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AfilCa [17]
2 years ago
12

Joe is thinking about buying a very good lawn tractor to save the money that he now pays to a lawn service. It will cost $3,000

and Joe expects it to last 10 years, with an average depreciation cost of $300 per year. Joe's wife, who opposes this purchase, feels that Joe will get bored with his tractor in a year. Joe counters by telling her that if he does, he will be able to sell it for about $2,700, which is the purchase price minus first-year depreciation. What do you think about Joe's argument?
Business
1 answer:
n200080 [17]2 years ago
3 0

Answer:

Depreciation refers to the expense matching against revenue caused from such capital project. It does not mean that after deducting the depreciation for a year the asset has the same market value as of the carrying value.

Here, the cost of tractor being capital asset is $3,000

Depreciation is $300

Carrying book value = $2,700

Now, it does not reflect the market value. Therefore, Joe's argument that now he can sell the tractor at a price of $2,700 is not valid. As he might or might not be able to sell the tractor for same.

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Vlad1618 [11]

Answer with its Explanation:

Step 1:

First of all record a loan of $3 million loan:

Dr Bank $3,000,000

Cr Loan      $3,000,000

Step 2:

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Dr Finance Charge $3million *3% = $90,000

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Step 3:

The interest on the note is 7% which is $70,000. So the journal entry would be:

Dr Interest Expense $70,000

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8 0
2 years ago
American airlines found that for some jobs it was unwise to train workers on equipment used at the work site. therefore, a speci
chubhunter [2.5K]
The correct answer is simulation training. 

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7 0
2 years ago
Jessica completed a four-year degree program in Finance and Accounting. She hasn’t yet gained any work experience in this field.
siniylev [52]
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Which of the following statements is CORRECT? a. The advantage of the basic earning power ratio (BEP) over the return on total a
leonid [27]

Answer: The advantage of the basic earning power ratio (BEP) over the return on total assets for judging a company's operating efficiency is that the BEP does not reflect the effects of debt and taxes

Explanation:

a. This is correct.

The advantage of basic earning power ratio over the return on the total assets for judging a firm's operating efficiency is that the basic earning power does not reflect effects of debt and taxes.

b. This is incorrect.

Only the price/earnings ratio of the company will tell us nothing about a company. When we compare the price/earnings of a company with the peers, we would know whether such company is under valued, or over valued or maybe fairly valued.

c. This is incorrect.

The total assets is made up of total liabilities plus the shareholders equity, when other things are held constant, less debt simply means less liabilities. To balance both sides, the total assets should reduce as the shareholder's equity is constant. When total assets decreases, the return on the assets will increase.

d. This is incorrect.

We can reach a conclusion on which firm is better managed based on the facts given. The debt ratio is the total liabilities divided by total assets, and a lower ratio is known to be good in comparison to a higher ratio. Similarly, the profit margin is the profit divided by the sales, and low profit margin shows high expenses and also a need for the management to decrease the expense.

3 0
2 years ago
Becky martinez paid $65 a share for stock in gbx corporation. the stock has a current market value of $48 a share and pays $1.60
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Dividend Yield ratio is calculated as percentage by dividing the Dividend per share by Market price per share. The formula for the Dividend Yield ratio is as follow:

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Hence, Dividend Yield = 1.60 /48 = 0.033 = 3.3%

8 0
2 years ago
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