Answer: A. An example of an agency cost is when an outside investor is only willing to pay less for stock because she thinks the original owner will consume too many perquisites.
Explanation:
An agency cost typically occurs between between a principal and the agent. This occurs when the agent is given much power and make decisions on behalf of the principal.
An example of an agency cost is when an outside investor is only willing to pay less for stock because she thinks the original owner will consume too many perquisites. The agent typically has more information and there might be different incentives sometimes.
Therefore, the correct option is A.
A firm has an average loan outstanding of $75,000,000 on a $100,000,000 line of credit. There is a commitment fee of 0.25% on the unused portion of the line, and the interest rate on the borrowed funds is LIBOR 175 basis points. LIBOR is 3.0%. What is the effective annual borrowing rate on the line of credit
Answer:
2.44%
Explanation:
Average outstanding loan = $75,000,000
Total line of credit = $100,000,000
Unused portion = $25,000,000 ($100,000,000-$75,000,000)
Commitment fee = 0.25%
Interest rate = 3.175% (3+0.175%)
Commitment fee = Unused portion*Commitment fee rate
Commitment fee = $25,000,000*0.0025
Commitment fee = $62,500
Interest = Average outstanding balance*Interest rate
Interest = $75,000,000*0.03175
Interest = $2,381,250
Total borrowing cost = Commitment fee + Interest
Total borrowing cost = $62,500 + $2,381,250
Total borrowing cost = $2,443,750
Effective borrowing rate = Total borrowing cost / Credit limit
Effective borrowing rate = $2,443,750/$100,000,000
Effective borrowing rate = 0.0244375
Effective borrowing rate = 2.44%
According to the survey article on mergers by Mukherjee et al,
A) a minority of managers believe that diversification can be a good reason to merge.
B) acquiring managers discount targets’ cash flows at the targets’ cost of capital.
C) managers do not believe operating synergies to be important in merger decisions.
D) managers do not use the discounted cash flow formula to value a target in a merger.
What is the purpose of database normalization in tables?
Answer:
This includes creating tables and establishing relationships between those tables according to rules designed both to protect the data and to make the database more flexible by eliminating redundancy and inconsistent dependency.
Answer: its A
Explanation:
Use the following information regarding the Newcastle Corporation to prepare a statement of cash flows using the indirect method:
Accounts payable decrease $9,100
Accounts receivable increase 12,740
Wages payable decrease 5,460
Amortization expense 29,120
Cash balance, January 1 54,600
Cash balance, December 31 12,740
Cash paid as dividends 10,920
Cash paid to purchase land 182,000
Cash paid to retire bonds payable at par 136,500
Cash received from issuance of common stock 81,900
Cash received from sale of equipment 21,840
Depreciation expense 70,980
Gain on sale of equipment 25,480
Inventory increase 23,660
Net income 174,720
Prepaid expenses increase 14,560
Answer and Explanation:
The preparation of the cash flow statement is presented below;
Cash Flows from Operating activities
Net income $174,720
Adjustments made
Less: Accounts payable decrease ($9,100)
Less Accounts receivable increase ($12,740)
Less: Wages payable decrease ($5,460)
Add: Amortization expense $29,120
Add: Depreciation expense $70,980
Less: Gain on sale of equipment ($25,480)
Less: Inventory increase ($23,660)
Less; Prepaid expenses increase ($14,560)
Net Cash Flows from Operating activities $183,820
Cash Flows from Investing activities
Cash paid to purchase land ($182,000)
Add: Cash received from the sale of equipment $21,840
Net Cash flows from Investing activities ($160,160)
Cash Flows from Financing Activities
Cash paid as dividends ($10,920)
Less; Cash paid to retire bonds payable at par ($136,500)
Add: Cash received from the issuance of common stock $81,900
Net Cash Flows from Financing activities ($65,520)
Net Increase (Decrease) in Cash ($41,860)
Add: Cash balance, January 1 $54,600
Cash balance, December 31 $12,740
Brightstone Tire and Rubber Company has capacity to produce 204,000 tires. Brightstone presently produces and sells 156,000 tires for the North American market at a price of $100 per tire. Brightstone is evaluating a special order from a European automobile company, Euro Motors. Euro is offering to buy 24,000 tires for $86.5 per tire. Brightstone's accounting system indicates that the total cost per tire is as follows:
Direct materials $54
Direct labor 24
Factory overhead (62% variable) 24
Selling and administrative expenses (44% variable) 25
Total $127.00
Brightstone pays a selling commission equal to 4% of the selling price on North American orders, which is included in the variable portion of the selling and administrative expenses. However, this special order would not have a sales commission. If the order was accepted, the tires would be shipped overseas for an additional shipping cost of $7.65 per tire. In addition, Euro has made the order conditional on receiving European safety certification. Brightstone estimates that this certification would cost $165,424.
Required:
a. Prepare a differential analysis dated January 21 on whether to reject (Alternative 1) or accept (Alternative 2) the special order from Euro Motors.
b. Determine whether the company should reject (Alternative 1) or accept (Alternative 2) the special order from Euro Motors
c. What is the minimum price per unit that would be financially acceptable to Brightstone?
Answer:
Brightstone Tire and Rubber Company
a. Differential Analysis dated January 21
Alternative 1 Alternative 2
Reject Accept
Revenue from special order ($2,076,000) $2,076,000
Avoidable costs 2,493,120 2,831,520
Cost Differential ($417,120) ($755,520)
b. The company should reject the special order from Euro Motors as it will incur more costs when it accepts than when it rejects the special order.
c. The minimum price per unit that would be financially acceptable to Brightstone is $117.98.
Explanation:
a) Data and Calculations:
Production capacity in tires = 204,000
Current production and sales units = 156,000
Selling price per tire for the North American market = $100
Special order of 24,000 tires from Euro Motors = $86.50 per tire
Total cost per tire: Total Variable
Direct materials $54 $54
Direct labor 24 24
Factory overhead (62% variable) 24 14.88
Selling and administrative expenses (44% variable) 25 11
Total $127.00 $103.88
Special Order:
Offer price = $86.50
Reject Accept
Variable cost per unit $103.88 $2,493,120
Less selling commission (0.44)
Additional shipping cost 7.65
Cost of certification 6.89
Total per unit costs = $117.98 $2,813,520
Operating income (loss) ($31.48)
The phase of the business cycle that includes a period of consistent growth
in GDP and falling unemployment is called a(n).
A. trough
B. contraction
C. expansion
D. peak
The phase of the business cycle that includes a period of consistent growth in GDP and falling unemployment is called expansion.
What do you mean by business cycle?A business cycle is characterized by four main stages that are expansion, peak, contraction, and trough.
The business cycle stage of expansion is when an economy experiences relatively rapid growth, interest rates tend to be low, production increases and inflationary pressures build.
Therefore, C is the correct option.
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Direct Labor Variances
The following data relate to labor cost for production of 22,000 cellular telephones:
Actual: 4,220 hrs. at $44.50
Standard: 4,160 hrs. at $46.00
a. Determine the direct labor rate variance, direct labor time variance, and total direct labor cost variance. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.
Rate variance $
Time variance $
Total direct labor cost variance $
b. The employees may have been less-experienced workers who were paid less than more-experienced workers or poorly trained, thereby resulting in a labor rate than planned. The lower level of experience or training may have resulted in efficient performance. Thus, the actual time required was than standard.
Answer:
Explanation:
a. The Direct labor rate variance will be:
= 4220 × (44.5 - 46)
= 4220 × -1.5
= -6330 Favorable
The direct labor time variance will be:
= 46 × (4220-4160)
= 46 × 60
= 2760 Unfavorable
Total direct labor cost variance will be:
= (4220 × 44.5) - (4160 × 46)
= 187790 - 191360
= -3570 Favorable
b. The employees may have been less-experienced workers who were paid less than more-experienced workers or poorly trained, thereby resulting in a (lower) labor rate than planned.
The lower level of experience or training may have resulted in (less) efficient performance. Thus, the actual time required was (more) than standard.
Tech Solutions is a consulting firm that uses a job-order costing system. Its direct materials consist of hardware and software that it purchases and installs on behalf of its clients. The firm’s direct labor includes salaries of consultants that work at the client’s job site, and its overhead consists of costs such as depreciation, utilities, and insurance related to the office headquarters as well as the office supplies that are consumed serving clients.
Tech Solutions computes its predetermined overhead rate annually on the basis of direct labor-hours. At the beginning of the year, it estimated that 72,500 direct labor-hours would be required for the period’s estimated level of client service. The company also estimated $652,500 of fixed overhead cost for the coming period and variable overhead of $0.50 per direct labor-hour. The firm’s actual overhead cost for the year was $671,800 and its actual total direct labor was 77,550 hours.
Required:
1. Compute the predetermined overhead rate.
2. During the year, Tech Solutions started and completed the Xavier Company engagement. The following information was available with respect to this job:
Direct materials $ 43,500
Direct labor cost $ 23,400
Direct labor hours worked 300
Compute the total job cost for the Xavier Company engagement.
Complete this question by entering your answers in the tabs below.
Required 1 Required 2
Compute the predetermined overhead rate. (Round your answer to 2 decimal places.)
Predetermined overhead rate per DLH
Compute the total job cost for the Xavier Company engagement. (Round your intermediate calculations to 2 decimal places.)
Direct materials
Direct labor
Overhead applied
Total manufacturing cost
Answer:
1. $9.50 per Direct labor hour
2. $69,750
Explanation:
1. Computation for the predetermined overhead rate
First step is to calculate the Total Estimated overhead cost
Variable overhead cost $36,250
(72,500 Direct labor hours *$ 0.50 )
Add Fixed overhead cost $652,500
Total Estimated overhead cost $688,750
Now let calculate the predetermined overhead rate
Using this formula
Predetermined overhead rate = Total estimated overhead cost / Total estimated direct labor hours
Let plug in the formula
Predetermined overhead rate = $688,750 / 72,500
Predetermined overhead rate = $9.50 per Direct labor hour
Therefore Predetermined overhead rate will be $9.50 per Direct labor hour
2. Computation for the total job cost for the Xavier company Engagement
Direct Materials $43,500
Direct Labor $ 23,400
Overhead applied $2,850
(300 Direct labor * $9.50 )
Total Manufacturing cost $69,750
Therefore total job cost for the Xavier Company engagement will be $69,750
Suppose that you are considering purchasing an investment property for $30 million. The property is expected to have a year 1 net operating income of $1.8 million. You expect to finance the purchase of the property with a 30-year loan for 60% of the purchase price. If the annual interest rate on the loan is 5% with monthly payments and monthly compounding, what will the year 1 before-tax cash flow be for the property
Answer:
b. $640,465.32
Explanation:
Options include "$1,800,000, $640,465, ($132,558), $614,846, $704,512"
I/Y = 0.42% [5%/12]
N = 360 [12*30]
PV = -$18,000,000 [-30000000*60%]
FV = $0
So, we calculate the PMT using financial calculator
Monthly payment (CPT) = PMT(I/Y. N, PV, FV)
Monthly payment (CPT) = PMT(0.42%. 360, 18000000, 0)
Monthly payment (CPT) = $96,627.89
Before-tax cash flow = Expected year 1 net operating income - 12*PMT
Before-tax cash flow = $1,800,000 - 12*$96,627.89
Before-tax cash flow = $1,800,000 - $1,159,534.68
Before-tax cash flow = $640,465.32
The Walking Dead Co. provides services on-account and in exchange for cash. All general ledger accounts are adjusted monthly. For September, the following information is available: Accounts Receivable on September 1st is $22,400 (debit) Allowance for Doubtful Accounts on September 1st is $4,400 (credit) Services provided during September for cash $20,000 Services provided during September on-account $45,000 During the month collections on account were $34,400 and accounts written off as uncollectible were $2,000. The Walking Dead estimates bad debts at 8% of accounts receivable. After adjusting journal entries are recorded, what is the September 30th balance in Allowance for Doubtful Accounts
Answer:
See below
Explanation:
Given that,
Accounts receivables :
Beginning balance 1 September = $22,400
Services on account = $45,000
Cash collected = $34,400
Written off accounts = $2,000
Allowance for doubtful accounts:
Beginning balance 1 September = $4,400
Adjusted balance for Allowance for doubtful accounts on 30th September
= Beginning balance 1 September - Written off accounts + Bad debt expense
= $4,400 + $2,000 + ($45,000 × 8%)
= $4,400 + $2,000 + $3,600
= $6,000
A PROSPECTIVE BUYER SIGNS AN OFFER TO PURCHASE A RESIDENTIAL PROPERTY. ALL THE FOLLOWING CIRCUMSTANCES WOULD AUTTOMATICALLY TERMINATE THE OFFER EXCEPT
Answer:
WHAT ARE THE CIRCEMENTANCES?
After the issuance of its year 1 financial statements, Serenity Inc. discovered a computational error of $150,000 in the calculation of December 31, year 1 inventory. The error resulted in a $150,000 overstated in the cost of goods sold for the year ended December 31, year 1. In October, year 2, Serenity paid $500,000 to settle litigation initiated it during year 1. In the financial statements for year 2, the year 1 retained earnings balance, as previously reported, should be adjusted by (ignore income taxes):_________-
a. $350,000 debit
b. $500,000 debit
c. $150,000 credit
d. $650,000 credit
Answer: C. $150,000 credit
Explanation:
In the financial statements for year 2, it should be noted that the year 1 retained earnings balance, should be adjusted by $150,000 credit.
The corrections of errors should be treated as the period adjustments before. In this case, the $150,000 overstatement for the cost of goods that was sold in the previous year, will then be credited to the beginning balance of the retained earnings.
Therefore, the correct option is C.
Examine this supply and demand graph for a product. What does the red dot
on the graph represent?
Demand
$5
Supply
$4
Price
$3
$2
$1
0
2
4
5
Quantity
O A. The product's equilibrium price
O B. The product's quantity demanded
O C. The product's quantity supplied
O D. The product's supply schedule
The product’s equilibrium price
Just simply because the price and quantity is the same
The red dot on the graph represents the product's equilibrium price.
What do you mean by demand and supply?Demand refers to the consumer's desire and ability in order to purchase a good or service at a given period of time. There is an inverse relationship between demand and price. When price of a product increases, the demand decreases and vice versa.
Supply refers to the total amount of a given product or service a supplier offers to consumers at a given period of time. Supply is usually determined by market movement.
What does the supply and demand graph indicate?The supply and demand graph indicates the relationship between quantity supplied and the quantity demanded. In the graph it is seen that the demand curve and supply curve meet a point, which is the point of intersection (the red dot) and also the point of equilibrium.
Equilibrium is a state of rest. At equilibrium demand matches supply at the same price. If a market is at its equilibrium price and quantity, then it has no reason to move away from that point, as it's balancing both, quantity supplied and the quantity demanded.
However, in the graph the equilibrium price represents the point where the supply of a product is equal to the demand for that product. Thus, red dot on the graph represents the product's equilibrium price where supply meets demand.
Hence, option A is correct.
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The distributable net income (DNI) of a fiduciary taxpayer: a.Marks the maximum amount of gross income that income beneficiaries must report when receiving distributions. b.Specifies the character of the distributions in the hands of the year's income beneficiaries. c.Constitutes the maximum amount for the fiduciary's distribution deduction. d.All of these choices are correct.
Answer: d. All of these choices are correct.
Explanation:
The Distributable Net income is the taxable income acquired by a person who is a beneficiary to a trust from that trust. It is therefore the maximum amount that they should report for taxation purposes when they receive distributions from their trusts.
It also specifies the character of the distribution and is the maximum amount that the fiduciary can deduct for distribution income purposes from their taxable income.
Jose Consulting paid $540 cash for utilities for the current month. Determine the general journal entry that Jose Consulting will make to record this transaction. Multiple Choice Utilities Expense 540 Cash 540 Cash 540 Utilities Expense 540 Cash 540 Accounts Payable 540 Utilities Expense 540 Accounts Payable 540 Prepaid Utilities 540 Accounts Payable 540
Answer: Utilities Expense 540 Cash 540
Explanation:
Journal entry simply refers to the recording of transactions in a company's books. It should be noted that every transaction entered in the general ledger begins with a journal entry.
With regards to the question, the journal entry will be:
Debit Utilities expense $540
Credit Cash $540
Coolidge Cola is forecasting the following income statement: Sales $30,000,000 Operating costs excluding depr and amort 20,000,000 EBITDA $10,000,000 Depreciation and amortization 5,000,000 Operating income (EBIT) $ 5,000,000 Interest expense 2,000,000 Taxable income (EBT) $ 3,000,000 Taxes (40%) 1,200,000 Net income $ 1,800,000 Assume that depreciation is Coolidge's only non-cash revenue or expense. Congress is considering a proposal allowing companies to depreciate their equipment at a faster rate. If approved, Coolidge's new depreciation expense would be $8,000,000, although there would be no effect on the economic value of the company's equipment, nor would it affect the company's tax rate, which would remain at 40%. If this proposal were implemented, what would be the company's net cash flow
Answer:
new net cash flow = $8,000,000
Explanation:
Current net cash flow before any change approved by Congress = net income + deprecaition expense = $1,800,000 + $5,000,000 = $6,800,000
Cash flow after Congress approves change = net income + new depreciation expense:
taxable income = $10,000,000 - $8,000,000 - $2,000,000 = $0
deprecaitione xpense = $8,000,000
new net cash flow = $8,000,000
A property that produces a first year NOI of $80,000 is purchased for $750,000. The NOI is expected stay constant through year 5, and to increase by 15% in the sixth year when some of the leases turn over. The NOI would then stay constant in years 6-10. The resale price in year 10 is expected to be $830,000. What is the net present value of investing in this property based on the 10-year holding period and a required return of 9.5%
Answer: $115998
Explanation:
Based on the information given, we can calculate the NOI from the 6th year which will be:
= $80,000 × (100% + 15%)
= $80,000 × 115%
= $80,000 × 1.15
= $92,000
Therefore, the net present value of the property based on the 10-year holding period and a discount rate of 9.5% will be:
= 80000(PVAF, 5 year) + 92000[PVAF,(10-5),9.5%] + 830000/(1.095)10-750000
= (80000 × 3.839) + (92000 × 2.439) + (830000 × 0.403) - 750000
= 307120 + 224388 + 334490 - 750000
= 865998 - 750000
= $115998
Therefore, the net present value is $115998
Web Cites Research projects a rate of return of 20% on new projects. Management plans to plow back 30% of all earnings into the firm. Earnings this year will be $3 per share, and investors expect a 12% rate of return on stocks facing the same risks as Web Cites. a. What is the sustainable growth rate
Answer:
6%
Explanation:
Sustainable growth rate is the rate of growth a company can afford in the long term
Sustainable growth rate (g) = b x ROE
b = retention rate. It is the portion of earnings that is not paid out as dividends = 30%
ROE = return on equity = 20%
Return on equity is an example of a profitability ratio.
Profitability ratios measure the ability of a firm to generate profits from its asset
g = 0.3 x 0.2 = 0.06 = 6%
Based on the information given the sustainable growth rate is 6%.
Using this formula
Sustainable growth rate= ROE × Plowback ratio
Where:
ROE=20%
Plowback ratio=30%
Let plug in the formula
Sustainable growth rate = 0.20 × 0.30
Sustainable growth rate=0.06×100
Sustainable growth rate= 6.00%
Inconclusions the sustainable growth rate is 6%.
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Consider the following information for Watson Power Co.: Debt: 3,500 7 percent coupon bonds outstanding, $1,000 par value, 20 years to maturity, selling for 102 percent of par; the bonds make semiannual payments. Common stock: 84,000 shares outstanding, selling for $59 per share; the beta is 1.06. Preferred stock: 10,000 shares of 6 percent preferred stock outstanding, currently selling for $104 per share. Market: 8.5 percent market risk premium and 5.5 percent risk-free rate. Assume the company's tax rate is 35 percent. Find the WACC.
Answer:
9. 82 %
Explanation:
WACC = Cost of equity x Weight of equity + Cost of Preferred Stock x Weight of Preferred Stock + Cost of Debt x Weight of Debt.
Remember to always use the After tax cost of debt :
Cost of Debt :
PV = - $1,020
FV = $1,000
N = 20 x 2 = 40
P/YR = 2
PMT = ($1,000 x 7 %) ÷ 2 = $35
I/YR = ???
The Cost (I/YR) is calculated as 6.82 %. The After tax cost of debt is 4.433 %.
Cost of Equity :
Cost of Equity = Return from risk free security + beta x market premium'
= 5.5 % + 1.06 x 8.5 %
= 14.51 %
Cost of Preferred Stock :
Cost of Preferred Stock = 6 %
therefore,
WACC = 14.51 % x 51.8 % + 6 % x 10.87 %+ 4.433 % x 37.3 %
= 9. 82 %
Presented below is information related to Ricky Henderson Company.
Cost Retail
Beginning inventory $ 282,140 $ 291,600
Purchases 1,425,000 2,144,000
Markups 92,300
Markup cancellations 17,400
Markdowns 37,900
Markdown cancellations 6,100
Sales revenue 2,346,000
Compute the inventory by the conventional retail inventory method.
Answer:the inventory by the conventional retail inventory method=the cost of Ending inventory becomes == $90,236.
Explanation:
Inventory computed for Ricky Henderson Company
Using the conventional retail inventory method, we have
Cost Retail
Beginning of Inventory $ 282,140 $ 291,600
Purchases 1,425,000 2,144,000
Total 1,707,140 2,435,600
Add:
Net Markups 74,900
(Markups -Markup 92,300 - 17,400)
cancellations)
Total 1,707,140 2510500
Less:
Net Markdown 31,800
(Markdowns -Markdown (37,900 - 6,100)
cancellations)
Sales price of goods 2,478,000
Sales revenue 2,346,000
The retail ending 132,700
(Sales price of goods-Sales revenue)
Therefore,
The retail cost ratio is = 1,707,140 /2,510,500=0.68= 68%
Hence, the cost of Ending inventory becomes = 132,700 x 68%
= $90,236.
Diamond Company has three product lines, A, B, and C. The following financial information is available:
Item Product Line A Product Line B Product Line C
Sales $30,000 $45,000 $12,000
Variable costs $18,000 $24,000 $7,500
Contribution margin $12,000 $21,000 $4,500
Fixed costs:
Avoidable $4,500 $9,000 $3,000
Unavoidable $3,000 $4,500 $2,000
Operating income $4,500 $7,500 ($500)
Assuming that Product Line C is discontinued and the manufacturing space formerly devoted to this line is rented for $6,000 per year, operating income for the company will likely:____________.
a. Increase by $7,200.
b. Increase by $3,300.
c. Increase by some other amount.
d. Be unchanged—the two effects cancel each other out.
e. Increase by $4,500.
Answer:
e. Increase by $4,500.
Explanation:
Analysis of the effect of discontinuing Product Line C
Income :
Rent Income $6,000
Savings : Fixed Costs - Avoidable $3,000
Total Income $9,000
Costs :
Opportunity Cost - Contribution Margin $4,500
Total Costs $4,500
Net Income (Loss) $4,500
therefore,
By discontinuing Product Line C, operating income for the company will likely Increase by $4,500
what are the principles of Csr
Answer:
there are three basic principles which together comprise all CSR activity. These are: Sustainability; • Accountability; • Transparency.
Explanation:
hope this helps you
ouvenir sheets to stamp collectors. The postal service purchases the souvenir sheets from a supplier for $1.80 each. St. Vincent has been selling the souvenir sheets for $14.00 each and ordinarily sells about 100,000 units. To test the market, the postal service recently priced a new souvenir sheet at $12.60 and sales increased to 114,000 units. Required: 1. What total contribution margin did the postal service earn when it sold 100,000 sheets at a price of $14.00 each
Answer:
Total contribution margin= $1,220,000
Explanation:
Giving the following information:
Purchase price= $1.8
Selling price= $14
Number of untis= 100,000
First, we will determine the unitary contribution margin:
Unitary contribution margin= selling price - unitary variable cost
Unitary contribution margin= 14 - 1.8
Unitary contribution margin= $12.2
Now, the total contribution margin:
Total contribution margin= 100,000*12.2
Total contribution margin= $1,220,000
Indirect: Computing cash flows from operation
Case X Case Y Case Z
Net income $7,200 $180,000 $129,600
Depreciation expense 54,000 14,400 43,200
Accounts receivable increase (decrease) 72,000 36,000 (7,200)
Inventory increase (decrease) (36,000) (18,000) 18,000
Accounts payable increase (decrease) 43,200 (39,600 ) 25,200
Accrued liabilities increase (decrease) (79,200 ) 21,600 (14,400)
For each of the above separate cases X, Y, and Z, compute cash flows from operations using the indirect method.
Answer:
CASE X CASE Y CASE Z
NET INCOME $7,200 $180,000 $129,600
ADJUSTMENT TO RECONCILE
NET INCOME TO NET CASH
DEPRECIATION $54,000 $14,400 $43,200
CHANGES IN ASSET & LIABILITIES
ACCOUNT RECEIVABLES $72,000 $36,000 ($7,200)
INVENTORY ($36,000) ($18,000) $18,000
ACCOUNT PAYABLE $43,200 ($39,600) $25,200
ACCRUED LIABILITY ($79,200) $21,600 ($14,400)
NET CASH PROVIDED BY $61,200 $194,400 $194,400
OPERATING ACTIVITY
Kiley Corporation had these transactions during 2022. Classify transactions by type of activity.
a. Purchased a machine for $30,000, giving a long-term note in exchange.
b. Issued $50,000 par value common stock for cash.
c. Issued $200,000 par value common stock upon conversion of bonds having a face value of $200,000.
d. Declared and paid a cash dividend of $13,000.
e. Sold a long-term investment with a cost of $15,000 for $15,000 cash.
f. Collected $16,000 from sale of goods.
g. Paid $18,000 to suppliers.
Answer:
Cash flow from Operating Activities
f. Collected $16,000 from sale of goods.
g. Paid $18,000 to suppliers.
Cash flow from Investing Activities
e. Sold a long-term investment with a cost of $15,000 for $15,000 cash.
Cash flow from Financing Activities
b. Issued $50,000 par value common stock for cash.
d. Declared and paid a cash dividend of $13,000.
None-Cash Activity
a. Purchased a machine for $30,000, giving a long-term note in exchange.
c. Issued $200,000 par value common stock upon conversion of bonds having a face value of $200,000.
Explanation:
Operating Activities - Results from business daily trading operations with customers and suppliers.
Investing Activities - Results from purchases and sell of assets and investments
Financing Activities - Results from a company`s efforts in raising and repayment of capital
Crane Co. leased equipment to Union Co. on July 1, 2021, and properly recorded the sales-type lease at $144000, the present value of the lease payments discounted at 8%. The first of eight annual lease payments of $21500 due at the beginning of each year of the lease term was received and recorded on July 3, 2021. Crane had purchased the equipment for $113000. What amount of interest revenue from the lease should Crane report in its 2021 income statement
Answer:
$4,900
Explanation:
Calculation to determine What amount of interest revenue from the lease should Crane report in its 2021 income statement
Interest revenue=8%/2*($144000 - $21500)
interest revenue=4%*$122,500
interest revenue = $4,900.
Therefore the amount of interest revenue from the lease should Crane report in its 2021 income statement is $4,900
Logan and Johnathan exchange land, and the exchange qualifies as like kind under § 1031. Because Logan's land (adjusted basis of $95,500) is worth $114,600 and Johnathan's land has a fair market value of $90,725, Johnathan also gives Logan cash of $23,875.
a. What is Logan's recognized gain?
b. Assume instead that Johnathan's land is worth $90,000 and he gives Logan $10,000 cash. Now what is Logan's recognized gain?
Answer:
A. $19,100 Recognized Gain or Fairmarket Value of ($23,875).
B.$19,100 Recognized Gain or Fairmarket Value of ($10,000).
Explanation:
a. Calculation to determine Logan's recognized gain
Based on the given information in a situation where Jonatha land is worth the amount of $90,725, which means Logan's RECOGNIZED GAIN will be $19,100, the lower of the REALIZED GAIN calculated as ($114,600 amount realized − $95,500 adjusted basis = $19,100) or the FAIRMARKET VALUE of the boot received of the amount of ($23,875).
b. Based on the information given assuming Johnathan and is been worth the Amount of $90,000 which therefore means that Logan's RECOGNIZED GAIN will be the amount of $19,100, the lower of the realized gain calculated as ($114,600 amount realized − $95,500 adjusted basis = $19,100) or the FAIRMARKET VALUE of the boot received OLog the amount of ($10,000).
Use the information presented in Northeastern Mutual Bank's balance sheet to answer the following questions. Bank's Balance Sheet Assets Liabilities and Owners' Equity Reserves $150 Deposits $1,200 Loans $600 Debt $200 Securities $750 Capital (owners' equity) $100 Suppose a new customer adds $100 to his account at Northeastern Mutual Bank, which the owners of the bank then use to make $100 worth of new loans. This would increase the loans account an
Answer:
A. Increase; Deposits
B. Initial Value 15; New Value 16
C. The aim of Capital requirement is to protect the interests of all depositors.
Explanation:
A. This would increase the loans account and INCREASE the DEPOSITS account since the double entry principle state that every Debit entry must have a corresponding Credit entry and every Credit entry must have a corresponding Debit entry, therefore based on the information given assuming the new customer adds the amount of $100 to his account at the Mutual Bank, which we were told that the owners of the bank then use to make $100 worth of new loans, in this case both the loans and deposits will be have to increase by the amount of $100.
B. Calculation to determine the leverage ratio from its initial value to a new value
Calculation for Leverage Ratio using this formula
Leverage Ratio = Reserves+Loans+Securities/Capital
Let plug in the formula
Leverage Ratio = $150+$600+$750/$100
Leverage Ratio = $1,500/$100
Leverage Ratio =15
Calculation for New Leverage Ratio
Using this formula
New Leverage Ratio=Reserves+(Loans+increase in loans)+Securities/Capital
Let plug in the formula
New Leverage Ratio=$150+($600+$100)+$750/$100
New Leverage Ratio=$150+$700+$750/$100
New Leverage Ratio=$1,600/$100
New Leverage Ratio=16
Therefore This would also bring the leverage ratio from its INITIAL VALUE of 15 to a NEW VALUE of 16
C.The aim of CAPITAL REQUIREMENT is to protect the interests of all depositors.
Tanner-UNF Corporation acquired as an investment $260 million of 5% bonds, dated July 1, on July 1, 2021. Company management is holding the bonds in its trading portfolio. The market interest rate (yield) was 7% for bonds of similar risk and maturity. Tanner-UNF paid $200 million for the bonds. The company will receive interest semiannually on June 30 and December 31. As a result of changing market conditions, the fair value of the bonds at December 31, 2021, was $215 million.
Required:
a. Prepare the journal entry to record Tanner-UNF’s investment in the bonds on July 1, 2021 and interest on December 31, 2021, at the effective (market) rate.
b. Prepare any additional journal entry necessary for Tanner-UNF to report its investment in the December 31, 2021, balance sheet.
Answer:
Tanner-UNF Corporation
a. Journal Entry
July 1, 2021:
Debit Investment in Bonds $260 million
Credit Discount on bonds $60 million
Credit Cash $200 million
To record the acquisition of bonds.
December 31, 2021:
Debit Cash $6.5 million
Debit Discount on bonds $0.5 million
Credit Interest Revenue $7 million
To record cash received from bond investment and amortization of the bond discount for the semi-period.
b. Debit Unrealized Bonds Investment Loss $45 million
Credit Investment in Bonds $45 million
To record the unrealized loss on the investments.
Explanation:
a) Data and Calculations:
July 1, 2021:
Face value of bonds = $260 million
Interest rate = 5%
Market interest rate = 7%
Payment for the bonds = $200 million
Discount on bonds = $60 million
December 31, 2021:
Semi-annual interest cash receipts = $6.5 million ($260m * 2.5%)
Semi-annual interest revenue = $7 million ($200m * 3.5%)
Amortization of bonds discount = $0.5 ($7 million - $6.5 million)
Fair value of bonds = $215 million
The amounts reported for assets and liabilities in the total column for the combining balance sheet for nonmajor governmental funds are also reported in the other governmental funds column of the governmental funds balance sheet.
A. True
B. False
Answer: True
Explanation:
Governmental funds refers to the assets, money, or property, of the government.
It should be noted that the non major governmental fund is also a form of fund as well and therefore, the amounts that are reported for assets and liabilities in the total column for the combining balance sheet for the nonmajor governmental funds will also have to be reported in the other governmental funds column of the governmental funds balance sheet.
Therefore, the correct option is True