A cartel is a group of independent market participants who collude with each other in order to improve their profits and dominate the market. Cartels are usually associations in the same sphere of business, and thus an alliance of rivals.
During 20x1, Orca Corp. decided to change from the FIFO method of inventory valuation to the weighted-average method. Inventory balances under each method were as follows:________.
FIFO Weighted-average
January 1, 20x1 $71,000 $77,000
December 31, 20x1 $79,000 $83,000
Orca's income tax rate is 30%.
In its 2005 financial statements, what amount should Orca report as the cumulative effect of this accounting change?
a) $2,800
b) $4,000
c) $4,200
d) $6,000
Answer:
Orca Corp.
The cumulative effect of this accounting change in estimate is:
That the cost of goods sold will be reduced by:
b) $4,000
Explanation:
a) Data and Calculations:
FIFO Weighted-average Difference
January 1, 20x1 $71,000 $77,000 $6,000
December 31, 20x1 $79,000 $83,000 $4,000
Orca's income tax rate is 30%.
Note that the difference in the cost of the beginning inventory does not have any effect in the current period's financials. It was an estimate that was done previously and Orca does not need to restate its financials for the previous year because of the change. The accounting change only affects the current period.
Ramirez Company is completing the information processing cycle at its fiscal year-end on December 31. Following are the correct balances at December 31 for the accounts both before and after the adjusting entries.
Trial Balance, December 31 of the Current Year
Before After
Adjusting Entries Adjusting Entries
Items Debit Credit Debit Credit
a. Cash $ 13,600 $ 13,600
b. Accounts receivable 430
c. Prepaid insurance 720 480
d. Equipment 169,880 169,880
e. Accumulated depreciation, $ 41,400 $ 46,700
equipment
f. Income taxes payable 1,920
g. Common stock and 110,000 110,000
additional paid-in capital
h. Retained earnings, January 1 15,680 15,680
i. Service revenue 72,500 72,930
j. Salary expense 55,380 55,380
k. Depreciation expense 5,300
l. Insurance expense 240
m. Income tax expense 1,920
$ 239,580 $ 239,580 $ 247,230 $ 247,230
Compute the amount of net income assuming that it is based on the amounts (a) before adjusting entries and (b) after adjusting entries.
Answer:
Please solution below
Explanation:
Computation of the amount of net income based on;
Adjusting entries (Amounts before)
Sales revenue.
$72,500
Less Expenses;
Depreciation exp.
Nil
Insurance expense
Nil
Salary expense
($55,380)
Income tax expense
Nil
Net income
$17,120
Adjusting entries(Amounts after)
Service revenue
$72,930
Less expenses:
Depreciation expense
($5,300)
Insurance expense
($240)
Salary expense
($55,380)
Income tax expense
($1,920)
Net income
$10,090.
•Note: The net income value of $10,090 after adjusting the entries is correct because all revenue and expenses were factored, in arriving at the figure, while the net income value of $17,120 before adjusting the entries, is incorrect due to the fact that it does not take cognizance of revenue of $430 and expenses of $7,460.
"Aldrich and Co. sold goods to Donovan on credit.The amount owed grew steadily, and finally Aldrichrefused to sell any more to Donovan unless Donovansigned a promissory note for the amount due.Donovan did not want to but signed the notebecause he had no money and needed more goods.When Aldrich brought an action to enforce the note,Donovan claimed that the note was not bindingbecause it had been obtained by economic duress.Was he correct? [Aldrich & Co. v. Donovan, 778 P.2d397 (Mont.)"
Answer and Explanation:
Economic duress happens when one party X in a contract makes demands from the other party Y which party Y has to fulfill or party X terminates the contract.
No there was no economic duress here since Aldrich had a right to demand that Donovan sign a promissory note in order to protect his claim in case of default from Donovan. Therefore Donovan signed not because he was under duress but because he needed financial assistance.
had $35 million in sales last year. Its cost of goods sold was $25 million and its average inventory balance was $3 million. What was its average days of inventory
Answer: 43.8 days
Explanation:
Average days of school inventory can be calculated as:
= Average inventory balance/(Cost of goods sold/365)
= $3million/($25 million/365)
= $3 million/$68493.15
= 43.8 days
How are productive resources
allocated among people and
businesses in the United States?
Answer:
see below
Explanation:
America is a good example of a free-market economy. In this type of market, productive resources are allocated through the interaction of a willing buyer and a willing seller. In a market economy, Mutual beneficial exchange of resources through trade is relied upon to solve economic problems. An Individual's self-interest is viewed as a benefit to society.
In a free-market economy like in America, purchasing power determines who owns resources. Resource owners are motivated by profits and other self-interest to engage in production. The forces of supply and demand control activities in a Free Market. Consumers decide what will be produced. In market economies, operation and acquisition of resources is by the freely and self-directed interaction between consumers and producers.
The specific The specific identification inventory costing method: Select one: A. Measures the ending inventory at the actual prices of the specific units sold during the period B. Is more appropriate for a firm selling construction equipment than for a firm selling greeting cards C. Is not a generally accepted method of pricing inventories D. Uses expected future acquisition costs rather than historical costs to measure the ending inventoryinventory costing method:
Answer:
A. Measures the ending inventory at the actual prices of the specific units sold during the period
Explanation:
The Specific identification inventory costing method is a strategy of getting the actual ending inventory cost. To get this cost requires the deliberate manual calculation of each of the remaining commodities brought on certain dates, at year-end inventory. The number gotten is then multiplied by their actual cost of purchase date. The result is then taken as the ending inventory cost.
Consequently, the purpose is to allocates the specific cost of each inventory item to cost of goods sold.
Hence, in this case, the correct answer is option A. Measures the ending inventory at the actual prices of the specific units sold during the period.
5. The average total cost to produce 100 cookies is $0.25 per cookie. The marginal cost is constant at $0.10 for all cookies produced. What is the total cost to produce 50 cookies
Answer:
$20
Explanation:
First, we need to find the total cost of producing 100 cookies.
From the above question, the total cost to produce 100 cookies is given by the average total cost of $0.25 multiplied by 100 units
TC = $0.25 × 100 = $25.
Therefore, the total cost to produce 50 cookies, is equal to the cost of producing 100 units minus the marginal cost ($0.10 per unit) of the additional 50 units.
TC = $25 - ($0.1 × 50) = $20
The following are the typical classifications used in a balance sheet:
a. Current assets
b. Investments and funds
c. Property, plant and equipment
d. Intangible assets
e. Other assets
f. Current liabilities
g. Long-term liabilities
h. Paid-in-capital
i. Retained earnings
Required:
For each of the following 2016 balance sheet items, use the letters above to indicate the appropriate classification category.
(If the item is a contra account, select the appropriate letter with a minus sign.)
Item Category
1. Accrued interest payable
2. Franchise
3. Accumulated depreciation
4. Prepaid insurance, for 2017
5. Bonds payable, due in 10 years
6. Current maturities of long-term debt
7. Note payable, due in three months
8. Long-term receivables
9. Restricted cash (used to retire bonds in 10 years)
10. Supplies
11. Machinery
12. Land, in use
13. Deferred revenue
14. Copyrights
15. Preferred revenue
16. Land, held for speculation
17. Cash equivalents
18. Wages payable
Answer and Explanation:
The categorizaton is shown below:
1. f. Current liabilities
2. d. Intangible assets
3. c. Property, plant, and equipment
4. a. Current assets
5. g. Long Term liabilities
6. f Current Liabilities
7. f Current Liabilities
8. b Investment and funds
9. b Investment and funds
10. a. Current assets
11. c. Property, plant, and equipment
12. c. Property, plant, and equipment
13. f. Current liabilities
14. d. Intangible assets
15. h paid in capital
16. b Investment and funds
17. a. Current assets
18. f Current Liabilities
Where can you find an image database of free and simple graphics in many
slide presentation programs?
A. The new slide button
B. Users of slide software do not have access to simple and free
graphics.
C. Clip art
D. The View tab on your toolbar
SUBMIT
Clip art is where you can find an image database of free and simple graphics in many slide presentation programs. Hence, option C is appropriate.
What is Clip Art?A sort of graphic art is clip art (also known as clipart or clipart). Premade visuals known as pieces are being used to highlight any medium. The clip art is widely utilized today and is available in numerous print and electronic formats. But nowadays, the majority of clip art is produced, shared, and employed digitally.
To be placed into a document, clip art is artwork or a picture created by multiple artists to match a variety of different categories, such as humans, animals, schools, etc. For instance, Microsoft Word includes several 100 different clip art images that may be quickly and easily added to a document.
Infographics, periodicals, mobile application icons, corporate presentations, trademarks and logos, websites, and presentations all employ clip art pictures. Because they include drawings and visual components, people employ clip art. They are time-savvy because they have been pre-designed. Hence, option C is correct.
Learn more about Clip art here:
https://brainly.com/question/1889758
#SPJ2
Answer:
Clip
Explanation:
Suppose that, in a competitive market without government regulations, the equilibrium price of gasoline is $3.00 per gallon.
Complete the following table by indicating whether each of the statements is an example of a price ceiling or a price floor and whether it is binding or nonbinding.
Statement Price Control Binding or Not
The government prohibits gas stations from selling gasoline for more than $2.50 per gallon.
The government has instituted a legal minimum price of $3.40 per gallon for gasoline.
There are many teenagers who would like to work at gas stations, but they are not hired due to minimum-wage laws.
Answer:
Price ceiling binding
price floor binding
Price floor binding
Explanation:
A price floor is when the government or an agency of the government sets the minimum price of a product. A price floor is binding if it is set above equilibrium price.
Price ceiling is when the government or an agency of the government sets the maximum price for a product. It is binding when it is set below equilibrium price.
The maximum price ($2.50) is less than the equilibrium price($3) . So it is a binding price ceiling
The minimum price ($3.40) is greater than the equilibrium price($3) . So it is a binding price floor
Charter Company, which uses the perpetual inventory method, purchases different letters for resale. Charter had a beginning inventory comprised of seven units at $4 per unit. The company purchased five units at $6 per unit in February, sold seven units in October, and purchased two units at $7 per unit in December. If Charter Company uses the LIFO method, what is the cost of its ending inventory
Answer:
Ending inventory cost= $34
Explanation:
Giving the following information:
Beginning inventory= 7 units for $4 per unit.
Purchased= 5 units for $6
Sold= 7 units
Purchased= 2 units for $7 each
Under the LIFO (last-in, first-out) method, the cost of ending inventory is calculated using the cost of the firsts units incorporated into inventory. The perpetual inventory system recognizes sales after it happens.
Ending inventory:
Beginning inventory= 7*4= 28
Purchased= 5*6= 30
Sold= (5*6) + (2*4)= (38)
Purchased= 2*7= 14
Ending inventory cost= $34
A car dealer acquires a used car for $12,000, with terms FOB shipping point. Compute total inventory costs assigned to the used car if additional costs include:
$100 for transportation-in.
$170 for shipping insurance.
$800 for car import duties.
$140 for advertising.
$1,400 for sales staff salaries.
$150 for trimming shrubs.
Required:
For computing inventory, what cost is assigned to the used car?
Answer:
$13,070
Explanation:
The Cost of inventory according to IAS 2 include all cost of purchase, cost of conversion and other cost incurred in bringing the inventory to their present location and condition.
Calculation of Inventory Cost
Cost of Purchase $12,000
Transportation-in $100
Shipping insurance $170
Car import duties $800
Total Cost $13,070
Use the following information for ECE incorporated: Shareholder Equity $100 million Assets $200 million Sales $300 million Net Income $15 million Interest Expense $2 million If ECE's stock is currently trading at $24.00 and ECE has 25 million shares outstanding, then ECE's market-to-book ratio is closest to:
Answer:
6.0
Explanation:
Market to book ratio is calculated as ; Market capitalization / Net book value.
Where,
Market capitalization = Price per share × Total shares outstanding
= $24 × 25,000,000 shares
= $600,000,000
Then,
Net book value = Total assets - Total liabilities
= $200,000,000 - $100,000,000
= $100,000,000
Therefore,
Market to book ratio = $600,000,000 / $100,000,000
= 6.0
Nancy Smith is the sole shareholder and employee of White Corporation, a calendar year C corporation that is engaged exclusively in accounting services. During the current year, White has operating income of $320,000 and operating expenses (excluding salary) of $150,000. Further, White Corporation pays Nancy a salary of $100,000. The salary is reasonable in amount and Nancy is in the 32% marginal tax bracket regardless of any income from White. Assuming that White Corporation distributes all after-tax income as dividends, how much total combined income tax do White and Nancy pay in the current year
Answer:
$63,325
Explanation:
Calculation for how much total combined income tax do White and Nancy pay in the current year
First step is to compute Corporate income tax
Since The Corporation is a personal service corporation which means that 35% flat tax rate will be applies to the Corporation taxable income which is calculated as:
Corporate income tax=($320,000-$100,000-$150,000)*35%
Corporate income tax=$70,000*35%
Corporate income tax=$24,500
Second step is to find the after-tax income that was distributed to Nancy
After-tax income = ($70,000 – $24,500)
After-tax income=$45,500
Third step is to compute for the income tax incur by Nancy on the salary income and on the dividend income
Income tax on salary income=($100,000×32%)
Income tax on salary income=$32,000
Income tax on dividend income=($45,500 ×15%)
Income tax on dividend income= $6,825
Total tax=$32,000+$6,825
Total tax=$38,825
Last step is to compute the total combined income tax
Total combined income tax =$24,500+$38,825
Total combined income tax= $63,325
Therefore the total combined income tax that White and Nancy pay in the current year will be $63,325
Crador Corp. uses a process costing system in which direct materials are added at the beginning of the process and conversion costs are incurred uniformly throughout the process. Beginning inventory for January consisted of 1,100 units. 14,000 units were started into the process during January. On January 31, the inventory consisted of 800 units. Equivalent units for conversion costs were 14,800. What percentage complete was the ending inventory with respect to conversion costs on January 31 using the weighted-average method
Answer: 62.5%
Explanation:
Equivalent units = Units completed and transferred out + percentage completed of ending inventory
14,800 = (1,100 + 14,000 - 800) + Percentage
14,800 = 14,300 + Percentage amount completed
Percentage amount completed = 14,800 - 14,300
Percentage amount completed = 500 units
Percentage = Ending equivalent units / ending inventory
= (500/800) * 100
= 62.5%
Creswell Corporation's fixed monthly expenses are $30,000 and its contribution margin ratio is 63%. Assuming that the fixed monthly expenses do not change, what is the best estimate of the company's net operating income in a month when sales are $92,000?
a. $27,960.b. $62,000.c. $57,960.d. $4,040.
Answer:
Net income= $27,960
Explanation:
Giving the following information:
Fixed costs= $30,000
contribution margin ratio= 0.63
Sales= $92,000
First, we need to calculate the total contribution margin:
Total contribution margin= 92,000*0.63= 57,960
Now, the net income:
Net income= 57,960 - 30,000
Net income= $27,960
An investor plans to divide $200,000 between two investments. The first yields a certain profit of 10%, whereas the second yields a profit with expected value 18% and standard deviation 6%. If the investor divides the money equally between these two investments, find the mean and standard deviation of the total profit.
Answer:
mean = 14%; standard deviation = 3%
Explanation:
We treat the combined investment as a portfolio, with 50% each of the portfolio size invested in each asset.
Asset A: return (r) = 10%; standard deviation (s) = 0
Asset B: return (r) = 18%; standard deviation (s) = 6%
Portfolio mean (R) =
[tex](w_{1}*r_{1})+(w_{2}*r_{2})\\=(0.5*0.1)+(0.5*0.18)\\=0.05+0.09\\=0.14[/tex]
Therefore, portfolio mean = 14%.
Portfolio standard deviation (S) = [tex][(w_{1}^{2}*s_{1}^{2})+(w_{2}^{2}*s_{2}^{2})+(2w_{1} w_{2}COV_{12} )]^{\frac{1}{2}}[/tex]
Since no information was given about portfolio covariance, we will assume it is zero.
[tex]S=[(w_{1}^{2}*s_{1}^{2})+(w_{2}^{2}*s_{2}^{2})]^{\frac{1}{2}}\\=[(0.5^{2} *0^{2} )+(0.5^{2} *0.06^{2} )]\\=0.25*0.0036\\=0.03[/tex]
Therefore, portfolio standard deviation = 3%.
Schaeffer Corporation reports $52 million accumulated other comprehensive income in its balance sheet as a component of shareholders’ equity. In a related statement reporting comprehensive income for the year, the company reveals net income of $520 million and other comprehensive income of $27 million. What was the balance in accumulated other comprehensive income in last year’s balance sheet? (Enter your answer in millions (i.e., 10,000,000 should be entered as 10).)
Answer:
$25,000,000
Explanation:
Schaeffer corporation reports $52 million accumulated other comprehensive income in its balance sheet
The company reveals a net income of $520 million
Other comprehensive income is $27 million
Therefore the balance accumulated in last year's balance sheet can be calculated as follows
= $52,000,000 - $27,000,000
= $25,000,000
The following are the transactions for the month of July. Units Unit Cost Unit Selling Price July 1 Beginning Inventory 40 $ 10 July 13 Purchase 200 11 July 25 Sold ( 100 ) $ 14 July 31 Ending Inventory 140 Calculate cost of goods available for sale and ending inventory, then sales, cost of goods sold, and gross profit, under (a) FIFO, (b) LIFO, and (c) weighted average cost. Assume a periodic inventory system is used.
Answer:
(a) FIFO (b) LIFO (c) weighted
average cost:
Cost of goods available for sale $2,600 $2,600 $2,600
Ending inventory 1,540 1,500 1,516
Sales $1,400 $1,400 1,400
Cost of goods sold 1,060 1,100 1,083
Gross profit $340 $300 $317
Explanation:
a) Data and Calculations:
Units Unit Cost Unit Selling Price
July 1 Beginning Inventory 40 $ 10 $400
July 13 Purchase 200 11 2,200
July 25 Sold ( 100 ) $ 14 (1,400)
July 31 Ending Inventory 140
July 31 Goods available 240
Average unit cost = $10.83 ($2,600/240)
FIFO:
Cost of goods available for sale $2,600 ($400 + $2,200)
Ending inventory 1,540 (140 * $11)
Sales $1,400 ($14 * 100)
Cost of goods sold 1,060 (40 * $10 + 60 * $11)
Gross profit $340
LIFO:
Cost of goods available for sale $2,600 ($400 + $2,200)
Ending inventory 1,500 (40 * $10 + 100 * $11)
Sales $1,400 ($14 * 100)
Cost of goods sold 1,100 (100 * $11)
Gross profit $300
Weighted Average:
Cost of goods available for sale $2,600 ($400 + $2,200)
Ending inventory 1,516 (140 * $10.83)
Sales $1,400 ($14 * 100)
Cost of goods sold 1,083 (100 * $10.83)
Gross profit $317
Subway, the sandwich shop, is run by Jim, Tim and Kim. When a customer arrives, Jim spends 5 minutes taking order from the customer. After this, Tim prepares bread and Kim prepares filling for the order. These activities are performed in parallel, and take 7 and 10 minutes respectively. Jim then assembles the bread and filling, which takes 5 minutes of his time. Finally, Tim spends 5 minutes in delivering the order and taking payment. What is the minimum time for an order to be completed in the process
Answer:
22 minutes minimum time
Explanation:
In the given scenario Subway sandwich shop has given its processes and time of each process.
We are to calculate the minimum time it will take to process a order. So we add all the times
Below is breakdown of the process time
Jim take orders 5 minutes
Tim prepares bread and Kim prepares filling for the order 7 - 10 minutes. We use 7 minutes since we are looking for minimum time.
Jim then assembles the bread 5 minutes
Time delivers order and takes payment 5 minutes
Total time = 5 + 7 + 5 + 5 = 22 minuites
If invests $12,672.32 now and she will receive $30,000 at the end of 10 years, what annual rate of interest will she be earning on her investment
Answer:
Rate of interest (r) = 9%
Explanation:
Given:
Amount invested (P) = $12,672.32
Future amount (A) = $30,000
Number of year (n) = 10
Find:
Rate of interest (r)
Computation:
A=P(1+r)ⁿ
30,000 = 12,672.32(1+r)¹⁰
2.3673=(1+r)¹⁰
1.090 = (1+r)
r = 0.09 or 9%
Rate of interest (r) = 9%
Gemstone Products located in New York City, is one of the world's largest producers of beauty and related products. The company's consolidated balance sheets for the 2016 and 2015 fiscal years included the following ($ in thousands): 2016 2015 Current assets: Receivables, less allowances of $133,425 in 2016 and $89,025 in 2015 $ 461,900 $ 441,500 A disclosure note accompanying the financial statements reported the following ($ in thousands) Year Ended 2016 2015 (In thousands) Calculation of account receivables, net: Receivables $ 595,325 $ 530,525 Less: allowance for doubtful accounts (123,125 ) (77,825 ) Less: reserve for product returns (10,300 ) (11,200 ) Trade accounts receivable, net: $ 461,900 $ 441,500 Assume that the company reported bad debt expense in 2016 of $192,500 and had products returned for credit totaling $187,225 (sales price). Net sales for 2016 were $5,653,800 ($ in thousands). Required: 1. What is the amount of accounts receivable due from customers at the end of 2016 and 2015
Answer:
Required:
1. What is the amount of accounts receivable due from customers at the end of 2016 and 2015?
2. What amount of accounts receivable did Gemstone write off during 2016?
3. What is the amount of Gemstone's gross sales for the 2016 fiscal year?
1. Particulars 2016 2015
Accounts receivables (Net) $461,900 $441,500
Add: Allowances $133,425 $89,025
Accounts receivables (gross) $595,325 $530,525
2. Particulars Amount
Allowance for doubtful accounts: Beginning balance $77,825
Add: Bad debt expenses $192,500
Less: Closing balance end of the year $123,125
Bad debts written off in 2016 $147,200
3. Particulars Amount
Balance, end of the year $10,300
Add: Actual returns $187,225
Less: Balance, beginning of the year $11,200
Estimated sales returns $186,325
Gross sales for the year = Net sales + Estimated sales returns
Gross sales for the year = $5,653,800 + $186,325
Gross sales for the year 2016 = $5,840,125
The Bell Weather Co. is a new firm in a rapidly growing industry. The company is planning on increasing its annual dividend by 17 percent a year for the next 4 years and then decreasing the growth rate to 6 percent per year. The company just paid its annual dividend in the amount of $2.40 per share. What is the current value of one share of this stock if the required rate of return is 7.90 percent?
Answer:
$196.91
Explanation:
The computation of the current value is shown below:
D1 = ($2.4 × 1.17) = 2.808
D2 = ($2.808 × 1.17) = 3.28536
D3 = (3.28536 × 1.17) = 3.8438712
D4 = (3.8438712 × 1.17) = 4.4973293
Now
Value after year 4 is
= (D4 × Growth rate) ÷ (Required return - Growth rate)
= (4.4973293 × 1.06) ÷ (0.079 - 0.06)
= 250.903635
Now the current value is
= Future dividend and value × Present value of discounting factor
=$2.808 ÷ 1.079 + 3.28536 ÷ 1.079^2 + 3.8438712 ÷ 1.079^3 + 4.4973293 ÷ 1.079^4 + 250.903635 ÷ 1.079^4
= $196.91
At the end of January of the current year, the records of Donner Company showed the following for a particular item that sold at $15.00 per unit:
Transactions Units Amount
Inventory, January 1 500 $2,500
Purchase, January 12 620 4,340
Purchase, January 26 100 900
Sale (380)
Sale (210)
Between FIFO or LIFO, which method would produce the more favorable cash flow?
Answer:
FIFO method decreases COGS and increases net income, but both methods will result in a similar cash flow ($8,850).
Explanation:
cost of goods sold using FIFO:
380 x $5 = $1,900
(120 x $5) + (90 x $7) = $1,230
total = $3,130
profit = (590 x $15) - $3,130 = $5,720
cost of goods sold using LIFO:
(100 x $9) + (280 x $7) = $2,860
210 x $7 = $1,470
total = $4,330
profit = (590 x $15) - $4,330 = $4,520
assuming that the company does not incur any operating costs:
Cash flow from operating activities (using FIFO):
Net income $5,270
adjustments to net income:
Decrease in inventory $3,130
Net cash flow $8,850
Cash flow from operating activities (using LIFO):
Net income $4,520
adjustments to net income:
Decrease in inventory $4,330
Net cash flow $8,850
On January 1, 20Y8, Crabb & Co. sold land to ASP, Inc. and accepted a two-year, $500,000 face value note as payment. 6% interest is due each December 31. ASP’s market rate of borrowing is 12%. Crabb originally purchased the land for $80,000 in 20Y1. REQUIRED Answer the following questions regarding the exchange. Round all amounts to the nearest whole dollar. 1. Was the note issued at a discount or a premium? Discount 2. What is the fair market value of the land at the date of exchange? $449,297 3. What is the gain or loss on the sale of the land? $369,297 4. How does this transaction affect Crabb & Co.’s balance sheet on the date of the exchange? Please include account names, dollar values, and whether the account increased or decreased.
Answer:
1. Discount
2. $449,298.47
3. $369,298.47 gain
4. land reduces by $80,000, investment increases by $449,298.47, reserves increases by $369,298.47
Explanation:
Question 1
Using the formula below
[tex]Price=\frac{I_{1}}{1+r} +\frac{I_{2}+F}{(1+r)^{2}}[/tex]
where
I = interest rate, which is 6% of 500,000 = 30,000
F = Face value, 500,000
r = borrowing cost = 12%
Therefore, the price of the note at the time it was used for payment was
[tex]Price=\frac{30,000}{1.12} +\frac{30,000+500,000}{(1.12)^{2}}[/tex]
= $449,298.47.
As the price is lower than the face value of the note, the note was issued at a discount.
Question 2
The fair market value of the note is $449,298.47, the compute price in question 1.
Question 3
The gain/loss on the sale of the land
= sale price - purchase price
= $449,298.47 - 80,000
= $369,298.47.
Question 4
The transaction would affect Crabb & Co's balance sheet as follows.
Asset side:
land reduces by $80,000
investment increases by $449,298.47
Equity & liabilities side:
reserves increases by $369,298.47
Sheet Company reported the following net income and dividends for the years indicated: Year Net Income Dividends 20X5 $ 35,000 $ 12,000 20X6 45,000 20,000 20X7 30,000 14,000 Pillow Corporation acquired 75 percent of Sheets common stock on January 1, 20X5. On that date, the fair value of Sheet net assets was equal to the book value. Pillow uses the equity method in accounting for its ownership in Sheet and reported a balance of $259,800 in its investment account on December 31, 20X7. Required: a. What amount did Pillow pay when i
Answer:
A. $211,800
B. $282,400
C. $70,600
D. $ 86,600
Explanation:
A. Calculation for the amount that True pay when it purchased Exacto’s shares
Balance in investment account, December 31, 20x7$259,800
Cumulative earnings since acquisition$110,000
Less Cumulative dividends since acquisition(46,000)
Total$64,000
($110,000-46,000)
×Proportion of stock held by True Corporation 0.75
=Total amount debited to Investment account(48,000)
(64,000*0.75)
Purchase amount on January 1, 20X5$211,800
($259,800-$48,000)
B. Calculation for the fair value of Exacto’s net assets on January 1, 20X5
True Corporation’s Purchase amount$211,800
÷True Corp.’s percentage 0.75
=Fair Value of Exacto Company’s Net Assets$282,400
($211,800÷0.75)
C. Calculation for What amount was assigned to the NCI shareholders on January 1, 20X5
Fair Value of Exacto Company’s Net Asset$282,400
×Exacto Company’s percentagex0.25
=NCI’s portion$70,600
($282,400×0.25)
D. Calculation forWhat amount will be assigned to the NCI shareholders
True Corp’s investment balance$259,800
True Corp’s percentage÷0.75
=Fair Value of Exacto’s Net Assets 20X7 $346,400
×Exacto Company’s percentage 0.25
=NCI’s Portion, December 31, 20X7$ 86,600
($346,400×0.25)
Kepler Company Comparative Income Statements This Year Last Year Sales $ 950,000 $ 900,000 Less: Cost of goods sold 500,000 490,000 Gross margin $ 450,000 $ 410,000 Less: Selling and administrative expenses 275,000 260,000 Operating income $ 175,000 $ 150,000 Less: Interest expense 12,000 18,000 Income before taxes $ 163,000 $ 132,000 Less: Income taxes 65,200 52,800 Net income $ 97,800 $ 79,200 Less: Dividends (common) 27,800 19,200 Net income, retained $ 70,000 $ 60,000 Also, assume that for last year and for the current year, the market price per share of common stock is $2.98. In addition, for last year, assets and equity were the same at the beginning and end of the year. Required: Note: Round all answers to two decimal places. 1. Compute the following for each year: This Year Last Year a. Return on assets % % b. Return on stockholders' equity % % c. Earnings per share $ $ d. Price-earnings ratio e. Dividend yield % % f. Dividend payout ratio
Kepler Company
Comparative Balance Sheets
This Year Last Year
Assets
Current assets:
Cash $ 50,000 $100,000
Accounts receivable, net 300,000 150,000
Inventory 600,000 400,000
Prepaid expenses 25,000 30,000
Total current assets $ 975,000 $680,000
Property and equipment, net 125,000 150,000
Total assets $1,100,000 $830,000
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 400,000 $290,000
Short-term notes payable 200,000 60,000
Total current liabilities $ 600,000 $350,000
Long-term bonds payable, 12% 100,000 150,000
Total liabilities $ 700,000 $500,000
Stockholders' equity:
Common stock
(100,000 shares) 200,000 200,000
Retained earnings 200,000 130,000
Total liabilities and
stockholders' equity $1,100,000 $830,000
Answer:
Kepler Company
a. Return on assets = Net Income/Total Assets
= $ 97,800/$1,100,000 $ 79,200/$830,000
= 8.89% = 9.54%
b. Return on stockholders' equity = Net Income/Stockholders' equity
= $ 97,800/$400,000 $ 79,200/$330,000
= 24.45% = 24%
c. Earnings per share = Net Income/Outstanding common shares
= $ 97,800/100,000 $ 79,200/100,000
= $0.98 = $0.79
d. Price-earnings ratio = Market price/Earnings per share
= $2.98/$0.98 = $2.98/$0.79
= 3.04 times = 3.77 times
e. Dividend yield = Dividend per share/price per share
= $0.28/$2.98 = $0.19/$2.98
= 9.40% = 6.38%
f. Dividend payout ratio = Total dividends/Net Income
= $27,800/$97,800 = $19,200/$79,200
= 28.43% = 24.24%
Explanation:
Kepler Company
Comparative Income Statements
This Year Last Year
Sales $ 950,000 $ 900,000
Less: Cost of goods sold 500,000 490,000
Gross margin $ 450,000 $ 410,000
Less: Selling and
administrative expenses 275,000 260,000
Operating income $ 175,000 $ 150,000
Less: Interest expense 12,000 18,000
Income before taxes $ 163,000 $ 132,000
Less: Income taxes 65,200 52,800
Net income $ 97,800 $ 79,200
Less: Dividends (common) 27,800 19,200
Net income, retained $ 70,000 $ 60,000
g Toyota has announced that it will offer free financing for 36-month loans on selected new models. How much is the zero-interest offer worth to you on a 36-month $25,000 loan if the market rate on loans of this type is 8%
Answer:
$2,839.02
Explanation:
The computation of zero-interest offer is shown below:-
monthly payment = $25,000 ÷ 36
= $694.44
PV of loan = PMT × [1 - (1 + i) ^-n)] ÷ i
$25,000 = PMT × [1 - (1 + 0.67%) ^-36] ÷ 0.67%
PMT = $783.41
Now, the difference in monthly payment with and without interest is
= $783.41 - $694.44
= $88.96
PV of saving = $88.96 × [1 - (1 + 0.67%) ^-36] ÷ 0.67%
= $2,839.02
Lambda Computer Products competed for and won a contract to produce two prototype units of a new type of computer that is based on laser optics rather than on electronic binary bits. The first unit produced by Lambda took 5,000 hours to produce and required $250,000 worth of material, equipment usage, and supplies. The second unit took 4,250 hours and used $237,500 worth of materials, equipment usage, and supplies. Labor is $20 per hour. Use Exhibit 6.5. a. Lambda was asked to present a bid for 10 additional units as soon as the second unit was completed. Production would start immediately. What would this bid be
Answer:
$2,731,672.50
Explanation:
first unit produced by lambda took 5,000 hours to produce and required $250,000 worth of material, equipment usage, and supplies
the second unit took 4,250 hours and used $238,500 worth of materials, equipment usage, and supplies
learning rate = time needed to produce second unit / time needed to produce first unit = 4,250 hours / 5,000 hours = 85%
materials and equipment usage rate = $237,500 / $250,000 = 95%
using the attached table of cumulative values, we can determine the cumulative improvement factors needed to solve this question:
Lambda's accumulated cost for producing 10 more computers
work hours = 4,250 x 7.116 (85% and 10 units) x $20 per hour = $604,860materials and equipment = $238,500 x 8.955 (95% and 10 units) = $2,126,812.50total = $604,860 + $2,126,812.50 = $2,731,672.50On December 31, 2020, Coolwear, Inc. had a balance in its prepaid insurance account of $59,400. During 2021, $97,000 was paid for insurance. At the end of 2021, after adjusting entries were recorded, the balance in the prepaid insurance account was $47,500. Insurance expense for 2021 was:
Answer:
$108,900
Explanation:
Opening balance in the prepaid insurance account = $59,400
Paid for insurance = $97,000
Balance in insurance account at the end = $47,500
Total amount paid ;
= Opening balance in the prepaid insurance account + paid for insurance
= $59,400 + $97,00
= $156,400
Insurance expense for 2021;
= Total amount paid - Balance at the end in the prepaid insurance account
= $156,400 - $47,500
= $108,900
