How much will an investment in each fund grow to after: (LO 4-5)
a. 1 year?
b. 3 years?
c. 10 years?
Answer:
A. Year 1 = $1036.35
B. Year 3 = $1158.96
C. Year 10 = $1714.08
Explanation:
Given an investment of $1000. The end value of the investment will be equal
to I × (1 - front-end load) × (1 + r - true expense ratio)T
Loaded-Up:
Then add the 12b-1 fee to the operating expenses to obtain the true expense ratio: Expense ratio + (12b-1 fee) = 1% + 0.75% = 1.75%
a. Year 1 = $1000 (1 + 0.06 - 0.0175) = $104.25
b. Year 3 = $1000 (1 + 0.06 - 0.0175)^3 = $113.30
c. Year 10 = $1000 (1 + 0.06 - 0.0175)^10 = $151.62
Economy fund:
a. Year 1 = $1000 * 0.98 (1 + 0.06 - 0.0025) = $1036.35
b. Year 3 = $1000 * 0.98 (1 + 0.06 - 0.0025)^3 = $1158.96
c. Year 10 = $1000 * 0.98 (1 + 0.06 - 0.0025)^10 = $1714.08
Maria, the landlord, refuses to fix a small leak in the roof that was there prior to the current tenant. Juan, the current tenant, has just discovered the leak after a heavy rain. The consequence is that black mold has been forming in the attic for quite some time. Juan still has significant time remaining on his lease. Juan has notified Maria in writing of the mold and leak issue but has received no response. He is concerned about the premises becoming unsafe to live in. It has been 14 days since he emailed her his notification. What are all of Juan’s options if Maria declines to do the repairs? Please discuss all remedies Juan may seek. Please remember to reference the contract and text to support your analysis.
Answer:
Please see answers below
Explanation:
Joan may as well put a call through to Maria in addition to his previous mail. Several remedial options are available to Juan and each has its own merits and demerits. It is proper for the tenant to consider each options carefully and seek legal opinion where necessary. However, if Maria declines to do the repairs, Juan may seek the following remedies
• Repair and deduct remedy . In this type of remedy, a tenant may deduct money that is equivalent of a month's rent to cover the cost of the repair or defect. Rental unit 156 covers a condition whether faulty or substandard rented unit could affect the tenant's health and safety. Since the landlord has refused to do the repair, she is guilty of implied warranty of habitability which includes leak in the roof, gas leak, no running water etc. Also, the tenant may not have to file a lawsuit against the landlord since this type of remedy has legal aid. Other conditions attached in addition to the above are ; the repairs cannot cost more than a month's rent, the tenant cannot use the repair and deduct remedy more that twice in any 12 month period, tenant must have informed the landlord in writing and through calls of the faulty area that requires repair. His family or pets must not be the cause of the faulty area that needed to be repaired etc.
• The abandonment remedy . Here, the tenant could move out of the faulty unit or defective rental unit due to its substandard condition which could affect his health and safety. Where the tenant uses the abandonment remedy judiciously, he is not liable to pay any other rent once he has abandoned or moved out of the defective rental unit. The conditions attached are that; the defects must be serious and directly related to the tenant's health and safety, the tenant or his family must not be the cause of the faulty space that requires repair. Moreover, the tenant must have informed the landlord whether in writing or orally telephone calls of the defects that requires repair.
• The rent withholding remedy. Legally, a tenant could withhold house rent if the landlord fails to take care of serious defects that negates the implied warranty of habitability. Conditions attached to this type of remedy are; the defects to be repaired must have threatened the tenant's safety and wellbeing. Again, the faulty or defective unit must be such that it becomes uninhabitable for the tenant . The tenant, his family or pets must not be the cause of the defects that requires repairs. The tenant must have also notified the landlord either through phone calls on in writing, amongst others.
• The tenant could also file a lawsuit against the landlord to recover the cost expended to fixing the faulty repairs where the landlord was not willing to do so. Conditions that must be met before this option could stand in the court of law are; the rental unit has serious defect that is not safe for living. A housing inspector has inspected the house and found to be short of minimum requirements for habitable place etc. A tenant may seek this type of redress where the option for out of court settlement has failed with the landlord.
DeLong Corporation was organized on January 1, 2017. It is authorized to issue 14,500 shares of 8%, $100 par value preferred stock, and 450,000 shares of no-par common stock with a stated value of $3 per share. The following stock transactions were completed during the first year.
Jan. 10 Issued 84,500 shares of common stock for cash at $6 per share.
Mar. 1 Issued 5,150 shares of preferred stock for cash at $110 per share.
Apr. 1 Issued 23,500 shares of common stock for land. The asking price of the land was $91,000. The fair value of the land was $81,500.
May 1 Issued 84,000 shares of common stock for cash at $5.00 per share.
Aug. 1 Issued 10,000 shares of common stock to attorneys in payment of their bill of $39,500 for services performed in helping the company organize.
Sept.1 Issued 11,500 shares of common stock for cash at $7 per share.
Nov. 1 Issued 2,000 shares of preferred stock for cash at $111 per share.
Journalize the transactions.
Answer:
Jan. 10
Cash $507,00 (debit)
Common Stock $507,00 (credit)
Mar 1
Cash $566,500 (debit)
Preferred Sock $515,000 (credit)
Share Premium : Preferred Stock $51,500 (credit)
April 1
Land $91,000 (debit)
Common Stock $91,000 (credit)
May 1
Cash $420,000 (debit)
Common Stock $420,000 (credit)
Aug 1
Legal Expenses : Attorneys bill $39,500 (debit)
Common Stock $39,500 (credit)
Sept 1
Cash $80,500 (debit)
Common Stock $80,500 (credit)
Nov 1
Cash $222,000 (debit)
Preferred Sock $200,000 (credit)
Share Premium : Preferred Stock $22,000 (credit)
Explanation:
Common Stocks are at no par value:
This means that ,
1.When Common Stocks are Issued, the value is the issue price there is no share premium reserve on it.
2. For consideration paid in Common Stocks, value of stocks would be the same as the cost at initial recognition. For example the Purchase of Land on April 1. Initial recognition is at Asking Price of $91,000. Hence common stocks are issued at $91,000.
Preference Stocks are at $100 par
This means that,
1.Any issue of Preference Stock made in excess of par value is accounted in the Preference Share Premium Reserve.
There is a zero coupon bond currently priced at $521.58. This bond has a par value of $1000 and matures in 9 years. What is the yield to maturity of this bond
Answer:
7.5%
Explanation:
The computation of yield to maturity is shown below:-
Let YTM be i%.
As we know that
Present Value = Face Value ÷ (1 + i)^n
$521.58 = $1,000 ÷ (1 + i)^9
(1 + i)^9 = 1.91725
1 + i = 1.075
i = 7.5%
Therefore for computing the yield to maturity we simply applied the above formula and for more clarification, we have attached the spreadsheet.
The following events occur for The Underwood Corporation during 2021 and 2022, its first two years of operations.
June 12, 2021, Provide services to customers on account for $33,800
September 17, 2021, Receive $19,000 from customers on account
December 31, 2021, Estimate that 40% of accounts receivable at the end of the year will not be received.
March 4, 2022, Provide services to customers on account for $48,800
May 20, 2022, Receive $10,000 from customers for services provided in 2021.
July 2, 2022, Write off the remaining amounts owed from services provided in 2021
October 19, 2022, Receive $39,000 from customers for services provided in 2022.
December 31, 2022, Estimate that 40% of accounts receivable at the end of the year will not be received.
Calculate net accounts receivable at the end of 2021 and 2022.
2021 2021
Total accounts receivable
Less: Allowance for uncollectible acounts
Net accounts receivable
Answer:
The Underwood Corporation
Calculation of the net accounts receivable at the end of 2021 and 2022:
2021 2021
Total accounts receivable $14,800 $9,800
Less: Allowance for uncollectible accounts 5,920 3,920
Net accounts receivable $8,880 $5,880
Explanation:
a) Accounts Receivable:
June 12, 2021: Service Revenue $33,800
Sept. 17, 2021: Cash receipts (19,000)
Dec. 31, 2021: Balance $14,800
March 4, 2022: Service revenue 48,800
May 20, 2022: Cash receipts (10,000)
July 2, 2022: Allowance for (4,800)
Oct. 19, 2022: Cash receipts (39,000)
Dec. 31, 2022: Balance $9,800
b) Allowance for uncollectible accounts:
Dec. 31, 2021: Bad Debts Expense $5,920
July 2, 2022: Accounts Receivable (4,800)
Dec. 31, 2022: Bad Debts Expense 2,800
Dec. 31, 2022: Balance $3,920
c) The allowance for doubtful accounts for The Underworld Corporation for 2022 will record a bad debts expense of $2,800, which represents the adjusting difference between the beginning balance of $5,920, the accounts receivable written off, and the ending balance of $3,920.
The following data were reported by a corporation: Authorized shares 20,000 Issued shares 15,000 Treasury shares 3,000 The number of outstanding shares is:
Answer:
12,000
Explanation:
The following data was reported for an organisation
Authorized shares is 20,000
Issued shares is 15,000
Treasury shares is 3,000
Therefore, the number of outstanding shares can be calculated as follows
Number of outstanding shares= Issued stock-Treasury stock
= 15,000-3,000
= 12,000
Hence the number of outstanding shares is 12,000
The opportunity cost of going to college for a student receiving a scholarship A. is zero because she does not have to pay tuition. B. is the expenses for food and clothing that she purchases while in college. C. is the income that she would have earned if she did not go to college. D. is the risk of dropping out.
Answer:
C. is the income that she would have earned if she did not go to college.
Explanation:
Opportunity cost is the gain to a person that is foregone by selecting one option over all other options available to himself.
Since in the question, it is mentioned that the opportunity cost for students earning a scholarship go to college
So according to the given scenario, the option c is correct
Hence, all the other options are incorrect
Indicate whether the following changes would cause a shift in the demand curve for Product A and, if so, the direction of the shift.
Change Demand curve shift? Direction of shift?
Increase in price of complementary product Yes or No Increase, decrease or N/A
Increase in the price of the Product A Yes or No Increase, decrease or N/A
Launch of effective advertising campaign for Product Yes or No Increase, decrease or N/A
Answer:
yes decrease
No N/A
Yes, Increase
Explanation:
A complementary good is a good that is consumed together. If the price of the complementary good increases, the quantity demanded of the good would decrease. this would lead to a decrease in demand for product A.
an increase in the price of product A, would increase the quantity demanded. an increase in quantity demanded leads to a movement along the demand curve and not a shift of the demand curve
An effective advertising campaign would increase the visibility of the product and increase the demand for the product. an increase in demand leads to an outward shift of the demand curve.
Exercise 16-18 Indigo Inc. presented the following data. Net income$2,410,000 Preferred stock: 52,000 shares outstanding, $100 par, 8% cumulative, not convertible5,200,000 Common stock: Shares outstanding 1/1729,600 Issued for cash, 5/1296,400 Acquired treasury stock for cash, 8/1152,400 2-for-1 stock split, 10/1 Compute earnings per share.
Answer:
EPS = $11.74 per share
Explanation:
earnings per share (EPS) = (net income - preferred dividends) / weighted average shares outstanding
net income = $2,410,000
preferred dividends = 52,000 x $100 x 8% = $416,000
weighted average shares outstanding:
beginning common stocks (29,600 x 257/274) x 2 = 55,527 + (55,527 x 91/365) = 69,370.72new stocks issued (96,400 x 142/274) x 2 = 99,918.25 + (99,918.25 x 91/365) = 124,819.38treasury stocks (-52,400 x 51/274) x 2 = -19,506.57 + (-19,506.57 x 91/365) = -24,369.85total = 169,820.25 ≈ 169,820 weighted stocksEPS = ($2,410,000 - $416,000) / 169,820 stocks = $11.74
Since the dates are a little confusing, I assumed 1/17 for beginning common stocks, 5/12 for issuance of new stocks, 8/11 for acquiring treasury stocks, and 10/1 for stock split. From January 1 to October 1, there are 274 days on a regular 365 day calendar year.
You are thinking of building a new machine that will save you $ 4 comma 000$4,000 in the first year. The machine will then begin to wear out so that the savings decline at a rate of 1 %1% per year forever. What is the present value of the savings if the interest rate is 9 %9% per year?
Answer:
The present value of the savings=$37,064.22
Explanation:
The present value of the savings is the amount that it worths today, this would be done in two stages;
The first stage is to determined the present of the first cash savings as follows:
PV of the first payment = 4,000 × (1.09)^(-1)=3,669.72
Second step is to determine the present value of the declining perpetuity
PV of declining perpetuity. A perpetuity is the series of cash flow occurring for the foreseeable future of years.
A- 4,000, g-negative growth rate = 1%,
interest rate = 9%
PV in year 1 = 4,000× (1-0.09)/(0.09+0.01)
= 36,400
PV in year 0 = 36,400 × (1.09)^(-1) = 33,394.49
The present value of the savings = 33,394.49 + 3,669.72= 37,064.22
The present value of the savings=$37,064.22
Bobby is a self-employed taxpayer reporting his business income on Schedule C (Form 1040 or 1040-SR). Identity thieves gained access to his business checking account and stole $10,000. After completing Form 4684, Casualties and Thefts, where does Bobby report this on his tax return?
Schedule C (Form 1040 or 1040-SR), line 2.
Bobby cannot deduct the loss.
Form 4797, line 14.
Schedule A (Form 1040 or 1040-SR), line 16.
Answer:
Bobby cannot deduct the loss
Explanation:
Bobby cannot claim deductions for theft on his property because from 2018 to 2025 they are not allowed as itemized deductions unless they are federally declared disasters in which case he would still need to have to complete the form 4684 and use the form 1040 schedule A to report his claims
Western Electric has 26,000 shares of common stock outstanding at a price per share of $67 and a rate of return of 13.60 percent. The firm has 6,700 shares of 6.60 percent preferred stock outstanding at a price of $89.00 per share. The preferred stock has a par value of $100. The outstanding debt has a total face value of $368,000 and currently sells for 105 percent of face. The yield to maturity on the debt is 7.72 percent. What is the firm's weighted average cost of capital if the tax rate is 35 percent?
Answer:
Weighted average cost of capital= 11.03%
Explanation:
The weighted average cost of capital (WACC) is the average cost of all the various sources of long-term finance used by a business weighted according to the proportion which each source of finance bears to the the entire pool of fund.
To calculate the weighted average cost of capital, follow the steps below:
Step 1: Calculate cost of individual source of finance:
Cost of Equity= 13.6%
After-tax cost of debt:
= (1- T) × before-tax cost of debt
= 7.72%× (1-0.35)= 5.018 %
Cost of preferred stock costs
= Div/Price × 100 = (6.60%× 100)/89× 100 =7.42%
Step 2 : Market value of all the sources of funds
Equity = $67×26,000 =1,742,000
Preferred stock = 89.00 × 6,700 = $596,300
Debt- 105/100 × 368,000 = $386,400
Step 3; Work out weighted average cost of capital (WACC)
Source Cost Market value Cost × Market value a b c b× c
Equity 13.6% $1,742,000 236,912
Preferred stock 7.42% $596,300 = 44,245.46
Debt 5.018 % 386400 = 19,389.55
Total 2,724,700 300,547.01
WACC = (300,547.01/ 2,724,700) × 100 = 11.03%
Weighted average cost of capital= 11.03%
You purchased 200 shares of ABC common stock on margin at $50 per share. Assume the initial margin is 50% and the maintenance margin is 30%. You will get a margin call if the stock drops below what price? (Assume the stock pays no dividends, and ignore interest on the margin loan.)
Answer:
Margin call will be obtained if the stock price drops below $35.71
Explanation:
Here in this question, we start by calculating the maintenance margin
Mathematically;
Maintenance margin = Equity/market value
From the question, maintenance margin= 30%
= 30/100 = 0.3
Let the unknown price be P.
Thus, the market value of the 200 shares at price P is 200p
Hence;
0.3 = (200 * p - purchased stock value * initial margin)/200p
0.3 * 200p = 200p - 200(0.5 * 50)/200p
0.3 * 200p = 200p - 5000
60p = 200p -5000
140p = 5000
p = 5000/140
p = $35.71
The crowding-out effect refers to the possibility that:
a. a deficit, financed by borrowing in the capital markets, will increase the interest rate and reduce investment in the private sector.
b. an increase in the supply of money will induce a decline in real spending.
c. when used simultaneously, expansionary fiscal and monetary policies are counter-productive.
d. the speculative demand for money varies inversely with the interest rate.
Answer:
a. a deficit, financed by borrowing in the capital markets, will increase the interest rate and reduce investment in the private sector.
Explanation:
Crowding out effect is when government borrowing from the capital markets leads to an increase in interest rate. this makes it more expensive for private sector to borrow and this reduces investment by private sector
A corporate bond pays 3% of its face value once per year. If this $4 comma 000 10-year bond sells now for $4 comma 450, what yield will be earned on this bond? Assume the bond will be redeemed at the end of 10 years for $4 comma 000.
Answer:
The answer is 1.76%
Explanation:
N(Number of periods) = 10 years
I/Y(Yield to maturity) = ?
PV(present value or market price) = $4,450
PMT( coupon payment) = $120 (7 percent x $4,000)
FV( Future value or par value) = $4,000.
We are using a Financial calculator for this.
N= 10; PV = -4,450; PMT = 120; FV= 4,000;
CPT I/Y= 1.76
Therefore, the Yield-to-maturity of the bond is bond is 1.76%
Why do mobile phone manufacturers (Apple, Google, and BlackBerry) want to track where their customers go?
Answer:
The cell phone manufacturers (Apple, Google, and BlackBerry) want to track where their customers go because they collect this data for advertising and marketing purposes. ... It does so by connecting to a cellular network provided by a mobile phone operator, allowing access to the public telephone network.
i think hope it helps
Explanation:
Small groups of consumers that interact with products or services and give their feedback based on their experiences are known as?
A. Test subjects
B. Focus group
C. Market research audiences
D. Survey takers
Answer:
B. Focus group
Explanation:
Use series of elimination on this one.
Test subjects- No
Market Research Audience- Those are people that watch the tests that you will conduct with your focus group.
Survey takers- Too simple.
Hope that I could help you!
Small groups of consumers that interact with products or services and give their feedback based on their experiences are known as Focus group. Option (b) is correct.
What do you mean by Product?Any good or service you offer to satisfy a customer's need or desire is a product. There are both real and virtual ones. Durable things (such as automobiles, furniture, and computers) and nondurable items are examples of physical products (like food and beverages).
A focus group is a market research technique that involves gathering 6–10 individuals in a space to offer input on a certain commodity, concept, or marketing campaign.
Therefore, Option (b) is correct. Small groups of consumers that interact with products or services and give their feedback based on their experiences are known as Focus group.
Learn more about Product, here;
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Under the equity method of accounting for investments, an investor recognizes its share of the earnings in the period in which the:_________.
a. investor sells the investment
b. investee declares a dividend
c. investee pays a dividend
d. earnings are reported by the investee in its financial statements
Answer: Earnings are reported by the investee in its financial statements
Explanation:
Equity method is when investments are being treated in associate companies and it is usually applied in cases whereby an investor entity holds about twenty to fifty percent of the associate company's voting stock. Due to this reason, it has a strong say in the associate company's management.
Under the equity method of accounting for investments, an investor recognizes its share of the earning in the period in which the earnings are reported by the investee in its financial statements.
On April 29, Welllington Co. paid $1,760 to repair the transmission on one of its delivery vans. In addition, Welllington paid $52 to install a GPS system in its van.
Journalize the entries for the transmission and GPS system expenditures. Refer to the Chart of Accounts for exact wording of account titles.
CHART OF ACCOUNTSGarcia Associates Co.General Ledger
ASSETS
110 Cash
111 Petty Cash
112 Accounts Receivable
114 Interest Receivable
115 Notes Receivable
116 Merchandise Inventory
117 Supplies
119 Prepaid Insurance
120 Land
123 Delivery Van
124 Accumulated Depreciation-Delivery Van
125 Equipment
126 Accumulated Depreciation-Equipment
130 Mineral Rights
131 Accumulated Depletion
132 Goodwill
133 Patents
LIABILITIES
210 Accounts Payable
211 Salaries Payable
213 Sales Tax Payable
214 Interest Payable
215 Notes Payable
EQUITY
310 Owner, Capital
311 Owner, Drawing
312 Income Summary
REVENUE
410 Sales
610 Interest Revenue
620 Gain on Sale of Delivery Van
621 Gain on Sale of Equipment
EXPENSES
510 Cost of Merchandise Sold
520 Salaries Expense
521 Advertising Expense
522 Depreciation Expense-Delivery Van
523 Delivery Expense
524 Repairs and Maintenance Expense
529 Selling Expenses
531 Rent Expense
532 Depreciation Expense-Equipment
533 Depletion Expense
534 Amortization Expense-Patents
535 Insurance Expense
536 Supplies Expense
539 Miscellaneous Expense
710 Interest Expense
720 Loss on Sale of Delivery Van
721 Loss on Sale of Equipment
Answer:
April 29,
DR Accumulated Depreciation - Delivery Van $1,760
CR Cash $1,760
(To record repair of van)
April 29,
DR Delivery Van $52
CR Cash $52
(To record installation of GPS system in Van)
Explanation:
The transmission being faulty in the Van is part of the depreciation of the van and so when it is fixed, it reduces the depreciation of the van. The amount needs to be debited to the Accumulated Depreciation Account to signal that it is a reduction.
Installing a new GPS in a Van is an additional benefit to the van that will last for a period of more than a year hence it should be capitalised and added to the cost of the Delivery Van.
Darth Company sells three products. Sales and contribution margin ratios for the three products follow: Given these data, the contribution margin ratio for the company as a whole would be:
Answer: A. 25%
Explanation:
The Contribution margin for the whole company = [tex]\frac{Total Contribution Margin Amounts}{Total Sales}[/tex]
Total Contribution Margin = (0.45 * 25,000) + (0.4 * 40,000) + ( 0.15 * 100,000)
= 9,000+16,000+15,000
= $40,000
Total Sales = 20,000+40,000+100,000
= $160,000
Contribution Margin for the whole Company = [tex]\frac{40,000}{160,000}[/tex]
= 25%
CakeCo, Inc. has three operating departments. Information about these departments is listed below. Maintenance is service department at CakeCo that incurred $20,400 of costs during the period. If allocated maintenance cost is based on floor space occupied by each of the operating departments, compute the amount of maintenance cost allocated to the Baking Department.
Mixing Baking Packaging
Direct costs $ 36,000 $ 30,000 $ 24,000
Sq. ft. of space 2,500 3,750 1,250
a. $272.
b. $816.
c. $10,000.
d. $13,950.
e. $10,200.
Answer: e. $10,200.
Explanation:
Total Square ft. of space;
= 2,500 + 3,750 + 1,250
= 7,500 Sq. ft. of space
Baking Department occupies 3,750 ft² of that space so it will be apportioned a cost of;
= Proportion * total cost
= 3,750/7,500 * 20,400
= $10,200
Consider the following $1,000 par value zero-coupon bonds: Bond Years to Maturity Yield to Maturity A 1 6.00 % B 2 7.00 % C 3 7.99 % D 4 9.41 % E 5 10.70 % The expected 1-year interest rate 4 years from now should be _________.
Answer:
16.01%
Explanation:
The expected 1-year interest rate 4 years from now is determined using the below formula:
The expected 1-year interest rate 4 years=(1+YTM5)^5/(1+YTM4)^4-1
YTM5 is the yield to maturity in year 5 i.e 10.70%
YTM4 is the yield to maturity in year 4 i.e 9.41%
The expected 1-year interest rate 4 years=(1+10.70%)^5/(1+9.41%)^4-1
The expected 1-year interest rate 4 years=16.01%
The value of a listed call option on a stock is lower when: I. The exercise price is higher. II. The contract approaches maturity. III. The stock decreases in value. IV. A stock split occurs.
Answer: a. I, II, and III only
Explanation:
The exercise price refers to the amount that the person who buys the call option will get to buy the underlying stock at. If this price is high, the profit from buying the stock at maturity will be less so the value of the listed call option reduces.
As the contract approaches maturity, the value will decrease because it will be less volatile as it approaches maturity.
The purpose of buying a call option is so that a profit can be made if the underlying stock increases in value. If the stock decreases in value, the allure of the call option decreases so therefore will the value.
A call bond option is termed as the option that implies the bondholder the right to purchase the bonds at the prevailing price in the market. A buyer of a bond call option in the secondary market forecasts a drop in investment substantial rise in bond prices.
The correct option is a. I, II, and III only
Option a. I, II, and III only is correct because The contract value will decline as it reaches maturation because it will become less unpredictable.
The goal of purchasing a call option is to benefit if the price of the underlying stock rises. The attractiveness of the callable bond falls as the price of bitcoin declines, and the worth of the call option reduces as well.
The exercise price is the price where the individual who acquires a call option will be able to acquire the underlying shares. If this price is too high, the benefit from buying the stock at maturity will be too little, diminishing the value of the specified call option.
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Assume that on September 1, Office Depot had an inventory that included a variety of calculators. The company uses a perpetual inventory system. During September, these transactions occurred.
Sept. 6 Purchased calculators from Green Box Co. at a total cost of $1,620, terms n/30.
9 Paid freight of $50 on calculators purchased from Green Box Co.
10 Returned calculators to Green Box Co. for $38 credit because they did not meet specifications.
12 Sold calculators costing $520 for $690 to University Book Store, terms n/30.
14 Granted credit of $45 to University Book Store for the return of one calculator that was not ordered. The calculator cost $34.
20 Sold calculators costing $570 for $760 to Campus Card Shop, terms n/30.
Required:
Journalize the September transactions.
Answer and Explanation:
The journal entries are shown below:
1. Merchandise Inventory $1,620
To Accounts Payable $1,620
(Being the calculators purchased on account)
2. Merchandise Inventory $50
To Cash $50
(Being freight expenses paid for cash)
3. Accounts Payable $38
To Merchandise Inventory $38
(being the returned inventory is recorded)
4. Accounts Receivable $690
To Sales Revenues $690
(Being the sales is recorded)
Cost of Goods Sold $520
To Merchandise Inventory $520
(Being the cost is recorded)
5. Sales returns $45
To Accounts Receivable $45
(being the sales return is recorded)
Merchandise Inventory $34
To Cost of Goods Sold $34
(Being the cost of returned is recorded)
6. Accounts Receivable $760
To Sales Revenues $760
(being the sale is recorded)
Cost of Goods Sold $570
To Merchandise Inventory $570
(Being the cost is recorded)
Brown Industries has a debt-equity ratio of 1.5. Its WACC is 9.6 percent, and its cost of debt is 5.7 percent. There is no corporate tax. a. What is the company's cost of equity capital
Answer:
Cost of equity capital is 0.122 or 12.2%
Explanation:
The WACC or weighted average cost of capital is the cost of a company's capital structure. The capital structure may contain one, two or all of the following components namely debt, preferred stock and common equity. The WACC is calculated by taking the weighted average of the each components cost.
WACC = wD * rD * (1 - tax rate) + wP * rP + wE * rE
Where,
w represents the weight of each componentr represents the cost of each componentD, P and E represent debt, preferred stock and common equity respectivelyTo calculate the cost of equity capital, we first need to find out the weight of each component in the capital structure.
debt to equity = 1.5
So, debt = 1
equity = 1.5
Total assets = 1 + 1.5 = 2.5
wD = 1/2.5 = 0.4
wE = 1.5/2.5 =0.6
Using the WACC formula,
0.096 = 0.4 * 0.057 + 0.6 * rE
0.096 = 0.0228 + 0.6 * rE
0.096 - 0.0228 = 0.6 * rE
0.0732 / 0.6 = rE
rE = 0.122 or 12.2%
Ross Island Co. issues 10,000 shares of no-par value preferred stock for cash at $120 per share. The journal entry to record the transaction will consist of a debit to Cash for $1,200,000 and a credit (or credits) to:
Answer:
Please see answer below
Explanation:
The journal entry to record the issuance of 10,000 shares of no-par value preferred stock for cash at $120 per shares has a debit to cash and a credit to preferred stock for $1,200,000 ( 10,000 shares × issue price of $120 per share )
The founder of Alchemy Products, Inc., discovered a way to turn lead into gold and patented this new technology. He then formed a corporation and invested $200,000 in setting up a production plant. He believes that he could sell his patent for $50 million.
a. What are the book value and market value of the firm?
b. If there are 1 million shares of stock in the new corporation, what would be the price per share and the book value per share?
Answer:
Book Value is $0.2 million
Market Value is $50 million
Book Value per share is $0.2 per share
Market Value per share is $50 per share
Explanation:
Part A. The book value of Alchemy Products Inc., is $0.2 million and its market value is $50 million.
Part B.
The Book value per share of Alchemy Products Inc., is calculated as under:
Book Value per share = $0.2 million / 1 Million shares = $0.2 per share
The Market value per share of Alchemy Products Inc., is calculated as under:
Market Value per share = $50 million / 1 Million shares = $50 per share
Coolibah Holdings is expected to pay dividends of $ 1.00 every six months for the next three years. If the current price of Coolibah stock is $ 21.90, and Coolibah's equity cost of capital is 14%, what price would you expect Coolibah's stock to sell for at the end of three years?
Answer: The price that would be expected for Coolibah's stock to sell for at the end of three years is $28.87
Explanation: It should be noted that to calculate a price that would be expected in Coolibah's stock to sell for at the end of three years can be calculated using financial calculator:
A) Using a financial calculator, PV = -$22.60 , PMT = $1.20, n = 6, I = 18% / 2;
calculate FV = $28.87 .
"In preparing the direct materials budget for Quan Company, management concludes that required purchases are 64,000 units. If 52,000 direct materials units are required in production and there are 9,000 units of beginning direct materials, what is the desired units of ending direct materials
Answer:
desired ending inventory= 21,000
Explanation:
Giving the following information:
In preparing the direct materials budget for Quan Company, management concludes that required purchases are 64,000 units. If 52,000 direct materials units are required in production and there are 9,000 units of beginning direct material.
To calculate the desired ending inventory, we need to use the following formula:
Purchases= production + desired ending inventory - beginning inventory
desired ending inventory= purchases - production + beginning inventory
desired ending inventory= 64,000 - 52,000 + 9,000
desired ending inventory= 21,000
A growing population encourages economic growth as it creates a larger workforce. Suppose a surge in immigration increases a country's total population and its overall economic output increases. As a result, the country's real GDP increases from $304,000 to $316,500. What is the percent change in real GDP
Answer:
4.11%
Explanation:
the percentage change in real GDP = [(new real GDP - old real GDP) / old real GDP] x 100 = [($316,500 - $304,000) / $304,000] x 100 = 4.11%
Generally a surge in immigration will result in both higher nominal and real GDP, but what should be more important is how real GDP per capita changes. If real GDP per capita increases, then the inflow was positive and made the economy grow for better. If real GDP per capita decreases, even if total real GDP increases, then the economy is not doing better.
What is the approximate yield to maturity and the exact yield to maturity (use a calculator) for the $1,000 semi-annual bond? Assume this is issued in the United States: 10 years to maturity, 6 percent coupon rate, current price is $950.
Answer:
6.67% and 6.694%
Explanation:
The computation of the approximate yield to maturity and the exact yield to maturity is shown below:
For Approximate yield to maturity it is
= 2 × ((Face value - current price) ÷ (2 × time period) + face value × coupon rate ÷ 2) ÷ (Face value + current price) ÷ 2)
=2 × (($1,000 - $950) ÷ (2 × 10) + $1,000 × 6% ÷ 2) ÷ (($1,000 + $950) ÷ 2)
= 6.67%
Now
the Exact yield to maturity is
= RATE(NPER,PMT,-PV,FV)
= RATE (10 × 2, 6% × $1000 ÷ 2,-$950,$1,000) × 2
= 6.694%