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nignag [31]
2 years ago
7

Eve's Apples opened for business on January 1, 2021, and paid for two insurance policies effective that date. The liability poli

cy was $55,800 for 18 months, and the crop damage policy was $19,200 for a two-year term. What was the balance in Eve's Prepaid Insurance account as of December 31, 2021?
Business
1 answer:
Liula [17]2 years ago
7 0

Answer:

The balance of Eve's Prepaid Insurance account as of December 31, 2021 is $28,200

Explanation:

Computation of prepaid Insurance

Insurance 1 ($55,800*6/18)       =  $18,600

Insurance 2 ($19,200*12/24)     =  <u>$9,600</u>

Total Prepaid Insurance               <u>$28,200</u>

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Kaelea, Inc., has no debt outstanding and a total market value of $81,000. Earnings before interest and taxes, EBIT, are project
son4ous [18]

Answer:

a. We have:

EPS under normal = $1.09 per share

EPS under expansion = $1.34 per share

EPS under recession = $0.74 per share

b. We have:

Percentage changes in EPS when the economy expands = 23%

Percentage changes in EPS when the economy enters recession = –32%

c. We have:

EPS under normal after recapitalization = $1.24

EPS under expansion after recapitalization = $1.59 per share

EPS under recession after recapitalization = $0.75 per share

d. We have:

Percentage changes in EPS after recapitalization when the economy expands = 28.23%

Percentage changes in EPS when the economy enters recession = –39.52%

Explanation:

a. Calculate earnings per share, EPS, under each of the three economic scenarios before any debt is issued.

Shares outstanding = 5,400

Net income under normal = EBIT under normal - (EBIT under normal * Tax rate) = $9,800 - ($9,800 * 40%) = $5,880

EPS under normal = Net income under normal / Shares outstanding = $5,880 / 5,400 = $1.09 per share

Net income under expansion = (EBIT under normal * (100% + Percentage increase in EBIT)) - ((EBIT under normal * (100% + Percentage increase in EBIT)) * Tax rate) = ($9,800 * (100% + 23%)) – (($9,800 * (100% + 23%))* 40%) = $7,232.40

EPS under expansion = Net income under expansion / Shares outstanding = $7,232.40 / 5,400 = $1.34 per share

Net income under recession = (EBIT under normal * (100% - Percentage decrease in EBIT)) - ((EBIT under normal * (100% - Percentage decrease in EBIT)) * Tax rate) = ($9,800 * (100% - 32%)) – (($9,800 * (100% - 32%))* 40%) = $3,998.40

EPS under recession = Net income under recession / Shares outstanding = $3,998.40 / 5,400 = $0.74 per share

b. Calculate the percentage changes in EPS when the economy expands or enters a recession.

Percentage changes in EPS when the economy expands = ((EPS under expansion - EPS under normal) / EPS under normal) * 100 = (($1.34 - $1.09) / $1.09) * 100 = 23%

Percentage changes in EPS when the economy enters recession = ((EPS under recession - EPS under normal) / EPS under normal) * 100 = (($0.74 - $1.09) / $1.09) * 100 = –32%

c. Calculate earnings per share, EPS, under each of the three economic scenarios after the recapitalization.

Market price per share = Total market value / Shares outstanding before recapitalization = $81,000 / 5,400 = $15

Number of shares to repurchase = Debt amount / Market price per share = $23,100 / $15 = 1,540

Shares outstanding after recapitalization = Shares outstanding before recapitalization - Number of shares to repurchase = 5,400 – 1,540 = 3,860

Interest on debt = Debt amount * Interest rate = $23,100 * 8% = $1,848

Net income under normal after recapitalization = EBIT under normal – Interest on debt - ((EBIT under normal – Interest on debt) * Tax rate) = $9,800 - $1,848 - (($9,800 - $1,848) * 40%) = $4,771.20

EPS under normal after recapitalization = Net income under normal after recapitalization / Shares outstanding after recapitalization = $4,771.20 / 3,860 = $1.24

EBIT under expansion = EBIT under normal * (100% + Percentage increase in EBIT) = ($9,800 * (100% + 23%)) = $12,054

Net income under expansion after recapitalization = EBIT under expansion – Interest on debt – ((EBIT under expansion – Interest on debt) * Tax rate) = $12,054 - $1,848 - (($12,054 - $1,848) * 40%) = $6,123.60

EPS under expansion after recapitalization = Net income under expansion after recapitalization / Shares outstanding after recapitalization = $6,123.60 / 3,860 = $1.59 per share

EBIT under recession = EBIT under normal * (100% - Percentage decrease in EBIT) = ($9,800 * (100% - 32%)) = $6,664

Net income under recession after recapitalization = EBIT under recession – Interest on debt – ((EBIT under recession – Interest on debt) * Tax rate) = $6,664 - $1,848 - (($6,664 - $1,848) * 40%) = $2,889.60

EPS under recession after recapitalization = Net income under recession after recapitalization / Shares outstanding after recapitalization = $2,889.60 / 3,860 = $0.75 per share

d. Calculate the percentage changes in EPS when the economy expands or enters a recession.

Percentage changes in EPS after recapitalization when the economy expands = ((EPS under expansion after recapitalization - EPS under normal after recapitalization) / EPS under normal after recapitalization) * 100 = (($1.59 - $1.24) / $1.24) * 100 = 28.2%

Percentage changes in EPS when the economy enters recession = ((EPS under recession - EPS under normal) / EPS under expansion) * 100 = (($0.75 - $1.24) / $1.24) * 100 = –39.52%

6 0
3 years ago
With regard to the three types of attributes customers use in evaluating the quality of goods and services, a vacation would bes
Marta_Voda [28]
<span>These would have high levels of experience attributes. These are the parts of the item or service that cannot be quantified in a concrete manner, but can have abstract qualities that a person can measure and rank against other, similar items.</span>
8 0
2 years ago
What important element of the watergate scandal, investigation, and court cases was not covered by the constitution?
grigory [225]
The answer to the question is the "Executive Privilege".

The executive privilege is an important element of the watergate scandal, investigation, and the court cases that was not covered by the constitution.This executive privilege is carried by the president of the executive branch.
8 0
3 years ago
ABC Corporation offered a four-for-one stock split. The number of outstanding shares before the split was 15,000, and the par va
svetoff [14.1K]

<u>Answer:</u> D. 60,000 shares at $5 per share

<u>Explanation:</u>

The company has 15,000 shares and offers to split the stock four-for-one. It means that the there will be four times the number of shares but the total value of the shares, before and after the split, would remain the same.

The total value of shares = $15,000 x 20 = $300,000

Since the stock split is 4-for-1, the number of shares would be = 15000 x 4

= 60,000 shares

Therefore the total value of shares divided by the number of shares will give us the par value of the shares:

300,000 / 60,000 = $5

8 0
2 years ago
Read 2 more answers
For the past year, lp gas, inc., had cash flow from assets of $38,100 of which $21,500 flowed to the firm's stockholders. the in
Sergio039 [100]

If for the past year, lp gas, inc., had cash flow from assets of $38,100 of which $21,500 flowed to the firm's stockholders. the interest paid was $2,300. The amount of the net new borrowing is:-$14,300.

<h3>Net new borrowing</h3>

First step is to calculate the  cash flow to creditors

Cash flow to creditors = $38,100 -$21,500

Cash flow to creditors= $16,600

Second step is to calculate the net new borrowing using this formula

Net new borrowing =Interest paid -Cash flow to creditors

Let plug in the formula

Net new borrowing = $2,300 - 16,600

Net new borrowing  = -$14,300

Therefore If for the past year, lp gas, inc., had cash flow from assets of $38,100 of which $21,500 flowed to the firm's stockholders. the interest paid was $2,300. The amount of the net new borrowing is:-$14,300.

Learn more about net new borrowing here:brainly.com/question/14703385

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5 0
1 year ago
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