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Kaylis [27]
3 years ago
8

Sway's Market is considering a project that will require the purchase of $1.4 million in new equipment. The equipment will be de

preciated straight-line to zero over the 5-year life of the project. The firm expects to sell the equipment at the end of the project for 20 percent of its original cost. New net working capital equal to 10 percent of sales will be required to support the project. All of the new net working capital will be recouped at the end of the project. Annual sales are estimated at $750,000 with costs of $338,000. The required rate of return is 12 percent and the tax rate is 34 percent.What is the value of the depreciation tax shield in Year 2 of the project?
Business
1 answer:
hodyreva [135]3 years ago
7 0

Answer:

tax shield year 2 95,200

Explanation:

The tax shield will be the depreciation expense times tax rate

<u>Our first step is to calculate the depreciation expense:</u>

The equipment is worth 1.4 million and has a 5-years useful life

It is being depreciate on straight-line

depreciation per year

equipment / useful life

1.4 million / 5 = 0.28 = 280,000

<u>Now we apply the tax rate of 34%</u>

280,000 x 34% = 95,200

This will be the tax shield on Year 2

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Avery Company has two divisions, Polk and Bishop. Polk produces an item that Bishop could use in its production. Bishop currentl
Aleksandr-060686 [28]

Answer and Explanation:

a. The computation of operating profit is shown below:-

Profit per unit = Purchase price from outside per unit + variable cost of production internally

= $15 - $7

= $8

Total increment in operating profit = Profit per unit × Total number of units

= $8 × 24,000

= $192,000

b. Minimum transfer price = Variable cost = $7 (because polk has overcapacity and there is no change in fixed cost and polk minimum has to recover its variable production cost)

c. Maximum transfer price = purchase cost from outside supplier = $15 (because if the internal transfer piece is more than $15 Bishop will lose so he prefers to buy from outside and the company as a whole will lose $192,000 in incremental operating profit

3 0
3 years ago
if a trial balance totals do not agree, the difference must be entered in a. nominal account b. the profit and loss account C. t
Lena [83]

Answer:

d. the suspense account​

Explanation:

Financial accounting is an accounting technique used for analyzing, summarizing and reporting of financial transactions like sales costs, purchase costs, payables and receivables of an organization using standard financial guidelines such as Generally Accepted Accounting Principles (GAAP).

Financial statements can be defined as a document used for the formal communication or disclosure of financial information and statements to present and potential users such as investors and creditors. These includes balance sheet, statement of retained earnings and income statement.

In Financial accounting, if a trial balance totals do not agree, the difference must be entered in the suspense account​

8 0
2 years ago
11. Nadine is retiring at age 62 and expects to live to age 85. On the day she retires, she has $402,000 in her retirement savin
Svet_ta [14]

Answer:

E. $2,688.77

Explanation:

We need to calculate the PMT of an ordinary annuity at 6%

PV \div \frac{1-(1+r)^{-time} }{rate} = C\\

PV 402,000

time:

85 years - 62 years = 23 years of retirement

23 years  x   12 months per year = 276 months

rate: 6% annual rate we must divide over 12 months to convert into monthly: 0.06/12 = 0.005

402000 \div \frac{1-(1+0.005)^{-276} }{0.005} = C\\

C  $ 2,688.766

<em>She can withdraw 2,688.76 per month</em>

7 0
2 years ago
If bonds for Crayon Corporation, with a face value of $150,000, are converted into common stock when the carrying value of the b
Llana [10]

Answer:

(C) Bonds Payable for $150,000

Explanation:

the face value of the bonds will the value at which bonds payable account enter the accounting. Then, there is a discount which decrease the net value of the bonds:

Bonds Payable        150,000 credit

Discount on bonds   15,000  debit

When the bonds are converted, we will write-off these account against common stock and additional paid-in

To wirte-off the account we need to post them in the other side so we got:

Bonds payable debit 150,000 debit

       Discount on bonds         15,000 credit

      Common Stock                       xx credit

      Additional paid.in                    xx credit

These makes option C correct

5 0
3 years ago
The letter “s” is directly printed on individual pieces of what brand of candy?
RSB [31]
The answer to this question is the candy skittles. The candy skittles have a letter s printed in each candy. This candy is manufactured and marketed by the Wrigley Company and was first produced in the year 1974 and have a fruit flavour.
4 0
3 years ago
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