Answer:
See below
Explanation:
First, we will calculate the depreciation expenses
Depreciation expense = Cost / life = $84,000 / 30 = $2,800 per year
"Situation where you have a personal budget for the year 2021 with Revenues of $20,000 and Expenses of $18,000. On July 1, 2021 two friends come to live with you and pay you $1,000/month in rent. They add $800 a month in expenses. What are your flexible budget expenses for 2021"
Answer:
$22,800
Explanation:
Flexible budget expenses = $18,000 + ($800 * 6 months)
Flexible budget expenses = $18,000 + $4,800
Flexible budget expenses = $22,800
So, the flexible budget expenses for 2021 is $22,800
Assume that you believe exchange rate movements are mostly driven by purchasing power parity. The U.S. and Canada presently have the same nominal (quoted) interest rate. The central bank of Canada just made an announcement that causes you to revise your estimate of Canada's real interest rate upward. Nominal interest rates were not affected by the announcement. Do you expect that the Canadian dollar to appreciate, depreciate, or remain the same against the dollar in response to the announcement
Answer:
The Canadian dollar would appreciate
Explanation:
Real interest rate is nominal interest rate less inflation rate
exchange rate is the rate at which one currency is exchanged for another currency
if the real interest rate of the canadian dollar increases, there would be an increase in demand for canadian dollars. As a result, the demand for canadian dollars would increase. the increase in demand would lead to an appreciation of the canadian dollar
Good Night manufactures comforters. The estimated inventories on January 1 for finished goods, work in process, and materials were $51,000, $28,000, and $33,000, respectively. The desired inventories on December 31 for finished goods, work in process, and materials were $48,000, $35,000, and $29,000, respectively. Direct material purchases were $555,000. Direct labor was $252,000 for the year. Factory overhead was $176,000. Prepare a cost of goods sold budget for Good Night, Inc. Good Night, Inc. Cost of Goods Sold Budget For the Year Ending December 31 Finished goods inventory, January 1 $fill in the blank 1 Work in process inventory, January 1 $fill in the blank 2 Direct materials: Direct materials inventory, January 1 $fill in the blank 3 Direct materials purchases fill in the blank 4 Cost of direct materials available for use $fill in the blank 5 Less direct materials inventory, December 31 fill in the blank 6 Cost of direct materials placed in production $fill in the blank 7 Direct labor fill in the blank 8 Factory overhead fill in the blank 9 Total manufacturing costs fill in the blank 10 Total work in process during the period $fill in the blank 11 Less work in process inventory, December 31 fill in the blank 12 Costs of good manufactured fill in the blank 13 Cost of finished goods available for sale $fill in the blank 14 Less finished goods inventory, December 31 fill in the blank 15 Costs of goods sold $fill in the blank 16
Answer:
See below
Explanation:
1. Step 1
Determine the direct materials used in production
Beginning materials inventory
$33,000
Add materials purchases
$555,000
Less ending materials inventory
($29,000)
Direct materials used in production
$559,000
Step 2
Determine the cost of goods manufactured
Beginning work in process inventory
$28,000
Add manufacturing costs;
Direct materials used
$559,000
Direct labor
$252,000
Factory overhead
$176,000
Less ending work in process inventory
($35,000)
Cost of goods manufactured
$980,000
3. Step 3
Prepare the cost of goods sold
Beginning finished good inventory
$51,000
Add cost of goods sold
$980,000
Less ending finished goods inventory
($48,000)
Cost of goods sold
$947,000
The risk-free rate of return is 9.0%, the expected rate of return on the market portfolio is 14%, and the stock of Xyrong Corporation has a beta coefficient of 2.0. Xyrong pays out 50% of its earnings in dividends, and the latest earnings announced were $20 per share. Dividends were just paid and are expected to be paid annually. You expect that Xyrong will earn an ROE of 18% per year on all reinvested earnings forever
a. What is the intrinsic value of a share of Xyrong stock? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Intrinsic valueS
b-1. If the market price of a share is currently $108, and you expect the market price to be equal to the intrinsic value one year from now, calculate the price of the share after one year from now. (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Price
b-2. What is your expected one-year holding-period return on Xyrong stock? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Expected one-year holding-period return
Answer:
$109
$118.81
18.26%
Explanation:
Intrinsic value can be determined using the constant growth dividend model
according to the constant dividend growth model
price = d1 / (r - g)
d1 = next dividend to be paid
r = cost of equity
g = growth rate
dividend, growth rate and cost of equity are not given and they have to be calculated
growth rate = retention rate x ROE
Retention rate = 1 - payout ratio = 1 - 0.5 = 0.5 = 50%
0.5 x 18% = 9%
According to the capital asset price model: cost of equity = risk free + beta x (market rate of return - risk free rate of return)
9% + 2x (14% - 9%) = 19%
dividend = payout ratio x earnings per share
0.5 x $20 = $10
Intrinsic value = [tex]\frac{10( 1 + 0.09)}{0.19 - 0.09}[/tex] = $109
Stock price in a year
[tex]\frac{10(1 + 0.9)^{2} }{0.19 - 0.09}[/tex] = 118.81
(dividend return + price return)
price return is the return on investment as a result of appreciation or depreciation of share price
Dividend return is the return on investment from dividend earned
price return = price at the end of the year - price at the beginning of the year
Wildhorse Company purchased 300 of the 1000 outstanding shares of Ayayai Company's common stock for $570000 on January 2, 2021. During 2021, Ayayai Company declared dividends of $85000 and reported earnings for the year of $370000. If Wildhorse Company used the fair value method of accounting for its investment in Ayayai Company, its Equity Investments (Ayayai) account on December 31, 2021 should be
Answer:
$664,000
Explanation:
Correct words: "If Wildhorse Company used the Equity value method of accounting for its investment in Ayayai Company"
Ownership percentage = 300/1000
Ownership percentage = 30%
Balance in equity investment at Dec 31, 2021 = $570,000 + Share in earnings ($370,000*30%) - Share in dividends paid out ($85000*20%)
Balance in equity investment at Dec 31, 2021 = $570,000 + $111,000 - $17,000
Balance in equity investment at Dec 31, 2021 = $664,000
So, the Equity Investments balance for Ayayai company on December 31, 2021 is $664,000.
Ice House Industries, Inc. has three operating departments: Cooking, Churning and Freezing. Indirect factory costs for the current period were Administrative, $560,000 and Maintenance, $98,000. Administrative costs are allocated to operating departments based on the number of workers and maintenance costs are allocated to operating departments based on square footage occupied.
cooking depart churning depart freezing depart
number of employees 2,940 employees 4,900 employees 1,960 employees
square feet occupied 33,250 Sq Ft 38,000 Sq Ft 23,750 Sq Ft
1. Based on the above data, determine the administrative cost allocated to each operating department of Ice House Industries, Inc.
(A) Cooking: $168,000 Churning: $280,000 Freezing: $112,000
(B) Cooking: $186,666 Churning: $186,666 Freezing: $186,666
(C) Cooking: $112,000 Churning: $280,000 Freezing: $168,000
(D) Cooking: $280,000 Churning: $112,000 Freezing: $168,000
(E) Cooking: $219,333 Churning: $219,333 Freezing: $219,333
A. Choice A
B. Choice B
C. Choice C
D. Choice D
E. Choice E
2. Based on the above data, determine the maintenance cost allocated to each operating department of Ice House Industries, Inc.
(A) Cooking: $219,333 Churning:$219,333 Freezing: $219,333
(B) Cooking: $230,00 Churning: $263,200 Freezing:$164,500
(C) Cooking: $33,250 Churning: $38,000 Freezing:$23,750
(D) Cooking: $32,666 Churning: $32,666 Freezing:$32,666
(E) Cooking:$34,300 Churning: $39,200 Freezing:$24,500
A. Choice A
B. Choice B
C. Choice C
D. Choice D
E. Choice E
Answer:
1. (A) Cooking: $168,000 Churning: $280,000 Freezing: $112,000
2. (E) Cooking:$34,300 Churning: $39,200 Freezing:$24,500
Explanation:
The computation is shown below:
a. For administrative cost allocated to each operating department is
Cooking
= $560,000 × 2,940 ÷ (2,940 + 4,900 + 1,960)
= $168,000
Churning
= $560,000 × 4,900 ÷ (2,940 + 4,900 + 1,960)
= $280,000
Freezing
= $560,000 × 1,960 ÷ (2,940 + 4,900 + 1,960)
= $112,000
b. For maintenance cost allocated to each operating department is
Cooking
= $98,000 × 33,250 ÷ (33,250 + 38,000 23750)
= $34,300
Churning
= $98,000 × 38,000 ÷ (33,250 + 38,000 23750)
= $39,200
And, for freezing
= $98,000 × 23,750 ÷ (33,250 + 38,000 23750)
= $24,500
Suppose a hypothetical economy is currently in a recessionary gap of $64 billion. Four economists agree that expansionary fiscal policy can increase total spending and move the economy out of recession, but they are debating which type of expansionary policy should be used.
Economist A believes that the government spending multiplier is 8 and the tax multiplier is 2. Economist B believes that the government spending multiplier is 4 and the tax multiplier is 8.
Required:
Compute the amount the government would have to increase spending to close the output gap according to each economist's belief.
Answer:
a. Amount the government would have to increase spending according Economist A = $8 billion
b. Amount the government would have to increase spending according Economist B = $16 billion
Explanation:
a. Economist A
Since government spending multiplier is believed to be 8, this implies that the government has to spend an amount that when it is multiplied by 8 it will be equal to recessionary gap of $64 billion in order to close the output gap. This amount can be calculated as follows:
Amount the government would have to increase spending according Economist A = Amount of recessionary gap / Government spending multiplier according to Economist A = $64 billion / 8 = $8 billion
b. Economist B
Since government spending multiplier is believed to be 4, this implies that the government has to spend an amount that when it is multiplied by 4 it will be equal to recessionary gap of $64 billion in order to close the output gap. This amount can be calculated as follows:
Amount the government would have to increase spending according Economist B = Amount of recessionary gap / Government spending multiplier according to Economist B = $64 billion / 4 = $16 billion
Birch Corp., a calendar-year corporation, was formed three years ago by its sole shareholder, James, who has operated it as an S corporation since its inception. Last year, James made a direct loan to Birch Corp. in the amount of $6,650. Birch Corp. has paid the interest on the loan but has not yet paid any principal. (Assume the loan qualifies as debt for tax purposes.) For the year, Birch experienced a $32,000 business loss.
What amount of the loss clears the tax basis limitation, and what is James?s basis in his Birch Corp. stock and Birch Corp. debt in each of the following alternative scenarios?
a. At the beginning of the year, James's basis in his Birch Corp. stock was $46,100 and his basis in his Birch Corp. debt was $6,600.
b. At the beginning of the year, James's basis in his Birch Corp. stock was $10,300 and his basis in his Birch Corp. debt was $6,600.
c. At the beginning of the year, James's basis in his Birch Corp. stock was $0 and his basis in his Birch Corp. debt was $6,600.
Answer:
A. $32,000 clears the tax basis limitation
$14,100 basis in his Birch Corp. stock
$6,600 Birch Corp. debt
B. $16,900 clears the tax basis limitation
$0 basis in his Birch Corp. stock
$0 Birch Corp. debt
$15,000 suspended loss
C. $6,600 clears the tax basis limitation
$0 basis in his Birch Corp. stock
$0 Birch Corp. debt
$25,400 suspended loss
Explanation:
A. Based on the information given All the $32,000 amount of the loss will clear up the tax basis limitation which means that James’s stock basis will be reduced to $14,100 ($46,100 – $32,000 loss) while His debt basis on the other hand remains at $6,600.
Therefore:
$32,000 clears the tax basis limitation
$14,100 basis in his Birch Corp. stock
$6,600 Birch Corp. debt
B. Based on the information given of the $32,000 loss, $16,900($10,300+$6,600) will clear up the tax basis limitation, While his stock basis will be reduced from $10,300 to $0, and his debt basis will be reduced from $6,600 to $0. Which means that he has a suspended loss of $15,100 ($32,000 - $16,900)
Therefore:
$16,900 clears the tax basis limitation
$0 basis in his Birch Corp. stock
$0 Birch Corp. debt
$15,000 suspended loss
C. Based on the information given the amount of $6,600 will clear up the tax basis limitation. His stock basis will remains at $0, while his debt basis will be reduced from $6,600 to $0. Which means that he has a suspended loss of $25,400 ($32,000 – $6,600)
Therefore:
$6,600 clears the tax basis limitation
$0 basis in his Birch Corp. stock
$0 Birch Corp. debt
$25,400 suspended loss
On August 1, Sparky assigned $100,000 of the accounts receivable to B Bank and received 90% of the value of the accounts assigned less a finance fee of $1,000. B Bank charges 1% per month on the outstanding loan balance. Cash collections from assigned accounts are to be remitted monthly to B Bank to cover both principal and interest payments. During August Sparky collected $30,000 in cash of the accounts receivable assigned and also accepted sales returns of $3,000 from assigned accounts. During September, Sparky collected $50,000 in cash on accounts assigned and, in addition, wrote off $2,000 of assigned accounts receivable as uncollectible. As a result of these transactions, determine the ending balance in the Accounts Receivable Assigned and Note Payable.
Answer and Explanation:
The computation of the ending balance in the Accounts Receivable Assigned and Note Payable is shown below:
For account receivable assigned:
Beginning account receivable $100,000
cash collected -$300,000
Sales returns - $3,000
Cash collected during September -$50,000
Uncollectible account receivable -$2,000
Ending balance of the account receivable $15,000
For note payable
Beginning balance (90% of $100,000) $90,000
Interest on the loan (1% of $90,000) $900
Cash paid during the August -$30,000
Beginning balance of September $60,900
Interest paid (1% of $60,900) $609
Cash paid during September -$50,000
Ending balance $11,509
_____ Web sites are dedicated to employment opportunities with a given city, state, or country.
Education
Industry
Government
Corporate
Answer:
the answer is government
Miracle Clean's variable costs are $3.00 per bottle and Fixed Expenses are $350,000 per year. The company currently sells 150,000 bottles for $6.50 which results in profit of $175,000. The company is considering raising the selling price to $7.00 per bottle which is expected to decrease sales by 20%. If the price is raised profits are expected to (increase/decrease) by $__________ per year. (Enter the profit increase or decrease as a whole number.)
Answer:
If the company decides to raise the selling price by $0.5, net income will decrease by $45,000
Explanation:
Giving the following information:
Unitary variable cost= $3
Number of units sold= 150,000
Selling price= $6.5
To calculate the effect on income, we need to use the following formula:
Net income= number of units sold*unitary contribution margin - fixed costs
Previous:
Net income= 150,000*3.5 - 350,000
Net income= $175,000
After:
Net income= 120,000*4 - 350,000
Net income= $130,000
Unitary contribution margin= 7 - 3= 4
Number of units sold= 150,000*0.8= 120,000
If the company decides to raise the selling price by $0.5, net income will decrease by $45,000
The most profitable form of business is
A Sole proprietorships
B General partnerships
C Limited partnerships
D Corporations
Answer:
d
Explanation:
Western Electric has 35,000 shares of common stock outstanding at a price per share of $85 and a rate of return of 12.70 percent. The firm has 7,600 shares of 8.40 percent preferred stock outstanding at a price of $98.00 per share. The preferred stock has a par value of $100. The outstanding debt has a total face value of $422,000 and currently sells for 114 percent of face. The yield to maturity on the debt is 8.26 percent. What is the firm's weighted average cost of capital if the tax rate is 40 percent
Answer:
10.83 %
Explanation:
Weighted average cost of capital = Cost of Equity x Weight of Equity + Cost of Debt x Weight of Debt + Cost of Preferred Stock x Weight of Preferred Stock
therefore,
Weighted average cost of capital = 12.70 % x 70.82 % + 4.956 % x 17.73 % + 8.40 % x 11.45 %
= 10.83 %
Remember to use after tax cost of debt.
Match each of the following terms with the correct definition:
a. additional paid-in capital
b. issued and outstanding
c. retained earnings
d. treasury stock
e. authorized share capital
f. par value
Correct Definitions:
A. The price at which each share is recorded in the company’sbooks
B. Held by investors
C. Cumulative amount of profits that have been plowed back
D. The difference between the amount of cash raised by anequity issue and the par value of the issue
E. The maximum number of shares that can be issued withoutshareholder approval
F. The amount that the company has spent
PBYI’s current BID-ASK is $59.00 - $60.00. PBYI is going to release their annual report tomorrow; you have special skill in valuing biotech companies, and you believe that PBYI has an expected alpha tomorrow of 2% compared to the market’s current best estimate of fair value. Is the following statement true? PBYI is currently overpriced. True False 1 points QUESTION 8 If you purchased PBYI now then sold it tomorrow right before market close, what is your best estimate for your expected profit after taking transactions cost into account? (in %, rounded to 1 decimal place)
Answer:
PBYI is not over priced
expected profit = $0.18
Explanation:
BID - ASK price : 59.00 - 60.00
expected alpha = 2%
In this scenerio ( positive alpha ) you can buy the PBYI at $60.00
when you buy at $60 the value will increase to ; 60 + ( 2% * 60 ) = $61.2
when you resell the security ( PBYI ) you will get ; ( 61.2 )* (59/60) = $60.18
therefore your expected profit = 60.18 - 60 = $0.18
PBYI is not not currently Overpriced since you can buy and make profit after selling the next day
At December 31, Gill Co. reported accounts receivable of $288,000 and an allowance for uncollectible accounts of $1,500 (credit) before any adjustments. An analysis of accounts receivable suggests that the allowance for uncollectible accounts should be 1% of accounts receivable. The amount of the adjustment for uncollectible accounts would be:
Answer:
$1,380
Explanation:
Given that;
Accounts receivables = $288,000
Allowance for uncollectible accounts = $1,500 (credit balance)
Allowance should be 1% of accounts receivables = $288,000 × 1% = 2,880
Then, the adjustment = $2,880 - $1,500 = $1,380
Therefore, the amount of the adjustment for uncollectible accounts would be $1,380
Can I use MemberPress to create and sell online courses?
Answer:Absolutely! the MemberPress Courses Add-on is built right in and is included as part of MemberPress. No separate download is required. And the 100% visual builder is super simple to use
https://memberpress.com/myohoguy/home
Explanation:
I have been using this for a while now so you can easily create and sell online courses
Answer:
Yes you can do this on Memberpress because you can offer a lot of different topics and sell online courses using this platform
Explanation:
Think about a financial decision you made regarding the purchase of a big-ticket item or investment within the last five years. Provide a summary on the discussion thread, answering the following questions:What decision did you make?How prepared were you to make the decision?What was your thought process as you were making the decision?What financial information did you need to make the decision and why?What lessons have you learned that you will apply to future financial decisions?
The Cork Company has been sent a special order of 6,000 dongles to be shipped at the end of the month at a selling price of $7 each. The company has a production capacity of 90,000 dongles per month with total fixed production costs of $144,000. At present, the company is selling 80,000 dongles per month through regular channels at a selling price of $11 each. For these regular sales, the cost for one dongle is:
Variable Production $4.60
Cost Fixed Production Cost $1.80
Variable Selling Expense $1.00
At what selling price per unit should Cork be indifferent between accepting or rejecting the special offer?
a. $7.40.
b. $7.70
c. $6.40
d. $4.90.
e. None of the answers provided is correct.
Answer:
Indifferent special order price=$5.60
Explanation:
To determine whether or not Cork Company should accept the order, we will compare the variable cost of the order to the sales value . If the special order generates a positive contribution margin, then it should be accepted.'
The relevant cash flows to be considered here includes
1. Variable cost of the special order
2. Sales revenue from the special order.
Note that the fixed cost are general unavoidable costs which would be incurred either way. And therefore should not be considered .
variable cos per unit = 4.60 +1.00= 5.60
$
Sales revenue from special order
(7×6,000) 42,000
Variable cost (5.60× 6,000) (33,600)
Net income from special order 8,400
A special order price that will produce a net income of zero is that which will make the Cork Company indifferent. And such price is that which equals to the variable cost of selling
Indifferent special order price = variable cost per unit = $5.60
Indifferent special order price=$5.60
The special offers under the cost accounting are the changes or the events arranged in between the regular business operations. The special offer is launched at lower or higher variable costs. This is done either to attract customers or to clear off the stock.
The correct option is e. None of the answer provided is correct.
The selling price per unit that is indifferent between accepting or rejecting the special offer is $5.60
As per the computation, the special offer should be accepted.
Computations:
The indifferent special order price should include only the variable cost.
[tex]\text{Indifferent price}=\text{Variable Production cost}+\text{Variable selling expense}\\\\=\$4.60+\$1.00\\\\=\$5.60[/tex]
Computation of net income from a special offer:
[tex]\text{Net Income}=\text{Sales revenue}-\text{Variable cost}\\\\=(\$7\times6,000)-(\$5.60\times6,000)\\\\=\$442,000-\$33,600\\\\=\$8,400[/tex]
For taking the decision of accepting or rejecting the special offer:
variable costs of existing and special offers are compared.The variable cost and the selling price must be equal for generating a net income of zero.The positive contribution margin indicates acceptance of the special offer.To know more about cost accounting, refer to the link:
https://brainly.com/question/4340876
On October 1, 2021, the Allegheny Corporation purchased equipment for $148,000. The estimated service life of the equipment is 10 years and the estimated residual value is $5,000. The equipment is expected to produce 260,000 units during its life.Required:Calculate depreciation for 2021 and 2022 using each of the following methods. Partial-year depreciation is calculated based on the number of months the asset is in service.
Answer:
Missing word: "1. Straight line. 2. Double-declining balance. Depreciation rate(20%)"
1. Straight line depreciation
Annual Depreciation = Cost - Salvage / Estimated Useful Life (years)
Annual Depreciation = $143,000 / 10
Annual Depreciation = $14,300
Depreciation Expenses = Annual Depreciation * Fraction of Year
2021: Depreciation Expenses = 14300 * 3/12
Depreciation Expenses = $3575
2022: Depreciation Expenses = 14300 * 12/12
Depreciation Expenses = $14,300
2. Double-declining balance
Depreciation Expense = Beginning of period Book value * Depreciation rate(%) * Fraction of Year
2021: Depreciation Expense = $148000 * 20% 3/12
Depreciation Expense = $7400
Book Value = Beginning of period Book value - Accumulated Depreciation
Book Value = $148000 - $7400
Book Value = $140,600
2022: Depreciation Expense = $140,600 * 20% * 12/12
Depreciation Expense = $35,520
Book Value = Beginning of period Book value - Accumulated Depreciation
Book Value = $140,600 - $35,520
Book Value = $105,080
Aldo Industries, Inc. has two service departments (Human Resources and Building Maintenance) and two production departments (Machining and Assembly). The company allocates Building Maintenance cost on the basis of square footage and believes that Building Maintenance provides more service than Human Resources. The square footage occupied by each department follows.
Human Resources 6,000
Building Maintenance 13,000
Machining 1 8,000
Assembly 26,000
Assuming use of the step-down method, over how many square feet would the Building Maintenance cost be allocated (i.e., spread)?
Answer:
50,000 Square feet
Explanation:
Building maintenance provides more service than human resource and this means the cost of Building maintenance departments would be allocated to all remaining three department including human resource department.
Square feet over which Building Maintenance cost would be allocated = Square Footage of Human Resources + Square Footage of Machining + Square Footage of Assembly
= 6,000 + 18,000 + 26,000
= 50,000
A machine cost $1104000, has annual depreciation of $184000, and has accumulated depreciation of $874000 on December 31, 2020. On April 1, 2021, when the machine has a fair value of $253000, it is exchanged for a machine with a fair value of $1242000 and the proper amount of cash is paid. The exchange had commercial substance. The new machine should be recorded at $1127000. $1242000. $989000. $1219000.
Answer:
$1,242,000
Explanation:
The new machine is to be recorded at its Fair Value which is $1,242,000 because the exchange has a commercial substance. Asset forgone is credited by its original cost, and accumulated depreciation till date of exchange is debited. Cash paid and loss or gain is adjusted as required. But the new asset is debited by the amount of its Fair Value on the day of exchange.
The following information is available for Sunland Company for the year ended December 31, 2022.
Beginning cash balance $38,250
Accounts payable decrease 3,145
Depreciation expense 137,700
Accounts receivable increase 6,970
Inventory increase 9,350
Net income 241,485
Cash received for sale of land at book value 29,750
Cash dividends paid 10,200
Income taxes payable increase 3,995
Cash used to purchase building 245,650
Cash used to purchase treasury stock 22,100
Cash received from issuing bonds 170,000
Required:
Prepare a statement of cash flows using the indirect method.
Answer:
see explanation
Explanation:
Indirect method method reconciles the Net Income to the Operating Cash flow by adjusting for non -cash items and changes in working capital included in Net Income.
Remember to show Cash flows from Operating, Investing and Financing Activities as these make up a full Cash flow Statement.
You are evaluating a proposed expansion of an existing subsidiary located in Switzerland. The cost of the expansion would be SF 14 million. The cash flows from the project would be SF 4.0 million per year for the next five years. The dollar required return is 14 percent per year, and the current exchange rate is SF 1.05. The going rate on Eurodollars is 6 percent per year. It is 4 percent per year on Swiss francs.
a. Convert the projected franc flows into dollar flows and calculate the NPV.
b-1. What is the required return on franc flows?
b-2. What is the NPV of the project in Swiss francs?
b-3. What is the NPV in dollars if you convert the franc NPV to dollars?
Answer:
a-The net present value in dollars is 494939.0687.
b-1-The required return on franc flows is 11.72%.
b-2-The net present value in Francs is 519686.02.
b-3-The NPV in dollars as calculated from NPV in Francs is $494939.07
Explanation:
a
In order to find the solution, firstly the exchange rate for the 5 years is calculated. It is calculated using the formula:
[tex]EER=CER*(1-GRD+GRF)^t[/tex]
Here
EER is the expected exchange rate which is to be calculatedCER is the current exchange rate which is 1.05GRD is the going rate of dollars which is 6% or 0.06GRF is the going rate of Francs which is 4% or 0.04t is the time in years.From this exchange rate, the PV factor is calculated which is than used to find the present value and similarly net present value in total. The solution is provided in the attached Excel Sheet.
The net present value in dollars is 494939.07
b-1
The required rate on the Franc return is given as:
[tex]FRR=(1+DR)(1-GRD+GRF)-1[/tex]
Here
FRR is the franc return rate which is to be calculatedDR is the dollar rate which is 14% or 0.14GRD is the going rate of dollar which is 6% or 0.06GRF is the going rate of Franc which is 4% or 0.04So the value becomes:
[tex]FRR=(1+DR)(1-GRD+GRF)-1\\FRR=(1+0.14)(1-0.06+0.04)-1\\FRR=0.1172\text{ or }11.72\%[/tex]
The required return on franc flows is 11.72%.
b-2
Similar to part a, the solution is found for the return rate of 11.72 and the exchange rate is not required. The values are as indicated in the excel sheet attached.
The net present value in Francs is 519686.02.
b-3
In order to convert the Franc NPV to dollars, the exchange rate of 1.05SF is used which gives
[tex]NPV_{dollars}=\dfrac{NPV_{Francs}}{ER}[/tex]
Here
NPV_dollars is the value of NPV which is to be calculated.NPV_francs is the value of NPV calculated in previous step which is 510686.02.ER is the exchange rate whose value is 1.05So the equation becomes:
[tex]NPV_{dollars}=\dfrac{NPV_{Francs}}{ER}\\NPV_{dollars}=\dfrac{519686.02}{1.05}\\NPV_{dollars}=494939.0666=\$494939.07[/tex]
The NPV in dollars as calculated from NPV in Francs is $494939.07
Joint products A and B emerge from common processing costs of $100,000 and yield 2,000 units of Product A and 1,000 units of Product B. Product A can be sold for $100 per unit. Product B can be sold for $120 per unit. The amount of joint costs allocated to Product A (if joint costs are allocated on the basis of relative sales value) will be $ (rounded to nearest dollar).
Answer:
Product A - Joint Cost Allocated = $62500
Explanation:
To calculate the allocation of joint costs to Product A, we must first calculate the sales revenue or value for both products.
Total sales value - Product A = 100 * 2000 = $200000
Total sales value - Product B = 120 * 1000 = $120000
Total Sales Value = 200000 + 120000 = $320000
The amount of Joint costs that will be allocated to Product A will be,
Product A - Joint Cost Allocated = (200000 / 320000) * 100000
Product A - Joint Cost Allocated = $62500
Terra Corporation purchased equipment with a 10-year useful life and zero residual value for $100,000. At the end of the fourth year, the equipment is exchanged for new equipment worth $110,000. Terra gets a trade-in allowance of $70,000 on the exchange, with the remaining $40,000 paid in cash. Which of the following is true of the net effect of this transaction? Assume the straight-line depreciation method is used.
A. Assets decrease by $10,000
B. Assets increase by $10,000
C. Liabilities increase by $10,000
D. Total stockholders' equity decreases by $10,000
E. Total stockholders' equity increases by $10,000
Answer:
Assets increase by $10,000
Total stockholders' equity decreases by $10,000
Explanation:
Assets increase =($110,000-$100,000)
Assets increase=$10,000
Total stockholders' equity decreases=$100,000-$110,000
Total stockholders' equity decreases= -$10,000
Therefore Based on the information given what is true of the net effect of the transaction are :
Assets increase by $10,000
Total stockholders' equity decreases by $10,000
Sicilian Defence, a division of Queen's Gambit Corp., has a net operating income of $60,000 and average operating assets of $300,000. The minimum required rate of return for the company is 15%. If the manager of the Sicilian Defence division is evaluated based on residual income, will she want to make an investment of $100,000 that would generate additional net operating income of $18,000 per year?
Answer:
Queen's Gambit Corp.
Sicilian Defence Division
If the manager of the Sicilian Defence division is evaluated based on residual income, will she want to make an investment of $100,000 that would generate additional net operating income of $18,000 per year?
Yes.
The additional investment yields comparable positive Residual Income.
Explanation:
a) Data and Calculations:
Net operating income of Sicilian Defence Division = $60,000
Average operating assets = $300,000
Required rate of return for the company = 15%
Residual income (RI)= Operating Income - (Operating Assets x Required Rate of Return)
= $60,000 - ($300,000 * 15%)
= $60,000 - $45,000
= $15,000
Investment cost = $100,000
Additional net operating income = $18,000
Residual Income = $18,000 - ($100,000 * 15%)
= $18,000 - $15,000
= $3,000
Total residual income = $78,000 - ($400,000 * 15%)
= $78,000 - $60,000
= $18,000
Compute the payback period for each of these two separate investments:
a. A new operating system for an existing machine is expected to cost $250,000 and have a useful life of four years. The system yields an incremental after-tax income of $72,115 each year after deducting its straight-line depreciation. The predicted salvage value of the system is $10,000.
b. A machine costs $200,000, has a $13,000 salvage value, is expected to last eight years, and will generate an after-tax income of $39,000 per year after straight-line depreciation.
Answer:
A. 1.89 years
B. 2.33 years
Explanation:
According to the scenario, computation of the given data are as follows,
(A) After-tax income = $72,115
Expected cost = $250,000
Useful life = 4 years
Salvage value = $10,000
Depreciation Value = ($250,000 - $10,000) ÷ 4 = $60,000
Annual net cashflow = After tax income + Depreciation
= $72,115 + $60,000 = $132,115
Payback Period = Machine expected cost ÷ Annual net cash flow
= $250,000 ÷ $132,115
= 1.89 years
(B) After-tax income = $39,000
Machine cost = $200,000
Useful life = 8 years
Salvage value = $13,000
Depreciation value = ($200,000 - $13,000) ÷ 4 = $46,750
Annual net cashflow = After tax income + Depreciation
= $39,000 + $46,750 = $85,750
Payback Period = Machine expected cost ÷ Annual net cash flow
= $200,000 ÷ $85,750
= 2.33 years
Estimated Income Statements, using Absorption and Variable Costing
Prior to the first month of operations ending October 31, Marshall Inc. estimated the following operating results:
Sales (15,200 x $53) $805,600
Manufacturing costs (15,200 units):
Direct materials 484,880
Direct labor 115,520
Variable factory overhead 53,200
Fixed factory overhead 63,840
Fixed selling and administrative expenses 17,400
Variable selling and administrative expenses 21,000
1. Prepare an estimated income statement, comparing operating results if 40,000 and 50,000 units are manufactured in the absorption costing format.
2. Prepare an estimated income statement, comparing operating results if 15,200 and 16,800 units are manufactured in the variable costing format.
Answer:
Marshall Inc.
1. Estimated Income Statement for the year ending October 31 (Absorption Costing)
Sales volume 40,000 Units 50,000 Units
Sales Revenue $2,120,000 $2,650,000
Cost of goods sold:
Direct materials ($31.90 per unit) 1,276,000 1,595,000
Direct labor ($7.60 per unit) 304,000 380,000
Variable factory overhead ($3.50 per unit) 140,000 175,000
Fixed factory overhead 63,840 63,840
Total cost of goods sold $1,783,840 $2,213,840
Gross profit $336,160 $436,160
Expenses:
Fixed selling & administrative expenses 17,400 17,400
Variable selling & administrative expenses 55,263 69,079
Total selling & administrative expenses $72,663 $86,479
Net income $263,497 $349,681
2. Estimated Income Statement for the year ending October 31 (Variable Costing)
Sales volume 15,200 Units 16,800 Units
Sales Revenue $805,600 $890,400
Cost of goods sold:
Direct materials ($31.90 per unit) 484,880 535,920
Direct labor ($7.60 per unit) 115,520 127,680
Variable factory overhead ($3.50 per unit) 53,200 58,800
Variable selling & administrative expenses 21,000 23,210
Total Variable costs $674,600 $745,610
Gross profit $131,000 $144,790
Fixed Expenses:
Fixed selling & administrative expenses 17,400 17,400
Fixed factory overhead 63,840 63,840
Total fixed expenses $81,240 $81,240
Net income $49,760 $63,550
Explanation:
a) Data and Calculations:
Estimated Operating Results
Sales (15,200 x $53) $805,600
Manufacturing costs (15,200 units):
Direct materials 484,880 ($31.90 per unit)
Direct labor 115,520 ($7.60 per unit)
Variable factory overhead 53,200 ($3.50 per unit)
Fixed factory overhead 63,840
Fixed selling and administrative expenses 17,400
Variable selling and administrative expenses 21,000
On January 1, 2020, Gerald received his 50% profits and capital interest in High Air, LLC in exchange for $2,000 in cash and real property with a $3,000 tax basis secured by a $2,000 nonrecourse mortgage. High Air reported a $15,000 loss for its 2020 calendar year. How much loss can Gerald deduct, and how much loss must he suspend if he only applies the tax basis loss limitation
Answer:
$4,000;$3,500
Explanation:
Calculation to determine How much loss can Gerald deduct, and how much loss must he suspend if he only applies the tax basis loss limitation
Calculation for How much loss can Gerald deduct
Gerald's loss Deduction = [$2,000 + $3,000 - $2,000 + (50% × $2,000)]
Gerald's loss Deduction =[$2,000 + $3,000 - $2,000 + $1,000]
Gerald's loss Deduction=$4,000
Calculation for how much loss must he suspend
Loss to Suspend=(50%*$15,000)-$4,000
Loss to Suspend=$7,500-$4,000
Loss to Suspend=$3,500
Therefore the amount of loss that Gerald can deduct is $4,000 and the amount of loss that he must suspend if he only applies the tax basis loss limitation is $3,500