Answer:
The correct option is B: "The change in Accounts Receivable is a source; The change in Inventory is a use"
Explanation:
However, you will need to look at the asset section as well in order to determine the correct response to this question statement. Depending on how the accounts receivable and inventory changes, you will be able to ascertain which is a source and which is a use. For instance, if the balance in Accounts Receivable and the Inventory has increased, the change is a use. And vice versa.
An example of an inventory accounting policy that should be disclosed in Summary of Significant Accounting Policies is the:_________ . a. amount of income resulting from the involuntary liquidation of LIFO b. major backlogs of inventory orders. c. method used for pricing inventory. d. division of inventory by raw materials, work-in-process, finished goods.
Answer:
Option C
Explanation:
The overview of important accounting rules is a portion of the end notes that accompanies the financial statements of an company, outlining the key policies that the finance department is following. The policy overview is prescribed by the accounting system in force (like the GAAP or IFRS).
The approach a corporation uses to assess the inventory expense (inventory valuation) affects the financial reports explicitly. Thus, it should be depicted in summary of accounting policies.
The one that exemplifies an inventory accounting policy would be:
C). method used for pricing inventory.
Inventory PolicyThe financial statement at the end of the accounting books exemplifies one of the significant rules of accounting.
This highlights the major policies to be followed by the company and its finance team.
The outline of policies acting are provided through this and hence, they will help in offering the method for pricing of inventory in the firm.
Thus, option C is the correct answer.
Learn more about "Inventory" here:
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Exercise 9-6 Percent of sales method; write-off LO P3 At year-end (December 31), Chan Company estimates its bad debts as 0.30% of its annual credit sales of $931,000. Chan records its Bad Debts Expense for that estimate. On the following February 1, Chan decides that the $466 account of P. Park is uncollectible and writes it off as a bad debt. On June 5, Park unexpectedly pays the amount previously written off. Prepare Chan's journal entries for the transactions.
Answer:
Refer to the below for explanation.
Explanation:
December 31,
Amount estimated = Annual credit sales × 0.30.%
= $931,000 × 0.30%
= $2,793
Please see journal entries below;
December 31, Bad debts expense A/c ....................Dr. $2,793
To allowance for doubtful accounts .......Cr $2,793
February 1, Allowance for doubtful A/c........ Dr. $466
To accounts receivable P.Park..........Cr $466
June 5, Accounts receivable P. Park account......... Dr $466
To allowance for doubtful accounts......... Cr $466
June 5,. Cash A/c..... Dr $466
To accounts receivable P.Park.............Cr $466
Stilley Corporation had earnings after taxes of $438,000 in 20X2 with 200,000 shares outstanding. The stock price was $42.10. In 20X3, earnings after taxes declined to $208,000 with the same 200,000 shares outstanding. The stock price declined to $28.30. a. Compute earnings per share and the P/E ratio for 20X2. (Do not round intermediate calculations. Round your final answers to 2 decimal places.) b. Compute earnings per share and the P/E ratio for 20X3. (Do not round intermediate calculations. Round your final answers to 2 decimal places.)\
Answer:
a) Earnings Per Share for 20X2 = 2.19
P/E ratio for 20X2 = 19.22
b) Earnings Per Share for 20X3 = 1.04
P/E ratio for 20X3 = 27.21
Explanation:
a) Compute earnings per share and the P/E ratio for 20X2.
The compute the earnings per share use the following:
Earnings Per Share for 20X2 = (Earnings after tax-Preference Dividend) / shares outstanding
[tex] = \frac{438,000 - 0}{200,000} = 2.19 [/tex]
Earnings Per Share for 20X2 = 2.19
Then find P/E ratio:
P/E ratio for 20X2 = Market Price per share / Earnings Per Share
[tex] \frac{42.10}{2.19} = 19.224 [/tex]
P/E ratio for 20X2 = 19.22
b) Compute earnings per share and the P/E ratio for 20X3.
The compute the earnings per share use the following:
Earnings Per Share for 20X3 =(Earnings after tax-Preference Dividend) / shares outstanding
[tex] = \frac{208,000 - 0}{200,000} = 1.04 [/tex]
Earnings Per Share for 20X3 = 1.04
Then find P/E ratio:
P/E ratio for 20X3 = Market Price per share / Earnings Per Share
[tex] \frac{28.30}{1.04} = 27.21 [/tex]
P/E ratio for 20X3 = 27.21
Similar to stock prices, bond values are derived as the discounted value of all cash flows received from bond ownership in exchange for the bond's price. The two main cash flows an investor receives in exchange for purchasing a bond are:
Answer: b. Interest or Coupon Payments (PMT) throughout the bond's life expand and the repayment of the principal or Face Value at the bond's maturity (FV).
Explanation:
For most bonds, a bond holder receives interest payments from the bond issuer in terms of coupon payments for the duration of the life of the bond. The coupon payment is a steady payment based on the par value of the bond.
When the bond matures, the bond holder receives the Principal/Face Value of the bond back. This value of usually the Par value of the bond regardless of how much the bond holder bought the bond for.
Small business owners' unique selling points (also known as benefits) that customers can expect from your goods or services, including benefits that differentiate your offering from those of the competition is known as:
Answer: Value proposition
Explanation: Value proposition in business is that service, innovation, or uniqueness about your business that attracts customers. A value proposition also helps answers the question 'why' someone should do business with you. It hells to convince potential customer why they should patronize you, and why your service or product would be of more value to them than what your competitors offering same service would be able to offer them.
Hancock Medical Supply Co., earned $85,000 of revenue on account during Year 1, its first year of operation. During Year 1, Hancock collected $67,600 of cash from its receivables accounts. The company did not write-off any uncollectible accounts. It estimates that it will be unable to collect 1% of revenue on account. What is the net realizable value of receivables that will be reported on the balance sheet at December 31, Year 1
Answer:
realizable value of the receivable = $16,550
Explanation:
First of all let us lay out the important information to be used in calculation clearly:
earnings = $85,000
receivables collected = $67,600
uncollectible amount = 1% of $85,000 = 0.01 × 85,000 = $850
Net realizable value of receivables is the total amount to be received, but that has not yet been received, and is not classified as uncollectible amount. This is calculated thus:
Net value of receivable = earnings - uncollectible amount - receivable collected.
= 85,000 - 850 - 67,600 = $16,550.
Note that the receivable collected is subtracted from the total earnings because it is no longer classified as receivable, once it has been received, hence whatever remains of the total earnings that has not bee received make up receivables.
E-Eyes just issued some new preferred stock. The issue will pay an annual dividend of $14 in perpetuity, beginning 19 years from now. If the market requires a return of 4.4 percent on this investment, how much does a share of preferred stock cost today
Answer:
Price of stock = $181.78
Explanation:
PV of dividend in year 13
PV =A×(1- (1+r)^(-n)/r )
PV of dividend in (year 13) = 14/(0.044=318.18
PV of dividend in year 0
PV = Div× (1+r)^(-n)
Dividend in year 13, r-interest rate, n- number of years
PV in year 0 = 318.1818182 × 1.044^(-13)= 181.78
Price of stock = $181.78
Botox Facial Care had earnings after taxes of $350,000 in 20X1 with 200,000 shares of stock outstanding. The stock price was $72.50. In 20X2, earnings after taxes increased to $420,000 with the same 200,000 shares outstanding. The stock price was $83.00. a. Compute earnings per share and the P/E ratio for 20X1. (The P/E ratio equals the stock price divided by earnings per share.) (Do not round intermediate calculations. Round your final answers to 2 decimal places.) b. Compute earnings per share and the P/E ratio for 20X2. (Do not round intermediate calculations. Round your final answers to 2 decimal places.) c. Why did the P/E ratio change
Answer:
a. Compute earnings per share and the P/E ratio for 20X1.
EPS = $1.75 per stock
P/E ratio = 41.43
b. Compute earnings per share and the P/E ratio for 20X2.
EPS = $2.10 per stock
P/E ratio = 39.52
Explanation:
after taxes net income $350,000 in 20x1
200,000 outstanding common stocks
stock price $72.50
after taxes net income $420,000 in 20x2
200,000 outstanding common stocks
stock price $83.00
EPS = net income / outstanding stocks
20x1 = $350,000 / 200,000 = $1.75 per stock
20x2 = $420,000 / 200,000 = $2.10 per stock
P/E ratio = stock price / EPS
20x1 = $72.50 / $1.75 = 41.43
20x2 = $83.00 / $2.10 = 39.52
You own a portfolio equally invested in a risk-free asset and two stocks (If one of the stocks has a beta of 0.66 and the total portfolio is equally as risky as the market, what must the beta be for the other stock in your portfolio? (Hint: Remember that the market has a Beta=1; also remember that equally invested means that each asset has the same weight- since there are 3 assets, each asset's weight is 1/3 or 0.3333). Enter the answer with 4 decimals (e.g. 1.1234)
Answer:
The beta of the other stock or stock B is 2.34
Explanation:
The beta of the portfolio is the weighted average of the individual stock betas that form up the portfolio. To calculate the beta for the portfolio, we use the following formula,
Portfolio beta = wA * Beta of A + wB * Beta of B + ... + wN * Beta of N
Where,
w represents the weight of each stock in the portfolioAs the portfolio is equally as risky as the market, the portfolio beta is assumed to be the same as that of the market and the beta is 1.
The beta is the measure of systematic risk and a risk free asset does not have risk and has a beta of 0.
To calculate the Beta of stock B in the portfolio, we simply put the available values in the formula for the portfolio beta,
1 = 1/3 * 0 + 1/3 * 0.66 + 1/3 * Beta of B
1 = 0 + 0.22 + 1/3 * Beta of B
1 - 0.22 = 1/3 * Beta of B
0.78 * 3 = 1 * Beta of B
2.34 = Beta of B
Thus, the beta of the other stock or stock B is 2.34
On January 1, 2021, Maywood Hydraulics leased drilling equipment from Aqua Leasing for a four-year period ending December 31, 2024, at which time possession of the leased asset will revert back to Aqua. The equipment cost Aqua $412,184 and has an expected economic life of five years. Aqua expects the residual value at December 31, 2024, to be $50,000. Negotiations led to Maywood guaranteeing a $70,000 residual value. Equal payments under the lease are $100,000 and are due on December 31 of each year with the first payment being made on December 31, 2021. Maywood is aware that Aqua used a 5% interest rate when calculating lease payments.
Required:
1. Prepare the appropriate entry for Maywood on January 1, 2021, to record the lease.
2. Prepare all appropriate entries for Maywood on December 31, 2021, related to the lease.
Answer:
1/1/2021
Dr Right of use Asset 371,049
Dr Lease Payable 371,049
12/31/2021
Dr Interest Expense 18,552
Dr Lease Payable 81,448
Cr Cash 100,000
12/31/2021
Dr Amortization Expense 92,762
Cr Right of use Asset 92,762
Explanation:
Maywood Hydraulics
First step is to Calculate for PMT, FV and PV
N= 4, I= 5, PMT=100,000, FV=20,000, PV= 371,049
1/1/2021
Dr Right of use Asset 371,049
Dr Lease Payable 371,049
12/31/2021
Dr Interest Expense 18,552
(371,049*.05)
Dr Lease Payable 81,448
(100,000-18,552)
Cr Cash 100,000
12/31/2021
Dr Amortization Expense 92,762
Cr Right of use Asset 92,762
[ (371,049-0)/4 years]
Jane, Joseph and John are supporting their father who lives in a separate apartment. Their contribution towards his support is 10%, 35% and 55%, respectively. In a multiple support agreement, who would be entitled to claim the father as a dependent?
Answer:
Joseph or John
Explanation:
In order to claim a person as a dependent in order to be eligible for tax benefits, one must contribute with more than 10% of the person's support.
In this case, only Joseph and John contribute with more than 10% and therefore only Joseph or John would be entitled to claim their father as a dependent.
Fifteen years ago, Mr. Fairhold paid $50,000 for a single-premium annuity contract. This year, he began receiving a $1,300 monthly payment that will continue for his life. On the basis of his age, he can expect to receive $312,000. How much of each monthly payment is taxable income to Mr. Fairhold
Answer: $1091.61
Explanation:
From the question, we are told that fifteen years ago, Mr. Fairhold paid $50,000 for a single-premium annuity contract and that this year, he began receiving a $1,300 monthly payment that will continue for his life and based on his age, he can expect to receive $312,000. The amount of each monthly payment is taxable income to Mr. Fairhold goes thus:
Based on the question, Mr Fairhold will have a tax free return of the $50,000 paid. The exclusion ratio will be the investment divided by the expected return. This will be:
= $50,000/$312,000
= 0.1603
Since he received monthly payment of $1,300 and exclusion ratio is 0.1603, the tax free return on investment will be:
= $1,300 × 0.1603
= $208.39
Taxable annuity payment will now be:
= $1300 - $208.39
= $1091.61
When a firm experiences diseconomies of scale, Group of answer choices short-run average total cost is minimized. long-run average total cost is minimized. long-run average total cost increases as output increases. long-run average total cost decreases as output increases.
Answer:
long-run average total cost decreases as output increases.
Explanation:
The company has 15 employees, who earn a total of $1,960 in salaries each working day. They are paid each Monday for their work in the five-day workweek ending on the previous Friday. Assume that December 31, 2015, is a Tuesday, and all 15 employees worked the first two days of that week. Because New Year's Day is a paid holiday, they will be paid salaries for five full days on Monday, January 6, 2016. Use the information to prepare adjusting entries as of December 31, 2015.
Answer:
Preparation of the adjusting entries as of December 31, 2015.
Dr Salaries Expense 3,920
Cr Salaries Payable 3,920
Explanation:
Since we were been told in the question that all the 15 employees worked the first 2 days of that week, the Adjustment we therefore be $3,920( 1,960×2) . And the transaction will be recorded as:
Dr Salaries Expense 3,920
Cr Salaries Payable 3,920
The Adjustment will be :
1,960 x 2 = 3,920
Therefore the pay that occured in New Year's Day will not be used because it falls in the next year.
1. If you are a major shareholder or an owner of a company, what could you do to make sure that your hired top managers are working in your interest? 2. If a firm is growing at its internal growth rate forever, what will happen to its capital structure or debt equity ratio? And why? 3. If you want to start a business, what long-term investments do you plan to choose and what assumptions and methods do you use to estimate your sales growth rates?
Answer:
1) As a shareholder, I have no direct control over what happens in the business. I'd influence the HR situation via the CEO. As the owner, I'd have a site down with the Head of HR to design a compensation plan that ties the performance of the Managers to the profitability of the company. One of such HR strategies are:
Profit-Sharing Incentives: This can be designed to be enforced on an enterprise-level or at the Business Unit Level or both. A profit-sharing compensation system ensures that a percentage (which is usually decided by the Remuneration Committee) is distributed according to points accrued based on the company's performance assessment for each unit/individual Sales/New Business Commission/Bonuses: This is a bonus/commission given for every sale/new business brought in to the company This encourages everyone in the company to become a salesperson. How much commission to give will depend on the advice fo the Chief Financial officer and the HR department.2) Internal Growth Rate is the maximum level of expansion attainable for a company using only self-financing or profits reinvested.
When this is the case, the company's capital structure will comprise mostly of ploughed back profits.
The Debt to Equity ratio will tend towards zero. This is because the company is funded more from Equity than from debt.
3) A long-term investment refers to an asset remains in the company's holding/books for a year and above. Its value is usually recorded on the assets part of a company's balance sheet. Investments which can be held for the long term are stocks, bonds, real estate, and interest earning savings.
Prior to igniting a startup, best practice requires that one holds a combination of various kinds of long-term investments. This portfolio will depend on a host of various factors such as:
Risk Affinity andEconomic PulseGovernment Bonds, Rent earning Real Estate and Interest-Earning Savings are relatively safe options. A ratio of 20:20:40 respectively will make for a great combination. The ratio for cash reserves is highest because, the higher the cash, the higher the interest. Besides, it's safe to keep maintain longterm investment that can be quickly converted when the need arises.
Sales Forecasting
As a startup, I'd go for the Intuitive Forecasting Method.
This method has a lot of demerits as it is not based on historical evidence or data. However, it's the best way to start off. If combined with market intelligence, (that is, data of businesses in a similar industry) this method can prove to be more effective.
Cheers!
Suppose your friend is a music major who sings at weddings. She has no fixed or marginal costs for singing and has two types of customers: 20 customers think it is worth paying $200 to have her sing at their wedding, whereas 10 customers think her singing services are worth only $100. Il earn S if she can charge only one price to:________.
(a) If your friend is able to sing at each wedding and maximizes profits all customers.
(b) She will earn S If she can perfectly price discriminate.
Answer: a. $4,000
b. $5,000
Explanation:
a. If she can sing at each wedding but decides to maximise profits, she will only sing at the weddings of those paying her $200 as it is the higher of the two payment options.
Should she sing at the $200 customer weddings, she would make;
= 20 people * $200
= $4,000
b. Price Discrimination is the charging of different types of customers different prices for the same or similar goods.
If your friend knows how to perfectly charge the two different groups the different prices that they value her at then she will be able to attend and sing at both weddings making her revenue;
= (10* $100) + (20 * $200)
= 1,000 + 4,000
= $5,000
Sub Sandwiches of America made the following expenditures related to its restaurant.
1. Replaced the heating equipment at a cost of $250,000.
2. Covered the patio area with a clear plastic dome and enclosed it with glass for use during the winter months. The total cost of the project was $750,000.
3. Performed annual building maintenance at a cost of $24,000.
4. Paid for annual insurance for the facility at $8,800.
5. Built a new sign above the restaurant, putting the company name in bright neon lights, for 9,900.
6. Paved a gravel parking lot at a cost of $65,000.
Required:
Sub Sandwiches of America credits cash for each of these expenditures. Select the account it debits for each.
Answer:
1. Heating Equipment
2. Premises
3. Maintenance Expense
4. Prepaid Insurance
5. Intangible Asset ; Logo
6. Premises
Explanation:
1. Replacement of heating equipment is substantial hence it is capitalized to the Heating Equipment Account.
2. The project is capitalized to the Premises Account as it form part of premises.
3. Annual Building maintenance is a revenue expenditure not capitalized.
4. An Asset Insurance Prepaid for future economic benefits to be realized is recognized.
5. The new sign would result in inflow of economic benefit and is non-tangible hence Intangible Asset is recognized.
6. Work done is capitalized in the Premises Account
A company has net credit sales of $ 1 comma 300 comma 000, beginning net accounts receivable of $ 270 comma 000, and ending net accounts receivable of $ 202 comma 000. What is the days' sales in accounts receivable? (Use 365 days in calculations as needed. Round any intermediate calculations to two decimal places, and your final answer to the nearest whole day.)
Answer:
66.36 days
Explanation:
Calculation of the days' sales in accounts receivable .
Using this formula
Accounts Receivable Turnover Ratio = [Net credit sales (Beginning net account receivable +Ending net account receivable)/2)]
Let plug in the formula
[$1,300,000/($270,000 + $202,000)/2)]
$1,300,000/($472,000/2)
=$1,300,000/236,000
=$5.50 Days' sales in receivables
= 365/5.5
= 66.36 days
Therefore the days' sales in accounts receivable will be 66.36 days
Chloe makes $500 per week and spends all her income on books and tea. Books cost $25 each, and Chloe buys 16 each week. Tea costs $5 per cup, and Chloe buys 20 cups. When Chloeâs income falls to $450 per week, she cuts her consumption of books by 3 books and purchases 5 more cups of tea. Based on these figures, indicate whether each of the following statements is true or false.
a. Books are an inferior good.
1. True
2. False
b. Tea is a necessity.
1. True
2. False
c. Books are a luxury good, and tea is an inferior good.
1. True
2. False
Answer:
hi i reallly tried but dont want to give an answer that is wrong
plz forgive me
god bless u
Explanation:
Pastina Company sells various types of pasta to grocery chains as private label brands. The company's reporting year-end is December 31. The unadjusted trial balance as of December 31, 2021, appears below.
Account Title Debits Credits
Cash 32,000
Accounts receivable 40,600
Supplies 1,800
Inventory 60,600
Notes receivable 20,600
Interest receivable 0
Prepaid rent 1,200
Prepaid insurance 6,600
Office equipment 82,400
Accumulated depreciation 30,900
Accounts payable 31,600
Salaries payable 0
Notes payable 50,600
Interest payable 0
Deferred sales revenue 2,300
Common stock 64,200
Retained earnings 30,000
Dividends 4,600
Sales revenue 149,000
Interest revenue 0
Cost of goods sold 73,000
Salaries expense 19,200
Rent expense 11,300
Depreciation expense 0
Interest expense 0
Supplies expense 1,400
Insurance expense 0
Advertising expense 3,300
Totals 358,600 358,600
Information necessary to prepare the year-end adjusting entries appears below.
Depreciation on the office equipment for the year is $10,300.
Employee salaries are paid twice a month, on the 22nd for salaries earned from the 1st through the 15th, and on the 7th of the following month for salaries earned from the 16th through the end of the month. Salaries earned from December 16 through December 31, 2021, were $900.
On October 1, 2021, Pastina borrowed $50,600 from a local bank and signed a note. The note requires interest to be paid annually on September 30 at 12%. The principal is due in 10 years.
On March 1, 2021, the company lent a supplier $20,600 and a note was signed requiring principal and interest at 8% to be paid on February 28, 2022.
On April 1, 2021, the company paid an insurance company $6,600 for a two-year fire insurance policy. The entire $6,600 was debited to prepaid insurance.
$560 of supplies remained on hand at December 31, 2021.
A customer paid Pastina $2,300 in December for 900 pounds of spaghetti to be delivered in January 2022. Pastina credited deferred sales revenue.
On December 1, 2021, $1,200 rent was paid to the owner of the building. The payment represented rent for December 2021 and January 2022 at $600 per month. The entire amount was debited to prepaid rent.
Required:
1. Prepare an income statement and a statement of shareholders’ equity for the year ended December 31, 2021, and a classified balance sheet as of December 31, 2021. Assume that no common stock was issued during the year and that $4,600 in cash dividends were paid to shareholders during the year.
2. Prepare the statement of shareholders' equity for the year ended December 31, 2021.
3. Prepare the classified balance sheet for the year ended December 31, 2021. (Amounts to be deducted should be indicated by a minus sign.)
Answer:
Adjusting entries
Depreciation on the office equipment for the year is $10,300.
Dr Depreciation expense 10,300
Cr Accumulated depreciation 10,300
Employee salaries are paid twice a month, on the 22nd for salaries earned from the 1st through the 15th, and on the 7th of the following month for salaries earned from the 16th through the end of the month. Salaries earned from December 16 through December 31, 2021, were $900.
Dr Wages expense 900
Cr Wages payable 900
On October 1, 2021, Pastina borrowed $50,600 from a local bank and signed a note. The note requires interest to be paid annually on September 30 at 12%. The principal is due in 10 years.
Dr Interest expense 1,518
Cr Interest payable 1,518
On March 1, 2021, the company lent a supplier $20,600 and a note was signed requiring principal and interest at 8% to be paid on February 28, 2022.
Dr Interest receivable 1,373
Cr Interest revenue 1,373
On April 1, 2021, the company paid an insurance company $6,600 for a two-year fire insurance policy. The entire $6,600 was debited to prepaid insurance.
Dr Insurance expense 2,475
Cr Prepaid insurance 2,475
$560 of supplies remained on hand at December 31, 2021.
Dr Supplies expense 1,240
Cr Supplies 1,240
A customer paid Pastina $2,300 in December for 900 pounds of spaghetti to be delivered in January 2022. Pastina credited deferred sales revenue.
No entry is required
On December 1, 2021, $1,200 rent was paid to the owner of the building. The payment represented rent for December 2021 and January 2022 at $600 per month. The entire amount was debited to prepaid rent.
Dr Rent expense 600
Cr Prepaid rent 600
Pastina Company
Income Statement
For the Year Ended December 31, 2021
Sales revenue $149,000
Interest revenue $1,373
Cost of goods sold -$73,000
Salaries expense -$20,100
Rent expense -$11,900
Depreciation expense -$10,300
Interest expense -$1,518
Supplies expense -$2,640
Insurance expense -$2,475
Advertising expense -$3,300
Net income = $25,140
Pastina Company
Balance Sheet
For the Year Ended December 31, 2021
Assets
Current assets:
Cash $32,000
Accounts receivable $40,600
Supplies $560
Inventory $60,600
Notes receivable $20,600
Interest receivable $1,373
Prepaid rent $600
Prepaid insurance $4,125
Total current assets: $160,458
Non-current assets:
Office equipment $82,400
Accumulated depreciation $41,200
Total non-current assets: $41,200
Total assets: $201,658
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $31,600
Wages payable $900
Interest payable $1,518
Deferred sales revenue $2,300
Total current liabilities: $36,318
Long term debt:
Notes payable $50,600
Total long term debt: $50,600
Total liabilities: $86,918
Stockholders' equity:
Common stock $64,200
Retained earnings $50,540
Total stockholders' equity: $114,740
Total liabilities and stockholders' equity: $201,658
retained earnings = previous balance + net income - dividends = $30,000 + $25,140 - $4,600 = $50,540
Pastina Company
Statement of Shareholders’ Equity
For the Year Ended December 31, 2021
Balance on January 1: Common stock $64,200
Balance on January 1: Retained earnings $30,000
Net income 2021 $25,140
- Dividends ($4,600)
Subtotal $50,540
Balance on December 31: Common stock $64,200
Balance on December 31: Retained earnings $50,540
On April 2 a corporation purchased for cash 5,000 shares of its own $11 par common stock at $28 per share. It sold 3,000 of the treasury shares at $31 per share on June 10. The remaining 2000 shares were sold on November 10 for $24 per share. a. Journalize the entries to record the purchase (treasury stock is recorded at cost). Apr. 2 b. Journalize the entries to record the sale of the stock. If an amount box does not require an entry, leave it blank. Jun. 10 Nov. 10
Answer:
April 2
Treasury Stock $140,000 (debit)
Cash $140,000 (credit)
June 10
Cash $93,000 (debit)
Treasury Stock $93,000 (credit)
Nov 10
Cash $48,000 (debit)
Treasury Stock $48,000 (credit)
Explanation:
When the Company purchases its own shares
De-recognize the equity item : Treasury Stock and also de-recognize the assets of Cash.
When the Company sales its own shares.
Recognize the Equity item : Treasury Stock and also recognize the asset Cash.
Van Frank Telecommunications has a patent on a cellular transmission process. The company has amortized the patent on a straight-line basis since 2017, when it was acquired at a cost of $10.8 million at the beginning of that year. Due to rapid technological advances in the industry, management decided that the patent would benefit the company over a total of six years rather than the nine-year life being used to amortize its cost. The decision was made at the beginning of 2021.Required:
Prepare the appropriate adjusting entry for patent amortization in 2021 to reflect the revised estimate.
Answer:
The appropriate adjusting entry for patent amortization in 2021 to reflect the revised estimate would be as follows:
Amortization Expense Dr. 3 million
Patent Cr. 3 million
Explanation:
In order to Prepare the appropriate adjusting entry for patent amortization in 2021 to reflect the revised estimate we would have to make the following calculations:
Calculation after the Change:
Original Cost =$10.8 million
Annual Amortization (Old) =$10.8 million/9 = $1.2 million
Amortization till Date (2017 - 2021) = 1.2*4 = 4.8 million
Unamortized Value = 10.8 - 4.8 = 6 million
Remaining Life = 6 - 4 = 2 Years
New Amortization = Unamortized Value/Remaining Life = 6/2 = 3 million
Therefore, the appropriate adjusting entry for patent amortization in 2021 to reflect the revised estimate would be as follows:
Amortization Expense Dr. 3 million
Patent Cr. 3 million
Victoria Enterprises expects earnings before interest and taxes (EBIT) next year of $ 2.5 million. Its depreciation and capital expenditures will both be $ 295 comma 000, and it expects its capital expenditures to always equal its depreciation. Its working capital will increase by $ 53 comma 000 over the next year. Its tax rate is 40 %. If its WACC is 11 % and its FCFs are expected to increase at 4 % per year in perpetuity, what is its enterprise value?
Answer:
Value of Victoria Enterprises= $21,498,285.71
Explanation:
Free cash flow represents the amount that is left to all the providers of capital after the payment of all all operating expenses, working capital and investment in fixed asset expenditures.
It is computed as cash flow made from operation less capital expenditures
For Victoria Enterprises
The Free cash flow
= EBIT(1-T) + depreciation- increase in capital expenditure - increase in working capital
= 2.5 × (1-0.4) + 0.295 - 0.295 - 0.053
= 2,500,000 × (1-0.4) + 295,000 -295,000- 53,000
FCFF= $1,447,000
Value of a firm = FCFF (1+g)/(WACC-g)
g- growth rate - 4%, WACC- 11%, FCFF-1,447,000
Value of Victoria = 1,447,000 × (1+0.04)/(0.11- 0.04) = 21,498,285.71
Value of Victoria= $21,498,285.71
Melissa recently paid $870 for round-trip airfare to San Francisco to attend a business conference for three days. Melissa also paid the following expenses: $400 fee to register for the conference, $260 per night for three nights’ lodging, $120 for meals, and $425 for cab fare. (Leave no answers blank. Enter zero if applicable. Do not round intermediate calculations. Round your final answer to the nearest dollar amount.) b. Suppose that while Melissa was on the coast, she also spent two days sightseeing the national parks in the area. To do the sightseeing, she paid $1,010 for transportation, $1,055 for lodging, and $495 for meals during this part of her trip, which she considers personal in nature. What amount of the total costs can Melissa deduct as business expenses?
Answer:
$2,535
Explanation:
you can deduct only business related costs:
50% of the money spent on meals = $120 x 50% = $60100% of transportation expenses = $870 + $425 = $1,295100% lodging expenses = $780100% of the registration fee = $400total deductions = $2,535Expenses that are not considered business related, e.g. sightseeing, cannot be deducted as business expenses.
Ms. Parker would like to have $99.000 buy a new car in 8 yearsTo accumulate $99,000 in years, how much should she invest monthly in a sinking tund with 3% Interest compounded monthly?
Answer:
$1,161.23
Explanation:
For computing the monthly payment we need to apply the PMT formula i.e to be shown in the attachment below:
Given that,
Present value = $99,000
Future value or Face value = $0
RATE = 3% ÷ 12 months = 0.25
NPER = 8 years × 12 months = 96 months
The formula is shown below:
= PMT(RATE;NPER;-PV;FV;type)
The present value come in negative
So, after applying the above formula, the monthly payment is $1,161.23
Thornton, Inc., had taxable income of $128,267 for the year. The company's marginal tax rate was 35 percent and its average tax rate was 24 percent. How much did the company have to pay in taxes for the year?
Answer:
$30784.08
Explanation:
Taxable income can be refer to as the amount of income used to calculate how much tax an organisation owes to the government in a particular tax year.
Thornton Inc. had taxable income of $128,267 for the year
The company's marginal tax rate is 35 percent
The company's average tax rate is 24 percent
To know how much did the company have to pay in taxes for the year, we multiply the Taxable income by the Company Average tax rate for the year.
=$128,267 * 24%
=$128,267 * 0.24
=$30784.08
Thornton Inc will pay $30784.08 for the year.
Bill Phillips is developing a Monte Carlo simulation to value a complex and thinly traded security. Phillips wants to model one input variable to have negative skewness and a second input variable to have positive excess kurtosis. In a Monte Carlo simulation, Phillips can appropriately use:_________
Answer: Both of them
Explanation:
The Monte Carlo Simulation is a forecasting technique that allows one to find out the probability of occurence of different outcomes which may be difficult to come up with because there are multiple random variables involved.
Monte Carlo simulations are used in many diverse fields such as Finance, Engineering and Science.
As earlier mentioned, this simulation allows for multiple random variables so Phillips can use it to model both the variables to have different characteristics.
Farming today in the U.S. is __________ productivity compared to a century ago, resulting in there being __________ farmers today than at the turn of the previous century.
Answer: d) much more fewer
Explanation:
Farming in the United States now employs large scale machinery to get the work done faster and more efficiently. As a result productivity has sky rocketed compared to a century ago and the contribution of Agriculture to US GDP is even higher than the entire GDP of some Countries such as Indonesia.
However, due to the large scale mechanisation involved as well as the diversification of the US economy, fewer people are farmers compared to a century ago with only 1.3% of employed Americans working in farms today.
Change all of the numbers in the data area of your worksheet so that it looks like this:
Data
4 Unit sales 10,000 units
5 Selling price per unit $20 per unit
6 Variable expenses per unit $8 per unit
7 Fixed expenses $90,000
A) What is the break-even in dollar sales?
B) What is the margin of safety percentage?
C) What is the degree of operating leverage?
1. Using the degree of operating leverage and without changing anything in your worksheet, calculate the percentage change in net operating income if unit sales increase by 20%.
2. Confirm your calculations in Requirement 3 above by increasing the unit sales in your worksheet by 20% so that the Data area looks like this:
Data
4 Unit sales 12,000 units
5 Selling price per unit $20 per unit
6 Variable expenses per unit $8 per unit
7 Fixed expenses $90,000
1. Using the degree of operating leverage and without changing anything in your worksheet, calculate the percentage change in net operating income if unit sales increase by 20%.
2. Confirm your calculations in Requirement 3 above by increasing the unit sales in your worksheet by 20% so that the Data area looks like this:
A. What is net operating income?
B. By what percentage did the net operating income increase?
Answer:
A) What is the break-even in dollar sales?
$150,000B) What is the margin of safety percentage?
25%C) What is the degree of operating leverage?
41. Using the degree of operating leverage and without changing anything in your worksheet, calculate the percentage change in net operating income if unit sales increase by 20%.
if unit sales increase by 20%, then profits should increase by 80%2. Confirm your calculations in Requirement 3 above by increasing the unit sales in your worksheet by 20%
A. What is net operating income?
(10,000 x 1.2 x $20) - (10,000 x 1.2 x $8) - $90,000 = $240,000 - $96,000 - $90,000 = $54,000B. By what percentage did the net operating income increase?
net operating income increased from $30,000 to $54,000 (an 80% increase)Explanation:
selling price $20
variable costs $8
contribution margin $12
break even point = $90,000 / $12 = 7,500 x $20 = $150,000
margin of safety = (current sales - break even) / current sales = $50,000 / $200,000 = 25%
degree of operating leverage = (quantity x contribution margin) / [(quantity x contribution margin) - fixed costs] = (10,000 x $12) / ($120,000 - $90,000) = $120,000 / $30,000 = 4
or contribution margin / net profits = $120,000 / $30,00 = 4
A company will pay a $2 per share dividend in 1 year. The dividend in 2 years will be $4 per share, and it is expected that dividends will grow at 5% per year thereafter. The expected rate of return on the stock is 12%.
Required:
a. What is the current price of the stock?
b. What is the expected price of the stock in a year?
c. Show that the expected return, 12%, equals dividend yield plus capital appreciation.
Answer:
current price P = $ 52.81
The expected price of the stock after one year = $57.16
The Total expected return for any investor after one year = 12%
Explanation:
Given that:
Dividend paid in 1 year = $2/ share
Dividend paid in 2 years = $4/share
Expect growth rate of the dividends g = 5% = 0.05
Expected rate of return on the stock r =12% = 0.12
Required:
a. What is the current price of the stock?
To calculate the current price of the stock ; we need to first determine the terminal value of the stock which can be done by using the formula:
[tex]Terminal \ Value = \dfrac{Dividend \ for \ the \ second \ year*(1+g)}{r-g}[/tex]
[tex]Terminal \ Value = \dfrac{4*(1+0.05)}{0.12-0.05}[/tex]
[tex]Terminal \ Value = \dfrac{4*(1.05)}{0.07}[/tex]
[tex]Terminal \ Value = \dfrac{4.2}{0.07}[/tex]
Terminal value = $60
Now; the current price of the stock is calculate as follows:
[tex]current \ price \ P = \dfrac{\$ 2}{(1+0.12)^1} + \dfrac{\$ 4 }{(1+0.12)^2} + \dfrac{\$ 60}{(1+0.12)^2}[/tex]
[tex]current \ price \ P = \dfrac{\$ 2}{1.12} + \dfrac{\$ 4 }{1.2544} + \dfrac{\$ 60}{1.2544}[/tex]
current price P = $1.79 + $3.19 + $47.83
current price P = $ 52.81
b) What is the expected price of the stock in a year?
The expected price of the stock after one year = [tex]\dfrac{\$ 4}{(1+0.12)^1}+ \dfrac{\$60}{(1+0.12)^1}[/tex]
The expected price of the stock after one year = $3.58 + $53.58
The expected price of the stock after one year = $57.16
c. Show that the expected return, 12%, equals dividend yield plus capital appreciation.
We understand now that the current price of the sock = $52.81
and the expected price of the stock after one year = $57.16 ; so any investor who purchased the stock at the current price will receive a dividend of $2 after one year.
Hence;
The Total expected return for any investor after one year =( (price after one year - current price ) + Dividend received) /current price
The Total expected return for any investor after one year =( ($57.16 - $52.81)+ $2 )/$52.81
The Total expected return for any investor after one year = ($4.35+$2)/$52.81
The Total expected return for any investor after one year = 0.12
The Total expected return for any investor after one year = 12%