On January 1, 2016, Calvert Company issues 9%, $100,000 face value bonds for $103,673.08, a price to yield 7%. The bonds mature on December 31, 2017. Interest is paid semiannually on June 30 and December 31.

Required:

Problem 5-5A a-c (Video)

Mary Willis is the advertising manager for Bargain Shoe Store. She is currently working on a major promotional campaign. Her ideas include the installation of a new lighting system and increased display space that will add $24,000 in fixed costs to the $270,000 currently spent. In addition, Mary is proposing that a 5% price decrease ($40 to $38) will produce a 20% increase in sales volume (20,000 to 24,000). Variable costs will remain at $24 per pair of shoes. Management is impressed with Mary’s ideas but concerned about the effects that these changes will have on the break-even point and the margin of safety.

Compute the current break-even point in units, and compare it to the break-even point in units if Mary’s ideas are used.

Current break-even point pairs of shoes

New break-even point pairs of shoes

Compute the margin of safety ratio for current operations and after Mary’s changes are introduced. (Round answers to 0 decimal places, e.g. 15%.)

Current margin of safety ratio %

New margin of safety ratio %

Prepare a CVP income statement for current operations and after Mary’s changes are introduced.

BARGAIN SHOE STORE
CVP Income Statement

Current

New

Administrative ExpensesContribution MarginCost of Goods SoldFixed ExpensesGross ProfitNet Income/(Loss)SalesSelling ExpensesVariable Expenses

$

$

Administrative ExpensesContribution MarginCost of Goods SoldFixed ExpensesGross ProfitNet Income/(Loss)SalesSelling ExpensesVariable Expenses

Administrative ExpensesContribution MarginCost of Goods SoldFixed ExpensesGross ProfitNet Income/(Loss)SalesSelling ExpensesVariable Expenses

Administrative ExpensesContribution MarginCost of Goods SoldFixed ExpensesGross ProfitNet Income/(Loss)SalesSelling ExpensesVariable Expenses

Administrative ExpensesContribution MarginCost of Goods SoldFixed ExpensesGross ProfitNet Income/(Loss)SalesSelling ExpensesVariable Expenses

$

$

Would you make the changes suggested?

7.Earnings per Share, Price-Earnings Ratio, Dividend Yield The following information was taken from the financial statements of Tolbert Inc. for December 31 of the current fiscal year: Common stock, $45 par value (no change during the year) $12,600,000 Preferred $10 stock, $200 par (no change during the year) 8,000,000 The net income was $960,000 and the declared dividends on the common stock were $70,000 for the current year. The market price of the common stock is $16.00 per share. For the common stock, determine (a) the earnings per share, (b) the price-earnings ratio, (c) the dividends per share, and (d) the dividend yield. If required, round your answers to two decimal places. a. Earnings per Share $ b. Price-Earnings Ratio c. Dividends per Share $ d. Dividend Yield %

On January 1, 2015, when its $30 par value common stock was selling for $80 per share, a corporation issued $30 million of 10% convertible debentures due in 10 years. The conversion option allowed the holder of each $1,000 bond to convert it into six shares of the corporation’s $30 par value common stock. The debentures were issued for $31 million. At the time of issuance, the present value of the bond payments was $28.50 million, and the corporation believes the difference between the present value and the amount paid is attributable to the conversion feature. On January 1, 2016, the corporation’s $30 par value common stock was split 3 for 1. On January 1, 2017, when the corporation’s $10 par value common stock was selling for $90 per share, holders of 40% of the convertible debentures exercised their conversion options. The corporation uses the straight-line method for amortizing any bond discounts or premiums.

Required:

1.what is the challenge in budgeting if the business is a SKI resort and cash flows vary with the season. 2. as a new owner of an existing business what resources do you have to prepare a porforma cash budget. 3.Is there any volume limit that is impractical to achieve given the current fixed capital

July 31, 2016, the end of the quarter, is on a Wednesday. Employees get paid each Friday for the week just worked. The company has five employees who earn $100 each per day. Make the Accrued Salaries Expense journal entry for Wednesday, July 31, 2016. Enter the date, accounts, debit and credit, and be sure to indent the credit line.

Robert buys a $20,000 bond that pays $1,200 interest annually on January 1st. How much does he pay on March 1st?

A. $20,000

B. $21,200

C. $1,200

D. $20,200

There is a woman, she is married, but her husband abandoned her. It has been a year but never divorced. They have two children. She has a job, she lives with her parents during work, her parents There is a big house, her parents didn’t charge her any rent, and most of her money is spent on food and children.
Question 1: will she qualify for a household
Question 2: preparing her tax return what should you say to her? whats her status?

The supervisor of the county Department of Transportation (DOT) is considering the replacement of some machinery. This machinery has zero book value but its current market value is $840. One possible alternative is to invest in new machinery, which has a cost of $39,400. This new machinery would produce estimated annual operating cash savings of $12,700. The estimated useful life of the new machinery is four years. The DOT uses straight-line depreciation. The new machinery has an estimated salvage value of $2,040 at the end of four years. The investment in the new machinery would require an additional investment in working capital of $3,000, which would be recovered after four years. If the DOT accepts this investment proposal, disposal of the old machinery and investment in the new equipment will take place on December 31, 20x1. The cash flows from the investment will occur during the calendar years 20x2 through 20x5. Use Appendix A for your reference. (Use appropriate factor(s) from the tables provided.) Required: Prepare a net-present-value analysis of the county DOT’s machinery replacement decision. The county has a 10 percent hurdle rate. (Round your "Discount factors" to 3 decimal places and final dollar amounts to whole dollars. Negative amounts should be indicated by a minus sign.)

Required information [The following information applies to the questions displayed below.] Washington County’s Board of Representatives is considering the construction of a longer runway at the county airport. Currently, the airport can handle only private aircraft and small commuter jets. A new, long runway would enable the airport to handle the midsize jets used on many domestic flights. Data pertinent to the board’s decision appear below. Cost of acquiring additional land for runway $ 82,500 Cost of runway construction 280,000 Cost of extending perimeter fence 19,908 Cost of runway lights 45,000 Annual cost of maintaining new runway 22,500 Annual incremental revenue from landing fees 57,500 In addition to the preceding data, two other facts are relevant to the decision. First, a longer runway will require a new snowplow, which will cost $180,000. The old snowplow could be sold now for $18,000. The new, larger plow will cost $16,000 more in annual operating costs. Second, the County Board of Representatives believes that the proposed long runway, and the major jet service it will bring to the county, will increase economic activity in the community. The board projects that the increased economic activity will result in $94,000 per year in additional tax revenue for the county. In analyzing the runway proposal, the board has decided to use a 10-year time horizon. The county’s hurdle rate for capital projects is 18 percent. Use Appendix A for your reference. (Use appropriate factor(s) from the tables provided.) Required: 1. Compute the initial cost of the investment in the long runway. 2. Compute the annual net cost or benefit from the runway. 3-a. Determine the IRR on the proposed long runway. (Round your answer to the nearest whole percent.) 3-b. Should it be built considering IRR?

The chief ranger of the state’s Department of Natural Resources is considering a new plan for fighting forest fires in the state’s forest lands. The current plan uses eight fire-control stations, which are scattered throughout the interior of the state forest. Each station has a four-person staff, whose annual compensation totals $320,000. Other costs of operating each base amount to $220,000 per year. The equipment at each base has a current salvage value of $240,000. The buildings at these interior stations have no other use. To demolish them would cost $22,000 each. The chief ranger is considering an alternative plan, which involves four fire-control stations located on the perimeter of the state forest. Each station would require a six-person staff, with annual compensation costs of $420,000. Other operating costs would be $230,000 per base. Building each perimeter station would cost $320,000. The perimeter bases would need helicopters and other equipment costing $620,000 per station. Half of the equipment from the interior stations could be used at the perimeter stations. Therefore, only half of the equipment at the interior stations would be sold if the perimeter stations were built. The state uses a 10 percent hurdle rate for all capital projects. The chief ranger has decided to use a 10-year time period for the analysis. Use Appendix A for your reference. (Use appropriate factor(s) from the tables provided.) Required: Use the incremental-cost approach to prepare a net-present-value analysis of the chief ranger’s decision between the interior fire-control plan and the perimeter fire-control plan. (Round your "Discount factors" to 3 decimal places. Negative amounts should be indicated by a minus sign.)

Snap on damage started business January 1st 2019 after receiving a loan of $10,000 from equity bank. The company also received $10,000 from an investor in return to be paid dividends at the end of the year. The company purchased a piece of land for $ 8000 to serve as a parking space for university students who go to the university across the street. The company incurred $ 2500 expenses during the year to repair the road which leads to the parking lot. The company leased the Parking lot to the university and received $3000 to cover the whole year. At the end of the year they paid dividends of $800 to the investor. REQUIRED: A. INCOME STATEMENT (NET INCOME). B. Cash flow statement C. Retained earnings statement D. Balance sheet

ales, Production, Direct Materials Purchases, and Direct Labor Cost Budgets

The budget director of Gourmet Grill Company requests estimates of sales, production, and other operating data from the various administrative units every month. Selected information concerning sales and production for July is summarized as follows:

a. Estimated sales for July by sales territory:

b. Estimated inventories at July 1:

c. Desired inventories at July 31:

d. Direct materials used in production:

e. Anticipated purchase price for direct materials:

f. Direct labor requirements:

Required:

1. Prepare a sales budget for July.

2. Prepare a production budget for July. For those boxes in which you must enter subtracted or negative numbers use a minus sign.

3. Prepare a direct materials purchases budget for July. For those boxes in which you must enter subtracted or negative numbers use a minus sign.

4. Prepare a direct labor cost budget for July.

Feedback

Remember to take into account expected units to be sold, desired units in ending inventory and estimated units in beginning inventory when calculating total units to be produced.

Once sales quantities are estimated, the expected sales revenue can be determined.

Remember to take into account materials required for production, desired ending materials inventory and estimated beginning materials inventory when calculating direct materials to be purchased.

Learning Objective 4.