Question
In: Accounting
The following investments are available to you: &n
The following investments are available to you:
Annual pretax yield
- Fully-taxable bonds - 9%
- Non-dividend paying stocks - 7.2%
- Tax-exempt not-for-profit bonds - 6%
The stocks are subject to a tax rate of 40% of the tax rate applicable to fully taxable bonds. This lower tax rate reflects capital gains treatment and deferral of taxation
At what tax rate are you indifferent between investing the fully taxable bonds and stocks and at what tax rate are you indifferent between investing in stocks and tax-exempt bonds?
Solutions
Feedback is welcomed
ekkarill92 answered 1 month agoRelated Solutions
You have a sum of $10,000 available for investments. You are offered two options: Deposit the...
You have a sum of $10,000 available for investments. You are
offered two options:
Deposit the sum in a bank for 3 years, with an interest rate of
10% compounded annually. The bank is also prepared to take on any
additional investments at the same rate at any time for the next 3
years.
Invest the $10,000 in a project with an annual return of $4200.
The project life is 3 years.
Which is the preferred option? Explain your answer....
Investments in available for sale marketable securities: 1) Only include investments in the capital stock of...
Investments in available for sale marketable securities:
1) Only include investments in the capital stock of publicly
traded corporations
2) May be reported in the balance sheet at market values lower
than cost, but never at values in excess of original cost
3) Are carried in the accounting records at current market
values, and therefore do not generate gains or losses when sold at
market values.
4) Are adjusted to current market value at the end of each
accounting period.
A company bought the available for sale investments during 2017 (no investments as of 12/31/16) -...
A company bought the available for sale investments during 2017
(no investments as of 12/31/16)
- they bought 200 shares of apple stock for $40,000 on
2/1/17
- they bought 100 treasury bonds at $1,000 par each with an 4%
interest rate at 4/2/2017 (semi annual on 4/1 and 10/1)
- $50,000 of company B 9% bonds due 3/1/37, interest payable on
3/1. our company paid 50,000 plus accrued interest for these bonds
on 7/1/17
Required:
1- prepare journal entries...
At the beginning of 2018, Ace Company had the following portfolio of investments in available-for-sale debt...
At the beginning of 2018, Ace Company had the following
portfolio of investments in available-for-sale debt securities (all
of which were acquired at par value):
Security
Cost
1/1/2018 Fair Value
A
$20,000
$25,000
B
30,000
29,000
Totals
$50,000
$54,000
During 2018, the following transactions occurred:
May
3
Purchased C debt securities at
their par value for $50,000.
July
1
Sold all of the A securities for
$25,000 plus interest of $1,000.
Dec.
31
Received interest of $7,600 on the
B...
At the beginning of 2018, Ace Company had the following portfolio of investments in available-for-sale debt...
At the beginning of 2018, Ace Company had the following
portfolio of investments in available-for-sale debt securities (all
of which were acquired at par value):
Security
Cost
1/1/2018 Fair Value
A
$20,000
$25,000
B
30,000
29,000
Totals
$50,000
$54,000
During 2018, the following transactions occurred:
May 3
Purchased C debt securities at their par value for
$50,000.
July 1
Sold all of the A securities for $25,000 plus interest of
$1,000.
Dec. 31
Received interest of $7,600 on the B...
At the beginning of 2018, Ace Company had the following portfolio of investments in available-for-sale debt...
At the beginning of 2018, Ace Company had the following
portfolio of investments in available-for-sale debt securities (all
of which were acquired at par value):
Security
Cost
1/1/18 Fair Value
A
$45,000
$56,000
B
68,000
65,000
Totals
$113,000
$121,000
During 2018, the following transactions occurred:
May 3
Purchased C debt securities at their par value for
$50,000.
July 1
Sold all of the A securities for $56,000 plus interest of
$1,000.
Dec. 31
Received interest of $1,000 on the B...
At the beginning of 2016, Ace Company had the following portfolio of investments in available-for-sale securities...
At the beginning of 2016, Ace Company had the following
portfolio of investments in available-for-sale securities (common
stock):
Security
Cost
12/31/15 Fair Value
A
$19,000
$22,500
B
32,000
30,000
Totals
$51,000
$52,500
During 2016, the following transactions occurred:
May
3
Purchased C securities (common
stock) for $14,500.
July
16
Sold all of the A securities for
$22,500.
Dec.
31
Received dividends of $650 on the B
and C securities, for which the following information was
available:
Security
12/31/16 Fair Value...
At the beginning of 2018, Ace Company had the following portfolio of investments in available-for-sale debt...
At the beginning of 2018, Ace Company had the following
portfolio of investments in available-for-sale debt securities (all
of which were acquired at par value):
Security
Cost
1/1/2018 Fair Value
A
$20,000
$25,000
B
30,000
29,000
Totals
$50,000
$54,000
During 2018, the following transactions occurred:
May 3
Purchased C debt securities at their par value for
$50,000.
July 1
Sold all of the A securities for $25,000 plus interest of
$1,000.
Dec. 31
Received interest of $7,600 on the B...
At the beginning of 2018, Ace Company had the following portfolio of investments in available-for-sale debt...
At the beginning of 2018, Ace Company had the following
portfolio of investments in available-for-sale debt securities (all
of which were acquired at par value):
Security
Cost
1/1/2018 Fair Value
A
$20,000
$25,000
B
30,000
29,000
Totals
$50,000
$54,000
During 2018, the following transactions occurred:
May 3
Purchased C debt securities at their par value for
$50,000.
July 1
Sold all of the A securities for $25,000 plus interest of
$1,000.
Dec. 31
Received interest of $7,600 on the B...
At the end of 2018, Terry Company prepared the following schedule of investments in available-for-sale debt...
At the end of 2018, Terry Company prepared the following
schedule of investments in available-for-sale debt securities:
Company
Amortized Cost
12/31/18 Fair Value
Cumulative Change in Fair Value
Morgan Company
$30,000
$29,200
$(800)
Nance Company
50,000
53,200
3,200
Totals
$80,000
$82,400
$2,400
During 2019, the following transactions occurred:
July 1
Purchased Oscar Company debt securities with a par value of
100,000 for $98,000. The securities carry an annual interest rate
of 10%, mature on July 1, 2024, and pay interest...
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