Answer:
a. Asset will increase and equity will increase
b. Asset will increase and liability will increase
c. Asset will increase and liability will increase
d. Asset decreases
e. Assets decrease and increase is balanced off
f. Assets increase and equity increase
g. Assets increase and liability increases.
h. Asset decreases
i. Equity decreases.
j. Asset increases.
Explanation:
Asset = Liability + Equity
This accounting equation is effected whenever any transaction is incurred. When the asset side of the accounts is increased then there will be increase in either liability or equity which off sets the account balances. The Assets will increase whenever owner invests in the business and the equity side also increases.
Shauna and Danielle decided to liquidate their jointly owned corporation, Woodward Fashions Inc. (WFI). After liquidating its remaining inventory and paying off its remaining liabilities, WFI had the following tax accounting balance sheet: FMV Adjusted Basis Appreciation Cash $ 225,000 $ 225,000 Building 45,000 22,500 22,500 Land 180,000 90,000 90,000 Total $ 450,000 $ 337,500 $ 112,500 Under the terms of the agreement, Shauna will receive the $225,000 cash in exchange for her 50 percent interest in WFI. Shauna's tax basis in her WFI stock is $56,250. Danielle will receive the building and land in exchange for her 50 percent interest in WFI. Danielle's tax basis in her WFI stock is $112,500. Assume for purposes of this problem that the cash available to distribute to the shareholders has been reduced by any tax paid by the corporation on gain recognized as a result of the liquidation. (Negative amounts should be indicated by a minus sign.) a. What amount of gain or loss does WFI recognize in the complete liquidation
Answer:
A. Building $22,500
Land $90,000
B. Recognizes gain of $180,000
C. Recognizes gain of $112,500
D. Building $45,000
Land $180,000
Explanation:
A. Based on the information given since WFI has a taxable transaction which means that WFI will recognizes gain of the amount of 22,500 on the transfer of the building and gain of the amount of 90,000 on the transfer of the land
b. Calculation for What amount of gain or loss does Shauna recognize in the complete liquidation
Based on the information given Shauna
will recognizess gain of $180,000 on the transfer of her stock to WFI ($ 225,000 - $45,000) in complete liquidation of WFI.
c. Calculation of the amount of gain or loss that Danielle recognize in the complete liquidation
Based on the information given Danielle will recognizes gain of the amount of $112,500 on the transfer of her stock to WFI ($ 225,000 - $112,500) in complete liquidation of WFI.
d. Based on the information given Danielle’s tax basis in the building will be $ 45,000 and land will be $180,000 after the complete liquidation
Otto is planning for his son's college education to begin ten years from today. He estimates the end-of-the-year tuition, books, and living expenses to be $10,000 per year for a four-year degree. How much must Otto deposit today, at an interest rate of 12 percent, for his son to be able to withdraw $10,000 per year for four years of college
Answer:
$30,373.49
Explanation:
The amount to be deposited today can be determined by finding the present value of the annuity
Present value is the sum of discounted cash flows
Present value can be calculated using a financial calculator
Cash flow each year from year 1 to 4 = $10,000
I = 12%
PV = $30,373.49
To find the PV using a financial calculator:
1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.
2. after inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction.
3. Press compute
The following is a December 31, 2021, post-closing trial balance for Almway Corporation.
Account Title Cash Investment in equity securities Accounts receivable Inventory Prepaid insurance (for the next 9 months) Land Buildings Accumulated depreciation-buildings Equipment Accumulated depreciation equipment Patent (net) Accounts payable Notes payable Interest payable Bonds Payable Common stock Retained earnings Totals Debits Credits $ 77,000 142,000 76,000 216,000 6,000 122,000 436,000 $ 116,000 126,000 76,000 26,000 107.000 178,000 36,000 256,000 348,000 110,000 $1,227,000 $1,227,000
Additional information:
1. The investment in equity securities account includes an investment in common stock of another corporation of $46,000 which management intends to hold for at least three years. The balance of these investments is intended to be sold in the coming year.
2. The land account includes land which cost $41,000 that the company has not used and is currently listed for sale.
3. The cash account includes $31,000 restricted in a fund to pay bonds payable that mature in 2024 and $39,000 restricted in a thre month Treasury bill
4. The notes payable account consists of the following:
a. a $46,000 note due in six months.
b. a $66,000 note due in six years.
c. a $66,000 note due in five annual installments of $13,200 each, with the next installment due February 15, 2022
5. The $76,000 balance in accounts receivable is net of an allowance for uncollectible accounts of $6,000
6. The common stock account represents 116,000 shares of no par value common stock issued and outstanding. The corporation has 300,000 shares authorized.
Required: Prepare a classified balance sheet for the Almway Corporation at December 31, 2021. (Amounts to be deducted should be indicated by a minus sign.)
Answer:
Almway Corporation
Classified Balance Sheet as at December 31, 2021:
Assets
Current assets:
Cash $ 7,000
Restricted Cash 39,000
Investment in
equity securities 46,000
Accounts receivable 82,000
Allowance for
uncollectible accounts $6,000 76,000
Inventory 216,000
Prepaid insurance 6,000
(for the next 9 months)
Total current assets $390,000
Long-term assets:
Land for sale 41,000
Land for use 81,000
Buildings 436,000
Acc. depreciation 116,000 320,000
Equipment 126,000
Acc. depreciation 76,000 50,000
Patent (net) 26,000
Investment in
equity securities 96,000
Restricted Cash 31,000
Long-term assets $645,000
Total assets $1,035,000
Liabilities and Equity
Current Liabilities:|
Accounts payable 107,000
Short-term notes payable 59,200
Interest payable 36,000
Total current liabilities $202,200
Long-term notes payable 118,800
Bonds Payable 256,000
Total long-term liabilities $374,800
Total liabilities $577,000
Common stock 348,000
Retained earnings 110,000
Total equity $458,000
Total liabilities & equity $1,035,000
Explanation:
a) Data and Calculations:
Almway Corporation
Post-closing Trial Balance as at December 31, 2021:
Account Titles Debit Credit
Cash $ 77,000
Investment in
equity securities 142,000
Accounts receivable 76,000
Inventory 216,000
Prepaid insurance 6,000
(for the next 9 months)
Land 122,000
Buildings 436,000
Accumulated depreciation-buildings $ 116,000
Equipment 126,000
Accumulated depreciation equipment 76,000
Patent (net) 26,000
Accounts payable 107,000
Notes payable 178,000
Interest payable 36,000
Bonds Payable 256,000
Common stock 348,000
Retained earnings 110,000
Totals $1,227,000 $1,227,000
Adjustments:
1. Investment in equity securities $142,000
Long-term investments 46,000
Short-term investments = 96,000
2. Land for sale = $41,000
Land for use = $81,000
Total land = $122,000
3. Restricted Cash (2024) = $31,000
Restricted Cash (short-term) = $39,000
Other cash = $7,000
4. Notes payable:
Short-term notes = $59,200 ($46,000 + $13,200)
Long-term notes = $118,800
5. Accounts receivable = $82,000
Allowance for Uncollectible accounts = $6,000
6. Authorized shares = 300,000
Issued and outstanding shares = 116,000
Almway Corporation
Adjusted Trial Balance as at December 31, 2021:
Account Titles Debit Credit
Cash $ 7,000
Restricted Cash 39,000
Investment in
equity securities 46,000
Accounts receivable 82,000
Allowance for uncollectible accounts $6,000
Inventory 216,000
Prepaid insurance 6,000
(for the next 9 months)
Land for sale 41,000
Land for use 81,000
Buildings 436,000
Accumulated depreciation-buildings 116,000
Equipment 126,000
Accumulated depreciation equipment 76,000
Patent (net) 26,000
Investment in
equity securities 96,000
Restricted Cash 31,000
Accounts payable 107,000
Short-term notes payable 59,200
Interest payable 36,000
Long-term notes payable 118,800
Bonds Payable 256,000
Common stock 348,000
Retained earnings 110,000
Totals $1,233,000 $1,233,000
The next dividend payment by Hoffman, Inc., will be $2.80 per share. The dividends are anticipated to maintain a growth rate of 5.25 percent forever. If the stock currently sells for $49.20 per share, what is the required return
Answer:
the required return is 10.94%
Explanation:
The computation of the required return is shown below:
Po = D1 ÷ (Ke - g)
$49.2 = $2.8 ÷ (Ke-.0525)
Ke-.0525 = $2.8 ÷ $49.2
= 0.0569105691
Ke = 0.0569105691+.0525
= 10.94%
hence, the required return is 10.94%
Answer:
10.94%
Explanation:
(Dividend/price)+growth rate
(2.80/49.20)+0.0525=10.94%
John Jones owns and manages a café in Collegetown whose annual revenue is $5,000. Annual expenses are as follows:
Expense - Amount
Labor $2,000
Food and drink 500
Electricity 100
Vehicle lease 150
Rent 500
Interest on loan for equipment 1,000
a. Calculate John's annual accounting profit. $____ .
b. Suppose John could earn $1,000 per year as a recycler of aluminum cans, but he prefers to run the café. In fact, he would be willing to pay up to $275 per year to run the café rather than to recycle. Is the café making an economic profit?
(Yes/No) the café is making an economic (profit/loss) of $ ___ per year.
Should John stay in the café business? __
c. Suppose the café's revenues and expenses remain the same, but recyclers' earnings rise to $1,100 per year. Is the café making an economic profit?
(Yes/No), the café is making an economic (profit/loss) of $____ per year
Should John stay in the café business?
d. Suppose John had not had to get a $10,000 loan at an annual interest rate of 10 percent to buy equipment, but instead had invested $10,000 of his own money in equipment.
Calculate John's annual accounting profit. $
e. As in part b, suppose John could earn $1,000 per year as a recycler and he has to pay $1,000 per year in interest on his loan, but, unlike part b, suppose John likes recycling just as well as running the café.
How much additional revenue would the café have to collect each year to earn a normal profit? $____
Answer:
a.) $750
b.) Yes, the café is making an economic profit of $25 per year.
Yes, he should stay in the café business.
c.) No, the café is making an economic loss of $75 per year
No, he should not stay in the café business.
d.)$3,250
e.) $250
Explanation:
a) John's accounting profit is his revenue minus his explicit costs:$5,000 - $4,250 = $750
b) In this case, John's opportunity cost of running the café is $725 per year ($1,000 − $275 = $725). Thus, the café is making an economic profit of $25 per year ($5,000 − $4,250 − $725 = $25). Since the café is earning an economic profit, John should stay in the café business.
c) In this case, John's opportunity cost of running the cafe is $825 per year ($1,100 − $275 = $825). Thus, the cafe is earning an economic loss of $75 per year ($5,000 − $4,250 − $825 = −$75). Since the café is earning an economic loss, John should not stay in the café business.
d) John's accounting profit equals his revenue minus his explicit costs. If he doesn't need a loan, then his explicit costs equal $3,250. So, his accounting profit equals $1,750 (= $5,000 − $3,250).
e) To earn a normal profit, the café would have to cover all its implicit and explicit costs. The opportunity cost of John's time is $1,000 per year while the café's accounting profit is only $750 per year. Thus, the café would have to earn additional revenues of $250 per year in order for John to make a normal profit.
A business wants to maximize its tax savings in an economy with declining costs. It should choose the ___ method.
O A. weighted average
O B. LIFO
O c. gross profit
O D. FIFO hi
Answer:
I think it's D
Explanation:
sorry if wrong
On January 2, 2019, Shank Co. issued at par $300,000 of 9% convertible bonds. Each $1,000 bond is convertible into 60 shares. No bonds were converted during 2019. Shank had 100,000 shares of common stock outstanding during 2019. Shank 's 2019 net income was $340,000 and the income tax rate was 30%. Shank's diluted earnings per share for 2019 would be (rounded to the nearest penny) Group of answer choices $3.04. $2.19. $3.26. $3.40. $2.29
Answer:
Shank's diluted earnings per share for 2019 would be $3.04.
Explanation:
This can be calculated as follows:
Amount of increase in net income if bonds are converted = Total value of convertible bonds * Bond rate * (100% - Tax rate) = $300,000 * 9% * (100% - 30%) = $18,900
Total earnings available to Equity Shareholders = Net income + Amount of increase in net income if bonds are converted = $340,000 + $18,900 = $358,900
Number of common shares obtainable from convertible bonds = (Total value of convertible bonds / $1,000) * 60 = ($300,000 / $1,000) * 60 = 18,000
Total number of shares outstanding = Number of shares of common stock outstanding during 2019 + Number of common shares obtainable from convertible bonds = 100,000 + 18,000 = 118,000
Diluted earnings per share = Total earnings available to Equity Shareholders / Total number of shares outstanding = $358,900 / 118,000 = 3.04
The operations manager for the Blue Moon Brewing Co. produces two beers: Lite (L) and Dark (D). Two of his resources are constrained: production time, which is limited to 8 hours (480 minutes) per day; and malt extract (one of his ingredients), of which he can get only 675 gallons each day. To produce a keg of Lite beer requires 2 minutes of time and 5 gallons of malt extract, while each keg of Dark beer needs 4 minutes of time and 3 gallons of malt extract. Profits for Lite beer are $3.00 per keg, and profits for Dark beer are $2.00 per keg.
Required:
a. What are decision variables
b. What is the objective function?
c. What are the two constrains?
Answer:
See notes below
Explanation:
The decision Variables includes the following are the quantities of lite beer and dark beer to be produced.
Quantity of lite =x
Quantity of Dark =y
The objective is to MaxiMize total profit.
let total total be z
MaxiMize z =3x + 2y
The two constraints are
Production tiMe: 2x + 4y ≤ 480
Malt : 5x + 4y ≤ 675
Yilan Company is considering adding a new product. The cost accountant has provided the following data.
Expected variable cost of manufacturing $ 50 per unit
Expected annual fixed manufacturing costs $ 92,000
The administrative vice president has provided the following estimates.
Expected sales commission $ 4 per unit
Expected annual fixed administrative costs $ 48,000
The manager has decided that any new product must at least break even in the first year.
Required:
Use the equation method and consider each requirement separately.
a. If the sales price is set at $74, how many units must Yilan sell to break even?
b. Yilan estimates that sales will probably be 10,000 units. What sales price per unit will allow the company to break even?
c. Yilan has decided to advertise the product heavily and has set the sales price at $78. If sales are 8,000 units, how much can the company spend on advertising and still break even?
Answer:
Following are the responses to the given choices:
Explanation:
In point a:
[tex]\text{Break even point} ( in \ units ) =\frac{Fixed\ cost}{contribution}[/tex]
[tex]=\frac{140000}{20}\\\\=7000 \ units[/tex]
In point b:
[tex]\text{Breakeven point selling prices = unit variable costs + unit fixed cost of 10,000 units}[/tex]
[tex]=\$ 54 +\$ 14 \\\\= \$ 68[/tex]
[tex]\text{Breakeven point selling prices = unit variable costs + unit fixed cost of 10,000 units}[/tex]
[tex]=\$54 +\$ 14\\\\=\$ 68[/tex]
Claim of work
Fixed unit costs For sale It is 4,000 units likely
[tex]\text{Units Fixed costs} = \frac{Total \ Fixed- cost}{Units \ Fixed-costs}[/tex]
[tex]= \frac{\$140,000}{10,000}\\\\=\$14[/tex]
In point C:
Sales([tex]8,000 \ units \times 78[/tex]) [tex]\$624,000[/tex]
Less : Cost of Variable ([tex]8000\times 54[/tex])[tex]\$432000[/tex]
Contribution [tex]\$192,000[/tex]
Less: Fixed cost [tex]\$140,000[/tex]
advertising balance [tex]\$52,000[/tex]
They realize there's no benefit and thus no loss at breakeven pomt.
Monica consumes only goods A and B. Suppose that her marginal utility from consuming good A is equal to 0.25/Qa, and her marginal utility from consuming good B is 0.75/Qb. If the price of A is $0.50, the price of B is $4.00, and Monica's income is $120.00, how much of good A will she purchase
Answer:
120
Explanation:
Calculation for how much of good A will she purchase
First step is to calculate Qa
1 / 0.5Qa = 1 / 4Qb
0.5Qa = 4Qb
Qa = 4 / 0.5 Qb
Qa = 8Qb
Second step is to calculate Qb
Qb = 120/8
Qb = 15
Now let calculate how much of good A will she purchase
Using this formula
Good A=Qa* Qb
Good A= 15 * 8
Good A = 120
Therefore how much of good A will she purchase is 120
What is the best way for an accountant to begin networking?
A. By going to local accounting firms and making inquiries
B. By contacting professional accounting organizations
C. By communicating with professors and fellow students
D. By meeting other people in the field on a social basis
The best way for an accountant to begin networking is By contacting professional accounting organizations. Option B
What are professional accounting organizations.?
Generally, A professional that conducts accounting and organizes the financial data that are necessary to operate a company, such as profit and loss statements, balance sheets, and other financial documents, is referred to as an accountant.
They do an audit of your records, generate reports for use in tax preparation, and simplify all of the complicated financial jargon that comes with operating a company.
The members of Professional Accounting Organizations (PAOs), which are organizations to which professional accountants belong, get support from these organizations in the form of continuous training, advice, and tools designed to assist them to maintain their professional competence. PAOs also give prospective partners in regulation to authorities, such as audit Public Oversight Bodies (POBs), which are provided by PAOs.
In conclusion, Getting in touch with several professional accounting groups is the most effective technique for an accountant to launch their networking career. Alternative B
Read more about professional accounting organizations.
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Given the following data, calculate the cost of ending inventory using the average cost method. (Round any intermediary and final answers to two decimal places.)
Date Item Unit
1/1 Beginning inventory 50 units at $15 per unit
4/25 Purchase of inventory 20 units at $20 per unit
5/19 Purchase of inventory 30 units at $25 per unit
12/31 Ending inventory 40 units
Answer:
Cost of ending inventory = $760
Explanation:
This can b calculated as follows:
Units of 1/1 Beginning inventory - 50
Units of 4/25 Purchase of inventory = 20
Units of 5/19 Purchase of inventory = 30
Total units available for sale = Units of 1/1 Beginning inventory + Units of 4/25 Purchase of inventory + Units of 5/19 Purchase of inventory = 50 + 20 + 30 = 100
Cost of 1/1 Beginning inventory = 50 * $15 = $750
Cost of 4/25 Purchase of inventory = 20 * $20 = $400
Cost of 5/19 Purchase of inventory = 30 * $25 = $750
Total cost of goods available for sale = Cost of 1/1 Beginning inventory + Cost of 4/25 Purchase of inventory + Cost of 5/19 Purchase of inventory = $750 + $400 + $750 = $1,900
Average cost per unit = Total cost of goods available for sale / Total units available for sale = $1,900 / 100 = $19
Therefore, we have:
Cost of ending inventory = Units of ending inventory * Average cost per unit = 40 * $19 = $760
You purchase Rayovac batteries from Wal-Mart. You send in your battery receipt and a form with your name, address, and UPC code to Rayovac. Rayovac sends you a check for $5.00. What type of discount is this? O A sale O A gift card O A rebate O A coupon
Answer:
a rebate because companies like that and paint companies give out rebates
Which of the following statements are true?
a. Pellegrini Southern Corporation has less liquidity but also a greater reliance on outside cash flow to finance its short-term obligations than Jing Foodstuffs Corporation.
b. If a company’s current liabilities are increasing faster than its current assets, the company’s liquidity position is weakening.
c. If a company has a quick ratio of less than 1 but a current ratio of more than 1 and if the difference between the two ratios is large, then the company depends heavily on the sale of its inventory to meet its short-term obligations.
d. Pellegrini Southern Corporation has a better ability to meet its short-term liabilities than Jing Foodstuffs Corporation.
e. An increase in the current ratio over time always means that the company’s liquidity position is improving.
Answer:
b. If a company’s current liabilities are increasing faster than its current assets, the company’s liquidity position is weakening. TRUE
higher liabilities respect to current assets, decrease the company's ability to meet its short term payments
c. If a company has a quick ratio of less than 1 but a current ratio of more than 1 and if the difference between the two ratios is large, then the company depends heavily on the sale of its inventory to meet its short-term obligations. TRUE
the current ratio = current assets / current liabilities
the quick ratio = (current assets - inventory) / current liabilities
the difference between both shows the dependence on selling inventory to pay off debts.
e. An increase in the current ratio over time always means that the company’s liquidity position is improving. TRUE
Although GDP is a reasonably good measure of a nation's output, it does not necessarily include all transactions and production for that nation. Which of the following scenarios are either not accounted for or measured inaccurately by either the income or the expenditure methods of calculating GDP for the United States? Check all that apply.
a. The quality of goods available to consumers.
b. The value of baby-sitting services, when the babysitter is paid in cash and the transaction isn't reported to the government.
c. The parts of a car manufactured in the United States that are produced in Canada.
d. The loss of enjoyment people incur when scenic land is converted to commercial use.
Answer:
a
b
d
Explanation:
Gross domestic product is the total sum of final goods and services produced in an economy within a given period which is usually a year
GDP calculated using the expenditure approach = Consumption spending by households + Investment spending by businesses + Government spending + Net export
Net export = exports – imports
When exports exceed import there is a trade deficit and when import exceeds import, there is a trade surplus.
Items not included in the calculation off GDP includes:
1. services not rendered to oneself
2. Activities not reported to the government
3. illegal activities
4. sale or purchase of used products
5. sale or purchase of intermediate products
6. quality of goods and services
7. externalities
The car parts produced in the US would be added to GDP as parts of exports
Analyzing and Interpreting Income Tax Disclosures The income tax footnote to the 2018 financial statements for Boeing follows. The components of income before tax were: Years ended December 31 ($ millions) 2018 2017 2016 U.S. $11,166 $9,660 $5,386 Non-U.S. 438 447 397 Total $11,604 $10,107 $5,783 Income tax expense/(benefit) consisted of the following: Years ended December 31 ($ millions) 2018 2017 2016 Current tax expense U.S. federal $1,873 $1,276 $1,193 Non-U.S. $169 $149 $133 U.S. State 97 23 15 Total current $2,139 $1,448 $1,341 Deferred tax expense U.S. federal $(996) $204 $(544) Non-U.S. $(4) $3 $(4) U.S. State 5 (6) (44) Total deferred $(995) $201 $(592) a. What is the amount of income tax expense reported by Boeing each year
Answer:
Boeing
The amount of the income tax expense reported by Boeing each year:
Years ended December 31 ($ millions)
2018 2017 2016
Total current tax expense $2,139 $1,448 $1,341
Total deferred tax expense $(995) $201 $(592)
Income tax expense reported $3,134 $1,247 $1,933
Explanation:
a) Data and Calculations:
Income before tax
Years ended December 31
($ millions) 2018 2017 2016
U.S. $11,166 $9,660 $5,386
Non-U.S. 438 447 397
Total $11,604 $10,107 $5,783
Income tax expense/(benefit) consisted of the following:
Years ended December 31
($ millions) 2018 2017 2016
Current tax expense
U.S. federal $1,873 $1,276 $1,193
Non-U.S. $169 $149 $133
U.S. State 97 23 15
Total current $2,139 $1,448 $1,341
Deferred tax expense
U.S. federal $(996) $204 $(544)
Non-U.S. $(4) $3 $(4)
U.S. State 5 (6) (44)
Total deferred $(995) $201 $(592)
b) The income tax expense reported by Boeing is the amount calculated by Boeing based on standard business accounting rules. It is quite different from the current tax expense, which represents the amount determined using tax laws. The income tax expense reported will be generally less than the current tax expense unless there is a current tax benefit.
The most recent financial statements for Live Co. are shown here: Income Statement Balance Sheet Sales $4,400 Current assets $4,677 Debt $9,351 Costs 2,904 Fixed assets 11,450 Equity 6,776 Taxable income $1,496 Total $16,127 Total $16,127 Taxes (35%) 524 Net income $972 ________________________________________ Assets and costs are proportional to sales. Debt and equity are not. The company maintains a constant 38 percent dividend payout ratio. No external equity financing is possible. What is the internal growth rate
Answer:
3.88%
Explanation:
ROA = Net income/Total assets
ROA = $972/$16,127
ROA = 0.0602716
ROA = 6.03%
Retention ratio = 1 - Payout ratio
Retention ratio = 1 - 0.38
Retention ratio = 0.62
Internal growth rate = (ROA*Retention ratio) / [1 - (ROA*Retention ratio)]
Internal growth rate = 0.0602716*0.62 / 1 - (0.0602716*0.62)
Internal growth rate = 0.037368392 / 1-0.037368392
Internal growth rate = 0.037368392/0.962631608
Internal growth rate = 0.038818995
Internal growth rate = 3.88%
Desert Rose, Inc., a prominent consumer products firm, is debating whetherto convert its all-equity capital structure to one that is 30 percent debt. Currently, there are 6,500 sharesoutstanding, and the price per share is $45. EBIT is expected to remain at $29,000 per year forever. Theinterest rate on new debt is 8 percent, and there are no taxes.a) Allison, a shareholder of the firm, owns 100 shares of stock. What is her cash flow under the current capital structure, assuming the firm has a dividend payout rate 100%?B) What will Allison's cash flow be under the proposed capital structure of the firm? Assume she keeps all 100 of her shares.C) Suppose the company does convert, but Allison prefers the current all-equity capital structure. Show how she could unlever her shares of stock to re-create the original structure.D) Using your answere to part(c), explain why the company's choice of capitl structure is irrelevant. Show work and explain.
Answer:
A. $450
B. $480
C. $540
D. The choice of capitl structure is irrelevant because the amount of $480 is the payoff amount based on the proposed capital structure with 30% debt, which indicate that investors cannot make use of home leverage to help create the capital structure as well as the payoffs they like.
Explanation:
a) Calculation to determine her cash flow under the current capital structure
First step is to calculate the earnings per share
EPS = $29,000 / 6,500 shares
EPS = $4.5
Now let calculate the cash flow under the current capital structure
Cash flow = $4.5*(100 shares)
Cash flow = $450
Therefore her cash flow under the current capital structure will be $450
b) Calculation to determine What will be the cash flow be under the proposed capital structure of the firm
First step is to calculate the earnings per share
First step is to calculate the MV of the firm
MV of the firm= $45(6,500)
MV of the firm= $292,500
Second step is to calculate the Debt
Debt = .30 x ($292,500)
Debt= $87,750
Third step is to calculate the Interest
Interest =8% x $87,750
Interest = $7,020
Fourth step is to calculate the repurchase shares
Repurchase shares =$87,750 / $45
Repurchase shares= 1,950
Fifth step is to calculate the Shrout new
Shrout new =6,500 - 1,950
Shrout new=4,550
Therefore, under the new capital structure,
EPS = (EBIT - Interest) / shares outstanding new
EPS = ($29,000 -$7,020) / 4,550shares
EPS =$21,980/4,550 shares
EPS =4.8
The shareholder will receive = $4.8*(100 shares) = $480
Therefore What will be the cash flow be under the proposed capital structure of the firm is $480
c) Calculation to Show how she could unlever her shares of stock to re-create the original structure.
Now she owns a total of 200 shares
Her payoff =[ (100 shares+100 shares) x $4.5 ]- [8% x $(100 shares x $45)]
Her payoff =(200shares×$4.5)-(8%×$4,500)
Her payoff =$900-$360
Her payoff= $540
Therefore Based on the above Calculation Allison did not successfully replicate the payoffs (b) under the proposed capital structure
d).Based on the above Calculation the choice of capitl structure is irrelevant because the amount of $480 is the payoff amount based on the proposed capital structure with 30% debt, which indicate that investors cannot make use of home leverage to help create the capital structure as well as the payoffs they like.
An apparel manufacturing plant has estimated the variable cost to be $4.20 per unit. Fixed costs are $1,300,000 per year. Forty percent of its business is with one preferred customer and the customer is charged at cost. The remaining 60% of the business is with several different customers who are charged $20 per unit. If 200,000 total units are sold in a year, compute the unit cost per item.
Answer:
$10.7
Explanation:
Variable cost ($4.2 × 200,000)
$840,000
Fixed cost
$1,300,000
Total cost
= Fixed cost + variable cost
= $1,300,000 + $840,000
= $2,140,000
Therefore,
Unit cost per item
= Total cost / Total units sold
= $2,140,000 / 200,000
= $10.7
Federal contractors/employers that provide more than $10,000 in goods or services to the federal government must agree to do all of the following except (CSLO1. 2. 3) -(Learning Activities Readings) A. permit the Secretary of Labor to access books, records and accounts to determine compliance with E.O. 11246 B. furnish information and reports required by E.O. 21246 its implementing regulations C. permit the contracting federal agency to access to books, records and accounts to investigate and determine compliance with E.O. 11246 D. permit employees to access to books, records and accounts to determine compliance with E.O. 11246
Answer:
C) permit the contracting federal agency to access to books, records and accounts to investigate and determine compliance with E.O. 11246
Home Products, Inc., is planning the introduction of a new food dryer. To compete effectively, the dryer would have to be priced at no more than $40 per unit. An investment of $600,000 would have to be made in order to produce and sell the new dryer. The company requires a return on investment of at least 25% on new products. Assuming that the company expects to produce and sell 30,000 dryers per year, the target cost per dryer would be closest to:
Answer:
The Target cost per dryer will be $35 per dryer
Explanation:
First, we need to calculate the required return
Required return = Investment x Required rate of return
Where
Investment = $600,000
Required rate of return = 25%
Placing values in the formula
Required return = $600,000 x 25% = $150,000
Now calculate the return per dryer
Return per dryer = Required return / Expected sale = $150,000 / 30,000 = $5 per dryer
Now use following formula to calculate the target cost per dryer
Return Per dryer = Selling price per dryer - Target cost per dryer
$5 per dryer = $40 per dryer - Target cost per dryer
Target cost per dryer = $40 per dryer - $5 per dryer
Target cost per dryer = $35 per dryer
Arntson, Inc., manufactures and sells two products: Product R3 and Product N0. The annual production and sales of Product of R3 is 1,200 units and of Product N0 is 200 units. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below:Expected Production Direct Labor-Hours Per Unit Total Direct Labor-HoursProduct R3 1,200 4.0 4,800Product N0 200 2.0 400Total direct labor-hours 5,200The direct labor rate is $26.20 per DLH. The direct materials cost per unit is $228.00 for Product R3 and $300.00 for Product N0.The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity:Estimated Expected ActivityActivity Cost Pools Activity Measures Overhead Cost Product R3 Product N0 TotalLabor-related DLHs $ 40,536 4,800 400 5,200Production orders orders 60,270 1,300 200 1,500Order size MHs 432,975 3,900 3,500 7,400$ 533,781The unit product cost of Product R3 under activity-based costing is closest to: (Round your intermediate calculations to 2 decimal places.)
Answer:
Unitary cost= $926.52
Explanation:
First, we need to calculate the activities rate:
Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base
Labor-related= 40,536 / 5,200= $7.8 per direct labor hour
Production orders= 60,270 / 1,500= $40.18 per order
Order size= 432,975 / 7,400= $58.51 per machine hour
Now, we can allocate costs to product R3:
Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base
Labor-related= 7.8*4,800= 37,440
Production orders= 40.18*1,300= 52,234
Order size= 58.51*3,900= 228,189
Total allocated costs= $654,863
Finally, the unitary cost:
Direct material= $300
Direct labor= 20.2*4= $80.8
Overhead= 654,863 / 1,200= $545.72
Unitary cost= $926.52
Green, Inc., provides group term life insurance for all of its employees. The coverage equals twice the employee's annual salary. Sam, a vice president, worked all year for Green, Inc., and received $200,000 of coverage for the year at a cost to Green of $1,500. The Uniform Premiums (based on Sam's age) are $0.25 per month for $1,000 of protection. How much must Sam include in gross income this year
Accounts Receivable from sales to customers amounted to $80,000 and $70,000 at the beginning and end the year, respectively. Income reported on the income statement for 2022 was $252,000. Exclusive of the effect of other adjustments, the cash flows from operating activities to be reported on the statement of cash flows is
Answer:
$332,000
Explanation:
Cash flow from operating activities
Net Income $252,000
Adjust for changes in working capital items :
Decrease in Accounts Receivable ($80,000 - $70,000 $80,000
Net Cash Provided by Operating Activities $332,000
Conclusion
the cash flows from operating activities to be reported on the statement of cash flows is $332,000
Stylon Co., a women's clothing store, purchased $27,000 of merchandise from a supplier on account, terms FOB destination, 2/10, n/30, using the net method under a perpetual inventory system. Stylon returned merchandise with an invoice amount of $4,600, receiving a credit memo.
Required:
Journalize Stylon’s entry to record the purchase. If an amount box does not require an entry, leave it blank.
Answer:
Date Accounts titles and Explanation Debit Credit
Inventory ($27,000*98%) $26,460
Accounts payable $26,460
(Being journal entry to record the purchase)
Date Accounts titles and Explanation Debit Credit
Accounts payable ($4600*98%) $4,508
Inventory $4,508
(Being journal entry to record the merchandise return)
Management at TJX Companies is deciding whether to build a new goods distribution center. The distribution center will cost $60 million to build; the estimated additional first year revenue will be $5 million. The distribution center will last 50 years, with a depreciation rate of 5% per year. The opportunity cost of this investment is predicted to be 7% interest earned. a. What is the present value of the stream of payments resulting from this potential new goods distribution center? Round to the nearest million. $ million b. TJX build the distribution center because the .
Answer:
PV= $69,003,731.47
Explanation:
Giving the following information:
Cash flows= $5,000,000 for 50 years
Opportunity cost= 7%
First, we need to calculate the Future Value of the cash flow stream using the following formula:
FV= {A*[(1+i)^n-1]}/i
A= annual cah flow
FV= {5,000,000*[(1.07^50) - 1]} / 0.07
FV= $2,032,644,647
Now, the present value:
PV= FV / (1+i)^n
PV= 2,032,644,647 / (1.07^50)
PV= $69,003,731.47
Ethan is developing a magazine ad. He writes an attention-getting headline
and body copy that will engage readers. He places the company's logo near
the bottom of the ad. What is another basic part of print advertising that he
should consider including?
A. A visual that supports the message
B. A storyboard to engage the audience
C. Interactive features to engage the audience
D. A script arranged in two columns
Answer:
a visual that supports the message
Explanation:
answer
A basic part of print advertising that Ethan should consider for a magazine ad is a visual that supports the message. Thus the correct answer is option A.
What is advertising?Advertising refers to the methods used to draw attention to a good or service. In order to attract consumers' attention, advertising seeks to highlight a good or service. It is often used to market a particular product or service, although there are many other applications as well, with commercial advertising being the most popular.
Print advertisement that appear in magazines are referred to as magazine advertising. Magazine advertising makes use of print media to promote the goods, services, or message of your company in regional or national magazines. Along with a headline and body copy that grab readers' attention, a strong image will draw viewers to the advertisement.
Therefore, a visual that supports the message is a basic part of print advertising.
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If a company's gross profit turns out to be higher than it had expected, the gross profit method of estimating inventory will have ___ ending inventory
Answer:
underestimate is the answer mark me as brainlist ❣️
Statz Company had sales of $1,800,000 and related cost of goods sold of $1,150,000 for its first year of operations ending December 31, 20Y1. Statz provides customers a refund for any returned or damaged merchandise. At the end of 20Y1, Statz Company estimates that customers will request refunds for 1.5% of sales and estimates that merchandise costing $16,000 will be returned. Assume that on February 3, 20Y2, Buck Co. returned merchandise with an invoice amount of $5,000 for a cash refund. The returned merchandise originally cost Statz Company $3,100.
(a) Journalize the adjusting entries on December 31, 20Y1, to record the expected customer returns.
(b) Journalize the entries to record the returned merchandise and cash refund to Buck Co. on February 3, 20Y2.
Answer:
A. Dec 31
Dr Sales $27,000
Cr Customer refunds payable $27,000
Dr Estimated returns inventory $16,000
Cr Cost of goods sold $16,000
B. Feb 3
Dr Customer refunds payable $5,000
Cr Cash $5,000
Dr Merchandise Inventory $3,100
Cr Estimated returns inventory $3,100
Explanation:
(a) Preparation of the adjusting entries on December 31, 20Y1, to record the expected customer returns.
Dec 31
Dr Sales $27,000
Cr Customer refunds payable $27,000
($1,800,000*1.5% )
Dr Estimated returns inventory $16,000
Cr Cost of goods sold $16,000
(b) Preparation of the entries to record the returned merchandise and cash refund to Buck Co. on February 3, 20Y2.
Feb 3
Dr Customer refunds payable $5,000
Cr Cash $5,000
Dr Merchandise Inventory $3,100
Cr Estimated returns inventory $3,100
.
Sectoral shifts, frictional unemployment, and job searches Suppose the world price of cotton rises substantially. The demand for labor among cotton-producing firms in Texas will ________. The demand for labor among textile-producing firms in South Carolina, for which cotton is an input, will_________ . The temporary unemployment resulting from such sectoral shifts in the economy is best described as ____________ unemployment. Suppose the government wants to reduce this type of unemployment. Which of the following policies would help achieve this goal?
a. Establishing government-run employment agencies to connect unemployed workers to job vacancies
b. Offering recipients of unemployment insurance benefits a cash bonus if they find a new job within a specified number of weeks
c. Increasing the benefits offered to unemployed workers through the government's unemployment insurance program
Answer:
increase
decrease
frictional unemployment
a, b
Explanation:
Frictional unemployment . the period of time a person is unemployed from the period he leaves his current job and the time he gets another job. Eg. when a real estate agent who leaves a job in Texas and searches for a similar, higher-paying job in California.
As a result of the increase in price of cotton, the profit of making cotton would increase. So the production of cotton would increase and more labour would be needed
the cost of production for cotton producing firms would increase and this would discourage production. The demand for labour would increase
the government can reduce frictional unemployment by having policies that reduce the job search period and would incentivise labour to get employed quickly