Answer:
a.
7.00%
b.
5.96%
c.
1.20%
Explanation:
a.
First and foremost, we need to determine the yield to maturity on the bond, using a financial calculator as shown thus:
The financial calculator should be set to its default end mode before making the following inputs:
N=20(number of semiannual coupons in 10 years=10*2=20)
PMT=30(semiannual coupon=face value*coupon rate*/2=$1000*6%/2=$30)
PV=-1163.51(current price=$1,163.51)
FV=1000(face value of the bond=$1000)
CPT
I/Y=2.00%(semiannual yield=2%, annnual yield=2.00%*2=4.00%)
bond yield plus risk premium=bond yield(4.00%)+ risk premium(3%)
bond yield plus risk premium=7.00%
b.
In determining the midpoint range is the maximum plus minimum cost of equity divided by 2
Let us determine cost of equity using the Capital Asset Pricing Model and Constant Dividend Growth Model
cost of equity=risk-free rate+beta*(expected return on the market portfolio-risk-free rate)
risk-free rate=yield on Treasury bonds= 0.6%
beta=0.8
expected return on the market portfolio= 6%
cost of equity=0.6%+0.8*(6%-0.6%)
cost of equity=4.92%
cost of equity=expected dividend/share price+growth rate
expected dividend=last dividend*(1+growth rate)
expected dividend=$1.13*(1+4%)=$1.1752
share price= $39.17
growth rate=4%
cost of equity=($1.1752/$39.17)+4%
cost of equity=7.00%
midpoint range=(maximum cost of equity+minimum cost of equity)/2
midpoint rate=(7.00%+4.92%)/2
midpoint range=5.96%
c.
WACC=(weight of equity*cost of equity)+(weight of preferred stock*cost of preferred stock)+(weight of debt*after-tax cost of debt)
weight of equity= 20%
cost of equity=5.96%
weight of preferred stock=20%
cost of preferred stock=annual dividend/price
cost of preferred stock=$4.3/$135.26=3.18%
weight of debt=60%
aftertax cost of debt=4.00%*(1-34%)=2.64%
WACC=(20%*5.96%)+(20%*3.18%)*(60%*2.64%)
WACC=1.20%
You would like to combine a risky stock with a beta of 1.68 with a treasury bill in a way that the risk level of the portfolio is equivalent to the risk level of the market. What weight of the portfolio should be invested in the Treasury Bill?
Answer:
0.60 or 60%
Explanation:
Calculation of weight of the portfolio
Assume that the weight is x
x*[Beta of stock) + (1+x)*(Beta of Tbills) = 1
x * (1.68) + (1-x)*(0) = 1
1.68x + (1-x)*0 = 1
1.68x + 0 = 1
x = [1/1.68]
x = 0.5952
x = 0.60 or 60%
So, the weight of the portfolio that should be invested in the Treasury Bill is 0.60 or 60%.
Consider the following information for Watson Power Co.: Debt: 3,500 7 percent coupon bonds outstanding, $1,000 par value, 20 years to maturity, selling for 102 percent of par; the bonds make semiannual payments. Common stock: 84,000 shares outstanding, selling for $59 per share; the beta is 1.06. Preferred stock: 10,000 shares of 6 percent preferred stock outstanding, currently selling for $104 per share. Market: 8.5 percent market risk premium and 5.5 percent risk-free rate. Assume the company's tax rate is 35 percent. Find the WACC.
Answer:
9. 82 %
Explanation:
WACC = Cost of equity x Weight of equity + Cost of Preferred Stock x Weight of Preferred Stock + Cost of Debt x Weight of Debt.
Remember to always use the After tax cost of debt :
Cost of Debt :
PV = - $1,020
FV = $1,000
N = 20 x 2 = 40
P/YR = 2
PMT = ($1,000 x 7 %) ÷ 2 = $35
I/YR = ???
The Cost (I/YR) is calculated as 6.82 %. The After tax cost of debt is 4.433 %.
Cost of Equity :
Cost of Equity = Return from risk free security + beta x market premium'
= 5.5 % + 1.06 x 8.5 %
= 14.51 %
Cost of Preferred Stock :
Cost of Preferred Stock = 6 %
therefore,
WACC = 14.51 % x 51.8 % + 6 % x 10.87 %+ 4.433 % x 37.3 %
= 9. 82 %
Which of these is an example of self employment
Answer:
Which of what?
Explanation:
Tanner-UNF Corporation acquired as an investment $260 million of 5% bonds, dated July 1, on July 1, 2021. Company management is holding the bonds in its trading portfolio. The market interest rate (yield) was 7% for bonds of similar risk and maturity. Tanner-UNF paid $200 million for the bonds. The company will receive interest semiannually on June 30 and December 31. As a result of changing market conditions, the fair value of the bonds at December 31, 2021, was $215 million.
Required:
a. Prepare the journal entry to record Tanner-UNF’s investment in the bonds on July 1, 2021 and interest on December 31, 2021, at the effective (market) rate.
b. Prepare any additional journal entry necessary for Tanner-UNF to report its investment in the December 31, 2021, balance sheet.
Answer:
Tanner-UNF Corporation
a. Journal Entry
July 1, 2021:
Debit Investment in Bonds $260 million
Credit Discount on bonds $60 million
Credit Cash $200 million
To record the acquisition of bonds.
December 31, 2021:
Debit Cash $6.5 million
Debit Discount on bonds $0.5 million
Credit Interest Revenue $7 million
To record cash received from bond investment and amortization of the bond discount for the semi-period.
b. Debit Unrealized Bonds Investment Loss $45 million
Credit Investment in Bonds $45 million
To record the unrealized loss on the investments.
Explanation:
a) Data and Calculations:
July 1, 2021:
Face value of bonds = $260 million
Interest rate = 5%
Market interest rate = 7%
Payment for the bonds = $200 million
Discount on bonds = $60 million
December 31, 2021:
Semi-annual interest cash receipts = $6.5 million ($260m * 2.5%)
Semi-annual interest revenue = $7 million ($200m * 3.5%)
Amortization of bonds discount = $0.5 ($7 million - $6.5 million)
Fair value of bonds = $215 million
Indirect: Computing cash flows from operation
Case X Case Y Case Z
Net income $7,200 $180,000 $129,600
Depreciation expense 54,000 14,400 43,200
Accounts receivable increase (decrease) 72,000 36,000 (7,200)
Inventory increase (decrease) (36,000) (18,000) 18,000
Accounts payable increase (decrease) 43,200 (39,600 ) 25,200
Accrued liabilities increase (decrease) (79,200 ) 21,600 (14,400)
For each of the above separate cases X, Y, and Z, compute cash flows from operations using the indirect method.
Answer:
CASE X CASE Y CASE Z
NET INCOME $7,200 $180,000 $129,600
ADJUSTMENT TO RECONCILE
NET INCOME TO NET CASH
DEPRECIATION $54,000 $14,400 $43,200
CHANGES IN ASSET & LIABILITIES
ACCOUNT RECEIVABLES $72,000 $36,000 ($7,200)
INVENTORY ($36,000) ($18,000) $18,000
ACCOUNT PAYABLE $43,200 ($39,600) $25,200
ACCRUED LIABILITY ($79,200) $21,600 ($14,400)
NET CASH PROVIDED BY $61,200 $194,400 $194,400
OPERATING ACTIVITY
Brightstone Tire and Rubber Company has capacity to produce 204,000 tires. Brightstone presently produces and sells 156,000 tires for the North American market at a price of $100 per tire. Brightstone is evaluating a special order from a European automobile company, Euro Motors. Euro is offering to buy 24,000 tires for $86.5 per tire. Brightstone's accounting system indicates that the total cost per tire is as follows:
Direct materials $54
Direct labor 24
Factory overhead (62% variable) 24
Selling and administrative expenses (44% variable) 25
Total $127.00
Brightstone pays a selling commission equal to 4% of the selling price on North American orders, which is included in the variable portion of the selling and administrative expenses. However, this special order would not have a sales commission. If the order was accepted, the tires would be shipped overseas for an additional shipping cost of $7.65 per tire. In addition, Euro has made the order conditional on receiving European safety certification. Brightstone estimates that this certification would cost $165,424.
Required:
a. Prepare a differential analysis dated January 21 on whether to reject (Alternative 1) or accept (Alternative 2) the special order from Euro Motors.
b. Determine whether the company should reject (Alternative 1) or accept (Alternative 2) the special order from Euro Motors
c. What is the minimum price per unit that would be financially acceptable to Brightstone?
Answer:
Brightstone Tire and Rubber Company
a. Differential Analysis dated January 21
Alternative 1 Alternative 2
Reject Accept
Revenue from special order ($2,076,000) $2,076,000
Avoidable costs 2,493,120 2,831,520
Cost Differential ($417,120) ($755,520)
b. The company should reject the special order from Euro Motors as it will incur more costs when it accepts than when it rejects the special order.
c. The minimum price per unit that would be financially acceptable to Brightstone is $117.98.
Explanation:
a) Data and Calculations:
Production capacity in tires = 204,000
Current production and sales units = 156,000
Selling price per tire for the North American market = $100
Special order of 24,000 tires from Euro Motors = $86.50 per tire
Total cost per tire: Total Variable
Direct materials $54 $54
Direct labor 24 24
Factory overhead (62% variable) 24 14.88
Selling and administrative expenses (44% variable) 25 11
Total $127.00 $103.88
Special Order:
Offer price = $86.50
Reject Accept
Variable cost per unit $103.88 $2,493,120
Less selling commission (0.44)
Additional shipping cost 7.65
Cost of certification 6.89
Total per unit costs = $117.98 $2,813,520
Operating income (loss) ($31.48)
Ian is a clerical worker. He sorts files, as do the other ten employees in the department. All the employees know that they are supposed to place the files in the exact place when they are finished so that others can find them when they need them. As a rule, the employees should have only one file out at a time. Ian's supervisor notices that Ian has five files on his desk of which one is a file that another employee urgently needs.
Required:
What steps of the coaching model should Ian's supervisor take immediately after describing to Ian his current behavior?
Answer: Describe desired performance
Explanation:
The step of the coaching model that Ian's supervisor should take immediately after describing to Ian his current behavior is to "describe desired performance".
The desired performance simply refers to the expectations that are expected from Ian by the company. Every organization has goals that they tend to achieve and this can only be done when employees meet the performance that's expected from them.
Which one of the following statements is TRUE?
a. An example of an agency cost is when an outside investor is only willing to pay less for stock because she thinks the original owner will consume too many perquisites.
b. The commission required by the Federal Housing Agency for a small business loan is an example of an agency cost.
c. An example of an agency cost is when an attorney hires an expert witness for a trial.
d. An example of an agency cost is when the board of directors pays a dividend to shareholders.
e. An example of an agency cost is the salary of the agent hired to work for the principal.
Answer: A. An example of an agency cost is when an outside investor is only willing to pay less for stock because she thinks the original owner will consume too many perquisites.
Explanation:
An agency cost typically occurs between between a principal and the agent. This occurs when the agent is given much power and make decisions on behalf of the principal.
An example of an agency cost is when an outside investor is only willing to pay less for stock because she thinks the original owner will consume too many perquisites. The agent typically has more information and there might be different incentives sometimes.
Therefore, the correct option is A.
Identifying and Analyzing Financial Statement Effects of Cash Dividends Freid Corp. has outstanding 6,000 shares of $50 par value, 6% preferred stock, and 40,000 shares of $1 par value common stock. The company has $328,000 of retained earnings. At year-end, the company declares and pays the regular $3 per share cash dividend on preferred stock and a $2.20 per share cash dividend on common stock. a. Using the financial statement effects template, illustrate the effects of these two dividend payments.
Answer:
Assets = Liabilities + Equity
cash (18,000) NA Retained earnigns (18,000)
cash (88,000) NA Retained earnigns (88,000)
Retained earnings is an equity account and any cash dividends paid either to preferred or common stock will decrease cash and retained earnings, remember that both sides must balance.
Using the financial statement effects template, the effects of the two dividend payments by Freid Corp. are as follows:
Balance Sheet Retained Earnings Cash Flow Statement
Assets = Liab. + Equity
a. ($18,000) = Liab. + ($18,000) ($18,000) ($18,000) FA
b. ($88,000) = Liab. + ($88,000) ($88,000) ($88,000) FA
Data Analysis:
Outstanding shares:
6,000 shares of $50 par value, 6% preferred stock $300,000
40,000 shares of $1 par value, common Stock $40,000
Retained earnings = $328,000
Preferred Stock Dividends = $18,000 ($3 x 6,000)
Common Stock Dividends = $88,000 ($2.20 x 40,000)
Cash = $106,000 ($18,000 + $88,000)
Thus, the effects of the two dividend payments are reductions in the Assets, Equity, and Retained Earnings. They are also cash outflows under the financing section of the Statement of Cash Flows.
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Balance Sheet
The assets of Dallas & Associates consist entirely of current assets and net plant and equipment. The firm has total assets of $2.9 million and net plant and equipment equals $2.6 million. It has notes payable of $145,000, long-term debt of $750,000, and total common equity of $1.55 million. The firm does have accounts payable and accruals on its balance sheet. The firm only finances with debt and common equity, so it has no preferred stock on its balance sheet. Write out your answers completely. For example, 25 million should be entered as 25,000,000.
a. What is the company's total debt?
b. What is the amount of total liabilities and equity that appears on the firm's balance sheet?
c. What is the balance of current assets on the firm's balance sheet?
d. What is the balance of current liabilities on the firm's balance sheet?
e. What is the amount of accounts payable and accruals on its balance sheet?
f. What is the firm's net operating working capital?
g. What is the firm's net working capital?
h. What is the monetary difference between your answers to part fand g?
What does this difference indicate?
Solution :
a). Total debt = notes payable + long term debt
= 145,000 + 750,000
= $ 895,000
b). Total liabilities and equity = total assets
= 2,900,000
c). Current assets = total assets - net plant and equipment
= 2,900,000 - 2,600,000
=$ 300,000
d). Total current liabilities = total liabilities and equity - total common equity - long term debt
= 2,900,000 - 1,550,000 - 750,000
= $ 600,000
e). Accounts payable and accruals = total current liabilities - notes payable
= 600,000 - 145,000
= 455,000
f). Net working capital = current asset - current liabilities
= 300,000 - 600,000
= - $300,000
g). Net operating working capital = current assets - accounts payable and accruals
= 300,000 - 455,000
= - $ 155,000
h). The difference between f) and g). represents the balance of notes payable.
Use the following information regarding the Newcastle Corporation to prepare a statement of cash flows using the indirect method:
Accounts payable decrease $9,100
Accounts receivable increase 12,740
Wages payable decrease 5,460
Amortization expense 29,120
Cash balance, January 1 54,600
Cash balance, December 31 12,740
Cash paid as dividends 10,920
Cash paid to purchase land 182,000
Cash paid to retire bonds payable at par 136,500
Cash received from issuance of common stock 81,900
Cash received from sale of equipment 21,840
Depreciation expense 70,980
Gain on sale of equipment 25,480
Inventory increase 23,660
Net income 174,720
Prepaid expenses increase 14,560
Answer and Explanation:
The preparation of the cash flow statement is presented below;
Cash Flows from Operating activities
Net income $174,720
Adjustments made
Less: Accounts payable decrease ($9,100)
Less Accounts receivable increase ($12,740)
Less: Wages payable decrease ($5,460)
Add: Amortization expense $29,120
Add: Depreciation expense $70,980
Less: Gain on sale of equipment ($25,480)
Less: Inventory increase ($23,660)
Less; Prepaid expenses increase ($14,560)
Net Cash Flows from Operating activities $183,820
Cash Flows from Investing activities
Cash paid to purchase land ($182,000)
Add: Cash received from the sale of equipment $21,840
Net Cash flows from Investing activities ($160,160)
Cash Flows from Financing Activities
Cash paid as dividends ($10,920)
Less; Cash paid to retire bonds payable at par ($136,500)
Add: Cash received from the issuance of common stock $81,900
Net Cash Flows from Financing activities ($65,520)
Net Increase (Decrease) in Cash ($41,860)
Add: Cash balance, January 1 $54,600
Cash balance, December 31 $12,740
A property that produces a first year NOI of $80,000 is purchased for $750,000. The NOI is expected stay constant through year 5, and to increase by 15% in the sixth year when some of the leases turn over. The NOI would then stay constant in years 6-10. The resale price in year 10 is expected to be $830,000. What is the net present value of investing in this property based on the 10-year holding period and a required return of 9.5%
Answer: $115998
Explanation:
Based on the information given, we can calculate the NOI from the 6th year which will be:
= $80,000 × (100% + 15%)
= $80,000 × 115%
= $80,000 × 1.15
= $92,000
Therefore, the net present value of the property based on the 10-year holding period and a discount rate of 9.5% will be:
= 80000(PVAF, 5 year) + 92000[PVAF,(10-5),9.5%] + 830000/(1.095)10-750000
= (80000 × 3.839) + (92000 × 2.439) + (830000 × 0.403) - 750000
= 307120 + 224388 + 334490 - 750000
= 865998 - 750000
= $115998
Therefore, the net present value is $115998
Coolidge Cola is forecasting the following income statement: Sales $30,000,000 Operating costs excluding depr and amort 20,000,000 EBITDA $10,000,000 Depreciation and amortization 5,000,000 Operating income (EBIT) $ 5,000,000 Interest expense 2,000,000 Taxable income (EBT) $ 3,000,000 Taxes (40%) 1,200,000 Net income $ 1,800,000 Assume that depreciation is Coolidge's only non-cash revenue or expense. Congress is considering a proposal allowing companies to depreciate their equipment at a faster rate. If approved, Coolidge's new depreciation expense would be $8,000,000, although there would be no effect on the economic value of the company's equipment, nor would it affect the company's tax rate, which would remain at 40%. If this proposal were implemented, what would be the company's net cash flow
Answer:
new net cash flow = $8,000,000
Explanation:
Current net cash flow before any change approved by Congress = net income + deprecaition expense = $1,800,000 + $5,000,000 = $6,800,000
Cash flow after Congress approves change = net income + new depreciation expense:
taxable income = $10,000,000 - $8,000,000 - $2,000,000 = $0
deprecaitione xpense = $8,000,000
new net cash flow = $8,000,000
Suppose that you are considering purchasing an investment property for $30 million. The property is expected to have a year 1 net operating income of $1.8 million. You expect to finance the purchase of the property with a 30-year loan for 60% of the purchase price. If the annual interest rate on the loan is 5% with monthly payments and monthly compounding, what will the year 1 before-tax cash flow be for the property
Answer:
b. $640,465.32
Explanation:
Options include "$1,800,000, $640,465, ($132,558), $614,846, $704,512"
I/Y = 0.42% [5%/12]
N = 360 [12*30]
PV = -$18,000,000 [-30000000*60%]
FV = $0
So, we calculate the PMT using financial calculator
Monthly payment (CPT) = PMT(I/Y. N, PV, FV)
Monthly payment (CPT) = PMT(0.42%. 360, 18000000, 0)
Monthly payment (CPT) = $96,627.89
Before-tax cash flow = Expected year 1 net operating income - 12*PMT
Before-tax cash flow = $1,800,000 - 12*$96,627.89
Before-tax cash flow = $1,800,000 - $1,159,534.68
Before-tax cash flow = $640,465.32
what are the principles of Csr
Answer:
there are three basic principles which together comprise all CSR activity. These are: Sustainability; • Accountability; • Transparency.
Explanation:
hope this helps you
The Walking Dead Co. provides services on-account and in exchange for cash. All general ledger accounts are adjusted monthly. For September, the following information is available: Accounts Receivable on September 1st is $22,400 (debit) Allowance for Doubtful Accounts on September 1st is $4,400 (credit) Services provided during September for cash $20,000 Services provided during September on-account $45,000 During the month collections on account were $34,400 and accounts written off as uncollectible were $2,000. The Walking Dead estimates bad debts at 8% of accounts receivable. After adjusting journal entries are recorded, what is the September 30th balance in Allowance for Doubtful Accounts
Answer:
See below
Explanation:
Given that,
Accounts receivables :
Beginning balance 1 September = $22,400
Services on account = $45,000
Cash collected = $34,400
Written off accounts = $2,000
Allowance for doubtful accounts:
Beginning balance 1 September = $4,400
Adjusted balance for Allowance for doubtful accounts on 30th September
= Beginning balance 1 September - Written off accounts + Bad debt expense
= $4,400 + $2,000 + ($45,000 × 8%)
= $4,400 + $2,000 + $3,600
= $6,000
A local partnership is liquidating and is currently reporting the following capital balances: Barley, capital (50% share of all profits and losses) $ 44,000 Carter, capital (30%) 32,000 Desai, capital (20%) (24,000 ) Desai has indicated that a forthcoming contribution will cover the $24,000 deficit. However, the two remaining partners have asked to receive the $52,000 in cash that is currently available. How much of this money should each of the partners receive
Answer:
Barley $29,000; Carter $23,000 ;Desai $0
Explanation:
Calculation to determine How much of this money should each of the partners receive
PARTNER WITH DEFICIT CAPITAL BALANCE
Barley,Capital(50%) Carter,Capital(30%)
Desai,Capital(20%)
Reported balances $44,000 $32,000 $(24,000)
Potential loss from Desai deficit
(split 5/8:3/8)
($15,000)($9,000) $24,000
Barley (5/8*$24,000=$15,000)
Carter (3/8*$24,000=$9,000)
Desai($15,000)($9,000) =$24,000
Cash distributions $29,000 $23,000 $0
Barley ($44,000-$15,000=$29,000)
Carter, ($32,000-$9,000=$23,000)
Desai($24,000-$24,000=0)
Therefore The amount of the money that each of the partners should receive is :
Barley $29,000; Carter $23,000 ;Desai $0
Examine this supply and demand graph for a product. What does the red dot
on the graph represent?
Demand
$5
Supply
$4
Price
$3
$2
$1
0
2
4
5
Quantity
O A. The product's equilibrium price
O B. The product's quantity demanded
O C. The product's quantity supplied
O D. The product's supply schedule
The product’s equilibrium price
Just simply because the price and quantity is the same
The red dot on the graph represents the product's equilibrium price.
What do you mean by demand and supply?Demand refers to the consumer's desire and ability in order to purchase a good or service at a given period of time. There is an inverse relationship between demand and price. When price of a product increases, the demand decreases and vice versa.
Supply refers to the total amount of a given product or service a supplier offers to consumers at a given period of time. Supply is usually determined by market movement.
What does the supply and demand graph indicate?The supply and demand graph indicates the relationship between quantity supplied and the quantity demanded. In the graph it is seen that the demand curve and supply curve meet a point, which is the point of intersection (the red dot) and also the point of equilibrium.
Equilibrium is a state of rest. At equilibrium demand matches supply at the same price. If a market is at its equilibrium price and quantity, then it has no reason to move away from that point, as it's balancing both, quantity supplied and the quantity demanded.
However, in the graph the equilibrium price represents the point where the supply of a product is equal to the demand for that product. Thus, red dot on the graph represents the product's equilibrium price where supply meets demand.
Hence, option A is correct.
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Crane Co. leased equipment to Union Co. on July 1, 2021, and properly recorded the sales-type lease at $144000, the present value of the lease payments discounted at 8%. The first of eight annual lease payments of $21500 due at the beginning of each year of the lease term was received and recorded on July 3, 2021. Crane had purchased the equipment for $113000. What amount of interest revenue from the lease should Crane report in its 2021 income statement
Answer:
$4,900
Explanation:
Calculation to determine What amount of interest revenue from the lease should Crane report in its 2021 income statement
Interest revenue=8%/2*($144000 - $21500)
interest revenue=4%*$122,500
interest revenue = $4,900.
Therefore the amount of interest revenue from the lease should Crane report in its 2021 income statement is $4,900
The following information should be used to according to the provisions of GAAP (Statement of Cash Flows) and using the following data. Net income $50,000 Provision for bad debts $2,000 Decrease in inventory $1,000 Decrease in accounts payable $2,000 Purchase of new equipment $35,000 Sale of equipment for $10,000 loss $20,000 Depreciation expense $6,000 Repurchase of common stock $13,000 Payment of dividend $4,000 Interest payment $3,000 What is net cash flow from operations
Answer:
Explanation:
The net cash flow from operations, according to the provisions of GAAP on Statement of Cash Flows, is $77,000.
What is the net cash flow from operations?The net cash flow from operations shows the ability of a firm to generate cash from its core business activities.
The net cash flow from operations is computed as the net income from the income statement and adjustments to modify net income from an accrual accounting basis to a cash accounting basis.
Data and Calculations:Net income $50,000
Non-Cash Expenses:
Loss from sale of equipment $20,000
Provision for bad debts $2,000
Depreciation expense $6,000
Changes in working capital:
Decrease in inventory $1,000
Decrease in accounts payable ($2,000)
Cash from operations $77,000
Thus, the net cash flow from operations, according to the provisions of GAAP on Statement of Cash Flows, is $77,000.
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Logan and Johnathan exchange land, and the exchange qualifies as like kind under § 1031. Because Logan's land (adjusted basis of $95,500) is worth $114,600 and Johnathan's land has a fair market value of $90,725, Johnathan also gives Logan cash of $23,875.
a. What is Logan's recognized gain?
b. Assume instead that Johnathan's land is worth $90,000 and he gives Logan $10,000 cash. Now what is Logan's recognized gain?
Answer:
A. $19,100 Recognized Gain or Fairmarket Value of ($23,875).
B.$19,100 Recognized Gain or Fairmarket Value of ($10,000).
Explanation:
a. Calculation to determine Logan's recognized gain
Based on the given information in a situation where Jonatha land is worth the amount of $90,725, which means Logan's RECOGNIZED GAIN will be $19,100, the lower of the REALIZED GAIN calculated as ($114,600 amount realized − $95,500 adjusted basis = $19,100) or the FAIRMARKET VALUE of the boot received of the amount of ($23,875).
b. Based on the information given assuming Johnathan and is been worth the Amount of $90,000 which therefore means that Logan's RECOGNIZED GAIN will be the amount of $19,100, the lower of the realized gain calculated as ($114,600 amount realized − $95,500 adjusted basis = $19,100) or the FAIRMARKET VALUE of the boot received OLog the amount of ($10,000).
What is the purpose of database normalization in tables?
Answer:
This includes creating tables and establishing relationships between those tables according to rules designed both to protect the data and to make the database more flexible by eliminating redundancy and inconsistent dependency.
Answer: its A
Explanation:
You are being asked to consider selling one of your regional divisions to a private equity company. The private equity company has just offered you $1.2 million for the regional division. The division is expected to provide your company net annual cash flows of $175,000 for each of the next 10 years without you having to make any additional investments in the division. Your team has calculated information to help you make your decision, as follows.
A) Your company's WACC is 7.9%
B) Your hurdle rate for this potential sale is 11.2%
C) The Net Present Value of this opportunity to your company using WACC as your discount rate is (-$20,420.78)
D) The likely Net Present Value of the division to the private equity company following the sale is $13,776.23
Which of the following answers is correct given the information provided above?
1) The IRR of the project to your company is between 7.9% and 11.2%
2) The hurdle rate for the private equity company is higher than the hurdle rate for your company
3) The IRR of the project to your company is below 7.9%
4) None of the Above
Answer:
3) The IRR of the project to your company is below 7.9%
Explanation:
As we can see in the question that at 7.9% wacc, the net present value is -$20,420.78
Since the net present value is in negative that shows that the internal rate of return would be less than 7.9%
So according to the given situation, the option 3 is correct
And, the same is to be considered
The IRR of the project to your company is below 7.9% as when the NPV is negative, IRR should be less than the weighted average cost of capital.
What is IRR?
IRR can be defined as the rate of discount at which the present value of cash flows is equal to the present value of the cash outflows.
When the net present value (NPV) is negative, it means that the discounted cash flows are less than the original investment. Furthermore, the discount rate used exceeds the IRR.
When IRR = Cost of capital, NPV is zero; nevertheless, because NPV is negative, IRR must be less than the weighted average cost of capital.
Hence, Option 3. is the correct answer; The IRR of the project to your company is below 7.9%.
To learn more about IRR, refer to the link:
https://brainly.com/question/15177997
Kiley Corporation had these transactions during 2022. Classify transactions by type of activity.
a. Purchased a machine for $30,000, giving a long-term note in exchange.
b. Issued $50,000 par value common stock for cash.
c. Issued $200,000 par value common stock upon conversion of bonds having a face value of $200,000.
d. Declared and paid a cash dividend of $13,000.
e. Sold a long-term investment with a cost of $15,000 for $15,000 cash.
f. Collected $16,000 from sale of goods.
g. Paid $18,000 to suppliers.
Answer:
Cash flow from Operating Activities
f. Collected $16,000 from sale of goods.
g. Paid $18,000 to suppliers.
Cash flow from Investing Activities
e. Sold a long-term investment with a cost of $15,000 for $15,000 cash.
Cash flow from Financing Activities
b. Issued $50,000 par value common stock for cash.
d. Declared and paid a cash dividend of $13,000.
None-Cash Activity
a. Purchased a machine for $30,000, giving a long-term note in exchange.
c. Issued $200,000 par value common stock upon conversion of bonds having a face value of $200,000.
Explanation:
Operating Activities - Results from business daily trading operations with customers and suppliers.
Investing Activities - Results from purchases and sell of assets and investments
Financing Activities - Results from a company`s efforts in raising and repayment of capital
Tech Solutions is a consulting firm that uses a job-order costing system. Its direct materials consist of hardware and software that it purchases and installs on behalf of its clients. The firm’s direct labor includes salaries of consultants that work at the client’s job site, and its overhead consists of costs such as depreciation, utilities, and insurance related to the office headquarters as well as the office supplies that are consumed serving clients.
Tech Solutions computes its predetermined overhead rate annually on the basis of direct labor-hours. At the beginning of the year, it estimated that 72,500 direct labor-hours would be required for the period’s estimated level of client service. The company also estimated $652,500 of fixed overhead cost for the coming period and variable overhead of $0.50 per direct labor-hour. The firm’s actual overhead cost for the year was $671,800 and its actual total direct labor was 77,550 hours.
Required:
1. Compute the predetermined overhead rate.
2. During the year, Tech Solutions started and completed the Xavier Company engagement. The following information was available with respect to this job:
Direct materials $ 43,500
Direct labor cost $ 23,400
Direct labor hours worked 300
Compute the total job cost for the Xavier Company engagement.
Complete this question by entering your answers in the tabs below.
Required 1 Required 2
Compute the predetermined overhead rate. (Round your answer to 2 decimal places.)
Predetermined overhead rate per DLH
Compute the total job cost for the Xavier Company engagement. (Round your intermediate calculations to 2 decimal places.)
Direct materials
Direct labor
Overhead applied
Total manufacturing cost
Answer:
1. $9.50 per Direct labor hour
2. $69,750
Explanation:
1. Computation for the predetermined overhead rate
First step is to calculate the Total Estimated overhead cost
Variable overhead cost $36,250
(72,500 Direct labor hours *$ 0.50 )
Add Fixed overhead cost $652,500
Total Estimated overhead cost $688,750
Now let calculate the predetermined overhead rate
Using this formula
Predetermined overhead rate = Total estimated overhead cost / Total estimated direct labor hours
Let plug in the formula
Predetermined overhead rate = $688,750 / 72,500
Predetermined overhead rate = $9.50 per Direct labor hour
Therefore Predetermined overhead rate will be $9.50 per Direct labor hour
2. Computation for the total job cost for the Xavier company Engagement
Direct Materials $43,500
Direct Labor $ 23,400
Overhead applied $2,850
(300 Direct labor * $9.50 )
Total Manufacturing cost $69,750
Therefore total job cost for the Xavier Company engagement will be $69,750
The distributable net income (DNI) of a fiduciary taxpayer: a.Marks the maximum amount of gross income that income beneficiaries must report when receiving distributions. b.Specifies the character of the distributions in the hands of the year's income beneficiaries. c.Constitutes the maximum amount for the fiduciary's distribution deduction. d.All of these choices are correct.
Answer: d. All of these choices are correct.
Explanation:
The Distributable Net income is the taxable income acquired by a person who is a beneficiary to a trust from that trust. It is therefore the maximum amount that they should report for taxation purposes when they receive distributions from their trusts.
It also specifies the character of the distribution and is the maximum amount that the fiduciary can deduct for distribution income purposes from their taxable income.
After the issuance of its year 1 financial statements, Serenity Inc. discovered a computational error of $150,000 in the calculation of December 31, year 1 inventory. The error resulted in a $150,000 overstated in the cost of goods sold for the year ended December 31, year 1. In October, year 2, Serenity paid $500,000 to settle litigation initiated it during year 1. In the financial statements for year 2, the year 1 retained earnings balance, as previously reported, should be adjusted by (ignore income taxes):_________-
a. $350,000 debit
b. $500,000 debit
c. $150,000 credit
d. $650,000 credit
Answer: C. $150,000 credit
Explanation:
In the financial statements for year 2, it should be noted that the year 1 retained earnings balance, should be adjusted by $150,000 credit.
The corrections of errors should be treated as the period adjustments before. In this case, the $150,000 overstatement for the cost of goods that was sold in the previous year, will then be credited to the beginning balance of the retained earnings.
Therefore, the correct option is C.
A PROSPECTIVE BUYER SIGNS AN OFFER TO PURCHASE A RESIDENTIAL PROPERTY. ALL THE FOLLOWING CIRCUMSTANCES WOULD AUTTOMATICALLY TERMINATE THE OFFER EXCEPT
Answer:
WHAT ARE THE CIRCEMENTANCES?
Direct Labor Variances
The following data relate to labor cost for production of 22,000 cellular telephones:
Actual: 4,220 hrs. at $44.50
Standard: 4,160 hrs. at $46.00
a. Determine the direct labor rate variance, direct labor time variance, and total direct labor cost variance. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.
Rate variance $
Time variance $
Total direct labor cost variance $
b. The employees may have been less-experienced workers who were paid less than more-experienced workers or poorly trained, thereby resulting in a labor rate than planned. The lower level of experience or training may have resulted in efficient performance. Thus, the actual time required was than standard.
Answer:
Explanation:
a. The Direct labor rate variance will be:
= 4220 × (44.5 - 46)
= 4220 × -1.5
= -6330 Favorable
The direct labor time variance will be:
= 46 × (4220-4160)
= 46 × 60
= 2760 Unfavorable
Total direct labor cost variance will be:
= (4220 × 44.5) - (4160 × 46)
= 187790 - 191360
= -3570 Favorable
b. The employees may have been less-experienced workers who were paid less than more-experienced workers or poorly trained, thereby resulting in a (lower) labor rate than planned.
The lower level of experience or training may have resulted in (less) efficient performance. Thus, the actual time required was (more) than standard.
Diamond Company has three product lines, A, B, and C. The following financial information is available:
Item Product Line A Product Line B Product Line C
Sales $30,000 $45,000 $12,000
Variable costs $18,000 $24,000 $7,500
Contribution margin $12,000 $21,000 $4,500
Fixed costs:
Avoidable $4,500 $9,000 $3,000
Unavoidable $3,000 $4,500 $2,000
Operating income $4,500 $7,500 ($500)
Assuming that Product Line C is discontinued and the manufacturing space formerly devoted to this line is rented for $6,000 per year, operating income for the company will likely:____________.
a. Increase by $7,200.
b. Increase by $3,300.
c. Increase by some other amount.
d. Be unchanged—the two effects cancel each other out.
e. Increase by $4,500.
Answer:
e. Increase by $4,500.
Explanation:
Analysis of the effect of discontinuing Product Line C
Income :
Rent Income $6,000
Savings : Fixed Costs - Avoidable $3,000
Total Income $9,000
Costs :
Opportunity Cost - Contribution Margin $4,500
Total Costs $4,500
Net Income (Loss) $4,500
therefore,
By discontinuing Product Line C, operating income for the company will likely Increase by $4,500