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WITCHER [35]
3 years ago
6

An asset falling under the MACRS five-year class was purchased three years ago for $200,000 (its original depreciation basis). C

alculate the cash flows if the asset is sold now at a) $60,000 and b) $80,000. Assume the applicable tax rate is 40 percent.
Business
1 answer:
Nitella [24]3 years ago
3 0

Answer:

(a) The cash flows is $59,040.

(b) The cash flows is $71,040.

Explanation:

From the  Modified Accelerated Cost Recovery System (MACRS) Tables, the depreciation rates for the first 3 years for an asset falling under the MACRS five-year class are 20%, 32% and 19.2%. Therefore, we have:

Accumulated depreciation rate = 20% + 32% + 19.2% = 71.20%

Accumulated depreciation = Cost of the asset * Accumulated depreciation rate =  $200,000 * 71.20% = $142,400

Net book value of the asset = Cost of the asset - Accumulated depreciation = $200,000 - $142,400 = $57,600

We can now proceed as follows:

(a) Calculate the cash flows if the asset is sold now at $60,000

Capital gains = Sales proceeds - Net book value = $60,000 - $57,600 = $2,400

Capital gains tax = Capital gains * Tax rate = $2,400 * 40% = $960

Net sales proceeds = Sales proceeds - Capital gains tax = $60,000 - $960 = $59,040

Therefore, the cash flows is $59,040 net sales proceeds.

(b) Calculate the cash flows if the asset is sold now at $80,000

Capital gains = Sales proceeds - Net book value = $80,000 - $57,600 = $22,400

Capital gains tax = Capital gains * Tax rate = $22,400 * 40% = $8,960

Net sales proceeds = Sales proceeds - Capital gains tax = $80,000 - $8,960 = $71,040

Therefore, the cash flows is $71,040 net sales proceeds.

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Which of these approaches will NOT accelerate the completion of a project? Group of answer choices Increase the bureaucratic ove
kogti [31]

Answer:

The correct answer is letter "A": Increase the bureaucratic oversight.

Explanation:

Bureaucratic entities have a well-structured hierarchy that must be respected by all employees. Workers have to transmit information from one unit to the next department in the hierarchy and the process is repeated until the message is received by a representative with decision-making who is a manager.  

<em>Bureaucratic organizations processes are slow due to centralized decision-making. In an attempt to accelerate the completion of a project the bureaucratic schemed must be avoided. Increasing resource productivity, the working method or adding more employees and machinery to a project is beneficial to expedite its completion.</em>

8 0
2 years ago
Gibson Energy Ltd.’s general ledger account for Cash in Bank showed the following at December 31, 2019:
viktelen [127]

Answer:

1. Adjusted cash balance = Adjusted bank statement balance = $133,620.

2. See the adjusting journal entries and explanation in part 2. below.

Explanation:

Note: The data in the question are merged and they are first sorted in the attached excel file before the questions are answered as follows:

1. Complete the bank reconciliation at December 31, 2019.

The bank reconciliation is presented in two ways as follows:

<u>a) Starting with cash book balance</u>

Gibson Energy Ltd.

Bank Reconciliation  

at 31 December 2019  

<u>Particulars                                                                  Amount ($)    </u>

Cash book bal. at 31 Dec. yet to be reconciled          62,000

Add:

Collected note receivable from XYZ Corp                  80,000

Less:  

Dishonored NSF check                                                 (7,000)

Overdraft interest expense                                            (1,320)

Bank service charge                                                 <u>         (60)   </u>

Adjusted cash balance at Dec 31                           <u>   133,620   </u>

<u>b) Starting with bank statement balance</u>

Gibson Energy Ltd.

Bank Reconciliation  

at 31 December 2019  

<u>Particulars                                                                       Amount ($)    </u>

Bank statement bal. at Dec 31 yet to reconciled              131,620

Add:  

Cash deposited on December 9th yet be credited          85,000

Cash deposited on December 31 yet be credited            15,000

Check #52094 wrongly drawn                                           62,000

Less:

Outstanding checks 233                                                    (83,000)

Outstanding checks 239                                                <u>    (77,000)   </u>

Adjusted bank statement balance at Dec. 31             <u>     133,620   </u>

2. Prepare the adjusting journal entries required to make the Cash in Bank account in the general ledger agree with the adjusted cash balance on the December 31 bank reconciliation. Include descriptions.

<u>Date      Accounts title & explanation              DR ($)           CR ($)  </u>

31 Dec 19    Cash                                                80,000  

                   Note Receivable                                                     78,049

                   Interest on note receivable                                       1,951

<em><u>                   (To record note receivable & int. collected from XYZ)     </u></em>

31 Dec 19   Overdraft interest expense                1,320

                  Service charge                                        60

                  Cash                                                                           1,380

<em><u>                    (To record interest expense and bank charges)                   </u></em>

31 Dec 19   Account Receivable                           7,000

                    Cash                                                                           7,000

<em><u>                   (To record NSF check dishonored)                                       </u></em>

Download xlsx
3 0
3 years ago
Humes Corporation makes a range of products. The company's predetermined overhead rate is $20 per direct labor-hour, which was c
hichkok12 [17]

Answer:

$7,400

Explanation:

The impact on the company's overall profit is shown below:-

<u>Particulars                Amount </u>

Sales                          $50,320  (740 × $68)

Less : Variable cost

Direct material          $30,340  (740 × $41)

Direct Labor               $10,360  (740 × $14)

Variable Manufacturing

overhead

($51,000 ÷ 17,000)        $2,220 (740 × $3)

= 3

company's overall profit $7,400

To reach the company's overall profit we simply deduct the Direct material, direct labor and variable manufacturing overhead from sales.

3 0
3 years ago
SDJ, Inc., has net working capital of $2,060, current liabilities of $5,550, and inventory of $1,250.
alexandr1967 [171]

Answer:

1.

Current ratio = 1.37 times

2.

Quick Ratio = 1.15 times

Explanation:

The current ratio and quick ratios both are measures to assess the liquidity position of businesses. These are useful indicators of how well the business is equipped to meet its current obligations using its liquid assets.

To calculate these ratios, we must first determine the value of current assets. We are given the value of net working capital. The net working capital is the difference between the current assets and the current liabilities.

Net Working capital = Current assets - Current Liabilities

2060 = Current Assets - 5550

2060 + 5550 = Current Assets

Current assets = $7610

<u>Requirement 1.</u>

The current ratio is calculated as follows,

Current Ratio = Current Assets / Current Liabilities

Current ratio = 7610 / 5550

Current Ratio = 1.3711 rounded off to 1.37 times

<u />

<u>Requirement 2.</u>

The quick ratio is calculated as follows,

Quick Ratio = (Current Assets - Inventories) / Current Liabilities

Quick Ratio = (7610 - 1250) / 5550

Quick Ratio = 1.1459 rounded off to 1.15 times

6 0
3 years ago
In the month of June, Bedford Company sold 350 widgets. The average sales price was $34. During the month, fixed costs were $6,3
VikaD [51]

Answer:

Results are below.

Explanation:

Giving the following information:

In June, Bedford Company sold 350 widgets. The average sales price was $34. During the month, fixed costs were $6,320 and variable costs were 40% of sales.

F<u>irst, we need to calculate the unitary variable cost:</u>

Unitary variable cost= 34*0.4= $13.6

<u>Now, we can determine the contribution margin per unit and the contribution margin ratio:</u>

contribution margin per unit= selling price - unitary variable cost

contribution margin per unit= 34 - 13.6= $20.4

contribution margin ratio= contribution margin per unit/selling price

contribution margin ratio= 20.4/34

contribution margin ratio= 0.6

<u>To calculate the break-even point in units and dollars, we need to use the following formula:</u>

Break-even point in units= fixed costs/ contribution margin per unit

Break-even point in units= 6,320/20.4

Break-even point in units= 310 units

Break-even point (dollars)= fixed costs/ contribution margin ratio

Break-even point (dollars)= 6,320/0.6

Break-even point (dollars)= $10,533

<u>To calculate the margin of safety, we will use the following formula:</u>

Margin of safety= (current sales level - break-even point)

Margin of safety= 350*34 - 10,533

Margin of safety= $1,367

<u>Finally, the desired profit is $4,000:</u>

Break-even point in units= (fixed costs + desired profit) / contribution margin per unit

Break-even point in units=  (6,320 + 4,000) / 20.4

Break-even point in units= 506 units

Break-even point (dollars)= (fixed costs + desired profit)/ contribution margin ratio

Break-even point (dollars)= 10,320/0.6

Break-even point (dollars)= $17,200

3 0
3 years ago
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