Answer: an offset against ordinary income of $3,000 and a NSTCL carryforward of $2,400
Explanation:
Feom the question, we are told that in the current year, Norris, an individual, has $59,000 of ordinary income, a net short-term Capital loss (NSTCL) of $9,100 and a net long-term capital gain (NLTCG) of $3,700.
From his capital gains and losses, Norris reports an an offset against ordinary income of $3,000 and the a net short-term Capital loss (NSTCL) balance carryforward will be the difference between the net short-term Capital loss (NSTCL) of $9,100 and a net long-term capital gain (NLTCG) of $3,700 and the offset against ordinary income. This will be:
= ($9100 - $3700) - $3000
= $5400 - $3000
= $2400
Your enterprising uncle opens a sandwich shop that employs 15 people. The employees are paid $20 per hour, and a sandwich sells for $5. If your uncle is maximizing his profit, the value of the marginal product of the last worker he hired is______ $ , and that worker's marginal product is sandwiches per hour.
Answer:
The value of the marginal product of the last worker hired is $20
The marginal product of the last worker hired is 4 sandwiches per hour
Please kindly note the difference between the terms, value of marginal product and the term marginal product
Explanation:
Since the uncle is trying to maximize profit, then he will hire workers up to a point where the wages of the workers equals their marginal product value
Now, from the question, the value of the wages is $20 per hour, this also means that their marginal product too will be $20 per hour
This automatically means that the value of the marginal product of the last worker hired is also $20
Mathematically;
Value of marginal product = Marginal product * price
Thus, marginal product = value of marginal product/ price
= $20/$5 = 4
This means that the new worker hired marginal product is 4 sandwiches per hour
Orion Iron Corp. tracks the number of units purchased and sold throughout each year but applies its inventory costing method at the end of the year, as if it uses a periodic inventory system. Assume its accounting records provided the following information at the end of the annual accounting period, December 31, 2012.
Transactions Units Unit
Cost
a. Inventory, December 31, 2011 500 $ 10
For the year 2012:
b. Purchase, April 11 800 8
c. Purchase, June 1 700 12
d. Sale, May 1 (sold for $38 per unit) 500
e. Sale, July 3 (sold for $38 per unit) 520
f. Operating expenses (excluding income tax expense), $19,000
Required:
1. Calculate the number and cost of goods available for sale.
2. Calculate the number of units in ending inventory.
3. Compute the cost of ending inventory and cost of goods sold under (a) FIFO, (b) LIFO, and (c) weighted average cost. (Do not round intermediate calculations. Round your final answers to the nearest dollar amount.)
4. Prepare an Income Statement that shows 2012 amounts under the FIFO method, LIFO method and weighted average method.
Answer:
Explanation:
Sales Purchase
Transaction unit Unit Unit cost Total
Opening inventory 500 10 5000
April 11 800 8 6,400
June 1 700 12 8,400
May 1 500 38
July 3 520 38
Operating expenses = $19,000
1)Number of goods available = 2000
Cost of goods available = $19,800
2) Number of units in ending inventory
= Opening inventory + purchase - sales
1500-1020= 480
3) COST(FIFO)
Ending inventory Goods sold
May 1 500*10 = 5000
July 3 520* 8 = 4,160
280 * 8 = 2240
700*12 = 8,400
Total 10,640 9,160
COST (LIFO)
May 1 500 * 12 = 6000
July 3 200*12 = 2400
320* 8 = 2560
480*8 = 3,840
500*10 = 5000
Total 8,840 10,960
Weighted average cost
19800/2000 =9.9 480*9.9 = 4,752 1020*9.9=10,098
sales revenue = (500+520)* 38 =$38760
Income statement
FIFO LIFO WEIGHTED AV
Sales 38,760 38,760 38,760
Cost of goods 9,160 10,960 10,098
Gross profit 29,600 27,800 28,662
Operating expenses 19,000 19,000 19,000
PBIT 10,600 8,800 9,662
On 1 July 2019, Quick Buck Ltd took control of the assets and liabilities of Eldorado Ltd. Quick Buck Ltd issued 80,000 shares having a fair value of $2.40 per share in exchange for the net assets of Eldorado Ltd. The costs of issuing the shares by Quick Buck Ltd cost $1,600. At this date the statement of financial position of Eldorado Ltd was as follows: Carrying amount Fair value Machinery $40,000 $67,000 Fixtures & fittings 60,000 68,000 Vehicles 35,000 35,000 Current assets 10,000 12,000 Current liabilities (16,000) (18,000) Total net assets $129,000 Share capital (80,000 shares at $1.00 per share) $80,000 General reserve 20,000 Retained earnings 29,000 Total equity $129,000 Required: Prepare the journal entries in the records of Quick Buck Ltd at 1 July 2019 for the acquisition. (10 marks)
Answer and Explanation:
The journal entries are shown below:
1. On July 1 2019
Machinery Dr $67,000
Fixture & Fittings Dr $68,000
Vehicles Dr $35,000
Current assets Dr $12,000
Goodwill Dr $28,000
To Current liabilities $18,000
To Share Capital (80,000 × $1 ) $80,000
To Paid in capital in excess of par 112,000 {80,000 × ($2.40 - $1)}
(Being the acquisition is recorded)
For recording this we debited all assets as it increased the values of assets and credited the liabilities and stockholder equity as it also increased
2. On July 1 2019
Paid in capital in excess of par $1,600
To Cash $1,600
(Being the share issuance cost is recorded)
For recording this we debited the paid in capital as it reduced the stockholder equity and credited the cash as it reduced the assets
Working notes:
For goodwill amount
= Purchase consideration - net identifiable assets
= $192,000 - $164,000
= $28,000
The net identifiable asset come from
= $67,000 + $68,000 + $35,000 + $12,000 - $18,000
= $164,000
Suppose that your state raises its sales tax from 5 percent to 6 percent. The state revenue commissioner forecasts a 20 percent increase in sales tax revenue. Which of the following are plausible as a result of this increase in the sales tax. Is this plausible? Explain.
Answer: No it's not plausible.
Explanation:
Here is the complete question:
Suppose that your state raises its sales tax from 5 percent to 6 percent. The state revenue commissioner forecasts a 20 percent increase in sales tax revenue. Is this plausible? Explain.
From the question, we are told that the state increases its sales tax from 5 percent to 6 percent and the state revenue commissioner predicted that a 20 percent increase in the sales tax revenue due to the increase in sales tax.
This is not plausible, when the sales tax increases from from 5 percent to 6 percent, this will lead to an increase in the prices of the goods. According to the law of demand, the higher the price of goods and services, the lower will be the demand for the good. So, in this case, due to the increase in sales tax, it may prompt the consumers to reduce their spending.
Therefore, a 20 percent increase in the sales tax revenue is not plausible. Even if there will be an increase in the sales tax revenue, it won't be up to 20 percent.
The company's fixed costs that are traceable to the Northern branch is $175,000, while fixed costs that are traceable to the Southern branch is $180,000. The Northern branch is further divided into two segments based on the customer types: the local and the nonlocal. Traceable fixed cost for the local is $68,250, and traceable fixed cost for the nonlocal is $88,700.
How much is the common fixed costs of the two order types for the Northern branch?
Answer:
$18,050
Explanation:
The computation of the common fixed cost of two order types for the northern branch is shown below:
= Company fixed cost traceable to the northern branch - traceable fixed cost for the local - traceable fixed cost for the non local
= $175,000 - $68,250 - $88,700
= $18,050
For computing it we simply deducted the traceable fixed cost from the company fixed cost so that the common fixed cost for the two orders types could come
The common fixed cost is the cost which supports more than the one division in the same business
On January 1, 2018, the general ledger of ACME Fireworks includes the following account balances:
Accounts Debit Credit
Cash $25,800
Accounts Receivable 47,600
Allowance for Uncollectible Accounts $4,900
Inventory 20,700
Land 53,000
Equipment 18,500
Accumulated Depreciation 2,200
Accounts Payable 29,200
Notes Payable (6% due April 1, 2016) 57,000
Common Stock 42,000
Retained Earnings 30,300
Totals $165,600 $165,600
During January 2018, the following transactions occur:
January 2 Sold gift cards totaling $9,400. The cards are redeemable for the merchandise within one year of the purchase date.
January 6 Purchase additional inventory on account $154,000
January 15 Firework sales for the first half of the month total $142,000. All of these sales are on account. The cost of the units sold is $77,300
January 23 Receive $126,100 from customers on accounts receivable
January 25 Pay $97,000 to inventory suppliers on accounts payable
January 28 Write off accounts receivable as uncollectible, $5,500
January 30 Firework sales for the second half of the month total $150,000. Sales include $15,000 for cash and $135,000 on account. The cost of the units sold is $83,000
January 31 Pay cash for monthly salaries $52,700
1. Depreciation on the equipment for the month of January is calculated using the straight-line method. At the time the equipment was purchased, the company estimated residual value of $4,700 and two-year service life.
2. The company estimates the future uncollectible accounts. The company determines $18,000 of accounts receivable on January 31 are past due, and 30% of these accounts are estimated to be uncollectible. The remaining accounts receivable on January 31 are not past due, and 5% of these accounts are estimated to be uncollectible. (Hint: Use the January 31 accounts receivable balance calculated in the general ledger.)
3. Accrued interest expense on notes payable for January.
4. Accrued income taxes at the end of January are $13,700.
5. By the end of January, $3,700 of the gift cards sold on January 2 have been redeemed.
Required:
Record the adjusting entries on January 31 for the above transactions.
Answer:
1. Depreciation on the equipment for the month of January is calculated using the straight-line method. At the time the equipment was purchased, the company estimated residual value of $4,700 and two-year service life.
Equipment cost = 18,500 - 4,700 (residual value) = 13,800 / 24 months = $575 per month
January 31, depreciation expense
Dr Depreciation expense 575
Cr Accumulated depreciation - equipment 575
2. The company estimates the future uncollectible accounts. The company determines $18,000 of accounts receivable on January 31 are past due, and 30% of these accounts are estimated to be uncollectible. The remaining accounts receivable on January 31 are not past due, and 5% of these accounts are estimated to be uncollectible. (Hint: Use the January 31 accounts receivable balance calculated in the general ledger.)
total accounts receivable Jan. 31 = 47,600 (beginning) + 142,000 - 126,100 - 5,500 + 135,000 = 193,000
overdue balance = 18,000
current accounts balance = 193,000 - 18,000 = 175,000
total bad debt = ($18,000 x 30%) + ($175,000 x 5%) = $5,400 + $8,750 = $14,150
January 31, bad debt expense
Dr Bad debt expense 14,150
Cr Allowance for doubtful accounts 14,150
3. Accrued interest expense on notes payable for January.
4. Accrued income taxes at the end of January are $13,700.
notes payable $57,000 x 6% x 1/12 = $285
January 31, interest expense
Dr Interest expense 285
Cr Interest payable 285
5. By the end of January, $3,700 of the gift cards sold on January 2 have been redeemed.
January 31, accrued revenue
Dr Unearned revenue 3,700
Cr Sales revenue 3,700
Using straight-line method Equipment cost is = 18,500 - 4,700 (residual value) = 13,800 / 24 months = $575 per month
Prepare the journal entries
1. Depreciation on the tools for January is computed using the straight-line method. At the juncture the equipment was purchased, the company evaluated a residual value of $4,700 and two-year service life.
Then the Equipment cost is = 18,500 - 4,700 (residual value) = 13,800 / 24 months = $575 per month
January 31, depreciation expenses are:
Dr. Depreciation expense 575
Cr Accumulated depreciation - equipment 575
2. The company evaluates the prospective uncollectible accounts. The company determines $18,000 of accounts receivable on January 31 are one-time due, and 30% of these accounts are assessed to be uncollectible. The remaining accounts receivable on January 31 are not past due, and 5% of these accounts are evaluated to be uncollectible. (Suggestion: Use the January 31 accounts receivable balance estimated in the general ledger.)
Then the total accounts receivable Jan. 31 is = 47,600 (beginning) + 142,000 - 126,100 - 5,500 + 135,000 is = 193,000
After that overdue balance is = 18,000
Then the current accounts balance is = 193,000 - 18,000 = 175,000
Now the total bad debt is = ($18,000 x 30%) + ($175,000 x 5%) = $5,400 + $8,750 = $14,150
January 31, bad debt expense are:
Dr Bad debt expense 14,150
Cr Allowance for doubtful accounts 14,150
3. The Accrued interest expense on notes payable for January.
4. When Accrued income taxes at the fate of January are $13,700.
After that, notes payable $57,000 x 6% x 1/12 = $285
January 31, interest payment
Dr. Interest expense 285
Cr Interest payable 285
5. Then By the end of January, $3,700 of the grant cards sold on January 2 have been saved.
January 31, accrued revenue is:
Dr. Unearned revenue 3,700
Cr Sales revenue 3,700
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The following purchase transactions occurred during September for Rehoboth, Inc.:
Sep.
4 Purchased cleaning supplies for $113 on account from General Supplies.
19 Purchased office equipment for $3,650 on account from Office Warehouse.
23 Purchased cleaning supplies for $183 on account from Rubble Supplies.
Record these transactions (in chronological order) in the following purchases journal. If an amount box does not require an entry, leave it blank. If no entry is required, select "No entry required" and leave the amount boxes blank.
Answer: The answer is given below
Explanation:
The purchases journal is an accounting book which takes record of all the acquisitions that are made on credit a a particular period of time. It is a record which keeps track of the vendors that a company is owing using accounts payable or vendor credit and also the current balance that the company owed each vendor.
The transactions above has been recorded in the purchases journal. Kindly check the attached document for further information.
Year round Retreats had the following balances at December 31, 2018,before the year-end adjustments:
Accounts Receivable Allowance for Bad Debts
74,000 1,535
The aging of accounts receivable yields the following data:
Age of Accounts Receivable
0-60 Days Over 60 Days Total Receivables
Accounts Recelvable $71,000 3,000 74,000
Estimated percent uncollectible x 3% x 23%
Requirements
1. Journalize Worldwide'sentry to record bad debts expense for 2018 using the aging-of-receivables method.
2. Prepare a T-account to compute the ending balance of Allowance for Bad Debts.
3. Joumalize Year round's entry to record bad debts expense for 2018 using the aging-of-recevables method.
Alvarado Company sells a machine for $7,400 with a 12-month warranty agreement that requires the company to replace all defective parts and to provide the repair labor at no cost to the customers. With sales being made evenly throughout the year, the company sells 600 machines in 2017 (warranty expense is incurred half in 2017 and half in 2018). As a result of product testing, the company estimates that the total warranty cost is $390 per machine ($170 parts and $220 labor).
Required:
Assuming that actual warranty costs are incurred exactly as estimated, what journal entries would be made relative to the following facts?
a. Sale of machinery and warranty expense incurred in 2017.
b. Warranty accrual on December 31, 2017.
c. Warranty costs incurred in 2018.
d. What amount, if any, is disclosed in the balance sheet as a liability for future warranty costs as of December 31, 2017?
Answer:
a.
Sale of machinery
Cash $4,440,000 (debit)
Revenue $4,440,000 (credit)
When Warranty expense incurrs 2017
Warranty Provision $117,000 (debit)
Parts Inventory $51,000 (credit)
Salaries and Wages $66,000 (credit)
b.
Warranty expense recognised 2017
Warranty Expense $117,000 (debit)
Warranty Provision $117,000 (credit)
c.
When Warranty expense incurrs 2018
Warranty Provision $117,000 (debit)
Parts Inventory $51,000 (credit)
Salaries and Wages $66,000 (credit)
d.
No future warranty costs are disclosed as of December 31, 2017
Explanation:
Sale of machinery and warranty expense incurred in 2017
Sale of machinery
Cash $4,440,000 (debit)
Revenue $4,440,000 (credit)
Being Sale of Machine in ordinary course of business
Revenue Calculation = $7,400 × 600 machines
= $4,440,000
Warranty expense recognised 2017
Warranty Expense $117,000 (debit)
Warranty Provision $117,000 (credit)
Being Recognition of Warranty Expense and Provision
Warranty Expense Calculation = $390 × 600 machines
= $234,000
Warranty Expense Calculation 2017 = $234,000 / 2
= $117,000
When Warranty expense incurrs 2017
Warranty Provision $117,000 (debit)
Parts Inventory $51,000 (credit)
Salaries and Wages $66,000 (credit)
Warranty expense recognised 2018
Warranty Expense $117,000 (debit)
Warranty Provision $117,000 (credit)
Being Recognition of Warranty Expense and Provision
Warranty Expense Calculation = $390 × 600 machines
= $234,000
Warranty Expense Calculation 2018 = $234,000 / 2
= $117,000
When Warranty expense incurrs 2018
Warranty Provision $117,000 (debit)
Parts Inventory $51,000 (credit)
Salaries and Wages $66,000 (credit)
Disclosure
The Provision for Warranty is already utilised in full when actual warranty costs are incurred exactly as estimated, thus No future warranty costs as of December 31, 2017 are disclosed
Dave is a salesperson who takes a long time to make decisions. He loves sales because he responds well to the pressure he faces in the many new or uncertain situations as a salesperson. Like most successful salespeople, he is high in his tolerance for ambiguity. Dave represents a person with a(n) ________ style.
Answer:
Analytical decision-making style
Explanation:
In this style of decision making or taking, it involves the process of careful studying and examination of a lot of information about a particular thing before taking action or decision. People with this type of decision making style are usually reserve and quiet, uses logical reasoning and they look at all possible options before arriving at a conclusion or decision.
Lvanhoe Co. wishes to enter receipts and payments in such a manner that adjustments at the end of the period will not require reversing entries at the beginning of the next period. Record the following transactions in the indicated manner and give the adjusting entry on December 31, 2020. (Two entries for each part.) (Credit account titles are automatically indented when the amount is entered. Do not indent manually.)
1. An insurance policy for two years was acquired on April 1, 2010 for $8,000.2. Rent of $12,000 for six months for a portion of the building was received on November 1, 2020.
Answer and Explanation:
The journal entries are shown below:
1. On Apr 1
Prepaid insurance $8,000
To Cash $8,000
(Being the cash paid is recorded)
For recording this we debited the prepaid insurance as it increased the assets and credited the cash as it decreased the assets
Insurance expense ($8,000 × 9 months ÷ 24 months) $3,000
To Prepaid insurance $3,000
(Being the insurance expense is recorded)
For recording this we debited the insurance expense as it increased the expenses and credited the prepaid insurance as it decreased the assets
We should considered April 1 2020 instead of April 1 2010
2. On Nov 1
Cash $12,000
To Deferred rent revenue $12,000
(Being cash receipt is recorded)
For recording this we debited the cash as it increased the assets and credited the deferred rent revenue as it increased the liabilities
Deferred rent revenue ($12,000 × 2 months ÷ 6 months) $4,000
To Rent revenue $4,000
(Being rent revenue is recorded)
For recording this we debited the deferred rent revenue as it decreased the liabilities and credited the rent revenue as it increased the revenue
Please prepare the multi-step income statement, the statement of stockholders' equity and the classified balance sheet.
Accounts Payable $28,000 Accounts Receivable $150,000
Equipment $220,000 Cost of Goods Sold $400,000
Supplies $36,000 Notes Payable (Due in 2years) $40,000
Rent Expense $12,000 Interest Expense $6,000
Sales Revenue $545,000 Sales Discount $45,000
Accumulated Depreciation $20,000 Depreciation Expense $10,000
Buildings $65,000 Income Tax Expense $8,000
Salaries Expenses $25,000 Cash $12,000
In addition, the company has common stock of $250,000 at the beginning of the year and issued additional shares for $50,000. The company also had retained earinings of $60,000 at the beginning of the year and paid dividend of $4,000 during the year.
Operating Income
Net Income $484,000
Ending balance of common stock
Ending balance of retained earnings
Ending total stockholders' equity
Total current assets
Total long-term assets
Total assets
Total liabilities
Answer:
Operating Income = $53,000
Net Income = $39,000
Ending balance of common stock = $300,000
Ending balance of retained earnings = $95,000
Ending total stockholders' equity = $395,000
Total current assets = $198,000
Net long-term assets = $265,000
Total long-term assets = $285,000
Total assets = $463,000
Total liabilities = 68,000
Explanation:
a. Multi-step Income Statement
Multi-step Income Statement put each revenues and expenditures items into different categories to show gross profit and net income. This can be prepared as follows:
Multi-step Income Statement
For the year ended
Details $
Sales Revenue 545,000
Sales Discount (45,000)
Net Sales Revenue 500,000
Cost of Goods Sold (400,000)
Gross profit 100,000
Operating expenses:
Rent Expense (12,000)
Depreciation Expense (10,000)
Salaries Expenses (25,000)
Operating Income 53,000
Non-operating expenses:
Interest Expense (6,000)
Income before tax 47,000
Income Tax Expense (8,000)
Net income 39,000
Dividend paid (4,000)
Retained earning for the year 35,000
b. Changes in Retained Earnings
Details $
Beginning retained earnings 60,000
Retained earning for the year 35,000
Ending retained earnings 95,000
c. Movement in Common Stock
Details $
Beginning balance of common stock 250,000
Additional shares issued 50,000
Ending balance of common stock 300,000
c. Statement of stockholders' equity
Details $
Beginning balance of common stock 250,000
Additional shares issued 50,000
Ending balance of common stock 300,000
Ending retained earnings 95,000
Ending total stockholders' equity 395,000
d. Classified Balance Sheet
Classified balance sheet shows each of the componets of assets, liabilities and equity. This can be prepared as follows:
Classified Balance Sheet
As at the year ended
Details $ $
Long-Term Assets
Buildings 65,000
Equipment 220,000
Total Long-Term Assets 285,000
Accumulated Depreciation 20,000
Net Long-Term Assets 265,000
Current Assets
Cash 12,000
Accounts Receivable 150,000
Supplies 36,000
Total Current Assets 198,000
Total Assets 463,000
Financed by:
Ending total stockholders' equity 395,000
Current Liability
Accounts Payable 28,000
Long-Term Liability
Notes Payable (Due in 2years) 40,000
Total Liabilities 68,000
Total Equity $ Liabilities 463,000
Conclusion
As both the Total Assets and Total Equity and Liabilities are each equal to $463,000, it implies the financial statement is accurately prepared since both must always be equal.
1. The preparation of the Multi-step Income Statement is as follows:
Sales Revenue $545,000
Sales Discount $45,000
Net Sales $500,000
Cost of Goods Sold $400,000
Gross profit $100,000
Operating Expenses:
Rent Expense $12,000
Salaries Expenses $25,000
Depreciation Expense $10,000
Total operating expense $47,000
Operating income $53,000
Interest Expense ($6,000)
Earnings before tax $47,000
Income Tax Expense $8,000
Net income $39,000
2. The Statement of Stockholders' Equity is as follows:
Common Stock $300,000
Retained earnings 95,000
Stockholders' equity $395,000
3. Classified Balance Sheet
Assets
Current Assets:
Cash $12,000
Accounts Receivable $150,000
Supplies $36,000
Total current assets $198,000
Long-term assets:
Buildings $65,000
Equipment $220,000
Accumulated Depreciation($20,000) $265,000
Total assets $463,000
Liabilities and Equity
Current Liabilities:
Accounts Payable $28,000
Long-term liabilities:
Notes Payable (Due in 2years) $40,000
Total liabilities $68,000
Equity:
Common stock $300,000
Retained Earnings $95,000 $395,000
Total liabilities and equity $463,000
Data and Calculations:
Cash $12,000
Accounts Receivable $150,000
Supplies $36,000
Buildings $65,000
Equipment $220,000
Accumulated Depreciation $20,000
Accounts Payable $28,000
Notes Payable (Due in 2years) $40,000
Common stock $300,000
Sales Revenue $545,000
Sales Discount $45,000
Net Sales $500,000
Cost of Goods Sold $400,000
Rent Expense $12,000
Salaries Expenses $25,000
Depreciation Expense $10,000
Interest Expense $6,000
Income Tax Expense $8,000
The Common Stock ending balance is $300,000 ($250,000 + $50,000).
Statement of Retained Earnings:
Retained Earnings $60,000
Net income $39,000
Dividend paid ($4,000)
Retained earnings, ending $95,000
Thus, the total stockholders' equity ending balance is $395,000 ($300,000 + $95,000).
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A small neighborhood comprised of 10 homes has a problem with break-ins and find the local police to be effective. They are considering hiring private security. Each household can calculate their marginal benefit of having a private security guard by the formula MB=100/(1+S) where S is the number of hours of security patrol provided per week.
If private security is a public good and the cost is $20 per hour, what is the efficient level of security? Do you expect this to be the equilibrium outcome?
Answer:
The efficient level of security is 4 hours of security.
The equilibrium may not be sustainable.
Explanation:
In order to calculate the efficient level of security we would Set MB=MC i.e. guard's wage for net benefit maximization.
Hence, 100/(1+S)=20
20*(1+S)=10
1+S=5
S=4
Therefore, 4 hours of security is needed . The efficient level of security is 4 hours of security.
In the followig case Security guards is public good in this case, Public good is non-excludable and non-rivalrous. People cannot be stopped from using it without paying for it. Payment for security guard is voluntary. So, equilibrium may not be sustainable.
The following transactions occur in November.
November 1 Issue common stock in exchange for $11,800 cash.
November 2 Purchase equipment with a long-term note for $2,300 from Spartan Corporation.
November 4 Purchase supplies for $1,200 on account.
November 10 Provide services to customers on account for $7,800.
November 15 Pay creditors on account, $1,000.
November 20 Pay employees $1,800 for the first half of the month.
November 22 Provide services to customers for $9,800 cash.
November 24 Pay $920 on the note from Spartan Corporation.
November 26 Collect $5,800 on account from customers.
November 28 Pay $1,000 to the local utility company for November gas and electricity.
November 30 Pay $3,800 rent for November.
Required:
1. Record each transaction.
2. Post each transaction to appropriate t-account.
Answer:
Required 1.
November 1
Cash $11,800 (debit)
Common Shares $11,800 (credit)
November 2
Equipment $2,300 (debit)
Note Payable $2,300 (credit)
November 4
Supplies $1,200 (debit)
Trade Payable $1,200 (credit)
November 10
Trade Receivable $7,800 (debit)
Revenue $7,800 (credit)
November 15
Trade Payable $1,000 (debit)
Cash $1,000 (credit)
November 20
Salaries and Wages $1,800 (debit)
Cash $1,800 (credit)
November 22
Cash $9,800 (debit)
Revenue $9,800 (credit)
November 24
Note Payable $920 (debit)
Cash $920 (credit)
November 26
Cash $5,800 (debit)
Trade Receivable $5,800 (credit)
November 28
Utilities $1,000 (debit)
Cash $1,000 (credit)
November 30
Rent $3,800 (debit)
Cash $3,800 (credit)
Required 2.
T - Account Balances
Cash = $18,800 (debit)
Common Shares = $11,800 (credit)
Equipment = $2,300 (debit)
Note Payable = $1,380 (credit)
Supplies = $1,200 (debit)
Trade Payable = $200 (credit)
Trade Receivable = $2,000 (debit)
Revenue = $17,600 (credit)
Salaries and Wages = $1,800 (debit)
Utilities = $1,000 (debit)
Rent = $3,800 (debit)
Explanation:
T - Account Balance Calculations :
Cash = $11,800 - $1,000 - $1,800 + $9,800 - $920 + $5,800 - $1,000 - $3,800 = $18,800 (debit)
Common Shares = $11,800 (credit)
Equipment = $2,300 (debit)
Note Payable $2,300 - $920 = $1,380 (credit)
Supplies = $1,200 (debit)
Trade Payable $1,200 - $1,000 = $200 (credit)
Trade Receivable $7,800 - $5,800 = $2,000 (debit)
Revenue $7,800 + $9,800 = $17,600 (credit)
Salaries and Wages = $1,800 (debit)
Utilities = $1,000 (debit)
Rent = $3,800 (debit)
Prepare Job-Order Cost Sheets, Predetermined Overhead Rate, Ending Balance of WIP, Finished Goods, and COGS At the beginning of March, Mendez Company had two jobs in process, Job 86 and Job 87, with the following accumulated cost information: Job 86 Job 87 Direct materials $4,800 $1,600 Direct labor 1,200 3,000 Applied overhead 888 2,220 Balance, March 1 $6,888 $6,820 During March, two more jobs (88 and 89) were started. The following direct materials and direct labor costs were added to the four jobs during the month of March: Job 86 Job 87 Job 88 Job 89 Direct materials $3,000 $7,000 $2,100 $1,500 Direct labor 800 6,000 900 500 At the end of March, Jobs 86, 87, and 89 were completed. Only Job 87 was sold. On March 1, the balance in Finished Goods was zero.
Answer and Explanation:
1. The computation of overhead rate based on direct labor cost is shown below:-
Overhead rate = Overhead applied × 100 ÷ Direct labor cost
= 888 × 100 ÷ 1,200
= 74%
2. The Preparation of job-order cost sheet for the four jobs is shown below:
Particulars Job 86 Job 87 Job 88 Job 89
Beginning balance $6,888 $6,820
Direct materials $3,000 $7,000 $2,100 $1,500
Direct labor $800 $6,000 $900 $500
Applied overhead
is 74% of direct labor $592 $4,440 $666 $370
Total $11,280 $24,260 $3,666 $2,370
3. The computation of ending balances of Work in Process and Finished Goods is shown below:-
Work in process of Job 88 = $3,666
Finished goods = Total of Job 86 + Total of Job 89
= $11,280 + $2,370
= $13,650
4. The computation of the Cost of Goods Sold for March is shown below:-
Cost of goods sold is
= Job 87
= $24,260
Loring Company incurred the following costs last year:
Costs
Amounts
Direct materials $216,000
Factory rent 24,000
Direct labor 120,000
Factory utilities 6,300
Supervision in the factory 50,000
Indirect labor in the factory 30,000
Depreciation on factory
equipment 9,000
Sales commissions 27,000
Sales salaries 65,000
Advertising 37,000
Depreciation on the
headquarters building 10,000
Salary of the corporate
receptionist 30,000
Other administrative costs 175,000
Salary of the factory
receptionist 28,000
Required:
1. Classify each of the costs using the table provided. Be sure to total the amounts in each column.
2. What was the total product cost for last year?
3. What was the total period cost for last year?
4. If 30,000 units were produced last year, what was the unit product cost?
Answer and Explanation:
1. The classification of each cost using the table provided i.e shown in the attachment is presented on the spreadsheet. Kindly find it below
2. Total product cost is
= Direct materials + Direct labor + Manufacturing overhead
= $216,000 + $120,000 + $147,300
= $483,300
The product cost includes direct material, direct labor and manufacturing overhead cost
3. Total period cost is
= Selling expenses + Administrative expenses
= $129,000 + $215,000
= $344,000
The period cost includes all selling and admin expenses
4. The total unit product cost is
= Total product cost ÷ Number of units produced
= $483,300 ÷ 30,000 units
= $16.11 per unit
Porter Plumbing's stock had a required return of 11.75% last year, when the risk-free rate was 5.50% and the market risk premium was 4.75%. Then an increase in investor risk aversion caused the market risk premium to rise by 2%. The risk-free rate and the firm's beta remain unchanged. What is the company's new required rate of return
Answer:
New required rate of return = 11.88%
Explanation:
The capital asset pricing model is a risk-based model. Here, the return on equity is dependent on the level of reaction of the the equity to changes in the return on a market portfolio. These changes are captured as systematic risk. The magnitude by which a stock is affected by systematic risk is measured by beta.
Under CAPM, Ke= Rf + β(Rm-Rf)
Ke- required rate of return, Rf-risk-free rate (treasury bill rate), β= Beta, Rm= Return on market.
Using the model, we work out Beta which is not given and then re-calculate the required rate of return of the new stock
Ke- 11.75 % Rf- 5.5, Rm-Rf = 4.75%, β= ?
11.75% = 5.50% + β(4.75%)
11.75% -5.50% = β(4.75%)
(11.75-5.50)/4.75= β
1.315789474 = β
1.315 = β
New required rate of return
5.50% + 1.315(1.02×4.75)
11.875
New required rate of return = 11.88%
Answer:
Explanation:
Given
Required rate of return, (Re) = 11.75%
Risk-free rate (Rf) = 5.50%
Market risk premium (Rm - Rf) = 4.75
Let's calculate beta (b) first, by using below formula.
Re = Rf + b (Rm - Rf)
11.75 = 5.50 + b ( 4.75)
By solving, we get beta (b) = 1.3157 = 1.32
Now, market risk premium is increased by 2%.
So, new market risk premium (Rm - Rf) = 6.75%. Beta and Rf values are same.
New Required rate of return (Re) = 5.50 + 1.32 * 6.75
By solving, we get Re = 14.41 %
Sun Devil Hair Design has the following transactions during the month of February. February 2 Pay $700 for radio advertising for February. February 7 Purchase beauty supplies of $1,300 on account. February 14 Provide beauty services of $2,900 to customers and receive cash. February 15 Pay employee salaries for the current month of $900. February 25 Provide beauty services of $1,000 to customers on account. February 28 Pay utility bill for the current month of $300.
Required:
Record each transaction. Sun Devil uses the following accounts: Cash, Accounts Receivable, Supplies, Accounts Payable, Service Revenue, Advertising Expense, Salaries Expense, and Utilities Expense.
Answer:
Sun Devil Hair Design Journal entries
Feb. 2
Dr Advertising expense 70p0
Cr Cash 700
Feb. 7
Dr Supplies 1,300
Cr Accounts payable 1,300
Feb. 14
Dr Cash 2,900
Cr Service revenue 2,900
Feb. 15
Dr Salaries expense 900
Cr Cash 900
Feb. 25
Dr Accounts receivable 1,000
Cr Service revenue 1,000
Feb. 28
Dr Utilities expense 300
Cr Cash 300
Explanation:
No further explanation was been given in this question.
Differential Analysis for a Lease or Buy Decision Sloan Corporation is considering new equipment. The equipment can be purchased from an overseas supplier for $125,500. The freight and installation costs for the equipment are $1,600. If purchased, annual repairs and maintenance are estimated to be $2,500 per year over the five-year useful life of the equipment. Alternatively, Sloan can lease the equipment from a domestic supplier for $30,000 per year for five years, with no additional costs. Prepare a differential analysis dated December 3 to determine whether Sloan should lease (Alternative 1) or purchase (Alternative 2) the equipment. Hint: This is a "lease or buy" decision, which must be analyzed from the perspective of the equipment user, as opposed to the equipment owner. If an amount is zero, enter "0". Use a minus sign to indicate a loss. Differential Analysis Lease Equipment (Alt. 1) or Buy Equipment (Alt. 2) December 3 Lease Equipment (Alternative 1) Buy Equipment (Alternative 2) Differential Effect on Income (Alternative 2) Revenues $ $ $ Costs: Purchase price $ $ $ Freight and installation Repair and maintenance (5 years) Lease (5 years) Income (loss) $ $ $ Determine whether Carr should lease (Alternative 1) or buy (Alternative 2) the equipment.
Answer: Carr should buy the equipment
Explanation:
Lease financing is a source of medium- and long-term financing whereby the owner of an asset gives the right to use an asset to another person, against periodical payments. Here, the owner of the asset is called the lessor and the person who uses the asset is called the lessee.
Based on the attached explanation, Carr should buy the equipment.
Techuxia Corporation worked on four jobs during October: Job A256, Job A257, Job A258, and Job A260. At the end of October, the job cost sheets for these jobs contained the following data: Job A256 Job A257 Job A258 Job A260 Beginning balance $ 1,200 $ 500 $ 0 $ 0 Charged to the jobs during October: Direct materials $ 2,600 $ 3,500 $ 1,400 $ 3,500 Direct labor $ 800 $ 1,000 $ 600 $ 400 Manufacturing overhead applied $ 1,200 $ 1,500 $ 900 $ 600 Units completed 100 0 200 0 Units in process at the end of October 0 400 0 500 Units sold during October 80 0 40 0 Jobs A256 and A258 were completed during October. The other two jobs had not yet been completed at the end of October. There was no finished goods inventory on October 1. In October, overhead was overapplied by $800. The company adjusts its cost of goods sold every month for the amount of the underapplied or overapplied overhead. Required: 1. Using the direct method, what is the cost of goods sold for October?
Answer:
1. Job A256 20
Job A258 160
2.$3,760
3.$10,400
Explanation:
Calculation of cost per unit Job A256 =
Beginning balance 1200
Charged to the jobs during October:
Direct material 3600
Direct labor 800
Manufacturing overhead applied 1200
Total 6800
6800/Units completed 100
=68
Calculation of Cost per unit Job A258
Beginning balance $0
Charged to the jobs during October:
Direct material 1400
Direct labor 600
Manufacturing overhead applied 900
Total 2900
2900/Unit completed 200
=15
1.
Cost of goods sold
= (80 X $68) + (40 X $15) - $800
=5440+600-800
=6040-800
= $5,240
Finished goods JobA256
= 100- 80
= 20
Finished goods JobA258
=200 - 40
= 160
2.
Finished goods
= (20 X $68) + (160 X $15)
= $1,360+$2,400
=$3,760
3.
Calaculation of total value of work in process Cost of JobA257 and JobA260
Job A257
Beginning balance 500
Charged to the jobs during October:
Direct material 3500
Direct labor 1000
Manufacturing overhead applied 900
Total 5900
JobA260
Beginning balance $0
Charged to the jobs during October:
Direct materials $3,500
Direct labor 400
Manufacturing overhead applied 600
Total $4,500
Addition of the total of both JobA257 and JobA260
$5900 +$4,500=$10,400
As a company produces more units within the relevant range, the difference between total variable cost and total fixed cost is:___________. A) Total variable cost and total fixed cost bother remain constant B) Total variable cost and total fixed cost both change C) Total variable cost changes and total fixed cost remains constant D) Total variable cost remains constant and total fixed cost changes
Answer:
C.Total variable cost changes and total fixed cost remains constant
Explanation:
The difference between both the total variable cost and total fixed cost is that then total variable cost changes and the total fixed cost remains constant because variable cost changes reason been that it is not constant which means that it is movable while fixed cost remains constant and tend to remain fixed in which case means that it is not movable. Example of fixed cost is Land because land cannot be moved from one location to another location.
Top Sound International designs and sells high-end stereo equipment for auto and home use. Engineers notified management in December 2021 of a circuit flaw in an amplifier that poses a potential fire hazard. Further investigation indicates that a product recall is probable, estimated to cost the company $4 million. The fiscal year ends on December 31.Required:Should this contingent liability be reported, disclosed in a note only, or neither.
Answer:
This should be reported
Explanation:
A contingent liability can be described as a liability that likely to be incurred at it depends on the outcome of an uncertain future event.
The condition for reporting a contingent liability is that its contigency must be likely and it is possible to reasonably estimate the amount of the liability.
Since it is indicated in the question that investigation indicates that a product recall is probable, ant it is estimated to cost the company $4 million, it therefore implies that the contigent liability meets the two conditions for it to be reported.
Private solutions to correct for externalities consider the following scenario:________.
Suppose that a chicken farm uses a nearby stream to dispose of the wastes released by its chickens. These wastes flow downstream into a lake that has become thick with algae and polluted due to the minerals in the waste matter. The local office of a nonprofit environmental organization collects enough donations to stop the farm's pollution.
Which of the following types of private solutions to the externality of pollution has occurred in this case?
A. Integration of different types of businesses
B. Contracts
C. Moral codes and social sanctions
D. Charities
It's important to note that sometimes private solutions to externalities do not work. For example, this occurs when communications barriers or social customs are important enough relative to the potential gains involved that __________
Answer: Charities; coordinating negotiations among all of the parties too costly
Explanation:
From the question, we are told that that a chicken farm uses a nearby stream to dispose of the wastes that is released by its chickens and that the wastes flow downstream into a lake that has become polluted due to the waste matter. The local office of a nonprofit environmental organization then collects enough donations in order to stop the farm's pollution.
The type types of private solutions to the pollution externality which has occured is charity. This is because it is a voluntary activity. The money collected is meant for a specific objective which is to tackle the issue of pollution.
It is also vital to note that sometimes the private solutions to externalities might not work. For example, this occurs when communications barriers or social customs are important enough relative to the potential gains involved that coordinating negotiations among all of the parties too costly.
Huron Company produces a commercial cleaning compound known as Zoom. The direct materials and direct labor standards for one unit of Zoom are given below:
Standard Quantity or Hours Standard Price
or Rate Standard Cost
Direct materials 5.6 pounds $ 3.00 per pound $ 16.80
Direct labor 0.4 hours $ 7.00 per hour $ 2.80
During the most recent month, the following activity was recorded:
a. Ten thousand eight hundred pounds of material were purchased at a cost of $2.90 per pound.
b.
The company produced only 1,080 units, using 9,720 pounds of material. (The rest of the material purchased remained in raw materials inventory.)
c. Five hundred and thirty two hours of direct labor time were recorded at a total labor cost of $6,384.
Required:
Compute the materials price and quantity variances for the month. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Do not round intermediate calculations.)
Direct materials price variance F
Direct materials quantity variance U
Answer:
Instructions are below.
Explanation:
Giving the following information:
Standard:
Direct materials 5.6 pounds $ 3.00 per pound
Actual:
10,800 pounds were purchased at a cost of $2.90 per pound.
The company produced only 1,080 units, using 9,720 pounds of material.
To calculate the direct material price and quantity variance, we need to use the following formulas:
Direct material price variance= (standard price - actual price)*actual quantity
Direct material price variance= (3 - 2.9)*10,800
Direct material price variance= $1,080 favorable
Direct material quantity variance= (standard quantity - actual quantity)*standard price
Direct material quantity variance= (5.6*1,080 - 9,720)*3
Direct material quantity variance= $11,016 unfavorable
Maya Company reports the following amounts for the year ending on December 31, 2004:Merchandise Inventory, January 1, 2004 : $70,000 Cost of Transportation : $2,300Invoice Cost of Merchandise Purchases : $195,000 Purchase Returns and Allowances: $4,650Purchase Discounts Received: $3,500 Cost of Goods Sold: $158,700Cost of merchandise returned by customers and restored to inventory: $17,300Calculate the Merchandise Inventory, December 31, 2004.A) $117,750B) $83,150C) $45,150D) $113,150E) $129,450
Answer:
$117,750
Explanation:
Maya Company Merchandise Inventory for the year ended December 31 2004
Merchandise inventory at the beginning $70,000
Add: Cost of transportation 2,300
Merchandise Purchase 195,000
Less: Purchase return and allowances (4,650)
Discount on purchase (3,500)
Cost of goods sold (158,700)
Add: Merchandise return 17,300
Merchandise inventory $117,750
Todd Mountain Development Corporation is expected to pay a dividend of $3 in the upcoming year. Dividends are expected to grow at the rate of 10% per year. The risk-free rate of return is 8%, and the expected return on the market portfolio is 18%. The stock of Todd Mountain Development Corporation has a beta of 0.60. Using the constant-growth DDM, the intrinsic value of the stock is _________.
Answer:
$75
Explanation:
As per the data given in the question,
Ke = risk free rate of return + beta×(market portfolio - risk free rate of return)
= 8% + 0.60 × (18% - 8%)
= 8% + 6%
= 14%
= 0.14
Now using the constant-growth DDM model :
Intrinsic value of the stock = Dividend ÷ (Ke - expected growing rate)
= $3 ÷ (0.14-0.10)
= $75
Hence, Intrinsic value of the stock is $75.
Samson Manufacturing Company, a calendar-year company, purchased a machine for $65,000 on January 1, 20X0. At the date of purchase, Samson incurred the following additional costs:
Loss on sale of old machinery $1,000
Freight-in 500
Installation cost 2,000
Testing costs prior to regular operation 300
The machine’s estimated salvage value was $5,000, and Samson estimated it would have a useful life of 20 years with depreciation being computed on the straight-line method. In January 20X2, accessories costing $3,600 were added to the machine to reduce its operating costs. These accessories neither prolonged the machine’s life nor provided any additional salvage value.
Required:
What should Samson record as depreciation expense for 2011?
Answer:
Samson record as depreciation expense for 2011 an amount of $3,340
Explanation:
In order to calculate What should Samson record as depreciation expense for 2011 we would have to calculate first the cost to capitalize as follows:
Cost to capitalize=purchase price+freight+installation+testing
=$65,000+$500+$2,000+$3,000
=$67,800
Depreciation expense for 2010=cost of machinery-residual value/life of machinery
Depreciation expense for 2010=$67,800-$5,000/20
Depreciation expense for 2010=$3,140
Hence, Book value=cost of machinery-(cost of machinery-residual value)/life of machinery))*period of asset used
=$67,800-($62,800-$5,000)/20))*2
=$61,250
Therefore, depreciation expense for 2011=$61,250+$3,600-$5,000/18
depreciation expense for 2011=$3,340
An investor must decide between putting $2,000 into a regular retirement plan or putting $1,440 into a Roth retirement plan. If the investor's tax rate is 28% now and in retirement, and she expects to earn 12% per year over the next 20 years, which will produce more cash in the end?
Answer:
They both produced the same cash amount
Explanation:
The regular retirement would have its deducted after withdrawal from the plan while Roth retirement plan's tax would have been deducted prior to investing funds in the plan
The future value of the $2000 is computed thus:
FV=PV*(1+r)^n
PV is the amount saved in the plan which is $2000
r is the growth rate of the funds in the plan which is 12%
n is the number of years the amount would be left in the plan
FV=$2000*(1+12%)^20=$ 19,292.59
After tax amount=$ 19,292.59*(1-28%)=$ 13,890.66
The future value of the $1,440 is computed thus:
FV=$1,440*(1+12%)^20=$ 13,890.66
The Roth plan has not tax implication thereafter as tax was paid before savings.
Additional data obtained from the income statement and from an examination of the accounts in the ledger for 20Y8 are as follows:
a. Net income, $151,500.
b. Depreciation reported on the income statement, $40,140.
c. Equipment was purchased at a cost of $78,820 and fully depreciated equipment costing $21,400 was discarded, with no salvage realized.
d. The mortgage note payable was not due for six years, but the terms permitted earlier payment without penalty.
e. 7,000 shares of common stock were issued at $18 for cash.
f. Cash dividends declared and paid, $92,320.
Required:
Prepare a statement of cash flows, using the indirect method of presenting cash flows from operating activities.
Answer:
Cash flow from Operating Activities
Net income, $151,500
Adjustment for Non-Cash items :
Depreciation $40,140
Cash flow from Operating Activities $191,640
Explanation:
To determine cash flow from Operating Activities, consider only those items related to trading in the ordinary course of business.
Note that the indirect method is required for this question.
Each month a bank adjusts the initial interest rate it offers to customers who wish to open a new high-yield savings account. The bank wants to determine if there is a relationship between the initial interest rate and the average daily number of new savings accounts. The bank plans to use the interest to predict the average number of new savings accounts opened in a month. Which one of the following statements is correct?
A. Both the interest rate and the average daily number of new accounts are explanatory variables.
B. Both the interest rate and the average daily number of new accounts are response variables.
C. Average daily number of new a variable.
D. Interest rate is the explanatory variable 1/0 Scatterplot of Ave.
Answer:
The correct answer is D
Explanation:
The initial interest rate is being manipulated by the researcher (that is the bank). Hence is the predictor or explanatory variable. It can also be called the independent variable.
Any variable can take on the quality of an independent variable. It all depends on the role it is playing in the research.
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