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anastassius [24]
3 years ago
15

Kier Company issued $660,000 in bonds on January 1, Year 1. The bonds were issued at face value and carried a 5-year term to mat

urity. The bonds have a 6.00% stated rate of interest and interest is payable in cash on December 31 each year. Based on this information alone, what are the amounts of interest expense and cash flows from operating activities, respectively, that will be reported in the financial statements for the year ending December 31, Year 1?
Business
1 answer:
yuradex [85]3 years ago
3 0

Answer:

Interest Expense $39,600

Cash Flow from Operating Activities $39,600

Explanation:

Payment of Interest Expense is the cash expense paid during the year which is deducted from the operating profit in the calculation of net income which is used to determine the cash flow from operating activities.

Interest on the Bond = $660,000 x 6% = $39,600

At the time of payment Journal Entry will be as follow

Dr. Interest Expense   $39,600

Cr. Cash                       $39,600

As the cash is paid against the operating activities.

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Answer:

d. $75,000

Explanation:

Minimum Claim value to claim in the court for a federal diversity suit is $75,000. It is also called the amount in controversy. For example federal court diversity suit requires a minimum value of claim is $75,000. So, The minimum amount required for a federal diversity suit is $75,000 in the court.

5 0
3 years ago
Classifying items on the statement of cash flows Cash flow items must be categorized into one of four categories. Identify each
valentina_108 [34]

Answer:

Explanation:

There are three types of activities in the cash flow statement which are described below:  

1. Operating activities: It includes those transactions which affect the working capital after net income. The increase in current assets and a decrease in current liabilities would be deducted whereas the decrease in current assets and an increase in current liabilities would be added.  

These changes in working capital would be adjusted. Moreover, the depreciation expense is added to the net income  and it also records the cash receipts and cash payment transactions

2. Investing activities: It records those activities which include purchase and sale of the long term assets. The purchase is an outflow of cash whereas sale is an inflow of cash

3. Financing activities: It records those activities which affect the long term liability and shareholder equity balance. The issue of shares is an inflow of cash whereas redemption and dividend is an outflow of cash.

The categorization is shown below:

a. Cash purchase of merchandise inventory - operating activity

b. Cash payment of dividend - financing activity

c. Cash receipt from the collection of long-term notes receivable - investing activity

d. Cash payment for income taxes - operating activity

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g. Cash received from borrowing money  - financing activity

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5 0
3 years ago
Marta's boss tells off-color jokes and tolerates sexually based teasing by male employees of women employees. when she complains
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3 years ago
What is prohibited in a command economy?
aleksandr82 [10.1K]
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2 years ago
The total market value of the equity of ITM is $6 million, and the total value of its debt is $4
timofeeve [1]

Answer:

a. The required rate of return on Okefenokee stock is 16%.

b. WACC = 10.56%.

c. Estimate the discount rate for an expansion of the company's present business.

It should be the same as the WACC = 10.56%

d. The required rate of return on Okefenokee's new venture is Ke = 18 %.

Explanation:

Here the given is,

E = $6 million, D = $4 million, Beta = 1.2,

Rmp = the expected risk premium on the market =10%.

Rf = The Treasury bill rate = 4%

a. The required rate of return on Okefenokee stock,

Ke = Rf + Beta \times Rmp = 4 + 1.2 \times 10 = 16%%.

b. Tax rate, T = 40%

The proportion of debt =Wd = D / (D + E) = 4 / (6 + 4) = 0.4

Proportion of equity, We = 1 - Wd = 1 - 0.4 = 0.6

Cost of debt, Kd = Risk-free rate as debt is free of default = 4%

WACC = Wd \times Kd \times (1 - T) + We\times Ke\\\\ = 0.4 \times4\times (1 - 40) + 0.6 \times 16\\\\ = 10.56%

WACC = 10.56%.

c. Estimate the discount rate for an expansion of the company's present business.

It should be the same as the WACC = 10.56%

d. Suppose the company wants to diversify into the manufacture of rose-colored glasses. The beta of optical manufacturers with no debt outstanding is 1.4. What is the required rate of return on Okefenokee's new venture? (You should assume that the risky project will not enable the firm to issue an additional debt)

Ke = Rf + Beta \times Rmp\\\\Ke     = 4 + 1.4 \times 10 = 18%

Ke = 18 %.

5 0
3 years ago
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