Two methods can be used to produce expansion anchors. Method A costs $65,000 initially and will have a $18,000 salvage value after 3 years. The operating cost with this method will be $28,000 in year 1, increasing by $3600 each year. Method B will have a first cost of $108,000, an operating cost of $8000 in year 1, increasing by $8000 each year, and a $38,000 salvage value after its 3-year life. At an interest rate of 8% per year, which method should be used on the basis of a present worth analysis
Answers
Answer:
Method B should be used
Explanation:
Note: See the attached excel file for the calculation of the present worth of Method A and Method B.
From the attached excel file, we have:
Present worth of Method A = –$210,889.85
Present worth of Method B = –$118,011.18
Since the present worth of Method A and B above imply Method A costs more than Method B, Method B should be used.
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Harriet's Wimsey is a bookstore for people who love mysteries. How would a complete set of P. D. James mystery novels, a first edition copy of The Maltese Falcon, the money in the cash register, and an IOU from a loyal customer who forgot her wallet one day when she came to purchase the newest Dorothy Cannell book be listed on the store's balance sheetA. as owners' equity B. as current liabilities C. as fixed assetsD. as long-term liabilities E. as current assets
Answers
Answer:
Explanation:
a) A corporation?
A Corporations are taxable entities. Miller, Inc. will pay tax on its income. Ramona will be taxed on dividends received. Ramona has $36,000 ($180,000 x 20%) of dividend income from Miller. The dividend income will be taxed at 15%.
b) An S corporation?
An S corporations are conduit entities and do not pay tax on their income. The income from the conduit flows through and is taxed to the owners of the S corporation. Ramona will be taxed on 20% of Miller's income. Capital gains and losses of conduit entities must be reported separately, so that the owners can properly treat them in the calculation of their net capital gain or loss for the year. Miller has $700,000 ($3,400,000 - $1,800,000 - $900,000) of operating income and a $250,000 long-term capital gain in the current year. Ramona must include $140,000 ($700,000 x 20%) of ordinary income and $50,000 ($250,000 x 20%) of long-term capital gain on her individual return. The $140,000 of ordinary income is added to Ramona's gross income. The long-term capital gain of $50,000 is netted with other capital gains and losses. Because the income of the conduit is being taxed at the owner level, dividends paid to owners are considered to be returns of capital investment and are not taxed.
Answer: on S corporation taxable income will be affected by 140,000 and on corporation it will be 36000
Taxable income of Ramona
S corporation Corporation
share on profits 140000 0
dividends 36000
Explanation:
Miller Inc
S corporation corporation
sales 3400000 3400000
cost of sales 1800000 1800000
gross profit 1600000 1600000
other income 250000 250000
gain on sale of stock 250000 250000
operating expenses 900000 900000
Net Profit 950000 950000
dividends 0 180000
taxable income of Miller Inc
S corporation Corproration
Net Profit 950000 950000
gain on sale of stock -250000 -250000
Taxable Income 700000 700000
for the S corporation Miller gets a share of 20% on the taxable profits of the S corporation and on the corporation he gets 20% of the total dividends to shareholder. The gain is capital in nature and is not taxable income as per SARS.
Answers
Answer:
Pederson enterprise would realize $8,000 incremental income by accepting the special Oder.
Explanation:
Pederson Enterprise
Incremental revenue (8,000 ×$14)
$112,000
Incremental variable costs ($12 ×8,000). (96,000)
Incremental shipping costs
($1×8,000) (8,000)
Incremental profit if special order accepted. $8,000
Pederson enterprise would realize $8,000 incremental income by accepting the special Oder as shown in the table above.
Answers
Answer:
Accounts receivable turn over is 16.64
Explanation:
To compute accounts receivable turn over ratio, we simply divide net credit sales over the average accounts receivable.
Accounts receivable turn over ratio = $1,240,000/$74,500
= 16.64
The higher the ratio, the better it is in the company. It simply means, the company exercises the effective way to collect its receivable from the customer.
*Net credit sales is derived by deducting sales returns and allowances from gross credit sales. If the problem is silent regarding cash sales, we will assume that the sales made by the period is all at credit.
Answers
Answer:
The actual usage of materials was less than the standard allowed.
Explanation:
Based on these variances, one could conclude that the actual usage of materials was less than the standard allowed because the Company planned to produce 3,000 units of its single product during November in which the standards for one unit of the product specify six pounds of materials at $0.30 per pound but at the end the Actual production in November was 3,100 units instead of 3,000 unit which was planned .
Therefore Materials quantity variance = (AQ - SQ) SP.
A favorable materials quantity variance can occurred in a situation where the actual usage of materials was less than the standard allowed which is AQ < SQ.
b) should the new computer system be purchased?
Answers
Galvanized Products consideration to buy a new computer system for their enterprise data management system with the purchase price of $100,000 is being a good decision
Explanation:
Purchase value $100,000
cash on hand 75,000 + bank loan 1/4 of $100,000= $25000 =$100,000
Estimated Income
(increased efficiencies-payment to technician+MARR )× 5( life span )+ 5000 (salvage value )
(($55,000-$25,000=30,000)+(100,000×18÷100)=18000))×5 =$240,000+5000 = $245,000
Expected liabilities
bank loan interest=((P*(1+i)^n) - P)=(25,000×(1+0.15)^3-25,000)= 13,022
Net value of the purchase proposal
(Estimated Income - Expected liabilities) - Purchase price
= (245,000 - 13,022) = $231,978 - $100,000 = $131,978 (profit)
Hence ,the Galvanized Products consideration to buy a new computer system is a good decision.
Final answer:
The present worth of this investment is -$30,911.60, and the new computer system should not be purchased as the current estimates show that the benefits do not outweigh the costs at the 18% discount rate.
Explanation:
To determine whether the investment is worth it, we will need to calculate the Net Present Value (NPV) of the investment. This takes into account the present value of both the costs and the benefits associated with the investment.
Let's start by calculating the present value of the costs:
- The system itself costs $100,000.
- The loan is $25,000, compounded annually at a rate of 15% over 3 years, which results in a total repayment of roughly $31,357.50 using the formula P(1+r)^n.
- The technician costs amount to a total of $125,000 over 5 years. If we discount these payments back to their present value using the rate of 18%, we get approximately $88,938.24. Using the formula [P/(1+r)^n] for each year and adding them up.
The total present value of costs is therefore roughly $220,295.74.
Next, let’s calculate the present value of the benefits. This is comprised of the $55,000 savings per year due to increased efficiencies, discounted back to present value over 5 years at a rate of 18%, which results in approximately $184,384.14. Then we add the salvage value of the system, which is $5,000, because this value is already in present terms.
The total present value of the benefits is thus around $189,384.14.
The net present value (NPV), calculated by subtracting the present value of costs from the present value of benefits, is thus around -$30,911.60. Since this is a negative value, this suggests that the anticipated benefits of the system does not outweigh its costs at the 18% discount rate.
Therefore: a) the present worth of this investment is about -$30,911.60 and b) the new computer system should not be purchased, based on these calculations and assumptions.
Learn more about Net Present Value Calculation here:
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Answers
Answer:
the standard deviation of demand during the 4-day lead time is 30
Explanation:
the computation of the standard deviation of demand during the 4-day lead time is given below;
= Sqrt(Lead time) × Std deviation daily demand
= Sqrt(4) × 15
=2 × 15
= 30
Hence, the standard deviation of demand during the 4-day lead time is 30