Consider the following scenario:

You have an opportunity to acquire a property form First Capital Bank. The bank recently obtained the property from a borrower w

love history [14]

Answer:

Acquiring the property will not be profitable. This is supported by the computation below;

Cash outflow required;

Offer cost $200,000

Other acquisition cost $10,500

Repairs cost $12,000

Selling expenses and fee $3,000

Loan Interest (180,000x8%) $14,400

Total $239,900

Expected selling price $225,000

Expected Loss $14,900

Explanation:

It is assumed that the $180,000 loan from the bank will be completely absorbed in the process of bringing the property into a good selleable condition. Also, the interest payable on loan will be paid monthly which will affect the liquidity of the buyer. Except funds are sought for somewhere else, the buy can not pay for the initial cost of the property. The venture will not be profitable.

Workings:

Cash outflow required;

Offer cost $200,000

Other acquisition cost $10,500

Repairs cost $12,000

Selling expenses and fee $3,000

Loan Interest (180,000x8%) $14,400

Total $239,900

Expected selling price $225,000

Expected Loss $14,900

7 0

2 years ago

Riley Company borrowed $36,000 on April 1, Year 1 from the Titan Bank. The note issued by Riley carried a one year term and a 5%

IRINA_888 [86]

Answer:

The amount of cash flow from operating activities that would appear on the Year 2 statement of cash flows would be -$850 or $850 outflow

Explanation:

The computation of the cash flow from the operating activities for year 2 is shown below:

= Cash revenue in year 2 - interest on notes payable

= $950 - $1,800

= -$850

The negative amount shows an outflow of cash .

The interest on the note payable is computed by

= Borrowed amount × interest rate

= $36,000 × 5%

= $1,800

7 0

2 years ago

Pete has started an electronics firm with the potential for high growth. he obtains funding for the business from a group of inv

TiliK225 [7]

The type of financing that Pete has secured is VENTURE CAPITAL. Venture capital is a type of private equity, a form of financing that provides funds by private investors to new companies with high potentials or emerging companies that are deemed to have high potentials. In return for the money provided by the private investors, they become part owners in the company.

7 0

2 years ago

If the roof a property cost $14,000 and its economic life is 18 years, what would its value be after four years using a straight

tester [92]

Given:
Cost of the roof of a property = $14,000
Economic life = 18 years
To find: value after 4 years using straight-line depreciation method. Solution:
Loss of value per year = cost of roof of property / economic life of property

14000/18 = $777.78
Every year, value of property is getting depreciated by $777.78.
So, value after four years is calculated below:

Value after 1 year = $(14000 - 777.78) = $13222.22
Value after 2 year = $(13222.22 - 777.78) = $12444.44
Value after 3 year = $(12444.44 - 777.78) = $11666.66
Value after 4 year = $(11666.66 - 777.78) = $10888.88
Value after four years = $10888.88

6 0

2 years ago

Bay Company acquires 60, 8%, 5 year, $1,000 Community bonds on January 1, 2014 for $60,000. The journal entry to record this inv

Alenkinab [10]

Answer: Interest revenue for $2400

Explanation:

From the question, we are informed that Bay Company acquires 60, 8%, 5 year, $1,000 Community bonds on January 1, 2014 for $60,000. The journal entry to record this investment includes a debit for Interest revenue for $2400.

This was calculated in the following way:

= $60,000 × 8% × 1/2

= $60,000 × 0.08 × 0.5

= $2400 interest revenue

8 0

2 years ago

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