Answer:
journal entries to make are as shown below: DAKOTA MINING CO
question 1
Date Transaction Debit credit amount
July 23 land purchase Land account $ 4,715,000
july 23 land purchase Bank $ 4,715,000
question 2
July 25 Machine cost machine account $410,000
July 25 Machine cost bank $410,000
December 31 depletion 5 months profit $441,600
December 31 depletion mine reserve $0.92/ton
December 31 Depreciation profit $441,600
December 31, depreciation land $441,600
Explanation:
Purchase of fixed asset: the asset account usually have debit balances, so you debit the asset account and credit Dakota bank account where the money was paid out. The land account and machine accout will have the purchase cost/installation cost as debit balances(entries) respectively while Dakota Mining co bank account will be credited with the respective amounts $ 4,715,000 -land purchase and $410,000- machine cost/installation.
The depletion quantity in 5 months was given. using ratio we extrapolate the depletion quantity was a full year as 1,152,000 QTY (12/5 X 480,000)
= 1,152,000 QTY the useful life of the mine is then calculated by dividing the reserve amount by the annual production of 1,152,000 = 4.448784 yrs
depreciation annually = divide cost of land by useful life = $1.059,840
5 months depreciation = 5/12 x annual depreciation = $441,600
depletion per ton is gotten as follows: divide $441,600 by 480,000 tons mined for 5 months = 0.92/ton depletion rate
Steel 1.18 30%
Financial
Services 1.14 70%
The average tax rate for these industries is 40%.
In the most recent period, the company you are analyzing earned 70% of its operating income from steel and 30% from financial services. The firm also had a debt/equity ratio of 150%, and a tax rate of 30%. Estimate the levered beta for the company.
Answer:
The levered beta for the company is 1.93.
Explanation:
Levered beta for the company = (Weight of steel business*levered beta of steel business) + (Weight of financial services business*levered beta of financial services business)
Levered beta of steel business = Unlevered beta of steel sector*[1+(1 - firm's tax rate)*(firm's debt/equity ratio)
levered beta of financial services business = Unlevered beta of financial services sector*[1+(1 - firm's tax rate)*(firm's debt/equity ratio)
Unlevered beta of steel sector = Current beta of steel sector/[1+(1 - avg. tax rate of firms in the sector)*(Avg. debt/equity ratio of the sector)
Unlevered beta of steel sector = 1.18/[1+((1-0.4)*0.3)]
Unlevered beta of steel sector = 1.18/[1+(0.6*0.3)]
Unlevered beta of steel sector = 1.18/(1+0.18)
Unlevered beta of steel sector = 1.18/1.18
Unlevered beta of steel sector = 1
Levered beta of steel business = 1*[1+((1-0.3)*1.5)]
Levered beta of steel business = 1*[1+(0.7*1.5)]
Levered beta of steel business = 1*(1+1.05)
Levered beta of steel business = 1*2.05
Levered beta of steel business = 2.05
Unlevered beta of financial services sector = Current beta of financial services sector/[1+(1 - avg. tax rate of firms in the sector)*(Avg. debt/equity ratio of the sector)
Unlevered beta of financial services sector = 1.14/[1+((1-0.4)*0.7)]
Unlevered beta of financial services sector =1.14/[1+(0.6*0.7)]
Unlevered beta of financial services sector = 1.14/(1+0.42)
Unlevered beta of financial services sector = 1.14/1.42
Unlevered beta of financial services sector = 0.80
Levered beta of financial services business = 0.8*[1+((1-0.3)*1.5)] = 0.8*[1+(0.7*1.5)] = 0.8*(1+1.05) = 0.8*2.05 = 1.64
Levered beta for the company = (0.7*2.05) + (0.3*1.64)
Levered beta for the company = 1.44 + 0.49
Levered beta for the company = 1.93
Hence, the levered beta for the company is 1.93.
To estimate the levered beta for a company with operations in multiple sectors - steel and financial services in this case - you take a weighted average of the sector betas based on earnings distribution to get the unlevered beta. You then adjust for the company's debt/equity ratio and tax rate to get the levered beta. The estimated levered beta for this company is 2.378.
To estimate the levered beta for the company, we first need to consider the betas for each of the sectors the company operates in - steel and financial services. Given the firm's earnings distribution, the unlevered beta is computed as 0.7*Steel Beta + 0.3*Financial Services Beta = 0.7*1.18 + 0.3*1.14 = 1.16.
Next, to calculate the levered beta, we need to factor in the firm's debt/equity ratio. We use the formula for the levered beta: Levered Beta = Unlevered Beta * (1 + (1 - Tax Rate) * D/E ratio). Substituting the values we have: Levered Beta = 1.16 * (1 + (1 - 0.3) * 1.5) = 1.16 * 2.05 = 2.378. Therefore, the estimated levered beta is 2.378.
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If Garden Variety Flower Shop uses 750 clay pots a month. The pots are purchased at $2 each. Annual carrying costs per pot are estimated to be 30 percent of cost, and ordering costs are $20 per order. The manager has been using an order size of 1,500 flower pots:
a. Additional annual cost
Annual demand (D) =$750 x 12= $9,000
Ordering cost=$20 per order
Annual carrying costs(H)=0.30 ×$2.00 = $0.60
Order Quantity(Q) = 1,500
Find TC for Q
TC=Q÷2×H + D÷Q × S
TC=1,500÷2 × $0.60 + $9,000÷1,500×$20
TC=$450+$120
TC=$570............. (1)
Now find Qo
Qo=√2DS÷H
Qo=√2×$9,000×$20÷0.60
Qo=√600,000
Qo=$774.596
Qo=$774.60 (Approximately)
Find TC for Qo
TC=Q÷2×H + D÷Q ×
TC=774.60÷2 × $0.60 + $9,000÷774.60×$20
TC=$232.38+$232.38
TC=$464.76................(2)
Now let determine the additional annual cost
Additional annual cost=$570-$464.56
Additional annual cost=$105.24
b. Benefit would using the optimal order quantity yield (relative to the order size of 1,500)
Benefit=Qo÷Q
Benefit=$774.60÷1,500×100
Benefit=51.63%
The benefit is that about 51.63% of the storage space would be needed.
Learn more here:
Answer:
Additional cost= $570
Explanation:
Monthly demand = 750
Annual demand (D) = Monthly Demand x Number of months in a year
Annual demand (D) = 750 x 12 = 9,000
Cost (C) = $2.00 each
Annual carrying costs (Cc) = 30 percent of cost
Annual carrying costs (Cc) = 30% of $2.00 = $0.60
Ordering costs (Co) = $20
Current order quantity (Q1) = 1,500
Solution:
(a) Current cost is calculated as,
Current cost = Annual carrying costs + Annual ordering costs
Current cost = [(Quantity / 2) x Carrying cost] + [(Annual demand / Current Quantity) x Ordering cost]
Current cost = [(1500 / 2) x $0.60] + [(9000 / 1500) x $20]
Current cost = $450 + $120
Current cost = $570
Answer:
The correct answer is letter "B": decrease the real rental price of capital.
Explanation:
The supply of capital increases when individuals and organizations have received more income out of their labor activities or production processes. As a result, the need for requesting loans will decrease. Thus, banks and financial institutions will decrease their interest rates to promote loans which will decrease the rental price of capital.
Answer:
The possible topics for writing a research paper:
Wages and salaries 60% 30% 10%
Other overhead 50% 35% 15%
Riverside anticipates making 20,000 bouquets and 4,000 deliveries in the upcoming year. The cost of wages and salaries and other overhead that would be charged to each bouquet made is closest to:
a. $12.50.
b. $7.15.
c. some other amount.
d. $8.75.
e. $13.75.
Answer:
b. $7.15
Explanation:
Cost of wages & salaries per bouquet = [($180,000*60%) + ($70,000*50%)] / 20,000
Cost of wages & salaries per bouquet = ($108,000 + $35,000) / 20,000
Cost of wages & salaries per bouquet = $143,000 / 20,000
Cost of wages & salaries per bouquet = $7.15
So, the cost of wages and salaries and other overhead that would be charged to each bouquet made will be $7.15.
The cost of wages and salaries charged to each bouquet is approximately $7.15.
Option (b) is true.
To find the cost of wages and salaries and other overhead allocated to each bouquet made, we can use the information provided for the allocation percentages for bouquet production.
Wages and Salaries allocated to bouquet production = 60%
Other overhead allocated to bouquet production = 50%
Now, let's calculate the costallocated to each bouquet:
Wages and Salaries for Bouquet Production:
Wages and Salaries = 60% of $180,000 (company personnel)
Wages and Salaries for Bouquet Production = 0.60 * $180,000 = $108,000
Other Overhead for Bouquet Production:
Other Overhead = 50% of $70,000 (other firm-wide overhead)
Other Overhead for Bouquet Production = 0.50 * $70,000 = $35,000
Now, add these two costs together to get the total cost allocated to bouquet production:
Total Cost Allocated to Bouquet Production = Wages and Salaries for Bouquet Production + Other Overhead for Bouquet Production
= $108,000 + $35,000
= $143,000
Now, we need to find the cost per bouquet. Given that Riverside anticipates making 20,000 bouquets in the upcoming year, divide the total cost allocated to bouquet production by the number of bouquets:
Cost per Bouquet = Total Cost Allocated to Bouquet Production / Number of Bouquets
Cost per Bouquet = $143,000 / 20,000 bouquets
Now, calculate the cost per bouquet:
Cost per Bouquet = $7.15
So, the cost of wages and salaries and other overhead allocated to each bouquet made is closest to $7.15.
The answer is (b) $7.15.
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