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GalinKa [24]
2 years ago
6

Santana Industries purchased a supply of electronic components from ABC Corporation on October 1, 2020. In payment for the $5 mi

llion purchase, Santana issued a 1-year installment note to be paid in equal monthly payments at the end of each month. The payments include interest at the rate of 12%. What is the amount of interest expense that Santana will report in its income statement for the year ended December 31, 2020?
Business
1 answer:
pshichka [43]2 years ago
6 0

Answer: they will report an interest expense of $150000 in December 2020

Explanation:

firstly we calculate how much interest will be accumulated for the whole year so we are given a $5 million Dollar purchase which is the amount that will accumulate interest over time, then we have been told the company ha issued a 1 year installment note therefore we have a time frame.

so now we will calculate the yearly interest of $5 million :

$5 000000x12% = $600000 so the company will accumulate this interest yearly then we divide this amount by 12 to get the monthly interest.

$600000/12 = $ 50000 per month interest thereafter we will multiply the monthly interest of $50000 by 3 months which is months from October to December.

therefore the interest expense to be reported on the December 2020 income statement is $50000 x 3= $150000

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The demand curve for a monopoly is horizontal because the demand is perfectly elastic. upward sloping. vertical because the dema
timama [110]

Answer:

Downward sloping

Explanation:

According to the law of demand, this law states that there is a inverse relationship between the price of a commodity and the quantity demanded for a commodity. This indicates that as the price of the commodity increases then as a result the quantity demanded for that commodity decreases and as the price of the commodity decreases then as a result the quantity demanded for that commodity increases.

Monopoly refers to the market conditions in which there is only a single firm operating in a whole market.

Hence, due to this inverse relationship between the price and the quantity demanded, the demand curve for a monopoly firm is downward sloping.

4 0
3 years ago
Wild Swings Inc.’s stock has a beta of 2.5. If the risk-free rate is 6% and the market risk premium is 7%, what is an estimate o
Bess [88]

Answer:

r = 0.235 or 23.5%

Explanation:

Using the CAPM, we can calculate the required/expected rate of return on a stock. This is the minimum return required by the investors to invest in a stock based on its systematic risk, the market's risk premium and the risk free rate.  

The formula for required rate of return under CAPM is,

r = rRF + Beta * rpM

Where,

  • rRF is the risk free rate
  • rpM is the market return

r = 0.06 + 2.5 * 0.07

r = 0.235 or 23.5%

3 0
3 years ago
A firm is evaluating a proposal which has an initial investment of $50,000 and has cash flows of $15,000 per year for five years
Harlamova29_29 [7]

Answer:

3 1/3 years

Explanation:

Payback period is the time required for the inflows from a project to be equal to the initial outflow for the project. It is a key consideration in capital budgeting. It is usually assumed that the outlay or initial outflow is made in year 0 and the first inflow comes in after a year.

Year       Cash outflow      Cash inflow           Balance

0                ($50,000)                   -                ($50,000)

1                         -                   $15,000           ($35,000)

2                        -                    $15,000          ($20,000)

3                        -                    $15,000           ($5,000)

4                      -                      $15,000           $10,000

5                       -                    $15,000            $25,000

Hence the payback period

= 3 years and 5000/15000 * 12 months

= 3 years 4 months

= 3 1/3 years

3 0
3 years ago
Rufus Inc. and Hardy Company are negotiating a nontaxable exchange of business properties. Rufus’s property has a $50,000 tax ba
Norma-Jean [14]

Answer:

Which party to the exchange must pay boot to make the exchange work?

  • Rufus must pay boot since the FMV of its property is less than the FMV of Hardy's property.

How much boot must be paid?

  • $90,000 - $77,500 = $12,500

Assuming the boot payment is made, how much gain or loss will Rufus realize and recognize on the exchange, and what tax basis will Rufus take in the property acquired?

  • Rufus doesn't have any gain, and the tax basis for the new asset will be $50,000 + $12,500 = $62,500

Assuming the boot payment is made, how much gain or loss will Hardy realize and recognize on the exchange and what tax basis will Hardy take in the property acquired?

  • Since Hardy's property basis is $60,000 and it would be receiving $50,000 (Rufus's property) + $12,500 = $62,500, then it must recognize a $2,500 gain. The basis of Hardy's new property will be $62,500.
8 0
3 years ago
Diamond Computer Company has been purchasing carrying cases for its portable computers at a purchase price of $59 per unit. The
Gemiola [76]

Answer:

<u>Part(a) Differential analysis as at February 24</u>

Make (Alternative 1) :

Direct Materials                             $35.00

Direct labor                                    $18.00

Variable Overheads                      $2.70

Fixed Overheads                           $0.00

Total Make Costs                         $55.70

Buy (Alternative 2) :

Total Purchase Cost                    $59.00

<u>(b) On the basis of the data presented, would it be advisable to make the carrying cases or continue buying them? </u>

It is clear that from comparison of the cost of Purchase and the Cost of Making the Carrying Cases, the Cost of Making the Carrying Cases is lower than the Cost of Purchasing the Cases by $3.30

It is thus advisable to make carrying cases instead of buying them

Explanation:

Total Make Costs;

The Factory fixed overheads are irrelevant to this decision hence they were ignored in the make cost calculations.

5 0
3 years ago
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