Accounting Answers

Discuss about the four finance functions (financial management decisions)

Discuss about the four basic financial statement (income statement, statement of owners’ equity, balance sheet, and statement of cash flows); comparing and contrasting their differences in merchandising firms Vs. service providing entities

Show diagrammatically the impact on the firm's profit if in the short run demand or the product reduces.

3. X Company is evaluating its cost of capital under alternative financing arrangements. In consultation with investment bankers, X Company expects to be able to issue new debt at par with a coupon rate of 10% and to issue new preferred stock with a $4.00 per share dividend at $25 a share. The common stock of X Company is currently selling for $20.00 a share. X Company expects to pay a dividend of $2.50 per share next year. Market analysts foresee a growth in dividends in Invest stock at a rate of 5% per year. Invest does not expect its cost of debt, preferred stock or common stock, to be different under the two possible financing arrangements. X Company marginal tax rate is 40%. Hint: coupon rate of the bond is the same as the before-tax cost of debt. The two arrangements are: Financing Arrangement, Debt, Preferred Stock, Common Stock, respectively

1, 20% 30% 50%

2, 50% 30% 20%

A. What is the weighted average cost of capital to X Company under the first financing arrangement?

2. Based on the following information answer questions Holy products corporations have the following capital structure, which it considers optimal: Bonds, 7% (at par)      Br 300,000   

Preferred stock, Br.5     240,000

Common stock                        360,000 Retained earnings                      300,000   Additional Information: Dividends on common stock are currently Br 3 per share and are expected to grow at constant rate of 6%. Market price of common stock is Br 40 and the preferred stock is selling at Br50. Flotation cost on new issues of common stock is 10%. A. Based on the above information, what would be the cost of the bond? B. What would be the cost of common stock for Holy Products Corporation?

1, Bonds with a nominal rate of interest of 7% are issued to yield 8% will bond sell at a premium or a discount?

2, Compare and contrast Petty Cash and Voucher Payable by giving tangible examples how to undertake both systems.

3, Write at least six types of short-term investment (discuss detail distinction features of each security). 

4, Write history of IFRS adoption in Ethiopia: role of IFRS in the development of accounting standards in Ethiopia and challenges of adopting IFRS.

1, On January 1, year 2, Investor Company made long term investments of 400,000 in the common stock of several publicly owned corporations. The aggregate market value of the investments was 360,000 at the end of year 2 and 384, 000 at the end of year 3. On October 20, year 4 Investor Company sold long term investment that cost 200,000 for 150,000 and the aggregate market value of the remaining investments (costs 200,000) was 190,000.

Required

A, Present the Journal entries to record the above transactions and information.

B, Determine the balance of (i) the investment, (ii) the allowance, and (iii) the unrealized loss account at the end of year 2, year 3 and year 4.

C, Show how the investment in marketable equity securities and the unrealized loss are presented in the balance sheets of investor Company at the end of year 2, year 3, and year 4.

Why is accounting considered a language of business? How is it related to management

process?

Dec. 1 Mr. John transferred cash from his personal account to the business to be used in

the business, Birr 150,000.

“ 1 Paid five months’ rent in advance, Birr 30,000

“ 1 Paid annual Insurance premium of Birr 7,200

“ 11 Purchased a truck for Birr 110,000 by paying Birr 60,000 Cash and giving a

notes payable for the difference.

“ 12 Purchased equipment on account, Birr 11,000

“ 13 Purchased supplies on account Birr 2400.

“ 14 Paid insurance premiums of Birr 8100

“ 15 Received cash for services completed Birr 36,000.

“ 18 Paid salaries of Birr 9000.

“ 21 Paid its liabilities for the purchase of equipment made on December 12

“ 24 Provided Service on account, Birr 52,000

“ 27 Paid utilities expense Birr 12,500.

“ 27 Paid miscellaneous expenses Birr 1,200.

“ 28 Received cash from customers on account birr 24,000

“ 30 Paid salaries to employees Birr 5,000

“ 30. The owner withdrew Birr 2,000 for personal use.

Dec. 1 Mr. John transferred cash from his personal account to the business to be used in

the business, Birr 150,000.

“ 1 Paid five months’ rent in advance, Birr 30,000

“ 1 Paid annual Insurance premium of Birr 7,200

“ 11 Purchased a truck for Birr 110,000 by paying Birr 60,000 Cash and giving a

notes payable for the difference.

“ 12 Purchased equipment on account, Birr 11,000

“ 13 Purchased supplies on account Birr 2400.

“ 14 Paid insurance premiums of Birr 8100

“ 15 Received cash for services completed Birr 36,000.

“ 18 Paid salaries of Birr 9000.

“ 21 Paid its liabilities for the purchase of equipment made on December 12

“ 24 Provided Service on account, Birr 52,000

“ 27 Paid utilities expense Birr 12,500.

“ 27 Paid miscellaneous expenses Birr 1,200.

“ 28 Received cash from customers on account birr 24,000

“ 30 Paid salaries to employees Birr 5,000

“ 30. The owner withdrew Birr 2,000 for personal use.

Required:

a) Record the above transactions in General Journal (Journalize the above transactions)