Answer:
Kingbird, Inc. Journal entry
March 1 2017
Dr Cash (250,000*96%) 240,000
Dr Discount on bonds payable
(250,000×4%) 10,000
Bonds payable 250,000
(to record issuance of bonds)
Explanation:
Since Kingbird, Inc. issues $250,000, 10 years 6% bonds at 96 this means we have to record the transaction as issuance of bonds by Debiting Cash with (250,000*96%)240,000 and as well Debiting Discount on bonds payable with(250,000×4%) 10,000 while Bonds payable will be Credited with 250,000.
Answer:
It is more profitable to add the vitamin and sell the product for $5. Income will increase by $260
Explanation:
Giving the following information:
The number of units= 1,000 packages
Actual:
Selling price= $4.00 per pack.
Variable cost is $1.50 per unit
Fixed costs are $1,700 per month.
New option:
Selling price= $5
Variable cost= $1.9
Fixed costs= $2,040
We need to calculate the net income of both options, and choose the more profitable one:
Actual:
Net income= 1,000*(4-1.5) - 1,700= $800
New:
Net income= 1,000*(5 - 1.9)- 2,040= $1,060
It is more profitable to add the vitamin and sell the product for $5.
Answer: $22.22
Explanation:
We can use the dividend discount model to solve for this.
The formula is,
P = D1 / r - g
Where,
D1 = the next dividend
r = the expected return
g = the growth rate.
We do not have the expected return but we can calculate for it using the old stock price and growth rate. Making it x we have,
28.5 = 0.5 / x - 0.075
28.5 (x - 0.075) = 0.5
x = 0.5 / 28.5 + 0.075
x = 0.09254385964
x = 9.25 %
Now that we have the expected return we can calculate the new stock price with the new growth rate,
P = 0.5 / 9.25% - 7%
P = 22.2222222222
P = $22.22
The new stock price is $22.22
Answer:
B and C are mis-categorized balance sheet.
Explanation:
A. Accounts Payable: Accounts payable refers to amounts that are due to be paid by a company to vendors or suppliers of goods or services received without making payments yet. This is a liability item and the categorization is correct.
B. Prepaid expenses: These are advanced payments made by a company for commodities yet to receive. This is an asset item and the categorization is not correct.
C. Accounts Receivable: These refers to amounts that are owed to a company by its debtors for goods or services supplied to them for which they are yet to pay for. This is an asset item and the categorization is not correct.
D. Accrued expenses: These refers to expenses that have been incurred by a company but which the company is yet to pay for. This is a liability item and the categorization is correct.
E. Unearned revenue: This refers to advanced payment received by a company in respect of goods it is yet to deliver or services it is yet to render. This is a liability item and the categorization is correct.
F. Long-term debt: This refers to the amount of of outstanding debt of business with a maturity of 12 months or longer. This is a liability item and the categorization is correct.
Conclusion
Only B and C are mis-categorized balance sheet. The reason is that they are both asset items, current assets to be specific, not liability items.
The legal contract between the bondholders and the issuer is called the bond <u>indenture.</u>
A bond indenture is important as it helps to protect the interest if the stakeholders and also lowers the chance of default.
It should be noted that the indenture list provides the details of a bond. It helps in ensuring transparency. Therefore, the legal contract between the bondholders and the issuer is called the bond indenture.
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