Answer:
$800 favorable
Explanation:
Calculation to determine what the total direct labor variance is
Using this formula
Total Direct Labor Variance=(Standard Direct Labor Cost - Actual Direct Labor Cost
Let plug in the formula
Total Direct Labor Variance=[(2800 × 2) × $15]- $83200
Total Direct Labor Variance=$84000 - $83200
Total Direct Labor Variance = $800 favorable
Therefore the total direct labor variance is$800 favorable
A defense contractor has been able to summarize its total annual fixed costs as $100,000 and the total variable cost per unit of production as $33/unit. If only 5000 units is all that is expected to sell to the government this year what should the per
Answer: $66.25
Explanation:
What should the per unit selling price be to make a 25% profit this year?
First, we'll calculate the total cost which will be:
= $100,000 + $5000(33)
= $100,000 + $165,000
= $265000
%profit = 100(revenue - cost)/ cost
25% = 100(revenue - 265000)/265000
Therefore, revenue will be:
265000(1 + 25%) = 331250
265000(1.25) = 331250
Revenue = $331250
Selling price per unit will be:
= $331250/5000
= $66.25/unit
Suppose a government has no debt and a balanced budget. Suddenly it decides to spend $5 trillion while raising only $4.5 trillion worth of taxes.
Instructions:
a. What will be the government's deficit?
b. If the government finances the deficit by issuing bonds, what amount of bonds will it issue?
c. At a 4 percent rate of interest, how much interest will the government pay each year?
d. Add the interest payment to the government $5 trillion expenditures for the next year, and assume that tax revenues remain at $4.5 trillion. In the second year, compute the
(i) Deficit: $____billion.
(ii) Amount of new debt (bonds) issued to finance the deficit in the second year: $____billion.
(iii) Total debt at the end of the second year: $___billion.
(iv) Debt service requirement: $____billion
Answer:
a. The government's deficit is $0.5 trillion or $500 billion.
b. The amount of bonds issued = $0.5 trillion or $500 billion.
c. At a 4 percent rate of interest, the interest the government will pay each year = $20 billion.
d. i) Deficit: $__520__billion.
(ii) Amount of new debt (bonds) issued to finance the deficit in the second year: $_520___billion.
(iii) Total debt at the end of the second year: $_1,020__billion.
(iv) Debt service requirement: $__40.8__billion
Explanation:
a) Data and Calculations:
Government spending = $5 trillion
Income from taxes = $4.5 trillion
Deficit = $0.5 trillion
Bonds issued = $0.5 trillion
Interest rate = 4%
Annual interest expense = $20 billion ($0.5 trillion * 4%)
Expenditure next year = $5 trillion
Interest payment = $0.02 trillion
Total governmental spending = $5.02 trillion
Tax revenue = 4.50 trillion
Deficit = $0.52 trillion
If you were an investor during the dot revolution, and you invested primarily in technology stocks, what fundamental principle of finance did you ignore and how did it affect the value of your portfolio
Answer:
If an individual has shares in a dot.com or IT firm in his or her portfolio, the essential concept of finance that might be overlooked while owning the commodity is :
1) The corporation's income/EPS has decreased.
2) A slowdown in the corporation 's growth and turnover.
3) The dividend payment ratio will be reduced.
Quarterly effects on the outcomes would rarely make a difference in the year results, given the seasonal or business pattern in IT organisations.
A developer of a new townhome community estimates that there will be 1,200 home (all types) sales in University City over the next year. An analysis of demographic information has revealed that the core market share for the townhome project within the community is 10%. Assuming a capture rate of 20%, what is the developer's first-year projection of townhome sales in the new community
PAnswer:
24 units
Explanation:
Calculation to determine what is the developer's first-year projection of townhome sales in the new community
First-year projection=10%*1200*20%
First-year projection=24 units
Therefore the developer's first-year projection of townhome sales in the new community is 24 units
In the space provided, using the letters (a-e), indicate in which category of the statement of cash flows the preceding items would. After each item, indicate with a plus sign ( ) or a minus sign (-) whether the item would be reported as an increase / inflow or a decrease/ outflow.
The following information relates to the Marshall Company for 2010:
Gain on sale of land $ 800
Bond premium amortization (by the issuer) 300
Decrease in accounts payable 700
Increase in prepaid expenses 100
Net income 9,000
Purchased equipment 10,000
Increase in salaries payable 400
Proceeds from sale of land 5,000
Decrease in inventories 1,100
Payment of dividends 600
Depreciation expense 1,000
Required:Compute net cash provided by operating activities for the Marshall Company for 2010.
Answer:
Particulars Amount
Cash Flows from Operating Activities
Net Income $9,000
Adjustments to reconcile net income to
Net Cash flows from Operating Activities
Depreciation Expense $1000
Gain On Sale of land ($800)
Decrease in accounts payable ($700)
Increase in prepaid expenses ($100)
Increase in salaries payable $400
Decrease in Inventories $1100
Amortization of bond premium ($300) $600
Net Cash flows from operating activities $9,600
What will appear under a misspelled word in Word Online?
An arrow
A zigzag line
An exclamation point
A bold line
Answer:
A red Zigzag line
Explanation:
I think
A zigzag line
Explanation:
Many restaurants do not take reservations. You simply arrive and wait your turn. If you arrive at 7:30 in the evening, you have at least an hour wait. Notwithstanding that fact, a few people arrive, speak quietly with the maître d’, hand him some money, and are promptly seated. At some restaurants that do take reservations, there is a month wait for a Saturday evening, three weeks for a Friday evening, two weeks for a Tuesday through Thursday, and virtually no wait for Sunday or Monday evening. How do you explain these events using demand and supply?
Waterway Industries reported the following data: 2020 2021 Sales $2980000 $4850000 Net Income 293000 391000 Assets at year end 1810000 2460000 Liabilities at year end 1000000 1520000 What is Waterway’s asset turnover for 2021?
Answer:
See
Explanation:
Given the above information, asset turnover ratio for 2021 is computed as seen below.
Asset turnover = Net sales / Average total assets
Net sales 2021 = $4,850,000
Average total assets = $2,135,000
Therefore, asset turnover ratio for 2021
= $4,850,000 / $2,135,000
= 2.27 times
Assume the current U.S. dollar-yen spot rate is 125¥/$. Further, the current nominal 180-day rate of return in Japan is 3% and 4% in the United States. What is the approximate forward exchange rate for 180 days?
Answer:
124.39Y/$
Explanation:
Calculation to determine the approximate forward exchange rate for 180 days
Using this formula
Forward exchange rate/spot exchange rate = [(1+rh)/(1+rf)]*r
Where,
rh = periodic interest rate in the home currency
rf = periodic interest rate in the foreign currency
r=Spot rate
Forward exchange rate= [1+3%*180/360]/[1+4%*180/360]*125¥/$.
Forward exchange rate = 1.015/1.02* 125¥/$
Forward exchange rate= 124.39Y/$
Therefore the approximate forward exchange rate for 180 days is 124.39Y/$
The financing of long term assets should be made from
Answer:
The main sources constituting long-term financing are shares, debentures, and debts form banks and financial institutions.
XYZ Company operates on a remote interstate highway. It provides premium services to truckers en route to remote locations. It has numerous competitors that offer lower prices, but it meets the demands of discerning clients with its high-quality services. Therefore, XYZ Company can be characterized as a firm with a: a. narrow market appeal to a price-sensitive niche that demands quality, service, and value. b. broadly targeted scope and price points aimed for the masses. c. value proposition based on differentiation and a niche clientele that is willing to pay for added value. d. niche clientele and business model that meets the needs of truckers in general.
Answer:
c. value proposition based on differentiation and a niche clientele that is willing to pay for added value.
Explanation:
Since in the question it is mentioned that XYZ company provides the premium service also they have various number of competitors that offered the customer at less prices but at the same time this company meet the customer demand having the high quality service so here the value should be proportioned that depend upon on the differentiation also it would be pay for adding the value
Hence, the option c is correct
A firm has sales of $3 million, and 10 percent of the sales are for cash. The year-end accounts receivable balance is $285,000. What is the average collection period
Answer:
38 days
Explanation:
The first step is to calculate the average daily credit sales
= 3,000,000× 0.9/360
= 2,700,000/360
= 7500
Therefore the average collection period can be calculated as follows
= 285,000/7500
= 38
Hence the average collection period is 38 days
During fiscal year 2012, Dioubate Cie earned $10,000 of interest revenue on an investment in a tax-free municipal bond. Which of the following items would be increased by the municipal bond revenue?
a. Pre-Tax Income
b. Income Tax Expense
c. Taxable Income
d. Income Tax Payable
e. Deferred Tax Liabilities
Answer:
a. Pre-Tax Income
Explanation:
Given that
The interest revenue earned is $10,000
So in the case when there is the municipal bond revenue so the pre tax income should be increased as there is an interest revenue so only this account should be increased
Therefore the correct option is a
Hence, the other options would be wrong
1. Do you think the day will come when people no longer use cash? Why, or why not?
2. Would the overall impact of a cashless economy be positive or negative? Explain your answer.
Type the correct answer in the box. Spell all words correctly.
Identify the activities in the receiving step in the supply chain process.
In a supply chain process, the receiving step consists of taking receipt of material and _________ the inventory records
(it's not inspect or requisition**) Giving 15 points
Answer:
inspect
Explanation:
plato
Answer:
The correct answer is UPDATING
Explanation:
Manufacturing cost data for Orlando Company, which uses a job order cost system, are presented below. Indicate the missing amount for each letter. Assume that in all cases manufacturing overhead is applied on the basis of direct labor cost and the rate is the same.
Direct materials used $(a) $83,000 $63,150
Direct labor 50,000 140,000 (h)
Manufacturing overhead applied 42,500 (d) (i)
Total manufacturing costs 145,650 (e) 213,000
Work in process 1/1/14 (b) 15,500 18,000
Total cost of work in process 201,500 (f) (j)
Work in process 12/31/14 (c) 11,800 (k)
Cost of goods manufactured 192,300 (g) 222,000
Answer:
Orlando Company
Indication of the missing amount for each letter:
a) = $53,150 ($145,650 - 50,000 - 42,500)
b) = $55,850 (201,500 - 145,650)
c) = $9,200 (201,500 - $192,300)
d) = $119,000 ($140,000 * 85%)
e) = $342,000 ($83,000 + $140,000 + $119,000)
f) = $357,500 ($342,000 + $15,500)
g) = $345,700 ($357,500 - $11,800)
h) = $81,000 = ($149,850 * 100/185)
h) and i) = $149,850 ($213,000 - $63,150)
$149,850 = 185% (100 + 85%)
i) = $68,850 ($149,850 * 85/185)
j) = $231,000 ($213,000 + $18,000)
k) = $9,000 ($231,000 - $222,000)
Explanation:
a) Data and Calculations:
Job 1 Job 2 Job 3
Direct materials used $(a) $83,000 $63,150
Direct labor 50,000 140,000 (h)
Manufacturing overhead applied 42,500 (d) (i)
Total manufacturing costs 145,650 (e) 213,000
Work in process 1/1/14 (b) 15,500 18,000
Total cost of work in process 201,500 (f) (j)
Work in process 12/31/14 (c) 11,800 (k)
Cost of goods manufactured 192,300 (g) 222,000
Job 1 Job 2 Job 3
Direct materials used $53,150 $83,000 $63,150
Direct labor 50,000 140,000 81,000
Manufacturing overhead applied 42,500 119,000 68,850
Total manufacturing costs 145,650 342,000 213,000
Work in process 1/1/14 55,850 15,500 18,000
Total cost of work in process 201,500 357,500 231,000
Work in process 12/31/14 9,200 11,800 9,000
Cost of goods manufactured 192,300 345,700 222,000
a) = $53,150 ($145,650 - 50,000 - 42,500)
b) = $55,850 (201,500 - 145,650)
c) = $9,200 (201,500 - $192,300)
d) = $119,000 ($140,000 * 85%)
e) = $342,000 ($83,000 + $140,000 + $119,000)
f) = $357,500 ($342,000 + $15,500)
g) = $345,700 ($357,500 - $11,800)
h) = $81,000 = ($149,850 * 100/185)
h and 1 = $149,850 ($213,000 - $63,150)
$149,850 = 185%
i) = $68,850 ($149,850 * 85/185)
j) = $231,000 ($213,000 + $18,000)
k) = $9,000 ($231,000 - $222,000)
Read the scenario carefully and provide your response regarding the organizational structure and culture in the fictional organization provided below.
Scenario:
An industry consulting firm has the following structure and culture:
All the employees at this consulting firm work full-time. All the full-time consultants report to various industry directors depending on the industry contract. The company employees work mostly from home with directors or consultants renting temporary office space with or without videoconferencing when needed for either client meetings or vendor meetings. The company is very successful and has an expanding client base. The company CEO is extremely relaxed and extremely smart and expects everyone at the company to display a relaxed yet expert demeanor as well. There really are very few rules or expectations at the company as the CEO also believes in keeping processes very simple. The previous president retired about six months ago, and the CEO, together with a human resources firm, hired a new president. About two months ago the companyâs employees (i.e., consultants) started receiving emails from the new president putting pressure on all of them to produce results in less time but pressuring them to charge the clients higher sums without making any more money for themselves. In addition, the new president wants the staff to come into the office now three times a week for meetings. Three months ago the new president hired thirty new full-time consultants that seem more like salespersons than consultants to existing employees. A few of the long-time consultants have been emailing the CEO about these changes and suggesting they may go elsewhere. In the meantime, the Finance Director has detected several anomalies in the contract terms and financial results from some of the new consultants and one or two of the existing consultants.
a. Describe the organizational structure at this consulting firm and how it affects employee behavior.
b. Describe how the changes to the organizationâs culture might affect employee behavior.
c. Provide a recommendation for any adjustments you think need to be made at this organization based on the Reading and explain why?
Answer:
The response to the given question can be defined as follows:
Explanation:
This organizational structure is flat and also has a strongly attributed. Its flat culture gives experts the chance to be innovative and boost productivity. Its freedom to work or to work allowed its productivity to be enhanced. It kept them in touch with it and allowed them t stay tuned to a consultation environment. This change has caused confusion amongst this personnel and they are frustrated with the change. You've begun to approach the CEO. It indicates that they're not really happy and that the change is not welcomed. They have dismantled a whole manner for working. The company should communicate its objectives to its employees and also develop an acceptable way of working. All they need to grasp here is that before the new President has been hired, people already exist inside a specific method of work and culture. When the changes are required, an organization as a whole must be discreet and agreeable to enable the implementation easier. The manager should develop a seamless transition–
Email the staff and express your view.Include a career strategy and schedule certain objectives.Identify modifications and also be receptive to input. Not that every modification done provides the best outcomes.It ensures the restoration of the inclusive community, as well as the manner of work and objectives, are altered still.
Weighted-average method, spoilage, equivalent units. (CMA, adapted)
Consider the following data for November 2017 from MacLean Manufacturing Company, which makes silk pennants and uses a process-costing system. All direct materials are added at the beginning of the process and conversion costs are added evenly during the process. Spoilage is detected upon inspection at the completion of the process. Spoiled units are disposed of at zero net disposal value MacLean Manufacturing Company uses the weighted-average method of process costing
Physical Units Direct Materials
Pennants
Work in process, November 1 1,350 $ 966
Started in November 2017 ?
Good units completed and transferred 8,800
out during November 2017
Normal spoilage 80
Abnormal spoilage 50
Work in process, November 30 1700
Total costs added during November 2017 $10,302
aDegree of completion: direct materials, 100%, conversion costs, 45%
bDegree of completion: direct materials, 100%, conversion costs, 35%
Compute equivalent units for direct materials and conversion costs.
Answer:
Equivalent Units: Materials = 10630
Equivalent Units : Conversion = 9525
Explanation:
MacLean Manufacturing Company
Weighted-Average Method
Process Costing
Particulars Units % Of Completion Equivalent Units
Materials Conversion Materials Conversion
Units completed
and transferred 8,800 100 100 8800 8800
Add
Ending Inventory 1700 100 35 1700 595
Normal Spoilage 80 100 100 80 80
Abnormal Spoilage 50 100 100 50 50
Equivalent Units 10630 9525
The weighted average method equivalent unit production implies that the units completed and the ending inventory completed plus any spoilage normal or abnormal is taken is accounted for.
The weighted average method EUP can also be determined by adding the beginning units and units started
The normal and abnormal spoilage are taken 100 % because all the spoilage is evident once the goods are completed.
A company with $60,000 in current assets and $35,000 in current liabilities pays a $1,000 current liability. As a result of this transaction, the current ratio and working capital will
Answer:
Increase and remain the same respectively
Explanation:
Given the above information, we know that current ratio is computed as;
Current ratio = Current assets ÷ Current liabilities
Current ratio = $60,000 ÷ $34,000
Current ratio = 1: 1.76
Working capital is computed as;
= Current asset - Current liabilities
= $60,000 - $34,000
= $26,000
As a result of the above, the current ratio increased because of the reduction in the current liabilities value while the working capital remains the same.
P&R Company is an all-equity company. Its stock has a beta of .82. The market risk premium is 6.9 percent and the risk-free rate is 4.5 percent. The company is considering a project that it considers riskier than its current operations so it wants to apply an adjustment of 1.7 percent to the project's discount rate. What should the firm set as the required rate of return for the project?
Answer:
11.86%
Explanation:
Project's discount rate = Rf rate + Beta*risk premium
Project's discount rate = 4.5% + 0.82*6.9%
Project's discount rate = 4.5% + 5.658%
Project's discount rate = 10.158%
Required rate = Project's discount rate + Adjustment rate
Required rate = 10.158% + 1.7%
Required rate = 11.86%
Thus, the firm set 11.86% as the required rate of return for the project.
How much must he save during each of the next 10 years (with equal deposits being made at the end of each year, beginning a year from today) to meet his retirement goal
Question Completion:
Assume that your father is now 50 years old, that he plans to retire in 10 years, and that he expects to live for 25 years after he retires - that is, until he is 85. He wants his first retirement payment to have the same purchasing power at the time he retires as $40,000 has today. He wants all his subsequent retirement payments to be equal to his first retirement payment. (Do not let the retirement payments grow with inflation: Your father realizes that the real value of his retirement income will decline year by year after he retires). His retirement income will begin the day he retires, 10 years from today, and he will then get 24 additional annual payments. Inflation is expected to be 5% per year from today forward. He currently has $100,000 saved up; and he expects to earn a return on his savings of 8% per year with annual compounding.
Answer:
He must save $57,326.75 yearly for 10 years to meet his retirement goal.
Explanation:
a) Data and Calculations:
The future value of the first retirement payment of $40,000 = $86,360 ($40,000 * 2.159)
Future value factor = 2.159 at 8% for 10 years
Amount to be paid over 24 years = $960,000 ($40,000 * 24)
Total amount to be paid in 25 years of retirement = $1,046,360 ($960,000 +$86,360)
Future value of initial savings of $100,000 = $215,892.50
Amount expected to be saved in ten years = $830,467.50 ($1,046,360 - $215,892.50)
N (# of periods) 10
I/Y (Interest per year) 8
PV (Present Value) 0
FV (Future Value) 830467.50
Results
PMT = $57,326.75
Sum of all periodic payments $573,267.47
Total Interest $257,200.03
Find the APR, or stated rate, in each of the following cases:
Stated Rate (APR) Number of Times Effective
Compounded Rate (EAR)
% Semiannually 11.9%
Monthly 12.8
Weekly 10.5
Infinite 14.2
Answer and Explanation:
The annual percentage rate or stated rate is as follows;
Effective annual rate = [1 + (Annual percentage rate ÷ compounding period )]^compounding period - 1
Annual percentage rate
= 2[(1.119)1 ÷ 2 - 1]
= 11.57%
Annual percentage rate is
= 12 [(1.128)1 ÷ 12 - 1]
= 12.11%
Annual percentage rate
= 52[(1.105)1 ÷ 52 - 1]=
= 9.99%
Annual percentage rate
= 365[(1.142)1 ÷ 365 - 1]
= 13.28%
A registered investment adviser often recommends real estate limited partnership investments to her wealthy clients. The RIA's personal financial statement and income are consistent with those of her wealthy clients, yet she never buys limited partnership units for her personal account. Which statement is TRUE
Answer: Her actions are inconsistent with the advice being given to her clients and this must be disclosed
Explanation:
Since the registered investment adviser often recommends real estate limited partnership investments to her wealthy clients but she never buys limited partnership units for her personal account.
This shows that her actions are inconsistent with the advice being given to her clients and this must be disclosed.
Why are multinational corporations (MNCs) getting involved in corporate social responsibility and sustainable business practice
Answer:
Some are genuinely giving back to the community:
Some MNCs are engaged in Corporate Social Responsibility (CSR) and Sustainable business practices because they genuinely care about the communities they have a presence in and the earth as well. With this is mind, they find out ways to give back to the community to ensure that people's lives are touched and improved so that the wider community benefits from the success of the MNC.
Brand Strengthening and Recognition.
Sometimes MNCs get involved in CSR to build their brand because people would associate their brand with the good works they do. This would go a long way in improving their sales figures as well because people want to support a company that supports its communities.
Tax Considerations.
Various tax credits exist for MNCs across many countries and tax regimes to reward them for their CSR activities. MNCs therefore see this as a chance to kill two birds with one stone as they get to use money that would have gone to taxes to improve their PR standing.
Training improves quality and efficiency of profession.Do you agree?
Answer: Yes
Explanation: This is true, because if you are new playing baseball like me I SUCKED at it but after some practice I won many leagues.
Which functions do investment companies perform for their investors? Check all that apply: Asset management Diversification and divisibility Investment advice Lower transaction costs Record keeping
Answer: All of the above
Explanation:
Investment companies such as mutual and closed end funds work to increase the investments of investors by providing superior asset management services. By investing in many different sectors, they give the investors diversification and divisibility benefits which reduce risk to the investor.
Because these investment companies invest for a lot of people, they are able to buy in bulk which lowers transaction costs per investor. They also have to keep records of all these transactions so they provide the benefit of record keeping as well.
The functions that can be attributed to investment companies to their investors are;
Asset management Diversification divisibility Investment advice Lower transaction costs Record keepinginvestment companies are those companies that are responsible management Diversification and divisibility Investment advice to their clients.
Therefore, all the provided options are correct.
Learn more about investment companies at;
https://brainly.com/question/11834742
Two cigarette manufacturers (Firm A and Firm B) are faced with lawsuits from states to recover the healthcare related expenses associated with cigarette smoking. Both cigarette firms have evidence that indicates that cigarette smoke causes lung cancer (and other related illnesses). State prosecutors do not have access to the same data used by cigarette manufacturers and thus will have difficulty recovering full costs without the help of at least one cigarette firm study. Each firm has been presented with an opportunity to lower its liability in the suit if it cooperates with attorneys representing the states. Pursuing its own best interests, Firm Awill concede that cigarette smoke causes cancer.
a. only if Firm B concedesthat cigarette smoke causes lung cancer.
b. only if Firm B does notconcede that cigarette smoke causes lung cancer.
c. regardless of whetherFirm B concedes that cigarette smoke causes lung cancer.
d. none of the above. Inpursuing its own best interests, Firm A will in no case concedethat cigarette
Answer:
d. none of the above. In pursuing its own best interests, Firm A will in no case concede that cigarette smoke causes cancer
Explanation:
The given scenario is a classic case of prisoner's dilemma.
Individuals in a given situation tend to tend to not cooperates or confess even if doing so is in their best interest.
Rationally Firm A will have the incentive of a lower liability in the suit brought against them. But they will in no situation admit that cigarette smoke causes cancer. Even if Firm B admits to it.
The best interest for Firm A will be not to admit and maintain their sales as this will affect their business adversely
The fundamental role of strategy is to: a. Determine how the firm will make a profit in its industry environment b. Determine how the firm will deploy its resources to satisfy its short-term financial goals c. Determine how the firm will deploy its resources to satisfy its long-term goals, given the conditions in the competitive environment d. Determine how the firm can organize its own activities and achieve dominance
Answer:
c. Determine how the firm will deploy its resources to satisfy its long-term goals, given the conditions in the competitive environment
Explanation:
The main role of the organization strategy is to implement the plan with respective to the development and deploying of the resources of the organization in order to attain the long term goals. It involved the word class quality of product or services that satisfy the customer needs as compared with the competitor. So here only long term goals option is considered
All of the following are advantages of using the average rate of return except a.the average rate of return method emphasizes accounting income, which is often used by investors and creditors in evaluating management performance. b.the average rate of return method uses present values. c.the average rate of return method includes the entire amount of income earned over the life of the proposal. d.the average rate of return is easy to compute.
Answer:
Advantages of using the average rate of return except:
b.the average rate of return method uses present values.
Explanation:
The company's average rate of return or the accounting rate of return (ARR) ignores the time value of money or the cash flows in its calculations. It is a simple capital evaluation method which calculates the ratio based on the percentage of annual returns over the project's initial cost. The ARR is not like other investmental appraisal methods, it bases its calculations on accounting profits rather than cash flows.
Knowledge Check 01 On January 1, Year 1, Abbott Company granted 92,000 stock options to certain executives. The options are exercisable no sooner than December 31, Year 3, and expire on January 1, Year 7. Each option can be exercised to acquire one share of $1 par common stock for $14. An option-pricing model estimates the fair value of the options to be $5 on the date of grant. What is the amount of compensation expense for Year 1
Answer:
$153,333
Explanation:
Calculation to determine What amount should Olympic recognize as compensation expense for 2016
Using this formula
Compensation expense =Total compensation/Vesting period
Let plug in the formula
Compensation expense=($5 x 92,000)/3 years
Compensation expense=$460,000/3 years
Compensation expense=$153,333
Therefore What amount should Olympic recognize as compensation expense for 2016 is $153,333