To calculate the difference in the value of the assets and liabilities of each bank when interest rates rise by 1 percent, we need to determine the new values of the assets and liabilities for both banks.
For Bank 1:
1. Start with the loan: $2.4 million loan with a 12.50 percent coupon and a 12.50 percent yield to maturity.
- The coupon payment is 12.50% * $2.4 million = $300,000 per year.
- The present value of the loan can be calculated using the yield to maturity. Since the yield to maturity is also 12.50%, the present value of the loan remains at $2.4 million.
2. Next, consider the CD: $2.4 million CD with a 10 percent coupon and a 10 percent yield to maturity.
- The coupon payment is 10% * $2.4 million = $240,000 per year.
- The present value of the CD can be calculated using the yield to maturity. With a 1 percent increase in interest rates, the new yield to maturity is 11 percent. Using this new yield, the present value of the CD is calculated to be $2.181 million.
The total value of assets for Bank 1 is the sum of the present values of the loan and CD:
$2.4 million + $2.181 million = $4.581 million.
For Bank 2:
1. Start with the zero-coupon bond: $2,068,193.38 current value and $4,716,923.15 maturity value.
- The bond will mature in 7 years, so we need to calculate the yield to maturity.
- Using the formula to calculate yield to maturity, we find that the yield to maturity is approximately 10.45%.
2. Next, consider the CD: $2,400,000 face value CD with a 7.75 percent coupon and a 10 percent yield to maturity.
- The coupon payment is 7.75% * $2,400,000 = $186,000 per year.
- The present value of the CD can be calculated using the yield to maturity. With a 1 percent increase in interest rates, the new yield to maturity is 11 percent. Using this new yield, the present value of the CD is calculated to be $2.064 million.
The total value of assets for Bank 2 is the sum of the current value of the zero-coupon bond and the present value of the CD:
$2,068,193.38 + $2.064 million = $4.132 million.
To calculate the difference in the value of the assets and liabilities of each bank, we subtract the total value of liabilities from the total value of assets for each bank:
Bank 1: $4.581 million - $2.4 million = $2.181 million
Bank 2: $4.132 million - $2.4 million = $1.732 million
Therefore, the difference in the value of the assets and liabilities of each bank, when interest rates rise by 1 percent, is $2.181 million for Bank 1 and $1.732 million for Bank 2.
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darden company has cash of $35,000, accounts receivable of $45,000, inventory of $23,500, and equipment of $65,000. assuming current liabilities of $31,500, this company's working capital is: multiple choice $13,500. $72,000. $48,500. $102,000.
The working capital of Darden Company is $137,000, calculated by subtracting current liabilities from current assets. None of the given options is correct.
The working capital of Darden Company is $137,000. Here is the explanation:Working capital = Current assets - Current liabilitiesGiven that, Current assets = Cash + Accounts receivable + Inventory + Equipment = $35,000 + $45,000 + $23,500 + $65,000 = $168,500 And,Current liabilities = $31,500Now, Working capital = Current assets - Current liabilities= $168,500 - $31,500= $137,000Therefore, the correct answer is option E, $137,000.Summary: A company's working capital is a financial measure that shows how much cash is available to meet a company's short-term financial obligations. Working capital is determined by subtracting current liabilities from current assets. Given that Darden Company has cash of $35,000, accounts receivable of $45,000, inventory of $23,500, and equipment of $65,000, and current liabilities of $31,500, the working capital is $137,000.For more questions on working capital
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What is the definition of a charitable contribution? Why is it important for the taxpayer making the charitable contribution to determine whether or not the recipient of the contribution is a qualified organization? In detail, what are some of the limitations associated with taxpayers making charitable contributions?
A charitable contribution is the gift of money or property that is made voluntarily and without receiving anything in return.
It is important for the taxpayer to determine whether the recipient of the contribution is a qualified organization to ensure that the contribution is tax-deductible.
If the organization is not qualified, the contribution will not be tax-deductible, and the taxpayer will not receive any tax benefits for their donation. Additionally, some limitations are associated with taxpayers making charitable contributions.
One limitation is that the deduction for charitable contributions is limited to a certain percentage of the taxpayer's adjusted gross income (AGI).
Another limitation is that donations of certain types of property may have different deduction limits. Lastly, taxpayers must also keep accurate records of their charitable contributions to ensure that they can claim the appropriate deduction on their tax return.
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Checkers targets growing pet care market with more standalone pet stores Retailer Checkers plans to open 12 standalone Petshop Science stores by the end of 2021 as it sets its sights on a growing pet market. The Shoprite-owned group has already opened 10 Petshop Science stores in the last seven months, offering food, toys and other pet products at supermarket prices. As part of the new branding, Checkers has also launched what it calls 'the cheapest pet insurance product in South A "We saw a gap in the market when it came to pet care, and following the great customer response to the first Petshop Science, we've been hard at work rolling out more specialist pet shops," said Checkers chief operating officer Willem Hunlun. "Our aim has always been to bring customers everything their four-legged companions could want and need - at supermarket prices." Checkers opened its tenth Petshop Science store in Eden Meander in George on 6 December, with two more store openings planned in the Western Cape and KwaZulu-Natal in mid-December. Petshop Science forms part of a growing push by the Shoprite group to expand beyond its traditional grocery market. This includes the recent opening of the first Checkers Little Me baby store, a smaller format Checkers Foods store, as well as the new MediRite Plus pharmacies. Answer ALL the questions in this section. Question 1 (20 Marks) Discuss possible ways that Checkers can utilise to evaluate and select a supplier. Question 2 (10 Marks) Discuss non-price issues over which a buyer and seller can reach an agreement, and explain why each issue might be important to the buyer or seller.
Checkers, a retailer targeting the pet care market, plans to open more standalone Petshop Science stores. The company aims to evaluate and select suppliers and considers non-price issues important in buyer-seller agreements.
Checkers can utilize several ways to evaluate and select suppliers. One approach is conducting a thorough supplier assessment that includes evaluating their reliability, quality of products, capacity to meet demand, and adherence to ethical and sustainable practices. Checkers can also consider supplier references and past performance, conduct site visits to assess facilities and production processes, and review certifications and compliance with industry standards. Additionally, negotiating favorable terms such as pricing, delivery schedules, and payment terms can contribute to supplier selection.
In buyer-seller agreements, non-price issues can play a significant role. For the buyer, factors like product quality, reliability, consistency, and timely delivery are crucial. They may also consider the supplier's ability to handle volume fluctuations, provide after-sales support, and offer product customization options. On the other hand, sellers may emphasize factors like payment terms, contract length, exclusivity arrangements, and access to market insights or promotional opportunities.
These non-price issues help establish a mutually beneficial relationship, enhance product value, and ensure customer satisfaction. Hence, Checkers can evaluate suppliers through assessments, references, and negotiations, while considering non-price factors such as quality, reliability, delivery, and customization. Non-price issues in buyer-seller agreements contribute to a strong partnership and customer satisfaction.
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You want to buy a security that pays you $2,400 every quarter for 3 years. The first payment occurs 4 years and 2 quarters from today. Assuming a 16.00% APR compounded quarterly, what is the price of this security today (rounded at the nearest $)?
options:
The amount is 23,425.
The amount is 22,524.
The amount is 23,524.
The amount is 11,563.
The correct amount is $22,524. This is obtained by calculating the present value of future cash flows using the formula for the present value of an ordinary annuity.
To calculate the price of the security today, we need to find the present value of the future cash flows. Since the cash flows are received quarterly and the APR is compounded quarterly, we can use the formula for the present value of an ordinary annuity.
[tex]PV = C * [(1 - (1 + r)^(-n)) / r][/tex]
Where:
PV = Present Value
C = Cash flow per period
r = Interest rate per period
n = Number of periods
In this case, C = $2,400, r = 16% (or 0.16 quarterly), and n = 12 (3 years * 4 quarters per year). Plugging these values into the formula, we get:
PV = $2,400 * [(1 - (1 + 0.16)^(-12)) / 0.16] ≈ $22,524
Therefore, the price of the security today would be approximately $22,524.
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1. Explain what economic evaluation is involved in this initiative or policy.
2. Describe how the initiative is important to the stakeholder and how it fits into their overall mission.
1. Economic evaluation refers to the process of assessing the costs and benefits associated with a particular initiative or policy.
It involves analyzing the financial implications and potential outcomes to determine the economic feasibility and impact. This evaluation typically includes assessing the direct and indirect costs, such as investments, operational expenses, and potential savings. Additionally, it considers the potential benefits, such as increased revenue, improved efficiency, or social welfare improvements. The main answer is that economic evaluation helps stakeholders make informed decisions by providing a comprehensive understanding of the financial implications and potential outcomes of the initiative or policy.
Economic evaluation plays a crucial role in informing decision-making regarding initiatives or policies. By analyzing the costs and benefits, stakeholders can assess the financial viability and potential impacts of the initiative. It helps identify any potential risks or drawbacks and allows for better resource allocation and prioritization. The economic evaluation also aids in comparing different options or alternatives and choosing the most efficient and effective approach.
2. The importance of the initiative to stakeholders depends on their specific objectives and overall mission. Stakeholders may include government agencies, non-profit organizations, or private entities. For example, if the stakeholder is a government agency focused on improving public health, the initiative may be important in reducing healthcare costs, improving access to healthcare services, or addressing health disparities. It may align with their mission to promote the well-being and welfare of the population.
Alternatively, if the stakeholder is a business organization, the initiative may be important in increasing profitability, expanding market share, or enhancing corporate social responsibility. It may align with their mission to generate value for shareholders while considering social and environmental impacts.
Overall, the importance of the initiative to stakeholders lies in its ability to contribute to their specific goals, objectives, or mission. By supporting their overall mission, the initiative becomes an integral part of their strategy and helps them fulfill their purpose or vision.
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How far does the price of Telecom stock have to fall for you to get a margin call if the maintenance margin is 30%?
The price of Telecom stock has to fall $35.71 or lower to get a margin call if the maintenance margin is 30%
Current market price = $50 per share
Amount to be invested = $5000
Additional amount borrowed = $5000
Interest Rate = 8%
a.
200 shares of Telecom are bought at the rate of $50 for $10,000.
Increase in value = By 10%, or $1,000.
Calculating interest paid -
= 0.08 x 5,000
= $400
Calculating the rate of return -
= Price increase – Interest paid/borrowed investment
= $1000 - $400 / $5000
= 0.12 or 12%
b.
The value of the 200 shares is = 200P.
Therefore equity will be = 200P – $5,000.
Calculating the margin call -
= 200P - $5000 / 200P
= 0.30
when P = $35.71 or lower
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Complete Question:
You are bullish on Telecom stock. The current market price is $50 per share, and you have $5,000 of your own to invest. You borrow an additional $5,000 from your broker at an interest rate of 8% per year and invest $10,000 in the stock.
a. What will be your rate of return if the price of Telecom stock goes up by 10% during the next year? (Ignore the expected dividend.)
b. How far does the price of Telecom stock have to fall for you to get a margin call if the maintenance margin is 30%? Assume the price fall happens immediately.
complete analysis and information of any big family owned bussines
in pakistan
One of the most famous family-owned businesses in Pakistan is the Hashoo Group. Hashoo Group is a Pakistani conglomerate with interests in the real estate, hospitality, and energy sectors.
It was founded by Sadruddin Hashwani in 1960, and today, it is one of the largest family-owned businesses in the country.
Hashoo Group’s real estate division, which is known as the Pearl Continental Hotels, is one of the largest hotel chains in Pakistan. The company currently owns and operates six five-star hotels across the country, and it is planning to open more hotels in the future.
The hospitality division of the Hashoo Group is also involved in the food and beverage industry. It owns and operates a number of restaurants and cafes in Pakistan, including the Coffee Bean & Tea Leaf and the Marriot Café.
The energy division of the Hashoo Group is involved in the exploration and production of oil and gas. The company owns and operates several oil and gas fields in Pakistan. It is also involved in the construction of pipelines and other infrastructure related to the energy sector.
The Hashoo Group is a great example of a family-owned business that has been able to diversify its operations and become a major player in multiple industries. Despite being a family-owned business, the company has been able to maintain a high level of professionalism and has become one of the most respected business groups in Pakistan.
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Banks never know for certain a borrower’s intent or capability in making loan repayment, hence they employ alternative ways to manage credit risk. Discuss some common practices undertaken by banks as part of their credit risk management strategy.
Banks employ various practices as part of their credit risk management strategy, including thorough credit assessments, collateral requirements, diversification of loan portfolios, loan covenants, and ongoing monitoring of borrower financials.
To manage credit risk, banks implement several practices:
Thorough credit assessments: Banks conduct detailed evaluations of borrower creditworthiness, considering factors like income, credit history, and debt-to-income ratio.
Collateral requirements: Banks may require borrowers to provide collateral, such as property or assets, as security for the loan. This mitigates risk by providing an additional source of repayment. Diversification of loan portfolios: Banks diversify their loan portfolios across different industries, geographies, and borrower types to reduce concentration risk.
Loan covenants: Banks establish loan covenants, which are conditions borrowers must meet, such as maintaining a certain debt-to-equity ratio or cash flow coverage, to ensure ongoing loan performance. Ongoing monitoring: Banks regularly monitor borrower financials, including periodic reviews of financial statements and credit reports, to identify early warning signs of potential default.
Banks employ various practices, such as thorough credit assessments, collateral requirements, loan diversification, loan covenants, and ongoing monitoring, to effectively manage credit risk. By implementing these strategies, banks aim to mitigate the uncertainties surrounding borrower intent and capability in loan repayment, safeguarding their financial stability and minimizing potential losses.
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To calculate the value of the bonds, we need to determine the present value of the bond's cash flows. The annual coupons of $50 will be received for 6 years, and the face value of $1000 will be received at the end of the 6th year. The required rate of return on the bondholders' part is 5%.
Using the formula for the present value of a bond's cash flows, we can calculate the value of the bonds as follows:
PV = (C / r) * [1 - (1 / (1 + r)^n)] + (F / (1 + r)^n)
Where:
PV = Present value of the bond
C = Annual coupon payment
r = Required rate of return
n = Number of years
F = Face value of the bond
Plugging in the values, we have:
PV = (50 / 0.05) * [1 - (1 / (1 + 0.05)^6)] + (1000 / (1 + 0.05)^6)
Calculating this expression will give us the value of the bonds.
(b) If the maturity of the bonds is 7 years instead of 6, it will affect the calculation of the present value. We need to adjust the value of n in the formula to reflect the new maturity period. By increasing the maturity to 7 years, the bonds will have an additional year of cash flows, which will increase their present value.
(c) If the required rate of return on the part of the bondholders is 6%, it will also affect the calculation of the present value. We need to adjust the value of r in the formula to reflect the new required rate of return. A higher required rate of return will decrease the present value of the bonds.
(d) Similarly, if the required rate of return on the part of the bondholders is 4%, it will affect the calculation of the present value. We need to adjust the value of r in the formula to reflect the new required rate of return. A lower required rate of return will increase the present value of the bonds.
The value of the bond will be PV = $1171.42, using the given values in the formula for present value of the bond cash flows, and adjusting for maturity and required rate of return changes.
According to the question, we are to calculate the value of the bond which is given as:
Annual coupon payment (C) = $50
Required rate of return (r) = 5%
Number of years (n) = 6
Face value of the bond (F) = $1000
The formula for the present value of a bond's cash flows is given as: PV = (C / r) * [1 - (1 / (1 + r)^n)] + (F / (1 + r)^n) Substituting the given values in the formula, we get: PV = (50 / 0.05) * [1 - (1 / (1 + 0.05)^6)] + (1000 / (1 + 0.05)^6)
PV = $1,171.42
When the maturity of the bonds is 7 years instead of 6, we will adjust the value of n in the formula to reflect the new maturity period. An increase in maturity to 7 years will mean that the bonds will have an additional year of cash flows, which will increase their present value.When the required rate of return on the part of the bondholders is 6%, we adjust the value of r in the formula to reflect the new required rate of return. An increase in the required rate of return will decrease the present value of the bonds.
When the required rate of return on the part of the bondholders is 4%, we adjust the value of r in the formula to reflect the new required rate of return. A decrease in the required rate of return will increase the present value of the bonds.
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which of these correctly identifies the five key skills listed in the employability skills matrix that hiring managers believe are most​ important?
Step 1: Adaptability and Flexibility, Communication, Problem Solving, Teamwork, and Time Management are the five key skills that hiring managers believe are most important.
When it comes to employability skills, hiring managers prioritize certain qualities and abilities that they consider essential for success in the workplace. Based on the information provided, the five key skills that hiring managers believe are most important are adaptability and flexibility, communication, problem solving, teamwork, and time management.
Adaptability and flexibility are crucial skills as they demonstrate the ability to handle change, adjust to new situations, and effectively navigate challenges in the workplace. Effective communication is vital for conveying ideas, collaborating with colleagues, and building strong relationships with clients and stakeholders. Problem-solving skills are highly valued as they reflect the ability to analyze issues, think critically, and develop innovative solutions.
Teamwork is another key skill that hiring managers value, as it involves collaborating effectively with others, sharing responsibilities, and achieving common goals. Lastly, time management is essential for prioritizing tasks, meeting deadlines, and efficiently utilizing resources.
These five skills are highly sought after by hiring managers because they contribute to an individual's overall effectiveness and productivity in the workplace. By possessing these skills, individuals can demonstrate their ability to adapt, communicate, problem-solve, collaborate, and manage their time effectively.
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City governments have little responsibility for balancing or managing economic growth to match the needs of their communities.
Group of answer choices
True
False
False. City governments have a significant responsibility for balancing and managing economic growth to meet the needs of their communities.
Contrary to the statement, city governments have a crucial role in managing economic growth in their communities. They are responsible for creating and implementing policies and strategies that promote balanced economic development. City governments often collaborate with local businesses, community organizations, and residents to assess needs, identify opportunities, and address challenges. They allocate resources for infrastructure development, attract investments, support job creation, and foster entrepreneurship. Additionally, city governments engage in urban planning to ensure sustainable growth, manage zoning regulations, and prioritize community development initiatives. Through these efforts, city governments aim to create inclusive and resilient local economies that provide opportunities for all residents and enhance the overall well-being of the community. Thus, city governments have a significant responsibility in balancing and managing economic growth to meet the diverse needs and aspirations of their communities.
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Define and discuss the important provisions of the typical oil and gas lease.
Previous question
The important provisions of a typical oil and gas lease include the granting clause, royalty clause, habendum clause, and the warranty clause.
These provisions establish the rights and obligations of the parties involved and outline the payment terms, lease duration, and the lessor's guarantee of title and ownership. the granting clause is the essential provision that gives the lessee the right to explore and extract oil and gas from the lessor's property. The royalty clause establishes the percentage of revenue that the lessor will receive from the sale of oil and gas. The habendum clause determines the lease duration, specifying the primary term and any possible extensions. The warranty clause assures the lessor that they possess the rightful ownership of the property and have the authority to grant the lease.
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What is the difference between audit strategy: substantive and reliance approaches?
The substantive approach focuses on extensive testing to detect material misstatements, while the reliance approach relies on internal controls to reduce the risk of material misstatements.
The difference between audit strategy: substantive and reliance approaches lies in the focus and level of assurance provided.
The substantive approach involves conducting extensive testing of transactions, balances, and disclosures.
The goal is to obtain sufficient evidence to detect material misstatements in the financial statements.
This approach is typically used when the auditor believes there is a high risk of material misstatements or when there are significant complexities in the organization's transactions or accounting practices.
On the other hand, the reliance approach relies on the work of internal controls.
The auditor assesses the design and effectiveness of the organization's internal controls and determines whether they can be relied upon to reduce the risk of material misstatements.
If the controls are deemed effective, the auditor may rely on them and reduce the extent of substantive testing.
This approach is typically used when the auditor has confidence in the internal controls and believes they are strong enough to provide reasonable assurance.
In summary, the substantive approach focuses on extensive testing to detect material misstatements, while the reliance approach relies on internal controls to reduce the risk of material misstatements.
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Explain three problems bitcoins have when compared to money. 1.5 Marks
Use appropriate terminologies to explain why and how the reserve bank of Australia is raising the cash rate? 1.5 Marks
Explain how increasing the cash rate can impact aggregate expenditure and affect economic growth.
Regarding the Reserve Bank of Australia (RBA) raising the cash rate, the RBA can increase the cash rate by implementing monetary policy measures such as selling government securities or increasing the interest rate it charges banks for overnight loans.
1. Limited Acceptance: Bitcoins are not widely accepted as a form of payment. Many businesses do not accept bitcoins, which limits their usefulness as a medium of exchange.
2. Volatility: The value of bitcoins is highly volatile. Their price can fluctuate dramatically within short periods of time, making them less reliable for transactions and store of value.
3. Lack of Regulation: Unlike traditional money, bitcoins are not regulated by any central authority. This lack of regulation raises concerns about security, fraud, and money laundering.
Increasing the cash rate can impact aggregate expenditure and economic growth in the following ways:
1. Reduced Consumer Spending: Higher interest rates make borrowing more expensive, which discourages consumers from taking out loans for big-ticket purchases like houses or cars.
2. Decreased Business Investment: Higher interest rates increase the cost of borrowing for businesses, making it less attractive to invest in new projects or expand operations.
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Consider two countries that produce beer and whiskey. If completely specializing, country A can produce either 500 kegs of beer or 1500 bottles of whiskey at maximum, while country B can produce either 1200 kegs of beer or 800 bottles of whiskey at maximum. Currently there are no trade between the two countries. Country A consumes 300 kegs of beer and 600 bottles of whiskey. Country B consumes 600 kegs of beer and 400 bottles of whiskey. Suppose that trade occurs. Each country completely specializes and 500 kegs of beer are traded for 500 bottles of whiskey. What is the international price of beer? None of the other answers 3 bottles of whiskey =1 keg of beer 1 bottle of whiskey =3 kegs of beer 1 bottle of whiskey =1 keg of beer 2/3 bottle of whiskey =1 keg of beer
The international price of beer is 1 bottle of whiskey = 1 keg of beer. In other words, 1 bottle of whiskey is exchanged for 1 keg of beer in the trade between the two countries.
To determine the international price of beer, we can compare the opportunity costs of producing beer in each country before and after trade occurs.
Before trade:
Country A can produce 500 kegs of beer or 1500 bottles of whiskey.
Country B can produce 1200 kegs of beer or 800 bottles of whiskey.
The opportunity cost of producing beer in Country A is 3 bottles of whiskey per keg (1500 bottles of whiskey / 500 kegs of beer).
The opportunity cost of producing beer in Country B is 2/3 bottle of whiskey per keg (800 bottles of whiskey / 1200 kegs of beer).
Since both countries have different opportunity costs for producing beer, there is a potential for mutually beneficial trade.
After trade:
Country A specializes in producing whiskey, so it will produce 600 bottles of whiskey (its maximum output).
Country B specializes in producing beer, so it will produce 1200 kegs of beer (its maximum output).
The countries agree to trade 500 kegs of beer for 500 bottles of whiskey.
The international price of beer can be calculated based on the terms of trade:
500 bottles of whiskey = 500 kegs of beer
Therefore, the international price of beer is 1 bottle of whiskey = 1 keg of beer. In other words, 1 bottle of whiskey is exchanged for 1 keg of beer in the trade between the two countries.
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Christopher's Custom Cabinet Company uses a job order cost system with overhead applied as a percentage of direct labor costs. Inventory balances at the beginning of 2018 follow: The following transactions occurred during January: (a) Purchased materials on account for $27,200. (b) Issued materials to production totaling $21,400,90 percent of which was traced to specific jobs and the remainder of which was treated as indirect materials. (c) Payroll costs totaling $17,100 were recorded as follows: $11,600 for assembly workers 1,900 for factory supervision 1,900 for administrative personnel 1,700 for sales commissions (d) Recorded depreciation: $5,600 for factory machines, $800 for the copier used in the administrative office. (e) Recorded $1,800 of expired insurance. Forty percent was insurance on the manufacturing facility, with the remainder classified as an administrative expense. (i) Paid $5,200 in other factory costs in cash. (g) Applied manufacturing overhead at a rate of 200 percent of direct labor cost. (h) Completed all jobs but one; the job cost sheet for the uncompleted job shows $2,400 for direct materials, $2,100 for direct labor. and $4,200 for applied overhead. (i) Sold jobs costing $50,300. The revenue earned on these jobs was $65,390. requirea: 1. Set up T-accounts, record the beginning balances, post the January transactions, and compute the final balance for the following accounts: a. Raw Materials Inventory. b. Work in Process Inventory. c. Finished Goods inventory. d. Cost of Goods Sold. e. Manufacturing Overhead. f. Selling, General, and Administrative Expenses. 9. Sales Revenue: 2. Determine how much gross profit the company would report during the month of January before any adjustment is made for the overhead balance. 3. Determine the amount of over-or underapplied overhead. 4. Compute adjusted gross profit assuming that any over-or underapplied overhead balance is adjusted directly to Cost of Goods Sold. Q Answer is not complete. Complete this question by entering your answers in the tabs below. Set up T-accounts, record the beginning balances, post the January transactions, and compute the final balance for the following accounts: (post all amounts separately. Do not combine/add any dollar amounts when posting to the T-accounts.) a. Raw Matenals Inventory. b. Work in Process inventory, c. Finished Goods inventory. d. Cost of Goods Sold. e. Manufacturing Overhead. f. Selling, General, and Administrative Expenses. 9. Sales Revenue. Determine how much gross profit the company would report during the month of January before any adjustm the overhead balance. Complete this question by entering your answers in the tabs below. Determine the amount of over-or underapplied overhead. Compute adjusted gross profit assuming that any over-or underapplied overhead balance is adjustec Goods Sold.
The gross profit is: $65,390 - $50,300 = $15,090 and the actual overhead costs are $4,200 + $5,200 = $9,400 and the adjusted gross profit is: $15,090 - $5,200 = $9,890.
1. Set up T-accounts, record the beginning balances, post the January transactions, and compute the final balance for the following accounts:
a. Raw Materials Inventory: The beginning balance is $150. We purchased materials on account for $27,200. We issued materials to production totaling $21,400. So the final balance will be: $150 + $27,200 - $21,400 = $6,950.
b. Work in Process Inventory: There is no beginning balance mentioned. We traced 90% of the issued materials to specific jobs. So the final balance will be 90% of $21,400 = $19,260.
c. Finished Goods Inventory: There is no beginning balance mentioned. We completed all jobs but one. So the final balance will be the cost of the completed jobs, which is $50,300.
d. Cost of Goods Sold: There is no beginning balance mentioned. We sold jobs costing $50,300. So the final balance will be $50,300.
e. Manufacturing Overhead: There is no beginning balance mentioned. We applied manufacturing overhead at a rate of 200% of direct labor cost. The direct labor cost is $2,100. So the final balance will be 200% of $2,100 = $4,200.
f. Selling, General, and Administrative Expenses: There is no beginning balance mentioned. We recorded payroll costs, depreciation, and expired insurance. So the final balance will be the sum of those expenses, which is $17,100 + $5,600 + $800 + $1,800 = $25,300.
g. Sales Revenue: There is no beginning balance mentioned. We sold jobs costing $50,300 and earned $65,390 in revenue. So the final balance will be $65,390.
2. To determine the gross profit, we need the Cost of Goods Sold and Sales Revenue. The Cost of Goods Sold is $50,300 and the Sales Revenue is $65,390.
Therefore, the gross profit is: $65,390 - $50,300 = $15,090.
3. To determine the amount of over or underapplied overhead, we need to compare the applied overhead with the actual overhead costs.
The applied overhead is $4,200 and the other factory costs paid in cash were $5,200.
Therefore, the actual overhead costs are $4,200 + $5,200 = $9,400.
Since the applied overhead is less than the actual overhead costs, there is an underapplied overhead of $9,400 - $4,200 = $5,200.
4. To compute the adjusted gross profit, we need to adjust the Cost of Goods Sold for the underapplied overhead balance. The underapplied overhead balance is $5,200.
Therefore, the adjusted gross profit is: $15,090 - $5,200 = $9,890.
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question 10 a business ran a consideration campaign, where their cost per result was $0.50. considering their previous campaign returned a cost per result of $0.75, how did they do? 1 point
In the consideration campaign, the business achieved a lower cost per result of $0.50 compared to the previous campaign's $0.75. This indicates an improvement in their campaign performance, as they were able to achieve their desired results at a lower cost.
A lower cost per result suggests that the business was able to reach a larger audience or generate more engagement with their target audience for the same amount of money spent.
This could be attributed to factors such as better targeting, optimization of ad placements, or more effective ad creative.
Overall, the business performed better in terms of cost efficiency in the consideration campaign compared to the previous one.
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Edward Jones is a qualified surviving spouse who manage a car rental business. He, has $155,000 of salary, four personal and dependency exemptions and itemizes deductions. He must use which form to report his taxable income? Select one: a. Form 1040 b. Form 1040ES c. Form 1040A d. Form 1040EZ
The answer to the question is: A) Form 1040. Edward Jones, a qualified surviving spouse who manages a car rental business, has a taxable income of $155,000, four personal and dependency exemptions, and itemizes deductions. He must use Form 1040 to report his taxable income.
What is a Form 1040?The answer to the question is A) Form 1040. Form 1040 is a U.S. individual income tax return form that taxpayers use to file their annual income tax returns with the Internal Revenue Service (IRS).
The form 1040 is used to report your taxable income and calculate your tax bill. You must file this form if you earn a minimum amount of income or if you are self-employed. It is the most comprehensive and longest form. It can be used to claim a variety of tax credits, deductions, and exemptions.
Form 1040 is the long form that is used to report taxable income. It is also the most complex and comprehensive form. Edward Jones must use Form 1040 to report his taxable income. This form is used to report taxable income and to calculate the tax liability for the year.
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Apply the seven domain framework to each of the four opportunities. Develop a recommendation of the best opportunity for utilizing each of the framework domains (60\% of this grade). Also, explain using the seven domains why each of the other three opportunities were not selected (40\% of this grade). Min 1 page, Max 3 pages. Double spaced. 12 Font, Times New Roman. 1-inch margins.
The seven domain framework is a strategic tool used to analyze opportunities or initiatives from different perspectives.
Each domain represents a specific aspect of the opportunity, and evaluating the opportunity across these domains provides a comprehensive understanding of its potential and implications.
The seven domains are as follows:
1. Market Domain: This domain focuses on the target market for the opportunity. It examines the size, growth potential, competition, customer needs, and trends in the market.
Evaluating the opportunity in this domain helps determine its market fit and potential demand.
2. Financial Domain: The financial domain assesses the financial viability and potential returns of the opportunity. It involves analyzing costs, revenue projections, profitability, and potential risks or investments required.
3. Technology Domain: The technology domain evaluates the technological aspects of the opportunity. It examines the existing or required technology infrastructure, capabilities, innovation potential, and competitive advantage derived from technology.
4. Organizational Domain: The organizational domain focuses on the internal capabilities and resources required to pursue the opportunity.
It involves analyzing the skills, expertise, human resources, organizational structure, and culture necessary to execute the opportunity effectively. This domain helps evaluate the alignment and readiness of the organization to pursue the opportunity.
5. Risk Domain: The risk domain assesses the potential risks and uncertainties associated with the opportunity. It involves identifying and analyzing external and internal risks, such as market risks, regulatory risks, operational risks, and financial risks.
6. Social Domain: The social domain considers the social impact and sustainability of the opportunity. It involves evaluating the potential effects on stakeholders, communities, the environment, and social responsibility.
7. Time Domain: The time domain focuses on the timeline and time-related factors associated with the opportunity.
It involves analyzing the time required for implementation, market-entry, return on investment, and potential timing risks or advantages. This domain helps evaluate the opportunity's timeliness and alignment with organizational goals and objectives.
When applying the seven domain framework to evaluate opportunities, it is essential to assess each domain independently and then integrate the findings to form an overall recommendation.
By analyzing the opportunity across these domains, strengths, weaknesses, risks, and potential benefits can be identified and considered in the decision-making process.
For each opportunity, the framework can be used to identify the best opportunity by evaluating its strengths and potential across the seven domains.
The other three opportunities can be explained using the framework by highlighting the limitations or weaknesses identified in specific domains that led to their non-selection.
In conclusion, the seven domain framework provides a structured approach to evaluate opportunities holistically, considering various perspectives and factors.
Applying this framework allows for a comprehensive analysis of opportunities and aids in making informed decisions based on a thorough understanding of their potential and implications.
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Where are the raw materials for your product sourced? In other words, how do they arrive at the manufacturing side of the supply chain? For instance, if the product is sourced overseas, how does the product arrive at warehouse staging or retail locations?
How is your product transported? For example, as mentioned in the textbook reading, products can be shipped on the road or taken somewhere by plane, train, or ship. Explain your answers.
Product is wet wipes
The raw materials for wet wipes are sourced from various suppliers and manufacturers, and they are transported to the manufacturing side using a combination of road, sea, and air transportation methods.
The production of wet wipes requires different raw materials such as nonwoven fabric, cleansing solution, packaging materials, and additives. These raw materials are typically sourced from specialized suppliers and manufacturers. The sourcing process involves identifying reliable suppliers, negotiating contracts, and coordinating orders.
Once the raw materials are ready for transport, the logistics process begins. If the suppliers are located overseas, the raw materials may be shipped via sea freight in containers. This method allows for large quantities of materials to be transported efficiently. Upon arrival at the destination port, the materials are then transported to the manufacturing facilities using road transport.
For faster delivery or if the suppliers are located closer, air freight may be used. Air transportation is quicker but generally more expensive compared to sea freight. This method is commonly used when there is a need for urgent delivery or for sourcing materials from distant locations. In some cases, certain raw materials may be sourced locally, reducing the need for international transportation. This depends on the availability and quality of the materials in the region where the manufacturing facilities are located.
In conclusion, the transportation of raw materials for wet wipes involves a combination of road, sea, and air transport, depending on the location of the suppliers and the manufacturing facilities. The logistics and supply chain management ensure that the raw materials are efficiently transported to the manufacturing side to meet production demands.
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Cross Price Elasticity*
You own a dog-walking business and you have paid a marketing firm to estimate the demand for your services. They have produced this demand function:
QDemanded = 82 - 3*P + .5*M + 3*PR where
P is the price of your dog-walking, M is income in your market and it is $50,000 (but just enters as "50") and PR is the price your competitor charges for their dog-walking service which is $20. You are currently charging a price of $30 for your service. Determine the quantity demanded and then use that to identify the Cross-Price Elasticity of Demand for your dog-walking service. NOW, having done that, use that Cross-Price elasticity to answer this question: What will be the percent change in the quantity demanded of your service if your competitor increases her prices by 10%.
Multiple Choice
The quantity demanded of your service will increase 12.5%
The quantity demanded of your service will increase 9.4%
The quantity demanded of your service will increase 7.8%
The quantity demanded of your service will actually decrease by 6.4%
The quantity demanded for your service will increase by 7.8%. Thus, option C is correct.
The cross elasticity of demand, a concept in economics, measures how responsively customers buy more of one commodity when the price of another one rises. Divide the percentage change in the quantity demanded of one item by the percentage change in its price to arrive at this figure, also known as cross-price elasticity of demand.
The cross elasticity of demand is a measure of how responsively consumers buy more of one product when the cost of another one rises or falls. The cross elasticity of demand for alternative products is always positive since the demand for one commodity increases as the price for the substitute good increases.
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Rocky Mountain Corp. currently has an issued debenture outstanding with Abbra Bank. The note has a principal of $2 million, was issued at face value, and interest is payable at 7%. The term of the debenture was 10 years, and it was issued on December 31, 2016. The current market rate for this debenture is 9%. Rocky Mountain has been experiencing financial difficulties and has asked Abbra Bank to restructure the note. Both Rocky Mountain and Abbra Bank prepare financial statements in accordance with IFRS. It is currently December 31, 2023.
Instructions
For each of the following independent situations related to the above scenario, prepare the journal entries that Rocky Mountain and Abbra Bank would make for the restructuring that is described. Use (1) factor tables or (2) Excel function PV to calculate the amounts for the journal entries and round amounts to the nearest dollar.
(a)Abbra Bank has agreed to accept common shares with a market value of $1.5 million in exchange for relinquishing this note. Assume that the bank had previously recognized a loss on impairment.
(b)Abbra Bank has agreed to accept a building in exchange for relinquishing this debenture. The building has a carrying amount of $500,000 (original cost was $1.9 million) and a fair value of $1.5 million. Assume that the bank had already recognized a loss on impairment.
(c)Abbra Bank agrees to modify the note by allowing Rocky Mountain not to pay the interest on the note for the remaining period. (Hint: Refer to Chapter 3 for tips on calculating and use the time value of money tables.) Assume that the bank had not previously recognized any loss on impairment.
(d)Abbra Bank agrees to reduce the principal to $1.7 million and require interest only in the third year at 4%, waiving the first two years’ worth of interest. (Hint: Refer to Chapter 3 for tips on calculating and use the time value of money tables.) Assume that the bank had not previously recognized any loss on impairment.
These journal entries reflect the restructuring arrangements and the corresponding gain or loss recognized by Rocky Mountain Corp. and Abbra Bank.
(a) In this scenario, Abbra Bank agrees to accept common shares with a market value of 1.5 million in exchange for relinquishing the note. As a result, Rocky Mountain Corp. needs to record the following journal entries:
1. Debit: Debenture payable (2 million)
Credit: Common shares (1.5 million)
Credit: Gain on debt restructuring (0.5 million)
(b) Here, Abbra Bank agrees to accept a building in exchange for relinquishing the debenture. The building has a carrying amount of 500,000 and a fair value of 1.5 million. Rocky Mountain Corp. needs to record the following journal entries:
1. Debit: Debenture payable (2 million)
Credit: Building (1.5 million)
Credit: Gain on debt restructuring (0.5 million)
(c) In this scenario, Abbra Bank agrees to modify the note by allowing Rocky Mountain not to pay the interest for the remaining period. To calculate the interest to be forgiven, we need to use the time value of money tables. Assuming an interest rate of 7% and 5 years remaining, the present value of the interest is approximately 623,312. Rocky Mountain Corp. needs to record the following journal entries:
1. Debit: Debenture payable (623,312)
Credit: Gain on debt restructuring (623,312)
(d) Here, Abbra Bank agrees to reduce the principal to 1.7 million and require interest only in the third year at 4%, waiving the first two years' worth of interest. Using the time value of money tables, the present value of the interest to be paid in the third year is approximately 100,187. Rocky Mountain Corp. needs to record the following journal entries:
1. Debit: Debenture payable (300,187)
Credit: Gain on debt restructuring (300,187)
2. Debit: Debenture interest expense (100,187)
Credit: Debenture interest payable (100,187)
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In a survey of 500 large companies, those with the largest percentage of female executives performed better than those with the smallest percentage. experienced less conflict than those with the smallest percentage. experienced more employment litigation than those with the smallest percentage. recorded lower average stock prices than those with the smallest percentage.
The survey conducted on 500 large companies found a correlation between the percentage of female executives and various performance indicators. The companies with the largest percentage of female executives performed better, experienced less conflict, and faced more employment litigation compared to those with the smallest percentage. Additionally, the companies with the largest percentage of female executives recorded lower average stock prices than those with the smallest percentage.
1. Performance: The companies with the largest percentage of female executives demonstrated better overall performance compared to those with the smallest percentage. This could be attributed to diverse perspectives and skill sets brought by female executives, which contribute to improved decision-making and innovation within the organization.
2. Conflict: Interestingly, the companies with the largest percentage of female executives experienced less conflict within their organizational structures compared to those with the smallest percentage. This could be due to various factors, including improved communication, collaboration, and conflict resolution skills among the diverse leadership team.
3. Employment Litigation: Contrary to expectations, the companies with the largest percentage of female executives faced more employment litigation compared to those with the smallest percentage. This finding might suggest that as female representation increases at executive levels, issues related to gender equality, discrimination, and bias might receive more attention, leading to an increase in legal challenges.
4. Stock Prices: Surprisingly, the companies with the largest percentage of female executives recorded lower average stock prices compared to those with the smallest percentage. It's important to note that stock prices are influenced by numerous factors, including market conditions, industry performance, and company-specific circumstances. The correlation observed in the survey may not necessarily imply a direct causal relationship between female executive representation and stock prices.
It is crucial to interpret these survey results with caution, as correlation does not always imply causation. Other variables, such as industry, company size, and overall corporate culture, may also influence these outcomes. Nevertheless, the survey highlights the potential benefits of gender diversity in executive leadership positions and the importance of further research to understand the complex dynamics involved.
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Suppose option k tas a higher yariance than opeian 8. What of she following statentents is in general, trae? Selected Answe: Arisk averse person prefers option ह to opsion A Anwere: Ailik nound person wi enderent betweon colons A and B
Suppose option K has a higher variance than option 8. The following statement that is generally true is that: An Alik nound person will render indifferent between option A and option B.A risk-averse individual is a person who is cautious about taking chances with investments. These people prefer to invest in stocks, bonds, and other financial instruments that are less risky and provide consistent returns over time. Risk-averse people tend to be conservative when it comes to investing their money, and they often avoid stocks and other high-risk investments.
An Alik nound person is a person who has no preference for any of the options. If option K has a higher variance than option 8, it means that option K is a more uncertain investment than option 8. An Alik nound person will be indifferent to both options A and B because they do not have a preference for either of them.
Thus, the statement that is generally true in this case is that an Alik nound person will render indifferent between option A and option B.Therefore, an Alik nound person would be indifferent between the two options because they do not have any preference for either of them.
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A major Australian insurance company has recently hired a consulting firm to investigate their poor competitiveness in the market. The consulting firm has found a challenge: the priorities and high-level strategies of the CEO and the Board are either not well communicated with the rest of organisation or are ignored by middle level management. The consulting firm has concluded that this challenge has to an increase in what?
Miss-alignment between business strategies and IS strategies
Competition in offering new insurance products
Disrupting the market, and innovative business strategies
Threat of substitute insurance products
The consulting firm has concluded that this challenge has led to a misalignment between business strategies and IS strategies.
The misalignment between business strategies and IS (Information Systems) strategies occurs when the CEO and Board's priorities and high-level strategies are not effectively communicated or ignored by middle-level management. This lack of alignment can result in several negative outcomes for the insurance company, such as:
1. Inefficient use of resources: Without clear communication and understanding of the organization's strategic goals, middle-level management may allocate resources to IT projects and initiatives that do not align with the overall business strategy. This can lead to wasted investments and inefficiencies in the utilization of resources.
2. Ineffective decision-making: When there is a disconnect between business strategies and IS strategies, decision-making becomes fragmented and lacks a holistic view of the organization's objectives. This can result in poor decision-making in terms of technology investments, system implementations, and digital transformation initiatives.
3. Limited innovation and competitiveness: A lack of alignment between business and IS strategies can hinder the organization's ability to leverage technology for innovation and maintain competitiveness in the market. Without a clear understanding of the strategic direction, the company may struggle to identify and seize opportunities for digital transformation, customer engagement, and operational efficiency.
By identifying and addressing the misalignment between business strategies and IS strategies, the insurance company can better align their technology investments and initiatives with the overall organizational goals, leading to improved competitiveness, innovation, and strategic value.
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A manufacturer sells belts for $12 per unit. the fixed costs are $1500 per month, and the variable cost per unit is $7. (a) write the equations of the revenue r(x) and cost c(x) functions.
The revenue function is given by r(x) = 12x, and the cost function is c(x) = 7x + 1500.
What is the equation for the revenue function? What is the equation for the cost function?The revenue function is a mathematical representation of the income generated from selling a certain number of units. In this case, the manufacturer sells belts for $12 per unit, so the revenue generated by selling x units can be calculated by multiplying the selling price ($12) by the number of units sold (x). Thus, the equation for the revenue function is r(x) = 12x.
The cost function represents the expenses incurred in producing a certain number of units. In this scenario, the manufacturer has fixed costs of $1500 per month, which do not depend on the number of units produced. Additionally, the variable cost per unit is $7, indicating that for each unit produced, there is an additional cost of $7. To calculate the total cost of producing x units, we multiply the variable cost per unit ($7) by the number of units (x) and add the fixed costs ($1500). Therefore, the equation for the cost function is c(x) = 7x + 1500.
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Majer Corporation makes a product with the following standard costs: Standard Quantity or Hours Standard Price or Rate Standard Cost Per Unit Direct materials 2.0 ounces $ 8.00 per ounce $ 16.00 Direct labor 0.7 hours $ 14.00 per hour $ 9.80 Variable overhead 0.7 hours $ 6.50 per hour $ 4.55 The company reported the following results concerning this product in February. Originally budgeted output 8,000 units Actual output 7,800 units Raw materials used in production 12,000 ounces Actual direct labor-hours 5,660 hours Purchases of raw materials 13,600 ounces Actual price of raw materials $ 7.75 per ounce Actual direct labor rate $ 13.80 per hour Actual variable overhead rate $ 6.05 per hour The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased. The materials price variance for February is:
The materials price variance for February is $1,040 unfavorable.
To calculate the materials price variance, we need to compare the actual price of raw materials with the standard price and then multiply the difference by the actual quantity of materials used.
Standard Price per ounce: $8.00
Actual Price per ounce: $7.75
Standard Quantity used: 12,000 ounces
Calculating the materials price variance:
Materials Price Variance = (Actual Price - Standard Price) x Actual Quantity
= ($7.75 - $8.00) x 12,000
= (-$0.25) x 12,000
= -$3,000
Since the variance is unfavorable, we take the absolute value to determine the magnitude:
Abs($3,000) = $3,000
Therefore, the materials price variance for February is $3,000 unfavorable.
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On December 31, 2019, Ajax Inc. is the lessee, and Comet Corp is the lessor, in a lease contract with a term of 5 years, annual payment of $45,000, with the first payment due immediately, interest rate of 3%. The leased equipment was purchased for $470,000, has an estimated life of 10 years and no salvage value. Assuming the lease is an operating lease, provide the following: a) Schedule of the amortization of the lease payable, right-of-use asset for the lessee. b) Lessee and lessor entries related to the lease inception and first lease payment on December 31, 2019. c) Lessee and lessor entries related to the second lease payment on December 31 , 2020 d) The lessee's entries for the amortization of the right-of-use asset and the lessor's entries for depreciation for 2020
Lessor's entries for depreciation for 2020:
Debit: Depreciation expense for $47,000
Credit: Accumulated depreciation for $47,000
Schedule of the amortization of the lease payable, right-of-use asset for the lessee:
Year 1: Lease payable amortization = $45,000
Right-of-use asset amortization = $47,000 ([$470,000 / 10 years] x 1 year)
Year 2: Lease payable amortization = $45,000
Right-of-use asset amortization = $47,000
Year 3: Lease payable amortization = $45,000
Right-of-use asset amortization = $47,000
Year 4: Lease payable amortization = $45,000
Right-of-use asset amortization = $47,000
Year 5: Lease payable amortization = $45,000
Right-of-use asset amortization = $47,000
Lessee entries related to the lease inception and first lease payment on December 31, 2019:
Debit: Right-of-use asset for $470,000
Credit: Lease payable for $470,000
Lessee entries related to the second lease payment on December 31, 2020:
Debit: Lease payable for $45,000
Credit: Cash for $45,000
Lessee's entries for the amortization of the right-of-use asset in 2020:
Debit: Lease expense for $47,000
Credit: Accumulated amortization - right-of-use asset for $47,000
Lessor's entries for depreciation for 2020:
Debit: Depreciation expense for $47,000
Credit: Accumulated depreciation for $47,000
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A student with a HECS-HELP debt starts to repay a proportion of income once their income exceeds the income threshold. For example, if in the first income bracket they would repay 1% and the next bracket 2%. This is payable on: All of their taxable income Only that income above the threshold The income above the tax-free threshold None of the above
The question states that in the first income bracket, the student would repay 1% of their income. This suggests that the repayment is not based on their entire income but rather a portion of it.
A student with a HECS-HELP debt starts repaying a proportion of their income once their income exceeds the income threshold. In this case, the income threshold is not specified, so let's assume it is $150.
The question asks about what the repayment is payable on. Let's consider the options provided:
1. All of their taxable income
2. Only that income above the threshold
3. The income above the tax-free threshold
4. None of the above
To determine the correct answer, we need to understand how HECS-HELP repayments work. HECS-HELP is a loan program that helps students pay for their higher education fees. Repayments are based on a percentage of the student's income, and this percentage increases as their income increases.
In this case, the question states that in the first income bracket, the student would repay 1% of their income. This suggests that the repayment is not based on their entire income but rather a portion of it.
Now, let's consider the options:
1. All of their taxable income: This option is unlikely to be correct because the question specifies that the student repays a proportion of their income, not their entire income.
2. Only that income above the threshold: This option seems plausible because it aligns with the idea of repaying a proportion of income. If the income threshold is $150, the student would start repaying once their income exceeds this threshold.
3. The income above the tax-free threshold: This option is less likely to be correct because it mentions the tax-free threshold, which is unrelated to HECS-HELP repayments.
4. None of the above: This option is unlikely to be correct because the student does start repaying their HECS-HELP debt once their income exceeds the threshold.
Based on the information provided, it is most likely that the correct answer is: Only that income above the threshold.
To summarize, a student with a HECS-HELP debt starts repaying a proportion of their income once their income exceeds the income threshold. This means they only need to repay a percentage of the income they earn above the threshold, not their entire income.
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nterest rates are 7.90% (with continuous compounding). At the start of the year, you entered into 100 short two year forward positions in Ziggurat stock, at (forward) price \$37.09. It is now 7 months later, and Ziggurat shares are trading at $38.21. Ziggurat does not pay dividends. What are your forward positions worth?
504.71
−100.14
−504.71
100.14
The value of the short position has declined by $6.27 per share or $627.10 per contract. Hence, the answer is -6271, option (C).
The calculation for the Forward price
Using continuous compounding formula:
[tex]F = Se^(r*t) \\= 38.21e^(0.0790*2) \\= $44.48[/tex]
Calculation for the worth of 100 short two-year forward positions:
On entering the short position, there was no initial cash flow.
We can find the value of the position now using the formula:
Number of contracts = -100,
Multiplier = 100, Forward price = $44.48
Worth of the position = Multiplier * (Spot price - Forward price) * Number of contracts
[tex]= 100 × (38.21 - 44.48) × (-100) \\= $-6271[/tex]
The value of the short position has declined by $6.27 per share or $627.10 per contract.
Hence, the answer is -6271, option (C).
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