Answer: Private Limited Company
Explanation:
From the question, we are informed that Burt has come across an excellent recipe for a new beer, and he and 20 college friends decide to go into business and they form a corporation named New Brew Inc., issuing stock only to the 21 of them and not selling any stock outside the group.
We are further told that the beer is a huge success, and they soon need to expand and decide to sell stock to members of the public to raise capital.
Before the sale of stock to the public, the corporation is a private limited company. The limited number of shareholders in this type of business is 50 and it does not trade its shares publicly.
A business issues 20-year bonds payable in exchange for preferred stock. This transaction would be reported on the statement of cash flows in a.a separate schedule. b.the cash flows from operating activities section. c.the cash flows from financing activities section. d.the cash flows from investing activities section.
Answer:
A. a separate schedule.
Explanation:
This is explained to be cash flow schedule or also cash flow statement. It is explained to be on out of the three financial statement which used generally to report for cash which been generated and how this money has been totally been spent within a period or interval which could be a week, month, quarter or even probably a year.
In the statement of cash flows, the cash flows are known to be generated from investing activities section while inclusion of receipts from the sale of investments. This is why in the stated 20 year payable bond, it is known to have been recorded in statement of cash flows in a separate schedule.
On January 1, James Industries leased equipment to a customer for a four-year period, at which time possession of the leased asset will revert back to James. The equipment cost James $700,000 and has an expected useful life of six years. Its normal sales price is $700,000. The residual value after four years, guaranteed by the lessee, is $100,000. Lease payments are due on December 31 of each year, beginning with the first payment at the end of the first year. Collectibility of the remaining lease payments is reasonably assured, and there are no material cost uncertainties. The interest rate is 5%. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)
Calculate the amount of the annual lease payments
Guaranteed Residual Value
Table or calculator function: n=?, i=?
Amount ot be recovered (fair value) $?
Guaranteed residual value $?
Amount to be recovered through periodic lease payments $?
Lease Payment
Table or calculator function: PVAD of $1 ?
n=?, i=?
Amount of fair value recovered each lease payment (Lease Payments $?)
* I would like to make sure the answer is correct. Please provide step by step calculate and explain.
Answer:
- $700,000
- 82,270
- $617,730
- present value of $1: n=4, i=5%
- the present value of an ordinary annuity of $1: n=4, i=5%
Explanation:
Amount to be recovered (fair value): $700,000
Less: Present value of the residual value ($100,000 x .82270*): 82,270
Amount to be recovered through periodic lease payments: $617,730
Lease payments -: end of each of the next four years: ($617,730 ÷ 3.54595**) $174,207
* present value of $1: n=4, i=5%
** present value of an ordinary annuity of $1: n=4, i=5%
Consider the everyday task of getting to work on time or arriving at your first class on time in the morning. Complete a fish-bone chart detailing reasons why you might arrive late in the morning. Identify each possible source of error.Material ________▼
Methods _______ ▼
Machinery ______▼
Complete the fish-bone chart by matching each number in the chart with the corresponding reason.
Answer:
Part 1.
Material - The road
Reason: due to the road is a part of the material or resource that is used in the driving process)
Method - Driving
Reason: driving itself is the method)
Machinery - The car
Reason: the car is the primary equipment for the driving process)
Manpower - Family or me
reason: the family or the owner is the manpower involved in the driving process)
Part 2. the correct chart is with reason and the possible source is attached.
Part 1. Reason: thanks to the road could be a part of the fabric or resource that's utilized in the driving process)
Fish-bone chartMaterial - The road
Method - Driving
Part-2 -Reason: driving itself is that the method)
Machinery - The car
Part-3 Reason: the car is that the primary equipment for the driving process)
Manpower - Family or me
Part-4 Reason: the family or the owner is that the manpower involved within the driving process)
Find out more information about Fish-bone chart here:
https://brainly.com/question/15898050
The combination of the degree of complexity and the degree of change existing in an organization's external environment is/are called:________
a. strategic fit.
b. strategic issues.
c. scenarios.
d. environmental uncertainty.
e. strategic factors.
Answer:
D. environmental uncertainty.
Explanation:
This could be explained to be a condition or situation when an organisation in form of a firm is said to have little or no information about its external environment and in this condition, making it unpredictable; especially when not expected. In other words, the term environmental uncertainty can be easily explained to be unpredicted, unexpected uncertainties that are said to happen in an external environment.
Global warming can be capitalized to be one of the physical and major environmental uncertainties that occurs in such a place.
The journal entry to record the $500 of work in process ending inventory that consists of $300 of direct materials, $50 of manufacturing overhead, and $150 of direct labor is which of the following?
A. Work in Process Inventory 500
Accounts Payable 500
B. Accounts Payable 500
Work in Process Inventory 500
C. Work in Process Inventory 500
Materials Inventory 300
Wages Payable 150
Manufacturing Overhead 50
D. Cost of Goods Sold 500
Work in Process Inventory 500
Answer:
C. Work in Process Inventory 500; Materials Inventory 300; Wages Payable 150; Manufacturing Overhead 50
Explanation:
The journal entry will definitely be as follows
Account Title Debit Credit
Work in Process Inventory $500
Raw materials inventory $300
Wages payable $150
Manufacturing overhead $50
asyFind manufactures and sells golf balls. The company is conducting a price test to find a better price point. Presently their golf balls sell for $21 per dozen. Their current volume is 4,250 dozen per month. They are considering reducing their sales price by 24% per dozen. What % increase in unit sales is necessary to achieve the same level of total contribution?
Answer:
%variation= 31.58% increase
Explanation:
Giving the following information:
Selling price per dozen= $21
Sales in units= 4,250
They are considering reducing their sales price by 24% per dozen.
First, we need to determine the actual total contribution:
Total contribution= 21*4,250= $89,250
Now, with the new selling price, the percentage variation in sales units:
Selling price= 21*0.76= $15.96
89,250= 15.96*units
5,592= units
Percentage:
%variation= [(5,592/4,250) - 1]*100= 31.58%
On November 1, Orpheum Company accepted a $10,000, 90-day, 8% note from a customer settle an account. What entry should be made on the November 1 to record the acceptance of the note
Answer:
Debit note receivable with $10,000
Credit accounts receivable with $10,000
Explanation:
The journal entry below should be used to record the acceptance of the note on November 1.
Note receivable account Dr $10,000
Accounts receivable Cr 10,000
Sunshine Blender Company sold 3000 units in October at a sales price of $45 per unit. The variable cost is $25 per unit. Calculate the total contribution margin.
Answer:
Total contribution margin= $60,000
Explanation:
Giving the following information:
Units sold= 3,000
Selling price per unit= $45
Unitary variable cost= $25
First, we will calculate the unitary contribution margin:
Unitary contribution margin= 45 - 25= $20
Now, total contribution margin:
Total contribution margin= 3,000*20= $60,000
During the week ended May 15, 2019, Scott Fairchild worked 40 hours. His regular hourly rate is $15. Assume that all of his earnings are subject to social security tax at a rate of 6.2 percent and Medicare tax at a rate of 1.45 percent. He also has deductions of $32 for federal income tax and $22 for health insurance. What is his gross pay for the week? What is the total of his deductions for the week? What is his net pay for the week?
Answer:
Gross pay = 600
Deductions = 99.9
Net Pay = 500.1
Explanation:
Requirement A:
Gross Pay = 40 hours x $15/hour
Gross Pay = $600
Requirement B:
Security Tax ( 600 x 6.2%) = $37.2
Medicare tax ( 600 x 1.45%) = $8.7
Federal Income = $32
Health Insurance = $22
Total deductions = $99.9
Requirement C :
Net Pay = Gross pay - all deductions
Net Pay = $600 - 99.9
Net Pay = 500.1
Information related to Harwick Co. is presented below.
1. On April 5, purchased merchandise on account from Botham Company for $23,000, terms 2/10, net/30, FOB shipping point.
2. On April 6, paid freight costs of $900 on merchandise purchased from Botham.
3. On April 7, purchased equipment on account for $26,000.
4. On April 8, returned damaged merchandise to Botham Company and was granted a $3,000 credit for returned merchandise.
5. On April 15, paid the amount due to Botham Company in full.
Required:
Prepare the journal entries to record these transactions on the books of Harwick Co. under a perpetual inventory system.
No. Date Account Titles and Explanation Debit Credit
1.
2.
3.
4.
5.
Answer:
1.
Apr 5
DR Merchandise inventory $23,000
CR Account payable $23,000
(To record Merchandise Purchased)
2.
Apr 6
DR Merchandise inventory $900
CR Cash $900
(To record payment of Freight Costs for Purchases)
3.
Apr 7
DR Equipment $26,000
CR Account payable $26,000
(To record purchase of Equipment)
4.
Apr 8
DR Account payable $3,000
CR Merchandise inventory $3,000
(To record return of damaged Merchandise)
5.
Apr 15
DR Account payable $20,000
CR Cash $19,600
CR Merchandise inventory $200
(To record payment for Merchandise bought on account)
Working
Terms of purchase 2/10 indicate that discount of 2% is warranted if goods paid for in 10 days which they were;
= 20,000 * ( 1 - 2%)
= $19,600
In response to the economic crisis in 2008, President Merkel "highlighted in her speech what the German government has already done: a financial sector rescue package worth up to €500 billion, and a proposed stimulus package of tax breaks [on income] and spending measures aimed at triggering investments of up to €50 billion over the next two years." Which parts of the stimulus plan will increase labor supply?
Answer:
Chancellor Merkel's proposed stimulus consisted of two parts:
a financial rescue package worth €500 billion (which I personally believe only helped bankers but didn't increase labor supply)tax breaks and investment measures worth €50 billionThe only part of the stimulus package that would actually help to increase labor supply is the last part, which also is the smallest part, since it should have increased investments. When investment increases, the interest rates decrease and aggregate demand increases. As aggregator demand increases, the demand for labor also increases. An increase in the demand for labor results in higher wages, which in turn increases labor supply until an equilibrium is reached.
Governments generally rescue financial institutions arguing that they are really important to the economy, but what is really amazing and repeats itself all over the world is that the same governments favor free markets. When small businesses fail, governments do not care, and small businesses represent 99% of America's companies. Governments only start caring when rich people lose money, since free market rules only apply to them when they favor them. If free market rules do not favor the rich, they are bad and governments intervene.
A customer enters your facility and discusses their most recent hunt. This was strictly a friendly, non-
professional conversation. According to your book, which of the following would you consider this use of
time in your business environment as?
1
Answer: Time spent
Explanation:
From the question, we are informed that a customer enters a facility and discusses their most recent hunt. We are further informed that it was strictly a friendly, non-professional conversation.
This will be consider as time spent in a business environment. Good customers relationship is needed for the success of every organization. Therefore, in this case, it'll be termed time spent.
Holdup Bank has an issue of preferred stock with a $6 stated dividend that just sold for $93 per share. What is the bank's cost of preferred stock
Answer:
6.45%
Explanation:
Calculation for bank's cost of preferred stock
Using this formula
Cost of preferred stock = Dividend / Price of Stock * 100
Where,
Dividend $6
Price of Stock 93 per share
Let plug in the formula
Cost of preferred stock =6/93*100
Cost of preferred stock= 0.0645*100
Cost of preferred stock=6.45 %
Therefore the bank's cost of preferred stock will be 6.45%
rawford Trucking plans to dispose of two trucks in 2022. They sell the first truck on January 2 and the second truck on July 9. If the end of their fiscal year is December 31, how will the calculation of book value differ for these two vehicles?
Answer: C : They will need to subtract a partial year of depreciation from the book value of the second truck but not the first truck.
Explanation:
When disposing of fixed assets such as vehicles, depreciation has to be charged on them to see their Net Book Value.
Companies usually depreciate their vehicles on a yearly basis in accordance with the end of their fiscal year. This company therefore most likely depreciates on December 31.
The first truck is sold 2 days after this Depreciation so there is no need to add more depreciation to it.
However the second truck on the other hand was sold 6 months later. Depreciation needs to charged on this substantial period but since it was not for the full year, a partial one needs to be charged.
Verizox Company uses a job order cost system with manufacturing overhead applied to products based on direct labor hours. At the beginning of the most recent year, the company estimated its manufacturing overhead cost at $181,090. Estimated direct labor cost was $481,580 for 19,900 hours.Actual costs for the most recent month are summarized here:Item Description Total CostDirect labor (1,800 hours) $46,361Indirect costs Indirect labor 2,540Indirect materials 3,420Factory rent 3,300Factory supervision 4,730Factory depreciation 5,760Factory janitorial work 1,270Factory insurance 1,890General and administrative salaries 4,240Selling expenses 5,350Required1. Calculate the predetermined overhead rate. (Round your answer to 2 decimal places.)Predetermined Overhead Rate _____ Per DL Hour2. Calculate the amount of applied manufacturing overhead.Applied Overhead Rate _____3. Calculate actual manufacturing overhead costs.Actual Manufacturing Overhead Costs _____4. Compute over- or underapplied overhead.Overhead _____
Answer:
Instructions are below.
Explanation:
Giving the following information:
Estimated overhead= $181,090
Estimated direct labor houra= 19,900
Actual costs:
Indirect labor= $2,540
Factory rent= $3,300
Factory supervision= $4,730
Factory depreciation= $5,760
Factory janitorial work= $1,270
Factory insurance= $1,890
Actual overhead= $19,490
Actual direct labor hours= 1,800
First, we need to calculate the predetermined overhead rate:
Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base
Predetermined manufacturing overhead rate= 181,090/19,900= $9.1 per direct labor hour
Now, we can allocate overhead based on actual direct labor hours:
Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base
Allocated MOH= 9.1*1,800= $16,380
Actual manufacturing overhead costs= $19,490
Finally, we can determine the over/under allocation:
Under/over applied overhead= real overhead - allocated overhead
Under/over applied overhead= 19,490 - 16,380
Under/over applied overhead= $3,110 underapplied
How much would you be willing to pay today for an investment that pays $1,300 per year at the end of the next 10 years
Answer:
The investment is worth $8,732.11 today.
Explanation:
Giving the following information:
Cash flow= $1,300
Number of years= 10
To calculate the present value, we need a discount rate. If not, the value of money through time is irrelevant.
Imagine a discount rate of 8% compounded annually.
First, we will calculate the future value:
FV= {A*[(1+i)^n-1]}/i
A= annual cash flow
FV= {1,300*[(1.08^10) - 1]} / 0.08
FV= $18,832.53
Now, the present value:
PV= FV/(1+i)^n
PV= 18,832.53/1.08^10
PV= $8,732.11
When setting optimal prices, which of the following is a concern when utilizing a regression of observed sales on observed prices to set them?
a. All of these answers apply.
b. Future prices might be outside the range of past prices.
c. There is not enough variation in observed prices.
Answer:
The Future prices might be outside the range of past prices when setting optimal price
Explanation:
Future prices might be outside the range of past prices is a concern when utilizing a regression of observed sales on observed prices to set them because setting An optimal price enables the price at which the seller can make the highest profit possible in order to increase revenue with maximum profitability in which this can only be done when using the optimal pricing strategy for example in a situation where a company is competing in several locations and different market segments, this means clearly understanding and planning a special approach for the environments before the company makes any changes in their pricing strategy is important because Future prices might be outside the range of past prices.
For the past year, Momsen, Ltd., had sales of $46,967, interest expense of $4,088, cost of goods sold of $17,184, selling and administrative expense of $12,051, and depreciation of $6,850. If the tax rate was 35 percent, what was the company's net income
Answer:
The Net Income is $4416.1
Explanation:
The net income is calculated as follows,
Sales $46967
Less:Cost of sales (17184)
Gross Profit 29783
Less:Expenses
Selling & Admin exp (12051)
Depreciation exp (6850)
Interest exp (4088)
Net income before ta 6794
tax expense (2377.9)
Net Income 4416.1
Knowledge Check 01 On March 15, Viking Office Supply agrees to accept $1,200 in cash along with a $2,800, 60-day, 15 percent note from one of its customers to settle his $4,000 past-due account. Prepare the March 15 entry for Viking Office Supply by selecting the account names from the drop-down menus and entering the dollar amounts in the debit or credit columns.
Answer:
Viking Office Supply
Debit Accounts Receivable $4,000
Credit Allowance for Uncollectible Accounts $4,000
To revise the write-off of past-due account.
Debit Cash Account $1,200
Debit 15% Notes Receivable $2,800
Credit Accounts Receivable $4,000
To record the cash receipt and notes settlement.
Explanation:
Since the account is past-due, it must have been written off as uncollectible expense. To revise this entry, a credit is made to the Allowance for Uncollectible Accounts and a debit to the Accounts Receivable.
Then a debit to the Cash Account in the sum of $1,200 and a debit to the Notes Receivable account for $2,800 and a credit to the Accounts Receivable.
Future Value At age 20 you invest $1,000 that earns 7 percent each year. At age 30 you invest $1,000 that earns 10 percent per year. In which case would you have more money at age 60?
Answer:
In the case of age 30, there will be more money at the age of 60
Explanation:
When person start investing at the age of 20 then total year till 60 years age is = 40 years.
Interest rate (r ) = 7 percent or 0.07.
Investment amount (Present value) = $1000
Now the total amount at the age of 60 years is calculated below.
[tex]Total \ amount = Present \ value (1 + r)^{n} \\= 1000 ( 1 + 0.07 ) ^{40}\\= 14974.4578 \ dollars[/tex]
Now calculate the total amount at the age of 60 years when he invest at the age of 30 and earns interest rate 10 percent. Now the number of years is 30.
[tex]Total \ amount = Present \ value (1 + r)^{n} \\= 1000 ( 1 + 0.1 ) ^{30}\\= 17449.4023 \ dollars[/tex]
Who would benefit if the exchange rate with yen (in U.S. dollars) increased (i.e. one dollar can buy more yens)?
Answer:
The answer is US consumers
Explanation:
Exchange rate is the rate at which a country can exchange its currency with another country’s currency.
An increase in the exchange rate of dollar with Yen discourages the Japanese from buying american goods.
Since US dollar is appreciating in relative to Japanese Yen, US consumers will benefit since they are buying the goods at a now cheaper rate.
You are hoping to have $10,000 in your account 7 years from today in order to go on a reindeer expedition in Lapland. If your current balance is $6,000, what APR (compounded monthly) would be required if you are to have $10,000 in your account in 7 years?
Answer:
APR= 7.32%
Explanation:
The APR is computed as shown below:
Future value = Present value (1 + r/ m)^nm
Future value = 10,000
Present value= 6,000
n=7
m=12
$ 10,000 = $ 6,000 (1 + r / 12 )^12 x 7
$ 10,000 = $ 6,000 (1 + r / 12 )^84
($ 10,000 / $ 6,000)^ 1 / 84 - 1 = r / 12
1.006099786 - 1 = r / 12
0.006099786 x 12 = r
r=0.006099786 x 12
r = 7.32%
APR= 7.32%
"According to the law of demand, with everything else being equal, the quantity demanded for a good or service will _____________ as the price increases."
Answer: Decrease
Explanation:
According to the Law of Demand, The quantity demanded for purchase of a commodity inversely varies with the price.
That is to say that "ceteris paribus" ( with everything being equal),When the prices of a particular good go higher, people will buy less of such commodity but will buy more, if the prices of the goods reduces.
We can say demand is elastic if quantity demanded for a commodity decreases with increase in price which will make people choose another lower substitute good eg, detergent, ice cream
Also if quantity demanded does not change much with increase in price , then it is referred to as Inelastic Demand for example necessity commodity such as gasoline.
According to Debra, the vice president of Theo Chocolate, the most important marketing vehicle the company has is: a.the fair trade certification. b.free product giveaways. c.tours of its factories. d.the unique varieties of chocolates it offers.
Answer:
The correct answer is the option C: Tours of its factories.
Explanation:
To begin with, the most important marketing vehicle the company has is the tours of its factories due to the fact that it is quite known that the showdown of the product and its current production to the customers increase the amount of desire that they have for them. Moreover, the fact of showing to the clients how well the products are made, with the greatest quality and all the correct process, the clients only feel more amaze for the products of the company and that is why that its demand increase as well as its sales, due to the tours.
Answer:
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Explanation:sqoakifthan yoikwp
High-Low Cost Estimation and Profit Planning Comparative 2007 and 2008 income statements for Dakota Products Inc. follow: DAKOTA PRODUCTS INC. Comparative Income Statements For Years Ending December 31, 2007 and 2008 2007 2008 Unit sales 5,000 8,000 Sales revenue $60,000 $96,000 Expenses (64,000) (76,000) Profit (loss) $(4,000) $20,000 (a) Determine the break-even point in units. Answer units (b) Determine the unit sales volume required to earn a profit of $5,000. Answer
Answer:
(a)
5,500 units
(b)
6,125 units
Explanation:
First, we need to calculate the per unit selling price.
2007 2008
Unit sales 5,000 8,000
Sales revenue $60,000 $96,000
Selling Price $12 $12
Now we need th separate the vairbale and fixed cost from total expense using high low method
Variable cost = ( Higher activity Expense - Lower activity Expense ) / ( Higher activity - Lower activity )
Variable cost = ( $76,000 - $64,000 ) / ( 8,000 units - 5,000 units )
Variable cost = $12,000 / 3,000 units = $4 per unit
Fixed cost = $76,000 - ( $4 x 8,000 units ) = $44,000
Contribution Margin = Selling Price - Variable cost = $12 - $4 = $8
(a)
Breakeven Point = Fixed Cost / Contributin margin per unit
Breakeven Point = $44,000 / $8 = 5,500 units
(b)
Target sales = ( Fixed cost + Desired Profit ) / Contribution margin per unit
Target sales = ( $44,000 + $5,000 ) / $8 = 6,125 units
A stock just paid a dividend of $3. The stock is expected to increase its dividend payment by 30% per year for the next 3 years. After that, dividends will grow at a rate of 8% forever. If the required rate of return is 10%, what is the price of the stock today?
Answer:
Price of stock today = $334.56
Explanation:
The Dividend Valuation Model(DVM) is a technique used to value the worth of an asset. According to this model, the value of an asset is the sum of the present values of the future cash flows would that arise from the asset discounted at the required rate of return.
This model would be applied as follows:
Year Present Value ( PV)
1 3 × 1.3 × 1.1^(-1) = 3.5454
2 3 × 1.3^2 × 1.1^(-2) = 4.1900
3 3 × 1.3^3 × 1.1^(-3) = 4.9519
Total 12.6874
Year 4 and beyond
This will be done in two steps
Step 1
D× (1+g)/k-g
3 × 1.3^4/(0.1-0.08)
=428.415
Step 2
Present Value in year 0
=428.415 × 1.1^(-3) = 321.87
Total present value = 12.6874 + 321.87 = 334.56
Price of stock today = $334.56
Expenditures on a nation's domestic production Group of answer choices are less than its domestic production. are equal to its domestic production. are greater than its domestic production. could be less than, equal to, or greater than its domestic production.
Answer:
are equal to it's domestic production
Explanation:
A country's Gross Domestic Product (GDP) is defined as value of all goods and services produced in a country during a given time. Domestic production refers to those goods and services produced at home for local consumption.
Expenditure refers to the monies expended by all entities namely; household, firms and government on goods and services with a country.
When all the entities involved in generating a country's GDP spend their money towards purchasing goods and services produced in a country, then local producers would have more money to buy materials that will be used for further production. The higher the money spent, the higher the production and vice versa.
The above is a cycle that is repeated each time household, firms and government buys locally produced goods hence expenditure on a nation's domestic production equal to it's domestic production.
The people in an economy have $10 million in money. There is only one bank that all the people deposit their money in and it holds 5% of the deposits as reserves. What is the money multiplier in this economy?
Answer:
The answer is 20
Explanation:
The money multiplier show us how an initial deposit can lead to a higher final increase in the total money supply or it relates to the maximum amount of bank money that can be created, given a certain amount of money from central bank money.
Money multplier = 1 / reserve requirement
Reserve requirement is 5% of the deposits
Therefore, money multiplier is
1 / 0.05
20
During 2022, Sheridan Company entered into the following transactions.
1. Purchased equipment for $318,770 cash.
2. Issued common stock to investors for $139,050 cash.
3. Purchased inventory of $70,940 on account.
Using the following tabular analysis, show the effect of each transaction on the accounting equation. (If a transaction causes a decrease in Assets, Liabilities or Stockholders' Equity, place a negative sign (or parentheses) in front of the amount entered for the particular Asset, Liability or Equity item that was reduced. See Illustration 3-4 for example.)
Answer with its Explanation:
Transaction 1: The purchase of equipment is increase in the fixed assets and as the amount paid is in cash, the decrease in cash asset will also be with the same amount. This means the net effect on assets will be zero.
Accounting Equation is given as under:
Fixed Assets + Current Asset = Equity + Liability
Equipment 318,770 - Cash $318,770 = Zero Net Effect
Transaction 2: The increase in the equity will increase the current asset as well here, which means:
Fixed Assets + Current Asset = Equity + Liability
Current Assets + $139,050 = Issued common stock + $139,050
Transaction 3: The purchase of inventory on account means that the current asset would be increased and the payables will increase with the same amount. The effect on the accounting equation is given as under:
Fixed Assets + Current Asset = Equity + Liability
Current Asset + $70,94 = Current liabilities + $70,940
Cox Media Corporation pays a coupon rate of 10 percent on debentures that are due in 15 years. The current yield to maturity on bonds of similar risk is 8 percent. The bonds are currently callable at $1,100. The theoretical value of the bonds will be equal to the present value of the expected cash flow from the bonds. Use Appendix B and Appendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods.a. Find the market value of the bonds using semiannual analysis. (Ignore the call price in your answer. Do not round intermediate calculations and round your answer to 2 decimal places.)b. Do you think the bonds will sell for the price you arrived at in part a?
Answer:
a. Find the market value of the bonds using semiannual analysis.
bond's price = PV of maturity value + PV of coupon payments
PV of maturity value = $1,000 / (1 + 4%)³⁰ = $308.32PV of coupon payments = $50 x 17.292 (annuity factor 4%, n = 30) = $864.60bond's price = $1,172.92
b. Do you think the bonds will sell for the price you arrived at in part a?
No, since they are currently callable at $1,100, their market price will be the call price. No investor will risk to pay more for a bond that can be called at a much lower price.