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Vikki [24]
3 years ago
6

Antonio would like to replace his golf clubs with a​ custom-measured set. A local sporting goods megastore is advertising custom

clubs for ​$710​, including a new bag.​ In-store financing is available at 5.22 ​percent, or he can choose not to renew his ​$600 certificate of deposit​ (CD), which just matured. The advertised CD renewal rate is 5.58 percent. Antonio knows the​ in-store financing costs would not affect his​ taxes, but he knows​ he'll pay taxes​ (25 percent federal and 5.75 percent​ state) on the CD interest earnings. Should he cash the CD or use the​ in-store financing?​ Why?
Business
1 answer:
AlexFokin [52]3 years ago
6 0

Answer:

Antonio and Replacement of Golf Clubs

a. He should cash the CD and use the proceeds to finance part of the golf clubs.

b. The reason is that he would pay more in in-store financing totaling $37.06 per annum than the net interest he would generate from the CD totaling $23.18 per annum.  And Antonio would incur a net loss of $13.88 if the CD was renewed unlike the $5.74 if the CD were not renewed.

Explanation:

Option 1: Renew Certificate of Deposit (CD):

Interest earned  = $33.48 ($600 * 5.58%)

Taxes                  =   10.30 ($33.48 * 30.75%)

Net Income         = $23.18

Cost of in-store financing = $37.06 ($710 * 5.22%)

Net Loss(overall) = $13.88 ($37.06 - $23.18)

Option 2:

Sale-off of CD = $600

Net financing required = $110 ($710 - $600)

Cost of financing = $5.74 ($110 * 5.22%)

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Tom Yuppy, a wealthy investor, paid $20,000 for 1,000 shares of $10 par common stock issued to him by Leuig Corp. A month later,
Sliva [168]

Answer:

See the attached excel file for the horizontal statements model.

Explanation:

In the attached excel file, we have:

FA = Financing activity

For event 1:

Cash = $20,000

Common stock = Number of shares * Share price at par = 1,000 * $10 = $10,000

PIC in Excess = Paid in capital in excess = Cash - Common stock = $20,000 - $10,000 = $10,000

For event 2:

Cash = Number of shares issued * Price per share = 2,000 * $2.50 = $50,000

Common stock = Number of shares * Share price at par = 2,000 * $10 = $20,000

PIC in Excess = Cash - Common stock = $50,000 - $20,000 = $30,000

Download xlsx
3 0
3 years ago
Using the following information: 12/31/17 Accounts receivable $526000 Allowance (35700 ) Cash realizable value $490300 During 20
yawa3891 [41]

Answer:

The change in the cash realizable value from the balance 12/31/17 to 12/31/18 was $37,840 increase.

Explanation:

Cash realizable value of accounts receivable is simply the amount that is deemed recoverable after factoring the portion that is uncollectible.

The effects of the transactions during the year are as follows:

Sales on account:

Debit Accounts receivable                            $145,400

Credit Sales revenue                                     $145,400

<em>(To recognize the sales on account)</em>

Collections on account:

Debit Cash                                                      $100,000

Credit Accounts receivable                           $100,000

<em>(To recognize collections on account)</em>

Write-off:

Debit Allowance for doubtful accounts            $3,960

Credit Accounts receivable                               $3,960

<em>(To recognize write-off of outstanding accounts receivable)</em>

Therefore, the effects of the foregoing journals on Accounts receivable are: $526,000 + $145,400 - $100,000 - $3,960 = $567,440.

As at 12/31/18, cash realizable value would be $567,440 - $39,300 = $528,140. The change in the cash realizable value from the balance at 12/31/17 to 12/31/18 was therefore $528,140 - $490,300 = $37,840 (increase).

7 0
3 years ago
Concord Corporation produces 5000 units of part A12E. The following costs were incurred for that level of production: Direct mat
mart [117]

Answer:

b. $85,000

Explanation:

First, we should prepare the analysis of cost savings if the company buys outside.

Analysis of cost and savings

Purchase (5,000 units × $68) = ($340,000)

Savings

Variable cost = $80,000

Fixed cost = $175,000

Net income effect

($85,000)

The effect is a decrease in net income by $85,000.

7 0
3 years ago
Landon is a senior manager for the firm Anderssen Inc. Because of his experience, he has been appointed to the board of EEC Inc.
Lapatulllka [165]

Answer:

Executive Director, Non Executive Director

Explanation:

Landon is a senior manager for the firm Anderssen Inc. Because of his experience, he has been appointed to the board of EEC Inc., even though he doesn't work for this firm. He also serves on the boards of several other companies. Landon is an Executive Director for Anderssen and a Non Executive Director for EEC.

An executive director has operational responsibilities in a firm but a non executive director does not have operational responsibilities in a firm but is involved in planning and policy formation which are strategic activities.

Operational refers to the daily running of a business.

8 0
3 years ago
Read 2 more answers
A property consists of 8 office suites, 3 on the first floor and 5 on the second floor. The contract rents are as follows: 2 sui
tangare [24]

Answer:

$89,100

Explanation:

Let us first calculate annual gross rent for Year 1:

Total rent per month:

= 2 suites at $1,800 + 1 suites at $3,600 + 5 suites at $1,560

= $3,600 + $3,600 + $7,800

= $15,000

Annual gross rent = Total rent per month × 12

                              = $15,000 × 12

                              = $180,000

Effective gross revenue = Potential gross rent revenue - Vacancy and connection losses (10% of potential gross rent)

                                        = $180,000 - $18,000

                                        = $162,000

Net operating income = Effective gross revenue - Operating expenses including depreciation

                                      = $162,000 - $72,900

                                      = $89,100

6 0
3 years ago
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