Answer:
Its basic earnings per share is $2.75
Explanation:
Basic Earnings Per Share (BEPS) = Earnings Attributable to Holders of Common Stocks ÷ Weighted Average of Common Stocks Outstanding
= $687,500 ÷ 250,000 shares
= $2.75
Raggs, Ltd. a clothing firm, determines that in order to sell x suits, the price per suit must be pequals180 minus 0.5 x. It also determines that the total cost of producing x suits is given by Upper C (x )equals5000 plus 0.75 x squared. a) Find the total revenue, Upper R (x ). b) Find the total profit, Upper P (x ). c) How many suits must the company produce and sell in order to maximize profit? d) What is the maximum profit? e) What price per suit must be charged in order to maximize profit?
Answer:
Explanation:
(a) R(x) = x(150 - 0.75x) => 150x - 0.75x²
(b) P(x) = R(x) - C(x) => 150x - 0.75x² - (2000 + 0.75x²)
so, P(x) = 150x - 2000 - 1.5x²
(c) Now, P '(x) = 150 - 3x = 0....at maximum
i.e. when x = 50 suits
(d) P(50) = 150(50) - 2000 - 1.5(50)²
=> 7500 - 2000 - 3750
i.e. £1750
(e) price --> 150 - 0.75(50) => 150 - 37.5
Hence, price per suit is £112.50 in order to maximise profits.
Allowance for Doubtful Accounts has a credit balance of $2,100 at the end of the year (before adjustment), and an analysis of customers' accounts indicates uncollectible receivables of $19,700. Which of the following entries records the proper adjustment for bad debt expense?
a. debit Bad Debt Expense, $21,800; credit Allowance for Doubtful Accounts, $21,800
b. debit Allowance dfor Doubtful Accounts, $17,600; credit Bad Debt Expense, $17,600
c. debit Allowance for Doubtful Accounts, $21,800; credit Debt Expense, $21,800
d. debit Bad Debt Expense, $17,600; crdit Allowance for Doubful Accounts, $17,600
Other receivables includes all of the followoing EXCEPT:
a. taes receivable
b. interest receivable
c. receivables from employees
d. notes receivabe
Answer:
1. Analysis of accounts receivables Allowance Required $19,700
Less: Credit balance available in Allowance account $2,100
Additional allowance required $17,600
The journal entry will be as follows
DEBIT CREDIT
Bad debt expenses $17,600
Allowance for doubtful accounts $17,600
Hence, the correct option is D.
2. Other receivables include all except "Notes Receivables"
Hence, the correct option is D
Crocetti Corporation makes one product and has provided the following information to help prepare the master budget for the next four months of operations: Budgeted selling price per unit $ 121 Budgeted unit sales (all on credit): January 7,000 February 7,500 March 11,900 April 14,900 Credit sales are collected: 40% in the month of the sale 60% in the following month The budgeted accounts receivable balance at the end of February is closest to:
Answer:
The budgeted accounts receivable balance at the end of February is closest to: $4,500.
Explanation:
Prepare a Accounts Receivable Budget for January and February
January February
Balance b/d $0 $4,200
Credit Sales $7,000 $7,500
Cash Received (40%) ($2,800) ($3,000)
Cash Received (60%) $0 ($4,200)
Balance c/d $4,200 $4,500
Conclusion:
Therefore, the budgeted accounts receivable balance at the end of February is closest to: $4,500
The risk-free rate of return is 3.2 percent and the market risk premium is 6.1 percent. What is the expected rate of return on a stock with a beta of 1.19? (round answer to whole number with two decimal points: i.e., use 1.23 percent instead of 0.0123)
Answer:
10.46%
Explanation:
The risk-free rate of return is 3.2%
The market risk premium is 6.1%
The stock beta is 1.19
Therefore, the expected rate of return on the stock can be calculated as follows
Rate of return= Risk-free rate+beta(market Risk premium)
= 3.2% + 1.19×6.1%
= 3.2% + 7.259
= 10.46%
Hence the expected rate of return on the stock is 10.46%
Marley Investments, Inc. purchased 45% of the common stock of Beige Corporation on January 1, 2019, Beige Corporation reports a net income of $700,000 for the 2019 year.
Which of the following is the correct journal entry?
A. Equity Investments-Beige Corporation 315,000
Revenue from Investments 315,000
B. Revenue from Investments 315,000
Cash 315,000
C. Revenue from Investments 315,000
Cash 315,000
D. Revenue from Investments 315,000
Equity Investments-Beige Corporation 315,000
Answer:
A.
Debit Equity Investments-Beige Corporation 315,000
Credit Revenue from Investments 315,000
Explanation:
In the given scenario Marley Investment is purchasing 45% of common stock of Beige Corporation
Revenue for the year is $700,000
So the cost of purchase will be 0.45 * 700,000 = $315,000
Since Marley Investment is making an investment in Beige shares, it will debit it's Equity Investment for this amount ($315,000)
Equity investment are costs incurred when a business purchases securities.
After purchase of the shares the revenue can now be recognised by crediting the Revenue from Investment account.
Marley Investment is now a stakeholder in Beige Corporation
If a company produces the same number of units per period over an asset's useful life, each period's depreciation expense using the straight-line method will be the same as that recorded using the units-of-production method.
A. True
B. False
Answer:
The answer is true.
Explanation:
Straight-line method of depreciation spreads the depreciation cost evenly over the life of the asset. The amount of depreciation is the same year in year out. It can be calculated as follows:
(Cost of the asset - residual value) ÷ number of useful life of the asset.
While units-of-production method is almost the same as the straight-line method. It is calculated as:
(Cost of the asset - residual value) ÷ expected number of units of production throughout the useful life of the asset.
Since the number of units of production will be same throughout the life span of the asset, the depreciation expense will also be the same
BPO Services is in the business of digitizing information from forms that are filled out by hand. In 2006, a big client gave BPO a distribution of the forms that it digitized in house last year, and BPO estimated how much it would cost to digitize each form. Form Type Mix of Forms Form Cost A 0.5 $3.75 B 0.5 $1.25 The expected cost of digitizing a form is $ . Suppose the client and BPO agree to a deal, whereby the client pays BPO to digitize forms. The price of each form processed is equal to the expected cost of the form that you calculated in the previous part of the problem. Suppose that after the agreement, the client sends only forms of type A. The expected digitization cost per form of the forms sent by the client is $ . This leads to an expected loss of $ per form for BPO. (Hint: Do not round your answers. Enter the loss as a positive number.)
Answer:
BPO Servicesa. The expected cost of digitizing a form is $2.50
b. The expected digitization cost per form of the forms sent by the client is $3.75, without a mix of forms.
c. This leads to an expected loss of $1.25 per form for BPO.
Explanation:
1. Data:
Form Type Mix of Forms Form Cost
A 0.5 $3.75
B 0.5 $1.25
b. Calculation of Expected Cost of digitizing a form:
Form Type Mix of Forms Form Cost Expected Cost
A 0.5 $3.75 $1.875 (0.5 * $3.75)
B 0.5 $1.25 $0.625 (0.5 * $1.25)
Total expected costs $2.50
c. Calculation of Expected cost of Form actually sent by Client without a mix of forms:
A 01 $3.75 $3.75 (1 * $3.75)
Total expected costs $3.75
d. Calculation of Expected Loss:
Expected Price = $2.50
Expected cost = $3.75
Expected loss = $1.25
e. The expected value (cost, price, or gain or loss) from the form digitization is the sum of all possible values from the mix of forms, each multiplied by the probability of its occurrence.
Sally goes to Honest Harry's used car lot to purchase a car. After test driving the car, she sits down to negotiate the contract. She asks about a warranty and Harry says that all cars that he sells come with a 30 day unconditional warranty on all parts and labor. She signs the contract and the next day the engine blows a rod. When she calls Harry she's told that there is no warranty according to the contract. She reads her contract and it says "as is"
Answer:
Sally can do very little in this case due to the parol evidence rule. In common law, the parol evidence rule limits what type of evidence one party can use in a court in order to support their arguments. In this case, Sally cannot present the evidence of an oral contract because it was previous to the signing of the written contract. This rule doesn't allow certain older evidence to be presented in order to support a change of an existing contract.
I.e. an individual cannot try to change the terms of a contact once they have been signed just because in older contracts certain parts were different.
how much would you have to earn each month to cover your living expense
Answer:
about $4,100 a month
Explanation:
Process A has fixed costs of $1000 and variable costs of $5 per unit. Process B has fixed costs of $500 and variable costs of $7.50 per unit. What is the crossover point between process A and process B? 50 units 250 units $9,500 $5,000 200 units
Answer:
200 units
Explanation:
The computation of the crossover point between process A and process B is shown below:
Let us assume the cross over point be x
We made a question i.e given below:
Total Cost of A = Total Cost of B
$1,000 + 5x = $500 +7.50x
$1,000 - $500 = 7.50x - 5x
$500 = 2.5x
So, the x is 200 units
Hence, the cross over point is 200 units by applying the above formula so that the correct units could arrive
200 units are the correct option
When we computation of the crossover point between process A and process B is shown below:
ComputationLet us assume the cross over point be x
Total Cost of A = Total Cost of B
Then $1,000 + 5x = $500 +7.50x
Then $1,000 - $500 = 7.50x - 5x
Now $500 = 2.5x
So, the x is 200 units
Hence, the cross over point is 200 units by applying the above formula so that the correct units could arrive.
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se the following information for Jett Co. to answer the following question: 2015 2014 Sales 1,200 1,000 COGS 850 700 Operating Expenses 200 200 Income Taxes 30 35 Jett Co.'s gross profit, operating profit and net profit margins for 2015 are: A. 50.0%, 32.5%, 22.5% respectively. B. 29.2%, 12.5%, 10.0%, respectively. C. 27.0%, 11.0%, 10.5%, respectively. D. 21.5%, 17.5%, 12.0%, respectively.
Answer:
B. 29.2%, 12.5%, 10.0%
Explanation:
Gross Profit = Sales - Cost of goods sold / Sales
Gross Profit = $1,200 - $850 / $1,200
Gross Profit = $350 / $1,200
Gross Profit = 0.2917
Gross Profit = 29.17%
Operating profit = Sales - Cost of goods sold - Operating Expenses / Sales
Operating profit = $1,200 - $850 - $200 / $1,200
Operating profit = $150 / $1,200
Operating profit = 0.125
Operating profit = 12.5%
Net profit margin = Sales - Cost of goods sold - Income Taxes / Sales
Net profit margin= $1,200 - $850 - $200 - $30 / $1,200
Net profit margin $120 / $1,200
Net profit margin= 0.1
Net profit margin= 10%
Two investment advisers are comparing performance. One averaged a 21% rate of return and the other a 18% rate of return. However, the beta of the first investor was 1.4, whereas that of the second investor was 1. a. Can you tell which investor was a better selector of individual stocks (aside from the issue of general movements in the market)? First investor Second investor Cannot determine b. If the T-bill rate was 7% and the market return during the period was 13%, which investor would be considered the superior stock selector? Second investor First investor Cannot determine c. What if the T-bill rate was 4% and the market return was 17%? First investor Second investor Cannot determine
Goodard Inc. planned to use $156 of material per unit but actually used $147 of material per unit, and planned to make 1,140 units but actually made 900 units. The sales−volume variance for materials is ________.
Answer:
2700, favorable
Explanation:
To calculate the sales-volume variance for materials, we use the equation as follows;
Sales-volume variance for materials = (Actual Price - Standard Price)*Aqual Quantity
sales-volume variance for materials = (147-150)*900
sales-volume variance for materials = 2700 Favorable
Greenbrier Industrial Products' bonds have a 7.60 percent coupon and pay interest annually. The face value is $1,000 and the current market price is $1,062.50 per bond. The bonds mature in 16 years. What is the yield to maturity
Answer:
6.9%
Explanation:
To find the answer, you have to use the formula to calculate the yield to maturity:
Yield to maturity= (C+(F-P/n))/(F+P/2), where:
C= Coupon payment= $1,000*7.60%= $76
F= Face value= $1,000
P= Price= $1,062.50
n= Years to maturity= 16
Yield to maturity=(76+(1,000-1,062.50/16))/(1,000+1,062.50/2)
Yield to maturity=72,09/1,031.25
Yield to maturity=0.069 → 6.9%
Accoriding to this, the yield to maturity is 6.9%.
The five major decisions addressed by logistics managers are A. transportation, warehousing, location, reverse logistics, and third-party logistics. B. location, transportation, warehousing, reverse logistics, and tactical. C. strategic, third-party logistics, warehousing, transportation, and location. D. None of the above answers is entirely correct.
Answer:
C. strategic, third-party logistics, warehousing, transportation, and location.
Explanation:
A logistics manager is an individual who is saddled with the responsibility of the entire or overall supply chain management of goods produced by an organization. They are usually responsible for the distribution and supply of goods through out the manufacturing and finished process of delivering to final consumers.
The five major decisions addressed by logistics managers are
1. Strategic.
2. Third-party logistics.
3. Warehousing.
4. Transportation.
5. Location.
If actual overhead incurred during a period exceeds applied overhead, the difference will be a credit balance in the Factory Overhead account at the end of the period.
True or False
Answer:
faslee
Explanation:
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The Cash account in the ledger of Clear Windows shows a balance of $12,596 at September 30. The bank statement, however, shows a balance of $16,253 at the same date. The only reconciling items consist of a bank service charge of $16, a large number of outstanding checks totaling $6,740, and a deposit in transit. Refer to the information above. What is the adjusted cash balance in the September 30 bank reconciliation
Answer:
Adjusted Cash Balance $ 12,596
Explanation:
September 30 Cash account balance$12,596
September 30 Bank statement, balance $16,253
September 30 Difference in balances $3657
Clear Windows
Bank Reconciliation Statement
September 30 Bank statement, balance $16,253
less Outstanding checks $6,740,
Less Bank service charge $16,
Add Deposit in Transit $ 3099
September 30 Cash account balance $ 12,596
Adjusted Cash Balance is the same as the cash book balance.
We start from the bank balance , dot the necessary adjustments and get the same cash book balance.
The rate of return on the common stock of Lancaster Woolens is expected to be 18 percent in a boom economy, 8 percent in a normal economy, and only 2 percent in a recessionary economy. The probabilities of these economic states are 12 percent for a boom and 10 percent for a recession. What is the variance of the returns on this common stock
Answer:
Variance of the return on this common stock is 0.15%
Explanation:
Note: See the attached excel file for the calculation of the variance of the returns on this common stock.
Note that the probability of a normal economy can be obtained as follows:
Probability of normal economy = 100% - Probability of a boom - Probability of a recession = 100% - 12% - 10% = 78%
These probabilities are used in the attached excel file.
Health and Wealth Company is financed entirely by common stock that is priced to offer a 12 percent expected return. If the company repurchases 20 percent of the common stock and substitutes an equal value of debt yielding 8 percent, what is the expected return on the common stock after refinancing
Answer: 13%
Explanation:
By substituting 20% of debt for debt yielding 8%, the company now has 20% financing from debt and 80% from equity.
The expected return on common stock after refinancing can be calculated by;
Return after refinancing = Return before refinancing + [tex]\frac{Debt}{Equity}[/tex](return before refinancing - Debt yield)
= 12% + [tex]\frac{0.2}{0.8} (0.12 - 0.08)[/tex]
= 13%
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 selected accounts and amounts for the month of August.
Cash $25,330 Dividends $5,960
Accounts receivable 22,330 Consulting fees earned 26,970
Office supplies 5,210 Rent expense 9,510
Land 43,980 Salaries expense 5,580
Office equipment 19,970 Telephone expense 840
Accounts payable 10,730 Miscellaneous expenses 490
Common stock 101,500
Required:
Use the above information to prepare an August 31 balance sheet
Answer:
Help Today
Balance Sheet
For the month ended August 31, 202x
Assets:
Cash $25,330
Accounts receivable $22,330
Office supplies $5,210
Land $43,980
Office equipment $19,970
Total assets: $116,820
Liabilities and stockholders' equity:
Accounts payable $10,730
Common stock $101,500
Retained earnings $4,590
Total liabilities and stockholders' equity: $116,820
Explanation:
Income statement:
Consulting fees earned $26,970
Rent expense $9,510
Salaries expense $5,580
Telephone expense $840
Miscellaneous expenses $490
Net income $10,550
Retained earnings = net income - dividends = $10,550 - $5,960 = $4,590
Required information [The following information applies to the questions displayed below.] Hudson Co. reports the contribution margin income statement for 2017. HUDSON CO. Contribution Margin Income Statement For Year Ended December 31, 2017 Sales (11,500 units at $225 each) $ 2,587,500 Variable costs (11,500 units at $180 each) 2,070,000 Contribution margin $ 517,500 Fixed costs 360,000 Pretax income $ 157,500 1. Compute Hudson Co.'s break-even point in units and. 2. Compute Hudson Co.'s break-even point in sales dollars.
Answer:
1) Break-even point in units =8000 units
2) Break-even point (sales) = $1,800,000
Explanation:
Break-even point is the level of activity at which a firm must operate such that its total revenue will equal its total costs. At this point, the company makes no profit or loss because the total contribution exactly equals the total fixed costs.
Break even point in units is calculated using this formula:
Break even point in units = Total general fixed cost/ (selling price - Variable cost)
Break-even point in units = 360,000/(225- 180) = 8000 units
Break-even point in units =8000 units
2) Break-even point (sales) is computed as follows:
Break-even point (sales) = Total general fixed cost/C/S ratio.
C/s ratio = (Selling price - variable cost)/Selling price × 100
= (225 - 180)/225 × 100 = 20%
Break-even point (sales) = 360,000/20% = $1,800,000
Break-even point (sales) = $1,800,000
1) Break-even point in units =8000 units
2) Break-even point (sales) = $1,800,000
Benjamin Graham, the father of value investing, once said, "In the short run, the market is a voting machine, but in the long run, the market is a weighing machine." In this quote, Benjamin Graham was referring to the key difference between the "price" and the "value" of a security. In November 2006, Citigroup's stock (NYSE: C) was trading at $49.59. Following the credit crisis of 2007-2008 and by the end of October 2009, Citigroup's stock price had plummeted to $4.27. Several banks went under, and others saw their stock prices lose more than 60% of their value. Based on your understanding of stock prices and intrinsic values, which of the following statements is true?
a. A stock's intrinsic value is based only on the perceived risk of a stock.
b. A stock's intrinsic value is based on true investor returns.
Which of the following describe the reason(s) why maximization of intrinsic stock value benefits society.
a. Most investors prefer companies that can rise prices beyond reasonable levels.
b. Successful companies can avoid raising external funds in the financial markets.
c. successful companies higher more employees.
d. stock price maximization requires efficient, low-cost businesses.
Answer:
1- a. A stock's intrinsic value is based on true investor return.
2- a. Most investors prefer companies that can rise prices beyond reasonable levels.
b. Successful companies can avoid raising external funds in the financial markets.
Explanation:
Intrinsic value of a company's stock is the real value of stock which is based on systematic factors affecting the company. The factors affecting the intrinsic value of company are usually internal factors. The performance of company management, employee satisfaction and its operational efficiencies are the factor which drive intrinsic value of a company.
The following account balances were extracted from the accounting records of Thomas Corporation at the end of the year:
Accounts Receivable $1,100,000
Allowance for Uncollectible Accounts (Credit) $37,000
Uncollectible-Account Expense $63,000
What is the net realizable value of the accounts receivable?
A. $1,137,000
B. $1,063,000
C. $1,100,000
D. $1,163,000
Answer: $1,063,000
Explanation:
Net realizable value is the value of an asset that a company will get when the asset is sold minus the cost that came with the asset sales.
The net realizable value of the accounts receivable will be the accounts receivable of $1,100,000 minus the allowance for uncollectible accounts which was given as $37,000.
= $1,100,000 - $37,000
= $1,063,000
produces sports socks. The company has fixed expenses of $ 75 comma 000$75,000 and variable expenses of $ 0.75$0.75 per package. Each package sells for $ 1.50$1.50. Read the requirementsLOADING.... Requirement 1. Compute the contribution margin per package and the contribution margin ratio. Begin by identifying the formula to compute the contribution margin per package. Then compute the contribution margin per package. (Enter the amount to the nearest cent.) – = Contribution margin per unit
Answer:
Results are below.
Explanation:
Giving the following information:
Selling price= $1.5
Unitary variable cost= $0.75
First, we need to calculate the unitary contribution margin:
Contribution margin= selling price - unitary variable cost
Contribution margin= 1.5 - 0.75
Contribution margin= $0.75
Now, we can calculate the contribution margin ratio:
contribution margin ratio= contribution margin/selling price
contribution margin ratio= 0.75/1.5
contribution margin ratio= 0.5
For each ratio listed, identify whether the change in ratio value from 2014 to 2015 is usually regarded as favorable or unfavorable.
Ratio 2015 2014
1. Profit margin 9% 8%
2. Debt ratio 47% 42%
3. Gross margin 34% 46%
4. Acid-test ratio 1.00 1.15
5. Accounts receivable turnover 5.5 6.3
6. Bank earnings per share $1.25 $1.58
7. Inventory turnover 3.6 3.4
8. Dividend payout 2.0% 1.2%
Answer:
1. Favorable
2. Unfavorable
3. Unfavorable
4. Favorable
5. Favorable
6. Unfavorable
7. Favorable
8. Favorable
Explanation:
1. Favorable
Less Profit is now being earned per sale
2. Unfavorable
More Debt more Financial risk
3. Unfavorable
Less Profit is now being earned per sale
4. Favorable
A lower ratio is good shows efficiency utilization of resources
5. Favorable
The company is efficient in collection of debt
6. Unfavorable
The earning per share is lower
7. Favorable
More efficient in inventory management
8. Favorable
More return given to investors
A jewelry firm buys semiprecious stones to make bracelets and rings. The supplier quotes a price of $8.10 per stone for quantities of 600 stones or more, $8.50 per stone for orders of 400 to 599 stones, and $9.00 per stone for lesser quantities. The jewelry firm operates 110 days per year. Usage rate is 28 stones per day, and ordering costs are $48.
a. If carrying costs are $2 per year for each stone, find the order quantity that will minimize total
annual cost.
b. If annual carrying costs are 30 percent of unit cost, what is the optimal order size?
c. If lead time is six working days, at what point should the company reorder?
Answer:
a.385 stones
b.349 stones
c.168 stones
Explanation:
Order quantity that minimizes total annual cost is known as the Economic Order Quantity.
Economic Order Quantity = √(2 × Annual Demand × Ordering Cost per Order) / Holding Cost per unit
= √(2×28×110×$48) / $2
= 384.5 or 385 stones
Economic Order Quantity = √(2 × Annual Demand × Ordering Cost per Order) / Holding Cost per unit
= √(2×28×110×$48) / ($8.10 × 30%)
= 348.8 or 349 stones
Re-oder point is the point at which the order should be placed to obtain additional inventories
Reorder Point = Lead Time × Usage
= 6 days × 28 stones
= 168 stones
Sharmer Company issues 5%, 5-year bonds with a par value of $1,000,000 and semiannual interest payments. On the issue date, the annual market rate for these bonds is 6%. What is the bond's issue (selling) price, assuming the following factors: n= i= Present Value of an Annuity Present value of $1 5 5 % 4.3295 0.7835 10 3 % 8.7521 0.7812 5 6 % 4.2124 0.7473 10 3 % 8.5302 0.7441
Answer:
$957,349
Explanation:
the market price of the bonds = PV of face value + PV of coupon payments
PV of face value = $1,000,000 / (1.03)¹⁰ = $744,094
PV of coupon payments = $25,000 x 8.5302 (PV annuity factor, 3%, 10 periods) = $213,255
market price of the bonds = $744,094 + $213,255 = $957,349
journal entry to record the issuance of the bonds:
Dr Cash 957,349
Dr Discount on bonds payable 42,651
Cr Bonds payable 1,000,000
An example of a societal ___________ is Germans' lack of interest in using credit cards like Visa and MasterCard, perhaps in part because the German word for 'debt' is the same as the word guilt.
Answer: values
Explanation:
Societal values can simply be defined as the moral principles defined by the traditions, society dynamics, and cultural beliefs.
These values impact on the behavior of the people. An example is Germans' lack of interest in using credit cards like Visa and MasterCard, because the German word for 'debt' is the same as the word guilt. This hae to do with their belief and values.
Holding other things constant, a decrease in the inflation rate in the US compared to the Canadian economy will cause the demand for the Canadian dollar to
Answer: To decrease, and the supply for Canadian dollar to increase.
Explanation: Inflation is an increase in the general price levels within an economy over a given period of time, when their is inflation in a given economy it causes the depreciation of the value of the currency of that economy and hence reduced demands for that currency and an increase in the supply for that currency which in this case is the Canadian dollar.
Moss County Bank agrees to lend the Sunland Company $605000 on January 1. Sunland Company signs a $605000, 6%, 9-month note. What is the adjusting entry required if Sunland Company prepares financial statements on June 30
Answer:
DR Interest Expense $18,150
CR Interest Payable $18,150
Explanation:
June 30 would mean that 6 months have elapsed since the note was issued. The interest rate is an annual one so will have to be adjusted for 6 months.
The interest expense so far will be;
= 605,000 * 6% * [tex]\frac{6}{12}[/tex]
= $18,150
This figure is to be debited to the Interest Expense account to show that it is an expense and credited to the Interest Payable account.