Answer:
Instructions are below.
Explanation:
Giving the following information:
The marketing manager believes that increasing advertising costs by $74,000 in 2020 will increase the company’s sales volume to 12,700 units.
We weren't provided with enough information to solve the requirement. But, I will provide the general structure:
Sales= (number of units*selling price per unit)=
Total variable cost= (total variable cost per unit*number of units)=
Contribution margin=
Fixed costs= (fixed costs + incremental fixed costs)=
Net operating income
If we want to determine the effect on income without an income statement:
Effect of income= incremental units*contribution margin - incremental fixed costs
Contribution margin= selling price - unitary variable cost
Empire Company is a manufacturer of smart phones. Its controller resigned in October 2017. An inexperienced assistant accountant has prepared the following income statement for the month of October 2020.EMPIRE COMPANYIncome StatementFor the Month Ended October 31, 2020Sales revenue $780,000Less:Operating expensesRaw materials purchases $264,000Direct labor cost 190,000Advertising expense 90,000Selling and administrative salaries 75,000Rent on factory facilities 60,000Depreciation on sales equipment 45,000Depreciation on factory equipment 31,000Indirect labor cost 28,000Utilities expense 12,000Insurance expense 8,000803,000Net loss $(23,000)Prior to October 2020, the company had been profitable every month. The company’s president is concerned about the accuracy of the income statement. As her friend, you have been asked to review the income statement and make necessary corrections. After examining other manufacturing cost data, you have acquired additional information as follows.1. Inventory balances at the beginning and end of October were:October 1 October 31Raw materials $18,000 $29,000Work in process 20,000 14,000Finished goods 30,000 50,0002. Only 75% of the utilities expense and 60% of the insurance expense apply to factory operations. The remaining amounts should be charged to selling and administrative activities.Prepare a letter to the president of the company, Shelly Phillips, describing the changes you made. Explain clearly why net income is different after the changes. Keep the following points in mind as you compose your letter.1. This is a letter to the president of a company, who is your friend. The style should be generally formal, but you may relax some requirements. For example, you may call the president by her first name.2. Executives are very busy. Your letter should tell the president your main results first (for example, the amount of net income).3. You should include brief explanations so that the president can understand the changes you made in the calculations.
Answer:
Tony Ohagwam, CPA, ACCAAddress & Telephone # & Email Address
June 26, 2020
The President
Empire Company
Address USA.
Attention: Shelly Phillips
Dear Shelly,
Re-Formatted Empire Company's Income Statement for the month ended October 31, 2020
As requested I have reformatted the company's Income Statement for the month ended October 31, 2020 (see attached), with some changes made.
The Net Income (not loss) is now $2,000. This came about after taking into account the beginning and ending inventories of raw materials, work in process, and finished goods, which were not considered in the earlier version prepared internally.
The costs of Utilities and Insurance were re-classified into their factory and selling & administration elements. The revised Income Statement also shows the cost of production, making it possible to determine the unit product cost. There are also indications of the cost of sales and the gross profit.
With the re-classification of costs into factory and selling & administration expenses, you can review some of these costs to ascertain where cost-savings could be achieved.
I hope that this will encourage you to continue in business.
Yours sincerely,
Tony Ohagwam, CPA, ACCA
Explanation:
a) Utilities:
Factory, 75% of $12,000 = $9,000
Office, 25% of $12,000 = $3,000
b) Insurance:
Factory, 60% of $8,000 = $4,800
Office, 40% of $8,000 = $3,200
c) Preparation of the Income Statement for a manufacturing company should consider the various cost elements and classify them according to factory cost or cost of production, cost of sales, and cost of selling and administration.
This will help management to have a clearer picture of financial performance. From this picture, it is easier for management to evaluate the various costs and make changes that will result to cost savings in order to ensure continued operations and profitability.
Firms that charge relatively low prices and offer substantial differentiation are following a best-cost strategy. A best cost strategy can be an effective level strategy to the extent that a firm whose fixed costs and overhead are very low relative to the competition.
What is an example of an industry where you think a best-cost strategy could be successful?
How would you differentiate a company to achieve this success in this industry?
Provide an example of a firm in Jacksonville that is following a best cost strategy? Explain
Answer: The answer is given below
Explanation:
A best-cost strategy is a strategy that is used by companies as they focus on low cost in order to give their customers better value for the money spent on the purchase of goods or services from them. The goal of this strategy is to keep the prices and costs lower when compared with the other competitors that offer similar products.
This strategy can be very successful in retail stores. Retail stores offer similar products to their competitors and using this strategy could help in making the store get more customers and hence push up its income.
For this strategy to work in such industry, firstly, the company will need to study its market very well, get to know its competitors, have a good working relationship with the manufacturers of different products, and have a friendly and amazing staffs who know what is and expected of them. With all these in place, success will be achievable.
An example of a firm in Jacksonville that is following a best cost strategy is
McDonald. The company over the years, has been successful and laid s foundation of offering fast-food meals that are of low prices and affordable.
1) Using the average cost method, compute the equivalent units of production in each of the following cases:
A) Units started in production during the month, 72,000; units completed and transferred, 52,800; and units in process at the end of the month (100% complete as to materials; 60% complete as to conversion), 19,200. (There was no beginning inventory.
B) Units in process at the beginning of the month (100% complete as to materials; 30% complete as to conversion), 12,000; units started during the month, 48,000; and units in process at the end of the month (100% complete as to materials; 40% complete as to conversion), 24,000.
2) In Department D, materials are added uniformly throughout processing. The beginning inventory was considered 80% complete, as was the ending inventory. Assume that there were 6,000 units in the beginning inventory and 20,000 in the ending inventory, and that 80,000 units were completed and transferred out of Department D. What are the equivalent units for the period using the average cost method?
3) If in question 2 the total costs charged to the department amounted to $960,000, including the $48,000 cost of the beginning inventory, what is the cost of the units completed and transferred out?
Answer:
1. the equivalent units of production
A. Materials = 72,000 units Conversion = 64,320 units
B. Materials = 60,000 units Conversion = 45,600 units
2. Materials = 45,600 units
3. $ 1,684,000
Explanation:
1. the equivalent units of production
The Concept of Equivalent Units of Production Measures the number of units completed to the extend of inputs introduced in the process
A.
Materials
units completed and transferred (52,800×100%) = 52,800
units in Ending Work In Process (19,200 × 100%) = 19,200
Total equivalent units of production = 72,000
Conversion
units completed and transferred (52,800×100%) = 52,800
units in Ending Work In Process (19,200 × 60%) = 11,520
Total equivalent units of production = 64,320
B.
First Determine the number of units completed and transferred.
units completed and transferred = 12,000 + 48,000 - 24,000
= 36,000
Materials
units completed and transferred (36,000×100%) = 36,000
units in Ending Work In Process (24,000 × 100%) = 24,000
Total equivalent units of production = 60,000
Conversion
units completed and transferred (36,000×100%) = 36,000
units in Ending Work In Process (24,000 × 40%) = 9,600
Total equivalent units of production = 45,600
2. the equivalent units of production
Materials
units completed and transferred (80,000×100%) = 80,000
units in Ending Work In Process (20,000 × 80%) = 16,000
Total equivalent units of production = 45,600
3. the cost of the units completed
First Calculate the cost per equivalent of production
cost per equivalent = Total Cost / Total Equivalent units
= $960,000 / 45,600
= $21.05
Then , calculate the cost of the units completed and transferred out
cost of the units completed and transferred = $21.05 × 80,000
= $ 1,684,000
Cretically analyse the difference and the point of convergence between floor inspection and functional inspection
Answer and Explanation:
The connection between Floor and Function Inspection is that these two techniques are used to eliminate and identify defective raw materials prior to the development of the same. Quality is the key priority for both processes, where standards are reviewed and evaluated to ensure that the operation continues correctly.
The distinction between the two is that in Floor Inspection the system inspects the material in process doe the machine or at the time of production to ensure that each and every machine or floor is working effectively. It is to make share the material processing costs don't go out or it could easily be found by hand and defect.
The Functional Inspection, on the other hand, will have the key feature tested which the product is supposed to perform. For instance, if the same has the right speed and output, the electric motor could be tested up. It doesn't inform us about the variability throughout all parts but gives us an overall view of the satisfaction that comes from investigating the same commodity.
The shape of a production possibility curve is downward-sloping because ____________________. Select the correct answer below: you can get more of one good only by giving up some of another good quantities produced are always negative you cannot get any more of good, even by giving up some of another good none of the above
Answer:
you can get more of one good only by giving up some of another good
Explanation:
A production possibilities frontier shows the opportunity cost of producing one good instead of another. This way, as you follow the curve, the combination of goods will vary, increasing the production of one good but deceasing the production of the other.
Opportunity costs are the benefits lost or extra costs associated to choosing one activity or investment over another alternative. Since resources are scarce, you must always give something up in order to obtain another thing, e.g. you give up your leisure time in order to study.
You just won $90,000 on a scratch-off lottery ticket. You plan to save the money in a retirement account expected to return 6% per year. If you intend to retire in 45 years, how much are these lottery winnings expected to be worth when you retire
Answer:
about 1.24 million dollars
Explanation:
Account value is multiplied by 1.06 each year, so after 45 years, it has been multiplied by 1.06^45. The value is ...
$90,000 × 1.06^45 = $1,238,814.97
Determine what the project’s ROE will be if its EBIT is –$55,000. When calculating the tax effects, assume that Flowers by Irene Inc. as a whole will have a large, positive income this year.
a. -8.62%
b. -7.5%
c. -7.87%
d. -6.75%
Answer:
-5.96%
Explanation:
The adjusted EBIT for tax purposes=-$55,000*(1-t)
t is the is the tax rate applicable which is 35% as contained in the attached
adjusted EBIT=-$55,000(1-35%)=-$35750
ROE =return on equity/initial outlay
return on equity is -35750
initial capital outlay is $600,000
ROE= -$35750 /$600,000=
The correct answer is -5,96% which is not available as of one of the options listed in question
Your uncle lends you $2,000 less $100 (interest at 5 percent), and you receive $1,900. Use the APR formula to find the true annual percentage rate. Assume you repay the entire loan in one year
Answer:
APR =5.263%
Explanation:
Computation of the true annual percentage rate
Using the APR formula to find the true annual percentage rate
APR=(2 × n × I) / [P × (N + 1)]
Hence;
APR= (2 × 1 × $100) / [$1,900 × (1 + 1)]
APR=$200/($1,900×2)
APR=$200/$3,800
APR= 0.05263 ×100
APR =5.263%
Therefore the true annual percentage rate using the APR formula will be 5.263%
Riviera Township reported the following data for its governmental activities for the year ended June 30, 20X9: Item Amount Cash and cash equivalents $1,000,000 Receivables 300,000 Capital assets 8,500,000 Accumulated depreciation 1,200,000 Accounts payable 400,000 Long-term liabilities 4,000,000 Additional information available is as follows: All of the long-term debt was used to acquire capital assets. Cash of $475,000 is restricted for debt service. 1) Based on the preceding information, on the statement of net assets prepared at June 30, 20X9, what amount should be reported for total net assets?A) $2,425,000B) $4,200,000C) $2,900,000D) $3,625,0002) Based on the preceding information, on the statement of net assets prepared at June 30, 20X9, what amount should be reported for net assets invested in capital assets, net of related debt?A) $4,200,000B) $2,900,000C) $2,825,000D) $3,300,0003) Based on the preceding information, on the statement of net assets prepared at June 30, 20X9, what amount should be reported for net assets, unrestricted?A) $425,000B) $900,000C) $525,000D) $825,000
Answer:
1. B) $4,200,000
2. D) $3,300,000
3. B) $900,000
Explanation:
1. Total net assets = Total assets - Total Liabilities
=(1,000,000+300,000+8,500,000) - (1,200,000 + 400,000 + 4,000,000)
=9,800,000 - 5,600,000
=$4,200,000
2. The amount that should be reported for net assets invested in capital assets, net of related debt is
=(Capital assets- Accumulated Dep) - Long term debt
=(8,500,000 - 1,200,000) - 4,000,000
=7,300,000 - 4,000,000
=$3,300,000
3. The amount that should be reported for net assets, unrestricted is
=Total Net assets - Net of related debt
=4,200,000 - 3,300,000
=$900,000
Cash flows of two mutually exclusive projects are as follows. Project A costs $80,000 initially and will have a $15,000 salvage value after 3 years. The operating cost with this method will be $30,000 per year. Project B has initial cost of $120,000, an operating cost of $8,000 per year, and a $40,000 salvage value after its 3-year life. Assume the interest rate is 10% per year. Which of the following statements is true?
A. Two projects have different life cycle
B. Project A should be selected.
C. The present worth of project A is -$143,252.17.
D. The present worth of project B is -$109,842.22.
Answer:
The correct answer is B.
Explanation:
Giving the following information:
Project A:
Costs $80,000 initially and will have a $15,000 salvage value after 3 years. The operating cost with this method will be $30,000 per year.
Project B:
The initial cost of $120,000, an operating cost of $8,000 per year, and a $40,000 salvage value after its 3-year life.
Assume the interest rate is 10% per year.
Both projects present a 3-year life cycle.
To determine which option is correct, we need to calculate the net present value using the following formula:
NPV= -Io + ∑[Cf/(1+i)^n]
Cf= cash flow
Project A:
Cf1= 30,000/1.10= 27,272.73
Cf2= 30,000/1.10^2= 24,793.39
Cf3= 45,000/1.10^3= 33,809.17
Total= 85,875.29
NPV= -80,000 + 85,875.29= 5,875.29
Because the net present value is positive, Project A should be accepted.
Project B doesn't provide income, therefore it shouldn't be accepted.
XYZ Company makes 400 widgets. The variable costs are $35.60 per unit and fixed costs are $30.00 per unit; however, $21.40 in fixed costs per unit is unavoidable. What is the effect on net income if the company instead buys the widgets from an outside supplier for $44.00 per unit?
Answer:
increase in income of $80
Explanation:
Prepare an Analysis of Costs and Savings if the Company buys from Outside Supplier.
Note : The fixed costs per unit at are unavoidable are irrelevant and disregarded in this decision.
Analysis of Costs and Savings
Purchase Price (400 widgets × $44.00) = ($17,600)
Savings :
Variable Costs ($35.60 × 400 widgets) = $14,240
Fixed Cost ( $8.60 × 400 widgets) = $3,440
Net Income effect = $80
Conclusion :
The effect on net income if the company instead buys the widgets is an increase in income of $80
Northern purchased the entire business of Southern including all its assets and liabilities for $682,500. Below is information related to the two companies: Northern Southern Fair value of assets $ 1,048,000 $ 797,000 Fair value of liabilities 580,000 320,000 Reported assets 811,000 647,000 Reported liabilities 496,000 257,000 Net Income for the year 56,000 51,000 How much goodwill did Northern pay for acquiring Southern
Answer:
Explanation:
Good will is the excess of the purchase consideration over the fair value of the net identifiable assets of an acquired business as a result of the intangible assets acquired along.
Purchase consideration is the amount paid in exchange an assets which can be in the foe of cash , shares or the fair value of other agreed means of exchange.
Fair value is the amount that an asset or a liability can be exchanged for at an arms length transaction
Workings
Northern Southern
fair value of asset 1,048,000 797,000
Fair value of liabilities 580,000 320,000
Reported Assets 811,000 647,000
Reported liabilities 496,000 257,000
Net Income 56,000 51,000
Fair value of net asset
1,048,000-580,000 468,000 477,000
797,000- 320,000
Purchase consideration = 682,500
Good will = Purchase consideration - fair value of the net asset acquired
682,500 - 477,000 =205,500
Will Jones, LIP is a small CPA firm that focuses primarily on preparing tax returns for small businesses.
The company pays a $403 annual fee plus $11 per tax return for a license to use Mega Tax software.
1a. What is the company's total annual cost for the Mega Tax software, if 332 returns are filed?
b. If 424 returns are filed?
c. If 522 returns are filed?
2a. What is the company's cost per return for the Mega Tax software, if 332 returns are filed?
b. If 424 returns are filed?
c. If 522 returns are filed?
Answer and Explanation:
1. The computation of the total annual cost in each case is shown below:
Total annual cost = Annual fee + license per tax return × number of returns filed
a. For 332 returns
= $403 + $11 × $332
= $403 + $3,652
= $4,055
b. For 424 returns
= $403 + $11 × $424
= $403 + $4,664
= $5,067
c. For 522 returns
= $403 + $11 × $522
= $403 + $5,742
= $6,145
2. Now the cost per return is
Cost per return = Total annual cost ÷ number of returns filed
a. For 332 returns
= $4,055 ÷ 332 retunrs
= $12.21
b. For 424 returns
= $5,067 ÷ 424 returns
= $11.95
c. . For 522 returns
= $6,145 ÷ 522 returns
= $11.77
Item 1 5 units Cost $50 Market $45 Item 2 7 units Cost $60 Market $65 Item 3 9 units Cost $30 Market $25 Applying the lower of cost or market method, the reported value of this company's ending inventory if LCM is applied to individual items is _____.
Answer:
Ending Inventory $870
Explanation:
Item #1 5 units Cost $50 Market $45 = 5 units x $45 = $225
Item #2 7 units Cost $60 Market $65 = 7 units x $60 = $420
Item #3 9 units Cost $30 Market $25 = 9 units x $25 = $225
Total inventory $225 + $420 + $225 = $870
For Items #3 and #1 As the market price ofthe items is lower than the historic cost (acquisition cost) of the good we shoudl decrease the valuation and use market price.
You are considering purchasing a stock that currently sells for $50. The expected price of the stock in a year is $45, and during the coming year a $2 dividend is expected to be paid. The risk-free rate is 5% and the market return is 10%. The stock has a beta of 0.85. What is the holding period return of the stock
Answer:
The holding period return of the stock is - 6 % or - 6.0%
Explanation:
Solution
Given that:
You are thinking of purchasing a stock that currently sells for= $50
The expected price of the stock =$45
Dividend expected to be paid =$2
Risk free rate = 5%
Market return = 10%
Stock (beta) = 0.85
We will now find the holding period return of the stock which is given below:
The formula for calculating the holding period return of a stock is given as,
= The Expected price in a year + Dividend earned during the year – Purchase Price / Purchase Price
We recall that:
The Purchase Price = $ 50
Expected price in a year = $ 45
Dividend earned during the year = $ 2
Now,
By Applying the above values in the formula we have the holding period return of the stock as :
= [45 + 2 – 50] / 50
= - 3 / 50
= - 0.0600 = - 6.00 %
= - 6.0 % ( when rounded off to one decimal place )
Therefore, the Holding period return of the stock is - 6 % or - 6.0%
According to the Phillips curve, policymakers could reduce both the inflation rate and the unemployment rate by Group of answer choices increasing the money supply. raising taxes. increasing government expenditures None of the other answers is correct
Answer:
None of the other answers is correct.
Explanation:
Williams A. Phillips was a notable economist born in New Zealand. Phillips wrote a famous article titled "The Relation between Unemployment and the Rate of Change of Money Wage Rates in the United Kingdom, 1861-1957" published in 1958 by Economica. In the article, he used data for the United Kingdom (U.K) to illustrate on a graph, a negative or inverse relationship between the rate of change of employee wages in the U.K and the unemployment rate in the United Kingdom (U.K).
Consequently, using the Phillips curve it is practically impossible for policymakers to reduce both the inflation rate and the unemployment rate because as the inflation rate decreases; the unemployment rate increases and vice-versa.
However, according to the Phillips curve, policymakers can reduce inflation and increase unemployment if aggregate demand is contracted.
7. Watson Wheels currently makes 6,000 wheels annually that are used in other products it manufactures. Current unit costs for the wheels are as follows: Direct materials $22.00 Direct labor 16.00 Variable manufacturing overhead 12.00 Fixed manufacturing overhead 15.00 Total $65.00 The company has an offer from a manufacturer to produce the wheels for $60 per wheel. If the company decides to buy the wheels, the empty warehouse space could be rented for $22,000 annually. In addition, half of the fixed manufacturing overhead costs would be avoided if the company decides to buy the wheels. If the company decides to accept the offer, what is the incremental effect on the company’s net income?
Answer:
It is more convenient to buy the units. Income will increase by $7,000.
Explanation:
Giving the following information:
Units= 6,000
Current unit costs for the wheels are as follows:
Direct materials $22.00
Direct labor 16.00
Variable manufacturing overhead 12.00
Avoidable fixed manufacturing overhead= 7.5
The company has an offer from a manufacturer to produce the wheels for $60 per wheel.
If the company decides to buy the wheels, the empty warehouse space could be rented for $22,000 annually.
First, we need to calculate the differential cost of making the units:
Total cost= 6,000*(22 + 16 + 12 + 7.5)= $345,000
Now, buying the units:
Total cost= 6,000*60 - 22,000= $338,000
It is more convenient to buy the units. Income will increase by $7,000.
A store has 5 years remaining on its lease in a mall. Rent is $2,000 per month, 60 payments remain, and the next payment is due in 1 month. The mall's owner plans to sell the property in a year and wants rent at that time to be high so that the property will appear more valuable. Therefore, the store has been offered a "great deal" (owner's words) on a new 5-year lease. The new lease calls for no rent for 9 months, then payments of $2,750 per month for the next 51 months. The lease cannot be broken, and the store's WACC is 12% (or 1% per month).
Required:
a. Should the new lease be accepted ?(Hint: Make sure you use 1% per month)
b. If the store owner decided to bargain with the mall's owner over the new lease payment, what new lease payment would make the store owner indifferent between the new and old lease ? ( Hint: Find FV of the old lease's original cost at t=9 months; then treat this as the PV of a 51- period annuity whose payments represent the rent during months 10 to 60.)
c. The store owner is not sure of the 12% WACC- it could be higher or lower. At what nominal WACC would the store owner be indifferent between the two lease ?
Answer:
Explanation:
Uhh
Answer:
This mad absolutly no sense
Explanation:
clarify and i can help more
Suppose there is a policy debate regarding the United States’ imposing trade restrictions on imported tires.
Read the following scenario and answer the question that follows.
A congresswoman from a state with several tire factories argues that the government should impose a tariff on tires because they are a necessary input into the production of various weapons. Free trade, she contends, would make the United States overly dependent on foreign countries for the supply of tires and thus, in case of war, unable to make enough weapons to defend itself.
Which of the following justifications is the congresswoman using to argue for the trade restriction on tires?
A. National-security argument
B. Unfair-competition argument
C. Infant-industry argument
D. Using-protection-as-a-bargaining-chip argument
E. Jobs argument
Answer:
A. National-security argument
Explanation:
The National-security argument is also known as the National-defense argument. The argument proposes the imposition of high tariffs on locally manufactured goods so that the country would not be dependent on other countries for those goods in the event of war. For example, if a country is dependent on other counties for the production of food, then it would be in great danger in the advent of war. Tires that are also used to prepare weapons should be sourced within a country so that in the advent of war, the country would not be dependent on others.
This is the argument employed by the congresswoman who sought the imposition of a tariff on tires so that the United States would not be dependent on other foreign countries during a war.
Suppose an initial investment of $100 will return $50/year for three years (assume the $50 is received each year at the end of the year). Is this a profitable investment if the discount rate is 20%
Answer:
Since the NPV is positive, it is a profitable investment.
Explanation:
Solution
Given that:
The initial investment of $100 would be considered as an outflow.
The inflow for the next three years will be =$50
The discount rate r = 0.2
To find or determine the probability of the investment, discount the future of outflows and inflows. the following formula is applied or used to find the present value of inflows
PV = FV/(1 + r )^k
Where
PV = present value
FV =future value
r = discount rate
k = time period
Now,
For k =1
PV = 50/(1 + 0.2)
=$41.67
So,
PV for k = 2 is $34.72 and for k =3 is $28.94
Thus,
The net present value can be calculated by the difference between the outflows and total inflows
NPV =$100- ($41.67 + $34.72 + $28.94)
=$5.33
It is a profitable investment with a positive NPV at a discount rate of 20%.
Data and Calculations:
Initial investment = $100
Annual cash inflows = $50
Period of investment = 3 years
Discount rate = 20%
Present Value (PV) annuity factor for 3 years at 20% = 2.106
Present value of annual cash inflows = $105.3 ($50 x 2.106)
Net Present Value (NPV) = $5.3 ($105.3 - $100)
Thus, with a positive NPV, it shows that the investment is profitable.
Learn more: https://brainly.com/question/12957049
Recent surveys indicate that more than half of employees are dissatisfied with their jobs.
True
False
Answer: True
Explanation:
This is true. In a recent survey that was carried out, which was titled the Effing Problem; it was stated that more that half of the workers in the United States were not happy with the jobs they currently have and that about forty percent will like to change the job that they are currently doing if they are given the opportunity.
People find it easy not to change jobs due to the fact that the economy is struggling and a job market that's also struggling. Therefore, people stay in their current jobs even if they are dissatisfied because they'll rather stay than stay jobless.
Mann, Inc., which owes Doran Co. $1,200,000 in notes payable with accrued interest of $108,000, is in financial difficulty. To settle the debt, Doran agrees to accept from Mann equipment with a fair value of $1,140,000, an original cost of $1,680,000, and accumulated depreciation of $390,000.
Instructions
(a) Compute the gain or loss to Mann on the settlement of the debt.
(b) Compute the gain or loss to Mann on the transfer of the equipment.
(c) Prepare the journal entry on Mann’s book to record the settlement of this debt.
(d) Prepare the journal entry on Doran’s books to record the settlement of the receivable.
Answer:
A. $168,000
B.$150,000
C.Dr Notes Payable1,200,000
Dr Interest Payable 108,000
Dr Accumulated Depreciation 390,000
Dr Loss on Disposal of Equipment 150,000
Cr Equipment 1,680,000
D.Dr Equipment 1,140,000
Dr Allowance for Doubtful Accounts 168,000
Cr Notes Receivable1,200,000
Cr Interest Receivable 108 ,000
Explanation:
Mann, Inc.,
(a)Computation of the gain or loss to Mann on the settlement of the debt will be:
Note payable$1,200,000
Add Interest payable108,000
Carrying amount of debt 1,308,000
Less Fair value of equipment (1,140,000)
Gain on restructuring of debt$ 168,000
(b)Computation of the gain or loss to Mann on the transfer of the equipment will be:
Cost$1,680,000
Less Accumulated depreciation (390,000)
Book value1,290,000
Less Fair value of plant assets (1,140,000)
Loss on disposal of equipment$ 150,000
(c) The Journal urnal entry on Mann’s book to record the settlement of this debt will be:
Dr Notes Payable1,200,000
Dr Interest Payable 108,000
Dr Accumulated Depreciation 390,000
Dr Loss on Disposal of Equipment 150,000
Cr Equipment 1,680,000
Cr Gain on Restructuring of Debt 168,000
(d) The journal entry on Doran’s books to record the settlement of the receivable will be:
Dr Equipment 1,140,000
Dr Allowance for Doubtful Accounts 168,000
Cr Notes Receivable1,200,000
Cr Interest Receivable 108 ,000
Mr. Thano, age 47, withdrew $22,000 from his employer-sponsored qualified retirement plan to pay for his daughter's wedding. Compute the tax cost of the withdrawal if Mr. Thano has a 24% marginal tax rate on ordinary income. Tax Cost is_____
Answer:
$7,480
Explanation:
Mr Thano withdrew $22,000 at the age of 47
Marginal Tax rate= 24%
At the age of 47 means that the withdraw was made prematurely. Immature withdrawal of retirement plans means withdrawal made before the age of 60-65 years depending on the Country Policy
Hence, Tax Cost = 24% * 22,000
Tax cost = 5,280.
In addition, Mr Thano will be charge premature withdrawal cost of 10% as well
10% * 22000 = 2,200.
In total, the tax cost on the withdrawal of $22,000 is = $5,280 + $2,200 = $7,480
Yosko Company expects to sell 2 comma 000 units of finished product in January and 2 comma 150 units in February. The company has 260 units on hand on January 1 and desires to have an ending inventory equal to 40% of the next month's sales. March sales are expected to be 2 comma 270 units. Prepare Yosko's production budget for January and February.
Answer:
Production budget
January 2,600 units
February 2,198 units
Explanation:
The sales budget is adjusted for the projected opening and closing inventories unit to arrive at the production budget:
The production budget can be determined using the formula below
Production budget = Sales budget + closing inventory- opening inventory
January production budget
Sales budget = 2,000 units
Closing inventory = 40% × February sales = 40% × 2,150
Opening inventory = 260 units
Production budget for January = 2000 + (40% × 2,150) - 260= 2,600 units
February production budget
Sales budget = 2,150
Opening inventory = January closing inventory = 860 units
Closing inventory = 40% × March sales= 40% × 2,270
Production budget fro February = 2,150 + (40% × 2,270) - 860= 2,198 units
Production budget
January 2,600 units
February 2,198 units
On January 1, 2021, Corvallis Carnivals borrows $30,000 to purchase a delivery truck by agreeing to a 5%, five-year loan with the bank Payments of $566.14 are due at the end of each month, with the first installment due on January 31, 2021
Record the issuance of the note payable and the first monthly payment.
Record the issuance of the note payable.
Answer:
1.Jan 01, 2021
Dr Equipment $30,000
Cr Notes Payable $30,000
2.Jan 30, 2021
Dr Notes Payable $441.14
Dr Interest Expense $125.00
($30,000 x 5% x 1/12)
Cr Cash $566.14
Explanation:
Corvallis Carnivals
1.The Record of the issuance of the note payable and the first monthly payment will be to Debit Equipment with $30,000 and Credit Notes Payable with the same amount.
2. The Record of the issuance of the note payable will be to Debit Notes Payable with $441.14 ($566.14-$125) and Debit Interest Expense with $125.00 ($30,000 x 5% x 1/12) while Cash will be credited with $566.14
A firm's average total cost is minimized when it produces 10 units. When it produces 10 units, the average total cost is $5/unit. What is the marginal cost when the firm produces 10 units
Answer:
$5/unit
Explanation:
In the theory of production cost, the relationships between average total cost and marginal cost are as follows:
1. When the average cost is increasing, the marginal cost will be greater than the average cost.
2. When the average cost is decreasing, the marginal cost will be less than the average cost.
3. When the average cost at the minimum, the marginal cost equals the average cost.
Based on number 3 above, the marginal cost when the firm produces 10 units is $5/unit since the firm's average total cost is minimized when it produces 10 units.
M Corporation has provided the following data concerning an investment project that it is considering: Initial investment $ 380,000 Annual cash flow $ 133,000 per year Expected life of the project 4 years Discount rate 13 % Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using the tables provided. The net present value of the project is closest to:
Answer:
NPV = $262,604.7
Explanation:
The NPV is the difference between the PV of cash inflows and the PV of cash outflows. A positive NPV implies a good investment decision and a negative figure implies the opposite.
NPV of an investment:
NPV = PV of Cash inflows - PV of cash outflow
PV of annuity= 1 -(1+r)^(-n)/r × Annual cash flow
r- discount rate, n- number of years
PV of cashinflow = 133,000 × (1- 1.13^(-4))/0.13 =395,604.6863
NPV = 395,604.6863 - 133,000= 262,604.7
NPV = $262,604.7
On December 31, Strike Company has decided to sell one of its batting cages. The initial cost of the equipment was $203,433.00 with an accumulated depreciation of $183,089.70. Depreciation has been taken up to the end of the year. The company found a company that is willing to buy the equipment for $18,308.97. What is the amount of the gain or loss on this transaction
Answer:
loss= $2,035.33
Explanation:
Giving the following information:
Purchasing price= $203,433.00
Accumulated depreciation= $183,089.70.
The company found a company that is willing to buy the equipment for $18,308.97.
The gain or loss from selling an asset depends on the book value. If the selling price is higher than the book value, the company gain from the sale.
Book value= purchasing price - accumulated depreciation
Book value= 203,433 - 183,089.7= 20,343.3
Gain/loss= 18,307.97 - 20,343.3= $2,035.33 loss
Stuart tells his student government representative at his college to propose rent controls on local rental housing as a way to help students afford rental housing. Maria disagrees with Stuart, saying rent controls will make students worse off. Who is correct and why
Answer:
Both are correct in part. Rent controls will be better for the students who are able to find housing at the reduced price but worse for students as a whole because there will be a shortage of rental housing, a lower future supply, and the quality will deteriorate.
Explanation:
Rent control involves use of price regimes such as price floor and price ceiling to control the cost of rent by the government.
Price ceiling is the maximum price allowed for rent while price floor is the minimum amount a property is allowed to be rented out.
The aim of rent control is to make housing cost cheap for everyone.
So both Stuart and Maria are correct. Rent control will make housing affordable for the students.
However when unfavourable rent ceiling is imposed by government, suppliers always aim to make profit and will refuse to give property out for rent. Resulting in shortage of rental housing, a lower future supply, and the quality will deteriorate.
Ginny currently earns a (real or nominal) wage of $12.00 per hour; in other words, the amount of her paycheck each week is $12.00 per hour times the number of hours she works. Suppose the price of sparkling water is $2.50 per gallon; in this case, Ginny (real or nominal) wage, in terms of the amount of sparkling water she can buy with her paycheck, is gallons of sparkling water per hour. When workers and firms negotiate compensation packages, they have expectations about the price level (and changes in the price level) and agree on a (real or nominal) wage with those expectations in mind. If the price level turns out to be higher than expected, a worker's (real or nominal) wage is than both the worker and employer expected when they agreed to the wage.
Ginny and her employer both expected inflation to be 4% between 2012 and 2013, so they agreed, in a two-year contract, that she would earn $12.00 per hour in 2012 and $12.48 per hour in 2013. However, suppose inflation between 2012 and 2013 actually turned out to be 5%, not 4%. For example, suppose the price of apple juice rose from $2.00 per gallon to $2.10 per gallon. This means that between 2012 and 2013, Ginny's nominal wage by___________ % , and her real wage by approximately____________ .
Answer:
since we are using this year as our base year, Ginny's real and nominal wage is $12 per hour
price of sparkling water $2.50 per gallon
Ginny can buy 4.8 gallons of sparkling water per hour of work
If the price level turns out to be higher than expected, a worker's real wage is LOWER than both the worker and employer expected when they agreed to the wage.
Ginny and her employer both expected inflation to be 4% between 2012 and 2013, so they agreed, in a two-year contract, that she would earn $12.00 per hour in 2012 and $12.48 per hour in 2013. However, suppose inflation between 2012 and 2013 actually turned out to be 5%, not 4%. This means that between 2012 and 2013, Ginny's nominal wage INCREASED by 4%, and her real wage by DECREASED BY approximately 0.92%.
Ginny's real wage in 2013 = $12.48 / 1.05 = $11.89
it decreased by ($11.89 - $12) / $12 = -0.92%