Answer:
find attached missing financial statements:
Indirect method
$4,623 million
$9,783 -$3404 million cash dividends and $6,880 million share buyback
Explanation:
The company used the indirect method of preparing cash flow because the net income was adjusted to reflect cash flow from operations
Income tax payment made during the year ended is $4,623 as shown under the supplemental disclosure in the attached financial statements missing from the question.
The cash of $9,783 million generated from operations was used in paying dividends of $3,404 million as well as buying back shares to the tune of $6,880 as contained in the financial activities section of the cash flow statement.
Factor Company is planning to add a new product to its line. To manufacture this product, the company needs to buy a new machine at a $519,000 cost with an expected four-year life and a $23,000 salvage value. All sales are for cash, and all costs are out-of-pocket, except for depreciation on the new machine. Additional information includes the following. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Expected annual sales of new product $ 1,870,000 Expected annual costs of new product Direct materials 495,000 Direct labor 678,000 Overhead (excluding straight-line depreciation on new machine) 337,000 Selling and administrative expenses 167,000 Income taxes 38 % Required: 1. Compute straight-line depreciation for each year of this new machine’s life. 2. Determine expected net income and net cash flow for each year of this machine’s life. 3. Compute this machine’s payback period, assuming that cash flows occur evenly throughout each year. 4. Compute this machine’s accounting rate of return, assuming that income is earned evenly throughout each year. 5. Compute the net present value for this machine using a discount rate of 6% and assuming that cash flows occur at each year-end. (Hint: Salvage value is a cash inflow at the end of the asset’s life.)
Answer:
Explanation:
Base on the scenario been describe in the question, we can use the following method to solve the given problem with the image attached below
The question involves several calculations pertaining to a business decision on purchasing a machine including calculating the straight-line depreciation, expected net income and cash flow, payback period, accounting rate of return, and net present value.
Explanation:
1. The straight-line depreciation for each year of the machine’s life is computed by subtracting the salvage value from the total cost and then dividing it by the machine’s expected life. In this case, it would be ($519,000 - $23,000) / 4 = $124,000 per year.
2. To calculate the expected net income, we subtract all costs associated with the product from the expected sales revenue, and then account for the income tax. That is, [(1,870,000 - 495,000 - 678,000 - 337,000 - 167,000 - $124,000)* (1-.38)]. The net cash flow on the other hand, is the net income plus depreciation.
3. The payback period is calculated by dividing the total cost of the machine by the annual net cash flow. With the given information, this cannot be computed.
4. The accounting rate of return is the average annual profit divided by Investment. To calculate this, the annual net income would be divided by the cost of the machine, [(Expected net income / $519,000)* 100]
5. To compute the net present value (NPV), the future net cash flows are discounted at the given rate and summed up. Then the initial cost of the machine is subtracted. The salvage value is also accounted for by discounting it back to the present value. This cannot be computed with the information given.
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Global Marine obtained a charter from the state in January that authorized 1,000,000 shares of common stock, $5 par value. During the first year, the company earned $400,000 of net income, declared no dividends, and the following selected transactions occurred in the order given:
1) Issued 100,000 shares of the common stock at $55 cash per share.
2) Reacquired 25,000 shares at $50 cash per share.
3) Reissued 10,000 shares from the treasury for $51 per share.
4) Reissued 10,000 shares from the treasury for $49 per share.
Required:
Prepare the stockholders' equity section of the balance sheet at December 31, 2013. (Amounts to be deducted should be indicated by a minus sign.)
Answer:
Total equity of stock holder = $5,650,000
Explanation:
As per the data given in the question,
Balance sheet Equity of Stock holder
Capital Contribution Amount
Common stock = $500,000 ((100,000 × $55) - ( 1,000,000 × $5))
Additional paid in capital = $5,000,000 ($5,000,000 + 10,000 - 10,000)
Retained earnings = $400,000
Total = $5,900,000 ($500,000 + $5,000,000 + $400,000)
Treasury stock at cost = $250,000 ($1,250,000 - $500,000 - $500,000)
Total equity of stock holder = $5,650,000 ($5,900,000 - $250,000)
Final answer:
To prepare the stockholders' equity section, account for the common stock issued, treasury stock transactions, and retained earnings of Global Marine. The balance sheet will include common stock, additional paid-in capital, treasury stock, and retained earnings.
Explanation:
Stockholders' Equity Section
To prepare the stockholders' equity section of Global Marine's balance sheet, we need to account for the common stock issued, treasury stock transactions, and retained earnings for the year. Here's a breakdown:
Common Stock: 100,000 shares were issued at $55 per share, but the par value of the stock is $5. The excess over par ($50 per share) is recorded in the additional paid-in capital account.
Treasury Stock: 25,000 shares were reacquired at $50 cash per share and later, 10,000 shares were reissued at $51 per share and another 10,000 at $49 per share.
Retained Earnings: The company earned $400,000 net income and declared no dividends.
Based on these transactions, the stockholders' equity section would appear as follows:
Common Stock (100,000 shares issued and outstanding at $5 par value): $500,000
Additional Paid-In Capital (100,000 shares × $50 excess over par): $5,000,000
Treasury Stock (25,000 shares reacquired at $50 per share): -$1,250,000 (Net of 20,000 shares reissued at $51 and $49 per share)
Retained Earnings from Net Income: $400,000
The treasury stock reissued at a different price affects the balance of treasury stock and additional paid-in capital. The total treasury stock is computed by subtracting the cost of reissued shares from the cost of acquired treasury stock.
Linwood is making an equipment change at his company. An old piece of equipment, with a salvage value of $60,000, is being replaced by new equipment. The new equipment costs $980,000 and would have a 10 year useful life and no salvage value. By replacing the equipment, Linwood will save $164,000 per year in cash operating costs. The simple rate of return on this investment is
Answer:
The simple rate of return is 0.178 or 17.8%
Explanation:
From the given question, we solve for the simple rate return on this investment
Solution
Recall that, the simple rate of return is defined as:
The simple rate of return = The operating net cash savings / Cash net investment
Thus,
The operating net cash savings = $164000 and
The cash net investment = $980000- $60000 = $920000
Then,
The Simple rate of return = $164000 / $920000 = 0.178 i.e. 17.8%
Therefore the simple rate of return on this investment is 0.178 or 17.8%
The simple rate of return for Linwood's new equipment investment is approximately 6.7%. Thus, option (b) is correct.
Let's calculate it step-by-step:
The cost of the new equipment: $980,000Annual savings in cash operating costs: $164,000The useful life of the new equipment: 10 yearsTo calculate the simple rate of return, we use the formula:
Simple Rate of Return = (Annual Incremental Net Operating Income) / Initial InvestmentSince the new equipment has no salvage value, the annual depreciation is:
Annual Depreciation = Initial Investment / Useful Life = $980,000 / 10 = $98,000Next, we calculate the annual incremental net operating income:
Annual Incremental Net Operating Income = Annual Cost Savings - Annual Depreciation = $164,000 - $98,000 = $66,000Finally, the simple rate of return is:
Simple Rate of Return = $66,000 / $980,000 ≈ 6.7%Complete Question:
Linwood is making an equipment change at his company. An old piece of equipment, with a salvage value of $60,000, is being replaced by new equipment. The new equipment costs $980,000 and would have a 10-year useful life and no salvage value. By replacing the equipment, Linwood will save $164,000 per year in cash operating costs. The simple rate of return on this investment is:
a. 7.2%
b. 6.7%
c. 16.7%
d. 17.8%
Heller Enterprises reports the following information. 2017 2016 Cash $10,800 $10,600 Operating assets $18,500 $18,800 Operating liabilities $14,100 $14,800 Net operating profit after tax $10,200 $10,300 Weighted average cost of capital 6.0% 6.0% What is the company's residual operating income (ROPI) for 2017? A. $9,072 B. $6,200 C. $9,312 D. $9,960 E. None of the above
Answer:
The company's residual operating income (ROPI) for 2017 is $9,960. The right answer is D.
Explanation:
In order to calculate the company's residual operating income (ROPI) for 2017 we would have to use the following formula:
Company's Residual operating Income = NOPAT - [ WACC x NOA at beginning ]
Where, NOPAT = Net operating profit after tax for 2017 = $10,200, WACC = weighted average cost of capital = 6%
NOA at beginning = Net operating assets at beginning of the year (NOA of 2016 closing) = $18,800 - $14,800 = $4000
Therefore, Company's residual operating income = $10,200 - [ 6% x $4000 ] = $9,960
The Wood Valley Dairy makes cheese to supply to stores in its area. The dairy can make 454 pounds of cheese per day (355 days per year), and the demand at area stores is 62 pounds per day. Each time the dairy makes cheese, it costs $295 to set up the production process. The annual cost of carrying a pound of cheese in a refrigerated storage area is $1.01. Determine the minimum total annual cost.
Answer:
$245,277
Explanation:
The dairy makes 454 pounds per day of which only 62 pounds is sold, thus the extra pounds of cheese per day are (454-62) = 392.
Now, the dairy operated 355 days a year, hence the annual cost of storage is,
(355 * 392) * $1.01 => $140,552.
Now the setup cost is $295 a day, so the annual would be,
(295 * 355) => $104,725.
Hence the minimum total annual costs will be = 140552+104725 = $245,277.
Hope I made myself clear.
Thanks
A division is considering the acquisition of a new asset that will cost $2,520,000 and have a cash flow of $700,000 per year for each of the four years of its life. Depreciation is computed on a straight-line basis with no salvage value. Ignore taxes. Required: a. & b. What is the ROI for each year of the asset's life if the division uses beginning-of-year asset balances and net book value for the computation? What is the residual income each year if the cost of capital is 8 percent? (Enter "ROI" answers as a percentage rounded to 1 decimal place (i.e., 32.1). Negative amounts should be indicated by a minus sign.)
Answer:
initial investment = $2,520,000
cash flow for years 1 - 4 = $700,000
ROI = (cash flow - depreciation) / investment
depreciation for year 1-4 using straight-line basis = $2,520,000 / 4 = $630,000
ROI year 1 = (700,000 - 630,000) / 2,520,000 = 70,000 / 2,520,000 = 2.8%
ROI year 1 = 70,000 / 1,890,000 = 3.7%
ROI year 1 = 70,000 / 1,260,000 = 5.6%
ROI year 1 = 70,000 / 630,000 = 11.1%
cost of capital year 1 = $2,520,000 x 8% = $201,600
cost of capital year 2 = $1,890,000 x 8% = $151,200
cost of capital year 3 = $1,260,000 x 8% = $100,800
cost of capital year 4 = $630,000 x 8% = $50,400
residual income = excess income - cost of capital
residual income year 1 = $70,000 - $201,600 = -$131,600
residual income year 2 = $70,000 - $151,200 = -$81,200
residual income year 3 = $70,000 - $100,800 = -$30,800
residual income year 4 = $70,000 - $50,400 = $19,600
year net investment cash flow - dep. ROI residual income
1 $2,520,000 $70,000 2.8% ($131,600)
2 $1,890,000 $70,000 3.7% ($81,200)
3 $1,260,000 $70,000 5.6% ($30,800)
4 $630,000 $70,000 11.1% $19,600
Moe ’s Electric sales vacuum cleaners with a one-year warranty to fix any defects. For the current year, 200 vacuums have been sold. By the end of the year 12 ovens have been repaired for an average cost of $45 dollars. Management estimates that 8 more vacuums of the 200 sold will need to be repaired next year at the same amount. How much should Paul’s Electric report warranty expense for the current year?
Answer:
$900
Explanation:
Given that
Total repair up to end of year = 12
Estimated need to be repaid = 8
Average cost = $45
The computation of warranty expense for the current year is shown below:-
For computing the warranty expense for the current year first we need to find out the total repaired cost which is here below
Total repaired cost = Total repair up to end of year + Estimated need to be repaid
= 12 + 8
= 20
Warranty expense for the current year = Average cost × Total
= $45 × 20
= $900
Therefore for computing the warranty expense for the current year we simply applied the above formula.
Kamal reproduces Lorena’s copyrighted work "Musica" without paying royalties. Kamal is most likely excepted from liability for copyright infringement under the "fair use" doctrine if a. Kamal copies the entire work. b. Kamal’s use has no effect on the market for Lorena’s work. c. Kamal distributes the copies without charge to the public. d. Kamal’s use is for a commercial purpose.
Answer:
Option B
Explanation:
In simple words, Fair use refers to the one of the patent protections designed to align the rights of copyright owners with that of the public's best interest in the broader dissemination and use of artistic works by enabling such restricted uses that would otherwise be deemed infringing complaints as a protection against copyright violation.
Thus, from the above we can conclude that the correct option is B .
ou have an outstanding student loan with required payments of $ 550 per month for the next four years. The interest rate on the loan is 9 % APR (compounded monthly). Now that you realize your best investment is to prepay your student loan, you decide to prepay as much as you can each month. Looking at your budget, you can afford to pay an extra $ 250 a month in addition to your required monthly payments of $ 550, or $ 800 in total each month. How long will it take you to pay off the loan? (Note: Be careful not to round any intermediate steps less than six decimal places.)
Answer:
Approx 34 months are required to payoff the loan
Explanation:
In order to calculate How long will it take you to pay off the loan we would have to calculate first the Loan amount outstanding as follows:
Loan amount outstanding = 600 *4 *12 = $ 28,800
Therefore, to calculate How long will it take you to pay off the loan we use the following formula:
Amount =Payment (1+ r/n)^t
28,800 = 775 (1+ .09/12)^t
28,800 /775 = (1 +.0075 ) ^t
37.16 = (1.0075)^ t
when we used it and trial method the compounded value comes to be 37.85 when t= 34 months
Hence, approx 34 months are required to payoff the loan
Rugged Sports Enterprises LP is organized as a limited partnership consisting of two individual partners: Hockey LP and Football LP. Hockey LP Football LP Total Beginning-year balance $ 345,000 $ 1,414,500 $ 1,759,500 Annual net income 36,664 751,612 788,276 Cash distribution — (120,000 ) (120,000 ) Ending-year balance $ 381,664 $ 2,046,112 $ 2,427,776 Compute partner return on equity for each limited partnership (and the total) for the year using the above data from Rugged Sports Enterprises LP.
Answer:
Find the answers in the explanation section below
Explanation:
The return on equity for each of the partners and the firm in total is the net income for the year divided by average capital invested in the business in the year.
Average capital or equity is the beginning balance plus ending balance divided by 2:
Hockey LP:
Annual net income is $36,664
average equity=($345,000+$381,664)/2=$363,332
return on equity= $36,664/$363,332 =10.09%
Football LP:
Annual net income is $751,612
average equity=($1,414,500+ $2,046,112)/2=$1,730,306
return on equity=$751,612/$1,730,306 =43.44%
Rugged sports:
Annual net income is $788,276
average equity=($1,759,500+ $2,427,776)/2=$2093638
return on equity=$788276/$2093638 =37.65%
Final answer:
Explanation of calculating partner return on equity for Rugged Sports Enterprises LP.
Explanation:
Partner return on equity (ROE) is a financial metric used to evaluate the profitability of a partner's investment in a partnership.
To calculate ROE for each partner in Rugged Sports Enterprises LP, divide the annual net income by the beginning-year balance and then multiply by 100 to get a percentage:
Hockey LP ROE: (36664 / 345000) * 100Football LP ROE: (751612 / 1414500) * 100Adding the individual ROEs will give you the total partnership ROE for Rugged Sports Enterprises LP for the year.
The Card Shoppe needs to maintain 18 percent of its sales in net working capital. Currently, the store is considering a four-year project that will increase sales from its current level of $279,000 to $308,000 the first year and to $314,000 a year for the following three years of the project. What amount should be included in the project analysis for net working capital in Year 4 of the project?
Answer:
$56,520
Explanation:
As per given data
Year Sales Working Capital 18%
0 $279,000 ($50,220)
1 $308,000 ($5,220)
2 $314,000 ($1,080)
3 $314,000 $0
4 $314,000 $56,520
As the sales value of year 2, 3 and 4 are same, as capital is adjusted in year 2 and company has equal working capital required in year 3, years 4 is the last year of the project so, working capital will be recovered from the project
Net Working capital will be reimbursed at the end of the project. The accumulated value of investment in working capital will be recorded as cash inflow in the analysis.
On December 31, Year 1, Mr. and Mrs. Wise purchased 50% of Cobra’s only class of stock outstanding for $300,000. Cobra is an electing S corporation. On November 30, Year 2, they purchased the other 50% of Cobra’s stock for $300,000. For the year, Cobra incurred an ordinary loss of $474,500. How much of the loss can Mr. and Mrs. Wise deduct on their individual income tax return for the year
Answer:
$257400
Explanation:
Under Sec. 1366(a) and Sec. 1377(a), a pro rata share is the tax payers hare of loss determined on a per-day and then a per-share basis. Cobra shareholder includes his or her pro rata share of loss from the cobra.
The ordinary loss for the whole year was $474,500, Therefore the loss per day was $1300 per day ( $474,500 ÷ 365 days).
Since Mr. and Mrs. Wise owned 50% of the stock for the full year and the other 50% for 31 days, their share of loss = [ $474,500/2 + (31 days × $1300 × 50%)] = $237250 + $20150 = $257400
For which capital component must you make a tax adjustment when calculating a firm’s weighted average cost of capital (WACC)? Equity Preferred stock Debt Water and Power Company (WPC) can borrow funds at an interest rate of 10.20% for a period of seven years. Its marginal federal-plus-state tax rate is 25%. WPC’s after-tax cost of debt is (rounded to two decimal places). At the present time, Water and Power Company (WPC) has 5-year noncallable bonds with a face value of $1,000 that are outstanding. These bonds have a current market price of $1,050.76 per bond, carry a coupon rate of 10%, and distribute annual coupon payments. The company incurs a federal-plus-state tax rate of 25%. If WPC wants to issue new debt, what would be a reasonable estimate for its after-tax cost of debt (rounded to two decimal places)? (Note: Round your YTM rate to two decimal place.) 6.53% 7.51% 5.22% 7.84%
Answer:
Debt
7.65%
6.53%
Explanation:
The debt finance has its capital component adjusted for tax when computing weighted average cost of capital.
The after tax cost of borrowing =pretax cost of debt*(1-t)
t is the tax rate of 25% or 0.25
The after tax cost of borrowing =10.20%*(1-0.25)=7.65%
The pretax cost of bond=rate(nper,pmt,-pv,fv)
nper is the duration of bond which is 5 years
pmt is the annual interest=$1000*10%=$100
pv is the current price of $1,050.76
fv is the face value of $1000
=rate(5,100,-1050.76,1000)=8.70%
After tax cost of bond=8.70% *(1-0.25)=6.53%
Under its executive stock option plan, National Corporation granted 15 million options on January 1, 2021, that permit executives to purchase 15 million of the company’s $1 par common shares within the next six years, but not before December 31, 2023 (the vesting date). The exercise price is the market price of the shares on the date of grant, $32 per share. The fair value of the options, estimated by an appropriate option pricing model, is $4 per option. Suppose that the options are exercised on April 3, 2024, when the market price is $36 per share. Ignoring taxes, what journal entry will National record?
Answer and Explanation :
As per the data given in the question,
Before passing the journal entries we need to do the following calculations which are shown below
Total compensation expense = Options granted × Fair value per option
= 15 million × $4 per options
= $60 million
Compensation expense to be recognized each year = $60 million ÷ 3 years
= $20 million
Now
Journal Entries are as follows
On Dec-31,2021
Compensation expense A/c Dr. $20 million
To Paid in capital stock options Cr. $20 million
(Being the compensation expense is recorded )
On Dec-31,2022
Compensation expense A/c Dr. $20 million
To Paid in capital stock options Cr. $20 million
(Being the compensation expense is recorded )
On Apr-3,2024
Cash A/c Dr. $480 million (15 million × $32)
Paid in capital stock options A/c Dr. $60 million
To Common stock Cr. $15 million
To Paid in capital in excess of par Cr. $525 million
(Being the exercise of options is recorded)
Cool Logos buys logo-imprinted merchandise and then sells it to university bookstores. Sales are expected to be $ 2 comma 003 comma 000 in September, $ 2 comma 240 comma 000 in October, $ 2 comma 378 comma 000 in November, and $ 2 comma 520 comma 000 in December. Cool Logos sets its prices to earn an average 30% gross profit on sales revenue. The company does not want inventory to fall below $ 420 comma 000 plus 20% of the next month's cost of goods sold. Prepare a cost of goods sold, inventory, and purchases budget for the months of October and November. Cool Logos Cost of Goods Sold, Inventory, and Purchases Budget For the Months of October and November October November Cost of goods sold Plus: Desired ending inventory Total inventory required Less: Beginning inventory Purchases
To calculate the COGS, inventory, and purchases budget for Cool Logos, subtract the 30% gross profit margin from projected sales to determine COGS, then compute the desired ending inventory based on a fixed amount plus a percentage of the next month's COGS. Finally, adjust for beginning inventory to find the purchases needed.
To prepare the cost of goods sold (COGS), inventory, and purchases budget for Cool Logos for the months of October and November, we need to follow several steps. Initially, we ascertain the cost of goods sold by deducting the desired gross profit margin from the sales revenue. Cool Logos aims for a 30% gross profit, so the cost of goods sold would be 70% of the sales revenue. Then we calculate the desired ending inventory, which should not fall below $420,000 plus 20% of the following month's COGS. We use these figures to determine the total inventory required and the purchases needed for each month after considering the beginning inventory.
For example, in October, the cost of goods sold would be 70% of $2,240,000, which amounts to $1,568,000. The desired ending inventory for October would be $420,000 plus 20% of November's COGS (which is 70% of $2,378,000). We compute the total inventory required by adding the COGS to the desired ending inventory. The purchases for October are then the difference between the total inventory required and the beginning inventory, which is September's ending inventory. The same process is used to calculate the figures for November.
Lithium, Inc. is considering two mutually exclusive projects, X and Y. Project X costs $95,000 today (year 0) and is expected to generate $65,000 in year one and $75,000 in year two. Project Y costs $120,000 and is expected to generate $64,000 in year one, $67,000 in year two, $56,000 in year three, and $45,000 in year four. The firm's investors require a rate of return of 16% and the weighted average cost of capital is 13%. What is the net present value for Project Y
Answer:
$52,521
Explanation:
As per Given Data
Project Y
Costs $120,000
Cash Inflows
Year 1 $64,000
Year 2 $67,000
Year 3 $56,000
Year 4 $45,000
Required rate of return = 16%
Weighted Average cost of Capital = 13%
Net Present Value
As we know Net Present value is calculated by discounting each years cash flows using using the Weighted Average cost of Capital.
Costs $120,000
Year Cash Inflows Discount factor 13% Present values
Year 0 $(120,000) (1+13%)^-0 $(120,000)
Year 1 $64,000 (1+13%)^-1 $56,640
Year 2 $67,000 (1+13%)^-2 $52,471
Year 3 $56,000 (1+13%)^-3 $38,811
Year 4 $45,000 (1+13%)^-4 $27,599
Net present value $52,521
A new barcode reading device has an installed cost basis of $21 comma 680 and an estimated service life of ten years. It will have a zero salvage value at that time. The 200% declining balance method is used to depreciate this asset. a. What will the depreciation charge be in year ten? b. What is the book value at the end of year nine? c. What is the gain (or loss) on the disposal of the device if it is sold for $700 after nine years?
Answer:
a. $2,910
b. $2,910
c. $2,210 loss
Explanation:
Note: See the attached excel file to see how the depreciation is calculated.
Since the useful life is 10, the normal depreciation rate is 10%. Therefore, 200% double declining depreciation rate implies 20% rate to be used (i.e. 10% * 200% = 20%).
a. What will the depreciation charge be in year ten?
Since the salvage value at year ten is zero, the depreciation charge in year 10 is $2,910.
b. What is the book value at the end of year nine?
The book value at the end of year nine = $2,910.
c. What is the gain (or loss) on the disposal of the device if it is sold for $700 after nine years
Loss = Sales proceed - book value at the end of year nine = $700 - $2,910 = 2,210 loss
A plant asset acquired on October 1, 2018, at a cost of $400,000 has an estimated useful life of 10 years. The salvage value is estimated to be $40,000 at the end of the asset's useful life. Collapse question part (a) Determine the depreciation expense for the first two years using the Straight-line method. Year 1Year 2 Straight-line method
Final answer:
To calculate depreciation using the straight-line method for a plant asset with a cost of $400,000, a salvage value of $40,000, and a useful life of 10 years, we find that the annual depreciation expense is $36,000. This amount is the same for the first two years of the asset's use.
Explanation:
The question involves calculating the depreciation expense of a plant asset using the straight-line method. The formula to calculate straight-line depreciation is: (Cost of the asset - Salvage value) / Useful life. The cost of the asset is $400,000, the salvage value is $40,000, and the useful life is 10 years.
First, calculate the total depreciation over the asset's life: $400,000 - $40,000 = $360,000. Then, divide this by the useful life: $360,000 / 10 years = $36,000 per year.
For year 1 (October 1, 2018, to September 30, 2019), the depreciation expense is $36,000. As the asset was acquired at the beginning of October, you would depreciate it for the full year.
For year 2 (October 1, 2019, to September 30, 2020), the depreciation expense is also $36,000.
Individuals derive utility from picnics, p, and kayak trips, k. Assuming that an individual's utility is U(p,k) = k Superscript 0.5k0.5p Superscript 0.5p0.5 and income is $100, what is the marginal rate of substitution (MRS) between picnics and kayak trips? A. MRS = minus−1. B. MRS = 1. C. MRS = minus−one half 1 2 D. There is no substitution because picnics and kayak trips are perfect complements.
Answer:
B) MRS = 1
Explanation:
In this question, we have been given the options as follows:
A) MRS = -1
B) MRS = 1
C) MRS = -1/2
D) There is no substitution because picnics and Kayak trips are perfect complements.
Where, MRS stands for = Marginal Rate of Substitution
First of all, we have to calculate the marginal utility with respect to kayak trips (k) and with respect to picnics (p).
Marginal Utility with respect to P = [tex]\frac{0.5k^{0.5} }{p^{0.5} }[/tex]
Now, calculate with respect to K
Marginal Utility with respect to K = [tex]\frac{0.5p^{0.5} }{k^{0.5} }[/tex]
Now, the formula for MRS is as follows:
Marginal Rate of Substitution = (Marginal Utility with respect to P ÷ Marginal Utility with respect to K)
MRS = [tex]\frac{0.5k^{0.5} }{p^{0.5} }[/tex] ÷ [tex]\frac{0.5p^{0.5} }{k^{0.5} }[/tex] = 1
Hence, the right answer is B) MRS = 1
Final answer:
The marginal rate of substitution (MRS) between picnics and kayak trips, given the utility function U(p,k) = k^0.5p^0.5, is -1, which means the consumer is willing to give up one picnic for one additional kayak trip without changing the level of utility.
Explanation:
The student's question revolves around the concept of the marginal rate of substitution (MRS), which is a pivotal idea in microeconomics and consumer behavior. The given utility function is U(p,k) = k0.5p0.5, and we want to find the MRS between picnics (p) and kayak trips (k). To compute the MRS, we need to find the negative of the slope of the indifference curve at a given point, which is derived by finding the ratio of the marginal utilities of both goods.
The marginal utility with respect to picnics is 0.5k0.5p-0.5 and with respect to kayak trips is 0.5k-0.5p0.5. Thus, the MRS, which is the absolute value of the ratio of marginal utilities, will be:
MRS = -(0.5k0.5p-0.5) / (0.5k-0.5p0.5)
This simplifies to MRS = -1, which is option A. Therefore, the marginal rate of substitution between picnics and kayak trips is -1.
Gitano Products operates a job-order costing system and applies overhead cost to jobs on production (not on the basis of raw materials purchased). Its predetermined overhead rate was based on a cost formula that estimated $124,600 of manufacturing overhead for an estimated allocation base of $89,000 direct material dollars to be used in production. The basis of direct materials used in the company has provided the following data for the just completed year
Purchase of raw materials 139,000
Direct labor cost $85,000
Manufacturing overhead costs:
Indirect labor $ 127,800
Property taxes $8,880
Depreciation of equipment $18,000
Maintenance $ 12,000
Insurance $ 11,300
Rent, building $ 40,000
Beginning Ending
Raw Materials $ 27,000 $ 13,000
Work in Process $ 46,000 $36,000
Finished Goods $71,000 $56,000
Required:
1. Compute the predetermined overhead rate for the year
2. Compute the amount of underapplied or overapplied overhead for the year
3. Prepare a schedule of cost of goods manufactured for the year. Assume all raw materials are used in production as direct materials
4. Compute the unadjusted cost of goods sold for the year. Do not include any underapplied or overapplied overhead in your answer
Answer:
1.predetermined overhead rate for the year = $1.40
2.the amount of underapplied or overapplied overhead for the year = $3,780
3.schedule of cost of goods manufactured for the year
Raw Materials ($ 27,000+$139,000 -$ 13,000) 153,000
Direct labor cost 85,000
Applied Overheads 214,200
Add Opening Inventory - Work in Process 46,000
Less Closing Inventory - Work in Process (36,000)
cost of goods manufactured for the year 462,200
4.the unadjusted cost of goods sold for the year = $477,200
Explanation:
1.predetermined overhead rate for the year
predetermined overhead rate = Budgeted Fixed Overheads / Budgeted Activity
= $124,600/$89,000
= $1.40
2.the amount of underapplied or overapplied overhead for the year
Actual Fixed Overheads > Applied Fixed Overheads = Underapplied
Actual Fixed Overheads < Applied Fixed Overheads = Overapplied
Applied Fixed Overheads = $1.40×($ 27,000+$139,000 -$ 13,000)
= $214,200
Actual Fixed Overheads Calculation :
Indirect labor $ 127,800
Property taxes $8,880
Depreciation of equipment $18,000
Maintenance $12,000
Insurance $11,300
Rent, building $40,000
Total $217,980
Note that : Actual Fixed Overheads > Applied Fixed Overheads
Therefore we have an Underapplied
Underapplied = $217,980 - $214,200 = $3,780
3.schedule of cost of goods manufactured for the year
Raw Materials ($ 27,000+$139,000 -$ 13,000) 153,000
Direct labor cost 85,000
Applied Overheads 214,200
Add Opening Inventory - Work in Process 46,000
Less Closing Inventory - Work in Process (36,000)
cost of goods manufactured for the year 462,200
4.the unadjusted cost of goods sold for the year
Opening Inventory - Finished Goods $71,000
Add Cost of Goods Manufactured $462,200
Less Closing Inventory - Finished Goods ($56,000)
Cost of Goods Sold $477,200
At year end, Rebos Company's financial statements showed sales of $820 million, net income of $425 million, total assets of $750 million, total liabilities (including preferred stock) of $735 million, and 1.20 million shares of common stock outstanding. Rebos has been offered $742.50 million to sell their assets. Based on this information, calculate the company's book value per share and liquidation value per share of common stock, respectively.
Answer:
total sales $820 million
net income $425 million
total assets $750 million
total liabilities $735
1.2 million outstanding common stocks
an offer was made to buy their assets at $742.5 million
company's book value per share:
= (total assets - total liabilities) / total number of outstanding common stocks
= ($750,000,000 - $735,000,000) / 1,200,000 = $12.50 per stock
company's liquidation value per share:
= (total offer - total liabilities) / total number of outstanding common stocks
= ($742,500,000 - $735,000,000) / 1,200,000 = $6.25 per stock
uppose that a Swiss watchmaker imports watch components from Sweden and exports watches to the United States. Also suppose the dollar depreciates, and the Swedish krona appreciates, relative to the Swiss franc. Speculate as to how each would hurt the Swiss watchmaker. Explain why the U.S. demand for Mexican pesos is downsloping and the supply of pesos to Americans is upsloping.
Answer:
1)
In this case, the depreciation of the US dollar will make the Swiss watches more expensive for American customers, which will probably lower their demand.
The Swedish krona appreciation will increase the production costs of the watches, so the company will suffer twice, its sales will lower and its costs will increase.
2)
The US demand for Mexican pesos is downsloping because there is an inverse relationship between the price of the Mexican peso against the US dollar and the quantity of Mexican pesos demanded. As the exchange rate of the Mexican pesos depreciates against the US dollar, the demand for Mexican products in the US will increase because Mexican products are cheaper.
When the Swiss franc depreciates and the Swedish krona appreciates, it would hurt the Swiss watchmaker by increasing their production costs and making their watches more expensive for American consumers. The downsloping demand for Mexican pesos in the United States can be attributed to the law of demand, while the upsloping supply of pesos to Americans can be explained by the law of supply.
Explanation:
If the Swiss franc depreciates and the Swedish krona appreciates, it would hurt the Swiss watchmaker in several ways. Firstly, importing watch components from Sweden would become more expensive because the watchmaker would need to pay more Swiss francs for the same amount of Swedish krona. This would increase their production costs. Secondly, when the Swiss watchmaker exports watches to the United States, the watches would become more expensive for American consumers because the dollar depreciated against the Swiss franc. This could lead to a decrease in demand for Swiss watches in the US market.
The downsloping demand for Mexican pesos in the United States can be attributed to the law of demand. When the price of Mexican pesos increases, American consumers would demand fewer pesos as they become more expensive. On the other hand, the upsloping supply of pesos to Americans can be explained by the law of supply. When the price of Mexican pesos increases, Mexican sellers would be willing to supply more pesos to American consumers as they can now sell them for a higher price.
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In its first year of operations, Woodmount Corporation reported pretax accounting income of $640 million for the current year. Depreciation reported in the tax return in excess of depreciation in the income statement was $480 million. The excess tax will reverse itself evenly over the next three years. The current year's tax rate of 25% will be reduced under the current law to 30% next year and 35% for all subsequent years. At the end of the current year, the deferred tax liability related to the excess depreciation will be:
Answer:
At the end of the current year, the deferred tax liability related to the excess depreciation will be 144 million
Explanation:
In order to calculate At the end of the current year, the deferred tax liability related to the excess depreciation we would have to use the following formula:
Deferred tax liability = ($160 million * 25%) + ($160 million * 30%) + ($160 million * 35%)
Deferred tax liability =$40 million + $48 million + $56 million
Deferred tax liability = $144 million
At the end of the current year, the deferred tax liability related to the excess depreciation will be 144 million
To find the deferred tax liability due to excess depreciation, calculate the temporary difference and apply future tax rates, resulting in a liability of $312 million.
Deferred tax liability:
1. Calculate the temporary difference due to excess depreciation: $480 million - $0 million = $480 million.
2. Calculate the tax effect at the different tax rates for the next three years: $480 million x 30% = $144 million, $480 million x 35% = $168 million.
3. The deferred tax liability related to the excess depreciation at the end of the current year will be $144 million + $168 million = $312 million.
Inflation in the Philippines was 6.7% in September, far above the central bank’s target of 2 – 4%. Suppose the central bank decides to raise interest rates. (a) Using the money market, describe the type of monetary policy (increase or decrease in the money supply) that would achieve higher interest rates. (b) The central bank's goal is to reduce inflation. Using the IS-LM-FE model, explain whether the policy of higher interest rates is appropriate or not. (c) Use the AD-AS model to predict the short-run and long-run effects of the central bank’s policy on Philippine inflation, output, and unemployment. Does it matter whether wages are flexible or not? Explain. (d) Suppose the demographic transition of the Philippines causes labor supply to grow more rapidly than usual. How does this affect your answer about unemployment and wages in (c)? Use the labor market.
Answer:
plsyes
Explanation:
Omicron Technologies has $ 40 million in excess cash and no debt. The firm expects to generate additional free cash flows of $ 32 million per year in subsequent years and will pay out these future free cash flows as regular dividends. Omicron's unlevered cost of capital is 11% and there are 8 million shares outstanding. Omicron's board is meeting to decide whether to pay out its $ 40 million in excess cash as a special dividend or to use it to repurchase shares of the firm's stock. Assume that Omicron uses the entire $ 40 million to repurchase shares. The number of shares that Omicron will have outstanding following the repurchase is closest to:
Answer:
$4.55 million
Explanation:
The calculation of number of shares repurchased is shown below:-
Market value = Enterprise value + Cash
= $32 million ÷ 0.11 + $40 million
= $330.909 million
Share price = Market value ÷ Outstanding shares
= $330.909 million ÷ $8 million
= $41.36 million
Number of shares repurchases = $40 million ÷ $41.36 million × 1,000,000
= 967,118 shares
Outstanding shares = 8 million - $967,118 shares
= $7,032,882
Dividend = Enterprise value ÷ Outstanding shares
= $32 million ÷ $7,032,882
= $4.55 million
Which one of the following is an argument in favor of a low dividend policy? Few, if any, positive net present value projects are available to the firm. A preponderance of stockholders have minimal taxable income. Corporate tax rates exceed personal tax rates. The tax on capital gains is deferred until the gain is realized. A majority of stockholders have other investment opportunities that offer higher rewards with similar risk characteristics.
Answer: The tax on capital gains is deferred until the gain is realized
Explanation:
The TAX DIFFERENTIAL VIEW of DIVIDEND POLICY is a notion that states that shareholders generally prefer capital gains fo dividend payouts because capital gains are taxed at a lower rate than dividend payouts.
Therefore they would like to pay less tax on dividends and instead wait until they make a capital gain as the taxes on that are less and are only charged after the gain is realized.
This translates to less dividends being paid by companies that follow this logic therefore the 4th option is correct.
At December 31, 2020 Marigold Corp. had 305000 shares of common stock and 9600 shares of 6%, $100 par value cumulative preferred stock outstanding. No dividends were declared on either the preferred or common stock in 2020 or 2021. On January 30, 2022, prior to the issuance of its financial statements for the year ended December 31, 2021, Marigold declared a 100% stock dividend on its common stock. Net income for 2021 was $1135000. In its 2021 financial statements, Marigold's 2021 earnings per common share should be
Answer:
Marigold Corp.
2021 Earnings per common share:
Common Stock:
Dec 31, 2020 Balance = 305,000 shares
Jan 30, 2022 Stock dividend = 305,000 shares
Balance on Jan 30 = 610,000 shares
Net Income for 2021 = $1,135,000
6% Cumulative preferred dividend for 2020 & 2021 = $115,200 ($57,600 x2)
2021 Earnings per share = ($1,135,000 - $115,200)/305,000 = $3.34
Explanation:
Earnings per share is the net income dividend by the number of outstanding stock.
As at December 31, 2021, the common stock outstanding equals 305,000 shares.
The preferred stock is cumulative. This means that whether dividend is declared or not in a year, it continues to be accumulated year on year until when the company is able to pay.
Since 2020 dividend for preferred stock was not declared, in 2021 when the common stock dividend was declared, the previous year's and the present would be accumulated and deducted from earnings to arrive at earnings for common stockholders.
Answer:
Marigold's 2021 earnings per common share should be $1.77
Explanation:
Given:
Net income for 2021: $1,135,000
Num. of common stck shares: 305,000
Cumulative preferred stock outstanding: 9600 shares of 6%, $100 par value.
The dividend to be accrued on preference shares=
9,600 * $100 * 6% = $57,600
Share outstanding will be:
305,000 * 2 = 610,000
Earnings available to common share-holders =
(Net income-Preferred dividend) =
$1,135,000 - $57,600 = $1,077,400
Earnings per share is calculated as:
$1,077,400 / 610,000 = $1.77
Therefore, Marigold's 2021 earnings per common share should be $1.77
6. If two portfolios are well-diversified with a risk-free rate of 3.11% and the S&P market return for the past year has been 12.87%. Portfolio ABC has a return of 15.75% and has a beta of 1.4, while Portfolio XYZ returns 11.92% and has a beta of .85. Based on Jack Treynor's Model what are the Treynor Indexes for each stock, and assuming that the correlation of each the same, which stock would you add to your own portfolio based solely on the results of the Treynor Index? And what results would the Jensen Model provide and what would be your decision then?
Answer:
Answer 1---- D. none of the above
Answer 2---- B. the project will delay by one day
Explanation:
See attached image
You are the treasurer of Arizona Corp. and must decide how to hedge (if at all) future receivables of 350,000 Australian dollars (A$) 180 days from now. Put options are available for a premium of $.02 per unit and an exercise price of $.50 per Australian dollar. The forecasted spot rate of the Australian dollar in 180 days is:
Answer:
50%
Explanation:
The computation of the probability for put option will be exercised is shown below:
She will exercise at the time when the exercise price i.e $.50 is bigger than the future spot price i.e (20% + 30% = 50%)
So in this case the probability should be 50%
Hence, the correct answer is option c.
All other information which is given is not relevant. Hence, ignored it
Refer to the payoff matrix at right for the profits (in $ millions) of two firms (A and B) and two pricing strategies (high and low). Which of the following is the outcome of the dominant strategy without cooperation? A. Both firm A and firm B choose the low price. B. Firm A chooses the high price while firm B chooses the low price. C. Firm A chooses the low price while firm B chooses the high price. D. Both firm A and firm B choose the high price.
Answer:
A. Both firm A and firm B choose the low price.
Explanation:
In a strategy of this form, it is said that both firm A and B chose the same pricing strategies which is of high and low.
In other words , a payoff matrix is defined as a visual representation of all the possible outcomes that can occur when two people or groups have to make a strategic decision. The decision is referred to as a strategic decision because each decision maker has to take into consideration how their choice will affect their opponent's choice and how their opponent's choice will affect their own choice. The payoff matrix illustrates each possible strategy that one side can choose, as well as every combination of outcomes that are possible based on each opponent's choice.