Answer:
$14,316.76
Explanation:
How much you will have saved?
Using MS Excel to calculate the FV function
= FV(Rate, Nper, Pmt)
= FV(1,5%, 24, 500)
= 14316.7604
= $14,316.76
So, the total amount you will have saved by putting away $500 per month for 24 months at a 1.5% annual interest rate is $14,316.76
Lopez Plastics Co. (LPC) issued callable bonds on January 1, 2018. LPC's accountant has projected the following amortization schedule from issuance until maturity: Date Cash Interest Effective Interest Decrease in balance Outstanding balance 1/1/2018 $207,020 6/30/2018 $7,000 $6,211 $789 206,230 12/31/2018 $7,000 6,187 813 205,417 6/30/2019 $7,000 6,163 837 204,580 12/31/2019 $7,000 6,137 863 203,717 6/30/2020 $7,000 6,112 888 202,829 12/31/2020 $7,000 6,085 915 201,913 6/30/2021 $7,000 6,057 943 200,971 12/31/2021 $7,000 6,027 971 200,000 What is the annual stated interest rate on the bonds
The Lopez Plastics Co. issued the callable bonds at the annual stated interest rate of 7%.
Data and Calculations:
Date Cash Interest Effective Interest Decrease Outstanding
in balance balance
1/1/2018 $207,020
6/30/2018 $7,000 $6,211 $789 206,230
12/31/2018 $7,000 6,187 813 205,417
6/30/2019 $7,000 6,163 837 204,580
12/31/2019 $7,000 6,137 863 203,717
6/30/2020 $7,000 6,112 888 202,829
12/31/2020 $7,000 6,085 915 201,913
6/30/2021 $7,000 6,057 943 200,971
12/31/2021 $7,000 6,027 971 200,000
Total cash interest per year = $14,000 ($7,000 + $7,000)
Annual stated interest rate = 7% ($14,000/$200,000 x 100)
This annual interest rate can also be worked out as 7% ($7,000/$200,000 x 100 x 2), while the effective interest rate is 6% ($6,027/$200,000 x 100).
Thus, Lopez Plastics Co. issued the callable bonds at the annual stated interest rate of 7%.
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Avery works for Proctor and Gamble as a market researcher in the United States. P&G is interested in launching a new line of shampoo in India and has asked her to look into doing research to support this decision. Since Avery is not familiar with the language or the culture, what should she do?
Explanation:
According to the scenario in question, an effective alternative for market researcher Avery would be to hire an Indian market research company to carry out the research that P&G needs to do before launching a new shampoo line in India, because as Avery does not is familiar with the Indian language and culture, these could be significant barriers to conducting effective research, since India is a country known for having a very strong culture, so an Indian company could achieve the objective of Proctor and Gamble of more effectively, as it would have more specific information about the culture and the need of the Indian people about a particular product.
Rupesh wants to buy a new BMW priced at $54,000. He makes a down payment of 20% of the original price. He also trades-in his old car for $10,000. (This means he sells the old car to the dealer for $10,000). For the balance, Rupesh takes a 60-month car loan at an interest rate of 3.45%. What will be the approximate payment at the end of every month
Answer:
The approximate payment at the end of every month will be $603.22.
Explanation:
Since the payment is going to be made at the end of every month, this can be calculated using the formula for calculating the present value of an ordinary annuity as follows:
PV = P * ((1 - (1 / (1 + r))^n) / r) …………………………………. (1)
Where;
PV = Present value or the balance = Price of BMW - Down payment - Old car sales amount = $54,000 - ($54,000 * 20%) - $10,000 = $33,200
P = Monthly payment = ?
r = Monthly interest rate = Annual interest rate / 12 = 3.45% / 12 = 0.0345 /
12 = 0.002875
n = number of months = 60
Substitute the values into equation (1) and solve for P, we have:
$33,200 = P * ((1 - (1 / (1 + 0.002875))^60) / 0.002875)
$33,200 = P * 55.0377058660197
P = $33,200 / 55.0377058660197
P = $603.22
Therefore, the approximate payment at the end of every month will be $603.22.
During the year ended December 31, 2018, Kelly’s Camera Shop had sales revenue of $210,000, of which $105,000 was on credit. At the start of 2018, Accounts Receivable showed a $12,000 debit balance and the Allowance for Doubtful Accounts showed a $680 credit balance. Collections of accounts receivable during 2018 amounted to $76,000.Data during 2018 follow:On December 10, a customer balance of $1,900 from a prior year was determined to be uncollectible, so it was written off.On December 31, a decision was made to continue the accounting policy of basing estimated bad debt losses on 2 percent of credit sales for the year.Required:Give the required journal entries for the two events in December.Show how the amounts related to Accounts Receivable and Bad Debt Expense would be reported on the balance sheet and income statement for 2018.On the basis of the data available, does the 2 percent rate appear to be reasonable?
Answer:
Kelly's Camera Shop
1. Journal Entries
Debit Accounts Receivable $105,000
Credit Sales Revenue $105,000
To record the sales on credit for the year.
Debit Cash $76,000
Credit Accounts Receivable $76,000
To record the cash collections on account.
Debit Allowance for doubtful accounts $1,900
Credit Accounts Receivable $1,900
To write off a bad debt.
Debit Bad Debt Expense $3,320
Credit Allowance for doubtful accounts $3,320
To record the bad debt expense for the year.
2. Balance Sheet (partial) as of December 31, 2018:
Accounts Receivable $39,100
Less Allowance for
doubtful accounts 2,100
Net Accounts Receivable $37,000
Explanation:
a) Data and Analysis:
T-accounts:
Accounts Receivable
Account Title Debit Credit
Beginning balance $12,000
Sales revenue 105,000
Cash $76,000
Bad Debts written off 1,900
Ending balance 39,100
Totals $117,000 $117,000
Allowance for Doubtful Accounts
Account Title Debit Credit
Beginning balance $680
Bad debts written off $1,900
Bad Debt Expense 3,320
Ending balance 2,100
Total $4,000 $4,000
Analysis of transactions:
Accounts Receivable $105,000 Sales Revenue $105,000
Cash $76,000 Accounts Receivable $76,000
Allowance for doubtful accounts $1,900 Accounts Receivable $1,900
Bad Debt Expense $3,320 Allowance for doubtful accounts $3,320
A small town is considering paving paradise hotel to put up a parking lot. The land will cost $25,000 and the construction of the lot is estimated to be $150,000. Each year, costs associated with the parking lot are estimated to be $17,500. The income from the lot is expected to be $18,000 the first year and increase by $3,500 each year for the 12 year life of the lot. Determine the B/C ratio if interest rate is 12%. [4 points]
Answer:
0.71
Explanation:
The benefit cost ratio is used to determine the profitability of an investor. It is determined by dividing the present value of benefit by the present value of cost
Benefit cost ratio (BC) = present value of benefits / present value of costs
if BC is greater than 1, the project is profitable
If BC is less than 1, the project is not profitable
Present value is the sum of discounted cash flows
Present value can be calculated using a financial calculator
Present value of the benefits
Cash flow in year 1 = $18,000
Cash flow in year 2 = $18,000 + 3500 = $21500
Cash flow in year 3 = $18,000 + (3500 x 2) = $25,000
Cash flow in year 4 = $18,000 + (3500 x 3) = $28500
Cash flow in year 5 = $18,000 + (3500 x 4) = $32,000
Cash flow in year 6 = $18,000 + (3500 x 5) = $35,500
Cash flow in year 7 = $18,000 + (3500 x 6) = $39,000
Cash flow in year 8 = $18,000 + (3500 x 7) = $42,500
Cash flow in year 9 = $18,000 + (3500 x 8) = $46,000
Cash flow in year 10 = $18,000 + (3500 x 9) = $49500
Cash flow in year 11 = $18,000 + (3500 x 10) = $53,000
Cash flow in year 12 = $18,000 + (3500 x 11) = $56,500
I = 12 %
PV = $202,331.70
Present value of the cost
Cash flow in year 0 = $25,000 + $150,000 = $175,000
Cash flow in year 1 to 12 = $17,500.
I = 12 %
PV = $283,401.55
B/C ratio = $202,331.70 / $283,401.55 = 0.71
To find the PV using a financial calculator:
1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.
2. after inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction.
3. Press compute
Billy Baroo Company uses a job order cost system. The following information was found in the Work-in-Process account for the month of July.
Date Description Amount [DR. or (CR.)]
July 1 Balance $13,500
July 31 Direct labor 41,000
July 31 Direct materials 58,000
July 31 Factory overhead 32,800
July 31 Transfer to finished goods (86,000 )
Billy Baroo applies overhead to production at a predetermined rate of 80% based on the direct labor cost. Job #23, the lyjob still inprocessattheendofJuly, has been chargedwith direct aboro $12,000 Direct material charged to Job#23 was:_________
Answer:
$37,700
Explanation:
Ending balance in WIP = 13,500 + 41,000 + 58,000 + 32,800 - 86,000
Ending balance in WIP = $59,300
Direct material charged to Job #23 = $59,300 - $12,000 - ($12,000*80%)
Direct material charged to Job #23 = $59,300 - $12,000 - $9,600
Direct material charged to Job #23 = $37,700
It is now January 1, 2018, and you are considering the purchase of an outstanding bond that was issued on January 1, 2016. It has a 9% annual coupon and had a 20-year original maturity. (It matures on December 31, 2035.) There is 5 years of call protection (until December 31, 2020), after which time it can be called at 109-that is, at 109% of par, or $1,090. Interest rates have declined since it was issued, and it is now selling at 114.12% of par, or $1,141.20. What is the yield to maturity
Answer:
YTM is 7.54%.
Explanation:
The yield to maturity can be calculated using the following RATE function in Excel:
YTM = RATE(nper,pmt,-pv,fv) .............(1)
Where;
YTM = yield to maturity = ?
nper = number of periods = number of years to maturity = original maturity number of years - number of years between January 1, 2016 and January 1, 2018 = 20 - 2 = 18
pmt = annual coupon payment = face value * annual coupon rate = 1000 * 9% = 90 (Note: This is an inflow to the bondholder and it is therefore a positive figure).
pv = present value = current bond price = -1141.20 (Note: This is an outflow to the buyer of the bond and it is therefore a negative figure).
fv = face value of the bond = 1000 (Note: This is an inflow to the bondholder and it is therefore a positive figure).
Substituting the values into equation (1), we have:
YTM = RATE(18,90,-1141.20,1000) ............ (2)
Inputting =RATE(18,90,-1141.20,1000) into excel (Note: as done in the attached excel file), the YTM is obtained as 7.54%.
Therefore, YTM is 7.54%.
A technological improvement in apple production will: A. Increase the demand for apples, lowering the equilibrium price but raising the equilibrium quantity of apples. B. Increase the supply of apples, raising the equilibrium price but lowering the equilibrium quantity of apples. C. Increase the supply of apples, lowering the equilibrium price and quantity of apples. D. Increase the supply of apples, lowering the equilibrium price but raising the equilibrium quantity of apples. E. Increase the supply apples, raising the equilibrium price and quantity of apples.
Answer:
C. Increase the supply of apples, lowering the equilibrium price and quantity of apples.
Explanation:
Technological improvement can be regarded as an positive change or rise in efficiency of a product as well as the process which in turn results in tangible increase in output, even though there is no significant increase in input. It should be noted that technological improvement in apple production will Increase the supply of apples, lowering the equilibrium price and quantity of apples.
Required: a. Adams Company's production cycle starts in Department A. The following information is available for July: Units Work in process, July 1 (60% complete) 71,000 Started in July 360,000 Work in process, July 31 (20% complete) 39,000 Materials are added at the beginning of the process in Department A. Using the weighted-average method, what are the equivalent units of production for materials and conversion costs for the month of July, respectively
Answer:
materials = 431,000 units and
conversion = 399,800 units
Explanation:
Note that Adams Company uses weighted-average method. This means we calculate equivalent units of production on the number of physical units completed and transferred and units in ending inventory.
Step 1 : Determine units completed and transferred
Units completed and transferred = Opening Inventory + Units Started - Ending Inventory
= 71,000 + 360,000 - 39,000
= 392,000
Step 2 : Determine equivalent units of production
Materials
Units completed and transferred (392,000 x 100%) = 392,000
Units in ending inventory (39,000 x 100%) = 39,000
Total equivalent units of production = 431,000
Conversion
Units completed and transferred (392,000 x 100%) = 392,000
Units in ending inventory (39,000 x 20%) = 7,800
Total equivalent units of production = 399,800
On January 20 of the current year, Zealand and Menandez form ZM LLC. Their contributions to the LLC are as follows: Adjusted Basis Fair Market Value From Zealand: Cash $82,000 $82,000 Accounts receivable $0 $214,000 Inventory $19,000 $26,000 From Menandez: Cash $201,000 $201,000 Temporary Investments $121,000 $121,000 Within 30 days of formation, ZM collects the receivables and sells the inventory for $26,000 cash. ZM realized the following income in the current year from these transactions: a. Ordinary income of $fill in the blank 2 from collecting cash basis accounts receivable. b. Ordinary income of $fill in the blank 4 from sale of inventory.
Answer:
Ordinary Income of $214,000 from collecting cash basis accounts receivable
Ordinary Income of $7,000 from sale of Inventory.
Explanation:
a. Adjusted basis of Accounts receivable = $0
Fair Market Value of Accounts Receivable = $214,000
Cash realized from Accounts Receivable = $214,000
Ordinary Income from collecting cash basis accounts receivable = $214,000
It is ordinary income since the Accounts receivable are taxed only after they are collected.
b. Adjusted basis of Inventory = $19,000
Fair Market Value of Inventory = $26,000
Cash realized from sale of Inventory = $26,000
Ordinary Income from sale of Inventory = Cash received from sale - Adjusted basis = $26,000 - $19,000 = $7,000
It is ordinary income since the Inventory only recognizes the adjusted basis i.e. the amount paid for inventory and any income recognized on sale of inventory is taxed accordingly.
Watson Oil recently reported (in millions) $8,250 of sales, $5,750 of operating costs. The company had $3,200 of outstanding bonds that carry a 5% interest rate, and its federal-plus-state income tax rate was 35%. In order to sustain its operations and thus generate future sales and cash flows, the firm was required to make $600 of capital expenditures on operating long-term assets and to invest $300 in net operating working capital. By how much did the firm's net income exceed its free cash flow
Answer:
$796
Explanation:
The computation of the excess amount is shown below:
As we know that
Free cash flows = Net Income + Depreciation + Interest (1-tax) - Capital expenditures +- changes in Working capital
Now the difference could be determined by the following formula
-Depreciation - interest (1-tax) + capital expenditure + changes in Working capital
= -$650 - 0.05 × $3,200 × (1 - 0.35) + $1,250 + $300
= $796
The following trial balance was taken from the records of Fairport Manufacturing Company at the beginning of 2019:
Cash $ 20,000
Raw materials inventory 1,800
Work in process inventory 2,400
Finished goods inventory 4,200
Property, plant, and equipment 15,000
Accumulated depreciation $ 6,000
Common stock 16,800
Retained earnings 20,600
Total $ 43,400 $ 43,400
Transactions for the Accounting Period:
Fairport purchased $11,400 of direct raw materials and $600 of indirect raw materials on account. The indirect materials are capitalized in the Production Supplies account. Materials requisitions showed that $10,800 of direct raw materials had been used for production during the period. The use of indirect materials is determined at the end of the year by physically counting the supplies on hand.
By the end of the year, $10,500 of the accounts payable had been paid in cash.
During the year, direct labor amounted to 950 hours recorded in the Wages Payable account at $21 per hour.
By the end of the year, $18,000 of wages payable had been paid in cash.
At the beginning of the year, the company expected overhead cost for the period to be $12,600 and 1,000 direct labor hours to be worked. Overhead is allocated based on direct labor hours, which, as indicated in Event 3, amounted to 950 for the year.
Selling and administrative expenses for the year amounted to $1,800 paid in cash.
Utilities and rent for production facilities amounted to $9,300 paid in cash.
Depreciation on the plant and equipment used in production amounted to $3,000.
There was $24,000 of goods completed during the year.
There was $25,500 of finished goods inventory sold for $36,000 cash.
A count of the production supplies revealed a balance of $178 on hand at the end of the year.
Any over- or underapplied overhead is considered to be insignificant.
Required
a) Prepare T-accounts with the beginning balances shown in the preceding list and record all transactions for the year including closing entries in the T-accounts.
b) Prepare a schedule of cost of goods manufactured and sold, an income statement, and a balance sheet.
Answer:
Fairport Manufacturing Company
T-accounts
Cash
Account Titles Debit Credit
Beginning balance $ 20,000
Accounts payable $10,500
Wages payable 18,000
Selling and distribution expense 1,800
Utilities and Rent for production 9,300
Sales Revenue 36,000
Ending balance $16,400
Raw materials inventory
Account Titles Debit Credit
Beginning balance $ 1,800
Accounts Payable 11,400
Work-in-Process $10,800
Ending balance $2,400
Work in process inventory
Account Titles Debit Credit
Beginning balance $ 2,400
Raw materials 10,800
Wages Payable 19,950
Overhead Applied 11,970
Finished Goods Inventory $24,000
Ending balance $21,120
Finished goods inventory
Account Titles Debit Credit
Beginning balance $ 4,200
Work-in-Process 24,000
Cost of goods sold $25,500
Ending balance $2,700
Property, plant, and equipment
Account Titles Debit Credit
Beginning balance $ 15,000
Accumulated depreciation
Account Titles Debit Credit
Beginning balance $ 6,000
Depreciation expense 3,000
Ending Balance $9,000
Accounts Payable
Account Titles Debit Credit
Raw materials $12,000
Cash $10,500
Ending balance $1,500
Wages Payable
Account Titles Debit Credit
Work-in-Process $19,950
Cash $18,000
Ending balance $1,950
Common stock
Account Titles Debit Credit
Beginning balance $ 16,800
Retained earnings
Account Titles Debit Credit
Beginning balance $ 20,600
Production Supplies
Account Titles Debit Credit
Accounts Payable $600
Overhead $422
Ending balance $178
Overhead Expenses
Account Titles Debit Credit
Work-in-Process $11,970
Cash (Utilities) 9,300
Depreciation expense 3,000
Production supplies 422
Cost of goods sold (Underapplied) 752
Sales Revenue
Account Titles Debit Credit
Cash $36,000
Income Summary $36,000
Cost of Goods Sold
Account Titles Debit Credit
Finished Goods Inventory $25,500
Overhead (underapplied) 752
Income Summary $26,252
Selling and Distribution Expense
Account Titles Debit Credit
Cash $1,800
Utilities and Rent
Account Titles Debit Credit
Cash $9,300
Overhead $9,300
Depreciation Expense - Plant & Equipment
Account Titles Debit Credit
Accumulated Depreciation $3,000
Overhead $3,000
b) Schedule of Cost of Goods Manufactured and Sold:
WIP Beginning Inventory $ 2,400
Raw materials 10,800
Direct labor 19,950
Overhead Applied 11,970
Cost of goods in production $45,120
Ending WIP Inventory 21,120
Cost of manufactured $24,000
Finished Goods Inventory $ 4,200
Cost of manufactured 24,000
Cost of goods available $28,200
Ending FG Inventory 2,700
Cost of goods sold $25,500
Income Statement for the year ended December 31, 2019:
Sales Revenue $36,000
Cost of Goods Sold 26,252
Gross profit 9,748
Selling and distribution exp. 1,800
Net income $7,948
Retained Earnings, January 1, 2019 $20,600
Net income 7,948
Retained Earnings, December 31, $28,548
Balance Sheet as of December 31, 2019:
Assets:
Cash $ 16,400
Raw materials inventory 2,400
Work in process inventory 21,120
Finished goods inventory 2,700
Production Supplies 178 $42,798
Property, plant, and equipment 15,000
Accumulated depreciation 9,000 $6,000
Total assets $48,798
Liabilities and Equity:
Accounts Payable $1,500
Wages Payable 1,950
Total liabilities $3,450
Common stock $16,800
Retained earnings 28,548 $45,348
Total liabilities and equity $48,798
Explanation:
a) Data and Calculations:
Trial Balance at January 1, 2019:
Account Titles Debit Credit
Cash $ 20,000
Raw materials inventory 1,800
Work in process inventory 2,400
Finished goods inventory 4,200
Property, plant, and equipment 15,000
Accumulated depreciation $ 6,000
Common stock 16,800
Retained earnings 20,600
Total $ 43,400 $ 43,400
Analysis of Transactions for the period:
1. Raw materials $11,400 Production Supplies $600 Accounts payable $12,000
2. Work-in-Process $10,800 Raw materials $10,800
3. Accounts payable $10,500 Cash $10,500
4. Work-in-Process $19,950 Wages Payable $19,950
5. Wages Payable $18,000 Cash $18,000
6. Work-in-Process $11,970 Overhead Applied $11,970 ($12,600 * 950/1,000)
7. Selling and Administrative expense $1,800 Cash $1,800
8. Utilities and Rent for production $9,300 Cash $9,300
9. Depreciation Expense-Plant and Equipment $3,000 Accumulated Depreciation $3,000
10. Finished Goods Inventory $24,000 Work-in-Process $24,000
11. Cost of Goods Sold $25,500 Finished Goods Inventory $25,500
12. Cash $36,000 Sales Revenue $36,000
13. Overhead $422 Production Supplies $422 ($600 - $178)
14. Cost of Goods Sold $752 Underapplied Overhead $752
Adjusted Trial Balance at December 31, 2019:
Account Titles Debit Credit
Cash $ 16,400
Raw materials inventory 2,400
Work in process inventory 21,120
Finished goods inventory 2,700
Property, plant, and equipment 15,000
Accumulated depreciation $ 9,000
Accounts Payable 1,500
Wages Payable 1,950
Common stock 16,800
Retained earnings 20,600
Production Supplies 178
Sales Revenue 36,000
Cost of Goods Sold 26,252
Selling and distribution exp. 1,800
Totals $85,850 $85,850
Penny’s Pool Service & Supply, Inc. (PPSS) is completing the accounting process for the year just ended, December 31, 2015. The transactions during 2015 have been journalized and posted. The following data with respect to adjusting entries are available:
a. PPSS owed $7,500 wages to the office receptionist and three assistants for working the last 10 days in December. The employees will be paid in January 2016.
b. On October 1, 2015, PPSS received $24,000 from customers who prepaid pool cleaning service for one year beginning on November 1, 2015.
c. The company received a $520 utility bill for December utility usage. It will be paid in January 2016.
d. PPSS borrowed $30,000 from a local bank on May 1, 2015, signing a note with a 10 percent interest rate. The note and interest are due on May 1, 2016.
e. On December 31, 2015, PPSS cleaned and winterized a customer’s pool for $800, but the service was not yet recorded on December 31.
f. On August 1, 2015, PPSS purchased a two-year insurance policy for $4,200, with coverage beginning on that date. The amount was recorded as Prepaid Insurance when paid.
g. On December 31, 2015, PPSS had $3,100 of pool cleaning supplies on hand. During 2015, PPSS purchased supplies costing $23,000 from Pool Corporation, Inc., and had $2,400 of supplies on hand on December 31, 2014.
h. PPSS estimated that depreciation on its buildings and equipment was $8,300 for the year.
i. At December 31, 2015, $110 of interest on investments was earned
Required: Prepare adjusting entries for Penny's Pool Service & Supply, Inc., on December 31, 2015.
Answer:
Penny's Pool Service & Supply, Inc.
Adjusting Entries:
a. Debit Wages Expense $7,500
Credit Wages Payable $7,500
To record accrued wages.
b. Debit Deferred Revenue $4,000
Credit Service Revenue $4,000
To record earned revenue.
c. Debit Utility Expense $520
Credit Utility Payable $520
To record accrued utility expense.
d. Debit Interest Expense $2,000
Credit Interest Payable $2,000
To record interest expense due.
e. Debit Accounts Receivable $800
Credit Service Revenue $800
To record service revenue earned.
f. Debit Insurance Expense $875
Credit Prepaid Insurance $875
To record expired insurance for the period.
g. Debit Supplies Expense $23,700
Credit Supplies $23,700
To record supplies expense for the period.
h. Debit Depreciation Expense - building and equipment $8,300
Credit Accumulated Depreciation - building and equipment $8,300
To record depreciation expense for the period.
i. Debit Interest Receivable $110
Credit Interest Revenue $110
To record interest revenue earned.
Explanation:
a) Data and Analysis:
a. Wages Expense $7,500 Wages Payable $7,500
b. Deferred Revenue $4,000 Service Revenue $4,000 ($24,000 * 2/12)
c. Utility Expense $520 Utility Payable $520
d. Interest Expense $2,000 Interest Payable $2,000 ($30,000 * 10% * 8/12)
e. Accounts Receivable $800 Service Revenue $800
f. Insurance Expense $875 Prepaid Insurance $875 ($4,200 * 5/24)
g. Supplies Expense $23,700 Supplies $23,700 ($3,100+23,000- 2,400)
h. Depreciation Expense - building and equipment $8,300 Accumulated Depreciation - building and equipment $8,300
i. Interest Receivable $110 Interest Revenue $110
In accounting terms, the adjusting entries are the entries that are usually made at the end of the accounting or the financial year in order to allocate the income and expenditure to the period of time in which they are actually incurred.
The Journal entries have been attached below.
Working notes:
[tex]\begin{aligned}\text{Service Revenue}= \$4,000\times \$24,000 \times\frac{2}{12}\end{aligned}[/tex]
[tex]\begin{aligned}\text{ Interest Payable}= \$2,000\times\$30,000 \times 10\% \times\frac{8}{12}\end{aligned}[/tex]
[tex]\begin{a;igned}\text{Prepaid Insurance}=\ $875 \times\$4,200 \times\frac{5}{24}\end{aligned}[/tex]
[tex]\text{Supplies}=\ $23,700 \times(\$3,100+23,000- 2,400)[/tex]
To know more about the Journal entries of the firms, refer to the link below:
https://brainly.com/question/14938184
For each hypothetical scenario, indicate whether the tariff described is more likely a protective tariff or a revenue tariff.
a. In response to concerns from business leaders, a legislator has designed a new tariff on raw materials used by many manufacturing firms. The legislator felt the new tariff was necessary based on input from the private sector that new discoveries of natural re
sources abroad would threaten to put domestic producers of raw materials out of business. To meet this goal, this tariff will charge $1,500 on every crate of the imported goods plus an additional 6% of the total value of the imported goods.
b. In an effort to balance next year's budget, a senator has proposed a new tariff. She proposed the new tariff with a goal of raising a total of $100 million, To meet this goal, this tariff will charge $2,000 on every ton that is imported.
Answer:
a. In response to concerns from business leaders, a legislator has designed a new tariff on raw materials used by many manufacturing firms. The legislator felt the new tariff was necessary based on input from the private sector that new discoveries of natural resources abroad would threaten to put domestic producers of raw materials out of business. To meet this goal, this tariff will charge $1,500 on every crate of the imported goods plus an additional 6% of the total value of the imported goods.
protective tariff since it is designed to protect domestic industries from competition of out of state producers. It is designed to increase the price of imported goods.b. In an effort to balance next year's budget, a senator has proposed a new tariff. She proposed the new tariff with a goal of raising a total of $100 million, To meet this goal, this tariff will charge $2,000 on every ton that is imported.
revenue tariff since its main purpose is to increase government revenue, not to protect domestic industries.The first scenario describes protective tariff whereas the second scenario explains revenue tariff.
What is protective and revenue tariff?In international trade, protective tariffs are applied on the imported goods to protect and prevent the domestic industries from competition.
In scenario a, a tariff of $1,500 and additional of 6% was charged on imported goods to protect the domestic producers. Therefore the first scenario describes protective tariff.
The revenue tariff on the other hand refers to a tariff that is designed with an intention to increase revenues.
The scenario b describes a tariff that was applied to reach the target revenue of $100 million. Therefore it is a revenue tariff.
Learn more about protective and revenue tariff here:
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On January 1, 2021, Jasperse Corporation leased equipment under a finance lease designed to earn the lessor a 10% rate of return for providing long-term financing. The lease agreement specified ten annual payments of $90,000 beginning January 1, and each December 31 thereafter through 2029. A 10-year service agreement was scheduled to provide maintenance of the equipment as required for a fee of $8,000 per year. Insurance premiums of $7,000 annually are related to the equipment. Both amounts were to be paid by the lessor and lease payments reflect both expenditures.
Required:
At what amount will Jasperse record a right-of-use asset?
Answer:
$554,320
Explanation:
Annual payment = $90,000
Rate = 10%
Time period = 10 years
Maintenance of equipment = $8,000
PVAD of $1(n = 10, i=11) = 6.76
Lease payment = $90,000 - $8,000 = $82,000
Amount of Right-of-use asset = Lease payment * PVAD of $1
Amount of Right-of-use asset = $82,000 * 6.76
Amount of Right-of-use asset = $554,320
So, Jasperse will record $554,320 as a right-of-use asset amount.
Dehner Corporation uses a job-order costing system with a single plantwide predetermined overhead rate based on direct labor-hours. The company based its predetermined overhead rate for the current year on the following data: Total direct labor-hours 47,000 Total fixed manufacturing overhead cost $ 202,100 Variable manufacturing overhead per direct labor-hour $ 2.00 Recently, Job P951 was completed with the following characteristics: Number of units in the job 50 Total direct labor-hours 100 Direct materials $ 850 Direct labor cost $ 4,700 The total job cost for Job P951 is closest to: (Round your intermediate calculations to 2 decimal places.)
Answer:
Total cost= $6,180
Explanation:
First, we need to calculate the predetermined overhead rate:
Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base
Predetermined manufacturing overhead rate= (202,100/47,000) + 2
Predetermined manufacturing overhead rate= $6.3 per direct labor hour
Now, we can allocate overhead:
Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base
Allocated MOH= 6.3*100
Allocated MOH= 630
Finally, the total cost:
Total cost= 850 + 4,700 + 630
Total cost= $6,180
You just got a job and plan to save for the college expenses for your kids. You have a son and a daughter. Your son is 4 years old, and your daughter is only 1 year old. Both of them plan to go to a four-year college at the age of 18. The estimated college expense is about $40,000 per year. Assume you plan to invest into a portfolio that offers you return about 6% per year until your daughter is graduated from college. How much money do you need to save every year if your first saving is in one year
Answer:
$11,508.25
Explanation:
your son will start college in 14 years, and the present value of his college tuition = $40,000 x 3.4651 (PVIFA, 6%, 4 periods) = $138,604
your daughter will start college in 17 years, so you need in today's dollars $138,604
you will need to save enough money to cover both tuitions;
money required to cover your son's tuition = $138,604 / 21.015 (FVIFA, 6%, 14 periods) = $6,595.48
money required to cover your daughter's tuition = $138,604 / 28.213 (FVIFA, 6%, 14 periods) = $4,912.77
total annual savings = $11,508.25
Foxmoor Company applies manufacturing overhead by using a predetermined rate of 50% of direct labor cost. The data that follow pertain to job no. 764:
Direct material cost $55,000
Direct labor cost 80,000
If Foxmoor adds a 40% markup on total cost to generate a profit, which of the following choices depicts a portion of the accounting needed to record the sale of job no. 764?
Account Debited Amount
A. Cost of Goods Sold $175,000
B. Cost of Goods Sold $245,000
C. Finished Goods Inventory $175,000
D. Finished Goods Inventory $245,000
E. Sales Reveune $245,000
a. Choice A
b. Choice B
c. Choice C
d. Choice D
e. Choice E
Answer:
e. Choice E
Explanation:
Total cost of job no. 764 = $55,000 + $80,000 + 80,000 x 50%
= $175,000
Total Revenue for job no. 764 = $175,000 + $175,000 x 40%
= $245,000
E. Sales Revenue $245,000
Use the following information: Accounts receivable, beginning of year: $16,000 Allowance for Uncollectible Accounts, beginning of year: $1,200 Net credit sales during the year: $105,000 Collections on accounts receivable during the year: $93,000 Delinquent accounts written off during the year: $1,600 Assume all accounts have normal balances. If bad debts are estimated to be 10% of ending accounts receivable, the adjusting entry to recognize bad debts would debit bad debt expense for
Answer:
Bad debts expense is $ 2240
Explanation:
Given that;
Accounts receivable, beginning of year = $16,000
Allowance for Uncollectible Accounts, beginning of year = $1,200
Net credit sales during the year = $105,000
Collections on accounts receivable during the year = $93,000
Delinquent accounts written off during the year: $1,600
If bad debts are estimated to be 10% of ending accounts receivable, the adjusting entry to recognize bad debts would debit bad debt expense for;
Account Receivable, ending = ( Accounts Receivable, beginning + Net credit sales - Collections on account - Accounts written off )
Account Receivable, ending = ( $16,000 + $105,000 - $93,000 - $1,600 )
Account Receivable, ending = $ 26,400
Estimated accounts uncollectible = (26,400 × 10%) = 2640
Allowance for uncollectible accounts debit balance = ( 1600 - 1200) = 400
so
Bad debts expense = Estimated accounts uncollectible - Allowance for uncollectible accounts debit balance
we substitute
Bad debts expense = (26,400 × 10%) - ( 1600 - 1200)
Bad debts expense = 2640 - 400
Bad debts expense = $ 2240
Therefore, Bad debts expense is $ 2240
Which of the following statements about real and nominal interest rates is correct? A. An increase in the real interest rate is necessarily accompanied by either an increase in the nominal interest rate, an increase in the inflation rate, or both. B. When the inflation rate is positive, the nominal interest rate is necessarily greater than the real interest rate. C. When the nominal interest rate is rising, the real interest rate is necessarily rising; when the nominal interest rate is falling, the real interest rate is necessarily falling. D. If the nominal interest rate is 4 percent and the inflation rate is 3 percent, then the real interest rate is 7 percent.
Answer:
B. When the inflation rate is positive, the nominal interest rate is necessarily greater than the real interest rate.
Explanation:
A real interest rate can be regarded as
an interest rate that adjustment has been made on in order to remove the effects of inflation so that the real cost of funds to the borrower as well as real yield to the lender can be reflected. A nominal interest rate on the other hand can be regarded as interest rates calculated before consideration of inflation. It should be noted that When the inflation rate is positive, the nominal interest rate is necessarily greater than the real interest rate.
Suppose Dan’s cost of making pizzas is C(Q) = 4Q + (Q2/40), and his marginal cost is MC = 4 + (Q/20). Dan is a price taker. (a) What is Dan’s supply function? (b) What is Dan’s supply function if he has an avoidable fixed cost of $10? [HINT: Recall that Dan will not supply anything unless P > min AC(Q). So, as a first step, you need to find AC(Q) from C(Q). In part (a), finding min AC(Q) is easy and you should be able to do so just by looking at the formula for AC (Q). For part (b), you can find the minimum of AC by using the fact that AC(Q) = MC(Q) at the minimum point of AC.]
Answer:
(a) Dan’s supply function S(P) can be stated as follows:
S(P)= 0 If P<4.
And S(P) = 20P- 80 If P≥4
(b) Dan’s supply function S(P) can be stated as follows:
S(P)= 0 If P<5.
And S(P) = 20P- 80 If P≥5.
Explanation:
Note that the equations given in the question can be correctly stated as follows:
C(Q) = 4Q + (Q^2/40) .................. (1)
MC = 4 + (Q/20) ............................ (2)
Therefore, we can now proceed as follows:
(a) What is Dan’s supply function?
The upward portion of the MC curve is the supply function of Dan.
Equating equation (2) to P, we have:
P = 4+ (Q/20)
P- 4 = Q/20
Q = 20P -80
The shutdown rule is that P > AVCmin
AVC = C(Q) / Q .................. (3)
Substituting equation (1) into (3), we have:
AVC = ( 4Q + Q^2/40)/ Q
AVC = 4 + (Q/40) ............... (4)
Since MC cuts the AVC at its minimum, equations (2) and (4) are then equated to solve Q which is the output level at which AVC is minimum as follows:
4 + (Q/20) = 4 + (Q/40)
(Q/20) - (Q/40) = 4 - 4
(Q/20) - (Q/40) = 0
Q = 0
Substituting Q = 0 into equation (4), we have:
AVCmin = 4+ (0/40)
AVCmin = 4
This implies that Dan will produce at any price ≥ $4.
Therefore, Dan’s supply function S(P) can be stated as follows:
S(P)= 0 If P<4.
And S(P) = 20P- 80 If P≥ 4.
(b) What is Dan’s supply function if he has an avoidable fixed cost of $10?
Since there is now a fixed cost, equation (1) becomes:
C(Q) = 4Q + (Q^2/40) + 10 ................. (5)
And the average cost (AC) will be as follows:
AC = (4Q + (Q2/40) + 10)/Q
AC = 4 + (Q/40) + (10/Q) .................... (6)
Since AC = MC when AC at its minimum, equations (2) and (6) are therefore equated to solve for Q as follows:
4 + (Q/40) + (10/Q) = 4 + (Q/20)
(Q/40) + (10/Q) = (Q/20)
Q = 20
Divide through by Q, we have:
(1/40) + (10/Q^2) = (1/20)
10/Q^2 = (1/20) - (1/40)
10/Q^2 = 0.05 - 0.025
10/Q^2 = 0.025
Q^2 = 10 / 0.025
Q^2 = 400
Q = [tex]\sqrt{400}[/tex]
Q = 20
Substituting Q = 20 into equation (6), we have:
AC = 4 + (20/40) + (10/20)
AC = $5
This implies that Dan will produce at any price ≥ $5.
Therefore, Dan’s supply function S(P) can be stated as follows:
S(P)= 0 If P<5.
And S(P) = 20P- 80 If P≥ 5
In each of the following cases, calculate the price of one share of the foreign stock measured in United States dollars (US$). a. A Belgian stock priced at euros () when the exchange rate is US$/ (i.e., each euro is worth $). b. A Swiss stock priced at Swiss francs (Sf) when the exchange rate is US$/Sf. c. A Japanese stock priced at yen (¥) when the exchange rate is ¥/US$.
Answer:
$114.24
$96.18
$12.23
Explanation:
Here is the complete question :
In each of the following cases, calculate the price of one share of the foreign stock measured in United States dollars(US$).
a. A Belgian stock priced at 103.1 euros (euro) when the exchange rate is 0.9025 euro/US$.
b. A Swiss stock priced at 93.1 Swiss francs (Sf) when the exchange rate is 0.968 Sf/US$.
c. A Japanese stock priced at 1,334 yen (¥) when the exchange rate is 109.1149 ¥/US$.
Exchange rate is the rate at which one currency is exchanged for another currency
In this question, US dollar is the base currency while the other currencies are the price currency
1. (103.1 / 0.9025) x 1usd = $114.24
2. (93.1 / 0.9680) x 1 usd = $96.18
c.( 1334/109.1149) x 1 usd = $12.23
Way Cool produces two different models of air conditioners. The company produces the mechanical systems in their components department. The mechanical systems are combined with the housing assembly in its finishing department. The activities, costs, and drivers associated with these two manufacturing processes and the production support process follow.
Process Activity Overhead Cost Driver Quantity
Components Changeover $ 470,000 Number of batches 890
Machining 304,000 Machine hours 8,130
Setups 225,000 Number of setups 120
$ 999,000
Finishing Welding $192,000 Welding hours 5,200
Inspecting 235,000 Number of inspections 850
Rework 61,000 Rework orders 220
$ 488,000
Support Purchasing 145,000 Purchase orders 543
Providing space 33,000 Number of units 4,620
Providing utilities 65,000 Number of units 4,620
$ 243,000
Additional production information concerning its two product lines follows.
Model 145 Model 212
Units produced 1,500 3,120
Welding hours 2,000 3,200
Batches 445 445
Number of inspections 480 370
Machine hours 2,850 5,280
Setups 60 60
Rework orders 160 60
Purchase orders 362 181
Required:
1. Determine departmental overhead rates and compute the overhead cost per unit for each product line. Base your overhead assignment for the components department on machine hours. Use welding hours to assign overhead costs to the finishing department. Assign costs to the support department based on number of purchase orders.
2. Determine the total cost per unit for each product line if the direct labor and direct materials costs per unit are $250 for Model 145 and $170 for Model 212.
3. If the market price for Model 145 is $1,700 and the market price for Model 212 is $300, determine the profit or loss per unit for each model.
Answer:
Way Cool
1. Using ABC, the overhead cost per unit for each product line:
Model 145 Model 212
Overhead cost per unit $534.39 $266.12
2. The total cost per unit for each product line, if the direct labor and direct materials costs per unit are $250 for Model 145 and $170 for Model 212:
Model 145 Model 212
Total cost per unit $784.39 $436.12
3. If the market price for Model 145 is $1,700 and the market price for Model 212 is $300, the profit or loss per unit for each model:
Model 145 Model 212
Profit (loss) per unit $915.61 ($136.12)
Explanation:
a) Data and Calculations:
Process Activity Overhead Cost Driver Quantity
Components Changeover $ 470,000 Number of batches 890
Machining 304,000 Machine hours 8,130
Setups 225,000 Number of setups 120
Total $ 999,000
Finishing
Welding $ 192,000 Welding hours 5,200
Inspecting 235,000 Number of inspections 850
Rework 61,000 Rework orders 220
Total $ 488,000
Support
Purchasing $ 145,000 Purchase orders 543
Providing space 33,000 Number of units 4,620
Providing utilities 65,000 Number of units 4,620
Total $ 243,000
Additional production information concerning its two product lines follows:
Model 145 Model 212 Total
Units produced 1,500 3,120 4,620
Welding hours 2,000 3,200 5,200
Batches 445 445 890
Number of inspections 480 370 850
Machine hours 1,800 4,200 6,000
Setups 60 60 120
Rework orders 160 60 220
Purchase orders 362 181 543
Overhead Rates per Activity Pool:
Components Changeover $ 470,000/890 = $528
Machining 304,000/ 8,130 = $37.39
Setups 225,000/120 = $1,875
Total $ 999,000
Finishing
Welding $ 192,000/5,200 = $36.92
Inspecting 235,000/850 = $276.47
Rework 61,000/220 = $277.27
Total $ 488,000
Support
Purchasing $ 145,000/543 = $267
Providing space 33,000/4,620 = $7.14
Providing utilities 65,000/4,620 = $14.07
Total $ 243,000
Total overheads = $1,730,000
Model 145 Model 212
Units produced 1,500 3,120
Welding hours $73,840 (2,000*$36.92) $118,144 (3,200*$36.92)
Batches 234,960 (445*$528) 234,960 (445*$528)
Number of inspections 132,706 (480*$276.47) 102,294 (370*$276.47)
Machine hours 106,562 (2,850*$37.39) 197,419 (5,280*$37.39)
Setups 112,500 (60*$1,875) 112,500 (60*$1,875)
Rework orders 44,363 (160*$277.27) 16,636 (60*$277.27)
Purchase orders 96,654 (362*$267) 48,327 (181*$267)
Total overhead costs $801,585 $830,280
Units produced 1,500 3,120
Overhead cost per unit $534.39 $266.12
Total production costs:
Model 145 Model 212
Direct costs per unit $250 $170
Total direct costs $375,000 $530,400
Total overhead costs $801,585 $830,280
Total production costs $1,176,585 $1,360,680
Units produced 1,500 3,120
Total cost per unit $784.39 $436.12
Model 145 Model 212
Market price per unit $1,700.00 $300.00
Total cost per unit 784.39 436.12
Profit (loss) per unit $915.61 ($136.12)
Before preparing financial statements for the current year, the chief accountant for Oriole Company discovered the following errors in the accounts.
1. The declaration and payment of $47,000 cash dividend was recorded as a debit to Interest Expense $47,000 and a credit to Cash $47,000.
2. A 10% stock dividend (1,100 shares) was declared on the $10 par value stock when the market price per share was $19. The only entry made was Stock Dividends (Dr.) $11,000 and Dividend Payable (Cr.) $11,000. The shares have not been issued.
3. A 4-for-1 stock split involving the issue of 354,000 shares of $5 par value common stock for 91,750 shares of $20 par value common stock was recorded as a debit to Retained Earnings $1,835,000 and a credit to Common Stock $1,835,000.
Required:
Prepare the correcting entries at December 31.
Answer:
Oriole Company
Correcting Journal Entries:
1. Debit Dividends $47,000
Credit Interest Expense $47,000
To correct the error.
2. No corrections required
3. Debit Common Stock $1,835,000
Credit Retained Earnings $1,835,000
To correct the error.
Explanation:
a) Data and Analysis:
1. Dividends $47,000 Interest Expense $47,000
2. No corrections required
3. Common Stock $1,835,000 Retained Earnings $1,835,000
b) When a stock split is done, there is no journal entry involving an amount of money. What is recorded is just a memo entry. The memo entry serves to notify that the number of Oriole shares and the par value per share have changed to reflect the reality.
Described below are certain transactions of Edwardson Corporation. The company uses the periodic inventory system.1. On February 2, the corporation purchased goods from Martin Company for $70,000 subject to cash discount terms of 2/10, n/30. Purchases and accounts payable are recorded by the corporation at net amounts after cash discounts. The invoice was paid on February 26.2. On April 1, the corporation bought a truck for $50,000 from General Motors Company, paying $4,000 in cash and signing a one-year, 12% note for the balance of the purchase price.3. On May 1, the corporation borrowed $83,000 from Chicago National Bank by signing a $92,000 zero-interest-bearing note due one year from May 1.4. On August 1, the board of directors declared a $300,000 cash dividend that was payable on September 10 to stockholders of record on August 31.Make all the journal entries necessary to record the transactions above using appropriate dates.Edwardson Corporation
Answer:
Edwardson Corporation
Journal Entries:
February 2:
Debit Purchases $68,600
Credit Accounts Payable $68,600
To record credit purchases, net ($70,000 * 98%) with terms of 2/10, n/30.
February 26: Debit Purchases $1,400
Credit Accounts Payable $1,400
To revise the cash discounts not taken.
February 26: Debit Accounts Payable $70,000
Credit Cash $70,000
To record the full settlement for cash
April 1: Debit Truck $50,000
Credit Cash $4,000
Credit Notes Payable $46,000
To record the purchase of truck with a 12% note.
May 1: Debit Cash $83,000
Debit Interest Expense $9,000
Credit Notes Payable $92,000
To record zero-interest-bearing note due on May 1.
August 1: Debit Dividends $300,000
Credit Dividends Payable $300,000
To record the declaration of dividends.
Explanation:
a) Data and Analysis:
February 2: Purchases $68,600 Accounts Payable $68,600 ($70,000 * 98%)
February 26: Purchases $1,400 Accounts Payable $1,400
Accounts Payable $70,000 Cash $70,000
April 1: Truck $50,000 Cash $4,000 Notes Payable $46,000
May 1: Cash $83,000 Interest Expense $9,000 Notes Payable $92,000
August 1: Dividends $300,000 Dividends Payable $300,000
b) Note that the Interest Expense of $9,000 will be split between the current year and the following year. Specific information for the split is not available.
The Hopper Leg Winery from California's Sonoma Valley is trying to enter the wine market in France. To the company's surprise, it found that the France wine distribution channel was difficult to access as an outsider. Based on this, the market must have a(n) _________ distribution channel. fragmented intensive formal exclusive concentrated
Answer:
exclusive
Explanation:
Marketing mix can be defined as the choices about product attributes, pricing, distribution, and communication strategy that a company blends and offer its targeted markets (customers) so as to build and maintain a desired response.
Generally, a marketing mix is made up of the four (4) Ps;
1. Products: this is typically the goods and services that gives satisfaction to the customer's needs and wants. They are either tangible or intangible items.
2. Price: this represents the amount of money a customer buying goods and services are willing to pay for it.
3. Place: this represents the areas of distribution of these goods and services for easier access by the potential customers.
4. Promotions: for a good sales record or in order to increase the number of people buying a product and taking services, it is very important to have a good marketing communication such as advertising, sales promotion, direct marketing etc.
In this scenario, The Hopper Leg Winery from California's Sonoma Valley is trying to enter the wine market in France. To the company's surprise, it found that the France wine distribution channel was difficult to access as an outsider. Based on this, the market must have an exclusive distribution channel i.e the exclusive or unique rights to be a retailer for the supplier or manufacturer of the wine products.
Extend the application of a method or conclusion
a.Segmentation b.Extrapolate
c.Diffusion d.Multinational
Answer:
B - Extrapolate
Explanation:
Extrapolate means to extend the application of (a method or conclusion, especially one based on statistics) to an unknown situation by assuming that existing trends will continue or similar methods will be applicable.
Which of the following should be considered last when searching for financing? Question 1 options: Family members Banks Commercial finance companies Credit cards
Answer:
Credit cards
Explanation:
A credit card can be defined as a small rectangular-shaped plastic card issued by a financial institution to its customers, which typically allows them to purchase goods and services on credit based on the agreement that the amount would be paid later with an agreed upon interest rate.
Credit cards should be considered last when searching for financing.
The main sources of finance are; Family members, Banks Commercial and finance companies.
You should make sure to send a
you.
letter to the person who interviewed
A. thank you
B. formal
C. recommendation
D. cover
Answer:
A. thank you
Explanation:
You should make sure to send a
you.
letter to the person who interviewed. you should say thank you to that person who interviewed.
Answer: Truly A. thank-you is the right answer
For me its C.
A drawback to using stock options as part of manager compensation is that Group of answer choices it encourages managers to engage in empire building. All of the listed answers are true. None of the listed answers are true. it can create an incentive for mangers to manipulate information to prop up a stock price temporarily, giving them a chance to cash out before the price returns to a level reflective of the firm's true prospects. it encourages managers to undertake projects that will increase stock price.
Answer:
C. it can create an incentive for mangers to manipulate information to prop up a stock price
temporarily, giving them a chance to cash out before the price returns to a level reflective of
the firm's true prospects.
Explanation:
A management stock option gives enable managers to have legal right in order to purchase some certain number of shares with the fixed price during some time in future time. Though there are some condition that are needed to be satisfied such as continued employment. It should be noted that drawback to using stock options as part of manager compensation is that it can create an incentive for mangers to manipulate information to prop up a stock price
temporarily, giving them a chance to cash out before the price returns to a level reflective of the firm's true prospects.