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Throughout this course we have been using the accrual basis of accounting to complete our work. However, there are two other methods of accounting, the cash and the modified cash bases.
For this assignment please answer each of the following questions in a short paragraph:
Explain the accrual, cash, and modified cash bases of accounting.
Compare the methods and demonstrate the similarities, differences, advantages, and disadvantages of each method.
Which method seems easiest to work with? Keep in mind not only the ease of recording the transactions but the ease with which the accountant can use the resulting financial information.
Which method(s) are approved by GAAP?
A hypothetical futures contract on a non dividend-paying stock with a current spot price of $160 has a maturity of 1 year. If the T-bill rate is 5%, what should the futures price be?
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(Bonds) A company has an outstanding issue of $1,000 face value bonds with a 9.5% annual coupon and 20 years remaining until maturity. The bonds are currently selling at a price of 90 (90% of face value). An investment bank has advised that a new 20-..
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Winnebagel Corp. currently sells 29,000 motor homes per year at $78,000 each and 8,000 luxury motor coaches per year at $120,000 each. The company wants to introduce a new portable camper to fill out its product line; What is the amount to use as the..
The Gibson Guitar Company has a coupon bond outstanding that pays coupon interest of $120 per year and has 8 years to maturity. If the market rate for similar bonds is currently 14 %, what is the bond’s current market value? Also, what is the coupon ..
With a 30 year 9% loan of $200,000, how much of your yearly payment would be interest and how much would be principal for the first 4 years? (complete the following table)
You take out a loan for $16101 that has equal nominal annual payments over the next five years. The real rate of return on the loan is 3.9%, and the annual inflation rate is 2.1%. What will the payments be?
TeleMedia is a technology firm that reported an operating loss of $15 million in the most recent year (just ended), after R&D expenses of $100 million. If R&D has a 3--year life and the company’s R&D expenses in the last three years have been $30 mi..
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