Answer:
24,500 shares
Explanation:
Common stock par $10 (authorized 31200 shares) = $245,000
Treasury stock (at cost is $15 per share) =$750
Common stock issued = Common stock value / Stock value
Common stock issued = $245,000 / $10
Common stock issued =24,500 shares
Sunland Company had a balance in the Accounts Receivable account of $801000 at the beginning of the year and a balance of $901000 at the end of the year. Net credit sales during the year amounted to $8049000. The average collection period of the receivables in terms of days was:_______
a) 4 days.
b) 36.5 days.
c) 37 days.
d) 38.4 days.
Answer:
d) 38.4 days
Explanation:
Accounts receivable = 801,000 + 901,000 = 1,702,000
Average Account receivables = 1,702,000 / 2 = 851,000
Net credit sales = $8,049,000 / 851,000 = 9.5
The average collection period of the receivables in terms of days = 365 days / 9.5 =38.4 days
Accounts receivable days = 38.4 days
Lottery jackpots are often paid out over 20 or more years, but the winner can often choose to take a lump sum instead. For some, the cash option is a lot better. In January 2007, an 84 year old retired electrician and WWII veteran in Missouri won the $254 million Powerball jackpot. He was given the option of receiving the jackpot as $8.467 million immediately and $8.467 million per year for the next 29 years, or $120.504 million immediately. What discount rate does this option imply?
Answer:
the discount rate for this option implies to be 6.26%
Explanation:
From the given information; we are to determine the discount rate for the cash option.
Let r represent the discount rate and [tex]C_o[/tex] represent the cash option
The the discount rate for the cash option is related to the sum of all the Present Value of the cash flows together with the discount rate.
r = discount rate = ???
[tex]C_o = 8.467[/tex] for the next 29 years.
Mathematically;
[tex]PV = (1+r)*(\dfrac{C_o}{r}) *({1 - \dfrac{1}{(1+r)^{30}}) = \$ 120.504 \ million[/tex]
If discount rate (r) = 1%; we have:
[tex]PV = (1+0.01)*(\dfrac{8.467}{0.01}) *({1 - \dfrac{1}{(1+0.01)^{30}}) = \$ 120.504[/tex]
[tex]PV = (1.01)*(846.7) *({1 - 0.7419229178}) = \$ 120.504[/tex]
[tex]PV =220.699 \neq \$ 120.504[/tex]
If the discount rate r= 2% ;
[tex]PV = (1+0.02)*(\dfrac{8.467}{0.02}) *({1 - \dfrac{1}{(1+0.02)^{30}}) = \$ 120.504[/tex]
[tex]PV = (1.02)*(423.35}) *({1 - 0.552070889}) = \$ 120.504[/tex]
[tex]PV = 193.4234049 \neq \$ 120.504[/tex]
If the discount rate r= 4% ;
[tex]PV = (1+0.04)*(\dfrac{8.467}{0.04}) *({1 - \dfrac{1}{(1+0.04)^{30}}) = \$ 120.504[/tex]
[tex]PV = (1.04)*(211.675}) *({1 - 0.308318668}) = \$ 120.504[/tex]
[tex]PV = 152.2681118 \neq \$ 120.504[/tex]
If the discount rate r = 6%
[tex]PV = (1+0.06)*(\dfrac{8.467}{0.06}) *({1 - \dfrac{1}{(1+0.06)^{30}}) = \$ 120.504[/tex]
[tex]PV = (1.06)*(141.12}) *({1 - 0.1741101309}) = \$ 120.504[/tex]
PV = 123.5396349 ≠ 120.504 (but that was so close)
If the discount rate r = 6.26%
[tex]PV = (1+0.0626)*(\dfrac{8.467}{0.0626}) *({1 - \dfrac{1}{(1+0.0626)^{30}}) = \$ 120.504[/tex]
[tex]PV = (1.626)*(135.26}) *({1 - 0.161772856) = \$ 120.504[/tex]
PV = 120.4722 million which is approximately equal to $120.504 million
Thus ,the discount rate for this option implies to be 6.26%
To loosen credit the Federal Reserve will: A sell U.S. Government securities to bank dealers with an agreement to buy them back at a later date B buy U.S. Government securities from bank dealers with an agreement to sell them back at a later date C sell Foreign Government securities to bank dealers with an agreement to buy them back at a later date D buy Foreign Government securities from bank dealers with an agreement to sell them back at a later date
Answer:
B buy U.S. Government securities from bank dealers with an agreement to sell them back at a later date
Explanation:
The Federal reserve uses open market operations to regulate liquidity in the economy. This eases or restricts how bank dealers can give credit.
To ease credit giving ability of bank dealers the Federal Reserve will buy US Government securities from bank dealers. This gives them extra money which they can give out as loans to their customers.
On the other hand when credit needs to be tightened, the Federal Reserve will mop up cash by selling Government securities to the bank dealers
In response to the financial crisis that began in 2007, the government began to bail out banks deemed "too big to fail." Critics of this action argued that this would create the prospect of future bailouts and encourage banks to be fiscally irresponsible in the future. This illustrates
Answer:
The moral hazard problem
Explanation:
Moral hazard problem is defined as a situation where a party gets involved in a risky venture knowing that another party will incur the cost of failure.
For example if a borrower knows that he can take borrowed funds and default easily, he will tend to not pay back because the lender will bear the loss.
During the the financial crisis that began in 2007, the government began to bail out banks deemed "too big to fail."
This created fiscal irresponsibility in banks that knew if they are at risk of failing they will be bailed out by the government.
Suppose that Italy and Germany both produce rye and cheese. Italy's opportunity cost of producing a pound of cheese is 5 bushels of rye while Germany's opportunity cost of producing a pound of cheese is 10 bushels of rye.
By comparing the opportunity cost of producing cheese in the two countries, you can tell that ? ( Italy OR Germany? ) has a comparative advantage in the production of cheese and ? ( Italy OR Germany? ) has a comparative advantage in the production of rye.
Suppose that Italy and Germany consider trading cheese and rye with each other. Italy can gain from specialization and trade as long as it receives more than ? (1 bushel , 1/10 bushel,1/5 bushel,5 bushel,10 bushel ?) of rye for each pound of cheese it exports to Germany. Similarly, Germany can gain from trade as long as it receives more than ? (1 pound , 1/10 pound ,1/5 pound ,5 pound ,10 pound ?) of cheese for each bushel of rye it exports to Italy.
Based on your answer to the last question, which of the following prices of trade (that is, price of cheese in terms of rye) would allow both Germany and Italy to gain from trade? Check all that apply.
6 bushels of rye per pound of cheese
7 bushels of rye per pound of cheese
4 bushels of rye per pound of cheese
1 bushel of rye per pound of cheese
Answer:
Italy has a comparative advantage in the production of cheese.
Germany has a comparative advantage in the production of rye.
5 bushels of rye
1/10 pound of cheese
6 bushels of rye per pound of cheese
7 bushels of rye per pound of cheese
Explanation:
Italy: 1 pound of cheese = 5 bushels of rye
Germany: 1 pound of cheese = 10 bushels of rye
Therefore, the opportunity cost of producing one pound of cheese in Italy is lower than the cost of producing one pound of cheese in Germany, which means that Italy has a comparative advantage in the production of cheese. The opposite can be said about rye since it costs the Germans only half a pound of cheese to produce 5 bushels of rye, while it costs the Italians a whole pound. Therefore, Germany has a comparative advantage in the production of rye.
This means that Italy can gain from specialization if it gains more than 5 bushels of rye for each pound of cheese.
As for Germany, can gain from specialization if it gains more than 1/10 pound of cheese for each bushel of rye.
Therefore, from the alternatives presented, the following would represent a gain from trade for both countries:
6 bushels of rye per pound of cheese
7 bushels of rye per pound of cheese
Mary makes monthly deposits of $450 at the end of each month over 25 consecutive years to support her retirement. If the account earns an interest rate of 7.5%, which amount comes closest to the value of the deposits at the end?
a. $120,938
b. $343,343
c. $382,667
d. $394,767
e. $367,100
Answer:
d. $394,767
Explanation:
For computing the amount of deposit at the end we need to apply the future value formula i.e to be shown in the attachment
Given that,
Present value = $0
Rate of interest = 7.5% ÷ 12 months = 0.625%
NPER = 25 years × 12 months = 300 months
PMT = $450
The formula is shown below:
= -FV(Rate;NPER;PMT;PV;type)
So, after applying the above formula, the future value is $394,767
The financial statement effects of the budgeting process are summarized on the cash budget and the capital expenditures budget. true or false
Answer:
true
Explanation:
One of the most useful applications of business statistics involves comparing two samples to examine whether a difference between them is significant or more likely due to chance variation from one sample to the next.1. True2. False
Answer: True
Explanation:
Using the p-value (probability of error) approach to hypothesis testing, business analysts are able to compare two samples to see if they are statistically significant or just different by chance.
They compare the data between the two samples and express a p-value. They also set a significance level with the logic being that if the p-value is below the significance level then the difference between the samples is significant.
For example, with a significance level of 0.05, a p-value below this would mean that the difference is significant.
Lakeside Components wishes to purchase parts in one month for sale in the next. On June 1, the company has 12,000 parts in stock, although sales for June are estimated to total 12,900 parts. Total sales of parts are expected to be 10,500 in July and 11,100 in August.
Parts are purchased at a wholesale price of $15. The supplier has a financing arrangement by which Lakeside Components pays 60 percent of the purchase price in the month when the parts are delivered and 40 percent in the following month. Lakeside purchased 15,000 parts in May.
Required:
a. Estimate purchases (in units) for June and July.
June July
Merchandise to be purchased in units: ? units ? units
b. Estimate the cash required to make purchases in June and July.
Month of payment
June:
July:
Answer:
a. Estimate purchases (in units) for June and July.
June = 11,400 partsJuly = 11,100 partsb. Estimate the cash required to make purchases in June and July.
June = $192,600July = $168,300Explanation:
Beginning stock June 1 = 12,000 parts
June's expected sales = 12,900 parts
July's expected sales = 10,500 parts
August's expected sales = 11,100 parts
purchase price $15 per part
60% paid in current month and 40% paid in the next month
15,000 parts were purchased in May at $225,000 ($90,000 to be paid in June)
estimated purchases June = estimated sales June + estimated sales July - beginning inventory = 12,900 + 10,500 - 12,000 = 11,400
estimated purchases July = estimated sales July + estimated sales August - beginning inventory = 10,500 + 11,100 - 10,500 = 11,100
cash payments June = (May's purchases x 40%) + (June's purchases x 60%) = (15,000 x $15 x 40%) + (11,400 x $15 x 60%) = $90,000 + $102,600 = $192,600
cash payments July = (June's purchases x 40%) + (July's purchases x 60%) = (11,400 x $15 x 40%) + (11,100 x $15 x 60%) = $68,400 + $99,900 = $168,300
can target costing be applied to the banking industry in Ghana
Answer:
The banking industry in Ghana can introduce target costing. However, its application is much more difficult due to the nature of banking services.
Introducing target costing in the banking industry in Ghana will eliminate non-value adding activities that increase the cost of banking in Ghana. It will enable Ghanaian customers to be charged competitive prices for the banking services that are rendered to them, with no more room for process wastages. The quality of services will increase coupled with lowered costs. The service processes will be improved as they will be more focused on the customers, and less on the staff, as it currently obtains in Ghana.
However, the nature of banking services makes introduction of target costing somehow difficult. These characteristics of banking services include: a) the production and consumption of banking services are coincidental, as the services are consumed when they are being produced; b) banking services are not storable like goods; c) banking services are not comparable, one unit to another; d) banking services are not tangible; e) ownership of banking services is not transferable; and f) there is not market price for banking services, except the price limits imposed by regulatory bodies.
Explanation:
Target costing in the banking industry in Ghana will take the form of first determining the market price for services that are acceptable to customers, establishing a target profit, and then designing banking services in such a manner that the costs do not exceed the target costs. The target cost will be the variance between the market price of a banking service and the target profit.
In your opinion which causes of work stress, or organizational stressors, are likely to be among the most common experienced by air traffic controllers? Explain your reasoning.
Answer:
There are four types of organizational stressors: task demands, physical demands, role demands, and interpersonal demands.
For air traffic controllers, task demands are probably the most common organizational stressor that they experience.
Among the task demands, we have the need of quick decisions, critical decisions, and the fact that some information may be incomplete.
The job of an air traffic controller is complex, difficult, requires taking quick, and specially, critical decisions all the time. A bad decision by a traffic controller can be very problematic, and even prove fatal, because of the delicate nature of the job. For all these reasons, air traffic controllers are likely to be subjected to this specific organizational stressor.
Marshall has received an inheritance and wants to invest a sum of money today that will yield $5,400 at the end of each of the next 10 years. Assuming he can earn an interest rate of 5% compounded annually, how much of his inheritance must he invest today
Answer:
$3,315.13
Explanation:
To determine the amount of inheritance Marshall should invest today, we have to calculate the present value of $5,400.
PV = FV (1 + r)^-n
FV = Future value = $5,400
P = Present value
R = interest rate 5%
N = number of years 10
$5400(1.05^-10) = $3,315.13
I hope my answer helps you
Lincoln Corporation used the following data to evaluate their current operating system. The company sells items for $12 each and used a budgeted selling price of $12 per unit. Actual Budgeted Units sold 48,000 units 34,000 units Variable costs $170,000 $156,000 Fixed costs $42,000 $57,000 What is the static−budget variance of operating income?
Answer:
Static−budget variance of operating income is $169,000F
Explanation:
Actual Budgetet
Sales $576,000 $408,000 $168,000
Variable cost $170,000 $156,000 $14,000
Contribution margin $406,000 $252,000 $154,000
Less: Fixed cost $42,000 $57,000 -$15,000
Net Income / (Loss) $364,000 $195,000 $169,000 Favourable
Workings
Sales: Actual 48,000 units * $12= 576,000
Budgeted 34,000 units * $12= 408,000
Determining the worst payoff for each alternative and choosing the alternative with the "best worst" is the criterion called: Multiple Choice minimin. maximin. maximax. maximum likelihood. Bayes decision rule.
Answer: Maximin
Explanation:
With a Maximin strategy, a player in Game theory will aim to pick the alternative that yields the best payoff out of the worst payoffs that are possible.
First the worst pay-offs are determined and then the one that looks the best out of them is selected. The logic here is that the costs associated with the worst outcomes are less. So the person picks this outcome in other to reduce their costs but at the same time picking the best alternative that gives them the most savings on cost.
On January 1, 2010, the balance in Tabor Co.'s Allowance for Bad Debts account was $13,085. During the first 11 months of the year, bad debts expense of $21,937 was recognized. The balance in the Allowance for Bad Debts account at November 30, 2010, was $9,919.Required:(a) What was the total of accounts written off during the first 11 months? (Hint: Make a T-account for the Allowance for Bad Debts account.)Bad debt write offs $(b) As the result of a comprehensive analysis, it is determined that the December 31, 2010, balance of the Allowance for Bad Debts account should be $9,450. Show the adjustment required in the journal entry format.Allowance for bad debt Debit $Bad debt expenses Credit $
Answer:
(a) What was the total of accounts written off during the first 11 months?
bad debts written for the first 11 months = allowance for bad debt accounts January 1 balance + bad debt expense - allowance for bad debt accounts November 30 balance = $13,085 + $21,937 - $9,919 = $25,103
(b) As the result of a comprehensive analysis, it is determined that the December 31, 2010, balance of the Allowance for Bad Debts account should be $9,450. Show the adjustment required in the journal entry format.Allowance for bad debt Debit $Bad debt expenses Credit $
to determine the amount of bad debt expense that must be adjusted, we must subtract the estimated balance in December 31 from the balance in November 30 = $9,919 - $9,450 = $469. Since the November 30 amount is larger, it means that we over estimated our bad debt expense and it must be reduced:
Dr Allowance for doubtful accounts 469
Cr Accounts receivable 469
Paul McLaren holds the following portfolio: Stock Investment Beta A $150,000 1.40 B 50,000 0.80 C 100,000 1.00 D 75,000 1.20 Total $375,000 Paul plans to sell Stock A and replace it with Stock E, which has a beta of 0.75. By how much will the portfolio beta change? a. −0.190 b. −0.211 c. −0.234 d. −0.286
Answer:
- 0.260
Explanation:
The computation of portfolio beta is shown below:-
Stocks Value Weight (a) Beta (b) Portfolio Beta (a × b)
Stock A $150,000 0.4000 1.4 0.560
Stock B $50,000 0.1333 0.8 0.107
Stock C $100,000 0.2667 1 0.267
Stock D $75,000 0.2000 1.2 0.240
Total $375,000 1.173
Now the revise of beta with stock E is
Stocks Value Weight (a) Beta (b) Portfolio Beta (a × b)
Stock E $150,000 0.4000 0.75 0.300
Stock B $50,000 0.1333 0.8 0.107
Stock C $100,000 0.2667 1 0.267
Stock D $75,000 0.2000 1.2 0.240
Total $375,000 0.913
Now
Net Change in Beta of Portfolio is
= Beta of portfolio with Stock E - Beta of Portfolio with Stock A
= 0.913 - 1.173
= - 0.260
This is the answer but the same is not provided in the given options
The change in portfolio beta is -0.26.
Beta is used to measure systemic risk. The higher the value of beta, the higher systemic risk is. A portfolio's beta can be determined by adding together the weighted beta of each stock in the portfolio
Weighed beta of a stock = percentage of the stock in the portfolio x beta of the stock
Beta of the initial portfolio
[(150,000 / 375000) x 1.4] + [(50,000 / 375000) x 0.8] + [(100,000/ 375,000) x 1] + [(75,000 / 375,000) x 1.2]
= 0.56 + 0.1067 + 0.2667 + 0.24 = 1.1734
Beta of the new portfolio
[(150,000 / 375000) x 0.75] + [(50,000 / 375000) x 0.8] + [(100,000/ 375,000) x 1] + [(75,000 / 375,000) x 1.2]
0.3 + 0.1067 + 0.2667 + 0.24 = 0.9134
Change in portfolio beta = -0.26
To learn more about beta, please check: https://brainly.com/question/2279630
Blossom Chemicals Company acquires a delivery truck at a cost of $31,200 on January 1, 2022. The truck is expected to have a salvage value of $4,200 at the end of its 4-year useful life. Compute annual depreciation for the first and second years using the straight-line method.
Answer:
$6,750
Explanation:
The computation of the annual depreciation using the straight line method for the first and second year is shown below:
= (Original cost - residual value) ÷ (useful life)
= ($31,200 - $4,200) ÷ (4 years)
= ($27,000) ÷ (4 years)
= $6,750
In this method, the depreciation is the same for all the remaining useful life
So in the given case, the first year and the second year depreciation is $6,750 respectively and the same is to be charged every year
Mountain Top Markets has total assets of $48,700, net working capital of $1,100, and retained earnings of $21,200. The firm has 12,500 shares of stock outstanding with a par value of $1 per share and a market value of $7.10 per share. The stock was originally issued to the firm's founders at par value. What is the market-to-book ratio
Answer: 2.63
Explanation:
The Market to Book ratio is also referred to as the price to book ratio. It is a financial evaluation of the market value of a company relative to its book value. It should be noted that the market value is current stock price of every outstanding shares that the company has while the book value is the amount that the company will have left after its assets have been liquidated and all liabilities have been repaid.
The market-to-book ratio will be the market price per share divided by the book value. It should be noted that the book value per share is the net worth of the business divided by the number of outstanding shares. The book value will be:
= [(12500 ×1) + $21200]/12500
= ($12500 + $21200)/$12500
= $33700/12500
=$2.70
The market-to-book ratio will now be:
= $7.10/$2.70
=2.63
Total revenue equals the price multiplied by the quantity. The relative change price and quantity is given by the concept of ________________.
Answer: elasticity
Explanation:
Elasticity has to do with how the changes in price affects the quantity I goods and services that are demanded by the consumers in the market.
Sometimes, a change in price may lead to either a larger change in the quantity demand or it ma lead to a minimal effect on the quantity of good demanded. This is the concept of elastic and inelastic demand.
A country's travel exports (good and services that international travelers buy while visiting the country) are increasing exponentially. The value of such exports, t years after 2011, can be approximated by V(t)equals115.31 e Superscript 0.087 t, where V is in billions of dollars. a) Estimate the value of the country's travel exports in 2019 and 2020. b) Estimate the growth rate of the country's travel exports in 2019 and 2020.
Answer:
The equation given is:
[tex]V(t) = 115.31e^{0.087t}[/tex]
Part AAs t represents the years after 2011, and we need to calculate exports in 2019 and 2020.
For 2019
t = 2019 - 2011 = 8
Substitute in the given equation:
[tex]V(8)=115.31e^{0.087((8)}\\V(8)=230.62[/tex]
For 2020
t = 2020-2011 = 9
[tex]V(9)=115.31e^{0.087((9)}\\V(9)=251.38[/tex]
Part B
First calculate V(0)
[tex]V(0)=115.31e^{0.087((0)}\\V(0)=115.31[/tex]
Formula for the growth rate is given by:
Growth Rate = (present/past)^1/t - 1
[tex]G.R=(\frac{Present}{Past})^{\frac{1}{t}}-1[/tex]
Where
Past = 115.31
Calculate Growth Rate for 2019
Present = 230.62
t = 8
Substitute in the equation of Growth rate:
[tex]G.R=(\frac{230.62}{115.31})^{\frac{1}{8}}-1\\G.R =1.09-1\\G.R = 0.09\\[/tex]
In percentage, the growth rate is:
G.R = 9.05 %
Calculate Growth Rate for 2020
Present = 251.38
t = 9
Substitute in the equation of Growth rate:
GR= 9.05%
Kramer Manufacturing produces blenders. Its total fixed costs are $30,000. Its variable costs are $55.00 per blender. As production of blenders increases (within the relevant range), fixed costs will
Answer:
As the production of blenders increases, unitary fixed costs decreases.
Explanation:
Its total fixed costs are $30,000. Its variable costs are $55.00 per blender.
On unitary bases, variable costs remain constant. On the contrary, fixed costs vary at a unitary level. Now, the same amount of costs is divided by a larger number of units.
As the production of blenders increases, unitary fixed costs decreases.
Demarco Lee invested $25,000 in the Camden & Sayler partnership for ownership equity of $25,000. Prior to the investment, equipment was revalued to a market value of $222,000 from a book value of $180,000. Kevin Camden and Chloe Sayler share net income in a 1:3 ratio. Required: a. Provide the journal entry for the revaluation of equipment. For a compound transaction, if an amount box does not require an entry, leave it blank. b. Provide the journal entry to admit Lee.
Answer and Explanation:
The Journal entry is shown below:-
Equipment Dr, $42,000 ($222,000 - $180,000)
To Kevin Camden-Capital $10,500 ($42,000 × 1 ÷ (1 + 3))
To Chloe Sayler-Capital $31,500 ($42,000 × 3 ÷ (1 + 3))
(Being revaluation of equipment is credited)
Here we debited the equipment as it increased the assets and we credited the Kevin Camden-Capital and Chloe Sayler-Capital as it also increased the equity
2. Cash Dr, $25,000
To Demarco Lee-Capital $25,000
(Being admission is recorded)
Here we debited the cash as it increased the assets and we credited the Demarco Lee-Capital as it also increased the equity
You are interested in buying a share of stock in CAD Corporation. You expect a dividend payment of $0.50 next year and that the dividend will grow by 5% per year thereafter. You desire a 10% return on your purchase. According to the Gordon growth model, what is the maximum price you would pay for a share of this stock?a. $20.00b. $15.00c. $12.50d. $10.00
Answer: d. $10.00
Explanation:
The Gordon Growth Model allows for the valuation of a stock based on its anticipated dividends (which can be determined from it's growth rate if not given) and required return.
The formula is;
Stock Price = Next Dividend / ( required return - growth rate)
= 0.50 / ( 10% - 5%)
= 0.50 / 5%
= $10
Andrea Apple opened Apple Photography on January 1 of the current year. During January, the following transactions occurred and were recorded in the company's books:
1. Andrea invested $13,500 cash in the business.
2. Andrea contributed $20,000 of photography equipment to the business.
3. The company paid $2,100 cash for an insurance policy covering the next 24 months.
4. The company received $5,700 cash for services provided during January.
5. The company purchased $6,200 of office equipment on credit.
6. The company provided $2,750 of services to customers on account.
7. The company paid cash of $1,500 for monthly rent.
8. The company paid $3,100 on the office equipment purchased in transaction #5 above.
9. Paid $275 cash for January utilities.
Based on this information, the balance in the A. Apple, Capital account reported on the Statement of Owner's Equity at the end of the month would be:__________.
a. $31,400.
b. $39,200.
c. $31,150.
d. $40,175.
e. $30,875.
Answer:
2356
Explanation:
3546478967654322 321
4. Operating Cash Flow [L02] In comparing accounting net income and operating cash flow, name two items you typically find in net income that are not in operating cash flow. Explain what each is and why it is excluded in operating cash flow.
Answer:
1. Depreciation or Amortization of Assets
2.Profit or Loss on sale of Assets
Explanation:
Operating Cash Flow is very different to Net Income. The earlier represent cash movement and the latter represent profit movement.Cash and profit literally are different.
So in the profit calculation you would find some non-cash items that include estimate of depreciation expense or amortization cost of intangible assets or a profit or loss on sale of a PPE item.
Whereas in Operating Cash Flow determination only cash items are considered and all non-cash items are removed from profit of the year to reach an amount of Operating Cash Flow.
Shelton Co. purchased a parcel of land six years ago for $871,500. At that time, the firm invested $143,000 in grading the site so that it would be usable. Since the firm wasn't ready to use the site itself at that time, it decided to lease the land for $53,000 a year. The company is now considering building a warehouse on the site as the rental lease is expiring. The current value of the land is $923,000. What value should be included in the initial cost of the warehouse project for the use of this land
Answer:
$923,000
Explanation:
In order to determine the value included in the initial investment of a new project, we must use the opportunity cost of the land. In this case, the opportunity cost of using the land equals its current market value = $923,000.
When considering and evaluating this new project, all prior costs are considered sunk costs because they cannot be recovered.
OS Environmental provides cost-effective solutions for managing regulatory requirements and environmental needs specific to the airline industry. Assume that on July 1 the company issues a one-year note for the amount of $5.2 million. Interest is payable at maturity.
Determine the amount of interest expense that should be recorded in a year-end adjusting entry under each of the following independent assumptions:
Interest rate Fiscal year-end Interest expense
12% December 31
10% September 30
9% October 31
6% January 31
Answer:
In accrual basis accounting, expenses are recorded in the period when their matching revenues are obtained.
In this case, even if the full interest will be paid at maturity, interest expense will still be recorded in each period according to the information that we are given in the question.
Interest expense to be recorded by December 31
5,200,000 * 0.12 = 624,000 / 2 = 312,000
Interest expense to be recorded by September 30
5,200,000 * 0.10 = 520,000 * 3/12 = 130,000
Interest expense to be recorded by October 31
5,200,000 * 0.09 = 468,000 * 4/12 = 156,000
Interest expense to be recorded by January 31
5,200,000 * 0.06 = 312,000 * 7/12 = 182,000
McConnell Corp. has a book value of equity of $13,480. Long-term debt is $8,750. Net working capital, other than cash, is $3,605. Fixed assets are $17,930 and current liabilities are $1,850.
Required:
a. How much cash does the company have?
b. What is the value of the current assets?
Answer:
1. $695
2.$6,150
Explanation:
1. Calculation of How much cash does the company have.
The total liabilities and equity of the company will be the net book worth in addition with the current liabilities as well as long-term debt.
Hence,
Total liabilities and equity = $13,480 + 1,850 + 8,750
Total liabilities and equity = $24,080
The of $24,080 is equal to the total assets of the company because the total assets are the Total of all assets in which cash is an asset. Therefore the cash account must be equal to total assets less all other assets.
Hence,
Cash = $24,080 – 17,930 – 3,605 – 1,850
Cash = $695
2. Calculation of the value of the current asset
The total of the Net Working Capital will be:
Net Working Capital = $695 + $3,605
Net Working Capital = $4,300
Calculation of the total current assets using the Net Working Capital equation.
Net Workingg Capital = CA – CL
$4,300 = CA – $1,850
CA = $6,150
Charlie’s Furniture Store has been in business for several years. The firm's owners have described the store as a "high-price, high-service" operation that provides lots of assistance to its customers. Margin has averaged a relatively high 34% per year for several years, but turnover has been a relatively low 0.4 based on average total assets of $800,000. A discount furniture Store is about to open in the area served by Charlie's, and management is considering lowering prices to compete effectively.Required:a. Calculate current sales and ROI for Charlie’s Furniture Store. (Round your "ROI" to 1 decimal place.)b. Assuming that the new strategy would reduce margin to 20%, and assuming that average total assets would stay the same, calculate the sales that would be required to have the same ROI as Charlie’s currently earns. (Do not round intermediate calculations.)c. Suppose you presented the results of your analysis in parts a and b of this problem to Charlie, and he replied, "What are you telling me? If I reduce my prices as planned, then I have to practically double my sales volume to earn the same return?" Given the results of your analysis, what is the actual amount of increase in sales required? (Do not round intermediate calculations.)d. Now suppose Charlie says, "You know, I'm not convinced that lowering prices is my only option in staying competitive. What if I were to increase my marketing effort? I'm thinking about kicking off a new advertising campaign after conducting more extensive market research to better identify who my target customer groups are." In general, explain to Charlie what the likely impact of a successful strategy of this nature would be on margin, turnover, and ROI.
Answer:
a. Calculate current sales and ROI for Charlie’s Furniture Store.
asset turnover formula = net sales / average assets
0.4 = net sales / $800,000
net sales = $320,000
ROI = net income / investment
net income = $320,000 x 34% = $108,800
ROI = $108,800 / $800,000 = 13.6%
b. Assuming that the new strategy would reduce margin to 20%, and assuming that average total assets would stay the same, calculate the sales that would be required to have the same ROI as Charlie’s currently earns.
net income = net sales x 20% (new margin)
net sales = $108,800 / 20% = $544,000
c. Suppose you presented the results of your analysis in parts a and b of this problem to Charlie, and he replied, "What are you telling me? If I reduce my prices as planned, then I have to practically double my sales volume to earn the same return?" Given the results of your analysis, what is the actual amount of increase in sales required?
sales increase = ($544,000 - $320,000) / $320,000 = 70% increase
d. Now suppose Charlie says, "You know, I'm not convinced that lowering prices is my only option in staying competitive. What if I were to increase my marketing effort? I'm thinking about kicking off a new advertising campaign after conducting more extensive market research to better identify who my target customer groups are." In general, explain to Charlie what the likely impact of a successful strategy of this nature would be on margin, turnover, and ROI.
An extensive market research and a "successful" marketing campaign are generally expensive. Even if the marketing campaign is really successful in increasing sales, costs would also increase. So the equation may or may not change, depending if the contribution margin of the additional units sold will be able to cover the expenses of a complex marketing campaign. If you spend $100 to earn $100 more, your situation hasn't changed at all. Which means that net income may or may not increase, therefore, the profit margin, ROI and asset turnover may not change.
If the yield curve is upward sloping, then short-term debt will be cheaper than long-term debt. Thus, if a firm's CFO expects the yield curve to continue to have an upward slope, this would tend to cause the current ratio to be relatively low, other things held constant.
A. True
B. False
Answer:
A. True
Explanation:
As per the given situation, if the yield curve is sloping upwards, it indicates that short-term interest rates are smaller than long-term interest rates.
In this case the bonds have an opposite relationship between the bond price and interest rates and If the short-term rates are lower then the value of the short-term bonds which includes the current liabilities, is higher. Short term bonds are loans to be settled in one.
As we know that
Current ratio = Current assets - Current liabilities
Current liabilities include short-term debt, hence the short-term value is higher as a result of a low current ratio.
Therefore the given statement is true