Answer:
D. Debt holders get $0 mil. under the unlevered plan vs. 0.6075 mil. under the levered plan
Explanation:
interests paid to debt holders = $13,500,000 x 10% = $1,350,000
generally, interest revenue is taxed as ordinary revenue = corporate income tax rate (if debt holder is a business) or personal income tax (if debt holder is an individual).
under the first plan, debt holders get nothing because there is no outstanding debt since the company is an all equity firm.
under the second plan, if the personal tax rate on interest income is 55%, which is really high, the debt holders will earn $1,350,000 x (1 - 55%) = $607,500
Because risk is associated with the potential for higher profits, businesspersons are motivated to choose organizational forms that limit their liability while allowing them to take risks that may lead to greater profits. True or False?
Answer:
True
Explanation:
Remember, business persons are profit oriented, and so they are willing to make needed organisational decisions to achieve their profit goals while reducing their liability (loses).
For example, an organization may choose the hierarchical structure; where instructions flows from top level management to bottom instead of the divisional structure, which allows a spread of authority if deems it to limit their liability while allowing them to take risks that may lead to greater profits.
An adviser with $133,000,000 of assets under management has its main offices in Illinois and branch offices in Wisconsin, Indiana, and Missouri. Which statement is TRUE regarding registration of the adviser
Answer: The adviser must register in all the states i.e Illinois, Wisconsin, Missouri and Indiana.
Explanation:
From the question, we are told that an adviser with $133,000,000 of assets under management has its main offices in Illinois and branch offices in Wisconsin, Indiana, and Missouri.
Based on th above scenario, the adviser has to register in all the states where it has offices.
Joe Dumars Company has outstanding 40,000 shares of $5 par common stock, which had been issued at $30 per share. Joe Dumars then entered into the following transactions.
1. Purchased 5,000 treasury shares at $45 per share.
2. Resold 2,000 of the treasury shares at $49 per share.
3. Resold 500 of the treasury shares at $40 per share.
Indicate the effect each of the three transactions has, assuming Joe Dumars Company uses the cost method.
Answer:
Transaction 1
Assets - Decrease by $225,000
Cash was used to purchase the shares at = 5,000 * 45 = $225,000
Liabilities - No effect
Stockholders' equity - Decrease by $225,000
Treasury shares reduce the amount held by stockholders.
Paid In Capital - No effect
Retained Earnings - No Effect
Net Income - No Effect
Transaction 2
Assets - Increase by $98,000
The shares were sold for at = 2,000 * 49 = $98,000
Liabilities - No effect
Stockholders' equity - Increase by $90,000
= 2,000 * 45 = $90,000
Treasury shares sold increases the amount held by stockholders. As we are using the Cost method, this will be recorded at cost.
Paid In Capital - Increase by $8,000
Using the cost method, when stock is sold for more than it was bought, record the cost in the stock account and credit the remainder to this account.
Retained Earnings - No Effect
Net Income - No Effect
Transaction 3
Assets - Increase by $20,000
The shares were sold for at = 500 * 40 = $20,000
Liabilities - No effect
Stockholders' equity - Increase by $22,500
= 500 * 45 = $22,500
Treasury shares sold increases the amount held by stockholders. As we are using the Cost method, this will be recorded at cost.
Paid In Capital - Decrease by $2,500
Using the cost method, when stock is sold for less than it was bought, record the cost in the stock account and debit the remainder to this account to indicate a decrease.
Retained Earnings - No Effect
Net Income - No Effect
Hiku Inc. developed a superior touch screen technology for tablet computers that enabled multiple users to operate the screen at the same time. The technology was leased to Broadway Technologies, a consumer electronics company, for five years. Which of the following alternatives to integration does this best illustrate?
Answer:
Licensing example
Explanation:
A licensing integration occurs when a firm under contractual terms allows another firm or group of firms to use it's intellectual property usually for an agreed amount.
For example, in this case, Hiku Inc. innovative technology– which enabled multiple users to operate the screen of a tablet at the same time, was licensed out to Broadway Technologies which gave them the freedom to use the technology for five years.
Purple Corporation acquired 75 percent of Socks Corporation’s common stock on January 1, 20X8, for $435,000. At that date, Socks reported common stock outstanding of $300,000 and retained earnings of $200,000, and the fair value of the noncontrolling interest was $145,000. The book values and fair values of Socks's assets and liabilities were equal, except for other intangible assets, which had a fair value $80,000 more than book value and a 10-year remaining life. Purple and Socks reported the following data for 20X8 and 20X9
Socks Corporation Purple Corporation
Year Net Income Comprehensive income Dividends paid Operating income Dividens paid
20X8 $40,000 50,000 15,000 $120,000 $70,000
20X9 60,000 65,000 30,000 140,000 70,000
Required:
Compute consolidated comprehensive income for 20X8 and 20X9.
20X8 20X9
Consolidated comprehensive income
Answer:
20X8 = 162,000
20X9 = $197,000
Explanation:
The calculation of the consolidated comprehensive income for the year 2008 and 2009 is shown below:
Consolidated comprehensive income
Particulars 20X8 20X9
Purple Corporation
Operating Income $120,000 $140,000
Add: Net Income
from Socks Corporation $40,000 $60,000
Less: Amortization of differential
($80,000 ÷ 10 Years) ($8,000) (8,000)
Consolidated net income $152,000 $192,000
Add: Comprehensive income
reported by Socks Corporation $10,000 $5,000
Consolidated
comprehensive income $162,000 $197,000
On April 1, 2016, Cyclone's Backhoe Co. purchases a trencher for $286,000. The machine is expected to last five years and have a salvage value of $43,000. Compute depreciation expense for both years ending December 2016 and 2017 assuming the company uses the straight-line method.
Answer:
2016 - $36,450
2017 - $48,600
Explanation:
Straight line depreciation expense = (Cost of asset - Salvage value) / useful life
($286,000 - $43,000) / 5 = $48,600
the depreciation expense each year would be $48,600 except in 2016 because it the machine was only used for 9 months
Depreciation expense in 2016 = (9 / 12) x $48,600 = $36,450
Recently, the Boeing Commercial Airline Group (BCAG) recorded orders for more than 15,000 jetliners and delivered more than 13,000 airplanes. To maintain is output volume, this Boeing division combines efforts of capital and more than 90,000 workers. Suppose the European company, Airbus, enjoys a similar production technology and produces a similar number of air craft, but that labor costs (including fringe benefits) are higher in Europe than in the United states. Would you expect workers at Airbus to have the same marginal product as workers at Boeing? Explain carefully.
Answer: Airbus Employees have a Higher Marginal Product than Boeing
Explanation:
Marginal Product of Labor refers to the extra unit produced by adding an extra unit of labor. For firms to maximise their profits, they produce at a mix of labor and Capital where [tex]\frac{MPK}{r} = \frac{MPL}{w}[/tex] with MPK being Marginal Product of capital and r being cost of capital and w being cost of labor.
Assuming both Boeing and Airbus are producing at the maximising expression. It is said that Airbus has the same [tex]\frac{MPK}{r}[/tex] as Boeing. They however has a higher w than Boeing which means that for it to equal the Capital side of the expression, the w must be dividing a higher Marginal Product of labor which shows that Airbus has a higher Marginal Product of labor.
For example,
Boeing MPK = 12
Boeing r = 4
Boeing MPL = 9
Boeing w = 3
Maximising level = 3
Airbus MPK = 12
Airbus r = 4
Airbus w = 6
Airbus MPL = ??
With a labor cost of 6, Airbus MPL will have to be 18 to be able to get to the equilibrium maximising level of 3.
Osterman Company provides its employees with vacation benefits and a defined contribution pension plan. Employees earned vacation pay of $33,100 for the period. The pension plan requires a contribution to the plan administrator equal to 6% of employee salaries. Salaries were $354,000 during the period, and the full amount due was contributed to the pension plan administrator. On December 31, provide the journal entry for the (a) vacation pay on page 11 of the journal and (b) pension benefit on page 12 of the journal.
Answer:
sorry l don't know the answer please forgive me
Average fixed cost rev: 06_26_2018 Multiple Choice equals marginal cost when average total cost is at its minimum. may be found by adding average variable cost and average total cost. graphs as a U-shaped curve. declines continually as output increases.
Answer: declines continually as output increases.
Explanation:
The Fixed costs are are constant and do not change throughout the production process. This means that on Average, they will keep dropping as more output is produced.
The formula for Average Fixed Costs;
Average Fixed Costs = Fixed Costs/ Output
From the formula you will see that as output increases, the Average Fixed Cost reduces because the Fixed Costs will remain the same while being divided by a larger number each time output increases.
If Jacques's Fire Engines were a competitive firm instead and $80,000 were the market price for an engine, decreasing its price from $80,000 to $60,000 would result in a decrease in the production quantity, but an increase in total revenue.
a) true
b) false
Answer:
The correct answer is:
false (b)
Explanation:
Reduction in the price of a good or service in a competitive market leads to an increase in quantity demanded, which in turn leads to an increase in the production quantity, to cater for the increase in the volume of demand. Hence the reduction in the price of Jacques's fire engines will increase demand and in effect increase the production quantity. With respect to the total revenue, depending on the extent of demand increase, the total revenue might increase or even decrease. If the total demand exceeds the previous demand to make up for the reduction in price, the total revenue will increase, if not so, the total revenue will decrease.
An optimum that occurs as a corner solution A. cannot exhaust the budget constraint. B. includes only one good. C. cannot be an equilibrium. D. includes the exact same amounts of each good.
Answer:
B. includes only one good.
Explanation:
A corner solution is a microeconomics concept, which is used to illustrate the graphical representation of a situation where an individual wouldn't do some things at any cost or for any price.
Optimum is usually experienced on the consumer graph at the point where the indifference curve (IC) is just tangential to the consumer's budget constraint. Thus, the corner solution lies at the non-zero interior, which then means that none of the other goods is contained in the optimum.
Hence, an optimum that occurs as a corner solution includes only one good.
For instance, Tracy saying she wouldn't buy a XYZ phone for any price, or Sarah saying she would visit a museum no matter how much it will cost her are some examples of corner solution.
On April 2 a corporation purchased for cash 7,000 shares of its own $11 par common stock at $26 per share. It sold 4,000 of the treasury shares at $29 per share on June 10. The remaining 3000 shares were sold on November 10 for $22 per share. a. Journalize the entries to record the purchase (treasury stock is recorded at cost). Apr. 2 b. Journalize the entries to record the sale of the stock. If an amount box does not require an entry, leave it blank. Jun. 10 Nov. 10
Answer:
A.
Dr Treasury stock 182,000
Cr Cash 182,000
B.
Jun 10
Dr Cash 116,000
Cr Treasury stock 104,000
Cr Paid in capital from treasury stock 12,000
Nov 10
Dr Cash 66,000
Dr Paid in capital from treasury stock 12,000
Cr Treasury stock 78,000
Explanation:
a. Preparation of the Journal entry to record the purchase
Dr Treasury stock 182,000
Cr Cash 182,000
(7,000*26)
b. Preparation of the Journal entries to record the sale of the stock
Jun 10
Dr Cash (4000*29) 116,000
Cr Treasury stock (4000*26) 104,000
Cr Paid in capital from treasury stock 12,000(116,000-104,000)
Nov 10
Dr Cash (3000*22) 66,000
Dr Paid in capital from treasury stock 12,000
Cr Treasury stock (3000*26) 78,000
On January 1, 20X6, Plus Corporation acquired 90 percent of Side Corporation for $180,000 cash. Side reported net income of $30,000 and dividends of $10,000 for 20X6, 20X7, and 20X8. On January 1, 20X6, Side reported common stock outstanding of $100,000 and retained earnings of $60,000, and the fair value of the noncontrolling interest was $20,000. It held land with a book value of $30,000 and a market value of $35,000 and equipment with a book value of $50,000 and a market value of $60,000 at the date of combination. The remainder of the differential at acquisition was attributable to an increase in the value of patents, which had a remaining useful life of five years. All depreciable assets held by Side at the date of acquisition had a remaining economic life of five years. Plus uses the equity method in accounting for its investment in Side.
1. Based on the preceding information, the increase in the fair value of patents held by Side is:
a. $20,000
b. $25,000
c. $15,000
d. $5,000
2. Based on the preceding information, what balance would Plus report as its investment in Side at January 1, 20X8?
a. $230,400
b. $180,000
c. $234,000
d. $203,400
Answer:
1) b) $25,000
2) d. $203,400
Explanation:
1)
Ref Particulars Amount
a Fair value of entity 200,000
b Total value without patent 175,000
c=a-b Patent 25,000
Therefore, the increase in the fair value of patents held by Side is;
b) $25,000
Fair value of consideration given:
Ref Particulars Amount
Stock 0
Cash 180,000
a Total consideration 180,000
b Stake acquired 90%
c=a/b Fair value of subsidiary 200,000
d=100%-b Minority interest 10%
e=c*d Fair value of minority interest 20,000
On acquisition date
Value of subsidiary without patent
Common stock 100,000
Paid in capital -
Retained earnings 60,000
Fair value adjustment:
Patent -
Equipment 10,000
Land 5,000
Fair value without patent 175,000
2)
Particulars Investment
Acquisition date 180,000
Add: share of net income 54,000
Less: Dividends 18,000
Less: Fair value amortization 12,600
Balance Jan 1, 20X8 203,400
{Share of earnings for 2 years = 30,000 × 2 × 90% = 54,000 }
{Share of dividends for 2 years = 10,000 × 2 × 90% = 18,000 }
{Fair value amortization for 2 years = 7,000 × 90% × 2 = 12,600}
Therefore Balance as at Jan 1, 20X8 is
d) $203,400
The Borio Company had an asset with an $8 book value and a $7 market value; it decided to distribute the asset as a property dividend. Journal entries were made to adjust the property to market value and declare the dividend. Indicate the combined effect on the Net Income and Total Assets, respectively:
Answer:
The net income will decrease and also the total assets will also decrease
Explanation:
Here, we want to know the combined effect on net income and total assets of company that made a decision of distributing assets as a property dividend.
As the asset value is down the entry is asset (credit) and loss on asset (debit)
This will effect the net income as it will come down and total assets value also come down
The Gerding Company discovered these errors made in year 3: Failed to record Unearned Revenue: $15 Failed to record Accrued Interest Expense: $7 Year 4 Net Income will be:
Answer:
Overstated $8
Explanation:
Calculation for Gerding Company Net income
Using this formula
Net income =Failure to record Unearned Revenue - Failure record Accrued Interest Expense
Let plug in the formula
Net income =$15-$7
Net income =$8
Therefore Gerding Company Net income will be an overstated of the amount of $8
With adaptive expectations, what is the inevitable consequence of an unexpected, active, expansionary monetary policy in the short and long run
Answer:
D. lower unemployment in the short run, higher inflation in the long run
Explanation:
Remember, like it's name, monetary policy affects the money supply of a country, which in turn influences the Interest rate and inflation rate.
By means of expansionary monetary policy, an economy may experience reduced interests rates, which leads to lower unemployment in the short run. However, in the long run the high inflation rate may begin to occur leading to adaptive expectations.
What is the purpose of the color coded tape located at the front entrance of
Dollar General stores?
A. It assists store maintenance with code compliance
B. You use it to determine the average height of new employees
ОО
C. It helps you estimate the height of someone who commits a crime in your store
D. None of the above
SUBMIT
Answer:
D. None of the above
Explanation:
The color-coded tape are used at the front entrance of Dollar General stores is a way to attract the customers in the store.
The color-coded tape attracts customers and shows the safety information to customers directly at the point.
Hence, the correct option is "D. None of the above".
It should be noted that none of the options serves as the purpose of the color coded tape located at the front entrance of Dollar General stores.
According to the question, we are to discuss the purpose of the color coded tape located at the front entrance of Dollar General stores.
As a result of this we can see that color coded tape gives the identification of the the type of hazard, and this employee so they can identify the level of severity.
Therefore, option D is correct because, none of the options serves as the purpose of the color coded tape located at the front entrance of Dollar General stores.
Learn more about color coded tape at:
https://brainly.com/question/1068333
Through which strategy do you believe Lockheed Martin would be most profitable to pursue diversification?
Answer: Related diversification
Explanation:
Here is the complete question:
Lockheed Martin has been a recognized brand in technology for aeronautics and space systems fordecades. The U.S. government is Lockheed Martin’s main customer. Recently, as large-scale military actions have decreased across the globe, the government has been consuming less of Lockheed Martin’sofferings.
As a top of executive of Lockheed Martin, you’ve been asked to consider the opportunities to diversify into new markets in order to remain competitive and continue to increase profits.
Through which strategy do you believe Lockheed Martin would be most profitable to pursue diversification?
Related diversification occurs when a business or an organization expands its activities into similar product lines that to the ones it currently offers.
An example of related diversification is when a computer manufacturer starts making calculators.
By pursuing related diversification, Martin is exploring innovative products which are still within aeronautics scope.
4. It is estimated that you pay $2,000 per year into the Social Security System (FICA) over your 40-year work span. For simplicity, assume that your annuity of $2,000 per year, starting with your 26th birthday and continuing through your 65th birthday. The deposit is done at the end of the year. However, the government decides to provide you the annual withdrawal only after the end of 67th birthday. If the government interest rate is 6% per year, what equal annual withdrawal you can do, if you expect to live till the end of 86th birthday
Answer:
$30,320.94
Explanation:
first we must determine the future value of your social security contributions:
when you are 65, your contributions will be worth = $2,000 x 154.762 (FV annuity factor, 6%, 40 periods) = $309,524
now we must determine the value of the contributions when you are 67:
FV = $309,524 x (1 + 6%)² = $347,781.17
you expect to live 20 more years, so we need to determine the annuity payment:
annuity payment = principal / PV annuity factor, 6%, 20 periods = $347,781.17 / 11.470 = $30,320.94
The Quick Buck Company is an all-equity firm that has been in existence for the past three years. Company management expects that the company will last for two more years and then be dissolved. The firm will generate cash flows of $860,000 next year and $1,340,000 in two years, including the proceeds from the liquidation. There are 38,000 shares of stock outstanding and shareholders require a return of 11 percent. a. What is the current price per share of the stock
Answer:
$49.01 per Share
Explanation:
We can find the value of the unit share of company that will be dissolved at the end of year 2 by using the following formula:
Current Price per Share = Value of Firm Today (Step1) / Number of Shares
= $1,862,345 / 38,000 shares
= $49.01 per Share
Step 1: Find the value of the firm in today's price by using the discounting technique
Value of Firm Today = Cash Flow for Year 1 / (1+r)^1 + Cash Flow for Year 2 / (1+r)^2
= $860,000 / (1 + 11%)^1 + $1,340,000 / (1 + 11%)^2
= $774,774 + $1,087,571
= $1,862,345
You want to create a portfolio equally as risky as the market, and you have $500,000 to invest. Information about the possible investments is given below: Asset Investment Beta Stock A $ 146,000 .91 Stock B $ 134,000 1.36 Stock C 1.51 Risk-free asset How much will you invest in Stock C
Answer:
Investment in stock C is $122450.3311 rounded off to $122450.33
Explanation:
A portfolio which is equally as risky as market should have a beta equal to the beta of the market as beta is a measure of the riskiness. The beta of market is always equal to 1. The formula for beta of a portfolio is as follows:
Portfolio beta = wA * Beta A + wB * Beta B + ... + wN * Beta N
Where w represents the weight of each stock in the portfolio.
Let investment in stock C be x
1 = 146000/500000 * 0.91 + 134000/500000 * 1.36 + x/500000 * 1.51
1 = 0.26572 + 0.36448 + 1.51x / 500000
1 - 0.6302 = 1.51x / 500000
0.3698 * 500000 = 1.51x
1844900 / 1.51 = x
x = $122450.3311 rounded off to $122450.33
A union contract agreement calling for an immediate 4 percent increase in production worker wages was signed. No changes were made in the standards.
Indicate which of the following standard cost variances would be affected.More than one variance will be affected in some areas.
a. Materials price variance
b. Materials quantity variance
c. Labor rate variance
d. Labor efficiency variance
e. Variable overhead spending variance
f. Variable overhead efficiency variance
g. Fixed overhead budget variance
Answer:
4 percent Increase in Production Worker Wages
Indication of the standard cost variances affected:
c. Labor rate variance
e. Variable overhead spending variance
Explanation:
An increase in production workers wages as a result of workers' union agreement with management will affect the labor rate variance and the variable overhead spending variance. Production workers are factory or manufacturing workers. The expenses incurred on them include the direct labor costs and the indirect labor costs. Direct labor cost is a function of the rate of pay and hours worked or any other parameter used for paying their wages. Indirect labor cost is influenced by the wages of indirect labor in the production unit, like factory supervisors.
Factory Overhead Cost Variances Blumen Textiles Corporation began April with a budget for 43,000 hours of production in the Weaving Department. The department has a full capacity of 57,000 hours under normal business conditions. The budgeted overhead at the planned volumes at the beginning of April was as follows: Variable overhead $146,200 Fixed overhead 102,600 Total $248,800 The actual factory overhead was $251,800 for April. The actual fixed factory overhead was as budgeted. During April, the Weaving Department had standard hours at actual production volume of 45,000 hours. Determine the variable factory overhead controllable variance and the fixed factory overhead volume variance. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number. Round your interim computations to the nearest cent, if required. a. Variable factory overhead controllable variance: $ b. Fixed factory overhead volume variance: $
Answer:
a. Controllable Variance = 3,800 (Favorable)
b. Volume Variance = 21,600 (Unfavorable)
Explanation:
a. Controllable Variance
Actual variable factory Overhead( 251,800 - 102,600) 149,200
Standard Variable factory Overhead at actual Production
Standard Hours at actual Production (A) 45,000
Variable Factory overhead Rate (B) 3.4
(146,200/ 43,000)
Standard variable factory Overhead (A*B) 153,000
Controllable Variance 3,800 F
b. Fixed factory Overhead volume variance
Volume variance:
Volume at 100% of normal capacity 57,000
Less: Standard hours 45,000
12,000
Fixed Overhead rate (B) (102,600/ 57,000) 1.8
Volume Variance (A*B) 21,600 (Unfavorable)
A stock has a beta of 1.28, the expected return on the market is 12%, and the risk-free rate is 4.5%. Using the CAPM, what is the expected return on this stock
Answer:
14.10%
Explanation:
The calculation of expected return on this stock is shown below:-
Expected rate of return = Risk-free rate of return + Beta × (Market rate of return - Risk-free rate of return)
= 4.5% + 1.28 × (12% - 4.5%)
= 4.5% + 1.28 × 7.5%
= 4.5% + 9.6%
= 14.10%
The Market rate of return - Risk-free rate of return) is also called as the market risk premium
hence, the expected rate of return is 14.10%
The following transactions are for Crane Company. 1. On December 3, Crane Company sold $513, 500 of merchandise to Sheridan Co., terms 3/10, n/30. The cost of the merchandise sold was $318, 300. 2. On December 8, Sheridan Co. was granted an allowance of $24, 700 for merchandise purchased on December 3. 3. On December 13, Crane Company received the balance due from Sheridan Co.
(a) Prepare the journal entries to record these transactions on the books of Crane Company. Crane Company uses a perpetual inventory system. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)
(b) Assume that Crane Company received the balance due from Sheridan Co. on January 2 of the following year instead of December 13, Prepare the journal entry to record the receipt of payment on January 2. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)
Answer:
a) December 3, 202x, merchandise sold to Sheridan Co., terms 3/10, n/30
Dr Accounts receivable 513,500
Cr Sales revenue 513,500
Dr Cost of goods sold 318,300
Cr Merchandise inventory 318,300
December 8, merchandise allowance
Dr Sales returns and allowances 24,700
Cr Accounts receivable 24,700
December 13, invoice collected from Sheridan Co.
Dr Cash 474,136
Dr Sales discounts 14,664
Cr Accounts receivable 488,800
b) January 2, invoice collected from Sheridan Co.
Dr Cash 488,800
Cr Accounts receivable 488,800
On July 1, Year 1, Danzer Industries Inc. issued $40,000,000 of 10-year, 7% bonds at a market (effective) interest rate of 8%, receiving cash of $37,282,062. Interest on the bonds is payable semiannually on December 31 and June 30. The fiscal year of the company is the calendar year.
1. Journalize the entry to record the amount of cash proceeds from the issuance of the bonds on July 1, Year 1.
2. Journalize the entries to record the following:
A. The first semi-annual interest payment on December 31, Year 1, and the amortization of the bond discount, using the interest method.
B. The interest payment on June 30, Year 2, and the amortization of the bond discount, using the straight-line method.
3. Determine the total interest expense for Year 1.
4. Will the bond proceeds always be less than the face amount of the bonds when the contract rate is less than the market rate of interest?
5. Compute the price of $37,282,062 received for the bonds by using the present value tables.
Answer:
1.Dr Cash 37,282,062
Dr Discount on bonds payable 2,717,938
Cr Bonds payable 40,000,000
2a.Dr Interest expense 1,535,896.90
Cr Cash 1,400,000
Cr Discount on bonds payable 135,896.90
b.Dr Interest expense 1,535,896.90
Cr Cash 1,400,000
Cr Discount on bonds payable 135,896.90
3.$1,535,896.90
4. Yes
5.$37,282,000
Explanation:
1. Preparation of the Journal entry to record the amount of cash proceeds from the issuance of the bonds on July 1, Year 1.
Dr Cash 37,282,062
Dr Discount on bonds payable 2,717,938
(40,000,000-37,282,062)
Cr Bonds payable 40,000,000
2. Preparation of the Journal entries to record the following:
a. Journal entry to record the first semiannual interest payment on December 31, Year 1, and the amortization of the bond discount
First coupon payment December 31, Year 1, f
Dr Interest expense 1,535,896.90
(1,400,000+135,896.90)
Cr Cash 1,400,000
Cr Discount on bonds payable 135,896.90
(2,717,938 / 20 coupons = $135,896.90)
b. Journal entry to record the interest payment on June 30, Year 2, and the amortization of the bond discount
June 30, Year 2, second coupon payment
Dr Interest expense 1,535,896.90
Cr Cash 1,400,000
Cr Discount on bonds payable 135,896.90
(2,717,938 / 20 coupons = $135,896.90)
3. Calculation to Determine the total interest expense for Year 1.
Cash 1,400,000 + Discount on bonds payable 135,896.90 = $1,535,896.90
4. Yes the bond proceeds will always be less than the face amount of the bonds in a situation where the contract rate is less than the market rate of interest because if we have a high market rate than the coupon, this would mean that the bonds will sell at a discount
5. Computation for the price of $37,282,062 received for the bonds using the present value tables
PV factor, 4%, 20 periods =0.4564
PV annuity factor, 4%, 20 periods =13.590
Present Value (Face value) = $40,000,000 x 0.4564 = $18,256,000
PV of coupon payments = $1,400,000 x 13.590 = $19,026,000
Therefore the bond's market price will be:
Present Value (Face value) +PV of coupon payments
Bond's market price = $18,256,000 + $19,026,000
b
Bond's market price = $37,282,000
The accounts receivable turnover measures a. the fair market value of accounts receivable b. how frequently during the year the accounts receivables are converted to cash c. the efficiency of the accounts payable function d. the number of days of accounts receivable outstanding
Answer:
b. how frequently during the year the accounts receivables are converted to cash
Explanation:
Accounts receivable turnover is an example of activity ratios.
Accounts receivable turnover = revenue / average receivables
it calculates how frequently receivables are converted into revenues.
Sinking fund bonds: A. Are bearer bonds. B. Are registered bonds. C. Require equal payments of both principal and interest over the life of the bond issue. D. Require the issuer to set aside assets at specified amounts to retire the bonds at maturity. E. Decline in value over time.
Answer:
The answer is D.
Explanation:
Sinking funds require the issuer(borrower) to set aside assets at specified amounts to retire the bonds at maturity. Sinking fund helps the issuer to secure a bond with lower yield.
An agreed amount is deposited at an agreed period (e.g yearly) so as to pay of the par value or principal value at maturity.
Factor Company is planning to add a new product to its line. To manufacture this product, the company needs to buy a new machine at a $800,000 cost with an expected four-year life and a $52,000 salvage value. All sales are for cash, and all costs are out-of-pocket, except for depreciation on the new machine. Additional information includes the following. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided. Round PV factor value to 4 decimal places.)
Expected annual sales of new product $ 2, 640,000
Expected annual costs of new product
Direct materials 512,000
Direct labor 704,000
Overhead (excluding straight-line depreciation on new machine)656,000
Selling and administrative expenses 192,000
Income taxes 30 %
Required:
1. Compute straight-line depreciation for each year of this new machine’s life.
2. Determine expected net income and net cash flow for each year of this machine’s life.
3. Compute this machine’s payback period, assuming that cash flows occur evenly throughout each year.
4. Compute this machine’s accounting rate of return, assuming that income is earned evenly throughout each year.
5. Compute the net present value for this machine using a discount rate of 3% and assuming that cash flows occur at each year-end. (Hint: Salvage value is a cash inflow at the end of the asset’s life.)
Answer:
1. Compute straight-line depreciation for each year of this new machine’s life.
depreciation per year $187,0002. Determine expected net income and net cash flow for each year of this machine’s life.
net income per year $272,300net cash flow for years 1 - 4 = $459,300net cash flow year 5 = $511,3003. Compute this machine’s payback period, assuming that cash flows occur evenly throughout each year.
1.74 years4. Compute this machine’s accounting rate of return, assuming that income is earned evenly throughout each year.
34%5. Compute the net present value for this machine using a discount rate of 3% and assuming that cash flows occur at each year-end.
$1,348,316Explanation:
machine's cost $800,000
useful life 4 years, with $52,000 salvage value
depreciation per year = ($800,000 - $52,000) / 4 years = $187,000
net income = $2,640,000 - $512,000 - $704,000 - $187,000 - $656,000 - $192,000 = $389,000 x 0.7 = $272,300
net cash flow = $272,300 + $187,000 = $459,300
payback period = $800,000 / $459,300 = 1.74 years
accounting rate of return = $272,300 / $800,000 = 34%
NPV = -$800,000 + ($459,300 x 3.7171 annuity factor) + ($511,300/1.03⁵) = -$800,000 + $1,707,264 + $441,052 = $1,348,316
In the sequential negotiation games:_____.
A. You can induce a change in the strategy in your opponent only if your threat is believed.
B. Any threat can induce a change in strategy in your opponent.
C. The best threat is the one that you do not have to carry out.
D. A and C.
Answer:
B. Any threat can induce a change in strategy in your opponent.
Explanation:
In a sequential negotiation games, the players move one by one and do not move at the same time.
In this game any threat can change the strategy in your opponent to prevent the threat and continue the game with new strategy.
Hence, the correct option is B.