Suppose quantity demanded is 2,000 when price is $10 and 3,000 when price is $5. If a monopolist who was initially charging a price of $10 discovers a way to price discriminate, it will be able to increase revenue from $20,000 to:
Answers
Answer:
$25,000 by charging consumers with more elastic demand only $5 and keeping the price for consumers with less elastic demand at $10
Explanation:
Price discrimination refers to the differentiation in the price of the product for every consumer that means the company charged different prices from the different customers
Also, in this it charges from the consumers having more elastic demand at less price. Here 2,000 units are purchased at $10 and the 1,000 units are purchased at $5 so the total quantity demanded is 3,000
The 25,000 units come from
= 2,000 ($10) + 1,000 ($5)
= 20,000 + 5,000
= 25,000
Related Questions
Sue, a secretary goes to the storeroom to get a box of paper for her department. This is a task she's performed without problem hundreds of times. This time however, she slips and hurts her back lifting the box of paper. She requires treatment and cannot sit for long periods of time so she cannot do her job. A. Sue can sue her employer in court for her injuries.B. Sue is entitled to Workers' Compensation even though her employer was not negligent.C. Sue is entitled to Workers' Compensation only if she can show that her employer was negligent.D. Sue is not entitled to anything because she assumed the risk.
Answers
Answer:
B. Sue is entitled to Workers' Compensation even though her employer was not negligent.
Explanation:
Sue is performing her normal duties that is required by her being a secretary when she was injured. So the employer cannot be said to be negligent in allowing her carry paper for her unit.
She will not be able to sue for employer for her injuries.
However when an employee is injured they are entitled to Worker's compensation and paid time off work.
This is given to employees even when the employer is not negligent.
Sue can get the Worker's compensation for her back treatment.
For a new Madden video game, EA Sports decides to have Antonio Brown on the cover and run an ad campaign on ESPN. After the advertisement has run, EA Sports asks ESPN viewers if they recall the advertising and if it changed their attitudes about the product. What is this process called?
Answers
Answer:
Post testing
Explanation:
Post-testing is the testing that could be done after finishing the product. It is to be done to check the performance, efficiency, effectiveness of the product so that if there is any error then it can be solved
Here in the given situation, after running the advertisement EA sports ask ESPN viewers for restarting the advertising also it changed the attitudes with respect to the product or not
So this we called as post-testing
On January 1, 2019, Providence, Inc., Issues $1,000,000 of 10 percent, 5-year bonds at par value. Complete the necessary journal entry by selecting the account names from the drop-down menus and entering the dollar amounts in the debit or credit columns. View transaction list Journal entry worksheet On January 1, 2019, Providence, Inc., Issues $1,000,000 of 10 percent, 5-year bonds at par value. Note: Enter debits before credits Date General Journal Debit Credit Jan 01
Answers
Answer:
01-Jan-19
Dr Cash $1,000,000
Cr Bonds Payable $1,000,000
Explanation:
Preparation of the Journal entry for Providence, Inc
Based on the information given we were told that the company issues the amount of $1,000,000 of 10% which include 5-year bonds at par value on January 1, 2019, this means that the Journal entry will be recorded as:
01-Jan-19
Dr Cash $1,000,000
Cr Bonds Payable $1,000,000
(To record bonds at par value)
Daniel wants to buy a laptop computer, and he has $300 in savings. He can purchase a new computer for $279 or a refurbished [repaired or renovated] computer for $100. What should Daniel do next?
Answers
Answer:
He should buy a refurbished computer
Explanation:
This saves him 179 dollars
A company has bonds outstanding with a par value of $100,000. The unamortized discount on these bonds is $4,500. The company retired these bonds by buying them on the open market at 97. What is the gain or loss on this retirement
Answers
Answer:
$1,500 loss
Explanation:
Calculation for the gain or loss on this retirement
First step is to find the 97% of the bond outstanding $100,000
Par value of bond=97%*$100,000
Par value of bond=$3,000
Second step is to calculate for the gain or loss on the retirement using this formula
Carrying value of bond=Par value of bond-Unamortized discount on bond
Let plug in the formula
Carrying value of bond=$3,000-$4,500
Carrying value of bond= -$1,500
Therefore the loss on this retirement will be $1,500
Joan, who has a PhD in economics, has been employed as an agent by Gibraltar Securities for the past 15 years. Missing academic life, she resigns from the broker-dealer and accepts a position as an economics professor at a state university. Which, if any party, is required to notify the state securities Administrator of this change
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Answer:
both the agent in question as well as the former broker/dealer are required to notify the Administrator promptly.
Explanation:
In the specific scenario that is being described both the agent in question as well as the former broker/dealer are required to notify the Administrator promptly. This is mainly due to the fact that the license that an agent possesses expires as soon as they cease to be employed by the broker/dealer and/or issuer for whom they were previously licensed. Therefore this information needs to be presented immediately to the securities administrator and her license needs to be revoked.
Deep Space Aeronautics is developing a profit-sharing plan. Randy, the human resource manager, assumes the employees are excited to participate in this start-up company's success. However, a supervisor tells Randy about anxiety surrounding a rumor that employees will lose money if the company has a bad year. How should Randy address this problem with employee morale
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The statement " Meeting should be conducted in order to teach about the profit-sharing & how it should be a benefit to the employees" is considered.
The information related to the profit-sharing plan is as follows:
It is a retirement plan that provides the share to the employee from the company profits. Here the employee should receive the percentage of the company profits that depend upon the quarterly or annual earnings.Ben was required to conduct the meeting in order to conduct the knowledge related to the norms and the profit-sharing details.
Therefore all other statements need not be considered.
So we can conclude that The statement " Meeting should be conducted in order to teach about the profit-sharing & how it should be a benefit to the employees" is considered.
Learn more about the profit here: brainly.com/question/9281343
A company makes several different kinds of shampoo, but it did not have a dandruff shampoo designed for women until it added Pro-Women antidandruff shampoo. This is an example of a(n) ________.
Answers
Answer:
Filling out strategy
Explanation:
Filling out strategy is a type of business strategy in which companies increase the number of products in a specific product line. This type of strategy is used by companies so as to ensure that there are no gaps in the product line in which competitors might exploit. This type of strategy is done by companies that offers a group of products closely related to each other.
An example is adding a Pro-Women antidandruff shampoo by a company which makes different kind of shampoos.
A properly licensed agent in Illinois, Missouri, and Iowa has a client who moves from Illinois to Michigan on July 1, 2014. On September 1 of that year, the agent sells him 100 shares of a nonexempt security in a nonexempt transaction. On October 1, 2015, the client discovers that the agent's firm never licensed him in Michigan and that the agent is subject to civil liability to the purchaser. The statute of limitations for this sale runs out on
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Answer: September 1, 2017
Explanation: The statute of limitation could be explained as a window period within which a civil violation or case may be filed by a plaintiff. Once this window period expires, the defendant may raise a claim against such case with respect that statute of limitation has been violated. In the scenario described above, the offense could be regarded as a professional malpractice with a statute of limitation of two years after the discovery of the incident which in this case is October 1, 2015, hence the statute of limitation of the sale will run out 2 years after October 1, 2015 which is September 1, 2017.
Chad runs a coffee shop that has annual revenues of $300,000, supply costs of $60,000, and employee salaries of $60,000. He has the option of renting out the coffee shop for $80,000 per year, and he has three outside offers from competitors to work as a senior barista at Starbucks (for an annual salary of $30,000), at Simon's coffee house (for an annual salary of $40,000), and at Peet's coffee shop (for an annual salary of $60,000). He can only hold one job at a time. What should Chad do?
Answers
Answer:
Explanation:
Option 1
Revenue from coffee -300,000
Cost of sales - 60,000
Salaries - 60,000
Net income 180,000
Option 2
Rental income - 80,000
Option 3
Rental income - 80,000
Salary at Starbuck- 30,000
110,000
Option 4
rental income 80,000
Salary at Simon 40,000
120,000
Option 5
Rental income 80,000
salary at Peet 60,000
140,000
Looking at all the options before Chad , his highest income compared to others options would come form running his own coffee shop,which is 180,000 . Therefore , it is advised that he should continue to run his own shop.
The term "debenture" is used to describe: Group of answer choices bonds that are below investment grade. bonds that are secured by a lien on real property. bonds that do not make coupon interest payments. an unsecured long-term debt. a complete set of removable, artificial teeth. Next
Answers
Answer:
The answer is D. an unsecured long-term debt
Explanation:
Debenture is a bond because it is a long-term loan and debenture is not secured (unsecured). It is unsecured in the sense that there is no collaterals but relies on the creditworthiness of the issuers.
Option A is incorrect becausebond is usually not bonds below Investment grade.
Option B is incorrect because debenture are nor secured by any properties.
Option C is incorrect because debenture makes coupon interest payment.
Two twelve-year-old boys were seriously injured when riding on a go-kart. The boys were riding on public streets, ran a stop sign, and were hit by a car that did not see them. The go-kart had clear warning labels on the sides stating that it was only for off-road use only. The manual stated the go-kart not to be used on public streets. The parents sued the go-kart manufacturer. One basic issue in this case would be:
Answers
Answer:
Disobedience of the law or it may be ignorance
Explanation:
It may be that the kids didnt see the sign or it might be ignorance
when convicts are released from prison, they have no money, and there is a high rate of recidivism the released prisoners return to crime and are arrested again. Would providing income support to ex-convicts during the first months after their release from prison reduces recidivism
Answers
Answer:
Yes
Explanation:
Recidivism can be defined as seen in the question as the tendency of an ex-convict to return to crime.
When a person returns from a sentence, he has nothing. No income, no job, etc. As a result of this, some ex-convicts are tempted into returning to the lifestyle that got them imprisoned in the first instance. Without a job,which is as a result of stigmatization of ex-convicts as never-do-well, there can't be income.
For this reason, the government should endeavor to give ex-convicts income support for a few months after their release from the prison. This will go a long way in helping the ex-convicts stay of crime and also help them plan towards a better life.
Cheers.
Suppose you have been inducted as IT Consultant (Cyber Security) in a growing E-Commerce driven business. How will you ensure security/privacy for online transactions over the internet while securing customer network/information/credentials?
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Answer:
The question is one of Cyber Security.
To ensure security/privacy for online transaction while securing customer network, information and credentials, the first step is to ensure that:
1. The website itself is hosted with a very secure platform. This can be achieved by:
Picking the right hosting company.Ensuring that your hosting company itself utilizes secure servers and networks.Adding a two-factor authentication for the C-Panel and other access points to the hosted websiteEnsuring that the website is secured using a Secure Sockets Layer (SSL) protocol. This certificate helps to ensure the authentication, encryption and decryption of data transmitted over the Internet.
2. Use Web Application Firewall (WAF)
This is a hardware or software system that allows authorized traffic and blocks unauthorized or potentially malicious access to a network.
3. Ensuring that the website is compliant with PCI DSS requirements
PCI DSS refers to Payment Card Industry Data Security Standard.
This technology helps to eliminate fraud and secure e-commerce websites.
4. Real-Time Bot Detection Technology
Bots are also used by malicious people to steal information and or vendor data. If the website is enhanced with a Bot Detection Technology, it will help reduce the effects of such.
5. As an e-commerce business, one must force users to use very strong passwords. This may be done a the point of registration. Passwords boxes besides having the regular encryption must be configured to accept only strong passwords.
Cheers!
The Great Depression was caused by all of the following factors except Group of answer choices American industries and banks were not involved in the European economy some of the major banks did not have enough reserves to withstand an economic downturn prosperity was dependent on a few basic industries too few Americans were able to purchase goods produced by American industries there was an overwhelming maldistribution of wealth
Answers
Answer:
Correct answer:
1. American industries and banks were not involved in the European economy
Explanation:
The Great Depression is one of the worst period in the history of America where Americans where hit with severe economic crises. It began after the stock market crash of October 1929, which sent Wall Street into a panic and wiped out millions of investors.
Over the next several years, consumer spending and investment dropped, causing steep declines in industrial output and employment as failing companies laid off workers.
The receipt of dividends and interest from abroad as a result of ownership of foreign assets by a country's residents is recorded as what:____________.
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Answer:
income-generating assets under the current account of the balance of payment.
Explanation:
Remember, the related term balance of payment refers to the calculation of a country's transactions at the international level for a specific period.
In other to determine the flow of money in and out of a country, the receipts from income-generating assets such as stocks (in the form of dividends) are thus recorded in the current account.
Urban City wants to acquire undeveloped private land within the city limits to construct a public park. The city brings a condemnation proceeding to obtain title to the land and determine its fair value to be paid to the private owner. This is
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Answer:
the power of eminent domain
Explanation:
Eminent domain is the power that can be excercised by a government to convert private property to public use. They must however compensate the owner of the property.
The government must display that the public use of the property is vital.
In the given instance Urban City wants to acquire undeveloped private land within the city limits to construct a public park.
The process by which they brought condemnation proceedings to obtain title to the land and determine its fair value to be paid to the private owner, is the government excercising their power of eminent domain
On May 10, 2017, Vaughn Co. enters into a contract to deliver a product to Greig Inc. on June 15, 2017. Greig agrees to pay the full contract price of $1,990 on July 15, 2017. The cost of the goods is $1,310. Vaughn delivers the product to Greig on June 15, 2017, and receives payment on July 15, 2017. Prepare the journal entries for Vaughn related to this contract. Either party may terminate the contract without compensation until one of the parties performs.
Answers
Answer:
June 15, 2017, goods sold on account to Greig
Dr Accounts receivable 1,990
Cr Sales revenue 1,990
Dr Cost of goods sold 1,310
Cr Merchandise inventory 1,310
July 15, 2017, payment collected from Greig
Dr Cash 1,990
Cr Accounts receivable 1,990
The transaction must be recorded only after some type of consideration is exchanged between the parties.
The owner of a property creates a deed, leaving the name of the grantee blank, and puts it in a drawer, where it is forgotten for several years. One day, a visitor finds the deed, fills in his name as grantee, and attempts to record it. However, the owner will probably have no trouble disputing the validity of the deed because
Answers
Answer is given below
Explanation:
The owner will probably have no trouble disputing the validity of the deed because the person listed as Granny allows the deed to be kept legally when it is filed, as well as the physical deed is clearly greedy, there is no way to dispute it unless the property owner has provided proof that the visitor has given his or her grading permission.A company has average demand of 30 units per day. Lead time from the supplier averages seven days. Assume that the combined standard deviation of demand during lead time has been calculated and is equal to 20 units. One unit costs $10 and the inventory carrying cost is 25 percent. 1 standard deviation covers 84.13% 1.04 standard deviations covers 85% 1.28 standard deviations covers 90% 1.65 standard deviations covers 95% 1.96 standard deviations covers 97.5% 2 standard deviations covers 97.72% 2.33 standard deviations covers 99% 3 standard deviations covers 99.86% 6 standard deviations covers 99.99966% What is the reorder point for the company if it decides on a 99 percent service level?
Answers
Answer:
Re-order quantity = 256.6 or 257 units
Explanation:
We can calculate the reorder point for the company at 99% service level as follows
Solution
The Standard deviation of demand during lead time = sigma
Average daily demand = d
lead time = L
Standard deviation covered 99% = Z
DATA
Sigma =20 units
d= 30 units per day
L= 7 days
Z= 2.3
Calculation
Reorder quantity = (d x L) + (Z x sigma)
Reorder quantity = (30x7) + (2.33 x 20)
Reorder quantity = 210 + 46.6
Reorder quantity = 256.6 or 257 units
Physical units to be accounted equals A : units started into production plus units in ending work in process inventory. B : units started into production plus units in beginning work in process inventory. C : units started into production less units in beginning work in process inventory. D : units completed and transferred out plus beginning work in process inventory.
Answers
Answer:
B : units started into production plus units in beginning work in process inventory.
Explanation:
If a Company uses process costing, the units to be accounted for are the units that were in production during the period.
Units in production comprises of units in beginning work in process still to be completed as a result of previous process plus the units started into production during the period.
: Stock in Daenerys Industries has a beta of .95. The market risk premium is 7 percent, and T-bills are currently yielding 3.6 percent. The company’s most recent dividend was $2.05 per share, and dividends are expected to grow at an annual rate of 4.1 percent indefinitely. If the stock sells for $39 per share, what is your best estimate of the company’s cost of equity?
Answers
Answer:
The best estimate of the company’s cost of equity is 9.81 %.
Explanation:
Use both the Growth Model and the Capital Asset Pricing Model (CAPM) to estimate the cost of equity and find the average.
Cost of Equity (Growth Model) = Recent Dividend Payout Ratio/ Market Price of Stock + Expected Growth
= $2.05 / $39.00 + 0.041
= 9.36 %
Cost of Equity (CAPM) = Return on Risk Free Security + Beta × Risk Premium
= 3.60 % + 0.95 × 7.00 %
= 10.25 %
Average = (9.36 % + 10.25 %) ÷ 2
= 9.81 %
The cost of equity of a company is 9.875% after taking the average of the cost of equity by the CAPM approach and the cost of equity by the Dividend growth model.
What is meant by the cost of equity?The cost of equity is the percentage of return earned by a stock investor by making an investment.
Given values for CAPM Approach:
A beta factor of stock: 0.95
Market risk premium: 7%
Return on T-bills: 3.6%
Step-1 Computation of cost of equity by using the CAPM approach:
[tex]\rm\ Cost \rm\ of \rm\ Equity=\rm\ Return \rm\ on \rm\ T-Bills + (\rm\ Market \rm\ Risk \rm\ Premium \times\ \rm\ Beta \rm\ Factor) \\\rm\ Cost \rm\ of \rm\ Equity= 3.6\% + (7\% \times 0.95)\\\rm\ Cost \rm\ of \rm\ Equity=10.25\%[/tex]
Given values for dividend growth approach:
Dividend rate: $2.05
Expected growth in dividend: 4.1 %
Stock price: $39
Step-2 Computation of cost of equity by using the dividend growth approach:
[tex]\rm\ Cost \rm\ of \rm\ Equity=\frac{\rm\ Dividend \rm\ Rate \times\ (1+ \rm\ Growth\rm\ Rate)}{\rm\ Stock \rm\ price} + \rm\ Growth \rm\ rate\\\rm\ Cost \rm\ of \rm\ Equity=\frac{\$2.05 \times\ (1+ 0.041)}{ \$39} + 0.041\\\rm\ Cost \rm\ of \rm\ Equity=\frac{\$2.13 }{\$39} + 0.041\\\rm\ Cost \rm\ of \rm\ Equity=9.50\%[/tex]
Step-3 Computation of average of both methods:
[tex]\rm\ Average \rm\ Cost \rm\ of \rm\ Equity= \frac{\rm\ Cost \rm\ of \rm\ Equity \rm\ in \rm\ CAPM \rm\ Method + \rm\ Cost \rm\ of \rm\ Equity \rm\ in \rm\ Dividend \rm\ growth}{2}\\\rm\ Average \rm\ Cost \rm\ of \rm\ Equity=\frac{10.25\% + 9.50\%}{2} \\\rm\ Average \rm\ Cost \rm\ of \rm\ Equity=9.875\%[/tex]
Therefore, the cost of equity comes out to be 9.875% by using the average of the two methods.
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A 50-year old customer is in a very low tax bracket. She lives in a state that has one of the highest income tax rates. The customer is seeking income and preservation of capital. She has a 10 year investment time horizon. The best r
ecommendation would be a 10 year maturity:__________
a. Treasury Bond
b. investment grade corporate bond
c. investment grade municipal bond
d. Treasury STRIPS
Answers
Answer:
b. investment grade corporate bond
Explanation:
Credit rating is used to show the reliability of a security. The Investment Grade is a credit rating the is low risk bond. There is low possiblity of default on this type of investment.
Medium rating of A and BBB represent the investment grade corporate bond.
This is an attractive investment for the more conservative investor.
This is an ideal investment choice for the 50-year old customer with very low tax bracket, in a state with high income tax rates. So she is seeking income and preservation of capital.
The best recommendation for the 5o-year-old customer would be 10- year maturity that is known as an investment-grade corporate bond.
Bonds rated "investment-grade" are considered to just have positive significant credit ratings and a low risk of default. Top companies may benefit from their status as investment-grade credits, resulting in lower interest rates.
A corporate or municipal bond with an investment-grade rating has a relatively low risk of default. Companies with a "AAA" rating are considered the least likely to default, according to Standard and Poors.
Businesses that Moody deems to be the least probable to happen start receiving an "Aaa" rank.
To know more about the various securities with maturity periods, refer to the link below:
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Midpoint City operates its own municipal public drinking water system for which the Environmental Protection Agency has set maximum levels of pollutants. The city does not use any equipment to meet these standards. With regard to any contamination of the water, under the Safe Drinking Water Act, this is most likely
Answers
Question options:
a. a violation. b. not a violation because the city does not set the standards. c. not a violation because water is not a stationary source. d. not a violation because the city does not use any equipment.
Answer:
A. A violation
Explanation:
The safe drinking water act(SDWA)is a federal law that protects and guards the public against unsafe drinking water. It enforces this through the Environmental Protection Agency(EPA) who are responsible for setting standards on quality of water and monitoring states and water suppliers in meeting these standards set. The state by not making use of any machine in trying to keep to these standards are clearly in violation of EPA standards and consequently SDWA
At year-end (December 31), Chan Company estimates its bad debts as 0.5% of its annual credit sales of $975,000. Chan records its Bad Debts Expense for that estimate. On the following February 1, Chan decides that the $580 account of P. Park is uncollectible and writes it off as a bad debt. On June 5, Park unexpectedly pays the amount previously written off.
Prepare the journal entries for these transactions.
View transaction list
Journal entry worksheet
1 2 3 4
Record the estimated bad debts expense.
Note: Enter debits before credits
Date General Journal Debit Credit
Dec 31
Record entry
Clear entry
View general journal
Answers
Answer:
Journal entries below
Explanation:
Dec 31, Bad debts expense a/c Dr $4,875
To Allowance for doubtful a/c Cr $4,875
(To record bad debt expense)
Feb 1, Allowance for doubtful a/c Dr $580
To Accounts receivable - P. Park a/c Cr $580
(To record allowance for doubtful a/c)
June 5, Accounts receivable -P. Park Dr $580
To Allowance for doubtful a/c Cr $580
(To record bad debt written off)
June 5, Cash a/c Dr $580
To Accounts receivable - P. Park a/c Cr $580
(To record cash paid).
• Chen write off the receivable from balance sheet using the percentage of sales method of receivable of ($975,000 × 0.5%) = $4,875.
• Also on February 1, Chen writes off P.Park from receivable of $580 since he knew he will not pay but did pay on June 5 for $580; meaning that Chen reinstate the receivable afterwards collected cash from receivable.
The government of Namibia is strapped for cash, and it has decided to tax all foreign investments (such as food packaged in the country) by up to 40 percent of the appraised value. The Namibian government has found that this is the handiest and quickest means of finding operating funds. The economic risk in discussion here is
Answers
Answer:
Tax control
Explanation:
Considering the scenario described above, the economic risk in the discussion here is TAX CONTROL.
This is because Tax Control is a means or process of identifying, securing, and controlling a company's tax risks to manage the total tax issues of the company involved.
Hence, in this case, the issue at hand is how the government of Namibia will be using the tax control framework to identify and secure tax returns from foreign investment.
In one year, Hitech Microdevices will pay a common stock dividend of $4.35. You predict that you will be able to sell your Hitech stock for $57 per share after 1 year. If you require a rate of return of 16 percent on Hitech stock, how much would you be willing to pay now for a share of the stock?
Answers
Answer:
Price to be paid now = $52.89
Explanation:
The Dividend Valuation Model is a technique used to value the worth of an asset. According to this model, the worth of an asset is the sum of the present values of its future cash flows discounted at the required rate of return.
The stock would be held for just a period, hence we would use the single period return model. This is given as follows:
Price now = D/(1+r) + P×(1+r)
Dividend , r - rate of return, P -year-end price of stock
Dividend = 4.35, r-16%, P- 57
Price = 4.35/(1.16) + 57/(1.16)= $52.89
Price to be paid now = $52.89
What profit-oriented pricing method is often used because of the difficulty in establishing a benchmark of sales or investment to show how much of a firm's effort is needed to achieve the target
Answers
Answer:a
Explanation:
Among its assets are the following: (1) the showroom building, a separate building used to service customer cars, and various parking lots, (2) a nearby acre of land not currently used by the auto dealership, (3) new and used cars and trucks for sale to customers, and (4) a car that is used to provide rides to customers who prefer to wait at home while their cars are serviced. The assets that are classified as plant assets on the company's balance sheet include
Answers
Answer:
(1) the showroom building, a separate building used to service customer cars, and various parking lots
(4) a car that is used to provide rides to customers who prefer to wait at home while their cars are serviced.
Explanation:
Plant Assets are defined as assets in the business that are expected to provide the benefit of helping a company accrue revenue and have will have a useful life of more than a year.
The showroom building, a separate building used to service customer cars, and various parking lots are all places where the company performs business with the showroom showcasing cars for sale and the separate building being used for servicing cars which is another revenue stream.
The car that is used to provide rides to customers who prefer to wait at home while their cars are serviced is also a plant asset as it provides a value added service to customers who will be more likely to have repeat business with the company as a result thereby generating more revenue.
On January 1, a company issues bonds dated January 1 with a par value of $320,000. The bonds mature in 5 years. The contract rate is 7%, and interest is paid semiannually on June 30 and December 31. The market rate is 6% and the bonds are sold for $333,650. The journal entry to record the first interest payment using the effective interest method of amortization is: (Rounded to the nearest dollar.)
Answers
Answer: Debit interest expense $10,010, debit premium on bonds payable $1,190, credit cash $11,200.
Explanation:
Given the following :
Par value = $320,000
Bonds payable = $333,650
Market rate = 6% compounded semianually
Contract rate = 7%
Cash credited :
Par value * contract rate = $320,000 * 0.07 * 0.5 = $11,200
Interest Expense :
Bonds payable * market rate * 0.5
$333,650 * 0.06 * 0.5 = $10,009.5 (debit)
= $10,010 ( nearest dollar)
Discount Premium on bonds :
Cash - interest expense
$11200 - $10010 = $1,190