Answer:
a. fallacy that association is causation
Explanation:
Alicia is making an association between chocolate and acne but, there is no proof on Alicia statement There should be a positive correlation between the chocolate eaten by Alicia and the acne to stablish a cause-effect between each variable else, we are doing a simplistic analysis.
Eric Christie and Johnnie Pitt organize a partnership. Their partnership agreement states that Christie will receive two-thirds of the partnership income or loss and Pitt will receive the remaining one-third. On January 2, the two partners agree to accept Peter Morgan as a partner with a 10% interest if Morgan invests $50,000 cash. At the time of Morgan's admission, the partnership`s accounting records show that Christie has recorded equity of $210,000 and Pitt has recorded equity of $60,000. The bonus that will be allocated to Christie as a result of this transaction (rounded to the nearest dollar) is:_______
Final answer:
Eric Christie receives a bonus of $90,000 when Peter Morgan invests $50,000 for a 10% interest in the partnership based on the implied and book values of Christie's equity before and after the transaction.
Explanation:
The transaction of accepting Peter Morgan as a partner involves calculating the bonus allocation for the existing partners, Eric Christie and Johnnie Pitt. We begin by determining the total capital or equity before Morgan's investment, which is $210,000 for Christie and $60,000 for Pitt, resulting in a total of $270,000. When Morgan invests $50,000 for a 10% interest, it implies the total post-investment valuation of the partnership to be $500,000 ($50,000 is 10% of $500,000). Thus, the implied value of the existing partnership before the investment is $450,000 ($500,000 - Morgan's $50,000).
To determine the bonus to Christie, we calculate the difference between the implied value of his share before the investment and the book value of his equity. Before the investment, two-thirds of the implied $450,000 value is $300,000. Subtracting Christie's book equity of $210,000 from this amount gives us a bonus of $90,000. However, since Christie and Pitt must now share their combined bonus with Morgan (who doesn't get a bonus but instead pays for his share), Christie's bonus is his two-thirds share of the $90,000 (the combined bonus before deducting Morgan's investment).
The calculation of Christie's bonus is as follows:
Total equity before Morgan's investment: $210,000 (Christie) + $60,000 (Pitt) = $270,000Total post-investment valuation: $50,000 / 10% = $500,000Implied value of existing partnership: $500,000 - $50,000 = $450,000Christie's share of the implied value: 2/3 of $450,000 = $300,000Bonus to Christie: $300,000 (implied share) - $210,000 (book equity) = $90,000Therefore, the bonus allocated to Christie as a result of the transaction is $90,000.
Tobacco companies did not resist the advertising ban instituted in 1970 because they actually increased profits by not being allowed to advertise. This ban forced these companies to abandon their dominant strategy of advertising and wind up at a cooperative outcome of not advertising. Prior to the ban, the tobacco companies were involved in playing:_______.
a. a pure coordination game.
b. an assurance game.
c. a prisoner's dilemma game.
d. a battle of the sexes game.
Answer:C. A prisoner's dilemma game
Explanation: Tobacco is a product classified by moat countries of the world as Toxic and harmful to both the environment,person and people around where it is produced and the places where it is used.
A prisoner's dilemma game is a situation where two people or organizations chose not to corporate even if it is their best interest, this was the situation with the Tobacco companies prior to the ban on Advertisement placed in the year 1970.
The disappearance of the family farm can be partially attributed to the fact that the elasticity of demand for wheat is __________, while at the same time, the income elasticity for wheat is __________.
A profit-maximizing decision must be made about whether to keep a bed & breakfast operating. Until the place sells, the mortgage of $3000/month must be paid, since it is a sunk cost. If the restaurant operates, costs rise by $4000 per month, but revenue will be only $6000 per month. Until the building can be sold,
a.it is best to shut down the bed & breakfast since it is taking a loss.
b.it is best to ignore sunk costs and keep the bed & breakfast operating.
c.it is best to shut down the bed & breakfast even though it is making a profit
d.it is best to keep the bed & breakfast operating because it is profitable.
Answer:
b.it is best to ignore sunk costs and keep the bed & breakfast operating.
Explanation:
The owner of the store will face the mortgage cost wether the bed and breakfast is open or closed therefore it should be ignore in the short-term for the decision wether or not to keep the business open.
The business revenues are 6,000 while their cost 4,000 thie means there is a contribution of 2,000 then we subtract the mortage to get a loss 1,000
If closed the losses will increase to 3,000 asthe mortage expense would not disappear.
We should keep it open and look for ways to either sale or rent the space for a better gain than 2,000
Final answer:
In the short term, the bed & breakfast should keep operating since the revenue of $6000 per month covers the variable costs of $4000, contributing $2000 towards the fixed mortgage cost.
Explanation:
When considering whether to keep a bed & breakfast operating we must apply the shutdown rule. This rule advises that even if a business cannot cover all its fixed costs, it should continue to operate in the short term if it can cover its variable costs with the revenue generated. In this scenario, the bed & breakfast's variable costs rise by $4000 per month, but there is $6000 per month in revenue. While the mortgage is a sunk cost and remains unchanged whether the business operates or not, the revenue exceeds the variable costs by $2000, meaning that, in the short run, the bed & breakfast should continue operating as it contributes towards the fixed costs.
__________ consist of organization infrastructure (administration and management), human resources (employee recruiting, hiring, and training), technology (improving products and the production process), and procurement (purchasing input).
Answer:
Secondary Activities
Explanation:
Secondary activities inside an organization are those who support the primary activity. The primary activity consists in the production and distribution of goods and/or services to customers, while secondary activities are meant to improve aspects of the primary activity.
For example, the goal of human resources is to create good labor conditions so that employees are happier, and therefore, more productive. And the goal of the technology department is to engage in research to produce new goods or provide new services in the future.
A set of values, ideas, attitudes, and norms of behavior that is learned and shared among the members of an organization is referred to as itsa.core benefit proposition. b.corporate philosophy. c.organizational culture. d.core value proposition.
Answer: Corporate culture.
Explanation:
The Corporate culture of a company is the ideas, behavior and values that are shared among workers of that company and it is normally in line with the vision and mission statements of that company. The Corporate culture of an organization is what makes it stand out from other similar Organizations.
Which kind of norm is so deeply ingrained that the very thought of breaking it brings feelings of disgust or horror?
All else equal, when investors consider a firm's return on equity (ROE) they consider less risky a firm that earns proportionately more of that return from operating activities as opposed to nonoperating activities. Select one: True False
Answer:
True
Explanation:
Return from operating activities are returns made from the regular and recurring operations of a business. Since they are from the normal operations of a company, they are less risky than returns made from the non-operating activities of a company which do not re-occur.
As such, a firm that earns more of its return from operating activities which are recurring is usually considered less risky than a firm than earns more of its return from non-operating activities which are usually one-off.
_______ are special-purpose printers that use output from graphics tablets or other graphical input devices that are typically found in architectural and engineering environments.
Answer:
The correct word for the blank space is: Plotters.
Explanation:
Plotters are high precision printing and cutting devices. They are used to print plans and projects. They are considered external devices that allow drawing o scheme diagrams and graphs. There are monochromatic plotters and other versions of four, eight, and twelve colors.
The correct answer which can be used to complete the given sentence is:
Plotters
Based on the given question, we can see that we need to find the name of a special purpose printer which makes use of output from graphical input devices.
With this in mind, we can see that a plotter is the correct answer because they make use of high precision to print building plans and are considered as external devices because they are not like the conventional printers which makes use of papers.
Therefore, the correct answer is plotters
Read more about plotters here:
https://brainly.com/question/24760639
In the implementation phase of the marketing process, ethics can be introduced by _______. a. including ethical statements in the firm's mission and vision b. statements policing the violation of human rights and child labor laws c. encouraging employees to exhibit ethical behavior d. putting systems in place to check ethical issues and react to changes
Answer:
The correct answer is C
Explanation:
In the phase of the implementation or execution of the strategy of the marketing, when the business or firms are recognizing the potential markets and the methods to deliver the 4Ps and the firms also need to consider the issues of the ethical.
Under this phase, the ethics is defined as encouraging or inspire or uplift the employees in order to exhibit the ethical behavior.
Chaos State Bank has an old computer system which can go down for weeks at a time, leaving customers unable to access their accounts online. Many customers have left the bank for banks with more reliable computer systems. Which type of risk would this be an example of_____________A. Operational riskB. Legal riskC. Compliance riskD. Strategic riskE. Reputation risk
Answer: A. Operational risk
Explanation:
Operational risk is a possibility of loss that happens as a result of inefficient system or policies, it could also be a result of someone not following internal policies or due process. Operational risk can be as a result of factors such as natural disasters, unfavourable or weak financial policies, fraudulent acts, etc.
The distinction between substitutes and complements is A. substitute goods are used together while complementary goods are used for the same purposes. B. when income increases, demand for a complementary good decreases while demand for a substitute good increases. C. substitute goods are used for the same purposes while complementary goods are used together. D. when income increases, demand for a substitute good increases while demand for a complementary good falls.
Answer:
C. substitute goods are used for the same purposes while complementary goods are used together
Explanation:
Substitute goods are goods that can be used in place of another good because they serve the same purposes. For example, butter and margarine can be substitutes. If the price of butter increases, the demand for butter falls and consumers shift to consuming margarine.
Complementary goods are goods that are consumed together. For example, gasoline and car are complementary goods. If the price of car falls, the demand for gasoline rises.
I hope my answer helps you
Substitute goods can be used interchangeably to fulfill similar purposes, while complementary goods are typically consumed together to complement each other.
Substitutes and complements are terms used to describe the relationship between two goods in economics. Substitute goods are products that can be used in place of each other to satisfy a particular need or want.
For example, if the price of tea increases significantly, people might switch to coffee as a substitute to fulfill their desire for a hot beverage. On the other hand, complementary goods are items that are often consumed together because they enhance each other's utility.
Classic examples are peanut butter and jelly or computers and software - when the price of one increases, the demand for the other tends to decrease.
Hence the correct option is (c).
To know more about complements here
https://brainly.com/question/29697356
#SPJ6
JBC Customs only hires people who are curious and eager to learn as its managers believe that those are the two traits every employee needs to have if they want to contribute anything of value to the company. Every applicant is carefully screened, and only those applicants who have these two traits are chosen to proceed further in the hiring process. In this scenario, JBC Customs is using _____
A) concertive control
B) adaptive control
C) bureaucratic control
D) normative control
Answer: (D) Normative control
Explanation:
The normative control is refers to the process of governing the behavior and the values of the different types of standards and the norms. It basically handle all the financial, bureaucratic, financial and the quality related controls in an organization.
According to the given question, the normative control basically used by the JBC custom for the hiring process and the every applicant are carefully screen by an organization.
Therefore, Option (D) is correct answer.
A comparative financial statement:
a. Places the balance sheet, the income statement, and the statement of cash flows side-by-side in order to compare the results
b. Places two or more years of a financial statement side-by-side in order to compare results
c. Places the financial statements of two or more companies side-by-side in order to compare results
d. Places the dollar amounts next to the percentage amounts of a given year for the income statement
Answer:
The answer is B
Explanation:
A comparative financial statement compares places two or more years financial statement together in order to compare.
It is always referred to as horizontal analysis because it is the same company and we are only comparing the previous years and the current year result which are placed side by side. Hence, the reason why it is called horizontal analysis.
Ruth keeps account of her family's expenses. She keeps track of the entire family's needs and discusses with other family members about what products need to be bought. She realizes that the family requires a bigger refrigerator and discusses this with her parents. She collects information about refrigerators from various brands so that her parents can make an informed decision. In the given scenario, Ruth plays the role of the ________ in the household purchase process.a. innovator
b. influencer
c. gatekeeper
d. purchaser
The correct answer is B. Influencer
Explanation:
In the purchasing process, an influencer refers to an individual who influences or affects the purchasing process; this includes the type of products other people buy, the reasons to buy them, and the frequency these are bought. Due to this, influencers can make other people pay for certain services or products or abstain from doing this.
In the case presented, Ruth acts as an influencer because through her actions she convinces her family they need to buy a refrigerator, which means she affects the purchasing process. Also, as an influencer, she is the one that chooses the type of product and she informs the buyers (her parents) about the reasons for buying this.
Changes in tariffs and quotas are A) a means of slowing outsourcing. B) corporate strategies designed to maximize profits. C) business actions stimulating imports. D) efforts to stimulate choices among government agencies. E) government actions that reduce competition from international firms.
Answer:
E) government actions that reduce competition from international firms.
Explanation:
Quotas place a limit on the amount of goods that can be imported.
A tariff is a tax levied on imported goods.
Tariffs and quotas are imposed by the government and they limit the amount of import flowing into a country. This reduces the amount of competition from international firms.
I hope my answer helps you
Changes in tariffs and quotas are a form of protectionism, a policy adopted by governments to shield domestic producers and workers from foreign competition by making imported goods more expensive.
Explanation:Changes in tariffs and quotas are primarily means implemented by a government to reduce competition from international firms, making the correct answer E) government actions that reduce competition from international firms.
This is part of a concept known as protectionism. Governments engage in protectionism to safeguard their domestic producers and workers from foreign competition.
The key tools in protectionism are tariffs, import quotas, and non-tariff barriers. For example, a government may place tariffs on goods imported from abroad to make them more expensive and thereby encourage consumers to buy domestic products instead.
Learn more about Protectionism here:https://brainly.com/question/29889337
#SPJ6
Tina and James have made an offer on a four-bedroom home that will be much more costly than their present mortgage. The day after making the offer, James learns his company is being sold and he will probably lose his job. Are Tina and James contractually obligated to the offer they have made on the new home?
A. Yes, an offer is put onto a purchase contract form and is legally binding.
B. No, an offer is just an offer until it is accepted by the seller. Once the owner has accepted the offer, the offeror is legally bound to the contract.
C. It depends. If Tina and James have not received notification of the seller's accepting the offer, they may legally withdraw the offer and not be held liable on the contract. However, if the offer has been accepted, and communication of this offer has been received by the buyer, it is legally binding.
D. None of the Above
Answer:
C. It depends. If Tina and James have not received notification of the seller's accepting the offer, they may legally withdraw the offer and not be held liable on the contract. However, if the offer has been accepted, and communication of this offer has been received by the buyer, it is legally binding.
Explanation:
This requirement is made as a form of protection between the sellers and the buyers. After all the parties involved signed the contract, both parties now held accountable to fulfill their part in the contract. No matter what situation occurs in each party, both of them are obligated to fulfill their contract.
In this case, Tina and James are required to pay the agreed upon numbers to the owner of the property. The owner now prohibited to sell the property to other people beside Tina and James.
The only way out for Tina and James in this situation is to convince the seller to nullify the contract by explaining their situation.
In order to generate quick revenue, Helium Corp., an electronics manufacturing firm makes a technical improvement to one of its competitor's ERP offerings. This is an example of _____.
1. leveraged creativity
2. state-of-the-art breakthrough
3. applications engineering
4. product adaptation
Answer:
This is an example of:
4. product adaptation
Explanation:
Product adaptation is the process by which the management of a company changes product features to meet the needs of specific consumers. It can involve the improvement of a key feature that meets customer demand. This improves a company's competitive advantage over it's rivals. There are various reason as to why a product might need to be improved, namely;
1. To meet the regulatory standards in that particular area. Maybe the specification standards has changed, so the company also adjusts it's products to fit into the threshold of the required standards.
2. To make the product more attractive to a particular audience.
In general, product adaptation is meant to increase the market share especially in a business environment that is always changing with respect to customer needs and business regulations. An increased market share for the improved products usually translates to increased profit margins. Big profit margins is usually considered as a sign of success by most commercial businesses.
An economist at the University of Alaska at Anchorage has been asked to explain why the price of Alaskan crude oil has fallen recently. In order to develop a model, the professor should take which steps?a. Identify the problem, develop a model based on simplifying assumptions and test the model to formulate a conclusion.
b. Gather data on crude oil prices and seemingly unrelated variables to look for associations, then formulate a hypothesis based on those unexpected associations.
c. Ask people in Alaska why they are not purchasing oil.
d. None of these. The oil industry is controlled by a cartel; therefore price changes in the industry cannot be explained using economic theories.
Answer:
The answer is: A. Identify the problem, develop a model based on simplifying assumptions and test the model to formulate a conclusion
Explanation:
I got you bruhtha, have a wonderful day, Y.O.L.O
On January 2, 20X2, Piranha Company acquired 70 percent of Salmon Corporation's common stock for $420,000 cash. At the acquisition date, the book values and fair values of Salmon' assets and liabilities were equal, and the fair value of the noncontrolling interest was equal to 30 percent of the total book value of Salmon. The stockholders' equity accounts of the two companies at the acquisition date are as follows:
Piranh Salmon
Common Stock ($10 par value) $600,000 $350,000
Additional Paid-In Capital 450,000 50,000
Retained Earnings 250,000 200,000
Total Stockholders’ Equity $1,300,000 $600,000
Noncontrolling interest was assigned income of $15,000 in Piranh consolidated income statement for 20X2.
Based on the preceding information, what amount will be assigned to noncontrolling interest on January 2, 20X2, in the consolidated balance sheet?
Answer:
Non Controlling interest (NCI) = 180000
Explanation:
Fair value of assets = Book Values
Total Equity of Salmon on 2 January 2002 = 600000
Share of Net assets NCI 30% = 600000*30% = 180000
There is no change at acquisition so 30% will be applied on book value which is equal to Fair Value.
15,000 income relates to the post acquisition share of profit of NCI.
Final answer:
The noncontrolling interest on the consolidated balance sheet as of January 2, 20X2, will be assigned an amount of $180,000, calculated as 30 percent of Salmon Corporation's total stockholders' equity, which is $600,000.
Explanation:
The given question requires us to determine the amount that will be assigned to the noncontrolling interest on the consolidated balance sheet on January 2, 20X2, after Piranha Company acquired 70 percent of Salmon Corporation. To find this, we need to know the fair value of the noncontrolling interest, which is equal to 30 percent of Salmon Corporation's total book value. From the data provided, the total stockholders' equity for Salmon is $600,000, which means the noncontrolling interest would have a book value of 30 percent of this amount.
Calculation:
Total stockholders' equity of Salmon Corporation: $600,000Percentage for noncontrolling interest: 30%Amount assigned to noncontrolling interest: $600,000 * 30% = $180,000Thus, the amount assigned to noncontrolling interest on the consolidated balance sheet will be $180,000.
Which interest group is thought to run the most effective grass-roots lobbying campaigns?
a. National Education Association (NEA)
b. American Association of Retired Persons (AARP)
c. American Medical Association (AMA)
d. American Civil Liberties Union (ACLU)
Answer:
b. American Association of Retired Persons (AARP)
Explanation:
American Association of Retired Persons (AARP) is the interest group is thought to run the most effective grass-roots lobbying campaigns.
American Association of Retired Persons is a US based interest group who empower people in US to choose, how they live as they age. AARP dependent on ambitious, healthy and skilled workforce. AARP create an environment that encourage and enable the workface to achieve high.
Answer:
b. American Association of Retired Persons (AARP)
Explanation:
Which of the following are steps in the warehouse management process?a. Create goods receiptb. Confirm transfer orderc. Create stock transfer orderd. Create transfer requiremente. Post goods issue
Answer:
Create transfer order
Confirm transfer order
Explanation:
A warehouse management system (WMS) refers to the software and procedures allowing companies to track and oversee warehouse activities from the moment that goods or products reach a warehouse before they pass out. Warehouse activities involve stock management and process picking and auditing.
In developing the transfer order stage, process must decide all the containers in the storage that are impacted by the transfer of the products (source storage bin, destination storage bin, and possibly also the return storage bin) and adjust the processing bin data directly.
Within this step, the supervisor confirms a transition order or transfer order product and verify that the quantity of material required has actually been moved from one area to the next, and that the processing of the transfer order or item has also been finished.
The listed steps are part of the warehouse management process that ensures inventory accuracy and efficient flow of goods in a warehouse as part of the larger supply chain sequence from production to distribution.
The steps in the warehouse management process that you've listed are integral to ensuring a seamless flow in the supply chain. These steps fit into larger stages, which include the typical supply chain processes, such as:
Extraction of raw materialsAcquisition of componentsProductionInventoryTransportationWorking with wholesalersDistribution to retailersIn the context of a warehouse management system (WMS), the steps you have listed play specific roles:
Create goods receipt - This is the step where the warehouse takes account of the received goods and updates its inventory.Confirm transfer order - Here, a warehouse worker completes the task of moving goods within the warehouse as directed by the system.Create stock transfer order - This step involves creating an order for moving stock from one location to another internally.Create transfer requirement - This initiates the process of moving goods, usually based on a sales order or production requirements.Post goods issue - This is final step where the goods leave the warehouse, updating the inventory to reflect the goods that have been dispatched or sold.Each of these steps helps in developing the product, developing the process, and developing the controls that will ultimately be transferred to Operations as part of the overall warehouse management strategy.
Which of the following is not one of the different classes of stocks A. Growth stock B. Preferred Stock C. Common stock CSR
Answer:
A. Growth Stock
Explanation:
Stocks are divided into classes based upon their features with respect to the rights they carry. Usually stocks are of two classes:
Common StockPreferred StockWhile the former carry voting rights and avail dividends as per the profitability of the company, the latter carry preferential rights with respect to principal repayment in the event of winding up apart from carrying a fixed rate of dividend which must be paid periodically.
Growth Stocks refer to those stocks which yield higher rate of growth than average market rate but don't usually carry a right to dividend. Growth stocks relate to capital appreciation.
A large film production company merges with a popular sound processing studio, resulting in the formation of a new company out of the two previously independent firms. This is most likely an example of a _____.
A. market extension merger
B. conglomerate merger
C. vertical merger
D. horizontal merger
Answer:
c. vertical merger
Explanation:
Answer:
The correct answer is letter "C": vertical merger.
Explanation:
A vertical merger happens when operations combine between two companies producing goods or services for the same finished products. Generally, the two combined companies work at different levels in the supply chain of a single industry, and they are expected to act more effectively as one.
Activity sequencing involves reviewing the activity list and attributes, project scope statement, and milestone list to determine the relationships or dependencies between activities.a. Trueb. False
Answer:
The correct answer is letter "A": True.
Explanation:
Activity sequencing is the set of steps organizations follow to accomplish certain tasks or even to reach greater goals at the corporate level. The activity implies finishing with a stage and jumping into the next one immediately after that according to a line-up strategically outlined.
Which of the following does not describe a trial balance? a. Proves that all transactions have been recorded b. Proves the mathematical equality of debits and credits after posting c. Assists in the preparation of the financial statements d. May uncover errors in journalizing and posting
Answer:
Statement which doesn't describe a trail balance is: Option A: Proves that all transactions have been recorded.
Explanation:
A Trial balance lists the accounts and their balances. It is like an internal control made by the accountants to check general ledger's accuracy. It extracts the list of debit and credit balance from the ledger and adds them. They should be equal else some error has been made. These errors might be human. It doesn't prove that company has recorded all its transactions.
So, all statements are correct describing trial balance except Option A.
When an organization has a strong talent pool available from which it can draw employees, the organization is positively influenced by the ______ in the external environment on the organization.
Answer: Labor force
Explanation: Labor force refers to the section of individuals within an environment who are employed and those who are seeking to get a job within an organization. The term labor force also called work force could refer to workers within a particular organization or those within a certain geographic location. An environment with a pool of talented labor force will no doubt have a highly positive on the organizations within that environment because these organizations will be able to recruit or hire brilliant minds which is a characteristic of the labor force in the environment.
Robert Brown is interested in attending a concert next weekend. Unfortunately, he is scheduled to work. If he finds a substitute for his shift so he can attend the concert, what kind of cost is he incurring?
Answer:
Opportunity cost relating to time
Explanation:
Opportunity cost refers to the benefits foregone of a non chosen option when a choice is made and an option is chosen.
The concept of opportunity cost relates to the sacrifice made of one option to pursue another option since both cannot be chosen at a time.
In the given case, Mr Brown is desirous of attending a musical concert but is scheduled to work for the same time and duration as the concert. So he can either work or go for the concert. Attending the concert would mean loss of income for hours worked instead.
A financing project is acceptable if its IRR is:
A. exactly equal to its net present value (NPV).
B. exactly equal to zero.
C. greater than the discount rate.
D. less than the discount rate.
E. negative.
A financing project is considered acceptable if its Internal Rate of Return (IRR) is greater than the discount rate, ensuring that the investment yields a return over the minimum required rate, thus indicating potential profitability.
Explanation:When assessing a financing project, one of the key factors considered is the Internal Rate of Return (IRR). The IRR is compared against the project's discount rate, which represents the opportunity cost of capital or the required rate of return. A project is considered acceptable if its IRR is greater than the discount rate. The IRR exceeds the discount rate means the project's return surpasses the minimum threshold required by investors or the company itself, indicating that it is expected to generate value.
The correct answer to the question is C: A financing project is acceptable if its IRR is greater than the discount rate. This criterion ensures that the investment's returns compensate for both the time value of money and the risk associated with the project. Choosing projects with an IRR above the discount rate can lead to increased profitability and a positive net present value (NPV).
Remember that IRR, NPV, and the discount rate are interrelated concepts in the field of finance, used to make informed investment decisions and evaluate potential projects' profitability.
Elba Company leased machinery to Conecuh Company on January 1, 2017, for a ten-year period expiring December 31, 2026. Equal annual payments under the lease are $300,000 and are due on January 1 of each year. The first payment was made on January 1, 2017. The rate of interest used by Elba and Conecuh is 9%. The cash selling price of the machinery is $2,100,000 and the cost of the machinery on Elba's accounting records was $1,860,000. Assuming that the lease is appropriately recorded as a sale for accounting purposes by Elba, what amount of interest revenue would Elba record for the year ended December 31, 2017?A. $0
B. $162,000
C. $189,000
D. $81,000
Answer:
The interest charged for the year will be the amount that Conecuh has to pay at the start of the year. In this case the amount that Conecuh has to pay at the start of the year (January 1, 2017) is the amount left after his equal annual payment. The price at which Conecuh purchased is $2,100,000 of which $300,000 was paid at the start of the year. So the residue amount is:
Liability = $2,100,000 - $300,000 = $1,800,000
So the interest charge which is 9% is= $1,800,000 * 9% = $162,000
Option B is the correct answer.