Answer:
July 31, 202x, salaries expense
Dr Sales salaries expense 660,000
Dr Office salaries expense 132,000
Dr FICA taxes (OASDI) expense 49,104
Dr FICA taxes (Medicare) expense 11,484
Dr FUTA taxes expense 408
Dr SUTA taxes expense 3,672
Dr Life insurance expense 19,500
Dr Medical insurance expense 24,000
Cr Federal income taxes withheld payable 198,000
Cr State income taxes withheld payable 44,000
Cr Social security taxes withheld payable 49,104
Cr Social security taxes payable 49,104
Cr Medicare taxes withheld payable 11,484
Cr Medicare taxes payable 11,484
Cr Medical insurance premiums payable 40,000
Cr Life insurance premiums payable 32,500
Cr Union dues deducted payable 10,000
Cr FUTA taxes payable 408
Cr SUTA taxes payable 3,672
Cr Salaries payable 450,412
July 31, 2021, payment of salaries payable
Dr Salaries payable 450,412
Cr Cash 450,412
Explanation:
Sales salaries, $660,000;
Office salaries, $132,000;
Federal income taxes withheld, $198,000;
State income taxes withheld, $44,000;
Social security taxes withheld, $49,104;
Medicare taxes withheld, $11,484;
Medical insurance premiums, $16,000;
Life insurance premiums, $13,000;
Union dues deducted, $10,000; and
Salaries subject to unemployment taxes, $68,000.
FUTA = $408SUTA = $3,672Stockton Company Adjusted Trial Balance December 31 Cash 5,192 Accounts Receivable 2,067 Prepaid Expenses 756 Equipment 15,056 Accumulated Depreciation 3,800 Accounts Payable 1,474 Notes Payable 5,103 Common Stock 1,000 Retained Earnings 10,197 Dividends 853 Fees Earned 6,286 Wages Expense 2,497 Rent Expense 762 Utilities Expense 338 Depreciation Expense 242 Miscellaneous Expense 97 Totals 27,860 27,860 Determine the total assets. $27,860 $19,271 $23,071 $11,197
Answer:
$19,271
Explanation:
Assets are resources controlled by an entity as a result of past events, for which future economic benefits will flow to the entity.
Examples include inventory, Prepayments, Cash and Cash equivalents, account receivables, Plant, Property and Equipment etc.
Total assets
= $5,192 + $2,067 + $756 + $15,056 - $3,800
= $19,271
Oceanside Marine Company manufactures special metallic materials and decorative fittings for luxury yachts that require highly skilled labor. Oceanside uses standard costs to prepare its flexible budget. For the first quarter of the year, direct materials and direct labor standards for one of their popular products were as follows: Direct materials: 2 pound per unit; $12 per pound Direct labor: 2 hours per unit; $16 per hour Oceanside produced 3,000 units during the quarter. At the end of the quarter, an examination of the direct materials records showed that the company used 6,500 pounds of direct materials and actual total materials costs were $99,600. What is the direct materials cost variance
Answer:
Direct material price variance $ 21,000 unfavorable
Explanation:
A material price variance occurs where materials are purchased at a price either lower or higher than the standard price. A favorable variance is recorded where the actual total cost of materials is lower that the standard cost. While an adverse variance implies the opposite.
$
6,5000 pounds should have cost (6500× $12) 78,000
but did cost 99,600
Direct material price variance 21,000 unfavorable
Moss Co. issued $780,000 of five-year, 11% bonds, with interest payable semiannually, at a market (effective) interest rate of 10%. Determine the present value of the bonds payable, using the present value tables in Exhibit 5 and Exhibit 7. Round to the nearest dollar.
Answer:
$810,113.2678
Explanation:
The computation of the present value of the bond payable is shown below:
= Issued amount × discount factor of 5% at 10 years + Issued amount × half of the bond interest × PVIFA factor of 5% at 10 years
= $780,000 × 0.613913254 + $780,000 × 5.5% × 7.7217
= $478,852.3378 + $331,260.93
= $810,113.2678
Refer to the discount factor table and PVIFA factor table
Current and Quick Ratios The Nelson Company has $1,250,000 in current assets and $500,000 in current liabilities. Its initial inventory level is $400,000, and it will raise funds as additional notes payable and use them to increase inventory. How much can Nelson's short-term debt (notes payable) increase without pushing its current ratio below 1.2
Answer:
Nelson's short-term debt (notes payable) can increase by $541,667 without pushing its current ratio below 1.2.
Explanation:
We know that the formula for calculating the current ratio is as follows:
Current ratio = Current Assets / Current Liabilities .................... (1)
Where;
Existing Current assets = $1,250,000
Existing current liabilities = $500,000
Existing Current ratio = $1,250,000 / $500,000 = 2.50
Since we want to keep the current assets at $1,250,000, and targeted current ratio is 1.2; we want to determine the following:
Targeted current liabilities = ?
We therefore also use and substitute into equation (1) as follows:
Targeted current ratio = Existing Current assets / Targeted current liabilities
Therefore, we have:
1.2 = $1,250,000 / Targeted current liabilities
Solving for Targeted current liabilities, we have:
Targeted current liabilities = $1,250,000 / 1.2 = $1,041,667
Therefore, we have:
Targeted increase in short-term debt = Targeted current liabilities - Existing current liabilities = $1,041,667 - $500,000 = $541,667
Therefore, Nelson's short-term debt (notes payable) can increase by $541,667 without pushing its current ratio below 1.2.
On July 16, 2017, Logan acquires land and a building for $500,000 to use in his sole proprietorship. Of the purchase price, $400,000 is allocated to the building, and $100,000 is allocated to the land. Cost recovery of $4,708 is deducted in 2017 for the building (nonresidential real estate).a. What is the adjusted basis for the land and the building at the acquisition date?b. What is the adjusted basis for the land and the building at the end of 2017?
Answer:
A.Land $100,000
Building 400,000
B.Land $100,000
Building 395,292
Explanation:
a. Logan's adjusted basis at acquisition date will be the cost of the land and that of the building which is:
Land $100,000
Building 400,000
b. What will be Logan adjusted basis at the end of 2017 :
Land will be: $100,000
Building will be :395,292
($400,000 − $4,708)
Thus the Depreciation is a capital recovery.
Ship Co. produces storage crates that require 34.0 meters of material at $0.20 per meter and 0.30 direct labor hours at $19.00 per hour. Overhead is applied at the rate of $16 per direct labor hour. What is the total standard cost for one unit of product that would appear on a standard cost card?
Answer:
Total standard cost = $103.7
Explanation:
Standard cost is the sum of the standard material cost , standard labour cost and standard overhead
Overhead = OAR × direct labour hour
= $16 × (0.30×$19.00)= 91.2
Standard cost = (34.0×$0.20) + (0.30×$19.00) + 91.2 = $103.7
Standard cost = $103.7
Do some Internet research to identify businesses who have suffered because of cloud security weaknesses or failures. What can companies who are contemplating cloud computing services learn from the negative experiences of these businesses
Answer:
The biggest lesson with the use of cloud computing services is that one should act as if unsecured even after purchasing the best and most "technologically advanced "
Many Cloud Computing Service provider always secure their layers. However, many users fo the services don't secure their systems. Some leave default passwords as it, weak passwords and or no advanced firewalls but those preinstalled with their systems using default settings.
Those contemplating cloud services must ensure that:
they change default passwords into very strong passwords;users must at the very least configure firewalls to prevent easy access. There are specialized software for this;users must thoroughly research the cloud service provider before making a purchase;Regular cybersecurity training will also help users take the best steps in protecting themselves.Cheers!
Anderson Crossing Investments, Inc., was a family-owned property investment organization, investing in undeveloped properties when prices were low and then selling them when prices went up. Among its holdings, Anderson Crossing owned fifty acres of undeveloped land next to another fifty acres of undeveloped land owned by Kortney Branson. William Hill, property manager for Anderson Crossing, approached Branson and offered to purchase her fifty acres "for Anderson." Branson sold the property for $50,000. Within one year, Anderson Crossing sold its 100 acres, including the property bought from Branson, to a developer for $1,000,000. Richard Anderson, a 5% owner of Anderson Crossing Investments and an old high school acquaintance of Branson, saw her at the mall and told her of the recent sale. Furious that she had lost out on the income and convinced that Hill had misled her, Branson sued Richard Anderson for the acts of his agent, Hill. Branson argued that the facts were sufficient to create an agency by estoppel to impose liability on Richard Anderson.
a. The land in this case was originally owned by:______
b. At the time of sale to the mall, the land in this case was owned by:________
c. Richard Anderson was a________ owner of Anderson crossing investment Inc.
Answer:
Anderson Crossing Investments, Inc.
a. The land in this case was originally owned by:______
Kortney Branson.
b. At the time of sale to the mall, the land in this case was owned by:________
Anderson Crossing Investments, Inc.
c. Richard Anderson was a__limited liability______ owner of Anderson Crossing Investment Inc.
Explanation:
Anderson Cross Investment Inc. is a corporation in which stockholders enjoy limited liability. Moreover, Anderson Cross Investment Inc. is separate from the owner, Richard Anderson under the Entity concept and separation of ownerships. Hill is not an agent of Richard Anderson but Anderson Crossing Investments, Inc.
But specifically, limited liability describes the condition that prevails when an entity suffers loss in business. The implication is that the loss that an owner or shareholder of an entity may suffer is limited to the capital invested in the business. A stockholder's liability arising from his shareholding in the entity does not extend to his personal assets. So, the concept considers the extent to which a company shareholder or director is financially responsible for the company's debts. The owners cannot be sued for the debts of the entity unless they have given their personal guarantees or a competent court of law lifts the corporate veil under specific circumstances.
The corporate veil, according to businessdictionary.com, is "a legal concept that separates the personality of a corporation from the personalities of its shareholders, and protects them from being personally liable for the company's debts and other obligations."
If Kortney Branson is serious in making a legal issue of the matter, she should sue the company that bought the land from her. She can then join Hill and Richard Anderson if she wishes, though the two can submit "no case submissions."
QS 11-4 Interest-bearing note transactions LO P1 On November 7, Mura Company borrows $150,000 cash by signing a 90-day, 10%, $150,000 note payable. 1. Compute the accrued interest payable on December 31. 2. & 3. Prepare the journal entry to record the accrued interest expense at December 31 and payment of the note at maturity on
Answer: the complete question is 1. Compute the accrued interest payable on December 31. 2. & 3. Prepare the journal entry to record the accrued interest expense at December 31 and payment of the note at maturity date
Notes Payable _____
Interest Expense______
Interest Payable______
Cash ____________.
Please see explanatory column for answer.
Explanation:
To calculate accrued interest on December 31st
we use Interest = Principal x Rate x Time
where time = November 7 to December 31 = 54 days.
Interest = $150,000 x 10% x 54/360= 150,000 x 0.10 x 54/360= $2,250
Journal entry to record the accrued interest expense at December 31
Date Account Debit Credit
December 31 interest expense $2,250
Interest payable $2,250
b) To calculate payment of note at maturity date.
the borrowed cash will be paid in 90 days which means fromn November 7 of the previous year to Feb 5 of the next year = 90
using Interest = P XRX T
150,000 X 10% X 90/360= $3,750
Journal entry to record the payment of the note at maturity. which is on February 5th of the next year.
Date Account Debit Credit
February 5 Notes payable $150,000
Interest expense $1,500
Interest payable $2,250
Cash $153,750
Calculation: interest expense = $3,750- $2,250= $1500 This is because even though the total accrued interest was $3,750, only $2,250 was payable remaining $1,500 as the new interest expense for maturity date.
(Appendix 11.1) Depreciation for Financial Statements and Income Tax Purposes Dinkle Company purchased equipment for $50,000. The equipment has an estimated residual value of $5,000 and an expected useful life of 10 years. Dinkle uses straight-line depreciation for its financial statements. Required: What is the difference between the company's income before taxes reported on its financial statements and the taxable income reported on its tax return in each of the first 2 years of the asset's life if the asset was purchased on January 2, 2016, and its MACRS life is 5 years?
Answer and Explanation:
The computation is shown below:
For year 1
According to the Company's Books Depreciation
= (Orginal Cost - Salvage value) ÷ useful Life
= ($50,000 - $5,000) ÷ 10 years
= $4,500
According to the Income Tax Depreciation
= Cost × MACRS Rate for Year 1
= $50,000 × 20%
= $10,000
So, the difference in year 1 is
= $10,000 - $4,500
= $5,500
For year 2
According to the Company's Books Depreciation
= (Orginal Cost - Salvage value) ÷ useful Life
= ($50,000 - $5,000) ÷ 10 years
= $4,500
According to the Income Tax Depreciation
= Cost × MACRS Rate for Year 2
= $50,000 × 32%
= $16,000
So, the difference in year 1 is
= $16,000 - $4,500
= $11,500
Joe has just moved to a small town with only one golf course, the Northlands Golf Club. His inverse demand function is pequals 160minus2 q, where q is the number of rounds of golf that he plays per year. The manager of the Northlands Club negotiates separately with each person who joins the club and can therefore charge individual prices. This manager has a good idea of what Joe's demand curve is and offers Joe a special deal, where Joe pays an annual membership fee and can play as many rounds as he wants at $20 , which is the marginal cost his round imposes on the Club. What membership fee would maximize profit for the Club? The manager could have charged Joe a single price per round. How much extra profit does the Club earn by using two-part pricing? The profit-maximizing membership fee (F) is $nothing . (Enter your response as a whole number.)
Answer:
Club membership fee of $60 would maximize profit.
If the club charges tow part pricing the maximum revenue can be $3500.
Explanation:
Joe has entered into a monopoly because he is owner of single golf course in the Northlands.
Demand function for Joe's golf course is:
P = 160 - 2q
P = $20 , q = 50
160 - 2 (50) = 60
Consumer surplus = 0.5 * equilibrium quantity
Consumer Surplus for Joe is ; 0.5 * 50 (160 - 20) = $3500
If MR = MC then demand function will become :
160 - 4q
If q = 25 then
160 - 4 * 25 = 60
Kruger Designs hired a consulting firm 3 months ago to redesign the information system that the architects use. The architects will be able to use state of the art computer- aided design (CAD) programs to help in designing the products. Further, they will be able to store these designs on a network server where they and other architects may be able to call them back up for future designs with similar components. The consulting firm has been instructed to develop the system without disrupting the architects. In fact, top management believes that the best route is to develop the system and then to introduce it to the architects during a training session. Management does not want the architects to spend precious billable hours guessing about the new system or putting work off until the new system is working. Thus, the consultants are operating in a back room under a shroud of secrecy.
Required:
a. Do you think that management is taking the best course of action for the announcement of the new system?Why?
b. Do you approve of the development process? Why?
Explanation:
a) Yes, because management is acting in such a way that the development of the new system implemented does not cause problems or disturbances to the work of architects. Management's goal is to present architects with the new system already developed by consultants and more efficient, which can also help in resisting changes that architects could face, so management is taking the best course of action for the announcement of the new system.
b) No. Because in my opinion, for management to take the best course of action for the process of developing the new system, first the main users of the system should be advised about changes that could occur in the system due to the operation of the consultants, because the work of architects could be harmed in any way, so business decisions must be clearly communicated when it involves the progress of third party activities.
Weighted Average Cost Flow Method Under Perpetual Inventory System
The following units of a particular item were available for sale during the calendar year:
Jan. 1 Inventory 30,000 units at $30.00
Mar. 18 Sale 24,000 units
May 2 Purchase 54,000 units at $31.00
Aug. 9 Sale 45,000 units
Oct. 20 Purchase 21,000 units at $32.10
The firm uses the weighted average cost method with a perpetual inventory system. Determine the cost of merchandise sold for each sale and the inventory balance after each sale. Present the data in the form illustrated in Exhibit 5. Round unit cost to two decimal places, if necessary.
Schedule of Cost of Merchandise Sold
Weighted Average Cost Flow Method
Purchases Cost of Merchandise Sold Inventory
Date Quantity Unit Cost Total Cost Quantity Unit Cost Total Cost Quantity Unit Cost Total Cost
Jan. 1 $ $
Mar. 18 $ $
May 2 $ $
Aug. 9
Oct. 20
Dec. 31 Balances $ $ $
Answer and Explanation:
The computation of the cost od merchandised sold for each sale and the inventory balance after each sale is presented in the attachment below;
The perpetual inventory is the system which updated the inventory as on a regular basis
While on the other hand, the weighted average cost method is the method in which the average cost is calculated after each every purchase is made
In the calculation below:
1. The weighted average cost of $30.90 come from
= (Total inventory cost) ÷ (Total quantity)
= ($180,000 + $1,674,000) ÷ (60,000 units)
= $30.90
1. The weighted average cost of $31.60 come from
= (Total inventory cost) ÷ (Total quantity)
= ($463,500 + $674,100) ÷ (36,000 units)
= $31.60
Chester Company plans to introduce a new product. A market research specialist claims that 20,000 units can be sold at a $100 selling price. Assuming the company desires a profit margin of 22% of sales, what is the target cost per unit
Answer:
$78
Explanation:
Profit margin is the ratio of profit to sales while the profit is the difference between the sales and the cost.
As such, profit margin is the ratio of the difference between the sales and the cost to the sales.
Given that margin is 22%, it means that
22% = profit/(20,000 * $100)
Profit = $440,000
Total cost = $2,000,000 - $440,000
= $1,560,000
Target cost per unit = $1,560,000/20,000
= $78
Consider the three theories of the upward slope of the short-run aggregate-supply curve. According to the sticky-wage theory, the economy recovers from a recession as nominal wages are adjusted so that real wages . True or False: According to the sticky-price theory, the economy is in a recession because not all prices adjust quickly. True False True or False: According to the misperceptions theory, the economy is in a recession when the price level is above what was expected. True False
Answer:
The three theories are all True.
Explanation:
Solution
(1) True
The sticky wage theory: As stated by the sticky wage theory the reimburse of employees tends to have a steady response to the changes in the performance of the economy or the organization.
Precisely wages are frequently said to be sticky- down, this means that they can go up easily but come down only with difficulty.
Without stickiness, wages would always adjust in more or less real-time with the market and bring about constant economic equilibrium.
(2) True
Sticky price theory: The logic behind sticky price theory is the same as sticky wage theory but with in terms to the price of goods.
Menu costs produce stickiness in prices because of the cost and time considered to change the price, such as costs of printing new sales materials and distributing catalogs and the time needed for a retailer to change price tags.
Businesses will at the time being minimize the quantity supplied until they can get prices unstuck.
(3) True
Misperception theory : This theory presents changes in the total price level at the moment mislead the suppliers about what is happening in the markets in which they sell their goods. they make an inaccurate assumption that their relative prices have also declined.
.
According to the sticky-wage theory, the economy recovers from a recession as nominal wages are adjusted so that real wages is a true theory. According to the sticky-price theory, the economy is in a recession because not all prices adjust quickly wages is a true theory. And, According to the misperceptions theory, the economy is in a recession when the price level is above what was expected is also a true theory. This can be further explained as follows:
1. According to the sticky wage theory, employee compensation tends to be stable in response to changes in the economy or the organization's performance. Wages are commonly described as sticky-down, which suggests that they can easily rise but only fall with difficulty. Lacking stickiness, salaries always would adapt in real time with the marketplace, bringing economic equilibrium to a halt.
2. Sticky price theory: Sticky price theory is based on the same logic as sticky wage theory, but it applies to the price of things. Due to the obvious time and cost required to change the price, like the costs of printing new sales material and circulating catalogues, as well as the time required for a merchant to adjust price stickers, menu costs induce stickiness in prices. Companies will decrease the amounts supplied for the term being till they can get their prices unstuck.
3. Variations in the overall level of prices at the time confuse vendors of what is occurring in the marketplaces where they sell their products, according to the misperception theory. People make the mistake of assuming that their comparable prices have decreased as well.
Therefore, it can be concluded that all of the given theories are correct in the economic situations.
Learn more about upward slope of the short-run aggregate-supply curve here:
https://brainly.com/question/12501350
Which of the following statements is most correct? Many large firms operate different divisions in different industries, and this makes it hard to develop a meaningful set of industry benchmarks for these types of firms. Financial ratios should be interpreted with caution because there exist seasonal and accounting differences that can reduce their comparability. Financial ratios should be interpreted with caution because it may be difficult to say with certainty what is a "good" value is neither high nor low. Ratio analysis facilitates comparisons by standardizing numbers. All of the statements above are correct.
Answer:
All of the statements above are correct.
Explanation:
All of the following statements listed below are correct and true about business management;
1. Many large firms operate different divisions in different industries, and this makes it hard to develop a meaningful set of industry benchmarks for these types of firms.
Hence, industry average or benchmarks are more applicable to a small and medium enterprise than it's to large enterprises. The industry benchmark is a process that is focused on comparing an industry with other successful industries.
2. Financial ratios should be interpreted with caution because there exist seasonal and accounting differences that can reduce their comparability.
Hence, it is important to interpret financial ratios with care and reasonable logic as factors such as inflation and depreciation.
3. Financial ratios should be interpreted with caution because it may be difficult to say with certainty what is a "good" value is neither high nor low.
4. Ratio analysis facilitates comparisons by standardizing numbers.
Ratio analysis can be defined as the analysis and comparison of various line items in the financial statements of a business such as the income statement or balance sheet, in order to gain insight into its operational efficiency, profitability and liquidity. Types of ratio analysis are liquidity, efficiency, solvency, market value, and profitability ratio.
Aging Class (Number Receivables Estimated Percent of
of Days Past Due) Balance on December Uncollectible Accounts
0-30 days $715,000 1%
31-60 days 310,000 2
61-90 days 102,000 15
91-120 days 76,000 30
More than 120 days 97,000 60
Total receivables $1,300,000
A. Journalize the write-offs under the direct write-off method. If an amount box does not require an entry, leave it blank.
B. Journalize the write-offs and the year-end adjusting entry under the allowance method, assuming that the allowance account had a beginning balance of $95,000 and the company uses the analysis of receivables method.
Answer and Explanation:
The journal entries are shown below:
a Bad debt expense $102,500
To Accounts Receivable-Kim Abel $21,550
To Accounts Receivable-Lee Drake $33,925
To Accounts Receivable-Jenny Green $27,565
To Accounts Receivable-Mike Lamb $19,460
(Being the bad debt expense is recorded)
b Allowance for Doubtful accounts $102,500
, To Accounts Receivable-Kim Abel $21,550
To Accounts Receivable-Lee Drake $33,925
To Accounts Receivable-Jenny Green $27,565
To Accounts Receivable-Mike Lamb $19,460
(Being the written- off amount is recorded)
Bad debt expense $117,150
Allowance for Doubtful accounts $117,150
(Being the bad debt expense is recorded)
Working notes:
(in $) (in $)
Days Receivables Balance % Uncollectible Allowance
0-30 days 715000 1% 7150
31-60 days 310000 2% 6200
61-90 days 102000 15% 15300
91-120 days 76000 30% 22800
More
than 120 days 97000 60% 58200
Total 1300000 109650
Now the adjustment balance is
= $109,650 - ($95,000 - $102,500)
= $109,650
Increased Efficiency, Inc. is looking for ways to shorten its cash conversion cycle. It has annual sales of $36,500,000, or $100,000 a day on a 365-day basis. The firm's cost of goods sold is 65% of sales. On average, the company has $9,000,000 in inventory and $8,000,000 in accounts receivable. Its CFO has proposed new policies that would result in a 20% reduction in both average inventories and accounts receivable. She also anticipates that these policies would reduce sales by 10%, while the payables deferral period would remain unchanged at 40 days. What effect would these policies have on the company's cash conversion cycle
Answer and Explanation:
The cash conversion cycle refers to the cycle which includes the days inventory outstanding and days sales outstanding and deduct the days payable outstanding
The cash cycle = Days inventory outstanding + days sale outstanding - days payable outstanding
The computation is shown in the attachment below:
As we can see in the attachment the new proposed policy i.e 234.19 days would decrease the cash conversion cycle by 24.27 days as compared with the current proposal policy i.e 258.46 days
Ski West, Inc., operates a downhill ski area near Lake Tahoe, California. An all-day adult lift ticket can be purchased for $85. Adulit customers also can purchase a season pass that entitles the pass holder to ski any day during the season, which typically runs from December 1 through April 30. Ski West expects its season pass holders to use their passes equally throughout the season. The company's fiscal year ends on December 31. On November 6, 2018, Jake Lawson purchased a season pass for $450.1. What will be included in the Ski West 2018 Income statement and balance sheet related to the sale of the season pass to Jake Lawson? Complete this question by entering your answers in the tabs below. 2. When should Ski West recognize revenue from the sale of its season passes?3. Prepare the appropriate ournal enteries that Sky West would record on November 6 and December 31.
Answer:
Ski West, Inc.
1. What Ski West 2018 should include in its Income statement and balance sheet related to the sale of the season pass to Jake Lawson?
a) Income Statement:
Season Passes Revenue = $90 ($450/5). This represents December season pass by Jake Lawson.
b) Balance Sheet:
Unearned Season Passes Revenue $360 as a current liability.
2. When Ski West should recognize revenue from the sale of its season passes:
Revenue should be recognized on December 31.
3. Journal Entries on November 6 and December 31:
November 6:
Debit Cash Account $450
Credit Unearned Season Passes Revenue $450
To record the receipt from Jake Lawson.
If this sale was on account, then the Accounts Receivable is debited instead.
December 31:
Debit Unearned Season Passes Revenue $90
Credit Season Passes Revenue $90
To record the earned revenue from Jake Lawson's.
Explanation:
Unearned revenue is not recognized in the income statement. It is taken to the Balance Sheet as a current liability. It is not recognized because it does not belong to the current period, as specified by the accrual concept and matching principle.
Summit Systems has an equity cost of capital of 11.0 %, will pay a dividend of $1.50 in one year, and its dividends had been expected to grow by 6.0 % per year. You read in the paper that Summit Systems has revised its growth prospects and now expects its dividends to grow at a rate of 3.0 % per year forever.
A. What is the new value of a share of Summit Systems stock based on this information?
B. If you tried to sell your Summit Systems stock after reading this news, what price would you be likely to get? Why?
Answer:
A) The new value of a share of Summit Systems stock based on this information is $17.65
B) $17.65. This is due to the fact that If the information about Summit Systems has reached the capital market, the revised growth rate has already been applied.
Explanation:
Given:
Equity cost of capital = 11.0 %
Dividend in one year = $1.50
Dividends growth per year = 6.0 %
A) If expected growth rate is 6.0%:
Value of share = Expected dividend ÷ (Cost of capital - Growth rate)
Value of share = $1.50 ÷ (0.1150 - 0.060)
Value of share = $27.27
If expected growth rate is 3.0%:
New_Value of share = Expected dividend ÷ (Cost of capital - Growth rate)
New_Value of share = $1.50 ÷ (0.1150 - 0.030)
New_Value of share = $17.65
Among the value-neutral incentives to diversify, some come from the firm's external environment while others are internal to the firm. External incentives to diversify include: a. the fact that other firms in an industry are diversifying. b. pressure from stockholders who are demanding that the firm diversify. c. changes in antitrust regulations and tax laws. d. a firm's low performance.
Answer:
c. changes in antitrust regulations and tax laws.
Explanation:
Different forms of these incentives are other firms in an industry are:
1). the low performance of a firm.
2). changes in antitrust regulations and tax laws.
3). pressure from stockholders who demand that the firm diversify and also 4). horizontal acquisition.
These strategies are been used to enhance a company’s strategic competitiveness. Also its enablement to in earnings above an average rate of its returns. When the company works hard enough, they are seen to have given its resources, competencies, and also taking into account the external environmental opportunities and threats.
Malmentier SA stock is currently priced at $85, and it does not pay dividends. The instantaneous risk-free rate of return is 5%. The instantaneous standard deviation of Malmentier SA stock is 25%. You want to purchase a put option on this stock with an exercise price of $90 and an expiration date 30 days from now. According to the Black-Scholes OPM, you should hold __________ shares of stock per 100 put options to hedge your risk.
Answer:
you should hold 76 shares of stock per 100 put options to hedge your risk.
Explanation:
Current stock price, S = $85
Risk-free rate of return, r = 5%
Standard Deviation, v = 25%
Exercise price, X = $90
expiration date, t (in years) = 30 days = 1 month = 1/12 = 0.083333 years
The option price (OP) is given by the formula:
[tex]OP = Xe^{-rt} * N(-d_{2} ) - S*N(-d_1)[/tex]
[tex]d_1 = [ln(S/X) + (r + v^{2} /2)t]/vt^{0.5}\\d_1 = [ln(85/90) + (0.05 + 0.25^{2} /2)*0.08333]/(0.25*0.08333^{0.5})\\d_1 = -0.6982[/tex]
[tex]d_2 = d_1 - (vt^{0.5})\\d_2 = -0.6982 - (0.25*0.08333^{0.5})\\d_2 = -0.7704[/tex]
Using the pro-metric calculator for the cumulative normal distribution:
N(-d1) = N(- (-0.6982)) = N(0.6982) = 0.75747
N(-d2) = N(-(-0.7704)) = N(0.7704) = 0.77947
[tex]OP = Xe^{-rt} * N(-d_{2} ) - S*N(-d_1)[/tex]
[tex]OP =[ 90e^{(-0.05*0.08333)} * 0.77947] - (85*0.75747)\\OP = 5.48[/tex]
Note that N(-d₁) = 0.76
This means that 76/100 (i.e to hedge your risk, you should hold 76 per 100 put options )
Ganado's Cost of Capital. Maria Gonzalez, Ganado's Chief Financial Officer, estimates the risk-free rate to be 3.70 %, the company's credit risk premium is 4.10%, the domestic beta is estimated at 1.13, the international beta is estimated at 0.96, and the company's capital structure is now 65% debt. The expected rate of return on the market portfolio held by a well-diversified domestic investor is 9.10% and the expected return on a larger globally integrated equity market portfolio is 8.20 %. The before-tax cost of debt estimated by observing the current yield on Ganado's outstanding bonds combined with bank debt is 8.10% and the company's effective tax rate is 35%. For both the domestic CAPM and ICAPM, calculate the following: a. Ganado's cost of equity b. Ganado's after-tax cost of debt
Answer:
a. Ganado's cost of equity for the domestic CAPM is 9.802% and ICAPM is 8.02%
b. Ganado's after-tax cost of debt for the domestic CAPM is 5.265% and ICAPM is 5.265%
Explanation:
a. In order to calculate for both, the domestic CAPM and ICAPM Ganado's cost of equity we would have to make the following calculation:
for the domestic CAPM
cost of equity=risk free+domestic beat(domestic market rate-risk free rate)
cost of equity=3.70%+1.13(9.10%-3.70%)
cost of equity=3.70%+6.102%
cost of equity=9.802%
for ICAPM
cost of equity=risk free+international beat(international market rate-risk free rate)
cost of equity=3.70%+0.96(8.20%-3.70%)
cost of equity=3.70%+4.32%
cost of equity=8.02%
b. In order to calculate for both, the domestic CAPM and ICAPM Ganado's after-tax cost of debt we would have to make the following calculation:
for the domestic CAPM
after-tax cost of debt=8.10%(1-35%)
after-tax cost of debt=5.265%
for ICAPM
after-tax cost of debt=8.10%(1-35%)
after-tax cost of debt=5.265%
Merit Consulting Company regularly performs services for its clients on credit but does not offer discount terms. Because the company was concerned about the credit-worthiness of a new client, that client paid $2,500 in cash at the time that the consulting services were performed. This transaction is recorded into Merit's cash receipts journal by entering __________
A. 2,500 in the Cash Dr. column
B. 2,500 in the Accounts Receivable Cr. column and 2,500 in the Other Accounts Cr. column
C. 2,500 in the Cash Dr. column and 2,500 in the Accounts Receivable Cr. column
D. 2,500 in the Cash Dr. column and 2,500 in the Other Accounts Cr. column
Answer:
Merit Consulting Company
When a client paid $2,500 in cash at the time that the consulting services were performed, the transaction is recorded into Merit's Cash Receipts Journal by entering.
A. 2,500 in the Cash Dr. column.
Explanation:
There is usually a single column for subsidiary or special journals like the Cash Receipts Journal. The journal simply accumulates the total per the period before posting this total to the controlling account.
A special journal records transactions of a particular type. Examples are Purchases, Sales, Returns Outwards and Inwards, Cash Receipts, and Cash Payment Journals.
Given that annual deposit rates for Dollars and Euros are 6% and 4% respectively for the next 5 years. If the current spot rate of the Euro is $1.4015, obtain the implied rate for the Euro five years from now if International Fisher Equation holds exactly.
a. $1.5415
b. $1.2742
c. $1.4284
d. $1.3750
e. None of the above.
Answer:
The correct answer is (a) $1.5415
Explanation:
Solution
Given that:
Annual deposit rate for dollar =6%
Annual deposit rate for Euro = 4%
n = 5 years
The present spot rate of Euro =$1,4015
The next step is to obtain the implied rate for the Euro.
Thus
Implied rate = $1,4015[(1.06)/(1.04)]^5
= $1,4015 * 1.019230769^5
=$1,4015* 1.099923877
=$1.5415
Hence the implied rate for Euro 5 years from now is $1.5415
Assignment: Capital Budgeting Decisions
Your company is considering undertaking a project to expand an existing product line. The required rate of return on the project is 8% and the maximum allowable payback period is 3 years.
time
0
1
2
3
4
5
6
Cash flow
$ 10,000
2,400
4,800
3,200
3,200
2,800
2,400
Evaluate the project using each of the following methods. For each method, should the project be accepted or rejected? Justify your answer based on the method used to evaluate the project’s cash flows.
Payback period
Internal Rate of Return (IRR)
Simple Rate of Return
Net Present Value
Answer:
NPV 4,648
Payback period 2.88
IRR 22.69%
Simple rate of return 31.33%
Explanation:
Payback period = 2 year + (10,000 – cash in year 1 – cash in year 2)/ cash in year 3 = 2.88 years
Net Present Value = -10000 + 2400/(1+8%) + 4800/(1+8%)^2+ 3,200/(1+8%)^3 + 3,200/(1+8%)^4 + 2,800/(1+8%)^5 + 2,400/(1+8%)^6 = 4,648
Simple Rate of Return = average cash inflow/ investment = ((2,400+4,800+3,200+3,200+2,800+2,400)/6)/10,000 = 31.33%
Internal Rate of Return (IRR): we can use excel to calculate
Please see excel attached
ix months ago, you purchased 2,900 shares of ABC stock for $32.58 a share. You have received dividend payments equal to $.70 a share. Today, you sold all of your shares for $35.26 a share. What is your total dollar return on this i
Answer:
$9802
Explanation:
The total return is the sum of the dividend value and the increase in share value:
return per share = $0.70 +($35.26 -32.58) = $3.38
Then the return on 2900 shares is . . .
2900 × $3.38 = $9802
Your enterprising uncle opens a sandwich shop that employs 6 people. The employees are paid $12 per hour, and a sandwich sells for $4.
If your uncle is maximizing his profit, the value of the marginal product of the last worker he hired is $, and that worker's marginal product is sandwiches per hour.
Answer:
if your uncle is maximizing his profit, the value of the marginal product of the last worker he hired will be $12 while that of worker's marginal product will be $2 sandwiches per hour.
Explanation:
Marginal Revenue Product can be seen as the way in which additional revenue is been generated by additional workers.
Price =$6
Wage = $12
Since your enterprising uncle is hiring workers such that their wage is been equals the marginal revenue product.
Hence,
wage = Marginal revenue product
12 = 12
In a situation where the marginal revenue product is 12 then the marginal product will be:
Marginal Revenue Product = Price x MP
MP = Marginal Revenue Product / Price
MP = 12 / 6
MP = 2
Therefore if your uncle is maximizing his profit, the value of the marginal product of the last worker he hired will be $12 while that of worker's marginal product will be $2 sandwiches per hour.
Marginal revenue is the excess revenue gained by each product being produced over the actual production limit.
The value of the marginal product of the last hired worker is $12 while the marginal product is 2 sandwiches per hour.
Computation:
The marginal revenue product:
[tex]\text{Marginal Revenue Product} = \text{Price} \times \text{Marginal Product}\\\\=\$6\times2\\\\=\$12[/tex]
The marginal product is:
[tex]\text{Marginal Product}=\dfrac{\text{Marginal revenue product}}{\text{Price}}\\\\=\dfrac{12}{6}\\\\=2[/tex]
Therefore, for maximizing the profit the owner should have the marginal product of the last worker as $12 while the same for the worker's marginal product will be 2 sandwiches per hour.
To know more about marginal revenue, refer to the link:
https://brainly.com/question/14769692
Grand Canal Incorporated issued 10-year bonds six years ago with an annual coupon rate of 9.625% APR. The bonds have a face value of $1,000.00 each and were issued at par value. Today, investors want a 5.99% return for bonds of similar risk and maturity. What is the current market price of Grand Canal bonds
Answer:
$1,125.98
Explanation:
market price of the bonds = present value of face value + present value of coupons
PV of face value = $1,000 / (1 + 0.0599)⁴ = $792.39
PV of coupons = coupon x {1 - [1/(1 + r)ⁿ]} / r = 96.25 x {1 - [1/(1 + 0.0599)⁴]} / 0.0599 = 96.25 x 3.34659 = $333.59
market value = $792.39 + $333.59 = $1,125.98
McGovern Enterprises is interested in issuing bonds with warrants attached. The bonds will have a 30-year maturity and annual interest payments. Each bond will come with 20 warrants that give the holder the right to purchase one share of stock per warrant. The investment bankers estimate that each warrant will have a value of $10.00. A similar straight-debt issue would require a 10% coupon. What coupon rate should be set on the bonds-with-warrants so that the package would sell for $1,000?
Answer:
The multiple choices are:
6.64%
7.11%
7.48%
7.88%
8.27%
coupon rate is 7.88%
Explanation:
In determining the coupon rate to set on the bond,we need to calculate the annual coupon of the debt using the pmt formula in excel
=pmt(rate,nper,-pv,fv)
rate is the coupon on similar straight debt issue
nper is number of coupons the bond would pay which is 30
pv =$1000-(value of 20 warrants)
pv=$1000-(20*$10)
pv=$800
fv id the face value of $1000
=pmt(10%,30,-800,1000)= 78.78
coupon rate=coupon amount/face value=$78.78/$1000=7.88%