Answer:
a-1. From a legal perspective, what is the maximum amount of dividends per share the firm could pay?
Dividends can only be paid from retained earnings because a corporation can distribute dividends only if it has made a profit.
Maximum amount of dividends per share = $811,000 / 300,000 common shares = $2.7033 per share
a-2. Is this realistic?
B. No
No corporation has a 100% dividend payout rate because it uses retained earnings to finance existing or new projects.
b. In terms of cash availability, what is the maximum amount of dividends per share the firm could pay?
$1.35 per share because the firm has $406,000 in cash and it has 300,000 outstanding shares.
c. Assume the firm earned an 20 percent return on stockholders’ equity last year. If the board wishes to pay out 40 percent of earnings in the form of dividends, how much will dividends per share be?
ROE = net income / stockholders' equity
20% = net income / $1,411,000
net income = $1,411,000 x 20% = $282,200
dividends = $282,200 x 40% = $112,880
dividends per share = $112,880 / 300,000 = $0.38 per share
A North Face retail store in Chicago sells 500 jackets each month. Each jacket costs the store $100 and the company has an annual holding cost of 25 percent. The fixed cost of a replenishment order (including transportation cost) is $100. The store currently places a replenishment order for Q.
1. What is the annual holding and ordering cost?
2. On average, how long does a jacket spend in inventory?
3. If the retail store wants to minimize ordering and holding cost, what order size do you recommend?
4. How much would the optimal order reduce holding and ordering cost relative to the current policy?
Answer:
(1) The annual holding cost is =$6250, The ordering costs is = 500 units
(2) The total cost is = $7450
(3)224 unit
(4) $1,864.30
Explanation:
Solution
Given that:
The annual demand = 520 units * 12
= 6,240 units
The cost per order = $100 per order
The Carrying Cost = 0.25% * $100
= 25 per unit per year
Thus
(1) The Ordering quantity = 500 units every month
The annual holding cost =0.5*quantity ordered*holding cost
The Annual Holding cost = 0.5*500*25
Annual Holding cost =$6250
(2) The ordering (Annual)cost = number of orders *cost per order
Annual ordering cost =(500*12/500)*100
Annual ordering cost =$1200
Total cost = 6250+1200=7450
(3)Thus
EOQ=(2*D*S/h)^0.5
EOQ=(2*6240*100/25^)0.5
EOQ=223.43
=224 unit
(4)The ordering cost =(6240/224)*100=2785.70
Holding cost=0.5*224*25
=2800
Total cost= 2785.70+2800
Total cost=5585.70
Total savings = 7450 - 5585.70
= $1,864.30
Gates Appliances has a return-on-assets (investment) ratio of 19 percent. a. If the debt-to-total-assets ratio is 20 percent, what is the return on equity
Answer:
23.8%
Explanation:
Gates appliances has a return-on-assets(investment) of 19%
The debt-to-total-assets ratio is 20%
Therefore, the return on equity can be calculated as follows
Return on equity= Return on assets(investment)/(1-debt/asset)
= 19/(1-20/100)
= 19/(1-0.2)
= 19/0.8
= 23.8%
Hence the return on equity is 23.8%
Peroni Corporation sold a parcel of land valued at $300,000. Its basis in the land was $250,000. For the land, Peroni received $75,000 in cash in the current year and a note providing Peroni with $225,000 in the subsequent year. What is Peroni's recognized gain in the current and subsequent year, respectively
Answer:
Peroni's recognized gain in the current and subsequent year is $12,502 and $37,507
Explanation:
In order to calculate Peroni's recognized gain in the current and subsequent year we would have to calculate first the Gross profit on sale with the following formula:
Gross profit on sale=(parcel of land sold-land basis)/parcel of land sold
Gross profit on sale=($300,000-$250,000)/$300,000
Gross profit on sale=16.67%
Hence, Peroni's recognized gain in the current and subsequent year would be as follows:
current year=amount received in cash*Gross profit on sale
current year=$75,000*16.67%
current year=$12,502
subsequent year=$225,000*16.67%
subsequent year=$37,507
Peroni's recognized gain in the current and subsequent year is $12,502 and $37,507
"Suppose a firm wants to take advantage of an upward-sloping yield curve. If the firm believes that interest rates will stay constant and it wants to use the current yield curve to bolster profits, which approach should the firm follow?"a. Conservative approach b. Aggressive approach c. Maturity matching approach
Answer: b. Aggressive approach
Explanation:
The Aggressive approach refers to using short term finance to finance temporary working capital and some of permanent working capital.
When facing an upward sloping yield curve which means that interest rates are expected to.rise in future, it is better to use the current rates to bolster profit. By engaging in an Aggressive approach, the company can borrow now to fund their operations as the Aggressive approach involves using short term financing to cater for working capital. This will keep interest costs at a minimum because they will.not be calculated based on the impending increase in interest rates but rather on current short term rates.
In the context of project management, a task duration is always the same as the amount of work (effort) it takes to finish the task. true or false?
Answer:
False
Explanation:
The statement that says that in the context of project management, a task duration is always the same as the amount of work (effort) it takes to finish the task is false because the effort is the time a person needs to finish a task while the duration is the period of time that a person has to finish it. For example, an employee has a task that takes forty hours of work to finish it but he has a month to do it. In this case, the effort is forty hours but the task duration is one month.
Given the following data for Glennon Company, compute (A) total manufacturing costs and (B) costs of goods manufactured:
A B
Direct materials used $270,000 Beginning work in process $40,000
Direct labor 200,000 Ending work in process 20,000
Manufacturing overhead 300,000 Beginning finished goods 50,000
Operating expenses 350,000 Ending finished goods 30,000
A) $750,000 $790,000
B) $770,000 $750,000
C) $790,000 $810,000
D) $770,000 $790,000
2) Carr Company is considering two capital investment proposals. Estimates regarding each project are provided below:
Project Soup Project Nuts
Initial investment $400,000 $600,000
Annual net income 30,000 46,000
Net annual cash inflow 110,000 146,000
Estimated useful life 5 years 6 years
Salvage value -0- -0-
The company requires a 10% rate of return on all new investments.
Present Value of an Annuity of 1
Periods 9% 10% 11% 12%
5 3.890 3.791 3.696 3.605
6 4.486 4.355 4.231 4.111
The annual rate of return for Project Soup is:
A) 55%.
B) 7.5%.
C) 27.5%.
D) 15.0%.
Answer:
1. Glennon Company
Total manufacturing costs and costs of goods sold:
C) $790,000 $810,000
2. Carr Company
Annual Rate of Return for Project Soup:
B) 7.5%.
Explanation:
1A) Total Manufacturing costs
Direct materials used $270,000
Beginning work in process 40,000
Direct labor 200,000
Ending work in process (20,000 )
Manufacturing overhead 300,000
Total manufacturing costs $790,000
1B) Costs of goods sold:
Beginning finished goods 50,000
Costs of goods manufactured 790,000
less Ending finished goods (30,000)
Cost of goods sold $810,000
2) Project Soup Project Nuts
Initial investment $400,000 $600,000
Annual net income 30,000 46,000
Net annual cash inflow 110,000 146,000
Annual Rate of Return = Annual net income/Initial Investment
= $30,000/$400,000 x 100 = 7.5%
Gullett Corporation had $32,000 of raw materials on hand on November 1. During the month, the Corporation purchased an additional $81,000 of raw materials. The journal entry to record the purchase of raw materials would include a:
Answer:
Dr Raw materials $81, 000
Cr Accounts payable $81,000
Explanation:
Preparation of the journal entry to record the purchase of raw materials for Gullett Corporation
Since we were told that the Corporation already had the amount of $32,000 of raw materials on hand in which they later purchased an additional amount of $81,000 of the raw materials this means we are going to record the Journal entry by Debiting Raw materials with the amount of $81, 000 which is the additional amount of the raw materials purchased and to Credit Accounts payable with the same amount of $81,000.
Dr Raw materials $81, 000
Cr Accounts payable $81,000
(To record purchase of raw materials)
Cainas Cookies purchased a commercial oven on 1/1/14 for a total cost of 35,000. Estimated useful life is 6 years, with a salvage value of 5,000 at the end of that time. Cainas estimates that the equipment will be used for 12,000 baking hours. For the first year of operations, Cainas had 2,500 backing hours. For the second year Cainas had 1,700 hours. Compute the depreciation for YEAR 2. Group of answer choices
Answer:
Units of production = $4250
Straight line depreciation expense = $5,000
Double declining method = $7.777
Explanation:
The depreciation method to he used wasn't stated, so I calculated the depreciation expense using 3 depreciation methods
Straight line depreciation expense = (Cost of asset - Salvage value) / useful life
(35,000 - 5,000) / 6 = $5,000
The depreciation expense each year would be $5000
Depreciation expense using the double declining method = Depreciation factor x cost of the asset
Depreciation factor = 2 x (1/useful life)
2 / 6 = 0.3333
Deprecation expense in year 1 = 0.3333 x $35,000 = $11,666.67
Book value = $35,000 - $11,666.67 = $23,333.33
Depreciation expense in year 2 = $23,333.33 × 0.3333 = $7.777
Depreciation expense using units of production = ( hours used in year / total estimated hours of the machine) x (Cost of asset - Salvage value)
(1,700 / 12,000) x (35,000 - 5,000) = $4250
I hope my answer helps you
The Cainas Cookies' depreciation expense for year 2 is C. $4,250.
The correct choice of answer is not A. $7,292 , B. $6,250 , or D. $4,598.
Data and Calculations:
Cost of commercial oven = $35,000
Salvage value = $5,000
Depreciable amount = $30,000 ($35,000 - $5,000)
Estimated useful life = 12,000 baking hours
Depreciation rate per baking hour = $2.50 ($30,000/12,000)
Depreciation expense for Year 2 = $4,250 ($2.50 x 1,700)
Thus, the depreciation expense for year 2 is $4,250.
Learn more: brainly.com/question/17312012
Solis Company uses the FIFO method to compute equivalent units. It has 4,000 units in beginning work in process, 20% complete as to conversion costs and 50% complete as to materials costs, 66,000 units started, and 6,000 units in ending work in process, 30% complete as to conversion costs, and 80% complete as to materials cost. How much are the equivalent units for materials under the FIFO method
Answer:
The equivalent units for materials under the FIFO method are 68,800 units
Explanation:
Equivalent units is a measurement of number of units completed in terms of percentage of inputs of production in output inventory.
Calculation of Equivalent Units under FIFO method.
To finish Opening work in process ( 4,000 units × 50%) = 2,000
Started and Completed units (66,000 - 4,000) × 100% = 62,000
Closing Work In Process (6,000 × 80%) = 4,800
Equivalent units of Production = 68,800
Conclusion :
The equivalent units for materials under the FIFO method are 68,800 units.
The US dollar/euro exchange rate is $1.6/€ while the Canadian dollar/US dollar exchange rate is C$1.25/$. You also observe that the actual euro/Canadian dollar cross exchange rate is €.65/C$. Find the triangular arbitrage profit (in USD) available to someone that has access to $1,000,000. Round intermediate steps to four decimals and your final answer to two decimals. Do not use the dollar sign when entering your answer.
Answer:
$300,000
Explanation:
I have $1,000,000 which I can use to buy C$1,250,000 (C$ = $1,000,000 x 1.25). Then I would use my C$1,250,000 to buy €812,500 (€ = C$1,250,000 x 0.65). Finally, if you use your €812,500 you can purchase $1,300,000 ($ = €812,500 x 1.6).
We started with $1,000,000 and ended up with $1,300,000 by purchasing Canadian dollars first and then Euros.
What will a bond be worth on the day it matures? Group of answer choices $0 $100 its face value (plus remaining coupon, if applicable) its remaining coupon, if applicable
Answer: Its face value (plus remaining coupon
Explanation:
On the day a bond matures it is to be paid back to the investors therefore it will be at it's face value to reflect the amount owed to investors. The last coupon may still have to be paid so it also be added to the bond on this date.
For example, if a bond is issued at $100 face value and will.mature in 5 years but is currently trading at $95, at the end of the 5th year it will be trading at $100 because that it what the Issuer of the bond will pay back.
Nieman Company purchased merchandise on account from Springhill Company for $5,400, terms 1/10, n/30. Nieman returned merchandise with an invoice amount of $900 and received full credit. a. If Nieman Company pays the invoice within the discount period, what is the amount of cash required for the payment? If required, round the answer to the nearest dollar.
Answer:
The amount of cash required for the payment is $4,455.
Explanation:
When Nieman Company purchased merchandise the entries will be :
Merchandise $5,400 (debit)
Account Payable : Springhill Company $5,400 (credit)
When Nieman Company returned some merchandise and received full credit, the entries will be:
Account Payable : Springhill Company $900 (debit)
Merchandise $900 (credit)
When Nieman Company finally pays the invoice within the discount period.
1. They are granted a cash discount of 1%
2. Pay 99% of amount owing less the credit previously granted on returned merchandise.
Entries will be :
Account Payable : Springhill Company $4,500 (debit)
Discount received $45 (credit)
Cash $4,455 (credit)
Conclusion :
The amount of cash required for the payment is $4,455.
Amy has opened a new startup company in web design. Within the first month of business, the startup agrees to maintain an accounting firm's website in exchange for someone at the firm doing the startup's tax returns. Which of the following principles of economic interaction best describes this scenario?
a) Trade can make everyone better off.
b) When markets do not achieve efficiency, government intervention can improve overall welfare.
c) Markets allocate goods effectively.
d) All costs are opportunity costs.
Answer:
a) Trade can make everyone better off
Explanation:
In business, it is common to see trades. If the startup agrees to maintain an accounting firm's website in EXCHANGE for the tax returns, that is called trading since you are giving one thing for another.
Hope this helps! :)
When deleting a check all of the following is true except: Multiple Choice It is better to delete the check than void the check in order to erase all records of the transaction The deleted check no longer appears in the check register QuickBooks changes the amount deducted in the check register to zero All of the choices are correct
Answer: It is better to delete the check than void the check in order to erase all records of the transaction
Explanation:
When a check is deleted, it should be noted that such check is being removed entirely from the system and also the transaction of the check will no longer be visible anywhere in the system.
Voiding a check mean that the amount of the transaction on the check will be changed to zero but it should be ited that a record of such transaction will still be kept in QuickBooks but deleting it will help remove the transaction in QuickBooks.
When a check is voided, the check details like the check number, account, payee, memo and date will be unchanged, even though the amount will change to zero.
Therefore, the option that says that it is better to delete the check than void the check in order to erase all records of the transaction isn't true.
Tiago makes three models of camera lens. Its product mix and contribution margin per unit follow: Percentage of Unit sales Contribution Margin per unit Lens A 25 % $ 38 Lens B 40 30 Lens C 35 43 Required: 1. Determine the weighted-average contribution margin per unit. 2. Determine the number of units of each product that Tiago must sell to break even if fixed costs are $187,000. 3. Determine how many units of each product must be sold to generate a profit of $73,000.
Answer:
A. $36.55
B. 5116 units
C. 7114 units
Explanation:
Requirement 1: Weighted average contribution margin per unit
Lens A = $38 x 25% = $9.5
Lens B = $30 x 40% = $12
Lens C = $43 x 35% = $15.05
Total Contribution margin per unit = $36.55
Requirement 2: Breakeven if fixed cost is $187,000
Break even point (units) = Fixed cost / Contribution per unit
Break even point (units) = 187,000/36.55
Break even point (units) = 5116 units
Lens A = 5116 x 25% = 1279 units
Lens B = 5116 x 40% = 2046 units
Lens C = 5116 x 35% = 1791 units
Requirement 3: How many units to be sold to generate $73,000 profit
Required units = Fixed cost - required profit / contribution per unit
Required units = ($187,000-$73,000)/$36.55
Required units = 7114 units
Lens A = 7114 x 25% = 1779 units
Lens B = 7114 x 40% = 2846 units
Lens C = 7114 x 35% = 2489 units
Consider the following timeline detailing a stream of cash flows: The timeline starts at Date 0 and ends at Date 4. The cash flow on Date 0 is indicated by a question mark. On Date 1, the cash flow is 100 dollars. On Date 2, the cash flow is 100 dollars. On Date 3, the cash flow is 200 dollars. On Date 4, the cash flow is 200 dollars. If the current market rate of interest is 6%, then the present value (PV) of this stream of cash flows is closest to:
Answer:
$509.68
Explanation:
Present value is the sum of discounted cash flows
Present value can be calculated using a financial calculator
cash flow in year 1 = $100
cash flow in year 2 = $100
cash flow in year 3= $200
cash flow in year 4 = $200
I = 6%
PV = $509.68
To find the PV using a financial calculator:
1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.
2. after inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction.
3. Press compute
Skolits Corp. issued 15-year bonds 2 years ago at a coupon rate of 7.3 percent. The bonds make semiannual payments. If these bonds currently sell for 103 percent of par value, what is the YTM?
Answer:
6.94%
Explanation:
The yield to maturity can be computed using excel rate function found below:
=rate(nper,pmt,-pv,fv)
nper is the coupons that bond has left to pay i.e 26 semiannual coupons in 13 years
pmt is the semiannual coupon amount i.e $1000*7.3%*6/12=36.5
pv is the current market price i.e 103%*$1000=$1030
fv is the face value of $1000
=rate(26,36.5,-1030,1000)=3.47%
semiannual yield =3.47%
annual yield =3.47% *2=6.94%
On December 28, 20X3, Stern Corporation and Ram Company established S&R Partnership, with cash contributions of $14,000 and $42,000, respectively. The partnership’s purpose is to purchase from Stern accounts receivable that have an average collection period of 90 days and hold them to collection. The partnership borrows cash from Midtown Bank and purchases the receivables without recourse but at an amount equal to the expected percent to be collected, less a financing fee of 5 percent of the gross receivables. Stern and Ram hold 20 percent and 80 percent of the ownership of the partnership, respectively, and Stern guarantees both the bank loan made to the partnership and a 15 percent annual return on the investment made by Ram. Stern receives any income in excess of the 15 percent return guaranteed to Ram. The partnership agreement provides Stern total control over the partnership’s activities. On December 31, 20X3, Stern sold $8,080,000 of accounts receivable to the partnership. The partnership immediately borrowed $7,580,000 from the bank and paid Stern $7,440,000. Prior to the sale, Stern had established a $414,000 allowance for uncollectibles on the receivables sold to the partnership. The balance sheets of Stern and S&R immediately after the sale of receivables to the partnership contained the following:
Stern Corporation S&R Partnership
Cash $8,036,000 $373,000
Accounts Receivable 4,380,000 8,080,000
Allowance for Uncollectible Accounts (212,000) (414,000)
Other Assets 5,420,000
Prepaid Finance Charges 404,000
Investment in S&R Partnership 11,000
Accounts Payable 942,000
Deferred Revenue 404,000
Bank Notes Payable 7,580,000
Bonds Payable 9,770,000
Common Stock 697,000
Retained Earnings 6,630,000
Capital, Stern Corporation 11,000
Capital, Ram Company 44,000
Required:
Assuming that Stern is S&R's primary beneficiary, prepare a consolidated balance sheet for Stern at January 1, 20X4.
Answer:
Total Assets $25,663,000
Total Liabilities and Stockholders’ Equity $25,663,000
Explanation:
Preparation of the prepare a consolidated balance sheet for Stern at January 1, 20X4
Stern CorporationConsolidated Balance StatementJanuary 1, 20X4
ASSET:
Cash $8,409,000
($8,036,000 +$373,000)
Accounts Receivable $12,460,000
( 4,380,000 +8,080,000)
Allowance for Uncollectible Accounts ($626,000)
[(212,000) (414,000)]
Other Assets 5,420,000
Total Assets $25,663,000
LIABILITIES:
Accounts Payable 942,000
Bank Notes Payable 7,580,000
Bonds Payable 9,770,000
Shareholders’ Equity
Controlling Interest:
Common Stock 697,000
Retained Earnings 6,630,000
Total Controlling interest $7,327,000
(6,630,000+697,000)
Non controlling interest $44,000
Total Liabilities and Stockholders’ Equity $25,663,000
Therefore consolidated balance sheet for Stern at January 1, 20X4 will have a Total Assets of $25,663,000 and a Total Liabilities and Stockholders’ Equity of $25,663,000
You are an analyst working for a mutual fund. Your job is to select stocks for the fund. You want to select only one of the following tech stocks to add into your current portfolio: Appscale, Bitwise, and Carbivore. All three stocks are similar along many metrics. They are all in the technology space and have been growing very fast over the past few years. However, it is hard to get all the information for those three stocks, and so far you have collected only the following relevant information to help you make the decision: Appscale is a tech firm that focuses on developing and integrating mobile apps. Reading through analyst reports and based on your own judgement, you think the cost of equity for Appscale is 12%. Appscale estimated earnings per share next year are $10. It pays all its earnings as dividends. Bitwise is a fintech company that is involved in Bitcoin and blockchain technology. Currently, Bitwise stock is trading at $100/share, with estimated earnings next year of $10/share. You read from their management disclosure and financial report that Bitwise retains 40% of their earnings for investments. Its reinvestment rate of return is 10%. Carbivore is a biotech firm that promotes and advocates sustainable food choices. The one period holding return is 10%.
What is the current price of Appscale?
a. $120/share
b. $83/share
c. Not enough information
Answer:
a. $120/share
Explanation:
The market value of a company is total value of a business. It is calculated by multiplying number of outstanding share with market value per share. This is also known as Market Capitalization. Cost of equity is the rate of return required by the equity holders of the company. The company decides its cost of equity based on the risk level of its business. The market price for Appscale will be:
Ke 12%
EPS $10
Market value is $120/share
(12% * $10 per share)
Use the following information for the Exercises below. [The following information applies to the questions displayed below.] Hart Company made 3,400 bookshelves using 22,400 board feet of wood costing $315,840. The company's direct materials standards for one bookshelf are 8 board feet of wood at $14.00 per board foot. Exercise 23-14A Recording and closing materials variances LO P6 Hart Company uses a standard costing system.
(1) Prepare the journal entry to charge direct materials costs to Work in Process Inventory and record the materials variances.
(2) Assume that Hart's materials variances are the only variances accumulated in the accounting period and that they are immaterial. Prepare the adjusting journal entry to close the variance accounts at period-end.
Answer and Explanation:
The Journal entries is shown below:-
1. Goods in Process Inventory Dr, (3,400 × 8 × $14) $380,800
Direct Materials Price Variance $2,240
$22,400 × ($14.00 - $315,840 ÷ $22,400))
To Direct Materials Quantity Variance $67,200
$14.00 × ((3,400 × 8) - 22,400)
To Raw Materials Inventory $315,840
(Being direct material charged is recorded)
2. Direct Materials Quantity Variance $67,200
To Direct Materials Price Variance $2,240
To Cost of Goods Sold $64,960
(being the closing is recorded)
Explain whether the following statement is true or false. There is no mark for stating true or false; the mark is awarded for the explanation and the illustration only.
One way in which monopolistic competition differs from oligopoly is there are no barriers to entry in oligopolies.Immersive Reader
Answer:
The statement is false.
Explanation:
Oligopoly is a market situation where the market of a given good or service is dominated by a few strong, powerful providers. It could be described as a mix between monopoly and perfect competition, where there are several players in the market, but not so many that they can not influence the market price, and in which those providers are strong enough to establish a monopoly if they could. Examples of oligopoly markets are the market for cars and oil, among others, in which there are few but powerful enterprises in the market.
In oligopolies there are almost as many barriers as in monopolies: although there is competition between companies, for a new company it is almost impossible to enter the market since prices, quality and customers are retained by companies already established in the market.
In large organizations, the potential exists for different parts of an organization to pursue its own goals rather than the overall company goals. Proper _______ can help to resolve conflicts when they arise
Answer:
Objectives
Explanation:
Generally, organizations are required to set short or medium-term objectives to ensure there's an effective customer relationships management, improve worker's efficiency or productivity and more importantly to increase their revenues and profits. These objectives are usually drafted by the executive or top management of an organization and it's mandatory that all the employees are diligently working towards achieving this set goals.
In large organizations, the potential exists for different parts of an organization to pursue its own goals rather than the overall company goals. Proper objectives can help to resolve conflicts when they arise.
For instance, the sales department in a bid to meet daily or monthly targets may result to unauthorized marketing channels and procedures which may be in contrast to the objectives of the human resources department.
With proper objectives such as policies and guidelines, conflicts of goals would be mitigated as various departments would ensure their activities are in tandem with the overall company goals. This can be easily achieved by appointing functional managers who have an oversight function of supervising the employees in their departments at all times.
Louie Company has a defined benefit pension plan. On December 31 (the end of the fiscal year), the company received the PBO report from the actuary. The following information was included in the report: ending PBO, $112,000; benefits paid to retirees, $10,000; interest cost, $7,500. The discount rate applied by the actuary was 10%. What was the service cost for the year
Answer: $39,500
Explanation:
Service Cost for the year = Ending PBO - Opening PBO - Interest cost + Benefits paid
Opening PBO
Opening PBO is the amount that the interest was charged on.
Discount rate of 10% came out to be $7,500.
The opening balance = 7,500/10%
= $75,000
Service Cost = 112,000 - 75,000 - 7,500 + 10,000
Service Cost for the year = $39,500
Hudson Corporation will pay a dividend of $3.60 per share next year. The company pledges to increase its dividend by 4.60 percent per year indefinitely. If you require a return of 7.00 percent on your investment, how much will you pay for the company's stock today
Answer:
The maximum that should be paid for the stock of the company today is $146.64
Explanation:
The current price of the stock can be calculated using the constant growth model of DDM. The DDM values the stock based on the present value of the expected future dividends from the stock.
The formula for the price of the stock today under the constant growth model is,
P0 = D0 * (1+g) / (r - g)
Where,
D0 is the most recent dividend paid
D0 * (1+g) is the dividend expected to be paid next period
r is the required rate of return
g is the growth rate in dividends
As we don't have a D0 but instead are given a D1, the constant growth rate will be applied from year 2 and we will calculate the price of the stock at year 1 using the constant growth model and discount is back one year to calculate the price of the stock today.
P1 = D1 * (1+g) / r - g
P1 = 3.6 * (1+0.046) / (0.07 - 0.046)
P1 = $156.9
Price of the stock today is,
P0 = P1 / (1+r)
P0 = 156.9 / (1+0.07)
P0 = $146.635514 rounded off to $146.64
Allowance for Doubtful Accounts has a debit balance of $800 at the end of the year (before adjustment), and bad debt expense is estimated at 3% of credit sales. If credit sales are $556,000, the amount of the adjusting entry to record the estimate of the uncollectible accounts
Answer:
$15,880
Explanation:
The Bad Debt Expense = $16,680 ($556,000 x 3%)
This will be credited to the Allowance for Doubtful Accounts and debited to the Bad Debt Expense account. When balancing the Allowance for Doubtful Accounts (the Uncollectible Accounts), the $800 debit balance will be netted off to arrive at $15,880 as the balance.
Allowance for Doubtful Accounts is a contra asset (Accounts Receivable) account. It is a way for prudently providing for credit losses. The Bad Debt Expense account is the account where the expense for uncollectibles for the period is charged.
Western Electric has 31,000 shares of common stock outstanding at a price per share of $77 and a rate of return of 13.10 percent. The firm has 7,200 shares of 7.60 percent preferred stock outstanding at a price of $94.00 per share. The preferred stock has a par value of $100. The outstanding debt has a total face value of $398,000 and currently sells for 110 percent of face. The yield to maturity on the debt is 8.02 percent. What is the firm's weighted average cost of capital if the tax rate is 39 percent
Answer:
Weighted average cost of capital = 11.10%
Explanation:
Market value of common stock = $31,000 * 77 = $2,387,000
Market value of preferred shares = $7,200 * 94 = 676,800
Market value of debt = $398,000 * 110% = 437,800
Total market value = Market value of common stock + Market value of preferred shares + Market value of debt
= 2,387,000 + 676,800 + 437,800
= 3,501,600
Weight of common stock = Market value of common stock / Total market value
= $2,387,000 / $3,501,600
= 0.6817
Weight of debt = Market value of preferred shares / Total market value
=437,800 / 3,501,600
= 0.1250
Weight of preferred stock = Market value of debt / Total market value
= 676,800 / 3,501,600
= 0.1933
Preferred dividend = 7.6% of 100 = 7.6
Cost of preferred stock = (Preferred dividend / price) * 100
Cost of preferred stock = (7.6 / 94) * 100
Cost of preferred stock = 8.0851%
Weighted average cost of capital = (Weight of equity *cost of equity) + (Weight of preferred stock * cost of preferred stock) + (Weight of debt * after tax cost of deb t)
Weighted average cost of capital = (0.6817 * 13.10%) + (0.1933 * 0.080851) + (0.1250 *0.0802*(1 - 0.39)
Weighted average cost of capital = 0.089303 + 0.015628 + 0.006115
Weighted average cost of capital = 0.1110
Weighted average cost of capital = 11.10%
"Total revenue equals the price multiplied by the quantity. The relative change price and quantity is given by the concept of ________________."
Answer:
Elasticity
Explanation:
Price elasticity of demand measures the responsiveness of quantity demanded to changes in price of the good.
If the absolute value of price elasticity is greater than one, it means demand is elastic. Elastic demand means that quantity demanded is sensitive to price changes.
Demand is inelastic if a small change in price has little or no effect on quantity demanded.
Demand is unit elastic if a small change in price has an equal and proportionate effect on quantity demanded.
I hope my answer helps you
If the total debt ratio is 36%, and the allowable mortgage debt ratio is 28%, which of the following debt ratios would a loan applicant qualify for if:
a. The loan applicant's gross monthly income is $2,500, with a mortgage payment of $600
b. A car payment of $250, and minimum monthly credit card payment of $75
Answer:
The loan applicant would qualify for the mortgage debt ratio in option a because his mortgage debt ratio is 24% and the allowable mortgage debt ratio is 28%.
Explanation:
First, you have to calculate the debt ratio in each case. It is calculated by dividing the total debt by the income.
a. Debt= $600
Income= $2,500
Mortgage debt ratio=600/2,500= 0.24→24%
b. Debt=$600+$250+$75=$925
Income=$2,500
Total Debt ratio=925/2,500= 0.37→37%
The loan applicant would qualify for the mortgage debt ratio because his mortgage debt ratio is 24% and the allowable mortgage debt ratio is 28%. The loan applicant would not qualify for the total debt ratio because his ratio is 37% and the allowable total debt ratio is 36%.
The following information is available for Lock-Tite Company, which produces special-order security products and uses a job order costing system.
April 30 May 31
Inventories
Raw materials $ 43,000 $ 52,000
Work in process 10,200 21,300
Finished goods 63,000 35,600
Activities and information for May
Raw materials purchases (paid with cash) 210,000
Factory payroll (paid with cash) 345,000
Factory overhead
Indirect materials 15,000
Indirect labor 80,000
Other overhead costs 120,000
Sales (received in cash) 1,400,000
Predetermined overhead rate based on direct labor cost 70 %
rev: 06_09_2015_QC_CS-17114
Exercise 15-8 Journal entries for materials LO P1
1. Raw materials purchases for cash.
2. Direct materials usage.
3. Indirect materials usage.
Exercise 15-9 Journal entries for labor LO P2
1. Direct labor usage.
2. Indirect labor usage.
3. Total payroll paid in cash.
Prepare journal entries for the above transactions for the month of May.
Transaction General Journal Debit Credit
1
Answer:
Exercise 15-8
1. Raw materials purchases for cash.
Raw Materials $210,000 (debit)
Cash $210,000 (credit)
2. Direct materials usage.
Work In Process : Indirect Materials $186,000 (debit)
Raw Materials $186,000 (credit)
3. Indirect materials usage.
Work In Process : Direct Materials $15,000 (debit)
Raw Materials $15,000 (credit)
Exercise 15-9
1. Direct labor usage.
Work In Process : Direct Labor $265,000 (debit)
Salaries and Wages Payable $265,000 (credit)
2. Indirect labor usage.
Work In Process : Indirect Labor $80,000 (debit)
Salaries and Wages Payable $80,000 (credit)
3. Total payroll paid in cash.
Salaries and Wages Payable : $345,000 (debit)
Cash $345,000 (credit)
Explanation:
Raw Materials - T Account (To determine the Materials Transferred to Production)
Debit
Opening Balance $ 43,000
Add Purchases $210,000
Totals $253,000
Credit
Closing Balance $ 52,000
Transferred to Production (Balancing figure) $201,000
Totals $253,000
Thus, Direct Materials = $201,000 - 15,000 = $186,000
Answer:
Explanation:
Raw materials purchases for cash.
Direct materials usage.
Indirect materials usage.
Prepare journal entries for the above transactions for the month of May.
DEBIT CREDIT
A 1 Raw materials inventory 2 10,000
Cash 210,000
B 2 Work in process inventory 186,000
Raw materials inventory 186,000
C 3 Factory overhead 15,000
Raw materials inventory 15,000
A client believes that XYZZY stock has topped out in price and is ready for a steep drop. What recommendation would give the customer the smallest profit if this occurs
Answer: Buy XYZZ stock and sell an XYZZ call
Explanation:
Since the buyer seems convinced that XYZZ stock has bottomed its price, he should purchase the stock since it has gotten to its cheapest Point.
And since he believes that XYZZ's price would rebound soon, He should exercise a little patience and not sell at a call option for XYZZ. Because if he attempts to sell at a call option then his earnings becomes very limited, since the price set at the call option would be very low.
My best advice would be for him to hold on to XYZZ stock for a while and allow for its price to rebound.