In the trade-off theory, debt levels chosen to balance interest tax shield against the costs of financial distress imply:________
a. an interior optimum (firm value maximizing) debt ratio
b. that investors are irrational, since they require lower returns the hgher the risk
c. that a firm would use little to no debt
d. that a firm would borrow as much as possible
Answer:
a) an interior optimum (firm value maximizing) debt ratio
Explanation:
Trade off Theory is about capital structure of an economic unit. It mentions about the benefit of debt - ie tax saving, as interest on debt is tax deductible; & cost of debt - bankruptcy & insolvency risk, due to fix interest cost.
The theory depicts the debt level, which is best to - balance interest tax shield against the costs of financial distress imply, which implies that it seeks a balance between benefit & cost of debt.
So, the theory finds the best interior optimum (firm value maximising) debt equity ratio.
The purpose or objectives of competition policy
Answer:
This Act, by prohibiting private monopolization, unreasonable restraint of trade and unfair trade practices, by preventing excessive concentration of economic power and by eliminating unreasonable restraint on production, sale, price, technology and the like, and all other unjust restriction of business
Explanation:
credits :- wwwjftc
The following transactions occurred during July:
a. Received $1,090 cash for services provided to a customer during July.
b. Issued common stock for $5,800 cash.
c. Received $940 from a customer in partial payment of his account receivable which arose from sales in June.
d. Provided services to a customer on credit, $565.
e. Borrowed $7,900 from the bank by signing a promissory note.
f. Received $1,440 cash from a customer for services to be performed next year.
Required:
What was the amount of revenue for July?
Answer:
$1,655
Explanation:
Revenue results from transactions with customers. We recognize revenue when services or goods have been transferred to customers not as when they are paid.
Calculation of Revenue for July :
Transaction a $1,090
Transaction d $565
Total Revenue $1,655
therefore,
The amount of revenue for July is $1,655.
On September 30, 2018, Corso Steel acquired a patent from Thermo Steel. The agreement specified that Corso will pay Thermo $1,000,000 immediately and then another $1,000,000 on September 30, 2020. An interest rate of 8% reflects the time value of money for this type of loan agreement.
What amount of interest expense, if any, would Corso record on December 31, 2019, the company’s fiscal year end?
a. $68,687.
b. $80,000.
c. $60,000.
d. $69,959.
Answer: $69,959
Explanation:
The amount of interest expense, that Corso will record on December 31, 2019, the company’s fiscal year end will be calculated thus:
First, we calculate the present value of payment which will be made on September 30,2020 and this will be:
= $1000000 × 0.857339
= $857339
Then, the interest expense on December 31,2018 will be:
= $857339 × 8%/12 × 3
= $17147
Therefore, the Interest expense on December 31,2019 will be:
= ($857339 + $17147) × 8%
= $874486 × 0.08
= $69959
You are evaluatig an equity investment in a public company called Corona Corp (ticker: COR). You expect the company will pay a $2.00 dividend per share at the end of next year and that dividends will grow at a constant rate of 5% annually in the future. You require a 13% return on investments in equity. Based on these assumptions, what is the fair value of a share of COR stock today?
Answer:
$25
Explanation:
according to the constant dividend growth model
price = d1 / (r - g)
d1 = next dividend to be paid
r = cost of equity
g = growth rate
2/ 0.13 - 0.08 = $25
The financial statements for Highland Corporation included the following selected information:
Common stock $ 1,000,000
Retained earnings $ 770,000
Net income $ 1,020,000
Shares issued 100,000
Shares outstanding 77,000
Dividends declared and paid $ 690,000
The common stock was sold at a price of $31 per share.
1. What is the amount o f additional paid-in capital?
2. What was the amount of retained earnings at the beginning of the year?
3. How many shares are in treasury stock?
Answer:
Highland Corporation
1. The amount of additional paid-in capital is:
= $210,000.
2. The amount of the retained earnings at the beginning of the year is:
= $440,000.
3. The number of shares in treasury stock is:
= 23,000 shares.
Explanation:
a) Data and Calculations:
Common stock $ 1,000,000
Retained earnings $ 770,000
Net income $ 1,020,000
Shares issued 100,000
Shares outstanding 77,000
Dividends declared and paid $ 690,000
Price of common stock = $31 per share
1. The amount of additional paid-in capital is:
Issued stock = 100,000 * ($31 - $10) = $210,000
2. The amount of the retained earnings at the beginning of the year:
Retained earnings at the ending $ 770,000
Add dividend 690,000
Total available for distribution $1,460,000
Less Net income 1,020,000
Retained earnings at the beginning $440,000
3. Treasury stock = 23,000 (100,000 - 77,000)
Dennis sells short 100 shares of ARC stock at $152 per share on January 15, 2020. He buys 200 shares of ARC stock on April 1, 2020, at $190 per share. On May 2, 2020, he closes the short sale by delivering 100 of the shares purchased on April 1
a. What are the amount and nature of Dennis’s loss upon closing the short sale?
b. When does the holding period for the remaining 100 shares begin?
c. If Dennis sells (at $27 per share) the remaining 100 shares on January 20, 2017, what will be the nature of his gain or loss?
Answer: See explanation
Explanation:
a. What are the amount and nature of Dennis’s loss upon closing the short sale?
Sales consideration = $100 × $152 = $15200
Less: Closing Value of Short sales = 100 × $190 = $19000
Short term capital loss = $3800
b. When does the holding period for the remaining 100 shares begin?
The holding period for the remaining 100 shares begin on May 2, 2020, which was when the short sale was closed.
c. If Dennis sells (at $27 per share) the remaining 100 shares on January 20, 2017, what will be the nature of his gain or loss?
Sales consideration = 100 × $27 = $2700
Less: Base value = $19000
Short term capital loss = $16300
home trade helps in proper utilization of local resources how
1. Higher trade volumes
2. Greater opportunities to capitalize on comparative advantages
3. More efficient use of raw materials
4. Stronger economic growth
Explain what nuclear medicine technologists and magnetic resonance technologists have in common.
Many radiologic laboratories utilize hybrid scanning devices that integrate the two technologies, and MRI technologists and nuclear medicine techs have similar expertise. Technologists may examine both structure and cellular health at a single glance by superimposing the two pictures.
Nuclear medicine technologists and MRI technologists share a number of abilities, and many radiologic facilities utilize hybrid scanning devices that integrate the two modalities.
What is nuclear medicine technologists?
Nuclear medicine creates images that demonstrate internal organ activity by using an ionizing radioactive tracer, typically injected into the blood.
High-quality, detailed images of inside body structures are created by MRI using radio waves and a strong magnetic field. By detecting radiation coming from various body areas after the patient receives a radioactive tracer, nuclear medicine imaging is a technique for creating images.
Hence, the significance of the nuclear medicine technologists is aforementioned.
Learn more about on nuclear medicine technologists, here:
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A non-governmental not-for-profit university in California charges its students tuition of $10,000,000. However, financial aid grants total $2,200,000. In addition, the school receives a $1,000,000 grant restricted for faculty salaries. Of this amount, $300,000 is spent appropriately this year. On the statement of activities, the school reports three categories: (1) revenues and support, (2) net assets released from restrictions, and (3) expenses. Which of the following is not true?
A. In the unrestricted net assets, the revenues and support should total $1.14 million.
B. Unrestricted net assets shows the $160,000 as a direct reduction to the tuition revenue balance.
C. Unrestricted net assets should recognize expenses of $24,000.
D. Unrestricted net assets should show an increase of $24,000 for net assets reclassified.
Answer:
b. In the unrestricted net assets, the revenues and support should total $10,000,000.
Explanation:
Based on the information given the statements that is NOT true will be "IN THE UNRESTRICTED NET ASSETS, THE REVENUES AND SUPPORT SHOULD TOTAL $10,000,000 reason been that in a non-governmental not-for-profit school the the financial grant that was provided by the school will reduce the tuition revenue which therefore means that the FINANCIAL SUPPORT OR GRANTS REVENUES AND SUPPORT should total only the amount of $7,800,000 calculated as ($10,000,000-$2,200,000).
Grouper Company purchased an electric wax melter on April 30, 2020, by trading in its old gas model and paying the balance in cash. The following data relate to the purchase.
List price of new melter $21,804
Cash paid 13,800
Cost of old melter (5-year life, $966 salvage value) 15,456
Accumulated Depreciation-old melter (straight-line) 8,694
Secondhand fair value of old melter 7,176
Required:
Prepare the journal entries necessary to record this exchange, assuming that the exchange (a) has commercial substance, and (b) lacks commercial substance. Sage’s fiscal year ends on December 31, and depreciation has been recorded through December 31, 2020.
Answer and Explanation:
The journal entries are shown below;
a. the exchange has commercial substance
Depreciation expense (($15,456 - $966) ÷ 5 × 4 ÷ 12 ) $966
To Accumulate depreciation $966
(being depreciation expense is recorded)
New Melter ($13,800 + $7,176) $20,976
accumulated depreciation ($8,694 + $966) $9,660
To loss on sale of melter $1,380
To old melter $15,456
To cash $13,800
(being equipment exchange is recorded)
b. The exchange lacks commercial substance
Depreciation expense (($15,456 - $966) ÷ 5 × 4 ÷ 12 ) $966
To Accumulate depreciation $966
(being current depreciation expense is recorded)
New Melter ($13,800 + $7,176) $20,976
accumulated depreciation ($8,694 + $966) $9,660
To loss on sale of melter $1,380
To old melter $15,456
To cash $13,800
(being equipment exchange is recorded)
Distributions from corporations to the shareholders in a nonliquidating distribution will usually be classified as a dividend up to the amount of the corporation's retained earnings stock basis taxable income for the year earnings and profits.
a. True
b. False
Answer: Earnings and profits.
Explanation:
This is not a true or false question as the options are given first.
It is assumed that dividends comes from earnings and profits so when a company distributes dividends, the total amount of those dividends cannot exceed the total amount of accumulated earnings and profits that the company has.
If the dividends exceed this amount, then they are to be considered as a return on capital to the shareholder and this is beholden to a different tax regime.
Kemper Company's balance sheet and income statement are shown below (in millions of dollars). The company and its creditors have agreed upon a voluntary reorganization plan. In this plan, each share of the $5 preferred will be exchanged for one share of $1.00 preferred with a par value of $25 plus one 9% subordinated income debenture with a par value of $75. The $9 preferred issue will be retired with cash. The company's tax rate is 30 percent.
Balance Sheet prior to Reorganization (in millions
Current Assets 400 Current liabilities 350
Net fixed assets 450 Advance payments 20
$5 preferred stock, $100 par value (1,000,000) shares 100
$9 preferred stock, no par, callable at 100 (160,000 shares) 30
Common stock, $0.10 par value (10,000,000) shares 50
Retained earnings 300
Total assets 850 Total claims 850
a. Construct the pro forma balance sheet after reorganization takes place. Show the new preferred at its par value.
b. Construct the pro forma income statement after reorganization takes place. How does the recapitalization affect net income available to common stockholders?
Answer:
Kemper Company
a. Pro forma Balance Sheet after Reorganization (in millions)
Current Assets 400
Net fixed assets 450
Total assets 850
Current liabilities 350
Advance payments 20
9% subordinated Debenture,
$75 par value (1,000,000) 75
$1 preferred stock, $25 par value
(1,000,000) shares 25
Common stock, $0.10 par value
(10,000,000) shares 50
Retained earnings 300
b. Pro forma Income Statement after Reorganization (in millions)
Retained earnings 300
Income tax 128.6 ($300/(1 - 0.3) - $300)
add $5 preferred dividend 5
$9 preferred dividend 1.44
Less: 9% debenture interest (6.75)
Income before taxes $428.29
Income tax 128.49
Income after taxes $299.80
Preferred dividend 1.00
Retained earnings $298.80
The recapitalization reduces the net income available to common stockholders by $0.2 million.
Explanation:
a) Data and Calculations:
Kemper Company
Balance Sheet prior to Reorganization (in millions
Current Assets 400
Net fixed assets 450
Total assets 850
Current liabilities 350
Advance payments 20
$5 preferred stock, $100 par value
(1,000,000) shares 100
$9 preferred stock, no par,
callable at 100 (160,000 shares) 30
Common stock, $0.10 par value
(10,000,000) shares 50
Retained earnings 300
Total assets 850 Total claims 850
Transaction Analysis:
$5 preferred stock, $100 par value (1,000,000) shares $100 $1 Preferred stock, $25 par value (1,000,000) shares $25 9% subordinated Debenture, $75 par value (1,000,000) $75
$9 preferred stock, no par, callable at 100 (160,000 shares) 30 Cash $30
Total assets 850 Total claims 850
The following information is available for the XYZ Company for the month of July:
Static Budget Actual
Units 7,000 6,650
Sales revenue $60,000 $55,715
Variable manufacturing costs $15,000 $14,250
Fixed manufacturing costs $20,000 $17,000
Variable selling & administrative expense $10,000 $10,500
Fixed selling & administrative expense $15,000 $12,000
The total sales-volume variance for operating income for the month of July would be:__________
Answer:
XYZ Company
The total sales-volume variance for operating income for the month of July would be:__________
$3,765 Favorable
Explanation:
a) Data and Calculations:
Static Budget Actual
Units 7,000 6,650
Sales revenue $60,000 $55,715
Variable manufacturing costs $15,000 $14,250
Fixed manufacturing costs $20,000 $17,000
Variable selling & administrative exp. $10,000 $10,500
Fixed selling & administrative expense $15,000 $12,000
Flexible Budget Actual
Units 6,650 6,650
Sales revenue = $57,000($60,000/7,000 * 6,650) $55,715
Variable manufacturing costs = $14,300 ($15,000/7,000 * 6,650) $14,250
Fixed manufacturing costs $20,000 $17,000
Variable selling & administrative exp. =$9,500 ($10,000/7,000 * 6,650) $10,500
Fixed selling & administrative expense $15,000 $12,000
Flexible Budget Actual Variance
Units 6,650 6,650
Sales revenue $57,000 $55,715 $1,285 U
Variable manufacturing costs $14,300 $14,250 50 F
Fixed manufacturing costs $20,000 $17,000 3,000 F
Variable selling & administrative exp. $9,500 $10,500 1,000 U
Fixed selling & administrative expense $15,000 $12,000 3,000 F
Operating income ($1,800) $1,965 $3,765 F
Money is neutral in:___________
A. the short run, since it cannot alter the real aggregate output or price level in the short run.
B. both the short and long run, since it cannot alter price levels or aggregate output in the long and short run.
C. the long run, since it only affects the price level, but not aggregate output or interest rates.
D. the short run, since it cannot alter the price levels or interest rate in the short run.
Answer:
C
Explanation:
Money neutrality is a theory which submits that money supply only affect nominal variable and not real variables.
Nominal variables include price, wages and exchange rate
real variables include employment and real GDP
Money is only neutral in the long run and not in the short run because of money illusion. Money illusion causes economic agents to respond to money supply changes.
Money is neutral only in the long run
Pharoah provides environmentally friendly lawn services for homeowners. Its operating costs are as follows.
Depreciation $1,500 per month
Advertising $450 per month
Insurance $3,330 per month
Weed and feed materials $20 per lawn
Direct labor $13 per lawn
Fuel $3 per lawn
Pharoah charges $80 per treatment for the average single-family lawn.
(a) Determine the company's break-even point in number of lawns serviced per month o per Break-even point lawns
(b) Determine the company's break even point in dollars.
Answer:
Results are below.
Explanation:
Giving the following information:
Advertising $450 per month
Insurance $3,330 per month
Total fixed costs= $3,780
Weed and feed materials $20 per lawn
Direct labor $13 per lawn
Fuel $3 per lawn
Total unitary varaible cost= $36
Selling price per unti= $80
To calculate the break-even point in units, we need to use the following formula:
Break-even point in units= fixed costs/ contribution margin per unit
Break-even point in units= 3,780 / (80 - 36)
Break-even point in units= 86
Now, in dollars:
Break-even point (dollars)= fixed costs/ contribution margin ratio
Break-even point (dollars)= 3,780 / (44 / 80)
Break-even point (dollars)= $6,873
Teal Mountain Industries produces a product that requires 2.6 pounds of materials per unit. The allowance for waste and spoilage per unit is 0.3 pounds and 0.1 pounds, respectively. The purchase price is $2 per pound, but a 2% discount is usually taken. Freight costs are $0.10 per pound, and receiving and handling costs are $0.07 per pound. The hourly wage rate is $12.00.00 per hour, but a raise which will average $0.30 will go into effect soon. Payroll taxes are $1.20 per hour, and fringe benefits average $2.40 per hour. Standard production time is 2.5 hour per unit, and the allowance for rest periods and setup is 0.1 hours and 0.2 hours, respectively. The standard direct materials price per pound is:______.
Answer:
$2.127.
Explanation:
According to the scenario, computation of the given data are as follows,
Purchase price per pound = $2
Freight (Add) = $0.10
Handling cost (Add) = $0.07
Total cost = $2.17
Discount (Less) = (2% × $2.17) = $0.043
Direct material price = $2.127
Hence, standard direct materials price per pound is $2.127.
For what reason might keeping an accounts payable subsidiary ledger be unnecessary for a business? A. if the business is very small B. if the business processes invoices for payment. C. if the business pays only on account D. if the business has more customers then vendors
Answer:
A. if the business is very small
Explanation:
Subsidiary ledgers are maintained to support the entries in the main ledger. They give more details of the individual items in the main ledger.
They are usually used when a company has large sales volumes to make sure transactions are accurate.
However in small businesses there no need for subsidiary ledger in a small company.
Accounts payable subsidiary ledger shows details of amounts owed to suppliers by a business.
When the business is very small there will be no need for this.
Gundy Company expects to produce 1,213,200 units of Product XX in 2020. Monthly production is expected to range from 80,000 to 114,000 units. Budgeted variable manufacturing costs per unit are: direct materials $5, direct labor $7, and overhead $11. Budgeted fixed manufacturing costs per unit for depreciation are $6 and for supervision are $1. In March 2020, the company incurs the following costs in producing 97,000 units: direct materials $515,000, direct labor $670,000, and variable overhead $1,073,000. Actual fixed costs were equal to budgeted fixed costs. Prepare a flexible budget report for March. (List variable costs before fixed costs.)
Answer:
Gundy Company
Flexible Budget Report for March 2020:
Actual Budget Flexible Budget Variance
Direct materials $515,000 $485,000 $30,000 U
Direct labor 670,000 679,000 9,000 F
Variable overhead 1,073,000 1,067,000 6,000 U
Actual fixed costs 679,000 679,000 0 None
Total costs incurred $2,937,000 $2,910,000 $27,000 U
Explanation:
a) Data and Calculations:
Expected production of Product XX in 2020 = 1,213,200 units
Monthly production range = 80,000 to 114,000 units
Budgeted variable manufacturing costs per unit are:
Direct materials $5
Direct labor $7
Overhead $11
Total variable $23
Fixed manufacturing costs per unit:
Depreciation are $6
Supervision are $1
Total fixed costs $7
Total costs = $30
March 2020 costs incurred for 97,000 units:
Direct materials $515,000
Direct labor $670,000
Variable overhead $1,073,000
Actual fixed costs 679,000
Total costs incurred $2,937,000
Flexible Budget Report for March 2020:
Actual Budget Flexible Budget Variance
Direct materials $515,000 $485,000 $30,000 U
Direct labor 670,000 679,000 9,000 F
Variable overhead 1,073,000 1,067,000 6,000 U
Actual fixed costs 679,000 679,000 0 None
Total costs incurred $2,937,000 $2,910,000 $27,000 U
guns has decided to organixe
Answer:
why wont people stop thinking about guns and help your community out let god get into your hangs its not about guns its about communication helping love this outside world is to enjoy the whole world
On March 1, 2021, McHugh Enterprises issued 1000 of its 8%, $1,000 bonds dated January 1, 2021 at 98. Interest is payable semiannually on January 1 and July 1. The bonds mature on January 1, 2031. McHugh paid $50,000 in bond issue costs. McHugh uses straight-line amortization. The interest expense recognized on July 1, 2021 will be:__________
Answer: $82000
Explanation:
Interest will be calculated as:
= No of shares x Face value per Share x Interest rate
= 1000 × $1000 × 8%
= 1000 × $1000 × 0.08
= $80000
Total face value of shares issued = 1000 × $1000 = $1,000,000
Issue Amount will be:
= No of shares x Face value per Share x Issue rate
= 1,000 x 1,000 x 98 %
= $980,000
Discount on issue will be:
= $1,000,000 - $980,000
= $20,000
Amortization of Discount on issue per annum will be:
= $20,000/10
= $2000
Therefore, interest expense will be:
= $80000 + $2000
= $82000
On July 31, 2020, Vaughn Company had a cash balance per books of $6,132.05. The statement from Dakota State Bank on that date showed a balance of $7,748.15. A comparison of the bank statement with the Cash account revealed the following facts.
1. The bank service charge for July was $25.
2. The bank collected $1,720 for Keeds Company through electronic funds transfer.
3. The July 31 receipts of $1,297.50 were not included in the bank deposits for July. These receipts were deposited by the company in a night deposit vault on July 31.
4. Company check No. 2480 issued to L. Taylor, a creditor, for $391 that cleared the bank in July was incorrectly entered as a cash payment on July 10 for $319.
5. Checks outstanding on July 31 totaled $1,866.60.
6. On July 31, the bank statement showed an NSF charge of $576 for a check received by the company from W. Krueger, a customer, on account.
Required:
Prepare the bank reconciliation as of July 31.
Answer and Explanation:
The preparation of the bank reconciliation as of July 31 is presented below;
Cash balance as per bank statement $7,748.15
Add: deposit in transit $1,297.50
Less: outstanding checks $1,866.60
Adjusted cash balance per bank $7,179.05
Cash balance as per books $6,132.05
Add: electronic fund transfer received $1,720
Less: error ($391 - $319) -$72
Less: service charges - $25
Less: NSF charges - $576
Adjusted bank balance per books $7,179.05
Splish Brothers Inc. gathered the following reconciling information in preparing its August bank reconciliation:______.
Cash balance per books, 8/31 $33600 Deposits in transit 1400 Notes receivable and interest collected by bank 8200 Bank charge for check printing 190 Outstanding checks 19200 NSF check 1630
The adjusted cash balance per books on August 31 is:_______.
a. $38580.
b. $22040.
c. $23580
d. $39980.
Answer:
d. $39,980
Explanation:
Given the above information, the adjusted cash balance per books on August 31
= Cash opening + Collection by bank - Bank charge check printing - NSF check
The next step is to fix in the values as given above.
= $33,600 + $8,200 - $190 - $1,630
= $39,980
Therefore, the adjusted cash balance per books on August 31 is $39,980
Howell Company has the following selected accounts after posting adjusting entries:
Accounts Payable $45,000
Notes Payable, 3 - month 80,000
Accumulated Depreciation - Equipment 14,000
Payroll and Benefits Payable 27,000
Notes Payable, 5-year, 8% 30,000
Estimated Warranty Liability 34,000
Payroll Tax Expense 6,000
Interest Payable 3,000
Mortgage Payable 200,000
Sales Tax Payable 16,000
Instructions:
(a) Prepare the current liability section of Howell Company's balance sheet, assuming $25,000 of the mortgage is payable next year.
(b) Comment on Howell's liquidity, assuming total current assets are $450,000.
Answer and Explanation:
a. The preparation of the current liability section is presented below;
Notes payable - 3 months $80,000
Accounts payable $45,000
Estimated warranty liabilities $34,000
Payroll and benefit payable $27,000
Current portion of the Mortgage $25,000
Sales Tax payable $16,000
Interest payable $3,000
Total $230,000
b. We know that
Current ratio = current asset ÷ current liabilty
= $450,000 ÷ $230,000
= 1.95 times
This represent the company is in the good liquidity position to pay off the short term liability
On May 13, 2020, Otto, Parker and Quentin bought a parcel of land as tenants in common. The deed provided that Otto owned 1/2 the property and Parker and Quentin each owned 1/4 each. If Quentin dies, the property will be divided as follows:
a. Otto 1/2. Parker 1/2
b. Otto 5/8, Parker 3/8
c. Otto 1/3, Parker 1/3, Quentin's heirs 1/3
d. Otto 1/2. Parker 1/4, Quentin's heirs 1/4
Answer:D. Otto 1/2. Parker 1/4, Quentin's heirs 1/4
Explanation:
Based on the information given in the question, if Quentin dies, the property will be divided as Otto 1/2. Parker 1/4, Quentin's heirs 1/4.
When a tenant in common dies, it should be noted that their share of a property will be passed to their legal heir and thesame percentage of ownership will be shared by the co-owners. Hence the correct option is D
A team member tells you that when his wife was diagnosed with a serious illness, he stole items from work and sold them, using money for her treatment. he has sice paid back the money taken, in ways that kept his theft secret. ethically, what should you do?
A. attempt to gather evidence to determine whether or not the theft in fact occurred.
B. report him to his manager
C. advice the team member to tell his manager
D. talk with a lawyer to see if this can be justified
Answer:
C
Explanation:
I would advice him to tell his manager what he has done
A common stock just paid a dividend (D0) of $3.35 per share. Dividends are expected to rise at the rate of 10% per year forever. If the interest rate on this stock is 14% per year, what will the price of this stock be in Year 36?
A. $0.28
B. $12.56
C. $77.96
D. $388.26
E. $1,404.64
The following data are taken from the financial statements of Bar Harbor Company:
2017 2016
Average accounts receivable $530,000 $550,000
Net sales on account 5,800,000 5,200,000
Terms for all sales are 2/10, n/30
a) Compute the accounts receivable for both years.
b) Compute the average collection period for both years.
Answer:
a. Accounts receivable turnover = Net sales on account/Average accounts receivable
2017
Accounts receivable turnover = $5,800,000/$530,000
Accounts receivable turnover = 10.94
2016
Accounts receivable turnover = $5,200,000 / $550,000
Accounts receivable turnover = 9.45
b. Average collection period = 365 days/Accounts receivable turnover
2017
Average collection period = 365/10.94
Average collection period = 33 days
2016
Average collection period = 365/9.45
Average collection period = 39 days
The Varone Company makes a single product called a Hom. The company has the capacity to produce 40,000 Homs per year. Per unit costs to produce and sell one Hom at that activity level are: Direct materials $20 Direct labor $10 Variable manufacturing overhead $5 Fixed manufacturing overhead $7 Variable selling expense $8 Fixed selling expense $2 The regular selling price for one Hom is $60. A special order has been received at Varone from the Fairview Company to purchase 8,000 Homs next year at 15% off the regular selling price. If this special order were accepted, the variable selling expense would be reduced by 25%. However, Varone would have to purchase a specialized machine to engrave the Fairview name on each Hom in the special order. This machine would cost $10,800 and it would have no use after the special order was filled. The total fixed costs, both manufacturing and selling, are constant within the relevant range of 30,000 to 40,000 Homs per year. Assume direct labor is a variable cost. If Varone has an opportunity to sell 37,960 Homs next year through regular channels and the special order is accepted for 20% off the regular selling price, the effect on net operating income next year due to accepting this order would be:________
a. $33,320 decrease
b. $35,480 decrease
c. $33,320 increase
d. $35,480 increase
Answer:
$69,200 Increase
Explanation:
Calculation to determine what the effect on net operating income next year due to accepting this order would be:
Incremental revenue $408,000
(8,000 units × $51 per unit)
[$60 × (1 − 15%) = $51]
Less incremental costs:
Direct materials $160,000
(8,000 units × $20 per unit)
Direct labor $80,000
(8,000 unit × $10 per unit)
Variable manufacturing overhead $40,000
(8,000 units × $5per unit)
Variable selling expense $48,000
[$8 × (1 − 25%) = $6]
(8,000 units × $6 per unit)
Special machine $10,800
Total incremental cost $338,800
Incremental net operating income$69,200
($408,000-$338,800)
Therefore the effect on net operating income next year due to accepting this order would be:
$69,200 Increase
Nordstrom, Inc. operates department stores in numerous states. Suppose selected financial statement data (in millions) for 2020 are presented below.
End of Year Beginning of Year
Cash and cash equivalents $750 $81
Accounts receivable (net) 2,060 1,810
Inventory 880 830
Other current assets 570 429
Total current assets $4,260 $3,150
Total current liabilities $2,060 $1,610
For the year, net credit sales were $8,258 million, cost of goods sold was $5,328 million, and net cash provided by operating activities was $1,251 million.
Required:
Compute the current ratio, current cash debt coverage, accounts receivable turnover, average collection period, inventory turnover, and days in inventory at the end of the current year.
Answer:
Nordstrom, Inc.
Current Ratio = Current assets/Current liabilities
= $4,260/ $2,060
= 2.1
Current cash debt coverage = Net Operating Cash/Current liabilities
= $1,251/$2,060
= 0.61
Accounts receivable turnover = Net Sales/Average Receivable
= $8,258/$1,935
= 4.27
Average collection period = 365/4.27
= 85.5 days
Inventory turnover = Cost of goods sold/Average inventory
= $5,328/$855
= 6.2 times
Days in inventory = 365/Inventory turnover
= 58.9 days
Explanation:
a) Data and Calculations:
End of Year Beginning of Year
Cash and cash equivalents $750 $81
Accounts receivable (net) 2,060 1,810
Inventory 880 830
Other current assets 570 429
Total current assets $4,260 $3,150
Total current liabilities $2,060 $1,610
Net credit sales = $8,258 million
Cost of goods sold = $5,328 million
Net operating cash = $1,251 million
Average receivables = $1,935 ($2,060 + $1,810)/2
Average inventory = $855 ($880 + $830)/2