Rica Company is a price−taker and uses a target−pricing approach. Refer to the following information:Production volume602,000un
1 answer:
Answer:
Desired profit for the year = $2,329,000
Explanation:
Using the given information, we have
Production volume = 602,000 units
Market price = $34
Operating income desired = 17% of total assets
Total Assets = $13,700,000
Operating income = $13,700,000 17% = $2,329,000
Therefore desired profit = $2,329,000
therefore with this information desired profit per unit = $2,329,000/602,000 = $3.869
Target cost per unit = $34 - $3.869 = $30.131
Desired profit for the year = $2,329,000
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Answer:
As the actual price of such bonds should be $950.51 and the bonds are offered at a lower price, the bonds should be bought at the offered price.
Explanation:
To determine whether the bonds should be bought at the given price or not, we first need to calculate the price of the bond. The formula for the price of the bond is attached.
The interest payed by the bonds can be treated as an annuity.
The semiannual rate will be = 9% / 2 = 4.5%
The number of semi annual payments will be = 7 * 2 = 14
The YTM expressed semi annually will be (r) = 10% / 2 = 5%
Semi annual coupon payment or C = 1000 * 0.045 = 45
Bond Price = 45 * [(1 - (1+0.05)^-14) / 0.05] + 1000 / (1+0.05)^14
Bond Price = 950.5068 rounded off to $950.51
As the actual price of such bonds should be $950.51 and they are offered at a lower price, the bonds should be bought at the offered price.
When the market rate is 12%, a company issues $50,000 of 9%, 10-year bonds and pay interest semiannually. When the bonds mature, the issuer records the journal entry of its payment of principal with a debit to cash in the amount of $50,000.
<h3>What is a journal entry?</h3>A systematic way of making and maintaining the record of the financial transactions in the journal books of an organization, with a proper narration of the same, is known as a journal entry.
Hence, option C holds true regarding the journal entry.
Learn more about a journal entry here:
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