Answer:
$124,200
Explanation:
Contribution margin is net of sales value and variable cost. This value is available to cover the fixed cost of the business and profit after adjusting fixed cost.
As per given data
Price = $98
Numbers of units sold = 1,800
Total Sales = $98 x 1,800 = $176,400
Variable cost = $23 x 1,800 units = $41,400
Variable marketing cost = $6 x 1,800 = $10,800
Total Variable cost = $41,400 + $10,800 = $52,200
Contribution Margin = Total Sales - Total Variable cost
Contribution Margin = $176,400 - $52,200
Contribution Margin = $124,200
Answer:
$124,200
Explanation:
Swan Textiles Inc contribution margin using variable costing
Total sales = $98.00 × 1,800 = $176,400
Variable cost of goods sold = $23.00 × 1,800 = $41,400
Variable marketing costs = $6.00 × 1,800 = $10,800
Total variable costs ($41,400+ $10,800)= $52,200
Contribution margin = $176,400 - $52,200 = $124,200
Therefore the contribution margin using variable costing will be $124,200
Each year, Mogul Enterprises prepares a reconciliation schedule that compares its income statement with its statement of cash flows on both the direct and indirect method bases. In its 2019 income statement, Mogul reported $11,000 of interest expense on its outstanding bonds. During the year, Mogul paid its regular installments of $9,000 of interest in cash. In its reconciliation schedule, Mogul should:
Answer:
$2,000 positive adjustments to net income under the indirect method for the decrease in bond discount
Explanation:
$11,000 of interest expense on its outstanding bonds.
Less $9,000 of interest in cash.
Balance $2,000
Therefore in its reconciliation schedule, Mogul should show a $2,000 positive adjustments to net income under the indirect method for the decrease in bond discount.
George Manufacturing had net income of $ 300 comma 000 and declared preferred dividends of $ 20 comma 000 during the current year. George began the year with 14 comma 000 common shares outstanding. It issued 40 comma 000 shares on June 30 and repurchased 6 comma 000 of the newly issued shares on November 1. Compute George's weightedminusaverage common shares outstanding for the year.
Answer:
33,000 shares
Explanation:
The computation of the weighted - average common shares outstanding is shown below:
= Outstanding common shares + Issued shares × number of months ÷ total number of months in a year - repurchased shares × number of months ÷ total number of months in a year
= 14,000 shares + 40,000 shares × 6 months ÷ 12 months - 6,000 shares × 2 months ÷ 12 months
= 14,000 shares + 20,000 shares - 1,000 shares
= 33,000 shares
Auto Parts is considering a merger with Car Parts. Car Parts market-determined beta is 0.9, and the firm currently is financed with 20% debt, at an interest rate of 8%, and its tax rate is 25%. If Auto Parts acquires Workman, it will increase the debt to 60%, at an interest rate of 9%, and the tax rate will increase to 35%. The risk-free rate is 6% and the market risk premium is 4%. What will Car Parts required rate of return on equity be after it is acquired?
Answer: 9.7%
Explanation:
Given Data
Rf = Risk free return = 6%,
Rpm = Risk premium = 4%,
Beta = 0.9
Wd = Debt = 20%
rd = cost of debt = 8%
We = equity = 80%
Re = Rf + Beta (Rpm)
= 0.06 +0.9 (0.04)
= 0.096 * 100
= 9.6%
Unlevered Equity Cost ;
ReU= Wd × rd + We × re
= 0.20 × 8% + 0.80 × 9.6%
= 9.28%
Levered Equity Cost:
New Debt = 60%,
New Equity = 40%,
New rd = 9%
ReL = ReU + (ReU - rd) (D ÷ E)
= 9.28% + (9.28% - 9%) (0.60 ÷ 0.40)
= 0.097 * 100
= 9.7%
A company mn this sampling method, we have a listing of our entire population of interest. So we create a rule for selecting people out of this population based on this list (like choosing every 15th person or so). As a result we randomly select individuals to try and get a representative sample of our population of interest. Which sampling method is this?ay market to its employees in the service industry because they know that its employees are responsible for _______________ with customers.
Answer: 1. Systematic Sampling
2. b. keeping promises
Explanation:
1. Systematic Sampling is a method of sampling that works by creating a sample from a population by using a set interval to pick. For example, every 15th person is picked. This number 15 is usually arrived at by dividing the population by the sample size needed for the research. For example if 5 people are needed from 75, you divide 75/5 to get 15. Every 15th person is then picked. This is not unlike the scenario described in the question.
2. Keeping promises
When a company markets to their employees first, they try to sell it to them on its benefits and advantages and how it generally works. The effect of this is that the employees go out to try to sell a product that they believe works. This is important because Employees are the ones that customers expect to keep the promise and will come back to it things don't work out.
On August 1, 2021, Trico Technologies, an aeronautic electronics company, borrows $21 million cash to expand operations. The loan is made by FirstBanc Corp. under a short-term line of credit arrangement. Trico signs a six-month, 9% promissory note. Interest is payable at maturity. FirstBanc Corp.’s year-end is December 31. Required: 1.-3. Record the necessary entries in the Journal Entry Worksheet below for FirstBanc Corp. Record the acceptance of note.
Answer:
On acceptance of note:
Debit Note receivable $21,000,000
Credit Cash $21,000,000
(Recognition of note receivable)
As at Dec 31:
Debit Interest receivable $787,500
Credit Interest revenue $787,500
(Recognition of interest accrual at Dec 31)
As at Feb 1 - collection of notes receivable:
Debit Cash $21,945,000
Credit Note receivable $21,000,000
Credit Interest receivable $945,000
(Collection of note receivable and interest)
Explanation:
Note is a promissory note with a written agreement made by the borrower to the lender (payee) to pay a certain, specific sum at a specified date.
Interest revenue on the note is calculated as: Principal x Interest Rate x Time
The total interest revenue is $21,000,000 x 9%/12 x 6 months = $945,000.
Monthly interest revenue is therefore $945,000 / 6 months = $157,500.
Total interest as at December 31, 2021 (Aug 1 - Dec 31): $157,500 x 5 months = $787,500.
1. In the past, Christopher Morrison’s tire dealership in Cincinnati sold an average of 3,200 tires every year. In the past 2 years, 900 and 1000, respectively, were sold in fall, 1500 and 1400 in winter, 400 and 350 in spring and 400 and 450. With a major expansion planned, Christopher forecasts sales next year to increase to 4,000 tires. What will be the demand during each of the FOUR seasons of next year?
Answer:
Explanation:
Seasonality = average of a season in the past two years/average per season
Average per year = 3200 tires
Average per season = 3200/4 = 800
Sales in Fall = 900 and 1000. Average sold in fall = (900 + 1000)/2 = 950
Sales in winter = 1500 and 1400. Average sold in winter = (1500 + 1400)/2 = 1450
Sales in spring = 400 and 350. Average sold in spring = (400 + 350)/2 = 375
Sales in Summer = 400 and 450. Average sold in Summer = (400 + 450)/2 = 425
Seasonality of Fall = average sold in fall/average per season = 950/800 = 1.1875
Seasonality of winter = 1450/800 = 1.8125
Seasonality of spring = 375/800 = 0.46875
Seasonality of summer = 425/800 = 0.53125
Sales next year = 4000 tires
Average per season = 1000 tires
Seasonal forecast = average per season * seasonality
Forecast for each season:
Fall: 1000×1.1875 = 1187.5 tires
Winter: 1000×1.8125 = 1812.5
Spring: 1000×0.46875 = 468.75
Summer: 1000×0.53125 = 531.25
Rounding off the forecast to whole numbers Fall will be 1188, Winter 1813 Spring 469 and Summer 531
The chief financial officer of Portland Oil has given you the assignment of determining the firm's marginal cost of capital. The present capital structure which is considered optimal, is: Book Value Market Value Debt $ 80 million $ 60 million Preferred Stock 30 million 30 million Common Equity 100 million 210 million Total $210 million $300 million The anticipated financing opportunities are these: Debt can be issued with a 12 percent before-tax cost. Preferred stock will be $100 par, carry a dividend of 15 percent, and can be sold to net the firm $85 per share. Common equity has a beta of 1.20, the return on the market is 8 percent, and the risk-free rate is 2 percent. The firm's tax rate is 40 percent. The company’s marginal cost of capital (MCC) is:
Answer:
9.645%
Explanation:
According to the scenario, computation of the given data are as follow:-
For calculating the marginal cost of capital we need to first calculate the following things which are given below:
Debt Weight = Market Value of Debt ÷ Total Market Value of Debt × 100
= $60 Million ÷ $300 Million × 100
= 20%
Preferred Stock Weight = Market Value of Preferred Stock ÷ Total Market Value of Preferred Stock × 100
=$30 Million ÷ $300 Million × 100
= 10%
Common Equity Weight = $210 Million ÷ $300 Million × 100 = 70%
Cost of Preferred Stock is
= Dividend ÷ Price
= 15 ÷ $85
= 17.65%
Cost of Equity is
= (Market Return - Risk Free Rate) × Beta + Risk Free Rate
= (8 - 2) × 1.20 + 2
= 6 × 1.20 + 2
= 9.2%
Now
Marginal Cost of Capital is
= Cost of Equity × Equity Weight + (1 - Tax Rate) × Debt Weight × Cost of Debt + Cost of Preferred Stock × Preferred Weight
= 9.2 × 0.70 + (1 - 0.40) × 0.20 × 12 + 17.65 × 0.10
= 6.44 + 1.44 + 1.765
= 9.645%
Seignorage is the ____________.A.increase in the price level when a government prints money to fund its budget deficit.B.difference between the cost of printing paper money and the value of the goods and services that the government can purchase with the newly printed money.C.difference between the amount of money a government prints and the tax revenue that the government brings in from individuals and businesses.D.costs that governments incur in printing money and minting coins.
Answer: difference between the cost of printing paper money and the value of the goods and services that the government can purchase with the newly printed money
Explanation: Seignorage is the revenue obtained by the difference between revenue earned from minting money and the costs of producing and distributing the notes. When the money it creates is worth more than it costs to produce it is noted as revenue.
Giada Foods reported $1,010 million in income before income taxes for 2021, its first year of operations. Tax depreciation exceeds depreciation for financial reporting purposes by $170 million. The company also had non-tax-deductible expenses of $108 million relating to permanent differences. The income tax rate for 2021 was 25%, but the enacted rate for years after 2021 is 30%. The balance in the deferred tax liability in the December 31, 2021, balance sheet is:
Answer:
$32.4 million
Explanation:
The computation of the balance in the deferred tax liability in the December 31, 2021, balance sheet is shown below:
Deferred tax liability is
= Tax depreciation exceeded depreciation for financial reporting purposes × enacted tax rate
= $108 million × 30%
= $32.4 million
Simply we multiplied the exceeded amount with the enacted rate so that the deferred tax liability could come
The Crown Howe accounting firm rents a skybox at Lucas Oil Field where the Indianapolis Colts plays their home games. The cost of the skybox for the season is $80,000 and includes 8 tickets to each game. The team plays 10 games a year at the arena. The most expensive non-luxury box seat is $200. After acquiring a new accounting client, the managing partner invites 5 business associates to watch a game in the firm skybox. What amount can Crown Howe deduct as an entertainment expense? a. $0 b. $1,000 c. $1,200 d. $2,400 e. $4,400
Answer:
The correct option is C) $1,200
Explanation:
Very simple to deduce. If the cost per game to the company is $200, then the total cost of that invitation is:
$200 x 6 people (Managing Partner + 5 Business Associates)
It's almost inconceivable that he would invite his associates to watch a game without being there to host them (all things being equal);
The managing partner is separate from the business. His income and expenses are therefore separate from that of the business. This is a principle taught in Accounting 101. If his income and expenses are separate from the business, then he should pay for services purchased and or enjoyed from the business.
Thus total entertainment expense deductible by Crown Howe equals $1,200.
Cheers!
g At the beginning of the year, manufacturing overhead for the year was estimated to be $1,033,125. At the end of the year, actual direct labor-hours for the year were 36,390 hours, the actual manufacturing overhead for the year was $972,000, and manufacturing overhead for the year was overapplied by $65,115. If the predetermined overhead rate is based on direct labor-hours, then the estimated direct labor-hours at the beginning of the year used in the predetermined overhead rate must have been:
Answer:
36,250 direct labor-hours
Explanation:
a. Underapplied (overapplied) manufacturing overhead = Actual manufacturing overhead - Manufacturing overhead applied
- $65,115 = $972,000 - Manufacturing overhead applied
Manufacturing overhead applied = $972,000 + $65,115 = $1,037,115
b. Manufacturing overhead applied = Predetermined overhead rate × Actual direct labor-hours
Therefore, we have:
Predetermined overhead rate = Manufacturing overhead applied ÷ Actual direct labor-hours = $1,037,115 ÷ 36,390 = $28.50 per direct labor-hour
c. Estimated direct labor-hours = Estimated total manufacturing overhead ÷ Predetermined overhead rate = $1,033,125 ÷ $28.50 = 36,250 direct labor-hours
Therefore, the estimated direct labor-hours at the beginning of the year used in the predetermined overhead rate must have been 36,250 direct labor-hours.
Cherokee Manufacturing Company established the following standard price and cost data: Sales price $ 12.00 per unit Variable manufacturing cost $ 7.20 per unit Fixed manufacturing cost $ 3,600 total Fixed selling and administrative cost $ 1,200 total Cherokee planned to produce and sell 2,000 units. Actual production and sales amounted to 2,200 units. Required Prepare the pro forma income statement in contribution format that would appear in a master budget. Prepare the pro forma income statement in contribution format that would appear in a flexible budget.
Answer:
Pro forma income statement in contribution format
Sales ( 2,200 units × $ 12.00) 26,400
Less Variable Costs :
Variable manufacturing cost ( 2,200 units × $ 7.20) (15,840)
Contribution 10,560
Less Expenses :
Fixed manufacturing cost (3,600)
Fixed selling and administrative cost (1,200)
Net Income 5,760
Explanation:
A flexed budget shows the Budgeted Costs and Revenues at Actual level of production rather than the Budgeted level of production.
A report is termed as the financial statement which shows the costs and revenues that are incurred by a firm. It also displays if a business is profitable or losing money over a given accounting period.
The financial statements, together with the pro forma financial statement, aids in the understanding of your company’s liquidity.
Pro forma income statement in contribution format
Sales[tex]( 2,200 \:units \times \$ 12.00)[/tex] 26,400
Less Variable Costs :
Variable manufacturing cost [tex]( 2,200 \:units \times \$ 7.20)[/tex] (15,840)
Contribution 10,560
Less: Expenses :
Fixed manufacturing cost (3,600)
Fixed selling and administrative cost (1,200)
Net Income 5,760
Therefore the net income is $5760
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Sheridan Company issues $280,000, 20-year, 10% bonds at 102. Prepare the journal entry to record the sale of these bonds on June 1, 2022. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Account Titles and Explanation Debit Credit Enter an account title enter a debit amount enter a credit amount Enter an account title enter a debit amount enter a credit amount Enter an account title enter a debit amount enter a credit amount
Answer:
Dr Cash 285,600
Cr Bonds payable 280,000
Cr Premium on bonds payable 5,600
Explanation:
Sheridan Company Journal entry
Dr Cash 285,600
Cr Bonds payable 280,000
Cr Premium on bonds payable 5,600
Par value of bonds ×Issue price of bonds
= $280,000 x 102%
=$280,000×1.02
= $285,600
Final answer:
The question relates to recording the journal entry for bonds sold over face value. Sheridan Company's journal entry for issuing $280,000, 20-year, 10% bonds at 102 would involve debiting Cash for $285,600, crediting Bonds Payable for $280,000, and crediting Premium on Bonds Payable for $5,600.
Explanation:
The subject of the student's question relates to corporate finance, specifically the issuance of bonds and the recording of such a transaction in the accounting records, which is a fundamental aspect of business finance. When Sheridan Company issues $280,000, 20-year, 10% bonds at 102, they are selling the bonds for more than their face value (par value). The journal entry to record this sale would involve debiting Cash for the proceeds received, crediting Bonds Payable for the face value of the bonds, and crediting Premium on Bonds Payable for the excess over the face value.
Journal Entry:
Cash (280,000 * 1.02) = $285,600 [Debit]Bonds Payable = $280,000 [Credit]Premium on Bonds Payable (285,600 - 280,000) = $5,600 [Credit]Thus, the journal entry on June 1, 2022, to record the sale of these bonds would be:
Debit Cash $285,600
Credit Bonds Payable $280,000
Credit Premium on Bonds Payable $5,600
A firm undertakes a five-year project that requires an initial capital investment of $100,000. The project is then expected to provide cash flow of $12,000 per year for the first two years, $50,000 in the third and fourth years, and $10,000 in the fifth year. The project has an end-of-life salvage value of $5,000. If the discount rate applied to these cash flows is 9.50 percent, to the nearest dollar, the net present value of this project is _____
Answer:
$3.356.86
Explanation:
The net present value is the present value of after tax cash flows from an investment less the amount invested.
NPV can be calculated using a financial calculator:
Cash flow in year 0 = -$100,000
Cash flow in year 1 and 2 = $12,000
Cash flow in year 3 and 4 = $50,000
Cash flow in year 5 = $10,000 + $5,000 = $15,000
I = 9.50%
NPV = $3.356.86
To find the NPV using a financial calacutor:
1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.
2. After inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction.
3. Press compute
I hope my answer helps you
On April 22, the board of directors for Cosmic Candy, Incorporated declared a cash dividend of $1 per share payable to stockholders of record on May 15. The dividends are paid on June 8. The company has 1,000 shares of stock outstanding. Prepare the appropriate journal entry that will be recorded on June 8.
Answer and Explanation:
The Journal entry is shown below:-
Dividends payable Dr, $1,000
(1,000 shares × $1)
To Cash $1,000
(Being payment of cash dividend is recorded)
Therefore, for recording the payment of cash dividend we simply debited the Dividends payable as decreases the liability and credited the cash account as it decreasing the assets.
Demand is projected to be 600 units for the first half of the year and 900 units for the second half. The monthly holding cost is $2 per unit, and it costs $55 to process an order. Assuming that monthly demand will be level during each of the six-month periods covered by the forecast (e.g., 100 per month for each of the first six months), determine an order size that will minimize the sum of ordering and carrying costs for each of the six-month periods
Answer:
74 units and 90 units.
Explanation:
So, we have the demand for the first six months, K1 = 600 units = 600 units/ 6months = 100 units; the demand for the second six months, K2 = 900 units = 900/6 = 150 units; holding cost,J = $2 per unit ; process cost, P = $55 per order.
The formula for determining an order size that will minimize the sum of ordering and carrying costs for each of the six-month periods is the Economic Order Quantity formula which is given below;
Economic Order Quantity = √[ (2 × K1 × P)/ J ].
(1). For the first six months;
Economic Order Quantity = √ [ ( 2 × 100 × 55)/ 2].
Economic Order Quantity = 74 units.
(2). For the second six months.
Economic Order Quantity = √ [ ( 2 × 150 × 55)/ 2].
Economic Order Quantity = 90 units.
Sanchez Company has 48,000 shares of 7% preferred stock of $100 par and 92,000 shares of $50 par common stock issued and outstanding. The following amounts were distributed as dividends: Year 1 $497,000 Year 2 $490,000 Year 3 $524,000 Determine the dividends per share for preferred and common stock for each year. Round the dividends per share to the nearest cent.
Answer:
Check Explanation.
Explanation:
The following parameters are given for dividends of three years;
Year 1 = $497,000, Year 2 = $490,000 Year 3 = $524,000.
The number of shares= 48,000 of 7%, preferred stock = $100 par and 92,000 shares of $50 par common stock issued and outstanding.
Therefore,
Year one:
=> Amount Distributed = $497,000.
=> Preferred dividend = 48,000 × 7% × $100 = 336,000.
=> Common dividend = 497,000 - 336,000 = 161,000.
=> Preferred divided per share = 336,000/ 48,000 = $ 7.
=> Common dividend = Common dividend/ 92,000 shares = 161,000/ 92,000 shares =$ 1.75.
Year Two:
=> Amount Distributed = $490,000.
=> Preferred dividend = 48,000 × 7% × $100 = 336,000.
=> Common dividend = 490,000 - 336,000 = 113,000.
=> Preferred divided per share = 336,000/ 48,000 = $ 7.
=> Common dividend = Common dividend/ 92,000 shares = 113,000/ 92,000 shares =$1.23.
Year Three:
=> Amount Distributed = $524,000.
=> Preferred dividend = 48,000 × 7% × $100 = 336,000.
=> Common dividend = $524,000 - 336,000 = 188,000.
=> Preferred divided per share = 336,000/ 48,000 = $7.
=> Common dividend = Common dividend/ 92,000 shares = 188,000/ 92,000 shares =$2.04
At the beginning of the current period, Griffey Corp. had balances in Accounts Receivable of $239,000 and in Allowance for Doubtful Accounts of $9,000 (credit). During the period, it had net credit sales of $898,000 and collections of $785,000. It wrote off as uncollectible accounts receivable of $7,000. However, a $4,300 account previously written off as uncollectible was recovered before the end of the current period. Uncollectible accounts are estimated to total $24,700 at the end of the period. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) (a) Prepare the entries to record sales and collections during the period. (b) Prepare the entry to record the write-off of uncollectible accounts during the period. (c) Prepare the entries to record the recovery of the uncollectible account during the period. (d) Prepare the entry to record bad debt expense for the period.
The following data were accumulated for use in reconciling the bank account of Creative Design Co. for August 20Y6: Cash balance according to the company’s records at August 31, $20,870. Cash balance according to the bank statement at August 31, $37,600. Checks outstanding, $23,375. Deposit in transit not recorded by bank, $7,500. A check for $100 in payment of an account was erroneously recorded in the check register as $1,000. Bank debit memo for service charges, $45. Journalize the entries that should be made by the company that (a) increase cash and (b) decrease cash.
Answer and Explanation:
The journal entries are shown below:
a. For increase in cash
Cash Dr $900 ($1,000 - $100)
To Account payable $900
(Being the increase in cash is recorded)
For recording this we debited the cash as it increased the assets and credited the account payable as it reduced the liabilities
b. For decrease in cash
Miscellaneous expense Dr $45
To cash $45
(Being the decrease in cash is recorded)
For recording this we debited the miscellaneous expense as it increased the expenses and credited the cash as it reduced the assets
A company wants to set up operations in a country with the following corporate tax rate structure: Taxable Income Tax Rate <$50,000 15% $50,000 - $75,000 25% $75,000 - $100,000 34% >$100,000 39% Therefore, a taxable income of $60,000 would result in taxes due of $50,000*0.15 + ($60,000-$50,000)*0.25 = $50,000*0.15 + $10,000*0.25 = $10,000 If the compay expects gross revenues of $500,000, $450,000 in total costs, $30,000 in allowable tax deductions and $15,000 in a one-time business start-up credit, how much should the company expect to pay in taxes?
Answer:The company should pay $3,000 in taxes
Explanation:
Taxable Income= Gross Revenues -Total cost- Allowable Deduction
=$ 500,000 –$ 450,000 - $30,000= $20,000
Gross Tax Liability=Given that the taxable income and tax rate as
<$50,000--- 15%
$50,000 - $75,000 ----25%
$75,000 - $100,000----34%
>$100,000----- 39%
Our calculate taxable income is less than <50,000, ie $20,000 from our Gross revenue
The gross tax liability, will now be 15% of $20,000=0.15 x 20,000= $3000
The company should pay $3,000 in taxes
To calculate the company's tax liability, we subtract allowable deductions and credits from the gross revenue to determine the taxable income. With a taxable income of $455,000, the company should expect to pay $177,450 in taxes.
Explanation:To calculate the taxes that the company should expect to pay, we need to determine its taxable income first. Taxable income is calculated by subtracting allowable tax deductions and credits from the gross revenue. In this case, the gross revenue is $500,000 and the allowable deductions and credits are $30,000 and $15,000 respectively. Therefore, the taxable income would be $500,000 - $30,000 - $15,000 = $455,000.
Next, we need to find the corresponding tax rate for this taxable income. The tax rates for the given corporate structure are:
- <$50,000: 15%
- $50,000 - $75,000: 25%
- $75,000 - $100,000: 34%
- >$100,000: 39%
Since the taxable income falls into the >$100,000 range, the tax rate would be 39%. Therefore, the company should expect to pay $455,000 * 0.39 = $177,450 in taxes.
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Orton Corporation, which has a calendar year accounting period, purchased a new machine for $40,000 on April 1, 2006. At that time Orton expected to use the machine for nine years and then sell it for $4,000. The machine was sold for $22,000 on Sept. 30, 2011. Assuming straight-line depreciation, no depreciation in the year of acquisition, and a full year of depreciation in the year of retirement, the gain to be recognized at the time of sale would be
To calculate the gain or loss to be recognized at the time of sale, subtract the accumulated depreciation from the selling price. In this case, there is a loss of $6,888.89 to be recognized.
Explanation:To calculate the gain to be recognized at the time of sale, we need to calculate the accumulated depreciation for the machine and compare it to the selling price. The machine was purchased for $40,000 and had an expected useful life of 9 years, so the annual depreciation expense would be $40,000 / 9 = $4,444.44.
Since the machine was sold on September 30, 2011, after 6.5 years (April 1, 2006, to September 30, 2011), the accumulated depreciation would be $4,444.44 * 6.5 = $28,888.89.
The gain to be recognized at the time of sale can be calculated by subtracting the accumulated depreciation from the selling price: $22,000 - $28,888.89 = -$6,888.89. Since the result is negative, it means that there is a loss of $6,888.89 to be recognized at the time of sale.
Jack's Construction Co. has 80,000 bonds outstanding that are selling at par value. Bonds with similar characteristics are yielding 8.5 percent. The company also has 4 million shares of common stock outstanding. The stock has a beta of 1.1 and sells for $40 a share. The U.S. Treasury bill is yielding 4 percent and the market risk premium is 8 percent. Jack's tax rate is 35 percent. What is Jack's weighted average cost of capital?
Answer: 10.8%
Explanation:
To calculate the weighted average cost of capital we use the following formula,
WACC = Ve/Vt * Re + Vd/Vt * Rd( 1 - tax rate)
Where,
Ve is the value of equity in the company
Vt is the total value of the company gotten by adding debt to Equity.
Re is the cost of Equity
Vd is the total value of debt in the company
Rd is the cost of debt
From the question above we have every variable except the Cost of Equity.
We can calculate that using the CAPM formula which is,
Re = rF + b(rM - rF)
Where,
rF is the risk free rate
b is beta
rM - rF is the market premium.
Plugging in the figures we have,
= 4% + 1.1 ( 8%)
= 12.8%
Now that we have the cost of debt we can go back to the original formula but first the value of Equity and debt need to be ascertained,
Value of debt = 80,000 * $1,000 ( par value)
= $80,000,000
Value of Equity = 4,000,000 * 40
= $160,000,000
Adding them up we have,
= $160 m + $80m
= $240m
WACC = Ve/Vt * Re + Vd/Vt * Rd( 1 - tax rate)
WACC = (160/240 * 12.8%) + (80/240 * 8.5%( 1 - 0.35)
WACC = 10.8%
Jack's weighted average cost of capital is 10.8%.
For each independent situation below, prepare the appropriate journal entry for the retirement. a) Noble Corporation retired $130,000 face value, 12% bonds on June 30, 2018, at a price of 102. The carrying (book) value of the bonds at the retirement date was $107,500. The bonds pay semiannual interest and the interest payment due on June 30, 2018, has been made and recorded. b) Vargas, Inc. retired $150,000 face value, 12.5% bonds on June 30, 2018 at a price of 96. The carrying (book) value of the bonds at the redemption date was $151,000. The bonds pay semi-annual interest and the interest payment due on June 30, 2018, has been made and recorded.
Answer: kindly check Explanation
Explanation:
DISCOUNT:
Carrying value : 107,500
Face value: (130,000)
Discount : (22500)
PROFIT / LOSS:
Carrying value: 107,500
Retirement price : (132,600) [130,000 × 102]
Loss : (25,100)
June 30, 2018 Bonds payable 130,000
---------------------- Loss on retirement 25100
- - - - - - - - - - Discount on bond payable 22,500
- - - - - - - - - - - - - - - - - - - - - - Cash 132,600
Record redemption of bond at loss
B.) PREMIUM :
Carrying value : 151,000
Face value: (150,000)
Discount : 1000
CALCULATE PROFIT/LOSS:
Carrying value: 151,000
Retirement price : (147000) [150,000 × 98]
Profit : (4000)
June 30, 2018 Bonds payable 150,000
---------------------- Gain on redemption 4000
- - - - - - - - - - - - - - - premium on bond 1000
- - - - - - - - - - - - - - - - - - - - - - Cash 147,000
Record redemption of bond at gain
You work for a bank as a business data analyst in the credit card risk-modeling department. Your bank recently conducted a bold experiment: over a short time interval three years ago, it quietly issued 600 credit cards to everyone who applied, regardless of their credit risk.
After three years, 150, or 25%, of card recipients defaulted – they failed to pay back at least some of the money they owed. However, the bank collected very valuable proprietary data that it can now use to optimize its future card-issuing process.
The bank initially collected six pieces of data about each person.
a. Age
b. Years at current employer
c. Years at current address
d. Income over the past year
e. Current credit card debt, and
f. Current automobile debt
One of the largest losses in history from unauthorized securities trading involved a securities trader for the French bank, Societe Generale (SCGLY). The trader was able to circumvent internal controls and create more than $7 billion in trading losses in six months. The trader apparently escaped detection by using knowledge of the bank's internal control systems learned from a previous back-office monitoring job. Much of this monitoring involved the use of software to monitor trades. In addition, traders were usually kept to tight trading limits. Apparently, these controls failed in this case. Answer the following True or False questions about Societe Generale's internal controls. These will assist you in determining the weaknesses. 1. The loss could have been avoided with a number of internal controls. 2. Required vacation time may have alerted managers to the hidden losses. 3. If traders have access to the monitoring software, then the separation of duties control is violated. 4. The trader was not under managerial oversight.
Answer: 1.true, 2.true , 3.true, 4.true
Explanation:
The Societe Generale trading losses is an eye opener that shows how poor management of the internal control can lead to huge consequences and loses.
The accumulated losses could have been avoided with proper segregation of duties in the internal controls with supervisors relating with the traders regarding their trades which would not have allowed the trader,Kerviel to manipulate the monitoring software due to his extensive knowledge from his previous job. If traders have free access to the monitoring software, then the separation of duties control is violated.
---Also, If the trader had an required vacation time, he would have been vacant in his duties and maybe enabling detection of fraud by management although we cannot conclude he had note gone for his vacation and returned before perpetuating the act
---In addition if the trader was able to fraud the company over a span of 7 months then there , then he was not under managerial oversight else he would have been caught and his acts rectified on time.
1. The loss could have been avoided with a number of internal controls.---TrUe
2.. Required vacation time may have alerted managers to the hidden losses
3. If traders have access to the monitoring software, then the separation of duties control is violated---TrUe
4. The trader was not under managerial oversight-- true
Answer:
The loss could have been avoided with a number of internal controls.
True
Required vacation time may have alerted managers to the hidden losses.
True
If traders have access to the monitoring software, then the separation of duties control is violated.
True
The trader was not under managerial oversight.
True
Scenario: Trader's Paradise Trader's Paradise is a global merchant that sells a variety of products. The company operates in forty-eight different countries (some developed, some developing) and some former communist countries. The company faces substantial risks given the differing conditions in foreign exchange markets. If Trader's Paradise purchases euros expecting the value to rise and generate a profit for the company, it is engaging in currency ________.
Answer: Hedging
Explanation: Trader's Paradise is engaging in currency hedging when it purchases one currency with hopes to profit from its rise in value. Hedging helps reduce one's exposure to risks. Currency hedging can be defined as the process of entering into a financial contract or arrangement in order to protect against unexpected, expected or anticipated price movements or interest rates in currencies. Predictability of exchange rates however, reduces the need for currency hedging.
Becky had net sales (all on account) in 2020 of $8,000,000. At December 31, 2020, before adjusting entries, the balances in selected accounts were:
accounts receivable $1,000,000 debit, and allowance for doubtful accounts $2,000 debit.
Becky estimates that 3% of its accounts receivable will prove to be uncollectible.
What is the net amount expected to be collected of the receivables reported on the financial statements at December 31, 2020?
Answer:
$970,000
Explanation:
Final answer:
To calculate the expected net collection of receivables, you subtract the adjusted allowance for doubtful accounts, which is estimated at 3% of accounts receivable, from the total accounts receivable. After adjusting the existing allowance balance, the net expected to be collected is $970,000.
Explanation:
The computation of the net amount expected to be collected involves estimating the uncollectible portion of accounts receivable. Becky's company uses an allowance method based on a percentage to account for doubtful accounts. First, we calculate the estimated amount that will not be collected.
To find the uncollectible amount, we take 3% of the accounts receivable balance:
0.03 × $1,000,000 = $30,000.
Next, we adjust the allowance for doubtful accounts. Since there is already a $2,000 debit, the additional amount needed to reach the estimated uncollectible amount of $30,000 will be:
$30,000 - $2,000 = $28,000. We would record this as a bad debt expense.
Finally, to determine the net amount expected to be collected, we subtract the adjusted allowance for doubtful accounts from the total accounts receivable :
$1,000,000 - $30,000 = $970,000.
Thus, Becky's company expects to collect a net amount of $970,000 from its receivables at the end of 2020.
A company paid $517,000 to purchase equipment and $16,700 to have the equipment delivered to and installed in the company's production facilities. The equipment is expected to be used a total of 29,700 hours throughout its estimated useful life of seven years. The estimated residual value of the equipment is $6,700. The company began using the equipment on May 1, 2018. The company has an October 31, 2018 year-end. It used the equipment for a total of 12,900 hours between May 1 and October 31, 2018. Using the units-of-production method, what amount of depreciation expense would the company report in the income statement prepared for the year-ended October 31, 2018?
Answer:
Using the units-of-production method, the amount of depreciation expense would the company report in the income statement prepared for the year-ended October 31, 2018 = $ 228899
Explanation:
Given
Acquisition Cost of Equipment = $ 517,000+ $ 16700= $ 533,700
Total units of production= 29,700 hours
Residual Value = $ 6700
Units of Production= 12,900 hours
Formula:
Depreciation per unit= (Cost -Salvage value) / Total units of production* Units of Production
Depreciation per unit= ($ 533,700 - 6700/ 29700)*12900
Depreciation per unit=($ 52,7000 / 29700)*12900
Depreciation per unit=( 17.744)*12900
Depreciation per unit= 228898.98= $ 228899
As units of production are given we do not need to calculate it for half year. The depreciation is calculated for units of production.
Brad expects interest rates to increase and purchases a put option on Treasury bond futures with an exercise price of 97-00. The premium paid for the put option is 3-00. Just prior to the expiration date, the price of the Treasury bond futures contract is valued at 89-00. Brad exercises the option and closes out the position by purchasing an identical futures contract. Brad's net gain from this speculative strategy is $____, and his return on his investment is about _______ percent.
Answer: Net Gain $5,000
Return on Investment = 167%
Explanation:
Profits are made on Puts if the spot price (current price) is less than the exercise price. Which is why the equation is such,
Profit equation of put option = Max ( exercise price - spot price, 0) - Premium paid.
The formula shows that there is no profit if the spot price climbs higher than the Exercise price as the option will not be exercised. In other words of the spot price is higher than the Exercise price, the option will not be exercised hence $0 profit. If the Exercise price is higher though then it will be exercised and the gain will be the exercise price minus the spot price.
Using that formula his gain was,
= 97 - 89 - 3
= $5
Treasury bond futures contracts are usually sold at a minimum of 1,000 bonds so assuming Brad got 1 then his gain would be,
= 5 * 1,000
= $5,000
His return on investment would be,
= Net profit / Initial investment
Bear in mind that his Net Investment would be the premium times the number of bonds
= 1,000 * 3
= $3,000
Return on Investment = 5,000/3,000
Return on Investment = 167%
Cypress Corporation, a calendar year end corporation, has an AMT credit carryforward from 2018 (the credit arose in 2017) in the amount of $43,000. In 2019, Cypress has $170,000 of taxable income. What is the amount of refund Cypress can expect to receive from its 2019 tax return filing?
Answer: $3,650
Explanation:
Alternative Minimum Tax ( AMT) can be used to lower the amount of taxes payable.
It is created when the tax payable is lower than AMT, it is carried forward and can reduce taxes Payable in future by the amount of the AMT credit.
The current AMT cycle of 2017 - 2022 allows for AMT credit to be refunded up to 50% of the excess of AMT credit over the normal tax liability with 100% being allowed in 2021.
The US corporate tax rate for 2019 is 21%.
Taxable Income = $170,000
Tax liability for 2019 = $170,000*21%
=$35,700
With a current tax liability of $35,700 being less than the AMT of $43,000, AMT will offset it.
Solving for yhe excess AMT Credit we have,
Excess AMT credit = AMT credit carryforward - Tax liability in 2019
= 43,000 - 35,700
= $7,300
The AMT Credit refunded can be calculated as,
AMT credit refunded = 50%*Excess AMT credit
= 50%*7,300
= $3,650
$3,650 is the amount of refund Cypress can expect to receive from its 2019 tax return filing.