Answer:
Journal entry to eliminate Sale to Peter Company
Debit : Sales Revenue (Sally Company ) $50,000
Credit : Cost of Sales (Peter Company) $50,000
Explanation:
Peter Company and Sally Company are in a group and Peter Company is the Parent whilst Sally Company is the subsidiary.
For 2019 Eliminate an Intragroup Transactions that occur between Peter Company and Sally Company.
Answer:
They will decrease as production decreases
Explanation:
Total Variable cost is sum of all the cost incurred in production of total units of goods produced. It is directly proportional to the number of units of goods produced. It helps to analyze cost structure of goods and then decide on pricing strategy of the goods. Some of the examples of variable cost can be packaging cost, raw material’s cost.
Mathematically it can be defined as
Total variable cost = Total units of goods produced * variable cost for one unit of good produced
Hence from the given option They will decrease as production decreases as the number of units of goods produced will decrease and hence lesser raw material and packaging will be required to produce the goods.
Answer:
d. Choose Option B because it has a higher NPV
Explanation:
The computation is shown below:
For Option A:
Investment = $10 million
Present Value of cash flows = Cash flow ÷ Discounting rate
= $2 ÷ 10%
= $20 million
Now
NPV = $20 - $10
= $10 million
We know that
IRR is the rate at which the NPV will be zero
So, 2 ÷ r - 10 = 0
r = 20%
For Option B:
Investment = $50 million
Present Value of cash flows = $6.5 ÷ 10% = $65 million
NPV = $65 - $50 = $15 million
we know that
IRR is the rate at which the NPV will be zero
So, 6.5÷ r -50 = 0
r = 13%
Based on NPV, Option B should be selected as it contains higher NPV as compared to option A.
However, Based on IRR, Option A should be chosen as it contains higher IRR and a higher IRR represent a higher profit percentage