Answer:
NPV = $246764705.88
Explanation:
The net present value of the stadium can be calculated by deducting the present value of cash outflow from the present value of cash inflow.
DATA
Initial price = $800,000,000
Revenue from sale of previous equipment = $85,000,000
Goverment provided fund to discount the price = $300,000,000
Discount factor for year 1 at 2% = 0.9804
Future Cash inflow = $675,000,000
Solution
NPV = Present value of cash inflows - Present value of cash outflows
NPV = $661,764,705.88 - $415,000,000
NPV = $246,764,706
Working
PV of Cash inflow = $675,000,000 x 0.9804
PV of cash inflow = $661,764,706
PV of Cash outflow = Initial price - Revenue form sale - Goverment fund
PV of cash outflow = $800,000,000 - $85,000,000 - $300,000,000
PV of cash outflow = $415,000,000
Brodrick Company expects to produce 21,200 units for the year ending December 31. A flexible budget for 21,200 units of production reflects sales of $508,800; variable costs of $63,600; and fixed costs of $142,000. Assume that actual sales for the year are $587,200 (26,300 units), actual variable costs for the year are $113,900, and actual fixed costs for the year are $137,000. Prepare a flexible budget performance report for the year.
Answer:
Flexible budget performance report for the year
Flexible budget Actual Variance Fav/Unf
Sales 631,200 587,200 44,000 UNF
Variable cost (78,900) (113,900) 35,000 F
Contribution 416,000 368,000 48,000 UNF
margin
Fixed cost (142,000) (137,000) 5000 UNF
Net operating 274,000 231,000 43,000 UNF
income
Working:
a. At flexible budget, selling price per unit = $508,800 / 21,200 = $24 per unit . Total sales =26,300 *24 = $631,200
b. Variable cost per unit = $63,600 / 21,200 = $3 per unit . Total cost = 3 * 26,300 = 78,900
For the coming year, Belton Company estimates fixed costs of $60,000, the unit variable cost of $25, and the unit selling price of $50.
a. Determine the break-even point in units of sales.
b. Determine the unit sales required to realize operating income of $100,000.
c. Determine the probable operating income if sales total $400,000.
Answer:
1. Break even point in units = 2,400 units
2. Sales required = 6,400 units
3. Operating income = $140,000
Explanation:
Given:
Fixed costs = $60,000
Variable cost =$25 per unit
Selling price = $50 per unit
Computation:
1. Break-even point in units of sales.
Contribution per unit = sales - VC
Contribution per unit = $50 - $25
Contribution per unit = $25
Break even point in units = Fixed costs / Contribution per unit
Break even point in units = $60,000 / $25
Break even point in units = 2400 units
2. Unit sales required to realize operating income = $100,000
Sales required = (Fixed costs + Operating income) / Contribution per unit
Sales required = ($60,000 + $100,000) / $25
Sales required = 6400 units
3. Operating income if sales total = $400,000
Contribution margin = [$25/ $50]100 = 50%
Operating income = Contribution margin - Fixed costs
Operating income = ($400,000 × 50%) - $60,000
Operating income = $140,000
A newly issued 20-year maturity, zero-coupon bond is issued with a yield to maturity of 8% and face value $1,000. Find the imputed interest income in: (a) the first year; (b) the second year; and (c) the last year of the bond’s life.
Answer:
First Year $ 17.17
Second Year $ 18.53
Last Year $ 74.08
Explanation:
Computation to Find the imputed interest income in: (a) the first year; (b) the second year; and (c) the last year of the bond’s life
Imputed Interest
First step
Using this formula
Imputed interest=(Present Value /1+Yield to maturity)^Numberd of years
Year Years Remaining to Maturity Constant Yield Value ( 1 / 1.08)^n
0 20 (1/1.08)^20= $ 214.54
1 19 (1/1.08)^19=$ 231.71
2 18 (1/1.08)^18=$ 250.24
19 1 (1/1.08)^1=$ 925.92
20 0 (1/1.08)^0=$ 1,000
Second step is to find the Imputed interest for the first year, second year; and the last year of the bond’s life
Year Years Remaining to Maturity Constant Yield Value ( 1 / 1.08)^n =Imputed Interest
0 20 $ 214.54
1 19 $ 231.71 $17.17
($231.71-$214.54)= $17.17
2 18 $ 250.24 $18.53
($250.24-$231.71)=$18.53
19 1 $ 925.92
20 0 $ 1,000 $74.08
($1,000-$925.92) =$74.08
Therefore the imputed interest will be:
First Year $ 17.17
Second Year $ 18.53
Last Year $ 74.08
Kartman Corporation makes a product with the following standard costs: Standard Quantity or Hours Standard Price or Rate Standard Cost Per Unit Direct materials 6.5 pounds $ 7.00 per pound $ 45.50 Direct labor 0.6 hours $ 24.00 per hour $ 14.40 Variable overhead 0.6 hours $ 4.00 per hour $ 2.40 In June the company's budgeted production was 3,400 units but the actual production was 3,500 units. The company used 22,150 pounds of the direct material and 2,290 direct labor-hours to produce this output. During the month, the company purchased 25,400 pounds of the direct material at a cost of $170,180. The actual direct labor cost was $57,021 and the actual variable overhead cost was $8,931. The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased. The labor efficiency variance for June is:
Answer:
Direct labor time (efficiency) variance= $4,560 unfavorable
Explanation:
Giving the following information:
Standard= Direct labor 0.6 hours $ 24.00 per hour $ 14.40
Actual production= 3,500 units.
2,290 direct labor-hours were used.
To calculate the direct labor efficiency variance, we need to use the following formula:
Direct labor time (efficiency) variance= (Standard Quantity - Actual Quantity)*standard rate
Standard quantity= 3,500*0.6= 2,100
Direct labor time (efficiency) variance= (2,100 - 2,290)*24
Direct labor time (efficiency) variance= $4,560 unfavorable
The labor efficiency variance is $4,560 unfavorable.
Calculation of the labor efficiency variance:The following formula should be used for determining the same.
Direct labor time (efficiency) variance= (Standard Quantity - Actual Quantity)*standard rate
Here,
Standard quantity= 3,500*0.6= 2,100
So,
Direct labor time (efficiency) variance= (2,100 - 2,290)*24
= $4,560 unfavorable
Learn more about labor here: https://brainly.com/question/24513550
In a transaction for a good valued at $550 by a buyer and $500 by a seller, what percentage sales tax (assume tax on $500) would result in an unconsummated transaction
Answer:
A percentage sales tax that is more than 10% will result in an unconsummated transaction, because the buyer is not willing to pay more than $550 for the good.
Explanation:
A sales tax of 10% will make the good to cost $550 ($500 x 1.1). This is the maximum value placed on the good by the buyer. If the rate of the sales tax exceeds this rate, the buyer will likely not buy the good unless it is an essential good that she cannot do without. So, in levying sales taxes, it is important to understand the demand elasticity of the good. A good whose demand is inelastic is more likely to favor high sales tax rates than a similar good with elastic demand. This elasticity of demand tries to explain the response that demand will generate based on an increase or a decrease in price of a good.
A one-month summary of manufacturing costs for Rapid Routers Company follows.
Direct materials $40,000
Direct labour 20,000
Material handling costs 1,500
Product inspection and rework 2,000
Materials purchasing and inspection 500
Routine maintenance and equipment servicing 1,200
Repair of equipment 300
Required:
Classify each cost as value-added or non-value-added
Answer:
Cost Classification
Direct materials Value added
Direct labor Value added
Material handling costs Non-value added
Product inspection and rework Non-value added
Materials purchasing and inspection Value added
Routine maintenance and equipment Non-value added
servicing
Repair of equipment Non-value added
Myers, Inc.
Income Statement
For the Year Ended December 31, 2020
Sales revenue $400,000
Cost of goods sold 180,000
Gross profit 220,000
Expenses (including $10,000 interest and $20,000 income taxes) 80,000
Net income $ 140,000
Additional information:________.
1. Common stock outstanding January 1, 2020, was 16,000 shares, and 24,000 shares were outstanding at December 31, 2020.
2. The market price of Myers stock was $9.59 in 2020.
3. Cash dividends of $19,600 were paid, $3,000 of which were to preferred stockholders.
Compute the following measures for 2020. (Round Earnings per share to 2 decimal places, e.g. 1.65, and all other answers to 1 decimal place, e.g. 6.8 or 6.8%.)
(a) Earnings per share $
(b) Price-earnings ratio times
(c) Payout ratio %
(d) Times interest earned times
Answer:
a. $6.85
b. 1.4 times
c. 11.9%
d. 17 times
Explanation:
a) Weighted Average number of common shares outstanding = (Number of common shares outstanding in the beginning + Number of common shares outstanding in the end)/2
= (16,000 +24,000) /2
= 20,000 shares
Earnings per share = (Net income – Preferred stock dividend)/Weighted Average number of common shares outstanding
= (140,000 - 3,000) / 20,000
= 137,000/20,000
= $6.85
b) Price earnings ratio = Market price of 1 common share/Earnings per share
= 9.59 / 6.85
= 1.4 times
c) Payout ratio = Cash dividends on common stock/Net income
= 16,600 / 140,000
= 0.11857
= 11.9%
d) Times interest earned = (Net income + Interest expense + Tax expense) / Interest expense
= (140,000 + 10,000 + 20,000)/10,000
= 170,000 / 10,000
= 17 times
On January 1, 2017, Boston Enterprises issues bonds that have a $1,850,000 par value, mature in 20 years, and pay 7% interest semiannually on June 30 and December 31. The bonds are sold at par. 1. How much interest will Boston pay (in cash) to the bondholders every six months
Answer:
Interest per six months =$64,750 .
Explanation:
Bonds are instruments used by companies, governments and other entries to borrow from the public.
They represent a contractual agreement where the borrower commits to pay a percentage of the principal amount borrowed plus the principal amount to the lender or investor.
The proportion of the amount borrowed which is paid as interest is called coupon. The interest payment is computed as the the coupon rate in percentage multiplied by the amount borrowed.
Interest payment = Coupon rate (%) × Nominal Value
Annual interest payment = 7% × 1,850,000 =$129,500
Semi-annual interest payment = Annual interest payment/2
Semi-annual interest payment =129,500 /2 =64,750 .
Interest per six months =$64,750 .
Note we had to divide by 2 because they are two six months in a year.
Nautical has two classes of stock authorized: $10 par preferred, and $1 par value common. As of the beginning of 2015, 125 shares of preferred stock and 2,700 shares of common stock have been issued. The following transactions affect stockholders� equity during 2015:
March 1 Issue 2,700 additional shares of common stock for $13 per share.
April 1 Issue 175 additional shares of preferred stock for $37 per share.
June 1
Declare a cash dividend on both common and preferred stock of $0.40 per share to all stockholders of record on June 15.
June 30 Pay the cash dividends declared on June 1.
August 1 Repurchase 175 shares of common treasury stock for $10 per share.
October 1 Reissue 125 shares of treasury stock purchased on August 1 for $12 per share.
Nautical has the following beginning balances in its stockholders� equity accounts on January 1, 2015: Preferred Stock, $1,250; Common Stock, $2,700; Paid-in Capital, $19,200; and Retained Earnings, $11,200. Net income for the year ended December 31, 2015, is $7,500.
Required:
1. Record each of these transactions. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
2. Select whether each of these transactions would increase (+), decrease (?), on total assets, total liabilities, and total stockholders� equity by completing the following table. (If none of the categories apply for a particular item, leave the cell blank.)
Transaction Total Assets Total Liabilities Total Stockholders Equity
Issue common stock
Issue preferred stock
Declare cash divedens
Pay cash divedens
Repurchase treasury stock
Reissue treasury stock
Answer:
Nautical1. Journal Entries:
March 1:
Debit Cash Account $35,100
Credit Common Stock $35,100
To record the issue of 2,700 shares of common stock for $13 per share.
April 1:
Debit Cash Account $6,475
Credit Preferred STock $6,475
To record the issue of 175 shares of preferred stock for $37 per share.
June 1:
Debit Dividends $2,280
Credit Dividends Payable $2,280
To record dividends of $0.40 per share to all stockholders of record.
June 30:
Debit Dividends Payable $2,280
Credit Cash Account $2,280
To record the payment of cash dividends.
August 1:
Debit Treasury Stock $1,750
Credit Cash Account $1,750
To record the repurchase of 175 shares of common stock for $10 per share.
October 1:
Debit Cash Account $1,500
Credit Treasury Stock Account $1,500
To record the reissue of 125 shares of treasury stock for $12 per share.
2. Selection of whether each of these transactions would increase (+), decrease (?), on total assets, total liabilities, and total stockholders' equity:
Transaction Assets Liabilities Stockholders
Total Total Total Equity
Issue common stock $35,100 +$35,100 +$35,000
Issue preferred stock $6,475 +$6,475 +$6,475
Declare cash dividends $2,280 +$2,280 ?$2,280
Pay cash dividends $2,280 ?$2,280 ?$2,280
Repurchase treasury stock $1,750 ?$1,750 ?$1,750
Reissue treasury stock $1,500 +$1,500 +$1,500
Explanation:
a) Data and Calculations:
Authorized share capital:
$10 par preferred
$1 par value common
Issued, beginning of 2015:
Preferred = 125 shares
Common = 2,700 shares
b) The issue of 2,700 additional shares of common stock for $13 per share totalled $35,100. This amount is credited to the Common Stock and the receipt of cash debited to the Cash Account. The same is applicable with respect to the 175 additional shares issued at $37 per share.
c) When a cash dividend is declared, the stockholders of record on the record date of June 15 are noted, since they are the only ones that will participate in the dividends. The accounting records are debit to the dividend account and a credit to the Dividends Payable account, establishing the liability. The payment for the declared dividend is recorded with a debit to the Dividends Payable account to close the liability and a credit to the Cash Account.
d) Treasury stock is a stock of common stock repurchased by the company. The issue and reissue of treasury stock are treated in the treasury stock account if the costing method is used, otherwise, the par-value method would be operational.
Yan Yan Corp. has a $3,000 par value bond outstanding with a coupon rate of 5.2 percent paid semiannually and 25 years to maturity. The yield to maturity on this bond is 4.8 percent. What is the price of the bond? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Answer:
$3,173.63
Explanation:
For computing the price of the bond we need to apply the present value i.e to be shown in the attachment
Given that,
Future value = $3,000
Rate of interest = 4.8% ÷ 2 = 2.4%
NPER = 25 years × 2 = 50 years
PMT = $3,000 × 5.2% ÷ 2 = $78
The formula is shown below:
= -PV(Rate;NPER;PMT;FV;type)
So, after applying the above formula, the price of the bond is $3,713.63
Calculate the cost of goods manufactured using the following information: Direct materials used $ 298,800 Direct labor used 132,300 Factory overhead costs 264,300 General and administrative expenses 85,800 Selling expenses 49,100 Work in Process inventory, January 1 118,800 Work in Process inventory, December 31 126,200 Finished goods inventory, January 1 232,400 Finished goods inventory, December 31 239,000
Answer:
$687,100
Explanation:
Cost of Goods Manufactured = Raw Materials Used + Direct Labor + Factory Overhead +Beginning Work in Process - Ending Work in ProcessCost of Goods Manufactured = $298,500 + $132,000 + $264,000 + $118,500 - $125,900 =$687,100
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As the assistant to the CFO of Johnstone Inc., you must estimate its cost of common equity. You have been provided with the following data: D 0 = $0.80; P 0 = $22.50; and g = 8.00% (constant). Based on the DCF approach, what is the cost of common from reinvested earnings?
Answer:
The cost of common equity from reinvested earnings is 11.84%
Explanation:
The constant growth model of DDM or DCF approach is used to calculate the price of a stock today whose dividends are expected to grow at a constant rate forever. The model values the stock based on the present value of the expected future dividends form the stock.
The formula for price today under this model is,
P0 = D0 * (1+g) / (r - g)
Where,
P0 is price todayD0 is the dividend todayr is the cost of equityg is the growth rate in dividendsPlugging in the available values for all the variables, we can calculate the r or cost of common equity to be,
22.5 = 0.8 * (1+0.08) / (r - 0.08)
22.5 * (r - 0.08) = 0.864
22.5r - 1.8 = 0.864
22.5r = 0.864 + 1.8
r = 2.664 / 22.5
r = 0.1184 or 11.84%
When analyzing the changes on a spreadsheet used to prepare a statement of cash flows, the cash flows from operating activities generally are affected by
Answer: a. Net income, current assets, and current liabilities
Explanation:
The Operating Cashflow relates to cash transactions that have to do with the normal operations of the business. In other words, the business that the firm does to make revenue. It therefore includes, production, purchases, admin expenses, net income and the assets required to run the business.
Operating cashflows will therefore be affected by the Net Income as this is the end result of the business transactions the business engaged in. The current assets were needed to sell goods as well as being derived from selling goods and the current liabilities enabled the company to buy goods that they sell amongst other things.
Net income, current assets, and current liabilities are directly related to the operations of the business and so affect the Operating cashflows.
Jessie and Paul have worked in the same office at DEF Insurance LLC for 6 years. Jessie has always taken extra care to follow the office norms and ensure that everyone has a happy and harmonious working experience. Paul has been very driven during his years at DEF Insurance, and though he started as an insurance agent, he has since been promoted to the agency manager and proudly displays all of his awards on the wall of his new office. According to Learned Needs Theory, Jessie most likely has a high: Group of answer choices
Answer:
Need for affiliation
Explanation:
from the learned needs theory, Jessie most likely has a high need for affiliation.
This describes her need to feel a sense of involvement and belonging within her work environment.
By following office norms and trying to ensure everyone is happy, she is expressing her need for open and good relationships at work. People like Jessie are usually friendly, outgoing and cooperative
Bark Inc. and Happy Toys Ltd. Bark Inc. and Happy Toys Ltd. are considering a merger and are worried that their two organizational cultures will clash. They perform a detailed diagnosis by collecting and analyzing data about the employees of the two companies. They identify several overlapping values, which they feel can be combined into a cohesive new culture. This process is known as:
Complete Question:
Bark Inc. and Happy Toys Ltd. Bark Inc. and Happy Toys Ltd. are considering a merger and are worried that their two organizational cultures will clash. They perform a detailed diagnosis by collecting and analyzing data about the employees of the two companies. They identify several overlapping values, which they feel can be combined into a cohesive new culture. This process is known as:
Group of answer choices.
A. a merger strategy.
B. a bicultural audit.
C. assimilation.
D. deculturation.
Answer:
B. a bicultural audit.
Explanation:
Bark Inc. and Happy Toys Ltd. Bark Inc. and Happy Toys Ltd. are considering a merger and are worried that their two organizational cultures will clash. They perform a detailed diagnosis by collecting and analyzing data about the employees of the two companies. They identify several overlapping values, which they feel can be combined into a cohesive new culture. This process is known as a bicultural audit.
A bicultural audit can be defined as the process of analyzing and measuring the cultural relations between two companies prior to a merger, as well as identifying the extent to which there might be cultural clashes among its employees.
Generally, bicultural audit process start with the identification of cultural differences between the merging companies. In order to create a cohesive new culture between the merging companies, a good action plan and effective strategy should be developed.
Jensen Corporation uses the percentageofsales method to estimate uncollectibles. Net credit sales for the current year amount to and management estimates % will be uncollectible. The Allowance for Doubtful Accounts prior to adjustment has a debit balance of . After all adjusting entries are made, the balance in Allowance for Uncollectible Accounts will be:
Answer:
$42,300 credit balance
Explanation:
The question is incomplete:
Jensen Corporation uses the percentage-of-sales method to estimate uncollectibles. Net credit sales for the current year amount to $2,010,000 and management estimates 3% will be uncollectible. The Allowance for Doubtful Accounts prior to adjustment has a debit balance of $18,000. After all adjusting entries are made, the balance in Allowance for Uncollectible Accounts will be:
uncollectible accounts = $2,010,000 x 3% = $60,300 credit
the adjusting entry at the end of the year:
December 31, 202x, bad debt expense:
Dr Bad debt 60,300
Cr Allowance for uncollectible accounts 60,300
the ending balance of the Allowance for uncollectible accounts account = $60,300 - $18,000 (debit balance) = $42,300
Teams with both difficult goals and specific incentives to attain them achieve the _____ performance levels.
Answer:
Highest
Explanation:
teams with highest performance are are social groups that work to achieve a common objective or goals that can be either short term or long term. These kind of teams achieve peak performance by By having both difficult goals and specific incentives to attain these goals. Such teams must have a common objective that can be turned into performance goals that can be measured.
The term economies of scale refers to the fact that as the:
o physical size of the product gets larger, the costs of production become lower
O quantity of product produced in a given period increases, the cost of manufacturing each unit increases
o quantity of product produced in a given period increases, the cost of manufacturing each unit remains constant
quantity of product produced in a given period increases, the cost of manufacturing each unit decreases
Need!
Answer:
quantity of product produced in a given period increases, the cost of manufacturing each unit decreases
Explanation:
Economies of scale happens when the average total cost (variable + fixed production costs per unit) decreases as total output increases. This generally takes place because fixed costs are the same for a small number of units produced or a large number of units produced, so the average fixed cost per unit tend to decrease as more units are produced (at least up to certain point). Variable production costs per unit can also decrease as total output increases since materials might be purchased in larger quantities resulting in higher discounts or labor productivity increases.
Juice Drinks has beginning inventory of $10,000, purchases in the amount of $150,000, and ending inventory of $8,000. Juice Drinks cost of goods sold is $ ____________.
Answer:
$152,000
Explanation:
Given the data as shown below;
Opening inventory = $10,000
Purchases = $150,000
Ending inventory = $8,000
Therefore,
Juice drinks cost of goods sold = Opening inventory + Purchases - Ending inventory
= $10,000 + $150,000 - $8,000
= $152,000
White says, “We live in a world where success is defined by income.” Do you agree with this statement? Discuss examples in your life that support or negate this idea.
Answer:
yes i agree coz nowadays even in my family, the outsiders give more respect and praise my big brother as he earns big income
The decision that could be made regarding the statement that "In the modern world, income has turned equivalent to success" would be:
Yes.
The reason to agree with this statement is due to the increased importance that the modern world has provided to money.For example, a person is considered successful only when he earns a handsome amount while a person with a lower or average income but greater satisfaction level is considered unsuccessful. However, there is also a saying that "money can't buy happiness" which suggests that people can be sad even after having money and vice versa.Thus, it depends on the individual's perception and the way they equate success with happiness or material possessions.Learn more about "Income" here:
brainly.com/question/14732695
If the IRS intends to close a Taxpayer Assistance Center, they must notify the public at least _____ days in advance of the closure date.
Answer: 90 days
Explanation:
The Internal Revenue Service is typically known as the revenue service of the federal government as it is in charge of tax collection and enforcing tax laws.
If the IRS intends to close a Taxpayer Assistance Center, they must notify the public at least 90 days in advance of the closure date.
If a firm is producing so that the point chosen along the production possibility frontier is socially preferred, then that firm is said to have reached its:________
a. allocative efficiency
b. productive efficiency
c. utility-maximizing efficiency
d. minimum price efficiency
Answer:
b
Explanation:
Productive efficiency means that production is been carried out with no waste.
Production possibility frontier is a curve that shows the various combinations of goods that can be produced in an economy when all resources are fully utilised.
On the ppf, all resources are fully utilised, so there is productive efficiency.
"he company’s beginning cash balance was $90 and its ending balance was $85. Required: 1. Use the indirect method to determine the net cash provided by operating activities for the year. 2. Prepare a statement of cash flows for the year."
Answer:
1. Net cash provided by operating activities for the year = $130
2. Ending cash balance = $85
Explanation:
Note: This question is not complete. A complete question is therefore provided before answering the question. See the attached pdf file for the complete question.
The explanation to the answer is now provided as follows:
1. Use the indirect method to determine the net cash provided by operating activities for the year.
Note: See the part 1 of the attached excel file for the calculation of the net cash provided by operating activities for the year.
Note: See the part 1 of the attached excel file for the calculation of the net cash provided by operating activities for the year.
Cash flows from operating activities refers to the section of the cash flow statement that shows the cash generated and provided by the ongoing regular business activities of a company in a particular period. Cash flows from operating activities normally comprise of net income from the income statement, adjustments to net income as well as changes in working capital.
2. Prepare a statement of cash flows for the year.
Note: See the part 1 of the attached excel file for the statement of cash flows for the year.
Statement of cash flow refers to the financial statement that presents the effect of changes in balance sheet accounts and income on cash and cash equivalents by breaking it down to operating, investing, and financing activities.
On January 1, 2017, Hi and Lois Company purchased 12% bonds having a maturity value of $300,000, for $322,744.44. The bonds provide the bondholders with a 10% yield. They are dated January 1, 2017, and mature January 1, 2022, with interest receivable January 1 of each year. Hi and Lois Company uses the effective-interest method to allocate unamortized discount or premium. The bonds are classified in the held-to-maturity category.a. Prepare the journal entry at the date of the bond purchase.
b. Prepare a bond amortization schedule.
c. Prepare the journal entry to record the interest revenue and the amortization at December 31, 2017
d. Prepare the journal entry to record the interest revenue and the amortization at December 31, 2018
Answer:
a. January 1, 2017, bonds are purchased at a premium
Dr Investment in bonds 300,000
Dr Premium on bonds receivable 22,744.44
Cr Cash 322,744.44
b.
Date Cash Interest Amortization Bond Carrying
received revenue of premium premium value
1/1/18 $36,000 $32,274.44 $3,725.56 $19,018.88 $280,981.12
1/1/19 $36,000 $31,904.89 $4,095.11 $14,923.77 $285,076.23
1/1/20 $36,000 $31,492.38 $4,507.62 $10,416.15 $289,583.85
1/1/21 $36,000 $31,041.61 $4,958.39 $5,457.76 $294,542.24
1/1/22 $36,000 $30,542.24 $5,457.76 $0 $300,000
amortization of bond premium = ($322,744.44 x 10%) - $36,000 = -$3,725.56
amortization of bond premium = ($319,018.88 x 10%) - $36,000 = -$4,095.11
amortization of bond premium = ($314,923.77 x 10%) - $36,000 = -$4,507.62
amortization of bond premium = ($310,416.15 x 10%) - $36,000 = -$4,958.39
amortization of bond premium = $10,416.15 - $4,958.39 = -$5,457.76
c.
December 31, 2017
Dr Interest receivable 36,000
Cr Interest revenue 32,274.44
Cr Premium on bonds receivable 3,725.56
d.
December 31, 2017
Dr Interest receivable 36,000
Cr Interest revenue 31,904.89
Cr Premium on bonds receivable 4,095.11
The expected before-tax IRR on a potential real estate investment is 14 percent. The expected after-tax IRR is 10.5 percent. What is the effective tax rate on this investment?
Answer:
25%
Explanation:
The expected before-tax IRR on a potential real estate investment is 14%
The expected after-tax IRR is 10.15%
Therefore, the effective tax rate on this investment can be calculated as follows
Effective tax rate= 1-(after-tax IRR/before-tax IRR)
Effective tax rate= 1-(10.15/14)
= 1-0.75
= 0.25×100
= 25%
Hence the effective tax rate is 25%
On December 18, 2017, Stephanie Corporation acquired 100 percent of a Swiss company for 4.0 million Swiss francs (CHF), which is indicative of book and fair value. At the acquisition date, the exchange rate was $1.00 = CHF 1. On December 18, 2017, the book and fair values of the subsidiary’s assets and liabilities were:
Cash CHF 814,000
Inventory 1,314,000
Property, plant & equipment 4,014,000
Notes payable 2,128,000
Stephanie prepares consolidated financial statements on December 31, 2017. By that date, the Swiss franc has appreciated to $1.10 = CHF 1. Because of the year-end holidays, no transactions took place prior to consolidation.
Required:
a. Determine the translation adjustment to be reported on Stephanie’s December 31, 2017, consolidated balance sheet, assuming that the Swiss franc is the Swiss subsidiary’s functional currency. What is the economic relevance of this translation adjustment?
b. Determine the remeasurement gain or loss to be reported in Stephanie’s 2017 consolidated net income, assuming that the U.S. dollar is the functional currency. What is the economic relevance of this remeasurement gain or loss?
Answer:
a. Translation adjustment = $401,400
b. Remeasurement loss = –$131,400
Explanation:
a. Determine the translation adjustment to be reported on Stephanie’s December 31, 2017, consolidated balance sheet, assuming that the Swiss franc is the Swiss subsidiary’s functional currency. What is the economic relevance of this translation adjustment?
This can determined as follows:
Step 1: Calculation of beginning net asset in
Particular Amount (CHF)
Cash CHF 814,000
Inventory 1,314,000
Property, plant & equipment 4,014,000
Notes payable (2,128,000)
Beginning net asset 4,014,000
Beginning net asset in USD = Beginning net asset in Swiss francs (CHF) * Beginning exchange rate = CHF4.014,000 * $1 = $4,014,000
Step 2: Calculation of ending net asset
Ending net asset in USD = Beginning net asset in Swiss francs (CHF) * Ending exchange rate = CHF4.014,000 * $1.10 = $4,415,400
Step 3: Calculation translation adjustment
Translation adjustment = Ending net asset in USD - Beginning net asset in USD = $4,415,400 - $4,014,000 = $401,400
Economic relevance of this translation adjustment
The positive translation adjustment implies that the equity of stockholders has increased by $401,000.
We obtained a positive value because the net position of the subsidiary in Switzerland is CHF4,014,000 and there was a Swiss franc appreciation of $0.10 (i.e. $1.10 - $1.00 = $0.10).
The translation adjustment of $401,000 does not however implies that it was made as a dollar cash flow. The only condition that can make to turn to a profit is if this operation is sold at CHF4,014,000 on December 31 and the amount realized as a proceed is changed to dollars at ruling exchange rate of $1.10 to a Swiss franc on December 31, 2017.
b. Determine the remeasurement gain or loss to be reported in Stephanie’s 2017 consolidated net income, assuming that the U.S. dollar is the functional currency. What is the economic relevance of this remeasurement gain or loss?
This can be determined as follows:
Beginning net liabilities in Swiss franc = Cash - Note payable = CHF814,000 - CHF2,128,000 = –CHF1,314,000
Beginning net liabilities in USD = Beginning net liabilities in Swiss franc * Beginning exchange rate = –CHF1,314,000 * $1.00 = –$1,314,000
Ending net liabilities in USD = Beginning net liabilities in Swiss franc * Ending exchange rate = –CHF1,314,000 * $1.10 = –$1,445,400
Remeasurement loss = Ending net liabilities in USD – Beginning net liabilities in USD = [–$1,445,400] – [–$1,314,000] = –$131,400
Economic relevance of this remeasurement gain or loss
There is a negative remeasurement or remeasurement lost because the net monetary liability position of the Swiss subsidiary is CHF 1,314,000. The appreciation of the Swiss franc by $0.10 results in a loss of $131,400] that not is unrealized.
The readjustment loss of $131,400 does not however implies that it was a dollar cash outflow. The only condition that can make it to turn to a loss is if this operation is sold on December 31. This will lead to the realization of a transaction gain of $81,400 [i.e. CHF814,000 x ($1.10 - $1.00)].
Also, the Swiss franc note payable will be paid off by using the US dollar. This will bring about the realization of a truncation loss of $212,800 [i.e. CHF2,128,000 x ($1.10 - $1.00)].
Long-Term Solvency Ratios Summary data from year-end financial statements of Palm Springs Company for 2017 follow.
Summary Income Statement Data
Sales $11,692,900
Cost of goods sold 5,135,000
Selling expenses 938,000
Administrative expenses 780,000
Interest expense 2,210,000
Income tax expense 905,000 9,968,000
Net income $1,724,900
Summary Balance Sheet Data
Cash $117,000
Total liabilities $900,000
Noncash assets 1,183,000
Stockholders' equity 400,000
Total assets $1,300,000
Total liabilities and equity $1,300,000
Round answers to two decimal places.
a. Compute the ratio of times-interest-earned.
b. Compute the debt-to-equity ratio.
Answer:
a. Compute the ratio of times-interest-earned.
times-interest-earned = EBIT / interest expense
EBIT = $4,839,900interest expense = $2,210,000times-interest-earned = $4,839,900 / $2,210,000 = 2.19
b. Compute the debt-to-equity ratio.
debt-to-equity ratio = total liabilities / total stockholders' equity
total liabilities = $900,000total stockholders' equity = $400,000debt-to-equity ratio = $900,000 / $400,000 = 2.25
Cole Co. began constructing a building for its own use in January 2016. During 2016, Cole incurred interest of $50,000 on specific construction debt, and $20,000 on other borrowings. Interest computed on the weighted-average amount of accumulated expenditures for the building during 2016 was $40,000. What amount of interest should Cole capitalize?
Answer:
$40,000
Explanation:
The accounting procedure involved in the above is that one picks the lower between the actual interest incurred and the interest computed on the weighted average amount of accumulated expenditures for PPE.
The actual interest incurred on specific construction debt and other borrowings
= $50,000 + $20,000
= $70,000
Since the interest computed on the weighted average amount of accumulated expenditure for the building is $40,000 , the lower between the actual interest incurred and interest on weighted average amount of accumulated expenditure is $40,000, hence will be the capitalized amount.
Supply Chain Integration Supply chain integration is a major contributing factor to organizational success. The goal of supply chain integration is alignment within the supply chain. As a business leader, how can you achieve greater supply chain integration with suppliers and customers
Answer:
True.
Explanation:
The integration of the supply chain comes from the use of the total quality management tool that will make the supply chain effective as a whole, generating significant improvements at each stage of the chain, with the help of technologies that streamline operations. Integrating the supply chain means organizing the steps so that there is a reduction in costs, time, waste and continuous optimization of the processes as a whole, making the product reach the final consumer correctly meeting their expectations and needs.
An e-business can redefine its market by removing traditional marketplace intermediaries or by creating new ways to add value to business transactions.
a. True
b. False
Answer: True
Explanation:
An e-business is a kind of business whereby information is passed across on the internet. Since we live in a digital world, organizations now engage their customers online.
An e-business can redefine its market by removing traditional marketplace intermediaries or by creating new ways to add value to business transactions.
