Answer:
Price of bond = $770.60
Explanation:
The value of the bond is the present value(PV) of the future cash receipts expected from the bond. The value is equal to present values of interest payment plus the redemption value (RV).
Value of Bond = PV of interest + PV of RV
The value of bond for Heather Smith can be worked out as follows:
Step 1
PV of interest payments
Semi annul interest payment
= 8%× 1000 × 1/2 =40
Semi-annual yield = 12/2 = 6% per six months
Total period to maturity (in months) = (2 ×10) = 20 periods
PV of interest =
40 × (1- (1+0.06)^(-20)/0.06) = 458.796
Step 2
PV of Redemption Value
= 1,000 × (1.06)^(-20) = 311.80
Step 3 :Price of bond
= 458.796 + 311.80 = 770.60
Price of bond = $770.60
Salud Company reports the following information. Use the indirect method to prepare only the operating activities section of its statement of cash flows for the year ended December 31, 2017. (Amounts to be deducted should be indicated with a minus sign.)
Selected 2017 Income Statement Data Selected Year-End 2017
Net income $455,000 Accounts receivable increase $52,800
Depreciation expense 95,500 Prepaid expenses decrease 17,400
Gain on sale of machinery 26,300 Accounts payable increase 6,200
Wages payable decrease 2,100
Answer:
Cash flow from Operating Activities
Net income $455,000
Adjustments for non-cash items :
Depreciation expense $95,500
Gain on sale of machinery ($26,300)
Adjustment for Changes in Working Capital :
Increase in Accounts receivable ($52,800)
Decrease in Prepaid expenses $17,400
Increase in Accounts payable $6,200
Decrease in Wages payable $2,100
Net Cash from Operating Activities $497,100
Explanation:
The Indirect method adjusts the Profit before tax with the following items :
Non-cash items previously added or deducted from net incomeChanges in Working CapitalAdditional short-term borrowings $ 20,000
Purchase of short-term investments 5,000
Cash dividends paid 16,000
Interest paid 8,000
Compute cash flows from financing activities using the above company information. (Amounts to be deducted should be indicated by a minus sign.)
Answer:
Cash flow from from financing activities = $(4,000)
Explanation:
The cash flow from financing activities includes that entails any or a combination of the following; issuance and redemption of stocks , issuance and redemption of debts and payment of interest and/or dividend, and receipt of dividend and or interest.
Kindly note that the purchase of short term investment is not a financing activity but rather an investing activity
Cash flow $
Short term borrowing 20,000
Cash dividend paid (16,000)
Interest paid (8,000)
Total Cash flow (4000)
Cash flow from from financing activities = $(4,000)
A corporation is attempting to sell additional shares to its existing shareholders through a rights distribution. A shareholder who wishes to subscribe must send the purchase amount with the rights certificate to the:
Answer:
Right agent.
Explanation:
A rights agent is said to be a correlative junction, serve and also seen to be an obedient mediator and right assistance between his client and any form of third party organisation or also other clients. A right agent is sometimes seen to be reliable to a principal when he/she acts without actual authority, but with apparent authority. He is also held responsible for indemnify and also principal loss or damage resulting from his/her act. He is also keen and careful in his advise and dealing on behalf of his client is he owes certain contractual duties to his/her agent as he protect him also from wrong claims, expenses that are not worthwhile, liabilities etc.
Chester currently has $17,624 (000) in cash and management has decided to issue stocks and bonds worth an additional $8,000 (000). Assuming that cash from operations will be the same for each of the following activities, which activity exposes this company to the most risk of being issued an emergency loan?
a) purchasing $18,000 (000) worth of plant and equiptment
b) liquidate the new inventory
c) retiring the oldest bond
d) a $5 dividend
Answer: a) purchasing $18,000 (000) worth of plant and equipment
Explanation:
Of the 4 options listed, liquidating the new inventory would lead to a cash inflow and so is not going to lead to an emergency loan.
Retiring the oldest bond is something that would probably have been budgeted for so it will be less probable to cause Chester to seek emergency funding.
The activity that poses the greatest threat to Chester in terms of loan solicitation would be the purchase of plant and equipment. This would have less chance of being budgeted for and is a significant amount to leave the company which is even larger than the company's current cash amount. It has a higher chance of causing Chester to seek emergency loan funding.
If it is determined that your procurement scenario will not be conducted using full and open competition you are prohibited from purchasing a non-domestic product.
A. True
B. False
Answer:
Correct answer:
A. True
Explanation:
When procurement of goods and services is to be made from another country, it is expected that, it should be open and done in full view showing other competitors. This is to prevent fraud, such as the marking up of the price of goods or outright false declaration of the procurement prices.
Broad network access, measured service, resource pooling, and rapid elasticity are essential characteristics of ___________.
Answer:
cloud computing
Explanation:
All of these characteristics alongside on-demand self-service are essential characteristics of cloud computing. Cloud computing refers to the different computer system resources that are always available to a client when needed from any remote location, usually in regards to data storage and computing power, without actual direct active involvement by the user themselves. Allowing the user to access information or computing power remotely.
It costs your company $240 to produce pens and pencils together. To produce the same amount of pens and pencils separately costs $100 for the pens and $120 for the pencils. The production of pens and pencils exhibits:_______
a. diseconomies of scope
b. economies of scope.
c. increasing returns to scale.
d. constant returns to scale.
Answer:
b
Explanation:
Which of the following is considered a source of general revenue in the Government-wide Statement of Activities?
A) Charges for Services
B) Operating Grants
C) Sales Tax
Answer:
C) Sales Tax
Explanation:
The Government-wide Statement of Activities shows the revenues and expenses of the government and the general revenues indicate all the taxes, aid received from other governments and earnings from investments. According to that, the answer is that the option that is considered a source of general revenue in the Government-wide Statement of Activities is sales tax.
The development manager is required to choose between two projects. Project A has an IRR of 25% and project B has an IRR of 30%. Which of the following statements is correct? A. If she can invest only in one project, the manager will choose project B B. None of the statements above is correct C. If she can invest only in one project, the manager will choose project A D. If she can invest in both projects, the manager will choose both projects A and B
Answer:
A
D
Explanation:
Internal rate of return is the discount rate that equates the after tax cash flows from an investment to the amount invested.
Because the IRR of both projects are positive, both projects are acceptable.
If the manager can only choose one project, she should choose the one with the higher IRR because it would be more profitable.
Cullumber Industries incurs unit costs of $7 ($5 variable and $2 fixed) in making an assembly part for its finished product. A supplier offers to make 14,700 of the assembly part at $6 per unit. If the offer is accepted, Cullumber will save all variable costs but no fixed costs. Prepare an analysis showing the total cost saving, if any, Cullumber will realize by buying the part. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)
Answer and Explanation:
The preparation of the analysis that depicts the total cost saving is presented below:
Particulars Make Buy Net Income or decrease
Variable
Manufacturing Cost $73,500 - $73,500
(14,700 × $5)
Fixed
Manufacturing cost $29,400 $29,400 -
(14,700 × $2)
Purchase price
(14,700 × $6) - $88,200 ($88,200)
Total annual cost $102,900 $117,600 ($14,700)
Based on the total annual cost the company should make the product as it saves the cost by $14,700
Suppose an item sells for $125 in the United States and for 62,500 pesos in Chile. According to the law of one price, the nominal exchange rate (pesos/dollar) should be ________.
Answer:
$1 = 500 Pesos
1 Pesos = $0.002
Explanation:
$125 = 62,500 Pesos
$1 = 62,500 / 125
$1 = 500 Pesos
$1 = 500 Pesos
1 Pesos = $1 / 500
1 Pesos = $0.002
On January 1, a company issued and sold a $300,000, 5%, 10-year bond payable, and received proceeds of $293,000. Interest is payable each June 30 and December 31. The company uses the straight-line method to amortize the discount. The carrying value of the bonds immediately after the first interest payment is:
Answer: $293,350
Explanation:
The carrying value of the bonds immediately after the first interest payment will be the addition of the received proceed and the ammortized discount. This will be:
= $293,000 + $350
= $293,350
Note that the ammortized discount was calculated as:
= ($300000 - $293000)/20
= $7000/20
= $350
A company is considering replacing an old piece of machinery, which cost $400,000 and has $175,000 of accumulated depreciation to date, with a new machine that has a purchase price of $550,000. The old machine could be sold for $250,000. The annual variable production costs associated with the old machine are estimated to be $72,500 per year for eight years. The annual variable production costs for the new machine are estimated to be $24,000 per year for eight years.
Required:
a. Prepare a differential analysis dated May 29 to determine whether to continue with (Alternative 1) or replace (Alternative 2) the old machine.
b. What is the sunk cost in this situation?
Answer:
Company A
a. Differential Analysis dated May 29
Alternative 1 Alternative 2
Opportunity cost $250,000 $550,000
Variable production costs 580,000 192,000
Total cost $830,000 $742,000
b. Sunk cost in this situation is: $225,000 ($400,000 - $175,000) cost of the old machine.
Explanation:
Company A's relevant cost for the old machine is the opportunity cost that it will lose if it continues with Alternative 1 or continued use of the old machine and the additional cost for the new machine for Alternative 2. Also relevant is the variable production costs that would be incurred if the old or new machine is used.
Company A's sunk cost is the cost of the old machine minus accumulated depreciation. Sunk cost is not relevant for decision making under differential analysis.
Company A's differential analysis is a managerial tool that is used to differentiate one decision alternative from another. In this analysis, only relevant costs are considered. A relevant cost in this case is cost that its inclusion or elimination makes a difference in the decision outcome.
Moorcroft sales are 40% cash and 60% credit. Credit sales are collected 20% in the month of sale, 50% in the month following sale, and 26% in the second month following sale; 4% are uncollectible. Moorcroft purchases are 50% cash and 50% on account. Purchases on account are paid 40% in the month following the purchase and 60% in the second month following the purchase.Prepare a schedule of expected collections from customers for June.
Answer:
The budgeted sales are missing, so I looked for them. I found the following question, hopefully it will be similar:
Month Sales
April $300,000
May $320,000
June $370,000
Schedule of expected collections
For the month of June, 202x
Cash sales during June = $370,000 x 40% = $148,000
Collection from June's credit sales = $222,000 x 20% = $44,400
Collection from May's credit sales = $192,000 x 50% = $96,000
Collection from April's credit sales = $180,000 x 26% = $46,800
Total cash collections during June = $335,200
If an investor's aversion to risk increased, would the risk premium on a high beta stock increase by more or less than that of a low-beta stock? Explain.
Answer:
risk premium increases by more of the low - beta stock
A risk averse investor is an investor that avoids risk. if risk aversion increases, it means that the investor is more wary of risky investment.
Beta measures the volatility of a portfolio. the higher the volatility, the more risky the portfolio is.
risk premium measures the rate of return in excess of the risk free rate.
According to CAPM :
risk free rate + (beta x stock risk premium)
Beta is a multiplier of stock risk premium, so the higher the beta, the more there would be an increase in the stock risk premium
If a risk averse investor invests in a high beta stock, he would want extra or higher compensation for holding such a volatile stock. this extra compensation would be in the form of a higher risk premium.
Explanation:
Blossom Street Inc. makes unfinished bookcases that it sells for $57. Production costs are $37 variable and $10 fixed. Because it has unused capacity, Blossom Street is considering finishing the bookcases and selling them for $70. Variable finishing costs are expected to be $6 per unit with no increase in fixed costs. Prepare an analysis on a per unit basis showing whether Blossom Street should sell unfinished or finished bookcases. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)
Answer and Explanation:
The Preparation of an analysis on a per unit basis is shown below:-
Particulars Sell unfinished Sell finished Increase/Decrease
bookcases bookcases in income
Sale price per
unit $57 $70 $13
Less: variable cost
per unit $37 $43 $6
($37 + $6)
Les: fixed cost per
unit $10 $10 $0
Total cost per
unit $47 $53 $6
Net income per
unit $10 $17 $7
Therefore, Unfinished bookcases are further processed, as net profit per unit increases further by processing by $7
Quality improvement teams are groups of people from various work areas who define, analyze, and solve common production problems.
a. True
b. False
Answer: True
Explanation:
The quality improvement teams are groups of employees that are from various departments who come together and meet regularly in order to define, analyze, and then solve common production problems.
The aim of the quality improvement team is to improve the production process. This is achievable by them working on their methods.
Which of these does NOT describe a friction that might prevent firms from choosing the optimal level of capital? A. Making too big of a change can be more expensive than making a few smaller changes. B. A firm might not be able to borrow enough to pay for the investments it wants to make. C. The firm likes its workers and doesn’t want to replace some jobs with machinery. D. Some capital is very specialized and cannot be re-sold in cases of economic downturns.
Answer:
C. The firm likes its workers and doesn’t want to replace some jobs with machinery.
Explanation:
Optimal level of capital simply refers to an ideal strategy used by a firm to raise capital. For example, a firm may decide between debt financing or equity financing, depending on the company's desired level of capital.
So, an already operational firm with that likes its workers and doesn’t want to replace some jobs with machinery has no direct relationship with its level of capital.
The following data has been collected about Keller Company's stockholders' equity accounts: Common stock $10 par value 21,000 shares authorized and 10,500 shares issued, 1,100 shares outstanding $105,000 Paid-in capital in excess of par value, common stock 51,000 Retained earnings 26,000 Treasury stock 12,760 Assuming the treasury shares were all purchased at the same price, the number of shares of treasury stock is:
Answer:
9,400 shares
Explanation:
Treasury stock is the difference between issued shares and outstanding shares.
Number of treasure shares = Number of issued shares - Number of outstanding shares
Number of treasure shares = 10,500 - 1,100
Number of treasure shares = 9,400 shares
Therefore, number of treasury shares is 9,400
A 4 year project has an annual operating cash flow of $55,000. At the beginning of the project, $4,600 in net working capital was required, which will be recovered at the end of the project. The firm also spend $23,100 on equipment to start the project. This equipment will have a book value of $4,940 at the end of the project, but can be sold for $5,880. The tax rate is 35 percent. What is the Year 4 cash flow?
a. $65,809
b. $63,422
c. $21193
d. $55,951
e. $65,151
Answer:Year 4 Cash flow =$65,151.----E
Explanation:
Salvage value of the equipment =$5,880
Book value at end of project before sale = $4,940
Gain on disposal = $940
tax gain non disposal = 35% of $940 =0.35 x 940= $329
Amount after tax salvage value = $5,880 - $329=$5,551
Year 4 Cash flow = Operating cash flow +Net working capital +Amount after tax salvage value = $55,000 + $4,600 +$5551= $65,151.
Leslie works as customer service representative for Lighthouse Point Lanterns. Her job is to fulfill customer orders and answer any questions that the customer may have. In order to ensure the best service possible, Lighthouse Point Lanterns makes test phone calls to their customer service representatives and rates their ability to correctly answer customer calls. If Leslie properly handles 80% of the test calls, she will receive a 20% bonus in her next pay check. This is an example of:_________.
Answer:
a performance reward.
Explanation:
A performance reward is a type of employee reward system. Companies generally reward employees in an attempt to motivate them to work more, harder or more efficiently. E.g. a company may reward salespeople that close 100 sales per week, regardless of the type of sales made. This type of reward is based on the gross amount of work carried out by the employee.
In Leslie's case, she is being rewarded for being an efficient employee. The parameter for measuring her efficiency is that 80% of the test calls that she makes are handed properly. She is not rewarded on the number of test calls, but instead on how she handled them.
This is an example of a performance reward if Leslie is going to be rewarded with a 20% bonus for handling 80% of the test calls.
A performance reward is a reward that a customer receives in an organization which is based on how well they have performed in the business.
The reward system here has stated that if Leslie is able to meet up with the target that the business has placed for her to reach she would be rewarded with a bonus of 20% when she receives her next salary.
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The manager of a crew that installs carpeting has tracked the crew’s output over the past several weeks, obtaining these figures:
Week Crew Size Yards Installed
1 4 97
2 3 71
3 4 98
4 2 54
5 3 63
6 2 52
a. Compute the labor productivity for each of the weeks. (Round your answers to 2 decimal places.)
Week Crew size Labor productivity
(Yards/Person)
1 4
2 3
3 4
4 2
5 3
6 2
b. Which crew size works best?
Answer:
a. Labor productivity is calculated as: Labor productivity = Total Yards Installed / Total Crew Size
Hence, the labor productivity for each week is;
Week 1 = 97 / 4 = 24.25
Week 2 = 71 / 3 = 23.67
Week 3 = 98 / 4 = 24.5
Week 4 = 54 / 2 = 27
Week 5 = 63 / 3 = 21
Week 6 = 52 / 2 = 26
b. A crew of size 2 works the best as they generate the highest labor productivity of 27. The crew with highest number generate a labor productivity of 24.5
Southtown Realty has entered into agency agreements with Sara, a seller and Tom, a buyer. Tom wants to make an offer on Sara’s home. Is this possible?
Answer: Yes it's possible as long as Tom and Sara gives a written consent to the dual agency arrangement.
Explanation:
From the question, we are informed that Southtown Realty has entered into agency agreements with Sara, a seller and Tom, a buyer. Tom wants to make an offer on Sara’s home.
This is possible as long as Tom and Sara gives a written consent to the dual agency arrangement.
The issue of _____ concerns how often a particular project will be repeated and what its lifespan will be.
Full question reads;
The issue of _____ concerns how often a particular project will be repeated and what its lifespan will be.
a. frequency
b. consumption
c. pressures
d. rules
Answer:
a. frequency
Explanation:
Indeed, no particular human project can last forever, so there is a need to ascertain the frequency of a project, detailing how often the project would be repeated so as to also determine what the project's lifespan will be.
For example, a road construction project may take into account how often the road would be used, which provides insight into the frequency of road repairs and the overall lifetime of the car.
The issue of _____ concerns how often a particular project will be repeated and what its lifespan will be.
Net present value method The following data are accumulated by Geddes Company in evaluating the purchase of $160,000 of equipment, having a four-year useful life: Net Income Net Cash Flow Year 1 $43,500 $83,500 Year 2 23,000 63,000 Year 3 13,500 53,500 Year 4 6,500 46,500 This information has been collected in the Microsoft Excel Online file. Open the spreadsheet, perform the required analysis, and input your answers in the questions below. Open spreadsheet Assuming that the desired rate of return is 12%, determine the net present value for the proposal. If required, round to the nearest dollar. Net present value $ 86,500 Would management be likely to look with favor on the proposal
Answer:
A.$32,396
B. Yes
Explanation
A. Calculation to determine the net present value for the proposal
Year Net Cash Flow Present value Discounting factor at 12% Discounted Cash Flow
1 $ 83,500.00 0.893 $ 74,565.50
2 $63,000.00 0.797 $ 50,211.00
3 $ 53,500.00 0.713 $ 38,145.50
4 $ 46,500.00 0.636 $ 29,574.00
Present value of net cash flows $ 192,496.00
Amount to be invested $ 160,000.00
Net Present Value $ 32,496
Net Present Value $ 32,496/Amount to be invested $160,000.00 =0.2031*100
=20.31%
B.Yes the management would likely to look with favor on the proposal because the net present value of 20.31% is higher than the expected rate of return of 12%.
A benevolent social planner would prefer that the output of good x be decreased from its current level if, at the current level of output of good x_________
a. social cost = private cost = private value < social value.
b. private cost < social cost = private value = social value.
c. social value = private value = private cost < social cost.
d. social cost = private cost = private value = social value.
Answer:
c
Explanation:
social value = private value = private cost < social cost.
A benevolent social planner would prefer that the output of good x be decreased from its current level if, at the current level of output of good x social value = private value = private cost < social cost. Thus, option (c) is correct.
What is the cost?
The term cost refers to the actual money are spent on the manufacturing of the product. The product are manufacture to spend on money are raw material, transportation, wages, salary, and other expenses add. The all expenses are added to identify the cost.
According to the system composed, the primary impact of the output of goods are the multiplied by the reduced from its present state are the primary effect of the output of products are the calculation where the social value equals the societal value. The private cost is lower than the societal cost.
As a result, the significance of the social cost are the aforementioned. Therefore, option (c) is correct.
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"PowerSurge, a company selling batteries in a monopolistically competitive market, collected the data below of revenues and costs. Assuming the firm is producing at the profit-maximizing level of output, calculate total profit for PowerSurge."
Answer:
Since the firm is maximizing its profit, it is producing and selling 40 units at $30 per unit, resulting in a net profit of $440.
Explanation:
Sine there is no information, I searched for a similar question:
Q Sales revenue Total costs Profit
10 $450 $340 $110
20 $800 $480 $320
30 $1,050 $620 $430
40 $1,200 $760 $440
50 $1,250 $900 $350
60 $1,200 $1,040 $160
70 $1,050 $1,180 -$130
80 $800 $1,320 -$520
90 $450 $1,460 -$1,010
Chapman Company, a major retailer of bicycles and accessories, operates several stores and is a publicly traded company. The comparative balance sheet and income statement for Chapman as of May 31, 2014, are as follows. The company is preparing its statement of cash flows.
CHAPMAN COMPANY
COMPARATIVE BALANCE SHEET
AS OF MAY 31
2014 2013
Current assets
Cash $28,560 $20,820
Accounts receivable 75,850 58,940
Inventory 220,080 250,770
Prepaid expenses 9,148 7,580
Total current assets 333,638 338,110
Plant assets
Plant assets 600,070 502,460
Less: Accumulated depreciation—plant assets
150,060 125,320
Net plant assets 450,010 377,140
Total assets $783,648 $715,250
Current liabilities
Accounts payable $123,190 $115,200
Salaries and wages payable 47,660 72,420
Interest payable 27,980 25,490
Total current liabilities 198,830 213,110
Long-term debt
Bonds payable 70,770 100,640
Total liabilities 269,600 313,750
Stockholders’ equity
Common stock, $10 par 370,460 280,890
Retained earnings 143,588 120,610
Total stockholders’ equity 514,048 401,500
Total liabilities and stockholders’ equity
$783,648 $715,250
CHAPMAN COMPANY
INCOME STATEMENT
FOR THE YEAR ENDED MAY 31, 2014
Sales revenue $1,255,260
Cost of goods sold 722,590
Gross profit 532,670
Expenses
Salaries and wages expense 252,580
Interest expense 75,830
Depreciation expense 24,740
Other expenses 8,980
Total expenses 362,130
Operating income 170,540
Income tax expense 43,250
Net income $127,290
The following is additional information concerning Chapman’s transactions during the year ended May 31, 2014.
1. All sales during the year were made on account.
2. All merchandise was purchased on account, comprising the total accounts payable account.
3. Plant assets costing $97,610 were purchased by paying $17,610 in cash and issuing 8,000 shares of stock.
4. The "other expenses" are related to prepaid items.
5. All income taxes incurred during the year were paid during the year.
6. In order to supplement its cash, Chapman issued 957 shares of common stock at par value.
7. Cash dividends of $104,312 were declared and paid at the end of the fiscal year.
Prepare a statement of cash flows for Chapman Company for the year ended May 31, 2014, using the direct method. (A reconciliation of net income to net cash provided is not required.) (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)
Answer:
Chapman Company
Statement of Cash Flows for the year ended May 2014:
Operating activities:
Cash from customers $1,238,350
Cash to suppliers ($683,910)
Salaries & Wages (277,340)
Other expenses (10,548)
Income Tax (43,250)
Net Cash from operating activities 223,302
Investing activities:
Plant (17,610) (17,610)
Financing activities:
Dividends (104,312)
Interest (73,340)
Bonds (29,870)
Issue of stock 9,570
Net cash from financing activities (197,952)
Net cash flows $7,740
Explanation:
a) Data and Calculations:
1. CHAPMAN COMPANY
COMPARATIVE BALANCE SHEET
AS OF MAY 31
2014 2013
Current assets
Cash $28,560 $20,820
Accounts receivable 75,850 58,940
Inventory 220,080 250,770
Prepaid expenses 9,148 7,580
Total current assets 333,638 338,110
Plant assets
Plant assets 600,070 502,460
Less: Accumulated depreciation
—plant assets 150,060 125,320
Net plant assets 450,010 377,140
Total assets $783,648 $715,250
Current liabilities
Accounts payable $123,190 $115,200
Salaries & wages payable 47,660 72,420
Interest payable 27,980 25,490
Total current liabilities 198,830 213,110
Long-term debt
Bonds payable 70,770 100,640
Total liabilities 269,600 313,750
Stockholders’ equity
Common stock, $10 par 370,460 280,890
Retained earnings 143,588 120,610
Total stockholders’ equity 514,048 401,500
Total liabilities and stockholders’
equity $783,648 $715,250
2. CHAPMAN COMPANY
INCOME STATEMENT
FOR THE YEAR ENDED MAY 31, 2014
Sales revenue $1,255,260
Cost of goods sold 722,590
Gross profit 532,670
Expenses
Salaries and wages expense 252,580
Interest expense 75,830
Depreciation expense 24,740
Other expenses 8,980
Total expenses 362,130
Operating income 170,540
Income tax expense 43,250
Net income $127,290
3) Cash Receipts:
Cash from customers $1,238,350
Issue of stock 9,570
4) Cash Payments:
Cash to suppliers $683,910
Plant 17,610
Income Tax 43,250
Dividends 104,312
Salaries & Wages 277,340
Interest 73,340
Other expenses 10,548
Bonds 29,870
5) Prepaid Expenses
Ending balance $9,148
Expenses 8,980
Beginning balance 7,580
Cash paid $10,548
6) Accounts Receivable:
Beginning balance $58,940
Sales 1,255,260
Ending balance 75,850
Cash received $1,238,350
7) Accounts Payable:
Beginning balance $115,200
Purchases 691,900
Ending balance $123,190
Cash paid $693,910
8) Purchases:
Ending inventory $220,080
Cost of goods sold 722,590
Beginning inventory 250,770
Purchases $691,900
9) Salaries and Wages Payable
Beginning balance $72,420
Expenses 252,580
Ending balance 47,660
Cash paid $277,340
10) Interest payable:
Beginning balance $25,490
Expense 75,830
Ending balance 27,980
Cash paid $73,340
Assume Division 1 of the XYZ Company had the following results last year. Sales $5,000,000 Operating income 1,000,000 Total assets (average) 10,000,000 Current liabilities 500,000 Management's required rate of return is 8% and the weighted average cost of capital is 6%. Its effective tax rate is 30%. What is the division's economic value added?
Answer:
Economic Value was $130,000
Explanation:
As we know that:
Economic Value Added = Net Operating Income after tax - (WACC * Capital Employed)
Here
Operating Income After Tax is $700,000 (Step1)
WACC is 6%
Capital Employed is $9,500,000 (Step2)
By putting values, we have:
EVA = $700,000 - 9,500,000 * 6%
EVA = $700,000 - $570,000
EVA = $130,000
Step1: Operating Income After Tax
Simply deduct the 30% tax share from the operating income to arise at Net Operating Income After Tax.
Mathematically,
Net Operating Income After Taxes = Operating Income *(1 - Tax Rate)
Here
Operating Income is $1,000,000
Tax Rate is 30%
By putting values, we have:
Net Operating Income After Taxes = $1,000,000 * (1 - 30%)
Net Operating Income After Taxes = $700,000
Step2: Capital Employed
Capital Employed = Total Assets - Current Liabilities
Capital Employed = $10,000,000 - $500,000
Capital Employed = $9,500,000
Three grams of musk oil are required for each bottle of Mink Caress, a very popular perfume made by a small company in western Siberia. The cost of the musk oil is $2.20 per gram. Budgeted production of Mink Caress is given below by quarters for Year 2 and for the first quarter of Year 3:Budget Production, in bottlesYear 2:First 72,000Second 102,000Third 162,000Fourth: 112,000Year 3:First 82,000Musk oil has become so popular as a perfume ingredient that it has become necessary to carry large inventories as a precaution against stock-outs. For this reason, the inventory of musk oil at the end of a quarter must be equal to 20% of the following quarter’s production needs. Some 43,200 grams of musk oil will be on hand to start the first quarter of Year 2.Required:
Prepare a direct materials budget for musk oil, by quarter and in total, for Year 2. (Round "Unit cost of raw materials" answers to 2 decimal places.)
Answer:
Since there is not enough room here, I used an excel spreadsheet and attached it.
Explanation:
Year 2 Year 3
First Second Third Fourth First
Budgeted prod. 72,000 102,000 162,000 112,000 82,000
in bottles
