Agency conflicts between managers and shareholders
Remember, an agency relationship can degenerate into an agency conflict when an agent acts in a manner that is not in the best interest of his or her principal. In large corporations, these conflicts most frequently involve the enrichment of the firm’s executives or managers (in the form of money and perquisites or power and prestige) at the expense of the company’s shareholders. This usurping and reallocation of shareholder wealth is most likely to occur when shareholders do not have sufficient information about the decisions and actions being made by the firm’s management.
Consider the following scenario and determine whether an agency conflict exists:
William and Abigail equally own and manage A New Beginning (ANB), a store that sells preowned clothing and furniture. William is responsible for ANB’s back-office activities, and Abigail staffs the store and makes deliveries to customers. Both have equal decision-making authority and, under the terms of their partnership agreement, both are prohibited from making personal purchases using company funds without prior approval of the other partner. William, without Abigail’s knowledge, used the company’s bank account recently to purchase a new sports car. William has acknowledged that the car will not be used to support the business.
Is this a potential agency conflict between William and Abigail?
No; William and Abigail are both authorized to spend ANB’s money, so no conflict of interest can occur.
No; William and Abigail co-own and co-manage ANB and have a partnership agreement that makes them equal, so an agency conflict cannot exist.
Yes; William is misappropriating some of Abigail’s wealth by unilaterally purchasing a nonbusiness asset using ANB’s funds.
Yes; it should have been Abigail who purchased the car.
Consider the following scenario and determine whether an agency conflict exists:
Five years ago, Caesar created a plant-care business that grew, stocked, and maintained fresh plants in office buildings throughout Raleigh. Over time, The Green Zone Inc. (TGZ) has grown from a proprietorship into a corporation, now reaching far beyond Raleigh. To finance and support this growth, TGZ issued shares that were sold to TGZ employees, Caesar’s family members, and selected outsiders. Caesar is TGZ’s chairman of the board of directors and CEO, but he is no longer the largest shareholder.
At the latest annual meeting, two mutually exclusive proposals were placed on the ballot for discussion and vote. The first was put forth by Caesar and TGZ’s management team, and the second was proposed by a small group of other shareholders. Both groups are adamantly opposed to the other group’s proposal, even though both proposals would likely have the same effect on TGZ’s value and riskiness.
Does an agency conflict exist between TGZ’s management and the small group of opposing shareholders?
No; although an agency relationship exists between TGZ’s management—including Caesar as TGZ’s chairman and CEO and the firm’s shareholders—there is no agency conflict, because no expropriation or wasting of the shareholders’ wealth has occurred.
No; Caesar was the original owner of TGZ, so he would always be sensitive to the concerns of the firm’s current owners (shareholders) and would not engage in an agency conflict.
Yes; any conflict or disagreement between the firm’s managers and its shareholders constitutes an agency conflict.
Yes; an agency relationship exists, and an agency relationship always gives rise to agency conflicts, regardless of the actual behavior of the participants.
Which of the following actions will help ease agency conflicts and better align managers’ objectives with the firm’s shareholder wealth?
Pay the manager a large base salary with a huge stock option package that matures on a single date.
Pay the manager a combination of salary and stock options (phased in over several years) that reward him or her for consistently increasing shareholder wealth.
Great Fortunes Baking Company’s stockholders are mostly individual investors, and there is relatively little institutional ownership. If several pension and mutual funds were to take large positions in Great Fortunes Baking Company’s stock, direct shareholder intervention would be more or less likely to motivate the firm’s management.
In the late 1980s and early 1990s, Congress passed legislation making it more difficult for outside investors to stage hostile takeovers. This legislation likely reduced or increased conflicts between managers and stockholders.

Answer:

1. True

Liquidity ratios such as the Current ratio are used to show that a company can cover its short-term obligations.

2. True

Asset management ratios juxtapose a company's performance vs its long term assets and so provide insights into management's efficiency.

3. False

Debt management ratios show how much of the company is funded by total debt not whether it has sufficient cash to repay its short- term debt obligations.

4. True

Profitability ratios take into account how much income is raised by a company so when this increases, the ratios will as well.

5. True

Market-Value ratios show the firm's value in the market which is a reflection of what investors and the markets think about the firm's growth prospects or current and future operational performance.

The Weakness/ Limitations are;

a. A firm may operate in multiple industries.

Should this be the case, the company's performance in one sector cannot necessarily be compared to companies that operate in that single sector because it would not take into account the company's other sectors which may impact figures.

c. Different firms may use different accounting practices.

When different accounting practices are used, ratio analysis may not be a true indication of the situations in the company. For instance, a company using LIFO cannot be effectively compared to a company using FIFO when using ratio analysis.

Answer:

$87,800

Explanation:

The following expenditures were incurred by Tamerisk incorporation when purchasing a land

Cash price = $74,000

Accured taxes = $4,400

Attorneys fee= $4,300

Real estate brokers commission = $1,500

Clearing and grading = $3,600

Therefore the cost of the land can be calculated as follows

= $74,000 + $4,400 + $4,300 + $1,500 + $3,600

= $87,800

Hence the cost of the land is $87,800

Answer:

$1,513.30

Explanation:

The Trading  price of the Bond is it Present Value (PV) and is calculated as :

Fv = $1000

n = 5 × 2 = 10

pmt = ($1000 × 10.0%) ÷ 2 = $100

p/yr = 2

i = 7.5%

Pv = ?

Using a Financial Calculator, the Price of the Bond (PV) is $1,513.30.

Answer:

1. No match.

2. Rebate.

3. No match.

4. No match.

5. Lease.

Explanation:

1. No match: This is the worth of the leased asset after the lease period expires.

2. Rebate: This is a partial refund offered to attract the buyer to purchase the vehicle.

3. No match: This is the price of an asset being leased as specified in the lease agreement, which includes the negotiated cost of the vehicle and any applicable fees and taxes.

4. No match: This is the advertised retail price listed on a particular vehicle for sale.

5. Lease: This is a contract which allows the lessee (consumer) to use the asset, such as car, land, services etc., in return for a specific amount paid periodically.

Answer:

a. Recorded jobs completed on account and sent Invoices to customers.

Account to be Debited ⇒ 2. Accounts Receivable

Account to be Credited ⇒ 11. Fees Earned

The fees are to be credited as it is revenue. The amount will be debited to Accounts receivables because the customers owe the company.

b. Received an invoice for truck expense to be paid in February.

Account to be Debited ⇒ 15. Truck Expense

Account to be Credited ⇒ 8. Accounts Payable

This is an expense so it is debited as expenses are debited when they increase. As it is to be paid in future, it is a liability and will be credited to Payables.

c. Paid utilities expense

Account to be Debited ⇒ 14. Utilities Expense

Account to be Credited ⇒ 1. Cash

As explained, this is an expense and will have to be debited. It was paid with cash which will reduce the cash balance so Cash should be credited.

d.  Received cash from customers on account

Account to be Debited ⇒ 1. Cash

Account to be Credited ⇒ 2. Accounts Receivable

Debtors are paying the company cash which will increase the cash balance so Cash is debited. The Receivables will be credited to reflect that they are decreasing from the debt settlement.

e. Paid Employees Wages

Account to be Debited ⇒ 12. Wages Expense

Account to be Credited ⇒ 1. Cash

As explained, this is an expense and will have to be debited. It was paid with cash which will reduce the cash balance so Cash should be credited.

f. Withdrew cash for personal use.

Account to be Debited ⇒ 10. Merry Walker, Drawing

Account to be Credited ⇒ 1. Cash

The owner withdrew cash for personal use and so this is sent to the Drawings account. It is debited to reflect that it is reducing capital. Cash will be credited as it is decreasing.

Answer:

The balance sheet

Explanation:

In a balance sheet, one can see the information on the assets of the company, their liabilities and the equity brought by the shareholders at any particular point in time.

In some cases, it can be referred to as statement of net worth because one can be able to see what the company owns and owes and how the assets are financed either as equity or debt.

Answer:

When the purchase price is lower than the fair market value, accountants generally refer to this as negative goodwill. All negative goodwill must be reported as a gain.  

Another way to refer to this type of situation is a bargain purchase (lower price than FMV).

Answer:

Sept 6.   DR Inventory (80 * 20)                                  1,600  

                    CR Accounts Payable                                             $1,600

Sept 9.    DR Inventory                                                    80

                    CR Cash                                                                   80

Sept 10.  DR Accounts Payable                                     63

                    CR Inventory                                                            63

Sept 12.  DR Accounts Receivable (26 * 31)                806

                     CR Sales Revenue                                                806

               DR Cost of Goods Sold  (21 * 26)                 546

                     CR Inventory                                                         546

Sept 14.    DR Sales Returns and Allowances                 31

                     CR Accounts Receivable                                        31

                 DR Inventory                                                  21

                      CR Cost of Goods Sold                                         21

Sept. 20    DR Accounts Receivable (30 * 32)             960

                        CR Sales Revenue                                              960

                  DR Cost of Goods Sold (30 * 21)               630

                        CR Inventory                                                        630

Answer:

the quoted bid price would be 97:16

Explanation:

the quoted ask price will be 97:50

The quoted bid price is the price at which buyers are willing to purchase a security, while the quoted ask is the price at which sellers are willing to sell their securities. There is always a difference between both of them, and it is called the spread.

Answer:

42% and 12%

Explanation:

The computation is shown below:

For Alpha Fund

Positive return = 60%

Lose money is

= 1 - 0.60

= 40%

For Omega Fund

 Positive return = 70%

Lose money is

= 1 - 0.70

= 0.30

Also the returns are non-dependent

Now the positive return is

= 60% × 70

= 42%

And, the probability of lose money is

= 40% × 30%

= 12%

Answer:

a) May 1 G. Gram invested $40,000 cash in the company in exchange for its common stock.

Dr Cash 40,000

    Cr Common stock 40,000

May 1 The company rented a furnished office and paid $2,200 cash for May’s rent.

Dr Rent expense 2,200

    Cr Cash 2,200

May 3 The company purchased $1,890 of equipment on credit.

Dr Equipment 1,890

    Cr Accounts payable 1,890

May 5 The company paid $750 cash for this month’s cleaning services.

Dr Cleaning expenses 750

    Cr Cash 750

May 8 The company provided consulting services for a client and immediately collected $5,400 cash.

Dr Cash 5,400

    Cr Service revenue 5,400

May 12 The company provided $2,500 of consulting services for a client on credit.

Dr Accounts receivable 2,500

    Cr Service revenue 2,500

May 15 The company paid $750 cash for an assistant’s salary for the first half of this month.

Dr Wages expense 750

    Cr Cash 750

May 20 The company received $2,500 cash payment for the services provided on May 12.

Dr Cash 2,500

    Cr Accounts receivable 2,500

May 22 The company provided $3,200 of consulting services on credit.

Dr Accounts receivable 3,200

    Cr Service revenue 3,200

May 25 The company received $3,200 cash payment for the services provided on May 22.

Dr Cash 3,200

    Cr Accounts receivable 3,200

May 26 The company paid $1,890 cash for the equipment purchased on May 3.

Dr Accounts payable 1,890

    Cr Cash 1,890

May 27 The company purchased $80 of equipment on credit.

Dr Equipment 80

    Cr Accounts payable 80

May 28 The company paid $750 cash for an assistant’s salary for the second half of this month.

Dr Wages expense 750

    Cr Cash 750

May 30 The company paid $300 cash for this month’s telephone bill.

Dr Telephone expense 300

    Cr Cash 300

May 30 The company paid $280 cash for this month’s utilities.

Dr Utilities expense 280

    Cr Cash 280

May 31 The company paid $1,400 cash in dividends to the owner (sole shareholder).

Dr Dividends 1,400

    Cr Cash 1,400

                                                 debit               credit

Cash                                        $42,780

Equipment                              $1,970

Accounts payable                                           $80

Common stock                                               $40,000

Service revenue                                             $11,100

Rent expense                         $2,200

Cleaning expenses                $750

Wages expense                     $1,500

Telephone expense               $300

Utilities expense                     $280

Dividends                                $1,400                          

totals                                        $51,180            $51,180

Service revenue                                             $11,100

Expenses:

Net income                                                    $6,070

Beginning balance                                               $0

Common stocks issued                             $40,000

Net income                                                   $6,070

Sub-total                                                     $46,070

Dividends                                                   ($1,400)

Ending balance                                          $44,670

Assets:

Cash $42,780

Equipment $1,970

Total assets                             $44,750

Liabilities and equity:

Accounts payable $80

Common stock $40,000

Retained earnings $4,670

Total liabilities and equity      $44,750

Cash flows from operating activities:

Net income                                      $6,070

Increase in accounts payable             $80

net cash from operating activities  $6,150

Cash flows from financing activities:

Purchase of equipment                  ($1,970)

Cash flow from financing activities:

Common stocks issued               $40,000

Dividends paid                              ($1,400)

net cash fro financing activities  $38,600

net cash increase                        $42,780

beginning cash balance                 $0    

ending cash balance                  $42,780

a.1. The final total for each account is determined in the general ledger as follows:

Date   Account Titles                  Debit       Credit

May 1 Common Stock             $40,000

May 1 Rent Expense                                   $2,200

May 5 Cleaning Services Expense              $750

May 8 Consulting Fees            $5,400

May 15 Salaries Expense                             $750

May 20 Accounts Receivable $2,500

May 25 Accounts Receivable $3,200

May 26 Accounts Payable                       $1,890

May 28 Salaries Expense                          $750

May 30 Telephone Expense                     $300

May 30 Utilities                                          $280

May 31  Dividends                                   $1,400

May 31  Balance                                   $42,780

Totals                                     $51,100   $51,100

Date   Account Titles                  Debit       Credit

May 12 Consulting Fees          $2,500

May 20 Cash                                             $2,500

May 22 Consulting Fees        $3,200

May 25 Cash                                            $3,200

Totals                                      $5,700      $5,700

Date   Account Titles                  Debit       Credit

May 3 Accounts Payable          $1,890

May 27 Accounts Payable              80

May 31 Balance                                          $1,970

Totals                                        $1,970      $1,970

Date   Account Titles                  Debit       Credit

May 1 Cash                                              $40,000

Date   Account Titles                  Debit       Credit

May 3  Equipment                                     $1,890

May 26 Cash                              $1,890

May 27 Equipment                                        $80

May 31  Balance                             $80

Totals                                         $1,970    $1,970

Date   Account Titles                  Debit       Credit

May 8 Cash                                                $5,400

May 12 Accounts Receivable                   $2,500

May 22 Accounts Receivable                    3,200

May 31  Balance                        $11,100

Totals                                        $11,100    $11,100

Date   Account Titles                  Debit       Credit

May 1  Cash                              $2,200

Date   Account Titles                  Debit       Credit

May 5 Cash                                 $750

Date   Account Titles                  Debit       Credit

May 15 Cash                                $750

May 28 Cash                               $750

May 31  Balance                                        $1,500

Totals                                       $1,500     $1,500

Date   Account Titles                  Debit       Credit

May 30 Cash                                $300

Date   Account Titles                  Debit       Credit

May 30 Cash                                $280

Date   Account Titles                  Debit       Credit

May 31 Cash                              $1,400

a.2. The determination that the equation is in balance is established through the Trial Balance as follows:

Date   Account Titles                  Debit       Credit

Cash                                         $42,780

Common stock                                         $40,000

Equipment                                 $1,970

Accounts payable                                           $80

Consulting fees                                          $11,100

Rent expense                         $2,200

Cleaning expenses                   $750

Wages expense                     $1,500

Telephone expense                $300

Utilities expense                      $280

Dividends                              $1,400

Totals                                   $51,180     $51,180

b. The preparation of the income statement is as follows:

The Gram Co.

For the month ended May 31

Service revenue                     $11,100

Expenses:

Rent expense          $2,200

Cleaning expenses    $750

Wages expense      $1,500

Telephone expense $300

Utilities expense       $280 ($5,030)

Net income                          $6,070

c. The preparation of the statement of owner's equity is as follows:

The Gram Co.

As of May 31

Common stocks issued $40,000

Net income                       $6,070

Dividends                        ($1,400)

Ending balance           $44,670

d. The preparation of the Balance Sheet is as follows:

The Gram Co.

As of May 31

Assets:

Cash                        $42,780

Equipment                 $1,970

Total assets            $44,750

Liabilities and equity:

Accounts payable        $80

Equity:

Common stock    $40,000

Retained earnings $4,670

Total equity         $44,670

Total liabilities and

owner's equity   $44,750

e. The preparation of the Statement of Cash Flows is as follows:

The Gram Co.

Operating activities:

Net income                          $6,070

Increase in accounts payable $80

Net operating cash             $6,150

Investing activities:

Purchase of equipment    ($1,970)

Financing activities:

Common stocks issued $40,000

Dividends paid                 ($1,400)

Net financing cash        $38,600

Net cash flows              $42,780

Beginning cash balance        $0

Net cash flows              $42,780

Ending cash balance   $42,780

May 1 Cash $40,000 Common Stock $40,000

May 1 Rent Expense $2,200 Cash $2,200

May 3 Equipment $1,890 Accounts Payable $1,890

May 5 Cleaning Services Expense $750 Cash $750

May 8 Cash $5,400 Consulting Fees $5,400

May 12 Accounts Receivable $2,500 Consulting Fees $2,500

May 15 Salaries Expense $750 Cash $750

May 20 Cash $2,500 Accounts Receivable $2,500

May 22 Accounts Receivable $3,200 Consulting Fees $3,200

May 25 Cash $3,200 Accounts Receivable $3,200

May 26 Accounts Payable $1,890 Cash $1,890

May 27 Equipment $80 Accounts Payable $80

May 28 Salaries Expense $750 Cash $750

May 30 Utilities (Telephone) $300 Cash $300

May 30 Utilities $280 Cash $280

May 31 Dividends $1,400 Cash $1,400

Learn more about preparing financial statements at https://brainly.in/question/33221066

Answer:

Sunk cost

Explanation:

The sunk cost is a type of cost which is already spent or incurred by company these cost are not relevant for the decision making as for the decision making only relevant cost is to be considered

It is a past cost that cannot be recovered back.

hence, as per the given situation, it is a sunk cost and the same is to be considered

Answer:

the implied rate of return on the stock is 14.80%

Explanation:

The computation of the implied rate of return is shown below:

The Rate of return is

= (Dividend at year 1  ÷  share price) + growth rate

= ( $6 ÷ 104) + 0.09

= 0.058 + 0.09

= 14.80%

We simply applied the above formula

And, the same is to be considered

hence, the implied rate of return on the stock is 14.80%

Answer:

A. Dr Cash 174,600

Dr Discount on bonds payable 18,941

Cr Bond Payable 173,000

Cr Paid-in Capital—Stock Warrants

20,541

B. Dr Cash 174,600

Cr Discount on bonds payable 1,600

Cr Bond Payable 173,000

Explanation:

A. Preparation of the Journal entries that should be made at the time of the issuance of the bonds and warrants

Dr Cash 174,600

Dr Discount on bonds payable 18,941

($173,000 - $154,059)

Cr Bond Payable 173,000

Cr Paid-in Capital—Stock Warrants

20,541

[(174,600+18,941)-173,000]

B. Preparation of the journal entry if the warrants were non-detachable Journal entries

Dr Cash 174,600

Cr Discount on bonds payable 1,600

(174,600-173,000)

Cr Bond Payable 173,000

Calculation for value assign to bonds

Value assign to bonds=(155,700/155,700+20,760)*174,600

Value assign to bonds=155,700/176,460*174,600

Value assign to bonds=154,059

Calculation for value assign to warrant

Value assign to warrant=(20,760/155,700+20,760)*174,600

Value assign to warrant=20,760/176,460*174,600

Value assign to warrant=20,541

Answer:

Please see attached trial balance as requested.

Explanation:

Please find attached solved trial balance for Spade Company as at May 31.

Answer:

I couldn't find the questions that should follow these transactions, the only requirement that I found on similar questions was to journalize them:

Oct. 1 Martin purchases 2 new saws on credit at $375 each; the saws are added to Martin's rental fleet; payment is due in 30 days.

Dr Equipment 750

    Cr Accounts payable 750

8 Martin accepts advance deposits for tool rentals of $75.

Dr Cash 75

    Cr Unearned revenue 75

15 Martin receives a $150 bill for electricity provided by Local Electric Company; payment is due in 30 days.

Dr Electricity expense 150

    Cr Accounts payable 150

20 Customers are charged $750 by Martin for tool rentals; payment is due from customers in 30 days.

Dr Accounts receivable 750

    Cr Service revenue 750

31 Payments of $500 are received by Martin from customers billed for rentals on October 20.

Dr Cash 500

    Cr Accounts receivable 500

Answer:

KW Steel Corp. and Waretown Steel

LIFO and FIFO Inventory Valuation Methods:

a. Computation of each company's 20X1 gross margin percentage and inventory turnover:

                                         KW Steel Corp.           Waretown Steel

                                         ($ in millions)                ($ in millions)

                                        20X1         20X0           20X1         20X0

B/sheet inventories      $797.6      $692.7         $708.2      $688.6

LIFO reserve                   378.0        334.9

Sales                            4,284.8     4,029.7         3,584.2     3,355.8

Cost of goods sold     3,427.8     3,226.5         2,724.0      2,617.5

Gross margin               $857.0     $803.2          $860.0      $738.3

Gross margin %             20%                                24%

Average Inventory =  $745.15                         $698.4        

Inventory Turnover    4.6 ($3,427.8/$745.15)  3.9  ($2,724.0/$698.4)

b. Restatement of KW's cost of goods sold and inventory balances to FIFO:

                                     KW Steel Corp.           Waretown Steel

                                       ($ in millions)                ($ in millions)

                                     20X1         20X0           20X1         20X0

Sales                         4,284.8     4,029.7         3,584.2     3,355.8

Cost of goods sold $3,805.8  $3,561.40

Gross margin             $479.0     $468.3          $860.0      $738.3

Gross margin %           11.2%                                24%

Inventory Turnover    9.8 ($3,805.8/$388.75)  3.9  ($2,724.0/$698.4)

c. The performance of KW Steel worsened with the reinstatement of the LIFO reserves.  Before the reinstatement, KW Steel was running closely behind its competitor, Waretown Steel.  But after the reinstatement, Waretown gave KW Steel more gap in performance.  This reinstatement shows that when the performances of two companies are compared based on different criteria, the financial analyst will likely arrive at a wrong conclusion.

Explanation:

a) Data and Calculations:

                                         KW Steel Corp.           Waretown Steel

                                         ($ in millions)                ($ in millions)

                                        20X1         20X0           20X1         20X0

B/sheet inventories      $797.6      $692.7         $708.2      $688.6

LIFO reserve                   378.0        334.9

Sales                            4,284.8     4,029.7         3,584.2     3,355.8

Cost of goods sold     3,427.8     3,226.5         2,724.0      2,617.5

Gross margin               $857.0     $803.2          $860.0      $738.3

Gross margin %             20%                                24%

Average Inventory =  $745.15                         $698.4        

Inventory Turnover    4.6 ($3,427.8/$745.15)  3.9  ($2,724.0/$698.4)

c.

                                     KW Steel Corp.           Waretown Steel

                                       ($ in millions)                ($ in millions)

                                     20X1         20X0           20X1         20X0

B/sheet inventories   $797.6      $692.7         $708.2      $688.6

LIFO reserve                378.0        334.9

FIFO balance             $419.6      $357.8

Cost of goods sold  3,427.8     3,226.5         2,724.0      2,617.5

LIFO reserve               378.0        334.9

Average Inventory =  $745.15                         $698.4

New Average Invt.      388.75      

Answer:

cash account reconciliation:

cash account balance      $16,893

+ earned interest                     $10

- bank fees                               ($6)

reconciled cash account $16,897

bank account reconciliation:

bank account balance      $17,616

+ deposits in transit           $2,785

- outstanding check         ($3,504)

reconciled bank account $16,897

After the accounts have been reconciled, both must have the same balance. If not, then you must check your answer and recalculate until both match.

Answer and Explanation:

The consumer price index refers to an index in which the prescribed market cost of goods & services by the prices years from the base year prices of the prescribed market basket and then it is multiplied by 100.

But the Gross Domestic Inflator would be represented when the all types of prices of goods and services generated domestically

An increase in the price refelected the GDP deflator

And, the decrease in the price of treewood represents CPI

Answer:

$16,500

Explanation:

She invested = $12,000

Total money spent to acquire the policy = ($16,500 + $5000) = $21,500

Total money invested on policy = $21500 + $12000

Total money invested on policy = $33500

Money that sara got after angela died = $50,000

Therefore, the taxable proceed will be = $50,000 - $33,500 = $16,500

Answer:

I used an excel spreadsheet since there is not enough room here.              

Explanation:

Answer: Check explanation

Explanation:

a. Sales tax payable

Amount = $120,000 × 5%

= $120,000 × 0.05

= $6000

b. Notes payable, short term

Amount = $85000

Interest payable = $85000 × 4% × 4/12

= $1133.3

c. Unearned revenue

Amount: $2400 × 2/6

= $800

d. Accrued Warranty Payable

Amount = $11600 + $34000 - $34800

= $10800

e. Current portion of long term note payable

Amount = $35,000

Interest payable

Amount = $70000 × 12%

= $8400

Please find attached

Answer and Explanation:

1. If there are no other bidders present as from question them we can conclude that Kenji would buy the art piece for $5000. See question

2. If there is a bidder present in the name of Manuel who would bid for $8000 then Kenji would bid at $8000 and win the bid for the art piece. See question. Kenji would bid at price of 2nd highest bidder to win the bid for art piece

Answer:

The answer is "8.37%".

Explanation:

[tex]\text{MV of equity} = \text{equity price} \times \text{number of outstanding shares}[/tex]

                     [tex]=84 \times 4100000\\\\=344400000[/tex]

[tex]\text{MV of Bond1}=\text{Par value} \times \text{bonds outstanding} \times \text{age of percentage}[/tex]

                      [tex]=1000 \times 70000 \times 0.98 \\\\=68600000[/tex]

[tex]\text{MV of Bond2}=\text{Par value} \times \text{bonds outstanding} \times \text{age of percentage}[/tex]

                      [tex]=1000 \times 50000 \times 1.08 \\\\=54000000[/tex]

[tex]\text{MV of firm} = \text{MV of Equity} + \text{MV of Bond1}+ \text{MV of Bond 2}[/tex]

                  [tex]=344400000+68600000+54000000\\\\=467000000[/tex]

[tex]\text{Weight of equity W(E)} = \frac{\text{MV of Equity}}{\text{MV of firm}}[/tex]

                                     [tex]= \frac{344400000}{467000000}\\\\=0.7375[/tex]

[tex]\text{Weight of debt W(D)}= \frac{\text{MV of Bond}}{\text{MV of firm}}[/tex]

                                  [tex]= \frac{122600000}{467000000}\\\\=0.2625[/tex]

Equity charges

By DDM.  

[tex]\text{Price = new dividend} \times \frac{(1 + \text{rate of growth})}{( \text{Equity expense-rate of growth)}}[/tex]

[tex]84 = 3.95 \times \frac{(1+0.05)}{(\text{Cost of equity}- 0.05)}\\\\84 = 3.95 \times \frac{(1.05)}{(\text{Cost of equity} - 0.05)}\\\\84 = \frac{4.1475}{ (\text{Cost of equity} - 0.05)}\\\\\text{Cost of equity} -0.05 = \frac{4.1475}{84}\\\\\text{Cost of equity} -0.05 = 0.049375\\\\\text{Cost of equity} = 0.049375 + 0.05\\\\\text{Cost of equity} = 0.099375 \\\\\text{Cost of equity} \% = 9.9375 \% \ \ \ or \ \ \ 9.94 \% \\\\[/tex]

Debt expenses  

Bond1

[tex]K = N \times 2 \\\\[/tex]

[tex]Bond \ Price = \sum [ \frac{\text{(Semi Annual Coupon)}}{(1 + \frac{YTM}{2})^k}] + \frac{Par\ value}{(1 + \frac{YTM}{2})^{N \times 2}}[/tex]

[tex]k=1\\\\K =20 \times 2\\\\980 = \sum [ \frac {(5.1 \times \frac{1000}{200})}{(1 + \frac{YTM}{200})^k}] + \frac{1000}{(1 + \frac{YTM}{200})}^{20 \times 2}\\\\k=1\\\\\ YTM1 = 5.2628923903\\\\Bond2\\[/tex]

[tex]K = N \times 2[/tex]

[tex]Bond \ Price = \sum [ \frac{\text{(Semi Annual Coupon)}}{(1 + \frac{YTM}{2})^k}] + \frac{Par\ value}{(1 + \frac{YTM}{2})^{N \times 2}}[/tex]

[tex]k=1\\\\K =12 \times 2\\\\[/tex]

[tex]1080 =\sum [\frac{(5.6 \times \frac{1000}{200})}{(1 + \frac{YTM}{200})^k}] +\frac{1000}{(1 +\frac{YTM}{200})^{12 \times 2}} \\\\k=1\\\\YTM2 = 4.72\\\\[/tex]

[tex]\text{Company debt costs} = YTM1 times \frac{(MV \ bond1)}{(MV \ bond1+MV \ bond2)}+YTM2 \times \frac{(MV \ bond2)}{(MV \ bond2)}\\\\[/tex]

The cost of the debt for the company:

[tex]= 5.2628923903 \times \frac{(68600000)}{(68600000+54000000)}+4.72 \times \frac{(68600000)}{(68600000+54000000)}\\\\[/tex]

Business debt cost=[tex]5.02 \% \\\\[/tex]

after taxation cost of debt:  

[tex]= \text{cost of debt} \times (1- tax \ rate)\\\\= 5.02 \times (1-0.21)\\\\= 3.9658\\\\[/tex]

[tex]WACC= \text{after debt charges} \times W(D)+equity cost \times W(E) \\\\[/tex]

            [tex]=3.97 \times 0.2625+9.94 \times 0.7375 \\\\ =8.37 \% \\\\[/tex]

Answer:

a. What is the estimated contribution margin per ticket sold for the benefit concert?

contribution margin per ticket = ($15.50 + $2 + $17) - ($6 + $2.55 + $7) = $34.50 - $15.55 = $18.95

b. What are the estimated total fixed costs for the benefit concert?

total fixed costs = $21,000 + $85,000 = $106,000

c. What is the estimated profit from the benefit concert if 10,500 tickets are sold?

estimated profit = (10,500 x $18.95) - $106,000 = $92,975

d. How many tickets must be sold in order for concert profit to be $100,000?

number of tickets sold = ($106,000 + $100,000) / $18.95 = 10,870.71 ≈ 10,871 tickets sold

e. Assuming a tax rate of 31% on profits from the concert, what must dollar ticket sales be in order for after-tax concert profits to be $100,000?

$100,000 / (1 - 31%) = $144,927.54

number of tickets sold = ($106,000 + $144,927.54) / $18.95 = 13,241.56 ≈ 13,241.56 tickets sold

f. Assume that the organizers can negotiate the fixed payment for the pavilion's operating expenses. If the organizers expect to sell 10,500 tickets, how much can they afford to pay and still earn a profit of $100,000 (ignore taxes)?

contribution margin increases to $18.95 + $7 = $25.95

10,500 = ($21,000 + $100,000 + ?) / $25.95

$272,475 = $121,000 + ?

? = $151,475

you can pay up to $151,475 in fixed expenses to the pavilion

Answer:

a) sales revenue     75,760

  cost of good sold 51,000

gross profit:             24,760

b)

LESSOR ENTRIES:

lease receivable  69,260 debit

cash                        6,500 debit

  sales revenue     75,760 credit

--to record sale on lease--

cost of good sold 51,000 debit

    Inventory            51,000 credit

--to record cost--

LESEE ENTRIES:

equipment 75,760 debit

 lease liability    69,260 credit

 cash                    6,500 credit

Lease Schedule:

[tex]\left[\begin{array}{cccccc}Time&Beg&Cuota&Interest&Amort&Ending\\0&75760&6500&&6500&69260\\1&69260&6500&2078&4422&64838\\2&64838&6500&1945&4555&60283\\3&60283&6500&1808&4692&55591\\4&55591&6500&1668&4832&50759\\5&50759&6500&1523&4977&45782\\6&45782&6500&1373&5127&40655\\7&40655&6500&1220&5280&35375\\8&35375&6500&1061&5439&29936\\9&29936&6500&898&5602&24334\\10&24334&6500&730&5770&18564\\11&18564&6500&557&5943&12621\\12&12621&13000&379&12621&0\\\end{array}\right][/tex]

December 31st, 2021  (1st payment)

LESEE ENTRIES:

lease liability        4,422 debit

interest expense 2,078 debit

     cash                     6,500 credit

--to record payment--

depreciation expense 3,547.5 debit

       acc depreciation      3,547.5 credit

--to record depreciation--

LESSOR ENTRIES:

cash 6,500 debit

     lease receivables  4,422 credit

    interest revenue    2,078 credit

e) option exercised:

LESEE ENTRIES:

lease liability       12,621 debit

interest expense     379 debit

     cash                     13,000 credit

--to record purchase option--

LESSOR ENTRIES:

cash 13,000 debit

     lease receivables  12,621  credit

    interest revenue         379 credit

--to record purchase option--

Explanation:

We solve for the present value of the lease:

Present Value of Annuity-due

[tex]C \times \frac{1-(1+r)^{-time} }{rate} = PV\\[/tex]

C $6,500

time 12

rate     0.03

[tex]6500 \times \frac{1-(1+0.03)^{-12} }{0.03} = PV\\[/tex]

PV $66,642.0567

+ 13,000 purchase option on June 2024:

PRESENT VALUE OF LUMP SUM

[tex]\frac{Maturity}{(1 + rate)^{time} } = PV[/tex]  

Maturity  13,000.00

time   12.00

rate  0.03

[tex]\frac{13000}{(1 + 0.03)^{12} } = PV[/tex]  

PV   9,117.94

Total lease receivables: 66,642.06 + 9,117.94 = 75,760

a) sales revenue     75,760

  cost of good sold 51,000

gross profit:             24,760

d) depreciation on equipment:

(75,760 - 19,000) / 4 year = 14,190 per year

we divide by four as only a quarter of the year past:

14,190 / 4 quarter = 3,547.5

It is the lesee which does the depreicaiton as the Truck possesion belong to it.