Question:
Early in 2020, Cullumber Equipment Company sold 500 Rollomatics at $6,300 each. During 2020, Cullumber spent $20,000 servicing the 2-year assurance warranties that accompany the Rollomatic. All applicable transactions are on a cash basis.
a. Prepare 2020 entries for Cullumber.
Assume that Cullumber estimates the total cost of servicing the warranties in the second year will be $34,000.
b. Prepare 2017 entries for Coronado assuming that the warranties are not an integral part of the sale (a service-type warranty).
Assume that of the sales total, $51,000 relates to sales of warranty contracts.
Coronado estimates the total cost of servicing the warranties will be $50,000 for 2 years.
Estimate revenues to be recognized on a straight-line basis.
Answer:
a.
Cash -------------------------------------_-_---------$3,150,000
Sales (to record sales of rollomatics) ----------------------------- $3,150,000
Warranty Expenses ------------------------ $20,000
Cash (Warranty Cost Incurred)------ -_-------------------_-----------. $20,000
Warranty Expenses -----_----- $14,000
Estimated Liabilities under Warranty (to accrue estimated warranty cost) -------- $14,000
b.
Cash ---- -----------_------------------------------- $3,150,000
Sales --------------------_------------------------------------------$3,099,000
Unearned Warranty Revenue ----------------------------- $51,000
(To record the sale of Rollomatics
Warranty Expenses ------------------------ $20,000
Cash (Warranty Cost Incurred)------ -_-------------------_-----------. $20,000
Unearned Warranty Revenue ------------------------ $25,000
Warranty Revenue (To recognise revenue earned)------ -_-------------------_-----------. $25,000
Answer:
Correct answer is 12.11%
Explanation:
expected dividend =$3.2*60%
=$1.92
Hence cost of equity from new common stock=(D1/Current price(1-Floatation cost)+Growth rate
=1.92/(30(1-0.1))+0.05
=(1.92/27)+0.05
which is equal to
=12.11%(Approx).
Answer: 12.11%
Explanation:
GIVEN THE FOLLOWING ;
Earning per Share = $3.20
Expected dividend pay out ratio.(proportion of earning paid out as interest.)
Cost of stock per share = $30
Dividend growth rate = 5%= 0.05
Floatation cost = 10% = 0.1
Cost of equity=(dividend/(Current price(1-Floatation cost)) +Growth rate
Cost of Equity =[ (1. 92÷(30(1 - 0.1)) + 0.05
Cost of equity = [ (1.92 ÷ (30(0.9)) + 0.05
Cost of equity = (1.92 ÷ 27) + 0.05
Cost of equity = 0.07111111 + 0.05 = 0.121111
0.12111 × 100 = 12.11%
b. its primary goal is to reap monopoly profits by replacing competition with cooperation.
c. producing homogenous output is more expensive than producing differentiated output.
d. producing differentiated output is more expensive than producing homogenous output.
e. it has a monopoly, but potential entrants exist in the form of contestable markets.
Answer:
a. it is part of a group of firms that has formally agreed to control the price and the output of a product.
Explanation:
A monopolistic competitive firm ensures that, the price of goods and the output of the products produced by them is controlled. This helps them to dictate the market in which they find themselves in.
A bond is an 'I owe you' note where the lender (the investor) lends capital to the borrower (the issuing entity) in return for a bond and gets paid back the face value plus interest at a predetermined rate. Legacy in this case has issued $570,000 worth of bonds with an 8.5% interest rate for four years, selling them at a rate of $508,050 when the current market rate is 12%. The price of a bond is influenced by current market rates.
The subject of the question pertains to bonds, which are part of the financial market. A bond is an 'I owe you' note that an investor buys in exchange for lending capital to an entity, like a corporation or government. In this scenario, Legacy is issuing bonds of $570,000 with an 8.5% interest rate for four years, that pay on a semiannual basis. These bonds are sold at $508,050 when the market rate is 12%.
When buying a bond, an investor becomes the lender and the issuing entity becomes a borrower who agrees to pay back the face value of the bond at maturity, plus an agreed-upon interest rate. As mentioned above, the bond has a coupon rate, usually semi-annual, and a maturity date when the borrower will pay back its face value and last interest payment. By these parameters of face value, interest rate, and maturity date, a buyer can calculate a bond's present value. This value may not be the same as the bond's face value.
If you consider a market rate now at 12%, you know that you could invest $964 in an alternative investment and receive $1,080 a year from now; or $964(1 + 0.12) = $1080. This means you would not pay more than $964 for the original $1,000 bond. Therefore, the price of a bond is influenced by the current market rate.
#SPJ12
A bond is an "I owe you" note that an investor receives in exchange for money. Legacy issued bonds at a price lower than the face value due to higher market interest rates.
In financial terms, a bond is an "I owe you" note that an investor receives in exchange for money. The bond has a face value, a coupon rate, and a maturity date. Combining these elements and market interest rates, a buyer can compute a bond's present value. Legacy issued $570,000 of 8.5%, four-year bonds at $508,050 when the market rate is 12%. This means that the present value of the bonds is less than the face value because the market rate is higher than the coupon rate.
#SPJ11
Answer:
Explanation:
a) A corporation?
A Corporations are taxable entities. Miller, Inc. will pay tax on its income. Ramona will be taxed on dividends received. Ramona has $36,000 ($180,000 x 20%) of dividend income from Miller. The dividend income will be taxed at 15%.
b) An S corporation?
An S corporations are conduit entities and do not pay tax on their income. The income from the conduit flows through and is taxed to the owners of the S corporation. Ramona will be taxed on 20% of Miller's income. Capital gains and losses of conduit entities must be reported separately, so that the owners can properly treat them in the calculation of their net capital gain or loss for the year. Miller has $700,000 ($3,400,000 - $1,800,000 - $900,000) of operating income and a $250,000 long-term capital gain in the current year. Ramona must include $140,000 ($700,000 x 20%) of ordinary income and $50,000 ($250,000 x 20%) of long-term capital gain on her individual return. The $140,000 of ordinary income is added to Ramona's gross income. The long-term capital gain of $50,000 is netted with other capital gains and losses. Because the income of the conduit is being taxed at the owner level, dividends paid to owners are considered to be returns of capital investment and are not taxed.
Answer: on S corporation taxable income will be affected by 140,000 and on corporation it will be 36000
Taxable income of Ramona
S corporation Corporation
share on profits 140000 0
dividends 36000
Explanation:
Miller Inc
S corporation corporation
sales 3400000 3400000
cost of sales 1800000 1800000
gross profit 1600000 1600000
other income 250000 250000
gain on sale of stock 250000 250000
operating expenses 900000 900000
Net Profit 950000 950000
dividends 0 180000
taxable income of Miller Inc
S corporation Corproration
Net Profit 950000 950000
gain on sale of stock -250000 -250000
Taxable Income 700000 700000
for the S corporation Miller gets a share of 20% on the taxable profits of the S corporation and on the corporation he gets 20% of the total dividends to shareholder. The gain is capital in nature and is not taxable income as per SARS.
Answer:
$9,236.71
Explanation:
The computation of the maturity value of the note is shown below:-
Interest Amount = ($9000 × 8%) × 120 ÷ 365
= $720 × 120 ÷ 365
= $236.71
So, the Maturity Value is
= Face value + Interest amount
= $9,000 + $236.71
= $9,236.71
Therefore for computing the maturity value we simply applied the above formula.
Cost of cleaning up coal ash sites is $30 million today.
If the coal ash is not cleaned up
a. There is a 10% chance the coal ash ponds flood and causes $70 million dollars in damages.
b. There is a 20% chances the coal ash seeps into the ground water causing $100 million in damages.
c. There is a 70% chance the coal ash sites cause no damage to the state of North Carolina.
1. What is the expected benefit of cleaning up the coal ash site (i.e. how much do we expect to avoid in future damages)?
2. What sort of analysis would you undertake to advise the governor? Would you recommend the governor require Duke clean up the coal ash sites? (no need to complete calculation, just write the formula used for decision making)?
Answer:
1) expected benefits of cleaning up coal ash site is $27 million
2) The expected benefits of cleaning the site are less than the costs of cleaning them ($30 million cost > $27 million benefits). But the problem is that the cleaning costs will be covered by Duke Energy today, but in the future, there is a risk that the costs will be covered by the state government. Companies are not eternal and even industry leaders like Kodak, Sears, Toys R Us, Radio Shack, GM, etc., have gone bankrupt. The difference between the costs and the benefits is not that large to risk the state government having to pay for the cleaning costs in the future.
Explanation:
Costs of cleaning coal ash $30 million
Expected benefits form cleaning coal ash: