Answer:
Yes, because Boat Builders, LLC failed to exercise a reasonable standard of care at their premises.
Explanation:
Remember, we are told, "Jake... invited them back to the Boat Builders premises," meaning they (Boat Bilders, LLC) had a duty of care responsibility toward all of his employees present.
Note we are told, "Mark made light of it but gave Jake a menacing look so Jake dropped it," this was a moment that shows Jake's negligence because as the owner of Boat Builders he had a duty of care to ensure no one is hurt without their own fault within their premises (which included their "parking lot").
Nash Company reported 2020 net income of $152,900. During 2020, accounts receivable increased by $17,160 and accounts payable increased by $9,582. Depreciation expense was $48,000. Prepare the cash flows from operating activities section of the statement of cash flows. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).) NASH COMPANY Cash Flow Statement choose the accounting period select an opening section name select an item $enter a dollar amount Adjustments to reconcile net income to select a subsection name select an item $enter a dollar amount select an item enter a dollar amount select an item enter a dollar amount enter a subtotal of the adjustments select a closing section name $enter a total amount for the section
Answer:
$112,478
Explanation:
Cash flows from operating activities
Net income $152,900
Adjustments to reconcile net income
Depreciation expense $48,000
Increase in accounts payable $9,582
Increase in accounts receivable $ (17,160) $40,422
Net cash provided by operating activities $112,478
Doug and Sue Click file a joint tax return and decide to itemize their deductions. The Clicks' income for the year consists of $89,000 in salary, $1,500 interest income, and $700 long-term capital loss. The Clicks' expenses for the year consist of $1,450 investment interest expense. Assuming that the Clicks' marginal tax rate is 35 percent, what is the amount of their investment interest expense deduction for the year
Answer:
$1,450
Explanation:
Interest Income = $1,500
Investment Interest expenses = $1,450
Allowed deduction limit investment interest is subject to investment income. So $1,450 is allowed as deduction
Farris Corporation, which has only one product, has provided the following data concerning its most recent month of operations: Selling price $ 78 Units in beginning inventory 0 Units produced 8,800 Units sold 8,700 Units in ending inventory 100 Variable costs per unit: Direct materials $ 18 Direct labor $ 10 Variable manufacturing overhead $ 4 Variable selling and administrative expense $ 5 Fixed costs: Fixed manufacturing overhead $255,200 Fixed selling and administrative expense $ 87,000 What is the unit product cost for the month under absorption costing
Answer:
$61
Explanation:
The computation of unit product cost for the month under absorption costing is shown below:-
Unit product cost = Direct material + Direct labor + Variable Manufacturing overhead + Fixed manufacturing cost
= $18 + $10 + $4 + ($255,200 ÷ 8,800)
= $61
Therefore for computing the unit product cost for the month under absorption costing we simply applied the above formula.
[Same investments as the prior question] Suppose two local start-ups are raising funding by issuing shares of equity at $10,000 per share. One start-up is a whiskey distillery; the other is a beer brewery. You estimate the expected returns on your investment to be 50% over five years in both cases. You also believe that the likelihood of being paid out $20,000 per share is greater with the distillery than with the brewery. Suppose now that you hold a portfolio of many other risky assets, and that this would be your N 1 investment. Which investment do you prefer to make, the distillery or the brewery
Answer:
you should purchase the brewery's stock
Explanation:
First of all, as investors we should always try to maximize our returns while avoiding risks. It is really hard to balance both, but we must compare stocks to see which may represent a higher gain while posing the lesser or same risk.
Initial investment in each = $10,000 (equal for both)expected returns over 5 years = $5,000 (equal for both)but there is a higher possibility of the distillery's stock being more valuable, and that makes a difference.Both stocks seem equally risky, but they are not. When you calculate expected returns, you multiply the possible returns by their probability. I'm not sure how they calculated the expected returns of the above stocks, but the following can help you understand my point:
stock B return probability expected return
great 100% 25% 25%
normal 50% 50% 25%
bad 0% 25% 0%
total 100% 50%
stock D return probability expected return
great 100% 30% 30%
normal 50% 40% 20%
bad 0% 30% 0%
total 100% 50%
Both stocks have the same expected return, but stock B is less risky because the chance of being a bad investment is lower.
A new manufacturing machine is expected to cost $278,000, have an eight-year life, and a $30,000 salvage value. The machine will yield an annual incremental after-tax income of $35,000 after deducting the straight-line depreciation. Compute the accounting rate of return for the investment.
Answer:
22.7 %
Explanation:
Accounting rate of return = Average Profits / Average Investments × 100
Where,
Average Profit = Sum of Profits ÷ Number of Years
= $35,000
and
Average Investment = (Initial Investment + Salvage Value) ÷ 2
= ($278,000 + $30,000) ÷ 2
= $154,000
Therefore,
Accounting rate of return = $35,000 ÷ $154,000
= 22.7 %
Suppose the banking system has $40 billion in reserves. Also assume that there are no cash leakages or excess reserves. If the central bank lowers the required reserve ratio from 20 percent to 16 percent, the money supply will
Answer:
Money supply increases by $1.6 billion
Explanation:
The reserve ratio is defined as the amount of a bank's reserves that the central bank of a country expects banks to keep as cash and not lend out.
Reserve ratio is also called cash reserve ratio.
This requirement is put in place in case customers decide to make mass withdrawals.
Central banks tend to control cash supply by increasing or reducing the reserve ratio.
When money to be supplied as loans is to be increased, the reserve ratio reduces so that banks can use more of their reserves for lending rather than for cash withdrawals.
In this instance reserve ratio reduced from 20% to 16%.
That is a 4% reduction
This means 4% of the reserves is freed up for lending or money supply to the public
Extra money supply = 0.04 * 40 billion = $1.6 billion
Money supply increases by $1.6 billion
you can acquire an existing business for $2 million. You are uncertain about future demand. There is a 40% chance of high demand, in which case the present value of the business will be $3 million. There is a 25% chance of moderate demand, and the associated present value is $1.5 million. Finally, there is a 35% chance of low demand, in which case the present value is $1 million. Draw a decision tree for this problem. What is the expected net present value of the business
Answer:
Expected net present value of the project = $1,925,000
Explanation:
The cost of acquiring business = $2,000,000
Expected net present value of the project = High demand NPV*High demand percent + Moderate demand NPV*Moderate demand percent + Low demand NPV*Low demand percent
Expected net present value of the project = $3,000,000 *40% + $1,500,000*25% + $1,000,000*35%
Expected net present value of the project = $1,200,000 + $375,000 + $350,000
Expected net present value of the project = $1,925,000
Conclusion: The cost of acquiring business is more than expected net present value, it is advisable not to invest in the project.
You will invest $25,000 in an ice cream shop your sister is starting. You expect to triple your investment in six years. What is the rate of return that you have in mind? (Rounded to the nearest percent.)
Answer:
r = 20.09%
Explanation:
we can use the future value formula to calculate the expected rate of return:
future value = present value x (1 + r)ⁿ
future value = $25,000 x 3 = $75,000present value = $25,000n = 6$75,000 = $25,000 x (1 + r)⁶
(1 + r)⁶ = $75,000 / $25,000 = 3
⁶√(1 + r)⁶ = ⁶√3
1 + r = 1.2009
r = 0.2009 = 20.09%
Wyle Co. has $3.9 million of debt, $1 million of preferred stock, and $2.1 million of common equity. What would be its weight on preferred stock
Answer:
Weight of Preferred stock = 0.1428571429 or 14.28571429% rounded off to 14.29%
Explanation:
The capital structure of a business is made up of at least one or at most all of the following components namely Debt, Preferred Stock and Common Equity. The ratio in which each of these components form the capital structure might differ from business to business. The weightage of each component in the capital structure can be calculated by dividing the market value of each component by the sum of the market value of all the components.
Weight of a component = Market Value of component / Sum of market value of all components
Weight of Preferred stock = 1,000,000 / (3,900,000 + 1,000,000 + 2,100,000)
Weight of Preferred stock = 0.1428571429 or 14.28571429% rounded off to 14.29%
Mr. C made the following gifts: $12,000 to a university to pay tuition costs for his niece. An undeveloped tract of land to his sister that had an adjusted basis to Mr. C of $4,000 and a fair market value of $25,000. Various shares of stock to his wife that had an adjusted basis to Mr. C of $15,000 and a fair market value of $40,000. Mr. C did not consent to gift-splitting. What is the total amount of taxable gifts
Answer:
$10,000
Explanation:
Gifts are only taxed when their fair market value is higher than $15,000. Any gifts made to your spouse are not taxable. Gift taxes are calculated on a per person base, as long as they do not exceed the lifetime exemption (which is $11.58 million).
The tuition costs of her niece are not taxable since they are less than $12,000. The stocks given to his wife are not taxable either. The only taxable gift is the land given to his sister which had a FMV of $25,000. The taxable amount = $25,000 - $15,000 = $10,000
4. Give two reasons why GDP is often not seen as the best measure of living standards.
Answer:
Different factors account to it.
Explanation:
Because many factors that contribute to people's happiness are not bought and sold, GDP is a limited tool for measuring standard of living. To understand it's limitations better, let's take a look at several factors that are not accounted for in GDP.
GDP does not account for leisure time. The US GDP per capita is larger than the GDP per capita of Germany, but does this prove that the standard of living in the United States is higher? Not necessarily since it is also true that the average US worker works several hundred hours more per year more than the average German worker. The calculation of GDP does not take German workers extra weeks of vacation into account.
GDP includes what is spent on environmental protection, healthcare, and education, but it does not include actual levels of environmental cleanliness, health, and learning. GDP includes the cost of buying pollution-control equipment, but it does not address whether the air and water are actually cleaner or dirtier. GDP includes spending on medical care, but it does not address whether life expectancy or infant mortality have risen or fallen. Similarly, GDP counts spending on education, but it does not address directly how much of the population can read, write, or do basic mathematics.
On October 1, 2020, Jackson Chemical was identified as a potentially responsible party by the Environmental Protection Agency. Jackson's management along with its counsel have concluded that it is probable that Jackson will be responsible for damages, and a reasonable estimate of these damages is $5,000,000. Jackson's insurance policy of $9,000,000 has a deductible clause of $500,000. How should Jackson Chemical report this information in its financial statements at December 31, 2020
Answer:
Jackson Chemical should report the $5,000,000 loss because we don't know if the insurance will actually pay out the policy.
Explanation:
Jackson chemical has to report $500,000 loss associated with the deductible would be accrued as liability in the company's financial statements at Dec 31, 2020 since it is probably that Jackson will be responsible for the damages.
$500,000 is the amount of the insurance policy's deductible Jackson will have to pay to receive the policy's benefits, which will cover the reasonably estimated damages.
Exercise 17-5 Assigning costs using ABC LO P3 Xie Company identified the following activities, costs, and activity drivers for this year. The company manufactures two types of go-karts: Deluxe and Basic. Activity Expected Costs Expected Activity Handling materials $ 625,000 100,000 parts Inspecting product 900,000 1,500 batches Processing purchase orders 105,000 700 orders Paying suppliers 175,000 500 invoices Insuring the factory 300,000 40,000 square feet Designing packaging 75,000 2 models Assume that the following information is available for the company’s two products for the first quarter of this year. Deluxe Model Basic Model Production volume 10,000 units 30,000 units Parts required 20,000 parts 30,000 parts Batches made 250 batches 100 batches Purchase orders 50 orders 20 orders Invoices 50 invoices 10 invoices Space occupied 10,000 sq. ft. 7,000 sq. ft Models 1 model 1 model Required: Compute activity rates for each activity and assign overhead costs to each product model using activity-based costing (ABC). What is the overhead cost per unit of each model? (Round activity rate and average OH cost per unit answers to 2 decimal places.)
Answer:
Instructions are below.
Explanation:
First, we need to calculate the activity rate for each activity:
Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base
Handling materials= 625,000/100,000= $6.25 per part
Inspecting product= 900,000/1,500= $600 per batch
Processing= 105,000/700= $150 per order
Paying suppliers= 175,000/500=$350 per invoice
Insuring the factory= 300,000/40,000= $7.5 per square feet
Designing packaging= 75,000/2= $37,500 per model
Now, we can allocate overhead to each model:
Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base
Deluxe:
Handling materials= 6.25*20,000= 125,000
Inspecting product= 600*250= 150,000
Processing= 150*50= 7,500
Paying suppliers= 350*50= 17,500
Insuring the factory= 7.5*10,000= 75,000
Designing packaging= 37,500*1= 37,500
Total allocated overhead= $412,500
Basic:
Handling materials= 6.25*30,000= 187,500
Inspecting product= 600*100= 160,000
Processing= 150*20= 3,000
Paying suppliers= 350*10= 3,500
Insuring the factory= 7.5*7,000= 52,500
Designing packaging= 37,500*1= 37,500
Total allocated overhead= $444,000
Finally, the unitary overhead:
Deluxe= 412,500/10,000= $41.25
Basic= 444,000/30,000= $14.8
Forrester Company is considering buying new equipment that would increase monthly fixed costs from $425,000 to $445,500 and would decrease the current variable costs of $60 by $15 per unit. The selling price of $100 is not expected to change. Forrester's current break-even sales are $1,140,000 and current break-even units are 11,400. If Forrester purchases this new equipment, the revised break-even point in dollars would be:
Answer:
Break-even point (dollars)= $810,000
Explanation:
Giving the following information:
Fixed costs= $445,500
Unitary variable cost= $45
Selling price= $100
To calculate the break-even point in dollars, we need to use the following formula:
Break-even point (dollars)= fixed costs/ contribution margin ratio
Break-even point (dollars)= 445,500 / [(100 - 45) / 100]
Break-even point (dollars)= $810,000
Cycle Time and Velocity In the first quarter of operations, a manufacturing cell produced 85,000 stereo speakers, using 20,000 production hours. In the second quarter, the cycle time was 10 minutes per unit with the same number of production hours as were used in the first quarter. Required: 1. Compute the velocity (per hour) for the first quarter. If required, round your answer to two decimal places. fill in the blank 1 units per hour 2. Compute the cycle time for the first quarter (minutes per unit produced). If required, round your answer to two decimal places. fill in the blank 2 minutes per unit 3. How many units were produced in the second quarter
Answer:
1. Velocity per hour= 4.35 units per hour
2. Cycle time=0.24
3. Units produced= 120,000 units
Explanation:
1.Computation for the velocity (per hour) for the first quarter.
Velocity per hour=85,000 units / 20,000 hour
Velocity per hour= 4.35 units per hour
2.Compution for the cycle time for the Frst quarter
Cycle time =20,000 hour/85,000 units
Cycle time=0.24
3. Calculation for How many units were produced in the second quarter
Units produced =60 minutes / 10 minutes per units * 20,000 Hours
Units produced= 120,000 units
Cutting flights and declaring bankruptcy are long-run decisions. What impact would you predict these actions would have on the airlines remaining in business?
Answer:
Follows are the solution to this question:
Explanation:
The declaration of bankruptcy as well as flight cutting reduces the amount for flights and also the flight sin operation leading to both a supply reduction. While the business continued, its other airlines will have an increased engagement and thus higher prices and will be seeing recovery for both the airline industry over an amount of time.
On April 1, 2020, the City of Southern Ponds issued $5,000,000 in 4% general obligation, tax supported bonds at 101 for the purpose of constructing a new police station. The premium was transferred to a debt service fund. A total of $4,990,000 was used to construct the police station, which was completed before December 31, 2020, the end of the fiscal year. The remaining funds were transferred to the debt service fund. The bonds were dated April 1, 2020, and paid interest on October 1 and April 1. The first of 20 equal annual principal payments of $250,000 is due April 1, 2021. In addition to reporting Bonds Payable and (unamortized) Bond Premium in the government-wide Statement of Net Position, how would the bond sale be reported
Answer:
$100,000
$350,000
Explanation:
The bond sale be reported as debt service expenditures for 2020 and 2021 can be calculated as follows
The Amount would be reported as debt service expenditures for 2020
= $5,000,000 x 4% x 1/2 year
= $100,000
The amount would be reported as debt service expenditures for 2021
= $5,000,000 x 4% + $250,000
= $350,000
The difference between total factory overhead cost incurred during a period and the total standard factory overhead cost assigned to production of the period is the:______________.
A) Flexible-budget variance.
B) Production-volume variance.
C) Total factory overhead variance.
D) Overhead efficiency variance.
E) Total overhead spending variance.
Answer: C. Total factory overhead variance
Explanation:
The difference between total factory overhead cost incurred during a period and the total standard factory overhead cost assigned to production of the period is the total factory overhead variance.
Flexible budget variance is the difference that occurs between the results that are gotten by the flexible budget model and the actual results gotten.
Production volume variance is the difference that occurs between the budgeted production volume for a particular company and the actual volume of goods produced.
The correct option is C.
Your grandpa doesn't trust "young 'uns" so you are set to inherit a $1,000,000 trust fund on your 50th birthday. Your Grandpa also doesn't like banks so he has buried the cash somewhere on his 40-acre farm in a location that will be revealed to you by his lawyer since Grandpa will not be around when you turn 50. If you could possibly get your hands on it now (when you are 20), you could put it in a bank at 6% annual interest. If you were able to dig up the money now, how much would you have when you turn 50?
Answer:
FV= $5,743,491.17
Explanation:
Giving the following information:
Present value (PV)= $1,000,000
Number of periods (n)= 30 years
Annual interest= 6% = 0.06
To calculate the future value (FV), we need to use the following formula:
FV= PV*(1+i)^n
FV= 1,000,000*(1.06^30)
FV= $5,743,491.17
Under the allowance method for uncollectible accounts, the journal entry to record the estimate of uncollectible accounts would include a credit to
Answer and Explanation:
The journal entry to record the estimation of the uncollectible accounts is shown below:
Bad debt expense XXXX
To Allowance of doubtful debts XXXX
(Being the estimation of the uncollectible account is recorded)
Here the bad debt expense is debited as it increases the expenses account and credited the allowance as it decreased the assets
Hence, the same is to be considered
Would you rather own your own business or become a franchise
Answer:
own a business
Explanation:
I'm able to create my own brand and free to do what I want
Answer:
{: Own My Own Business :}
Explanation:
I would rather own my own business so that I could get lots of money yet give other people money ^w^ It would also be a restaurant. Most likely so I could eat da food as in.. 'taste' da food. :}
ear Net Income Profitable Capital Expenditure 1 $ 14 million $ 8 million 2 18 million 11 million 3 9 million 6 million 4 20 million 8 million 5 23 million 9 million The Hastings Corporation has 2 million shares outstanding. (The following questions are separate from each other). a. If the marginal principle of retained earnings is applied, how much in total cash dividends will be paid over the five years? (Enter your answer in millions.)
Answer:
$42 Million
Explanation:
The computation of the total cash dividend is shown below:-
Year Net Income Profitable capital Expenditure Dividends
1 $14 Million $8 Million $6 Million
2 $18 Million $11 Million $7 Million
3 $9 Million $6 Million $3 Million
4 $20 Million $8 Million $12 Million
5 $23 Million $9 Million $14 Million
Total cash dividends $42 Million
A bank offers 8.00% on savings accounts. What is the effective annual rate if interest is compounded semi-annually?Percentage Round to: 4 decimal places (Example: 9.2434%, % sign required. Will accept decimal format rounded to 6 decimal places (ex: 0.092434))
Answer:
Effective Annual Rate = 8.1600%
Explanation:
The effective annual rate the interest rate that is adjusted for compounding over a given period of time. It is given by the formula:
[tex]r = (1+\frac{i}{n})^n -1\\where:\\r = effective\ annual\ rate\\i = nominal\ interest\ rate\ = 8.00\% = 0.08 \\n = number\ of\ compounding\ periods\ per\ year\ = 2\ (semi-annually)[/tex]
[tex]r = (1+\frac{0.08}{2})^2 -1\\r = (1\ +\ 0.04)^2 - 1\\r = (1.04)^2 - 1\\r = 1.0816 - 1\\r = 0.0816\\r = 8.1600 \%[/tex]
The expected return on the market portfolio is 12%, and the relevant risk-free rate is 4.2%. What is the equity premium?
Answer:
7.8%
Explanation:
The expected return on the market portfolio is 12 percent
The risk free rate is 4.2 percent
Therefore the equity premium can be calculated as follow
= expected return - risk free rate
= 12% - 4.2%
= 7.8%
Hence the equity premium is 7.8%
A decreasing-cost industry is one in which: a. contraction of the industry will decrease unit costs. b. input prices fall or technology improves as the industry expands. c. the long-run supply curve is perfectly elastic. d. the long-run supply curve is upsloping.
Answer:
B
Explanation:
When we talk of a decreasing cost industry, we refer to an industry in which the expansion of the industry will lead to a decrease in the unit production cost.
So with respect to the question at hand , the correct answer is that the input prices will fall as industry expands
The case of a a technological improvement is expected to drive a decrease in the input prices for production in the expanding industry
Dr. Bob Jackson owns a parcel of land that a local farmer has offered to rent from Dr. Bob for the next 10 years. The farmer has offered to pay $20,000 today or an annuity of $3,200 at the end of each of the next 10 years. Which pay-ment method should Dr. Jackson accept if his required rate of return is 10 percent
Answer:
Dr. Jackson should accept the $20,000 paid today
Explanation:
you must analyse the present value of both payment options:
the present value of the $20,000 paid today is exactly $20,000the present value of the annuity = $3,200 x 6.1446 (PV annuity factor, 10%, 10 periods) = $19,662.72Since the present value of the immediate cash payment is higher than the annuity payment, Bob should choose that offer.
Yoshi Co.'s 12/31/2020 inventory on a FIFO basis was $980,000. The following information is available: Estimated selling price is $1,020,000; Estimated cost of disposal is $40,000; Normal profit margin is $120,000; and Current replacement cost is $900,000. At 12/31/2020, assuming Yoshi uses the loss method, what amount of loss should Yoshi record from applying LCM
Answer:
Yoshi Co.
The amount of loss that Yoshi Co. should record from applying LCM (the lower of Cost or Market price) is:
$40,000
Explanation:
a) Data and Calculations:
FIFO inventory on 12/31/2020 = $980,000
Current replacement cost = $900,000
Net realizable value = $980,000 ($1,020,000 - $40,000)
Normal profit margin = $120,000
Loss to be recognized based on current replacement cost = FIFO purchase cost minus Current replacement cost
= $80,000 ($980,000 - $900,000)
b) Under the US GAAP (generally accepted accounting principles) of prudence and conservatism, the loss of $80,000 must be recognized in the current period, since the inventory will be booked at $900,000, its current replacement cost, which is lower than the FIFO purchase cost of $980,000.
Preston Corp. is estimating its WACC. Its target capital structure is 20 percent debt, 20 percent preferred stock, and 60 percent common equity. Its bonds have a 12 percent coupon, paid semiannually, a current maturity of 20 years, and sells for $1,100. The firm could sell, at par, $100 preferred stock which pays a 5.52 percent annual dividend, but flotation costs of 5 percent would be incurred. Preston's beta is 1.2, the risk-free rate is 3 percent, and the market risk premium is 5 percent. The firm's marginal tax rate is 40 percent. What is Preston's WACC
Answer:
Follows are the solution to this question:
Explanation:
[tex]\text{Equity expense = free risk rate+beta} \times \text{market risk premium}[/tex]
[tex]=3 \% + 1.2 \times 5 \% \\\\= 0.03 + 1.2 \times 0.05 \\\\= 0.03 +0.06 \\\\= 0.09\\\\=9 \%[/tex]
[tex]\text{Preferred inventory cost} = \frac{\text{annual dividend}}{( price - floation \ rate)}[/tex]
[tex]= \frac{(100 \times 5.46 \%)}{(100-100 \times 5 \%)}\\\\=5.75 \%[/tex]
[tex]\text{Excel feature = RATE(nper, PMT, PV, FV)}[/tex]
[tex]=(RATE( \frac{20 \times 2,1000 \times 12 \%}{2,-1100,1000})) \times 2 \\\\=10.77 \%[/tex]
[tex]\text{Debt expense after tax}= 10.77 \% \times (1-40 \%)[/tex]
WACC from Preston = Capital weight [tex]\times[/tex] Capital equity costs+cost of common stock [tex]\times[/tex] cost of common shares [tex]\times[/tex] debt cost [tex]\times[/tex] (1-tax rate)
[tex]=60 \% \times 9 \%+20 \% \times 5.75 \%+20 \% \times 6.46 \% \\\\=7.84 \%[/tex]
Division A makes a part that it sells to customers outside of the company. Data concerning this part appear below: Selling price to outside customers $ 40 Variable cost per unit $ 30 Total fixed costs $ 10,000 Capacity in units 20,000 Division B of the same company would like to use the part manufactured by Division A in one of its products. Division B currently purchases a similar part made by an outside company for $38 per unit and would substitute the part made by Division A. Division B requires 5,000 units of the part each period. Division A has ample capacity to produce the units for Division B without any increase in fixed costs and without cutting into sales to outside customers. If Division A sells to Division B rather than to outside customers, the variable cost be unit would be $1 lower. What is the lowest acceptable transfer price Division A should accept
Answer:
Lower selling price= $29
Explanation:
Giving the following information:
Selling price to outside customers $40
Variable cost per unit $ 30
Total fixed costs $10,000
Capacity in units 20,000
The variable cost per unit would be $1 lower.
Because there is unused capacity, and it won't affect other sales. We will not take into account the fixed costs.
The lower selling price is the one that equals the unitary variable cost.
Unitary variable cost= 30 - 1= $29
Lower selling price= $29
On January 1, 2020, Echo Company issued $550,000, 16 year, 9%, annual, callable bonds for $475,000. On December 31, 2025, Echo Company redeemed (called) the bonds at 102. REQUIRED: 1. Prepare the Journal Entry to record the Issuance of the Bond 2. Determine the amount of the Discount/Premium that is still not amortized (using the Straight-Line Method) 3. Prepare the Journal Entry to record the Retirement (Redemption) of the Bond.
Answer:
1. Prepare the Journal Entry to record the Issuance of the Bond
January 1, 2020, bonds issued at a discount
Dr Cash 475,000
Dr Discount on bonds payable 75,000
Cr Bonds payable 550,000
2. Determine the amount of the Discount/Premium that is still not amortized (using the Straight-Line Method)
total bond life = 16 years, 5 years have passed
amortization of bond discount per coupon payment = $75,000 / 16 = $4,687.50
so $51,562.50 have not been amortized yet
3. Prepare the Journal Entry to record the Retirement (Redemption) of the Bond.
Before being able to redeem the bonds, the remaining discount must be amortized:
December 31, 2025, amortization of bond discount
Dr Interest expense 51,562.50
Cr Discount on bonds payable 51,562.50
the journal entry to record the redemption of the bonds
December 31, 2025, bonds redeemed at a loss
Dr Bonds payable 550,000
Dr Loss on retirement of debt 11,000
Cr Cash 561,000