Answer and Explanation:
The journal entries are shown below:
a. Cash Dr $20,000
To Capital $20,000
(being the issuance of the capital stock is recorded)
b. Rent Dr $5,000
To cash $5,000
(being the rent paid is recorded)
c. Supplies dr $1,500
To Account payable $1,500
(being the supplies purchased on account is recorded)
d. Account payable Dr $1,000
To cash $1,000
(being the amount paid is recorded)
e. Cash Dr $25,000
To sales commission $25,000
(being the sales commission earned is recorded)
f. Automobile expense $4,500
To Cash $4,500
(being cash paid is recorded)
g. Office salaries Dr $8,000
To cash $8,000
(being cash paid is recorded)
h Supplies expense $1,500
To supplies $1,500
(being supplies expense is recorded)
g. Dividend payable $1,500
To Cash $1,500
(being dividend paid is recorded)
A new tennis court complex is planned. Each of two alternatives will last 18 years, and the interest rate is 7%. Use present worth analysis to determine which should be selected.
Construction Cost Annual O&M
A $500,000 $25,000
B 640,000 10,000
Answer:
B should be selected.
Explanation:
Below is the calculation of net present worth:
Present value of A = -500000 - 25000 * (P/A, 7%,18)
Present value = -500000 - 25000 * 10.059087
Present value = -751477.17
Present value of B = -640000 - 10000 * (P/A, 7%,18)
Present value = -640000 - 10000 * 10.059087
Present value = -740590.87
The present value of B is lower so it will be selected.
You have accepted a job as the president and CEO of a large transportation conglomerate. Over the years, the conglomerate has acquired a number of unrelated divisions. Your first action as CEO is to complete a strategic plan.
Business Projected Growth Rate Current market share
Shipping Low 1%
Cargo inspection High 5%
Railroad loading Low 75%
Freight forwarding High 70%
Which of the following divisions would you take profits from and continue to run?
a. Railroad loading
b. Shipping
c. Freight forwarding
d. Cargo inspection
Answer: a. Railroad loading
Explanation:
This question relates to the BCG matrix which allows a company with multiple divisions to know how to deal with its various divisions based on their growth rate and market share.
The question specifically relates to a matrix called "Cash cows". Cash cows are divisions that have a significant market share but a low growth rate. These divisions are stable and bring more money into the company than they cost to run.
This allows us to take profits from them and invest in other. The Railroad loading controls a significant market share of 75% but has a low growth rate so is a Cash cow.
The concept of leverage is that a.a high debt-to-equity ratio is favorable. b.it is appropriate to borrow if the return on the assets is greater than the cost of the financing. c.it is appropriate to borrow as long as the lender approves the loan. d.it is unfavorable to borrow funds rather than raise the capital from stockholders.
Answer:
b. it is appropriate to borrow if the return on the assets is greater than the cost of the financing.
Explanation:
A leverage can be defined as a process which typically involves the use of fixed-charged assets or items in a business with the intention of multiplying potential financial gains and returns.
In Financial accounting, the concept of leverage is that it is appropriate for a business firm to borrow an amount of money (debt), if the return on the assets (capital gain or income) is greater than the cost of the financing (debt or borrowed money).
Basically, financial leverage which is also known as trading on equity, is the utilization of debt (borrowed money) to acquire or purchase new assets with the intent and expectation that the income generated from these assets would exceed the cost incurred from borrowing. Thus, a business that engages in financial leveraging assumes that it would generate a higher income or capital gain from the amount of debt (borrowed money) used in its capital structure.
If a monopoly charges higher prices to consumers who buy smaller quantities than to consumers who buy larger quantities, then
Answer:
Explanation:
Monopoly is the form of market in which the single market trading products and services are discussed and then the possibility of producing good economic profit is given. The monopoly is linked to the absence of a competitive scenario.
In large volumes, when the customer buys items, individuals are only impacted by the tiniest price fluctuation. Consumers who buy fewer amounts of items are, by contrast, subject to higher pricing as the smallest price changes do not much affect them. There is therefore increased demand price elasticity for customers who purchase bigger amounts of items.
You are told that standing up during the Cowboys football game will give you a better view of the field. However, if everyone stands up at the same time, then your view is obscured. This example best describes:
a. inclusion of an irrelevant variable.
b. a violation of ceteris paribus .
c. a fallacy of composition.
d. a post hoc ergo propter hoc fallacy.
e. an omission of a relevant variable.
Answer:
I think the answer is e. Because you the variable that if everyone stands up you cant see is omitted.
Which statement below best describes what will most likely happen, from an economic standpoint, when a music group with growing popularity goes on tour and sells out a certain venue in hours with tickets for $25 apiece?
a. Nothing changes, since the market is already clearing.
b. The price of tickets for future concert dates will rise until it hits equilibrium.
c. The group will cancel the concert and give everyone a refund.
d. The group will add more performance dates with tickets at a lower cost.
Answer:
A
Explanation:
Market clears when quantity supplied equals quantity demanded. here the market is in equilibrium
Equilibrium price is the price at which quantity demand equal quantity supplied. Above equilibrium price there is a surplus - quantity supplied exceeds quantity demanded.
Below equilibrium price there is a shortage - quantity demanded exceeds quantity supplied
The management of Nicto Company plans to have an inventory at the end of each month equal to 30% of the next month's sales. Budgeted sales in units over the next three months are 87,000 in October, 127,000 in November, and 107,000 in December. Budgeted production for November would be:
Answer:
Production= 121,000
Explanation:
To calculate the budgeted production for November, we need to use the following formula:
Production= sales + desired ending inventory - beginning inventory
Production= 127,000 + (107,000*0.3) - (127,000*0.3)
Production= 127,000 + 32,100 - 38,100
Production= 121,000
To maintain competitive prices, control of costs is critical. Management has considered moving production overseas, but so far they are committed to remaining in the U.S. Management has decided to permit their employees to participate in setting up a new standard cost system. Management likely expects the new standard cost system, along with the employee input, to provide all of the following benefits except that:_______
a. Employees who participate in setting standards may be more efficient.
b. Standard costs will help management in uncovering potential cost problems.
c. Unfavorable variances are more likely to occur
d. Standard costing permits management by exception, which should save some time.
Answer:
C)Unfavorable variances are more likely to occur.
Explanation:
From the question we are informed about an instance, whereby To maintain competitive prices, control of costs is critical. Management has considered moving production overseas, but so far they are committed to remaining in the U.S. Management has decided to permit their employees to participate in setting up a new standard cost system. In this case, Management likely expects the new standard cost system, along with the employee input, to provide all of the following benefits
✓ Employees who participate in setting standards may be more efficient.
✓Standard costs will help management in uncovering potential cost problems.
✓Standard costing permits management by exception, which should save some time.
Competitive pricing can be regarded as process involving selection of strategic price points so that advantage of a product/service can be take base on market relative to competition. Competitive pricing can be utilized in a case whereby price for a product/ service has gotten to level of equilibrium. Cost control can be regarded as practice which involves identification as well as reduction of business expenses so that profit can be increased usually begins as budgeting process.
At the beginning of the current season on April 1, the ledger of Granite Hills Pro Shop showed Cash $3,065; Inventory $4,065; and Common Stock $7,130. The following transactions occurred during April 2017
Apr
5 Purchased golf bags, clubs, and balls on account from Arnie Co. $1,695, terms 3/10, n/60.
7 Paid freight on Arnie Co. purchases $90.
9 Received credit from Arnie Co. for merchandise returned $395.
10 Sold merchandise on account to members $1,514, terms n/30.
12 Purchased golf shoes, sweaters, and other accessories on account from Woods Sportswear $938, terms 2/10, n/30.
14 Paid Arnie Co. in full.
17 Received credit from Woods Sportswear for merchandise returned $138.
20 Made sales on account to members $915, terms n/30.
21 Paid Woods Sportswear in full.
27 Granted credit to members for clothing that did not fit properly $90.
30 Received payments on account from members $1,379.
Requried:
Journalize the April transactions using a periodic inventory system.
Answer and Explanation:
The journal entries are shown below:
On April 5
Purchase Dr $1,695
To account payable $1,695
(Being purchase on account is recorded)
On April 7
Freight in Dr $90
To cash $90
(being cash paid is recorded)
On April 9
Account payable Dr $395
To Purchase return & allowances $395
(being received the credit on returned)
On April 10
Account receivable Dr $1,514
To Sales $1,514
(being merchandise sold on credit)
On April 12
Purchase Dr $938
To account payable $938
(Being purchase on account is recorded)
On April 14
Account payable $1,300
To Cash $1,261
To Purchase discount $39
(being cash paid)
On April 17
Account payable Dr $138
To Purchase return & allowances $138
(being received the credit on returned)
On April 20
Account receivable Dr $915
To Sales $915
(being merchandise sold on credit)
On APril 21
Account payable $800
To Cash $784
To Purchase discount $16
(being cash paid)
On April 27
Sales returns & allowances $90
To account receivable $90
(Being credit granted is recorded)
On April 30
Cash Dr 1,379
To account receivable $1,379
(being cash received is recorded)
Manero Company included the following information in its annual report: 20X3 20X2 20X1 Sales$178,400 $162,500 $155,500 Cost of goods sold 115,000 102,500 100,000 Operating expenses 50,000 50,000 45,000 Operating income 13,400 10,000 10,500 In comparison to year 20X2, the increase in operating income of 20X3 was primarily caused by the effect of margin increase of (ignore taxes):Multiple Choice$2,422.$3,400.$978.$1,194.
Answer:
Manero Company
In comparison to year 20X2, the increase in operating income of 20X3 was primarily caused by the effect of margin increase of
= $3,400.
Explanation:
a) Data and Calculations:
20X3 20X2 20X1
Sales $178,400 $162,500 $155,500
Cost of goods sold 115,000 102,500 100,000
Operating expenses 50,000 50,000 45,000
Operating income 13,400 10,000 10,500
Increase in operating income of 20X3 compared to 20X2 is $3,400 ($13,400 - $10,000)
This increase represents 34% increase in the margin of 20X3 when compared to 20X2. The increase resulted from increased sales revenue.
The financial statements of the Kingbird, Inc. reports net sales of $323700 and accounts receivable of $49000 and $29000 at the beginning of the year and end of year, respectively. What is the accounts receivable turnover for Kingbird
Answer:
See below
Explanation:
Given that;
Net sales = $323,700
Beginning accounts receivables = $49,000
Ending accounts receivables = $29,000
Account receivable turnover is computed as
= Net credit sales / Average accounts receivables
Average accounts receivables = $49,000 + $29,000 / 2 = $39,000
Net sales = $323,700
Then,
Accounts receivable turnover = $323,700 / $39,000
Account receivables turnover = 8.3 times
An investor sells 100 shares short at $43. The sale requires a margin deposit equal to 60 percent of the proceeds of the sale. The company paid a cash dividend of $1 per share. If the investor closed the position at $38, what was the percentage earned or lost on the investment
Answer:
15.5%
Explanation:
We first calculate the beginning value of the investment
= 43$x100 = 4300
We find ending value = $38x100 = 3800
We find dividend = $1x100 = $100
Profit therefore = 4300-3800-100 = 400
Investment = 60% x 4300= 2580
ROI = 400/2580 = 0.1550 = 15.5%
Therefore calculated percentage = 15.5%
Thank you!
XYZ has the following for the January budget: Budgeted sales are $210,000; Cost of goods sold averages 66% of sales; Marketing costs are $3,600; Distribution costs are $5,300; Administrative costs are $10,100. The budgeted nonmanufacturing costs are
Answer:
Budgeted manufacturing cost= $138,600
Explanation:
Giving the following information:
Budgeted sales are $210,000
Cost of goods sold averages 66% of sales
To calculate the budgeted manufacturing costs, we need to use the following formula:
Budgeted manufacturing cost= sales*COGS ratio
Budgeted manufacturing cost= 210,000*0.66
Budgeted manufacturing cost= $138,600
What do we call interest on interest?
Answer:
Interest-on-interest, also referred to as 'compound interest', is the interest that is earned when interest payments are reinvested.
Formal written promises to pay suppliers or lenders specified sums of money at definite future times are known as a.accounts receivable. b.notes payable. c.accounts payable. d.All of these choices are correct.
Answer:
B)Notes payable.
Explanation:
Notes payable can be regarded as written agreements which is a (promissory notes) whereby there is agreement by one party to pay other party a definite amount of cash. Note payable can as well be regarded as loan between two parties. A note payable usually consist information such as the amount to be paid as well as interest rate. It should be noted that Formal written promises to pay suppliers or lenders specified sums of money at definite future times are known as Notes payable.
Milano Pizza is a small neighborhood pizzeria that has a small area for in-store dining as well as offering take-out and free home delivery services. The pizzeria’s owner has determined that the shop has two major cost drivers—the number of pizzas sold and the number of deliveries made. The pizzeria’s cost formulas appear below:
Fixed Cost Cost per Cost per
per Month Pizza Delivery
Pizza ingredients $5.00
Kitchen staff $6,030
Utilities $670 $0.90
Delivery person $2.70
Delivery vehicle $690 $2.10
Equipment depreciation $448
Rent $1,990
Miscellaneous $790 $0.15
In November, the pizzeria budgeted for 1,740 pizzas at an average selling price of $13 per pizza and for 200 deliveries. Data concerning the pizzeria’s actual results in November appear below:
Actual Results
Pizzas 1,840
Deliveries 180
Revenue $24,530
Pizza ingredients 8,290
Kitchen staff $5,970
Utilities $915
Delivery person $486
Delivery vehicle $998
Equipment
depreciation $448
Rent $1,990
Miscellaneous $826
Required:
Complete the flexible budget performance report that shows both revenue and spending variances and activity variances for the pizzeria for November.
Answer:
Milano Pizza
Flexible Budget Performance Report for November
Static Flexible Actual Variances
Budget Budget Results Spending Activity
Sales Revenue $22,620 $23,920 $24,530 $610 F $1,300 F
Pizza ingredients $8,700 $9,200 $8,290 $910 F $500 U
Kitchen staff 6,030 $6,030 5,970 60 F 0 N
Utilities 2,236 $2,326 915 1,411 F 90 U
Delivery person 540 $486 486 0 N 54 F
Delivery vehicle 1,110 $1,068 998 70 F 42 F
Equipment depreciation 448 $448 448 0 N 0 N
Rent 1,990 $1,990 1,990 0 N 0 N
Miscellaneous 1,051 $1,066 826 240 F 15 U
Total expenses $22,105 $22,614 $19,923 $2,691 F $509 U
Explanation:
a) Data and Calculations:
Pizzeria's Cost Formulas:
Fixed Cost Cost per Cost per Static
per Month Pizza Delivery Budget
Pizza ingredients $5.00 $8,700
Kitchen staff $6,030 6,030
Utilities $670 $0.90 2,236
Delivery person $2.70 540
Delivery vehicle $690 $2.10 1,110
Equipment depreciation $448 448
Rent $1,990 1,990
Miscellaneous $790 $0.15 1,051
Budgeted pizzas for November = 1,740
Average selling price per pizza = $13
Average deliveries for the month = 200
Sales revenue = $23,920 (1,840 * $13)
Flexing the budget:
Fixed Cost Cost per Cost per Flexible
per Month Pizza Delivery Budget
Pizza ingredients ($5.00 * 1,840) $9,200
Kitchen staff $6,030 6,030
Utilities $670 ($0.90 * 1,840) 2,326
Delivery person $2.70*180 486
Delivery vehicle $690 $2.10*180 1,068
Equipment depreciation $448 448
Rent $1,990 1,990
Miscellaneous $790 ($0.15*1,840) 1,066
Actual results in November:
Pizzas 1,840
Deliveries 180
Revenue $24,530
Pizza ingredients 8,290
Kitchen staff $5,970
Utilities $915
Delivery person $486
Delivery vehicle $998
Equipment depreciation $448
Rent $1,990
Miscellaneous $826
To complete the flexible budget performance report for Milano Pizza in November, we will calculate the revenue and spending variances, Here's the breakdown:
Revenue Variance:
$610 (Favorable)
Spending Variances :
a. Pizza Ingredients:
$910 (Unfavorable)
b. Kitchen Staff:
$60 (Favorable)
c. Utilities:
-$903 (Favorable)
d. Delivery Person:
$0 (Favorable)
e. Delivery Vehicle:
$620 (Unfavorable)
f. Equipment Depreciation:
$0 (Favorable)
g. Rent:
$0 (Favorable)
h. Miscellaneous:
$523 (Unfavorable)
Activity Variances:
a. Pizzas:
100 (Favorable)
b. Deliveries:
-20 (Unfavorable)
Overall Performance:
Revenue Variance: $610 (Favorable)
Total Spending Variances: -$590 (Unfavorable)
Total Activity Variances: 80 (Favorable)
The flexible budget performance report for Milano Pizza in November shows a favorable revenue variance of $610, an unfavorable spending variance of $590, and a favorable activity variance of 80.
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property has Gross Scheduled Income of $100,000. The vacancy rate and credit rate allowance is 3% whereas Operating expenses are $34,000. a) What will be the Cap. Rate if you purchased the property for $600,000
Answer:
The answer is "[tex]10.5\%[/tex]"
Explanation:
Following are the Cap rate:
[tex]= \frac{(Income \times (1 - vacancy\ rate) - operating \ expense)}{\text{purchase price of property}}[/tex]
[tex]= \frac{(\$ 100,000 \times 0.97 - \$ 34,000)}{\$ 600,000}\\\\= \frac{\$ 63,000}{ \$ 600,000}\\\\= 10.5\%[/tex]
The financial statements of the Sunland Company reports net sales of $828000 and accounts receivable of $79200 and $43200 at the beginning of the year and end of year, respectively. What is the average collection period for accounts receivable in days
Answer:
See below
Explanation:
Given the above information, the average collection period in days is computed as
= Average balance of account receivables / Net credit sales × 365
Average balance of account receivables = ($79,200 + $43,200) / 2
= $61,200
Net credit sales = $828,000
= $61,200 / $828,000 × 365
= 26.97 days
= 27 days
Hence the average collection period in days is 27 days
Which of the following is the best definition of transferable skills?
Answer:
Skills that you may have learned in one context that you can take with you to many other contexts and industries.
Explanation:
Considering the available options, the best definition of transferable skills is "Skills that you may have learned in one context that you can take with you to many other contexts and industries."
This is based on the fact that transferable skills are skills and talents or proficiency that are considered suitable and valuable across different situational roles, including social context, and professional context. Good examples are creativity, leadership, and time management.
According to the CAPM, what is the expected market return given a required return on a security of 14.6%, a stock beta of 1.2, and a risk-free interest rate of 5%
Answer:
13%
Explanation:
According to the capital asset price model: Expected rate of return = risk free + beta x (market rate of return - risk free rate of return)
14.6% = 5% + 1.2(market rate of return - 5%)
14.6% = 5% + 1.2 x market rate of return - 6%
14.6% = -1%+ 1.2 x market rate of return
14.6% + 1% = + 1.2 x market rate of return
15.6% = + 1.2 x market rate of return
15.6% / 1.2 = market rate of return
market rate of return = 13%
Melanie is the director of human resources for a small manufacturing firm. She has a strong personal interest in technology, and is known throughout the firm as the one with the most knowledge about new kinds of communications technologies. If the firm decides to upgrade its network, Melanie will probably function in what role in the firm's buying center
Answer:
Influencer
Explanation:
An influencer is a person that has the ability to affect the purchasing decision of customers through their authority, position, relationship, or relationship.
They have good social relations and this is an asset in directing customer buying decision.
In the given scenario Melanie has a strong personal interest in technology, and is known throughout the firm as the one with the most knowledge about new kinds of communications technologies.
This knowledge will be beneficial in the buying centre, where she can be an influencer.
Mullee Corporation produces a single product and has the following cost structure: Number of units produced each year 7,000 Variable costs per unit: Direct materials $ 51 Direct labor $ 12 Variable manufacturing overhead $ 2 Variable selling and administrative expense $ 5 Fixed costs per year: Fixed manufacturing overhead $441,000 Fixed selling and administrative expense $112,000 The absorption costing unit product cost is:________
a. $65 per unit
b. $128 per unit
c. $63 per unit
d. $149 per unit
Answer:
unitary absorption production cost= $128
Explanation:
The absorption costing method includes all costs related to production, both fixed and variable. The unit product cost is calculated using direct material, direct labor, and total unitary manufacturing overhead.
First, we need to calculate the unitary fixed manufacturing overhead:
Unitary fixed overhead= 441,000 / 7,000= $63
Now, the unitary absorption production cost:
unitary absorption production cost= 51 + 12 + 2 + 63
unitary absorption production cost= $128
Concentration is the ability to focus and pay
Answer:
nice
Explanation:
As reported by the Bureau of Labor Statistics, the CPI for Airfare in 2263 was 586.1 (using a base year of 1914 = 100). The CPI for Airfare in 2264 was 605.7. Based on this data, what was the inflation rate of airfare from 2263 to 2264?
Answer: 3.34%
Explanation:
Firstly, we have to calculate the difference in CPI from the year 2263 to 2264 which will be:
= 605.7 - 586.1
= 19.6
Then, the inflation rate will be:
= Difference in CPI / Base CPI × 100
= 19.6/586.1 × 100
= 3.34%
The inflation rate is 3.34%.
macarthy landscape supply's selected accounts follow Selling Expenses $12,900 Interest Revenue 900 Net Sales Revenue 134,700 Cost of Goods Sold 114,000 Administrative Expense 10,200 compute gross profit percentage
Answer:
15.37%
Explanation:
Computation of the gross profit percentage
First step is to calculate the Gross profit using this formula
Gross profit = Net sales revenue - Cost of goods sold
Let plug in the formula
Gross profit= $134,700 - $114,000
Gross profit= $20,700
Now let determine the Gross profit percentage using this formula
Gross profit percentage = Gross profit / net sales revenue
Let plug in the formula
Gross profit percentage= $20700/ $134700
Gross profit percentage= 15.37%
Therefore Gross profit percentage is 15.37%
The
purpose or objectives of
Competition policy
Answer:
enhance consumer welfare by promoting competition
Explanation:
if i wrote any more, you wouldn't even truly understand what i wrote or how it connects with your question. :/
Because stocks rely on dividends as the principal source of cash flow, ascertaining stock prices is an easier and more precise process than the valuation of bonds, which relies on variable coupon payments.
a. True
b. False
Answer:
B
Explanation:
Shares grants ownership rights to holders of the shares.
The payment of stock is not fixed. it is variable and it depends on the net income earned by a company. stockholders are paid after bondholders have been paid.
bonds are debt instruments issued by a company
coupon payments are fixed and contractual.
bonds are thus easier to value
On April 15, 2012, Andy purchased some furniture and fixtures (7-year property) for $10,000 to be used in his business. He did not elect to expense the equipment under Section 179 or bonus depreciation. On June 30, 2020, he sells the equipment. What is the cost recovery deduction for 2020
Answer:
$874.50
Explanation:
Calculation to determine the cost recovery deduction for 2020
2020 cost recovery deduction = $10,000 × 17.49% × ½
2020 cost recovery deduction = $874.50
Therefore the cost recovery deduction for 2020 is $874.50
ABC Company's production budget for March is 32,000 units. Budgeted fixed overhead is $64,000. ABC's standard fixed overhead application rate is $2 per machine hour and each unit is allowed a standard of 1 hour of machine time. Actual fixed overhead for March is $67,000 Actual production in March is 36,000 units. To calculate its standard fixed overhead application rate, ABC divided its budgeted (units/overhead) by its budgeted (units/overhead)
Answer:
Overheads by its budgeted units.
Explanation:
Given that
Budgeted fixed overhead = $64,000
Budgeted output = 32,000 units
We know that
Standard fixed overhead application rate is
= Budgeted fixed overhead ÷ Budgeted output
= $64,000 ÷ 32,000
= $2 per unit
So, Overheads by its budgeted units.
Gilmore, Inc., had equity of $135,000 at the beginning of the year. At the end of the year, the company had total assets of $290,000. During the year, the company sold no new equity. Net income for the year was $29,000 and dividends were $3,400. a. What is the sustainable growth rate for the company
Answer:
A. 18.96%
B. 18.96%
C. 15.94%
Explanation:
A. Calculation to determine the sustainable growth rate for the company
First step is to calculate the Ending equity
Ending equity = 135,000 + 29,000 -3,400
Ending equity=$160,600.
Second step is to calculate the return on equity
Return on equity =29,000/160,600
Return on equity=0.18057285
Third step is to calculate the retention ratio
Retention ratio =(Net income- dividends) / Net income
Retention ratio= (29,000-3400) / 29,000
Retention ratio=25,600 /29,000
Retention ratio=0.88275862.
Now let calculate the Sustainable growth rate using this formula
Sustainable growth rate = (Return on equity *Retention ratio) / [1-(Return on equity*retention ratio)]
Let plug in the formula
Sustainable growth rate=(0.18057285*0.88275862)/ [1-(0.18057285*0.88275862)]
Sustainable growth rate=0.15940224/ [1-0.15940224]
Sustainable growth rate=0.1896*100
Sustainable growth rate=18.96%.
b. Calculation to determine the sustainable growth rate if you use the formula ROE band beginning of period equity
First step is to calculate the return on equity using beginning of the period equity
Return on equity using beginning of the period equity=$29,000 /135,000
Return on equity using beginning of the period equity=0.21481481.
Now let calculate the sustainable growth rate if you use the formula ROE band beginning of period equity
roe * b = 0.21481481*0.88275862
ROE band=0.1896*100
ROE band=18.96%.
c.return on equity using ending of period equity = 29,000/160,600
=>0.18057285
roe*b=>0.18057285*0.88275862
=>0.1594
=>15.94%.