Answer:
$52,000 Increase
Explanation:
In the cash flow from operating activities only those transactions are listed which involves actual exchange of cash. When a company writes off some of account receivable it has not recorded as bad debt expense. When the company is confirmed about the uncollectible amounts then the company will write off the uncollectible amounts. These will be then adjusted in the net income to calculate net cash flow from operating activities.
Mountain High Ice Cream Company transferred $68,000 of accounts receivable to the Prudential Bank. The transfer was made without recourse. Prudential remits 90% of the factored amount to Mountain High and retains 10%. When the bank collects the receivables, it will remit to Mountain High the retained amount (which Mountain estimates has a fair value of $5,800) less a 2% fee (2% of the total factored amount).
Required:
Prepare the journal entry to record the transfer on the books of Mountain High assuming that the sale criteria are met.
Answer:
Dr Cash $59,840
Dr Loss on Sale of Receivables $8,160
Dr Recievable from Factor $5,800
Cr Recourse liability $5,800
Cr Accounts Receivable $68,000
Explanation:
Preparation of the journal entry to record the transfer on the books of Mountain High assuming that the sale criteria are met.
Dr Cash $59,840
[(68,000 x .90) - (68,000 x .02)]
Dr Loss on Sale of Receivables $8,160
[(5,800 + 68,000) - ($59,840 + 5,800)]
Dr Recievable from Factor $5,800
Cr Recourse liability $5,800
($59,840+$8,160+5800-68,000)
Cr Accounts Receivable $68,000
(To record the transfer on the books of Mountain High)
Dr Loss on Sale of Rec = (5,800 + 68,000) - ($59,840 + 5,800) = $8,160
73,800-65650
He ….. enough time to finish the report.
What's the question????This is for school,not nothing else
If the efficient market hypothesis is correct, then a. index funds should typically beat managed funds, and usually do. b. index fund should typically beat managed funds, but usually do not. c. mutual funds should typically beat index funds, and usually do. d. mutual funds should typically beat index funds, but usually do no
Answer:
a. index funds should typically beat managed funds, and usually do.
Explanation:
The efficient market hypothesis is also known as efficient market theory. In financial economics, it is a hypothesis which states that the prices of the assets reflect all the available information. It hypothesizes that the stocks trade at the fair market value on the exchanges. When the efficient market hypothesis is correct, the stock market is informationally efficient and also the index fund usually beat the managed funds.
what is Asset-Backed Security? in your own words.
Explanation:
Well, an asset banked security is a security whose income payments and hence value & derived from AND collateralized by specified pool of underlying assets, the pool assets is typically a group of small & illiquid assets which are unable to be sold individually.
if that makes any sense, hope it helps
Sandhill Corporation was organized on January 1, 2019. During its first year, the corporation issued 1,900 shares of $50 par value preferred stock and 109,000 shares of $10 par value common stock. At December 31, the company declared the following cash dividends: 2019, $5,950; 2020, $13,800; and 2021, $28,000. (a) Show the allocation of dividends to each class of stock, assuming the preferred stock dividend is 7% and noncumulative.
Answer:
Sandhill Corporation
Allocation of dividends to each class of stock:
Year Total Dividends Preferred Stock Common Stock
2019 $5,950 $5,950 $0
2020 $13,800 $6,650 $7,150
2021 $28,000 $6,650 $21,350
Explanation:
a) Data and Calculations:
7% Preferred stock, $50 par value: Issued 1,900 = $95,000
Common stock, $10 par value: Issued 109,000 = $1,090,000
Dividends declared at December 31:
Year Dividends 7% Preferred Common Stock
2019 = $5,950 $6,650 Paid $5,950 $0
2020 = $13,800 $6,650 Paid $6,650 $7,150
2021 = $28,000 $6,650 Paid $6,550 $21,350
b) The preferred stock dividend is fixed at 7% of $95,000 yearly. Since it is noncumulative, the 2019 dividend will be limited to the dividends declared. For other years, the dividend for the preferred stock is fixed at $6,650 annually. Whatever remains after paying the preferred dividends is paid to the common stockholders.
describe the advantages and disadvantages of using a certificate of deposit (cd) to save money.
Explanation:
Advantages of a CD
Flexible Terms: The terms and the amounts that can be deposited into a CD are flexible. If you are not willing to tie up your money for a long time, you can easily opt for a shorter term. At the end of a CD term, you can renew that CD or start a new one.
Safety: CDs that are available from a federally insured institution are generally insured up to $250,000. This takes much of the risk out of the investment.
Better Return Than Saving Accounts: Since the CD holder is not allowed to withdraw money freely like savings account holders, a CD is often more valuable to the financial institution. For this reason, the interest rate offered to a CD holder is higher than a traditional savings account.
Wide Selection: You can get a CD at various maturities and terms from different financial institutions. Because of the diversity of CDs, investors can find a CD that meets their individual needs.
Fixed, Predictable Return: The investor can be sure about getting a specific yield at a specific time. Even if the interest rates come down to a broader economy, the CD rate will remain constant. You will be able to easily determine the rate at which your balance will grow, thus making financial planning easy.
Disadvantages of a CD
Limited Liquidity: The owner of a CD cannot access their money as easily as a traditional savings account. To withdrawal money from a CD before the end of the term requires that a penalty has to be paid. This penalty can be in the form of lost interest or a principal penalty. To increase flexibility, the investor can create a CD Ladder, which is composed of CDs with different maturity dates and terms. With a laddering strategy, you have more options to access your CD savings at different intervals of time.
Inflation Risk: CD rates may be lower than the rate of inflation. This means that your money may lose its purchasing power over time if interest gains are outdone by inflation rates.
With these advantages and disadvantages in mind, it is wise to consider that CD advantages usually outweigh the disadvantages. CDs allow you to grow your savings without hassle. You can easily compare different types of CDs with the help of online resources, and you can find one that best suits your needs.
Summary of Certificates of Deposits
Certificates of Deposit (CD) are useful for people looking for a way to save money while earning a relatively high interest. This not only helps you save money, but also earns you interest without requiring any effort on your part. The disadvantages of CD’s are minor and typically outweighed by their
Why is it important to consider how you will spend your retirement when planning for retirement?
Answer:
Retirement planning is important because it can help you avoid running out of money in retirement. Your plan can help you calculate the rate of return you need on your investments, how much risk you should take, and how much income you can safely withdraw from your portfolio.
Explanation:
Choose a real or made up example of a company, and describe at least three variable costs the company has.
central bank definition
Explanation:
a national bank that provides financial and banking services for its country's government and commercial banking system, as well as implementing the government's monetary policy and issuing currency.
How much time is involved in an electrician?
Answer:
Maintenance electricians usually have regular work which they complete in a typical 40-hour week. Most keep regular business hours on weekdays and don't usually work on weekends, public holidays, or late at night. Some electricians work on-call and put in extra hours to troubleshoot urgent problems.Sep 20, 2017
Explanation:
Blackwater Company has a foreign branch that earns income before income taxes of $500,000. Income taxes paid to the foreign government are $150,000 or 30%. Sales and other taxes paid to the foreign government are $100,000. Blackwater Company must include the $500,000 of foreign branch income in determining its home country taxable income. In determining its taxable income, Blackwater can choose between taking a deduction for all foreign taxes paid or a credit only for foreign income taxes paid. The corporate income tax rate in Blackwater’s’ home country is 40%.
Determine whether Blackwater would be better off taking a deduction of a credit for foreign taxes paid (FTC).
a. If foreign tax rate increased from 30% to 50%, how would it change your answer?
b. If foreign tax rate decreased from 30% to 10%, how would it change your answer?
b. If parent country’s tax rate decreased from 40% to 20%, how would it change your answer?
c. If local taxes were $250,000, how would it change your answer?
Answer:
Blackwater Company
a. It is generally better for Blackwater to take a credit for foreign taxes paid than taking it as a deduction.
A good look at the tables below show that from (a) to (c) there is no change in the above answer.
Explanation:
a) Data and Calculations:
Foreign income before taxes = $500,000
Foreign Taxes a deduction from home taxable income:
Foreign Foreign FTC as a Home Tax
Tax Rates Income Deduction Payable
30% $500,000 $150,000 $140,000 ($500,000 - $150,000*40%)
50% $500,000 $250,000 $100,000 ($500,000-$250,000*40%)
10% $500,000 $50,000 $180,000 ($500,000 - $50,000*40%)
30% $500,000 $150,000 $70,000 ($500,000 - $150,000*20%)
30% $500,000 $150,000 $250,000
Foreign Taxes treated as a credit:
Foreign Foreign FTC as a Home Tax
Tax Rates Income Home Tax (40%) Credit Payable
30% $500,000 $200,000 (40%) $150,000 $50,000
50% $500,000 $200,000 (40%) $250,000 ($50,000)
10% $500,000 $200,000 (40%) $50,000 $150,000
30% $500,000 $100,000 (20%) $150,000 ($50,000)
30% $500,000 $250,000 (0%) $150,000 $100,000
Crazy Mountain Outfitters Co., an outfitter store for fishing treks, prepared the following unadjusted trial balance at the end of its first year of operations:
Crazy Mountain Outfitters Co. Unadjusted Trial Balance April 30, 20Y5
Debit Balances Credit Balances
Cash 12,110
Accounts Receivable 80,410
Supplies 19,380
Equipment 407,380
Accounts Payable 18,890
Unearned Fees 21,310
Common Stock 55,000
Retained Earnings 225,000
Dividends 15,990
Fees Earned 484,400
Wages Expense 112,380
Rent Expense 85,740
Utilities Expense 61,520
Miscellaneous Expense 9,690
804,600 804,600
For preparing the adjusting entries, the following data were assembled:
Required:
Supplies on hand on April 30 were $7,160.
Fees earned but unbilled on April 30 were $8,770.
Depreciation of equipment was estimated to be $12,110 for the year.
Unpaid wages accrued on April 30 were $1,550.
The balance in unearned fees represented the April 1 receipt in advance for services to be provided. Only $16,830 of the services was provided between April 1 and April 30.
a. Determine the revenues, expenses, and net income of Crazy Mountain Outfitters Co. before the adjusting entries.
b. Determine the revenues, expenses, and net income of Crazy Mountain Outfitters Co. after the adjusting entries.
c. Determine the effect of the adjusting entries on Retained Earnings.
Answer:
Crazy Mountain Outfitters Co.
a. Income Statement before Adjusting Entries:
Fees Earned 484,400
Wages Expense 112,380
Rent Expense 85,740
Utilities Expense 61,520
Miscellaneous Expense 9,690 269,330
Net Income 215,070
b. Income Statement after adjustments:
Fees Earned 510,000
Wages Expense 113,930
Rent Expense 85,740
Utilities Expense 61,520
Supplies Expense 12,220
Depreciation expense 12,110
Miscellaneous Expense 9,690 295,210
Net Income 214,790
c. The effect of the adjusting entries on Retained Earnings:
Retained earnings per unadjusted trial balance $225,000
Net income after adjusting entries 214,790
Ending Retained earnings after adjusting entries $439,790
Ending Retained earnings before adjusting entries 440,070 (225,000 + 215,070)
Difference in the Retained earnings = $280
Explanation:
a) Data and Calculations:
Crazy Mountain Outfitters Co.
Unadjusted Trial Balance April 30, 20Y5
Debit Credit
Cash 12,110
Accounts Receivable 80,410
Supplies 19,380
Equipment 407,380
Accounts Payable 18,890
Unearned Fees 21,310
Common Stock 55,000
Retained Earnings 225,000
Dividends 15,990
Fees Earned 484,400
Wages Expense 112,380
Rent Expense 85,740
Utilities Expense 61,520
Miscellaneous Expense 9,690
Totals 804,600 804,600
b) Analysis:
1. Supplies Expense $12,220 Supplies $12,220 ($19,380 - $7,160)
2. Accounts receivable $8,770 Fees earned $8,770
3. Depreciation expense $12,110 Accumulated Depreciation $12,110
4. Wages Expense $1,550 Wages Payable $1,550
5. Unearned Fees $16,830 Fees earned $16,830
After Adjusting Entries:
Fees Earned = 510,000 (484,400 + 8,770 + 16,830)
Wages Expense = 113,930 (112,380 + 1,550)
Rent Expense 85,740
Utilities Expense 61,520
Supplies Expense 12,220 (0 + 12,220)
Depreciation expense 12,110 (0 + 12,110)
Miscellaneous Expense 9,690 295,210
On July 1, 2020, Bramble Inc. made two sales.
1. It sold land having a fair value of $905,820 in exchange for a 4-year zero-interest-bearing promissory note in the face amount of $1,425,321. The land is carried on Ayayai's books at a cost of $599,100.
2. It rendered services in exchange for a 3%, 8-year promissory note having a face value of $409,970 (interest payable annually). Ayayai Inc. recently had to pay 8% interest for money that it borrowed from British National Bank. The customers in these two transactions have credit ratings that require them to borrow money at 12% interest.
Required:
Record the two journal entries that should be recorded by Bramble Inc. for the sales transactions above that took place on July 1, 2020.
Answer:
Bramble Inc.
Journal Entries:
July 1, 2020:
1.
Debit Long-term Note Receivable $1,425,321
Credit Land $599,100
Credit Interest Receivable $519,501
Credit Gain from Sale of Land $306,720
To record the sale of land for a 4-year zero-interest-bearing note.
2.
Debit Long-term Note Receivable $409,970
Credit Service Revenue $323,634
Credit Interest Receivable $86,336
To record the rendering of services in exchange for a 3%, 8-year note.
Explanation:
a) Data and Analysis:
1. Long-term Note Receivable $1,425,321
Land $599,100
Interest Receivable $519,501 ($1,425,321 - $905,820)
Gain from Sale of Land $306,720 ($905,820 - $599,100)
2. Long-term Note Receivable $409,970
Service Revenue $323,634
Interest Receivable $86,336
NB: The interest receivable and the present value of the service revenue for 2 were obtained from an online financial calculator, using the future value of $409,970 and 3% interest rate for 8 years.
Nancy, the owner of a very successful hotel chain in the Southeast, is exploring the possibility of expanding the chain into a city in the Northeast. She incurs $35,000 of expenses associated with this investigation. Based on the regulatory environment for hotels in the city, she decides not to expand. During the year, she also investigates opening a restaurant that will be part of a national restaurant chain. Her expenses for this are $53,000. The restaurant begins operations on September 1.
Determine the amount Nancy can deduct in the current year for investigating these two businesses.
Answer:
$3,133.
As regard to opening a restaurant, investigation expense = 53,000 - 2000 = $51,000.
Explanation:
Before diving straight into the solution to this problem, let's take out some of the parameters given in the question above.
=> Nancy incurs $35,000 of expenses associated with the investigation of the possibility of expanding the chain into a city in the Northeast.
=> Nancy expenses for investigates opening a restaurant that will be part of a national restaurant chain are $53,000.
The first thing to do right now is to determine the value for the investigation as regard to the opening of a restaurant = [ 2000 × (51,000/180 months) × 4] = $3,133.
The next thing is to determine the value for the deduction which is available. This can be done below as:
The amount Nancy can deduct in the current year for investigating these two businesses = 5000 - [ 53000 - 50000] = $2, 000
As regard to opening a restaurant, investigation expense = 53,000 - 2000 = $51,000.
Question 7 (4 points)
Saved
Which of the following inestments would be considered the most liquid?
Question 7 options:
Real Estate
A one year CD
A standard savings account
A 401k
Charles Austin of the controller's office of Thompson Corporation was given the assignment of determining the basic and diluted earnings per share values for the year ending December 31, 2013. Austin has compiled the information listed below.
The company is authorized to issue 8,000,000 shares of $10 par value common stock. As of December 31, 2012, 2,000,000 shares had been issued and were outstanding.
The per share market prices of the common stock on selected dates were as follows.
Price per Share
July 1, 2012 $20.00
January 1, 2013 21.00
April 1, 2013 25.00
July 1, 2013 11.00
August 1, 2013 10.50
November 1, 2013 9.00
December 31, 2013 10.00
A total of 700,000 shares of an authorized 1,200,000 shares of convertible preferred stock had been issued on July 1, 2012. The stock was issued at its par value of $25, and it has a cumulative dividend of $3 per share. The stock is convertible into common stock at the rate of one share of convertible preferred for one share of common. The rate of conversion is to be automatically adjusted for stock splits and stock dividends. Dividends are paid quarterly on September 30, December 31, March 31, and June 30.
Thompson Corporation is subject to a 40% income tax rate.
The after-tax net income for the year ended December 31, 2013 was $11,550,000.
The following specific activities took place during 2013.
January 1–A 5% common stock dividend was issued. The dividend had been declared on December 1, 2012, to all stockholders of record on December 29, 2012.
April 1–A total of 400,000 shares of the $3 convertible preferred stock was converted into common stock. The company issued new common stock and retired the preferred stock. This was the only conversion of the preferred stock during 2013.
July 1–A 2-for-1 split of the common stock became effective on this date. The board of directors had authorized the split on June 1.
August 1–A total of 300,000 shares of common stock were issued to acquire a factory building.
November 1–A total of 24,000 shares of common stock were purchased on the open market at $9 per share. These shares were to be held as treasury stock and were still in the treasury as of December 31, 2013.
Common stock cash dividends–Cash dividends to common stockholders were declared and paid as follows.
April 15–$0.30 per share
October 15–$0.20 per share
Preferred stock cash dividends–Cash dividends to preferred stockholders were declared and paid as scheduled.
Required:
1. Determine the number of shares used to compute basic earnings per share for the year ended December 31, 2013.
shares
2. Determine the number of shares used to compute diluted earnings per share for the year ended December 31, 2013.
shares
3. Compute the adjusted net income to be used as the numerator in the basic earnings per share calculation for the year ended December 31, 2013.
Answer:
Thompson Corporation
1. Number of shares for computing basic earnings per share for the year ended December 31, 2013 is:
= 7,476,000
2. Number of shares used to compute diluted earnings per share for the year ended December 31, 2013 is:
7,776,000
3. Adjusted Net Income to be used as the numerator in the basic earnings per share calculation for the year ended December 31, 2013:
= $10,650,000
Explanation:
a) Data and Calculations:
After-tax net income for 2013 = $11,550,000
July 1, 2012: Convertible preferred stock = 700,000
Cumulative dividend = 12% ($3/$25)
April 1 Converted preferred stock = (400,000)
Outstanding convertible preferred stock 300,000
Common Stock
December 31, 2012 Outstanding = 2,000,000
April 1 Converted preferred stock = 400,000
July 1 2-for-1 split 4,800,000
August 1 Factory building 300,000
November 1 Treasury Stock (24,000)
Outstanding common stock shares 7,476,000
Outstanding convertible preferred stock 300,000
Total shares for diluted earnings per share = 7,776,000
Adjusted Net Income:
After-tax net income for 2013 = $11,550,000
Preferred stock dividends 900,000
Adjusted net income = $10,650,000
Campbell Boat Company makes inexpensive aluminum fishing boats. Production is seasonal, with considerable activity occurring in the spring and summer. Sales and production tend to decline in the fall and winter months. During year 2, the high point in activity occurred in June when it produced 201 boats at a total cost of $155,550. The low point in production occurred in January when it produced 36 boats at a total cost of $45,000. Required Use the high-low method to estimate the amount of fixed cost incurred each month by Campbell Boat Company. Determine the total estimated cost if 160 boats are made.
Answer:
Campbell Boat Company
a) The amount of fixed cost incurred each month by Campbell Boat Company is:
= $20,880.
b) The total estimated cost if 160 boats are made is:
= $128,080.
Explanation:
a) Data and Calculations:
June production = 201 boats at a total cost of $155,550
January production = 36 boats at a total cost of $45,000
Differences = 165 boats at $110,550
Variable cost per boat = $670 ($110,550/165)
Fixed cost, at the June production level:
Variable costs = $134,670 ($670 * 201)
Fixed costs = $20,880 ($155,550 - $134,670)
Check at January production level of 36 boats:
Variable costs = $24,120 ($670 * 36)
Fixed costs = 20,880 ($45,000 - $24,120)
At 160 boats production level:
Variable costs = $107,200 ($670 * 160)
Fixed costs = 20,880
Total costs = $128,080
The Assembly Department started the month with 25,300 units in its beginning work in process inventory. An additional 310,300 units were transferred in from the prior department during the month to begin processing in the Assembly Department. There were 30,300 units in the ending work in process inventory of the Assembly Department. How many units were transferred to the next processing department during the month
Answer:
305,300 units
Explanation:
The computation of the number of units that should be transferred to the next processing department is given below:
As we know that
Opening inventory +Transferred in inventory = Transferred out inventory + ending inventory
25,300 units + 310,300 units = Transferred out inventory + 30,300 units
So, the Transferred out inventory is
= 25,300 units + 310,300 units - 30,300 units
= 305,300 units
Fixed expenses consist of $306,000 of common costs allocated to the three products based on relative sales, as well as direct fixed expenses unique to each model of $29,000 (Tingler), $79,400 (Shocker), and $34,700 (Stunner). The common costs will be incurred regardless of how many models are produced. The direct fixed expenses would be eliminated if that model is phased out.
Answer:
Net income for Cawley Company is $65,300.
Explanation:
Stunner and Shocker income will be proportionate to Cawley company since these production lines produce net income more than the minimum threshold. Tingler production line has net income less than minimum threshold and the company may think of shutting this production line.
Assume the firms operating in an oligopolistic market experience a relatively small change in marginal costs. According to the kinked demand curve model this would: A) cause a large change in the profit-maximizing level of output. B) leave the equilibrium price unchanged. C) cause the profit-maximizing level of output to change by the same amount and in the same direction. D) cause the profit-maximizing price to change by the same amount but in the opposite direction.
Answer:
B) Leave the equilibrium price unchanged.
Explanation:
Oligopolistic market is the arrangement where few companies offer same product to the customers. There is very less competition in the market so every supplier has fair chance for operating their business successfully. The kinked demand model curve in oligopolistic market would leave the equilibrium price unchanged.
Inventory records for Dunbar Incorporated revealed the following:
Date Transaction Number Unit
of Units Cost
Apr. 1 Beginning inventory 550 $2.33
Apr. 20 Purchase 310 2.68
Dunbar sold 560 units of inventory during the month. Ending inventory assuming weighted-average cost would be:__________.
a. $737.
b. $694.
c. $817.
d. $752.
Answer:
a. $737.
Explanation:
The computation of the ending inventory using weighted average cost is shown below:
But before that first determine the average cost per unit
= (Beginning cost + purchase cost) ÷ (Beginning units + purchased units)
= (550 × $2.33 + 310 × $2.68) ÷ (550 units + 310 units)
= ($1,281.5 + $830.8) ÷ (860 units)
= $2.46
Now the ending inventory is
= (860 units - 560 units) × $2.46
= $737
Trendy Toes produces sports socks. The company has fixed expenses of $85,000 and variable expenses of $1.20 per package. Each package sells for $2.00.
Requirements:
1. Compute the contribution margin per package and the contribution margin ratio.
2. Find the breakeven point in units and in dollars.
3. Find the number of packages Trendy Toes needs to sell to earn a $26,000 operating income.
Answer:
Results are below.
Explanation:
To calculate the contribution margin and contribution margin ratio we need to use the following formulas:
contribution margin= selling price - unitary variable cost
contribution margin= 2 - 1.2= 0.8
contribution margin ratio= contribution margin / selling price
contribution margin ratio= 0.8 / 2
contribution margin ratio= 0.4
Now, we can calculate the break-even point in units and dollars:
Break-even point in units= fixed costs/ contribution margin per unit
Break-even point in units= 85,000 / 0.8
Break-even point in units= 106,250
Break-even point (dollars)= fixed costs/ contribution margin ratio
Break-even point (dollars)= 85,000 / 0.4
Break-even point (dollars)= $212,500
Finally, the desired profit is $26,000:
Break-even point in units= (fixed costs + desired profit) / contribution margin per unit
Break-even point in units= 111,000 / 0.8
Break-even point in units= 138,750
For each of the following transactions that occur in their lives, identify whether it is included in the calculation of U.S. GDP as part of consumption (C), investment (I), government purchases (G), exports (X), or imports (M).
a. Kevin buys a bottle of Italian wine.
b. The state of Pennsylvania repaves highway PA 320, which goes through the center of Swarthmore.
c. Maria's father in Sweden orders a bottle of Vermont maple syrup from the producer's website.
d. Kevin's employer upgrades all of its computer systems using U.S.-made parts.
Answer:
a. Imports (M), b. Government Expenditure (G), c. Exports (X), d. Investment 'I'
Explanation:
a) 'Kevin buys a bottle of Italian wine' is a part of US Imports (M)
b) 'The state of Pennsylvania repaves highway PA 320' is a part of US Government Expenditure (G)
c) 'Maria's father in Sweden orders a bottle of Vermont maple syrup from the producer's website' is a part of US Exports (X)
d) 'Kevin's employer upgrades all of its computer systems using U.S.-made parts' is a part of US Investment 'I'
Given the following financial structure for Company S for all of 2016:
Common stock, $1 par value, 800,000 shares issued and outstanding all year.
Convertible preferred stock, 50,000 shares, $100 par value, 6% cumulative dividend, each share convertible into 5 shares of common stock.
Convertible bonds, $500,000 face value, 8% stated rate, each $1,000 bond is convertible into 20 shares of common stock.
Stock options, 100,000 options outstanding, each option convertible for one share of stock at an option price of $60 per share.
Additional information:
1. The convertible bonds were issued at par in 2015.
2. The average market price per share for the common stock was $80 for the year.
3. The income tax rate for Company S is 30 percent.
4. Net income for Company S for 2016 was $$2,600,000.
A. Calculate Basic EPS (carry calculations to 2 decimal places).
B. Show your calculations for the numerator and denominator effect of each of the above convertible securities.
C. From your calculations in Part B, complete the schedule to calculate the dilution index of each convertible security, then indicate the ranking (most dilutive = 1) of each convertible security.
D. Using the indexes above to incrementally evaluate the dilutive effect, calculate diluted earnings per share in the space provided on the answer sheet. Show the DEPS calculation at each incremental stage, and carry the calculation to 2 decimal places. CIRCLE the DEPS number that would be displayed in the financials.
Answer:
Explanation:
A.)
The Basic EPS can be determined by using the formula:
[tex]\mathtt{Basic \ EPS = \dfrac{Net \ income \ attributabe \ to\ common \ stock \ holders }{\text{common stock outstanding throughout the year}} }[/tex]
[tex]\text{Given Net income = \$2,600,000}[/tex]
[tex]\text{Net income available for common stock holders = }[/tex][tex]\text{ Net income given less dividend}[/tex]
[tex]\text{ to preferred holders of stock}[/tex]
[tex]\mathtt{=$2,600,000 - $100 \times 50000\times 6\%}[/tex]
[tex]=\$2,300,000[/tex]
[tex]\text{Common stock} = $800,000[/tex]
∴
[tex]\mathbf{Basic \ EPS = \dfrac{\$2,300,000}{800,000} }[/tex]
[tex]\mathbf{Basic \ EPS = \$2.88 \ per \ common \ stock}[/tex]
B.)
The calculations for the numerator and denominator effect are:
[tex]\text{Calculation of the effect on incremental EPS}[/tex]
Convertible on preferred stock [tex]\mathtt{=\dfrac{500,000 \times 100 \times 6\%}{50000\times 5}}[/tex]
[tex]=1.20[/tex]
Convertible Bond [tex]=\dfrac{500,000 \times 8\%\times 70\%}{\dfrac{500,000}{1000\times 20}}[/tex]
= 2.80
Stock options [tex]= \dfrac{0}{100,000- (100,000\times \dfrac{60}{80})}[/tex]
= 0
Determination of the numerator & denominator effect for each convertible securities shown above are:
Numerator (N) Denominator (D) Dilution index = N/D
Net income $2,600,000
Less: Preferred $300000
Dividend
Common stock A
Net income $2,300,000 800,000 2.875
Add: Stock
Options (B) 0 25000
Total (C) = (A + B) $2300000 825000 2.788
Add: Convertible
Bonds (D) 428000 10000
Total (E) = (C+D) $2328000 835000 2.787
Add: Convertible
Preferred Stock (F) $300000 250000
Total (E) + (F) $2628000 1085000 2.422
C.)
Particulars Dilutive Index Rank (most dilutive is 1.)
Stock Option 2.788 1
Convertible Bonds 2.787 3
Preferred Stock 2.422 2
D.)
From above, the convertibles are diluted EPS (DEPS)
[tex]\text{ DEPS =Net income available common stockholders + net tax dividend on convertible securities}[/tex]÷ [tex]\text{weighted average no. of common shares + effect of convertible stock + convertible stock options}[/tex]
[tex]\text{DEPS (1{st} stage) for only common stock}= \dfrac{2300000}{800000} = \$2.88}[/tex]
[tex]\text{DEPS (2{st} stage)with \ stock \ options}= \dfrac{2300000+0}{800000+25000} = \$2.788}[/tex]
[tex]\text{DEPS (3{st} stage)with \ stock \ options \& preferred \ stock }= \dfrac{2300000+300000+0}{800000+250000+25000} = \$2.42}[/tex]
Climate is based on the way people in the organization view all of the following except _____ .
the organization's formal and informal training programs
the organization's formal and informal policies
the organization's formal and informal practices
the organization's formal and informal procedures
Answer:
the organization's formal and informal practices
Explanation:
Answer:
c: The organization's formal and informal practices
Southwestern Edison Company leased equipment from Hi-Tech Leasing on January 1, 2018. Hi-Tech manufactured the equipment at a cost of $85,500.
Other information:
Lease term 4 years
Annual payments $31,000 on January 1 each year
Life of asset 4 years
Fair value of asset $110,890
Implicit interest rate 8%
Incremental rate 8%
There is no expected residual value.
Required:
Prepare appropriate journal entries for Hi-Tech Leasing for 2018. Assume a December 31 year-end. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your answers to the nearest whole dollar amounts.)
1.Record the lease.
2.Record the cash received
3.Record the interest revenue
The appropriate journal entries for Hi-Tech Leasing for 2018 will be :-
January 1, 2018
Debit Lease receivable $124,000
Credit Unearned interest revenue $38,500
Credit Equipment inventory $85,500
Debit Cash $31,000
Credit Lease receivable $31,000
December 31, 2018
Debit Unearned interest revenue $4,360
Credit Interest revenue $4,360
What is a journal entry?A journal entry is used to record a business transaction in a company's accounting records. A journal entry is typically recorded in the general ledger. However, it may also be recorded in a subsidiary ledger before being summarized and rolled forward into the general ledger.
Preparation of Journal entries for Hi-Tech Leasing for 2018:-
1. To record the lease on January 1, 2018
Debit Lease receivable $124,000
($31,000 x 4)
Credit Unearned interest revenue $38,500
(124,000-85,500)
Credit Equipment inventory $85,500
2. To record the cash received:-
Debit Cash $31,000
Credit Lease receivable $31,000
3. To record the interest revenue on December 31, 2018
Debit Unearned interest revenue $4,360
[($85,500- $31,000) x 8%]
Credit Interest revenue $4,360
Therefore, the necessary journal entries for Hi-Tech Leasing for 2018 is prepared.
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Steve's Outdoor Company purchased a new delivery van on January 1 for $47,000 plus $4,000 in sales tax. The company paid $13,000 cash on the van (including the sales tax), with the $38,000 balance on credit at 8 percent interest due in nine months (on September 30). On January 2, the company paid cash of $900 to have the company name and logo painted on the van. On September 30, the company paid the balance due on the van plus the interest. On December 31 (the end of the accounting period), Steve's Outdoor recorded depreciation on the van using the straight-line method with an estimated useful life of 5 years and an estimated residual value of $4,700.
Answer:
Steve's Outdoor Company purchased a new delivery van on January 1 for $47,000 plus $4,000 in sales tax. The company paid $13,000 cash on the van (including the sales tax), with the $38,000 balance on credit at 8 percent interest due in nine months (on September 30).
January 1, 202x, delivery van purchased
Dr Vehicles 51,000
Cr Cash 13,000
Cr Notes payable 38,000
The sales tax increases the asset's historical cost
On January 2, the company paid cash of $900 to have the company name and logo painted on the van.
January 2, 202x, company's logo was painted on the delivery van
Dr Vehicles 900
Cr Cash 900
On September 30, the company paid the balance due on the van plus the interest.
September 30, 202x, notes payable cancelled
Dr Notes payable 38,000
Dr Interest expense 2,280
Cr Cash 40,280
On December 31 (the end of the accounting period), Steve's Outdoor recorded depreciation on the van using the straight-line method with an estimated useful life of 5 years and an estimated residual value of $4,700.
December 31, 202x, depreciation expense
Dr Depreciation expense 9,400
Cr Accumulated depreciation, vehicles 9,400
Depreciable value = $51,700 - $4,700 = $47,000
Depreciation expense per year = $47,000 / 5 = $9,400
An investor purchased a "par bond" for $300 with the principal $300. Over n = 5 years the bond will pay 8% coupon annually. Find the IRR of the cash flow stream (also called Yield to Maturity).
Answer:
8%
Explanation:
Internal rate of return is the discount rate that equates the after-tax cash flows from an investment to the amount invested
IRR can be calculated with a financial calculator
Cash flow in year 0 = $-300
Cash flow each year from year 1 to 4 = [tex]\frac{8}{100}[/tex] × $300 = $24
Cash flow in year 5 = $300 + 24 = $324
IRR = 8%
To find the IRR using a financial calculator:
1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.
2. After inputting all the cash flows, press the IRR button and then press the compute button.
What are the benefits of multiple marketing channels? Are there any disadvantages?
Bond X is a premium bond making semiannual payments. The bond has a coupon rate of 9.2%, a YTM of 7.2%, and has 17 years to maturity. Bond Y is a discount bond making semiannual payments. This bond has a coupon rate of 7.2%, a YTM of 9.2%, and also has 17 years to maturity. Assume the interest rates remain unchanged and both bonds have a par value of $1,000.
1. What are the prices of these bonds today?
2. What do you expect the prices of these bonds to be in one year?
3. What do you expect the prices of these bonds to be in three years?
4. What do you expect the prices of these bonds to be in eight years?
5. What do you expect the prices of these bonds to be in 12 years?
6. What do you expect the prices of these bonds to be in 17 years?
Answer:
I used an Excel spreadsheet to calculate the answers (see attached file):
1. What are the prices of these bonds today?
bond X = $1,194
bond Y = $830
2. What do you expect the prices of these bonds to be in one year?
bond X = $1,194
bond Y = $830
3. What do you expect the prices of these bonds to be in three years?
bond X = $1,175
bond Y = $844
4. What do you expect the prices of these bonds to be in eight years?
bond X = $1,131
bond Y = $879
5. What do you expect the prices of these bonds to be in 12 years?
bond X = $1,083
bond Y = $921
6. What do you expect the prices of these bonds to be in 17 years?
bond X = $1,046
bond Y = $1,036