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3 years ago

David purchased a $5,000 bond on the secondary market. He paid a $500 premium. What is David's basis?

Business

1 answer:

Pavel [41]3 years ago

5 0

Answer:

David's basis on the $5,000 bond purchased is:

C. $5,000.

Explanation:

a) Data and Analysis:

Cost of Investment in bond = $5,000

Premium paid = $500

b) David's basis on the bond is the quoted price of the bond, which is a security investment. It is on this basis price that future interest will be calculated. The additional $500 as premium he paid is just an additional cost which he incurred in exchange for his interest in the bond. It does not form part of the basis.

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1. Bart Simpson, Inc., is considering the possibility of building an additional factory that would produce a new addition to its

garri49 [273]

Answer:

Three cases are considered: First case is to construct a small factory, second is to construct a large factory and third is to do nothing.

Construct a Small Facility is the most suitable option from the business perspective which makes case 1 recommended.

Explanation:

Case 1 - Construct a small facility

Return = [P(High Demand) x Revenue in case of High Demand] + [P(Low Demand) x Revenue in case of Low Demand] - Cost of Setup

= [ 0.4 x 12 ] + [ 0.6 x 10 ] - 6 = $ 4.8 million

Case 2 - Construct a Large Facility

Return = [P(High Demand) x Revenue in case of High Demand] + [P(Low Demand) x Revenue in case of Low Demand] - Cost of Setup

= [0.4 x 14] + [0.6 x 10] - 9 = $ 2.6 million

Case 3 - Do Nothing

Return = 0

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3 years ago

On March 1st, the Picasso Co. issued a 12 month, $120,000 note, to the Bank of Carbondale. The note carries a 10% interest rate

alexira [117]

Answer:

The maturity value of the note is <u>$132,000</u>

Explanation:

A Loan note is a promissory note that is signed to make a promise of an amount of Loan taken by someone that to be returned after a specific time with interest value at a defined in the loan note.

The maturity value of the loan note can be calculated as follow

Face value = $120,000

Interest rate = 10%

Time period = 1 years

Use following formula to calculate the maturity value of the loan note.

Maturity value = Face value x ( 1 + interest rate )^ numbers of years

Placing values in the formula

Maturity value = $120,000 x ( 1 + 10% )^1

Maturity value = $132,000

6 0

3 years ago

Explain your understanding of the closing process by choosing the correct statements below. (Check all that apply.) Multiple sel

elena55 [62]

Answer:

Resets the balances to zero

6 0

3 years ago

Brooks Co. purchases debt investments as trading securities at a cost of $66,000 on December 27. This is its first and only purc

Thepotemich [5.8K]

Answer:

Dr. Cr.

December 31

*Securities FV adjustment $6,000

Unrealized Gain $6,000

January 3

Cash $4,000

Securities FV adjustment $1,000

Trading Securities $3,000

* Securities FV adjustment is a sub asset account of trading securities.

Explanation:

Trading security are reported on its fair market value at each period end. The gain or loss should be recorded.

Dec 27, Purchase price = $66,000

Dec 31, Fair value = $72,000

Unrealized gain = $72,000 - $66,000 = $6,000

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4 years ago

JPix management is considering a stock split. JPix currently sells for $70 per share and a 3-for-1 stock split is contemplated.

Vlad [161]

Answer:

$23

Explanation:

Calculation to determine What will be the company's stock price following the stock split, assuming that the split has no effect on the total market value of JPix's equity

P0=70, Split = 3 for 1, New P0?

P0 new= $70/(3/1)

P0 new=$70/3

P0 new= $23

Therefore What will be the company's stock price following the stock split, assuming that the split has no effect on the total market value of JPix's equity is $23

8 0

3 years ago