Answer:
The answer is D.
Explanation:
Number of days' sales in inventory is the average number of days that a company will take to sell of its inventory within the year. It tells us the number of days funds are tied up in inventory.
The formula is (average inventory/cost of sales) x 365days.
Average inventory =
($200,000 + $140,000) ÷ 2
$170,000
Therefore, Number of days' sales in inventory is
($170,000/$552,500) x 365days
=112.3 days
In this case, trade could benefit both Steve and Tom.
What is trade?
Trade, which is typically done in exchange for money, is the transfer of goods and services from one person or institution to another. Economists refer to a system or network that allows trading as a market.
While Tom makes baseball bats and gloves. Baseball bats and gloves are another product that Steve makes, but Tom excels at both. Here, a trade might be advantageous to both Tom and Steve. The fundamental reasoning behind this response is that even though Steve is not better at making baseball gloves and bats than Tom, he can still compete with him because Tom's higher-quality goods will encourage Steve to produce something slightly more superior in order to keep him in the market and in the competition. However, when Steve isn't creating as many high-quality goods, Tom will get a competitive advantage, which will undoubtedly assist him to increase his revenues and win over more devoted clients. As a result, in this cycle, both Steve and Tom will benefit.
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Answer:
Option D. $6.25 Million
Explanation:
The Free Cash Flow can be calculated using the following formula (Ignoring investment):
Free Cash Flow = (Revenue - Operating Expenses) Minus Tax
Here
Revenue is $20 Million
Operating Expenses are $12 Million
And
Tax is not given however tax rate is given which is 35% here. For tax purposes, we will assume that the depreciation is tax allowable expense, so
Tax = (Revenue - Operating Expenses - Depreciation) * Tax rate
By putting values we have:
Tax = ($20m - $12m - $3m) = $1.75 Million
The cash impact is taken while calculating the Free cash flow. This free cash flow method is also used in IRR, NPV, discounted payback method, etc.
By putting values in the above bold equation, we have:
Free Cash Flow = ($20m - $12m) - $1.75 = $6.25 Million
Answer:
Debit Insurance expense $8,000
Credit Prepaid insurance $8,000
Explanation:
The company uses asset method of recording the purchase of insurance. Hence, at end of year end the company must recognize the expire portion of the policy and charge it against insurance expense.
$12,000 / 6 months = $2,000 (monthly insurance expense)
$2,000 x 4 months (September 1 to December 31) = $8,000
Entry:
Debit Insurance expense $8,000
Credit Prepaid insurance $8,000
The balance of the prepaid insurance at the end of first year is $4,000 (12,000 - 8,000).
