However, the debt issues also raises the probability of bankruptcy. You company has a 30% chance of going bankrupt after 3 years
1 answer:
Answer:
Expected Cost = $60,000
Present Value of Expected Cost = $45,079
Explanation:
The chance that the bankruptcy will happen is 30% and the cost it will incur if it happens is $200,000. The expected cost is the probability of the event happening multiplied by the cost of the event happening.
Expected Cost = 200,000 * 0.3
= $60,000
The present value of this cost assuming a discount rate of 10% is;
=
= $45,078.89
= $45,079
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Answer and Explanation:
As per situation the Journal entries with narrations is here below:-
As per requirement of a
1. Slice Co. investment Dr, $319,500
To Cash $319,500
(Being cash paid is recorded)
2. Slice Co. investment Dr, $27,000
To Income from Slice Co. $27,000
(Being investment is recorded)
3 Cash Dr, $13,500
To Slice Co. investment $13,500
(Being cash is recorded)
As per requirement b
1. Sales Dr, $90,000
To Total Expenses $80,000
To Dividends Declared $5,000
To Retained Earnings $5,000
(Being sales is recorded)
2. Common stock Dr, $160,000
Additional paid-in capital Dr, $40,000
Retained earnings Dr, $155,000
Income from Slice Co. Dr, $27,000
NCI in NI of Slice Co. Dr, $3,000
To Dividends declared $15,000
($1,500 + $13,500)
To Investment in Slice Co. $333,000
($319,500 + $27,000 - $135,00)
To NCI in NA of Slice Co. $37,000
(Being acquisition is recorded)
