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3 years ago

Dobbs Company issues 6%, two-year bonds, on December 31, 2018, with a par value of $106,000 and semi-annual interest payments.

Business

1 answer:

Rashid [163]3 years ago

5 0

Answer: See explanation

Explanation:

a. The issuance of bonds on December 31, 2018.

Dec 31, 2018.

Debit Cash $99880

Debit Discount on bonds payable $6120

Credit Bonds payable $106000

(to record bond issue)

b. The first through fourth interest payments on each June 30 and December 31.

June 30

Debit Interest expense = $4718

Credit Discount on bonds payable = $1538

Credit Cash (106000×6%×6/12) = $3180

(To record interest)

Dec, 31.

Debit Interest expense = $4718

Credit Discount on bonds payable = $1538

Credit Cash (106000×6%×6/12) = $3180

(To record interest)

June 30

Debit Interest expense = $4718

Credit Discount on bonds payable = $1538

Credit Cash (106000×6%×6/12) = $3180

(To record interest)

Dec, 31

Debit Interest expense = $4718

Credit Discount on bonds payable = $1538

Credit Cash (106000×6%×6/12) = $3180

(To record interest)

c. The maturity of the bonds on December 31, 2020.

Dec 31,2020

Debit Bonds payable = $106000

Credit Cash = $106000

(To record retirement)

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Option d. $35.00 is the share price that one should pay for the stock today to get the required return

The share price, or the price you will pay for the company's stock right now, can be calculated using the necessary rate of return calculation, the formula is as follows:

RRR=(EDP/SP)+DGW

where;

RRR=required rate of return

EDP=expected dividend payment from share

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In our case:

RRR=15.40%=15.4/100=0.154

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DGW=7.40%=7.40/100=0.074

Substituting the values in the formula we get the following:

0.154=(2.80/SP)+0.074

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SP=2.80/0.08

So, the share price of the stock=$35

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1 year ago

On April 1, a patent with an estimated useful economic life of 12 years was acquired for $1,500,000. In addition, on December 31

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Answer:

April 1

Debit : Patent $1,500,000

Credit : Cash $1,500,000

December 31

Debit : Amortization $125,000

Credit : Accumulated Amortization $125,000

December 31

Debit : Impairment loss $6,000,000

Credit : Accumulated Impairment loss $6,000,000

Explanation:

Both the Amortization and Impairment loss reduce the value of assets. They are therefore expenses accounted in Income Statement.

Amortization : is the loss of value of an asset due to passage of time.

Amortization Expense = (Cost - Residual Amount) ÷ Useful Life

= ( $1,500,000 - $ 0) ÷ 12

= $125,000

Impairment loss : is the excess of the Carrying Amount of an Asset over its Recoverable Amount( Higher of Value in Use and Fair Value less Cost to Sell)

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2 years ago

Renata's US-based lifestyle company decides to invest in a company based in France that specializes in health and wellness. This

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People often make investments the health and wellness sector. This would be an example of foreign direct investment.

<h3>What is a foreign direct investment (FDI)?</h3>

This is known as a purchase of an interest that a firm is involved in. Here, the company by a company or an investor are found outside its borders.

The 3 types of FDI are;

Horizontal FDI
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It is simply a business decision to get or buy a good amount of stake in a foreign business as in the case with Reneta.

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2 years ago

A 30-year zero coupon bond with a face value of $5,000 is currently selling for $1,156.88 and has a market rate of interest of 5

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Answer:

Price will increase by $277.58

Explanation:

Market rate of Interest of a zero coupon bond can be determined by following formula

Market Rate of Interest = [ ( F / P )^(1/30) ] - 1

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0.0425 + 1 = ( $5000 / P )^1/30

( 1.0425 )^30 = (( $5000 / P )^1/30)^30

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P = $5,000 / 3.4856

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Now Calculate the change in Price

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3 years ago

Income elasticity of demand is

coldgirl [10]

Answer: Option (a) is correct.

Explanation:

Income elasticity of demand measures the responsiveness of quantity demanded with change in the income level of an individual.

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