E22-19 Preparing a financial budget [25–30 min]
Consider the following June actual ending balances and July 31, 2012, budgeted amounts for Oleans.com:
a. June 30 inventory balance, $17,750
b. July payments for inventory, $4,300
c. July payments of accounts payable and accrued liabilities, $8,200
d. June 30 accounts payable balance, $10,600
e. June 30 furniture and fixtures balance, $34,500; accumulated depreciation balance, $29,830
f. June 30 equity, $28,360
g. July depreciation expense, $900
h. Cost of goods sold, 50% of sales
i. Other July expenses, including income tax, total $6,000, paid in cash
j. June 30 cash balance, $11,400
k. July budgeted credit sales, $12,700
l. June 30 accounts receivable balance, $5,140
m. July cash receipts, $14,200
Requirement
1. Prepare a budgeted balance sheet.
Click here for the solution: Consider the following June actual ending balances and July 31, 2012, budgeted amounts for Oleans.com
Showing posts with label consider. Show all posts
Showing posts with label consider. Show all posts
Friday, September 11, 2015
Thursday, September 10, 2015
Consider a firm that has decided to make, but has not yet announced, a large “bonus” cash dividend amounting in the aggregate to $5 million
B3. (Cash dividend versus share repurchase) Consider a firm that has decided to make, but has not yet announced, a large “bonus” cash dividend amounting in the aggregate to $5 million. The firm has 1 million shares outstanding that sell for $20 each. The firm has no debt; there are no taxes; and all transactions take place in a perfect capital market. Using calculations like those in the illustration of dividend irrelevance in a perfect capital market, show that shareholders will be indifferent between whether the firm pays out the “bonus” as a dividend or uses the money to buy back $5 million of its shares.
Click here for the solution: Consider a firm that has decided to make, but has not yet announced
Click here for the solution: Consider a firm that has decided to make, but has not yet announced
Saturday, August 22, 2015
(Integrative-Risk, return, and CAPM) Wolff Enterprises must consider several investment projects
(Integrative-Risk, return, and CAPM) Wolff Enterprises must consider several investment projects, A through E, using the capital asset pricing model (CAPM) and its graphical representation, the security market line (SML). Relevant information is presented in the following table.
Item Rate of return Beta,b
Risk-free asset 9% 0.00
Market portfolio 14 1.00
Project A __ 1.50
Project B ___ 0.75
Project C ___ 2.00
Project D ___ 0.00
Project E ___ -0.50
a. Calculate (1) the required rate of return and (2) the risk premium for each project, given its level of nondiversifiable risk.
b. Use your findings in part a to draw the security, market line (required return relative to nondiversifiable risk).
c. Discuss the relative nondiversifiable risk of projects A through E
d. Assume that recent economic events have caused investors to become less risk- averse, causing the market return to decline by 2%, to 12%. Calculate the new required returns for assets A through E, and draw the new security market line on the same set of axes that you used in part b.
e. Compare your findings in part a and b with those in part d. What conclusion can you draw about the impact of a decline in investor risk aversion on the required returns of risky assets?
Click here for the solution: (Integrative-Risk, return, and CAPM) Wolff Enterprises must consider several investment projects
Item Rate of return Beta,b
Risk-free asset 9% 0.00
Market portfolio 14 1.00
Project A __ 1.50
Project B ___ 0.75
Project C ___ 2.00
Project D ___ 0.00
Project E ___ -0.50
a. Calculate (1) the required rate of return and (2) the risk premium for each project, given its level of nondiversifiable risk.
b. Use your findings in part a to draw the security, market line (required return relative to nondiversifiable risk).
c. Discuss the relative nondiversifiable risk of projects A through E
d. Assume that recent economic events have caused investors to become less risk- averse, causing the market return to decline by 2%, to 12%. Calculate the new required returns for assets A through E, and draw the new security market line on the same set of axes that you used in part b.
e. Compare your findings in part a and b with those in part d. What conclusion can you draw about the impact of a decline in investor risk aversion on the required returns of risky assets?
Click here for the solution: (Integrative-Risk, return, and CAPM) Wolff Enterprises must consider several investment projects
Tuesday, August 18, 2015
Challenge Problem: Consider a market with only the following three risky assets
Challenge Problem: Consider a market with only the following three risky assets:
Expected Return % per month Risk % Covariance with market
Asset 1 2.03 2 1.12
Asset 2 1.79 1 0.90
Asset 3 1.49 1 0.62
Market Portfolio 0.92
a) Consider the market portfolio comprised of 4% invested in Asset 1, 76% invested in Asset 2, and 20% invested in Asset 3. What is the expected return of this portfolio?
b) What are the betas of the three risky assets?
c) Suppose the riskless rate of interest is 0.8% (8/10ths of one percent per month). Are these three securities priced correctly?
d) What is the beta of the market portfolio calculated as a weighted average of the betas of its components?
Click here for the solution: Challenge Problem: Consider a market with only the following three risky assets
Expected Return % per month Risk % Covariance with market
Asset 1 2.03 2 1.12
Asset 2 1.79 1 0.90
Asset 3 1.49 1 0.62
Market Portfolio 0.92
a) Consider the market portfolio comprised of 4% invested in Asset 1, 76% invested in Asset 2, and 20% invested in Asset 3. What is the expected return of this portfolio?
b) What are the betas of the three risky assets?
c) Suppose the riskless rate of interest is 0.8% (8/10ths of one percent per month). Are these three securities priced correctly?
d) What is the beta of the market portfolio calculated as a weighted average of the betas of its components?
Click here for the solution: Challenge Problem: Consider a market with only the following three risky assets
Saturday, August 1, 2015
Consider the following information about the Dilbert Printing Company
B3. (Book and market values) Consider the following information about the Dilbert Printing Company. All data are in millions of dollars.
BOOK VALUE MARKET VALUE
Assets, December 31, previous year 1,000 2,000
Assets, December 31, latest year 1,200 1,400
Liabilities, December 31, previous year 600 900
Liabilities, December 31, latest year 650 1,050
a. What is the book value of stockholders’ equity at the end of the previous and latest years?
b. What is the market value of stockholders’ equity at the end of the previous and latest years?
c. For the latest year ending December 31, net income was $175 million. If Dilbert paid its stockholders cash dividends of $50 million, what is the total economic income of the stockholders during this year?
Click here for the solution: Consider the following information about the Dilbert Printing Company
BOOK VALUE MARKET VALUE
Assets, December 31, previous year 1,000 2,000
Assets, December 31, latest year 1,200 1,400
Liabilities, December 31, previous year 600 900
Liabilities, December 31, latest year 650 1,050
a. What is the book value of stockholders’ equity at the end of the previous and latest years?
b. What is the market value of stockholders’ equity at the end of the previous and latest years?
c. For the latest year ending December 31, net income was $175 million. If Dilbert paid its stockholders cash dividends of $50 million, what is the total economic income of the stockholders during this year?
Click here for the solution: Consider the following information about the Dilbert Printing Company
Sunday, July 19, 2015
Consider the following independent situations
E6-10 (Unknown Periods and Unknown Interest Rate) Consider the following independent situations.
(a) Mark Yoders wishes to become a millionaire. His money market fund has a balance of $148,644 and has a guaranteed interest rate of 10%. How many years must Mark leave that balance in the fund in order to get his desired $1,000,000?
(b) Assume that Elvira Lehman desires to accumulate $1 million in 15 years using her money market fund balance of $239,392. At what interest rate must Elvira’s investment compound annually?
Click here for the solution: Consider the following independent situations
(a) Mark Yoders wishes to become a millionaire. His money market fund has a balance of $148,644 and has a guaranteed interest rate of 10%. How many years must Mark leave that balance in the fund in order to get his desired $1,000,000?
(b) Assume that Elvira Lehman desires to accumulate $1 million in 15 years using her money market fund balance of $239,392. At what interest rate must Elvira’s investment compound annually?
Click here for the solution: Consider the following independent situations
Tuesday, June 23, 2015
Consider the following transactions of Parolini Company for 2008
Consider the following transactions of Parolini Company for 2008.
1. Sold a 6-month insurance policy to Orosco Corporation for $9,000 on March
2. Leased office space to Easley Supplies for a 1-year period beginning September 1.The rent of $30,000 was paid in advance.
3. Received a deposit of $10,000 for an office space in September from Alpha Corporation. The space will not be available until October 2008.
4. Sold a 12 month insurance policy to Great Idea Corporation for $12,000 on June 1, 2008.
Instructions
For each item above, indicate the amount of revenue Parolini should recognize in calendar year 2008. Explain.
Click here for the solution: Consider the following transactions of Parolini Company for 2008
1. Sold a 6-month insurance policy to Orosco Corporation for $9,000 on March
2. Leased office space to Easley Supplies for a 1-year period beginning September 1.The rent of $30,000 was paid in advance.
3. Received a deposit of $10,000 for an office space in September from Alpha Corporation. The space will not be available until October 2008.
4. Sold a 12 month insurance policy to Great Idea Corporation for $12,000 on June 1, 2008.
Instructions
For each item above, indicate the amount of revenue Parolini should recognize in calendar year 2008. Explain.
Thursday, June 18, 2015
(Unknown Periods and Unknown Interest Rate) Consider the following independent situations
ACC 421 Week 5
Exercise 6-10 (E6-10) (Unknown Periods and Unknown Interest Rate)
Consider the following independent situations. (a) Mike Finley wishes to become a millionaire. His money market fund has a balance of $92,296 and has a guaranteed interest rate of 10%. How many years must Mike leave that balance in the fund in order to get his desired $1,000,000? (b) Assume that Serena Williams desires to accumulate $1 million in 15 years using her money market fund balance of $182,696. At what interest rate must Serena’s investment compound annually?
Click here for the solution: (Unknown Periods and Unknown Interest Rate) Consider the following independent situations
Exercise 6-10 (E6-10) (Unknown Periods and Unknown Interest Rate)
Consider the following independent situations. (a) Mike Finley wishes to become a millionaire. His money market fund has a balance of $92,296 and has a guaranteed interest rate of 10%. How many years must Mike leave that balance in the fund in order to get his desired $1,000,000? (b) Assume that Serena Williams desires to accumulate $1 million in 15 years using her money market fund balance of $182,696. At what interest rate must Serena’s investment compound annually?
Click here for the solution: (Unknown Periods and Unknown Interest Rate) Consider the following independent situations
Monday, May 11, 2015
ACC 561 Question 13-B3 (Comparison of Variable Costing and Absorption Costing) Youngstown Manufacturing
ACC 561 Question 13-B3, Comparison of Variable Costing and Absorption Costing, on p. 617
Consider the following information pertaining to a year’s operations of Youngstown Manufacturing:
Units sold 1,400
Units produced 1,600
Direct labor $4,200
Direct materials used 3,500
Fixed manufacturing overhead 2,200
Variable manufacturing overhead 300
Selling and administrative expenses (all fixed) 700
Beginning inventories 0
Contribution margin 5,600
Direct-material inventory, end 800
There are no work-in-process inventories.
1. What is the ending finished-goods inventory cost under absorption costing?
2. What is the ending finished-goods inventory cost under variable costing?
Click here for the solution: ACC 561 Question 13-B3, Comparison of Variable Costing and Absorption Costing Youngstown Manufacturing
Consider the following information pertaining to a year’s operations of Youngstown Manufacturing:
Units sold 1,400
Units produced 1,600
Direct labor $4,200
Direct materials used 3,500
Fixed manufacturing overhead 2,200
Variable manufacturing overhead 300
Selling and administrative expenses (all fixed) 700
Beginning inventories 0
Contribution margin 5,600
Direct-material inventory, end 800
There are no work-in-process inventories.
1. What is the ending finished-goods inventory cost under absorption costing?
2. What is the ending finished-goods inventory cost under variable costing?
Click here for the solution: ACC 561 Question 13-B3, Comparison of Variable Costing and Absorption Costing Youngstown Manufacturing
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