Answer: a. Issuer
Explanation:
When bonds trade at a premium, it means that the yield has fallen below the coupon rate which means that interest rates have dropped. Companies can take advantage of this to reissue new bonds at the lower interest rate so that they can save on costs.
Bonds usually have a call provision which would enable the issuer to call the bond in and pay the holder at the par value plus interest repayments at the lower yield which they will do in this case. They will then reissue new bonds at a lower rate.
Brickhouse is expected to pay a dividend of $3.15 and $2.46 over the next two years, respectively. After that, the company is expected to increase its annual dividend at 3.9 percent. What is the stock price today if the required return is 11.3 percent?
Answer: $32.70
Explanation:
According to the dividend discount model, the value of the stock today is the present value of the dividends to be paid plus the present value of the value of the dividend from when the company starts maintaining a stable growth rate which in this question in year 2.
= (Year 1 Dividend / ( 1 + r)) + (Year 2 Dividend / ( 1 + r)²) + (value at year 2 / ( r - g))
Value at year 2 = Year 3 dividend / ( required return - growth rate)
= ( Year 2 dividend * (1 + g)) / ( required return - growth rate)
= (2.46* ( 1 + 0.039)) / ( 0.113 - 0.039)
= $34.54
Value today = (Year 1 Dividend / ( 1 + r)) + (Year 2 Dividend / ( 1 + r)²) + (value at year 2 / ( r - g))
= 3.15/1.113 + 2.46/1.113² + 34.54/1.113²
= 2.83 + 1.99 + 27.88
= $32.70
Currently Baldwin is paying a dividend of $16.58 (per share). If this dividend were raised by $3.64, given its current stock price what would be the Dividend Yield? Select: 1Save Answer $20.22 8.9% $3.64 10.9%
Information Missing was:
Stock Market Summary
Company Close Change Shares MarketCap ($M) Book Value EPS Dividend Yield P/E
Andrews $1.00 $0.00 2,461,289 $2 $19.10 ($10.20) $0.00 0.0% -0.1
Baldwin $203.72 $73.28 1,908,475 $389 $63.83 $28.01 $19.85 9.7% 7.3
Chester $35.32 $9.33 3,490,508 $123 $26.71 $2.27 $2.39 6.8% 15.6
Digby $49.20 $9.01 3,149,499 $155 $36.95 $3.17 $0.86 1.7% 15.5
Answer:
11.5%
Explanation:
The dividend yield of Baldwin Co can be calculated by using the following formula:
Dividend Yield = (Current Dividend + Increase in Dividend) / Current Stock Value
Here
Current Dividend is $16.58 per share
Dividend Increase is $3.64 per share
Current Stock Value is $203.72
By putting values we have:
Dividend Yield = ($16.58 - $3.64) / $203.72
Dividend Yield = $23.49 per share / $203.72
Dividend Yield = 11.5%
Lloyd Inc. had sales of $200,000, a net income of //415,000, and the following balance sheet:
Cash $10,000 Accounts Payable $30,000
Receivables 50,000 Notes Payable To Bank 20,000
Inventories 150,000 Total Current Liabilities $50,000
Total Current Assets $210,000 Long-Term Debt 50,000
Net Fixed Assets 90,000 Common Equity 200,000
Total Assets $300,000 Total Liabilities And Equity $300,000
The new owner thinks that inventories are excessive and can be lowered to the point where the current ratio is equal to the industry average, 2.5x, without affecting sales or net income. If inventories are sold and not replaced (thus reducing the current ratio to 2.5x); if the funds generated are used to reduce common equity (stock can be repurchased at book value); and if no other changes occur, by how much will the ROE change? What will be the firm’s new quick ratio?
Answer:
The firm's new quick ratio is 2.9
Explanation:
The current ratio is calculated as
Current ratio = Current assets / Current liabilities
2.5 times = (Cash + receivables + Inventories ) / (Accounts payable + Other current liabilities)
2.5 = ($10,000 + $50,000 + Inventories) / $50,000
$60,000 + inventories = $125,000
Inventories = $65,000
Therefore, $85,000 worth of inventories were sold off.
If the funds generated are used to reduce the common equity that is by repurchasing the equity at book value.
Hence, the common equity amounts to $115,000
Calculating the ROE before the inventory is sold off:
ROE = Net income / Stockholder's equity
= $15,000 / $200,000
= 0.075 or 7.5%
Calculating the ROE after selling off the inventory:
ROE = $15,000 / $115,000
= 0.13 or 13%
The firm's new quick ratio is
Quick ratio = (Current assets - Inventories) / Current liabilities
= ($210,000 - $65,000) / $50,000
= 2.9
Lang Warehouses borrowed $131,300 from a bank and signed a note requiring 9 annual payments of $15,328 beginning one year from the date of the agreement. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)Required:Determine the interest rate implicit in this agreement. (Round interest rate to 1 decimal place.)Solve for iPresent value: n = i %
Annuity payment
Answer:
The interest rate implicit in this agreement is 1%
Explanation:
Present Value = $131,300
n = 9
i = ?
Annuity Payment = $15,328
Use the following formula to calculate the interest rate
PV of Annuity payment = Annuity Payment x ( 1 - ( 1 + r )^-n / r
$131,300 = $15,328 x ( 1 - ( 1 + r )^-9 / r
$131,300 / $15,328 = ( 1 - ( 1 + r )^-9 / r
8.5660 = ( 1 - ( 1 + r )^-9 / r
using Annuity Table the 8.5662 annuity factor for 9 payments shows under 1% interest rate.
So, the answer is 1%
The distinction between fundamental and particular risks is important because a. normally only particular risks are insurable. b. whether a risk is fundamental or particular may determine how society will deal with it. c. none of the above. d. fudamental risks are a souce of gain to society.
Answer:
b. whether a risk is fundamental or particular may determine how society will deal with it.
Explanation:
The fundamental risk is the risk that impacts the larger number of people or we can say the population
While the particular risk is the risk that contains the losses of personal with respect to the origin and their effects. Here it impacts an individual or smaller number of people
So the distinction between both risk could be figured out by seeing how society would deal with it
Hence, the correct option is b.
Assume that markets are not efficient and that you will earn the average return of an active investor if you pick stocks. How should you choose between active and passive investments and why
Answer with Explanation:
If the markets are not efficient then there higher probability that the investor can earn from the price fluctuations because the markets are not valuation is different. The investor would be spending money on gaining the benefit of price fluctuations which will be for short term only and he will be acting in time to continuously earn money from the fluctuation.
The investors and financial institutions will master the quantitative analysis and qualitative analysis of the price changes to guess where will be the change going to happen and we must take advantage of it.
The passive investment is the investment which the management intents to hold for a longer period to benefit from it. If the markets are not efficient then it is useless to hold an passive investment. Rather holding a passive investment it would be better to hold an active investment which benefit more as we will be beating the market by price differences. The possession of passive investment is less expensive as apposed to active investments because less fee is charged by the broker. Active investment would be risky investment because we will continuously gaining and loosing money.
The financial advisers opt to creating a portfolio of active and passive investments to lower the unsystematic risk and increase the gain limit to average return.
A company purchased equipment and signed a 6-year installment loan at 8% annual interest. The annual payments equal $9,400. The present value of an annuity factor for 6 years at 8% is 4.6229. The present value of a single sum factor for 6 years at 8% is .6302. The present value of the loan is:_________.
a. $9,400.
b. $5,924.
c. $14,916.
d. $56,400.
e. $43,455.
Answer: e. $43,455
Explanation:
Annual payments are constant so this is an annuity. To calculate the present value of an annuity, multiply the annity by the present value of an annuity factor corresponding with its discount rate and number of periods.
Present value of loan = 9,400 * present value of an annuity factor, 6 years, 8%
= 9,400 * 4.6229
= $43,455.26
= $43,455
On October 1st, a company received $30,000 in cash and a building worth $200,000, and in return, issued common stock to an investor. Create the complete journal entry and post to the appropriate T-accounts.
Answer:
1. Journal:
October 1:
Debit Cash $30,000
Debit Building $200,000
Credit Common Stock $230,000
To record the receipt of cash and building for common stock.
2. T-accounts:
Cash Account
Date Description Debit Credit Balance
Oct. 1 Common Stock $30,000 $30,000
Building Account
Oct. 1 Common Stock $200,000 $200,000
Common Stock
Oct. 1 Cash $30,000 $30,000
Oct. 1 Building $200,000 $200,000
Explanation:
Journal entries show the accounts to be debited and credited respectively. They are the initial records of a business transaction. They can be used to post any transaction, make adjustments to the accounts, and close the accounts at the end of the accounting period.
Economic research "consistently" finds that immigration negatively impacts the average American wage. "false"
Answer: The given statement is false.
Explanation:
Immigrants give a boost to the average wages of Americans by increasing the overall productivity and help in investment. Immigrant workers are more advanced in skill sets and knowledge which helps the native Americans to improve their productivity. This process has boosted the investment which in turn increased the demand for labor and increased the pressure on improving wages of labor.
Selected current year company information follows: Net income $ 17,753 Net sales 730,855 Total liabilities, beginning-year 101,932 Total liabilities, end-of-year 121,201 Total stockholders' equity, beginning-year 216,935 Total stockholders' equity, end-of-year 148,851 The return on total assets is
Answer:
6.03%
Explanation:
Calculation for the return on total assets
First step will be to find the assets at the beginning using this formula
Beginning year Assets =Beginning Total liabilities + Beginning Stockholders' equity
Let plug in the formula
Beginning year Assets=$101,932 + $216,935
Beginning year Assets=$318,867
Second step is to find the end of the year asset using this formula
End of the year assets = Ending Total liabilities + Ending Stockholders' equity
Let plug in the formula
End of the year assets=$121,201 + $148,851
End of the year assets = $270,052
Last step is to calculate for the return on total assets using this formula
Return on total assets = Net income/Average of total assets,
Let find the Total asset averages
Using this formula
Total asset averages=(Beginning year Assets+End of the year assets)/2
Let plug in the formula
Total asset averages($318,867 + $270,052)/2 Total asset averages=$588,919/2
Total asset averages= $294,459.50
Hence,
Return on total assets = Net income/Average of total assets
Return on total assets=$ 17,753/294,459.50
Return on total assets=0.0603
Return on total assets=6.03%
Therefore the return on total assets will be 6.03%
A produce distributor uses 783 packing crates a month, which it purchases at a cost of $11 each. The manager has assigned an annual carrying cost of 32 percent of the purchase price per crate. Ordering costs are $31. Currently the manager orders once a month.How much could the firm save annually in ordering and carrying costs by using the EOQ? (Round intermediate calculations and final answer to 2 decimal places. Omit the "$" sign in your response.)
Answer:
Annual Savings will be ;
Ordering Cost = $2,993.88
Holding Cost = $661.78
Explanation:
First Calculate the Economic Order Quantity (EOQ)
EOQ = √ 2 × Annual Demand × Ordering Cost per Order / Holding Cost per unit
= √ ((2 × 783× 12 × $31) / ($11 × 32%))
= 407
Note : Currently the firm orders at 783 crates per month
Savings in Ordering Cost will be :
Savings = Ordering Cost at Current Quantity - Ordering Cost at EOQ
= (Total Demand / Current Quantity × Ordering Costs) - (Total Demand / Current Quantity × Ordering Costs)
= (9396/783 × $31) - (9396/407 × $31)
= $2,993.88
Savings in Holding Cost will be :
Savings = (Current Quantity - Economic Order Quantity) / 2 × Holding Cost per unit
= (783 - 407) / 2 × ($11 × 32%)
= $661.78
Which set of headings is the most helpful to a business reader who wishes to grasp the main ideas of a report quickly?
Answer:
b.Common Ethical Lapses Among Office Workers
Economic Losses From Unethical Behavior
Ethical Theories Invoked by Offenders
Punitive Measures
Possible Remedies
Explanation:
For a reader who hopes to grasp the main ideas of a report quickly, the report would have to be structured in such a way that the different sections follow each other sequentially so the progression of the report is picked up quickly.
The different sections should also be brief so that the reader can scan through them quickly and get the message.
Option B contains section topics in sequential order which show the reader that the point of the report is unethical behavior by employees. Section topics are also brief and to the point so the reader understands quickly.
On december 2017 coolwear had a balance in its prepaid insurance acount of 68,400. During 2018, 106,000 was paid for insurance. At the end of 2018, after adjusting entries were recorded, the balance in the prepaid insurance account was $42,000. Insurance expense recorded for 2018 would be:_____.
A. $86,000.
B. $134,400.
C. $74.400.
D. $92,400.
Answer:
$132,400
Explanation:
Calculation for the Insurance expense
Using this formula
Insurance expense= 2017 Ending Balance in prepaid insurance account+ Amount paid for insurance-2018 Ending Balance in prepaid insurance account
Let plug in the formula
Insurance expense=$68,400+$106,000-$42,000
Insurance expense=$132,400
Therefore the Insurance expense recorded 2018 would be $132,400
A company issues $15200000, 9.8%, 20-year bonds to yield 10% on January 1, 2017. Interest is paid on June 30 and December 31. The proceeds from the bonds are $14939182. Using effective-interest amortization, how much interest expense will be recognized in 2017
Answer:
$1,494,026.16
Explanation:
journal entry to record issuance:
January 1, 2017, bonds issued at discount
Dr Cash 14,939,182
Dr Discount on bonds payable 260,818
Cr Bonds payable 15,200,000
the first coupon payment:
amortization of bond discount = (14,939,182 x 0.1/2) - 744,800 = 2,159.10
Dr Interest expense 746,959.10
Cr Cash 744,800
Cr Discount on bonds payable 2,159.10
the second coupon payment:
amortization of bond discount = (14,941,341.10 x 0.1/2) - 744,800 = 2,267,06
Dr Interest expense 747,067.06
Cr Cash 744,800
Cr Discount on bonds payable 2,267,06
total interest expense for 2017 = $746,959.10 + $747,067.06 = $1,494,026.16
Chambliss Corp.'s total assets at the end of last year were $305,000 and its EBIT was 62,500. What was its basic earning power (BEP)
Answer:
20.49%
Explanation:
Chamblis corporation has a total assets of $305,000
The EBIT is $62,500
Therefore the basic earning power can be calculated as follows
= $62,500/$305,000
= 0.2049×100
= 20.49%
Hence the basic earning power is 20.49%
At a=0.02 , is there enough evidence to support the tax collector's claim that the means are different?
Full question attached
Answer:
There is enough evidence to claim that the means are different
Explanation:
Please find explanation attached: we've used the the two sample t test to test our hypothesis to reach conclusion
Give at least one example that you believe demonstrates when the cost of government actions outweighs the benefits.
Answer: The creation of a government set price for gasoline by ni government.
Explanation:
In 1970 president Nixon inteoduced a soft artificial price ceiling on gasoline in the United States. This was as a result of the OPEC crisis of 1970s. It is a good example of scenerios where the cost of government action outweighs the benefits. this was due to the creation of the government-set price which would cause the quantity demanded to be more than the quantity supplied because gasoline was cheaper now.
Which accounting principle states that all transactions have two aspects: debit and credit?
A: historical cost
B: matching
C: dual-aspect
D: accrual
E: business entity
Answer:
The answer is c
Explanation:
Answer:
The answer is c
Explanation:
A firm has a current ratio of 1.4 and a quick ratio of .9. Given this, you know for certain that the firm:
Had a positive Net working Capital
A firm has a current ratio of 1.4 and a quick ratio of has positive net working capital. Thus, option (e) is correct.
What is quick ratio?The fast ratio reflects how successfully a corporation can pay its short-term debts using only its most liquid assets. The ratio is significant because it indicates if the business will run out of cash to internal management and outside investors.
A healthy current ratio somewhere between 1.2 and 2, indicating that the company has twice as many current assets as liabilities to cover its debts. A suitable current ratio in most sectors is between 1.5 and 2. A ratio smaller than one implies that a company's liabilities due within a year or less exceed its assets. A ratio smaller than one implies that a firm's liabilities due within a year or less exceed its assets.
As a result, the firm has a current ratio of 1.4 and a quick ratio of has positive net working capital. Therefore, option (e) is correct.
Learn more about on quick ratio, here:
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Your question is incomplete, but most probably the full question was.
A. pays cash for its inventory.
B. has more than half its current assets invested in inventory.
C. has more cash than inventory.
D. has more current liabilities than it does current assets.
E. has positive net working capital.
The management of Heider Corporation is considering dropping product J14V. Data from the company's accounting system appear below:
Sales: $980,000
Variable expenses: $394,000
Fixed manufacturing expenses: $376,000
Fixed selling and administrative expenses : $256,000
In the company's accounting system all fixed expenses of the company are fully allocated to products. Further investigation has revealed that $245,000 of the fixed manufacturing expenses and $206,000 of the fixed selling and administrative expenses are avoidable if product J14V is discontinued. What would be the effect on the company's overall net operating income if product J14V were dropped?
Answer:
financial disadvantage of dropping product J14V = $135,000, so net operating income would decrease by that amount
Explanation:
net loss generated by product J14V = $980,000 - $394,000 - $376,000 - $256,000 = ($46,000)
unavoidable fixed costs:
Fixed manufacturing expenses = $376,000 - $245,000 = $131,000
Fixed selling and administrative expenses = $256,000 - $206,000 = $50,000
total unavoidable fixed costs = $181,000
the overall effect = total unavoidable fixed costs - net loss = $181,000 - (-$46,000) = $135,000 financial disadvantage since unavoidable costs are higher than current losses
uan and Rita are having trouble with new employees Peters and Jackson, indicating which of the four targeted areas of change is most needed?
Answer:
Changing people
Explanation:
The targeted area of change mostly needed is change in people. The idea here is to change attitude, motivation and effect new behaviors. Since Juan and Rita are having problems with the new employees the targeted area that they need mostly is changing people. As this aspect would bring about a resolution to the issues they are having with the new employees.
A furniture manucturer specializes in wood tables. The tables sell for per unit and incur per unit in variable costs. The company has in fixed costs per month. The company desires to earn an operating profit of per month.
1. Calculate the required sales in units to earn the target profit using the equation method.
2. Calculate the required sales in units to earn the target profit using the contribution margin method.
3. Calculate the required sales in dollars to earn the target profit using the contribution margin ratio method.
4. Calculate the required sales in units to break even using the contribution margin method.
Answer:
1. 100 units
2. 300 units
3. $30,000
4. 100 units
Explanation:
Note: This question is not complete. The complete question is therefore provided before answering the question as follows:
A furniture manufacturer specializes in wood tables. The tables sell for $100 per unit and incur $40 per unit in variable costs. The company has $6000 in fixed costs per month. The company desires to earn an operating profit of $12000 per month.
1. Calculate the required sales in units to earn the target profit using the equation method.
2. Calculate the required sales in units to earn the target profit using the contribution margin method.
3. Calculate the required sales in dollars to earn the target profit using the contribution margin ratio method.
4. Calculate the required sales in units to break even using the contribution margin method.
The explanation to the answers is now given as follows:
1. Calculate the required sales in units to earn the target profit using the equation method.
This can be calculated using the following formula:
Target profit = Net sales revenue - Total variable cost - Total fixed cost ....... (1)
Where, by letting q denotes quantity sold;
Target profit = $12,000 per month
Net sales revenue = Selling price per unit * quantity sold = $100 * q = 100q
Total variable cost = Variable cost per unit * quantity sold = $40 * q = 40q
Total fixed cost = $6,000 per month
Substituting the values into equation (1) and solve for q, we have:
$12,000 = $100q - $40q - $6,000
$12,000 - $6,000 = $60q
$6,000 = $60q
q = $6,000 / $60
q = 100 units.
2. Calculate the required sales in units to earn the target profit using the contribution margin method.
Contribution margin per unit = Selling price per unit – Variable cost per unit = $100 - $40 = $60
Required sales in units to earn the target profit = (Fixed cost + Target profit) / Contribution margin per unit = ($6,000 + $12,000) / $60 = $18,000 / $60 = 300 units
3. Calculate the required sales in dollars to earn the target profit using the contribution margin ratio method.
Contribution margin ratio = Contribution margin / Selling price per unit = $60 / $100 = 0.60, or 60%
Required sales in dollars to earn the target profit = (Fixed cost + Target profit) / Contribution margin ratio = ($6,000 + $12,000) / 0.60 = $18,000 / 0.60 = $30,000
4. Calculate the required sales in units to break even using the contribution margin method.
Sales in units to break even = Fixed cost / Contribution margin per unit = $6,000 / $60 = 100 units
The statement of cash flows for Baldwin Company shows what happens in the Cash account during the year. It can be seen as a summary of the sources and uses of cash (sources of cash are added, uses of cash are subtracted). Please answer which of the following is true if Baldwin makes plant improvements:
a) It is a use of cash, and will be shown in the financing section as a subtraction.
b) It is a source of cash and will be shown in the financing section as an addition.
c) It is a source of cash, and will be shown in the investing section as an addition.
d) It is a use of cash, and will be shown in the investing section as a subtraction.
Answer:
d) It is a use of cash, and will be shown in the investing section as a subtraction.
Explanation:
The plant improvements will result in cash outflow and is to be considered as an investing activity and not financing activity. It is not a source of cash. So, this option is incorrect.
There will be cash outflows when a company makes plant improvements. It is reported under the investing activity and not under financing activity. So, this option is incorrect.
There will be cash usage when their plant improvements. It is not a source of cash which does not result in cash inflows. So, this option is incorrect.
A major expenditure made to equipment that extends its useful life beyond the original estimate is journalized by
Answer:
Debit : Equipment and Credit : Cash
Explanation:
Major expenditure made to equipment that extends its useful life meets the definition and recognition criteria of assets.
The definition and recognition criteria of assets read as follows in the conceptual framework : Definition - An Asset is an economic resource that is controlled by the entity as a result of a past event from which economic benefits are expected to flow into the entity.
The major expenditure, will ensure further flow of economic benefits into the entity beyond the estimated useful life. Hence the cost is capitalized, included in the cost of the asset.
The net income available to stockholders is $230,000. The beginning number of common shares outstanding was 100,000. The ending number of common shares outstanding was 150,000. What is the earnings per share
Answer:
$1.84
Explanation:
The formula for earning per share (EPS) is given as;
= Net income of the company / Average outstanding shares of the company
Given that ;
Net income = $230,000
Average outstanding shares = (100,000 + 150,000) / 2
= 125,000
Therefore,
EPS = $230,000 / 125,000
= $1.84
The techniques used by systems analysts to identify or extract system problems and solution requirements are known as
Answer: requirements discovery
Explanation:
The techniques used by systems analysts to identify or extract system problems and solution requirements are known as requirements discovery.
A requirements discovery is simply defined as the process and tools that are typically used to identify the system requirements for the users of a system that has been proposed.
A system requirement helps to describe the desires and needs for an application or a system. The system requirement describes the features, functions, and constraints.
An investor believes that the price of a stock, say IBM's shares, will increase in the next 60 days. If the investor is correct, which combination of the following investment strategies will show a profit in all the choices?
(i) - buy the stock and hold it for 60 days
(ii) - buy a put option
(ii) - sell (write) a call option
(iv) - buy a call option
(v) - sell (write) a put option
A. (i), (ii), and (iii)
B. (ii) (i), (ii), and (iv)
C. (i), (iv), and (v)
D. (ii) and (iii)
Answer:
C. (i), (iv), and (v)
Explanation:
(i) - buy the stock and hold it for 60 days
This step is quite natural since buying at lower price and selling at higher price will give profit .
(iv) - buy a call option
In option we do not buy stocks but we buy the right to buy a stock on a predetermined price . For it we give some price for it . It is called premium . As price of stock goes up the premium goes up . So the option premium acts as price of stock , though it does not involve much money . So it is a less investment option . By selling the option at higher premium we can earn income .
v ) An option seller receives money from the buyer in the beginning . So when price rises , the option will not be exercised by the buyer so the seller receives money and earns income as option premium .
Fireside Inc. has the following data. What is the firm's cash conversion cycle? ( Please Show Work)
Inventory conversion period 38 days
Average collection period 19 days
Payables deferral period 20 days
Answer:
37 days
Explanation:
Fireside incorporation has the following data
Inventory conversion period = 38 days
Average collection period = 19 days
Payables deferral period = 20 days
Therefore the firm's cash conversion cycle can be calculated as follows
= 38 days + 19 days - 20 days
= 57 days - 20 days
= 37 days
Hence the firm's cash conversion cycle is 37 days
Ivanhoe Inc. issues $240,000, 10-year, 8% bonds at 96. Prepare the journal entry to record the sale of these bonds on March 1, 2020.
Answer:
Dr Cash 230,400
Dr Premium on Bonds Payable 9,600
Cr Bonds payable 240,000
Explanation:
Preparation of the journal entry to record the sale of bonds
Based on thr information given we were told that Ivanhoe Inc. issues the amount of $240,000 with bonds at 96 which means that the journal entry to record the transaction will be:
Dr Cash 230,400
(240,000×96%)
Dr Premium on Bonds Payable 9,600
Cr Bonds payable 240,000
Explain what is happening during each phase of the cycle with: I. output, II. employment III. and inflation
Answer:
During each phase of the economic cycle of Recession and Expansion, the following economic variables fluctuate, accordingly:
I. Output: During Recession, production output reduces. But, during expansion, product output rises with rising income, employment, and even stable inflation.
II. Employment: During phases of economic Expansion, employment rises, while it contracts during the phases of Recession.
III. Inflation: Due to rising income and output during economic expansionary periods, inflation rate also rises. It reduces when the economy enters a recession.
Explanation:
Business or Economic Cycle describes the recurrent, but not periodic, sequence of changes in the aggregate economic activities of a nation. It usually cascades between the spectrum of expansion and recession. This means that there is an alternation of the phases of economic cycle between expansion and contraction (recession) when the aggregate economic activities may rise or decline due to the equal movement of economic variables like the GDP output, employment, income, and sales.