Answer:
$3,000.
Explanation:
Given that, the margin in an arbitrage account is 5% minimum maintenance on the long side under FINRA rules.
Also, in this case, there is no Regulation T requirement, since the customer has no risk, which means hs net position = "0."
Therefore, given that, the market value of the securities is $150 * 400 = $60,000
Then, the minimum margin which is 5% = $3,000.
Additionally, the customer can borrow the remaining $57,000.
Hence, the right answer is $3,000
In a duopoly game we observe the following payouts: if the two firms collude they will each earn $50,000. If one firm cheats then he earns $60,000 and the other firm earns -$10,000. If both firms cheat then they each earn zero economic profit. In this game what is the Nash equilibrium?
Answer:
the Nash equilibrium for both players is to collude
Explanation:
A duopoly is when there are two firms operating in an industry.
Game theory looks at the interactions between participants in a competitive game and calculates the best choice for the player.
Dominant strategy is the best option for a player regardless of what the other player is playing.
Nash equilibrium is the best outcome for players where no player has an incentive to change their decisions.
the Nash equilibrium for both players is to collude because it is the best outcome for both players. if, a player cheats, there is a chance that the other player would cheat and both firms would end up earning a zero economic profit
Based on the various payoffs to be made, the Nash Equilibrium for this game would be that both firms should collude.
The Nash Equilibrium is the outcome that would be most beneficial for both firms to stay in. If either of them leave, they would incur losses.
If both firms decide to collude and one cheats, the other firm would cheat as well to avoid making a loss which would lead to both of them making zero economic profit.
Both firms will therefore collude so as to make $50,000 a piece.
In conclusion, the Nash Equilibrium is collusion between the two firms.
Find out more at https://brainly.com/question/7141724.
company's retained earnings have a financing cost associated with them because retained earnings belong to which of the following? a. The common stockholders b. The company's long-term debt holders c. The preferred stockholders d. The company
Answer:
a. The common stockholders.
Explanation:
A company's retained earnings have a financing cost associated with them because retained earnings belong to the common stockholders.
Retained earnings can be defined as the accumulated profits or net income generated by an organization but are not distributed or given as dividends to the stockholders, rather are reinvested in to the business.
Generally, retained earnings are used to pay off debts, used for capital expenditures and working capitals.
Retained earnings represents the total stockholders' equity reinvested back into the company.
George bought the following amounts of Stock A over the years: (Loss amounts should be indicated with a minus sign.) Date Purchased Number of Shares Adjusted Basis Stock A 11/21/1993 1,100 $ 26,400 Stock A 3/18/1999 550 9,900 Stock A 5/22/2008 850 30,600 On October 12, 2019, he sold 1,350 of his shares of Stock A for $38 per share. a. How much gain/loss will George have to recognize if he uses the FIFO method of accounting for the shares sold
Answer:
George
Using the FIFO method of accounting for the shares sold, the gain to be recognized is $20,400.
Explanation:
a) Data:
Date Purchased Number of Shares Adjusted Basis Cost/unt
Stock A 11/21/1993 1,100 $ 26,400 $24
Stock A 3/18/1999 550 9,900 $18
Stock A 5/22/2008 850 30,600 $36
On October 12, 2019, he sold 1,350, $38 per share
Stock A remaining 1,150
Stock A:
Cost of sales = 1,100 x $24 = $26,400
plus 250 x $18 = $4,500
Total cost of sales $30,900
Sales revenue 1,350 x $38 = $51,300
Gain on sale $20,400
b) The FIFO (First-In, First-Out) method is an inventory method of recognizing the cost of goods sold and the ending inventory based on the assumption that the items that were first brought into inventory are the the ones to be sold. With this method, the cost of sales will be determined by the earlier purchases of inventory while the cost of ending inventory will be calculated based on the later purchases of inventory. Other methods in use in inventory costing are the Last-In, First-Out, the Weighted-Average, and Specific Identification Methods.
Hillside issues $2,000,000 of 6%, 15-year bonds dated January 1, 2017, that pay interest semiannually on June 30 and December 31. The bonds are issued at a price of $2,447,990.Required:a. Prepare the January 1, 2013, journal entry to record the bonds issuance.b. Prepare the first two years of an amortization table using the straight-line method.c. Prepare the journal entries to record the first two interest payments.
Answer:
a.
Cash $2,447,990 (debit)
Investment in Bonds $2,447,990 (credit)
b.
Amortization Table for the first two years will be :
2013
Capital $22.307
Interest $97.693
Balance $2,425,683
2014
Capital $34,472
Interest $145,528
Balance $2,402,475
c.
First Payment : June 30, 2013
Interest Expense $48,957 (debit)
Investment in Bonds $11,043 (debit)
Cash $60,000 (credit)
Second Payment : December 31, 2013
Interest Expense $48,736 (debit)
Investment in Bonds $11,264 (debit)
Cash $60,000 (credit)
Explanation:
On the day of issuance of the Bonds, the entries will be :
Cash $2,447,990 (debit)
Investment in Bonds $2,447,990 (credit)
Use the data given to prepare an amortization schedule
Hint : First find the YTM as follows :
n = 15 × 2 = 30
FV = - $2,000,000
PV = $2,447,990
PMT = ($2,000,000 × 6%)/2 = $60,000
P/ yr = 2
YTM = ? 3.998
Using a financial calculator, the YTM is 3.998 or 4 %
Amortization Table for the first two years will be :
2013
Capital $22.307
Interest $97.693
Balance $2,425,683
2014
Capital $34,472
Interest $145,528
Balance $2,402,475
Journal Entries for the Payment of Interest :
First Payment : June 30, 2013
Interest Expense $48,957 (debit)
Investment in Bonds $11,043 (debit)
Cash $60,000 (credit)
Second Payment : December 31, 2013
Interest Expense $48,736 (debit)
Investment in Bonds $11,264 (debit)
Cash $60,000 (credit)
A pension plan that promises employees a fixed annual pension benefit, based on years of service and compensation, is called a(n)The journal entry a company uses to record accrued vacation privileges for its employees at the end of the year is
Answer:
1. Defined Benefit Plan
2. debit Vacation Pay Expense; credit Vacation Pay Payable
Explanation:
1. With a Defined Benefit Plan, employers promise to pay employees a pension based on factors like years of service and salary. The plan will be sponsored by the employer and will be managed by the company.
2. As the Vacation is an expense, it will need to be debited to an expense account being the Vacation Pay Expense account. It will also be credited to the Vacation Pay Payable to reflect that this is a liability that the company must fulfil.
When group investors become aware of overseas investment opportunities and are willing to diversify their portfolios internationally, __________.
Answer:
they benefit from an expanded opportunity set.
Explanation:
As most of the business organizations focused on grabbing the investment opportunities which leads to diversify their business in terms of expanding the business in various locations, maximize the market share etc
This can be done with the help of opportunity set i.e. to expanded through which the firm could get the benefit of it
Hence, this would be the answer
You will require $700 in 5 years. If you earn 5% interest on your funds, how much will you need to invest today in order to reach your savings goal
Answer:
PV= $548.47
Explanation:
Giving the following information:
You will require $700 in 5 years. You earn 5% interest on your funds.
To calculate the initial investment, we need to use the following formula:
PV= FV/(1+i)^n
PV= present value
FV= future value
n= number of years
i= interest rate
PV= 700/(1.05^5)
PV= $548.47
Journalize the following transactions assuming a perpetual inventory system:
May 5
Purchased merchandise from Archie Co., $6,000, terms FOB shipping point, 2/10, n/30.
Prepaid freight costs of $100 were added to the invoice.
May 12
Issued a debit memo to Archie Co. for $2,500 of merchandise returned from purchase on May 5.
May 14
Paid Archie Co. for invoice of May 5, less debit memo of May 12.
Answer:
May 5
Merchandise Inventory $6,000 (debit)
Freight Charges $100 (debit)
Accounts Payable : Archie Co. $6,000 (credit)
Cash $100 (credit)
May 12
Accounts Payable : Archie Co. $2,500 (debit)
Merchandise Inventory $2,500 (credit))
May 14
Accounts Payable : Archie Co. $3,500 (debit)
Discount Received $70 (credit)
Cash $3,430 (credit)
Explanation:
May 5
Recognize the Assets of Merchandise and a Liability : Accounts Payable : Archie Co. as a result of purchase.
Also Recognize the Freight Expenses since this is a F.O.B delivery
May 12
De-recognize the Liability : Accounts Payable - Archie Co. and the Merchandise Inventory asset to the extend of Merchandise returned to Archie Co.
May 14
De-recognize the Liability : Accounts Payable : Archie Co. of $3,500 and the Cash assets to the extend of Payment made to Archie Co less cash discount of $3,430 .
Barb Campbell owns an entertainment company which has increased both its profits and revenues over an extended period of time. Barb's firm is experiencing:
Answer:
sustained growth
Explanation:
Based on this information it seems that Barb's firm is experiencing sustained growth. This term refers to the realistically attainable amount of growth that a company can have without running into problems. If a business grows way too fast it will not be able to fund that growth, but if they do not grow enough then they will amass debt and fail. Sustainable Growth is usually the goal for new companies.
Some companies resort to questionable means to enforce computer use policies. They use surveillance software to monitor employees' IT use. Every activity on the employee's computer is simultaneously tracked and recorded. Everything that the employee sees on their monitor can also be seen on the monitor of the person tracking them. The same software is used to monitor children's online activities and monitor spouses suspected on infidelity. Should employees be treated as undisciplined children of cheating spouses
Answer:
Its appropriate because the company monitors its employee's use of IT system during office time not their personal devices.
Explanation:
If the company is monitoring closely its own IT systems then it is appropriate as the company is keen in increasing the employee productivity during office time. This is also appropriate if the employee is told about the close monitoring because he will not access his personal things which includes payments of utilities and other item using online banking. So this is appropriate as it is not meant to harm the employee and is part of improving employee performance.
Crystal Apple Sales Company began 2014 with cash of $2,000, inventory of $3,600 (200 crystal apples that cost $18 each), $2,500 of common stock, and $3,100 of retained earnings. The following events occurred during 2014.
1. Crystal Apple purchased additional inventory twice during 2018. The first purchase consisted of 800 apples that cost $20 each, and the second consisted of 1,200 apples that cost $24 each. The purchases were on account.
2. The company sold 2,040 apples for cash at a selling price of $40 each.
3. The company paid $44,800 cash on accounts payable for inventory purchases.
4. Crystal Apple paid $26,000 cash for operating expenses.
5. Assume an income tax rate of 30 percent. Crystal Apple paid income tax expense in cash.
Required:
a. Determine the ending inventory and cost of goods sold using the three different cost flow assumptions: FIFO, LIFO, and Weighted Average.
b. Prepare an income statement, a balance sheet, and a statement of cash flows under each of the three cost flow assumptions.
Answer and Explanation:
a. The computation of ending inventory and cost of goods sold using the three different cost flow assumptions: FIFO, LIFO, and Weighted Average is shown below:-
Cost of goods sold = (200 × $18) + (800 × $20) + (1,040 × (2,040-200-800)
= (200 × $18) + (800 × $20) + (1,040 × $24)
= $3,600 + $16,000 + $24,960
= $44,560
Ending Inventory Under FIFO = (1,200 - 1,040) × (2,040-200-800)
= 160 × $24
= $3,840
Under LIFO method
Cost of goods sold is
= (1,200 × $24) + (800 × $20) + (40 × $18)
= $28,800 + $16,000 + $720
= $45,520
Ending Inventory Under LIFO is
= (200 - 40) × $18
= 160 × $18
= $2,880
Weighted Average cost flow Assumption
Weighted Average cost per apple = Cost of Beginning inventory and purchase ÷ Total apple available
Cost of Beginning inventory and purchases is
= (200 × $18) + (800 × $20) + (1,200 × $24)
= $3,600 + $16,000 + $28,800
= $48,400
Total apples available is
= 200 + 800 + 1,200
= 2,200
Weighted Average cost per apple is
= $48,400 ÷ 2,200
= $22
Cost of goods sold is
= 2,040 × $22
= $44,880
Ending Inventory is
= 160 × $22
= $3,520
b. The Preparation of income statement, a balance sheet, and a statement of cash flows under each of the three cost flow assumptions is prepared below:-
Income Statement Amount
Sales (2,040 × $40) $81,600
Less: Cost of goods sold ($44,560)
Gross Profit $37,040
Less: Operating Expenses ($26,000)
Income before income taxes $11,040
Less: Income tax (30% × $11,280) ($3,312)
Net Income $7,728
Balance Sheet
Assets
Cash $9,488
Inventory $3,840
Total Assets $13,328
Liabilities and Stockholder's Equity
Common Stock $2,500
Retained Earnings $10,828
Total Liabilities and Equity $13,328
Working note
cash = (opening + Sales - Purchases - Operating expenses - Income tax expenses )
= $2,000 + $81,600 - $44,800 - $26,000 - $3,312
= $9,488
Retained earning = (Opening + Net Income)
= $3,100 + $7,728
= $10,828
Statement of Cash Flow
Cash Flow from Operating Activities
Cash Sales $81,600
Payment to Accounts Payable ($44,800)
Operating Expenses ($26,000)
Income tax paid ($3,312)
Net Increase in cash and
cash equivalents $7,488
Add: Opening Cash and
cash equivalents $2,000
Closing Cash and cash equivalents $9,488
LIFO cost flow Assumption
Income Statement
Sales (2,040 × $40) $81,600
Less: Cost of goods sold ($45,520)
Gross Profit $36,080
Less: Operating Expenses ($26,000)
Income before income taxes $10,080
Less: Income tax (30% × $10,080) ($3,024)
Net Income $7,056
Balance Sheet
Assets
Cash $9,776
Inventory $2,880
Total Assets $12,656
Liabilities and Stockholder's Equity
Common Stock $2,500
Retained Earnings $10,156
Total Liabilities and Equity $12,656
Working note:-
Cash = (opening + Sales - Purchases payment - Operating expenses -Income tax expenses)
= $2,000 + $81,600 - $44,800 - $26,000 - $3,024
= $9,776
Retained earning = (Opening + Net Income)
= $3,100 + $7,056
= $10,156
Statement of Cash Flows
Cash Flow from Operating Activities
Cash Sales $81,600
Payment to Accounts Payable ($44,800)
Operating Expenses ($26,000)
Income tax paid ($3,024)
Net Increase in cash and
cash equivalents $7,776
Add: Opening Cash and
cash equivalents $2,000
Closing Cash and cash equivalents $9,776
Weighted Average cost flow Assumption
Income Statement
Sales (2,040 × $40) $81,600
Less: Cost of goods sold ($44,880)
Gross Profit $36,720
Less: Operating Expenses ($26,000)
Income before income taxes $10,720
Less: Income tax (30% × $10,720) ($3,216)
Net Income $7,504
Balance Sheet
Assets
Cash $9,584
Inventory $3,520
Total Assets $13,104
Liabilities and Stockholder's Equity
Common Stock $2,500
Retained Earnings $10,604
Total Liabilities and Equity $13,104
Working note
Cash = opening + Sales - Purchases payment - Operating expenses - Income tax expenses )
= $2,000 + $81,600 - $44,800 - $26,000 - $3,126
= $9,584
Retained earning = (Opening + Net Income)
= $3,100 + $7,504
= $10,604
Statement of Cash Flows
Cash Flow from Operating Activities
Cash Sales $81,600
Payment to Accounts Payable ($44,800)
Operating Expenses ($26,000)
Income tax paid ($3,216)
Net Increase in cash and
cash equivalents $7,584
Add: Opening Cash and
cash equivalents $2,000
Closing Cash and
cash equivalents $9,584
Discuss the requisite skills a person needs to lead change for a chosen organization. How can the organization’s structure accommodate change?
Explanation:
Organizational changes can create insecurity in workers, often caused by a lack of sufficient information and fear of the unknown.
Therefore, in the case of any organizational change, however small, it must be properly communicated to all employees, then communication is the essential ability of a leader to promote a transition of some practice or procedure in a rational, objective and clear way.
It is ideal that the leader knows how to communicate the changes using various channels, such as e-mail, panel, meetings, and explain in detail that the change will generate positive results for the work and for the organization, in order to make the workers safe and prepared.
It is also essential to provide adequate training in the event of changes in work, technological innovations, etc. The essential thing is that people management is geared towards the improvement of the employee along with the changes that are necessary and happen in every organization.
Based on the HEADLINE article titled "Inflation and the Weimar Republic," which of the following is the best illustration of the wealth effect of inflation?
a. Workers were often paid daily and sometimes two or three times a day.
b. Debtors sought out creditors to pay them in valueless currency.
c. Profits fell as employees demanded frequent wage adjustments.
d. Businessmen traveling around the country found themselves borrowing funds from their customers each stage of the way. The cash they'd allocated for the entire trip barely sufficed to pay the way to the next stop."
Answer: Businessmen traveling around the country found themselves borrowing funds from their customers each stage of the way. The cash they'd allocated for the entire trip barely sufficed to pay the way to the next stop."
Explanation:
Inflation is when there is a general increase in the prices of goods and services on the economy.
The best illustration of the wealth effect of inflation based on the article titled "Inflation and the Weimar Republic," is that businessmen traveling around the country found themselves borrowing funds from their customers each stage of the way. The cash they'd allocated for the entire trip barely sufficed to pay the way to the next stop."
This is because when there is inflation, theee will be rise in price and hence, the money the businessmen wanted to use won't be enough to get meet their needs hence they'll need more funds.
Annual Worth and Capital Recovery Calculations U S. Steel is considering a plant expansion to produce austenitic, precipitation hardened, duplex, and martensitic stainless steel round bars that is expected to cost $13 million now and another $10 million 1 year from now. If total operating costs will be $1.2 million per year starting 1 year from now, and the estimated salvage value of the plant is virtually zero, how much must the company make annually in years 1 through 10 to recover its investment plus a return of 15% per year?
Answer:
$5,601,632
Explanation:
we must first calculate the present value of the required investments and the annual costs:
initial investment = $13,000,000 + $10,000,000/1.1 = $22,090,909
annual costs = $1,200,000 x 5.0188 (PV annuity factor, 15%, 10 periods) = $6,022,560
present value of initial investment + annual costs = $28,113,469
we must calculate an annuity that has a present value = $28,113,469 with a 15% discount rate and 10 years:
annuity = $28,113,469 / 5.0188 = $5,601,631.67 ≈ $5,601,632
Piedmont Company segments its business into two regions—North and South. The company prepared the contribution format segmented income statement as shown: Total Company North South Sales $ 675,000 $ 450,000 $ 225,000 Variable expenses 405,000 315,000 90,000 Contribution margin 270,000 135,000 135,000 Traceable fixed expenses 150,000 75,000 75,000 Segment margin 120,000 $ 60,000 $ 60,000 Common fixed expenses 65,000 Net operating income $ 55,000 Required: 1. Compute the companywide break-even point in dollar sales. 2. Compute the break-even point in dollar sales for the North region. 3. Compute the break-even point in dollar sales for the South region.
Answer:
Piedmont Company
1. Computation of the Companywide break-even point:
Break-even point = Fixed Cost/Contribution per margin
= $215,000/$27 = 7,963 units
2. Computation of the break-even point in dollar sales for the North region:
Break-even point in dollar sales = Fixed Costs/Contribution margin percentage
= $107,500/30% = $358,333
3. Computation of the break-even point in dollar sales for the South region:
= $107,500/60% = $179,1667
Explanation:
a) Data
Piedmont Company Contribution format segmented income statement as shown:
Total Company North South
Sales $ 675,000 $ 450,000 $ 225,000
Variable expenses 405,000 315,000 90,000
Contribution margin 270,000 135,000 135,000
Traceable fixed expenses 150,000 75,000 75,000
Segment margin 120,000 $ 60,000 $ 60,000
Common fixed expenses 65,000 32,500 32,500
Net operating income $ 55,000 $27,500 $27,500
NB: The common fixed expenses must be shared in some way to calculate the break-even points.
b) Total fixed costs:
Company-wide = $215,000 ($150,000 + 65,000)
North = $107,500 ($75,000 + 32,500)
South = $107,500 ($75,000 + 32,500)
c) We assume that the sales unit of 5,000 each for the two regions. Total units = 10,000
d) Contribution per margin:
Company-wide = $270,000/10,000 = $27
North = $135,000/5,000 = $27
South = $135,000/5,000 = $27
e) Contribution margin percentage:
= Contribution/Sales x 100
Company-wide = $270,000/$675,000 x 100 = 40%
North = $135,000/$450,000 x 100 = 30%
South = $135,000/$225,000 x 100 = 60%
f) The break-even point is the quantity of sales that must be achieved for the fixed costs to be fully covered and no profit or loss is recorded. It is the point at which fixed costs are equal to the contribution. The contribution is the difference between the sales value and the variable costs.
A 4-year project has an annual operating cash flow of $54,000. At the beginning of the project, $4,500 in net working capital was required, which will be recovered at the end of the project. The firm also spent $22,900 on equipment to start the project. This equipment will have a book value of $4,860 at the end of the project, but can be sold for $5,820. The tax rate is 40 percent. What is the Year 4 cash flow
Answer:
$64,704
Explanation:
Year 4 cash flow = operating cash flow + non operating cash flow
non operating cash flow = salvage value + net working capital - tax(Salvage value - book value)
$5,820 + $4,500 - 0.4($5,820 - $4,860) = $10,704
$10,704 + $54,000 = $64,704
Panner, Inc., owns 30 percent of Watkins and applies the equity method. During the current year, Panner buys inventory costing $126,000 and then sells it to Watkins for $180,000. At the end of the year, Watkins still holds only $26,400 of merchandise. What amount of gross profit must Panner defer in reporting this investment using the equity method
Answer:
The gross profit that will be deferred is $2376
Explanation:
The cost of inventory = $126000
Selling price of inventory (revenue) = $180000
The remaining inventory with Watkins = $26400
Gross profit percentage = (revenue – cost) / revenue
Gross profit percentage = (180000 – 126000) / 180000 = 0.3 or 30%
Remaining value = $26400 × 30% = 7920
Ownership = 7920 × 30% = $2376
The gross profit that will be deferred is $2376
In March, Kelly Company had the following unit production costs: materials $11 and conversion costs $8. On March 1, it had no work in process. During March, Kelly transferred out 22,000 units. As of March 31, 4,100 units that were 45% complete as to conversion costs and 100% complete as to materials were in ending work in process.
Required:
a. Compute the total units to be accounted for.
b. Compute the equivalent units of production.
c. Prepare a cost reconciliation schedule, including the costs of materials transferred out and the costs of materials in process.
Answer:
a. 26,100 units
b. Materials = 26,100 units Conversion Costs = 23,845 units
c.
cost reconciliation schedule
Inputs
Beginning Work In Process $0
Started $477,500
Totals = $477,500
Outputs
Completed and Transferred Out : (22,000 × $19) = $418,000
Ending Work In Process : = $59,500
Materials (4,100 × $11)
Conversion Costs (1,845 × $8)
Totals = $477,500
Explanation:
a.Total units to be accounted for
Units Completed and Transferred Out 22,000
Units in Ending Work In Process 4,100
Total units to be accounted for 26,100
b. Compute the equivalent units of production.
Materials
Units Completed and Transferred Out (22,000 × 100%) = 22,000
Units in Ending Work In Process (4,100 × 100%) = 4,100
Total units to be accounted for = 26,100
Conversion Costs
Units Completed and Transferred Out (22,000 × 100%) = 22,000
Units in Ending Work In Process (4,100 × 45%) = 1,845
Total units to be accounted for = 23,845
Baxter Company produces Frisbees using a threeminusstep sequential process that includes molding, coloring and finishing. At what stage would the sets be allocated Manufacturing Overhead?
The options are:
A) When the Frisbees are in WIP InventoryWIP Inventory-Molding
B) When the Frisbees are in WIP InventoryWIP Inventory-Finishing
C) When the Frisbees are in WIP InventoryWIP Inventory-Coloring
D) All of the above
Answer:
D) All of the above
Explanation:
Manufacturing overhead is defined as all manufacturing cost incurred in producing a good that cannot be traced directly to the product in an economically feasible way.
For example processes in Work In Process stage of manufacturing such as labour and utility expenses are manufacturing overhead costs. Work in process is the manufacturing stage where goods are converted from raw goods to partially finished goods.
So all the options given which are on the WIP are correct.
On June 10, 20X8, Playoff Corporation acquired 100 percent of Series Company's common stock. Summarized balance sheet data for the two companies immediately after the stock acquisition are as follows:
Playoff Corp. Series Company
Item Book Value Fair Value
Cash $ 15,000 $ 5,000 $ 5,000
Accounts Receivable 30,000 10,000 10,000
Inventory 80,000 20,000 25,000
Buildings & Equipment (net) 120,000 50,000 70,000
Investment in Series Stock 100,000
Total $ 345,000 $ 85,000 $ 110,000
Accounts Payable $ 25,000 $ 3,000 $ 3,000
Bonds Payable 150,000 25,000 25,000
Common Stock 55,000 20,000
Retained Earnings 115,000 37,000
Total $ 345,000 $ 85,000 $ 28,000
Required:
a. Prepare the consolidating entries required to prepare a consolidated balance sheet immediately after the acquisition of Series Company shares. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
b. Record the excess value (differential) reclassification entry.
Answer:
a. Consolidating Journal Entries:
Description Debit Credit
June 10, 20X8:
Cash $5,000
Accounts receivable 10,000
Inventory 25,000
Building & Equipment 70,000
Unrealized Gain on fair value $25,000
Accounts payable 3,000
Bonds payable 25,000
Investment in Series Stock 100,000
Excess Value (differential) 43,000
To record consolidating entries in the consolidated parent.
Goodwill 43,000
Excess Value (differential) 43,000
To record the reclassification of the excess value as Goodwill on acquisition.
Explanation:
a) Summarized balance sheet data
Playoff Corporation Series Company
Item Book Value Fair Value
Cash $ 15,000 $ 5,000 $ 5,000
Accounts Receivable 30,000 10,000 10,000
Inventory 80,000 20,000 25,000
Buildings & Equipment (net) 120,000 50,000 70,000
Investment in Series Stock 100,000
Total $ 345,000 $ 85,000 $ 110,000
Accounts Payable $ 25,000 $ 3,000 $ 3,000
Bonds Payable 150,000 25,000 25,000
Common Stock 55,000 20,000
Retained Earnings 115,000 37,000
Total $ 345,000 $ 85,000 $ 28,000
b) Consolidated entries are made for assets and liabilities acquired of the subsidiary using fair values. An unrealized gain on fair value account is created to account for the differences in fair values. Any excess or differential after consolidation and above the fair values is regarded as Goodwill arising from the acquisition.
Nichols Enterprises has an investment in 31,500 bonds of Elliott Electronics that Nichols accounts for as a security available for sale. Elliott bonds are publicly traded, and The Wall Street Journal quotes a price for those bonds of $10 per bond, but Nichols believes the market has not appreciated the full value of the Elliott bonds and that a more accurate price is $23 per bond. Nichols should carry the Elliott investment on its balance sheet at:
Answer: $315,000
Explanation:
From the question, we are informed that Nichols Enterprises has an investment in 31,500 bonds of Elliott Electronics that Nichols accounts for as a security available for sale. Elliott bonds are publicly traded, and The Wall Street Journal quotes a price for those bonds of $10 per bond, but Nichols believes the market has not appreciated the full value of the Elliott bonds and that a more accurate price is $23 per bond.
To get the amount that Nichols should carry on the balance sheet as Elliott investment, we multiply the bond invested by the price per bond. This will be:
= 31,500 × $10
= $315,000
Review the Inquirer to determine Chester’s current strategy. Where will they seek a competitive advantage? From the following list, select the top five sources of competitive advantage that Chester would be most likely to pursue.
Select 5:
a) Increase demand through TQM initiatives
b) Offer attractive credit terms
c) Seek excellent product designs, high awareness, and high accessibility
d) Add additional products
e) Seek the lowest price in their target market while maintaining a competitive contribution margin
f) Accept lower plant utilization and higher capacities to insure sufficient capacity is available to meet demand
g) Reduce labor costs through training and recruitment
h) Seek high automation levels
i) Seek high plant utilization, even if it risks occasional small stockouts
j) Reduce cost of goods through TQM initiatives
Answer:
a) Increase demand through TQM initiatives
b) Offer attractive credit terms
c) Seek excellent product designs, high awareness, and high accessibility
e) Seek the lowest price in their target market while maintaining a competitive contribution margin
g) Reduce labor costs through training and recruitment
Explanation:
Chester by pursuing the top five targets listed above would Have a competitive advantage among it's competitors. First their total quality management strategy(TQM) would increase customer satisfaction and spiral their demand growth. Secondly attractive credit terms would increase demand by encouraging customers that require credit facilities for their purchases. Excellent product designs and more awareness would increase product quality while also bring more awareness to the business. Reducing price would also increase demand and since they'd be able to keep a competitive contribution margin they would be able to stay ahead in the market. Lastly reduction in labour costs will have a ripple effect on the whole business as costs will be reduced and cost of goods will be reduced to ensure lower prices and high demand
Lindon Company is the exclusive distributor for an automotive product that sells for $34.00 per unit and has a CM ratio of 30%. The company’s fixed expenses are $193,800 per year. The company plans to sell 21,600 units this year. Required: 1. What are the variable expenses per unit? (Round your "per unit" answer to 2 decimal places.) 2. What is the break-even point in unit sales and in dollar sales? 3. What amount of unit sales and dollar sales is required to attain a target profit of $91,800 per year? 4. Assume that by using a more efficient shipper, the company is able to reduce its variable expenses by $3.40 per unit. What is the company’s new break-even point in unit sales and in dollar sales? What dollar sales is required to attain a target profit of $91,800?
Answer:
1. $23.80
2. Break even Point (units) = 19,000 units and Break even Point (dollars) = $646,000
3. Unit sales to attain a target profit = 28,000 units and Dollar sales to attain a target profit = $952,000
4. Break even Point (units) = 28,500 units, Break even Point (dollars) = $969,000 and Dollar sales to attain a target profit = $1,428,000.
Explanation:
Variable Cost % = 100% - 30%
= 70%
Thus, variable expenses per unit = $34.00 × 70%
= $23.80
Break even Point is the level of activity where a firm makes neither a profit nor a loss.
Break even Point (units) = Fixed Cost / Contribution per unit
= $193,800 / ($34.00 ×30%)
= $193,800 / $10.20
= 19,000 units
Break even Point (dollars) = Fixed Cost / CM Ratio
= $193,800 / 0.30
= $646,000
Unit sales to attain a target profit = (Fixed Cost + Target Profit) / Contribution per unit
= ($193,800 + $91,800) / $10.20
= 28,000
Dollar sales to attain a target profit = (Fixed Cost + Target Profit) / CM Ratio
= ($193,800 + $91,800) / 0.30
= $952,000
When variable expenses reduce by $3.40 per unit.
Break even Point (units) = Fixed Cost / Contribution per unit
= $193,800 / ($34.00 - $23.80 - $3.40 )
= $193,800 / $6.80
= 28,500 units
Break even Point (dollars) = Fixed Cost / CM Ratio
= $193,800 / ($6.80/ $34.00)
= $969,000
Dollar sales to attain a target profit = (Fixed Cost + Target Profit) / CM Ratio
= ($193,800 + $91,800) / 0.20
= $1,428,000
Principal-principal conflicts occur within one class of principals, such as a disagreement among certain majority stockholders and other majority stockholders.
a. True
b. False
Answer: False
Explanation:
The principal to principal conflict typically exists between the two main categories of shareholders, which are the controlling shareholders and the second one which is the minority shareholders
Therefore, the analysis in the question that the principal-principal conflicts occur within one class of principals, such as a disagreement among certain majority stockholders and other majority stockholders is not true.
Tamarisk Corporation issued 115,000 shares of $18 par value, cumulative, 8% preferred stock on January 1, 2018, for $2,530,000. In December 2020, Tamarisk declared its first dividend of $730,000. Prepare Tamarisk’s journal entry to record the issuance of the preferred stock. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)
Answer:
Dr Cash $2,530,000
Cr Preferred stock $2,070,000
Cr Additional Paid-in-Capital (Preferred Stock) $460,000
(To record issuance of Preferred Stock)
Explanation:
Preferred Stock
= 115,000 shares * $18 par value
= $2,070,000
Additional Paid-in-Capital (Preferred Stock)
= 2,530,000 - 2,070,000
= $460,000
A machine can be purchased for $140,000 and used for five years, yielding the following net incomes. In projecting net incomes, straight-line depreciation is applied, using a five-year life and a zero salvage value.
Year 1 Year 2 Year 3 Year 4 Year 5
Net income $ 9,500 $ 23,500 $ 64,000 $ 35,500 $ 94,000
Compute the machine’s payback period (ignore taxes). (Round your intermediate calculations to 3 decimal places and round payback period answer to 3 decimal places.)
Year Net Income Depreciation Net Cash Flow Cumulative Cash Flow
0 $ (140,000) $ (140,000)
1 $ 9,500
2 23,500
3 64,000
4 35,500 0
5 94,000 0
Payback period =
Answer:
2.554 years
Explanation:
Payback period calculates the amount of time it takes to recover the amount invested in a project from its cumulative cash flows.
to derive cash flow from net income, add depreciation back
Straight line depreciation expense = (Cost of asset - Salvage value) / useful life
$140,000 / 5 = $28,000
depreciation expense each year would be $28,000
cash flow in year 1 = $9500 + $28,000 = $37,500
cash flow in year 2= $23,500 + $28,000 =$51,500
cash flow in year 3 =$64,000 + $28,000 = $92,000
cash flow in year 4 =$35,500 + $28,000 = $63,500
cash flow in year 5 =$94,000 + $28,000 = $122,000
in year 1, the amount recovered = $-140,000 + $37,500 = $-102,500
in year 2, the amount recovered = $-102,500 + $51,500 = $-51,000
in year 3, the amount recovered = $-51,000 + $92,000 = $41,000
the amount invested is recovered in 2 years + 51,000 / 92,000 = 2.554 years
Economist C says all of the following: Expansionary fiscal policy is needed to raise aggregate demand and remove the economy from a recessionary gap. The choice of fiscal policy measures is between ________________ government spending and a _______________ in taxes. Since I am in favor of bigger government, I choose a(n) _________________ in _________________.
Answer:
The choice of fiscal policy measures is between ___increased_____________ government spending and a ____decrease___________ in taxes. Since I am in favor of bigger government, I choose a(n) ____increase_____________ in ____governmental spending_____________.
Explanation:
Government employ two fiscal measures to drive the economy toward stability. They are taxation and government expenditure. Depending on the desired outcome and the prevailing circumstances, an increase in taxation reduces the propensity to consume, thus fueling increased savings and investments. Increased government expenditure galvanizes the economy to grow and the increased expenditure acts as a stimulus to economic activities. But fiscal policy measures are not used in isolation. They are complemented by monetary policies by the Federal Reserve.
You would expect a bond of the U.S. government to pay higher interestrate as compared to a bond of an Eastern European government.
A. True
B. False
Answer: False
Explanation:
Bond interest is determined in part by the riskiness of the Issuer of the bond. The United States is one of the most trust-worthy countries in the world and this is reflected by the US T-bills being considered a risk-free asset the world over.
The less risky an asset is, the less interest it has to pay as it does not have to compensate its investors for more added risk. A United States Bond is definitely safer than an Eastern European Government bond who are not as developed as the Western Europeans speaking in an unbiased manner. Therefore the US Bond will pay a lower interest relative to a bond of an Eastern European government.
Meginnis Corporation's relevant range of activity is 3,000 units to 7,000 units. When it produces and sells 5,000 units, its average costs per unit are as follows: Average Cost per Unit Direct materials $ 5.20 Direct labor $ 3.75 Variable manufacturing overhead $ 1.65 Fixed manufacturing overhead $ 2.60 Fixed selling expense $ 0.50 Fixed administrative expense $ 0.40 Sales commissions $ 1.50 Variable administrative expense $ 0.50 If 6,000 units are produced, the total amount of direct manufacturing cost incurred is closest to
Answer:
$53,700
Explanation:
Direct manufacturing cost = (Direct material per unit + Direct labor per unit) * Units produced
=($5.20 + $3.75) * 6,000 units
=$8.95 * 6,000
=$53,700
The total amount of direct manufacturing cost incurred is closest to $53,700
On January 1, 20X7, Pisa Company acquired 80 percent of Siena Company by purchasing 40,000 shares of Siena's common stock. There was no differential related to this transaction. The noncontrolling interest had a fair value equal to 20 percent of book value. The book value of Siena on December 31, 20X7 was as follows:
On January 1, 20X8, Pisa purchased an additional 12,500 shares directly from Siena for $25 per share. The elimination entry to prepare the consolidated financial statements on December 31, 20X7 would include one of the following answers:
a. credit to common stock for $625,000
b. debit to retained earnings for $37,500
c. credit to Investment in Siena Co. for $976,500
d. credit to NCI in the net assets of Siena Co. for $232,500
Answer:
a. credit to common stock for $625,000
Explanation:
When a company acquires more than 75% of holding in any company along with significant control then it is known as subsidiary. The company Is then able to record investment in subsidiary as debit balance in its statement of financial position. The cash consideration paid for acquiring the stock is recorded as investment in subsidiary. When the Pisa Company acquired Siena Company it has recorded the investment in Siena but when additional share are purchased Pisa will raise its stock capital.