Answer:
Return on equity (ROE) would have changed by 6.27%.
Explanation:
In accounting ratio, we know that:
Asset Turnover = Sales/Total Assets .............................. (1)
From equation (1), we can solve for Total Assets as follows:
Total Assets = Sales / Asset Turnover ............................ (2)
Substituting the values in the question into equation (2), we have:
Total Assets = $195,000 / 1.33 = $146,616.54
Also, we know that:
Equity Multiplier = Total Assets/Total Equity ......................... (3)
We can solve Total Equity from equation (3) as follows:
Total Equity = Total Assets / Equity Multiplier ..................... (4)
Substituting the relevant values into equation (4), we have:
Total Equity = $146,616.54 / 1.75 = $83,780.88
As a result, we have:
Return on Equity = Net Income/Total Equity = $10,549 / $83,780.88 = 0.1259, or 12.59%
If the company had operated more efficiently, we would have:
New net income = Net income + Amount of increase in net income = $10,549 + $5,250 = $15,799
New return on equity = New net Income / Total Equity = $15,799 / $83,780.88 = 0.1886, or 18.86%
Change in return on equity = New return on equity - Return on Equity = 18.86% - 12.59% = 6.27%
Therefore, return on equity (ROE) would have changed by 6.27%.
A customer is long 400 shares of fully paid XYZ stock, valued at $150 per share. The customer sells "short against the box" another 400 shares of XYZ. XYZ is listed on the New York Stock Exchange. The minimum maintenance margin requirement is:
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
Find end inventory and cost of goods
Date Transactions Units Unit Cost Total Cost
June 1 Beginning inventory 16 $ 340 $ 5,440
June 7 Sale 11
June 12 Purchase 10 330 3,300
June 15 Sale 12
June 24 Purchase 10 320 3,200
June 27 Sale 8
June 29 Purchase 10 310 3,100
$ 15,040
Answer:
End inventory = $4,730
Cost of goods sold = $10,310
Explanation:
Note: This question is not complete. The complete question is therefore provided in the attached Microsoft word document before answering the question as follows:
a. Calculation of ending inventory
Number of units of Beginning inventory remaining unsold = 16 - 11 - 3 - 1 = 1 unit
Value of number of units Beginning inventory remaining unsold = 1 * $340 = $340
Number of units June 12 Purchase remaining unsold = 10 - 9 = 1 unit
Value of number of units June 12 Purchase remaining unsold = 1 * $330 = $330
Number of units of June 24 Purchase remaining unsold = 10 - 7 = 3 units
Value of number of June 24 Purchase remaining unsold = 3 * $320 = $960
Value of number of June 29 Purchase remaining unsold = 10 * $310 = $3,100
Therefore, End inventory is the addition of all the values of units remaining unsold as follows:
End inventory = $340 + $330 + $960 + $3,100 = $4,730
b. Calculation of cost of goods sold
June 7 cost of goods sold = 11 * $340 = $3,740
June 15 cost of goods sold = (3 * $340) + (9 * $330) = $3,990
June 27 cost of goods sold = (1 * $340) + (7 * $320) = $2,580
Cost of goods sold can therefore be calculated as follows:
Cost of goods sold = June 7 cost of goods sold + June 15 cost of goods sold + June 27 cost of goods sold = $3,740 + $3,990 + $2,580 = $10,310
On November 1, Alan Company signed a 120-day, 10% note payable, with a face value of $27,000. What is the maturity value of the note on March 1
Answer: $27,900
Explanation:
From the question, we are informed that on November 1, Alan Company signed a 120-day, 10% note payable, with a face value of $27,000.
The maturity value of the note on the note on March 1 will be the face value plus the interest. This will be:
= $27,000 + [($27,000 × 10%)/360 × 120]
= $27,000 + [($2700/360) × 120]
= $27,000 + ($7.5 × 120)
= $27,000 + $900
= $27,900
For much of the 1990s, the U.S. economy was experiencing long-run economic growth, low unemployment, and a stable inflation rate. Which of the following would give rise to these outcomes?
A. an increase in aggregate demand and short-run aggregate supply
B. a decrease in aggregate demand and short-run aggregate supply
C. a decrease in aggregate demand and an increase in short-run aggregate supply
D. an increase in aggregate demand and a decrease in short-run ag
Answer: . an increase in aggregate demand and short-run aggregate supply
Explanation:
From the question, we are informed that during the 1990s, the economy of the United States was experiencing long-run economic growth, low unemployment, and a stable inflation rate.
The reason for this is due to an increase in aggregate demand and short-run aggregate supply. This two factors will lead to the long run economic growth which the United States experienced.
A put option gives its owners the right, but not the obligation, to: buy a commodity at a specified price and future date, at which time physical delivery occurs. sell a commodity at a specified price and future date, but physical delivery does not occur. sell a specified number of shares at a certain price within a specified period of time. buy a specified number of shares at a certain price within a specified period of time.
Answer:
sell a specified number of shares at a certain price within a specified period of time.
Explanation:
A put option is a contract in which there is a right given to an owner but its not an obligation for selling a particular number of shares at a specific price within a time period set. Here specific price we called as predetermined price where the option put the buyer to sell at the strike price
Hence, the third option is correct
A firm selling its product for $25,000 has overproduced, increasing inventory by 40,000 units at a cost of $15,000 per unit. What is the impact of the inventory change on cash flow?
Answer:
Increasing Inventory by 40,000 units at a cost of $15,000 per unit
The Cost of producing 40,000 units extra = $40,000 *$15,000 = $600,000,000
Conclusion: As this is an additional cost incurred by the firm by increasing inventory by 40,000 unit at $15,000 per unit, it will be term as cash outflow. The impact of the inventory change on cash flow is outflow.
Cobe Company has already manufactured 23,000 units of Product A at a cost of $25 per unit. The 23,000 units can be sold at this stage for $420.000. Alternatively, the units can be further processed at a $280.000 total additional cost and be converted into 6.000 units of Product B and 11,900 units of Product C. Per unit selling price for Product B is $106 and for Product C is $52.
Required:
Prepare an analysis that shows whether the 23,000 units of Product A should be processed further or not.
Answer:
It is more profitable to continue processing the units.
Explanation:
Giving the following information:
Product A:
Units= 23,000
Selling price= $420,000
Continue processing:
Product B= 6,000 units sold for $106 each
Product C= 11,900 units sold for $52 each
Total cost= $280,000
We need to calculate the effect on the income of both options and choose the most profitable one. We will not take into account the first costs of Product A because they are irrelevant.
Option 1:
Effect on income= $420,000
Option 2:
Effect on income= (6,000*106) + (11,900*52) - 280,000
Effect on income= $974,800
It is more profitable to continue processing the units.
Tiger Company completed the following transactions.
The annual accounting period ends December 31.
Jan. 3 Purchased merchandise on account at a cost of $31,000. (Assume a perpetual inventory system.)
Jan. 27 Paid for the January 3 purchase
Apr. 1 Received $87,000 from Atlantic Bank after signing a 12-month, 6.0% promissory note
June 13 Purchased merchandise on account at a cost of $9.400
July 25 Paid for the June 13 purchase
Aug. 1 Rented out a small office in a building owned by Tiger Company and collected eight months' rent
Dec. 31 Determined wages of $19,000 were earned but not yet paid on December 31 (ignore payroll in advance amounting to $9,400. (Use an account called Unearned Rent Revenue.)
Dec. 31 Adjusted the accounts at year-end, relating to interest
Dec. 31 Adjusted the accounts at year-end, relating to rent
Required:
1. For each listed transaction and related adusting entry, indicate the accounts, amounts, and effects on the accounting equation.
(Do not round intermediate calculations)
Enter your answers in transaction order provided in the problem statement.
Date Assets = Liabilities + Stockholders' Equity
2. For each item, indicate whether the debt-to-assets ratio is increased or decreased or there is no change.
(Assume Tiger Company's debt-to-assets ratio is less than 1.0)
Enter your answers in transaction order provided in the problem statement
Date Effect Numerator Denominator
Answer:
Tiger Company
1. Accounts, Amounts, and Effects on the Accounting Equation:
Date Assets = Liabilities + Stockholders' Equity
Jan. 3 Inventory $31,000 increased = Accounts Payable $31,000 increased + Stockholders' Equity
Jan. 27 Cash $31,000 decreased = Accounts Payable $31,000 decreased + Stockholders' Equity.
Apr. 1 Cash $87,000 increased = Notes Payable $87,000 increased + Stockholders' Equity
June 13 Inventory $9,400 increased = Accounts Payable $9,400 increased + Stockholders' Equity
July 25 Cash $9,400 decreased = Accounts Payable $9,400 decreased + Stockholders' Equity.
Aug. 1 Cash $9,400 increased = Liability + Rent Revenue (Retained Earnings) $9,400 increased.
Dec. 31 Assets = Wages Payable $19,000 increased + Wages Expense (Retained Earnings) $19,000 decreased
Dec. 31 Assets = Interest Payable $1,305 increased + Interest Expense (Retained Earnings) $3,915 decreased
Dec. 31 Assets = Unearned Rent Revenue $3,525 increased + Rent Revenue (Retained Earnings) $3,525 decreased.
2. Indication of whether the debt-to-assets ratio is increased or decreased:
Date Effect Numerator Denominator
Jan. 3 Increased, Debt is increased, Assets are increased
Jan. 27 Decreased, Debt is decreased, and Assets are decreased
Apr. 1 Increased, Debt is increased, Assets are increased
June 13 Increased, Debt is increased, Assets are increased
July 25 Decreased, Debt is decreased, and Assets are decreased
Aug. 1 Increased, Debt is increased, Assets are increased
Dec. 31 Increased, Debt is increased, Assets are not affected.
Dec. 31 Increased, Debt is increased, Assets are not affected.
Dec. 31 Increased, Debt is increased, Assets are not affected.
Explanation:
The accounting equation indicates the balance that exists between the basic elements of accounting. It states that Assets = Liabilities + Stockholders' Equity. For every transaction, this equation holds true, because by the double entry system of bookkeeping, two or more accounts are always involved in every business transaction.
You have been given this probability distribution for the holding-period return for KMP stock: Stock of the Economy Probability HPR Boom 0.30 18 % Normal growth 0.50 12 % Recession 0.20 – 5 % What is the expected holding-period return for KMP stock?
Answer: 12.4%
Explanation:
The Expected return for a stock is the summation of all the returns given the probability of all market conditions.
Expected Return = ∑(Probability of return * return)
= (0.30 * 18%) + (0.50 * 12%) + (0.20 * 5%)
= 0.054 + 0.06 + 0.01
= 0.124
= 12.4%
As the name suggests, convertible bonds allow the owner the option to convert the bonds into a fixed number of shares of common stock.
Innovative Energy LLC is a start-up company that just raised $100,000 to conduct a third-party feasibility study on its business model. the company agreed to treat the $100,000 investment as debt at 10% interest rate; however, the investor has the right to exchange the debt for common stock during the company's next financing round. Which of the following terms best describes the $100,000 investment?
Convertible bond
Warrant
Consider the case of an investor, Nazem:
Nazem wants to include bonds in his investment portfolio, but he wants the option to sell the bond to the issuer at a specified price at a certain date before the maturity of the bond. Which of the following bond redemption features should he pick?
Warrants
Puttable bond
Nazem also recently bought bonds that have their interest rate tied to the consumer price index (CPI) so that he will be protected if inflation rates increase. Nazem has invested in:_________
Answer: 1. Convertible bond
2. Putable bond
3. Purchasing power bond.
Explanation:
The $100,000 investment is a convertible bond. This is a fixed-income debt security which yields interest payments. It should be noted that it can also be converted to equity shares or common stock.
Nazeem should pick a putable bond. This is because the puttable bond has a put option that is embedded ans he can also demand his principal to be paid early.
Nazem also recently bought bonds that have their interest rate tied to the consumer price index (CPI) so that he will be protected if inflation rates increase. Nazem has invested in purchasing power bond .
Cheryl's marginal rate of substitution between apples and bananas is four apples for one banana. If apples are on the vertical axis and bananas are on the horizontal axis, the slope of Cheryl's indifference curve is
Answer:
The correct answer is: -4 (minus four).
Explanation:
To begin with, the concept of "Marginal Rate of Substitution" indicates how much of a good a consumer is willing to sacrifice to obtain a unit more of another good without changing the total satisfaction of the consumer. Therefore that this term is explained as the difference between one good and the other and that is why that the concept comprehends the slope of the indifference curve. That is why that if Cheryl's MRS of apples for banas is four then she is willing to sacrifice four apples for one banana and that indicates that the slope of the indiference curve is minus four (-4) because the result is always negative because it shows the sacrifice.
CakeCo, Inc. has three operating departments. Information about these departments is listed below. Maintenance is service department at CakeCo that incurred $20,400 of costs during the period. If allocated maintenance cost is based on floor space occupied by each of the operating departments, compute the amount of maintenance cost allocated to the Baking Department.
Mixing Baking Packaging
Direct costs $ 36,000 $ 30,000 $ 24,000
Sq. ft. of space 2,500 3,750 1,250
a. $272.
b. $816.
c. $10,000.
d. $13,950.
e. $10,200.
Answer: e. $10,200.
Explanation:
Total Square ft. of space;
= 2,500 + 3,750 + 1,250
= 7,500 Sq. ft. of space
Baking Department occupies 3,750 ft² of that space so it will be apportioned a cost of;
= Proportion * total cost
= 3,750/7,500 * 20,400
= $10,200
Consider the market for minivans (Some would describe a minivan as a family car). Looking at the two statements, which one is true and which one is false? Then again, are they both true or both false? Statement 1: People decide to have fewer children. The demand curve for minivans will shift to the right. Statement 2: The stock market crashes lowering people’s wealth (Hint: Minivan would be considered a normal good). The demand curve for minivans will shift to the right.
Answer:
both statements are false
Explanation:
if People decide to have fewer children, there would be less demand for minivans as a result the demand curve would shift to the left.
also, if The stock market crashes lowering people’s wealth and minivans are normal goods, the demand for minivans would fall and the demand curve would shift to the left.
A leftward shift signifies a fall in demand while a rightward shift signals a rise in demand
Normal goods are goods that are goods whose demand increases when income increases and falls when income falls
Calculate the earnings of workers A, B and C under the Straight Piece
Rate System and Merrick’s Differential Piece Rate System from the
following particulars.
Normal rate per hour: Rs. 5.40
Standard time per unit: 1 minute
Output per day is as follows.
Worker A – 390 units
Worker B – 450 units
Worker C – 600 units.
Working hours per day are 8
Answer:
Earnings of Workers:
Rates Systems
Worker Straight Piece Merrick's Differential Piece
A $35.10 $28.08
B $40.50 $32.40
C $54.00 $64.80
Explanation:
a) Data:
Normal rate per hour: Rs. 5.40
Standard time per unit: 1 minute
Output per day is as follows.
Worker A – 390 units
Worker B – 450 units
Worker C – 600 units
Working hours per day are 8
b) Calculations:
i) Standard units per day = 8 x 60 minutes = 480 units
ii) Earnings per day is as follows.
Worker A – 390 units :
Straight piece Wages = 390 / 60 x $5.40 = $35.10
Merrick's Earnings = 390/60 x $5.40 x 0.8 = $28.08
Worker B – 450 units :
Straight piece Wages = 450 / 60 x $5.40 = $40.50
Merrick's Earnings = 450/60 x $5.40 x 0.8 = $32.40
Worker C – 600 units:
Straight piece Earnings = 600 / 60 x $5.40 = $54
Merrick's Earnings = 600/60 x $5.40 x 1.2 = $64.80
c) The factor for multiplying the rate is obtained by dividing the units produced by the number of minutes in an hour, in order to convert output to a rate based on the hour.
d) The standard output per day helps Merrick in calculating the weights to be assigned to each worker and differentiate the slow worker from the superior worker (hence, the name: Merrick's Differential Piece Rate). The slow workers (those who produce below the standard output) are paid a rate lower than the standard rate by adding a weight of 0.8 as a punishment while the superior worker is assigned a weight of 1.20 as a reward for good performance. Meanwhile, a standard performer who produced 480 units will be paid the normal rate or weighed as 1.0.
Centore Inc. has provided the following data for the month of June. There were no beginning inventories; consequently, the direct materials, direct labor, and manufacturing overhead applied listed below are all for the current month. Work In Process Finished Goods Cost of Goods Sold Total Direct materials $ 650 $ 7,590 $ 24,860 $ 33,100 Direct labor 2,180 20,700 67,800 90,680 Manufacturing overhead applied 930 7,130 22,940 31,000 Total $ 3,760 $ 35,420 $ 115,600 $ 154,780 Manufacturing overhead for the month was underapplied by $3,000. The company allocates any underapplied or overapplied manufacturing overhead among work in process, finished goods, and cost of goods sold at the end of the month on the basis of the overhead applied during the month in those accounts. The work in process inventory at the end of June after allocation of any underapplied or overapplied manufacturing overhead for the month is closest to:
Answer:
$3,833
Explanation:
The computation of the work in process inventory after allocating the underapplied or overapplied manufacturing overhead for the month is shown below:
But before that we need to compute the amount i.e added which is given below
Amount added is
= Total work in process × manufacturing overhead underapplied ÷ total cost
= $3,760 × $3,000 ÷$154,780
= $72.88
Now the amount of work in process inventory at the end of June is
= $3,760 + $72.88
= $3,833
Exercise D Viking Corporation is operating at 80% of capacity, which means it produces 8,000 units. Variable cost is $100 per unit. Wholesaler Y offers to buy 2,000 additional units at $120 per unit. Wholesaler Z proposes to buy 1,500 additional units at $140 per unit. Which offer, if either, should Viking Corporation accept
Answer:
Results are below.
Explanation:
Giving the following information:
The variable cost is $100 per unit.
Wholesaler Y offers to buy 2,000 additional units at $120 per unit.
Wholesaler Z proposes to buy 1,500 additional units at $140 per unit.
We need to choose the best alternative, in this case, the one with the higher increase in income:
Effect on income= total contribution margin
Wholesaler Y:
Effect on income= 2,000*(120 - 100)= $40,000 increase
Wholesaler Z:
Effect on income= 1,500*(140 - 100)= $60,000 increase
The best option is to sell the units to Wholesaler Z. If Wholesaler Y accepts, you can still sell 500 more units.
Applying Excel: Exercise (Part 2 of 2)
Requirement 2:
A
B
1
2
3
4
5
6
7
Chapter 11: Applying Excel
Data
Sales $45,000,000
Net operating income $4,500,000
Average operating assets$15,000,000
Minumum required rate of return 21%
Revise the data in your worksheet as follows:
If your formulas are correct, you should get the correct answers to the following questions.
a. What is the ROI?
b. What is the residual income? (Negative amount should be indicated by a minus sign.)
c. Why is the residual income positive?
Answer:
ROI 15%
Residual Income $1,350,000
Explanation:
Residual Income is the difference between net income of the company and the required rate of return. It determines the excess of income generate than the minimum return. The formula to calculate the residual income is,
RI = Net operating Income - (Required rate of return * Cost of operating assets)
RI = $4,500,000 - (21% * $15,000,000 )
RI = $1,350,000
ROI = [tex]\frac{Net Operating Income}{Capital Employed}[/tex]
Capital Employed = Sales - Average operating assets
ROI = 15%
Residual income is positive when the department has meet the minimum return requirement. Minimum return is the return that is required by the company stakeholders. The particular projects and activities are selected on the basis of residual income.
a friend wants to borrow money from you. He states that he will pay you $3000 every 6 months for 12 years with the first payment exactly 3 years and six months from today. The interest rate is an APR of 5.3 percent with semiannual compounding. What is the value of the payments today?
Answer:
$45,111.41
Explanation:
For calculation of value of the payments today first we need to find out the value at 3 years which is shown below:-
Value at 3 years = PMT × (1 - (1 ÷ (1 + r^n))) ÷ r
= $3,000 × (1 - (1 ÷ (1.0265 ^24))) ÷ 0.0265
= $52,776.45
Now, The value of the payment today = Value at 3 year ÷ (1 + r^n)
= $52,776.45 ÷ (1.0265^6)
= $45,111.41
Therefore we have applied the above formula.
eal per capita GDP in Singapore in 1961 was about $450, but it doubled to about $900.00 by 1978. a. What was the average annual economic growth rate in Singapore over the 17.00 years from 1961 to 1978
Answer:
The answer is 4.16%
Explanation:
Per capita GDP is the average income earned per person in a given country during a given period of time usually a year.
Per capita GDP in Singapore in 1961 equals $450
Per capita GDP in Singapore in 1978 equals $900
Difference between 1978 and 1961 is 17 years.
The formula for economic growth rate is;
[(End value/beginning value)^1)/17] - 1
[($900/$450)^1/17] - 1
1.041613 - 1
0.0416
Expressed as a percentage:
4.16%
You observe a portfolio for five years and determine that its average return is % and the standard deviation of its returns in %. Would a 30% loss next year be outside the 95% confidence interval for this portfolio? The low end of the 95% prediction interval is nothing%. (Enter your response as a percent rounded to one decimal place.) A. Yes, you can be confident that the portfolio will not lose more than 30% of its value next year. This is because the low end of the prediction interval is less than 30%. B. No, you cannot be confident that the portfolio will not lose more than 30% of its value next year. This is because the low end of the prediction interval is greater than 30%. C. Yes, you can be confident that the portfolio will not lose more than 30% of its value next year. This is because the low end of the prediction interval is greater than 30%. D. No, you cannot be confident that the portfolio will not lose more than 30% of its value next year. This is because the low end of the prediction interval is less than 30%.
Answer:
A. Yes, you can be confident that the portfolio will not lose more than 30% of its value next year. This is because the low end of the prediction interval is less than 30%
Explanation:
Confidence Interval is a type of estimated probability that the observed data lies within the parameters. 95% confidence interval means that its is 95% certain that true mean of population is within the range. In the given scenario there is 95% confidence interval that the portfolio will not lose more than 30% of its value next year.
Goods that are specifically made for the buyer and are of such an unusual nature that they are not suitable for trade in the ordinary course of the seller's business are called _____.
Answer:
non-resellable goods
Explanation:
Sometimes goods that are so uniquely customized in order to fit or serve only one client, cannot be sold to anyone else. This type of goods are considered non-resellable since it is very difficult or very unusual for another customer to purchase such a good.
E.g. suppose that you have a lot of money but at the same time like rainbows and decide that you are going to purchase a Porsche, but you are going to customize with a rainbow like paint and interior. This car would be so unique that only you would buy it and drive it.
Creative Solutions Company, a computer consulting firm, has decided to write off the $11,750 balance of an account owed by a customer, Wil Treadwell.
Journalize the entry to record the write-off, assuming that the direct write-off method is used.
Answer:
DR Bad Debts Expense $11,750
CR Accounts Receivable $11,750
(To record accounts receivable written off)
Explanation;
Direct method of writing off involves removing the bad debt directly from the Accounts Receivable account instead of using the Allowance for Doubtful debt account.
When using the cost of production report to analyze the change in direct materials cost per equivalent unit compared to conversion cost per equivalent unit, an investigation may reveal that direct materials costs:_____.
a. will never decrease due to the way the cost is calculated.
b. will never increase due to the way the cost is calculated.
c. may increase or decrease between periods, depending on the fluctuation of the cost of the direct materials.
d. will only increase if conversion costs increase as well.
Answer:
The correct answer is the option C: May increase or decrease between periods, depending on the fluctuation of the cost of the direct materials.
Explanation:
To begin with, in the field of business a manager or an account would perfectly know that when using the cost of production report with the purpose to analyze the change in direct materials costs per equivalent unit compared to conversion cost per unit the investigation will reveal that the direct material costs may increase or decrease between periods, depending on the fluctuation of the cost of those materials due to the fact that the fluctuation mentioned will arise if the company starts using more direct material in the production so that means that the volumen will increase as well as the costs of it
Sketches Inc. purchased a machine on January 1, 2016. The cost of the machine was $29,000. Its estimated residual value was $9,000 at the end of an estimated 5-year life. The company expects to produce a total of 20,000 units. The company produced 1,100 units in 2016 and 1,550 units in 2017. Required: a. Calculate depreciation expense for 2016 and 2017 using the straight-line method.
Answer:
Annual depreciation= $4,000
Explanation:
Giving the following information:
The cost of the machine was $29,000. Its estimated residual value was $9,000 at the end of estimated 5-year life.
To calculate the depreciation expense, we need to use the following formula:
Annual depreciation= (original cost - salvage value)/estimated life (years)
Annual depreciation= (29,000 - 9,000)/5
Annual depreciation= $4,000
True or False: All other things being equal, firms exhibiting high degrees of operating leverage exhibit lower levels of business risk. This statement is: True False
Answer: False
Explanation:
Operating Leverage is used to measure how much a change in sales translates to a change in income. In general, a higher operating leverage means that a small change in sales leads to a higher change in income. This is quite risky because it shows that even a small error when forecasting sales can lead to a larger error in the cash flow that will be expected from the sales. This makes forecasting harder and increases business risk.
Following are the transactions of a new company called Pose-for-Pics.
Aug.1 Madison Harris, the owner, invested $8,300 cash and $35,300 of photography equipment in the company in exchange for common stock.
2 The company paid $3,900 cash for an insurance policy covering the next 24 months.
5 The company purchased office supplies for $1,060 cash.
20 The company received $5,131 cash in photography fees earned.
31 The company paid $855 cash for August utilities.
1 Madison Harris, the owner, invested $8,300 cash and $35,300 of photography equipment in the company in exchange for common stock.
2 The company paid $3,900 cash for an insurance policy covering the next 24 months.
3 The company purchased office supplies for $1,060 cash.
4 The company received $5,131 cash in photography fees earned.
5 The company paid $855 cash for August utilities.
Question Requirement:
Prepare an August 31st Trial Balance
Answer:
Pose-for-PicsTrial Balance as of August 31st
Description Debit Credit
Cash $7,616
Photography Equipment 35,300
Common Stock $43,600
Prepaid Insurance 3,900
Supplies 1,060
Photography fees earned 5,131
Utilities 855
Total $48,731 $48,731
Explanation:
a) Common Stock
Cash 8,300
Equipment 35,300
Total 43,600
b) Cash account:
Common stock $8,300
Insurance (3,900)
Supplies (1,060)
Fees 5,131
Utilities (855)
Balance $7,616
c) A trial balance is a list of general ledger balances at the end of a period. It is an accounting tool to ensure that the two sides of the double entry bookkeeping are in balance. Discrepancies are sorted out, if any. It forms the basis for preparing the financial statements whereby temporary accounts are transferred to the income summary while the permanent accounts are taken to the balance sheet, after all adjustments have been made.
"If the regulations for environmental protection were strictly adhered to and industries, cities, and individuals considered the environment crucial for survival and a thriving market, what would be the benefits from this change
Explanation:
The benefits arising from complying with an environmental protection regulation would be diverse for society, for companies and for the environment as a whole.
It is ideal to recognize the scarcity of natural resources, and knowing how to preserve them as citizens is everyone's duty. Environmental awareness and compliance with regulations would lead to significant changes in quality of life, air, water, decrease the greenhouse effect, decrease respiratory diseases, etc.
For the industry, complying with environmental regulation makes it better positioned in the market, attracts more investors, motivates employees more, reduces unnecessary risks and costs in addition to enhancing the continuous improvement of processes as a whole.
A stock has an expected return of 13 percent, the risk-free rate is 4.1 percent, and the market risk premium is 5.3 percent. What is the stock's beta?
Answer:
Stock Beta = 1.68
Explanation:
The expected return on stock can be estimate using te capital asset pricing model (CAPM).
The capital pricing model establishes the relationship between expected return from a stock and its systematic risk . The systematic risk is that which affects all players (businesses and firms) in the entire market, such risks are occasioned by changes in interest rate, exchange rate e.t.c
According to the model , the expected return is computed as follows
E(r) = Rf + β(Rm-Rf)
Rf- risk -free rate, Rm-Rf - market premium , β- beta
DATA:
E(r) = 13%, Rm-Rf = 5.3 , risk-free rate- 4.1%, β?
Applying this model, we have
13% = 4.1% + β× (5.3%)
0.13 = 0.041 + 0.053β
Collecting like terms
0.053β= 0.13 - 0.041
divide both sides by 0.053
β= (0.13 - 0.041)/0.053
β = 1.679
Stock Beta = 1.68
The difference between Karson's behavior at the end of the 12 weeks versus the promise to cure Karson of ADHD can be described as the measure of the:________.
A. expectation interest.
B. reliance interest.
C. restitution interest.
D. All of these are correct.
Answer:
A. Expectation interest.
Explanation:
Expectation interest is explained as the party of interest being in a good position in the point or financial angles during a business dealing. Here he/she is said to have a good stance of a deal or a contract been contacted for. Sometimes, it is seen to be triggered by net profits and losses less any costs or losses, which are sometimes tool in weighing the reasonable measure of damages. Therefore, when no contracts are be agreed on, determination must be made as to whether or not one party benefited from contact with the other party.
On May 1, Soriano Co. reported the following account balances along with their estimated fair values:
Carrying Amount Fair Value
Receivables $ 143,600 $ 143,600
Inventory 76,400 76,400
Copyrights 136,000 577,000
Patented technology 913,000 753,000
Total assets $ 1,269,000 $ 1,550,000
Current liabilities $ 197,000 $ 197,000
Long-term liabilities 676,000 658,300
Common stock 100,000
Retained earnings 296,000
Total liabilities and equities $ 1,269,000
On that day, Zambrano paid cash to acquire all of the assets and liabilities of Soriano, which will cease to exist as a separate entity. To facilitate the merger, Zambrano also paid $141,000 to an investment banking firm.
The following information was also available:
• Zambrano further agreed to pay an extra $85,000 to the former owners of Soriano only if they meet certain revenue goals during the next two years. Zambrano estimated the present value of its probability adjusted expected payment for this contingency at $42,500.
• Soriano has a research and development project in process with an appraised value of $244,000. However, the project has not yet reached technological feasibility and the project’s assets have no alternative future use.
Prepare Zambrano’s journal entries to record the Soriano acquisition assuming its initial cash payment to the former owners was (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
Answer:
Receivables (Dr.) $143,600
Inventory (Dr.) $76,400
Copyrights (Dr.) $577,000
Patented Technology (Dr.) $913,000
Goodwill (Dr.) $32,800
Current Liability (Cr.) $197,000
Long term liability (Cr.) $658,300
Cash (Cr.) $845,000
Contingent Consideration (Cr.) $42,500
Professional Fee Expense (Dr.) $141,000
Cash (Cr.) $141,000
Paid of Investment banking firm
Explanation:
Total of Assets 1,710,000
Total of Liabilities 855,300
Net Assets 854,700
Total Fair value of identifiable Assets 854,700
Fair value of contingent Liability 42,500
Consideration Paid as Cash 845,000
Good will $32,800