bill buyer elects to close without a survey. following closing, he discovers his neighbor's fence is on his property. what is bi
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Answer:
If sales fall by 20% AFC raises 38 cents per paper, i.e. a 25% increase in AFC.
Explanation:
To find the average fixed cost (AFC), we have to sum all fixed costs and divide it by the amount of units produced. Fixed costs are those that don't depend on how much is produced, in this case, rental and labor cost don't depend on output, as you can neither move to a cheaper place nor decrease labor obligations even if the factory had no output (newspapers printed).
We can see that as the output reduced, AFC rose 38 cents per paper or a 25% increase in AFC.
Answer:
cash 2,011,446 debit
unamortized bond cost 50,000 debit
bonds payable 2,000,000 credit
premium on BP 61,446 credit
--to record issuance--
# Beg. Carrying //cash // expense //Amortization// End.Carrying Value
1 2,061,446 210,000 206144.57 3855.43 2,057,590
2 2,057,590 210,000 205759.02 -4240.98 2,053,349
3 2,053,349 210,000 205334.93 -4665.07 2,048,684
4 2,048,684 210,000 204868.42 -5131.58 2,043,553
5 2,043,553 210,000 204355.26 -5644.74 2,037,908
Bonds payable 1,000,000 debit
premium on BP 24,342 debit
issuance cost expense 25,000 debit
interest expense 51,217.1 debit
loss at redemption 41.959,9 debit
cash 1,117,500 credit
unarmortized bond issuance cost 25,000 credit
Explanation:
First, we solve the value collected which is the present value of the coupon payment and maturity
C 210,000.000
time 10
rate 0.1
PV $1,290,359.0922
Maturity 2,000,000.00
time 10.00
rate 0.1
PV 771,086.58
PV c $ 1,290,359.0922
PV m $ 771,086.5789
Total $ 2,061,445.6711
Now, we solve for the premium
2,061,446 - 2,000,000 = 61,446 premium
the interst expense will be calcualte as carrying value times market rate
the cash will be the same for every period thus 210,000
Finally, the difference will be the amortizationon the premium
If redem on July 1st 2016 we need to record the interst:
2,048,684 x .05 = 102.434,2/2 = 51.217,1
cash interest: 1,000,000 x 10.5% / 2 = 52,500
<em>Total cash</em>
52,500 interest
<u>1,065,000 bonds </u>
1,117,500
portion of unamortized cost 25,000
face value 1,000,000
portion of premium: 48,684/2 = 24.342
the loss f redemption will be the difference between the interest expense, amoritzation on premiun and write-off of the face value with the amount of cash outlay.