Caroline was found liable in an accident. This was probably not due to negligence on her part. FALSE Usually, liability is because of negligence.
If the motorist is determined to be at blame for the incident, they are entirely responsible for the accident, the injuries, and the damages. To receive payment for the losses you suffered, you must file an accident liability claim. You need to identify the responsible party after an accident. The person who caused the accident is the one who is accountable. There may be several responsible parties. However, a third person, such as an employer, who was unrelated to the collision may also be held accountable for the harm.To know more about Liability here
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Dess Inc., a manufacturing company, has provided the following data for the month of August. The balance in the Work in Process inventory account was $10,000 at the beginning of the month and $22,000 at the end of the month. During the month, the used direct material cost was $63,000, and direct labor cost was $39,000. The manufacturing overhead cost was $43,000.
1. The manufacturing costs for August was:
A. $59,000
B. $67,000
C. $145,000
D. $133,000
2. The cost of goods manufactured for August was:
A. $133,000
B. $142,000
C. $145,000
D. $130,000
Answer:
See below
Explanation:
1. Manufacturing cost. This is computed as
= Direct materials + Direct labor + Manufacturing overhead
= $63,000 + $39,000 + $43,000
= $145,000
2. Cost of goods manufactured. This is computed as;
= Beginning WIP + Direct materials + Direct labor + Allocated manufacturing overhead - Ending WIP
= $10,000 + $63,000 + $39,000 + $43,000 - $22,000
= $133,000
13) Storico Co. just paid a dividend of $3.15 per share. The company will increase its dividend by 20 percent next year and then reduce its dividend growth rate by 5 percentage points per year until it reaches the industry average of 5 percent dividend growth, after which the company will keep a constant growth rate forever. If the required return on the company’s stock is 12 percent, what will a share of stock sell for today? (4 pts)
Answer:
$61.29
Explanation:
Calculation to determine what will a share of stock sell for today
First step is to calculate the price in Year 3
P3= $3.15(1.20)(1.15)(1.10)(1.05) / (.12 – .05)
P3= $5.020785/0.07
P3=$71.72
Now Let Calculate the price of stock today using the Present Value (PV) of the first three dividends in addition with the Present Value (PV) of the stock price in Year 3:
P0= $3.15(1.20)/(1.12) + $3.15(1.20)(1.15)/1.12^²+ $3.15(1.20)(1.15)(1.10)/1.12^³+ $71.72/1.12^³
P0=$3.78/1.12+$4.347/1.2544+$4.7817/1.404928+$71.72/1.404928
P0=$3.375+3.465+3.4035+$51.048
P0= $61.29
Therefore what will a share of stock sell for today is $61.29
Hoffman Corporation issued $60 million of 9%, 15-year bonds at 106. Each of the 60,000 bonds was convertible into one share of $1 par common stock. Prepare the journal entry to record the issuance of the bonds. (Enter your answers in millions rounded to 1 decimal place (i.e., 5,500,000 should be entered as 5.5). If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
Answer:
Dr Cash $63,600,000
Cr Premium on Bonds $3,600,000
Cr Bonds payable $60,000,000
Explanation:
Preparation of the journal entry to record the issuance of the bonds.
Dr Cash $63,600,000
(106%*$60,000,000)
Cr Premium on Bonds $3,600,000
($63,600,000-$60,000,000)
Cr Bonds payable $60,000,000
(To record issuance of the bonds)
Kier Company issued $700,000 in bonds on January 1, Year 1. The bonds were issued at face value and carried a 4-year term to maturity. The bonds have a 6.50% stated rate of interest and interest is payable in cash on December 31 each year. Based on this information alone, what are the amounts of interest expense and cash flows from operating activities, respectively, that will be reported in the financial statements for the year ending December 31, Year 1
Answer: Interest expense = $45500
Cash outflow = $45500
Explanation:
Based on the information that were given in the question, the amounts of interest expense and cash flows from operating activities, that will be reported in the financial statements for the year ending December 31, Year 1 will be calculated thus:
Interest expense = $700,000 × 6.50%
= $700,000 × 0.065
= $45500
The interest expense of $45500 will be reported on December 31, Year 1 in the income statement and will also be reported in the cash outflow as well. Therefore,
Interest expense = $45500
Cash outflow = $45500
The principal objectives of the human resource management process are to ______. Multiple select question. accrue liabilities for wages, payroll taxes, and employee benefit programs ensure that payroll costs are for legitimate entity activities record production and other types of payroll costs in accounts report compensation paid to consultants or contractors on IRS Form 1099
Answer:
ensure that payroll costs are for legitimate entity activities.
Explanation:
Human resources management (HRM) can be defined as an art of managing, controlling and improving the number of people (employees or workers), functions, activities which are being used effectively and efficiently by an organization.
Generally, human resources managers are saddled with the responsibility of recruiting, managing and improving the welfare and working conditions of the employees working in an organization.
The principal objectives of the human resource management process are to ensure that payroll costs are for legitimate entity activities because they make sure work attendance are taken, so as to record the number of times each employee reported to work and whether or not they were punctual on a daily basis.
Manrow Growers, Inc., owns equipment for sowing and harvesting its organic fruit, vegetables, and tree nuts that are sold to local restaurants and grocery stores. At the beginning of 2019, an asset account for the company showed the following balances:
Equipment $350,000
Accumulated depreciation through 2018 165,000
During 2019, the following expenditures were incurred for the equipment:
Major overhaul of the equipment on January 1, 2019, that improved efficiency $42,000
Routine maintenance and repairs on the equipment 5,000
The equipment is being depreciated on a straight-line basis over an estimated life of eight years with a $20,000 estimated residual value. The annual accounting period ends on December 31.
Required:
Record the adjusting entry for depreciation on the equipment during 2018.
Answer: See explanation
Explanation:
The adjusting entry for depreciation on the equipment during 2018 will be calculated as:
Depreciation = (Equipment cost - Estimated residual value) / Estimated life
= ($350000 - $20000) / 8
= $41250
Debit: Depreciation = $41250
Credit: Accumulated depreciation = $41250
(To record depreciation for the year)
Sierra Company produces its product at a total cost of $89 per unit. Of this amount, $14 per unit is selling and administrative costs. The total variable cost is $58 per unit, and the desired profit is $28 per unit. Determine the markup percentage using the (a) total cost, (b) product cost, and (c) variable cost methods. Round your answers to one decimal place. a. Total cost fill in the blank 1 % b. Product cost fill in the blank 2 % c. Variable cost fill in the blank 3 %
Answer: and Explanation:
The computation of the markup percentage using the following cost is shown below:
a. Total cost
= Desired profit ÷ total cost
= $28 ÷ $89
= 31.46%
b. Under product cost
= Desired profit ÷ (total cost - seling & admin cost)
= ($28) ÷ ($89 - $14)
= 37.33%
c. Under variable cost
= Desired profit ÷ variable cost
= $28 ÷ $58
= 48.28%
By applying the above formulas we can easily calculate them
as an austrian-thai company, red bull has done a remarkable job of positioning itself internationally by coming across as a local company in every country where red bull is sold. Would you be more or less likely to buy redbull knowing the brand is austrian but with a strong tahi influence? Does it generally mattter to consumers where a product orignates from?
No
It does not actually matter, because what we buy is the quality of the product not where the product is from.
If someone is discriminated by a law based on gender, the burden is on the state to show that the law is substantially related to an important government purpose.
true
or FALSE
Rouse Corporation's December 31, 2012 balance sheet showed the following: 8% preferred stock, $20 par value, cumulative, 20,000 shares authorized 10,000 shares issued $150,000 Common stock, $10 par value, 2,000,000 shares authorized 1,950,000 shares issued, 1,930,000 outstanding 19,000,000 Paid-in capital excess of par --- preferred stock 60,000 Paid-in capital excess of par --- common stock 27,000,000 Retained earnings 7,650,000 Treasury stock (20,000 Shares) 630,000 Rouse's total stockholders' equity was:
Answer:
See bellow
Explanation:
With regards to the above, Rouse total stockholder's equity is computed as;
= Preferred stock + common stock + paid in capital in excess of par (preferred stock and common stock) + retained earnings - Treasury stock
= $150,000 + $1,950,000 + $60,000 + $27,000,000 + $7,650,000 - $630,000
= $53,730,000
Which of the following is not a benefit of contributing to a retirement
account?
A. Contributions earning interest once deposited
B. Contributions equaling "free money"
O C. Reduction in taxable income
D. Employer matching
Answer:
"as long as you contribute, you dont have to pay any taxes" is the correct answer for me.
Explanation:
i just took the quiz, hope this helps!
The following is not a benefit of contributing to a retirement account: Contributions equaling "free money". Thus option (B) is correct.
What is a retirement account?A retirement account is a type of investment account designed to help individuals save for retirement. These accounts are intended to provide a source of income for individuals after they retire from work. There are several different types of retirement accounts, each with its own set of rules and tax advantages.
Overall, retirement accounts can be an effective way to save for retirement, and can provide tax advantages, potential employer contributions, and the benefits of compound interest over time.
Contributions equaling "free money" is not a benefit of contributing to a retirement account. Therefore option (B) is correct.
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All of the following statements are true regarding the periodic inventory system except Under the periodic system, a company uses separate accounts to record freight costs, returns, and discounts. Using the periodic inventory system affects the balance sheet contents differently than when the perpetual system is used. Under the periodic inventory system, the balance of cost of goods sold is calculated at the end of the period. Under the periodic inventory system, the balance in ending inventory is calculated at the end of the period.
Answer:
Using the periodic inventory system affects the balance sheet contents differently than when the perpetual system is used
Explanation:
Periodic inventory system can be regarded as a method used in inventory valuation for the purpose of
financial reporting whereby physical count of the inventory is carried out at specific intervals. There is no effort made in keeping up-to-date records patterning the cost of goods sold as well as inventory under this system. It should be noted that these followings as regards to periodic inventory system
✓ Under the periodic system, a company uses separate accounts to record freight costs, returns, and discounts.
✓Under the periodic inventory system, the balance of cost of goods sold is calculated at the end of the period. ✓Under the periodic inventory system, the balance in ending inventory is calculated at the end of the period.
Simon lost $7,100 gambling this year on a trip to Las Vegas. In addition, he paid $2,730 to his broker for managing his $273,000 portfolio and $500 to his accountant for preparing his tax return. In addition, Simon incurred $3,390 in transportation costs commuting back and forth from his home to his employer's office, which were not reimbursed. Calculate the amount of these expenses that Simon is able to deduct (assuming he itemizes his deductions).
Answer:
The Deductible amount = $0
Explanation:
The Deductible amount = $0
Reason -
Gambling losses are deductible to extent of winnings. As there is no winning, loss of $7,100 is not deductible.
Simon paid $2,730 to his broker for managing his portfolio and $500 to his accountant for preparing his tax return.
Both investment fees and tax preparation fees were in the past (before 2018) allowed under miscellaneous itemized deductions to the extent the total miscellaneous itemized deductions exceeded 2 percent of taxpayer's adjusted gross income.
However, in 2018 miscellaneous itemized deductions are no longer available.
Hence for 2018 investment fees and tax preparation fees are not deductible.
Transportation Cost of $3,390 for commuting back and forth from home to employer's office is not deductible.
As per IRS commuting expenses are personal expense.
As such:
Deductible amount = $0
The Labor Market — End of Chapter Problem
The number of bank tellers declined from an aver-age of 20 per branch in 1988 to 13 in 2004, as ATMs replaced human tellers. This meant that the cost of running each branch fell. Banks responded by increasing the number of urban bank branches by 43% in the same time period, which increased the total number of bank employees. So ATMs shifted employees' work from routine tasks like deposits and withdrawals towards skills machines cannot provide, such as sales and customer service.
When the use of ATMs became more prevalent, reducing the banks' overall costs, the ______ was dominant. On net, labor and capital would be considered _______ in this industry.
Answer: scale effect; complement
Explanation:
When the use of ATMs became more prevalent, reducing the banks' overall costs, the (scale effect) was dominant while on net, labor and capital would be considered (complement) in this industry.
Labor and Capital are regarded as complement because they work alongside each other. The ATM machines can only work with the labor available who operates it. Therefore, they go hand in hand as one can't function without the other.
On August 10, a credit card account had a balance of $325. A purchase of $56 was made on August 15, and $157 was charged on August 27. A payment of $79 was made on August 15. The interest on the average daily balance is 1.35% per month. Find the finance charge on the September 10 bill. (Round your answer to two decimal places.)
Answer:
The finance charge on the September 10 bill is $5.08.
Explanation:
Note: See the attached excel file for the calculation of the sum of total amount owed each day (in bold red color).
From the attached excel file, we have:
Sum of total amount owed each day = $11,675
Average daily balance = Sum of total amount owed each day / Number of days in the billing period = $11,675 / 31 = $376.61
Finance charge = Average daily balance * Interest rate per month = $376.61 * 1.35% = $5.08
Therefore, the finance charge on the September 10 bill is $5.08.
Jane Cooper's Department Stores allocates the costs of the Personnel and Payroll departments to three retail sales departments, Housewares, Clothing, and Furniture. In addition to providing services to the operating departments, Personnel and Payroll provide services to each other. Copper's allocates Personnel Department costs on the basis of gross payroll. Cost and allocation information for June is as follows:
Personnel Payroll Housewares Clothing Furniture
Direct department cost $15,600 $6,400 $24,400 $40,000 $33,500
Number of employees 15 12 24 32 12
Gross payroll $12,000 $6,600 $21,200 $26,100 $16,200
A) Determine the percentage of total Personnel Department services that was provided to the Payroll Department
B) Determine the percentage of total Payroll Department services that was provided to the Personnel Department.
C) Prepare a schedule showing Personnel Department and Payroll Department cost allocations to the operating departments, assuming Cooper's uses the step method.
Answer:
Jane Cooper's Department Stores
A) The percentage of total Personnel Department services provided to the Payroll Department is:
= 7.45%
b) The percentage of total Payroll Department services provided to the Personnel Department is:
= 14.33%
C) A Schedule showing Personnel Department and Payroll Department Cost Allocations to the operating departments, using the step method:
Allocation of service departments' costs:
Service Departments Retail Sales Departments
Personnel Payroll Housewares Clothing Furniture
Direct department cost $15,600 $6,400 $24,400 $40,000 $33,500
Number of employees 15 12 24 32 12
Gross payroll $12,000 $6,600 $21,200 $26,100 $16,200
Total costs $27,000 $13,000 $45,600 $66,100 $49,700
Personnel costs -27,000 2,013 7,060 10,233 7,694
Total costs remaining 0 15,013 $52,660 $76,333 $57,394
Payroll costs -15,013 4,242 6,148 4,623
Total costs after allocation of service costs $56,902 $82,481 $62,017
Explanation:
a) Data and Calculations:
Cost Allocation
Service Departments Retail Sales Departments
Personnel Payroll Housewares Clothing Furniture
Direct department cost $15,600 $6,400 $24,400 $40,000 $33,500
Number of employees 15 12 24 32 12
Gross payroll $12,000 $6,600 $21,200 $26,100 $16,200
Personnel costs:
Payroll = $13,000/$174,400 * $27,000 = $2,013
Housewares = $45,600/$174,400 * $27,000 = $7,060
Clothing = $66,100/$174,400 * $27,000 = $10,233
Furniture = $49,700 /$174,400 * $27,000 = $7,694
Payroll costs:
Housewares = $52,660/$186,387 * $15,013 = $4,242
Clothing = $76,333/$186,387 * $15,013 = $6,148
Furniture = $57,394/$186,387 * $15,013 = $4,623
Total Personnel Department services provided to the Payroll Department:
= $2,013/$27,000 * 100 = 7.45%
= $13,000/$174,400 * 100 = 7.45%
Total Payroll Department services provided to the Personnel Department:
= $27,000/$188,400 * 100 = 14.33%
What factor might an Irrational decision maker consider when making economic decisions?*
A emotions
B perceptions
C sunk costs
D any of the above
Max wanted to open a pizza and sub restaurant. He compared purchasing a well-known franchise to opening his own restaurant as a small business. Which of the following would be a disadvantage to the franchise option? • Max will be able to use the business model provided by the franchise. • Max will have many competitors that offer pizzas and similar Italian fast food. • Max will have to use his savings and borrow some money to start his business. • Max will have to use the franchise's pizza sauce instead of his family recipe
Answer:
Max will have to use his savings and borrow some money to start his business
Explanation:
Max will be able to employ the franchise's offered business plan.A marketing concept that can be used by an organization as a strategy for business expansion is franchising. Hence option B is correct .
What was Franchise ?Where applicable, a franchisor grants a franchisee a license to use all or part of its operational methods, intellectual property, business model, brand, and rights to market and sell its branded goods and services. In exchange, the franchisee agrees to pay certain fees and adhere to specific requirements, usually outlined in a franchise agreement.
The word "franchise" is Anglo-French in origin, deriving from the French verb "francer," which means "to be free." Instead than expanding through acquisition, the franchisor's utilization of a franchise system is an alternate corporate growth approach.
Chains of stores controlled by corporations. For the selling and distribution of goods and services, a franchise system business growth plan reduces the franchisor's capital investment and liability risk.
Particularly in the conventional structure where the franchisee is an individual, franchising is rarely an equal partnership.
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You and your family visit Orlando for a week. While there, you decide to go to Universal Studios. When you arrive, you notice that each family member can buy a day pass for $115 or a two-day pass for $150. If you want a three-day pass, the price is $170. Suppose your benefit, measured in utility, is equal to $120 in value the first day you go to the park, $50 more if you go a second day, and $15 more for the third day. What ticket, if any, should you buy
Answer:
the second day ticket
Explanation:
We would purchase the ticket with the highest net benefit
Net benefit = Benefit - cost of ticket
First day
Net benefit = $120 - $115 = $5
Second day
Net benefit = ($120 + $50) - $150 = $20
Third day
Net benefit = ($170 + $15) - $170 = $15
The second day yields the highest net benefit
Scoring: Your score will be based on the number of correct matches. There is no penalty for incorrect or missing matches.
Match each of the following transactions to the journal in which it would be entered.
Clear All
Revenue journal Cash receipts journal Purchases journal Cash payments journal General journal Recognized depreciation on the building Journalized the adjusting entry for supplies used during the period Closed the revenue account at the end of the period Received cash from the bank in exchange for a note payable Withdrew cash for personal use (by owner)
Answer:
Matching transactions to the journal in which they would be entered:
Transactions Journal Type
1. Recognized depreciation on the building General Journal
2. Journalized the adjusting entry for supplies
used during the period General Journal
3. Closed the revenue account at the end
of the period General Journal
4. Received cash from the bank in exchange
for a note payable Cash Receipts Journal
5. Withdrew cash for personal use (by owner) Cash Payments Journal
Explanation:
Revenue journal records revenue transactions.
Cash receipts journal records all cash receipts.
Purchases journal records all purchases on account.
Cash payments journal records all cash payments.
General journal is used for all transactions, especially those that cannot be recorded in any of the other specialized journals.
Kyle owned a small business that sold and repaired several styles of bicycles. Last month, Kyle had sales of $15,000 and the costs of operating his business were $12,300.
Which of the following is true about Kyle's business?
•
The business earned a profit.
•
The business should focus on expansion.
•
The business experienced a loss.
•
The business is not capitalizing on a need
Answer:
The business earned a profit.
What is the difference between social marketing and advertising?
Answer:
Social media marketing is any social media action you take that is unpaid. If you're posting about your blogs, sharing info with your followers, or commenting in social media groups, you're marketing. Social media advertising is any action you take on social media that is paid.
Explanation:
Frida makes bread every day and due to demand she is thinking of increasing her bread production. In order to make this decision, she would calculate her marginal costs of bread production (increased number of employees, equipment, etc.) and her marginal benefits (number of loaves sold, price paid, new customers, etc.) and continue to produce where Select the correct answer below:
a. MB
b. MB>MC or until they are equal.
c. total benefits equal total costs.
d. the price of bread equals exactly the marginal benefit of each loaf.
Answer: b. MB > MC or until they are equal.
Explanation:
It is best that Frieda produces bread at the level where Marginal benefits exceeds marginal costs. The difference will keep giving her more profit.
She should keep increasing her production so long as the Marginal benefit exceeds marginal cost but should stop at the level where the Marginal benefit and marginal cost become equal because producing past this point would mean that she would incur a marginal loss on each unit.
Suppose that Federal Reserve policy leads to higher interest rates in the U.S.
If the U.S. is a closed economy in the short run, real GDP will _________ increase stay the same decrease .
If the U.S. is an open economy real GDP will _______ increase stay the same decrease by ________ more than in a closed economy the same amount as in a closed economy less than in a closed economy .
Answer:
If the U.S. is an open economy real GDP will decrease by more than in a closed economy.
Explanation:
Federal fund rate is the rate of depository fund which banks pay overnight. The rise in fed will cause the banks to pay more interest on the mandated reserve. If the interest rates are increased the real GDP will decrease because there will be reduced investments, less spending and consumption which leads to declined net exports. These all factors lead to decline in the Real GDP of U.S.
A mother notices that when she divides brownies equally between her two children and gives each child her share on a separate plate, the brownies last a long time. But when she gives her children a plate to share, the brownies are gone pretty quickly. The mother concludes from this that brownies given on a single plate are:_______.
A) excludable but they might either be rival or nonrival.
B) nonexcludable and nonrival.
C) excludable and rival.
D) excludable and nonrival.
E) nonexcludable and rival.
Answer:
E
Explanation:
I think this because if the children had'nt rivaled over the brownies, they would've lasted longer.
You have decided to start a lawn service business to help pay your tuition so that you can complete your undergraduate accounting degree. You plan to provide various lawn maintenance services that will include lawn mowing services, aeration and fertilization. You and two of your friends have agreed to work for you in this new business endeavor. Which of the following would best describe organizing for your new business?
A. Preparing monthly billing statements for clients.
B. Determining the types of lawn services that you will provide for clients.
C. Providing employees with the authority to make decisions regarding a client.
D. Hiring and training new employees.
Answer:
B. Determining the types of lawn services that you will provide for clients.
Explanation:
As can be seen in the question above, you have decided to open a gardening business. However, as we know, gardening is very broad and many services can be associated with it. In order not to leave your business disorganized and to define the service you are offering, you have organized your business by determining the types of lawn services that your business offers, such as lawn mowing, aeration and fertilization.
Record the following transactions as general journal entries. Use the gross-price method.
Aug. 6 Purchased $830 of merchandise on account from Johnston Co. Credit terms 2/10, n/30.
8 Bought an $18,000 truck from Pillner Co., paying $3,000 down; balance on account.
13 Purchased $2,611 of merchandise for cash from Pillner and Co.
15 Paid for the August 6 purchase of merchandise from Johnston Co.
17 Purchased $1,743 of merchandise from Luis Co. Credit terms 2/10, n/30.
Answer:
General Journal Entries:
Aug. 6 Debit Inventory $830
Credit Accounts Payable (Johnston Co.) $830
To record the purchase of merchandise; Credit terms 2/10, n/30.
Aug. 8 Debit Truck $18,000
Credit Accounts Payable (Pillner Co.) $15,000
Credit Cash $3,000
To record the purchase of truck.
Aug. 13 Debit Inventory $2,611
Credit Cash $2,611
To record the purchase of inventory for cash.
Aug. 15 Debit Accounts Payable (Johnston Co.) $830
Credit Cash $813
Credit Cash Discounts $17
To record the payment on account, including discounts.
Aug. 17 Debit Inventory $1,743
Credit Accounts Payable (Luis Co.) $1,743
To record the purchase of goods; Credit terms 2/10, n/30.
Explanation:
a) Data and Analysis:
Aug. 6 Inventory $830 Accounts Payable (Johnston Co.) $830
Credit terms 2/10, n/30.
Aug. 8 Truck $18,000 Accounts Payable (Pillner Co.) $15,000 Cash $3,000
Aug. 13 Inventory $2,611 Cash $2,611
Aug. 15 Accounts Payable (Johnston Co.) $830 Cash $813 Cash Discounts $17
Aug. 17 Inventory $1,743 Accounts Payable (Luis Co.) $1,743
Credit terms 2/10, n/30.
Taking a smartphone to the gym when you work out becomes more popular. What is the result of this event?
As a result, _______.
A. the quantity of smartphones demanded increases
B. the demand for smartphones increases
C. the quantity of smartphones demanded decreases
D. the demand for smartphones decreases
Answer:
B is the answer
Explanation:
it's B i think
When the smartphone you take to gym becomes more popular, then, the result will be an an increases in demand for smartphones
Demand means the willingness to acquire a product or service. Here, the popularity of the smartphone will result to an increase in its demand because people want to use the smartphone.
Hence, when the smartphone you take to gym becomes more popular, then, the result will be an an increases in demand for smartphones
Therefore, the Option B is correct
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Interest rates and decisions
Suppose that a firm is facing an upward-sloping yield curve and needs to borrow money to invest in production. Does this mean that the firm should consider borrowing only at short-term rates?
a. No, the firm needs to take the volatility of short-term rates into account.
b. No, an upward-sloping yield curve means that the firm will get a lower interest rate if it uses long-term financing
c. Yes, using short-term financing will give the firm the lowest possible interest rate over the life of the project.
Credit ratings affect the yields on bonds. Based on the scenario described in the following table, determine whether yields will increase or decrease and whether it will be more expensive or less expensive, as compared to other players in the market, for a company to borrow money from the bond market.
Scenario Impact on Yield Cost of Borrowing Money
from Bond Markets
ABC Real Estate is a commercial real estate firm that primarily uses short-term financing, while its competitors primarily use long-term financing. Interest rates have recently increased dramatically. Decrease More expensive Ziffy Corp.’s credit rating was downgraded from AAA to A. Bellgotts Inc. has increased its market share from 15% to 37% over the last year while maintaining a profit margin greater than the industry average. Previously, Ferro Co. had only used short-term debt financing. The company now finances its current assets such as inventories and receivables with short-term debt, and it finances its fixed assets such as buildings and equipment with long-term debt.
Answer:
a. No, the firm needs to take the volatility of short-term rates into account.
Explanation:
Short term interest rates are more volatile than the long term interest rates. If the company chooses to finance its operations solely from short term financing than it will need to incorporate the affect of volatility in the short term interest rates to identify the net returns. The volatility should be calculated with the risk factor and required rate of return of the funds.
b. Prepare the adjusting entry to record Bad Debts Expense using the estimate from part a. Assume the unadjusted balance in the Allowance for Doubtful Accounts is a $5,400 credit. c. Prepare the adjusting entry to record bad debts expense using the estimate from part a. Assume the unadjusted balance in the Allowance for Doubtful Accounts is a $1,900 debit.
Question Completion:
Daley Company estimates uncollectible accounts using the allowance method at December 31. It prepared the following aging of receivables analysis.
Days Past Due
Total 0 1 to 30 31 to 60 61 to 90 Over 90
Accounts
receivable $570,000 $396,000 $90,000 $36,000 $18,000 $30,000
Percent uncollectible 1% 2% 5% 7% 10%
a. Complete the below table to calculate the estimated balance of Allowance for Doubtful Accounts using the aging of accounts receivable method.
Answer:
Daley Company
a. The estimated balance of Allowance for Doubtful Accounts using the aging of accounts receivable method is:
= $11,820.
b. Adjusting Journal Entry:
Debit Bad debts expense $6,420
Credit Allowance for Doubtful Accounts $6,420
To record bad debts expense and bring Allowance balance to $11,820.
c. Adjusting Journal Entry:
Debit Bad debts expense $13,720
Credit Allowance for Doubtful Accounts $13,720
To record bad debts expense and bring Allowance balance to $11,820.
Explanation:
a) Data and Calculations:
Ageing of Accounts Receivable:
Days Past Due
Total 0 1 to 30 31 to 60 61 to 90 Over 90
Accounts
receivable $570,000 $396,000 $90,000 $36,000 $18,000 $30,000
Percent uncollectible 1% 2% 5% 7% 10%
Allowance $11,820 $3,960 $1,800 $1,800 $1,260 $3,000
Bad Debts Expense:
Allowance for Doubtful Accounts:
b. c.
Unadjusted balance $5,400 credit $1,900 debit
Adjusted balance 11,820 credit 11,820 credit
Bad debts expense $6,420 $13,720