E10-13 Herzogg Company, organized in 2008, has the following transactions related to intangible assets. 1/2/08 Purchased patent (7-year life) $560,000 4/1/08 Goodwill purchased (indefinite life) 360,000 7/1/08 10-year franchise; expiration date 7/1/2018 440,000 9/1/08 Research and development costs 185,000 Instructions Prepare the necessary entries to record these intangibles. All costs incurred were for cash. Make the adjusting entries as of December 31, 2008, recording any necessary amortization and reporting all intangible asset balances accurately as of that date.
The Hayes Company manufactures and sells several products, one of which is called a slip differential. The company normally sells 30,000 units of the slip differential each month. At this activity level, unit costs are
The Hayes Company manufactures and sells several products, one of which is called a slip differential. The company normally sells 30,000 units of the slip differential each month. At this activity level, unit costs are:
Direct materials............................ $4
Direct labor.................................. 3
Variable manufacturing overhead..... 4
Fixed manufacturing overhead......... 5
Variable selling.............................. 3
Fixed selling................................. 1
An outside supplier has offered to produce the slip differentials for the Hayes Company, and to ship them directly to the Hayes Company's customers. This arrangement would permit the Hayes Company to reduce its variable selling expenses by one third (due to elimination of freight costs). The facilities now being used to produce the slip differentials would be idle and fixed manufacturing overhead would continue at 60 percent of its present level. The total fixed selling expenses of the company would be unaffected by this decision.
Required: What is the maximum acceptable price quotation for the slip differentials from the outside supplier?
P11-1A Prepare current liability entries, adjusting entries, and current liabilities section
P11-1A Prepare current liability entries, adjusting entries, and current liabilities section.
On January 1, 2008, the ledger of Mane Company contains the following liability accounts. Accounts Payable $52,000 Sales Taxes Payable 7,700 Unearned Service Revenue 16,000 During January the following selected transactions occurred. Jan. 5 Sold merchandise for cash totaling $22,680, which includes 8% sales taxes. 12 Provided services for customers who had made advance payments of $10,000. (Credit Service Revenue.) 14 Paid state revenue department for sales taxes collected in December 2007 ($7,700). 20 Sold 800 units of a new product on credit at $50 per unit, plus 8% sales tax. 21 Borrowed $18,000 from UCLA Bank on a 3-month, 8%, $18,000 note. 25 Sold merchandise for cash totaling $12,420, which includes 8% sales taxes.
Instructions
(a) Journalize the January transactions.
(b) Journalize the adjusting entries at January 31 for (1) the outstanding notes payable, and (2) estimated warranty liability, assuming warranty costs are expected to equal 7% of sales of the new product(Hint: Use on third of a month for the UCLA Bank note.)
(c) Prepare the current liabilities section of the balance sheet at January 31, 2008. Assume no change in accounts payable.
SOLUTION PREVIEW
MANE COMPANY
|
Date
|
Account Titles
|
Debit
|
Credit
|
|||
|
(a)
|
|
|
|
|
|
|
|
Jan 5
|
Cash
|
|
22,680
|
|
||
|
|
Sales
|
|
|
21,000
|
||
|
|
Sales tax payable
|
|
|
1,680
|
||
Randazzo's cost accountant recently completed a study that associated cost and revenue data with each product listed in the company's
Randazzo's cost accountant recently completed a study that associated cost and revenue data with each product listed in the company's catalogue. Exhibit A identifies sales volume, selling prices per unit, and variable costs for a sample of ten products representing the mix manufactured by Randazzo.
In addition to the variable costs indentified in Exhibit A the accountant estimated $600,000 of fixed costs would be associated with the production of these ten products.
Products A, B, C, D, E, F, G, H, I, J
Sales volume in units (x 1,000) 50, 80, 10, 20, 70, 25, 5, 12, 11, 15
Selling price per unit- $12, $15, $2, $10, $15, $10, $2, $5, $5, $6
Variable cost $10, $11, $3, $8, $10, $8, $4, $4, $5, $6
Assume $70,000 of the $600,000 in fixed costs can be saved if products C and G are dropped.
Kroncke target structure is 30% debt, 20% preferred, and 50% common equity.
Kroncke target structure is 30% debt, 20% preferred, and 50% common equity. The after-tax cost of debt is 8%, the cost of preferred is 6.5%, and the cost of retained earnings is 13.25%. The will will not be issuing any new stock. What is its WACC?
After a protracted legal case, Joe won a settlement that will pay him $11,000 each year for the next ten years.
After a protracted legal case, Joe won a settlement that will pay him $11,000 each year for the next ten years. If the market interest rates are currently 5%, exactly how much should the court invest today, assuming end of year payments, so there will be nothing left in the account after the final payment is made?
Mary just deposited $33,000 in an account paying 7% interest. She plans to leave the money in this account for eight years. How much will she have in the account at the end of the seventh year?
Mary and Joe would like to save up $10,000 by the end of three years from now to buy new furniture for their home. They currently have $1500 in a savings account set aside for the furniture. They would like to make equal year end deposits to this savings account to pay for the furniture when they purchase it three years from now. Assuming that this account pays 6% interest, how much should the year end payments be?
Show all work for each assignment and explain each step carefully.
CLICK HERE FOR SOLUTION
Mary just deposited $33,000 in an account paying 7% interest. She plans to leave the money in this account for eight years. How much will she have in the account at the end of the seventh year?
Mary and Joe would like to save up $10,000 by the end of three years from now to buy new furniture for their home. They currently have $1500 in a savings account set aside for the furniture. They would like to make equal year end deposits to this savings account to pay for the furniture when they purchase it three years from now. Assuming that this account pays 6% interest, how much should the year end payments be?
Show all work for each assignment and explain each step carefully.
CLICK HERE FOR SOLUTION
Unit 4 Finance 1. Money markets are markets for (Points: 4)
1. Money markets are markets for (Points: 4)
Foreign currencies.
Consumer automobile loans.
Corporate stocks.
Long-term bonds.
Short-term debt securities such a Treasury bills.
2. Which of the following statements is CORRECT? (Points: 6)
1. The most important difference between spot markets versus futures markets is the maturity of the instruments that are traded. Spot market transactions involve securities that have maturities of less than one year whereas futures markets transactions involve securities with maturities greater than one year.
2. Capital market transactions involve only preferred stock or common stock.
3. If General Electric were to issue new stock this year, it would be considered a secondary market transaction since the company already has stock outstanding.
4. Both Nasdaq dealers and “specialists” on the NYSE hold inventories of stocks.
5. Money market transactions do not involve securities denominated in currencies other than the U.S. dollar.
3. If the stock market is semistrong-form efficient, which of the following statements would be CORRECT?(Points: 6)
1. The required returns on all stocks are the same, and the required returns on stocks are higher than the required returns on bonds.
2. The required returns on stocks equal the required returns on bonds.
3. A trading strategy in which you buy stocks that have recently fallen in price is likely to provide you with a return that exceeds the return on the overall stock market.
4. If you have insider information about a particular stock, you cannot expect to earn an above average return on this information because it is already incorporated into the current stock price.
5. Even if a market is semistrong-form efficient, an investor could still earn a better return than the market return if he or she had inside information.
4.Suppose 1-year T-bills currently yield 5.00% and the future inflation rate is expected to be constant at 3.10% per year. What is the real risk-free rate of return, r*? Disregard cross-product terms, i.e., if averaging is required, use the arithmetic average. (Points: 6)
1. 1.90%
2. 2.00%
3. 2.10%
4. 2.20%
5. 2.30%
5. Suppose the real risk-free rate is 3.50%, the average future inflation rate is 2.25%, and a maturity premium of 0.10% per year to maturity applies, i.e., MRP = 0.10%(t), where t is the years to maturity. What rate of return would you expect on a 5-year Treasury security, assuming the pure expectations theory is NOT valid? Disregard cross-product terms, i.e., if averaging is required, use the arithmetic average.(Points: 6)
1. 5.95%
2. 6.05%
3. 6.15%
4. 6.25%
5. 6.35%
6. Which of the following would be most likely to lead to a higher level of interest rates in the economy?(Points: 6)
1. Households start saving a larger percentage of their income.
2. Corporations step up their expansion plans and thus increase their demand for capital.
3. The level of inflation begins to decline.
4. The economy moves from a boom to a recession.
5. The Federal Reserve decides to try to stimulate the economy.
7. Assume that interest rates on 20-year Treasury and corporate bonds are as follows:
1. T-bond = 7.72% A = 9.64%
2. AAA = 8.72% BBB = 10.18%
The differences in rates among these issues were caused primarily by (Points: 6)
1. Tax effects.
2. Default risk differences.
3. Maturity risk differences.
4. Inflation differences.
5. Real risk-free rate differences
8. What does it mean when it is said the U.S. is running a trade deficit? What impact do you think a trade deficit could have on interest rates? Scroll down to respond.
9. Consider the following scenario: John buys a house for $150,000 and takes out a five year adjustable rate mortgage with a beginning rate of 6%. He makes annual payments rather than monthly payments.
Unfortunately for John, interest rates go up by 1% for each of the five years of his loan (Year 1 is 6%, Year 2 is 7%, Year 3 is 8%, Year 4 is 9%, Year 5 is 10%).
Calculate the amount of John's payment over the life of his loan. Compare these findings if he would have taken out a fix rate loan for the same period at 7.5%. Which do you think is the better deal?
P11-3A Hawks Electronic Repair Shop has budgeted the following time and material for 2008. EXCEL TEMPLATE
P11-3A
Hawks Electronic Repair Shop has budgeted the following time
and material for 2008.
|
HAWKS
ELECTRONIC REPAIR SHOP
Budgeted
Costs for the Year 2008
|
||
|
|
Time
Charges
|
Material
Loading Charges
|
|
Shop
employees’ wages and benefits
|
$108,000
|
—
|
|
Parts
manager’s salary and benefits
|
—
|
$25,400
|
|
Office
employee’s salary and benefits
|
20,000
|
13,600
|
|
Overhead
(supplies, depreciation, advertising, utilities)
|
26,000
|
18,000
|
|
Total
budgeted costs
|
$154,000
|
$57,000
|
Hawks budgets 5,000 hours of repair
time in 2008 and will bill a profit of $5 per labor hour along with a 30%
profit markup on the invoice cost of parts. The estimated invoice cost for
parts to be used is $100,000.
On January 5, 2008 Hawks is asked to
submit a price estimate to fix a 72-inch big-screen TV. Hawks estimates that
this job will consume 20 hours of labor and $500 in parts.
Instructions
(a)
Compute the labor rate for Hawks Electronic Repair Shop for the year 2008.
(b)
Compute the material loading charge percentage for Hawks Electronic Repair Shop
for the year 2008.
(c)
Prepare a time-and-material price quotation for fixing the big-screen TV.
SOLUTION PREVIEW (The
Solution is done in EXCEL TEMPLATE)
PROBLEM
11-3A
(a)
Computation
of time charge rate
|
Total
|
Total
|
Per Hour
|
||||||
|
Cost
|
÷
|
Hours
|
=
|
Charge
|
||||
|
Hourly labor rate for repairs
|
||||||||
|
Shop employee’s wages
and benefits
|
$108,000
|
÷
|
5,000
|
=
|
$21.60
|
|||
File name: P11-3A-Hawks-Elect.xls File
type: application/vnd.ms-excel
PRICE: $10
E11-11 Allied Company’s Small Motor Division manufactures a number of small motors used in household and office appliances. EXCEL TEMPLATE
Determine
minimum transfer price. (SO 4)
E11-11
Allied Company’s Small Motor Division manufactures a number
of small motors used in household and office appliances. The Household Division
of Allied then assembles and packages such items as blenders and juicers. Both
divisions are free to buy and sell any of their components internally or
externally. The following costs relate to small motor LN233 on a per unit
basis.
|
Fixed
cost per unit
|
$5
|
|
Variable
cost per unit
|
$8
|
|
Selling
price per unit
|
$30
|
Instructions
(a)
Assume that Frame Body has excess capacity and is able to meet all of the Cycle
Division’s needs. If the Cycle Division buys 1,000 frames from Frame Body,
determine the following: (1) effect on the income of the Cycle Division; (2)
effect on the income of Frame Body; and (3) effect on the income of Travel Velocity.
(b)
Assume that Frame Body does not have excess capacity and therefore would lose
sales if the frames were sold to the Cycle Division. If the Cycle Division buys
1,000 frames from Frame Body, determine the following: (1) effect on the income
of the Cycle Division; (2) effect on the income of Frame Body; and (3) effect
on the income of Travel Velocity.
SOLUTION PREVIEW (The
Solution is done in EXCEL TEMPLATE)
EXERCISE 11-11
|
(a)
|
Minimum Transfer Price
- with excess capacity
|
|
Given that the Small Motor Division has excess apacity, the
minimum transfer price is the variable cost of $8.00 per unit.
|
E11-3 Mucky Duck makes swimsuits and sells these suits directly to retailers. - EXCEL TEMPLATE
E11-3
Mucky Duck makes swimsuits and sells these suits directly to
retailers. Although Mucky Duck has a variety of suits, it does not make the
All-Body suit used by highly skilled swimmers. The market research department
believes that a strong market exists for this type of suit. The department
indicates that the All-Body suit would sell for approximately $110. Given its
experience, Mucky Duck believes the All-Body suit would have the following
manufacturing costs.
Direct
materials
|
$ 25
|
Direct
labor
|
30
|
Manufacturing
overhead
|
45
|
Total
costs
|
$100
|
Instructions
(a)
Assume that Mucky Duck uses cost-plus pricing, setting the selling price 25%
above its costs. (1) What would be the price charged for the All-Body swimsuit?
(2) Under what circumstances might Mucky Duck consider manufacturing the All-Body
swimsuit given this approach?
(b)
Assume that Mucky Duck uses target costing. What is the price that Mucky Duck
would charge the retailer for the All-Body swimsuit?
(c)
What is the highest acceptable manufacturing cost Mucky Duck would be willing to
incur to produce the All-Body swimsuit, if it desired a profit of $25 per unit?
(Assume target costing.)
SOLUTION PREVIEW (The Solution is done in EXCEL TEMPLATE)
Week 7 Template
EXERCISE
11-3
(a)
(1)
|
= ($100 + [$100 x 25%])
= $125.
|
(2)
|
If the company can cover its variable costs it might want to
sell at the $110 level.
|
File name: E11-3-Mucky-Duck.xls File type: application/vnd.ms-excel PRICE $4
P5-1A Bjerg Company specializes in manufacturing a unique model of bicycle helmet. EXCEL TEMPLATE
P5-1A
Bjerg Company specializes in manufacturing a unique model of
bicycle helmet. The model is well accepted by consumers, and the company has
enough orders to keep the factory production at 10,000 helmets per month (80%
of its full capacity). Bjerg’s monthly manufacturing cost and other expense
data are as follows.
|
Rent on
factory equipment
|
$ 7,000
|
|
Insurance
on factory building
|
1,500
|
|
Raw
materials (plastics, polystyrene, etc.)
|
75,000
|
|
Utility
costs for factory
|
900
|
|
Supplies
for general office
|
300
|
|
Wages
for assembly line workers
|
43,000
|
|
Depreciation
on office equipment
|
800
|
|
Miscellaneous
materials (glue, thread, etc.)
|
1,100
|
|
Factory
manager’s salary
|
5,700
|
|
Property
taxes on factory building
|
400
|
|
Advertising
for helmets
|
14,000
|
|
Sales
commissions
|
7,000
|
|
Depreciation
on factory building
|
1,500
|
Marginal
check figures for parts of some problems, in most chapters, provide key numbers
to confirm that you are on the right track in your computations.DM $75,000DL $43,000MO $18,100PC $22,100
SOLUTION PREVIEW (The Solution is done in EXCEL TEMPLATE)
(a)
|
|
Product Costs
|
|||||||
|
Direct
|
Direct
|
Manufacturing
|
Period
|
|||||
|
Cost Item
|
Materials
|
Labor
|
Overhead
|
Costs
|
||||
|
Rent on factory
equipment
|
|
|
$7,000
|
|
||||
|
Insurance on factory
building
|
|
|
1,500
|
|
||||
File name: P5-1A-Bjerg-Company.xls File type: application/vnd.ms-excel Price: $6
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