Answer:
Residual Income = $6,000
Explanation:
Residual income is the excess income of a firm leftover the opportunity cost of capital or over the desired income.
Given,
The minimum rate of return 12%
Average operating assets = $300,000
Net operating income = $42,000
We know,
Residual Income = Net Operating Income - (Average operating assets x the minimum rate of return)
Residual Income = $42,000 - ($300,000 x 12%)
Residual Income = $42,000 - $36,000
Residual Income = $6,000
Answer:
D) $8,040
Explanation:
<u>Credit Sales Method:</u>
Bad Debt Losses = 3% of Credit Sales
Bad Debt Losses = 0.03 x $588,000
Bad Debt Losses = $17,640
<u>Adjusted balance in the Allowance for Doubtful Accounts:</u>
Bad Debt Losses - (uncollectible accounts receivable - Allowance for Doubtful Accounts)
$17,640 - ($24,000 - $14,400)
$17,640 - $9,600
$8,040
Answer: $75
Explanation:
Using the Gordon Growth Model:
Price of stock = Next year dividend / (Required return - growth rate)
Growth rate is 0% as dividend does not change per year.
Price of stock = 6 / 8%
= $75
Answer:
The correct answer is A.
All other things being equal, in the early years of the asset's life, the amount of income shown <u>on the tax return will be higher than the amount of income shown on the income state.</u>
Here's why
Explanation:
In the United States, the Modified Accelerated Cost Recovery System (MACRS) is a depreciation system used for tax purposes.
It allows the capitalized cost of an asset to be recovered over a specified period via annual deductions. The MACRS system puts fixed assets into classes that have set depreciation periods.
This depreciation system allows an asset to be depreciated faster in the first years of an asset's life and slows depreciation later on. This is beneficial to businesses from a tax perspective.
This is logical, the less the value of an assets, the less the property tax applicable to it and so the company increases it's bottom line in tax savings whiles maximizing the useful life of the asset.
Cheers!
