• An event or transaction shall be presumed to be an ordinary and usual activity of the reporting entity, the effects of which shall be included in income from operations, unless the evidence clearly supports its classification as an extraordinary item. 2: State the issues of the case. • The Issue of the case is that the company sustained a tax loss of $8.4 million • The loss was primarily due to $10 million in expenses related to product recall Why is the issue of presentation of the recall amount controversial? • The issue was controversial because if reported as an extraordinary item their income from continuing operation will show an increase from the prior year. Why is presentation as an extraordinary item on the income statement a positive choice for the company?
1991 = (280,000 – 150,000) / 290,000 = .448 C. Average Collection Period i. 1991 = 120,000 / (1,200,000 * .6 / 360) = 60,000 days D. Inventory Turnover i. 1991 = 900,000 / 150,000 = 6.00 E. Fixed Asset Turnover i. 1991 = 1,200,000 / 920,000 = 1.304 F. Total Asset Turnover i. 1991 = 1,2000,000 / 1,200,000 = 1.00 G. Debt Ratio i.
Question 3 Which price increase is needed to offset the profit impact of the increased raw material costs (assuming that volumes are constant)? Which price decrease will result from instituting price-flex (assume a best case and a worst case)? Answer 3 The selling price would increase by offsetting the raw material cost which is given in the “Appendix A” which shows that increase in the price by 6.5% would result in the positive side and a reductioncompany from reduction in the price. Understanding all this is done with respect to the case material. The volume is a constant which is assumed at 80% in the analysis of the price.
A taxpayer if given the choice would always choose to have their taxes truncated and not rounded. This is, because by truncating they will have to pay fewer taxes than if there government were to round. So let’s say there taxes is 27.5, 27.6, 27.7, 27.8, and 27.9 when rounding this would increase the taxpayer taxes from 27% to 28% which could equal a few hundred or thousands of more dollars. This is due to the rules of rounding which dictate that anything above 5 directly after a decimal point would increase the whole number by a value of 1.
734 812 + 50 + 1 062 328 = A 1 977 180 C 1 797 180 B 1 797 190 ( D 1 779 190 9. 2 450 000 − 36 000 − 300 500 = A 1 789 500 C 2 113 500 ( B 1 798 500 D 2 383 950 10. 158 780 ÷ 25 = 6 351 remainder . What is the number need to be written in the above? A 1 C 10 B 5 ( D 15 11.
Low costs could be realized if, say, material costs are low and machine breakdowns are infrequent, while costs could be higher if material prices increase and the machinery needs frequent maintenance. All costs and revenues are perpetual and after tax. Thus, the revenue (costs) are annual amounts that Excellent will receive (pay) each year forever. Assume that Excellent's cost of capital is 10 percent. What should Excellent do?
a) Today 1 year 2 years 10 years -10.000 500 1.500 10.000 NPV = -10.000 + 500/1,06 + 1.500/1,06^2 + 10.000/1,06^10 = -2.609,36 If the interest rate were lower the project would be positive. Thus, high amounts far away in the future are onle worth if the interest rate is very low. 4.18 Consol Bond = Perpetuity. 4.38 The interest rate that would make the NPV = 0 is called the IRR. Now $5000, in a year pay $6000.
4. 5. 14.69 13.69 12.69 11.69 10.69 1000 800 600 400 200 150 120 90 60 30 Group Incentive Program 12% 1. 2. 3.
Using the following calculation, we find: z= x- μ σ -1.96 = 10,000 – 20,000 σ σ=5102 Standard deviation σ = 5,102 μ = 20,000 mean 2. Stock outs were calculated by the four management numbers. Equation is: z = (x – μ)/ σ 15,000: Z = (15,000-20,000)/5102 z = -0.98 Then, reference the cumulative probabilities for standard deviation table in the beginning of the book to identify what -0.98 represents, which is .1635. Since stock outs are any quantity greater than what management suggested, they need to be subtracted from 1. 1 - .1635 = .8365 which = 83.65% Same logic/steps for the rest of the values: 18,000 24,000 28,000 Z = (18,000-20,000)/5102 z=(24,000-20,000)/5102 z=(28,000-20,000)/5102 z = -.39 z=.78 z= 1.57 1 - .3483 = .6517 1 - .7823 = .2177 1 –.9418 = .0582 which = 65.17% which = 21.77% which = 5.82% 3.
With the calculated WACC, the initial rate must be at least 7.96% to determine whether to purchase the stocks. Since the revenue has increased, the profit margin will have changes as well. The profit margin equals to Net Income divided by Sales. The Net Income increases as the revenues increasing. In that case, whether the efficiency improves or not is determined by the sales.