Answer:
sorry sir you would have to do this on your own
During the year, ABC. had the following cash flows: receipt from customers, $10,000; receipt from the bank for long-term borrowing, $6,000; payment to suppliers, $5,000; payment of dividends, $1,000, payment to workers, $2,000; and payment for machinery, $8,000. What amount would be reported for investing net cash flows on the Statement of Cash Flows (put a minus number in front if it is negative)
Answer:
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The following amounts were received by ABC throughout the course of the year: $10,000 from consumers; $6,000 from the bank for long-term borrowing; $5,000 to suppliers; $1,000 in dividends; $2,000 to employees; and $8,000 for machinery. The amount that would be reported for investment net cash flows is -8000.
What is meant by Cash Flow?A cash flow is a physical or fictitious flow of funds:
The phrase "cash flow" is typically used to represent payments that are anticipated to occur in the future, are thus unknown, and so need to be projected using cash flows;
A cash flow in its restricted sense is a payment (in a currency), especially from one central bank account to another;
A cash flow is determined by its time t, nominal amount N, currency CCY, and account A; symbolically, CF = CF (t,N,CCY,A).
Nonetheless, it is common to use the term "cash flow" in a less precise sense to describe (symbolic) payments into or out of a business, project, or financial product.
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The Clean Air Act (CAA) of 1970 did all of the following except _____.
establish the National Ambient Air Quality Standards (NAAQS)
introduce motor vehicle emissions controls
create State Improvement Plans (SIP) to promote better air quality
reduce the federal government's enforcement authority
Answer:
The Clean Air Act (CAA) of 1970 did all of the following except ___
reduce the federal government's enforcement authority__.
Answer:
reduce the federal government's enforcement authority
Explanation:
i got it right
A company buys a machine for $69,000 that has an expected life of 7 years and no salvage value. The company uses straight-line depreciation. The company anticipates a yearly net income of $3,300 after taxes of 38%, with the cash flows to be received evenly throughout each year. What is the accounting rate of return
Answer:
9.57%
Explanation:
Accounting rate of return = Annual after tax net income/Average investment
Accounting rate of return = $3,300 / ($69,000/2)
Accounting rate of return = $3,300 / $34,500
Accounting rate of return = 0.095652174
Accounting rate of return = 9.57%
Statement Of Owner's Equity Jay Pembroke started a business in April. Prepare a Statement of Owner's Equity using the following balances for April transactions. Cash $12,165 Accounts Receivable 1,811 Office Supplies 4,747 Prepaid Insurance 1,492 Accounts Payable 346 Jay Pembroke, Capital 17,536 Jay Pembroke, Drawing 100 Service Fees 3,033 Rent Expense 600 You will need to calculate the net income for April.
Answer:
$2,433
Explanation:
Net Income = Sales - Expenses
where,
Sales = $3,033
and
Expenses = $600
therefore,
Net Income = $3,033 - $600 = $2,433
Bond valuation [LO14-2] Your investment department has researched possible investments in corporate debt securities. Among the available investments are the following $100 million bond issues, each dated January 1, 2021. Prices were determined by underwriters at different times during the last few weeks. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1)
Company Bond Price Stated Rate
1. BB Corp. $ 107 million 15 %
2. DD Corp. $ 100 million 14 %
3. GG Corp. $ 93 million 13 %
Each of the bond issues matures on December 31, 2040, and pays interest semiannually on June 30 and December 31. For bonds of similar risk and maturity, the market yield at January 1, 2021, is 14%.
Required: Other things being equal, which of the bond issues offers the most attractive investment opportunity if it can be purchased at the prices stated?
Answer:
Bond Valuation
Other things being equal, the bond issue that offers the most attractive investment opportunity if it can be purchased at the prices stated is:
= BB Corp. bonds.
Explanation:
a) Data and Calculations:
Maturity period = 20 years
Issue date = January 1, 2021
Maturity date = December 31, 2040
Company Bond Price Stated Rate Annual Interest FV
1. BB Corp. $ 107 million 15 % $15 million $3,518,371,301.23
2. DD Corp. $ 100 million 14 % $14 million 2,827,106,832.58
3. GG Corp. $ 93 million 13 % $13 million 2,260,756,079.53
From an online financial calculator, the future values of the bonds are:
N (# of periods) 20
I/Y (Interest per year) 15
PV (Present Value) 107000000
PMT (Periodic Payment) 15000000
Results
FV = $3,518,371,301.23
Sum of all periodic payments $300,000,000.00
Total Interest $3,111,371,301.2
N (# of periods) 20
I/Y (Interest per year) 14
PV (Present Value) 100000000
PMT (Periodic Payment) 14000000
Results
FV = $2,827,106,832.58
Sum of all periodic payments $280,000,000.00
Total Interest $2,447,106,832.58
N (# of periods) 20
I/Y (Interest per year) 13
PV (Present Value) 93000000
PMT (Periodic Payment) 13000000
Results
FV = $2,260,756,079.53
Sum of all periodic payments $260,000,000.00
Total Interest $1,907,756,079.53
Oscanda Accessories Corporation manufactured 21,400 travel bags during March. The following fixed overhead data pertain to March: Actual Static Budget Production 21,400 units 22,000 units Machine-hours 3,400 hours 4,400 hours Fixed overhead cost for March $176,300 $184,800 What is the amount of fixed overhead spending variance
Answer:
$8,500 favorable
Explanation:
The computation of the fixed overhead spending variance is shown below
= Budgeted fixed overhead - actual fixed overhead
= $184,800 - $176,300
= $8,500 favorable
We simply deduct the actual fixed overhead from the budgeted one so that the fixed overhead spending variance could come
According to the survey article on mergers by Mukherjee et al,
A) a minority of managers believe that diversification can be a good reason to merge.
B) acquiring managers discount targets’ cash flows at the targets’ cost of capital.
C) managers do not believe operating synergies to be important in merger decisions.
D) managers do not use the discounted cash flow formula to value a target in a merger.
Brightstone Tire and Rubber Company has capacity to produce 204,000 tires. Brightstone presently produces and sells 156,000 tires for the North American market at a price of $100 per tire. Brightstone is evaluating a special order from a European automobile company, Euro Motors. Euro is offering to buy 24,000 tires for $86.5 per tire. Brightstone's accounting system indicates that the total cost per tire is as follows:
Direct materials $54
Direct labor 24
Factory overhead (62% variable) 24
Selling and administrative expenses (44% variable) 25
Total $127.00
Brightstone pays a selling commission equal to 4% of the selling price on North American orders, which is included in the variable portion of the selling and administrative expenses. However, this special order would not have a sales commission. If the order was accepted, the tires would be shipped overseas for an additional shipping cost of $7.65 per tire. In addition, Euro has made the order conditional on receiving European safety certification. Brightstone estimates that this certification would cost $165,424.
Required:
a. Prepare a differential analysis dated January 21 on whether to reject (Alternative 1) or accept (Alternative 2) the special order from Euro Motors.
b. Determine whether the company should reject (Alternative 1) or accept (Alternative 2) the special order from Euro Motors
c. What is the minimum price per unit that would be financially acceptable to Brightstone?
Answer:
Brightstone Tire and Rubber Company
a. Differential Analysis dated January 21
Alternative 1 Alternative 2
Reject Accept
Revenue from special order ($2,076,000) $2,076,000
Avoidable costs 2,493,120 2,831,520
Cost Differential ($417,120) ($755,520)
b. The company should reject the special order from Euro Motors as it will incur more costs when it accepts than when it rejects the special order.
c. The minimum price per unit that would be financially acceptable to Brightstone is $117.98.
Explanation:
a) Data and Calculations:
Production capacity in tires = 204,000
Current production and sales units = 156,000
Selling price per tire for the North American market = $100
Special order of 24,000 tires from Euro Motors = $86.50 per tire
Total cost per tire: Total Variable
Direct materials $54 $54
Direct labor 24 24
Factory overhead (62% variable) 24 14.88
Selling and administrative expenses (44% variable) 25 11
Total $127.00 $103.88
Special Order:
Offer price = $86.50
Reject Accept
Variable cost per unit $103.88 $2,493,120
Less selling commission (0.44)
Additional shipping cost 7.65
Cost of certification 6.89
Total per unit costs = $117.98 $2,813,520
Operating income (loss) ($31.48)
On December 31, 2020, the Bennett Company had 100,000 shares of common stock issued and outstanding. On July 1, 2021, the company sold 18,000 additional shares for cash. Bennett's net income for the year ended December 31, 2021, was $650,000. During 2021, Bennett declared and paid $71,000 in cash dividends on its nonconvertible preferred stock. What is the 2021 basic earnings per share
Answer:
$5.31
Explanation:
Earnings per share = Earnings Attributable to Holders of Common Stock ÷ Weighted Average Number of Common Stocks Outstanding
where,
Earnings Attributable to Holders of Common Stock is :
Net Income $650,000
Less Preference Stock dividend ($71,000)
Earnings Attributable to Holders of Common Stock $579,000
and
Weighted Average Number of Common Stocks Outstanding :
Common Stocks at Beginning outstanding 100,000
Stocks Sold at Weighted Average (18,000 / 2) 9,000
Weighted Average Number of Common Stocks Outstanding 109,000
therefore,
Earnings per share = $579,000 ÷ 109,000
= $5.31
The 2021 basic earnings per share is $5.31.
Holbrook, a calendar year S corporation, distributes $89,500 cash to its only shareholder, Cody, on December 31. Cody's basis in his stock is $107,400, Holbrook's AAA balance is $40,275, and Holbrook has $13,425 AEP before the distribution. According to the distribution ordering rules, complete the chart below to indicate how much of the $89,500 is from AAA and AEP as well as how Cody's stock basis is affected. If an amount is zero, enter "0".
Distribution from Account Affect on Stock Basis Balance after Distribution
From AAA Account $8000 $8000 $0
From AEP Account $2500 $0 $0
From Cody's stock basis $ $ $
Answer:
Explanation:
........................
The phase of the business cycle that includes a period of consistent growth
in GDP and falling unemployment is called a(n).
A. trough
B. contraction
C. expansion
D. peak
The phase of the business cycle that includes a period of consistent growth in GDP and falling unemployment is called expansion.
What do you mean by business cycle?A business cycle is characterized by four main stages that are expansion, peak, contraction, and trough.
The business cycle stage of expansion is when an economy experiences relatively rapid growth, interest rates tend to be low, production increases and inflationary pressures build.
Therefore, C is the correct option.
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Jacoby Company received an offer from an exporter for 25,400 units of product at $18 per unit. The acceptance of the offer will not affect normal production or domestic sales prices. The following data are available: Domestic unit sales price $21 Unit manufacturing costs: Variable 13 Fixed 5 The differential revenue from the acceptance of the offer is
Answer:
Differential income from the special order= $127,000
Explanation:
A company should accept a special order where the order generates additional contribution. i.e where the special order sales exceeds all relevant cost.
The relevant cost for decision to accept the special order are
I Incremental Revenue from the special order
2. incremental variable cost
Contribution per unit = 18-13=5
Total contribution from special order = contribution per unit × units
= 5× 25,400=$127,000
Differential income from the special order= $127,000
Note that whether or not the special order is accepted the fixed manufacturing and fixed operating expenses of would be incurred either way. Therefore , they are not relevant for the decision
Everything else held constant, in the market for reserves, when the federal funds rate is 2%, lowering the interest rate paid on excess reserves rate from 1% to 0.5% has no effect on the federal funds rate. has an indeterminate effect on the federal funds rate. lowers the federal funds rate. raises the federal funds rate.
Answer: lowers the federal funds rate.
Explanation:
The federal funds rate is the rate at which banks lend money to their selves overnight to ensure that they meet lending and reserve requirements.
The interest rate paid on excess reserves rate is the amount of interest that the Fed pays banks to keep excess reserves. If this rate was to decrease, banks would have less incentive to keep excess reserves at the Fed and so would have more money to meet lending and reserve requirements such that they won't need to borrow from other banks as much which would then lead to the federal funds rate decreasing due to less demand.
1 points eBookPrintReferencesCheck my workCheck My Work button is now enabledItem 6 Beverly Company has determined a standard variable overhead rate of $3.80 per direct labor hour and expects to incur 0.50 labor hour per unit produced. Last month, Beverly incurred 1,600 actual direct labor hours in the production of 3,300 units. The company has also determined that its actual variable overhead rate is $2.40 per direct labor hour. Calculate the variable overhead rate and efficiency variances as well as the total amount of over- or underapplied variable overhead.
Answer:
$8,700
Explanation:
Variable Overhead Rate Variance = Actual Hours *(Actual Rate - Standard Rate) =
Variable Overhead Rate Variance = 1,600 * ($2.40 - $3.80)
Variable Overhead Rate Variance = 1,600 * $1.40 F
Variable Overhead Rate Variance = $2240 F
Variable Overhead Efficiency Variance = Standard Rate*(Actual Hours - Standard Hours) =
Variable Overhead Efficiency Variance = $3.80*(1,600 - 0.50*3,300)
Variable Overhead Efficiency Variance = $3.80* 50 F
Variable Overhead Efficiency Variance = $190 F
Over- or Underapplied Variable Overhead = Actual Overhead Incurred - Overhead Applied
Over- or Underapplied Variable Overhead = 1600*$2.40 - 3,300*$3.80
Over- or Underapplied Variable Overhead = $3840 - $12540
Overapplied Variable Overhead = $8,700
For the year ended December 31, 2021, Norstar Industries reported net income of $960,000. At January 1, 2021, the company had 1,050,000 common shares outstanding. The following changes in the number of shares occurred during 2021:
Apr. 30 Sold 80,000 shares in a public offering.
May 24 Declared and distributed a 5% stock dividend.
June 1 Issued 90,000 shares as part of the consideration for the purchase of assets from a subsidiary.
Required:
Compute Norstar's earnings per share for the year ended December 31, 2021. (Enter your answers in thousands. Round "EPS" answer to 2 decimal places. Do not round intermediate calculations.)
Answer:
Earning per share for the year ended December 31, 2021 on Norstar's earnings = $0.79 per share
Explanation:
Earning per share is calculated as
Net income reported / Weighted number of outstanding shares
where,
Net income reported is $960,000
And, the weighted number of outstanding share is
For Jan.1
Jan 1 2021 shares × stock dividend
Dividend = 100 + rate = 100 + 0.05 = 1.05
1,050,000 x 1.05=$1, 102,500
For April
April 30 shares × stock dividend× number of months / total number of months in a year
80,000 x 1.0 5 x 8/12(April 30 to December 31 = 8 months)=56,000
For June
June 1 shares × number of months/ total number of months in a year
90,000 x 7/12=56,000
Total weighted number of outstanding shares =$1,102,500+56,000+52,500= $1,211,000
So, the earning per share is
= 960,000 / $1,211,000 shares
= $0.79 per share
New Line Cinema is considering producing a new movie. To evaluate the proposal, the company needs to calculate its cost of capital. The firm has collected the following information:
a. The company wants to maintain is current capital structure, which is 20% equity, 20% preferred stock and 60% debt.
b. The firm has marginal tax rate of 34%.
c. The firm's preferred stock pays an annual dividend of $4.3 forever, and each share is currently worth $135.26.
d. The firm has one bond outstanding with a coupon rate of 6%, paid semiannually, 10 years to maturity, a face value of $1,000, and a current price of $1,163.51.
e. The company's beta is 0.8, the yield on Treasury bonds is is 0.6% and the expected return on the market portfolio is 6%.
f. The current stock price is $39.17. The firm has just paid an annual dividend of $1.13, which is expected to grow by 4% per year.
g. The firm uses a risk premium of 3% for the bond-yield-plus-risk-premium approach.
h. New preferred stock and bonds would be issued by private placement, largely eliminating flotation costs. New equity would come from retained earnings, thus eliminating flotation costs.
Required:
a. What is the cost of equity using the bond yield plus risk premium?
b. What is the midpoint of the range for the cost of equity?
c. What is the company's weighted average cost of capital?
Answer:
a.
7.00%
b.
5.96%
c.
1.20%
Explanation:
a.
First and foremost, we need to determine the yield to maturity on the bond, using a financial calculator as shown thus:
The financial calculator should be set to its default end mode before making the following inputs:
N=20(number of semiannual coupons in 10 years=10*2=20)
PMT=30(semiannual coupon=face value*coupon rate*/2=$1000*6%/2=$30)
PV=-1163.51(current price=$1,163.51)
FV=1000(face value of the bond=$1000)
CPT
I/Y=2.00%(semiannual yield=2%, annnual yield=2.00%*2=4.00%)
bond yield plus risk premium=bond yield(4.00%)+ risk premium(3%)
bond yield plus risk premium=7.00%
b.
In determining the midpoint range is the maximum plus minimum cost of equity divided by 2
Let us determine cost of equity using the Capital Asset Pricing Model and Constant Dividend Growth Model
cost of equity=risk-free rate+beta*(expected return on the market portfolio-risk-free rate)
risk-free rate=yield on Treasury bonds= 0.6%
beta=0.8
expected return on the market portfolio= 6%
cost of equity=0.6%+0.8*(6%-0.6%)
cost of equity=4.92%
cost of equity=expected dividend/share price+growth rate
expected dividend=last dividend*(1+growth rate)
expected dividend=$1.13*(1+4%)=$1.1752
share price= $39.17
growth rate=4%
cost of equity=($1.1752/$39.17)+4%
cost of equity=7.00%
midpoint range=(maximum cost of equity+minimum cost of equity)/2
midpoint rate=(7.00%+4.92%)/2
midpoint range=5.96%
c.
WACC=(weight of equity*cost of equity)+(weight of preferred stock*cost of preferred stock)+(weight of debt*after-tax cost of debt)
weight of equity= 20%
cost of equity=5.96%
weight of preferred stock=20%
cost of preferred stock=annual dividend/price
cost of preferred stock=$4.3/$135.26=3.18%
weight of debt=60%
aftertax cost of debt=4.00%*(1-34%)=2.64%
WACC=(20%*5.96%)+(20%*3.18%)*(60%*2.64%)
WACC=1.20%
Harvey Hotels has provided a defined benefit pension plan for its employees for several years. At the end of the most recent year, the following information was available with regard to the plan: service cost: $6.2 million, expected return on plan assets: $1.2 million, actual return on plan assets: $1 million, interest cost: $1.4 million, payments to retired employees: $2 million, and amortization of prior service cost (created when the pension plan was amended causing a drop in the projected benefit obligation): $1.1 million. What amount should Harvey Hotels report as pension expense in its income statement for the year? Group of answer choices $7.5 million $8.7 million $7.7 million $1.4 million
Answer:
$7.5 million
Explanation:
Calculation to determine What amount should Harvey Hotels report as pension expense in its income statement for the year
Service cost $6.2 million
Add Interest cost $1.4 million
Less Expected return on plan assets($1.2 million)
Add Amortization of prior service cost $1.1 million
Pension expense $7.5 million
Therefore the amount that Harvey Hotels should report as pension expense in its income statement for the year is $7.5 million
The following items are relevant to the preparation of a statement of cash flows for Pier Imports Inc. 1. Comparative balance sheets show a decrease of $4,800 in accrued utilities payable for the current year. 2. Nontrade short-term notes payable to banks increased $64,000 during the current year due to new borrowings. 3. The following end-of-year adjusting entry was recorded. No other interest-related transactions or entries occurred during the year. Interest Expense 9,600 Premium on Bonds Payable 640 Interest Payable 10,240 4. $400 payment was made to reduce the principal balance of a nontrade loan from a bank. 5. Gross equipment account increased $16,000 during the year, accumulated depreciation increased $6,400, and depreciation expense for the period is $8,000. One item of equipment (cost $8,000, accumulated depreciation $1,600) was sold during the year; a gain of $800 on the sale was recognized. 6. Purchase of treasury stock, $24,000. 7. Distribution of cash dividends, $4,000. 8. Sale of available-for-sale debt securities for $12,800, at a loss of $2,400. Note: For the following questions, indicate a net cash outflow with a negative sign. a. Determine the amount of net cash flows that would be reported in the investing section of the statement of cash flows. Answer 0 b. Determine the amount of net cash flows that would be reported in the financing section of the statement of cash flows.
Answer:
Pier Imports Inc.
a. Investing section:
Purchase of equipment -16,000
Sale of equipment 7,200
Purchase of treasury stock, -24,000
Sale of available-for sale debt securities 12,800
b. Financing section:
Non-trade short-term notes payable $64,000
Increase in interest payable 10,240
Payment of loan -400
Cash dividends of -4,000
Explanation:
a) Data and Analysis:
1. Decrease of $4,800 in Utilities payable = operating activity
2. Increase of $64,000 in non-trade short-term notes payable to banks = financing activity. They are not related to normal business operations.
3. Increase of $10,240 in interest payable = financing activity
4. Cash payment of $400 to reduce non-trade bank loan = financing activity
5. Increase of $16,000 in gross equipment account = investing activity
6. Cash $7,200 from sale of equipment = investing activity
7. Purchase of treasury stock, $24,000 = investing activity
8. Cash dividends of $4,000 = financing activity
9. Cash sale, $12,800 of available-for-sale debt securities = investing activity
During the first quarter, Francum Company incurs the following direct labor costs: January $55,200, February $51,000, and March $64,600. For each month, prepare the entry to assign overhead to production using a predetermined rate of 71% of direct labor cost.
Answer:
See below
Explanation:
Date General journal Debit Credit
Jan. Work in process $39,192
Manufacturing overhead $39,192
($55,200 × 71%)
Feb. Work in process $36,210
($51,000 × 71%)
Manufacturing overhead $36,210
March. Work in process $45,866
($64,600 × 71%)
Manufacturing overhead $45,866
The following information relates to the only product sold by Harper Company. Sales price per unit $ 45 Variable cost per unit 27 Fixed costs per year 247,000 a. Compute the contribution margin ratio and the dollar sales volume required to break even. b. Assuming that the company sells 20,000 units during the current year, compute the margin of safety (in dollars).
Answer and Explanation:
The computation is shown below
a.
For Contribution Margin ratio
We know that
Contribution margin per unit = Sale price per unit - Variable cost per unit
= $45 - $27
= $18
Now
Contribution margin ratio = Contibution Margin per unit ÷ Sale price per unit
= $18 ÷ $45
= 0.4
Now
Break even sales dollar
Break even sales = Fixed Cost ÷ Contribution margin ratio
= $247,000 ÷ 0.4
= $617,500
b.
For Margin of Safety
The Margin of safety = Actual sales - Break Even Sales
where,
Actual sales(in $) = 20000 × 45
= $900,000
So, Margin of safety is
= $900,000 - $617,500
= $282,500
The following selected transactions relate to investment activities of Ornamental Insulation Corporation during 2018. The company buys debt securities, intending to profit from short-term differences in price and maintaining them in an active trading portfolio. Ornamental’s fiscal year ends on December 31. No investments were held by Ornamental on December 31, 2017.
Mar. 31 Acquired 8% Distribution Transformers Corporation bonds costing $510,000 at face value.
Sep. 1 Acquired $1,230,000 of American Instruments' 10% bonds at face value.
Sep. 30 Received semiannual interest payment on the Distribution Transformers bonds.
Oct. 2 Sold the Distribution Transformers bonds for $590,000.
Nov. 1 Purchased $1,950,000 of M&D Corporation 6% bonds at face value.
Dec. 31 Recorded any necessary adjusting entry(s) relating to the investments. The market prices of the investments are:
American Instruments bonds$1,181,000
M&D Corporation bonds$2,021,000
(Hint: Interest must be accrued.)
Required:
Prepare the appropriate journal entry for each transaction or event during 2018, as well as any adjusting entries necessary at year end.
Answer:
1. Mar.31
Dr Investment in Distribution Transformers bonds $510,000
Cr Cash $510,000
2. September 01,
Dr Investment in American Instruments bonds
$1,230,000
Cr Cash $1,230,000
3 September 30
Dr Cash $20,400
Cr Interest revenue $20,400
4 October 02
Dr Fair value adjustment $80,000
Cr Unrealized holding gain—NI $80,000
5.October 02
Dr Cash $590,000
Cr Investment in Distribution Transformers bonds $510,000
Cr Fair value adjustment $8,000
6. November 01
Dr Investment in M&D Corporation bonds $1,950,000
Cr Cash $1,950,000
7 December 31
Dr Interest receivable $41,000
Cr Interest revenue $41,000
8 December 31
Dr Interest receivable $19,500
Cr Interest revenue $19,500
9. December 31
Dr Fair value adjustment $22,000
Cr Unrealized holding gain—NI $22,000
Explanation:
Preparation of the appropriate journal entry for each transaction or event during 2018, as well as any adjusting entries necessary at year end
1. Mar.31
Dr Investment in Distribution Transformers bonds $510,000
Cr Cash $510,000
2. September 01,
Dr Investment in American Instruments bonds
$1,230,000
Cr Cash $1,230,000
3 September 30
Dr Cash $20,400
Cr Interest revenue $20,400
(8%/2*$510,000)
4 October 02
Dr Fair value adjustment $80,000
Cr Unrealized holding gain—NI $80,000
($590,000-$510,000)
5.October 02
Dr Cash $590,000
Cr Investment in Distribution Transformers bonds $510,000
Cr Fair value adjustment $8,000
6. November 01
Dr Investment in M&D Corporation bonds $1,950,000
Cr Cash $1,950,000
7 December 31
Dr Interest receivable $41,000
Cr Interest revenue $41,000
($1,230,000 x 10% x 4/12)
8 December 31
Dr Interest receivable $19,500
Cr Interest revenue $19,500
($1,950,000* 6% x 2/12)
9. December 31
Dr Fair value adjustment $22,000
Cr Unrealized holding gain—NI $22,000
Available for sale securities Cost Fair market Value Profit/Loss
M & D Corporation shares
$1,950,000 $2,021,000 $ -71,000
American Instruments bonds $1,230,000 $1,181,000 $49,000
Totals $3,180,000 $3,202,000 $22,000
Which of the following two ARMs is likely to be priced higher, that is, offered with a higher initial interest rate?
a. ARM A has a margin of 3 percent and is tied to a three-year index with payments adjustable every two years; payments cannot increase by more than 10 percent from the preceding period; the term is 30 years.
b. ARM B has a margin of 3 percent and is tied to a one-year index with payments to be adjusted each year; payments cannot increase by more than 10 percent from the preceding period; the term is 30 years.
Answer: ARM A
Explanation:
The issuers of Adjustable-Rate Mortgage adjust its rate based on a certain index in the market, the purpose of which is to reflect the current cost being incurred by the issuer for loaning out money.
Both these mortgages are similar in everything except the index period. ARM A has a longer index period which means that it is expose to more forward rates and as the yield curve is generally upward trending(interest rates are higher in future), ARM A will be offered at a higher interest rate.
You work for a mature company with a long history in the industry and have been given stock options. Which of the following are you most likely wanting to see happen with top line (revenue) and bottom line (net profit) growth rates?
A. Top line and bottom line holding steady without much variation.
B. Top line growing faster than bottom line.
C. Bottom line growing faster than top line.
D. Both top and bottom line growing at the same rate.
Answer: D. Both top and bottom line growing at the same rate.
Explanation:
Based on the information given in the question, the most likely thing will be for the top and bottom line growing at the same rate. This implies that both the revenue and the net profit grow at same rate.
It's vital for them to grow at a steady rate in order to ensure stability. The top line growing faster than bottom line or the bottom line growing faster than top line isn't good for the stock options.
Hotel California Hotel California is a luxury hotel which has just got a new manager, Rocky. Given its location and quality, the hotel always had enough people making advance reservations to fill up all the rooms available. The hotel charges $200 per room per night for reservations made in advance (Hint:think of this $200 as the purchasing cost in the Newsvendor model). Rocky had taken the OPRE3310 at UTD last semester and decided to implement some of those techniques in his current job. He implemented a policy of reserving some rooms for last-minute requests and charges these requests S300 per room per night (Hint: think of this $300 as the selling price in the Newsvendor model) The unsold reserved rooms are worth nothing at the end of the day (Hint: that is the salvage value is $0). Based on his estimation, the number of last minute customers is uniformly distributed with minimum of 1 and maximum of 10
a) How much is the cost of reserving too little by one? That is the underage cost, Cu
b) How much is the cost of reserving too much by one? That is the overage cost, Co
c) What is the optimal service level?
d) How many rooms should be reserved for last-minute customers? Hint: what is Q"?
Answer:
Hotel California
a) The cost of reserving too little by one, (the underage cost) Cu
= $100
b) The cost of reserving too much by one, (the overage cost) Co =
= $200
c) The optimal service level
= 0.33
d) The number of rooms that should be reserved for last-minute customers, Q
= 3
Explanation:
a) Data and Calculations:
Charges per room per night (purchase cost) = $200
Charges for last-minute requests per room per night (selling price) - $300
Value of unsold reserved rooms (Salvage value) = $0
Minimum of last-minute customers, Min = 1
Maximum of last-minute customers, Max = 10
a) The cost of reserving too little by one, (the underage cost) Cu = Selling price - Purchasing cost
= $300 - $200
= $100
b) The cost of reserving too much by one, (the overage cost) Co = Purchasing cost - Salvage value
= $200 - $0
= $200
c) The optimal service level = Cu/Co+Cu
= $100/$200 + $100
= $100/$300
= 0.33
d) The number of rooms that should be reserved for last-minute customers, Q
= Cu/Co+Cu (Max - Min) + Min
= 0.33 * (10 - 1) + 1
= 0.33 * (10)
= 3
explain errors are not detected by a trial balance
Answer:
Errors not detected by a trial balance are:
1. Posting to Wrong Account
2. Error of Amounts in Original Book
3. Compensating Errors
4. Errors of Principle
5. Errors of Omission
Explanation:
The Trial Balance does not provide absolute assurance of ledger account accuracy. It is just an evidence of the postings' arithmetical accuracy. Even though the amount of debits equals the amount of credits, there may be inaccuracies.
A trial balance will not reveal such errors, and they are:
1. Posting to Wrong Account: IF accidentally posted something to the wrong account, but it was on the right side, the Trial Balance agreement will not be affected. For example, if a $200 purchase from John was credited to Joshua instead of John. As a result, Trial Balance will miss such an error.
2. Error of Amounts in Original Book: The Trial Balance will come out appropriately if an invoice for $632 is filed in Sales Book as $623, because the debit and credit have been recorded as $623. The arithmetical precision is there, yet there is a flaw.
3. Compensating Errors: This occurs one mistake is offset by a similar mistake on the other side. These errors are cancelled if one account in the ledger is debited $500 less and another account in the ledger is credited $500 less.
4. Errors of Principle: An errors of Principle is one that breaches the foundations of bookkeeping. Purchases of furniture, for example, are debited to the Purchase Account rather than the Furniture Account; wages paid for the erection of plant are debited to the Wages Account rather than the Plant Account; and the amount spent on a building extension is debited to the Repairs Account rather than the Building Account, and so on. These kind of errors do not alter the total debits and credits, but they do impair the bookkeeping principle.
5. Errors of Omission: There will be no effect on the Trial Balance if a transaction is completely omitted. An error of omission occurs when a transaction is fully unreported in both aspects, or when a transaction is documented in the books of primary entry but never entered in the ledger. For example, if a credit purchase is not recorded in the Purchase Day Book, it will not be posted to both the Purchase Account and the Supplier's Account. This error, on the other hand, will not cause Trial Balance to disagree.
The company has 7 million shares of common stock outstanding. The current share price is $68, and the book value per share is $8. The company also has two bond issues outstanding. The first bond issue has a face value of $70 million, a coupon rate of 6%, and sells for 97% of par. The second issue has a face value of $40 million, a coupon rate of 6.5%, and sells for 108% of par. The first issue matures in 21 years, the second in 6 years. Suppose the most recent dividend was $3.25 and the dividend growth rate is 5%. Assume that the overall cost of debt is the weighted average of that implied by the two outstanding debt issues. Both bonds make semiannual payments. The tax rate is 21%. What is the company’s WACC?
Seidman Company manufactures and sells 20,000 units of product X per month. Each unit of product X sells for $17 and has a contribution margin of $8. If product X is discontinued, $45,000 in fixed monthly overhead costs would be eliminated and there would be no effect on the sales volume of Seidman Company's other products. If product X is discontinued, Seidman Company's monthly income before taxes should:
Answer:
Effect on income= $115,000 decrease
Explanation:
Giving the following information:
Fixed costs= $45,000
Number of units= 20,000
Unitary contribution margin= $8
To calculate the effect on income, we need to use the following formula:
Effect on income= decrease in fixed costs - decrease in contribution margin
Effect on income= 45,000 - 20,000*8
Effect on income= $115,000 decrease
Use in your own words, what is corporate debt ?
Answer:
The corporate debt market is where companies go to borrow cash. And for over a decade, super-low interest rates left over from the 2008 financial crisis have made borrowing easier and easier. Since then, U.S. companies have regularly offered up bonds for sale, taking advantage of the cheap access to cash.
Explanation:
Hope this helps you
On December 1, delivery equipment was purchased for $6,144. The delivery equipment has an estimated useful life of four years (48 months) and no salvage value. Using the straight-line depreciation method, analyze the necessary adjusting entry as of December 31 (one month) using T accounts, and then formally enter this adjustment in the general journal.
Answer and Explanation:
The presentation is shown below;
Depreciation expense
Adjustment $128 ($6,144 ÷ 48 months)
Accumulated depreciation
Adjustment $128
The journal entry is
Depreciation expense $128
To Accumulated depreciation $128
(Being depreciation expense is recorded)
Here the depreciation expense is debited as it increased the expense and credited the accumulated depreciation as it decreased the asset
Rebecca Bennett is an 8-year-old who was recently diagnosed with diabetes mellitus. She is hospitalized with diabetic ketoacidosis, and she is beginning to learn about the disease process. Her parents are with her continually. She has an identical twin sister who is staying with her maternal grandparents.
Mrs. Bennett is concerned that Rebecca’s sister will also develop diabetes. Based on the preceding information, an acceptable response for the nurse to make would be to:________.
a. reassure the parents that the disease is not contagious.
b. discuss the hereditary and viral factors of type 1 diabetes.
c. discuss the hereditary factors of type 1 diabetes.
d. discuss the viral factors of type 1 diabetes.
Answer:
C
Explanation: