Answer: $315,000 deferred tax asset
Explanation:
The amount that Dwyer should record as a net deferred tax asset or liability for the year ended December 31, 2007 will be calculated thus:
= ($2400000 – $1500000) × 35%
= $900000 × 35%
= $900000 × 35/100
= $900000 × 0.35
= $315000.
Therefore, the answer is $315,000 deferred tax asset
13) Storico Co. just paid a dividend of $3.15 per share. The company will increase its dividend by 20 percent next year and then reduce its dividend growth rate by 5 percentage points per year until it reaches the industry average of 5 percent dividend growth, after which the company will keep a constant growth rate forever. If the required return on the company’s stock is 12 percent, what will a share of stock sell for today? (4 pts)
Answer:
$61.29
Explanation:
Calculation to determine what will a share of stock sell for today
First step is to calculate the price in Year 3
P3= $3.15(1.20)(1.15)(1.10)(1.05) / (.12 – .05)
P3= $5.020785/0.07
P3=$71.72
Now Let Calculate the price of stock today using the Present Value (PV) of the first three dividends in addition with the Present Value (PV) of the stock price in Year 3:
P0= $3.15(1.20)/(1.12) + $3.15(1.20)(1.15)/1.12^²+ $3.15(1.20)(1.15)(1.10)/1.12^³+ $71.72/1.12^³
P0=$3.78/1.12+$4.347/1.2544+$4.7817/1.404928+$71.72/1.404928
P0=$3.375+3.465+3.4035+$51.048
P0= $61.29
Therefore what will a share of stock sell for today is $61.29
The price of Microsoft is $37 per share and that of Apple is $43 per share. The price of Microsoft increases to $42 per share after one year and to $47 after two years. Also, shares of Apple increase to $49 after one year and to $59 after two years. If your portfolio comprises 100 shares of each security, what is your portfolio return in year 1 and year 2
Answer: 13.75% ; 16.48%
Explanation:
Year 0:
Microsoft: Current value = 100 at $37 = $3700
Apple: Current value = 100 at $43 = $4300
Portfolio value = $3700 + $4300 = $8000
Year 1:
Microsoft: value at year 1 = 100 at $42 = $4200
Apple: value at year 1= 100 at $49 = $4900
Portfolio value = $4200 + $4900 = $9100
Year 2:
Microsoft: value at year 2 = 100 at $47 = $4700
Apple: value at year 2 = 100 at $59 = $5900
Portfolio value = $4700 + $5900 = $10600
Therefore, Portfolio returns for year 1 will be:
= (value at the end of year 1 / current value) - 1
= (9100 / 8000) - 1
= 1.1375 - 1
= 0.1375
= 13.75%
Portfolio returns for year 2 will be:
= (value at the end of year 2 / value at the end of year 1) - 1
= (10600 / 9100) - 1
= 16.48%
Adkins Bakery uses the modified half-month convention to calculate depreciation expense in the year an asset is purchased or sold. Adkins has a calendar year accounting period and uses the straight-line method to compute depreciation expense. On March 17, 2018, Adkins acquired equipment at a cost of $220,000. The equipment has a residual value of $43,000 and an estimated useful life of 4 years. What amount of depreciation expense will be recorded for the year ending December 31, 2018
Answer:
Depreciation expense= $36,875
Explanation:
Under the straight line method of depreciation, the cost of an asset less the salvage value is spread equally over the expected useful life.
An equal amount is charged as annual depreciation over the life of the asset. The annual depreciation is calculated as follows:
Annual depreciation:
= (cost of assets - salvage value)/ Estimated useful life
Cost - 220,000
Residual value = 43,000
Estimated useful life = 4 years
Annual depreciation = (220,000- 43,000)/4 =44,250
Annual depreciation = 44,250.
Under the half-month convention, a full month depreciation is charged where an asset is first put to at the middle month of the month.
Thus March 17, 2018 to December 2018 is taken to be 10 full months
Depreciation expense = 44,250.× 10/12 = 36,875
Depreciation expense= $36,875
Storm Tools has formed a new business unit to produce battery-powered drills. The business unit was formed by the transfer of selected assets and obligations from the parent company. The unit's initial balance sheet on January 1 contained cash ($500,000), plant and equipment ($2,500,000), notes payable to the parent ($1,000,000), and residual equity ($2,000,000).
The business unit is expected to repay the note at $50,000 per month, plus all accrued interest at 1/2% per month. Payments are made on the last day of each month.
The unit is scheduled to produce 25,000 drills during January, with an increase of 2,500 units per month for the next three months. Each drill requires $40 of raw materials. Raw materials are purchased on account, and paid in the month following the month of purchase. The plant manager has established a goal to end each month with raw materials on hand, sufficient to meet 25% of the following month's planned production.
The unit expects to sell 20,000 drills in January; 25,000 in February, 25,000 in March, and 30,000 per month thereafter. The selling price is $100 per drill. Half of the drills will be sold for cash through a website. The others will be sold to retailers on account, who pay 40% in the month of purchase, and 60% in the following month. Uncollectible accounts are not material. Each drill requires 20 minutes of direct labor to assemble. Labor rates are $24 per hour. Variable factory overhead is applied at $9 per direct labor hour. The fixed factory overhead is $25,000 per month; 60% of this amount is related to depreciation of plant and equipment. With the exception of depreciation, all overhead is funded as incurred.
Selling, general, and administrative costs are funded in cash as incurred, and consist of fixed components (salaries, $100,000; office, $40,000; and advertising, $75,000) and variable components (15% of sales). Prepare a monthly comprehensive budget plan for Storm's new business unit for January through March. The plan should include the (a) sales and cash collections budget, (b) production budget, (c) direct materials purchases and payments budget, (d) direct labor budget, (e) factory overhead budget, (f) ending finished goods budget (assume total factory overhead is applied to production at the rate of $11.73 per direct labor hour), (g) SG&A budget, and (h) cash budget.
STORM TOOLS
Sales Budget
For the Three Months January to March
January February March
Expected Cash Collections From Sales
STORM TOOLS
Production Budget
For the Three Months January to March
January February March
STORM TOOLS
Direct Materials Budget
For the Three Months January to March
January February March
Expected Cash Payments for Materials Purchases
STORM TOOLS
Direct Labor Budget
For the Three Months January to March
January February March
STORM TOOLS
Factory Overhead Budget
For the Three Months January to March
January February March
STORM TOOLS
Ending Finished Goods Inventory
31-Mar
Units Per Unit Cost Per Unit Total
STORM TOOLS
Selling, General, and Administrative Budget
For the Three Months January to March
January February March
STORM TOOLS
Cash Budget
For the Three Months January to March
January February March
Beginning cash balance
Plus: Customer receipts
Available cash
Less disbursements:
Direct materials
Direct labor
Factory overhead
SG&A
Total disbursements
Cash surplus/(deficit)
Financing:
Planned repayment
Interest on note (1/2% of unpaid balance)
Ending cash balance
Answer:
Storm Tools
STORM TOOLS
1. Sales Budget
For the Three Months January to March
January February March
Expected Cash Collections
From Sales $1,400,000 $2,275,000 $2,500,000
STORM TOOLS
2. Production Budget
For the Three Months January to March
January February March
Production Schedule 25,000 27,500 30,000
Cost of direct materials $1,000,000 $1,100,000 $1,200,000
STORM TOOLS
4. Direct Materials Budget
For the Three Months January to March
January February March
Expected Cash Payments
for Materials Purchases $1,025,000 $1,125,000
STORM TOOLS
5. Direct Labor Budget
For the Three Months January to March
January February March
Direct labor costs $200,000 $220,000 $240,000
STORM TOOLS
6. Factory Overhead Budget
For the Three Months January to March
January February March
Variable overhead $75,000 $82,500 $90,000 $97,500
Fixed overhead 25,000 25,000 25,000 25,000
Total overhead $100,000 $107,500 $115,000 $122,500
Depreciation cost 15,000 15,000 15,000 15,000
Cash payment for o/h $85,000 $92,500 $100,000 $107,500
STORM TOOLS
7. Ending Finished Goods Inventory
31-Mar
Units Per Unit Cost Per Unit Total
January 5,000 $51.91 $259,550
February 7,500 $51.91 $389,325
March 12,500 $51.91 $648,875
STORM TOOLS
Selling, General, and Administrative Budget
For the Three Months January to March
January February March
Fixed overhead:
Salaries $100,000 $100,000 $100,000
Office expenses 40,000 40,000 40,000
Advertising 75,000 75,000 75,000
Fixed overhead $215,000 $215,000 $215,00
Variable overhead 210,000 341,250 375,000
Selling, General, and Admin. $425,000 $556,250 $590,000
STORM TOOLS
Cash Budget
For the Three Months January to March
January February March
Beginning cash balance $500,000 $1,135,000 $1,461,500
Plus: Customer receipts 1,400,000 2,275,000 2,500,000
Available cash $1,900,000 $3,410,000 $3,961,500
Less disbursements:
Direct materials $0 $1,025,000 $1,125,000
Direct labor 200,000 220,000 240,000
Factory overhead 85,000 92,500 100,000
SG&A 425,000 556,250 590,000
Total disbursements $710,000 $1,893,750 $2,055,000
Cash surplus/(deficit) $1,190,000 $1,516,250 $1,906,500
Financing:
Planned repayment $50,000 $50,000 $50,000
Interest on note
(1/2% of unpaid balance) 5,000 4,750 4,500
Ending cash balance $1,135,000 $1,461,500 $1,852,000
Explanation:
a) Data and Calculations:
Initial Balance Sheet on January 1:
Cash $500,000
Plant and equipment $2,500,000
Total assets $3,000,000
Notes payable $1,000,000
Residual equity $2,000,000
Total liabilities and equity $3,000,000
Repayment of note:
Note payment $50,000 per month
Accrued interest 250
Total repayment $50,250 per month
January February March April
Production Schedule 25,000 27,500 30,000 32,500
Cost of direct materials $1,000,000 $1,100,000 $1,200,000 $1,300,000
Ending raw materials 6,875 7,500 8,125
Production Schedule 25,000 27,500 30,000 32,500
Beginning raw materials 6,250 6,875 7,500 8,125
Purchase of materials 25,625 28,125 30,625
Cost price = $40 per drill
Payment for materials $1,025,000 $1,125,000 $1,225,000
Beginning Finished goods 5,000 7,500 12,500
Production 25,000 27,500 30,000 32,500
Ending Finished goods 5,000 7,500 12,500 15,000
Sales 20,000 25,000 25,000 30,000
Selling price = $100 per drill
Credit sales: $1,000,000 $1,250,000 $1,250,000 $1,500,000
40% month of sale 400,000 625,000 625,000 750,000
60% following month 400,000 625,000 625,000
Cash sales 1,000,000 1,250,000 1,250,000 1,500,000
Total sales collection $1,400,000 $2,275,000 $2,500,000 $2,875,000
Direct labor per drill = 20 minutes
Labor rates = $24 per hour
Variable overhead = $9 per direct labor hour
Production Schedule 25,000 27,500 30,000 32,500
Total labor hours 8,333 9,167 10,000 10,833
Direct labor costs $200,000 $220,000 $240,000 $260,000
Variable overhead $75,000 $82,500 $90,000 $97,500
Fixed overhead 25,000 25,000 25,000 25,000
Total overhead $100,000 $107,500 $115,000 $122,500
Depreciation cost 15,000 15,000 15,000 15,000
Cash payment for o/h $85,000 $92,500 $100,000 $107,500
Selling, general, and administrative costs:
Fixed overhead $215,000 $215,000 $215,000 $215,000
Variable overhead 210,000 341,250 375,000 431,250
Total selling, etc $425,000 $556,250 $590,000 $628,250
Cost of production:
Cost of direct materials $1,000,000 $1,100,000 $1,200,000 $1,300,000
Direct labor costs $200,000 $220,000 $240,000 $260,000
Overhead applied 97,746 107,529 117,300 127,071
Total costs of prodn. $1,297,746 $1,427,529 $1,557,300 $1,687,071
Production Schedule 25,000 27,500 30,000 32,500
Cost per unit $51.91 $51.91 $51.91 $51.91
Suppose the economy of the large country of Hendrix is currently experiencing expansion as a result of short run business cycle fluctuations. Hendrix has a trade deficit. The items below are possible effects of this expansion on the trade balance. Please sort them into boxes below as appropriate. If they do not fit into either box (e.g. not likely to occur in an expansion), leave them unsorted.
Likely to occur in an expansion and increase the trade deficit
Likely to occur in an expansion and decrease the trade deficit
private savings decrease domestic private investment increases private savings increase government borrowing decreases imports increase government borrowing increases domestic private investment decreases imports decrease
Answer:
Likely to occur in an expansion and increase the trade deficit.
Domestic private investment increasesImports increaseAs a result of expansion, there is more income in the economy which means that people will be able to invest more. The investment will however lead to more imports as capital goods are acquired. This will therefore increase the trade deficit which is defined as the difference between net exports and net imports.
Likely to occur in an expansion and decrease the trade deficit.
Private savings increaseGovernment borrowing decreasesIn an expansion, people will have more income and so will save more. As a result of them not spending these savings on imports, the trade deficit will go down.
Also with the economy in an expansion, the government would not need to borrow as much money to prop up the economy. This will reduce the trade deficit which includes loans from outside.
Suppose the economy is experiencing a recession. The output gap is hovering at −7%, causing higher than normal unemployment. Using the Fed model, complete the following passages to compare and contrast how monetary policy and fiscal policy can impact the economy. a. The Federal Reserve can reduce the to stimulate greater output and employment. The federal government can increase to help ease the recession. b. If both monetary and fiscal policy are used, the MP curve will shift , and the IS curve will shift to the . Both shifts will increase , and t
Answer:
a. The Federal Reserve can reduce the interest rates to stimulate greater output and employment. The federal government can increase government spending to help ease the recession.
The Fed can reduce interest rates by engaging in expansionary monetary policy that would then make it easier to borrow funds for investment. The Federal government can also increase spending as this will put more money into the economy to help it start moving again.
b. If both monetary and fiscal policy are used, the MP curve will shift downward, and the IS curve will shift to the right. Both shifts will increase income.
If both monetary and fiscal policy are used, companies will start producing again and hiring more people which will shift the Marginal Productivity curve downward. The IS curve will also shift to the right and both to these are indicators of an increase in income.
how can the size of the industrial/service sector and the agriculture employment rate indicate the level of industrialization?
Answer:
The more electricity, communications, and transportation used in a nation's economy, it will give them a more developed country and a greater potential for increased industrialization
Use the chart to answer the questions. Year Potential GDP Real GDP 2017 $18.17 trillion $18.05 trillion 2018 $18.51 trillion $18.56 trillion Be sure to put your answer in percentage form, and round answers to two decimal places. a. Calculate the output gap for 2017. % b. Calculate the output gap for 2018. % c. From 2017 to 2018, the output gap became more .
Answer:
a. Output gap for 2017 = –0.66%
b. Output gap for 2018 = 0.27%
c. From 2017 to 2018, the output gap became more positive.
Explanation:
The following are given in the question:
Year Potential GDP Real GDP
2017 $18.17 trillion $18.05 trillion
2018 $18.51 trillion $18.56 trillion
To calculate output gap in percentage form, the following formula is used:
Output gap = ((Real GDP - Potential GDP) / Potential GDP) * 100 ......... (1)
Therefore, we have:
a. Calculate the output gap for 2017. %
Using equation (1), we have:
Output gap for 2017 = ((18.05 - 18.17) / 18.17) * 100 = –0.66%
b. Calculate the output gap for 2018. %
Using equation (1), we have:
Output gap for 2018 = ((18.56 - 18.51) / 18.51) * 100 = 0.27%
c. From 2017 to 2018, the output gap became more .
Since the output gap in 2017 is negative while the output gap in 2018 is positive; this implies that from 2017 to 2018, the output gap became more positive.
A small factory is considering replacing its existing coining press with a newer, more efficient one. The existing press was purchased three years ago at a cost of $200000, and it is being depreciated according to a 7-year MACRS depreciation schedule. The factoryâs CFO estimates that the existing press has 6 years of useful life remaining. The purchase price for the new press is $280000. The installation of the new press would cost an additional $20000, and this installation cost would be added to the depreciable base. The new press (if purchased) would be depreciated using the 7-year MACRS depreciation schedule although, as noted below, it would be retired/sold after 6 years. Interest expenses associated with the purchase of the new press are estimated to be roughly $4000 per year for the next 6 years.
The appeal of the new press is that it is estimated to produce a pre-tax operating cost savings of $81000 per year for the next 6 years. Also, if the new press is purchased, the old press can be sold for $30000 today. The CFO believes that the new press would be sold for $45000 at the end of its 6-year useful life. Assume that NWC would not be affected. The company has an average tax rate of 29% and a marginal tax rate of 34%. The cost of capital (i.e., the discount rate) for this project is 8.5%.
Required:
Develop the incremental cash flows for this replacement decision and use them to calculate NPV and IRR. Next, make a conclusion about whether or not the existing coining press should be replaced at this time.
Answer:
1. Incremental Cash Flows:
Cash Flows Total PV of annual
Cash Flows
After-tax operating savings $57,510 $261,877
Sale proceeds from old press 30,000 30,000
Sale proceeds from new press 45,000 27,583
Total incremental cash inflows $132,510 $319,460
Cost of new press $280,000 $280,000
Installation cost of new press 20,000 20,000
Interest expense (associated) 4,000 18,214
Total incremental cash outflows $340,000 $318,214
2. NPV $1,246 ($319,460 -$318,214)
IRR = the cost of capital that will cause the NPV to be zero. Since it is $1,246, to find the rate, that makes it zero, we do the following calculations:
$1,246/$318,214 * 100 = 0.4%
Cost of capital = 8.5%
3. IRR = 8.5 - 0.4 = 8.1%
4. Conclusion: The existing press should be replaced at this time.
Explanation:
a) Data and Calculations:
Cost of old press = $200,000
Estimated useful life remaining = 6 years
Cost of new press = $280,000
Installation cost = $20,000
Total cost of new press $300,000
Interest expenses per year for the new press = $4,000
Cost Savings from new press:
Pre-tax operating cost savings = $81,000 per year
After-tax savings = $57,510 ($81,000 * (1 - 29%))
Sales proceeds from old press = $30,000 today
Sale proceeds from new press = $45,000 (at the end of its 6-year life)
Average tax rate = 29%
Marginal tax rate = 34%
Cost of capital = 8.5%
The carrying value of bonds at maturity always equals: Multiple Choice the amount of discount or premium. the amount of cash originally received in exchange for the bonds plus any unamortized discount or less any premium. the par value of the bond. the amount of cash originally received in exchange for the bonds. the amount in excess of par value.
Answer: the par value of the bond
Explanation:
The carrying value of bonds at maturity will always be equal to the par value of the bond. The carrying value of a bond is simply refered to as the bond's face value or par value plus the premiums taht are unamortized.
We should note that during the time of maturity of the bond, there'll have been an ammortization of the discounts or premiums, while the bond's par value will be left.
The carrying value of bonds at maturity always equals to the amount of cash originally received in exchange for the bonds plus any unamortized discount or less any premium. Thus, option (b) is correct.
At maturity, bonds' carrying values will always be the same as their par values. The face value or par value of a bond plus any unamortized premiums are simply referred to as the bond's carrying value.
To put it another way, it is the total of a bond's face value, any unamortized premiums, and any unamortized discounts, if any. The par value, interest rate, and remaining maturity period of the bond must all be known before calculating the carrying value using the effective interest rate technique.
Therefore, option (b) is correct.
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Expenses recognition Sun Microsystems uses the accrual basis of accounting and recognizes revenue at the Lime it sells goods or renders services. It applies U.S. GAAP and reports in U.S. dollars. Indicate the amount of expenses (if any) the firm recognizes during the months of June. July, and August in each of the following hypothetical transactions. The firm does the following:
a. Pays $180,000 on July 1 for one year’s rent on a warehouse beginning on that date.
b. Receives a utility bill on July 2 totaling $4,560 for services received during June. It pays the utility bill during July.
c. Purchases office supplies on account costing $12,600 during July. It pays $5,500 for these purchases during July and the remainder during August. Office supplies on hand on July 1 cost $2,400, on July 31 cost $9,200, and On August 31 cost $2,900.
d. Pays $7,200 on July 15 for property taxes on office facilities for the current calendar year.
e. Pays $2,000 on July 15 as a deposit on a custom-made delivery van that the manufacturer will deliver on September 30.
f. Pays $4,500 on July 25 as an advance on the August salary of an employee.
g. Pays $6,600 on July 25 for advertisements that appeared in computer journals during June.
Answer:
Sun Microsystems
Amount of Expenses to recognize during the months of June, July, and August in each of the following transactions:
a. Rent Expense = $30,000
b. Utility Expense = $4,650
c. Supplies Expense = $9,700
d. Property Taxes = $1,800
e. No expense is recognized.
f. Salary Expense = $4,500
g. Advertising Expense = $6,600
Explanation:
Data and Calculations:
a. Rent Expense = $180,000/12 * 2 = $30,000 Rent Prepaid $150,000
b. Utility Expense $4,560
c. Supplies Expense $9,700 ($12,600 - $2,900)
d. Property Taxes = $7,200 *3/12 = $1,800
e. No expense is recognized for the advance payment for delivery van.
f. Salary Expense $4,500
g. Advertising Expense $6,600
Trainees are put through a two-month school. The fixed cost of running one session of this school is $150,000. Any number of sessions can be run during the year but must be scheduled so that the airline always has enough flight attendants. The cost of having excess attendants is simply the salary that they receive, which is $15,000 per month. How many sessions of the school
Answer:
The airline training school can run maximum of 10 sessions.
Explanation:
There can be 10 sessions which can be held at the training school. The airline school needs to have enough attendants so that they do not run a session in spare capacity. If a session is run with few attendants then it will cost $15,000 per session which is an additional cost burden for the airline training school.
Two years ago, Kimberly became a 30 percent partner in the KST Partnership with a contribution of investment land with a $10,000 basis and a $16,000 fair market value. On January 2 of this year, Kimberly has a $15,000 basis in her partnership interest, and none of her pre-contribution gain has been recognized. On January 2 Kimberly receives an operating distribution of a tract of land (not the contributed land) with a $12,000 basis and an $18,000 fair market value.
a. What is Kimberly’s remaining basis in KST after the distribution?
b. What is KST’s basis in the land Kimberly contributed after Kimberly receives this distribution?
Answer:
A. $6,000
B. $13,000
Explanation:
A. Calculation to determine Kimberly’s remaining basis in KST after the distribution
Basis in KST$ 15,000
Add §737 gain $3,000
($15,000-$12,000)
Deduct Carryover basis in land ($12,000)
Remaining basis in KST $6,000
($15,000+$3,000-$12,000).
Therefore Kimberly’s remaining basis in KST after the distribution will be $6,000
B. Calculation to determine KST’s basis in the land Kimberly contributed after Kimberly receives this distribution
KST basis upon contribution $10,000
Add Kimberly’s §737 gain $3,000
($15,000-$12,000)
KST’s basis in land $13,000
($10,000+$3,000)
Therefore KST’s basis in the land Kimberly contributed after Kimberly receives this distribution is $13,000
Patterson Development sometimes sells property on an installment basis. In those cases, Patterson reports income in its income statement in the year of the sale but reports installment income by the installment method on the tax return. Installment income in 2021 was $240 million, which Patterson expects to collect equally over the next four years. The tax rate is 25%, but based on an enacted law, is scheduled to become 35% in 2023.
Patterson's pretax accounting income for the 2013 income statement was $530 million of this, $30 million is non-taxable revenue from proceeds of a life insurance policy. There were no differences between accounting income and taxable income other than those described above and no cumlative temporary differences existed at the beggining of the year:
1. Prepare the appropriate journal entry to record patterson's 2013 income taxes.
2. What is Patterson's 2013 net income?
Answer:
1. Debit Income tax expense for $143 million; Credit Deferred tax liability for $78 million; and Credit Income tax payable for $65 million.
2. Patterson's 2021 net income is $387.
Explanation:
Note: There is an error in the question because of date inconsistency. Therefore, 2021 upward is used in the answer to ensure date consistency.
1. Prepare the appropriate journal entry to record patterson's 2021 income taxes.
Note: See the attached excel file for the calculation of income tax payable and deferred tax liability.
The journal entry will look as follows:
Date General journal Debit ($'M) Credit ($'M)
31 Dec 2021 Income tax expense 143
Deferred tax liability 78
Income tax payable 65
(To record income tax payable.)
2. What is Patterson's 2021 net income?
This can be determined as follows:
Particulars ($'Million)
Pre accounting income 530
Income tax expense (143)
Net income 387
Just before the year ended, a company offered to buy 4,120 units for $14.95 each. X Company had the capacity to produce the additional 4,120 units, but because the special order product was slightly different than the regular product, direct material costs were expected to increase to $2.40 per unit, and some special equipment would have to be rented for a total of $19,000.
Sales $1,225,500
Cost of goods sold 521,805
Gross margin $703,695
Selling and administrative costs 153,510
Profit $550,185
Fixed cost of goods sold for the year was $130,935, and fixed selling and administrative costs were $72,885. The special order product has some unique features that will require additional material costs of $0.90 per unit and the rental of special equipment for $3,000. Assume the following fact: regular variable selling and administrative costs include sales commissions equal to 4% of sales, but there will be no sales commissions on the special order. This will cause the special order profit to increase by:__________
Answer:
4%
Explanation:
Profit on special order = 7847.7 or 7848 Selling price 11 Variable cost special material 0.72 Cost of goods sold 6.69 Selling and administrative cost 1.02 Total variable cost per unit Particulars Per Unit 64500 Units Sales 19 1225500 Less: Variable cost Cost of Goods Sold (521805-130935) 6.06 390870 Sales commission (Sales*4%) 0
Patterson and Clay Companies both use cost-plus pricing formulas and arrived at a selling price of $1,000 for the same product. Patterson uses absorption manufacturing cost as the basis for computing its dollar markup whereas Clay uses total cost. Which of the following choices correctly denotes the company that would have (1) the higher cost basis for deriving its dollar markup and (2) the higher markup percentage?
Cost Basis Patterson Patterson Clay Clay More information is needed to judge Markup Percentage Patterson Clay Patterson Clay More information is needed to judge
A. Choice A
B. Choice B
C. Choice C
D. Choice D
E. Choice E
Answer:
Patterson and Clay Companies
1. Higher cost basis for marking up is:
= Clay Company
2. Higher markup percentage is:
= Patterson Company
Explanation:
a) Data and Analysis:
Costing formulas:
Patterson:
Absorption manufacturing cost
Markup = Higher markup rate
Selling price $1,000
Clay:
Total cost = Higher cost basis for marking up
Markup
Selling price $1,000
b) Total cost is higher than total manufacturing costs. It includes more than the total manufacturing costs. Absorption manufacturing costs only include the variable manufacturing costs and fixed manufacturing overhead costs. Total costs include all the absorption costs and other selling, administrative, and distribution costs.
Mauro Products distributes a single product, a woven basket whose selling price is $28 per unit and whose variable expense is $23 per unit. The company’s monthly fixed expense is $9,500. Required: 1. Calculate the company’s break-even point in unit sales. 2. Calculate the company’s break-even point in dollar sales. (Do not round intermediate calculations.) 3. If the company's fixed expenses increase by $600, what would become the new break-even point in unit sales? In dollar sales? (Do not round intermediate calculations.)
Answer:
Results are below.
Explanation:
To calculate the break-even point in units, we need to use the following formula:
Break-even point in units= fixed costs/ contribution margin per unit
Break-even point in units= 9,500 / (28 - 23)
Break-even point in units= 1,900 units
To calculate the break-even point in dollars, we need to use the following formula:
Break-even point (dollars)= fixed costs/ contribution margin ratio
Break-even point (dollars)= 9,500 / (5 / 28)
Break-even point (dollars)= $53,200
Finally, the fixed costs increase to $10,100:
Break-even point in units= 10,100 / 5
Break-even point in units= 2,020 units
Break-even point (dollars)= 10,100 / (5/28)
Break-even point (dollars)= $56,560
Hoffman Corporation issued $60 million of 9%, 15-year bonds at 106. Each of the 60,000 bonds was convertible into one share of $1 par common stock. Prepare the journal entry to record the issuance of the bonds. (Enter your answers in millions rounded to 1 decimal place (i.e., 5,500,000 should be entered as 5.5). If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
Answer:
Dr Cash $63,600,000
Cr Premium on Bonds $3,600,000
Cr Bonds payable $60,000,000
Explanation:
Preparation of the journal entry to record the issuance of the bonds.
Dr Cash $63,600,000
(106%*$60,000,000)
Cr Premium on Bonds $3,600,000
($63,600,000-$60,000,000)
Cr Bonds payable $60,000,000
(To record issuance of the bonds)
11) Domergue Corp. currently has an EPS of $3.76, and the benchmark PE for the company is 21. Earnings are expected to grow at 5.1 percent per year. (4 pts.) a) What is your estimate of the current stock price? b) What is the target stock price in one year? c) Assuming the company pays no dividends, what is the implied return on the company’s stock over the next year?
Answer:
(a) 78.96
(b) 82.99
(c) 5.10
Explanation:
The current stock price can be calculated as follows
= 3.76 × 21
= 78.96
The target stock price in one year can be calculated as follows
= 3.76(1+5.1%)×21
= 3.76×(1+0.051)×21
= 3.76×1.051×21
= 82.99
The implied return on company's stock over one year can be calculated as follows
= 82.99-78.96/78.96
= 4.03/78.96
= 0.0510× 100
= 5.10
Jessica purchased a home on January 1, 2018 for $580,000 by making a down payment of $230,000 and financing the remaining $350,000 with a 30-year loan, secured by the residence, at 6 percent. During 2018 and 2019, Jessica made interest-only payments on this loan of $21,000 (each year). On July 1, 2018, when her home was worth $580,000 Jessica borrowed an additional $145,000 secured by the home at an interest rate of 8 percent. During 2018, she made interest-only payments on the second loan in the amount of $5,800. During 2019, she made interest only on the second loan in the amount of $11,600. What is the maximum amount of the $32,600 interest expense Jessica paid during 2019 may she deduct as an itemized deduction if she used the proceeds of the second loan to finish the basement in her home and landscape her yard
Answer:
$32,600
Explanation:
Calculation to determine her itemized deduction if she used the proceeds of the second loan to finish the basement in her home and landscape her yard
Using this formula
Itemized deduction =(Financing amount * 6 percent)+(Additional amount borrowed*interest rate of 8 percent)
Let plug in the formula
Itemized deduction=( $350,000 * 6 percent)+($145,000 *8 percent)
Itemized deduction=($21,000+$11,600)
Itemized deduction=$32,600
Therefore her itemized deduction if she used the proceeds of the second loan to finish the basement in her home and landscape her yard wi be $32,600
The trial balance for Splish Brothers Inc. appears as follows: Splish Brothers Inc. Trial Balance December 31, 2022 Cash $340 Accounts Receivable 595 Prepaid Insurance 93 Supplies 205 Equipment 4560 Accumulated Depreciation, Equipment $680 Accounts Payable 438 Common Stock 1370 Retained Earnings 1600 Service Revenue 3415 Salaries and Wages Expense 1140 Rent Expense 570 $7503 $7503 If as of December 31, 2022, rent of $171 for December had not been recorded or paid, the adjusting entry would include a: debit to Rent Expense for $171 debit to Rent Payable for $171 credit to Cash for $171. credit to Accumulated Rent for $171.
Answer:
debit to Rent Expense for $171
Explanation:
The adjusting entry would be
Rent Expense $171
To Rent expenses payable $171
(Being Rent expense accounted is recorded)
Here the rent expense is debited as it increased the assets and credited the rent expense payable as it also increased the liabilities
Therefore the a option is correct
ANd, the rest of the options would be wrong
You have your choice of two investment accounts. Investment A is a 6-year annuity that features end-of-month $1,980 payments and has an interest rate of 7 percent compounded monthly. Investment B is an annually compounded lump-sum investment with an interest rate of 9 percent, also good for 6 years.
How much money would you need to invest in B today for it to be worth as much as Investment A 6 years from now? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Answer:
$112,166
Explanation:
the future value of Investment A:
payment = $1,980
n = 6 x 12 = 72
i = 9% / 12 = 0.75%
FVIFA = [(1 + i)ⁿ- 1 ] / i = [(1 + 0.0075)⁷² - 1 ] / 0.0075 = 95.007
future value = $1,980 x 95.007 = $188,114
now we need to determine the PV of investment B:
PV = $188,114 / (1 + 9%)⁶ = $112,166
Answer: $105,264.24
Explanation:
Step 1) Calculate Future Value of Investment A
Rate: .07/12 = .58%
Payment: $1,980
Term: 72 (6 years * 12 months)
Future Value: ?
In excel -> FV(.58,72,-1980,0)
Future Value = $176,538.67
Step 2) Calculate Present Value of Investment B using Investment A Future Value
Rate: .09
Payment: $0
Term: 6
Future Value: $176,538.67 (from step 1)
PV(.09,6,0,-176538.67)
Present Value = $105,264.24
Thats your answer!! ^^^^^
You can also use the formula or calculator, but I've found excel is the easiest/fastest.
Cheers!
he Dimitrios Company records the following transactions during September 2018: Cash sales to customers totaling $5,800. Sales to customers on credit cards totaling $18,800. The average credit card fee is 3.0%. The company collects all cash due from the credit card companies. A $2,000 sale on account to a long-time customer with terms of 2/10, n/30. The sale is made on September 5. The customer pays the invoice on September 14. A customer returns product they had purchased last month for $500. Dimitrios accepts the return and gives the customer a cash refund. Calculate the following amounts: Service charge expense for credit card sales Sales discount (contra-revenue) for sales on account Sales returns (contra-revenue) Gross sales revenue Net sales revenue Net cash collected from sales
Answer:
The Dimitrios Company
Service charge expense for credit card sales = $564 ($18,800 * 3%)
Sales discount (contra-revenue) for sales on account = $40 ($2,000 * 2%)
Sales returns (contra-revenue) - $500
Gross sales revenue:
Cash $5,800
Cards $18,800
Accounts receivable $2,000
Total = $26,600
Net sales revenue = $26,100 ($26,600 - $500)
Net cash collected from sales:
Cash Sales $5,800
Card Sales $18,800
Accounts Receivable $2,000
Less: Card Fees $564
Cash Discounts $40
Cash Refund $500
Net cash = $ 25,496
Explanation:
a) Data and Analysis:
Sept. 2018:
Cash $5,800 Sales Revenue $5,800
Credit Cards Receivable $18,800 Sales Revenue $18,800
Credit Card Fee Expense $ 564 Cash $564
Cash $18,800 Credit Cards Receivable $18,800
Accounts Receivable $2,000 Sales Revenue $2,000, terms of 2/10, n/30.
Cash $1,960 Cash Discounts $40 Accounts Receivable $2,000
Sales Returns $500 Cash $500
1 points Time Remaining 1 hour 14 minutes 35 seconds01:14:35 eBookPrintReferencesCheck my workCheck My Work button is now enabledItem 13 Time Remaining 1 hour 14 minutes 35 seconds01:14:35 Alice is single and self-employed in 2020. Her net business profit on her Schedule C for the year is $196,000. What is her self-employment tax liability and additional Medicare tax liability for 2020
Answer:
Self employment tax liability = $22,323.97Additional Medicare tax liability = $0Explanation:
According to the IRS, the amount subject to self-employment tax is 92.35% of net income from self-employment for the year.
Alice's taxable income is:
= 92.35% * 196,000
= $181,006
Self employment tax-liability:
Social security tax for 2020 is 12.4% for the first $137,700 of income.
= 12.4% * 137,700
= $17,074.80
Medicare tax:
= 2.9% on taxable income
= 2.9% * 181,006
= $5,249.17
Self-employment tax is:
= 17,074.80 + 5,249.17
= $22,323.97
Additional Medicare tax applies on only amounts above $200,000 so it is $0 in this case.
Scoring: Your score will be based on the number of correct matches. There is no penalty for incorrect or missing matches.
Match each of the following transactions to the journal in which it would be entered.
Clear All
Revenue journal Cash receipts journal Purchases journal Cash payments journal General journal Recognized depreciation on the building Journalized the adjusting entry for supplies used during the period Closed the revenue account at the end of the period Received cash from the bank in exchange for a note payable Withdrew cash for personal use (by owner)
Answer:
Matching transactions to the journal in which they would be entered:
Transactions Journal Type
1. Recognized depreciation on the building General Journal
2. Journalized the adjusting entry for supplies
used during the period General Journal
3. Closed the revenue account at the end
of the period General Journal
4. Received cash from the bank in exchange
for a note payable Cash Receipts Journal
5. Withdrew cash for personal use (by owner) Cash Payments Journal
Explanation:
Revenue journal records revenue transactions.
Cash receipts journal records all cash receipts.
Purchases journal records all purchases on account.
Cash payments journal records all cash payments.
General journal is used for all transactions, especially those that cannot be recorded in any of the other specialized journals.
Current Attempt in Progress
Cullumber Company entered into these transactions during May 2022, its first month of operations.
1. Stockholders invested $42,500 in the business in exchange for common stock of the company.
2. Purchased computers for office use for $31,900 from Ladd on account.
3. Paid $2,900 cash for May rent on storage space.
4. Performed computer services worth $17,900 on account.
5. Performed computer services for Wharton Construction Company for $5,400 cash.
6. Paid Western States Power Co. $8,300 cash for energy usage in May.
7. Paid Ladd for the computers purchased in (2).
8. Incurred advertising expense for May of $1,600 on account.
9. Received $14,000 cash from customers for contracts billed in (4).
Create a tabular analysis, show the effect of each transaction on the accounting equation. Put explanations for changes to Stockholders' Equity in the far right column. (If a transaction causes a decrease in Assets, Liabilities or Stockholders' Equity, place a negative sign (or parentheses) in front of the amount entered for the particular Asset, Liability or Equity item that was reduced.)
Answer:
Assets = Liabilities + Stockholders' Equity = $68,600
Explanation:
Note: See the attached excel file for the tabular analysis of the effect of each transaction on the accounting equation.
From the attached excel file, we have:
Assetes = Total assets balance = = $18,800 + $17,900 + 31,900 = $68,600
Liabilities = Total liabilities balance = $1,600
Stockholders' Equity = Total Common Stock balance + Total Net Income balance = $42,500 + $25,500 = $67,000
Liabilities + Stockholders' Equity = $1,600 + $67,000 = $68,600
Therefore, we have:
Assets = Liabilities + Stockholders' Equity = $68,600
Ghost, Inc., has no debt outstanding and a total market value of $240,000. Earnings before interest and taxes, EBIT, are projected to be $32,000 if economic conditions are normal. If there is strong expansion in the economy, then EBIT will be 15% higher. If there is a recession, then EBIT will be 30% lower. The company is considering a $80,000 debt issue with an interest rate of 7 percent. The proceeds will be used to repurchase shares of stock. There are currently 15,000 shares outstanding. Ignore taxes for this problem.
a-1. Calculate earnings per share (EPS) under each of the three economic scenarios before any debt is issued.
a-2. Calculate the percentage changes in EPS when the economy expands or enters a recession.
b-1. Calculate earnings per share (EPS) under each of the three economic scenarios assuming the company goes through with recapitalization.
b-2. Given the recapitalization, calculate the percentage changes in EPS when the economy expands or enters a recession.
a-1 Recession EPS $0.97
Normal EPS $1.39
Expansion EPS Z $1.59
a-2 Recession percentage
change in EPS -30.0
Expansion percentage
change in EPS 15.0
b-1 Recession EPS $1.09
Normal EPS 15.00
Expansion EPS
b-2 Recession percentage
change in EPSE -36.36
Expansion percentage
change in EPS 18.18
Answer:
a-1. We have:
Recession EPS = $1.49
Normal EPS = $2.13
Expansion EPS = $2.45
a-2. We have:
Recession percentage change in EPS = -30.00%
Expansion percentage change in EPS = 15.00%
b-1. We have:
Recession EPS = $1.12
Normal EPS = $1.76
Expansion EPS = $2.08
b-2. We have:
Recession percentage change in EPS = -36.36%
Expansion percentage change in EPS = 18.18%
Explanation:
Note: See the attached excel file for the calculations of the EPS and the percentage changes in EPS.
From the attached excel file, we have:
a-1. Calculate earnings per share (EPS) under each of the three economic scenarios before any debt is issued.
Recession EPS = $1.49
Normal EPS = $2.13
Expansion EPS = $2.45
a-2. Calculate the percentage changes in EPS when the economy expands or enters a recession.
Recession percentage change in EPS = -30.00%
Expansion percentage change in EPS = 15.00%
b-1. Calculate earnings per share (EPS) under each of the three economic scenarios assuming the company goes through with recapitalization.
Recession EPS = $1.12
Normal EPS = $1.76
Expansion EPS = $2.08
b-2. Given the recapitalization, calculate the percentage changes in EPS when the economy expands or enters a recession.
Recession percentage change in EPS = -36.36%
Expansion percentage change in EPS = 18.18%
Nthanda Corporation has just completed a physical inventory count at year end, December 31, 2020. Only the items on the shelves, in storage, and in the receiving area were counted and costed on the FIFO basis. The inventory amounted to K80,000. During the audit, the independent Accountant discovered the following additional information:
(a) There were goods in transit on December 31, 2020, from a supplier with terms FOB Shipping Point, costing K10,000. Because the goods had not arrived, they were excluded from the physical inventory count.
(b) On December 27, 2020, a regular customer purchased goods for cash amounting to K1,000 and had them shipped to a bonded warehouse for temporary storage on December 28, 2020. The goods were shipped via common carrier with terms FOB Destination. The customer picked the goods up from the warehouse on January 4, 2021. Nthanda Company had paid K500 for the goods and, because they were in storage, Nthanda included them in the physical inventory count.
(c) Nthanda Company, on the date of the inventory, received notice from a supplier that goods ordered earlier, at a cost ofK4,000, had been delivered to the transportation company on December 28, 2020; the terms were FOB shipping point. Because the shipment had not arrived on December 31, 2020, it was excluded from the physical inventory.
(d) On December 31, 2020, there were goods in transit to customers, with terms FOB shipping point, amounting to K800 (expected delivery on January 8, 2021). Because the goods had been shipped, they were excluded from the physical inventory count.
(e) On December 31, 2020, Nthanda Company shipped K2,500 worth of goods to a customer, FOB destination. The goods arrived on January 5, 2020. Because the goods were not on hand, they were not included in the physical inventory count.
(f) Nthanda Company, as the consignee, had goods on consignment that cost K3,000. Because these goods were on hand as of December 31, 2020, they were included in the physical inventory count.
Required
i. Pass an analysis of the above information and calculate a correct amount for the ending inventory. Give explanation of the basis for your treatment of each item.
f-1. Assume that no intra-entity inventory or land sales occurred between Placid Lake and Scenic. Instead, on January 1, 2020, Scenic sold equipment (that originally cost $170,000 but had a $84,000 book value on that date) to Placid Lake for $118,000. At the time of sale, the equipment had a remaining useful life of five years. What worksheet entries are made for a December 31, 2021, consolidation of these two companies to eliminate the impact of the intra-entity transfer
Answer:
Journal 1
Debit : Other Income $34,000
Credit : Equipment $34,000
Journal 2
Debit : Accumulated depreciation $6,800
Credit : depreciation $6,800
Explanation:
Step 1 : Eliminate the Income resulting from sale and the additional value of equipment sitting in the buyer books
Income = Selling Price - Carrying Amount
where,
Carrying Amount = Cost - Accumulated depreciation
= $84,000
therefore,
Income = $118,000 - $84,000 = $34,000
Journal;
Debit : Other Income $34,000
Credit : Equipment $34,000
Step 2 : Eliminate the unrealized profit as a result of additional asset value
unrealized profit = income ÷ remaining useful life
= $34,000 ÷ 5
= $6,800
Journal;
Debit : Accumulated depreciation $6,800
Credit : depreciation $6,800
At the beginning of 2020, Beerbo acquired a mine for $970,000. Of this amount, $100,000 was ascribed to the land value (the remaining portion was ascribed to the mine). Surveys conducted by geologists have indicated that approximately 12,000,000 units of ore appear to be in the mine. Beerbo incurred $170,000 of development costs associated with this mine prior to any extraction of minerals. It also determined that the fair value of its obligation to prepare the land for an alternative use (when all of the minerals have been removed) is $40,000. During 2020, 2,500,000 units of ore were extracted and 2,100,000 of these units were sold. What is the amount extracted in 2020
Answer:
$225,000
Explanation:
Depletion rate = [Mine cost - Land value + Obligation to prepare the land for an alternative + Development cost] / Total number of ore extracted
Depletion rate = [$970,000 - $100,000 + $40,000 + $170,000] / $12,000,000
Depletion rate = $1,080,000/$12,000,000
Depletion rate = $0.09
Amount extracted in 2020 = Unit of ore extracted in 2020 / Depletion rate
Amount extracted in 2020 = 2,500,000 units * $0.09
Amount extracted in 2020 = $225,000