The company has an opportunity to sell 40,000 additional units at $12 per unit. The additional sales would not affect its current expected sales. Direct materials and labor costs per unit would be the same for the additional units as they are for the regular units. However, the additional volume would create the following incremental costs: (1) total overhead would increase by 16% and (2) administrative expenses would increase by $172,000.
Calculate the combined total net income if the company accepts the offer to sell additional units at the reduced price of $13 per unit.
Answers
Answer:
$1,576,000
Explanation:
The computation of the combined total net income is shown below:
Particulars Normal volume Additional volume Combined total
Sales $6,000,000 $480,000 $6,480,000
(40,000 × $12)
Less: Costs and expenses
Direct material $800,000 $80,000 $880,000
($800,000 ÷ 400,000 × 40,000)
Direct labour $1,600,000 $160,000 $1,760,000
($1,600,000 ÷ 400,000 × 40,000)
Overhead $400,000 $64,000 $464,000
($400,000 × 16%)
Selling expenses $600,000 $0 $600,000
Administrative
expense $1,028,000 $172,000 $1,200,000
Total costs
and expenses $4,428,000 $476,000 $4,904,000
Incremental
income
(loss) from
new busines $1,572,000 $4,000 $1,576,000
We assume reduced price of $12 per unit instead of $13 per unit
Related Questions
On January 1, 2021, Maywood Hydraulics leased drilling equipment from Aqua Leasing for a four-year period ending December 31, 2024, at which time possession of the leased asset will revert back to Aqua. The equipment cost Aqua $412,184 and has an expected economic life of five years. Aqua expects the residual value at December 31, 2024, to be $50,000. Negotiations led to Maywood guaranteeing a $70,000 residual value. Equal payments under the lease are $100,000 and are due on December 31 of each year with the first payment being made on December 31, 2021. Maywood is aware that Aqua used a 5% interest rate when calculating lease payments.
Required:
1. Prepare the appropriate entry for Maywood on January 1, 2021, to record the lease.
2. Prepare all appropriate entries for Maywood on December 31, 2021, related to the lease.
Answers
Answer:
1/1/2021
Dr Right of use Asset 371,049
Dr Lease Payable 371,049
12/31/2021
Dr Interest Expense 18,552
Dr Lease Payable 81,448
Cr Cash 100,000
12/31/2021
Dr Amortization Expense 92,762
Cr Right of use Asset 92,762
Explanation:
Maywood Hydraulics
First step is to Calculate for PMT, FV and PV
N= 4, I= 5, PMT=100,000, FV=20,000, PV= 371,049
1/1/2021
Dr Right of use Asset 371,049
Dr Lease Payable 371,049
12/31/2021
Dr Interest Expense 18,552
(371,049*.05)
Dr Lease Payable 81,448
(100,000-18,552)
Cr Cash 100,000
12/31/2021
Dr Amortization Expense 92,762
Cr Right of use Asset 92,762
[ (371,049-0)/4 years]
Chloe makes $500 per week and spends all her income on books and tea. Books cost $25 each, and Chloe buys 16 each week. Tea costs $5 per cup, and Chloe buys 20 cups. When Chloeâs income falls to $450 per week, she cuts her consumption of books by 3 books and purchases 5 more cups of tea. Based on these figures, indicate whether each of the following statements is true or false.
a. Books are an inferior good.
1. True
2. False
b. Tea is a necessity.
1. True
2. False
c. Books are a luxury good, and tea is an inferior good.
1. True
2. False
Answers
Answer:
hi i reallly tried but dont want to give an answer that is wrong
plz forgive me
god bless u
Explanation:
Russell Co. received a $680 utility bill for the current month's electricity. It is not due until the end of the next month which is when they intend to pay it. Which of the following general journal entries will Russell Co. make to record the receipt of the bill?
a. Utilities Expense 400
Accounts Payable 400
b. Accounts Payable 400
Utilities Expense 400
c. No journal entry is required.
d. Cash 400
Utilities Expense 400
e. Utilities Expense 400
Accounts Receivable 400
Answers
The correct options are :
a. Utilities Expense 680
Accounts Payable 680
b. Accounts Payable 680
Utilities Expense 680
c. No journal entry is required.
d. Cash 680
Utilities Expense 680
e. Utilities Expense 680
Accounts Receivable 680
Answer:
a. Debit Utilities Expense $680
Credit Accounts Payable $680
Explanation:
Russel Co has received a utility bill for the current month but they intend to pay next month.
Since the expense is for this month it must be recognised now. So there will be a debit to the Utilities Expense account for $680.
The payment is not being made now but in the next month. This is an amount the business owes so it will be recorded as a credit to Accounts Payable of $680
Accounts payable is used to record monies that the business owes its creditors. Payments are due at a future date.
Answer:
Debit Utilities Expense 680
Credit Accounts Payable 680
Explanation:
Russell Co. Journal entry to record the receipt of the bill will be:
Debit Utilities Expense 680
Credit Accounts Payable 680
Since Russell Co. received a $680 utility bill which is not yet due until the end of the next month which means we have to Debit Utilities Expense with 680 which is the amount not yet due and Credit Accounts Payable with the same amount .
Decision Making Mystic Bottling Company bottles popular beverages in the Bottling Department. The beverages are produced by blending concentrate with water and sugar. The concentrate is purchased from a concentrate producer. The concentrate producer sets higher prices for the more popular concentrate flavors. A simplified Bottling Department cost of production report separating the cost of bottling the four flavors follows:
A B C D E
1 Orange Cola Lemon-Lime Root Beer
2 Concentrate $ 4,625 $129,000 $ 105,000 $ 7,600
3 Water 1,250 30,000 25,000 2,000
4 Sugar 3,000 72,000 60,000 4,800
5 Bottles 5,500 132,000 110,000 8,800
6 Flavor changeover 3,000 4,800 4,000 10,000
7 Conversion cost 1,750 24,000 20,000 2,800
8 Total cost transferred to finished goods $19,125 $391,800 $324,000 $36,000
9 Number of cases 2,500 60,000 50,000 4,000
10 Beginning and ending work in process inventories are negligible, so they are omitted from the cost of production report. The flavor changeover cost represents the cost of cleaning the bottling machines between production runs of different flavors.
Determine the cost per case for each of the four flavors. Round your answers to two decimal places
Orange Cola Lemon-Lime Root Beer
per case $_____ $_____ $_____ $_____
Answers
Answer and Explanation:
As per the scenario the solution of cost per case for each of the four flavors is shown below:-
Particulars Orange Cola Lemon Lime Root Beer
Total Cost
transferred to
finished goods a $19,125 $391,800 $324,000 $36,000
Number of cases b 2,500 60,000 50,000 4,000
Cost Per Case $7.65 $6.53 $6.48 $9
(c = a ÷ b)
Therefore we divide the total cost transferred to finished out by number of cases to figure out the cost per case.
Fifteen years ago, Mr. Fairhold paid $50,000 for a single-premium annuity contract. This year, he began receiving a $1,300 monthly payment that will continue for his life. On the basis of his age, he can expect to receive $312,000. How much of each monthly payment is taxable income to Mr. Fairhold
Answers
Answer: $1091.61
Explanation:
From the question, we are told that fifteen years ago, Mr. Fairhold paid $50,000 for a single-premium annuity contract and that this year, he began receiving a $1,300 monthly payment that will continue for his life and based on his age, he can expect to receive $312,000. The amount of each monthly payment is taxable income to Mr. Fairhold goes thus:
Based on the question, Mr Fairhold will have a tax free return of the $50,000 paid. The exclusion ratio will be the investment divided by the expected return. This will be:
= $50,000/$312,000
= 0.1603
Since he received monthly payment of $1,300 and exclusion ratio is 0.1603, the tax free return on investment will be:
= $1,300 × 0.1603
= $208.39
Taxable annuity payment will now be:
= $1300 - $208.39
= $1091.61
Sub Sandwiches of America made the following expenditures related to its restaurant.
1. Replaced the heating equipment at a cost of $250,000.
2. Covered the patio area with a clear plastic dome and enclosed it with glass for use during the winter months. The total cost of the project was $750,000.
3. Performed annual building maintenance at a cost of $24,000.
4. Paid for annual insurance for the facility at $8,800.
5. Built a new sign above the restaurant, putting the company name in bright neon lights, for 9,900.
6. Paved a gravel parking lot at a cost of $65,000.
Required:
Sub Sandwiches of America credits cash for each of these expenditures. Select the account it debits for each.
Answers
Answer:
1. Heating Equipment
2. Premises
3. Maintenance Expense
4. Prepaid Insurance
5. Intangible Asset ; Logo
6. Premises
Explanation:
1. Replacement of heating equipment is substantial hence it is capitalized to the Heating Equipment Account.
2. The project is capitalized to the Premises Account as it form part of premises.
3. Annual Building maintenance is a revenue expenditure not capitalized.
4. An Asset Insurance Prepaid for future economic benefits to be realized is recognized.
5. The new sign would result in inflow of economic benefit and is non-tangible hence Intangible Asset is recognized.
6. Work done is capitalized in the Premises Account
Coronado Company had the following department information for the month: Total materials costs $55000 Equivalent units of materials 10000 Total conversion costs $81000 Equivalent units of conversion costs 15000 What is the total manufacturing cost per unit
Answers
Answer:
10.9 per unit
Explanation:
Total manufacturing cost per unit= Material cost per unit + Conversion cost per unit
Material Cost per Unit= Total materials cos / Equivalent units of materials
Material cost per unit = 55000 / 10000 = 5.5
Conversion cost per unit = Total conversion costs / Equivalent units of conversion costs
Conversion cost per unit = 81,000 / 15000 = 5.4
Hence, Total manufacturing cost per unit = 5.5 +5.4 = 10.9 per unit
Pastina Company sells various types of pasta to grocery chains as private label brands. The company's reporting year-end is December 31. The unadjusted trial balance as of December 31, 2021, appears below.
Account Title Debits Credits
Cash 32,000
Accounts receivable 40,600
Supplies 1,800
Inventory 60,600
Notes receivable 20,600
Interest receivable 0
Prepaid rent 1,200
Prepaid insurance 6,600
Office equipment 82,400
Accumulated depreciation 30,900
Accounts payable 31,600
Salaries payable 0
Notes payable 50,600
Interest payable 0
Deferred sales revenue 2,300
Common stock 64,200
Retained earnings 30,000
Dividends 4,600
Sales revenue 149,000
Interest revenue 0
Cost of goods sold 73,000
Salaries expense 19,200
Rent expense 11,300
Depreciation expense 0
Interest expense 0
Supplies expense 1,400
Insurance expense 0
Advertising expense 3,300
Totals 358,600 358,600
Information necessary to prepare the year-end adjusting entries appears below.
Depreciation on the office equipment for the year is $10,300.
Employee salaries are paid twice a month, on the 22nd for salaries earned from the 1st through the 15th, and on the 7th of the following month for salaries earned from the 16th through the end of the month. Salaries earned from December 16 through December 31, 2021, were $900.
On October 1, 2021, Pastina borrowed $50,600 from a local bank and signed a note. The note requires interest to be paid annually on September 30 at 12%. The principal is due in 10 years.
On March 1, 2021, the company lent a supplier $20,600 and a note was signed requiring principal and interest at 8% to be paid on February 28, 2022.
On April 1, 2021, the company paid an insurance company $6,600 for a two-year fire insurance policy. The entire $6,600 was debited to prepaid insurance.
$560 of supplies remained on hand at December 31, 2021.
A customer paid Pastina $2,300 in December for 900 pounds of spaghetti to be delivered in January 2022. Pastina credited deferred sales revenue.
On December 1, 2021, $1,200 rent was paid to the owner of the building. The payment represented rent for December 2021 and January 2022 at $600 per month. The entire amount was debited to prepaid rent.
Required:
1. Prepare an income statement and a statement of shareholders’ equity for the year ended December 31, 2021, and a classified balance sheet as of December 31, 2021. Assume that no common stock was issued during the year and that $4,600 in cash dividends were paid to shareholders during the year.
2. Prepare the statement of shareholders' equity for the year ended December 31, 2021.
3. Prepare the classified balance sheet for the year ended December 31, 2021. (Amounts to be deducted should be indicated by a minus sign.)
Answers
Answer:
Adjusting entries
Depreciation on the office equipment for the year is $10,300.
Dr Depreciation expense 10,300
Cr Accumulated depreciation 10,300
Employee salaries are paid twice a month, on the 22nd for salaries earned from the 1st through the 15th, and on the 7th of the following month for salaries earned from the 16th through the end of the month. Salaries earned from December 16 through December 31, 2021, were $900.
Dr Wages expense 900
Cr Wages payable 900
On October 1, 2021, Pastina borrowed $50,600 from a local bank and signed a note. The note requires interest to be paid annually on September 30 at 12%. The principal is due in 10 years.
Dr Interest expense 1,518
Cr Interest payable 1,518
On March 1, 2021, the company lent a supplier $20,600 and a note was signed requiring principal and interest at 8% to be paid on February 28, 2022.
Dr Interest receivable 1,373
Cr Interest revenue 1,373
On April 1, 2021, the company paid an insurance company $6,600 for a two-year fire insurance policy. The entire $6,600 was debited to prepaid insurance.
Dr Insurance expense 2,475
Cr Prepaid insurance 2,475
$560 of supplies remained on hand at December 31, 2021.
Dr Supplies expense 1,240
Cr Supplies 1,240
A customer paid Pastina $2,300 in December for 900 pounds of spaghetti to be delivered in January 2022. Pastina credited deferred sales revenue.
No entry is required
On December 1, 2021, $1,200 rent was paid to the owner of the building. The payment represented rent for December 2021 and January 2022 at $600 per month. The entire amount was debited to prepaid rent.
Dr Rent expense 600
Cr Prepaid rent 600
Pastina Company
Income Statement
For the Year Ended December 31, 2021
Sales revenue $149,000
Interest revenue $1,373
Cost of goods sold -$73,000
Salaries expense -$20,100
Rent expense -$11,900
Depreciation expense -$10,300
Interest expense -$1,518
Supplies expense -$2,640
Insurance expense -$2,475
Advertising expense -$3,300
Net income = $25,140
Pastina Company
Balance Sheet
For the Year Ended December 31, 2021
Assets
Current assets:
Cash $32,000
Accounts receivable $40,600
Supplies $560
Inventory $60,600
Notes receivable $20,600
Interest receivable $1,373
Prepaid rent $600
Prepaid insurance $4,125
Total current assets: $160,458
Non-current assets:
Office equipment $82,400
Accumulated depreciation $41,200
Total non-current assets: $41,200
Total assets: $201,658
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $31,600
Wages payable $900
Interest payable $1,518
Deferred sales revenue $2,300
Total current liabilities: $36,318
Long term debt:
Notes payable $50,600
Total long term debt: $50,600
Total liabilities: $86,918
Stockholders' equity:
Common stock $64,200
Retained earnings $50,540
Total stockholders' equity: $114,740
Total liabilities and stockholders' equity: $201,658
retained earnings = previous balance + net income - dividends = $30,000 + $25,140 - $4,600 = $50,540
Pastina Company
Statement of Shareholders’ Equity
For the Year Ended December 31, 2021
Balance on January 1: Common stock $64,200
Balance on January 1: Retained earnings $30,000
Net income 2021 $25,140
- Dividends ($4,600)
Subtotal $50,540
Balance on December 31: Common stock $64,200
Balance on December 31: Retained earnings $50,540
Exercise 9-6 Percent of sales method; write-off LO P3 At year-end (December 31), Chan Company estimates its bad debts as 0.30% of its annual credit sales of $931,000. Chan records its Bad Debts Expense for that estimate. On the following February 1, Chan decides that the $466 account of P. Park is uncollectible and writes it off as a bad debt. On June 5, Park unexpectedly pays the amount previously written off. Prepare Chan's journal entries for the transactions.
Answers
Answer:
Refer to the below for explanation.
Explanation:
December 31,
Amount estimated = Annual credit sales × 0.30.%
= $931,000 × 0.30%
= $2,793
Please see journal entries below;
December 31, Bad debts expense A/c ....................Dr. $2,793
To allowance for doubtful accounts .......Cr $2,793
February 1, Allowance for doubtful A/c........ Dr. $466
To accounts receivable P.Park..........Cr $466
June 5, Accounts receivable P. Park account......... Dr $466
To allowance for doubtful accounts......... Cr $466
June 5,. Cash A/c..... Dr $466
To accounts receivable P.Park.............Cr $466
A team is working on a cutting-edge technology, and does not have a lot of familiarity with the technical environment. As a result, it is struggling to estimate a complex story because the approach itself is not clear. How should the team proceed
Answers
Answer:
The answer is "Writing a SPIKE (a non-technical nonstory) as well as the period box until you accept your system planning article".
Explanation:
The working of the team is on state-of-the-art technology and its understanding of the relevant setting, and its main purpose of removing technological complexity is to conduct experiments-this is what a SPIKE tale is about. Whenever a story could not be predicted as the manager wants an experiment, it's indeed best to read a piece before continuing to work on the storyline.
Martin runs a successful house painting business. He runs his business out of his garage, which he got converted into an office space. Martin, who had previously worked as a house painter in another company had good know-how of how to run a house-painting business. After a storm destroyed public properties in his neighboring town, he contracted with the mayor of that town to fulfill any painting jobs required during the town's reconstruction. In order to meet this demand and expand business, he hired more house painters.
According to the BRIE model, which of the following is an example of Martin's resource competency?
A. Martin hiring more house painters to meet demand
B. Martin contracting with the mayor to help paint during reconstruction
C. Martin setting up the business's office in his garage
D. Martin having prior knowledge of the house-painting business
Answers
Answer:
A. Martin hiring more house painters to meet demand
Explanation:
The BRIE model for entrepreneurship refers to:
Boundary: creating a physical place for your business and creating a mental place for your business inside your customers' mindsResources: all the physical resources that your business possesses Intention: how determined you are in making your business succeed Exchange: actually make your business generate revenue and business transactionsFarming today in the U.S. is __________ productivity compared to a century ago, resulting in there being __________ farmers today than at the turn of the previous century.
Answers
Answer: d) much more fewer
Explanation:
Farming in the United States now employs large scale machinery to get the work done faster and more efficiently. As a result productivity has sky rocketed compared to a century ago and the contribution of Agriculture to US GDP is even higher than the entire GDP of some Countries such as Indonesia.
However, due to the large scale mechanisation involved as well as the diversification of the US economy, fewer people are farmers compared to a century ago with only 1.3% of employed Americans working in farms today.
Melissa recently paid $870 for round-trip airfare to San Francisco to attend a business conference for three days. Melissa also paid the following expenses: $400 fee to register for the conference, $260 per night for three nights’ lodging, $120 for meals, and $425 for cab fare. (Leave no answers blank. Enter zero if applicable. Do not round intermediate calculations. Round your final answer to the nearest dollar amount.) b. Suppose that while Melissa was on the coast, she also spent two days sightseeing the national parks in the area. To do the sightseeing, she paid $1,010 for transportation, $1,055 for lodging, and $495 for meals during this part of her trip, which she considers personal in nature. What amount of the total costs can Melissa deduct as business expenses?
Answers
Answer:
$2,535
Explanation:
you can deduct only business related costs:
50% of the money spent on meals = $120 x 50% = $60100% of transportation expenses = $870 + $425 = $1,295100% lodging expenses = $780100% of the registration fee = $400total deductions = $2,535Expenses that are not considered business related, e.g. sightseeing, cannot be deducted as business expenses.
Rafael has decided to retire once he has $1,000,000 in his retirement account. At the end of each year, he will contribute $7,000 to the account, which is expected to provide an annual return of 6.2%. How many years will it take until he can retire
Answers
Answer:
38 years
Explanation:
in order to determine the amount of years that it will take Rafael to retire, we can use the future value annuity formula:
future value = payment x annuity factor
we know:
future value = $1,000,000payment = $7,000annuity factor = $1,000,000 / $7,000 = 142.8571
the formula to calculate an annuity factor = [(1 + r)ⁿ - 1] / r
142.8571 = [(1 + 0.062)ⁿ - 1] / 0.062
8.8571 = (1.062)ⁿ - 1
9.8571 = (1.062)ⁿ
using a scientific calculator, we can determine the value of n = 38.0389491 years ≈ 38 years
An example of an inventory accounting policy that should be disclosed in Summary of Significant Accounting Policies is the:_________ . a. amount of income resulting from the involuntary liquidation of LIFO b. major backlogs of inventory orders. c. method used for pricing inventory. d. division of inventory by raw materials, work-in-process, finished goods.
Answers
Answer:
Option C
Explanation:
The overview of important accounting rules is a portion of the end notes that accompanies the financial statements of an company, outlining the key policies that the finance department is following. The policy overview is prescribed by the accounting system in force (like the GAAP or IFRS).
The approach a corporation uses to assess the inventory expense (inventory valuation) affects the financial reports explicitly. Thus, it should be depicted in summary of accounting policies.
The one that exemplifies an inventory accounting policy would be:
C). method used for pricing inventory.
Inventory PolicyThe financial statement at the end of the accounting books exemplifies one of the significant rules of accounting.
This highlights the major policies to be followed by the company and its finance team.
The outline of policies acting are provided through this and hence, they will help in offering the method for pricing of inventory in the firm.
Thus, option C is the correct answer.
Learn more about "Inventory" here:
brainly.com/question/14184995
Victoria Enterprises expects earnings before interest and taxes (EBIT) next year of $ 2.5 million. Its depreciation and capital expenditures will both be $ 295 comma 000, and it expects its capital expenditures to always equal its depreciation. Its working capital will increase by $ 53 comma 000 over the next year. Its tax rate is 40 %. If its WACC is 11 % and its FCFs are expected to increase at 4 % per year in perpetuity, what is its enterprise value?
Answers
Answer:
Value of Victoria Enterprises= $21,498,285.71
Explanation:
Free cash flow represents the amount that is left to all the providers of capital after the payment of all all operating expenses, working capital and investment in fixed asset expenditures.
It is computed as cash flow made from operation less capital expenditures
For Victoria Enterprises
The Free cash flow
= EBIT(1-T) + depreciation- increase in capital expenditure - increase in working capital
= 2.5 × (1-0.4) + 0.295 - 0.295 - 0.053
= 2,500,000 × (1-0.4) + 295,000 -295,000- 53,000
FCFF= $1,447,000
Value of a firm = FCFF (1+g)/(WACC-g)
g- growth rate - 4%, WACC- 11%, FCFF-1,447,000
Value of Victoria = 1,447,000 × (1+0.04)/(0.11- 0.04) = 21,498,285.71
Value of Victoria= $21,498,285.71
You work for a marketing agency advising a client considering whether to drop prices during an economic downturn. The client, a manufacturer of children's outdoor swing sets, believes that reducing prices would lead to more sales. The client is aware that lower prices would yield less revenue per sale. However, the client is unaware of any other possible negative consequences of dropping prices.
1. Advise the client of some of those possible consequences. Include a description of the psychological issues at play in dropping a brand's price.
2. Identify and evaluate price-adjustment strategies beyond a straightforward reduction in retail price that the client should consider.
Answers
Explanation:
1- One of the pieces of advice I could give the customer about lowering the balance sheet price is that this could generate different interpretations for the potential consumer, as there may be a perception that the price reduction of the product occurred due to the loss of product quality in relation to competing products.
2- There are other effective strategies for managing an economic crisis in addition to a direct reduction in the retail price, such as the psychological price strategy, which are the marketing techniques used by salespeople so that consumers respond emotionally to the product, and not a logical way, which generates a perception of greater benefit for the consumer, which can lead to increased sales without having to lower the price of the product.
Hancock Medical Supply Co., earned $85,000 of revenue on account during Year 1, its first year of operation. During Year 1, Hancock collected $67,600 of cash from its receivables accounts. The company did not write-off any uncollectible accounts. It estimates that it will be unable to collect 1% of revenue on account. What is the net realizable value of receivables that will be reported on the balance sheet at December 31, Year 1
Answers
Answer:
realizable value of the receivable = $16,550
Explanation:
First of all let us lay out the important information to be used in calculation clearly:
earnings = $85,000
receivables collected = $67,600
uncollectible amount = 1% of $85,000 = 0.01 × 85,000 = $850
Net realizable value of receivables is the total amount to be received, but that has not yet been received, and is not classified as uncollectible amount. This is calculated thus:
Net value of receivable = earnings - uncollectible amount - receivable collected.
= 85,000 - 850 - 67,600 = $16,550.
Note that the receivable collected is subtracted from the total earnings because it is no longer classified as receivable, once it has been received, hence whatever remains of the total earnings that has not bee received make up receivables.
1. If you are a major shareholder or an owner of a company, what could you do to make sure that your hired top managers are working in your interest? 2. If a firm is growing at its internal growth rate forever, what will happen to its capital structure or debt equity ratio? And why? 3. If you want to start a business, what long-term investments do you plan to choose and what assumptions and methods do you use to estimate your sales growth rates?
Answers
Answer:
1) As a shareholder, I have no direct control over what happens in the business. I'd influence the HR situation via the CEO. As the owner, I'd have a site down with the Head of HR to design a compensation plan that ties the performance of the Managers to the profitability of the company. One of such HR strategies are:
Profit-Sharing Incentives: This can be designed to be enforced on an enterprise-level or at the Business Unit Level or both. A profit-sharing compensation system ensures that a percentage (which is usually decided by the Remuneration Committee) is distributed according to points accrued based on the company's performance assessment for each unit/individual Sales/New Business Commission/Bonuses: This is a bonus/commission given for every sale/new business brought in to the company This encourages everyone in the company to become a salesperson. How much commission to give will depend on the advice fo the Chief Financial officer and the HR department.2) Internal Growth Rate is the maximum level of expansion attainable for a company using only self-financing or profits reinvested.
When this is the case, the company's capital structure will comprise mostly of ploughed back profits.
The Debt to Equity ratio will tend towards zero. This is because the company is funded more from Equity than from debt.
3) A long-term investment refers to an asset remains in the company's holding/books for a year and above. Its value is usually recorded on the assets part of a company's balance sheet. Investments which can be held for the long term are stocks, bonds, real estate, and interest earning savings.
Prior to igniting a startup, best practice requires that one holds a combination of various kinds of long-term investments. This portfolio will depend on a host of various factors such as:
Risk Affinity andEconomic PulseGovernment Bonds, Rent earning Real Estate and Interest-Earning Savings are relatively safe options. A ratio of 20:20:40 respectively will make for a great combination. The ratio for cash reserves is highest because, the higher the cash, the higher the interest. Besides, it's safe to keep maintain longterm investment that can be quickly converted when the need arises.
Sales Forecasting
As a startup, I'd go for the Intuitive Forecasting Method.
This method has a lot of demerits as it is not based on historical evidence or data. However, it's the best way to start off. If combined with market intelligence, (that is, data of businesses in a similar industry) this method can prove to be more effective.
Cheers!
The required return on the stock of Moe's Pizza is 10.8 percent and aftertax required return on the company's debt is 3.40 percent. The company's market value capital structure consists of 69 percent equity. The company is considering a new project that is less risky than current operations and it feels the risk adjustment factor is minus 1.9 percent. The tax rate is 39 percent. What is the required return for the new project? rev: 12_20_2018_QC_CS-152115 Multiple Choice 10.41% 6.19% 8.51% 9.99% 6.61%
Answers
Answer:
The required return for the new project is 6.87%
Explanation:
In order to calculate the required return for the new project we would have to calculate the Weighted Average Cost of Capital (WACC) adjusted by risk adjustment factor .
The Weighted Average Cost of Capital (WACC) = [After Tax Cost of Debt x Weight of Debt] + [Cost of equity x Weight of Equity]
After -tax Cost of Debt = 3.40%
Cost of Equity = 10.80%
Weight of Debt = 0.39
Weight of Equity = 0.69
Therefore, the Weighted Average Cost of Capital (WACC) = [After Tax Cost of Debt x Weight of Debt] + [Cost of equity x Weight of Equity]
= [3.40% x 0.39] + [10.80% x 0.69]
= 1.32% + 7.45%
= 8.77%
The required return for the new project = Weighted Average Cost of Capital – Risk Adjustment Factor
= 8.77% - 1.90%
= 6.87%
The required return for the new project is 6.87%
Similar to stock prices, bond values are derived as the discounted value of all cash flows received from bond ownership in exchange for the bond's price. The two main cash flows an investor receives in exchange for purchasing a bond are:
Answers
Answer: b. Interest or Coupon Payments (PMT) throughout the bond's life expand and the repayment of the principal or Face Value at the bond's maturity (FV).
Explanation:
For most bonds, a bond holder receives interest payments from the bond issuer in terms of coupon payments for the duration of the life of the bond. The coupon payment is a steady payment based on the par value of the bond.
When the bond matures, the bond holder receives the Principal/Face Value of the bond back. This value of usually the Par value of the bond regardless of how much the bond holder bought the bond for.
Assume the following data for Lusk Inc. before its year-end adjustments: Debit CreditSales $3,600,000 Cost of Merchandise Sold $2,100,000Estimated Returns Inventory 1800Customer Refunds Payable 900Estimated cost of merchandise that Will be returned in the next year 15,000Estimated percent of refunds for current year sales 0.8%Journalize the adjusting entries for the following: a. Estimated customer allowances b. Estimated customer returns
Answers
Answer:
a. Estimated customer allowances
December 31, 202x. estimated customer allowance
Dr Sales 27,900
Cr Customer refunds payable 27,900
total estimated refunds payable = $3,600,000 x 0.8% = $28,800 - $900 (account balance) = $27,900
b. Estimated customer returns
December 31, 202x. estimated customer returns
Dr Estimated returns inventory 13,200
Cr Cost of merchandise sold 13,200
total estimated returns $15,000 - $1,800 = $13,200
Explanation:
Sales $3,600,000
Cost of Merchandise Sold $2,100,000
Estimated Returns Inventory $1800
Customer Refunds Payable $900
Estimated cost of merchandise that Will be returned in the next year $15,000
Estimated percent of refunds for current year sales 0.8%
Stilley Corporation had earnings after taxes of $438,000 in 20X2 with 200,000 shares outstanding. The stock price was $42.10. In 20X3, earnings after taxes declined to $208,000 with the same 200,000 shares outstanding. The stock price declined to $28.30. a. Compute earnings per share and the P/E ratio for 20X2. (Do not round intermediate calculations. Round your final answers to 2 decimal places.) b. Compute earnings per share and the P/E ratio for 20X3. (Do not round intermediate calculations. Round your final answers to 2 decimal places.)\
Answers
Answer:
a) Earnings Per Share for 20X2 = 2.19
P/E ratio for 20X2 = 19.22
b) Earnings Per Share for 20X3 = 1.04
P/E ratio for 20X3 = 27.21
Explanation:
a) Compute earnings per share and the P/E ratio for 20X2.
The compute the earnings per share use the following:
Earnings Per Share for 20X2 = (Earnings after tax-Preference Dividend) / shares outstanding
[tex] = \frac{438,000 - 0}{200,000} = 2.19 [/tex]
Earnings Per Share for 20X2 = 2.19
Then find P/E ratio:
P/E ratio for 20X2 = Market Price per share / Earnings Per Share
[tex] \frac{42.10}{2.19} = 19.224 [/tex]
P/E ratio for 20X2 = 19.22
b) Compute earnings per share and the P/E ratio for 20X3.
The compute the earnings per share use the following:
Earnings Per Share for 20X3 =(Earnings after tax-Preference Dividend) / shares outstanding
[tex] = \frac{208,000 - 0}{200,000} = 1.04 [/tex]
Earnings Per Share for 20X3 = 1.04
Then find P/E ratio:
P/E ratio for 20X3 = Market Price per share / Earnings Per Share
[tex] \frac{28.30}{1.04} = 27.21 [/tex]
P/E ratio for 20X3 = 27.21
Tony saved enough money to place $125,500 in an investment generating 10% compounded monthly. He wants to collect a monthly income of $1,350, at the beginning of each month, for as long as the money lasts. How many months will Tony have this income coming to him?
A.165.
B.145.
C.192.
D.162.
Answers
Answer:
The answer is 162 months, option (D)
Explanation:
Solution
Given that:
Tony saved an amount of money =$125,500
Investment generates a =10% compounded monthly
A monthly income of =$1350
Now, we have to find How many months will Tony have this income coming to him
Thus
The current income value will be equal to = $125,500.
So,
125,500 = 1350 + 1350/1.0077 + 1350/1.0077^2 + 1350/1.0077^3 + ... + 1350/1.0077^n
125,500 = 1350 * 1.0077 / 0.0077 * ( 1 - (1/1.0077)^n )
Therefore n= 162 months
A company will pay a $2 per share dividend in 1 year. The dividend in 2 years will be $4 per share, and it is expected that dividends will grow at 5% per year thereafter. The expected rate of return on the stock is 12%.
Required:
a. What is the current price of the stock?
b. What is the expected price of the stock in a year?
c. Show that the expected return, 12%, equals dividend yield plus capital appreciation.
Answers
Answer:
current price P = $ 52.81
The expected price of the stock after one year = $57.16
The Total expected return for any investor after one year = 12%
Explanation:
Given that:
Dividend paid in 1 year = $2/ share
Dividend paid in 2 years = $4/share
Expect growth rate of the dividends g = 5% = 0.05
Expected rate of return on the stock r =12% = 0.12
Required:
a. What is the current price of the stock?
To calculate the current price of the stock ; we need to first determine the terminal value of the stock which can be done by using the formula:
[tex]Terminal \ Value = \dfrac{Dividend \ for \ the \ second \ year*(1+g)}{r-g}[/tex]
[tex]Terminal \ Value = \dfrac{4*(1+0.05)}{0.12-0.05}[/tex]
[tex]Terminal \ Value = \dfrac{4*(1.05)}{0.07}[/tex]
[tex]Terminal \ Value = \dfrac{4.2}{0.07}[/tex]
Terminal value = $60
Now; the current price of the stock is calculate as follows:
[tex]current \ price \ P = \dfrac{\$ 2}{(1+0.12)^1} + \dfrac{\$ 4 }{(1+0.12)^2} + \dfrac{\$ 60}{(1+0.12)^2}[/tex]
[tex]current \ price \ P = \dfrac{\$ 2}{1.12} + \dfrac{\$ 4 }{1.2544} + \dfrac{\$ 60}{1.2544}[/tex]
current price P = $1.79 + $3.19 + $47.83
current price P = $ 52.81
b) What is the expected price of the stock in a year?
The expected price of the stock after one year = [tex]\dfrac{\$ 4}{(1+0.12)^1}+ \dfrac{\$60}{(1+0.12)^1}[/tex]
The expected price of the stock after one year = $3.58 + $53.58
The expected price of the stock after one year = $57.16
c. Show that the expected return, 12%, equals dividend yield plus capital appreciation.
We understand now that the current price of the sock = $52.81
and the expected price of the stock after one year = $57.16 ; so any investor who purchased the stock at the current price will receive a dividend of $2 after one year.
Hence;
The Total expected return for any investor after one year =( (price after one year - current price ) + Dividend received) /current price
The Total expected return for any investor after one year =( ($57.16 - $52.81)+ $2 )/$52.81
The Total expected return for any investor after one year = ($4.35+$2)/$52.81
The Total expected return for any investor after one year = 0.12
The Total expected return for any investor after one year = 12%
The Campbell Company is considering adding a robotic paint sprayer to its production line. The sprayer's base price $1,080,000, and it would cost another $22,500 to install it. The machine falls into MACRS 3-year class, and it would be sold after 3 years for $605,000. The MACRS rates for 3 years are 0.333, 0.4445, 0.1481. The machine wold require an increase in the net working capital (inventory) of $15,500. The sprayer would no change revenues, but is expected to save the firm $380,000 per year in before-tax operating costs, mainly labor. Campbell's marginal tax rate is 35%.a. What is the Year 0 net cash flow?b. What are the net operating cash flows in Years 1, 2, 3?c. What is the additional Year 3-cash flow (i.e. after tax salvage and the return of working capital)?
d. If the project's cost of capital is 12%, should the machine be purchased?
Answers
Answer:
a. What is the Year 0 net cash flow?
= $1,102,500 + $15,500 = $1,118,000b. What are the net operating cash flows in Years 1, 2, 3?
NCF Year 1 = $375,496.38NCF Year 2 = $418,521.44NCF Year 3 = $304,148.09c. What is the additional Year 3-cash flow (i.e. after tax salvage and the return of working capital)?
$355,433.10d. If the project's cost of capital is 12%, should the machine be purchased?
NPV = $20,384.22 since it is positive, then the project should be carried out and the machine should be purchased.Explanation:
book value of the robotic sprayer = $1,080,000 + $22,500 = $1,102,500
useful life 3 years, salvage value $605,000
MACRS 3-year class:
0.333 x $1,102,500 = $367,132.50
0.4445 x $1,102,500 = $490,061.25
0.1481 x $1,102,500 = $163,280.25
requires an additional $15,500 investment in inventory
saves $380,000 per year
marginal tax rate 35%
net cash flow year 1 = [net savings x (1 - tax rate)] + (depreciation expense x tax rate) = ($380,000 x 65%) + ($367,132.50 x 35%) = $247,000 + $128,496.38 = $375,496.38
net cash flow year 2 = [net savings x (1 - tax rate)] + (depreciation expense x tax rate) = ($380,000 x 65%) + ($490,061.25 x 35%) = $247,000 + $171,521.44 = $418,521.44
net cash flow year 3 = [net savings x (1 - tax rate)] + (depreciation expense x tax rate) = ($380,000 x 65%) + ($163,280.25 x 35%) = $247,000 + $57,148.09 = $304,148.09
terminal cash flow = [sales price - (purchase cost - accumulated depreciation)] x (1 - tax rate) + recovered net working capital = [$605,000 - ($1,102,500 - $1,020,474)] x 0.65 + $15,500 = $355,433.10
using an excel spreadsheet I calculated the NPV:
Year 0 -$1,118,000
Year 1 $375,496.38
Year 2 $418,521.44
Year 3 $304,148.09 + $355,433.10 = $659,581.19
discount rate 12%
NPV = $20,384.22
A $ 43 comma 000,twominusmonth,10%note payable was issued on December 1, 2018. What is the amount of interest expense recorded in the year 2019? (Round your final answer to the nearest dollar.)
Answers
Answer:
Preparation of the amount of interest expense recorded in the year 2019
Dr Notes Payable 43,000
Dr Interest expense 358.33
($43,000 × 0.1% × 1/12)
Dr Interest Payable 358.33
($43,000 × 0.1% × 1/12)
Cr Cash 43,716.66
Explanation:
Since $ 43,000 2month and 10%note payable were been issued on December 1, 2018 this means we have to record the transaction by Debiting Notes Payable 43,000, Debiting Interest expense 358.33 ($43,000 × 0.1% × 1/12) and Debiting Interest Payable 358.33
($43,000 × 0.1% × 1/12) while we Credit Cash with 43,716.66(43,000+358.33+358.33)
GPR, Inc., has an inventory turnover of 18.42 times, a payables turnover of 10.93 times, and a receivables turnover of 8.24 times. What is the length of the company's cash cycle
Answers
Answer: 30.73 days
Explanation:
From the question, we are told that GPR, Inc., has an inventory turnover of 18.42 times, a payables turnover of 10.93 times, and a receivables turnover of 8.24 times. The length of the company's cash cycle for thus:
Let's assume that there are 365 days in a year.
The cash cycle will be:
= (365/18.42) + (365/8.24) − (365/10.93)
= 19.82 + 44.3 - 33.39
= 30.73
The length of the company's cash cycle is 30.73 days
Van Frank Telecommunications has a patent on a cellular transmission process. The company has amortized the patent on a straight-line basis since 2017, when it was acquired at a cost of $10.8 million at the beginning of that year. Due to rapid technological advances in the industry, management decided that the patent would benefit the company over a total of six years rather than the nine-year life being used to amortize its cost. The decision was made at the beginning of 2021.Required:
Prepare the appropriate adjusting entry for patent amortization in 2021 to reflect the revised estimate.
Answers
Answer:
The appropriate adjusting entry for patent amortization in 2021 to reflect the revised estimate would be as follows:
Amortization Expense Dr. 3 million
Patent Cr. 3 million
Explanation:
In order to Prepare the appropriate adjusting entry for patent amortization in 2021 to reflect the revised estimate we would have to make the following calculations:
Calculation after the Change:
Original Cost =$10.8 million
Annual Amortization (Old) =$10.8 million/9 = $1.2 million
Amortization till Date (2017 - 2021) = 1.2*4 = 4.8 million
Unamortized Value = 10.8 - 4.8 = 6 million
Remaining Life = 6 - 4 = 2 Years
New Amortization = Unamortized Value/Remaining Life = 6/2 = 3 million
Therefore, the appropriate adjusting entry for patent amortization in 2021 to reflect the revised estimate would be as follows:
Amortization Expense Dr. 3 million
Patent Cr. 3 million
Compute net income for 2019 by comparing total equity amounts for these two years and using the following information: During 2019, the owner invested $33,000 additional cash in the business (in exchange for common stock) and the company paid a $36,000 cash dividend.
Equity, December 31, 2018
Equity, December 31, 2019
The accounting records of Nettle Distribution show the following assets and liabilities as of December 31, 2018 and 2019.
December 31 2018 2019
Cash $55,530 $10,900
Accounts receivable 30,142 23,632
Office Supplies 4,755 3,483
Office equipment 145,958 155,473
Trucks 57, 115 66, 115
Building 0 190, 398
Land 0 47,511
Accounts payable 79,245 39,303
Note payable 0 137,909
Answers
Answer:
net income during 2019 = $109,045
Explanation:
total stockholder equity 2018 = assets - liabilities = $293,500 - $79,245 = $214,255
total stockholder equity 2019 = assets - liabilities = $497,512 - $177,212 = $320,300
change in equity from 2018 to 2019 = $106,045
$33,000 can be explained by additional capital invested, and the remaining $73,045 corresponds to change in retained earnings
change in retained earnings = net income - dividends distributed
$73,045 = net income - $36,000
net income = $109,045