6. Last year Bill Bailey quit his $20,000 per year job and invested $200,000 to open theBargain Bonanzas. This year he sold for $600,000 merchandise he bought for $400,000.He paid his sales clerks $50,000. Bill could have earned 10 percent interest on otherinvestments. This year, Bill's:a. accounting and economic profit were both $150,000b. economic loss wasd. economic profit was $220,000 less than his accounting profit

Economic profit takes into consideration all revenue items and cost items and also the opportunity…

Answered: 6. Last year Bill Bailey quit his…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Howard Bowen is a large-scale cotton farmer. The land and machinery he owns has a current market value of $4 million. Bowen owes his local bank $3 million. Last year Bowen sold $5 million worth of cotton. His variable operating costs were $4.5 million; accounting depreciation was $40,000, although the actual decline in value of Bowen’s machinery was $60,000 last year. Bowen paid himself a salary of $50,000, which is not considered part of his variable operating costs. Interest on his bank loan was $400,000. If Bowen worked for another farmer or a local manufacturer, his annual income would be about $30,000. Bowen can invest any funds that would be derived if the farm were sold to earn 10 percent annually. (Ignore taxes.)a. Compute Bowen’s accounting profits.b. Compute Bowen’s economic profits.
Tracy has the following capital gains and losses for the current year: Short-term capital gain $1,000 Short-term capital loss 8,000 Long-term capital gain 5,000 Long-term capital loss 3,000 What is the net capital gain position?
You purchased a small company for $50,000 (in year zero). Unfortunately, things did not go well and your company lost $2,500 each year for the first three years. To alleviate the situation, during the third year, you decided to invest an additional $12,000 in the company. This smart decision resulted in a profit of $11,000 each year from the fourth year through the 16th year. At the end of 16 years the company can be sold for $40,000.Calculate the internal rate of return (IRR) as well as the NPV if MARR = 12%. Neglect depreciation or taxes in this problem.
Hobby Losses (LO 3.12) Lew is a practicing CPA who decides to raise bonsai as a business. Lew engages in the activity and has the following revenue and expenses: Sales $ 5,000 Depreciation on greenhouse 10,000 Fertilizer, soil, pots 1,500 If an amount is zero, enter "0". b. If the activity is deemed to be a regular business, what is the amount of Lew's loss from the activity?$fill in the blank 9a0cfdf68fac035_1 c. If the activity is deemed to be a hobby, what is the amount of Lew's expenses (if any) from the activity that may be deducted?$fill in the blank 12b81b026feafdb_1
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Changes Analyze Operational Richmond's is a retail store with eight departments, including a garden department that has been operating at a loss. The following condensed income statement gives the latest year's operating results: Sales Cost of sales Gross profit Direct expenses Common expenses Total expenses Net income (Loss) Garden Department $336,000 201,600 134,400 108,000 48,000 156,000 $(21,600) % All other departments 0 All Other Departments $2,400,000 1,560,000 840,000 273,000 312,000 585,000 $255,000 a. Calculate the gross profit percentage for the garden department and for the other departments as a group. Garden department 0 % b. Suppose that if the garden department were discontinued, the space occupied could be rented to an
4 Last year Alice worked as a consultant. She hired an administrative assistant for $17,000 per year and rented office space (utilities included) for $2,600 per month. Her total revenue for the year was $105,000. If Alice hadn't worked as a consultant, she would have worked at a real estate firm earning $40,000 a year. Last year, Alice's ---_ and her economic profit A. $88,000; $65,000 B. $73,800; -$40,000 accounting profit was was C. $85,400; $62,400 D. $56,800; $16,80
Firm X needs 1 computer. Firm X can buy 1 computer for 3,059. The cost of debt for Firm X is 5%. The corporate tax equals 35%. Firm X follows a straight-line depreciation method and the economic life of the computer is 2 years. Compute the depreciation tax shield of year 2.
3. The car that Deborah bought is 4 years old. She paid $9,600. This make and model depreciates exponentially at a rate of 7.50% per year. What was the original price of the car when it was new?
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Last week, Ken purchased a painting for $5,000 and paid for it with cash from his checking account. When he got home he realized that the painting's market value was actually $30,000. What is the impact of this transaction on Ken's net worth? Decrease of $5,000 Increase of $5,000 Decrease of $25,000 Increase of $25,0000 Decrease of $30,0000 Increase of $30,0000 No impact
A 162. Subject:- finance

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