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3 years ago

Questions and Problems

Business

1 answer:

prisoha [69]3 years ago

4 0

Answer:

Adjusted Basis = $571,300

Explanation:

Given.

Amount Procured = $750,000

Capital Improvement = $50,000

Depreciation = $128,700

Adjusted basis is the net cost of an asset after adjusting for various tax-related items.

In other words, it is the original cost or other basis of property, reduced by depreciation deductions and increased by capital expenditures.

Calculating Jocasta's adjusted basis in the building.

= Amount Procured - Depreciation - Capital Improvement

= $750,000 - $128,700 - $50,000

= $571,300

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Your broker is selling you an investment scheme in which you will receive $5,000 four years from now, $6,000 five years from now

kvasek [131]

Answer:

IRR = 3.64%

Explanation:

using a financial calculator or excel spreadsheet we can determine the IRR of this investment:

year 0 = -$15,000

year 1 = $0

year 2 = $0

year 3 = $0

year 4 = $5,000

year 5 = $6,000

year 6 = $7,000

IRR = 3.64%

Since your required rate of return is 12%, you should pay a maximum of $10,128.57

6 0

3 years ago

Knowledge Check 03 On January 5, 2015, Barnaby, Inc., purchased a patent costing $100,000 with a useful life of 20 years. The co

Finger [1]

Answer:

The journal entry is as follows:

Explanation:

January 5 Patent A/c..................Dr $100,000

To Cash A/c............Cr $100,000

As patent is purchased so asset is increasing and any increase in asset would be debited. Therefore, patent account is debited. And it is purchased against cash and decrease in asset is credited. Therefore, cash account is credited.

December 31 Amortization expense- Patent................Dr $5,000

To Accumulated Amortization- Patent........Cr $5,000

Working Note:

Patent Cost is $100,000

Useful life is 20 years

Amortization expense = Patent Cost / Useful life of asset

= $100,000 / 20

= $5,000

7 0

3 years ago

The Stone Harbor Fund is a closed-end investment company with a portfolio currently worth $310 million. It has liabilities of $3

defon

Answer: 8.79%

Explanation:

The premium or discount as a percent of NAV will be calculated thus:

NAV will be calculated as:

= (Market value of portfolio - liabilities ) / shares outstanding

= ($310 million - $3million) ÷ 10 million

= $30.7 per share.

Then, the calculation for the discount percent will be:

= (selling price - NAV) / NAV

= ($28 - $30.7) / $30.7

= ($-2.7) / $30.7

= (0.0879)

= 8.79%

Therefore, NAV is trading at discount of 8.79%

8 0

3 years ago

Agee Storage issued 33 million shares of its $1 par common stock at $21 per share several years ago. Last year, for the first ti

Tpy6a [65]

Answer:

$23 million

Explanation:

Calculation to determine at what amount will Agee’s total paid-in capital decline

First step is to calculate the Cash paid for the first repurchase

Cash paid for the first repurchase = 1 million * 19

Cash paid for the first repurchase = $19 million

Second step is to calculate the Value of first purchase

Value of first purchase = 1 million * 21

Value of first purchase = $21 million

Third step is to calculate the Benefit on first repurchase

Benefit on first repurchase = 21 million - 19 million

Benefit on first repurchase = $2 million

Fourth step is to calculate Cash paid for second repurchase

Cash paid for second repurchase = 1 million * 24

Cash paid for second repurchase = $24 million

Fifth step is to calculate the Value of second purchase = Reacquired shares * Common stock price

Value of second purchase = 1 million * 21

Value of second purchase = $21 million

Last step is to calculate the Decline in total paid-in capital using this formula

Decline in total paid-in capital= Benefit on first repurchase + Value of second purchase

Decline in total paid-in capital = 2 million + 21 million

Decline in total paid-in capital = $23 million

Therefore what amount will Agee’s total paid-in capital decline is $23 million

8 0

2 years ago

Bob is evaluating a bond issue to determine the right price for the bond. In his evaluation, he gathers the following informatio

Elanso [62]

Answer:

The price of the bond is $1000. Thus, option a is the correct answer.

Explanation:

The price of a bond is calculated using the present value of the interest payments made by the bond, which is in the form of an annuity, plus the present value of the face value of the bond. The present value is calculated by discounting the annuity of interest and the face value by the YTM or yield to maturity. In case YTM is not provided, we assume that it is same as or equal to the coupon rate paid by the bond.

The formula for the price of the bond is attached.

Bond Price = 25 * [(1 - (1+0.025)^-8) / 0.025] + 1000 / (1+0.025)^8

Bond Price = $1000

5 0

3 years ago