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The accrual basis of accounting calls for expenses to be recorded in the period when they are incurred rather than when the cash is paid. The "Matching Principle" indicates that expenses be recorded in the period in which the related revenue is earned. This is why a hair salon owner records a debit to Pre-paid Rent (asset account) for $12,000 and a credit to Cash (another asset) when her landlord asks her to pre-pay an entire year's worth of rent at the beginning of the year. You learned in this chapter that the salon owner would then make an adjusting entry each month during the year to record a $1,000 credit to reduce Pre-paid Rent and a debit to Rent Expense. Describe what you think the impact or consequences might be on the Salon's monthly financial statements if the salon owner instead decided to record the entire $12,000 as Rent Expense in January in order to avoid having to make monthly adjusting entries. Would this pose any problems for the banker (at the bank where the salon borrows money) who reviews the salon's quarterly financial statements?
Bunge Corp. earned $7.75 per share and paid $3.25 in dividends in the year just ended. Bunge’s (trailing) P/E ratio is 9.0. If Bunge dividends are expected to grow at a 5% rate forever, what is the expected rate of return on Bunge stock?
What is the yield to maturity of a bond that sells for $1,045 today and pays $30 every six months and matures in 12 years if bonds issued today are paying $40.00 annually?
Universal Financial, Inc. has total current assets of $1,200,000; long-term debt of $600,000; total current liabilities of $500,000; and long-term assets of $800,000. How much is the firm's net working capital?
App Store Co. issued 16-year bonds one year ago at a coupon rate of 7.7 percent. The bonds make semi-annual payments. If the YTM on these bonds is 5.4 percent, what is the current bond price? (Do not round intermediate calculations. Round your answer..
Cranberry Chemical recorded pre tax restructuring charges of $1378 million in 2014. The charges consisted of asset write-downs of $908 million, costs associated with exit or disposal activities of $132 million, and employee severance costs of $338 mi..
A bond has a $1,000 par value, 7 years to maturity, and a 9% annual coupon and sells for $1,095. What is its yield to maturity (YTM)? Assume that the yield to maturity remains constant for the next 4 years. What will the price be 4 years from today?
East Coast Television is considering a project with an initial outlay of $X (you will have to determine this amount). It is expected that the project will produce a positive cash flow of $52,000 a year at the end of each year for the next 16 years. T..
Describe the maximum gain when a bear spread is created from the calls Describe the maximum loss when a bear spread is created from the calls
ACC5502 Accounting and Financial Management, Outline the key duties of directors. Outline the arguments for the directors of Forge Group Ltd that they carried out their duties.
a financial system3939s major economic purpose is to ltbrgta channel savings to more efficient and productive uses
Refer to the Bulldog battery company’s cash budget in Table 18-7. Explain why the company would probably not issue $1 million worth of new common stock in January to avoid all short-term borrowing during the year.
One way to calculate a stock's beta is to
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