Farmer A is a lucrative wine farmer in the Western Cape. To expand farming operations, A entered into an agreement with S, the owner of the neighbouring farm under which S would sell 50 acres of the farm to A. Instead of payment in cash, the agreement entailed the transfer of 30 000 already bottled wine which S plans to resell. The market value of 300 bottles of wine (a 225 litre barrel) amounted to R10 500 with bottling at R46 per bottle. The price for 300 bottled wine thus amounted to R24 300 [R10 500 + R13 800 (R300 × R46)]. The cost of the 30 000 bottles of wine was R2 430 000 (R24 300 × 100). The market value of the 50 acres of land was R3 million at the time of the barter transaction. determine the amount to be included in Farmer A’s taxable income?

Farmer A is a lucrative wine farmer in the Western Cape. To expand farming operations, A entered into an agreement with S, the owner of the neighbouring farm under which S would sell 50 acres of the farm to A. Instead of payment in cash, the agreement entailed the transfer of 30 000 already bottled wine which S plans to resell. The market value of 300 bottles of wine (a 225 litre barrel) amounted to R10 500 with bottling at R46 per bottle. The price for 300 bottled wine thus amounted to R24 300 [R10 500 + R13 800 (R300 × R46)]. The cost of the 30 000 bottles of wine was R2 430 000 (R24 300 × 100). The market value of the 50 acres of land was R3 million at the time of the barter transaction. determine the amount to be included in Farmer A’s taxable income?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter16: Working Capital Policy And Short-term Financing

Section: Chapter Questions

Problem 28P

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Barter Transactions Farmer A is a lucrative wine farmer in the Western Cape. To expand farming operations, A entered into an agreement with S, the owner of the neighbouring farm under which S would sell 50 acres of the farm to A. Instead of payment in cash, the agreement entailed the transfer of 30 000 already bottled wine which S plans to resell. The market value of 300 bottles of wine (a 225 litre barrel) amounted to R10 500 with bottling at R46 per bottle. The price for 300 bottled wine thus amounted to R24 300 [R10 500 + R13 800 (R300 × R46)]. The cost of the 30 000 bottles of wine was R2 430 000 (R24 300 × 100). The market value of the 50 acres of land was R3 million at the time of the barter transaction. You are required to determine the amount to be included in Farmer A’s taxable income.
You are the manager of Synlait. Your accountant has indicated that one of the milking machines worth $1m needs to be replaced. You as the manager are required to agree to and sign off the purchase of a replacement machine priced at $25m. Before you make the decision, you need to understand the impact of the purchase and its financing on the financial statements. The milking machine will be financed by paying 20% in cash and the balance as a signed note agreeing to pay the balance at the end of the year. Interest of 5% p.a. will start accruing in the month following the purchase. The old machine will be sold for cash of $1m. Indicate, using the accounting equation, the impact of this transaction on the Balance Sheet and Income Statement. That is, the impact of the sale of the old machine, the purchase of the replacement machine and the first month of interest, but you can ignore depreciation.
Green Lantern, a pub & grill estimates that it will sell 10 000 beers per year which it will purchase from a distributor in Luanshya. A beer costs K18.00 to purchase and K2.00 in freight charges each. The company borrows funds at 9 % interest rate to finance inventories. Green Lantern’s purchasing agent has calculated that it costs K50.00 to place an order for beers and that the handling is K3.00 for each beer.1. Calculate the number of beers that Green Lantern should request in each order2. Calculate the annual number of orders3. Calculate the total annual ordering cost
Green Lantern, a pub & grill estimates that it will sell 10 000 beers per year which it will purchase from a distributor in Luanshya. A beer costs K18.00 to purchase and K2.00 in freight charges each. The company borrows funds at 9 % interest rate to finance inventories. Green Lantern’s purchasing agent has calculated that it costs K50.00 to place an order for beers and that the handling is K3.00 for each beer.1. Calculate the total annual carrying cost2. Determine the order-size decision Green Lantern should make if the Luanshya distributor offers a 5 % discount off the purchase cost excluding the delivery price for minimum orders of 1 824 beers.3. Assuming sales are uniform throughout the year (365 days) and the lead time is 9 days; determine the reorder point at the EOQ level.
Green Lantern, a pub & grill estimates that it will sell 10 000 beers per year which it will purchase from a distributor in Luanshya. A beer costs K18.00 to purchase and K2.00 in freight charges each. The company borrows funds at 9 % interest rate to finance inventories. Green Lantern’s purchasing agent has calculated that it costs K50.00 to place an order for beers and that the handling is K3.00 for each beer.1. What is the financial consequence if only 7 orders are placed for the year instead of ordering at the EOQ level?2. What is the cost of money called3. What is the process costing system
Sammie's Club wants to buy a 320,000-square-feet distribution facility on the northern edge of a large midwestern city. The subject facility is currently renting for $5.9 per square foot. Based on recent market activity, two properties have sold within a two-mile distance from the subject facility and are very comparable in size, design, and age. One facility is 350,000 square feet and is presently being leased for $5.80 per square foot annually. The second facility contains 300,000 square feet and is being leased for $6.00 per square foot. Market data indicates that current vacancies and operating expenses should run approximately 50 percent of gross income for these facilities. The first facility sold for $13.8 million, and the second sold for $12.3 million. Required: a. Using a going-in or direct capitalization rate approach to value, how would you estimate value for the subject distribution facility? (Do not round intermediate calculations. Round your final answers to 2 decimal…
Video Concepts, Inc. (VCI) markets video equipment and film through a vari- ety of retail outlets. Presently, VCI is faced with a decision as to whether it should obtain the distribution rights to an unrelcased film titled Touch of Orange. If this film is distributed by VCI directly to large retailers, VCI's invest- ment in the project would be $150,000. VCI estimates the total market for the film to be 100,000 units. Other data available are as follows: Cost of distribution rights for film $125,000 Label design 5,000 Package design 10,000 Advertising 35,000 Reproduction of copies (per 1,000) 4,000 Manufacture of labels and packaging (per 1,000) 500 Royalties (per 1,000) VC's suggested retail price for the film is $20 per unit. The retailer's margin is 40 percent. 500 a. What is VCI's unit contribution and contribution margin? b. What is the break-even point in units? In dollars? c. What share of the market would the film have to achieve to earn a 20 percent return on VCI's investment…
Sammie’s Club wants to buy a 320,000-square-foot distribution facility on the northern edge of a large midwestern city. The subject facility is presently renting for $4 per square foot. Based on recent market activity, two properties have sold within a two-mile distance from the subject facility and are very comparable in size, design, and age. One facility is 350,000 square feet and is presently being leased for $3.90 per square foot annually. The second facility contains 300,000 square feet and is being leased for $4.10 per square foot. Market data indicate that current vacancies and operating expenses should run approximately 50 percent of gross income for these facilities. The first facility sold for $9.4 million, and the second sold for $7.9 million. a. Using a “going-in” or direct capitalization rate approach to value, how would you estimate value for the subject distribution facility?b. What additional information would be desirable before the final direct rate (R) is selected?
Hudson Valley Distributors wants to be sure it has 10,000 cases of Beaujolais Nouveau to sell next November. In January, they enters into an agreement to buy the wine at a price of 30 euro per case. Payment will be due at the end of November. They expect to sell the wine to restaurants and retailers for $63 per case. If Hudson Valley does not hedge its position and the exchange rate in November is $1.50 /euro, what is the gross profit on the wine? (Round to the nearest dollar.) a. 330,000 b. 150,000 c. (180,000) d. 180,000
Flatland Corp. harvested potatoes at a cost of FC 1,000,000 and sold them to Pot Corp. for FC 2,500,000. Pot Corp. sold the potatoes to its customers and received FC 4,000,000. If the national VAT is 20%, how much tax did Pot Corp. pay?
Leo Consulting enters into a contract with Highgate University to restructure Highgate’s processes for purchasing goods from suppliers. The contract states that Leo will earn a fixed fee of $25,000 and earn an additional $10,000 if Highgate achieves $100,000 of cost savings. Leo estimates a 50% chance that Highgate will achieve $100,000 of cost savings. Assuming that Leo determines the transaction price as the expected value of expected consideration, what transaction price will Leo estimate for this contract?
b) Konga sells processing machines to the food industry. Each can be bought alone for K270,000 or as a package with a two-year service agreement included with in the price of K300,000. After the two-year period, annual service agreements may be purchased at a standard cost of K30,000. Half-way through the current year ended 31 December 2015, Konga sold 40 machines with a service package in a single order to a Russian farm co- operative. How should the related revenue he recorded in Konga's financial statements for the year?