Answer:
1. Capital will Increase and Asset will increase
2. Cash in the Assets will increase and liability will increase
3. Assets increase and decrease off sets the effect on equation
4. Asset will increase and capital will increase
5. Asset will increase and liability will increase
6. Asset increase and decrease will offset
7. Asset will increase and liability will increase
8. Asset decreases
9. Asset decrease and capital will decrease
Explanation:
Accounting equation is Asset = Liabilities + Capital
Accounting equation is affected in business transaction. The Increase in the side will lead to increase in either liability or capital. There are some transactions which just involve asset side transaction which means there will be increase and decrease on the same account this will offset the balance and no effect on equation.
Which organization would you work best in, an organically or mechanistically structured one, and why?
Answer:
i dont know
Explanation:
Equity securities acquired by a corporation which are accounted for by recognizing unrealized holding gains or losses in the income statement are:______
a. equity method investments where a company has holdings of less than 20%.
b. trading securities where a company has holdings of less than 20%.
c. equity method securities where a company has holdings of between 20% and 50%.
d. consolidated investments where a company has holdings of more than 50%.
Answer:
a.equity method investments where a company has holding of less than 20 %
Flagstaff Company has budgeted production units of 7,900 for July and 8,100 for August. The direct materials requirement per unit is 2 ounces (oz.). The company requires to have safety stock of direct materials on hand at the end of each month to complete 20% of the units of budgeted production in the following month. There was 3,160 ounces of direct material in inventory at the start of July. The total ounces of direct materials to be purchased in July is:
a. 15,720 oz.
b. 15,880 oz.
c. 16,200 oz.
d. 15,800 oz.
e. 19,040 oz.
Answer:
Purchases= 15,880 ounces
Explanation:
Giving the following information:
Production:
July= 7,900
August= 8,100
The direct materials required per unit are 2 ounces (oz.).
Desired ending inventory= 20% of the units of budgeted production in the following month.
Beginning inventory= 3,160 ounces
To calculate the direct material purchase, we need to use the following formula:
Purchases= production + desired ending inventory - beginning inventory
Purchases= 7,900*2 + (8,100*2)*0.2 - 3,160
Purchases= 15,880 ounces
An Internet company located in Southern California has season tickets to the Los Angeles Lakers basketball games. The company president always invites one of the six vice presidents to attend games with him, and claims he selects the person to attend at random. One of the six vice presidents has not been invited to attend any of the last seven Lakers home games.
Required:
What is the likelihood this could be due to chance?
Answer:
27.91%
Explanation:
We are told that the company president invites one of the six vice presidents to attend the games with him. Thus, probability of a vice president getting invited is;
P(vice president invited) = 1/6
Now, we are told that One of the six vice presidents was not invited to attend any of the last seven Lakers home games.
Thus, the likelihood this could be due to chance is;
(1 - 1/6)^(7) = (5/6)^(7)
This gives; 0.2791 or 27.91%
Sarah is working on the layout of a company newsletter. What should she keep in mind?
Answer:
should understand deeply to put well the newsletter in approximately file card so as to avoid misplace and disappear of potential file.
Presented below is a condensed version of the comparative balance sheets for Ravensclaw Corporation for the last two years at December 31.
2019 2018
Cash $230,100 $101,400
Accounts receivable 234,000 240,500
Investments 67,600 96,200
Equipment 387,400 312,000
Accumulated Depreciation-Equipment (137,800 ) (115,700 )
Current liabilities 174,200 196,300
Common stock 208,000 208,000
Retained earnings 399,100 230,100
Additional information:
Investments were sold at a loss of $13,000; no equipment was sold; cash dividends paid were $39,000; and net income was $208,000.
Required:
Create a Statement of Cash Flows for 2019.
Answer:
Ravensclaw Corporation
Statement of Cash Flows for the year ended December 31, 2019:
Net income $208,000
Add non-cash expense:
Depreciation expense 22,100
Loss from sale of investment 13,000
Cash from operations $243,100
Adjustments of working capital:
Accounts receivable $6,500
Current liabilities -22,100
Net cash from operations $227,500
Investing activities:
Cash from investment sale 15,600
Equipment -75,400
Financing activities:
Cash dividends paid -39,000
Net cash flows $128,700
Explanation:
a) Data and Calculations:
2019 2018 Differences
Cash $230,100 $101,400 +$128,700
Accounts receivable 234,000 240,500 -$6,500
Investments 67,600 96,200 -$28,600
Equipment 387,400 312,000 +$75,400
Accumulated Depreciation-
Equipment (137,800) (115,700) +$22,100 Depreciation Exp.
Current liabilities 174,200 196,300 -$22,100
Common stock 208,000 208,000 $0
Retained earnings 399,100 230,100 +$169,000
Cash dividends +$39,000
Net income = $208,000 ($169,000 + $39,000)
Cash from sold investments = $15,600 ($28,600 - $13,000)
Bruce Corporation makes four products in a single facility. These products have the following unit product costs:
Products
A B C D
Direct materials $16.10 $20.00 $13.00 $15.70
Direct labor 18.10 21.50 15.90 9.90
Variable manufacturing overhead 4.90 6.10 8.60 5.60
Fixed manufacturing overhead 28.00 14.90 15.00 17.00
Unit product cost 67.10 62.50 52.50 48.20
Additional data concerning these products are listed below.
Products
A B C D
Grinding minutes per unit 2.25 1.35 0.95 0.55
Selling price per unit $81.20 $73.60 $70.40 $65.10
Variable selling cost per unit $3.10 $3.60 $3.30 $4.00
Monthly demand in units 3,500 2,500 2,500 4,500
The grinding machines are potentially the constraint in the production facility. A total of 10,500 minutes are available per month on these machines. Direct labor is a variable cost in this company.
Required:
Which product makes the MOST profitable use of the grinding machines?
Answer:
Product D
Explanation:
Calculation to determine Which product makes the MOST profitable use of the grinding machines
First step is to calculate the Variable cost per unit
Products
A B C D
Direct materials $16.10 $20.00 $13.00 $15.70
Add Direct labor 18.10 21.50 15.90 9.90
Add Variable manufacturing overhead 4.90 6.10 8.60 5.60
Add Variable selling cost per unit $3.10 $3.60 $3.30 $4.00
Variable cost per unit $42.20 $51.60 $40.80 $35.20
Now let calculate the product that makes the MOST profitable use of the grinding machines
Selling price per unit $81.20 $73.60 $70.40 $65.10
Less Variable cost per unit $42.20 $51.60 $40.80 $35.20
=Contribution margin per unit $39 $22 $29.60 $29.90
÷Grinding minutes per unit 2.25 1.35 0.95 0.55
=Contribution per grinding minutes $17.33 $16.30 $31.16 $54.36
Therefore Based on the above calculation the product that makes the MOST profitable use of the grinding machines is PRODUCT D because it has the highest Contribution per grinding minutes of the amount of $54.36
Most effective bad-news messages contain a variety of components. Indirect bad-news messages contain the following components in this order: greeting, buffer, rationale for the bad news, the bad news, an expression of concern, an explanation of impacts on the bad-news recipients, possible solutions and a focus on the future, an expression of goodwill, and a closing.
Assume that you manufacture and sell exercise equipment. A customer recently purchased an elliptical from you. He sent a message requesting the replacement of a broken pedal. The parts warranty is for three months. The customer's message was sent to you four months after the purchase, so the warranty is no longer in effect. You will write a message to him denying his claim.
Match each of the options below to the items.
a. Closing
b. Concern
c. Rationale
d. Buffer
e. Bad News
f. Greeting
g. Possible Solutions
h. Focus on the Future
1. Since it's been four months since your purchase. the broken pedal is no longer under warranty.
2. We know it's inconvenient while your elliptical is not in use, and we'd like to help you get your pedal replaced as quickly as possible.
3. Match each of the options above to the items below.
4. Since it's been four months since your purchase, the broken pedal is no longer under warranty.
5. We know it's inconvenient while your elliptical is not in use, and we'd like to help you get your pedal replaced as quickly as possible.
6. Best wishes, Jenny Peterson
Answer:
1. Since it's been four months since your purchase. the broken pedal is no longer under warranty. ⇒ BAD NEWS.
This will fall under the Bad News because it is news that the customer would not want to receive.
2. We know it's inconvenient while your elliptical is not in use, and we'd like to help you get your pedal replaced as quickly as possible.⇒ CONCERN.
Falls under concern because it expresses sympathy at the customer's situation.
6. Best wishes, Jenny Peterson ⇒ CLOSING
This falls under Closing because such salutations are used to end a letter or response.
common stock definition.
Answer:
Common stock is a security that represents ownership in a corporation.
Explanation:
Holders of common stock elect the board of directors and vote on corporate policies.
You have acquired a new CT scanner at a cost of $750,000. You expect to perform 7,000 procedures per year over the estimated 5-year life of the scanner. Assuming no salvage value and an annual increase in replacement cost of 10 percent, what capital charge per procedure should the hospital levy to provide for replacement cost in the second year
Answer:
The capital charge per procedure that the hospital should levy to provide for replacement cost in the second year is:
= $64.82 per procedure.
Explanation:
a) Data and Calculations:
Cost of CT Scanner = $750,000
Annual increase in replacement cost = 10%
Estimated useful life of the scanner = 5 years
Number of procedures per year over the estimated 5-year life = 7,000
Total number of procedures = 35,000 (7,000 * 5)
Replacement cost in 2 years = $750,000 * FV factor
= $750,000 * 1.21
= $907,500
Amount to charge per procedure = $907,500/14,000
= $64.82
Imagine that you are the newly appointed HR manager for a 500-employee health care provider organization. Using features of the various HR service models described in the chapter and any other information you might need, develop an ideal human resources organization. Identify the HR models from which you are borrowing and explain why this particular orientation or perspective is needed in your ideal organization. Next, describe how the philosophy or outlook of the chief executive officer (CEO) might cause you to modify your model.
Answer:
Answer is explained in the explanation section below.
Explanation:
As the newly appointed HR manager of a 500-employee health care provider organization, I will focus on employee development and training because skilled and trained employees will demonstrate high efficiency in the health organization and less error in medical reports, which could lead to patient dissatisfaction if their problem is not resolved due to medical report errors or lacunae.
So, I'd go with the Counseling model, in which our health-care service providers provide employee training and development through techniques like job training, internships, role plays, and learning classes, all of which are essential in health-care organizations because we provide health-care solutions to our patients and want to hire and retain highly skilled and professional personnel in our organizations.
Since qualified and skilled workers are capable of operating at a high level of productivity, have the ability to evaluate challenges and produce solutions, support both technical and non-technical activities in the organization, are experts in their fields, and so on, this model is required to transform my company into an ideal organization.
Since I would look out for what is best for employees and their growth as an HR manager, but the CEO is more concerned with cost and profit, and training and development for 500 employees could be a little more costly, the CEO will want me to adapt my model based on cost and budget.
Olivia wants to buy some vacant land for investment purposes. She currently cannot afford the full purchase price. Instead, Olivia pays the landowner $8,000 to obtain an option to buy the land for $175,000 anytime in the next four years. Fourteen months after purchasing the option, Olivia sells the option for $10,000. What is the amount and character of Olivia's gain or loss
Answer:
$2,000 gain
Explanation:
Calculation to determine the amount and character of Olivia's gain or loss
Based on the information given we were told that she pays the landowner the amount of $8,000 in order for her to obtain an option to buy a land in which after purchasing the option she sells the option for the amount of $10,000 making her to gain the amount of $2,000.
Olivia's gain =$10,000-$8,000
Olivia's gain =$2,000
Therefore The amount and character of Olivia's gain will be $2,000
Answer: $2000
Explanation:
The amount and character of Olivia's gain or loss will be gotten by calculating the amount that Olivia paid the landowner $8,000 to obtain an option to buy the land and the amount she eventually sold the option. This will be:
= $10000 - $8000
= $2000
Therefore, she had a capital gain of $2000
At the end of 2009, the following information is available for Clobes Company, Snyder Company, and Welz Company (you must show your calculations to receive full credit): Required: Which company has the highest level of financial risk? Using an appropriate ratio, support your answer. Which company is the most profitable from the owners' perspective? Using an appropriate ratio, support your answer. (3) Which company is getting the greatest return on assets? Show calculations.
Answer:
Answer is explained in the explanation section below.
Explanation:
Note: This question is incomplete and lacks necessary data to solve for this question. However I have found similar question on the internet and I will be using that data. Besides, I have attached the data used in the attachment below.
Solution:
1. The debt-to-equity ratio is the best way to assess financial risk. A higher debt-to-equity ratio indicates a higher level of financial risk. This ratio represents the willingness of the equity of the owners to fulfil their obligations.
Formula used:
Debt-to-equity ratio = Total liabilities divided by owner's equity
For Clobes:
Total liabilities = 100,000
Owners' equity = 200,000
Debt-to-equity ratio = 100000/200000 = 0.5
For Snyder:
Total liabilities = 300,000
Owners' equity = 200,000
Debt-to-equity ratio = 300000/200000 = 1.5
For Welz:
Total liabilities = 300,000
Owners' equity = 100,000
Debt-to-equity ratio = 300000/100000 = 3
Welz faces the greatest financial risk because it has the highest debt-to-equity ratio. It has a debt-to-equity ratio of three. Even though it depends on the industry, a company's debt-to-equity ratio should be between 1 and 1.5 if it is considered optimal. In this case, Welz's financial risk is considerably higher.
2. calculate Return on Equity(ROE)
Formula used:
ROE = Net income / Owner's equity
For Clobes:
Net income = 25,000
Owners' equity = 200,000
ROE = 25,000 / 200000 = 0.125
For Snyder:
Net income = 30,000
Owners' equity = 200,000
ROE = 30000 / 200000 = 0.15
For Welz:
Net income = 20,000
Owners' equity = 200,000
ROE = 20000 / 100000 = 0.2
Welz has the highest return of equity (ROE) of 0.2.
As a result, Welz is the most profitable company.
3. Return on assets:
Formula used
Return on Assets = Net income / Total assets
For Clobes:
Net income = 25,000
Total assets = 300,000
Return on Assets = 25,000 / 300000 = 0.08
For Snyder:
Net income = 30,000
Total assets = 500000
Return on Assets = 30000 / 500000 = 0.06
For Welz:
Net income = 20,000
Total assets = 400,000
Return on Assets = 20000 / 400000 = 0.05
Hence,
Clobes has the highest return on assets, which is 0.08.
Assume that a $1,000,000 par value, semiannual coupon U.S. Treasury note with five years to maturity (YTM) has a coupon rate of 3%. The yield to maturity of the bond is 8.80%. Using this information and ignoring the other costs involved, calculate the value of the Treasury note:
Answer:
$775,751
Explanation:
the effective semiannual rate = 1.088 = (1 + r)²
r = 4.3072%
we must first determine the present value of the face value = $1,000,000 / (1 + 4.3072%)¹⁰ = $655,927.02
now the present value of the coupon payments = $15,000 x [1 - 1/(1 + i)ⁿ ] / i = $15,000 x [1 - 1/(1 + 0.043072)¹⁰ ] / 0.043072 = $119,823.98
market price = $775,751
1. Compute the throughput time. 2. Compute the manufacturing cycle efficiency (MCE) for the quarter. (Round your percentage answer to nearest whole percent.) 3. What percentage of the throughput time was spent in non–value-added activities? (Round your percentage answers to the nearest whole percent.) 4. Compute the delivery cycle time. 5. If by using Lean Production all queue time during production is eliminated, what will be the new MCE? (Round your percentage answer to 1 decimal place.)
Answer:
1. Throughput time.
This is the length of time it takes to transform a raw material into finished goods.
= Inspection time + Process time + Move time + Queue time
= 0.7 + 2.8 + 1.3 + 4.1
= 8.9 days
2. Manufacturing Cycle Efficiency:
= Value added time / Throughput time * 100%
= 2.8 / 8.9 * 100%
= 31%
3. Percentage of time spent on none valuable activities:
= 1 - Manufacturing cycle efficiency
= 1 - 31%
= 69%
4. Delivery Cycle time:
= Wait time + Throughput time
= 16.2 + 8.9
= 25.1 days
5. New MCE.
Queue time is eliminated:
= 8.9 - 4.1
New Throughput time = 4.8 days
MCE = 2.8 / 4.8
= 58%
credit default swap definition.
Answer:
a financial contract whereby a buyer of corporate or sovereign debt in the form of bonds attempts to eliminate possible loss arising from default by the issuer of the bonds. This is achieved by the issuer of the bonds insuring the buyer’s potential losses as part of the agreement. if that makes sense.
Muecke Inc. is working on its cash budget for April. The budgeted beginning cash balance is $40,000. Budgeted cash receipts total $150,000 and budgeted cash disbursements total $158,000. The desired ending cash balance is $50,000. To attain its desired ending cash balance for April, the company needs to borrow: Group of answer choices $18,000 $0 $50,000 $82,000
Answer:
See
Explanation:
Which bank deals with short term of credit A. Agricultural bank B. Comersial bank C. Industrial Bank D. None of these
Answer:
B) commercial bank
Explanation:
i hope it helps you :)
leases telecommunications equipment from Photon Company. Assume the following data for equipment leased from Photon Company. The lease term is 5 years and requires equal rental payments of $31,000 at the beginning of each year. The equipment has a fair value at the commencement of the lease of $150,000, an estimated useful life of 8 years, and a guaranteed residual value at the end of the lease of $15,500. Photon set the annual rental to earn a rate of return of 6%, and this fact is known to Callaway. The lease does not transfer title or contain a bargain purchase option, and is not a specialized asset.
Required:
How should Callaway classify this lease?
Answer:
Financial lease
Explanation:
The computation is shown below:
The Present value of minimum lease payments is
= Present value of rental payments + Present value of GRV
= $31,000 × Cumulative PV factor at 6% for 5 periods of annuity due + $15,500 × PV Factor at 6% for 5th period
= $31,000 × 4.46511 + $15,500 × 0.79209
= $138,418 + $12,277
= $150,695
Since the lease payments present value would be more than 90% of the fair value so it would be classified as the financial lease
What’s the anti-money laundering (AML)
program ?
Answer: An anti-money laundering (AML) program is a set of procedures designed to guard against someone using the firm to facilitate money laundering or terrorist financing.
Explanation:
Ted owns a small florist shop. Since his business is booming, his realizes he will soon need one more delivery van. He decides he will purchase a full size van versus a minivan, which he currently owns. The van he is looking to buy in 3 years will cost him $25,000. How much should he invest each quarter into an account that pays 3% per year compounded quarterly, so that he can have the desired funds in 3 years
Answer:
$1998.79
Explanation:
Quarterly payment = future value /annuity factor
Annuity factor = {[(1+r)^mn] - 1} / r
r = interest rate = interest rate / number of compounding 3%/4
N = number of years
m = number of compounding
Annuity factor =[ (1.0075)^12 - 1] / 0.0075 = 12.507586
Quarterly payment = $25,000 / 12.507586 = $1998.79
Theory Enterprises uses a standard cost system and prepared the following budget for May when 24,000 machine hours of activity were anticipated: variable overhead, $48,000; fixed overhead: $240,000. Actual data for May were: Standard machine hours allowed for output attained: 25,000 Actual machine hours worked: 24,000 Variable overhead incurred: $50,000 Fixed overhead incurred: $250,000 The variable-overhead spending and efficiency variances for Theory are: Variable-Overhead Spending Variance Variable-Overhead Efficiency Variance A. $ 0 $ 0 B. $ 0 $ 2,000 unfavorable C. $ 2,000 unfavorable $ 0 D. $ 2,000 favorable $ 2,000 unfavorable E. $ 2,000 unfavorable $ 2,000 favorable
Answer:
See below
Explanation:
a. Variable overhead spending variance
= AH × ( AR - SR)
Where
AH = Actual Hours worked = 24,000
AR = Actual variable overhead rate = $50,000
SR = Standard variable overhead rate = $48,000
Therefore,
Variable overhead spending variance
= 24,000 × ($50,000 - $48,000)
= $48,000
Suppose that a hot dog vendor uses a cart (K) and his time (L) to make and sell hot dogs. The vendor's production function is , where Q is the number of hot dogs per day. Suppose that the rental on hot dog carts is $50 per day and that the vendor wants to produce 500 hot dogs per day. The demand for labor is ____.
Answer:
L = 2084.75 W^-0.3
Explanation:
The computation of the demand of the labor is shown below:
At the optimum input
As we know that
MRTS = MPL ÷ MPK = w ÷ r
0.7(K ÷ L)^0.3 ÷ 0.3(L ÷ K)^0.7 = w ÷ 50
7K ÷ 3L = w ÷ 50
K = (3 ÷ 350)wL
Now apply the production function
Q = K^0.3L^0.7
500 = ((3 ÷ 350)wL)^0.3 L^0.7
500 = (3 ÷ 350)^0.3 × w^0.3 × L
L = 2084.75 × w^-0.3.
Wattan Company reports beginning inventory of 14 units at $42 each. Every week for four weeks it purchases an additional 14 units at respective costs of $43, $44, $47, and $52 per unit for weeks 1 through 4. Compute the cost of goods available for sale and the units available for sale for this four-week period. Assume that no sales occur during those four weeks.
Answer:
$3192
70
Explanation:
the cost of goods available for sale = (14 X 42) + (14 X 43) + (14 X 44) (14 X 47) + (14 X 52) = $3192
14 X 5 = 70
Desert Company exchanged 3,000 shares of its stock, for equipment from Jungle Company. Desert's stock has a par value of $50 per share and at the time of the exchange was not actively traded on a market but 12 months ago was sold at a value of $49 per share. The quoted fair value of the equipment is $170,993. What is the amount Desert should record as the historical cost of the equipment?
Answer:
Desert Company
The amount that Desert should record as the historical cost of the equipment is:
= $170,993.
Explanation:
a) Data and Calculations:
Value of stock exchanged = $150,000 (3,000 * $50)
Fair value of equipment = $170,993
Gain from exchange of Equipment for shares = $20,993
b) The quoted fair value of Jungle's equipment should be used to record the historical cost in the financial statement of Desert Company. This value represents the only verifiable value. This value should then be compared to the value of the Desert shares exchanged with Jungle to determine if there is a loss or a gain from the exchange.
Equipment was sold for $50,000. The equipment was originally purchased for $85,000. At the time of the sale, the equipment had accumulated depreciation of $30,000. Calculate the gain or loss to be recorded on the sale of equipment. Multiple Choice Gain of $5,000. Loss of $35,000. Gain of $20,000. Loss of $5,000.
Answer:
Loss of $5,000
Explanation:
loss to be recorded on the sale of equipment is $5,000
Burgundy, Inc., and Violet are equal partners in the calendar year BV LLC.
Burgundy uses a fiscal year ending April 30, and Violet uses a clean year.
Burgundy receives an annual guaranteed payment of $100,000 for use of capital contributed by Burgundy.
BV's taxable income (after deducting the payment to Burgundy, Inc.) is $80,000 for 2016 and $90,000 for 2017.
1. What is the amount of income from the LLC that Burgundy must report for its tax year ending April 30, 2017?
2. What is the amount of income from the LLC that Violet must report for her tax year ending December 31, 2017?
Answer: a. $141667
b. $45000
Explanation:
1. What is the amount of income from the LLC that Burgundy must report for its tax year ending April 30, 2017?
Guaranteed payments = $100,000
Share of 2016 income = ($80000 × 50% × 8/12) = $80000 × 0.5 × 0.67 = $26667
Share of 2017 income = ($90000 × 50% × 4/12) = $15000
Income = $100000 + $26667 + $15000
= $141,667
2. What is the amount of income from the LLC that Violet must report for her tax year ending December 31, 2017.
This will be the share of 2017 income which will be:
= 50% × $90000
= 0.5 × $90000
= $45000
Suppose a monopolist is producing a level of output such that MR > MC. Which of the following best describes what will happen as the firm moves to its profit-maximizing equilibrium? A) Marginal revenue will rise and marginal cost will fall. B) Marginal cost and marginal revenue will both rise. C) Marginal revenue will fall and marginal cost will rise. D) Marginal cost and marginal revenue will both fall.
Answer: C) Marginal revenue will fall and marginal cost will rise.
Explanation:
The profit-maximizing equilibrium is the production point where the Marginal Revenue equals the Marginal cost.
As the monopolist moves towards this point, they will see their marginal costs increase because they will be producing more goods.
For a monopolist to sell more goods however, they will need to reduce their prices. This means that Marginal revenue will come down.
Marginal revenue will keep decreasing and Marginal cost will keep increasing until both of them become equal to each other.
On January 1, 2021, Carla Vista Corporation signed a 5-year noncancelable lease for equipment. The terms of the lease called for Carla Vista to make annual payments of $195000 at the beginning of each year for 5 years beginning on January 1, 2021 with the title passing to Carla Vista at the end of this period. The equipment has an estimated useful life of 7 years and no salvage value. Carla Vista uses the straight-line method of depreciation for all of its fixed assets. Carla Vista accordingly accounts for this lease transaction as a finance lease. The lease payments were determined to have a present value of $813124 at an effective interest rate of 10%.
In 2022, Carla Vista should record interest expense of:________
a. $67994.
b. $48494.
c. $61812.
d. $42312.
Answer:
In 2022, Carla Vista should record interest expense of:________
c. $61,812.
Explanation:
a) Data and Calculations:
The Present Value (PV) of a 5-year noncancelable lease of equipment = $813,124
Annual lease payments = $195,000
Effective interest rate = 10%
Estimated lease term = 5 years
Estimated useful life of equipment = 7 years
Salvage value of equipment = $0
Method of Depreciation = Straight-line method
Lease period percentage = 71% (5/7)
Interest expense:
December 31, 2021 = $81,312 ($813,124 * 10%)
December 31, 2022 - $61,812 ($813,124 - $195,000 * 10%)
Garland Inc. offers a new employee a single-sum signing bonus at the date of employment, June 1, 2021. Alternatively, the employee can receive $44,000 at the date of employment plus $15,000 each June 1 for four years, beginning in 2024. Assuming the employee's time value of money is 9% annually, what single amount at the employment date would make the options equally desirable
Answer: $84,902.17
Explanation:
Find the present value of the $44,000 and the $15,000 each June for 4 years.
First find the present value of the $15,000 in June 2024:
= 15,000 * Present value interest factor of Annuity due, 4 years, 9%
= 15,000 * 3.5313
= $52,969.50
Then present value it to 2021:
= 52,969.50 / (1 + 9%)³
= $40,902.17
Add this to the $44,000 on June 2021:
= 44,000 + 40,902.17
= $84,902.17
Employee will be indifferent if $84,902.17 is received.