BUSINESS COLLEGE

A bank estimates that its profit next year is normally distributed with a mean of 0.8% of assets and the standard deviation of 2% of assets. How much equity (as a percentage of assets) does the company need to be (a) 99% sure that it will have a positive equity at the end of the year and (b) 99.9% sure that it will have positive equity at the end of the year

Answers

Answer 1

Answer:

Answer:

a) 5.45%

b) 6.98%

Explanation:

We are given the following information in the question:

Mean, μ = 0.8%

Standard Deviation, σ = 2%

We are given that the distribution of profit is a bell shaped distribution that is a normal distribution.

Formula:

$z_(score) = \displaystyle(x-\mu)/(\sigma)$

a) We have to find the value of x such that the probability is 0.99

P(X < x)

$P( X < x) = P( z < \displaystyle(x - 0.8)/(2))=0.99$

Calculation the value from standard normal z table, we have,

$P(z < 2.326) = 0.99$

$\displaystyle(x - 0.8)/(2) = 2.326\n\nx = 5.452 \approx 5.45$

Thus, 5.45% of assets does the company need to be 99% sure that it will have a positive equity at the end of the year.

b) We have to find the value of x such that the probability is 0.999

P(X < x)

$P( X < x) = P( z < \displaystyle(x - 0.8)/(2))=0.999$

Calculation the value from standard normal z table, we have,

$P(z < 3.090) = 0.999$

$\displaystyle(x - 0.8)/(2) = 3.090\n\nx = 6.98$

Thus, 6.98% of assets does the company need to be 99% sure that it will have a positive equity at the end of the year.

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Wolf Company used $5,940 of indirect raw materials and $56,700 of direct raw materials during the period. The company incurred $37,800 of direct factory labor and $6,480 of indirect factory labor during the period. What amount will Wolf assign to Manufacturing Overhead

Answers

Answer:

Overhead= $12,420

Explanation:

Giving the following information:

Wolf Company used $5,940 of indirect raw materials and $6,480 of indirect factory labor during the period.

Factory overhead costs are the costs that can't be directly assigned to a product, service or job. This is why companies assigned overhead using manufacturing overhead rates.

In this case, the overhead is the sum if indirect material and indirect labor:

Overhead= 5,940 + 6,480= $12,420

Internal rate of return method The internal rate of return method is used by Testerman Construction Co. in analyzing a capital expenditure proposal that involves an investment of $149,630 and annual net cash flows of $45,000 for each of the six years of its useful life. This information has been collected in the Microsoft Excel Online file. Open the spreadsheet, perform the required analysis, and input your answers in the question below. Open spreadsheet Determine the internal rate of return for the proposal.

Answers

Answer:

Testerman Construction Co.

Internal rate of return method in analyzing capital expenditure:

Present value of expenditure = $149,630

Present of cash inflows annuity = $149,630 (using 20% discount rate and present value annuity factor of 3.3251 x $45,000)

NPV = $0 (PV of cash outflow - PV of cash inflow)

Therefore, the IRR = 20%

Explanation:

a) Data and Calculations:

Investment cost = $149,630

Annual net cash flows = $45,000

Investment period = 6 years

Annuity of future cash flows = 3.3251

b) Testerman’s IRR (Internal Rate of Return) is a capital budgeting and analysis tool which determines the discount rate that makes the present value of future inflows equal to the present value of outflows from a project. This IRR helps the managers to determine the projects that add value and are worth undertaking. IRR is based on assumptions. Similar projects with the same IRR will differ in returns due to the differences in timing and the size of the cash, the amount of debts and equity used to generate the returns, and the assumption of a constant reinvestment may which IRR makes.

During January, Luxury Cruise Lines incurs employee salaries of $2.9 million. Withholdings in January are $221,850 for the employee portion of FICA, $435,000 for federal income tax, $181,250 for state income tax, and $29,000 for the employee portion of health insurance (payable to Blue Cross Blue Shield). The company incurs an additional $179,800 for federal and state unemployment tax and $87,000 for the employer portion of health insurance.Required:
A) Record the employee salary expense, withholdings, and salaries payable.
B) Record the employer-provided fringe benefits.
C) Record the employer payroll taxes.

Answers

Explanation:

The journal entries are shown below:

a. Salaries expense $2,900,000

To Income tax payable $616,250 ($435,000 + $181,250)

To FICA tax payable $221,850

To Account payable $29,000

To Salaries payable $2,032,900

(Being the employee salary expense, withholdings, and salaries payable is recorded)

b. Salaries expense $87,000

To Account payable $87,000

(Being the employer-provided fringe benefits is recorded)

c. Payroll tax expense $179,800

FICA tax expense $221,850

To Unemployment tax payable $401,650

(being the employer payroll taxes is recorded)

An Engel curve:________. A. slopes upward for normal goods and downward for inferior goods.
B. slopes upward for inferior goods and downward for normal goods.
C. slopes downward for both normal and inferior goods.
D. slopes upward for both normal and inferior goods.

Answers

Answer:

A. slopes upward for normal goods and downward for inferior goods.

Explanation:

In the case of Engle curve it plots the relationship between income and demand for a good.

In the case of the normal goods, as the income rises the demand also rises while on the other hand in the case of inferior goods, the income rises the demand false

So it sloped upward for the normal goods and slop downwards for the inferior goods

Final answer:

An Engel curve shows the relationship between the quantity of a good consumed and a consumer's income. It slopes upward for normal goods and downward for inferior goods.

Explanation:

An Engel curve shows the relationship between the quantity of a good consumed and a consumer's income. It helps us understand how the demand for a particular good changes as income levels vary.

The correct answer to the question is A. An Engel curve slopes upward for normal goods and downward for inferior goods. This means that as income increases, the demand for normal goods also increases, while the demand for inferior goods decreases.

For example, if someone's income increases, they may choose to consume more high-quality goods like organic food instead of cheaper alternatives. This would result in an upward-sloping Engel curve for organic food, indicating that it is a normal good.

Learn more about Engel curve here:

brainly.com/question/32824694

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On December 31, 2016, the manager of Jordan Creek Apartments noticed that four tenants had not paid their December rent amounting to $500 each. The manager spoke to each tenant individually and was promised by all 4 that the rent would be paid by January 15, 2017. Assuming the tenants follow through and make their payments by January 15, 2017, Jordan Creek should make the following entry as of December 31, 2016:______. Cash (dr) $2,000
Rental Receivable (cr) $2,000
A. True
B. False

Answers

Answer:

B. False

The business should not make this entry on 31 December.

Explanation:

The accounting principle of prudence states that profits should not be overstated and losses should not be understated. This means that any profit should not be recorded until it is realized while any losses should be recorded as soon as they are anticipated. As the business has not received cash from tenants on 31 December 2016, it should not make any entry debiting cash and crediting the rent receivable.

The business should let the rent receivable balance intact until the rent is received on 15 January and till then record no entry to such as the above.

In December 2016, Learer Company's manager estimated next year's total direct labor cost assuming 50 persons working an average of 2,500 hours each at an average wage rate of $20 per hour. The manager also estimated the following manufacturing overhead costs for 2017 Indirect labor Factory supervision Rent on factory building Factory utilities Factory insurance expired Depreciation-Factory equipment 494, 000 Repairs expense-Factory equipment Factory supplies used Miscellaneous production costs 50,000 Total estimated overhead costs $1,500, 000 $ 333, 200 128,000 154, 000 102,000 82, 000 74,000 82,800 At the end of 2017, records show the company incurred $1,600,000 of actual overhead costs. It completed and sold five jobs with the following direct labor costs: Job 201, $618,000, Job 202, $577,000; Job 203, $312,000; Job 204, $730,000, and Job 205, $328,000. In addition, Job 206 is in process at the end of 2017 and had been charged $31,000 for direct labor. No jobs were in process at the end of 2016. The company's predetermined overhead rate is based on direct labor cost