Answer:
Journalize the following transactions for the Scott company:
Nov 4. Received a $6,500, 90-day, 6% Note from Michael Tim's in payment of his account.
Dr Notes receivable 6,500
Cr Accounts receivable 6,500
Dec 31. Accrued interest on the Tim's note.
Dr Interest receivable ($6,500 x 6% x 57/365) = 60.90
Cr Interest revenue 60.90
Feb 2. Received the amount due from Tim's on his note.
Dr Cash 6,596.16
Cr Notes receivable 6,500
Cr Interest receivable 60.90
Cr Interest revenue 35.26
I did all my calculation based on a 365 day calendar year. Generally banks calculate interest on a 360 day calendar year.
Answer:
The sustainable Growth Rate is 15.46%
Explanation:
Return on equity= (Net income/Equity Shareholder's Fund) * 100
= ($19,789 / $83,200) * 100
= 23.78%
Payout ratio is 35%.
Therefore, Retention Rate is 65% or 0.65
Sustainable Growth Rate = Return on Equity * Retention Rate
= 23.78% * 0.65 =
= 0.2378 * 0.65
= 0.15457
= 15.46%
Thus, the sustainable Growth Rate is 15.46%
Answer:
When monopolistically competitive firms advertise, in the long run they will still earn zero economic profit.
Explanation:
Monopolistic competition happens when many producers sell products that are differentiated from one another and hence are not perfect substitutes
Based on this, the demand curve of a firm in a monopolistic competitive market will shift so that it is tangent to the firm's average total cost curve and this will make it impossible for the firm to make economic profit. The best that can be expected is to be able to break even
This means in the long run, a monopolistically competitive firm will make zero economic profit.
A good example is Hotel which can only raise its prices without losing all of its customers based on brand loyalty and distinct quality differentiation.
Answer:
A. What is the company's cost of preferred equity?
B. What is the company's cost of common equity?
C. What is the company's WACC?
Explanation:
20% debt ⇒ after tax cost of debt 3.76%
20% preferred stock ⇒ 8.42%
60% common equity ⇒ 11.45%
in order to determine the after tax cost of debt we must first determine the yield to maturity of debt:
approximate YTM = {37.5 +[(1,000 - 1,150.78)/40]} / [(1,000 + 1,150.78)/2] = 33.7305 / 1,075.39 = 3.3166% x 2 = 6.2732%
after tax cost of debt = 6.2732% x 0.6 = 3.76%
cost of preferred stocks = 8 / (100 x 0.95) = 8 / 95 = 8.42%
cost of equity (Re) = 2.45% + (1.8 x 5%) = 2.45% + 9% = 11.45%
WACC = (60% x 11.45%) + (20% x 8.42%) + (20% x 3.76%) = 6.87% + 1.684% + 0.752% = 9.306% = 9.31%
Answer: Increase the treasury stock account and decrease the cash account by $36,000.
Explanation:
The journal entries that would be used to record the purchase of treasury stock will be to increase the treasury stock account and decrease the cash account by $36,000.
Note that the $36000 was calculated as:
= 1,000 shares × $36 per share
= $36,000
