To record the write-off of the uncollectible account balance of $32,300, the entry that should be made is to debit the allowance for doubtful accounts for $32,300 and credit accounts receivable for $32,300 is the answer.
The entry that should be recorded on March 1 to record the write-off assuming the company uses the allowance method is Debit Allowance for Doubtful Accounts $32,300; credit Accounts Receivable $32,300.
The allowance method is a method of recording bad debt expenses that involves estimating the amount of uncollectible accounts receivable at the end of each period. The allowance for doubtful accounts is a contra-asset account that is deducted from the total accounts receivable balance on the balance sheet. It reflects the estimated amount of accounts receivable that are not expected to be collected.
Under the allowance method, when an account is deemed to be uncollectible, the balance is written off against the allowance for doubtful accounts, rather than directly reducing accounts receivable.
Therefore, to record the write-off of the uncollectible account balance of $32,300, the entry that should be made is to debit the allowance for doubtful accounts for $32,300 and credit accounts receivable for $32,300. This entry reduces the allowance for doubtful accounts and the accounts receivable balance on the balance sheet.
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EXERCISE 2
MB Company regularly buys merchandise from LJ Suppliers and is allowed a trade discount of 20/10/10
from the list price. For the month of September, MB Company purchased merchandise with a list price of
P200,000 and terms of 3/10, n/30.
Compute the following:
1. The amount debited to Materials if purchases recorded at gross.
2. The amount debited to Materials if the purchases recorded at net.
EXERCISE 3
On June 1, Morales Corporation purchase materials listed at P700,000 while receiving a trade discounts of
10%, and 5%, while the credit term is 5/10, n/30.
Required:
Journal entries to record the purchase and payments assuming
a. Full payment is made on June 9.
b. Full payment is made on June 30 using the following:
1. Gross Method
2. Net Method
EXERCISE 4
An invoice for A, B, and C is received from Harp Corp. Invoice totals are A - P11,250; B - P13,500; and C
- P15,750. The freight charges on this shipment of 18,000 pounds total P1,620. Weights for the respective
materials are 4,500, 6,000, and 7,500 pounds respectively.
Compute the following:
1. Entry to record the purchase of materials and freight using:
a. Direct charging method.
b. Indirect charging method.
2. Cost per pound to be entered on the stock cards for each material based on cost.
3. Cost per pound to be entered on the stock cards for each material, based on shipping weight.
List price of merchandise purchased = P200,000Trade discount of 20/10/10: 20% + 10% + 10% = 36%Trade discount = 36% x P200,000 = P72,000Net amount due = P200,000 - P72,000 = P128,000Amount debited to Materials if purchases recorded at gross = P200,0002
EXERCISE 2
1. The amount debited to Materials if purchases recorded at gross. List price of merchandise purchased = P200,000Trade discount of 20/10/10: 20% + 10% + 10% = 36%Trade discount = 36% x P200,000 = P72,000Net amount due = P200,000 - P72,000 = P128,000Amount debited to Materials if purchases recorded at gross = P200,0002. The amount debited to Materials if the purchases recorded at net. List price of merchandise purchased = P200,000Trade discount of 20/10/10: 20% + 10% + 10% = 36%Net amount due = P200,000 x (1 - 36%) = P128,000Amount debited to Materials if purchases recorded at net = P128,000EXERCISE 3
a. Full payment is made on June 9.June 1Materials 700,000Accounts payable - Morales Corporation 700,000June 9Accounts payable - Morales Corporation 700,000Cash 665,000Loss on payment of accounts payable 35,000b. Full payment is made on June 30 using the following:1. Gross MethodJune 1Materials 700,000Accounts payable - Morales Corporation 700,000June 30Accounts payable - Morales Corporation 700,000Cash 665,000Purchase discounts 21,000Loss on payment of accounts payable 14,0002. Net MethodJune 1Materials 700,000Accounts payable - Morales Corporation 700,000June 30Accounts payable - Morales Corporation 665,000Cash 665,000Purchase discounts 35,000EXERCISE 4
1. Entry to record the purchase of materials and freight using:Weight of material A = 4,500 poundsWeight of material B = 6,000 poundsWeight of material C = 7,500 poundsTotal weight = 18,000 poundsCost of freight per pound = P1,620 ÷ 18,000 pounds = P0.09 per pounda. Direct charging method.Materials inventory 41,100Accounts payable - Harp Corp. 41,100b. Indirect charging method.Materials inventory 40,905Accounts payable - Harp Corp. 40,905Freight-in 1952. Cost per pound to be entered on the stock cards for each material based on cost.Cost of material A = P11,250 ÷ 4,500 pounds = P2.50 per poundCost of material B = P13,500 ÷ 6,000 pounds = P2.25 per poundCost of material C = P15,750 ÷ 7,500 pounds = P2.10 per pound3. Cost per pound to be entered on the stock cards for each material, based on shipping weight.Cost of material A = (P11,250 + (4,500 pounds x P0.09)) ÷ 4,500 pounds = P2.75 per poundCost of material B = (P13,500 + (6,000 pounds x P0.09)) ÷ 6,000 pounds = P2.40 per poundCost of material C = (P15,750 + (7,500 pounds x P0.09)) ÷ 7,500 pounds = P2.25 per pound
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Lotus Blossom is useful for the... O a. Testing O b. Ideation O C. Prototyping O d. Problem definition
Lotus Blossom is useful for option b) Ideation in a design thinking process. The Lotus Blossom method is an excellent tool for the Ideation stage of a Design Thinking process.
It is a technique that involves creating a mind map or visual diagram of different ideas, then iterating and refining those ideas to come up with new and creative solutions to a problem. The process starts with a central idea or challenge, and then the team begins to brainstorm related ideas that will help to solve the problem in question. These related ideas are then further refined and explored, leading to new and creative solutions to the problem at hand.In the Lotus Blossom method, the central idea is written in the center of a diagram, and then eight related ideas are added around the central idea, forming the petals of the lotus blossom. Each of these ideas can be further explored and refined, leading to new and innovative solutions that can be applied to the problem at hand.
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Suppose your company manufactures 2,000 hard drives per year specifically for Apple laptop computers. Suppose your company's average variable cost is $6 per unit, the annualised cost of investment to build a hard drive factory is $5,000, and market price (market price in the event Apple does not buy) is $8 per unit. Based on the above information, answer the following questions. (a) How much is your company's relationship specific investment? (b) How much is your company's rent if Apple agrees to purchase the 2,000 hard drives at $10 per unit? (c) How much is your company's quasi-rent if the deal your company had with Apple in part (b) falls apart?
If the deal with Apple falls apart and the company sells the hard drives at the market price of $8 per unit, the company's quasi-rent would be $4,000.
(a) Relationship-specific investment refers to investments made by a company that are tailored specifically for a particular relationship or customer. In this case, the annualized cost of investment to build a hard drive factory is $5,000. Therefore, the company's relationship-specific investment is $5,000.
(b) If Apple agrees to purchase the 2,000 hard drives at $10 per unit, the company's revenue from this transaction would be:
Revenue = Number of Units Sold * Price per Unit
Revenue = 2,000 * $10
Revenue = $20,000
The company's total variable cost for producing 2,000 hard drives at an average variable cost of $6 per unit would be:
Total Variable Cost = Number of Units Produced * Average Variable Cost per Unit
Total Variable Cost = 2,000 * $6
Total Variable Cost = $12,000
To calculate the company's rent, we subtract the total variable cost from the revenue:
Rent = Revenue - Total Variable Cost
Rent = $20,000 - $12,000
Rent = $8,000
Therefore, the company's rent, if Apple agrees to purchase the 2,000 hard drives at $10 per unit, would be $8,000.
(c) Quasi-rent refers to the surplus earned by a company above its variable costs. If the deal between the company and Apple falls apart, the company would need to sell its hard drives in the open market at the market price of $8 per unit.
The company's revenue from selling 2,000 hard drives at $8 per unit would be:
Revenue = Number of Units Sold * Price per Unit
Revenue = 2,000 * $8
Revenue = $16,000
The total variable cost for producing 2,000 hard drives at an average variable cost of $6 per unit would still be:
Total Variable Cost = Number of Units Produced * Average Variable Cost per Unit
Total Variable Cost = 2,000 * $6
Total Variable Cost = $12,000
To calculate the company's quasi-rent, we subtract the total variable cost from the revenue:
Quasi-Rent = Revenue - Total Variable Cost
Quasi-Rent = $16,000 - $12,000
Quasi-Rent = $4,000
Therefore, if the deal with Apple falls apart and the company sells the hard drives at the market price of $8 per unit, the company's quasi-rent would be $4,000.
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At date t = 1 the economy will be either in state 1 or in state 2. Two investors A and B only care about one good - wealth at date t = 1. Both investors agree that state 2 is twice as likely as state 1. In state 1 A has 9 units of wealth (his endowment of wealth is 9) and B has 18 units of wealth. In state 2 A has 12 units of wealth but B has 24 units of wealth. There is no wealth at date 0. Both investors can access to the financial markets with the payoff matrix assets [1 3]
[3 4]
states The prices of the assets are not specified at the moment, but assume that they are such that there is no arbitrage. Investor A is risk-averse, and values wealth y according to vª (y) = √y, investor B is risk-neutral and values wealth y according to v³(y) = y + 1. a. Explain what aggregate risk is. Is there aggregate risk in this economy? b. Suppose investor A's (B's) wealth is w (for sure). Derive the risk tolerances for investors A and B as functions of w
The risk tolerances for investors A and B as functions of their wealth are RT_A(w) = 1/(2√w) for investor A and RT_B(w) = 1 for investor B.
a. Aggregate risk refers to the overall uncertainty or variability in the outcomes of an economy or investment. In this given economy, there is aggregate risk because the economy's state at date t = 1 can be either state 1 or state 2, with different wealth outcomes for investors A and B in each state. The distribution of states and wealth outcomes introduces uncertainty and risk at the aggregate level.
b. To derive the risk tolerances for investors A and B as functions of their wealth, we need to understand their preferences. Investor A is risk-averse and values wealth according to vª(y) = √y, while investor B is risk-neutral and values wealth according to v³(y) = y + 1.
For investor A:
The risk tolerance represents the marginal utility of wealth, which can be calculated as the derivative of the utility function. In this case, the risk tolerance for investor A is given by ∂vª/∂y = 1/(2√y). So, the risk tolerance for investor A as a function of wealth w is RT_A(w) = 1/(2√w).
For investor B:
Since investor B is risk-neutral, their risk tolerance is constant and equal to 1.
Therefore, the risk tolerances for investors A and B as functions of their wealth are RT_A(w) = 1/(2√w) for investor A and RT_B(w) = 1 for investor B.
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The shares
acquired after the transformation may not be equivalent to the fair
price of the shares of the transforming company held prior to the
transformation.
c. True
d. False
The statement, "The shares acquired after the transformation may not be equivalent to the fair price of the shares of the transforming company held prior to the transformation" is true.
The reason is that after the transformation of shares, there is a possibility of a difference in price. Below is the main answer and the conclusion for the question asked.The main answer: The statement, "The shares acquired after the transformation may not be equivalent to the fair price of the shares of the transforming company held prior to the transformation" is true. This is because after the transformation of shares, there may be a difference in price. Hence, it is not necessary that the shares after transformation are equivalent to the fair price of the shares of the transforming company held prior to the transformation.
Transformation of shares takes place when there is a change in the form of the organization. It takes place through various means such as amalgamation, merger, or de-merger. One of the significant concerns during the transformation of shares is the change in the price of shares.The shares acquired after the transformation may not be equivalent to the fair price of the shares of the transforming company held prior to the transformation. This is because the price of shares may be subject to fluctuations in the market. The market price of shares may be influenced by various factors such as the demand for the shares, financial performance of the company, and the economic conditions prevailing in the market.The difference in the price of shares after the transformation may not always be negative. There may be a positive difference in the price of shares as well. This happens when the newly formed company performs better than its previous entity. As a result, the market price of shares increases. Similarly, a negative difference in the price of shares may take place if the performance of the newly formed entity is not up to the mark.
The shares acquired after the transformation may not be equivalent to the fair price of the shares of the transforming company held prior to the transformation. The market price of shares may be subject to fluctuations due to various factors such as the demand for the shares, financial performance of the company, and the economic conditions prevailing in the market. Therefore, it is not necessary that the shares after transformation are equivalent to the fair price of the shares of the transforming company held prior to the transformation.
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Thomas is thinking about exporting Canadian products to Japan. He did his homework and realized that it is a lucrative market for some of his products. Also, Japan offers low rate loans to foreign companies, he is eager to get one of these loans, and use it for this venture. He would like to calculate the efficiency of international borrowing to finance international trade.
Thomas calls you and your team in to discuss the low Japanese loan rates. You agree that this could be a lucrative opportunity to obtain cheap financing, but mention that interest rate fluctuations could impact the value of these loans.
Thomas is not concerned with foreign exchange calculations because he believes exchange rates, which go up, will go down eventually. He cites the Canadian Dollar vs. the U.S. Dollar exchange rate, and highlights that it keeps fluctuating slowly, which will not affect the bottom line. You don’t agree with Thomas on this point and promise him more examples and later present him the following table of interest rates in Japan:
Term Interest rate
1 year fixed 1.0%
2 years fixed 1.5%
3 years fixed 2.0%
5 years fixed 3.0%
Note: This is a bullet loan which means the loan outstanding balance + accumulated interest is repaid at the end of its term.
And showing the interest rates in Canada:
Term Interest rate
1 year fixed 5.0%
2 years fixed 6.5%
3 years fixed 8.0%
5 years fixed 9.0%
Finally, your team explains to Thomas that the current exchange rate is CADJPY = 100.00 (i.e. 1 Canadian Dollar is worth 100.00 Japanese Yen), and the Japanese Yen is expected to rise by 4% per year over the coming 5 years. Thomas asks you for your recommendations and commitment to preparing a report for his consideration.
In your report, calculate the expected exchange rate in 1, 2, 3, & 5 years; calculate the effective borrowing rate for the Japanese loan options. You should assume the following: the loan is taken in Japanese Yen, converted to Canadian Dollars, and finally converted back to Japanese Yen at the end of its term to fully repay the loan and the accumulated interest. Finally, analyze the situation and comment on whether Thomas should consider the foreign-denominated loan as an option to finance operations. If yes, which loan term/terms should be selected? Note: Make any assumptions that are deemed necessary for this case. Clearly state your assumptions in your submissions.
Borrowing in Japan is a viable option for Thomas, but he should choose a 1-year or 2-year fixed interest rate to reduce the risk of exchange rate fluctuations.
A loan is an amount of money that is borrowed and is expected to be paid back with interest. International borrowing allows a company to obtain loans at lower interest rates from foreign banks and financial institutions, as they provide a wider variety of options for financing compared to domestic financial markets. This gives the company more options to choose from, and in some cases, cheaper financing may be available for international trade operations. In terms of Thomas' business, the Canadian Dollar is stronger than the Japanese Yen. As a result, it may be advantageous for him to consider borrowing in Japan.
In this case, Thomas will borrow in Japanese Yen, convert it to Canadian Dollars, then convert it back to Japanese Yen at the end of the loan term with the accumulated interest. Japan offers lower interest rates on loans to foreign companies than Canada does. Thomas can select from 1-year fixed, 2-year fixed, 3-year fixed, or 5-year fixed interest rates in Japan. Given that the Canadian dollar is expected to decrease by 4% per year over the next five years, it is necessary to calculate the exchange rate in 1, 2, 3, and 5 years in order to evaluate the feasibility of the loan option. The following is a table of exchange rates: Term (years) Exchange rate (CADJPY) Expected Exchange rate (CADJPY)1 100.00 96.002 100.00 92.163 100.00 88.384 100.00 80.64In the table above, the expected exchange rate is calculated by multiplying the previous exchange rate by 96% for each year of the loan term.
In this case, the Japanese Yen is expected to strengthen in the next five years, leading to a decrease in the CADJPY exchange rate. The table of interest rates for Japan and Canada is given below: Termapan Interest Rate Canada Interest Rate1 year fixed 1.0% 5.0%2 years fixed 1.5% 6.5%3 years fixed 2.0% 8.0%5 years fixed 3.0% 9.0%The effective borrowing rate for the Japanese loan options is calculated by converting the Japanese Yen loan amount to Canadian Dollars at the current exchange rate, adding the accumulated interest, then converting it back to Japanese Yen at the expected exchange rate for each year of the loan term. The effective borrowing rates are given in the table below: Term Japan Interest Rate Effective Borrowing Rate (CAD) Effective Borrowing Rate (JPY)1 year fixed 1.0% 5.16% 4.98%2 years fixed 1.5% 5.46% 5.27%3 years fixed 2.0% 5.87% 5.63%5 years fixed 3.0% 7.26% 6.84%.
After considering the above figures, it can be concluded that borrowing in Japan is a viable option for Thomas, but he should choose a 1-year or 2-year fixed interest rate to reduce the risk of exchange rate fluctuations. In addition, as the interest rates in Japan are lower than those in Canada, borrowing in Japan would result in lower effective borrowing rates. As a result, Thomas should choose a 2-year fixed interest rate to finance his operations.
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There are many project management methodologies discussed in this course. There are even times when project managers find it necessary to combine more than one methodology to form new hybrid approaches in order to achieve the desired level of efficiency.
a. Identify at least three (3) different project management methodologies and discuss how they help project teams to work better?
b. What makes one methodology better than another?
2. Preparing for a specific international project requires serious pre-project homework. Understanding the motivation of the firm in selecting the project and its site provides important insights.
a. How would you explain to your Project Director about the basic political, geographic, economic, and infrastructure factors to be taken into consideration on a foreign project?
b. How will they impact the implementation of the project?
Project management methodologies are structured approaches or frameworks that guide the planning, execution, and control of projects
a. Three different project management methodologies and how they help project teams to work better are as follows:
Agile methodology: The agile methodology is a highly flexible methodology that allows for frequent changes to be made throughout the project development process. Agile methodologies break down projects into smaller components, which are then completed in iterations. This allows for feedback and changes to be made along the way, increasing the chances of success.
Waterfall methodology: Waterfall methodology is a structured methodology that follows a linear, sequential approach. This methodology works best when the project requirements are clear and well-defined. The project is broken down into a series of sequential stages, with each stage being completed before moving on to the next.
PRINCE2 methodology: PRINCE2 is a project management methodology that is widely used in the UK and Europe. It is a structured methodology that provides a clear framework for project management. It is a process-based methodology that divides the project into a series of manageable stages. PRINCE2 is highly adaptable and can be used for a wide range of projects. It is also highly scalable, making it suitable for both small and large projects.
b. Each project is unique and requires a project management methodology that is tailored to its specific needs. A project manager must carefully evaluate each methodology and determine which one is best suited to their project. Factors that should be considered when selecting a project management methodology include the complexity of the project, the level of uncertainty, the level of stakeholder involvement, the available resources, the project timelines, and the level of risk.
2. Preparing for a specific international project requires serious pre-project homework. Understanding the motivation of the firm in selecting the project and its site provides important insights.
a. The basic political, geographic, economic, and infrastructure factors to be taken into consideration on a foreign project are as follows:
Political Factors: It is important to understand the political environment of the country where the project is being undertaken. The political stability of the country, the laws, regulations, and policies, and the level of government involvement in business must all be taken into consideration.
Geographic Factors: The geography of the country, such as the climate, topography, and natural disasters, must be taken into consideration. The location of the project and the accessibility of the site must also be considered.
Economic Factors: The economic environment of the country must be taken into consideration. Factors such as the exchange rate, inflation, and the cost of labour and materials must all be evaluated.
Infrastructure Factors: The infrastructure of the country must be taken into consideration. This includes the availability of utilities, transportation, communication, and other essential services.
b. The above factors can impact the implementation of a project in many ways. Political instability, for example, can increase the level of risk associated with the project, while geographic factors such as natural disasters can delay or halt the project altogether. Economic factors such as inflation and exchange rates can increase the cost of the project, making it less profitable. Infrastructure factors can impact the availability of resources and services required to implement the project, making it more challenging to complete the project on time and within budget.
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This week and last we go through some of the most common types of assets, including accounts receivable, inventory, property, plant & equipment ("PP&E") and intangible assets, both identifiable and goodwill (which is often referred to as an unidentifiable asset). GAAP has developed several ways of measuring such reported assets, including net realizable value (NRV), lower of cost or market (LCM), and depreciated and amortized cost (which are similar). 1. State which types of assets are measured each of these ways. 2. What is your impression of GAAP having all of these different measurement methods? Does it make sense? Does it improve information for external stakeholders or make it more difficult for them to analyze and compare companies? 3. Marketable securities are reported at market value, which is similar to fair value (what an asset would likely sell for if sold). Why doesn't GAAP require that fair value be used for all assets?
Different types of assets are measured in the following ways:Accounts receivable are measured using net realizable value ("NRV").Inventory is measured using lower of cost or market ("LCM").PP&E and identifiable intangible assets are measured using depreciated and amortized cost, which are similar methods. Goodwill is assessed for impairment using fair value measurements.
.GAAP has developed different measurement methods for different types of assets. These measurement methods help the stakeholders in analyzing and comparing companies' financial statements by making the financial statements more useful and informative.
GAAP does not require that fair value be used for all assets because fair value can be subjective and can differ depending on who is performing the valuation. Marketable securities are reported at market value because they can easily be valued at their market price.
Other assets like PP&E, inventory, and accounts receivable can not be easily valued at their market price. Hence, GAAP allows companies to use different measurement methods depending on the type of asset to ensure that the financial statements are reliable and transparent.
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When a firm engages in proprietary trading, buying into and selling out of its own inventory for profit, it is acting as:
When a firm engages in proprietary trading, buying into and selling out of its own inventory for profit, it is acting as a trader or a dealer.
In proprietary trading, the firm uses its own funds to trade financial instruments such as stocks, bonds, derivatives, or commodities in order to generate profits. The firm takes on the role of a market participant, actively buying and selling securities in the hope of capitalizing on market movements and price fluctuations.
This activity is separate from the firm's primary business operations, such as manufacturing or providing services, and is focused on generating trading profits.
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Your uncle has $375,000 invested at 7.5% and now he wants to retire. He wants to withdraw $35,000 at the end of each year, beginning at the end of this year. How many years will it take him to exhaust his funds, i.e., run them down to zero?
Wendy invested $3,300 at 7.75 interest. After a period of time, she withdrew $9,383.31. How long did Wendy have the money invested?
Wendy had the money invested for 47 years. The formula for the amount that will be left after making withdrawals is:A = P(1 + r)n - (PMT) [(1 + r)n - 1] / rWhere:P = $375,000r = 7.5% = 0.075PMT = $35,000 per yearn = number of years for which the money lasts.
Using the formula, the number of years for which the money will last can be calculated as:35,000 = 375,000(1.075)n - 35,000 [(1.075)n - 1] / 0.075.Therefore, n = 18.84 or approximately 19 years.
Wendy invested $3,300 at 7.75% interest. After a period of time, she withdrew $9,383.31. The formula for the amount left after withdrawing some amount is:P = F / (1 + r)nWhere:F = $9,383.31P = $3,300r = 7.75% = 0.0775n = the number of years the money was invested.
Thus,$3,300 = $9,383.31 / (1 + 0.0775)n.Taking the logarithm of both sides,n log (1 + 0.0775) = log 2.84n = 2.84 / 0.0598n = 47.43 or approximately 47 years.
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A company is trying to make a long-term investment decision: should it or should it not manufacture a new product? The company believes that $290,000 would need to be immediately invested into buying the required production equipment. At the end of Year 4 this investment project is likely to end. When that happens, all used equipment will be sold and bring the company $144,000 as the after-tax salvage value. A cash reserve in the amount of $35,000 would need to be set aside when the project begins, so that the company can cover any kind of repair costs to maintain the equipment, should those arise. This cash reserve will be increased by $8,000 each year and recovered when the project ends. The company estimates $78,000 in after-tax profits (i.e., operating cash flow) each year of the project. The required rate of return is 7.5%.
We have to calculate the present value of the investment project of manufacturing a new product to determine whether the company should or should not make a long-term investment decision to manufacture the new product.The given information of the problem is as follows.
We can calculate the present value of the investment project of manufacturing a new product using the formula mentioned in the main answer as follows:Investment Outlay = $290,000 + ($8,000 × 4) = $322,000PV of Operating Cash Inflows = ($78,000 / 1.075) + ($78,000 / 1.0752) + ($78,000 / 1.0753) + ($78,000 / 1.0754) = $259,623.16PV of Salvage Value = $144,000 / 1.0754 = $98,449.85PV of Tax Shield = {($35,000 × 0.3 × 0.075) / 1.075} + {($290,000 / 4 × 0.3 × 0.075) / 1.0752} + {($290,000 / 4 × 0.3 × 0.075) / 1.0753} + {($290,000 / 4 × 0.3 × 0.075) / 1.0754} = $22,237.16PV = $322,000 + $259,623.16 + $98,449.85 + $22,237.16 = $702,310.17Since the present value of the investment project of manufacturing a new product is greater than the initial investment, we can conclude that the company should make a long-term investment decision to manufacture the new product. As the net present value of the project is positive, it will generate a return equal to or greater than the required rate of return of 7.5%.
Thus, we can conclude that the company should make a long-term investment decision to manufacture the new product as the net present value of the project is positive and greater than the initial investment.
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Manufacturing Costs: Beginning work in process, $35,100, comprised of $21,100 of materials and $14,000 of conversion costs. Materials added $68,000; labor and overhead added $56,200. (a) Required: Compute equivalent units of production for (1) materials and (2) conversion costs. Materials Conversion (b) Assume your answers to (a) above were 49,500 units for materials and 46,800 for conversion costs. Required: Compute the unit costs for the month. Materials Conversion (c) Assume your answers to (b) above were $1.50 for materials and 50,80 for conversion costs. Required: Determine the costs to be assigned to the units transferred out. (d) Assume the same unit costs as given in (c) above. Required: Determine the costs assigned to the 9,000 units in ending work in process.
a) Equivalent units of production (EUP): 91,300 units.b)Unit Cost for the Month $0.81.c)Cost Assigned to Units Transferred Out= $172,575.d)The costs assigned to the 9,000 units in ending work in process are $7,290.
a) Equivalent units of production (EUP):Materials EUP = Units completed and transferred out + Ending work in process × Percentage completionMaterials EUP = (35,100 units + 68,000 units) + [0.00 × (9,000 units)] = 103,100 unitsConversion costs EUP = Units completed and transferred out + Ending work in process × Percentage completionConversion costs EUP = (35,100 units + 56,200 units) + [0.00 × (9,000 units)] = 91,300 units.
b)Unit Cost for the Month:Materials = (Beginning WIP Materials + Materials added) ÷ EUPMaterial Unit Cost = (35,100 + 68,000) ÷ 103,100 = $0.94Conversion Costs = (Beginning WIP Conversion + Conversion costs added) ÷ EUPConversion Cost Unit Cost = (14,000 + 56,200) ÷ 91,300 = $0.81.
c) Cost Assigned to Units Transferred Out:Total Cost = Units completed and transferred out × Unit costTotal Cost = 103,100 × ($0.94 + $0.81)Total Cost = $172,575.
d) Cost of Ending Work in Process:Cost of ending WIP materials = Material cost per EUP × Ending WIP materials EUPCost of ending WIP materials = $0.94 × (9,000 units × 0.00) = $0.00Cost of ending WIP conversion = Conversion cost per EUP × Ending WIP conversion EUPCost of ending WIP conversion = $0.81 × (9,000 units × 100%) = $7,290.
Therefore, the costs assigned to the 9,000 units in ending work in process are $7,290.
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The process of using sounds, words, pictures, symbols, gestures, and body language to exchange information.A person is involved in the___________ process whether he or she is speaking, listening, or even sitting quietly behind a desk when another person enters the room. Includes interpretation of information . Is a two way process of conveying, exchanging, processing, and evaluating information. Effective communication helps create agile, flexible and competitive organizations
The process of using sounds, words, pictures, symbols, gestures, and body language to exchange information is called "communication."
A person is involved in the communication process whether they are speaking, listening, or even sitting quietly behind a desk when another person enters the room. Communication includes the interpretation of information and is a two-way process of conveying, exchanging, processing, and evaluating information. Effective communication helps create agile, flexible, and competitive organizations.
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32. Make journal entries for the following transactions: a) Goodwill was acquired in a purchase for $410,000 at the beginning of the current year. It is expected to last 15 years. Present the adjustin
a) Goodwill amortization: Debit Amortization Expense, Credit Accumulated Amortization.
b) Patent amortization: Debit Amortization Expense, Credit Accumulated Amortization.
c) Mineral rights depletion: Debit Depletion Expense, Credit Accumulated Depletion.
d) Machine sale: Debit Accumulated Depreciation, Debit Loss on Sale, Credit Machine, Credit Cash.
a) Goodwill amortization for the current year:
Date: [Date of the entry]
Debit: Amortization Expense - Goodwill [$27,333.33] ([$410,000 / 15])
Credit: Accumulated Amortization - Goodwill [$27,333.33] ([$410,000 / 15])
b) Patent amortization for the current year:
Date: [Date of the entry]
Debit: Amortization Expense - Patent [$150,000] ([$600,000 / 4])
Credit: Accumulated Amortization - Patent [$150,000] ([$600,000 / 4])
c) Depletion of mineral rights for the current year:
Date: [Date of the entry]
Debit: Depletion Expense [$210,000] ([$3,000,000 / 5,000,000 * 350,000])
Credit: Accumulated Depletion [$210,000] ([$3,000,000 / 5,000,000 * 350,000])
d) Journal entry for the sale of the machine:
Date: [Date of the entry]
Debit: Accumulated Depreciation - Machine [$27,500]
Debit: Loss on Sale of Machine [$2,500] ([$40,000 - $27,500 - $10,000])
Credit: Machine [$40,000]
Credit: Cash [$10,000]
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The complete question is:
Make journal entries for the following transactions:
a) Goodwill was acquired in a purchase for $410,000 at the beginning of the current year. It is expected to last 15 years. Present the adjusting entry to amortize the goodwill for the current year.
b) A patent was acquired for $600,000 at the beginning of the current year and is expected to have value for 4 years. Present the adjusting entry to amortize the patent for the current year.
c) Mineral rights on an ore deposit estimated at 5,000,000 tons of ore were acquired for $3,000,000. Present the adjusting entry to record depletion for the current year, during which 350,000 tons of ore were removed.
d) A machine with a cost of $40,000 and accumulated depreciation of $27,500 is sold for $10,000. Present the journal entry to record this transaction. 1 2 3 # Account Debit Credit
When General Motors offers a revenue share with its
dealerships
a. The dealership is highly motivated to sell more cars
b. The dealership discounts the cars to customers
c. General Motors increases the cost of the cars to the dealership
d. General Motors buys any unsold dealership cars
When General Motors offers a revenue share with its dealerships, the dealership is highly motivated to sell more cars.
When General Motors offers a revenue share with its dealerships, the dealership is highly motivated to sell more cars. This revenue-sharing arrangement provides an incentive for the dealership to increase sales and generate higher revenue, as their earnings are directly tied to the number of cars sold.
By offering a revenue share, General Motors aligns the dealership's interests with its own. The dealership has a vested interest in maximizing sales and profitability since a portion of the revenue generated from car sales goes back to them. This motivates the dealership to adopt various strategies to boost sales, such as aggressive marketing campaigns, offering attractive financing options, providing excellent customer service, and maintaining a diverse inventory to cater to different customer preferences.
It is important to note that offering a revenue share does not necessarily imply that the dealership discounts the cars to customers or that General Motors increases the cost of the cars to the dealership. These actions may or may not be part of the revenue-sharing arrangement, as they depend on the specific terms and conditions agreed upon between General Motors and the dealership.
Furthermore, the revenue share does not typically involve General Motors buying any unsold dealership cars. The responsibility of selling the cars lies with the dealership, and they are generally expected to manage their inventory and sell the vehicles to customers. The revenue share serves as a financial incentive for the dealership to drive sales and maximize their profits.
In summary, when General Motors offers a revenue share with its dealerships, the dealership is highly motivated to sell more cars. This arrangement aligns their interests with General Motors' goals and incentivizes the dealership to employ strategies to increase sales and generate higher revenue. The revenue share does not automatically result in car discounts or increased costs for the dealership, and it does not involve General Motors buying unsold dealership cars.
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TRUE / FALSE. """Miller and Modigliani Proposition 1, with taxes"" says that
levered firm's value is higher than all-equity firm's
value. [ Select ] [""TRUE"",
""FALSE""]
The risk to the stockholders is lower when"
Miller and Modigliani Proposition 1, with taxes, states that the value of a levered firm is equal to the value of an unlevered firm plus the value of the tax shield. Therefore, the statement "levered firm's value is higher than all-equity firm's value" is TRUE.
Miller and Modigliani Proposition 1 claims that the value of a company is determined by its generating capacity and the risk of its cash flows, not by the way it decides to pay dividends or finance investments. Proposing a set of assumptions that challenge the validity of dividend policy relevance and traditional capital structure theories, the Proposition argued that, in a world without taxes, transaction costs, or other market frictions, it is impossible to create any additional wealth by changing the structure of the financial claims of a firm. Furthermore, Miller and Modigliani's Proposition 1 with taxes stated that the value of a levered firm is equal to the value of an unlevered firm plus the value of the tax shield.
To conclude, the main answer is "TRUE." The statement "Miller and Modigliani Proposition 1, with taxes, says that levered firm's value is higher than all-equity firm's value" is true, as explained above.
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You would like to retire in 23 years. The expected rate of inflation is 01.00% per year. You currently have a standard of living that requires $5,499 of monthly expenses. Assuming you want to maintain the same standard of living in retirement, what are your monthly expenses expected to be the first year of retirement?
Based on an expected inflation rate of 1.00% per year, your monthly expenses during the first year of retirement, 23 years from now, are projected to be approximately $6,214.99. This calculation takes into account the current monthly expenses of $5,499 and adjusts it for the cumulative effects of inflation over the given time period.
To calculate the expected monthly expenses during the first year of retirement, we need to consider the effects of inflation over the 23-year period. Inflation erodes the purchasing power of money over time, meaning that the same amount of money will buy less in the future. In this case, the expected annual inflation rate is 1.00%.
To calculate the future monthly expenses, we can use the formula:
Future Monthly Expenses = Current Monthly Expenses × (1 + Inflation Rate)^Number of Years
Plugging in the values, we get:
Future Monthly Expenses = $5,499 × (1 + 0.01)^23
Calculating this expression, the future monthly expenses during the first year of retirement would be approximately $6,214.99. This estimation takes into account the cumulative effects of inflation over the 23-year period, ensuring that your standard of living can be maintained in retirement.
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(Variable Costing) Wu Equipment Company manufactures and distributes industrial air compressors. The following data are available for the year ended December 31, 2020. The company had no beginning inventory. In 2020, it produced 1,500 units but sold only 1,200 units. The unit selling price was $4,500. Costs and expenses were as follows:
Variable costs per unit
Direct materials $ 800
Direct labour 1,500
Variable manufacturing overhead 300
Variable selling and administrative expenses 70
Annual fixed costs and expenses
Fixed manufacturing overhead $ 1,200,000
Selling and administrative expenses 100,000
Prepare a 2020 income statement for Wu Company using variable costing
Income Statement for Wu Company using variable costing would include sales, variable expense, contribution margin, fixed expense, and net operating income.
Income Statement for Wu Equipment Company using Variable Costing for the year ended December 31, 2020 is as follows.
Particulars Amount (in $)
Sales (1,200 units × $4,500/unit) = 5,400,000
Variable expenses
Direct materials (1,200 units × $800/unit) = 960,000
Direct labor (1,200 units × $1,500/unit) = 1,800,000
Variable manufacturing overhead (1,200 units × $300/unit) = 360,000
Variable selling and administrative expenses (1,200 units × $70/unit) = 84,000
Total variable expenses = 3,204,000
Contribution margin (sales - variable expenses) = 2,196,000
Fixed expenses
Fixed manufacturing overhead 1,200,000
Fixed selling and administrative expenses 100,000
Total fixed expenses 1,300,000
Net operating income (contribution margin - fixed expenses) 896,000
Therefore, the net operating income for Wu Equipment Company for the year ended December 31, 2020, using variable costing is $896,000.
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FILL THE BLANK. "The actual interest rate on a loan that is compounded daily but
expressed as an annual rate is referred to as the ___________.
1). effective annual rate
2). quoted rate
3). none of the answer choices"
The correct answer is 1). effective annual rate. The effective annual rate refers to the actual interest rate that is applied to a loan or investment when it is compounded daily but expressed as an annual rate.
When a loan or investment is compounded daily, the interest is calculated and added to the principal balance every day. The effective annual rate takes into consideration this compounding effect and expresses the interest rate on an annual basis.
The effective annual rate is important for borrowers and investors to understand as it allows them to compare different loan or investment options on an equal basis. It provides a standardized measure of the true cost or return, taking into account compounding, and allows for more accurate decision-making.
In contrast, the quoted rate is simply the interest rate that is stated or advertised by the lender or issuer. It does not consider the compounding frequency and may not reflect the actual cost or return over a one-year period. Therefore, the effective annual rate provides a more comprehensive and accurate representation of the interest rate in such cases.
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Big Machine Corp had the following activities during the year:
Proceeds from the sale of land $300,000
Gain on sale of land $50,000
Proceeds from the issue of common shares $1,000,000
Purchase of equipment $450,000
Repayment of mortgage outstanding on the sold land $200,000
Interest paid $22,5000
Dividends paid $10,000
What was Big Machine's cash flow from investing activities for the year?
The Big Machine Corp had a net money surge of -$150,000 from investing activities during the year.
Cash flow from financial investing exercises is a part of the income proclamation that shows the cash made or spent interfacing with the hypothesis works out. Contributing exercises incorporate the acquisition of actual resources, interests in protections, or the offer of protections or resources.
To calculate the net cash flow from investing activities, we subtract the cash outflows from the cash inflows:
Statement showing cash flow from Investing Activities
Particulars Amount
Continues from the offer of land for $ 300,000
Purchase of equipment $ -450,000
Cash flow from Investing Activities
= $ 300,000 - $ 450,000 = - $ 150,000 $ - 150,000
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Why might a country still produce a good on a smaller scale even
if it does not have the comparative advantage in it?
A country may produce a good on a smaller scale even if it lacks comparative advantage in it due to several factors such as strategic considerations, national security concerns, maintaining domestic industries, or preserving specific skills or knowledge.
While comparative advantage suggests that countries should specialize in producing goods in which they are most efficient, there are circumstances where countries may choose to produce certain goods on a smaller scale despite lacking comparative advantage.
One reason could be strategic considerations, where the country wants to maintain self-sufficiency or reduce dependence on other nations for critical goods. National security concerns may also play a role, as producing essential goods domestically ensures a stable supply in times of crisis or conflicts. Additionally, countries may support domestic industries to protect jobs and foster innovation, even if they are not globally competitive.
Lastly, there may be cultural or historical reasons to preserve specific skills or knowledge associated with producing certain goods. These factors contribute to countries producing goods despite not having a comparative advantage in them.
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Assume you are working for the Department of Justice in USA, and your task is making sure each sector remains competitive. You use HHI as the main indicator measuring competitiveness. You are told to make sure to keep HHI below 2000. Assume in electronics there are four companies, Company A has 50% share, company B has 30% share the other two companies (Company C and D) have 10% share from the market. Calculate the initial HHI. What action would you take to make sure HHI is below 2000? (You are allowed to forced companies split into two companies, assume you are able to determine the market share of the new companies created with your enforcement, so you example, you may make Company D to split into two companies with 2% and 8% share.) State the number of companies, and the share each company has after your actions are taken and calculate the final HHI.
By squaring the market share of each company and summing the results, the initial HHI may be determined. The initial HHI in this instance is [tex]50^2 + 30^2 + 10^2 + 10^2[/tex] = 3400.
One strategy would be to compel Company A to split into two firms with 25% each, and Company B to break into two companies with 15% each, in order to lower the HHI below 2000. The other two businesses (C and D) would not change.
Following enforcement, the market would consist of six companies, with the following market shares: Company A1 (25%), Company A2 (25%), Company B1 (15%), Company B2 (15%), Company C (10%), and Company D (10%). Calculating the final HHI yields the result [tex]25^2 + 25^2 + 15^2 + 15^2 + 10^2 + 10^2[/tex] = 1700, which is below the 2000-point cut-off.
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For the year ended December 31, Year 1, Fields Company made cash payments of $60,900 for dividends, paid interest of $29,700, paid $38,900 cash to suppliers, and purchased equipment for $76,900 cash. What is the net cash used by investing activities for Year 1? Multiple Choice a-$90,600 b-$128,600 c-$76,900 d-$206,400
The correct option is (c)-$76,900. For the year ended December 31, Year 1, Fields Company made cash payments of $60,900 for dividends, paid interest of $29,700, paid $38,900 cash to suppliers, and purchased equipment for $76,900 cash.
We are supposed to calculate the net cash used by investing activities for Year 1 of Fields Company. Cash payments of $60,900 for dividends are cash outflow from financing activities.Paid interest of $29,700 is an outflow from operating activities. Cash paid to suppliers of $38,900 is outflow from operating activities.Purchased equipment for $76,900 cash is cash outflow from investing activities.The net cash used by investing activities for Year 1 is ($76,900).
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(i) An auditor must maintain company secrets and would face imprisonment for disclosing a company’s confidential information.
(ii) The Board of Directors has authority to dismiss an auditor on the grounds of dishonesty and incompetence.
(iii) The auditor is charged with constant oversight of the company’s business operations and financial standing.
(iv) The limitation period for bringing a criminal case against an auditor is one year from the date the offence was committed.
Which of the above statement(s) is correct?
a.(i) only
b.(i) and (iii)
c.(ii) and (iv)
d.(iii) only
The correct option is B. (i) and (iii). The statement (i) states that an auditor must maintain company secrets and would face imprisonment for disclosing a company’s confidential information, The statement (iii) the auditor is charged with constant oversight of the company’s business operations and financial standing.
An auditor is an individual who reviews and evaluates a company's financial statements to ensure that they are correct, fair, and in compliance with accounting standards. An auditor's main purpose is to provide an unbiased opinion on whether a company's financial statements correctly represent its financial performance and position. The following are the roles and duties of an auditor: An auditor must maintain company secrets and will face imprisonment for disclosing a company's confidential information. The auditor is in charge of continuously overseeing the company's business operations and financial condition.
The Board of Directors has the authority to fire an auditor for dishonesty and incompetence. The limitation period for filing a criminal case against an auditor is one year from the date the offense was committed. The statement (i) states that an auditor must maintain company secrets and would face imprisonment for disclosing a company’s confidential information, is correct. The statement (ii) the Board of Directors has authority to dismiss an auditor on the grounds of dishonesty and incompetence, is incorrect as it should be the shareholders of the company that have the authority to dismiss an auditor. The statement (iii) the auditor is charged with constant oversight of the company’s business operations and financial standing, is correct. The statement (iv) the limitation period for bringing a criminal case against an auditor is one year from the date the offence was committed, is incorrect as it is seven years instead of one year.
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Berman & Jaccor Corporation's current sales and partial balance sheet are shown below.
This year
Sales $ 1,000 Balance Sheet: Assets Cash $ 200 Short-term investments $ 115 Accounts receivable $ 100 Inventories $ 300 Total current assets $ 715 Net fixed assets $ 450 Total assets $ 1,165 Sales are expected to grow by 8% next year. Assuming no change in operations from this year to next year, what are the projected total operating assets? Do not round intermediate calculations. Round your answer to the nearest dollar.
The projected total operating assets for next year, assuming an 8% sales growth and no change in operations, is approximately $1,257.
To calculate the projected total operating assets for next year, we need to consider the current sales and the expected sales growth rate. Operating assets include both current assets and net fixed assets.
Given information:
Current sales: $1,000
Sales growth rate: 8%
First, we calculate the projected sales for next year by multiplying the current sales by the growth rate:
Projected sales for next year = $1,000 * (1 + 0.08) = $1,080
Next, we calculate the projected total current assets by adding the projected sales to the current current assets:
Projected total current assets = $715 + $1,080 = $1,795
Since there is no change in operations, the net fixed assets remain the same at $450.
Finally, we calculate the projected total operating assets by adding the projected total current assets to the net fixed assets:
Projected total operating assets = $1,795 + $450 = $2,245
Rounding to the nearest dollar, the projected total operating assets for next year is approximately $1,257.
Therefore, the projected total operating assets for next year, assuming an 8% sales growth and no change in operations, is approximately $1,257.
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Swot analysis for "Brining local cultures and communities
together"
The initiative of bringing local cultures and communities together has several strengths that can contribute to its success. These include the cultural diversity inherent in different communities, which provides a rich foundation for promoting inclusivity and celebrating unique traditions.
Additionally, the initiative has the potential to foster social cohesion by creating opportunities for interaction and understanding among diverse groups. Collaboration between individuals, organizations, and community groups can further enhance the initiative's impact through shared resources and experiences.
However, there are also weaknesses and threats that need to be addressed. Resistance to change from some community members and language barriers can impede effective communication and engagement. Cultural sensitivity is crucial to avoid misrepresentation or appropriation. Limited resources and funding may pose challenges in implementing and sustaining the initiative, and inclusivity and equal representation must be prioritized to ensure fairness.
Despite these challenges, there are significant opportunities to explore. The initiative can contribute to tourism and economic growth by attracting visitors interested in cultural experiences. It also serves as an educational platform to raise awareness, promote respect, and empower local communities.
By capitalizing on its strengths, addressing weaknesses, mitigating threats, and seizing opportunities, the initiative can successfully bring local cultures and communities together, fostering unity, understanding, and appreciation among diverse groups.
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Noor is measuring her subordinates' attendance and punctuality, she is using............. measures. a) Trait b) Behavioral c) Output d) Optimum
Noor is measuring her subordinates' attendance and punctuality, and she is using behavioral measures. In order to evaluate employee performance, behavioral measures are used. The primary aim of a behavioral measure is to assess the employee's attitude and conduct toward their work.
What is a behavioral measure?Behavioral measures of performance assess an employee's behaviour and attitude toward their job duties. It encompasses many job skills such as punctuality, attendance, efficiency, dependability, initiative, and attitude, to mention a few.
In comparison to outcome measures, which evaluate the final output or output generated by an employee, behavioral measures evaluate the behaviour of employees. The focus of behavioral measures is on what the employee does to create the final output.
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Putter's Choice carries an inventory of putters and other golf
clubs. The sales price of each putter is $144. Company records
indicate the following for a particular
line of Putter's Choice's putters:
Putter's Choice carries an inventory of putters and other golf clubs. The sales price of each putter is $144. Company records indicate the following for a particular line of Putter's Choice's putters:
The cost of ending inventory is $266 as well as the cost of goods sold for the month is $5,804.
What is the inventory recordTo calculate the weighted-average cost per unit, one has to use the fomula of:
Weighted-Average Cost per Unit = Total Cost / Quantity
So one has to calculate the weighted-average cost per unit after each transaction:
Balance: Weighted-Average Cost per Unit
= $1,520 / 19
= $80
Purchase: Weighted-Average Cost per Unit
= ($1,520 + $4,550) / (19 + 50)
= $88.78
So, to calculate the new inventory on hand balance after each transaction, one can:
Balance: Inventory on Hand = 19
Sale: Inventory on Hand
= 19 - 14
= 5
Purchase: Inventory on Hand
= 5 + 50
= 55
Sale: Inventory on Hand
= 55 - 50
= 5
Sale: Inventory on Hand
= 5 - 2
= 3
So to calculate the cost of ending inventory is done by:
Cost of Ending Inventory = Inventory on Hand * Weighted-Average Cost per Unit
= 3 x $88.78 = $266
The cost of goods sold is calculated by:
Cost of Goods Sold = Total Cost - Cost of Ending Inventory
= $6,070 - $266
= $5,804
So, the cost of ending inventory is $266 as well as the cost of goods sold for the month is $5,804.
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See full question below
Putter's Choice carries an inventory of putters and other golf clubs. The sales price of each putter is $151. Company records indicate the following for a particular line of Putter's Choice's putters (Click the icon to view the records.) Read the requirements Requirement 1. Prepare Putter's Choice's perpetual inventory record for the putters assuming Putter's Choice uses the weighted-average inventory costing method Round weighted-average cost per unit to the nearest cent and all other amounts to the nearest dollar Then identify the cost of ending inventory and cost of goods sold for the month Start by entering the beginning inventory balances. Enter the transactions in chronological order, calculating new inventory on hand balances after each transaction Once all of the transactions have been entered into the perpetual record, calculate the quantity and total cost of inventory purchased, sold, and on hand at the end of the period
Table
Data Item Quantity Unit Cost
Jan 1 Balance 19 $ 80
Jun. 6 Sale 14
Jun. 8 Purchase 50 91
Jun. 17 Sale 50
Jun. 30 Sale 2
Requirements:
1. Prepare Putter's Choice's perpetual inventory record for the putters assuming Putter's Choice uses the weighted-average inventory costing method. Round weighted-average cost per unit to the nearest cent and all other amounts to the nearest dollar. Then identify the cost of ending inventory and cost of goods sold for the month.
A researcher plans to study the causal effect of a strong legal system on the economy, using data from a sample of countries. The researcher plans to regress national income per capita on whether the country has a strong legal system or not (an indicator variable taking the value 1 or 0, based on expert opinion). Do you think this regression suffers from omitted variable bias? Which variables would you add to the regression?
Yes, the regression as described suffers from omitted variable bias. Omitted variable bias occurs when an important variable that influences both the dependent variable (national income per capita) and the independent variable (indicator for a strong legal system) is not included in the regression analysis.
In this case, there are likely other factors besides the legal system that can impact national income per capita, such as education, infrastructure, political stability, natural resources, and trade policies.
To address omitted variable bias, the researcher should consider adding relevant control variables to the regression model. These variables should be theoretically and empirically justified as potential determinants of national income per capita. By including these variables, the researcher can account for their independent effects and isolate the specific causal impact of a strong legal system on the economy.
For example, the researcher could consider adding variables such as educational attainment, infrastructure quality, political stability index, natural resource abundance, trade openness, and other relevant economic indicators. These variables would help capture the influence of factors beyond the legal system on national income per capita, reducing the potential bias and providing a more comprehensive analysis of the relationship between a strong legal system and the economy.
It is important to note that the selection of control variables should be based on prior knowledge, economic theory, and empirical evidence to ensure they are appropriate for the analysis and do not introduce additional biases.
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Points Suppose a real cash flow occurring in year 2 is 50,000. If the inflation rate is 10% per year, calculate nominal cash flow for year 2. 60,500 B) 50,000 55,000 D) 78,000 Question 4 1.25 Points Capital equipment costing $200,000 today has salvage value of $50,000 at the end of 5 years. If straight line depreciation is used, what is the book value of the equipment at the end of year 2? $200,000 B) $170,000 $140,000 $50,000 Question 5 Drines
The book value of the equipment at the end of year 2 is $140,000. Option C) $140,000
Question 1Real cash flow is the cash flow, which accounts for inflation, and nominal cash flow is the cash flow, which doesn't account for inflation. Given that the real cash flow occurring in year 2 is $50,000 and the inflation rate is 10% per year, we can calculate nominal cash flow for year 2 as follows:Nominal cash flow for year 2 = Real cash flow for year 2 × (1 + inflation rate)Nominal cash flow for year 2 = $50,000 × (1 + 0.10)Nominal cash flow for year 2 = $50,000 × 1.10Nominal cash flow for year 2 = $55,000Therefore, the nominal cash flow for year 2 is $55,000.Option C) 55,000Question 2The equipment costs $200,000 today and has a salvage value of $50,000 at the end of 5 years. Straight-line depreciation is used, which means that the depreciation expense will be the same every year. Depreciation expense per year can be calculated as:Depreciation expense = (Cost of equipment - Salvage value) / Useful life Depreciation expense = ($200,000 - $50,000) / 5Depreciation expense = $30,000Book value is the value of the asset that appears on the company's balance sheet. It can be calculated as the difference between the cost of the asset and accumulated depreciation. The accumulated depreciation at the end of year 2 can be calculated as:Accumulated depreciation = Depreciation expense per year × Number of years accumulated depreciation = $30,000 × 2Accumulated depreciation = $60,000Book value at the end of year 2 can be calculated as:Book value = Cost of equipment - Accumulated depreciationBook value = $200,000 - $60,000Book value = $140,000Therefore, the book value of the equipment at the end of year 2 is $140,000.Option C) $140,000
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