Answer:
Almway Corporation
Classified Balance Sheet as at December 31, 2021:
Assets
Current assets:
Cash $ 7,000
Restricted Cash 39,000
Investment in
equity securities 46,000
Accounts receivable 82,000
Allowance for
uncollectible accounts $6,000 76,000
Inventory 216,000
Prepaid insurance 6,000
(for the next 9 months)
Total current assets $390,000
Long-term assets:
Land for sale 41,000
Land for use 81,000
Buildings 436,000
Acc. depreciation 116,000 320,000
Equipment 126,000
Acc. depreciation 76,000 50,000
Patent (net) 26,000
Investment in
equity securities 96,000
Restricted Cash 31,000
Long-term assets $645,000
Total assets $1,035,000
Liabilities and Equity
Current Liabilities:|
Accounts payable 107,000
Short-term notes payable 59,200
Interest payable 36,000
Total current liabilities $202,200
Long-term notes payable 118,800
Bonds Payable 256,000
Total long-term liabilities $374,800
Total liabilities $577,000
Common stock 348,000
Retained earnings 110,000
Total equity $458,000
Total liabilities & equity $1,035,000
Explanation:
a) Data and Calculations:
Almway Corporation
Post-closing Trial Balance as at December 31, 2021:
Account Titles Debit Credit
Cash $ 77,000
Investment in
equity securities 142,000
Accounts receivable 76,000
Inventory 216,000
Prepaid insurance 6,000
(for the next 9 months)
Land 122,000
Buildings 436,000
Accumulated depreciation-buildings $ 116,000
Equipment 126,000
Accumulated depreciation equipment 76,000
Patent (net) 26,000
Accounts payable 107,000
Notes payable 178,000
Interest payable 36,000
Bonds Payable 256,000
Common stock 348,000
Retained earnings 110,000
Totals $1,227,000 $1,227,000
Adjustments:
1. Investment in equity securities $142,000
Long-term investments 46,000
Short-term investments = 96,000
2. Land for sale = $41,000
Land for use = $81,000
Total land = $122,000
3. Restricted Cash (2024) = $31,000
Restricted Cash (short-term) = $39,000
Other cash = $7,000
4. Notes payable:
Short-term notes = $59,200 ($46,000 + $13,200)
Long-term notes = $118,800
5. Accounts receivable = $82,000
Allowance for Uncollectible accounts = $6,000
6. Authorized shares = 300,000
Issued and outstanding shares = 116,000
Almway Corporation
Adjusted Trial Balance as at December 31, 2021:
Account Titles Debit Credit
Cash $ 7,000
Restricted Cash 39,000
Investment in
equity securities 46,000
Accounts receivable 82,000
Allowance for uncollectible accounts $6,000
Inventory 216,000
Prepaid insurance 6,000
(for the next 9 months)
Land for sale 41,000
Land for use 81,000
Buildings 436,000
Accumulated depreciation-buildings 116,000
Equipment 126,000
Accumulated depreciation equipment 76,000
Patent (net) 26,000
Investment in
equity securities 96,000
Restricted Cash 31,000
Accounts payable 107,000
Short-term notes payable 59,200
Interest payable 36,000
Long-term notes payable 118,800
Bonds Payable 256,000
Common stock 348,000
Retained earnings 110,000
Totals $1,233,000 $1,233,000
A process in which computer software that uses statistical analysis, database technology, and artificial intelligence finds hidden patterns, trends, and connections in data so that business owners can make better marketing decisions and predictions about customers' behavior is known as ________. Group of answer choices Total Quality Management Data Mining Guerilla Marketing Individualized Marketing
Answer:
Data Mining
Explanation:
A database management system (DBMS) can be defined as a collection of software applications that typically enables computer users to create, store, modify, retrieve and manage data or informations in a database. Generally, it allows computer users to efficiently retrieve and manage their data with an appropriate level of security.
A data dictionary can be defined as a centralized collection of information on a specific data such as attributes, names, fields and definitions that are being used in a computer database system.
In a data dictionary, data elements are combined into records, which are meaningful combinations of data elements that are included in data flows or retained in data stores.
This ultimately implies that, a data dictionary found in a computer database system typically contains the records about all the data elements (objects) such as data relationships with other elements, ownership, type, size, primary keys etc. This records are stored and communicated to other data when required or needed.
A process in which computer software that uses statistical analysis, database technology, and artificial intelligence finds hidden patterns, trends, and connections in data so that business owners can make better marketing decisions and predictions about customers' behavior is known as data mining. It plays a significant role in the growth and development of a business and its products or services.
The Fantastic Ice Cream Shoppe sold 8,800 servings of ice cream during June for Dollar 5 per serving. The shop purchases the ice cream in large tubs from the Deluxe Ice Cream Company. Each tub costs the shop $14 and has enough ice cream to fill 28 ice cream cones. The shop purchases the ice cream cones for $0.15 each from a local warehouse club. The Fantastic Ice Cream Shoppe is located in a strip mall, and rent for space is $2,050 per month. The shop expenses $220 a month for the depreciation of the shop's furniture and equipment. During June, the shop incurred an additional $2,800 of other operating expenses (75% of these were fixed costs).
Required:
a. Prepare the Fantastic Ice Cream Shoppe's June income statement using a traditional format.
b. Prepare the Fantastic Ice Cream Shoppe's June income statement using a contribution margin format
Answer:
The Fantastic Ice Cream Shoppe
a) Fantastic Ice Cream Shoppe
June Income Statement, using traditional format
Sales Revenue $44,000
Cost of goods sold 5,720
Gross profit $38,280
Expenses:
Rent expense 2,050
Depreciation exp. 220
Other operating exp. 2,800
Total expenses $5,070
Net Income $33,210
b) Fantastic Ice Cream Shoppe
June Income Statement, using contribution margin format
Sales Revenue $44,000
Direct materials 5,720
Operating expense 700
Total variable expense 6,420
Contribution margin $37,580
Fixed expenses:
Rent expense 2,050
Depreciation exp. 220
Other operating exp. 2,100
Total expenses $4,370
Net income $33,210
Explanation:
a) Data and Calculations:
Sales of ice cream during June = 8,800 servings
Price per serving = $5
Sales revenue = $44,000 ($5 * 8,800)
Purchase cost of ice cream in large tubs = $14 * 8,800/28 = $4,400
Purchase cost of ice cream cones = $0.15 * 8,800 = $1,320
Total cost of direct materials = $5,720
Fixed costs:
Rent = $2,050 per month
Depreciation = $220
Other operating expenses:
Fixed operating expense = $2,100 ($2,800 * 75%)
Variable operating expense = $700 ($2,800 * 25%)
Presented below are selected ledger accounts of Tucker Corporation as of December 31, 2014.
Cash $50,000
Administrative expenses $100,000
Selling expenses $80,000
Net sales $540,000
Cost of goods sold $210,000
Cash dividends declared (2014) $20,000
Cash dividends paid (2014) $15,000
Discontinued operations (loss before income taxes) $40,000
Depreciation expense, not recorded in 2013 $30,000
Retained earnings, December 31, 2013 $90,000
Effective tax rate 30%
Required:
a. Compute net income for 2014.
b. Prepare a partial income statement beginning with income from continuing operations before income tax and including appropriate earnings per share
Answer:
Income from continuing operations:
= Net sales - COGS - Selling expense - Admin expenses
= 540,000 - 210,000 - 80,000 - 100,000
= $150,000
Discontinued operations net of tax:
= 40,000 * ( 1 - 30%)
= $28,000
Net income and Partial income statement
Income from continuing operations before tax $150,000
Income tax expense (150,000 * 30%) ($45,000)
Income from continuing operations $105,000
Discontinued operations net of taxes loss ($28,000)
Net income $77,000
Earnings per share
Income from continuing operations(105,000/10,000) $10.50
Discontinued operations(28,000 / 10,000) $2.80
Net income (77,000 / 10,000) $7.70
Earnings per share calculated assuming 10,000 shares.
Tropical Tours reported revenue of $411,000 for its year ended December 31, 2021. Accounts receivable at December 31, 2020 and 2021, were $36,100 and $31,400, respectively. Using the direct method for reporting cash flows from operating activities, Tropical Tours would report cash collected from customers of:
Answer:
$406,300
Explanation:
The computation of the cash collection is shown below:
Cash Collected From Customers is
= Ending account receivable +Revenue For the Year - opening account receivable
= $31,400 + $411,000 - $36,100
= $406,300
what is a savings and loans bank? advantages and disadvantages.
Three advantages of savings accounts are the potential to earn interest, it's easy to open and access, and FDIC insurance and security. Three disadvantages of savings accounts are minimum balance requirements, lower interest rates than other accounts/investments, and federal limits on saving withdrawal.
Rembrandt Paint Company had the following income statement items for the year ended December 31, 2021 ($ in thousands):
Sales revenue $25,000 Cost of goods sold $14,000
Interest revenue 240 Selling and administrative expense 3,200
Interest expense 440 Restructuring costs 1,500
In addition, during the year the company completed the disposal of its plastics business and incurred a loss from operations of $3.2 million and a gain on disposal of the component’s assets of $5.2 million. 600,000 shares of common stock were outstanding throughout 2018. Income tax expense has not yet been recorded. The income tax rate is 40% on all items of income (loss).
Required:
Prepare a multiple-step income statement for 2021, including EPS disclosures.
Answer:
Net income = $4,860,000
Earning Per Share
Income From Continuing Operations ($3660/600) 6.10
Income From Discontinued Operations )$1,200/600) 2.0
Net Income 8.10
Explanation:
The multiple-step income statement can be described as an income statement that differentiate a company's operating revenues and operating expenses from its nonoperating revenues, nonoperating expenses, gains, and losses. It also shows gross profit separately as net sales revenue minus the cost of goods sold.
The required multiple-step income statement can be prepared as follows:
Rembrandt Paint Company
Income Statement
For the Year Ended December 31, 2021
Particulars $'000 $'000
Sales revenue 25,000
Cost of goods sold 14,000
Gross profit 11,000
Operating expenses
Selling and administrative expense (3,200)
Restructuring costs (1,500)
Total operating expenses (4,700)
Operating income 6,300
Other income (expense)
Interest revenue 240
Interest expense (440)
Net interest revenue (expense) (200)
Income from continuing op. b4 tax 6,100
Taxes (40% * $6,100) (2,440)
Income From Continuing Operations 3,660
Discontinued operation
Loss from op. (3,200 * (1-Tax rate)) (1,920)
Gain on disposal (5,200 * (1-Tax rate)) 3,120
Income from discontinued op. 1,200
Net income 4,860
Number of common shares outstanding 600
Earning Per Share
Income From Continuing Operations ($3660/600) 6.10
Income From Discontinued Operations )$1,200/600 2.00
Net Income 8.10
Anna owns the Sweet Alps Chocolate store. She charges $10 per pound for her hand made chocolate. You, the economist, have calculated the elasticity of demand for chocolate in her town to be 2.5. If she wants to increase her total revenue, what advice will you give her and why? Use diagrams and economic terms to explain your answer.
Answer: Decrease her prices.
Explanation:
The elasticity of demand shows the change in quantity demanded as a result of a change in price.
In this case, if price decreases by 1%, quantity demanded for chocolate would increase by 2.5%.
If she wants to increase her revenue therefore, she should decrease the price.
For example:
If the demand was 10 chocolate bars a day, she would earn:
= 10 * 10
= $100 a day
If she decreased the price by 10%, price would be:
= 10 * ( 1 -10%)
= $9.00
Quantity demanded would be:
= 10 * (1 + 25%)
= 12.5 bars
Revenue would become:
= 12.5 * 9
= $112.50 which is more than the previous $100 she was making.
Sunland Company uses a perpetual inventory system. Its beginning inventory consists of 83 units that cost $56 each. During June, (1) the company purchased 248 units at $56 each on account, (2) returned 10 units for credit, and (3) sold 206 units at $83 each on account. Journalize the June transactions. (If no entry is required, select "No entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)
Answer:
Item 1
Debit : Merchandise $13,888
Credit : Accounts Payable $13,888
Item 2
Debit : Merchandise $560
Credit : Accounts Payable $560
Item 3
Debit : Accounts Receivable $17,098
Debit : Cost of Sales $11,536
Credit : Sales Revenue $17,098
Credit : Merchandise $11,536
Explanation:
See the journal entries prepared above.
Pharoah Inc. loans money to John Kruk Corporation in the amount of $976,000. Pharoah accepts an 8% note due in 7 years with interest payable semiannually. After 2 years (and receipt of interest for 2 years), Pharoah needs money and therefore sells the note to Chicago National Bank, which demands interest on the note of 10% compounded semiannually. What is the amount Pharoah will receive on the sale of the note
Answer: $900,635
Explanation:
Amount Pharaoh will receive is:
= Present value of the interest payments + Present value of the note
2 years have gone by which leaves 5 years.
Period = 5 * 2 = 10 semi annual periods
Periodic interest = 8% / 2 = 4%
Periodic discount = 10% / 2 = 5% per period
Interest payment = 976,000 * 4%
= $39,040
Amount to be received:
= (39,040 * Present value interest factor of annuity, 5%, 10 periods) + 976,000/(1 + 5%)¹⁰
= (39,040 * 7.7217) + 599,179.34
= $900,635
Why aren't they hiring kids to work for Epic Games? They could give the workers more ideas. Not that they don't have good ideas already. Wouldn't they?
NuEditions Book Company uses a final average salary formula to calculate an employee’s pension benefits. The amount used in the calculations is the salary average of the final 3 years of employment. The retiree will receive an annual benefit that is equivalent to 1.75% of the final average for each year of employment. Mike and Rob are both retiring at the end of this year. Calculate their annual retirement pension given the following information:
Mike: Years of employment: 25;
Final three annual salaries: $84,780, $84,900, $85,000
Kristy: Years of employment: 27;
Final three annual salaries: $71,600, $73,400, $78,000
Answer:
Mike : $37140.83
Kristy : $35,122.50
Explanation:
Given the data:
Mike:
Years of employment: 25;
Final three annual salaries: $84,780, $84,900, $85,000
Average :
$(84,780 + 84,900 + 85,000) /3
$254680 ÷ 3
= $84893.333
1.75% of average
0.0175 * $84893.333
= $1485.6333
$1485.6333 * number of years
$1485.6333 * 25
= $37140.833
Kristy:
Years of employment: 27;
Final three annual salaries: $71,600, $73,400, $78,000
Average = $(71,600 + 73,400 + 78,000) / 3
Average = $223,000 / 3
= $74,333.333
1.75% * $74333.333
= $1300.8333
$1300.8333 * 27
= $35,122.5
Testbank Multiple Choice Question 100 Bramble Corp. purchased machinery on January 2, 2015, for $880000. The straight-line method is used and useful life is estimated to be 10 years, with a $86000 salvage value. At the beginning of 2021 Bramble spent $188000 to overhaul the machinery. After the overhaul, Bramble estimated that the useful life would be extended 4 years (14 years total), and the salvage value would be $42000. The depreciation expense for 2021 should be
Answer:
33,585.71
Explanation:
Marlin Corporation reported pretax book income of $1,005,000. During the current year, the net reserve for warranties increased by $26,000. In addition, book depreciation exceeded tax depreciation by $100,500. Finally, Marlin subtracted a dividends received deduction of $15,500 in computing its current year taxable income. Marlin's current income tax expense or benefit would be:
Answer: $234360
Explanation:
Marlin's current income tax expense or benefit would be calculated thus:
Pre-tax book income = $1,005,000
Add: net reserve for warranties = $26,000
Add: Increase in Book depreciation over tax depreciation = $100,500.
Less: Dividend deduction = ($15500)
Taxable income = $1,116,000
Since tax rate = 21%, then the income expense will be:
= 21% × $1,116,000
= 0.21 × $1,116,000
= $234360
What is the labor force of Macroland for people between the ages of 18 and 65 in January?
Answer:
In the month of January in Macroland, the number of people in the 18 to 65 years old group that have jobs are 35,000 people, The number in that age group looking for jobs are 7,000 people.
Explanation:
The idea that a person who has custody of money or products should never
be the person keeping records accounting for them is called
A. risk assessment
B. assignment of responsibilities
C. separation of duties and approvals
D. dual control
Answer:
it's C
Explanation:
I ACTUALLY TOOK THE TEST
The idea that a person who has custody of money or products should never be the person keeping records accounting for them is called separation of duties and approvals. Hence, option C is correct.
What is separation of duties and approvals?One important internal control is the separation of duties, which prevents employees from being able to commit fraud or errors while also covering them up while performing their regular duties.
Separation of duties refers to the process by which no one individual has complete control over the course of a transaction. A transaction shouldn't ideally be initiated, recorded, authorized, and reconciled by a single individual.
relates to the idea that no user should be granted sufficient power to independently abuse the system. For instance, it is inappropriate for the person authorizing a paycheck to also be the one who can prepare it.
Thus, option C is correct.
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The financial records of Sunland Inc. were destroyed by fire at the end of 2020. Fortunately, the controller had kept certain statistical data related to the income statement as follows.
1. The beginning merchandise inventory was $75,440 and decreased 20% during the current year.
2. Sales discounts amount to $18,700.
3. 17,108 shares of common stock were outstanding for the entire year.
4. Interest expense was $18,000.
5. The income tax rate is 30%.
6. Cost of goods sold amounts to $440,000.
7. Administrative expenses are 20% of cost of goods sold but only 8% of gross sales.
8. Four-fifths of the operating expenses relate to sales activities.
Required:
From the foregoing information prepare an income statement for the year 2020 in single-step form.
Answer:
Sunland Inc.
Income statement for the year 2020
Sales $1,100,000
Less Sales Discounts ($18,700)
Net Sales $1,081,300
Less Cost of goods sold ($440,000)
Gross Profit $641,300
Less Expenses
Administrative expenses ($440,000 x 20%) ($88,000)
Interest expense ($18,000)
Net Profit before tax $535,300
Income tax expense ($535,300 x 30%) ($160,590)
Net Profit after tax $374,710
Explanation:
The Income Statement shows the Profit earned during the Reporting Period. Only Revenues or Incomes and Expenses are recorded in this Statement.
Using the amount of admin expenses to fin the Gross Sales we have :
Gross Sales = 100 / 8 x $88,000 = $1,100,000
In perfect competition, an individual firm Question 4 options: can not affect its price nor determine the quantity it sells in the marketplace. sets the price and determines the quantity it sells in the marketplace. sets the price but does not determine the quantity it sells in the marketplace. determines the quantity it sells in the marketplace but has no influence over its price.
Answer:
sets the price and determines the quantity it sells in the marketplace.
Explanation:
In a perfect competition, there are many buyers and sellers of homogeneous products, and there is free entry and exit in the market.
This simply means that, in a perfectly competitive market, there are many buyers and sellers (price takers) of homogeneous products (standardized products with substitute) and the market is free (practically open) to all individuals or business entities that are willing to trade all their goods and services.
Generally, a perfectly competitive market is characterized by the following features;
1. Perfect information.
2. No barriers, it is typically free.
3. Equilibrium price and quantity.
4. Many buyers and sellers.
5. Homogeneous products.
Examples of a perfectly competitive market are the Agricultural sector, e-commerce and the foreign exchange market.
In perfect competition, an individual firm sets the price and determines the quantity it sells in the marketplace.
During 2016 Green Thumb Company introduced a new line of garden shears that carry a two-year warranty against defects. Experience indicates that warranty costs should be 2% of net sales in the year of sale and 3% in the year after sale. Net sales and actual warranty expenditures were as follows: Net sales Actual warranty expenditures 2016 $ 45,000 $ 1,000 2017 120,000 3,500 At December 31, 2017, Green Thumb should report as a warranty liability of:
Answer:
See below
Explanation:
Given the above information, the computation of warranty liability is shown below;
Warranty liability = (Net sales of 2016 × After sale percentage) + (Net sales of 2017 × Year of sale percentage)
= ($45,000 × 3%) + ($120,000 × 2%)
= $1,350 + $2,400
= $3,750
Therefore, Green Thumb should report as a warranty liability of $3,750
What is the Best loan option for your
lemonade Stand? Why?
Answer:
Short term loan
Explanation:
Lemonade stand can be regarded as a small business, Hence, the loan that suit the business is " Short term loan".
Short term loan can be regarded as loan that can be obtained to give support to ones personal as well as business capital. It is designed for the needs of small business capital with less interest compare to long term loan. The period of payment is usually within a year. It is of low risk and good profit.
Which statement describes why the people in a nation with a command
economy might resist a shift to a free market economy?
A. People who hold political power are threatened by fundamental changes.
B. Workers are reluctant to give up their participation in a classless society.
C. Workers are reluctant to accept complete government control of their economy.
D. Factory and business owners are reluctant to place their capital under worker
authority Xd
Answer:
People who hold political power are threatened by fundamental changes.
Explanation:
People who hold political power are threatened by fundamental changes is the statement describes why the people in a nation with a command economy might resist a shift to a free market economy. Thus, option (a) is correct.
What is economy?The mechanism through which a nation or region organizes its money, industry, and trade is concerned to as its “economy.” The economy is the important part of the country. The primary sector of the economy is the industrial sector and agriculture sector. The family (consumption) and company (product sales) are both parts of the economy.
According to the population is the important part of the economy. The individual citizen in the nation is a command economy might resist a shift to a free market economy. A people are the special rights to hold political power are imperiled by fundamental changes.
As a result, the significance of the economy are the aforementioned. Therefore, option (a) is correct.
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Given the following information, calculate the current value of the stock: current dividend is $3.00, projected super normal growth for three years at 20%, growth rate after year 3 should remain constant at 11% and you want to earn a 16% annual return. What should you pay for the stock?
A.$67.55
B.$83.34
C.$74.39
D.$61.46
Answer:
B. $83.34
Explanation:
Current Dividend (D0) = $3.00
Super Normal growth for next three years (g1) = 20% = 0.20
Growth Rate after three year (g2) = 11% = 0.11
Required rate of Return (r) = 16% or 0.16
P3 = D4/(r-g2) = D0*(1+g1)^3*(1+g2)/(r-g2)
P3 = $3.00*(1+0.20)^3*(1+0.11)/(0.16-0.11)
P3 = $115.0848
Value of Share (P0) = [D1/(1+r)] + [D2/(1+r)^2] + [D3/(1+r)^3] + [P3/(1+r)^3]
Value of Share (P0) = [D0*(1+g1)/(1+r)1] + [D0*(1+g1)^2/(1+r)^2] + [D0*(1+g1)^3/(1+r)^3] + [P3/(1+r)^3]
Value of Share (P0) = [$3.00*(1+0.20)/(1+0.16)^1] + [$3.00*(1+0.20)^2/(1+0.16)^2] + [$3.00*(1+0.20)^3/(1+0.16)^3] + [$115.0848/(1+0.16)^3]
Value of Share (P0) = $3.10 + $3.21 + $ 3.32 + $73.72
Value of Share (P0) = $83.34
Jones Furniture Company produces beds and desks for college students. The production process requires carpentry and varnishing. Each bed requires 6 hours of carpentry and 4 hour of varnishing. Each desk requires 4 hours of carpentry and 8 hours of varnishing. There are 36 hours of carpentry time and 40 hours of varnishing time available. Beds generate $30 of profit and desks generate $40 of profit. Demand for desks is limited, so at most 8 will be produced.a. Formulate the LP model for this problem. b. Solve the problem using the graphical method.
Explanation:
To formulate the LP model for this problem,
Let,
X1 = Number of beds to produce
X2 = Number of Desks to produce
Our objective function:
Max: 30X1 + 40X2
Constraints:
6X1 + 4X2 ≤ 36 available carpentry hours 4X1 + 8X2 ≤ 40 available vanishing hoursX2 ≤ 8 (demand for X2)X1, X2 ≥0Based on the constraints information as well as the objective function you can then solve using the graphical method.
Practice Drawing Timelines!
Purpose: This section describes how to draw a timeline and visualizing the problem being presented. It is important because a time problem that is set up incorrectly will lead to incorrect answers. For each of the descriptions below, draw the timeline on your own.
Inserted a picture of your timeline (the picture can be a jpeg or pasted in a word document).
Criteria: Full points will be based three separate timelines attached as a picture. Your work should be original and not copied, borrowed, or obtained from another student (this would be cheating as defined by Texas Tech University and stated in the syllabus).
Consider an asset that generates $3,000 in 5 years and $5,000 in 1 year; discount rate - 6% (These are uneven cash flows- there is no pattern).
2. Consider an asset that pays $500 per year for 8 years (This is an annuity- it is the same cash flow, evenly spaced, for a finite time (it has an end)).
3. Consider an asset that pays $50 per year starting at the end of year 3 (This is a delayed perpetuity- it is the same cash flow evenly spaced forever, but does not begin until a future date).
Answer:
1. Since the last cash flow occurs at year 5, the timeline ends at 5th year.
2. Since the same cash flow for a finite time of 8 years, the timeline ends at 8th year.
3. The 3 dots at the end of the timeline indicates a perpetuity.
Explanation:
A timeline refers to a line that shows the timing and amount of cash flows. Therefore, we have:
1. Consider an asset that generates $3,000 in 5 years and $5,000 in 1 year; discount rate - 6% (These are uneven cash flows- there is no pattern).
Note: See number 1 in the attached photo for the timeline.
The fact that the last cash flow occurs at year 5 makes the timeline to end at 5th year.
It can also be seen in the timeline that the 6% discount rate is shown in between the previous period and the next.
2. Consider an asset that pays $500 per year for 8 years (This is an annuity- it is the same cash flow, evenly spaced, for a finite time (it has an end)).
Note: See number 2 in the attached photo for the timeline.
The fact that the same cash flow for a finite time of 8 years makes the timeline to end at 8th year.
3. Consider an asset that pays $50 per year starting at the end of year 3 (This is a delayed perpetuity- it is the same cash flow evenly spaced forever, but does not begin until a future date).
Note: See number 3 in the attached photo for the timeline.
It should be noted the 3 dots at the end of the time line indicates a perpetuity.
Sweet Corporation purchased 360 shares of Sherman Inc. common stock for $11,900 (Sweet does not have significant influence). During the year, Sherman paid a cash dividend of $3.25 per share. At year-end, Sherman stock was selling for $37.50 per share. Prepare Sweet's journal entries to record (a) the purchase of the investment, (b) the dividends received, and (c) the fair value adjustment. (Assume a zero balance in the Fair Value Adjustment account.)
Answer:
(a) Debit Equity Investments for $11,900; and Credit Cash for $11,900.
(b) Debit Cash for $1,170; and Credit Dividend Revenue for $1,170.
(c) Debit Fair Value Adjustment for $1,600; and Unrealized Holding Gain or Loss - Income for $1,600.
Explanation:
(a) Journal entries to record the purchase of the investment
The journal entries will look as follows:
Accounts Title and Description Debit ($) Credit ($)
Equity Investments 11,900
Cash 11,900
(To record the purchase of the investment.)
(b) Journal entries to record the dividends received
The journal entries will look as follows:
Accounts Title and Description Debit ($) Credit ($)
Cash (w.1) 1,170
Dividend Revenue 1,170
(To record the dividends received.)
(c) Journal entries to record the fair value adjustment. (Assume a zero balance in the Fair Value Adjustment account.
The journal entries will look as follows:
Accounts Title and Description Debit ($) Credit ($)
Fair Value Adjustment (w.2) 1,600
Unrealized Holding Gain or Loss - Income 1,600
(To record the fair value adjustment.)
Workings:
w.1: Cash = Dividend received = Number of shares * Cash dividend per share = 360 * $3.25 = $1,170
w.2: Fair Value Adjustment = Fair value - Common stock purchase cost = (Number of shares * Selling price per share) - Common stock purchase cost = (360 * $37.50) - $11,900 = $1,600
Your grandparents would like to share their fortune with you. They offer you money under one of the following scenarios: 1. $7,250 per year at the end of each of the next eight years. 2. $49,650 (lump sum) now 3. $98,650 (lump sum) eight years from now Calculate the present value of each scenario using an 8% discount rate. Which scenario yields the highest present value
Answer:
$98,650 (lump sum) eight years from now yields the highest present value.
Explanation:
This can be determined as follows:
1. Calculation of the present value of $7,250 per year at the end of each of the next eight years.
This can be calculated using the formula for calculating the present value of an ordinary annuity as follows:
PV = P * ((1 - (1 / (1 + r))^n) / r) …………………………………. (1)
Where;
PV = present value of $7,250 per year at the end of each of the next eight years = ?
P = Annual payment = $7,250
r = discount rate = 8% or 0.08
n = number of years = 8
Substitute the values into equation (1), we have:
PV =$7,250 * ((1 - (1 / (1 + 0.08))^8) / 0.08)
PV = $41,663.13
2. Calculation of the present value of $49,650 (lump sum) now
Since now is the present time, the present value of $49,650 (lump sum) now is still equal to $49,650.
3. Calculation of the present value of $98,650 (lump sum) eight years from now
This can be calculated using the present value formula as follows:
PV = FV / (1 + r)^n ................... (2)
Where:
PV = present value of $98,650 (lump sum) eight years from now = ?
FV = future value or (lump sum) eight years from now = $98,650
r = discount rate = 8% or 0.08
n = number of years = 8
Substitute the values into equation (2), we have:
PV = $98,650 / (1 + 0.08)^8
PV = $53,297.53
Comparison of the present values
1. Present value of $7,250 per year at the end of each of the next eight years = $41,663.13
2. Present value of $49,650 (lump sum) now = $49,650
3. Present value of $98,650 (lump sum) eight years from now = $53,297.53
As can be seen from the above, $98,650 (lump sum) eight years from now yields the highest present value.
As a long-term investment at the beginning of the 2021 fiscal year, Florists International purchased 25% of Nursery Supplies Inc.'s 18 million shares for $66 million. The fair value and book value of the shares were the same at that time. During the year, Nursery Supplies earned net income of $28 million and distributed cash dividends of $2.00 per share. At the end of the year, the fair value of the shares is $62 million. Required: Prepare the appropriate journal entries from the purchase through the end of the year.
Answer:
Dr Investment in Nursery supplies $66 million
Cr Cash $66 million
Dr Investment in Nursery supplies $7 million
Cr Investment Revenue $7 million
Dr Cash $9 million
Cr Investment in Nursery supplies $9 million
No Entry
Explanation:
Preparation of the appropriate journal entries from the purchase through the end of the year.
Dr Investment in Nursery supplies $66 million
Cr Cash $66 million
(To record purchase of 25% shares for $66 million)
Dr Investment in Nursery supplies ($28 million x 25%) $7 million
Cr Investment Revenue $7 million
(To record investor share of investee's net income)
Dr Cash (18 million shares x 25% share x $2 per share) $9 million
Cr Investment in Nursery supplies $9 million
(To record receipt of dividend)
No Entry
You have been asked to estimate the market value of an apartment complex that is producing annual net operating income of $44,500. Four highly similar and competitive apartment properties within two blocks of the subject property have sold in the past three months. All four offer essentially the same amenities and services as the subject. All were open-market transactions with similar terms of sale. All were financed with 30-year fixed-rate mortgages using 70 percent debt and 30 percent equity. The sale prices and estimated first year net operating incomes were as follows:
Comparable 1: Sales price $500,000; NOI $55,000
Comparable 2: Sales price $420,000; NO/ $50,400
Comparable 3: Sales price $475,000; NO/ $53,400
Comparable 4: Sales price $600,000; NOI $69,000
Required:
What is the indicated value of the subject property using direct capitalization?
Under absorption costing, a company had the following unit costs when 8,000 units were produced. Compute the total production cost per unit under variable costing if 20,000 units had been produced. Direct labor $8.50 per unit Direct material $9.00 per unit Variable overhead $6.75 per unit Fixed overhead ($60,000/8,000 units) $7.50 per unitCompute the total production cost per unit under variable costing if 20,000 units had been produced. a. $26.25 b. $27.25 c. $24.25 d. $31.75 e. $17.50
Answer:
d. $31.75
Explanation:
Computation for the total production cost per unit
Direct labor $8.50 per unit
Direct material $9.00 per unit
Variable overhead $6.75 per unit
Fixed overhead ($60,000/8,000 units) $7.50 per unit
Total production cost per unit $31.75
($8.50 + $6.75 + $9.00 + $7.50)
Therefore the total production cost per unit under variable costing if 20,000 units had been produced will be $31.75
A manufacturer of cedar shingles has supplied the following data: Bundles of cedar shakes produced and sold 360,000 Sales revenue $ 2,412,000 Variable manufacturing expense $ 1,170,000 Fixed manufacturing expense $ 714,000 Variable selling and administrative expense $ 414,000 Fixed selling and administrative expense $ 82,000 Net operating income $ 32,000 The company's break-even in unit sales is closest to:
Answer:
Break-even point in units= 346,087
Explanation:
First, we need to calculate the unitary selling price and unitary variable cost:
Selling price= 2,412,000 / 360,000= $6.7
Unitary variable cost= (1,170,000 + 414,000) / 360,000= $4.4
To calculate the break-even point in units, we need to use the following formula:
Break-even point in units= fixed costs/ contribution margin per unit
Break-even point in units= (714,000 + 82,000) / (6.7 - 4.4)
Break-even point in units= 346,087
2. On January 1, 2017, Gaskin Cabinetry Company purchases $300,000 of equipment by paying $50,000 in cash and
signing a 10-year mortgage note at 13% for the balance. Gaskin will make yearly payments of $46,072. The
amortization schedule for the first five payments is provided.
01/01/2017
01/01/2018
01/01/2019
01/01/2020
01/01/2021
01/01/2022
Beginning Principal Interest Total Ending
Balance Payment Expense Payment Balance
$250,000
$250,000 $13,572 $32,500 $46,072 236,428
236,428 15,336 30,736 46,072 221,092
221,092 17,330 28,742 46,072 203,762
203,762 19,583 26,489
46,072 184,179
184,179 22,129 23,943 46,072 162,050
Prepare the journal entry for the purchase of the equipment and for the January 1, 2018 mortgage payment.
Answer.
Answer:
(a) Debit Equipment for $300,000; Credit Cash for $50,000; and Credit Mortgage Note for $250,000
(b) Debit Mortgage Note for $13,572; Deebit Interest expense - Mortgage for $32,500; Credit Cash for $46,072.
Explanation:
(a) Prepare the journal entry for the purchase of the equipment.
The journal entries will look as follows:
Date Accounts Name and Explanation Debit ($) Credit ($)
1 Jan 2017 Equipment 300,000
Cash 50,000
Mortgage Note 250,000
(To record purchase of the equipment.)
(b) Prepare the journal entry for the January 1, 2018 mortgage payment.
The journal entries will look as follows:
Date Accounts Name and Explanation Debit ($) Credit ($)
1 Jan 2018 Mortgage Note 13,572
Interest expense - Mortgage 32,500
Cash 46,072
(To record mortgage and interest payments.)