Answer: #1.Water #2.Doctor #3.Wants #4.There are more foofing materialsbeing manufactured than there are houses that need them.
Explanation:
Answer:
D.) Water
C.) Hair Stylist
D.) Want
A.) The demand for roofers is higher than the number of people willing to do roofing.
ane is planning to offer a Groupon for inner tube rentals that she will distribute on hot, sunny, summer days by the river that runs through her town. Based on her past experience with Groupon, she has assigned the following probability distribution to the number of tubes she will rent on a randomly selected day. If Jane would like her expected revenue to be at least $300 per day, what should the Groupon price be? (Round your answer up to the nearest whole dollar amount.)
Probability assigned:|
x 30 60 120 180
P(x) .10 .40 .40 .10
Answer:
Jane
Price of Groupon for a revenue of $300 is:
$3
Explanation:
a) Data and Calculations:
Expected Sales volume:
Number of Tubes x 30 60 120 180
Probability P(x) .10 .40 .40 .10
Expected values 3 24 48 18
Total = 93 tubes
Groupon price = $300/93 = $3.23
b) Jane's price for each Groupon will be the rent revenue per day divided by the expected number of tubes to rent daily. The expected number of tubes is derived by multiplying each expected number of tubes by its probability and then summing up the results.
7 pounds of raw material are required to make 1 finished unit. The company desires an ending raw materials inventory for each month equal to 29% of the following months production (in units of raw material) . How many pounds of raw material should be purchased in May?
Answer:
Instructions are below.
Explanation:
We weren't provided with enough information to answer the request. But, I will give an example and formulas to guide an answer.
For example:
Production in units:
May=20,000
June= 22,000
Beginning inventory of direct materials= 8,000
To calculate the purchase for May, we need to use the following formula:
Purchases= production + desired ending inventory - beginning inventory
Purchases= 20,000*7 + (22,000*7)*0.29 - 8,000
Purchases= 176,660 pounds
On January 1, 2021, Splash City issues $320,000 of 8% bonds, due in 15 years, with interest payable semiannually on June 30 and December 31 each year. Required:Assuming the market interest rate on the issue date is 8%, the bonds will issue at $320,000. Record the bond issue on January 1, 2021, and the first two semiannual interest payments on June 30, 2021, and December 31, 2021. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field.)
Answer:
Journal entries are given below
Explanation:
Entry for the bond issue on January 1, 2021, and the first two semiannual interest payments on June 30, 2021, and December 31, 2021, are prepared as follows
January 01, 2021 (Splash City issues $320,000 of 8% bonds)
Debit Credit
Cash 320,000
Bonds payable 320,000
June 30, 2021 (Interest paid)
Debit Credit
Interest expense $12,800
Cash $12,800
Working
Interest expense = $320,000 x 8% x 6/12
Interest expense = $12,800
December 31, 2021 (Interest paid)
Debit Credit
Interest expense $12,800
Cash $12,800
Working
Interest expense = $320,000 x 8% x 6/12
Interest expense = $12,800
A company retired $80 million of its 10% bonds at 104 ($83.2 million) before their scheduled maturity. At the time, the bonds had a remaining discount of $2 million. Prepare the journal entry to record the redemption of the bonds. (Enter your answers in millions rounded to 1 decimal place (i.e., 5,500,000 should be entered as 5.5). If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
Answer:
Dr Bonds payable 80.0
Dr Loss on early extinguishment 5.2
Cr Discount on bonds payable 2.0
Cr Cash 83.2
Explanation:
Preparation of the journal entry to record the redemptionnof the bonds
Based on the information given we were told that the company retired the amount of $80 million with a 10% bonds at 104 ($83.2 million) and as well had a remaining discount of $2 million, which means that the transaction will be recorded as:
Dr Bonds payable 80.0
Dr Loss on early extinguishment 5.2
[(83.2+2.0)-80.0]
Cr Discount on bonds payable 2.0
Cr Cash 83.2
"The internal rate of return method differs from the net present value method in that it results in finding the" ___________________ of the potential investment.
Answer: profitability
Explanation: The internal rate of return method differs from the net present value method in that it results in finding the profitability of the potential investment.
In capital budgeting which is the process by which companies determine whether a new investment or expansion opportunity is worthwhile and if undertaken, could either yield net profits or losses for the company, both the net present value (NPV) (present value of cash inflows minus the present value of cash outflows over a given period time) and the internal rate of return (IRR) methods are employed.
How does the IRR method determine profitability? - This it does by using a percentage value rather than a dollar amount and therefore is advantageous in representing the possible returns of investments by comparing it with other alternative investments.
All reports required to can be found online at sec.gov.
Per Twitter’s amended S-1 filing, what are the maximum estimated capital expenditures in 2013? Please provide your answer in millions without comma separator or decimal.
Answer:
Twitter's amended S-1 filing
Maximum estimated capital expenditures in 2013:
= $98 million
Explanation:
Twitter's capital expenditures in 2013 can be estimated by subtracting the long-term or non-current assets of 2012 from 2013.
The 2013 long-term assets (Property and equipment, net) are worth $284,024,000
The 2012 long-term assets (Property and equipment, net) are worth $185,574,000
The capital expenditure in 2013 = $98,450,000
The implication is that Twitter added to (or increased) its property and equipment by $98,450,000, which represent new capital expenditures in 2013.
Twitter filed SEC Form 1-A (S-1) with the Securities and Exchange Commission (SEC) when it was seeking exemption for registration requirements for its public offerings as an "emerging growth company," as it is "allowed by the federal securities laws to elect to comply with certain reduced public company reporting requirements for future filings."
A portfolio to the right of the market portfolio on the CML is: Group of answer choices a lending portfolio. an inefficient portfolio. a borrowing portfolio.
Answer:
a borrowing portfolio.
Explanation:
A borrowing portfolio is a portfolio to the right of the market portfolio. It is on the right half of the line. It shows that an investor can purchase the market portfolio and still borrow money so as to purchase more.
CML is known as the the capital market line. It shows the most advantageous portfolios that are a combination of risk and return.
Answer:
a borrowing portfolio.
Explanation:
A borrowing portfolio is a portfolio to the right of the market portfolio. It is on the right half of the line. It shows that an investor can purchase the market portfolio and still borrow money so as to purchase more.
CML is known as the the capital market line. It shows the most advantageous portfolios that are a combination of risk and return.
Explanation:
You want a seat on the board of directors of Red Cow, Inc. The company has 295,000 shares of stock outstanding and the stock sells for $64 per share. There are currently 3 seats up for election. The company uses straight voting. How much will it cost you to guarantee that you will be elected to the board?
Answer: $147,501
Explanation:
Since the company uses straight voting whereby each share gets only one vote per seat, the cost to guarantee that one will be elected to the board is;
Cost = Share price*( (shares outstanding/2) +1 )
= 64 * (( 295,000/2) + 1)
= 64 * 147,501
= $147,501
This is the cost of owning more than 50% of the shares and it will guarantee that you can vote yourself in for a seat as you will have the majority to do so.
Earnings per Share, Price-Earnings Ratio, Dividend Yield The following information was taken from the financial statements of Tolbert Inc. for December 31 of the current fiscal year:
Common stock, $25 par value (no change during the year) $5,500,000
Preferred $5 stock, $100 par (no change during the year) 3,000,000
The net income was $502,000 and the declared dividends on the common stock were $55,000 for the current year. The market price of the common stock is $13.60 per share. For the common stock
Determine:
a. the earnings per share
b. the price-earnings ratio
c. the dividends per share
d. the dividend yield.
Answer:
a. the earnings per share is $2.28
b. the price-earnings ratio is 5.96 times
c. the dividends per share is $0.25
d. the dividend yield is 1.84%
Explanation:
a. the earnings per share
Earning per share is the net earning of the company against each outstanding share.
Earning per share = Net Income / Numbers of Outstanding shares
Earning per share = $502,000 / ($5,500,000/$25)
Earning per share = $502,000 / 220,000 = $2.28
b. the price-earnings ratio
Price earning ratio determines the impact of net income on market value of the share.
Price earning Ratio = Market Pice of stock / Earning per share
Price earning Ratio = $13.60 / $2.28
Price earning Ratio = 5.96
c. the dividends per share
Dividend per share is the value of dividend paid to each outstanding common share.
Dividend per share = Dividend declared / Numbers of outstanding shares
Dividend per share = $55,000 / 220,000 shares
Dividend per share = $0.25 per share
d. the dividend yield.
Dividend yield is the ratio of dividend per share and Market price per share.
Dividend Yield = Dividend Per share / Market price per share
Dividend Yield = $0.25 / $13.60 = 0.0184 = 1.84%
During a recent month, Company planned to provide cleaning services to customers for per hour. Each job was expected to take hours. The company actually served more customers than expected, but the average time spent on each job was only hours each. 's revenues for the month were
Answer: B. $1,050 more than expected.
Explanation:
The company originally planned to have revenue resulting from 30 customers and charging $30 for an estimated 33 hours.
Estimated revenue was;
= 30 * 30 * 3
= $2,700
However, in actuality, they sold to 20 more customers than estimated but only spent 2.5 hours each.
Number of customers = 30 + 20
= 50 customers
Actual revenue
= 50 * 30 * 2.5
= $3,750
Difference is;
= 3,750 - 2,700
= $1,050 more
Wertz Corporation issued ten-year, 8% bonds on January 1, 2017 at a discount. During 2017, the company's accountant failed to amortize any of the bond discount. The omission of the discount amortization will
Answer:
Wertz Corporation
Omission of the discount amortization will:
increase the net income by the amount of the discount that should have been amortized in the year ended December 31, 2017.
Explanation:
Wertz's bond discount represents a loss to the corporation that should be written off over the life of the bond. If the 2017 discount amortization is omitted, the net income is increased by the amount of the discount amortization expense. This means that the income is overstated by that amount. If this omission is discovered before the issuance of the financial reports, it should be reflected in the accounts. If not, depending on its materiality, this amount must be reflected by restating the 2017 financial statements.
seigel co. maintains a defined-benefit pension plan for its employees. at each balance sheet date, seigel should report a pension asset / liability equal to the
Answer: funded status relative to the projected benefit obligation
Explanation:
A defined benefit pension plan is a pension plan type in which the employer promises to pay the worker a lump sum or a pension payment which is based on the earnings history, age and the tenure of service of the worker.
Since Seigel co. maintains a defined-benefit pension plan for its employees. at each balance sheet date, seigel should report a pension asset/liability that will be equal to the funded status relative to the projected benefit obligation.
A $1,000 par value 10-year bond with a 10 percent coupon rate rec%ently sold for $900. The yield to maturity is:
Answer:
Yield to Maturity = 11.58 %
Explanation:
The Yield to maturity is the discount rate that equates then price of the bonds to the present of cash inflows expected from the bond
The yield on the bond can be determined as follows using the formula below:
YTM = C + F-P/n) ÷ 1/2 (F+P)
YTM-Yield to maturity-
C- annual coupon
F- Face Value
P- Current Price
n- years to maturity
YTM-?, C- 10%× 1000 =100, Face Value - 1000, P-900, n- 10
YTM = (100 + (1000-900)/10) ÷ ( 1/2× (1000 + 900) )
YTM = 0.1158 × 100 = 11.58 %
Yield to Maturity = 11.58 %
Products is a manufacturer of large flower pots for urban settings. The company has these standards:
Direct materials (resin) 9.6 pounds per pot at a cost of $4.55 per pound
Direct labor 1 .0 hour at a cost of $15.80 per hour
Standard variable manufacturing overhead rate $3.40 per direct labor hour
Predetermined fixed manufacturing overhead rate $6.00 per direct labor hour
Required:
a. Compute the standard cost of each of the following inputs per pot: direct materials, direct labor, variable manufacturing overhead, and fixed manufacturing overhead.
b. Determine the standard cost of one flower pot.
Answer:
Results are below.
Explanation:
First, we need to determine the standard production costs:
Direct materials= 9.6*4.55= $43.68
Direct labor= 1*15.80= $15.8
Variable manufacturing overhead rate= 3.40*1= $3.4
Predetermined fixed manufacturing overhead rate= 6*1= $6
Finally, the standard cost per unit:
Total unitary cost= 43.68 + 15.8 + 3.4 + 6= $68.88
The twentieth century saw an accelerating shift from traditional manufacturing activities to production procedures requiring large investments in raw materials and labor.
a. True
b. False
Answer:
true
Explanation:
A sofa manufacturer can produce 10 sofas for $2,500 and 12 sofas for $2,760. What is the difference between the average cost per sofa for 12 sofas and the marginal cost of the 12th sofa
Answer:100
Explanation:
The following information can be gotten from the question:
Cost for 10 sofas = $2500
Cost for 12 sofas = $2760.
Average Cost = Total Cost/Quantity
2500 / 10 = $250 and
$2760 / 12 = $230
The average cost for 12 sofas will be $230
Marginal cost is the change in total cost divided by the change in quantity. This will be:
= ( 2760 - 2500 )/( 12 - 10 )
= 260/2
= 130
The difference between the average cost per sofa for 12 sofas and the marginal cost of the 12th sofa will be:
=230 - 130
= 100
Answer:
100
Explanation:
I took the question on the assignment and got it right
Computing absorption costing gross profit
Refer to your answers to Short Exercise S21-6. Product X sells for $175 per unit. Assume no beginning inventories. Calculate the gross profit using absorption costing when Adamson:
a. Produces and sells 2,000 units.
b. Produces 2,500 units and sells 2,000 units
c. Produces 5,000 units and sells 2,000 units.
Answer:
a lot of information is missing, so I looked for a similar question that can help you understand this one:
Variable costs (including direct labor, direct materials and variable overhead) = $80 per units
Fixed overhead = $150,000
a) If Adamson produces 2,000 units, the total cost per unit = $80 + ($150,000 / 2,000) = $80 + $75 = $155
gross profit = total sales revenue - total cogs = (2,000 x $175) - (2,000 x $155) = $350,000 - $310,000 = $40,000
b) If Adamson produces 2,500 units, the total cost per unit = $80 + ($150,000 / 2,500) = $80 + $60 = $140
gross profit = total sales revenue - total cogs = (2,000 x $175) - (2,000 x $140) = $350,000 - $280,000 = $70,000
c) If Adamson produces 5,000 units, the total cost per unit = $80 + ($150,000 / 5,000) = $80 + $30 = $110
gross profit = total sales revenue - total cogs = (2,000 x $175) - (2,000 x $110) = $350,000 - $220,000 = $130,000
Taunton's is an all-equity firm that has 152,000 shares of stock outstanding. The CFO is considering borrowing $245,000 at 6 percent interest to repurchase 21,000 shares. Ignoring taxes, what is the value of the firm
Answer:
The value of the firm is $1,773,333
Explanation:
Calculation of Value of each share
Amount borrowed (A) $245,000
No. of shares repurchased (B) 21,000
Value for each share (C) $11.67
No. of shares outstanding after repurchase(A) 131,000
(152,000 - 21,000)
Value for each share(B) $11.67
Equity value after repurchase(A*B) $1,528,333
Add: Amount borrowed $245,000
Firm value after this transaction $1,773,333
if the growth rate of the money supply is 8%, velocity is constant, and reald GDP grows at 2% per year on average, then the inflation rate will be
Answer:
4%
Explanation:
The quantity theory of money states that :
Money supply x Velocity = price x real GDP
8% = 2% x price
Price = 4%
Your textbook discussed a model of a simple economy with four markets: labor, capital, energy, and food. Which of the following statements is inconsistent with a general equilibrium for this simple economy?
A. The household demand for energy equals the industry supply of energy.
B. The household demand for food equals the industry supply of food.
C. The household demand for labor equals the industry supply of labor.
D. The household supply of capital equals the industry demand for capital.
Answer:
The correct answer is the option C: The household demand for labor equals the industry supply of labor
Explanation:
To begin with, when it comes to the microeconomics theory the market of labor is considered to be as a factor of production market and from that point of view the labor is demanded by the companies to the households who are the ones who offered the labor due to the fact that the workers are the one who put their force to disposition of the companies. And that is why that it would be inconsistent to say that the household demand for labor will equals the industry supply of labor, because it is all the way around, the household supply of labor will equals the industry demand of it.
On November 10 of the current year, Flores Mills sold carpet to a customer for $8,000 with credit terms 1/10, n/30. Flores uses the gross method of accounting for cash discounts. What is the correct entry for Flores on November 10
Answer:
Nov 10,
DR Accounts Receivable .........................$8,000
CR Sales ......................................................................$8,000
(To record credit sale)
Explanation:
On the day that Flores Mills sold the carpet, they are to record this as a credit sales as cash was not paid. The correct entry would be to debit Accounts receivable and credit Sales.
The discount will only be applied if/when the customer settles the account.
Carter Company reported the following financial numbers for one of its divisions for the year; average total assets of $4,100,000; sales of $4,525,000; cost of goods sold of $2,550,000; and operating expenses of $1,372,000. Compute the division's return on investment:
Answer:
14.7%
Explanation:
The computation of return on investment is shown below:
Return on Investment = Net Income ÷ Average total assets × 100
where,
Net Income is
= Sales - Cost of goods sold - Operating expense
= $4,525,000 - $2,550,000 - $1,372,000
= $603,000
And,
Average total assets = $4,100,000
So,
Return on Investment is
= $603,000 ÷ $4,100,000 × 100
= 14.7%
Suppose you are building a scatter plot in Excel for a large amount of data. After selecting the scatter plot option, how do you enter the data into your scatter plot?
a. By manually typing each data point into the scatter plot
b. By using the Quick Styles button under the Chart menu
c. By using the Select Data button and the Select Data Source option
Answer:
c. By using the Select Data button and the Select Data Source option
Explanation:
A scatter plot is a plot which is used to plot the points of the data on the horizontal and the vertical axis also it depicts how one variable is affected by the another.
After preparing the scatter plot to enter the data in the scatter plot we need to use the data button and then data source option so that the data could be entered in the scatter plot
hence, option c is correct
Which group of people would be the most concerned about the operating areas that have contributed to the success of the firm and which have not?
Answer:
Management / Competitors.
Explanation:
The company's management is configured as the group of people who would be most concerned with the effectiveness of the management of the operational areas to achieve the company's success. Effective management must understand the organization as a system that must be integrated so that organizational activities flow effectively to achieve objectives and goals, in order to coordinate, control, monitor and review activities and subordinates so that the organization generates positive results in the market.
In 2017, Randa Merchandising, Inc., sold its interest in a chain of wholesale outlets, taking the company completely out of the wholesaling business. The company still operates its retail outlets. A listing of the major sections of an income statement follows:
Item Debit Credit
1. Net sales $3,040,000
2. Gain on state's condemnation of company property, net of tax 269,000
3. Cost of goods sold $1,551,448
4. Income taxes expense 206,000
5. Depreciation expense 242,500
6. Gain on sale of wholesale business segment, net of tax 790,000
7. Loss from operating wholesale business segment, net of tax 470,000
8. Loss of assets from a meteor strike, net of tax 642,000
Prepare the income statement for the calendar year 2017.
Answer:
Randa Merchandising, Inc
Income Statement
For the year Ended December 31, 2017
Net sales $3,040,000
Expenses
Cost of goods sold $1,551,448
Depreciation Expenses $242,500 $1,793,948
Total Operating Expenses $1,240,052
Other Unusual / infrequent gains (Losses)
Gain on state condemnation of $269,000
company property, net of tax
Loss of assets from meteror strike, ($642,000) $373,000
net of tax
Income from continuing operations before taxes $867,052
Income Tax expenses $206,000
Income from Continuing operations $661,052
Discontinuing segment
Loss from operating wholesale $470,000
business segment (net of tax)
Gain on sales of wholesale ($790,000) $320,000
business segment (net of tax)
Net Income $981,052
ROI, Residual Income, and EVA with Different Bases Envision Company has a target return on capital of 12 percent. The following financial information is available for October ($ thousands):
Software Division . Consulting Division Venture Capital Division
(Value Base) (Value Base) (Value Base)
Book Current Book Current Book Current
Sales $100,000 $100,000 $200,000 $200,000 $800,000 $800,000
Income 12,250 11,700 16,400 20,020 56,730 51,920
Assets 70,000 90,000 100,000 110,000 610,000 590,000
Liabilities 10,000 10,000 14,000 14,000 40,000 40,000
Required
a. Compute the return on investment using both book and current values for each division. Round answers to three decimal places.
Book Value Current Value
Software Answer ? Answer ?
Consulting Answer ? Answer ?
Venture Capital Answer ? Answer ?
b. Compute the residual income for both book and current values for each division. Use negative signs with answers, when appropriate.
Book Value Current Value
Software $Answer 3,850 $Answer 900
Consulting Answer 4,400 . Answer 6,820
Venture Capital Answer (16,470) Answer (1,880)
c. Compute the economic value added income for both book and current values for each division if the tax rate is 30 percent and the weighted average cost of capital is 10 percent. Use negative signs with answers, when appropriate. Book Value Current Value
Software $Answer ? $Answer ?
Consulting Answer ? Answer ?
Venture Capital Answer ? Answer ?
Answer:
a. ROI = income / Assets
Book Value Current Value
Software Division 0.175 0.13
Consulting Division 0.164 0.182
Venture Capital Division 0.093 0.088
Workings:
i. Book value
Software Division = 12,250/70,000=0.175
Consulting Division = 16,400/100,000=0.164
Venture Capital Division = 56,730/610,000 =0.093
ii. Current value
Software Division = 11,700/90,000=0.13
Consulting Division = 20,020/110,000=0.182
Venture Capital Division= 51,920/ 590,000=0.088
b. Residual income = Income - {Asset x Return on capital 12% }
Book Value Current Value
Software Division 3850 900
Consulting Division 4400 6820
Venture Capital Division -16470 -18880
Workings:
i. Book value
Software Division = 12,250-(70,000*12%)=3850
Consulting Division = 16,400-(100,000*12%)=4400
Venture Capital Division = 56,730-(610,000*12%) =-16470
ii. Current value
Software Division = 11,700-(90,000*12%)=900
Consulting Division = 20,020-(110,000*12%)=6820
Venture Capital Division= 51,920-(590,000*12%)=-18880
c. Economic Value Added ( EVA ) = Net Income After Tax - ( Amount of Capital x Weighted Average Cost of Capital [WACC] )
C. Software Division
(Value Base)
Book Current
Sales 100,000 100,000
Income 12,250 11,700
Assets 70,000 90,000
Liabilities 10,000 10,000
Capital invested 60,000 80,000
(Asset - Liabilities)
Tax on Income(30%) 3675 3510
Income after Tax 8,575 8,190
(Income - Tax on
income) (A)
Capital invested 6,000 8,000
* WACC - 10% ) (B)
EVA (C)=(A)-(B) 2,575 190
Consulting Division
(Value Base)
Book Current
Sales 200,000 200,000
Income 16,400 20,020
Assets 100,000 110,000
Liabilities 14,000 14,000
Capital invested 86,000 96,000
(Asset - Liabilities)
Tax on Income(30%) 4920 6006
Income after Tax 11,480 14,014
(Income - Tax on
income) (A)
Capital invested 8,600 9,600
* WACC - 10% ) (B)
EVA (C)=(A)-(B) 2,880 4,414
Venture Capital Division
(Value Base)
Book Current
Sales 800,000 800,000
Income 56,730 51,920
Assets 610,000 590,000
Liabilities 40,000 40,000
Capital invested 570,000 550,000
(Asset - Liabilities)
Tax on Income(30%) 17019 15576
Income after Tax 39,711 36,344
(Income - Tax on
income) (A)
Capital invested 57,000 55,000
* WACC - 10% ) (B)
EVA (C)=(A)-(B) -17,289 -18,656
The marginal revenue of the last bowl of soup a restaurant (in a perfectly competitive market) produced was $11 and its marginal cost was $4. Each time the restaurant produces an additional bowl of soup the marginal cost increases by 20% relative to the previous bowl. The restaurant should:
Answer:
The restaurant should:
decrease its marginal cost in order to maintain the marginal profit and ensure that the marginal cost is not more than the average cost.
Explanation:
Company A's marginal cost represents the incremental costs incurred when the company produces an additional unit of its good or service. This company's marginal cost is calculated by dividing the total change in the cost of producing more goods by the change in the number of goods produced. For example, if the cost of production increases by $120 when additional 10 units of goods are produced, then the marginal cost = $12 ($120/10).
Pisa, Inc. leased equipment from Williamsburg Company under a four-year lease requiring equal annual payments of $68,830, with the first payment due at lease inception. The lease does not transfer ownership, nor is there a bargain purchase option. The equipment has a 4-year useful life and no salvage value. Pisa, Inc.'s incremental borrowing rate is 10% and the rate implicit in the lease (which is known by Pisa, Inc.) is 8%. Assuming that this lease is properly classified as a capital lease, what is the approximate amount of principal reduction recorded when the second lease payment is made in Year 2?
Answer:
$54,639
Explanation:
the approximate amount of principal reduction when the second lease payment is made in Year 2 can be calculated by making the Lease amortization table as follows
DATA
Annual payments = 68,830
Implicit rate = 8%
Annuty factor for 4 years at 8% = 3.55710
Present value of lease payment =$246,212 (68830*3.57710 )
Year 1 Year 2
Opening balance - $177,382(w)
interest - $14,191(w)
payments $68,830 $68,830
principal payments $68,830 $54,639
closing balance $177,382(w) $122,743
Working
Closing balance = Present value of lease payment - Annual payment
Closing balance = $256,212 - $68,830
Closing balance = $177,382
Interest = closing balance x implicit rate
Interest = $177,382 x 8%
Interest = $14,190.56
Which of the following does not represent an outflow of cash and therefore would not be reported on the statement of cash flows as a use of cash?
a. purchase of noncurrent assets
b. purchase of treasury stock
c. discarding an asset that had been fully depreciated.
Answer:
The answer is C.
Explanation:
Discarding an asset that had been fully depreciated is the correct answer. No exchange of cash was involved in this unlike the purchase of non current asset(which is a cash outflow under investing activities) and the purchase of treasury stock (which is a cash outflow under financing activities).
Discarding a fully depreciated asset only is a non cash transaction.
You own 10,000 shares of Microsoft stock. A good way to hedge the risk involved in owning this stock would be to buy some call options on Microsoft stock.
a. True
b. False
Answer: False
Explanation:
If you want to hedge the risk of owning the stock then that would mean that you want to take measures to ensure that you don't lose out if prices fall.
A call option is not the way to do this because call options are bought with the expectations that prices will go up. If you buy call options then and the prices fall, you would make a loss on both the call options and the stock that you own.
A good way to hedge this would be to take Put options on the stock. Put options help you benefit if prices fall because you would be allowed to sell at a certain price unaffected by the fall in prices.
