Answer:
36.05
Explanation:
$22.56/2=11.28
$11.28+24.77=$36.05
Dedrick Inc. did not pay dividends in 2018 or 2019, even though 60,000 shares of its 7.5%, $50 par value cumulative preferred stock were outstanding during those years. The company has 900,000 shares of $2 par value common stock outstanding. Required: Calculate the annual dividend per share obligation on the preferred stock. (Round your answer to 2 decimal places.) Calculate the amount that would be received by an investor who has owned 3,100 shares of preferred stock and 29,000 shares of common stock since 2017 if a $0.40 per share dividend on the common stock is paid at the end of 2020. (Do not round intermediate calculations.)
Answer:
no hablo tacka tacka
Explanation:
tacka tacka gracias
Michael's, Inc., just paid $2.60 to its shareholders as the annual dividend. Simultaneously, the company announced that future dividends will be increasing by 5.6 percent. If you require a rate of return of 9.8 percent, how much are you willing to pay today to purchase one share of the company's stock
Answer:
$65.37
Explanation:
Calculation for how much are you willing to pay today to purchase one share of the company's stock
Using this formula
P/0 = D0 ( 1 + g ) / R-g
Let plug in the formula
P/0 = $2.60 (1 + .056) / .098 - .056
P/0 = $2.60 (1 .056)/0.042
P/0=$2.7456/0.042
P/0=$65.37
Therefore how much are you willing to pay today to purchase one share of the company's stock will be $65.37
Why is the United States concerned about China’s devaluation of the yuan?
Answer:
a stronger dollar cuts into inflation in the United States, and it might force the fed to cut interest rates by more than it would otherwise to sustain its desired pace of growth and price gains.
Explanation:
The amount of money withheld from an employee's paycheck is...
A.Payroll deductions
B.Levied taxes
C.FICA
D.Gross earnings
Answer:
A.Payroll deductions
Explanation:
Withholding is the action by employers to retain a portion of an employee's salary for a specific function. Money withheld does not get to the employee bank's account. The amount withheld is shown in the pay stub, but the employee will not access it.
Employers collect the amounts withheld and remit them to the concerned agency. Deductions are usually a percentage of the employee's gross pay.
The management accountant at Lang Manufacturing Co. collected the following data in preparation for a life-cycle analysis on one of its products, a leaf blower: Item This Year Change Over Last Year Average Annual Change Over the Last Four Years Annual sales $2,700,000 1.8% 23.5% Unit sales price 450 2.4% 8.3% Unit profit 100 -1.0% 3.0% Total profit 600,000 -1.2% 30.0% The stage of the sales life cycle the product is in is: Withdrawal. Introduction. Decline. Maturity. Growth.
Answer: Decline stage
Explanation:
The stage of the sales life cycle the product is in the Decline stage of the product cycle. We can see that the average performance of the product over its past life is higher than that of its last year's performance.
Under the decline stage, there will be a reduction in the quantity of goods that's sold thereby leading to a reduction in profits until it gets to a point that producing the goods will not be profitable anymore.
The adjusted trial balance for China Tea Company at December 31, 2021, is presented below: Accounts Debit Credit Cash $ 16,000 Accounts receivable 158,000 Prepaid rent 7,000 Supplies 27,000 Equipment 330,000 Accumulated depreciation $ 127,000 Accounts payable 19,000 Salaries payable 3,800 Interest payable 1,500 Notes payable (due in two years) 30,000 Common stock 180,000 Retained earnings 94,700 Dividends 30,000 Service revenue 470,000 Salaries expense 185,000 Advertising expense 78,000 Rent expense 18,000 Depreciation expense 33,000 Interest expense 2,000 Utilities expense 42,000 Totals $ 926,000 $ 926,000 Prepare a classified balance sheet for China Tea Company as of December 31, 2021.
Answer:
China Tea Company
Classified Balance Sheet as at December 31, 2021
ASSETS
Non Current Assets
Equipment $330,000
Accumulated depreciation ($127,000)
Total Non - Current Assets $203,000
Current Assets
Prepaid rent $7,000
Supplies $27,000
Accounts receivable $158,000
Cash $ 16,000
Total Current Assets $208,000
TOTAL ASSETS $411,000
EQUITY AND LIABILITIES
EQUITY
Common stock $180,000
Retained Earnings $361,700
TOTAL EQUITY $541,700
LIABILITIES
Non Current Liabilities
Notes payable (due in two years) $30,000
Total Non - Current Liabilities $30,000
Current Liabilities
Accounts payable $19,000
Salaries payable $3,800
Interest payable $1,500
Total Current Liabilities $24,300
TOTAL LIABILITIES $54,300
TOTAL EQUITY AND LIABILITIES $596,000
Explanation:
A Balance Sheet show the Assets, Liabilities and Equity Balances as at the Reporting date
Retained Earnings Balance = Opening Balance + Profit for the year - Dividends.
where,
Profit for the Year = Sales - Expenses
= $470,000 - ($78,000 + $18,000 + $33,000 + $2,000 + $42,000)
= $297,000
therefore,
Retained Earnings Balance = $94,700 + $297,000 - 30,000 = $361,700
Please answer !!! For a lot of points
i think B is the answer,but ask another person too!
.
and tnx for points too :)
Answer:
thanks for points
Explanation:
Suppose you know that a company's stock currently sells for $57 per share and the required return on the stock is 10.4%. You also know that the total return on the stock is evenly divided between capital gains yield and dividend yield. If it's the company's policy to always maintain a constant growth rate in its dividends, what is the current dividend per share?
What is the dividend per share in Year 4?
Answer:
$2.82
Explanation:
Calculation for what is the current dividend per share
First step is to calculate the Dividend yield
Dividend yield= 1/2 (.104)
Dividend yield= .052
Now let calculate the current dividend per share
Current dividend per share=(.052*57 per share)/(1+0.052)
Current dividend per share= 2.964/1.052
Current dividend per share=$2.82
Therefore the Current dividend per share will be $2.82
On 12/31/2020, Heaton Industries Inc. reported retained earnings of $675,000 on its balance sheet, and it reported that it had $172,500 of net income during the year. On its previous balance sheet, at 12/31/2019, the company had reported $555,000 of retained earnings. No shares were repurchased during 2020. How much in dividends did Heaton pay during 2020?
a. $47,381
b. $49,875
c. $57,881
d. $55,125
e. $52,500
Answer:
e. $52,500
Explanation:
Beginning balance of retained earnings= $555,000
Net earning for the period=$172,500
Closing retained earnings balance for the period: $675,000
Closing retained earning =Beginning balance + net earnings - dividend
$675000 = $555,000 +$172,500- Dividends
$675000 = $727,500 - Dividends
Dividends = $727,500 - $675,000
Dividends =$52,500
A shoe company will make a new type of shoe. The fixed cost for the production will be $24,000. The variable cost will be $31 per pair of shoes. The shoes will sell for $100 for each pair. How many pairs of shoes will have to be sold for the company to break even on this new line of shoes
Answer:
Break-even point in units= 348
Explanation:
Giving the following information:
The fixed cost for the production will be $24,000. The variable cost will be $31 per pair of shoes. The shoes will sell for $100 for each pair.
To calculate the break-even point in units, we need to use the following formula:
Break-even point in units= fixed costs/ contribution margin per unit
Break-even point in units= 24,000 / (100 - 31)
Break-even point in units= 347.82 = 348
Sonor Systems undertakes its own machine maintenance. The depreciation on the equipment is $20,000 per year and operating cost is $2 per machine hour. Last year 275,000 machine hours were used to produce 100,000 units. If 300,000 machine hours had been worked last year, what would be the total machine maintenance cost
Answer:
$570,000
Explanation:
Total machine maintenance cost calculation.
Depreciation expenses $20,000
Operating cost
($275,000 MH × $2). $550,000
Total machine machine maintenance cost $570,000
Therefore, the total machine maintenance cost of the machine is $570,000
After marketers have defined a problem they need to solve, what is the next
step in the marketing research process?
A. Analyze the situation.
B. Write a survey.
C. Create a database.
D. Collect data.
After marketers have defined a problem they need to solve, Analyze the situation is the next step in the marketing research process. The appropriate response is option A.
What is marketing research process?The goal of the marketing research process is to gather information about your target market's attitudes and opinions so you can evaluate your current goods and services or test ideas for making them better. Additionally, it can measure how customers view your business.
Market research gives you vital knowledge about your industry and competitive environment. It can inform you of how the target clients and customers you want to reach view your business.
An in-depth evaluation of a market within a particular industry is what is known as a market analysis.
Hence, the appropriate response is option A.
To learn more about marketing research process
https://brainly.com/question/14663280
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Consider the decision to purchase either a 5-year corporate bond or a 5-year municipal bond. The corporate bond is a 12% annual coupon bond with a par value of $1,000. It is currently yielding 11.5%. The municipal bond has an 8.5% annual coupon and a par value of $1,000. It is currently yielding 7%. Assume that your marginal tax rate is 35%. What is the after tax yield to maturity (YT
Answer:
MUNICPAL BOND YTM; r= 7.00%
CORPORATE BOND YTM; r= 7.35%
Explanation:
Given the data in the question;
To get the after tax yield to maturity (YTM)
MUNICPAL BOND
Purchase price PV of coupons + PV of Face value at maturity
[(1000×8.5%) × (1 - 1.07⁻⁵] / 0.07) + (1000/1.07⁵)
348.516 + 712.98 = 1061.5
After-tax coupon payment 1000 × 8.5% = 85
COUPONS RECORD ON MUNICIPAL ARE
TAX-EXCEMPT.
Par value 1000
Calculated YTM 1061.5 = (85× (1-(1+r)⁻⁵)/r) + (1000/(1+r)⁵)
r= 7.00%
CORPORATE BOND
Purchase price PV of coupons +PV of Face value at maturity
((1000×12%) × (1-1.115⁻⁵)/0.115) +(1000/1.115⁵)
437.985 + 580.264 = 1018.25
After-tax coupon payment 1000 × 12% × (1 - 35%) = 78
Par value 1000
Calculated YTM 1018.25 = (78× (1-(1+r)⁻⁵)/r) + (1000/(1+r)⁵)
r= 7.35%
MUNICPAL BOND YTM; r= 7.00%
CORPORATE BOND YTM; r= 7.35%
John, who has just completed his first finance course, is unsure whether he should take a course in business analysis and valuation using financial statements, since he believes that financial analysis adds little value, given the efficiency of capital markets. Explain to John when financial analysis can add value, even if capital markets are efficient.
Answer:
Following are the solution to the given question:
Explanation:
The financial analysis allows you to understand the strong a corporation's finances throughout the study of capital markets, which's very helpful. Mercedes typically produce short-term misprice for resources as well as the returns are created by an investor/fund manager. These gains also are called Alpha. Economic analysis shows whether an organization handles its money. Economic reporting in project management is useful to recognize its competitive edge of a capital market business and, ultimately, that company(asset) sells efficiently over a lengthy sector.
has assets with a market value of $100 million, $10 million of which are cash. has debt of $40 million, and 10 million shares outstanding. Suppose that distributes $10 million as a dividend. Assuming perfect capital markets, what will new market debt-equity ratio be after the dividend is paid
Answer:
See below
Explanation:
First, we need to calculate new stock price.
Current stock price = (Assets market value - debt) / Number of shares outstanding.
= (100 - 40)/10
= $6
Assets value after dividend distribution = 100 - 10
= 90
Number of shares purchased = 10/6 = 1.667 million shares
New stock price = (90 - 40)/(10 - 1.667)
= $7.20
Debt equity ratio = Debt / Equity
Equity = Stock price × number of shares
= $ (7.20 × (10 - 1.667)
= $ (7.2 × 8.33)
= $60
Debt = 40
Debt equity = 40/60 = 0.667 times
Based on past experience, Maas Corp. (a U.S.-based company) expects to purchase raw materials from a foreign supplier at a cost of 1,000,000 francs on March 15, 2021. To hedge this forecasted transaction, on December 15, 2020, the company acquires a call option to purchase 1,000,000 francs in three months. Maas selects a strike price of $0.58 per franc when the spot rate is $0.58 and pays a premium of $0.005 per franc. The spot rate increases to $0.584 at December 31, 2020, causing the fair value of the option to increase to $7,500. By March 15, 2021, when the raw materials are purchased, the spot rate has climbed to $0.59, resulting in a fair value for the option of $10,000. The raw materials are used in assembling finished products, which are sold by December 31, 2021, when Maas prepares its annual financial statements. Prepare all journal entries for the option hedge of a forecasted transaction and for the purchase of raw materials. What is the overall impact on net income over the two accounting periods
Answer:
A. 15-Dec-20
Dr Foreign Currency Option $5,000
Cr Cash $5,000
2. 15-Dec-20 No Journal Entry Required
3 31-Dec-20 Dr Foreign Currency Option
$4,000
Cr To Accumulated - Other Comrehensive Income $4,000
4 31-Dec-20 Dr Option Expense (AOCI) $1,500
Cr To Foreign currency option $1,500
5 15-Mar-21 Dr Foreign Currency Option $6,000
Cr To Accumulated - Other Comrehensive Income $6,000
6 15-Mar-21 Dr Option Expense (AOCI) $3,500
Cr To Foreign currency option $3,500
7 15-Mar-21 Cash A/c $10,000
Cr To Foreign currency option $10,000
8 15-Mar-21 Dr Raw material inventory $590,000
Cr To Cash $590,000
9 15-Mar-21 Dr Accumulated - Other Comprehensive Income $6,000
Cr To Gain on sale of Option (Income statement) $6,000
b. Impact on net income in 2020= $2,500
Impact on net income in 2021 = $4,500
Explanation:
A. Preparation of all journal entries for the option hedge of a forecasted transaction and for the purchase of raw materials
15-Dec-20
Dr Foreign Currency Option Dr (1,000,000*0.005) $5,000
Cr To Cash $5,000
(Being call option purchased to acquire 1000000 marks at $0.005 per mark)
2 15-Dec-20 No Journal Entry Required
3 31-Dec-20 Dr Foreign Currency Option
[($0.584 - 0.58)*1000000] $4,000
Cr To Accumulated - Other Comrehensive Income $4,000
(Being adjustment of increase in fair value of option)
4 31-Dec-20 Dr Option Expense (AOCI) ($4,000 + $5,000 - $7,500) $1,500
Cr To Foreign currency option $1,500
(Being time value reduction of foreign currency option)
5 15-Mar-21 Dr Foreign Currency Option [(0.59 - 0.584)*1000000] $6,000
Cr To Accumulated - Other Comrehensive Income $6,000
(Being adjustment of increase in fair value of option)
6 15-Mar-21 Dr Option Expense (AOCI) ($7,500 + $6,000 - $10,000) $3,500
Cr To Foreign currency option $3,500
(Being time value reduction of foreign currency option)
7 15-Mar-21 Cash A/c $10,000
Cr To Foreign currency option $10,000
(Being sale of foreign currency option)
8 15-Mar-21 Dr Raw material inventory $590,000
Cr To Cash (1000000*0.59) $590,000
(To record purchase of raw material)
9 15-Mar-21 Dr Accumulated - Other Comprehensive Income $6,000
Cr To Gain on sale of Option (Income statement) $6,000
($4,500+$2,500)
(Being gain on option realzied and transferred to statement of comprehensive income)
b. Calculation for What is the overall impact
Impact on net income in 2020 = $4,000 - 1,500 = $2,500
Impact on net income in 2021 = $6,000 - $1,500 = $4,500
The slope of the PPF can also be expressed as the ratio of the marginal products of labor to the marginal product of capital. consumer utility. the opportunity cost of the good measured on the horizontal axis. the ratio of abundance of labor to capital.
Answer:
the opportunity cost of the good measured on the horizontal axis.
Explanation:
The Production possibilities frontiers is a curve that shows the various combination of two goods a company can produce when all its resources are fully utilised.
The PPF is concave to the origin. This means that as more quantities of a product is produced, the fewer resources it has available to produce another good. As a result, less of the other product would be produced. So, the opportunity cost of producing a good increase as more and more of that good is produced.
Although appealing to more refined tastes, art as a collectible has not always performed so profitably. Assume that in 2015, an auction house sold a statute at auction for a price of $10,710,500. Unfortunately for the previous owner, he had purchased it in 2010 at a price of $12,738,500. What was his annual rate of return on this sculpture
Answer:
-3.41%
Explanation:
The computation of the annual rate of return is shown below;
We use the formula:
Future value = Present value × (1 + rate of interest)^number of years
$10,710,500 = $12,738,500 × (1 + rate of interest)^5
($10,710,500 ÷ $12,738,500)^(1 ÷ 5) = (1 + rate of interest)
(1 + rate of interest) = 0.965913622
r = (0.965913622 - 1) × 100
= -3.41%
Question 1 of 10
If a product lacks necessary instructions, it is a(n)
product.
A. defective
B. express warranty
C. limited warranty
D. extended warranty
What is the answer to this
Prompt What is the term for a potential customer who has shown interest in the company‘s product?
As an investor, what is the risk involved when investing in companies on the stock
exchange?
a. Investors can lose their existing shares if the value of the stock does not
increase within 90 days of purchase
b. Once they purchase a share, investors cannot sell them at a higher price
The price of stocks can decrease; for example, when the company
receives bad press
d. Investors are only at risk if the purchase a share when the stock price has
fallen
C.
Answer:d
Explanation:
The investor are only at risk if the purchase of a share when the stoc price has fallen
Golden Corporation uses direct labor-hours in its predetermined overhead rate. At the beginning of the year, the estimated direct labor-hours were 22,300 hours. At the end of the year, actual direct labor-hours for the year were 21,100 hours, the actual manufacturing overhead for the year was $538,980, and manufacturing overhead for the year was underapplied by $24,140. The estimated manufacturing overhead at the beginning of the year used in the predetermined overhead rate must have been
Answer:
$544,120
Explanation:
Calculation for what The estimated manufacturing overhead at the beginning of the year used in the predetermined overhead rate must have been
First step is to calculate the Applied manufacturing overhead
Applied manufacturing overhead = $538,980 - $24,140
Applied manufacturing overhead = $514,840
Second step is to calculate the Predetermined overhead rate using this formula
Predetermined overhead rate = Applied manufacturing overhead / Actual direct labor hours
Let plug in the formula
Predetermined overhead rate = $514,840 / 21,100
Predetermined overhead rate = $24.4
Now let calculate the Estimated total manufacturing overheads using this formula
Estimated total manufacturing overheads = Estimated direct labor hours * Predetermined overhead rate
Let plug in the formula
Estimated total manufacturing overheads= 22,300 *$24.4
Estimated total manufacturing overheads= $544,120
Therefore The estimated manufacturing overhead at the beginning of the year used in the predetermined overhead rate must have been $544,120
At the second week in March, job 710 has an accumulated beginning cost of $37,800. A) $9000 of direct materials were used. B) 300 hours of direct labor were charged to the job at $40 per hour C) Manufacturing Overhead was charged to the job at the rate of $40 per machine hour 160 machine hours were used. The entire Finished Goods Inventory was sold . Transfer the appropriate number to the Costs of Goods sold.
Answer:
Costs of Goods sold = $65,200
Explanation:
Since the entire Finished Goods Inventory was sold, thhis implies that there is no accumulated ending cost.
The Costs of Goods sold can be calculated as follows:
Accumulated beginning cost = $37,800
Direct materials were used = $9,000
Direct labor = Number of direct labor hours * Labor cost per hour = 300 * $40 = $12,000
Manufacturing Overhead = Number of machine hours * Cost per machine hour = 160 * $40 = $6,400
Therefore, we have:
Costs of Goods sold = Accumulated beginning cost + Direct materials were used + Direct labor + Manufacturing Overhead = $37,800 + $9,000 + $12,000 + $6,400 = $65,200
4.9 Each day of the week you meet with your direct supervisor and your coworkers for a morning meeting. The meeting is open-forum and issues, goals, topics, and ideas are all discussed at the meeting, during which the supervisor responds when able and asks for feedback often. This is an example of ___________________________________. A. authority compliance management B. team management C. country club management D. middle-of-the-road management
Answer:
B. team management
Explanation:
A team can be defined as a group of people or set of individuals with various skill set, knowledge and experience coming together to work on a project or task in order to successfully achieve a set goal and objective.
This ultimately implies that, a team comprises of individuals, workers or employees having complementary skills, knowledge and experience needed to execute a project or task successfully. Therefore, workers working as a team usually interact with the other team members and as a result, this enhances performance and strengthen the level of relationship they share.
In this scenario, each day of the week you meet with your direct supervisor and your coworkers for a morning meeting. The meeting is open-forum and issues, goals, topics, and ideas are all discussed at the meeting, during which the supervisor responds when able and asks for feedback often. This is an example of team management.
A merchant plans to sell two models of home computers at costs of $250 and $400, respectively. The $250 model yields a profit of $45 and the $400 model yields a profit of $50. The merchant estimates that the total monthly demand will not exceed 250 units. Find the number of units of each model that should be stocked in order to maximize profit. Assume that the merchant does not want to invest more than $70,000 in computer inventory. (See Exercise 21 in Section 9.2.)
Answer:
That is there is maximum profit when 250 units of $250 model computer and 50 units of $400 model computer is stocked.
Explanation:
Let x represent the number of $250 model and let y represent the number of $400 model. Since the total monthly demand will not exceed 250 units, hence:
x + y < 250 (1)
Also the merchant does not want to invest more than $70,000, hence:
250x + 400y < 70000 (2)
x, y ≥ 0
Plotting the equations using geogebra online graphing tool. The solution to the problem is at (0,0), (200, 50), (250,0), (0, 175).
The profit equation is:
Profit = 45x + 50y
At (0,0); Profit = 45(0) + 50(0) = 0
At (250,0); Profit = 45(250) + 50(0) = $11250
At (0,175); Profit = 45(0) + 50(175) = 8750
At (200,50); Profit = 45(200) + 50(50) = $11500
Therefore the maximum profit is at (200, 50). That is there is maximum profit when 250 units of $250 model computer and 50 units of $400 model computer is stocked.
To be considered part of a market, an individual must
Answer:
Have both willingness to buy and the financial resources needed to buy.
The following costs result from the production and sale of 4,450 drum sets manufactured by Tight Drums Company for the year ended December 31, 2019. The drum sets sell for $295 each. The company has a 30% income tax rate. Variable production costs Plastic for casing $ 115,700 Wages of assembly workers 404,950 Drum stands 155,750 Variable selling costs Sales commissions 106,800 Fixed manufacturing costs Taxes on factory 14,500 Factory maintenance 29,000 Factory machinery depreciation 89,000 Fixed selling and administrative costs Lease of equipment for sales staff 29,000 Accounting staff salaries 79,000 Administrative management salaries 159,000 Required: 1. Prepare a contribution margin income statement for the year. 2. Compute its contribution margin per unit and its contribution margin ratio.
Answer:
See below
Explanation:
1. Contribution margin income statement
Sales (4,450 × $295)
$1,312,750
Less: Variable costs
Plastic for casting
$115,700
Wages
$404,950
Drum stand
$155,750
Variable selling
$106,800
Contribution
$529,550
Less : Fixed costs
Taxes on factory
$14,500
Factory Maintenance
$29,000
Depreciation
$89,000
Lease of equipment
$29,000
Accounting staff salaries
$79,000
Admin management salaries
$159,000
Profit before tax
$130,050
Less :
Tax at 30%
$39,015
Profit after tax
$91,035
2. Contribution margin per unit
Contribution margin per unit = Total contribution / Number of units
Contribution margin per unit = $529,550 / 4,450
Contribution margin per unit = $119 per unit
•Contribution margin ratio
= Contribution margin per unit / Unit cost of drum
= $119 / $295
Contribution margin ratio = 40.34%
The ACE Equity Fund has an expected return E[r] of 11.830% and the ZQR Bond Fund has an expected return E[r] of 6.690%. A portfolio comprised of 3% ACE and 97% ZQR would have an expected return of __________%. (percent, rounded three places after decimal)
Answer:
The answer is "6.8442%".
Explanation:
The expected portfolio return is the total average portfolio return for all stocks
ACE fund weight (wA) =3%
ACE fund (ErA) expected return= 11.830%
Bond fund ZQR weight (wB) = 97%.
The ACE fund (ErB) expected return = 6.690%
Expected portfolio return = [tex](wA \times ErA)+(wB \times ErB)[/tex]
[tex]=(3\% \times 11.830 \% )+(97 \% \times 6.690\%)\\\\= 0.03 \times 0.1183 +0.97 \times 0.0669 \\\\=0.003549+ 0.064893\\\\=0.068442\\\\=6.8442 \%[/tex]
You want to receive $5000 per month for 20 years in real dollars in an account when you retire in 35 years. The first monthly payment to be received 1 month after you retire. The nominal return on your investment is 9.94 percent and the inflation rate is 3.2 percent. What is the real amount you must deposit each year for 35 years to achieve your goal
Answer:
The real amount you must deposit each year for 35 years to achieve your goal is $5,359.02
Explanation:
To calculate the real amount we need to calculate the real interest rate as follow
1 + Nominal rate = ( 1 + Real rate ) x ( 1 + Inflation rate )
1 + 9.94% = ( 1 + Real rate ) x ( 1 + 3.2% )
1.0994 = ( 1 + Real rate ) x 1.032
1 + Real rate = 1.0994 / 1.032
1 + Real rate = 1.06531
Real rate = 1.06531 - 1
Real rate = 0.06531
Real rate = 6.531% = 6.53%
We need to calculate the PV of the payment that should be received.
Use the following formula to calculate the present value
PV of Annuity = Annuity payment x ( 1 - ( 1 + Interest rate )^-numbers of annuity payments ) / Interest rate
Where
Annuity Payment = $5,000 per month
Interest rate = 6.53% / 12 = 0.5442%
Numbers pf annuity payments = 20 years x 12 payments per year = 240 payment
PLacing values in the formula
PV of Annuity = $5,000 x ( 1 - ( 1 + 0.5442% )^-240 ) / 0.5442%
PV of Annuity = $5,000 x 133.80362
PV of Annuity = $669,018.09
Now calculate the amount of deposit required to receive the payment after retirement.
Use the following formula to calculate the real deposit
Future value of annuity = Annuity Payment x ( 1 + Interest rate )^numbers of annuity payments - 1 ) / Interest rate
Where
Future value of annuity = $669,018.09
Interst rate = 6.53%
Numbers of annuity payment = 35 years x 1 payment per year = 35 payments
Annuity payment = Real amount of deposit = ?
Placing values in the formula
$669,018.09 = Real amount of deposit x ( 1 + 6.53% )^35 - 1 ) / 6.53%
$669,018.09 = Real amount of deposit x 124.83967
Real amount of deposit = $669,018.09 / 124.83967
Real amount of deposit = $5,359.02
On January 1, 2020, Sheffield Company makes the two following acquisitions. 1. Purchases land having a fair value of $220,000 by issuing a 4-year, zero-interest-bearing promissory note in the face amount of $346,174. 2. Purchases equipment by issuing a 6%, 8-year promissory note having a maturity value of $410,000 (interest payable annually). The company has to pay 12% interest for funds from its bank. (a) Record the two journal entries that should be recorded by Sheffield Company for the two purchases on January 1, 2020. (b) Record the interest at the end of the first year on both notes using the effective-interest method.
Answer:
A. Dr Land $220,000.00
Dr Discount on Notes Payable $126,174.00
Cr Notes Payable $346,174.00
Dr Cash $287,796.06
Dr Discount on Note Payable $122,203.94
Cr Note Payable $410,000
B. December 31, 2017
Dr Interest expense $26,400
Cr Discount on Notes Payable $26,400
December 31, 2017
Dr Interest expense $34,535.5
Cr Cash $24,600
Cr Discount on Notes Payable $9,935.5
Explanation:
(a) Preparation to Record the two journal entries that should be recorded by Sheffield Company for the two purchases on January 1, 2020.
Dr Land $220,000.00
Dr Discount on Notes Payable $126,174.00
($346,174.00-$220,000.00)
Cr Notes Payable $346,174.00
Dr Cash $287,796.06
Dr Discount on Note Payable $122,203.94
Cr Note Payable $410,000
Calculation for the PV of note using Financial calculator
N=8
I/Y% = 12%
Interest payment – $410,000 x .06 = $24,600
FV = $410,000
PV of note = $287,796.06
Calculation for Discount on note
Discount on note = $410,000 –$287,796.06
Discount on note= $122,203.94
(b) Preparation of the journal entry to Record the interest at the end of the first year on both notes using the effective-interest method.
December 31, 2017
Dr Interest expense $26,400
($220,000 x .12)
Cr Discount on Notes Payable $26,400
December 31, 2017
Dr Interest expense $34,535.5
($287,796.06*.12)
Cr Cash $24,600
($410,000 x .06)
Cr Discount on Notes Payable $9,935.5
($34,535.5-$24,600)