Answer:
A. Depreciation expense in 20Y5 = $900
Depreciation expense in 20Y6 = $3,600
B. Depreciation expense in 20Y5 = $2800
Depreciation expense in 20Y6 =$7840
Explanation:
Straight line depreciation expense = (Cost of asset - Salvage value) / useful life
($42,000 - $6,000) / 10 = $3,600
The depreciation expense would be $3600 each year except in 20Y5. when the equipment was used from October to December which is 3 months
Depreciation expense in 20Y5 = 3/12 x $3600 = $900
Depreciation expense using the double declining method = Depreciation factor x cost of the asset
Depreciation factor = 2 x (1/useful life) = 2/10 = 0.2
Depreciation expense in 20Y5 = 0.2 x $42,000 = $8,400
But the equipment was only used for 3 months, so we would divide the figure above by 3
$8400 / 3 = $2800
Depreciation expense in 20Y5 = $2800
Depreciation expense in 20Y6 = book value in the beginning of 20Y6 x depreciation expense
Book value = cost of the asset - depreciation expense in 20Y5
$42,000 - $2800 = $39,200
Depreciation expense in 20Y6 = $39,200 x 0.2 = $7840
Western Energy makes quarterly deposits into an account reserved for purchasing new equipment two years from now. The interest paid on the deposits is 12% per year, compounded monthly. Identify the interest period, compounding period, and compounding frequency in the interest period.
a. The interest period is ____________.
b. The compounding period is _______________ .
c. The compounding frequency is___________ .
Answer:
a. 2 years
b. 1 year
c. 12 times
Explanation:
Interest period is the duration of the deposit. It is the length of time the money would remain in deposit. This is 2 years according to the question
Compounding period = number of times interest would be paid. In the question, this is a year. So interest would be paid every year
The compounding frequency - it is the number of times the deposit would be compounded. It is 12 months
The future value of the deposit can be determined using this formula :
FV = P (1 + r/m)^nm
FV = Future value
P = Present value
R = interest rate
N = number of years
m = number of compounding
You're considering a project with an initial cost of $6400, what is the payback period for this project if the cash inflows are $900, $1350,$2800, $1350 & $500 a year over the next five years
Ringmeup Inc. had net income of $129,300 for the year ended December 31, 2019. At the beginning of the year, 37,000 shares of common stock were outstanding. On May 1, an additional 15,000 shares were issued. On December 1, the company purchased 4,100 shares of its own common stock and held them as treasury stock until the end of the year. No other changes in common shares outstanding occurred during the year. During the year, Ringmeup paid the annual dividend on the 6,000 shares of 4.95%, $100 par value preferred stock that were outstanding the entire year. Required: Calculate basic earnings per share of common stock for the year ended December 31, 2019. (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Answer:
$2.13 per share
Explanation:
The computation of the basic earnings per share is shown below:
But before that following calculations need to be done
The Weighted average share is
= (37000 shares × 4 ÷ 12 + (37,000 + 15,000) shares × 7 ÷ 12 + (52,000 - 4,100) shares × 1 ÷ 12)
= 46,658 Shares
And, the Preferred dividend is
= 6,000 shares × $100 × 4.95%
= $29,700
Now EPS is
= (Net income - Preferred dividend) ÷ Weighted average share outstanding = ($129,300 - $29,700) ÷ 46,658
= $2.13 per share
At the end of the current year, using the aging of receivable method, management estimated that $18,000 of the accounts receivable balance would be uncollectible. Prior to any year-end adjustments, the Allowance for Doubtful Accounts had a debit balance of $450. What adjusting entry should the company make at the end of the current year to record its estimated bad debts expense
Answer:
Dr Bad Debt Expense $18,450
Cr Allowance for Doubtful Accounts
$18,450
Explanation:
Preparation of the appropiate adjusting journal entry that the company should make at the end of the current year to record its estimated bad debts expense
Dr Bad Debt Expense $18,450
Cr Allowance for Doubtful Accounts
$18,450
($18,000+Debit balance$450)
(Being to record estimated bad debts expense)
Alpha Corporation has just paid its annual dividend and is looking forward to another successful year ahead. The company had free cash flow for the year just ended of $1 billion, all of which it just paid out to its shareholders as a dividend. Right now, shareholders do not believe that Alpha has any growth opportunities, so they expect the annual cash flow and dividend stream to remain unchanged for the foreseeable future. Alpha has 100 million 3 shares outstanding and a market capitalization of $10 billion. The company is entirely equity-financed. The capital market is efficient.
A) Alpha's CEO now proposes that the company skip its dividend one year from now and instead invest the entire amount of the coming year's $1 billion free cash flow in a project that management believes will generate a perpetual annual rate of return of 21%. The CEO further asserts that the new project has similar risk to the company's assets in place. If the company were to announce immediately its plans for the investment one year from now (financed by skipping next year's dividend) what do you think will happen to Alpha's stock price?
B) Some of Alpha's Board members are worried that shareholders are expecting a dividend next year and that announcing plans to skip next year's dividend will lower the stock price today. Suppose Alpha were to announce instead that it plans to pay its usual dividend one year from now and that it has no plans for any new investment at T-. What will happen to the stock price today?
C) Suppose Alpha settles on a compromise: Alpha announces today that it will invest in the new project one year from now, butwill simultaneously issue enough new shares at that time to enable it to pay the usual S10 dividend per share to its existing shareholders. What do you think will happen to Alpha's share price one year from now under this plan? What do you think will happen to Alpha's stock price today? Which of the three plans do you think Alpha's shareholders would prefer?
Answer:
(A) Alpha's stock price will fall.
(B) What will happen to the stock price today is that it will rise.
Explanation:
(C)
(i) Under the compromise plan and one year from now, Alpha's share price will fall, since Alpha will be desperate for new share holders.
(ii) Alpha's stock price today will rise, since the value of existing stocks will increase - that is, existing shareholders are assured of their usual $10 dividend plus extra dividend from the 21% estimated annual ROR on the intended project.
(iii) Which of the three plans would Alpha's shareholders prefer?
Regular-thinking shareholders would prefer Plan B. Patient shareholders would prefer Plan A, especially if they don't see many new shareholders in one year's time. Optimistic shareholders would prefer Plan C.
Refer to the following selected financial information from McCormik, LLC. Compute the company's working capital for Year 2.
Year 2 Year 1
Cash $38,800 $33,550
Short-term investments 103,000 66,500
Accounts receivable, net 92,000 86,000
Merchandise inventory 127,500 131,500
Prepaid expenses 13,400 11,000
Plant assets 394,500 344,500
Accounts payable 106,900 114,300
Net sales 717,500 682,500
Cost of goods sold 396,500 381,500
Answer:
$267,800
Explanation:
Working capital = Current Assets - Current Liabilities
where for Year 2,
Current Assets = $38,800 + $103,000 + $92,000 + $127,500 + $13,400
= $374,700
and
Current Liabilities = $106,900
therefore,
Working capital = $267,800
thus,
The company's working capital for Year 2 is $267,800.
It is ethical to hold negative opinions about people.
Please select the best answer from the choices provided
OT
OF
Answer:
True
Explanation:
lol it's true
Most consumers and investors today want the firms they do business with to look beyond just the profit motive. In fact, they want firms that behave legally and ethically while also giving back to their communities via philanthropic activities. The framework that attempts to reconcile these wants is known as
Answer:
corporate social responsibility.
Explanation:
In Business management, social responsibility can be defined as an organization's obligation to act in a manner that benefits and adds significant value to the society, usually it has its business operations.
Hence, in addition to making profits and maximizing shareholders, organizations are required to lessen negative environmental impact or degradation and provide social amenities such as pipe-borne water, electricity, roads etc. It is also referred to as corporate social responsibility (CSR).
Generally, most consumers and investors today want the firms they do business with to look beyond just the profit motive. In fact, they want firms that behave legally and ethically while also giving back to their communities via philanthropic activities. Thus, the framework that attempts to reconcile these wants is known as corporate social responsibility.
In 2014, Lena assigned a paid-up whole life insurance policy to an Irrevocable Trust for the benefit of her three children. Lena died in 2018, and the face value of the whole life insurance policy of $2,000,000 was paid to the Irrevocable Trust. Regarding this transfer, how much is included in Lena’s gross estate at her death? A. $0 B. $45,000 C. $2,000,000 D. $1, 955,000
Answer: A. $0
Explanation:
By current tax rules, any transfers of life insurance policies within three years of the death of the owner of the policy should be included in their gross estates.
As Lena's policy was transferred in 2014 which was 4 years before he death in 2018, it does not qualify to be included in the gross estate so the answer is $0.
Answer:
A. $0
Explanation:
Hope this helps
Insurance fraud is estimated to cost $27.6 billion per year. This includes Automobile fraud, Business and Commercial fraud, Homeowner fraud, Life/disability fraud, and others.
true or false?
Answer: true
Explanation:
About 10 years ago, the POM Pomegranate Juice brand was created by a middle-aged couple in Nebraska. Theyâre business started small and then began to skyrocket after news spread of how yummy pomegranate juice is and also, how healthy is it (more antioxidants than any other juice out there!) Now, brands such as Nantucket Nectars, Ocean Spray, Minute Maid, and more have created their own pomegranate mixtures.
Required:
What has happened to the supply of pomegranate beverages as a result?
Answer:
OM Pomegranate Juice
The supply of pomegranate beverages has risen above demand, thereby causing market glut.
Explanation:
With many suppliers of pomegranate beverages, the quantity being supplied will outstrip demand. The immediate result is a glut in the market. This will lead to producing at less than full capacity as individual producers make efforts to sell their inventories. Workers may need to be laid off in order to meet the resulting economic situation.
Shipping cost at Junk Food Imports is a mixed cost with variable and fixed components. Past records indicate total shipping cost was $18,000 for 16,000 pounds shipped and $22,500 for 22,000 pounds shipped. Assuming that this activity is within the relevant range, if the company plans to ship 18,000 pounds next month, the expected shipping cost is:
Answer:
$18,500
Explanation:
Calculation to determine what the expected shipping cost is:
First step is to calculate the Variable using this formula
Variable =Change in total cost /change in units
Let plug in the formula
Variable=(22,500-18,000)/(22,000-16,000)
Variable=$0.75 per pound
Now let calculate the expected shipping cost
Expected shipping cost=$0.75 per pound *18,000 pound
Expected shipping cost=$18,500
Therefore The Expected shipping cost is $18,500
Mrs. Jonas believes strongly that it is important that workers' rights be respected, and that one of the more important ways of doing this is to ensure that all workers be properly documented. She is supervising a contracting company that is building a new warehouse for her company. While doing this she discovers that many of the workers employed by the contractor are undocumented aliens working for well below minimum wage. In this situation Mrs. Jonas has a(n) ________ that is in conflict with a(n) ________.
Answer: behavior; attitude
Explanation:
From the situation given in the question, we can infer that Mrs. Jonas has a behavior that is in conflict with an attitude.
This can be seen in the information given that Mrs. Jonas believes strongly about the importance of workers' rights be respected, which can be done through proper documentation but then while supervising a contracting company, she then discovers that many of the workers employed by the contractor are undocumented aliens that were working for well below minimum wage.
Eastman Publishing Company is considering publishing an electronic textbook about spreadsheet applications for business. The fixed cost of manuscript preparation, textbook design, and web site construction is estimated to be $150,000. Variable processing costs are estimated to be $9 per book. The publisher plans to sell single-user access to the book for $41.
Required:
Build a spreadsheet model in Excel to calculate the profit/loss for a given demand. What profit can be anticipated with a demand of 3,400 copies?
Answer:
I prepared an excel spreadsheet which includes the income model and an example.
Explanation:
Dean has earned $70,750 annually for the past five years working as an architect for WCC Incorporated Under WCC's defined benefit plan (which uses a seven-year graded vesting schedule) employees earn a benefit equal to 3.5 percent of the average of their three highest annual salaries for every full year of service with WCC. Dean has worked for five full years for WCC and his vesting percentage is 60 percent. What is Dean's vested benefit (or annual retirement benefit he has earned so far)
Answer:
$7,429
Explanation:
Calculation to determine Dean's vested benefit
Using this formula
Vested benefit=Average salary for the prior three years×( 3.5% × 5 years of service)×Vesting percentage)
Let plug in the formula
Vested benefit=$70,750 ×( 3.5% × 5)× 60%
Vested benefit=$70,750 × 17.5%× 60%
Vested benefit=$7,428.75
Vested benefit=$7,429 (Approximately)
Therefore Dean's vested benefit is $7,429
Kartman Corporation makes a product with the following standard costs: Standard Quantity or HoursStandard Price or RateStandard Cost Per Unit Direct materials 6.5pounds$7.00per pound$45.50 Direct labor 0.6hours$24.00per hour$14.40 Variable overhead 0.6hours$4.00per hour$2.40 In June the company's budgeted production was 3,400 units but the actual production was 3,500 units. The company used 22,150 pounds of the direct material and 2,290 direct labor-hours to produce this output. During the month, the company purchased 25,400 pounds of the direct material at a cost of $170,180. The actual direct labor cost was $57,021 and the actual variable overhead cost was $8,931. The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased. The variable overhead rate variance for June is: Select one: A. $210 F B. $229 U C. $210 U D. $229 F
Answer:
Variable manufacturing overhead rate variance= $229 favorable
Explanation:
eGiving the following information:
Variable overhead 0.6 hours $4.00per hour
The company used 2,290 direct labor-hours
The actual variable overhead cost was $8,931.
To calculate the variable overhead rate variance, we need to use the following formula:
Variable manufacturing overhead rate variance= (standard rate - actual rate)* actual quantity
Variable manufacturing overhead rate variance= (4 - 3.9)*2,290
Variable manufacturing overhead rate variance= $229 favorable
Actual rate= 8,931 / 2,290= $3.9
The Herfindahl-Hirschman index is a measure of concentration found by: squaring the percentage market share of each firm in the industry. squaring the sums of the concentration ratios found in an industry survey of the largest four and largest eight firms. squaring the percentage market share of each firm in the industry and then summing the squared market shares. summing the percentage market shares of each firm in the industry.
Answer:
squaring the percentage market share of each firm in the industry and then summing the squared market shares.
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 involves specific processes such as recording, summarizing, analysis and reporting of financial transactions with respect to business operations over a specific period of time.
Herfindahl-Hirschman index can be defined as a measure of the market concentration of a particular business firm or industry. Thus, it's typically used to measure the size of a particular business firm with respect to the industry it's operating in.
The Herfindahl-Hirschman index is a measure of concentration found by squaring the percentage market share of each firm in the industry and then summing the squared market shares.
Suppose that you wish to hedge the exchange rate risk on a foreign receivable of 1,240,000 euros. You decide to do this with a long option whose underlying asset is the euro (I won't tell you whether it's a put or a call). If this option has a strike of $1.15/euro, a multiple of 10,000 euros, and a per-contract (i.e. per 10k euros) premium of $175, then what is the least number of dollars you could possibly expect to net from this hedged receivable
Answer: $1404300
Explanation:
The least number of dollars that one could possibly expect to net from this hedged receivable will be calculated thus:
Amount receivable = 1,240,000 euros
Contract size for put option = 10000
Therefore, the number of contract that can be purchased will be:
= 1240000 / 10000
= 124
The total cost of option will be:
= $175 × 124
= $21700
We then calculate the minimum dollars available which will be:
= 1240000 × 1.15
= $1426000
We then deduct the total cost of option to get the net dollar proceed which will be:
= $1426000 - $21700
= $1404300
Therefore, the the least number of dollars that is expected to net from this hedged receivable is $1404300.
While making a business decision, a manager who believes in rights theories is most likely to focus on achieving collective goals, even if that involves violating fundamental rights. weighing the associated social benefits, costs, and risks. maximizing stockholders' wealth and profits. respecting fundamental human privileges. propagating home-country standards of ethics.
Answer:
respecting fundamental human privileges.
Explanation:
A manager can be defined as an individual who is saddled with the responsibility of providing guidance, support, supervision, administrative control, as well as acting as a role model or example to the employees working in an organization by being morally upright.
Generally, managers are typically involved in taking up leadership roles and as such are expected to be build a strong relationship between their employees or subordinates by creating a fair ground for effective communication and sharing of resources and information. Also, they are required to engage their staff members (entire workforce) in the most efficient and effective manner.
While making a business decision, a manager who believes in rights theories is most likely to focus on respecting fundamental human privileges that are applicable to the staffs or employees working within an organization, as well as all of its clients or customers.
The following information is provided for Sandhill Company and Whispering Corporation. (in $ millions) Sandhill Company Whispering Corporation Net income 2022 $130 $445 Net sales 2022 1715 4640 Total assets 12/31/20 1010 2010 Total assets 12/31/21 1085 3070 Total assets 12/31/22 1150 4100 What is Sandhill's return on assets for 2022
Answer:
11.63%
Explanation:
Average assets = [Total assets 12/31/21 + Total assets 12/31/22] / 2
Average assets = [$1085 + $1150] / 2
Average assets = $2,235 / 2
Average assets = $1,117.50
Return on Assets = Net income / Average assets
Return on Assets = $130 / $1,117.50
Return on Assets = 0.1163311
Return on Assets = 11.63%
So therefore, Sandhill's return on assets for 2022 is 11.63%.
The national lottery in the country of San Dayana is advertising on billboards in the poverty stricken, inner-cities of the country. "Buy your way out of here to America" Buy the 5 for 1 lottery tickets every Friday." Would you consider this an ethical marketing strategy? Why/Why not?
The correct answer to this open question is the following.
Would you consider this an ethical marketing strategy?
No. Of course not. It is not ethical. However, it is not illegal.
It cannot be considered ethical because this piece of advertisement is playing with the lack and necessity of the poor people of San Dayana.
The lottery advertisement is trying to be lucrative and benefit from the ignorance and poverty of the people of this poor country.
Once said that people are the ones who had the last word on the decision to buy or not to buy the lottery tickets. They know that the probabilities are minimum to win the big prize.
So instead of work, save and invest, or do other legal things to prosper, they prefer to spend their hard-earn money to get the "miracle" and become rich.
Graham, Inc.'s April bank statement shows an April 30 balance of $5,120. Prior to reconciliation, its books show a cash balance of $5,510. ThIs information pertains to Graham, Inc.: Deposits in transit $800; Checks outstanding $465; Bank service charge $10; Error in Graham's records understating cash disbursement $180; Check of another company charged erroneously against Graham's bank account $115; Bank statement shows bank collected a note receivable and interest income for Graham $250. The reconciled cash balance at April 30 on the bank reconciliation should be:
Answer:
$5,570
Explanation:
The purpose of a bank reconciliation statement is to reconcile the difference between Cash Book balance and Bank Statement balance. Also it is used to check accuracy of Cash Book and the accuracy of Bank Statement.
Graham, Inc.'s April bank reconciliation statement is prepared as :
Graham, Inc.
Bank reconciliation statement as at April 30
Balance as per Bank Statement $5,120
Add outstanding lodgments $800
Add back error at the bank $115
Less unpresented checks ($465)
Balance as per Cash Book $5,570
therefore,
The reconciled cash balance at April 30 on the bank reconciliation should be $5,570.
SECTION -A
Q1. Which of the following is not a feature of divisional structure?
(a) It is easy to fix the responsibility on one department.
(b) It is nor suitable for large firms.
(c) It facilitates managerial development.
(d) It's formation is based on product lines.
Answer:
B. it is more suitable for large firms
Explanation:
Sana makatulong
RCS, Inc. Gross fixed assets 284,950 Inventory 136,500 Accrued expenses 11,850 Accumulated depreciation 82,310 Notes payable 32,570 Preferred stock 8,000 Retained earnings 89,280 Current portion of L-T debt 4,080 Long-term debt 134,300 Accounts receivable 105,770 Additional paid-in capital 71,600 Accounts payable 50830 Common stock ($0.20 par) 60,000 Cash 17,600 Referring to the above balance sheet accounts for RCS, Inc. for the year ending Dec 31, 2016, the number of common shares issued by the company is closest to:_____.
a. 658,000
b. 12,000
c. 300,000
d. 26,320
Answer:
The correct option is c. 300,000.
Explanation:
The number of common shares issued by the company can be calculated as follows:
Common stock each at par =$0.20
Common stock total value at par = $60,000
Number of common shares issued = Common stock total value at par / Common stock each at par = $60,000 / $0.20 = 300,000
Therefore, the number of common shares issued by the company is closest to: c. 300,000.
Vijay Company reports the following information regarding its production costs. Direct materials $ 10 per unit Direct labor $ 20 per unit Overhead costs for the year Variable overhead $ 10 per unit Fixed overhead $ 160,000 Units produced 20,000 units
Compute its product cost per unit under absorption costing.
Production cost per unit
Answer:
$48 per unit
Explanation:
Given the above data, we need to find the value of unitary fixed overhead.
Unitary fixed overhead = $160,000 / 20,000 = $8
Now, we can then calculate unitary cost of production
Unitary cost = Direct material + Direct labor + Total overhead
Unitary cost = $10 + $20 + $10 + $8
Unitary cost = $48 per unit
The income statement of Pharoah Company is shown below.
PHAROAH COMPANY INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2020
Sales revenue $7,410,000
Cost of goods sold Beginning inventory $1,880,000
Purchases 4,360,000
Goods available for sale 6,240,000
Ending inventory 1,500,000
Cost of goods sold 4,740,000
Gross profit 2,670,000
Operating expenses
Selling expenses 460,000
Administrative expenses 630,000 1,090,000
Net income $1,580,000
Additional information:
1. Accounts receivable decreased $313,770 during the year.
2. Prepaid expenses increased $167,640 during the year.
3. Accounts payable to suppliers of merchandise decreased $279,000 during the year.
4. Accrued expenses payable decreased $124,020 during the year.
5. Administrative expenses include depreciation expense of $58,970.
Required:
Prepare the operating activities section of the statement of cash flows for the year ended December 31, 2020, for Vince Gill Company, using the indirect method.
Answer and Explanation:
The preparation of the operating activities section of the statement of cash flows for the year ended December 31, 2020 is presented below;
Cash flow from operating activities
Net income $1,580,000
Add: depreciation expense $58,970
Add: decrease in account receivable $313,770
Less: Increase in prepaid expense -$167,640
Less: Decrease in account payable -$279,000
Less: decrease in accrued expense payable -$124,020
Add: Decrease in inventory $380,000 ($1,880,000 - $1,500,000)
Cash flow provided by operating activities $1,762,080
5. Write short note on the following
a. Bailee
b. An overt
c. Estoppel
d. Ratification
e. Del credere agent
Answer:
a). Bailee - It is described as the individual who gains or holds bailed property or possession of it. He/she is the one who takes possession of the property of another(called a bailor) for a temporary period in order to keep that property safe for the other.
b). An overt - In terms of law, an act is characterized as an overt act when it is open and not hidden or concealed. Such an act can clearly be observed and revealed the criminal intent of the person.
c). Estoppel - A legal principle in the law of equity that prevents a party from asserting otherwise valid legal rights against another party because of conduct by the first party, or circumstances to which the first party has knowingly contributed, make it unjust for those rights to be asserted.
d). Ratification - It is described as a formal declaration of agreement, giving consent, sign off, or validifying to a treaty in an official manner. Thus, it is the process of providing legal authority to the law or principle.
e). Del Credere Agent - These are described as the agent who not only engages in selling goods on credit but also ensures a guarantee to the principal that the purchaser/buyer is solvent. The seller is otherwise responsible for the debt.
Tamarisk, Inc. gathered the following reconciling information in preparing its April bank reconciliation:
Cash balance per books, 4/30 $18300
Deposits in transit 2500
Notes receivable and interest collected by bank 6160
Bank charge for check printing 210
Outstanding checks 12500
NSF check 1160
The adjusted cash balance per books on April 30 is:_________.
a. $24460.
b. $23090.
c. $25410.
d. $25590.
Answer:
hiiiiiiiiii berrryyryr.commmddm
Tangshan Mining Company must choose its optimal capital structure. Currently, the firm has a 40 percent debt ratio and the firm expects to generate a dividend next year of $4.89 per share and dividends are expected to grow at a constant rate of 5 percent for the foreseeable future. Stockholders currently require a 10.89 percent return on their investment. Tangshan Mining is considering changing its capital structure if it would benefit shareholders. The firm estimates that if it increases the debt ratio to 50 percent, it will increase its expected dividend to $5.24 per share. Because of the additional leverage, dividend growth is expected to increase to 6 percent and this growth will be sustained indefinitely. However, because of the added risk, the required return demanded by stockholders will increase to 11.34 percent. (a) What is the value per share for Tangshan Mining under the current capital structure
Answer:
Tangshan Mining Company
The value per share for Tangshan Mining under the current capital structure is:
= $44.90
Explanation:
a) Data and Calculations:
Debt ratio = 40%
Equity ratio = 60% (100 - 40)
Expected dividend per share next year = $4.89
Expected dividend growth rate = 5%
Stockholders' required rate of return = 10.89%
New capital structure:
Estimated debt ratio = 50%
Estimated equity ratio = 50% (100 - 50)
Projected dividend under new capital structure = $5.24
Projected dividend growth rate = 6%
Projected stockholders' required rate of return = 11.34%
Under current capital structure:
Value per share = Dividend/Required rate of return
= $44.90 ($4.89/10.89%)
Suppose the end of 2013 is approaching and most of the activity for the year has been entered into the accounts of Hipzone Inc. However, there are a few transactions that still need to be posted.
List the journal entries required
Suppose on December 31, Hipzone Inc. bills one of their customers $450 for a project that they had completed which had accumulated $220 of costs. The invoice has the normal terms requesting payment in 30 days. Make ALL of the entries required by this transaction.
HINT: Think of Accumulated Project Costs as an account similar to Inventory - it is an asset account used to accumulate the costs that have been incurred related to the project being completed for the customer.
THEN Hipzone Inc. needs to record depreciation on a piece of office equipment. The equipment was purchased on 1/1/2010 for $2,000, was expected to last 10 years at the time of purchase, and had an expected salvage value of $200. No depreciation has been recorded on the equipment for 2013. Make ALL of the entries required by this transaction.
Answer:
Hipzone Inc.
a. Journal Entries:
December 31, 2013:
Debit Accounts receivable $450
Credit Service revenue $450
To record the completion of a project for a customer, terms n/30.
Debit Cost of service $220
Credit Accumulated Project Costs $220
To record the cost of service.
b. Journal Entries:
December 31, 2013:
Debit Depreciation Expense $180
Credit Accumulated Depreciation $180
To record the depreciation expense for the year.
Explanation:
a) Data and Analysis:
December 31, 2013:
Accounts receivable $450 Service revenue $450, terms n/30.
Cost of service $220 Accumulated Project Costs $220
December 31, 2013:
Cost of equipment on 1/1/2010 = $2,000
Expected useful life = 10 years
Salvage value = $200
Depreciable amount = $1,800 ($2,000 - $200)
Annual depreciation expense = $180 ($1,800/10)
December 31, 2013:
Depreciation expense $180 Accumulated Depreciation $180