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The accrual basis of accounting calls for expenses to be recorded in the period when they are incurred rather than when the cash is paid. The "Matching Principle" indicates that expenses be recorded in the period in which the related revenue is earned. This is why a hair salon owner records a debit to Pre-paid Rent (asset account) for $12,000 and a credit to Cash (another asset) when her landlord asks her to pre-pay an entire year's worth of rent at the beginning of the year. You learned in this chapter that the salon owner would then make an adjusting entry each month during the year to record a $1,000 credit to reduce Pre-paid Rent and a debit to Rent Expense. Describe what you think the impact or consequences might be on the Salon's monthly financial statements if the salon owner instead decided to record the entire $12,000 as Rent Expense in January in order to avoid having to make monthly adjusting entries. Would this pose any problems for the banker (at the bank where the salon borrows money) who reviews the salon's quarterly financial statements?
Jane Smith currently holds tax-exempt bonds of Good Samaritan Healthcare that pay 7 percent interest. She is in the 40 percent tax bracket. Her broker wants her to buy some Beverly Enterprises taxable bonds that will be issued next week. With all els..
A 20-year annuity pays $2,350 per month, and payments are made at the end of each month. If the interest rate is 13 percent compounded monthly for the first eight years, and 10 percent compounded monthly thereafter, what is the present value of the a..
You are planning your retirement in 10 years. You currently have $160,000 in a bond account and $600,000 in a stock account. You plan to add $8,000 per year at the end of each of the next 10 years to your bond account. How much can you withdraw each ..
With a positive amount invested in each stock, the more the stocks move together and the higher their covariance or correlation, the more volatile the portfolio will be. Stocks in the same industry tend to have more highly correlated returns than sto..
financial management 3 essay questions apa format250 words each question 2 cited sources each question.no
A bank offers two 30 year, fixed rate, fully amortizing LPMs: an 85% LTV loan at 6%, and an 80% LTV loan at 5.5%. What is the marginal cost of borrowing if the loan is going to be held for 10 years?
Complete the financial reporting for each period
Write a 500-1,000 word essay describing Net Present Value, and what Net Present Value means to your future.
You can assume the fund is fully invested by the beginning of year 6, and then realizes 20 percent of its investment capital in each of the following ?ve years. What are the lifetime fees and investment capital for this fund? (Make assumptions for..
What is the value of a bond that has a par value of $1,000, a coupon rate of 17.65 percent (paid annually), and that matures in 4 years? Assume a required rate of return on this bond is 14.40 percent.
The coupon rate on an issue of debt is 12%. The yield to maturity on this issue is 14%. The corporate tax rate is 31%. What would be the approximate after-tax cost of debt for a new issue of bonds? The coupon rate on a debt issue is 12%. If the yield..
a critical assessment of the capital asset pricing model capmyou are required todescribe the capital asset pricing
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