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ikadub [295]
3 years ago
9

Item 3Item 3 Cutter Enterprises purchased equipment for $87,000 on January 1, 2018. The equipment is expected to have a five-yea

r life and a residual value of $4,800. Using the sum-of-the-years'-digits method, depreciation for 2018 and book value at December 31, 2018, would be
Business
1 answer:
Rus_ich [418]3 years ago
8 0

Answer:

$27,400 and $59,600

Explanation:

The computation of the depreciation expense and the book value using the sum of-the-years'-digits method is shown below:

Depreciation expense is

= (Purchase cost - residual value) × useful life ÷ sum of years

= ($87,000 - $4,800) × 5 years ÷ (5 + 4 + 3 + 2 + 1)

= $27,400

And, the book value is

= Purchase cost - depreciation expense

= $87,000 - $27,400

= $59,600

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Targaryen Corporation has a target capital structure of 65 percent common stock, 5 percent preferred stock, and 30 percent debt.
Juli2301 [7.4K]

Answer:

  • a. What is the company’s WACC?

R_Wacc =  13% (65%) + 5% (5%) + 6% (30%) * (1-0,25) =  10,05%

  • b. What is the aftertax cost of debt?

The aftertax cost of debt is:    

R_Debt :  (1 - 0,25) x 6% = 4,50%

Explanation:

The WACC it's defined by the formula :

WACC: E/V*Re + D/V*Rd *(1-0,25)

Re:   13,00%  Cost of Common Equity    

Re:   5,00%  Cost of Preferred STOCK  

Re:   6%     Cost of Debt  

E/V:   65%   Percentage of financing that is Common Equity  

PS/V:   5%     Percentage of financing that is Preferred Stock  

DB/V:   30%    Percentage of financing that is Debt  

Tax:  25%    Corporate tax rate  

Now we have all of the components to calculate the WACC.

The WACC is:      

R_Wacc =  13% (65%) + 5% (5%) + 6% (30%)*(1-0,25) =  10,05%  

The aftertax cost of debt is:    

R_Debt :  (1 - 0,25) x 6% = 4,50%

5 0
3 years ago
Milano Pizza Club owns three identical restaurants popular for their specialty pizzas. Each restaurant has a debt–equity ratio o
algol13

Answer:

A. $516,000

B. $696,600

Explanation:

A. Calculation to to determine the value of the Company's equity

First step is to calculate the Net income

Sales1,540,000

Less: Cost of goods sold790,000

Less: General and administrative costs525,000

Less: Interest expenses53,000

Income before corporate tax 172,000

Less: Corporate tax 40% 68,800

(40%*172,000)

Net income103,200

(172,000-68,800)

Now let determine the value of the Company's equity using this formula

Value of the Company's equity

= Net income/ cost of the firm’s levered equity

Let plug in the formula

Value of the Company's equity = $103,200/0.20

Value of the Company's equity = $516,000

Therefore The Value of the Company's equity is $516,000

B. Calculation to determine the total value of Company equity

First step is to calculate the Debt

Debt equity Ratio = 0.35

Debt/Equity = 0.35

Debt/ $516,000 = 0.35

Debt = $516,000 * 0.35

Debt =$180,600

Now let determine The Company’s value using this formula

Company’s Total value = Equity + Debt

Let plug in the formula

Company’s Total value = $516,000 + $180,600

Company’s Total value = $696,600

Therefore the total value of Company equity is $696,600

7 0
2 years ago
The government of Happyland collects $100 million in taxes each year and currently has a public debt of $1.2 billion, which it f
DanielleElmas [232]

Answer:

No, the debt is not manageable because interest payments equal $96 million per year.

Explanation:

Annual interest payment for debt = 0.08*1.2B = $96 million

Only the interest payment is about 96% of government revenue, so its not manageable.

5 0
3 years ago
Cullumber Company uses the percentage-of-receivables basis to record bad debt expense. Accounts receivable (ending balance) $605
Lana71 [14]

Answer:

a. Journal entry

b. $18,150

c. $586,850

Explanation:

a. The adjusting journal entry is as follows

Bad debt expense A/c Dr

  To Allowance for doubtful debts

(Being bad debt expense is recorded)\

The computation of the bad debt expense is shown below:

= Account receivable × estimated percentage given  + debit balance of allowance for uncollectible accounts

= $605,000 × 3% + $4,700

= $18,150 + $4,700

= $22,850

b. The adjusted balance in Allowance for Doubtful Accounts is $18,150

c. The cash realizable value is

= $605,0000 - $18,150

= $586,850

8 0
2 years ago
the general rule associated with the segregation of duties is that accounting controls should be set up to separate (1) custody
irina1246 [14]

The general guideline for the segregation of duties is that the following areas should be separated by accounting controls : 1. custody of assets, 2. authorization of transactions, and 3. record-keeping responsibilities.

<h3>Give a brief account on segregation of duties.</h3>

The assignment of distinct steps in a process to different personnel is known as the segregation of duties. By exercising extreme control over a process, the goal is to prevent situations in which someone might steal something or do another fraud. In essence, distinct parties should have physical custody of an asset, record-keeping responsibilities for it, and acquisition and disposal authority.

A key component of a control system is the separation of roles. When evaluating an entity's system of internal controls, auditors will consider duty segregation and will give the system a lower rating if there are any segregation problems.

The auditors will change their methods when there are segregation problems because they will presume that the danger of fraud has increased. This method shift typically entails a rise in audit workload, which is passed on to the customer in the form of higher audit fees.

To know more about, segregation of duties, visit :

brainly.com/question/28289850

#SPJ4

4 0
11 months ago
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