Answer:
Breach of Contract
Explanation:
If a contract was signed that promised a job/salary, then rescinding the job by the prospective employer is grounds for a "Breach of Contract" lawsuit.
Rose Corporation, a calendar year corporation, had accumulated earnings and profits of $40,000 as of January 1, 2014. However, for the first six months of 2014 Rose Corporation had an operating loss of $36,000, and finished the year with a total net operating loss for tax year 2014 of $55,000. Rose Corporation distributed $15,000 to its shareholders on July 1, 2014. Which of the following is correct?A. The entire distribution of $15,000 is taxable as a dividend.B. The entire distribution is not taxable.C. The part of the distribution which is taxable as a dividend is $12,500.D. The part of the distribution which is taxable as a dividend is $14,000.
Answer:
C. The part of the distribution which is taxable as a dividend is $12,500.
Explanation:
Rose's total loss for the year = $55,000
we must prorate the loss: $55,000 / 12 months = $4,583.33 per month
loss allocated to the first 6 months = $4,583.33 x 6 = $27,500
retained earnings before the distribution = $40,000 - $27,500 = $12,500
since distributions must come from retained earnings to be considered dividends, then only $12,500 will be considered dividends. The remaining $2,500 will be considered a return of capital
One Step, Inc., is trying to determine its cost of debt. The firm has a debt issue outstanding with 27 years to maturity that is quoted at 105 percent of face value. The issue makes semiannual payments and has a coupon rate of 4 percent.
Requried:
a. What is the company's pretax cost of debt?
b. If the tax rate is 23 percent, what is the aftertax cost of debt?
Answer:
Before tax cost of debt=3.72%
After-tax cost of debt =2.87 %
Explanation:
The yield to maturity to Maturity van be worked out using the formula below:
YM =( C + F-P/n) ÷ ( 1/2× (F+P))
C- annual coupon,
F- face value ,
P- current price,
n- number of years to maturity
YM - Yield to maturity
DATA
C- 4%× 100 = 4, P- 105, F- 100
AYM = 4 + (100-105)/27 ÷ 1/2× (100+105)
=0.0372 × 100= 3.72%
Yield to maturity =3.72%
Before tax cost of debt = Yield to maturity
Before tax cost of debt=3.72%
After tax cost of debt =Before tax cost of debt × (1-T)
Before tax cost of debt = 3.72%
Tax rate = 23%
After-tax cost of debt = 3.72%× (1-0.23) =2.87 %
After-tax cost of debt =2.87 %
Corporation has found that % of its sales in any given month are credit sales, while the remainder are cash sales. Of the credit sales, Corporation has experienced the following collection pattern: 20% received in the month of the sale 40% received in the month after the sale 24% received two months after the sale 16% of the credit sales are never received November sales for last year were , while December sales were . Projected sales for the next three months are as follows: January sales. . . . . . . . . . . . . . . . $150,000 February sales. . . . . . . . . . . . . . . $130,000 March sales. . . . . . . . . . . . . . . . . $175,000 Requirement Prepare a cash collections budget for the first quarter, with a column for each month and for the quarter. (Round your answers to the nearest whole dollar.) Sweeney Corporation Cash Collections Budget For the Months of January through March January Cash sales Collections on credit sales: 20% Month of sale 40% Month after 24% Two months after Total cash collections Enter any number in the edit fields and then click Check An
Answer:
Some information is missing, specifically the % of credit sales. Similar questions use 80%, so I will use that %. Also, November sales were $85,000 and December sales were $115,000.
Cash collections budgetJanuary February March
Cash sales $30,000 $26,000 $35,000
Collection from Nov. sales $16,320
Collection from Dec. sales $36,800 $22,080
Collection from Jan. sales $24,000 $48,000 $28,800
Collection from Feb. sales $20,800 $41,600
Collection from March sales $28,000
Total cash collections $107,120 $116,880 $133,400
Jason has a loan that requires a single payment of $6,000 at the end of 3 years. The loan's interest rate is 10%, compounded semiannually. How much did Jason borrow? (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.)
Answer:
Jason borrowed $4,4,77.29
Explanation:
In order to calculate this, let we will use the formula for the future value on an invested amount, semiannually, yielding interest at a certain interest rate. This is done as follows:
[tex]FV\ =\ PV(1+\frac{r}{n} )^{(n\times t)}[/tex]
where:
FV = future value = $6,000 (loan repayment)
PV = present value = amount borrowed = ??
r = interest rate = 10% = 10/100 = 0.1
n = number of compounding periods per year = 2
t = time = 3 years
[tex]6,000\ =\ PV(1+\frac{0.1}{2} )^{(2\times 3)}\\6,000\ =\ PV(1+ 0.05)^{6}\\6,000\ =\ PV(1.05)^{6}\\6,000\ =\ PV (1.340096)\\diving\ both\ sides\ by\ 1.340096\\PV = \frac{6,000}{1.340096} \\PV = \$4,477.29[/tex]
Therefore, Jason borrowed $4,4,77.29
Compute the companywide break-even point in dollar sales. 2. Compute the break-even point in dollar sales for the East region. 3. Compute the break-even point in dollar sales for the West region. 4. Prepare a new segmented income statement based on the break-even dollar sales that you computed in requirements 2 and 3. Use the same format as shown above. What is Crossfire’s net operating income (loss) in your new segmented income statement? 5. Do you think that Crossfire should allocate its common fixed expenses to the East and West regions when computing the break-even points for each region?
Complete Question:
Crossfire Company segments its business into two regions - East and West. The company prepared a contribution format segmented income statement as shown below:
Total Company East West
Sales $900,000 $600,000 $300,000
Variable Expenses 675,000 480,000 195,000
Contribution margin 225,000 120,000 105,000
Traceable Fixed Expenses 141,000 50,000 91,000
Segment Margin $84,000 $70,000 $14,000
Common Fixed Expenses 59,000
Net Operating Income $25,000
Instructions: (As given).
Answer:
Crossfire Company1. Computation of the companywide break-even point in dollar sales:
Break-even point in dollar sales
= Sales = Total costs
Sales = $816,000
Total costs = Variable costs + Traceable fixed costs
= $675,000 + $141,000
= $816,000
2. Computation of the break-even point in dollar sales for the East region:
Break-even point in dollar sales
= Sales = Total costs
= $530,000
Total costs = $530,000 ($480,000 + 50,000)
3. Computation of the break-even point in dollar sales for the West region:
Break-even point in dollar sales
= Sales = Total costs
= $286,000
Total costs = $286,000 ($195,000 + 91,000)
4. A new segmented income statement based on the break-even dollar sales that are computed in requirements 2 and 3:
Total Company East West
Sales $816,000 $530,000 $286,000
Variable Expenses 675,000 480,000 195,000
Contribution margin 141,000 50,000 105,000
Traceable Fixed Expenses 141,000 50,000 91,000
Segment Margin $0 $0 $0
Common Fixed Expenses 59,000
Net Operating Income/(loss) ($59,000)
Crossfire's net operating income (loss) in the new segmented income statement is: $59,000
5. I think that Crossfire should allocate the common fixed expenses to the East and West regions when computing the break-even points for each region.
This ensures that Crossfire does not run into net operating loss, company-wide. The segmented sales revenues for the regions can be used to allocate the common fixed expenses. Other suitable bases are traceable fixed expense, number of sales and administrative staff, or activity cost pools, using activity-based costing technique.
Explanation:
a) Break-even point in sales dollars is the sales point at which Crossfire's sales revenue will be equal to the total costs. At this point, Crossfire will not make any profit or incur any loss.
n the cash flow information for the Ping Kings project, Ping spent $300,000 for research and development of the golf clubs. Ping's tax rate is 40%. How much of this cost should be included in the initial (t = 0) cash flow for this project
Answer: C. $0
Explanation:
When including initial costs in a project's cash-flow, the relevant costs are those that henceforth will be spent on the project. Sunk costs are not to be included because they have already been incurred and cannot be recovered.
Research and Development costs have already been incurred and so are sunk costs. Hence they are not to be included in the initial cash-flow for the project.
The amount of the cost that should be included in the initial (t = 0) cash flow for Ping Kings' Project is D. $300,000.
This is a cash outlay (outflow). It bears a negative value. The initial cash flow cannot be $120,000, $180,000, or $0 because of Ping's tax rate of 40%. Under the FASB, Research and Development costs are capitalized.
Secondly, tax is not applied on capital investment but its net income.
Options for this question include:
A. $120,000
B. $180,000
C. $0
D. $300,000
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If interest rates rise, which of the following U.S. Government debt instruments would show the greatest percentage drop in value?
a. treasury bills.
b. treasury notes.
c. treasury bonds.
d. savings bonds.
Answer: treasury bonds
Explanation:
The treasury bonds are typically debt securities for the government that have a long maturity period e.g ten years ane above.
If interest rates rise, the U.S. Government debt instruments that would show the greatest percentage drop in value is the treasury bonds because of its longer maturity period.
The bookkeeper prepared a check for $48 but accidently recorded it as $95. When preparing the bank reconciliation, this should be corrected by:
Answer:
Adding $47 to the book balance.
Explanation:
The above is an example of transposition error, which is caused by substituting two or more sequential digits ; mistake would be corrected by adding $47 ($95 -$48) to the book balance.
Conner Manufacturing has two major divisions. Management wants to compare their relative performance. Information related to the two divisions is as follows:
Division 1:
Sales: $200,000
Expenses: $150,000
Asset investment: $950,000
Division 2:
Sales: $45,000
Expenses: $35,000
Asset investment: $200,000
Based on ROI, which division is more profitable?
a. Division 1
b. Both divisions have the same ROI ratio
c. Division 2
Answer:
The correct answer is:
Division 1 (a.)
Explanation:
Return on investment (ROI) is a financial ratio used to calculate the benefit earned on an investment cost.
Mathematically, it is represented as:
[tex]ROI = \frac{Net\ Income}{original\ cost\ of\ investment} \times 100[/tex]
where:
Net income = Sales - expenses
Original cost of investment = asset invested
Now let us calculate the ROI for each division:
Division 1 :
Net income = Sales - Expenses = 200,000 - 150,000 = $50,000
Asset investment = $950,000
[tex]ROI = \frac{50,000}{950,000} \times 100\ \\\\ROI = 5.26\%[/tex]
Division 2:
Net income = 45,000 - 35,000 = $10,000
Asset investment = $200,000
[tex]ROI = \frac{10,000}{200,000} \times 100\\\\= ROI = 0.05\ \times\ 100\ = 5\%[/tex]
Therefore, based on the ROI for both divisions, Division 1 has a greater ROI (5.26%) than Division 2 (5%) hence, Division 1 is more profitable.
The major components of a time series are all of the following EXCEPT: trend. cycles. random variations. seasonality. inflation.
Answer: Inflation
Explanation:
Time series data are refer to those taken over a period of years with a minimum of four years being satisfactory. The data shown will have variations that fall under four major components being;
Trend - Data that moves in a predictable fashion and so can be used to predict future behavior.Cycles - The variation here follows the business cycle or its own. Random Variables - Cannot be predicted. Seasonal - These follow a chronological pattern.Only Inflation does not fall here.
Which one of these is the best description of a comparative market analysis? It shows what similar homes in the area have recently sold for It shows the list prices of similar homes in the area It’s a guide to the minimum acceptable offer It discloses issues with the home that are known to the seller
Answer:
It shows what similar homes in the area have recently sold for.
Explanation:
Answer:
The statement "It shows the same types of homes in the area that are presently sold" is considered to be the best description for the comparative market analysis.
Explanation:
A comparative market analysis is a tool that is used by the real estate agent in order to remove the value of the particular property via evaluation of the same types of homes that could be presently sold in a similar area.
For finding the best description regarding the comparative market analysis, we need to determine the following information:
It does not show the list prices of the same types of homes in the area.It does not guide for a minimum acceptable offer.Also, it does not disclose the issues for the income that are aware to the seller.Therefore we can conclude that the first statement is correct
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Haruto Kawa, a Japanese citizen who works for Shin-Ro Corp. in Japan, has been asked to head the company's sales office in the United States. Upon taking the assignment, Haruto will be a(n) _____ manager.
Answer:
The correct answer will be "Expatriate".
Explanation:
An expatriate seems to be a migrant worker through his or her occupation, a specialist, or maybe even a skilled worker. Expatriate managers could've been characterized because of those who aren’t residents including its country during which individuals work, and were employed because of everyone's specialized operational skills but rather because of about there willingness to employ organization knowledge.If a firm has a service that is valuable, rare, and costly-to-imitate, but a substitute exists for the service, the firm will
Answer: the firm will have a temporary competitive advantage
Explanation: The firm in question would have a temporary competitive advantage. Competitive advantage describes something that places a company or business or a person above the competition such as value, rarity, difficult/costly-to-imitate amongst others. However, where a substitute is already in existence for such service, then the firm would have a temporary competitive advantage.
Kathy fields wants to buy a condominium selling for $95,000. The bank is requiring 20% down and is charging 9.5% interest for a 25 year loan. determine the amount required down payment and the amount of the monthly payment for the principal and interest.
Answer:
The down payment is 19000 and monthly payment is 664.009
Explanation:
The purchase price of condominium = $95000
Down payment = 20%
Interest charged = 9.5 %
Time period = 25 years
Down payment amount = 95000 × 20% = 19000
Remaining loan amount = $76000
Below is the calculation of monthly payment:
[tex]\text{Present vlaue of annuity} =\frac{A(1-(1+r)^{-n})}{r} \\A = monthy \ installment \\76000 = \frac{A(1-(1+ 0.095/12)^{-25\times 12})}{ 0.095/12} \\A(0.906112) = 601.667 \\A = 664.009[/tex]
Break-Even Sales and Sales to Realize Income from OperationsFor the current year ended October 31, Friedman Company expects fixed costs of $14,300,000, a unit variable cost of $250, and a unit selling price of $380.a. Compute the anticipated break-even sales (units).unitsb. Compute the sales (units) required to realize income from operations of $2,405,000.units
Answer:
a. 110,000 units
b. 128,500 units
Explanation:
a. Compute the anticipated break even sales in unit
Break even point in unit = Total fixed cost / Contribution margin
Total fixed cost = $14,300,000
Contribution margin per unit = Unit selling price - Unit variable cost
= $380 - $250
= $130
Break even point in units = $14,300,000 / $130
= 110,000 units
b. Compute sales (units) required to realize income from operations of $2,405,000
Break even point + expected profits = (total fixed costs + expected profits) / Contribution margin
° total fixed cost + expected profits
= $14,300,000 + $2,405,000
= $16,705,000
°contribution margin per unit
= $380 - $250
= $130
Break even point + expected profits in unit
= $16,705,000 / $130
= 128,500 units
The accountant for Mandarin Company is preparing the company's statement of cash flows for the fiscal year just ended. The following information is available:
Retained earnings balance at the beginning of the year $949,000
Net income for the year 295,000
Cash dividends declared for the year 55,000
Retained earnings balance at the end of the year 1,397,000
Cash dividends payable at the beginning of the year 12,600
Cash dividends payable at the end of the year 14,900
What is the amount of cash dividends paid that should be reported in the financing section of the statement of cash flows?
a. $55,000.
b. $57,300.
c. $82,500.
d. $2,300.
e. $52,700.
Answer: e. $52,700
Explanation:
Cash Dividend to be paid = Cash dividends payable at the beginning of the year + Cash dividends declared for the year - Cash dividends payable at the end of the year
= 12,600 + 55,000 - 14,900
= $52,700
What is the beta for a company with a 12% expected return, while treasury bills are yielding 5% and the market risk premium is 7%
Answer:
The beta for the company is 1.
Explanation:
A beta is the measure of systematic risk associated to a stock or the portfolio. Systematic risk is the market risk that affects all the stocks in the market due to factors that are uncontrollable. Such a risk is what the companies compensate the investors for. Using the CAPM equation, we calculate the expected rate of return of a stock. The equation is,
r = rRF + Beta * rpM
Where,
rRF is the risk free raterpM is the risk premium on marketWe already have the values for r, rRF and rpM. Plugging them in the formula, we calculate the beta to be,
0.12 = 0.05 + Beta * 0.07
0.12 - 0.05 = Beta * 0.07
0.07/ 0.07 = Beta
Beta = 1
hi , what is third-party companies??? thank
Answer:
A 'third party', is any entity that a company does business with. This may include suppliers, vendors, contract manufacturers, business partners and affiliates, brokers, distributors, resellers, and agents.
Mangum Co. is a large company that segments its business into cost and profit centers. The Cost center for the manufacture of Product M2T incurred the following costs in October:
Direct Labor: $25/unit
Direct Materials: $80/unit
Variable Overhead: $15/unit
Traceable Fixed Costs: $62,000
Common Fixed Costs: $100,000
Sales were 2,000 units in October. Each unit sells for $210. The M2T Department is being evaluated on overall profitability. In September, the department margin was $100,000. By how much did the department margin increase or decrease in October?
a. $100,000 decrease
b. $118,000 increase
c. $18,000 increase
d. $82,000 decrease
Answer: c. $18,000 increase
Explanation:
Department margin was $100,000 in September.
October Margin = Sales - Variable Costs - Traceable Fixed Costs
= (2,000 *( 210 - 25 - 80 - 15) ) - 62,000
= (2,000 * 90) - 62,000
= $118,000
= October Margin - September Margin
= 118,000 - 100,000
= $18,000 increase
Oligopoly firms will seldom change prices but if one firm increases their price, others may follow if costs have ____________ .
Answer:
decreased
Explanation:
if firms have decreased then it would be likely to follow other firms to increase popularity
Oligopoly firms will seldom change prices but if one firm increases its price, others may follow if costs have Decreased.
What is Oligopoly?A market structure known as an oligopoly has a limited number of enterprises, none of which can prevent the others from having a large impact. The market share of the major companies is calculated using the concentration ratio.
A market with a monopoly has only one producer, a duopoly has two businesses, and an oligopoly has three or more businesses. The maximum number of firms in an oligopoly is unknown, but it must be low enough so that each firm's actions have a significant impact on the others.
In the past, oligopolies have existed in the steel industry, the oil industry, the railroad industry, the tire industry, grocery store chains, and the wireless industry. An oligopoly can prevent new competitors from entering the market, stifle innovation, and raise prices, all of which are detrimental to consumers.
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Since the 1980s and 1990s, segmentation in global financial markets has been reduced. As a result of this, the correlation among securities markets has increased, thereby reducing, but not eliminating, the benefits of international portfolio diversification. True or Worse
Answer: True
Explanation:
With the on-going drive towards Globalization, companies took advantage to raise more capital by listing across various stock exchanges in the world. The result of this became that the securities market became more correlated.
This had the advantage of granting many companies enough capital that they became Multinational companies but it had the disadvantage of reducing the benefits of international portfolio diversification because the companies would be able to influence the movement of stock across the nations that they are listed in. Where before you could trade in Japan if there were losses in the NYSE, with a company being on both and suffering, both exchanges would feel it.
Income statement.
Use the data from the following financial statement in the popup window, Complete the partial income statement if the company paid interest expense of $18,100 for 2014 and had an overall tax rate of 40% for 2014. Complete the income statement below:
(Round to the nearest dollar.)
Income Statement Year Ending 2014
Sales revenue $360,000
Cost of goods sold $150,000
Fixed costs $42,900
Selling, general, and administrative expenses $27,200
Depreciation $45,900 EBIT $
Interest expense $ 18100
Taxable income $
Taxes $
Net income $
Find the accumulated depreciation for 2014 first.
The accumulated depreciation for 2014 is:_____(Round to the nearest dollar.)
Answer:
Income Statement Year Ending 2014
Sales revenue $360,000
Cost of goods sold $150,000
Gross profit $210,000
Fixed costs $42,900
Selling, general, and
administrative expenses $27,200
Depreciation $45,900
EBIT $94,000
Interest expense $18,100
Taxable income $ 75,900
Taxes $ 30,360
Net income $ 45,540
Find the accumulated depreciation for 2014 first.
The accumulated depreciation for 2014 is:_$45,900____(Round to the nearest dollar.)
Explanation:
A company's income statement is one of the three financial statements prepared by the entity at the end of its fiscal period. The statement compares the company's revenue with the expenses. After deducting the total expenses from the total revenue, the net income or loss is obtained. But before arriving at the net income or loss, there are other profit points that are usually calculated. The first is the gross profit, which is the difference between the sales revenue and the cost of goods sold. It shows the ability of the management to generate enough revenue to cover the cost of goods sold and make a profit from its trading or primary activities.
The next profit point is the Earnings before Interests and Taxes (EBIT). This is an important index for checking the financial performance of a company. The next is the Taxable Income on which the tax rate is determined and paid to government as Company Income Tax. After deducting the tax expense from the pre-tax income, the final profit point is the After-Tax Income or the Net Income. This determines the dividends policy and the share of retained earnings of the entity.
An 85-year old risk averse investor is not happy about the minimal return she is earning on her current investments. She is stressed about having enough income because her cost of living has been increasing by more than 10% annually. Her current portfolio composition consists of:
40% Money Market Fund
50% Bonds
10% Equities
What changes should you suggest to her portfolio?
A. Reduce the Money Market Fund allocation by 10% (to 30%) and put the released funds in commodities such as gold
B. Reduce the Money Market Fund allocation by 30% (to 10%) and put the released funds in AAA-rated corporate bonds
C. Liquidate the entire Money Market Fund allocation and put the released funds in Equities, bringing that allocation up to 50%
D. Liquidate the entire Money Market Fund allocation and put the released funds in U.S. Treasury securities
Answer:
B. Reduce the Money Market Fund allocation by 30% (to 10%) and put the released funds in AAA-rated corporate bonds
Explanation:
First of all, since the investor is risk averse and cannot afford to lose money on any risky investment, she should change the mix of her investment portfolio but without increasing risks. Corporate bonds that are AAA-rated carry a very low risk and pay a little higher than money market funds. So a small decrease in money market fund assets and an increase in AAA-rated bonds should yield a slightly higher return.
Investing in equities would be too risky and US Treasuries pay even less interests than money market funds.
Listed below are transactions that might be reported as investing and/or financing activities on a statement of cash flows. Possible reporting classifications of those transactions are provided also.
Required:
Indicate the reporting classification of each transaction by entering the appropriate classification code. (The first item is provided as an example.)
Classifications
+ I Investing activity (cash inflow)
– I Investing activity (cash outflow)
+ F Financing activity (cash inflow)
– F Financing activity (cash outflow)
N Noncash investing and financing activity
X Not reported as an investing and/or a financing activity
Classifications Transactions
+I 1. Sale of land.
2. Issuance of common stock for cash.
3. Purchase of treasury stock.
4. Conversion of bonds payable to common stock.
5. Lease of equipment.
6. Sale of patent.
7. Acquisition of building for cash.
8. Issuance of common stock for land.
9. Collection of note receivable (principal amount).
10. Issuance of bonds.
11. Issuance of stock dividend.
12. Payment of property dividend.
13. Payment of cash dividends.
14. Issuance of short-term note payable for cash.
15. Issuance of long-term note payable for cash.
16. Purchase of marketable securities ("available for sale").
17. Payment of note payable.
18. Cash payment for five-year insurance policy.
19. Sale of equipment.
20. Issuance of note payable for equipment.
21. Acquisition of common stock of another corporation.
22. Repayment of long-term debt by issuing common stock.
23. Payment of semiannual interest on bonds payable.
24. Retirement of preferred stock.
25. Loan to another firm.
26. Sale of inventory to customers.
27. Purchase of marketable securities (cash equivalents).
Answer:
Investing Activities refer to cashflow activities that have to do with Fixed assets as well as the ownership of the securities of other companies.
Financing Activities refer to cashflow activities that have to do with how the company sources funds for the company so this includes Equity related activities and long term liabilities.
1. Sale of land. +I
2. Issuance of common stock for cash. +F
3. Purchase of treasury stock. -F
4. Conversion of bonds payable to common stock. N
5. Lease of equipment. N
6. Sale of patent. +I
7. Acquisition of building for cash. -I
8. Issuance of common stock for land. N
9. Collection of note receivable (principal amount). +I
10. Issuance of bonds. +F
11. Issuance of stock dividend. X
12. Payment of property dividend. X
13. Payment of cash dividends. -F
14. Issuance of short-term note payable for cash. +F
15. Issuance of long-term note payable for cash. +F
16. Purchase of marketable securities ("available for sale"). -I
17. Payment of note payable. -F
18. Cash payment for five-year insurance policy. X
19. Sale of equipment. +I
20. Issuance of note payable for equipment. N
21. Acquisition of common stock of another corporation. -I
22. Repayment of long-term debt by issuing common stock. N
23. Payment of semiannual interest on bonds payable. X
24. Retirement of preferred stock. -F
25. Loan to another firm. -I
26. Sale of inventory to customers. X
27. Purchase of marketable securities (cash equivalents). X
Please see appropriate classification below.
+ I Investing activity (cash inflow)
1. Sale of land. +I
6. Sale of patent. +I
9. Collection of note receivable (principal amount). +I
19. Sale of equipment. +I
– I Investing activity (cash outflow)
7. Acquisition of building for cash. -I
16. Purchase of marketable securities ("available for sale"). -I
21. Acquisition of common stock of another corporation. -I
25. Loan to another firm. -I
+ F Financing activity (cash inflow)
2. Issuance of common stock for cash. +F
10. Issuance of bonds. +F
14. Issuance of short-term note payable for cash. +F
15. Issuance of long-term note payable for cash. +F
– F Financing activity (cash outflow)
3. Purchase of treasury stock. -F
13. Payment of cash dividends. -F
17. Payment of note payable. -F
24. Retirement of preferred stock. -F
N Noncash investing and financing activity
4. Conversion of bonds payable to common stock. N
5. Lease of equipment. N
8. Issuance of common stock for land. N
20. Issuance of note payable for equipment. N
22. Repayment of long-term debt by issuing common stock. N
X Not reported as an investing and/or a financing activity
11. Issuance of stock dividend. X
12. Payment of property dividend. X
18. Cash payment for five-year insurance policy. X
23. Payment of semi-annual interest on bonds payable. X
26. Sale of inventory to customers. X
27. Purchase of marketable securities (cash equivalents). X
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The Matterhorn Corporation is trying to choose between the following two mutually exclusive design projects:
Year Cash Flow (I) Cash Flow (II)
0 –$87,000 –$55,000
1 36,900 11,700
2 47,000 34,500
3 27,000 28,500
Requirement 1:
(a) If the required return is 10 percent, what is the profitability index for each project? (Do not round intermediate calculations). Round your answers to 3 decimal places.
(b) If the required return is 10 percent and the company applies the profitability index decision rule, which project should the firm accept?
Requirement 2:
(a) If the required return is 10 percent, what is the NPV for each project? (Do not round intermediate calculations. Round your answers to 2 decimal places .
Answer:
PI for the first project = 1 + ($5,673.93 / 87,000) = 1.065
PI for the second project = 1 + ($5,561.23 / $55,000) = 1.101
b. the second project should be chosen because the PI is higher
NPV for 1 = $5,673.93
NPV for 2 = $5,561.23
Explanation:
profitability index = 1 + (NPV / Initial investment)
Net present value is the present value of after tax cash flows from an investment less the amount invested.
NPV can be calculated using a financial calculator
for the first project
Cash flow in year 0 = –$87,000
Cash flow in year 1 = 36,900
Cash flow in year 2 = 47,000
Cash flow in year 3 = 27,000
I = 10%
NPV = $5,673.93
for the second project
Cash flow in year 0 = –$55,000
Cash flow in year 1 = 11,700
Cash flow in year 2 = 34,500
Cash flow in year 3 = 28,500
I = 10%
NPV = $5,561.23
PI for the first project = 1 + ($5,673.93 / 87,000) = 1.065
PI for the second project = 1 + ($5,561.23 / $55,000) = 1.101
b. the second project should be chosen because the PI is higher
To find the NPV using a financial calculator:
1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.
2. after inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction.
3. Press compute
A firm is expected to have net earnings of $1,480,000 three years from now. There are 500,000 shares of stock outstanding. The firm's current P/E ratio is 18 and it is expected to remain at that level. What is the firm's expected stock price for year 3
Answer:
Stock price = $53.28
Explanation:
DATA
Earnings = $1,480,000
Shares outstanding = 500,000
P/E ratio = 18
Stock price = ?
he firm's expected stock price for year 3 can be calculated by using Price earning ratio formula
Formula:
P/E ratio = Stock price / EPS
Stock price = P/E ratio x EPS
Stock price = 18 x $2.96(w)
Stock price = $53.28
Workings
EPS = Earning per share
EPS = Earning /Shares
EPS = $1,480,000 /500,000
EPS = $2.96
Merry Maidens Cleaning generally charges $280 for a detailed cleaning of a normal-size home. However, to generate additional business, Merry Maidens is offering a new-customer discount of 10%. On May 1, Ms. E. Pearson has Merry Maidens clean her house and pays cash equal to the discounted price. Required: Record the revenue earned by Merry Maidens Cleaning on May 1.
Answer:
May 1
DR Cash $252
CR Service Revenue $252
(To record payment for services rendered)
Working
Cash = Net Service revenue
Net Service revenue = $280 * ( 1 - 10%)
= 280 * 90%
= $252
Calculate gross profit ratio and cost of goods sold Refer to the consolidated statements of earnings in the Campbell Soup Company annual report in the appendix.
Required:
a. Calculate the gross profit ratio for each of the past three years.
b. Assume that Campbell's net sales for the first four months of 2015 totaled 527 billion. Calculate an estimated cost of goods sold and gross profit for the four months.
Answer:
gross profit ratio = (total revenue - cost of goods sold) / total revenue
I looked for the missing information:
year total sales cost of goods sold
2012 $7,175 $4,365
2013 $8,052 $5,140
2014 $8,268 $5,370
a)
gross profit ratio:
2012 = ($7,175 - $4,365) / $7,175 = 39.16%
2013 = ($8,052 - $5,140) / $8,052 = 36.16%
2014 = ($8,268 - $5,370) / $8,268 = 35.05%
b)
since the gross profit margin ratio is decreasing every year, we can assume that it will keep decreasing in 2015. Using linear regression, the slope is -0.02055. So the estimated gross profit margin ratio for 2015 = 34.33%
estimated cogs (first four months of 2015) = $527 billion x (1 - 34.33%) = $346.08 billion
estimated gross profit (first four months of 2015) = $527 billion x 34.33% = $180.92 billion
Bramble Corp. receives $360,000 when it issues a $360,000, 8%, mortgage note payable to finance the construction of a building at December 31, 2020. The terms provide for annual installment payments of $60,000 on December 31. Prepare the journal entries to record the mortgage loan and the first two payments.
Answer:
The First Payment occurs on 31 December 2021 as :
Mortgage Payable $31,200 (debit)
Interest Expense $28,800 (debit)
Cash $60,000 (credit)
The Second Payment occurs on 31 December 2022 as :
Mortgage Payable $33,696 (debit)
Interest Expense $26,304 (debit)
Cash $60,000 (credit)
Explanation:
First prepare an amortization schedule using the following data concerning the mortgage note :
Hint : Determine the number of years, N of this bond.
PV = $360,000
PMT = - $60,000
P/Yr = 1
r = 8 %
FV = 0
N = ?
The length of the bond, N is 8.4969 or 9 years
The First Payment occurs on 31 December 2021 as :
Mortgage Payable $31,200 (debit)
Interest Expense $28,800 (debit)
Cash $60,000 (credit)
The Second Payment occurs on 31 December 2022 as :
Mortgage Payable $33,696 (debit)
Interest Expense $26,304 (debit)
Cash $60,000 (credit)
eally Great Corporation manufactures industrial−sized landscaping trailers and uses budgeted machine−hours to allocate variable manufacturing overhead. The following information pertains to the company's manufacturing overhead data: Budgeted output units 51,000 units Budgeted machine−hours 10,200 hours Budgeted variable manufacturing overhead costs for 51,000 units $387,600 Actual output units produced 35,750 units Actual machine−hours used 14,300 hours Actual variable manufacturing overhead costs $328,900 What is the budgeted variable overhead cost rate per output unit?
Answer:
$7.60 per unit of output
Explanation:
Budgeted output units 51,000 units
Budgeted machine−hours 10,200 hours
Budgeted variable manufacturing overhead costs for 51,000 units $387,600
budgeted variable overhead cost per unit of output = $387,600 / 51,000 units = $7.60 per unit of output
In this case, the applied variable overhead rate = 35,750 units x $7.60 = $271,700, which would have been under-applied since the actual variable overhead costs were much higher, $328,900.
