Answer:
The amount to be reported as the cost of the land is $ 114,200
Explanation:
Cash paid for the land = $ 98,000
Net cost of demolishing old ware house = $ 11,000 - $ 3,100 = $ 7,900
Attorney's fee = $2,000
Real estate broker's fee = $ 6,300
Total cost of the land = Cash paid for the land + Net cost of demolishing old ware house + Attorney's fee + Real estate broker's fee
= $98,000 + $ 7,900 + $2,000 + $ 6,300
= $ 114,200
Explanation:
Qualitative analysis;
The given case belongs to real options in finance terms where the project offers tangible assets in comparison to financial instruments.
The project is of real option. The value of any real option would be more when:
- the project under consideration is very risky
- With respect to timing option value, there is time to change the decisions
Having said that, since project is risky and investment can be made later, hence it would be more feasible to wait and observe
Answer:
b. encourages people to engage in behaviors directly related to goal accomplishment
Explanation:
When companies engage in planning, they establish a guide for the operations, setting goals and preparing the strategies and actions that will help accomplish those goals. Because of this, planning helps the employees to focus and work towards achieving the objectives.
Answer:
Explanation:
Bike Co.
Bank Reconciliation
Cash balance according to Bank statement 8,980
Add:Deposits of May 31,not recorded by bank 1,050
Add:Bank error in charging checks as 730instead of $370 360 1,410
10,390
Deduct:checks outstanding 5,560
Adjusted balance 4,830
Cash balance according to company records 3795 (5140+39175-40520)
Add:collection of note 2,120
5915
Deduct: Error in recording cheque (310-130) 180
Bank service charge 25
NSF 880 1,085
Adjusted balance 4,830
2) Journal entries'
a 31-May Cash 2,120
Note receivable 2,000
interest revenue 120
b. 31-May Accounts payable-rack pro co 180
Miscellaneous expense 25
account receivable 880
cash 1,085
3) 4,830
Answer:
Building C
Explanation:
Building A: Purchase for a cash price of $620,000, useful life 27 years.
Building B: Lease for 27 years with annual lease payments of $71,170 being made at the beginning of the year.
Building C: Purchase for $657,500 cash. This building is larger than needed; however, the excess space can be sublet for 27 years at a net annual rental of $6,200. Rental payments will be received at the end of each year.
11% cost of funds
we must determine the present value of each option:
- Building A's present value = $620,000
- Building B's present value = $71,170 x 9.48806 (PV annuity due factor, 11%, 27 periods) = $375,265.23
- Building C's present value = $657,500 - [$6,200 x 8.5478 (PV ordinary annuity factor, 11%, 27 periods) = $657,500 - $52,996.36 = <u>$604,503.64 (LOWEST PV)</u>
