Challenging Business Problems with Detailed Answers

Short-term bank loans (Select all that apply.) usually have a lower interest rate than long-term debt. usually have a higher interest rate than long-term debt. are not frequently used by large corporations as a significant component of capital structure. are frequently used by large corporations as a significant component of capital structure.
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4. Give two reasons why GDP is often not seen as the best measure of living standards.
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The Heinlein and Krampf Investment firm has just been instructed by one of its clients to invest $250,000 for her money. The client has a good deal of trust in the investment firm, but she has also her own ideas about the distribution of funds being invested. In particular, she requests the following: - municipal bonds should constitute at least 20% of the investment - at least 40% of the investment should be placed in a combination of electronic firms, aerospace firms, and drug manufacturers. - no more than 50% of the amount invested in municipal bonds should be placed in nursing home stock. Subject to these constraints, the client's goal is to maximize her return on investments. The investment firm has the following estimated rate of returns on investment choices: 5.3% Electronics Investment Estimated rate of return (%) Los Angeles Municipal Bonds Thompson Electronics 6.8% United Aerospace 4.9% Palmer Drugs 8.4% Happy Days Nursing Homes 11.8% What is the optimal rate of return for the client's portfolio
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Under its executive stock option plan, N Corporation granted options on January 1, 2021, that permit executives to purchase 12.0 million of the company's $1 par common shares within the next eight years, but not before December 31, 2023 (the vesting date). The exercise price is the market price of the shares on the date of grant, $19 per share. The fair value of the options, estimated by an appropriate option pricing model, is $4 per option. No forfeitures are anticipated. Ignoring taxes, what is the effect on earnings in the year after the options are granted to executives
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Explain the difference between the unadjusted and the adjusted trial balance. Multiple choice question. The adjusted trial balance is prepared after adjusting entries have been recorded and posted. The unadjusted trial balance is more up to date than the adjusted trial balance. The unadjusted trial balance is more accurate and should be used to prepare financial statements. The adjusted trial balance contains only the accounts which were adjusted. The unadjusted trial balance contains all of the remaining accounts.
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Allowance for Doubtful Accounts, showed a credit balance of $950 on January 1, 2004. During the year, the company wrote off $3,200 of uncollectible accounts, and reinstated $1,300 of previously written off accounts. The Dec 31, 2004 balance of Accounts Receivable is $97,500, and 6% of outstanding accounts receivable are assumed to be uncollectible. What will be the company's Bad Debts Expense for 2004
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CDF Appliances has assembly plants in Atlanta and Fort Worth where it produces a variety of kitchen appliances, including a 12-cup coffee maker and a cappuccino machine. In each hour at the Atlanta plant, 160 of the coffee makers and 200 of the cappuccino machines can be assembled, and the hourly cost is $600. In each hour at the Fort Worth plant, 800 of the coffee makers and 200 of the cappuccino machines can be assembled, and the hourly cost is $2400. CDF Appliances expects orders each week for at least 80,000 of the coffee makers and at least 28,000 of the cappuccino machines. How many hours per week should each plant be operated in order to provide inventory for the orders at minimum cost
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Delisa Corporation has two divisions: Division L and Division Q. Data from the most recent month appear below: Total Company Division L Division Q Sales $529,000 $161,000 $368,000 Variable expenses 305,900 99,820 206,080 Contribution margin 223,100 61,180 161,920 Traceable fixed expenses 122,380 33,320 89,060 Segment margin 100,720 $ 27,860 $ 72,860 Common fixed expenses 36,030 Net operating income $ 64,690 The break-even in sales dollars for Division Q is closest to: Multiple Choice $280,790 $223,375 $446,200 $202,409
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Southern Atlantic Distributors began operations in January 2021 and purchased a delivery truck for $40,000. Southern Atlantic plans to use straight-line depreciation over a four-year expected useful life for financial reporting purposes. For tax purposes, the deduction is 50% of cost in 2021, 30% in 2022, and 20% in 2023. Pretax accounting income for 2021 was $200,000, which includes interest revenue of $28,000 from municipal governmental bonds. The enacted tax rate is 25%. Assuming no differences between accounting income and taxable income other than those described above:
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An equivalent description of the holding of a receive-floating pay-fixed swap is as follows: A. An exchange of a long position in a fixed-rate bond for a short position in a floating-rate note. B. A portfolio of long positions in forward-rate agreements (FRAs) for each swap payment date, all at the same fixed rate as the swap. C. All of the above. D. A bond that pays the fixed rate minus the floating rate each period.
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The following information relates to a product produced by Faulkland Company: Direct materials $ 10 Direct labor 7 Variable overhead 6 Fixed overhead 8 Unit cost $ 31 Fixed selling costs are $1,000,000 per year. Variable selling costs of $4 per unit sold are added to cover the transportation cost. Although production capacity is 500,000 units per year, Faulkland expects to produce only 400,000 units next year. The product normally sells for $40 each. A customer has offered to buy 60,000 units for $30 each. The customer will pay the transportation company directly for the transportation charges on the units purchased. If Faulkland accepts the special order, the effect on operating profits would be a:
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If a company purchases equipment costing $4,500 on credit, the effect on the accounting equation would be: Multiple Choice Assets increase $4,500 and liabilities decrease $4,500. One asset increases $4,500 and another asset decreases $4,500. Equity decreases $4,500 and liabilities increase $4,500. Equity increases $4,500 and liabilities decrease $4,500. Assets increase $4,500 and liabilities increase $4,500.
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A construction company entered into a fixed-price contract to build an office building for $20 million. Construction costs incurred during the first year were $6 million and estimated costs to complete at the end of the year were $9 million. The company recognizes revenue over time according to percentage of completion. How much revenue and gross profit or loss will appear in the companys income statement in the first year of the contract? (Enter your answer in whole dollars.)
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Sheet Company reported the following net income and dividends for the years indicated: Year Net Income Dividends 20X5 $ 35,000 $ 12,000 20X6 45,000 20,000 20X7 30,000 14,000 Pillow Corporation acquired 75 percent of Sheets common stock on January 1, 20X5. On that date, the fair value of Sheet net assets was equal to the book value. Pillow uses the equity method in accounting for its ownership in Sheet and reported a balance of $259,800 in its investment account on December 31, 20X7. Required: a. What amount did Pillow pay when i
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Assume that, on January 1, 2021, Matsui Co. paid $1,296,000 for its investment in 48,000 shares of Yankee Inc. Further, assume that Yankee has 240,000 total shares of stock issued. The book value and fair value of Yankee's identifiable net assets were both $480,000 at January 1, 2021. The following information pertains to Yankee during 2021: Net income $ 240,000 Dividends declared and paid $ 72,000 Market price of common stock on 12/31/2021 $ 29 /share What amount would Matsui report in its year-end 2021 balance sheet for its investment in Yankee
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[Same investments as the prior question] Suppose two local start-ups are raising funding by issuing shares of equity at $10,000 per share. One start-up is a whiskey distillery; the other is a beer brewery. You estimate the expected returns on your investment to be 50% over five years in both cases. You also believe that the likelihood of being paid out $20,000 per share is greater with the distillery than with the brewery. Suppose now that you hold a portfolio of many other risky assets, and that this would be your N 1 investment. Which investment do you prefer to make, the distillery or the brewery
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Minden, Mel, and Montana decide to liquidate their partnership. All assets are sold, and the liabilities are paid. Following these transactions, the capital balances are as follows: Minden, $27,400; Mel, $(12,600); Montana, $43,500. The income-sharing ratio for Minden, Mel, and Montana is 3:4:3. Mel is unable to contribute any assets to reduce the deficiency. How much cash will Montana receive as a result of the partnership liquidation
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What was this product's net operating income (loss) last year? last year minden company introduced a new product and sold 15,000 units of it at a price of $70 per unit. the product's variable expenses are $40 per unit and its fixed expenses are $540,000 per year. required: 1. what was this product's net operating income (loss) last year? 2. what is the product's break-even point in unit sales and dollar sales? 3. assume the company has conducted a marketing study that estimates it can increase annual sales of this product by 5,000 units for each $2 reduction in its selling price. if the company will only consider price reductions in increments of $2 (e.g., $68, $66, etc.), what is the maximum annual profit that it can earn on this product? what sales volume and selling price per unit generate the maximum profit? 4. what would be the break-even point in unit sales and in dollar sales using the selling price that you determined in requirement 3?
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Division A makes a part that it sells to customers outside of the company. Data concerning this part appear below: Selling price to outside customers $ 40 Variable cost per unit $ 30 Total fixed costs $ 10,000 Capacity in units 20,000 Division B of the same company would like to use the part manufactured by Division A in one of its products. Division B currently purchases a similar part made by an outside company for $38 per unit and would substitute the part made by Division A. Division B requires 5,000 units of the part each period. Division A has ample capacity to produce the units for Division B without any increase in fixed costs and without cutting into sales to outside customers. If Division A sells to Division B rather than to outside customers, the variable cost be unit would be $1 lower. What is the lowest acceptable transfer price Division A should accept
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Reyes manufacturing company uses a job order cost system. at the beginning of january, the company had one job in process (job 201) and one job completed but not yet sold (job 200). job 202 was started during january. other select account balances follow (ignore any accounts that are not listed).
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One has to ask oneself how you know that you've discovered something that distinguishes the successful companies from other companies? otherwise, you can fall into a trap that is the same as identifying "the management practice equivalent of having buildings" (collins & porras, 2002, p. 14).
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Refer to exhibit 4-5. if a free market were allowed in the transplanted kidney market, then the equilibrium price would be p2. the number of kidneys transplanted would increase by _________ compared to the number transplanted at a price ceiling of p= $0. (q3 - q2) q2 (q2 - q1) (q3 - q1)
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On December 31, 2020, Coolwear, Inc. had a balance in its prepaid insurance account of $59,400. During 2021, $97,000 was paid for insurance. At the end of 2021, after adjusting entries were recorded, the balance in the prepaid insurance account was $47,500. Insurance expense for 2021 was:
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Task 3: Budget for 25- to 30-year-old Business ProfessionalsTalk to your mentor, family members, or relatives between the ages of 25-30 and who areemployed to see what their budgets look like. Develop a sample budget for someone aged 25to 30 years old.
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