Answer:
A. Unrealized Holding Loss - Trading 3,400
Fair Value Adjustment - Trading 3,400
Explanation:
Since this investment is classified as a trading investment, any change in its fair market value must be included in their income statement. The appropriate journal entry should be:
Dr Unrealized loss on trading security 3,400
Cr Debt investments 3,400
This will decrease the carrying value of the debt investments in the balance sheet and the loss will be included in the 2019 income statement. The fair value adjustment account normally has a credit balance since it decreases the carrying value of the investment account.
Carmen Camry operates a consulting firm called Help Today, which began operations on August 1. On August 31, the company's records show the following accounts and amounts for the month of August. Use this information to prepare an August income statement for the business.
Cash $25,360 Dividends $6,000
Accounts receivable 22,360 Consulting fees earned 27,000
Office supplies 5,250 Rent expense 9,550
Land 44,000 Salaries expense 5,600
Office equipment 20,000 Telephone expense 860
Accounts payable 10,500 Miscellaneous expenses 520
Common stock 102,000
Answer:
Carmen Camry
Income Statement for August 31
$
Consulting fees earned 27,000
Less Expenses :
Rent expense (9,550)
Salaries expense (5,600)
Telephone expense (860)
Miscellaneous expenses (520)
Net Income / (Loss) 10,470
Explanation:
Income Statement shows the Incomes and expenses for the business for the specific period of operation.
If the U.S. dollar appreciates in the foreign exchange market, U.S. exports will be __________ and U.S. imports will be __________.
decrease and increases
If the rate of inflation is 4.8 %4.8%, what nominal interest rate is necessary for you to earn a 2.2 %2.2% real interest rate on your investment? (Note: Be careful not to round any intermediate steps less than six decimal places.
Answer:
Nominal rate of return= 7.11%
Explanation:
Inflation is the increase in the price level.It erodes the value of money.rise in the price of money
Nominal interest is that quoted for investment or loan transactions. It has not been been adjusted for inflation.
Real interest rate is the amount of interest in terms of the the quantity of good and services that can be purchased. It is the nominal interest rate adjusted for inflation.
The relationship between inflation, real interest and nominal interest rate is given using the Fishers Effect;
N = ( (1+R) × (1+F)) - 1
N- nominal rate, R-real rate, F- inflation
real rate - 2.2%, inflation - 4.8%
Nominal rate of return =(1.022)× (1.048) - 1 = 0.071056
Nominal rate of return = 0.071056 × 100 = 7.1056 %
Nominal rate of return= 7.11%
The bank section of the bank reconciliation a.ends with the adjusted balance. b.begins with the cash balance according to the company's records. c.ends with the unadjusted bank balance. d.None of these choices are correct.
Answer:
a. ends with the adjusted balance.
Explanation:
In Financial accounting, bank reconciliation can be defined as an evaluation which give a complete details of the financial items responsible for any difference between the balance of the cash account in the balance sheet and the cash balance reported in an entity's bank statement. These reconciliations should be done at regular intervals so as to ensure a balanced record of the cash account are kept by an organization or firm.
The bank section of the bank reconciliation ends with the adjusted balance. Therefore, in the event of any fraudulent behavior by an employee, the bank reconciliation would detect any anomaly or financial fraud in the organization.
In a nutshell, after a reconciliation of the bank statement, the adjusted bank balance should be equal to the company's ending adjusted cash balance on the balance sheet.
Consider this case: Mildred’s Brewing Corp. needs to take out a one-year bank loan of $500,000 and has been offered loan terms by two different banks. One bank has offered a simple interest loan of 11% that requires monthly payments. The loan principal will be paid back at the end of the year. Another bank has offered 8% add-on interest to be repaid in 12 equal monthly installments. Based on a 360-day year, what will be the monthly payment for each loan for November? (Hint: Remember that November has 30 days.) Value Simple interest monthly payment Value Add-on interest monthly payment
Answer:
Mildred's Brewing Corp.
Monthly Payment for each loan for November:
a) Simple Interest = $55,000/12
= $4,583
b) Value Add-on interest monthly payment
= $43,494.31 ($521,931.68/12)
Explanation:
a) Data:
Bank loan = $500,000
Terms by bank one:
Simple interest of 11% paid monthly
Loan principal to be repaid at the end of the year.
Terms by bank two:
Add-on (Compound) interest = 8%
Repayment of interest and loan principal in 12 equal monthly installments.
b) Total Simple Interest Calculation:
Monthly Simple interest = ($500,000 x 11% )
= $55,000
c) Add-on Interest Calculation:
Using an online calculator, the total add-on interest will be $21,932.68 at an effective interest rate of 0.667% compounded monthly or 8%/12.
Principal = $500,000.00
Total interest $21,931.68
Principal + Interest $521,931.68
Monthly Repayment = $43,494.31 ($521,931.68/12)
d) The simple interest option will cost $55,000 in simple interest and the loan repayment at year-end of $500,000. The Add-on interest with equal monthly repayment of interest and principal will be $43,494.31, which costs $21,931.68 in total compound interest.
During which step in the STP marketing process is a value proposition defined and an action plan developed? Group of answer choices Profiling Planning Targeting Positioning Segmentation
The correct answer is Positioning
Explanation:
In marketing, the acronym STP means Segmentation, Target, and Positioning, which are essential steps to develop an effective marketing strategy. In the case of Positioning, this is the last stage of the process and implies creating a unique and clear perception of customers about the products. Due to this, in the positioning stage, it is necessary to propose the value of the product or the value the product has for the customer and therefore the reasons to buy it. Moreover, during this stage an action plan is developed, this means a set of strategies are defined to position the product.
railway cabooses justpaid its annual sividend of $1.70 per share. The company has been reducing the dividends by 11.3 percent each year. how much are you willing to pay today to purchase stock in this company if your required rate of return is 12 percent?
Answer:
$6.47
Explanation:
The computation of the current price of the stock is shown below:
= {Current Dividend x [1 + (Dividend Growth)} ÷ [Required rate of Return - (Dividend growth)]
= {$1.70 × [1 + (- 0.113)]} ÷ [0.12 - (- 0.113)]
= $1.5079 ÷ 0.233
= $6.47
hence, the current price of the stock valued today is $6.47 i.e come by applying the above formula
"A customer purchases 3M of Chicago Water Authority 9% revenue bonds maturing in 2042 at 87. The interest payments are Mar 15th and Sept 15th. The trade took place on Tuesday, April 15th. How much accrued interest will the customer be required to pay the seller?"
Answer:
$24
Explanation:
Given the following variables:
3M stands for $3,000 face amount of bonds (M is Latin for $1,000).
The day count is = 32 days interest
The bonds = 3 bonds
The interest rate = $90
The day basis = 360 days. (Considering that each month has 30 days)
Hence, using the formula
Accrued Interest = [Interest Rate X (Time Period / 365)] X Loan Amount
= 9% x (32 days / 360) x $3000
= $23.9999997 ≈ $24.
Therefore the final answer for accrued interest the customer will be required to pay seller = $24.
Gugenheim, Inc., has a bond outstanding with a coupon rate of 6.5 percent and annual payments. The yield to maturity is 7.7 percent and the bond matures in 21 years. What is the market price if the bond has a par value of $2,000?
Answer:
Price of bond=$1,753.96
Explanation:
The value of the bond is the present value(PV) of the future cash receipts expected from the bond. The value is equal to present values of interest payment plus the redemption value (RV).
Value of Bond = PV of interest + PV of RV
The value of bond for Gugenheim, Inc can be worked out as follows:
Step 1
Calculate the PV of interest payments
Annual interest payment
= 6.5%% × 2000 = 130
PV of interest payment
PV = A× (1- 1+r)^(-n)
A- 130, r- 7.7, n- 21
= 130 × (1-(1.077)^(-21)/0.077) = 1,332.743
Step 2
PV of redemption Value
PV = RV × (1+r)^(-n)
RV - 2000, r- 7.7%, n- 21
PV = 2000 × (1.077)^(-21) = 421.2115063
Step 3
Price of bond
= 1,332.743 + 421.211
=$1753.955
Price of bond=$1,753.96
On January 1, the first day of the fiscal year, a company issues a $450,000, 6%, 10-year bond that pays semiannual interest of $13,500 ($450,000 × 6% × ½ year), receiving cash of $450,000. (a) Journalize the entry to record the issuance of the bonds. (b) Journalize the entry to record the first interest payment on June 30. (c) Journalize the entry to record the payment of the principal on the maturity date.
Answer and Explanation:
According to the situation, the journal entries are as follows
a. Cash Dr $450,000
To bond payable $450,000
(Being the issuance of the bond is recorded)
Here we debited the cash as it increased the assets and credited the bond payable as it also increased the liabilities
b. Interest expense Dr $13,500
To cash $13,500
(Being the first interest payment is recorded)
Here we debited the interest expense as it increased the expenses and credited the cash as it decreased the assets
c. Bond payable Dr $450,000
To cash $450,000
(Being the payment of the principal on the maturity date is recorded)
Here we debited the bond payable as it decreased the liabilities and credited the cash as it decreased the assets
Any insurance agent who engages in the insurance business and violates the Code with respect to insurance replacement shall on the first violation:________.
Answer:
Can be fined upto an amount of $1,000
Explanation:
The first code violation with respect to replacement by the insurance agent can result in fine upto an amount of $1000.
Jenny promises National Bank that she will repay the loan that National Bank makes to Garrett if Garrett fails to pay it. In this instance, Jenny is the:
Answer: b. guarantor.
Explanation:
Guarantors who can also be called Sureties, are people who promise to pay the debt of another person if that person fails to honor the debt obligation. To be a Guarantor, you must have assets that will be able to cover the debt and you will probably have to pledge the assets to be collateral for the debt. Having a Guarantor increases the trust that the lender has in the lendee.
Jenny is a Guarantor as she has promised to repay the loan should Garrett default on it.
dentify what concept each of the following circumstances is an example of: a. Students end up doing "all-nighters" just to finish a term paper. (Click to select) b. The so-called "Lake Wobegon effect" where everyone in a group claims to be above average. (Click to select) c. People who are usually very neat tend to litter in areas that are covered with graffiti. (Click to select) d. Behavioral economists suggest that brand loyalty can be a source of monopoly power for producers. (Click to select)
Answer:
a. Students end up doing "all-nighters" just to finish a term paper.- Planning Fallacy
The Planning fallacy is a tendency by humans to overestimate how much time they have to complete a project due to them having an optimism bias when projecting how much time will be needed. The students thought they had time to study up until they didn't.
b. The so-called "Lake Wobegon effect" where everyone in a group claims to be above average. - The Overconfidence Effect
The overconfidence effect leads people to believe that their abilities exceed what they actually are and can be called the Lake Wobegon effect which was derived from the name of a fictional town where every child was supposedly above average.
c. People who are usually very neat tend to litter in areas that are covered with graffiti.- Framing effect
The Framing effect refers to a cognitive tendency by people to make decisions based on the how it is presented to them. The places covered with graffiti appeared dirty to them so them chose to litter there.
d. Behavioral economists suggest that brand loyalty can be a source of monopoly power for producers. - Status quo bias
This supports the old saying, "if it isn't broke, don't fix it". This bias is an emotional one that leads people to stay in a condition that they are used to because it is what they know and anything else might be considered a loss to them. Therefore companies can use these to always sell to a group of people if those people have brand loyalty.
A $200 petty cash fund has cash of $20 and receipts of $177. The journal entry to replenish the account would include a credit to Group of answer choices Cash for $20 Cash Short and Over for $3 Petty Cash for $190 Cash for $180
Answer: Cash for $180
Explanation:
The Petty Cash balance should be at a certain level necessary to cover petty cash expenses of the company. In this case that amount is $200. $20 is already in cash in the account and so will need to be topped up to get to $200.
= 200 - 20
= $180
$180 will take the balance back to $200. The Cash account would be credited of this $200 and the Petty Cash would be debited.
Between 2015 and 2016 the country of experienced a growth rate of 0.3 If nominal GDP had increased by 2.0 and the population growth was recorded as 0.4 then calculate the annual inflation rate in West Fredonia Give your answer to one decimal
Answer: 1.3%
Explanation:
Inflation refers to general increase in prices in a given economy in a given period. Given the variables available, the best formula to use would be the Economic growth formula;
Economic Growth = %Δ Nominal GDP – %ΔPrices – %ΔPopulation
0.3 = 2.0 - %ΔPrices - 0.4
%ΔPrices = 2.0 - 0.4 - 0.3
%ΔPrices = 1.3
Inflation rose by 1.3%
You are finishing your 3rd year in business with $535,000 of gross income and $275,000 in deductions. Two years ago, you had a net loss of $93,000 and last year, you had a net loss of $52,000. Calculate your taxable income for this year.
Answer:
Taxable Income for this year is $115,000
Explanation:
Particulars Amount ($)
Gross income of 3rd year 535,000
Less: Net loss of last years (145,000)
Gross Income 390,000
Less: Deductions (275,000)
Taxable Income $115,000
Working
Net loss of last years = $93,000 + $52,000
= $145,000
Real GDP means GDP:________.
a. corrected for changes in quality.
b. valued at prices in a base year.
c.that does not change from year to year.
d. valued at prices at which goods are actually sold.
Answer:
b. valued at prices in a base year.
Explanation:
Real gross domestic product (GDP) is basically nominal GDP adjusted to inflation. This means that the in order for the real GDP to increase or decrease, the actual output of goods and services must change, not only their price.
E.g. a small economy that produces 10 hats at $5 and 5 bikes at $10 in 2019, the 2019 (base year) GDP = $100.
In 2020, the economy produced 12 hats at $50 and 5 bikes at $10, the nominal GDP = $650, but the real GDP = (12 x $5) + (5 x $10) = $110.
Two car manufacturers, Saab and Volvo, have fixed costs of $1 billion and marginal costs of $15,000 per car. If Saab produces 500,000 cars per year and Volvo produces 200,000 cars per year, calculate the average production cost for each company.
Answer:
Average production cost for Saab is $17000
Average production cost for Volvo is $20,000
Explanation:
In order to calculate average production cost for each car manufacturer,the formula below comes handy:
Average Total cost = Fixed cost/Quantity + Marginal cost
Saab:
Average Total cost=($1,000,000,000/500,000)+$15000=$17000
Volvo:
Average Total cost=($1,000,000,000/200,000)+$15000=$20000
A monopoly's cost function is CQ and its the demand for its product is pQ where Q is output, p is price, and C is the total cost of production. Determine the profit-maximizingLOADING... price and output for a monopoly.
Answer:
The answer is "70 units".
Explanation:
In the given question some equation is missing which can be defined as follows:
[tex]C = 1.5Q^2+40Q\\\\P=320-0.5Q[/tex]
Monopolistic functions are used where Marginal Profit = Marginal Cost where marginal revenue and marginal cost stand for the MR and MC.
Finding the value of MR :
[tex]\ MR = \frac{\partial TR}{\partial Q} \\\\[/tex]
[tex]= \frac{\partial PQ}{\partial Q} \\\\= \frac{\partial (320-0.5Q)Q}{\partial Q}[/tex]
[tex]= \frac{\partial (320Q -0.5Q^2)}{\partial Q}\\\\ = \frac{\partial Q (320 -0.5Q)}{\partial Q}\\\\ \ by \ solving \ we \ get \\\\ = 320 - Q...(1)[/tex]
Calculating the value of the MC:
[tex]MC = \frac{\partial TC}{\partial Q} \\[/tex]
[tex]=\frac{\partial (1.5Q^2 + 40Q)}{\partial Q} \\\\=\frac{\partial Q (1.5Q + 40)}{\partial Q}\\\\ \ by \ solve \ value \\\\ = 3Q + 40....(2)[/tex]
compare the above equation (i) and (ii):
[tex]\to 320 -Q = 3Q+40\\\\\to 320 -40 = 3Q+ Q\\\\\to 280 = 4Q\\\\\to 4Q =280 \\\\\to Q= \frac{280}{4}\\\\\to Q= 70 \\[/tex]
One reason for not requiring a balanced federal budget at all times is that with a balanced-budget rule:_________.
a. the distorting features of the tax system are minimized.
b. it is possible to shift the burden of a war from current to future generations.
c. expenditures are not limited because, if the government wants to raise expenditures, it just raises taxes.
d. in a recession the automatic stabilizing powers of our system of taxes and transfers could not work.
Answer:
d. in a recession the automatic stabilizing powers of our system of taxes and transfers could not work.
Explanation:
A balanced government expenditure is when government spending equals government revenue.
most times, the government doesn't have a balanced budget. it either has a surplus or a deficit.
When there is a recession, automatic stabilisers - progressive tax and transfer payment - may not be adequate to lift the economy out of recession. So, the government would have to spend more than it receives from taxes to revive the economy. in this case there would be a deficit
The Federal Reserve and the money supply
Suppose the money supply (as measured by checkable deposits) is currently $400 billion. The required reserve ratio is 20%. Banks hold $80 billion in reserves, so there are no excess reserves. The Federal Reserve ("the Fed") wants to decrease the money supply by $35 billion, to $365 billion. It could do this through open-market operations or by changing the required reserve ratio. Assume for this question that you can use the oversimplified money multiplier formula. If the Fed wants to decrease the money supply using open-market operations, it shouldsell $7 billion worth of U.S. government bonds. If the Fed wants to decrease the money supply by adjusting the required reserve ratio, it shouldincrease the required reserve ratio.
Answer:
1. Sell $7 billion worth of U.S. government bonds
2. Increase the required reserve ratio.
Explanation:
1. If the Fed wants to change the money supply in the economy, it can use the Money Multiplier to determine how much is it has to put in or take out of the economy to increase/decrease the Money supply to a certain level. The Money Multiplier is a figure that shows how much the money supply will increase/ decrease by as a result of an additional dollar put into or removed from the economy.
Formula is;
= 1/ Reserve Ratio
= 1 / 20%
= 5
Federal Reserve wants to decrease supply by $35 billion.
$35 billion = Amount of Bonds to sell * Multiplier
$35 billion = Amount of Bonds to sell * 5
Amount of Bonds to sell = 35/5
Amount of Bonds to sell = $7 billion worth of bonds
2. If the Fed wants instead to use the required reserve ratio to reduce money supply then it should increase the ratio. This way banks will have to keep more money in reserve instead of giving it out as loans. This reduced lending in the economy will lead to less money being created and hence a reduced money supply.
The petty cash fund has a current balance of $ 350, which is the established fund balance. Based on activity in the fund, it is determined that the balance needs to be changed to $ 550. Which journal entry is needed to make this change?
A. No journal entry is needed because this change only involves cash.
B. Debit the Petty Cash account and credit the Cash account for $200.
C. Debit the Cash account and credit the Petty Cash account for $200.
D. Debit the Petty Cash account and credit the Cash account for $550.
Answer:
i think the answer is B. Debit the Petty Cash account and credit the Cash account for $200.
Explanation:
When generating a globalized marketing plan, a Japanese company called Trusco decided to implement a localization strategy when introducing its work and tool products into the Swiss and Canadian markets. In order to reach the new markets, Trusco needed to translate its product packaging, consider the political and economic environments, identify its competitors, and consider other areas of the marketing mix that require additional localization efforts. Which of the following statements matches best with Trusco's experience in generating its marketing plan?
a. Generating worldwide marketing plans requires most companies to communicate one identical message to all global markets.
b. Creating a global marketing plan is a task that can be accomplished with very little effort.
c. Creating a global marketing plan is a complex task.
Answer:
c. Creating a global marketing plan is a complex task.
Explanation:
It is correct to say that creating a global marketing plan is a complex task.
There are several barriers that can spell failure if the international company's strategy is poorly planned.
Therefore, the ideal is to research in depth about the new market to which the organization intends to enter.
In addition to legally adapting to local legislation, the company must analyze and plan to generate local interest in its products and services.
This requires market research that seeks to identify your target audience, what are their particularities, preferences, characteristics and needs.
The set of variables in the marketing mix: price, product, place and promotion, should also be adapted to the location where the company is located, the key to success is adaptation and the strategy aligned with the location.
One of the major criticisms of functionalist theory is that it ____________. a. assumes greater equality leads to a more successful and productive organization b. ignores macro-level factors affecting social organizations c. correctly identifies how informal social networks influence organizations d. tends to gloss over dysfunctions like worker dissatisfaction and alienation e. emphasizes that social groups and organizations are composed of interrelated parts
Answer: D. tends to gloss over dysfunctions like worker dissatisfaction
Explanation:
The correct option is (D) tends to gloss over dysfunctions like worker dissatisfaction and alienation.
Functionalism has come under fire for failing to adequately account for societal change and underestimating the importance of human activity. The main units of study in the functionalist viewpoint are society and its institutions.Functionalism has drawn criticism for underestimating the importance of human activity and for failing to explain social change.What is a criticism of structural functionalism ?The main critique of structural-functionalism is that it is unable to explain why certain social behaviors continue to exist while having no purpose. The primary premise behind. symbolic interactionism is that humans attribute meaning to things based on interactions with others and society.Learn more about functionalist theory https://brainly.com/question/15169486
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Mazie Supply Co. uses the percent of accounts receivable method. On December 31, it has outstanding accounts receivable of $58,000, and it estimates that 5% will be uncollectible. Prepare the year-end adjusting entry to record bad debts expense under the assumption that the Allowance for Doubtful Accounts has: (a) a $986 credit balance before the adjustment. (b) a $290 debit balance before the adjustment.
Answer:
(a) a $986 credit balance before the adjustment.
$2,900 - $986 = $1,914
Dr Bad debt expense 1,914
Cr Allowance for doubtful accounts 1,914
(b) a $290 debit balance before the adjustment.
$2,900 + $290 = $3,190
Dr Bad debt expense 3,190
Cr Allowance for doubtful accounts 3,190
Explanation:
outstanding accounts receivable $58,000 x 5% = $2,900 in bad debt
A company purchased $270,000 in supplies during the year. The supplies account increased by $10,000 during the year to an ending balance of $66,000. For what amount was the adjusting entry to supplies expense?
Answer:
$260,000
Explanation:
Opening balance = Ending balance - Increase in ending balance
=$66,000 - $10,000
=$56,000
Supplies Expenses = Opening balance + Purchases - Closing balance
=$56,000 + $270,000 - $66,000
=$336,000 - $66,000
=$260,000
Therefore, the amount that will be the adjusting entry to supplies expenses is $260,000
Find the following values using the equations and then a financial calculator. Compounding/discounting occurs annually.
a. An initial $500 compounded for 1 year at 6%
b. An initial $500 compounded for 2 years at 6%
c. The present value of $600 due in 1 year at a discount rate of 6%.
d. The present value of $600 due in 2 years at a discount rate of 6%.
Answer:
a) Future Value = $530
b) Future Value = $561.8
c) Present Value =$566.037
d) Present Value =$533.99
Explanation:
FV = PV × (1+r)^n
FV -future Value , r- interest rate,n- number of years , PV-present Value
FV = 500 ×(1.06)^1 =
Future Value = $530
b
FV = 500 × 1.06^2 =
Future Value = $561.8
c) Present Value
PV = FV × (1+r)^(-n)
PV = 600 ×1.06^(-1)=566.037
Present Value =$566.037
d)
PV = FV × (1+r)^(-n)
FV -future Value , r- interest rate,n- number of years , PV-present Value
PV = 600 ×1.06^(-2) = 533.99
Present Value =$533.99
a) Future Value = $530
b) Future Value = $561.8
c) Present Value =$566.037
d) Present Value =$533.99
Gordon purchased real estate for $900,000 and listed title to the property as "Gordon and Fawn, joint tenants with right of survivorship." Gordon predeceases Fawn when the real estate is worth $2,900,000. Gordon and Fawn are brother and sister.
What are the gift and estate tax consequences?
If an amount is zero, enter "0".
a. Gordon made a gift when the real estate was purchased of $_____ to Fawn.
b. Gordon's estate must include $______ as to the property.
c. How would the estate tax consequences change if it was Fawn (not Gordon) who died?
Fawn's estate would include $___0___ as to the property.
Answer:
a. Gordon made a gift when the real estate was purchased of $450,000 to Fawn.
Since Gordon gave 50% of the real estate to his sister as a gift when he purchased it, the gift must be valued at the time it happened ($900,000 x 50%)
b. Gordon's estate must include $2,900,000 as to the property.
Gordon purchased all the real estate by himself, so his estate must include the value of the whole property.
c. How would the estate tax consequences change if it was Fawn (not Gordon) who died?
Fawn's estate would include $0 as to the property.
Since Fawn didn't buy the property, her estate cannot include any amount of it.
Fortune Enterprises is an all-equity firm that is considering issuing $13.5 million of perpetual debt. The interest rate is 10%. The firm will use the proceeds of the bond sale to repurchase equity. Fortune distributes all earnings available to stockholders immediately as dividends. The firm will generate $3 million of earnings before interest and taxes (EBIT) every year into perpetuity. Fortune is subject to a corporate tax rate of 40%. Suppose the personal tax rate on interest income is 55%, and the personal tax rate on equity income is 20%.
What is the annual after-tax cash flow to debt holders under each plan?
a. Debt holders get $0 mil. under the unlevered plan vs. 1.2 mil. under the levered plan
b. Debt holders get $1.2 mil. under the unlevered plan vs. 0.66 mil. under the levered plan
c. Debt holders get $0 mil. under the unlevered plan vs. 0.66 mil. under the levered plan
d. Debt holders get $0 mil. under the unlevered plan vs. 0.6075 mil. under the levered plan
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
The following selected transactions relate to cash collections for a firm that maintains a $100 change fund at all times. Present entries to record the transactions for each of the two days of cash receipts from sales.
(a) Actual cash in cash register, $5,412.36; cash receipts per cash register tally, $5,413.07.
(b) Actual cash in cash register, $3,712.95; cash receipts per cash register tally, $3,712.16.
What will be an ideal response?
Answer:
a, Journal Entries to record transactions
Account Titles Debit Credit
Cash $5,412.36
Cash Short and Over $0.71
($5,413.07 - $5,412.36)
Sales $5,413.07
The actual cash in cash register is debited to cash account and cash receipts per cash register tally is credited to sales account and the balancing figure is debited or credited to Cash short and over account.
b. Journal Entries to record transactions
Account Titles Debit Credit
Cash $3,712.95
Cash Short and Over $0.79
(3,712.95 - 3,712.16)
Sales $3,712.16