1) Consider the following information for Executive Electronics: 12/31/2017 12/31/2018 Total assets $12,650,000 $12,100,000 Noninterest-bearing current...

1)

Consider the following information for Executive Electronics:

	12/31/2017	12/31/2018
Total assets	$12,650,000	$12,100,000
Noninterest-bearing current liabilities	550,000	572,000
Net income	770,000	880,000
Interest expense	2,310,000	330,000
Tax rate	40%	40%
Required rate of return	10%	12%

(a)

Evaluate the company in terms of residual income (RI), which is equivalent to EVA since there are no adjustments for accounting distortions. (Enter negative answers preceding either - sign, e.g. -45 or in parentheses, e.g. (45).)

		2017		2018
Residual income		$		$

2)

Crown Jewelry produced 1,500 rings during March. The standard cost of each ounce of gold used in a ring is $1,000 per ounce. The standard quantity of material for each ring is a 0.5 ounce of gold per ring. The cost of gold purchased and used in March was $788,480 at $1,024 per ounce. Determine the material price variance and the material quantity variance for March. Indicate whether each variance is favorable or unfavorable. (Enter all variances as a positive number.)

Material price variance:

Material quantity variance:

Expert Solution

Answer

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ekkarill92 answered 2 years ago

Consider the following for Executive Electronics Total Assets: 2017- 12,650,000 and 2018- 12,100,000 Noninterest-bearing current liabilities:...

Consider the following for Executive Electronics Total Assets: 2017- 12,650,000 and 2018- 12,100,000 Noninterest-bearing current liabilities: 2017-550,000 and 2018- 572,000 Net income: 2017- 770,000 and 2018- 880,000 Interest Expense: 2017- $2,310,000 and 2018- 330,000 Tax Rate: 2017- 40% and 2018-40% Required rate of return: 2017- 10% and 2018-12% Evaluate the company in terms of residual income (RI) which is equivalent to EVA since there are nonadjustments for accounting distortions. Residual income 2017: Residual income 2018:

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