MBA800X22 - Accountings rate of return is higher Accounts...

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A. 0.5($6000) + 0.5(3000) = $4500 expected value for each year $4500/1.1 + $4500/(1.1)^2 = $4091 + $3719 = $7810 equlas cash B. Cash $3,000 Common Sock $7,810 Investment 4,545 Retained Earnings (265) $7,545 $7,545 (2/3)($6000) + (1/3)($3000) = $4000+$1000= $5000 $5000/(1.1) = $4545 C. Normal = $7810 X 10% = $781 Actual = -$265 Abnormal = $-265-$781 = $-1046 $1046/$7810 = -13.4% D. Cash $3,000 Common Sock $7,810 Investment 3,905 Retained Earnings (905) $6,905 $6,905 $7810/2 = $3905 E. $7545/$6905 = 1.09 F. earnings are the amount from B = $-265 $-265/$7810 = -3.4% G. earnings from D are $-905 $-905/$7810 = -11.6% H. Accounting rate of return has higher numerator and lower denominator.
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Unformatted text preview: Accountings rate of return is higher. Accounts Receiveble begin balance 360,000 1,260,000 collections on A/R bad debts credit sales 1,200,000 47,000 bad debts reinstate accoun 2,500 2,500 recognize reinstated account as paid 253,000 Allowance for Doubtful Accounts 47,000 43,000 begin balance 2,500 reinstate account 26,800 plug to get 25,300 below 25,300 is 10% of A/R at end Year Straight Line SYD DDB 2005 $12,500 $20,000 $30,000 2006 12,500 15,000 15,000 2007 12,500 10,000 5,000 limited to 5,000 to get down to 10,000 salvage 2008 12,500 5,000 -...
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This note was uploaded on 07/28/2011 for the course MBA 800 taught by Professor Wallin during the Summer '11 term at Ohio State.

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MBA800X22 - Accountings rate of return is higher Accounts...

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