Answer: $152,309.69
Explanation:
You are looking for the future value of this amount in 29 years assuming it will be compounded annually.
Future value = Amount * (1 + rate)^ number of years
= 4,400 * ( 1 + 13%)²⁹
= $152,309.69
Bothell Company uses a job order costing system that allocates estimated overhead as 40% of prime costs. What is the cost of a job that required direct materials of $2,000 and direct labor of $5,200
Answer:
$10,080
Explanation:
The computation of the cost of the job is shown below:
We know that
prime cost = direct material + Direct labor
= $2,000 + $5,200
= $,7200
Now overhead is
= 40% of $7200
= $2,880
And,
Cost of job = direct material + Direct labor + overhead
= $2,000 + $5,200 + $2,880
= $10,080
If there are six firms in an industry and the market shares of the firms are 32 percent, 25 percent, 19 percent, 9 percent, 8 percent and 7 percent, the Herfindahl index is
Answer: 2,204
Explanation:
The Herfindahl-Hirschman Index (HHI) shows just how competitive an industry is with a higher HHH meaning that it is not very competitive and a lower one meaning that it is quite competitive.
It is calculated by adding up the squares of the percentage market shares of the firms in the industry of interest:
= 32² + 25² + 19² + 9² + 8² + 7²
= 1,024 + 625 + 361 + 81 + 64 + 49
= 2,204
For each of the following scenarios, identify the number of firms present, the type of product, and the appropriate market model.
a. A large city has lots of small shops where people can buy sweaters. Each store's sweaters reflect the style of that particular store. Additionally, some stores use higher-quality yarn than others, which is reflected in their price.
b. There are hundreds of high school students in need of algebra tutoring services. Dozens of companies offer tutoring services; parents view the quality of the tutoring at the different companies to be largely the same.
c. Only three airlines fly from San Francisco to Medford, Oregon. No new airline will enter this market, because there are not enough customers to share among four or more airlines without each one experiencing substantially higher average costs. Consumers view all airlines as providing basically the same service and will shop around for the lowest price.
d. The government has granted a patent to a drug company for an experimental AIDS drug. That company is the only firm permitted to sell the drug.
Answer:
a. large number of firms, they have differentiated products, and this is a monopolistic market model
b. large number of firms, they have standardized products, and this is a perfectly competitive market model
c. few number of firms, they have standardized products, and this is an oligopolistic market model
d. one number of firms, they have a single products, and this is a monopoly
Explanation:
a. This first question is a monopolistic competition. this is because it has the following characteristics:
It has large number of firms, the products here are differentiated, there is no entry cost and also no exit cost in the long run. Entereing the market is challenging
b. this is a perfect competition, the characteristics are large number of firms, the products are identical and the entry and exit in the market is easy
c. this market is an oligopoly. it has a few firms, the products can be identical or they can be differntiated, and it has barriers to entry from what we have seen here.
d. this market is a monopoly. the firm is a single one, and due to the patent there are no new entries for any other firm.
The EPS for TJX for the fiscal years ending January 2006 (FY2005) through January 2010 (FY2009) are:
Answer:
Fiscal Year:
2005 $1.40
2006 $1.60
2007 $1.70
2008 $2.00
2009 $2.80
Explanation:
Earnings per share is the residual profit after interest and dividends available for shareholders. EPS is calculated by dividing net profit by outstanding shares. It indicates company profitability and analysts use this ratio to make prediction about future performance of the company.
Combining a protective put with a forward contract generates equivalent outcomes at expiration to those of a:
Answer:
Fiduciary call.
Explanation:
Foreign exchange market can be defined as type of market in which the currency of one country is converted into that of another country.
For example, the conversion of dollars of the United States of America can be converted into naira (Nigeria) at the foreign exchange market.
A covered interest arbitrage can be defined as trading strategy in which an investor minimizes his or her currency risk by using a forward contract to hedge against the interest rate difference between two countries i.e the exchange rate risk. Thus, it's considered to be the most common interest rate arbitrage around the world.
Generally, when a protective put is combined with a forward contract it would generate equivalent outcomes at expiration to those of a fiduciary call.
This ultimately implies that, a fiduciary call combines both a call option and a bond that's risk free and matures on the expiry date of an option.
Layton Corp. has a $2,000 par value bond outstanding with a coupon rate of 4.6 percent paid semiannually and 13 years to maturity. The yield to maturity of the bond is 3.8 percent. What is the dollar price of the bond
Answer:
Bond Price= $2,162.94
Explanation:
Giving the following information:
Par value= $2,000
YTM= 0.038/2= 0.019
Coupon= (0.046/2)*2,000= $46
Years to maturity= 13*2= 26
To calculate the price of the bond, we need to use the following formula:
Bond Price= cupon*{[1 - (1+i)^-n] / i} + [face value/(1+i)^n]
Bond Price= 46*{[1 - (1.019^-26)] / 0.019} + [2,000 / (1.019^26)]
Bond Price= 936.91 + 1,226.03
Bond Price= $2,162.94
When using the Time-Cost Critical Path Method (CPM) Scheduling Model to "crash" a project, you know when you have arrived at the optimal solution when _____.
a) You have found the critical path
b) You have run out of crash time
c) You no longer have a linear relationship with costs
d) You have reached the minimum total cost
e) You have run out of crash costs
Answer:
a) You have found the critical path
Explanation:
The Time Cost Critical Path Method(CPM) in project management works by adding up/calculating duration of all tasks/activities in the project in order to find the longest time possible to complete the project. It is a method to estimate project duration using a flow chart that shows a network of tasks and estimated duration(start and finish times). The critical path is reached when project time is at the maximum/longest time of completion.
A sequence aligned with creating and evaluating an information system or resource includes:________.
a. Model formulation
b. System developement
c. System deployment
d. Study of effects
Answer:
C. System development
Explanation:
The sequence that is aligned with creating and evaluating an information system or resource includes system development
What is information system?An information system (IS) is a formal, sociotechnical, organizational system designed to collect, process, store, and distribute information. From a sociotechnical perspective, information systems are composed by four components: task, people, structure (or roles), and technology.
Information systems can be defined as an integration of components for collection, storage and processing of data of which the data is used to provide information, contribute to knowledge as well as digital products that facilitate decision making.
A computer information system is a system that is composed of people and computers that processes or interprets information. The term is also sometimes used to simply refer to a computer system with software installed.
What is system development?In systems engineering, information systems and software engineering, the systems development life cycle (SDLC), also referred to as the application development life-cycle, is a process for planning, creating, testing, and deploying an information system.
The systems development life cycle concept applies to a range of hardware and software configurations, as a system can be composed of hardware only, software only, or a combination of both.
There are usually six stages in systems development cycle: requirement analysis, design, development and testing, implementation, documentation, and evaluation.
Hence, option C is the correct answer
To learn more about information system (IS) here,
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Salud Company reports the following information.
Selected Annual Income Statement Data Selected Year-End Balance Sheet Data
Net income $445,000 Accounts receivable increase $46,000
Depreciation expense 93,000 Prepaid expenses decrease 16,500
Gain on sale of machinery 23,600 Accounts payable increase 7,400
Wages payable decrease 3,700
Use the indirect method to prepare the operating activities section of its statement of cash flows for the year ended December 31.
Answer:
The Cash Flow statement is attached with this answer please find that
Explanation:
In the Indirect method the following adjustments are made in the net income for the period
Non cash AdjustmentsNon operating adjustmentsWorking capital changesA complete answer is available in the attached file.
E-commerce activities that take place within an organization's data communication network are part of _____.
Answer:
intrabusiness
Explanation:
Intra-business e-commerce can be regarded as type of e-commerce whereby involved parties that are taking part in the electronic exchanges comes from within a particular firm or business. In a case, whereby e-commerce exchange does not have inclusion of numerous organizations then it can be regarded as Intra-business e-commerce. It is a developing field that It is a business plan that encourages data gathering as well as exchange within an organization, so that quick review of complaints as regards common people can be simply possible.
It should be noted E-commerce activities that take place within an organization's data communication network are part of intrabusiness.
Jose rents office space for $20,000 per year. He uses the office to fill out tax returns for 1,000 clients per year. If the office rent increases to $25,000 per year, the marginal cost of filling out tax returns will A. increase, but we cannot determine the amount of the increase with the information given. B. increase by $5. C. not change. D. increase by $5,000.
Answer:
C. Not change
Explanation:
Based on the information given the MARGINAL COST of filling out tax returns will NOT CHANGE reason been that RENT is a FIXED COST because it is not movable which is why RENT
DOES NOT AFFECT MARGINAL COST.
Therefore the marginal cost of filling out tax returns will NOT CHANGE.
Which of the following statements from a hypothetical job advertisement is intended to develop interest in a job?
A) "You’ll thrive on challenging work."
B) "Ideal candidates will possess a four-year degree."
C) "Familiarity with various software applications is required."
D) "Responsibilities include event planning and relationship management."
Answer:
A) "You’ll thrive on challenging work."
Explanation:
Of the above options, the one that is most intended for an individual to develop interest in a job advertisement is the one that states that the candidate will have the opportunity to thrive in a challenging job.
Generally a potential candidate for a job is looking for a personal development opportunity through a job that will enable them to develop their skills and increase their knowledge, so when the ad makes it clear that the job is challenging but it will give the candidate opportunities prosper, this sounds like the ad that draws the most attention to a job opportunity that will add to the individual's life.
Axis Pvt. Ltd., an international financial services firm, assigns projects to employees in different nations. Since these multinational projects and careers provide employees with global exposure, they are more than willing to cooperate. With regard to organizing a multinational company, which of the following internal factors has been covered in this example?
A. Structure.
B. People.
C. Culture.
D. Management.
Answer: B. People
Explanation:
The people who work in a company are a very important internal factor because their work makes or breaks a company. When the company does something that can be expected to improve the efficiency of its workers, it is said to be investing in its people.
In the above, Axis is sending workers around the world which is giving these workers much needed exposure. In this day and age where globalization is everything, skills gained from being exposed to different nations are very important and can make workers more efficient.
Which are broad categories of action for crafting strategic moves to improve a diversified company's overall performance? (Choose every correct answer.)
Question Completion with Options:
O sticking closely with the existing business lineup and pursuing opportunities that those businesses present.
O Divesting certain businesses and retrenching to a narrower base of business operations.
O Widening the company's business scope by making new acquisitions in new industries.
Answer:
The broad categories of action for crafting strategic moves to improve a diversified company's overall performance are:
O sticking closely with the existing business lineup and pursuing opportunities that those businesses present.
O Divesting certain businesses and retrenching to a narrower base of business operations.
O Widening the company's business scope by making new acquisitions in new industries.
Explanation:
In addition to pursuing existing business opportunities, a diversified company can increase its performance indexes by divesting itself of certain unprofitable lines of business or slow-growth businesses and focusing its resources on cash cows and stars. The pursuit of stars will lead it to make new acquisitions in relatively new industries in order to remain attractive to investors, otherwise, it runs the risk of growing into extinction like the historical dinosaur.
Suppose velocity is constant, but real GDP is not independent of the money supply. If this is the case, a 10 percent increase in the money supply will:
Answer: d. have an unpredictable effect on inflation.
Explanation:
Changes in money supply affect inflation with an increase in money supply causing inflation to rise and a decrease calling inflation to fall. Real GDP is supposed to be independent of the money supply as it is not meant to be affected by inflation.
If a situation arises where real GDP is not actually independent of the money supply then that means that it is not independent of inflation either. Should the money supply therefore rise, the effect on the prices of goods and services (real GDP) in the economy will be unpredictable as it might go either way.
Plastic Products Ltd is a company business whole the country that produces and markets plastic cups, teaspoons, knives and forks for the catering industry. The company was established in 2010 in response to the changes taking place in the catering industry. The growth of the fast-food sector of the market was seen as an opportunity to provide disposable eating utensils which would save on human resources and allow the speedy provision of utensils for fast customer flow. In addition, Plastic Products has benefited from the growth in supermarkets, convenience stores and food processed manufacturers. The expansion of sales and outlets has led Mr. Long, the sales manager, to recommend to Mr. An, the general manager, that the present sales force should be increased. Mr. Long believes that the new recruits should have experience of selling fast-moving consumer goods since essentially that is what his products are. Mr. An believes that the new recruits should be familiar with plastic products since that is what they are selling. He favors recruiting from within the plastics industry, since such people are familiar with the supply, production and properties of plastic field.
Answer:
ooffffano yan bul bul ka ba!?
or each of the following situations, indicate the liability amount, if any, that is reported on the balance sheet of Bloomington Inc. at December 31, 2019. Next to each situation, enter the liability amount reported on Bloomington's balance sheet. If the amount is not reported as a liability, enter zero as your answer. a. Bloomington owes $220,000 at year-end 2019 for inventory purchase. Answer b. Bloomington agreed to purchase a $28,000 drill press in January 2020. Answer c. During November and December of 2019, Bloomington sold products to a customer and warranted them against product failure for 90 days. Estimated costs of honoring this 90-day warranty during 2020 are $3,100. Answer d. Bloomington provides a profit-sharing bonus for its executives equal to 5%
Answer:
Bloomington Inc.
Indication of Liability Amount on the Balance Sheet at December 31, 2019:
Situation Liability Amount
a. $220,000
b. $0
c. $3,100
d. $0
Explanation:
For Bloomington to recognize a liability or record it in its financial statements, the probability that an outflow of economic resources will occur in the future must be established. Bloomington must also be able to reliably measure the amount of the liability. These two conditions are satisfied in situations A and C. For situation B, the contract is not in force as at December 31, 2019, since the drill press will be purchased in January, 2020. Lastly, for situation D, the amount of the profit-sharing bonus cannot be reasonably and reliably ascertained because the amount to apply the 5% is not clear or known.
An outside supplier offers to provide Epsilon with all the units it needs at $64.50 per unit. If Epsilon buys from the supplier, the company will still incur 40% of its overhead. Epsilon should choose to:
Answer:
See below
Explanation:
The above is an incomplete question. However, the beginning part from similar question is
Epsilon co. Can produce a unit of product for the following costs. Direct material Direct labor overhead total cost per unit
$8.20 $24.20 $41 $73.40
Calculation to determine what Epsilon should choose
Relevant costs to make = $8.2 + $24.20 + [$41 × (100% - 40%)]
Relevant costs to make = $8.2 + $24.20 + ($41 × 60%)
Relevant costs to make = $8.2 + $24.20 + $24.6
Relevant costs to make = $57
Therefore, Epsilon should choose to:
Make since the relevant cost to make it is $57
Umatilla Bank and Trust is considering giving Kingbird, Inc. a loan. Before doing so, it decides that further discussions with Kingbird, Inc.’s accountant may be desirable. One area of particular concern is the Inventory account, which has a year-end balance of $253,450. Discussions with the accountant reveal the following.
1. Kingbird, Inc. sold goods costing $51,940 to Hemlock Company FOB shipping point on December 28. The goods are not expected to reach Hemlock until January 12. The goods were not included in the physical inventory because they were not in the warehouse.
2.The physical count of the inventory did not include goods costing $88,290 that were shipped to Kingbird, Inc. FOB destination on December 27 and were still in transit at year-end.
3. Kingbird, Inc. received goods costing $25,690 on January 2. The goods were shipped FOB shipping point on December 26 by Yanice Co. The goods were not included in the physical count.
4. Kingbird, Inc. sold goods costing $53,020 to Ehler of Canada FOB destination on December 30. The goods were received in Canada on January 8. They were not included in Kingbird, Inc. physical inventory.
5. Kingbird, Inc. received goods costing $46,060 on January 2 that were shipped FOB destination on December 29. The shipment was a rush order that was supposed to arrive December 31. This purchase was included in the ending inventory of $253,450.
Answer:
$286,100
Explanation:
Calculation to determine the correct inventory amount on December 31.
Using this formula
Correct Inventory amount=Ending Inventory+ Goods received shipping points + Goods shipped FOB destination-Goods received FOB destination
Let plug in the formula
Correct Inventory amount=$253,450+$25,690+$53,020-$46,060
Correct Inventory amount=$286,100
Therefore the correct inventory amount on December 31 is $286,100
Small businesses make up the majority of the competitive landscape for most businesses. There are approximately __________ small businesses in the United States.
Answer:
29 million
Explanation:
The Small Business Administration (SBA) is an agency of the federal government that is saddled with the responsibility of providing both managerial and financial assistance to small businesses in the United States of America. SBA was established in 1953 as an autonomous or independent agency of the government of the United States of America. Generally, it is saddled with the responsibility of providing both managerial and financial assistance and counseling to small businesses in order to bolster the American economy.
The small business administration (SBA) serves as an intermediary between entrepreneurs and investors or creditors, in order to provide them with the necessary funds required to plan, start and grow their business.
Basically, SBA provides services such as entrepreneurial development, access to funds, advocacy and contracting to small businesses (entrepreneurs) in the United States of America.
In the United States of America, majority of the competitive landscape or business environment is made up of small business enterprise.
According to the small business administration (SBA), there are approximately 29 million small businesses in the United States.
Baxter Co. wants to issue new 20-year bonds for some much-needed expansion projects. The company currently has 5.6 percent coupon bonds on the market that sell for $1,094.30,page 160 make semiannual payments, and mature in 20 years. What coupon rate should the company set on its new bonds if it wants them to sell at par
Answer:
The coupon rate the company should set on its new bonds if it wants them to sell at par is 4.86%.
Explanation:
The coupon rate can be determined by calculating the yield to maturity (YTM) using the following RATE function in Excel:
YTM = RATE(nper,pmt,-pv,fv) * Number of semiannuals in a year = RATE(nper,pmt,-pv,fv)*2 .............(1)
Where;
YTM = yield to maturity = ?
nper = number of periods = number of years to maturity * number of semiannuals in a year = 20 * 2 = 40
pmt = semiannual coupon payment = face value * (annual coupon rate / number of semiannuals in a year) = 1000 * (5.6% / 2) = 28
pv = present value = current bond price = $1,094.30 = 1094.30
fv = face value of the bond = 1000
Substituting the values into equation (1), we have:
YTM = RATE(40,28,-1094.30,1000)*2
Inputting =RATE(40,28,-1094.30,1000)*2 into excel (Note: as done in the attached excel file), we have
YTM = 4.86%
Therefore, the coupon rate the company should set on its new bonds if it wants them to sell at par is 4.86%.
A health club has 3 employees who work on lead generation. Each employee contacts leads 20 hours a week and is paid $24 per hour. Each employee contacts an average of 210 leads a week. Approximately 8% of the leads become members and pay a onetime fee of $100. Material costs are $180 per week, and overhead costs are $1,000 per week. a. Calculate the multifactor productivity for this operation in fees generated per dollar of input
Answer:
0.64 fees generated per dollar of input
Explanation:
Fees generated per week = Average number of leads * Leads % conversion to members * One time fee per lead
Fees generated per week = 210 * 8% * $100
Fees generated per week = $1,680
Overhead cost = $1,000 per week
Material cost = $180 per week
Labor cost = Number of employees * Hours per week * Wage per hour = 3 * 20 * $24 = $1,440
Multifactor productivity = Fees generated per week/(Overhead cost + Material cost + Labor cost)
Multifactor productivity = $1,680 / ($1,000 + $180 + $1,440)
Multifactor productivity = $1,680 / $2,620
Multifactor productivity = 0.6412214
Multifactor productivity = 0.64 fees generated per dollar of input
The ending Retained Earnings balance of Lambert Inc. increased by $1.7 million from the beginning of the year. The company's net income earned during the year is $5.1 million. What is the amount of dividends Lambert Inc. declared and paid
Answer: $3.4 million
Explanation:
The increase in Retained earnings is the net earnings for the year.
Net earnings are calculated by deducting dividends from the Net income.
Net earnings = Net income - Dividends
1,700,000 = 5,100,000 - Dividends
Dividends = 5,100,000 - 1,700,000
= $3,400,000
= $3.4 million
A river barge company can offer cheaper, although slower, per pound transportation of products to companies when compared with transportation by air, truck, or rail. The river barge company should first target customers whose companies use Group of answer choices
Answer:
The cost leadership strategy
Explanation:
The organization should focused on the cost leadership strategy that fouces on decreasing the cost also in generally it have an interest for employing this option
So as per the given option the river barge should first target customers that use the cost leadership strategy
hence, the same should be considered
Free Skies Inc.'s annual report contained the following information (dollars in millions): Net loss $ (13,302 ) Depreciation, amortization, and impairments 34,990 Decrease in receivables 2,045 Increase in inventories 6,266 Decrease in accounts payable 505 Additions to equipment 4,677 Required: 1. Based on this information, compute cash flow from operating activities using the indirect method.
Answer: $16,962
Explanation:
The cashflow from operating activities of a company shows the cash it gets from its day-to-day operations.
It is calculated as follows:
= (Net loss) + Depreciation + Decrease in receivables - increase in inventory - Decrease in accounts payable
= -13,302 + 34,990 + 2,045 - 6,266 - 505
= $16,962
Windhoek Mines, Ltd., of Namibia, is contemplating the purchase of equipment to exploit a mineral deposit on land to which the company has mineral rights. An engineering and cost analysis has been made, and it is expected that the following cash flows would be associated with opening and operating a mine in the area: Cost of new equipment and timbers $ 370,000 Working capital required $ 115,000 Annual net cash receipts $ 130,000 * Cost to construct new roads in year three $ 43,000 Salvage value of equipment in four years $ 68,000 *Receipts from sales of ore, less out-of-pocket costs for salaries, utilities, insurance, and so forth. The mineral deposit would be exhausted after four years of mining. At that point, the working capital would be released for reinvestment elsewhere. The company’s required rate of return is 18%. Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using tables. Required: a. What is the net present value of the proposed mining project? b. Should the project be accepted?
Answer:
Windhoek Mines, Ltd., of Namibia
a. The net present value (NPV) of the proposed mining project is:
= -$117,258
b. No. The project should be rejected. It has a negative NPV.
Explanation:
a) Data and Calculations:
Cost of new equipment and timbers = $370,000
Working capital required = $115,000
Cost to construct new roads in year three = $43,000
Annual net cash receipts = $130,000
Salvage value of equipment in four years = $68,000
Company's required rate of return = 18%
Mining duration = 4 years
Annuity factor for 4 years at 18% = 2.1690
Relevant discount factors at 18%:
Year 3 = 0.712
Year 4 = 0.636
Present values of Cash Flows:
Transaction Cash Flows PV Factor PV Amount
Cost of new equipment and timbers $370,000 1.000 -$370,000
Working capital required 115,000 1.000 -115,000
Cost to construct new roads in year three 43,000 0.712 -30,616
Annual net cash receipts 130,000 2.169 281,970
Salvage value of equipment in four years 68,000 0.636 43,248
Working capital released 115,000 0.636 73,140
Net present value -$117,258
Quantity demand is 385 and quantity supplied is 203 calculate the shortage
Answer:
Shortage = 182 units
Explanation:
Given:
Quantity demanded = 385
Quantity supplied = 203
Find:
Shortage
Computation:
In economic terms, a shortage occurs when the amount sought exceeds the quantity available at the market price.
Shortage is difference between Quantity demanded and Quantity supplied.
Shortage = Quantity demanded - Quantity supplied
Shortage = 385 - 203
Shortage = 182 units
a. After the magazine The Economist publishes an article indicating that analysts expect the value of Tunisian dinars to rise relative to Peruvian sol, Peru's currency will
Answer: Depreciate
Explanation:
The Economist is a widely respected financial and economic magazine which means that their articles can cause movements in the market especially when backed up by analysts.
The Economist believes that the Tunisian Dinar will rise relative to the Peruvian Sol, this means that the Peruvian Sol will depreciate against the Tunisian Diner. Some people and entities holding Peruvian Sol assets will try to offload it so that they do not suffer losses.
This increase in supply and reduction in demand for the Peruvian Sol will lead to it depreciating.
A rate-making method designed to adjust a premium to reflect the actual loss experience of an insured during the policy period is known as:_______.
a. retrospective rating,
b. experience rating,
c. premium discount,
d. all of the above
Answer:
a. retrospective rating
Explanation:
Retrospective Rating can be regarded as a rating plan which is able to give
adjustments to it's premium, this rating can be subjected to a certain minimum as well as maximum, the rating is able to reflect or state the current loss experience of the insured. This rating give combination of actual losses as well as graded expenses so that produce a premium that reflects the current experience of the insured accurately can be produced. It should be noted that retrospective rating is a rate-making method designed to adjust a premium to reflect the actual loss experience of an insured during the policy period
Ehler Corporation sells rock-climbing products and also operates an indoor climbing facility for climbing enthusiasts. During the last part of 2017, Ehler had the following transactions related to notes payable.
Sept. 1
Issued a $12,000 note to Pippen to purchase inventory. The 3-month note payable bears interest of 6% and is due December 1. (Ehler uses a perpetual inventory system.)
Sept.
30 Recorded accrued interest for the Pippen note.
Oct.
1 Issued a $16,500, 8%, 4-month note to Prime Bank to finance the purchase of a new climbing wall for advanced climbers. The note is due February 1.
Oct.
31 Recorded accrued interest for the Pippen note and the Prime Bank note.
Nov.
1 Issued a $26,000 note and paid $8,000 cash to purchase a vehicle to transport clients to nearby climbing sites as part of a new series of climbing classes. This note bears interest of 6% and matures in 12 months.
Nov.
30 Recorded accrued interest for the Pippen note, the Prime Bank note, and the vehicle note.
Dec.
1 Paid principal and interest on the Pippen note.
Dec.
31 Recorded accrued interest for the Prime Bank note and the vehicle note.
Instructions
(a) Prepare journal entries for the transactions noted above.
(b) Post the above entries to the Notes Payable, Interest Payable, and Interest Expense accounts. (Use T-accounts.)
Interest Payable $590
(c) Show the balance sheet presentation of notes payable and interest payable at December 31.
(d) How much interest expense relating to notes payable did Ehler incur during the year?
Answer:
Ehler Corporation
a) Journal Entries:
Sept. 1 Debit Inventory $12,000
Credit 6%, 3-month Notes Payable (Pippen) $12,000)
To record issuance of note to purchase inventory.
Sept. 30 Debit Interest expense $60
Credit Interest Payable $60
To accrue interest expense ($12,000 * 6% * 1/12).
Oct. 1 Debit Climbing Wall $16,500
Credit 8%, 4-month Note Payable (Prime Bank) $16,500
To record issuance of note payable to purchase climbing wall.
Oct. 31 Debit Interest expense $170
Credit Interest payable $170
To accrue interest expense ($60 + $16,500 * 8% * 1/12).
Nov. 1 Debit Vehicle $26,000
Credit Cash $8,000
Credit 6%, 12-month Note Payable $18,000
To record the purchase of a new vehicle for climbers.
Nov. 30 Debit Interest expense $260
Credit Interest payable $260
To accrue interest expense ($170 + $18,000 * 6% * 1/12).
Dec. 1 Debit 6% Notes Payable (Pippen) $12,000)
Debit Interest payable $180
Credit Cash $12,180
To record the payment of principal and interests.
Dec. 31 Debit Interest expense $200
Credit Interest payable $200
To accrue interest expense ($110 + $90)
b) T-accounts:
Notes Payable
Date Account Titles Debit Credit
Sept. 1 Inventory $12,000
Oct. 1 Climbing Wall 16,500
Nov. 1 Vehicle 18,000
Dec. 1 Cash $12,000
Dec. 31 Balance 34,500
Interest Payable
Date Account Titles Debit Credit
Sept. 30 Interest expense $60
Oct. 31 Interest expense 170
Nov. 30 Interest expense 260
Dec. 1 Cash $180
Dec. 31 Interest expense 200
Dec. 31 Balance $510
Interest Expense
Date Account Titles Debit Credit
Sept. 30 Interest payable $60
Oct. 31 Interest payable 170
Nov. 30 Interest payable 260
Dec. 31 Interest payable 200
Dec. 31 Income summary $690
c) Balance Sheet:
Current liabilities:
Interest payable $510
Notes payable $34,500
d) Total interest expense = $690
Explanation:
a) Data and Analysis:
Sept. 1 Inventory $12,000 6% Notes Payable (Pippen) $12,000) to purchase inventory. The 3-month note payable
Sept. 30 Interest expense $60 Interest payable $60 ($12,000 * 6% * 1/12)
Oct. 1 Climbing Wall $16,500 8%, 4-month Note Payable (Prime Bank) $16,500
Oct. 31 Interest expense $170 Interest payable $170 ($60 + $16,500 * 8% * 1/12)
Nov. 1 Vehicle $26,000 Cash $8,000 6%, 12-month Note Payable $18,000
Nov. 30 Interest expense $260 Interest payable $260 ($170 + $18,000 * 6% * 1/12)
Dec. 1 6% Notes Payable (Pippen) $12,000) Interest payable $180 Cash $12,180
Dec. 31 Interest expense $200 Interest payable $200
