Answer:
No Account and explanation Debit Credit
Dec 31 Cash 554861
Discount on bonds payable 45139
Bonds payable 600000
(To record issuance of bonds)
June 30 Bond interest expense 33292
(554861*12%*6/12)
Discount on bonds payable 292
Cash (600000*11%*6/12) 33000
(To record first semiannual interest)
Dec 31 Bond interest expense 33309
(555153*12%*6/12)
Discount on bonds payable 309
Cash 33000
(To record interest)
The appropriate journal entries to reflect the issuance of the bonds and the semiannual interest payment and discount amortization are:
Blair Company Journal entries
a. Dec 31
Debit Cash $554,861
Debit Discount on Bonds payable $45,139
($600,000-$554,861)
Credit Bonds payable $600,000
(To record issuance of bonds)
b. Jun 30
Debit Bond interest expense $33,292
($554,861×12%/2)
Debit Discount on Bonds payable $292
($33,000-$33,292)
Credit Cash $33,000
($600,000×11%/2)
(To record semiannual interest payment)
c. Dec 31
Debit Bond interest expense $33,309
[($554,861+$292)×12%/2]
Credit Discount on Bonds payable $309
($33,000-$33,309)
Credit Cash $33,000
($600,000×11%/2)
(To record semiannual interest payment)
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On January 1, Boston Enterprises issues bonds that have a $1,900,000 par value, mature in 20 years, and pay 6% interest semiannually on June 30 and December 31. The bonds are sold at par. 1. How much interest will Boston pay (in cash) to the bondholders every six months? 2. Prepare journal entries to record (a) the issuance of bonds on January 1, (b) the first interest payment on June 30, and (c) the second interest payment on December 31. 3. Prepare the journal entry for issuance assuming the bonds are issued at (a) 98 and (b) 102.
Answer:
Boston Enterprises
1. Bond Interests every six months:
Interest = $1,900,000 x (6%/2)= $57,000
2. Journal entries:
a) Issuance of bonds on January 1:
Debit Cash Account with $1,900,000
Credit Bonds Payable with $1,900,000
To record the issue of bonds at par value, 20 years' maturity at 6% semiannually.
b) First Interest Payment on June 30:
Debit Interest Expense with $57,000
Credit Cash Account with $57,000
To record payment of interest.
c) Second Interest Payment on December 31:
Debit Interest Expense with $57,000
Credit Cash Account with $57,000
To record payment of interest.
3. Journal Entries for issuance of bonds:
a) at $98,
Debit Cash Account with $1,862,000
Debit Bonds Discount with $38,000
Credit Bonds Payable with $1,900,000
To record the issue of bonds at $98 (discount).
b) at $102
Debit Cash Account with $1,938,000
Credit Bonds Payable with $1,900,000
Credit Bonds Premium with $38,000
To record the issue of bonds at $102 (premium).
Explanation:
a) Bond interest: Since the bond's interest of 6% are paid semiannually, the effective interest rate is 3% (6%/2). The interest payment would be $57,000 every six months. This is equal to 3% of $1,900,000.
b) Bonds are sold at a discount when the market interest rate exceeds the coupon rate of the bond. The purpose of issuing at a discount is to make the bonds attractive vis-a-vis the market interest rate. The bondholders will then benefit from the interests and being repaid at the par value.
c) Bonds are sold at a premium when the coupon rate of the bond exceeds the market interest rate. This yields more for the issuer. The bondholders benefit from the interest payments.
Duluth Ranch, Inc. purchased a machine on January 1, 2018. The cost of the machine was $21,500. Its estimated residual value was $6,500 at the end of an estimated 5-year life. The company expects to produce a total of 10,000 units. The company produced 850 units in 2018 and 1,300 units in 2019. Required: Calculate depreciation expense for 2018 and 2019 using the straight-line method. Calculate the depreciation expense for 2018 and 2019 using the units-of-production method. Calculate depreciation expense for 2018 through 2022 using the double-declining balance method.
Answer:
Explanation:
Cost of acquisition - $21,500
Residual value - $6,500
Depreciable amount - 21500-6500 =15,000
Useful life = 5 years
Total units produced = 10000
Depreciation rate = 1/5*100 = 20%
Double depreciation raate = 40%
Depreciation 2018 2019
Straight line 20%*15000 3000 3000
Units of production
850/10000*15000 1275
1300/10000*15000 1950
Double declining balance method
2018 = 40%*21500 = 8600
2019 =(21500-8600) *40%= 5160
2020 (12900 -5160)*40% = 3096
2021 (7740-3096) *40% =1858
2022 (4644-1858)*40% = 1114
Deal is a product of the Digby company. Digby's sales forecast for Deal is 505 units. Digby wants to have an extra 10% of units on hand above and beyond their forecast in case sales are better than expected. (They would risk the possibility of excess inventory carrying charges rather than risk lost profits on a stock out.) Taking current inventory into account, what will Deal's Production After Adjustment have to be in order to have a 10% reserve of units available for sale?
Answer:
Production Units = 555.5 or 556 units
Explanation:
Digby's Sales Forecast for Deal = 505 units.
Digby wants to have extra 10% of units = 100% + 10%
Taking current inventory into account? But, we don't know the current inventory in this question. So, We will calculate the that 10% extra only. If we knew the current inventory then we would have calculated after the adjustment of the current inventory.
Here's the formula to calculate the production units:
Production units = Number of Sales x (100% + Extra Units Percentage)
Production Units = 505 units x (100% + 10%)
Production Units = 505 units x 110%
Production Units = 555.5 or 556 units
"Hubbard Industries is an all-equity firm whose shares have an expected return of 9.1%. Hubbard does a leveraged recapitalization, issuing debt and repurchasing stock, until its debt-equity ratio is 0.45. Due to the increased risk, shareholders now expect a return of 12.5%. Assuming there are no taxes and Hubbard's debt is risk-free, what is the interest rate on the debt?"
Answer: 1.54 %
Explanation:
Assuming no risk, the interest rate on the debt can be calculated using the Cost of Equity of levered Capital formula which is,
Cost of Equity of Levered Capital = Un levered cost of capital + Debt / equity * (rate of return - rate of debt)
All the variables are present except the rate of debt.
Plugging them in is,
0.125 = 0.091 + 0.45 ( 0.091 - rD)
0.125 = 0.091 + 0.04095 - 0.45(rD)
0.125 = 0.13195 - 0.45rD
0.45rD= 0.13195 - 0.125
0.45rD = 0.00695
rD = 0.00695/0.45
rD = 0.01544444444
rD = 1.54%
1.54% is the interest rate on the debt.
The question asks for the determination of the interest rate on Hubbard Industries' debt after a leveraged recapitalization. The interest rate can be calculated using a rearranged Modigliani-Miller proposition formula for levered cost of equity. Given all equity return and post-recapitalization equity return, along with the debt-equity ratio, one can compute the cost of debt.
Explanation:The question involves determining the interest rate on the debt after Hubbard Industries performs a leveraged recapitalization. Initially, the firm was all-equity with an expected return of 9.1%. Post recapitalization, we are given that the new expected equity return is 12.5% and the debt-equity ratio is 0.45. To calculate the interest rate on Hubbard's debt, we must use the Modigliani-Miller proposition without taxes which implies that the firm's value (and cost of capital) does not change due to the capital structure decisions. The formula for the levered cost of equity is:
Re = Ru + (Ru - Rd) * (D/E)
Where Re is the cost of equity after leverage, Ru is the cost of equity (or assets) without leverage, Rd is the cost of debt, and (D/E) is the debt-to-equity ratio. Here, Re is 12.5%, Ru is 9.1%, and D/E is 0.45.
Rearranging the formula to solve for Rd gives us:
Rd = Ru - (Re - Ru) / (D/E)
Substituting the given values:
Rd = 9.1% - (12.5% - 9.1%) / 0.45
Rd represents the interest rate on the company's debt. After calculation, we can determine the interest rate which Hubbard's shareholders will face post recapitalization.
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Choose the correct statement.
A. Marginal revenue equals total revenue divided by quantity sold.
B. For a monopoly, marginal revenue equals price.
C. For a monopoly, total revenue equals marginal revenue multiplied by the quantity sold.
D. When price is lowered to sell one more unit, the lower price results in a revenue loss and the increased quantity sold results in a revenue gain.
Answer:
D) When price is lowered to sell one more unit, the lower price results in a revenue loss and the increased quantity sold results in a revenue gain.
When you offer a sales discount, you are losing revenue since marginal revenue is lower than price, but at the same time if the marginal revenue is ≥ to marginal cost, then your profit and total revenue is increasing.Explanation:
the other statements are false because:
A. Marginal revenue equals total revenue divided by quantity sold. FALSE, MARGINAL REVENUE IS THE REVENUE GENERATED BY SELLING ONE ADDITIONAL UNIT. B. For a monopoly, marginal revenue equals price. FALSE, FOR A MONOPOLY MARGINAL REVENUE IS LOWER THAN PRICE. C. For a monopoly, total revenue equals marginal revenue multiplied by the quantity sold. FALSE, TOTAL REVENUE = PRICE X QUANTITY SOLDOn September 1, 2021, Daylight Donuts signed a $170,000, 9%, six-month note payable with the amount borrowed plus accrued interest due six months later on March 1, 2022. Daylight Donuts records the appropriate adjusting entry for the note on December 31, 2021. In recording the payment of the note plus accrued interest at maturity on March 1, 2022, Daylight Donuts would: (Do not round your intermediate calculations.) Multiple Choice Debit Interest Expense, $7,650. Debit Interest Expense, $5,100. Debit Interest Expense, $2,550.
Answer:
The correct answer is Debit Interest Expense, $5,100.
Explanation:
Note is a promissory note with a written promise made by the borrower to the lender (payee) to pay a certain, definite sum at a specified date.
Interest expense on the notes is calculated as: Principal x Interest Rate x Time
In this case, the total interest expense is $170,000 x 9%/12 x 6 months = $7,650.
Interest expense as at December 31, 2021 is therefore $7,650 / 6 x 4 = $5,100.
Products with positive externalities are underconsumed, thus creating a market failure. How can the government correct this failure? I. By taxing the output of the product to increase tax revenue II. By paying subsidies to the producers, to lower the cost of the product to potential buyers III. By reducing the marginal social benefit of the product, thus eliminating the externality IV. By requiring producers to manufacture more of the product V. By producing it themselves and distributing it free or at very low cost to consumers
Answer:
The government can correct the failure of consuming products with positive externalitiies by:
By paying subsidies to the producers, to lower the cost of the product to potential buyersExplanation:
A positive externality occurs when the production as well as the consumption of a particular product or service generates a social benefit that impacts on a third party not involved in the transaction.
Example of such products and services include, education, Telecommunication, good road, electric power, transportation and logistics services.
Take for instance, if the government pays money to the providers of electric power thereby subsidizing its cost, it will drastically reduce the cost of production and benefit the final consumers who will now purchase goods at cheaper rates.
Similarly, reducing the cost of education for low income earners will increase the participation of school goers among the under privileged and reduce drop out rates. the ripple effect is reduction in crime and increase in skilled labor for the nation's human resource capital pool.
Answer:
The answer is 2 and 5 ( II and V)
Explanation:
Wehrs Corporation has received a request for a special order of 8,600 units of product K19 for $45.50 each. The normal selling price f this product is $50.60 each, but the units would need to be modified slightly for the customer. The normal unit product cost of product K19 is computed as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Unit product cost $16.30 5.60 2.80 $30.40 irect labor is a variable cost. The special order would have no effect on the company's total fixed manufacturing overhead costs. The ustomer would like some modifications made to product K19 that would increase the variable costs by $5.20 per unit and that would equire a one-time investment of $45,000 in special molds that would have no salvage value. This special order would have no effect on the company's other sales. The company has ample spare capacity for producing the special order.
Required: Determine the effect on the company's total net operating income of accepting the special order
Answer:
Increase in the net income=$ 89,160
Explanation:
The amount of the financial advantage or disadvantage would be determined as follows:
Unit variable cost of order = 16.30 + 5.60+ 2.80+5.20 = 29.9
$
Sales from special order) ($45.50× 8,600) 391300
Variable cost of special order ($29.9× 8,600) 257,140
Contribution from special order 134,160
Cost of special machine (45,000)
Increase in contribution 89,160
Increase in the net income=$ 89,160
Note the fixed manufacturing overhead is irrelevant, they are cost that would be incurred whether or not the order is accepted
Jamara has started a home party business that hosts parties and those attending paint signs. Jamara must pay $500 a year to be a representative for Paint A Sign. In addition, Jamara buys all the materials for the parties, including the metal base, the paints, brushes, stencils, and transfers. These items all add up to $10 on average. Jamara charges each participant $25 for each sign they make. For Jamara's Paint A Sign business, the gross margin or contribution margin for Jamara's business is:
Answer:
Unit contribution margin= $15
Explanation:
Giving the following information:
These items all add up to $10 on average. Jamara charges each participant $25 for each sign they make.
The contribution margin is the result of deducting from the selling price, the unitary variable cost.
Unit contribution margin= selling price - unitary variable cost
Unit contribution margin= 25 - 10
Unit contribution margin= $15
Final answer:
The gross margin or contribution margin for Jamara's Paint A Sign party business is $15 per sign, calculated by subtracting the variable cost of $10 for materials from the revenue of $25 per sign.
Explanation:
To calculate the gross margin or contribution margin for Jamara's home party Paint A Sign business, we need to consider the revenues generated from the parties and subtract the variable costs associated with hosting those parties.
The revenue per sign is $25, which is what each participant pays. The variable cost per sign is $10 for materials. Therefore, the gross margin per sign would be the revenue per sign minus the variable cost per sign:
Gross Margin per sign = Revenue per sign - Variable cost per sign
Gross Margin per sign = $25 - $10
Gross Margin per sign = $15
Note that this calculation does not take into account the annual fee of $500, which is a fixed cost and doesn't vary with the number of signs made or parties hosted.
When Chris Mittelstaedt says, "People like to be part of something bigger than themselves," what are the implications for employee motivation?
Answer:
When Chris Mittelstaedt says, “People like to be part of something bigger than themselves,"
He means that the Association or cluster of individuals whose one among the part an individual need to be. Once an individual is in him selves /her selves he's non-creative or unaccompanied, however once it get-together with an association of individuals, it efficiency increases and he/she could be a part of group/combination/establishment/relationship and not alone.
The following data is available for three different alternatives. Assume an interest rate of 9% per year, compounded annually.
Alternative A Alternative B Alternative C
Initial Cost 7,000 8,600 14,000
Annual Benefit 1,375 793 6,007
Useful Life (yrs) infinite 18 9
Alternatives B and C are replaced at the end of their useful lives with identical replacements. Using present worth analysis, find the best alternative.
To determine the best option using present worth analysis at a 9% interest rate, calculate the present value of the benefits for each alternative. Use the perpetuity formula for Alternative A and equivalent annual benefits for Alternatives B and C considering their respective lifespans and replacement costs. The alternative with the highest present worth is the best option.
Explanation:To find the best alternative using present worth analysis, we need to calculate the present value (PV) of each alternative at the 9% per year interest rate over the given lifespan of the alternatives. Since Alternative A has an infinite lifespan, its annual benefit of $1,375 will be perpetually received, which means we can use the perpetuity formula to calculate its present worth. The formula for perpetuity is PV = (Annual Benefit / Interest Rate).
For Alternative A:
Present Worth (PW) = $1,375 / 0.09 = $15,277.78Alternatives B and C are finite and will be replaced with identical replacements at the end of their useful lives, thus we can consider them as perpetuities as well, but we need to calculate the equivalent annual benefit that takes the replacement cost into account.
For Alternative B (18-year lifespan):
Capital Recovery Factor (CRF) = (Interest Rate * (1 + Interest Rate)^n) / ((1 + Interest Rate)^n - 1)Equivalent Annual Benefit (EAB) = (Annual Benefit - (Initial Cost * CRF))Present Worth (PW) = EAB / Interest RateFor Alternative C (9-year lifespan):
Repeat the same CRF and EAB calculation with 9 yearsCalculate the PW using the obtained EABOnce the PW for B and C are calculated, compare the PW of all three alternatives. The alternative with the highest present worth is considered the best financial option.
21. In the chart below, both suppliers have the same average lead time. If you want equivalent service levels against the planned lead time in your planning system for these suppliers, which of the following describes the lead time input to the planning system for these suppliers: a. Lead times for both suppliers should be the same b. Lead time for supplier 1 needs to be greater than lead time for supplier 2 c. Lead time for supplier 2 needs to be greater than lead time for supplier 1
Answer:
a. Lead time for both suppliers should be the same
Explanation:
Lead time is the time required from order to delivery of good. The supplier 1 has less variability as compared to supplier 2 but the average lead time for both supplier will be the same. The supplier 1 has higher delivery time but no of days are lesser. The supplier 2 has higher number of days but less delivery time than supplier 1. The average lead time will be same for both the suppliers.
Consider the economy of Arcadia. Its households spend 75% of increases in their income. There are no taxes and no foreign trade. Its currency is the arc. Potential output is 600 billion arcs. Suppose that actual output is 700 billion arcs, and the government of Arcadia decides to tax its citizens. To bring the economy to potential output, the government should:
Answer:
The economy has an actual output of 700 billion, and its potential ouput was 600 billion, therefore, we can say that the economy is already performing well, beyond potential, for this reason, the government should simply not intervene, because government intervetion reduces the economic efficiency of market outcomes.
If the economy was below potential, the government could tax some of the 25% income that households save, in order to increase spending. This would promote economic growth, bringing the economy closer to potential.
Jallouk Corporation has two different bonds currently outstanding. Bond M has a face value of $30,000 and matures in 20 years. The bond makes no payments for the first six years, then pays $1,900 every six months over the subsequent eight years, and finally pays $2,200 every six months over the last six years. Bond N also has a face value of $30,000 and a maturity of 20 years; it makes no coupon payments over the life of the bond. The required return on both these bonds is 12 percent compounded semiannually.
Even though no final conclusion is currently warranted, a number of research papers, including those of Fama and French, have argued that:________.
a. there is no noticeable difference in the returns of growth versus value stocks.
b. growth stocks outperform value stocks.
c. stocks with high book-value-to-stock-price ratios outperform stocks with low ratios.
d. no observable differences in returns can be associated with varying price-earnings ratios.
e. stocks with low earnings-to-price ratios outperform stocks with high ratios.
Answer:
c
Explanation:
Even though no final conclusion is currently warranted, a number of research papers, including those of fama and French, have argued that:
The correct option is option c.
c.stocks with high book-value-to-stock-price ratios outperform stocks with low ratios.
Rest all option are absurd in context of the question.
Suppose that a telecommunications company controls a large share of the national market. The government believes that the economies of scale in this industry are not significant, and, therefore, multiple smaller firms would be able to provide lower prices. Which of the following policy options might most effectively enable the government to achieve its objectives in this situation?Do nothing at all.Regulate the firm's pricing behavior.Use antitrust laws to increase competition.Turn the company into a public enterprise.
Answer: Use antitrust laws to increase competition.
Explanation:
If the aim of the Government really is to.improve competition then they should use Anti-trust laws to increase competition.
This question is rooted in the concept of Capitalism and focuses on its good side which is that competition is good.
With such a law coming into effect, the large market share of the big company can be redistributed to the smaller firms which would enable competition amongst them and the large company as well. Competition at base level is good for the Economy for two main reasons;
1. It will make companies more efficient as they strive to better than each other. They'll produce better products and be more cost effective.
2. The citizens and consumers gain better service at cheaper costs because again, the companies would be competing amongst themselves and introducing newer and better ways to capture market share.
Answer:
Turn the company into a public enterprise.
Explanation:
Base on the scenario been described in the question, the policy options might most effectively enable the government to achieve its objectives in this situation is turn the company into a public enterprise.
If the government belief that the economies of scale in this industry are not significant, and therefore, multiple smaller firms would be able to provide lower prices is true, it would be profitable for the market, When a natural monopoly, such as an electric utility, is forced to sell itself to a public institution, the private monopoly will become a public enterprise. Such a policy option, which might be chosen by a government that views electricity as a public good, is generally the European approach to providing utilities. A potential drawback of this approach is that government managers may have little incentive to keep costs down
Sneakers Incorporated designs and manufactures fashion sneakers. For the coming year, the company scheduled production of 50,000 sneakers. Budgeted costs for this product are as follows: Unit Costs Total (50,000 units) Variable manufacturing costs $40 $2,000,000 Variable selling expenses 15 750,000 Fixed manufacturing costs 12 600,000 Fixed operating expenses 10 500,000 Total costs and expenses $77 $3,850,000 The management of Sneakers is considering a special order from Discount Kicks for an additional 20,000 sneakers. These sneakers would carry the Discount Kicks label, rather than the Sneakers Inc. label. In all other responds, they would be identical to the regular Sneakers Inc. fashion sneakers. Although Sneaker Inc. regularly sells its sneakers to retail stores at a price of $180 each, Discount Kicks has offered to pay only $45 per sneaker. However, because no sales commissions would be involved with this special offer, Sneaker Inc. will incur variables selling expenses of only $10 per units on these sales rather than the $15 it normally incurs. Accepting the order would cause no change in the company’s fixed manufacturing cost or fixed operating cost. Sneaker Inc. has enough plant capacity to product 70,000 sneakers per year. A. Using incremental revenue and incremental costs, compute the expected effect of accepting this special order on Sneaker Inc. operating income.
Answer:
Net loss $100,000
Explanation:
The relevant cost for decision to accept the special order are
I Incremental Revenue from the special order
2. incremental variable cost
Note that whether or not the special order is accepted the fixed manufacturing and fixed operating expenses of would be incurred either way. Therefore , they are not relevant for the decision
Variable cost cost= 40 +10= 50
Sales revenue from the special order $
(45 × 20,000) 900000
Variable cost of the special order (50× 20,000) (1,000,000 )
Net loss 100,000
On January 22, Zentric Corporation issued for cash 76,000 shares of no-par common stock at $15. On February 14, Zentric issued at par value 8,000 shares of preferred 6% stock, $50 par for cash. On August 30, Zentric issued for cash 12,000 shares of preferred 6% stock, $50 par at $65. Journalize the entries to record the January 22, February 14, and August 30 transactions. Refer to the Chart of Accounts for exact wording of account titles.
Answer:
Zentric Corporation
Journal Entries:
January 22:
Debit Cash with $1,140,000
Credit Common Stock with $1,140,000
To record issue of 76,000 shares of no-par value common stock at $15 each.
February 14:
Debit Cash Account with $400,000
Credit Preferred 6% Stock with $400,000
To record the issue of 8,000 shares at $50 par.
August 30:
Debit Cash Account with $780,000
Credit Preferred 6% Stock with $600,000
Credit APIC - Preferred with $180,000
To record issue of 12,000 shares, $50 par at $65.
No Chart of Accounts was provided for exact wording of account titles.
Explanation:
1. No-par common stock: When shares are issued at no-par, it means that there is no set par value. Par value is the nominal value of a share. Issuing at no-par implies that the amount realized from the sale would be credited to the Common Stock without any to the Additional Paid-in Capital (APIC).
2. Issue of preferred 6% stock at par value: This means that the stock was issued without additional paid-in capital. The stock was issued at the nominal value without premium.
3. Issue of preferred 6% stock, $50 par at $65: This stock was issued at a premium. More was charged above the par value. There is additional paid-in capital of $15 per share. This additional is credited to Additional Paid-in Capital - Preferred.
"Suppose that General Motors Acceptance Corporation issued a bond with 10 years until maturity, a face value of $ 1 comma 000, and a coupon rate of 7.4 % (annual payments). The yield to maturity on this bond when it was issued was 6.4 %. What was the price of this bond when it was issued?"
Answer:
$ 1,072.23
Explanation:
Price of the Bond is the Present Value of the Bond.
Thus, Calculate the Present Value of this Bond
N= 10
PMT = $1,000×7.4% = $ 74
YTM = 6.4%
FV = $1,000
P/YR = 1
PV = ?
Using a Financial Calculator PV is $ 1,072.23
Answer:
$1,072.22
Explanation:
Price of the bond is the present value of all cash flows of the bond. These cash flows include the coupon payment and the maturity payment of the bond. Both of these cash flows discounted and added to calculate the value of the bond.
According to given data
Face value of the bond is $1,000
Coupon payment = C = $1,000 x 7.4% = $74 annually
Number of periods = n = 10 years
Market Rate = 6.4% annually
Price of the bond is calculated by following formula:
Price of the Bond = C x [ ( 1 - ( 1 + r )^-n ) / r ] + [ F / ( 1 + r )^n ]
Price of the Bond = $74 x [ ( 1 - ( 1 + 1.064% )^-10 ) / 1.064% ] + [ $1,000 / ( 1 + 1.064% )^10 ]
Price of the Bond = $534.47 + $537.75 = $1072.22
Price of the Bond = $5,627.25
What is the quantity of money demanded when the interest rate is 6%? quantity: $ billionbillion What is the quantity of money demanded when the interest rate is 8%? quantity: $ billionbillion Choose the statement that best explains the relationship between the quantity of money demanded and the interest rate on bonds. If the interest rates increase, the quantity of money demanded decreases. If the interest rates increase, money demand falls. If the interest rates increase, money demand increases. If the interest rates increase, the quantity of money demanded increases.
Question
Using the attached hypothetical demand curve, answer the following questions:
What is the quantity of money demanded when the interest rate is 6%?What is the quantity of money demanded when the interest rate is 8%? Choose the statement that best explains the relationship between the quantity of money demanded and the interest rate on bonds.
A) If the interest rates increase, the quantity of money demanded decreases.
B) If the interest rates increase, money demand falls.
C) If the interest rates increase, money demand increases.
D) If the interest rates increase, the quantity of money demanded increases.
Answer 1) & 2)
When the interest rate is 6%, the demand for money is $40 billion, and when the interest rate climbs to 8%, the money nosedives to $20 billion.
Answer 3):
The correct choice is B)
Explanation:
The relationship between interest rate and money demand is very simple. The higher the rate, the higher the cost of capital. The higher the cost of capital, the lower the Return On Investment. Because businesses are structured to thrive on more profit or returns, business owners, generally will gun for more money when there is a lower interest rate thus creating a surge in demand.
Kindly note that the analysis is based the assumption that all other factors remain constant.
Cheers!
Swifty Corporation spent $4400 to produce Product 89, which can be sold as is for $5500, or processed further incurring additional costs of $1650 and then be sold for $7700. Which amounts are relevant to the decision about Product 89
Answer:
Relevant:
$5,500
$1,650
$7,700
Explanation:
The only data irrelevant is the first production cost. The $4,400 is not relevant because it is a sunk cost. It will remain constant in both choices. The other costs and income are relevant because they vary on each decision. The $4,400 should not be a part of the decision making process.
Sam and Drew are equal partners in SD LLC formed on June 1 of the current year. Sam contributed land that he inherited from his uncle in 2013. Sam's uncle purchased the land in 1986 for $30,000. The land was worth $100,000 when Sam's uncle died. The fair market value of the land was $200,000 at the date it was contributed to the LLC.
Drew has significant experience developing real estate. After the LLC is formed, he will prepare a plan for developing the property and secure zoning approvals for the LLC. Drew would normally bill a third party $50,000 for these efforts. Drew also will contribute $150,000 of cash in exchange for his 50% interest in the LLC. The value of his 50% interest is $200,000.
How much gain or income will Sam recognize on his contribution of the land to the LLC? What is the character of any gain or income recognized?
Answer:
How much gain or income will Sam recognize on his contribution of the land to the LLC?
$0What is the character of any gain or income recognized?
None, since no gain or loss is recognized.Explanation:
§ 721 establishes that when partners' contribute assets (e.g. property) to a partnership or limited liability company, they do not need to recognize any gain or loss regarding the contribution.
In this case, Sam is contributing property to an operating partnership, so he does not need to recognize any gain or loss. His basis on the partnership will be $100,000 which is the current basis on the land. Sam's basis on the land is equal to the fair market value of the land when his uncle died. His uncle's estate was taxed back then for the gain between the original purchase price and the FMV.
Sarah, Sue, and AS Inc. formed a partnership on May 1, 20X9, called SSAS, LP. Now that the partnership is formed, they must determine its appropriate year-end. Sarah has a 30 percent profits and capital interest while Sue has a 35 percent profits and capital interest. Both Sarah and Sue have calendar year-ends. AS Inc. holds the remaining profits and capital interest in the LP, and it has a September 30 year-end. What tax year-end must SSAS, LP, use for 20X9, and which test or rule requires this year-end
Answer:
The correct answer to the following question will be "12/31, majority interest taxable year".
Explanation:
Throughout the incident in question, all parties mostly in calendar year carry upwards of fifty percent and the result is 12/31, most interest taxing year.When all the participants in the calendar year have a mutual value of more than 50 percent so the same will be selected.They will vote for the 12/31 fiscal year minimum interest. And the solution to the above seems to be the right one.
Novak provides environmentally friendly lawn services for homeowners. Its operating costs are as follows. Depreciation $2,400 per month Advertising $400 per month Insurance $2,400 per month Weed and feed materials $15 per lawn Direct labor $31 per lawn Fuel $2 per lawn Novak charges $100 per treatment for the average single-family lawn. Determine the company’s break-even point in number of lawns serviced per month. Break-even point enter the company’s break-even point in number of lawns lawns
Answer: 100 lawns
Explanation:
The Break-Even Point is the point where expenses/costs equal revenue.
First calculate the costs starting with the fixed costs which are Depreciation, advertising and insurance
= 2,400 + 400 + 2,400
= $5,200
Then the Variable costs per units which are, Weed and feed materials, Direct labor and Fuel.
= 15 + 31 + 2
= $48
Now calculate the Contribution Margin ratio which is,
= (Sales - Variable Cost ) / Sales
= (100 - 48) / 100
= 52%
With Contribution Margin, Break-Even sales can be calculated as,
Breakeven sales = fixed costs / contribution margin ratio
Breakeven sales = 5,200/52%
Breakeven sales in cash = $10,000
Breakeven sales in lawns = breakeven sales / sales per unit
Breakeven sales in lawns = 10,000/100
Breakeven sales in lawns = 100 lawns
Novak breaks even at servicing 100 lawns.
Martha receives $200 on the first of each month. Stewart receives $200 on the last day of each month. Both Martha and Stewart will receive payments for 30 years. The discount rate is 9 percent, compounded monthly. What is the difference in the present value of these two sets of payments?
Answer:
Instructions are below.
Explanation:
Giving the following information:
Martha receives $200 on the first of each month. Stewart receives $200 on the last day of each month. Both Martha and Stewart will receive payments for 30 years. The discount rate is 9 percent, compounded monthly.
To calculate the present value, first, we need to determine the final value.
i= 0.09/12= 0.0075
n= 30*12= 360
Martha:
FV= {A*[(1+i)^n-1]}/i + {[A*(1+i)^n]-A}
A= montlhy payment
FV= {200*[(1.0075^360)-1]}/0.0075 + {[200*(1.0075^360)]-200}
FV= 366,148.70 + 2,746.12
FV= 368,894.82
Now, the present value:
PV= FV/ (1+i)^n
PV= 368,894.82/ 1.0075^360
PV= $25,042.80
Stewart:
FV= {A*[(1+i)^n-1]}/i
A= monthly payment
FV= {200*[(1.0075^360)-1]}/0.0075
FV= 366,148.70
PV= 366,148.70/1.0075^360
PV= $24,856.37
Martha has a higher present value because the interest gest compounded for one more time.
Final answer:
The difference in present value for Martha and Stewart's payments stems from receiving payments at the beginning versus the end of the month, with Martha's payments having a slightly higher present value due to earlier investment potential.
Explanation:
The question relates to the calculation of present value of annuity payments, received at different times, under a certain discount rate. Martha receives her payments at the beginning of the month, and Stewart receives his at the end of the month, both over a 30-year period with a 9 percent discount rate, compounded monthly. The present value difference between their payments arises because of the time value of money; Money received earlier is worth more because it can be invested to earn interest.
To calculate the present value of the payments for both Martha and Stewart, we would use the present value of an annuity formula considering the timing of their payments. As Martha receives her payments at the beginning of the month, her valuation would be slightly higher than Stewart's, who receives payments at the end of the month, due to Martha being able to invest each payment a month earlier over the 30-year period.
. Tiger Mfg. owns a manufacturing facility that is currently sitting idle. The facility is located on a piece of land that originally cost $159,000. The facility itself cost $1,390,000 to build. As of now, the book value of the land and the facility are $159,000 and $1,258,000, respectively. The firm owes no debt on either the land or the facility at the present time. The firm received a bid of $1,200,000 for the land and facility last week. The firm's management rejected this bid even though they were told that it is a reasonable offer in today's market. If the firm was to consider using this land and facility in a new project, what cost, if any, should it include in the project analysis?
Answer: $1,200,000
Explanation:
The firm should include $1,200,000 as the cost of the Manufacturing facility for a new project in it's analysis.
This is because $1,200,000 is the opportunity cost of not selling the facility. The old costs that were incurred for the land and the facility are to be considered sunk costs as they have already been incurred and the only relevant cost now is what the market will pay for the facility which is $1,200,000.
Final answer:
In the project analysis for Tiger Mfg.'s potential use of an idle manufacturing facility and land, only the opportunity cost, which is the forgone sale price of $1,200,000, should be included.
Explanation:
The question revolves around determining the relevant costs that Tiger Mfg. should include in the project analysis for utilizing an idle manufacturing facility and land, which have book values of $1,258,000 and $159,000 respectively, and for which they recently rejected a $1,200,000 offer. In project analysis, the focus should be on incremental cash flows or costs and benefits that would change as a result of undertaking the project. In this case, the original cost and the book value of the land and facility are sunk costs and should not be considered in the project analysis. However, if the project precludes the sale of the land and facility, the potential sale price (opportunity cost) of $1,200,000 represents the economic cost that should be factored into the project analysis.
Which of the following statements is correct? Revenue is recognized at the time of shipment when goods are shipped FOB destination. Sales returns and allowances are reported as operating expenses on an income statement. A seller records revenue when title and risks of ownership transfer to the buyer. Sales discounts are reported as cost of sales on an income statement.
Answer:
The correct answer to the following question will be Option C.
Explanation:
The buyers, as well as sellers, must negotiate an understanding as to who is capable of paying certain transport costs and also who, whenever the item is delivered, assumes the default risk throughout transportation.A seller reports compensation whenever the purchaser has the transition of titles as well as ownership uncertainties.The other three options are not related to a certain scenario. So that option C is the right answer.
Considering the available options, the correct statement is "A seller records revenue when title and risks of ownership transfer to the buyer."
Under the accounting principles, a seller can choose to record revenue in as much the sales have been made regardless of whether payment has been made or not.
In a business transaction, a sale has been made when the title and risks of ownership transfer to the buyer.
Hence, in this case, it is concluded that the correct answer is option C. "A seller records revenue when title and risks of ownership transfer to the buyer."
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Cougar Corp. sold 2-year, 6%, $300,000, bonds on January 1, 2020 for $270,000. Interest is paid semi-annually on June 30 and December 31. 2 points What is the journal entry to record the issuance of the Bond on 1/1/2020? 8 points: Complete the amortization schedule below. Period ended Cash Paid Interest expense amortization Carrying amount 06/30/2020 12/31/2020 06/30/2021 12/31/2021
Answer:
Dr Cash $270,000
Dr discount on bonds payable($300,000-$270,000) $30,000
Cr bonds payable $300,000
Explanation:
First and foremost we need to determine the yield to maturity on this bond using rate formula in excel:
=rate(nper,pmt,-pv,fv)
nper is the number of interest payments the bond would make,which is 2
years multiplied 2 since interest is paid twice i.e nper is 4
pmt is the semiannual interest payable =$300,000*6%*6/12=$9000
pv is the current price of $270,000
fv is the face value of $300,000
=rate(4,9000,-270000,300000)=5.88%
5.88% is the semiannual rate
5.88%*2=11.76% is the annual yield
The annual yield is made use of in the attached amortization schedule.
1. The journal entry to record the Bonds Issuance on January 1, 2020, is as follows:
Debit Cash $270,000
Debit Bond Discounts $30,000
Credit Bonds Payable $300,000
To record the issuance of the bonds.
2. The completion of the Amortization Schedule is as follows:
Period ended Cash Paid Interest Expense Amortization Carrying amount
01/01/2020 $270,000
06/30/2020 $9,000 $16,500 $7,500 277,500
12/31/2020 $9,000 $16,500 $7,500 285,000
06/30/2021 $9,000 $16,500 $7,500 292,500
12/31/2021 $9,000 $16,500 $7,500 $300,000
Data and Calculations:
Face value of bonds = $300,000
Bonds Proceeds = $270,000
Bonds Discounts = $30,000 ($300,000 - $270,000)
Maturity period = 2 years
Coupon interest rate = 6%
Interest payment = semi-annually on June 30 and December 31
Amortization method = Straight-line
Semi-annual amortization = $7,500 ($30,000/4)
Cash payment = $9,000 ($300,000 x 6% x 1/2)
Interest Expense = $16,500 ($9,000 + $7,500)
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MF Corp. has an ROE of 16% and a plowback ratio of 50%. If the coming year's earnings are expected to be $2 per share, at what price will the stock sell? The market capitalization rate is 12%. (Do not round intermediate calculations.) Price $ b. What price do you expect MF shares to sell for in three years? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Answer:
$31.49 per share
Explanation:
The price of the shares after 3 years according to the Dividend Valuation formula would be:
Future Value after three years = Po * (1 + g)^3
And here,
Po = Do * (1 + g) / (k - g)
So this means that the the above equation becomes:
Future Value after three years = E1 * (1 - b) / (k - g) * (1 + g)^3
Here
E1 is the earnings per share $2
b is 50%
k is the shareholder's rate of return, which is 12%
g = Plowback ratio * ROE = 50% * 16% = 8%
Now by putting values, we have:
Future Value after three years = $2 * (1 - 50%) / (12% - 8%) * (1 + 8%)^3
= $31.49 per share
A company purchased 500 units for $ 30 each on January 31. It purchased 600 units for $ 36 each on February 28. It sold a total of 650 units for $ 40 each from March 1 through December 31. What is the cost of ending inventory on December 31 if the company uses the firstminusin, firstminusout (FIFO) inventory costing method? (Assume that the company uses a perpetual inventory system.)
Answer:
The answer is $16,200
Explanation:
First-in, first-out (FIFO) inventory costing method refers to one in which the most recently stocked goods are sold last. To calculate this, let us first lay out the relevant information:
January 31 purchase = 500 units at $30 each
February 28 purchase = 600 units at $36 each
sales = 650 units at $40 each.
required = cost of ending inventory
According to FIFO method, all the goods bought in January, will be sold first before the goods bought in February, hence out of the 650 units sold:
500 units are from January inventory and the remaining 150 units are from February inventory.
Therefore to calculate the cost of ending inventory, which is units of goods remaining from February purchases:
Total initial units in February = 600 units
Units sold from February purchases = 150 units
∴ Units remaining from February purchases = 600 - 150 = 450
remember that for unit cost of goods for February = $36 per unit
∴ Cost of ending inventory = units of ending inventory × unit cost of ending inventory
= 450 × 40 = $16,200
Final answer:
The cost of ending inventory on December 31 using FIFO is $16,200, calculated by considering that 450 units remaining from the February purchase at $36 each are left after sales.
Explanation:
Given the purchases and sales data, here's how you would calculate the ending inventory:
Initial purchase of 500 units at $30 each on January 31.Subsequent purchase of 600 units at $36 each on February 28.Total sales of 650 units throughout the year.According to FIFO, the oldest inventory is sold first. To calculate the ending inventory, subtract the 650 units sold from the total units purchased (500 + 600 = 1100 units). As 500 of the oldest units were sold first, only 150 out of the 650 sold units would come from the batch purchased in February. This leaves us with 450 units from the February purchase remaining in the ending inventory. Therefore:
450 units x $36 each = $16,200 ending inventory on December 31.