1. If there were many suppliers of diamonds, the price would be $3,000 per diamond and the quantity sold would be 8,000 diamonds.
2. If there were only one supplier of diamonds, the price would be $6,000 per diamond and the quantity sold would be 5,000 diamonds.
Suppose Russia and South Africa form a cartel.
3. In this case, the price would be $6,000 per diamond and the total quantity sold would be 5,000 diamonds. If the countries split the market evenly, South Africa would produce 2,500 (5,000/2) diamonds and earn a profit of $7,500,000 (2,500 x $3,000).
4. If South Africa increased its production by 1,000 diamonds while Russia stuck to the cartel agreement, South Africa's profit would DECREASE to $7,000,000 (3,500 * $2,000).
In this situation, South Africa will produce 3,500 and Russia 2,500 diamonds. The total quantity produced will be 6,000 and price will then reduce to $5,000 per diamond. The profit margin will reduce to $2,000 per diamond ($5,000 - $3,000) from $3,000 per diamond as in 3 above.
5. Cartel agreements are often not successful because One party has an incentive to cheat to make more profit.
Thus, the incentive is for producers to maximize profits always, where the marginal revenue (MR) is equal or greater than the marginal cost (MC).
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Data and Calculations:
Marginal cost of mining diamonds = $3,000 per diamond
Schedule of Demand for Diamonds
Price Quantity Total Revenue Marginal
(Dollars) (Diamonds) TR Revenue
P Q = P x Q MR = ΔTR/AQ
8,000 3,000 $24 million -
7,000 4,000 28 million 4,000 ($4,000,000/1,000)
6,000 5,000 30 million 2,000 ($2,000,000/1,000)
5,000 6,000 30 million 0 ($0/1,000)
4,000 7,000 28 million 2,000 (-$2,000,000/1,000)
3,000 8,000 24 million -4,000 (-$4,000,000/1,000)
2,000 9,000 18 million -6,000 (-$6,000,000/1,000)
1,000 10,000 10 million -8,000 (-$8,000,000/1,000)
Grouper Company purchased an electric wax melter on April 30, 2020, by trading in its old gas model and paying the balance in cash. The following data relate to the purchase.
List price of new melter $21,804
Cash paid 13,800
Cost of old melter (5-year life, $966 salvage value) 15,456
Accumulated Depreciation-old melter (straight-line) 8,694
Secondhand fair value of old melter 7,176
Required:
Prepare the journal entries necessary to record this exchange, assuming that the exchange (a) has commercial substance, and (b) lacks commercial substance. Sage’s fiscal year ends on December 31, and depreciation has been recorded through December 31, 2020.
Answer and Explanation:
The journal entries are shown below;
a. the exchange has commercial substance
Depreciation expense (($15,456 - $966) ÷ 5 × 4 ÷ 12 ) $966
To Accumulate depreciation $966
(being depreciation expense is recorded)
New Melter ($13,800 + $7,176) $20,976
accumulated depreciation ($8,694 + $966) $9,660
To loss on sale of melter $1,380
To old melter $15,456
To cash $13,800
(being equipment exchange is recorded)
b. The exchange lacks commercial substance
Depreciation expense (($15,456 - $966) ÷ 5 × 4 ÷ 12 ) $966
To Accumulate depreciation $966
(being current depreciation expense is recorded)
New Melter ($13,800 + $7,176) $20,976
accumulated depreciation ($8,694 + $966) $9,660
To loss on sale of melter $1,380
To old melter $15,456
To cash $13,800
(being equipment exchange is recorded)
You are an insurance salesman. If you make 12% on all insurance sales and sold an average $35,000 / month, how much money did you make at the end of 12 months?
Answer:
$50,400
Explanation:
To do this first start by multiplying .12 x 35,000. The answer should be $4,200. After this multiply 4,200 by 12 in order to get the amount of money earned over a 12 month period. This will give you $50,400.
A company's unit costs based on 100,000 units are:
Variable costs $75
Fixed costs 30
The normal unit sales price per unit is $165. A special order from a foreign company has been received for 5,000 units at $135 a unit. In order to fulfill the order, 3,000 units of regular sales would have to be foregone.
The opportunity cost associated with this order is:_________.
a. $495,000
b. $270,000
c. $405,000
d. $225,000
Answer: b. $270,000
Explanation:
The opportunity cost is the contribution margin of sales that would be foregone if the special order was fulfilled.
Contribution margin = Selling price - Variable cost
= 165 - 75
= $90
Total contribution cost for the 3,000 units that will be foregone:
= 90 * 3,000
= $270,000
A posting reference in a ___ includes the page number of the account debited or credited in the ___ and serves as a link to cross-reference the transaction from one record to another.
Answer:
Ledger; journal.
Explanation:
Financial accounting is an accounting technique used for analyzing, summarizing and reporting of financial transactions like sales costs, purchase costs, account payables and receivables of an organization using standard financial guidelines such as Generally Accepted Accounting Principles (GAAP) and financial accounting standards board (FASB).
Thus, it is a field of accounting involving specific processes such as recording, summarizing, analysis and reporting of financial transactions with respect to business operations over a specific period of time. Financial experts or accountant uses either the cash basis or accrual basis of accounting.
A general journal is used for initially recording a transaction before it's then subsequently transferred or posted to the general ledger. In Financial accounting, this process of transferring information about a transaction from the general journal to the general ledger is known as posting.
Furthermore, the main purpose of a general ledger is to list all accounts used in recording an organization's transactions and as such it contains a list of transactions affecting each account and the account's balance.
The page number of the account debited or credited in the journal is written in a posting reference of a ledger and it usually serves as a link to cross-reference or juxtapose the transaction from one record to another in a business firm.
Gundy Company expects to produce 1,213,200 units of Product XX in 2020. Monthly production is expected to range from 80,000 to 114,000 units. Budgeted variable manufacturing costs per unit are: direct materials $5, direct labor $7, and overhead $11. Budgeted fixed manufacturing costs per unit for depreciation are $6 and for supervision are $1. In March 2020, the company incurs the following costs in producing 97,000 units: direct materials $515,000, direct labor $670,000, and variable overhead $1,073,000. Actual fixed costs were equal to budgeted fixed costs. Prepare a flexible budget report for March. (List variable costs before fixed costs.)
Answer:
Gundy Company
Flexible Budget Report for March 2020:
Actual Budget Flexible Budget Variance
Direct materials $515,000 $485,000 $30,000 U
Direct labor 670,000 679,000 9,000 F
Variable overhead 1,073,000 1,067,000 6,000 U
Actual fixed costs 679,000 679,000 0 None
Total costs incurred $2,937,000 $2,910,000 $27,000 U
Explanation:
a) Data and Calculations:
Expected production of Product XX in 2020 = 1,213,200 units
Monthly production range = 80,000 to 114,000 units
Budgeted variable manufacturing costs per unit are:
Direct materials $5
Direct labor $7
Overhead $11
Total variable $23
Fixed manufacturing costs per unit:
Depreciation are $6
Supervision are $1
Total fixed costs $7
Total costs = $30
March 2020 costs incurred for 97,000 units:
Direct materials $515,000
Direct labor $670,000
Variable overhead $1,073,000
Actual fixed costs 679,000
Total costs incurred $2,937,000
Flexible Budget Report for March 2020:
Actual Budget Flexible Budget Variance
Direct materials $515,000 $485,000 $30,000 U
Direct labor 670,000 679,000 9,000 F
Variable overhead 1,073,000 1,067,000 6,000 U
Actual fixed costs 679,000 679,000 0 None
Total costs incurred $2,937,000 $2,910,000 $27,000 U
Aztec Company sells its product for $160 per unit. Its actual and budgeted sales follow
Units Dollars
April (actual) 4,500 720,000
May (actual) 2,200 352,000
June (budgeted) 5,000 800,000
July (budgeted) 4,000 799,000
August (budgeted) 3,000 600,000
All sales are on credit. Recent experience shows that 28% of credit sales are collected in the month of the sale, 42% in the month after the sale, 27% in the second month after the sale, and 3% prove to be uncollectible. The product's purchase price is $110 per unit, 60% of purchases made in a month is paid in that month and the other 40% is paid in the next month. The company has the policy to maintain an ending monthly inventory of 18% of the next month's unit sales plus a safety stock of 180 units. The April 30 and May 31 actual Inventory levels are consistent with this policy. Selling and administrative expenses for the year are $1,584,000 and are paid evenly throughout the year In cash. The company's minimum cash balance at the month-end is $120,000. This minimum is maintained, If necessary, by borrowing cash from the bank. If the balance exceeds $120,000, the company repays as much of the loan as It can without going below the minimum. This type of loan carries an annual 13% interest rate. On May 31, the loan balance is $39,500, and the company's cash balance Is $120,000
Required:
a. Prepare a schedule that shows the computation of cash collections of its credit sales (accounts receivable) in each of the months of June and July.
b. Prepare a schedule that shows the computation of budgeted ending inventories (in units) for April, May, June, and July.
c. Prepare the merchandise purchases budget for May, June, and July. Report calculations in units and then show the dollar amount of purchases for each month.
d. Prepare a schedule showing the computation of cash payments for product purchases for June and July.
e. Prepare a cash budget for June and July, including any loan activity and interest expense. Compute the loan balance at the end of each month.
Answer:
a. Total cash collections are as follows:
June = $605,760
July = $715,580
b. Ending units are as follows:
April = 623 units
May = 1,295 units
June = 1,055 units
July = 815 units
c-1. Units purchased are as follows:
May = 2,872 units
June = 4,760 units
July = 2,130 units
c-2. Purchases amount are as follows:
May = $315,920
June = $523,600
July = $234,300
d. Cash payments for product purchases are as follows:
June = $440,528
July = $350,020
e. Loan Balance End of Month are as follows:
June = $1,324,163
July = $2,226,541
Explanation:
Note: See the attached excel file for requirements a, b, c, d, and e.
In the attached excel file under requirement e, the following calculations is made:
June additional loan = Minimum required cash balance - June Preliminary cash balance = $110,000 - (-$1,169,663) = $110,000 + $1,169,663 = $1,279,663
July additional loan = Minimum required cash balance - July Preliminary cash balance = $110,000 - (-$792,378) = $110,000 + $792,378 = $902,378
The Pampered Pet Shop operates in a perfectly competitive industry and hires you as an economic consultant. The firm is currently producing at a point where market price equals its marginal cost. Its market price is less than its average variable cost. You advise the firm to:_____.
a. raise its price until it breaks even.
b. lower it's price so it can sell more units of output.
c. cease production immediately, because it is incurring a loss.
d. produce in the short run to minimize its loss, but exit the industry in the long run.
Answer:
c. cease production immediately, because it is incurring a loss.
Explanation:
When a business engages in production it looks to make profit. That is for the production price to be higher than cost incurred in producing the good.
However when the price is lower than the average variable cost as is indicated in the scenario then the firm needs to shut down production in the short term.
Factors that will adversely affect a firm in the short term are price, average total cost, and average variable cost.
Once price is less than average total cost or average variable cost it is better to stop production.
As they are incurring an economic loss
Answer: cease production immediately, because it is incurring a loss
Explanation:
A perfectly competitive industry is an industry whereby firms make similar products, and there are many firms and customers.
Since from the scenario, the market price is less than its average variable cost, it is advisable for the firm to stop producing. This is because the firm isn't covering its variable cost, therefore it's running at a loss.
On March 1, 2021, McHugh Enterprises issued 1000 of its 8%, $1,000 bonds dated January 1, 2021 at 98. Interest is payable semiannually on January 1 and July 1. The bonds mature on January 1, 2031. McHugh paid $50,000 in bond issue costs. McHugh uses straight-line amortization. The interest expense recognized on July 1, 2021 will be:__________
Answer: $82000
Explanation:
Interest will be calculated as:
= No of shares x Face value per Share x Interest rate
= 1000 × $1000 × 8%
= 1000 × $1000 × 0.08
= $80000
Total face value of shares issued = 1000 × $1000 = $1,000,000
Issue Amount will be:
= No of shares x Face value per Share x Issue rate
= 1,000 x 1,000 x 98 %
= $980,000
Discount on issue will be:
= $1,000,000 - $980,000
= $20,000
Amortization of Discount on issue per annum will be:
= $20,000/10
= $2000
Therefore, interest expense will be:
= $80000 + $2000
= $82000
Select the correct answer from each drop-down menu.
Jerry's company has launched a new product following the market penetration pricing. What rates would his products have and on what would he
spend a lot on?
Jerry's company has launched a new product following the market penetration pricing. Thus, his products have____
and he is spending a lot on
____the product.
price
First blank:
A.) a high
B.) a low
C.) an above average
Second blank:
A.) packaging
B.) manufacturing
C.) advertising
Jerry's company has launched a new product following the market penetration pricing. Thus, his products have a low price and he is spending a lot on the advertising product price.
Using a lower price during the initial offering of a new product or service, firms utilize penetration pricing as a marketing approach to draw clients to the new offering.
A new product or service can more easily enter the market and draw clients away from rivals thanks to a reduced price. Pricing for market penetration is based on the principle of initially offering a new product at low rates to attract the attention of as many consumers as possible.
A price penetration strategy seeks to increase market share by luring consumers to test new products in the hopes that they would remain loyal after prices return to normal. An online news site that offers a trial month of a subscription-based service is an example of penetration pricing.
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Charlotte is a partner in, and sales manager for, CD Partners, a domestic business that is not a "specified services" business. During the tax year, she receives guaranteed payments of $161,400 from CD Partners for her services to the partnership as its sales manager. In addition, her distributive share of CD Partners' ordinary income (its only item of income or loss) was $96,840.
Required:
What is Charlotte's qualified business income?
Answer and Explanation:
Qualified business income represents which do not involve the income from services performing in terms of the employee.
Therefore, Charlotte qualified business income (QBI) $96,840 as it does not involve the $161,400 income as sales manager.
Biopure is a company that manufactures and markets oxygen therapeutics. Its products are Hemopure for human use and Oxyglobin for animal use. Both have been developed as alternatives to red blood cell transfusions. Which of the following would be part of Biopure's internal environment?
a. approval by the U.S.Food and Drug Administration to allow veterinarians to use Oxyglobin.
b. the global market for the raw materials needed to make Hemopure and Oxyglobin
c. the patented manufacturing process that Biopure uses to produce Hemopure and Oxyglobin
d. a competitor developing a similar product
e. changes in patent law
Answer: c. the patented manufacturing process that Biopure uses to produce Hemopure and Oxyglobin
Explanation:
The internal environment of a company refers to those actions and activities that have to do with the way the company is running from within the country such as corporate culture and management.
In patenting, the Patent that was received will be company propriety and as no one outside the company can access it, it is part of the internal environment that works to ensure that that the company is ran smoothly.
Ryan's Express has total credit sales for the year of $189,000 and estimates that 3% of its credit sales will be uncollectible. Record the end-of-period adjusting entry on December 31, in general journal form, for the estimated bad debt expense. Assume the following independent conditions existed prior to the adjustment:
a. Allowance for Doubtful Accounts has a credit balance of $925.
b. Allowance for Doubtful Accounts has a debit balance of $385.
Answer:
a. Date Account title Debit Credit
Bad debt expenses $4,745
(3%*189,000 - $925)
Allowance for doubtful account $4,745
(To record the adjusting entry)
a. Date Account title Debit Credit
Bad debt expenses $1,505
(3%*189,000 - $385)
Allowance for doubtful account $1,505
(To record the adjusting entry)
Sabrina Company borrowed $225,000 to buy an equipment on January 1, 2019, and signed a 7% instalment note requiring annual equal payments of $24,704, including principal and interest at the end of every year for 15 years. Rounded to the nearest dollar, determine the balance in the Instalment Note Payable account on January 1, 2021, after making the first two annual payments.
a. $189,613.
b. $206,466.
c. $199.194.
d. $216,046.
Answer:
The correct option is b. $206,466.
Explanation:
Interest expense on December 31, 2019 = Note payable on January 1, 2019 * Interest rate = $225,000 * 7% = $15,750
Principal paid on December 31, 2019 = Annual fixed installment - Interest expense on December 31, 2019 = $24,704 - $15,750 = $8,954
Note Payable balance on January 1, 2020 = Note payable on January 1, 2019 - Principal paid on December 31, 2019 = $225,000 - $8,954 = $216,046
Interest expense on December 31, 2020 = Note payable on January 1, 2020 * Interest rate =$216,046 * 7% = $15,123
Principal paid on December 31, 2020 = Annual fixed installment - Interest expense on December 31, 2020 = $24,704 - $15,123 = $9,581
Note Payable balance on January 1, 2021 = Note payable balance on January 1, 2020 - Principal paid on December 31, 2020 = $216,046 - $9,581 = 206,465
From the options in the question, the closest one to the Note Payable balance on January 1, 2021 calculated above is b. $206,466. Therefore, the correct option is b. $206,466.
On January 1, 2018, Splash City issues $340,000 of 9% bonds, due in 20 years, with interest payable semiannually on June 30 and December 31 each year. Assuming the market interest rate on the issue date is 8%, the bonds will issue at $373,648.
Required:
1. Complete the first three rows of an amortization table.
Date Cash Paid Interest Expense Decrease in Carrying Value Carrying Value
1/1/18
6/30/18
12/31/18
On January 1, 2018, Splash City issues $340,000 of 9% bonds, due in 20 years, with interest payable semiannually on June 30 and December 31 each year. Assuming the market interest rate on the issue date is 8%, the bonds will issue at $373,648.
2. Record the bond issue on January 1, 2018, and the first two semiannual interest payments on June 30, 2018, and December 31, 2018.
Answer:
Splash City
1. 1. The first three rows of an amortization table.
Date Cash Paid Interest Expense Decrease in Carrying Value
Carrying Value
1/1/18 $0 $373,648
6/30/18 $15,300 $14,946 $354 373,294
12/31/18 $15,300 14,932 368 372,926
2. Journal Entries:
January 1, 2018L:
Debit Cash $373,648
Credit 9% Bonds Payable $340,000
Credit Bonds Premium $33,648
To record the proceeds from the bond issue, including the premium.
June 30, 2018:
Debit Interest Expense $14,946
Debit Amortization of Bonds Premium $354
Credit Cash $15,300
To record the first semiannual interest payment.
December 31, 2018:
Debit Interest Expense $14,932
Debit Amortization of Bonds Premium $368
Credit Cash $15,300
To record the second semiannual interest payment.
Explanation:
a) Data and Calculations:
January 1, 2018:
Face value of 9% bonds issued = $340,000
Proceeds from issue of bonds = 373,648
Premium on issue of bonds = $33,648
Coupon Interest rate = 9%
Payment = Semiannually on June 30 and December 31
Market interest rate = 8%
June 30:
Interest expense = $14,946 ($373,648 * 4%)
Cash payment = 15,300 ($340,000 * 4.5%)
Amortized premium $354
Fair value of bonds = $373,294 ($373,648 - $354)
December 31:
Interest expense = $14,932 ($373,294 * 4%)
Cash payment = 15,300 ($340,000 * 4.5%)
Amortized premium $368
Fair value of bonds = $372,926 ($373,294 - $368)
The financial statements for Highland Corporation included the following selected information:
Common stock $ 1,000,000
Retained earnings $ 770,000
Net income $ 1,020,000
Shares issued 100,000
Shares outstanding 77,000
Dividends declared and paid $ 690,000
The common stock was sold at a price of $31 per share.
1. What is the amount o f additional paid-in capital?
2. What was the amount of retained earnings at the beginning of the year?
3. How many shares are in treasury stock?
Answer:
Highland Corporation
1. The amount of additional paid-in capital is:
= $210,000.
2. The amount of the retained earnings at the beginning of the year is:
= $440,000.
3. The number of shares in treasury stock is:
= 23,000 shares.
Explanation:
a) Data and Calculations:
Common stock $ 1,000,000
Retained earnings $ 770,000
Net income $ 1,020,000
Shares issued 100,000
Shares outstanding 77,000
Dividends declared and paid $ 690,000
Price of common stock = $31 per share
1. The amount of additional paid-in capital is:
Issued stock = 100,000 * ($31 - $10) = $210,000
2. The amount of the retained earnings at the beginning of the year:
Retained earnings at the ending $ 770,000
Add dividend 690,000
Total available for distribution $1,460,000
Less Net income 1,020,000
Retained earnings at the beginning $440,000
3. Treasury stock = 23,000 (100,000 - 77,000)
Acct. Optimistic Likely Activity Variance
ID Description Predecessor Mosta a Pessimistic Time (te) [(b - a)/6]2 Critical 7
(a) (m) (b)
1 Design package None 6 12 24 13 9 x
2 Design product 1 18 19 28 20.33 2.78 x
3 Build package 1 4 7 10 7 1
4 Secure patent 2 21 30 39 30 9 x
5 Build product 2 17 29 47 30 25 x
6 Paint 3,4,5 4 7 12 7.3 1.78 x
7 Test market 6 13 18 19 16 1 x
(m) (b) Time (te) 1 Design package
The Variance for the activity Secure patent equals to:_____.
Answer thats dificult
Explanation: thats dificult
Thornton Industries began construction of a warehouse on July 1, 2021. The project was completed on March 31, 2022. No new loans were required to fund construction. Thornton does have the following two interest-bearing liabilities that were outstanding throughout the construction period:
$3,000,000, 12% note
$7,000,000, 7% bonds
Construction expenditures incurred were as follows:
July 1, 2021 $ 700,000
September 30, 2021 990,000
November 30, 2021 990,000
January 30, 2022 930,000
The company’s fiscal year-end is December 31.
Required:
Calculate the amount of interest capitalized for 2021 and 2022.
Calculate the amount of interest capitalized for 2021. (Do not round the intermediate calculations. Round your percentage answers to 1 decimal place (i.e. 0.123 should be entered as 12.3%).)
Date Expenditure Weight Average
July 1, 2021 x =
September 30, 2021 x =
November 30, 2021 x =
Accumulated expenditures
Amount Interest Rate Capitalized Interest
Average accumulated expenditures x % x =
2021
Date Expenditure Weight Average
January 1, 2022 x =
January 30, 2022 x =
Amount Interest Rate Capitalized Interest
Average accumulated expenditures x x =
Solution :
The interest capitalization for 2021
Date Expenditure x Weight = Average
1 July,2021 700,000 6/12 350,000
30 Sept,2021 990,000 3/12 247,500
30 Nov, 2021 990,000 1/12 82,500
Total 2,680,000 680,000
Amount x interest rate = Capitalization interest
Average total expenditure 680,000 8.50% 57,800
The weighted average interest rate
[tex]$=\frac{3,000,000 \times 12\% + 7,000,000 \times 7\%}{3,000,000+7,000,000}$[/tex]
= 8.5 %
Balance as on 1st Jan, 2022 = [tex]$2,680,000+57,800 = 2,737,800$[/tex]
The interest Capitalized for 2022
Date Expenditure x Weight = Average
1 Jan,2022 2,737,800 12/12 2,737,800
30 Jan, 2022 930,000 11/12 852,500
Accumulated 3,667,800 3,590,300
expenditures
Amount x interest rate = Capitalization interest
Average accumulated 3,590,000 8.50% 305,175.5
expenditure
Kemper Company's balance sheet and income statement are shown below (in millions of dollars). The company and its creditors have agreed upon a voluntary reorganization plan. In this plan, each share of the $5 preferred will be exchanged for one share of $1.00 preferred with a par value of $25 plus one 9% subordinated income debenture with a par value of $75. The $9 preferred issue will be retired with cash. The company's tax rate is 30 percent.
Balance Sheet prior to Reorganization (in millions
Current Assets 400 Current liabilities 350
Net fixed assets 450 Advance payments 20
$5 preferred stock, $100 par value (1,000,000) shares 100
$9 preferred stock, no par, callable at 100 (160,000 shares) 30
Common stock, $0.10 par value (10,000,000) shares 50
Retained earnings 300
Total assets 850 Total claims 850
a. Construct the pro forma balance sheet after reorganization takes place. Show the new preferred at its par value.
b. Construct the pro forma income statement after reorganization takes place. How does the recapitalization affect net income available to common stockholders?
Answer:
Kemper Company
a. Pro forma Balance Sheet after Reorganization (in millions)
Current Assets 400
Net fixed assets 450
Total assets 850
Current liabilities 350
Advance payments 20
9% subordinated Debenture,
$75 par value (1,000,000) 75
$1 preferred stock, $25 par value
(1,000,000) shares 25
Common stock, $0.10 par value
(10,000,000) shares 50
Retained earnings 300
b. Pro forma Income Statement after Reorganization (in millions)
Retained earnings 300
Income tax 128.6 ($300/(1 - 0.3) - $300)
add $5 preferred dividend 5
$9 preferred dividend 1.44
Less: 9% debenture interest (6.75)
Income before taxes $428.29
Income tax 128.49
Income after taxes $299.80
Preferred dividend 1.00
Retained earnings $298.80
The recapitalization reduces the net income available to common stockholders by $0.2 million.
Explanation:
a) Data and Calculations:
Kemper Company
Balance Sheet prior to Reorganization (in millions
Current Assets 400
Net fixed assets 450
Total assets 850
Current liabilities 350
Advance payments 20
$5 preferred stock, $100 par value
(1,000,000) shares 100
$9 preferred stock, no par,
callable at 100 (160,000 shares) 30
Common stock, $0.10 par value
(10,000,000) shares 50
Retained earnings 300
Total assets 850 Total claims 850
Transaction Analysis:
$5 preferred stock, $100 par value (1,000,000) shares $100 $1 Preferred stock, $25 par value (1,000,000) shares $25 9% subordinated Debenture, $75 par value (1,000,000) $75
$9 preferred stock, no par, callable at 100 (160,000 shares) 30 Cash $30
Total assets 850 Total claims 850
Foreign Sub, for which the functional currency is the local currency, recognizes a receivable on 11/12/20X1. On December 31, 20X1, Foreign Sub's parent company determines that the exchange rate has changed since the receivable was recognized. In its consolidated financial statements, the parent company should report Foreign Sub's receivable using the exchange rate:_______
a. in effect on 12/31/20X1.
b. that results in the highest reported receivable.
c. in effect on 11/12/20X1.
d. that results in the lowest reported receivable.
Answer:
c. in effect on 11/12/20X1.
Explanation:
According to IAS 21 the exchange rate used to record financial transactions in consolidated statement is the exchange rate at which the transaction took place. There is allowance to used an average rate if the historic rate is not accurate. The receivable should be recorded at the exchange rate which was in effect on 11/12/20X1.
Complete the following sentence.
Today, marketing strategies are generally divided into two sectors: inbound and
Answer:
Today, marketing strategies are generally divided into two sectors: inbound and
outbound.
Explanation:
Marketing strategies are broadly divided into two. One is inbound marketing strategy, which aims to attract customers, who have already indicated interest in an entity's products and services. They are already out there trying to reach out to the entity in order to satisfy their needs. As a marketing strategy category, it utilizes pull marketing activities to create brand awareness and attract willing new customers, including content, blogs, events, search engine optimization (SEO), and social media marketing. Outbound marketing strategy uses push marketing activities to chase customers. For example, it uses TV, radio, and other media ads, trade shows, cold calling, and cold emails.
You must choose between four pieces of comparable equipment based on the cash flows given below. All four pieces have a life of 8 years.
Parameter A B C D
First cost $25,000 $35,000 $20,000 $40,000
Annual costs $8,000 $6,000 $9,000 $5,000
Salvage value $2,500 $3,500 $2,000 $4,000
The discount rate is 12%. Ignore taxes. The most preferable top two projects and the difference between their present worth values are most nearly:_____.
A. A and C, $234.
B. B and D, $170.
C. A and C, $170.
D. B and D, $234.
Answer:
You must choose between four pieces of comparable equipment based on the cash flows.
Explanation:
Explain how introducing an agile method will improve the outcomes of software development?
Answer:
In simple words, Agile architecture, in fact, speeds up the distribution of original market value and ensures that quality is maximized during the implementation system by a process of constant preparation and feedback.
Projects are finished in shorter iterations, rendering them more achievable, thanks to the incremental design of the agile process. It also makes it possible to roll out goods efficiently and make adjustments at any time throughout the phase
Abel Corporation uses activity-based costing. The company makes two products: Product A and Product B. The annual production and sales of Product A is 370 units and of Product B is 740 units. There are three activity cost pools, with total cost and activity as follows:
Total Activity
Activity Cost Pools Total Cost Product A Product B Total
Activity 1 $23,205 900 150 1,050
Activity 2 $38,850 1,950 1,550 3,500
Activity 3 $10,598 145 245 390
The activity rate for Activity 2 is closest to:______.
a. 43.17.
b. 25.06.
c. 19.92.
d. 11.10.
Answer:
Predetermined manufacturing overhead rate (A2)= $11.1
Explanation:
Giving the following information:
Total Activity
Activity Cost Pools Total Cost Total
Activity 2 $38,850 3,500
To calculate the activity rate, we need to use the following formula:
Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base
Predetermined manufacturing overhead rate (A2)= 38,850 / 3,500
Predetermined manufacturing overhead rate (A2)= $11.1
For what reason might keeping an accounts payable subsidiary ledger be unnecessary for a business? A. if the business is very small B. if the business processes invoices for payment. C. if the business pays only on account D. if the business has more customers then vendors
Answer:
A. if the business is very small
Explanation:
Subsidiary ledgers are maintained to support the entries in the main ledger. They give more details of the individual items in the main ledger.
They are usually used when a company has large sales volumes to make sure transactions are accurate.
However in small businesses there no need for subsidiary ledger in a small company.
Accounts payable subsidiary ledger shows details of amounts owed to suppliers by a business.
When the business is very small there will be no need for this.
The accountant for Christiane Company forgot to make an adjusting entry for Depreciation expense for the current year. Which of the following is one of the effects of this error in the current year?
A. Revenues are overstated.
B. Net income is understated.
C. Total assets are overstated.
D. Total assets are understated.
Answer:
B. Net income is understated.
Explanation:
While computing the bills for an organization, if one makes an error while valuation of the of the goods or an inventory or a depreciation expenses, on the balance sheet, then it causes a corresponding error in the balance sheet for the company, which is represented on the income statement.
Thus in the context, when the accountant of Christiane company did not make an entry of the depreciation cost in the balance sheet for the current year, it produces an error for the current year in the form of the net income that is being understated.
Distributions from corporations to the shareholders in a nonliquidating distribution will usually be classified as a dividend up to the amount of the corporation's retained earnings stock basis taxable income for the year earnings and profits.
a. True
b. False
Answer: Earnings and profits.
Explanation:
This is not a true or false question as the options are given first.
It is assumed that dividends comes from earnings and profits so when a company distributes dividends, the total amount of those dividends cannot exceed the total amount of accumulated earnings and profits that the company has.
If the dividends exceed this amount, then they are to be considered as a return on capital to the shareholder and this is beholden to a different tax regime.
Zooey Inc. issued 8% bonds with a face of $760,000,000 for $696,000,000 cash on January 1, 2021, when the market effective rate was 10%. Zooey pays interest semiannually on June 30 and December 31, records interest at the effective rate, and elected the option to report these bonds at their fair value at year-end, 12/31. There was no change in rates during the first 6 months of 2021. On December 31, 2021, the fair value of the bonds was $712,000,000, and $1,000,000 of the increase in fair value was due to a change in the general (risk-free) rate of interest.
Required:
1. Record the first interest payment on June 30, 2021.
2. Record the second interest payment on on December 31, 2021.
3. Record the fair value adjustment on December 31, 2021.
Answer:
1.June 30, 2021
Dr Interest expense $34,800,000
Cr Discount on bonds payable $4,400,000
Cr Cash $30,400,000
2. Dec.31,2021
Dr Interest expense $35,020,000
Cr Discount on bonds payable $4,620,000
Cr Cash $30,400,000
3. Dec.31,2021
Dr Unrealized holding loss- NI $1,000,000
Dr Unrealized holding loss- OCI $24,020,000
Cr Fair value adjustment $25,020,000
Explanation:
1. Preparation of the journal entry to Record the first interest payment on June 30, 2021.
June 30, 2021
Dr Interest expense $34,800,000
($696,000,000 * 10%/2)
Cr Discount on bonds payable $4,400,000
($34,800,000-$30,400,000)
Cr Cash $30,400,000
($760,000,000 * 8%2)
(To record the first interest payment)
2. Preparation of the journal entry to Record the second interest payment on on December 31, 2021.
Dec.31,2021
Dr Interest expense $35,020,000
[($696,000,000+$4,400,000)* 10%/2]
Cr Discount on bonds payable $4,620,000
($35,020,000-$30,400,000)
Cr Cash $30,400,000
($760,000,000 * 8%2)
(To record the second interest payment)
3. Preparation of the journal entry to Record the fair value adjustment on December 31, 2021.
Dec.31,2021
Dr Unrealized holding loss- NI $1,000,000
Dr Unrealized holding loss- OCI $24,020,000
($25,020,000-$1,000,000)
Cr Fair value adjustment $25,020,000
($712,000,000-$696,000,000+$4,400,000+$4,620,000)
(To adjust the bonds to their fair value)
he following labor standards have been established for a particular product: Standard labor-hours per unit of output 10.1 hours Standard labor rate $ 13.90 per hour The following data pertain to operations concerning the product for the last month: Actual hours worked 7,900 hours Actual total labor cost $ 106,650 Actual output 1,100 units
What is the labor efficiency variance for the month?
a. $47,779 F
b. $47,779 U
c. $43,335 F
d. $44,619 F
Answer:
d. $44,619 Favorable
Explanation:
Given the above information, labor efficiency variance is computed as;
= (Standard quantity - Actual quantity) × Standard rate
Standard quantity = 10.1 × 1,100 = 11110
Actual quantity = 7,900
Standard rate = $13.9
Then,
Labor efficiency variance =
(11,110 - 7,900) × $13.90
= (3,210) × $13.90
= $44,619 favorable
On January 1, Year 1, Missouri Company purchased a truck that cost $56,000. The truck had an expected useful life of 10 years and a $5,000 salvage value. The amount of depreciation expense recognized in Year 2 assuming that Missouri uses the double declining-balance method is:__________
Answer:
Annual depreciation= $8,160
Explanation:
Giving the following information:
Purchase price= $56,000
Useful life= 10 years
Salvage value= $5,000
To calculate the annual depreciation, we need to use the following formula:
Annual depreciation= 2*[(book value)/estimated life (years)]
Year 1:
Annual depreciation= 2*[(56,000 - 5,000) / 10]
Annual depreciation= $10,200
Year 2:
Annual depreciation= 2*[(51,000 - 10,200) / 10]
Annual depreciation= $8,160
Howell Company has the following selected accounts after posting adjusting entries:
Accounts Payable $45,000
Notes Payable, 3 - month 80,000
Accumulated Depreciation - Equipment 14,000
Payroll and Benefits Payable 27,000
Notes Payable, 5-year, 8% 30,000
Estimated Warranty Liability 34,000
Payroll Tax Expense 6,000
Interest Payable 3,000
Mortgage Payable 200,000
Sales Tax Payable 16,000
Instructions:
(a) Prepare the current liability section of Howell Company's balance sheet, assuming $25,000 of the mortgage is payable next year.
(b) Comment on Howell's liquidity, assuming total current assets are $450,000.
Answer and Explanation:
a. The preparation of the current liability section is presented below;
Notes payable - 3 months $80,000
Accounts payable $45,000
Estimated warranty liabilities $34,000
Payroll and benefit payable $27,000
Current portion of the Mortgage $25,000
Sales Tax payable $16,000
Interest payable $3,000
Total $230,000
b. We know that
Current ratio = current asset ÷ current liabilty
= $450,000 ÷ $230,000
= 1.95 times
This represent the company is in the good liquidity position to pay off the short term liability