Answer:
d.$60,400
Explanation:
The computation of the gross margin is shown below:
= Sales - Direct materials cost - Direct labor cost - Overhead cost
where,
Sales = 3,000 units × $29 = $87,000
And all the other items would remain the same
Now put these values to the above formula
So, the value would equal to
= $87,000 - $7,000 - $10,000 - $9,600
= $60,400
The purchasing agent of the Poplin, Inc. ordered materials of lower quality in an effort to economize on price. What variance will most likely result?
(A) Favorable materials quantity variance
(B) Favorable total materials variance
(C) Unfavorable materials price variance
(D) Unfavorable labor quantity variance
Answer:
(D) Unfavorable labor quantity variance
Explanation:
Since in the question, the lower quality material is ordered so that less price can be given which required more hours to process the material as compared to the standard which results in unfavorable labor quantity variance
The formula to compute the labor quantity variance is shown below:
= Standard Rate × (Actual hours - Standard hours)
If the standard hours are more than actual hours than it leads to unfavorable instead of favorable
What is market segmentation? List the steps in the market segmentation process.
Answer:
Market segmentation refers to a term in which there is a division of large markets into the smaller ones and this segregation is based on the customers which are having similar characteristics, wants or needs.
Following are the steps included in the market segmentation process:-
a) Market potential will be forecasted
b) Market share will be estimated
c) Market segments would be chosen
d) Formation of users profile
Answer:
hes right ^^
Explanation:
When both parties agree to definitize a contract change before the work is begun, the change is made contractually through a __________.
Answer:
Supplemental agreement
Explanation:
A supplemental agreement is an agreement which is modified (but not replaced and/or rearranged) with the mutual understanding and consent of both the parties involved. The binding spirit of the contract is not affected because of this modification, nor the mutual considerations to be transferred. The reason behind a supplemental agreement could be anything, it might be because for the inclusion of some important consequences that were previously left unmentioned, which could have increased the contractual inadequacy risk for both the parties or any reason detrimental to legal and/or financial capacity of the parties involved.
Sally acquired an apartment building 15 years ago for $150,000 and sold it for $410,000 in the current year. At the time of the sale, there is $65,000 of accumulated straight-line depreciation on the apartment building. Assuming Sally is in the 32 percent tax bracket for ordinary income, how much of her gain is taxed at 15 percent?
Answer:
Capital gain taxed @ 15% = $260000
Explanation:
given data
Cost of Building = $150,000
sold = $410,000
accumulated depreciation = $65,000
tax bracket = 32 %
to find out
how much of her gain is taxed at 15 percent
solution
first we get here gain on sale that is express as
gain on sale = sold + Accumulated Depreciation - Cost of Building ..............1
gain on sale = $410,000 + $65,000 - $150,000
gain on sale = $325000
and
Unrecaptured depreciation of taxed @ 25% is = $65000
so Capital gain taxed @ 15% is = $325000 - $65000
Capital gain taxed @ 15% = $260000
During formation of Beecky partnership, Sam contributed property with an adjusted basis of $130,000 in exchange for a 25% interest in Beecky. The fair market value of the contributed property was $170,000 and the property was encumbered by a mortgage with a balance of $120,000. What amount of gain should Sam recognize from contributing the property into Beecky partnership?
Answer:
Sam would not recognize any gain on the contribution.
Explanation:
A partner does not recognize a gain on the contribution from the appreciated property to a partnership unless it is subject to a liability that exceeds the contributing partner basis in the property. Sam is contributing property with a basis of $130,000, subject to a liability of $120,000, for a 25 % in partnership. As a result Sam would have a basis in the contributed property, minus the $120,000 liability assumed by the partnership, plus Sam's portion of the liability, 25% x $120,000 or $30,000.
Luther is a successful logistical services firm that currently has $5 billion in cash. Luther has decided to use this cash to repurchase shares from its investors, and has already announced the stock repurchase plan. Currently Luther is an all equity firm with 1.25 billion shares outstanding. Luther's shares are currently trading at $20 per share.With perfect capital markets, what is the market price per share of Luther's stock after the share repurchase?A) $25B) $24C) $15D) $20
Answer:
Total market value of shares
= 1.25 billion x $20
= $25 billion
Market value of the share after share repurchase
= $25 billion - $5 billion
= $20 billion
Number of shares repurchased
= $5 billion/$20 per share
= 0.25 billion shares
Number of shares outstanding after the share repurchase
= 1.25 billion shares - 0.25 billion shares
= 1 billion shares
Market price per share after repurchase
= $20 billion/1 billion shares
= $20 per share
The correct answer is D
Explanation:
The market value of the company's shares should be calculated which is a function of number of shares outstanding multiplied by market price per share. Then, we will calculate the market value after the share repurchase by deducting the value of share repurchase from the total market value. we also need to calculate the number of shares repurchased by dividing the cash available by market price per share. Number of shares outstanding after the share repurchase is the difference between the total number of shares and the number of shares repurchased. Finally, the market price per share after the share repurchase is calculated by dividing the market value of shares after repurchase by the number of shares outstanding after repurchase.
The market value of the company's shares should be computed as a function of the number of outstanding shares multiplied by the market price per share. Hnce option D is correct.
What is the share repurchase ?The market value after the share repurchase will be calculated by subtracting the value of the share repurchase from the total market value. We must also compute the number of shares repurchased by dividing the available cash by the market price per share.
The difference between the total number of shares and the number of shares repurchased is the number of shares outstanding after the share repurchase.
Finally, the market price per share following share repurchase is calculated by dividing the market value of shares after repurchase by the number of shares outstanding following repurchase.
Total market value of shares
= 1.25 billion x $20
= $25 billion
Market value of the share after share repurchase
= $25 billion - $5 billion
= $20 billion
Number of shares repurchased
= $5 billion/$20 per share
= 0.25 billion shares
Number of shares outstanding after the share repurchase
= 1.25 billion shares - 0.25 billion shares
= 1 billion shares
Market price per share after repurchase
= $20 billion/1 billion shares
= $20 per share
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The contact lens company, Here's Clear Eye, sold thousands of pairs of contact lenses in Kenya. The lenses were defective and resulted in severe eye infections, and in 156 cases, blindness. The purchasers of the lenses who bring suit in Kenya will be entitled to recover their purchase price, attorney fees and medical bills. Kenya does not permit recovery for pain and suffering nor for permanent injury. Several of the purchasers who are blind have brought suit in South Carolina, the home of Here's Clear Eye. South Carolina permits recovery for permanent injury as well as punitive damages. The average recovery in Kenya for the purchasers is $600. A lawyer for the purchasers from Columbia, South Carolina estimates the average verdict will be $600,000. Which of the following statements is true?
(A) The Kenya purchasers may use the South Carolina courts because their remedies in Kenya are inadequate.
(B) The South Carolina cases will be dismissed on the grounds of forum non conveniens.
(C) The Kenya purchasers can recover only punitive damages in South Carolina.
(D) The Kenya purchasers can recover only for permanent injuries in South Carolina.
Answer:
(B) The South Carolina cases will be dismissed on the grounds of forum non conveniens.
Explanation:
Forum non conveniens is a discretionary power that allows courts to dismiss a case where another court, or forum, is much better suited to hear the case. This dismissal does not prevent a plaintiff from re-filing his or her case in the more appropriate forum.
Tanya's employer offers a cafeteria plan that allows employees to choose among a number of benefits. Each employee is allowed $6,000 in benefits. For 2019, Tanya selected $3,420 ($285 per month) of parking, $1,780 in 401(k) contributions, and $800 of cash. How much must Tanya include in taxable income?
Tanya must include $3,420 in taxable income.
Explanation:Tanya must include $3,420 in taxable income.
In a cafeteria plan, the amount an employee contributes to certain benefits, such as parking and 401(k) contributions, is tax-free. However, any cash received from the cafeteria plan is taxable income. In this case, Tanya selected $3,420 of parking and $1,780 of 401(k) contributions, which are not taxable. But the $800 of cash she received is considered taxable income.
Therefore, Tanya must include $800 in taxable income.
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Within an organizational structure, the person most likely to be evaluated in terms of controllable costs would be:
a. A payroll clerk.
b. A cost center manager.
c. A production line worker.
d. A maintenance worker.
e. A sales representative.
Answer: (B) A cost center manager
Explanation:
According to the given question, the cost center manager is basically responsible for evaluating the controllable cost in an organization structure.
They are also keeps the cost in the specific line of budget by taking the various types of investment decisions and also managing the revenue in an organization.
The main function of the cost center manager is that it managing all the department such as IT, human resource department more efficiently by keeping the given cost below the budget.
Therefore, option (B) is correct.
Suppose the demand for cigarettes is perfectly inelastic, while the supply of cigarettes slopes upward from left to right. The equilibrium price of cigarettes is $5 and the equilibrium quantity is 100 packs
a) Draw the market for cigarettes given the information above. Label the equilibrium point, axes, and any ntercepts
b) What would happen if the price of cigarettes were $6 per pack and not at the equilibrium of $5 per pack? Would it stay at $6 per pack? Briefly explain.
c) Suppose that as a result of government anti-smoking campaigns, the demand for cigarettes decreases to 80 packs (but is still perfectly inelastic). What would happen to the equilibrium price (increase, decrease, not change)? What is the new quantity?
Answer:
See below and the picture attached.
Explanation:
For a)
Find the attached image. The initial equilibrium is at EQD1 and Price = 5, the quantity demanded at this level is 100 cigarettes.
For b)
When the price rises to $6, the supply curve for cigarettes shift outwards to supply 2 while the inelastic demand stays the same. This forms and equilibrium of Price 2 and EQD1, qty demanded is still at 100 packs. It would stay the same as there is no demand loss pressure from inelastic demand.
For c)
When the demand falls to 80 packs but remains inelastic, there is a horizontal demand curve shift to the left, from D1 to D2. This forms a new equilibrium with Price = p3 that is less than the equilibrium price of $5. The new quantity demanded and supplied will form a new equilibrium for D2 = 80 packs but price less than the initial P1.
Hope that helps.
Scenario C At DoubleTalk, Inc., Joe, a supervisor, pushes his employees' performance by constantly checking their work and threatening them if they fail to keep their deadlines. After months of mistreatment, the employees get together and sign a letter to the human resources department to express their grievances. What form of influence are the employees using?
a. Impression management
b. Silent authority
c. Referent
d. Assetiveness
e. Persuasion
Answer:
in 4 days i will delete brainly warn to friends b btw
Explanation:
OJ's Orange Juice produces orange juice to sell in a perfectly competitive market. Given uncertainty in weather patterns, OJ has to determine how much juice to produce prior to knowing the competitive price. It is estimated that the competitive price will be $5 with 20 percent chance and an 80 percent chance the price will be $2. If the marginal cost of producing orange juice is MC = 2Q, then to maximize expected profits, OJ should produce A. 0.25 units. B. 0.90 units. C. 1.15 units. D. 1.30 units
Answer:
so firm will maximize profit produce is 1.30 units
so correct option is D. 1.30 units
Explanation:
given data
competitive price = $5
chance = 20%
chance the price = $2
marginal cost MC = 2Q
to find out
maximize expected profits, OJ should produce
solution
we get here maximum profit as that
E(P) = MC = 2Q ..............1
as we know competitive firm maximum profit as P = MC
and profit = 0 in long run
so put here value in equation 1
E(P) = 0.2 × 5 + 0.8 × 2
2Q = 2.6
Q = 1.3
so firm will maximize profit produce is 1.30 units
so correct option is D. 1.30 units
Pollyanna Publishing, a textbook publishing firm, purchased a new machine for $80,000. This machine is expected to operate for 10 years, after which it will be sold for salvage value (estimated to be $8,000).
A. How much will the first and second year’s depreciation expense be under the double-declining-balance method?
B. How much will the first and second year’s depreciation expense be under the straight line method?
Answer:
A.
The first year’s Depreciation Expense: $14,400
The second year’s depreciation expense: $11,520
B.
The first year’s Depreciation Expense = The second year’s depreciation expense = $7,200
Explanation:
A. Under the straight-line method, useful life is 10 years, so the asset's annual depreciation will be 10% of the Depreciable cost.
Depreciable cost = Total asset cost - salvage value = $80,000-$8,000 = $72,000
Under the double-declining-balance method the 10% straight line rate is doubled to 20% - multiplied times the Depreciable cost's book value at the beginning of the year.
In the first year, depreciation expense = 20% x $72,000 = $14,400
At the beginning of the second year, the Depreciable cost's book value is $72,000 -$14,400 = $57,600
In the second year, depreciation expense = 20% x $57,600 = $11,520
B.
The company uses straight-line depreciation, Depreciation Expense each year is calculated by following formula:
Depreciation Expense = (Cost of machine − salvage value)/Useful Life = ($80,000-$8,000)/10 = $7,200
The first year’s Depreciation Expense = The second year’s depreciation expense = $7,200
During the implementation phase of the systems development life cycle (SDLC), in _____, as each module of a new system is converted, the corresponding part of an old system is retired.a. Parallel Conversionb. Plunge Conversionc. Pilot Conversiond. Phased-iIn-Phased-Out Conversion
Answer:
The correct answer is letter "D": Phased-In-Phased-Out Conversion.
Explanation:
Systems Development Life Cycle or SDLC is the process of creating and changing systems. models and methodologies that people use to develop software. In the Phased-In-Phased-Out Conversion stage, the new information system is split into several modules so they can be easily introduced and gradually the previous system used is left behind.
Rhine Company sets price equal to cost plus 40%. Recently, Rhine charged a customer a price of $280 for an item.
What was the cost of the item to Rhine?
a. $580
b. $340
c. $200
d. $185
e. $120
Answer:
Option (C) is correct.
Explanation:
Given that,
Price of an item charged by the Rhine company = $280
Rhine company sets price = Cost + 40% of cost
Let the cost of an item to Rhine be x,
Hence,
Price = x + 40%(x)
$280 = x + 0.4x
$280 = 1.4x
x = $280 ÷ 1.4
= $200
Profit for Rhine = Price - cost
= $280 - $200
= $80
Therefore, the cost of the item to Rhine is $200.
If the quantity of loanable funds demanded exceeds the quantity of loanable funds supplied______________.
a. there is a surplus and the interest rate is above the equilibrium level.
b. there is a surplus and the interest rate is below the equilibrium level.
c. there is a shortage and the interest rate is above the equilibrium level.
d. there is a shortage and the interest rate is below the equilibrium level.
When the demand for loanable funds exceeds the supply, there is a shortage and the interest rate rises above the equilibrium level. This situation persists until the demand and supply of loanable funds are once again balanced, restoring equilibrium in the market.
Explanation:If the quantity of loanable funds demanded exceeds the quantity of loanable funds supplied, the correct choice would be c. there is a shortage and the interest rate is above the equilibrium level. This concept is under the subject of economics and specifically deals with the loanable funds market, which is a theoretical model used to explain interest rate determination. In this model, the quantity of loanable funds is determined by savers (supply) and borrowers (demand).
In the scenario where demand exceeds supply, there's a shortage of loanable funds. Applying the basic principle of economics, when there is a shortage, the price of the commodity typically increases. In this context, the price of the commodity is the interest rate, so it will increase above the equilibrium level until the quantity demanded and the quantity supplied become equal again, restoring equilibrium in the market.
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Contributions of assets always have restrictions attached as to their use. 41. During the annual fund-raising drive, the Cancer Society raised $900,000 in pledges of financial support for general operations. By fiscal year-end, the society had collected $600,000 of the pledges. The society estimates that 10% of the remaining pledges will be uncollectible. The NET amount of revenue the society should recognize during the current year from this pledge drive is
a) $900,000.
b) $870,000.
c) $810,000.
d) $600,000.
Answer:
b) $870,000.
Explanation:
Step 1. Given information.
the Cancer Society raised $900,000 in pledges of financial support for general operationsCollected 600.000 The society estimates that 10% of the remaining pledges will be uncollectible
Step 2. Formulas needed to solve the exercise.
Net amount revenue = Mount raised - (remaining pledges * estimation of uncollectibles revenues)
Step 3. Calculation.
$900.000 - $300.000 * 10% = 870.000
Step 4. Solution.
The NET amount of revenue the society should recognize during the current year from this pledge drive is 870.000
Minstrel Manufacturing uses a job order costing system. During one month Minstrel purchased $205,200 of raw materials on credit; issued materials to production of $201,000 of which $31,800 were indirect. Minstrel incurred a factory payroll of $153,600, paid in cash, of which $41,800 was indirect labor. Minstrel uses a predetermined overhead application rate of 150% of direct labor cost. Minstrel's beginning and ending Work in Process Inventory are $16,100 and $28,200 respectively. Compute the cost of product transferred to Finished Goods Inventory: a. $453,800. b. $575,900. c. $436,600. d. $427,600. e. $425,600.
Answer:
c. $436,600
Explanation:
Direct materials to production = $201,000 - $31,800 = $169,200
Direct factory payroll = $153,600 - $41,800 = $111,800
Minstrel uses a predetermined overhead application rate of 150% of direct labor cost, then overhead = 150% * $111,800 = $167,700
Cost of product produced in one month = direct materials to production of $169,200 +a direct factory payroll of $111,800 + overhead $167,700 = $448,700
The cost of product transferred to Finished Goods Inventory = Cost of product produced in one month + Beginning WIP Inventory - Ending WIP Inventory
= $448,700 + $16,100 - $28,200 = $436,600
Since much innovation arises from experimentation and improvisation, the _____ organization structure is typically considered better suited for innovation despite its possible detriment to efficiency. Multiple Choice formalized mechanistic organic standardized
Answer:
Organic.
Explanation:
An organic organizational structure has emerged from a current need for companies to quickly adapt to market changes and optimize processes. Which is justified by the great competition of the market and its instability.
This structural model is characterized by greater flexibility rather than rigidity, as decisions are decentralized and there is greater interaction between the functional areas of the organization. The benefits of this organic structural model are mainly the possibility of innovation and adaptation to changes, the hierarchical flexibility that generates greater interaction between employees and motivation to contribute with solutions to possible problems.
But like every structural model, there are also the negatives, which can be justified by the emphasis on relationships, which can cause inefficiency at some point, as concern for human needs can be taken into account more than concern for technical efficiency, which is a relevant challenge for companies with an organic structure.
Which mode of transportation typically has the highest value-to-weight ratio? (Food for thought as you answer this question: Think of taking the value of the items typically shipped by a given mode and then dividing that value by the weight of the item. For example, compare the value-to-weight ratio of coal shipped on the water versus the value-to-weight ratio of an electronics item purchased online and shipped via truck or road. Which of these two has the higher value-to-weight ratio?A. Road B. MultimodalC. WaterD. PipelineE. RailF. Air
Option F, Air
Explanation:
The value to weight of an item is an indicator of the financial value per kilogram or kilo of an item. It is an important step for the development and strategy of the distribution chain.
If it is decided whether the cost savings in total inventory holding costs should be compared with savings on cost by means of cheaper transportation when shipments are made by sea, taking longer, than by air, usually the shorter one.
The diamonds and coal are a different example of the weight ratio. They are two types of carbon but they are of very different weight ratios. For diamonds, air and private jet charter can be well justified, depending on the size and value of the shipment.
Economies of scope Question 21 options: stem from the cost-saving efficiencies of scattering a company's manufacturing/assembly plants over a wider geographic area. have to do with the cost-saving efficiencies of operating across a bigger portion of an industry's total value chain. stem from cost-saving strategic fits along the value chains of related multiple businesses.
Answer:
stem from cost-saving strategic fits along the value chains of related multiple businesses.
Answer:
Economies of scope stem from cost-saving strategic fits along the value chains of related multiple businesses.
Explanation:
Economies of scope holds that as more and more of different but related products are produced, the unit cost it takes to produce one product will reduce.
This happens because an organization that produces multiple similar products can streamline its processes and equipment such that it cuts out costs that would have been incurred if the products were produced separately. For example using one equipment to produce a variety of products decreases production costs.
Similarly, multiple related businesses, considering their resources, can take advantage of available opportunities they present each other, and streamline activities along their value chains to reduce costs.
Meals n’ More, Inc., a catering company, requires its customers to pay by check. Lyra, a Meals n’ More driver, tells customers that they can pay her with cash. When Meals n’ More learns of Lyra’s collections, it takes no action to stop it. Lyra steals some of the cash. Meals n’ More may suffer the loss under the doctrine of ___.
Answer:
Apparent authority
Explanation:
Meals n’ More, Inc., a catering company, requires its customers to pay by check. Lyra, a Meals n’ More driver, tells customers that they can pay her with cash. When Meals n’ More learns of Lyra’s collections, it takes no action to stop it. Lyra steals some of the cash. Meals n’ More may suffer the loss under the doctrine of Apparent authority.
A clothing store has ordered 100,000 swimsuits. It costs $22 to produce a swimsuit. They plan to sell them until August 31 at a price of $40 and then mark the price down to $30. Given values for demand through August 31 and after August 31, develop a worksheet to compute the profit from this order. (Hint: you select demand values. The point is to create a formula that will provide the correct profit for any demand level.)
Answer:
Total profit = $1800000 @ a given demand level of 100K units of swimsuit.
Explanation:
Lets first develop a formula representing the Total profit for any demand level, see as follows:
(Selling price per unit× d) - (cost per unit× d)= Total profit
We will be using the short forms of the components in this formula.
SP = selling price per unit
d= demand
cp= cost per unit
TP= Total profit.
Now lets substitute the values into the formula to compute profit at any demand level (in this case 100,000 units of swimsuits) as follows:
Total profit = ($40× 100000) - ($22× 100000)
Total profit = $4000,000 - $2200,000
Total profit = $1800000 @ a given demand level of 100K units of swimsuit.
(NOTE: The formula mentioned above can be used to compute the correct profit for any demand level, even though if there is a change in sp and/or cp, the formula can also be useful.)
Rayburn owns all the shares of Newcastle Corporation, which operates as an S corporation. Rayburn's basis in the stock is $15,000. During the year, he receives a cash distribution of $22,000 from Newcastle. What must Rayburn and Newcastle report as income from the cash distribution?
Answer:
$7,000 $-0-
Explanation:
For Rayburn to know what to record from the cash distribution, he will need to subtract his basis in the stock from the cash distribution he receives
Therefore $22 000 - $15 000 = $7 000.
And Newcastle has no income =$-0-
To the extent that Italian Americans have intermarried with Anglo Americans and are proportionately represented in various societal institutions, they have experienced:
(A) minitorization
(B) ethnic loss
(C) structural assimilation
(D) acculturation
Answer:
The correct answer is (C) structural assimilation
The Florida Real Estate Commission (FREC) was first organized in 1926. It is composed of 7 members who are appointed by the Governor and approved by the Senate. The purpose of the FREC is:__________.
Answer:
Protect the Public by Educating and Licensing Sales Associates and Brokers and creating real estate laws.
Explanation:
The Florida Real Estate Commission (FREC) was established primarily for the protection of the public by educating and reguating real estate licensees. The commission make real estate laws, creates licensing criteria for sales associates and brokers. All these are done primarily to protect the public.
Of the 7 members appointed by the Governor, one is a licensed sales associate or broker and must have held an active license for at least 2 years before the appointment. Four other members are licensed brokers with atleast 5 years active license. The final 2 members must be individuals who have never been sales associates or brokers.
You would like to generate a number of potential ideas. What type of thinking would best facilitate this?a. Egocentric Tendencies b. Systems Thinking c. Critical Thinking
Answer:
The correct answer is letter "C": Critical Thinking.
Explanation:
Critical Thinking is the type of thinking that allows individuals to discriminate and have a particular judgment over a specific matter. It helps by determining accuracy and validity on that topic by gathering a certain quantity of information to then highlight the most relevant.
What caused the U.S. Congress, the OECD, the International Federation of Accountants, and other organizations to enact stricter rules on corporate governance in recent years?
A. Sudden increase in world trade
B. High-profile corporate scandals
C. Significant decline in world trade
D. Expansion of the European Union membership
Answer: The correct answer is "B. High-profile corporate scandals".
Explanation: High-profile corporate scandals caused the U.S Congress, the OECD, the International Federation of Accountants, and other organizations to enact stricter rules on corporate governance in recent years.
The demand curve for pizza is downward sloping because
A. as the price of pizza rises, people will seek other, relatively cheaper alternatives, like hamburgers or tacos.
B. pizza is popular and there are more pizza parlors.
C. when fewer pizzas are produced, the money in people’s pizza budgets does not have to stretch as far.
D. when pizza prices rises, the price of other goods must also be rising, so people cannot afford to buy as much.
Answer:
The correct answer is A
Explanation:
The demand curve is downward sloping, it means or states that there exist the inverse relationship among the quantity demanded and the price. In other words, it states that when the price increases, the demand for the goods decreases whereas, when the price falls, the demand of the goods will increase.
So, the demand curve of pizza is downward sloping, it is because as the price of the pizza increases and people seek other alternatives, which is cheaper, which in turn decreases the demand of pizza.
Which of the following choices concerning the recognition of interest income for corporate bondare CORRECT?
a. If bonds are purchased at a premium in the secondary market, the premium can be amortized or added to the basis of the bond.
b. If bonds were issued at a discount, special original issue discount rules apply
c. The actual interest payments received are included in gross income.
Answer:
The correct answers are letters "A", "B", and "C".
Explanation:
Corporate bonds are securities that firm issues to be sold to investors to raise funds that will be using to keep the company up and running. Investors profit from the interest rate dealt in the bond agreement or sometimes they obtain physical assets of the organization as collateral. If in the secondary market bonds are issued at a premium, the premium can be amortized or applied to the bond base but if the bonds were issued at a discount, discount bond rules take into place. The interest payment received thanks to the bonds are recorded in the gross income.