Answer:
$41.14
Explanation:
Declared dividend per share = $1.20
Tax on declared dividend per share = $1.20 * 28% = $0.3360
Net Declared dividend per share = $1.20 - $0.3360 = $ 0.864
Firm's closing stock price per share today = $42
Opening share price tomorrow = $42 - $0.8640 = $41.1360, approximately $41.14.
Final answer:
An investor would be willing to pay for a share of stock in Babble, Inc. based on the present discounted value of the expected dividends. Assuming a PDV of total profits at $51.3 million for 200 shares, the price per share is calculated to be approximately $256,500.
Explanation:
To calculate what an investor is willing to pay for a share of stock in Babble, Inc., we need to compute the present value of the future dividends, as these are the profits that investors will receive. Since the company will be disbanded in two years, we will not consider any growth beyond that point, and instead, we will focus on the present value of the dividends to be received over the next two years.
Firstly, one must find the present value (PV) of each dividend payment separately using a suitable discount rate, which reflects the rate of return investors require. Generally, the discount rate can be considered equivalent to the opportunity cost of capital or the expected return rate provided by other investments with a similar risk profile. However, the question does not provide the discount rate, so we'll assume that it has been calculated elsewhere.
Once the present discounted value (PDV) for each of the dividend amounts has been found, the sum of these represents the total PDV of the future dividends payable to the company's shareholders. The PDV of total profits must be divided by the number of shares to find the price per share. If the PDV of the profits is $51.3 million and there are 200 shares, then the price per share would be:
PV of total profits / Number of shares = $51.3 million / 200
= $256,500 per share.
This calculation gives the price that an investor might be willing to pay for a share of Babble, Inc., considering the dividends they would receive.
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.
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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Pottery Ranch Inc. has been manufacturing its own finials for its curtain rods. The company is currently operating at 100% of capacity, and variable manufacturing overhead is charged to production at the rate of 70% of direct labor cost. The direct materials and direct labor cost per unit to make a pair of finials are $4 and $5, respectively. Normal production is 30,000 curtain rods per year. A supplier offers to make a pair of finials at a price of $12.95 per unit. If Pottery Ranch accepts the supplier’s offer, all variable manufacturing costs will be eliminated, but the $45,000 of fixed manufacturing overhead currently being charged to the finials will have to be absorbed by other products.
Prepare an incremental analysis to decide if Pottery Ranch should buy the finials.
Answer and Explanation:
The preparation of the incremental analysis is presented below
Particulars Make Buy net Income Increase or (decrease)
Direct material $120,000 - $120,000
[$4 × 30,000]
Direct labor $150,000 - $150,000
[$5 × 30,000]
variable manufacturing $105,000 - $105,0000
[$150,000 × 70% ]
Fixed manufacturing $45,000 $45,000 -
Purchase price - 373,560 -$373,560
[30,000 × $12.95 ]
Total annual cost $420,000 $433,500 -$13,500
There is a decrement of $13,500 so it should be make decision rather buying decision
Your bosses at the residential contracting firm has asked you to help them decide about whether they should keep a particular item of construction equipment or accept an offer for sale. The equipment cost $126,000 new and it has a useful life of eight years.The firm has been using a double declining balance (DDB) method of depreciation and this is the third year of ownership. Your firm has received an offer to purchase the item (at the end of this third year of ownership) for $60,000. However, your bosses only will sell if doing so will make a profit. To help your bosses decide whether or not they should sell the equipment, calculate the remaining book value at the end of year 3 (the anticipated time of sale).
Answer:
The remaining book value at the end of year 3 is $53,156.25 < Selling price
The Bosses should sell the equipment.
Explanation:
Under the straight-line method, useful life is 8 years, so the asset's annual depreciation will be 12.5% of the Depreciable cost.
Depreciable cost = Total asset cost - salvage value = $126,000-$0 = $126,000
Under the double-declining-balance method the 12.5% straight line rate is doubled to 25% - multiplied times the Depreciable cost's book value at the beginning of the year.
In the first year, depreciation expense = 25% x $126,000 = $31,500
At the beginning of the second year, the Depreciable cost's book value is $126,000-$31,500 = $94,500
Depreciation expense in second year = 25% x $94,500 = $23,625
At the beginning of the year 3, the Depreciable cost's book value is $94,500-$23,625 = $70,875
Depreciation expense in second year = 25% x $70,875 = $17,718.75
Accumulated depreciation at the end of year 3 = $31,500 + $23,625 + $17,718.75 = $72,843.75
The remaining book value at the end of year 3 = Total asset cost - Accumulated depreciation at the end of year 3 = $126,000 - $72,843.75 = $53,156.25 < $60,000 (Selling price)
The Bosses should sell the equipment.
In January of year 0, Justin paid $4,800 for an insurance policy that covers his business property for accidents and casualties. Justin is a calendar-year taxpayer who uses the cash method of accounting.
1. What amount of the insurance premium may Justin deduct in year 0 in the following scenario?
a) The policy covers the business property from April 1 of year 0 through March 31 of year 1.
Answer:
$4,800
Explanation:
The total amount of the premium can be deducted under the 12-month rule. The reason for this is that the insurance does not cover more than 12 months and can not cover any time that is outside the next year end.
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%
Internal Controls System Availability Terms a. Activities required to keep a firm running during a period of displacement or interruption of normal operations b. A process that identifies significant events that may threaten a firm’s operations and outlines the procedures to ensure that the firm will resume operations if such events occur c. A service model in which a third-party service provider offers computing resources, including hardware and software applications, to cloud users over the Internet, and the service provider charges on a per-user basis d. A clearly defined and documented plan that covers key personnel, resources including IT infrastructure and applications, and actions required to be carried out in order to continue or resume the systems for critical business functions e. Using redundant units to provide a system with the ability to continue functioning when part of the system fails f. A device using battery power to enable a system to operate long enough to back up critical data and shut down properly during the loss of power
Answer:
A. Business Continuity Management (BCM): the activities required to keep a firm running during a period of displacement or interruption of normal operations.
B. Disaster Recovery Planning(DRP): a process that identifies significant events that may threaten a firm’s operations and outlines the procedures to ensure that the firm will resume operations if such events occur.
C. Cloud computing: a service model in which a third-party service provider offers computing resources, including hardware and software applications, to cloud users over the Internet, and the service provider charges on a per-user basis.
D. Disaster Recovery Planning (DRP): a clearly defined and documented plan that covers key personnel, resources including IT infrastructure and applications, and actions required to be carried out in order to continue or resume the systems for critical business functions.
E. Fault tolerance: using redundant units to provide a system with the ability to continue functioning when part of the system fails.
F. Uninterruptible power supply: a device using battery power to enable a system to operate long enough to back up critical data and shut down properly during the loss of power.
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%.
Turney Company produces and sells automobile batteries, the heavy-duty HD-240. The 2020 sales forecast is as follows. Quarter HD-240 1 5,500 2 7,420 3 8,260 4 10,130 The January 1, 2020, inventory of HD-240 is 2,200 units. Management desires an ending inventory each quarter equal to 40% of the next quarter’s sales. Sales in the first quarter of 2021 are expected to be 25% higher than sales in the same quarter in 2020. Prepare quarterly production budgets for each quarter and in total for 2020.
Answer:
Explanation:
1 2 3 4 5
sales 15500 7420 8260 10130 19220
Inventory 2200
Ending
inventory 2968 3304 4052 7688
Production 16,268 7756 9008 13766
Total production = 46,798
Workings
Ending inventory
Quarter 1 =40%*7420
Quarter 2 40%*8260= 3304
Quarter 3 40%*10130=4052
Quarter 4 40%* 19220=7688
Production formula
Quarterly sales + ending inventory - opening inventory
Please note that the ending inventory of a quarter is the opening inventory of the next quarter
Quarterly production budgets for Turney Company in 2020: Q1 - 6,268 units, Q2 - 7,756 units, Q3 - 8,008 units, Q4 - 7,091 units.
To prepare quarterly production budgets for Turney Company for the year 2020, we need to consider the forecasted sales, desired ending inventory, and the beginning inventory for each quarter. Here's how we can calculate the production for each quarter:
1. Quarter 1 (Q1):
- Forecasted sales: 5,500 units
- Desired ending inventory for Q2: 40% of Q2 sales (7,420 units * 40% = 2,968 units)
- Beginning inventory for Q1 (January 1, 2020): 2,200 units
Production needed in Q1:
= Forecasted sales (5,500 units) + Desired ending inventory for Q2 (2,968 units) - Beginning inventory for Q1 (2,200 units)
= 5,500 + 2,968 - 2,200
= 6,268 units
2. Quarter 2 (Q2):
- Forecasted sales: 7,420 units
- Desired ending inventory for Q3: 40% of Q3 sales (8,260 units * 40% = 3,304 units)
- Beginning inventory for Q2: Ending inventory from Q1 (2,968 units)
Production needed in Q2:
= Forecasted sales (7,420 units) + Desired ending inventory for Q3 (3,304 units) - Beginning inventory for Q2 (2,968 units)
= 7,420 + 3,304 - 2,968
= 7,756 units
3. Quarter 3 (Q3):
- Forecasted sales: 8,260 units
- Desired ending inventory for Q4: 40% of Q4 sales (10,130 units * 40% = 4,052 units)
- Beginning inventory for Q3: Ending inventory from Q2 (3,304 units)
Production needed in Q3:
= Forecasted sales (8,260 units) + Desired ending inventory for Q4 (4,052 units) - Beginning inventory for Q3 (3,304 units)
= 8,260 + 4,052 - 3,304
= 8,008 units
4. Quarter 4 (Q4):
- Forecasted sales: 10,130 units
- Desired ending inventory for Q1 (2021): 40% of Q1 (2021) sales (25% higher than Q1, 2020) (10,130 units * 25% * 40% = 1,013 units)
- Beginning inventory for Q4: Ending inventory from Q3 (4,052 units)
Production needed in Q4:
= Forecasted sales (10,130 units) + Desired ending inventory for Q1 (2021) (1,013 units) - Beginning inventory for Q4 (4,052 units)
= 10,130 + 1,013 - 4,052
= 7,091 units
In total for 2020, the production budget is as follows:
- Q1: 6,268 units
- Q2: 7,756 units
- Q3: 8,008 units
- Q4: 7,091 units
These quarterly production budgets ensure that the desired ending inventory levels are met while fulfilling forecasted sales requirements throughout the year 2020.
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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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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.
Lindsay Electronics, a small manufacturer of electronic research equipment, has approximately 7,000 items in its inventory and has hired Joan Blasco-Paul to manage its inventory. Joan has determined that 10% of the items in inventory are A items, 35% are B items, and 55% are C items. She would like to set up a system in which all A items are counted monthly (every 20 working days), all B items are counted quarterly (every 60 working days), and all C items are counted semiannually (every 120 working days). How many items need to be counted each day?
Answer:
The items need to be counted each day are 108 items
Explanation:
To calculate how many items need to be counted each day we would have to calculate first the amount of items according to its percentages as follows:
A items are 0.1 * 7000 = 700
B items are 0.35 * 7000 = 2,450
C Items are 0.55 * 700 = 3,850
Therefore, to calculate how many items need to be counted each day we would have to make the following calculation:
Items to be counted everyday= 700/20 + 2450/60 + 3850/120 = 108 items
In order to determine how many items need to be counted each day, we calculate the number of A, B, and C items in the inventory and divide them by the corresponding counting frequency. Approximately 35 A items, 40.83 B items, and 32.08 C items need to be counted each day.
Explanation:In order to determine how many items need to be counted each day, we need to calculate the number of A, B, and C items in the inventory. Since 10% of the items are A items, we can multiply the total number of items (7,000) by 0.10 to find that there are 700 A items. Similarly, there are 35% (or 0.35) of B items, which is 2,450 items, and 55% (or 0.55) of C items, which is 3,850 items. Now, let's calculate the number of items that need to be counted each day for each category.
For A items, counting is done monthly, so we divide 700 by the number of working days in a month (20) to get 35 A items that need to be counted each day. Similarly, for B items, counting is done quarterly, so we divide 2,450 by the number of working days in a quarter (60) to get approximately 40.83 B items that need to be counted each day. Lastly, for C items, counting is done semi-annually, so we divide 3,850 by the number of working days in half a year (120) to get approximately 32.08 C items that need to be counted each day.
Therefore, a total of 107.91 items need to be counted each day.
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In the new product development process, ideas that pass the idea screening step continue through ________. Strong concepts proceed to ________. A. marketing strategy development; business analysis B. product concept development; marketing strategy development C. product concept development; product development D. product concept development; business analysis E. marketing strategy development; product concept development
Answer:
B. product concept development; marketing strategy development
Explanation:
Product concept development is the stage at which a lot of product ideas are generated, and new product are screened with the purpose of identifying good ideas and discarding poor ones on time. The new product concepts are then tested at this stage with a group of target consumers in order to discover the concepts with strong consumer appeal.
After product concept development, strong concepts proceed to marketing strategy development which, based on the product concept, is the stage at which an initial marketing strategy for a new product are designed.
In the new product development process, after an idea passes the idea screening, it enters the product concept development phase. If it is a strong concept, it then proceeds to business analysis.
Explanation:In the new product development process, once an idea goes through the idea screening stage, it moves into product concept development. During this phase, the idea turns into a product concept where it is fully detailed with all its features and benefits. Then, if the concept is strong and promising, it proceeds to the next stage, which is business analysis. Here, the feasibility of the product concept is assessed in relation to the company's business model and market dynamics.
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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.
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!
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.
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%
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%
mz technologies’ dividend growth is expected to decline gradually. for the next four years, the growth is expected to be 20%. in years 5,6 and 7 it is expected to grow at 16%, 12% and 8%. during year 8 and beyond, dividends are expected to grow at 5% for perpetuity. assume the last dividend paid was $1 (a moment ago) and the required rate of return is 10%. what is the current price?
Answer:
$9.00
Explanation:
Note: See the attached file for the calculation of PV of year 1 to 7 dividends.
Price at year 7 = year 8 dividend / (Rate of return - Perpetual growth rate) = (0.5747245056 * 1.05) / (10% - 5%) = $12.0692146176
PV of price at year 7 = $12.0692146176 / (1.10)^7 = $6.19341546169015
Current price = Sum of PV of years 1 to 7 dividends + PV of price at year 7 = $2.81096656749202 + $6.19341546169015 = $9.00
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.
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.
Westshore Diagnostics has 28,000 shares of common stock outstanding and the price is per share of $71 . The rate of return on their stock is 13.40 percent. Westshore Diagnostics has 6,900 shares of 7.00 percent preferred stock outstanding at a price of $91.00 per share. The preferred stock has a par value of $100. The outstanding debt has a total face value of $380,000 and currently sells for 107 percent of face. The yield to maturity on the debt is 7.84 percent. What is the firm's weighted average cost of capital if the tax rate is 39 percent?
Answer :
Weighted average capital cost = 11.05%
Explanation :
As per the data given in the question,
(a) (b) (c = a × b)
Amount per share Bond price or share price Market value Weight (c/Total)
Debt $380,000 107% $406,600 13.45%
Preferred stock 6,900 $91 $627,900 20.77%
Common stock 28,000 $71 $1,988,000 65.77%
Total $3,022,500
Now the WACC is
Particulars Cost Weight Weighted cost
Debt 4.78% 13.45% 0.64%
Preferred stock 7.69% 20.77% 1.60%
Common stock 13.40% 65.77% 8.81%
WACC 11.05%
Working Notes:
Cost of debt = 7.84% × (1 - 39%)
= 4.78%
Cost of preferred stock = Dividend ÷ current price
=(7% × 100) ÷ 91
= 0.07692
= 7.69%
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
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.
Booker Corporation had the following comparative current assets and current liabilities: Dec. 31, 2019 Dec. 31, 2018 Current assets Cash $60,000 $30,000 Short-term investments 40,000 10,000 Accounts receivable 55,000 95,000 Inventory 110,000 90,000 Prepaid expenses 35,000 20,000 Total current assets $300,000 $245,000 Current liabilities Accounts payable $140,000 $110,000 Salaries payable 40,000 30,000 Income tax payable 20,000 15,000 Total current liabilities $200,000 $155,000 During 2019, credit sales and cost of goods sold were $750,000 and $400,000, respectively.
Compute the following liquidity measures for 2019.
1. Current ratio
2. Working capital
3. Acid-test ratio
4. Accounts receivable turnover times
5. Inventory turnover times
Answer:
1. $1.5
2. $95,000
3. 5.28
4. $75,000
5. $100,000
Explanation:
The computation of liquidity measures for 2019 is shown below:-
Computation of the different Liquidity Measures
1. Current Ratio = Current assets ÷ Current liabilities
= $300,000 ÷ $200,000
= $1.5
2. Working Capital for 2019 = Current assets ÷ Current liabilities
= $300,000 - $200,000
= $100,000
Working Capital for 2018 = $245,000 - $155,000
= $90,000
Average Working Capital = (Opening Working capital + Closing Working capital) ÷ 2
= ($90,000 + $100,000) ÷ 2
= $95,000
3. Acid Test Ratio = Cash and cash equivalents + Short Term Investment + Current Receivables ÷ Current liabilities
= ($60,000 + $40,000 + $55,000) ÷ $200,000
= 5.28
4. Accounts receivable turnover times
Accounts Receivable Turnover Times = Net Credit Sales ÷ Average Accounts Receivable
= $750,000 ÷ $75,000
= 10
Average Accounts Receivable = ($55,000 + $95,000) ÷ 2
= $75,000
5. Inventory Turnover Times = Cost of Goods Sold ÷ Average Inventory
= $400,000 ÷ $100,000
= 4
Average Inventory = ($110,000 + $90,000) ÷ 2
= $100,000
therefore we have applied the above formula.
The liquidity measures for Booker Corporation in 2019 are: Current ratio of 1.5, Working capital of $100,000, Acid-test ratio of 0.95, Accounts receivable turnover times of 10 and Inventory turnover times of 4.
Explanation:The liquidity measures required to be calculated are:
Current ratio is calculated by dividing total current assets by total current liabilities. As per information provided, current ratio for 2019 is $300,000 / $200,000 = 1.5.Working capital, is calculated by subtracting total current liabilities from total current assets. Working capital for 2019 is $300,000 - $200,000 = $100,000.The acid-test ratio or quick ratio, is calculated by subtracting inventories from current assets and then dividing by current liabilities. It is ($300,000 - $110,000) / $200,000 = 0.95 for 2019.Accounts receivable turnover times is calculated by dividing credit sales by average accounts receivable. Here it is $750,000 / (($55,000 + $95,000)/2) = 10 times in 2019.Inventory turnover times is calculated by dividing cost of goods sold by average inventory. It is $400,000 / (($110,000 + $90,000)/2) = approximately 4 times in 2019.Learn more about Liquidity Measures here:https://brainly.com/question/16752845
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Cameron Blair, a friend from college, asks you to form a partnership to import fragrances. Since graduating, Blair has worked for the Spanish Embassy, developing important contacts among government officials. Blair believes she is in a unique position to capitalize on an important market. With expertise in accounting, you would have responsibility for the partnership's accounting and finance. List the seven items that would need to be incorporated into the written partnership agreement.
Answer:
The definition for the problem is listed in the segment below on explanations.
Explanation:
The seven elements that will have to go along with the partnership agreement or resolution are given below:
Name, place, as well as nature.Title, capital commitment, and responsibilities.New partner practices.Benefit and loss account.Asset withdrawal.Partnership liquidation.So that the above is the right answer.
Final answer:
A written partnership agreement is crucial and should include the partnership's name and partners, funding arrangements, profit/loss distribution, partner roles and responsibilities, procedures for partner changes, terms of the agreement, and liability/insurance provisions.
Explanation:
When forming a partnership, it’s essential to draft a comprehensive written partnership agreement that outlines the specifics of the business relationship. The following seven items should be included:
The name of the partnership and the names of the partners involved.Investment amounts from each partner and how additional funding will be handled.The distribution of profits and losses and the formulas for such calculations, including the handling of draws and distributions.The roles and responsibilities of each partner, including decision-making authority and dispute resolution mechanisms.Procedures for admitting new partners, handling the withdrawal or death of a partner, and the dissolution of the partnership.The terms of the partnership, including the duration of the partnership and any events that would lead to its dissolution.Any clauses related to the limitation of liability or the inclusion of insurance to manage risks associated with the partnership’s operations.These components help safeguard the interests of all partners and ensure that the has an effective framework for operation and conflict resolution.
Madison Corporation's production cycle starts in the Processing Department. The following information is available for April: Units Work-in-process, April 1 (25% complete) 40,000 Total units in process during April 280,000 Work-in-process, April 30 (60% complete) 25,000 Materials are added at the beginning of the process in the Processing Department. What are the equivalent units of production for the month of April, assuming Madison uses the weighted-average method
Answer:
Equivalent units = 270,000
Explanation:
Under the weighted average method of valuation, to account for completed units, it is assumed that the entire degree of work required is done in the period under consideration. So there is no separation of the completed units into opening inventory and fully worked.
Completed Units= total units in process during April - Closing WIP
= 280,000 - 25,000 = 255,000
Note that the description 'total units in process in during April', implies that the opening inventory is inclusive in the figure of 280,000.
Equivalent units = degree of completion(%) × units
Item Equivalent units
Completed units 255,000 255,000× 100% = 255,000
Closing work in progress 25,000 25,000× 60% = 15,000
Total equivalent units 270,000
Equivalent units = 270,000
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.
Management Theories, Inc. at a cash price of $1.5 million. Management Theories, Inc. has short-term liabilities of $500,000. As a result of acquiring Management Theories, Inc., Marketing Concepts, Inc. would acquire the copyrights to a national best-seller which would provide an estimated cash flow of $300,000 for the next five years. The firm has a cost of capital of 20 percent. The approximate net present value of this acquisition is
Answer:
$1,102,820
Explanation:
The computation of the net present value is shown below:
= Present value of yearly cash inflows - initial investment
where,
Present value of yearly cash inflows is
= Annual year cash inflows × PVIFA factor
= $300,000 × 2.9906
= $897,180
And, the initial investment is
= $1,500,000 + $500,000
= $2,000,000
So the net present value is
= $897,180 - $2,000,000
= $1,102,820
Nefchio is a popular Web site among online gamers. It incorporates interactive and collaborative features to create a richer, more interesting, and more useful experience. In this scenario, Nefchio uses an approach called
Answer:
Web 2.0
Explanation:
Web 2.0: The term "Web 2.0" is described as a specific website that is responsible for allowing the different users to collaborate and interact with one another via "social media dialogue" as creators associated with "user-generated content" in a particular virtual community. However, it tends to contrast the very first generation of "Web 1.0-era" websites in which individuals were considered as limited towards viewing a specific content in a "passive manner".
In the question above, the given statement represents "Web 2.0".
Nefchio, a gaming website, uses an approach known as social networking as part of the Web 2.0 domain, focusing on interactive and collaborative features to enrich the user experience through user-generated content, interoperability, and end-user driven design.
Nefchio, a popular website among online gamers that incorporates interactive and collaborative features to enhance the user experience, employs an approach known as social networking. This method is part of a larger category within technology known as Web 2.0, which focuses on the ability to facilitate interactive information sharing, interoperability, user-centered design, and collaboration on the World Wide Web. A site like Nefchio, which enables users to engage in discussions, share information, and collaborate in a more social environment, exemplifies the core values of Web 2.0.
Key features that align with the Web 2.0 approach include user-generated content, interoperability, and end-user driven design. User-generated content allows for a richer and more diverse pool of ideas and experiences. Interoperability ensures that the platform can work seamlessly across different devices and networks, enhancing user accessibility. End-user driven design prioritizes the needs and preferences of the users, making the interface more intuitive and engaging.
Through these features, Nefchio not only provides a platform for gaming discussions and collaborations but also enriches the user experience by fostering a community-oriented environment. This approach is fundamental in creating a dynamic and interconnected online experience that goes beyond traditional, static web pages.