Answer:
Cotton’s capital balance after this new investment is $102,000
Explanation:
In order to calculate Cotton’s capital balance after this new investment we would have to calculate first the goodwill as follows:
Lovett invests $60,000, therefore, Actual value of partnership= $60,000
20%
Actual value of partnership=$300,000
Partnershio capital=$120,000+ $90,000+$60,000
Partnershio capital=$270,000
Therefore, goodwill=$300,000-$270,000
goodwill=$30,000
Therefore, distribution of goodwill would be as follows:
Bishop=$30,000×60%=$18,000
Cotton=$30,000×40%=$12,000
Therefore, Cotton's capital=$90,000+12,000
Cotton's capital=$102,000
Cotton’s capital balance after this new investment is $102,000
Common-Sized Income Statement Revenue and expense data for the current calendar year for Lyons Electronics Company and for the electronics industry are as follows. Lyons Electronics Company data are expressed in dollars. The electronics industry averages are expressed in percentages. Lyons Electronics Company Electronics Industry Average Sales $ 7,500,000 100 % Cost of goods sold (4,125,000) (61.0) Gross profit $3,375,000 39.0 % Selling expenses $(2,250,000) (23.0) % Administrative expenses (525,000) (10.0) Total operating expenses $(2,775,000) (33.0) % Operating income $600,000 6.0 % Other revenue and expense: Other revenue 30,000 3.0 Other expense $(7,500) (1.0) Income before income tax $ 622,500 8.0 % Income tax (187,500) (2.5) Net income $435,000 5.5 % a. Prepare a common-sized income statement comparing the results of operations for Lyons Electronics Company with the industry average. If required, round percentages to one decimal place.
Answer:
Explanation:
In common sized income statement , each line item is expressed as a percentage of sales turnover and compared to the percentage industry standard for analysis purpose.
Lyon % Industry %
Revenue 7,500,000 100 100
Cost of goods (4,125,000) 55 61
Gross profit 3,375,000 45 39
Selling expenses (2,250,000) 30 23
Admin Expenses (525,000) 7 10
Total Operating Exp (2,775,000) 37 33
Operating income 600,000 8 6
Other revenue 30,000 0.4 3
Other expenses (7500) 0.1 1
Income before tax 622,500 8.3 8
Income Tax 187,500 2.5 2.5
Net Income 435,000 5.8 5.5
On 4/1/Y9, Petal Corp. began offering a new product for sale under a 1-year warranty. Petal had 5,000 units in inventory on 4/1/Y9. By 6/30/Y9, 3,000 of these units had been sold. Based on its experience with similar products, Petal estimated that the average warranty cost per unit sold would be $8. Actual warranty costs incurred from April 1 through June 30, Year 9, were $7,000.
Required:
1. What amount should Petal report as estimated warranty liability at June 30, Year 9?
Answer:
$17,000
Explanation:
Units sold = 3,000 units
Expected warranty = 3,000 * $8 = $24,000
Actual warranty costs = $7,000
Estimated warranty liability = $24,000 - $7,000 = $17,000
Therefore, Petal should report $17,000 as estimated warranty liability at June 30, Year 9.
Ginger, Inc., has declared a $5.40 per share dividend. Suppose capital gains are not taxed, but dividends are taxed at 20 percent. New IRS regulations require that taxes be withheld at the time the dividend is paid. The company's stock sells for $94.00 per share, and the stock is about to go ex dividend. What do you think the ex-dividend price will be
Answer: $89.68
Explanation:
The Ex-dividend measures how much a stock price drops as a result of the disbursement of dividends. It is calculated by subtracting the dividend from the current stock price.
In the above question the IRS require that taxes be withheld at the time that the dividend is paid.
This means that taxes have to be accounted for first before ex - dividend is calculated.
After tax dividend = 5.40 * ( 1 - 0.2)
After tax dividend = $4.32
Solving for Ex-dividend gives,
= 94.00 - 4.32
= $89.68
The ex-dividend price will be $89.68
Beerbo purchased a patent from Mitter Lite Co. for $1,000,000 on January 1, 2018. At that time, the patent's useful life was 10 years, expiring on December 31, 2027. In early 2020, Beerbo determined that the economic benefits of the patent would not last longer than 4 more years (6 years from the date of acquisition). Given the revised useful life, Beerbo expects the useful life of the patent to expire on December 31, . (Input year; e.g. "2020") At the end of 2019 / beginning of 2020, what was the value / net book value of the patent in Beerbo's books
Answer:
Given the revised useful life, Beerbo expects the useful life of the patent to expire on December 31, 2024 .
Book Value at the end of 2019 / beginning of 2020 = $666,667
Explanation:
In the Books Of Beerbo
Given
Cost of Patent= $ 1000,000
Useful Life = 10 years
In early 2020, Beerbo determined that the economic benefits of the patent would not last longer than 4 more years.
So the useful life of the patent will expire on December 31,2024.
As Beerbo estimated the useful life of the patent to be 6 years instead of 10 years so amortizing the patent accordingly would given
Amortization for 1 year = Cost/ Useful life= $ 1000,000/6= $ 166666.67
Amortization for 2 years=$ 166666.67*2= $ 333,333
Book Value at the end of 2019 / beginning of 2020= Cost - Amortization= $ 1000,000-$ 333,333= $666,667
Gator Corporation manufactures several types of accessories. For the year, the gloves and mittens line had sales of $480,000, variable expenses of $360,000, and fixed expenses of $140,000. Therefore, the gloves and mittens line had a net loss of $20,000. If Gator eliminates the line, $35,000 of fixed costs will remain. Prepare an analysis showing whether the company should eliminate the gloves and mittens line. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)
Answer:
The company will lose $85,000 if the product line is discontinued
Explanation:
Giving the following information:
Sales= 480,000
variable expenses= (360,000)
Contribution margin= 120,000
fixed expenses= (140,000)
Net operating income= (20,000)
If Gator eliminates the line, $35,000 of fixed costs will remain.
We need to determine the effect on income if the product line is discontinued.
Effect on income= fixed costs - net operating income
Effect on income= -105,000 - (-20,000)
Effect on income= -85,000
The company will lose $85,000 if the product line is discontinued
(Present value tables are needed.) Miami Marine Enterprises is evaluating the purchase of an elaborate hydraulic lift system for all of its locations to use for the boats brought in for repair. The company has narrowed their choices down to two: the B14 Model and the F54 Model. The B14 model is considered to be riskier than the F54 model so the rate of return required for it is higher. Financial data about the twochoices follows.
B14 Model F54 Model
Investment $ 320,000 $ 240,000
Useful life (years) 8 8
Estimated annual net cash inflows for useful life $ 75,000 $ 40,000
Residual value $ 30,000 $ 10,000
Depreciation method Straight-line Straight-line
Required rate of return 14% 10%
What is the total present value of future cash inflows and residual value from the B14 Model?
A. $218,070
B. $410,655
C. $358,455
D. $38,455
Answer:
C. $358,455
Explanation:
As per given data
B14 Model F54 Model
Investment $320,000 $240,000
Useful life (years) 8 8
Estimated annual net cash inflows $75,000 $40,000
Residual value $30,000 $10,000
Depreciation method Straight-line Straight-line
Required rate of return 14% 10%
Net Present value of the net cash inflows can be calculated by using the formula of present value of annuity because the cash inflows of each year are constant cash flows.
Present value of Annuity = P x [ ( 1 - ( 1 + r )^-n ) / r ]
Where
P = Annual cash inflows = $75,000
r = required rate of return = 14%
n = numbers of periods = 8 years
Placing values in the formula
Present value of cash inflows = $75,000 x [ ( 1 - ( 1 + 14% )^-8 ) / 14% ]
Present value of cash inflows = $347,915
Present value of residual value of asset can be calculated by discounting the residual value using required rate of return.
Formula for Discounting
Present value = P (1 + r)^-n
Where
P = Value to be discounted = $30,000
r = required rate of return = 14%
n - numbers of periods = 8 years
Placing values in the formula
Present value of residual value = $30,000 x ( 1 + 14% )^-8 = $10,517
Total Present value = $10,517 + 347,915 = 358,432
There is a difference due to the rounding effect in the calculations, the closest value id C. $358,455
Entries for Issuing Bonds and Amortizing Discount by Straight-Line Method On the first day of its fiscal year, Chin Company issued $18,600,000 of five-year, 10% bonds to finance its operations of producing and selling home improvement products. Interest is payable semiannually. The bonds were issued at a market (effective) interest rate of 12%, resulting in Chin Company receiving cash of $17,230,938.
(a) Journalize the entries to record the following:
1. Issuance of the bonds.
2. First semiannual interest payment. The bond discount amortization is combined with the semiannual interest payment. Round your answer to the nearest dollar.
3. Second semiannual interest payment. The bond discount amortization is combined with the semiannual interest payment. Round your answer to the nearest dollar.
(b) Determine the amount of the bond interest expense for the first year.
(c) Explain why the company was able to issue the bonds for only $9,594,415 rather than for the face amount of $10,000,000.
Answer and Explanation:
a. The Journal entry is shown below:-
1. Cash Dr, $17,230,938
Bond payable discount Dr, $1,369,062
To Payable bond $18,600,000
(Being issuance of bonds is recorded)
2. Interest expenses Dr, $793,094
To discount on bonds payable $136,906 ($1,369,062 ÷ 10)
To Cash $930,000 ($18,600,000 × 10% ÷ 2)
(Being first semi annual interest is recorded)
3. Interest expense Dr, $793,094
To Bond payable discount $136,906
To Cash $930,000
(Being second semi annual interest is recorded)
b. Interest expenses for the first year = Interest expenses + Discount amortized
= ($930,000 + $930,000) + ($136,906 + $136,906)
= $1,860,000 + $273,812
= $2,133,812
c. The company issued the bond with a maximum interest of $10,000,000, for $9,594,415. That is the bonds are issued at a $1,369,062 discount. The bonds are issued at a discount because the bond market interest is higher than the coupon rate for the debt.
Final answer:
The detailed answer explains journal entries for issuing bonds, bond interest expense calculation, and reasons for issuing bonds below face value.
Explanation:
Entries for Issuing Bonds and Amortizing Discount by Straight-Line Method
a) Journal entries:
Issuance of bonds: Debit Cash $17,230,938, Credit Bonds Payable $18,600,000, Credit Discount on Bonds Payable $1,369,062
First semiannual interest payment: Debit Interest Expense $930,136, Debit Discount on Bonds Payable $4,801, Credit Cash $935,938
Second semiannual interest payment: Debit Interest Expense $915,487, Debit Discount on Bonds Payable $4,249, Credit Cash $919,736
b) Bond interest expense for the first year is $1,845,623.
c) The company issued the bonds for less than face amount due to the market interest rate being higher than the bond's stated interest rate, making the bonds less attractive to investors at face value.
On January 1, Year 1, the Mahoney Company borrowed $176,000 cash from Sun Bank by issuing a five-year 8% term note. The principal and interest are repaid by making annual payments beginning on December 31, Year 1. The annual payment on the loan based on the present value of annuity factor would be $40,925. The amount of principal repayment included in the December 31, Year 1 payment is:
The principal repayment included in the December 31, Year 1 payment for Mahoney Company's loan is $26,845. This is calculated by subtracting the interest payment from the total annual payment.
The Mahoney Company needs to repay a loan by making annual payments, including both principal and interest. The total annual payment is $40,925 and the interest rate is 8%. The interest portion of the first year’s payment is calculated as 8% of $176,000, which is $14,080.
The **principal repayment** in the first year can be found by subtracting the interest payment from the total annual payment: $40,925 - $14,080 = $26,845.
Therefore, the amount of principal repayment included in the December 31, Year 1 payment is $26,845.
2. The nominal interest rate in the U.S. is 6% and the nominal interest rate in Canada is 3%. The spot value of the U.S. dollar is 1.1 ($/Canadian dollar) and the forward rate is 1.3 ($/Canadian dollar). Calculate the forward discount or premium for the dollar. Does the interest parity condition hold? If not explain what is likely to occur in foreign exchange markets. Assume that interest rates cannot change.
Answer:
The forward discount is 1.0688679245. Interest parity does not hold. In foreign markets Dollar will not appreciate in spot because it is trading at forward discount
Explanation:
According to the given data we have the following:
1 USD = 1.1 Canadian dollar (Spot)
1 USD = 1.3 Canadian dollar (Forward)
In order to calculate forward discount we would have to use the following formula:
Forward= Spot rate * (1+ Interest rate of Canada) / (1+ Interest rate of US)
Forward = 1.1*(1+0.03) / (1+0.06) = 1.0688679245
1.0688679245 < 1.2 (Interest parity does not hold)
Here dollar is trading at forward discount
In foreign markets Dollar will not appreciate in spot because it is trading at forward discount
Two projects are presented to the project selection committee. Project A will cost $250,000 to implement and is expected to have annual net cash flows of $75,000. Project B will cost $150,000 to implement and should generate annual net cash flows of $52,000. Using the payback period method which project is better? Show your work or no credit will be given.
Answer: Project B at 2.88 years
Explanation:
The Payback period analyses the viability of a project by measuring how long it will take to pay back the initial outlay.
In the case of a constant inflow, it can be calculated by simply dividing the initial outlay by the constant inflow to find out how long it will take to reach that Outflow.
Project A will cost $250,000 and bring in $75,000 a year.
= 250,000/75,000
= 3.33 years
Project B will cost $150,000 and bring in 52,000 a year.
= 150,000/52,000
= 2.88 years
Project B takes the shorter time to repay it's initial cost/outlay so it is the better project out of the 2.
Denny Corporation is considering replacing a technologically obsolete machine with a new state-of-the-art numerically controlled machine. The new machine would cost $190,000 and would have a ten-year useful life. Unfortunately, the new machine would have no salvage value. The new machine would cost $28,000 per year to operate and maintain, but would save $60,000 per year in labor and other costs. The old machine can be sold now for scrap for $19,000.
The simple rate of return on the new machine is closest to (Ignore income taxes.):
Answer:
The simple rate of return is closest to 87.1%
Explanation:
To calculate the rate of return, we will determine first determine the net return on investment on the machine after 10 years as follows:
cost of maintenance per year = $28,000
cost of maintenance for 10 years (expenditure) = 28,000 × 10 = $280,000
Labor savings per year = $60,000
Labor savings for 10 years ( income) = 60,000 × 10 = $600,000
Net income after 10 years = Total income - total expenditure
= 600,000 - 280,000 = $320,000
Next, we will determine the cost of investment as shown below:
cost of new machine = $190,000
scrap value of old machine = $19,000
Net cost of machine = 190,000 - 19,000 = $171,000
Therefore, the net return on investment is calculated as:
Net return on investment = Net income - cost of machine
= 320,000 - 171,000 = $149,000
Finally the rate of return in percentage, is calculated as follows:
rate of return = [(Net return on investment) ÷ (cost of investment) ] × 100
= ( 149,000 ÷ 171,000 ) × 100 = 87.1% (to 1 decimal place).
1. Izzy Company sells a television that carries a 90-day unconditional warranty against product failure. From prior years’ experience, Izzy estimates that 4% of units sold each period will require repair at an average cost of $150 per unit. During the current period, Izzy sold 22,000 units and repaired 200 units.How much warranty expense must Izzy report in its current period income statement? 138,000 132,000 102,000 30,000 1
Answer:
$132,000
Explanation:
The computation of the warranty expense is shown below:
Warranty expense = Units sold × repaired cost × estimated percentage
= 22,000 units × $150 × 4%
= $132,000
We simply multiplied the unit sold with the repaired cost and the estimated percentage so that the amount of warranty expense could come
All other things that are mentioned in the question is not relevant. Hence, ignored it
A particular product line is most likely to be dropped when: Group of answer choices its total fixed costs are more than its contribution margin. its variable costs are more than its fixed costs. its variable costs are equal to the square root of fixed costs less the wages of the factory security personnel its avoidable fixed costs are more than its contribution margin. its unavoidable fixed costs are more than its contribution margin.
Answer:
A particular product line is most likely to be dropped when:
its total fixed costs are more than its contribution marginits variable costs are more than its fixed costsits unavoidable fixed costs are more than its contribution margin.Explanation:
The aim of every producer is to maximize profit and to make this possible, the cost of producing a particular product should fall below the contribution margin.
In the case that the gross profit is always negative due to high cost of production, further production should be discouraged.
The decision to drop a particular product line is usually reached when:
Its total fixed costs are more than its contribution margin: Here, the company will run at a loss. It is sustainable to continue production..Its variable costs are more than its fixed costs: This is also an unfavorable situation that does not sustain mass production. Therefore, further production should discontinue.its unavoidable fixed costs are more than its contribution margin: At this rate, profit cannot be maximized. It is a lose-lose situation for the company.J Corporation has gathered the following data on a proposed investment project (Ignore income taxes.): Investment required in equipment $ 30,500 Annual cash inflows $ 6,200 Salvage value of equipment $ 0 Life of the investment 15 years Required rate of return 10 % The company uses straight-line depreciation on all equipment. Assume cash flows occur uniformly throughout a year except for the initial investment. The simple rate of return for the investment (rounded to the nearest tenth of a percent) is:
Answer:
Simple accounting rate of return= 27.32%
Explanation:
The accounting rate of return = Average annual operating income / Average investment
Annual depreciation = ( Cost - Salvage value)/No of years = (30,500 - 0 )/15
= 2033.33
Average Investment -= (Cost + scrap Value)/ 2
= (30500 + 0)/2 =15,250
Average Annual income = 6,200 - 2033.33
= 4166.67
Simple accounting rate of return =( 4,166.667/ 15,250 )× 100
= 27.32%
The WACC is a weighted average of the cost of debt, preferred stock, and common equity. Would the WACC be different if the equity for the coming year came solely in the form of retained earnings versus some equity from the sale of new common stock? Would the calculated WACC depend in any way on the size of the capital budget? How might dividend policy affect the WACC?
Answer:
The answer is:
Question 1: WACC will be lower if the equity came solely from retained earnings.
Question 2: Yes, WACC depends on the size of the capital budget
Question 3: Dividend policy affects WACC. The The higher the firm’s dividend payout, the smaller the addition to retained earnings and this will make the WACC higher
Explanation:
Weighted Average Cost of Capital (WACC) is the rate at which a company will pay for raising finances. Company raises money issuance of new shares, issuance of note or bonds(debts). The WACC is also the same as Cost of Capital.
Question 1: WACC are going to be different if the equity for the approaching year came solely from retained earnings. WACC are going to be lower if equity comes solely from retained earnings because the price of retained earnings is zero or smaller than if new equity is issued.
Question 2: WACC does rely on the dimensions of the capital budget. If usage of retained earnings is above new equity, WACC will decrease and vice-versa.
Question 3. Dividend policy affects WACC. If a firm’s dividend payout is high, there will be smaller addition to retained earnings and this will make the WACC to increase and vice-versa
Recently, Galaxy Corporation lowered its allowance for doubtful accounts by reducing bad debt expense from 2% of sales to 1% of sales. Ignore taxes. a. What are the immediate effects on operating income? bad debt expense will result in operating income. b. What are the immediate effects on operating cash flow? bad debt expense will have operating cash flow.'
Answer:
(a) Operating income will increase.
(b) Effect on the operating cash flow is an increase.
Explanation:
The answers above depend on the volume of sales, if a comparative analysis is done. If volume of credit sales was low when the rate was 2%, and now that it is reduced the credit sales increases significantly, the bad debt expense in this cash might be minutely different.
Definitely, operating income and operating cash flows will increase in absolute terms since lower bad debt expense rate is applied on credit sales.
Final answer:
Reducing bad debt expense from 2% to 1% of sales increases operating income due to lower expense recognition, while operating cash flow remains unaffected as this is a non-cash accounting adjustment.
Explanation:
Immediate Effects on Operating Income and Cash Flow
When Galaxy Corporation reduces its allowance for doubtful accounts by decreasing the bad debt expense from 2% of sales to 1% of sales, the immediate effect on operating income is an increase. Bad debt expense is an estimate of the portion of accounts receivable that may not be collected. By decreasing this expense, the company will report higher profits, assuming no change in sales. However, it is important to note that this action reflects an accounting change rather than an actual increase in cash collected.
b. The immediate effect on operating cash flow is neutral. Bad debt expense is a non-cash expense, which means it does not directly affect the cash flows. Operating cash flow is primarily concerned with cash transactions, such as the receipt of cash from customers and the payment of cash to suppliers and employees. Therefore, a change in the bad debt expense affects only the accounting representation of income and not the cash actually moving in and out of the business.
Mary's construction company receives a lucrative contract to build car ports on a U.S. Air force base. To celebrate she purchases a new sports car. The salesman of the car feels happy about his big sale and celebrates by going to the ballet with a date. A ballerino pays his rent. A landlord hires a plumber to install new toilets. In this scenario what macroeconomic process is being described?
Answer:
Multiplier effect
Explanation:
Multiplier effect refers to increase in final income as a result of an injection of spending into the circular flow of income.
It refers to how demand triggers further spending.
In this question, we see how as a result of marys contract, income flows down to the plumber.
The size of the multiplier depends on the marginal propensity to consume. The greater the marginal propensity to consume, the greater the multiplier effect.
I hope my answer helps you
Written, Inc. has outstanding 600,000 shares of $2 par common stock and 120,000 shares of no-par 6% preferred stock with a stated value of $5. Dividends have been paid in every year except the past two years and the current year. Assuming that $234,000 will be distributed, and the preferred stock is cumulative and participating, how much will the common stockholders receive
Answer :
Common stockholder will receive = $126,000
Explanation :
As per the data given in the question,
Preferred stock capital = $600,000
Rate of preferred dividend = 6%
Annual preferred dividend = $600,000*6%
=$36,000
Cumulative preferred dividend = $36,000 × 2 = $72,000
Total amount of dividend paid = $234,000
Arrears cumulative dividend = $72,000
Current year preferred dividend = $36,000
Amount of common stock is
= $234,000 - $72,000 - $36,000
= $126,000
Georgey's Pawn Shop had 1,000 shares of its $1.00 par value common stock issued and outstanding Before a 2 for 1 stock split. Each of the shares had a market value of $8.00 per share. AFTER the 2 for 1 stock split, which of the following statements is FALSE? The market value of each share should be $4.00 The par value per share would be $.50 per share The number of shares issued and outstanding would be 2,000 None of the above (i.e., all of the above statements are 'True' After the 2 for 1 stock split).
Answer:
None of the above(i.e., all of the above statements are 'True' After the 2 for 1 stock split).
Explanation:
Stock split is a way of increasing total of shares a company's shareholders have while proportionately reducing the share price per unit.In essence , it is about re-denominating the shares of a company.
A 2-1 stock split means for every one share that shareholders possess previously.they now have 2 in place of 1.
In other words,the shareholders now have 2,000 shares in all(2/1*1000)
The par value now=$1*1/2=$0.50
The market price now=$8*1/2=$4
Without mincing words,the last option is the correct answer.
Exercise 11-28 (LO. 3) Lucy sells her partnership interest, a passive activity, with an adjusted basis of $305,000 for $330,000. In addition, she has current and suspended losses of $28,000 associated with the partnership and has no other passive activities. a. Calculate Lucy's total gain and her current deductible loss. Her total gain is $ and her deductible loss is $ . b. What type of income can the deductible loss offset? Lucy's deductible loss is offset against
Answer and Explanation:
The actual gain or loss from the investment, including any suspended losses, should be determined when the tax payer disposes of his or her interest in a passive activity. According to the passive activity law, any gain realized on passive activity transition is viewed as passive and is initially compensated by suspended passive active losses from that activity.
If latest and suspended losses of passive activity exceed the gain accomplished, any loss from the activity for the tax year exceeding the net gain for the tax year from all passive activities shall be allowed to treat as a loss not arising from passive activity.
The computation of total gain and current deductible is shown below:-
Total gain = Net sales price - Adjusted basis amount
= $330,000 - 305,000
= $25,000
And Current deductible amount is
= Total gain earned - Suspended losses suffered
= $25,000 - $28,000
= $3,000
This amount represents the non passive amount
b. Deductible loss that may offset profit from passive investment that is realized in passive activity on the selling of partnership interest. The benefit realized in passive activity on selling of interest is regarded as passive.
On July 31, 2020, Novak Company engaged Minsk Tooling Company to construct a special-purpose piece of factory machinery. Construction begun immediately and was completed on November 1, 2020. To help finance construction, on July 31 Novak issued a $326,400, 3-year, 12% note payable at Netherlands National Bank, on which interest is payable each July 31. $217,400 of the proceeds of the note was paid to Minsk on July 31. The remainder of the proceeds was temporarily invested in short-term marketable securities (trading securities) at 10% until November 1. On November 1, Novak made a final $109,000 payment to Minsk. Other than the note to the Netherlands, Novak’s only outstanding liability at December 31, 2020, is a $31,400, 8%, 6-year note payable, dated January 1, 2017, on which interest is payable each December 31.
Calculate the interest revenue, weighted-average accumulated expenditures, avoidable interest, and total interest cost to be capitalized during 2020.
Answer:
weighted expenditures 54,350
avoidable interest 6,522
capitalized interest 6,522
interest revenue 2,725
Total Interest expense 12,310
Explanation:
217,400 paid to Misk and capitalized until Nov 1st:
August, September, October: 3 months
217,400 x 3/12 = 54,350 weighted expenditures
We apply to this the specific borrowing rate:
54,350 x 12% = 6,522
Interest revenue
amount invested: 326,400 - 217,400 = 109,000
at 10% for a period of 3 month:
109,000 x 10% x 3/12 = 2,725
Interest expense:
326,400 x 12% x 5/12 = 16,320
31,400 x 8% x full-year = 2,512
avoidable interest (6,522)
Total Interest expense 12,310
Prepare journal entries to record the following transactions for Sherman Systems. Purchased 6,800 shares of its own common stock at $43 per share on October 11. Sold 1,450 treasury shares on November 1 for $49 cash per share. Sold all remaining treasury shares on November 25 for $38 cash per share. 2. Prepare the stockholders' equity section after the October 11 treasury stock purchase.
Explanation
I think your question missed of key information for question 2, so I just answer question at my best for helping you.
Debit Credit
11-Oct
Treasury 292400
Cash 292400
Being own shares repurchased
1-Nov
Cash (1,450 × 49) 71,050
Treasury Stock (1,450 × 43) 62,350
Paid-in Capital from Sale of Treasury Stock 9,700
To record the sale of treasury stock.
November 25
Cash (5350 × 38) 203,300
Paid-in Capital from Sale of Treasury Stock 9,700
Retained Earnings 17,050
Treasury Stock (5350 × 43) 230,050
To record the sale of the remaining treasury shares
Final answer:
To record transactions involving treasury stock, journal entries must reflect the purchase and sale of these shares, affecting cash and equity accounts. After purchasing its own stock, the company's equity decreases by the purchase price of the treasury stock.
Explanation:
Journal Entries for Treasury Stock Transactions
To record the various treasury stock transactions for Sherman Systems, we would make the following journal entries on the respective dates:
On October 11, purchase of 6,800 treasury shares at $43 per share:After the October 11 purchase of treasury stock, the stockholders' equity section would reflect a decrease in total equity by the cost of the treasury shares purchased.
Michael's, Inc., just paid $1.90 to its shareholders as the annual dividend. Simultaneously, the company announced that future dividends will be increasing by 4.2 percent. If you require a rate of return of 8.5 percent, how much are you willing to pay today to purchase one share of the company's stock?
Final answer:
To find the value one would pay for a share of Michael's, Inc. stock with an initial dividend of $1.90, growing at 4.2%, with a required return of 8.5%, the Gordon Growth Model is used. The dividend next year is estimated at $1.98, leading to a stock value of approximately $46.05 today.
Explanation:
The value one is willing to pay today for a share of Michael's, Inc. stock, given that it has an annual dividend growth rate and a required rate of return, can be determined using the Gordon Growth Model (also known as the Dividend Discount Model). The model takes into account the most recent dividend payment, anticipated growth in dividends, and the investor's required rate of return to calculate the present value of the stock.
As per the question, the initial dividend (D0) is $1.90, with future dividends expected to grow at a rate of 4.2 percent (g). The required rate of return (r) is 8.5 percent. The formula to calculate the price one would pay for the stock today (P0) is:
P0 = D1 / (r - g), where D1 is the dividend expected next year.
First, we must calculate D1, which is the dividend expected next year: D1 = D0 x (1 + g), so we have D1 = $1.90 x (1 + 0.042) = $1.98 approximately. Then we plug D1 into our P0 calculation:
P0 = $1.98 / (0.085 - 0.042) = $1.98 / 0.043 = $46.05 approximately.
Therefore, based on the given requirements, one would be willing to pay approximately $46.05 to purchase a share of Michael's, Inc. stock today.
The Conity Corporation has an Electric Mixer Division and an Electric Lamp Division. Of a $ 15 comma 000 comma 000 bond issuance, the Electric Mixer Division used $ 9 comma 300 comma 000 and the Electric Lamp Division used $ 5 comma 700 comma 000 for expansion. Interest costs on the bond totaled $ 1 comma 000 comma 000 for the year. What amount of interest costs should be allocated to the Electric Mixer Division? (Round any intermediary calculations two decimal places and your final answer to the nearest dollar.)
Answer:
Amount allocated = $620,000
Explanation:
As per the data given in the question,
Bond issuance = $15,000,000
Electric mixer division used = $9,300,000
Electric lamp division used = $5,700,000
Interest cost on the bond = $1,000,000
Electric mixer division = Electric mixer division used ÷ Bond issuance
= $9,300,000 ÷ $15,000,000
=0.62
So, Allocated interest expense = Interest cost on the bond × Electric mixer division
= $1,000,000 × 0.62
= $620,000
You bought a stock one year ago for $51.41 per share and sold it today for $59.82 per share. It paid a $1.03 per share dividend today. How much of the return came from dividend yield and how much came from capital gain? The return that came from dividend yield is ________ (Round to one decima %. l place.) The return that came from capital gain is _______.
Answer:
Return from dividend yield= 2.0%
Capital gain = 16.4%
Explanation:
The return on a stock is the sum of the capital gains(loss) plus the dividends earned.
Capital gain is the difference between the value of the stocks when sold and the cost of the shares when purchased.
Total shareholders Return =
(Capital gain/ loss + dividend )/purchase price × 100
The total return can be broken down into
Dividend yield = Dividend/price × 100
= 1.03/51.41 × 100
=2.0%
Capital gain = capital gain/ price × 100
= (59.82 - 51.41)/51.41 × 100 = 16.4%
Monthly sales are $530,000. Warranty costs are estimated at 5% of monthly sales. Warranties are honored with replacement products. No defective products are returned during the month. At the end of the month, the company should record a journal entry with a credit to: A. Sales for $26,500. B. Warranty Expense for $26,500. C. Estimated Warranty Payable for $26,500. D. Inventory for $26,500.
Answer:
C. Estimated warranty payable for $26,500.
Explanation:
The monthly sales are $530,000 and the warranty costs are 5% of monthly sales,
Therefore, Warranty costs will be = $530,000*5% = $26,500.
Now, we know that no defective products were returned during the current month, hence the other options in the questions are discarded and Estimated warranty payable is taken at the month end.
Thank buddy.
Good luck and Cheers.
Vasco Company purchased equipment on January 1, 2001 at a purchase price of $50,000. Vasco paid $2,500 in shipping costs on the new machine and $500 on insurance on the new machine while in transit. Vasco has determined that the sum-of-the-years digits method is the appropriate depreciation method and estimates the useful life of the equipment to be 6 years and the residual value to be $5,000. On January 1, 2003, the estimate of the useful life was changed to be a total of 10 years, and the estimate of residual value was changed to $1,000. Determine the amount of depreciation expense
Answer:
The amount of depreciation expense is $3,871.86.
Explanation:
Sum-of-the-years digits method is determined by: (Remaining useful life/Sum of the years' digits) x Depreciable cost.
Depreciable cost = Cost - Salvage value
Depreciable cost = $50,000 + $2,500 - $5,000 = $47,500
Insurance premium is usually for a period of 1 year. This will be treated as prepayment instead of being added to the cost of the equipment. Shipping cost is added based on the recommendation of IAS 16 Property, Plant and Equipment.
Depreciation expense = 6/21 x $47,500 = $13,571.43 for Year 2001
Depreciation expense = 5/21 x $47,500 = $11,309.52 for Year 2002
As at December 2002, the accumulated depreciation will be $13,571.43 + $11,309.52 = $24,880.95; so, net book value is $52,500 - $24,880.95 = $27,619.05.
Change in estimate: 8/55 x $27,619.05 - $1,000 = $3,871.86.
55 = 10+9+8+7+6+5+4+3+2+1
The WCU maintenance department used 850 brackets during the course of a year. The brackets are purchased from a supplier in Asheville. These brackets cost $10 apiece to purchase. The inventory holding coat as a percentage of cost that WCU uses for their accountants is 13%. Based on the number of orders that are placed each year, the cost of placing an order is $21. The supplier can get the brackets to WCU 3 days after receiving the order. The maintenance department operates 250 days per year. Determine: 1) how many brackets should be ordered when WCU places an order with their supplier, and, 2) how many brackets do they have when they should place a new order with the supplier.
Answer:
a. 166 units should be ordererd of brackets
b. They have when they should place a new order with the supplier 10 brackets
Explanation:
According to the given data we have the following:
Annual Demand= 850 brackets
Buying cost=$10
carrying cost=13%×$10=$1.30
ordering cost per order=$21
a. To calculate how many brackets should be ordered when WCU places an order with their supplier we have to calculate the EOQ as follows:
EOQ=√2AO
C
EOQ=√2×850×21
1-30
EOQ=166 Units
166 units should be ordererd of brackets
b. To calculate how many brackets do they have when they should place a new order with the supplier we would habe to make the following calculation:
Reorder point=Annual Demand × lead time
working days in year
Reorder point=850 × 3
250
=10 brackets
They have when they should place a new order with the supplier 10 brackets
A company exchanged land for equipment and $2,300 in cash. The book value and the fair value of the land were $105,400 and $89,700, respectively. Assuming that the exchange has commercial substance, the company would record equipment and a gain/(loss) of: Equipment Gain/(loss) a.$87,400 $2,300 b.$105,400 $(2,300) c.$87,400 $(15,700) d.None of these answer choices are correct.
Answer:
c.$87,400 $(15,700)
Explanation:
Equipment ($89,700- $2,300) $87,400
Cash $2,300
Loss ($105,400 – $89,700) $15,700
Land (book value)105,400
Therefore Assuming that the exchange has commercial substance, the company would record equipment and a gain/(loss) of $87,400 $(15,700)
You want to have $1,200,000 when you retire and you are in a defined contribution plan. You can earn 9 percent per year on the money invested and you will retire in 25 years. Your employer also contributes to your plan. The employer will contribute 4 percent of what you put into the plan each year. How much do you have to contribute per year to meet your goal
Answer:
Annual deposit= $13,600.8
Explanation:
Giving the following information:
You want to have $1,200,000 when you retire and you are in a defined contribution plan.
Interest rate= 9%
Number of years= 25 years.
The employer will contribute 4 percent of what you put into the plan each year.
First, we need to calculate the total annual contribution:
FV= {A*[(1+i)^n-1]}/i
A= annual deposit
Isolating A:
A= (FV*i)/{[(1+i)^n]-1}
A=(1,200,000*0.09) / [(1.09^25)-1]
A= $14,167.50
Now, your annual deposit:
Annual deposit= 14,167.5*0.96= $13,600.8