Answer:
Price of Bond = $1,147.201
Explanation:
The value of the bond is the present value(PV) of the future cash receipts expected from the bond. The value is equal to present values of interest payment plus the redemption value (RV).
Value of Bond = PV of interest + PV of RV
The value of bond for Morgan can be worked out as follows:
Step 1
PV of interest payments
PV of interest =
A × (1+r)^(-n)/r
A- interest payment- 80, r-yield on bond- 6%, n-years to maturity- 10
80 × (1- (1.06)^(-10)
= 588.8069
Step 2
PV of Redemption Value
= 1,000 × (1.06)^(-10)
= 558.3947769
Price of bond
= 588.80 + 558.394
Price of Bond = $1,147.201
Jan's Dry Cleaning holds $10,000 on a typical day, although only $2,000 is essential for carrying out business. Making a midday deposit is estimated to reduce cash holdings to $8,000 and cost an extra $80 per year in lost production. If, in addition, an armored car service is engaged to pick up cash more frequently for a fee of $120 per year, cash holdings will be further reduced to $6,000 per day. Employing a computerized cash management service for an annual fee of $180 would reduce cash holdings further to $4,000. If any reduction in cash holdings will be invested in government bonds earning 3 percent, then how much money should Jan's hold?
Answer: $6000
Explanation:
If holding is $10000,
Reduction in cash holding = (10000-10000) = 0
Interest earned in government bonds=(Reduction in holdings) × 0.03 =0
Cost of deposits = 0
Additional benefit = (interest earned - cost of deposit)
Additional benefit = 0-0 = 0
Making a mid day deposit;
Reduction in cash holding = (10000-8000) = $2000
Interest earned in government bonds = Reduction in holdings × 0.03
= 2000 × 0.03 =$60
Cost of deposits=$80
Additional benefit=$60-80=-$20
Using a armored car service;
Reduction in cash holding=(10000-6000)=4000
Interest earned in government bonds= 4000 × 0.03 = $120
Cost of deposits=$120
Additional benefit=120 - 120= $0
Using computerized cash management service;
Reduction in cash holding=(10000-4000)=6000
Interest earned in government bonds;
6000 × 0.03 = $180
Cost of deposits=$180
Additional benefit=180 - 180=$0
Additional benefit is maximized in case of both computerized management service and armor vehicle . So, Optimal cash holding is $6000
Assume that you manage a risky portfolio with an expected rate of return of 12% and a standard deviation of 39%. The T-bill rate is 6%. Your risky portfolio includes the following investments in the given proportions: Stock A 23% Stock B 32% Stock C 45% Your client decides to invest in your risky portfolio with a proportion (y) of his investment budget with the rest in a T-bill (MMF) money market fund so that the overall portfolio will have an expected return of 9%. What is the proportion y
Answer:
y = 50 %
Explanation:
As per the data given in the question, computation are as follows:
Expected return = y × expected rate of return for portfolio + (1 - y) × rate of T-bills
By putting the value from the given data in the above formula, we get
0.09 = y×0.12 + (1 - y)×0.06
0.09 = 0.12y + 0.06 - 0.06y
0.03 = 0.06 y
y = 0.50
= 50%
Final answer:
The client should invest 50% of their investment budget in the risky portfolio to achieve an expected return of 9% when the risky portfolio's expected return is 12% and the T-bill rate is 6%.
Explanation:
The student is interested in understanding the proportion of investment (y) that must be invested in a risky portfolio to achieve an overall expected return of 9%, given that the risky portfolio has an expected return of 12% and the T-bill rate is 6%. To calculate this, we can use the formula of a combination of a risky asset and a risk-free asset to determine the overall expected return:
Expected Return of Overall Portfolio = y * Expected Return of Risky Portfolio + (1 - y) * Risk-Free Rate
Plugging in the values:
0.09 = y * 0.12 + (1 - y) * 0.06
Solving for y:
y = (0.09 - 0.06) / (0.12 - 0.06)
y = 0.03 / 0.06
y = 0.5
Therefore, the client should invest 50% of the investment budget in the risky portfolio and the rest in T-bills to achieve the desired expected return of 9%.
Garland Company uses a standard cost system. The standard for each finished unit of product allows for 3 pounds of plastic at $0.72 per pound. During December, Garland bought 4300 pounds of plastic at $0.75 per pound, and used 4000 pounds in the production of 1300 finished units of product. What is the direct materials purchase price variance for the month of December
Answer:
Direct material price variance= $129 unfavorable
Explanation:
Giving the following information:
The standard for each finished unit of the product allows $0.72 per pound. During December, Garland bought 4300 pounds of plastic at $0.75 per pound.
To calculate the direct material price variance, we need to use the following formula:
Direct material price variance= (standard price - actual price)*actual quantity
Direct material price variance= (0.72 - 0.75)*4,300
Direct material price variance= $129 unfavorable
2. A company has been successful in reducing the amount of sales returns and allowances. At the same time, a credit card company reduced the credit card discount from 3% to 2%. What effect will these changes have on the company's net sales, all other things equal? a. Net sales will not change. b. Net sales will increase. c. Net sales will decrease. d. Either (b) or (c).
Answer:
B) Net sales will increase.
Explanation:
Net sales = total sales - sales returns and allowances
If the percentage of sales returns and allowances is reduced, then total net sales should increase. E.g. total sales are $100, sales returns and allowances are $4, then net sales = $96. If sales returns and allowances decreases to $2, then net sales will be $98.
Also, if the fee that credit cards charge decreases by 1%, net sales will also increase. Credit card fees decrease total sales, e.g. you sell $50 using credit card and the credit card company charges you $1.50, your total sales will be $48.50, but if the credit card company only charges $1, then total sales will be $49.
Heavy Metal Corporation is expected to generate the following free cash flows over the next five years: Year 1 2 3 4 5 FCF ($ million) 53 68 78 75 82 After 5 years, the free cash flows are expected to grow at the industry average of 4% per year. Using the discounted free cash flow model and a weighted average cost of capital of 14%: Estimate the enterprise value of Heavy Metal. If Heavy Metal has no excess cash, debt of $300 million, and 40 million shares outstanding, estimate its share price.
Answer:
Enterprise Value of Heavy Metal =$820
Share price of Heavy Metal = $9.53
Explanation:
Base on the scenario been describe in the question, we can use the following method to solve the given problem.
a)Terminal Value
= 82 / (14% – 4%) = $820
Enterprise Value of Heavy Metal
Terminal Value= 53 / 1.14 + 68/1.14^2 + 78 / 1.14^3 + (75 + 820) / 1.14^4 =$681
b) Share price of Heavy Metal
=(Enterprise value + cash – Debt) / Shares outstanding
Share price of Heavy Metal= (681 + 0 – 300)/40 = $9.53
To estimate the enterprise value and share price of Heavy Metal Corporation, we use the discounted free cash flow model and a weighted average cost of capital (WACC) of 14%. The enterprise value is calculated by finding the present value of the projected free cash flows over the next five years, plus a perpetual growth rate applied to the last cash flow. To calculate the share price, we subtract the debt from the enterprise value and divide by the number of shares outstanding.
Explanation:To estimate the enterprise value of Heavy Metal Corporation, we will calculate the present value of the projected free cash flows. In this case, we have free cash flows for the first five years, and then a perpetual growth rate of 4% is applied to the last cash flow. Using the discounted free cash flow model and a weighted average cost of capital (WACC) of 14%, we can calculate the present value of each cash flow. Adding these present values together will give us the enterprise value.
To estimate the share price, we need to subtract the debt from the enterprise value and divide by the number of shares outstanding. In this case, the debt is $300 million and there are 40 million shares outstanding. Dividing the enterprise value minus the debt by the number of shares gives us the share price.
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Copies Plus Print operates a copy business at two different locations. Copies Plus Print has one support department that is responsible for cleaning, service, and maintenance of its copying equipment. The costs of the support department are allocated to each copy center on the basis of total copies made. During the first month, the costs of the support department were expected to be $200,000. Of this amount, $60,000 is considered a fixed cost. During the month, the support department incurred actual variable costs of $128,000 and actual fixed costs of $72,000. Normal and actual activity (copies made) are as follows: Copy Center 1 Copy Center 2 Normal activity (copies) 600,000 400,000 Actual activity (copies) 500,000 440,000 For purposes of performance evaluation, fixed costs allocated to Copy Center 2 are: a. $24,000 b. $28,800 c. $51,200 d. $60,000
Answer:
a. $24,000
Explanation:
60,000 fixed cost which, are allocated in the base of expected copies:
total expected copies: 600,000 + 400,000 = 1,000,000
Copy Center 2 represent 400,000 / 1,000,000 = 40% of the total copies volume for the period
Therefore from the 60,000 fixed cost the 40% was applied.
60,000 x 40 % = 24,000
For performance evaluation, the fixed costs allocated to Copy Center 2 amount to $24,000, calculated by applying the center's share of normal activity (40% of total copies) to the expected total fixed costs.
Allocating fixed costs to a copy center depends on the predetermined allocation rate based on expected activity levels. In this scenario, Copies Plus Print has one support department and the fixed costs are allocated based on the number of copies made. Hence, the fixed costs allocated to Copy Center 2 can be determined following these steps:
Calculate the proportion of copies made by each center out of the normal total.Apply this ratio to the total fixed costs to determine the allocation to each center.Fixed costs for the support department were expected to be $60,000 out of the total expected costs of $200,000.Normal activity for Copy Center 1 is 600,000 copies, and for Copy Center 2 is 400,000, making a total of 1,000,000 expected copies.Therefore, Copy Center 2, responsible for 40% of the total copies (400,000/1,000,000), would get 40% of the fixed costs.This amounts to $60,000 x 0.40, which equals $24,000.Therefore, for performance evaluation purposes, the fixed costs allocated to Copy Center 2 are $24,000.
Vaughn Manufacturing received cash of $63600 on August 1, 2017 for one year's rent in advance and recorded the transaction with a credit to Rent Revenue. The December 31, 2017 adjusting entry is:
A. debit Cash and credit Unearned Rent Revenue, $37100.
B. debit Unearned Rent Revenue and credit Rent Revenue, $26500.
C. debit Rent Revenue and credit Unearned Rent Revenue, $26500.
D. debit Rent Revenue and credit Unearned Rent Revenue, $37100.
Answer:
C. debit Rent Revenue and credit Unearned Rent Revenue, $26500.
Explanation:
The adjusting entry is shown below:
Rent revenue
To Unearned rent revenue
(Being the unearned rent revenue is recorded)
For recording this we debited the rent revenue as it reduced the sales and credited the unearned rent revenue as it increased the liability
Since the cash is received on August 1 and we need to record the adjusting entry on December 31,2017 so we considered the 5 months instead of taking 12 months i.e
= $63,600 × 5 months ÷ 12 months
= $26,500
Maben Company was started on January 1, Year 1, and experienced the following events during its first year of operation:
1. Acquired $35,000 cash from the issue of common stock.
2. Borrowed $47,000 cash from National Bank.
3. Earned cash revenues of $63,000 for performing services.
4. Paid cash expenses of $52,500.
5. Paid a $2,500 cash dividend to the stockholders.
6. Acquired an additional $35,000 cash from the issue of common stock.
7. Paid $12,000 cash to reduce the principal balance of the banknote.
8. Paid $46,000 cash to purchase land.
9. Determined that the market value of the land is $64,000.
Required:
Show the effects of the events on the financial statements using a horizontal financial statements model. In the Cash Flow column, use OA to designate operating activity, IA for investment activity, FA for financing activity, and NC for net change in cash. (Enter any decreases to account balances with a minus sign. Not all cells in the "Statement of Cash Flows" column may require an input - leave cells blank if there is no corresponding input needed.)
Answer: kindly check attached picture
Explanation:
Kindly view the attached picture for complete financial statement.
Final answer:
The effects of Maben Company's first-year transactions include various cash inflows and outflows categorized under operating, investing, and financing activities, leading to a net cash increase of $67,000 by the end of the year.
Explanation:
Effects of Maben Company's Events on Financial Statements
The following horizontal financial statements model showcases the effects of Maben Company’s transactions:
Acquired $35,000 cash from the issue of common stock. (FA)
Borrowed $47,000 cash from National Bank. (FA)
Earned cash revenues of $63,000 for performing services. (OA)
Paid cash expenses of $52,500. (OA)
Paid a $2,500 cash dividend to the stockholders. (FA)
Acquired an additional $35,000 cash from the issue of common stock. (FA)
Paid $12,000 cash to reduce the banknote. (FA)
Paid $46,000 cash to purchase land. (IA)
Determined that the market value of the land is $64,000. (No cash flow effect)
Now let’s translate those events into the financial statement effects:
Net Increase in Cash: = ($35,000 FA + $47,000 FA + $63,000 OA - $52,500 OA - $2,500 FA + $35,000 FA - $12,000 FA - $46,000 IA) = $67,000
Cash and cash equivalents - beginning of year = $0 (since the company started)
Cash and cash equivalents - end of year = $67,000
This model uses the cash flow designations OA, IA, and FA to reflect operating, investing, and financing activities, respectively. Balance sheet accounts like cash and cash equivalents and liabilities, specifically the banknote, have been affected by these transactions.
The highest value of total cost was $ 710 comma 000 in June for Horchata Beverages, Inc. Its lowest value of total cost was $ 550 comma 000 in December. The company makes a single product. The production volume in June and December were 13 comma 000 and 5 comma 000 units, respectively. What is the fixed cost per month? (Round any intermediate calculations to the nearest cent, and your final answer to the nearest dollar.) A. $ 450 comma 000 B. $ 5 comma 000 C. $ 160 comma 000 D. $ 550 comma 000
Answer:
A. $ 450 comma 000
Explanation:
In order to compute the fixed cost per month first we have to determine the variable cost per unit which is shown below.
Variable cost per hour = (High total cost - low total cost) ÷ (High production volume - low production volume)
= ($710,000 - $550,000) ÷ (13,000 units - 5,000 units )
= $160,000 ÷ 8,000 units
= $20
Now the fixed cost equal to
= High total cost - (High production volume × Variable cost per unit)
= $710,000 - (13,000 units × $20)
= $710,000 - $260,000
= $450,000
We simply applied the above formula
Harry Trading Company must choose its optimal capital structure. Currently, the firm has a 20 percent debt ratio and the firm expects to generate a dividend next year of $5.64 per share. Dividends are expected to remain at this level indefinitely. Stockholders currently require a 12.3 percent return on their investment. Harry is considering changing its capital structure if it would benefit shareholders. The firm estimates that if it increases the debt ratio to 30 percent, it will increase its expected dividend to $5.92 per share. Again, dividends are expected to remain at this new level indefinitely. However, because of the added risk, the required return demanded by stockholders will increase to 13.6 percent. Based on this information, should Harry make the change?
Answer:
They should not make the change because the price of the stocks will decrease.
Explanation:
the current price of the stocks using the perpetuity formula = dividend / required rate of return
current price with current capital structure = $5.64 / 0.123 = $45.85
if the company changes its capital structure by increasing debt, the price of the stocks will be
$5.92 / 0.136 = $43.53
since the price of the stocks would actually decrease if the capital structure changes, the change should not be made. The stockholders' wealth is measured by the price of the stocks, and if the price of the stocks decreases, then the stockholders' wealth also decreases.
Jones Excavation Company is planning an investment of $125,000 for a bulldozer. The bulldozer is expected to operate for 1,000 hours per year for five years. Customers will be charged $90 per hour for bulldozer work. The bulldozer operator costs $30 per hour in wages and benefits. The bulldozer is expected to require annual maintenance costing $7,500. The bulldozer uses fuel that is expected to cost $15 per hour of bulldozer operation.
Determine the equal annual net cash flows from operating the bulldozer.
Answer:
net cash flows = $37,500 per year
Explanation:
initial investment $125,000
operate 1,000 hours per year for 5 years
price per hour $90
direct labor costs $30 per hour
direct materials (fuel) $15 per hour
annual maintenance $7,500
the annual cash flows from operating the bulldozer = [($90 (price per hour) - $45 (total variable costs per hour) x 1,000 hours] - $7,500 (annual maintenance cost) = $45,000 - $7,500 = $37,500 per year
the cash flows should be the same for years 1 through 5.
The equal annual net cash flows from operating the bulldozer are $37,500.
Explanation:The equal annual net cash flows from operating the bulldozer can be calculated by subtracting the costs of operating the bulldozer from the revenue generated. In this case, the revenue is the customer charge per hour multiplied by the number of operating hours per year. The costs include the operator wages, annual maintenance costs, and fuel costs per hour. Let's calculate the net cash flows:
Revenue per year: $90/hour x 1,000 hours/year = $90,000Operator costs per year: $30/hour x 1,000 hours/year = $30,000Maintenance costs per year: $7,500Fuel costs per year: $15/hour x 1,000 hours/year = $15,000Total costs per year: $30,000 + $7,500 + $15,000 = $52,500Net cash flows per year = Revenue per year - Total costs per year = $90,000 - $52,500 = $37,500Therefore, the equal annual net cash flows from operating the bulldozer are $37,500.
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It is January 2nd. Senior management of Digby meets to determine their investment plan for the year. The current long-term debt is equal to $33,862,062. They decide to fully fund a plant and equipment purchase by issuing 50,000 shares of stock plus a new bond issue. The CFO happily notes this will raise their Leverage (Assets/Equity) to a new target of 2.45. Assume the stock can be issued at yesterday's stock price $20.54.
Which of the following statements are true? (Select 2 answers)
A) Total investment for Digby will be $2,518,806
B) Total Assets will rise to $140,042,395
C) Digby bond issue will be $48,116
D) Long term debt will increase from $33,862,062 to $34,888,934
E) Digby will issue stock totaling $1,026,872
F) Digby working capital will be unchanged at $14,847,979
Answer:
E, F
Explanation:
1) The working capital remain unchanged as new stock issue and the the share issues are purposely to fund the purchase of plant and equipment. Please note that the components of working capital which are cash , inventory , receivable and payable are not affected by this.
2)The total share stock issued issued is close to 1,026,872. (50000*20.54)
Answer:
A) Total investment for Digby will be $2,518,806
D) Long term debt will increase from $33,862,062 to $34,888,934
Explanation:
The current Long-term debt is $33,862,062
Digby issues new shares of 50,000 with stock price $20.54.
50,000 shares * $20.45 = $1,027,000
Assets of Digby will rise by,
Assets / Equity = 2.45
Assets / $1,027,000 = 2.45
Assets = 2.45 * $1,027,000
Assets = $2,516,150
CarMax Inc. reports sales of $15,875,118 thousand and cost of sales of $13,691,824 thousand for the year ended February 28, 2017. The gross profit for the year is: A. $2,183,294 thousand B. $1,464,362 thousand C. 86.2% D. 13.8% E. There is not enough information to determine gross profit.
Answer: A. $2,183,294 thousand
Explanation:
Gross Profit is calculated by deducting the Cost of Goods sold from the Sales figure.
In this case therefore the Gross Profit would be,
Gross Profit = 15,875,118 - 13,691,824
Gross Profit = $2,183,294 thousand.
$2,183,294 is the Gross Profit for year therefore Option A is correct.
Selected information from Peridot Corporation's accounting records and financial statements for 2021 is as follows ($ in millions): Cash paid to acquire machinery $ 38 Reacquired Peridot common stock 56 Proceeds from sale of land 96 Gain from the sale of land 46 Investment revenue received 71 Cash paid to acquire office equipment 86 In its statement of cash flows, Peridot should report net cash outflows from investing activities of:
Answer:
$43 million
Explanation:
The cash flow statement categories the company's transactions in a financial period into 3 groups; these are operating, investing and financing.
The net profit/loss, depreciation, changes in current assets (other than cash) and liabilities are considered as operating activities including income taxes.
The sale of assets, interest received, purchase of investments are examples of investing activities while the issuance of stocks, debt principal deduction (loan settlement), issuance of debt securities etc are examples of financing activities.
An increase in assets other than cash is an outflow while an increase in liabilities is an inflow. Depreciation and other non-cash expenses deducted in the income statements are added back while the non-cash income such gain on asset are deducted from net income.
Peridot's Net cash outflows from investing activities (in millions)
= -$38 + $96 + $71 - $86
= $43
The gain from the disposal of land will be deducted from the net income under the cash flows from operating activities while the requisition of own shares is a financing activity.
Suppose that the duopolists Carl and Simon face an inverse demand function for pumpkins of P = 400 - Q, where Q = Qs + Qc is the total number of pumpkins that reach the market and P is the price of pumpkins. Suppose further that Simon's cost function is Cs(Qs) = Qs2 and Carl's cost function is Cc(Qc) = 30Qc + Qc2. In the Cournot-Nash equilibrium, Simon's production is
Answer:
the Cournot-Nash equilibrium, Simon's production is 82 units
Explanation:
The Cournot-Nash Equilibrium for Simon's production is calculated as follows:
[tex]P = 400 - Q \\ \\ Q = Q_s + Q_c[/tex]
Reaction function of Carl is as follows:
Carl maximize profit at [tex]HR_c = HC_c[/tex]
[tex]TR_c = P*Q_c[/tex]
[tex]TR_c = (400 -Q_s -Q_c)Q_c[/tex]
[tex]TR_c = 400Q_c -Q_sQ_c -Q_c^2[/tex]
⇒ [tex]HR_c = \delta TR_c/ \delta Q_c[/tex]
[tex]HR_c =400 -Q_s -2 Q_c[/tex]
[tex]C_c = 30 Q_c + Q_c^2[/tex]
⇒ [tex]HC_c = \delta C_c/ \delta Q_c[/tex]
[tex]HC_c =30+2Q_c[/tex]
Set [tex]HR_c = HC_c[/tex]
[tex]400 - Q_s - 2 Q_c = 30 - 2Q_c \\ \\ 400 - Q_s -30 = 2Q_c + 2Q_c \\\\(370 Q_s) = 4 Q_c \\ \\ Q_c = (370-Q_s)/4 \\ \\ Q_c = 92.5 - 0.25 Q_s \to Reaction \ function \ of \ Carl --- equation (1)[/tex]
Reaction function of Simon
Since Simon maximize profit at [tex]HR_s = HC_s[/tex]
[tex]TR_s = PQ_s \\ \\ TR_s = (400-Q_c -Q_s)Q_s \\ \\ TR_s = 400 Q_s - Q_cQ_s - Q_s^2[/tex]
[tex]HR_s = \delta TR_s/ \delta Q_s[/tex]
[tex]HR_s =400 - Q_c -2Q_s[/tex]
[tex]C_s = Q_s^2[/tex]
[tex]HC_s= \delta C_s/ \delta Q_s[/tex]
[tex]HC_s=2Q_s[/tex]
Set [tex]HR_s = HC_s[/tex]
[tex]400- Q_c - 2Q_s = 2Q_s \\ \\ 400 - Q_c = 2Q_s+2Q_s \\ \\ 4Q_s = 400 - Q_c \\ \\ Q_s = (4000- Q_c)/4 \\ \\ Q_s = 100 -0.25 Q_c --- Reaction \ function \ of \ Simon \ -- equation (2)[/tex]
Substituting equation (1) into equation (2)
[tex]Q_s =100 -0.25Q_c \\ \\ Q_s = 100 - 0.25(92.5-0.25 Q_s) \\ \\ Q_s = 100 -23.125 +0.0625Q_s \\ \\ (Q_s-0.0625Q_s) = 76.375 \\ \\ 0.9375 Q_s = 76.875 \\ \\ Q_s = 76.375/0.9375 \\ \\ Q_s = 82[/tex]
Thus; the Cournot-Nash equilibrium, Simon's production is 82 units
The cash account for Pala Medical Co. at June 30, 20Y1, indicated a balance of $166,436. The bank statement indicated a balance of $195,688 on June 30, 20Y1. Comparing the bank statement and the accompanying canceled checks and memos with the records revealed the following reconciling items: a. Checks outstanding totaled $19,427. b. A deposit of $12,300, representing receipts of June 30, had been made too late to appear on the bank statement. c. The bank collected $26,500 on a $25,000 note, including interest of $1,500. d. A check for $4,000 returned with the statement had been incorrectly recorded by Pala Medical Co. as $400. The check was for the payment of an obligation to Skyline Supply Co. for a purchase on account. e. A check drawn for $195 had been erroneously charged by the bank as $915. f. Bank service charges for June amounted to $55.
Final answer:
The subject of this question is the reconciliation of cash accounts for Pala Medical Co. The company needs to analyze the differences between its cash account balance and the balance on the bank statement and consider various reconciling items.
Explanation:
The subject of this question is the reconciliation of cash accounts for Pala Medical Co. The question provides a list of reconciling items that need to be taken into account to reconcile the balance in the company's cash account with the balance on the bank statement. By analyzing the differences between the two balances and considering the reconciling items, the company can determine the correct balance of its cash account.
Marciano Manufacturing uses a standard cost system. Standards for direct materials are as follows: Direct materials (pounds per unit of output) 3 Cost per pound of direct materials $ 6 The company plans to produce 2 comma 000 units and has purchased on account 12 comma 000 pounds of direct materials at a net cost of $ 43 comma 800. What is the journal entry to record this transaction?
Answer:
Debit Raw Materials Inventory with $72,000; Credit Direct materials Cost Variance with 28,200, and Credit Accounts Payable with $43,800.
Explanation:
Direct materials purchase on account = $43,800
Standard cost of direct materials = 12,000 * $6 = $72,000
Direct materials cost variance = $72,000 - $43,800 = $28,200
The journal entries will therefore be as follows:
Details Dr ($) Cr ($)
Raw Materials Inventory 72,000
Direct materials Cost Variance 28,200
Accounts Payable 43,800
To record direct materials cost and variance.
Lily Company sells automatic can openers under a 75-day warranty for defective merchandise. Based on past experience, Lily estimates that 4% of the units sold will become defective during the warranty period. Management estimates that the average cost of replacing or repairing a defective unit is $20. The units sold and units defective that occurred during the last 2 months of 2020 are as follows.
Months Units Sold Units Defective Prior to December 31
November 37,300 746
December 39,300 491
Prepare the journal entries to record the estimated liability for warranties and the costs incurred in honoring 1,237 warranty claims.
Answer and Explanation:
The journal entries are shown below:
a. On November
Warranty expense Dr $29,840 (37,300 units × 4% × $20)
To Estimated warranty payable $29,840
(Being the warranty expense is recorded)
For recording this we debited the expense as it increase the expense and credited the estimated warranty payable as it increased the liabilities
On December
Warranty expense Dr $31,440 (39,300 units × 4% × $20)
To Estimated warranty payable $31,440
(Being the warranty expense is recorded)
For recording this we debited the expense as it increase the expense and credited the estimated warranty payable as it increased the liabilities
For cost incurred
Accrued Warranty Expense $24,740
To Cash $24,740
(Being the cash is paid)
For recording this we debited the expense as it increase the expense and credited the cash as it reduced the assets
The following selected transactions were completed by Interlocking Devices Co., a supplier of zippers for clothing: 2017 Dec. 7. Received from Unitarian Clothing & Bags Co., on account, a $75,000, 60-day, 3% note dated December 7. 31. Recorded an adjusting entry for accrued interest on the note of December 7. 31. Recorded the closing entry for interest revenue. 2018 Feb. 5. Received payment of note and interest from Unitarian Clothing & Bags Co. Journalize the entries to record the transactions. If an amount box does not require an entry, leave it blank. Assume 360 days in a year.
Answer:
The journal entry to record receiving the note would be:
December 7, 2017, promissory note received from Unitarian Clothing & Bags Co.
Dr Notes receivable 75,000
Cr Accounts receivable 75,000
Adjusting entry to record accrued interest:
December 31, 2017, accrued interest from notes receivable
Dr Interest receivable ($75,000 x 3% x 24/360 days) 150
Cr Interest revenue 150
December 31, 2017, closing entry for interest revenue
Dr Interest revenue 150
Cr income summary 150
The entry to record the collection of the note receivable:
Dr Cash ($75,000 + $75,000 x 3% x 60/360) 75,375
Cr Notes receivable 75,000
Cr Interest receivable 150
Cr Interest revenue 225
The transactions between Interlocking Devices Co. and Unitarian Clothing & Bags Co. involved receiving a note, recording accrued interest, closing entries for revenue, and receiving payment for the note with interest. These transactions were journalized with the relevant debit and credit entries to corresponding accounts.
Explanation:The transactions involving Interlocking Devices Co. and Unitarian Clothing & Bags Co. can be journalized as follows:
2017 Dec 7: Debit: Accounts Receivable - $75,000 Credit: Sales - $75,000 (Upon receiving the note) 2017 Dec 31: Debit: Interest Receivable - $250 Credit: Interest Revenue - $250 (To record accrued interest, calculated as [$75,000 * 3% * 24 days] / 360) 2017 Dec 31: Debit: Retained Earnings - $250 Credit: Interest Revenue - $250 (Closing entry to transfer Revenue to Retained Earnings) 2018 Feb 5: Debit: Cash - $75,750 Credit: Accounts Receivable - $75,000 Credit: Interest Receivable - $250 Credit: Interest Revenue - $500 (Receive payment for both the note and the interest, where the remaining interest is calculated as [$75,000 * 3% * 36 days] / 360) Learn more about Accounting Transactions here:https://brainly.com/question/34190871
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Calculator Crawford Company's standard fixed overhead rate is $6 per direct labor hour based on budgeted fixed costs of $600,000. The standard allows one direct labor hour per unit. Last year, Crawford produced 110,000 units of product, incurred $630,000 of fixed overhead costs, and recorded 212,000 actual hours of direct labor. What is Crawford's fixed overhead spending variance for last year
Answer:
$30,000(U)
Explanation:
Calculator Crawford Company's
Fixed overhead cost $630,000
Less budgeted fixed costs $600,000
Fixed overhead spending variance $30,000(U)
Therefore Crawford's fixed overhead spending variance for last year will be
$30,000(U)
How do insurance companies make money
Answer: They make money from monthly payments by customers.
Explanation:
Insurance companies make money primarily from insurance premiums paid by their clients and from investment income by investing unused funds. Actuaries help predict claims and set premium rates to ensure profits. These companies need to balance providing affordable premiums with high enough rates to cover potential claims and generate profits.
Insurance companies generate revenue through two main sources: insurance premiums and investment income. Clients pay premiums in exchange for coverage, which collectively allows the insurer to negotiate lower service rates and cover claims.
Actuaries within these companies predict possible claims based on historical patterns and set premium rates that cover these claims while still ensuring profitability.
Beyond premiums, insurers invest the funds they accumulate — that aren't immediately needed to pay out claims — in safe, liquid assets. These investments must be readily accessible, so they are typically quite conservative. However, this investment strategy still yields returns, contributing additional revenue to the insurance company.
Despite careful planning, unexpected events like natural disasters can result in substantial losses for insurance companies. Nevertheless, adequately set premiums and investment strategies generally let an insurance company cover its losses, pay out dividends to shareholders, and maintain a profitable business model.
During May, Joliet Fabrics Corporation manufactured 530 units of a special multilayer fabric with the trade name Stylex. The following information from the Stylex production department also pertains to May.
Direct material purchased: 18,300 yards at $1.41 per yard $ 25,803
Direct material used: 9,800 yards at $1.41 per yard 13,818
Direct labor: 2,400 hours at $9.18 per hour 22,032
The standard prime costs for one unit of Stylex are as follows:
Direct material: 20 yards at $1.38 per yard $ 27.60
Direct labor: 4 hours at $9.00 per hour 36.00
Total standard prime cost per unit of output $ 63.60
Required: Compute the following variances for the month of May. (Indicate the effect of each variance by selecting "Favorable" or "Unfavorable". Select "None" and enter "0" for no effect (i.e., zero variance).
Answer:
Direct material price variance = -$294 Unfavorable
Direct material quantity variance = $1,104 Favorable
Direct material purchase price variance = 549 Unfavorable
Direct labor rate variance = $432 Unfavorable
Direct labor efficiency variance = -$2,520 Unfavorable
Explanation:
The computation of given question is shown below:-
Standard hours = 530 × 4
= 2,120
Direct material price variance = (Standard price - Actual price) × Actual quantity
= ($1.38 - $1.41) × 9,800
= -$0.03 × 9,800
= -$294 Unfavorable
Direct material quantity variance = (Standard quantity - Actual quantity) × Standard price
= (530 × 20 - 9,600) × $1.38
= (10,600 - 9,800) × $1.38
= 800 × $1.38
= $1,104 Favorable
Direct material purchase price variance = (Standard price - Actual price) × Actual quantity
= ($1.38 - $1.41) × 18,300
= -$0.03 × 18,300
= $549 Unfavorable
Direct labor rate variance = (Standard rate - Actual rate) × Actual hours
= ($9 - $9.18) × 2,400
= -$0.18 × 2,400
= $432 Unfavorable
Direct labor efficiency variance = (Standard hours - Actual Hours) × Standard rate
= (2,120 - 2,400) × $9.00
= -280 × $9.00
= -$2,520 Unfavorable
1. Direct Material Price Variance: $549 Unfavorable. 2. Direct Material Quantity Variance: $1,104 Favorable 3. Direct Labor Rate Variance: $432 Unfavorable 4. Direct Labor Efficiency Variance: $2,520 Unfavorable
To compute the variances for the month of May for Joliet Fabrics Corporation, we need to calculate the following:
1. Direct Material Price Variance
2. Direct Material Quantity Variance
3. Direct Labor Rate Variance
4. Direct Labor Efficiency Variance
1. Direct Material Price Variance (DMPV)
[tex]\[ \text{DMPV} = (\text{Actual Price} - \text{Standard Price}) \times \text{Actual Quantity Purchased} \][/tex]
[tex]\[ \text{Standard Price} = \$1.38 \, \text{per yard} \][/tex]
[tex]\[ \text{Actual Price} = \$1.41 \, \text{per yard} \][/tex]
[tex]\[ \text{Actual Quantity Purchased} = 18,300 \, \text{yards} \][/tex]
[tex]\[ \text{DMPV} = (\$1.41 - \$1.38) \times 18,300 = \$0.03 \times 18,300 = \$549 \, \text{Unfavorable} \][/tex]
2. Direct Material Quantity Variance (DMQV)
[tex]\[ \text{DMQV} = (\text{Actual Quantity Used} - \text{Standard Quantity Allowed}) \times \text{Standard Price} \][/tex]
[tex]\[ \text{Standard Quantity Allowed}[/tex] = [tex]\text{Standard Quantity per Unit}[/tex] [tex]\times[/tex] Actual Output}
Standard Quantity per Unit = 20 [tex]\text{yards/unit}[/tex]
Actual Output = 530 , [tex]\text{units}[/tex]
[tex]\[ \text{Standard Quantity Allowed} = 20 \times 530 = 10,600 \, \text{yards} \][/tex]
[tex]\[ \text{Actual Quantity Used} = 9,800 \, \text{yards} \][/tex]
[tex]\[ \text{DMQV} = (9,800 - 10,600) \times \$1.38 = (-800) \times \$1.38 = -\$1,104 \, \text{Favorable} \][/tex]
3. Direct Labor Rate Variance (DLRV)
[tex]\[ \text{DLRV} = (\text{Actual Rate} - \text{Standard Rate}) \times \text{Actual Hours Worked} \][/tex]
[tex]\[ \text{Standard Rate} = \$9.00 \, \text{per hour} \][/tex]
[tex]\[ \text{Actual Rate} = \$9.18 \, \text{per hour} \][/tex]
[tex]\[ \text{Actual Hours Worked} = 2,400 \, \text{hours} \][/tex]
[tex]\[ \text{DLRV} = (\$9.18 - \$9.00) \times 2,400 = \$0.18 \times 2,400 = \$432 \, \text{Unfavorable} \][/tex]
4. Direct Labor Efficiency Variance (DLEV)
[tex]\[ \text{DLEV} = (\text{Actual Hours Worked} - \text{Standard Hours Allowed}) \times \text{Standard Rate} \][/tex]
[tex]\[ \text{Standard Hours Allowed}[/tex] =[tex]\text{Standard Hours per Unit}[/tex] [tex]\times[/tex] Actual Output
Standard Hours per Unit= 4 hours/unit
Actual Output} = 530units
Standard Hours Allowed = 4 ×530 = 2,120 hours
Actual Hours Worked = 2,400hours
DLEV = (2,400 - 2,120) × $9.00 = 280 × $9.00 = $2,520 Unfavorable
nder the general transfer pricing rule with excess capacity, the opportunity cost would be equal: Multiple Choice zero. the direct expenses incurred in producing the goods. the total difference in the cost of production between two divisions. the contribution margin forgone from the lost external sale. the summation of variable cost plus fixed cost.
Answer:
ZERO.
Explanation:
A transfer price normally is used to determine the cost to charge another division, subsidiary, or holding company for services rendered. It is said that transfer prices are priced based on the going market price for that good or service. Transfer pricing can also be applied to intellectual property such as research, patents, and royalties.
However, companies at times can also use (or misuse) this practice by altering their taxable income, thus reducing their overall taxes. The transfer pricing mechanism is a way that companies can shift tax liabilities to low-cost tax jurisdictions.
Answer:
zero
Explanation:
When there is an excess capacity available, the opportunity cost will be zero, company can use this capacity to make the potential benefit from an alternative. Transfer pricing is the price charged to a subsidiary division of a company. This price can also be charged by the subsidiary to the parent company. Some companies use this to manage the tax matters. It may also applicable to the transfer of assets of the companies.
MC Qu. 122 Marian Corporation has two... Marian Corporation has two separate divisions that operate as profit centers. The following information is available for the most recent year: Black Division Navy Division Sales (net) $ 400,000 $ 350,000 Salary expense 23,000 43,000 Cost of goods sold 140,000 154,000 The Black Division occupies 22,000 square feet in the plant. The Navy Division occupies 33,000 square feet. Rent is an indirect expense and is allocated based on square footage. Rent expense for the year was $55,000. Compute departmental income for the Black and Navy Divisions, respectively. (Do not round your intermediate computations)
Answer: Black Division $215,000
Navy Division $120,000
Explanation:
The other expenses are straightforward except for the Rent Expense so I'll tackle that first.
The Black Division occupies 22,000 square feet in the plant. The Navy Division occupies 33,000 square feet. Rent is an indirect expense and is allocated based on square footage.
Total square feet is,
= 22,000 + 33,000
= 55,000 square feet.
Black Division's percentage of the rent will be,
= 22,000/55,000
= 0.4
Navi Division's percentage of the rent will be
= 33,000/55,000
= 0.6
Total rent is $55,000.
Black Division is therefore apportioned,
= 0.4 * $55,000
= $22,000
Navy is apportioned,
= 0.6 * $55,000
= $33,000
Black Division Departmental Income is therefore,
= Sales - Cost of Goods sold - Salary - Rent
= 400,000 - 140,000 - 23,000 - 22,000
= $215,000
Black Division's Departmental Income is $215,000
Navy Division's Departmental Income is,
= Sales - Cost of Goods sold - Salary - Rent
= 350,000 - 154,000 - 43,000 - 33,000
= $120,000
Navy Division's Departmental Income is $120,000
"financing activities" Creative Sound Systems sold investments, land, and its own common stock for $35.0 million, $15.5 million, and $41.0 million, respectively. Creative Sound Systems also purchased treasury stock, equipment, and a patent for $21.5 million, $25.5 million, and $12.5 million, respectively.
Answer:
The flow of cash of C Company from investing activity is $12.5 million
Explanation:
Recall that
The statement of cash flows comprises of three activities. The ones associated with the general operations of the company are refereed to as operating activities.
investing activities refers various investments in assets, their sale or purchase. while financing activities refers to activities that affect the capital with liabilities.
The Computation of cash flows from investing activity is given below:
Statement showing cash flow of activities from investing activities of Creating sound systems company
Particulars Amount (In millions)
The sale of investment 35
The sale of land 15.5
Purchase of equipment - 25.5
Purchase of Patent - 12.5
The flow of cash from investing
activities 12.5
Therefore,
The cash flow of investing activities C company is 12. 5 million
or we can compute as follows:
Cash flow from investing activities = Sale of investment + sale of land - purchase of equipment = Purchase of potent
which is
= $ 35 million + $15 million - $ 25 million - 12.5 million
= $ 12.5 million
Therefore, the flow of cash from investing activity is $12.5 million.
Which description identifies the controlling function of the management process? Group of answer choices monitoring a firm's performance to ensure that it is meeting its goals scanning the business environment for threats and opportunities guiding and motivating employees to meet organizational objectives determining how to arrange a firm's resources into a coherent structure determining what an organization needs to do and how best to get it done
Answer:
Monitoring a firm's performance to ensure that it is meeting its goals
Explanation:
The controlling function refers to evaluating the progress the company has to make sure that it wil be able to achieve its goals and determining actions to be taken when there are deviations. According to this, the answer is that the description that identifies the controlling function of the management process is monitoring a firm's performance to ensure that it is meeting its goals.
The other options are not right because guiding and motivating employees to meet organizational objectives refers to the leading function, determining how to arrange a firm's resources into a coherent structure refers to the organizing function and determining what an organization needs to do and how best to get it done refers to the planning function. Also, scanning the business environment for threats and opportunities refers to environmental scanning.
Statement that explains controlling function of the management process as regards this question A: monitoring a firm's performance to ensure that it is meeting its goals.
Controlling function of management can be regarded as function of management that measure the progress of the organization towards her goals.It also brings in corrective action incase there is any deviation from pursuing the set goals. It takes charge if the control of the organization goals.Therefore, option A is correct.
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"Why do transportation costs initially decrease as the number of warehouses in a system increases? Why do transportation costs eventually increase as the number of warehouses increase? Why do inventory costs increase as the number of warehouses in a system increases? "
Answer:
In simple words, The general explanation is that efficiency gains do exist. Which lowers the cost of transport. In addition, as products are delivered to the facilities, one boat load will support more just one storage facility, lowering the expense of transport. In addition, as products are delivered to the facilities, one boatload will support rather than one supermarket, lowering the cost of transport.
In her first few weeks at the marketing division of Rolland Retails, Judith Cox realized that Joshua, Doug, and Carl were closer to her manager, Eric Scott, than the other five team members. Eric, Joshua, Doug, and Carl came to work at the same time, were seen together at the cafeteria, and stayed late and worked when the need arose. While Judith was in training, she received very good feedback from Eric, and as she transitioned to the floor, she felt that Eric was giving her interesting projects, allowing her more freedom, and seeking her opinion frequently. The information provided in the scenario supports the prediction that ________. Joshua, Doug, and Carl will display low trust propensity in Judith Judith will become a part of Eric's ingroup in the marketing division Judith will have lower levels of identification-based trust with Eric when compared to other trainees Eric's ingroup will remain a reference group for Judith permanently Judith will develop low trust propensity toward Eric
Answer:
Judith will become a part of Eric's in-group in the marketing division.
in-group
Explanation:
in-group are said to be a social group containing some amount of individuals whereby an individual identifies himself/herself as a member of the group. they are a set of people who are together just to achieve a common goal/objectives
Final answer:
Based on the information provided, it's likely that Judith will become a part of Eric's ingroup in the marketing division due to the preferential treatment and trust shown towards her.
Explanation:
The scenario presented suggests that Judith Cox is being integrated into the ingroup of her manager, Eric Scott. Given her positive feedback during training, the interesting projects she's been assigned, the freedom in her work, and the frequency with which Eric seeks her opinion, it supports the prediction that Judith will become a part of Eric's ingroup in the marketing division. Such dynamics indicate that Eric trusts Judith and values her contributions, which leads to closer working relationships resembling those he has with Joshua, Doug, and Carl.
Moreover, the scenario does not provide any indication that Joshua, Doug, and Carl would display low trust propensity in Judith. If anything, their inclusion in the ingroup suggests a higher likelihood of acceptance, if Judith aligns with the group's norms and performs well. Similarly, the notion of Eric's ingroup remaining a reference group for Judith permanently is inconclusive, as group dynamics can change over time. Trust propensity toward Eric on Judith's part can only be speculated upon, but given the positive interactions thus far, lower levels of trust propensity seem unlikely unless future events suggest otherwise. Lastly, there's no given reason to believe that Judith will have lower levels of identification-based trust with Eric than other trainees, especially since she is receiving favorable treatment akin to those in Eric's trusted circle.
On July 31, 2022, Sunland Company had a cash balance per books of $6,275.00. The statement from Dakota State Bank on that date showed a balance of $7,825.80. A comparison of the bank statement with the Cash account revealed the following facts.
1. The bank service charge for July was $17.00.
2. The bank collected $1,655.00 from a customer for Sunland Company through electronic funds transfer.
3. The July 31 receipts of $1,336.30 were not included in the bank deposits for July. These receipts were deposited by the company in a night deposit vault on July 31.
4. Company check No. 2480 issued to L. Taylor, a creditor, for $384.00 that cleared the bank in July was incorrectly entered in the cash payments journal on July 10 for $348.00.
5. Checks outstanding on July 31 totaled $1,995.10.
6. On July 31, the bank statement showed an NSF charge of $710.00 for a check received by the company from W. Krueger, a customer, on account.
Prepare the bank reconciliation as of July 31. (List items that increase balance as per bank & books first.)
SUNLAND COMPANY
Bank Reconciliation
choose the accounting period For the Year Ended July 31, 2022July 31, 2022For the Month Ended July 31, 2022
select an opening name for section one Deposits in transitElectronic funds transfer receivedBank service chargeCash balance per bank statementOutstanding checksError in recording check No. 2480NSF checkAdjusted cash balance per bank
$enter a dollar amount
select between addition and deduction AddLess:
select a reconciling item Error in recording check No. 2480Cash balance per bank statementAdjusted cash balance per bankBank service chargeDeposits in transitOutstanding checksElectronic funds transfer receivedNSF check
enter a dollar amount
enter a subtotal of the two previous amounts
select between addition and deduction AddLess:
select a reconciling item NSF checkError in recording check No. 2480Deposits in transitCash balance per bank statementElectronic funds transfer receivedOutstanding checksBank service chargeAdjusted cash balance per bank
enter a dollar amount
select a closing name for section one Outstanding checksCash balance per bank statementBank service chargeNSF checkElectronic funds transfer receivedDeposits in transitAdjusted cash balance per bankError in recording check No. 2480
$enter a total amount for the first section
select an opening name for section two Deposits in transitBank service chargeError in recording check No. 2480NSF checkAdjusted cash balance per booksCash balance per booksElectronic funds transfer receivedOutstanding checks
$enter a dollar amount
select between addition and deduction AddLess:
select a reconciling item Cash balance per booksOutstanding checksError in recording check No. 2480Deposits in transitAdjusted cash balance per booksElectronic funds transfer receivedBank service chargeNSF check
enter a dollar amount
enter a subtotal of the two previous amounts
select between addition and deduction AddLess:
select a reconciling item Adjusted cash balance per booksElectronic funds transfer receivedNSF checkError in recording check No. 2480Deposits in transitCash balance per booksOutstanding checksBank service charge
$enter a dollar amount
select a reconciling item Deposits in transitError in recording check No. 2480Adjusted cash balance per booksOutstanding checksNSF checkElectronic funds transfer receivedBank service chargeCash balance per books
enter a dollar amount
select a reconciling item NSF checkBank service chargeElectronic funds transfer receivedCash balance per booksError in recording check No. 2480Deposits in transitAdjusted cash balance per booksOutstanding checks
enter a dollar amount
enter a subtotal of the three previous amounts
select a closing name for section two Deposits in transitAdjusted cash balance per booksElectronic funds transfer receivedOutstanding checksError in recording check No. 2480NSF checkCash balance per booksBank service charge
$enter a total amount for the second section
Answer:
CASH
Balance 6275
Service Charge -17
mistake -36
NSF -710
collection 1655
Adjusted Balance 7167.00
BANK
Balance 7825.8
Outstanding Check - 1995.1
Deposit in transit 1336.3
Adjusted Balance 7167.000
Explanation:
We adjust each statement for the unknow information
For the bank these are the outstanding check as the bank only see the checks when the holder goes to cleared and the deposit in transit.
Now, for the company will be the service cash, the collected account in their behalf pretty straight-forward.
Next, the NSF means the company accept this check as a way to settle and account but it wasn't honor It bounce making the cash in the accounting to decrease the check conversion for cash wasn't possible
Finally, the mistake we remove the mistkae by adding the 348 to cash and then, removing the 384 actual check value in both cases against, account payable as we deliver it to a supplier.
Identify whether the market supply curve will shift right or left or will stay the same for the following: a. Firms in an industry are required to pay a fine for their carbon dioxide emissions. b. Companies are sued for polluting the water in a river. c. Power plants in a specific city are not required to address the impact of their air quality emissions. d. Companies that use fracking to remove oil and gas from rock are required to clean up the damage.
Answer:
1. In first example, supply curve moves to the left. Delivery curve moves to the left as supply is heading downward due to variables apart from rate change. In this scenario, the cost of output rises due to the current penalty, and vendors will be able to produce less at the same amount.
2. In second scenario, businesses are prosecuted for contaminating river water, rises in manufacturing prices and vendors will be able to produce worse at the same amount. The output curve then shifts for its left.
3. In third case the output curve will remain the same. That's since the quantities given does not change.
4. In this situation, the harm done by drilling must be cleaned up by the businesses. Hence, production cost rises, and vendors will be willing to provide worse at the provided price. The supply curves then shifts to the left.