a cash refund of $218.
4 Purchased merchandise on credit from Breit Distributors, Invoice 125, $871, terms n/30; freight of $46 prepaid by Breit Distributors and added to the invoice.
7 Returned damaged merchandise purchased on April 4 from Breit Distributors; received Credit Memorandum 202 for $58.
30 Paid the amount due to Breit Distributors for the purchase of April 4, less the return on April 7, Check 1458.
Answer:
Fronke's Fashions
General Journal:
April 1:
Debit Purchases $2,310
Credit Cash Account $2,310
To record purchase of merchandise for cash.
April 2:
Debit Cash Account $218
Credit Purchases Returns $218
To record return of merchandise for cash.
April 4:
Debit Purchases $825
Debit Freight-in $46
Credit Accounts Payable (Breit Distributors) $871
To record purchase of merchandise on credit, Invoice 125, terms n/30
April 7:
Debit Accounts Payable (Breit Distributors) $58
Credit Purchases Returns $58
To record return of damaged merchandise, Credit Memo 202.
April 30:
Debit Accounts Payable (Breit Distributors) $813
Credit Cash Account $813
To record payment of amount due via Check 1458.
Explanation:
Journal entries are made to record business transactions as they occur on a daily basis. The journal is the first accounting record kept about a transaction. It shows the account that will be debited or credited in the General Ledger.
Lindsay is training two new sales representatives, Lance and Ayden, to use the revised client-tracking database, which has been updated and improved. Lindsay is sharing her desktop to walk them through the steps of inputting new client information. Lindsay is in Indianapolis, Lance is in Boston, and Ayden is in Phoenix.
In order to make the meeting more successful, Lindsay should:________.
a. Be sure that Lance and Ayden know how to connect to Lindsay’s desktop.
b. Frequently ask Lance and Ayden if what she is saying makes sense.
c. Explain how questions should be asked and answered.
e. Expect to review meeting content due to the limitations of virtual technology.
Answer:
a. Be sure that Lance and Ayden know how to connect to Lindsay’s desktop.
b. Frequently ask Lance and Ayden if what she is saying makes sense.
e. Expect to review meeting content due to the limitations of virtual technology.
Explanation:
In today's world there is a wide array of different programs that allow us to virtually connect with other individuals in order to communicate, share ideas, and hold meetings. These options, unfortunately, have their downsides as well, the main one being faulty connection which leads to miscommunication. This can lead to serious problems. Therefore the best way to guarantee success is to help those attending the meeting make sure they know how to connect and participate correctly, and continuously make sure they are understanding everything that is being said. Once the meetings are done, a review will make sure that everyone is on the same page and clear up any questions that anyone may have.
4. After making a visual inspection, buyer bought property from seller and proceeded to build a home. When the possibility of soil slippage soon became apparent, construction was halted. Buyer sued seller to rescind the sale. Soil expert testified that the property was not suitable for the construction of a residence. Seller was unaware of the stability hazard of the soil when the sale was transacted. Could buyer rescind
Answer:
The buyer could not rescind the contract.
Since there was no deceit on the part of the seller, the buyer should have taken reasonable care, according to the doctrine of caveat emptor, before concluding the contract. This would have forced him to undertake a soil test to determine its suitability.
Some questions to ask the buyer are: did he communicate with the seller about the suitability of the property for a residential house?
Can the buyer prove that he was reasonably induced to make the contract because it was difficult to discover the unsuitability? This is not the case.
Was the buyer induced by the seller's assurances of no defects? The seller was not aware of the stability hazard of the soil, so he could not have assured the buyer of no defects.
Did the buyer discover the defects within a reasonable time? This was not likely.
Explanation:
Under Article 2 of the Uniform Commercial Code, for a buyer to revoke or rescind, "he must show (1) the goods failed to conform to the contract and (2) it substantially impaired the value of the goods (this is a question of fact). "
The buyer can rescind the contract if he can show he accepted the property knowing that the seller would cure it and this did not happen.
Cost estimates that are based as a guideline on real numbers, or figures derived after the completion of preliminary design work, are:
a. Definitive estimates.
b. Feasibility estimates.
c. Parametric estimates.
d. Order of magnitude estimates
Answer:
B. Feasibility estimates.
Explanation:
This is explained as an analysis used to determine the viability of an idea based on its risks and to check if it is legally and technically feasible.
Feasibility estimates are also used to determine whether a research study is likely to be delivered successfully, taking into account the practical aspects of managing the project. Moreso, feasibility assessments are not just about figures as it is also used to assess the relevance and intensity of the study for participants and the study
team. Large feasibility estimates will help identify possible problems with recruitment and may highlight
logistical challenges that may face sites involved with the study.
ecan Theatre Inc. owns and operates movie theaters throughout Florida and Georgia. Pecan Theatre has declared the following annual dividends over a six-year period: 20Y1, $30,000; 20Y2, $60,000; 20Y3, $143,000; 20Y4, $173,000; 20Y5, $218,000; and 20Y6, $270,000. During the entire period ended December 31 of each year, the outstanding stock of the company was composed of 25,000 shares of cumulative, preferred 3% stock, $100 par, and 100,000 shares of common stock, $25 par. Required: 1. Determine the total dividends and the per-share dividends declared on each class of stock for each of the six years. There were no dividends in arrears at the beginning of 20Y1. Summarize the data in tabular form. If required, round your answers to two decimal places. If the amount is zero, please enter "0".
Answer:
Find the attached dividend analysis spreadsheet for Theater Inc.
Explanation:
In analyzing the dividends in the respective years, I first calculated yearly preferred dividends which is $75,000 i.e 25,000*$100*3%
In any year where total dividends declared and paid fell short of $75,000,the entire amount is given as preferred dividends with balance carried over to future years.
Marigold Corp. is authorized to issue both preferred and common stock. The par value of the preferred is $50. During the first year of operations, the company had the following events and transactions pertaining to its preferred stock. Feb. 1Issued 48,500 shares for cash at $51 per share. July 1Issued 58,000 shares for cash at $59 per share. Journalize the transactions.
Answer:
Dr cash $ 2,473,500.00
Cr preferred stock $ 2,425,000.00
Cr paid-in capital in excess of par-preferred stock $48,500
Dr cash $ 3,422,000.00
Cr preferred stock $ 2,900,000
Cr paid-in capital in excess of par-preferred stock $522,000
Explanation:
The issue of preferred shares on Feb 1 would result in cash proceeds of $ $2,473,500.00 i.e (48,500*$51)
The proceeds would be debited to cash while preferred stock account is credited with par amount of $ 2,425,000.00 (48,500*$50) and the remaining amount of $ 48,500.00 is credited to paid-in capital in excess of par-preferred stock.
The issue of preferred shares on July 1 would result in cash proceeds of $3,422,000.00 i.e (58,000*$59)
The proceeds would be debited to cash while preferred stock account is credited with par amount of $ 2,900,000.00 (58000*$50) and the remaining amount of $ 522,000.00 is credited to paid-in capital in excess of par-preferred stock
The income statement for the Sage Hill Inc. for the month ended July 31 shows Service Revenue $17,470, Salaries and Wages Expense $8,870, Maintenance and Repairs Expense $3,370, and Income Tax Expense $1,470. The statement of retained earnings shows an opening balance for Retained Earnings of $20,520 and Dividends $1,760.
Prepare closing journal entries.
Answer along with its Explanation:
The profit for the year is calculated as under:
Profit for the year = Revenue - Salaries and Wages - Maintenance and Repairs Expense - Income Tax Expense
Profit for the year = $17,470 - $8,870 - $3,370 - $1,470 = $3,760
Now the entry would be to close the expense and income accounts for the year and carry forward the difference (Profit for the year) to retained earnings.
The entry would be as under:
Dr Service Revenue $17,470
Cr Salaries and Wages Expense $8,870
Cr Maintenance and Repairs Expense $3,370
Cr Income Tax Expense $1,470
Cr Retained Earnings (Balancing figure) $3,760
The recording of the dividends (A decrease in Capital) would be decrease in the retained earnings which is given as under:
Dr Dividends $1,760
Cr Cash Balance $1,760
The waiving off this amount will be by debiting the retained earnings and crediting dividends paid.
Dr Retained Earnings $1,760
Cr Dividends $1,760
Asonia Co. will pay a dividend of $5.30, $9.40, $12.25, and $14.25 per share for each of the next four years, respectively. The company will then close its doors. If investors require a return of 9.8 percent on the company's stock, what is the stock price?
Answer:
$31.68
Explanation:
The computation of the stock price is shown below:
= Dividend for year 1 ÷ (1 + required return)^number of years + Dividend for year 2 ÷ (1 + required return)^ number of years + Dividend for year 3 ÷ (1 + required return)^ number of years + Dividend for year 4 ÷ (1 + required return)^ number of years
= $5.30 ÷ (1 + 9.8%) + $9.40 ÷ (1 + 9.8%)^2 + $12.25 ÷ (1 + 9.8%)^3 + $14.25 ÷ (1 + 9.8%)^4
= 4.82695810564663 + 7.79692170895252 + 9.25399090557962 + 9.80404969365523
= 31.681920413834
= $31.68
We have learned about four types of adjustments: (1) prepaid expenses, (2) unearned revenues, (3) accrued revenues, and (4) accrued expenses. With those concepts in mind, review the following scenario, As the book-keeper for your company you are required to create quarterly financial statements (Income Statement, Statement of Owner's Equity Balance Sheet and Statement of Cash Flows) in order to report on the financial activities of the company for the quarter (three months). It is now March 29th, and in preparation for creating the 1st quarter's financial statements (as of 3/31), you have called a meeting with the Dept. Managers for Accounts Receivable and Accounts Payable to confirm deadlines that have to be met for recording March-related transactions. As the meeting starts the owner walks in - she sits quietly as you explain the deadlines, but as soon as you have finished she says "Well, for this quarter, if we have not paid March invoices by March 31, there is no need to record them in March. We can record/expense those invoices when we pay them in April or May." Required:
1. Do you agree with the owner, or, do you feel that an adjusting entry is necessary in the situation described? If so - which type of adjusting entry is needed?
2. Why is the adjustment necessary? (Refer to concepts in the chapter) In your post:
a) discuss the impact (understated or overstated) on the accounts affected if the adjustment is not made, and
b) explain how the adjustment affects the appropriate financial statements
3, Assume one of the unpaid invoices is for $2,000 in Advertising. Show the type of adjusting entry you would create.
Answer:
1. Do you agree with the owner, or, do you feel that an adjusting entry is necessary in the situation described? If so - which type of adjusting entry is needed?
She is wrong, because the accrual principle states that both revenues and expenses must be recognized during the periods that they actually occur, not when they are collected or paid for.2. Why is the adjustment necessary? (Refer to concepts in the chapter) In your post:
If you do not record accrued expenses, then you are understating first quarter expenses and overstating second quarter expenses.a) discuss the impact (understated or overstated) on the accounts affected if the adjustment is not made, and
March invoices represent costs and expenses associated to the activities carried out during March, and not recording them properly will result in net income being over stated during March (first quarter)and under stated during the second quarter.b) explain how the adjustment affects the appropriate financial statements
First quarter's net income will be over stated while second quarter's net income will be under stated.3, Assume one of the unpaid invoices is for $2,000 in Advertising. Show the type of adjusting entry you would create.
Dr Advertising expense 2,000
Cr Accounts payable 2,000
Explanation:
Jonathan, the HR manager of a manufacturing company, asks all the employees to use public transportation and thus contribute to the reduction of the emission of greenhouse gases. However, the employees state that they lose time if they use public transport, and they continue to commute in private vehicles. In the context of social dilemmas, the employees' actions will result in ________ in this scenario.
Answer:
the Tragedy of the Commons
Explanation:
A lot of people still fail to consider our environment as part of ourselves and where we live. They choose to believe that pollution is not that serious because they do not see it or are not affected by it. But our world is one big house where we all live. The burning of the Amazon rain forests affects us all, the same as car pollution affects the whole world, even if you do not feel the negative effects right away. Since people do not see the bad consequences of pollution, they will continue to pollute until it is too late. Most people place their individual needs ahead of the collective needs of society and our environment.
In which performance appraisal method are various performance levels shown along a scale that incorporates only positive performance behaviors?
Answer:
Behavioral observation scales (BOS).
Explanation:
Performance appraisal is a formal systematic process combining both written and oral elements for reviewing and evaluation of individuals or a team's task performance in an organization. It helps employers to understand the abilities of their employees for further growth, training and development. One of such tool for performance appraisal is
Behavioral observation scales (BOS) is a performance appraisal method in which various performance levels are shown along a scale that incorporates only positive performance behaviors.
This simply means, BOS is focused on using one or more scales to gauge the frequency with which a staff has performed positively, effectively and efficiently in the job.
Hence, Behavioral observation scales (BOS) are goal-orientated process helps an employer to maximize the productivity of his or her employees, team members and by extension the organization.
Wadding Corporation applies manufacturing overhead to products on the basis of standard machine-hours. For the most recent month, the company based its budget on 5,500 machine-hours. Budgeted and actual overhead costs for the month appear below: Original Budget Based on 5,500 Machine-HoursActual Costs Variable overhead costs: Supplies$12,800 $13,730 Indirect labor 54,300 55,690 Fixed overhead costs: Supervision 21,600 21,240 Utilities 7,800 7,860 Factory depreciation 8,800 9,110 Total overhead cost$105,300 $107,630 The company actually worked 5,590 machine-hours during the month. The standard hours allowed for the actual output were 5,580 machine-hours for the month. What was the overall variable overhead efficiency variance for the month
Answer:
Variable overhead efficiency variance = $798.36 unfavorable
Explanation:
Variable overhead efficiency variance is the difference between the actual time taken to achieve a given production output less the standard hours for same multiplied by the standard variable overhead rate
Since the variable overhead is charged using machine hours, any amount by which the actual labour hours differ from the standard allowable hours would result in a variance
Overhead absorption rate =Estimated overhead/estimated machine hours
105,300/5,500 machine hours = $19.14 per machine hour
$
5,580 hours should have cost (5,580× 19.14) 106,831.6
but did cost (actual cost ) 107,630
Variable overhead efficiency variance. 798.36 unfavorable
Variable overhead efficiency variance = $798.36 unfavorable
Waterways puts much emphasis on cash flow when it plans for capital investments. The company chose its discount rate of 7% based on the rate of return it must pay its owners and creditors. Using that rate, Waterways then uses different methods to determine the best decisions for making capital outlays. This year Waterways is considering buying five new backhoes to replace the backhoes it now has. The new backhoes are faster, cost less to run, provide for more accurate trench digging, have comfort features for the operators, and have 1-year maintenance agreements to go with them. The old backhoes are working just fine, but they do require considerable maintenance. The backhoe operators are very familiar with the old backhoes and would need to learn some new skills to use the new backhoes. The following information is available to use in deciding whether to purchase the new backhoes.
Old Backhoes New Backhoes
Purchase cost when new $90,000 $200,000
Salvage value now $42,000
Investment in major overhaul needed in next year $55,000
Salvage value in 8 years $15,000 $90,000
Remaining life 8 years 8 years
Net cash flow generated each year $30,425 $43,900
Instructions
(a) Evaluate in the following ways whether to purchase the new equipment or overhaul the old equipment. (Hint: For the old machine, the initial investment is the cost of the overhaul. For the new machine, subtract the salvage value of the old machine to determine the initial cost of the investment.)
(1) Using the net present value method for buying new or keeping the old.
(2) Using the payback method for each choice. (Hint: For the old machine, evaluate the payback of an overhaul.)
(3) Comparing the profitability index for each choice.
(4) Comparing the internal rate of return for each choice to the required 8% discount rate.
(b) Are there any intangible benefits or negatives that would influence this decision?
(c) What decision would you make and why?
Answer:
(a) Evaluate in the following ways whether to purchase the new equipment or overhaul the old equipment.
(1) Using the net present value method for buying new or keeping the old.
buying the new backhoes has a higher net present value (NPV), so we should choose that project according to this method of evaluation ($156,521 > $135,407 )(2) Using the payback method for each choice.
the payback period for keeping the old backhoes is shorter than buying new backhoes, so we should choose that project according to this method of evaluation (1.81 years < 3.6 years)(3) Comparing the profitability index for each choice.
keeping the old backhoes also has a higher profitability index, so we should choose that project according to this method of evaluation (3.46 > 1.99)(4) Comparing the internal rate of return for each choice to the required 7% discount rate.
Both project have a very high IRR, but keeping the old backhoes has a higher IRR, so we should choose that project according to this method of evaluation (54% > 26%)(b) Are there any intangible benefits or negatives that would influence this decision?
The new backhoes provide intangible benefits that the old backhoes do not, e.g. they are faster and more accurate which results in better work done. While the old backhoes require a lot of maintenance work and once starts to require a lot of maintenance, the odds are that they will keep breaking even more than expected.(c) What decision would you make and why?
I would purchase the new backhoes because it would improve the company's work and efficiency, since old equipment tends to break a lot specially construction equipment. Even though the NPV is the only method of valuation where the new backhoes were better, it is also the most important one.Explanation:
Old Backhoes New Backhoes
Purchase cost when new $90,000 $200,000
Salvage value now $42,000
Investment in major overhaul
needed in next year $55,000
Salvage value in 8 years $15,000 $90,000
Remaining life 8 years 8 years
Net cash flow per year $30,425 $43,900
initial investment -$55,000 -$158,000
cash flow years 1-7 $30,425 $43,900
cash flow year 8 $45,425 $133,900
discount rate 7% 7%
I used an excel spreadsheet to calculate the following
net present value $135,407 $156,521
IRR 54% 26%
payback period 1.81 years 3.6 years
profitability index 3.46 1.99
(= PV of cash flows / investment)
A machine that produces a certain piece must be turned off by the operator after each piece is completed. The machine "coasts" for 15 seconds after it is turned off, thus preventing the operator from removing the piece quickly before producing the next piece. An engineer has suggested installing a brake that would reduce the coasting time to 3 seconds.
The machine produces 50,000 pieces a year. The time to produce one piece is 1 minute 45 seconds, excluding coastint time. The operator earns $10 an hour and other direct costs for operating the machine are $5 an hour. The brake will require servicing every 589 hours of operation. It will take the operator 30 minutes to perform the necessary maintenance and will require $48 in parts and material. The brake is expected to last 7,500 hours of operation (with proper maintenance) and will have no salvage value.How much could be spent for the brake if the Minimum Attractive Rate of Return is 10% compounded annually?
Answer:
$9197.72
Explanation:
To find the amount to be spent for the brake if the Minimum Attractive Rate of Return is 10% compounded annually, we have the following:
Cost incurred without the brake = Number of pieces * (Number of minutes for producing one product / total number of minute in an hour) * cost per peice
Where,
Number of minutes for producing a product without the brake system =
105 seconds(1 min, 45 sec) + 15 seconds(coast time) = 2 minutes or 120 seconds
Thus,
Cost incurred without break is =
[tex]50,000* \frac{2}{60}* (10 + 5) = 25,000 [/tex]
Let's find the number of minutes for installing a break
= 105 + 3 seconds = 108 seconds = 1.8 minutes
Cost incurred with break =
[tex] 50,000 * \frac{1.8}{60} * (10 + 5) = $ 22,500 [/tex]
To find the maintainence cost, let's consider parts & material cost and labor cost for operator
[tex] (\frac{50000 * \frac{1.8}{60}}{589}) * (\frac{30}{60} * (10+48)) = 73.85 [/tex]
No. of years the brake will last
[tex] = \frac{\frac{7500}{50000}}{1.8/60} = 5 years [/tex]
The maximum amount that can be spent on brake will be the difference in cost incurred with brake and without brake * present value of annuity factor of 5 years at 10%
= (25,000 - 22,573.85)*PVAF, 10% for 5 years = $9197.72
$9198 (rounded off)
The the amount to be spent for the brake if the Minimum Attractive Rate of Return is 10% compounded annually is $9197.72
Bond X is a premium bond making semiannual payments. The bond has a coupon rate of 9.6 percent, a YTM of 7.6 percent, and has 13 years to maturity. Bond Y is a discount bond making semiannual payments. This bond has a coupon rate of 7.6 percent, a YTM of 9.6 percent, and also has 13 years to maturity. Assume the interest rates remain unchanged and both bonds have a par value of $1,000.
Required:
a. What are the prices of these bonds today?
b. What do you expect the prices of these bonds to be in one year?
c. What do you expect the prices of these bonds to be in three years?
d. What do you expect the prices of these bonds to be in eight years?
e. What do you expect the prices of these bonds to be in 12 years?
f. What do you expect the prices of these bonds to be in 13 years?
Answer:Hi
Explanation:Hi
Lenders charge a loan origination fee to A. cover the expenses involved in generating the loan B. guard against charges of usury C. guard against losses in the event of a short sale D. cover the losses involved if the borrower repays the loan before the end of the loan term.
Answer:
A
Explanation:
An origination fee is the fee charged to cover expenses involved with processing a loan application.
At December 31, 2015, Albrecht Corporation had outstanding 368,000 shares of common stock and 6,000 shares of 9.5%, $100 par value cumulative, nonconvertible preferred stock. On May 31, 2016, Albrecht sold for cash 12,000 shares of its common stock. No cash dividends were declared for 2016. For the year ended December 31, 2016, Albrecht reported a net loss of $1,743,000.
Calculate Albrecht's net loss per share for the year ended December 31, 2016.
Answer:
Net loss per share is -$4.80
Explanation:
The net loss per share is the total loss in the year divided by the weighted average number of common stock in the year.
Total net loss=net loss-preferred stock dividend
preferred stock dividend=$100*6,000*9.5%=$ 57,000.00
total net loss=-$1,743,000-$57,000=-$1,800,000
weighted average number of common stock=368,000*5/12+(368,000+12,000)*7/12=375,000 shares
net loss per share=-$1,800,000/375,000=-$4.80
Evaluate the following investment options by comparing their risk and liquidity: buying a franchise real estate (buying property) mutual fund Which of the three investment alternatives is the best for you? Explain the reasons for your choice.
Answer:
Buying a franchise: For me, this is the riskiest investment, because the success of the business depends on the product or service it sells. If there is no demand for the product or service, the business will go under. This investment is also highly illiquid—in addition, finding someone willing to buy a business is difficult.
Mutual fund: This is the least risky of the three investment options. It is highly liquid compared to buying a franchise or real estate. Mutual fund investors can easily cash in their investments by selling the units they hold in a fund at the current market price.
Real estate: Real estate is a risky investment. First, property prices can fall in a depressed housing market. Second, real estate properties are illiquid. They can’t be sold quickly for a good price, especially in times of recession in the housing market or in the overall economy.
A mutual fund is the best of the three investment options for me, for the following reasons:
I can invest small amounts of money regularly and get higher returns on the investment than I would from a savings account. Also, this is a highly liquid investment. In case of a financial emergency, I can quickly sell my mutual fund units at their current market price.
Real estate is currently both a risky and illiquid investment, because of poor market conditions.
Buying a franchise is not a good option for me, because I don’t plan to go into business. In any case, I don’t have the money to make this investment.
Explanation: PLATO
Buying a franchise: For me, this is the riskiest investment, because the success of the business depends on the product or service it sells. If there is no demand for the product or service, the business will go under. This investment is also highly illiquid in addition to someone willing to buy a business is difficult. Mutual fund is the least risky of the three investment options. It is highly liquid compared to buying a franchise or real estate. Mutual fund investors can easily cash in their Investments by selling the units they hold in a fund at the current market price. Real estate: Real estate is a risky investment. First, property prices can fall in a depressed housing market. Second, real estate properties are illiquid. They can't be sold quickly for a good price, especially in times of recession in the housing market or in the overall economy. A mutual fund is the best of the three investment options for me, for the following reasons: I can invest small amounts of money regularly and get higher returns on the investment than I would from a savings account. Also, this is a highly liquid investment. In case of a financial emergency, I can quickly sell my mutual fund units at their current market price. Real estate is currently both a risky and liquid investment, because of poor market conditions. Buying a franchise is not a good option for me, because I don't plan to go into business. In any case, I don't have the money to make this investment.
Explanation:
plato and i change it up a little
Kater Company manufactures shelving units. The company receives pre-cut wood, drills holes in the wood so that movable shelves may be installed, then assembles and paint the units. Classify each of the following items of factory overhead as either fixed or variable cost.
a. Supervisor of the Drilling Department
b. Oil used to lubricate drill press machines
c. Propane for forklift trucks used to move the material from the Drilling Department to the Assembly Department
d. Natural gas used to heat the plant
e. Security guard
f. Insurance on factory building
g. Electricity to power drill press machines
h. Rent of factory building
Answer: Please see below for answers.
Explanation:
Variable costs are referred to as costs incurred to a company which change as the volume of production by the company or business changes that is when the volume of production increases, the costs increases , and decreases with decreased production.
Fixed costs are expenses incurred to a company which do not change in relation to the volume of production by the company or business that is when the volume of production increases or decreases, the costs remains the same.
a. Supervisor of the Drilling Department----- Fixed cost
b.Oil used to lubricate drill press machines---- Variable cost
c.Propane for forklift trucks used to move the material from the Drilling Department to the Assembly Department---- Variable cost
e.Natural gas used to heat the plant----- Variable cost
f.Security guard---- fixed cost s
g.Insurance on factory building----- Fixed costs
h.Electricity to power drill press machines---- Variable costs
.i Rent of factory building-Fixed costs
g Question 1 of 1010.0 Points A company's unethical behavior may result in the following except A. buyers will shun the company B. the company will have difficulty recruiting and retaining talented employees C. the company risks damage to shareholders in the form of lost revenues, higher costs, and lower profits, and the company's reputation will suffer D. the company will have to deal with the Sarbanes-Oxley Act of 2002, which requires the company remove the tarnished employees E. All of these choices are correct
Answer:
E
Explanation:
Answer:
the answer is E
Explanation:
If business taxes decrease, economists would say that this was a positive demand shock that shifts AD to the left. positive demand shock that shifts AD to the right. positive demand shock that shifts SRAS to the right. positive supply shock that shifts SRAS to the right. positive supply shock that shifts SRAS to the left.
Answer:
Positive supply shock that shifts SRAS to the right.
Explanation:
There are different factors that affect this but primarily its seen that change in input price and also productivity are the two vital factors.
Normally, the AS curve is defined as showing the quantity of real GDP producers will supply at any aggregate price level.
Supply shocks are events that shift the aggregate supply curve. When the aggregate supply curve shifts to the right, then at every price level, a greater quantity of real GDP is produced. This is called a positive supply shock. When the AS curve shifts to the left, then at every price level, a lower quantity of real GDP is produced. This is a negative supply shock.
Answer:
positive supply shock that shifts SRAS to the right.
Explanation:
Which of the following is correct with respect to Debt Service Funds?
A. Debt service funds report the balance of governmental debts except debt of proprietary and fiduciary funds.
B. Debt service funds account for and report financial resources that are restricted, committed or assigned to expenditure for principle and interest for all governmental long-term debt.
C. Debt service funds account for and report financial resources that are restricted, committed or assigned to expenditure for principle and interest for governmental debts except debt of proprietary and fiduciary funds who account for their own interest and principle payments.
D. Debt service funds must accrue interest on long-term debt at year end.
Answer:
C. Debt service funds account for and report financial resources that are restricted, committed or assigned to expenditure for principle and interest for governmental debts except debt of proprietary and fiduciary funds who account for their own interest and principle payments.
Explanation:
Debt service funds are used to pay for principal and interest on certain types of debts. This reduced the risk of debt security that investors face and also reduces the effective rate at which the offering can be sold.
However debt service funds cannot be used for proprietary funds like 400 and 500.
Instead we use Enterprise funds for 400. That is operations similar to corporate enterprise. For example water and sewage utilities.
Internal service funds for 500 used by other funds or departments bin a government in a cost reimbursement basis. For example a food supplier that takes orders and is reimbursed for each order.
Answer:
C. Debt service funds account for and report financial resources that are restricted, committed or assigned to expenditure for principle and interest for governmental debts except debt of proprietary and fiduciary funds who account for their own interest and principle payments.
Explanation:
Under the Codification of Governmental Accounting and Financial Reporting Standards by the Governmental Accounting Standards Board (GASB); Code 200 states that debt service funds are to be used to service terms and bond reserves, guaranty, warrants, note, capital leases, or sinking funds.
Debt service funds is a cash reserve that is used to account for and report financial resources that are restricted, committed or assigned to expenditure for principle and interest for governmental debts except debt of proprietary and fiduciary funds who account for their own interest and principle payments.
The purpose of using a debt service fund is to reduce the risk of a debt security for investors, thereby making it more attractive and appealing to them. Also, the debt service fund helps to mitigate the effective interest rate needed by the government to sell the offering.
The other types of governmental funds are namely;
- Capital projects funds.
- Permanent funds.
- General funds.
- Special revenue funds.
Mike Corporation uses residual income to evaluate the performance of its divisions. The company's minimum required rate of return is 14%. In January, the Commercial Products Division had average operating assets of $790,000 and net operating income of $148,700. What was the Commercial Products Division's residual income in January
Answer:
The Commercial Products Division's Residual income in January is $ 37,400.
Explanation:
Residual income (which is a Managerial Accounting concept) is what remains from a departments income after the opportunity cost of the capital that it deploys has been removed.
The formula is given below:
Residual Income (RI) = Controllable Margin (CM) - Required Rate of Return (RRR) × Average Operating Assets (AOR)
Step I:
Insert all the given factors
RI = 148,000 - (14% x 790,000)
RI = 148,000 - 110600
Therefore, residual income RI = $ 37,400
Cheers!
Many luxury sheets cost less than $200 to make but sell for more than $500 in retail stores. Some cost even more dash–consumers pay almost $3,000 for Frett'e "Tangeri Pizzo" king-size luxury linens. The creators of a new brand of luxury linens, called Boll & Branch, have entered this market. They want to price their sheets lower than most brands but still want to earn an adequate margin on sales. The sheets come in a luxurious box that can be reused to store lingerie, jewelry, or other keepsakes. The Boll & Branch brand touts fair trade practices when sourcing its high-grade long-staple organic cotton from India. The company calculated the price to consumers to be $350If the company decides to sell through retailers instead of directly to consumers online, to maintain the consumer price at $350,at what price must it sell the product to a wholesaler who then sells it to retailers? Assume wholesalers desire a 5percent margin and retailers get a 30percent margin, both based on their respective selling prices.
Answer:
at what price must it sell the product to a wholesaler who then sells it to retailers?
$232.75Explanation:
sales price to consumers = $350
retailers' margin = $350 x 30% = $105
price at which retailers purchase each unit = $350 - $105 = $245
sales price to retailers = $245
wholesaler's margin = $245 x 5% = $12.25
price at which wholesaler purchases each unit = $245 - $12.25 = $232.75
how to verify this:
($232.75 x 5/95) + $232.75 = $245
($245 x 30/70) + $245 = $350
Information related to Whispering Winds Corp. is presented below.
1. On April 5, purchased merchandise on account from Martinez Company for $34,800, terms 2/10, net/30, FOB shipping point.
2. On April 6, paid freight costs of $790 on merchandise purchased from Martinez.
3. On April 7, purchased equipment on account for $28,200.
4. On April 8, returned damaged merchandise to Martinez Company and was granted a $5,500 credit for returned merchandise.
5. On April 15, paid the amount due to Martinez Company in full.
Prepare the journal entries to record these transactions on the books of Harwick Co. under a perpetual inventory system.
Answer:
Harwick Co Entries
DATE ACCOUNT TITLE & EXPLANATION DEBIT CREDIT
$ $
5 Apr. Merchandise Inventory 34,800
Account Payable 34,800
(To record purchase of inventory on account)
6 Apr. Freight In 790
Cash 790
(To record freight cost incurred Purchase of merchandise)
7 Apr. Equipment 28,200
Account Payable 28,200
(To record purchase of equipment on account)
8 Apr. Account Payable 5,500
Merchandise Inventory 5,500
(To record return of damaged merchandise)
15 Apr. Account Payables 34,800
Cash (34,800-5,500) 29,300
(To record payment made)
