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ExtremeBDS [4]
3 years ago
12

Suppose that on January 6, 2018, Excel Motors paid $240,000,000 for its 45% investment in Dynamic Motors. Excel has significant

influence over Dynamic after the purchase. Assume Dynamic earned net income of $10,000,000 and paid cash dividends of $15,000,000 to all outstanding stockholders during 2018. (Assume all outstanding stock is voting stock.) Read the requirements Requirement 1. What method should Excel Motors use to account for the investment in Dynamic Motors? Give your reasoning. Excel Motors should use the ▼ method to account for its investment in Dynamic Motors because the investment Requirement 2. Journalize all required 2018 transactions related to Excel Motors's Dynamic investment. Include an explanation for each entry
Business
1 answer:
Ivenika [448]3 years ago
8 0

Answer: provided in the explanation segment

Explanation:

To begin we will answer each part accordingly.

For Requirement 1 :  

I would say that Excel Motors should use the Equity method to account for its investment in Dynamic Motors, because the investment results in significant influence over the investment company.

For Requirement 2 :  

In the books of Excel Motors: we have that;

Transaction/ Event   Date Accounts&Explanation   Debit ($

)  Credit($

)

    1.     Jan 6, 2018   Investment in Associate 240,000,000    

                                                        Cash                            240,000,000

Accnt&Explan: To record cash paid for equity investment in Dynamic Motors.  

   

    2.              Cash ( $ 15,000,000 x 45%)      6,750,000  

                        Investment in Associate                         6,750,000

Accnt&Explan:To record dividend received in cash from Dynamic Motors  

   

3. Investment in Associate ( $ 10,000,000 x 45%) 4,500,000  

                                           Investment Revenue                        4,500,000

Accnt&Explan:To record income earned on equity investment

For Requirement 3:

 Equity Investment in Dynamic Motors:

               Cash      240,000,000           Cash                 6,750,000

Investment Income 4,500,000  

                                                                       Ending Balance 237,750,000

                                      244,500,000  244,500,000

The balance would be classified as a non-current asset on the balance sheet dated December 31, 2018

cheers i hope you understand, this is actually in a tabular form.

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A foreign company (whose sales will not affect cornish's market) offers to buy 3,000 units at $17.00 per unit. in addition to va
Marianna [84]

Trescott company had the following results of operations for the past year:

Sales (20,000 units at $22) $440,000

Direct materials and direct labor $200,000

Overhead (40% variable) 100,000

Selling and Administrative expenses (all fixed) 92,000 (392,000)

Operating income $ 48,000

A foreign company (whose sales will not affect Trescott's market) offers to buy 3,000 units at $17.00 per unit. In addition to the variable manufacturing costs, selling these units would increase fixed overhead by $500 and selling and administrative costs by $1,000. If Trescott accepts the offer, its profits will increase (decrease) by:

Answer : If Cornish accepts this order, its profits will increase by $13,500.

<u>Calculation of Variable Costs per unit :</u>

Direct Material and labor per unit = Total Direct Material and labor / No. of units sold

Direct Material and labor per unit =200000/20000 = $10

Variable Overhead per unit = Total Variable Overhead / No. of units sold

Variable Overhead per unit = (100000*0.4)/20000 = $2

Variable Cost per unit = $12 (Direct Material and labor per unit + Variable Overhead per unit)

Selling price of new order = $17 per unit

No. of units = 3,000

Increase in Fixed Costs = Inc in fixed overhead + inc in S&A Expenses

Increase in Fixed Costs = $1500 (500 + 1000)

Total Cost of new order = (Variable Cost per unit * No. of units) + Increased Fixed Cost

Total Cost of new order = (12*3000) + 1500 = $37,500

Total Revenues from new order = Selling price per unit * No. of units sold

Total Revenues = $51,000 (17 *3,000)

Profit from new order = Total Revenues from new order - Total Cost of new order

Profit from new order = 51000 - 37500 = $13,500

6 0
3 years ago
Suppose that a demand curve exhibits two points. Initially, at price P 0 P0 , the quantity demanded is Q 0 Q0 . When price chang
Vinvika [58]

Answer:

Price Elasticity of Demand= \frac{Percentage change in Demand}{Percentage change in Price}

At Price = P_{0}

Quantity demanded = Q_{0}

At Price = P_{1}

Quantity Demanded = Q_{1}

Now,

Percentage change in Demand = \frac{(Q_{1} - Q_{0})}{Q_{0}}

Percentage change in Price = \frac{(P_{1} - P_{0})}{P_{0}}

Price Elasticity of Demand = \frac{\frac{(Q_{1} - Q_{0})}{Q_{0}}}{\frac{(P_{1} - P_{0})}{P_{0}}}

Above formula if used will give the correct answer related to Price Elasticity of Demand.

Another variant of above formula is also being used on prominent basis.

Price Elasticity of Demand = \frac{\frac{(Q_{1} - Q_{0})}{(Q_{1} + Q_{0})} }{\frac{(P_{1} - P_{0})}{P_{1} + P_{0}} }

Utilization of any of the above Formula will give the ideal outcome in estimating Price elasticity of demand.

5 0
3 years ago
Carl’s business insurance costs $3,000 per year. Carl paid for and purchased a 12-month insurance policy on October 1, Year 1. O
Naddika [18.5K]

Answer:

Carl's Insurance Expense Deduction for Year 2

Since he took advantage of the 12-month prepayments rule, his Year 2 Insurance deduction was deducted in Year 1.

While his deduction should have been equal to

= Annual Insurance Expense/12 x 9 = $3,300/12 x 9 = $2,475

In Year 2, it is equal to $0 since he did not make any payment for Insurance.

Explanation:

Under the cash method of accounting, two rules govern how someone can deduct prepaid expenses:

1. The General Rule

2. The 12-Month Rule

1. The General Rule

Under the general rule, you cannot deduct the full amount of an advance payment covering more than 12 months. You must deduct a portion of the payment in the year to which it applies.

Example: The General Rule.

Carl is a cash method taxpayer on a calendar year.

On October 1, 2018 Carl pays $3,600 in advance for business insurance covering three years.

Coverage begins October 1, 2018.

Coverage ends September 30, 2021.

Result:

The general rule applies.

The advance payment covers more than 12 months (36 months).

A portion of the $3,600 must be deducted ratably over the three-year period.

To find the portion of the $3,600 Carl deduct each tax year:

First, divide the $3,600 by 36 (months) to find the monthly premium amount.

Then, multiply the number of months remaining in each tax year by the monthly premium

Monthly premium: $3,600 / 36 = $100 per month.

Oct. 1, 2018 - Dec. 31, 2018: 3 x $100 = $300 deduction for 2018

Jan. 1, 2019 - Dec. 31, 2019: 12 x $100 = $1,200 deduction for 2019

Jan .1, 2020 - Dec. 31, 2020: 12 x $100 = $1,200 deduction for 2020

Jan. 1, 2021 - Sep. 30, 2021: 9 x $100 = $900 deduction for 2021

The 12-Month Rule

The 12-month rule says that Carl may deduct the full amount of an advance payment in the year the payment is made if it creates rights or benefits for the taxpayer that do not extend beyond the earlier of:

12 months after the right or benefit begins, or

The end of the tax year after the tax year in which payment is made.

Example 1: The 12-Month Rule.

Carl is a cash basis taxpayer on a calendar year.

On October 1, 2018 he pays $2,000 for business insurance covering one year.

The policy begins October 1, 2018 and ends September 30, 2019.

Result:

The 12-month rule applies.

Deduct the full $2,000 in 2018

The benefit does not extend beyond 12 months after the right to receive the benefit begins - October 1, 2018.

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In introducing the opportunity cost of time into the theory of consumer behavior, we find that, all else equal:______.
olchik [2.2K]

In introducing the opportunity cost of time into the theory of consumer behavior, we find that, all else equal  one should consume less of time-intensive goods.

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