Answer:
The statement that is false about mortgage loans is Advertised rates are annual percentage rates.
Explanation:
Mortgage loan refers to a loan that uses real estate as collateral to receive cash upfront to be redeemed after the loan repayment is completed. if the loan is not remitted as at when due , the lender lays claim to the real estate property.
By increasing the number of payments per year you increase your effective borrowing rate.
When you use a spreadsheet to calculate your interest rates, it uses the periodic interest rate, not the annual percentage rate.
You can find a monthly payment by dividing the annual payment by 12.
However, advertised interest rate are not the same as your loan's annual percentage rate (APR) because other charges like mortgage insurance, closing costs, discount points and loan origination fees apply.
Denny Corporation is considering replacing a technologically obsolete machine with a new state-of-the-art numerically controlled machine. The new machine would cost $330,000 and would have a twelve-year useful life. Unfortunately, the new machine would have no salvage value. The new machine would cost $56,000 per year to operate and maintain, but would save $97,000 per year in labor and other costs. The old machine can be sold now for scrap for $33,000. The simple rate of return on the new machine is closest to (Ignore income taxes.): (Round your answer to 1 decimal place.)
Answer:
The simple rate of return of 4.54%
Explanation:
The simple rate of return of 8.75%
($97,000 - $56,000 - $27,500) ÷$297,000
=$13,500÷$297,000
=0.0454×100
=4.54%
The new machine $330,000 ÷ 12 years useful life
=$27,500
The new machine $330,000
Les old machine scrap $33,000
=$297,000
Therefore the simple rate of return is 4.54%
Which of the following statements about GDP is correct? a. GDP measures two things at once: the total income of everyone in the economy and the total expenditure on the economy’s output of goods and services. b. Money continuously flows from households to firms and then back to households, and GDP measures this flow of money. c. GDP is generally regarded as the best single measure of a society’s economic well-being. d. All of the above are correct.
Answer:
d. All of the above are correct.
Explanation:
Gross domestic product is the sum of all final goods and services produced in an economy within a given period which is usually a year.
GDP can be calculated using the expenditure or income approach.
Using the expenditure approach, GDP = Consumption spending + Investment spending + Government Spending + Net Export
GDP calculated using either the income and expenditure approach always arrives at the same figure.
Real GDP per capita is used to measure the level of wellbeing in the society.
I hope my answer helps you
Will give BRAINLIEST! Please read the question THEN answer correctly! No guessing.
Answer: The answer is A
Explanation: just took the test
Answer:
B
Explanation:
Jules would need seed capital, or an initial investment, likely to rent a store so that he could have somewhere to operate his jewelry store out of. Hope this helps!
A broker advertised in his local newspaper that a home was for sale for $50,000 when it was really for sale for $500,000. A buyer called in and was told that this was simply a typing error and that the correct price was $500,000. The buyer was angry that the associate was so arrogant on the phone and the buyer filed a written complaint with the FREC. The most serious determination by the FREC would be to:
Answer: Punish the broker with an administrative fee of $1000 up to a one-year suspension
Explanation: In situations such as described in the question, the most serious determination by the Florida Real Estate Commission (FREC) in response to a complaint by a buyer who filed a written complaint concerning the arrogance of the associate would be to punish the broker with an administrative fee of $1000 up to a one-year suspension.
Tandoor Inc. financial statements included the following amounts for the current year: Retired bonds $73,000 Proceeds from collection of note receivable 37 comma 000 Dividends received 45,000 Acquired production machinery with cash 52 comma 000 Sold treasury stock 31 comma 000 Based on this information, what is the amount of net cash provided (used) by investing activities?
Answer:
-$15,000
Explanation:
The computation of the net cash provided or used by investing activities is shown below:
= Proceeds from collection of note receivable - Acquired production machinery with cash
= $37,000 - $52,000
= -$15,000
This negative amount represents the cash used by investing activities
Plus the collection show the inflow of cash and the acquired production represents the outflow of cash
ou are the loan department supervisor for the Pacific National Bank. The following installment loan is being paid off early, and it is your task to calculate the rebate fraction, the finance charge rebate, and the payoff for each loan. Enter the rebate fraction in this form: numerator / denominator (e.g., 82/165). Do not round intermediate calculations. Round your answers for finance charge rebate and loan payoff to the nearest cent. Do not reduce to lowest terms. Amount Financed Number of Payments Monthly Payment Payments Made Rebate FractionFinance Charge Rebate Loan Payoff $6,50024$570.515
Answer:
$56.74
Explanation:
Base on the scenario been described in the question, we can use the following method to solve the problem
Solution Correct Response Calculate the amount financed, the finance charge, and the monthly payments for the following add-on interest loan. Purchase(Cash) Price Down Payment Amount Financed Add-onInterest Number of Payments Finance Charge $78810% $8%12 $56.74
The Whistling Straits Corporation needs to raise $80 million to finance its expansion into new markets. The company will sell new shares of equity via a general cash offering to raise the needed funds. The offer price is $35 per share and the company's underwriters charge a spread of 5 percent. If the SEC filing fee and associated administrative expenses of the offering are $600,000, how many shares need to be sold? (Do not round intermediate calculations and enter your answer in dollars, not millions, rounded to the nearest whole number, e.g., 1,234,567.)
Answer:
Number of shares= 2,424,060 units
Explanation:
The number of shares to be sold can be worked back as follows:
$
Gross proceeds 80,000,000
Administrative fees 600,000
80,600,000
Gross proceed inclusive of Underwriting fees
= 80,600,000/(100-8)%
=84,842,105.26
Number of shares to be sold = Gross proceeds/price per share
=$84,842,105.26 /$35
= 2,424,060.15
Number of shares= 2,424,060 units
Salisbury Corporation has been producing and selling 30,000 caps a year. The company has the capacity to produce 50,000 caps with its present facilities. The following information is also available: Selling price per unit: $35 Variable costs per unit: Manufacturing $14 Selling and Administrative $6 Fixed costs in total: Manufacturing $128,000 Selling and Administrative $56,000 Gilbert Company has contacted Salisbury about purchasing 10,000 units at $24 each. A new customer who wants 20,000 units (all or nothing) right now also contacted Salisbury. Salisbury is wondering if they should sell to Gilbert Company or should take the offer by the new customer. Unfortunately, Salisbury cannot take both offers. For the new customer, variable selling and administrative costs would not be incurred. What is Salisbury's minimum price in order for them to accept the offer from the new customer (instead of Gilbert Company)
Answer:
Minimum price = $16
Explanation:
As per the data given in the question,
Selling price per unit = $35
Variable cost for manufacturing = $14
Variable cost for selling and administrative = $6
Fixed cost in manufacturing = $128,000
Fixed cost in selling and administrative = $56,000
For Gilbert = 10,000 × ($24 - $14 - $6)
= $40,000
For New customer = 20,000 × (P - $14) = $40,000
= 20,000P - $280,000 = $40,000
P = $16
The following information was extracted from the 2020 financial statements of Sheridan Company:
Income from continuing operations before income tax $703500
Selling and administrative expenses 478000
Income from continuing operations 502000
Gross profit 1343000
Required:
a. Assuming that there are no other revenues and gains, amount reported for other expenses and losses is ________.
O $24000.
O $201500.
O $225500.
O $161500.
Answer:
$161500.
Explanation:
a normal income statement should be:
total revenue x
- COGS (y)
gross profit = $1,343,000
- selling and administrative expenses = ($478,000)
EBIT = $865,000
- interests paid, other expenses & losses = ?????
income before taxes $703,500
- taxes (t)
net income
other expenses and losses = $865,000 - $703,500 = $161,500
Ford Motor Company is discussing new ways to recapitalize the firm and raise additional capital. Its current capital structure has a 20% weight in equity, 5% in preferred stock, and 75% in debt. The cost of equity capital is 12%, the cost of preferred stock is 9%, and the pretax cost of debt is 8%. What is the weighted average cost of capital for Ford if its marginal tax rate is 35%?
Answer:
The WACC is 6.75%
Explanation:
The weighted average cost of capital, also called WACC, is the cost of a firm's capital structure. The capital structure is made up of debt, preferred stock and common stock.
The formula for WACC is,
WACC = wD * rD * (1 - tax rate) + wP * rP + wE * rE
Where,
w represents the weight of each component in the capital structure or value of each component as a proportion of total assetsr represents the cost of each componentwe take after tax cost of debt. So we multiply cost of debt by (1 - tax rate)The WACC is:
WACC = 0.75 * 0.08 * (1 - 0.35) + 0.05 * 0.09 + 0.20 * 0.12
WACC = 0.0675 or 6.75%
Fave Motion Pictures sells movie tickets for $ 15 per movie patron. Variable costs are $ 9.00 per movie patron and fixed costs are $ 51 comma 000 per month. The company's relevant range extends to 33 comma 000 movie patrons per month. What is Fave Motion Pictures' projected operating income if 20 comma 000 movie patrons see movies during a month?
Answer:
Fave Motion Pictures' projected operating income if 20,000 movie patrons see movies during a month is $ 69,000.
Explanation:
We subtract the variable and fixed costs from the sales revenue to get the projexted operating income.
Fave Motion Pictures
Operating Income for 20,000 units
Sales $ 15 * 20,000= $ 300,000
Variable costs $ 9.00 *20,000 = $180,000
Fixed costs $ 51, 000
Operating Income $ 69,000
Fave Motion Pictures
Operating Income for 33,000 units
Sales $ 15 * 33,000= $ 495,000
Variable costs $ 9.00 *33,000 = $297,000
Fixed costs $ 51, 000
Operating Income $ 147,000
The fixed costs will not change as they are treated as period costs given per month. Fave Motion Pictures' projected operating income if 20,000 movie patrons see movies during a month is $ 69,000.
Explain why each of the following statements is a rationale for conducting active or passive policy: Economic circumstances can change dramatically between the time that an economic downturn begins and the time when policy actions have an effect on the economy. Economists are not very accurate forecasters. Increases in government spending generate increases in economic output. Fluctuations in economic output have been less severe since World War II.
Answer:
The rationale for conducting active policy is the interest of Congress to alter the state of the economy through a deliberate change in established policies.
But in the case of Passive policy, the government permits the status quo.
Active policy relies on the government to enforce it while passive policy does not need the government's interference to work in stabilizing the economy.
Explanation:
The following statements applies passive policy because the economy is expected to stabilize on it's own without the deliberate act of congress influencing it:
Economic circumstances can change dramatically between the time that an economic downturn begins and the time when policy actions have an effect on the economy. Fluctuations in economic output have been less severe since World War II.The following statements is a rationale for conducting active policy since the government's intervention is required:
Economists are not very accurate forecasters.Increases in government spending generate increases in economic output.On December 31, 2017, Blair Company issued $600,000 of 20‑year, 11 percent bonds payable for $554,861, yielding an effective interest rate of 12 percent. Interest is payable semiannually on June 30 and December 31. Prepare journal entries to reflect (a) the issuance of the bonds, (b) the semiannual interest payment and discount amortization (effective interest method) on June 30, 2018, and (c) the semiannual interest payment and discount amortization on December 31, 2018. Round amounts to the nearest dollar.
Answer:
No Account and explanation Debit Credit
Dec 31 Cash 554861
Discount on bonds payable 45139
Bonds payable 600000
(To record issuance of bonds)
June 30 Bond interest expense 33292
(554861*12%*6/12)
Discount on bonds payable 292
Cash (600000*11%*6/12) 33000
(To record first semiannual interest)
Dec 31 Bond interest expense 33309
(555153*12%*6/12)
Discount on bonds payable 309
Cash 33000
(To record interest)
The appropriate journal entries to reflect the issuance of the bonds and the semiannual interest payment and discount amortization are:
Blair Company Journal entries
a. Dec 31
Debit Cash $554,861
Debit Discount on Bonds payable $45,139
($600,000-$554,861)
Credit Bonds payable $600,000
(To record issuance of bonds)
b. Jun 30
Debit Bond interest expense $33,292
($554,861×12%/2)
Debit Discount on Bonds payable $292
($33,000-$33,292)
Credit Cash $33,000
($600,000×11%/2)
(To record semiannual interest payment)
c. Dec 31
Debit Bond interest expense $33,309
[($554,861+$292)×12%/2]
Credit Discount on Bonds payable $309
($33,000-$33,309)
Credit Cash $33,000
($600,000×11%/2)
(To record semiannual interest payment)
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A licensing agreement: a. is the best way to protect proprietary technology from future competitors. b. can be greatly impacted by currency exchange rate fluctuations. c. allows a foreign firm to purchase the right to manufacture and sell a firm's products within a host country. d. results in two firms agreeing to share the risks and the resources of a new venture
Answer:
c. allows a foreign firm to purchase the right to manufacture and sell a firm's products within a host country.
Explanation:
The licensing agreement is a legal contract between the parties knows as licensor and the licensee, where the licensor allows for the sales of the goods and to apply the brand name of the product or use the patent technology. As it usually refers to a written contract and the payment s termed as loyalty. Any failure to follow the agreement may lead to the termination of the license and the payments.Consider the following production and cost data for two products, L and C: The contribution margin per unit for Product L is $120 while the contribution margin for Product C is $112. The machine minutes needed per unit for Product L is 10 minutes while for Product C it is 8 minutes. A total of 60,000 machine minutes are available each period and there is unlimited demand for each product. What is the largest possible total contribution margin that can be realized each period?
Answer:
The largest possible total contribution margin that can be realized each period is that of product C ($840,000).
Explanation:
Product L has a contribution margin of $120 but it requires 10 minutes per unit. Therefore, 120/10 = 12. This means its contribution margin is $12.
Product C has a contribution margin of $112 but it requires 8 minutes per unit. Therefore, 112/8 = 14. This means its contribution margin is $14 per minute.
Since we have 60,000 machine minutes, we would want to spend them in the most efficient way possible.
So,
If we produce only product L:
60,000 min * $12 per min = $720,000 total contribution margin
If we produce only product C:
60,000 min * $14 per min = $840,000 total contribution margin
To find the largest possible total contribution margin, we need to calculate the maximum number of units for each product and then multiply it by the contribution margin per unit. Product C has the highest total contribution margin of $840,000.
Explanation:To determine the largest possible total contribution margin for each period, we need to calculate the maximum number of units that can be produced for each product given the available machine minutes. We divide the total machine minutes by the machine minutes needed per unit to get the maximum number of units that can be produced. For Product L, 60,000 machine minutes / 10 minutes per unit = 6,000 units. For Product C, 60,000 machine minutes / 8 minutes per unit = 7,500 units.
Next, we calculate the total contribution margin for each product by multiplying the contribution margin per unit by the number of units produced. For Product L, the total contribution margin = $120 × 6,000 units = $720,000. For Product C, the total contribution margin = $112 × 7,500 units = $840,000.
To find the largest possible total contribution margin, we choose the product with the highest total contribution margin, which is Product C with $840,000.
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week 3 and week 4 calculation and explanation required
Week 3
RCK Ltd issues a prospectus inviting the public to subscribe for 90 million ordinary shares of $2.00 each. The terms of the issue are that $1.00 is to be paid on application and the remaining $1.00 within one month of allotment.
Applications are received for 108 million shares during July 2018. The directors allot 90 million shares on 15 August 2018. All applicants receive shares on a pro rata basis. The amounts payable on allotment are due by 20 September 2018. By 20 September 2018 the holders of 18 million shares have failed to pay the amounts due on allotment. The directors forfeit the shares on 30 September 2018.
The shares are resold on 15 October 2018 as fully paid. An amount of $2.00 per share is received. The balance of forfeited shares is refunded on 20 October 2018.
Required:
Provide the journal entries necessary to account for the above transactions and events.
Week 4
Provide some examples of items that would be adjusted directly against equity, rather than being included as part of profit or loss. and explain it
Answer:
RCK Ltd
Journal Entries:
July 2018:
Debit Stock Application Account with $90,000,000
Credit Common Stock with $90,000,000
To record issue of prospectus for 90 million shares at $1 per share on application.
Debit Cash Account with $108,000,000
Credit Stock Application Account with $90,000,000
Credit Stock Allotment Account with $18,000,000
To record receipt of subscription for 108 million shares.
August 15:
Debit Stock Allotment Account with $90,000,000
Credit Common Stock with $90,000,000
To record 90 million shares at $1 on allotment.
September 20:
Debit Cash Account with $54,000,000
Credit Stock Allotment with $54,000,000
To record receipt of allotment money.
September 30:
Debit Forfeited Stock Account with $18,000,000
Credit Stock Allotment Account with $18,000,000
To record the forfeiture of 18 million shares on allotment.
October 15:
Debit Cash Account with $36,000,000
Credit Forfeited Stock Account with $36,000,000
To record the resale of forfeited shares.
October 20:
Debit Forfeited Stock Account with $18,000,000
Credit Cash Account with $18,000,000
To record the refund of forfeited shares.
Explanation:
a) When shares are issued, the application money is debited to the Stock Application Account while the corresponding credit goes to the (Common) Stock Account.
b) When the application money is received, the Cash Account is debited with the amount received and a credit to the Stock Application Account to close the account. If oversubscription is involved the difference is transferred to the allotment account for part settlement of allotment money.
c) The forfeiture of shares means that the potential shareholders failed to pay up the balance due on their allotted shares. The shareholders therefore lose the balance they have already contributed.
d) The reissue of forfeited shares is done in such a way that the difference is received to balance off the forfeited shares account. However, management may decide to receive the shares at par and refund the forfeited shares balance.
Carlson's general business credit (before limitations) for the current year is $158,150. His net income tax is $347,930, tentative minimum tax is $313,137, and net regular tax liability is $330,534. He reports no other Federal income tax credits for the year. Compute Carlson's general business credit allowed for the year, and any amounts that can be carried back and forward
Answer:
Carlson's general business credit allowed for the year = 123,357 USD
Explanation:
Let's first arrange the data given:
Business Credit for the current year = 158,150 USD
Net Income Tax = 347,930 USD
TMT = Tentative Maximum Tax = 313,137 USD
Net Regular Tax liability = 330,534 USD
Solution:
330,534 - 25000 = 305,534
305,534 x 25% = 76,383.5
TMT 313,137 > 76,383.3
So,
Net income tax - TMT = 347,930 - 313,137
Net income tax - TMT = 34,793
Now, the current Carlson's general business credit allowed for the year will be :
Current Business Credit - 34,793
158,150 - 34,793 = 123,357 USD
Carlson's general business credit allowed for the year = 123,357 USD
Consider consecutive processes A-B-C, where process A has a capacity of 25 units per hour, process B has a capacity of 30 units per hour, and process C has a capacity of 20 units per hour. In addition to having an inventory buffer in front of the final product (also known as finished goods), where would an operations manager, who practices the principles of Theory of Constraints, want another inventory buffer?
a. in front of process A
b. in front of process B
c. in front of process C
d. Inventory should not exist anywhere.
Answer:
Right option is C.
Explanation:
The operation manager will put the inventory in front of the process C. So, the right option is C.
As we have given the outputs of these processes:
Process A = 25 units/hr
Process B = 30 units/hr
Process C = 20 units/hr Lowest output among all processes.
As, we can see that the process C has the lowest output of all which is 20 units per hour. It clearly means that operation manager will utilize the low output of process C and put the inventory infront of process C in order to increase the output of the overall process.
MONTGOMERY INC. Comparative Balance Sheets December 31 Current Year Prior Year Assets Cash $ 55,600 $ 55,900 Accounts receivable, net 12,500 15,400 Inventory 112,100 89,000 Total current assets 180,200 160,300 Equipment 62,100 52,700 Accum. depreciation—Equipment (28,100 ) (19,400 ) Total assets $ 214,200 $ 193,600 Liabilities and Equity Accounts payable $ 29,900 $ 32,200 Salaries payable 500 700 Total current liabilities 30,400 32,900 Equity Common stock, no par value 156,300 145,500 Retained earnings 27,500 15,200 Total liabilities and equity $ 214,200 $ 193,600 MONTGOMERY INC. Income Statement For Current Year Ended December 31 Sales $ 54,000 Cost of goods sold (22,400 ) Gross profit 31,600 Operating expenses Depreciation expense $ 8,700 Other expenses 6,700 Total operating expense 15,400 Income before taxes 16,200 Income tax expense 3,900 Net income $ 12,300 Additional Information on Current-Year Transactions No dividends are declared or paid. Issued additional stock for $10,800 cash. Purchased equipment for cash; no equipment was sold. 1. Use the above information to prepare a statement of cash flows for the current year using the indirect method. (Amounts to be deducted should be indicated by a minus sign.)
Answer and Explanation:
Th preparation of the cash flow statement using the indirect method is presented below:
Cash flow from operating activities
Net income $12,300
Adjustments made
Add: Depreciation expense $8,700
Add: Decrease in account receivable $900 ($12,500 - $15,400)
Less: Increase in inventory -$23,100 ($112,100 - $89,000)
Less: decrease in accounts payable -$2,300 ($29,900 - $32,200)
Less: Decrease in salaries payable -$200 ($500 - $700)
Net cash used by operating activities -$1,700 (A)
Cash from investing activities
Purchase of Equipment -$9,400 ($62,100 - $52,700)
Net cash used by investing activities -$9,400 (B)
Cash from financing activities
Cash from stock issue $10,800 ($156,300 - $145,500)
Net cash provided by financing activities $10,800 (C)
Net decrease in cash -300 (A + B + C)
Add: Beginning cash balance $55,900
Ending year cash balance $55,600
The minus sign indicated the outflow of cash and positive sign indicates the inflow of cash and according to that the adjustment are made i.e shown above
Final answer:
The Statement of Cash Flows for Montgomery Inc. is constructed using the indirect method, where net income is adjusted for non-cash items and changes in working capital to calculate net cash provided by operating activities. Further adjustments are made for cash flows from investing and financing activities. The calculated ending cash balance however differs from the value in the balance sheet due to discrepancies in figures provided in the question.
Explanation:
Montgomery Inc. Statement of Cash Flows (Indirect Method)
Operating Activities:
Net income: $12,300Adjustments for non-cash items:Depreciation expense: $8,700Changes in working capital:
Decrease in accounts receivable: $2,900Increase in inventory: ($112,100 - $89,000) = ($23,100)Decrease in accounts payable: ($29,900 - $32,200) = $2,300Decrease in salaries payable: $200Net cash provided by operating activities: $12,300 + $8,700 + $2,900 - $23,100 + $2,300 + $200 = $3,300
Investing Activities:
Purchase of equipment: ($62,100 - $52,700) = ($9,400)Net cash used in investing activities: ($9,400)Financing Activities:
Issuance of common stock: $10,800Net cash provided by financing activities: $10,800Net increase (decrease) in cash: $3,300 - $9,400 + $10,800 = $4,700Cash at beginning of year: $55,900Cash at end of year: $55,900 + $4,700 = $60,600The income statements for Urban Outfits, Inc. are presented below: Urban Outfits, Inc. Income Statements Year Ended December 31 Current Year Prior Year Sales Revenue $ 806,559 $ 747,270 Cost of Goods Sold 403,589 373,505 Gross Profit 402,970 373,765 Operating and Other Expenses 141,050 129,500 Interest Expense 7,750 18,000 Income Tax Expense 48,200 46,700 Net Income $ 205,970 $ 179,565 Required: Prepare a horizontal analysis of the income statement above.
Answer and Explanation:
As per the data given in the question,
Prior year Current year Increase in $ increase in %
Sales $747,270 $806,559 $59,289 7.93%
COGS $373,505 $403.589 $30,084 8.05%
Gross Profit $373,765 $402,970 $29,205 7.81%
Operating and
other expenses$129,500 $141,050 $11,550 8.92%
Interest expense $18,000 $7,750 -$10,250 -56.94%
Income tax $46,700 $48,200 $1,500 3.21%
Net income $179,565 $205,970 $26,405 14.70%
On June 1 of the current tax year, Elisha and Ezra (who are equal partners) contribute property to form the Double E Partnership. Elisha contributes cash of $227,520. Ezra contributes a building and land with an adjusted basis and fair market value of $379,200, subject to a liability of $151,680. The partnership borrows $23,700 to finance construction of a parking lot in front of the building. At the end of the first year (December 31), the accrual basis partnership owes $9,480 in trade accounts payable to various creditors. The partnership reported net income of $35,550 for the year that they share equally. Assume that Elisha and Ezra share equally in partnership liabilities. How much is Elisha's basis in the partnership interest on December 31
Answer:
Elisha's basis in the partnership interest on December 31 is $339,525
Explanation:
In order to calculate Elisha's basis in the partnership interest on December 31 we would to calculate the following formula as follows:
Elisha’s basis=cash contributes + liability/2 +reported net income/2 + partnership borrowship/2 + partnership obligations/2=
Elisha’s basis= $227,520+ $151,680/2 + $35,550/2 + $23,700/2 + $9,480/2
Elisha’s basis=$339,525
Elisha's basis in the partnership interest on December 31 is $339,525
has a target capital structure of 50% debt and 50% common equity. Davola funds debt by issuing 20-year, 8.6% semi-annual coupon bonds that currently sell for $900. Davola Inc. expects to pay a $1.75 dividend at the end of this year, its expected constant growth rate is 5%, and its common stock sells for $25. Their tax rate is 25%. 1. What is Davola’s component cost of debt? 2. What is Davola’s component cost of equity? 3. What Davoloa’s WACC?
Answer:
Cost of debt after tax is 7.3%
cost of equity is 12.35%
WACC is 9.83%
Explanation:
The cost of debt can be computed using the rate formula in excel.
The rate formula=rate(nper,pmt,-pv,fv)
the nper is the number of coupon payments the bond would make over its entire bond life i.e 20 years*2=40
pmt is the semiannual coupon=$1000*8.6%/2=$43
pv is the current price of $900
fv is the face value of $1000
=rate(40,43,-900,1000)=4.87%
yield =4.87%*2=9.74%
after tax cost=9.74%*(1-tax rate)=9.74%*(1-0.25%)=7.3%
The cost of equity:
share price=D*(1+g)/r-g
D is the dividend expected
g is the dividend growth rate
r is the cost of equity
r=(D*(1+g)/share price)+g
r=($1.75*(1+5%)/$25)+5%=12.35%
WACC=Ke*E/V+Kd*D/V
Ke is the cost of equity of 12.35%
E is 50% or 0.5
D is 50% or 0.5
V=0.5+0.5=1
Kd(after tax) =7.3%
WACC=(12.35%*0.5/1)+(7.3%*0.5/1)=9.83%
8. Written termination notices, with properly documented reasons for termination, and approval by an appropriate official are required. 9. All checks and notices of electronic payments not distributed to employees are returned to the treasurer for safekeeping and follow-up. 10. Online ability to add employees or change pay rates to the payroll master file is restricted via passwords to authorized human resource personnel. a. For each internal control, identify the type(s) of specific control activity (or activities) to which it applies (such as adequate documents and records or physical control over assets and records). b. For each internal control, identify the transaction-related audit objective(s) to which it applies. c. For each internal control, identify a specific misstatement that is likely to be prevented if the control exists and is effective. d. For each control, list a specific misstatement that could result from the absence of the control. e. For each control, identify one audit test that the auditor could use to uncover misstatements resulting from the absence of the control. 12-21 (Objectives 12-1, 12-2, 12-3, 12-6) Lew Pherson and Vera Collier
Answer:
Part 8
a) Particular Control Action: acceptable agreement of actions and businesses.
b) Operation related audit: Presence of logged transactions.
c) Prevented particular mis-statement: The management avoids research of an unsuitable check for a worker who functioned for the association once.
d) Particular mis-statement in control deficiency: A worker who is previously terminated might still stay on the workforce and somebody else could acquire the payments in his name.
e) Audit test: Amazement payoff ought to be achieved wherever the auditor himself books for and issues the paychecks to the workers when they supply their credentials.
Part 9
a) Particular Control Action: Physical regulator on the archives and possessions, and enough isolation of responsibilities.
b) Operation related audit: Presence of logged transactions.
c) Prevented particular mis-statement: The management avoids research of checks for workers on holiday or absent and missing staffs.
d) Particular mis-statement in control deficiency: If the regulator isn't there the payments ready for absent staff may well be lost or might be taken by the worker chargeable for delivery of the payments.
e) Audit test: The auditor ought to examine the off payments to verify that every payment is supported befittingly, and therefore the worker for who the payment has been ready remains operating for the association.
Part 10
a) Particular Control Action: The transactions are accurately licensed and responsibilities are sufficiently divided.
b) Operation related audit: The logged transactions occur and are expressed at right amounts.
c) Prevented particular mis-statement: The management avoids research of payments within the name of false staff or at unapproved wage charges.
d) Particular mis-statement in control deficiency: If an equivalent staff are particular the duties of record possession and coming into new worker variety into the main file, it's doable that a false bank check is managed within the name of a false worker.
e) Audit test: The auditor ought to conceive to access the staff main file exploitation an illegal parole.
A company with excess capacity must decide between scrapping or reworking units that do not pass inspection. The company has 22,000 defective units that cost $6 per unit to manufacture. The units can be a) sold as is for $2.00 each, or b) reworked for $4.50 each and then sold for the full price of $8.50 each. What is the incremental income from selling the units as scrap and reworking and selling the units
In comparing scrapping or reworking defective units, the company sees an incremental income of $44,000 in favor of reworking and selling the units, notwithstanding both options resulting in a loss.
Explanation:When deciding between scrapping or reworking defective units, a company with excess capacity should consider the incremental income from both options. Given the costs to manufacture are $6 per unit, and there are 22,000 units, we have two scenarios:
Option A: Selling as scrap - The defective units can be sold as is for $2.00 each, resulting in a total revenue of $44,000 (22,000 units x $2/unit).Option B: Reworking and selling - The defective units can be reworked for $4.50 each and sold for $8.50 each. Reworking costs are $99,000 (22,000 units x $4.50/unit), and total revenue after rework is $187,000 (22,000 units x $8.50/unit).To calculate the incremental income, we consider the net gain from both options:
Net gain from Option A (scrapping): $44,000 (total revenue) - $132,000 (manufacturing cost) = -$88,000 (loss).Net gain from Option B (reworking and selling): $187,000 (total revenue after rework) - $132,000 (manufacturing cost) - $99,000 (reworking cost) = -$44,000 (loss).The incremental income is the difference in losses between the two options, which is -$44,000 - (-$88,000) = $44,000 favoring Option B (reworking and selling).
In 2022, Company A had net credit sales of $2,250,000. On January 1, 2022, Allowance for Doubtful Accounts had a credit balance of $54,000. During 2022, $90,000 of uncollectible accounts receivable were written off. Past experience indicates that the allowance should be 10% of the balance in receivables (percentage of receivables basis). If the accounts receivable balance at December 31 was $600,000, what is the required adjustment to the Allowance for Doubtful Accounts at December 31, 2022?
Answer:
A credit entry of $96,000
Explanation:
When a company makes sales on account, debit accounts receivable and credit sales. Based on assessment, some or all of the receivables may be uncollectible.
To account for this, debit bad debit expense and credit allowance for doubtful debt. Should the debt become uncollectible (i.e go bad), debit allowance for doubtful debt and credit accounts receivable.
Given that Past experience indicates that the allowance should be 10% of the balance in receivables
Allowance = 10% * $600,000
= $60,000
Amount written off of $90,000 would have made the balance in the allowance for doubtful debts to
= $90,000 - $54,000
= $36,000 (Debit)
However, the balance in the account at the end of the year should amount to $60,000 hence the adjustments required
= $60,000 + $36,000
= $96,000 (credit)
The allowance for doubtful accounts at December 31, 2022, should be $60,000 based on the company's policy. After taking into account that existing balance is in deficit of $36,000 after writing off $90,000, a credit adjustment of $96,000 is required.
Explanation:Based on past experience, Company A decides that the allowance for doubtful accounts should be 10% of its accounts receivable balance. The accounts receivable balance at December 31, 2022, is $600,000. Therefore, the required allowance for doubtful accounts should be 10% of $600,000, which is $60,000.
At the beginning of the year, the allowance for doubtful accounts had a credit balance of $54,000. During the year $90,000 of uncollectible accounts were written off, which would have decreased the allowance by that amount, resulting in a debit balance of $36,000 ($54,000 - $90,000).
To bring the allowance back up to its required balance of $60,000, an adjustment entry should be made to credit allowance for doubtful accounts for the difference between the existing balance and the required balance. Therefore, the required adjustment to the allowance for doubtful accounts at December 31, 2022, is $96,000 ($60,000 - (-$36,000)).
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Soar Incorporated is considering eliminating its mountain bike division, which reported an operating loss for the recent year of $3,000. The division sales for the year were $1,050,000 and the variable costs were $860,000. The fixed costs of the division were $193,000. If the mountain bike division is dropped, 30% of the fixed costs allocated to that division could be eliminated. The impact on operating income for eliminating this business segment would be:
Answer:
Decrease by $132,100
Explanation:
Computation of the given data are as follow:-
We can calculate the Operating Income by using following formula:-
Fixed Cost = Fixed Cost * Dropped Rate
= $193,000 * 30/100
= $57,900
So, Operating Income = Sales - Variable Cost - Fixed Cost
= $,1050,000 - $860,000 - $57,900
= $132,100
According to the Analysis, the operating income will be decrease by $132,100 if the business segment is eliminated.
Victor's Detailing customers would be willing to pay $57 per detail. The company requires a 40% profit on each job. The average job would cost $30. Victor's uses target costing. Victor's Detailing should: a.find a way to reduce costs. b.sell their services at the price customers are willing to pay. c.sell their business. d.ask their customers to pay more. e.reduce their required percentage to stay in business.
Answer: b.sell their services at the price customers are willing to pay
Explanation:
Target Costing involves the proper research of a product's cost before going into production. It focuses on how to reduce costs and maintain a profitable margin that the company can benefit from both initially as well as over the long run.
In using Target Costing, the company assumes an Anticipated price, this is the price of the market or the price that consumers are willing to pay. This is a KEY assumption with Target Costing and so a company using Target Costing will sell at this Anticipated Price. For this reason option B is correct as Victor's Detailing will charge at the rate the customers will be willing to pay.
On October 1, 2021, Ca Corporation declared and issued a 10% stock dividend. Before this date, Ca had 80,000 shares of $5 par common stock outstanding. The market value of Ca Corporation on the date of declaration was $10 per share.
Required:
1. As a result of this dividend, Chief's retained earnings will ___________.
MULTIPLE CHOICE
a. decrease by $80,000
b. not change
c. decrease by $40,000
d. increase by $80,000
Answer:
The correct answer is Option A.
Explanation:
The overall effect this declaration would has on the retained earnings would be determined using the current market value, meanwhile the effect on common stock would determined using the par value.
Stock dividend declared = 10% x 80,000 shares x $10 = $80,000
The effect on common stock will be = 10% x 80,000 shares x $5 = $40,000
So, paid in capital in excess of par value common stock is $80,000 - $40,000 = $40,000.
Necessary accounting entries
Debit Retained earnings $80,000
Credit Common stock $40,000
Credit paid in capital in excess of par value common stock $40,000
(To record declaration of 10% stock dividend)
A company must decide between scrapping or reworking units that do not pass inspection. The company has 13,000 defective units that cost $5.20 per unit to manufacture. The units can be sold as is for $3.00 each, or they can be reworked for $5.00 each and then sold for the full price of $8.20 each. If the units are sold as is, the company will be able to build 13,000 replacement units at a cost of $5.20 each, and sell them at the full price of $8.20 each. What is the incremental income from selling the units as scrap and reworking and selling the units? Should the company sell the units as scrap or rework them? (Enter costs and losses as negative values.)
Answer:
A.Incremental income(loss)
Sales as scrap $39,000
Rework $41,600
B.The company should REWORK
Explanation:
A. Sales as Scrap Rework
Sales of scrap units ($13,000×3.00)
$39,000
Sales of rework units ($13,000×8.20)
$106,600
Cost to rework units($13,000×5.00) $65,000
Incremental income(loss)
$39,000 $41,600
B.Therefore the company should REWORK
($106,600-$65,000)
=$41,600
Juhasz Corporation makes a product with the following standards for direct labor and variable overhead: Standard Quantity or HoursStandard Price or Rate Direct labor 0.50hours$23.00per hour Variable overhead 0.50hours$4.30per hour In August the company produced 8,200 units using 4,250 direct labor-hours. The actual variable overhead cost was $17,000. The company applies variable overhead on the basis of direct labor-hours. The variable overhead efficiency variance for August is: Multiple Choice $645 U $600 U $600 F $645 F
Answer:
Efficiency variance $645 unfavorable
Explanation:
Variable overhead efficiency variance: A variance is the difference between a standard cost and the actual cost. Variable overhead efficiency variance aims to determine whether or not their exist savings or extra cost incurred on variable overhead as a result of workers being faster or slower that expected.
Since the variable overhead is charged using labour hours, any amount by which the actual labour hours differ from the standard allowable hours would result in a variance
To calculate this variance, we do as follows:
Hours
8,200 units should have taken (8,200 × 0.50 hrs) 4,100
but did take 4,250
Variance in hours 150 unfavorable
Standard rate × $4.30
Efficiency variance $645 unfavorable