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3 years ago

Which of the following statements are consistent with how inflation affects the three functions of money? Check all that apply.

Business

1 answer:

Anna [14]3 years ago

6 0

Answer:

B,C, D, E

Explanation:

B. Rising prices (inflation) makes comparism of financial data less reliable. This is one of the major drawbacks of historic financial information because such information does not take into account the impact of inflation.

C. Money loses its attributes as a store of value in inflationary period. This is because the nominal value of money increase through an increase in Consumer Price Index (CPI) while the real value of money drops as the unit amount of purchasing power decrease from increase in prices.

D. The demand for money increases in inflationary period as more money chases few goods. This reduces purchasing power of individuals and leads to rise in prices.

E. This has the potential of reducing purchasing power as money loses its value in periods of inflation.

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For financial reporting, Clinton Poultry Farms has used the declining-balance method of depreciation for conveyor equipment acqu

Llana [10]

Answer:

The answer is given below

Explanation:

Depreciable cost at 31 December 2021 (2,848,000-2,004,000)

Depreciable Cost $844,000

Less: Residual value ($232,000)

Written down value as at January 1 ,2021 612,000

Depreciation per year as per straight line method (612,000/3) $204,000

Depreciation expense Dr.$204,000

Accumulated Depreciation Cr.$204,000

The change in depreciation method is change in estimate which is always accounted for prospectively.Therefore the written down value as at January 2021 will be depreciation over remaining useful life of the asset which is 3 years

4 0

3 years ago

Which of the following statements is CORRECT, other things held constant? Select one: a. If companies have fewer good investment

jolli1 [7]

Answer: e. Interest rates on long-term bonds are more volatile than rates on short-term debt securities like T-bills.

Explanation:

Long term bonds are considered to be more sensitive to interest rates as opposed to short term securities. If interest rates were to rise, the bond could lose value.

They are also more sensitive to inflation. If inflation rates rise, the value of payment reduces. It is for this reason that longer term bonds have maturity risk premiums added to them to cater for the amount of time the bond has till maturity.

If you need any clarification do react or comment.

3 0

3 years ago

George's Equipment is planning on merging with Nelson Machinery. George's will pay Nelson's shareholders the current value of th

zalisa [80]

Answer:

31 per share

Explanation:

The computation of value per share is shown below:-

Share exchange ratio = MPS of Nelson ÷ MPS of George

= $38 ÷ $31

= 1.2258

MPS a + b = MVa + MVb ÷ Number of shares a + Number of shares b × SER

= (1600 × $38) + (4,600 × $31) ÷ 4,600 + (1,600 × 1.2258)

= $60,800 + $142,600 ÷ 4600 + 1,961

= $203,400 ÷ 6,561

= 31 per share

Therefore for computing the value per share we simply applied the above formula.

4 0

3 years ago

Vandalay Industries manufactures two products: toasters and blenders. The annual production and sales of toasters is 2100 units,

Usimov [2.4K]

Answer:

a. Overhead cost per blender = $28.27

Explanation:

Overhead rate = $149,315 / 3,945

Overhead rate = $37.85

Overhead cost per blender = (Blender Direct labor hours * Overhead rate) / Units of blunder Produced and sold

Overhead cost per blender = (1,195 * $37.85) / 1,600

Overhead cost per blender = $45,230.75 / 1,600

Overhead cost per blender = $28.27

5 0

3 years ago

Barton Industries expects that its target capital structure for raising funds in the future for its capital budget will consist

iris [78.8K]

Answer:

a. With New Stock = 8.307%

b. With Old stock = 7.971%

Explanation:

The weighted average cost of capital (WACC) defines the cost rate that blends the capital structure cost including equity, debt, and preferred stock.

Requirement A

If it uses retained earnings as its source of common equity,

Given,

The weight of the combination of the capital structure is -

$W_{d}$ = 40% = 0.40; $W_{p}$ = 5% = 0.05; $W_{e}$ = 55% = 0.55

For cost of debt, we have to find cost of debt after tax, $R_{d}(1 - t)$ =

6.9% x (1 - 0.40) = 4.14%

Cost of preferred stock, $R_{p}$ = 6.4%

Cost of new Equity, $R_{e}$ = 11.51%

We know, the weighted average cost of capital (WACC) =

$W_{d}$ x $R_{d}$ + $W_{p}$ x $R_{p}$ + $W_{e}$ x $R_{e}$

= (0.40 x 4.14%) + (0.05 x 6.4%) + (0.55 x 11.51%)

= 1.656% + 0.32% + 6.3305%

= 8.307%

Requirement B

If it has to issue new common stock, the weighted average cost of capital (WACC) = $W_{d}$ x $R_{d}$ + $W_{p}$ x $R_{p}$ + $W_{s}$ x $R_{s}$

Given,

The weight of the combination of the capital structure is -

$W_{d}$ = 40% = 0.40; $W_{p}$ = 5% = 0.05; $W_{e}$ = 55% = 0.55

For cost of debt, we have to find cost of debt after tax, $R_{d}(1 - t)$ =

6.9% x (1 - 0.40) = 4.14%

Cost of preferred stock, $R_{p}$ = 6.4%

Cost of new Equity, $R_{s}$ = 10.9%

Therefore, putting the value in the equation,

WACC = (0.40 x 4.14%) + (0.05 x 6.4%) + (0.55 x 10.9%)

WACC = 1.656% + 0.32% + 5.995%

WACC = 7.971%

4 0

3 years ago