Answer: Yellow dominates portfolios Blue and Purple.
Explanation:
Portfolio Yellow has a higher expected return than either portfolio Blue or Portfolio Purple which means that if we were evaluating the portfolios on return alone, Portfolio Yellow would dominate the other two.
However, we need to adjust for risk. The portfolio with the lowest standard deviation is the less riskier one of the three. That portfolio is Yellow which means that Yellow has both a higher expected return and a lower risk. It would therefore dominate the rest.
what is the current exchange rate?
C Corporation is investigating automating a process by purchasing a machine for $808,200 that would have a 9 year useful life and no salvage value. By automating the process, the company would save $141,000 per year in cash operating costs. The new machine would replace some old equipment that would be sold for scrap now, yielding $22,800. The annual depreciation on the new machine would be $89,800. The simple rate of return on the investment is closest to (Ignore income taxes.): Multiple Choice 11.28% 5.28% 6.52% 16.88%
Answer:
6.52%
Explanation:
According to the scenario, computation of the given data are as follows,
New machine cost = $808,200
Scrap sold = $22,800
Cost of investment = $808,200 - $22,800 = $785,400
Saving from new machine = $141,000
Annual depreciation of machine = $89,800
Net operating income = $141,000 - $89,800 = $51,200
Now we can calculate the rate of return by using following formula,
Simple rate of return = Net operating income ÷ Cost of Investment
= $51,200 ÷ $785,400
= 6.52%
You are given the following information concerning Parrothead Enterprises:
Debt: 9,300 6.5% coupon bonds outstanding, with 22 years to maturity and a quoted price of 104.75. These bonds have a par value of $1,000 and pay interest semi-annually.
Common stock: 240,000 shares of common stock selling for $64.80 per share. The stock has a beta of .93 and will pay a dividend of $3.00 next year. The dividend is expected to grow by 5.3 percent per year indefinitely.
Preferred stock: 8,300 shares of 4.65 percent preferred stock selling at $94.30 per share.
Market: 11.7% expected return, a risk-free rate of 3.75%, and a 23% tax rate.
Calculate the company's WACC.
Answer:
WACC is 8.19%
Explanation:
WACC (Weighted Average Cost of Capital is determined by multiplying capital source cost of both equity and debt by their relevant weight and then summing the results to identify the value using the formulae given below:
WACC = (E/V x Re) + [D/V x Rd x (1 - Tc)]
where:
E = Market Value of the firm's equity
D = Market Value of the firm's debt
V = E + D
Re = Cost of Equity
Rd = Cost of Debt
Tc = Tax Rate
In the given question, we will first determine the cost of equity. As shown below:
Cost of Equity = Average of CAPM and Dividend Capitalisation Model
CAPM = Risk free rate of return + Beta x (market rate of return - risk free rate of return)
CAPM = 3.75 + 0.93 x (11.7 - 3.75)
CAPM = 11.14%
Dividend Capitalisation Model = Expected dividend net year / Current Price + Growth Rate
Dividend Capitalisation Model = 3 / 64.8 * 100 + 5.3
Dividend Capitalisation Model = 9.93%
Cost of Equity = 9.93 + 11.14 = 10.54%
Next is the cost of debt which would be calculated using YTM (Yield to maturity)
where:
Par Value = 1047.5
Face Value = 1000
Coupon rate = 6.5
Years to maturity = 22 years
Coupon Payment Frequency is semi annually.
The Cost of debt = 6.1%
After Tax it would be 4.7% [6.1% * (1 - 23%)]
Next, we will determine the rate of preferred stock before calculating the WACC.
Rate of preferred stock = Annual dividend / Current Price * 100
Rate of preferred stock = 4.65 / 94.3 * 100
Rate of preferred stock = 4.93%
Finally, we will calculate the Market Value (MV) of equity, debt and preferred stock. As shown below:
MV Equity = 240,000 x 64.8 = 15,552,000
MV Debt = 1047.5 x 9300 = 9,741,750
MV preferred stock = 8,300 x 94.3 = 782,690
Total = 26,076,440
WACC = (15,552,000 / 26,076,440 * 10.54%) + (9,741,750 / 26,076,440 * 4.7%) + (782,690 / 26,076,440 * 4.93%)
WACC = 6.28% + 1.76% + 0.15%
WACC = 8.19%
Required information Skip to question [The following information applies to the questions displayed below.] ABC Company prepared the following aging of receivables analysis at December 31. Days Past Due Total 0 1 to 30 31 to 60 61 to 90 Over 90 Accounts receivable $ 640,000 $ 410,000 $ 104,000 $ 50,000 $ 32,000 $ 44,000 Percent uncollectible 3 % 4 % 7 % 9 % 12 % a. Estimate the balance of the Allowance for Doubtful Accounts assuming the company uses 5% of total accounts receivable to estimate uncollectibles, instead of the aging of receivables method. b. Prepare the adjusting entry to record Bad Debts Expense using the estimate from part a. Assume the unadjusted balance in the Allowance for Doubtful Accounts is a $13,400 credit. c. Prepare the adjusting entry to record bad debts expense using the estimate from part a. Assume the unadjusted balance in the Allowance for Doubtful Accounts is a $2,400 debit. Estimate the balance of the Allowance for Doubtful Accounts assuming the company uses 5% of total accounts receivable to estimate uncollectibles, instead of the aging of receivables method.
Answer:
A. $32,000
B. Dec 31
Dr Bad debts expense $18,600
Cr Allowance for doubtful accounts $18,600
C. Dec 31
Dr Bad debts expense $34,400
Cr Allowance for doubtful accounts $34,400
Explanation:
a. Calculation to Estimate the balance of the Allowance for Doubtful Accounts assuming the company uses 5% of total accounts receivable to estimate uncollectibles, instead of the aging of receivables method
Accounts receivable
Not due $ 410,000
1 to 30 $ 104,000
31 to 60 $ 50,000
61 to 90 to$ 32,000
Over 90 $44,000
Total Accounts receivable $640,000
Estimate the balance of the Allowance for Doubtful Accounts=$640,000*5%
Estimate the balance of the Allowance for Doubtful Accounts=$32,000
Therefore the Estimated balance of the Allowance for Doubtful Accounts will be $32,000
b. Preparation of the adjusting entry to record Bad Debts Expense from part a. Assume the unadjusted balance in the Allowance for Doubtful Accounts is a $13,400 credit.
Dec 31
Dr Bad debts expense $18,600
Cr Allowance for doubtful accounts $18,600
($32,000-$13,400)
(To record Bad Debts Expense)
c. Preparation ofn the adjusting entry to record bad debts expense using the estimate from part a. Assume the unadjusted balance in the Allowance for Doubtful Accounts is a $2,400 debit.
Dec 31
Dr Bad debts expense $34,400
Cr Allowance for doubtful accounts $34,400
($32,000+$2,400)
(To record bad debts expense )
The Acme Toy Company introduced a new electric train, the Silver Bullet, in its Christmas catalog last year. Within four days of the catalog's mailing date, Acme had received phone orders for its entire inventory of trains. Paul Murrah, the sales manager responsible for the Silver Bullet, was delighted with the product's success. However, his excitement was overshadowed by the ____ cost resulting from lost sales that his division would suffer.
Answer:
Stock out
Explanation:
Stockout cost can be regarded as lost of income as well as expenses which is as a result of shortage of inventory.
These can come up in different vways such as
✓Sales-related way; instance of these is when there is an order been placed by a customer but inventory is not available to sell to him/her gross margin that is related to sale would be loss by the company.
✓Internal process-related; this is when there is no inventory for a production run when the company needs it, then cost will be incurred in getting it even on short notice.
what is the role of the prosecutor in a civil case
A prosecutor is a legal representative of the prosecution in countries with either the civil case inquisitorial system, they represents the government in the case brought against the accused person
Answer:
same as the answer of her/him
Explanation:
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Jamari conducts a business with the following results in 2020: Revenue $20,000 Depreciation on car 3,960 Operating expenses of car 3,100 Rent 6,000 Wages 8,200 Amortization of intangibles 680 Jamari estimates that due to a depressed real estate market, the value of land owned by the business declined by $5,200. a. Calculate the effect of Jamari's business on his AGI. Jamari's business has a of $fill in the blank d33155077fa8faf_2 which is reported on his tax return. b. How would your answer in part (a) change if the activity was a hobby
Answer:
A. Net loss; $1,940; For AGI
B. $20,000 ;$20,000; But Will Not Be Deductible
Explanation:
1. Calculation to determine what Jamari's business has and the amount which is reported on his tax return
Calculation for Net Income / (loss)
Revenue $ 20,000
Less:
Depreciation on Car ($3,960)
Operating Exp of car ($3,100)
Rent ($6,000)
Wages ($8,200)
Amortization of intangible ($ 680) ($21,940)
Net Income / (loss) $ -1,940
($20,000-$21,940)
Therefore Jamari's business has a NET LOSS of $1,940 which is reported FOR AGI (ADJUSTED GROSS INCOME) on his tax return
B . Based on the information given we were that the REVENUE is the amount of $20,000 which means that in a situation where the activity was a hobby Jamari will report $$20,000 as income. Of his expenses, $20,000 are ALLOWED BUT WILL NOT BE DEDUCTIBLE on his tax return.
On February 1, 2020, Nash's Contractors agreed to construct a building at a contract price of $5,700,000. Nash's estimated total construction costs would be $3,920,000 and the project would be finished in 2022. Information relating to the costs and billings for this contract is as follows:
2020 2021 2022
Total costs incurred to date $1,470,000 $2,580,000 $4,550,000
Estimated costs to complete 2,450,000 1,720,000 -0-
Customer billings to date 2,100,000 3,920,000 5,500,000
Collections to date 1,900,000 3,400,000 5,400,000
Fill in the correct amounts on the following schedule. For percentage-of-completion accounting and for completed-contract accounting, show the gross profit that should be recorded for 2020, 2021, and 2022.
2020 $________ 2020 $________
2021 $________ 2021 $________
2022 $________ 2022 $________
Answer:
Nash's Contractor
Gross profit that should be recorded for 2020, 2021, and 2022:
Percentage -of completion Completed-contract
2020 $___667,500_____ 2020 $___0_____
2021 $____361,395____ 2021 $____0____
2022 $____121,105____ 2022 $____1,150,000____
Explanation:
a) Data and Calculations:
Contract price = $5,700,000
Estimated construction costs = $3,920,000
Project completion date = 2022
Costs and Billings:
2020 2021 2022
Total costs incurred to date $1,470,000 $2,580,000 $4,550,000
Estimated costs to complete 2,450,000 1,720,000 -0-
Customer billings to date 2,100,000 3,920,000 5,500,000
Collections to date 1,900,000 3,400,000 5,400,000
Percentage of completion:
2020:
Revenue = $2,137,500 ($1,470,000/$3,920,000 * $5,700,000)
Cost incurred = 1,470,000
Gross profit = $667,500
2021:
Revenue = $1,471,395 ($1,110,000/$4,300,000 * $5,700,000)
Cost incurred = 1,110,000
Gross profit = $361,395
2022:
Revenue = $2,091,105 ($5,700,000 - $2,137,500 - $1,471,395)
Cost incurred 1,970,000
Gross profit = $121,105
Completed contract
2022: Revenue = $5,700,000
Total costs = 4,550,000
Gross profit = $1,150,000
Company A owns a 40% equity method investment in Company B. Subsequently, Company A acquires a controlling interest in a Company B and now must prepare consolidated financial statements. If the date Company A obtains control occurs midyear, how are subsidiary revenues and expenses reported in consolidated income statement in the year of the business combination
Answer:
Pre acquisition subsidiary revenues and expenses are excluded from consolidated revenue and expenses. Post acquisition subsidiary revenues and expenses are included in consolidated revenues and expenses.
Explanation:
Company A has acquired control over company B. When accounting for the consolidated financial statement the pre acquisition revenues and expenses will not be included, only post acquisition revenues and expenses will be included in the consolidated statement and they will be accounted for according to controlling percentage.
Prepare journal entries to record the following transactions for Sherman Systems. Purchased 6,000 shares of its own common stock at $35 per share on October 11. Sold 1,250 treasury shares on November 1 for $41 cash per share. Sold all remaining treasury shares on November 25 for $30 cash per share. 2. Prepare the stockholders' equity section after the October 11 treasury stock purchase.
Answer:
Revised Equity Section of Balance Sheet After October 11
Common Stock at par $820,000
Paid-in capital in excess of Par $266,000
Total Contributed Capital $1,086,000
Retained earnings $ 944,000
Total $2,030,000
Less: Treasury Stock ($ 210,000)
Total Stockholder's Equity $1,820,000
Treasury stock = 6,000 * 35
= $210,000
The following data relate to Ramesh Company’s defined benefit pension plan: ($ in millions) Plan assets at fair value, January 1 $ 780 Expected return on plan assets 78 Actual return on plan assets 62 Contributions to the pension fund (end of year) 136 Amortization of net loss 16 Pension benefits paid (end of year) 23 Pension expense 108 Required: Determine the amount of pension plan assets at fair value on December 31. (Enter your answers in millions. Amounts to be deducted should be indicated with a minus sign.
Answer:
$955 million
Explanation:
Calculation to Determine the amount of pension plan assets at fair value on December 31
(millions)
Plan Assets Beginning of the year $780
Actual return $62
Cash contributions $136
Less: Retiree benefits($23)
End of the year pension plan assets $955
Therefore the amount of pension plan assets at fair value on December 31 is $955 million
List five developmental issues common to most LDCs.
Answer:
..........................
On November 1, Year One, a company is paid $12,000 in advance to do a job for a customer. The job has ten separate steps. The first four steps were completed in Year One and the remaining six steps were completed in Year Two. The accountant mistakenly believed that this was just one big job and recorded it in that fashion. However, each of the ten steps was really an individual job and should have been accounted for in that way. Which of the following statements is true?
a. At the end of Year One, the company's liabilities are understated.
b. At the end of Year Two, the company's assets are overstated.
c. At the end of Year Two, the company's retained earnings are overstated.
d. At the end of Year One, the company's retained earnings are understated.
e. At the end of Year Two, the company's net income is understated.
Answer: a. At the end of Year One, the company's liabilities are understated.
Explanation:
Under the Accrual basis of Accounting, revenue should be recorded for only jobs that have been completed. In other words, only earned revenue should be recorded. Revenue that has not been earned but yet received, is to be termed Deferred revenue and should be treated as a current liability.
In this scenario, there are steps that have not been completed so some of the revenue received should be termed deferred revenue. These should therefore be in current liabilities and because they were not, the liabilities for the end of year 1 will be understated.
Cook Company processes and packages frozen seafood. The year just ended was Cook's first year of business and they are preparing financial statements. The immediate issue facing Cook is the treatment of the direct labor costs. Cook set a standard at the beginning of the year that allowed two hours of direct labor for each unit of output. The standard rate for direct labor is $27 per hour. During the year, Cook processed 60,000 units of seafood for the year, of which 4,800 units are in ending finished goods. (There are no work-in-process inventories). Cook used 123,500 hours of labor. Total direct labor costs paid by Cook for the year amounted to $3,087,500.
Required:
a. What was the direct labor price variance and the direct labor efficiency variance for the year?
b. Assume Cook writes off all variances to Cost of Goods Sold. Prepare the entries Cook would make to record and close out the variances.
c. Assume Cook prorates all variances to the appropriate accounts. Prepare the entries Cook would make to record and close out the variances.
Answer:
Cook Company
a. The direct labor price variance and the direct labor efficiency variance for the year:
Direct labor price variance = (Actual rate - Standard rate) * Actual hours
= $247,000 Favorable
Efficiency variance = (Actual hours - Standard hours) * Standard rate
= $94,500 Unfavorable
b. If all variances are written off to the Cost of Goods Sold:
Journal Entries:
Debit Work in Process $247,000
Credit Direct labor variance $247,000
To record the favorable direct labor price variance.
Debit Direct labor variance $94,500
Credit Work in Process $94,500
To record the unfavorable direct labor efficiency variance.
Debit Direct labor variance $152,500
Credit Cost of Goods Sold $152,500
To close the direct labor price variance.
c. The appropriate accounts are not indicated, though they should be Raw materials, Work in Process, and Cost of Goods Sold. However, the ratios are not given for prorating.
Explanation:
a) Data and Calculations:
Standard direct labor hours per unit = 2
Standard rate per direct labor hour = $27
Production units = 60,000
Ending Finished goods = 4,800
Cost of goods sold units = 55,200
Actual direct labor hours used = 123,500
Standard hours = 120,000 (2 * 60,000)
Actual direct labor costs = $3,087,500
Actual direct labor price = $25 ($3,087,500/123,500)
Standard direct labor costs = $3,240,000 (120,000 * $27)
a. The direct labor price variance and the direct labor efficiency variance for the year:
Direct labor price variance = (Actual rate - Standard rate) * Actual hours
= ($25 - $27) * 123,500
= $247,000 Favorable
Efficiency variance = (Actual hours - Standard hours) * Standard rate
= (123,500 - 120,000) * $27
= $94,500 Unfavorable
b. If all variances are written off to the Cost of Goods Sold:
Analysis of Journal Entries:
Work in Process $247,000 Direct labor variance $247,000
Direct labor variance $94,500 Work in Process $94,500
Direct labor variance $152,500 Cost of Goods Sold $152,500
($247,000 - $94,500)
Which situation would increase the scarcity of a product?
A. Demand for the product falls, and fewer customers buy it.
B. One of only two factories that made the product shuts down.
C. A new production method lowers the cost of making the product.
D. A foreign country begins exporting the product in high volume.
Answer:
B. one of only 2 factories that made the product shuts down.
Resources do not limit the number of needs and wants people
can
satisfy.
True or False
Answer:
False
Explanation:
Resources absolutely limit what can be accomplished and done. Just think of the timber industry. They want to cut down all trees they can to make a profit, but society needs to preserve natural forests so their cutting is limited.
Answer:
false
Explanation:
resources is a source that is generate form nature. the resources satisfy the wants because is the will no resource like - chair , table, food( that we cook) etc. we can't survive in this world. some examples for reading in school tables, chair are made form wood, which is a source .
Tops Co. purchases equipment for $12,000 and has been using straight-line depreciation, estimating a 5-year life and $500 salvage value. At the beginning of the third year, Tops decides to use the equipment for a total of 6-years with no salvage value. Compute the revised depreciation for the third year. Multiple choice question. $2,875 $1,850 $1,250 $2,375
Answer:
Annual depreciation= $1,850
Explanation:
Giving the following formula:
Purchase price= $12,000
Salvage value= $500
Useful life= 5 years
First, we need to calculate the annual depreciation and accumulated depreciation:
Annual depreciation= (original cost - salvage value)/estimated life (years)
Annual depreciation= (12,000 - 500) / 5
Annual depreciation= 2,300
Accumulated depreciation (2 years)= 2,300*1= 4,600
Now, we can determine the annual depreciation with a 4 more years of useful life:
Book value= 12,000 - 4,600= 7,400
useful life= 4 years more
Annual depreciation= 7,400/4
Annual depreciation= $1,850
The chapter explained why exporters cheer when their home currency depreciates. At the same time, domestic consumers find that they pay higher prices, so they should be disappointed when the currency becomes weaker. Why do the exporters usually win out, so that governments often seem to welcome depreciations while trying to avoid appreciations? (Hint: Think about the analogy with protective tariffs.)
Answer:
Exporters usually win out when their home currency depreciates because it increases demand for the exported products.
Explanation:
The foreign consumers find that the prices of the imports are now reduced because of the depreciation of the exporting nation's currency. The impact is reduced cost of importation for the importing consumers. When prices fall, demand tends to increase relative to supply. For any government that wants to encourage exports for earning foreign exchange, it will always work hard to avoid currency appreciation so that consumers from the importing nation are not discouraged or made to develop alternatives.
Exporters usually win out when their home currency depreciates because the depreciation increases the demand of the exported products.
When the prices fall, demand of the products and goods tend to increase. When the home currency depreciates, this will leads to higher demand of goods from other countries so the exporters produce and exports more goods and earn more money.
The government also wants to encourage exports in order to earn foreign exchange so that's why the exporters as well as the government cheers when their home currency depreciates.
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Aaron's Rentals has 58,000 shares of common stock outstanding at a market price of $36 a share. The common stock just paid a $1.64 annual dividend and has a dividend growth rate of 2.8 %. There are 12,000 shares of 6 % preferred stock outstanding at a market price of $51 a share. Preferred stock pays a dividend of $6 a year The outstanding bonds mature in 17 years, have a total face value of $750,000, a face value per bond of $1,000, and a market price of $1,011 each. The bonds pay 8 % interest, semiannually. The tax rate is 34 %. What is the firm's weighted average cost of capital
Answer:
The firm's weighted average cost of capital (WACC) is 7.76%.
Explanation:
Note: Par value of the preferred stock is $100 but it is omitted in the question.
Market price share = (Dividend just paid (1 + Dividend growth rate)) / (Cost of equity – Dividend growth rate) ………………………………….. (1)
Substituting the relevant values into equation and solve for cost of equity, we have:
36 = (1.64 * (1 + 0.028)) / (Cost of equity – 0.028)
36 = 1.68592/ (Cost of equity – 0.028)
36(Cost of equity – 0.028) = 1.68592
36Cost of equity - 1.008 = 1.68592
36Cost of equity = 11.68592 + 1.008
Cost of equity = (1.68592 + 1.008) / 36
Cost of equity = 0.0748, or 7.48%
Cost of preferred stock = (Par value * Dividend rate) / Current price = (100 * 6%) / 51 = 0.1176, or 11.76%
Cost of debt = Coupon rate * (100% - tax rate) = 8% * (100% - 34%) = 0.0528, or 5.28%
Common stock market value = 58,000 * $36 = $2,088,000
Preferred market value = 12,000 * $51 = $612,000
Bond market value = $750,000 * ($1,011 / $1,000) = $758,250
Total market value of the company = Common stock market value + Preferred market value + Bond market value = $2,088,000 + $612,000 + $758,250 = $3,458,250
WACC = (7.48% * ($2,088,000 / $3,458,250)) + (11.76% * (612,000 / $3,458,250)) + (5.28% * ($758,250/ $3,458,250)) = 0.0776, or 7.76%
Shannon, who has a job and no dependents, has two credit cards she uses for food and entertainment. All card balances are close to the limit. What could be the best action for Shannon to take next?
Request an extension of credit to her credit card company.
Pay off all her balances within the payment cycle.
Apply for a new credit card to increase her credit limit.
Cancel all her credit cards.
Pay off all her balances is my answer for your question.
Indicate whether each of the following costs associated with productionwould be classified as direct materials, direct labor, or manufacturing overhead.
a. Salaried supervisor responsible for several product lines
b. Maintenance personnel
c. Hourly workers assembling goods
d. Nails used to assemble cabinets
e. Bike frame used to build a racing bike
f. Factory utilities
g. Glue used to assemble toys
Answer and Explanation:
The classification is as follows
a. Manufacturing overhead as it is an indirect cost
b. Manufacturing overhead as it is related to factory
c. Direct labor as it represent the hours
d. Manufacturing overhead as it is an indirect material cost
e. Direct material as it represent the material cost
f. Manufacturing overhead as it is an indirect cost
g. Manufacturing overhead as it is an indirect material cost
In this way it could be categorized
Harmon Inc, manufactures two products from a joint process, product A and product B. A standard production run incurs joint costs of $45,000 and results in 1,500 units of product A and 2,500 units of product B. Product A sells for $50.00 per unit and Product B sells for $20.00 per unit. Assuming that no further processing occurs after the split-ff point, how much of the joint costs are allocated to Product A and B using the physical measure method
Answer:
Harmon Inc.
Joint costs of $45,000 allocated to:
Product A = $16,875
Product B = $28,125
Explanation:
a) Data and Calculations:
Joint costs of a standard production run = $45,000
Joint products Product A Product B Total
Production units 1,500 2,500 4,000
Selling price per unit $50 $20
Allocation of joint costs based on physical measure method:
Product A = $16,875 (1,500/4,000 * $45,000)
Product B = $28,125 (2,500/4,000 * $45,000)
b) Joint costs of $45,000 were incurred by Product A and Product B jointly because they consumed the same resources during the production run. These costs can be allocated to the products based on established criteria, for example, units of products and sales value. The purpose is to properly account for the joint costs at split-off.
Discounting Cash Flows and Earnings. Under the residual income approach and the discounted cash flow approach to firm valuation, carnings and cash flows, respectively, are discounted using a firm's cost of equity. Discuss why the cost of equity is the appropriate discount rate to use to discount a firm's camings and cash flows. Why is the cost of debt inappropriate to use to discount a firm's earnings or cash flows
Answer:
Cost of debt is used for external source of finance whereas cost of equity is used for internal source of finance.
Explanation:
Debt is the fund borrowed from lender at a standard rate of interest. Equity is fund acquired by the investors and shareholders. The required rate of return for equity is higher than the rate of return to the debt holders. This is because debt holders are safe and they are paid first in case of a bankruptcy and liquidity situation of a company. Debt is considered as cheap source of finance but acquiring higher debt will increase company gearing. It is not suitable to use cost of debt as discount factor for the cash flows of the company. The best and ideal discount factor is WACC which is derived by the combination of debt and equity.
Define four functions of managenet
Answer:
The answer is below
Explanation:
The Four functions of management are:
1. Planning: this is the process of setting out a plan by the management team that involves the goals and the template or means to achieve those goals.
2. Organizing: this is a process of organizing the resources; both human and material resources, that are deemed essential to the realization of the set out plans or goals.
3. Leading: this is a process of ensuring all the team members work together to achieve the main goals or set out plans.
4. Controlling: this is a process that involves constant checking, evaluation, and monitoring activities to ensure the ongoing performance meets the actual plans and will eventually yield to the goal.
Cala Manufacturing purchases land for $357,000 as part of its plans to build a new plant. The company pays $44,900 to tear down an old building on the lot and $66,374 to fill and level the lot. It also pays construction costs $1,616,200 for the new building and $102,019 for lighting and paving a parking area. Prepare a single journal entry to record these costs incurred by Cala, all of which are paid in cash.
Answer and Explanation:
The journal entry to record the given cost is shown below:
Land Dr ($357,000 + $44,900 + $66,374) $468,274
Building Dr $1,616,200
Land improvement Dr $102,019
To Cash $2,186,493
(being the cash paid is recorded)
Here land, building & land improvement is debited as it increased the assets and credited the cash as it decreased the assets
Calculate the cash dividends required to be paid for each of the following preferred stock issues: Required: The semiannual dividend on 6% cumulative preferred, $62 par value, 8,200 shares authorized, issued, and outstanding. The annual dividend on $2.25 cumulative preferred, 130,000 shares authorized, 78,000 shares issued, 68,900 shares outstanding. Last year's dividend has not been paid. The quarterly dividend on 10.0% cumulative preferred, $90 stated value, $106 liquidating value, 78,000 shares authorized, 67,600 shares issued and outstanding. No dividends are in arrears.
Answer:
Preferred dividend calculation:
= Percentage return * Par Value * number of shares
a. The semiannual dividend on 6% cumulative preferred, $62 par value, 8,200 shares authorized, issued, and outstanding.
= 6% * 62 * 8,200 * 1/2 years
= $15,252
b. The annual dividend on $2.25 cumulative preferred, 130,000 shares authorized, 78,000 shares issued, 68,900 shares outstanding. Last year's dividend has not been paid.
In this case, last year's dividend was not paid and this is a cumulative preferred stock so the dividend will be accrued from last year and paid this year.
= Preferred dividend * 2 years
= (2.25 * 68,900 shares outstanding) * 2
= $310,050
c. The quarterly dividend on 10.0% cumulative preferred, $90 stated value, $106 liquidating value, 78,000 shares authorized, 67,600 shares issued and outstanding. No dividends are in arrears.
= 10% * 90 * 67,600 * 1/4 years
= $152,775
On March 31, 2021, Wolfson Corporation acquired all of the outstanding common stock of Barney Corporation for $17,000,000 in cash. The book values and fair values of Barney’s assets and liabilities were as follows:
Book Value FairValue
Current assets $ 6,000,000 $7,500,000
Property, plant, and equipment 11,000,000 14,000,000
Other assets 1,000,000 1,500,000
Current liabilities 4,000,000 4,000,000
Long-term liabilities 6,000,000 5,500,000
Required:
Calculate the amount paid for goodwill.
Answer:
the amount paid for goodwill is $3,500,000
Explanation:
The computation of the amount paid for goodwill is given below
But before that the net fair value of assets would be determined
Net fair value of assets purchased is
= ($7,500,000 + $14,000,000 + $1,500,000) - ($4,000,000 + $5,500,000)
= $13,500,000
Now Amount paid for goodwill is
= $17,000,000 - $13,500,000
= $3,500,000
Hence the amount paid for goodwill is $3,500,000
RealTurf is considering purchasing an automatic sprinkler system for its sod farm by borrowing the entire $50,000 purchase price. The loan would be repaid with four equal annual payments at an interest rate of 12%/year. It is anticipated that the sprinkler system would be used for 9 years and then sold for a salvage value of $5,000. Annual operating and maintenance expenses for the system over the 9-year life are estimated to be $10,500 per year. If the new system is purchased, cost savings of $20,500 per year will be realized over the present manual watering system. RealTurf uses a MARR of 15%/year for economic decision making.What is the internal rate of return used to reach your decision?
Answer:
savings per year = $20,500 - $10,500 = $10,000
the loan and interest are not included in the calculation
initial outlay = $50,000
cash flows 1-8 = $10,000
cash flow 9 = $15,000
discount rate = 15%
using a financial calculator, the NPV = -$862.85, and the IRR = 14.53%
Required: 1. Determine the carrying value of inventory at year-end, assuming the lower of cost or net realizable value (LCNRV) rule is applied to (a) individual products, (b) product categories, and (c) total inventory. 2. Assuming inventory write-downs are common for Almaden, record any necessary year-end adjustment amount for each of the LCNRV applications in requirement 1.
Question Completion:
Almaden Hardware Store sells two product categories, tools and paint products. Information pertaining to its 2018 year-end inventory is as follows:
Inventory, by Per Unit Net Realizable
Product Category Quantity Cost Value
Tools:
Hammers 100 $5.00 $5.50
Saw 200 10.00 9.00
Screwdrivers 300 2.00 2.60
Paint products:
1-gallon cans 500 6.00 5.00
Paint brushes 100 4.00 4.50
Required:
1. Determine the carrying value of inventory at year-end, assuming the lower of cost or net realizable value (LCNRV) rule is applied to (a) individual products, (b) product categories, and (c) total inventory.
2. Assuming inventory write-downs are common for Almaden, record any necessary year-end adjustment amount for each of the LCNRV applications in requirement 1.
Answer:
Almaden Hardware Store1. The carrying value of inventory at year-end, assuming the lower of cost or net realizable value (LCNRV) rule is applied to
(a) individual products:
= $5,800
(b) product categories:
= $6,050
(c) total inventory:
= $6,080
2. Inventory write-down as a line item in the income statement, for each of the LCNRV applications for:
(a) individual products:
Debit Cost of goods sold $700
Credit Inventory $700
To record the inventory write down based on LCNRV.
(b) product categories:
Debit Cost of goods sold $450
Credit Inventory $450
To record the inventory write down based on LCNRV.
(c) total inventory:
Debit Cost of goods sold $420
Credit Inventory $420
To record the inventory write down based on LCNRV.
Explanation:
a) Data and Calculations:
Inventory, by Per Unit Net Realizable LCNRV Inventory
Product Category Quantity Cost Value Value
Tools:
Hammers 100 $5.00 $5.50 $5.00 $500
Saw 200 10.00 9.00 9.00 1,800
Screwdrivers 300 2.00 2.60 2.00 600
Paint products:
1-gallon cans 500 6.00 5.00 5.00 2,500
Paint brushes 100 4.00 4.50 4.00 400
Inventory amount (LCNRV rule applied to individual products) $5,800
Inventory amount (LCNRV rule applied to product categories)
Tools: Cost value = (100 * $5) + (200 * $10) + (300 * $2) = $3,100
NRV value = (100 * $5.50) + (200 * $9) + (300 * $2.60) = $3,130
LCNRV = $3,100 for tools
Paint products: Cost value = (500 * $6) + (100 * $4) = $3,400
NRV value = (500 * $5) + (100 * $4.50) = $2,950
LCNRV = $2,950 for paint products
Total LCNRV = $6,050 ($3,100 + $2,950)
Inventory amount (LCNRV rule applied to total inventory):
Cost value = (100 * $5) + (200 * $10) + (300 * $2) + (500 * $6) + (100 * $4)
= $6,500
NRV value = (100 * $5.50) + (200 * $9) + (300 * $2.60) + (500 * $5) + (100 * $4.50) = $6,080
Year-end Adjustments for each of the LCNRV applications in requirement 1:
(a) individual products:
Cost of Inventory = $6,500
LCNRV = 5,800
Inventory write down $700
(b) product categories:
Cost of Inventory = $6,500
LCNRV = 6,050
Inventory write down $450
(c) total inventory:
Cost of Inventory = $6,500
LCNRV = 6,080
Inventory write down $420
An investor deposits 50 in an investment account on January 1. The following summarizes the activity in the account during the year: DateValue Immediately Before DepositDeposit March 154020 June 18080 October 117575 On June 30, the value of the account is 157.50. On December 31, the value of the account is X. Using the time-weighted method, the equivalent annual effective yield during the first 6 months is equal to the (time-weighted) annual effective yield during the entire 1-year period. Calculate X.
Answer:
236.25
Explanation:
Calculation to determine X
First step is to calculate the 6 months Yield
6 month Yield=(40/40+20) (80/40+20) (157.60/80+80)+1)
6 month Yield=(40/60) (80/60) (157.60/160)-1
6 month Yield=5%
Second step is to calculate the Annual equivalent
Annual equivalent=(1.05)^2-1
Annual equivalent=10.25%
Third step is to calculate the 1 year yield
1 year yield=(40/50) (80/40+20) (175/80+80) (x/175+75)
1 year yield=(40/50) (80/60) (175/160) (x/250)-1
1 year yield=0.1025
Now Let calculate X
x(0.004667)=1+.1025
x(0.004667)=1.1025
x=1.1025/0.004667
x=236.25
Therefore X is 236.25