Answer:
Desert Company
The TOTAL dollar amount of discount that was amortized during the entire first year (5/1/20 through 4/3/21) these bonds were outstanding is:
= $65,447.
Explanation:
a) Data and Calculations:
Face value of bonds = $15,000,000
Issue value (proceeds) 13,308,942
Discount on the bonds $1,691,058
Coupon rate = 8%
Effective interest rate = 10%
Period of bonds = 8 years
November 1, 2020:
Interest expense = $665,447 ($13,308,942 * 5%)
Cash payment = $600,000 ($15,000,000 * 4%)
Discount amortized $65,447
Bond outstanding value = $13,374,389 ($13,308,942 + $65,447)
May 1, 2021:
Interest expense = $668,719 ($13,374,389 * 5%)
Cash payment = $600,000 ($15,000,000 * 4%)
Discount amortized $68,719
Bond outstanding value = $13,443,108 ($13,374,389 + $68,719)
A customer browses through several online retail sites and examines product descriptions of several different styles and brands of bed linens. The customer then goes to Macy's and purchases a set of flannel sheets that he had read about on another retailer's site. The purchase of this set of flannel sheets is most clearly an example of ________.
Answer:
digitally influenced purchasing
Explanation:
This is an example of digitally influenced buying, which occurs when consumers search for data and information on a product on the internet before buying at the physical store. There are surveys that show that 64% of in-store purchases are digitally influenced, which makes companies look for strategies to increase their online presence so that customers search for information about their products and services, such as personalizing the search, including location options and product availability, which makes it easier for customers to find the product of their choice in the most convenient store.
Which of the following best describes the purpose of INSURANCE?
Group of answer choices
Insurance prevents accident and injury to insured individuals
Insurance protects individuals from financial loss.
Insurance helps pay your car payments.
Insurance is an emergency savings plan
Answer:
I think B
Explanation:
Insurance in short term is something that helps people protect themselves from losing money. So financial losses can be money.
Snowbound Tours is considering investing $5,650,000 in a new lodge on the Tanana River. Management projects 15 years of cash flows per the chart below. Using a discount rate of 9.65%, management should:_______.
Year Cash Flow Year Cash Flow
1 260,000 9 980,000
2 340,000 10 965,000
3 505,000 11 920,000
4 610,000 12 890,000
5 790,000 13 840,000
6 1,200,000 14 720,000
7 1,295,000 15 690,000
8 1,110,000
A. Accept the project
B. Reject the project
C. Be indifferent to the project
Answer:
A. Accept the project
Explanation:
For deciding whether the project should be accepted or rejected we need to determine the net present value
Year cash flows PV factor at 9.65% Present value
0 -$5,650,000 1 -$5,650,000
1 $260,000 0.9120 $237,118.10
2 $340,000 0.8317 $282,788.44
3 $505,000 0.7585 $383.058.82
4 $610,000 0.6918 $421,983.33
5 $790,000 0.6309 $498,406.75
6 $1,200,000 0.5754 $690,445.54
7 $1,295,000 0.5247 $679,531.07
8 $1,110,000 0.4786 $531,194.89
9 $980,000 0.4364 $427,708.96
10 $965,000 0.3980 $384,097.03
11 $920,000 0.3630 $333,958.75
12 $890,000 0.3311 $294,636.38
13 $840,000 0.3019 $253,610.38
14 $720,000 0.2753 $198,249.27
15 $690,000 0.2511 $173,268.47
Net present value $140,056.19
Since the net present value comes in positive so the project should be accepted
A company has 800 bonds outstanding with a par value of $1,000 and priced at 95% of par. It also has 40,000 shares of common stock outstanding with a book value per share of $50 and market price per share of $60. Calculate the capital-structure weights for the firm (as if you were calculating the firm’s Weighted Average Cost of Capital).
Answer:
Bonds = 24%
Shares = 76%
Explanation:
The weight of each of the finance sources is the proportion that their market value bears to the total market value.
This is computed as follows:
$
Market value of bonds= 95%× 1,000× 800= 760,000
Market value of shares = 60× 40,000= 2,400,000
Total market value 3,160,000
Bonds = 760,000/3,160,000× 100= 24%
Shares = 2400000/3,160,000× 100= 76%
I need Public Administration introdution please about half a page
Answer:
u a opp now
Explanation:
Kyle Corporation is comparing two different capital structures, an all-equity plan (Plan I) and a levered plan (Plan II). Under Plan I, the company would have 765,000 shares of stock outstanding. Under Plan II, there would be 515,000 shares of stock outstanding and $9.25 million in debt outstanding. The interest rate on the debt is 12 percent, and there are no taxes. a. Assume that EBIT is $2.6 million. Compute the EPS for both Plan I and Plan II. (Do not round intermediate calculations and round your answers to 2 decimal places, 32.16.) EPS Plan I $ Plan II $ b. Assume that EBIT is $3.1 million. Compute the EPS for both Plan I and Plan II. (Do not round intermediate calculations and round your answers to 2 decimal places, 32.16.) EPS Plan I $ Plan II $ c. What is the break-even EBIT
Solution :
Calculation of the [tex]$\text{EPS}$[/tex] for both [tex]$\text{plan I}$[/tex] and [tex]$\text{plan II}$[/tex] where EBIT is 2.6 million.
[tex]$\text{plan I}$[/tex] [tex]$\text{plan II}$[/tex]
EBIT $ 2.6 million $ 2.6 million
Less : Interest $ 1.1 million
Less
PAT $ 2.6 million $ 1.5 million
Earnings available $ 2.6 million $ 1.5 million
for share holder
No. of shares 765,000 515,00
[tex]$\text{EPS}$[/tex] = earnings available $ 3.40 $ 2.9
for share holder/no. of
shares
Hence [tex]$\text{EPS}$[/tex] under the [tex]$\text{plan I}$[/tex] is $ 3.40 and [tex]$\text{plan II}$[/tex] is $ 2.91
Calculating the [tex]$\text{EPS}$[/tex] for both plan I and [tex]$\text{plan II}$[/tex] where EBIT is $ 3.1 million
[tex]$\text{plan I}$[/tex] [tex]$\text{plan II}$[/tex]
EBIT $ 3.1 million $ 3.1 million
Less : Interest $ 1.1 million
Less
PAT $ 3.1 million $ 2.0 million
Earnings available $3.1 million $ 2.0 million
for share holder
No. of shares 765,000 515,00
[tex]$\text{EPS}$[/tex] = earnings available $ 4.05 $ 3.88
for share holder/no. of
shares
Hence, [tex]$\text{EPS}$[/tex] under the [tex]$\text{plan I}$[/tex] is [tex]$\$4.05$[/tex] and [tex]$\text{plan II}$[/tex] is [tex]$\$ 3.88$[/tex]
Calculating the breakeven EBIT
When [tex]$\text{accessing}$[/tex] the relative effectiveness leverage versus equity financing companies look for the level of the EBIT where [tex]$\text{EPS}$[/tex] remains unaffected, called the EBIT-EPS breakeven point .
To calculate the EBIT-EPS breakeven point, rearranging the [tex]$\text{EPS}$[/tex] formula:
[tex]$\text{EBIT}=\text{(EPS }\times \text{no. of common shares outstanding )}+\frac{\text{preferred share dividends}}{1-\text{tax rate}}+ \text {debt interest}$[/tex]
[tex]$=(\$4.05 \times 515,000)+0+\$1,100,000 = \$3,185,750$[/tex]
Therefore, the break even EBIT is $ 3,185,750
Oriole Company incurs these expenditures in purchasing a truck: cash price $26,070, accident insurance (during use) $1,910, sales taxes $1,350, motor vehicle license $260, and painting and lettering $1,960. What is the cost of the truck?
Answer:
$29,380
Explanation:
Calculation of cost of truck for Oriole company.
Cost of truck
Cash price
$26,070
Sales taxes
$1,350
Painting and lettering
$1,960
Total cost of truck
$29,380
Please note that insurance cost and motor vehicle license are revenue expenditures and are ignored while computing the cost of the truck.
When the interest rate is above the equilibrium level, a. the quantity of money that people want to hold is less than the quantity of money that the Federal Reserve has supplied. b. people respond by buying interest-bearing bonds or by depositing money in interest-bearing bank accounts. c. bond issuers and banks respond by lowering the interest rates they offer. d. All of the above are correct.
Answer:
D
Explanation:
When interest rate is above the equilibrium level, people would be less willing to hold cash. Instead they would prefer to save or invest in interest-bearing bonds. This is because as a result of the higher interest rate, interest paid on their deposit and investment would be higher.
As a result of the increase in savings, there would be an increase in the supply of loanable funds over demand for loanable funds. This would lead to a reduction in interest rate until equilibrium interest rate is reached.
Why would you choose a job over a career?
Answer:
A job can be just going to work to earn a paycheck. A career means that each of your jobs, experiences, and training programs is helping you advance in pay or responsibility. The real difference between a job and a career is your attitude. People who want a career are always thinking about their long-term goals.
Explanation:
Sorry if this isn't right love, I tried:(
Liu Zhang operates Lawson Consulting, which began operations on June 1. On June 30, the company’s records show the following accounts and amounts for the month of June.
Cash $ 6,500 Service revenue $ 12,900
Accounts receivable 4,800 Equipment 6,800
Accounts payable 3,800 Rent expense 2,300
L. Zhang, Withdrawals 1,800 Wages expense 8,000
Need an income statement for june
Answer:
Lawson Consulting
LAWSON CONSULTING
Income Statement for the month ended June 30
Service revenue $ 12,900
Rent expense 2,300
Wages expense 8,000 10,300
Net income $2,600
Explanation:
a) Data and Calculations:
Cash $ 6,500
Accounts receivable 4,800
Equipment 6,800
Accounts payable 3,800
L. Zhang, Withdrawals 1,800
Service revenue $ 12,900
Rent expense 2,300
Wages expense 8,000
b) The income statement for the month of June summarizes Lawson's revenue and expenses, giving rise to a net income of $2,600. On the statement, the financial profitability of the business is determined. Only temporary accounts from the list of account balances are used to prepare the statement.
The price of a dozen eggs falls from $3 to $2.70. In response to this price change, the quantity supplied of eggs falls from 150,000 dozen eggs to 125,000 dozen eggs. What is the price elasticity of supply for eggs
Answer:
Price elasticity of supply=1.67
Explanation:
Price elasticity of supply is a measure of the degree of responsive of supply to a change in price . It is computed using the formula below:
% change in Quantity supply/% change in price
% change in Quantity supply= 125,000-150,000/150,000× 100=16.67%
% change in price = (2.70-3.00)/3.00× 100= 10.00%
Price elasticity of supply = 16.67/10.00=1.67
Price elasticity of supply=1.67
If the four-firm concentration ratio for industry X is 60, Multiple Choice the four largest firms account for 60 percent of total sales. each of the four largest firms accounts for 15 percent of total sales. the four largest firms account for 60 percent of total advertising expenditures. the industry is monopolistically competitive, but on the threshold of being an oligopoly.
Answer:
The four largest firms account for 60 percent of total sales.
Explanation:
The four firm concentration ratio calculates the concentration ratio of the 4 largest firms in an industry.
IF the concentration ratio is 60, it means that the 4 largest firms account for 60% of the sales
Principal Printing produces custom labels and stationery for companies. In conducting CVP analysis of its Personalized Package, management decided to determine how many of the packages would need to be sold in order to justify continuing the product line. Management determined that fixed costs direct related to this particular product amounted to $54,000 annually. Principal reported $240,000 of gross sales related to this product and variable product costs of $180,000. Assuming that each Personalized Package sells for $12 per unit, what is the minimum amount of total sales dollars of Personalized Packages that Principal needs in order to justify the product line
Answer:
18,000 personalized packages
Explanation:
Profit-volume ratio = ($240,000 - $180,000) / $240,000
Profit-volume ratio = 0.25
Profit-volume ratio= 25%
Break-Even-Point = $54,000 / 25%
Break-Even-Point = 216,000
The minimum personalized packages that needs to sell to break even:
= Break-Even-Point / Personalized Package sales per unit
= 216,000 / $12
= 18,000 personalized packages
The management of Unter Corporation, an architectural design firm, is considering an investment with the following cash flows: Year Investment Cash Inflow 1 $ 42,000 $ 3,000 2 $ 5,000 $ 6,000 3 $ 12,000 4 $ 14,000 5 $ 16,000 6 $ 15,000 7 $ 13,000 8 $ 11,000 9 $ 10,000 10 $ 10,000 Required: 1. Determine the payback period of the investment. 2. Would the payback period be affected if the cash inflow in the last year were several times as large
Answer:
Unter Corporation
1. The payback period of the investment is:
= 5 years.
2. No. The payback period would not be affected if the cash inflow in the last year were several times as large. The payback period was reached in the 5th year, which is half-way before the last year. As it stands, no cash inflows after the 5th year will have any impact on the payback period.
Explanation:
a) Data and Calculations:
Cash flows:
Year Investment Cash Inflow Cumulative inflow
1 $ 42,000 $ 3,000 $3,000
2 5,000 $ 6,000 9,000
3 $ 12,000 21,000
4 $ 14,000 35,000
5 $ 16,000 51,000
6 $ 15,000
7 $ 13,000
8 $ 11,000
9 $ 10,000
10 $ 10,000
Total $47,000 $110,000
RM Company, a manufacturer, has provided the following information pertaining to its recent year of operation:
Net income $390,000
Accounts payable increased $33,000
Prepaid rent decreased $14,500
Depreciation expense was $44,000
Accounts receivable increased $43,000
Gain on sale of a building was $15,500
Wages payable decreased $30,000
Unearned revenue increased $53,000
Using the indirect method, how much was RM's net cash provided by operating activities?
a. $259,000.
b. $327,000.
c. $347,000.
d. $358,000.
Answer:
RM Company
Using the indirect method, RM's net cash provided by operating activities is:
= $446,000.
Explanation:
a) Data and Calculations:
Net income $390,000
Accounts payable increased $33,000
Prepaid rent decreased $14,500
Depreciation expense was $44,000
Accounts receivable increased $43,000
Gain on sale of a building was $15,500
Wages payable decreased $30,000
Unearned revenue increased $53,000
Operating Activities:
Net income $390,000
Adjustment with non-cash items:
Depreciation expense was 44,000
Gain on sale of a building was (15,500)
Working capital changes:
Accounts payable increased 33,000
Prepaid rent decreased 14,500
Unearned revenue increased 53,000
Accounts receivable increased (43,000)
Wages payable decreased (30,000)
Net cash provided by operating
activities $446,000
Jacques lives in Chicago and runs a business that sells pianos. In an average year, he receives $701,000 from selling pianos. Of this sales revenue, he must pay the manufacturer a wholesale cost of $420,000; he also pays wages and utility bills totaling $247,000. He owns his showroom; if he chooses to rent it out, he will receive $9,000 in rent per year. Assume that the value of this showroom does not depreciate over the year. Also, if Jacques does not operate this piano business, he can work as a financial advisor, receive an annual salary of $32,000 with no additional monetary costs, and rent out his showroom at the $9,000 per year rate. No other costs are incurred in running this piano business.
What are Raphael's explicit costs of selling pianos?
1) The salary Raphael could earn if he worked in an accounting firm.
2) The wages and utilty bills that Raphael pays.
3) The wholesale cost for pianos that Raphael pays the manufacturer.
4) The rental income Raphael could receive per year if he chose to rent his showroom out.
What is this omg
I didn't saw a question like this
The sharper is available for 120 hours, and the grinder is available for 110 hours. No more than 200 units of component 3 can be sold, but up to 1000 units of each other components can be sold. In fact, the company already has orders for 600 units of component 1 that must be satisfied. The profit contributions for components 1, 2, and 3 are $8, $6, and $9, respectively. a. Formulate this LP problem and make sure you define all the decision variables. b. Transform your formulation to the Standard LP form. c. The Excel Solver Solution to this problem is presented below. Identify and present the optimal solution and the values of the decision variables. d. Find the slack and/or surplus variables. e. Will the Sharper or the Grinder or both need more time
Answer:
I don't no the answer sorry
Torino Company has 1,500 shares of $10 par value, 7.0% cumulative and nonparticipating preferred stock and 15,000 shares of $10 par value common stock outstanding. The company paid total cash dividends of $500 in its first year of operation. The cash dividend that must be paid to preferred stockholders in the second year before any dividend is paid to common stockholders is:________.
a. $1,600.
b. $550.
c. $1,050.
d. $2,100.
e. $500.
Answer:
a. $1,600.
Explanation:
The computation of the amount of the dividend that should be paid to the preference shareholder in the second year is shown below:
Annual dividend is
= 1,500 shares × 7% × $10
= $1,050
Now the dividend that should be paid to the next year
= $1,050 + $1,050 - $500
= $1,600
Hence, the mount of the dividend that should be paid to the preference shareholder in the second year is $1,600
Expected cash flows: FireRock Wheel Corp is evaluating a project in which there is a 40 percent probability of revenues totaling $4 million and a 60 percent probability of revenues totaling $2 million per year. Its cash expenses will be $1.0 million while depreciation expense will be $300,000. What is the expected free cash flow from taking the project if the marginal tax rate for the firm is 25 percent
Answer:
$1,425,000
Explanation:
Calculation to determine the expected free cash flow
Expected revenue$2,800,000
[(40%*$4 million)+(60%*$2 million)]
Less Cash Expenses $1,000,000
Less Depreciation Expense $300,000
EBIT$1,500,000
($2,800,000-$1,000,000-$300,000)
Tax $375,000
(25%*$1,500,000)
Net Income $1,125,000
($1,500,000-$375,000)
Add Depreciation Expense $300,000
Free Cash Flow $1,425,000
($1,125,000+$300,000)
Therefore the expected free cash flow is $1,425,000
In its first year of operations, Roma Company reports the following.
Earned revenues of $55,000 ($47,000 cash received from customers).
Incurred expenses of $30,500 ($23,750 cash paid toward them).
Prepaid $9,250 cash for costs that will not be expensed until next year.
Required:
Compute the company’s first-year net income under both the cash basis and the accrual basis of accounting.
Answer:
Cash Basis $14,000
Accrual Basis $24,500
Explanation:
Computation for the company’s first-year net income under both the cash basis and the accrual basis of accounting.
CASH BASIS ACCRUAL BASIS
Revenues $47,000 $55,000
Less Expenses $33,000 $30,500
($23,750+9,250=$33,000)
Net income $14,000 $24,500
Therefore the company’s first-year net income under both the cash basis and the accrual basis of accounting will be :
Cash Basis $14,000
Accrual Basis $24,500
A company uses the weighted average method for inventory costing. At the beginning of a period the production department had 54,000 units in beginning Work in Process inventory which were 33% complete; the department completed and transferred 168,000 units. At the end of the period, 15,000 units were in the ending Work in Process inventory and are 68% complete. Compute the number of equivalent units produced by the department.
The market consensus is that Analog Electronic Corporation has an ROE of 9% and a beta of 1.70. It plans to maintain indefinitely its traditional plowback ratio of 2/3. This year's earnings were $3.6 per share. The annual dividend was just paid. The consensus estimate of the coming year's market return is 15%, and T-bills currently offer a 5% return.
Required:
a. Find the price at which Analog stock should sell.
b. Calculate the P/E ratio.
c. Calculate the present value of growth opportunities.
d. Suppose your research convinces you Analog will announce momentarily that it will immediately reduce its plowback ratio to 1/3. Find the intrinsic value of the stock.
Answer:
a $7.95
b. $2.21
c $16.36
d, $13.01
Explanation:
according to the constant dividend growth model
price = [d0 (1+g)] / (r - g)
d0 = recently paid dividend
Dividend = payout ratio x earnings
payout ratio = 1 - plowback rate
1 - 2/3 = 1/3
1/3 x 3.6 = $1.2
r = cost of equity
According to the capital asset price model: Expected rate of return = risk free + beta x (market rate of return - risk free rate of return)
5% + 1.7(15 - 5) = 22%
g = growth rate
g = plowback rate x ROE
2/3 X 9 = 6%
1. [1.2 x 1.06] / (0.22 - 0.06) = 1.272/ 0.16 = $7.95
2.
The price to earning ratio is a financial metric used to value a company. it compares the price of a stock to the earnings of the stock. the lower the metric is, the higher the valuation of the firm
price to earning ratio = market value per share / earnings
$7.95 / $3.6 = $2.21
c. present value of growth opportunities = earnings / cost of equity
3.6 / 0.22 = $16.36
d.
price = [d0 (1+g)] / (r - g)
d0 = recently paid dividend
Dividend = payout ratio x earnings
payout ratio = 1 - plowback rate
1 - 1/3 = 2/3
2/3 x 3.6 = $2.40
r = cost of equity = 22%
g = plowback rate x ROE
1/3 X 9 = 3%
[2.4 x 1.03] / (0.22 - 0.03) = 2.472/ 0.19 = $13.01
4. What have been some of the causes of the changing busi-
ness environment in recent decades?
Answer:
The answer is below
Explanation:
Some of the causes of the changing business environment in recent decades are:
1. the commencement and development of technology
2. the economy
3. societal components
4. deregulation of several industries
5. Regional differences
6. the rise in white-collar workers, women, and older people in the workforce
7. a complex and varying level of workforce
8. rise in the number of small businesses.
What is least likely and most likely to do ?
Answer:
Most Likely to do:
" Try to learn why the customer likes the product, and suggest a similar but less expensive alternative."
This will help you to gain the customer's trust, and will most likely take or buy the alternative if he is convinced of getting the same functionality.
Least Likely to do:
"Offer to check with your Store Manager to see if anything can be done. Ask your Manager how to handle the situation."
This will probably not yield a positive result because the price would not likely be changed, and it may put you in a bad light under your Manager, as he will believe you can't think on your feet or improvise on your own.
Identify whether the actions or scenarios would likely increase or decrease the natural rate of unemployment. You are currently in a sorting module. Turn off browse mode or quick nav, Tab to items, Space or Enter to pick up, Tab to move, Space or Enter to drop. Increases natural rate of unemployment reducing workers' collective bargaining rights extra financial benefits for the unemployed a large number of young people entering the labor force an increase in union membership Decreases natural rate of unemployment
Answer:
increases natural rate of unemployment
extra financial benefits for the unemployed
a large number of young people entering the labor force
an increase in union membership
Decreases natural rate of unemployment
reducing workers' collective bargaining rights
Explanation:
natural rate of unemployment is unemployment that exists when there is only structural and frictional unemployment in an economy
structural unemployment is an unemployment that occurs as a result of changes in the economy. These changes can be as a result of changes in technology, polices or competition . Structural unemployment tends to be permanent.
Frictional unemployment . the period of time a person is unemployed from the period he leaves his current job and the time he gets another job. Eg. when a real estate agent who leaves a job in Texas and searches for a similar, higher-paying job in California.
If the unemployed are given extra benefits, there would be less incentive to find a job, thus unemployment would increase
An increase in union membership increases bargaining power of employees. this can lead to increase in wages. increase in wages reduces demand for labour and this increases unemployment. reducing collective bargaining right has the opposite effect on unemployment
a large number of people entering the labour force increases frictional unemployment
P Corporation acquires all of S Company's voting stock. At the date of acquisition, the fair value of S Company's long-term debt is $100 greater than its book value. The debt has a 5-year remaining life at the date of acquisition. When consolidating S Company's financial statements for the first year following acquisition, how will eliminating entry (O) affect long-term debt and interest expense
Answer:
$20 debit to long-term debt, $20 credit to interest expense
Explanation:
Based on the information given the eliminating entry that will affect the long-term debt and interest expense is to DEBIT LONG-TERM DEBT with the amount of $20 and CREDIT INTEREST EXPENSE with the amount of $20
Debit long-term debt $20
Credit Interest expense $20
Calculated as:
Fair value of S Company's long-term debt/Remaining life at the date of acquisition
=$100/5years
=$20
Amigo Software, Inc., has total assets of $800,000, current liabilities of $150,000, and long-term liabilities of $120,000. There is $65,000 in preferred stock outstanding. Thirty thousand shares of common stock have been issued.
Required:
a. Compute book value (net worth) per share.
b. If there is $48,000 in earnings available to common stockholders and the firm’s stock has a P/E of 20 times earnings per share, what is the current price of the stock?
c. What is the ratio of market value per share to book value per share? (Round to two places to the right of the decimal point.)
Answer and Explanation:
a. The book value per share is
But before that the net worth is
= Total assets - current liabilities - long term liabilities - preferred stock
= $800,000 - $150,000 - $120,000 - $65,000
= $465,000
Now the book value per share is
= $465,000 ÷ 30,000 shares
= $15.50
b. The current price of the stock is
= $48,000 ÷ 30,000
= $1.60
Now the market value is
= $1.60 × 20
= $32
c. The ratio of market value per share to book value per share is
= $32 ÷ $15.50
= 2.06
The Peoria Supply Company sells for $30 one product that it purchases for $20. Budgeted sales in total dollars for next year are $720,000. The sales information needed for preparing the July budget follows:
Month Sales Revenue
May $30,000
June 42,000
July 51,000
August 54,000
Account balances at July 1 include these:
Cash $20,000
Merchandise inventory 18,000
Accounts receivable (sales) 23,000
Accounts payable (purchases) 12,000
The company pays for one-half of its purchases in the month of purchase and the remainder in the following month. End-of-month inventory must be 50 percent of the budgeted sales in units for the next month. A 2 percent cash discount on sales is allowed if payment is made during the month of sale. Experience indicates that 50 percent of the billings will be collected during the month of sale, 40 percent in the following month, 8 percent in the second following month, and 2 percent will be uncollectible. Total budgeted selling and administrative expenses (excluding bad debts) for the fiscal year are estimated at $180,000 , of which one-half is fixed expense (inclusive of a $20,000 annual depreciation charge). Fixed expenses are incurred evenly during the year. The other selling and administrative expenses vary with sales. Expenses are paid during the month incurred.
Required:
a. Prepare a schedule of estimated cash collections for July.
b. Prepare a schedule of estimated July cash payments for purchases.
c. Prepare schedules of July selling and administrative expenses, separately identifying those requiring cash disbursements.
Answer:
The Peoria Supply Company
a. Schedule of Estimated Cash Collections:
Cash collections: July
50% sales month $25,500
less 2% cash discount (510)
40% following month 16,800
8% second month 2,400
Total collections $44,190
b. A Schedule of Estimated July Cash Payments for Purchases
June July
Sales $42,000 $51,000
Ending inventory 18,000* 27,000
Beginning inventory 21,000 18,000*
Estimated Purchases 39,000 60,000
Payment for purchases:
50% purchase month $30,000
50% following month 19,500
Total payment for purchases $49,500
c. Selling and administrative expenses
Non-Cash expenses:
Depreciation expense $1,667
Cash disbursements:
Other fixed costs 5,333
Variable costs 6,375
Total costs $13,375
Explanation:
a) Data and Calculations:
Selling price per product = $30
Purchase cost per product = $20
Total sales dollars for next year = $720,000
Month Sales Revenue
May $30,000
June 42,000
July 51,000
August 54,000
July 1:
Cash balance = $20,000
Merchandise inventory $18,000
Accounts receivable (sales) 23,000
Accounts payable (purchases) 12,000
Ending inventory = $27,000 ($54,000 * 50%)
Ending inventory = 50% of next month's budgeted sales
Selling and administrative expenses (excluding bad debts) for the year = $180,000
Fixed costs = $90,000
Depreciation 20,000
Cash fixed costs = $70,000
Monthly fixed costs = $5,833
Variable costs = $90,000
Variable costs per sales dollars = $90,000/$720,000 = $0.125
Cash variable cost for July $0.125 * $51,000 = $6,375
a. Schedule of Estimated Cash Collections:
Cash collections: May June July August
$30,000 $42,000 $51,000 $54,000
50% sales month 15,000 21,000 25,500 27,000
less 2% cash discount (300) (420) (510) (540)
40% following month 16,800 20,400
8% second month 2,400 3,360
2% Uncollectible
KrAmerica Jewelers sold a necklace to George on a layaway plan. George paid a portion of the price and agreed to make additional payments over six months. The necklace was to remain in the possession of KrAmerica until payment was fully made. A burglary occurred at KrAmerica and the necklace along with other items were stolen. KrAmerica argued that George must bear the risk of loss. George sought recovery of the full value of the necklace. Explain who shall prevail for each claim.
Answer:
- KrAmerica will bear the risk of the loss
- George will not get full recovery for the value of the necklace
Explanation:
George only made some payments for the necklace and he had not taken possession of it yet. So the risk for the loss is with KrAmerica since they are the current owners of the necklace.
George was only to take possession of the necklace when payment was completed.
On the other hand George is seeking full recovery of the value of the necklace.
He has only made a part payment on the necklace, so he is not entitled to get the full value of the necklace.
Only the amount he has paid will be refunded to him.
Diamond Boot Factory normally sells its specialty boots for $22 a pair. An offer to buy 120 boots for $18 per pair was made by an organization hosting a national event in Norfolk. The variable cost per boot is $8, and special stitching will add another $2 per pair to the cost. Determine the differential income or loss per pair of boots from selling to the organization.
Answer:
Differential income = $960
Explanation:
In a special order decision , the offer should be accepted if the sales revenue from the order is greater than the relevant costs of the special orders.
The relevant costs of the special order = variable cost + additional cost of special stitching machine
$
Sales revenue (120× $18) 2,160
The relevant costs of the special order
= (120×8) + (120×2) (1,200)
Differential income 960