Answer:
Accounting rate of return= 20%
Explanation:
The accounting rate of return is the average annual income expressed as a percentage of the average investment.
The simple rate of return can be calculated using the two formula below:
Accounting rate of return
= Annual operating income/Average investment × 100
Average investment = (Initial cost + scrap value)/2
Average profit = Total profit over investment period / Number of years
Total revenue = 8000+12000+ 15000 + 20,000+ 20,000 = 75000
Total expenses= 8000 + 8000 + 9000 +10,000 + 10,000 = 45000
Cash profit = 75,000 - 45,000 = 30,000
Depreciation = 4000× 5 = 20,000
Accounting profit = Cash profit - Depreciation = 30,000- 20,000 = 10,000
Average profit = 10,000/5 = 2,000
Accounting rate of return = 2,000/20000× 100 = 20%
Accounting rate of return= 20%
A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a long-term government and corporate bond fund, and the third is a T-bill money market fund that yields a sure rate of 5.5%. The probability distributions of the risky funds are: Expected Return Standard Deviation Stock fund (S) 15 % 32 % Bond fund (B) 9 % 23 % The correlation between the fund returns is 0.15. What is the Sharpe ratio of the best feasible CAL?
Answer:
0.296875
Explanation:
Given the following :
Probability distribution of risky funds :
- - - - - - - - - - - - - - stock fund(S) - - bond fund(B)
Expected return - - - 15% - - - - - - - - - - 9%
Std - - - - - - - - - - - - - 32% - - - - - - - - - - 23%
Correlation between funds return = 0.15
Sure rate = 5.5%
To calculate the Sharpe ratio we use the formula :
Sharpe Ratio = (Expected Return of Investment - Risk Free Rate) / Standard Deviation of excess return of investment
For the stock fund :
Expected return = 15%
Risk free rate = market sure rate = 5.5%
Standard deviation = 32%
Sharpe ratio of stock fund :
(15% - 5.5%) / 32%
= 9.5% / 32%
= 0.296875
For Bond fund :
Expected return = 9%
Risk free rate = market sure rate = 5.5%
Standard deviation = 23%
Sharpe ratio of bond fund :
(9% - 5.5%) / 23%
= 3.5% / 23%
= 0.1521739
Therefore the Sharpe ratio of the best feasible CAL is the higher of the two ratios which is 0.296875
Polychromasia Company sold inventory costing $30,000 to its subsidiary, Simply Colorful, for double its cost in 2009. Polychromasia owns 80% of Simply Colorful. Simply resold $50,000 of this inventory for $60,000 to outsiders in 2009. How much unrealized profit exists at the end of the year?
a) $20,000
b) $8,000
c) $10,000
d) $5,000
Answer:
D.
Explanation:
30000 x 2 = 60000
60000 - 50000 = 10000
10000/2
= 5000
Suppose the firms in a perfectly competitive industry merge to form a monopoly. Which of the following would NOT occur?
a. A rise in total consumer plus producer surplus
b. A deadweight loss
c. A rise in producer surplus
d. A fall in consumer surplus
Answer: a. A rise in total consumer plus producer surplus
Explanation:
When a Monopoly is formed, the Producer surplus will increase but the Consumer surplus will decrease. This is because a Monopoly will charge a higher price than a Competitive firm to get more profit as well reduce output as well.
This will result in the transfer of some Consumer surplus to the Producer as well as a Dead-weight loss being formed thereby reducing the Consumer surplus. The total surplus will therefore fall as a result of this merger.
Seadrill Engineering licenses software to oil-drilling firms for 5 years. In addition to providing the software, the company also provides after sales consulting services and support to ensure smooth operation of the software over the license period of 5 years. The total transaction price is $420,000. Based on standalone values, the company estimates the consulting services and support have a value of $120,000 and the software license has a value of $300,000. Assuming the performance obligations are not interdependent, the journal entry to record the transaction on the date software is sold includes
Answer:
Dr Cash 420,000
Cr Sales Revenue (software) 300,000
Cr Unearned Service Revenue 120,000
Explanation:
software license $300,000
consulting services and support $120,000
total transaction cost $420,000
The recorded transaction should be:
Dr Cash 420,000
Cr Sales Revenue (software) 300,000
Cr Unearned Service Revenue 120,000
Cash account should be debited, since it's an asset. Sales revenue should be credited since it increases equity. Unearned revenue is a type of liability, so it should be credited.
1. The Lounge Company manufactures slippers and sells them at $10 a pair. Variable manufacturing cost is $4.75 a pair, and allocated fixed manufacturing cost is $0.75 a pair. It has enough idle capacity available to accept a one-time-only special order of 30,000 pairs of slippers at $5.50 a pair. Lounge will not incur any marketing costs as a result of the special order. What would the effect on operating income be if the special order could be accepted without affecting normal sales: (a) $0, (b) $22,500 increase, (c) $142,500 increase, or (d) $165,000 increase? Show your calculations. 2. The St. Paul Company manufactures Part No. 498 for use in its production line. The manufacturing cost per unit for 25,000 units of Part No. 498 is as follows:
Answer:
1. The Lounge Company
The effect on operating income be if the special order could be accepted without affecting normal sales:
(b) $22,500 increase
2. Manchester
Explanation:
1. The Lounge Company:
Selling price = $10 per pair
Variable manufacturing cost = $4.75 per pair
Allocated fixed manufacturing cost = $0.75 per pair
Total manufacturing costs = $5.50
Special order of 30,000 pairs
Price of special order = $5.50 per pair
Sales value of special special order = $165,000 (30,000 x $5.50)
Manufacturing cost for special order:
Based on full cost = $165,000 (30,000 x $5.50)
Based on variable cost = $142,500 (30,000 x $4.75)
Contribution = $22,500 ($165,000 - $142,500)
The special order will not bring about any increase in operating income if the full cost is used to determine the net income. If, however, the variable cost is used, considering that The Lounge Company has idle capacity, then there is a contribution of $22,500 to the operating income.
In the rational choice decision process model, which of the following immediately follows the step where possible choices have been discovered or developed?
a. Discover possible choices.
b. Select the choice with the highest value.
c. Implement the selected choice
d. Evaluate the selected choice.
Answer:
Correct Answer:
b. Select the choice with the highest value.
Explanation:
In the rational choice decision process model, it is a series of process whereby steps are taking towards making a beneficial decision for a given business setup. In a situation where possible choices has been discovered, the next step would be to select the choice with the highest value which is going to be implemented.
The step that followed where possible choices have been discovered or developed is option b.
The following information should be considered:
In the case of the rational choice decision process, it should be the sequence of the process in which the steps should be taken so that the decision should be carried out i.e. beneficial for the business setup. When the possible choices are discovered so the next step should be that the choice should be selected having the high value.Therefore we can conclude that The step that followed where possible choices have been discovered or developed is option b.
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Differentiate between team and teamwork
Team - A team is a group of individuals working together to achieve their goal(s).
Teamwork - Teamwork is the collaborative effort of a group to achieve a common goal or to complete a task in the most effective and efficient way. This concept is seen within the greater framework of a team, which is a group of interdependent individuals who work together towards a common goal.
(From Wikipedia)
Answer:
The correct answer is
Explanation:
Team: A group of people working together to achieve their goals.
Teamwork: A skill used by a group of people to achieve their required goal. It helps to finish the work perfectly and efficiently. It also shows that the members of that particular group are skillful and hard working.
Hope this helps....
Have a nice day!!!!
Suppose the real risk-free rate is 3.50%,the average future inflation rate is 2.50%, a maturity premium of 0.20% per year to maturity applies, i.e., MRP = 0.20%(t), where t is the years to maturity. Suppose also that a liquidity premium of 0.50% and a default risk premium of 0.80% applies to A-rated corporate bonds.
Required:
What is the difference in the yields on a 5-year A-rated corporate bond and on a 10-year Treasury bond?
Answer:
the 5 year A-rated corporate bond yields 0.3% more than the 10-year Treasury bond
Explanation:
the yield of a 10 year treasury bond = real risk free rate + average future inflation rate + (maturity premium x number of years) = 3.5% + 2.5% + (20% x 10 years) = 8%
the yield of a 5 year A-rated corporate bond = real risk free rate + average future inflation rate + liquidity premium + default risk premium + (maturity premium x number of years) = 3.5% + 2.5% + 0.5% + 0.8% + (20% x 5 years) = 8.3%
difference in yields = 8.3% - 8% = 0.3%
Metals and energy currency futures contracts are actively traded on Group of answer choices propane. gold. All of the options are correct. gold and silver. silver.
Answer: All of the options are correct.
Explanation:
Futures refer to a Derivative Instrument contract that mandates a person to buy an asset (underlying asset) at a future date and at a certain price. This enables the buyer of the contract to be certain of an asset's price in future thereby getting rid of various risks.
Metal futures are mostly traded on gold, silver, and copper and energy futures are traded on energy resources like oil and natural usable gas like Propane which is used for most gas related appliances in the household such as cooking gas.
Bramble Corp. purchased equipment for $48800. Sales tax on the purchase was $2928. Other costs incurred were freight charges of $732, repairs of $427 for damage during installation, and installation costs of $813. What is the cost of the equipment
Answer:
Cost of equipment = $52,887
Explanation:
According to International Accounting Standards (IAS) 16, property plants and equipment, the cost of land includes all of the cost necessary to bring and make it ready for the intended use.
These costs include purchase cost, fees and commission associated with the purchase transaction.
Here in this question the installation cost, sales taxes and repairs slab all fall within the definition of IAS 16
Hence cost of the equipment
48,800 + 2,928 + 732 + 427 = $52,887
Cost of equipment = $52,887
On February 1, 2020, Pat Weaver Inc. (PWI) issued 9%, $1,200,000 bonds for $1,500,000. PWI retired all of these bonds on January 1, 2021, at 105. Unamortized bond premium on that date was $126,000. How much gain or loss should be recognized on this bond retirement
Answer: Gain on bond retirement = $66,000
Explanation:
A gain on retirement of bonds occurs when a bond issuer or a corporation buys back bonds which it previously sold for an amount less than the book value of the particular liability while a loss would be recognized if the bought back bonds are more than the amount of the book value of the liability.
Book value / Carrying value = $1,200,000 + $126,000 =$1,326,000
paid at redemption = $1,200,000 x 105%= $1, 260,000
Gain on bond retirement = Book/ Carrying value -Amount paid at redemption
= $1,326,000 - $1, 260,000 = $66,000
if average demand for invenrory item is 200 units per day lead time is three days and safety stock is 1-- units the reorder point is
please do you mean 1 unit for safety stock or 100 units, will solve for both
Answer:when safety stock =1, Reorder point= 601 units
when safety stock =100, Reorder point= 700 units
Explanation:
Reorder Point (ROP), also called reorder level, is the point of inventoryset by a busness in which it replenishes its stock of items.
given:
Average demand= 200
lead time = 3
when safety stock =1
Reorder point= (Average demand X Delivery lead time ) + Safety stock
= (200 x 3 ) +1 = 601 units
when safety stock = 100
Reorder point= (Average demand X Delivery lead time ) + Safety stock
= (200 x 3 ) +100 = 700 units
On the first day of the fiscal year, a company issues a $8,800,000, 7%, 10-year bond that pays semiannual interest of $308,000 ($8,800,000 × 7% × ½), receiving cash of $7,655,303. Required:Journalize the first interest payment and the amortization of the related bond discount.
Answer and Explanation:
The journal entry is shown below:
Interest expense $403,391
To Cash $308,000
To Discount on note payable $95,391
{($8,800,000 - $7,655,303) ÷ 12}
Here we debited the interest expense as it increased the expenses and credited the cash as it decreased the assets and credited the discount on note payable
Tameika Johnson’s supervisor is in charge of the arrangements for the annual company party. He has given Johnson the responsibility for finding a caterer for the event, arranging the entertainment, and selecting the door prizes. Johnson’s supervisor used _____ to make her accountable for most of the success or failure of the picnic.
Answer: delegation of authority
Explanation:
From the question, we are informed that Tameika Johnson’s supervisor is in charge of the arrangements for the annual company party and that he has given Johnson the responsibility for finding a caterer for the event, arranging the entertainment, and selecting the door prizes.
In this scenario, the outcome of the picnic has already been delegated to Johnson because the job role has been shared to him.
if average daily demand for an item is 15 units safety stock is 55 units and lead time is three days the rop will be
Answer:ROP= Reorder Point = 100
Explanation:
Reorder Point (ROP), also called reorder level, is the level of inventory which causes that the stock of a business is replenished. When a stock is being utilized and reaches a set amount by a firm, it holds that such item be reordered or replenished.
ROP= Reorder Point = (Average Daily Usage x Average Lead Time in Days) + Safety Stock
=(15 x 3) + 55 = 100
This means that when the inventory level of stock falls to 100, the commodity or item should be reordered.
The following transactions occurred during March 2016 for the Wainwright Corporation. The company owns and operates a wholesale warehouse.
1. Issued 30,000 shares of capital stock in exchange for $300,000 in cash.
2. Purchased equipment at a cost of $40,000. $10,000 cash was paid and a note payable was signed for the balance owed.
3. Purchased inventory on account at a cost of $90,000. The company uses the perpetual inventory system.
4. Credit sales for the month totaled $120,000. The cost of the goods sold was $70,000.
5. Paid $5,000 in rent on the warehouse building for the month of March.
6. Paid $6,000 to an insurance company for fire and liability insurance for a one-year period beginning April 1, 2016.
7. Paid $70,000 on account for the merchandise purchased in 3.
8. Collected $55,000 from customers on account.
9. Recorded depreciation expense of $1,000 for the month on the equipment.
Required:
Analyze each transaction and classify each as a financing, investing, and/or operating activity (a transaction can represent more than one type of activity). In doing so, also indicate the cash effect of each. (Amounts to be deducted should be indicated with a minus sign. If there is no cash effect, leave cell blank.)
Answer:
1. Financing Activity : $300,000
2.Investing Activity : $10,000 and Non-cash Financing and Investing Activity : $30,000
3.Operating Activity : - $90,000
4.Operating Activity : $50,000
5.Operating Activity : -$5,000
6.Operating Activity : -$6,000
7.Operating Activity : -$70,000
8.Operating Activity : $55,000
9.Operating Activity : $1,000
Explanation:
Operating Activities involves the entity`s trading operation in ordinary course of business.
Investing Activities involves the entity`s sale or purchase of Investments.
Financing Activities involves the entity`s acquisition and sale of funds.
During the first month of operations ended August 31, Kodiak Fridgeration Company manufactured 60,000 mini refrigerators, of which 54,000 were sold. Operating data for the month are summarized as follows:
Sales $10,260,000.00
Manufacturing costs:
Direct materials $5,100,000.00
Direct labor 1,800,000.00
Variable manufacturing cost 1,200,000.00
Fixed manufacturing cost 840,000.00 8,940,000.00
Selling and administrative expenses:
Variable $972,000.00 324,000.00
Fixed 1,296,000.00
Required:
1. Prepare an income statement based on the absorption costing concept.
2. Prepare an income statement based on the variable costing concept.
3. Explain the reason for the difference in the amount of operating income reported in (1) and (2). Refer to the list of Labels and Amount Descriptions provided
Labels and Amount Descriptions
Labels
August 31
Cost of goods sold
Fixed costs
For the Month Ended
August 31
Variable cost of goods sold
Amount Descriptions
Contribution margin
Contribution margin ratio
Cost of goods manufactured
Fixed manufacturing costs
Fixed selling and administrative expenses
Gross profit
Operating income
Inventory, August 31
Loss from operations
Manufacturing margin
Planned contribution margin
Sales
Sales mix
Selling and administrative expenses
Total cost of goods sold
Total fixed costs
Total fixed costs
Total variable cost of goods sold
Variable cost of goods manufactured
Variable selling and administrative expenses
Answer:
Kodiak Fridgeration Company
1. Income Statement for the month ended August 31, absorption costing concept:
Sales $10,260,000.00
Manufacturing costs:
Direct materials $5,100,000.00
Direct labor 1,800,000.00
Variable manufacturing cost 1,200,000.00
Fixed manufacturing cost 840,000.00
Total manufacturing 8,940,000.00
Less Ending Inventory 894,000.00 8,046,000.00
Gross profit $2,214,000.00
Selling and administrative expenses:
Variable $972,000.00
Fixed 324,000.00 1,296,000.00
Net Income $918,000.00
2. Income Statement for the month ended August 31, absorption costing concept:
Sales $10,260,000.00
Manufacturing costs:
Direct materials $5,100,000.00
Direct labor 1,800,000.00
Variable manufacturing cost 1,200,000.00
Total manufacturing 8,100,000.00
Less Ending Inventory 810,000.00 7,290,000.00
Gross profit $2,970,000.00
Fixed manufacturing cost 840,000.00
Selling and administrative expenses:
Variable 972,000.00
Fixed 324,000.00 2,136,000.00
Net Income $834,000.00
3. The reason for the difference in the amount of operating income reported in (1) and (2) are the cost of products assigned to cost of goods sold and ending inventory are not the same. The following reconciliation buttresses this point:
Net operating income as per absorption costing $918,000.00
less Ending inventory, ($149 - $135) x 6,000 84,000.00
Net operating income as per variable costing $834,000.00
Explanation:
a) Data and Calculations:
Units produced = 60,000
Units sold = 54,000
Ending inventory = 6,000
Sales $10,260,000.00
Manufacturing costs:
Direct materials $5,100,000.00
Direct labor 1,800,000.00
Variable manufacturing cost 1,200,000.00
Fixed manufacturing cost 840,000.00 8,940,000.00
Selling and administrative expenses:
Variable $972,000.00 324,000.00
Fixed 1,296,000.00
Kodiak's absorption costing concept incorporates all production costs into the cost of products. This means that the cost of production includes all variable and fixed costs associated with production. Costs that are not related to production are treated as period costs. Whereas, with variable costing technique, only the variables costs of production are included in the costs of production. All fixed costs, including factory overheads are treated as period costs.
If $4000 is borrowed at a rate of 4.75% interest per year, compounded quarterly, find the amount due at the end of the given number of years. (Round your answers to the nearest cent.)
Answer:
1. $4000(1 + 4.75/4)^20 = $5,065.21
2. $4000(1 + 4.75/4)^28 = $5,566.88
3. $4000(1 + 4.75/4)^36 = $6,118.25
Explanation:
Here is the full question :
f $4000 is borrowed at a rate of 4.75% interest per year, compounded quarterly, find the amount due at the end of the given number of years. (Round your answers to the nearest cent.)
5 Years
7 Years
9 Years
We are to find the future value of the amount
The formula for calculating future value:
FV = P (1 + r/m)^ nm
FV = Future value
P = Present value
R = interest rate
N = number of years
M = number of compounding per year
1. $4000(1 + 4.75/4)^20 = $5,065.21
2. $4000(1 + 4.75/4)^28 = $5,566.88
3. $4000(1 + 4.75/4)^36 = $6,118.25
How much time, on average, would a server need to spend on a customer to achieve a service rate of 20 customers per hour?
Answer:
3 hour 18 minutes or 3 hour
Explanation:
According to the given situation, the computation of time on average is shown below:-
The Average waiting time in the system
= [tex]\frac{1}{\mu} -\gamma[/tex]
Now we will put the values into the above formula to reach the time on average which is here below:-
[tex]= \frac{1}{20} - 1[/tex]
[tex]= \frac{1}{19}[/tex]
= 0.053 × 60 minutes
= 3 hours 18 minutes
We assume [tex]\gamma[/tex] is 1 hour
Therefore for computing the time on average we simply applied the above formula.
Mr. Fred Mitchell is requesting the birth record for Amy, his birth daughter. Mr. and Mrs. Mitchell gave Amy up for adoption four years ago. Should you release the records to him? Why or why not?
Answer: No you should not
Explanation:
Mr. and Mrs. Mitchell gave Amy up for adoption four years ago and in effect legally voided their guardianship of her. As far as the law is concerned, they are no longer Amy's parents. As such, Mr Fred Mitchell requesting for information on the girl is akin to a stranger doing the same and so cannot be honored, at least not without the consent of the new parents.
Read Eye on Fiscal Stimulus. How big was the fiscal stimulus package of 2008-2009, how many jobs was it expected to create, and how large was the multiplier implied by that expectation? Did the stimulus work?
Answer:
1. $787 billion
2. 650,000; 1.6
3. did not meet; the multiplier was much smaller than 1.6
Explanation:
The fiscal stimulus package of 2008-2009 was $787 billion. This is because, the United States government wanted to increase spending in order to have sufficient economic growth. Thus, the fiscal stimulus was expected to create 650,000 JOBS, in which the multiplier implied by that expectation is 1.6.
However, the stimulus did fiscal stimulus did not work, as it DID NOT MEET the expectations of the Obama administration, simply because "the multiplier was much smaller than 1.6"
Cardinal Health bonds have an annual coupon rate of 3.4 percent and a par value of $1,000 and will mature in 7 years. If you require a 5 percent return, what price would you be willing to pay for a Cardinal bond
Annual coupon to be paid[tex]\bold{= \$1000 \times 3.4\%= \$1000 \times \frac{3.4}{100} = \$34}[/tex]
years = 7
Calculating the bond price:
[tex]= \$1000 \times PVF(5\%, 7\ years) +\$34 \times PVAF(5\%, 7\ years) \\\\= \$1000 \times 0.71068 +\$34 \times 0.17282\\\\= \$710.68 + \$5.87588\\\\= \$716.55588\\\\= \$716.56\\\\[/tex]
So, the final answer is "$716.56".
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A monopoly's cost function is
C = 1.5q^2 + 40 Q
and its the demand for its product is
p = 320-0.5Q
where Q is output, p is price, and C is the total cost of production. Determine the profit-maximizing price and output for a monopoly. The profit maximizing output level is units. (Enter a numeric response using an integer)
Answer:
70 units
Explanation:
The computation of profit maximizing output level is shown below:-
Monopolist perform Marginal Revenue which equivalent to the Marginal Cost as
MR = Marginal Revenue and MC = Marginal Cost
[tex]MR = \frac{\partial TR}{\partial Q} = \frac{\partial PQ}{\partial Q} = \frac{\partial (320-0.5Q)Q}{\partial Q}[/tex]
[tex]MR = \frac{\partial (320Q -0.5Q^2)}{\partial Q}[/tex]
MR = 320 - Q
Now we will find the MC which is
[tex]MC = \frac{\partial TC}{\partial Q} =\frac{\partial (1.5Q^2 + 40Q)}{\partial Q} = 3Q + 40[/tex]
now we will put the value of which is into MR = MC
320 - Q = 3Q + 40
280 = 4Q
70 = Q
So, the profit maximizing output level is 70 units.
Green Thumb Garden Tools Inc. produces and sells home and garden tools and equipment. A lawnmower has a total cost of $230 per unit, of which $160 is product cost and $70 is selling and administrative expenses. In addition, the total cost of $230 is made up of $120 variable cost and $110 fixed cost. The desired profit is $58 per unit. Determine the markup percentage on product cost.
Answer:
80%
Explanation:
The computation of markup percentage on product cost is shown below:-
Markup percentage on product cost = ((Selling and administrative expenses + Desired profit) ÷ Product cost) × 100
= (($70 + $58) ÷ $160) × 100
= 0.8
or
= 80%
Therefore for computing the markup percentage on product cost we simply applied the above formula.
A factory costs $400,000. It will produce an inflow after operating costs of $100 000 in year 1. $ 200,000 in year 2, and $ 300,000 in year 3. The opportunity cost of capital is 12%. Calculate NPV.
Answer:
NPV = $62,258.56
Explanation:
initial outlay year 0 = $400,000
cash inflow year 1 = $100,000
cash inflow year 2 = $200,000
cash inflow year 3 = $300,000
discount rate = 12%
using a financial calculator, NPV = $62,258.56
if you do it by hand:
NPV = -$400,000 + $100,000/1.12 + $200,000/1.12² + $300,000/1.12³ = -$400,000 + $89,285.71 + $159,438.78 + $213,534.07 = $62,258.56
Budgeted variable overhead for the year is $150,000. Expected activity is 30,000 standard direct labor hours. The actual hours worked were 15,000 and the standard hours allowed for actual production were 18,000. The variable overhead efficiency variance is:
Answer:
-$15,000 favorable variance
Explanation:
variable overhead efficiency variance = standard overhead rate x (actual hours - standard hours)
standard variable overhead rate = $150,000 / 30,000 = $5actual hours 15,000standard hours 18,000variable overhead efficiency variance = $5 x (15,000 - 18,000) = $5 x (-3,000) = -$15,000 favorable variance
The ABC Company is preparing its financial statements on December 31. During the year, they purchased IBM stock for $20,000. On December 31, the market value of the IBM stock is $8,000. The journal entry on December 31 will include a debit to:_______.
Answer:
Debit to unrealized loss for for $12,000
Explanation:
Based on the information given about ABC Company we were told that the company made a purchased of IBM stock for the amount of $20,000 in which the market value of the stock was the amount of $8,000 this means that the journal entry on December 31 will include a:
Debit to unrealized loss for for $12,000
Calculated as :
Unrealized loss=Market value - IBM stock
Unrealized loss=$8,000-$20,000
Unrealized loss=-$12,000
Myers, Inc.
Income Statement
For the Year Ended December 31, 2020
Sales revenue $400,000
Cost of goods sold 180,000
Gross profit 220,000
Expenses (including $10,000 interest and $20,000 income taxes) 80,000
Net income $ 140,000
Additional information:________.
1. Common stock outstanding January 1, 2020, was 16,000 shares, and 24,000 shares were outstanding at December 31, 2020.
2. The market price of Myers stock was $9.59 in 2020.
3. Cash dividends of $19,600 were paid, $3,000 of which were to preferred stockholders.
Compute the following measures for 2020. (Round Earnings per share to 2 decimal places, e.g. 1.65, and all other answers to 1 decimal place, e.g. 6.8 or 6.8%.)
(a) Earnings per share $
(b) Price-earnings ratio times
(c) Payout ratio %
(d) Times interest earned times
Answer:
a. $6.85
b. 1.4 times
c. 11.9%
d. 17 times
Explanation:
a) Weighted Average number of common shares outstanding = (Number of common shares outstanding in the beginning + Number of common shares outstanding in the end)/2
= (16,000 +24,000) /2
= 20,000 shares
Earnings per share = (Net income – Preferred stock dividend)/Weighted Average number of common shares outstanding
= (140,000 - 3,000) / 20,000
= 137,000/20,000
= $6.85
b) Price earnings ratio = Market price of 1 common share/Earnings per share
= 9.59 / 6.85
= 1.4 times
c) Payout ratio = Cash dividends on common stock/Net income
= 16,600 / 140,000
= 0.11857
= 11.9%
d) Times interest earned = (Net income + Interest expense + Tax expense) / Interest expense
= (140,000 + 10,000 + 20,000)/10,000
= 170,000 / 10,000
= 17 times
e. Assume that the average price of a new home is $132,500. If new homes are increasing at a rate of 8% per year, how much will a new home cost in seven years? (Round your answer to 2 decimal places.)
Answer:
A new home will cost $227081.72 in seven years.
Explanation:
To calculate the value or price of the new home in seven years, we need to calculate the future value of $132500 increasing at a rate of 8% per year for 7 years. The formula to calculate the future value will be,
Future value = Present value * (1+r)^t
Where,
r is the rate which will be used for compoundingt is the time in number of yearsFuture value = 132500 * (1+0.08)^7
Future value = $227081.7156 rounded off to $227081.72
Canyon Canoe Company's Amber Zack Wilson are continuing their analysis of the company's position and believe the company will need to borrow $15,000 in order to expand operations. They consult Rivers Nation Bank and secure a 66 %, one-year note on September 1, 2019, with interest due at maturity. Additionally, the company hires an employee, John Vance, on September 1. John will receive a salary of $3,000 per month. Payroll deductions include federal income tax at 25 %, OASDI at 6.2 %, Medicare at 1.45 %, and monthly health insurance premium of $250. The company will incur matching FICA taxes, FUTA tax at 0.6 %, and SUTA tax at 5.4 %. Round calculations to two decimals. Omit explanations on journal entries.Requirements:
1. Record the issuance of the $15,000 note payable on September 1, 2019.
2. Record the employee payroll and employer payroll tax entries on September 30, 2019.
3. Record all payments related to September's payroll. Payments are made on October 15, 2019.
4. Record the entry to accrue interest due on the note at December 31, 2019.
5. Record the entry Canyon Canoe Company would make to record the payment to the bank on September 1, 2020.
Answer and Explanation:
The Journal entry is shown below:-
1. Cash Dr, $15,000
To Notes payable $15,000
(Being note payable is recorded)
2. Salaries expense Dr, $3,000
To Federal income tax payable $750 (25% × $3,000)
To Social security tax payable $186 (6.2% × $3000)
To Medicare tax payable $43.50 (1.45% × $3,000)
To Health insurance premium payable $250
To Salaries payable $1770.50
(Being salaries expense is recorded)
Payroll tax expense Dr, 409.50
To Social security tax payable $186 (6.2% × $3,000)
To Medicare tax payable $43.5 (1.45% × $3,000)
To FUTA tax payable $18 (0.6% × $3,000)
To SUTA tax payable $162 (5.4% × $3,000)
(Being payroll tax expense is recorded)
3. Salaries payable Dr, $1,770.50
To Cash $1,770.50
(Being cash paid is recorded)
Federal income tax payable Dr, $750
Social security tax payable Dr, $372
Medicare tax payable $87
Health insurance premium payable Dr, $250
FUTA tax payable Dr, $18
SUTA tax payable Dr, $162
To Cash $1,639
(Being cash paid is recorded)
4. Interest expense Dr, $300 ($15,000 × 6% × 4 ÷ 12)
To Interest payable $300
(Being interest expense is recorded)
5. Note payable Dr, $15,000
Interest payable Dr, $300
Interest expense $600 ($15000 × 6% × 8 ÷ 12)
To Cash $15,900
(Being cash paid is recorded)