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goldfiish [28.3K]
2 years ago
6

On January 1, 2016, Piper Co., purchased a machine (its only depreciable asset) for $900,000. The machine has a five-year life,

and no salvage value. Sum-of-the-years'-digits depreciation has been used for financial statement reporting and the elective straight-line method for income tax reporting. Effective January 1, 2019, for financial statement reporting, Piper decided to change to the straight-line method for depreciation of the machine. Assume that Piper can justify the change. Piper's income before depreciation, before income taxes, and before the cumulative effect of the accounting change (if any), for the year ended December 31, 2019, is $750,000. The income tax rate for 2019, as well as for the years 2016-2018, is 30%. What amount should Piper report as net income for the year ended December 31, 2019
Business
1 answer:
tensa zangetsu [6.8K]2 years ago
6 0

Answer:

$462,000

Explanation:

<u>Computing the Sum-of-the-years'-digits depreciation</u>

Accumulated Depreciation till 2018 = $900,000*(5+4+3)/15

Accumulated Depreciation till 2018 = $900,000*12/15

Accumulated Depreciation till 2018 = $720,000

Book Value at beginning 2019 = $900,000 - $720,000 = $180,000

Depreciation Expense in 2019 = $180,000/2 = $90,000

Net Income before depreciation & taxes = $750,000

Depreciation = $90,000

EBT = Net Income before depreciation & taxes - Depreciation = $750,000 - $90,000 = $660,000

Tax Expenses = EBT * Tax rate = $660,000*30% = $198,000

Net Income = EBT - Tax Expenses

Net Income = $660,000 - $198,000

Net Income = $462,000

So therefore, Piper should report $462,000 as net income for the year ended December 31, 2019

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Answer and Explanation:

Given:

Weighted average β = 1.15

Average return (r) = 12.4%

Risk free return (Rf) = 1.2%

Market return (Rm) = 10.2%

Standard deviation (SD) = 16.2%

Computation of Jensen's α :

Jensen's α = r - [Rf + β(Rm - Rf)]

Jensen's α = 12.4% - [1.2% + 1.15(10.2% - 1.2%)]

Jensen's α = 12.4% - [1.2% + 10.35%]

Jensen's α = 12.4% - 11.55%

Jensen's α = 0.85%

Computation of Treynor's index :

Treynor's index (Ratio) = (r - Rf) / β

Treynor's index (Ratio) = (12.4% - 1.2%) / 1.15

Treynor's index (Ratio) = 11.2% / 1.15

Treynor's index (Ratio) = 9.73913043%

Treynor's index (Ratio) = 9.74% (Approx)

Computation of Sharpe's index :

Sharpe's index (Ratio) = (r - Rf) / SD

Sharpe's index (Ratio) = (12.4% - 1.2%) / 16.2%

Sharpe's index (Ratio) = 11.2% / 16.2%

Sharpe's index (Ratio) = 0.69 13%

5 0
3 years ago
Which of the following statements is true regarding variable costing?Multiple Choice
pentagon [3]

Answer:

a

Explanation:

8 0
3 years ago
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Colorado Traffic laws are revised each year by
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Colorado General Assembly. 
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3 years ago
You want a seat on the board of directors of Four Keys, Inc. The company has 265,000 shares of stock outstanding and the stock s
Mila [183]

Answer:

44,167.67 shares

Explanation:

Given that

Number of shares of stock outstanding = 265,000

Sale value per share of stock = $76

Number of seat for election = 5

So by considering the above information, the number of shares needed by using the cumulative voting is

= {shares outstanding ÷ (number of seats + 1) + 1}

= {(265,000 shares ÷ (5 +1) +1}

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5 0
3 years ago
Materials used by the Instrument Division of Ziegler Inc. are currently purchased from outside suppliers at a cost of $1,350 per
Sergio039 [100]

Answer:

(a) $33750000 (b) $11250000 (c) $22500000

Explanation:

Solution

(a) How much would Ziegler Inc. total income of operating  increase.

Now,

Units * (Cost of purchased from outside supplier - Variable cost)

Thus,

75000 * ($1350 - $900) = $33750000

(b) How much would the Instrument Division's operating income increase

Now,

The Units * (Cost of purchased from outside supplier - Transfer Price)

So,

75000 units * ($1350 - $1200) = $11250000

(C) How much would the Components Division's operating income increase?

Now,

Units * (Transfer Price - Variable cost)

75000 units * ($1200 - $900) = $22500000

3 0
3 years ago
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