Indicate which barrier to entry appropriately explains why a monopoly exists in each scenario?

On January 1, 2017, Culver Company issued 10-year, $2,140,000 face value, 6% bonds, at par. Each $1,000 bond is convertible into

Dvinal [7]

Answer:

a) diluted earnings per share = 0

Explanation:

Diluted earnings per share (DEPS) is a recalculation of the basic EPS. The difference between DEPS and EPS is, EPS represents the current position of earnings per share. No changes in number shares and/or earnings in the future are incorporated in the basic EPS.

Whereas DEPS is a representation of not only the current position of earnings and shares but also includes the commitments an entity has already made whose occurrence may result in an increase/decrease in the amount of earnings and/or number of shares. For example, in the question Culver Company has issued 10-year convertible bonds which right now have no impact on basic EPS but if in the future these bond holders exercise their right of conversion, this would result in an increase in number of ordinary shares hence decreasing/diluting the basic EPS. The entities use DEPS to show shareholders the impact of such commitments on the basic EPS to improve their decision making.

So in 2017 none of the bonds were converted therefore no diluted earnings per share is calculated in 2017.

If all of the bonds were converted in 2017 the DEPS would have been calculated as follows:

The formula for calculating DEPS is as follows;

DEPS = (Net income + interest savings) ÷ number of ordinary shares + increase in ordinary shares as a result of conversion.

Tax savings as a result of conversion=$128400 ($2140000×6%). Because if bond holders convert into ordinary shares then Culver company will not have to pay them interest and hence the amount of interest is saved.

Increase in ordinary shares upon conversion= 29960 ($2140000÷$1000=2140 bonds. Each bond is convertible into 14 shares therefore, 2140×14=29960).

Now Lets calculate DEPS as follows;

DEPS = ($296000+$128400) ÷ 91000+29960

DEPS =$424400÷120960

DEPS = $3.5

5 0

3 years ago

A company's chart of accounts is: a detailed list of the accounts that make up the five financial statement elements. the set of

polet [3.4K]

Answer:

A detailed list of the accounts that make up the five financial statement elements.

Explanation:

The company's chart of accounts is the listing of all the accounts that the company has included as part of the five financial statement elements during a specific period of time.

The five financial statement elements are: assets, liabilities, equity (part of the balance sheet), expenses and revenues (part of the income statement).

Examples of accounts that can be part of a firm's chart of accounts are: land (asset), cash (asset), notes payable (liabilities), outstanding stock (equity), operating expenses (expenses), and sales revenue (revenues).

The chart of accounts can differ greatly from company to company simply because companies engage in vastly different economic activities.

8 0

3 years ago

Monopolistic competition means:

rjkz [21]

Answer: Option C

Explanation: In a monopolistic competition market structure, there are many producers selling their products and each product is not a perfect substitute of the other.

The number of producers are large but each operate at a relatively smaller level. The products offered in the market are similar but not identical.

Hence, from the above explanation we can conclude that option C is correct.

3 0

3 years ago

Computing second-year depreciation and accumulated depreciationAt the beginning of 2016, Air Asia purchased a used airplane at a

Bezzdna [24]

Answer:

1. a.$4,375,000

b. $7,500,000

c. $9,800,000

2. $8,750,000

$18,200,000

$17,500,000

Explanation:

1. The computation of the depreciation expense for the second year is presented below:

a) Straight-line method:

= (Purchase value of airplane - residual value) ÷ (useful life)

= ($40,000,000 - $5,000,000) ÷ (8 years)

= ($35,000,000) ÷ (8 years)

= $4,375,000

In this method, the depreciation is same for all the remaining useful life

(b) Double-declining balance method:

First we have to find the depreciation rate which is shown below:

= One ÷ useful life

= 1 ÷ 8

= 12.5%

Now the rate is double So, 25%

In year 1, the original cost is $40,000,000 so the depreciation is $10,000,000 after applying the 25% depreciation rate

And, in year 2, the $30,000,000 × 25% = $7,500,000

(c) Units-of-production method:

= (Purchase value of airplane - residual value) ÷ (estimated miles)

= ($40,000,000 - $5,000,000) ÷ ($5,000,000 miles)

= ($35,000,000) ÷ ($5,000,000 miles)

= $7 per miles

In first year, it would be

= Miles in first year × depreciation per miles

= 1,200,000 miles × $7

= $8,400,000

Now for the second year, it would be

= Miles in second year × depreciation per miles

= 1,400,000 miles × $7

= $9,800,000

2. The calculation of the accumulated depreciation balance would be

Straight line method:

= $4,375,000 + $4,375,000

= $8,750,000

Double-declining balance method:

= $10,000,000 + $7,500,000

= $17,500,000

Units-of-production method:

= $8,400,000 + $9,800,000

= $18,200,000

4 0

3 years ago

Kurtz Fencing Inc. uses a job order cost system. The following data summarize the operations related to production for March, th

dimulka [17.4K]

Answer:

The solution is shown in the file attached below

Explanation:

Download docx

8 0

3 years ago