Answer:
The correct answer is letter "D": extended the time for the federal copyright protection to 70 years beyond the life of the creator/author.
Explanation:
The Sonny Bono Copyright Extension Act mostly known as the Copyright Term Extension Act (CTEA) is a regulation passed in 1998 to extend the length of copyrights. It is an amendment to the Copyright Act of 1976 where copyrights granted exclusiveness over inventions for 50 years after the decease of the author if individual or 75 years for corporate creations.
With the CTEA copyrights are granted to be used by individual creators only for until 70 years after their decease or 120 years for corporate authorship.
3) What are the main factors behind economic growth? Write a short essay. Be expansive. Take a broad view of this question. What institutional factors are important? What cultural factors are important? But be sure to include the traditional economic factors. What factors are most important?
Explanation:
It is a level of goods and services provided by the country in a specific periodCertain factors associated with the economic growth are1. Natural resources: Every country must protect their land forms so that the natural resources like oil or mineral can be obtained adequately and thus it can boost the economy of the country
2. Infrastructure: Creating an successful infrastructure make goods and services faster and thus increasing the economic growth.
3. Higher population: There are both advantages and disadvantages. We have high man power and on the other side there might be huge unemployment too.
Culture is closely associated with the branch of economy because it can turn the country upside down. Because, it is the culture which decides the like and unlike of a particular product.
Final answer:
The main factors behind economic growth include physical capital, human capital, technology, institutional factors, and cultural factors. These factors contribute to increasing production and income over time. While their importance may vary, investment in physical and human capital, technological advancements, and favorable institutional and cultural factors all play key roles in driving economic growth.
Explanation:
Economic Growth: Factors and Impacts
Economic growth refers to the increase in a country's production and income over time. There are several main factors that contribute to economic growth:
Physical capital: This refers to the stock of machinery, equipment, and infrastructure that is used in production. Developing countries often need to invest in physical capital to boost economic growth.Human capital: This includes the knowledge, skills, and health of the workforce. Education and training programs are important for building human capital and increasing productivity.Technology: Technological advancements drive economic growth by increasing efficiency and productivity. Innovation and research and development (R&D) are crucial in this regard.Institutional factors: Institutions such as the rule of law, property rights, and a stable political environment are important for fostering economic growth. They provide a framework for economic transactions and investment.Cultural factors: Cultural values and attitudes can also impact economic growth. For example, a culture that values entrepreneurship and innovation may be more conducive to economic growth.While all these factors are important, their relative importance may vary from country to country. For example, a country with abundant natural resources may prioritize physical capital investment, while a country with a highly educated workforce may focus more on technology and innovation.
a car's price is currently $20,000 and is expected to rise by 4% a year. if the interest rate is 6%, how much do you need to put aside today to buy the car one year from now?a. $18,182
b. $19,231
c. $19,263d. $14,085
Answer:
$19,591.63Explanation:
1. Calculate the price of the car in a year from now.
This is add the 4% on the current price:
$20,000 × 1.04 = $20,8002. Calculate the amount of money that must be put aside to have $20,800 in a year:
Use the formula of monthly compound interest, with 6% annual interest
r = 6% / 12 = 0.06/12 = 0.05P(1 + 0.005)¹² = $20,800P = $20,800 / (1 + 0.005)¹² = $19,591.63Debra King wants to invest in four-year bonds that are currently priced at $898.49. These bonds have a coupon rate of 6.0 percent and make semiannual coupon payments. What is the current market yield on this bond?
Answer:
9.08%
Explanation:
We use the RATE formula that is shown in the attachment below
Given that,
Present value = $898,.49
Assuming figure - Future value or Face value = $1,000
PMT = 1,000 × 6% ÷ 2 = $30
NPER = 4 years × 2 = 8 years
The formula is shown below:
= Rate(NPER;PMT;-PV;FV;type)
The present value come in negative
Therefore,
After solving this, the yield to maturity is 9.08%
Kebt Corporation's Class Semi bonds have a 12-year maturity and an 8.75% coupon paid semiannually (4.375% each 6 months), and those bonds sell at their $1,000 par value. The firm's Class Ann bonds have the same risk, maturity, nominal interest rate, and par value, but these bonds pay interest annually. Neither bond is callable. At what price should the annual payment bond sell? $937.56 $961.60 $986.25 $1,010.91 $1,036.18
Answer:
Total $986.2534
Explanation:
We have to discount the annual bond against the same rate but compounding semiannualy
[tex](1+ 0.0875/2)^2 -1 = r_e\\1.0894140625 - 1 = r_e\\0.0894140625 = r_e[/tex]
Now we discount the 12 coupon payment and the maturity at the given discount rate
[tex]C \times \frac{1-(1+r)^{-time} }{rate} = PV\\[/tex]
C 87.500 (1,000 x 0.0875)
time 12
rate 0.0894140625
[tex]87.5 \times \frac{1-(1+0.0894140625)^{-12} }{0.0894140625} = PV\\[/tex]
PV $628.4172
[tex]\frac{Maturity}{(1 + rate)^{time} } = PV[/tex]
Maturity 1,000.00
time 12.00
rate 0.0894140625
[tex]\frac{1000}{(1 + 0.0894140625)^{12} } = PV[/tex]
PV 357.84
PV c $628.4172
PV m $357.8362
Total $986.2534
When calculating the maximum home price using either the front ratio or the back ratio, one result is the maximum monthly payment the household can sustain. This amount covers:_____
a. Principal, interest, and escrow for taxes and insurance
b. The annual mortgage payment
c.The before-tax cash flow
d. The break-even occupancy level
e. The debt service coverage ratio
Answer:A. Principal, interest, and escrow for taxes and insurance
Explanation: Front-end ratio is a percentage of your total annual gross income which can be dedicated to the payment of your home loan monthly.
Back-end ratio is a term used to describe the total percentage of your annual gross income which you can put into the servising of your debts.
The maximum monthly payment which a household can sustain covers the PRINCIPAL, INTEREST, AND ESCROW FOR TAXES AND INSURANCE When calculating the maximum home price using either the front ratio or the back ratio.
When par value capital stock is issued, capital stock is credited with the par value of the shares issued, regardless of whether the issuance price is equal to par, more than par, or less than par.a. Trueb. False
Answer:
False
Explanation:The Par value of a stock is has a different value when compared with its market value. Well established companies usually have have a higher market value when compared to its par value. The par value of a stock can be represented in three different ways
1) When the par value of a stock is equal with the market value.
2) When the par value of a stock is lower than the market value.
3) When the par value of a stock is Higher than the market value.
WHEN THE PAR VALUE OF A CAPITAL STOCK IS EQUAL TO THE CAPITAL STOCK IS ISSUED WITH THE PAR VALUE ONLY WHEN THE PAR VALUE IS EQUAL TO THE MARKET VALUE.
Jenny was feeling frustrated. "What's taking them so long to make a decision? It's been weeks since I first met with them, and they all seem interested in the product. I've also jumped through all their paperwork hoops." Jenny is likely selling to a firm in which kind of buying situation?
Answer: A. New buy
Explanation:
The situation described is most likely a NEW BUY situation because it bares some characteristics of same. In a new buy, customers generally take their time to make a decision and put the seller through a lot of paperwork in the case of corporate entities in a bid to assess the risk or cost of the new product. It is also necessary to do so as they have no previous experience with the seller and so trust cannot play a center stage.
Jenny also implied that it was the first time she had met them and it was also the first time they had been introduced to the product so there is that.
If you have any need for clarification do react or comment.
Group of answer choices:
A) New buy
B) Modified rebuy
C) Straight rebuy
D) Generic buy
E) Adapted buy
Answer:
The correct answer is letter "A": New buy .
Explanation:
In the corporate world, the new buy refers to the process in which a firm engages in the purchase of a new product or service. The company needs time to research different options attempting to select the most suitable. From the seller side, they must provide as many details of their goods as possible to attract new consumers. Persuasion is a key factor to close the deal.
After the decision is taken, some organizations may still be looking for options in case the product bought does not meet their standards.
Releasing more information, in a common-value auction is a. Good for the bidders because it reduces the risk that they face b. Good for the auctioneer because it attracts more bidders c. Good for the bidders because they are less likely to bid more on the item than it’s worth d. Both A&B
Answer:
d. Both A&B
Explanation: Auction is a term used in the field of marketing or trading of goods where bidders are allowed to make bids(amount which they intend to pay for a given product) the Product can either be an Artwork or other goods like furniture,Cars, clothes etc.
A common value auction is a type of auction where certain information about the value of a product are available to some bidders and other sets of bidders have other information about the value.
DISPLAYING INFORMATION ABOUT A COMMON VALUE AUCTION IS GOOD FOR THE BIDDERS AS IT REDUCES THE RISK THEY FACE ESPECIALLY BEFORE BUYING THE PRODUCT AND FOR THE AUCTIONEER AS IT HELPS TO ATTRACT MORE BIDDERS.
The main difference between CPM and PERT is Group of answer choices
CPM and PERT use different activity time estimates.
PERT analysis is less expensive to conduct.
PERT lends itself to computerization while CPM networks must be constructed manually.
CPM integrates time and cost performance while PERT is based solely on time performance.
Answer: CPM and PERT use different activity time estimates.
Explanation:
Program (Project) Management and Review Technique (PERT) is appropriate when the project time needed to complete different activities are unknown while the Critical Path Method or CPM is fitted for recurring projects in nature. PERT deals with activities that are not predictable but CPM deals with repetitive activities. PERT focuses/concentrates on time while CPM focuses on time-cost & trade-off. Also, PERT requires three-time estimate while CPM requires one-time estimate. PERT uses a probabilistic model and on the other hand, CPM uses a deterministic model. In PERT, a technique of planning and controlling time is used but CPM uses a technique to control cost and time.
Answer:
The correct answer is letter "D": CPM integrates time and cost performance while PERT is based solely on time performance.
Explanation:
The Project Management and Review Technique also called PERT is used to plan and control the time of uncertain activities during the development of a project. The PERT is an event-oriented technique. The Critical Path Method or CPM is a statistical technique used to control the cost and time of well-defined activities of a project. The CPM is activity-oriented.
Parent Corporation sells land (a capital asset) to Subsidiary Corporation in an intercompany transaction, realizing a $25,000 gain. Subsidiary uses the land for five years in its trade or business before selling the land to a nonmember of the group in a cash sale in which a $50,000 gain is realized. Which statement is correct?a. A $25,000 capital gain is included in consolidated taxable income when Parent sells the land to Subsidiary Corporation. A $50,000 Sec. 1231 gain is included in consolidated taxable income when Subsidiary sells the land.b. A $25,000 capital gain and a $50,000 Sec. 1231 gain are included in consolidated taxable income when Subsidiary sells the land.c. A $75,000 Sec. 1231 gain ($25,000 from Parent and $50,000 from Subsidiary) is included in consolidated taxable income in the year Subsidiary sells the land (assuming no recapture of previously deducted Sec. 1231 losses must occur).d. None of the above are correct.
The correct statement is that a $75,000 Sec. 1231 gain ($25,000 from Parent and $50,000 from Subsidiary) is included in consolidated taxable income when the Subsidiary sells the land, assuming there is no recapture of previously deducted Sec. 1231 losses.
When the Parent Corporation sells land to the Subsidiary Corporation, realizing a $25,000 gain, this gain is typically deferred for tax purposes in a consolidated return because it is an intercompany transaction. Therefore, answer a, which suggests a $25,000 capital gain is included in consolidated taxable income when Parent sells the land to Subsidiary, is incorrect since this gain is not immediately recognized.
When the Subsidiary Corporation later sells the land to a nonmember, the entire gain realized, including the previously deferred gain from the intercompany sale plus any additional gain recognized by the Subsidiary, is recognized. Therefore, the correct statement is c, which states that a $75,000 Sec. 1231 gain ($25,000 from Parent and $50,000 from Subsidiary) is included in consolidated taxable income in the year Subsidiary sells the land, assuming no recapture of previously deducted Sec. 1231 losses must occur. This includes the deferred gain and the additional gain on the final sale.
If Zenyatta Inc. has the following anticipated dividends: in year 1 of $4.00, in year 2 of $3.50, after that dividends are expected to grow at a 1.4% rate. What is a fair price if the required return is 5%
Answer:
The fair price per share today is $96.40
Explanation:
The fair price per share can be calculated using the DDM approach whereby the expected future dividends are discounted back to calculate the fair value of the share today.
The fair price per share will be,
P0 or V = 4 / (1+0.05) + 3.5 / (1+0.05)² + [(3.5 * (1+0.014)) / 0.05 - 0.014] / (1+0.05)²
Fair price per share = $96.40
Answer:
$96.403(Approx)
Explanation:
Using The dividend discount model (DDM) which is a method or technique that is used in the valuation of a company's stock price based on the premise that the company’s stock is worth of all of its potential dividend payments, discounted back to their current value.
Value after year 2=(D2*Growth rate)/(Required return-Growth rate)
=(3.5*1.014)/(0.05-0.014)
=98.583
Hence fair price=Future dividend and valu x Present value of discounting factor(rate%,time period)
=4/1.05+3.5/1.05^2+98.583/1.05^2
=$96.403(Approx)
A study finds that the noise from airplanes is harmful; hence, the government imposes a $25 tax on the sale of every airplane. This amount accurately accounts for the external cost of the noise pollution. Before the corrective tax, airplane tickets regularly sold for $190. After the tax is in place, the market price for airplane tickets rises to $195. Because of the tax, the number of airplane tickets sold will decrease . The socially optimal price of airplane tickets is $ . The private market price is $ . A firm selling airplane tickets receives $ after it pays the tax.
Answer:
Negative externality is the point at which the onlooker bears the expense of any action. To disguise this externality, government forces charge equivalent to the outside expense.
In negative externality showcase delivers more amount than socially ideal amount. At the point when government forces charge, it decreases the market amount and brings it equivalent to ideal amount.
As of tax, the number of tickets selling is reduce. Socially the optimal price for ticket is $205. The private market price is $190. After tax, the firm will get $205 - $25 = $180The firm will choose to abate the first 30 pounds of particulates it emits because the abatement costs are less than the pollution tax. If Congress imposes a carbon emissions tax, there's a conflict between the benefits to the townspeople and the costs to the factories, making it difficult to achieve the optimal outcome due to misaligned incentives.
Explanation:When a government imposes a corrective tax on goods or services that cause external costs, such as pollution, firms are presented with a choice. They can either continue their activities as before and pay the tax, which is intended to internalize the external cost, or they can take measures to reduce the externality and pay for the cost of abatement.
In the scenario where a firm faces a pollution tax of $1,000 for every 10 pounds of particulates emitted, the firm must compare the cost of abatement with the cost of paying the tax. Given that the first 10 pounds of abatement costs $300, the second 10 pounds costs $500, and the third 10 pounds costs $900, which are all less than the $1,000 tax, the firm will choose to abate the first 30 pounds of particulates. For the fourth 10 pounds, which would cost $1,500 to abate, the firm will choose to pay the tax, as it is cheaper than the cost of abatement.
Taking into account the benefits to the community and the costs to the factories, if Congress proposes a tax on carbon emissions, the townspeople might collectively benefit by a dollar amount equivalent to $300 each. However, the factories will see reduced profits by $1 million each, prompting a consideration of how much each side might be willing to spend to either support or oppose the tax. This scenario illustrates the challenges in reaching a societally optimal outcome, as the interests of different stakeholders must be balanced, and frequently, individual incentives can misalign with the societal good.
Jonathan is considering opening a shop for online baseball memorabilia. He has two options. He can build the web site himself and only pay for hosting. This would cost him $2,000/year. The average item for sale is $4. Average costs associated with each sale are $3. His second option is to use an existing e-commerce service. This incurs an additional monthly cost of $15/month. The site takes a cut of his sales, so he is planning on increasing his prices by $0.5/item. The remaining costs stay the same.
a. What is the annual fixed cost for the e-commerce site option?
b. What is the unit price for the e-commerce option?
C. What is the variable cost for the self-developed site option?
d. If Jonathan sells 200 items, which option does he prefer?
e. If Jonathan sells 700 items, which option does he prefer?
Answer:
The annual fixed cost of e-commerce option is $2180 as shown above
The unit price for the unit price for the e-commerce option is $4.5($4 original price plus the extra $0.50 as a result of cut taken by the site owner)
The variable cost for the self-developed site is $3
If sells 200 items he would prefer self-developed option with a lower amount of loss $1800
If sell 700 items he would prefer e-commerce option with amount of $1130 as losses
Explanation:
Options Self-Built site E-commerce
Fixed cost $2000 $2180 ($2000+15*12)
Variable cost $3 $3
Revenue $4 $4.5 ($4+$0.5)
The profit under each option when 200 items are sold are :
Self-developed option:
revenue=$4*200=$800
total cost =$2000+($3*200)
total cost =$2600
Profit/(loss) =$800-$2600
loss=-$1800
e-commerce
revenue=$4.5*200=$900
total cost=$2180+($3*200)
total cost =$2780
profit/(loss)=$900-$2780
loss=-$1880
when 700 items were sold:
self-developed option;
revenue=$4*700=$2800
total cost=$2000+($3*700)
total cost=$4100
profit/(loss)=$2880-$4100
loss=-$1220
e-commerce option
revenue =$4.5*700
revenue=$3150
total cost=$2180+(700*$3)
total cost=$4280
loss=$3150-$4280
loss=-$1130
The annual fixed cost for the e-commerce site option is $180. The unit price for the e-commerce option would be $4.5. If Jonathan sells 200 items, the self-developed site option would be preferred, while if he sells 700 items, the e-commerce option would be preferred.
Explanation:a. The annual fixed cost for the e-commerce site option is $180 (15*12 months).
b. The unit price for the e-commerce option would be $4.5 ($4 + $0.5).
c. The variable cost for the self-developed site option is $3 per item sold.
d. If Jonathan sells 200 items, the self-developed site option would be preferred as the cost would be $600 for the e-commerce site and $600 for the self-developed site.
e. If Jonathan sells 700 items, the e-commerce option would be preferred as the cost would be $1,260 for the e-commerce site and $2,100 for the self-developed site.
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Mayor Magnus wants to recruit a Harvard economist, Milton, to be the Chief Developer for the Small Town's economic development division. The legal cap on the job of Chief Developer is $60,000. Mayor Magnus offers Milton $100,000. The contract is:
A. unconscionable based on unequal bargaining power.
B.injurious to public service.
C. exculpatory.
D. enforceable.
Answer:
The correct answer is letter "B": injurious to public service.
Explanation:
Contracts that are injurious to public service are those where public deputies deviate from their duties going out of the law. In most cases, the deviation implies using public resources incorrectly to benefit a third party or the representative in charge of allocating those resources efficiently. The contract is injurious to public service because it decreases the benefits the population should receive according to what central authorities have provided.
A biotech company has an effective income tax rate of 40%. Recaptured depreciation is also taxed at the rate of 40%. The company must choose one of the following mutually exclusive cryogenic freezers for its tissue samples. The after-tax MARR is 12% per year. Which freezer should be selected based on after-tax present worth?
Answer:
Freezer 2 is the better option because it has higher present worth.
Explanation:
Final answer:
This engineering question deals with the selection of a cryogenic freezer by analyzing after-tax present worth, demonstrating the significance of tax rates, recaptured depreciation, and after-tax MARR in such decisions. It encompasses evaluating investment returns at different costs, the impact of tax credits, and considerations for maximum investment based on borrowing costs.
Explanation:
The question relates to the decision of selecting a cryogenic freezer for a biotech company, considering after-tax present worth (ATPW), which involves applying principles of engineering economics. It underscores the importance of understanding the effective income tax rate, recaptured depreciation, and after-tax minimum acceptable rate of return (MARR) in evaluating investment options. The hypothetical scenarios provided include calculating rates of return on investments at different costs, the impact of an investment tax credit, and determining the maximum investment based on borrowing costs. This forms a basis for applying tax effects and financing costs to investment decisions in engineering economic analysis.
Key Concepts
Effective income tax rate and its influence on net taxable income.
The role of recaptured depreciation in investment decisions.
Calculating after-tax present worth for comparing investment options.
The effect of investment tax credits on the attractiveness of an investment.
Linking borrowing costs to the maximum payable for an investment without the benefit of tax credits.
A company is evaluating a new 4-year project.
The equipment necessary for the project will cost $3,800,000 and can be sold for $745,000 at the end of the project. The asset is in the 5-year MACRS class. The depreciation percentage each year is 20.00 percent, 32.00 percent, 19.20 percent, 11.52 percent, and 11.52 percent, respectively. The company's tax rate is 34 percent.
What is the aftertax salvage value of the equipment?
Answer:
$ 714.957,6
Explanation:
We should solve for the book value afer four years:
3,800,000 x (0.2 + 0.32 + 19.2 + 11.52) =
3,800,000 x 0,8272 = 3.143.360
book value: 3,800,000 - 3,143,360 = 656.640
Now, we compare it against our expected sales value
745,000 - 656,640 = 88,360
This gain will be taxes at 34%
88,360 x 34% = 30.042,4
Now, the after tax salvage value will be :
745,000 - 30,042.4 = 714.957,6
Suppose Kyoko is an avid reader and buys only mystery novels. Kyoko deposits $3,000 in a bank account that pays an annual nominal interest rate of 10%. Assume this interest rate is fixed—that is, it won't change over time. At the time of her deposit, a mystery novel is priced at $15.00.
Initially, the purchasing power of Kyoko's $3,000 deposit is___________mystery novels.
For each of the annual inflation rates given in the following table, first determine the new price of a mystery novel, assuming it rises at the rate of inflation. Then enter the corresponding purchasing power of Kyoko's deposit after one year in the first row of the table for each inflation rate. Finally, enter the value for the real interest rate at each of the given inflation rates.
Hint: Round your answers in the first row down to the nearest mystery novel. For example, if you find that the deposit will cover 20.7 mystery novels, you would round the purchasing power down to 20 mystery novels under the assumption that Kyoko will not buy seven-tenths of a mystery novel.
Annual Inflation Rate
0% 10% 13%
Number of Novels Kyoko Can Purchase after One Year
Real Interest Rate
When the rate of inflation is equal to the interest rate on Kyoko's deposit, the purchasing power of her deposit ______ over the course of the year.
Question is incomplete, Complete question is as follows :
Suppose Kyoko is an avid reader and buys only mystery novels. Kyoko deposits $3,000 in a bank account that pays an annual nominal interest rate of 10%. Assume this interest rate is fixed—that is, it won't change over time. At the time of her deposit, a mystery novel is priced at $15.00.
Initially, the purchasing power of Kyoko's $3,000 deposit is___________mystery novels.
For each of the annual inflation rates given in the following table, first determine the new price of a mystery novel, assuming it rises at the rate of inflation. Then enter the corresponding purchasing power of Kyoko's deposit after one year in the first row of the table for each inflation rate. Finally, enter the value for the real interest rate at each of the given inflation rates.
Hint: Round your answers in the first row down to the nearest mystery novel. For example, if you find that the deposit will cover 20.7 mystery novels, you would round the purchasing power down to 20 mystery novels under the assumption that Kyoko will not buy seven-tenths of a mystery novel.
When the rate of inflation is equal to the interest rate on Kyoko's deposit, the purchasing power of her deposit ______ over the course of the year.
Answer:
1) Purchasing power = 3000/15 = 200 novels
2) 0% Annual inflation rate:
Novel price = $ 15
Number of novels bought = 3300/15 = 220 novels
Real rate of interest = Nominal interest rate - Inflation = 10% - 0 = 10%
10% Annual inflation rate:
Novel price =10% of 15 + $ 15 = 1.5 +15 = 16.5
Number of novels bought = 3300/16.5 = 200 novels
Real interest rate = Nominal interest rate - Inflation = 10% - 10% = 0%
13% Annual inflation rate:
Novel price = 13% of 15 + $15= 1.95 + 15= 16.95
Number of novels bought = 3300/16.95 = 194.69 = 195 novels
Real rate of interest = Nominal interest rate - Inflation = 10% - 13% = - 3%
3) remains same over the course of year
Kyoko's initial purchasing power is 200 mystery novels. With different inflation rates, her purchasing power decreases to 181 novels (10% inflation) and 177 novels (13% inflation). The real interest rate is 10%, 0%, and -3% for inflation rates of 0%, 10%, and 13% respectively.
Explanation:Initial PurchaseSince each mystery novel costs $15.00, Kyoko can initially purchase $3000 / $15.00 = 200 mystery novels.
With an annual inflation rate of 0%, the price of a mystery novel remains the same at $15.00. Therefore, Kyoko's purchasing power remains at 200 mystery novels.
With an annual inflation rate of 10%, the new price of a mystery novel after one year is $15.00 * (1 + 10%) = $15.00 * 1.10 = $16.50. Kyoko's purchasing power after one year is $3000 / $16.50 = 181 mystery novels.
With an annual inflation rate of 13%, the new price of a mystery novel after one year is $15.00 * (1 + 13%) = $15.00 * 1.13 = $16.95. Kyoko's purchasing power after one year is $3000 / $16.95 = 177 mystery novels.
The real interest rate is calculated by subtracting the inflation rate from the nominal interest rate. So, at an inflation rate of 0%, the real interest rate is 10% - 0% = 10%. At an inflation rate of 10%, the real interest rate is 10% - 10% = 0%. And at an inflation rate of 13%, the real interest rate is 10% - 13% = -3%.
When the inflation rate is equal to the interest rate, the purchasing power of Kyoko's deposit remains the same over the course of the year.
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Cynthia hates writing term papers and reports, so when she receives an assignment to write a paper for her law class, she calls her friend Stephanie and agrees to pay Stephanie to write the paper for her. Stephanie, instead of writing the paper, copies a paper from a small, remote law journal that publishes faculty-written papers from throughout the world online. When the plagiarism is discovered, an infringement claim is brought. Cynthia is guilty of_______________.
Answer: Vicarious infringement
Explanation:
Vicarious infringement is a term used in legal processes to describe the Liabilities of which a person or an organisation incurs or inherits as a result of the infringement acts of another person, the other person may be a person's agent who represents him in certain circumstances.
VICARIOUS INFRINGEMENT IS THE SAME FOR BOTH COPYRIGHT AND TRADEMARK LAWS.
c. Cynthia hates writing term papers and reports, so when she receives an assignment to write a paper for her law class, she calls her friend Stephanie and agrees to pay Stephanie to write the paper for her. Stephanie, instead of writing the paper, copies a paper from a small, remote law journal that publishes faculty-written papers from throughout the world online. When the plagiarism is discovered, an infringement claim is brought. Cynthia is guilty of indirect, or contributory, infringement.
Indirect or contributory infringement happens when a person contributes to or facilitates someone else's direct infringement. In this case, Cynthia made an arrangement with Stephanie, knowingly enabling her to engage in copyright infringement by copying and submitting a paper from a law journal without proper attribution.
Complete question
Cynthia hates writing term papers and reports, so when she receives an assignment to write a paper for her law class, she calls her friend Stephanie and agrees to pay Stephanie to write the paper for her. Stephanie, instead of writing the paper, copies a paper from a small, remote law journal that publishes faculty-written papers from throughout the world online. When the plagiarism is discovered, an infringement claim is brought. Cynthia is guilty of_______________.
a. nothing because Stephanie, not Cynthia, infringed on the author's/publisher's copyright.
b. vicarious infringement.
c. indirect, or contributory, infringement.
d. nothing because once a work is published online, the fair use doctrine permits unlimited use of the work without attribution.
Ventaz Corp manufactures small windows for back yard sheds.Historically, its demand has ranged from 30 to 50 windows per day with an average of 41. Alex is one of the production workers and he works eight hours a day, five days a week. Each order is one window and each window takes 55 minutes.
What is the cycle time for an order?
A. 6.86 minutes per window
B12.5minutes per window
C.5minutes per window
D. 250minutes per window
Answer:
C. 5 minutes per window
Explanation:
Hello, I felt there was an error in the question, and I believe it should be "each window takes 5 minutes" and not "each window takes 55 minutes". I was able to retrieve the question elsewhere and have attached it for your perusal :)
Cycle Time is the time taken between two successive deliveries. Simply spoken, it is the time taken from when the order is initiated to when the order is successfully accomplished. It is important not to confuse cycle time with lead time. Lead time is the time between when an order is requested to when it is delivered. For example, in this case, the window may have been requested to be manufactured half hour before Alex started work on it. Thus, the lead time would be 35 minutes (30 minutes prior + 5 minutes it takes to complete). Cycle time on the other hand is simply 5 minutes on an order. It takes 5 minutes to complete a window and each order is only one window. Hence, cycle time is 5 minutes per window.
Hope this helps :)
On January 1, a shareholder purchased 81 shares of stock in Beta company for $115 per share. On August 20, the company paid an $8 dividend per share. On December 31, the shareholder sold all the shares for $113 per share. What is the overall Economic Rate of Return for this investment?
Answer:
Explanation:
Economic rate of return on the investment is as follows
Total Cash Received =
Dividend = 8
Share disposal = 113
Total 121
Total investment = 115
Net return on investment = 121-115 = 6
Net return on investment = 6/115*100 =5.217%
Answer:
5.22%
Explanation:
Dividend per share = $8
Loss on sales per share = Purchase price - Sales price - = $115 - $113 = -$2
Total return per share = Dividend per share - Loss on sales per share
= $8 -$2 = $6
Overall Economic Rate of Return = (Total return per share ÷ purchase price) × 100
Overall Economic Rate of Return = ($6 ÷ $115) × 100
= 5.217391304347830
= 5.22% approximately
Therefore, the overall Economic Rate of Return for this investment is 5.22%.
After deciding to acquire a new car, you realize you can either lease the car or purchase it with a three-year loan. The car you want costs $32,500. The dealer has a leasing arrangement where you pay $94 today and $494 per month for the next three years. If you purchase the car, you will pay it off in monthly payments over the next three years at an APR of 6 percent. You believe that you will be able to sell the car for $20,500 in three years.a. What is the present value of purchasing the car? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16)b. What is the present value of leasing the car? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16)c. What break-even resale price in three years would make you indifferent between buying and leasing? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16)
Answer:
a. $15,369.28
b. $16,332.28
c. $19,347.60
Explanation:
a. What is the present value of purchasing the car?
PV of resale = SP ÷ (1 + r)^n ................................................. (1)
Where SP = Resales proceed = $20,500
r = discount rate = 6% annually = 0.06 annually = (0.06 ÷ 12) monthly = 0.005 monthly
n = number of periods = 3 years = 3 × 12 = 36 months
Substituting into equation (1), we have:
PV of resale = $20,500 ÷ (1 + 0.005)^36 = $17,130.7208354753
Net PV = Purchase price - PV of resale
= $32,500 - $17,130.7208354753
Net PV = $15,369.28
Therefore, the present value of purchasing the car $15,369.28.
b. What is the present value of leasing the car?
PV of future period payment can be calculated using the following formula:
PV of monthly payment = M × 1 - (1 + r)^-n ÷ r .......................................... (2)
Where,
M = monthly payment = $494
r = discount rate = 6% annually = 0.06 annually = (0.06 ÷ 12) monthly = 0.005 monthly
n = number of periods = 3 years = 3 × 12 = 36 months
Substituting into equation (2), we have:
PV of monthly payment = $494 × {[1 - (1 + 0.005)^-36] ÷ 0.005}
PV of monthly payment = $16,238.2820221969
PV of leasing the car = Today's payment + PV of monthly payment
= $94 + $16,238.2820221969
PV of leasing the car = $16,332.28
Therefore, PV of leasing the car is $16,332.28.
c. What break-even resale price in three years would make you indifferent between buying and leasing?
This will be calculated by equating the PV of leasing the car to the difference between the purchase price and the PV of resale as follows:
PV of leasing car = Purchase price - PV of resale
$16,332.28 = $32,500 - PV of resale
Solving for PV of resale, we have:
PV of resale = $16,167.72.
The future value (FV) of resale price in 3 years can be calculated as follows:
FV of resale = PV of resale × (1 + r)^n
FV of resale = $16,167.72 × (1 + 0.005)^36 = $19,347.60
Therefore, the break even resale price in 3 years is $19,347.60.
Susan Zupan, a lawyer, accepts a legal engagement in March, performs the work in April, and is paid in May. If Zupan's law firm prepares monthly financial statements, when should it recognize revenue from this engagement? The law firm should recognize the revenue in________
Zupan's law firm should recognize the revenue in April, as that is when the services were performed and, thus, the revenue was earned. This is in accordance with the accrual basis of accounting where revenue is recognized when it is earned, not when payment is received.
Explanation:The subject of this question pertains to revenue recognition, a fundamental concept in accounting. In accordance with the accrual basis of accounting, revenues are recognized when they are earned, regardless of when the payment is received. In this scenario, Susan Zupan's firm should recognize the revenue from the legal engagement in April because that is the month the work was completed and the services were rendered.
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Option b) April is the correct choice.
This question relates to the recognition of revenue in accordance with Generally Accepted Accounting Principles (GAAP). According to GAAP, revenue should be recognized when it is earned and realizable. In the case of Susan Zupan, who performed the legal work in April, the revenue should be recognized in April when the service was provided.
Option a) March – This is when the engagement was accepted, but no services were rendered.Option b) April – This is when the legal work was performed, making the revenue earned and realizable.Option c) May – This is when payment was received, but GAAP requires revenue recognition when earned, not when cash is received.Option d) June – This option is irrelevant as it does not pertain to when services were provided or payment was received.Therefore, the correct answer is April, aligning with the principle that revenue is recognized when services are performed.
Complete Question
Susan Zupan, a lawyer, accepts a legal engagement in March, performs the work in April, and is paid in May. If Zupan's law firm prepares monthly financial statements, when should it recognize revenue from this engagement?
a) March
b) April
c) May
d) June
During the month of June, Ace Incorporated purchased goods from two suppliers. The sequence of events was as follows: June 3 Purchased goods for $4,800 from Diamond Inc. with terms 3/12, n/45. 5 Returned goods costing $1,450 to Diamond Inc. for credit on account. 6 Purchased goods from Club Corp. for $1,350 with terms 3/12, n/45. 11 Paid the balance owed to Diamond Inc. 22 Paid Club Corp. in full. Required: Assume that Ace uses a perpetual inventory system and that the company had no inventory on hand at the beginning of the month. Calculate the cost of inventory as of June 30.
Final answer:
To calculate the cost of inventory for Ace Incorporated as of June 30, transactions with Diamond Inc. and Club Corp. were evaluated, adjusting for returns and discounts. After applying the respective discounts, the total inventory cost as of June 30 is $4,559.
Explanation:
To calculate the inventory cost for Ace Incorporated as of June 30, first, we address each transaction sequentially. With a perpetual inventory system, inventory values and costs of goods sold are updated continuously with each purchase or sale.
June 3: Purchased goods for $4,800 from Diamond Inc. with terms 3/12, n/45. This means if payment is made within 12 days, a 3% discount is applied.June 5: Returned goods worth $1,450 to Diamond Inc., which reduces the amount owed to $3,350 ($4,800 - $1,450).June 6: Purchased goods from Club Corp. for $1,350 with terms similar to the first supplier.June 11: Paid Diamond Inc. Before 12 days, hence took advantage of the 3% discount. $3,350 - 3% of $3,350 = $3,249.50 paid to Diamond Inc.June 22: Paid Club Corp. in full. Since payment was within 12 days, a 3% discount on $1,350 equals $1,309.50 paid.Therefore, the total inventory cost as of June 30 is the sum of payments made to both suppliers, $3,249.50 + $1,309.50 = $4,559.
The cost of inventory for Ace Incorporated as of June 30 is $4,515.50 after accounting for goods purchased, returns, and discounts.
During the month of June, Ace Incorporated purchased goods from two suppliers.
The sequence of events was as follows: June 3 Purchased goods for $4,800 from Diamond Inc. with terms 3/12, n/45. 5 Returned goods costing $1,450 to Diamond Inc. for credit on account. 6 Purchased goods from Club Corp. for $1,350 with terms 3/12, n/45. 11 Paid the balance owed to Diamond Inc. 22 Paid Club Corp. in full.
Required: Assume that Ace uses a perpetual inventory system and that the company had no inventory on hand at the beginning of the month.
Calculate the cost of inventory as of June 30.
To answer this, follow these steps:
On June 3, Ace purchased goods worth $4,800 from Diamond Inc. with terms 3/12, n/45. The effective cost was $4,800 - $144 (3% of $4,800) = $4,656.On June 6, Ace purchased goods worth $1,350 from Club Corp. with terms 3/12, n/45. The effective cost was $1,350 - $40.50 (3% of $1,350) = $1,309.50. By June 30, Ace had inventory worth the sum of the goods purchased and net credits for returns: $3,206 (from Diamond Inc.) + $1,309.50 (from Club Corp.) = $4,515.50.Direct Materials Variances The following data relate to the direct materials cost for the production of 2,300 automobile tires: Actual: 52,400 lbs. at $1.7 per lb. Standard: 53,400 lbs. at $1.75 per lb. a. Determine the direct materials price variance, direct materials quantity variance, and total direct materials cost variance. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number. Direct Materials Price Variance $ Direct Materials Quantity Variance $ Total Direct Materials Cost Variance $ b. The direct materials price variance should normally be reported to the . When lower amounts of direct materials are used because of production efficiencies, the variance would be reported to the . When the favorable use of raw materials is caused by the purchase of higher-quality raw materials, the variance should be reported to the
Answer:
Direct Material Price Variance = ( Ap - Sp) * AQ
($1.70 - $1.75) * 52,400 = (-0.05)*52,400 = -$2,620 Favorable
Direct Material Quantity Variance = ( Aq - Sq)* Sp
( 52,400 -53,400) $1.75 = -$1,750 Favorable
Total materials cost variance = Material price variance + Material quantity variance
= -$2,260 (f) + -$1,750 (f)
=-$4,010 (F)
Explanation:
Ap = Actual Price
Sp = Standard Price
Aq = Actual Quantity
Sq = Standard Quantity
F= Favorable
Loring Company incurred the following costs last year:
Costs Amounts
Direct materials $210,000
Factory rent 20,000
Direct labor 123,000
Factory utilities 6,400
Supervision in the factory 54,000
Indirect labor in the factory 34,000
Depreciation on factory equipment 6,000
Sales commissions 26,000
Sales salaries 66,000
Advertising 3 4,000
Depreciation on the headquarters building 9,600
Salary of the corporate receptionist 35,000
Other administrative costs 186,000
Salary of the factory receptionist 24,000
Required:
1. Classify each of the costs using the table provided. Be sure to total the amounts in each column.
2. What was the total product cost for last year?
3. What was the total period cost for last year?
4. If 30,000 units were produced last year, what would be the unit product cost?
Answer:
1. please refer to item 1 in explanation table below
2. $477, 400
3. $256, 600
4. $15.91
Explanation:
Loring Company
(1) Classification of costs:
Direct Materials Direct Labor Overhead Selling Expense Admin Expense
Direct materials $210, 000
Factory rent $20, 000
Direct labor $123, 000
Factory utilities $6, 400
Supervision in factory $54, 000
Indirect labor $34, 000
Depreciation of factory equipment $6, 000
Sales commission $26, 000
Sales salaries $66, 000
Advertising $34, 000
Depreciation on headquarter building $9, 600
Salary of corporate receptionist $35, 000
Other administrative costs $186, 000
Salary of factory receptionist $24, 000
(2) Total Product cost is the total cost incurred in the production process. It is a sum of all direct labor costs, direct material costs and factory overhead costs. Factory overhead costs include factory rent, factory utilities, salaries of factory supervisor, indirect labor, indirect materials and depreciation of all equipment and plants used in the factory. These are basically all costs that re directly, and indirectly involved in the production process.
Total Product cost = $210, 000 + $20, 000 + $123, 000 + $6, 400 + $54, 000 + $34, 000 + $34, 000 + $6, 000 + $24, 000 = $477, 400
(3) Total Period cost is any cost that cannot be capitalized into inventory, prepaid expenses or fixed assets. This cost is the cost that is incurred not as a result of production. They are incurred independently of the production process.
Total period costs = $26, 000 + $66, 000 + $34, 000 + $9, 600 + $35, 000 + $186, 000
= $356, 600
(4) Unit cost = $477, 400 / 30, 000 = $15.91
Final answer:
The total product cost of Loring Company is $477,400, the total period cost is $356,600, and the unit product cost for last year is $15.91 per unit, assuming 30,000 units were produced.
Explanation:
To classify each of the Loring Company's costs and calculate the total product cost, period cost, and unit product cost, we can separate the costs into categories of product and period costs. Product costs include all the costs that are necessary to manufacture a product, whereas period costs are non-manufacturing costs that are expensed within the period they are incurred.
Classified Costs:
Product Costs: Direct materials, Direct labor, Factory rent, Factory utilities, Supervision in the factory, Indirect labor in the factory, Depreciation on factory equipment, Salary of the factory receptionistPeriod Costs: Sales commissions, Sales salaries, Advertising, Depreciation on the headquarters building, Salary of the corporate receptionist, Other administrative costsTotal Product Cost:
The total product cost equals the sum of all product costs:
$210,000 (Direct materials) + $123,000 (Direct labor) + $20,000 (Factory rent) + $6,400 (Factory utilities) + $54,000 (Supervision in the factory) + $34,000 (Indirect labor in the factory) + $6,000 (Depreciation on factory equipment) + $24,000 (Salary of the factory receptionist) = $477,400Total Period Cost:
The total period cost equals the sum of all period costs:
$26,000 (Sales commissions) + $66,000 (Sales salaries) + $34,000 (Advertising) + $9,600 (Depreciation on headquarters building) + $35,000 (Salary of the corporate receptionist) + $186,000 (Other administrative costs) = $356,600Unit Product Cost:
If 30,000 units were produced last year, the unit product cost would be calculated by dividing the total product cost by the number of units:
$477,400 / 30,000 units = $15.91 per unit.Suppose the required reserve ratio is 0.20. Total bank deposits are $200 million and the bank holds $50 million in reserves. How much more money could the bank create if it does not hold excess reserves
Answer:
$50 million
Explanation:
The computation is shown below:
As we know that
Required reserve = Deposits × Required reserve ratio
= $200 million × 0.20
= $40 million
Now the excess reserves is
= Bank reserves - required reserve
= $50 million - $40 million
= $10 million
So, the money creation is
Money creation = Money multiplier × excess reserve
where,
Money multiplier = 1 ÷ required reserve ratio
= 1 ÷ 0.20
= 5
So, the money creation is
= 5 × $10 million
= $50 million
When prices rise a. the effect in the rich and poor is uncertain. b. both the rich and poor lose real income. c. the poor benefit at the expense of the rich. d. the rich benefit at the expense of the poor.
Answer:
The correct answer is letter "B": both the rich and poor lose real income.
Explanation:
Real income refers to the amount of money left to individuals after adjustments for inflation. In front of an increase in prices or, inflation, the purchasing power of individuals decreases since wages tend to remain at the same level. The same situation is faced by poor and wealthy individuals, thus, both of them see their real income decreased when inflation hits the markets.
Final answer:
When prices rise, b) both the rich and poor generally lose real income, with a potentially greater impact on the poor due to their reliance on basic necessities. In situations where income changes, the consequences for poverty and inequality depend on the relative changes in income levels among different socio-economic groups.
Explanation:
When prices rise, it typically affects individuals differently based on their income levels and wealth status. If we assess the options provided, the most likely scenario is that b) both the rich and poor lose real income. This is because as prices go up, the purchasing power of a given amount of money diminishes, which is referred to as a decrease in real income. However, the impact might be more significant on the poor because they spend a higher proportion of their income on basic necessities.
In the case of self-check questions, when incomes rise more for high-income earners than for low-income workers, inequality is likely to increase even though the level of poverty might remain stable or even decrease if low-income workers' wages rise above poverty thresholds. Conversely, if incomes fall more for high-income earners, inequality might lessen as the income gap between the high-income and low-income workers narrows.
The income effect and substitution effect play a role when prices change. The income effect affects buying power, and the substitution effect comes into play when consumers switch their preferences due to changes in price relative to other goods. These economic concepts are crucial in understanding the broader implications of changes in wages, profits, and prices.
2. The Pennington Corporation issued new bonds 23 years ago. The bonds have a coupon rate of 12 percent, semi-annual payments, and were sold at their par value of $1,000. The 30-year bonds have 7 years remaining to maturity and the level of interest rates has declined. If the required rate of return for this bond is 10 percent, what is the intrinsic value of the bond
Answer:
c) $1,099
Explanation:
First, the multiple chices for the question
a) $1,692 b) $705 c) $1,099 d) $1,058 e)$1,189
Solution
what are we given,
First the future value = $1000 (which is the par value)
Years left to maturity = 7 yeras
Periods to consider = 2x7 = 14 (since the bonds involve a semi-annual payment)
Coupon rate = 12%
Therefore, we calculate teh interest amount as follows
= Future value x (coupon rate/2) =
$1000 x (0.12/2)= $60
Step 2: Calculate the Present value Based on given figures
Rate to use for present value = Required rate of return/2 = 10%/2 = 5%
Considering the Present Value
= PV(Rate,nper, pmt, FV)
PV ( 5%, 14, 60, 1000) = $1098.99
PResent Value = $1098.99
Final answer:
To find the intrinsic value of the bond, calculate the present value of the remaining semi-annual coupon payments and the par value at the required semi-annual rate of return, which is 5%.
Explanation:
The student's question pertains to the calculation of the intrinsic value of a bond. The Pennington Corporation issued 30-year bonds with a coupon rate of 12 percent, semi-annual payments, and a par value of $1,000. With 7 years remaining to maturity and the current required rate of return at 10 percent, we would need to calculate the present value of the remaining coupon payments and the par value of the bond.
To calculate this, we need to discount the semi-annual interest payments, which would be $60 (12% of $1,000 divided by 2), as well as the $1,000 par value, using the semi-annual discount rate (which would be 5%, half of the 10% required return). This requires calculating the present value of an annuity for the interest payments, plus the present value of a single sum for the par value of the bond.
Here are selected data for Creek Corporation: Cost of materials purchases on account $ 68 comma 500 Cost of materials requisitioned (includes $ 4 comma 500 of indirect) $ 51 comma 100 Direct labor costs incurred $ 77 comma 000 Manufacturing overhead costs incurred, including indirect materials $ 98 comma 300 Cost of goods manufactured $ 223 comma 300 Cost of goods sold $ 151 comma 300 Beginning raw materials inventory $ 14 comma 500 Beginning work in process inventory $ 30 comma 400 Beginning finished goods inventory $ 33 comma 200 Predetermined manufacturing overhead rate (as % of direct labor cost) 120% What is the balance in work in process inventory at the end of the year? A. $ 51 comma 700
Answer:
Thus, Work in process inventory (Ending) = $23,840
Explanation:
Below is the Schedule of Cost of Goods Manufactured:
Cost of materials requisitioned = 51,200
Manufacturing overhead applied = 92,640
Direct materials used = 46,700
Indirect materials = 4,500
Direct labor = 77,200
Total manufacturing cost = 216,540
Work in process inventory, beginning = 30,300
Work in process inventory, ending = 23,840
Cost of goods manufactured = 223,000
Applied Manufacturing overhead = Direct labor cost x 120%
= 77,200 x 120%
Applied Manufacturing overhead= $92,640
Cost of manufactured goods = Total manufacturing cost + Work in process inventory (beginning) - Work in process inventory (Ending)
223,000 = 216,540+30,300 - Work in process inventory (Ending)
Work in process inventory (Ending) = (216,540 +30,300) - 223,000
= 246,840 - 223,000
= 23,840
Thus, Work in process inventory (Ending) = $23,840
Answer:
23100
Explanation:
To get to this answer we must use process costing and we will begin by explaining what it is first.
A process costing system is used in industries where masses of similar products or services are produced. Products are produced in the same manner and consume the same amount of direct cost overheads.it is therefore unnecessary to assign costs to individual units of outputs for that period.
The term work-in-progress (WIP) is a production and supply-chain management term describing partially finished goods awaiting completion. WIP refers to the raw materials, labour, and overhead costs incurred for products that are at various stages of the production process
Manufacturing cost is the sum of costs of all resources consumed in the process of making a product. The manufacturing cost is classified into three categories: direct materials cost, direct labour cost and manufacturing overhead.
Direct materials are raw materials that are made into finished products. These are not materials that are used in the production process. Direct materials are goods that physically become the finished product at the end of the manufacturing process.
Direct labour cost is a part of wage-bill or payroll that can be specifically and consistently assigned to or associated with the manufacture of a product, a work order, or provision of a service.
23,100
Explanation:
Beginning WIP---------------------------------------30,400
Add: Total manufacturing costs
Direct materials used
(51,100 - 4,500) ----------------------46,600
Direct labour----------------------------77,000
Overhead (120% x 77,000) --------92,400-----216,000
Total cost in work in process--------------------246,400
Less; Ending WIP--------------------------------------? -----
Cost of goods manufactured--------------------223,300
Ending WIP = 246,400 - 223,300 = 23,100
On December 31, 2016, Marin Inc. borrowed $4,500,000 at 12% payable annually to finance the construction of a new building. In 2017, the company made the following expenditures related to this building: March 1, $540,000; June 1, $900,000; July 1, $2,250,000; December 1, $2,250,000. The building was completed in February 2018. Additional information is provided as follows.
1. Other debt outstanding
10-year, 13% bond, December 31, 2010, interest payable annually $6,000,000
6-year, 10% note, dated December 31, 2014, interest payable annually $2,400,000
2. March 1, 2017, expenditure included land costs of $225,000
3. Interest revenue earned in 2017
$73,500
Determine the amount of interest to be capitalized in 2017 in relation to the construction of the building.
The amount of interest _________
Answer:
$274,500
Explanation:
*March 1 : Amount spent = 540,000; Period = 10
Weighted average accumulated expenditure = (10/12)*540000= 450,000
*June 1: Amount spent = 900,000; Period = 7
Weighted average accumulated expenditure = (7/12)*900000= 525,000
*July 1: Amount spent = 2,250,000; Period = 6
Weighted average accumulated expenditure = (6/12)*2250000= 1,125,000
*December 1: Amount spent = 2,250,000; Period = 1
Weighted average accumulated expenditure = (1/12)*2250000= 187,000
Therefore total Weighted average accumulated expenditure = 2,287,500
Interest on weighted average = 12% * 2,287,500 = 274,500 = Avoidable interest
Calculation of Actual interest on the instruments;
Bond: 13%*6,000,000= 780,000
Note: 10%*2,400,000= 240,000
Loan: 12%*4,500,000= 540,000
Actual interest = 1,560,000
According to GAAP; The least amount between Actual Interest and Avoidable interest can be capitalized.
Following the figures above, amount of interest to be capitalized in 2017 in relation to the construction of the building is $274,500