e) consistent color selections; multiple fonts
Three years ago, Adrian purchased 365 shares of stock in X Corp. for $68,620. On December 30 of year 4, Adrian sells the 365 shares for $61,320.
A. Assuming Adrian has no other capital gains or losses, how much of the loss is Adrian able to deduct on her year 4 tax return?
B. Assume the same facts as in part (A), except that on January 20 of year 5, Adrian purchases 365 shares of X Corp. stock for $61,320. How much loss from the sale on December 30 of year 4 is deductible on Adrian's year 4 tax return? What basis does Adrian take in the stock purchased on January 20 of year 5?
Answer:
The answer is b
Explanation:
im 100 percent sure of my answer
Requirement 2:
Change all of the numbers in the data area of your worksheet so that it looks like this:
A B C D
1 Chapter 6: Applying Excel
2
3 Data
4 Selling price per unit $353
5 Manufacturing costs:
6 Variable per unit produced:
7 Direct materials $137
8 Direct labor $51
9 Variable manufacturing
overhead $22
10 Fixed manufacturing
overhead per year $127,600
11 Selling and administrative expenses:
12 Variable per unit sold $5
13 Fixed per year $76,000
14
15 Year 1 Year 2
16 Units in beginning
inventor 0
17 Units produced during
the year 2,900 2,200
18 Units sold during the year 2,400 2,400
19
If your formulas are correct, you should get the correct answers to the following questions.
(a) What is the net operating income (loss) in Year 1 under absorption costing? (Input the amount as a positive value. Omit the "$" sign in your response.)
(Click to select)Net operating incomeNet operating loss
$
(b) What is the net operating income (loss) in Year 2 under absorption costing? (Input the amount as a positive value. Omit the "$" sign in your response.)
(Click to select)Net operating lossNet operating income
$
(c) What is the net operating income (loss) in Year 1 under variable costing? (Input the amount as positive value. Omit the "$" sign in your response.)
(Click to select)Net operating lossNet operating income
$
(d) What is the net operating income (loss) in Year 2 under variable costing? (Input the amount as a positive value. Omit the "$" sign in your response.)
(Click to select)Net operating lossNet operating income
$
(e) The net operating income (loss) under absorption costing is less than the net operating income (loss) under variable costing in Year 2 because (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer.):
Units were left over from the previous year.
The cost of goods sold is always less under variable costing than under absorption costing.
Sales exceeded production so some of the fixed manufacturing overhead of the period was released from inventories under absorption costing.
Answer:
Requirement 2
a) Net Operating Income (Loss) for year 1 under absorption costing = 110,600
b) Net Operating Income (Loss) for year 2 under absorption costing = 257,600
c) Net Operating Income (Loss) for year 1 under variable costing = 238,200
d) Net Operating Income (Loss) for year 2 under variable costing = 385,200
e) The cost of goods sold is always less under variable costing than under absorption costing.
Explanation:
a) Absorption Costing, also called full absorption costing, capture all costs associated with manufacturing a particular product, such that the direct and indirect costs, such as direct materials, direct labor, rent, and insurance, are fully accounted for using this managerial accounting method.
b) Variable Costing is a managerial accounting technique that assigns variable costs to inventory, so that all period (fixed overhead) costs are charged to expenses in the period incurred, while only direct materials, direct labor, and variable manufacturing overhead costs are assigned to inventory.
Six years ago, James Corporation sold a $100 million bond issue to expand its facilities. Each debenture has a $1,000 par value, an original maturity of 20 years (there are now 14 years left to maturity), and an annual coupon rate of 11.5% with semiannual payments. If you require a 14% return, what price would you pay today for a James bond?
Answer:
Price of Bonds=$848.286
Explanation:
The value of the bond is the present value (PV) of the future cash receipts expected from the bond. The value is equal to present values of interest payment plus the redemption value (RV) discounted at the yield rate
Value of Bond = PV of interest + PV of RV
The value of bond for James Corporation can be worked out as follows:
Step 1
PV of interest payments
PV = A × (1+r)^(-n)/r
A- semiannual interest payment, n-number of periods, r- semi annul yield
A-semi- annul interest payment:
=11.5%× 1,000× 1/2 = 75
r-semi-Annual yield = 14%/2 = 7%
n-Maturity period =1 4 × 2= 28
PV of interest payment:
=57.5 × (1- (1+0.07)^(-28)/0.07)
= 697.88
Step 2
PV of Redemption Value
= 1,000 × (1.07)^(-28) = 150.40
Step 3
Price of bond
=697.88 + 150.40
=$848.286
Firm A's demand for a product is 15 units per month. Its supplier charges an ordering cost of $5 per order and $10 per unit with a 10% discount for orders of 15 units or higher. Firm A incurs a 25% annual holding cost. What is Firm A's annual ordering costs if it orders at a quantity of 28 units?
Answer:
Annual ordering cost=$32.142
Explanation:
Annual ordering cost = Annual demand/order quantity × ordering cost per order
Annual demand = 15 × 12 = 180 units
Kindly note that there are 12 months in year.
Annual Ordering cost = 180/28 × $5= $32.142
Annual ordering cost=$32.142
1- Storm Concert Promotions: Determine whether overhead is overapplied or underapplied.
2- Storm Concert Promotions: Prepare the journal entry to allocate (close) overapplied or underapplied overhead to Cost of Goods Sold.
3- Valle Home Builders: Determine whether overhead is overapplied or underapplied.
4- Valle Home Builders: Prepare the journal entry to allocate (close) overapplied or underapplied overhead to Cost of Goods Sold.
Storm Concert Promotions Valle Home Builders
Actual indirect materials costs $12,800 $6,800
Actual indirect labor costs $55,500 $47,000
Other overhead costs $17,100 $49,000
Overhead applied $91,600 $98,400
Answer and Explanation:
1. The overhead is overapplied or underapplied is shown below:-
Valle Home Storm:
Particulars Amount
Indirect materials $12,800 $91,600 Applied overhead
Indirect Labor $55,500
Other overhead costs $17,100
$85,400 $6,200 Over applied overhead
2. The Journal entry is shown below:-
Factory overhead Dr, $6,200
To Cost of goods sold $6,200
(Being overapplied overhead is recorded)
3. The overhead is overapplied or underapplied is shown below:-
Valle Home Builders:
Indirect materials $6,800 $98,400 Applied overhead
Indirect Labor $47,000
Other overhead costs $49,000
Underapplied overhead $4,400
4. The Journal entry is shown below:-
Cost of goods sold Dr, $4,400
To Factory overhead $4,400
(Being under applied is recorded)
Suppose you sold a futures contract on gold 3 months ago when the futures price was $1,350 per ounce. Each contract is on 100 ounces of gold. The contract is closed out today. The current futures price is $1,340.
Part a. What was your position?
Part b. What was the buyer’s position?
Part c. Calculate your loss/gain on the contract
Answer: The answers are provided below
Explanation:
a. What was your position?
My position will be the difference between the past future price when I sold the good and the current future price which is then multiplied by the contract size. This will be:
= ($1,350 - $1,340) × 100
= $10 × 100
My position = $1,000
b. What was the buyer’s position?
The buyer's position will be the opposite of mine. This will be:
= ($1,340 - $1,350) × 100
= -$10 × 100
= -$1000
Buyer's position = -$1,000
c. Calculate your loss/gain on the contract.
The profit will be the difference between the selling price and the closing price multiplied by the contract size. This will be:
= ($1,350 - $1,340) × 100
= $10 × 100
= $1,000
My profit = $1,000
Production estimates for July are as follows:
Estimated inventory (units), July 1 725
Desired inventory (units), July 31 1, 200
Expected sales volume (units), July 7,500
For each unit produced four hours of direct labor is required. The labor rate per hour is $15. The number of direct labor hours required for July production is:_________
Answer:
31,900
Explanation:
For the computation of the number of direct labor hours required for July production first we need to find out the production in units which is shown below:-
Production in units = Expected sales in Units + Ending Inventory - Beginning inventory
= 7,500 + 1,200 - 725
= 7,975
Total direct labor hours required = Production in units × Hours per unit
= 7,975 × 4
= 31,900
We simply applied the above formulas
Seattle Shoestring Sales, Inc. arranged to sell shoestrings to Victory, Inc., a tennis shoe manufacturer. According to the terms of the deal, Seattle Shoestring Sales committed to sell Victory whatever number of shoestrings it will produce next year, at seventy-five cents per pair. Since entering into their agreement, the price of cotton has skyrocketed five hundred percent. To produce shoestrings, Seattle Shoestring Sales’ cost alone will be approximately $1.50 per pair. Seattle Shoestring Sales has informed Victory that it cannot and will not honor the deal.
Required:
a. Is there an enforceable contract between Seattle Shoestring Sales, Inc. and Victory, Inc.?
b. Is the failure to include a quantity term in the agreement fatal to its enforceability?
c. What about the fact that the price of cotton dramatically increased after the companies reached their agreement?
d. Should a court or other arbiter increase the per-pair contract price to account for the increase in the price of cotton, and then enforce the agreement?
Answer:
(a) Enforceable contract is a contract that is valid. but it cannot be forced by the court. the contract designed by Seattle Shoestring Sales Incorporation and Victory, Incorporation was valid
(b)For the agreement, Seattle Shoestring Sales is not liable to sell any specific amount.
(c)The fact that price of cotton went higher would also be considered by the court.
(d) The court or arbitrator cannot impose the contract after increasing the per-pair contract price to account for the increase in price of cotton, due to the mentioned deliberation.
Explanation:
Solution
(a)Enforceable contract is a contract that is correct. but it cannot be forced by the court.
The contract entered by Seattle Shoestring Sales, Incorporation and Victory, Incorporation was correct.
So, the consideration of the agreement would restrict the court from resisting the agreement if Seattle Shoestring Sales denies fulfilling its promise.
The main reason behind this is that in the terms of agreement specific quantity of was not stated.
(b)As per the agreement, Seattle Shoestring Sales is not liable to sell any specific amount.
(c)The fact that price of cotton dramatically increased would also be considered by the court.
(d)The court or arbitrator cannot enforce the contract after increasing the per-pair contract price to account for the increase in price of cotton, due to the mentioned consideration.
Free Cash Flow Catering Corp. reported free cash flows for 2008 of $8.08 million and investment in operating capital of $2.08 million. Catering listed $1.08 million in depreciation expense and $2.08 million in taxes on its 2008 income statement. What was Catering's 2008 EBIT
Answer: $11.16 million.
Explanation:
Free Cash Flow Catering Corp Earnings Before Interest and Tax (EBIT) can be calculated by the following formula,
EBIT = Operating Cashflow + Taxes - Depreciation.
Operating Cashflow = Free Cashflow + Investment in Operating Capital
= 8.08 million + 2.08 million
= $10.16 million
EBIT = 10.16 million + 2.08 million - 1.08 million
EBIT = $11.16 million.
Ramsey Company produces speakers (Model A and Model B). Both products pass through two producing departments. Model A's production is much more labor-intensive than that of Model B. Model B is also the more popular of the two speakers. The following data have been gathered for the two products.
Model A Model B
Units produced per year 10,000 Units produced per year 100,000
Prime Costs $150,000 Prime Costs $1,500,000
Direct Labor Hours 140,000 Direct labor Hours 300,000
Machine Hours 20,000 Machine Hours 200,000
Production runs 40 Production runs 60
Inspection hours 800 Inspection hours 1200
Maintenance hours 10,000 Maintenance hours 90,000
Overhead costs:
Setup costs $270,000
Inspection costs $210,000
Machining $240,000
Maintenance $270,000
Total overhead costs $990,000
Required:
a. Compute the overhead cost per unit for each product by using a plantwide rate based on direct labor hours (Round to two decimal places).
b. Compute the overhead cost per unit for each product by using ABC.
c. Using the activity-based product costs as the standard, comment on the ability of departmental rates to improve the accuracy of product costing. Did the department rate do better than the plant rate?
Answer:
a. $2.05 (two decimal places)
b. Model A = $312,000 Model B= $1,397,000
c. The use of departmental overheads rate is more accurate than the plant wide.
Explanation:
Plant wide overhead rate = Total Overheads / Total Activity
= $990,000 / (140,000 + 300,000)
= $990,000 / 440,000
= $2.04545 OR $2.05 (two decimal places)
For ABC, first calculate Cost Driver Rate as follows :
Setup costs = $270,000 / (40 +60)
= $2,700 per production run.
Inspection costs = $210,000 / (800 +1,200)
= $105 per inspection hour
Machining = $240,000 / (20,000 + 200,000)
= $1.09 per machine hour
Maintenance = $990,000 / (10,000 + 90,000)
= $9.90 per maintenance hour
The next step is to Allocate the overheads to the Products :
Model A Model B
Overhead costs:
Setup costs $108,000 $162,000
Inspection costs $84,000 $126,000
Machining $21,000 $218,000
Maintenance $99,000 $891,000
Total overhead costs $312,000 $1,397,000
A business is considering a cash outlay of $880,000 for the purchase of land, which it intends to lease for $200,000 per year. If alternative investments are available that yield a 15 percent return, the opportunity cost of the purchase of the land is
Answer:
132000$
Explanation:
880000 *0,15=132000
A business is considering a cash outlay of $880,000 for the purchase of land, which it intends to lease for $200,000 per year. If alternative investments are available that yield a 15 percent return, the opportunity cost of the purchase of the land is $132,000.
What is an opportunity cost rate?When economists talk about a resource's "opportunity cost," they mean the worth of the resource's next-highest-valued alternative usage.
Given
Cost of Land = $880,000
Return = 15%
Lease = $200000
Required to the opportunity cost =?
opportunity cost = cost of land x return rate
opportunity cost = 880,000 x 15 = $132,000
Opportunity cost is crucial for businesses because it helps them decide how to effectively use their limited resources and cash. A corporation can pick which choice gives the highest or most productive return by calculating the opportunity cost of a specific option or options.
Thus, the opportunity cost of the purchase of the land is $132,000.
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A company purchased a computer system at a cost of $25,000. The estimated useful life is 8 years, and the estimated residual value is $6,000. Assuming the company uses the double-declining-balance method, what is the depreciation expense for the second year
Answer:
$4,687.50
Explanation:
The computation of the depreciation expense of the second year using the double-declining method is shown below:
First we have to determine the depreciation rate which is given below:
= One ÷ useful life
= 1 ÷ 4
= 12.5%
Now the rate is double So, 25%
In year 1, the original cost is $25,000, so the depreciation is $6,250 after applying the 25% depreciation rate
And, in year 2, the ($25,000 - $6,250) × 25% = $4,687.50
On April 25, Foreman Electric installs wiring in a new home for $2,800 on account. However, on April 27, Foreman’s electrical work does not pass inspection, and Foreman grants the customer an allowance of $530 because of the problem. The customer makes full payment of the balance owed, excluding the allowance, on April 30.
Required:
1. Record the credit sale on April 25.
2. Record the sales allowance on April 27.
3. Record the cash collection on April 30.
4. Calculate net sales associated with these transactions.
Answer:
1. April 25
Dr Accounts receivable 2,800
Cr Service revenue 2,800
2. April 27
Dr Sales allowances 530
Cr Accounts receivable 530
3.April 30
Dr Cash 2,270
Cr Accounts receivable 2,270
4. Net sales $2,270
Explanation:
1. Preparation to record the credit sale on April 25 for Foreman Electric because Foreman Electric installs wiring in a new home for $2,800 on account which means to record service provide on account by :
April 25
Dr Accounts receivable 2,800
Cr Service revenue 2,800
2. Preparation to record the sales allowance on April 27 because Foreman was said to grants the customer an allowance of $530 which means we have tobrecord sales allowances for credit sales by :
April 27
Dr Sales allowances 530
Cr Accounts receivable 530
3. Preparation to record the cash collection on April 30 because the customer makes the full payment of the balance owed which exclude the allowance, on April 30 which means we have to record collected cash on account less the sales allowance .
April 30
Dr Cash 2,270
(2,800-530)
Cr Accounts receivable 2,270
4.Calculation of the net sales associated with these transactions
Service revenue 2,800
Les sales allowances 530
Net sales $2,270
First, April 25
The entry is Dr. assets 2,800
Cr Service revenue 2,800
The second, April 27
Dr. Sales allowances 530
Cr assets 530
The third, April 30
Dr. Cash 2,270
Cr assets 2,270
The forth, income is $2,270
What are the Journal Transaction?1. Maintain the record for Preparation the credit sale on April 25 for Foreman Electric because Foreman Electric installs wiring in an exceedingly new home for $2,800 on account which suggests to record service provide on account by :
April 25
Dr assets 2,800
Cr Service revenue 2,800
2. Maintain the record for Preparation the sales allowance on April 27 because Foreman was said to grants the purchasers an allowance of $530 which suggests we've to record sales allowances for credit sales by :
April 27
Dr. Sales allowances 530
Cr assets 530
3. Maintain the record for Preparation the cash collection on April 30 because the customer makes the entire payment of the balance owed which excludes the allowance, on April 30 which suggests we have got to record collected cash on account less the sales allowance.
April 30
Dr Cash 2,270
(2,800-530)
Cr assets 2,270
4. Now we Calculate of the net sales associated with these transactions
Service revenue 2,800
Fewer sales allowances 530
Thus the online sales are $2,270
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Cantlivia is a small and poor nation, but its current prime minister has a desire to create more wealth for her citizens. The prime minister has received recommendations from several of her advisors. Which of the following recommendations is likely to create the most wealth for Cantilever?
a. Acquire more land by invading a nelghboring country that is even poorer and weak.
b. Use foreign aid from other nations to purchase more tools and machinery.
c. Establish a business environment that promotes and rewards entrepreneurship.
d. Establish barriers to trede to protect Cantlivia businesses from foreign competition.
Answer: Establish a business environment that promotes and rewards entrepreneurship
Explanation:
Entrepreneurship simply means setting up a business or an enterprise in order to make profit and also create wealth.
From the question, we are informed that Cantlivia is a small and poor nation, but its current prime minister has a desire to create more wealth for her citizens. The best recommendation will be for the prime minister to establish a business environment whereby entrepreneurship is promoted and rewarded.
When this is done, wealth will be created among the people in the nation as most of them will have their own businesses. This will also lead to the economic growth of the country as there will be an increase in it's gross domestic product. Also, more businesses will lead to creation of more jobs.
Mica, a minor, signs a contract to pay National Health Club a monthly fee for twenty-four months to use its facilities. Six months later, after reaching the age of majority, Mica continues to use the club. This act is Group of answer choices
Answer:
Ratification
Explanation:
Since in the question, it is given that the mica who is a minor signed a contract regarding 24 months monthly fee for the national health club
Now after six months she or he is reaching her majority age and she or he continues to take the facilities of the club so this act we called as ratification as this a valid contract between the mica and the health club because he or she reaches the age of majority
Suppose Friendly Airlines is considering signing a long-term contract with the union representing its pilots. Friendly Airlines and the union both agree that real wages should increase by 2%. Inflation is expected to be 3%, so they agree on a 5% nominal wage increase.
Now, suppose inflation turns out to be lower than expected, coming in at 2%. This would (benefit or harm) the union and (benefit, harm) Friendly Airlines because the real wage increase would now be?
Answer and Explanation:
As we know that
Nominal interest rate = Real interest rate + inflation rate
where
Nominal interest rate is 5%
Real interest rate is 2%
So, the inflation rate is 3%
Now if the inflation rate is increased by 2%
So the new inflation rate is 4%
And, the nominal interest rate would remain the same i.e 5%
So, the real interest rate is
= 5% - 4%
= 1%
Since the interest rate declines that decreased the consumer purchasing power
Moreover, the increase in the inflation rate declines the workers real wages i.e purchasing power also falls
So if there is an increase in inflation than it would be harmful for the union and benefit Friendly Airlines as the real wage increased would be less or low
Assume that TarMart purchased equipment at the beginning of fiscal year 2016 for $480,000 cash. The equipment had an estimated useful life of 8 years and a residual value of $30,000.
1. What would depreciation expense be for year 3 under the straight-line method?
2. What would depreciation expense be for year 3 under the double-declining balance method?
3. What is the first year in which depreciation expense under the straight-line method is higher than under the declining balance method?
4. Assume TarMart uses the straight-line depreciation method for its equipment. Also assume that at fiscal year-end 2020, TarMart sold the equipment purchased at the beginning of fiscal year 2016 for $200,000 cash. Prepare the journal entry to record the sale of the equipment at year-end 2020.
Answer:
1. What would depreciation expense be for year 3 under the straight-line method?
= ($480,000 - $30,000) / 8 = $56,250
same depreciation expense for every year
2. What would depreciation expense be for year 3 under the double-declining balance method?
depreciation year 1 = 2 x 1/8 x $480,000 = $120,000
depreciation year 2 = 2 x 1/8 x $360,000 = $90,000
depreciation year 3 = 2 x 1/8 x $270,000 = $67,500
3. What is the first year in which depreciation expense under the straight-line method is higher than under the declining balance method?
under double declining method
depreciation year 4 = 2 x 1/8 x $202,500 = $50,625
In year 4, depreciation expense wil be higher using the straight line method.
4. Assume TarMart uses the straight-line depreciation method for its equipment. Also assume that at fiscal year-end 2020, TarMart sold the equipment purchased at the beginning of fiscal year 2016 for $200,000 cash. Prepare the journal entry to record the sale of the equipment at year-end 2020.
Dr Cash 200,000
Dr Accumulated depreciation - equipment 225,000
Dr Loss on sale of equipment 55,000
Cr Equipment 480,000
Explanation:
purchase cost $480,000
useful life 8 years
salvage value $30,000
Garden Corporation uses cost-plus pricing with a 30% mark-up. The company is currently selling 12,000 units at $21.45 per unit. Each unit has a variable cost of $11.50. In addition, the company incurs $60,000 in fixed costs annually. If demand falls to 10,000 units, how much will the company have to charge per unit in order to earn the same annual profit
Answer:
$23.44
Explanation:
The computation of profit charge per unit for earning same annual profit is shown below:
Given that
No of Units Sold = 12,000
Sale Price of each Unit = $21.45
Variable Cost = 11.50
So,
Contribution Per Unit is
= Selling price per unit - variable cost per unit
= $21.45 - $11.50
= $9.95
So,
Total Contribution is
= 12,000 units × $9.95
= $119,400
And,
Fixed Costs for the year is $60,000
So, the Profit for the year is
= Contribution margin - fixed cost
= $119,400 - $60,000
= $59,400
Now If the demand for the product falls to 10,000 Unit
So we assume Number of units expected to be sold is10,000
Since Variable cost Per Unit is 11.50
So, the Total Variable Cost is
= 10,000 units × $11.50
= $115,000
And,
Fixed Cost per annum $60,000
Expected Profit $59,400
So, the total amount is
= $115,000 + $60,000 + $59,400
= $234,400
So, the price per unit charged is
= $234,400 ÷ 10,000 units
= $23.44
International businesses with markets and production facilities in other countries, or that use materials from different countries need to understand the ways and rates at which currency is converted. Countries may operate using different exchange rate regimes, all of which have different advantages and disadvantages.
Governments around the world pursue a number of different exchange rate policies. No one exchange rate system is universal, and the international monetary system is continually emerging. One key factor an international business must consider when looking at foreign markets is how the currency will be converted into the home-country currency. Because the foreign exchange market is so volatile, the firm needs to understand the advantages and disadvantages of each regime.
Match each description to the correct currency arrangments.
Currencies:
a. Floating exchange rate
b. Fixed exchange rate
c. Managed-float
d. Pegged exchange rate
e. Target Zone
Descriptions:
1.Reduces uncertainty
2. Uncertainty
3. Fluctuation with limits
4. Limited options
5. Difficult
6. No uncertainty
7. Unknown elements
8. Government adjusts
9. Market-based
10. Continual government
11. Intervention
Answer:
a. Floating exchange rate - Uncertainty
b. Fixed exchange rate - No uncertainty
c. Managed-float - Reduces uncertainty
d. Pegged exchange rate - Market based
e. Target Zone - Fluctuations with limits
Explanation:
Floating exchange rate is uncertain and it fluctuates with the market movements.
Fixed exchange rate is defined and there is no uncertainty.
Managed float reduces uncertainty but there is government interventions
Pegged exchange rate is market based rate
Target zone rate is fluctuated within the specified limits.
a. Floating exchange rate - Uncertainty
b. Fixed exchange rate - No uncertainty
c. Managed-float - Reduces uncertainty
d. Pegged exchange rate - Market based
e. Target Zone - Fluctuations with limits
Explanation regarding matching:The floating exchange rate should be uncertain and it fluctuates with the market movements.
The fixed exchange rate should be well defined and due to this is no uncertainty.
Managed float decreased uncertainty however there is government interventions
The pegged exchange rate should be considered market based rate
The Target zone rate has fluctuated within the specified limits.
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Lower of Cost or Market Black Corporation uses the LIFO cost flow assumption. Each unit of its inventory has a net realizable value of $300, a normal profit margin of $35, and a current replacement cost of $250. Determine the amount per unit that should be used as the market value to apply the lower of cost or market rule to determine Black’s ending inventory.
Answer:
$265
Explanation:
The computation of Net realizable value-normal profit margin by using the lower of cost or market rule is shown below:-
Amount per unit = Net realizable value or Ceiling - Normal profit margin
= $300 - $35
= $265
Therefore for computing the amount per unit we simply applied the above formula i.e by deducting the normal profit margin from the net realizable value so that the amount per unit could come
Carby Hardware has an outstanding issue of perpetual preferred stock with an annual dividend of $7.50 per share. If the required return on this preferred stock is 6.5%, at what price should the preferred stock sell
Answer:
The answer is $115.38
Explanation:
Solution
Given that
The annual dividend on preferred stock = $7.50
Required return on preferred stock+= 6.5%
The next step is to find at what price should the preferred stock sell which is given as follows:
The rice of preferred stock = 7.50/6.5%
= $115.38
$115.38 is the price at which the stock preferred was sold.
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.
The beginning inventory for Dunne Co. and data on purchases and sales for a three-month period are as follows: Date Transaction Number of Units Per Unit Total Apr. 3 Inventory 25 $1,200 $30,000 8 Purchase 75 1,240 93,000 11 Sale 40 2,000 80,000 30 Sale 30 2,000 60,000 May 8 Purchase 60 1,260 75,600 10 Sale 50 2,000 100,000 19 Sale 20 2,000 40,000 28 Purchase 80 1,260 100,800 June 5 Sale 40 2,250 90,000 16 Sale 25 2,250 56,250 21 Purchase 35 1,264 44,240 28 Sale 44 2,250 99,000 Required: 1. Determine the inventory on June 30 and the cost of goods sold for the three-month period, using the first-in, first-out method and the periodic inventory system. Inventory, June 30 $ Cost of goods sold $ 2. Determine the inventory on June 30 and the cost of goods sold for the three-month period, using the last-in, first-out method and the periodic inventory system. Inventory, June 30 $ Cost of goods sold $ 3. Determine the inventory on June 30 and the cost of goods sold for the three-month period, using the weighted average cost method and the periodic inventory system. Note: Round the weighted average unit cost to the nearest dollar and final answers to the nearest dollar. Inventory, June 30 $ Cost of goods sold $ 4. Compare the gross profit and June 30 inventories using the following column headings. For those boxes in which you must enter subtracted or negative numbers use a minus sign. FIFO LIFO Weighted Average Sales $ $ $ Cost of goods sold Gross profit $ $ $ Inventory, June 30 $ $ $
Answer:
Dunne Co.
1. Determine the inventory on June 30 and the cost of goods sold for the three-month period, using the first-in, first-out method and the periodic inventory system:
a) Inventory, June 30 = $32,864 (26 x $1,264)
b) Cost of goods sold = Cost of goods available for sale - Ending Inventory = $310,776 ($343,640 - $32,864)
2. Determine the inventory on June 30 and the cost of goods sold for the three-month period, using the last-in, first-out method and the periodic inventory system:
a) Inventory, June 30 = $
Beginning Inventory 25 units at $1,200 = $30,000
Purchase on April 8, 1 unit at $1,240 1,240
Total Ending Inventory $31,240
b)Cost of goods sold = Cost of goods available for sale - Ending Inventory
= $311,400 ($343,640 - $32,240)
3. Determine the inventory on June 30 and the cost of goods sold for the three-month period, using the weighted average cost method and the periodic inventory system. Note: Round the weighted average unit cost to the nearest dollar and final answers to the nearest dollar:
a) Inventory, June 30 = $32,489.60 (26 x $1,249.60)
b) Cost of goods sold = $311,150.40 (249 x $1,249.60)
4. Compare the gross profit and June 30 inventories using the following column headings. For those boxes in which you must enter subtracted or negative numbers use a minus sign.
FIFO LIFO Weighted Average
Sales $525,250 $525,250 $525,250
Cost of goods sold 310,776 311,400 311,150
Gross profit $214,474 $213,850 $214,100
Inventory, June 30 $32,864 $31,240 $32,489.60
Explanation:
a) Purchases and Sales Data:
Date Transaction Number of Units Per Unit Total
In Out Cost Sales
Apr. 3 Inventory 25 $1,200 $30,000
8 Purchase 75 1,240 93,000
11 Sale 40 2,000 80,000
30 Sale 30 2,000 60,000
May 8 Purchase 60 1,260 75,600
10 Sale 50 2,000 100,000
19 Sale 20 2,000 40,000
28 Purchase 80 1,260 100,800
June 5 Sale 40 2,250 90,000
16 Sale 25 2,250 56,250
21 Purchase 35 1,264 44,240
28 Sale 44 2,250 99,000
b) Goods Available 275 $343,640
Cost of goods sold 249 $525,250
Ending Inventory 26
c) Average cost of goods = Cost of goods available for sale/Quantity of goods available for sale = $343,640/275 = $1,249.60
d) FIFO, LIFO, and Weighted Average Costing Method under the periodic inventory system assume that 1) FIFO, the goods bought first are sold first; 2) LIFO, the goods bought last are sold first; and 3) Weighted Average, the cost of goods is the weighted average, and lastly that it is only when physical count is taken of inventory that one can estimate its value. Unlike the perpetual inventory system, the periodic must wait till the end of a financial period to value stock. The results for ending inventory under the weighted average method, using the perpetual inventory system differs from the results under the same method, using the periodic inventory system.
The question is about inventory costing.
FIFO
Total Sales $525,250
Cost of Goods Sold $310,776
Gross Profit $214,474.
Ending Inventory as on June 30th 26 units $32,864
LIFO
Total Sales $525,250
Cost of Goods Sold $311,400
Gross Profit $213,850
Ending Inventory as on June 30th 26 units $31,240
AVCO / Weighted Average
Total Sales $525,250
Cost of Goods Sold $311,150
Gross Profit $214,100
Ending Inventory as on June 30th 26 units $32,490
Highest Gross profit is $214,474 in FIFO
Lowest Ending Inventory is $31,240 LIFO
Highest Ending Inventory is $32,864 FIFO
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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.
A recent consumer survey conducted for a car dealership indicates that, when buying a car, customers are primarily concerned with the salesperson's ability to explain the car's features, the salesperson's friendliness, and the dealer's honesty. The dealership should be ESPECIALLY concerned with which determinants of service quality?
Answer: a. communication, courtesy, and credibility
Explanation:
The Consumer survey showed that when buying a car customers are interested in the salesperson's ability to explain what the car does and what it's has, in short it's features. This means that they would like a Salesperson that Communicates effectively, the need for the car.
Dealers should therefore be very concerned with the communication skills of their sales people.
The Consumers would also like a friendly person. This is simple Courtesy. The sales person must be able to show courtesy to the customers to entice them to buy a car and so Dealership management should be very worried about this.
A final thing the Dealer should be worried about is Credibility. Consumers want to know if the Dealer is credible in that if the claims the dealer is making is true and honest. Too many salespersons say anything to get people to buy things even if it is a lie. A car is a big investment and so consumers would very much like to avoided being lied to.
An investor has been making payments into a variable annuity for the last 20 years. The investor decides to annuitize and selects a straight-life payout. Which two of the following statements are TRUE?
I. the investment risk is assumed by the insurance company
II. the investment risk is assumed by the customer
III. the amount of the payment to the customer is guaranteed by the insurance company
IV. the amount of the payment to the customer is not guaranteed
a. I and III
b. I and IV
c. II and III
d. II and IV
Answer:
d. II and IV.
Explanation:
Since the investor has been making payments into a variable annuity for the last 20 years and decides to annuitize and selects a straight-life payout. The following statements would be true;
a. the investment risk is assumed by the customer.
b. the amount of the payment to the customer is not guaranteed.
An annuity is an agreement between an investor (contract owner) and an insurance company, where he or she gives a lump-sum of money to the insurer and in return receives regular disbursements, either immediately or some time in the future. It offers the following covers, legacy planning, primary protection, healthcare costs, lifetime income etc.
Annuities are generally classified into two (2) categories mainly; Fixed and Variable annuities.
Under the variable annuity, the investment risk is assumed by the customer (investor) unlike what is obtainable in the fixed annuity.
Ultimately, the performance of the separate account impacts the amount of the payment. Thus, the payment might decrease, increase, or even remain the same since the amount of the payment to the customer (investor) isn't guaranteed.
Q4) An investment offers a total return of 12.8 percent over the coming year. Janice thinks the total real return on this investment will be only 7 percent. What does Janice believe the approximate inflation rate will be over the next year
Answer:
inflation rate= 5.8%
Explanation:
Giving the following information:
An investment offers a total return of 12.8 percent over the coming year. Janice thinks the total real return on this investment will be only 7 percent.
The real return on investment includes the effect on inflation.
Real rate of return= total return - inflation rate
0.07=0.128 - inflation rate
inflation rate= 0.058= 5.8%
If a purchasing agent must put up a cash deposit for construction services, for security purposes, instead of giving it directly to the contractor, he or she may insist that it be placed in a(n):
Answer:
Escrow account
Explanation:
An escrow account is a type of account in which a third party helds a certain amount of money while two parties complete a transaction. This is used to protect people from fraud when they are involve in transactions like purchasing a house as both parties can trust that the money is safe and the third party only provides the funds when they agree with everything and are happy with the results.
According to this, the answer is that if a purchasing agent must put up a cash deposit for construction services, for security purposes, instead of giving it directly to the contractor, he or she may insist that it be placed in an escrow account because the money would be safe and it would be maintained by a third party that will provide the funds when the services are complete.
Taylor Bank lends Guarantee Company $117,933 on January 1. Guarantee Company signs a $117,933, 9%, nine-month note. The entry made by Guarantee Company on January 1 to record the proceeds and issuance of the note is
Answer:
January 1, 202x, bank loan obtained from Taylor Bank (9 months, 9% interest rate)
Dr Cash 117,933
Cr Notes payable 117,933
Explanation:
Since this is an interest bearing note that will be paid in less than a year, we should record it at face value. All current liabilities must be recorded at face value.
Mike has spent $600 purchasing and repairing an old fishing boat, which he expects to sell for $800. Mike discovers, that, in addition to the $600 he has already spent, he needs to make an additional repair, which will cost another $300 in order to make the boat worth $800 to potential buyers. He can sell the boat as is now for $300. What should he do
Answer:
Mike should complete the repairs and sell off the boat for $800
Explanation:
Mike has already spent $600 purchasing and repairing the boat. He still needs to make an additional repair of $300. This means the cost price of the boat will be:
Cost price = $600 + $300 = $900
Selling price = $800
His loss would be:
$900 - $800 = $100
But without making the additional repair, the boat's worth is $300. This means that
Cost price = $600
Selling price = $300
His loss would be:
$600 - $300 = $300
From the above calculations, if the additional repair is done, Mike's loss would be lesser.
Therefore, the best option Mike should take is to complete the repairs and sell off the boat for $800