Ann and Jack have been partners for several years. Their firm, A & J Tax Preparation, has been very successful, as the pair agree on most business-related questions. One disagreement, however, concerns the legal form of their business. For the past two years, Ann has tried to convince Jack to incorporate. She believes that there is no downside to incorporating and sees only benefits. Jack strongly disagrees; he thinks that the business should remain a partnership forever. First, take Ann's side, and explain the positive side to incorporating the business. Next, take Jack's side, and state the advantages to remaining a partnership. Lastly, what information would you want if you were asked to make the decision for Ann and Jack?
Answers
Answer and Explanation:
The partnership refers to the agreement between the two or more persons, who works as a partners in an organization. The motive of establishing the partnership is to divide the profit and losses in their respective ratio or profit or loss ratio.
On the other hand, the corporation refers to the business organization that reflects the different legal entity with respect to its owners and moreover it involves more statutory compliance.
Based on this the advantage of partnership is to attractive less taxes and less expensive for creating this business organization as it easy to form.
And, the advantage of corporation is limited liability, long life or unlimited life, and the ownership is easily transferable
Related Questions
On December 31, 2017, Berclair Inc. had 560 million shares of common stock and 5 million shares of 9%, $100 par value cumulative preferred stock issued and outstanding. On March 1, 2018, Berclair purchased 168 million shares of its common stock as treasury stock. Berclair issued a 5% common stock dividend on July 1, 2018. Four million treasury shares were sold on October 1. Net income for the year ended December 31, 2018, was $1,050 million.
Also outstanding at December 31 were 30 million incentive stock options granted to key executives on September 13, 2013. The options were exercisable as of September 13, 2017, for 30 million common shares at an exercise price of $56 per share. During 2018, the market price of the common shares averaged $70 per share.
Required:
a. Compute Berclair's basic and diluted earnings per share for the year ended December 31, 2018.
Answers
Answer:
Basic Earnings Per Share = $1,44
Diluted Earnings Per Share = $1,38
Explanation:
Basic Earnings Per Share = Earnings Attributable to Holders of Common Stock / Weighted Average Number of Common Shares
Calculation of Earnings Attributable to Holders of Common Stock
Net income for the year ended December 31, 2018, $1,050,000,000
Less cumulative preferred stock dividend ($45,000,000)
Earnings Attributable to Holders of Common Stock $1,005,000,000
Calculation of Weighted Average Number of Common Shares
1 January Outstanding Common Shares 560,000,000
March 1 - Purchases (10/12×168,000,000) 140,000,000
October 1 - Sold (3/12×4,000,0000) (1,000,000)
Weighted Average Number of Common Shares 699,000,000
Basic Earnings Per Share = $1,005,000,000/699,000,000
= $1,44
Diluted Earnings Per Share = Adjusted Earnings Attributable to Holders of Common Stock / Adjusted Weighted Average Number of Common Shares
Calculation of Adjusted Weighted Average Number of Common Shares
Weighted Average Number of Common Shares (Basic) 699,000,000
Incentive Stock Options 30,000,000
Adjusted Weighted Average Number of Common Shares 729,000,000
Diluted Earnings Per Share = $1,005,000,000/ 729,000,000
= $1,38
7.The firm has an inventory period of 84.6 days, an accounts payable period of 43.2 days, and an accounts receivable period of 41.7 days. Management is considering an offer from their suppliers to pay within 10 days and receive a discount of 2 percent. If the new discount is taken, the accounts payable period is expected to decline by 30.4 days. What will be the new operating cycle given the change in the payables period
Answers
Answer: 126.3 days.
Explanation:
The Operating Cycle essentially refers to how long it takes a business to convert inventory to cash. The entire period between production, to selling to recovering money from Receivables is incorporated here.
The formula therefore is,
= Days Sales in inventory + Days Sales Receivables
= 84.6 + 41.7
= 126. 3 days
Wehrs Corporation has received a request for a special order of 9,300 units of product K19 for $46.80 each. The normal selling price of this product is $51.90 each, but the units would need to be modified slightly for the customer. The normal unit product cost of product K19 is computed as follows: Direct materials $ 17.60 Direct labor 6.90 Variable manufacturing overhead 4.10 Fixed manufacturing overhead 7.00 Unit product cost $ 35.60 Direct labor is a variable cost. The special order would have no effect on the company's total fixed manufacturing overhead costs. The customer would like some modifications made to product K19 that would increase the variable costs by $6.50 per unit and that would require a one-time investment of $46,300 in special molds that would have no salvage value. This special order would have no effect on the company's other sales. The company has ample spare capacity for producing the special order. Required: Determine the effect on the company's total net operating income of accepting the special order.
Answers
Answer:
Effect on income= $62,510 increase
Explanation:
Giving the following information:
Offer= 9,300 units of product K19 for $46.80 each.
Direct materials $ 17.60
Direct labor $6.90
Variable manufacturing overhead $4.10
The customer would like some modifications made to product K19 that would increase the variable costs by $6.50 per unit and that would require a one-time investment of $46,300 in special molds that would have no salvage value.
Because it is a special offer and there is unused capacity, we will take into account only the incremental fixed costs.
First, we need to calculate the total cost of the offer:
Unitary variable cost= 17.6 + 6.9 + 4.1 + 6.5= $35.1
Total variable cost= 35.1*9,300= $326,430
Total fixed costs= 46,300
Total cost= $372,730
Finally, we can determine the effect on income:
Effect on income= 9,300*46.8 - 372,730
Effect on income= $62,510 increase
After a retiring from a successful business career, you would like to make a donation to your university. This donation will go into the school’s endowment pool and the returns generated from the donation will support the salary of a new professor in the business school on a perpetual basis. The university expects to earn returns of 5.5% on its endowment pool. You may assume that any distributions to support the salary will be made annually.
Part A) You can make a donation today (t=0) in the amount of $2,500,000. The first cash flow distribution from your donation to cover the professor's salary will take place in one year (at t=1). Which of the following is closest to the annual salary payment that can be made as a result of your donation?
A. $2,500,000
B. $454,545
C. $100,000
D. $137,500
Part B) After further discussions, the university determines that the employment agreement with the new professor will call for annual salary increases of 2%. Given this new requirement, and assuming the first salary distribution will still occur one year from today, what is the starting salary (at t=1) that can be supported with your $2,500,000 donation?
A. $50,000
B. $187,500
C. $140,250
D. $87,500
Answers
Answer:
Part A) D. $137,500
Part B) C. $140,250
Explanation:
Part A) The computation of annual salary payment is shown below:-
Annual salary = Donation made × Interest rate
= $2,500,000 × 5.5%
= $137,500
So, for computing the annual salary we simply multiply the donation made with interest rate.
Part B) The computation of starting salary is shown below:-
Starting salary = Annual salary + Increased annual salary
= $137,500 + 2%
= $140,250
Therefore for computing the starting salary we simply added the annual salary with increased annual salary.
Dax Pet Foods compiled the following information for the year for its dog division Average operating assets $3,500,000 Controllable margin $315,000 Dax’s corporate office expects the division to earn a minimum return of 8%. Suppose the dog division invests in a new machine that will produce a new dog food product. The machine is expected to generate $19,500 of controllable profit and will cost $150,000. If Dax buys the new machine, what happens to ROI?
Answers
Answer:$2836360
Explanation:
A company uses the percent of receivables method to determine its bad debts expense. At the end of the current year, the company's unadjusted trial balance reported the following selected amounts: Accounts receivable $ 382,000 debit Allowance for uncollectible accounts 570 credit Net Sales 870,000 credit All sales are made on credit. Based on past experience, the company estimates that 5% of receivables are uncollectible. What amount should be debited to Bad Debts Expense when the year-end adjusting entry is prepared
Answers
Answer:
$18,530
Explanation:
The computation of the amount debited to the bad debt expense is shown below:
= Account receivable × estimated uncollectible percentage - credit balance of allowance for uncollectible accounts
= $382,000 × 5% - $570
= $19,100 - $570
= $18,530
We simply applied the above formula so that the amount debited to bad debt expense could come
On January 1, a company issued and sold a $408,000, 9%, 10-year bond payable, and received proceeds of $403,000. Interest is payable each June 30 and December 31. The company uses the straight-line method to amortize the discount. The journal entry to record the first interest payment is:
Answers
Answer and Explanation:
The Journal entry is shown below:-
Bond interest expense Dr, $18,610
To Cash $18360
To Discount on bonds $250
(Being first interest payment is recorded)
For recording the first interest payment we simply debited the bond interest expenses as it increased the expenses and we credited cash and discount on bonds as it reduced the assets and the discount should be credited
Working Note
Total discount on bonds issued = Sold bonds - Received proceeds
= $408,000 - $403,000
= $5,000
Amortization of Semi Annual Discount = Total discount on bonds issued ÷ Number of periods
= $5,000 ÷ 20
= $250
Cash interest paid = Sold bonds × Interest rate × From Jan to June ÷ Total number of months in a year
= $408,000 × 9% × 6 ÷ 12
= $18,360
Total Interest expense = Cash interest paid + Amortization of Semi Annual Discount
= $18,360 + $250
= $18,610
In its first month of operations, Literacy for the Illiterate opened a new bookstore and bought merchandise in the following order: (1) 150 units at $7 on January 1, (2) 590 units at $8 on January 8, and (3) 890 units at $10 on January 29. M7-12 Calculating Cost of Goods Available for Sale, Cost of Goods Sold, and Ending Inventory under Periodic LIFO [LO 7-3] Assume 1,110 units are on hand at the end of the month, calculate the cost of goods available for sale, ending inventory, and cost of goods sold under the LIFO. Assume a periodic inventory system is used. (Round "Cost per Unit" to 2 decimal places.
Answers
Answer:
Goods available for sale = $14,670
Ending inventory = $9,470
Cost of goods sold = $5,200
Explanation:
As per the data given in the question,
Total units purchased = 150 + 590 + 890 = 1,630
Ending inventory = 1,110
Sales units = 1,630 units - 1,110 units = 520 units
Goods available for sale = 150 × $7 + 590 × $8 + 890 × $10
= $14,670
Ending inventory = 150 × $7 + 590 × $8 + 370 × $10
= $9,470
Cost of goods sold = $14,670 - $9,470
= $5,200
Assume there is a decrease in the market demand for a good sold by price-taking firms that are initially producing the profit-maximizing level of output. How will the market adjust over time? Firms will exit the market, causing price to fall until positive profits are eliminated. Firms will exit the market, causing price to rise until losses are eliminated. Firms will enter the market, causing price to rise until losses are eliminated. Firms will enter the market, causing price to fall until positive profits are eliminated.
Answers
Answer: Firms will exit the market, causing price to rise until losses are eliminated
Explanation:
When there is a decrease in demand in a Perfectly Competitive Market, firms will have to start producing at a lower Quantity to manage their Marginal cost. This leads to Economic losses on their part in the short run.
In the long run however, should the situation remain the same, the new price would be less than their Average Cost which would deepen Economic losses. Firms would respond by exiting the market in the long run.
As the firms exit, the supply curve shifts left as supply drops. This drop in supply leads to a price rise. The exits will continue until enough firms leave that the market's remaining firms will stop suffering economic losses.
[10 points] Suppose Wilwaukee Telecom offers its users the option of paying either (a) $2.00 per minute for telephone service or (b) a $125 flat charge for a year of unlimited toll-free calls. Consider a customer with an annual demand for telephone service of P = 11 – 0.1Q, where P is the price per minute and Q is the number of minutes of calls made per year. Calculate the consumer surplus for each of the plans (a) and (b).
Answers
Answer:
For plan A, P = 2.
Then from demand curve, 2 = 11-.1Q
So .1Q = 9
Q* = 90
B) under plan b, P = zero
So make 11 = .1Q
Q* = 110
Now Consumer surplus from a)
CS = .5*(11-2)*90 = ∆ABC
= .5*9*90 = 405
From b)
CS = .5*11*110 - 125 = ∆ ADE - fixed fee
= 605-125 = 480
When I called about the cost of these items, it was implied that my total would only be $35.00
Answers
Answer:
Each Item Cost 11.6666667
Explanation:
35.00 / 3 = 11.6666667
So each item cost about 11.66 or 11.67
Xion Co. budgets a selling price of $80 per unit, variable costs of $35 per unit, and total fixed costs of $270,000. During June, the company produced and sold 10,800 units and incurred actual variable costs of $351,000 and actual fixed costs of $285,000. Actual sales for June were $885,000. Prepare a flexible budget report showing variances between budgeted and actual results. List variable and fixed expenses separately. (Indicate the effect of each variance by selecting for favorable, unfavorable, and no variance)
Answers
Answer and Explanation:
The preparation of flexible budget report is shown below:-
Xion CO.
Flexible budget report
Flexible budget Actual results Variances Favorable/
Unfavorable
Sales $864,000 $885,000 $21,000 Favorable
(10,800 × $80)
(-) Variable
cost $378,000 $351,000 $27,000 Favorable
(10,800 × $35)
Contribution $486,000 $534,000 $48,000 Favorable
(-) Fixed cost $270,000 $285,000 $15,000 Unfavorable
Net income $216,000 $249,000 $33,000 Favorable
Determine whether each of the following events causes a shift of a curve or a movement along a curve in the short run. Indicate which curve is involved and the direction of the change. As a result of an increase in the value of the dollar relative to other currencies, American producers pay less in dollar terms for foreign steel, a major commodity used in production. This will cause a the aggregate curve to the .
Answers
Answer:
Check the explanation
Explanation:
Increase in value of dollar has made the foreign steel (a major commodity used in production) cheaper for American producers.
This will reduce the cost of production of American Producers and would increase their profit-margin.
This will induce US firms to produce more and therefore there will be increase in short-run aggregate supply.
So, the given scenario will involve short-run aggregate supply curve and would shift the curve to the right.
Kindly check the attached image below to see the required graph -
Library, Inc. has 2,500 shares of 4%, $50 par value, cumulative preferred stock and 50,000 shares of $1 par value common stock outstanding at December 31, 2017, and December 31, 2018. The board of directors declared and paid a $3,000 dividend in 2017. In 2018, $18,000 of dividends are declared and paid. What are the dividends received by the preferred and common shareholders in 2018?
Answers
Answer:
preferred stocks = 2,500 stocks x 4% x $50 par value = $5,000 preferred dividends per year
common stock = 50,000 stocks outstanding of $1 par value
in 2017, $3,000 in dividends are distributed, all to preferred stocks
In 2018, $18,000 in dividends are distributed, $7,000 to preferred stock ($2,000 cumulative from last year and $5,000 from this year) and $11,000 are distributed to common stockholders.
In 2018, each preferred stock received = $7,000 / 2,500 stocks = $2.80 per preferred stock. Each common stockholder received $11,000 / 50,000 = $0.22 per common stock.
Are monopolies economically efficient? Consider the market to the right. Compared to the perfectly competitive outcome, what would be the change in surplus if instead the market had one supplier that was a monopoly?
Answers
Answer:
Deadweight loss (Triangle between all three lines, hits all three points).
Explanation:
This is explained to be triangle between all three lines as it hits all three points involved.
It can also be explained to be Harberger's triangle in the sense that the loss occurring in the trade of a good or service due to market power of buyers or sellers or a government intervention, or other bodies concerned is lost due when it is not produced maximumly to reach everyone who meeds it.
Deadweight loss, also can be a measure of lost economic efficiency when the socially optimal quantity of a good or a service is not produced. Non-optimal production can be caused by monopoly pricing in the case of artificial scarcity, a positive or negative externality, a tax or subsidy, or a binding price ceiling or price floor such as a minimum wage.
On January 1, 2019, a company issued $401,600 of 10-year, 12% bonds. The interest is payable semi-annually on June 30 and December 31. The issue price was $417,153 based on a 10% market interest rate. The effective-interest method of amortization is used. Rounding all calculations to the nearest whole dollar, what is the interest expense for the six-month period ending June 30, 2019?
Answers
Answer:
$ 20,857.65
Explanation:
The interest expense for the first interest expense is cash proceeds from the bond issuance multiplied by the 10% market interest rate adjusted for semiannual amount by multiplying by 6 months and dividing by 12 months.
Interest expense=cash proceeds*market interest rate*6/12
cash proceeds is $417,153
market interest rate is 10%
interest expense for the six-month period ending June 30 2019=$417,153*10%*6/12=$ 20,857.65
The first interest expense is closest to $ 20,857.65
Discussion Questions What project management tasks should Kelvin perform before his next meeting? What change management tasks should Kelvin perform before his next meeting, and how do these tasks fit within the project management process? Had you been in Kelvin’s place, what would you have done differently to prepare for this meeting?
Answers
Answer:
The overview of that same given problem is outlined in the following portion on the explanation.
Explanation:
(1)...
Kelvin will organize a meeting that comprises each trustee of suspense to keep them informed of the mission design communicate, advise to involve all those who may be concerned about the undertaking. All due respect, identity management is the responsibility of everyone in the organization.
(2)...
Kelvin became evidently up to date in ventures. His entitlements with either the beginning of the explanation of his undertaking indicate that he organized without grabbing the task's approval from alternate collaborators.
His key priorities would be to construct a point-by-point business plan as well as assign portions of something to other selection makers. By splitting the task, Kelvin would have the freedom to focus on his project managing operation, whilst the corresponding chiefs might have become experts in interpreting the job, the sets of capabilities assigned to the execution of the task, the start and end deadlines of the contract, the calculation including its effort needed for both the completion costs as well as the identification of circumstances between as well as between chores.
(3)...
Reconsidering organizational change assignments seems to be certainly just something Kelvin requires to reconstitute already when he ends up going with his next conference.
Such adjustments that I will make comprise of revamping the framework of job breakup, as well as internal engagement before and after the development's initial stages. Mostly during the conference, he specifies the idea of his strategy, like:
Tags provided for activities. List among all-time limits. Description of weekly modifications It gets insulin resistance to its management strategy after the presentation.Mr. Etemadi has prepared the following list of statements about service companies and merchandisers. Identify each statement as true or false.
1. Measuring net income for a merchandiser is conceptually the same as for a service company.
2. For a merchandiser, sales less operating expenses is called gross profit.
3. For a merchandiser, the primary source of revenues is the sale of inventory.
4. Sales salaries and wages is an example of an operating expense.
5. The operating cycle of a merchandiser is the same as that of a service company.
Answers
Answer:
Explanation:
1. Measuring net income for a merchandiser is conceptually the same as for a service company. TRUE
2. For a merchandiser, sales less operating expenses is called gross profit.
FALSE
For a merchandiser,sales subtracted from cost of goods sold is called gross profit.
3. For a merchandiser, the primary source of revenues is the sale of inventory.
TRUE
4. Sales salaries and wages is an example of an operating expense. TRUE
5. The operating cycle of a merchandiser is the same as that of a service company.
FALSE
A perpetual inventory system continuously leeps detailed records of the cost of the each purchase and sale. It shows the inventory that should be on hand for energy item.
Under the allowance method of accounting for uncollectible accounts, a. the cash realizable value of accounts receivable is greater before an account is written off than after it is written off. b. Bad Debts Expense is debited when a specific account is written off as uncollectible. c. the cash realizable value of accounts receivable in the balance sheet is the same before and after an account is written off. d. Allowance for Doubtful Accounts is closed each year to Income Summary.
Answers
Answer:
c. the cash realizable value of accounts receivable in the balance sheet is the same before and after an account is written off.
Explanation:
Under the allowance method of accounting for uncollectible accounts, the cash realizable value of accounts receivable in the balance sheet is the same before and after an account is written off and bad debt expenses is debited.
This means that in the period in which an account previously written off is collected, the income is unaffected.
Also, under the allowance method of accounting, total assets will remain unchanged when a particular account is being written off.
g Tanning Company analyzes its receivables to estimate bad debt expense. The accounts receivable balance is $276,000 and credit sales are $1,000,000. An aging of accounts receivable shows that approximately 3% of the outstanding receivables will be uncollectible. What adjusting entry will Tanning Company make if the Allowance for Doubtful Accounts has a credit balance of $2,200 before adjustment?
Answers
Answer:
accounts receivable = $276,000
total credit sales = $1,000,000
3% of accounts receivable will not be decollete = $276,000 x 3% = $8,280
if allowance for doubtful accounts has a credit balance of $2,200, you must add = $8,280 - $2,200 = $6,080
the adjusting entry should be:
Dr Bad debt expense 6,080
Cr Allowance for doubtful accounts 6,080
Since allowance for doubtful accounts is a contra asset account it has a credit balance that reduces the value of accounts receivable.
The production manager of a company, in an effort to gain a promotion, negotiated a new labor contract with the factory employees that required them to bear a greater percentage of benefit costs than before, thus bringing down the cost of direct labor to the company. Shortly afterward, several experienced and highly skilled workers resigned, and were replaced by new employees whose work was very slow during their training period. At the end of the quarter, the company's profits fell 10%. This would produce a(n) ________.
Answers
Answer:
Unfavorable Direct labor efficiency variance
Explanation:
Labour efficiency is what every organisation look forward to in order to increase output, quality and maximize profit. In this case, all of that dropped maybe as a result of new experience. For this quarter, the organisation have experience Unfavorable Direct Labor Efficiency Variance.
Selected information from Frosty Freeze Corporation's accounting records and financial statements for 2022 is as follows ($ in millions): Cash paid to acquire machinery$34 Reacquired Peridot common stock 54 Proceeds from sale of land 93 Gain from the sale of land 54 Investment revenue received 73 Cash paid to acquire office equipment 87 In its statement of cash flows, Frosty Freeze should report net cash outflows from investing activities of: Multiple Choice $101 million. $28 million. $80 million. $33 million.
Answers
Answer:
$45 million
Explanation:
The cash flow statement categories the company's transactions in a financial period into 3 groups; these are operating, investing and financing.
The net profit/loss, depreciation, changes in current assets (other than cash) and liabilities are considered as operating activities including income taxes.
The sale of assets, interest received, purchase of investments are examples of investing activities while the issuance of stocks, debt principal deduction (loan settlement), issuance of debt securities etc are examples of financing activities.
An increase in assets other than cash is an outflow of cash while an increase in liabilities is an inflow of cash.
Hence, the net cash outflows from investing activities (in $'million)
= -$34 + $93 + $73 - $87
= $45
A strategic business unit (SBU) refers to:_________.
a. a single product or service identification code used to identify items for strategic marketing planning purposes.
b. a small number of people from different departments in an organization who are mutually accountable to accomplish a task or common set of performance goals.
c. a strategic product that has a unique brand, size, or price. a privately-owned franchise under the auspices of a larger group or organization bearing the same name.
d. a subsidiary, division, or unit of an organization that markets a set of related offerings to a clearly defined group of customers.
Answers
Answer:
D.
Explanation:
Strategic Business unit is also popularly known as SBU. It is an independent entity of a large company. This entity have its own aims and visions, and operates individually but report its working to the headquarter. The aim of this entity is target market.
An example of SBU is Samsung. The company have different categories of product under one name. It is an electron company that makes phones, televisions, refrigators, camera, etc. All these sub-categories or divison of Samsung are SBU.
From the given options the correct one is D.
Alex Company prepares its statement of cash flows using the direct method for operating activities. For the year ended December 31, 2018, Alex Company reports the following activity: Sales on account $2,100,000 Cash sales 1,110,000 Decrease in accounts receivable 915,000 Increase in accounts payable 108,000 Increase in inventory 72,000 Cost of good sold 1,575,000 What is the amount of cash collections from customers reported by Alex Company for the year ended December 31, 2018
Answers
Answer:
The amount of cash collections from customers reported by Alex company for the year ended December 31, 2018 is $4,125,000.
Explanation:
Cash collection refers to the collection of cash from from an individual or a business whom invoice has been issued to. Any invoice unpaid are noted as being outstanding.
Cash collection fomular is therefore;
Cash collection = Sales on account + Cash sales + Decrease in accounts receivable
=$2,100,000 +$1,110,000 + $915,000
=$4,125,000
A brown-eyed father and a green-eyed mother have a 25% chance of having a green-eyed child. What is the probability that, in a family of four children, three of them have green eyes?
a.0.421 875
c 0.011 718 75
b. 0046 875
d. 0.1875
Answers
Answer:t
Explanation:
Money's power to buy goods and services changes ________.
Answers
Answer:
...with rates of inflation.
Explanation:
The more that a particular currency appears in the market without any work (value) being associated with that currency, the smaller the value of that particular form of currency (For example, the U.S. dollar). When inflation is high, banks will increase interest rates on loans in order to get rid of some of the of the surplus currency in the market, bringing down inflation and increasing the total value of a particular form of currency.
Steve Reese is a well-known interior designer in Fort Worth, Texas. He wants to start his own business and convinces Rob O’Donnell, a local merchant, to contribute the capital to form a partnership. On January 1, 2016, O’Donnell invests a building worth $130,000 and equipment valued at $140,000 as well as $60,000 in cash. Although Reese makes no tangible contribution to the partnership, he will operate the business and be an equal partner in the beginning capital balances.
To entice O'Donnell to join this partnership, Reese draws up the following profit and loss agreement:
- O'Donnell will be credited annually with interest equal to 10 percent of the beginning capital balance for the year
- O'Donnell will also have added to his capital account 15 percent of partnership income each year (without regard for the preceding interest figure) or $7,000, whichever is larger. All remaining income is credited to Reese.
- Neither partner is allowed to withdraw funds from the partnership during 2013. Thereafter, each can draw $5,000 annually or 20 percent of the beginning capital balance for the year, whichever is larger.
The partnership reported a net loss of $8,000 during the first year of its operation. On January 1, 2014, Terri Dunn becomes a third partner in this business by contributing $10,000 cash to the partnership. Dunn receives a 20 percent share of the business's capital. The profit and loss agreement is altered as follows:
- O'Donnell is still entitled to (1) interest on his beginning capital balance as well as (2) the share of partnership income just specified.
- Any remaining profit or loss will be split on a 5:5 basis between Reese and Dunn, respectively.
Partnership income for 2014 is reported as $64,000. Each partner withdraws the full amount that is allowed. On January 1, 2015, Dunn becomes ill and sells her interest in the partnership (with the consent of the other two partners) to Judy Postner. Postner pays $75,000 directly to Dunn. Net income for 2015 is $64,000 with the partners again taking their full drawing allowance On January 1, 2016, Postner withdraws from the business for personal reasons. The articles of partnership state that any partner may leave the partnership at any time and is entitled to receive cash in an amount equal to the recorded capital balance at that time plus 10 percent
a. Prepare journal entries to record the preceding transactions on the assumption that the bonus (or no revaluation) method is used. Drawings need not be recorded, although the balances should be included in the closing entries. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your answers to the nearest dollar amount.)
b. Prepare journal entries to record the previous transactions on the assumption that the goodwill (or revaluation) method is used. Drawings need not be recorded, although the balances should be included in the closing entries. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your answers to the nearest dollar amount.)
Answers
Which assertions about statement 1 and statement 2 is true? Statement 1: 10,000 bonds sold by Echo Corporation were bought by a variety of investors. If Echo received $10 million from the sale of these bonds, then bonds were more likely sold on the secondary market than on the primary market. Statement 2: Bonds issued by Foxtrot have a face value of $1,000 and pay annual coupons with the next coupon due in 1 year. If the price of the bond is greater than $1,000, then the bond’s coupon rate is more than its YTM.
Answers
Answer: E. Statement 1 is false and statement 2 is true.
Explanation:
Statement 1 is false because when bonds are sold in the secondary market, the issuing company does not get anything from it. That is because sales in the secondary market are between bond holders and those who would like to buy the bond. For the company to make money from a bond issue, they would have to issue it in the Primary Market where it would come directly from them.
Statement 2 is true because when the coupon rate of a bond is higher than it's YTM, it signals that the bond is a PREMIUM bond which means that it is selling at a rate above Par. It is a measure showing that the bond is not very risky therefore investors charge less on the bond than the coupon rate. If the Coupon rate was lower than the YTM that would mean that investors consider the bond risky and so are charging more to hold it and this would reduce the price of the bond below it's face value.
Your client has $80,000 invested in stock A. She would like to build a two-stock portfolio by investing another $80,000 in either stock B or C. She wants a portfolio with an expected return of at least 15% and as low a risk as possible, the standard deviation must be no more than 25%. Expected Return Standard Deviation Correlation With A A 18% 30% 1.0 B 17% 25% 0.3 C 15% 15% 0.4_____
Answers
Answer: Please see below for answer
Explanation:
Expected Return Standard Deviation Correlation With A
A 18% 30% 1.0
B 17% 25% 0.3
C 15% 15% 0.4_____
Expected return of A (RA) = 18%
Expected return of B (RB) = 17%
Standard Deviation of A (σA) = 30%
Standard Deviation of B (σB) = 25%
Weight of A (WA) = 50% (Since equal amount of $80,000 is being invested)
Weight of B (WB) = 50%
Correlation = 0.3
Portfolio Returns = WARA + WBRB = (18%*50%) + (17%*50%) = 17.5%
Portfolio Standard Deviation = (WA2 * σA2 + WB2 * σB2 + 2*(WA)*(WB)*CorrelationAB* σA* σB)(1/2)
= [(50%2 X 30%2) + (50%2 X 25%2) + (2 X 50% X 50%X 0.3 X 30% X 25%)](1/2)
=0.0025 +0.015625+SQR 0.01125
=0.0025+0.015625+0.1061=0.1241= 12.4%
If Invested in Stock C
Expected return of A (RA) = 18%
Expected return of C (RC) = 15%
Standard Deviation of A (σA) = 30%
Standard Deviation of C (σC) = 15%
Weight of A (WA) = 50% (Since equal amount of $80,000 is Being invested)
Weight of C (WC) = 50%
Correlation = 0.4
Portfolio Returns = WARA + WCRC = (18%*50%) + (15%*50%) = 16.5%
Portfolio Standard Deviation = (WA2 * σA2 + WC2 * σC2 + 2*(WA)*(WC)*CorrelationAC* σA* σC)(1/2)
= [(50%²X 30%²) + (50%² X 15%²) + (2 X 50% X 50%X 0.4 X 30% X 15%)]^1/2
= 0.0025+0.005625+ SQR 0.009= 0.1029= 10.29%= 10.3%
The expected return and standard deviation if invested in Stock B is 17.5% and 12.4% while that of STOCK C is 16.5% and 10.2 % but the client wants expected return of at least 15% and at low risk as possible with standard deviation not more than 25%, it is advised that the client invest in stock C as the values obtained are more towards her choice.
Ahmed, a lawyer, sold his car to Carlos. Has an implied warranty of merchantability been created by this transaction? No, because Ahmed is not a merchant. Yes, because if the car is defective Carlos will have a right to return in to Ahmed. No, Ahmed has not implied so either orally or in written. Yes, because a car is "goods" and the Uniform Commercial Code applies to contracts for the sale of goods.
Answers
Answer:
A. No, because Ahmed is not a merchant.
Explanation:
Implied warranty of merchantability is a law in contract which states that when there is a transaction between a seller (the merchant), and a buyer, there is an unwritten guarantee from the seller, that the product meets up to the ordinary standards of care. This means that the goods must be fit to do what the merchant says it will do. Therefore, if the seller finds it defective, he could return it to the seller. and if the seller refuses to make a change, a legal case could be established. The merchant by law is a wholesaler or retailer, who sells goods in which he has expertise or special skills.
Ahmed in the question could be argued in court to not be a merchant of cars and as such, has no expertise with which he can make a guarantee for the car being sold to Carlos.
