QS 10-9 Bond retirement by call option LO P4 On July 1, 2017, Advocate Company exercises an $6,400 call option (plus par value) on its outstanding bonds that have a carrying value of $329,600 and par value of $320,000. The company exercises the call option after the semiannual interest is paid on June 30, 2017. Record the entry to retire the bonds.

Answer:

D. refraining from the use of liquor, assuming the promisor is of legal drinking age

Explanation:

forbearance is having self control or restraint.

An adult of legal age that restrains himself from drinking exhibits forbearance

Answer: A. The new bonds will be issued at a premium to the current price of the 7% bonds

Explanation:

The New Bonds will have a coupon of 10% which will be higher than the 7% that was previous on offer for the same type of bonds.

This means that the same type of bond is giving a greater return than before. Investors will therefore want more of the bond giving out better returns and will not mind paying a higher price to get it.

For this reason, the bonds issued this year with a 10% coupon will sell at a Premium (higher than) the bonds that were issued years ago that only have a coupon rate of 7%.

Answer:

$56,000

Explanation:

Data:

Cost of good sold (single) = $50,000

Weighted average rate of the year = $1.12

Cost of good sold consolidated = ???????

Solution:

In order to find the translated amount of cost of goods sold that should appear in the consolidated income statement, we will multiply the cost of goods sold given for Canadian subsidiary with the weighted average rate of the year.

Calculation:

Cost of good sold (consolidated) = $50,000 x $1.12

Cost of good sold (consolidated) = $56,000

Answer:

December 15, 2015, bank loan is received

Dr Cash 120,000

    Cr Notes payable 120,000

December 31, 2015, adjusting entry for accrued interests payable ($120,000 x 9% x 15/360)

Dr Interest expense 450

    Cr interest payable 450

January 30,2016, loan is paid back to the back along with interests

Dr Interest expense 900

Dr Notes payable 120,000

Dr Interest payable 450

    Cr Cash 121,350

Answer:

Light Company

Merchandise Inventory:

Goods $2,400 sold on FOB shipping point =            $0

Goods $3,400 bought on FOB shipping point =       $3,400

Goods $4,400 on consignment               =                 $4,400

Goods $5,400 with net realizable value of $1,200 = $1,200

Value of inventory owned by Light Company     =  $9,000

Explanation:

a) Goods $2,400 sold on FOB shipping point: FOB shipping point means Free on Board shipping point.  This trade term specifies when ownership right is established, that it is at the shipping point and not the destination of the goods when the buyer takes possession.  The ownership was transferred to customer at shipping point with all risks and benefits.  They no longer belong to Light and are therefore not part of Light's inventory after the shipment.

b) Goods $3,400 bought on FOB shipping point:  As explained above, the ownership right and obligation were transferred at shipping point.  The goods belong to Light as it is the lawful owner based on the shipping term.

c) Goods $4,400 on consignment:  Goods on consignment do not belong legally to consignee though they are at his physical possession.  They belong to the consignor until they are sold to a third party.

d) Goods $5,400 with net realizable value of $1,200: The value of an item is not actually the cost but what it can be sold for.  This is especially so for an item that had previously suffered some damage.  The net realizable value is therefore to be used to account for the damaged goods so that profit is not overstated.

Answer:

a. Prepare the journal entry to record the issuance of the bonds on January 1, 2018

we must first determine the market price of the bonds:

PV of face value = $2,000,000 / (1 + 5%)²⁰ = $753,778.97 ≈ $753,779

PV of coupon payments = $110,000 x 12.462 (PV annuity factor, 5%, 20 periods) = $1,370,820

market value of the bonds = $753,779 + $1,370,820 = $2,124,599

January 1, 2018, bonds are issued at a premium

Dr Cash 2,124,599

    Cr Bonds payable 2,000,000

    Cr Premium on bonds payable 124,599

b. Prepare a bond amortization schedule up to and including January 1, 2022

since we are not told which amortization method to use, I will use the straight line method.

Date           Interest        Cash              Premium          Carrying

                  expense      paid               amortization     value

7/2018        $103,770     $110,000       $6,230             $2,118,369

1/2019         $103,770     $110,000       $6,230             $2,112,139

7/2019        $103,770     $110,000       $6,230             $2,105,909  

1/2020        $103,770     $110,000       $6,230             $2,099,679    

7/2020       $103,770     $110,000       $6,230             $2,093,449

1/2021         $103,770     $110,000       $6,230             $2,087,219  

7/2021        $103,770     $110,000       $6,230             $2,080,989                              

1/2022        $103,770     $110,000       $6,230             $2,074,759                                

c. Prepare the journal entries to record the interest payments on January 1, 2020 and January 1, 2021.

bond premium amortization per coupon = 124,599 / 20 = $6,229.95 ≈ $6,230

January 1, 2020, coupon payment

Dr Interest expense 103,770

Dr Premium on bonds payable 6,230

    Cr Cash 110,000

January 1, 2021, coupon payment

Dr Interest expense 103,770

Dr Premium on bonds payable 6,230

    Cr Cash 110,000

d. Prepare the journal entry to record the bond called on January 2021 at 106

Dr Bonds payable 2,000,000

Dr Premium on bonds payable 87,219

Dr Loss on retirement of debt 32,781

    Cr Cash 2,120,000

Answer:

Sherman Antitrust Act of 1890

Explanation:

Based on the information provided within the question it can be said that this communication is violating the Sherman Antitrust Act of 1890. This Act was passed prohibiting any contract, trust, or conspiracy in restraint of interstate or foreign trade in order to prevent oppressive business practices and monopolies. This is what the two companies are doing by agreeing to jointly raise the price they are able to control the entire markets price thus creating a monopoly in the automotive industry, which forces consumers to pay a lot more than what the vehicles are actually worth.

Answer:

Procurement

Explanation:

The purchasing function, sometimes called procurement is an important part of any firm's production strategy. The role of procurement is simply to get goods and services for the business needs.

Procurement is the act of getting goods or services, for business purposes. It is generally the last act of purchasing.

Answer:

A and D

Explanation:

Here, we want to select which of the options are correct;

A is correct

The GATT was established to provide access to more international trade between countries through the reduction of tarrifs. Hence , it helped reduce the tariff barrier in international trade.

B is incorrect

It is the other way round.

In fact, it is thus same Uruguay round of negotiations that gave birth to its successor which is WTO(world trade organization)

C is incorrect

The service provision is under the GATS( General agreement on trades in services).

The service branch was negotiated in 1995 as against the goods branch already in place in 1947

D is correct

It was indeed negotiated in 1947

Answer:

Trademarks.

Explanation:

Trademarks can be said to be symbols or logos that are been attached to a certain product that makes it distinct from the others and with times turns to shine as an authenticity mark or quality symbol of the merchant or the said product.

The above discusses one of the crucial benefits of trademarks; this is seen to be beneficial not only to the business owners or merchants but the customers are inclusive here, this is because these logos help them ascertain or easily identify their likely said products with little or no stress, and this is with peace of mind.

Answer:

The correct answer is B.

Explanation:

Giving the following information:

Direct material $8.40

Direct labor 24.40

Overhead 42.00

Total costs per unit $74.80

Purchasing price= $66.20 per unit.

First, we need to determine the real production cost per unit. If 30% of overhead is not avoidable, we will take into account only 70% of overhead.

Total production cost per unit= 8.4 + 24.4 + (42*0.7)= $62.2

It is cheaper to make the unit. If the unit is produced, the company will save $4 per unit.

Answer:

c. Interest on notes receivable is recognized when it is earned, which is not necessarily when the interest is received in cash.

Explanation:

Accrual principle of accounting is applied when it comes to recording of interest on notes receivable.

Accrual principle states that revenue or expense is recognized when it incurs or occurs not when it is paid or received.

Thus, Interest on notes receivable is recognized when it is earned, which is not necessarily when the interest is received in cash.

Answer:

Compensatory Damages

Explanation:

Based on this scenario it can be said that Donald is entitled to Compensatory Damages. This is a lawsuit that covers the loss that the non-breaching party incurred as a result of the breach of contract. In this scenario, Donald's employer breached the contract by firing Donald before the twelve months. Therefore Donald can sue for compensatory damages which would be the amount of money that he would have made in the rest of the twelve months.

Answer:

a. Compute the break-even number of seats sold on a single round-trip flight for the overall product. Assume that the overall product is 10% business class and 90% economy class tickets.

b. How many business class and economy class seats would be sold at the break-even point?

Explanation:

Fixed costs:

Variable costs:

Contribution margin:

Weighted average contribution margin:

break even point in units = $24,480 / $272 = 90 seats

business class = 90 x 10% = 9 seats

economy class = 90 x 90% = 81 seats

Answer:

e) 118.3.

Explanation:

days' sales in inventory = (average inventory x 365 days) / cost of goods sold year 2

days' sales in inventory = ($129,000 x 365 days) / $398,000 = 118.30 days

Days' sales in inventory measures how much time it takes on average for a company to sell its inventory.

Answer:

True

Explanation:

To illustrate how the sum-of-the-digits method allocates interest we can use a lease example:

You are the lessor and you will lease a machine during 4 years. The lease requires 4 equal payments of $100,000 at the beginning of the year. After the lease, the asset's salvage value = $0.

The asset's current value = $300,000, so total interests received = $100,000

Using the sum-of-the-digits method, you will allocate interest as follows:

The largest portion of interests is allocated during the beginning of the loan.

Answer:

$8.78

Explanation:

National advertising made dividend payment of $0.75 per share

The dividend is expected to grow at a constant rate of 6.50%

= 6.50/100

= 0.065

The company beta is 1.85

The required return on the market is 10.50%

The risk free rate is 4.50%

The first step is to calculate the rate of return using the CAMP model

R = Risk free rate+beta(market return-risk free rate)

= 4.50%+1.85(10.50%-4.50%)

= 4.50%+1.85×6%

= 4.50%+11.1

= 15.6

Required rate of return= 15.6

Therefore the current stock price can be calculated as follows

Po= Do(1+g)/(r-g)

Where Do= 0.75, g= 0.065, r= 15.6

Po= 0.75(1+0.065)/(0.156-0.065)

Po= 0.75(1.065)/0.091

Po= 0.7987/0.091

Po= $8.78

Hence the company current stock price is $8.78

Answer:

The expense account will be increased by $22,200

Explanation:

During the first year, all purchases were recorded as assets instead of expenses(supplies). This means asset account have been overstated while expenses account have been understated.

The adjusting entry will be

Supplies purchased - Actual year-end supplies

$28,800 - $6,600

$22,200.

The expense account will be increased by $22,200

Answer:

5.36%

Explanation:

We would need to calculate the yield to maturity of the current bonds:

YTM = {coupon + [(face value - market value)/n]} / [(face value + market value)/2]

YTM = {$30 + [($1,000 - $1,083)/40]} / [($1,000 + $1,083)/2] = $27.925 / $1,041.50 = 0.026812 x 2 = 0.05362 = 5.36%

Since the bond's coupon rate is higher than the market rate, the bonds are sold at a premium. In order to sell bonds at the par value, you must lower the coupon rate.

Answer:

$2,610

Explanation:

Calculation for how much money you must borrow.

Using this formula

Amount to be borrowed =( Purchased shares* Per share price*(Initial margin requirement percentage)

Let plug in the formula

Amount to be borrowed= 150 shares*$60 per shares *(1-0.71)

Amount to be borrowed=$9,000*(0.29)

Amount to be borrowed=$2,610

Therefore how much money you must borrow will be $2,610

Answer:

1. Share of Ann's Loss: $31,048

2. Share of Becky's Loss: $60,000

3. Maximum Loss Allowed: $41,300

Explanation:

The total loss for the year is $120,000 and both Ann and Becky own 50% each.

1. Share of Ann's Loss:

Ann had ownership of Whitman Inc. for 189 days which means the 50% of the total loss would be further lessened by 189/365 factor.

Mathematically:

Ann's Loss = $1,20,000 * 50% *  (189/365) = $31,048 Loss

2. Share of Becky's Loss:

This means that the share of loss for Becky would be = $120,000 * 50%

= $60,000

3. Maximum Loss Allowed:

As the stock basis is $41,300, hence the maximum loss for Becky would be $41,300.

Answer:

Total unitary cost= $13

Explanation:

Giving the following information:

Direct labor $2

Direct material 3

Variable overhead 4

Total variable cost= 9

Fixed overhead= $50,000

Units produed= 12,500

To calculate the total cost per unit, first, we need to calculate the unitary fixed overhead.

Unitary fixed overhead= 50,000/12,500= $4

Total unitary cost= 9 + 4= $13

Answer:

Amounts owed to suppliers for products and/or services purchased on credit.

Explanation:

Accounts payable are basically short term debts that a company has with its suppliers. E.g. a retailer purchases goods from a wholesaler on terms n/30. In this case, the accounts payable would be the amount of money owed to the retailer. There is no specific time frame for an accounts payable, since it varies depending on the credit that the supplier gives. E.g. sometimes a supplier will sell on a 45 day credit period, or even 60 day period.

Answer:

$23,200

Explanation:

                              Alternative 1               Alternative 2            Incremental

                              no repairs                   repair units              revenue

sales revenue       $31,200                       $0                            ($31,200)

repair costs           $0                                -$18,400                  ($18,400)

revenue from        $0                                $72,800                  $72,800

selling repaired units                                                                                    

total                                                                                            $23,200

Incremental revenues refer to the extra or additional revenues generated by a business activity or transaction. In this case, repairing and then selling the damaged units would increase income by $23,200.

Answer:

The amount needed to be deposited today = $13184.93

Explanation:

From the given information;

You need to have $33,250 in 20 years.

Annual interest rate :

4 percent for the first 6 years

4.6 percent for the next 5 years

5.3 percent for the final 9 years

The amount needed to be deposited today =

[tex]\dfrac{33250}{(1+\dfrac{4}{100})^6 \times (1+\dfrac{4.6}{100} )^5 \times (1+\dfrac{5.3}{100} )^9 }[/tex]

The amount needed to be deposited today = [tex]\dfrac{33250}{(1+0.04)^6 \times (1+ 0.046 )^5 \times (1+0.053 )^9 }[/tex]

The amount needed to be deposited today = [tex]\dfrac{33250}{(1.04)^6 \times (1.046 )^5 \times (1.053 )^9 }[/tex]

The amount needed to be deposited today = [tex]\dfrac{33250}{1.265319018 \times 1.252155953 \times 1.591678466 }[/tex]

The amount needed to be deposited today = $13184.93

Available Options are:

A. higher in City A than City B.

B. higher in City B than City A.

C. identical in both cities.

D. dependent on non-property tax revenues in each.

Answer:

Option B. Higher in the city B than in city A.

Explanation:

If we talk about the assessment ration, then it is calculated as under:

Assessment ratio = Value of property assessed by municipality / Fair Market value of the property

This ratio helps in calculating the property tax for each year and if the ratio is higher then the property tax rate will be set higher to collect the target property tax revenue and vice versa.

As in this case, the assessment ratio of company B is 100% which is higher than city A, which means that the city B will require higher tax rates to collect the target property tax revenue.

Hence the property tax rate in city B will be higher than City A to collect the same target property tax revenue.

Answer:

The end of the year balance in retained earnings after correction of prior period error is $2,135,390  

Explanation:

It is important to note that the error discovered has reduced retained earnings previously and by the time it is corrected retained earnings would increase by that amount of $89,590

Beginning retained earnings                     $702,500

net income for 2017                                   $1,426,500

dividends declared and paid in 2017         ($83,200)

correction of prior period error                   $89,590

Ending retained earnings                           $2,135,390  

Answer:

Autonomous consumption is $1,000 and the marginal propensity to consume is 0.9.

A consumer whose income increases by​ $100 will increase consumption by ​$90.

Explanation:

Given C = 1000 + 0.9Y

Autonomous consumption refers to consumption expenditure of consumers that does not depend on income. Therefore, autonomous consumption is therefore the consumption expenditure made by the consumers when they do not have income or when income is zero (i.e. when Y = 0).

Substituting for Y = 0 into the consumption function, we can obtain autonomous consumption is follows:

Autonomous consumption = 1000 + (0.9 * 0) = 1,000

The marginal propensity to consume refers to the proportion of the increase in disposable income that is spent on the consumption of goods and services by a consumer. From the consumption function, the marginal propensity to consume is 0.9.

Since marginal propensity to consume is 0.9, a consumer whose income increases by​ $100 will therefore increase consumption by $90 (i.e. $100 * 0.9 = $90).

Answer:

Investment in the investee will be overstated, retained earnings will be overstated.

Explanation:

The effect on the investor’s statement of financial position is shown below:-

Because the investor owns more than 30 percent of the equity approach has to be used. This will result in overestimated investments of $8,000 which comes from $20,000 × 40 percent in investee, which will also result in overestimated retained earnings of $8,000 which comes from $20,000 × 40 percent

Answer and Explanation:

There are six people totaling on behalf of the Score

But as a person 2 scores as much as a person 6 scores And person 1 scores as much as a person 5 scores so for all six people we only need four different ranking categories.

As an individual 6 score thus the highest

There are two people Pers 2 and Individual 6 in Excellent Category

We can say that the highest score belongs to person 3 hence Person 3 categories as Good after them from the graph.

After him, the highest score goes to person 1 and person 5, since both score equal

While person 1 and person 5 appear at Category Fair

The last person who is a minimum score of Person 4 thus falls in Poor Category.

We can also see, as with the highest scorers (2 and 6), that a total of 9 squares (these none squares are counted separately by lines in the graph) if we take each line as 4 units.

Then Individual 2 scores 36

(The only probability divisible by 9 is here 36)

Thus we may claim that individual 2 comes with 36 points in Category Excellence.