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Solnce55 [7]
3 years ago
10

On January 1, 2021, Blair Company sold $800,000 of 10% ten-year bonds. Interest is payable semiannually on June 30 and December

31. The bonds were sold for $708,000, priced to yield 12%. Blair records interest at the effective rate. Blair should report bond interest expense for the six months ended June 30, 2021 in the amount of:
Business
1 answer:
Anika [276]3 years ago
7 0

Answer:

$42,480

Explanation:

Given that,

Value of bonds = $800,000

Interest rate = 10%

Selling price of bond (Book value) = $708,000

Priced to yield = 12%

The semi-annual yield is calculated as follows:

= 12% / 2 (because the interest is payable semiannually on June 30 and December 31)

= 6%

Therefore, the semi-annual bond interest expense:

= Selling price of bond × semi-annual yield

= $708,000 × 6%

= $42,480

Hence, the Blair should report bond interest expense for the six months ended June 30, 2021 in the amount of $42,480.

But the actual cash paid for the interest expense will be:

= (Value of bonds × Interest rate on bonds)

= [$800,000 × (10%/2)]

= $800,000 × 5%

= $40,000

So, the amortization for bond discount is the difference between actual cash paid and bond interest expense:

= $42,480 - $40,000

= $2,480

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3 years ago
A fast-food restaurant has determined that the chance a customer will order a soft drink is 0.90. The proba- bility that a custo
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Answer:

(a) The probability that the order will include a soft drink and no fries is 0.45.

(b) The probability that the order will include a hamburger and fries is 0.48.

Explanation:

Let the events be denoted as follows:

S = an order of soft drink

H = an order of hamburger

F = an order of french fries.

Given:

P (S) = 0.90

P (H) = 0.60

P (F) = 0.50

(a)

It is provided that the event of ordering a soft drink and fries are independent.

If events A and B are independent then the probability of event (A ∩ B) is:

P(A\cap B)=P(A)\times P(B)

Compute the probability that the order will include a soft drink and no fries as follows:

P(S\cap \bar F)=P(S)\times P(\bar F)\\=P(S)\times[1-P(F)]\\=0.90\times (1-0.50)\\=0.45

Thus, the probability that the order will include a soft drink and no fries is 0.45.

(b)

It is provided that the conditional probability that a customer will order fries given that he/she has already ordered a hamburger as, P (F|H) = 0.80.

The conditional probability of an event B given another event A has already occurred is:

P(B|A)=\frac{P(A\cap B}{P(A)}

Compute the probability that the order will include a hamburger and fries as follows:

P(F|H)=\frac{P(H\cap F)}{P(H)}\\P(H\cap F)=P(F|H)\times P(H)\\=0.80\times 0.60\\=0.48

Thus, the probability that the order will include a hamburger and fries is 0.48.

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3 years ago
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Rama09 [41]

Answer:

The intrinsic value of Stock A is 500

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According to the DDM method the formula for calculating the intrinsic value of a stock is

Upcoming Dividend/Required rate of return - Growth rate of stock.

Upcoming Dividend of Stock A= 5

Required rate of return on Stock A= 11% or 0.11

Growth rate on stock A= 10% or 0.10

Intrinsic value of stock A=

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The intrinsic value of Stock A is 500

4 0
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A decision in which a manager needs to determine whether a product line (or segment) should continue or be eliminated is what ki
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Answer:

Keep-or-drop decision

Explanation:

Keep-or-drop decision is taken when a manager is in a dilemma whether to continue a product line or segment or shut it down. The manager needs to analyse income statement related to the product line to understand the major issue with product line. If costs are more than revenue, then the product line needs to be shut down. If the reasons for incurring losses can be addressed and that revenue from the product line is more, then it is not dropped.

Therefore, manager takes a keep-or-drop decision.

7 0
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