Answer:
B) supply and demand.
Explanation:
By using the supply and demand concept, the company is able to determine the prices. Here the relationship is lies between the commodity quantity in which the producers sells at different prices and how much quantity is to be purchased by the consumers. It is an important model for determining the price. When the supply and the demand meet at a point it is known as the equilibrium point at this the quantity supplies is equivalent to the quantity demanded
hence, the option B is correct
From the following list of steps in the accounting cycle, identify what two steps are missing:
a. Transactions are analyzed and recorded in the journal. b. Transactions are posted to the ledger. c. An unadjusted trial balance is prepared. d. An optional end-of-period spreadsheet is prepared. e. Adjusting entries are journalized and posted to the ledger. f. An adjusted trial balance is prepared. g. Financial statements are prepared. h. A post-closing trial balance is prepared.
Answer:
d. Adjustment data are assembled and analyzed.
h. Closing entries are journalized and posted to the ledger.
Explanation:
The fourth step is missing which is to adjust the data. After the unadjusted trial balance is prepared, if the debit side and the credit side do not match, the data will need to be adjusted and that is what this step is for.
The penultimate step is also missing being the journalizing of the closing entries and posting them to the ledger. This is done to close out the accounts for the year and bring all accounts except permanent ones to zero.
Prepaid items on financial statements
Therapy Inc. experienced the following events in 2013, its first year of operation:
1. Performed counseling services for $18,000 cash.
2. On February 1, 2013, paid $12,000 cash to rent office space for the coming year.
3. Adjusted the accounts to reflect the amount of rent used during the year.
Required
Based on this information alone
a. Record the events under an accounting equation.
b. Prepare an income statement, balance sheet, and statement of cash flows for the 2013 accounting period.
c. Ignoring all other future events, what is the amount of rent expense that would be recognized in 2014?
Answer:
a. Record the events under an accounting equation (I divided the accounting equation in 2)
assets = liabilities + equity
cash prepaid rent
1) 18,000 0 0 18,000
2) -12,000 12,000
3) 0 -11,000 0 -11,000
revenue - expenses = net income cash flow type
1) 18,000 0 18,000 18,000 OA
2) 0 0 0 -12,000 OA
3) 0 11,000 -11,000 0 OA
b. Prepare an income statement, balance sheet, and statement of cash flows for the 2013 accounting period.
Therapy Inc.
Income Statement
For the year ended December 31, 2013
Service revenue $18,000
Rent expense ($11,000)
Net income $7,000
Therapy Inc.
Income Statement
For the year ended December 31, 2013
Assets:
Cash $6,000
Prepaid rent $1,000
Total assets $7,000
Liabilities $0
Equity
Retained earnings $7,000
Total liabilities and equity $7,000
Therapy Inc.
Cash Flow Statement
For the year ended December 31, 2013
Cash flows from operating activities
Net income $7,000
Adjustments to net income:
Increase in prepaid rent ($1,000)
Net cash flow from operating activities $6,000
Cash flows from investing activities: $0
Cash flows form financing activities: $0
Net increase in cash $6,000
Beginning cash balance $0
Ending cash balance $6,000
c. Ignoring all other future events, what is the amount of rent expense that would be recognized in 2014?
If they continue to rent the same office, the rent expense for 2014 should be $12,000 (assuming that rent didn't change)
The objectives of cybersecurity are to accomplish each of the following except:_______ a. Make data and documents available and accessible 24/7 while simultaneously restricting, access. b. Promote secure and legal sharing of information among authorized persons and partners. c. Ensure compliance with supply chain business partners. d. Detect, diagnose, and respond to incidents and attacks in real time.
Answer:
C
Explanation:
Cybersecurity is the protection of internet-connected systems such as hardware, software and data from cyber-threats. It is used to prevent unauthorized access to data.
What is the price of a perpetuity that has a coupon of $50 per year and a yield to maturity of 2.5%? If the yield to maturity doubles, what will happen to its price?
Answer:
1.
$2000
2.
If the yield to maturity doubles,the price of perpetuity would reduce by 100%
Explanation:
The price of the perpetuity is determined by dividing the coupon by the yield to maturity as shown below:
price=coupon/yield to maturity
coupon=$50
yield to maturity=2.5%
price=$50/2.5%
price=$2000
If the yield to maturity doubles, it becomes 5% and a new price is shown below:
price=$50/5%=$1000
Which amount best reflects operating income? Enter your answer in millions without commas or dollar signs.
Answer:
4673 million
Explanation:
The operating income is the income that is arrived after deducting all the operating expenses from the sales revenue before deducting the payment of interest and taxes. It is also called as Earning before interest and taxes (EBIT)
So based on the attached figure, as it can be seen that the operating income that should be recorded for 4673 millions i.e. equivalent to the Earning before interest and taxes
Determine whether each characteristic describes a general partnership (GP), limited liability company (LLC), both, or neither.A. Must pay a business (corporate) income tax.B. When the business cannot pay its debts, creditors can take the owners' personal assets. C. All owners can have management duties. D. The owners are often referred to as members. E. Ownership is split among two types of owners: general and limited partners. F. Owners have limited liability.
Answer and Explanation:
The categorization is shown below:
a. Neither should be selected as partnership and LLC are through entities and for the income tax is calculated on personal income tax
b. General partnership as it contains the unlimited liabilities
c. LLC as it contains the equal status in this type of business organization.
d,. LLC as it is standardized according to the organization articles
e. Neither should be selected as general and limited should be come under the limited partnership
f. LLC should be selected as in this, owners have the limited liability
Which of the following is an advantage of having a single set of accounting standards used worldwide?a. Reduced accounting costs for multinational corporationsb. Increased power of the FASBc. Reduced number of multinational corporations on the NYSEd. Increased diversity of accounting methods used by multinational corporations
Answer: Reduced accounting costs for multinational corporations.
Explanation:
An accounting standards are common standards, procedures and set of principles, that define financial accounting policies basis. Accounting standards also help in improving transparency of financial reporting.
An advantage of having a single set of accounting standards used worldwide is reduced accounting costs for multinational corporations.
Squirrel tree services reports the following amounts on december 31, 2021.Assets Liabilities and Stockholders’ EquityCash $9,500 Accounts payable $15,100Supplies 3,600 Salaries payable 5,300Prepaid insurance 5,300 Notes payable 38,000Building 90,000 Common stock 40,000 Retained earnings 10,000In addition, the company reported the following cash flows.Cash Inflows Cash OutflowsCustomers $96,000 Employee salaries $40,000Borrow from the bank (note) 38,000 Supplies 22,000Sale of investments 35,800 Dividends 15,500 Purchase building 98,000Required:
1. Prepare a balance sheet.
2. Prepare a statement of cash flows.
Answer and Explanation:
1. The preparation of the balance sheet is presented below:
Squirrel tree services
Balance sheet
For the year ended December, 31, 2021
Liabilities Amount Assets Amount
and stockholder equity
Liabilities
Account payable $15,100 Cash $9,500
Salaries payable $5,300 Supplies $3,600
Note payable $38,000 Prepaid insurance $5,300
Total liabilities $58,400 Building $90,000
Equity
Common stock $40,000
Retained earnings $10,000
Total equity $50,000
Total liabilities & equity $108,400 Total assets $108,400
2. The preparation of the cash flow statement is presented below:
Squirrel tree services
Cash flow statement
For the year ended December, 31, 2021
Particulars Amount ($) Amount ($)
Cash flow from operating activities-
Cash inflows customers 96,000
Cash outflows salaries (40,000)
Cash outflows supplies (22,000)
Net Cash flow from operating activities (A) 34,000
Cash flow from investing activities-
Sale of investments 35,800
Purchase of building (98,000)
Net Cash flow from investing activities (B) (62,200)
Cash flow from financing activities
Borrowed from bank 38,000
Dividends (15,500)
Net Cash flow from financing activities (C) 22,500
Net increase in cash (A+B+C) (5,700)
Add: Cash at beginning of year 15,200
Cash at end of year 9,500
BlueInk Corporation's accumulated depreciation increased by $14,000, while patents decreased by $3,875 between consecutive balance sheet dates.There were no purchases or sales of depreciable or intangible assets during the year. In addition,the income statement showed a loss on sale of land of $1,950. Accounts receivable increased $6,320, inventory decreased $3,125, prepaid expenses decreased $720, and account payable increased $2,760.Required:Reconcile a net income of $55,000 to net cash flow from operating activities.
Answer:
Net cash flow from operating activities $69,285
Explanation:
The computation of the net cash flow from operating activities is shown below:
Cash flow from operating activities
Net income $55,000
Adjustments made to reconcile
Add: Depreciation expense $14,000
Less: Increase in account receivable -$6,320
Add: Decrease in inventory $3,125
Add: Decrease in prepaid expense $720
Add: Increase in account payable $2,760
Net cash flow from operating activities $69,285
Which of the following is true about services?
A. The customer is the input.
B. The customer takes an active part in the service.
C. Compared to goods, capacity management of services is more difficult to manage.
D. Production and consumption of services occur simultaneously.
E. All of the above are true.
Answer:
The correct answer is the option E: All of the above are true.
Explanation:
To begin with, in the field of marketing the services are considered to be very different from the products in terms of characteristics because the first ones are always unique, intangible and heterogenous. Moreover, they cannot be stored and its production and consumption happens at the same time because when someone demands for a service then that particular job happens, therefore meaning that is being produced and consumed at the same moment. In addition to that, it is quite obvious that when the service is happen the costumer is taking active part in it due to the fact that the service is focus on him and that is why that the client is an input as well.
An individual who suffers from a self-reference criterion should learn to take into consideration the ________ before making an international marketing decision.a. total cost of goods soldb. home country valuesc. competitor stanced. culture of the other countrye. global resources
Answer: culture of the other country
Explanation:
Self reference criterion is simply influence of an individual's culture on his or her behavior in certain situations. Individuals try as much as possible to respond in a way associated with their culture when faced with certain situations.
An individual who suffers from a self-reference criterion should learn to take into consideration the culture of the other country before making an international marketing decision. This is necessary to Foster good working relationship.
Cynthia requested a two-week leave from her employer to go on a religious pilgrimage. The pilgrimage was not a requirement of her religion, but Cynthia felt it was a "calling from God." Will it violate Title VII if Cynthia's employer does not grant her the leave? Explain. Compare with a case in which the UPS Jehovah's Witness employee's supervisor denied his request for a schedule accommodation to allow him to attend the annual religious service, terminated the new employee a few days later, and placed him on a do- not-rehire list.
Answer:
For Cynthia
No, it is not a sincerely held belief and does not take place of religion
For the UPS Jehovah Witness employee
Yes, no reasonable good-faith accommodation was made.
Explanation:
Title VII is also called the Civil Rights Act of 1964. It outlaws any form of discrimination in the grounds or race, religion, color, sex, country of origin, and sexual orientations.
In this scenario Cynthia's pilgrimage was not a requirement of her religion, but Cynthia felt it was a "calling from God." So it does not violate Title VII because it is not a sincerely held belief and cannot be classified as religion.
However in the case of the Jehovah Witness employee he wanted to attend a annual religious service. His request was rejected and his employment terminated.
This is discrimination based on religion and is a violation of Title VII
Explain and comment on any factors related to organizational culture and innovation within Mattel’s setting that might have influenced the company to move in a more positive direction.
Answer: There were many shortcomings in the organizational culture of Mattel setting.
Explanation:
Mattle would have been influenced in a more positive direction, if the following factors were implemented in the relation.:
1. If the company had reviewed its goal, it could redefine its product.
2. The managers not allowed the design of new products that would be meeting the changing needs of the customers.
3. Mattle should have adopted an organizational structure that could be useful in production and could be helpful in changing the market demands.
If consumers start to believe they need a product, what is likely to happen?
A. The demand becomes less elastic.
В. The demand becomes more elastic.
C. The supply decreases.
D. The price decreases.
Answer:
i think its D, cause its what stores want. to make people want to have something so enable to get peoples attention they would make the product more pricy.'
Answer:
A. The demand becomes less elastic.
Explanation:
For ed2020, this is the correct answer.
As the manager of a Papa Sean's restaurant, you must deal with a variety of business transactions. Give an example of a transaction that has each of the following effects on the accounting equation:a. Increase one asset and decrease another asset. b. Decrease an asset and decrease equity. c. Decrease an asset and decrease a liability. d. Increase an asset and increase equity. e. Increase an asset and increase a liability.
Answer:
Papa Sean's Restaurant
Transactions that affect the Accounting Equation:
a. Increase one asset and decrease another asset.
Cash of $40,000 is received from customers on account.
b. Decrease an asset and decrease equity.
A wage expense of $56,000 is paid for the period
c. Decrease an asset and decrease a liability.
Suppliers are paid $67,000 on account.
d. Increase an asset and increase equity.
Customers are billed $90,000 for services rendered in the month.
e. Increase an asset and increase a liability.
The company purchases equipment worth $35,000 on account.
Explanation:
The accounting equation shows that for each financial transaction of a business affects at least two accounts and may involve the two sides of the accounting equation or affect two accounts on one side of the equation. This implies that the equation is always in balance. The accounting equation also explains the duality of business transactions.
What jobs would require a point count sample on soil particles?
Answer:
The soil particles sank in the water as it is heavier. It is different from the soil and sand as the lighter particles of the sand are suspended. Soil in the soil bottle looks grainy.
Explanation:
The soil in the soil bottle is just particles of soil whereas that in the soil and sand bottle is a mixture of the soil and sand. The particles at the bottom are the particles with the largest grain size and the heaviest among the soil and sand particles.
Explanation:
On January 2, 2015, Denny Corp. enters into a five-year capital lease for machinery with annual payments of $15,000. Complete the necessary journal entry by selecting the account names from the drop-down menus and entering the dollar amounts in the debit or credit columns.
Answer:
some information was missing, the present value of the equipment which is $65,000
the journal entries to record the lease agreement is:
January 2, 2015, five year lease for machinery
Dr Machinery 65,000
Cr Lease liability 65,000
then you must record the lease payment, since it is done immediately, there is no interest expense recorded:
January 2, 2015, first annual lease payment
Dr Lease liability 15,000
Cr Cash 15,000
Only the first lease payment will not include an interest expense since it was done the same day as the machinery was leased.
What is the importance of the Define Phase in terms of its placement in the DMAIC method? a) It provides the data collection prior to data analysis b) It clarifies the problem, the process and the customer of the process prior to data collection c) It provides monitoring of the solution in order to sustain the gains d) It takes the data and process analysis into account in order to develop solutions
Answer:
b) It clarifies the problem, the process and the customer of the process prior to data collection
Explanation:
DMAIC is the acronym representing the steps taken in the lean six sigma programme to increase efficiency.
The steps are define, measure, analyse, improve, and control.
Define is the first stage at which the need of the process client is determined. Process knowledge is obtained by interacting with the participants.
In this stage we ensure there is alignment between project focus and goals of organisational leadership.
When financial services companies undertake layoffs, the most valuable employees, whom the companies want to retain, often leave the company voluntarily for new jobs not long after the layoffs. ITEL Financial Services, however, has not lost any of its most valuable employees despite multiple layoffs in the past decade. ITELcredits its success in keeping valuable employees to its high tolerance for risk when employees make investment decisions.
Which of the following, if true, most strongly supports ITEL’s reasoning as to why the company retains its most valuable employees?
(A) People in the financial services industry are often motivated to change jobs by a significant salary increase.
(B) The way in which layoffs are handled can have a significant upward or downward impact on the morale and company loyalty of the employees who remain.
(C) Layoffs often occur during industry downturns, and it is generally much more difficult to find a new job when the industry is struggling.
(D) It is difficult to develop an objective method or definition for determining who should be considered a very valuable employee.
(E) A risk-intolerant environment impedes the entrepreneurial drive that financial services industry employees feel is a requirement to be successful
Answer:
(E) A risk-intolerant environment impedes the entrepreneurial drive that financial services industry employees feel is a requirement to be successful
Explanation:
Option E describes the justification of why ITEL most valuable employees have decided to remained to continue with a particular firm considering the situation of an economic downturn.
Thus, given that, the ITEL satisfies this justification or standards which implies maintaining a high tolerance for risks, hence the correct answer is option E, as it helps us to reinforce or bolster ITEL's understanding.
Therefore option E is the correct answer.
A report on the effectiveness of internal control over financial reporting as required by Section 404 of the Sarbanes-Oxley Act. Which option is correct:
1. An audit of historical financial statements
2. An attestation service other than an audit service
3. An assurance service that is not an attestation service
Answer:
2. An attestation service other than an audit service
Explanation:
When auditors are engaged to give an independent opinion that internal controls designed over financial reporting are working as or otherwise, the report of such engagement is known as an attestation service other than an audit service. In other words, a confirmation of the effectiveness of internal controls other than audit of financial statements
Of the four sources of cash listed below, which can be found in the balance sheet?a. funds provided by operations.b. funds provided by borrowing.c. funds provided by the sale of assets.d. funds provided by issuing common or preferred stock.e. all of the above.
Answer: b. funds provided by borrowing.
c. funds provided by the sale of assets.
d. funds provided by issuing common or preferred stock.
Explanation:
The financial statement consists of two main components which are the balance sheet and the income statement. The balance sheet simoly shows the financial standing of a firm.
Of the options, those that can found in the balance sheet are:
b. funds provided by borrowing.
c. funds provided by the sale of assets.
d. funds provided by issuing common or preferred stock.
When Coca Cola introduced Coke Zero,this was an example of a _____ strategy.
A) repositioning
B) product line extension
C) cannibalization
D) disintermediation
E) demarketing
Answer:
B) product line extension
Coke Zero is an example of Coca Cola expanding their line of products. They are adding in more options for consumers to buy.
Tried and True’s accountant suggests that monthly rent and hourly wage rate also be factored into the productivity calculations. Annandale pays the highest average wage at $10 an hour. Blacksburg pays $7.25 an hour, Charlottesville $8, and Danville $7.50. The cost to rent store space is $2800 a month in Annandale, $1200 a month in Blacksburg, $2000 a month in Charlottesville, and $800 a month in Danville.
a. Which store is most productive?
b. Tried and True is not sure it can keep all four stores open. Based on multifactor productivity, which store would you close? What other factors should be considered?
Answer:
a. Blacksburg
b. Blacksburg
Explanation:
a. Productivity is measured by how much output is derived per input.
= Output/Input
= Sales Volume/Labor Hours
Annandele = 40,000/250
= $160 per hour
Blacksburg = 12,000/60
= $200 per hour
Charlottesville = 60,000/500
= $120
Danville = 25,000/250
= $100
Blacksburg is most productive at $200 per labor hour.
b. Multifactor productivity would incorporate the other costs such as labor rate and rent.
= Sales volume / ( Rent + Labor cost)
Annandale = 4,0000/ (2,800 + 250 * 10)
= $7.5
Blacksburg = 12,000 / (1,200 + 60 * 7.25)
= $7
Charlottesville = 60,000/ ( 2,000 + 500 * 8)
= $10
Danville = 25,000 / ( 800 + 200 * 7.50)
= $10.86
Blacksberg is least productive using Multifactor so should be closed down.
Equity method journal entries (price greater than book value) An investor purchases a 25% interest in an investee company, and the investor concludes that it can exert significant influence over the investee. The book value of the investee’s Stockholders’ Equity on the acquisition date is $500,000, and the investor purchases its 25% interest for $145,000. The investor is willing to pay the purchase price because the investee owns an unrecorded (internally developed) patent that the investor estimates is worth $80,000. The patent has a remaining useful life of 10 years. Subsequent to the acquisition, the investee reports net income of $100,000, and pays a cash dividend to the investor of $20,000. At the end of the first year, the investor sells the Equity Investment for $180,000. Prepare all of the required journal entries to account for this Equity Investment during the year.
Answer:
See answer an explanation below.
Explanation:
The journal entries will look as follows:
General Journal
Description Debit ($) Credit ($)
Equity investment 145,000
Cash 145,000
(To record purchase of investment.)
Cash 25,000
Income from equity investment (w.1) 25,000
(To record equity income.)
Cash 20,000
Equity investment 20,000
(To record receipt of cash dividend.)
Income from equity investment 2,000
Equity investment (w.2) 2,000
(To record patent amortization expense.)
Cash 180,000
Gain on sale of equity invest. (w.4) 32,000
Equity investment (w.3) 148,000
(To record sale of investment.)
Workings
w.1: Income from equity investment = Investee's net income * Percentage of interest = $100,000 * 25% = $25,000
w.2: Equity investment = (Patent value / Remaining useful life) * Percentage of interest = ($80,000 / 10) * 25% = $8,000 * 25% = $2,000
w.3: Equity investment = $145,000 + $25,000 - $20,000 - $2,000 = $148,000
w.4: Gain on sale of equity investment = Sales proceed - w.3 = $180,000 - $148,000 = $32,000
Charles lackey operates a bakery in Idaho, Falls Because of its excellent product location, demand has increased by 35% in the last year. On far too many occasions, customers have not been able to purchase the bread of their choice. Because of the size of the store, no new ovens can be added. At a staff meeting, one employee suggested ways to load the ovens differently so that more loaves of bread can be backed at one time. this new process will require that the ovens be loaded by hand, requiring additional manpower. This is the only production change that will be made in order to meet the increased demand. The bakery currently makes 1,800 loaves per month. Employees are paid $8.00 per hour. In addition to the labor cost, Charles has a constant utility cost per month of $800 and a per loaf ingredient cost of $0.40.
1. Current multi-factor productivity for 640 work hours per month =_____.
2. After increasing the number of work hours to 864 per month, the multi-factor productivity =______.
3. The percentage increase in productivity =______.
Answer:
1) $0.27 per loaf of bread
2) $0.28 per loaf of bread
3) 3.7%
Explanation:
current production = 1,800 loaves per month
current labor expense = $8 per hour
constant utility cost = $800
ingredients per loaf = $0.40
multi-factor productivity = total output / (labor + materials + overhead)
current multi-factor productivity = 1,800 loaves / ($5,120 + $800 + $720) = $0.27 per loaf of bread
new output level = 1,800 x 1.35 = 2,430 loaves
new multi-factor productivity = 2,430 loaves / ($6,912 + $800 + $972) = $0.28 per loaf of bread
% increase = ($0.28 - $0.27) / $0.27 = 3.7%
Nabors Company reported the following current assets and liabilities for December 31 for two recent years: Dec. 31, Current Year Dec. 31, Previous Year Cash $650 $680 Temporary investments 1,500 1,550 Accounts receivable 700 770 Inventory 1,250 1,400 Accounts payable 2,375 2,000 a. Compute the quick ratio on December 31 of both years. If required, round your answers to one decimal place. Quick Ratio December 31, current year December 31, previous year b. Is the quick ratio improving or declining?
Match the following definitions to the appropriate term. Each term may be used only once or not at all. Definition (or partial definition) A. Used in preparing dividend payments and other communication with shareholdersB. A document that contains requirements such as fund. C. An unsecured bond, dependent upon the general credit of he issuer. D. Charged with maintaining detailed records of shareholders and handling purchases and sales of stock. E. A book that contains the record of shares issued in numerical sequence. 1. Capital stock 2. Debenture bond3. Paid-in Capital in excess of par4. Security bond 5. Sinking fund 6. Stock certificate book 7. Stock reconciliation file 8. Stock certificate holder 9. Stockholders ledger 10. Stock transfer agent 11. Treasury stock 12. Trust indenture
Answer:
Explanation:
Match the definitions to the appropriate term
TERMS:
1. CAPITAL STOCK 2. DEBENTURE BOND
3. PAID-IN CAPITAL IN EXCESS OF PAR 4. SECURITY BOND
5. SINKING FUND 6. STOCK CERTIFICATE BOOK
7. STOCK RECONCILIATION FILE 8. STOCK CERTIFICATE HOLDER
9. STOCKHOLDERS LEDGER 10. STOCK TRANSFER AGENT
11. TREASURY STOCK 12. TRUST INDENTURE
DEFINITIONS:
NOTE: Since the definitions given are 5 in number and each term may be used only once or not at all; only 5 of the terms will be used.
For statement (A), Term 9 matches
For statement (B), Term 12 matches
For statement (C), Term 2 matches
For statement (D), Term 10 matches
For statement (E), Term 6 matches
J. Brown provided services to a customer and immediately collected $1,900 cash. Show how to record the transaction to the T-accounts by completing the following sentence.
Service Revenue would be ____________ on the _______________ side of the T-account, and Cash would be ______________ on the _______________ side of the T-account.
Answer and Explanation:
Since in the question it is mentioned that the J.brown provides a service and on the instant it collected the cash for $1,900
So here the journal entry that would be
Cash Dr $1,900
To Service revenue $1,900
(Being cash collected is recorded)
The service revenue is shown in the on the right side of the T-account that should be credited and the cash to be shown on the left hand side of the T-account that should be debited as both the account is increasing.
Recent financial statements for Madison Company follow:Recent financial statements for Madison Company follow: Madison Company Balance Sheet June 30Assets Current assets: Cash $21,000 Accounts receivable, net 160,000 Merchandise inventory 300,000 Prepaid expenses 9,000 Total current assets 490,000 Plant and equipment, net 810,000 Total assets $1,300,000 Liabilities and Stockholders' EquityLiabilities: Current liabilities $200,000 Bonds payable, 10% 300,000 Total liabilities 500,000 Stockholders’ equity: Common stock, $5 par value $100,000 Retained earnings 700,000 Total stockholders’ equity 800,000 Total liabilities and stockholders' equity $1,300,000 Madison Company Income Statement For the Year Ended June 30Sales $2,100,000 Cost of goods sold 1,260,000 Gross margin 840,000 Selling and administrative expenses 660,000 Net operating income 180,000 Interest expense 30,000 Net income before taxes 150,000 Income taxes 45,000 Net income $105,000 ccount balances at the beginning of the company’s fiscal year were: accounts receivable, $140,000; and inventory, $260,000. All sales were on account.Required:Compute financial ratios as follows:1. Gross margin percentage. 2. Current ratio. (Round your answer to 2 decimal places.)3. Acid-test ratio.4. Average collection period. 5. Average sale period. 6. Debt-to-equity ratio. 7. Times interest earned.8. Book value per share.
Answer:
1. Gross margin percentage = 40%
2. Current ratio. (Round your answer to 2 decimal places.) = 2.45
3. Acid-test ratio = 0.95
4. Average collection period = 26 days
5. Average sale period = 81 days
6. Debt-to-equity ratio = 0.63
7. Times interest earned = 6 times
8. Book value per share = $40 per share
Explanation:
1. Gross margin percentage.
This can be calculated using the following formula:
Gross margin percentage = (Gross margin / Sales) * 100 .......... (1)
Where;
Sales = $2,100,000
Gross margin = $840,000
We substitute the values into equation (1) and have:
Gross margin percentage = ($840,000 / $2,100,000) * 100 = 0.40 * 100 = 40%
2. Current ratio. (Round your answer to 2 decimal places.)
This can be calculated using the following formula:
Current ratio = Total current assets / Current liabilities ............ (2)
Where;
Total current assets = $490,000
Current liabilities = $200,000
We substitute the values into equation (2) and have:
Current ratio = $490,000 / $200,000 = 2.45
3. Acid-test ratio.
This can be calculated using the following formula:
Acid-test ratio = (Total current assets – Closing Merchandise Inventory) / Current liabilities ........ (3)
Where;
Total current assets = $490,000
Closing Merchandise Inventory = $300,000
Current liabilities = $200,000
We substitute the values into equation (3) and have:
Acid-test ratio = ($490,000 - $300,000) / $200,000 = $190,000 / $200,000 = 0.95
4. Average collection period.
This can be calculated using the following formula:
Average collection period = (Average accounts receivable / Sales) * 365 days …….. (4)
Where;
Average accounts receivable = (Beginning account receivable + Ending account receivable) / 2 = ($140,000 + $160,000) / 2 = $300,000 / 2 = $150,000
Sales = $2,100,000
We substitute the values into equation (4) and have:
Average collection period = ($150,000 / $2,100,000) * 365 = 26 days approximately.
5. Average sale period.
This can be calculated using the following formula:
Average sale period = 365 days / Inventory turnover ……………………….. (5)
Where;
Inventory turnover = Cost of goods sold / Average inventory = Cost of goods sold / [(Opening inventory + Closing inventory) / 2] = 1,260,000 / [($260,000 + $300,000) / 2] = 1,260,000 / [$560,000 / 2] = 1,260,000 / $280,000 = 4.50
We substitute the values into equation (5) and have:
Average sale period = 365 days / 4.50 = 81 days
6. Debt-to-equity ratio.
This can be calculated using the following formula:
Debt-to-equity ratio = Total liabilities / Total stockholders’ equity ……………………. (6)
Where;
Total liabilities = $500,000
Total stockholders’ equity = $800,000
We substitute the values into equation (6) and have:
Debt-to-equity ratio = $500,000 / $800,000 = 0.63
7. Times interest earned.
This can be calculated using the following formula:
Times interest earned = Income before interest and tax / Interest expense ……………….. (7)
Where;
Income before interest and tax = Net operating income = $180,000
Interest expense = $30,000
We substitute the values into equation (7) and have:
Times interest earned = $180,000 / $30,000 = 6 times
8. Book value per share.
This can be calculated using the following formula:
Book value per share = Total stockholders’ equity / Number of shares outstanding ……….. (8)
Where;
Total stockholders’ equity = $800,000
Number of shares outstanding = $100,000 / $5 = 20,000 shares
We substitute the values into equation (8) and have:
Book value per share = $800,000 / 20,000 = $40 per share
What is not a potential risk of purchasing a used car?
O used cars can require repairs sooner
O warranties can be very limited
O used cars can have lower initial cost
unexpected issues may arise
Answer:
used cars can have lower initial cost
Explanation:
Remember, the term risk often refers to an unpleasant or unwelcome event such as a loss arising from a particular action.
Hence, since we are looking for what is not a loss (potential risk) of purchasing a used car, the best option that matches this is that used cars have a lower initial cost which ofcourse can be seen as an advantage.
The fact that "used cars can have lower initial cost" is not a potential risk.
Potential risk in this context refers to various risk or issues that the used car can develop in the course of active use of the purchased car.
Usually, cars which are bought fairly requires more repair and maintenance than newly bought carsUsed cares are very susceptible to break-down at any point in time.Some others potential risk to this context includes:
They are less reliable because its good moment have been used by previous user.Ignorance of how the car have been managed in past may prove costly ir the routine is not adhered to.A used car usually have a shorter or no warranty.In conclusion, as this context i concern, the car having a lower initial cost is not a potential risk because the value ofa used car is expected to drop.
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