A newly issued bond pays its coupons once a year. Its coupon rate is 4%, its maturity is 10 years, and its yield to maturity is 7%.
a. Find the holding-period return for a one-year
investment period if the bond is selling at a yield to maturity of
6% by the end of the year. (Do not round intermediate
calculations. Round your answer to 2 decimal places.)
Holding-period return
%
b. If you sell the bond after one year when its yield is 6%, what taxes will you owe if the tax rate on interest income is 40% and the tax rate on capital gains income is 30%? The bond is subject to original-issue discount (OID) tax treatment. (Do not round intermediate calculations. Round your answers to 2 decimal places.)
| Tax on interest income | $ |
| Tax on capital gain | $ |
| Total taxes | $ |
c. What is the after-tax holding-period return on the bond? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
After-tax holding-period return
%
d. Find the realized compound yield before taxes for a two-year holding period, assuming that (i) you sell the bond after two years, (ii) the bond yield is 6% at the end of the second year, and (iii) the coupon can be reinvested for one year at a 2% interest rate. (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Realized compound yield before taxes
%
e. Use the tax rates in part (b) to compute the after-tax two-year realized compound yield. Remember to take account of OID tax rules. (Do not round intermediate calculations. Round your answer to 2 decimal places.)
After-tax two-year realized compound yield %
In: Finance
A newly issued bond pays its coupons once a year. Its coupon rate is 5.6%, its maturity is 20 years, and its yield to maturity is 8.6%.
a. Find the holding-period return for a one-year
investment period if the bond is selling at a yield to maturity of
7.6% by the end of the year. (Do not round intermediate
calculations. Round your answer to 2 decimal places.)
Holding-period return
%
b. If you sell the bond after one year when its yield is 7.6%, what taxes will you owe if the tax rate on interest income is 40% and the tax rate on capital gains income is 30%? The bond is subject to original-issue discount (OID) tax treatment. (Do not round intermediate calculations. Round your answers to 2 decimal places.)
| Tax on interest income | $ |
| Tax on capital gain | $ |
| Total taxes | $ |
c. What is the after-tax holding-period return on the bond? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
After-tax holding-period return
%
d. Find the realized compound yield before taxes for a two-year holding period, assuming that (i) you sell the bond after two years, (ii) the bond yield is 7.6% at the end of the second year, and (iii) the coupon can be reinvested for one year at a 3.6% interest rate. (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Realized compound yield before taxes
%
e. Use the tax rates in part (b) to compute the after-tax two-year realized compound yield. Remember to take account of OID tax rules. (Do not round intermediate calculations. Round your answer to 2 decimal places.)
After-tax two-year realized compound yield %
In: Finance
Sylvia Sweet opened Sweet Angels, Inc. on June 1, 2020. During June, the following transactions were completed:
|
June 1 |
Issued 5,000 shares of Cleaning Angels common stock for $13,000. Each share has a $1.00 par. |
|
2 |
Borrowed $7,500 on a 2-year, 8% note payable. |
|
2 |
Paid $9,000 to purchase used floor and window cleaning equipment from a company going out of business ($4,820 was for the floor equipment and $4,180 for the window equipment). |
|
2 |
Paid $250 for June for Internet and phone service. |
|
3 |
Purchased cleaning supplies for $980 on account. |
|
4 |
Hired 4 employees. Each will be paid $450 per 5-day work week (Monday-Friday). Employees will begin working on Monday, June 8th. |
|
4 |
Discussions with the insurance agent indicated that providing outside window cleaning services would cost too much to insure. Sylvia sold the window cleaning equipment for $4,000 cash. |
|
4 |
Obtained insurance coverage for $9,840 per year. Coverage runs from June 4, 2020, through June 04, 2021. Sylvia paid $2,460 cash for the first quarter of coverage. |
|
8 |
Paid $2.80 per share to buy 300 shares of Cleaning Angels, Inc common stock from a shareholder who disagreed with management goals. The shares will be held as treasury stock. |
|
12 |
Paid $300 on amount owed on cleaning supplies. |
|
15 |
Paid for employees’ wages for the week of June 8-12. |
|
15 |
Billed customers $3,600 for cleaning services performed through June 12, 2020. |
|
17 |
Received $600 from a customer for 4 weeks of cleaning services to begin on June 22, 2020. |
|
22 |
Billed customers $4,300 for cleaning services performed through June 19. |
|
22 |
Paid employees’ wages for the week of June 15-19 |
|
23 |
Collected $2,400 cash from customers billed on June 15. |
|
25 |
Paid $250 for Internet and phone services for July. |
|
29 |
Declared and paid a cash dividend of $0.08 per share. |
|
29 |
Collected $3,100 from customers billed on June 15 & 22. |
|
29 |
Billed customers $3,900 for cleaning services performed through June 26th |
|
29 |
Paid employees’ wages for the week of June 22-26 |
|
30 |
Received notice that a customer who was billed $150 for services performed June 10th has filed for bankruptcy. Sweet Angels, Inc does not expect to collect any portion of this outstanding receivable. (Sweet Angels will follow the GAAP Guidelines for uncollectible accounts.) |
Adjustment Data:
A. Services performed for customers through June 30, 2020, but unbilled and uncollected were $1,500.
B. Cleaning Angels used the allowance method to estimate bad debts. Cleaning Angels estimates that 3% of its month-end receivables will not be collected.
C. Record 1 month of depreciation for the floor equipment. Use the straight-line method, an estimated life of 5 years, and $400 salvage value.
D. Record 1 month of insurance expense.
E. An inventory count shows $350 of supplies on hand at June 30th.
F. Record services performed for the customer who paid in advance on June 17th.
G, Accrue for wages owed through June 30, 2020.
H. Accrue for interest expense for one month.
I. Sylvia estimates a 20% income tax rate. (Hint: Prepare an income statement up to “income before taxes” to help with the income tax calculation.)
Instructions:
In: Accounting
Sylvia Sweet opened Sweet Angels, Inc. on June 1, 2020. During June, the following transactions were completed:
|
June 1 |
Issued 5,000 shares of Cleaning Angels common stock for $13,000. Each share has a $1.00 par. |
|
2 |
Borrowed $7,500 on a 2-year, 8% note payable. |
|
2 |
Paid $9,000 to purchase used floor and window cleaning equipment from a company going out of business ($4,820 was for the floor equipment and $4,180 for the window equipment). |
|
2 |
Paid $250 for June for Internet and phone service. |
|
3 |
Purchased cleaning supplies for $980 on account. |
|
4 |
Hired 4 employees. Each will be paid $450 per 5-day work week (Monday-Friday). Employees will begin working on Monday, June 8th. |
|
4 |
Discussions with the insurance agent indicated that providing outside window cleaning services would cost too much to insure. Sylvia sold the window cleaning equipment for $4,000 cash. |
|
4 |
Obtained insurance coverage for $9,840 per year. Coverage runs from June 4, 2020, through June 04, 2021. Sylvia paid $2,460 cash for the first quarter of coverage. |
|
8 |
Paid $2.80 per share to buy 300 shares of Cleaning Angels, Inc common stock from a shareholder who disagreed with management goals. The shares will be held as treasury stock. |
|
12 |
Paid $300 on amount owed on cleaning supplies. |
|
15 |
Paid for employees’ wages for the week of June 8-12. |
|
15 |
Billed customers $3,600 for cleaning services performed through June 12, 2020. |
|
17 |
Received $600 from a customer for 4 weeks of cleaning services to begin on June 22, 2020. |
|
22 |
Billed customers $4,300 for cleaning services performed through June 19. |
|
22 |
Paid employees’ wages for the week of June 15-19 |
|
23 |
Collected $2,400 cash from customers billed on June 15. |
|
25 |
Paid $250 for Internet and phone services for July. |
|
29 |
Declared and paid a cash dividend of $0.08 per share. |
|
29 |
Collected $3,100 from customers billed on June 15 & 22. |
|
29 |
Billed customers $3,900 for cleaning services performed through June 26th |
|
29 |
Paid employees’ wages for the week of June 22-26 |
|
30 |
Received notice that a customer who was billed $150 for services performed June 10th has filed for bankruptcy. Sweet Angels, Inc does not expect to collect any portion of this outstanding receivable. (Sweet Angels will follow the GAAP Guidelines for uncollectible accounts.) |
Adjustment Data:
A. Services performed for customers through June 30, 2020, but unbilled and uncollected were $1,500.
B. Cleaning Angels used the allowance method to estimate bad debts. Cleaning Angels estimates that 3% of its month-end receivables will not be collected.
C. Record 1 month of depreciation for the floor equipment. Use the straight-line method, an estimated life of 5 years, and $400 salvage value.
D. Record 1 month of insurance expense.
E. An inventory count shows $350 of supplies on hand at June 30th.
F. Record services performed for the customer who paid in advance on June 17th.
G, Accrue for wages owed through June 30, 2020.
H. Accrue for interest expense for one month.
I. Sylvia estimates a 20% income tax rate. (Hint: Prepare an income statement up to “income before taxes” to help with the income tax calculation.)
Instructions:
In: Accounting
Erin is a chemical engineer and saves twelve percent of her salary in her 401(k) account with Axis Chemical. Axis Chemical makes a 3% match to employees’ 401(k) contributions. Erin earned $80,000 in 2020. In addition to her 401(k) contribution in 2020, Erin also saved $2,400 in a Roth IRA. What is Erin’s savings rate in 2020?
In: Finance
On May 1, 2020, Johnson Corporation issued $300,000, ten-year, 12% bonds which were priced to yield 14%. The bonds were dated March 1, 2020, and pay interest semiannually on March 1 and September 1. Johnson is a calendar year corporation. Determine the issue price of the bonds and prepare the September 1, 2020 journal entry for Johnson Corporation.
In: Accounting
During 2020, Harris Inc. reported revenues of $237,000 and expenses of $130,000, and declared cash dividends of $65,000. Retained Earnings on December 31, 2019 was $165,000. Required: Prepare closing journal entries as at December 31, 2020; show your journal entries. Calculate the balance in Retained Earnings on December 31, 2020. Please show your work.
(use appendix to solve)
In: Accounting
On 1 July 2020, Brooklyn Ltd (lessor) leased Equipment to New Ltd (lessee).
The lease agreement contained the following:
|
Annual Lease receivable on 1 July (in advance) |
$50,000 |
|
Lease Receivable on 1 July 2020 – measured at NPV net of initial lease receipts |
$176,992 |
What would be the journal entries on 1 July 2020 for the lessor (Brooklyn Ltd)?
In: Accounting
X Company estimates the following for its only two products for 2020 - X and Y:
| X | Y | |
| Unit sales | 4,850 | 630 |
| Selling price | $11.30 | $33.00 |
| Variable cost | $5.40 | $25.80 |
Total fixed costs in 2020 are expected to be $17,400. What is the
expected weighted average contribution margin per unit in 2020
(rounded to two decimal places)?
In: Accounting
Tia is married and is employed by Carrera Auto Parts. In 2019, established high-deductible health insurance for all its employees. The plan has a $2,700 deductible for married taxpayers. Carrera also contributes 5% of each employee’s salary to a Health Savings Account. Tia’s salary is $43,000 in 2019 and $45,000 in 2020. Tia makes the maximum allowable contribution to her HSA in 2019 and 2020. She received $600 from the HSA for her 2019 medical expenses. In 2020, she spends $2,000 on medical expenses from her HSA. The MSA earns $30 in 2019 and $48 in 2020.
Round intermediate computations and final tax liability to the nearest dollar.
a. What is the effect of the HSA transactions on Tia's adjusted gross income?
The maximum aggregate contribution to an HSA for a family in 2019 is $______. The earnings of an HSA, as well as medical reimbursements, are (excludable/included). Based on Carrera's contribution, in 2019, Tia (can/cannot deduct) for AGI $_______
b. What is the balance in Tia's HSA account at the end of 2020?
Tia has $_________ in her HSA account at the end of 2020.
In: Finance