Select the correct answer

Palmona Co. establishes a $270 petty cash fund on January 1. On January 8, the fund shows $181 in cash along with receipts for t

damaskus [11]

Answer:

Journal Entry for establishing a Petty cash fund

Date Particulars Debit Credit

Jan 1 Petty cash A/c $270

To Cash A/c $270

(Being Petty cash fund established)

Journal Entry for reimbursement of petty cash

Date Particulars Debit Credit

Jan 8 Postage A/c $36

Transportation A/c $13

Delivery Expense A/c $15

Miscellaneous Exp A/c $25

To Cash A/c $89

(Being reimbursement of petty cash expenses

incurred from petty cash fund)

Journal entry for Increasing the limit of Petty cash fund

Date Particulars Debit Credit

Jan 8 Petty Cash A/c $50

To Cash A/c $50

(Being Petty cash fund limit extended to $320 i.e., we have

to add $50 to existing fund in order to make it $ 320.)

6 0

3 years ago

Consider a hypothetical closed economy in which households spend $0.70 of each additional dollar they earn and save the remainin

MAVERICK [17]

(a) Marginal propensity to consume (MPC) = 0.7

(b) Multiplier of this economy:

= 3.33

(c) Decrease government purchases by $300 billion,

Initial change in consumption = Change in government purchases × MPC

= $300 × 0.7

= -$210 billion

(d) This decreases income yet again, causing a second change in consumption equal to:

= Initial change in consumption × MPC

= -$210 × 0.7

= -$147 billion

(e) The total change in demand resulting from the initial change in government spending is:

= Change in government purchases × Multiplier

= $300 × 3.33

= -$1 trillion

6 0

3 years ago

High Flyer, Inc., wishes to maintain a growth rate of 16.75 percent per year and a debt–equity ratio of 1.05. The profit margin

mylen [45]

Answer:

The dividend payout ratio is -48.12%

The Sustainable growth rate is 16.74%

Explanation:

In order to calculate the dividend payout ratio we would have to calculate the following formula:

growth rate=(ROE x dividend payout ratio ) / [ (1 - (ROE x dividend payout ratio))

To calcuate the ROE we would have to use the following formula:

ROE=Profit margin x Total asset turnover x Equity multiplier

ROE=0.045 x 1.05 x (1 + 1.05)

ROE=0.0968625

Therefore, dividend payout ratio would be calculated as follows:

0.1675 = (0.0968625 x dividend payout ratio) / [ 1 - (0.0968625 x dividend payout ratio))

0.1675 = 0.0968625 dividend payout ratio / (1 - 0.0968625 dividend payout ratio)

0.1675 - 0.016224469 dividend payout ratio = 0.0968625 dividend payout ratio

0.1675 = 0.113086969 dividend payout ratio

dividend payout ratio=1.481160928

Therefore, dividend payout ratio=1-1.481160928

dividend payout ratio=-48.12%

To calculate the Sustainable growth rate we would have to calcilate the following formula:

Sustainable growth rate=ROE*b/1-ROE*b

Sustainable growth rate=0.0968625*1.481160928/1-0.0968625*1.481160928

Sustainable growth rate=0.14346895/1-0.14346895

Sustainable growth rate=0.14346895/0.85653105

Sustainable growth rate=16.74%

8 0

3 years ago

Frontier Corp. sells units for $57, has unit variable costs of $29, and fixed costs of $164,000. If Frontier sells 10,000 units,

jeka94

Answer:

2.4

Explanation:

Frontier corporation sells unit for $57

The unit variable cost is $29

Fixed cost is $164,000

Frontier sells 10,000 units

The first step is to calculate the contribution margin

= 57-29×10,000

= 28×10,000

= 280,000

Profit = 280,000-164,000

= 116,000

Degree of operating leverage can be calculated as follows

= 280,000/116,000

= 2.4

6 0

3 years ago

You were hired as a consultant to Quigley Company, whose target capital structure is 35% debt, 10% preferred, and 55% common equ

alexgriva [62]

Answer:

A. 8.15

Explanation:

WACC is the firm's weighted average cost for the capital that is employed from different sources which includes common equity, preferred equity and debt.

In order to calculate WACC, the weighted average cost of each capital is added, so the formula becomes:

WACC = (E x %E) + (D x (1 - Tax) x %D) + (PE x %PE)

E = Common equity

D = Debt

PE = Preferred equity

%E = Common equity / total capital

%D = Debt / total capital

%PE = Preferred equity / total capital

Tax = Tax rate

<em>Interest on debt is a tax deductible expense therefore the interest rate is taken after accounting for tax in order to calculate WACC.</em>

<u>Calculation:</u>

Using the above formula we can calculate WACC

WACC = (11.25% x 55%) + (6.5% x (1-40%) x 35%) + (6% x 10%)

WACC = 0.0815 or 8.15%

7 0

3 years ago