Answer:
Tristar Production Company
a. September 1, Debit Land $156,000
Debit Building $84,000
Credit Cash $240,000
To record the purchase of land, which had a fair value of $169,000 and building, which had a fair value of $91,000.
b. September 1, Debit Equipment $54,000
Credit Notes Payable $54,000
To record the purchase of equipment with a note.
Assume that 9% is a reasonable interest rate.
c. September 15, Debit Truck $3,900
Credit Donation $3,900
To record the receipt of a truck through donation.
d. September 18, Debit Attorney Fee $4,500
Credit Cash $4,500
To record the payment of legal fees for organizing the corporation.
e. October 10, Debit Maintenance Equipment $30,200
Credit Cash $30,200
To record the purchase of equipment for $29,000 and $1,200 in freight.
f. December 2, Debit Office equipment $6,900
Credit Common stock $6,900
To record the purchase of office equipment with 200 shares of no-par common stock in exchange for the equipment.
g. December 10, Debit Land $34,000
Credit Cash $4,500
Credit 11% Notes Payable $29,500
To record the purchase of land for cash and notes payable.
Explanation:
a) Data and Calculations:
a. September 1, Land $156,000 Building $84,000 Cash $240,000
land had a fair value of $169,000 and the building had a fair value of $91,000.
b. September 1, Equipment $54,000 Notes Payable $54,000
Assume that 9% is a reasonable interest rate.
c. September 15, Truck $3,900 Donation $3,900
d. September 18, Attorney Fee $4,500 Cash $4,500
for organizing the corporation.
e. October 10, Maintenance Equipment $30,200 Cash $30,200
$29,000 and $1,200 in freight charges also were paid.
f. December 2, Office equipment $6,900 Common stock $6,900
200 shares of no-par common stock in exchange for the equipment.
g. December 10, Land $34,000 Cash $4,500 11% Note Payable $29,500
Identify the statement below that is true regarding the Allowance for Doubtful Accounts account. Multiple Choice The account has a normal credit balance and is reported on the balance sheet. The account has a normal debit balance and is reported on the balance sheet. The account has a normal credit balance and is reported on the income statement. The account has a normal debit balance and is reported on the income statement.
Answer: The account has a normal credit balance and is reported on the balance sheet.
Explanation:
The allowance for doubtful accounts refers to the amount of account receivable that the company believes will not be paid by the customers. It is referred to as the bad debt reserve as well.
The allowance for doubtful accounts reduces the accounts receivable. It also has a normal credit balance and is reported on the balance sheet.
Bond valuation [LO14-2] Your investment department has researched possible investments in corporate debt securities. Among the available investments are the following $100 million bond issues, each dated January 1, 2021. Prices were determined by underwriters at different times during the last few weeks. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1)
Company Bond Price Stated Rate
1. BB Corp. $ 107 million 15 %
2. DD Corp. $ 100 million 14 %
3. GG Corp. $ 93 million 13 %
Each of the bond issues matures on December 31, 2040, and pays interest semiannually on June 30 and December 31. For bonds of similar risk and maturity, the market yield at January 1, 2021, is 14%.
Required: Other things being equal, which of the bond issues offers the most attractive investment opportunity if it can be purchased at the prices stated?
Answer:
Bond Valuation
Other things being equal, the bond issue that offers the most attractive investment opportunity if it can be purchased at the prices stated is:
= BB Corp. bonds.
Explanation:
a) Data and Calculations:
Maturity period = 20 years
Issue date = January 1, 2021
Maturity date = December 31, 2040
Company Bond Price Stated Rate Annual Interest FV
1. BB Corp. $ 107 million 15 % $15 million $3,518,371,301.23
2. DD Corp. $ 100 million 14 % $14 million 2,827,106,832.58
3. GG Corp. $ 93 million 13 % $13 million 2,260,756,079.53
From an online financial calculator, the future values of the bonds are:
N (# of periods) 20
I/Y (Interest per year) 15
PV (Present Value) 107000000
PMT (Periodic Payment) 15000000
Results
FV = $3,518,371,301.23
Sum of all periodic payments $300,000,000.00
Total Interest $3,111,371,301.2
N (# of periods) 20
I/Y (Interest per year) 14
PV (Present Value) 100000000
PMT (Periodic Payment) 14000000
Results
FV = $2,827,106,832.58
Sum of all periodic payments $280,000,000.00
Total Interest $2,447,106,832.58
N (# of periods) 20
I/Y (Interest per year) 13
PV (Present Value) 93000000
PMT (Periodic Payment) 13000000
Results
FV = $2,260,756,079.53
Sum of all periodic payments $260,000,000.00
Total Interest $1,907,756,079.53
For many years, college costs (including tuition, fees, and room and board) increases have been higher than the inflation rate, averaging 5% to 8% per year. According to the College Board's Trends in College Pricing, the average total costs at present in dollars is $19,500 for students attending in-state four-year public colleges and universities and $41,000 for students at four-year private colleges and universities. Assume an additional $5,000 per year for textbooks, supplies, transportation, and other expenses.
Using a 7% per year inflation rate, how much can a sophomore high-school student expect to spend on in-state tuition, fees, and room and board for the freshman year (3 years from now) at a four-year public university?
A sophomore high-school student is expected to spend $ for the freshman year.
Answer: $23,888
Explanation:
The cost today for a freshman at a public university is $19,500.
Inflation is at 7% a year and the period is 3 years from now. It is best to use a future value formula:
= Fees * ( 1 + rate) ^ number of years
= 19,500 * ( 1 + 7%)³
= 19,500 * 1.225043
= $23,888
Assume Digby Corp. is downsizing the size of their workforce by 10% (to the nearest person) next year from various strategic initiatives. Digby is planning to conduct exit interviews to learn more about how they can improve in processes and increase productivity. The exit interviews are estimated to cost $100 per employee in additional to normal separation costs of $5000. How much will the company pay in separation costs if these exit interviews are implemented next year? Select : 1
Answer:
$318,240
Explanation:
Calculation to determine How much will the company pay in separation costs if these exit interviews are implemented next year
First step is to calculate the Seperation cost per employee
Seperation cost per employee=$5,000+$100
Seperation cost per employee=$5,100
Now let calculate How much will the company pay in separation costs
Total cost =(624*10%)*$5,100
Total cost =62.4*$5,100
Total cost =$318,240
Note that the Total Employee of 624 was given in Complement
Therefore The amount that the company will pay in separation costs if these exit interviews are implemented next year is $318,240
Roberto has received various gifts over the years and has decided to dispose of the following assets he received as gifts:
What is the recognized gain or loss from the following transactions, assuming that no gift tax was paid when the gifts were made.
If an answer is zero, select "neither a gain nor a loss" and enter "0" as the amount.
a. In 1981, he received land worth $32,000. The donor's adjusted basis was $35,000. Roberto sells the land for $95,000 in 2018.
(neither a gain or a loss/ a gain/ a loss) of $__________ is recognized.
b. In 1986, he received stock in Gold Company. The donor's adjusted basis was $19,000. The fair market value on the date of the gift was $34,000. Roberto sells the stock for $40,000 in 2018.
(neither a gain or a loss/ a gain/ a loss) of $__________ is recognized.
c. In 1992, he received land worth $15,000. The donor's adjusted basis was $20,000. Roberto sells the land for $9,000 in 2018.
(neither a gain or a loss/ a gain/ a loss) of $__________ is recognized.
d. In 2013, he received stock worth $30,000. The donor's adjusted basis was $42,000. Roberto sells the stock for $38,000 in 2018.
(neither a gain or a loss/ a gain/ a loss) of $__________ is recognized.
Answer: See explanation
Explanation:
a. The recognized gain or loss from the transaction will be:
= Amount realized - Adjusted basis
= $95000 - $35000
= $60000
Gain of $60000 will be recognized
b. The recognized gain or loss from the transaction will be:
= Amount realized - Adjusted basis
= $40000 - $19000
= $21000
Gain of $21000 is recognized
c. The recognized gain or loss from the transaction will be:
= Amount realized - Adjusted basis
= $9000 - $15000
= -$6000
Loss of $6000 is recognized
d. In this case, no gain or loss will be recognized.
Missouri River Supply Co. sells canoes, kayaks, whitewater rafts, and other boating supplies. During the taking of its physical inventory on December 31, 20Y2, Missouri River Supply incorrectly counted its inventory as $233,400 instead of the correct amount of $238,600. Enter all amounts as positive numbers. a. State the effect of the error on the December 31, 20Y2, balance sheet of Missouri River Supply. Balance Sheet Items Understated/Overstated Amount Merchandise Inventory $fill in the blank 2 Current Assets fill in the blank 4 Total Assets fill in the blank 6 Owner's Equity fill in the blank 8 b. State the effect of the error on the income statement of Missouri River Supply for the year ended December 31, 20Y2. Income Statement Items Overstated/Understated Amount Cost of Merchandise Sold $fill in the blank 10 Gross Profit fill in the blank 12 Net Income fill in the blank 14 c. If uncorrected, what would be the effect of the error on the 20Y3 income statement
Answer:
A. Balance Sheet
Merchandise Inventory $5,200 Understated
Current Asset $5,200 Understated
Total Assets $5,200 Understated
Owner's equity $5,200 Understated
B. Income Statement
Cost of merchandise sold $5,200 Overstated
Gross profit $5,200 Understated
Net income $5,200 Understated
C. Income Statement
Cost of merchandise sold $5,200 Understated
Gross profit $5,200 Overstated
Net income $5,200 Overstated
Explanation:
A. Calculation to State the effect of the error on the December 31, 20Y2, balance sheet of Missouri River Supply
BALANCE SHEET
Merchandise Inventory $5,200 Understated
Current Asset $5,200 Understated
Total Assets $5,200 Understated
Owner's equity $5,200 Understated
($238,600-$233,400)
B. Calculation to State the effect of the error on the income statement of Missouri River Supply for the year ended December 31, 20Y2.
INCOME STATEMENT
Cost of merchandise sold $5,200 Overstated
Gross profit $5,200 Understated
Net income $5,200 Understated
($238,600-$233,400)
C. Calculation to determine what would be the effect of the error on the 20Y3 income statement If uncorrected
INCOME STATEMENT
Cost of merchandise sold $5,200 Understated
Gross profit $5,200 Overstated
Net income $5,200 Overstated
($238,600-$233,400)
Gaetana is the new marketing director for a local theater. One of her major responsibilities is to monitor and manage aspects of the theater's immediate environment. Discuss, in detail, (1) what and (2) how will Gaetana monitor and manage the four factors in her environment?
Answer:
Market
Explanation:
She is a marketing director she directs markets
A company's Cash account shows an ending balance of $4,600. Reconciling items included a bookkeeper error of $105 (a $525 check recorded as $630), two outstanding checks totaling $830, a service charge of $20, a deposit in transit of $260, and interest revenue of $33. What is the adjusted book balance
Answer:
$5,275
Explanation:
Bank Reconciliation Statement
Balance as per Cash Book $4,600
Add check error $105
Add unpresented checks $830
Less Lodgments not yet credited ($260)
Balance as per Bank Statement $5,275
therefore,
The adjusted Cash book balance is $5,275
Twix Dots Skor
Net income $4,200 $106,000 $76,800
Depreciation expense 31,600 8,400 25,600
Accounts receivable increase (decrease) 42,200 21,000 (4,200 )
Inventory increase (decrease) (21,200 ) (10,600 ) 10,600
Accounts payable increase (decrease) 25,400 (23,400 ) 14,800
Accrued liabilities increase (decrease) (46,600 ) 12,800 (8,400 )
Required:
For each separate company, compute cash flows from operations using the indirect method. (Amounts to be deducted should be indicated by a minus sign.)
Answer:
Twix, Dots, and Skor
Twix Dots Skor
Net income $4,200 $106,000 $76,800
Depreciation expense 31,600 8,400 25,600
Accounts receivable increase (decrease) 42,200 21,000 (4,200 )
Inventory increase (decrease) (21,200 ) (10,600 ) 10,600
Accounts payable increase (decrease) 25,400 (23,400 ) 14,800
Accrued liabilities increase (decrease) (46,600 ) 12,800 (8,400 )
Cash flows from operations ($6,400) $93,400 $102,400
Explanation:
a) Data and Calculations:
Twix Dots Skor
Net income $4,200 $106,000 $76,800
Depreciation expense 31,600 8,400 25,600
Accounts receivable increase (decrease) 42,200 21,000 (4,200 )
Inventory increase (decrease) (21,200 ) (10,600 ) 10,600
Accounts payable increase (decrease) 25,400 (23,400 ) 14,800
Accrued liabilities increase (decrease) (46,600 ) 12,800 (8,400 )
b) Depreciation is added back to the net income. Increases in current assets are cash outflows, reducing cash flows, while decreases are cash inflows, increasing cash flows. On the other hand, increases in current liabilities are cash inflows, increasing cash flows, while decreases are cash outflows, reducing cash flows.
James is the new manager of operations at Springfield Motors. To his dismay, he finds the employees coming in late to work, taking long breaks, and behaving unprofessionally at their workstations. James decides to promote desirable work practices. He plans to introduce incentives for meeting the required targets but, at the same time, to withhold those incentives when employees are late, take long breaks, or behave unprofessionally. Identify the contingencies that James is planning to implement.
Answer: b. Positive reinforcement and punishment
Explanation:
Positive reinforcement is a way of encouraging certain behavior by adding something pleasant when the subject does something that it desirable or a stimulus. James giving the employees some incentives (something pleasant) when they meet required targets (something desirable) is therefore positive reinforcement.
Punishment on the other hand, refers to taking away something pleasant in response to the subject doing something that isn't very desirable. In this scenario, James would take away the incentives (pleasant) in response to the employees behaving unprofessionally (isn't very desirable).
Amari has two jobs, one for the winter and one for the summer. In the winter, he works as a lift attendant at a ski resort where he earns $18 per hour. During the summer, he drives a tour bus around the ski resort, earning $13 per hour.
Refer to Scenario 18-3. If Amari takes more hours of leisure in the winter than in the summer, we can assume that his labor supply curve for the range of earnings in this example:
a. is vertical.
b. has a backward-bending portion.
c. is horizontal
d. is upward sloping.
Answer: b. has a backward-bending portion.
Explanation:
A backward-bending supply curve shows what happens when people substitute higher wages for more leisure time like Amari is doing in this scenario.
At a higher wage, people will be able to work for shorter hours as such a job will still give them the same amount of money as working longer in lower paying jobs.
After they get a certain level of payment from the higher paying job, they will then substitute the remaining hours for leisure. This creates a backward-bending curve because labor hours are reducing past a certain level of wages.
The ABC Company has recognized the following demand for the next four quarters:
Quarter Demand
1 3000 units
2 4000 units
3 4500 units
4 3500 units
ABC has traditionally used the hiring and firing of workers to accommodate the changes in demand for their products but is considering maintaining a stable workforce and subcontracting production when demand exceeds the capability of the workforce. They currently have 30 workers, each capable of producing 100 units per quarter. It costs them $3000 to hire a worker and $5000 to fire a worker.
If they subcontract the work, it will cost them $30 per unit above their normal production cost. Given this information, should they continue their current practice or move to subcontracting the production over what their current workforce can produce?
Answer: Subcontracting production
Explanation:
It is cheaper for ABC Company to subcontract the jobs than to hire and fire workers as needed. Even though the cost is similar when it comes to hiring permanent workers and training them vs subcontracting them, when the company needs to produce less goods, the cost of firing the permanent employees is simply too much.
For instance, 1,000 units out of the 4,000 units in the second quarter cannot be covered by the 30 workers they have. They will need to hire 10 additional workers and training them would cost $30,000. That is the same cost they would incur if they subcontracted (30 * 1,000 units = $30,000).
What happens in quarter 4 however, when they have to let go of 10 employees because production dropped by 1,000 units? They will have to pay $50,000. If they were subcontracting, they would not have to pay a dime. It is therefore better to subcontract.
A project has a discount rate of 14 percent, an initial cost of $99,200, an inflow of $56,400 in year 1 and an inflow of $75,900 in year 2. Your boss requires that every project return a minimum of $1.10 for every $1 invested. Based on this information, what is your recommendation on this project?
Answer:
I would recommend the project because the return is greater than 10%
Explanation:
We are to determine the internal rate of return of the project
rate of return the boss requires = (1.1 /1) - 1 = 10%
Internal rate of return is the discount rate that equates the after-tax cash flows from an investment to the amount invested
IRR can be calculated with a financial calculator
Cash flow in year 0 = -99200
cash flow in year 1 and 2 = 75900
IRR = 33.7%
The following are some of the components included in the master budget of a merchandising company. List the items of the master budget in order of preparation. a. Budgeted balance sheet b. Sales budget c. Capital expenditures budget d. Budgeted income statement e. Cash budget f. Inventory, purchases, and cost of goods sold budget g. Selling and administrative expense budget
Answer:
Items of the master budget in order of preparation:
b. Sales budget
f. Inventory, purchases, and cost of goods sold budget
g. Selling and administrative expense budget
c. Capital expenditures budget
e. Cash budget
d. Budgeted income statement
a. Budgeted balance sheet
Explanation:
In a master budget, the first is the sales budget. It forms the nucleus for the preparation of other budgets. The sales targets determine the production requirements. From the production, inventory, or purchase budgets, other budgets will be formed sequentially. All are directed at meeting the needs of customers as captured in the sales budget. Lastly, the financial statements budgets are prepared, which include the income statement and the balance sheet.
Bond X is a premium bond making semiannual payments. The bond has a coupon rate of 9.7 percent, a YTM of 7.7 percent, and has 14 years to maturity. Bond Y is a discount bond making semiannual payments. This bond has a coupon rate of 7.7 percent, a YTM of 9.7 percent, and also has 14 years to maturity. Assume the interest rates remain unchanged and both bonds have a par value of $1,000.
1. What are the prices of these bonds today? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)
2. What do you expect the prices of these bonds to be in one year? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)
3. What do you expect the prices of these bonds to be in three years? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)
4. What do you expect the prices of these bonds to be in eight years? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)
5. What do you expect the prices of these bonds to be in 12 years? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)
Answer:
I used an Excel spreadsheet and the IRR function:
1. $1,169.55
2. $1,162.47
3. $1,146.61
4. $1,094.67
5. $1,036.43
An entrepreneur is thinking of starting a firm. The firm will pay Tk. 320,000 in wages/salary, Tk. 150,000 on raw materials, Tk. 100,000 for rent per month. If the entrepreneur worked as a manager for somebody else, he would earn Tk. 50,000 per month. The firm’s total revenue per month is Tk. 600,000.
It is a statement that describes the desired long-term results of your company's efforts. *
The answer is your mission statement
A mission statement states each goal the company has with their organization and what they wanna do
BugLess Inc, a calendar year, accrual basis corporation, provides pest extermination services to its customers. In October 2020, BugLess contracted with Mr. Cass to provide monthly service calls for 24 months. Each service call costs $60, and Mr. Cass prepaid $1,440 when he signed the contract. BugLess made three service calls to Mr. Cass' home in 2017. As a result of the contract, BugLess should report: Group of answer choices $1,440 taxable income in 2020. $180 taxable income in 2020, and $1,260 taxable income in 2021. $180 taxable income in 2020, $720 taxable income in 2021, and $540 taxable income in 2022. None of the above
Answer:
$180 taxable income in 2020, and $1,260 taxable income in 2021.
Explanation:
Calculation to determine what BugLess should report As a result of the contract
Calculation for the TAXABLE INCOME IN 2020
Using this formula
2020 Taxable income=Service call costs*Numbers of service calls
Let plug in the formula
2020 Taxable income=$60*3
2020 Taxable income=$180
Calculation for the TAXABLE INCOME IN 2021
Using this formula
2021 Taxable income=Prepaid Amount-(Service call costs*Numbers of service calls)
Let plug in the formula
2021 Taxable income=$1,440-($60*3)
2021 Taxable income=$1,440-$180
2021 Taxable income=$1,260
Therefore As a result of the contract, BugLess should report:$180 taxable income in 2020, and $1,260 taxable income in 2021.
At the beginning of the current period, Sheridan Company had balances in Accounts Receivable of $203,500 and in Allowance for Doubtful Accounts of $8,620 (credit). During the period, it had net credit sales of $739,000 and collections of $813,450. It wrote off as uncollectible accounts receivable of $7,198. However, a $2,978 account previously written off as uncollectible was recovered before the end of the current period. Uncollectible accounts are estimated to total $26,810 at the end of the period. (Omit cost of goods sold entries.)
Required:
a. Prepare the entries to record sales and collections during the
b. Prepare the entry to record the write-off Of accounts the period.
c. Prepare the entries to record the recovery of the uncollectible account during the period.
d. Prepare the entry to record bad debt expense for the period.
Answer:
Sheridan Company
a. Debit Accounts receivable $739,000
Credit Sales revenue $739,000
To record sales of goods on account.
Debit Cash $813,450
Credit Accounts receivable $813,450
To record collections from customers.
b. Debit Allowance for Uncollectible Accounts $7,198
Credit Accounts receivable $7,198
To record the write-off of accounts for the period.
c. Debit Accounts receivable $2,978
Credit Allowance for Uncollectible Accounts $2,978
To record the recovery of the uncollectible account.
d. Debit Bad Debts Expense $22,410
Credit Allowance for Uncollectible Accounts $22,410
To record bad debt expense for the period.
Explanation:
a) Data and Analysis:
a. Accounts receivable $739,000 Sales revenue $739,000
b. Cash $813,450 Accounts receivable $813,450
c. Allowance for Uncollectible Accounts $7,198 Accounts receivable $7,198
d. Accounts receivable $2,978 Allowance for Uncollectible Accounts $2,978
e. Bad Debts Expense $22,410 Allowance for Uncollectible Accounts $22,410
Allowance for Uncollectible Accounts
Account Titles Debit Credit
Beginning balance $8,620
Accounts receivable $7,198
Accounts receivable 2,978
Bad debts expense 22,410
Ending balance 26,810
Totals $34,008 $34,008
Coordination refers to ________. a. identifying the span of control within an organization b. portioning the performance of specific tasks c. assigning tasks to qualified managers d. linking various value activities within an organization
Answer:
d. linking various value activities within an organization.
Explanation:
A functional (departmental) organizational structure is a type of structure used to organize staffs by dividing them into various departments based on their skill set, roles or functions and knowledge.
These departments which are vertically structured may include, finance, IT, sales and marketing, research and development, customer service etc. Also, the various departments are headed by a functional manager who are saddled with the responsibility of overseeing, managing and reporting to the executive management.
The employees in companies engaged in a single line of business are generally referred to as silos because they work independently, collaborate and communicate with their colleagues in a vertical style i.e exclusively with each other.
A manager can be defined as an individual who is saddled with the responsibility of providing guidance, support, supervision, administrative control, as well as acting as a role model or example to the employees working in an organization by being morally upright.
Generally, managers are typically involved in taking up leadership roles and as such are expected to be build a strong relationship between their employees or subordinates by creating a fair ground for effective communication and sharing of resources and information. Also, they are required to engage their staff members (entire workforce) in the most efficient and effective manner.
Coordination refers to linking various value activities within an organization.
Answer:
d. linking various value activities within an organization.
Explanation:
Coordination refers to linking various value activities within an organization.
People in societies where uncertainty avoidance is high want
Answer:
I don't see any options.
discuss whethet or not a merger between two book publishing firms will benefits consumers
Answer: See explanation
Explanation:
A merger simply means when two companies come together and becomes one.
A merger between two book publishing firms will benefits the consumers as it may bring about the improvement in the product quality.
Also, the merger can result in the reduction in the price of the books as the company enjoys economies of scale due to its expansion. Furthermore, there can be an expansion of the business into new geographical areas and therefore more customers will be reached.
Southern Alliance Company needs to raise $120 million to start a new project and will raise the money by selling new bonds. The company will generate no internal equity for the foreseeable future. The company has a target capital structure of 55 percent common stock, 15 percent preferred stock, and 30 percent debt. Flotation costs for issuing new common stock are 8 percent, for new preferred stock, 5 percent, and for new debt, 3 percent.
What is the true initial cost figure the company should use when evaluating its project? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to the nearest whole dollar amount, e.g., 1,234,567.)
Answer:
$127,727,515
Explanation:
Calculation to determine the true initial cost figure Southern should use when evaluating its project
First step is to find the weighted average flotation cost.
Weighted average flotation cost= .55(.08) + .15(.05) + .30(.03)
Weighted average flotation cost= .044+.0075+.009
Weighted average flotation cost= .0605*100
Weighted average flotation cost=6.05%
Now let determine the true initial cost figure
True initial cost figure=(1 – .0605) = $120,000,000
True initial cost figure = $120,000,000 / (1 – .0605)
True initial cost figure = $120,000,000 / .9395
= $127,727,515
Therefore the true initial cost figure Southern should use when evaluating its project is $127,727,515
Firm B Firm T Shares outstanding 4,800 1,800 Price per share $ 47 $ 20 Firm B has estimated that the value of the synergistic benefits from acquiring Firm T is $9,100. Firm T can be acquired for $22 per share in cash or by exchange of stock wherein B offers one of its shares for every two of T's shares. Are the shareholders of Firm T better off with the cash offer or the stock offer? Cash offer is better Share offer is better At what exchange ratio of B shares to T shares would the shareholders in T be indifferent between the two offers? (Do not round intermediate calculations and round your answer to 4 decimal places, e.g., 32.1616.)
Answer:
A. Share Offer Is Better
B. .4569
Explanation:
A. Based on the information given the shareholders of Firm T will be better off with the STOCK OFFER because cash offer is the amount of $22 per share.
B. Calculation to determine the exchange ratio of B shares to T shares
First step is to calculate the New shares created
New shares created = 1,800(1/2)
New shares created = 900 new shares
Second step is to calculate the value of the merged firm
Value of the merged firm= 4,800($47) + 1,800($20) + $9,100
Value of the merged firm= $270,700
Third step is to calculate the price per share of the merged firm
Price= $270,700/(4,800 + 900)
Price= $270,700/5,700
Price= $47.49
Fourth step is to calculate the Equity offer value
Equity offer value = (1/2)($47.49)
Equity offer value = $23.75 per share
Fifth step is to calculate the post merger share price
Value of the merged firm= $270,700
Shares in new firm = 4,800 + 1,800x
Hence:
Post merger share price:
P= $270,700/(4,800 + 1,800x)
Sixth step
For the target firm’s shareholders to be indifferent which means they have to receive the same wealth
Hence;
1,800(x)P= 1,800($22)
Let solve this equation for P
P= $22/x
Now Let Combine the two equations
$270,700/(4,800 + 1,800x) = $22/x
x= .4569
Seventh step is to calculate the NPV
NPV = 1,800($20) + $9,100 – 1,800($22)
NPV = $5,500
Eight step is to calculate the Share price
Share price = [4,800($47) + $5,500]/4,800
Share price = $48.15
Now let calculate the Exchange ratio
Exchange ratio = $22/$48.15
Exchange ratio = .4569
Therefore the exchange ratio of B shares to T shares that the shareholders in T would be indifferent between the two offers is .4569
Identify information that would be included in a printed, hand-delivered résumé and not an online résumé.
Answer: Your High School/College diploma. Copy of your educational degree. Liesence, Contact information, and employment history.
Explanation:
On December 31, 2020, the Bennett Company had 100,000 shares of common stock issued and outstanding. On July 1, 2021, the company sold 18,000 additional shares for cash. Bennett's net income for the year ended December 31, 2021, was $650,000. During 2021, Bennett declared and paid $71,000 in cash dividends on its nonconvertible preferred stock. What is the 2021 basic earnings per share
Answer:
$5.31
Explanation:
Earnings per share = Earnings Attributable to Holders of Common Stock ÷ Weighted Average Number of Common Stocks Outstanding
where,
Earnings Attributable to Holders of Common Stock is :
Net Income $650,000
Less Preference Stock dividend ($71,000)
Earnings Attributable to Holders of Common Stock $579,000
and
Weighted Average Number of Common Stocks Outstanding :
Common Stocks at Beginning outstanding 100,000
Stocks Sold at Weighted Average (18,000 / 2) 9,000
Weighted Average Number of Common Stocks Outstanding 109,000
therefore,
Earnings per share = $579,000 ÷ 109,000
= $5.31
The 2021 basic earnings per share is $5.31.
Hearne Company has a number of potential capital investments. Because these projects vary in nature, initial investment, and time horizon, management is finding it difficult to compare them. Assume straight line depreciation method is used. (Future Value of $1, Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1.) (Use appropriate factor(s) from the tables provided.)
Project 1: Retooling Manufacturing Facility This project would require an initial investment of $4,850,000. It would generate $865,000 in additional net cash flow each year. The new machinery has a useful life of eight years and a salvage value of $1,000,000.
Project 2: Purchase Patent for New Product The patent would cost $3,400,000, which would be fully amortized over five years. Production of this product would generate $425,000 additional annual net income for Hearne.
Project 3: Purchase a New Fleet of Delivery Trucks Hearne could purchase 25 new delivery trucks at a cost of $115,000 each. The fleet would have a useful life of 10 years, and each truck would have a salvage value of $5,000. Purchasing the fleet would allow Hearne to expand its customer territory resulting in $200,000 of additional net income per year.
Required:
a. Determine each project's accounting rate of return. (Round your answers to 2 decimal places.)
b. Determine each project's payback period. (Round your answers to 2 decimal places.)
c. Using a discount rate of 10 percent, calculate the net present value of each project. (Future Value of $1, Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1.) (Use appropriate factor(s) from the tables provided. Round your final answersto 2 decimal places.)
d. Determine the profitability index of each project and prioritize the projects for Hearne. (Round your intermediate calculations to 2 decimal places. Round your final answers to 4 decimal places.)
Answer:
Hearne Company
Project 1 Project 2 Project 3
Initial investment cost $4,850,000 $3,400,000 $2,875,000
Annual cash inflows 865,000 1,105,000 475,000
PV annuity (5.335/3.791/6.145) 4,614,775 4,189,055 $2,918,875
Useful life 8 years 5 years 10 years
Salvage Value 1,000,000 0 125,000
PV (0.467/0/0.386 467,000 0 48,250
Depreciable/Amortization amount $3,850,000 $3,400,000 $2,750,000
Annual depreciation/amortization 481,250 680,000 275,000
Annual Returns 383,750 425,000 200,000
Average annual investment cost 606,250 680,000 287,500
a. Accounting rate of return 63.30% 62.50% 69.57%
b. Payback period 5.61 years 3.08 years 6.05 years
Total PV of cash inflows 5,081,775 4,189,055 2,967,125
c. NPV $231,775 $789,055 $92,125
d. Profitability Index 1.0478 1.2321 1.0320
Prioritization of Projects:
Project 2
Project 1
Project 3
Based on NPV, Profitability Index, and Payback Period.
Explanation:
a) Data and Calculations:
Project 1 Project 2 Project 3
Initial investment cost $4,850,000 $3,400,000 $2,875,000
Annual cash inflows 865,000 1,105,000 475,000
PV annuity (5.335/3.791/6.145) 4,614,775 4,189,055 $2,918,875
Useful life 8 years 5 years 10 years
Salvage Value 1,000,000 0 125,000
PV (0.467/0/0.386 467,000 0 48,250
Depreciable/Amortization amount $3,850,000 $3,400,000 $2,750,000
Annual depreciation/amortization 481,250 680,000 275,000
Annual Returns 383,750 425,000 200,000
Average annual investment cost 606,250 680,000 287,500
Accounting rate of return 63.30% 62.50% 69.57%
Payback period 5.61 years 3.08 years 6.05 years
Total PV of cash inflows 5,081,775 4,189,055 2,967,125
NPV $231,775 $789,055 $92,125
Profitability Index 1.0478 1.2321 1.0320
Key Calculation Formulas:
Annual cash flows = Annual Depreciation Plus Annual Net Income
Present of annual cash flows = Annuity factor * Annual cash flows
PV of Salvage value = Salvage value * Discount Factor
The Depreciable or Amortization amount = Initial investment cost Minus Salvage value
Annual Returns = Annual Cash inflow Minus Depreciation
Average annual investment cost = Initial investment cost/useful life
Accounting rate of return = average annual returns/average annual investment cost
Payback period = Initial investment/Annual cash inflows
Total PV of cash flows = PV of annual cash inflows + PV of Salvage value
NPV = Total PV of cash flows Minus Initial Investment Cost
Profitability Index = Total PV of cash flows/Initial Investment Cost
The accounting records of EZ Company provided the data below. Net income $ 52,850 Depreciation expense 8,350 Increase in inventory 2,175 Decrease in salaries payable 1,355 Decrease in accounts receivable 2,900 Amortization of patent 605 Amortization of premium on bonds 2,185 Increase in accounts payable 5,350 Cash dividends paid 13,500 Prepare a reconciliation of net income to net cash flows from operating activities
Answer:
$64,340
Explanation:
Cash flows from operating activities
Net income $52,850
Adjustments for non cash effects
Depreciation expense $8,350
Amortization of patent $605
Changes in operating assets and liabilities
Increase in inventory -$2,175
Decrease in bonds premium -$2,185
Decrease in salaries payable -$1,355
Decrease in accounts receivable $2,900
Increase in accounts payable $5,350
Net Cash flow from operating activities $64,340
On January 1, 2020, UML Inc. began construction of an automated cattle feeder system. The system was finished and ready for use on December 31, 2021. Expenditures on the project were as follows: January 1, 2020 $ 500,000 July 1, 2020 $ 300,000 December 1, 2020 $ 600,000 March 31, 2021 $ 300,000 September 30, 2021 $ 200,000 UML borrowed $600,000 on a construction loan at 8% interest on January 1, 2020. This loan was outstanding throughout the construction period. The company had $2,000,000 in 5% bonds payable outstanding in 2020 and 2021. UML used the specific interest method. Interest capitalized for 2020 was: Multiple Choice $53,000. $56,000. $70,000. $112,000.
Answer:
UML Inc.
The interest capitalized for 2020 was:
= $70,000
Explanation:
a) Data and Calculations:
Date Amount Weight Weighted Average
January 1, 2020 $ 500,000 24/24 $500,000
July 1, 2020 $ 300,000 18/24 225,000
December 1, 2020 $ 600,000 13/24 325,000 $1,050,000
March 31, 2021 $ 300,000 9/24 112,500
September 30, 2021 $ 200,000 3/24 25,000
Total accumulated weighted-average expenditure for 2020 = $1,050,000
Interest capitalized
Construction loan = $600,000 * 8% = $48,000
Part from the bond= $450,000 * 5% = 22,500
= $70,500
The Tree Company provides the following standard cost data per unit of product: Variable overhead $ 8.00 Tree Co. anticipated that they would produce and sell 24,000 units. During the period, the company produced and sold 25,000 units, incurring $210,000 of variable overhead costs. The variable overhead flexible budget variance was: A. $8,000 unfavorable. B. $10,000 unfavorable. C. $8,000 favorable. D. $10,000 favorable.
Answer:
Flexible budget variance= $10,000 unfavorable
Explanation:
Giving the following information:
Standard Variable overhead= $8.00 per unit
During the period, the company produced and sold 25,000 units, incurring $210,000 of variable overhead costs.
First, we need to calculate the standard variable overhead cost:
Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base
Allocated MOH= 8*25,000
Allocated MOH= $200,000
Now, the flexible budget variance:
Flexible budget variance= allocated overhead - actual overhead
Flexible budget variance= 200,000 - 210,000
Flexible budget variance= $10,000 unfavorable