The inventory records of Frost Company for the years 2016 and 2017 reveal the cost and market of the January 1, 2016, inventory to be $125,000. On December 31, 2016, the cost of inventory was $130,000, while the market value was only $128,000. The December 31, 2017, market value of inventory was $140,000, and the cost was only $135,000. Frost uses a perpetual inventory system.
| Required: | |||||
| 1. | Assume the inventory that
existed at the end of 2016 was sold in 2017. Prepare the journal
entries at the end of 2016 and 2017 to record the lower of cost or
market under the:
|
||||
| 2. | Show the presentation of cost
of goods sold and inventory on Frost’s income statement and balance
sheet for 2016 and 2017 under the:
|
In: Accounting
Alex is going to work for a company for 1 year. The estimated cost of lunch for Alex is about $250 per month. The company has two options for his lunches:
Option 1) Company has a restaurant and Alex can use the restaurant by a provided card from company with no cost on Alex (Lunch is on company).
Option 2) Company will pay Alex $120 monthly and $1500 at the beginning of the year and then lunch will be on Alex.
If the interest rate is 8%, which option is more beneficial for Alex?
In: Finance
Jenny constructed a building for use as a residential rental property. The cost of the building was $82,488, and it was placed in service on August 1, 1997. The building has a 27.5-year MACRS life. What is the amount of depreciation on the building for 2019 for tax purposes?
In: Finance
You are considering making a movie. The movie is expected to cost $ 10.5million upfront and take a year to produce. After that, it is expected to make $ 4.5 million in the year it is released and $ 1.9 million for the following four years. What is the payback period of this investment? If you require a payback period of two years, will you make the movie? Does the movie have positive NPV if the cost of capital is 10.6%
In: Finance
A medical researcher surveyed 15 hospitals and found that the standard deviation for the cost for removing a person's gall bladder was $ 50. Assume that the variable is normally distributed. Based on this, what is the 90% confidence interval of the population variance?
In: Statistics and Probability
| Select either true or false for the following statements |
| 1. | An opportunity cost is the potential benefit that is lost by taking a specific action when two or more alternative choices are available. | (Click to select)FalseTrue |
| 2. | A sunk cost will change with a future course of action. | (Click to select)TrueFalse |
| 3. | An out-of-pocket cost requires a current and/or future outlay of cash. | (Click to select)FalseTrue |
| 4. | Relevant costs are also known as unavoidable costs. | (Click to select)FalseTrue |
| 5. | Incremental costs are also known as differential costs. | (Click to select)TrueFalse |
In: Accounting
Cost behavior refers to:
A.Costs that are both good and bad.
B.Costs that are variable or fixed.
C.Costs that decrease at a quicker rate than others.
D.Costs that increase at a quicker rate than others.
E.None of these.
In: Accounting
The inventories of Berry Company for the years 2016 and 2017 are as follows:
| Cost | Market | |
|---|---|---|
| January 1, 2016 | $10,000 | $10,000 |
| December 31, 2016 | 13,000 | 11,500 |
| December 31, 2017 | 15,000 | 14,000 |
Berry uses a perpetual inventory system.
| Required: | |||||
| 1. | Assume the inventory that
existed at the end of 2016 was sold in 2017. Prepare the necessary
journal entries at the end of each year to record the correct
inventory valuation if Berry uses the:
|
||||
| 2. | Next Level Explain any differences in inventory valuation and income between the two methods. |
In: Accounting
You are given the task of calculating the cost of capital of N Corp. The company faces a tax rate of 40%. The company has 200,000 common shares and 50,000 preferred shares outstanding. Each preferred share has a par value of $50, and is currently priced at 90% of the par value. The preferred shares are paying dividends that total 5% of the par value. You estimate that the beta of the common stock is 1.5. The equity market risk premium is estimated to be 5%, and the risk-free rate is 5%. The company has just paid a dividend of $2 per share. You expect that the dividends will grow at a rate of 15% until Year 4. After Year 4, the dividends are expected to grow at a constant rate of 5% forever. You decide to employ the CAPM approach to calculate the cost of equity.
The company has two different debt issues that are outstanding. The first issue consists of 1,000 semi-annual coupon bonds. Each bond has a face value of $3,000. The annual coupon rate is 12%, and the bonds are currently trading at a YTM that equals 12%. The bonds will mature 10 years from now. The second issue consists of 1,000 zero coupon bonds. Each bond has a face value of $1,000, and will mature 15 years from now. The zero-coupon bonds are trading at 50% of their face value.
Calculate the weighted average cost of capital
In: Finance
A project has an initial cost of $1,000,000 and is expected to last for 2 years. In year 1, depreciation charge will be $100,000 and earnings are expected to be $164,747. In year 2, depreciation will be $100,000 and earnings are expected to be $208,905. Assume the required return is 8%. What is the value of this project?
In: Finance