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Whitepunk [10]
3 years ago
12

Interest versus dividend expense Michaels Corporation expects earnings before interest and taxes to be $ 50 comma 000 for the cu

rrent period. Assuming a flat ordinary tax rate of 21 %​, compute the​ firm's earnings after taxes and earnings available for common stockholders​ (earnings after taxes and preferred stock​ dividends, if​ any) under the following​ conditions: a. The firm pays $ 12 comma 000 in interest. b. The firm pays $ 12 comma 000 in preferred stock dividends.
Business
1 answer:
Brilliant_brown [7]3 years ago
8 0

Answer:

Here we have two cases and in one of these we are paying interest on a normal loan which is tax deductible and in the other case we are paying interest on a preference share which is not Tax allowable expense. So in the nutshell, the only difference will be tax amount computed in both cases for calculating Earnings available for ordinary shareholders.

Case 1. Interest paid on normal loan

Earning After tax = (Earnings before Interest & Tax - Interest) - Tax

Earning After tax = ($50,000 - 12000) - 21%

Earning After tax = $38000 - 21%*$38000

Earning After tax =  $30020

The amount available for the ordinary shareholders is $300,20

Case 2. Interest on preference shares

As the interest paid on preference share is not tax deductible so the tax will be calculated as 21% of the amount $50,000. So

Earning After tax = Earnings before Interest & Tax - Interest - Tax

Earning After tax = $50,000 - 12000 - (21%*$50,000)

Earnings After Tax = $38,000 - $10,500 = $27,500

So the amount available for the ordinary shareholders is $27,500.

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TB MC Qu. 9-371 Irving Corporation makes a product with ... Irving Corporation makes a product with the following standards for
lisov135 [29]

Answer:

Variable manufacturing overhead rate variance= $664 favorable

Explanation:

Giving the following information:

Variable overhead 0.2 hours $ 5.10 per hour

The company used 1,660 direct labor-hours to produce this output. The actual variable overhead cost was $7,802.

<u>To calculate the variable overhead rate variance, we need to use the following formula:</u>

Variable manufacturing overhead rate variance= (standard rate - actual rate)* actual quantity

Actual rate= 7,802/1,660= $4.7

Variable manufacturing overhead rate variance= (5.1 - 4.7)*1,660

Variable manufacturing overhead rate variance= $664 favorable

6 0
3 years ago
Which one of the following statements is TRUE? a. Company sponsorship of a local charity is an example of a nonpecuniary benefit
mojhsa [17]

Answer: c. An inside director is a board member who also holds a managerial position in the company

Explanation:

Inside Directors are indeed Board members who are employees/ hold managerial positions in the company.

They are in a unique position to help the board in Corporate Governance because as they are on the ground, they have specialized knowledge of the company and as such can provide complete information to the Board.

They typically include a Company's top executives such as the CEO, CFO and the COO.

5 0
3 years ago
Cheese makers in Wisconsin sell their leftover brine to local city and county highway​ departments, which use it in conjunction
alexdok [17]

Answer:

A) By product pricing

Explanation:

If you are able to sell your companies by products it is a great way to make more money and to reduce costs. Imagine if the cheese factories needed to throw away all that brine. They would need to develop some waste disposal facility which obviously costs money to build and operate. Instead they are lowering their costs by selling it and at the same time are getting more money. They would probably even give it away for free if no one was willing to pay for it.

5 0
3 years ago
Daphne contracts with speedy builders inc. To construct a six-foot fence around her yard. Daphne’s neighbor rando is delighted b
baherus [9]

If previously there was a letter of agreement, then Daphne can sue the builder quickly for violating the agreement. but if there is no written agreement then Daphne cannot sue the builder quickly.

An employment agreement or work contract is an agreement made by a worker with a company which is carried out orally or in writing. Usually, the employment contract is valid for a certain time or an indefinite time. The things discussed in it are, terms of work, rights and obligations.

  • A valid employment contract must meet the following criteria and requirements.
  • There are Workers and Employers
  • Work Implementation Information
  • Specific Time Information
  • Number of Wages Received
  • Mutual agreement
  • Authority Information
  • Have Objects Clearly Organized
  • Must be in accordance with the Law

You can learn more about employment agreement here brainly.com/question/28387425

#SPJ4

6 0
1 year ago
Why is understanding the relationship between the cash conversion cycle (CCC) and net working capital important to the contempor
murzikaleks [220]

Answer: To understand how businesses need money and how they can sustain themselves for a period of time to fund bills and still operate

Explanation:

Understanding the relationship between cash conversation cycle and contemporary business executive aims at knowing the business needs funds to operate and building strategic alliances, make money and propose ideas that will sustain and elevate it's strength for some time. Money is vital in running business operations, as organizations will foot bills and do some expenditure and sought out ways to earn more business.

8 0
3 years ago
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