The overhead applied to the Regular product using activity-based costing is $1,440,000, calculated by distributing machining and assembling overheads based on machine hours and the number of parts respectively.
To calculate the overhead applied to the Regular product using activity-based costing (ABC), we need to allocate the total overhead costs based on the activity drivers for both machining and assembling activities.
First, let's distribute the machining overhead based on machine hours. The total machine hours are:
Regular: 10,000 hours
Supreme: 30,000 hours
Total: 40,000 hours
Machining overhead cost per machine hour:
$ [tex]\frac{3,600,000}{40,000}[/tex] hours = $90 per machine hour
Overhead for Regular from machining:
10,000 hours * $90 = $900,000
Next, let's distribute the assembling overhead based on the number of parts. The total number of parts is:
Regular: 90,000 parts
Supreme: 160,000 parts
Total: 250,000 parts
Assembling overhead cost per part:
$ [tex]\frac{1,500,000}{250,000}[/tex] parts = $6 per part
Overhead for Regular from assembling:
90,000 parts * $6 = $540,000
Total overhead applied to Regular:
$900,000 (machining) + $540,000 (assembling) = $1,440,000
Recently, Galaxy Corporation lowered its allowance for doubtful accounts by reducing bad debt expense from 2% of sales to 1% of sales. Ignore taxes. a. What are the immediate effects on operating income? bad debt expense will result in operating income. b. What are the immediate effects on operating cash flow? bad debt expense will have operating cash flow.'
Answer:
(a) Operating income will increase.
(b) Effect on the operating cash flow is an increase.
Explanation:
The answers above depend on the volume of sales, if a comparative analysis is done. If volume of credit sales was low when the rate was 2%, and now that it is reduced the credit sales increases significantly, the bad debt expense in this cash might be minutely different.
Definitely, operating income and operating cash flows will increase in absolute terms since lower bad debt expense rate is applied on credit sales.
Final answer:
Reducing bad debt expense from 2% to 1% of sales increases operating income due to lower expense recognition, while operating cash flow remains unaffected as this is a non-cash accounting adjustment.
Explanation:
Immediate Effects on Operating Income and Cash Flow
When Galaxy Corporation reduces its allowance for doubtful accounts by decreasing the bad debt expense from 2% of sales to 1% of sales, the immediate effect on operating income is an increase. Bad debt expense is an estimate of the portion of accounts receivable that may not be collected. By decreasing this expense, the company will report higher profits, assuming no change in sales. However, it is important to note that this action reflects an accounting change rather than an actual increase in cash collected.
b. The immediate effect on operating cash flow is neutral. Bad debt expense is a non-cash expense, which means it does not directly affect the cash flows. Operating cash flow is primarily concerned with cash transactions, such as the receipt of cash from customers and the payment of cash to suppliers and employees. Therefore, a change in the bad debt expense affects only the accounting representation of income and not the cash actually moving in and out of the business.
Exercise 11-28 (LO. 3) Lucy sells her partnership interest, a passive activity, with an adjusted basis of $305,000 for $330,000. In addition, she has current and suspended losses of $28,000 associated with the partnership and has no other passive activities. a. Calculate Lucy's total gain and her current deductible loss. Her total gain is $ and her deductible loss is $ . b. What type of income can the deductible loss offset? Lucy's deductible loss is offset against
Answer and Explanation:
The actual gain or loss from the investment, including any suspended losses, should be determined when the tax payer disposes of his or her interest in a passive activity. According to the passive activity law, any gain realized on passive activity transition is viewed as passive and is initially compensated by suspended passive active losses from that activity.
If latest and suspended losses of passive activity exceed the gain accomplished, any loss from the activity for the tax year exceeding the net gain for the tax year from all passive activities shall be allowed to treat as a loss not arising from passive activity.
The computation of total gain and current deductible is shown below:-
Total gain = Net sales price - Adjusted basis amount
= $330,000 - 305,000
= $25,000
And Current deductible amount is
= Total gain earned - Suspended losses suffered
= $25,000 - $28,000
= $3,000
This amount represents the non passive amount
b. Deductible loss that may offset profit from passive investment that is realized in passive activity on the selling of partnership interest. The benefit realized in passive activity on selling of interest is regarded as passive.
11.1. One reason why firms might want to pursue a strategic alliance strategy is to exploit economies of scale. Exploiting economies of scale should reduce a firm’s costs. Why would this mean that a firm pursuing an alliance strategy to exploit economies of scale is actually pursuing a cost leadership strategy?
Answer:
In simple words, economies of scale refers to the method of reducing cost of production by producing any commodity at a very high level. By doing strategic alliance two companies can combine their operations to work more efficiently.
Thus, strategic alliance will help the combining group in two ways, first they can target more customers without effective competition and also they can reduce their cost from economies of scale. The further effect of economies of scale would be lesser priced products, that is, cost leadership in the market.
Final answer:
Firms exploit economies of scale through strategic alliances to become cost leaders by reducing per-unit costs and increasing production efficiency. This cost-saving aligns with the cost leadership strategy as firms aim to offer goods or services at a lower price than their competitors while maintaining profitability.
Explanation:
A firm pursuing a strategic alliance strategy to exploit economies of scale is effectively implementing a cost leadership strategy because economies of scale result in reduced costs per unit by spreading fixed costs over a larger number of units and utilizing more efficient production methods. This cost reduction is a hallmark of cost leadership strategies where firms aim to become the lowest-cost producers in their industry. According to Michael Porter, firms should either pursue cost leadership or product differentiation to delay the effects of perfect competition and maintain sustainable profits.
Engaging in strategic alliances allows firms to merge their resources and capabilities, thus achieving cost efficiencies and higher volumes which lead to economies of scale. This not only helps firms lower their costs but also hinders new competitors due to the larger scale needed to compete effectively. Horizontal integration is one such example where firms expand or merge to achieve cost efficiencies.
Thus, when a firm forms an alliance to gain economies of scale, it is essentially focusing on minimizing costs to gain a competitive price advantage, which underpins the cost leadership approach. Being a cost leader can also potentially lead to market dominance by setting prices that are difficult for smaller or less efficient competitors to match, which can result in higher market shares for the cost-leading firms.
Mary's construction company receives a lucrative contract to build car ports on a U.S. Air force base. To celebrate she purchases a new sports car. The salesman of the car feels happy about his big sale and celebrates by going to the ballet with a date. A ballerino pays his rent. A landlord hires a plumber to install new toilets. In this scenario what macroeconomic process is being described?
Answer:
Multiplier effect
Explanation:
Multiplier effect refers to increase in final income as a result of an injection of spending into the circular flow of income.
It refers to how demand triggers further spending.
In this question, we see how as a result of marys contract, income flows down to the plumber.
The size of the multiplier depends on the marginal propensity to consume. The greater the marginal propensity to consume, the greater the multiplier effect.
I hope my answer helps you
A full-time worker aged 2525 invests $250250 a month in a fund which has an average yearly return of 7.27.2% compounded monthmonthly. (a) The worker wants to estimate what they will have for retirement when they are 6060 years old if the rate stays constant. Assume monthmonthly compounding. (b) If the worker makes no further deposits and makes no withdrawals after age 6060, how much will they have for retirement at age 6666?
Answer:
Instructions are below.
Explanation:
Giving the following information:
The number of years/months= 60 - 25= 35*12= 420
Interest rate= 0.072/12= 0.006 compounded monthly
Monthly investment= $250
(a) We need to use the following formula:
FV= {A*[(1+i)^n-1]}/i
A= monthly deposit
FV= {250*[(1.006^420)-1]} / 0.006
FV= $472,306.75
(b) I assume that the monthly compounded continues.
Number of months= 6*12= 72
We need to use the following formula:
FV= PV*(1+i)^n
FV= 472,306.75* (1.006^72)
FV= $726,572.28
Written, Inc. has outstanding 600,000 shares of $2 par common stock and 120,000 shares of no-par 6% preferred stock with a stated value of $5. Dividends have been paid in every year except the past two years and the current year. Assuming that $234,000 will be distributed, and the preferred stock is cumulative and participating, how much will the common stockholders receive
Answer :
Common stockholder will receive = $126,000
Explanation :
As per the data given in the question,
Preferred stock capital = $600,000
Rate of preferred dividend = 6%
Annual preferred dividend = $600,000*6%
=$36,000
Cumulative preferred dividend = $36,000 × 2 = $72,000
Total amount of dividend paid = $234,000
Arrears cumulative dividend = $72,000
Current year preferred dividend = $36,000
Amount of common stock is
= $234,000 - $72,000 - $36,000
= $126,000
Entries for Issuing Bonds and Amortizing Discount by Straight-Line Method On the first day of its fiscal year, Chin Company issued $18,600,000 of five-year, 10% bonds to finance its operations of producing and selling home improvement products. Interest is payable semiannually. The bonds were issued at a market (effective) interest rate of 12%, resulting in Chin Company receiving cash of $17,230,938.
(a) Journalize the entries to record the following:
1. Issuance of the bonds.
2. First semiannual interest payment. The bond discount amortization is combined with the semiannual interest payment. Round your answer to the nearest dollar.
3. Second semiannual interest payment. The bond discount amortization is combined with the semiannual interest payment. Round your answer to the nearest dollar.
(b) Determine the amount of the bond interest expense for the first year.
(c) Explain why the company was able to issue the bonds for only $9,594,415 rather than for the face amount of $10,000,000.
Answer and Explanation:
a. The Journal entry is shown below:-
1. Cash Dr, $17,230,938
Bond payable discount Dr, $1,369,062
To Payable bond $18,600,000
(Being issuance of bonds is recorded)
2. Interest expenses Dr, $793,094
To discount on bonds payable $136,906 ($1,369,062 ÷ 10)
To Cash $930,000 ($18,600,000 × 10% ÷ 2)
(Being first semi annual interest is recorded)
3. Interest expense Dr, $793,094
To Bond payable discount $136,906
To Cash $930,000
(Being second semi annual interest is recorded)
b. Interest expenses for the first year = Interest expenses + Discount amortized
= ($930,000 + $930,000) + ($136,906 + $136,906)
= $1,860,000 + $273,812
= $2,133,812
c. The company issued the bond with a maximum interest of $10,000,000, for $9,594,415. That is the bonds are issued at a $1,369,062 discount. The bonds are issued at a discount because the bond market interest is higher than the coupon rate for the debt.
Final answer:
The detailed answer explains journal entries for issuing bonds, bond interest expense calculation, and reasons for issuing bonds below face value.
Explanation:
Entries for Issuing Bonds and Amortizing Discount by Straight-Line Method
a) Journal entries:
Issuance of bonds: Debit Cash $17,230,938, Credit Bonds Payable $18,600,000, Credit Discount on Bonds Payable $1,369,062
First semiannual interest payment: Debit Interest Expense $930,136, Debit Discount on Bonds Payable $4,801, Credit Cash $935,938
Second semiannual interest payment: Debit Interest Expense $915,487, Debit Discount on Bonds Payable $4,249, Credit Cash $919,736
b) Bond interest expense for the first year is $1,845,623.
c) The company issued the bonds for less than face amount due to the market interest rate being higher than the bond's stated interest rate, making the bonds less attractive to investors at face value.
Under the last-in, first-out (LIFO) inventory valuation method, a price index for inventory must be established for tax purposes. The quantity weights are based on year-ending inventory levels. Unit Price ($) Product Ending Inventory Beginning Ending A 500 0.17 0.21 B 50 1.40 1.80 C 100 4.50 4.20 D 40 12.00 13.20 Use the beginning-of-the-year price per unit as the base-period price and develop a weighted aggregate index for the total inventory value at the end of the year. (Round your answer to the nearest integer.) I
Answer:
105.35
Explanation:
The computation of Laspeyres Index is shown below:-
Laspeyres Index = 100 × (Sum(Ending × Ending Inventory) ÷ Sum(Beginning × Ending Inventory))
= 100 × ((500 × 0.21) + (50 × 1.80) + (100 × 4.20) + (40 × 13.20)) ÷ ((500 × 0.17) + (50 × 1.40) + (100 × 4.50) + (40 × 12)
= 100 × (105 + 90 + 420 + 528) ÷ (85 + 70 + 450 + 480)
= 100 × 1,143 ÷ 1,085
= 100 × 1.053
= 105.35
So, for computing the Laspeyres Index we simply applied the above formula.
Desert Company purchased land to be used as a factory site for $1,350,000. Desert paid $100,000 to tear down two buildings on the land. Salvage was sold for $8,500. Legal fees of $5,250 were paid for title investigation and making the land purchase. Architect’s fees were $46,600. Title insurance cost $3,600 and liability insurance during construction cost $3,900. Excavation cost $16,720. The contractor was paid $4,200,000. Landscaping cost $9,800. Interest costs during construction were $225,000. What is the historical cost of the land that should be recorded by Desert, Co.?
Answer:
historical cost is $1,460,150
Explanation:
Computation of Cost of Land
Cost $1,350,000
Tear down $100,000
Salvage -$8,500
Legal fees $5,250
Title insurance $3,600
pavement $9,800
Total $1,460,150
Answer:
Desert Company
Historical cost of Land:
Purchase price = $1,350,000
Tearing down Buildings = $91,500 $(100,000 - 8,500)
Title Investigation = $5,250
Title Insurance = $3,600
Total = $1,450,350
Explanation:
The historical cost of land is the initial price paid to purchase the land and any other costs incurred in order to put the land to use, except building costs.
The other costs, including Architect's fee, Liability Insurance during construction, excavation cost, contractor fee, and landscaping cost are costs incurred for the building and not for the land.
Allure Company manufactures and distributes two products, M and XY. Overhead costs are currently allocated using the number of units produced as the allocation base. The controller has recommended changing to an activity-based costing (ABC) system. She has collected the following information: Activity Cost Driver Amount M XY Production setups Number of setups $ 82,000 8 12 Material handling Number of parts 48,000 56 24 Packaging costs Number of units 130,000 80,000 50,000 $ 260,000 What is the total overhead allocated to Product XY using the current system
Answer:
$113,600
Explanation:
According to the scenario, computation of the given data are as follows:-
Particular Activity cost driver Amount Product M Product XY Total
Production setup No. of prod. $82,000 8 12 20
Material handling No. of parts $48,000 56 24 80
Packaging costs No. of units $1,30,000 80,000 50,000 130,000
$2,60,000
Allocation to Product XY
Production Set up = Production Set up Amount ÷ Number of Total Production Set up × Number of Product XY Setup
= $82,000 ÷ 20 × 12
= $49,200
Material Handling = $48,000 ÷ 80 × 24 = $14,400
Packaging Costs = $130,000 ÷ 130,000 × 50,000 = $50,000
Total overhead = Production Set up + Material Handling + Packaging Costs
= $49,200 + $14,400 + $50,000
= $113,600
1. Izzy Company sells a television that carries a 90-day unconditional warranty against product failure. From prior years’ experience, Izzy estimates that 4% of units sold each period will require repair at an average cost of $150 per unit. During the current period, Izzy sold 22,000 units and repaired 200 units.How much warranty expense must Izzy report in its current period income statement? 138,000 132,000 102,000 30,000 1
Answer:
$132,000
Explanation:
The computation of the warranty expense is shown below:
Warranty expense = Units sold × repaired cost × estimated percentage
= 22,000 units × $150 × 4%
= $132,000
We simply multiplied the unit sold with the repaired cost and the estimated percentage so that the amount of warranty expense could come
All other things that are mentioned in the question is not relevant. Hence, ignored it
At December 31, 2021, Bonita Industries had 508000 shares of common stock issued and outstanding, 396000 of which had been issued and outstanding throughout the year and 112000 of which were issued on October 1, 2021. Net income for the year ended December 31, 2021, was $1705000. What should be Bonita's 2021 earnings per common share, rounded to the nearest penny? $4.02 $4.31 $3.77 $36.18
Answer:
$4.02 per share
Explanation:
The computation of the earning per share is shown below:
Earning per share = (Net income) ÷ (weighted average number of outstanding shares)
where,
Net income is $1,705,000
And, the weighted average number of shares is
= (396,000 shares + 112,000 × 3 months ÷ 12 months)
= 424,000 shares
So, the earning per share is
= ($1,705,000) ÷ (424,000 shares)
= $4.02 per share
You want to have $1,200,000 when you retire and you are in a defined contribution plan. You can earn 9 percent per year on the money invested and you will retire in 25 years. Your employer also contributes to your plan. The employer will contribute 4 percent of what you put into the plan each year. How much do you have to contribute per year to meet your goal
Answer:
Annual deposit= $13,600.8
Explanation:
Giving the following information:
You want to have $1,200,000 when you retire and you are in a defined contribution plan.
Interest rate= 9%
Number of years= 25 years.
The employer will contribute 4 percent of what you put into the plan each year.
First, we need to calculate the total annual contribution:
FV= {A*[(1+i)^n-1]}/i
A= annual deposit
Isolating A:
A= (FV*i)/{[(1+i)^n]-1}
A=(1,200,000*0.09) / [(1.09^25)-1]
A= $14,167.50
Now, your annual deposit:
Annual deposit= 14,167.5*0.96= $13,600.8
A company exchanged land for equipment and $2,300 in cash. The book value and the fair value of the land were $105,400 and $89,700, respectively. Assuming that the exchange has commercial substance, the company would record equipment and a gain/(loss) of: Equipment Gain/(loss) a.$87,400 $2,300 b.$105,400 $(2,300) c.$87,400 $(15,700) d.None of these answer choices are correct.
Answer:
c.$87,400 $(15,700)
Explanation:
Equipment ($89,700- $2,300) $87,400
Cash $2,300
Loss ($105,400 – $89,700) $15,700
Land (book value)105,400
Therefore Assuming that the exchange has commercial substance, the company would record equipment and a gain/(loss) of $87,400 $(15,700)
An outside supplier has offered to sell motors to RGM for $52 per motor. If RGM stops making the motors, 1/4 of the fixed manufacturing overhead would be avoidable. In addition, the facilities being used to make motors could be rented to another company for $40,000 per year. If RGM purchases the motors from the supplier, by how much will net income change?
Answer:
net income will decrease by $60,000
Explanation:
current costs:
direct materials = $20direct labor = $18variable manufacturing overhead = $10fixed manufacturing overhead = $8total cost per unit = $56total production costs = $56 x 50,000 = $2,800,000relevant costs if product is purchased form external supplier:
purchase price per unit = $52 x 50,000 = $2,600,000fixed manufacturing overhead = $8 x 3/4 x 50,000 = $300,000- lease of facilities = ($40,000)total relevant costs if product is purchased = $2,860,000Since the relevant costs of purchasing the product are $60,000 higher, net income would decrease by that amount.
On 4/1/Y9, Petal Corp. began offering a new product for sale under a 1-year warranty. Petal had 5,000 units in inventory on 4/1/Y9. By 6/30/Y9, 3,000 of these units had been sold. Based on its experience with similar products, Petal estimated that the average warranty cost per unit sold would be $8. Actual warranty costs incurred from April 1 through June 30, Year 9, were $7,000.
Required:
1. What amount should Petal report as estimated warranty liability at June 30, Year 9?
Answer:
$17,000
Explanation:
Units sold = 3,000 units
Expected warranty = 3,000 * $8 = $24,000
Actual warranty costs = $7,000
Estimated warranty liability = $24,000 - $7,000 = $17,000
Therefore, Petal should report $17,000 as estimated warranty liability at June 30, Year 9.
Denny Corporation is considering replacing a technologically obsolete machine with a new state-of-the-art numerically controlled machine. The new machine would cost $190,000 and would have a ten-year useful life. Unfortunately, the new machine would have no salvage value. The new machine would cost $28,000 per year to operate and maintain, but would save $60,000 per year in labor and other costs. The old machine can be sold now for scrap for $19,000.
The simple rate of return on the new machine is closest to (Ignore income taxes.):
Answer:
The simple rate of return is closest to 87.1%
Explanation:
To calculate the rate of return, we will determine first determine the net return on investment on the machine after 10 years as follows:
cost of maintenance per year = $28,000
cost of maintenance for 10 years (expenditure) = 28,000 × 10 = $280,000
Labor savings per year = $60,000
Labor savings for 10 years ( income) = 60,000 × 10 = $600,000
Net income after 10 years = Total income - total expenditure
= 600,000 - 280,000 = $320,000
Next, we will determine the cost of investment as shown below:
cost of new machine = $190,000
scrap value of old machine = $19,000
Net cost of machine = 190,000 - 19,000 = $171,000
Therefore, the net return on investment is calculated as:
Net return on investment = Net income - cost of machine
= 320,000 - 171,000 = $149,000
Finally the rate of return in percentage, is calculated as follows:
rate of return = [(Net return on investment) ÷ (cost of investment) ] × 100
= ( 149,000 ÷ 171,000 ) × 100 = 87.1% (to 1 decimal place).
A new bank offers you a 0% Intro APR on balance transfers. All transfers must be completed in first 4 months. After that the variable APR will be 24%, based on your credit score remaining above 650. If you transfer a balance with this offer, after your 0% Intro purchase APR expires, both new purchases and unpaid purchase balances will automatically accrue interest until all balances, including your transferred balance, are paid in full. You have transferred $600 to this account and paid half before the fourth month. You then charge $350 in the fifth month. What is your balance at the end of the fifth month if you have made no additional charges, payments or transfers?
Answer:
$663
Explanation:
Answer:663
Explanation:
On July 31, 2020, Novak Company engaged Minsk Tooling Company to construct a special-purpose piece of factory machinery. Construction begun immediately and was completed on November 1, 2020. To help finance construction, on July 31 Novak issued a $326,400, 3-year, 12% note payable at Netherlands National Bank, on which interest is payable each July 31. $217,400 of the proceeds of the note was paid to Minsk on July 31. The remainder of the proceeds was temporarily invested in short-term marketable securities (trading securities) at 10% until November 1. On November 1, Novak made a final $109,000 payment to Minsk. Other than the note to the Netherlands, Novak’s only outstanding liability at December 31, 2020, is a $31,400, 8%, 6-year note payable, dated January 1, 2017, on which interest is payable each December 31.
Calculate the interest revenue, weighted-average accumulated expenditures, avoidable interest, and total interest cost to be capitalized during 2020.
Answer:
weighted expenditures 54,350
avoidable interest 6,522
capitalized interest 6,522
interest revenue 2,725
Total Interest expense 12,310
Explanation:
217,400 paid to Misk and capitalized until Nov 1st:
August, September, October: 3 months
217,400 x 3/12 = 54,350 weighted expenditures
We apply to this the specific borrowing rate:
54,350 x 12% = 6,522
Interest revenue
amount invested: 326,400 - 217,400 = 109,000
at 10% for a period of 3 month:
109,000 x 10% x 3/12 = 2,725
Interest expense:
326,400 x 12% x 5/12 = 16,320
31,400 x 8% x full-year = 2,512
avoidable interest (6,522)
Total Interest expense 12,310
On January 1, Year 1, the Mahoney Company borrowed $176,000 cash from Sun Bank by issuing a five-year 8% term note. The principal and interest are repaid by making annual payments beginning on December 31, Year 1. The annual payment on the loan based on the present value of annuity factor would be $40,925. The amount of principal repayment included in the December 31, Year 1 payment is:
The principal repayment included in the December 31, Year 1 payment for Mahoney Company's loan is $26,845. This is calculated by subtracting the interest payment from the total annual payment.
The Mahoney Company needs to repay a loan by making annual payments, including both principal and interest. The total annual payment is $40,925 and the interest rate is 8%. The interest portion of the first year’s payment is calculated as 8% of $176,000, which is $14,080.
The **principal repayment** in the first year can be found by subtracting the interest payment from the total annual payment: $40,925 - $14,080 = $26,845.
Therefore, the amount of principal repayment included in the December 31, Year 1 payment is $26,845.
At Hodgson Corporation, direct materials are added at the beginning of the process and conversions costs are uniformly applied. Other details include: Beginning WIP direct materials $32,000 Beginning WIP conversion costs $20,250 Costs of materials added $384,100 Costs of conversion added $271,125 WIP beginning (50% for conversion) 19,200 units Units started 119,500 units Units completed and transferred out 115,700 units WIP ending (60% for conversion) 23,000 units What is the cost per equivalent unit for conversion costs
Answer:
$2.25 per unit
Explanation:
The computation of the cost per equivalent is shown below:
= Total conversion cost ÷ total units completed
where,
Total conversion cost is
= Beginning work in process conversion cost + cost of conversion added
= $20,250 + 271,125
= 291,375
And, the number of units is
= Units completed + work in process ending inventory units × completion percentage
= 115,700 units + 23,000 units × 60%
= 115,700 + 13,800
= 129,500 units
So, the cost per equivalent unit for conversion cost is
= $291,375 ÷ 129,500 units
= $2.25 per unit
Prepare journal entries to record the following transactions for Sherman Systems. Purchased 6,800 shares of its own common stock at $43 per share on October 11. Sold 1,450 treasury shares on November 1 for $49 cash per share. Sold all remaining treasury shares on November 25 for $38 cash per share. 2. Prepare the stockholders' equity section after the October 11 treasury stock purchase.
Explanation
I think your question missed of key information for question 2, so I just answer question at my best for helping you.
Debit Credit
11-Oct
Treasury 292400
Cash 292400
Being own shares repurchased
1-Nov
Cash (1,450 × 49) 71,050
Treasury Stock (1,450 × 43) 62,350
Paid-in Capital from Sale of Treasury Stock 9,700
To record the sale of treasury stock.
November 25
Cash (5350 × 38) 203,300
Paid-in Capital from Sale of Treasury Stock 9,700
Retained Earnings 17,050
Treasury Stock (5350 × 43) 230,050
To record the sale of the remaining treasury shares
Final answer:
To record transactions involving treasury stock, journal entries must reflect the purchase and sale of these shares, affecting cash and equity accounts. After purchasing its own stock, the company's equity decreases by the purchase price of the treasury stock.
Explanation:
Journal Entries for Treasury Stock Transactions
To record the various treasury stock transactions for Sherman Systems, we would make the following journal entries on the respective dates:
On October 11, purchase of 6,800 treasury shares at $43 per share:After the October 11 purchase of treasury stock, the stockholders' equity section would reflect a decrease in total equity by the cost of the treasury shares purchased.
Michael's, Inc., just paid $1.90 to its shareholders as the annual dividend. Simultaneously, the company announced that future dividends will be increasing by 4.2 percent. If you require a rate of return of 8.5 percent, how much are you willing to pay today to purchase one share of the company's stock?
Final answer:
To find the value one would pay for a share of Michael's, Inc. stock with an initial dividend of $1.90, growing at 4.2%, with a required return of 8.5%, the Gordon Growth Model is used. The dividend next year is estimated at $1.98, leading to a stock value of approximately $46.05 today.
Explanation:
The value one is willing to pay today for a share of Michael's, Inc. stock, given that it has an annual dividend growth rate and a required rate of return, can be determined using the Gordon Growth Model (also known as the Dividend Discount Model). The model takes into account the most recent dividend payment, anticipated growth in dividends, and the investor's required rate of return to calculate the present value of the stock.
As per the question, the initial dividend (D0) is $1.90, with future dividends expected to grow at a rate of 4.2 percent (g). The required rate of return (r) is 8.5 percent. The formula to calculate the price one would pay for the stock today (P0) is:
P0 = D1 / (r - g), where D1 is the dividend expected next year.
First, we must calculate D1, which is the dividend expected next year: D1 = D0 x (1 + g), so we have D1 = $1.90 x (1 + 0.042) = $1.98 approximately. Then we plug D1 into our P0 calculation:
P0 = $1.98 / (0.085 - 0.042) = $1.98 / 0.043 = $46.05 approximately.
Therefore, based on the given requirements, one would be willing to pay approximately $46.05 to purchase a share of Michael's, Inc. stock today.
You bought a stock one year ago for $51.41 per share and sold it today for $59.82 per share. It paid a $1.03 per share dividend today. How much of the return came from dividend yield and how much came from capital gain? The return that came from dividend yield is ________ (Round to one decima %. l place.) The return that came from capital gain is _______.
Answer:
Return from dividend yield= 2.0%
Capital gain = 16.4%
Explanation:
The return on a stock is the sum of the capital gains(loss) plus the dividends earned.
Capital gain is the difference between the value of the stocks when sold and the cost of the shares when purchased.
Total shareholders Return =
(Capital gain/ loss + dividend )/purchase price × 100
The total return can be broken down into
Dividend yield = Dividend/price × 100
= 1.03/51.41 × 100
=2.0%
Capital gain = capital gain/ price × 100
= (59.82 - 51.41)/51.41 × 100 = 16.4%
Gator Corporation manufactures several types of accessories. For the year, the gloves and mittens line had sales of $480,000, variable expenses of $360,000, and fixed expenses of $140,000. Therefore, the gloves and mittens line had a net loss of $20,000. If Gator eliminates the line, $35,000 of fixed costs will remain. Prepare an analysis showing whether the company should eliminate the gloves and mittens line. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)
Answer:
The company will lose $85,000 if the product line is discontinued
Explanation:
Giving the following information:
Sales= 480,000
variable expenses= (360,000)
Contribution margin= 120,000
fixed expenses= (140,000)
Net operating income= (20,000)
If Gator eliminates the line, $35,000 of fixed costs will remain.
We need to determine the effect on income if the product line is discontinued.
Effect on income= fixed costs - net operating income
Effect on income= -105,000 - (-20,000)
Effect on income= -85,000
The company will lose $85,000 if the product line is discontinued
Factor Co. can produce a unit of product for the following costs: Direct material $ 7.70 Direct labor 23.70 Overhead 38.50 Total product cost per unit $ 69.90 An outside supplier offers to provide Factor with all the units it needs at $40.95 per unit. If Factor buys from the supplier, the company will still incur 70% of its overhead. Factor should choose to:
Ginger, Inc., has declared a $5.40 per share dividend. Suppose capital gains are not taxed, but dividends are taxed at 20 percent. New IRS regulations require that taxes be withheld at the time the dividend is paid. The company's stock sells for $94.00 per share, and the stock is about to go ex dividend. What do you think the ex-dividend price will be
Answer: $89.68
Explanation:
The Ex-dividend measures how much a stock price drops as a result of the disbursement of dividends. It is calculated by subtracting the dividend from the current stock price.
In the above question the IRS require that taxes be withheld at the time that the dividend is paid.
This means that taxes have to be accounted for first before ex - dividend is calculated.
After tax dividend = 5.40 * ( 1 - 0.2)
After tax dividend = $4.32
Solving for Ex-dividend gives,
= 94.00 - 4.32
= $89.68
The ex-dividend price will be $89.68
(Present value tables are needed.) Miami Marine Enterprises is evaluating the purchase of an elaborate hydraulic lift system for all of its locations to use for the boats brought in for repair. The company has narrowed their choices down to two: the B14 Model and the F54 Model. The B14 model is considered to be riskier than the F54 model so the rate of return required for it is higher. Financial data about the twochoices follows.
B14 Model F54 Model
Investment $ 320,000 $ 240,000
Useful life (years) 8 8
Estimated annual net cash inflows for useful life $ 75,000 $ 40,000
Residual value $ 30,000 $ 10,000
Depreciation method Straight-line Straight-line
Required rate of return 14% 10%
What is the total present value of future cash inflows and residual value from the B14 Model?
A. $218,070
B. $410,655
C. $358,455
D. $38,455
Answer:
C. $358,455
Explanation:
As per given data
B14 Model F54 Model
Investment $320,000 $240,000
Useful life (years) 8 8
Estimated annual net cash inflows $75,000 $40,000
Residual value $30,000 $10,000
Depreciation method Straight-line Straight-line
Required rate of return 14% 10%
Net Present value of the net cash inflows can be calculated by using the formula of present value of annuity because the cash inflows of each year are constant cash flows.
Present value of Annuity = P x [ ( 1 - ( 1 + r )^-n ) / r ]
Where
P = Annual cash inflows = $75,000
r = required rate of return = 14%
n = numbers of periods = 8 years
Placing values in the formula
Present value of cash inflows = $75,000 x [ ( 1 - ( 1 + 14% )^-8 ) / 14% ]
Present value of cash inflows = $347,915
Present value of residual value of asset can be calculated by discounting the residual value using required rate of return.
Formula for Discounting
Present value = P (1 + r)^-n
Where
P = Value to be discounted = $30,000
r = required rate of return = 14%
n - numbers of periods = 8 years
Placing values in the formula
Present value of residual value = $30,000 x ( 1 + 14% )^-8 = $10,517
Total Present value = $10,517 + 347,915 = 358,432
There is a difference due to the rounding effect in the calculations, the closest value id C. $358,455
A quality improvement team is best described as a: A. Group of employees coming together for a specific, unplanned purpose B. Group of selected employees that must be prepared to convene quickly in response to an emergency C. Group of individuals working together to address a particular problem or process D. Team in the storming phase of development E. Formally established and defined group of individuals who work together over time
Answer:
Group of individuals working together to address a particular problem or process.
Explanation:
Quality improvement team can be be described as a group of employees whose task is the ensure the quality of a particular product. This team is in charge of an entire production process, they also have the right to make alterations to the design of a product to ensure that there is more demand for the product in the market.
The quality improvement team also take part in decision making by bringing up new policies and ideas capable of boosting the amount of profit incurred by the organisation.
Chester currently has $17,334 (000) in cash and management has decided to issue stocks and bonds worth an additional $8,000 (000). Assuming that cash from operations will be the same for each of the following activities, which activity exposes this company to the most risk of being issued an emergency loan? Select: 1 A $5 dividend Liquidate the entire inventory Purchasing $18,000 (000) worth of plant and equipment Retiring the oldest bond
Answer:
Purchasing $18,000 (000) worth of plant and equipment
Explanation:
The purpose of an emergency loan is to help a company pay its current liabilities and obligations because they temporarily o not have enough cash. A company might be economically very healthy, but financially unstable. E.g. a company increased its total sales by handing out more credit to its customers, but it cannot collect its accounts receivables fast enough to pay for its current obligations.
In this case, since we do not know the number of outstanding stocks nor the value of the oldest bonds, we cannot choose these options. While liquidating the inventory would increase the cash balance, not decrease it. The only action that we know for sure would severely affect the cash position of the company is purchasing a lot of equipment in cash.