Answer:
Amount borrowed = $69,418.30
Explanation:
The amount borrowed by Texas Foods would be the present value of the $139,000 payable at the the ed of year 12 with a discount rate of 5.8% computed monthly
PV = A× (1+ r/m)^(-m×n)
P= Amount borrowed-?
A= Lump sum payment- 139,000
r- interest rate- 5,8%
m- number of times compounding is done- 12
r/m= 5.8%/12=0.483%
PV - 139,000 × (1+0.004833)^(-12× 12)=69,418.30
Amount borrowed = $69,418.30
Spiro Hospital is investigating the possibility of investing in new dialysis equipment. Two local manufacturers of this equipment are being considered as sources of the equipment. After-tax cash inflows for the two competing projects are as follows: Year Puro Equipment Briggs Equipment 1 $320,000 $120,000 2 280,000 120,000 3 240,000 320,000 4 160,000 400,000 5 120,000 440,000 Both projects require an initial investment of $560,000. In both cases, assume that the equipment has a life of 5 years with no salvage value. Required: Round present value calculations and your final answers to the nearest dollar. 1. Assuming a discount rate of 12%, compute the net present value of each piece of equipment.
Answer:
NPV for puro = $289,529.95
NPV for briggs = $374,450.85
Explanation:
Net present value is the present value of after tax cash flows from an investment less the amount invested.
net present value can be calcuated using a financal calcuatopr
Puro Equipment
cash flow in year 0 = $-560,000
cash flow in year 1= $320,000
cash flow in year 2 = $280,000
cash flow in year 3 = $240,000
cash flow in year 4 = 160,000
cash flow in year 5 = 120,000
I = 12%
NPV = $289,529.95
Briggs Equipment
cash flow in year 0 = $-560,000
cash flow in year 1= $120,000
cash flow in year 2= $120,000
cash flow in year 3= $320,000
cash flow in year 4= 400,000
cash flow in year 5= 440,000
I = 12%
NPV = $374,450.85
To find the NPV 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
The computation of the net present values of the two equipment are as follows:
Puro Equipment Briggs Equipment
Initial investment ($560,000) ($560,000)
Present value of cash inflows $849,600 $934,520
Net present value $289,600 $374,520
Data and Calculations:
Estimated useful life = 5 years
Discount factor = 12%
Initial cash outlay in each equipment = $560,000
Year Puro Equipment
Cash Flows PV Factor Present Value
0 ($560,000) 1 ($560,000)
1 $320,000 0.893 285,760
2 280,000 0.797 223,160
3 240,000 0.712 170,880
4 160,000 0.636 101,760
5 120,000 0.567 68,040
Total present value of cash inflows $849,600
Net present value = $289,600
Year Briggs Equipment
Cash Flows PV Factor Present Value
0 ($560,000) 1 ($560,000)
1 $120,000 0.893 107,160
2 120,000 0.797 95,640
3 320,000 0.712 227,840
4 400,000 0.636 254,400
5 440,000 0.567 249,480
Total present value of cash inflows $934,520
Net present value = $374,520
Thus, the net present value of Puro Equipment is $289,600 while that of Briggs Equipment is $374,520.
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Uniform Supply accepted a $4,800, 90-day, 10% note from Tracy Janitorial on October 17. What entry should Uniform Supply make on December 31, to record the accrued interest on the note
Answer:
The answer is
Dr: Notes Receivable $4,800
Dr: Interest Receivable $120
Cr: Sales $4,920
Explanation:
The yearly interest rate is 10%
So the interest rate for 90 days(assume 360 days make a year?
90/360 x 10%
2.5% is the interest rate for 90 days.
The interest payment for 90 days will be;
2.5% x $4,800
= $120
The entry will now be:
Dr: Notes Receivable $4,800
Dr: Interest Receivable $120
Cr: Sales $4,920
When all firms earn zero economic profits producing the output level where P=MR=MC and P=AC and there is no incentive to leave or join the market, the market is in __________.
Answer:
Long-run equilibrium.
Explanation:
When all firms earn zero economic profits producing the output level where P=MR=MC and P=AC and there is no incentive to leave or join the market, the market is in long-run equilibrium.
In a perfectly competitive market in long-run equilibrium, a long-run equilibrium avails firms the opportunity to adjust all inputs and all fixed costs are maximized. Also, it's characterized by free entry and exit, as such there isn't a fixed number of firms. This simply means that, since the number of firms in a long-run equilibrium can change, a firm must exit the market as a result of losses i.e when the firm is unable to cover its fixed costs in the long-run while new firms are allowed entry into the market when it anticipates potential profits or gains.
However, the firms always strive to maximize profits by increasing their level of output, such that P = MC. Also, the firms wouldn't be willing to leave or enter into the market because they are not making any profit, such that P=AC.
In a nutshell, in the long run equilibrium P=MR=MC and P=AC.
Where, P represents the price.
Answer:
The correct answer is: long-run equilibrium.
Explanation:
To begin with, the market that is refered in the question is a perfect competitive one, you can tell by the fact that the price equals the marginal revenue(MR) and that equals the marginal costs(MC) and also the price equals the average cost and that combination only happens in the competitive market and therefore that the relationship established happen when that industry is in the long run equilibrium and there is no incentive to leave or join the market.
On Oct. 14, Sheffield Company discounted at Sunshine Bank a $9,000 (maturity value), 113-day note dated July 13. Sunshine’s discount rate was 11%.
Required:
What proceeds did Sheffield Company receive?
Answer: $8,945
Explanation:
Number of days that have passed since Note was issued is;
18 days in July
31 days in August
30 Days in September, and
14 days in October
= 18 + 31 + 30 + 14
= 93 days
93 days have already elapsed out of the 113 so days left is;
= 113 - 93
= 20 days
Assuming a 360 day Calender, Sheffield Company will receive;
= Maturity level - Discount Amount
= 9,000 - (9,000 * 11% * 20/360)
= 9,000 - 55
= $8,945
Sheffield would will get $8,945 of proceeds to represent that 20 days are still left of the note till it matures and so need to be discounted from the maturity value.
No Doubt Company includes one coupon in each box of soap powder that it packs, and 10 coupons are redeemable for a premium (a kitchen utensil). In 2020, No Doubt Company purchased 8,800 premiums at 80 cents each and sold 110,000 boxes of soap powder at $3.30 per box; 44,000 coupons were presented for redemption in 2014. It is estimated that 60% of the coupons will eventually be presented for redemption.
Instructions
Prepare all the entries that would be made relative to sales of soap powder and to the premium plan in 2014.
Answer:
Prepare all the entries that would be made relative to sales of soap powder and to the premium plan in 2014.
Explanation:
ere presented for redemption in 2014. It is estimated that 60% of the coupons will eventually be prese
B2B co. is considering the purchase of equipment that would allow the company to add a new product to its line. The equipment is expected to cost $120,000 with a 12-year life and no salvage value. It will be depreciated on a straight-line basis. The company expects to sell 48,000 units of the equipment's product each year. The expected annual income related to this equipment follows.
Sales $75,000
Costs Materials, labor, and overhead (except depreciation on new equipment) 40,000
Depreciation on new equipment 10,000
Selling and administrative expenses 7,500
Total costs and expenses 57,500
Pretax income 17,500
Income taxes (40%) 7,000
Net income $10,500
Required:
a. Compute the payback period.
b. Compute the accounting rate of return for this equipment.
Answer:
a. 5.85 years
b. 17.5%
Explanation:
a. For the computation of payback period first we need to find out the annual cash flow which is shown below:-
Annual Cash Inflow = Sales - Material - Selling and Administrative Expenses - Income Tax
= $75,000 - $40,000 - $7,500 - $7,000
= $20,500
Payback period = Initial investment ÷ Annual cash flow
= $120,000 ÷ $20,500
= 5.85 years
b. The computation of the accounting rate of return is shown below:-
accounting rate of return = Net income ÷ Average investment
= $10,500 ÷ ($120,000 ÷ 2)
= $10,500 ÷ $60,000
= 17.5%
a. The payback period would be 5.85 years.
b. The accounting rate of return for the given equipment would be 17.5%.
The payback period is computed when the initial investment is divided by the annual cash flow of the business. Therefore, the annual cash flow would be derived as follows:
[tex]75,000 - $40,000 - $7,500 - $7,000\\=$20,500[/tex]
Here, material expense, selling and administrative expenses, and Income tax is all deducted from the total sales.
Now, the payback period is calculated below:
[tex]\frac{120,000}{20,500} \\=5.85[/tex]
Finally, the accounting rate of return computation would be:
[tex]\frac{10,500}{60,000} \\=0.175*100\\=17.5[/tex]
Here, the net income is divided by average investment, that is:
[tex]\frac{120,000}{2} \\=60,000[/tex]
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Timberline Associates uses the weighted-average method in its process costing system. The following data are for the first processing department for a recent month:
Work in process, beginning:
Units in process 2,400
Percent complete with respect to materials 75%
Percent complete with respect to conversion 50%
Costs in the beginning inventory:
Materials cost $8,400
Conversion cost $7,200
Units started into production during the month 20,800
Units completed and transferred out 22,200
Costs added to production during the month:
Materials cost $97,400
Conversion cost $129,600
Work in process, ending:
Units in process 1,000
Percent complete with respect to materials 80%
Percent complete with respect to conversion 60%
Required:
A. Determine the equivalent units of production.
B. Determine the costs per equivalent unit.
C. Determine the cost of ending work in process inventory.
D. Determine the cost of the units transferred to the next department.
Elin owes Floyd $10,000. Floyd assigns the claim to Gary. Gary does not notify Elin of the assignment. A week later, Floyd assigns the same claim to Holly. Holly immediately notifies Elin of the assignment. Holly has Group of answer choices priority to payment in all states. priority to payment in states that follow the English rule. no priority to payment. priority to payment in most states.
Answer: priority to payment in states that follow the English rule
Explanation:
From the question, we are told that Elin owes Floyd $10,000 but Floyd assigns the claim to Gary and that Gary does not notify Elin of the assignment.
A week later, Floyd assigns the same claim to Holly. Holly immediately notifies Elin of the assignment. Holly has priority to payment in states that follow the English rule.
Holly has priority claim because Holly has already notified Elin of the task before and therefore has priority to payment in states that follow the English rule.
Option B is correct
The University Store, Inc. is the major bookseller for four nearby colleges. An income statement for the first quarter of the year is presented below: University Store, Inc. Income Statement For the Quarter Ended March 31 Sales $ 800,000 Cost of goods sold 560,000 Gross margin 240,000 Selling and administrative expenses Selling $ 100,000 Administrative 110,000 210,000 Net operating income $ 30,000 On average, a book sells for $40.00. Variable selling expenses are $3.00 per book; the remaining selling expenses are fixed. The variable administrative expenses are 5% of sales; the remainder of the administrative expenses are fixed. The net operating income computed using the contribution approach for the first quarter is:
Answer: $30,000
Explanation:
Sales are $800,000 and the average price is $40. Number of units sold is;
= 800,000/40
= 20,000 units
Sales $ 800,000
Less: Cost of Goods Sold ($560,000)
Gross Margin $240,000
Less : Variable Costing
Selling Expenses (20,000 units X $3.00) ($60,000)
Administrative Expenses (5% of $ 800,000) ($40,000)
Contribution Margin $140,000
Less: Fixed Cost
Selling Expenses ($100,000 - $60,000) ($40,000)
Administrative Expenses ($110,000 -$40,000) ($70,000)
Net Operating Income $30,000
Oak Outdoor Furniture manufactures wood patio furniture. If the company reports the following costs for June 2018,Wood $ 270,000Nails, glue, stain 18,000Depreciation on saws 5,300Indirect manufacturing labor 45,000Depreciation on delivery truck 1,700Assemblyline workers' wages 51,000What is the balance in the Manufacturing Overhead account before overhead is allocated to jobs? Assume that the labor has beenincurred, but not yet paid. Prepare journal entries for overhead costs incurred in June. What is the balance in the Manufacturing Overhead account before overhead is allocated to jobs?1. First, prepare an entry for the overhead costs for materials used.2. Next, prepare an entry for the overhead costs for labor incurred.3. Finally, prepare an entry for all other overhead costs.
Answer:
0. Manufacturing Overhead account balance before allocation.
Every expense incurred that is not directly linked to manufacturing of wood patio furniture goes here.
Oak Outdoor Furniture Manufacturing Overhead June 30
Nails, Glue, Stain 18,000
Depreciation on Saws 5,300
Indirect Manufacturing Labour 45,000
Balance $68,300
1. Journal entry for the overhead costs for materials used.
DR Manufacturing Overhead $18,000
CR Raw material Inventory $18,000
(To record cost of indirect materials used)
2. Journal entry for the overhead costs for labor incurred.
DR Manufacturing Overhead $45,000
CR Wages Payable $45,000
(To record cost of overhead labor costs incurred)
3. Journal entry for all other overhead costs.
DR Manufacturing Overhead $5,300
CR Accumulated Depreciation $5,300
(To record depreciation on saws)
The next dividend payment by Savitz, Inc., will be $2.12 per share. The dividends are anticipated to maintain a growth rate of 8 percent forever. If the stock currently sells for $43 per share, what is the required return?
Answer:
The answer is 12.9%
Explanation:
This question will be solved using the Dividend Discount Model(DDM).
Po = D1/r - g
Po is the current worth of stocks
D1 is the next dividend paid
r is the rate of return
g is the growth rate
$43 = $2.12/ r - 0.08
43r - 3.44 = 2.12
43r = 5.56
r = 5.56/43
=0.129
Expressed as a percentage:
The required return for Savitz, Inc., is therefore 12.9%
Suppose you're in charge of establishing economic policy for this small island country. Which of the following policies would lead to greater productivity in the weaving industry? Check all that apply. Sharply increasing the interest rate on student loans to people pursuing advanced degrees in weaving Imposing restrictions on foreign ownership of domestic capital Encouraging saving by allowing workers to set aside a portion of their earnings in tax-free retirement accounts Imposing a tax on looms
Answer:
Encouraging saving by allowing workers to set aside a portion of their earnings in tax-free retirement
Imposing restrictions on foreign ownership of domestic capital
Explanation:
Determine the ending inventory using the periodic inventory system and the weighted average cost method (rounded to the nearest cent), assuming that 18 units were sold at a price of $14. Date Item Units Cost Total June 1 Beginning inventory 6 $5 $30 June 12 Purchase 10 6 60 June 18 Purchase 8 7 56 Totals 24 — $146 a.$36.48 b.$109.44 c.$145.92 d.$56.00
Answer:
The ending inventory using the periodic inventory system and the weighted average cost method is $36.48
Explanation:
Weighted Average Method.
The average cost of goods held is recalculated each time a new delivery of goods is received. Issues are then priced out at this weighted average cost.
First Calculate the average cost per unit
average cost per unit = Total cost / total units
= ($30 + $60 + $56) / 24
= $6.08
Then calculate ending inventory cost
ending inventory cost = units at hand × average cost per unit
= 6 units × $6.08333
= $36.48
Conclusion :
The ending inventory using the periodic inventory system and the weighted average cost method is $36.48
n January, Marigold company requisitions raw materials for production as follows: Job 1 $920, Job 2 $1,600, Job 3 $720, and general factory use (indirect materials) $700. Prepare a summary journal entry to record raw materials used. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)
Answer and Explanation:
The summarized journal entry for using the raw material is shown below:
Work in process inventory $3,240 ($920 + $1,600 + $720) Dr
Manufacturing overhead 700 Dr
To Raw material inventory $3,940
(Being the raw material used is recorded)
For recording this we debited the work in process and factory overhead as it increased the assets and expenses and credited the raw material inventory as it decreased the assets
A seller accepts a contingent backup offer from a second buyer and notifies the first buyer under a release clause. The first buyer decides to remove the sale of buyer's property contingency. What happens next
Answer: Completion of transaction and down payment
Explanation:
Contingency backup offer is when the seller has an already potential buyer for a property.
In this scenario, the seller would have to conclude with the first buyer to avoid fractions and disagreement in some factors and to see if the buyer can make a down payment on the propery.
In November, one of the processing departments at Goodsell Corporation had beginning work in process inventory of $36,000 and ending work in process inventory of $35,000. During the month, $427,000 of costs were added to production and the cost of units transferred out from the department was $428,000. The company uses the FIFO method in its process costing system. In the department's cost reconciliation report for November, the total cost to be accounted for would be:__________.a) $890,000b) $71,000c) $463,000d) $926,000
Answer:
c) $463,000
Explanation:
Goodsell Corporation
FIFO Method
Current Costs
Costs Added $ 427,000
Add Beginning Work in Process Inventory $36,000
Total Current Cost $ 463,000
Cost Transferred Out $ 428,000
Add Ending Work in Process Inventory $35,000
Total Current Cost $ 463,000
FIFO assigns the current period costs to the inventories. Current period costs are obtained by adding the costs transferred out and ending inventories costs or beginning costs and costs added.
When analyzing stages of economic development in the United States, it appears that we have entered the "tertiary stage." This is a stage marked by a shift toward:_______
A) agriculture.B) manufacturing.C) services.D) population increases.
Answer:
C) services.
Explanation:
This is easily explained to be the stepping in to a tertiary stage. As it is explained that economic development analysis stages consists of different phases and levels. This services that is been denoted in this growth in the US plays a key role in financial services, humanity, health and other visible relevant parts which help in the building and aiding of economic growth of a country's economy.
Information technology and educational services in a product offering. These services are seen to boost different parts of an economy especially in developing countries is mostly concentrated in financial services, hospitality, retail, health and human services.
g "6. Financially, why would a company: (a) increase its dividend; (b) buy back some of its common stock shares; (c) pay down some of its debt; (d) increase its use of internal financing; (e) take the public firm private?"
Answer:
(a) increase its dividend;
dividends are increased for two reasons:
the company has excess cash and it doesn't have any possible investments on handthe board and upper management want to increase the stock price and higher dividends always result in higher stock prices, even if it is only in the short run.(b) buy back some of its common stock shares;
the company has excess cash and the board and upper management believe that the stock price is too low.(c) pay down some of its debt;
the company has excess cash and it considers that the cost of its debt is too high and it can get cheaper financing from other sources if needed.(d) increase its use of internal financing;
the board and upper management considers that the company needs to invest in new or existing projects and they consider that the financing costs are too high. Also, on the long run if things work well, the stock price should increase.(e) take the public firm private
the company has excess cash and the board and upper management believe that the stock price is too low. It is similar to (b) only on an extreme situation.The calculated cost of trade credit for a firm that buys on terms of 2/10, net 30, is lower (other things held constant) if the firm plans to pay in 40 days than in 30 days.
A. True
B. False
Answer:
A. True
Explanation:
The terms of 2/10, net 30 implies that the firm is entitled to receive a 2 percent discount if it makes payment within 10 days for the goods it bought on term but the seller expects to pay full amount of the amount due in 30 days if it fails to pay within 10 days.
However, since there will be no more discount after the discount period, the cost of trade credit will continue to fall longer the payment is extended. For this question this can be demonstrated using the formula for calculating the cost of trade discount as follows:
Cost of trade discount = {[1 + (discount rate / (1 - discount rate))]^(365/days after discount)} - 1 ................... (1)
We can now applying equation (1) as follows:
For payment in 40 days
Cost of trade credit (payment in 40 days)= {[1 + (0.02 / (1 - 0.02))]^(365/40)} - 1 = 0.202436246672765, or 20%
For payment in 30 days
Cost of trade credit (payment in 30 days) = {[1 + (0.02 / (1 - 0.02))]^(365/30)} - 1 = 0.278643315029666, or 28%
Conclusion
Since the 20% calculated cost of trade credit for payment in 40 days is lower than 28% calculated cost of trade credit for payment in 30 days, the correct option is A. True. That is, the calculated cost of trade credit for a firm that buys on terms of 2/10, net 30, is lower (other things held constant) if the firm plans to pay in 40 days than in 30 days.
Moody Corporation uses a job-order costing system with a plantwide predetermined overhead rate based on machine-hours. At the beginning of the year, the company made the following estimates:
Machine-hours required to support estimated production 155,000
Fixed manufacturing overhead cost $ 653,000
Variable manufacturing overhead cost per machine-hour $ 4.70
Required:
1. Compute the plantwide predetermined overhead rate.
2. During the year, Job 400 was started and completed. The following information was available with respect to this job:
Direct materials $ 390
Direct labor cost $ 220
Machine-hours used 37
Compute the total manufacturing cost assigned to Job 400.
3. If Job 400 includes 60 units, what is the unit product cost for this job?
4. If Moody uses a markup percentage of 120% of its total manufacturing cost, then what selling price per unit would it have established for Job 400?
find- Predetermined overhead rate =
total manufacturing cost=
If Job 400 includes 60 units, what is the unit product cost for this job?
If Moody uses a markup percentage of 120% of its total manufacturing cost, then what selling price per unit would it have established for Job 400?
Answer:
Instructions are below.
Explanation:
Giving the following information:
Machine-hours required to support estimated production 155,000
Fixed manufacturing overhead cost $ 653,000
Variable manufacturing overhead cost per machine hour $ 4.70
First, we need to calculate the predetermined overhead rate.
Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base
Predetermined manufacturing overhead rate= (653,000/155,000) + 4.7
Predetermined manufacturing overhead rate= $8.91 per machine hour
Job 400:
Direct materials $ 390
Direct labor cost $ 220
Machine-hours used 37
To allocate overhead, we need to use the following formula:
Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base
Allocated MOH= 8.91*37= $329.67
Now, we can calculate the total cost and unitary cost:
Total cost= 390 + 220 + 329.67= 939.67
Unitary cost= 939.67/60= $15.66
Finally, the selling price for Job 400:
Selling price0 939.67*1.2= $1,127.6
Assume that the following data characterize the hypothetical economy of Trance: money supply = $200 billion; quantity of money demanded for transactions = $160 billion; quantity of money demanded as an asset = $10 billion at 12 percent interest, increasing by $10 billion for each 2-percentage-point fall in the interest rate.
a. What is the equilibrium interest rate in Trance? _____ percent.
b. At the equilibrium interest rate, what is the quantity of money supplied, the money demanded, the amount of money demanded for transaction, and the amount of money demanded as an asset in trace?
Quantity of money supplied = $ _____ billion
Quantity of money demanded = $ _____ billion
Amount of money demanded for transactions = $ _____ billion
Amount of money demanded as an asset = $_____ billion
Answer:
a. What is the equilibrium interest rate in Trance?
The equilibrium interest rate is 6%, because it is the interest rate that brings the money supply and the money demand to equilibrium.
At 12% interest rate, the quantity of money demanded is 170 billion, while the money supply is 200 billion.
The quantity of moned demanded as an asset increases by 10 billion if the interest rate falls by two percentage points. Thus, if the interest rate falls 6 percentage points, the quantity of money demanded as an asset will increase by 30 billion, reaching 40 billion.
At this point, money demand is:
$160 billion (money demanded for transactions) + $40 billion (money demanded as an asset) = $200 billion.
Which is the same as the money supply.
b. At the equilibrium interest rate, what is the quantity of money supplied, the money demanded, the amount of money demanded for transaction, and the amount of money demanded as an asset in trace?
The quantity of money supplied is still 200 billion.
The quantity of money demanded is 200 billion.
The amount of money demanded for transactions is 160 billion.
And the amount of money demanded as an asset is 40 billion.
A total asset turnover ratio of 5.1 indicates that: Multiple Choice For every $1 in sales, the firm acquired $5.1 in assets during the period. For every $1 in assets, the firm produced $5.1 in net sales during the period. For every $1 in assets, the firm earned gross profit of $5.1 during the period. For every $1 in assets, the firm earned $5.1 in net income. For every $1 in assets, the firm paid $5.1 in expenses during the period.
Answer:
For every $1 in assets, the firm produced $5.1 in net sales during the period.
Explanation:
The formula to compute the total asset turnover ratio is shown below:
Total Asset turnover ratio = Net Sales ÷ Average Total Asset
where,
Net sales come after deducting the sales discounts, and other expenses
And, the average total assets could be computed by taking an average of opening and closing total assets
So, the total asset turnover shows that for every $1 of assets would create $5.1 of sales
Hence, the first option is correct
A 10% coupon bond, $1,000 par value, annual payments, 10 years to maturity is callable in 3 years at a call price of $1,100. If the bond is selling today for $975, the yield to call is _________.
Answer:
13.98%.
FV = 1100, n = 3, PMT = 100, PV = -975, i = 13.98%.
Cold Chiller Corporation (CCC) has annual sales of $10 million, cost of goods sold of 60 percent, average age of inventory of 80 days, average collection period of 35 days, average payment period of 30 days, and purchases that are 60 percent of cost of goods sold. How much does CCC have invested in its cash conversion cycle assuming a 365-day year?
Answer:
Cold Chiller Corporation (CCC)
Investment in cash conversion cycle:
= $10 million x 60% = $6million
which is invested for 145 (80 + 35 + 30) days before being realized as cash.
Explanation:
The cash conversion cycle (CCC) is a metric that expresses the time (measured in days) it takes for a company to convert its investments in inventory and other resources into cash flows from sales. It gives us an indication as to how long it takes a company to collect cash from sales of inventory. Often a company will finance its inventory instead of paying for it with cash up front.
The formula for the Cash Conversion Cycle is:
CCC = Days of Sales Outstanding PLUS Days of Inventory Outstanding MINUS Days of Payables Outstanding.
CCC = DSO + DIO – DPO.
Days of Sales outstanding:
DSO = [(Beginning Accounts Receivable + Ending Account Receivable) / 2] / (Revenue / 365)
Days of Inventory Outstanding:
DIO = [(Beginning Inventory + Ending Inventory / 2)] / (COGS / 365)
Operating Cycle = DSO + DIO.
Days of Payables Outstanding:
DPO = [(Beginning Accounts Payable +Ending Accounts Payable) / 2] / (COGS / 365)
Hiram’s Lakeside is a popular restaurant located on Lake Washington in Seattle. The owner of the restaurant has been trying to better understand costs at the restaurant and has hired a student intern to conduct an activity-based costing study. The intern, in consultation with the owner, identified three major activities and then completed the first-stage allocations of costs to the activity cost pools. The results appear below: Activity Cost Pool Activity Measure Total Cost Total Activity Serving a party of diners Number of parties served $ 33,000 6,000 parties Serving a diner Number of diners served $ 138,000 15,000 diners Serving a drink Number of drinks ordered $ 24,000 10,000 drinks The above costs include all of the costs of the restaurant except for organization-sustaining costs such as rent, property taxes, and top-management salaries. Some costs, such as the cost of cleaning the linens that cover the restaurant's tables, vary with the number of parties served. Other costs, such as washing plates and glasses, depends on the number of diners served or the number of drinks served. Prior to the activity-based costing study, the owner knew very little about the costs of the restaurant. She knew that the total cost for the month (including organization-sustaining costs) was $240,000 and that 15,000 diners had been served. Therefore, the average cost per diner was $16.
Required:
1. According to the activity-based costing system, what is the total cost of serving each of the following parties of diners? (Round your intermediate calculations and final answers to 2 decimal places.)
a. A party of four dinners who order three drinks-?
b. A party of two dinners who do not order any drinks-?
c. A party of one dinner who order two drinks-?
2. Convert the total costs you computed in (1) above to costs per diner. In other words, what is the average cost per diner for serving each of the following parties? (Round your intermediate calculations to 2 decimal places and final answers to 3 decimal places.)
a. A party of four dinners who order three drinks-?
b. A party of two dinners who do not order any drinks-?
c. A party of one dinner who order two drinks-?
Answer:
Kindly check attached picture
Explanation:
Required:
1. According to the activity-based costing system, what is the total cost of serving each of the following parties of diners? (Round your intermediate calculations and final answers to 2 decimal places.)
a. A party of four dinners who order three drinks-?
b. A party of two dinners who do not order any drinks-?
c. A party of one dinner who order two drinks-?
2. Convert the total costs you computed in (1) above to costs per diner. In other words, what is the average cost per diner for serving each of the following parties? (Round your intermediate calculations to 2 decimal places and final answers to 3 decimal places.)
a. A party of four dinners who order three drinks-?
b. A party of two dinners who do not order any drinks-?
c. A party of one dinner who order two drinks-?
Kindly check attached picture for detailed explanation.
Average cost per dinner is $12.375, $11.95, $19.50 respectively
Average cost based problem:Computation:
1.A.
Activity pool Activity rate Activity Activity cost
Parties $5.5 1 $5.5
Dinners $9.2 4 $36.8
Drinks $2.4 3 $7.2
Total $49.50
1.B.
Activity pool Activity rate Activity Activity cost
Parties $5.5 1 $5.5
Dinners $9.2 2 $18.4
Drinks $2.4 0 0
Total $23.9
1.C.
Activity pool Activity rate Activity Activity cost
Parties $5.5 1 $5.5
Dinners $9.2 1 $9.2
Drinks $2.4 2 $4.8
Total $19.50
2. Average cost per dinner
A = 49.50 / 4 = $12.375 per dinner
B =23.9 / 2 = $11.95 per dinner
C = 19.50 / 1 = $19.50 per dinner
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A stock has an expected return of 12.6 percent, the risk-free rate is 7 percent, and the market risk premium is 10 percent. What must the beta of this stock be
Answer:
0.56
Explanation:
In this question we used the Capital Asset Pricing Model formula i.e shown below:
As we know that
Expected rate of return = Risk free rate of return + Beta × market risk premium
12.6% = 7% + Beta × 10%
12.6% - 7% = Beta × 10%
5.6% = Beta × 10%
So, the beta is
= 5.6% ÷ 10%
= 0.56
Hence, the beta of the stock is 0.56
A company issued 8%, 15-year bonds with a par value of $550,000 that pay interest semiannually. The market rate on the date of issuance was 8%. The journal entry to record each semiannual interest payment is:
Answer:
Debit Credit
Bond Interest Expense $22,000
Cash $22,000
Being semi-annual interest payment on bonds
Explanation:
The semi-interest payment on the bonds equals
Coupon rate × par Value × 1/2
Semi-annual interest payment = 8%× 550,000 × 1/2=22,000
Semi- annual payment = $22,000
The accounting entry to record the interest payment each time payment is made would be:
Debit Credit
Bond Interest Expense $22,000
Cash $22,000
Being semi-annual interest payment on bonds
Note that interest payment is an expense, hence to increase an expense the expense account is debit. On the other hand. the interest payment is a cash outflow, which reduces the cash asset, hence the cash account is credited.
When the Fed acts as a "lender of last resort," like it did in the financial crisis of 2007-2008, it is performing its role of
Answer:
The answer is Banker's bank
Explanation:
The Fed is performing its role as a banker's bank. The Fed is the U.S or the central bank in most countries are referred to banker's bank. It acts a commercial bank for all banks in the country.
Commercial banks in all countries have an account with the central bank. Commercial banks also have access to very short-term loans when it is in the distress. Banker's bank(The Fed) has the sole authority for the money supply in the economy.
Stocks X and Y have the following data. Assuming the stock market is efficient and the stocks are in equilibrium, which of the following statements is CORRECT? X Y Price $25 $25 Expected dividend yield 5% 3% Required return 12% 10% a. Stock X pays a higher dividend per share than Stock Y. b. Stock Y pays a higher dividend per share than Stock X. c. Stock Y has a lower expected growth rate than Stock X. d. One year from now, Stock X should have the higher price. e. Stock Y has the higher expected capital gains yield.
Answer:
a. Stock X pays a higher dividend per share than Stock Y.
Explanation:
stock x, dividend = $1.25
$25 = $1.25 / (12% - g)
12% - g = $1.25 / $25
12% - g = 5%
g = 7%
stock y, dividend = $0.75
$25 = $0.75 / (10% - g)
10% - g = $0.75 / $25
10% - g = 3%
g = 7%
both growth rates are equal, what varies are the dividends that the stocks yield and the required rates of return
The stock of Wiley United has a beta of 1. The market risk premium is 11.5 percent and the risk-free rate is 2.3 percent. What is the expected return on this stock in percent
Answer:
9.41%
Explanation:
Wiley United has a beta of 1
The market risk premium 11.5%
= 11.5/100
=0.115
Risk free rate is 2.3%
= 2.3/100
= 0.023
Therefore the expected rate of return can be calculated as follows
Expected rate of return= Risk free rate+beta(market return-risk free rate)
= 0.023+1(0.115-0.023)
= 1.023(0.092)
= 0.0941×100
=9.41%
Hence the expected return on the stock is 9.41%