Answer:
C
Explanation:
ecan Theatre Inc. owns and operates movie theaters throughout Florida and Georgia. Pecan Theatre has declared the following annual dividends over a six-year period: 20Y1, $30,000; 20Y2, $60,000; 20Y3, $143,000; 20Y4, $173,000; 20Y5, $218,000; and 20Y6, $270,000. During the entire period ended December 31 of each year, the outstanding stock of the company was composed of 25,000 shares of cumulative, preferred 3% stock, $100 par, and 100,000 shares of common stock, $25 par. Required: 1. Determine the total dividends and the per-share dividends declared on each class of stock for each of the six years. There were no dividends in arrears at the beginning of 20Y1. Summarize the data in tabular form. If required, round your answers to two decimal places. If the amount is zero, please enter "0".
Answer:
Find the attached dividend analysis spreadsheet for Theater Inc.
Explanation:
In analyzing the dividends in the respective years, I first calculated yearly preferred dividends which is $75,000 i.e 25,000*$100*3%
In any year where total dividends declared and paid fell short of $75,000,the entire amount is given as preferred dividends with balance carried over to future years.
When the current state of the economy is such that Real GDP is greater than Natural Real GDP, the economy is in a(n) ____________________ gap. In this situation, the (actual) unemployment rate is ___________ than the natural unemployment rate, and there is a ________________ in the labor market. Question 3 options: recessionary; greater; shortage inflationary; less; shortage inflationary; greater; surplus recessionary; greater; surplus recessionary; less; shortage
Answer:
inflationary; less; shortage.
Explanation:
A country's economy is said to be experiencing inflationary gap, when the current state of the economy is such that Real Gross Domestic Products (GDP) is greater than the Natural Real Gross Domestic Products (GDP). Under this condition, the (actual) unemployment rate is less than the natural unemployment rate, and there is a shortage in the labor market.
Hence, an inflationary gap, also known as the expansionary gap in economics is used to measure the difference between the gross domestic product (GDP) and the current level of Real Gross Domestic Products that exists when a country's economy is gauged at a full employment rate. This eventually causes the price of goods and services to go up with a low income level among the people living in the country.
The HNH Corporation will pay a constant dividend of $ 2.00$2.00 per share, per year, in perpetuity. Assume all investors pay a 20 %20% tax on dividends and that there is no capital gains tax. Suppose the other investments with equivalent risk to HNH stock offer an after-tax return of 12 %12%. a. What is the price of a share of HNH stock? b. Assume that management makes a surprise announcement that HNH will no longer pay dividends but will use the cash to repurchase stock instead. What is the price of a share of HNH stock now?
Answer:
a. The price of a share of HNH stock is $13.33 per share
b. The price of a share of HNH stock now is $16.66 per share
Explanation:
a. According to the given, in order to calculate the price of a share of HNH stock we would have to use the following formula:
Price of the stock = Constant Dividend * (1-T) / Required Return
Price of the stock= 2 * (1-.20)/0.12
Price of the stock= $13.33 per share
b. If management will not pay dividend but will use the cash to repurchase stock, so now the only change to the cash flows will be that there will be no tax. Share repurchase equals dividend per share without taxes.
Now, the price of the stock = 2 / 0.12 = $16.66 per share
Many luxury sheets cost less than $200 to make but sell for more than $500 in retail stores. Some cost even more dash–consumers pay almost $3,000 for Frett'e "Tangeri Pizzo" king-size luxury linens. The creators of a new brand of luxury linens, called Boll & Branch, have entered this market. They want to price their sheets lower than most brands but still want to earn an adequate margin on sales. The sheets come in a luxurious box that can be reused to store lingerie, jewelry, or other keepsakes. The Boll & Branch brand touts fair trade practices when sourcing its high-grade long-staple organic cotton from India. The company calculated the price to consumers to be $350If the company decides to sell through retailers instead of directly to consumers online, to maintain the consumer price at $350,at what price must it sell the product to a wholesaler who then sells it to retailers? Assume wholesalers desire a 5percent margin and retailers get a 30percent margin, both based on their respective selling prices.
Answer:
at what price must it sell the product to a wholesaler who then sells it to retailers?
$232.75Explanation:
sales price to consumers = $350
retailers' margin = $350 x 30% = $105
price at which retailers purchase each unit = $350 - $105 = $245
sales price to retailers = $245
wholesaler's margin = $245 x 5% = $12.25
price at which wholesaler purchases each unit = $245 - $12.25 = $232.75
how to verify this:
($232.75 x 5/95) + $232.75 = $245
($245 x 30/70) + $245 = $350
Fallon Osmond is chairperson of the board of Simple Treats, Inc. Suppose Osmond has just founded Simple Treats, and assume that she considers her home and other personal assets as part of Simple Treats. Answer these questions about the evaluation of Simple Treats, Inc 1. Which accounting assumption governs this situation? assumption gve Osmond and others a realistic view of Simple Treats, Inc? Explain in detail 2. How can the proper application of this 1. Which accounting assumption governs this situation? The entity assumption applies The entity assumption The going-concern assumption The stable-monetary-unit assumption
Answer:
The correct answer will be "The entity assumption ". The further explanation is given below.
Explanation:
The entity hypothesis or assumptions that are also considered separate legal entity hypothesis claims that a corporation is regarded as something of an autonomous organization.Therefore a separate entity that has it's own finance importance and position that would be independent of the legislature as well as any company data is separated from its owner's accounts.So that the above is the right answer.
When the marginal revenue curve intersects the horizontal axis A. demand is relatively inelastic. B. demand is perfectly elastic. C. demand is relatively elastic. D. demand is unitary elastic.
Answer:
D. demand is unitary elastic.
Explanation:
A unitary elastic demand means that the quantity demanded will change proportionally to any change in the price of the product or service. E.g. price decreases by 10%, then quantity demanded will increase by 10%.
The marginal revenue curve represents the additional revenue generated by selling one more unit. As the marginal revenue curve approaches 0, it means that selling one additional unit generates lower revenues.
2. The managerial grid only provides a framework for conceptualizing leadership
style
A True
B False
Answer:
The correct answer to the following question will be "True".
Explanation:
The managerial or management design model or principles seems to be a self-assessment tool that allows people and communities to probably decide the aesthetic of a manager or supervisor.This proposed model described 5 various types of leadership styles premised on compassion for individuals and concern for manufacturing.So that the given statement is true.
At the end of the fiscal year, the following adjusting entries were omitted:
a. No adjusting entry was made to transfer the $1,750 of prepaid insurance from the asset account to the expense account.
b. No adjusting entry was made to record accrued fees of $525 for services provided to customers.
Assuming that financial statements are prepared before the errors are discovered, indicate the effect of each error, considered individually, by inserting the dollar amount in the appropriate spaces.
Answer:
The answers of the both parts are well explained below:
Explanation:
Part A.
The double entry to record the prepaid insurance would be:
Dr Insurance Expense $1750
Cr Prepaid Insurance $1750
Both prepaid insurance is a current asset which means that not decreasing the current asset at December 31 would overstate it by $1,750 and increase the profit by the same amount because the expenses are understated by $1750. It will also affect the tax calculated for the year.
Part B.
The double entry to record the expense that have been accrued, will be:
Dr Fees Accrued $525
Cr Fees Payable $525
Both the current liabilities and the expenses would be understated and would result in increase in the Profit which will increase the tax calculated.
Bartman, Corp. observes that the Swiss franc (SF) is quoted at $0.6164/SF, while the Swedish krona (SK) is quoted at $0.1981/SK. What is the SK/SF cross rate? (Round your final answer to four decimal places.
Answer: SK is 3.1116/SF
Explanation:
If 1 Franc = $0.6164 and 1 krona = $0.1981 then the expression can be also be expressed as,
1 Franc = 1 krona
$0.6164 = $0.1981.
Then if,
0.6164 = 0.1981
What is 1 Krona in terms of a Franc
0.6164 : 0.1981
x : 1
0.1981x = 0.6164
x = 0.6164 / 0.1981
x = 3.11155981827
x = 3.1116
This means that 1 krona is 3.1116 Franc or,
SK is 3.1116/SF
Scratch Miniature Golf and Driving Range Inc. was opened on March 1 by Scott Verplank. The following selected events and transactions occurred during March. Mar. 1 Invested $50,000 cash in the business in exchange for common stock. 3 Purchased Michelle Wie's Golf Land for $38,000 cash. The price consists of land $10,000, building $22,000, and equipment $6,000. (Make one compound entry). 5 Advertised the opening of the driving range and miniature golf course, paying advertising expenses of $1,600. 6 Paid cash $1,480 for a one‐year insurance policy. 10 Purchased golf equipment for $2,500 from Singh Company, payable in 30 days. 18 Received golf fees of $1,200 in cash. 25 Declared and paid a $500 cash dividend. 30 Paid wages of $900. 30 Paid Singh Company in full. 31 Received $750 of fees in cash.Scratch uses the following accounts: Cash, Prepaid Insurance, Land, Buildings, Equipment, Accounts Payable, Common Stock, Dividends, Service Revenue, Advertising Expense, and Salaries and Wages Expense. Instructions: Journalize the March transactions.
Answer and Explanation:
The Journal entry is shown below:-
1. Cash Dr, 50,000
To Common Stock 50,000
(Being issuance of common stock is recorded)
2. Land Dr, 10,000
Buildings Dr, 22,000
Equipment Dr, 6,000
To Cash 38,000
(Being fixed assets is recorded)
3. Dr. Advertising Expense Dr, 1,600
To Cash $1,600
(Being advertisement expenses is recorded)
4. Prepaid Insurance Dr, $1,480
To Cash $1,480
(Being prepaid insurance is recorded)
5.Equipment Dr, $2,500
To Accounts Payable $2,500
(Being purchase of equipment is recorded)
6. Cash $1,200
To Service Revenue $1,200
(Being service revenue is recorded)
7. Dividends Dr, $500
To Cash $500
(Being dividend is recorded)
8. Salaries and Wages Expense Dr, $900
To Cash 900
(Being salaries and wages expenses is recorded)
9. Accounts Payable Dr, 2,500
To Cash 2,500
(Being accounts payable is recorded)
10. Cash Dr, $750
To Service Revenue $750
(Being service revenue is recorded)
Which of the following is correct with respect to Debt Service Funds?
A. Debt service funds report the balance of governmental debts except debt of proprietary and fiduciary funds.
B. Debt service funds account for and report financial resources that are restricted, committed or assigned to expenditure for principle and interest for all governmental long-term debt.
C. Debt service funds account for and report financial resources that are restricted, committed or assigned to expenditure for principle and interest for governmental debts except debt of proprietary and fiduciary funds who account for their own interest and principle payments.
D. Debt service funds must accrue interest on long-term debt at year end.
Answer:
C. Debt service funds account for and report financial resources that are restricted, committed or assigned to expenditure for principle and interest for governmental debts except debt of proprietary and fiduciary funds who account for their own interest and principle payments.
Explanation:
Debt service funds are used to pay for principal and interest on certain types of debts. This reduced the risk of debt security that investors face and also reduces the effective rate at which the offering can be sold.
However debt service funds cannot be used for proprietary funds like 400 and 500.
Instead we use Enterprise funds for 400. That is operations similar to corporate enterprise. For example water and sewage utilities.
Internal service funds for 500 used by other funds or departments bin a government in a cost reimbursement basis. For example a food supplier that takes orders and is reimbursed for each order.
Answer:
C. Debt service funds account for and report financial resources that are restricted, committed or assigned to expenditure for principle and interest for governmental debts except debt of proprietary and fiduciary funds who account for their own interest and principle payments.
Explanation:
Under the Codification of Governmental Accounting and Financial Reporting Standards by the Governmental Accounting Standards Board (GASB); Code 200 states that debt service funds are to be used to service terms and bond reserves, guaranty, warrants, note, capital leases, or sinking funds.
Debt service funds is a cash reserve that is used to account for and report financial resources that are restricted, committed or assigned to expenditure for principle and interest for governmental debts except debt of proprietary and fiduciary funds who account for their own interest and principle payments.
The purpose of using a debt service fund is to reduce the risk of a debt security for investors, thereby making it more attractive and appealing to them. Also, the debt service fund helps to mitigate the effective interest rate needed by the government to sell the offering.
The other types of governmental funds are namely;
- Capital projects funds.
- Permanent funds.
- General funds.
- Special revenue funds.
During the year, the following selected transactions affecting stockholders' equity occurred for Navajo Corporation:
a. Feb. 1 Repurchased 200 shares of the company's own common stock at $28 cash per share.
b. Jul. 15 Sold 110 of the shares purchased on February 1 for $29 cash per share.
c. Sept. 1 Sold 80 of the shares purchased on February 1 for $27 cash per share.
Required: 1. Prepare the journal entry required for each of the above transactions. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
Answer: Please refer to Explanation
Explanation:
a.
February 1
DR Treasury Stock $5,600
CR Cash $5,600
(To record repurchasing of Company Shares)
Workings.
Treasury Stock = 200 * 28
= $5,600
b.
July 15
DR Cash $3,190
CR Treasury Stock $3,080
CR Additional Paid-in Capital $110
(To record sale of Treasury Stock)
Workings
Cash
= 110 shares * $29
= $3,190
Treasury Stock
= 110 shares * $28 (purchase price)
= $3,080
c.
Sept 1
DR Cash $2,160
DR Additional Paid-in Capital $80
CR Treasury Stock $2,240
(To record sale of Treasury Stock)
Workings
Because resale price was lower than repurchase price, Additional Paid-in Capital will have to be debited to reflect the loss.
Treasury Stock
= 80 shares * $28 (purchase price)
= $2,240
Cash
= $27 * 80
= $2,160
The income statement for the Sage Hill Inc. for the month ended July 31 shows Service Revenue $17,470, Salaries and Wages Expense $8,870, Maintenance and Repairs Expense $3,370, and Income Tax Expense $1,470. The statement of retained earnings shows an opening balance for Retained Earnings of $20,520 and Dividends $1,760.
Prepare closing journal entries.
Answer along with its Explanation:
The profit for the year is calculated as under:
Profit for the year = Revenue - Salaries and Wages - Maintenance and Repairs Expense - Income Tax Expense
Profit for the year = $17,470 - $8,870 - $3,370 - $1,470 = $3,760
Now the entry would be to close the expense and income accounts for the year and carry forward the difference (Profit for the year) to retained earnings.
The entry would be as under:
Dr Service Revenue $17,470
Cr Salaries and Wages Expense $8,870
Cr Maintenance and Repairs Expense $3,370
Cr Income Tax Expense $1,470
Cr Retained Earnings (Balancing figure) $3,760
The recording of the dividends (A decrease in Capital) would be decrease in the retained earnings which is given as under:
Dr Dividends $1,760
Cr Cash Balance $1,760
The waiving off this amount will be by debiting the retained earnings and crediting dividends paid.
Dr Retained Earnings $1,760
Cr Dividends $1,760
An insurance company must pay liabilities of 99 at the end of one year, 102 at the end of two years and 100 at the end of three years. The only investments available to the company are the following three bonds. Bond A and Bond C are annual coupon bonds. Bond B is a zero-coupon bond.
Bond Maturity (in years) Yeild to Maturity(Annualized) Coupon Rate
A 1 6% 7%
B 2 7% 0%
C 3 9% 5%
All three bonds have a par value of 100 and will be redeemed at par. Calculate the number of units of Bond A that must be purchased to match the liabilities exactly
a. 0.8807
b. 0.8901
c. 0.8975
d. 0.9524
e. 0.9724
Answer:
The correct answer is option (a) 0.8807
Explanation:
Solution
Given that:
We start from the liability of bond in 3 years.
Thus, the $100 liability can be an offset by Bond C.
The cash flow of Bond C and the payment of final coupon in year 3 is given as:
100 + (5%*100) = 105
Now,
the number of Bond C which will offset a liability of $100 which is = 100/105 = 0.9524 (All cash flows of Bond C is multiplied by this)
So, the remaining liability becomes
Time Liabilities cash flow Cash flow from Bond C Remaining liabilities
1 99 4.76 94.24
2 102 4.76 97.24
3 100 100.00
Thus,
The year 2 liability offset is $97.24
For Bond B, this can be the offset which contains a cash flow of $100 (which is a zero coupon bond)
The Bond number which are required for this offset is = 97.24/100 =0.974
The remaining cash flow is computed as follows:
Time = 1 ,2, 3
Liabilities cash flow = 99, 102, 100
Cash flow from Bond C =4.76, 4.76. 100.00
Remaining liabilities = 94.24, 97.24
Cash flow from Bond B = 0, 97.24
Remaining liabilities = 97.24
What this suggest is that The Bond A has to offset at approximately $94.24 in year 1.
The Cash flow from Bond A = 100 + (7%*100) = 107
Hence,
The number of Bond A's needed = 94.24/107 = 0.8807
Suppose that you hold a piece of land in the City of London that you may want to sell in one year. As a U.S. resident, you are concerned with the dollar value of the land. Assume that, if the British economy booms in the future, the land will be worth £2,000 and one British pound will be worth $1.40. If the British economy slows down, on the other hand, the land will be worth less, i.e., £1,500, but the pound will be stronger, i.e., $1.50/£. You feel that the British economy will experience a boom with a 60% probability and a slow-down with a 40% probability.
Required:
a. Estimate your exposure b to the exchange risk.
b. Compute the variance of the dollar value of your property that is attributable to the exchange rate uncertainty.
c. Discuss how you can hedge your exchange risk exposure and also examine the consequences of hedging.
Answer and Explanation:
(A) E(P) = (0.6) × ($2800) + (0.4) × ($2250)
= $1680+$900
= $2,580
E(S) = (0.6) × (1.40)+(0.4) × (1.5)
= 0.84 + 0.60
= $1.44
Var(S) = (0.6)(1.40 - 1.44)² + (.4)(1.50 - 1.44)²
= .00096+.00144
= 0.0024.
Cov(P,S) = (0.6)(2800-2580)(1.4-1.44) + (0.4)(2250-2580)(1.5-1.44)
= -5.28-7.92
= -13.20
b = Cov(P,S)/Var(S)
= -13.20/.0024
= -£5,500.
there is a negative exposure. as the pound gets stronger/weaker against the dollar the dollar value of british holding goes higher.
(B) b²Var(S) = (-5500)²(.0024) = 72,600($)²
(C). i would Buy 5,500 forward to hedge exchange risk exposure. By doing this, i can eliminate the volatility of the dollar value of your British asset that is due to the volatility of the exchange rate
You are tasked with composing a program to compute the payroll earnings for the sales force at the Arctic Ice company. All sales employees are on a straight commission basis of 12.5% of gross sales. The sales manager calculates the bonuses separately. Your program is needed to calculate the withholdings and deductions from the employee’s gross pay. Your program must calculate the federal and state withholdings (taxes) and also the retirement contribution of each employee
A. 25% Federal withholding
B. 10% State withholding
C. 8% Retirement plan
Salesperson Sales Bonus
1 53,500 425
2 41,00 300
3 56,800 350
4 36,200 175
Answer:
Programming language: C
Code:
#include<stdio.h>
double fed_with(double total){ //declaring the functions
return 0.25*total;
}
double ste_with(double total){
return 0.1*total;
}
double ret_plan(double total){
return 0.08*total;
}
int main(){
double sales[4][2],total,fw,sw,rp; //variables to be used
int i,j;
for(i=0;i<4;i++){ //taking input loop
printf("Salesperson %d: (Sales + Bonus)\t", i+1);
scanf("%lf %lf",&sales[i][0],&sales[i][1]);
printf("\n");
}
for(i=0;i<4;i++){ //printing payroll loop
printf("Salesperson %d: Statement\n", i+1);
total = 0.125*sales[i][0]+sales[i][1];
printf("Sales + Bonus: %lf\n",sales[i][0]+sales[i][1]);
printf("Total: %lf\n",total);
fw=fed_with(total);
printf("Federal Withholding: %lf\n",fw);
sw=ste_with(total);
printf("State Withholding: %lf\n",sw);
rp=ret_plan(total);
printf("Retirement Plan: %lf\n",rp);
printf("Final: %lf\n",total-fw-sw-rp);
printf("\n");
}
return 0;
}
Explanation:
If business taxes decrease, economists would say that this was a positive demand shock that shifts AD to the left. positive demand shock that shifts AD to the right. positive demand shock that shifts SRAS to the right. positive supply shock that shifts SRAS to the right. positive supply shock that shifts SRAS to the left.
Answer:
Positive supply shock that shifts SRAS to the right.
Explanation:
There are different factors that affect this but primarily its seen that change in input price and also productivity are the two vital factors.
Normally, the AS curve is defined as showing the quantity of real GDP producers will supply at any aggregate price level.
Supply shocks are events that shift the aggregate supply curve. When the aggregate supply curve shifts to the right, then at every price level, a greater quantity of real GDP is produced. This is called a positive supply shock. When the AS curve shifts to the left, then at every price level, a lower quantity of real GDP is produced. This is a negative supply shock.
Answer:
positive supply shock that shifts SRAS to the right.
Explanation:
Orlin purchases a refrigerator, on credit, from a door to door salesman. Orlin only has a 5th grade education, and the terms of the credit arrangement are such that Orlin will pay 10 times what the refrigerator is worth by the time he completes all of the payments. If Orlin wants to challenge the enforcement of this contract's terms, his best argument under the UCC would be based upon:_________
a. the mirror image rule.
b. the principle of fair trade.
c. the doctrine of unconscionability.
d. the predominant-factor test.
Answer: the doctrine of unconscionability
Explanation:
The doctrine of unconscionability is a defense that is against enforcing a contract. From the question, we are informed that Orlin bought a refrigerator, on credit, from a salesman and the salesman want him to pay 10 times the worth of the refrigerator.
In this scenario, the contract is deemed to be unfair and also oppressive to Orlin, thus he a find it unconscionable and therefore he can refuse to enforce it. Therefore, if he wants to challenge the contract’s terms, the doctrine of unconscionability will be used.
Operating data for Martinez Corp. are presented below. 2022 2021 Sales revenue $842,600 $639,100 Cost of goods sold 529,000 410,400 Selling expenses 123,900 76,300 Administrative expenses 73,000 52,400 Income tax expense 37,700 23,100 Net income 79,000 76,900 Prepare a schedule showing a vertical analysis for 2022 and 2021
Answer:
Martinez Corp.
Schedule showing a vertical analysis for 2022 and 2021:
2022 % 2021 %
Sales revenue $842,600 100 $639,100 100
Cost of goods sold 529,000 62.8 410,400 64.2
Gross Profit 313,600 37.2 228,700 35.8
Selling expenses 123,900 14.7 76,300 11.9
Administrative expenses 73,000 8.7 52,400 8.2
Income before Taxes 189,700 22.5 100,000 15.6
Income tax expense 37,700 4.5 23,100 3.6
Net income 79,000 9.4 76,900 12
Explanation:
a) Vertical analysis is a method of analyzing financial statements in which each line item is listed as a percentage of a base figure within the statement. Usually, the base figure used is the Sales Revenue for the Income Statement and Total Assets for the Balance Sheet.
b) The formulas for the Vertical Analysis are as follows:
Vertical Analysis formula = Individual Item / Base Amount *100
i) Vertical Analysis Formula (Income Statement) = Income Statement Item / Total Sales * 100.
ii) Vertical Analysis Formula (Balance Sheet) = Balance Sheet Item / Total Assets (Liabilities) * 100.
Ramapo Company produces two products, Blinks and Dinks. They are manufactured in two departments, Fabrication and Assembly. Data for the products and departments are listed below. Product Number of Units Labor Hours Per Unit Machine Hours Per Unit Blinks 1,000 4 5 Dinks 2,000 2 8 All of the machine hours take place in the Fabrication Department, which has an estimated overhead of $84,000. All of the labor hours take place in the Assembly Department, which has an estimated total overhead of $72,000. Ramapo Company uses a single plantwide overhead rate to apply all factory overhead costs. The single plantwide rate, if it is based on machine hours instead of labor hours, is a.$7.43 per machine hour b.$19.50 per machine hour c.$9.00 per machine hour d.$4.00 per machine hour
Answer:
OAR = $4 per machine hour
Explanation:
Plant wide overhead absorption rate (OAR)
= Estimated overhead/Estimated total machine hours
Estimated machine hours = (5 × 1000) +( 8× 2000) = 21,000 machine hours
OAR = $84,000/21,000 machine hour= $4 per machine hour
OAR = $4 per machine hour
Nutty Nuts is a monopolistic firm in the market for nuts. The following equations describe the demand for, and the cost of producing nuts, where Q is output in thousand pounds, and P is price per pound. Demand: P = 31 - 3Q Marginal Cost: MC = 3 + Q Total Cost: TC = 3 + 3Q + 0.5Q2 Consider that after filing for bankruptcy and engaging in a legal battle with neighboring landowners, the government decides to dissolve the monopolist, and the market becomes competitive. Given the perfectly competitive market outcome, one would expect that in the long run,:
a. the market price and the number of firms in the market will both decrease.
b. the market price and the number of firms in the market will both increase.
c. the market price will decrease but the number of firms will increase.
d. the market price will increase but the number of firms will decrease.
Answer: the market price will decrease but the number of firms will increase.
Explanation:
A monopoly exists when there is one supplier of a particular good or service in the market. A monopolistic firm has full control of the market, and therefore sets the price and the supply of a good or service. Typically a monopoly usually selects a higher price and also lesser quantity of output to be supplied. There is also a high barrier to entry.
When the government dissolves the monopolist, and the market becomes competitive, this will lead to more firms coming into the market. As a result of more firms coming to the market, there'll be cheaper price of goods. The market price which is determined by the forces of demand and supply will decrease.
Wadding Corporation applies manufacturing overhead to products on the basis of standard machine-hours. For the most recent month, the company based its budget on 5,500 machine-hours. Budgeted and actual overhead costs for the month appear below: Original Budget Based on 5,500 Machine-HoursActual Costs Variable overhead costs: Supplies$12,800 $13,730 Indirect labor 54,300 55,690 Fixed overhead costs: Supervision 21,600 21,240 Utilities 7,800 7,860 Factory depreciation 8,800 9,110 Total overhead cost$105,300 $107,630 The company actually worked 5,590 machine-hours during the month. The standard hours allowed for the actual output were 5,580 machine-hours for the month. What was the overall variable overhead efficiency variance for the month
Answer:
Variable overhead efficiency variance = $798.36 unfavorable
Explanation:
Variable overhead efficiency variance is the difference between the actual time taken to achieve a given production output less the standard hours for same multiplied by the standard variable overhead rate
Since the variable overhead is charged using machine hours, any amount by which the actual labour hours differ from the standard allowable hours would result in a variance
Overhead absorption rate =Estimated overhead/estimated machine hours
105,300/5,500 machine hours = $19.14 per machine hour
$
5,580 hours should have cost (5,580× 19.14) 106,831.6
but did cost (actual cost ) 107,630
Variable overhead efficiency variance. 798.36 unfavorable
Variable overhead efficiency variance = $798.36 unfavorable
On January 1, 2018, Earnest Company purchased equipment and signed a sixminusyear mortgage note for $ 80 comma 000 at 15%. The note will be paid in equal annual installments of $ 21 comma 139, beginning January 1, 2019. Calculate the portion of principal paid on the third installment. (Round any intermediate calculations to two decimal places, and your final answer to the nearest dollar.)
Answer:
$12,086
Explanation:
Mortgage installment payment includes the payment of interest on the outstanding balance of mortgage and Principal Payment. Principal payment is calculated by deducting the interest payment from total installment payment. Gradually the interest payment decreases as the outstanding balance of mortgage decreases and Principal payment increases.
First Payment
Installment = 21,139
Interest Payment = $80,000 x 15% = 12,000
principal Payment = $21,139 - 12000 = $9,139
Closing Balance of Mortgage = $80,000 - $9,139 = $70,861
Second Payment
Installment = 21,139
Interest Payment = $70,861 x 15% = $10,629
principal Payment = $21,139 - $10,629 = $10,510
Closing Balance of Mortgage = $70,861 - $10,510 = $60,351
Third Payment
Installment = 21,139
Interest Payment = $60,351 x 15% = $9,053
principal Payment = $21,139 - $9,053 = $12,086
Closing Balance of Mortgage = $60,351 - $12,086 = $48,265
Halverstein Company's outstanding stock consists of 9,450 shares of cumulative 5% preferred stock with a $10 par value and 4,050 shares of common stock with a $1 par value. During the first three years of operation, the corporation declared and paid the following total cash dividends. Year Dividend Declared 2015 $0 2016 $6,000 2017 $32,000 The amount of dividends paid to preferred and common shareholders in 2016 is:
a. $3,500 preferred; $2,500 common.
b. $3,000 preferred; $3,000 common.
c. $0 preferred; $6,000 common.
d. $4,200 preferred; $1,800 common.
e. $6,000 preferred; $0 common.
Answer:
e. $6,000 preferred; $0 common.
Explanation:
The Preference Stock holders hold first preference during payment of dividends followed by the Common Stockholders.
Note also that Cumulative Preference Stock can have their dividends accumulated and paid in the latter years when funds become available.
Amount of Preference Stock dividend is fixed and calculated as follows:
9,450 shares × $10 × 5% = $ 4,725
2015
Cash dividends = $0
Preference Stock dividend Paid = $0
Preference Stock dividend Arrears = $ 4,725
No Common Stock Dividend
2016
Cash dividends = $6,000
Preference Stock dividend Paid = $6,000
Preference Stock dividend Arrears = $ 3,450
No Common Stock Dividend
The market price of a security is $50. Its expected rate of return is 14%. The risk-free rate is 6% and the market risk premium is 8.5%. What will be the market price of the security if its correlation coefficient with the market portfolio doubles (and all other variables remain unchanged)? Assume that the stock is expected to pay a constant dividend in perpetuity
Answer:
The market price of the security is $31.81
Explanation:
In order to calculate the market price of the security if its correlation coefficient with the market portfolio doubles we would have to calculate first the following:
First, calculate the dividend expected after one year with the following formula:
D=P*E(ri)
D=$50*0.14
D=$7
Next, we would have to calculate the beta of the security using the CAAPM Equation:
βi= E(ri)-rf/E(rm)-rf
=0.14-0.06/0.085
=0.9412
Next, we have to calculate the new beta due to the change in the correlation coefficient with the following formula:
β=correlation coefficient/σm*σs
=2*0.941
=1.882
Next, Calculate the new expected return as follows:
E(ri)=rf+βi(E(rm)-rf)
=0.06+(1.882)(0.085)
=0.22
Finally we calculate the new piece of the security as follows:
P=D/E(ri)
=$7/0.22
=$31.81
The market price of the security is $31.81
Waterways puts much emphasis on cash flow when it plans for capital investments. The company chose its discount rate of 7% based on the rate of return it must pay its owners and creditors. Using that rate, Waterways then uses different methods to determine the best decisions for making capital outlays. This year Waterways is considering buying five new backhoes to replace the backhoes it now has. The new backhoes are faster, cost less to run, provide for more accurate trench digging, have comfort features for the operators, and have 1-year maintenance agreements to go with them. The old backhoes are working just fine, but they do require considerable maintenance. The backhoe operators are very familiar with the old backhoes and would need to learn some new skills to use the new backhoes. The following information is available to use in deciding whether to purchase the new backhoes.
Old Backhoes New Backhoes
Purchase cost when new $90,000 $200,000
Salvage value now $42,000
Investment in major overhaul needed in next year $55,000
Salvage value in 8 years $15,000 $90,000
Remaining life 8 years 8 years
Net cash flow generated each year $30,425 $43,900
Instructions
(a) Evaluate in the following ways whether to purchase the new equipment or overhaul the old equipment. (Hint: For the old machine, the initial investment is the cost of the overhaul. For the new machine, subtract the salvage value of the old machine to determine the initial cost of the investment.)
(1) Using the net present value method for buying new or keeping the old.
(2) Using the payback method for each choice. (Hint: For the old machine, evaluate the payback of an overhaul.)
(3) Comparing the profitability index for each choice.
(4) Comparing the internal rate of return for each choice to the required 8% discount rate.
(b) Are there any intangible benefits or negatives that would influence this decision?
(c) What decision would you make and why?
Answer:
(a) Evaluate in the following ways whether to purchase the new equipment or overhaul the old equipment.
(1) Using the net present value method for buying new or keeping the old.
buying the new backhoes has a higher net present value (NPV), so we should choose that project according to this method of evaluation ($156,521 > $135,407 )(2) Using the payback method for each choice.
the payback period for keeping the old backhoes is shorter than buying new backhoes, so we should choose that project according to this method of evaluation (1.81 years < 3.6 years)(3) Comparing the profitability index for each choice.
keeping the old backhoes also has a higher profitability index, so we should choose that project according to this method of evaluation (3.46 > 1.99)(4) Comparing the internal rate of return for each choice to the required 7% discount rate.
Both project have a very high IRR, but keeping the old backhoes has a higher IRR, so we should choose that project according to this method of evaluation (54% > 26%)(b) Are there any intangible benefits or negatives that would influence this decision?
The new backhoes provide intangible benefits that the old backhoes do not, e.g. they are faster and more accurate which results in better work done. While the old backhoes require a lot of maintenance work and once starts to require a lot of maintenance, the odds are that they will keep breaking even more than expected.(c) What decision would you make and why?
I would purchase the new backhoes because it would improve the company's work and efficiency, since old equipment tends to break a lot specially construction equipment. Even though the NPV is the only method of valuation where the new backhoes were better, it is also the most important one.Explanation:
Old Backhoes New Backhoes
Purchase cost when new $90,000 $200,000
Salvage value now $42,000
Investment in major overhaul
needed in next year $55,000
Salvage value in 8 years $15,000 $90,000
Remaining life 8 years 8 years
Net cash flow per year $30,425 $43,900
initial investment -$55,000 -$158,000
cash flow years 1-7 $30,425 $43,900
cash flow year 8 $45,425 $133,900
discount rate 7% 7%
I used an excel spreadsheet to calculate the following
net present value $135,407 $156,521
IRR 54% 26%
payback period 1.81 years 3.6 years
profitability index 3.46 1.99
(= PV of cash flows / investment)
Mike Corporation uses residual income to evaluate the performance of its divisions. The company's minimum required rate of return is 14%. In January, the Commercial Products Division had average operating assets of $790,000 and net operating income of $148,700. What was the Commercial Products Division's residual income in January
Answer:
The Commercial Products Division's Residual income in January is $ 37,400.
Explanation:
Residual income (which is a Managerial Accounting concept) is what remains from a departments income after the opportunity cost of the capital that it deploys has been removed.
The formula is given below:
Residual Income (RI) = Controllable Margin (CM) - Required Rate of Return (RRR) × Average Operating Assets (AOR)
Step I:
Insert all the given factors
RI = 148,000 - (14% x 790,000)
RI = 148,000 - 110600
Therefore, residual income RI = $ 37,400
Cheers!
Cost estimates that are based as a guideline on real numbers, or figures derived after the completion of preliminary design work, are:
a. Definitive estimates.
b. Feasibility estimates.
c. Parametric estimates.
d. Order of magnitude estimates
Answer:
B. Feasibility estimates.
Explanation:
This is explained as an analysis used to determine the viability of an idea based on its risks and to check if it is legally and technically feasible.
Feasibility estimates are also used to determine whether a research study is likely to be delivered successfully, taking into account the practical aspects of managing the project. Moreso, feasibility assessments are not just about figures as it is also used to assess the relevance and intensity of the study for participants and the study
team. Large feasibility estimates will help identify possible problems with recruitment and may highlight
logistical challenges that may face sites involved with the study.
Jonathan, the HR manager of a manufacturing company, asks all the employees to use public transportation and thus contribute to the reduction of the emission of greenhouse gases. However, the employees state that they lose time if they use public transport, and they continue to commute in private vehicles. In the context of social dilemmas, the employees' actions will result in ________ in this scenario.
Answer:
the Tragedy of the Commons
Explanation:
A lot of people still fail to consider our environment as part of ourselves and where we live. They choose to believe that pollution is not that serious because they do not see it or are not affected by it. But our world is one big house where we all live. The burning of the Amazon rain forests affects us all, the same as car pollution affects the whole world, even if you do not feel the negative effects right away. Since people do not see the bad consequences of pollution, they will continue to pollute until it is too late. Most people place their individual needs ahead of the collective needs of society and our environment.
Solomon Boards produces two kinds of skateboards. Selected unit data for the two boards for the last quarter follow: Basco Boards Shimano Boards Production costs Direct materials $ 25.40 $ 38.80 Direct labor $ 31.40 $ 53.80 Allocated overhead $ 15.70 $ 20.80 Total units produced and sold 5,400 9,400 Total sales revenue $ 491,400 $ 1,259,600 Solomon allocates production overhead using activity-based costing. It allocates delivery expense and sales commissions, which amount to $61,000 per quarter, to the two products equally. Required Compute the per-unit cost for each product. (Do not round intermediate calculations. Round your answers to 2 decimal places.) Compute the profit for each product.
Answer:
The Basco per unit cost is $5.65
The Shimano per unit cost is $3.24
The profit of Basco is $99,900. The profit of Shimano is $193,640
Explanation:
In order to calculate the per-unit cost for each product we would have to make the following calculations according to the given data:
Basco boards Shimano boards
Direct material $25.40 $38.80
Direct labor $31.40 $53.80
Allocated overhead $15.70 $20.80
Delivery expenses and sales commission $5.65 $3.24
Unit cost $78.15 $116.64
Allocation of delivery expenses and sales commission on an equal basis = $61,000 / 2 = $30,500.
Basco per unit cost = $30,500 / 5,400 = $5.65
Shimano per unit cost = $30,500 / 9,400 = $3.24
To calculate the profit for each product we would have to make the following calculations:
Basco Shimano
Sales $491,400 $1,259,600
Cost of goods sold $391,500 (5,400 * 72.5) $1,065,960 (9,400 * 116.64)
Profit $99,900 $193,640
