Aakash has a liability of 6000 due in four years. This liability will be met with payments of A in two years and B in six years. Aakash is employing a full immunization strategy using an annual effective interest rate of 5%. Calculate ∣∣A−B∣∣.

Answers

Answer 1

Answer:

∣A−B∣ = 586.411

Explanation:

The effective interest rate is 0.05 so at the end of a year total amount will be 1.05 multiplied by principal

Liability = 6,000 ÷ 1.05^4 = Asset

Therefore

6,000 ÷ 1.05^4 = (A ÷ 1.05^2) + (B ÷ 1.05^6) (equation 1)

Multiply through by 1.05^6

6000(1.05^2) = A(1.05^4) + B

B = 6000(1.05^2) - A(1.05^4) (equation 2)

Finding differential from equation 1

4= 2((A ÷ 1.05^2) ÷ (6000 ÷ 1.05^4)) + 6(B ÷ 1.05^6) ÷ (6000 ÷ 1.05^4))

4(6000 ÷ 1.05^4) = 2(A ÷ 1.05^2) +6 (B ÷ 1.05^6)

Multiply through by 1.05^6

4(6000 ÷ 1.05^2) = 2(A ÷ 1.05^4) + 6B

Substitute value of B from equation 2

4(6000 ÷ 1.05^2) = 2(A ÷ 1.05^4) + 6 *6000(1.05^2) - 6*A(1.05^4)

A= 2721.0884

Substitute A in equation 2

B = 6000(1.05^2) - 2721.0884(1.05^4)

B= 3307.5

∣A−B∣ = |2721.0884 - 3307.5|

∣A−B∣ = 586.411


Related Questions

Your estimate of the market risk premium is ​%. The​ risk-free rate of return is ​%, and General Motors has a beta of . According to the Capital Asset Pricing Model​ (CAPM), what is its expected​ return?

Answers

Answer:

The correct option is option A) 16.4%.

Explanation:

Note: This question is not complete as all the important data are omitted from it. The complete question is therefore provided before answering the question as follows:

Your estimate of the market risk premium is 9%. The risk-free rate of return is 3.8% and General Motors has a beta of 1.4. According to the Capital Asset Pricing Model (CAPM), what is its expected return?

Options:

A) 16.4%

B) 17.2%

C) 14.8%

D) 15.6%

The question is now answered as followed:

Capital asset pricing model (CAPM) can be described as a model that is employed to compute a theoretical required rate of an asset in order decide whether or not to add assets a portfolio of investment that is well-diversified.

According to the Capital Asset Pricing Model (CAPM), the expected return can be calculated using the following formula:

Expected return = Risk-free rate + (Beta * Market ris premium) .......... (1)

Where;

Risk-free rate of return = 3.8%

Market risk premium = 9%

Beta = 1.4

Substitute the values into equation (1), we have:

Expected return = 3.8% + (1.4 * 9%) = 16.40%

Therefore, the correct option is option A) 16.4%.

Assume a corporation has earnings before depreciation and taxes of $123,000, depreciation of $41,000, and that it has a 35 percent tax bracket. a. Compute its cash flow using the following format. (Input all answers as positive values.) b. How much would cash flow be if there were only $21,000 in depreciation

Answers

Answer:

a.                     Computation of cash flow

Earnings before depreciation and taxes    $123,000

Less: Depreciation                                         $41,000

Earnings before taxes                                   $82,000

Less: Taxes ($82,000*35%)                          $28,700

Earnings after taxes                                       $53,300

Add: Depreciation                                          $41,000

Cash Flow                                                      $94,300

b.  If Depreciation = 21,000  

                     Computation of cash flow

Earnings before depreciation and taxes  $123,000

Less: Depreciation                                          $21,000

Earnings before taxes                                    $102,000

Less: Taxes($102,000*35%)                           $35,700

Earnings after taxes                                        $66,300

Add: Depreciation                                           $21,000

Cash Flow                                                        $87,300

The management of Mecca Copy, a photocopying center located on University Avenue, has compiled the following data to use in preparing its budgeted balance sheet for next year: Ending Balances Cash ? Accounts receivable $ 8,900 Supplies inventory $ 5,500 Equipment $ 38,000 Accumulated depreciation $ 15,400 Accounts payable $ 2,600 Common stock $ 5,000 Retained earnings ? The beginning balance of retained earnings was $25,000, net income is budgeted to be $21,100, and dividends are budgeted to be $3,500.

Answers

Answer:

                                      Mecca Copy

                             Budgeted Balance Sheet

Assets

Current assets:

Cash                                    13200  

Accounts receivable           8900  

Supplies inventory              5500

Total current assets                                27600

Plant and equipment:  

Equipment                            38000  

Accumulated depreciation  (15400)

Plant and equipment, net                         22600

Total assets                                               50200

Liabilities and Stockholders' Equity

Current liabilities:

Accounts payable                                           2600

Stockholders' equity:  

Common stock                     5000  

Retained earnings              42600

Total stockholders' equity                              47600

Total liabilities and stockholders' equity     50200

Note: Retained earnings = beginning balance of retained earnings + Net income - Dividend

= 25,000 + 21100 - 3500

= 42,600

According to the producer price index database maintained by the Bureau of Labor Statistics, the average cost of computer equipment fell 3.8 percent between January and December 2016. Let's see whether these changes are reflected in the income statement of Computer Tycoon Inc. for the year ended December 31, 2016.
2016 2015
Sales Revenue $ 109,000 $ 133,500
Cost of Goods Sold 64,500 75,100
Gross Profit 44,500 58,400
Selling, General, and Administrative Expenses 36,900 38,800
Interest Expense 590 520
Income before Income Tax Expense 7,010 19,080
Income Tax Expense 1,500 5,900
Net Income $ 5,510 $ 13,180
Required:
1. Compute the times interest earned ratios for 2016 and 2015. (Round your answers to 1 decimal place.) Times Interest Earned 2015 2016
2. Does Computer Tycoon generate sufficient net income in both years before taxes and interest) to cover the cost of debt financing?
a. Yes
b. No

Answers

Answer:

A.

2015 37.7

2016 12.9

B. Yes

Explanation:

Computation of the times interest earned ratios for 2016 and 2015

First step is to find the EBIT

EBIT: 2016 $ 2015 $

Gross profit 44,500 58,400

Less Selling, General and Administrative expenses (36,900) (38,800)

EBIT 7,600 19,600

Second step is to compute the times interest earned ratios for 2016 and 2015 using this formula

Time interest earned = EBIT / Interest expense

Let plug in the formula

Time interest earned 2016 2015

EBIT $7,600 $19,600

÷Interest expense $590 $520

=Time interest earned 12.9 37.7

Therefore the Time interest earned will be :

2015 37.7

2016 12.9

2. Yes Computer Tycoon generate sufficient net income in both 2015 and 2016 before taxes and interest in order to cover the cost of debt financing.

A sole proprietor owned an office building with a cost of $300,000 and accumulated depreciation of $40,000, using modified accelerated cost recovery system (MACRS) straight-line depreciation. In the current year, she sold the building for $320,000. What is the unrecaptured Section 1250 gain from this sale, if any

Answers

Answer:

The Correct Answer:

$40,000

Explanation:

IRC Section 1250 requires that excess depreciation (actual depreciation in excess of straight-line depreciation) be recaptured as ordinary income. Since the property has sold for more than the adjusted basis ($300,000 − $40,000 = $260,000 adjusted basis), the initial gains are recaptured based on the original purchase price of $300,000.

This makes the first $40,000 of the profit subject to the unrecaptured Section 1250 gain while the remaining $20,000 is considered regular long-term capital gains.

"ABC corporation is trading in the market for $51. The corporation declares a 25% stock dividend. After the ex date, the holder of 1 ABC Jan 50 Call will have:"

Answers

Answer:

1 ABC Jan 50 call

Explanation:

Based on the information given we were told that the Corporation was trading for the amount of $51 with a declare stock dividend of 25 percent, this means that After the ex date which is the day in which the stock will begin to trade without the monetary worth of the following dividend payment , which means that the holder of the 1 ABC Jan 50 call will have still have 1 ABC Jan 50 call.

Write a detailed note on Manufacturing Process types and Service process types in process design?

Answers

Answer:

Each of the process are used to the crosses organizational borders.

Explanation:

Process structure of manufacturing:

Job process: It is highly adaptable, scaled operation and structured around particular events. Batch process: It most common used in industries. It is small to large batches. Line process: It is the repetitive process and have modular production with large quantity. Continuous flow chart: It is product focused process. It processed only one item at a time.

Process design: There are three major process of design

Professional service designMass service designService shop design

A Missouri job shop has four departments machining (M), dipping in a chemical bath (D), finishing (F), and plating (P) assigned to four work areas. The operations manager, Mary Marrs, has gathered the following data for the movement of material. The number of workpieces moved yearly between work areas are:
M D F P
M - 800 2,000 200
D - - 400 400
F - - - 2,000
P - - - -
It costs $0.75 to move 1 workpiece 1 foot in the job shop. For the layout design of the job shop,
LAYOUT PLAN A:
Distance between work areas (departments) in feet:
M D F P
M - 21 12 8
D - - 5 10
F - - - 4
P - - - -
The yearly total material handling cost of the current layout presented in PLAN A_____________.

Answers

Answer: Find the answer in the attached file

Explanation:

The following information pertains to J Company's outstanding stock for 2021:

Common stock, $1 par
Shares outstanding, 1/1/2021 10,000
2 for 1 stock split, 4/1/2021 10,000
Shares issued, 7/1/2021 5,000

Preferred stock, $100 par, 7% cumulative
Shares outstanding, 1/1/2021 4,000

What is the number of shares J should use to calculate 2018 basic earnings per share?

a. 20,000.
b. 22,500.
c. 25,000 .
d. 27,000.

Answers

Answer: b. 22,500

Explanation:

J should use the total number of outstanding common stock at end of year to calculate 2018 basic earnings.

As a result of the Stock-split, the shares are split into 2 for 1.

There were 10,000 shares split so;

= 10,000 * 2

= 20,000

On the 1st of July, 5,000 shares were issued. This means that up till December 2021, the stock was outstanding for 6 months.

This will reflected by;

= 5,000 * 6/12

= 2,500 shares

Total shares = 20,000 + 2,500

= 22,500 shares

Use information from the Washington Post article "Why We've Been Hugely Underestimating the Overfishing of the Oceans" to determine whether each statement is true or false.

a. According to the Food and Agriculture Organization of the United Nations (FAO), worldwide catches peaked in 2001 at 86 million tons.
b. Using catch reconstruction, researchers estimate that the actual peak catch was 50% larger than the reported peak catch.
c, Catch reconstruction shows that, since the peak, catches have been increasing, not decreasing as previously reported.
d. The Sea Around Us Project found several problems with the FAO data, such as the fact that data that were not available were reported as catches of zero fish.

Answers

Answer:

"Why We've Been Hugely Underestimating the Overfishing of the Oceans"

Determining whether each statement is true or false:

a. False

b. True

c. False

d. True

Explanation:

The article "Why We've Been Hugely Underestimating the Overfishing of the Oceans," was published by the Washington Post on January 19, 2016.  It was written by Chelsea Harvey.  It tried to show how the world fish stock had been declining due to overfishing.  This is why it provided a report contrary to the FAO report.  

While the FAO report noted that the peak of worldwide catches was at 86 million tons in 1996, the contrary and independent report, using "catch reconstruction" showed that the peak was at 130 million tons in 1996.  The reconstructed research also showed that worldwide fish catches had suffered declines ever since the 1996 peak, thereby threatening "world food security and marine ecosystems".  The contrary report also suggested that all stakeholders must collaborate so that fish stocks can rebuild naturally.

Farmers and ranchers are considered to be part of the ________ which is the subdivision of the food industry that produces agricultural commodities.

Answers

Answer: producers sector

Explanation:

Farmers, rancher, and so on are part of the producers sector of the food industry where they engage in the production of raw food, fiber, and other agricultural products or commodities. In the case of farmers, they work the land and/or keep livestock, especially on the farm. Ranchers operate large plots of land for raising cattle, sheep or other livestock.

other major sectors of the food industry would include: -Farm Service , Processors , and Marketers.

Union Local School District has bonds outstanding with a coupon rate of 4.5 percent paid semiannually and 20 years to maturity. The yield to maturity on these bonds is 3.8 percent and the bonds have a par value of $10,000. What is the dollar price of the bond? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Answers

Answer:

$10,974.45

Explanation:

coupon rate 4.5%, semiannual = 2.25%

20 years until maturity = 40 periods

market rate 3.8%, semiannual = 1.9%

par value $10,000

market price of the bonds = PV of par value + PV of coupon payments

PV of par value = $10,000 / (1 + 1.9%)⁴⁰ = $4,710.13

PV of coupon payments = $225 x 27.84144 (PV annuity factor, 1.9%, 40 periods) = $6,264.32

market value = $4,710.13 + $6,264.32 = $10,974.45

Answer:

The dollar price of the bond is $10,974.45.

Explanation:

The dollar price of the bond, PV, can be determined as follows :

N = 20 × 2 = 40

PMT = ($10,000 × 4.5%) ÷ 2 = $225

P/YR = 2

YTM = 3.80 %

FV = $10,000

PV = ?

Using a Financial Calculator, the dollar price of the bond, PV is $10,974.45.

The owners of a landscaping business decide they need insurance to cover their trucks in case of accidents , injuries caused by flying debris from their trimmers and blowers, and property damage caused by falling tree limbs. What type of policy should the owners consider to cover all of these risk?

Answers

A business owners policy

Answer:

it is a business owners policy

Explanation:

APEX

Webb, Inc. uses a flexible budget for manufacturing overhead based on machine hours. Variable manufacturing overhead costs per machine hour are as follows: Indirect labor $5.00 Indirect materials 2.50 Maintenance .50 Utilities .30 Fixed overhead costs per month are: Supervision $1,200 Insurance 400 Property taxes 600 Depreciation 1,800 The company believes it will normally operate in a range of 4,000 to 8,000 machine hours per month. During the month of August, 2019, the company incurs the following manufacturing overhead costs: Indirect labor $28,000 Indirect materials 16,200 Maintenance 2,800 Utilities 1,900 Supervision 1,440 Insurance 400 Property taxes 600 Depreciation 1,860 Prepare a flexible budget report, assuming that the company used 6,000 machine hours during August.

Answers

Answer:

Variable overhead costs per machine hour:

Indirect labor $5.00 Indirect materials $2.50 Maintenance $0.50 Utilities $0.30Total $8.30

Fixed overhead costs:

Supervision $1,200 Insurance $400 Property taxes $600 Depreciation $1,800 Total $4,000

                                        Flexible              Actual             Spending

                                        budget               expenses        variances

Variable costs:

Indirect labor         $30,000             $28,000          $2,000 FIndirect materials  $15,000              $16,200           $1,200 UMaintenance         $3,000                $2,800            $200 FUtilities                   $1,800                $1,900              $100 UTotal                       $49,800             $48,900          $900 F

Fixed costs:

Supervision           $1,200                 $1,440              $240 UInsurance              $400                   $400                 $0Property taxes      $600                   $600                 $0Depreciation         $1,800                 $1,860              $60 UTotal                      $4,000                $4,300              $300 U

Total costs                     $53,800              $52,300           $600 F

The following information was available for the year ended December 31, 2013: Sales $ 520,000 Dividends per share $ 1.36 Net income 74,480 Earnings per share 3.00 Average total assets 820,000 Market price per share at year-end 28.50 Average total stockholders’ equity 380,000 Required: a. Calculate margin, turnover, and ROI for the year ended December 31, 2013. (Do not round intermediate calculations and ro

Answers

Answer:

Margin ratio =  14.32%

Assets turnover ratio = 63.41%

Return on investment = 9.08%

Explanation:

The computation of margin, turnover, and ROI for the year is shown below:-

Margin ratio = Net income ÷ Sales

= $74,480 ÷ $520,000

= 0.1432

or

= 14.32%

Assets turnover ratio = Sales ÷ Average total assets

= $520,000 ÷ $820,000

= 0.6341

or

= 63.41%

Return on investment = Net income ÷ Average total assets

= $74,480 ÷ $820,000

= 0.0908

or

= 9.08%

When recording journal entries for production costs using a standard cost accounting system, the debit to Work in Process Inventory account is for the ______ amount.

Answers

Answer: Actual amount

Explanation:

Standard Costing deviates from traditional accounting in that it is not based on historical costs of a good. In standard cost accounting, the actual costs are put in place of standard costs and then the variance between the two will be recorded and used for analysis.

The debit to the Work in Process Inventory account under a standard cost accounting system will be the actual amount.

Polly Khan is trying to calculate the current market rate given the following information: Investor’s have been requiring a 12% annual return on Builtrite’s stock which has a beta of 2.0 and the current risk-free rate is 4%. What is the current market rate?

Answers

Answer:

The current market rate is 8%

Explanation:

The market rate is the return on market or the market portfolio. To calculate the market rate (rM) we will use the CAPM equation which is used to calculate the required rate of return on a stock or portfolio. The formula for required rate of return under CAPM is,

r = rRF + Beta * (rM - rRF)

Where,

rRF is the risk free raterM is the market rate

We already know the value of r, rRF and Beta. We will input these values in the above equation to calculate the market rate.

0.12 = 0.04 + 2 * (rM - 0.04)

0.12 - 0.04 = 2 * rM - 0.08

0.08 + 0.08 = 2 * rM

0.16 / 2 = rM

rM = 0.08 or 8%

Sue Helms Appliances wants to establish an assembly line to manufacture its new​ product, the Micro Popcorn Popper. The goal is to produce five poppers per hour. The​ tasks, task​ times, and immediate predecessors for producing one Micro Popcorn Popper are as​ follows:

Task Performance time(minutes) Predecessor
A 8 -
B 10 A
C 8 A,B
D 10 B,C
E 8 C
F 4 D,E

a. The theoretical minimum number of workstations is:___________
b. The assignment of tasks to workstations should be:________

Were you able to assign all the activities to workstations equivalent to the theoretical minimum workstation ?

c. The efficiency of the assembly line is:________

Answers

Answer:

Please see explanation below.

Explanation:

a. Cycle time = Production time available per hour / Units required per hour

= 60 / 5

= 12minutes

Minimum number of workstations = Sum of the task time / Cycle time

Sum of task time

= 8 + 10 + 8 + 10 + 8 + 4

= 48

The theoretical minimum number of work stations is

= 48 / 12

= 4

b. In order to assign the tasks to the work station, events that precede the task must be considered together with the time taken to complete each task.

°Task A This task is assigned to work station 1 and no task would further be assigned to work station 1, otherwise it will exceed the cycle time.

°Task B. This next task will be assigned to work station 2, no additional task will be assigned to station 2.

Task C is assigned to workstation 3, hence can no longer accept any other assigned task.

°Task D is the next task and will be assigned to work station 4, and we cannot assign any more task to work station 4.

°Task E and F will not be assigned as there are no more available stations.

Task Time Workstation

A. 8 1

B. 10 2

C. 8 3

D. 10 4

E. 8 -

F. 4 -

Please note that due to the theoretical minimum number of work station, which is 4, it will not be possible to assign task to all the workstations hence task E and F remains unassigned.

C. Efficiency of the assembly line

Efficiency ;

= Sum of task times / Actual number of work stations × cycle time

Although the actual number of required workstation is 5 but we cannot assign task E and F due to the theoretical minimum number of workstation. Therefore, additional work station will be required and there are 5 work stations in total.

= 48 ÷ (5 × 12) × 100

= 80%

The theoretical minimum should be = 4

The efficiency of the assembly line should be 80 percent

The production time = 60

The units that are required per hour = 5

[tex]cycle time = \frac{minutes in one hour}{units needed in a day} \\\\cycle time=\frac{60}{5}[/tex]

= 12

The workstation = 8+10+8+10+8+4

= 48

[tex]The minimum number = \frac{48}{12} \\\\= 4[/tex]

The efficiency of the assembly line

[tex]\frac{48}{5*60} \\\\= 0.8\\\\0.8*100 = \\\\80percent[/tex]

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2. Using semiannual compounding, what is the value to you of a 9% coupon bond with a par value of $10,000 that matures in 10 years if you require a 7% return

Answers

Answer:

The Value of the Bond, PV is $10.962.65

Explanation:

The Value of the Bond (PV) can be determined as follows :

PMT = ($10,000 × 9%) ÷ 2 = $450

P/YR = 2

N = 10

Required Return (YTM) = 7 %

FV = $10,000

PV = ?

Using a Financial Calculator, the Value of the Bond, PV is $10.962.65

Choose the statement that is incorrect.
A. In the long​ run, a rise in the foreign price level brings dollar appreciation and a rise in the U.S. price level brings dollar depreciation.
B. In the long​ run, a change in the nominal exchange rate brings an equivalent change in the real exchange rate.
C. In the long​ run, the nominal exchange rate is a monetary phenomenon.
D. In the long​ run, the nominal exchange rate is determined by the quantities of money in two countries.

Answers

Answer:

B. In the long​ run, a change in the nominal exchange rate brings an equivalent change in the real exchange rate.

Explanation:

As we know that in the short run there is a decline in the nominal exchange that results in a decrease of real exchange rate due to which there is a reduction of the import and the export is risen.

But in the case of the long run, if there is a change in the nominal exchange rate so the real exchange rate would remain the same

This results that if there is a change in the nominal exchange rate so it would not bring the equal change in the real exchange rate

Hence, option B is incorrect

On January 1, Parson Freight Company issues 9.0%, 10-year bonds with a par value of $3,400,000. The bonds pay interest semiannually. The market rate of interest is 10.0% and the bond selling price was $3,168,967. The bond issuance should be recorded as:

Answers

Answer:

January 1

Cash                                           $3168967 Dr

Discount on Bonds Payable    $231033

            Bonds Payable                        $3400000 Cr

Explanation:

The issuance of bond on January 1 is at a discount as the coupon rate paid by the bond is less than the market interest rate. In such case the bond is issued at a lower value than its par/face value. The discount on bonds payable is the difference between the face value and the cash received on issuance.

The entry to record the issues include a debit to cash account as cash is received, a debit to the discount on bonds payable account for the amount of discount and a credit to bonds payable account as liability is created as a result of the issuance of the bonds.

Discount = 3400000 - 3168967 = 231033

1. What are Red Bull's greatest strengths and risks as more companies (like Coca-Cola, Pepsi, and Monster) enter the energy drink category and gain market share? 2. Should Red Bull do more traditional advertising? Why or why not? Discuss the effectiveness of Red Bull's sponsorships, for example, Bull Stratos. Is this a good use of Red Bull' marketing budget? Where should the company draw the line?

Answers

Answer:

Strengths

RedBull is a well-established brand in the Energy Drink sub-sector.It has been in existence since 1987 making it a 33-year-old company. That's a lot of experience doing the same thing. Given its years of experience, consumers have a lot of confidence in its brand. This means it has strong brand equity.As of 2019, RedBull still has the highest market share of any energy drink in the world with a record 7.5 billion cans sold

Risks

The challenge is this, Coca-cola is a much older company with about 128 years behind it. It was established in 1892.Coca-cola equally has a very strong brand equityIn the carbonated drinks sub-sector, it has dominated the sector since 2004. It's market share is estimated at 42.5%.It has about 500 brands compared to Redbull which has only one brand.In Pepsi was created in 1893. Just one year younger than Coca-cola. It currently has about 24.9% of the soda market. Within the cola segment alone, it has about 100 flavours.Monster energy as a strong entrant into the energy drink market is only 18 years old and it already has 49 different drinks with about 14% market share worldwide.

Suffice it to say that if Red Bull does not concieve of a critical strategy to maintain market dominance, it may continue to bleed it's market share.

2. Red Bull should do more than traditional advertising.

There is no reason why it can go into the Soda space. There are countries where the big players still exert a huge dominance. Mexico, for instance, consumes the more coca-cola than anywhere else in the world.

Red Bull in addition to keeping it's market share through aggressive advertising, can enter into the soda market, targeting these regions where coca-cola and other players seem to have a pseudo monopoly.

Red Bull can also look at creating more flavours depending on the psychographics of the target market it is looking at.

Bull Stratos

Red Bull Stratos is the official name for the project involving Mr Baumgartner's mission. Mr Baumgartner's project involved a record breaking jump for the ages from the edge of space which cost about USD 30 million. It is on record that this is nothing like what Red Bull have ever done before and it did so at a fraction of it's annual sports marketing which is estimated at about USD 300 Million.

To answer the question about its effectiveness, its definitely yes.

Over 8 million people saw the jump which had the Red Bull logo/ branding conspicuously displayed. It was dubbed "the most successful Public Relations campaign of year 2012."

The line will always be dictated by the metrics which show returns on marketing budget invested.

Any strategy that currently works to enhance the brand of Red Bull or at least keep its dominance over the energy drink market, must be explored.

Cheers!

George Bailey purchased equipment from M. Potter for $450,000, paying $35,000 cash as a down payment and financing the remainder. The correct journal entry to record this event is:

Answers

Answer:

Equipment $450,000 (debit)

Cash $35,000 (credit)

Suppliers Loan $415,000 (credit)

Explanation:

George Bailey must recognize the Asset of Equipment, de-recognize the Assets of Cash and recognize the Suppliers Loan as above.

Hawk Corporation purchased 10,000 Diamond Corporation bonds in 2015 for $55 per bond and classified the investment as securities available for sale. The value of the Diamond investment was $85 per bond on December 31, 2016, and $97 on December 31, 2017. During 2018, Hawk sold all of its Diamond investment at $147 per bond. In its 2018 income statement, Hawk would report:_________.

Answers

Answer:

Gain of $920,000

Explanation:

Calculation for what Hawk would report In its 2018 income statement.

First step is the adjustment of Hawk accumulation of unrealized holding gain and fair value for 205-2017

Unrealized holding gain and fair value Adjustment=($97- 55) × 10,000 shares

Unrealized holding gain and fair value Adjustment=$42×10,000 shares

Unrealized holding gain and fair value Adjustment= $420,000

Second step is to find the additional increase that occurred in 2018

Additional increase=($147-$97)×10,000 shares

Additional increase=50×10,000 shares

Additional increase =$500,000

Last step is to find the total gain realized in the income statement

Total gain realized=$500,000+$420,000

Total gain realized=$920,000

Therefore what Hawk would report In its 2018 income statement will be a gain of $920,000

Item 3Item 3 Cutter Enterprises purchased equipment for $87,000 on January 1, 2018. The equipment is expected to have a five-year life and a residual value of $4,800. Using the sum-of-the-years'-digits method, depreciation for 2018 and book value at December 31, 2018, would be

Answers

Answer:

$27,400 and $59,600

Explanation:

The computation of the depreciation expense and the book value using the sum of-the-years'-digits method is shown below:

Depreciation expense is

= (Purchase cost - residual value) × useful life ÷ sum of years

= ($87,000 - $4,800) × 5 years ÷ (5 + 4 + 3 + 2 + 1)

= $27,400

And, the book value is

= Purchase cost - depreciation expense

= $87,000 - $27,400

= $59,600

TB MC Qu. 8-129 Dilly Farm Supply is located in a small ... Dilly Farm Supply is located in a small town in the rural west. Data regarding the store's operations follow: Sales are budgeted at $306,000 for November, $326,000 for December, and $226,000 for January. Collections are expected to be 70% in the month of sale and 30% in the month following the sale. The cost of goods sold is 75% of sales. The company desires to have an ending merchandise inventory at the end of each month equal to 80% of the next month's cost of goods sold. Payment for merchandise is made in the month following the purchase. Other monthly expenses to be paid in cash are $22,700. Monthly depreciation is $29,000. Ignore taxes.

Balance Sheet October 31

Assets:
Cash $32,000
Accounts receivable 82,500
Merchandise inventory 182,880
Property, plant and equipment, net of $624,000 accumulated depreciation 916,000
Total assets $1,213,380

Liabilities and Stockholders' Equity
Accounts payable $250,000
Common stock 751,000
Retained earnings 212,380
Total liabilities and stockholders' equity $1,213,380

Retained earnings at the end of December would be:_______

Answers

Answer:

retained earnings at December 31, 202x = $266,980

Explanation:

income statement for November and December:

Sales revenue               $632,000

COGS                            ($474,000)

Gross profit                     $158,000

Operating expenses:

Depreciation                   ($58,000)

Other expenses              ($45,400)

Net income                      $54,600

retained earnings = previous balance + net income - dividends paid = $212,380 + $54,600 - $0 = $266,980

The Securities and Exchange Commission requires companies listing on the New York Stock Exchange and the Nasdaq Stock Market to have codes of ethics. A code of ethics is

Answers

Answer:

A Code of Ethics are a set of guidelines that helps the member in distinguishing right and wrong and always following the guidelines that protects the interest of profession and stakeholders.

Explanation:

Basically these Ethical codes are set of guidelines that helps the entities and professionals to acknowledge what is expected from them and what are their responsibilities. Usually every reputable profession and organizations adopt code of ethics to encourage and enforce ethical practices in decision making process.

Answer:

Answer:

A Code of Ethics are a set of guidelines that helps the member in distinguishing right and wrong and always following the guidelines that protects the interest of profession and stakeholders.

Explanation:

Basically these Ethical codes are set of guidelines that helps the entities and professionals to acknowledge what is expected from them and what are their responsibilities. Usually every reputable profession and organizations adopt code of ethics to encourage and enforce ethical practices in decision making process.

Explanation:

Cost recovery. ​ Richardses' Tree​ Farm, Inc. purchased a new aerial tree trimmer for ​$. It is classified in the property class category of a​ single-purpose agricultural and horticultural structure. Then the company sold the tree trimmer after four years of service. If a​ seven-year life and​ MACRS, LOADING...​, was used for the depreciation​ schedule, what is the​ after-tax cash flow from the sale of the trimmer​ (use a ​% tax​ rate) if a. the sales price was ​$​? b. the sales price was ​$​? c. the sales price was ​$​? a. If the sales price is ​$​, what is the​ after-tax cash​ flow?

Answers

Answer:

after tax cash flow = $29,512.32

Explanation:

the numbers are missing in this question:

purchase cost = $82,000

tax rate = 40%

selling price at end of year 4 = $32,000

MACRS 7 year depreciation schedule:

year             %            depreciation expense         carrying value

1                  14.29%           $11,717.80                          $70,282.20

2                 24.29%          $19,917.80                        $50,364.40

3                 17.49%           $14,341.80                         $36,022.60

4                 12.49%           $10,241.80                        $25,780.80

after tax cash flow = $32,000 - [($32,000 - $25,780.80) x 40%] = $32,000 - $2,487.68 = $29,512.32

Parilo Company acquired $170,000 of Makofske Co., 5% bonds on May 1, 2016, at their face amount. Interest is paid semiannually on May 1 and November 1. On November 1, 2016, Parilo Company sold $50,000 of the bonds for 96.
Journalize entries to record the following (refer to the Chart of Accounts for exact wording of account titles):
May 1 Initial acquisition of the bonds
Nov. 1 Semiannual interest received
1 Sale of the bonds
Dec. 31 Accrual of $1,000 interest

Answers

Answer:

May 1, 2016

DR Investments Bonds.................................$170,000  

CR Cash ...........................................................................$170,000

(To record acquisition of bonds)

Nov 1, 2016

DR Cash............................................................$4,250  

CR Interest Revenue......................................................$4,250

(To record interest received)

Working

Cash = $170,000*5%*6/12

= $4,250

Nov 1, 2016

DR Cash........................................................... $48,000  

DR Loss on sale of investment...................... $2,000  

CR Investment Bonds .....................................................$50,000

(To record sales of bonds)

Working

Cash = $50,000*0.96

= $48,000

Loss on investment = 50,000 - 48,000

= $2,000

Dec 31, 2016

DR Interest receivable........................................$1,000  

CR Interest revenue...........................................................$1,000

Masterson, Inc., has 3.6 million shares of common stock outstanding. The current share price is $85.50, and the book value per share is $9.25. The company also has two bond issues outstanding. The first bond issue has a face value of $73 million, a coupon rate of 5.3 percent, and sells for 95.7 percent of par. The second issue has a face value of $45 million, a coupon rate of 5.9 percent, and sells for 104.9 percent of par. The first issue matures in 23 years, the second in 11 years. The most recent dividend was $4.04 and the dividend growth rate is 4.3 percent. Assume that the overall cost of debt is the weighted average of that implied by the two outstanding debt issues. Both bonds make semiannual payments. The tax rate is 23 percent.
1. What is the company's cost of equity?
2. What is the company's aftertax cost of debt?
3. What is the company's weight of equity?
4. What is the company's weight of debt?
5. What is the company's WACC?

Answers

Answer:

1. 9.03 %

2. 7.56 %

3. 72.45 %

4. 27.55 %

5. 8.63 %

Explanation:

Cost of equity is the return that is required by holders of Common Stocks

Cost of equity = Recent year`s dividend / Current Market Price + Expected Growth Rate

                       = $4.04 / $85.50 + 0.043

                       = 0.0903 or 9.03 %

1st bond issue

PV = $69,861,000

Pmt = ($73,000,000 × 5.30%) ÷ 2 = - $1,934,500

p/y = 2

n  = 23 × 2 = 46

Fv = 0

i = ?

Cost of the 1st Bond Issue, i is : 2.1571 %

After tax cost = 2.1571 % × 77 %

                      = 1.66%

2nd Bond Issue

PV = $47,205,000

Pmt = ($45,000,000 × 5.90%) ÷ 2 = - $1,327,500

p/y = 2

n  = 11 × 2 = 22

Fv = 0

i = ?

Cost of the 2nd Bond Issue, i is : 7,6681 %

After tax cost = 7,6681 % × 77 %

                      = 5.90%

Total Cost of Debt = 1.66% + 5.90%

                               = 7.56 %

Market Values :

Market Value of Equity = 3,600,000 shares × $85.50

                                      = $307,800,000

Market Value of Bonds

1st Issues  =  $69,861,000

2nd Issue  = $47,205,000

Total          = $117,066,000

Weight of equity = Market Value of Equity ÷ Total Market Value

                            = $307,800,000 ÷ ($307,800,000 + $117,066,000)

                            = 72.45 %

Weight of debt    = Market Value of Bonds ÷ Total Market Value

                            = $117,066,000 ÷ ($307,800,000 + $117,066,000)

                            = 27.55 %

WACC = Weighted Cost of Debt + Weighted Cost of Equity

           = 27.55 % × 7.56 % + 72.45 % ×  9.03 %

           = 8.63 %

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