Answer:
$1481.37
Explanation:
Annual savings = future value / annuity factor
Annuity factor = {[(1+r)^n] - 1} / r
[(1.114)^3 - 1 ] / 0.114 = 3.3549996
$4,970 / 3.3549996 = $1481.37
You are a farmer who is putting away bales of hay for the winter months. Each bale is 3 feet long, 2 feet wide, and 1.5
feet thick. The bales of hay are stacked in storage bins 12 feet long, 8 feet wide, and 6 feet deep.
What is the minimum number of bins needed for 350 bales of hay?
Answer: 5.46 bins would be needed, so 6 bins for 350 bales of hay.
Explanation: Bales 350 bales have 9³ft each L=3×W=2×H=1.5 totals 3150³ft Bins L 12ft × W 8ft × H 6ft have 546³ft each 3150³ft ÷ 546³ft = 5.46875you can't buy half a bin, you would need 6 bins1.how can you categorize the buyers who are not price sensitive ?
When first eliminating multiple choice answer choices, you should cross out answers that are silly or are impossible
to be correct
Please select the best answer from the choices provided
ОТrue
OFalse
Answer:
True
.......
When approaching a multiple-choice question, it's essential to first eliminate answer choices that are obviously incorrect or "silly." Hence th statement is true .
What is MCQ ?Doing so will increase your chances of selecting the correct answer from the remaining options.
To begin, carefully read the question stem and identify any clues or keywords that might help you narrow down the possible answers. Then, review each answer choice and eliminate any that are blatantly wrong, based on your knowledge of the subject matter or common sense.
For example, if you are taking a math test and the question asks you to solve for x in the equation 2x + 5 = 13, you can quickly eliminate answer choices such as -5 or 50, which are clearly impossible solutions.
It's important to note that eliminating "silly" answer choices is just the first step in the process of solving a multiple-choice question. After you've narrowed down the possibilities, you'll need to carefully consider each remaining option and choose the one that best fits the question stem.
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The mean of a set of data is 5.07 and its standard deviation is 3.39.
Find the z-score for a value of 9.65.
Answer:
1.35
Explanation:
zscore= (x-mean)/(Standard deviation)
(9.65-5.07)/3.39= 1.35
Allen buys only beer and pizza. When the price of beer is $2.00 per bottle and the price of pizza is $10.00, Allen maximizes his total utility (satisfaction) by buying 5 beers and 4 pizzas. If the marginal utility of the 5th beer is 100 utils. What would be the marginal utility of the 4th pizza?
Answer:
500 utils.
Explanation:
Calculation to determine What would be the marginal utility of the 4th pizza
First step is to determine the Total utility maximized
Using this formula
Total utility maximized =Beer Marginal Utility/Price of beers =Pizza Marginal Utility/Price of pizza.
Let plug in the formula
Total utility maximized= 100 utils/$2.00 = Marginal Utility of pizza/$10.00.
Marginal Utility of beers = 100/$2
Marginal Utility of beers= 50 utils per dollar
Marginal Utility of pizza =50 utils per dollar
Now let determine the marginal utility of the 4th pizza
Hence,
50 = Marginal Utility of pizza/$10
Marginal Utility of pizza=50*$10
Marginal Utility of pizza= 500 utils.
Therefore What would be the marginal utility of the 4th pizza is 500 utils
Melhoyo Corporation, a manufacturing company, has provided data concerning its operations for September. The beginning balance in the raw materials account was $37,000 and the ending balance was $29,000. Raw materials purchases during the month totaled $57,000. Manufacturing overhead cost incurred during the month was $102,000, of which $2,000 consisted of raw materials classified as indirect materials. The direct materials cost for September was: Group of answer choices
Answer:
The correct answer is "$63,000".
Explanation:
Given:
Beginning balance of raw materials,
= $37,000
Purchases made,
= $57,000
Ending balance,
= $29,000
Expenses of raw material,
= $2,000
Now,
The direct material cost will be:
= [tex]Beginning \ balance+Purchases \ made-Ending \ balance-Expenses \ of \ raw \ material[/tex]= [tex]37000+57000-29000-2000[/tex]
= [tex]63,000[/tex] ($)
Currency $1,000 Checking Account Balances $2,000 Savings Account Balances $5,000 Small-Denomination Time Deposits $6,000 Non-Institutional Money Market Fund Shares $7,000 Consider the information above from 2019 and assume there are no traveler's checks. Calculate M1.
Answer:
M1 = $3000
Explanation:
Below is the given values:
Given the currency = $1000
The balance of checking account = $2000
In order to find the M1, just add the balances of currency and balances of the checking account.
Thus M1 = Currency + Balance of checking account
M1 = 1000 + 2000
M1 = 3000
Therefore, the M1 = $3000
On December 31, the company provides consulting services and bills its customer $3,000 for these services.
Required:
Write down the necessary journal entry.
Answer:
Debit Accounts receivable $3,000
Credit Consulting Revenue $3,000
Explanation:
Based on the information given if the company provides consulting services and bills its customer the amount of $3,000 for these services the appropriate journal entry On December 31 will be:
On December 31
Debit Accounts receivable $3,000
Credit Consulting Revenue $3,000
On December 31
Accounts Receivable $3,000
To Consulting Revenue $3,000
(Being consulting services is recorded)
Here the account receivable should be recorded as it increased the assets and credited the consulting revenue as it also increased the revenue.
Therefore we can conclude that the above journal entry should be recorded.
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Menning Inc. uses a job-order costing system in which any underapplied or overapplied overhead is closed out to cost of goods sold at the end of the month. The company has provided the following data for June:
Direct materials $78,750
Direct labor cost $94,000
Manufacturing overhead cost incurred $61,275
Manufacturing overhead cost applied $65,800
Inventories: Beginning Ending
Work in process $17,500 $19,850
Finished goods $61,500 $38,250
The cost of goods sold that appears on the income statement for August and that has been adjusted for any underapplied or overapplied overhead is closest to: __________
a. $254,925
b. $263,975
c. $236,200
d. $259,450
Answer:
Adjusted COGS= $254,925
Explanation:
First, we need to calculate the cost of goods manufactured:
cost of goods manufactured= beginning WIP + direct materials + direct labor + allocated manufacturing overhead - Ending WIP
cost of goods manufactured= 17,500 + 78,750 + 94,000 + 65,800 - 19,850
cost of goods manufactured= $236,200
Now, the COGS:
COGS= beginning finished inventory + cost of goods manufactured - ending finished inventory
COGS= 61,500 + 236,200 - 38,250
COGS= $259,450
Finally, the over/under applied overhead and the adjustment:
Under/over applied overhead= real overhead - allocated overhead
Under/over applied overhead= 61,275 - 65,800
Overapplied overhead= $4,525
As overhead was overapplied, COGS must be reduced:
Adjusted COGS= 259,450 - 4,525
Adjusted COGS= $254,925
g Determine the amount to be added to Allowance for Doubtful Accounts in each of the following cases and indicate the ending balance in each case. a. Credit balance of $370 in Allowance for Doubtful Accounts just prior to adjustment. Using the aging method, the balance of Allowance for Doubtful Accounts is estimated as
Answer:
Missing word "is estimated as $8,820. Amount added Ending balance b. Credit balance of $450 in Allowance for Doubtful Accounts just prior to adjustment. Bad debt expense is estimated at 2% of credit sales, which totaled $1,111,000 for the year. Amount added Ending balance"
a. Amount added = Balance as per aging method - Credit balance
Amount added = $8,820 - $370
Amount added = $8,450
So, Amount added = $8,450, Ending balance = $8,820
b. Amount added = 2% * Credit sale
Amount added = 2% * $1,111,000
Amount added = $22,220
Ending balance = $22,220 + $370
Ending balance = $21,850
_______ is best described as the process of transformation of an idea into a new product or process, or the modification and recombination of existing ones.
Answer: Invention
Explanation:
Invention simply refers to the process for transforming an idea into a new product or the modification and the recombination of existing ones.
Invention is the unique method, or process that's used in the creation of a product or may be an improvement on a product or machine that's already created.
Which statement is true?
A bank interest lower than inflation means more purchasing power.
Nominal rates are an accurate figure of purchasing power.
Real interest measures the power of the saved money
Real interest is the rate quoted in loan and deposit agreements.
Answer:
Nominal rates are an accurate figure of purchasing power.
The statement nominal rates are an accurate figure of purchasing power can be marked as true. Thus, the correct option is B). Nominal rates are an accurate figure of purchasing power.
What is nominal interest rate?Nominal interest rate refers to the interest rate before taking inflation into account. It is also refer to the interest rate on a loan that is charged without taking into account any fees or compounding of interest.
The nominal rate of interest is often used in banks to describe the interest on different loans and in the investment field as well. The higher the nominal rate, the more interest will be earned on savings.
Basically, the nominal interest rate is approximately equal to the real interest rate plus the inflation rate that can be depicts as (i = R + h).
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In a pull manufacturing system, ______. Group of answer choices Production is based on government regulations Production is based on capacity of the manufacturer Production is based on actual customer demand Production is based on past trends only
Answer:
actual customer demand
Explanation:
Pull production systems can be regarded as system whereby the product is been manufactured as a result of response to a specific demand. pull system can be regarded as lean manufacturing strategy , this strategy helps in reduction of waste in the production process. The components that is been used in manufacturing process are been only replaced only when consumed , so in this case, enough products are been made by companies only to meet customer demand. It should be noted that In a pull manufacturing system, Production is based on actual customer demand
Which business unit could have its shares quoted on the stock exchange?
Answer:
To promote trading of its stock, a corporation may choose to list its shares on a stock exchange. Apple, Walmart and Ford are high-profile publicly traded corporations, but smaller companies also trade on the major exchanges.
Derk owns 960 shares of stock in Rose Corporation. The remaining 2,240 shares of Rose are owned as follows: 320 by Derk's daughter Rosalie, 640 by Derk's aunt Penelope, and 1,280 by a partnership in which Derk holds an interest of 90%. Determine the number of shares that Derk owns (directly and indirectly) in Rose Corporation. Derk is deemed to own (directly and indirectly) __________ shares in Rose Corporation.
Answer:
2,432 shares
Explanation:
Calculation to determine the number of shares that Derk owns (directly and indirectly) in Rose Corporation
First step is to determine the Shares in partnerships holding
Using this formula
Shares in partnerships holding = Interest rate * Partnership
Let plug in the formula
Shares in partnerships holding = 90% * 1,280
Shares in partnerships holding = $1152
Now let determine the Total shares deemed to be own
Total shares deemed to be own = Own shares + Daughter shares + Shares in partnerships holding
Let plug in the formula
Total shares deemed to be own = 960 + 320 + 1152
Total shares deemed to be own = 2432
Therefore Derk is deemed to own (directly and indirectly) 2432 shares in Rose Corporation.
If the dollar contribution margin per unit is increased by 10%, total fixed expenses is decreased by 20%, and all other factors remain the same, net operating income will:
Answer:
Operating profit increases by $11,000
Explanation:
Missing word "A company has provided the following data: Sales 3,000 units Sales Price $70 per unit Variable Cost $50 per unit Fixed Cost $25,000"
Particulars Status quo
Sales $210,000 (3000*70)
Less: Variable cost $150,000 (3000*50)
Contribution margin $60,000
Less: Fixed costs $25,000
Operating profit $35,000
Alternate profit = Alternate contribution margin - Alternate fixed cost
Alternate profit = [(Status quo contribution margin + %change) − (Alternate fixed cost-%change)]
Alternate profit = ($60,000+10%)−($25,000−20%)
Alternate profit = $46,000
Change in profit = Alternate profit - Status quo profit
Change in profit = $46,000 - $35,000
Change in profit = $11,000
So, the operating profit increases by $11,000
The minimum efficient scale for a good is beyond the point of output where marginal cost intersects the demand curve. This describesa. diseconomies of scaleb. a legal monopolyc. market powerd. comparative advantagee. a natural monopoly
Answer:
diseconomies of scale
Explanation:
From June 2008 oil was at a high of $144.78 per barrel. During the period from April 2011 until July of 2014, the price of oil hovered between about $115.32 per barrel and about $105.22 a barrel. Then, starting in August 2014 oil began a precipitous fall in price from the $105.22 to $33.62 a barrel in January 2016. Although the U.S. has great amounts of oil that can be brought out of the ground by “fracking,” by the beginning of 2016 many of the workers in the U.S. oil exploration and drilling industry were out of work and tremendous amounts of oil exploration equipment was sitting in the equivalent of “used car lots” to be sold.
Answer:
The explanation of the subject is described in the following part of the discussion.
Explanation:
The idea which should generally be used in this instance seems to be that individuals are generally motivated by motivations and take advantage of chances to improve. Because when a group continues operating, several tasks have been needed to do operate effectively. This should lead to labor revenue.Whenever companies identify an expense as well as a speedier way to accomplish operations, they will most surely go to it. The above leaves the job to be done as well as no machinery to operate and even if the device does not operate, these same commodities are not being usedLink Co. purchased machinery that cost $3,000,000 on January 4, 2019. The entire cost was recorded as an expense. The machinery has a nine-year life and a $200,000 residual value. The error was discovered on December 20, 2021. Before the correction was made, and before the books were closed on December 31, 2018, retained earnings was understated by:__________
a. $3,000,000.
b. $2,066,667.
c. $2,377,778
d. $2,333,333.
Answer:
See below
Explanation:
On July 1, 2020, Sarasota Company purchased for $5,760,000 snow-making equipment having an estimated useful life of 5 years with an estimated salvage value of $240,000. Depreciation is taken for the portion of the year the asset is used. Complete the form below by determining the depreciation expense and year-end book values for 2014 and 2015 using the
1. Sum-of-the-years'-digits method.
2. Double-declining balance method.
a.
Sum-of-the-Years'-Digits Method 2014 2015
Equipment $2,880,000 $2,880,000
Less: Accumulated Depreciation
Year-End Book Value
Depreciation Expense for the Year
b.
Double-Declining Balance Method 2014 2015
Equipment $2,880,000 $2,880,000
Less: Accumulated Depreciation
Year-End Book Value
Depreciation Expense for the Year
Assume the company had used straight-line depreciation during 2014 and 2015. During 2016, the company determined that the equipment would be useful to the company for only one more year beyond 2016. Salvage value is estimated at $160,000.
Compute the amount of depreciation expense for the 2016 income statement.
Answer:
1. We have:
Depreciation expense for 2014 = $920,000
Depreciation expense for 2015 = $1,472,000
2. We have:
Depreciation expense for 2014 = $1,152,000
Depreciation expense for 2015 = $1,843,200
3. Depreciation expense for 2016 = $1,972,000
Explanation:
1. Sum-of-the-years'-digits method.
Depreciable amount = Equipment cost – Salvage value = $5,760,000 - $240,000 = $5,520,000
Sum of the year digits = 5 + 4 + 3 + 2 + 1 = 15
Depreciation expense for a year = Depreciable amount * (Remaining years / Sum of the year digits) ………. (1)
Using equation (1), we have:
Depreciation expense for 2014 = $5,520,000 * (5 / 15) * (6 / 12) = $920,000
Depreciation expense for 2015 = $5,520,000 * (4 / 15) = $1,472,000
Accumulated depreciation at the end of 2015 = $920,000 + $1,472,000 = $2,392,000
Therefore, we have:
Sum-of-the-Years'-Digits Method 2014 2015
Equipment $5,760,000 $5,760,000
Less: Accumulated Depreciation (920,000) (2,392,000)
Year-End Book Value 4,600,000 3,128,000
Depreciation Expense for the Year 920,000 1,472,000
2. Double-declining balance method.
Depreciable amount = Equipment cost – Salvage value = $5,760,000 - $240,000 = $5,520,000
Double-declining depreciation rate = Straight line depreciation rate * 2 = (1 / Number of estimated useful life) * 2 = (1 / 5) * 2 = 0.40, or 40%
Depreciation expense for 2014 = Equipment cost * Double-declining depreciation rate = $5,760,000 * 40% * (6 / 12) = $1,152,000
Depreciation expense for 2015 = (Equipment cost - 2014 Depreciation expense) * Double-declining depreciation rate = ($5,760,000 - $1,152,000) * 40% = $1,843,200
Accumulated depreciation at the end of 2015 = $1,152,000 + $1,843,200= $2,995,200
Note that under Double-declining balance method, the salvage value is not considered until the last year of the asset.
Therefore, we have:
Double-Declining Balance Method 2014 2015
Equipment $5,760,000 $5,760,000
Less: Accumulated Depreciation (1,152,000) (2,995,200)
Year-End Book Value 3,456,000 2,073,600
Depreciation Expense for the Year 1,152,000 1,843,200
3. Compute the amount of depreciation expense for the 2016 income statement.
Straight line depreciation rate = 1 / Number of estimated useful life = 1 / 5 = 0.20, or 20%
Depreciable amount = Equipment cost – Salvage value = $5,760,000 - $240,000 = $5,520,000
Depreciation expense for 2014 = Depreciable amount * Straight line depreciation rate * (6 / 12) = $5,520,000 * 20% * (6 / 12) = $552,000
Depreciation expense for 2015 = Depreciable amount * Straight line depreciation rate = $5,520,000 * 20% = $1,104,000
Accumulated depreciation at the end of 2015 = $552,000 + $1,104,000 = $1,656,000
Net book value at end of 2015 = Equipment cost - Accumulated depreciation at the end of 2015 = $5,760,000 - $1,656,000 = $4,104,000
Depreciation expense for 2016 = (Net book value at end of 2015 - New Salvage value) / Remaining useful years = ($4,104,000 - $160,000) / 2 = $1,972,000
The journal entry a company uses to record fully funded pension rights for its salaried employees at the end of the year is
a. debit Pension Expense; credit Unfunded Pension Liability and Cash.
b. debit Pension Expense; credit Unfunded Pension Liability.
c. debit Pension Expense; credit Cash.
d. debit Salary Expense; credit Cash.
Answer:
The answer is C.
Explanation:
The correct option to the question is C.
Debit pension expense and credit cash.
Because the pension expense account is increasing, we debit. Increase in expense goes to the debit side.
And because cash is reducing by paying out pension expense from there, we credit the cash account. Decrease in asset(like cash) goes to the credit side.
A one-year insurance policy was purchased on June 1 for $2,400. The adjusting entry on December 31 would be:____________. (If an amount box does not require an entry, leave it blank.) Dec. 31 i. Accounts Payable ii. Cash iii. Insurance Expense iv. Insurance Payable v. Prepaid Insurance
Answer:
Adjusting Journal Entry:
Debit Insurance Expense $1,400
Credit Prepaid Insurance $1,400
To record the insurance expense for the year (7 months).
Explanation:
This adjustment will cause the Prepaid Insurance account to remain $1,000. This balance represents the insurance cost for 5 months having deducted the insurance cost for 7 months from June 1 to December 31. So, in line with the accrual concept and the matching principle of generally accepted accounting principles, only $1,400 Insurance was incurred for the current year. The balance will be charged to the account when the service is consumed.
Twinkies on the shelf of a convenience store lose their fresh tastiness over time. We say that the taste quality is 11 when the Twinkies are first put on the shelf at the store, and that the quality of tastiness declines according to the function Q(t)=.85tQ(t)=.85t (tt in days). Determine when the taste quality will be one half of its original value.
Answer:
4.27 days
Explanation:
Initial taste quality = 1
Quality of tastiness declines using this function
Q(t) = 0.85^t ( t in days )
Determine when the taste quality will be 1/2 of original value
i.e. when Q(t) = 1/2
1/2 = 0.85^t
= In ( 2 ) = - t ( In 0.85 )
∴ t = - In (2) / In (0.85)
= 4.265 days ≈ 4.27 days
Tan Corporation of Japan has two regional divisions with headquarters in Osaka and Yokohama. Selected data on the two divisions follow: Division Osaka Yokohama Sales $ 9,600,000 $ 26,000,000 Net operating income $ 672,000 $ 2,340,000 Average operating assets $ 3,200,000 $ 13,000,000 Required: 1. For each division, compute the return on investment (ROI) in terms of margin and turnover. 2. Assume that the company evaluates performance using residual income and that the minimum required rate of return for any division is 16%. Compute the residual income for each division.
Answer and Explanation:
The computation is shown below;
a. The return on investment is
= Margin turnover
= Net operating income ÷ sales × sales ÷ average operating assets
For Osaka
= $672,000 ÷ $9,600,000 × $9,600,000 ÷ $3,200,000
= 21%
For Yokohama
= $2,340,000 ÷ $2,600,000 × $2,600,000 ÷ $13,000,000
= 18%
2. The residual income is
= Net operating income - (average operating assets × rate of return)
For Osaka
= $672,000 - ($3,200,000 × 16%)
= $160,000
For yokohama
= $2,340,000 - ($13,000,000 × 16%)
= $260,000
Your dream is about to come true! You are about to buy your first classic sports car. To do so, you have arranged to borrow $65,000 from your local credit union. The interest rate on the loan is 6.00%. To simplify the calculations, assume that you will repay your loan over the next four years by making annual payments at the end of each year. According to the loan officer at the credit union, you must answer the following questions before you can go pick up your new car.
a. How much is the annual payment on your new car loan?
b. How much of your Year 2 payment will constitute interest on your loan?
c. How much of your Year 3 payment will be used to repay principal on the loan?
d. How much will you pay in total interest to finance the purchase of your $65,000 car?
Answer:
Car Loan
a. The annual payment on the new car loan = $18,758.45.
b. Year 2 payment that is interest on the loan = $3,008.49.
c. Year 3 payment that is principal repayment = $16,694.95
d. The total interest to be paid to finance the purchase of the $65,000 car is:
= $10,033.79.
Explanation:
Data and Calculations:
Loan Amount 65000
Loan Term 4 years 0 months
Interest Rate 6
Compound Annually (APY)
Pay Back Every Year
Results:
Payment Every Year $18,758.45
Total of 4 Payments $75,033.79
Total Interest $10,033.79
Principal 87%
Interest 13%
Amortization Schedule
Beginning Balance Interest Principal Ending Balance
1 $65,000.00 $3,900.00 $14,858.45 $50,141.55
2 $50,141.55 $3,008.49 $15,749.95 $34,391.60
3 $34,391.60 $2,063.50 $16,694.95 $17,696.65
4 $17,696.65 $1,061.80 $17,696.65 -$0.00
Gray, Stone, and Lawson open an accounting practice on January 1, 2016, in San Diego, California, to be operated as a partnership. Gray and Stone will serve as the senior partners because of their years of experience. To establish the business, Gray, Stone, and Lawson contribute cash and other properties valued at $410,000, $340,000, and $170,000, respectively. An articles of partnership agreement is drawn up. It has the following stipulations:
Personal drawings are allowed annually up to an amount equal to 10 percent of the beginning capital balance for the year.
Profits and losses are allocated according to the following plan:
1. A salary allowance is credited to each partner in an amount equal to $8 per billable hour worked by that individual during the year.
2. Interest is credited to the partners’ capital accounts at the rate of 12 percent of the average monthly balance for the year (computed without regard for current income or drawings).
3. An annual bonus is to be credited to Gray and Stone. Each bonus is to be 10 percent of net income after subtracting the bonus, the salary allowance, and the interest. Also included in the agreement is the provision that there will be no bonus if there is a net loss or if salary and interest result in a negative remainder of net income to be distributed.
4. Any remaining partnership profit or loss is to be divided evenly among all partners.
Because of financial shortfalls encountered in getting the business started, Gray invests an additional $9,200 on May 1, 2016. On January 1, 2017, the partners allow Monet to buy into the partnership. Monet contributes cash directly to the business in an amount equal to a 20 percent interest in the book value of the partnership property subsequent to this contribution. The partnership agreement as to splitting profits and losses is not altered upon Monet’s entrance into the firm; the general provisions continue to be applicable. The billable hours for the partners during the first three years of operation follow:
2016 2017 2018
Gray 2,020 4,200 2,130
Stone 1,680 2,300 1,860
Lawson 3,700 1,620 1,550
Monet 0 1,430 1,820
The partnership reports net income for 2016 through 2018 as follows:
2016 $98,000
2017 (44,400)
2018 236,000
Each partner withdraws the maximum allowable amount each year.
A. Determine the allocation of income for each of these three years.
B. Prepare in appropriate form a statement of partners’ capital for the year ending December 31, 2018.
Answer:
thast way too long for just 10 points
Explanation:
sy
Politicalization of Accounting Standards
Some accountants have said that politicization in the development and acceptance of generally accepted accounting principles (i.e., rule-making) is taking place. Think about the term more broadly to mean the compromise that results when the bodies responsible for developing generally accepted accounting principles (FASB) are pressured by interest groups (SEC, American Accounting Association, businesses through their various organizations, Institute of Management Accountants, financial analysts, bankers, lawyers, and so on).
Required:
a. The Committee on Accounting Procedure of the AICPA was established in the mid to late 1930s and functioned until 1959, at which time the Accounting Principles Board came into existence. In 1973, the Financial Accounting Standards Board was formed, and the APB went out of existence. Do the reasons these groups were formed, their methods of operation while in existence, and the reasons for the demise of the first two indicate an increasing politicalization (as the term is used in the broad sense) of accounting standard setting? Explain.
b. What arguments can be raised to support the politicalization of accounting standard setting?
c. What arguments can be raised against the politicalization of accounting standard setting?
Answer: Some accountants have said that politicization in the development and acceptance of generally accepted accounting principles (i.e., rule-making) is taking place. Some use the term “politicization” in a narrow sense to mean the influence by governmental agencies, particularly the Securities and Exchange Commission, on the development of generally accepted accounting principles. Others use it more broadly to mean the compromise that results when the bodies responsible for developing generally accepted accounting principles are pressured by interest groups (SEC, American Accounting Association, businesses through their various organizations, Institute of Management Accountants, financial analysts, bankers, lawyers, and so on).
Instructions
(a) The Committee on Accounting Procedure of the AICPA was established in the mid- to late 1930s
and functioned until 1959, at which time the Accounting Principles Board came into existence. In
1973, the Financial Accounting Standards Board was formed and the APB went out of existence.
Do the reasons these groups were formed, their methods of operation while in existence, and the
reasons for the demise of the first two indicate an increasing politicization (as the term is used in
the broad sense) of accounting standard-setting? Explain your answer by indicating how the CAP,
the APB, and the FASB operated or operate. Cite specific developments that tend to support your
answer.
(b) What arguments can be raised to support the “politicization” of accounting rule-making?
(c) What arguments can be raised against the “politicization” of accounting rule-making?
Solution
a) CAP. The Committee on Accounting Procedure, CAP, which was in existence from 1939 to 1959, was a natural outgrowth of AICPA committees which were in existence during the period 1933 to 1938. The committee was formed in direct response to the criticism received by the accounting profession during the financial crisis of 1929 and the years thereafter. The authorization to issue pronouncements on matters of accounting principles and procedures was based on the belief that the AICPA had the responsibility to establish practices that would become generally accepted by the profession and by corporate management.
Explanation:
North Pole Fishing Equipment Corporation and South Pole Fishing Equipment Corporation would have identical equity betas of 1.10 if both were all equity financed. The market value information for each company is shown here: North Pole South PoleDebt $ 2,900,000 $ 3,800,000 Equity $ 3,800,000 $ 2,900,000 The expected return on the market portfolio is 10.9 percent, and the risk-free rate is 3.2 percent. Both companies are subject to a corporate tax rate of 35 percent. Assume the beta of debt is zero.a. What is the equity beta of each of the two companies? (Do not round intermediate calculations and round your final answers to 2 decimal places. (e.g., 32.16))Equity betaNorth Pole South Pole b. What is the required rate of return on each of the two companies’ equity? (Do not round intermediate calculations and round your final answers to 2 decimal places. (e.g., 32.16))Rate of returnNorth Pole % South Pole %
Answer and Explanation:
The calculation is given below;
For North Pole:
Unlevered Beta = 1.10
Debt = $2,900,000
Equity = $3,800,000
So,
D/E Ratio = Debt ÷ Equity
= $2,900,000 ÷ $3,800,000
= 0.76316
Now
Levered Beta = Unlevered Beta × [1 + (1 - tax) × D ÷ E Ratio]
= 1.10 × [1 + (1 - 0.35) × 0.76316]
= 1.65
Required Return = Risk-free Rate + Levered Beta × (Market Return - Risk-free Rate)
= 3.20% + 1.65 × (10.90% - 3.20%)
= 15.91%
For South Pole:
Unlevered Beta = 1.10
Debt = $3,800,000
Equity = $2,900,000
So,
D/E Ratio = Debt ÷ Equity
= $3,800,000 ÷ $2,900,000
= 1.31034
Now
Levered Beta = Unlevered Beta × [1 + (1 - tax) × D ÷ E Ratio]
= 1.10 × [1 + (1 - 0.35) × 1.31034]
= 2.04
And
Required Return = Risk-free Rate + Levered Beta × (Market Return - Risk-free Rate)
= 3.20% + 2.04 × (10.90% - 3.20%)
= 18.91%
The data is D = 50,000/year, S= $500 per order, H = $0.25 per unit per year. Assume a lead time of 3 days.
Fill in the following table. Write out the formulas you are using.
Annual demand
Holding cost (units per year)
Ordering cost
Ordering quantity (EOQ)
Number of orders per year
Average inventory
Maximum inventory
Reorder level
Length of order cycle
Annual holding cost
Annual ordering cost
Annual Affected Inventory Cost
b. Suppose a mistake was made in the data and the correct data is D = 60,000 per year, S = $400 per order, H = $0.20 per unit per year. Calculate the correct EOQ and affected inventory cost.
c. Now suppose we used the incorrect EOQ (based on the first set of data) instead of the correct EOQ. Calculate the affected inventory cost.
d. Compute the percentage error in the EOQ and in the inventory cost.
e. Moral of the story is that incorrect estimation of costs or demand (does or does not) result in substantial deviation from the optimal cost (circle the right answer).
Answer:
Annual demand 50,000 units
Holding cost $0.25 per year
Ordering Cost $500 per order
EOQ : 14,142
Number of orders per year 4
Average inventory 14,142 units
Maximum inventory 14,500 units
Reorder level 410 units
Length of order cycle 3 days
Annual Holding cost $12,500
Annual ordering cost $2000
Annual affected inventory cost $14,500
Explanation:
EOQ = [tex]\sqrt{\frac{2 * D * S}{H} }[/tex]
EOQ = [tex]\sqrt{\frac{2 * 50000 * 500}{0.25} }[/tex]
EOQ = 14,142 units
Number of Order : Annual demand / EOQ
Number of order : 50,000 / 14,142 = 3.53 or approximately 4
Annual Ordering cost : No. of order * cost per order
Annual ordering cost : 4 * $500 = $2,000
Annual Holding Cost : Demand * Holding cost per unit
Annual holding cost = 50,000 * $0.25 per unit = $12,500
Reorder level : Daily demand * lead time
Reorder level : [ 50000 / 365 ] * 3 = 410 units
For tax reasons, your client wishes to purchase an annuity that pays $60,000 each year for 11 years, with the first payment in one year. At an interest rate of 12% and focusing on time value of money without consideration of any fees, how much would the client need to invest now?
Equivalent problem structure (in neutral time-value-of-money terms): What is the present value of an annuity that pays $60,000 each year for 11 years, assuming a discount rate of 12% and the first payment occurs one year from now? Equivalent problem structure (as a borrower): How much could you borrow today in exchange for paying back $60,000 each year for 11 years, assuming an interest rate of 12% and the first payment occurs one year from now?
Answer:
$356,261.95
Explanation:
Interest rate per annum = 12%
No of years = 11
No of corresponding per annum = 1
Interest rate per period = 12% (12%/1)
No of period = 11
Payment per period = $60,000
1.12^11
Investment today = P * [1 - (1/(1+r)^n)]/r
Investment today = 60,000 * {1 - (1/(1+0.12)^11)] / 12%
Investment today = 60,000 * {1 - (1/3.47855) / 0.12
Investment today = 60,000 * {1 - 0.2874761) / 0.12
Investment today = 60,000 * 0.7125239/0.12
Investment today = 60,000 * 5.937699167
Investment today = 356261.95002
Investment today = $356,261.95