Answer and Explanation:
The journal entries are shown below:
On Jan 1
Cash $400,000
To Bonds payable $400,000
(Being the bond is issued for cash)
For recording this we debited the cash as it increased the assets and at the same time it increased the liabilities so the bond payable is credited
On July 1
Interest expense $14,000
To Cash $14,000
(Being the payment of interest is recorded)
The computation is shown below:
= $400,000 × 7% × 6 months ÷ 12 months
= $14,000
For recording this we debited the expenses as it increased the expenses and at the same time it decreased the assets so the cash is credited
On Dec 31
Interest expense $14,000
To Interest payable $14,000
(Being the accrual of interest is recorded)
For recording this we debited the expenses as it increased the expenses and at the same time it increased the liabilities so the interest payable is credited
Answer:
$13.53
Explanation:
Data provided in the question:
Annual dividend per share, D0 = $1.84
Cost of capital, ke = 13.6% = 0.136
Now,
since,
the dividend remains the constant, the growth rate (g) of the dividend will be 0%
Also,
Current price = [ D0 × ( 1 + g ) ] ÷ [ ke - g ]
= [ $1.84 × ( 1 + 0% ) ] ÷ [ 13.6% - 0% ]
= $1.84 ÷ 0.136
= $13.53
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Answer:
a. demand for existing shares of the stock and the price will both fall.
Explanation:
The stock price is formed by the interaction of supply and demand of companies's shares and when a news like this is released is expected that the future cashflows of that company will drop. Being share buyers rational actors, the demand for the company's shares will drop, therefore the price of the company will drop as well.
