Answer:
9.57 %
Explanation:
The computation of the weighted-average interest rate used for interest capitalization purposes is shown below:
Particulars Loan Amount Interest
9 % 5 year note payable $2,493,000 ($2,493,000 × 9 %) = $224,370
10 % 4 year note payable $3,319,800 ($3,319,800 × 10 %) = $331,980
Total $5,812,800 $556,350
Now
Weighted- average interest rate is
= $556,350 ÷ $5,812,800
= 9.57 %
Presented below is information related to Splish Company at December 31, 2020, the end of its first year of operations.
Sales revenue $334,910
Cost of goods sold 149,030
Selling and administrative expenses 54,000
Gain on sale of plant assets 32,710
Unrealized gain on available-for-sale debt investments 9,080
Interest expense 6,360
Loss on discontinued operations 11,260
Dividends declared and paid 4,660
Compute the following:
(a) Income from operations -
(b) Net income -
(c) Comprehensive income
(d) Retained earnings balance at December 31, 2020 -
Answer:
a. $131,880
b. $167,310
c. $156,050
d. $151,390
Explanation:
(a) Income from operations
Income from Operations is Income resulting from Primary Trading Activities of the Company.
Income from Operations = Gross Profit + Operating Income - Operating Expenses
where,
Gross Profit = Sales - Cost of Goods Sold
= $334,910 - $149,030
= $185,880
thus,
Income from Operations = $185,880 - $54,000 = $131,880
(b) Net income
Income resulting from Primary and Secondary Trading Activities of the the Company.
Net income = Income from Operations + Non Operating Income - Non Operating Expenses
= $131,880 + $32,710 + $9,080 - $6,360
= $167,310
(c) Comprehensive income
Income from both Continuing and Non - Continuing Activities.
Comprehensive income = Net income + Non - Continuing Activities
= $167,310 - $11,260
= $156,050
(d) Retained earnings balance at December 31, 2020
The Income remaining after distributions to shareholders have been made.
Retained earnings = Comprehensive income - Dividends
= $156,050 - $4,660
= $151,390
“It’s great to listen to the customer when you are designing your product, but it’s just not practical in pricing. All the customers have to say is that they want lower prices. If you want me to increase profits, I can’t very well listen to that!”
a. What should the marketing director make of this response?
Answer:
189038¥$
Explanatio
first play attention in class
The candidate hasn't fully understood the marketing strategy of the company
What is marketing?Marketing refers to the actions of a company in order to promote buying or selling of the company’s product, as well as creating a brand image of its product. Marketing has become a vital part of total’s world, where everything is connected via the internet and social media. New fields like Digital Marketing, Social Media Marketing have propped up for the marketing of the products.
The marketing director while appreciating this response should know the person responding hasn't been fully aware of the marketing strategy. He should make the candidate understand how much vital it is to take the opinion of the customers. Even, the company's main focus is on customers' responses and needs.
In today’s economy, a couple of viral videos against the company by genuine customers can ruin the whole image of the company. Also, customers might not necessarily want a lower-priced product in today’s age of show-offs. The customers might be wanting a product of distinction among his/her peers to stand out.
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Iaukea Company makes two products from a common input. Joint processing costs up to the split-off point total $47,000 a year. The company allocates these costs to the joint products on the basis of their total sales values at the split-off point. Each product may be sold at the split-off point or processed further. Data concerning these products appear below:
Product X Product Y Total
Allocated joint processing costs $17,900 $27,200 $45,100
Sales value at split-off point $25,400 $37,000 $62,400
Costs of further processing $22,400 $16,700 $39,100
Sales value after further processing $47,000 $54,700 $101,700
Required:
a. What is the net monetary advantage (disadvantage) of processing Product X beyond the split-off point?
b. What is the net monetary advantage (disadvantage) of processing Product Y beyond the split-off point?
Answer:
Product Net monetary advantage
X (800)
Y 1,000
Explanation:
A company should process further a product if the additional revenue from the split-off point is greater than than the further processing cost.
Also note that all costs incurred up to the split-off point are irrelevant to the decision to process further .
Product X
$
Additional sales revenue from further processing
( 47,000-25,400) 21600
Further processing cost (22,400)
Net monetary advantage (800)
Product Y
$
Additional sales revenue from further processing
( 54,700-37,000) 17,700
Further processing cost (16,700)
Net monetary advantage 1,000
Product Net monetary advantage
X (800)
Y 1,000
Kokomochi is considering the launch of an advertising campaign for its latest dessert product, the Mini Mochi Munch. Kokomochi plans to spend $5.5 million on TV, radio, and print advertising this year for the campaign. The ads are expected to boost sales of the Mini Mochi Munch by $8.2 million this year and $6.2 million next year. In addition, the company expects that new consumers who try the Mini Mochi Munch will be more likely to try Kokomochi's other products. As a result, sales of other products are expected to rise by $1.8 million each year. Kokomochi's gross profit margin for the Mini Mochi Munch is 37%, and its gross profit margin averages 22% for all other products. The company's marginal corporate tax rate is 25% both this year and next year. Question 3a HomeworkAnswered What are the incremental earnings associated with the advertising campaign in its first year
Answer:
Kokomochi
The incremental earnings associated with the advertising campaign in its first year is:
= $0.3 million.
Explanation:
a) Data and Calculations:
Advertising campaign cost = $5.5 million
Mini Mochi Other Products Total
Much
Incremental sales revenue $8.2 million 1.8 million $10 million
Incremental cost of goods sold 5.2 million 1.4 million 6.6 million
Incremental gross profit $3.0 million 0.4 million 3.4 million
Advertising cost 3.1 million
Incremental earnings associated with the advertising campaign = $0.3 million
Advertising cost apportioned to:
This year = $8.2/$14.4 * $5.5 million = $3.1 million
Next year = $6.2/$14.4 * $5.5 million = $2.4 million
You own shares of Somner Resources' preferred stock, which currently sells for per share and pays annual dividends of $ per share. If the market's required yield on similar shares is percent, should you sell your shares or buy more?
Answer:
You should buy more shares
Explanation:
The above-mentioned question is missing few components. I have added them to explain on how the question would be solved if all the variables were provided. Please note the additions in bold text below. The answer of which is given afterwards.
You own 300 shares of Somner Resources' preferred stock, which currently sells for $39 per share and pays annual dividends of $5.50 per share. If the market's required yield on similar shares 12% is percent, should you sell your shares or buy more?
Solution as mentioned below:
First of all we need to calculate value of the preferred stock by dividing the annual dividend per share from the market required rate.
Value of preferred stock = 5.50 / 12%
Value of preferred stock = $45.83
Now given the fact that the current price at which the stocks are sold is $39 which is less than the price at which they are actually valued which is $45.83. You should buy more of the shares as they are currently undervalued.
James, Inc., has purchased a brand new machine to produce its High Flight line of shoes. The machine has an economic life of 6 years. The depreciation schedule for the machine is straight-line with no salvage value. The machine costs $594,000. The sales price per pair of shoes is $87, while the variable cost is $37. Fixed costs of $295,000 per year are attributed to the machine. The corporate tax rate is 22 percent and the appropriate discount rate is 10 percent.
What is the financial break-even point?
Answer:
James, Inc.
The financial break-even point in:
Sales unit = 8,322
Sales dollars = $724,014
Explanation:
a) Data and Calculations:
Cost of machine purchased = $594,000
Estimated economic life = 6 years
Salvage value = $0
Sales price per pair of shoes = $87
Variable cost per pair of shoes = 37
Contribution margin per pair = $50
Discounted contribution = $50 * 0.909 = $45.45
After-tax contribution = $35.45 ($45.45 * 0.78)
After-tax contribution margin ratio = $35.45/$87 * 100 = 41%
Fixed cost per year = $295,000
Corporate tax rate = 22%
Discount rate = 10%
Break-even point = Fixed cost/After-tax contribution
= $295,000/$35.45
= 8,322 units
= $724,014 ($87 * 8,322)
A progressive tax is a tax that:
A. Requires you to pay less money in taxes when you have more income.
B. Requires everyone to pay the same tax rate.
c. Only applies to people who make more than $150,000 per year.
D. Requires people who make more money to pay a larger percentage of their income in taxes.
Answer:
I’m pretty sure it’s B.
Explanation:
^ I said pretty sure
Golden Eagle Company prepares monthly financial statements for its bank. The November 30 adjusted trial balance includes the following account information:
November 30 December
Debit Credit Debit Credit
Supplies $1,550 $3,050
Prepaid Insurance 6,200 $4,650
Salaries Payable $10,100 $15,100
Deferred Revenue 2,100 $1.050
The following information is known for the month of December:
A. Purchases of supplies during December total $3,600.
B. Supplies on hand at the end of December equal $3,050.
C. No insurance payments are made in December.
D. Insurance cost is $1,550 per month.
E. November salaries payable of $10,100 were paid to employees in December. Additional salaries for December owed at the end of the year are $15,100.
F. On November 1, a tenant paid Golden Eagle $3,150 in advance rent for the period November through January, and Deferred Revenue was credited for the entire amount.
Required:
Show the adjusting entries that were made for supplies, prepaid insurance, salaries payable, and deferred revenue on December 31.
Answer:
December 31
Dr Supplies expense $2100
Cr Supplies $2100
December 31
Dr Insurance expense $1,550
Cr Prepaid insurance $1,550
December 31
Dr Salaries expense $15,100
Cr Salaries payable $15,100
December 31
Dr Deferred revenue $1,050
Cr Rent revenue $1,050
Explanation:
Preparation of the adjusting entries that were made for supplies, prepaid insurance, salaries payable, and deferred revenue on December 31.
December 31
Dr Supplies expense $2100
Cr Supplies $2100
( $1,550+3,600-$3,050= $2100)
( To record supplies expense)
December 31
Dr Insurance expense $1,550
Cr Prepaid insurance $1,550
( To record insurance expense)
December 31
Dr Salaries expense $15,100
Cr Salaries payable $15,100
( To record salaries expense)
December 31
Dr Deferred revenue $1,050
Cr Rent revenue $1,050
($3,150 x 1/3= $1,050)
( To record rent revenue)
Kailua and Company is a legal services firm. All sales of legal services are billed to the client (there are no cash sales). Kailua expects that, on average, 20% will be paid in the month of billing, 50% will be paid in the month following billing, and 25% will be paid in the second month following billing. For the next 5 months, the following sales billings are expected: May $84,000 June 100,800 July 77,000 August 86,100 September 88,000
Required:
Prepare a schedule showing the cash expected in payments on accounts receivable in August and in September. If an amount box does not require an entry, leave it blank or enter "0". Be sure to enter percentages as whole numbers.
Kailua and Company Schedule
August September
June:
$ × % $ $
July:
$ × %
$ × %
August:
$ × %
$ × %
September:
$ × %
Total cash receipts $ $
Answer:
Total cash receipts August $80,920
Total cash receipts August September $79,900
Explanation:
Preparation of the schedule showing the cash expected in payments on accounts receivable in August and in September
KAILUA AND COMPANY SCHEDULE
AUGUST SEPTEMBER
June $25,200 $0
($100800 × 25%)
July $38,500 $19,250
($77000 × 50%=$38,500)
($77000 × 25%=$19,250)
August $17,220 $43,050
($ 86,100× 20%=$17,220)
($ 86,100× 50%=$43,050)
September $0 $17,600
($88,000 × 20%=$17,600)
Total cash receipts $80,920 $79,900
($25,200+$38,500+$17,220=$80,920)
($19,250+$43,050+$17,600=$79,900)
Therefore the cash expected in payments on accounts receivable in August and in September are:
Total cash receipts August $80,920
Total cash receipts August September $79,900
Caldwell Corporation is considering an investment proposal that will require an initial outlay of $816,000 and would yield yearly cash inflows of $212,000 for nine years. The company uses a discount rate of 10%. What is the NPV of the investment?
Present value of an ordinary annuity of $1:
8%
9%
10%
1
0.926
0.917
0.909
2
1.783
1.759
1.736
3
2.577
2.531
2.487
4
3.312
3.24
3.17
5
3.993
3.89
3.791
6
4.623
4.486
4.355
7
5.206
5.033
4.868
8
5.747
5.535
5.335
9
6.247
5.995
5.759
A.
$251,667
B.
$371,000
C.
$408,000
D.
$404,908
Answer:
623
Explanation:
because I guessed and 816,000-212,000= 604,000
The unadjusted and adjusted trial balances for American Leaf Company on October 31, 2018, follow:
American Leaf Company
Trial Balances
October 31, 2018
Debit Balances (Unadjusted) Credit Balances (Unadjusted) Debit Balances (Adjusted) Credit Balances(Adjusted)
Cash $16.00 $16.00
Accounts receivable 38.00 44.00
Supplies 10.00 7.00
Prepaid Insurance 22.00 10.00
Land 27.00 27.00
Equipment 41.00 41.00
Accumulated Depreciation-Equipment $7.00 $12.00
Accounts Payable 27.00 27.00
Wages Payable 0.00 2.00
Common Stock 22.00 22.00
Retained Earnings 74.00 74.00
Dividends 10.00 10.00
Fees Earned 70.00 76.00
Wages Expense 23.00 25.00
Rent Expense 6.00 6.00
Insurance Expense 0.00 12.00
Utilities Expense 3.00 3.00 20
Depreciation Expense 0.00 5.00
Supplies Expense 0.00 3.00
Miscellaneous Expense 4.00 4.00
$200.00 $200.00 $191.00 $191.00
Journalize the five entries that adjusted the accounts at October 31, 2018.
Answer:
1. Dr Accounts Receivable $6
Cr Fees Earned $6
2. Dr Supplies Expense $3
Cr Supplies $3
3. Dr Insurance Expense $12
Cr Prepaid Insurance $12
4. Dr Depreciation Expense $5
Cr Accumulated Depreciation—Equipment $5
5. Dr Wages Expense $2
Cr Wages Payable $2
Explanation:
Preparation of the five journal entries that adjusted the accounts at October 31, 2018.
1. Dr Accounts Receivable $6
Cr Fees Earned $6
($44-$38)
(To Accrued fees earned)
2. Dr Supplies Expense $3
Cr Supplies $3
($10-$7)
(To record Supplies used)
3. Dr Insurance Expense $12
Cr Prepaid Insurance $12
($22-$10)
(To record Insurance expired)
4. Dr Depreciation Expense $5
Cr Accumulated Depreciation—Equipment $5
($12-$7)
(To record Equipment depreciation)
5. Dr Wages Expense $2
Cr Wages Payable $2
($2-$0)
(To record Accrued wages)
Pension funds pay lifetime annuities to recipients. If a firm will remain in business indefinitely, the pension obligation will resemble a perpetuity. Suppose, therefore, that you are managing a pension fund with obligations to make perpetual payments of $2 million per year to beneficiaries. The yield to maturity on all bonds is 16%. a. If the duration of 5-year maturity bonds with coupon rates of 12% (paid annually) is four years and the duration of 20-year maturity bonds with coupon rates of 6% (paid annually) is 11 years, how much of each of these coupon bonds (in market value) will you want to hold to both fully fund and immunize your obligation
Solution :
The PV "perpetual" obligation of the firm = [tex]$\frac{\$ 2 \text{ million}}{0.16}$[/tex]
= $ 12.5 million
Also based on duration of the perpetuity, duration of this obligation = [tex]$\frac{1.16}{0.16}$[/tex]
= 7.25 years
Let [tex]$w$[/tex] be the [tex]$\text{weight}$[/tex] on the [tex]$5$[/tex] year maturity bond, which has a duration of [tex]$4$[/tex]years. Then :
[tex]$w \times 4 +(1-w) \times 11 = 7.25$[/tex]
[tex]$w=0.5357$[/tex]
Therefore,
[tex]$0.5357 \times \$ 12.5 = \$ 6.7$[/tex] million in the [tex]$5$[/tex] year bond
[tex]$0.4643 \times \$12.5=\$5.8$[/tex] million in the [tex]$2$[/tex] year bond.
Therefore, the total invested amounts to $ [tex]$(6.7+5.8)$[/tex] million = [tex]$\$12.5$[/tex] million, which fully matches the funding needs.
What is the relationship between institutions, such as private property rights, and productive resources in terms of encouraging economic growth? Group of answer choices Private property rights mean that the government will produce no goods or services Private property rights allow resources to be used by those with the most political connections. Private property rights mean that everyone has the right to equal amounts of property. Private property rights encourage resources to be used in the most productive way.
Answer:
The relationship between institutions, such as private property rights, and productive resources in terms of encouraging economic growth is:
Private property rights encourage resources to be used in the most productive way.
Explanation:
Private property rights define the rights that individual persons have to possess, control, exclude others, derive income, or dispose of property. The main characteristics of private property rights are the rights of exclusivity, transferability, and enforceability. These rights are conferred and enforced by the law. They enable the property owner to exclude others from the costs and benefits that accrue to them from owning the property. They also enable the owner to be in a position to transfer the property from herself to others.
The following options it gives me are
There would be a shortage of 2,000 bags of popcorn and consumers would be happy with the quality
There would be a shortage of 2,000 bags and consumers would be unhappy with the quality
There would be a surplus of 2,000 bags and consumers would be happy with the quality
There would be a shortage of 2,000 bags and producers would be happy with the law
There would be a surplus of 2,000 bags and producers would be happy with the law
Answer:
There would be a surplus of 2,000 bags, and producers would be happy with the law.
Explanation:
Unlike a price floor that prevents the price of movie theater popcorn from falling below the equilibrium price level of $15, a price ceiling of $5 prevents the price of movie theater popcorn from rising above $20. When a price ceiling is set above the equilibrium price, the quantity supplied exceeds the quantity demanded by 2,000 packets of popcorn, and there will be a surplus supply.
Gelb Company currently manufactures 52,500 units per year of a key component for its manufacturing process. Variable costs are $4.05 per unit, fixed costs related to making this component are $65,000 per year, and allocated fixed costs are $75,500 per year. The allocated fixed costs are unavoidable whether the company makes or buys this component. The company is considering buying this component from a supplier for $3.50 per unit. Calculate the total incremental cost of making 52,500 units and buying 52,500 units. Should it continue to manufacture the component, or should it buy this component from the outside supplier
Answer:
Gelb Company should choose to Buy the Component since it is the cheaper option. This gives a cost advantage of $28,875.
Explanation:
For each Option, include costs which are unavoidable because those would change as a result of this decision, they are relevant costs items.
Total incremental cost : Making
Variable costs (52,500 x $4.05) $212,625
Fixed Costs (unavoidable) $75,500
Total $288,125
Total incremental cost : Buying
Purchase Price ( 52,500 x $3.50) $183,750
Fixed Costs (unavoidable) $75,500
Total $259,250
Conclusion :
Gelb Company should choose to Buy the Component since it is the cheaper option. This gives a cost advantage of $28,875 ($288,125 - $259,250).
Financial information is presented below: Operating expenses $ 45000 Sales returns and allowances 3000 Sales discounts 7000 Sales revenue 160000 Cost of goods sold 96000 Gross Profit would be $64000. $54000. $61000. $67000.
Explanation:
160,000−3,000−96,000=61000
expenses are not taken into account because their not required to find the gross profit.
Financial information is presented below: Operating expenses $ 45000 Sales returns and allowances 3000 Sales discounts 7000 Sales revenue 160000 Cost of goods sold 96000 Gross Profit would be "$64000". The correct option is A.
To calculate the Gross Profit, we use the formula:
Gross Profit = Sales Revenue - Cost of Goods Sold
Given the financial information,
Sales Revenue = $160,000
Cost of Goods Sold = $96,000
Gross Profit = $160,000 - $96,000
Gross Profit = $64,000
Therefore, the correct option is A that is $64,000.
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When a crisis interferes with normal operations, the establishment may need to _____.
hold a press conference
close temporarily or scale back operations
fire all the employees and start over
hire a public relations firm
Casey Nelson is a divisional manager for Pigeon Company. His annual pay raises are largely determined by his division’s return on investment (ROI), which has been above 20% each of the last three years. Casey is considering a capital budgeting project that would require a $3,500,000 investment in equipment with a useful life of five years and no salvage value. Pigeon Company’s discount rate is 16%. The project would provide net operating income each year for five years as follows: Sales $ 3,400,000 Variable expenses 1,600,000 Contribution margin 1,800,000 Fixed expenses: Advertising, salaries, and other fixed out-of-pocket costs $ 700,000 Depreciation 700,000 Total fixed expenses 1,400,000 Net operating income $ 400,000 Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using tables. Required: 1. What is the project’s net present value? 2. What is the project’s internal rate of return? 3. What is the project’s simple rate of return? 4-a. Would the company want Casey to pursue this investment opportunity? 4-b. Would Casey be inclined to pursue this investment opportunity?
Answer:
1. What is the project’s net present value?
NPV = $101,7232. What is the project’s internal rate of return?
IRR = 17.24%3. What is the project’s simple rate of return?
simple rate of return = 11.43%4-a. Would the company want Casey to pursue this investment opportunity?
Yes, since the NPV is positive4-b. Would Casey be inclined to pursue this investment opportunity?
No, since it will decrease the average ROIExplanation:
initial outlay = -$3,500,000
cash flow years 1-5 = $400,000 + $700,000 = $1,100,000
discount rate = 16%
using a financial calculator:
NPV = $101,723
IRR = 17.24%
simple rate of return = $400,000 / $3,500,000 = 11.43%
Mann Co. is preparing an Excel spreadsheet for its 5-year, 6%, $400,000 installment notes. The notes were issued on January 1 for $421,236. Installment payments are payable each December 31. A portion of the spreadsheet appears as follows: A B C D E 1 Effective rate: 0.06 2 Cash payments: 100,000 3 Term to maturity in years: 5 4 5 Period Cash Payment Interest Expense Change in Balance Outstanding Balance 6 0 7 1 8 2 What formula should Mann use in cell E8 to calculate the outstanding balance (book value) of the notes after the second interest
Answer:
The correct formula that Mann should use in cell E8 is =E7-D8.
Explanation:
Note: The data in this question are merged together. They are therefore sorted before answering the question. See the attached excel file for the complete question with the sorted data.
The explanation of the answer is now given as follows:
The correct formula that Mann should use in cell E8 is =E7-D8. If this formula is used, it will calculate the outstanding balance (book value) of the notes after the second interest for period 2.
Additional Note:
Although this is not part of the requirement of the question, but it is provided for you to assist your further in your learning.
Note: See the below the attached excel file for the full answer and calculations of all the cells required for the amortization schedule.
For example, using the correct formula =E7-D8 in cell E8 gives $267,301 (in red color).
At December 31, 2020, Carter Company had 450,000 shares of common stock issued and outstanding, 350,000 of which had been issued and outstanding throughout the year and 100,000 of which were issued on September 1, 2020. Net income for the year ended December 31, 2020, was $1,160,000. What should be Twin Rivers' 2020 earnings per common share, rounded to the nearest penny
Answer:
$3.03
Explanation:
Calculation to determine What should be Twin Rivers' 2020 earnings per common share,
Using this formula
Earnings per common share=
Net Income for 2020/Weighted Average Shares Outstanding
Let plug in the formula
Earnings per common share=$1,160,000/ [(350,000 x 8/12) + (450,000 × 4/12)]
Earnings per common share=$1,160,000/(233,333+150,000)
Earnings per common share=$1,160,000/383,333
Earnings per common share= $3.03
Therefore What should be Twin Rivers' 2020 earnings per common share is $3.03
Maui Resort Inc. determined that the balance in its deferred tax asset account on December 31, 2020, was $50,000. Management reviewed all available positive and negative evidence to estimate that 30% of the deferred tax asset was more likely than not to be realized. The valuation allowance for deferred tax assets has a December 31, 2020, unadjusted balance of $4,000 (credit). Record the entry to adjust the allowance on December 31, 2020.
Answer:
Maui Resort Inc.
Journal Entry:
December 31, 2020:
Debit Loss from Unrealizable DTA $31,000
Credit Allowance for Unrealizable DTA $31,000
To record the expected loss from unrealizable DTA and to increase the Allowance balance to $35,000.
Explanation:
a) Data and Calculations:
December 31, 2020 Deferred Tax Asset (DTA) = $50,000
Estimate of realizable DTA = 30% of $50,000 = $15,000
Allowance for unrealizable DTA for 2020 = 70% of $50,000 = $35,000
Loss from unrealizable DTA = $31,000 ($35,000 - $5,000)
b) We can liken the Allowance for Doubtful Accounts to the DTA Valuation Allowance, which is a contra-account to the Deferred Tax asset Account. In it, the amount of the deferred tax asset that has a more than 50% probability of being lost or unutilized in the future arising from non-availability of sufficient future taxable income is accounted for.
Farmer Brown grows Number 1 red corn and would like to hedge the value of the coming harvest. However, the futures contract is traded on the Number 2 yellow grade of corn. Suppose that yellow corn typically sells for 90% of the price of red corn. If he grows 180,000 bushels, and each futures contract calls for delivery of 5,000 bushels, how many contracts should Farmer Brown buy or sell to hedge his position
Answer:
40 contracts
Explanation:
Calculation to determine how many contracts should Farmer Brown buy or sell to hedge his position
First step is to calculate how much The farmer must sell forward
Farmer must sell forward=180,000∗(1/0.90)
Farmer must sell forward= 200,000bushels of yellow corn.
Now let calculate the requires selling
Requires selling=200,000/ 5,000 bushels
Requires selling =40 contracts.
Therefore how many contracts should Farmer Brown buy or sell to hedge his position is 40 contracts.
Masse Corporation uses part G18 in one of its products.
The company's Accounting Department reports the following costs of producing the 17,100 units of the part that are needed every year:
Per Unit
Direct materials $4.30
Direct labor 5.00
Variable overhead 8.00
Supervisor's salary 8.70
Depreciation of special equipment 9.30
Allocated general overhead 6.30
An outside supplier has offered to make the part and sell it to the company for $32.00 each.
If this offer is accepted, the supervisor's salary and all of the variable costs, including direct labor, can be avoided.
The special equipment used to make the part was purchased many years ago and has no salvage value or other use.
The allocated general overhead represents fixed costs of the entire company.
If the outside supplier's offer were accepted, only $23,100 of these allocated general overhead costs would be avoided.
In addition, the space used to produce part G18 could be used to make more of one of the company's other products, generating an additional segment margin of $33,000 per year for that product.
Required:
1. Calculate the effect on the company's total net operating income of buying part G18 from the supplier rather than continuing to make it inside the company.
2. Which alternative should the company choose?
Buy or Make
Answer:
Masse Corporation
1. The effect on the company's total net operating income of buying part G18 from the supplier rather than continuing to make it inside the company is an additional cost of $47,100.
2. Masse Corporation should continue to produce the part in-house. The "Make" alternative is better.
Explanation:
a) Data and Calculations:
Units of part G18 needed yearly = 17,100
Costs of production:
Direct materials $4.30
Direct labor 5.00
Variable overhead 8.00
Supervisor's salary 8.70
Total variable costs= $26 * 17,100 = $444,600
Avoidable general overhead cost = $23,100
Total avoidable costs = $467,100
Outside supplier's offered price for the part = $32 each
Total cost for the outside supply = $547,200 ($32 * 17,100)
Unavoidable fixed costs:
Depreciation of special equipment 9.30
Allocated general overhead 6.30 * 17,100 = $107,730
Unavoidable cost = $84,630 ($107,730 - $23,100)
b) The effect on the company's total net operating income of buying part G18 from the supplier rather than continuing to make it inside the company is an additional cost of $47,100 ($547,200 - $467,100 - $33,000).
Crypton Electronics has a capital structure consisting of percent common stock and percent debt. A debt issue of $ par value, percent bonds that mature in years and pay annual interest will sell for $. Common stock of the firm is currently selling for $ per share and the firm expects to pay a $ dividend next year. Dividends have grown at the rate of percent per year and are expected to continue to do so for the foreseeable future. What is Crypton's cost of capital where the firm's tax rate is percent?
Answer:
A. After-cost of debt 4.20%
B. Cost of common equity 12.15%
C. Cost of capital 7.02%
Explanation:.
A. Calculation to determine the After-cost of debt
After-cost of debt =RATE(15,5.8%*1000,-980,1000)*(1-30%)
After-cost of debt =4.20%
Therefore After-cost of debt is 4.20%
b) Calculation to determine cost of common equity
Cost of common equity=2.17/29.12+4.7%
Cost of common equity=12.15%
Therefore Cost of common equity is 12.15%
c) Calculation to determine cost of capital
Cost of capital=(4.20%*63%)+(12.15%*36%)
Cost of capital=7.02%
Therefore Cost of capital is 7.02%
The budget director for Kanosh Cleaning Services prepared the following list of expected selling and administrative expenses. All expenses requiring cash payments are paid for in the month incurred except salary expense and insurance. Salary is paid in the month following the month in which it is incurred. The insurance premium for six months is paid on October 1. October is the first month of operations; accordingly, there are no beginning account balances.
Required Complete the schedule of cash payments for S&A expenses by filling in the missing amounts.
Determine the amount of salaries payable the company will report on its pro forma balance sheet at the end of the fourth quarter.
Determine the amount of prepaid insurance the company will report on its pro forma balance sheet at the end of the fourth quarter.
October November December
Budgeted S&A Expenses
Equipment lease expense $7,500 $7,500 $7,500
Salary expense 8,200 8,700 9,000
Cleaning supplies 2,800 2,730 3,066
Insurance expense 1,200 1,200 1,200
Depreciation on computer 1,800 1,800 1,800
Rent 1,700 1,700 1,700
Miscellaneous expenses 700 700 700
Total operating expenses $23,900 $24,330 $24,966
Schedule of Cash Payments for S&A Expenses
Equipment lease expense
Prior month’s salary expense, 100%
Cleaning supplies
Insurance premium
Depreciation on computer
Rent
Miscellaneous expenses
Total disbursements for operating expenses $19,900 $20,830 $21,666
b. Salaries payable
c. Prepaid insurance
Answer:
Kanosh Cleaning Services
a. Schedule of Cash Payments for S&A Expenses
October November December
Equipment lease expense $7,500 $7,500 $7,500
Prior month’s salary expense, 100% 0 8,200 8,700
Cleaning supplies 2,800 2,730 3,066
Insurance premium 7,200 0 0
Depreciation on computer 0 0 0
Rent 1,700 1,700 1,700
Miscellaneous expenses 700 700 700
Total disbursements for operating expenses $19,900 $20,830 $21,666
b. Salaries payable = $9,000
c. Prepaid insurance = $3,600
Explanation:
a) Data and Calculations:
October November December
Budgeted S&A Expenses
Equipment lease expense $7,500 $7,500 $7,500
Salary expense 8,200 8,700 9,000
Cleaning supplies 2,800 2,730 3,066
Insurance expense 1,200 1,200 1,200
Depreciation on computer 1,800 1,800 1,800
Rent 1,700 1,700 1,700
Miscellaneous expenses 700 700 700
Total operating expenses $23,900 $24,330 $24,966
Schedule of Cash Payments for S&A Expenses
October November December
Equipment lease expense $7,500 $7,500 $7,500
Prior month’s salary expense, 100% 0 8,200 8,700
Cleaning supplies 2,800 2,730 3,066
Insurance premium 7,200 0 0
Depreciation on computer 0 0 0
Rent 1,700 1,700 1,700
Miscellaneous expenses 700 700 700
Total disbursements for operating expenses $19,900 $20,830 $21,666
b. Salaries payable = $9,000
c. Prepaid insurance = $3,600 ($7,200 - $3,600)
a. See the attached photo for the complete schedule of cash payments for S&A expenses.
Under the complete schedule of cash payments for S&A expenses in the attached photo, the following are determined as follows:
Insurance premium paid in October = Monthly insurance expense * 6 months = $1,200 * 6 months = $7,200
Depreciation on computer = This is zero for each of the month because depreciation is not a cash expense.
b. Salaries payable = Salary expense for December = $9,000
c. Prepaid insurance = 6 months insurance premium paid – (October insurance expense + November insurance expense + December insurance expense) = $7,200 – ($1,200 + $1,200 + $1,200) = $7,200 - $3,600 = $3,600
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IBM stock currently sells for 64 dollars per share. The implied volatility equals 40.0. The risk-free rate of interest is 5.5 percent continuously compounded. If you shorted an option on 100 shares of IBM stock with strike price 69 and maturity 9 months, how many shares of stock would you have to buy (sell) to create a delta-neutral hedge
Answer:
53.19
Explanation:
$64 per share
Implied volatility = 40.0
risk-free rate of interest = 5.5%
number of shares shorted ( N ) = 100
strike price = 69
with maturity = 9 months
Calculate number of shares of stocks you have to be buy(sell) to create a delta-neutral hedge
we will apply the Black Scholes Formula
= N [ (ln(64/69) + (5.5%+(40%)^2 / 2) * (9/12)) / (40%* √(9/12)) ]
= N [ (ln(64/69) + (0.055+(0.40)^2 / 2) * (9/12)) / (0.40* √(9/12)) ]
= N * 0.5319
Number of shares to create a delta neutral hedge = 100 * 0.5319 = 53.19
The number of shares of stock that the person would have to buy in order to be able to create a delta-neutral hedge will be 53.19.
The following can be depicted from the question:
Implied volatility = 40.0Risk-free rate of interest = 5.5%Strike price = 69Number of shares shorted = 100Therefore, the number of shares to create a delta-neutral hedge will be:
= N[(In64/69) + (5.5% + (40%)² / 2) × (9/12) / (40% × ✓0.75)]
= N[(In0.9275) + (0.055 + 0.40)² / 2) × 0.75 / (0.40 × ✓0.75)
= N × 0.5319
= 100 × 0.5319
= 53.19
Therefore, the number of shares of stock is 53.19.
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how can gdp per capita and poverty rates indicate standards of living in each system?
Answer:
both measures that can be used to measure standards of living because they are both measures of how much money people have.
Explanation:
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Why is it a good idea to turn off Wi-Fi while using a mobile banking app?
Answer:
The fact that Wi-Fi broadcasts data to anybody in range means that your information could be at risk.
Explanation: 1 That's especially risky if you use Wi-Fi for online banking. Avoiding Wi-Fi altogether is not realistic. It's probably not even practical to save banking sessions for when you're at home or on a wired connection.
During the month of March, Munster Company's employees earned wages of $64,000. Withholdings related to these wages were $4,896 for FICA, $7,500 for federal income tax, $3,100 for state income tax, and $400 for union dues. The company incurred no cost related to these earnings for federal unemployment tax but incurred $700 for state unemployment tax. Journalize payroll entries.
Answer:
A. Dr salaries and wages expense for 64,000
Cr to FICA taxes payable for 4,896
Cr Federal Income Tax Payable for 7,500
Cr State Income Tax Payable for 3,100
Cr Union Dues Payable for 400
Cr Salaries and Wages Payable for 48,104
B. Dr payroll tax expense for 5,596
Cr FICA tax payable for 4,896
Cr State Unemployment for 700
Explanation:
Preparation to Journalize the payroll entries
A. Dr salaries and wages expense for 64,000
Cr to FICA taxes payable for 4,896
Cr Federal Income Tax Payable for 7,500
Cr State Income Tax Payable for 3,100
Cr Union Dues Payable for 400
Cr Salaries and Wages Payable for 48,104
(64,000-4,896-7,500-3,100-400)
B. Dr payroll tax expense for 5,596
(4,896+700)
Cr FICA tax payable for 4,896
Cr State Unemployment for 700
Stellan Manufacturing is considering the following two investment proposals:
Proposal X
Proposal Y
Investment
$730,000
$504,000
Useful life
5 years
4 years
Estimated annual net cash inflows received at the end of each year
$156,000
$100,000
Residual value
$50,000
$0
Depreciation method
Straightminus
line
Straightminus
line
Annual discount rate
10%
9%
Compute the present value of the future cash inflows from Proposal Y.
Present value of an ordinary annuity of $1:
8%
9%
10%
1
0.926
0.917
0.909
2
1.783
1.759
1.736
3
2.577
2.531
2.487
4
3.312
3.240
3.170
5
3.993
3.809
3.791
6
4.623
4.486
4.355
A.
$252,000
B.
$292,320
C.
$268,884
D.
$324,000
Answer:When the federal government spends more money than it receives in taxes in a ... spending over time in nominal dollars is misleading because it does not take ... defense spending as a share of GDP has generally declined since the 1960s, ... Healthcare expenditures include both payments for senior citizens (Medicare), ...
Explanation: