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3 years ago

The advantage of relating a company's bad debt expense to its outstanding accounts receivable is that this approach:

Business

1 answer:

jeka57 [31]3 years ago

4 0

Answer:

A. gives a reasonably correct statement of receivables in the balance sheet.

Explanation:

As bad debts are related to the companies current assets that are receivables and are also referred to as the uncontrollable expenses and results for the nonpayment of the delivered good and the services

Hence the correct method to show this is through the balance sheets clarify on the amounts of the outstanding accounts receivables and payment made.

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Consider the following projects. Project CO C1 C2 СЗ C4 C5 A -1,000 +1,000 0 0 0 10 B -2,000 |+1,000 |+1,000 +4,000 +1,000 +1,00

Nuetrik [128]

Answer:

a) $3,458

Explanation:

The net present value is the present value of future cash flows discounted at the firm's weighted average cost of capital(which is the appropriate discount rate in this case) minus the initial investment outlay

cost of equity=risk-free rate+beta*(expected market return-risk free rate)

cost of equity=2.5%+1.5*(12%-2.5%)

cost of equity=16.75%

after-tax cost of debt=5.2%*(1-21%)

after-tax cost of debt=4.11%

WACC=(weight of equity*cost of equity)+(weight of debt*after-tax cost of debt)

weight of equity=value of equity/(value of equity+value of debt)

value of equity=6 billion*$3=$18 billion

value of debt=$5 billion

weight of equity=$18 billion/($18 billion+$5 billion)

weight of equity=78.26%

weight of debt=1-78.26%

weight of debt=21.74%

WACC=(78.26%*16.75%)+(21.74%*4.11%)

WACC=14.00%

present value of a future cash flow=future cash flow/(1+WACC)^n

n is the year in which the cash flow is expected, it is 1 for year 1 cash flow, 2 for year 2 cash flow ,and so on

NPV of project B=1000/(1+14%)^1+1000/(1+14%)^2++4000/(1+14%)^3+1000/(1+14%)^4+1000/(1+14%)^5-2000

NPV of project B=$ 3,458.00

5 0

2 years ago

If Tex's Manufacturing Company purchases the component externally, $20,000 of the fixed costs can be avoided. At what external p

Delvig [45]

Answer:

$210,000

Explanation:

The computation of the external price is shown below

Making cost = buying cost

$120,000 + $25,000 + $45,000 + $30,000) = external price + Unavoidable fixed cost (30,000-20,000)

$220,000 = External price + $10,000

So,

External price = 210,000

Hence, the same is to be considered

Therefore the external price is $210,000

5 0

3 years ago

A bank has excess reserves of $1,000,000 and makes a new loan for $500,000. If the bank faces a 10% required reserve ratio, by h

lianna [129]

Answer:

Money supply increase=500000/10%=5000000

Explanation:

3 0

3 years ago

Farmer Joe is planning to purchase a new hog farm. He anticipates making $20,000 the first year, $25,000 the second year and $30

Pachacha [2.7K]

Answer:

The simple rate of return is 37.5%

Explanation:

Simple rate of return is the percentage of return on investment that takes the net annual return cash flow of an investment and compare with initial capital of the investment. It is calculated with this formula:

Total annual return - Depreciation expense

Initial capital outlay

For farmer Joe, the simple rate of return is:

$20,000 + $25,000 + $30,0000 -$0 x 100

$200,000

= $75,000 x 100

$200,000

= 37.5%

Depreciation expense is assumed to be zero.

6 0

2 years ago

Which of the following journal entries will record the payment of a $675 accounts payable originally incurred for Office Supplie

sweet-ann [11.9K]

Answer:

C. Debit Office Supplies; credit Cash

Explanation:

The journal entry is shown below:

Accounts Payable A/c Dr $675

To Cash A/c $675

(Being the payment of an account payable is recorded)

For recording this transaction, we debited the account payable account and credited the cash account as cash is paid so it reduces the cash account for $675 so that the correct posting could be done

8 0

3 years ago