Innovative Technologies, Inc. incurred research and development costs of $150,000 (A+ Guaranteed)

Innovative Technologies, Inc. incurred research and development costs of $150,000 and legal fees of $42,000 to acquire a patent. The patent has a legal life of 20 years and a useful life of 10 years. What amount should Innovative Technologies record as Patent Amortization Expense in the first year?

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On March 1, 2004, Tucker Corporation purchased a new machine for $355,000 (A+ Guaranteed)

On March 1, 2004, Tucker Corporation purchased a new machine for $355,000. At the time of acquisition, the machine was estimated to have a useful life of ten years and an estimated salvage value of $19,000. The company has recorded monthly depreciation using the straight-line method. On July 1, 2013, the machine was sold for $45,000. What gain should be recognized from the sale of the machine?

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At the beginning of 2013, Brennan Corporation purchased a delivery truck for $80,000 (A+ Guaranteed)

At the beginning of 2013, Brennan Corporation purchased a delivery truck for $80,000. The truck was estimated to have a useful life of 150,000 miles and a salvage value of $5,000. It was driven 29,000 miles in 2013 and 33,000 miles in 2014. What is the depreciation expense for 2014?

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On April 1, 2012, Shoemaker Corporation realizes that one of its main suppliers (A+ Guaranteed)

On April 1, 2012, Shoemaker Corporation realizes that one of its main suppliers is having difficulty meeting delivery schedules, which is hurting Shoemaker’s business. The supplier explains that it has a temporary lack of funds that is slowing its production cycle. Shoemaker agrees to lend $1,800,000 to its supplier using a 12-month, 11% note.

Record the following transactions for Shoemaker Corporation.

24.

Required:
1. The loan of $1,800,000 and acceptance of the note receivable on April 1, 2012. (If no entry is required for a particular transaction, select “No journal entry required” in the first account field.)

25.

2. The adjustment for accrued interest on December 31, 2012. (If no entry is required for a particular transaction, select “No journal entry required” in the first account field.)

26.

3. Cash collection of the note and interest on April 1, 2013. (If no entry is required for a particular transaction, select “No journal entry required” in the first account field.)

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Fredonia Inc. had a bad year in 2013. For the first time in its history (A+ Guaranteed)

Fredonia Inc. had a bad year in 2013. For the first time in its history, it operated at a loss. The company’s income statement showed the following results from selling 80,000 units of product: Net sales $2,000,000; total costs and expenses $2,135,000; and net loss $135,000. Costs and expenses consisted of the following.

Total

Variable

Fixed

Cost of goods sold

$1,468,000

$950,000

$518,000

Selling expenses

517,000

92,000

425,000

Administrative expenses

150,000

58,000

92,000

$2,135,000

$1,100,000

$1,035,000

Management is considering the following independent alternatives for 2014.

1.

Increase unit selling price 25% with no change in costs and expenses.

2.

Change the compensation of salespersons from fixed annual salaries totaling $200,000 to total salaries of $40,000 plus a 5% commission on net sales.

3.

Purchase new high-tech factory machinery that will change the proportion between variable and fixed cost of goods sold to 50:50.

a) Compute the break-even point in dollars for 2014. (Round contribution margin ratio to 4 decimal places e.g. 0.2512 and final answers to 0 decimal places, e.g. 2,510.)

Break-even point

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(b) Compute the break-even point in dollars under each of the alternative courses of action. (Round contribution margin ratio to 4 decimal places e.g. 0.2512 and final answers to 0 decimal places, e.g. 2,510.)

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Describe the act of cross-hedging. What determines the effectiveness of a cross-hedge (A+ Guaranteed)

Cross-Hedging – Describe the act of cross-hedging. What determines the effectiveness of a cross-hedge?

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Explain how the probability distribution of a financial institution’s returns (A+ Guaranteed)

Impact of Futures Hedge – Explain how the probability distribution of a financial institution’s returns is affected when it uses interest rate futures to hedge. What does this imply about its risk?

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Explain the difference between a long hedge and a short hedge (A+ Guaranteed)

Long versus Short Hedge – Explain the difference between a long hedge and a short hedge used by financial institutions. When is a long hedge more appropriate than a short hedge?

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Why do some financial institutions remain exposed to interest rate risk (A+ Guaranteed)

Hedging Decision -Why do some financial institutions remain exposed to interest rate risk, even when they believe that the use of interest rate futures could reduce their exposure?

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Assume a financial institution has more rate-sensitive assets than rate (A+ Guaranteed)

Hedging with Futures Assume a financial institution has more rate-sensitive assets than rate-sensitive liabilities. Would it be more likely to be adversely affected by an increase or a decrease in interest rates? Should it purchase or sell interest rate futures contracts in order to hedge its exposure?

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