Final answer:
Banks act as financial intermediaries by pooling funds from savers and lending them to creditworthy borrowers, thus solving the problem of credit risk assessment for individual savers.
Explanation:
Banks act as financial intermediaries by accepting deposits from savers and lending those funds to borrowers. In the case of Alyssa, depositing her money in a local bank allows her to earn interest on her savings while avoiding the need to evaluate the credit risks of potential borrowers.
Financial intermediaries like banks help solve the problem of credit risk assessment for individual savers. By pooling funds from multiple savers, banks can diversify their lending portfolios and evaluate the creditworthiness of borrowers on behalf of the savers. This reduces the risks associated with lending money directly to individual borrowers.
By depositing her money in the bank, Alyssa can earn interest on her savings while having the assurance that her funds are being lent to creditworthy borrowers.
The Mammon Savings and Loan Company claims that the average amount of money on deposit in a savings account in their bank is $7,500. Suppose a random sample of 49 accounts shows the average amount on deposit to be $6,850 with sample standard deviation $1,200. Construct a hypothesis test to determine whether the average amount on deposit per account is different from $7,500. Use a 1% level of significance.
Answer:
We reject H0 to conclude that average money deposit in savings bank account in the bank is different from $7500.
Explanation:
Please see attachment
Miller owns a personal residence with a fair market value of $202,700 and an outstanding first mortgage of $162,160, which was used entirely to acquire the residence. This year, Miller gets a home equity loan of $10,135 to purchase new jet skis. How much of this mortgage debt is treated as qualified residence indebtedness?
Qualified Residence Indebtedness includes only those loans used for buying, building, or improving a home, and not those used for other purchases. In this case, only the original mortgage amount of $162,160 qualifies, while the home equity loan of $10,135 does not.
Explanation:The IRS defines Qualified Residence Indebtedness as a mortgage that you took out to buy, build, or substantially improve your primary or secondary home, and it must also be secured by that home. In Miller's case, the mortgage outstanding of $162,160 qualifies as this was used to acquire the residence. Although the home equity loan of $10,135 was secured by the same home, because it was used for purchasing jet skis and not for home improvement, it is not counted as Qualified Residence Indebtedness. Therefore, only the $162,160 from the first mortgage is treated as Qualified Residence Indebtedness.
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On September 1, Horn Co. accepted a 60-day, 5% note in the amount of $3,000 from a customer. On the due date of the note, the customer dishonors the note and fails to pay. The journal entry that Horn would make on the due date would include debit to:
Answer:
Notes Receivables $3,025.
Explanation:
As the company issued a note on credit, an notes Receivables account created. Therefore, it is the duty to pay the due during the maturity date. If he fails to pay, the notes receivables account will become debit again.
Therefore, notes receivable is debit.
Calculation:
Interest on Notes receivables on due date -
$3,000 x 5% x (60/360) = $150 x (1/6) = $25
Total amounts to be paid -
$3,000 + 25 = $3,025.
Answer:
Accounts Receivable for $3,025
Explanation:
Carbondale Oil announces that a well that it has sunk in a new oil province has shown the
existence of substantial oil reserves. The exploitation of these reserves is expected to increase
Carbondaleʹs free cash flow by $100 million per year for eight years. If investors had not been
expecting this news, what is the most likely effect on Carbondaleʹs stock price upon the
announcement, given that Carbondale has 80 million shares outstanding, no debt, and an equity
cost of capital of 11%?
A) no effect
B) rise by $5.15
C) rise by $6.43
D) rise by $7.72
Answer:
C) rise by $6.43
Explanation:
This due to the fact that investors had not expected the news and it is favorable to them.
NU YU announced today that it will begin paying annual dividends. The first dividend will be paid next year in the amount of $.35 a share. The following dividends will be $.40, $.55, and $.85 a share annually for the following three years, respectively. After that, dividends are projected to increase by 2.7 percent per year. How much are you willing to pay today to buy one share of this stock if your desired rate of return is 8 percent?]
Answer:
$13.84
Explanation:
Find the present value (PV) of each year's dividend;
PV( of D1) = 0.35 / (1.08) = 0.3241
PV( of D2) = 0.40 / (1.08²) = 0.3429
PV( of D3) = 0.55 / (1.08³) = 0.4366
PV( of D4) = 0.85 /(1.08^4) = 0.6248
Find PV of terminal cashflow;
D5 = D4(1+g) = 0.85(1.027) = 0.8730
PV( of D5 onwards)= [tex]\frac{\frac{0.8730}{0.08- 0.027} }{1.08^{4} }\\ \\ =\frac{16.4717}{1.3605}[/tex]
PV( of D5 onwards) = 12.1071
Sum up the PVs to find the price per share;
= 0.3241 + 0.3429 + 0.4366 + 0.6248 + 12.1071
= 13.836
Therefore, you should pay $13.84
On January 22, Jefferson County Rocks Inc., a marble contractor, issued for cash 77,000 shares of $50 par common stock at $53, and on February 27, it issued for cash 17,040 shares of preferred stock, $10 par at $11. Required: a. Journalize the entries for January 22 and February 27. Refer to the Chart of Accounts for exact wording of account titles. b. What is the total amount invested (total paid-in capital) by all stockholders as of February 27?
Answer:
A) Journal Entries are in the explanation section
B) Total amount invested by stockholders - $4,268,440
Explanation:
Requirement - A)
Date Account Titles & Explanation Debit ($) Credit ($)
For common stock -
Jan-22 Cash (77,000 stocks*$53) 4,081,000
Common stock
($50 par value, 77,000 shares) 3,850,000
Paid-in Capital in excess of par value
($53 - $50 = $3; 77,000 shares) 231,000
As the market value of a stock price is more than par value, there will be additional paid-in capital of $3 per stock. The above journal is made to record the issuance of common stock.
For preferred stock -
Feb-27 Cash (17,040 stocks*$11) 187,440
Preferred stock
($10 par value, 17,040 shares) 170,400
Paid-in Capital in excess of par value - Preferred stock
($11 - $10 = $1; 17,040 shares) 17,040
As the market value of the preferred stock is more than par value, there will be additional paid-in capital of $1 per stock. The above journal is made to record the issuance of preferred stock.
Requirement - B)
Particulars Amount ($)
Common Stock ($50 x 77,000) 3,850,000
Paid-in Capital in excess of par value-Common Stock 231,000
[($53-$50)*77,000]
Preferred stock ($10*17,040) 170,400
Paid-in Capital in excess of par value - Preferred stock 17,040
[($11 - $10)*17,040 shares]
Total invested amount $4,268,440
Therefore, the shareholders invested the par value as well as additional value in order to continue the company's operation.
Dirty Don's Bicycle Shop is current financed with 100% equity. The firm currently has 100,000 shares of common stock outstanding, selling for $50 per share. Don is considering a capital restructuring project, where the firm would be financed with 45% debt and 55% equity. How many bonds would Don have to sell at par value? (Remember that par value of a bond is $1,000).
Answer:
Number of bonds to raise = 2250
Explanation:
given data
current financed = 100% equity
common stock outstanding = 100,000 shares
selling = $50 per share
debt = 45%
equity =55%
par value of a bond = $1,000
to find out
How many bonds would Don have to sell at par value
solution
we get here first the value of equity that is express as
value of equity = Number of shares × Price per share .................1
put here value
value of equity = 100,000 × $50
value of equity = $5,000,000
and
financed with bonds = 45 % of value of equity
financed with bonds = 45 % × $5,000,000
financed with bonds = $2,250,000
so
Number of bonds to raise is express as
Number of bonds to raise = [tex]\frac{2,250,000}{1000}[/tex]
Number of bonds to raise = 2250
XYZ Company is in the process of issuing bonds. The bonds have a stated interest rate of 4%, which is 2% below the current market rate. What effect will the two interest rates have on the bond issue price?
A. The issue price will be above the bond's face value.
B. The issue price will equal the bond's face value.
C. The issue price will be below the bond's face value.
Answer:
C. The issue price will be below the bond's face value
Explanation:
Issuing new bonds with a stated interest rate of 2% below the market rate means that the issuing company will pay investors(bondholders) a coupon amount that is less than what the market is currently offering. Due to this reason, investors will not be willing to pay a higher price to receive lower coupon payments for the life of the bond. Therefore, the issuing price will be below the bond's face value.
The equation represents the savings and investment identity for the country of Moonzealand (all values are in billions of DolurMoonZees). Private savings+Inflow of foreign savings=Private investment+Government deficit 85.0+45.0=130.0+0.0a.What is the total financial capital demanded?b.What is the total quantity supplied of financial capital?
Answer:
$130 billions, $130 billions
Explanation:
We know that
Private savings + Inflow of foreign savings = Private investment + Government deficit
The right hand side reflect the total financial capital demanded and the left hand side reflect the total quantity supplied of financial capital
So, in the given case
Total financial capital demanded = $130 billions
And, the Total quantity supplied of financial capital would be
= $85 billion + $45 billions
= $130 billions
Hence, the demand and supply are equal
A company purchased $10,100 of merchandise on June 15 with terms of 2/10, n/45, and FOB shipping point. The freight charge, $550, was added to the invoice amount. On June 20, it returned $880 of that merchandise. On June 24, it paid the balance owed for the merchandise taking any discount it is entitled to. The cash paid on June 24 equals:
Answer:
$9,586
Explanation:
The computation of the cash paid is shown below:
= Merchandise amount - returned goods - discount + freight charges
= $10,100 - $880 - $184.40 + $550
= $9,586
The discount = (Merchandise amount - returned goods) × discount rate
= ($10,100 - $880) × 2%
= $184.40
Simply we deduct the returned goods and discount and added the freight charges to the merchandise amount so that the correct amount can come.
Fill in the blanks. It is ____ for individual firms in competitive markets to invest in advertising because they sell ______. Advertising in this market increases _____ without directly influencing sales. However, ______ will still advertise to increase demand for the common product.
In competitive markets, firms are less likely to invest in advertising due to the homogeneity of products, but they may still do so in monopolistic competition to differentiate their offerings. Successful advertising can make the perceived demand curve for a firm's product more inelastic or shift it to the right.
Explanation:It is less common for individual firms in competitive markets to invest in advertising because they sell homogeneous products. Advertising in this market increases market awareness without directly influencing sales. However, firms will still advertise to increase demand for the common product.
Advertising in competitive markets is a way for firms to differentiate themselves from their competitors. In a monopolistic competition, advertising can make a firm's perceived demand curve become more inelastic (steeper) or increase overall demand for the firm's product (shifting the demand curve to the right). A successful advertising strategy may lead to increased profits by allowing the firm to charge higher prices or sell larger quantities.
One of the least desirable and routine tasks members of your team must do is taking minutes (notes) at team meetings. Proof that this task is disagreeable can be seen in the repeated arguments among team members before every meeting about who should take the minutes. Which of the following would be the most effective way for the team to address this stuation? Sellect 1- Save Answer ts ■ Ask your manager to decide in order to minimize any personal bias among team members. [] Randomly assign a person to bé the official note taker at the beginig of each meeting
Answer:
This question is incomplete, here is the complete question:
One of the least desirable and routine tasks members of your team must do is taking minutes (notes) at team meetings. Proof that this task is disagreeable can be seen in the repeated arguments among team members before every meeting about who should take the minutes. Which of the following would be the most effective way for the team to address this situation? Select: 1
a) Assign note-taking to whichever person enters last at each meeting.
b) Ask your manager to decide in order to minimize any personal bias among team members.
c) Randomly assign a person to be the official note-taker at the beginning of each meeting.
d) Create a rotating assignment so each team member shares note-taking
The answer is d)
Explanation:
Since bias and routine can be a big culprit for team effectiveness, it is up to the manager to control the level of uniformity and objectivity. Teams are all about equality and there is no reason why a particular team member should engage with a monotonous task more frequently than others.
Therefore, a rotating assignment is the way to get every team member engaged with the troublesome task.
Although team member bias would be avoided in the b) case, manager bias would still be present and unavoidable. The a) case is highly unprofessional and is an over-the-top gamification element in team management.
While c) may be a reasonable answer, random assignment can "favor" one person over the other at certain times, as the random algorithm doesn't always have to abide with the uniform distribution.
Having all of that in mind, d) is the best answer possible.
Assume that a $1,000,000 par value, semiannual coupon U.S. Treasury note with two years to maturity has a coupon rate of 6%. The yield to maturity (YTM) of the bond is 9.90%. Using this information and ignoring the other costs involved, calculate the value of the Treasury note:
The current value of the U.S. Treasury note is calculated by discounting its semiannual interest payments and face value by its yield to maturity. The value of treasury note is $30,000 every six months.
Explanation:The value of a $1,000,000 par value, semiannual coupon U.S. Treasury note with two years to maturity and a coupon rate of 6% can be calculated by discounting its future cash flows by its yield to maturity (YTM) of 9.90%. The Treasury note will pay semiannual interest payments based on the coupon rate, which in this case is $1,000,000 * 6% / 2 = $30,000 every six months.
To find the present value (PV) of these payments, we need to discount each payment by the YTM using the formula for PV of an annuity. Additionally, the $1,000,000 face value due at maturity must be discounted back to the present value as well. By doing this, we will find the current market value of the Treasury note.
To clarify the effect of interest rates on the bond's price: When interest rates rise, bonds issued at lower interest rates will sell for less than face value, while bonds issued at higher rates will sell more than face value.
This is because investors demand a higher yield for taking on the risk of a bond with lower relative interest payments. Conversely, when interest rates fall, bonds with higher coupon rates become more attractive because they offer higher interest payments than newly issued bonds.
The short-term scheduling activity called "loading": Select one:
a. assigns workers to jobs.
b. assigns jobs to work centers
c. assigns workers to machines.
d. assigns dates to specific jobs or operations steps.
e. specifies the order in which jobs should be done at each center.
Answer:
b. assigns jobs to work centers
Explanation:
Initially an aggregate plan is prepared and then there is a master plan, accordingly with that master plan divided into smaller sections some short term schedules are prepared.
Under the short term scheduling the term loading is done which refers to assignment of jobs to work centers.
This provides for the segregation of duties and work in between different work centers as in which work center will perform which job.
The company jointly performs all activities in order to meet the aggregate plan, by performing duties of each work center properly the goal can be achieved.
Today, Jennifer earns $55000 at her first job. Her mom used to make $15,000 at her first job in 1975. Jennifer is of the opinion that she makes more than her mom would have made if she started working today. Her mom thinks Jennifer would have earned less than she if Jennifer had started working in 1975. If the CPI today is 237 and the CPI in 1975 was 82, then
Answer:
Jennifer makes more.
Explanation:
($15,000/82) x 237= $43,354
($55,000/237) x 82 = $19,030
Jennifer makes more.
Hemmer Company reported net income for 2018 in the amount of $45,000. The company's financial statements also included the following: Decrease in accounts receivable $ 6,400 Increase in inventory 1,100 Depreciation expense 3,200 What is net cash provided by operating activities?.
Answer:
$53,500
Explanation:
The preparation of the Cash Flows from Operating Activities—Indirect Method is shown below:
Cash flow from Operating activities - Indirect method
Net income $45,000
Adjustment made:
Add : Depreciation expense $3,200
Add: Decrease in accounts receivable $6,400
Less: Increase in inventory -$1,100
Total of Adjustments $8,500
Net Cash flow from Operating activities $53,500
Given the following information, calculate the effective gross income multiplier: sale price: $950,000; potential gross income: $250,000; vacancy and collection losses: 15%; and miscellaneous income: $50,000.
A. 0.36
B. 0.30
C. 2.8
D. 3.6
Answer:
D. 3.6
Explanation:
The effective gross income multiplier (EGIM) is the ratio between the sale price (SP) and the effective growth income (EGI)
[tex]EGIM = \frac{SP}{EGI}[/tex]
Sales Price (SP) = $950,000
Potential gross income (PI) = $250,000
Vacancy and collection losses (VC)= 15% = 0.15 * $250,000 = $37,500
Miscellaneous income (M) = $50,000.
The effective growth income is given by:
[tex]EGI = PI +M - VC = \$250,000 +\$50,000 - \$37,500\\EGI = \$262,500[/tex]
Thus, the effective gross income multiplier is:
[tex]EGIM = \frac{\$950,000}{\$262,500} \\EGIM = 3.6[/tex]
Which of the following variables is/are not required input(s) for parsimonious multiyear forecasting? Select one:
A. Net operating asset turnover (NOAT)
B. Net operating profits margin (NOPM)
C. Sales growth
D. Net nonoperating obligations (NNO)
E. All of the above are required inputs
Option(D) For parsimonious multiyear forecasting, variables such as NOAT, NOPM, and Sales Growth are commonly used, whereas NNO might not be essential. Off-balance sheet activities also influence financial analysis but are not typically considered in this type of forecasting.
When considering parsimonious multiyear forecasting, not all variables are essential inputs. Specifically, variables such as Net Operating Asset Turnover (NOAT), Net Operating Profits Margin (NOPM), and Sales Growth tend to be critical as they directly relate to a company's operational efficiency and market performance.
However, Net Nonoperating Obligations (NNO), while important in broader financial analysis, may not be as crucial for a compact multiyear forecast focused on the core operations of the firm. Additionally, other factors like banking activities taking place off the balance sheet can affect a firm's financial outlook but are not typically included in a parsimonious forecasting model.
Sensible Insurance Company collected a premium of $18,000 for a 1-year insurance policy on April 1. What amount should Sensible report as a current liability for Unearned Insurance Revenue at December 31?
Answer:
Current liability for 3 months will be $4500
Explanation:
We have given that
Sensible insurance company has collected a premium of $18000
We have given time = 1 year = 12 months
So the premium collected per month [tex]=\frac{$1800}{12}=$1500[/tex
Now, the company has collected the revenue on April 1 and now it is December 31
So number of months from April to December = 9
So total premium earned in 9 months = 9× $1500 = $13500
So current liability for 3 months will be = 3×$1500 = $4500
Ivanhoe company purchased machinery with a list price of $88000. They were given a 7% discount by the manufacturer. They paid $400 for shipping and sales tax of $4700. Ivanhoe estimates that the machinery will have a useful life of 10 years and a residual value of $25000. If Ivanhoe uses straight-line depreciation, annual depreciation will be
A) $6194
B) $5684
C) $8694
D) $6152
Answer:
A) $6194
Explanation:
Price before discount = $88,000
discount rate = 7%
Amount of discount = 7% *$88,000 = $6,160
Price after discount = Price before discount - Amount of discount
= $88,000 - $6,160
Price after discount = $81,840 (this is the price included in depreciation)
Items included in total cost of machinery;
Price of machinery after discount = $81,840
Shipping cost = $400
Sales tax = $4,700
Therefore, total cost is therefore = $81,840 + $400 + $4,700 = $86,940
Depreciation per year = (Total cost of the machinery - salvage value) / useful life
= (86,940 - 25,000)/ 10
= 61,940/10
= 6,194
Therefore annual depreciation = $6,194
In February 2017 the risk-free rate was 4.97 percent, the market risk premium was 7 percent, and the beta for Twitter stock was 1.40. What is the expected return that was consistent with the systematic risk associated with the returns on Twitter stock?
Answer:
14.77%
Explanation:
In this question, we apply the Capital Asset Pricing Model (CAPM) formula which is shown below
Expected rate of return = Risk-free rate of return + Beta × (Market rate of return - Risk-free rate of return)
= 4.97% + 1.40 × 7%
= 4.97% + 9.8%
= 14.77%
The (Market rate of return - Risk-free rate of return) is also called market risk premium and the same is shown in the answer
Based on the concept of the risk-free rate and the available information, the expected return on Twittér stock is $14.77
How to determine the expected returnTo calculate the expected return consistent with the systematic risk associated with the returns on Twittér stock, use the Capital Asset Pricing Model (CAPM).
The CAPM formula is as follows:
Expected Return = Risk-Free Rate + (Beta * Market Risk Premium)
Given the following information:
Risk-Free Rate = 4.97%
Market Risk Premium = 7%
Beta (β) for Twittér stock = 1.40
calculate the expected return:
Expected Return = 4.97% + (1.40 * 7%)
Expected Return = 4.97% + 9.8%
Expected Return = 14.77%
Therefore, in this case, it is concluded that the expected return that is consistent with the systematic risk associated with the returns on Twittér stock is 14.77%.
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Suppose you and a classmate are playing a game where your classmate proposes a division of $1.00. Then, you either accept or reject the offer. If you accept, then you and the classmate get the proposed portions of the dollar. However, if you reject theoffer, then you and your classmate receive nothing.
Suppose your classmate offers you $0.12
What is your optimal strategy?
Your optimal strategy is to _________ the proposed division.
A. Accept
B. Reject
Now suppose instead that you propose the division of the dollar. Your classmate will then accept or reject your division. If the classmate accepts, then you each receive the portion of the dollar as you have proposed. However, if your classmate rejects, then you both get nothing.
Your optimal strategy is to offer your classmate $_______. (Enter a numeric response to two decimal places)
Answer:
Your optimal strategy is to accept the proposed division.Your optimal strategy is to offer your classmate $ 0.49.Explanation:
An optimarl strategy is one that maximizes a player’s expected payoff. In this case this is a cooperative game.
Within the marketing concept, a service orientation is an integrated organizational effort that revolves around.
Multiple Choice
O finding out what consumers want and providing it for them.
O making goods and services that will earn the most profit.
O training employees to sell services in unique ways.
O making sure customers are satisfied.
In marketing, service orientation is about focusing entirely on delivering customer satisfaction, which directly aligns with finding out what consumers want and providing it for them.
Explanation:In the context of marketing, service orientation means focusing on creating customer satisfaction. This notion aligns with the first option from the multiple choice question: finding out what consumers want and providing it for them. This lens of operation seeks to enhance the customer experience by discerning their needs and fulfilling them to retain loyalty. Profit, unique sales techniques, or how goods/services are made do not take priority in service orientation, but are, instead, products of successfully creating a satisfied and loyal customer base.
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A service orientation is an integrated effort within a marketing concept that revolves around ensuring customer satisfaction, meeting and exceeding customers' needs and expectations.
Explanation:In the context of the marketing concept, a service orientation is an intrinsic effort by an organization to focus primarily on customer satisfaction. This implies that the correct option is 'making sure customers are satisfied'. A service orientation strives to understand and meet customer needs, placing them at the core of all business decisions. It is not strictly about devising ingenuous ways to sell services or merely creating profitable products but rather delivering services that meet and exceed customer expectations to foster satisfaction and loyalty.
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Suppose you invested $100 in the Ishares High Yield Fund (HYG) a month ago. It paid a
dividend of $2 today and then you sold it for $95. What was your dividend yield and capital
gains yield on the investment?
A) 2%, -5%
B) 2%, 5%
C) -2%, 5%
D) 5%, 2%
Answer:
A) 2%, -5%
Explanation:
The computations are shown below:
Dividend yield = (Annual yield) ÷ (market price) × 100
where,
Market price = $95 per share
Annual dividend = $2 per share
So, the dividend yield = ($2 per share ÷ $95 per share) × 100
= 2%
Capital gain yield = (Market price - purchase price) ÷ (purchase price) × 100
= ($95 - $100) ÷ ($100) × 100
= -5%
We assume the purchase price is 100
On March 31, 2021, Wolfson Corporation acquired all of the outstanding common stock of Barney Corporation for $17,500,000 in cash. The book values and fair values of Barney’s assets and liabilities were as follows: Book Value Fair Value Current assets $ 6,500,000 $ 8,000,000 Property, plant, and equipment 11,500,000 14,500,000 Other assets 1,050,000 1,550,000 Current liabilities 4,500,000 4,500,000 Long-term liabilities 6,500,000 6,000,000
Answer:
Amount paid for goodwill = $3950000
Explanation:
given data
outstanding common stock = $17,500,000
book values fair values
Current assets $6,500,000 $8,000,000
Property plant and equipment 11,500,000 14,500,000
Other assets 1,050,000 1,550,000
Current liabilities 4,500,000 4,500,000
Long-term liabilities 6,500,000 6,000,000
to find out
Calculate the amount paid for goodwill
solution
we get here first Net fair value of assets acquired that is here
Net fair value of assets = Current assets + Property plant and equipment +Other assets - Current liabilities - Long-term liabilities .................1
put here value we get
Net fair value of assets = 8,000,000 + 14,500,000 + 1,550,000 - 4,500,000 - 6,000,000
Net fair value of assets = 13550000
and
Amount paid for goodwill here
Amount paid for goodwill = outstanding common stock - Net fair value of assets .......................2
put here value
Amount paid for goodwill = $17,500,000 - 13550000
Amount paid for goodwill = $3950000
The Goodwill from Wolfson Corporation's acquisition of Barney Corporation is calculated to be $4,000,000. This represents the excess of the purchase price over the fair value of the net identifiable assets and liabilities acquired.
Explanation:When Wolfson Corporation acquired Barney Corporation, a calculation called Goodwill must be performed to account for the difference between the purchase price and net fair value of the identifiable assets and liabilities acquired. The fair values of Barney's assets and liabilities become the basis for Wolfson's balance sheet entries relative to the acquisition.
Goodwill can be calculated as follows:
purchase price: $17,500,000
Fair value of assets acquired: $8,000,000 (current assets) + $14,500,000 (property, plant, and equipment) + $1,550,000 (other assets) = $24,050,000
Fair value of liabilities assumed: $4,500,000 (current liabilities) + $6,000,000 (long-term liabilities) = $10,500,000
Goodwill = Purchase price - (Fair value of assets acquired - Fair value of liabilities assumed) = $17,500,000 - ( $24,050,000 - $10,500,000) = $4,000,000
Thus, Wolfson Corporation would record a Goodwill of $4,000,000 in its balance sheet related to the acquisition of Barney Corporation.
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At the beginning of his current tax year, David invests $12,000 in original issue U.S. Treasury bonds with a $10,000 face value that mature in exactly 10 years. David receives $700 in interest ($350 every six months) from the Treasury bonds during the current year, and the yield to maturity on the bonds is 5 percent. (Round your intermediate calculations to the nearest whole dollar amount.) How much interest income will he report this year if he elects to amortize the bond premium?
Answer:
$599.
Explanation:
Please see attachment .
The interest income will he report this year if he elects to amortize the bond premium $599
Briefing:-If David decides to amortize the $2,000 bond premium, he will do so semiannually using the constant yield approach, which is analogous to the effective interest method used to amortize bond premium under GAAP. In the end, he will declare $599 in bond interest income.
What is a discount or premium on bonds?A premium bond has a coupon rate that is greater than the going rate for the maturity and credit grade of the bond. In contrast, a discount bond has a coupon rate that is lower than the current rate of interest for bonds of that maturity and credit rating.
What do you earn from interest?income from specific bank accounts or from lending money to others is known as interest income. Income from interest that must be taxed is known as taxable interest income. All interest income, unless specifically excluded, is taxed.
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Two insulation thickness alternatives have been proposed for a process steam line subject to severe weather conditions. One alternative must be selected. Estimated savings in heat loss and installation cost are given below. Which thickness would you recommend for a MARRequals12% per year and negligible market (salvage) values? The study period is 4 years. Use the imputed market value technique to estimate the market value of the 5 cm alternative after four years.
Answer:
= - $3068 per year
Explanation:
The AW of 5 cm insulation is
AW 5 cm (15%) = -40000(A/P, 15%, 6) +7500
=-40000(0.2642) +7500
= - $3068 per year
For a MARR of 12% per year and negligible market values, the recommended insulation thickness for the process steam line that is subject to severe weather conditions would be based on the insulation that leads to the highest net savings over the four-year period considering the cost of installation and the reduction in heat loss. However, without the specific heat loss and installation cost data provided for the alternatives, a definitive recommendation cannot be given. The imputed market value technique cannot be applied without these values.
To make an informed recommendation between two insulation thickness alternatives for a steam process line, an evaluation using the net present value (NPV) or equivalent annual cost (EAC) methods would typically be conducted. These methods consider both the upfront installation costs and the ongoing savings from reduced heat loss due to the insulation. The imputed market value technique might estimate the remaining value of the insulation after the study period, but without the initial cost and savings data, such calculations cannot be completed. Energy cost, installation cost, and heat conduction rate variations based on insulation thickness are key inputs for this decision-making process.
Patrick, an attorney, is the sole shareholder of Gander Corporation, a C corporation. Gander is a personal service corporation with a fiscal year ending November 30 (pursuant to a § 444 election). The corporation paid Patrick a salary of $180,000 during its fiscal year ending November 30, 2018. How much salary must Gander pay Patrick during the period December 1 through December 31, 2018, to permit the corporation to continue to use its fiscal year without negative tax effects?
Answer:
Therefore, the Salary that Gander Corporation Pay Patrick during the Period without Negative Tax effects is $15,000.
Explanation:
Calculation of the Salary that Gander Corporation Pay Patrick during the Period:
December 1 through December 31 of the Current Year is One Month, They have to Pay 1/12 of the following year tax:
The salary for the deferral period (December 1 through December 31) must be at least proportionate to the employee’s salary received for the fiscal year.
Gander Corporation must pay the amount to Patrick during the Period December 1 through December 31, to permit the continued use of its fiscal year without negative tax effects is as follows,
$180,000 *1/12 = $15,000
The Fed’s control of the money supply is not precise because a. Congress can also make changes to the money supply. b. there are not always government bonds available for purchase when the Fed wants to perform open-market operations. c. the Fed does not know where all U.S. currency is located. d. the amount of money in the economy depends in part on the behavior of depositors and bankers.
Answer:
The correct answer is (d)
Explanation:
The Fed doesn't have exact power over the cash supply on the grounds that the multiplier connecting the fiscal base and the cash supply isn't exceptionally steady or unsurprising, particularly in the short run. The cash supply is at last constrained by people in general, the banks, and the Fed. People in general chooses the amount of the fiscal base they will store in banks and the amount they will hold as money in the hands of the general population.
In each of the following scenarios, explain and categorize the cost of inflation.a) Because inflation has risen, the J.Crew clothing company decides to issue a new catalog monthly rather than quarterly.b) Grandpa buys an annuity for $100,000 from an insurance company, which promises to pay him $10,000 a year for the rest of his life. After buying it, he is surprised that high inflation triples the price level over the next few years.c) Maria lives in an economy with hyperinflation. Each day after being paid, she runs to the store as quickly as possible so she can spend her money before it loses value.d) Gita lives in an economy with an inflation rate of 10%. Over the past year, she earned a return of $50,000 on her million-dollar portfolio of stocks and bonds. Because her tax rate is 20%, she paid $10,000 to the government.e) Your father tells you that when he was your age, he worked for only $4 an hour. He suggests that you are lucky to have a job that pays $9 an hour.
Answer:
Consider the following explanation
Explanation:
a) J. Crew is issuing its catalogs monthly in response to inflation. This will incur cost and it is known as 'Menu Cost'.
b) Grandpa has bought annuity which has promised $10,000 a year for the rest of his life. However, higher than expected inflation means grandpa has lesser purchasing power. This is loss of purchasing power and also 'redistribution cost'. In higher inflation borrower tends to get benefit. Here insurance company is at the gain.
c) Maria is witnessing loss of purchasing power because of hyper inflation. In such scenario, cost keeps rising and product's price could be higher a few hours later. This was witnessed in Germany as well as in Zimbabwe. People run to the stores as soon as they get cash or salary. It is known as 'shoe leather cost'. People make frequent trips to banks or stores but do not keep cash in fear of losing value.
d) Gita actually earned only 5% on her portfolio but as her income is in taxable bracket so she has to pay 20% tax. Her income from portfolio not even compensated inflation. This is a redistribution cost and also known as fiscal drag. More people fall into bracket because higher nominal income but real income is neglected which makes people worse off.
e) Father thinks that son is earning far more than him but inflation over the period of time erodes purchasing power and it could be possible that current income might be lower, same or higher comparing to inflation data. However, if it is lower then it is obviously loss of purchasing power.
Final answer:
The provided scenarios illustrate various impacts of inflation, including increased operational costs for businesses, erosion of purchasing power, particularly for fixed-income investments, rapid loss of money value in hyperinflation, and the nuanced effects on nominal wages and investment returns.
Explanation:
In understanding the scenarios provided, we see different manifestations of the cost of inflation. Inflation impacts the economy and individuals in various ways, reflected in the following examples:
J.Crew's decision to issue a new catalog monthly rather than quarterly is an example of a business absorbing higher operational costs due to inflation. This scenario highlights the cost of menu changes, where businesses must update and communicate price changes more frequently due to rising inflation.
Grandpa's annuity losing purchasing power illustrates the inflation risk to fixed-income investors. Inflation erodes the real value of money over time, leaving recipients of fixed payments, like annuities, at a disadvantage as the cost of living increases.
Maria's rush to spend her money in a hyperinflation scenario reflects the loss of purchasing power. Hyperinflation causes money to lose value rapidly, compelling individuals to spend it quickly before prices rise further.
Gita's investment earnings show how inflation can impact investment returns. Even with a 5% return on her portfolio, after factoring in a 10% inflation rate and 20% tax, the real, post-tax return is negative, illustrating the inflation-tax interaction.
The comparison of wage rates over time, like the one between your father's and your wage, showcases inflation's impact on nominal wages. Even if nominal wages increase, the important measure is the purchasing power of these wages, which can be eroded by inflation.
These scenarios collectively demonstrate how inflation affects both the economy and individual financial situations in different contexts.