Answer:
Journal entry to record wages expense and wages payable
Explanation:
As the company incurred no cost related to these earnings for federal unemployment tax so it would be excluded from wages and salaries expense
Entry DEBIT CREDIT
Salaries and wages Expense $68,000
Social Security(FICA) $5,202
Federal income tax $14,700
State income tax $6,300
union dues $900
Salaries and wages payable $40,898
Mason Automotive is an automotive parts company that sells car parts and provides car service to customers. This is Mason's first year of operations and they have hired you as their CPA to prepare the income statement and balance sheet for their company. As such, January 1st , 2019 was the first day that Mason was in business.
Required:
For the month of January, record all the necessary journal entries for transactions that occurred during the month. In addition, please prepare all necessary adjusting journal entries as of the end of the month.
Answer:
Mason Automotive sells 10,000,000 shares at $5 par for $15 on January 1st, 2019.
Dr Cash 150,000,000
Cr Common stock 50,000,000
Cr Additional paid in capital 100,000,000
Ed Mason, the CEO, hires 4,000 employees, whom will receive a combined salary of $6.5 Million on a monthly basis. The employees started on January 1st and will be paid for the month of January on February 5th. Employee's withholdings are as follows: 10% for federal income taxes 5% for state income taxes and 7% for FICA. Record the necessary entry as of January 1st, 2019.
No journal entry required
Adjusting entry:
January 31, 2019, wages expense
Dr Wages expense 6,500,000
Dr FICA taxes expense 455,000
Cr Federal income taxes withheld payable 650,000
Cr State income taxes withheld payable 325,000
Cr FICA taxes withheld payable 455,000
Cr FICA taxes payable 455,000
Cr Wages payable 5,070,000
On January 1st, Mason Automotive receives $70 Million advance payment from a customer, Highland Inc., to manufacture 7,000 cars.
Dr Cash 70,000,000
Cr Deferred revenue 70,000,000
Adjusting entry:
January 31, 2019, 5,000 cars were finished and delivered
Dr Deferred revenue 35,000,000
Cr Sales revenue 35,000,000
Mason Automotive issues a bond payable on January 1st, 2019 with a face value of $500 Million at 98. The bond will have a useful life of 10 years with an interest payment of 8% (Annual Percentage Rate) due at the end of the month. Record the necessary journal entry as of January 1st, 2019.
Dr Cash 490,000,000
Dr Discount on bonds payable 10,000,000
Cr Bonds payable 10,000,000
(Note: When considering the amortization of the discount or premium, assume the straight line method is used).
Adjusting entry
January 31, 2019, interest expense
Dr interest expense 3,416,666
Cr Discount on bonds payable 83,333
Cr Interest payable 3,333,333
Mason Automotive purchased $6 Million dollars worth of supplies on account on January 2nd, 2019.
Dr Supplies 6,000,000
Cr Accounts payable 6,000,000
Adjusting entry
January 31, 2019, supplies expense
Dr Supplies expense 3,500,000
Cr Supplies 3,500,000
On January 2nd, Mason Automotive shipped an order to Panther Paws Corporation. The shipping terms were FOB shipping point and the value of the order was $95 Million and the inventory cost was $55 Million. Assume that this sale was made on account. Dr Accounts receivable 95,000,000
Cr Sales revenue 95,000,000
Dr Cost of goods sold 55,000,000
Cr Inventory 55,000,000
Adjusting entry:
January 31, 2019, allowance for doubtful accounts (3%)
Dr Bad debt expense 2,850,000
Cr Allowance for doubtful accounts 2,850,000
Mason Automotive purchased $150 Million dollars worth of inventory on January 2nd, 2019. $80 Million was paid with cash with the remaining balance on account. Mason notes that it will use a perpetual inventory system to track inventory.
Dr Inventory 150,000,000
Cr Cash 80,000,000
Cr Accounts payable 70,000,000
Mason Automotive buys a patent from Apple for $20 Million on January 3rd, 2019. The patent has a legal life of 20 years and the useful life was the same. Record the necessary entry as of January 3rd, 2019. Assume the patent was purchased using cash. Dr Patent 20,000,000
Cr Cash 20,000,000
Adjusting entry:
January 31, 2019, patent amortization expense
Dr Patent amortization expense 83,333
Cr Patent 83,333
Mason Automotive pre-pays for Rent Expense for the next year of $12 Million and Insurance Expense of $3.7 Million on January 3rd, 2019.
Dr Prepaid rent 12,000,000
Dr Prepaid insurance 3,700,000
Cr Cash 15,700,000
Adjusting entries:
January 31, 2019, rent expense
Dr Rent expense 1,000,000
Cr Prepaid rent 1,000,000
January 31, 2019, insurance expense
Dr Insurance expense 308,333
Cr Prepaid insurance 308,333
Mason Automotive purchases fixed assets of $100 Million that will have a useful life of 10 years and a salvage value of $20 million on January 4th, 2019. $20 million was paid with cash with the remaining balance on account. These assets are depreciated using the straight-line method.
Dr Fixed assets 100,000,000
Cr Cash 20,000,000
Cr Accounts payable 80,000,000
Adjusting entry:
January 31, 2019, depreciation expense
Dr Depreciation expense 666,667
Cr Accumulated depreciation - fixed assets 666,667
On January 20th, Mason Automotive decides to purchase 500,000 shares of Treasury stock at $35 per share.
Dr Treasury stock 17,500,000
Cr Cash 17,500,000
Fortune Enterprises is an all-equity firm that is considering issuing $13.5 million of perpetual debt. The interest rate is 10%. The firm will use the proceeds of the bond sale to repurchase equity. Fortune distributes all earnings available to stockholders immediately as dividends. The firm will generate $3 million of earnings before interest and taxes (EBIT) every year into perpetuity. Fortune is subject to a corporate tax rate of 40%. Suppose the personal tax rate on interest income is 55%, and the personal tax rate on equity income is 20%.
What is the annual after-tax cash flow to debt holders under each plan?
a. Debt holders get $0 mil. under the unlevered plan vs. 1.2 mil. under the levered plan
b. Debt holders get $1.2 mil. under the unlevered plan vs. 0.66 mil. under the levered plan
c. Debt holders get $0 mil. under the unlevered plan vs. 0.66 mil. under the levered plan
d. Debt holders get $0 mil. under the unlevered plan vs. 0.6075 mil. under the levered plan
Answer:
d. Debt holders get $0 mil. under the unlevered plan vs. 0.6075 mil. under the levered plan
Explanation:
interests paid to debt holders = $13,500,000 x 10% = $1,350,000
generally, interest revenue is taxed as ordinary revenue = corporate income tax rate (if debt holder is a business) or personal income tax (if debt holder is an individual).
under the first plan, debt holders get nothing because there is no outstanding debt since the company is an all equity firm.
under the second plan, if the personal tax rate on interest income is 55%, which is really high, the debt holders will earn $1,350,000 x (1 - 55%) = $607,500
g The AD curve is the relationship between A. the quantity of real GDP demanded and the quantity of real GDP supplied. B. the quantity of real GDP demanded and the unemployment rate. C. aggregate planned expenditure and real GDP when the price level is fixed. D. aggregate planned expenditure and the price level. E. aggregate planned expenditure and the quantity of real GDP demanded.
Answer:
D. aggregate planned expenditure and the price level.
Explanation:
Aggregate demand (AD) can be defined as the total amount spent on domestic goods and services in an economy. It is called total planned expenditure by economists.
Aggregate demand (AD) consist of four components of demand:
1. Consumption
2. Savings
3. Government spending
4. Net export, that is, export minus import.
The aggregate demand (AD) curve shows the relationship between total spending on domestic goods and services at each price level.
D. aggregate planned expenditure and the price level is the correct answer.
Describe Reid Hoffman the founder and creator Linkedln?
Answer:
Reid Garrett Hoffman is an American internet businessman, tech entrepreneur, writer. Hoffman became co-founder and president of LinkedIn, an enterprise-oriented social media network mainly utilized for business networking. In 2016, Hoffman transferred LinkedIn for $26.2 billion in cash to Microsoft, then entered the board for Microsoft.
Exercise F The luggage department of Sampson Company has revenues of $1,000,000; variable expenses of $250,000; direct fixed costs of $500,000; and allocated, indirect fixed costs of $300,000 in an average year. If the company eliminates this department, what would be the effect on net income
Answer:
Decrease by $250,000
Explanation:
Calculation for what would be the effect on net income.
We would be using Differential Analysis method to find the effect on the net income
Differential Analysis
Continue with Luggage Department; Eliminate Luggage Department; Effect on Income
Sales
1,000,000 0 -1,000,000
Variable cost
-250,000 0 250,000
Direct fixed costs
-500,000 0 500,000
Indirect fixed costs
-300,000 -300,000 0
Net Income
-$50,000 -$300,000 -$250,000
Therefore in a situation where the luggage department is eliminated, the income would decrease by $250,000
Playa Inc. owns 85 percent of Seashore Inc. During 20X8, Playa sold goods with a 25 percent gross profit to Seashore. Seashore sold all of these goods in 20X8. How should 20X8 consolidated income statement items be adjusted g
Answer:
Debit the Cost of Sales and,
Credit the Revenue.
Explanation:
Transactions that occur within a group of companies must be eliminated. Playa is a Parent (85%) and Seashore Inc is a Subsidiary.
The effect of the Sale by Playa to Seashore is that Group Cost of Sales and Revenue would be over-valued by the price of intragroup sale.
Thus, the adjustment for this intragroup sale, is to Debit the Cost of Sales and Credit the Revenue.
Computer equipment was acquired at the beginning of the year at a cost of $57,000 that has an estimated residual value of $9,000 and an estimated useful life of five years. Determine the second-year depreciation using the straight-line method.
Answer:
$9,600
Explanation:
When you use the straight line depreciation method, the depreciation expense is the same for every year. The only difference can result if the asset was purchased during the year, and the depreciation for year 1 would only be partial and proportionate to the number of months of use.
In this case, the depreciation expense per year = (purchase price - residual value) / useful life = ($57,000 - $9,000) / 5 = $48,000 / 5 = $9,600 per year (the depreciation expense is the same for all the five years).
Meredith, the General Manager at Gladfle Inc., is planning to use certain new strategies to control and reduce the health care benefit costs to her company. What should she include in her list of strategies?
Answer:
Switching to consumer driven health plans
Explanation:
Meridith should include switching to consumer driven health plans in her list of strategies since she is trying to reduce health care benefits costs.
A consumer-driven health plan allows the workers in an organization, it could be both employers and their employees, to put aside amounts of money usually pre-tax money, which could be used to pay for qualified medical expenses not covered by their health plan.
The market price of a share of common stock at the time of issuance was $17.00, while the market price of a preferred share of stock at the time of issuance was $26.50. The company paid $11.50 per share for its treasury stock. Required: Determine the missing amount in the stockholders' equity section of the balance sheet set forth below. (Input all amounts as positive values.)
The correct answer is $55
Explanation:
If the U.S. dollar appreciates in the foreign exchange market, U.S. exports will be __________ and U.S. imports will be __________.
decrease and increases
The burn down chart for a team showed a peculiar trend. It started dropping rapidly at the beginning of the Sprint and then seemed to plateau in the middle. A day before the Sprint, the line dipped rapidly and reached the horizontal axis. Whiat is the most likely reason for this trend?
Answer:
Explanation:
In the scenario being described, it is the most likely that the team encountered a major blocking issue in the middle of the Sprint which was resolved only toward the end. This can be deduced from the graph due to it plateauing in the middle, which usually happens when tasks are not finishing, which ultimately causes a blocking issue and since the chart went back to normal afterwards, they most likely resolved the blocking issue.
An account is today credited with its annual interest thereby bringing the accountbalance to $12,490. The interest rate is 5.70% compounded annually. You plan tomake annual withdrawals of $1,450 each. The first withdrawal is in exactly one yearand the last in exactly 9 years. Find the account balance immediately after the lastwithdrawal.
Answer:
Explanation:
Let the account balance be B .
Equating the present value of money at 5.7 % discount
12490 = 1450 ( PVIFA , 5.7 , 9 ) + B ( PVIF , 5.7 , 9 )
= 1450 x 6.8938 + .6072 x B
= 9996.01 + .6072B
.6072 B = 2494
B = 4107
On April 30, Victor Services had an Accounts Receivable balance of $37,800. During the month of May, total credits to Accounts Receivable were $73,600 from customer payments. The May 31 Accounts Receivable balance was $31,000. What was the amount of credit sales during May?
Answer:
The answer is $66,800
Explanation:
Beginning accounts receivable balance ---$37,800
Ending accounts receivable balance -----$31,000
Total credits to Accounts Receivable------ $73,600
Credit sales = (Total credits to Accounts Receivable + Ending accounts receivable balance) - Beginning accounts receivable balance
($73,600 + $31,000) - $37,800
$104,600 - $37,800
= $66,800
Refer to the financial statements of Burnaby Mountain Trading Company. The firm's asset turnover ratio for 2017 is _________. (Please keep in mind that when a ratio involves both income statement and balance sheet numbers, the balance sheet numbers for the beginning and end of the year must be averaged.)
Answer:
1.69
Explanation:
asset turnover ratio = net sales / average assets
I looked up the missing information and found the following:
total assets year 1 = $4,000,000
total assets year 2 = $4,300,000
net sales year 2 = $7,000,000
average assets = ($4,000,000 + $4,300,000) / 2 = $4,150,000
asset turnover ratio = $7,000,000 / $4,150,000 = 1.6867 = 1.69
The higher the asset turnover ratio, the more efficient a company is. Therefore, a higher asset turnover ratio is always better although there is no fixed parameter.
Anthony Corporation reported the following amounts for the year: Net sales $296,000 Cost of goods sold 138,000 Average inventory 50,000 Anthony's average days in inventory is (round to the nearest whole day):
Answer:
132.25 days
Explanation:
average days in inventory is an activity ratio.
Activity ratios calculates the efficiency of performing daily tasks.
average days in inventory = number of days in a period / inventory turnover
inventory turnover = cost of goods sold / average inventory = 138,000 / 50,000 = 2.76
Assuming a 365 day period , 365 / 2.76 = 132.25
At December 31, 2017, Hawke Company reports the following results for its calendar year.
Cash sales $1,905,000
Credit sales 5,682,000.
In addition, its unadjusted trial balance includes the following items.
Accounts receivable $1,270,100 debit
Allowance for doubtful accounts 16,580 debit
Reqiured:
1. Prepare the adjusting entry for this company to recognize bad debts under each of the following independent assumptions.
A. Bad debts are estimated to be 1.5% of credit sales.
B. Bad debts are estimated to be 1% of total sales.
C. An aging analysis estimates that 5% of year-end accounts receivable are uncollectible.
2. Show how Accounts Receivable and the Allowance for Doubtful Accounts appear on its December 31, 2015, balance sheet given the facts in part 1a.
3. Show how Accounts Receivable and the Allowance for Doubtful Accounts appear on its December 31, 2015, balance sheet given the facts in part 1c.
Answer:
Hawke Company
1. Adjusting Entries to recognize bad debts under the following independent assumptions:
A. Bad debts are estimated to be 1.5% of credit sales:
Debit Bad Debts Expense $73,400
Credit Allowance for Doubtful Accounts $73,400
To record bad debts expenses and bring the allowance for doubtful accounts balance to $56,820.
B. Bad debts are estimated to be 1% of total sales:
Debit Bad Debts Expense $92,450
Credit Allowance for Doubtful Accounts $92,450
To record bad debts expenses and bring the allowance for doubtful accounts balance to $75,870.
C. An aging analysis estimates that 5% of year-end accounts receivable are uncollectible:
Debit Bad Debts Expense $80,085
Credit Allowance for Doubtful Accounts $80,085
To record bad debts expenses and bring the allowance for doubtful accounts balance to $63,505.
2. Balance Sheet as of December 31, 2015:
A. Accounts Receivable $1,270,100
less allowance for doubtful accounts 56,820
Net balance $1,213,280
3. Balance Sheet as of December 31, 2015:
C. Accounts Receivable $1,270,100
less allowance for doubtful accounts 63,505
Net balance $1,206,595
Explanation:
a) Data:
Cash sales $1,905,000
Credit sales 5,682,000
Accounts Receivable $1,270,100
Allowance for doubtful accounts $16,580 debit
1. Bad debts = 1.5% of $5,682,000 = $56,820
2. Bad debts are estimated to be 1% of total sales:
Bad debts = 1% of $7,587,000 = $75,870
3. An aging analysis estimates that 5% of year-end accounts receivable are uncollectible:
Bad debts = 5% of $1,270,100 = $63,505
The adjusting entries to recognize bad debts including how Accounts Receivable and the Allowance for Doubtful Accounts appear on its December 31, 2015 balance sheet are:
1a. Journal entry to estimate Bad debts at 1.5% of credit sales.
First step is to calculate the Bad debt accrual
Bad debt accrual=Total credit sales × Bad debt accrual percentage
Bad debt accrual=$ 5,682,000×1.5%
Bad debt accrual=$85,230
Second step is to calculate Bad debt expense for Dec 31
Bad debt accrual $85,230
Less Allowance for doubtful account balance ($16,580)
Bad debt expense for Dec 31 $101,810
Third step is to prepare the Adjusting Entry
Debit Bad debt expense $101,810
Credit Allowance for doubtful account $101,810
(To record Bad debts at 1.5% of credit sales)
1b. Journal entry to estimate Bad debts at 1% of credit sales.
First step is to calculate the Bad debt accrual
Total credit sales $5,682,000
Total cash sales $1,905,000
Total sales $7,587,000
($5,682,000+$1,905,000)
Bad debt accrual % 1%
Bad debt accrual $75,870
($7,587,000× 1%)
Second step is to calculate Bad debt expense for Dec 31
Bad debt accrual $75,870
Less Allowance for doubtful account balance ($16,580)
Bad debt expense for Dec 31 $92,450
Third step is to prepare the Adjusting Entry
Debit Bad debt expense $92,450
Credit Allowance for doubtful account $92,450
(To record Bad debts at 1% of credit sales)
1c. Journal entry to estimate 5% of year-end accounts receivable are uncollectible
First step is to calculate the Bad debt accrual
Accounts Receivable $1,270,100
Bad debt accrual % 5.0%
Bad debt accrual $63,505
($1,270,100×5%)
Second step is to calculate Bad debt expense for Dec 31
Bad debt accrual $63,505
Less Allowance for doubtful account balance ($16,580)
Bad debt expense for Dec 31 $80,085
Third step is to prepare the Adjusting Entry
Debit Bad debt expense $80,085
Credit Allowance for doubtful account $80,085
(To record accounts receivable uncollectible)
2. How Accounts Receivable and the Allowance for Doubtful Accounts should appear on its December 31, 2015, balance sheet:
Balance Sheet as on December 31, 2015
Accounts Receivable (gross) $1,270,100
Less: Allowance for doubtful accounts $101,810
Accounts Receivable (net) $1,168,290
3. How Accounts Receivable and the Allowance for Doubtful Accounts should appear on its December 31, 2015, balance sheet:
Balance Sheet as on December 31, 2015
Accounts Receivable (gross) $1,270,100
Less: Allowance for doubtful accounts $80,085
Accounts Receivable (net) $1,190,015
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https://brainly.com/question/15714259
Suppose that, in an attempt to combat severe unemployment, the government decides to increase the amount of money in circulation in the economy.
This monetary policy ___________ the economy's demand for goods and services, leading to ____________ product prices. In the short run, the change in prices induces firms to produce __________ goods and services. This, in turn, leads to a _________ level of unemployment.
In other words, the economy faces a trade-off between inflation and unemployment: Higher inflation leads to ____________ unemployment.
Answer:
increases
higher
more
lower
lower
Explanation:
If the money supply is increased. individuals would have more money and consumption would increase. Increase in consumption would lead to a rise in demand.
when demand exceeds supply, prices rise,
When there is a rise in price, it encourages producers to increase production in order to increase their profit margin.
In order to expand production, more factors of production would be needed. So, more labour would be hired. thus, unemployment would fall.
it can be seen that higher inflation lowers unemployment
Which of the following is true for a company that doesn't adjust their WACC for project risk? a. The company would accept more average risk projects than they should otherwise. b. The company's risk would decrease. c. The company would accept more less than average risk projects than they should otherwise. d. The company would accept more riskier than average projects than they should otherwise.
Answer: d. The company would accept more riskier than average projects than they should otherwise.
Explanation:
A company's Weighted Average Cost of Capital can enable it know the calibre of risk to accept from new project because it shows the business risk of funding current business operations.
If a project will bring more risk to the company, the WACC should be adjusted so that the company will get a fair rate of return from the new project. If they do not adjust the new project for risk, not only will the company not get a fair return but they might also accept riskier projects because they will accept projects that they think have a lower risk than their WACC even though they are higher because they did not adjust their WACC.
Following are selected account balances from Penske Company and Stanza Corporation as of December 31, 2018:
Penske Stanza
Revenues 700,000 400,000
Cost of goods sold 250,000 100,000
Depreciation expense 150,000 200,000
Investment income Not given __
Dividend declared 80,000 60,000
Retained earnings 600,000 200,000
Current assets 400,000 500,000
Copyrights 900,000 400,000
Royal agreements 600,000 1,00,0000
Investment in stanza ---- -------
Liabilities 500,000 13,80,000
Common stock 600,000 200,000
Additional paid capital 150,000 80,000
On January 1, 2018, Penske acquired all of Stanza's outstanding stock for $680,000 fair value in cash and common stock. Penske also paid $10,000 in stock issuance costs. At the date of acquisition, copyrights (with a six-year remaining life) have a $440,000 book value but a fair value of $560,000.
a. As of December 31, 2018, what is the consolidated copyrights balance?
b. For the year ending December 31, 2018, what is consolidated net income?
c. As of December 31, 2018, what is the consolidated retained earnings balance?
d. As of December 31, 2018, what is the consolidated balance to be reported for goodwill?
Answer:
a. Consolidated Copyright
Penske (Book value) $900,000
Stanza (Book value) $400,000
Allocation $120,000
Less: Excess Amortization ($20,000)
Total $1,400,000
b. Consolidated Net Income 2019
Revenues $1,100,000
Expenses:
Cost of goods sold $350,000
Depreciation Expenses $350,000
$700,000
Excess amortization $20,000 $720,000
Consolidated Net Income $380,000
Workings
Cost of goods sold = 250,000 + 100,000 = 350,000
Depreciation Expenses = 150,000 + 200,000 = 350,000
3. Consolidated Retainer earnings on December 31,2018
Retained Earnings 1/1/28 $600,000
Net Income 2018 $380,000
Less: Dividend Declared 2018 (Penske) ($80,000)
Total $900,000
d. Consolidated Balance to be reported for goodwill
Stanza acquisition fair value $680,000
(10,000 in stock issue costs reduced
additional paid in capital)
Book value of subsidiary $480,000
(1/1/18 Stockholder equity balance)
Fair value in excess of book value $200,000
Less: Excess fair value allocated $120,000
to copy right based on fair value
Goodwill $80,000
Workings
Stockholder equity balance 1/1/18
Common stock 200,000
Additional paid-in capital 80,000
Retained earnings 200,000
Stockholder equity 480,000
Excess fair value
Copyright fair value 560,000
Less Copyright book value 440,000
Excess fair value allocated 120,000
Copyright year 6 years
Annual Excess Amortization $20,000
A company issues a ten-year bond at par with a coupon rate of 6.4% paid semi-annually. The YTM at the beginning of the third year of the bond (8 years left to maturity) is 9.1%. What is the new price of the bond?
Answer:
[tex]\mathbf{current \ price \ of \ the \ bond= \$848.78}[/tex]
Explanation:
The current price of the bond can be calculated by using the formula:
[tex]current \ price \ of \ the \ bond= ( coupon \times \dfrac{ (1- \dfrac{1}{(1+YTM)^{no \ of \ period }})}{YTM} + \dfrac{Face \ Value }{(1+YTM ) ^{no \ of \ period}}[/tex]
[tex]current \ price \ of \ the \ bond= ( \dfrac{0.064 \times \$1000}{2} \times \dfrac{ (1- \dfrac{1}{(1+ \dfrac{0.091}{2})^{8 \times 2}})}{\dfrac{0.091}{2}} + \dfrac{\$1000 }{(1+\dfrac{0.091}{2} ) ^{8 \times 2}})[/tex]
[tex]current \ price \ of \ the \ bond= \$32 \times $11.19 + \$490.70[/tex]
[tex]current \ price \ of \ the \ bond= \$358.08+ \$490.70[/tex]
[tex]\mathbf{current \ price \ of \ the \ bond= \$848.78}[/tex]
Journalize the following transactions for the Scott company:
Nov 4. Received a $6,500, 90-day, 6% Note from Michael Tim's in payment of his account.
Dec 31. Accrued interest on the Tim's note.
Feb 2. Received the amount due from Tim's on his note.
Answer:
Journalize the following transactions for the Scott company:
Nov 4. Received a $6,500, 90-day, 6% Note from Michael Tim's in payment of his account.
Dr Notes receivable 6,500
Cr Accounts receivable 6,500
Dec 31. Accrued interest on the Tim's note.
Dr Interest receivable ($6,500 x 6% x 57/365) = 60.90
Cr Interest revenue 60.90
Feb 2. Received the amount due from Tim's on his note.
Dr Cash 6,596.16
Cr Notes receivable 6,500
Cr Interest receivable 60.90
Cr Interest revenue 35.26
I did all my calculation based on a 365 day calendar year. Generally banks calculate interest on a 360 day calendar year.
Mercury Company reports depreciation expense of $40,000 for Year 2. Also, equipment costing $150,000 was sold for its book value in Year 2. There were no other equipment purchases or sales during the year. The following selected information is available for Mercury Company from its comparative balance sheet. Compute the cash received from the sale of the equipment. At December 31 Year 2 Year 1 Equipment $ 600,000 $ 750,000 Accumulated Depreciation-Equipment 428,000 500,000
Answer:
Mercury Company
Sale of Equipment account:
Equipment $150,000
Acc. Depreciation 112,000
Book value $38,000
Cash received $38,000
Explanation:
a) Data and Calculations:
Equipment Account:
Beginning balance $750,000
Ending balance 600,000
Sale of equipment $150,000
Accumulated Depreciation - Equipment account:
Beginning balance $500,000
Depreciation expense 40,000
Ending balance 428,000
Sale of Equipment $112,000
b) The Cash received from the sale of Mercury Company's equipment is equal to the book value in Year 2 according to the question. Since the book value (value after accumulated depreciation) is $38,000, that means that the equipment was sold at $38,000 recording no profit or loss for the company on the sale.
Assignment: Capital Budgeting Decisions Your company is considering undertaking a project to expand an existing product line. The required rate of return on the project is 8% and the maximum allowable payback period is 3 years.
time 0 1 2 3 4 5 6
Cash flow $ 10,000 2,400 4,800 3,200 3,200 2,800 2,400
Evaluate the project using each of the following methods. For each method, should the project be accepted or rejected? Justify your answer based on the method used to evaluate the project’s cash flows.
A. Payback period
B. Internal Rate of Return (IRR)
C. Simple Rate of Return
D. Net Present Value
Answer:
A. Payback period
payback period = 2.875 years, therefore, the project should be accepted because the payback period is less than 3 years.B. Internal Rate of Return (IRR)
IRR = 22.69%, therefore, the project should be accepted since the IRR is higher than the required rate of return (8%).C. Simple Rate of Return
simple rate of return = 18%, therefore, the project should be accepted because the simple rate of return is higher than the required rate of return.D. Net Present Value
NPV = $4,647.85 , therefore, the project should be accepted since the NPV is positive.Explanation:
year cash flow
0 -$10,000
1 $2,400
2 $4,800
3 $3,200
4 $3,200
5 $2,800
6 $2,400
discount rate 8%
I used a financial calculator to determine the NPV and IRR.
Payback period = $10,000 - $2,400 - $4,800 = $2,800 / $3,200 = 0.875
payback period = 2.875 years
simple rate of return:
average cash flow = ($2,400 + $4,800 + $3,200 + $3,200 + $2,800 + $2,400) / 6 = $3,467
depreciation expense per year = $10,000 / 6 = $1,667
simple rate of return = ($3,467 - $1,667) / $10,000 = 18%
Piedmont Hotels is an all-equity company. Its stock has a beta of .82. The market risk premium is 6.9 percent and the risk-free rate is 4.5 percent. The company is considering a project that it considers riskier than its current operations so it wants to apply an adjustment of 1.7 percent to the project's discount rate. What should the firm set as the required rate of return for the project?
Answer:
11.86%
Explanation:
Piedmont hotels can be described as an all-equity company
Its stock has a beta of 0.82
The market risk premium is 6.9%
The risk free rate is 4.5%
The adjustment is 1.7%
Therefore, the required rate of return can be calculated as follows
Required rate of return= Risk free rate of return + ( beta×market risk premium) + adjustment
= 4.5% + (0.82×6.9%) + 1.7%
= 4.5% + 5.658 + 1.7%
= 11.86%
Hence the required rate of return for the project is 11.86%
Exercise 16-18 Indigo Inc. presented the following data. Net income$2,410,000 Preferred stock: 52,000 shares outstanding, $100 par, 8% cumulative, not convertible5,200,000 Common stock: Shares outstanding 1/1729,600 Issued for cash, 5/1296,400 Acquired treasury stock for cash, 8/1152,400 2-for-1 stock split, 10/1 Compute earnings per share.
Answer:
EPS = $11.74 per share
Explanation:
earnings per share (EPS) = (net income - preferred dividends) / weighted average shares outstanding
net income = $2,410,000
preferred dividends = 52,000 x $100 x 8% = $416,000
weighted average shares outstanding:
beginning common stocks (29,600 x 257/274) x 2 = 55,527 + (55,527 x 91/365) = 69,370.72new stocks issued (96,400 x 142/274) x 2 = 99,918.25 + (99,918.25 x 91/365) = 124,819.38treasury stocks (-52,400 x 51/274) x 2 = -19,506.57 + (-19,506.57 x 91/365) = -24,369.85total = 169,820.25 ≈ 169,820 weighted stocksEPS = ($2,410,000 - $416,000) / 169,820 stocks = $11.74
Since the dates are a little confusing, I assumed 1/17 for beginning common stocks, 5/12 for issuance of new stocks, 8/11 for acquiring treasury stocks, and 10/1 for stock split. From January 1 to October 1, there are 274 days on a regular 365 day calendar year.
yle Co. has $1.1 million of debt, $3 million of preferred stock, and $1.2 million of common equity. What would be its weight on common equity
Answer:
0.22
Explanation:
Calculation for the weight on common equity
Using this formula
Weight of Common equity = Common Equity/(Debt + Preferred Equity+Common Equity)
Where,
Common Equity=1.2
Debt =1.1
Preferred Equity=3
Let plug in the formula
Weight of common equity = 1.2/(1.1+ 3+ 1.2)
Weight of common equity=1.2/5.3
Weight of Common Equity=0.22
Therefore the weight on common equity will be 0.22
If Wiper's stock had a price/earnings ratio of 10 at the end of 2020, what was the market price of the stock?Calculate the cash dividend per share for 2020 and the dividend yield based on the market price calculated in part e.Calculate the dividend payout ratio for 2020.Assume that accounts receivable at December 31, 2020, totaled $322 million. Calculate the number of days' sales in receivables at that date.Calculate Wiper's debt ratio and debt/equity ratio at December 31, 2020 and 2019.Calculate the times interest earned ratio for 2020 and 2019.
Answer:
Stock Price is $54.50
Cash Dividend per share $1.50
Dividend Yield 2.75%
Dividend payout ratio 27.46%
Days Sales in Receivable 38 days
Debt Ratio 68.29%
Debt/equity ratio 1.57
Interest earned ratio 3.16 times
Explanation:
1. Market price = Price to earning ratio * Earning per share
Earnings per share = Net Income / Average number of shares outstanding
Earnings per share : 233 / 42.7 = 5.45
Market price per share : 10 * 5.45 = 54.50
2. Dividend per share : Dividend paid / number of shares outstanding
DPS : 64 / 42.7 = 1.50
3. Dividend Yield : Dividend per share / Stock Price share
Dividend Yield : 1.50 / 54.50
4. Dividend Payout ratio : Total Dividend paid / Net Income
Dividend Payout ratio : 64 / 233 = 27.46%
5. Day Receivale : (Average Receivable / Sales ) * 365
Days Receivables : 322/ 3064 * 365 = 38 days
6. Debt Ratio : Total Liabilities / Total Assets
Debt ratio : 2194 / 3215 = 68.29%
7. Debt/ equity ratio : Debt / Equity
Debt/Equity : 1603 / 1021 = 1.57
8. Interest Earned Ratio : Earning before Interest and Tax / Interest Expense
Interest Earned Ratio : 310 / 98 = 3.16 times
Required: 1. Prepare the journal entries to record the sale on November 17 (ignore cost of goods) and collection on November 26, 2021, assuming that the gross method of accounting for cash discounts is used. 2. Prepare the journal entries to record the sale on November 17 (ignore cost of goods) and collection on December 15, 2021, assuming that the gross method of accounting for cash discounts is used.
Answer:
Check Explanation section.
Explanation:
(1). The Gross method: in this kind of method, the sales and the cash are separately recorded.
Date: November 17, 2021.
Account titles and Explanation:
• Account receivable:
Lf = 0, Debit ($) = 42,000(100 units × 600 × 70% = 42,000). Credit ($). = 0.
• Sales revenue:
Lf = 0, Debit($) = 0, Credit ($) = 42,000(100 units × 600 × 70% = 42,000).
NB: the account receivable is debited in order to record sales.
Date: November 26, 2021.
Account titles and Explanation:
• cash:
Lf = 0, debit($) = 41,160( 42,000 × 98%), Credit ($) = 0.
• Sales discount:
Lf = 0, debit($) = 840( 42,000 × 2%). Credit ($) = 0.
• Account receivable:
Lf = 0, Debit($) = 0, credit ($) = 42,000.
(2). Date: November 17, 2021.
Account titles and Explanation:
• Account receivable:
Lf = 0, Debit ($) = 42,000(100 units × 600 × 70% = 42,000). Credit ($). = 0.
• Sales revenue:
Lf = 0, Debit($) = 0, Credit ($) = 42,000.
Date: December 15, 2021.
Account titles and Explanation:
• cash:
Lf = 0, debit($) = 42,000, Credit ($) = 0.
• Sales discount:
Lf = 0, debit($) = 42,000, Credit ($) = 0.
• Account receivable:
Lf = 0, Debit($) = 0, credit ($) = 42,000.
On the first day of 2016, Holthausen COmpany acquired the assets of Leftwich Company including several intangible assests. These include a patent on Ledtwicj's primary product, a device called a plentiscope. Leftwich carried the patent on its book for $1,500, but Holthausen believes that the fair value is $200,000. The patent expires in seven years, but companies can be expected to develop competing patents within three years. Holthausen believes that, with expected technlogical improvements, the product is marketable for a t least 20 years.
The registration of the trademark for the Leftwich name is scheduled to expire in 15 years. However, the Leftwich brand name, which Holthausen believes is worth $500,000, could be applied to related products for many years beyond that.
As part of the acquisition, Leftwich's principal researcher left the company. As part of the acquisition, he signed a five-year noncompetition agreement that prevents him from developing competing products. Holthausen paid the scientist $300,000 to sign the agreement.
a. What amount should be capitalized for each of teh identifiable intangible assets?
b. What amount of amortization expense should Holthausen record in 2016 for each asset?
Answer:
Holthausen Company and Leftwich Company
Intangible Assets:
a) Amount to be capitalized:
1) Patent: $200,000
2) Trademark: $500,000
3) Non-competition Agreement: $300,000
b) Amount of Amortization Expense for 2016:
1) Patent: $200,000/7 years = $28,571.43
2) Trademark: $500,000/15 years = $33,333,33
3) Non-competition Agreement: $300,000/5 = $60,000
Explanation:
The fair values of the "plentiscope" patent and Leftwich's branded trademark should be capitalized as intangible assets, while the cost of the non-competition agreement with Leftwich's principal researcher should be capitalized.
For the amortization of the Leftwich-connected intangibles, we have adopted the straight-line method, in the absence of any prescribed method. The patent expiration in 7 years was used as the basis for its useful life, despite Holthausen belief that the product could be marketable for at least 20 years.
The trademark was amortized over its remaining useful life of 15 years as given, while the non-competition agreement was amortized for 5 years when the agreement remains effective.
The offering price of an open-end fund is $12.30 per share and the fund is sold with a front-end load of 5%. What is its net asset value?
Answer:
$11.685
Explanation:
Calculation for the net asset value
Since the front-end load is 5% this means that we are going to deduct 5% from 100% which will give us 95%, therefore 95% will be our front-end load percentage.
Now let find the Net asset value
Using this formula
Net asset value=Front-end load Percentage × Offering price
Let plug in the formula
Net asset value=95%×$12.30
Net asset value=$11.685
Therefore the Net asset value will be $11.685