The question is incomplete:
You work for AdSmart, a marketing research firm. You and a new coworker are meeting a potential client for lunch. You have several morning meetings on the same day as the lunch meeting, so you arrange to meet your coworker and the potential client at 12:15 p.m. at the restaurant. You arrive five minutes early, and the prospective client arrives shortly thereafter. You both wait in the lobby until 12:35 p.m. when you decide to be seated. You check your smart phone and see no received communications from your colleague. Finally, at 12:45 p.m., your coworker arrives.
During the lunch, your coworker tells several white lies and reveals information regarding your boss that should have been kept confidential. The prospective client doesn't seem to notice these indiscretions, however, when your coworker begins to badmouth his former employer, a competitor of AdSmart, the client appears ill at ease.
Despite the rough start to the lunch meeting, all ends well. You believe that with the appropiate follow-up, the potential client will become one of the firm's more lucrative partnerships. Once you are back at the office, you debrief with your coworker and discuss the next steps. You decide to take on the task of putting together the proposal the client has requested, and your colleague agrees to send a follow-up note thanking the client and indicating that the proposal will arrive within the next week.
When you send off the proposal three days later, you inadvertently learn from the client that he never received any correspondence from your coworker. "What dimension of professional behavior did your coworker violate when with the prospective client?
Answer:
Courtesy and respect
Explanation:
The dimension of professional behavior that your coworker violated with the prospective client is courtesy and respect. He violated courtesy because it is about being polite and he was not polite because he arrived late to the meeting and he didn't let you know about it.
Also, he violated responsibility because it is about doing the things that you are in charge of and he was in charge of sending a follow-up note and he didn't do it.
An investor considers investing $10,000 in the stock market. He believes that the probability is 0.30 that the economy will improve, 0.40 that it will stay the same, and 0.30 that it will deteriorate. Further, if the economy improves, he expects his investment to grow to $15,000, but it can also go down to $8,000 if the economy deteriorates. If the economy stays the same, his investment will stay at $10,000.a. What is the expected value of his investment?b. Should he invest the $10,000 in the stock market if he is risk neutral?c. Is the decision clear-cut if he is risk averse? Explain.
Answer:
a. What is the expected value of his investment?
$10,900b. Should he invest the $10,000 in the stock market if he is risk neutral?
If the investor is risk neutral, then he pays little attention to market risk, therefore, he/she should invest because the expected value is higher than the investment.c. Is the decision clear-cut if he is risk averse?
If the investor is risk averse, it means that he/she is afraid of market risk and likes to make decisions that involve the least possible risk. In this case, the possibility of losing money is not that large (in my opinion) and the expected value is relatively high, but a risk averse investor would probably prefer an investment that yields a lower rate but is more secure, e.g. US securities.Explanation:
total investment $10,000
if economy improves = 0.30 x $15,000 = $4,500if economy remains the same = 0.40 x $10,000 = $4,000if economy deteriorates = 0.30 x $8,000 = $2,400total expected value = $10,900
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
A plant asset is acquired by a business on January 2, 20X6, for $10,000. The asset's estimated residual value is $2,000 and it's estimated useful life is 5 years. Management chooses to use straight-line depreciation. On January 2. 20X8. the asset is sold for $5,000. The entry to record the sale has what effect on the financial statements? a. Assets decrease, expenses increase, and net income and owners' equity decrease. b. Assets decrease and owners' equity and expenses both increase. c. Has no effect on the financial statements if the journal entry is in balance. d. Assets increase, expenses decrease, and net income and owners' equity increase.
Answer:
Option A
Explanation:
From the calculation below, it is clearly seen that Assets are being decreased and expenses are increased therefore Option A is correct.
Workings
Depreciation expense = (cost - residual value) / useful life
Depreciation expense = 10,000 - 2,000 / 5
Depreciation expense = $1600
Accumulated depreication = depreciation x 2 years -= $3,200
Carrying value = 10,000 - 3,200
Carrying value = $6,800
Disposal = $5,000
Loss on disposal = $1,800
Mr. and Ms. Kingsley owned acre as joint tenants in fee simple absolute. Ms Kingsley secretly conveyed her interest to herself in an instrument that added, "I hereby terminate the joint tenancy in Black-acre with Mr. Kingsley." Ms. Kingsley thereafter leased a portion of the property to Mr. Matthew, over the objections of Mr. Kingsley for Mr. Matthew to use for holding boxing matches. Their lease provided that Mr. Matthew would pay $1000.00 on the first day of each month during which he was permitted to use the property. Mr. Kingsley demanded from Ms. Kingsley one-half of the rents received from Mr. Matthew.
Required:
Describe the property relations between the parties and Mr. Kingsley's rights and remedies.
Answer:
Mr. and Ms. Kingsley as Joint Tenants
1. Property Relations between Mr. and Ms. Kingsley: The titles show that the Kingsleys are living together but not married partners. However, the Black-acre is jointly owned by these partners. Each has equal rights and obligations over the acre. Ms. Kingsley does not have absolute right to sell or lease any part of the acre without the consent of Mr. Kingsley or without obtaining a court permit to sell or lease, especially upon Mr. Kingsley's objections. She also lacks the legal right to secretly "terminate the joint tenancy in Black-acre" without the knowledge of Mr. Kingsley or without going through the applicable court process.
2. Mr. Kingsley's Rights and Remedies: Having leased a portion of the acre to Mr. Matthew, Mr. Kingsley is entitled to half of the monthly lease payments. He also has the right to demand from Ms. Kingsley one-half of the rents from the lease. He can, in the absence of Ms. Kingsley's refusal, initiate a court process to enforce his joint-tenancy rights.
Explanation:
Joint-tenancy can exist between Mr. Kingsley and Ms. Kingsley, whether they are legally married or not. Joint-tenancy can also exist between two or more parties without the intention of marriage. The term is a legal term that describes an equally shared ownership interest in a property. Joint-tenancy deeds are established in order to avoid the need for a probate in the case of a party's death.
Sinking fund bonds: A. Are bearer bonds. B. Are registered bonds. C. Require equal payments of both principal and interest over the life of the bond issue. D. Require the issuer to set aside assets at specified amounts to retire the bonds at maturity. E. Decline in value over time.
Answer:
The answer is D.
Explanation:
Sinking funds require the issuer(borrower) to set aside assets at specified amounts to retire the bonds at maturity. Sinking fund helps the issuer to secure a bond with lower yield.
An agreed amount is deposited at an agreed period (e.g yearly) so as to pay of the par value or principal value at maturity.
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.
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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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.
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.
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 .
Which of the following is a characteristic of both the sales approach for service-type warranties and the expense approach for assurance-type warranties?
a. Estimated liability under warranties
b. Warranty expense
c. Unearned warranty revenue
d. Warranty revenue
Answer: Unearned warranty revenue
Explanation:
Unearned warranty revenue is usually shown as an unearned revenues in the accrued liabilities during the preparation of the balance sheets.
It should be noted that the unearned warranty revenue is a characteristic of both the sales approach for service-type warranties and the expense approach for assurance-type warranties.
The aggregate demand and aggregate supply model is a useful simplification of the macroeconomy used to explain short-run fluctuation in economic activity around its long-run trend.
a) The vertical axis of a diagram of the aggregate demand and aggregate supply curves measures which of the following?
A. An economy's price level.
B. The amount of a particular representative good produced in the economy.
C. The price of a particular representative good produced in the economy.
b) Which of the following are reasons that the short-run aggregate supply curve slopes upward?
A. As the price level rises, firms expand their production because they can sell their output for more money.
B. As the price level rises, firms find it more profitable to hire workers at any given wage.
C. As the price level rises, firms decrease their investment, because it is more expensive to purchase capital.
Answer:
The correct answers are:
a) A. An economy's price level.
b) A. As the price level rises, firms expand their production because they can sell their output for more money.
Explanation:
On the one hand, in this type of economic model, the aggregate supply and demand represent the economy's price and quantity level regarding the output of the country as a whole. Therefore that in the vertical axis of the diagram the curves measures the price level of the economy and in the horizontal axis the curves measure the output that the economy produces at that given price.
On the other hand, the slope of the aggregate supply is upward because of the same reason as it is in the supply curve, because of the law of the supply, that states that there is a direct relationship between the price of the good an its quantity offered. Thefore that when the price level rises the firms will produce more because they can sell their production at a higher price.
Which of the following is not considered to be a liability? Answers: a. Wages Payable b. Unearned Revenues c. Accounts Payable d. Accounts Receivable
Answer:
d. Accounts Receivable.
Explanation:
In Financial accounting, liability can be defined as the amount of money being owed by an individual or organization to another.
Simply stated, liability is a debt being owed and as such it usually has "payable" in its account title on the balance sheet.
Generally, liabilities are recorded on the right side of the balance sheet and it comprises of financial informations such as warranties, bonds, loans, deferred revenues, mortgages, account payable etc.
Accounts Receivable is not considered to be a liability because it is the payment a business firm would receive from its customers for goods purchased or services taken on credit. Accounts Receivable are recorded in the current assets section of the balance sheet because they add value to a business firm.
A parent company exchanges 5,000 shares of its $2 par value common stock, with a market value of $10/share, for all of the shares owned by the subsidiary's shareholders, resulting in a $50,000 total purchase price. On the acquisition date, the subsidiary reported a book value of Stockholders' Equity of $37,500, comprised of $15,000 of Common Stock and $22,500 of Retained Earnings. An examination of the subsidiary's balance sheet revealed that book values were equal to fair values for all assets except for PPE (net), which has a book value of $20,000 and a fair value of $32,500.
a. Prepare the entry that the parent makes to record the investment.
b. Prepare the [E] and [A] consolidation entries.
Answer:
a. The entry that the parent makes to record the investment
Investment in Subsidiary $50,000 (debit)
Common Stocks $50,000 (credit)
b. Consolidation Entries
Common Stock (Subsidiary) $15,000 (debit)
Retained Earnings (Subsidiary) $35,000 (debit)
Investment in Subsidiary $50,000 (credit)
Explanation:
The entry that the parent makes to record the investment
Investment in Subsidiary $50,000 (debit)
Common Stocks $50,000 (credit)
Recognize the Investment in Subsidiary and recognize the Equity element : Common Stocks
Consolidation Entries
Common Stock (Subsidiary) $15,000 (debit)
Retained Earnings (Subsidiary) $35,000 (debit)
Investment in Subsidiary $50,000 (credit)
Eliminate Common Items and recognize Goodwill or Gain on Bargain Purchase if any.
Which of the following statements regarding a partner's basis of inventory received in a liquidating distribution is True?
A) Partners may either increase or decrease the basis in inventory distributed in a liquidating distribution.
B) Partners may only increase the basis in inventory distributed in a liquidating distribution.
C) Partners may only decrease the basis in inventory distributed in a liquidating distribution.
D) None of these statements is True.
Answer:
C) Partners may only decrease the basis in inventory distributed in a liquidating distribution.
Explanation:
Liquidating distribution refers to the absence of dividend distribution that is to be allocated to the shareholders in case of the partial or complete liquidation. In this, the whole equity is allocated along with the profit-sharing
In case fo inventory received based on a partner basis, the partners are only eligible to decrease the inventory basis
hence, the option c is correct
The following cost behavior patterns describe anticipated manufacturing costs for 2013: raw material, $8.20/unit; direct labor, $11.20/unit; and manufacturing overhead, $386,400 + $9.20/unit. Required: If anticipated production for 2013 is 42,000 units, calculate the u
Answer:
Note: The missing part of the question is "using variable costing and absorption costing. Explain the difference"
Solution
According to variable costing, the unit cost based was
= $8.20 + $11.20 + $9.20
= $28.6
According to absorption costing,
Total Manufacturing costs= Direct material + Direct labor + Overhead
= $8.20 + $11.20 + ($386,400/42,000 units) + $9.20
= $8.20 + $11.20 + $9.2 + $9.2
= $37.8
The difference between the variable costing and the absorption cost is because the product costing using variable costing method only includes variable costs.
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.
Sampson Co. sold merchandise to Batson Co. on account, $46,000, terms 2/15, net 45. The cost of the merchandise sold is $38,500. Batson Co. paid the invoice within the discount period. Assume both Sampson and Batson use a perpetual inventory system.
Required:
Prepare the entries that both Sampson and Batson Companies would record.
Answer:
Sampson Company
Dr Accounts Receivable -Batson Co.45,080
Cr Sales 45,080
Dr Cost of Merchandise Sold38,500
Cr Merchandise Inventory38,500
Dr Cash 45,080
Cr Accounts Receivable-Batson Co.45,080
Batson Company
Dr Merchandise Inventory45,080
Cr Accounts Payable - Sampson Co.45,080
Dr Accounts Payable -Sampson Co.45,080
Cr Cash45,080
Explanation:
Preparation of the Journal entries for both Sampson and Batson Companies would record
Based on the information given we were told that Sampson Company sold merchandise to Batson Company At the amount of $46,000 with 2/15 term while the merchandise was sold at the amount of $38,500 and since we are Assuming that both of them uses a perpetual inventory system this means the transaction will be recorded as:
Journal Entries for Sampson Company
Dr Accounts Receivable -Batson Co.45,080
Cr Sales 45,080
(2%*46,000=920)
(45,000-920=45,080)
Dr Cost of Merchandise Sold38,500
Cr Merchandise Inventory38,500
Dr Cash 45,080
Cr Accounts Receivable-Batson Co.45,080
Journal Entries for Batson Company
Dr Merchandise Inventory45,080
Cr Accounts Payable - Sampson Co.45,080
(2%*46,000=920)
(45,000-920=45,080)
Dr Accounts Payable -Sampson Co.45,080
Cr Cash45,080
(2%*46,000=920)
(45,000-920=45,080)
The comparative cash flow statements from Sears and Wal-Mart are presented above. Amounts presented are in millions. Review both statements considering what you've learned in this chapter about the cash flow statement. Answer the following questions: When analyzing a company's cash flow statement, which section of the statement (operating, investing or financing) do you believe is the best predictor of a company's future profitability? Why? Which company do you believe is healthier based on the cash flow statements presented? Provide at least two specific examples from the statements. Your initial post is due four (4) days prior to the discussion due date or points will be deducted from your discussion score. Please review the discussion board requirements above.
The complete question is attached.
Answer:
Sears Holding Corporation and Wal-Mart Stores, Inc.
1. The section of the cash flow statement that is the best predictor of a company's future profitability is the Operating Activities Section. The reason is that the operating activities section shows the net cash from operating activities or the core business activities of the entity. A business entity's profitability is not determined by subsidiary activities like financing and investing activities. But it is ascertained by reviewing its operating activities which also define the mission of the business and show the strategies it can deploy to attain its goals.
2. Walmart Stores, Inc. is by far healthier than Sears Holdings Corporation, at least based on the January 30, 2016 statements of cash flows. For instance, Walmart Stores recorded a Net Cash Flow from operations in the sum of $27,389 million while Sears recorded a negative Net Cash Flow from operations in the sum of $2,167 million. Again, from the operating activities sections, one can see that Walmart Stores, Inc. was able to make a net income before adjustments of $15,080 million, whereas Sears Holding Corporation performed abysmally poor by incurring a net loss of $1,128 million.
Explanation:
The Sears and Walmart's statements of cash flows are one of the three main financial statements prepared and presented by Sears Holding Corporation or Walmart Stores, Inc. to its stockholders and the general public to show financial information about its activities. Specifically, the statements of cash flows for Sears and Walmart show the flow of cash under three main activity headings: operating, financing, and investing.
Two methods can be used by Sears and Walmart to prepare the statement. They include the indirect method, which starts from the net income, and the direct method, which shows the cash inflows and outflows for each cash flow item for Sears and Walmart.
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
The manufacturer Mike and Ike, the fruit-flavored chewy candies, has changed its packaging and developed contests all geared to 12- to 17-year-olds. What type of market segmentation identifies its market
Answer:
Demographic
Explanation:
A market is segmented so as to narrow down a large market into a narrow base, or a target market. This helps the organization to be better focused on providing its services to these target groups of people. A market can be segmented on the basis of demography, psychography, behavior, and geography. Demography deals more with statistical data of the population being studied and would typically include; age, gender, race, income levels, etc.
So, when the manufacturer Mike and Ike changes its packaging and developed contests all geared to 12-17-years-old, he has segmented the market according to demography and age.
Answer:
im sorry
Explanation:
Consider a product with a daily demand of 600 units, a setup cost per production run of $200, a monthly holding cost per unit of $5.00, and an annual production rate of 300,000 units. The firm operates and experiences demand 300 days per year.
Required:
a. What is the optimum size of the production run?
b. What is the average holding cost per year?
c. What is the setup cost per year?
d. What is the total cost per year if cost of each unit is 10 dollars?
e. Suppose that management mistakenly used the basic EOQ model to calculate the batch size instead of using the POQ model. How much money per year has that mistake cost the company?
Answer:
a. 3,795 units
b. $1,897.50
c. $2,845.80
d. $42,693.80
Explanation:
Optimum size for the Production ran is the size that minimizes Set-up costs and Holding costs.
Optimum size for the Production = √ (2 × Annual Production × Set-up cost) / Holding Cost per unit
Optimum size for the Production = √ (2 × 600 × 300 × $200) / $5.00
= 3,794.73 or 3,795 units
Average Holding Cost = Optimum size for the Production / 2
= 3,795 units / 2
= $1,897.50
Set - up Cost = Total Annual Production / Optimum size for the Production × Set - up cost per unit
= ((600 × 300) / 3,795)× $5.00
= $237.15
Annual cost = $237.15 × 12
= $2,845.80
Total Cost Calculation
Purchase Price (3,795 × $10) = $37,950.50
Holding Cost = $1,897.50
Set - up Cost = $2,845.80
Total Cost = $42,693.80
POQ = Optimum size for the Production / Annual Demand
= 3,795 units / (300 × 600)
= 0.021
[The following information applies to the questions displayed below.] Hudson Co. reports the contribution margin income statement for 2017. HUDSON CO. Contribution Margin Income Statement For Year Ended December 31, 2017 Sales (11,300 units at $175 each) $ 1,977,500 Variable costs (11,300 units at $140 each) 1,582,000 Contribution margin $ 395,500 Fixed costs 315,000 Pretax income $ 80,500 Assume the company is considering investing in a new machine that will increase its fixed costs by $37,000 per year and decrease its variable costs by $8 per unit. Prepare a forecasted contribution margin income statement for 2018 assuming the company purchases this machine.
Answer:
Pretax income= $133,900
Explanation:
Giving the following information:
Selling price= $175
New unitary variable cost= $132
New fixed costs= 315,000 + 37,000= 352,000
Now, we can determine the new operating income:
Sales= 11,300*175= 1,977,500
Total variable cost= 11,300*132= (1,491,600)
Total contribution margin= 485,900
Fixed costs= (352,000)
Pretax income= 133,900
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
Golden Corp.'s current year income statement, comparative balance sheets, and additional information follow. For the year, (1) all sales are credit sales, (2) all credits to Accounts Receivable reflect cash receipts from customers, (3) all purchases of inventory are on credit, (4) all debits to Accounts Payable reflect cash payments for inventory, (5) Other Expenses are all cash expenses, and (6) any change in Income Taxes Payable reflects the accrual and cash payment of taxes.
GOLDEN CORPORATION Comparative Balance Sheets December 31
Current Year Prior Year
Assets
Cash $167,000 $110,300
Accounts receivable 87,500 74,000
Inventory 605,500 529,000
Total current assets 860,000 713,300
Equipment 343,000 302,000
Accum. depreciation—Equipment (159,500) (105,500)
Total assets $1,043,500 $909,800
Liabilities and Equity:
Accounts payable $93,000 $74,000
Income taxes payable 31,000 26,600
Total current liabilities 124,000 100,600
Equity:
Common stock, $2 par value 595,600 571,000
Paid-in capital in excess of par value, common stock 201,400 164,500
Retained earnings 122,500 73,700
Total liabilities and equity $1,043,500 $909,800
GOLDEN CORPORATION Income Statement For Current Year Ended December 31
Sales $1,807,000
Cost of goods sold 1,089,000
Gross profit 718,000
Operating expenses
Depreciation expense $54,000
Other expenses 497,000 551,000
Income before taxes 167,000
Income taxes expense 26,200
Net income $140,800
Additional Information on Current Year Transactions:
Purchased equipment for $41,000 cash.
Issued 12,300 shares of common stock for $5 cash per share.
Declared and paid $92,000 in cash dividends.
Required:
Prepare a complete statement of cash flows: report its cash inflows and cash outflows from operating activities according to the indirect method.
Answer:
Golden Corp.
Statement of Cash Flows for the year ended December 31, using the indirect method:
Net Income before taxes $167,000
Add non-cash expenses:
Depreciation 54,000
Adjustment of current assets:
Accounts receivable (13,500)
Inventory (76,500)
Adjustment of current liabilities:
Accounts payable 19,000
Income taxes payable (4,400)
Net Cash Flow from operations $145,600
Financing Activities:
Common Stock $61,500
Dividend paid 92,000
Net Cash Flow from financing activities $153,500
Investing Activities:
Equipment purchase $41,000
Net Cash Flow from investing activities $41,000
Net Cash Flow $340,100
Explanation:
The Golden Corp.'s statement of cash flows depicts the flow of cash under three main activity headings: operating, financing, and investing. There are two methods under which Golden Corp. can prepare the statement. They include the indirect method, which starts from the net income, adjusts the non-cash expenses and the changes in working capital, and the direct method, which shows the cash inflows and outflows for each cash flow item.
The cash flow for the company is analyzed below:
Net Income before taxes $167,000
Add: non-cash expenses:
Depreciation $54,000
Adjustment of current assets:
Accounts receivable (13,500)
Inventory (76,500)
Adjustment of current liabilities:
Accounts payable 19,000
Income taxes payable (4,400)
Net Cash Flow from operations $145,600
Financing Activities:
Common Stock $61,500
Add: Dividend paid 92,000
Net Cash Flow from financing activities $153,500
Investing Activities:
Equipment purchase $41,000
Net Cash Flow from investing activities $41,000
Net Cash Flow $340,100
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XYZ Corporation’s bonds have 14 years remaining to maturity. Interest is paid annually, the bonds have a $1,000 par value, and the coupon interest rate is 10%. The bonds sell at a price of $950. What is their yield to maturity? Show your work.
Answer:
The answer is 10.71%
Explanation:
N(Number of periods) = 14 years
I/Y(Yield to maturity) = ?
PV(present value or market price) = $950
PMT( coupon payment) = $100 ( 10 percent x $1,000)
FV( Future value or par value) = $1,000.
We are using a Financial calculator for this.
N= 14; PV= -950 ; PMT = 100; FV= $1,000; CPT I/Y= 10.71
Therefore, the yield to maturity of the bond is 10.71%
Assignment: Capital Budgeting Decisions Your company is considering undertaking a project to expand an existing product line. The required rate of return on the project is 8% and the maximum allowable payback period is 3 years.
time 0 1 2 3 4 5 6
Cash flow $ 10,000 2,400 4,800 3,200 3,200 2,800 2,400
Evaluate the project using each of the following methods. For each method, should the project be accepted or rejected? Justify your answer based on the method used to evaluate the project’s cash flows.
A. Payback period
B. Internal Rate of Return (IRR)
C. Simple Rate of Return
D. Net Present Value
Answer:
A. Payback period
payback period = 2.875 years, therefore, the project should be accepted because the payback period is less than 3 years.B. Internal Rate of Return (IRR)
IRR = 22.69%, therefore, the project should be accepted since the IRR is higher than the required rate of return (8%).C. Simple Rate of Return
simple rate of return = 18%, therefore, the project should be accepted because the simple rate of return is higher than the required rate of return.D. Net Present Value
NPV = $4,647.85 , therefore, the project should be accepted since the NPV is positive.Explanation:
year cash flow
0 -$10,000
1 $2,400
2 $4,800
3 $3,200
4 $3,200
5 $2,800
6 $2,400
discount rate 8%
I used a financial calculator to determine the NPV and IRR.
Payback period = $10,000 - $2,400 - $4,800 = $2,800 / $3,200 = 0.875
payback period = 2.875 years
simple rate of return:
average cash flow = ($2,400 + $4,800 + $3,200 + $3,200 + $2,800 + $2,400) / 6 = $3,467
depreciation expense per year = $10,000 / 6 = $1,667
simple rate of return = ($3,467 - $1,667) / $10,000 = 18%
A bond that pays interest annually yielded 6.01 percent last year. The inflation rate for the same period was 3 percent. Given that information, the actual real rate of return on this bond for last year was _____percent.
Answer:
2.3%
Explanation:
The computation of the actual real rate of return is shown below:-
Actual real rate of return on this bond for last year = ((1 + Nominal rate of interest ) ÷ (1 + Inflation rate of return)) - 1
= ((1 + 0.0601) ÷ (1 + 0.03)) - 1
= 1.0601 ÷ 1.03 - 1
= 1.023 - 1
= 0.023
or
= 2.3%
Therefore for computing the actual rate of return we simply applied the above formula.
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