Answer:
The expected return on this stock will be 10.84 %.
Explanation:
The return that is expected from this stock is the cost to the company. The equity cost of the company can the calculated using the Capital Asset Pricing Model.
The Capital Asset Pricing Model calculate the expected return on an equity stock by adding a market premium on the return that is provided by the government bond or risk free stock.
Cost of Equity Stock = Risk Free Rate + Company`s Beta × Risk Premium
= 0.03 + 1.12 × (0.10 - 0.03)
= 0.1084 or 10.84 %
Conclusion :
The expected return on this stock will be 10.84 %.
Paper Clip Company sells office supplies. The following information summarizes the company's operating activities for the year: Utilities for the store $ 9 comma 600 Sales commissions 10 comma 100 Sales revenue 164 comma 800 Purchases of merchandise 89 comma 900 January 1 inventory 27 comma 000 Rent for store 13 comma 800 December 31 inventory 23 comma 500 What is operating income?
Answer:
$41,400
Explanation:
Calculation for Paper Clip Company Operating income
OPERATING NET INCOME for Paper Clip Company
Sales revenue 164,800
Less: Purchases of merchandise (89,900)
Utilities for the store (9,600)
Sales commission (10,100)
Rent for store (13,800)
Operating net income $41,400
Therefore the Operating net income will be $41,400
2. Think about the pros and cons associated with the concept of market pricing. What have your personal experiences been in relation to fairness and equity of your own compensation where you have worked
Explanation:
The market pricing system is an approach that differs from the formal salary structure because it is not an organizational process where the levels of remuneration are assigned according to a certain function.
In this wage definition strategy, the remuneration is calculated according to a present value, determined by the market itself and defined by conducting surveys whose objective is to analyze the service pricing strategies practiced by competitors.
This strategy can guarantee several significant advantages for an organization, such as increasing competitiveness by establishing a remuneration structure based on market value.
However, if this strategy is not duly reviewed periodically, what can happen is that there are flaws in the calculation of the current value, which generates an outdated salary system for employees and the company.
Which of the following industries is most likely to exhibit the characteristic of free entry? a. nuclear power b. municipal water and sewer c. dairy farming d. airport security
Answer:
c. dairy farming
Explanation:
Free entry can be defined as the situation in which business firms such as sellers of goods or service providers can enter into the market freely and start selling to consumers.
This ultimately implies that, there are no legal barriers or just a minimum barrier, if any for new firms starting the same business as others.
Hence, dairy farming is the industry which is most likely to exhibit the characteristic of free entry.
A diary farming is one of such industries that allows new agents to come into the business without any barrier because it simply involves the production of essential commodities such as milk, beef etc which are usually required on a large scale in an economy.
If a monopolist raises its price:________
a) the quantity demanded decreases.
b) it raises the barriers to entry.
c) the quantity demanded increases.
d) the quantity demanded remains the same.
Answer:
a) the quantity demanded decreases
Explanation:
As we know that'
A monopolist creates a monopoly in the market as the firm is a sole producer for the entire market due to which it charges high prices plus it is a price taker that means it offers cheap quality products at a lesser price
But if monopolist increased its price so the quantity demanded declines as the purchasing power reduced
Therefore option a is correct
Prepare a cost of goods manufactured schedule and a partial income statement based off the following information.
Cepeda Corporation has the following cost records for June 2017.
Indirect factory labor $4500 Factory utilities $400
Direct materials used $20,000 Depreciation, factory equipment $1,400
Work in process, 6/1/17 3,000 Direct labor $40,000
Work in process, 6/30/17 3,800 Maintenance, factory equipment $1,800
Finished goods, 6/1/17 5, 000 Indirect materials $2,200
Finished goods, 6/30/17 7,500 Factory manager’s salary $3,000
Instructions:
A) Prepare a cost of goods manufactured schedule for June 2017
B) Prepare an income statement through gross profit for June 2017 assuming sales revenue is $92,100.
Answer:
A. Cost of goods manufactured schedule for June 2017
Indirect factory labor $4,500
Factory utilities $400
Direct materials used $20,000
Depreciation, factory equipment $1,400
Maintenance, factory equipment $1,800
Factory manager’s salary $3,000
Indirect materials $2,200
Add Opening Work in Process Inventory $3,000
Less Closing Work in Process Inventory ($3,800)
Cost of goods manufactured $32,500
B. Income statement for June 2017
Sales Revenue $92,100
Less Cost of Sales
Opening Finished Goods Inventory $5,000
Add Cost of goods manufactured $32,500
Less Closing Finished Goods Inventory ($7,500) ($30,000)
Gross Profit $62,100
Explanation:
The cost of goods manufactured schedule include all manufacturing costs for the production period.
Income statement calculates the gross profit as Sales less Cost of Goods Sold.
Travelwell manufactures and sells luggage and briefcases. Their marketing research indicates that durability is the attribute that consumers most desire in their luggage and briefcases. Travelwell now emphasizes durability in all of their promotional efforts. This strategy is intended to build brand equity.
a) true
b) false
Answer:
a) true
Explanation:
When we are talking about building brand equity, we are talking about increasing our customers' perception and value of our brand or company's name. Building brand equity emphasizes the brand itself over any specific product or service that our company offers. E.g. Rolls Royce is the most luxurious car manufacturer in the world, and they built brand equity upon luxury in all its vehicles, not one specific car.
In this case, Travelwell is emphasizing a characteristic that should apply to all its product line, not just one specific type of luggage.
" Fiona wants to sell a local advertising calendar. She knows there are 1000 households in her community, and estimates 30 percent will buy the calendar. The printing company will charge a $100 set up fee and calendars will cost $1 each to print. What price will she need to charge to cover all costs and make a $500 profit. Group of answer choices"
Answer:
The answer is $3
Explanation:
Pr = Q(P-VC) - FC
Where Pr is the profit made
Q is the quantity of calendar to be sold
P is the price to be charged
VC is the variable cost
FC is the fixed cost
Quantity of calendar to be produced is
30 percent of 1000
0.3 x 1000 units
= 300 units
500 = 300(x-1) - 100.
500 = 300x - 300 - 100
300x = 500 + 300 + 100
300x = 900
x = 900/300
x = 3
The price to be charged to cover all costs and make a $500 profit is therefore $3
Jorge owns a U.S. textile company. After a few years of resisting the trend, he realizes the only way his company can remain competitive is to outsource at least some of its production overseas. When looking for an international partner, Jorge should
Complete Question:
Jorge owns a U.S. textile company. After a few years of resisting the trend, he realizes the only way his company can remain competitive is to outsource at least some of its production overseas. When looking for an international partner, Jorge should;
A. Demand socially responsible behavior from his business partner.
B. Demand that his business partners adapt to U.S. culture and social behaviors.
C. Ignore the ethics of potential overseas business partners because the purpose of outsourcing is to make a profit.
D. Remind himself that his business responsibility is limited to his own actions.
Answer:
A. Demand socially responsible behavior from his business partner.
Explanation:
In this scenario, Jorge owns a U.S. textile company. After a few years of resisting the trend, he realizes the only way his company can remain competitive is to outsource at least some of its production overseas. When looking for an international partner, Jorge should demand socially responsible behavior from his business partner.
Its important to note that in order to grow your business successfully with a good reputation and customer satisfaction, you will have to bring in competent, credible, ethical and reliable professionals on board. Jorge should demand for socially responsible individuals from the outsourcing firm as this would go a long way to help his business achieve its aims, goals and by extension develop globally.
Hence, in order to build a wonderful and successful international brand, it's important that Jorge ask the recruiters (outsourcing firm) to go for individuals that are socially responsible. This simply entails, individuals who are ethical and do not have bad vices, criminal records or charges against them.
Under NASAA rules, if a customer wishes to trade a margin account prior to returning the signed margin agreement, such an action is:
Answer:
Explanation:
This action is only permitted if the customer returns the signed margin agreement promptly. Since a margin agreement is an agreement between a brokerage and a client governing a margin account and allows the client to borrow from the brokerage in order to buy securities. Without agreeing to all the details in this contract the individual cannot trade on a margin account or borrow money.
Jessica is very proud of herself for having $5,000 in her savings account that pays 4 percent interest. She currently has a balance of $2,300 on her credit card account that charges 21 percent interest. Jessica thinks she is making a wise financial decision by keeping her money in her savings account instead of paying off her credit card balance. What financial principle from Chapter 1 would you use to give her good advice
Missing options:
A. Taxes affect personal financial decisions.
B. The time value of money.
C. Mind games, financial personality, and your money
D. Both A and C.
Answer:
D. Both A and C.
Explanation:
Jessica earns a small interest on her savings account and she will need to include that earned interest in her tax returns. Her credit card also charges her an interest, which is much higher, but that interest is not tax deductible. So besides paying a lot of interest for money that she shouldn't owe, the small interest received will decrease since she will pay taxes for it.
Besides the tax effect on the interests that she earns, the interest charged by the credit card is much higher. Assuming Jessica only pays 10% marginal tax rate:
total interest earned by the $2,300 in savings account = $2,300 x 4% x (1 - 10%) = $82.80 total interest paid for $2,300 owed to her credit card company = $2,300 x 21% = $483.If a player chooses a mixed strategy in a Nash equilibrium, this implies that the payoff from using that mixed strategy is the same as the payoff from using any of the pure strategies in it. If the statement is true try to reason why, if it is false find a counterexample.
Answer:
False.
Explanation:
The concept of "Nash equilibrium" is been by economist and also by "gamers" in game theory. Nash equilibrium is so good for making decisions and the determination of strategies.
In playing this game, the players or participants can use the pure strategy or the mixed strategy. The mixed strategy is the use of different strategies randomly.
"If a player chooses a mixed strategy in a Nash equilibrium, this implies that the payoff from using that mixed strategy is the same as the payoff from using any of the pure strategies in it".
The statement given above is FALSE because the PAYOFF WILL INCREASE IF WE ARE TO PLAY A MIXED STRATEGY.
For instance if we have a head of 1 and -1, and a tail of -1 and 1, the payoff for pure strategy is likely one or minus one but for a mixed strategy it could be zero.
Define the role of the mathematical concepts of maximization and equilibrium in microeconomic theory.
Answer:
Functions and graphs are two mathematical concepts that are heavily used in microeconomics.
Explanation:
1. Functions
Economics is full of functions: manufacturing functions, distribution functions, parameter values, components for welfare programs, and so on. A function is indeed a connexion between several sets of data, such that the second set correlates exactly to one variable for each value in one collection.
2. Graphs
By visualising it in a graph we can enhance the innate knowledge of a practices and organisational performance. In a chart, independent variable effects are generally read off the horizontal axis, and the dependent variable effects are generally read off another vertical axis. And for variables, each position in the line matrix correlates to a set of variables
1. The Troller Corporation’s common stock has a beta of 1.15. If the risk-free rate is 3.5 percent and the expected return on the market is 11 percent, what is the company’s cost of equity capital?
Answer:
Cost of equity capital is 0.12125 or 12.125%
Explanation:
The cost of equity capital or the required rate of return is the minimum rate of return expected by the investors to invest in the stock of the company. The cost of equity capital can be calculated using the CAPM equation. The formula for CAPM is,
r = rRF + Beta * (rM - rRF)
Where,
r is the cost of equity capital or required rate of returnrRF is the risk free raterM is the return on Marketr = 0.035 + 1.15 * (0.11 - 0.035)
r = 0.12125 or 12.125%
At the start of the current year, Blue Corporation (a calendar year taxpayer) has accumulated E & P of $100,000. Blue's current E & P is $60,000, and at the end of the year, it distributes $200,000 ($100,000 each) to its equal shareholders, Pam and Jon. Pam's stock basis is $11,000, Jon's stock basis is $26,000. How is the distribution treated for tax purposes?
Answer:
Pam and Jon's dividend income = $80,000 each
[ ($100000 Accumulated E&P + $60000 current E&P ) / 2] = $80,000
Statement of distribution for shareholders for tax purpose
Pam Jon
Total distribution $100,000 $100,000
Less: Dividend income $80,000 $80,000
$20,000 $20,000
Less: Stock basis $11,000 $26,000
Capital gain $9,000 $0
Therefore, Pam has a taxable gain of $9000 which reduces the stock basis to $0, whereas Jon has not any taxable gain but the stock basis has reduced to $6000 [$26000 - $20000]
Jack's adjusted basis in his passive activity is $30,000 at the beginning of the year. His losses from the activity is $8,000. What is Jack's deduction for the year
Answer:
No deduction
Explanation:
A passive activity is that event, in which the taxpayer did not participate significantly in the sector. In the other hand if the taxpayer is not having passive income though-out the the year, so a taxpayer will not get any deduction of passive losses which is available.
Therefore as per the above explanation, the passive loss is 8,000 and as per the situation, Jack is not eligible to get any deduction.
"Reginald greets and chats with his regular customers every morning when they come in for coffee. He offers them tastes of anything special he is cooking that day, and has a database with their birthdays, offering regulars a free meal on their birthday. Reginald knows his regular customers create repeat business and: "
Answer:
spread positive word of mouth
Explanation:
Reginald knows his regular customers create repeat business and spread positive word of mouth. This means that the repeat customers leave happy and tell their friends about the great experience they had at Reginald's restaurant. This creates enthusiasm in the repeat customers' friends which in term causes them to go to Reginald's business and try the food. This creates more repeat customers and increased profitability for Reginald's business.
The shipping problem in LP is also called the:__________.
a) production mix problem.
b) freight train problem.
c) transportation problem.
d) land and sea problem.
e) none of the above.
Answer:
c) transportation problem
Explanation:
The SHIPPING PROBLEM in LP which is also known as the TRANSPORTATION PROBLEM in LP can be defined as a unique type of linear programming problem in which the aim and purpose is to help to minimise the overall cost of a product which occured when distributing the product from a number of sources to another number of destinations.
Therefore because of its unique structure the method which is the usual simplex method is not suitable to been used in solving the transportation problems.
When comparing a letter of credit and a banker's acceptance for financing international business transactions, a letter of credit
a. pays a specified amount if certain conditions are met. Conversely, a banker's acceptance represents an unconditional promise to pay
b. provides financing directly between buyers and sellers in different countries. A banker's acceptance provides an arrangement in which a bank serves as a broker taking title to the goods.
c. provides payment anywhere in the world. A banker's acceptance pays in areas in which the bank has a branch.
d. requires both the buyer and seller to deal in the same currencies. A banker's acceptance provides for currency exchange.
Answer:
The answer is A.
Explanation:
A letter of credit is a promise given by an issuing bank at the request of its customer in which the bank promises to pay the beneficiary the states amount within a specified period of time. It has three elements – the beneficiary/seller, the buyer/applicant and the issuing bank.
While A banker's acceptance is a short term instrument given by a bank that obligates itself to make a payment at a later date. It is like a post-dated check.
During the first year of operations, Shapiro Tool accumulated the following manufacturing costs:
Raw materials purchased on account $12,000
Factory labor accrued 6,000
Incurred manufacturing overhead on account 4,000
Required:
Prepare separate journal entries for each manufacturing cost.
Answer:
Journal Entries are given below
Explanation:
DEBIT CREDIT
Raw Material purchase on account
Raw material $12,000
Account payable $12,000
Factory Labor Accrued
Direct labor $6,000
Wages payable $6,000
Manufacturing Overhead
Manufacturing Overhead $4,000
Account payable $4,000
The journal entries based on the details given are:
Date Account Title Debit Credit
XX-XXXX Raw materials inventory $12,000
Accounts Payable $12,000
Date Account Title Debit Credit
XX-XXXX Factory Labor $6,000
Factory Wages Payable $6,000
Date Account Title Debit Credit
XX-XXXX Manufacturing Overhead $4,000
Accounts Payable $4,000
Find out more at https://brainly.com/question/15610378.
Challenge Tennis & Recreation's operating activities for the year are listed below. Purchases $174 comma 800 Operating expenses 62 comma 600 Beginning inventory 27 comma 600 Ending inventory 37 comma 800 Sales revenue 334 comma 000 What is the gross profit for the year?
Answer:
The answer is $169,400
Explanation:
Gross profit is a line item under income statement and it is the difference between net sales(revenue) and cost of sales. It is a measure of profitability ( net sales - cost of sales?
Cost of sales = beginning Inventory + purchases - ending Inventory
$27,600 + $174,800 - $37,800
$164,600.
Now, cost of sales is: ( net sales - cost of sales)
$334,000 - $163,800
=$169,400
Zapper has beginning equity of $279,000, net income of $62,000, dividends paid of $51,000 and stockholder investments of $17,000. Its ending equity is:
Answer:
$307,000
Explanation:
Equity is the remaining value of the owner;s interest in a company after all liabilities have been settled.
It can also be defined as the capital contributed by the owners and the attributable profit or losses after a trading period that is retained in the entity.
The net income and the stockholder investment , being an inflow ,will be added to the beginning equity while the dividends paid being an outflow is deducted.
Workings
Ending equity = Beginning equity + net income +Stockholder investment - Dividends paid
=279,000+62,000+17,000-51,000
307,000
Laurel, Inc., and Hardy Corp. both have 7 percent coupon bonds outstanding, with semiannual interest payments, and both are priced at par value. The Laurel, Inc., bond has four years to maturity, whereas the Hardy Corp. bond has 15 years to maturity. If interest rates suddenly rise by 2 percent, what is the percentage change in the price of these bonds
Answer:
Laurel bond % change = -6.6%
Hardy bond % change = -16.3%
Explanation:
current bond price $1,000
interest rate 7%
Laurel bond matures in 4 years, 8 semiannual payments
Hardy bonds matures in 15 years, 30 semiannual payments
if market interest increases to 9%
Laurel bond:
$1,000 / (1 + 4.5%)⁸ = $703.19
$35 x 6.59589 (annuity factor, 4.5%, 8 periods) = $230.86
market price = $934.05
% change = -6.6%
Hardy bond:
$1,000 / (1 + 4.5%)³⁰ = $267.00
$35 x 16.28889(annuity factor, 4.5%, 30 periods) = $570.11
market price = $837.11
% change = -16.3%
Human resource management as a value-chain activity consists of activities involved in the recruiting, hiring, training, development, and compensation of all types of personnel. It supports:_________.
Answer:
Support Both individual primary and support activities as well as the entire value chain
Explanation:
VALUE CHAIN can be defined as the chain of activities that occur within a firm’s operations reason been that all products and services often pass through or go through all activities of the chain in which at each value chain activity the product or service tend to gains more value which is why Human resource management as a value-chain activity help to shown the components as having both primary activities and support activities, with all the human resource management functions of recruiting, hiring, training , development, retaining as well as growing right-fit the human resources as the important part of the support component.
Therefore Human resource management as a value-chain activity supports: BOTH INDIVIDUAL PRIMARY AND SUPPORT ACTIVITIES AND THE ENTIRE VALUE CHAIN.
Answer:
Support Both individual primary and support activities as well as the entire value chain
Explanation:
Gion Company is considering eliminating its windows division, which reported an operating loss for the recent year of $111,000. Division sales for the year were $1,170,000 and its variable costs were $1,035,000. The fixed costs of the division were $245,000. If the windows division is dropped, 60% of the fixed costs allocated to it could be eliminated. The impact on Gion’s operating income from eliminating this business segment would be:
Answer:
$12,000 increase
Explanation:
The computation of the impact on operating income from eliminating this business segment is shown below:
= Lost revenue + Variable cost avoided + Eliminated Fixed cost
= -$1,170,000 + $1,035,000 + $245,000 × 0.60
= -$1,170,000 + $1,035,000 + $147,000
= $12,000
The $12,000 represent the increase in operating income
Amanda Winter worked as a public engagement coordinator at Safe Food Alliance until three months ago when her manager, Laura Morris, promoted her to the position of a sustainable food campaigner. However, soon after this, Laura noticed that Amanda was facing major difficulties in achieving campaign milestones and the project was falling behind schedule due to her lack of performance. Which of the following, if true, would most strengthen the argument that Laura was influenced by the halo effect in her decision to promote Amanda? A) Laura is known to micromanage most of her projects. B) Laura uses cultural stereotyping in order to speed up the process of decision making. C) Laura has made good hiring decisions in the past and is known to be an unbiased judge of character. D) Laura sat in on only one of Amanda's presentations prior to giving her the promotion. E) Laura worked closely with Amanda over a period of eight months.
Answer:
Option D is the correct answer to this question.
Explanation:
Laura sat in on only one of Amanda's presentations before giving her the promotion.
They were made by hand before slides were mounted on computers. Designing a PowerPoint presentation took several hours and though it was costly. Presentations were illustrated back then people with devices such as journal flip charts and computer monitors, but these have been used in schools and conference rooms worldwide.
Other options are incorrect because they are not related to the given scenario.
Xie Company identified the following activities, costs, and activity drivers for 2017 The company manufactures two types of go-karts Deluxe and Basic.
Activity Expected Costs Expected Activity
handling materials $ 625,000 100,000 parts
Inspecting product 900,800 1,500 batches
Processing purchase orders 105,000 700 orders
Paying suppliers 175,000 500 invoices
Ensuring the factory 300,000 40,000 square feet
Designing packaging 75,000 2 models
Required:
1. Compute a single plantwide overhead rate, assuming that the company assigns overhead based on 125,000 budgeted direct labor hours
2. In January 2017, the Deluxe model required 2,500 direct labor hours and the basic model required 6,000 direct labor hours. Assign overhead costs to each model using the single plantwide overhead rate.
Answer:
Instructions are below.
Explanation:
Giving the following information:
handling materials $625,000
Inspecting product $900,800
Processing purchase orders $105,000
Paying suppliers $175,000
Ensuring the factory $300,000
Designing packaging $75,000
Total overhead= $2,180,800
First, we need to calculate the plantwide predetermined overhead rate:
Estimated direct-labor hours= 125,000
Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base
Predetermined manufacturing overhead rate= 2,180,800/125,000
Predetermined manufacturing overhead rate= $17.45 per direct labor hour
Now, we can allocate overhead:
Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base
Deluxe= 2,500*17.45= $43,625
Basic= 6,000*17.45= $104,700
Setrakian Industries needs to raise $96.2 million to fund a new project. The company will sell bonds that have a coupon rate of 6.04 percent paid semiannually and that mature in 30 years. The bonds will be sold at an initial YTM of 6.85 percent and have a par value of $2,000. How many bonds must be sold to raise the necessary funds
Answer:
53,597 Bonds
Explanation:
The first is to determine how much each bond of $2,000 face value is sold using the excel pv function below:
=-pv(rate,nper,pmt,fv)
rate is the yield to maturity which is 6.85% divided by 2
nper is the number of semiannual coupons the bond would pay i.e 30*2
pmt is the amount of semiannual coupon i.e $2,000*6.04%*6/12=60.4
fv is the face value of $2,000 per bond
=-pv(6.85%/2,60,60.40,2000)= 1,794.86
a bond is $ 1,794.86
number of bonds=$96,200,000/$1,794.86= 53,597
Metallica Bearings, Inc., is a young start-up company. No dividends will be paid on the stock over the next nine years because the firm needs to plow back its earnings to fuel growth. The company will pay a dividend of $17 per share 10 years from today and will increase the dividend by 3.9 percent per year thereafter. If the required return on this stock is 12.5 percent, what is the current share price? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Answer:
Price of the stock today = $67.15
Explanation:
The current price of the stock can be calculated using the constant growth model of DDM. The DDM values the stock based on the present value of the expected future dividends from the stock.
The formula for the price of the stock today under the constant growth model is,
P0 = D1 / (r - g)
Where,
D1 is the dividend expected to be paid next periodr is the required rate of returng is the growth rate in dividendsTo calculate the price today, we use the dividend for the next period. Thus, we will use D11 to calculate the price of the stock at Year 10 and will discount it back to today to calculate the price today.
P10 = 17 * (1+0.039) / (0.125 - 0.039)
P10 = $218.0617284
Price of the stock today = 218.0617284 / (1+0.125)^10
Price of the stock today = $67.15
20. A country with a surplus of oil but limited access to fresh water decides to trade resources with a country w
exchange these resources without any money involved. This exchange of products is best described as
O A. countertrading.
O B. mutual import.
O C. dual export.
O D. resource
Answer:
The correct answer is A. This exchange of products is best described as countertrading.
Explanation:
In international trade, countertrading is the process by which countries trade with each other through the exchange of products, as in barter, and not through the use of money to pay for such goods or services. That is, a country gives a series of goods that another country needs, in exchange for goods that said country produces and it does not have.
This type of international trade has the advantage of not altering the trade balance of nations, which remains neutral given that both countries deliver goods valued equally. Thus, fair and equitable trade is reached, although not always possible since the needs of one party do not always match those of the other.
Pharoah Company sublet a portion of its warehouse for five years at an annual rental of $71700, beginning on May 1, 2017. The tenant, Sheri Charter, paid one year's rent in advance, which Pharoah recorded as a credit to Unearned Rent Revenue. Pharoah reports on a calendar-year basis. The adjustment on December 31, 2017 for Pharoah should be
Answer:
Adjusting entries
Dr Unearned rent revenue $47,800
Cr Rent revenue $47,800 to record accrued rent revenue.
Explanation:
Contract value for one year $71,700
One month of rent $71,700/12 = $5,975
We will need to get how many month that has passed from May to December i.e 8 months
Value of 8 month of rent = 8 × $5,975
= $47,800 i.e earned portion of the contract.
Balance unearned rent revenue at year end= $71,700 - $47,800
= $23,900