Answer:
6.92%
Explanation:
Beginning investment fund is $20,800.
Now, fund available= Beginning fund(1-front end load)
=20,800(1-0.03)=$20176
Now, the number of shares that can be brought with the available fund
[tex}\text{Number of shares}=\frac{\text{fund available}}{NAV_{beginning}}[/tex]
[tex]=\frac{20176}{18}[/tex]
=1120
Now calculating closing NAV
NAV(closing)=NAV(beginning)=(1+increased%)
=$18(1+12%)=18×1.12
=$20.16
Calculate year end asset value
Year end asset value =NAV(closing)×No. of shares
=$20.16×1120=$22579.2
Value of investment after deducting the expense ratio
Closing investment value = Year end asset value×(1-expense ratio)
=$22579.2×(1-1.5%)
=$22240.512
Now,
Return on the fund =[(closing investment value)-(Beginning investment fund)]÷Beginning investment fund
=(22240.512-20800)÷20800
=0.0692
or, 6.92%
The conversion rate is restated for all stock dividends and splits. Coffee had the following stock transactions in 2005 and 2006:
1/1/2005 - Sold 30,000 shares of common stock at $20 per share.
1/1/2005 - Sold 10,000 shares of preferred stock at $100 per share.
4/1/2005 - Issued at 50 percent stock dividend when the market price is $26 per share.
9/1/2005 - Purchased 4,000 treasury shares at $30 per share.
10/1/2005 - Sold 1,000 of the treasury shares at $32 per share.
11/1/2005 - Sold 2,000 of the treasury shares at $25 per share.
12/1/2005 - Issued a 2-1 for stock split.
12/20/2005 - Declared the required dividend to preferred stock holders and a $.25 per share dividend to common stockholders. Dividends are payable on 12/31/2005.
Prepare journal entries to record all of the above business events
Answer and Explanation:
The journal entries are shown below:
On Jan 1
Cash (30,000 Shares × $20) $600,000
To Common Stock (30,000 Shares × $2) $60,000
To Paid In Capital in Excess of Par - Common Stock $540,000
(Being the sale of the common stock is recorded)
On Jan 1
Cash (10,000 Shares × $100) $600,000
To Preferred Stock (10,000 Shares × $100) $1,000,000
(Being the sale of the preferred stock is recorded)
On Jan 4
Retained Earnings (30,000 × 50% × $26) $390,000
To Common Stock (15,000 shares × $2) $30,000
To Paid In Capital in Excess of Par - Common Stock $360,000
(Being the issued of the stock dividend is recorded)
On Jan 9
Treasury Stock (4,000 Shares × $30) $120,000
To Cash $120,000
(Being the purchase of treasury stock is recorded)
On Jan 10
Cash (1,000 Shares × $32) $32,000
To Treasury Stock (1,000 Shares × $30) $30,000
To Paid in Capital from Treasury Stock $2,000
(Being the sale of the treasury stock is recorded)
On Jan 11
Cash (2,000 Shares × $25) $50,000
Paid in Capital - Treasury Stock $2,000
Retained Earnings $8,000
To Treasury Stock (2,000 Shares × $30) $60,000
(Being the sale of the treasury stock is recorded)
On Jan 12
Since the shares are issued for 2 to 1 i.e the number of shares is rises from 29,000 shares to 58,000 shares due to which the par value is decreased from $2 to $1 per share. So the new 29,000 shares were to be distributed
On Dec 20
Retained Earnings $74,500
To Dividend Payable - Preferred Stock (10,000 Shares × 100 × 6%) $60,000
To Dividend Payable - Common Stock (58,000 Shares × $0.25) $14,500
(Being the dividend is declared)
The selling price of imported olive oil is $20 per case. Your cost is 15 Euros per case, and the exchange rate is currently 1.25, so it takes 1.25 Euros to buy $1. Your largest customer has ordered 15,000 cases of olive oil. How much is the pretax profit for this transaction?
Answer:
$120,000
Explanation:
According to the question, the selling price (S.P) i.e. amount to be sold, of one imported olive oil case is $20 while the cost price (C.P) i.e. amount it was purchased, is €15
Looking at the currencies of both prices, they are different. To make the currencies the same, we need to convert euros (€) to dollars ($).
Based on the exchange rate of €1.25 to $1 given in the question;
€15 will be 15/1.25 = $12.
Therefore, the C.P is $12 and the S.P is $20
A customer ordered 15,000 cases of olive oil. This means that the;
1) The cost price (C.P) will be $12 × 15,000 = $180,000
2) The selling price will be $20 × 15,000 = $300,000
In order to obtain the pretax profit, we subtract the cost price (C.P) from the selling price (S.P). That is, $300,000 - $180,000 = $120,000
Suppose that SoS sells both versions and wants to charge different prices for different versions. What is the highest price of the bluetooth version for the high-valuation buyers? (Hint: Since low-valuation buyers will not have an incentive to buy the more expensive version, the highest price of the stripped-down version for the low-valuation buyers is equal to their willingness to pay, i.e., pL = $250)
Answer:
Check the explanation
Explanation:
Since the high valuation customers are willing to pay $500 for the Bluetooth headphones, that price should be set for the Bluetooth versions. The problem will arise if the high valuation customers shift to the stripped down version as well. However, since they care for the Bluetooth versions and stripped down versions separately, it is highly likely that they will prefer the Bluetooth headphones.
So the highest price that can be set for the Bluetooth headphones for the high value buyer will be $500.
5) If the price is set at $500 for high value customers and $250 for low value customers, total profit can be given as
Profit = 1,000,000 * (250 - 100) + 800,000 * (500 - 100)
Profit = 150,000,000 + 320,000,000 = $470 million
Running Co. had an equity investment where it owned less than 20% of an investee, and therefore Running Co. was not able to exercise significant influence. Information about the investment is below: 20X1 20X2 Investment cost 170,000 170,000 Fair value 181,400 155,000 Total unrealized gain (loss) 11,400 (15,000) The company sold the investment during 20X3 for the below price: Sales price 192,400 What is the gain (loss) recorded in the income statement in the year of sale, in 20X3
Answer:
Gain or Loss to be reocrded in Financial Statement: 151600 - 155000= 3400 loss to be booked as Fair value recorded in the books as in year ended 20X2 is 155000.
Donovan company incurred the following costs while producing 2000 units: Direct Materials, $15 per unit; direct labor, $5 per unit; variable manufacturing overhead, $12 per unit; variable selling and administrative costs, $14, per unit; total fixed overhead costs, $20,000; total fixed selling and administrative costs, $10,000. There are no beginning inventories.
What is the unit productive cost using absorption costing?
a. $32 per unit
b. $42 per unit
c. $52 per unit
d. $61 per unit
What is the unit product cost using variable costing?
a. $32 per unit
b. $44 per unit
c. $46 per unit
d. $61 per unit
What is the operating income using absorption costing if 1800 units are sold for $100 each?
a. $104,400
b. $96,000
c. $79,200
d. $69,200
What is the operating income using variable costing if 1900 units are sold for $100 each?
a. $57,400
b. $72,600
c. $80,200
d. $102,600
*Formulas or explanations with each part of the problem.
Answer:
1. b. $42 per unit
2. a. $32 per unit
3. d. $69,200
4. b $72,600
Explanation:
1 and 2 The computation of unit productive cost using absorption costing and unit product cost using variable costing is shown below:-
Absorption Variable
Direct material $15 $15
Direct labor $5 $5
Variable manufacturing
overhead $12 $12
Fixed manufacturing
overhead $10
($20,000 ÷ 2000)
Product cost $42 $32
Therefore for computing the product cost of absorption and variable cost we simply added direct material, direct labor, variable manufacturing overhead and fixed overhead rate
3. The computation of the unit product cost using variable costing is shown below:-
Sales $180,000
Cost of goods manufactured ($756,00)
(1800 × $42)
Difference $104,400
Variable and selling
administrative ($25,200)
(1800 × $14)
Gross profit $79,200
Fixed selling and administrative
expenses ($10,000)
Net operating income $69,200
So, for computing the net operating income we simply deduct the Fixed selling and administrative expenses from gross profit.
4. The computation of operating income using variable costing is shown below:-
Sales $190,000
(1,900 × $100)
Variable cost of goods
manufactured $60,800
(1,900 × $32)
Gross contribution margin $129,200
Variable and selling administrative ($26,600)
(1900 × $14)
Net contribution margin $102,600
Fixed cost ($30,000)
Operating income $72,600
Therefore for computing the operating income using variable costing we simply deduct the fixed cost from net contribution margin.
Which of the following is true of a stock dividend? Multiple Choice It is a liability on the balance sheet. The decision to declare a stock dividend resides with the shareholders. Transfers a portion of equity from retained earnings to a cash reserve account. Does not affect total equity, but transfer amounts between the components of equity. Reduces a corporation's assets and stockholders' equity.
Answer:
Yes it is true that a stock dividend does not affect total equity.
Explanation:
A stock dividend is a non cash payment given to shareholders. Instead of cash, additional shares that is equivalent to the earnings that accrue is given to shareholders.
While this may increase the number of shares held, it does not affect total equity.
One of the benefits of stock dividends tax exemption and retained equity which translates to additional investment.
However, the additional; shares created could dilute the share prices.
The following data pertain to last year's operations at Tredder Corporation, a company that produces a single product: Units in beginning inventory 0 Units produced 20,000 Units sold 19,000 Selling price per unit $100.00 Variable costs per unit: Direct materials $12.00 Direct labor $25.00 Variable manufacturing overhead $3.00 Variable selling and administrative $2.00 Fixed expenses per year: Fixed manufacturing overhead $500,000 Fixed selling and administrative $600,000 What was the absorption costing net operating income last year?
Answer:
Net operating income= 27,000
Explanation:
Giving the following information:
Units produced 20,000
Units sold 19,000
Selling price per unit $100.00
Variable costs per unit:
Direct materials $12.00
Direct labor $25.00
Variable manufacturing overhead $3.00
Variable selling and administrative $2.00
Fixed expenses per year:
Fixed manufacturing overhead $500,000
Fixed selling and administrative $600,000
Under the absorption costing method, the fixed manufacturing overhead gets included in the unitary production cost. First, we need to calculate the unitary product cost.
Unitary product cost= (12 + 25 + 3) + (500,000/20,000)
Unitary product cost= 40 + 25= $65
Income statement:
Sales= 100*19,000= 1,900,000
COGS= 65*19,000= (1,235,000)
Gross profit= 665,000
Variable selling and administrative= (2*19,000)=(38,000)
Fixed selling and administrative= (600,000)
Net operating income= 27,000
The pretax financial income (or loss) figures for Whispering Company are as follows. 2015 $164,000 2016 275,000 2017 86,000 2018 (164,000 ) 2019 (390,000 ) 2020 113,000 2021 98,000 Pretax financial income (or loss) and taxable income (loss) were the same for all years involved. Assume a 25% tax rate for 2015 and 2016 and a 20% tax rate for the remaining years. Prepare the journal entries for the years 2017 to 2021 to record income tax expense and the effects of the net operating loss carryforwards. All income and losses relate to normal operations. (In recording the benefits of a loss carryforward, assume that no valuation account is deemed necessary.)
Answer and Explanation:
The journal entries are shown below:
On 2017
Income Tax Expense $17,200 ($86,000 × 20%)
To Income Tax Payable $17,200
(Being the income tax expense is recorded)
On 2018
Income Tax Refund Receivable $32,800 ($164,000 × 20%)
To Income tax refund due to loss carry back $32,800
(Being the refund receivable is recorded)
On 2019
Income Tax Return Receivable $17,200 ($86,000 × 20%)
To Income tax refund $17,200
(Being the refund receivable is recorded)
Deferred Tax Asset $60,800 [(390,000 - $86,000) × 20%]
To income tax refund $60,800
(Being the refund receivable is recorded)
On 2020
Income Tax Expense $22,600 ($113,000 × 20%)
To Deferred Tax Asset $22,600
(Being the income tax expense is recorded)
On 2021
Income Tax Expense $19,600 ($98,000 × 20%)
To Deferred Tax Asset $19,600
(Being the income tax expense is recorded)
The common stock of Leaning Tower of Pita Inc., a restaurant chain, will generate payoffs to investors next year, which depend on the state of the economy, as follows: Dividend Stock Price Boom $ 10 $ 200 Normal economy 6 90 Recession 0 0 The company goes out of business if a recession hits. Assume for simplicity that the three possible states of the economy are equally likely. The stock is selling today for $80.
a. Calculate the rate of return to Leaning Tower of Pita shareholders for each economic state. (Negative amounts should be indicated by a minus sign. Enter your answers as a percent rounded to 2 decimal places.) Rate of return Boom Normal economy Recession a-2.
b. Calculate the expected rate of return and standard deviation of return to Leaning Tower of Pita shareholders. (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.) Expected return Standard deviation
Answer:
a) Boom = 162.50%
Normal =20.00%
Recession = - 100.00%
b) Expected return = 27.50%
Standard deviation = 107.30%
Explanation:
a) To find the rate of return for each economy state, let's use:
Rate of return = (Dividend +Stock price next year-stock price today)/stock price today
i) For Boom:
[tex] \frac{10 + 200 - 80}{80} = 1.625 [/tex] = 162.50%
ii) Normal:
[tex]\frac{6 + 90- 80}{80} = 0.2 [/tex] = 20.00%
iii) Recession :
[tex]\frac{0 + 0 - 80}{80} = - 1 [/tex] = -100%
b) To calculate the expected rate of return, let's use:
Expected return = Sum of expected return in different scenario / number of economy states
[tex] = \frac{162.5 + 20 - 100}{3} = 27.50[/tex]
Standard deviation:
To find the standard deviation, let's use:
Standard deviation = √[(sum of square of expected return in each scenario -average return)/n]
[tex] = \sqrt{\frac{(162.50-27.50)^2+(20-27.50)^2+(-100-27.50)^2}{3}} [/tex]
[tex] = \sqrt{\frac{(135)^2 + (-7.50)^2 + (-127.50)^2}{3}} [/tex]
[tex] = \sqrt{\frac{18225+56.25+16256.25}{3} [/tex]
= 107.30%
Standard deviation = 107.30%
You are given the following information about 2 accounts: Account 1 Time Account Value before transactions Deposit Withdrawal 0 100 0.25 110 X 0.75 120 3X 1 82 Account 2 Time Account Value before transactions Deposit Withdrawal 0 100 0.5 120 2X 1 140 You are also told that the dollar weighted return over the year on account 1 is i. If the time weighted return over the year on account 2 is also i, what are X and i
Answer:
Check the explanation
Explanation:
For account 1:
Dollar weighted investment = 100 for entire year + X for three fourth of the year - 3X for one fourth of the year = 100 + 3X/4 - 3X/4 = 100
Dollar return = Closing balance - opening balance - (Total deposit - total withdrawal) = 82 - 100 - (X - 3X) = 2X - 18
Hence, dollar weighted return = i = Dollar return / Dollar weighted investment = (2X - 18) / 100
Or, 100i = 2X - 18 Or, 50i = X - 9
For account 2:
Time weighted return: It has two components:
100 growing to 120 in 0.5 year
Immediately after deposit of 2X, the capital becomes 120 + 2X that grows to become 140 in the next 0.5 year
Hence time weighted return = 1 + i = 120 / 100 x 140 / (120 + 2X) = 168 / (120 + 2X) = 84 / (60 + X)
From the first equation, i = (X - 9) / 50
Hence, from second equation, 1 + i = 1 + (X - 9) / 50 = (41 + X) / 50 = 84 / (60 + X)
Hence, (60 + X).(41 + X) = 50 x 84
Hence, X2 + 101X + 2,460 = 4,200
Or, X2 + 101X - 1,740 = 0
It's a quadratic equation that can be factorized as:
(X - 15).(X + 116) = 0
Hence, X = 15
Hence, i = (X - 9) / 50 = (15 - 9) / 50 = 0.12 = 12%
A work center uses kanban containers that hold 200 parts. To produce enough parts to fill a container, 60 minutes of setup plus run time are needed. Moving the container to the next workstation, waiting time, processing time at the next work station, and return of the empty container take 120 minutes. There is an overall demand rate of 10 units per minute. Calculate the number of containers needed for this process.
Answer:
9 containers
Explanation:
Data given
Container holds (capacity) = 200 units
Demand rate per minute = 10 units
The computation of number of containers needed is shown below:-
Time to fill container = Setup time + Processing time
= 60 + 120
= 180 minutes
Number of containers (n) = (Demand × Time to fill container) ÷ Capacity of the container
= (10 × 180) ÷ 200
= 1,800 ÷ 200
= 9 containers
Therefore for computing the number of containers we simply applied the above formula.
The predetermined overhead rate for Zane Company is $5, comprised of a variable overhead rate of $3 and a fixed rate of $2. The amount of budgeted overhead costs at normal capacity of $150000 was divided by normal capacity of 30000 direct labor hours, to arrive at the predetermined overhead rate of $5. Actual overhead for June was $9500 variable and $6050 fixed, and standard hours allowed for the product produced in June was 3000 hours. The total overhead variance is
Answer:
Total Overhead Variance= $500 unfavorable
Explanation:
The total overhead variance is the difference between actual overhead and the applied overhead.
Actual Overhead = Variable + Fixed= $9500 + $6050= $ 15,550
Budgeted Overhead for 30000 direct labor hours = $ 150,000
Applied Overhead for 3000 hours = 3000 *$5= $15000
Total Overhead Variance= Actual Overhead Less Applied Overhead
= $15,500- $ 15000= $500 unfavorable
As actual is greater than applied it is unfavorable.
Answer:
$550 unfavorable.
Explanation:
Total actual overhead = $9,500 + $6,050 = $15,550
Total predetermined overhead = Predetermined overhead rate * Standard hours = $5 * 3,000 = $15,000
Total overhead variance = $15,550 - $15,000 = $550 unfavorable.
Note: It is unfavorable because total actual is greater than total predetermined overhead.
Darrin’s Auto Northern Division is currently purchasing a part from an outside supplier. The company's Southern Division, which has no excess capacity, makes and sells this part for external customers at a variable cost of $15 and a selling price of $27. If Southern begins sales to Northern, it (1) will use the general transfer-pricing rule and (2) will be able to reduce variable cost on internal transfers by $3. On the basis of this information, Southern would establish a transfer price of:
Answer:
Transfer price = $24
Explanation:
As per the data given in the question,
The excess capacity of Company's Southern division is nill therefore for transferring the units the division will have to decrease its external sales.The Loss occurred due to reduction in external sales should be from inter divisional transfer price. Therefore,
Transfer price = variable cost + Loss of contribution
= ($15 - $3) + ($27 - $15)
= $24
Movers Company manufactures sneakers. Production of its new sneakers for the coming three months is budgeted as follows: August 28,000 September 50,000 October 33,000 Each sneaker requires 2.5 hours of direct labor time. Direct labor wages average $16 per hour. Monthly variable overhead averages $10 per direct labor hour plus fixed overhead of $4,500. What is the total overhead budgeted for the month of September
Answer:
Budgeted overhead cost =$1,250,000
Explanation:
Budgeted overhead for the month of September = Total labour hours × overhead rate per hour
Total labor hours = standard hours × budgeted production units
=2.5 hours × 40,000= 125,000
Budgeted overhead cost Total = $10× 125,000 =$1250000
Budgeted overhead cost =$1,250,000
Answer:
$1,254,500
Explanation:
Solution
Recall that:
Production of sneakers for three months budgets were :
August= 28000
September = 50,000
October = 33,000
Each sneakers requires labor time = 2.5 hours
Labor wages average = $16.
Now,
The total overhead budgeted for the month of September is calculated as follows:
The total overhead budgeted for the month of September = Variable overhead + Fixed overhead
= (50,000 units * 2.5 direct labor hours per unit * $10 per direct labor hour) + $4,500
= $1,254,500
Therefore, the total overhead budgeted for the month of September is $1,254,500
A company can sell all the units it can produce of either Product A or Product B but not both. Product A has a unit contribution margin of $16 and takes two machine hours to make and Product B has a unit contribution margin of $30 and takes three machine hours to make. If there are 5,000 machine hours available to manufacture a product, income will be:
a. $10,000 more if Product A is made.
b. $10,000 less if Product B is made.
c. $10,000 less if Product A is made.
d. the same if either product is made.
Answer:
Product B has a net income of $10,000 superior to Product A.
The correct answer is C.
Explanation:
Giving the following information:
Product A:
Unitary contribution margin= $16
Machine-hours required= 2
Product B:
Unitary contribution margin= $30
Machine-hours required= 3
First, we will calculate the total income of both products.
Product A= 16*(5,000/2)= $40,000
Product B= 30*(5,000/3)= $50,000
Product B has a net income of $10,000 superior to Product A.
Purdum Farms borrowed $16 million by signing a five-year note on December 31, 2017. Repayments of the principal are payable annually in installments of $3.2 million each. Purdum Farms makes the first payment on December 31, 2018 and then prepares its balance sheet. What amount will be reported as current and long-term liabilities, respectively, in connection with the note at December 31, 2018, after the first payment is made?
Answer:
Current liabilities $3.2 million
long-term liabilities =$16 million-$3.2 million-$3.2 million=$9.6 million
Explanation:
The amount classified as current liabilities as at 31st December 2018 is the portion of the loan repayable within a year,that the repayment due at 31st December 2019 which is $3.2 million.
The amount to be classified as long term liabilities is the balance of the loan after having taken out the payment in year 1 as well as the repayment to be made in year 2
Tiki Corporation had net income of $120,000 during the year. Depreciation expense was $6,000. The following information is available: Held- to-Maturity Bonds purchased25,000increase Common Stock issued70,000increase Accounts Receivable10,000decrease Accounts Payable15,000increase Gain on sale of AFS Investment5,000increase What amount should Tiki report as net cash provided by operating activities in its statement of cash flows for the year
Answer:
Tiki should report $101,000 as net cash provided by operating activities in its statement of cash flows for the year.
Explanation:
Tiki Corporation
Statement of cash flows (extract)
Net income $120,000
Add: Depreciation expense 6,000
Less: Increase Accounts Receivable (10,000)
Less: Decrease in Accounts Payable (15,000)
Net cash flows from operating activities $101,000
Wicker Rockers, Inc. is planning to offer a defined contribution plan for its employees. The company would like to incorporate a "cliff" vesting schedule for the employer contributions into the plan. What is the minimum vesting period the company can choose for a "cliff" vesting schedule
Answer:3 years
Explanation:
Cliff vesting is when an employee of a company becomes fully vested on a specified date rather than the employee becoming partially vested in increasing amounts over extended period. Cliff Vesting is a process whereby the employees are entitled to full benefits from their firm’s pension policies and qualified retirement plans on a given date.
Upon the completion of the cliff period, employees receive full benefits. The Pension Protection Act of 2006 deduced a three-year cliff vesting schedule for the designated defined-contribution plans which includes 401Ks.
A company's income statement showed the following: net income, $117,000; depreciation expense, $31,500; and gain on sale of plant assets, $5,500. An examination of the company's current assets and current liabilities showed the following changes as a result of operating activities: accounts receivable decreased $9,700; merchandise inventory increased $19,500; prepaid expenses increased $6,500; accounts payable increased $3,700. Calculate the net cash provided or used by operating activities. Multiple Choice $143,400. $141,400. $148,200. $130,400. $169,400.
Answer:
$130,400
Explanation:
The computation of net cash provided or used by operating activities is shown below:-
Net cash provided or used by operating activities
Net income $117,000
Depreciation expense $31,500
Gain on sale of plant assets ($5,500)
Accounts receivable decreased $9,700
Increase inventory ($19,500)
Prepaid expenses increased ($6,500)
Increase account payable $3,700
Net cash flow from
operating activities $130,400
Therefore the Net cash flow from operating activities is $130,400
Enviro Company issues 8%, 10-year bonds with a par value of $300,000 and semiannual interest payments. On the issue date, the annual market rate for these bonds is 10%, which implies a selling price of 87 1/2. The straight-line method is used to allocate interest expense. 1. Using the implied selling price of 87 ½, what are the issuer's cash proceeds from issuance of these bonds? 2. What total amount of bond interest expense will be recognized over the life of these bonds? 3. What is the amount of bond interest expense recorded on the first interest payment date?
Answer:
1. Issuer's cash is $262,500
2. Total amount of bond interest is $277,500
3. The amount of bond interest expense is $13,875.
Explanation:
1. Issuer's cash = Face Value × Selling Price
Issuer's cash = $300,000 × 87.50%
Issuer's cash = $262,500
2. Discount on bond = $300,000 × 12.5% = $37,500
Interest on bond = $300,000 × 8% = $24,000
Period of bonds= 10 years
Total amount of bond interest = Discount on Bond + (Interest on Bond × period)
Total amount of bond interest = $37,500 + ($24,000 × 10)
Total amount of bond interest = $277,500
3. Discount on bond = $300,000 × 12.5% = $37,500
Interest on bond = $300,000 × 8% = $24,000
Period = 0.5 years
The amount of bond interest expense = (Discount of Bond ÷ 20) + Interest
The amount of bond interest expense = ($37,500 ÷ 20) + ($24,000 × 0.5)
The amount of bond interest expense = $1,875 + $12,000
The amount of bond interest expense = $13,875.
An outside supplier has offered to provide the annual requirement of 7,200 of the parts for only $13 each. The company estimates that 60% of the fixed manufacturing overhead cost above could be eliminated if the parts are purchased from the outside supplier. Assume that direct labor is an avoidable cost in this decision. Based on these data, the financial advantage (disadvantage) of purchasing the parts from the outside supplier would be:
Super corporation produces a part in the manufactures of its product. The unit cost is $21 computed as follows:
An outside supplier has offered to provide the annual requirement of 7,200 of the parts for only $13 each. The company estimates that 60% of the fixed manufacturing overhead cost above could be eliminated if the parts are purchased from the outside supplier. Assume that direct labor is an avoidable cost in this decision. Based on these data, the financial advantage (disadvantage) of purchasing the parts from the outside supplier would be:
$
Direct material 6
Direct labour 8
Variable manufacturing overhead 2
Fixed manufacturing overhead 5
Total cost 21
Answer:
Total financial advantage of buying from the supplier $43,200
Explanation:
Unit relevant variable cost of making= 6+8 +2 = 16
$
Variable cost of making ( 16× 7200) = 115,200
Variable of buying (13 ×7200) 93,600
Savings in variable cost 21,600
Savings in fixed cost (60%*72300 × 5) 21600
Total savings from buying 43,200
Total financial advantage of buying from the supplier $43,200
CSUSM is a zero growth company. It currently has zero debt and its earnings before interest and taxes (EBIT) are $85,000. CSUSM 's current cost of equity is 11%, and its tax rate is 21%. The firm has 15,000 shares of common stock outstanding. Assume that CSUSM is considering changing from its original capital structure to a new capital structure with 39% debt and 61% equity. This results in a weighted average cost of capital equal to 8.7% and a new value of operations of $576,345. Assume CSUSM raises $165,000 in new debt and purchases T-bills to hold until it makes the stock repurchase. What is the stock price per share immediately after issuing the debt but prior to the repurchase?
Answer:
Check the explanation
Explanation:
Calculation of CSUSM 's New value of Operation :
For the purpose of Calculation of New Value of Operation we need to first calculate new WACC
Given :
Debt value ( Wd) = 30% or 0.30
Equity Value ( We)= 70% or 0.70
Cost of Debt ( Kd) =8%
New cost of equity (Ke) =12%
WACC =Kd(1-T) * Wd + Ke* We
WACC =[8%(1-0.40) * 0.30] + [12% * 0.70]
= [4.80% * 0.30 ] + [8.4 %]
= 1.44% + 8.4%
= 9.84 %
Given EBIT = $ 80,000
Tax rate = 40%
Currently the company has no growth. Therefore growth rate is 0 %
Value of New Operation =FCF / WACC
=EBIT (1-T) / WACC
=$80,000 (1-0.40)/ 9.84%
= $ 487,804.88
On April 1, a company purchased two units of inventory, A and B. The cost of unit A was $640, and the cost of unit B was $550. On April 30, the company had not sold the inventory. The net realizable value of unit A was now $660 while the net realizable value of unit B was $480. The adjustment associated with the lower of cost and net realizable value on April 30 will be:
Answer: b
Explanation:
EHW Office Supplies, Inc. uses the perpetual inventory system. On September 4, 2019,EHW sold merchandise inventory on account at a price of $50,000 with payment terms of 1/10, n/30. The merchandise cost EHW $40,000. On September 12, 2019, the customer pays the proper amount due for the merchandise based on the credit terms. How much will be credited to Accounts Receivable when recording the collection
Answer:
$50,000
Explanation:
The cash payment was made within the discount period of 10 days,hence the amount received in respect of the sales on account is face value minus discount of 1%.
When sales was made EHW would have debited accounts receivable with $50,000 and credited same to sale revenue.
Cash received=$50,000*(1-1%)=$49,500
discount =$50,000-$49,500=$500
The appropriate entries for cash collection:
Dr cash $49,500
Dr discount allowed $500
Cr accounts receivable $50,000
Tom, Dan and Phil work indifferent teams at Springfield Automotive. Tom's team ensures that all the raw materials, machinery, tools and other production equipment are available for the employees around the clock. Any procurement needs have to be addressed to Tom, who also takes part in high-level decisions regarding the number of units to produced, exported and so on. Dan works as part of a team of eight members who concentrate the day-to-day productions; they also ensure that the quality checks are done and inspect each other's work. Phil is the operations manager, who works for 5 hours in the production department and then spends the rest of his time assisting management as an internal consultant on manufacturing issues. His input is crucial in improving the production process. Dan's contribution is toward the __________.
Answer: Work team
Explanation: Dan's contribution is towards the work team whereas Phil works in the parallel team while Tom is part of the management team. a work team which Dan is a member of is defined as a group of workers or employees with different set of skills that work together on a given task such as the day-to-day productions in a business, quality control and inspection, etc. Work teams are most efficient or useful where there is a frequent change in job content and employees with limited skills and a specific set of duties are unable to cope (work teams thus provide expert advice that will increase the ability of employees to participate in planning, problem-solving, and decision-making that are needed to complete a set of work and to better serve customers).
At the beginning of last year, Tarind Corporation budgeted $900,000 of fixed manufacturing overhead and chose a denominator level of activity of 600,000 machine-hours. At the end of the year, Tari's fixed manufacturing overhead budget variance was $12,000 favorable. Its fixed manufacturing overhead volume variance was $19,200 favorable. Actual direct labor-hours for the year were 625,000. What was Tari's total standard machine-hours allowed for last year's output?
Answer:
The answer is 612800 hours
Explanation:
Solution
Recall that:
At the start of last year, Tari Corporation budgeted $900,000 of fixed manufacturing overhead and chose a denominator level of activity of 600,000 machine-hours.
At the end of the year, Tari's fixed manufacturing overhead budget variance was $12000 favorable. Its fixed manufacturing overhead volume variance was $19200 favorable. The direct actual labor-hours for the year were 625,000. What was Tari's standard total machine-hours allowed for last year's output?
Now,
The Budgeted at beginning of the year = $900,000
fixed manufacturing overhead for = 600,000 machine hours
Thus,
The Standard = $900,000 / 600,000 hours = $1.5 fixed overhead / machine/machining hour
So,
At end of year, manufacturing overhead volume was $19,200 favorable which means that,
$19200 / $1.5 = 12800 additional hours.
Total Standard Machine Allowance Allowed for output = 600,000 +12800 = 612800 hours
Therefore, Tari's total standard machine-hours allowed for last year's output is 612800 hours
If Tarind Corporation budgeted $900,000 of fixed manufacturing overhead and chose a denominator level of activity of 600,000 machine-hours. At the end of the year, Its fixed manufacturing overhead volume variance was $19,200 favorable. What Tari's total standard machine-hours allowed for last year's output will be is: 612,800 machine hours
Using this formula
Total standard machine-hours=Machine -hours level of activity+ [Fixed manufacturing overhead volume variance÷(Fixed manufacturing overhead÷ Machine -hours level of activity)]
Where:
Machine -hours level of activity=600,000
Fixed manufacturing overhead volume variance=$19,200
Fixed manufacturing overhead=$900,000
Let plug in the formula
Total standard machine-hours=600,000+[$19,200÷($900,000÷600,000)]
Total standard machine-hours=600,000+($19,200÷1.5)
Total standard machine-hours=600,000+12,800
Total standard machine-hours=612,800 machine hours
Inconclusion if Tarind Corporation budgeted $900,000 of fixed manufacturing overhead and chose a denominator level of activity of 600,000 machine-hours. At the end of the year, Its fixed manufacturing overhead volume variance was $19,200 favorable. What Tari's total standard machine-hours allowed for last year's output will be is: 612,800 machine hours
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Marle Construction enters into a contract with a customer to build a warehouse for $950,000 on March 30, 2018 with a performance bonus of $50,000 if the building is completed by July 31, 2018. The bonus is reduced by $10,000 each week that completion is delayed. Marle commonly includes these completion bonuses in its contracts and, based on prior experience, estimates the following completion outcomes: Completed by Probability July 31, 2018 65% August 7, 2018 5% August 14, 2018 5% August 21, 2018 The transaction price for this transaction, based on the expected value approach, is:_______.
a. $950,000
b. $995,000
c. $685,000
d. $652,500
Answer:
b. $995,000
Explanation:
The computation of the transaction price based on the expected value approach is shown below:
The formula is
= (Building cost of warehouse + bonus) × probability percentage
Date Calculation Amount
July 31, 2018 ($950,000+$50,000) × 0.65 $650,000
August 7, 2018 ($950,000+$40,000) × 0.25 $247,500
August 14, 2018 ($950,000+$30,000) × 0.05 $49,000
August 21, 2018 ($950,000+$20,000) × 0.05 $48,500
Total $995,000
Since the bonus is reduced $10,000 each week so $10,000 is deducted for every delayed week
Selected information from Arbon Corporation's accounting records and financial statements for 2021 is as follows ($ in millions): Cash paid to acquire machinery $ 36 Reacquired Arbon common stock 50 Proceeds from sale of land 90 Gain from the sale of land 52 Investment revenue received 66 Cash paid to acquire office equipment 80 In its statement of cash flows, Arbon should report net cash outflows from investing activities of:
Answer:
Arbon should report net cash outflows from investing activities of: ($26)
Explanation:
Arbon Corporation
Statement of cash flows (extract)
Purchase of machinery ($36)
Proceeds from sale of land 90
Cash paid to acquire office equipment (80)
Net cash outflows from investing activities ($26)
Therefore, Arbon should report net cash outflows from investing activities of ($26).
Note that reacquired stock affects the financing section of the cash flows, while gain on sale of land and investment revenue received affect the operating section of the cash flows.
Equipment with a book value of $78,000 and an original cost of $168,000 was sold at a loss of $31,000. Paid $106,000 cash for a new truck. Sold land costing $315,000 for $420,000 cash, yielding a gain of $105,000. Long-term investments in stock were sold for $90,000 cash, yielding a gain of $15,500. Use the above information to determine this company's cash flows from investing activities. (Amounts to be deducted should be indicated with a minus sign.)
Answer:
$451,000
Explanation:
The computation of cash flows from investing activities is shown below:-
Sale of equipment $47,000
($78,000 - $31,000)
Purchase of new truck ($106,000)
Sale of land $420,000
Sale of Long-term investments $90,000
Net cash provided by investing activities $451,000
Therefore to reach the cash flows from investing activities we simply added the sale of equipment, sale of land, sale of long term investments and deduct the purchase of new truck.
Red Co. acquired 100% of Green, Inc. on January 1, 2017. On that date, Green had land with a book value of $42,000 and a fair value of $52,000. Also, on the date of acquisition, Green had a building with a book value of $200,000 and a fair value of $390,000. Green had equipment with a book value of $350,000 and a fair value of $280,000. The building had a 10-year remaining useful life and the equipment had a 5-year remaining useful life. In Red’s December 31, 2017 consolidated worksheet, what total amount of excess fair over book value amortization expense adjustments should Red recognize resulting from its 100% acquisition of Green?
Answer:
$5,000
Explanation:
The computation of total amount of excess fair over book value amortization expense adjustments to be recognized by red is shown below:-
Excess of fair value over book value = Land fair value - Land book value
= $52,000 -$42,000
= -$10,000
Here land is not amortized
Excess of fair value over book value = Building fair value - Building book value
= $390,000 - $200,000
= $190,000
Excess fair value over book value amortization expense adjustments to be recognized by red = Excess of fair value over book value of building ÷ Number of Years
= $190,000 ÷ 10
= $19,000
Excess of fair value over book value = Equipment fair value - Equipment book value
= $280,000 - $350,000
= ($70,000)
Excess fair value over book value amortization expense adjustments to be recognized by red for equipment = Excess of fair value over book value of equipment ÷ Number of Years
= ($70,000) ÷ 5
= ($14,000)
Total amount of excess fair over book value amortization expense adjustments to be recognized by red
= $19,000 - $14,000
= $5,000
