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3 years ago

How does revenue affect profit (also called “net profit”)? How do expenses affect profit?

Business

1 answer:

Ivanshal [37]3 years ago

3 0

Answer:

See below

Explanation:

<u>1. How revenue affects Profits</u>

Revenue is income that a business receives selling its products or from the services it provides. Income from other sources such as win in lawsuits is also revenue.

A business with high revenue is more profitable than a company with low income. For a business to make profits, its revenues must exceed its total expenditure. Profit is total income minus expenses. After the breakeven, extra sales contribute to profits. The more the sales, the higher the profits. Low revenue makes low profits.

<u>2. How do expenses affect profit?</u>

Expenses are costs incurred by a business in its productions and sales processes. Service providers incur expenses as they provide services to customers.

Expenses have a direct impact on profits. High costs may result in losses. Profits are realized after deducting expenses from revenues.

If the expenses are high, then profits will be minimal. Low expenses will result in high profits.

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Johnson Company uses the allowance method to account for uncollectible accounts receivable. Bad debt expense is established as a

Fofino [41]

Answer:

1. $67,500

2. $69,500

3. $69,500

Explanation:

1. The computation of bad debt expense is shown below:-

Bad debt expense = Credit sales × Debt percentage

= $4,500,000 × 1.5%

= $67,500

2. The computation of receivable written off is shown below:-

receivable written off = Allowance Beginning balance + bad debt expense - Allowance ending balance

= $42,000 + $67,500 - $40,000

= $69,500

3. The computation of bad debt expense be for 2013 is shown below:-

= receivable written off

= $69,500

5 0

3 years ago

Dorsey Co. has expanded its operations by purchasing a parcel of land with a building on it from Bibb Co. for $83,000. The appra

algol [13]

Answer:

The cost should be recorded for the land is $15,150

Explanation:

In order to calculate the cost should be recorded for the land we would have to calculate the following formula:

cost should be recorded for the land=(Appraised value of land/Appraised value of land and building)*combine cost of land and building

Appraised value of land=$23,000

Appraised value of land and building=$23,000+$103,000=$126,000

combine cost of land and building=$83,000

Therefore, cost should be recorded for the land=($23,000/$126,000)*$83,000

cost should be recorded for the land=$15,150

The cost should be recorded for the land is $15,150

4 0

3 years ago

Carver Lumber sells lumber and general building supplies to building contractors in a medium-sized town in Montana. Data regardi

masya89 [10]

Answer:

$39,300

Explanation:

The computation of the net income is shown below:

= Sales - cost of good sold - other monthly expenses - depreciation expense

= $320,000 - $240,000 - $24,700 - $16,000

= $39,300

The cost of goods sold is computed below:

= December sales × cost of goods sold percentage

= $320,000 × 75%

= $240,000

All other information which is given is not relevant. Hence, ignored it

4 0

3 years ago

Suppose that the risk-free rates in the United States and in Canada are 5% and 3%, respectively. The spot exchange rate between

Yuri [45]

Answer:

The futures price of the C$ should be 0.82/C$.

Explanation:

Let:

rUS = Risk-free rates in the United States = 5%

rC = Risk-free rates in Canada = 3%

S = Spot exchange rate = $0.80/C$

Since the rUS is greater than rC, we have:

Future price of C$ = S + ((rUS -rC) * S) = 0.80 + ((5% - 3%) * 0.80) = 0.80 + (2% * 0.80) = 0.80 + 0.016 = 0.816, or 0.82

Therefore, the futures price of the C$ should be 0.82/C$.

4 0

3 years ago

A 3-year interest rate swap has a level notional amount of $300,000. Each settlement period is one year and the variable rate is

tankabanditka [31]

Answer:

(a)0.04317 (b) 3672 which will be paid by the payer to the receiver (c) -399. so, the 399 which will be paid by the receiver to the payer (d) 2659.38

Explanation:

Solution

(a) Swap Rate (R) = (1 - P₃)/(P₁+P₂+P₃)

= (1 – 0.88)/(0.97 + 0.93 + 0.88)

= 0.04317

(b) The payer pays the fixed interest rate and gets the variable interest rate.

Then, the fixed interest rate is known as the swap rate which is 4.317%.

Now,

The variable rate is the one year spot rate for the first year of the loan. which is r₁ = 1/P₁ -1 = 1/0.97 - 1 = 0.03093

Thus,

The net swap payment becomes (300,000)(0.04317) - (300,000)(0.03093) = 3672 which will be paid by the payer to the receiver.

(c) The payer pays the fixed interest rate and receives the variable interest rate. The fixed interest rate is the swap rate which is 4.317%.

Thus,

The variable rate is the one year spot rate for the second year of the loan is 4.45%.

So,

The net swap payment becomes (300,000)(0.04317) - (300,000)(0.04450) = -399.

Therefore, the 399 which will be paid by the receiver to the payer.

(d) The market value is the present value of expected future cash flows. under this swap, the variable rate has been swapped for the constant swap rate. There is one year left under the swap.

Then,

The expectation is that the swap owner will pay (300,000)(0.04317) and receive (300,000)(0.0525). these payments would be made at the end of one year. Therefore, the market value will be:

{(300,000)(0.0525) - (300,000)(0.04317)}/1.0525 = 2799/1.0525 = 2659.38

4 0

3 years ago