Answer and Explanation:
1. The computation of warranty expenses is shown below:-
Warranty expense in 2018 = Warranty for a customer × Rate of sales
= $13,000 × 6%
= $13,000 × 0.06
= $780
2. The computation of estimated warranty liability is shown below:-
As we have calculated in part 1 so it is same that is
Estimated warranty liability in 2018 = $780
3. The computation of Warranty expenses in 2019 is shown below:-
In 2019 no warranty expense is there so the correct answer is $0
4. The computation of estimated warranty liability is shown below:-
Estimated warranty liability = Warranty expenses in 2018 - Repairs cost
= $780 - $121
= $659
5. The Journal entries is shown below:
a. Cash Dr, $13,000
To Sales $13,000
(Being cash is recorded)
b. Cost of goods sold Dr, $6,500
To Merchandise inventory $6,500
(Being cost of goods sold is recorded)
c. Warranty expense $650
To Estimated warranty liability $650
(Being warranty expenses is recorded)
Estimated warranty liability Dr, $121
To Repair parts inventory $121
(Being warranty liability is recorded)
On January 2, 2020, Bridgeport Company borrowed $174,000 from Lyon Country Bank. The terms of the loan agreement specified 4 equal annual payments at 4% annual interest. Compute the amount of each of these payments, assuming they begin on December 31, 2020.
Answer:
annual payment = $50,460
Explanation:
In order to solve this, we will use the formula for calculating simple interest on an invested amount over a period of time.
Simple interest = Principal × Rate × Time
Where:
Principal = $174,000
Rate = 4% = 4/100 = 0.04
Time = 4 years (4 annual payments)
∴ Simple interest = 174,000 × 0,04 × 4 = $27,840
Total amount to be paid = principal + interest
= 174,000 + 27,840 = $201,840
since 4 equal annual payments were made, the amount to be repaid is divided into 4. This is done as follows:
annual payments = 201,840 ÷ 4 = $50,460
Rodgers Inc. is imports paper from Shanghai China. In a typical transaction Rodgers receives a delivery of paper from the Chinese Company and pays the company in Yuan. In all transactions, the amounts and payments are set today, but all deliveries, payments, and revenues come 90 days later. How can Rodgers hedge its foreign currency risk
Answer:
Rodgers can hedge its foreign risk by using a Contract to buy Yuan in the futures market today at an agreed upon price in 90 days.
Explanation:
Solution
Since Rodgers receives a delivery of paper from the Chinese Company and pays the company in Yuan, so he has to hedge his exchange rate risk by buying or purchasing Yuan future contract for 90 days.
So, Rodgers Incorporation should make a contract to buy Yuan in the future market today at an agreed price in 90 days.
Felipe is an illegal immigrant seeking work in the U.S. He is hired by a small factory doing manual labor. When it is discovered that Felipe is an illegal immigrant:
a. Felipe can be deported, and the employer can be punished.
b. Felipe cannot be deported, and the employer will not be punished.
c. Felipe can be deported, and the employer will not be punished.
d. Felipe can be deported, and the employer can be punished.
At the beginning of its current fiscal year, Willie Corp.’s balance sheet showed assets of $13,400 and liabilities of $5,200. During the year, liabilities decreased by $1,400. Net income for the year was $2,850, and net assets at the end of the year were $8,950. There were no changes in paid-in capital during the year. Required: Calculate the dividends, if any, declared during the year.
Answer:
Willie Corp.
Calculation of dividends during the year:
Dividends = $5,900 ($14,850 - $8,950)
The difference between the accounting equation of Assets = Liabilities + Equity
Explanation:
Past Fiscal Year:
Assets = $13,400
Liabilities = $5,200
Equity = $8,200 ($13,400 - 5,200)
Current Fiscal Year:
Assets = $8,950
Liabilities = $3,800 ($5,200 - 1,400)
Equity = $8,200
Net Income = $2,850
Total Liabilities + Equity + Net Income = $14,850
Dividends paid = $5,900 ($14,850 - $8,950)
The solution is in the accounting equation, which states that Assets are equal to the Liabilities plus the Equity. Any difference must therefore be an increase in equity (Retained Earnings) or a decrease (Net Loss or Dividends). What reduces equity is the dividends paid out to stockholders or the loss incurred during the period. Since there was a net income of $2,850, there was no loss, therefore, equity reduces as a result of dividends.
Ayayai Inc. presented the following data. Net income $2,680,000 Preferred stock: 48,000 shares outstanding, $100 par, 8% cumulative, not convertible 4,800,000 Common stock: Shares outstanding 1/1 729,600 Issued for cash, 5/1 273,600 Acquired treasury stock for cash, 8/1 160,800 2-for-1 stock split, 10/1
Compute earnings per share. (Round answer to 2 decimal places, e.g. $2.55.)
Answer:
$1.35 per share
Explanation:
Note: See the attached excel file for the calculation of the weighted shares outstanding.
The earnings per share can be computed as follows:
Weighted shares outstanding = 1,702,000 shares
Preferred stock dividend = 48,000 * $100 * 8% = $384,000
Net income = $2,680,000
Net income after preferred stock dividend = $2,680,000 - $384,000 = $2,296,000
Earnings per share = Net income after preferred stock dividend / Weighted shares outstanding = $2,296,000 / 1,702,000 = $1.35 per share
Edison Leasing leased high-tech electronic equipment to Manufacturers Southern on January 1, 2021. Edison purchased the equipment from International Machines at a cost of $113,515. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1).
Related Information:Lease term 2 years (8 quarterly periods)Quarterly rental payments $15,700 at the beginning of each periodEconomic life of asset 2 yearsFair value of asset $113,515Implicit interest rate 12%
Required:Prepare a lease amortization schedule and appropriate entries for Edison Leasing from the beginning of the lease through January 1, 2022. Edison’s fiscal year ends December 31.
Answer:
Schedule:
[tex]\left[\begin{array}{cccccc}$Period&$Beginning&$Installment&$Interest&$Amortization&$Ending\\1&113515&15700&0&15700&97815\\2&97815&15700&2934&12766&85049\\3&85049&15700&2551&13149&71900\\4&71900&15700&2157&13543&58357\\5&58357&15700&1752&13948&44409\\6&44409&15700&1333&14367&30042\\7&30042&15700&902&14798&15244\\8&15244&15700&456&15244&0\\\end{array}\right][/tex]
Journal entries:
equipment 113,515 debit
lease liablity 97,815 credit
cash 15,700 credit
--to record lease agrement and first payment.
interest expense 2,934 debit
lease liability 2,934 credit
--to record interest for the year 2021--
lease liablity 15,700 debit
cash 15,700 credit
--to record Jan 1st,2022 Payment--
Explanation:
As the payment are at the beginning there is no interest in the first period.
We record the expense for the year at Dec 31th Increasing the liability. When paying we increase decrease the liability and cash.
On June 1, 2017, Bonita Industries was started with an initial investment in the company of $22,220 cash. Here are the assets, liabilities, and common stock of the company at June 30, 2017, and the revenues and expenses for the month of June, its first month of operations: Cash $ 4,850 Notes payable $12,500 Accounts receivable 4,360 Accounts payable 860 Service revenue 7,750 Supplies expense 1,030 Supplies 2,370 Maintenance and repairs expense 630 Advertising expense 400 Utilities expense 270 Equipment 26,250 Salaries and wages expense 1,650 Common stock 22,220 In June, the company issued no additional stock but paid dividends of $1,520.Prepare an income statement for the month of June.
Answer and Explanation:
The preparation of the income statement is presented below:
Bonita Industries
Income Statement
For the month of June 2017
Revenues
Service Revenue $7,750 (A)
Less: Expenses
Salaries and wages $1,650
Advertising expenses $400
Supplies expense $1,030
Maintenance and repairs expense $630
Utilities expenses $270
Total Expenses $3,980 (B)
Net Income $3,770 (A - B)
We simply deduct all expenses from the revenue earned so that the net income could be determined.
A global brand is a brand marketed under the same name in multiple countries with similar and centrally coordinated marketing programs. However, adaptations of global brands are made:________.a. if required by government regulations in the host market and for no other reason.b. only in its initial introduction into a market and only until the brand is recognized.c. by domestic competitors causing brand confusion and loss of market share.d. only when necessary to better connect the brand to consumers in different markets.e. when there is a serious drop in market share.
Answer:
Option (D) is the correct answer to this question.
Explanation:
Global brand adaptations are made except when necessary to better communicate the brand to consumers from different markets because it has a particular market image. Global brands are brands that are widely recognized around the world.
Companies which intend to create global brands must do the following:
Classify the perceived attractiveness of your product in each sector. Carry out studies of attitude and usage in each region you are planning to enter.Other options are incorrect because they are not related to the given scenario.
is making a change to the layout of the logo, text, and numbers on their basketball uniforms. They have provided these updated specifications to their usual sports apparel supplier, and ordered uniforms for the 2020-2021 basketball team. This is an example of a
Baruch College is making a change to the layout of the logo, text, and numbers on their basketball uniforms. They have provided these updated specifications to their usual sports apparel supplier, and ordered uniforms for the 2020-2021 basketball team. This is an example of a
A.Generic buy
B.Modified rebuy
C.New buy
D.Straight rebuy
E.Customized buy
Answer: Modified rebuy
Explanation:
The modified rebuy is a situation in which the order is sent by the person or organization with some modifications in it.
The goods have been purchased from the same supplier previously but for the next order there are some modifications made on it.
Here, the modifications are text, logo, and the number of uniforms for basketball for the session 200-2021.
Hence, this is an example of modified rebuy.
bartleby Bramble Co. uses the gross method to record sales made on credit. On July 1, 2020, it made sales of 59,000 with terms 2/10 n/30. On July 9, 2020, Bramble received full payment for the July 1 sale. Prepare the required journal entries for Bramble Co.
Answer:
Dr cash $57,820.00
Dr sales discount $1180.00
Cr accounts receivable $59,000.00
Explanation:
Since payment was made during the discount period,hence the payment received would have been net of discount of 2%.
Discount=2%*$59,000=$1180
cash received=$59,000-$1,180=$ 57,820.00
The cash would be debited to cash account and the discount would also b debited to sales discount with the full amount being being credited to accounts receivable.
The concept of permanent current assets reflects the fact that some components of current assets do not shrink to zero even when a business is at its seasonal or cyclical low. Thus, permanent current assets represent a minimum level of current assets that must be financed.a) trueb) false
Answer:
The answer is True
Explanation:
Solution
The statement above from the question is TRUE because the concept of permanent current assets considers the fact that some components of current assets do not diminish to zero even when a business is at its seasonal or recurring low.
Thus, permanent current assets displays or shows a minimum level of current assets that must be financed.
Steven has a typed copy of a contract, which he would like to have Thomas sign. Thomas, who needs glasses to read typing, doesn't want to sign until he has read the document, but Steven convinces Thomas to sign it anyway, because it is a "standard" contract for this type of situation. Is the contract which Thomas signed binding upon him?
Answer:
Yes, because he was negligent in not ascertaining its contents
Explanation:
Based on the information provided regarding the scenario at hand it can be said that Yes, this contract is binding upon Thomas because he was negligent in not ascertaining its contents. Each individual is responsible for completely reading and fully understanding the contents of the contract before they sign. Once an individual signs the contract it means that they fully agree with all that is specified in the contract and are held liable. Thomas should have waited until he had his glasses and read the contract before signing, regardless of what Steven had to say.
Based on the following information, prepare the bank reconciliation for Cougar Corp. as of December 31. A. On December 31, Cougar Corp. general ledger showed a cash balance of $26,504. The company's bank statement showed an ending balance of $24,575. B. A deposit on December 31 for $2,500 was not recorded by the bank until January 1. C. A check for $550 received from one of Cougar's customers was noted as NSF by the bank. D. A review of the company's deposits shows that a deposit entered in the company's general ledger for $5400 was actually a deposit for $4500. E. The company's checking account shows interest of $21. F. Cougar's bank statement shows an EFT received from a customer for $1,700. G. The following information related to outstanding checks was prepared.
Answer and Explanation:
The Preparation of bank reconciliation for Cougar Corp. as of December 31 is shown below:-
Cougar Corp.
Bank reconciliation
For the year ended December 31
Particulars Amount
Bank balance Dec 31 $24,575
Add: Deposit in transit $2,500
Less:
Outstanding checks #302 ($180)
Outstanding checks #303 ($95)
Outstanding checks #304 ($25) ($300)
Bank balance adjusted $26,775
Cash balance on 31 Dec $26,504
Add: EFT from customer $1,700
Add: Interest income $21 $1,721
Less: Posting error
($5,400 - $4,500) $900
Less: NSF check $500 $1,400
Book balance adjusted $26,775
Hence, the bank balance and the book balance are matched
You purchase a bond with a coupon rate of 8.6 percent, a par value of $1,000, semiannual coupons, and a clean price of $860. If the next coupon payment is due in three months, what is the invoice price
Answer:
The answer is $881.5
Explanation:
Solution
Given that:
The accrued interest is refers to the payment (coupon) for the time with the fraction of the time that has exceed since the last coupon payment.
Since we have a semiannual coupon bond, the coupon payment for six months is 1/2 of the annual coupon payment.
Three months has exceeded since the last coupon payment.
So the accrued interest for the bond is given below:
Accrued Interest = $86/2 * 3/6
= $21.5
Thus
The price (dirty) = Clean Price + Accrued Interest
= $860 + $21.5
= $881.5
Therefore the invoice price is $881.5
11.Jones and company had a balance in their retained earnings account at the end of 2020 in the amount of 990,000. They have forecasted net income in 2021 in the amount of 350,000. They pay an estimated 40% of their net income in dividends. What will be the addition to retained earnings at the end of 2021. What will be the ending balance in retained earnings at the end of 2021
Answer:
$210,000 and $1,200,000
Explanation:
The computation is shown below:
Given that
Ending Balance in retained earnings = $990,000
Net income = $350,000
Dividend paid in 2021 is
= 40% of net income
= 40% of $350,000
= $140,000
So, the Addition to retained earning is
= Net income - dividends
= $350,000 - $140,000
= $210,000
Now the ending balance in retained earnings is
= Beginning balance in retained earnings + addition to retained earnings
= $990,000 + $210,000
= $1,200,000
Susan needs to communicate a denial of warranty work to a customer. Based on her conservations with the customer, Susan feels that the information will evoke a negative response. In this context, which of the following formats should Susan use to organize the information in his message?
a. Chronological order
b. Direct order
c. Critical order
d. Indirect order
e. Complex order
Answer:
d. Indirect order
Explanation:
Based on the information provided it can be said that Susan should organize the information as an indirect order. This refers to avoiding direct orders and phrasing everything in such a way that we make a request in a more polite way, using words such as want, would like and would love. This will lighten the tone of the conversation and prevent the client from evoking a negative response while still being able to convey the correct information.
During the period, Sanchez Company sold some excess equipment at a loss. The following information was collected from the company's accounting records:
From the Income Statement:
Depreciation expense $860
Loss on sale of equipment 2,800
From the Balance Sheet:
Beginning equipment 20,000
Ending equipment 10,200
Beginning accumulated depreciation 1,950
Ending accumulated depreciation 1,790
No new equipment was bought during the period.
1) For the equipment that was sold, determine its original cost, its accumulated depreciation, and the cash received from the sale.
2) Sanchez Company uses the indirect method for the Operating Activities section of the cash flow statement. What amount related to the sale would be added or subtracted in the computation of Net Cash Flows from Operating Activities?
3) What amount related to the sale would be added or subtracted in the computation of Net Cash Flows from Investing Activities?
Answer:
1) For the equipment that was sold, determine its original cost, its accumulated depreciation, and the cash received from the sale.
original cost = $9,800accumulated depreciation = $1,020cash received = $5,9802) Sanchez Company uses the indirect method for the Operating Activities section of the cash flow statement. What amount related to the sale would be added or subtracted in the computation of Net Cash Flows from Operating Activities?
the loss on sale of equipment ($2,800) should be added to the cash flows from operating activities.3) What amount related to the sale would be added or subtracted in the computation of Net Cash Flows from Investing Activities?
the cash received ($5,980) should be added to the cash flow from investing activitiesExplanation:
equipment cost = beginning equipment - ending equipment = $20,000 - $10,200 = $9,800
equipment's accumulated depreciation = beginning accumulated depreciation + depreciation expense - ending depreciation = $1,950 + $860 - $1,790 = $1,020
book value = $9,800 - $1,020 = $8,780
cash received = book value - loss = $8,780 - $2,800 = $5,980
Your parents are giving you $170 a month for 5 years while you are in college. At a 7 percent discount rate, what are these payments worth to you when you first start college
Answer:
PV= $8,586.15
Explanation:
Giving the following information:
Cash flow= $170
Number of months= 5*12= 60
Discount rate= 0.07/12= 0.00583
First, we need to calculate the future value, using the following formula:
FV= {A*[(1+i)^n-1]}/i
A= annual deposit
FV= {170*[(1.00583 ^60)-1]} / 0.00583
FV= $12,169.53
Now, the present value:
PV= FV/(1+i)^n
PV= 12,169.53/(1.00583^60)
PV= $8,586.15
Assume the assembly division of Baxter Bicycles wants to buy 5,800 trailers per year from the trailer division. If the trailer division can sell all of the trailers it manufactures to outside customers, what price should be used on transfers between Baxter Bicycles's divisions
Answer: $104
Explanation:
The Trailer division has the capacity to sell ALL of its inventory to outside customers for a price of $104.
They will therefore transfer the trailers to the Assembly line at the same price of $104 that they charge outside customers because anything less would be a loss on profit that could have been made from selling the trailers outside.
This loss on profit would affect the entire Baxter Bicycles and not just the Trailer Division so it is better to sell and transfer at the same price.
Fosters Manufacturing Co. warrants its products for one year. The estimated product warranty is 6% of sales. Assume that sales were $540,000 for January. On February 7, a customer received warranty repairs requiring $160 of parts and $75 of labor. Required: a. Journalize the adjusting entry required at January 31, the end of the first month of the current fiscal year, to record the accrued product warranty. Refer to the Chart of Accounts for exact wording of account titles. b. Journalize the entry to record the warranty work provided in February. Refer to the Chart of Accounts for exact wording of account titles.
Answer: The answer is given below
Explanation:
The journal is used to record transactions for a business or an organization.
It should be noted that the product warranty expense of $32,400 provided in the attached file was gotten as:
= 6% of $540,000
= 6/100 × $540,000
= 0.06 × $540,000
= $32,400
The journal entries for (a) and (b) has been prepared and attached.
Consider a risky portfolio. The end-of-year cash flow derived from the portfolio will be either $75,000 or $330,000 with equal probabilities of 0.5. The alternative risk-free investment in T-bills pays 4% per year.
A. If you require a risk premium of 7%, how much will you be willing to pay for the portfolio?
B. Suppose the portfolio can be purchased for the amount you found in (a). What will the expected rate of return on the portfolio be?
C. Now suppose you require a risk premium of 15%. What is the price you will be willing to pay now?
Answer:
A. $182,432.43
B. 11%
C. $165,983.607
Explanation:
A. The computation of value of portfolio is shown below:-
Value of portfolio = (Cash flow × equal probabilities) ÷ (1 + (Risk free rate + Risk premium))
= (($75,000 × 0.5) + ($330,000 × 0.5)) ÷ (1 + (4% + 7%))
= $202,500 ÷ 1.11
= $182,432.4324
or
= $182,432.43
B. The computation of expected rate of return on the portfolio is shown below:-
Rate of return is
= (Cash flow × equal probabilities) - (value of portfolio) ÷ (value of portfolio)
= ($202,500 - $182,432.43) ÷ $182,432.43
= $20,067.57 ÷ $182,432.43
= 0.11
or
= 11%
C. The computation of value of portfolio is shown below:-
Required rate of return = Risk free rate + Risk premium
= 7% + 15%
= 22%
Price = Expected cash flow ÷ (1 + Required rate of return)
= $202,500 ÷ (1 + 0.22)
= $202,500 ÷ 1.22
= $165,983.607
Condensed financial data of Bonita Company for 2020 and 2019 are presented below. BONITA COMPANY COMPARATIVE BALANCE SHEET AS OF DECEMBER 31, 2020 AND 2019 2020 2019 Cash $1,830 $1,180 Receivables 1,710 1,320 Inventory 1,590 1,920 Plant assets 1,890 1,710 Accumulated depreciation (1,220 ) (1,190 ) Long-term investments (held-to-maturity) 1,320 1,440 $7,120 $6,380 Accounts payable $1,190 $890 Accrued liabilities 210 260 Bonds payable 1,400 1,580 Common stock 1,940 1,660 Retained earnings 2,380 1,990 $7,120 $6,380 BONITA COMPANY INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2020 Sales revenue $6,720 Cost of goods sold 4,680 Gross margin 2,040 Selling and administrative expenses 920 Income from operations 1,120 Other revenues and gains Gain on sale of investments 80 Income before tax 1,200 Income tax expense 550 Net income 650 Cash dividends 260 Income retained in business $390 Additional information: During the year, $70 of common stock was issued in exchange for plant assets. No plant assets were sold in 2020. Prepare a statement of cash flows using the direct method.
Answer:
Statement of cash flows for the year ended December 31, 2020
Cash flow from Operating Activities
Income before tax 1,200
Adjustments for Non - Cash items :
Depreciation (1,220 - 1,190) 30
Gain on sale of investments (80)
Adjustments to Changes in Working Capital Items :
Increase in Receivables (390)
Decrease in Inventory 330
Increase in Accounts payable 300
Decrease in Accrued liabilities (50)
Cash generated from operations 1340
Income tax paid ( 550)
Net Cash from Financing Activities 790
Cash flow from Investing Activities
Purchase of Plant Assets (180 - 70) (110)
Proceeds from Sale of Investments(1,440 +80 - 1,320) 200
Net Cash from Investing Activities 90
Cash flow from Financing Activities
Repurchase of Bonds (1,580-1,400) (180)
Issue of Common Stock (1940 - 1660 - 70) 210
Net Cash from Financing Activities 30
Movement during the year 650
Cash and Cash Equivalents at Beginning of the year 1,180
Cash and Cash Equivalents at End of the year 1,830
Explanation:
The Direct method has been used : This must show adjustment to the Income before interest and tax.
The Statement of Cash flows is prepared under the following headings :
Cash flow from Operating ActivitiesCash flow from Financing ActivitiesCash flow from Investing ActivitiesReview the "Types of Distribution Channels" study material. Explain why the selection of distribution channels is essential to a successful marketing strategy. Provide an example of a well-known company's distribution channels and defend their choices. In replies to peers, agree or disagree with their assessment and justify your response.
The correct answer to this open question is the following.
Although the question does not provide a specific text, we can say that the selection of distribution channels is essential to a successful marketing strategy because that is how companies deliver their products to consumers. This is of key importance due to the fact that there are numerous competitors selling the same or similar products so the company has to be precise and effective in delivering the product to match the client's expectations.
One good example of a successful company would be Underarmour. This Maryland company sells its products through direct distribution, uses intermediaries and brokers, has open many outlets where the company sells direct to the consumer, and also sells products through e-commerce portals. You can find Underarmour apparel in big chain stores, fashion stores, the internet, and sports stores.
Fill in the blank that completes the statement. Alonzo’s Crooked Cake Shop has had workers attempting to unionize in order to be able to work fewer hours per week. Alonzo’s argues in court that because there is only one other cake shop in the region, a strike and other union activities would disrupt competition in the cake business. Alonzo’s is using __________ to prevent union activities.
Answer:
Antitrust law
Explanation:
Alonzo is using antitrust law by arguing in the court that there is only one other cake shop in the region and a strike or union activities would disrupt competition in the cake business.
In antitrust laws, These laws promote vigorous competition and protect consumers from anticompetitive mergers and business practices.
Which of the following is true about the leveraging effect? Under economic growth conditions, firms with relatively low financial leverage will have higher expected returns. Under economic growth conditions, firms with relatively more financial leverage will have higher expected returns.
Answer: Under economic growth conditions, firms with relatively more financial leverage will have higher expected returns.
Explanation:
Under economic growth conditions, firms and organizations with more financial muscle usually have higher expected returns.
This Growth, is as a result of the change in the company's earnings, revenue, GDP or some other sources over a period of time (usually a year) to the next. This growth are usually not affected by inflation.
Liability policies, such as personal liability, professional malpractice, or business liability insurance, do NOT protect the insured against a. a personal injury on the insured's property, such as the mail carrier who slips and falls on the owner's sidewalk. b. intentional harm caused by the insured. c. someone injured by the insured away from home or business. d. claims for property damaged by the insured.
Answer:
b. intentional harm caused by the insured.
Explanation:
Liability insurance is a means to provide the insured party with some protection against claims resulting from injuries and damage to people or property, covering both legal costs and any payouts for which the insured party would be responsible if found legally liable.
Note that there are two types of liability coverage: bodily injury and property damage. Most states in the US require liability coverages, subject to limits, which is the maximum amount the insurer will pay when the incident occurs. For example, a car accident can be expensive. This is why there is a limit of compensation which an insurer can offer.
You are evaluating an investment that requires $2,000 upfront, and pays $500 at the end of each of the first 2 years, and an additional lump-sum of $1000 at the end of year 2. What would happen to the IRR if the annual payment at the end of the first year go down from $500 to $300 and the annual payment at the end of second year stays at $500
Answer:
The IRR decreases
Explanation:
The internal rate of return is the discount rate that equates the after tax cash flows from an investment to the amount invested.
To determine what happens to the IRR when year 1 Cash flow changes, we have to calculate the IRR in both scenarios.
IRR can be calculated using a financial calculator
IRR when year 1 cash flow in $500
Cash flow in year 0 = $-2000
Cash flow in year 1 = $500
Cash flow in year 2 = $500 + $1000 = $1500
IRR = 0
IRR when year 1 cash flow in $500
Cash flow in year 0 = $-2000
Cash flow in year 1 = $300
Cash flow in year 2 = $1500
IRR = -5.57%
The IRR decreases and turns negative
To find the IRR using a financial calacutor:
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.
I hope my answer helps you
Depreciation associated with a project will: Answer A. cause incremental cash flows to increase B. only affect the fixed asset account as depreciation is a sunk cost C. have no effect on incremental cash flows D. cause incremental operating cash flows to decrease
Answer: A. cause incremental cash flows to increase
Explanation:
Incremental Cashflow (ICF) is the added cash that a company gets from embarking on a project which means that this Cashflow must be independent of expenses. If ICF is positive then the company will see it's Cashflow increase if they accept the project because it will contribute to their cash flow.
ICF is calculated from the Net Income of the project but seeing as Depreciation is a non-cash expense that is removed from the Income Statement. In calculating ICF it is added back as ICF deals with actual cash and Depreciation did not cost any actual cash.
More Depreciation therefore means an increase in Incremental Cash flow when it is being calculated from Net Income.
McCoy Brothers manufactures and sells two products, A and Z in the ratio of 5:2. Product A sells for $75; Z sells for $95. Variable costs for product A are $35; for Z $40. Fixed costs are $418,500. Compute the contribution margin per composite unit
Answer:
Weighted average contribution margin= $44.29
Explanation:
Giving the following information:
Sales proportion:
Product A= 5/7= 0.714
Product Z= 2/7= 0.286
Product A sells for $75; Z sells for $95.
Variable costs for product A are $35; for Z $40.
To determine the contribution margin per composite unit, we need to use the following formula:
Weighted average contribution margin= (weighted average selling price - weighted average unitary variable cost)
Weighted average contribution margin= (0.714*75 + 0.286*95) - (0.714*35 + 0.286*40)
Weighted average contribution margin= 80.72 - 36.43
Weighted average contribution margin= $44.29
The beginning and ending finished goods inventories of the Prize Ring manufacturing company were $84,000 and $79,750 respectively. If cost of goods sold equaled $71,400, what is the amount of cost of goods manufactured for this period
Answer:
$67,150
Explanation:
The computation of cost of goods manufactured for this period is shown below:-
Cost of goods sold = Beginning finished goods + Cost of goods manufactured - Ending finished goods
$71,400 = $84,000 + Cost of goods manufactured - $79,750
$71,400 = $4,250 + Cost of goods manufactured
Cost of goods manufactured = $71,400 - $4,250
= $67,150
Therefore for computing the cost of goods manufactured we simply applied the above formula.