This choice does, however, affect how individual shareholders’ accounts are reported in the balance sheet. Formally retiring shares restores the balances in both the common stock account and paid-in capital - excess of par to how those balances would have looked if the shares never had been issued. Any net increase in assets produced from the sale and ensuing repurchase is reflected as Paid-in capital—share repurchase. On the other hand, any net decrease in assets resulting from the sale and subsequent repurchase is repeated as a subtraction of retained earnings. Inversely, when a share repurchase is seen as treasury stock, the cost of the treasury stock is naturally disclosed as a decrease in total shareholders’ equity.
Calculate the following financial ratios. TIP: If you don't remember how to calculate financial ratios, review the Calculating Financial Ratio pages from Section 9, Lesson 2 of this course. a. A company makes a net profit before tax of $12,000 and has $20,000 in total equity. Calculate the company's return on equity as a percentage.
Quick ratio Current ratio measures the current assets to be turned into cash to meet its debts in one year. Quick ratio is a more immediate measure of liquidity to obtain the cash. Again, Premier Investments Ltd dropped sharply on quick ratio from 3.48 to 1.40. However, David Jones Ltd only got 1.29and 1.18 for quick ratio. It is a bad signal for David Jones Ltd that is lower than 1.
The final component of trading accounts is gross profit; gross profit is the amount of money that is left after the cost of goods sold has been taken away from the stock turnover. The formula for gross profit is sales turnover – cost of goods sold. According to business alpha the gross profit was 410,000.
What course of action should the firm take? Current Balance Sheet: Assets: $100 Debt: $10 Equity: $90 Optimal Balance Sheet: Assets: $100 Debt: $20 Equity: $80 c. As a firm initially substitutes debt for equity financing, what happens to the cost of capital, and why? When a firm substitutes debt for equity financing the cost of capital will initially decrease because the effective cost of debt is less than the growth of the cost of equity. d. If a firm uses too much debt financing, why does the cost of capital rise? If a firm uses the more and more debt for financing, the cost of capital will increase.
What amount of unrealized inter-company profit must be deferred by Luffman? | | Your Answer: | | | $0 | | CORRECT | | | $8,400 | | | | | $28,000 | | | | | $52,000 | | | | | $80,000 | | | | | | Points Received: | 2 of 2 | | Comments: | | 2. | Question: | (TCO 1) Which of the following results in a decrease in the Equity in Investee Income account when applying the equity method? | | Your Answer: | | | Dividends paid by the investor | | | | | Net income of the investee | | INCORRECT | | | Unrealized gain on inter-company inventory transfers for the current year | | CORRECT ANSWER | | | Unrealized gain on inter-company inventory transfers for the prior year | | | | | Extraordinary gain of the investee | | | | | | Points Received: | 0 of 2 | | Comments: | | 3. | Question: | (TCO 1) In a situation where the investor exercises significant influence over the investee, which of the following entries is not actually posted to the books of the investor?
Facts In 1983, GEICO announced plans to purchase several million shares of its outstanding common stock for $60 per share. Among GEICO’s largest stockholders was Berkshire Hathaway, Inc., an investment company. Executives of the two companies decided that Berkshire would tender approximately 350,000 if its GEICO shares in the stock buyback plan, which would allow Berkshire to treat the transaction as a proportionate redemption. In a proportionate redemption, the percentage equity interest of on company in a second company is maintained at the level that existed immediately before the transaction. For federal taxation purposes, the proceeds received by the investor company in a proportionate redemption are taxed as dividends by applying the effective intercorporate dividend tax rate.
If the firm decides to use its cash for the notes payable it will then have to obtain financing to maintain the cash balance. The firm may need to renegotiate its notes payable and obtain additional financing to maintain the minimum cash balance of $15,000. 5-1A (Compound Interest) To what amount will the following investments accumulate? a. $5,000 invested for 10 years at 10 percent compounded annually rate (i)= 10% number of periods (n) = 10 Payment (PMT) = $0 present value (PV) = $5,000 type (0 at end of = period) = 0 Future value (FV) =
What would happen if B.E. wasn’t able to sell all of the 30,000,000 units? They would get stockpiled into ending inventory and allocated expense which would increase costs of goods sold and therefore net income. Since the presidents bonus is based off of net income and the amount he can
ACCT 504 Week 4 Midterm Exam Click here to Purchase (TCO A, B, C) Which of the following statements concerning users of accounting information is incorrect? (TCO C) Issuing shares of stock in exchange for cash is an example of a(n) (TCO C) Which activities involve putting the resources of the business into action to generate a profit? (TCO A) The cost of assets consumed or services used is also known as (TCO C) Edwards Company recorded the following cash transactions for the year (TCO A) On a classified balance sheet, prepaid insurance is classified as (TCO A) An intangible asset (TCO A) These are selected account balances on December 31, 2007. -Land (location of the corporation's office building) $200,000 -Land (held for future use) 300,000