Answer:
A.Residential 34%
Professional 42%
B.Residential 8%
Professional 14%
C.Residential 4.25%
Professional 3%
D.Residential 34%
Professional 42%
E.Residential $18,000.00
Professional $62,050.00
Explanation:
A.Calculation for each division’s ROI
Using this formula
Return on Investment
=Net Income / Average Invested Assets
Let plug in the formula
Residential $68,000.00/$200,000.00 = 34.00%
Professional $153,300.00/$365,000.00 = 42.00%
B.Calculation for each division’s sales margin. Interpret your results
Using this formula
Sales Margin= Operating income/Sales
Let plug in the formula
Residential $68,000.00/$850,000.00 = 8.00%
Professional $153,300.00/$1,095,000.00 = 14.00%
C.Calculation for each division’s capital turnover
Using this formula
Capital Turnover=Sales/Average operating assets
Let plug in the formula
Residential $850,000.00 /$200,000.00 = 4.25
Professional $1,095,000.00/$365,000.00 = 3.00
D.Using the expanded ROI formula to confirm the results from Requirement a.
Using this formula
Return on Investment=Profit Margin * Investment Turnover
Let plug in the formula
Residential 8.00% * 4.25% 34.0%
Professional 14.00% * 3.00% 42.0%
E.Calculation for each division’s residual income (RI)
Residential Professional
Average investment
$200,000.00 $365,000.00
×Target return 25% 25%
=Target income
$50,000.00 $91,250.00
Hence,
Operating income $68,000.00 $153,300.00
Less:Target income$50,000.00 $91,250.00
Residual income $18,000.00 $62,050.00
Tasty Doughnuts has computed the net present value for capital expenditure at two locations. Relevant data related to the computation are as follows: Des Moines Cedar Rapids Total present value of net cash flow $712,500 $848,000 Amount to be invested (750,000) (800,000) Net present value $(37,500) $ 48,000 a. Determine the present value index for each proposal. Round your answers for the present value index to two decimal places.
Answer:
0.95 and 1.06
Explanation:
The computation of the present value index is shown below:
Present value index = Present Value of net cash Flow ÷ Amount invested
So for each projects, it would be
Particulars Des Moines Cedar Rapids
Total present value of
net cash flow (A) $712,500 $848,000
Amount invested (B) $750,000 $800,000
Present value index (A ÷ B) 0.95 1.06
A 25-year old single client has just started his own small business and is not covered by a retirement plan. He has $5,000 to invest and currently has a low level of income. He wishes to start saving for retirement. The BEST recommendation is a:
Answer:
Roth IRA
Explanation:
Based on this scenario, it can be said that the best recommendation would be a Roth IRA. This is an individual retirement account that non-deductible tax-free growth for retirement at age 59 1/2. As of 2018, the yearly limit for a Roth IRA account is $5,500 meaning that the client in this scenario would not have any problem investing the entire $5000 as soon as they open the account. And since he is in a low tax bracket he should not have any problem opening an Account.
chuyển 1 TSCĐ hữu hình thuộc nguồn
NSNN cấp do không đủ tiêu chuẩn chuyển thành CCDC, theo nguyên giá 25.000,
giá trị hao mòn lũy kế: 21.000.
Glacier Trails manufactures backpacks for adventurers. The backpacks come in two types: Daytripper, and Excursion. Glacier anticipates the following sales volumes for the coming period:
Daytripper: 2,000 backpacks
Excursion: 1.200 backpacks
If total budgeted revenue for the period is $250,000 and the sales price for Daytripper backpacks is $50, what is the budgeted sales price for Excursion backpacks?
a. $ 78.
b. $125.
c. $5130.
d. $158.
e. none of the above.
Answer:
the budgeted sales price for Excursion backpacks is b. $125.
Explanation:
Total Budgeted Revenue = Daytripper Budgeted Revenue + Excursion Budgeted Revenue
Therefore,
Let the budgeted sales price for Excursion backpacks be $y
$250,000 = 2,000 × $50 + 1.200 × $y
$150,000 = $1,200 y
$125 = y
Therefore, the budgeted sales price for Excursion backpacks is $125.
Dairy Wishes, a local ice cream store, finds
that it sells out of ice cream sandwiches at the current price of $1. It raises the price to increase its
revenues and finds that no one buys ice cream sandwiches anymore
The demand for icecream sandwiches is
a. inelastic.
b. elastic.
c. perfectly inelastic.
d. perfectly elastic.
e. unitary elastic.
Answer:
d. perfectly elastic.
Explanation:
Demand is perfectly elastic if it at the current price, the product is sold out but if there is a change in price demand falls to zero. the demand curve is horizontal
Demand in perfectly inelastic if there is no change in quantity demanded regardless of the change in price.
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. The absolute value of elasticity would be less than one
Demand is unit elastic if a small change in price has an equal and proportionate effect on quantity demanded.
Petrox Oil Co. is considering a project that will have fixed costs of $12,000,000. The product will be sold for $37.50 per unit and will incur a variable cost of $12.80 per unit.
Given Petrox's cost structure, it will have to sell __________ units to break even on this project (Q_BE).
Petrox Oil Co.'s marketing sales director doesn't think that the market for the firm's goods is big enough to sell enough units to make the company's target operating profit of $15,000,000. In fact, she believes that the firm will be able to sell only about 150,000 units. However, she also thinks the demand for Petrox Oil Co.'s product is relatively inelastic, so the firm can increase the sale price. Assuming that the firm can sell 150,000 units, what price must it set to meet the CFO's EBIT goal of $15,000,000?
a. $192.80
b. $221.72
c. $241.00
d. $202.44
Answer:
Fixed costs = $12,000,000
Selling price = $37.50
Variable cost = $12.80
hope this helps
At the given cost structure, Petrox have to sell 485,830 units to break-even on this project .The selling price to to be set to meet the profit of $15,000,000 is $192.80. Thus, the correct answer is option A.
What is break-even ?The break-even point occurs when total cost and total revenue are equal. Though opportunity costs have been paid and capital has received the risk-adjusted, expected return, there is no net loss or gain. In short, all necessary costs are met, and there is no profit or loss.
The break even units is calculated as,
Break-even units = Fixed Cost / Contribution Margin
= Fixed Cost / Sale Price - Variable Cost
= $12,000,000/ $37.50-$12.80
= 485,830 units
The price that needed to be set is calculated as,
Target units=Fixed Costs+ Target EBIT/selling price-variable cost
Assume selling price is X
150,000= ($12,000,000+$15,000,000) / X-12.80
150,000=27,000,000 / X-12.80
150,000× (X-12.80)=27,000,000
X - 12.80=27,000,000 / 150,000
X-12.80 = 180
X = 180+12.80
X= $192.80
Therefore, the break-even units is 485,830 and the the price to be set is $192.80 to meet the CFO's EBIT goal of $15,000,000.
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Let M be the number of units to make and B be the number of units to buy. If it costs $2 to make a unit and $3 to buy a unit and 4000 units are needed, the objective function is
Min 2M + 3B
Min 4000 (M + B)
Max 2M + 3B
Max 8000M + 12000B
Answer:
Min 2M + 3B
Explanation:
Data provided in the question
Let us assume M denotes the making units
B denotes the buying units
So,
Making cost per unit = $2
And, the buying cost per unit = $3
And, the total number of units required = 4,000 units
Based on the above information, the objective function is Min 2M + 3B.
This indicates the minimum total cost
Hence, the correct option is A.
Required information [The following information applies to the questions displayed below.) Fiddle Corp. has been an S corporation since inception. Charlie has a tax basis of $18,750 in his Fiddle stock. In 2019, Charlie was allocated $23,750 of ordinary income from Fiddle. What is the amount and character of gain Charlie recognizes from end-of-the-year distributions in each of the following alternative scenarios, and what is his stock basis following each distribution? (Leave no answer blank. Enter zero if applicable. If the answer is "O", select "None"). Fiddle distributes $47.500 to Charlie.
Answer and Explanation:
According to the given question, the computation is shown below:-
a. The amount and character of gain Charlie recognizes from end-of-the-year distributions is
Particulars Amount
Tax basis a $18,750
Ordinary income b $23,750
Stock basis $42,500
(c = a + b)
Distribution $47,500 ($42,500 + $5,000)
b. The stock basis is
Particulars Amount Character
Gain $5,000 Capital ($23,750 - $18,750)
Stock basis - None
Key facts and assumptions concerning Kroger Company, at December 12, 2007, appear below. Using this information, answer the questions following.
Facts and Assumptions
Yield to maturity on long-term government bonds 4.54%
Yield to maturity on company long-term bonds 6.32%
Coupon rate on company long-term bonds 7.50%
Market price of risk, or risk premium 6.30%
Estimated company equity beta 1.05
Stock price per share $ 25.97
Number of shares outstanding 681.2 million
Book value of equity $ 4,965 million
Book value of interest-bearing debt $ 6,674 million
Tax rate 35.0%
a. Estimate Kroger's cost of equity capital.
b. Estimate Kroger's weighted-average cost of capital. Prepare a spreadsheet or table showing the relevant variables.
Answer:
a. 11.16 %
b. 7.56 %
Explanation:
Cost of equity capital is the return that is required by Common Stockholders.
This can be determined as follows :
1. Growth Model
Cost of equity = Recent dividend / Market Price of Share + Expected Growth Rate
or
2. Capital Asset Pricing Model (CAPM)
Cost of equity = Return on Risk Free Security + Beta × Return on Market Portfolio Security
= 4.54% + 1.05 × 6.30%
= 11.16 %
WACC = Ke × (E/V) + Kd × (D/V) +Kp × (P/V)
Explanation and value of Variables
Ke = Cost of Equity
= 11.16 %
E/V = Weight of Equity
= $ 4,965 ÷ ( $ 4,965 + $ 6,674)
= 42.66 %
Kd = Cost of Debt :
= Interest × (1 - tax rate)
= 7.50% × ( 1 - 0.35)
= 4.875 or 4.88 %
D/V = Weight of Debt
= $ 6,674 ÷ ( $ 4,965 + $ 6,674)
= 57.34 %
Therefore,
WACC = 11.16 % × 42.66 % + 4.88 % × 57.34 %
= 7.56 %
As an American investor, you are trying to calculate the present value of a £25 million cash flow that will occur one year in the future. You know that the spot exchange rate is S= $1.9397/ £ and one-year forward rate is F= $1.9581/ £. You also know that the appropriate dollar cost of capital for this cash flow is 6.25% and that the appropriate pound cost of capital for this cash flow is 5.25%. a) What is the present value of the £25 million cash flow from the standpoint of a British investor, and what is the dollar equivalent of this amount? b) What is the present value of the £25 million cash flow from the standpoint of a U.S. investor who first converts the £25 million into dollars and then applies the dollar discount rate?
Answer:
1. Present value in pound=$23,752,969
Dollar equivalent=$46,073,634
2.Dollar equivalent for U.S investors=$48,952,500
Present value in pound=$46,072,918
Explanation:
1a.Calculation for present value of the £25 million cash flow
Using this formula
Present value in pound =cash flow*(1/1+Cash flow cost of capital)^ One year in the future
Let plug in the formula
Present value in pound=$25,000,000*(1/1+0.0525)^1
Present value in pound=$25,000,000*(1/1.0525)^1
Present value in pound=$25,000,000*0.950119
Present value in pound=$23,752,969
1b.Calculation for the dollar equivalent of this amount
Using this formula
Dollar equivalent=Present value in pound*Spot exchange rate
Let plug in the formula
Dollar equivalent=$23,752,969*$1.9397
Dollar equivalent=$46,073,634
2a. Calculation for the Dollar equivalent for U.S investors
Using this formula
Dollar equivalent for U.S investors=Cash flow*one-year forward rate
Let plug in the formula
Dollar equivalent for U.S investors=$25,000,000*$1.9581
Dollar equivalent for U.S investors=$48,952,500
2b. Calculation for the present value of the £25 million cash flow from the standpoint of a U.S. investor .
Using this formula
Present value in pound =Cash flow*(1/1+Cash flow cost of capital)^ One year in the future
Let plug in the formula
Present value in pound=$48,952,500*(1/1.0625)^1
Present value in pound=$48,952,500*0.941176
Present value in pound=$46,072,918
Therefore the Present value in pound for question 1 is $23,752,969 while the Dollar equivalent is $46,073,634.
The Dollar equivalent for U.S investors in question 2 is $48,952,500 while the Present value in pound is $46,072,918
In capital rationing, alternative proposals that survive initial screening by cash payback and average rate of return methods are further analyzed using:________
Answer:
Net present value and internal rate of return
Explanation:
when making a decision between alternative projects, initial analysis is done with the cash payback and average rate of return.
Cash payback period calculates the amount of time it takes to recover the amount invested in a project from its cumulative cash flows
Average rate of return = Average net income / average book value.
this is followed by the Net present value analysis and Internal rate of return determination.
Net present value is the present value of after tax cash flows from an investment less the amount invested.
Internal rate of return is the discount rate that equates the after tax cash flows from an investment to the amount invested
project with the highest positive project NPV should be chosen.
Also, a project with an IRR greater than the discount rate should be chosen. when choosing between alternative projects, the project with the highest IRR should be chosen if the IRR is greater than the discount rate.
Assume that the following are independent situations recently reported in the Wall Street Journal.
a. General Electric (GE) 7% bonds, maturing January 28, 2018, were issued at 110.30.
b. Boeing 7% bonds, maturing September 24, 2032, were issued at 98.15.
Required:
a. Were GE and Boeing bonds issued at a premium or a discount?
b. The General Electric bonds were issued at a___________ and the Boeing bonds were issued at a__________
Answer:
a. Were GE and Boeing bonds issued at a premium or a discount?
GE bonds were issued at a premium, at 110.3%, while Boeing bonds were issued at a discount, at 98.15%
b. The General Electric bonds were issued at a premium (at $1,103) and the Boeing bonds were issued at a discount (at $981.50).
When bonds are issued at a value higher than face value, they are issued at a premium. When bonds are issued at a value lower than face value, they are issued at a discount.
has a target debt−equity ratio of .50. Its cost of equity is 15 percent, and its cost of debt is 6 percent. If the tax rate is 34 percent, what is the company’s WACC?
Answer:
11.35%
Explanation:
The calculation of WACC is shown below:-
WACC = Cost of equity × (equity ÷ (Debt + Equity)) + cost of debt × (debt ÷ (Debt + Equity)) × (1 - tax rate)
= 0.15 × (1 ÷ 1.50) + 0.06 × (0.50 ÷ 1.50) × (1 - 0.34)
= 0.15 × 0.67 + 0.06 × 0.33 × 0.66
= 0.1005 + 0.013068
= 11.35%
Therefore for computing the WACC we simply applied the above formula.
15 POINTS IF U ANSWER NOW!!!!! Which non-income factor for a potential job promotion would influence a person whose mother needs frequent medical attention? A.) Location (im pretty sure its not A) B.) Personal satisfaction C.) Independence D.)Family
Answer:
D. Family
Explanation:
Jasper makes a $27,000, 90-day, 8.0% cash loan to Clayborn Co. Jasper's entry to record the collection of the note and interest at maturity should be: (Use 360 days a year.)
Answer:
Dr Cash $25,500
Cr Interest Revenue $500
Cr Notes Receivable $25,000
Explanation:
Based on the information we were told Jasper makes the amount of $27,000 which include 90-day and 8.0% cash loan to Clayborn Co, which means that Jasper's Journal entry to record the collection of the note and interest at maturity should be:
Dr Cash $25,500
(25,000+500)
Cr Interest Revenue $500
(25,000*8%*90/360)
Cr Notes Receivable $25,000
Use the following to answer question 22: Fleeting Moscow Nights currently manufactures vodka as its main product. The costs per unit are as follows: Direct materials and direct labor $33 Variable overhead Fixed overhead Total 22. Fleeting Moscow Nights Inc has contacted Old Prof Mullen with an offer to sell him 5,000 bottles of premium KGB vodka for $54 each. If that Sly Old Prof makes his own KGB vodka, variable costs are $48 per unit (DM and DL = $33 and VOH = $15). Fixed costs are $24 per unit; however, $15 per unit is unavoidable. Should the Old Prof make or buy the vodka?
A) Buy; savings = $45,000
B) Buy; savings = $15,000
C) Make; savings = $30,000
D) Make; savings = $15,000
Answer:
hihihihihihi ola oal oaad
has a target debt−equity ratio of 1.35. Its WACC is 8.3 percent, and the tax rate is 35 percent. If the company’s cost of equity is 14 percent, what is its pretax cost of debt? (Do not round intermediate calculations. Enter yo
Answer:
5.74%
Explanation:
WACC = weight of equity x cost of equity + weight of debt x cost of debt x (1 - tax rate)
weight of debt = D / (D + E) = 1.35/ (1.35 + 1) = 0.574468 = 57.4468%
weight of equity = 100% - 57.4468% = 42.5532%
let x represent pretax cost of debt
8.1% = 0.425532 x 14% +( 0.574468x) x 0.65
8.1% = 0.373404x + 5.957448%
solve for x
x = 5.74%
Webster Corporation's monthly projected general and administrative expenses include $5,600 administrative salaries, $3,000 of other cash administrative expenses, $1,650 of depreciation expense on the administrative equipment, and .5% monthly interest on an outstanding bank loan of $16,000. Compute the total general and administrative expenses to be reported on the general and administrative expense budget per month.
Answer:Total general and administrative expenses budget per month =$10,250
Explanation:
Total general and administrative expenses are the compulsory costs to ensure that a company's day to day operations is maintained whether or not the company is making profit.
General and administrative expenses includes Rent, Utility bills, insurance wages and benefits, depreciation of office furnitures, Office supplies and are regarded as operating expenses and therefore interest paid on a bank loan is not an operating expenses but a financing activities and will not be considered as an administrative expense.
Administrative expenses= administrative Salaries+Other cash administrative expenses+Depreciation
=$5,600+$3,000+$1,650
=$10,250
The business case for why companies should act in a socially responsible manner includes: Select one: a. It generates internal benefits including employee recruiting, workforce retention, training, and improved worker productivity b. It reduces the risk of reputation-damaging incidents c. It is in the best interest of shareholders and offers potential for increased buyer patronage d. All of the above
Answer:
d. All of the above
Explanation:
All alternatives are correct due to the fact that when a company acts in a socially responsible manner, it achieves several internal and strategic benefits that help in the success of the business.
Currently, organizations are no longer just profitable entities but are also promoters of positive social transformations for the locality in which they operate and for the world.
Being socially responsible includes having benefit programs for stakeholders, which includes improving the perception with which the company is seen, generating a position that attracts shareholders, retains employees, generates greater job satisfaction, which increases productivity and retention of staff.
Generally, corporate governance programs include the review and culture of continuous improvement of organizational processes, which reduces costs, risks and waste, which contributes to the generation of competitive and profitable advantages for the organization.
A preferred share of Coquihalla Corporation will pay a dividend of $8 in the upcoming year and every year thereafter; that is, dividends are not expected to grow. You require a return of 7% on this stock. Using the constant-growth DDM to calculate the value of Coquihalla Corporation is worth _________. A. $13.50 B. $45.50 C. $91 D. $114.29
Answer:
$114.29
Explanation:
A preferred share of Coquihalla corporation will pay a dividend of $8
The return on the stock is 7%
= 7/100
= 0.07
Therefore, by using the constant growth DMM the worth of the corporation can be calculated as follows
Vo= 8/0.07
= $114.29
Hence the value of Coquihalla corporation is worth $114.29
Find the operating cash flow for the year for Harper Brothers, Inc. if it had sales revenue of , cost of goods sold of , sales and administrative costs of , depreciation expense of , and a tax rate of .
Answer:
$101,960,000
Explanation:
For the computation of operating cash flow first we need to follow some steps which are shown below:-
Step 1
EBIT = Sales - Cost of goods sold - Sales and administrative costs - Depreciation
= $302,100,000 - $135,900,000 - $39,600,000 - $65,000,000
= $61,600,000
Step 2
Net income = EBIT - Tax
= $61,600,000 - ($61,600,000 × 40%)
= $61,600,000 - $24,640,000
= $36,960,000
and finally
Operating cash flow = EBIT - Taxes + Depreciation
= $61,600,000 - $24,640,000 + $65,000,000
= $101,960,000
Previous Question Question 5 of 20 Next Question Which of the following items represents the net income/(loss) for the year? The difference between the revenues/gains and expenses/losses. The difference between the cash receipts and payments. The difference between the funds raised by stock issuance and the dividends paid. The difference between the net increase in assets and in liabilities.
Answer:
Option A. The difference between the revenues/gains and expenses/losses
Explanation:
The net income of an organization is the net value received by taking the difference of all the income earned and the losses borned by the organization.
Mathematically,
Net Income = Revenue - Expenses
It can be also calculated as under:
Net Income = Gains - Losses
In which of the following scenarios would enforcement of specific performance be appropriate? Multiple Choice Your bookstore agrees to order a textbook for you but breaches its contract with you by canceling the order the next day. You order 3 gallons of white ceiling paint from a local store, and the store breaches by not delivering or making available to you the 3 gallons. You own the pistol used by Hamilton and contract to buy the pistol used by Burr in the Hamilton-Burr duel to complete your set, but despite the contract the Burr pistol owner refuses to sell at the last minute. You order a current-model, name-brand television from a department store, and a few days later the store breaches by not ordering it from the manufacturer.
Answer:
Correct Answer:
2. You order 3 gallons of white ceiling paint from a local store, and the store breaches by not delivering or making available to you the 3 gallons.
3. You own the pistol used by Hamilton and contract to buy the pistol used by Burr in the Hamilton-Burr duel to complete your set, but despite the contract the Burr pistol owner refuses to sell at the last minute.
1. Your bookstore agrees to order a textbook for you but breaches its contract with you by canceling the order the next day.
Explanation:
In enforcement of specific performance is applied in situations where there there is an established contract that has was not honored. This bridge of contract would then trigger performance enforcement.
The linear correlation coefficient of a set of data points is -0.9.
a. Is the slope of the regression line positive or negative?
b. Determine the coefficient of determination.
Answer:
1. The slope is negative.
2. 0.81
Explanation:
The slope of the regression line is definitely negative
A linear equation has its regression line as
T = a + bc
The slope of the regression line is known as b.
From the question, b = -0.9
Therefore the slope of the regression line is negative.
B. Coefficient of determination = r²
r =(-0.90)
r² = 0.81
If you could purchase IBM stock and simultaneously sell the stock for $5 more, you would be involved in one type of economic activity?a. indifference principleb. arbitragec. carry traded. marked to markete. none of the above
Answer:
arbitrage
Explanation:
Arbitrage can be defined as an act or process of buying buying and selling an asset simultaneously. Purchasing IBM stock and selling it for 5 dollar more simultaneously is an example of arbitrage. Such a seller is going to cash in on the price difference in buying and selling this stock. It is simply taking advantage of the difference in price that is gotten from buying and reselling this stock at 5dollars.
A company plans to invest X at the beginning of each month in a zero-coupon bond in order to accumulate 100,000 at the end of six months. The price of each bond as a percentage of redemption value is given in the following chart:1 2 3 4 5 6 ; 99% 98% 97% 96% 95% 94%; Calculate X given that the bond prices will not change during the six-month period.
Answer:
x = $16,078.46
Explanation:
$100,000 = 1.0101x + 1.0204x + 1.0309x + 1.0417x + 1.0526x + 1.0638x
$100,000 = 6.2195x
x = $100,000 / 6.2195 = $16,078.46
month investment value at end of month 6
1 $16,078.46 $17,104.74
2 $16,078.46 $16,924.68
3 $16,078.46 $16,748.39
4 $16,078.46 $16,575.73
5 $16,078.46 $16,406.59
6 $16,078.46 $16,240.87
total $96,470.76 $100,001*
*the extra $1 is due to rounding errors.
The percent change in nominal gross domestic product (GDP) minus the percent change in price level equals
Answer:
Real GDP
Explanation:
Nominal GDP less percent change in price levels equals to real GDP
Nominal GDP is GDP calculated using current year prices
Real GDP is GDP using base year prices. it has been adjusted for inflation.
Gross domestic product is the total sum of final goods and services produced in an economy within a given period which is usually a year
On December 21, 2017, Novak Company provided you with the following information regarding its equity investments.
December 31, 2017
Investments (Trading)
Cost
Fair Value
Unrealized Gain (Loss)
Clemson Corp. stock $20,200 $19,300 $(900)
Colorado Co. stock 9,900 8,900 (1,000)
Buffaloes Co. stock 20,200 20,790 590
Total of portfolio $50,300 $48,990 (1,310)
Previous fair value adjustment balance 0
Fair value adjustment—Cr. $(1,310)
During 2018, Colorado Company stock was sold for $9,410. The fair value of the stock on December 31, 2018, was Clemson Corp. stock—$19,410; Buffaloes Co. stock—$20,700. None of the equity investments result in significant influence.
(a) Prepare the adjusting journal entry needed on December 31, 2017.
(b) Prepare the journal entry to record the sale of the Colorado Co. stock during 2018.
(c) Prepare the adjusting journal entry needed on December 31, 2018.
(Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)
No.
Account Titles and Explanation
Debit
Credit
(a) On December 21, 2017, Novak Company provided you w
On December 21, 2017, Novak Company provided you w
On December 21, 2017, Novak Company provided you w
On December 21, 2017, Novak Company provided you w
On December 21, 2017, Novak Company provided you w
On December 21, 2017, Novak Company provided you w
(b) On December 21, 2017, Novak Company provided you w
On December 21, 2017, Novak Company provided you w
On December 21, 2017, Novak Company provided you w
On December 21, 2017, Novak Company provided you w
On December 21, 2017, Novak Company provided you w
On December 21, 2017, Novak Company provided you w
On December 21, 2017, Novak Company provided you w
On December 21, 2017, Novak Company provided you w
On December 21, 2017, Novak Company provided you w
(c) On December 21, 2017, Novak Company provided you w
On December 21, 2017, Novak Company provided you w
On December 21, 2017, Novak Company provided you w
On December 21, 2017, Novak Company provided you w
On December 21, 2017, Novak Company provided you w
On December 21, 2017, Novak Company provided you w
Answer:
(a)
Dr Unrealized Holding Gain or Loss -Equity $1,410
Cr Fair Value Adjustment $1,410
(b)
Dr Cash $9,410
Dr Loss on Sale of Investment $590
Cr Equity Investment $10,000
(c)
Dr Fair Value Adjustment $1,120
Cr Unrealized Holding Gain or Loss-Equity $1,120
Explanation:
(a) Preparation of the adjusting journal entry needed on December 31, 2017.
Dr Unrealized Holding Gain or Loss -Equity $1,410
Cr Fair Value Adjustment $1,410
(To Adjust to Fair Value for 2017)
(b) Preparation of the journal entry to record the sale of the Colorado Co. stock during 2018.
Dr Cash $9,410
Dr Loss on Sale of Investment $590
(20,200- 20,790)
Cr Equity Investment $10,000
($9,410+$590)
(To Record Sale of Stock)
(c)Preparation of the adjusting journal entry needed on December 31, 2018.
Dr Fair Value Adjustment $1,120
Cr Unrealized Holding Gain or Loss-Equity $1,120
(To Adjust to Fair Value for 2018)
Investments Amortized Costs, Fair Value , Unrealized Gain (Loss)
Clemson Corp. stock
$20,200 $19,410 ($790)
Buffaloes Co. stock
$20,200 $20,700 $500
$40,400 $40,110 ($290)
Previous Fair Value Adjustment (Credit)
$1,410
Fair Value Adjustment (Debit)$1,120
We are evaluating a project that costs $874,800, has a nine-year life, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 85,000 units per year. Price per unit is $55, variable cost per unit is $39, and fixed costs are $765,000 per year. The tax rate is 24 percent, and we require a return of 11 percent on this project. Suppose the projections given for price, quantity, variable costs, and fixed costs are all accurate to within ±10 percent.
Calculate the best-case and worst-case NPV figures
Answer:
best case scenario:
project outlay = $874,800
yearly cash flows:
projected sales = 85,000 x 110% = 93,500sales price = $55 x 110% = $60.50variable costs = $39 x 90% = $35.10fixed costs = $765,000 x 90% = $688,500depreciation costs = $874,800 / 9 = $97,200tax rate = 24%yearly cash flows = {[(93,500 x $60.50) - (93,500 x $35.10) - $688,500 - $97,200] x (1 - 24%)} + $97,200 = $1,304,992
using a financial calculator, NPV = $6,351,002.73
worst case scenario:
project outlay = $874,800
yearly cash flows:
projected sales = 85,000 x 90% = 76,500sales price = $55 x 90% = $49.50variable costs = $39 x 110% = $42.90fixed costs = $765,000 x 110% = $841,500depreciation costs = $874,800 / 9 = $97,200tax rate = 24%yearly cash flows = {[(76,500 x $49.50) - (76,500 x $42.90) - $841,500 - $97,200] x (1 - 24%)} + $97,200 = -$232,488
using a financial calculator, NPV = -$2,071,211.79
Assume a corporation has earnings before depreciation and taxes of $123,000, depreciation of $41,000, and that it has a 35 percent tax bracket. a. Compute its cash flow using the following format. (Input all answers as positive values.) b. How much would cash flow be if there were only $21,000 in depreciation
Answer:
a. Computation of cash flow
Earnings before depreciation and taxes $123,000
Less: Depreciation $41,000
Earnings before taxes $82,000
Less: Taxes ($82,000*35%) $28,700
Earnings after taxes $53,300
Add: Depreciation $41,000
Cash Flow $94,300
b. If Depreciation = 21,000
Computation of cash flow
Earnings before depreciation and taxes $123,000
Less: Depreciation $21,000
Earnings before taxes $102,000
Less: Taxes($102,000*35%) $35,700
Earnings after taxes $66,300
Add: Depreciation $21,000
Cash Flow $87,300