Answer:
1. Yoplait ⇒ C. Licensing . Yoplait is the largest yogurt license in the world.
2. Moodmatcher lipstick ⇒ A. Indirect Exporting . It produces their products in the US and then sells them abroad through trading companies.
3. McDonald's ⇒ D. Franchising . McDonald's is one of the largest franchises in the world and it operates in a similar manner everywhere.
4. Ericsson and CGCT ⇒ E. Joint Venture . Ericsson is a Swedish telecommunications company and CGCT is a French company.
5. Boeing ⇒ B. Direct Exporting . Boeing is America's largest exporter. It opened its first overseas facility on December 15, 2018, in response to the trade dispute between China and the US. But the vast majority of its planes are still built int eh US.
6. Nissan ⇒ F. Direct Investment. Nissan is part of a French-Japanese car company that produces its cars on their own plants located around the world.
Presented below is information from Headland Computers Incorporated.
July 1 Sold $22,600 of computers to Robertson Company with terms 3/15, n/60. Headland uses the gross method to record cash discounts. Headland estimates allowances of $1,334 will be honored on these sales.
10 Headland received payment from Robertson for the full amount owed from the July transactions.
17 Sold $256,100 in computers and peripherals to The Clark Store with terms of 2/10, n/30.
30 The Clark Store paid Headland for its purchase of July 17.
Answer:
July 1
Dr Accounts receivable $22,600
Cr Cash $22,600
Dr Sales returns and allowances $1,334
Cr Allowances for Sales returns and allowances $1,334
July 10
Dr Cash $21,922
Dr Sales Discount $678
Cr Accounts Receivable $22,600
July 17
Dr Accounts receivable $256,100
Cr Sales revenue $256,100
July 30
Dr Cash $256,100
Cr Accounts receivable $256,100
Explanation:
Preparation of Journal entry
July 1
Dr Accounts receivable $22,600
Cr Cash $22,600
Dr Sales returns and allowances $1,334
Cr Allowances for Sales returns and allowances $1,334
July 10
Dr Cash $21,922
(97%×$22,600)
Dr Sales Discount $678
(3%×$22,600)
Cr Accounts Receivable $22,600
($21,922+$678)
July 17
Dr Accounts receivable $256,100
Cr Sales revenue $256,100
July 30
Dr Cash $256,100
Cr Accounts receivable $256,100
Question 5 of 10
Why do business often add fees to their invoices?
O A. To help pay for business expenses
B. To attract new customers
C. To reward customers' for their loyalty
D. To make more profit than their competitors
Answer: I think it's A
Explanation:
Answer:
Its A!
Explanation:
Just took the quiz
Which best describes the role that government and business play in investments?
O They both use taxes to support a country's growth.
They both invest money to earn a profit.
They both receive capital to use for growth.
They both act as angel investors for start-ups.
Answer:
They both receive capital to use for growth.
Explanation:
The government received the capital in the form of tax that being paid by the citizens. After collecting the tax income, the government allocated it to make a couple of investments such as building the country's infrastructure, providing aid for people to pursue education, and investing in scientific research/development.
Business on the other hand could receive their capital from either reallocating their profit or receiving capital injection from the investors. They use the capital for growth by reinvesting it to increase the scope of their business operation or putting it under investment accounts.
Statement that best describes the role that government and business play in investments is They both receive capital to use for growth
What is an investment?Investment can be regarded as the input that is been put into some business in order to generate revenue.
however, this also applies to the government because they use the public funds as investment for the betterment of the economy and the public.
Learn more about investments at;
https://brainly.com/question/200850
In its first year of business, Borden Corporation had sales of $2,020,000 and cost of goods sold of $1,210,000. Borden expects returns in the following year to equal 6% of sales. The adjusting entry or entries to record the expected sales returns is (are):
Answer: Please see answers in explanation column
Explanation:
Accounts title and explanation Debit Credit
Sales returns and allowances $121,200
Sales refund payable $121,200
Calculation
Expected Sales returns and allowances = sales x expected percentage
= 2,020,000 x 6%= $121,200
Accounts title and explanation Debit Credit
Inventory returns estimated $72,600
Cost of goods sold $72,600
Calculation
expected Cost of goods sold = Cost of goods soldx expected percentage
= 1,210,000 x6%=$72,600
BMW’s vehicle-assembly facility in South Carolina represents a direct investment inside the United States by the German manufacturer. This facility is an example of:
Answer:
Foreign direct investment.
Explanation:
BMW’s vehicle-assembly facility in South Carolina represents a direct investment inside the United States by the German manufacturer. This facility is an example of foreign direct investment.
A foreign direct investment (FDI) can be defined as an investment made by an individual or business entity (investor) into an investment market (industry) located in another country. The investor here, shares a different country of origin from the country where his investment is located.
In a foreign direct investment (FDI), an investor must establish his business, factory and operations in a foreign country or acquire assets in a business that is being operated in a foreign country.
Additionally, foreign direct investment (FDI) are categorized into three (3) main types and these are;
1. Vertical FDI: it involves establishing a different business that is however similar to the main business owned by the investor.
2. Horizontal FDI: it involves establishing the same type of business in a foreign country as owned in the investor's country.
3. Conglomerate FDI: it involves establishing a business that is completely different in another (foreign) country.
Last month Empire Company had a $35,280 profit on sales of $287,000. Fixed costs are $68,040 a month. By how much would sales be able to decrease for Empire to still break even
Answer:
sales might decrease by $287,000 - $189,000 = $98,000 and the company will still break even
Explanation:
gross profit = net income + fixed costs = $35,280 + $68,040 = $103,320
COGS = total sales - gross profit = $287,000 - $103,320 = $183,680
contribution margin ratio = $103,320 / $287,000 = 36%
break even point in $ = $68,040 / 36% = $189,000
sales might decrease by $287,000 - $189,000 = $98,000 and the company will still break even
The number of people or subordinates that a manager effectively controls and directs is called the manager's span of:
Answer: Span of Control
Explanation:
A Manager's span of control refers to all the subordinates that report to that manager. The manager therefore effectively controls and directs them and as such is answerable for them.
Spans of Control are different depending on the type of company it is. A manager with a lot of people in their span of control is said to have a Wide span of control and the reverse is a Narrow Span of control.
A very important part of management is determining the largest number of subordinates that can be in a span of control without overwhelming the manager.
According to the video, what are some things that Human Resources Managers do? Check all that apply.
oversee hiring and firing
purchase computers
distribute office supplies
develop training programs
develop personnel policies
develop pricing strategies
develop recruiting programs
Answer:
1 4 5 7
Explaination:
Answer:
1 4 5 7
Explanation:
In early 2016, the same Germany machinery company has interest from four prospective clients from emerging markets: Indonesia, Brazil, Russia, and South Africa. They all want to buy ten machines, but the factory can only produce ten in time. Therefore, the company has to choose only one client. Given the volatility of the domestic currencies of the four prospective clients, the CFO would like to choose the client which is least likely to cancel the order due to currency volatility. The invoice comes due on June 30, 2016. According to volatility alone, which prospective client would be most likely to cancel the order?
Answer:
Brazil
Explanation:
According to the picture below, Brazilian real is the currency that has the lowers currency volatility, its spot is 4.0685, and its forward is 4.1820. These values are way lower than the values of the other three currencies, and for this reason, the CFO should choose the Brazilian client, clearly.
Indonesia is the country that is most likely to cancel this order. This is due to its high volatility.
Following the volatility chart that is attached to this question we can clearly spot that Indonesia has the most likelihood to cancel the order.
The volatility of the currency of the country Indonesia is shown to be high and this high volatility is very much going to have an impact on trade.
When there is a weakness in the currency of a nation, the cost of import would go up.
Read more on https://brainly.com/question/13694329?referrer=searchResults
today ,I am happy I help my grandma
Last week, an investigative reporter for a major metropolitan newspaper discovered that the doctors conducting clinical trials of a new cancer treatment drug are also the principal shareholders in Cancer Solutions Inc. (CSI). CSI is the company developing and attempting to market the drug. Upon being interviewed by federal authorities, the doctors acknowledged their conflict of interest but reported that they were sold the shares at a 75% discount by CSI's chief financial officer. The CFO was concerned that CSI might not be able to meet its annual performance objectives and in turn pay his anticipated multimillion-dollar bonus.
Does an agency conflict exist between CSI's CFO and the company's shareholders?
a. Yes; CSI's CFO engaged in unethical conduct to manipulate the firm's short-term earnings and improve the likelihood of receiving his annual bonus.
b. Yes; the shares should not have been sold at a 75% discount, which is price discrimination.
c. No; professionals, such as doctors and professional money managers, would not participate in unethical activities.
d. No; in general, shareholders are satisfied with company officers engaging in any type of legal or illegal activity to ensure the chances of them receiving greater dividend payments.
Which of the following actions will help ease agency conflicts and better align managers' objectives with the firm's shareholder wealth?
a. Pay the manager a combination of salary and stock options (phased in over several years) that reward him or her for consistently increasing shareholder wealth.
b. Pay the manager a large base salary with a huge stock option package that matures on a single date.
Amalgamated Metals Corporation's stockholders are mostly individual investors, and there is relatively little institutional ownership. If several pension and mutual funds were to take large positions in Amalgamated Metals Corporation's stock, direct shareholder intervention would be___________ likely to motivate the firm's management.
Answer:
FIRST QUESTION
A)Yes; CSI's CFO engaged in unethical conduct to manipulate the firm's short-term earnings and improve the likelihood of receiving his annual bonus.
SECOND QUESTION
A)Pay the manager a combination of salary and stock options (phased in over several years) that reward him or her for consistently increasing shareholder wealth.
LAST QUESTION
MORE likely
Explanation:
We are informed from the question about an investigative reporter for a major metropolitan newspaper discovery about the doctors conducting clinical trials of a new cancer treatment drug are also the principal shareholders in Cancer Solutions Inc. And how The CFO was concerned that CSI might not be able to meet its annual performance objectives and in turn pay his anticipated multimillion-dollar bonus.
In this case there is an agency conflict that exist between CSI's CFO and the company's shareholders, this is because the, CSI's CFO engaged in unethical conduct to manipulate the firm's short-term earnings and improve the likelihood of receiving his annual bonus.
Agency conflict in finance, is also regarded as conflict of interest, usually occur between the management and the shareholders of that company, it is conflict that usually emerge when those that are required for certain responsibility like interest of principal decide to divert the the authority for their own benefits. However,agency conflict can be minimized by allowing transparency and some ways.
It should be noted here that the CSI's CFO engaged in unethical conduct to manipulate the firm's short-term earnings and improve the likelihood of receiving his annual bonus which is the reason behind the conflict because he act on his own interest.
SECOND QUESTION,
Which of the following actions will help ease agency conflicts and better align managers' objectives with the firm's shareholder wealth?
From the explanation of Agency conflict from First question it should be noted that there are some actions that will help to ease agency conflicts and better align managers' objectives with the firm's shareholder wealth such as
Payment of the manager a combination of salary and stock options (phased in over several years) that reward him or her for consistently increasing shareholder wealth.
The payment of the stock options to the manager will allow selling of stock at agreed price as well as date.
LAST QUESTION
Amalgamated Metals Corporation's stockholders are mostly individual investors, and there is relatively little institutional ownership. If several pension and mutual funds were to take large positions in Amalgamated Metals Corporation's stock, direct shareholder intervention would be__MORE__ likely to motivate the firm's management.
Following are several figures reported for Allister and Barone as of December 31, 2015:
Allister Barone
Inventory $50,000 $300,000
Sales 1,000,000 8,00,000
Investment income Not given
Cost of goods sold 500,000 400,000
Operating expenses 230,000 300,000
Allister acquired 90 percent of Barone in January 2020. In allocating the newly acquired subsidiary's fair value at the acquisition date, Allister noted that Barone had developed a customer list worth $66,000 that was unrecorded on its accounting records and had a six-year remaining life. Any remaining excess fair value over Barone's book value was attributed to goodwill. During 2021, Barone sells inventory costing $135,000 to Allister for $190,000. Of this amount, 20 percent remains unsold in Allister's warehouse at year-end.
Determine balances for the following items that would appear on Allister's consolidated financial statements for 2015:
a. Inventory
b. Sales
c. Cost of Goods Sold
d. Operating Expenses
e. Net Income Attributable to Non-controlling Interest
Answer:
a. $344,500
b. $1,610,000
c. $405,500
d. $530,000
e. $9,550 loss
Explanation:
First, Eliminate the Intragroup transactions as follows :
Elimination Journal for the Intragroup Sale :
Sales (Barone) $190,000 (debit)
Cost of Sales (Allister) $190,000 (credit)
Elimination of unrealized profit in closing inventory :
Cost of Sales (Barone) $5,500 (debit)
Inventory (Allister) $5,500 (credit)
Unrealized Profit in Inventory ($190,000 - $135,000) × 10% = $5,500
Then, Consolidate the Financial Statements taking into account the elimination journals
Note : Consolidation is 100% of Parent + 100% of Subsidiary.
Note : A firm that is exercising control (> 50% Voting Rights) is required to prepare Consolidated Financial Statements - IFRS 3.
Consolidated Income Statement
Sales (1,000,000 + 8,00,000 - $190,000) $1,610,000
Cost of Sales ( $500,000 + 400,000 - $190,000 + $5,500) ($715,500)
Gross Profit $894,500
Less Operating Expenses ($230,000 + $300,000) ($530,000)
Net Income $364,500
Consolidated Financial Statement (Extract)
Inventory ($50,000 + $300,000 - $5,500) $344,500
Subsidiary Profit
Net Income Attributable to Non-controlling Interest
Net Income Attributable to Non-controlling Interest = Net Subsidiary Income × % Non Controlling Interest
Net Subsidiary Income - Barone
Sales (800,000 - 190,000) $610,000
Less Cost of Sales ( 400,000 + 5,500) ($405,500)
Gross Profit $204,500
Less Operating Expenses ($300,000)
Net Income/ (loss) ($95,500)
Therefore,
Net Income Attributable to Non-controlling Interest = ($95,500) × 10%
= $9,550 loss
Fields Company has two manufacturing departments, forming and painting. The company uses the weighted-average method of process costing. At the beginning of the month, the forming department has 36,000 units in inventory, 70% complete as to materials and 30% complete as to conversion costs. The beginning inventory cost of $82,100 consisted of $58,000 of direct materials costs and $24,100 of conversion costs.
During the month, the forming department started 520,000 units. At the end of the month, the forming department had 40,000 units in ending inventory, 85% complete as to materials and 35% complete as to conversion. Units completed in the forming department are transferred to the painting department. Cost information for the forming department is as follows:
Beginning work in process inventory $82,100
Direct materials added during the month 1,942,930
Conversion added during the month 1,359,730
1A. Calculate the equivalent units of production for the forming department.
1B. Calculate the costs per equivalent unit of production for the forming department.
1C. Using the weighted-average method, assign costs to the forming department’s output—specifically, its units transferred to painting and its ending work in process inventory.
Answer:
Please see attached detailed solution
Explanation:
1a. Direct material 550,000
Conversion 530,000
1b. Direct materials $3.64 per EUP
Conversion $2.61 per EUP
1c. Costs assigned to the forming department's output
• Total cost of ending work in process $160,300
• Total costs assigned $3,384,760
Please see attached detailed solution to the above questions and answers.
On December 31, 2021, the end of the fiscal year, California Microtech Corporation completed the sale of its semiconductor business for $15 million. The semiconductor business segment qualifies as a component of the entity according to GAAP. The book value of the assets of the segment was $13 million. The loss from operations of the segment during 2021 was $4.8 million. Pretax income from continuing operations for the year totaled $7.8 million. The income tax rate is 25%.
Prepare the lower portion of the 2021 income statement beginning with income from continuing operations before income taxes. Ignore EPS disclosures. (Amounts to be deducted and negative amounts should be indicated with a minus sign. Enter your answers in whole dollars and not in millions.)
Answer and Explanation:
The preparation of the lower portion is presented below:
Income from the continuing operation
before income tax $7,800,000
Less: Income tax expenses ($7,800,000 × 25%) (1,950,000)
Income from continuing operation(A) 5,850,000
Discontinued operation:
Loss from operation discontinued components
($15 - $13 - $4.8) ($2,800,000)
Income tax benefits ($2,800,000 × 25%) $700,000
Loss on discontinued operation(B) ($21,000,000)
Net loss (A - B) -$15,150,000
Wilson Products uses standard costing. It allocates manufacturing overhead (both variable and fixed) to products on the basis of standard direct manufacturing labor-hours (DLH). Wilson Products develops its manufacturing overhead rate from the current annual budget. The manufacturing overhead budget for 2014 is based on budgeted output of 672,000 units, requiring 3,360,000 DLH. The company is able to schedule production uniformly throughout the year.
A total of 72,000 output units requiring 321,000 DLH was produced during May 2014. Manufacturing overhead (MOH) costs incurred for May amounted to $ 355,800. The actual costs, compared with the annual budget and 1/12 of the annual budget, are as follows:
Calculate the following amounts for Wilson Products for May 2014:
Total Amount Per Output Unit Per DLH Input Unit Monthly MOH Budget May 2017 Actual MOH Costs for May 2017
Variable MOH
Indirect manufacturing labor $1,008,000 $1.50 $0.30 $84,000 $84,000
Supplies 672,000 1.00 0.2 56,000 117,000
Fixed MOH
Supervision 571,200 0.85 0.17 47,600 41,000
Utilities 369,600 0.55 0.11 30,800 55,000
Depreciation 705,600 1.05 0.21 58,800 88,800
Total $33,26,400 $4.95 $0.99 $277,200 $355,800
Required:
a. Total manufacturing overhead costs allocated.
b. Variable manufacturing overhead spending variance.
c. Fixed manufacturing overhead spending variance.
d. Variable manufacturing overhead efficiency variance.
e. Production-volume variance Be sure to identify each variance as favorable (F) or unfavorable(U).
Answer:
Please see attached solution
Explanation:
a. Total manufacturing overhead costs allocated $356,400
b. Variable manufacturing overhead spending variance $40,500U
c. Fixed manufacturing overhead spending variance $17,600U
d. Variable manufacturing overhead efficiency variance $19,500F
e. Production volume variance $39,200F
Please find attached detailed solution to the above questions
Major League Bat Company manufactures baseball bats. In addition to its work in process inventories, the company maintains inventories of raw materials and finished goods. It uses raw materials as direct materials in production and as indirect materials. Its factory payroll costs include direct labor for production and indirect labor. All materials are added at the beginning of the process, and conversion costs are applied uniformly throughout the production process. Required: You are to maintain records and produce measures of inventories to reflect the July events of this company. The June 30 balances: Raw Materials Inventory, $22,000; Work in Process Inventory, $9,690 ($2,810 of direct materials and $6,880 of conversion); Finished Goods Inventory, $140,000; Sales, $0; Cost of Goods Sold, $0; Factory Payroll Payable, $0; and Factory Overhead, $0. 1. Prepare journal entries to record the following July transactions and events. Purchased raw materials for $130,000 cash (the company uses a perpetual inventory system). Used raw materials as follows: direct materials, $52,540; and indirect materials, $11,500. Recorded factory payroll payable costs as follows: direct labor, $206,000; and indirect labor, $26,500. Paid factory payroll cost of $232,500 with cash (ignore taxes). Incurred additional factory overhead costs of $83,000 paid in cash. Allocated factory overhead to production at 50% of direct labor costs. 2. Information about the July inventories follows. Use this information with that from part 1 to prepare a process cost summary, assuming the weighted-average method is used. (Round "Cost per EUP" to 2 decimal places.) Units Beginning inventory 6,500 units Started 14,000 units Ending inventory 8,000 units Beginning inventory Materials—Percent complete 100 % Conversion—Percent complete 80 % Ending inventory Materials—Percent complete 100 % Conversion—Percent complete 30 % 3.
Using the results from part 2 and the available information, make computations and prepare journal entries to record the following: Total costs transferred to finished goods for July. Sale of finished goods costing $273,200 for $640,000 in cash.Using the results from part 2 and the available information, make computations and prepare journal entries to record the following: Total costs transferred to finished goods for July. Sale of finished goods costing $273,200 for $640,000 in cash. Using the results from part 2 and the available information, make computations and prepare journal entries to record the following: Total costs transferred to finished goods for July. Sale of finished goods costing $273,200 for $640,000 in cash.
Answer:
Major League Bat Company
1. Journal Entries:
a. Debit Raw Materials Inventory $130,000
Credit Cash Account $130,000
To record the purchase of raw materials.
b. Debit Work in Process $52,540
Debit Manufacturing Overhead $11,500
Credit Raw Materials $64,040
To record materials used.
c. Debit Factory Wages $232,500
Credit Cash Account $232,500
To record factory payroll paid in cash.
d. Debit Work in Process $206,000
Debit Manufacturing Overhead $26,500
Credit Factory Wages $232,500
To record factory payroll costs.
e. Debit Manufacturing Overhead $83,000
Credit Cash Account $83,000
To record additional factory overhead costs.
f. Debit Work In Process $103,000
Credit Manufacturing Overhead $103,000
To allocate factory overhead to production at 50% of direct labor costs.
2. Computation of Equivalent Units of Production:
Materials Conversion Total
Beginning inventory 6,500 units 6,500 5,200
Started 14,000 units 14,000 14,000
Ending inventory 8,000 units 8,000 2,400
Total equivalent unit 22,000 16,400
3. Costs of Production:
Beginning Inventory $2,810 $6,880
Raw materials 52,540 309,000
Total costs $55,350 $315,880
Total equivalent unit 22,000 16,400
Cost per equivalent unit $2.52 $19.26
Total costs:
Started 14,000 $35,280 14,000 $269,640 $304,920
Ending inventory 8,000 20,160 2,400 46,224 $66,384
Total 22,000 $55,440 16,400 $315,864 $371,304
4. Journal Entries:
Debit Finished Goods Inventory $304,920
Credit Work In Process $ 304,920
To record the transfer of goods.
Debit Cost of Goods Sold $273,200
Credit Finished Goods Inventory $273,200
To record the cost of goods sold.
Debit Cash Account $640,000
Credit Sales Revenue $640,000
To record the sale of goods for cash.
5. Ledger accounts:
Raw Materials Inventory
Accounts Titles Debit Credit
Balance $22,000
Cash Account 130,000
Work in Process $52,540
Manufacturing Overhead 11,500
Work In Process
Accounts Titles Debit Credit
Balance $9,690
Raw materials 52,540
Factory Wages 206,000
Manufacturing
Overhead 103,000
Finished Goods Inventory $ 304,920
Balance 66,384
Manufacturing Overhead
Accounts Titles Debit Credit
Raw materials $11,500
Factory wages 26,500
Other overheads 83,000
Work in Process applied $103,000
Underapplied overhead 18,000
6. Income Statement:
For July
Sales Revenue $640,000
Cost of goods sold 273,200
Underapplied overhead 18,000 $291,200
Gross profit $348,800
Explanation:
a) Data and Calculations:
June 30 Balances:
Raw Materials Inventory, $22,000;
Work in Process Inventory, $9,690 ($2,810 of direct materials and $6,880 of conversion);
Finished Goods Inventory, $140,000;
Sales, $0;
Cost of Goods Sold, $0;
Factory Payroll Payable, $0; and
Factory Overhead, $0. 1.
You are invested in two hedge funds. The probability that hedge fund Alpha generates positive returns in any given year is 60%. The probability that hedge fund Omega generates positive returns in any given year is 70%. Assume the returns are independent. What is the probability that both funds generate positive returns in a given year? What is the probability that both funds lose money?
Answer:
42% and 12%
Explanation:
The computation is shown below:
For Alpha Fund
Positive return = 60%
Lose money is
= 1 - 0.60
= 40%
For Omega Fund
Positive return = 70%
Lose money is
= 1 - 0.70
= 0.30
Also the returns are non-dependent
Now the positive return is
= 60% × 70
= 42%
And, the probability of lose money is
= 40% × 30%
= 12%
Leach Inc. experienced the following events for the first two years of its operations:
Year 1:
Issued $10,000 of common stock for cash.
Provided $78,000 of services on account.
Provided $36,000 of services and received cash.
Collected $69,000 cash from accounts receivable.
Paid $38,000 of salaries expense for the year.
Adjusted the accounting records to reflect uncollectible accounts expense for the year.
Leach estimates that 5 percent of the ending accounts receivable balance will be uncollectible.
Closed the revenue account. Closed the expense account.
Year 2:
Wrote off an uncollectible account for $650.
Provided $88,000 of services on account.
Provided $32,000 of services and collected cash.
Collected $81,000 cash from accounts receivable.
Paid $65,000 of salaries expense for the year.
Adjusted the accounts to reflect uncollectible accounts expense for the year.
Leach estimates that 5 percent of the ending accounts receivable balance will be uncollectible.
Required
a. Record the Year 1 and Year 2 events in general journal form and post them to T-accounts.
b. Prepare the income statement, statement of changes in stockholders’ equity, balance sheet, and statement of cash flows for Year 1 and Year 2.
c. What is the net realizable value of the accounts receivable at Year 1 and Year 2?
Answer:
a.1) year 1
Issued $10,000 of common stock for cash.
Dr cash 10,000
Cr common stock 10,000
Provided $78,000 of services on account.
Dr accounts receivable 78,000
Cr service revenue 78,000
Provided $36,000 of services and received cash.
Dr cash 36,000
Cr service revenue 36,000
Collected $69,000 cash from accounts receivable.
Dr cash 69,000
Cr accounts receivable 69,000
Paid $38,000 of salaries expense for the year.
Dr wages expense 38,000
Cr cash 38,000
Adjusted the accounting records to reflect uncollectible accounts expense for the year. Leach estimates that 5 percent of the ending accounts receivable balance will be uncollectible.
Dr bad debt expense 450
Cr accounts receivable 450
Closed the revenue account. Closed the expense account.
Dr service revenue 114,000
Cr income summary 114,000
Dr income summary 38,450
Cr wages expense 38,000
Cr bad debt expense 450
Dr income summary 75,550
Cr retained earnings 75,550
b.1) income statement year 1Service revenue $114,000
Expenses:
Wages $38,000Bad debt $450 ($38,450)Net income $75,550
balance sheet year 1Assets:
Cash $77,000
Accounts receivable $8,550
total assets $85,550
Equity:
Common stock $10,000
Retained earnings $75,550
total equity $85,550
statement of cash flows year 1Cash flows form operating activities:
Net income $75,550
adjustments:
Increase in accounts receivable ($8,550)
net cash from operating activities $67,000
Cash flow from financing activities:
Common stocks issued $10,000
Net cash increase $77,000
beginning cash balance $0
Ending cash balance $87,000
a.2) Year 2:
Wrote off an uncollectible account for $650.
Dr bad debt expense 650
Cr accounts receivable 650
Provided $88,000 of services on account.
Dr accounts receivable 88,000
Cr service revenue 88,000
Provided $32,000 of services and collected cash.
Dr cash 32,000
Cr service revenue 32,000
Collected $81,000 cash from accounts receivable.
Dr cash 81,000
Cr accounts receivable 81,000
Paid $65,000 of salaries expense for the year.
Dr wages expense 65,000
Cr cash 65,000
Adjusted the accounts to reflect uncollectible accounts expense for the year. Leach estimates that 5 percent of the ending accounts receivable balance will be uncollectible.
Dr bad debt expense 745
Cr accounts receivable 745
b.2) income statement year 2Service revenue $120,000
Expenses:
Wages $65,000Bad debt $1,395 ($38,450)Net income $53,605
balance sheet year 2Assets:
Cash $125,000
Accounts receivable $14,155
total assets $139,155
Equity:
Common stock $10,000
Retained earnings $129,155
total equity $139,155
statement of cash flows year 2Cash flows form operating activities:
Net income $53,605
adjustments:
Increase in accounts receivable ($5,605)
net cash from operating activities $48,000
Net cash increase $48,000
beginning cash balance $77,000
Ending cash balance $125,000
c) net realizable value of accounts receivable at year 1 = $8,550
net realizable value of accounts receivable at year 2 = $14,155
a. Recording the Year 1 and Year events in general journal form and posting to T-accounts for Leach Inc. are as follows:
General JournalYear 1:
Debit Cash $10,000
Credit Common stock $10,000
Debit Accounts Receivable $78,000
Credit Service Revenue $78,000
Debit Cash $36,000
Credit Service Revenue $36,000
Debit Cash $69,000
Credit Accounts Receivable $69,000
Debit Salaries Expense $38,000
Credit Cash $38,000
Adjustment:
Debit Bad Debts Expense $450
Credit Uncollectible Allowance $450
Year 2:
Debit Accounts Receivable $650
Credit Uncollectible Allowance $650
Debit Accounts Receivable $88,000
Credit Service Revenue $88,000
Debit Cash $32,000
Credit Service Revenue $32,000
Debit Cash $81,000
Credit Accounts Receivable $81,000
Debit Salaries Expense $65,000
Credit Cash $65,000
Adjustment:
Debit Bad Debts Expense $968
Credit Uncollectible Allowance $968
T-accounts:Year 1:
Cash AccountCommon stock $10,000
Service Revenue $36,000
Accounts Receivable $69,000
Salaries Expense $38,000
Balance $77,000
Uncollectible AllowanceBad debts Expense $450
Common Stock
Cash account $10,000
Accounts Receivable
Service Revenue $78,000
Cash $69,000
Balance $9,000
Service RevenueAccounts Receivable $78,000
Cash $36,000
Income Summary $114,000
Salaries ExpenseCash $38,000
Income Summary $38,000
Bad Debts Expense
Uncollectible Allowance $450
Income Summary $450
Year 2:
Cash AccountBalance $77,000
Service Revenue $32,000
Accounts Receivable $81,000
Salaries Expense $65,000
Balance $125,000
Uncollectible AllowanceBalance $450
Accounts Receivable $650
Bad debts expense $968
Balance $768
Common StockBalance $10,000
Accounts Receivable
Balance $9,000
Service Revenue $88,000
Uncollectible allowance $650
Cash $81,000
Balance $15,350
Service RevenueAccounts Receivable $88,000
Cash $32,000
Income Summary $120,000
Salaries ExpenseCash $65,000
Income Summary $65,000
Bad Debts Expense
Uncollectible Allowance $968
Income Summary $968
b. The preparation of the income statement, statement of changes in stockholders' equity, balance sheet, and statement of cash flows for Year 1 and Year 2 are as follows:
Leach Inc.
Income Statements for Year 1 and Year 2:Year 1 Year 2
Service Revenue $114,000 $120,000
Salaries Expense 38,000 $65,000
Bad Debts Expense 450 38,450 968 65,968
Net income $75,550 $54,032
Leach Inc.
Statements of Changes in Stockholders' Equity for Year 1 and Year 2:Year 1 Year 2
Beginning balance $10,000 $85,550
Net income 75,550 54,032
Ending balance $85,550 $139,582
Leach Inc.
Balance Sheets at Year 1 and Year 2:Year 1 Year 2
Assets:
Cash $77,000 $125,000
Accounts Receivable 9,000 15,350
Uncollectible Allowance (450) (768)
Total assets $85,550 $139,582
Equity:
Ending balance $85,550 $139,582
Leach Inc.
Statements of Cash Flows for Year 1 and 2:Operating Activities: Year 1 Year 2
Net income $75,550 $54,032
Changes in working capital:
Accounts receivable (8,550) (6,032)
Operating cash flows $67,000 $48,000
Financing Activities:
Common Stock $10,000 $0
Increase in cash flows $77,000 $48,000
c. The net realizable value of the accounts receivable at Year 1 is $8,550 ($9,000 - $450) and Year 2 is $14,582 ($15,350 - $768).
Data Analysis:Year 1:
Cash $10,000 Common stock $10,000
Accounts Receivable $78,000 Service Revenue $78,000
Cash $36,000 Service Revenue $36,000
Cash $69,000 Accounts Receivable $69,000
Salaries Expense $38,000 Cash $38,000
Adjustment:
Bad Debts Expense $450 Uncollectible Allowance $450
Year 2:
Uncollectible Allowance $650 Accounts Receivable $650
Accounts Receivable $88,000 Service Revenue $88,000
Cash $32,000 Service Revenue $32,000
Cash $81,000 Accounts Receivable $81,000
Salaries Expense $65,000 Cash $65,000
Adjustment:
Bad Debts Expense $968 Uncollectible Allowance $968
= $968 ($650 + $768 - $450)
$768 ($15,350 x 5%)
Learn more about preparing financial statements at https://brainly.com/question/735261
Cooperative San José of southern Sonora state in Mexico makes a unique syrup using cane sugar and local herbs. The syrup is sold in small bottles and is prized as a flavoring for drinks and for use in desserts. The bottles are sold for $12 each. The first stage in the production process is carried out in the Mixing Department, which removes foreign matter from the raw materials and mixes them in the proper proportions in large vats. The company uses the weighted-average method in its process costing system.
A hastily prepared report for the Mixing Department for April appears below:
Units to be accounted for:
Work in process, April 1 (materials 90% complete; conversion 80% complete) 5,700
Started into production 34,100
Total units to be accounted for 39,800
Units accounted for as follows:
Transferred to next department 29,400
Work in process, April 30 (materials 70% complete; conversion 50% complete) 10,400
Total units accounted for 39,800
Cost Reconciliation Cost to be accounted for:
Work in process, April 1 $15,276
Cost added during the month 96,248
Total cost to be accounted for $111,524
Cost accounted for as follows:
Work in process, April 30 $20,384
Transferred to next department 91,140
Total cost accounted for $111,524
Required:
a. What were the Mixing Department's equivalent units of production for materials and conversion for April?
b. What were the Mixing Department's cost per equivalent unit for materials and conversion for April? The beginning inventory consisted of the following costs: materials, $10,545; and conversion cost, $4,731. The costs added during the month consisted of: materials, $64,649; and conversion cost, $31,599.
c. How many of the units transferred out of the Mixing Department in April were started and completed during that month?
d. The manager of the Mixing Department stated, "Materials prices jumped from about $1.65 per unit in March to $2.15 per unit in April, but due to good cost control I was able to hold our materials cost to less than $2.15 per unit for the month." Should this manager be rewarded for good cost control?
Answer:
a. EU:
materials = 29,400 + 7,280 = 36,680
conversion = 29,400 + 5,200 = 34,600
b. cost per EU:
materials = $75,194 / 36,680 = $2.05
conversion = $36,330 / 34,600 = $1.05
c. units started and completed during April = 23,700
d. no, he didn't do anything, When a company uses the weighted average process costing method, the cost of beginning WIP is used to determine the cost per equivalent unit. On the other hand, FIFO process costing method doesn't, it only considers costs incurred during the month to calculate cost per equivalent unit.
Explanation:
beginning WIP 5,700 $15,276
materials, $10,545
conversion cost, $4,731
units started 34,100
costs added during the month = $96,248
materials, $64,649
conversion cost, $31,599
units transferred out 29,400 $91,140
ending WIP 10,400 $20,384
materials 70% = 7,280 EU
conversion 50% = 5,200 EU
EU:
materials = 29,400 + 7,280 = 36,680
conversion = 29,400 + 5,200 = 34,600
total cost for materials = $64,649 + $10,545 = $75,194
total cost for conversion = $31,599 + $4,731 = $36,330
cost per EU:
materials = $75,194 / 36,680 = $2.05
conversion = $36,330 / 34,600 = $1.05
units started and completed during April = 29,400 - 5,700 = 23,700
The following are selected account balances from Penske Company and Stanza Corporation as of December 31, 2021:
Penske Stanza
Revenues $(842,000 ) $(568,000 )
Cost of goods sold 299,700 142,000
Depreciation expense 207,000 304,000
Investment income Not given 0
Dividends declared 80,000 60,000
Retained earnings, 1/1/21 (668,000 ) (222,000 )
Current assets 572,000 566,000
Copyrights 1,076,000 449,500
Royalty agreements 604,000 1,180,000
Investment in Stanza Not given 0
Liabilities (546,000 ) (1,631,500 )
Common stock (600,000 )($20 par) (200,000 ) ($10 par)
Additional paid-in capital 150,000 80,000
On January 1, 2013, Penske acquired all of Stanza's outstanding stock for $680,000 fair value in cash and common stock. Penske also paid $10,000 in stock issuance costs. At the date of acquisition copyrights (with a six-year remaining life) have a $440,000 book value but a fair value of $560,000.
a. As of December 31,2013, what is the consolidated copyrights balance?
b. For the year ending December 31,2013, what is consolidated net income?
c. As of December 31,2013, what is the consolidated retained earnings balance?
d. As of December 31,2013, what is the consolidated balance to be reported for goodwill?
Answer:
a. $1,625,500
b. $437,300
c. $1,025,300
d. $58,000
Explanation:
a. As of 31, December 2013, what is the consolidated copy rights balance
b. For the year ending, December 31, 2013, what is consolidated net income
c. As of December 31, 2013, what is the consolidates retained earnings balance
d. As of December 31, 2013 what is the consolidated balance to be reported for Goodwill.
Please find attached detailed explanations to the above questions and answers.
Blago Wholesale Company began operations on January 1, 2017, and uses the average cost method in costing its inventory. Management is contemplating a change to the FIFO method in 2018 and is interested in determining how such a change will affect net income. Accordingly, the following information has been developed:
2017 2018
Final inventory:
Average cost $150,000 $255,000
FIFO 160,000 270,000
Condensed income statements for Blago Wholesale appear below:
2017 2018
Sales $1,000,000 $1,200,000
Cost of goods sold 600,000 720,000
Gross profit 400,000 480,000
Selling, general, and administrative 250,000 275,000
Net income $150,000 $205,000
Required:
Based on this information, what would 2018 net income be after the change to the FIFO method?
Answer:
Blago Wholesale Company
New Net income for 2018 = $220,000
Explanation:
Data and Calculations:
Final inventory: 2017 2018
Average cost $150,000 $255,000
FIFO 160,000 270,000
Difference $10,000 $15,000
2017 2018
Sales $1,000,000 $1,200,000
Cost of goods sold 600,000 720,000
Gross profit 400,000 480,000
Selling, general, and
administrative 250,000 275,000
Net income $150,000 $205,000
2018 Net Income after the change to the FIFO method:
Cost of goods sold (weighted average) 720,000
less adjustment for change of method 15,000
Adjusted cost of goods sold 705,000
Income Statement after the change
Sales $1,200,000
Cost of goods sold 705,000
Gross profit 495,000
Selling, general, and
administrative 275,000
Net income $220,000
The transactions of Spade Company:
a. Kacy Spade, owner, invested $16,750 cash in the company in exchange for common stock.
b. The company purchased office supplies for $486 cash.
c. The company purchased $9,263 of office equipment on credit.
d. The company received $1,977 cash as fees for services provided to a customer.
e. The company paid $9,263 cash to settle the payable for the office equipment purchased in transaction c.
f. The company billed a customer $3,551 as fees for services provided.
g. The company paid $520 cash for the monthly rent.
h. The company collected $1,491 cash as partial payment for the account receivable created in transaction f.
g. The company paid a $800 cash dividend to the owner (sole shareholder).
Required:
Prepare the Trial Balance. Use May 31 as its report date.
Answer:
Please see attached trial balance as requested.
Explanation:
Please find attached solved trial balance for Spade Company as at May 31.
The lowest amount a manufacturer can pay factory workers is an example of
an incentive.
a price floor.
a price ceiling.
an elastic service.
Answer:
The answer to this question is given below in the explanation section.
Explanation:
The correct answer to this question is the price floor.
The Price floor is the lowest amount that is imposed by the government or group-imposed lowest price limit for a product or service. The government uses the price floor to keep prices at a certain level from going to low. So price floors for workers set by the government that the employer should not pay less than the set amount.
while other options are not correct because::
The price ceiling is the high amount set by the government or the by other groups for a product or service.
An incentive is an amount or something that can be given to employees or someone for motivation or encouraging them to do something.
An elastic service is given by amazon to develop and run the application with different tools etc.
Answer:price floor
Explanation:
Mattola Company is giving each of its employees a holiday bonus of $200 on December 13, 20-- (a nonpayday). The company wants each employee's check to be $200. The supplemental tax percent is used.
Nobody has capped for OASDI prior to the bonus check.
a. What will be the gross amount of each bonus if each employee pays a state income tax of 2.8% (besides the other payroll taxes)? You may need to add one penny to the gross so that net bonus exactly equals $200. Round your calculations and final answers to the nearest cent.
b. What would the net amount of each bonus check be if the company did not gross-up the bonus? Round your intermediary calculations to the nearest cent.
Answer:
a. Gross amount of each bonus = $309.84
b. Net amount of each bonus = $129.10
Explanation:
Since the supplemental tax percent is used, the following are the relevant tax rates to be applied in the calculations:
STP = Supplemental tax percent = 25%
FICASO = Federal Insurance Contributions Act (FICA) social security tax = 6.2%
FICAM = Federal Insurance Contributions Act (FICA) Medicare tax = 1.45%.
SIT = State income tax = 2.8%
We therefore proceed as follows:
a. What will be the gross amount of each bonus if each employee pays a state income tax of 2.8% (besides the other payroll taxes)? You may need to add one penny to the gross so that net bonus exactly equals $200. Round your calculations and final answers to the nearest cent.
Given the tax rates above, the following formula is used to calculate the gross amount of each bonus:
Gross amount of each bonus = Holiday bonus amount / (100% - STP - FICASO - FICAM - SIT) …… (1)
Substituting the relevant values into equation (1), we have:
Gross amount of each bonus = $200/ (100% - 25% - 6.20% - 1.45% - 2.8%)
Gross amount of each bonus = $200 / 64.55%
Gross amount of each bonus = $309.837335398916
To the nearest cent which implies to two decimal places, we have:
Gross amount of each bonus = $309.84
b. What would the net amount of each bonus check be if the company did not gross-up the bonus? Round your intermediary calculations to the nearest cent.
The net amount of each bonus can be calculated using the following formula:
Net amount of each bonus = Holiday bonus amount * (100% - STP - FICASO - FICAM - SIT) …… (2)
Substituting the relevant values into equation (2), we have:
Net amount of each bonus = $200 * (100% - 25% - 6.20% - 1.45% - 2.8%)
Net amount of each bonus = $200 * 64.55%
Net amount of each bonus = $129.10
Key figures for Apple and Google follow.
$ millions Apple Google
Cash and equivalents. . . . . . . $20,484 $12,918
Accounts receivable, net. . . . . 15,754 14,137
Inventories. . . . . . . . . . . . 2,132 268
Retained earnings. . . . . . . . . 96,364 105,131
Cost of sales. . . . . . . . . . . 131,376 35,138
Revenues. . . . . . . . . . . . . . 215,639 90,272
Total assets. . . . . . . . . . . . 321,686 167,497
Required:
a. Compute common-size percents for each of the companies using the data provided.
b. If Google decided to pay a dividend, would retained earnings as a percent of total assets increase or decrease
Answer:
a. Common-size analysis Income statement figures expresses them as a percentage of Sales while for Balance sheet figures, entries are expressed as a percentage of Total Assets.
Cash and Cash Equivalents
Apple Google
= 20,484/321,686 = 6.37 % = 12,918/167,497 = 7.71%
Accounts Receivables
Apple Google
= 15,754/321,686 = 4.90 % = 14,137/167,497 = 8.44%
Inventories
Apple Google
= 2,132/321,686 = 0.66 % = 268/167,497 = 0.16%
Retained Earnings
Apple Google
= 96,364/321,686 = 29.96 % = 105,131/167,497 = 62.77%
Cost of Sales
Apple Google
= 131,376/215,639 = 60.92 % = 35,138/90,272 = 38.92%
Apple Google
Cash and equivalents 6.37% 7.71%
Accounts receivable, net 4.90% 8.44%
Inventories 0.66% 0.16%
Retained Earnings 29.96% 62.77%
Cost of Sales 60.92% 38.92%
Revenues 100% 100%
Total Assets 100% 100%
b. Dividends are paid from Retained Earnings so Retained earnings as a percent of total assets WILL DECREASE.
Hart Attorney at Law experienced the follwoing transactions in 2016, the first year of operations:
1. Accepted $36,000 on 4/1/16, as a retainer for services to be performed evenly over the next 12 months.
2. Performed legal services for cash of $54,000.
3. Purchased $2,800 of office suppies on account.
4. Paid $2,400 of the amount due on accounts payable.
5. Paid a cahs dividend to the stockholders of $5,000.
6. Paid cash for operationg expenses of $31,000.
7. Determined that at the end of the accounting period $200 of office supplies remained on hand.
8. On 12/31/16, recognized the revenue that had been earned for services performed in accordance with Transaction 1
Required:
Show the effects of the events on the fianncial statements using a horizontal statement model.
Answer:
I used an excel spreadsheet since there is not enough room here.
Explanation:
The text presents five signs of organizational culture: mission statement, stories & language, physical layout, rules & policies, and rituals. Select an organization where you have worked or are familiar with and identify an example of each sign of organizational culture. How do you think each of these things conveyed the organizational culture to employees and customers/clients.
Answer:
Face book
mission statement: give people the power to build community and bring the world closer together.
physical layout: How Face book is constructed.
rules & policies: The employees are required to act honestly, lawfully, ethically and in favor of the company they represent.
rituals: Face book looks for innovation and breaking the status quo, and to do so Face book employees are invited to paint, create and decore their offices and public spaces with own made art.
Explanation:
Organizational culture is what we call the mix of core values and actions that make up an organization, it's mostly and widely used for companies but it also applies to schools, governments, non-profits, and any group of people working together towards a goal.
The mission statement is basically what the organization wants to achieve, or its dreamed goal.
Stories and language are the speech that the organization communicates to the audience or anyone interacting with it.
The physical layouts are the colors and buildings, apps, or any way of direct interaction that any person could have with the organization.
Rules and policies are what dictate the behavior of all the employees and people related to the organization.
And rituals are the activities that the organization does in order to reinforce the values and policies they try to live day by day, doing your own painting is one example of these rituals.
In 2009, an 1893 Morgan silver dollar sold for $6,450. Required: What was the rate of return on this investment? (Do not include the percent sign (%). Enter rounded answer as directed, but do not use the rounded numbers in intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)
Answer: 7.86%
Explanation:
Using the Future Value formula;
= Amount * ( 1 + r)^n
The question is looking for the rate so making that the subject would be;
Assuming the car was $1 in 1893,
And n = 2009 - 1893 = 116 years
FV = Amount * ( 1 + r)^n
( 1 + r)^n = FV/ Amount
1 ^n + r^n = FV / Amount
r = n√((FV/ Amount) / 1^n)
r = n√(FV/ Amount)
r = 116√(6,450/ 1)
= 1.07855
Subtract 1 for the percentage;
= 1.07855 - 1
= 7.86%
Cost of Goods Sold and Income Statement Schuch Company presents you with the following account balances taken from its December 31 adjusted trial balance:
Inventory, January 1 $40,000 Purchases returns $3,500
Selling expenses 35,000 Interest expense 4,000
Purchases 110,000 Sales discounts taken 2,000
Sales 280,000 Gain on sale of property (pretax) 7,000
General and administrative expenses 22,000 Freight-in 5,000
Additional data:
1. A physical count reveals an ending-inventory of $22,500 on December 31.
2. Twenty-five thousand shares of common stock have been outstanding the entire year.
3. The income tax rate is 30% on all items of income.
Required:
a. As a supporting document for Requirements 2 and 3, prepare a separate schedule for Schuch's cost of goods sold.
b. Prepare a 2013 multiple-step income statement.
c. Prepare a 2013 single-step income statement.
Answer:
Schuch Company
a) Schedule of Cost of Goods Sold
Inventory, January 1 $40,000
Purchases 110,000
Purchases returns -3,500
Freight-in 5,000
Cost of goods available for sale $151,500
less Inventory, December 31 22,500
Cost of goods sold $129,000
b) Multi-step Income Statement
For the year ended December 31, 2013:
Net Sales Revenue $278,000
Cost of Goods Sold 129,000
Gross profit $149,000
Expenses:
Selling expenses 35,000
General & admin exp. 22,000 57,000
Operating profit $92,000
Interest expense 4,000
Income after interest expense $88,000
Gain on sale of property (pretax) 7,000
Comprehensive income before tax $95,000
Income Tax (30%) 28,500
Net income $66,500
EPS = $2.66
c) Single-step Income Statement
For the year ended December 31, 2013:
Net Sales Revenue $278,000
Gain on sale of property (pretax) 7,000
Total revenue and gains $285,000
Cost of Goods Sold 129,000
Selling expenses 35,000
General & admin exp. 22,000
Interest expense 4,000
Total expenses $190,000
Income before taxes $95,000
Income Taxes (30%) 28,500
Net income $66,500
EPS = $2.66
Explanation:
a) Data and Calculations:
December 31 adjusted trial balance:
Inventory, January 1 $40,000
Purchases returns $3,500
Selling expenses 35,000
Interest expense 4,000
Purchases 110,000
Sales discounts taken 2,000
Sales 280,000
Gain on sale of property (pretax) 7,000
General and administrative expenses 22,000
Freight-in 5,000
Additional data:
Ending Inventory $22,500
Common Stock outstanding = 25,000
Income tax rate = 30%
Sales $ 280,000
Sales discounts taken 2,000
Net Sales Revenue $278,000
Cash flows from operations may not be sufficient for a firm to keep up with growth-related financing needs, or the firm may not be able to always generate enough cash flow to maintain a surplus of cash. Firms prefer to borrow now to fulfill their capital requirements through means of short-term financing or long-term financing. Both methods have their advantages and disadvantages.
The following statement identifies a possible characteristic of short-term financing.
Consider this case:
Short-term loans usually have a lower cost than long-term loans. Identify whether the preceding statement is true or false.
a. This statement is false and a disadvantage of short-term financing.
b. This statement is true and an advantage of short-term financing.
Firms use a variety of short-term financing sources to support working capital. Use the descriptions in the following table to identify the short-term financing source.
Description Short-Term Financing Source
A formal, committed line of credit extended by a bank or other lending institution.
An obligation backed by collateral, often inventories or accounts receivable.
Answer:
1. Consider this case:
Short-term loans usually have a lower cost than long-term loans. Identify whether the preceding statement is true or false.
a. This statement is false and a disadvantage of short-term financing.
2. Identify the short-term financing source:
An obligation backed by collateral, often inventories or accounts receivable.
Explanation:
Some organizations regularly require short-term financing to ease uneven cash flows. It is also called working capital financing. Its duration is less than 12 months, unlike long-term financing that can last more than two years. Most of this financing is arranged with banks in the form of bank overdraft.