Northern purchased the entire business of Southern including all its assets and liabilities for $2,400,000 on December 31, 2021.
1 answer:
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Answer and Explanation:
The transactions 3 6 and 8 represents that the expenses are incurred which results in increased and expenses and the transaction 4 and 5 shows that there is an increased in revenue
The journal entry is shown below:
For transaction 3
Rent expense
To Cash
(Being the rent expense is paid for cash is recorded)
As the expense has debit balance so it would be increased
For transaction 6
Electricity expenses Dr
To Cash
(Being the energy usage is paid for cash is recorded)
As the expense has debit balance so it would be increased
For transaction 8
Advertising expense Dr
To Account payable
(Being the advertising expense is recorded)
As the expense has debit balance so it would be increased
For transaction 4
Account receivable Dr
To Service revenue
(Being the service is provided)
As the revenue has credit balance so it would be increased
For transaction 5
Cash Dr
To Service revenue
(Being the service provided is recorded)
As the revenue has credit balance so it would be increased
The attachment is provided for better understanding
The other transactions represent the assets, liabilities and stockholder equity
Answer:
WACC = 9.86%
so correct option is d. 9.86%
Explanation:
given data
cost of equity = 11.6 percent
bonds = 6.2 percent
bonds sell = 103.2 percent
debt book value = $408,000
total assets book value= $952,000
market to book ratio = 2.74 times
to find out
what is the company's WACC
solution
we get here first Total book value of equity that is express as
Total book value of equity = Total assets book value - Total debt book value .................1
Total book value of equity = 952000 - 408000
Total book value of equity = $544000
and here market to book ratio is
market to book ratio =
so market value of equity = (2.74 × 544000) = $1490560
and
After tax cost of debt = 6.2 (1 - tax rate)
After tax cost of debt = 6.2 (1 - 0.4)
After tax cost of debt = 3.72%
and
Market value of Debt = 408000 × 103.2%
Market value of Debt = $421056
so
Total market value = $1490560 + $421056
Total market value is =$1911616
and
WACC will be
WACC = Respective costs × Respective weights
WACC =
WACC = 9.86%
so correct option is d. 9.86%