Challenging Business Problems with Detailed Answers

borrowed $10 million by signing a five-year note on December 31, 2015. Repayments of the principal are payable annually in installments of $2 million each. Purdue Farms makes the first payment on December 31, 2016 and then prepares its balance sheet. What amount will be reported as current and long-term liabilities, respectively, in connection with the note at December 31, 2016, after the first payment is made
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Sherman, Inc. manufactures chainsaws that sell for $65. Each chainsaw uses $14 in direct materials and $9 in direct labor per unit. Sherman has two activities: Machining, which is applied at the rate of $4 per machine hour, and Finishing, which is applied at the rate of $20 per batch. This month, Sherman made 225 chainsaws, using 1,125 machine hours in 45 batches. What is the gross profit for one chainsaw
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Flo enters into a contract with Global Shipping Ltd. to insure and ship a painting from France to the United States for a certain price. Global makes a mistake in adding the costs, which results in a contract price that is $1,000 less than the true cost. Most likely, a court would a. enforce the contract as is. b. allow the parties to rescind the contract. c. award damages to Global for the mistake. d. award damages to Flo for the mistake.
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Gemstone Products located in New York City, is one of the world's largest producers of beauty and related products. The company's consolidated balance sheets for the 2016 and 2015 fiscal years included the following ($ in thousands): 2016 2015 Current assets: Receivables, less allowances of $133,425 in 2016 and $89,025 in 2015 $ 461,900 $ 441,500 A disclosure note accompanying the financial statements reported the following ($ in thousands) Year Ended 2016 2015 (In thousands) Calculation of account receivables, net: Receivables $ 595,325 $ 530,525 Less: allowance for doubtful accounts (123,125 ) (77,825 ) Less: reserve for product returns (10,300 ) (11,200 ) Trade accounts receivable, net: $ 461,900 $ 441,500 Assume that the company reported bad debt expense in 2016 of $192,500 and had products returned for credit totaling $187,225 (sales price). Net sales for 2016 were $5,653,800 ($ in thousands). Required: 1. What is the amount of accounts receivable due from customers at the end of 2016 and 2015
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The firm has just declared a dividend of $1.09 per share for the current fiscal year. The firm has earnings per share of $2.11, and 225,000 shares outstanding with a market price of $31.17 per share prior to the ex-dividend day. Ignore taxes. As a result of this dividend, the: A) the current dividend yield is 51.66% B) retained earnings will increase by $245,250. C) the current dividend payout ratio is 3.497% D) earnings per share will increase to $3.20. E) price-earnings ratio will be 14.26 ex-dividend.
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Preston Corp. is estimating its WACC. Its target capital structure is 20 percent debt, 20 percent preferred stock, and 60 percent common equity. Its bonds have a 12 percent coupon, paid semiannually, a current maturity of 20 years, and sells for $1,100. The firm could sell, at par, $100 preferred stock which pays a 5.52 percent annual dividend, but flotation costs of 5 percent would be incurred. Preston's beta is 1.2, the risk-free rate is 3 percent, and the market risk premium is 5 percent. The firm's marginal tax rate is 40 percent. What is Preston's WACC
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On August 31, Year 1, the general ledger of a company shows a balance for cash of $7,774. Cash receipts yet to be deposited into the checking account total $3,168, and checks written by the academy but not yet processed by the bank total $1,255. The company's balance of cash does not reflect a bank service fee of $18 and interest earned on the checking account of $29. These amounts are included in the balance of cash of $5,872 reported by the bank as of the end of August. Required: 1. Prepare a bank reconciliation to calculate the correct ending balance of cash on August 31, Year 1. (Amounts to be deducted should be indicated with a minus sign.)
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Business K exchanged an old asset (FMV $95,000) for a new asset (FMV $95,000). Business Ks tax basis in the old asset was $107,000. Compute Business Ks realized loss, recognized loss, and tax basis in the new asset assuming the exchange was a taxable transaction. Compute Business Ks realized loss, recognized loss, and tax basis in the new asset assuming the exchange was a nontaxable transaction. Six months after the exchange, Business K sold the new asset for $100,000 cash. How much gain or loss does Business K recognize if the exchange was taxable? How much gain or loss if the exchange was nontaxable?
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Lilliput is a country that has closed borders and does not import or export any goods or services; hence, they do not worry about trade with other countries. Total spending for the federal government of Lilliput for the last fiscal year was $4.71 billion. The country collected $4.83 billion in taxes during this same fiscal year. Assume government transfers were zero. Based on this information, what is Lilliput's budget balance
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On December 31, 2016, Fall Company prepared adjusting entries that included the following items: Depreciation expense: $31,000. Accrued sales revenue: $29,000. Accrued expenses: $12,000. Used insurance: $9,000; the insurance was initially recorded as prepaid. Rent revenue earned: $7,000; the rent was initially prepaid by the tenant and credited to unearned rent revenue. If Fall Company reported pretax income of $120,000 prior to the adjusting entries, how much is Fall's pretax income after the adjusting entries
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The income statement for the year 2015 of Fugazi Co. contains the following information: Revenues$70,000 Expenses: Salaries and Wages Expense$45,000 Rent Expense12,000 Advertising Expense10,000 Supplies Expense6,000 Utilities Expense2,500 Insurance Expense2,000 Total expenses77,500 Net income (loss)$ (7,500) After all closing entries have been posted, the Income Summary account will have a balance of
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The primary focus for financial accounting information is to provide information useful for: Investing decisions Credit decisions a. Yes Yes b. Yes No c. No Yes d. No
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The slopes of the curve at points A and B (maximum and minimum) are:A.zero and zeroB. Infinity and zero C. Zero and 1D. 1 and zero
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Type the correct answer in the box. Spell all words correctly. Who plans, codes, and creates web pages? plan, code, and create web pages.
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What is not a principal tool used by government organizations to constrain the activities of businesses and consumers?
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Support functions manage and improve the efficiency of an organization's conversion processes so that more value is created.
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Tanner wants to buy a new car. What will he most likely consider when making his decision on the type of car to buy?
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Question 3A situation where the level of output scale and average costs are all rising is called
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Select two of your personal values and give examples of things you have done (behaviors) that demonstrate the importance of the value to you.28PTS!
2 Answers
Sandersen Inc. sells minicomputers. During the past year, the company's sales were million. The cost of its merchandise sold came to $ million, and cash operating expenses were $; depreciation expense was $, and the firm paid $ in interest on its bank loans. Also, the corporation paid $ in the form of dividends to its own common stockholders. Calculate the corporation's tax liability by using the corporate tax rate structure in the popup window,
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On January 1, 2020, Echo Company issued $550,000, 16 year, 9%, annual, callable bonds for $475,000. On December 31, 2025, Echo Company redeemed (called) the bonds at 102. REQUIRED: 1. Prepare the Journal Entry to record the Issuance of the Bond 2. Determine the amount of the Discount/Premium that is still not amortized (using the Straight-Line Method) 3. Prepare the Journal Entry to record the Retirement (Redemption) of the Bond.
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Mr. Boyd and Ms. Tuck decide to form a new corporation named BT Inc. Mr. Boyd transfers $10,000 cash and business inventory ($20,000 FMV; adjusted tax basis $3,200), and Ms. Tuck transfers business equipment (FMV $60,000; adjusted tax basis $41,500) to BT. In exchange for their cash and property, BT issues 1,200 shares of common stock to its two shareholders. How many shares should Mr. Boyd and Ms. Tuck each receive? Compute Mr. Boyds realized and recognized gain on his exchange of property for stock, and determine his tax basis in his BT common shares. Compute Ms. Tucks realized and recognized gain on her exchange of property for stock, and determine her tax basis in her BT common shares. Determine BT Inc.s book and tax basis in the inventory transferred by Mr. Boyd and the equipment transferred by Ms. Tuck.
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Flesch Corporation produces and sells two products. In the most recent month, Product C90B had sales of $24,000 and variable expenses of $6,480. Product Y45E had sales of $29,000 and variable expenses of $11,010. The fixed expenses of the entire company were $32,280. If the sales mix were to shift toward Product C90B with total dollar sales remaining constant, the overall break-even point for the entire company: Multiple Choice could increase or decrease. would increase. would not change. would decrease.
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The following data is for the coming year. FinCorp's Net Income is reported as $195 million. Depreciation Expense is $20 million, accounts receivable decreased by $20 million, accounts payable decreased by $10 million, and inventories increased by $10 million. The firm's interest expense is $22 million. Assume the tax rate is 35% and the net debt of the firm increases by $3 million. What is the market value of equity if the FCFE is projected to grow at 3% indefinitely and the cost of equity is 11%?
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