Answer:
Regulation A
Explanation:
We are evaluating a project that costs $874,800, has a nine-year life, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 85,000 units per year. Price per unit is $55, variable cost per unit is $39, and fixed costs are $765,000 per year. The tax rate is 24 percent, and we require a return of 11 percent on this project. Suppose the projections given for price, quantity, variable costs, and fixed costs are all accurate to within ±10 percent.
Calculate the best-case and worst-case NPV figures
Answer:
best case scenario:
project outlay = $874,800
yearly cash flows:
projected sales = 85,000 x 110% = 93,500sales price = $55 x 110% = $60.50variable costs = $39 x 90% = $35.10fixed costs = $765,000 x 90% = $688,500depreciation costs = $874,800 / 9 = $97,200tax rate = 24%yearly cash flows = {[(93,500 x $60.50) - (93,500 x $35.10) - $688,500 - $97,200] x (1 - 24%)} + $97,200 = $1,304,992
using a financial calculator, NPV = $6,351,002.73
worst case scenario:
project outlay = $874,800
yearly cash flows:
projected sales = 85,000 x 90% = 76,500sales price = $55 x 90% = $49.50variable costs = $39 x 110% = $42.90fixed costs = $765,000 x 110% = $841,500depreciation costs = $874,800 / 9 = $97,200tax rate = 24%yearly cash flows = {[(76,500 x $49.50) - (76,500 x $42.90) - $841,500 - $97,200] x (1 - 24%)} + $97,200 = -$232,488
using a financial calculator, NPV = -$2,071,211.79
Which of the following would increase the likelihood that a company would increase its debt ratio, other things held constant? a. The company's stock price hits a new low. b. An increase in costs incurred when filing for bankruptcy. c. An increase in the personal tax rate. d. The Federal Reserve tightens interest rates in an effort to fight inflation. e. An increase in the corporate tax rate.
Answer:
Option e: An increase in the corporate tax rate
Explanation:
Corporate income tax rate is used to know how much people are willing to invest their new capital and also where they will place that new capital.
An increase in it is likely to encourage a company to use more debt in its capital structure.
The lower the corporate tax rate, the more it drives or leads to growth in capital stock, wages, jobs and others while the higer(increase) in corporate income tax rate, the more it affects economic decisions.
An Increase in a company's debt ratio will therefore lead to an increase in the marginal cost of both debt and equity financing. Also this action may lower the company's WACC
A mother, aged 60, wishes to withdraw monies from her variable annuity to pay for her son's college education. Which statement is true regarding the taxation of the withdrawal?
A. The withdrawal is 100% taxable
B. Any amount withdrawn above the cost basis is taxable
C. Any amount withdrawn above the cost basis is taxable, and is subject to a 10% penalty tax
D. The withdrawal is not subject to tax
Answer:
Any amount withdrawn above the cost basis is taxable
Explanation:
This woman is above 59½ years at age 60. If she was least than 60, she would be owing a 10% penalty on the taxable amount of this withdrawal. But since she is above this age she has to pay income taxes on the whole taxable amount of the funds she withdrew. Variable annuities would never be taxed the money is withdrawn. Therefore option B is the best answer for This question.
A customer has requested that Inga Corporation fill a special order for 3,000 units of product K81 for $30 a unit. While the product would be modified slightly for the special order, product K81's normal unit product cost is $21.30:
Direct materials $ 5.40
Direct labor 6.00
Variable manufacturing overhead 2.50
Fixed manufacturing overhead 7.40
Unit product cost $21.30
Direct labor is a variable cost. The special order would have no effect on the company's total fixed manufacturing overhead costs. The customer would like modifications made to product K81 that would increase the variable costs by $1.00 per unit and that would require an investment of $14,000 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. If the special order is accepted, the company's overall net operating income would increase (decrease) by:______.
A. $14,200
B. $31,300
C. $(13,700)
D. $(2,800)
Answer:
B. $31,300
Explanation:
Sales $90,000
Less: Variable Cost $44,700
Less: Additional Fixed Cost $14,000
Increase in Operating Income $31,300
Workings:
Sales= 3,000 unit * $30
Sales= 90,000
Variable cost = 3,000 unit * (5.4 + 6 + 2.5 +1)
Variable cost = 3,000 * 14.9
Variable cost = $44,700
McConnel corporation has bonds on the market with 16.5 years to maturity, a YTM of 7.7 percent, a par value of 1000 and current price of 1065. The bonds make semiannual payment and have a par value of $1,000.Required:What must the coupon rate be on these bonds?
Answer:
Coupon rate = 0.08402 or 8.402%
Explanation:
To calculate the price of the bond, we need to first calculate the coupon payment per period. We assume that the interest rate provided is stated in annual terms. As the bond is a semi annual bond, the coupon payment, number of periods and semi annual YTM will be,
Coupon Payment (C) = x
Total periods (n)= 16.5 * 2 = 33
r or YTM = 7.7% * 1/2 = 3.85% or 0.0385
The formula to calculate the price of the bonds today is attached.
Using the bond price formula and the available values, we calculate the coupon rate to be,
1065 = x * [( 1 - (1+0.0385)^-33) / 0.0385] + 1000 / (1+0.0385)^33
1065 = x * (18.50739407) + 287.4653284
1065 - 287.4653284 = x * 18.50739407
777.5346716 / 18.50739407 = x
x = 42.012 rounded off to $42.01
If the semi annual coupon payment is $42.01, the annual coupon payment will be 42.01 * 2 = $84.02
The coupon rate on bonds is = 84.02 / 1000
Coupon rate = 0.08402 or 8.402%
Which of the costs below would be included in the recorded cost of merchandise inventory? (Check all that apply.) Storage costs Invoice cost Wages costs Insurance costs Selling costs
Answer: Storage costs; Invoice costs; Insurance costs.
Explanation:
The costs that would be included in the recorded cost of merchandise inventory are the storage costs, the invoice cost and the insurance costs.
It should be noted that merchandise inventory has to do with the goods that have been gotten from suppliers by a distributor in order to sell them to third parties.
Currently Baldwin is paying a dividend of $1.10 (per share). If this dividend stayed the same, but the stock price rose by 10% what would be the dividend yield
Answer:
Dividend yield = 227.06%
Explanation:
Assuming the Closing stock market summary for Baldwin company is $44.05
Dividend yield = Dividend * 100 / (Price* (1 + growth rate) )
Dividend yield = 1.10 * 100 / (44.05 * (1+0.10) )
Dividend yield = 1.10 * 100 / (44.05 * 1.10)
Dividend yield = 110 / 48.455
Dividend yield = 2.2706
Dividend yield = 227.06%
Long-term debt ratio 0.3
Times interest earned 10.0
Current ratio 1.2
Quick ratio 1.0
Cash ratio 0.4
Inventory turnover 3.0
Average collection period 73 days
Use the above information from the tables to work out the following missing entries, and then calculate the company’s return on equity.
Net sales _____$
Cost of goods sold
Selling, general, and administrative expenses 20.00
Depreciation 30.00
Earnings before interest and taxes (EBIT) _____$
Interest expense
Income before tax _____$
Tax (35% of income before tax)
Net income _____$
Conclusions and recommendations are the most widely read sections of any report. Conclusions summarize a nd explain your findings and are the heart of your report. The ability to draw sound conclusions and make clear recommendations from your research is crucial to business success.
When drawing conclusions, make sure you________.
Consider the scenario:
You are making recommendations after researching and writing a report on employee vacation time and job satisfaction. What writing tips should you keep in mind when writing your recommendations?
A. Your recommendations should always be the result of prior logical analysis.
B. Your recommendations should never be in the form of a command.
C. You can combine recommendations and conclusions.
D. You should use words such as maybe and perhaps.
E. You can omit conclusions and move straight to recommendations in short reports.
Answer:
a. When drawing conclusions, make sure you summarize and explain your findings.
b. Tips for writing recommendations:
A. Your recommendations should always be the result of prior logical analysis.
B. Your recommendations should never be in the form of a command.
Explanation:
A good conclusion touches the theme or main topic, summarizes the main points, and connects with the introduction, but with a sense of closure. Conclusions should be sound and logical. Irrelevant conclusions are annoying to the senses. Without a conclusion, the report will sound like one illogical move without clear direction and purpose.
Recommendations should address improvement efforts based on the problem(s) presented in the body of the report.
When comparing investment opportunities with approximately the same cost and risk level, choose the investment with the:
Answer: highest positive net present value
Explanation:
Net present value is typically used by organizations in order to know the projects that will bring more profit to an organization.
Therefore, when comparing investment opportunities with approximately the same cost and risk level, choose the investment with the highest positive net present value.
Phoenix Agency leases office space for $7,000 per month. On January 3, Phoenix incurs $65,000 to improve the leased office space. These improvements are expected to yield benefits for 8 years. Phoenix has 5 years remaining on its lease. Compute the amount of expense that should be recorded the first year related to the improvements.
Answer:
$13,000
Explanation:
The computation of the expense recorded in the first year is shown below:
Here the leasehold improvement should be depreciation by considering the lease term left or the estimated useful life whichever is lesser
Now the depreciation expense is
= Improvement cost ÷ lease term left
= $65,000 ÷ 5 years
= $13,000
hence, the amount of expense for the first year is $13,000
XARA is a newly emerging wine company. After extensive market research, XARA divides its market into wine enthusiasts, casual drinkers and restaurants. Each category has its own needs, traits and marketing goals. In this scenario, XARA has engaged in market _________.
Answer: segmentation
Explanation:
Market segmentation is when a business market that is made up of different customers is being divided, into smaller groups or segments based on some characteristics.
From the question, we are informed that XARA is a newly emerging wine company. After extensive market research, XARA divides its market into wine enthusiasts, casual drinkers and restaurants. Each category has its own needs, traits and marketing goals. In this scenario, XARA is using market segmentation.
Market research is a systematic attempt to acquire data about target markets and customers: learn everything you can about them, starting with their names. It is considered as the crucial part of business strategy.
XARA is a newly emerging wine company. After extensive market research, XARA divides its market into wine enthusiasts, casual drinkers and restaurants. Each category has its own needs, traits and marketing goals. In this scenario, XARA is using market segmentation.
Market segmentation is when a business market that is made up of different customers is being divided, into smaller groups or segments based on some characteristics.
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Bawl purchased ABC bonds on 1/1/21. Data regarding these available-for-sale securities follow: Cost MV December 31, 2021 $100,000 $ 91,000 December 31, 2022 100,000 111,000 December 31, 2023 100,000 106,000 The unrealized Gain/Loss reported in OCI of the 2023 Comprehensive Income statement is:
Answer:
Bawl with ABC bonds
The unrealized Gain/Loss reported in OCI of the 2023 Comprehensive Income statement is:
A Loss of $5,000
Explanation:
a) Data and Calculations:
Cost MV Unrealized Profit or (Loss)
December 31, 2021 $100,000 $ 91,000 $9,000 (Loss)
December 31, 2022 100,000 111,000 20,000
December 31, 2023 100,000 106,000 5,000 (Loss)
Available-for-sale Investment
Debit Credit
Dec 31 100,000
Loss 9,000
Dec 31 91,000
Profit 20,000
Dec 31 111,000
Loss 5,000
Dec 31 106,000
The Available-for-sale Investment will show a loss of $5,000 in the Other Comprehensive Income of the 2023 Comprehensive Income Statement based on the yearly adjustments to the account with losses and profits.
Which of the following statements about collateral contracts is true? Group of answer choices The guarantor promises to pay only if the principal debtor fails to do so. The principal debtor's debt is secondary. A collateral contract involves three parties and one promise to perform. The guarantor's debt is primary.
Answer:
The principal debtor's debt is secondary
Explanation:
The collateral contracts involves three parties and one promise to perform.
What is a Collateral Contract?A collateral contract is a separate contract which exists beside the main contract. Largely, where a written contract, the term of agreement base on the contract.
The collateral contracts are independent oral or written contracts that are made between two parties to a separate agreement or between one of the original parties and a third party.
This type of contract is usually made before or simultaneously with the original contract.
A collateral contract is a secondary agreement added to the original contract that is meant to ensure that the pre-contract promise are met.
Collateral contracts contain terms that conflict with the terms of the primary agreement.
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Prepare journal entries to record each of the following four separate issuances of stock. A corporation issued 10,000 shares of $20 par value common stock for $240,000 cash. A corporation issued 5,000 shares of no-par common stock to its promoters in exchange for their efforts, estimated to be worth $45,500. The stock has a $1 per share stated value. A corporation issued 5,000 shares of no-par common stock to its promoters in exchange for their efforts, estimated to be worth $45,500. The stock has no stated value. A corporation issued 2,500 shares of $50 par value preferred stock for $170,500 cash.
Answer:
1.
DR Cash.................................................$240,000
CR Common Stock................................................... $200,000
Paid in Excess of Par- Common Stock.....................$40,000
Working
Common Stock = $20 * 10,000 = $200,000
Paid in Excess of Par- Common Stock = 240,000 - 200,000 = $40,000
2.
DR Promotion Expenses................................$45,500
CR Common Stock.........................................................$5,000
Paid in Excess of Par- Common Stock ........................$40,500
Working
Common stock = 5,000 * 1 = $5,000
Paid in Excess of Par- Common Stock = 45,500 - 5,000 = $40,500
3
DR Promotion Expenses..........................$45,500
CR Common Stock....................................................$45,500
4
DR Cash ...................................................$170,500
CR Preferred Stock .....................................................$125,000
CR Paid in Excess of Par - Preferred Stock ..............$45,500
Working
Preferred Stock = 50 * 2,500 = $125,000
Paid in Excess of Par - Preferred Stock = 170,500 - 125,000 = $45,500
Sea Blue manufactures flotation vests in Charleston, South Carolina. Sea Blue's contribution margin income statement for the month ended December 31, 2018, contains the following data:
Sea Blue
Income Statement
For the Month Ended December 31, 2018
Sales in Units 32,000
Net Sales Revenue $608,000
Variable Costs:
Manufacturing 96,000
Selling and Administrative 108,000
Total Variable Costs 204,000
Contribution Margin 404,000
Fixed Costs:
Manufacturing 124,000
Selling and Administrative 94,000
Total Fixed Costs 218,000
Operating Income $186,000
Suppose Overboard wishes to buy 4,600 vests from Sea Blue. Sea Blue will not incur any variable selling and administrative expenses on the special order. The Sea Blue plant has enough unused capacity to manufacture the additional vests. Overboard has offered $15 per vest, which is below the normal sales price of $19.
1. Identify each cost in the income statement as either relevant or irrelevant to Sea Blue's decision.
a. Variable Manufacturing Costs
b. Variable Selling and Administrative Costs
c. Fixed Manufacturing Costs
d. Fixed Selling and Administrative Costs
2. Prepare a differential analysis to determine whether Sea Blue should accept this special sales order.
3. Identify long-term factors Sea Blue should consider in deciding whether to accept the special sales order. In addition to determining the special order's effect on operating profits, Sea Blue's managers also should consider the following:
A. Will Sea Blue's other customers find out about the lower sale price Sea Blue accepted from Overboard? If so, will these other customers demand lower sale prices?
B. Will the special order customer come back again and again, asking for the same reduced price?
C. How will Sea Blue's competitors react? Will they retaliate by cutting their prices and starting a price war?
D. All of the above
E. None of the above
Answer:
1. Variable Cost
Manufacturing 96,000 ( Relevent )
Selling and administrative 108,000 ( Irrelevent )
Fixed Cost
Manufacturing 124,000 ( Irrelevent )
Selling and administrative 94,000 (Irrelevent )
2. $55,200
3. A. If the regular customer found out about this order and will demand a lower price?
B. Will this order customer come back again and again asking the same reducted price?
C. Will this order price will start a price war with the competitors?
Explanation:
1. Calculation to Identify each cost in the income statement as either relevant or irrelevant to Sea Blue's decision.
Variable Cost
Manufacturing 96,000 ( Relevent )
Selling and administrative 108,000 ( Irrelevent )
Fixed Cost
Manufacturing 124,000 ( Irrelevent )
Selling and administrative 94,000 (Irrelevent )
2. Preparation of a differential analysis to determine whether Sea Blue should accept this special sales order.
Differential analysis
Expected increase in income in revenue
( 4,600 vest * $15 per vest ) 69,000
Less :Expected increase in Variable manufacturing
( 4,600 vest * $3 per vest) (13,800)
=$55,200
Variable manufacturing cost of $96,000 / divide by 32,000 units will give us $3
Based on the above calculation Sea blue should accept this order reason been that the order will increase their operating income by the amount of $55,200.
3. The manager of Sea blue should know that the sale might affect their regular sale in long run.
Therefore In addition to determining the special order's effect on operating profits, Sea Blue's managers also should consider:
A. If the regular customer found out about this order and will demand a lower price?
B. Will this order customer come back again and again asking the same reducted price?
C. Will this order price will start a price war with the competitors?
Night Shades, Inc. (NSI), manufactures biotech sunglasses. The variable materials cost is $11.13 per unit, and the variable labor cost is $7.29 per unit.Required:a. What is the variable cost per unit?b. Suppose the company incurs fixed costs of $875,000 during a year in which total your answer to 2 decimal places, e.g., 32.16.) production is 190,000 units. What are the total costs for the year?c. If the selling price is $44.99 per unit, does the company break even on a cash basis? I depreciation is $435,000 per year, what is the accounting break-even point?
Answer:
Explanation:
Giving the following information:
Unitary direct material cost= $11.13
Unitary direct labor cost= $7.29
A.
Total variable cost per unit= 11.13 + 7.29= $18.42
B. Fixed costs= $875,000
Production= 190,000
Total costs= 875,000 + 18.42*190,000= $4,374,800
C.
To calculate the break-even point in units, we need to use the following formula:
Break-even point in units= fixed costs/ contribution margin per unit
Break-even point in units= 875,000 / (44.99 - 18.42)
Break-even point in units= 32,932 units
D. Depreciation= $435,000
Accounting break-even point= (875,000 - 435,000) / 26.75
Accounting break-even point= 16,449 units
A company’s common stock has a market value of $63.18 per share and its next dividend is expected to be $3.26 per share. The stock’s beta is 1.2, the tax rate is 35%, and the market risk premium is 6.1% per year. The yield to maturity for the company’s long-term debt is 6.4% per year. If the riskiness of the company’s equity requires that it provide a risk premium of 3.2% per year over the yield on its long-term debt, what is the company’s annual cost of internal equity financing?
Answer:
Cost of equity = 9.6%
Explanation:
The cost of equity is the return a firm theoretically pays to its equity investors, In order to calculate the cost of equity here we need to add up the yield to maturity for the company's long term debt and the risk premium per year over the yield on its long term debt.
Solution
Cost of equity = Yield to maturity + Risk premium
Cost of equity = 6.4% + 3.2%
Cost of equity = 9.6%
_____ is a method for determining the estimated annual costs and benefits for a project and the resulting annual cash flow.
Answer:
Cash flow analysis, is the right answer.
Explanation:
“Cash flow analysis” is the method that determined the actual cash that goes out of the business and the actual cash that comes in the business. Basically this method is used for financial purposes. This method exhibits the actual cost that the business has incurred and the actual benefit it has earned. Moreover, new investors that invest in the company primarily sees the financial report of the company and then take the decision to invest.
Which of the following statements is CORRECT? a. Commercial paper can be issued by virtually any firm so long as it is willing to pay the going interest rate. b. Short-term debt is favored by firms because, while it is generally more expensive than long-term debt, it exposes the borrowing firm to less risk than long-term debt. c. Commercial paper is a form of short-term financing that is primarily used by large, strong, financially stable companies. d. Trade credit is provided only to relatively large, strong firms. e. Commercial paper is typically offered at a long-term maturity of at least five years.
Answer: Commercial paper is a form of short-term financing that is primarily used by large, strong, financially stable companies.
Explanation:
Commercial papers a promissory notes which are issued by companies on a short term basis that are unsecured. It should be noted that that they are used by the strong, large, and financially stable companies.
Commercial paper are issued in order to finance payroll, and also meet a company's short-term liabilities.
On July 1, Shady Creek Resort borrowed $400,000 cash by signing a 10-year, 9% installment note requiring equal payments each June 30 of $62,328. What is the journal entry to record the first annual payment
Answer:
Journal Entry
Debit Credit
Interest Expense $36,000
Notes Payable $26,328
Cash $62,328
Workings
Interest portion for one year = 400,000 * 9% = $36,000
Total installment paid = $62,328
So, principal portion repaid = $62,328 - $36,000
= $26,328
A manufacturing company has variable overhead costs of $2.50 per unit and fixed costs of $5,000 per month. Each unit requires 4 hours of direct labor and the company expects to produce 2,000 units each month. The standard overhead rate will be
Answer:
Standard Overhead rate is $1.25 per Direct labor hours
Explanation:
Total variable cost (2000 unit * $2.50) = $5,000
Total fixed cost = $5,000
Estimated Overhead cost = $10,000
Estimated Direct labor hour = 2000 unit * 4 hours = 8,000 hours
Standard Overhead rate = Estimated overhead cost / Estimated Direct labor hour
Standard Overhead rate = $10,000 / 8,000 hours
Standard Overhead rate = $1.25 per Direct labor hours
You have learned at work that today’s successful companies at all levels have one thing in common: they are heavily committed to marketing and strongly ________.
Answer:
This question is incomplete, the options are missing. The options are the following:
a) Obtaining the best CEOs
b) Increasing wealth to stockholders
c) Customer focused
d) Employee motivation
e) Social responsibility
And the correct answer is the option C: Customer focused.
Explanation:
To begin with, nowadays due to the fact of the globalization and the increase in the use of social networks and the huge impact of the use of the internet the companies had to adapt to the new conditions and in that part is where the marketing enters because is used as a huge instrument in the battle in order to obtain more customers. Therfore that the successful companies of today have one thing in common in all their levels inside the organization and is that the marketing is one of the most important weapons that they had and that they have to be strongly focused in their customers.
Instead of a dividend of $1.60 per share, the company has announced a share repurchase of $16,000 worth of stock. How many shares will be outstanding after the repurchase?
Answer:
9,690 stocks
Explanation:
some information is missing:
Market Value Balance Sheet
Cash $45,300 Equity $515,300
Fixed assets $470,000
Total $515,300 Total $515,300
total number of shares outstanding = 10,000
stock's market price = $515,300 / 10,000 = $51.53
stocks repurchased = $16,000 / $51.53 = 310.50, but we must round down to 310 stocks
stocks outstanding after repurchase = 10,000 - 310 = 9,690
You own a portfolio that has a total value of $235,000 and it is invested in Stock D with a beta of .82 and Stock E with a beta of 1.43. The beta of your portfolio is equal to the market beta. What is the dollar amount of your investment in Stock D?
Answer:
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Why must corporate managers use multiple techniques of project evaluation? Which technique is most commonly used and why? Describe several ways you may be able to use the techniques above as you progress in your professional career.
Answer:
The most important technique for project evaluation is the net present value (NPV) which compares the present value of discounted cash flows against the initial costs associated with the project. The other two most important techniques used are the payback period (either regular or discounted) and the internal rate of return (IRR).
Depending on the company's needs, sometimes one technique might be used instead of others. E.g. technological firms generally use the payback period because most of their projects have a very short life, 1 or 2 years. Other times, you might have to compare different projects and even if they are not mutually exclusive, no company can dispose of money freely. It only invests in certain projects that have a minimum required rate of return.
But the basic technique, the NPV, is the most relevant in a sense that no project with a negative NPV should be accepted.
Which one of these people does not attend the closing?
a. Your real estate agent
b. Closing agent
c. Seller
d. Appraiser
Answer:
d. Appraiser
Explanation:
During a closing appointment, there are many individuals usually present, including the buyer, seller, closing agent, and the attorney. Sometimes the company representative, mortgage lender, and other real estate agents may attend in unique situations. From the list provided the one individual that never attends a closing appointment is the Appraiser. This individual's only job is to estimate the market value of the house before listing it, and once this is done has no involvement in the selling process.
Where can you go in the Banking Center to review downloaded bank feed transactions that have already been matched to existing transactions in QuickBooks Online?a. For Review tabb. Reviewed tabc. Recognized tab d. Excluded tab
Answer:
Where can you go in the Banking Center to review downloaded bank feed transactions that have already been matched to existing transactions in QuickBooks Online?
a. For Reviewed tab
Explanation:
In QuickBooks online, you have the Reviewed tab where you can download at least the last 90 days of transactions, made with your bank or credit card. QuickBooks is also able to categorize all the downloaded transactions you have done. In the reviewed tab you can find all the accepted bank transactions.
On January 1, 2021, Legion Company sold $270,000 of 4% ten-year bonds. Interest is payable semiannually on June 30 and December 31. The bonds were sold for $169,056, priced to yield 10%. Legion records interest at the effective rate. Legion should report bond interest expense for the six months ended June 30, 2021, in the amount of: (Round your answer to the nearest dollar amount.)
Answer:
Interest expense = $8453
Explanation:
We can calculate Bond interest expense by multiplying Carrying value of the bond with the effective interest rate and the period of time,
DATA
Carrying value of bond = $169,056
Effective interest rate = 10%
Period of time = 6 months
Interest expense =?
Calculation
Interest expense = Carrying value x Effective interest rate x Time period
Interest expense = $169,056 x 10% x [tex]\frac{6months}{12months}[/tex]
Interest expense = $8453
Assume the Apple division of the Gala Company had the following results last year (in thousands). Managements required rate of return is 10% and the weighted average cost of capital is 8%. Its effective tax rate is 30%. What is Apple division's residual income
Answer:
$50,000
Explanation:
The computation of the residual income for each division is shown below:
As we know that
Residual income = Operating income - target income
where,
Operating income is given in the question
And, the target income could be calculated by
= Average invested assets × required rate of return
= $4,500,000 × 10%
= $450,000
So, the residual income is
= $500,000 - $450,000
= $50,000
