3a. Resilient Company had sales of $100,000, operating income of $15,000 and net income of $10,000...

3a. Resilient Company had sales of $100,000, operating income of $15,000 and net income of $10,000 in 2017. Total assets amounted to 180,000 at the beginning of 2017 and 220,000 at the end of the year. Total stockholders’ equity amounted to $45,000 at the beginning of 2017 and $55,000 at the end of 2017. Using the DuPont formula, calculate the return on investment for Resilient in 2017. Calculate return of stockholders’ equity for 2017.

3b. Volume Company sold for $950,000 bonds that had a face (maturity) value of $1,000,000 on June 1, 2017. The bonds had a 5 year term with a maturity date of May 31, 2022. The annual interest rate on the bonds is 12 percent which is paid semiannually each November 30 and May 31. What entries should Volume Company make on issuance of the bond on June 1, 2017, on payment of interest on November 30, 2017 and on the accrual of interest on December 31, 2017?

Expert Solution

Solution 3a:

Net Profit margin = Net Income / Sales = $10,000 / $100,000 = 10%

Average Total assets = ($180,000 + $220,000)/2 = $200,000

Asset turnover = Sales / Average total assets = $100,000 / $200,000 = 0.50

Return on investment = Profit margin * Asset turnover = 10% * 0.5 = 5%

Equity Multiplier = Average total assets / Average stockholder's equity

Average stockholder's equity = ($45,000 + $55,000)/2 = $50,000

Equity multiplier = $200,000 / $50,000 = 4

Return on stockholder's equity = Net Profit margin * Asset turnover * Equity multiplier

= 10% * 0.5 * 4 = 20%

Solution 3b:

Journal Entries - Volume Company
Date	Particulars	Debit	Credit
1-Jun-17	Cash Dr	$950,000.00
	Discount on issue of bond Dr	$50,000.00
	To Bond Payable		$1,000,000.00
	(To record issue of bond)

30-Nov-17	Interest expense Dr	$65,000.00
	To Discount on issue of bond ($50,000/10)		$5,000.00
	To Cash		$60,000.00
	(To record interest payment and discount amortization)

31-Dec-17	Interest expense Dr	$10,833.00
	To Discount on issue of bond ($50,000/5*1/12)		$833.00
	To Cash ($1,000,00012%1/12)		$10,000.00
	(To record interest expense accured and discount amortized)

ekkarill92 answered 1 year ago

The Alpha Company had sales of $2,000,000, net operating income of $320,000 and average operating assets...

The Alpha Company had sales of $2,000,000, net operating income of $320,000 and average operating assets of $575,000. What was the return on investment? Round your percentage answer to the nearest whole percent. Answer:____________ ABC Industries is evaluating the amount of time between when a customer places an order and when the order is shipped. For last year, the following data was reported: Inspection time 0.3 days Wait time 7.0 days Process time 2.6 days Move time ...

MC Qu. 99 A company had net income... A company had net income of $2,690,000, net...

MC Qu. 99 A company had net income... A company had net income of $2,690,000, net sales of $25,200,000, and average total assets of $8,400,000. Its return on total assets equals: Multiple Choice -312.27%. -33.33%. -10.67%. -32.02%. -3.12%. MC Qu. 109 Carpark Services... Carpark Services began operations in 20X1 and maintains long-term investments in available-for-sale securities. The year-end cost and fair values for its portfolio of these investments follow. The year-end adjusting entry to record the unrealized gain/loss at December...

1) A company had net income of $2,740,000, net sales of $26,500,000, and average total assets...

1) A company had net income of $2,740,000, net sales of $26,500,000, and average total assets of $11,800,000. Its return on total assets equals: Multiple Choice 23.22%. 44.53%. 10.34%. 4.31%. 430.66%. 2) Using the information below, calculate cost of goods sold for the period: Sales revenues for the period $ 1,316,000 Operating expenses for the period 251,000 Finished Goods Inventory, January 1 48,000 Finished Goods Inventory, December 31 53,000 Cost of goods manufactured for the period 552,000 Multiple Choice $798,000....

1. A company had net income of $48,000, net sales of $380,000, and average total assets...

1. A company had net income of $48,000, net sales of $380,000, and average total assets of $280,000. Its profit margin and total asset turnover were respectively: Multiple Choice 1.36%; 0.17. 1.97%; 1.36. 12.63%; 1.36. 1.36%; 12.63. 12.63%; 0.17. 2. Six months ago, a company purchased an investment in stock for $69,000. The investment is classified as available-for-sale securities. This is the company’s first and only investment in available-for-sale securities. The current fair value of the stock is $72,600. The...

If a business has $100,000 in net income, $20,000 in advertising expenses, $10,000 in accounting fees,...

If a business has $100,000 in net income, $20,000 in advertising expenses, $10,000 in accounting fees, and a $40,000 positive effect in foreign currency adjustments, then what is their comprehensive income?

Impact of Increased Sales on Operating Income Using the Degree of Operating Leverage Head-First Company had...

Impact of Increased Sales on Operating Income Using the Degree of Operating Leverage Head-First Company had planned to sell 5,000 bicycle helmets at $75 each in the coming year. Unit variable cost is $45 (includes direct materials, direct labor, variable factory overhead, and variable selling expense). Total fixed cost equals $49,500 (includes fixed factory overhead and fixed selling and administrative expense). Operating income at 5,000 units sold is $100,500. The degree of operating leverage is 1.5. Now Head-First expects to...

Net operating income for the Midal Company for 2018 was: Sales (45,000 units) $450,000 Cost of...

Net operating income for the Midal Company for 2018 was: Sales (45,000 units) $450,000 Cost of goods sold: Direct materials $ 90,000 Direct labor 67,500 Variable overhead 27,000 Fixed overhead 45,000 $229,500 Gross margin $220,500 Selling and administrative expenses: Fixed $140,500 variable 27,000 167,500 Net operating income $ 53,000 To prepare the budget for 2019, sales are forecasted at a 20% volume increase with no change in sales price or variable costs per unit. Fixed overhead...

In 2020 Our Company had Net Income of $550,000. On 1/1/20, there were 100,000 shares of...

In 2020 Our Company had Net Income of $550,000. On 1/1/20, there were 100,000 shares of common stock outstanding. On 4/1/20, we issued 36,000 shares of common stock. On 6/1/20, we issued 24,000 shares of $100 par value, 6% cumulative preferred stock. This preferred stock is convertible into 48,000 shares of common stock. On 9/1/20, we issued $6,000,000 of 4% bonds at par. These bonds are convertible into 48,000 shares of common stock. The marginal tax rate is 25%. In...

. In the last month, Cash Is King, Inc. had net income of $10,000, an increase...

. In the last month, Cash Is King, Inc. had net income of $10,000, an increase in a/r of $5,000, a decrease in a/p of $5,000, their inventories rose by $7500, they purchased computers worth $10,000, sold stock worth $100,000, and paid down their bank loans by $50,000. What was their cash flow from each of the following areas: a. Operations b. Investing Activities c. Financing Activities d. What was their total cash flow for the period?

One department in a company had a contribution margin of $15,000 and a net loss from...

One department in a company had a contribution margin of $15,000 and a net loss from operations of $2,000. The indirect expenses allocated to this department would have been incurred whether or not the department existed. If this department had been eliminated, the company's reported net income would have been a. $2,000 higher. b. $15,000 lower. c. $13,000 lower. d. The same with or without the department.

Question