Answer:
A) $0, no cash paid in 2016, both interest and principal were paid on March 31, 2017.
B) = [($90,000 x 8%) / 12] x 3 months = ($7,200 / 12) x 3 = $600 x 3 = $1,800
C) = $90,000 + $1,800 = $91,800
D) = ($600 x 6 months) + $90,000 = $3,600 + $90,000 = $93,600
E) = $600 x 3 months = $1,800
<u>Calculation of firm's times interest earned ratio:</u>
The times interest earned ratio can be calculated with the help of following formula:
Times interest earned ratio = Income before Interest and Tax / Interest Expense
Interest expense is given $898, and Income before Interest and Tax can be calculated as follows:
Net Income $4,238
Add: Tax (4238*35/65) $2,282
Income before tax =$6520
Add: Interest Expense $898
Income before Interest and Tax = $7,418
Hence, Times interest earned ratio = 7418 /898 = <u>8.26 times</u>
Answer: Option D
Explanation: Accumulated depreciation refers to the total amount of reduction in value that an asset has incurred upto a certain point of time. Depreciation is charged on fixed assets.
When a fixed asset is sold or discarded the accumulated deprecation of such asset is debited from the value to ascertain actual value of the asset.
If the selling amount received exceeds the actual value then a gain is recorded.
Hence from the above we can conclude that the correct option is D.
Answer: C. Suppose the returns on two stocks are negatively correlated. One has a beta of 1.2 as determined in a regression analysis using data for the last 5 years, while the other has a beta of %u22120.6. The returns on the stock with the negative beta must have been negatively correlated with returns on most other stocks during that 5-year period.
Explanation:
From the options given, the correct option is option C "Suppose the returns on two stocks are negatively correlated. One has a beta of 1.2 as determined in a regression analysis using data for the last 5 years, while the other has a beta of %u22120.6. The returns on the stock with the negative beta must have been negatively correlated with returns on most other stocks during that 5-year period".
Option A is wrong because when there is information that a particular stock will be strong in the future, one should not sell your high-beta stocks and buy low-beta stocks rather the low best stocks should be sold and high beta stocks should be bought.
Option B is wrong because during recession, collections' revenues, profits, and stock price tend to fall and not rise. During recession, there is decrease in economic growth, unemployment and other negative effects in the economy.
Option D and E are wrong as well as the reverse is the case in both situations. The correct option is C.
If a company failed to make the end-of-period adjustment to remove from the unearned management fees account the amount of management fees that were earned, this omission would cause an overstatement of liabilities.
Liabilities are owing debts or legal responsibilities to another individual or business. Liabilities, then, are future forfeitures of economic gains that an entity must make to other entities as a result of previous occurrences or previous transactions.So,if a company failed to make the end-of-period adjustment to remove from the unearned management fees account the amount of management fees that were earned, this omission would cause an overstatement of liabilities.
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