Which of the following is an appropriate solution to an overspending allowance?

Your client has been offered a 5-year, $1,000 par value bond with a 10 percent coupon. Interest on this bond is paid quarterly.

Serjik [45]

Answer:

$906.18

Explanation:

Step 1: Calculation of the present value of the coupon (PVC) cash flow

The formula for calculating the PV of an ordinary annuity is used as follows:

PVC = P × [{1 - [1 ÷ (1+r)]^n} ÷ r] …………………………………. (1)

Where;

PVC = Present value of the coupon (PVC) payment =?

P = Quarterly coupon amount = $1,000 × (10%/4) = $25

r = interest rate = 12% annual = 12% ÷ 4 quarterly = 3% or 0.03 quarterly

n = number of period = 5 years = 7 × 4 quarters = 28 quarters

Substitute the values into equation (1) to have:

PVC = 25 × [{1 - [1 ÷ (1+0.03)]^28} ÷ 0.03] = $469.10

Step 2: Calculation of the present value of the face value (PVFAV) of the bond

The simple PV formula is used as follows:

PVFAV = FAV ÷ (1 + r)^n ……………………………………. (2)

Where;

PVFAC = Present value of the face value of the bond = ?

FAC = Face value of the bond = $1,000

r and n are as already given in step 1 above

Substituting these values into equation (2), we have:

PVFAV = FAV ÷ (1 + 0.03)^28 = $437.08

Step 3: Calculation of the market price of the bond

Market price of the bond = PVC + PVFAC …………………………… (3)

From step 1, PVC is $469.10, and PVFAC is $437.08 from Step 2. We can them substitute for them in equation (3) and have:

Market price of the bond = $469.10 + $437.08 = $906.18

Conclusion

Therefore, she should pay $906.18 for the bond.

5 0

4 years ago

In absorption costing, nonmanufacturing costs are assigned to units of product. True or False True False

Andru [333]

Answer:

The statement is: False.

Explanation:

Non-manufacturing costs are those not related to the production process of the company. It implies costs useful for the operations of the firm but does not have an impact on the process of creating a final good. Administrative salaries, office supplies, and depreciation fall into this category.

Absorption costing describes an accounting approach in which all the manufacturing costs are assigned to the units produced.

Thus, as non-manufacturing costs are not related to the manufacturing process, they cannot be allocated within the units of production using the absorption costing method.

3 0

3 years ago

Suppose that the U.S. textile industry is competitive and there is no international trade in textiles. In long-run equilibrium,

MaRussiya [10]

Answer:

Since we are not given the equilibrium price or quantity, I drew a graph showing Pe and Qe as them.

If foreign firms start selling in the domestic market at a higher price, then the curve shouldn't modify, but if they start to sell at a lower price, the equilibrium price and quantity will shift to the left.

Pai = price after imports

Qai = quantity after imports

The second graph shows the equilibrium point for an individual firm.

7 0

3 years ago

Sanchez Company engaged in the following transactions during Year 1: Started the business by issuing $42,000 of common stock for

sladkih [1.3K]

Answer:

The gross margin is $24,200

Explanation:

The computation of the gross margin is shown below:

As we know that

Gross margin is

= Sales - cost of goods sold

= $57,000 - $32,800

= $24,200

We simply deduct the cost of goods sold from the sales so that the gross margin could come

hence, the gross margin is $24,200

We simply applied the above formula

5 0

3 years ago

Scoop Masters Inc. has been charged by Fab Flavors Corp. with stealing Fab Flavors' patented process for making ice cream. After

amm1812

Answer:

No - FALSE

Explanation:

Scoop Masters Inc. has been charged by Fab Flavors Corp. with stealing Fab Flavors' patented process for making ice cream. After the papers are filed, Scoop Masters begins shredding all documents pertaining to its ice cream-making process. Since no motion has been made requesting production of documents, Scoop Masters has done nothing wrong is a false statement. Scoop Masters Inc. has done really wrong. They have stolen someone else's idea of making a product even without their consent and then without mentioning their name and rights and trademarks. Moreover, they shredded all the proof in order not to be caught by the court in law. They have some serious crime which is totally wrong and unacceptable in all cases at all grounds.

8 0

3 years ago