Playa Inc. owns 85 percent of Seashore Inc. During 20X8, Playa sold goods with a 25 percent gross profit to Seashore. Seashore sold all of these goods in 20X8. How should 20X8 consolidated income statement items be adjusted g
Answer:
Debit the Cost of Sales and,
Credit the Revenue.
Explanation:
Transactions that occur within a group of companies must be eliminated. Playa is a Parent (85%) and Seashore Inc is a Subsidiary.
The effect of the Sale by Playa to Seashore is that Group Cost of Sales and Revenue would be over-valued by the price of intragroup sale.
Thus, the adjustment for this intragroup sale, is to Debit the Cost of Sales and Credit the Revenue.
Exercise F The luggage department of Sampson Company has revenues of $1,000,000; variable expenses of $250,000; direct fixed costs of $500,000; and allocated, indirect fixed costs of $300,000 in an average year. If the company eliminates this department, what would be the effect on net income
Answer:
Decrease by $250,000
Explanation:
Calculation for what would be the effect on net income.
We would be using Differential Analysis method to find the effect on the net income
Differential Analysis
Continue with Luggage Department; Eliminate Luggage Department; Effect on Income
Sales
1,000,000 0 -1,000,000
Variable cost
-250,000 0 250,000
Direct fixed costs
-500,000 0 500,000
Indirect fixed costs
-300,000 -300,000 0
Net Income
-$50,000 -$300,000 -$250,000
Therefore in a situation where the luggage department is eliminated, the income would decrease by $250,000
Mary buys an annuity that promises to pay her $1,500 at the end of each of the next 20 years. The appropriate interest rate is 7.5%. What is the value of this 20-year annuity today?
Answer:
PV= $15,291.74
Explanation:
Giving the following information:
Annual cash flow= $1,5000
Number of years= 20
Interest rate= 7.5%
To calculate the present value, first, we need to determine the future value using the following formula:
FV= {A*[(1+i)^n-1]}/i
A= annual cash flow
FV= {1,500*[(1.075^20) - 1]} / 0.075
FV= $64,957.02
Now, we can calculate the present value:
PV= FV/(1+i)^n
PV= 64,957.02/(1.075^20)
PV= $15,291.74
Suppose you have $1,500 and plan to purchase a 5-year certificate of deposit (CD) that pays 3.5% interest, compounded annually. How much will you have when the CD matures
Answer:
$ 1,781.53
Explanation:
The future value of the 5-year CD can be determined by using the future value formula stated below:
FV=PV*(1+r)^n
FV is the future value which is expected future amount after 5 years
PV is the initial amount used in purchasing the CD i.e $1500
r is the rate of return on the CD on an annual basis which is 3.5%
n is the number of years the investment would last which is 5 years
FV=$1500*(1+3.5%)^5
FV=$1500*1.187686306
FV=$ 1,781.53
Jackpot Mining Company operates a copper mine in central Montana. The company paid $1,150,000 in 2021 for the mining site and spent an additional $630,000 to prepare the mine for extraction of the copper. After the copper is extracted in approximately four years, the company is required to restore the land to its original condition, including repaving of roads and replacing a greenbelt. The company has provided the following three cash flow possibilities for the restoration costs: (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1)
Cash flow Probability
1 $330,000 25%
2 430,000 40%
3 630,000 35%
To aid extraction, Jackpot purchased some new equipment on July 1, 2021, for $150,000. After the copper is removed from this mine, the equipment will be sold. The credit-adjusted, risk-free rate of interest is 10%.
Required:
a. Determine the cost of the copper mine.
b. Prepare the journal entries to record the acquisition costs.
Answer:
a. Determine the cost of the copper mine.
$2,104,430b. Prepare the journal entries to record the acquisition costs.
Date X, 2021, acquisition of copper mine
Dr Copper mine 2,104,430
Cr Cash 1,780,000
Cr Asset retirement liability 324,430
July 1, 2021, acquisition of mining equipment
Dr Equipment 150,000
Cr Cash 150,000
Explanation:
estimated restoration costs = ($330,000 x .25) + ($430,000 x .4) + ($630,000 x .35) = $475,000
now we must adjust the restoration cost and determine its present value = $475,000 x 0.68301 (present value factor, 10%, 4 periods) = $324,430
total cost of copper mine = purchase cost + preparation costs + restoration costs = $1,150,000 + $630,000 + $324,430 = $2,104,430
The standard deviation of return on investment A is 25%, while the standard deviation of return on investment B is 20%. If the correlation coefficient between the returns on A and B is −0.260, the covariance of returns on A and B is _________. Multiple Choice –0.2080 –0.0130 0.0130 0.2080
Answer: –0.0130
Explanation:
Correlation given the variance and the standard deviation of the two returns can be calculated by;
Correlation coefficient = Covariance of returns on investment A and B / (Standard deviation of return on investment A * Standard deviation of return on investment B).
Rearranging the formula, Covariance becomes;
Covariance of returns on investment A and B = Correlation coefficient * (Standard deviation of return on investment A * Standard deviation of return on investment B)
Covariance of returns on investment A and B = -0.260 * 0.25 * 0.20
Covariance of returns on investment A and B = –0.0130
On January 1, Beckman, Inc., acquires 60 percent of the outstanding stock of Calvin for $54,480. Calvin Co. has one recorded asset, a specialized production machine with a book value of $10,000 and no liabilities. The fair value of the machine is $78,000, and the remaining useful life is estimated to be 10 years. Any remaining excess fair value is attributable to an unrecorded process trade secret with an estimated future life of 4 years. Calvin’s total acquisition date fair value is $90,800.
At the end of the year, Calvin reports the following in its financial statements:
Revenues 65,550 Machine 13,590 Common stock 10,000
Expenses 29,250 Other assets 27,710 Retained earnings 31,300
Net income 36,300 Total assets 41,300 Total equity 41,300
Dividends paid 5,000
Required:
Determine the amounts that Beckman should report in its year-end consolidated financial statements for noncontrolling interest in subsidiary income, noncontrolling interest, Calvin’s machine (net of accumulated depreciation), and the process trade secret.
Answer:
Beckman noncontrolling interest in subsidiary income $10,520
Calvin Machine (net of accumulated depreciation) $71,200
Explanation:
To calculate noncontrolling interest in subsidiary's income;
Revenue $65,550
Expenses $39,250 (29,250 + $6,800 + $3,200)
Net Income $26,300
Noncontrolling percentage = 40%
NonControlling Income = $10,520
Depreciation of Machine = [tex]\frac{Fair value of Machine - Book value}{estimated useful life}[/tex]
[tex]\frac{78,000 - 10,000}{10 years}[/tex] = 6,800 per annum
Amortization of trade secrets = [tex]\frac{Fair Value Total - Machine value}{Useful life}[/tex]
Amortization of trade secrets = [tex]\frac{90,800 - 78,000}{4 years}[/tex]
= 3,200
At December 31, 2017, Hawke Company reports the following results for its calendar year.
Cash sales $1,905,000
Credit sales 5,682,000.
In addition, its unadjusted trial balance includes the following items.
Accounts receivable $1,270,100 debit
Allowance for doubtful accounts 16,580 debit
Reqiured:
1. Prepare the adjusting entry for this company to recognize bad debts under each of the following independent assumptions.
A. Bad debts are estimated to be 1.5% of credit sales.
B. Bad debts are estimated to be 1% of total sales.
C. An aging analysis estimates that 5% of year-end accounts receivable are uncollectible.
2. Show how Accounts Receivable and the Allowance for Doubtful Accounts appear on its December 31, 2015, balance sheet given the facts in part 1a.
3. Show how Accounts Receivable and the Allowance for Doubtful Accounts appear on its December 31, 2015, balance sheet given the facts in part 1c.
Answer:
Hawke Company
1. Adjusting Entries to recognize bad debts under the following independent assumptions:
A. Bad debts are estimated to be 1.5% of credit sales:
Debit Bad Debts Expense $73,400
Credit Allowance for Doubtful Accounts $73,400
To record bad debts expenses and bring the allowance for doubtful accounts balance to $56,820.
B. Bad debts are estimated to be 1% of total sales:
Debit Bad Debts Expense $92,450
Credit Allowance for Doubtful Accounts $92,450
To record bad debts expenses and bring the allowance for doubtful accounts balance to $75,870.
C. An aging analysis estimates that 5% of year-end accounts receivable are uncollectible:
Debit Bad Debts Expense $80,085
Credit Allowance for Doubtful Accounts $80,085
To record bad debts expenses and bring the allowance for doubtful accounts balance to $63,505.
2. Balance Sheet as of December 31, 2015:
A. Accounts Receivable $1,270,100
less allowance for doubtful accounts 56,820
Net balance $1,213,280
3. Balance Sheet as of December 31, 2015:
C. Accounts Receivable $1,270,100
less allowance for doubtful accounts 63,505
Net balance $1,206,595
Explanation:
a) Data:
Cash sales $1,905,000
Credit sales 5,682,000
Accounts Receivable $1,270,100
Allowance for doubtful accounts $16,580 debit
1. Bad debts = 1.5% of $5,682,000 = $56,820
2. Bad debts are estimated to be 1% of total sales:
Bad debts = 1% of $7,587,000 = $75,870
3. An aging analysis estimates that 5% of year-end accounts receivable are uncollectible:
Bad debts = 5% of $1,270,100 = $63,505
The adjusting entries to recognize bad debts including how Accounts Receivable and the Allowance for Doubtful Accounts appear on its December 31, 2015 balance sheet are:
1a. Journal entry to estimate Bad debts at 1.5% of credit sales.
First step is to calculate the Bad debt accrual
Bad debt accrual=Total credit sales × Bad debt accrual percentage
Bad debt accrual=$ 5,682,000×1.5%
Bad debt accrual=$85,230
Second step is to calculate Bad debt expense for Dec 31
Bad debt accrual $85,230
Less Allowance for doubtful account balance ($16,580)
Bad debt expense for Dec 31 $101,810
Third step is to prepare the Adjusting Entry
Debit Bad debt expense $101,810
Credit Allowance for doubtful account $101,810
(To record Bad debts at 1.5% of credit sales)
1b. Journal entry to estimate Bad debts at 1% of credit sales.
First step is to calculate the Bad debt accrual
Total credit sales $5,682,000
Total cash sales $1,905,000
Total sales $7,587,000
($5,682,000+$1,905,000)
Bad debt accrual % 1%
Bad debt accrual $75,870
($7,587,000× 1%)
Second step is to calculate Bad debt expense for Dec 31
Bad debt accrual $75,870
Less Allowance for doubtful account balance ($16,580)
Bad debt expense for Dec 31 $92,450
Third step is to prepare the Adjusting Entry
Debit Bad debt expense $92,450
Credit Allowance for doubtful account $92,450
(To record Bad debts at 1% of credit sales)
1c. Journal entry to estimate 5% of year-end accounts receivable are uncollectible
First step is to calculate the Bad debt accrual
Accounts Receivable $1,270,100
Bad debt accrual % 5.0%
Bad debt accrual $63,505
($1,270,100×5%)
Second step is to calculate Bad debt expense for Dec 31
Bad debt accrual $63,505
Less Allowance for doubtful account balance ($16,580)
Bad debt expense for Dec 31 $80,085
Third step is to prepare the Adjusting Entry
Debit Bad debt expense $80,085
Credit Allowance for doubtful account $80,085
(To record accounts receivable uncollectible)
2. How Accounts Receivable and the Allowance for Doubtful Accounts should appear on its December 31, 2015, balance sheet:
Balance Sheet as on December 31, 2015
Accounts Receivable (gross) $1,270,100
Less: Allowance for doubtful accounts $101,810
Accounts Receivable (net) $1,168,290
3. How Accounts Receivable and the Allowance for Doubtful Accounts should appear on its December 31, 2015, balance sheet:
Balance Sheet as on December 31, 2015
Accounts Receivable (gross) $1,270,100
Less: Allowance for doubtful accounts $80,085
Accounts Receivable (net) $1,190,015
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Mercury Company reports depreciation expense of $40,000 for Year 2. Also, equipment costing $150,000 was sold for its book value in Year 2. There were no other equipment purchases or sales during the year. The following selected information is available for Mercury Company from its comparative balance sheet. Compute the cash received from the sale of the equipment. At December 31 Year 2 Year 1 Equipment $ 600,000 $ 750,000 Accumulated Depreciation-Equipment 428,000 500,000
Answer:
Mercury Company
Sale of Equipment account:
Equipment $150,000
Acc. Depreciation 112,000
Book value $38,000
Cash received $38,000
Explanation:
a) Data and Calculations:
Equipment Account:
Beginning balance $750,000
Ending balance 600,000
Sale of equipment $150,000
Accumulated Depreciation - Equipment account:
Beginning balance $500,000
Depreciation expense 40,000
Ending balance 428,000
Sale of Equipment $112,000
b) The Cash received from the sale of Mercury Company's equipment is equal to the book value in Year 2 according to the question. Since the book value (value after accumulated depreciation) is $38,000, that means that the equipment was sold at $38,000 recording no profit or loss for the company on the sale.
Karim Corp. requires a minimum $9,900 cash balance. If necessary, loans are taken to meet this requirement at a cost of 2% interest per month (paid monthly). Any excess cash is used to repay loans at month-end. The cash balance on July 1 is $10,300 and the company has no outstanding loans. Forecasted cash receipts (other than for loans received) and forecasted cash payments (other than for loan or interest payments) follow.
July August September
Cash receipts $25,900 $33,900 $41,900
Cash payments 30,850 31,900 33,900
Prepare a cash budget for July, August, and September.
Answer:
Karim Corp.
Cash Budget
For July, August and September
JULY$ AUGUST$ SEPTEMBER$
Beginning cash balance 10,300 9,900 9,900
Cash receipts 25,900 33,900 41,900
Total cash available 36,200 43,800 51,800
Cash payment 30,850 31,900 33,900
Interest on bank loan 0 91 53
Preliminary cash balance 5,350 11,809 17,847
Additional loan(loan repayment) 4,550 -1,909 -2,641
Ending cash balance 9,900 9,900 15,206
Loan Balance
Loan balance - Beginning of month 0 4,550 2,641
Additional loan(loan repayment) 4,550 -1,909 -2,641
Loan balance - End of month 4,550 2,641 0
August Interest on bank loan = 4550 * 2% = $91
September interest on loan = 2641 * 2% = 52.82 = $53
Mountain High Ice Cream Company transferred $65,000 of accounts receivable to the Prudential Bank. The transfer was made with recourse. Prudential remits 90% of the factored amount to Mountain High and retains 10% to cover sales returns and allowances. When the bank collects the receivables, it will remit to Mountain High the retained amount (which Mountain estimates has a fair value of $5,500). Mountain High anticipates a $3,500 recourse obligation. The bank charges a 3% fee (3% of $65,000), and requires that amount to be paid at the start of the factoring arrangement.
Required:
Prepare the journal entry to record the transfer on the books of Mountain High assuming that the sale criteria are met.
Answer:
Dr Cash 56,550
Dr Receivable from factor 5,500
Dr Loss on sale of receivables 6,450
Cr Accounts receivables 65,000
Cr Recourse liability 3,500
Explanation:
cash = ($65,000 x 90%) - factoring fees = $58,500 - $1,950 = $56,550
factoring fees = $65,000 x 3% = $1,950
loss on sale of receivables (includes factoring fees) = (accounts receivables + recourse liability) - (cash + receivable from factor) = ($65,000 + $3,500) - ($56,550 + $5,500) = $68,500 - $62,050 = $6,450
Advika is a resident of India who exports hand-dyed fabrics to other nations. Since India has an exchange control system, what does this mean for Advika
Answer: The Reserve Bank of India keeps all of Advika’s foreign currency for her.
Explanation:
When a country uses exchange controls, it limits the amount of foreign currency that can come into a country. This is usually done to ensure stability in the money market of the country as well as to improve the balance of payments for the country.
One way of implementing exchange control is for all foreign currency to go through the Central bank of the country. Should a citizen need access to foreign currency, they would need to apply to the central bank to access it. With India having an exchange control system, the Reserve Bank of India keeps all foreign currency and Advika would have to apply for it should she need it.
An account is today credited with its annual interest thereby bringing the accountbalance to $12,490. The interest rate is 5.70% compounded annually. You plan tomake annual withdrawals of $1,450 each. The first withdrawal is in exactly one yearand the last in exactly 9 years. Find the account balance immediately after the lastwithdrawal.
Answer:
Explanation:
Let the account balance be B .
Equating the present value of money at 5.7 % discount
12490 = 1450 ( PVIFA , 5.7 , 9 ) + B ( PVIF , 5.7 , 9 )
= 1450 x 6.8938 + .6072 x B
= 9996.01 + .6072B
.6072 B = 2494
B = 4107
Panner, Inc., owns 30 percent of Watkins and applies the equity method. During the current year, Panner buys inventory costing $126,000 and then sells it to Watkins for $180,000. At the end of the year, Watkins still holds only $26,400 of merchandise. What amount of gross profit must Panner defer in reporting this investment using the equity method
Answer:
The gross profit that will be deferred is $2376
Explanation:
The cost of inventory = $126000
Selling price of inventory (revenue) = $180000
The remaining inventory with Watkins = $26400
Gross profit percentage = (revenue – cost) / revenue
Gross profit percentage = (180000 – 126000) / 180000 = 0.3 or 30%
Remaining value = $26400 × 30% = 7920
Ownership = 7920 × 30% = $2376
The gross profit that will be deferred is $2376
Koczela Inc. has provided the following data for the month of May:
Inventories:
Beginning Ending
Work in process $ 25,000 $ 20,000
Finished goods $ 54,000 $ 58,000
Additional information:
Direct materials $ 65,000
Direct labor cost $ 95,000
Manufacturing overhead cost incurred $ 71,000
Manufacturing overhead cost applied to Work in Process $ 69,000
Any underapplied or overapplied manufacturing overhead is closed out to cost of goods sold.
The cost of goods manufactured for May is:___________
$229,000
$234,000
$231,000
$236,000
Answer:
$234,000
Explanation:
cost of goods manufactured = beginning work in process + direct materials + direct labor + manufacturing overhead cost applied - ending work in process
cost of goods manufactured = $25,000 + $65,000 + $95,000 + $69,000 - $20,000 = $234,000
cost of goods sold = beginning finished inventory + cost of goods manufactured - ending finished inventory + underapplied overhead
cost of goods sold = $54,000 + $234,000 - $58,000 + $2,000 = $232,000
A "tariff" on imported products is an example of a trade barrier that is always preferred to the free trade, because it generates government revenues in addition to restricting the amounts of imports.
A. True
B. False
Answer:
The answer is true
Explanation:
One of the most common trade barriers is a tariff. Tariff is a tax imposed by the government on imported goods and services. Imposing tariffs on imported goods and services raise their prices.
Imposing tariff on imported goods can either be done to raise government revenue or to protect indigenous companies.
Choose three distinct but related business functions (e.g., inventory control, purchasing, payroll, accounting, etc.). Write a short paper describing how interfacing the information systems of these three functions can improve an organization’s performance.
Answer:
The three functions can be described as follows:
i) Inventory control
ii) Procurement
iii) Sales
Explanation:
Following are the description of the given points:
In point (i):
It is also the center of the operational activities, in which it would be accountable to always get rid of a perfect product inventory and thus not have an untouched inventory in the storage facility.
In point (ii):
This is the first step for just a brand until it hits the end user. It is sourcing, which most appropriate and progressed necessity for both the manufacturing of the company.
In point (iii):
For the business, it primarily provides, a large number of alternative considerations. However, certain expenses it control, including the expense of keeping as well as the wastefulness in raw resources, all will be determined from selling price.
What represents a difference in the process by which a monopolistic competitor and a monopolist make their respective decisions about quantity and price?
Answer:
There is no need for the monopolists to have the fear for entry
Explanation:
So, this particular problem or question is what is the part of economics known as the microeconomics. So, let us take the definitions of some important terms in the question which is going to assist us in solving this particular problem or question.
=> MONOPOLISTIC COMPETITOR: the term monopolistic competitor will also mean to say imperfect competitor. That is to say the kind of competition in which sellers or competitors compete in order for them to get some kind of advantage over the prices of goods and services in the market. The demand curve thus now has a download slope.
=> MONOPOLIST: Monopolists have advantage over the price of products or services in the market.
On June 10, 20X8, Playoff Corporation acquired 100 percent of Series Company's common stock. Summarized balance sheet data for the two companies immediately after the stock acquisition are as follows:
Playoff Corp. Series Company
Item Book Value Fair Value
Cash $ 15,000 $ 5,000 $ 5,000
Accounts Receivable 30,000 10,000 10,000
Inventory 80,000 20,000 25,000
Buildings & Equipment (net) 120,000 50,000 70,000
Investment in Series Stock 100,000
Total $ 345,000 $ 85,000 $ 110,000
Accounts Payable $ 25,000 $ 3,000 $ 3,000
Bonds Payable 150,000 25,000 25,000
Common Stock 55,000 20,000
Retained Earnings 115,000 37,000
Total $ 345,000 $ 85,000 $ 28,000
Required:
a. Prepare the consolidating entries required to prepare a consolidated balance sheet immediately after the acquisition of Series Company shares. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
b. Record the excess value (differential) reclassification entry.
Answer:
a. Consolidating Journal Entries:
Description Debit Credit
June 10, 20X8:
Cash $5,000
Accounts receivable 10,000
Inventory 25,000
Building & Equipment 70,000
Unrealized Gain on fair value $25,000
Accounts payable 3,000
Bonds payable 25,000
Investment in Series Stock 100,000
Excess Value (differential) 43,000
To record consolidating entries in the consolidated parent.
Goodwill 43,000
Excess Value (differential) 43,000
To record the reclassification of the excess value as Goodwill on acquisition.
Explanation:
a) Summarized balance sheet data
Playoff Corporation Series Company
Item Book Value Fair Value
Cash $ 15,000 $ 5,000 $ 5,000
Accounts Receivable 30,000 10,000 10,000
Inventory 80,000 20,000 25,000
Buildings & Equipment (net) 120,000 50,000 70,000
Investment in Series Stock 100,000
Total $ 345,000 $ 85,000 $ 110,000
Accounts Payable $ 25,000 $ 3,000 $ 3,000
Bonds Payable 150,000 25,000 25,000
Common Stock 55,000 20,000
Retained Earnings 115,000 37,000
Total $ 345,000 $ 85,000 $ 28,000
b) Consolidated entries are made for assets and liabilities acquired of the subsidiary using fair values. An unrealized gain on fair value account is created to account for the differences in fair values. Any excess or differential after consolidation and above the fair values is regarded as Goodwill arising from the acquisition.
1. Peter applied for a job at an accounting firm and a consulting firm. He knows that 50% of similarly qualified applicants receive job offers from the accounting firm; only 40% of similarly qualified applicants receive job offers from the consulting firm Peter also knows that 60% of similarly qualified applicants receive an offer from one firm or the other. Hints: A
Answer:
75%
Explanation:
Assume that:
X is the probability that the Peter, qualified accountant would receive offer from the accounting firm AND
Y is the probability that the Peter, qualified accountant would receive offer from the consulting firm.
Here,
P(X) is 50%, P(Y) is 40% and P(X∪Y) is 60%
Now we want to find P(X/Y) = ?
We also know that:
P(X/Y) = P(X∩Y) STEP1 / P(Y)
By putting values, we have:
P(X/Y) = 0.3 / 0.4 = 0.75 = 75%
Step 1: Find P(X∩Y)
P(X∪Y) = P(X) + P(Y) - P(X∩Y)
This implies that:
P(X∩Y) = P(X) + P(Y) - P(X∪Y)
By putting values we have:
P(X∩Y) = 0.5 + 0.4 - 0.6 = 0.3
This question explores the calculation of the unemployment rate. You will be provided some imperfect employment data for four different countries and asked to identify the unemployment rate. Task 1: The population of Asartaland is 95. Of these 95 individuals, 75 are in the labor force and 65 are employed. What is the unemployment rate in Asartaland
Answer:
Unemployment rate= 0.13= 13%
Explanation:
Giving the following information:
Of these 95 individuals, 75 are in the labor force and 65 are employed.
To calculate the unemployment rate, we need to use the following formula:
Unemployment rate= unmeployed population / labor force
Unemployment rate= 10/75
Unemployment rate= 0.13
The burn down chart for a team showed a peculiar trend. It started dropping rapidly at the beginning of the Sprint and then seemed to plateau in the middle. A day before the Sprint, the line dipped rapidly and reached the horizontal axis. Whiat is the most likely reason for this trend?
Answer:
Explanation:
In the scenario being described, it is the most likely that the team encountered a major blocking issue in the middle of the Sprint which was resolved only toward the end. This can be deduced from the graph due to it plateauing in the middle, which usually happens when tasks are not finishing, which ultimately causes a blocking issue and since the chart went back to normal afterwards, they most likely resolved the blocking issue.
WACC and Cost of Common Equity
Kahn Inc. has a target capital structure of 45% common equity and 55% debt to fund its $10 billion in operating assets. Furthermore, Kahn Inc. has a WACC of 12%, a before-tax cost of debt of 10%, and a tax rate of 25%. The company's retained earnings are adequate to provide the common equity portion of its capital budget. Its expected dividend next year (D1) is $3, and the current stock price is $34.
A. What is the company's expected growth rate?
B. If the firm's net income is expected to be $1.6 billion, what portion of its net income is the firm expected to pay out as dividends?
Answer:
A. What is the company's expected growth rate?
current stock price = expected dividend / (required rate of return - growth rate)
$34 = $3 / (12% - g)
12% - g = $3 / $34 = 8.82%
growth rate = 12% - 8.82% = 3.18%
B. If the firm's net income is expected to be $1.6 billion, what portion of its net income is the firm expected to pay out as dividends?
WACC = (equity x Re) + [debt x cost of debt x (1 - tax rate)]
12% = (45% x Re) + (55% x 10% x 0.75) = 0.45Re + 4.125%
0.45Re = 12% - 4.125% = 7.875%
Re = 7.875% / .45 = 17.5%
growth rate = (net income / equity) x (1 - dividend payout ratio)
3.18% = ($1.6 billion / $4.5 billion) x (1 - dividend payout ratio)
3.18% = 0.3556 x (1 - dividend payout ratio)
1 - dividend payout ratio = 3.18 / 0.3556 = 0.089
dividend payout ratio = 1 - 0.089 = 0.911
this means that the company distribute 91.1% of its net income to its stockholders
Maria, the landlord, refuses to fix a small leak in the roof that was there prior to the current tenant. Juan, the current tenant, has just discovered the leak after a heavy rain. The consequence is that black mold has been forming in the attic for quite some time. Juan still has significant time remaining on his lease. Juan has notified Maria in writing of the mold and leak issue but has received no response. He is concerned about the premises becoming unsafe to live in. It has been 14 days since he emailed her his notification. What are all of Juan’s options if Maria declines to do the repairs? Please discuss all remedies Juan may seek. Please remember to reference the contract and text to support your analysis.
Answer:
Please see answers below
Explanation:
Joan may as well put a call through to Maria in addition to his previous mail. Several remedial options are available to Juan and each has its own merits and demerits. It is proper for the tenant to consider each options carefully and seek legal opinion where necessary. However, if Maria declines to do the repairs, Juan may seek the following remedies
• Repair and deduct remedy . In this type of remedy, a tenant may deduct money that is equivalent of a month's rent to cover the cost of the repair or defect. Rental unit 156 covers a condition whether faulty or substandard rented unit could affect the tenant's health and safety. Since the landlord has refused to do the repair, she is guilty of implied warranty of habitability which includes leak in the roof, gas leak, no running water etc. Also, the tenant may not have to file a lawsuit against the landlord since this type of remedy has legal aid. Other conditions attached in addition to the above are ; the repairs cannot cost more than a month's rent, the tenant cannot use the repair and deduct remedy more that twice in any 12 month period, tenant must have informed the landlord in writing and through calls of the faulty area that requires repair. His family or pets must not be the cause of the faulty area that needed to be repaired etc.
• The abandonment remedy . Here, the tenant could move out of the faulty unit or defective rental unit due to its substandard condition which could affect his health and safety. Where the tenant uses the abandonment remedy judiciously, he is not liable to pay any other rent once he has abandoned or moved out of the defective rental unit. The conditions attached are that; the defects must be serious and directly related to the tenant's health and safety, the tenant or his family must not be the cause of the faulty space that requires repair. Moreover, the tenant must have informed the landlord whether in writing or orally telephone calls of the defects that requires repair.
• The rent withholding remedy. Legally, a tenant could withhold house rent if the landlord fails to take care of serious defects that negates the implied warranty of habitability. Conditions attached to this type of remedy are; the defects to be repaired must have threatened the tenant's safety and wellbeing. Again, the faulty or defective unit must be such that it becomes uninhabitable for the tenant . The tenant, his family or pets must not be the cause of the defects that requires repairs. The tenant must have also notified the landlord either through phone calls on in writing, amongst others.
• The tenant could also file a lawsuit against the landlord to recover the cost expended to fixing the faulty repairs where the landlord was not willing to do so. Conditions that must be met before this option could stand in the court of law are; the rental unit has serious defect that is not safe for living. A housing inspector has inspected the house and found to be short of minimum requirements for habitable place etc. A tenant may seek this type of redress where the option for out of court settlement has failed with the landlord.
Which of the following is an advantage of a partnership?
A.ease of starting and ending the business
B. Shared management and pooled skills
C. Unlimited liability
D. Little time commitment
Answer:
B
Explanation:
as if u share a business then the time and management is also shared
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Harmony Company sells handminusknit scarves. Each scarf sells for $ 45. The company pays $ 70 to rent vending space for one day. The variable costs are $ 12 per scarf. How many scarves should the company sell each day in order to break even? (Round your answer up to the nearest whole scarf.)
Answer:
2.12, rounded up to 3
Explanation:
To solve the equation, we first need to set up an equation.
Let x represent the number of scarves. We want one side of the equation to be the amount earned and the other to be the cost
45x is how much they earn since each scarf is $45
70+12x is how much they cost for rent and production
45x=70+12x
Subtract 12x from both sides
33x=70
Divide both sides by 33
x=2.12
It says we should round up so 3 scarves to break even
Factory Overhead Rates, Entries, and Account Balance Eclipse Solar Company operates two factories. The company applies factory overhead to jobs on the basis of machine hours in Factory 1 and on the basis of direct labor hours in Factory 2. Estimated factory overhead costs, direct labor hours, and machine hours are as follows: Factory 1 Factory 2 Estimated factory overhead cost for fiscal year beginning August 1 $18,500,000 $44,000,000 Estimated direct labor hours for year 800,000 Estimated machine hours for year 1,250,000 Actual factory overhead costs for August $1,515,800 $3,606,300 Actual direct labor hours for August 64,500 Actual machine hours for August 105,000 a. Determine the factory overhead rate for Factory 1. Round your answer to two decimal places.
Answer:
Predetermined manufacturing overhead rate= $14.8 per machine hour
Explanation:
Giving the following information:
Factory 1
Estimated factory overhead= $18,500,000
Estimated machine hours for year 1,250,000
To calculate the predetermined manufacturing overhead rate we need to use the following formula:
Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base
Predetermined manufacturing overhead rate= 18,500,000/1,250,000
Predetermined manufacturing overhead rate= $14.8 per machine hour
On the first day of 2016, Holthausen COmpany acquired the assets of Leftwich Company including several intangible assests. These include a patent on Ledtwicj's primary product, a device called a plentiscope. Leftwich carried the patent on its book for $1,500, but Holthausen believes that the fair value is $200,000. The patent expires in seven years, but companies can be expected to develop competing patents within three years. Holthausen believes that, with expected technlogical improvements, the product is marketable for a t least 20 years.
The registration of the trademark for the Leftwich name is scheduled to expire in 15 years. However, the Leftwich brand name, which Holthausen believes is worth $500,000, could be applied to related products for many years beyond that.
As part of the acquisition, Leftwich's principal researcher left the company. As part of the acquisition, he signed a five-year noncompetition agreement that prevents him from developing competing products. Holthausen paid the scientist $300,000 to sign the agreement.
a. What amount should be capitalized for each of teh identifiable intangible assets?
b. What amount of amortization expense should Holthausen record in 2016 for each asset?
Answer:
Holthausen Company and Leftwich Company
Intangible Assets:
a) Amount to be capitalized:
1) Patent: $200,000
2) Trademark: $500,000
3) Non-competition Agreement: $300,000
b) Amount of Amortization Expense for 2016:
1) Patent: $200,000/7 years = $28,571.43
2) Trademark: $500,000/15 years = $33,333,33
3) Non-competition Agreement: $300,000/5 = $60,000
Explanation:
The fair values of the "plentiscope" patent and Leftwich's branded trademark should be capitalized as intangible assets, while the cost of the non-competition agreement with Leftwich's principal researcher should be capitalized.
For the amortization of the Leftwich-connected intangibles, we have adopted the straight-line method, in the absence of any prescribed method. The patent expiration in 7 years was used as the basis for its useful life, despite Holthausen belief that the product could be marketable for at least 20 years.
The trademark was amortized over its remaining useful life of 15 years as given, while the non-competition agreement was amortized for 5 years when the agreement remains effective.
Statfeld Company's income statement for the current month shows that the company sold 300,000 units of its product and earned a net operating income of $450,000, Management is very pleased with the result and believes the company's financial position is strong because sales would have to go down by 40% from the current level before losses would occur. Management further believes that if the company runs a new TV commercial at a cost of $50,000 per month, sales volume next month could grow by 20% from the current sales level without the need to lower the sales price. If this action is taken, what will be the increase decrease in the next month's net operating income from the current month?
a. Increase of $175,000
b. Increase of $40,000
c. Increase of $225,000
d. Decrease by $50,000
e. None of the above.
Answer:
b. Increase of $40,000
Explanation:
Incremental Analysis of the Operating Profit arising from new TV commercial
Hint : Consider Incremental amounts Only
Operating Income ( $450,000 × 20 %) $90,000
Less Cost of new TV commercial ($50,000)
Incremental Income / (loss) $40,000
Conclusion :
There will be an increase in next month's net operating income from the current month of $40,000 .
To prepare a budgeted balance sheet as of December 31, 2020, data is needed from the ______ December 31, 2019. income statement for the year ended
Answer and Explanation:
For preparing the budgeted balance sheet as of December 31,2020 we need to refer the data of balance sheet as of December 31,2019 so that the firm could get an idea.
Also by referring the income statement, statement of owner equity, profit and loss account we can get an idea so that it becomes easy for the company to prepare the budgeted balance sheet
Answer:
data is needed from the balanceh sheet as of