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viva [34]
3 years ago
6

18.On January 1, 2016, the Accounts Receivable and the Allowance for Uncollectible Accounts for Darius Company carried balances

of $20,000 and $550 respectively. During the year, the company reported $70,000 of credit sales. There were $400 of receivables written off as uncollectible in 2016. Cash collections of receivables amounted to $74,700. The company estimates that it will be unable to collect 5% of the year-end accounts receivable balance.
Required:
Part 1) The amount of bad debts expense recognized in the 2016 income statement will be __________.
Part 2) The net realizable value of receivables appearing on the 2016 balance sheet will amount to ___________.
Business
1 answer:
Kisachek [45]3 years ago
7 0

Answer:

Part 1) The amount of bad debts expense recognized in the 2016 income statement will be $400.

Part 2) The net realizable value of receivables appearing on the 2016 balance sheet will amount to $ 14,155

Explanation:

<em>Bad Debts</em> are closed off to Trade Receivables accounts and they are an expense in the Income Statement

To find the Accounts Receivable Balance at year end, we open a Total <em>Accounts Receivable - T Account</em> and Balance it off.

Note :Allowances for Doubtful Debts are not recorded in this Account

Debits :

January 1, 2016 Accounts Receivable                                  $20,000

Credit sales                                                                            $70,000

Totals                                                                                      $90,000

Credits:

Bad Debts Written Off                                                                 $400

Cash collections                                                                      $74,700

December 31,  Accounts Receivable (<em>Balancing Figure</em>)    $14,900

Totals                                                                                       $90,000

Allowances for Doubtful debts are at 5% of the year-end accounts receivable balance, therefore amount to reduce the Accounts Receivables is $14,900 × 5% = $745

<u>Net realizable value of receivables </u>:

=$14,900 -  $745

=$ 14,155

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7 0
3 years ago
What is the weighted average cost of capital (WACC) for ABC Limited which has the following capital structure? $5m of equity wit
katrin2010 [14]

The weighted average cost of capital (WACC) for ABC Limited is 12.63%

The weighted average cost of capital(WACC) of a firm is the average cost of finance incurred by the firm on all its sources of finance.

It is determined as the sum of the cost of each source of finance multiplied by their respective weights in the firm's capital structure.

By weights, I mean the percentage of funding each source contributes to the total finance available at the firm's disposal.

WACC=(weight of equity*cost of equity)+(weight of mezzanine finance*cost of mezzanine finance)+(weight of debt*cost of debt)

weight of equity=equity finance/total finance

cost of equity=15%

weight of mezzanine finance=mezzanine finance/total finance

cost of mezzanine finance=9.5%

weight of debt of finance=debt finance/total finance

total finance=$5m+$2m+$1m

total finance=$8m

WACC=($5/$8*15%)+($2/$8*9.5%)+($1/$8*7%)

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7 0
2 years ago
SME Company has a debt-equity ratio of .57. Return on assets is 7.9 percent, and total equity is $620,000. a. What is the equity
PtichkaEL [24]

Answer:

(i) 1.57

(ii) 12.40%

(iii) $76,898.60

Explanation:

Debt-equity ratio = debt/equity

Hence debt= 0.57 equity

= (0.57 × 620000)

= $353,400

Total assets = debt + equity

                     = (353400+620000)

                    = $973400

1. Equity multiplier = Total assets ÷ Equity

                               = $973,400 ÷ 620,000

                               = 1.57

3.  ROA = net income ÷ Total assets

net income = ($973,400 × 0.079)

                    = $76,898.60

2. ROE = net income ÷ Total equity

= $76,898.60 ÷ 620,000

= 12.40%(Approx).

7 0
3 years ago
Assume that Microsoft has no debt, a total market value of $300 billion, and a marginal tax rate of 21%. If it permanently chang
Sphinxa [80]

The presence value of tax shield is =522,000,000

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Tax shields is calculate by substraction cash flow form two different sessions.

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Tax payable= Tax rate/100% * Market Value

Tax payable = 20/100× $300 billion

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Market value = $300 billion

Tax rate = 20%

Debt = 13% of $300 billion

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5 0
1 year ago
Shelhorse Corporation produces and sells a single product. Data concerning that product appear below:
zloy xaker [14]

Answer:

See explanation section.

Explanation:

Requirement 1

At first we have to find the original net income.

                              Shelhorse Corporation

              Contribution format income statement

              For the year ended, December 31, 20YY

Sales Revenue (6,100 × $260) = $1,586,000

Less: Variable expense (6,100 × $91) = $555,100

Contribution Margin = $1,030,900

Less: Fixed Expense  $366,000

Net Operating Income = $664,900

Requirement 2

As the marketing manager believes that a $23,000 increase in the monthly advertising budget would result in a 150 unit increase in monthly sales, the new sales volume = 6,100 + 150 = 6,250 and new fixed expense = $366,000 + $23,000 = $389,000

                          Shelhorse Corporation

              Contribution format income statement

              For the year ended, December 31, 20YY

Sales Revenue (6,250 × $260) = $1,625,000

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Contribution Margin = $1,056,250

Less: Fixed Expense  = $389,000

Net Operating Income = $667,250

The effect on the company's monthly net operating income of this change =  $667,250 - $664,900 = $2,350

5 0
3 years ago
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