BUSINESS COLLEGE

What is an advantage of taking out a long-term loan instead of a short-termloan?

A. A long-term loan usually requires a low debt-to-income ratio.

B. A long-term loan usually has a lower total cost.

C. A long-term loan usually has a lower interest rate.

D. A long-term loan usually requires no credit check.

Answers

Answer 1
Answer:

One of the major advantages of taking a long-term loan is that a long-term loan usually has a lower interest rate. Therefore (C) is the correct option.

What is a long-term loan?

A long-term loan is a financial instrument with a one-year maturity. Both private and public institutions are accepting applications for this loan. Collateral is generally needed for long-term loans.

The loan's interest rate is lower than that of a short-term loan because it must be repaid over a three-to ten-year period.

Therefore, (C) is the correct option.

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Nolan Company's cash account shows a $29,193 debit balance and its bank statement shows $28,152 on deposit at the close of business on June 30. Outstanding checks as of June 30 total $2,801. The June 30 bank statement lists $32 in bank service charges; the company has not yet recorded the cost of these services. In reviewing the bank statement, a $80 check written by the company was mistakenly recorded in the company’s books as $89. June 30 cash receipts of $3,853 were placed in the bank’s night depository after banking hours and were not recorded on the June 30 bank statement. The bank statement included a $34 credit for interest earned on the company’s cash in the bank. The company has not yet recorded interest earned. Prepare a bank reconciliation using the above information.
Peterson Company billed its customers a total of $840,000 for the month of November. The total includes a 5% state sales tax.(a) Determine the proper amount of revenue to report for the month.(b) Prepare the general journal entry to record the revenue and related liabilities for the month.

On January 1, Year 1, Stratton Company borrowed $100,000 on a 10-year, 7% installment note payable. The terms of the note require Stratton to pay 10 equal payments of $14,238 each December 31 for 10 years. The required general journal entry to record the first payment on the note on December 31, Year 1 is:

Answers

Answer:

Dr interest expense $7,000

Dr notes payable $7,238

Cr cash                                     $14,238    

Explanation:

The first task is to compute interest expense on the loan in year 1 which is shown below:

interest expense=$100,000*7%

interest expense=$7,000

Principal repayment=repayment-interest repayment

Principal repayment=$14,238-$7,000=$7,238

The double entries are to debit interest expense and notes payable with $7,000 and $7,238 respectively while cash is credited with $14,238 as an outflow of cash.

Assume Gillette Corporation will pay an annual dividend of $ 0.61 one year from now. Analysts expect this dividend to grow at 12.9 % per year thereafter until the 6th year.​ Thereafter, growth will level off at 1.7 % per year. According to the​ dividend-discount model, what is the value of a share of Gillette stock if the​ firm's equity cost of capital is 8.8 %​?

Answers

Answer:

what is the value of a share of Gillette stock if the​ firm's equity cost of capital is 8.8 %​?

$ 13,36  

Explanation:

First it's necessary to find the present value of the annual dividend paid during the next 6 years, which is calculate by the formula of the Present Value.

PV = Dt / (1+r)^t , it means that each Dividend at the year "t" will be value with the rate r calculated a this same moment "t".

  • Will pay an annual dividend of $ 0.61 one year from now. Analysts expect this dividend to grow at 12.9 % per year thereafter until the 6th year.​

Year 1

0,61 = Div

1,09  = (1+0,88)^1

0,56  = Div/1,09

Year 2

0,69 = Div Year 1(0,61) * 1,129, because increase at 12,9%  by year

1,18  =  (1+0,88)^2

0,58  = Div/1,18

Year 3

0,78 = Div Year 2(0,69) * 1,129, because increase at 12,9%  by year

1,29  =  (1+0,88)^3

0,60  = Div/1,18

Year 4

0,88 = Div Year 3(0,78) * 1,129, because increase at 12,9%  by year

1,24 =  (1+0,88)^4

0,63  = Div/1,24

Year 5

0,99 = Div Year 4(0,88) * 1,129, because increase at 12,9%  by year

1,52 =  (1+0,88)^5

0,65  = Div/1,52

Year 6

1,12 = Div Year 5(0,99) * 1,129, because increase at 12,9%  by year

1,66 =  (1+0,88)^6

0,67  = Div/1,66

PV of 6 Years= 0,56 + 0,58 + 0,60 + 0,63 + 0,65 + 0,67 = $3,70  

  • Thereafter, growth will level off at 1.7 % per year.

To this second part the model indicates that de dividend is calculated by = Dividend /(Rate-Growth) , which means that if a dividend grows forever, we applied the perpetuity formula where dividend growth it's applied as negative to the discount rate.

Year 6

1,14 = Div Year 6(1,12) * 1,017, thereafter will growth at 1,7%  by year.

7,1% =  (8,8%-1-7%) Discount rate less growth of dividend.

16,03  = Div/0,071 = In this case we use the rate not the 1+rate.

This value it's calculated at the moment of Year 7, we need to apply the Present Value to calculate the actual value, which is:

16,03 = Perpetuity calculated before until year 6.  

1,66  = Discount Rate applied this year.

9,66   = Present Value of the Dividen which grows forever at 1,7%

TOTAL Value of Share = PV of 6 Years + PV Perpetuity =

                                          $3,70 + $9,66=$13,36

Jepson uses the periodic inventory system and the gross method of accounting for purchases. The journal entry that Jepson will make on September 12 is:

Answers

Answer and Explanation:

The journal entry is shown below:

Purchases $6,000  

       To Account payable $6,000

(Being purchases on the account is recorded)  

Here we debited the purchase as it increase the inventory while on the other hand the account payable is credited as it also increased the liability

So the above entry should be recorded

Wren Pork Company uses the relative market value method/Value basis method of allocating joint costs in its production of pork products. Relevant information for the current period follows:Product Pounds Price/lb.
Loin chops 3,080 $5.40
Ground 10,200 2.20
Ribs 4,120 5.05
Bacon 6,160 3.70
The total joint cost for the current period was $45,400. How much of this cost should Wren Pork allocate to Loin chops?
A. $0.
B. $6,443.
C. $9,134.
D. $11,350.
E. $45,400.

Answers

Answer:

C. $9,134

Explanation:

Product              Pounds     Price/Ib      Total Value

Loin chops          3,080        $5.40           $16,632

Ground                10,200       $2.20           $22,440

Ribs                      4,120         $5.05           $20,806

Bacon                   6,160         $3.70           $22,792

                                                                    $82,670  

The Total Joint cost = $45,400

Hence Joint cost to Lopin chops = $45,400 * $16,632 / $82,670

Joint cost to Lopin chops = $9,134

Jack Pickle decided to start a small business as a corporation. His initial investment was $4,000 cash in exchange for common stock. Demonstrate how to record this transaction in the accounting equation?

Answers

Answer:

Increase cash by $4,000 and Increase common stock by $4,000

Explanation:

Demonstration of how to record Jack Pickle

transaction in the accounting equation

Since we were told that Jack Pickle decided to start a small business in form of a corporation in which his initial investment was the sum of $4,000 cash and the cash was in exchange for common stock, therefore using accounting equation this means when we want to record Jack Pickle transactions we have to increase the cash by the sum of $4,000 and the increase common stock by the sum of $4,000.

Increase cash by $4,000 and Increase common stock by $4,000

Empirical evidence finds that the average propensity to consume is falling: A. for neither the short-run nor the long-run consumption.
B. for only the long-run.
C. for both the short-run and the long-run.
D. for only the short-run.

Answers

Answer:

The correct option is D

Explanation:

Empirical evidence is the evidence which is defined as the information received through the senses, specifically by documentation as well as monitoring of patterns and behavior via experimentation.

APC stands for Average Propensity to Consume is the one which measures the percentage of income spent instead of savings. And it is evaluated by dividing the average household consumption by average household income.

So, if the empirical evidence states that the APC is falling or decreasing then it is only for short- run or short- period.

Answer:

D. for only the short-run.
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