The following questions contain numbers and you have to do different things with the number in each question. I'm not sure of the steps to take to figure out each answer. And, when I try to do what the book shows me I come up with wrong answers. So if you could give me the formula or explain to me better what each question is trying to say I would love it.
As part of the initial investment, Omar contributes accounts receivable that had a balance of $25,000 in the accounts of a sole proprietorship. Of this amount, $1,150 is completely worthless. For the remaining accounts, the partnership will establish a provision for possible future uncollectible accounts of $750. The amount debited to Accounts Receivable for the new partnership is
a. $23,100
b. $25,000
c. $24,250
d. $23,850
Treasury stock that had been purchased for $6,400 last month was reissued this month for $8,500. The journal entry to record the reissuance would include a credit to
a. Treasury Stock for $8,500
b. Paid-In Capital from Treasury Stock for $8,500
c. Paid-In Capital in Excess of Par/Common for $2,100
d. Paid-In Capital from Treasury Stock for $2,100
____ 11. The Dayton Corporation began the current year with a retained earnings balance of $25,000. During the year, the company corrected an error made in the prior year, which was a failure to record depreciation expense of $3,000 on equipment. Also, during the current year, the company earned net income of $12,000 and declared cash dividends of $5,000. Compute the year end retained earnings balance.
a. $29,000
b. $35,000
c. $39,000
d. $45,000
____ 13. A corporation has 50,000 shares of $28 par value stock outstanding that has a current market value of $150. If the corporation issues a 4-for-1 stock split, the market value of the stock will fall to approximately
a. $7
b. $112
c. $37.50
d. $600
____ 14. The present value of $40,000 to be received in one year, at 6% compounded annually, is (rounded to nearest dollar)
a. $37,736
b. $42,400
c. $40,000
d. $2,400
____ 15. The present value of $30,000 to be received in two years, at 12% compounded annually, is (rounded to nearest dollar)
a. $23,916
b. $37,632
c. $23,700
d. $30,000
14 a
Question 1:
In this question, Omar contributes accounts receivable to a partnership. The total balance of the accounts receivable is $25,000. However, $1,150 is completely worthless and will not be collected. The partnership decides to establish a provision of $750 for possible future uncollectible accounts.
To find the amount debited to Accounts Receivable for the new partnership, you need to subtract the completely worthless amount and the provision from the total balance.
Formula: Total balance - Worthless amount - Provision = Amount debited to Accounts Receivable
Calculation:
$25,000 - $1,150 - $750 = $23,100
Answer: The amount debited to Accounts Receivable for the new partnership is $23,100 (Option a).
Question 2:
In this question, treasury stock that was previously purchased for $6,400 is reissued this month for $8,500.
To record the reissuance, you need to credit the appropriate account.
Answer: The journal entry to record the reissuance would include a credit to Treasury Stock for $8,500 (Option a).
Question 3:
In this question, the Dayton Corporation begins the year with a retained earnings balance of $25,000. During the year, they correct an error from the previous year and record depreciation expense of $3,000. They also earn net income of $12,000 and declare cash dividends of $5,000.
To calculate the year-end retained earnings balance, you need to add net income, deduct cash dividends, and adjust for the correction in the prior year.
Formula: Retained earnings at the beginning + Net income - Cash dividends + Correction = Year-end retained earnings balance.
Calculation:
$25,000 + $12,000 - $5,000 + $3,000 = $35,000
Answer: The year-end retained earnings balance is $35,000 (Option b).
Question 4:
In this question, a corporation has 50,000 shares of $28 par value stock outstanding with a current market value of $150. The corporation decides to issue a 4-for-1 stock split.
To calculate the new market value of the stock, divide the current market value by the split ratio.
Formula: Current market value / Split ratio = New market value
Calculation:
$150 / 4 = $37.50
Answer: The new market value of the stock will be approximately $37.50 (Option c).
Question 5:
In this question, you need to find the present value of $40,000 to be received in one year at a compound interest rate of 6% per annum.
To calculate the present value, you need to use the formula for present value, considering the future value, interest rate, and time.
Formula: Present value = Future value / (1 + interest rate)^time
Calculation:
$40,000 / (1 + 0.06)^1 = $37,736 (rounded to the nearest dollar)
Answer: The present value of $40,000 to be received in one year at 6% compounded annually is $37,736 (Option a).
Question 6:
In this question, you need to find the present value of $30,000 to be received in two years at a compound interest rate of 12% per annum.
To calculate the present value, use the same formula as in the previous question but with a different time period.
Formula: Present value = Future value / (1 + interest rate)^time
Calculation:
$30,000 / (1 + 0.12)^2 = $23,916 (rounded to the nearest dollar)
Answer: The present value of $30,000 to be received in two years at 12% compounded annually is $23,916 (Option a).