Answer and Explanation:
The Journal entry is shown below:-
1. Sales revenue Dr, $28,656 ($121,700 + $287,673) × 7%
To Sales tax payable $28,656
(Being sales tax payable is recorded)
Here we debited the sales revenue as it decreased the revenue while we credited the sales tax payable as it increased the liabilities so that the proper posting could be done
Working note
Credit sales = $130,219 × 100 ÷ 107
= $121,700
Cash sales = $302,810 × 100 ÷ 107
= $287,673
Direct materials information Medium speed bump Large speed bump
Standard pounds per unit 15 ?
Standard price per pound $1.00 $1.80
Actual quantity purchased and used per unit ? 16
Actual price paid for material per pound $1.80 $2.10
Direct materials price variance $1,120 U $1,920 U
Direct materials quantity variance $100 F ?
Total direct material variance ? $480 U
Number of units produced 100 400
Calculate missing direct material variables
Answer:
Explanation:
For Medium speed bump
AQ AP AQ SP SQ SP
1,400 $ 1.80 1,400 $ 1.00 1,500 $ 1.00
$ 2,520.00 $ 1,400.00 $ 1,500.00
A B C
DMPV A-B $ 1,120.00 U
DMQV C-B $ 100.00 F
DMV A-C $ 1,020.00 U
We know that Direct material price variance = AQ(AP-SP) = 1120
AQ = 1120/(AP-SP)
AQ = 1120/(1.80-1.00)
AQ = 1,400
SQ = 100 x 15 = 1500
For Large speed bump
AQ AP AQ SP SQ SP
6,400 $ 2.10 6,400 $ 1.80 7,200 $ 1.80
$ 13,440.00 $ 11,520.00 $ 12,960.00
A B C
DMPV A-B $ 1,920.00 U
DMQV C-B $ 1,440.00 F
DMV A-C $ 480.00 U
Using this equation , DMV = DMPV + DMQV
DMQV = DMV-DMPV
DMQV = 480-1920
DMQV = 1440 F
Direct material quantity variance = SP(SQ-AQ) = 1440
SQ-AQ = 1440/SP
1440/SP + AQ = SQ
1440/1.8 + 6400 = SQ
SQ = 7200
he following data has been collected about Keller Company's stockholders' equity accounts: Common stock $10 par value 30,000 shares authorized and 15,000 shares issued, 2,000 shares outstanding $150,000 Paid-in capital in excess of par value, common stock 60,000 Retained earnings 35,000 Treasury stock 25,000 Assuming the treasury shares were all purchased at the same price, the number of shares of treasury stock is:
Answer:
13,000 shares
Explanation:
data provided for computing the number of shares of treasury stock is here below:-
Issued Share = 15,000
Outstanding Shares = 2,000
The computation of the number of shares of treasury stock is shown below:-
Number of shares of treasury stock = Issued Share - Outstanding Shares
= 15,000 - 2,000
= 13,000 shares
Therefore for computing the number of shares of treasury stock we simply deduct the outstanding share from issued shares.
Peggy sells pistachios and almonds at the farmer’s market. She currently prices pistachios at $7 per bag and almonds at $4 per bag. She observes that every hour, 4 people each buy one bag of pistachios and 2 people each buy one bag of almonds. Having surveyed them, she learns that 2 of the pistachio buyers would be willing to pay $2 for the bag of almonds while the other two would only be willing to pay $1. Both almond buyers would be willing pay $5 for the bag of pistachios. Suppose Peggy decides to sell a bundle containing one bag of pistachios and one bag of almonds in addition to selling them separately. What price should she charge for the bundle in order to maximize revenue?
Answer:
The price she should charge for the bundle in order to maximize profit is 9
Explanation:
Solution
The total pistachios sold = 7 * 2 =14
The total almonds sold is = 4*1 = 4
So,
The total of both pistachios and almonds = 14 + 4 + 18
Thus,
we solve for getting average of the two which is:
Getting the average of the two in the bundle = 18/2
=9
Therefore p =9
According to an article in the Wall Street Journal, KB Home and other builders found demand for new houses increasing in 2017 as a result of an increase in the formation of new households. In the long run, formation of new households depends on population growth. Source: Laura Kusisto and Sarah Chaney, "U.S. Housing Starts Fell in April for Third Time in Four Months," Wall Street Journal, May 16, 2017. Are firms like homebuilders that sell products whose demand depends partly on demographic factors likely to be more or less affected by the business cycle than are other firms whose products are less dependent on these factors (holding constant other factors that affect the demand for new houses)? Briefly explain.
Answer:
Generally speaking, demographic growth can affect the economy quite a lot, but the economy has a very little effect on demographic growth. E.g. the baby boomers were great for the economy during several decades, but there is no clear relationship between population growth and economic activity.
This means that companies like home builders whose demand depends on other factors besides the economy, will be less affected by economic recessions or expansions. E.g. the demographic growth in America was around 0.7% during 2019 and the economy was growing that year.
Actually, the US population has been declining over the last decades. The real growth factor in population has been immigration in the last decades, and that has also been declining lately.
Proper payroll accounting methods are important for a business for all of the following reasons except a.payroll is subject to various federal and state regulations b.good employee morale requires timely and accurate payroll payments c.to help a business with cash flow problems by delayed payments of payroll taxes to federal and state agencies d.payroll and related payroll taxes have a significant effect on the net income of most businesses
Answer:
Option C
Explanation:
In simple words, Payroll Accounting refers to the task of estimating and delivering to workers and other organizations pay , bonuses and allowances. That is usually achieved by various papers, including time sheets, earnings, as well as an accounting register.
Payroll management actually tracks an enterprise's payroll costs through accounting records. Payroll planning covers both cost and liability reports which including FICA Payable Payments, fed and provincial taxes Payable, Life Care Contributions Payable, etc.
During March 2020, Toby Tool & Die Company worked on four jobs. A review of direct labor costs reveals the following summary data. Actual Standard Job Number Hours Costs Hours Costs Total Variance A257 200 $4,000 210 $4,200 $200 F A258 450 10,350 430 8,600 1,750 U A259 300 6,390 299 5,980 410 U A260 110 2,090 103 2,060 30 F Total variance $1,990 U Analysis reveals that Job A257 was a repeat job. Job A258 was a rush order that required overtime work at premium rates of pay. Job A259 required a more experienced replacement worker on one shift. Work on Job A260 was done for one day by a new trainee when a regular worker was absent. Prepare a report for the plant supervisor on direct labor cost variances for March. (Round actual rate and standard rate to 2 decimal places, e.g. 10.50.)
Answer and Explanation:
The Preparation of report for the plant supervisor on direct labor cost variances for March is attached with the help of spreadsheet.
The Formula are as shown below:-
Actual per hour = Actual costs ÷ Actual number of hours
Standard per hour = Standard costs ÷Standard number of hours
Quantity variance = (Actual hours -Standard hours) × Standard Rate
Price variance = (Actual Rate - Standard Rate) × Actual Hour
Therefore if actual hours is lesser than Standard hours it will become favorable and if actual hours is higher than standard hours it will become unfavorable. In the similar way if actual rate is higher than standard rate then it will become unfavorable on the other hand if actual rate is lesser than standard rate then it will become favorable.
Precise Machinery is analyzing a proposed project. The company expects to sell 2,100 units, give or take 5 percent. The expected variable cost per unit is $260 and the expected fixed costs are $589,000. Cost estimates are considered accurate within a plus or minus 4 percent range. The depreciation expense is $129,000. The sales price is estimated at $750 per unit, give or take 2 percent. The tax rate is 35 percent. The company is conducting a sensitivity analysis on the sales price per unit using a sales price estimate of $755. What is the operating cash flow based on this analysis
Answer:
$337,975
Explanation:
Operating Cash Flow:
Operating Cash Flow
{[($755 - $260) x 2,100 units] - $589,000} {1 - 0.35} + {$129,000 x 0.35}
{[$495 x 2,100 units] - $589,000} {0.65} + {$129,000 x 0.35}
{$1,039,500 - $589,000} {0.65} + $45,150
{$450,500} {0.65} + $45,150
$292,825 + $45,150
$337,975
Garcia's Garage desires to create some colorful charts and graphs to illustrate how reliably its mechanics "get under the hood and fix the problem." The historic average for the proportion of customers that return for the same repair within the 30-day warranty period is 0.09.Each month, Garcia tracks 100customers to see whether they return for warranty repairs. The results are plotted as a proportion to report progress toward the goal. If the control limits are to be set at twostandard deviations on either side of the goal, determine the control limits for this chart. In March, 5of the 100customers in the sample group returned for warranty repairs. Is the repair process in control?
Answer:
the given question historic average is given as 0.09 for 100 customers.
Therefore,
P = 0.09 and n = 100
The control liimits are to be set two standard deviation around the mean.
Standard deviation =
\sigma = \sqrt{p(1-p)/n)}
Therefore substitutin g the value in the above formula:
\sigma = \sqrt{0.09(1-0.09)/100)}
After soving we get result as:
\sigma = 0.0286
Upper Control Limit = 0.09 + 2 * \sigma = 0.09 + (2 * 0.0286) = 0.1472
Lower Control Liimit = = 0.09- 2 * \sigma = 0.09 - (2 * 0.286) = -0.0328
For March, 5 out of 100 customers returned for warranty repairs, therefore,
p for March = 5/100 = 0.05
The process doses not fall under control limits, so it is out of control for March.
The Berkel Corporation manufactures Widgets, Gizmos, and Turnbols from a joint process. June production is 5,000 widgets; 8,750 gizmos; and 10,000 turnbols. Respective per unit selling prices at splitoff are $75, $50, and $25. Joint costs up to the splitoff point are $187,500. If joint costs are allocated based upon the sales value at splitoff, what amount of joint costs will be allocated to the widgets
Answer:
Allocated join cost = $66,176.47
Explanation:
The joint cost is allocated using sales. This is done by using the proportion of sales of the total which is attributed to the sales value of widget
Total sales value of the three products=
(75 × 5,000) + ($50× 8,750) + ( $25× 10,000)= 1,062,500
Joint cost = $187,500.
Joint costs allocated to Widget
= (75 × 5,000)/1,062,500 × $187,500. = 66,176.47
Allocated join cost =$66,176.47
Mobility Partners makes wheelchairs and other assistive devices. For years it has made the rear wheel assembly for its wheelchairs. A local bicycle manufacturing firm, Trailblazers, Inc., offered to sell these rear wheel assemblies to Mobility. If Mobility makes the assembly, its cost per rear wheel assembly is as follows (based on annual production of 2,000 units): Direct materials $ 26 Direct labor 53 Variable overhead 21 Fixed overhead 49 Total $ 149 Trailblazers has offered to sell the assembly to Mobility for $110 each. The total order would amount to 2,000 rear wheel assemblies per year, which Mobility's management will buy instead of make if Mobility can save at least $20,000 per year. Accepting Trailblazers's offer would eliminate annual fixed overhead of $38,500. Required: a. Prepare a schedule that shows the total differential costs. (Select option "higher" or "lower", keeping Status Quo as the base. Select "none" if there is no effect.)
Answer and Explanation:
The preparation of the total differential cost schedule is presented below
Schedule showing statement of total differential cost
Particulars Make the wheels Buy from trailblazers Differential cost
Offer of trailblazer $220,000 $220,000 Higher
(2000 × $110)
Material cost $52,000 $52,000 Lower
($26 × 2000)
Labor cost $106,000 $106,000 Lower
($53 × 2000)
Variable overhead $42000 $42,000 Lower
($21 × 2000)
Fixed overhead $98000 $59,500 $38,500 Lower
($49 × 2000) ($98,000 -$38,500)
Total cost $298,000 $279,500 ($18,500) Lower
By adding the total cost we can get the making cost, buying cost and differential cost
The members of a wedding party have approached Imperial Jewelers about buying 26 of these gold bracelets for the discounted price of $367.00 each. The members of the wedding party would like special filigree applied to the bracelets that would require Imperial Jewelers to buy a special tool for $457 and that would increase the direct materials cost per bracelet by $7. The special tool would have no other use once the special order is completed. To analyze this special order opportunity, Imperial Jewelers has determined that most of its manufacturing overhead is fixed and unaffected by variations in how much jewelry is produced in any given period. However, $8.00 of the overhead is variable with respect to the number of bracelets produced. The company also believes that accepting this order would have no effect on its ability to produce and sell jewelry to other customers. Furthermore, the company could fulfill the wedding party’s order using its existing manufacturing capacity.
Answer:
this special order will result in a $2,637 profit, so the company should accept it
Explanation:
special order for 26 gold bracelets
discounted price of $367 per unit
normal production costs:
direct materials $143direct labor $90manufacturing overhead $31total $264costs related to the special order
increase in direct materials = $7 per unit, total of $150 per unit
direct labor $90 per unit
variable overhead = $8 per unit
machine used for this project only $457
revenue generated by special order:
total revenue $9,542
- variable costs ($6,448)
direct materials $3,900direct labor $2,340variable overhead $208- special machine ($457)
profit from special order $2,637
Whitmer Corporation is working on its direct labor budget for the next two months. Each unit of output requires 0.07 direct labor-hours. The direct labor rate is $9.00 per direct labor-hour. The production budget calls for producing 4,200 units in February and 4,700 units in March. Required: Prepare the direct labor budget for the next two months, assuming that the direct labor work force is fully adjusted to the total direct labor-hours needed each month. (Round "labor-hours per unit"
Answer:
Results are below.
Explanation:
Giving the following information:
Each unit of output requires 0.07 direct labor-hours. The direct labor rate is $9.00 per direct labor-hour. The production budget calls for producing 4,200 units in February and 4,700 units in March.
Direct labor budget of February:
Direct labor hours= 4,200*0.07= 294
Direct labor cost= 294*9= $2,646
Direct labor budget of March:
Direct labor hours= 4,700*0.07= 329
Direct labor cost= 329*9= $2,961
Grey Inc. has been purchasing a component, Z for $85 a unit. The company is currently operating at 75% of full capacity, and no significant increase in production is anticipated in the near future. The cost of manufacturing a unit of Z, determined by absorption costing method, is estimated as follows: Direct materials $30 Direct labor 15 Variable factory overhead 26 Fixed factory overhead 10 Total $81 Prepare a differential analysis report, dated March 12 of the current year, on the decision to make or buy Part Z.
Answer:
The difference between buying and making is $14 per unit. It is $14 cheaper to make the unit.
Explanation:
Giving the following information:
Purchasing price= $85 a unit.
Variable cost per unit:
Direct materials $30
Direct labor 15
Variable factory overhead 26
Because there is unused capacity, the fixed costs won't increase. Fixed factory overhead should not be taken into account.
Total unitary variable cost= $71
The difference between buying and making is $14 per unit. It is $14 cheaper to make the unit.
g On the first day of its fiscal year, Chin Company issued $10,000,000 of five-year, 7% bonds to finance its operations of producing and selling home improvement products. Interest is payable semiannually. The bonds were issued at a market (effective) interest rate of 8%, resulting in Chin receiving cash of $9,594,415. a. Journalize the entries to record the following: Issuance of the bonds. First semiannual interest payment. The bond discount is combined with the semiannual interest payment. (Round your answer to the nearest dollar.) Second semiannual interest payment. The bond discount is combined with the semiannual interest payment. (Round your answer to the nearest dollar.) If an amount box does not require an entry, leave it blank. 1. 2. 3. b. Determine the amount of the bond interest expense for the first year. $ c. Why was the company able to issue the bonds for only $9,594,415 rather than for the face amount of $10,000,000? The market rate of interest is the contract rate of interest. Therefore, inventors wi
Answer and Explanation:
According to the scenario, computation of the given data are as follow:-
Total Years = 5, semiannually = 5 × 2 = 10
Rate = 7% yearly, semiannually rate = 7 ÷ 2 = 3.5%
Journal Entries
On Jan 1
Cash A/c Dr. $9,594,415
Discount on bonds payable A/c Dr. $405,585
To Bonds payable A/c $10,000,000
(Being the issuance of bond payable is recorded)
Discount value of issued bonds = $10,000,000 - $9,594,415 = $405,585
2).
On Jun
Interest expenses A/c Dr. $390,559
Discount on bonds payable A/c($405,585 ÷10) Dr.40,559
To Cash A/c($10,000,0000 × 3.5%) $350,000
(Being the payment of first semiannual interest is recorded)
3).
On Dec 31
Interest expenses A/c Dr. $390,559
Discount on bonds payable A/c($405,585*10/100) Dr.$40,559
To Cash A/c($10,000,000*3.5/100) $350,000
(Being the payment of second semiannual interest is recorded)
b). Bond Interest Expense Amount for First Year
= Interest Expenses + Amortized Discount
= $700,000 + $81,117
= $781,117
Interest expenses = $350,000 + $350,000 = $700,000
Amortized Discount = $40,559 + $40,559 = $81,117
c).The Company issued the bonds at $9,594,415 for the face amount of $10,000,000 because bonds issued at discount for $405,585 as the coupon rate is less than the market interest.
Computer Service and Repair was started five years ago by two college roommates. The company’s comparative balance sheets and income statement are presented below, along with additional information. Current Year Prior Year Balance Sheet at December 31 Cash $ 6,765 $ 8,815 Accounts receivable 1,150 590 Prepaid expenses 550 95 Equipment 530 0 Accumulated depreciation (95 ) 0 $ 8,900 $ 9,500 Wages payable $ 440 $ 1,550 Short-term note payable 255 0 Common stock 2,800 2,800 Retained earnings 5,405 5,150 $ 8,900 $ 9,500 Income Statement for Current Year Service revenue $ 43,000 Depreciation expense 95 Salaries expense 34,500 Other expenses 8,150 Net income $ 255 Additional Data: a. Prepaid expenses relate to rent paid in advance. b. Other expenses were paid in cash. c. Purchased equipment for $530 cash at the beginning of the current year and recorded $95 of depreciation expense at the end of the current year. d. At the end of the current year, the company signed a short-term note payable to the bank for $255. Required: Prepare the statement of cash flows for the year ended December 31, current year, using the indirect method. (List cash outflows as negative amounts.)
Answer:
Explanation:
Cash Flow Statement For the year ended December 31, Current Year:
Particulars AmountCash Flow from Operating Activities
Net income 255
Add: Non-cash Charges
Depreciation expense 95
Less: Increase in W.Capital
Accounts receivable -560
Prepaid expenses -455
Wages payable -1110
Short-term note payable 255
Net Cash used in Operating Activities -1520
Cash Flow from Investing Activities
Purchase of equipment -530
Net Cash used in Investing Activities
Cash Flow from Investing Activities NIL
Net cash Used during the year -2050
Opening cash and cash equivalent 8815
Closing cash and cash equivalent 6765
Which of the following statements is correct with respect to inventories? The FIFO method assumes that the costs of the earliest goods acquired are the last to be sold. It is generally good business management to sell the most recently acquired goods first "Under FIFO, the ending inventory is based on the latest units purchased." FIFO seldom coincides with the actual physical flow of inventory.
Answer:
Under FIFO, the ending inventory is based on the latest units purchased.
Explanation:
First in, first out inventory (FIFO) method values cost of goods sold using the purchase price of the "oldest" units in inventory. This means that the cost of the first units sold will be used to determine COGS.
On the other hand, last in, first out (LIFO) method uses the price of the most recently purchased units to determine the cost of goods sold.
A television manufacturer would like to reduce its inventory. To this end, you are asked by the operations manager to assess its inventory level. You have the following information on average inventories from last year's financial statement: Raw materials $1,500,000 Work-in-process $1,200,000 Finished goods $800,000 In addition, the cost of goods sold last year (50 weeks) was $20 million. What is its total inventory (measured as weeks of supply) Answer
Answer:
A.8.75 weeks
B.5.71
Explanation:
a.
Weeks of supply = average aggregate inventory value/weekly sales at cost
=(1,500,000 + 1,200,000 + 800,000)/(20,000,000/50)
=3,500,000/400,000
= 8.75 weeks
b.Inventory turnover = annual sales (at cost)/average aggregate inventory value
=20 million/3.5 million
= 5.71
Answer:
Weeks Of Supply = 27.82 weeks
Explanation:
Weeks of Supply tells us that on average how long an inventory will last based on current demand.
The formula to calculate it is given below
Weeks Of Supply = Average Aggregate Inventory Value/ Weekly Cost of Sales
Weeks Of Supply = Raw Materials + Work In Process + Finished Goods/ Weekly Cost of Sales
Weeks Of Supply =$1,500,000+ $1,200,000+ $800,000/$ 20,000,000/52
Weeks Of Supply = 10,700,000/384615.385= 27.82 weeks
If the weeks of supply is lower it is better.
Inventory Turnover= $ 20,000,000/10,700,000=1.87 turns
(Ignore income taxes in this problem.) James just received an $8,000 inheritance check from the estate of his deceased uncle. James wants to set aside enough money to pay for a trip in five years. If the trip is expected to cost $5,000 and the rate of return is 12 percent per year, how much of the $8,000 must James deposit now to have the $5,000 in five years
Answer:
$2837.13
Explanation:
The account value is multiplied by 1 +12% = 1.12 each year, so at the end of 5 years, it will have been multiplied by 1.12^5. For some investment P, we want ...
5000 = P×1.12^5
5000/1.12^5 = P ≈ $2837.13
James must deposit about $2837.13 now to have the required amount in 5 years.
Royal Dutch Shell(RDS) acquires ethanol fuel from Brazilian Cosan energy company. The Ethanol costs 500 million Brazilian Real(BRL) to grow the corn and convert it to ethanol. RDS doesn't have BRL, so they must use the futures market to acquire the currency. If 1 BRL/USD futures contract is for 100,000 reals What is the optimal number of BRL/USD futures contracts for Shell to take to receive the entire amount of Real at delivery.
Answer:
The answer is 5000 future contracts
Explanation:
Solution
Given that:
Royal Dutch buys ethanol fuel from Brazilian energy company
Nowm,
The Required coverage = 500,000,000
The BRL/USD futures contract size = 100,000
Number of contracts required = 500,000,000/100,000
So,
= 500,000,000/100,000 = 5000
Therefore, the optimal number of BRL/USD futures contracts for Shell to take to receive the entire amount of Real at delivery is 5000
The Essex Company found that an average of 10 days elapses between when customer payments are received and the deposited funds clear the customer's bank and become usable by the firm. Essex's annual sales are $240 million. (Assume 365 days per year when converting from annual data to daily data or vice versa.) What is the increase in Essex's average cash balance assuming that it can reduce the time required to process customer payments by 3 days through more efficient payment processing methods
Answer:
$1,972,602.74
Explanation:
According to the scenario, computation of the given data are as follow:-
Increase in Essex’s Average Cash Balance = (Annual Sales ÷ Days Per Year) × Required Process Customer by Days
= (240,000,000 ÷ 365) × 3
= 657,534.25 × 3
= $1,972,602.74
According to the analysis, Increase in Essex’s average cash balance is $1,972,602.74
A perfectly competitive firm is a: Group of answer choices price taker, because it must accept the market equilibrium price. price participant, because it can coordinate its pricing decisions with other firms. price maker, because it has the freedom to set the selling price. price leader; it can change its price and other firms will adjust.
Answer:
A. price taker, because it must accept the market equilibrium price.
Explanation:
A perfectly competitive firm is an ideal firm in which different firms sell products that are homogeneous or similar in nature. They are price takers because the prices of goods are determined by changes in demand and supply, therefore they must accept the market equilibrium price. They do not attempt to fix the prices of commodities. The opposite of this type of firm is a monopoly where a firm has complete control of a market, having the ability to change prices as it wills.
An example can be found among businesses that sell similar kinds of products. It could be in the form of grocery stores that sell similar wares. When any of the sellers leave the market, it does not affect the other sellers as their prices are at equilibrium. Therefore, anyone can enter or exit this type of market.
Zoum Corporation had the following transactions during the year: Issued $250,000 of par value common stock for cash. Recorded and paid wages expense of $120,000. Acquired land by issuing common stock of par value $100,000. Declared and paid a cash dividend of $20,000. Sold a long-term investment (cost $8,000) for cash of $6,000. Recorded cash sales of $800,000. Bought inventory for cash of $320,000. Acquired an investment in Zynga stock for cash of $42,000. Converted bonds payable to common stock in the amount of $1,000,000. Repaid a 6-year note payable in the amount of $440,000. What is the net cash provided by financing activities?
Answer:
-$210,000
Explanation:
Issued Common Stock at par for Cash $250,000
Less:
Declared and paid a cash dividend $20,000
Repayment of 6-year note payable $440,000
Net Cash provided by Financing Activities ($210,000)
The MoMi Corporation’s income before interest, depreciation and taxes, was $2.7 million in the year just ended, and it expects that this will grow by 5% per year forever. To make this happen, the firm will have to invest an amount equal to 15% of pre tax cash flow each year. The tax rate is 30%. Depreciation was $330,000 in the year just ended and is expected to grow at the same rate as the operating cash flow. The appropriate market capitalization rate for the unlevered cash flow is 12% per year, and the firm currently has debt of $5 million outstanding. Use the free cash flow approach to calculate the value of the firm and the firm’s equity. (Enter your answer in dollars not in millions.)
Answer:
1. The value of the firm is $23,760,000
2. The value of the equity is $18.76m
Explanation:
In order to calculate the value of the firm we would have to use the following formula:
Value of firm = FCF1 / (r - g) = FCF0 x (1 + g) / (r - g)
Operating Cash Flows (OCF) = (EBITDA - Depreciation) x (1 - tax) + Depreciation
= (2,700,000 - 330,000) x (1 - 30%) + 330,000
= $1,989,000
Free Cash Flow (FCF) = OCF - Investment
We know that investment = 15% of EBITDA = 15% x 2,700,000 = 405,000
Current FCF = 1,989,000 - 405,000 = 1,584,000
Therefore, Value of the firm = 1,584,000 x (1 + 5%) / (12% - 5%) = $23,760,000
To calculate the value of equity we would have to use the following formula:
Value of equity = Value of Firm - Value of Debt = 23.76 - 5 = $18.76m
Answer:
Value of the firm $ 14550000.
Value of the firm's equity $ 11550000.
Explanation:
Cash flow from operations = $ 1785000 (1700000 + 5 % of 1700000).
Depreciation = $ 241500. (230000 + 5 % of 230000).
Taxable income = $ 1543500 (1785000 - 241500)
Net income (after tax) = 1543500 - 30 % of 1543500 = $ 1080450.
Cash flow from operations (after tax) = 1080450 + 241500 (Depreciation, being non cash expense). = $ 1321950.
Free cash flow available = Cash flow from operations (after tax) - Income from investment.
= 1321950 - (1700000 * 17 % * 1.05)
= 1321950 - 303450.
= $ 1018500.
Value of the firm = Free cash flow available / (Capitalization rate - Growth rate)
= 1018500 / (0.12 - 0.05)
= 1018500 / 0.07
= $ 14550000.
Value of the firm's equity = Total value of firm - Value of debt of firm
= 14550000 - 3000000
= $ 11550000.
Conclusion :-
Value of the firm $ 14550000.
Value of the firm's equity $ 11550000.
Companies within the oneworld, Star, and Sky Team alliances have also engaged in major mergers and acquisitions (M&A): American and US Air (oneworld), Delta and Northwest (Sky Team), and Continental and United (Star). What are the advantages and disadvantages of M&A versus non-equity alliances in this industry? 15-4. Some airlines, such Daniels, John. International Business (p. 425). Pearson Education. Kindle Edition.
Answer:
Check the explanation
Explanation:
Merger and acquisition. It is a general terminology used to mention consolidation of firms merger that takes place when two businesses join together to form a new organization.
While Acquisition is the buying of one firm by another company.
The following are the benefits of merger and acquisition in the airlines industry:
• Executes economies of scale
• Help obtain coordination effect
• Competitors restriction
• Improved resources allocation
The following are the drawbacks of merger and acquisition in the airlines industry:
• Cultural mismatch among companies during merger
•Antitrust
• Placing risk of acquired workers
The following data concerning the retail inventory method are taken from the financial records of Welch Company. Cost Retail Beginning inventory $ 196,000 $ 280,000 Purchases 896,000 1,280,000 Freight-in 24,000 — Net markups — 80,000 Net markdowns — 56,000 Sales — 1,344,000 If the ending inventory is to be valued at approximately the lower of cost or market, what is the cost-to-retail ratio?
Answer:
$ 168,000
Explanation:
Include both Mark-ups and Mark-Downs and Exclude beginning inventory
When LIFO Inventory Method is used to find out Ending inventory retail Value. Cost to Retail Ratio will be Applied for both Previous year ending Inventory and the Current Year addition To Calculates
the Previous year Ending inventory :
Cost to Retail Ratio : Ending inventory at cost / Ending inventory at Retail
For Current year Addition :
Cost to Retail Ratio : Current Year Addition in Cost /Current Year Addition in Retail
Current year addition in retail includes : Markup ,Markdown purchases
Kindly check the attached images below to see the step by step explanation to the question above.
2021 2020 Income Statement Information Sales revenue $ 8,400,000 $ 7,900,000 Cost of goods sold 5,535,600 5,400,000 Net income 332,500 198,000 Balance Sheet Information Current assets $ 1,550,000 $ 1,450,000 Long-term assets 2,150,000 1,850,000 Total assets $ 3,700,000 $ 3,300,000 Current liabilities $ 1,150,000 $ 850,000 Long-term liabilities 1,550,000 1,550,000 Common stock 750,000 750,000 Retained earnings 250,000 150,000 Total liabilities and stockholders' equity $ 3,700,000 $ 3,300,000 Required: 1. Calculate the following profitability ratios for 2021: (Round your answers to 1 decimal place.) 2. Determine the amount of dividends paid to shareholders in 2021.
Answer:
2021 2020 Income Statement Information
Sales revenue $ 8,400,000 $ 7,900,000
Cost of goods sold 5,535,600 5,400,000
Net income 332,500 198,000
Balance Sheet Information
Current assets $ 1,550,000 $ 1,450,000
Long-term assets 2,150,000 1,850,000
Total assets $ 3,700,000 $ 3,300,000
Current liabilities $ 1,150,000 $ 850,000
Long-term liabilities 1,550,000 1,550,000
Common stock 750,000 750,000
Retained earnings 250,000 150,000
Total liabilities and stockholders' equity $ 3,700,000 $ 3,300,000
1.Calculate the following profitability ratios for 2021: (Round your answers to 1 decimal place.)
The four main profitability ratios are:
gross profit margin = (revenue - COGS) / revenue = ($8,400,000 - $5,535,600) / $8,400,000 = 0.341 or 34.1%net profit margin = net profit / revenue = $332,500 / $8,400,000 = 0.03958 or 3.96%return on assets = net income / average total assets = $332,500 / [($3,700,000 + $3,300,000)/2] = $332,500 / $3,500,000 = 0.095 or 9.5%return on equity = net income / shareholders equity = $332,500 / $1,000,000 = 0.3325 or 33.25%2.Determine the amount of dividends paid to shareholders in 2021.
retained earnings 2021 - retained earnings 2020 = net income - dividends
$250,000 - $150,000 = $332,500 - dividends
$100,000 + dividends = $332,500
dividends = $332,500 - $100,000 = $232,500
7. A generous benefactor pledges $1 million to The Smith Foundation, a NPO that promotes the arts. The gift is to be used to provide scholarships for talented musicians at a music camp operated by the Foundation. The gift was given in August 2006 to support the Summer 2007 music program. The Foundation Director argues that the gift is a conditional restricted gift and therefore cannot be recognized as revenue in 2006. The accountant argues that the gift is an unconditional restricted gift and must be recognized in the current year. What is the basis for the Director’s argument? What is the basis for the accountant’s argument? In your answer provide an explanation of the terms conditional, unconditional, restricted and unrestricted.
Answer:
What is the basis for the Director’s argument?
The director believes that this is a temporarily restricted contribution and therefore it should be classified as restricted and recognized in 2007 once it can be classified as unrestricted.What is the basis for the accountant’s argument?
Unconditional gifts or donations must be recognized when they are made, and since the money was received in 2006, it should be recognized then.Explanation:
I agree with the Director since this is a restricted donation, i.e. the donor established strict conditions for its use both in time and purpose. For it to be unconditional, the donor should have stated that the money could be used in the best way that the NPO considers and at any time. But instead it established that it must be used to provide scholarships to musicians during 2007.
Both a condition and a restriction exits:
the restriction refers to the time: 2007the condition refers to its use: scholarships for musiciansBecton Labs, Inc., produces various chemical compounds for industrial use. One compound, called Fludex, is prepared using an elaborate distilling process. The company has developed standard costs for one unit of Fludex, as follows: Standard Quantity or Hours Standard Price or Rate Standard Cost Direct materials 2.50 ounces $ 22.00 per ounce $ 55.00 Direct labor 0.90 hours $ 16.00 per hour 14.40 Variable manufacturing overhead 0.90 hours $ 2.00 per hour 1.80 Total standard cost per unit $ 71.20 During November, the following activity was recorded related to the production of Fludex: Materials purchased, 14,000 ounces at a cost of $289,800. There was no beginning inventory of materials; however, at the end of the month, 4,050 ounces of material remained in ending inventory. The company employs 26 lab technicians to work on the production of Fludex. During November, they each worked an average of 150 hours at an average pay rate of $15.00 per hour. Variable manufacturing overhead is assigned to Fludex on the basis of direct labor-hours. Variable manufacturing overhead costs during November totaled $5,000. During November, the company produced 3,900 units of Fludex. Required: 1. For direct materials: a. Compute the price and quantity variances. b. The materials were purchased from a new supplier who is anxious to enter into a long-term purchase contract. Would you recommend that the company sign the contract
Answer and Explanation:
a. The computation is shown below:
Material price variance
= Actual Quantity × (Standard Price - Actual Price)
= 14,000 × ($22 - $289,800 ÷ 14,000)
= 14,000 × ($22 - $20.70)
= 14,000 × $1.30
= $18,200 favorable
Material quantity variance
= Standard Price × (Standard Quantity - Actual Quantity)
= $22 × (3,900 units × 2.5 - 14,000 ounces - 4,050 ounces)
= $22 × (9,750 - 9,950)
= $22 × 200
= $4,400 unfavorable
b. Yes the contract should be signed as it is the actual price i.e $20.70 is less than the standard price $22
Which of the following are considered to be benefits of international trade? Instructions: In order to receive full credit, you must make a selection for each option. For correct answer(s), click the box once to place a check mark. For incorrect answer(s), click the option twice to empty the box. Higher prices for domestic firms in industries with the highest level of imports unanswered More jobs in industries with a significant number of imports unanswered The ability to purchase goods produced abroad at lower prices than the domestic good unanswered Access to new resources that are not available domestically unanswered The ability to purchase new products that are not produced domestically
Answer:
1. Access to new resources that are not available domestically.
2. The ability to purchase new products that are not produced domestically.
3. The ability to purchase goods produced abroad at lower prices than the domestic good.
Explanation:
International trade involves the economic exchange or transactions of capital, goods and services between countries, mainly over international boundaries as a result of want or need by the consumers.
Examples of such goods are crude oil, clothing, electronic gadgets etc.
International trade can be classified into three categories namely;
- Import trade.
- Export trade.
- Entrepot trade.
The International Trade Organization now known as the World Trade Organization which was founded in 1994 is focused on efficiently lowering the cost of alternatives, creating access to resources and increased diversity of choice for consumers.
Sarafiny Corporation is in the process of preparing its annual budget. The following beginning and ending inventory levels are planned for the year. Beginning Inventory Ending Inventory Finished goods (units) 27,000 77,000 Raw material (grams) 57,000 47,000 Each unit of finished goods requires 3 grams of raw material. The company plans to sell 740,000 units during the year. The number of units the company would have to manufacture during the year would be:
Answer:
790,000
Explanation:
Data provided
Budgeted sales = 740,000
Desired ending inventory = 77,000
Beginning inventory = 27,000
The computation of number of units is shown below:-
Number of units to be manufactured = Budgeted sales + Desired ending inventory - Beginning inventory
= 740,000 + 77,000 - 27,000
= 817,000 - 27,000
= 790,000
Therefore for computing the number of units manufactured we simply applied the above formula.
