The transaction would be recorded by debiting the "Accounts Payable" account and crediting the "Supplies" account in the general ledger.
What is the process of recording a credit purchase transaction in the accounting system?When a company purchases something on credit, the transaction is recorded by debiting the "Accounts Payable" account and crediting the relevant asset account in the general ledger. This is because, when a company purchases something on credit, it is incurring a liability, which is an obligation to pay the supplier in the future. The debit to Accounts Payable records this liability, while the credit to the relevant asset account records the increase in the company's assets. The process of recording credit purchase transactions in the accounting system is important to keep track of the company's liability and assets.
The transaction would be recorded by debiting the "Accounts Payable" account and crediting the "Supplies" account in the general ledger. The debit to Accounts Payable increases the amount the company owes to its suppliers, while the credit to Supplies increases the company's assets.
This is because, when a company purchases supplies on credit, it is incurring a liability, which is an obligation to pay the supplier in the future. The debit to Accounts Payable records this liability, while the credit to Supplies records the increase in the company's assets.
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Kennedy Company reports the following costs and expenses in May.
Factory utilities $ 16,500
Depreciation on factory equipment 12,650
Direct labor 79100
Sales salaries 48400
Property taxes on factory building 2500
Repairs to office equipment 1300
Factory repairs 2000
Advertising 23,000
Depreciation on delivery trucks 3800
Indirect factory labor 48900
Indirect materials 70800
Direct materials used 157600
Factory manager's salary 8000
Office supplies used 4640
Instructions:
From the information, determine the total amount of:______.
(a) Manufacturing overhead.
(b) Product costs.
(c) Period costs.
Answer and Explanation:
The computation is shown below:
a. The manufacturing overhead is
= factory utilities + depreciation on factory equipment + indirect factory labor + indirect material + factory manager salary + property tax + factory repairs
= $16,500 + $12,650 + $48,900 + $70,800 + $8,000 + $2,500 + $2,000
= $161,350
b. The product cost is
= Direct material used + direct labor + total manufacturing overhead
= $157,600 + $79,100 + $161,350
= $398,050
c. The period cost is
= Depreciation on delivery truck + sales salaries + repairs to office equipment + advertising + office supplies used
= $3,800 + $48,400 + $1,300 + $23,000 + $4,640
= $81,140
The current asset section of the Excalibur Tire Company’s balance sheet consists of cash, marketable securities, accounts receivable, and inventory. The December 31, 2021, balance sheet revealed the following:
Inventory $890,000
Total assets $3,500,000
Current ratio 2.40
Acid-test ratio 1.40
Debt to equity ratio 1.5
Required:Determine the following 2016 balance sheet items:1. Current assets2. Shareholders' equity3. Non-current assets4. Long-term liabilities
Answer:
1. Current assets $2,136,000
2. Shareholders' equity $2,000,000
3. Non-current assets $1,364,000
4. Long term liabilities = $610,000
Explanation:
Calculation to determine the following 2016 balance sheet items: Current assets, Shareholders' equity, Non-current assets and Long-term liabilities
1. Current assets
First step is to calculate the Acid test ratio using this formula
Acid test ratio = (Current assets-Inventory)/Current liabilities
Let plug in the formula
1.40 = (2.40X-$890,000)/X
1.40X = 2.40X-$890,000
-1.00X = $890,000
X=$890,000/1.00
X = $890,000
Now let calculate the Current assets
Current assets =$ 890,000*2.4
Current assets = $2,136,000
Therefore Current assets will be $2,136,000
2. Shareholders' equity
Using this formula
Total assets = Debt+Equity
Let plug in the formula
$3,500,000 = 1.5X+X
X = $2,000,000
Therefore Shareholders' equity will be $2,000,000
3 .Non-current assets
Long term assets = $3,500,000- $2,136,000
Long term assets = $1,364,000
Therefore Non-current assets will be $1,364,000
4. Long-term liabilities
Long term liabilities =[($3,500,000-$2,000,000)-$890,000]
Long term liabilities =$1,500,000-$890,000
Long term liabilities = $610,000
Therefore Long term liabilities will be $610,000
Each scenario below gives some information about price elasticity of demand for a firm. Use this information to answer the questions. Round answers to two places after the decimal where applicable. Honest Abe's Used Cars estimates the price elasticity of demand for their cars to be 4.60 . Last month, Abe tried a new marketing scheme which decreased the number of cars sold by 67 %.
Abe must have_________ prices. Therefore, Abe's total revenue ____________ Abe's prices must have changed by:________%
At Webs-R-Us, a website design company, the new manager has decided to increase the price of Webs-R-Us services by 45%.
If Webs-R-Us has a price elasticity of demand at 0.70, we can expected the number of websites designed to ___________
Answer:
increased
fell
14.57%
decrease
Explanation:
Price elasticity of demand measures the responsiveness of quantity demanded to changes in price of the good.
Price elasticity of demand = percentage change in quantity demanded / percentage change in price
If the absolute value of price elasticity is greater than one, it means demand is elastic. Elastic demand means that quantity demanded is sensitive to price changes.
Honest Abe's Used Cars has an elastic demand because its coefficient of elasticity is greater than one. Because demand is elastic, a rise in price would lead to a decrease in the number of cars sold. If price is increased, demand would fall more than the change in price, so total revenue would fall.
4.6 = 0.67 / percentage change in price
Percentage change in price = 0.67 / 4.6 = 0.1457 = 14.57%
Demand is inelastic if a small change in price has little or no effect on quantity demanded. The absolute value of elasticity would be less than one
Webs-R-Us services has an inelastic demand.
If prices are increased, demand would fall but it would fall less than the increase in price
Demand is unit elastic if a small change in price has an equal and proportionate effect on quantity demanded
Mather Company purchased equipment on January 1, 2012 at a total invoice cost of $224,000; additional costs of $4,000 for freight and $20,000 for installation were incurred. The equipment has an estimated salvage value of $8,000 and an estimated useful life of five years. The amount of accumulated depreciation at December 31, 2013 if the straight-line method of depreciation is used is:
Answer:
$96,000
Explanation:
Note that December 2013 is the end of the second year since the equipment was purchased, hence, the accumulated depreciation is 2-year accumulated depreciation which is shown thus:
Annual depreciation=(cost of equipment-salvage value)/useful life
The cost of equipment includes total invoice cost, freight, and installation costs
The cost of equipment=$224,000+$4,000+$20,000
The cost of equipment=$248,000
salvage value=$8,000
useful life= 5 years
Annual depreciation=($248,000-$8000)/5
Annual depreciation=$240,000/5
Annual depreciation=$48,000
Accumulated depreciation for 2 years=$48,000*2
Accumulated depreciation for 2 years=$96,000
A company sells 500 shirts at a price of $15 each with a cost of goods sold of $2 per shirt. The company has selling and administrative expenses of $2,500, depreciation expenses of $500, interest expenses of $1,000, and a tax rate of 35%. Calculate the operating (EBIT)
Answer:
EBIT= $3,500
Explanation:
EBIT is the earnings before interest and taxes.
First, we need to calculate the sales revenue and cost of goods sold:
Sales= 500*15= $7,500
COGS= 500*2= $1,000
Now, we can determine the EBIT:
Sales= 7,500
COGS= (1,000)
Gross profit= 6,500
Selling and administrative expense= (2,500)
Depreciation expense= (500)
EBIT= $3,500
If we want to determine the net income:
EBIT= 3,500
Interest= (1,000)
EBT= 2,500
Tax= 2,500*0.35= (875)
Depreciation= 500
Net income= 2,125
what is the meaning of gpp in poultry industry
Answer:
five year ghana poultry program
Explanation:
Presented below is information related to Wyrick Company:(1.) The company is granted a charter that authorizes issuance of 15,000 shares of $100 par value preferred stock and 40,000 shares of no-par common stock.(2.) 8,000 shares of common stock are issued to the founders of the corporation for land valued by the board of directors at $300,000. The board establishes a stated value of $5 per share for the common stock.(3.) 5,000 shares of preferred stock are sold for cash at $120 per share.(4.) The company issues 100 shares of common stock to its attorneys for costs associated with starting the company. At that time, the common stock was selling at $60 per share.Instructions:Prepare the general journal entries necessary to record these transactions.
Answer and Explanation:
The journal entries are shown below:
1. No journal entry is required
2. Land 300,000
Common Stock 40,000
Paid-in Capital in Excess
of Stated Value 260,000
(Being the land is purchased by the issue of the shares)
3. Cash 600,000
Preferred Stock 500,000
Paid-in Capital in Excess
of Par—Preferred Stock 100,000
(Being the preferred stock is issued for cash)
4. Organization Expense 6,000
Common Stock 500
Paid-in Capital in Excess
of Stated Value 5,500
(Being organizaiton expense is recorded)
Hillside issues $1,600,000 of 9%, 15-year bonds dated January 1, 2017, that pay interest semiannually on June 30 and December 31. The bonds are issued at a price of $1,382,579.
Required:
a. Prepare the January 1, 2017, journal entry to record the bonds' issuance.
b. Prepare the journal entries to record the first two interest payments.
Answer: Check attachment
Explanation:
a. Prepare the January 1, 2017, journal entry to record the bonds' issuance.
This has been attached. Kindly note that the discount on bond payable was calculated as:
= Bond payable - Cash
= 1,600,000 - 1,382,579
= 217,421
b. Prepare the journal entries to record the first two interest payments.
Check attachment as the first two interest payments on June 30th 2017 and December 31st, 2017 has been attached.
Which of the following statements is true? Group of answer choices When you invest money, you are taxed each year on any capital gains even if you do not sell the asset. Both when you invest money, you are taxed each year on any capital gains even if you do not sell the asset and you will be taxed each year that you receive a dividend from an investment are correct. You will be taxed each year that you receive a dividend from an investment. Interest earned on an investment is considered to be tax free until you sell the investment.
Answer:
Interest earned on an investment is considered to be tax free until you sell the investment.
Explanation:
Time Value of Money is Simply know as to the truth or fact that money received today is worth more money received next year or the year after it.
Future Value is the rate or amount of money an investment will grow to over some period of time at some given interest rate. Investment is simply known as the buying or purchase of assets with the aim of increasing future income and interest.
After-tax rate of returns of investments depends on Before-tax rate of return., When investment income and gains are taxed,Taxed annually, e.t.c.
Tomas, manager of a 50-person engineering department, exhibits group maintenance behaviors; that is he ensures employee satisfaction, harmonious work relationships, and the department's social stability. However, his division manager, Stan, notes that Tomas' department rarely achieves its yearly goals, in terms of work speed, quality and accuracy, output, and compliance with company policies and requirements. How would you advise Stan to coach Tomas to perform his job at a higher level and to increase the performance of Tomas' organization
Answer: Tell Thomas to focus more on task performance behaviors.
Explanation:
The options are:
a. Tell Thomas to focus more on group maintenance behaviors.
b. Tell Thomas to focus more on participative leadership.
c. Tell Thomas to focus more on task performance behaviors.
d. Tell Thomas to focus more on democratic leadership.
e. Tell Thomas to focus more on social factors.
Based on the information given in the question, the answer will be for Thomas to focus more on task performance behaviors.
This will enable Thomas to know whether the employees in the department are performing their roles well or not. He already exhibits group maintenance behaviors and participative leadership. Therefore, option C will be the right answer.
TheThe economic analysis of minimum wage involves both normative and positive analysis. Consider the following consequences of a minimum wage: a. The minimum wage law causes unemployment. b. Unemployment would be lower without a minimum wage law. c. Minimum wage laws benefit some workers and harm others. d. The minimum wage should be more than $7.25 per hour. economic analysis of minimum wage involves both normative and positive analysis. Consider the following consequences of a minimum wage:
Answer:
a. The minimum wage law causes unemployment. - Positive statement
This is a positive statement because it describes a factual statement about minimum wage. It does not say whether minimum wage is a good thing or not, even if the inherent quality of the statement can be somewhat inferred.
b. Unemployment would be lower without a minimum wage law. - Postive statement.
This is a positive statement for the same reasons as the statement above. Besides, this statement says exactly the opposite as the statement above.
c. Minimum wage laws benefit some workers and harm others. - Positive statement.
This statement is also positive, it does not establish whether minimum wage is a good or a bad, thing, and it also does not recommend any policy regarding minimum wage.
d. The minimum wage should be more than $7.25 per hour. - Normative statement.
This above is a normative statement. It clearly establishes a preference when it comes to minimum wage, and recommends a public policy according to it: $7.25 per hour.
Tanaka Company manufactures two products. The budgeted per-unit contribution margin for each product follows:
Super Supreme
Sales price $90 $129
Variable cost per unit (69) (75)
Contribution margin per unit $21 $54
Fanning expects to incur annual fixed costs of $132,870. The relative sales mix of the products is 70 percent for Super and 30 percent for Supreme.
Required:
a. Determine the total number of products (units of Super and Supreme combined) Tanaka must sell to break even.
b. How many units each of Super and Supreme must Tanaka sell to break even? (Do not round intermediate calculations.)
Answer:
A. 4,300 units
B.Units of super =3,010 Units
Units of Spreme =1,290 Units
Explanation:
a) Calculation to Determine the total number of products (units of Super and Supreme combined) Tanaka must sell to break even.
First step is to calculate the Contribution margin per sales mix
Contribution margin per sales mix = (0.70*$21) + (0.30*$54)
Contribution margin per sales mix = $14.7+$16.2
Contribution margin per sales mix =$30.9
Now let calculate the Break-even Point In Unit using this formula
Break-even Point In Unit = Fixed Cost/
Contribution Margin Per Sales Mix
Let plug in the formula
Break-even Point In Unit= $132,870/$30.9
Break-even Point In Unit=4,300 units
Therefore the Break-even Point In Unit will be 4,300 units
b) Calculation to determine How many units each of Super and Supreme must Tanaka sell to break even
Units of super = 4,300 units *70%
Units of super =3,010 Units
Units of Spreme =3,660 units *30%
Units of Spreme =1,290 Units
Therefore How many units each of Super and Supreme must Tanaka sell to break even will be:
Units of super =3,010 Units
Units of Spreme =1,290 Units
Carl transfers land to Cardinal Corporation for 90% of the stock in Cardinal Corporation worth $20,000 plus a note payable to Carl in the amount of $40,000 and the assumption by Cardinal Corporation of a mortgage on the land in the amount of $100,000. The land, which has a basis to Carl of $70,000, is worth $160,000.
a. Cardinal Corporation will have a basis of $160,000 in the land transferred by Carl.
b. Carl will have a recognized gain on the transfer of $30,000
c. Carl will have a recognized gain on the transfer of $90,000.
d. Cardinal Corporation will have a basis of $70,000 in the land transferred by Carl.
e. None of these choices are correct.
Answer:
e. None of these choices are correct.
Explanation:
Carl's gain = value of the note received + value of the mortgage - land's basis = $40,000 + $100,000 - $70,000 = $70,000
Snice the mortgage is higher than the basis ($100,000 higher than $70,000), this must be recognized as a Section 357 gain. The note receivable must also be recognized as gain since it doesn't qualify for Section 351.
The ultimate goal of operations management is to provide high-quality goods and services instantaneously in response to customer demand.
a. True
b. False
Answer:
a. True
Explanation:
The ultimate goal of operations management is to provide, in a timely and successful manner, goods and/or services to the final customer.
In this sense, operation management is customer-focused, and for this reason, its main task is to ensure the successful production and/or delivery of a good or service, from the moment the inputs enter the firm, to the moment the output exits the firm and reaches the final customer.
Lee Financial Services pays employees monthly. Payroll information is listed below for January 2018, the first month of Lee's fiscal year. Assume that none of the employees exceeded any relevant wage base.
Salaries $470,000
Federal income taxes to be withheld 94,000
Federal unemployment tax rate 0.60%
State unemployment tax rate (after
FUTA deduction) 5.40%
Social security tax rate 6.20%
Medicare tax rate 1.45%
Required:
1. Calculate the income and payroll taxes for the January 2018 pay period.
2. Prepare the appropriate journal entries to record salaries and wages expense (not paid) and payroll tax expense for the January 2018 pay period.
Answer and Explanation:
1. The computation is shown below:
As we know that employee taxes involved the social security tax, medicare tax and the income tax
Social security tax
= Gross pay × 6.2%
= $470,000 × 6.2%
= $29,140
Medicare tax
= Gross pay × 1.45%
= $470,000 × 1.45%
= $6,815
And,
Income tax withheld = $94,000
Now payroll taxes involved social security tax, Medicare tax, Federal unemployment tax, and state unemployment tax.
Social security tax
= Gross pay × 6.2%
= $470,000 × 6.2%
= $29,140
Medicare tax
= Gross pay × 1.45%
= $470,000 × 1.45%
= $6,815
Federal unemployment tax is
= Gross pay × 0.6%
= $470,000 × 0.6%
= $2,820
State unemployment tax
= Gross pay × 5.40%
= $470,000 × 5.40%
= $25,380
2. Now the journal entries are
On January, 2018
Salaries wages expense $470,000
To Withholding income tax payable $94,000
To Social security tax payable $29,140
To Medicare tax payable $6,815
to Salaries and wages payable $340,045
(being salaries and wages expense is recorded)
On Jan 2018
Payroll tax expense $64,155
To Social security tax payable $29,140
To Medicare tax payable $6,815
To Federal unemployment tax payable $2,820
To State unemployment tax payable $25,380
(being tax liabilities is recorded)
The stockholders’ equity section of Fauberg Marigny Corporation at December 31 is as follows.
FAUBERG MARIGNY CORPORATION
Balance Sheet (partial)
Stockholders' equity
Paid-in capital
Preferred stock, cumulative, 10,000 shares authorized,
5,000 shares issued and outstanding $300,000
Common stock, no par, 750,000 shares authorized,
150,000 shares issued 1,500,000
Total paid-in capital 1,800,000
Retained earnings 2,050,000
Total paid-in capital and retained earniings 3,850,000
Less: Treasury stock (5,000 common shares) (64,000)
Total stockholders' equity $3,786,000
From a review of the stockholders’ equity section:
1) How many shares of common stock are outstanding?
2) Assuming there is a stated value, what is the stated value of the common stock?Stated value of common stock per share.
3) What is the par value of the preferred stock?
4) If the annual dividend on preferred stock is $18,000, what is the dividend rate on preferred stock?
5) If dividends of $36,000 were in arrears on preferred stock, what would be the balance in retained earnings?
Answer:
1. 295,000 shares
2. $10 per share
3. $60 per value
4. 6%
5. $2,046,400
Explanation:
1. Calculation for How many shares of common stock are outstanding
Outstanding common stock 300,000 shares
Less Common shares 5,000
Common shares outstanding 295,000 shares
2. Calculation for the stated value of the common stock
Stated value of the common stock
$1,500,000/150,000
Stated value of the common stock = $10 per share
3. Calculation for What is the par value of the preferred stock
Par value of the preferred stock=$300,000/5,000
Par value of the preferred stock=$60 par value
4. Calculation for dividend rate on preferred stock
Dividend rate on preferred stock=$18,000/$300,000 = 6%
5. Calculation for what would be the balance in Retained Earnings
Balance in Retained Earnings= $2,050,000 -$36,000
Balance in Retained Earnings=$2,046,400
One major advantage of limited liability is that it:________.
a. is not subject to a free-rider problem.
b. has unlimited profit sharing among the firm's owners.
c. shields the personal assets of owners from liability claims.
d. is not subject to a principal-agent problem.
Answer: c. shields the personal assets of owners from liability claims.
Explanation:
An advantage of limited liability is that it shields the personal assets of owners from liability claims.
For a limited liability company, it should be noted that the liabilities of the members in the company for the debts that are incurred are limited only to the investment of the members. Personal assets are not affected if the company first into debt.
Yale Corporation issued to Zap Corporation $70,000, 10% (cash interest payable semiannually on June 30 and December 31) 10-year bonds dated and sold on January 1, 2020. Assume that the company uses the effective interest method for amortization. If the bonds were sold at 97, yielding 10.5%. What is true for journal entries to be made at June 30, 2020, for interest payment if Effective interest method is used?
Answer:
Journal Entry
June 30, 2020
Dr. Interest expense __$3,564.75
Cr. Discount on bonds_$64.75
Cr. Cash ___________$3,500
[To record interest]
Explanation:
First, we need to calculate the issuance price of the bond
Issuance price of the bond = Face value x Seling rate = $70,000 x 97/100 = $67,900
Now we need to calculate the discount value as follow
Discount = Face value - Isuance vaue = $70,000 - $67,900 = $2,100
Now, need to calculate the discount amortization as follow
Discount amortization = ( Carrying value of bond x Effective interest rate x 6/12 ) - ( Face value x Coupon rate x 6/12 ) = ( $67,900 x 10.5%x 6/12 ) - ( $70,000 x 10% x 6/12 = $3,564.75 - $3,500 = $64.75
Now calculate the interest payment
Interst payment = Face value x Coupon rate x 6/12 = $70,000 x 10% x 6/12 = $3,500
The bonds would expire on the date of maturity, and the issuing company will pay the debt holder the face value of the bond.
The issue price is termed as the price at which the issuer of the bond sells the bonds for the first time.
The Journal entry has been attached below.
The calculation of the issuance price of the bond:
Issuance price of the bond = [tex]\text{Face value} \times \text{Seling rate} = \$70,000 \times \frac{97}{100}[/tex] = $67,900
Calculation of the discount value:
Discount = Face value - Isuance vaue = $70,000 - $67,900 = $2,100
Calculation of the discount amortization:
Discount amortization = [tex]( \text{Carrying value of bond} \times \text{Effective interest rate} \itimes \frac{6}{12} ) - ( \text{Face value} \times \text{Coupon rate} \times \frac{6}{12})[/tex]
= [tex]( \$67,900 \times 10.5\%\times \frac{6}{12}) - ( \$70,000 \times 10\% \times \frac{6}{12})[/tex]
= $3,564.75 - $3,500 = $64.75
Calculation of the interest payment:
Interst payment =[tex]\text{ Face value} \times \text{Coupon rate} \times \frac{6}{12} = \$70,000 \times 10\% \times \frac{6}{12}[/tex]= $3,500
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What is another term for the buying and selling of stocks?
A.) Entrepreneurial ability.
B.) Trading.
C.) Shares.
D.) Lack of scarcity.
what is the main difference between regular work hours and overtime
Answer:
regular work hour- employee are expected to on the basis of their employment contract.
overtime- hours worked exceed normally scheduled working hours.
Cullumber Co. began operations on January 2, 2020. It employs 15 people who work 8-hour days. Each employee earns 11 paid vacation days annually. Vacation days may be taken after January 10 of the year following the year in which they are earned. The average hourly wage rate was $18 in 2020 and $19.50 in 2021. The average vacation days used by each employee in 2021 was 10. Cullumber Co. accrues the cost of compensated absences at rates of pay in effect when earned
Prepare journal entries to record the transactions related to paid vacation days during 2020 and 2021.
Answer and Explanation:
The Journal entries are shown below:
On 2020,
Wages expense Dr. $23,760(15 × 8 hrs × 11 days × $18)
To vacation wages payable $23,760
(To record the wages expense)
On 2021
Wages expense Dr $1,800
Vacation wages payable $21,600 (15 × 8 hrs × 10 days × $18)
To Cash $23,400 (15 × 8 hrs × 10 days × $19.50)
(To record the cash paid)
Wages expense Dr.$25,740 (15 × 8 hrs × 11 days × $19.50)
To vacation wages payable $25,740
(To record the wages expense)
An investor obtained a fully amortizing mortgage five years ago for $95,000 at 11-percent for 30 years. Mortgage rates have dropped, so that a fully amortizing 25-year loan can be obtained at 10-percent. There is no prepayment penalty on the mortgage balance of the original loan, but three points will be charged on the new loan and other closing costs will be $2,000. All payments are monthly.
Required:
a. Should the borrower refinance if he plans to own the property for the remaining loan term? Assume that the investor borrows only an amount equal to the outstanding balance of the loan.
b. Would your answer to part (a) change if he planned to own the property for only five more years?
Answer:
a) yes, you should refinance the loan
b) yes, you should refinance the loan
Explanation:
the original monthly payment = $904.71
after 60 payments, the principal owed = $838.79
the difference between both payments = $904.71 - $838.79 = $65.92
in order to determine whether the loan should be refinanced or not, we must find the present value of refinancing costs:
are 300 payments of $65.92 worth more than $2,000?
PV = $65.92 x 110.162 (PVIFA, 0.833%, 300 periods) = $7,261.88 ≥ $2,000
PV = $65.92 x 47.07(PVIFA, 0.833%, 60 periods) = $3,102.85 ≥ $2,000
Amy and Brian were investigating the acquisition of a tax accounting business, Bottom Line Inc. (BLI). As part of their discussions with the sole shareholder of the corporation, Ernesto Young, they examined the company's tax accounting balance sheet. The relevant information is summarized as follows:
FMV Adjusted Basis Appreciation
  Cash $32,250 $32,250
  Receivables 18,600 18,600
  Building 136,000 68,000 68,000
  Land 269,250 89,750 179,500
Total $456,100 $208,600 $247,500
Payables $27,200 $27,200
  Mortgage* 135,750 135,750
Total $162,950 $162,950
Ernesto was asking for $408,000 for the company. His tax basis in the BLI stock was $150,000. Included in the sales price was an unrecognized customer list valued at $150,000. The unallocated portion of the purchase price ($68,000) will be recorded as goodwill. Required:
a. What amount of gain or loss does BLI recognize if the transaction is structured as a direct asset sale to Amy and Brian? What amount of corporate level tax does BLI pay as a result of the transaction, assuming a tax rate of 34 percent?
b. What amount of gain or loss does Ernesto recognize if the transaction is structured as a direct asset sale to Amy and Brian, and BLI distributes the after-tax proceeds (computed in question a) to Ernesto in liquidation of his stock?
c. What is the nature of tax benefits to Amy and Brian as a result of structuring the acquisition as a direct asset purchase?
d. What is the tax basis in the assets received by Amy and Brian?
Answer:
Bottom Line, Inc. (BLI)
a. The amount of gain that BLI should recognize if the transaction is structured as a direct asset sale to Amy and Brian is:
= $199,400
BLI will a corporate tax of $ 67,796 ($199,400 * 34%) as a result of the transaction.
b. The amount of gain that Ernesto recognizes when BLI distributes the after-tax proceeds to Ernesto in liquidation of his stock is:
= $190,204
c. Amy and Brian can step up the tax basis of the assets to their fair market values.
d. The tax basis in the assets received by Amy and Brian is:
= $408,000
Explanation:
a) Data and Calculations:
FMV Adjusted Basis Appreciation
Cash $32,250 $32,250
Receivables 18,600 18,600
Building 136,000 68,000 68,000
Land 269,250 89,750 179,500
Total $456,100 $208,600 $247,500
Payables $27,200 $27,200
Mortgage* 135,750 135,750
Total $162,950 $162,950
Net Value $293,150 $45,650
Sales price for the company = $408,000
Ernesto tax basis in BLI stock = 150,000
Difference = $258,000
Unrecognized customer list = 150,000
Unallocated Goodwill = $108,000
Gain to be recognized if transaction is a direct asset sale:
Sales price = $408,000
Adjusted basis 208,600
Capital gain = $199,400
After-tax proceeds:
Sales price = $408,000
Corporate tax on capital gain = $ 67,796
After-tax proceeds = $340,204
Ernesto's tax basis = 150,000
Capital gain for Ernesto = $190,204
Revise the following sentences to eliminate flabby expressions.
a. Despite the fact that we lost the contract, we must at this point in time move forward.
b. In the event that interest rates increase, we will begin investing in the very near future.
Answer:
. Despite the fact that we lost the contract, we must at this point in time move forward.
Explanation:
Coronado Corporation had income from continuing operations of $10,661,000 in 2020. During 2020, it disposed of its restaurant division at an after-tax loss of $190,500. Prior to disposal, the division operated at a loss of $321,600 (net of tax) in 2020 (assume that the disposal of the restaurant division meets the criteria for recognition as a discontinued operation). Coronado had 10,000,000 shares of common stock outstanding during 2020. Prepare a partial income statement for Coronado beginning with income from continuing operations
Answer and Explanation:
The preparation of the partial income statement for Coronado beginning with income from continuing operations is presented below:
Income from continuing operations $10,661,000
Discontinued Operations :
Loss from operations of discontinued restaurant division ($321,600)
After tax Loss from disposal of restaurant division ($190,500)
Net Income $10,148,900
Earning Per Share :
Income from continuing operations [$10,661,500 ÷ 10,000,000] $1.07
Discontinued Operations [$521,100 ÷ 10,000,000] ($0.05121)
Net Income [$10,148,900 ÷ 10,000,000] $1.01489
It's best if you share the details of a personal appointment when you need to request time off work. True Or False
Answer:
False
Explanation:
On January 1, 2021, Teal Corp. had 502,000 shares of common stock outstanding. During 2021, it had the following transactions that affected the Common Stock account.
February 1 Issued 125,000 shares
March 1 Issued a 10% stock dividend
May 1 Acquired 98,000 shares of treasury stock
June 1 Issued a 3-for-1 stock split
October 1 Reissued 58,000 shares of treasury stock
The weighted-average number of shares outstanding. Assume that Indigo Corp. earned net income of $3,605,000 during 2021. In addition, it had 104,000 shares of 9%, $100 par nonconvertible, noncumulative preferred stock outstanding for the entire year. Because of liquidity considerations, however, the company did not declare and pay a preferred dividend in 2021. Compute earnings per share for 2018, using the weighted-average number of shares.
Assume that Indigo Corp. earned net income of $3,605,000 during 2021. In addition, it had 104,000 shares of 9%, $100 par nonconvertible, noncumulative preferred stock outstanding for the entire year. Because of liquidity considerations, however, the company did not declare and pay a preferred dividend in 2021. Compute earnings per share for 2018, using the weighted-average number of shares determined in part (a).
Answer:
a. The weighted-average number of shares for 2021 is 1,853,225 shares.
b. Earnings per share for 2021 = $1.95 per share
Explanation:
Note: The correct year in the requirement is 2021 not 2018 as erroneously stated parts a and b.
The explanation of the answers is now given as follows:
a. Compute earnings per share for 2021, using the weighted-average number of shares.
Note: See the attached excel file for the computation of the weighted-average number of shares.
From the attached excel file (see the bold red color), the total weighted-average number of shares for 2021 is 1,853,225 shares.
b. Assume that Indigo Corp. earned net income of $3,605,000 during 2021. In addition, it had 104,000 shares of 9%, $100 par nonconvertible, noncumulative preferred stock outstanding for the entire year. Because of liquidity considerations, however, the company did not declare and pay a preferred dividend in 2021. Compute earnings per share for 2021, using the weighted-average number of shares determined in part (a).
To calculate earnings per share for 2021, the following formula is used:
Earnings per share for 2021 = Net income of $3,605,000 during 2021 / Weighted-average number of shares for 2021
Therefore, we have:
Earnings per share for 2021 = $3,605,000 / 1,853,225 = $1.95 per share
An investor takes a long position in 3 futures contracts. The initial margin is $8,200 per contract and the maintenance margin is $6,000 per contract. At 1 p.m. today, the investor's total margin account balance is $15,490.64 and the investor receives a margin call. How much must the investor deposit into the margin account at 1 p.m. to keep the futures position open
Answer:
$3,036.45
Explanation:
Total Initial margin = Initial margin per contract * Number of contracts = $8,200 * 3 = $24,600
Total maintenance margin = maintenance per contract * Number of contracts = $6,000 * 3 = $18,000
Total margin account balance = $15,490.64
We observe Margin account balance < Maintenance margin
Margin call required = Initial margin - Total account balance
Deposit Amount = Total initial Margin - Total Margin Account balance = $24,600 - $15,490.64 = $9,109.36 or $9,109.36/3 = $3,036.45 per contract.
Wayne is working at the overseas branch of his organization. He needs some clarification about a project. He approaches a senior manager thinking he would get a good explanation. However, he is instructed to follow protocol and sent away. Also, he is informed that only team leads are allowed to approach senior managers. This implies that the organization has a ______ score.
A) high Individualism/Collective Index
B) high Power Distance Index
C) low Individualism/Collective Index
D) low Power Distance Index
E) high Uncertainty Avoidance Index
Answer:
B)High Power Distance Index
Explanation:
From the question, we are informed about Wayne who is working at the overseas branch of his organization. He needs some clarification about a project. He approaches a senior manager thinking he would get a good explanation. However, he is instructed to follow protocol and sent away. Also, he is informed that only team leads are allowed to approach senior managers. In this case, the organization has a High Power Distance Index score. The power-distance index can be regarded as way to measure acceptance of hierarchy of wealth/power by some people in a nation, business as well as culture. power-distance index helps to know how well citizen can accept authority or challenge authority of those in power.
Assuming a 12% annual interest rate, determine the present value of a five-period annual annuity of $5,000 under each of the following situations:
1. The first payment is received at the end of the first year, and interest is compounded annually.
2. The first payment is received at the beginning of the first year, and interest is compounded annually.
3. The first payment is received at the end of the first year, and interest is compounded quarterly.
Depoosite date: 12/31/17, i=?, n=?, Deposit= $4100, PV - 12/31/16: ?
Deposite date 12/31/18, i=?, n=?, Deposit=$4100, PV -12/31/16: ?
Deposite date: 12/31/19, i=?, n=?, Deposit= $4100, PV- 12/31/16: ?
Deposti date: 12/31/20, i=?, n=?, Depostie= $4100, PV - 12/31/16: ?
Deposit date: 12/31/21, i=?, n=?, deposite=$ 4100, PV - 12/31/16: ?
Solution :
Annual payment = [tex]$\$ 5000$[/tex]
1. The rate of interest annually = 12%
Present value [tex]$=\$5000 \times \text{PVA of} \ \$1(12\%, 5)$[/tex]
[tex]$=\$5000 \times 3.60478$[/tex]
= $ 18,023.90
2. The rate of interest annually = 12%
Present value [tex]$=\$5000 \times \text{PVAD of} \ \$1(12\%, 5)$[/tex]
[tex]$=\$5000 \times 4.03735$[/tex]
= $ 20,186.75
3. The rate of interest annually = 12%
The rate of interest quarterly = 3%
Present value = [tex]$\$5000 \times \text{PV of} \ \$1(3\%, 4) + \$5000 \times \text{PV of} \ \$1(3\%, 8) +\$5000 \times \text{PV of} \ \$1(3\%, 12) $[/tex] [tex]$+\$5000 \times \text{PV of} \ \$1(3\%, 16) + \$5000 \times \text{PV of} \ \$1(3\%, 16)$[/tex]
[tex]$= \$5000 \times 0.88849 + \$5000 \times 0.78941 + \$5000 \times 0.70138 + \$5000 \times 0.62317 + \$5000 \times 0.55368$[/tex][tex]$=\$ 17,780.65$[/tex]