If a portfolio regularly falls twice as much as a benchmark index rises, the portfolio's beta coefficient is _________

On August 1, 2021, Limbaugh Communications issued $30 million of 10% nonconvertible bonds at 104. The bonds are due on July 31,

kodGreya [7K]

Answer:

Answers are journal entries, in the explanation box

<h2>Explanation:</h2><h3>Bonds:</h3>

Bonds is an interest bearing security or long term promissory note that a company represents while borrowing money with the interested investors.

<h2>Requirement 1:</h2><h2>Prepare the journal entries on August 1, 2021, to record:</h2><h3>Requirement 1(a):</h3>

The issuance of the bonds by Limbaugh (L)

Solution:

Following is the journal entry for the issuance of bonds on August 1, 2021:

1st August 2021:

Debit: Cash $31,200,000 (Working 1)

Debit: Discount on bonds payable $3,600,000 (Working 3: Note 1)

Credit: Bonds payable $30,000,000

Credit: Equity - stock warrants $4,800,000 (Working 2)

Working 1:

Calculation of cash received:

Cash received = Face value × Issued rate

Cash received = $30,000,000 × 104%

Cash received = $31,200,000

Working 2:

Calculation of amount of equity - stock warrants:

Equity - stock warrants = Market price per warrant × number of warrants × number of bonds

Equity - stock warrants = $8 × 20 warrants × (30,000,000÷ 1,000 bonds)

Equity - stock warrants = $4,800,000

Working 3:

Calculate the discount on bonds payable:

Discount on bonds payable = Bonds payable + Equity stock warrants - Cash received

Discount on bonds payable = $30,000,000 + $4,800,000 - $31,200,000

Discount on bonds payable = $3,600,000

Note 1: Since discount on bonds issues is an expense, therefore, it is debited.

<h3>Requirement: 1 (b)</h3>

Prepare the journal entries on August 1, 2021, to record the investment by Interstate (I).

The following is the journal entry on August 1, 2021 to record the investment by Interstate (I) i.e. investor:

Debit: Investment in stock $960,000 (Working 4)

Debit: Investment in bonds $6,000,000 (Working 5)

Credit: Discount on bonds investment $720,000 (Working 7)

Credit: Cash $6,240,000 (Working 6)

Working 4:

Calculate the investment in stock warrants:

Investment in stock warrant = Equity - stock warrant × 20%

Investment in stock warrant = $4,800,000 × 20%

Investment in stock warrant = $960,000

Working 5:

Calculate the amount of investment in bonds:

Investment in bonds = Face value × 20%

Investment in bonds = $30,000,000 × 20%

Investment in bonds = $6,000,000

Working 6:

Calculate the amount of cash paid:

Cash paid = Face value × issued rate × 20%

Cash paid = $30,000,000 × 104% × 20%

Cash paid = $6,240,000

Working 7:

Calculate discount on bond investment:

Discount on bond investment = Investment in stock warrants + Investment in bonds - Cash paid

Discount on bond investment = $960,000 + $6,000,000 - $6,240,000

Discount on bond investment = $720,000

<h2>Requirement 2:</h2><h2>Prepare the journal entries for both Limbaugh and Interstate in February 2032, to record the exercise of the warrants.</h2>

<h3>Requirement 2(a)</h3>

Prepare the journal entries for Limbaugh in February 2032, to record the exercise of the warrants.

Solution:

Following is the journal entry for exercise of warrants by Limbaugh:

Debit: Cash: $7,200,000 (Working 8)

Debit: Equity - stock warrants $960,000 (Working 9)

Credit: Common stock - equity $8,160,000

Working 8:

Amount of cash received from the exercise:

Amount of cash received from the exercise = Exercise price per warrant × Number of warrants × Number of bonds × 20%

Amount of cash received from the exercise = $60 × 20 warrants × ($30,000,000/$1,000) × 20%

Amount of cash received from the exercise = $7,200,000

Working 9:

Amount of equity - stock warrants from exercise:

Equity - stock warrants = Total equity stock-warrants × 20%

Equity - stock warrants = $4,800,000 × 20%

Equity - stock warrants = $960,000

Working 10:

Amount of common stock:

Amount of common stock = Cash received + equity - stock warrants

Amount of common stock = $7,200,000 + $960,000

Amount of common stock = $8,160,000

<h3>Requirement 2(b)</h3>

Prepare the journal entries for Interstate in February 2032, to record the exercise of the warrants.

Solution:

The journal entry is as follows:

Debit: Investment in common stock: $8,160,000 (Working 13)

Credit: Investment in stock warrants: $960,000 (Working 11)

Credit: Cash: $7,200,000 (Working 12)

Working 11:

Amount of equity - stock warrants from exercise:

Equity - stock warrants = Total equity stock-warrants × 20%

Equity - stock warrants = $4,800,000 × 20%

Equity - stock warrants = $960,000

Working 12:

Calculate the amount of cash paid for exercise:

Amount of cash paid for the exercise = Exercise price per warrant × Number of warrants × Number of bonds × 20%

Amount of cash paid for the exercise = $60 × 20 warrants × ($30,000,000/$1,000) × 20%

Amount of cash paid for the exercise = $7,200,000

Working 13:

Investment in common stock:

Amount of common stock:

Investment in common stock = Cash paid + Investment in stock warrants

Investment in common stock = $7,200,000 + $960,000

Investment in common stock = $8,160,000

3 0

2 years ago

Lachlan Stuart is employed by International Paper, a company that values his vision and creativity. To stay ahead in a very comp

Sveta_85 [38]

Answer: c) intrapreneur

Explanation:

Intrapreneur is the person who who belongs to a large firm and acts in the manner of entrepreneur to make innovative development ideas for any project .They help in promotion of production and innovation along with taking measures for functioning in organization.

According to the question,Lachlan Stuart is an intrapreneur who is an employee in a company .He is responsible for methods and ideas development to be ahead of other competing firms.

Other options are incorrect because in-sourced entrepreneur, corporate entrepreneur and multipreneur are not the way in which a person acts like an entrepreneur even through he/she is working for a firm.Thus, the correct option is option(c).

8 0

1 year ago

Suppose every Buick owner's demand for gasoline is 20 - 5 p for p less than or equal to 4 and 0 for p > 4. Every Dodge owner'

mario62 [17]

I think the answer is b

4 0

2 years ago

On December 31, 2016 before adjusting entries, Accounts Receivable for Nickolas Company had a debit balance of $200,000, and the

Karo-lina-s [1.5K]

Answer:

b. The balance of the Allowance for Doubtful Accounts will be $22,000 after adjustment.

Explanation:

If credit losses are estimated at 1% of credit sales than balance of allowance for doubtful account after adjustment will be = $6,000 + $1,600,000 * 1%

= $6,000 + $16,000

= $22,000

4 0

1 year ago

The typical consumer's food basket in the base year 2015 is as follows: 30 chickens at $4 each 10 hams at $5 each 10 steaks at $

jarptica [38.1K]

Answer:

A) change in the cost of eating index = 20% increase

B) Suppose that consumers are completely indifferent between two chickens and one ham. For this example, how large is the substitution bias in the official "cost-of-eating" index?

The INCREASE in the cost-of-eating index is 18 %.

The OVERESTIMATE of inflation in the cost of eating reflects substitution bias.

Explanation:

2015

product units unit cost total

chickens 30 $4 $120

hams 10 $5 $50

steaks 10 $8 $80

total $250

2016

product units unit cost total

chickens 30 $5 $150

hams 10 $7 $70

steaks 10 $8 $80

total $300

A) ($300 - $250) / $250 = 20%

B)

if consumers are indifferent for 2 chickens per 1 ham, then the new basket should be assuming consumers will purchase the cheapest option:

2016

product units unit cost total

hams 25 $7 $175

steaks 10 $8 $80

total $255

the increase in inflation would have been = ($255 - $250) / $250 = 2%

the substitution bias = reported inflation - real inflation = 20% - 2% = 18%

8 0

2 years ago

If a portfolio regularly falls twice as much as a benchmark index rises, the portfolio's beta coefficient is __________.