Answer and Explanation:
The computation is shown below:
a. Schedule variance (SV)
= Earned value - planned cost
= $600 - $560
= $40
b. Cost variance (CV)
= Earned value - actual cost
= $600 - $650
= -$50
c. Consumer price index (CPI)
= Earned value ÷ actual cost
= $600 ÷ 650
= 0.92
As we can see from the above calculation, the project showed negative CV i.e overbudgeted but at the same time, it also showed Positive SV i.e the project is on schedule.
And, the CPI determines that the completing cost is more than the planned cost that reflects the bad condition
Researchers have identified the tendency for increasing diversity among team members to create difficulties even as it offers improved potential for problem solving is known as the __________.
a. positive-negative dilemma
b. enhancement-enactment dilemma
c. upside-downside dilemma
d. good news-bad news dilemma
e. diversity-consensus dilemma
Answer:
. diversity-consensus dilemma
Explanation:
Even though it is important to have diverse people in a group to provide varying opinions
and perspectives, sometimes this diversity leads to conflicts among group members and this can hinder decision making even though the potential to make better decisions are improved. This is known as diversity-consensus dilemma.
I hope my answer helps you
Answer:
E
Explanation:
Bond A pays $8,000 in 20 years. Bond B pays $8,000 in 10 years. (To keep things simple, assume these are zero-coupon bonds, which means the $8,000 is the only payment the bondholder receives.)
Suppose the interest rate is 7 percent.
Using the rule of 70, the value of Bond A is approximately_______ , and the value of Bond B is approximately_______ .
Now suppose the interest rate increases to 14 percent.
Using the rule of 70, the value of Bond A is now approximately_________ , and the value of Bond B is approximately________ . Comparing each bond's value at 7 percent versus 14 percent, Bond A's value decreases by a_______ percentage than Bond B's value. The value of a bond__________ when the interest rate increases, and bonds with a longer time to maturity are _________sensitive to changes in the interest rate.
Answer:
To find the value of bond, let's use the formula:
Value of bond = price of bond / (1 + interest rate)ⁿ
Here n represents number of years.
At 7% interest rate:
Value of bond A = [tex]\frac{8000}{(1+0.07)^2^0} = 2067.35[/tex]
Value of bond B = [tex]\frac{8000}{(1+0.07)^1^0} = 4066.79[/tex]
At 14% interest rate:
Value of bond A = [tex] = \frac{8000}{(1+0.14)^20} = 582.09 [/tex]
Value of bond B = [tex] = \frac{8000}{(1+0.14)^10} = 2157.95 [/tex]
The difference between bond A at 7% and 14%:
$582.09 - $2067.35 = -$1485.26
The difference between bond B at 7% and 14%:
$2157.95 - $4066.79 = -$1908.84
% decrease between bond A and B:
[tex] \frac{1908.84 - 1485.26}{1908.84} * 100 = 22.19 [/tex]
Therefore, from the above calculations, we have the following:
Suppose the interest rate is 7%, Using the rule of 70, the value of Bond A is approximately $2067.35, and the value of Bond B is approximately $4066.79 .
Now suppose the interest rate increases to 14 percent.
Using the rule of 70, the value of Bond A is now approximately $528.09 , and the value of Bond B is approximately $2157.95 .
Comparing each bond's value at 7 percent versus 14 percent, Bond A's value decreases by a 22.19 percentage than Bond B's value.
The value of a bond decreases when the interest rate increases, and bonds with a longer time to maturity are more sensitive to changes in the interest rate.
8. Kidder Corporation hired Louis as a stockbroker. The employment contract provided that all disputes between the parties would be decided by arbitration. The employment agreement was a standardized form prepared by the corporation. Does Louis have a valid challenge to the legality of the contract
Answer:
idk
Explanation:
A business operated at 100% of capacity during its first month and incurred the following costs: Production costs (5,000 units): Direct materials $70,000 Direct labor 20,000 Variable factory overhead 10,000 Fixed factory overhead 2,000 $102,000 Operating expenses: Variable operating expenses $17,000 Fixed operating expenses 1,000 18,000 If 1,000 units remain unsold at the end of the month and sales total $150,000 for the month, the amount of operating income reported on the absorption costing income statement would be
Answer:
Net operating income= $50,400
Explanation:
Giving the following information:
Production costs (5,000 units):
Direct materials $70,000
Direct labor 20,000
Variable factory overhead 10,000
Fixed factory overhead 2,000
Total= 102,000
Operating expenses:
Variable operating expenses $17,000
Fixed operating expenses 1,000
Sales= 4,000 units
Sales revenue= $150,000
The absorption costing method includes all costs related to production, both fixed and variable. The unit product cost is calculated using direct material, direct labor, and total unitary manufacturing overhead.
Unitary product cost= 102,000/5,000= $20.4
Income statement:
Sales= 150,000
COGS= 20.4*4,000= (81,600)
Gross profit= 68,400
Variable operating expenses= (17,000)
Fixed operating expenses= (1,000)
Net operating income= 50,400
The selection process for a school teacher's job requires the applicant to keep a class of thirty students engaged in a classroom activity for an hour. The candidate is evaluated by the interviewers during this period, and the activity plays a vital role in the selection process. This is an example of which of the following types of tests?A. Physical ability test
B. Personality test
C. Ability test
D. Paper-and-pencil test
E. Performance Test
Answer:
E. Performance Test
Explanation:
Based on the scenario being described in the question it can be said that this is an example of a performance test. These are simply tests in which an individual is observed performing the tasks/actions that are required of them. Their performance is evaluated based on a predefined guideline in order to rate their efficiency. Which is what the interviewer is doing to the candidates in order to find the best individual to hire as a teacher.
On November 4, 2016, Blue Company acquired an asset (27.5-year residential real property) for $200,000 for use in its business. In 2016 and 2017, respectively, Blue took $642 and $5,128 of cost recovery. These amounts were incorrect; Blue applied the wrong percentages (i.e., those for 39-year rather than 27.5-year assets). Blue should have taken $910 and $7,272 cost recovery in 2016 and 2017, respectively. On January 1, 2018, the asset was sold for $180,000. Enter the values for each item below. If required, round all computations to the nearest dollar.a. The adjusted basis of the asset at the end of 2017 is $.b. The cost recovery deduction for 2018 is $.c. The__________ on the sale of the asset in 2018 is $
Answer:
a. $191,818
b. $303
c. The loss on the ale of the asset in 2018 is $11,515.
Explanation:
a. The adjusted basis of the asset at the end of 2017 is $
Asset cost = $200,000
Greater of allowed and allowable cost recover in 2016 = $910
Greater of allowed and allowable cost recover in 2017 = $7,272
Basis at the end of 2017 = Asset cost - Greater of allowed and allowable cost recover in 2016 - Greater of allowed and allowable cost recover in 2016 = $200,000 - $910 - $7,272 = $191,818
b. The cost recovery deduction for 2018 is $.
Cost recovery for 2018 = $200,000 * (0.5/12) * 3.636% = $303
c. The__________ on the sale of the asset in 2018 is $
Basis on date of sale = Basis at the end of 2017 - Cost recovery for 2018 = $191,515
Profit (Loss) on sale of asset = Sales proceed - Basis on date of sale = $180,000 − $191,515 = ($11,515) .
Therefore, the loss on the ale of the asset in 2018 is $11,515.
Accounts Receivable Analysis A company reports the following: Sales $1,182,600 Average accounts receivable (net) 43,800 Determine (a) the accounts receivable turnover and (b) the number of days' sales in receivables. Round interim calculations to the nearest dollar and final answers to one decimal place. Assume a 365-day year. a. Accounts receivable turnover b. Number of days' sales in receivables days
Answer:
a. The account Receivable Turnover is 27 times
b. 13.52 days approximately
Explanation:
1. Account Receivable Turnover = Net sales / Average Account Receivables
Account Receivable Turnover = $1,182,600 / $43,800
Account Receivable Turnover = 27 times
The account Receivable Turnover is 27 times
2. Number of days' sales in receivables days = (Average Account Receivables * 365 days) / Net sales
=(43,800 * 365) / 1,182,600
=13.5185
=13.52 days approximately
If 4 million kegs of beer are sold, , which means that: It would be fairer for society to devote fewer resources to the production of beer. It would be fairer for society to devote more resources to the production of beer. Society is currently devoting the efficient quantity of resources to the production of beer. It would be more efficient for society to devote more resources to the production of beer. If 12 million kegs of beer are sold, , which means that: It would be fairer for society to devote more resources to the production of beer. Society is currently devoting the efficient amount of resources to the production of beer. It would be fairer for society to devote fewer resources to the production of beer. It would be more efficient for society to devote fewer resources to the production of beer. The efficient allocation of resources would result in the production of kegs of beer.
Answer:
1. It would be more efficient for society to devote more resources to the production of beer.
2. Society is currently devoting the efficient amount of resources to the production of beer.
Explanation:
1. If 4 million kegs of beer are sold, the marginal benefit exceeds marginal cost which means that: the society values this quantity of kegs of beer and would be more beneficial and efficient if the society devote more resources to beer production.
2. If 12 million kegs of beer are sold, where marginal cost equal marginal benefit, it means that this is a good point in which shows an efficient allocation of resources to beer production because the marginal cost of the resources is equal to the marginal benefit of each keg of beer.
If 4 million kegs of beers are sold, marginal benefit exceeds the marginal cost, which means that :
It would be more efficient for society to devote more resources to the production of beers.
Reason :
the advantage of an additional unit of producing a good is more than the cost of producing it.hence it is good to produce more where marginal benefit equals marginal cost.If 12 million kegs of beers are sold, marginal cost exceeds the marginal benefit, which means that :
It would be more efficient for society to devote fewer resources to the production of beers.
Reason :
the advantage of an additional unit of producing a good is less than the cost of producing it.hence it is good to produce less where marginal benefit equals marginal cost.Learn More :
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The Melrose Corporation produces a single product, Product C. Melrose has the capacity to produce 90,000 units of Product C each year. If Melrose produces at capacity, the per unit costs to produce and sell one unit of Product C are as follows:
Direct materials $22.80
Direct labor $18.60
Variable manufacturing overhead $14.20
Fixed manufacturing overhead $16.00
Variable selling expense $12.80
Fixed selling expense $8.40
The regular selling price of one unit of Product C is $100.80. A special order has been received by Melrose from Moore Corporation to purchase 3,500 units of Product C during the upcoming year. If this special order is accepted, the variable selling expense will be reduced by 75%. Total fixed manufacturing overhead and fixed selling expenses would be unaffected except that Melrose will need to purchase a specialized machine to engrave the Moore name on each unit of product C in the special order. The machine will cost $6,300 and will have no use after the special order is filled. Assume that direct labor is a variable cost.
Assume that Melrose expects to sell 68,000 units of Product C to regular customers next year. At what selling price for the 3,500 units would Melrose be economically indifferent between accepting and rejecting the special order from Moore?
a. $59.10
b. $60.60
c. $81.10
d. $82.60
Answer:
Indifferent selling price =$67 per units
Explanation:
The selling at which Mel rose would be economically be indifferent between accepting and rejecting the special order from Moore is that that equates the relevant cost of making to the revenue from t
Relevant variable cost making
= 22.80 + 18.60 + 14.20 + (75%×12.80) = $65.2
$
Variable cost of special order (= $65.2 × 3,500)= 228,200
Cost of machine 6,300
Total relevant cost of special order 234,500
The price at which Melrose would be indifferent
= total relevant cost/ number of units
$234,500/3500 units
=$67 per units
. Eric has another get-rich-quick idea, but needs funding to support it. He chooses an all-debt funding scenario. He will borrow $1 comma 823 from Wendy, who will charge him 4% on the loan. He will also borrow $1 comma 533 from Bebe, who will charge him 6% on the loan, and $644 from Shelly, who will charge him 12% on the loan. What is the weighted average cost of capital for Eric? What is the weighted average cost of capital for Eric?
Answer:
6.04%
Explanation:
The weighted average cost of capital (WACC) can be described as the average rate that is expected that a business will pay to finance its assets to all holders of its security.
The weighted average cost of capital (WACC) can be estimated as the summation of the products of the weight of each loan in the total loan and their interest rate for this question as follows:
Total loan amount = $1,823 + $1,533 + $644 = 4,000
Weight of loan from Wendy = $1,823 / $4,000 = 0.46, or 46%
Weight of loan from Bebe = $1,533 / $4,000 = 0.38, or 38%
Weight of loan from Shelly = $644 / $4,000 = 0.16, or 16%
Weighted average cost of capital = (46% * 4%) + (38% * 6%) + (16% * 12%) = 6.04%.
Therefore, the weighted average cost of capital for Eric is 6.04%.
Tipton Processing maintains its internal inventory records using average cost under a perpetual inventory system. The following information relates to its inventory during the year: Jan. 1 Inventory on hand—80,000 units; cost $4.25 each. Feb. 14 Purchased 120,000 units for $4.50 each. Mar. 5 Sold 150,000 units for $14.00 each. Aug. 27 Purchased 50,000 units for $4.80 each. Sep. 12 Sold 60,000 units for $14.00 each. Dec. 31 Inventory on hand—40,000 units. Required: 1. Determine the amount Tipton would calculate internally for ending inventory and cost of goods sold using average cost under a perpetual inventory system. 2. Determine the amount Tipton would report externally for ending inventory and cost of goods sold using last-in, first-out (LIFO) under a periodic inventory system. 3. Determine the amount Tipton would report for its LIFO reserve at the end of the year. 4. Record the year-end adjusting entry for the LIFO reserve, assuming the balance at the beginning of the year was $8,000.
Answer:
1. Determine the amount Tipton would calculate internally for ending inventory and cost of goods sold using average cost under a perpetual inventory system.
COGS = $936,000Ending inventory = $184,0002. Determine the amount Tipton would report externally for ending inventory and cost of goods sold using last-in, first-out (LIFO) under a periodic inventory system.
COGS using LIFO = $950,000Ending inventory = $170,0003. Determine the amount Tipton would report for its LIFO reserve at the end of the year.
$22,0004. Record the year-end adjusting entry for the LIFO reserve, assuming the balance at the beginning of the year was $8,000.
Dr Cost of goods sold 14,000
Cr LIFO reserve 14,000
Explanation:
1)
Jan. 1 Inventory on hand—80,000 units; cost $4.25 each.
Feb. 14 Purchased 120,000 units for $4.50 each.
Mar. 5 Sold 150,000 units for $14.00 each.
COGS = {[(80,000 x $4.25) + (120,000 x $4.50)] / 200,000} x 150,000 = $660,000
remaining inventory 50,000 units at $4.40 = $220,000
Aug. 27 Purchased 50,000 units for $4.80 each.
Sep. 12 Sold 60,000 units for $14.00 each.
COGS = {[(50,000 x $4.40) + (50,000 x $4.80)] / 100,000} x 60,000 = $276,000
Dec. 31 Inventory on hand—40,000 units at $4.60 = $184,000
2)
Jan. 1 Inventory on hand—80,000 units; cost $4.25 each.
Feb. 14 Purchased 120,000 units for $4.50 each.
Mar. 5 Sold 150,000 units for $14.00 each.
Aug. 27 Purchased 50,000 units for $4.80 each.
Sep. 12 Sold 60,000 units for $14.00 each.
Dec. 31 Inventory on hand—40,000 units at $4.60 = $184,000
total units sold = 210,000
COGS using LIFO = (50,000 x $4.80) + (120,000 x $4.50) + (40,000 x $4.25) = $240,000 + $540,000 + $170,000 = $950,000
Ending inventory = 40,000 x $4.25 = $170,000
3) LIFO reserve = FIFO inventory - LIFO inventory
FIFO inventory = $192,000 - $170,000 = $22,000
4) $22,000 - $8,000 = $14,000
If a perpetual inventory system is in use _____. a physical inventory count is not required because the Inventory account is updated for each purchase and sale. a physical inventory count is not required because the Inventory account is updated every time a transaction or event occurs. a physical inventory count should be taken at least annually. a physical inventory count is required because the Inventory account is not updated when inventory is purchased or sold.
Answer: a physical inventory count should be taken at least annually
Explanation: That an inventory is perpetual does not discount the need for taking physical inventory at least once a year. This is important because it helps in the identification of shrinkage or shortages and to also test the accuracy of the perpetual records under use. Now, a perpetual inventory is a kind of inventory that tracks and records continuously, items as they are added to or subtracted from the inventory thus keeping it updated and aids in keeping the track of the cost of goods bought and sold.
A decrease in operating expenses would have which of the following effects on a company's profit margin? Multiple Choice There is not enough information given to determine the effect. Net profit margin would increase. Net profit margin would decrease. Net profit margin would remain unchanged.
Answer: Net profit margin would increase.
Explanation:
A company's net profit margin is the Net Profit divided by Revenue. Net Profit is derived by subtracting some expenses and liabilities from the Revenue such as Cost of Goods as well as operating expenses.
If operating expenses were to reduce therefore, there would be less subtractions from the revenue. The would translate to a higher Net Profit and when that is then divided by the Revenue, it will give a higher Net Profit Margin.
A medium of exchange, by definition, is Group of answer choices the method used to buy and sell, be it barter or personal checks. paper bills and coins that are used to buy goods and services. precious metals that hold inherent value. what people trade for goods and services. the infrastructure used to transport and sell goods and services.
Answer:
what people trade for goods and services.
Explanation:
A medium of exchange is what people trade for goods and services. It could be coins, paper bills, coins, cowries, goods or personal check
I hope my answer helps you
The standard deviation from investing in the asset is: (Round to the nearset hundredth percent. Answer in the percent format. Do not include % sign in your answer (i.e. If your answer is 4.33%, type 4.33 without a % sign at the end.))
Here is the complete question.
State of the Economy Probability of Percentage Returns
the States
Economic recession 25% 5%
Moderate economic growth 55% 10%
Strong economic growth 20% 13%
The standard deviation from investing in the asset is: (Round to the nearest hundredth percent. Answer in the percent format. Do not include % sign in your answer (i.e. If your answer is 4.33%, type 4.33 without a % sign at the end.))
Answer:
standard deviation from investing in the asset is: 2.76
Explanation:
From the information given above; the main task to do is to calculate for the standard deviation from investing in the asset ,but in order to do that; we must first determine the expected return value and the variance.
The expected return can either be the profit or loss the investor predict to get after investing on an instrument. It can be determined by multiplying the potential outcomes by the chances of them occurring and then totaling these results.
Here;
the potential outcome = Probability of the States
chances of them occurring = Percentage Returns
∴
Expected return = (0.25 × 5%) + (0.55 × 10%) + (0.20 × 13%)
Expected return = (1.25 + 5.5 + 2.6)%
Expected return = 9.35%
Variance = 0.25 × (5% - 9.35%)² + 0.55 × (10% - 9.35%)² + 0.20 × (13% - 9.35%)²
Variance = 0.25 ( -4.35%)² + 0.55 (0.3575%)² + 0.20 (3.65%)²
Variance = 0.0473 + 0.0023 + 0.0266
Variance = 0.0763
Finally; the standard deviation = [tex]\sqrt{variance}[/tex]
standard deviation = [tex]\sqrt {0.0763[/tex]
standard deviation = 0.276
To the nearest hundredth percent and by answering in the percent format without including the % sign ; we have
standard deviation = 2.76
Wolford Department Store is located in midtown Metropolis. During the past several years, net income has been declining because suburban shopping centers have been attracting business away from city areas. At the end of the company’s fiscal year on November 30, 2017, these accounts appeared in its adjusted trial balance.
Accounts Payable $ 26,800
Accounts Receivable 17,200
Accumulated Depreciation—
Equipment 68,000
Cash 8,000
Common Stock 35,000
Cost of Goods Sold 614,300
Freight-Out 6,200
Equipment 157,000
Depreciation Expense 13,500
Dividends 12,000
Gain on Disposal of Plant Assets 2,000
Income Tax Expense 10,000
Insurance Expense 9,000
Interest Expense 5,000
Inventory 26,200
Notes Payable 43,500
Prepaid Insurance 6,000
Advertising Expense 33,500
Rent Expense 34,000
Retained Earnings 14,200
Salaries and Wages Expense 117,000
Sales Revenue 904,000
Salaries and Wages Payable 6,000
Sales Returns and Allowances 20,000
Utilities Expense 10,600
Answer:
Wolford Department Store
Income Statement
For the Year Ended November 30,2017
Sales Revenue $904,000
Sales Returns and Allowances ($20,000 )
Net Sales $884,000
Cost of Goods Sold ($614,300)
Gross profit $269,700
Operating expenses:
Wages Expense $117,000 Advertising Expense $33,500 Rent Expense $34,000 Depreciation Expense $13,500 Insurance Expense $9,000 Utilities Expense $10,600Freight-Out $6,200Total operating expenses ($223,800)
Income from operations $45,900
Other revenues:
Gain on Disposal of Plant Assets $2,000
Other expenses:
Interest Expense ($5,000 )
Income before income taxes $42,900
Income Tax Expense ($10,000)
Net income after taxes $32,900
Wolford Department Store
Balance Sheet
For the Year Ended November 30,2017
Assets:
Cash $8,000
Accounts Receivable $17,200
Prepaid Insurance $6,000
Inventory $26,200
Equipment $157,000
Accumulated Depreciation - Equipment (68,000)
Total Assets: $146,400
Liabilities and Stockholders' Equity:
Accounts Payable $26,800
Wages Payable $6,000
Notes Payable $43,500
Common Stock $35,000
Retained Earnings $35,100
Total Liabilities and Stockholders' Equity: $146,400
Wolford Department Store
Statement of Retained Earnings
For the Year Ended November 30,2017
Retained earnings at the beginning of the period: $14,200
Net income after taxes: $32,900
Dividends ($12,000)
Retained earnings at he end of the period: $35,100
a. The Wolford Department Store's Multi-level Income Statement, Balance Sheet, and Statement of Retained Earnings as of November 30, 2017 are as follows:
Wolford Department Store
Income Statement
For the Year Ended November 30,2017
Sales Revenue $904,000
Sales Returns and Allowances ($20,000)
Net Sales $884,000
Cost of Goods Sold ($614,300)
Gross profit $269,700
Operating expenses:
Wages Expense $117,000
Advertising Expense 33,500
Rent Expense 34,000
Depreciation Expense 13,500
Insurance Expense 9,000
Utilities Expense 10,600
Freight-out 6,200
Total operating expenses ($223,800)
Income from operations $45,900
Other revenues:
Gain from Disposal of Plant Assets $2,000
Other expenses:
Interest Expense ($5,000)
Income before Income Taxes $42,900
Income Tax Expense ($10,000)
Net Income After Taxes $32,900
Wolford Department Store
Balance Sheet
As of November 30,2017
Assets:
Current Assets:
Cash $8,000
Accounts Receivable 17,200
Prepaid Insurance 6,000
Inventory 26,200
Current assets $57,400
Long-term assets:
Equipment $157,000
Accumulated Depreciation (68,000) $89,000
Total Assets $146,400
Liabilities and Stockholders' Equity:
Current Liabilities:
Accounts Payable $26,800
Wages Payable 6,000
Current liabilities $32,800
Long-term liabilities
Notes Payable $43,500
Total liabilities $76,300
Equity:
Common Stock $35,000
Retained Earnings 35,100
Total Equity $70,100
Total Liabilities & Stockholders' Equity $146,400
Wolford Department Store
Statement of Retained Earnings
As of November 30,2017
Retained earnings 1 Dec. 2016 $14,200
Net income after taxes 32,900
Dividends ($12,000)
Retained earnings, Nov. 30, 2017 $35,100
b) The profitability ratios are computed as follows:
1. Profit Margin = (Net Income/Net Sales x 100)
= $32,900/$884,000 x 100
= 3.72%
2. Gross Profit rate = Gross Profit/Net Sales x 100)
= $269,700/$884,000 x 100
= 30.51%
c. If the net sales increases by 15%, the Net sales = $1,016,600 ($884,000 x 1.15)
If Gross profit increases by $40,443, the Gross profit = $310,143 ($269,700 + $40,443)
If Expenses increase by $58,600, the total operating Expenses = $282,400 ($223,800 + $58,600)
Revised Net Income:
Gross Profit $310,143
Total operating expenses (282,400)
Income from operations $27,743
Other revenues:
Gain from Disposal of Plant Assets $2,000
Other expenses:
Interest Expense ($5,000)
Income before Income Taxes $24,743
Income Tax Expense ($10,000)
Net Income After Taxes $14,743
b) The profitability ratios are computed as follows:
1. Profit Margin = (Net Income/Net Sales x 100)
= $14,743/$1,016,600 x 100
= 1.45%
2. Gross Profit rate = Gross Profit/Net Sales x 100)
= $310,143/$1,016,600 x 100
= 30.51%
d. With the proposed changes, the gross profit rate remains the same (without any impact) because the net sales increased by the same rate (15%) as the cost of goods sold and the gross profit.
However, the net income reduced drastically, especially with the income tax remaining the same amount.
Thus, without the income tax effect, there is no merit in this proposal as it reduced the net income margin from 3.72% to 1.45%.
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Fortune Company's direct materials budget shows the following cost of materials to be purchased for the coming three months: January February March $ 3 Material purchases 14,870 11,690 12,760 Payments for purchases are expected to be made 50% in the month of purchase and 50% in the month following purchase. The December Accounts Payable balance is $7,200. The budgeted cash payments for materials in January are
A. $13,580.
B. $13,815
C. $9,980
D. $7,200.
E. $19,960.
Answer:
Total= $14,635
Explanation:
Giving the following information:
Cost of materials:
January= 14,870
February= 11,690
March= 12,760
Payments for purchases are expected to be made 50% in the month of purchase and 50% in the month following purchase.
The December Accounts Payable balance is $7,200.
To calculate the cash disbursement for January, we need to use the following structure:
Cash collection:
Accounts Payable= 7,200
Cash From January= (14,870*0.5)= 7,435
Total= $14,635
An advance payment of $1,000 for services was received on December 1 and was recorded as a liability. By the end of the year, $400 has been earned. What is the correct adjusting entry that should be include?
Answer:
The answer is "$400"
Explanation:
Given:
advance payment = $ 1,000
by the end of year he earned= $ 400
So, the total eared value is $ 400 because it is the Debit unearned income.
Answer:
Debit unearned revenues for $400
Explanation:
Adjusting entries are journal entries made to record revenues and expenses accounts. These entries are made at the end of an accounting cycle.
Payment received for services on December 1 that was recorded as a liability = $1,000
Amount earned by the end of the year = $400
Therefore,
adjusting entry: Debit unearned revenues for $400 so that expenses matched to the accounting period in which the revenue paying for them is earned.
Vanishing Games Corporation (VGC) operates a massively multiplayer online game, charging players a monthly subscription of $10. At the start of January 2015, VGC’s income statement accounts had zero balances and its balance sheet account balances were as follows:
Cash $2,360,000
Accounts Receivable 152,000
Supplies 19,100
Equipment 948,000
Land 1,920,000
Building 506,000
Accounts Payable 109,000
Unearned Revenue 152,000
Notes Payable (due 2018) 80,000
Common Stock 2,200,000
Retained Earnings 3,364,100
In addition to the above accounts, VGC’s chart of accounts includes the following: Service Revenue, Salaries and Wages Expense, Advertising Expense, and Utilities Expense.
Required:
1. Analyze the effect of the January transactions (shown below) on the accounting equation, and indicate the account, amount, and direction of the effect (+ for increase and − for decrease) of each transaction. (Enter any decreases to account balances with a minus sign.)
a. Received $52,250 cash from customers for subscriptions that had already been earned in 2014.
b. Received $235,000 cash from Electronic Arts, Inc. for service revenue earned in January.
c. Purchased 10 new computer servers for $41,900; paid $12,000 cash and signed a three-year note for the remainder owed.
d. Paid $15,600 for an Internet advertisement run on Yahoo! in January.
e. Sold 10,100 monthly subscriptions at $10 each for services provided during January. Half was collected in cash and half was sold on account.
f. Received an electric and gas utility bill for $5,900 for January utility services. The bill will be paid in February.
g. Paid $310,000 in wages to employees for work done in January.
h. Purchased $5,100 of supplies on account.
i. Paid $5,100 cash to the supplier in (h).
2. Prepare journal entries for the January transactions listed in part 1, using the letter of each transaction as a reference.
3. Create T-accounts, enter the beginning balances shown above, post the journal entries to the T-accounts, and show the unadjusted ending balances in the T-accounts.
4. Prepare an unadjusted trial balance as of January 31, 2015.
Answer:
Vanishing Games Corporation (VGC)
1. Analysis of the effect of transactions on the accounting equation:
Assets = Liabilities + Equity
Assets (Cash) increases +$52,500 and Assets (Accounts Receivable) decreases -$52,500 = Liabilities + Equity.
b. Assets (Cash) increases +$235,000 = Liabilities + Equity (Retained Earnings) increase + $235,000.
c. Assets (Equipment) increases +41,900; Cash decreases -$12,000 = Liabilities (Notes Payable) increase +$29,900 + Equity.
d. Assets (Cash) decreases -$15,600 = Liabilities + Equity (Retained Earnings) decrease - $15,600.
e. Assets (Cash) increases + $50,500 and (Accounts Receivable) increases + $50,500 = Liabilities + Equity (Retained Earnings) increase + $101,000.
f. Assets = Liabilities (Accounts Payable) increase +$5,900 + Equity (Retained Earnings) decrease -$5,900.
g. Assets (Cash) decreases - $310,000 = Liabilities + Equity (Retained Earnings) decreases - $310,000.
h. Assets (Supplies) increase + $5,100 = Liabilities (Accounts Payable) increase +$5,100 + Equity.
i. Assets (Cash) decreases - $5,100 = Liabilities (Accounts Payable) decrease - $5,100 + Equity.
2. Journal Entries:
a. Debit Cash Account $52,500
Credit Accounts Receivable $52,500
To record cash from customers.
b. Debit Cash Account $235,000
Credit Service Revenue $235,000
To record cash for service revenue.
c. Debit Equipment $41,900
Credit Cash Account $12,000
Credit Notes Payable $29,900
To record purchase of 10 new computer services
d. Debit Advertising Expense $15,600
Credit Cash Account $15,600
To record payment for advertising.
e. Debit Cash Account $50,500
Debit Accounts Receivable $50,500
Credit Service Revenue $101,000
To record subscriptions for services sold.
f. Debit Utilities Expense $5,900
Credit Utilities Payable $5,900
To record utilities expense.
g. Debit Wages & Salaries Expense $310,000
Credit Cash Account $310,000
To record wages paid.
h. Debit Supplies Account $5,100
Credit Accounts Payable $5,100
To record purchase of supplies on account.
i. Debit Accounts Payable $5,100
Credit Cash Account $5,100
To record payment on account.
3. T-Accounts:
Cash Account
Beginning Balance $2,360,000 c. Equipment 12,000
a. Accounts Receivable 52,250 d. Advertising Expense 15,600
b. Electronic Arts, Inc. 235,000 g. Wages & Salaries 310,000
e. Service Revenue 50,500 i. Accounts Payable 5,100
Balance c/d 2,355,050
2,697,750 2,697,750
Balance b/d 2,355,050
Accounts Receivable
Beginning Balance 152,000 a. Cash 52,250
e. Service Revenue 50,500 Balance c/d 150,250
202,500 202,500
Balance b/d 150,250
Supplies
Beginning Balance 19,100 Balance c/d 24,200
Accounts Payable 5,100
24,200 24,200
Balance b/d 24,200
Equipment
Beginning Balance 948,000 Balance c/d 989,900
c. Cash 12,000
c. Notes Payable 29,900
989,900 989,900
Balance b/d 989,900
Land
Beginning Balance 1,920,000
Building
Beginning Balance 506,000
Accounts Payable
i. Cash 5,100 Beginning Balance 109,000
Balance c/d 109,000 h. Supplies 5,100
114,100 114,100
Balance b/d 109,000
Unearned Revenue
Beginning Balance 152,000
Advertising Expense
d. Cash 15,600
Utilities Expense
f. Utilities Payable 5,900
Utilities Payable
f. Utilities Expense 5,900
Wages & Salaries Expense
g. Cash 310,000
Service Revenue
b. Cash 235,000
Balance c/d 336,000 e. Cash 50,500
e. Accounts Receivable 50,500
336,000 336,000
Balance b/d 336,000
Notes Payable (due 2018)
Balance c/d 109,900 Beginning Balance 80,000
c. Equipment 29,900
109,900 109,900
Balance b/d 101,000
Common Stock
Beginning Balance 2,200,000
Retained Earnings
Beginning Balance 3,364,100
4. Trial Balance as at January 31:
Debit Credit
Cash $2,355,050
Accounts Receivable 150,250
Supplies 24,200
Equipment 989,900
Land 1,920,000
Building 506,000
Advertising expense 15,600
Utilities Expense 5,900
Utilities Payable $5,900
Wages & Salaries 310,000
Service Revenue 336,000
Notes Payable 109,900
Accounts Payable 109,000
Unearned Revenue 152,000
Common Stock 2,200,000
Retained Earnings 3,364,100
Total $6,276,900 $6,276,900
Explanation:
a) Note: the adjustment of the Utilities could have been eliminated to produce the same result, with totals reduced by $5,900.
Answer 1:
Analysis of the effect of transactions on the accounting equation:
Assets = Liabilities + Equitya. Assets (Cash) increases +$52,500 and Assets (Accounts Receivable) decreases -$52,500 = Liabilities + Equity.
b. Assets (Cash) increases +$235,000 = Liabilities + Equity (Retained Earnings) increase + $235,000.
c. Assets (Equipment) increases +41,900; Cash decreases -$12,000 = Liabilities (Notes Payable) increase +$29,900 + Equity.
d. Assets (Cash) decreases -$15,600 = Liabilities + Equity (Retained Earnings) decrease - $15,600.
e. Assets (Cash) increases + $50,500 and (Accounts Receivable) increases + $50,500 = Liabilities + Equity (Retained Earnings) increase + $101,000.
f. Assets = Liabilities (Accounts Payable) increase +$5,900 + Equity (Retained Earnings) decrease -$5,900.
g. Assets (Cash) decreases - $310,000 = Liabilities + Equity (Retained Earnings) decreases - $310,000.
h. Assets (Supplies) increase + $5,100 = Liabilities (Accounts Payable) increase +$5,100 + Equity.
i. Assets (Cash) decreases - $5,100 = Liabilities (Accounts Payable) decrease - $5,100 + Equity.
Answer 2:
Journal Entriesa. Debit Cash Account $52,500
Credit Accounts Receivable $52,500
(To record cash from customers)
b. Debit Cash Account $235,000
Credit Service Revenue $235,000
(To record cash for service revenue)
c. Debit Equipment $41,900
Credit Cash Account $12,000
Credit Notes Payable $29,900
(To record purchase of 10 new computer services)
d. Debit Advertising Expense $15,600
Credit Cash Account $15,600
(To record payment for advertising.)
e. Debit Cash Account $50,500
Debit Accounts Receivable $50,500
Credit Service Revenue $101,000
(To record subscriptions for services sold)
f. Debit Utilities Expense $5,900
Credit Utilities Payable $5,900
(To record utilities expense)
g. Debit Wages & Salaries Expense $310,000
Credit Cash Account $310,000
(To record wages paid)
h. Debit Supplies Account $5,100
Credit Accounts Payable $5,100
(To record purchase of supplies on account)
i. Debit Accounts Payable $5,100
Credit Cash Account $5,100
(To record payment on account)
Answer 3:
T-AccountsCash Account
Beginning Balance $2,360,000 c. Equipment 12,000
a. Accounts Receivable 52,250 d. Advertising Expense 15,600
b. Electronic Arts, Inc. 235,000 g. Wages & Salaries 310,000
e. Service Revenue 50,500 i. Accounts Payable 5,100
Balance c/d 2,355,050
Total 2,697,750 2,697,750
Balance b/d 2,355,050
Accounts Receivable
Beginning Balance 152,000 a. Cash 52,250
e. Service Revenue 50,500 Balance c/d 150,250
Total 202,500 202,500
Balance b/d 150,250
Supplies
Beginning Balance 19,100 Balance c/d 24,200
Accounts Payable 5,100
Total 24,200 24,200
Balance b/d 24,200
Equipment
Beginning Balance 948,000 Balance c/d 989,900
c. Cash 12,000
c. Notes Payable 29,900
Total 989,900 989,900
Balance b/d 989,900
Land
Beginning Balance 1,920,000
Building
Beginning Balance 506,000
Accounts Payable
i. Cash 5,100 Beginning Balance 109,000
Balance c/d 109,000 h. Supplies 5,100
Total 114,100 114,100
Balance b/d 109,000
Unearned Revenue
Beginning Balance 152,000
Advertising Expense
d. Cash 15,600
Utilities Expense
f. Utilities Payable 5,900
Utilities Payable
f. Utilities Expense 5,900
Wages & Salaries Expense
g. Cash 310,000
Service Revenue
b. Cash 235,000
Balance c/d 336,000 e. Cash 50,500
e. Accounts Receivable 50,500
Total 336,000 336,000
Balance b/d 336,000
Notes Payable (due 2018)
Balance c/d 109,900 Beginning Balance 80,000
c. Equipment 29,900
Total 109,900 109,900
Balance b/d 101,000
Common Stock
Beginning Balance 2,200,000
Retained Earnings
Beginning Balance 3,364,100
Answer 4:Trial Balance as at January 31:
Debit Credit
Cash $2,355,050
Accounts Receivable 150,250
Supplies 24,200
Equipment 989,900
Land 1,920,000
Building 506,000
Advertising expense 15,600
Utilities Expense 5,900
Utilities Payable $5,900
Wages & Salaries 310,000
Service Revenue 336,000
Notes Payable 109,900
Accounts Payable 109,000
Unearned Revenue 152,000
Common Stock 2,200,000
Retained Earnings 3,364,100
Total $6,276,900 $6,276,900
Learn more about "accounts":
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Sunset Corporation (a C corporation) had operating income of $200,000 and operating expenses of $175,000. In addition, Sunset had a $30,000 long-term capital gain, a $52,000 short-term capital loss, and $5,000 tax-exempt interest income. What is Sunset Corporation's taxable income for the year
Answer:
Sunset Corporation's taxable income is $3,000
Explanation:
Calculation of Sunset Corporation's taxable income is as worked below
Taxable Income = Operating Income - Operating Expenses + Capital Gains - Capital Losses
Taxable Income = $200,000 - $175,000 + $30,000 - $52,000
Taxable Income = $3,000. Hence, Sunset Corporation's taxable income is $3,000
Note that taxable income is the amount of income used to calculate how much tax an individual or a company owes or is going to pay the government in a particular tax year.
Byer, a plastics processor, is considering the purchase of a high-speed extruder as one option. The new extruder would cost $50,000 and would have a residual value of $3000 at the end of its 6-year life. The annual operating expenses of the new extruder would be $5000. The other option that Byer has is to rebuild its existing extruder. The rebuilding would require an investment of $30,000 and would extend the life of the existing extruder by 6 years. The existing extruder has annual operating costs of $13,000 per year and does not have a residual value. Byer's discount rate is 12%. Using net present value analysis, which option is the better option and by how much? Present Value of $1 Periods 12% 14% 16% 6 0.507 0.456 0.410 8 0.404 0.351 0.305 10 0.322 0.270 0.227 12 0.257 0.208 0.168Present Value of Annuity of $1 Periods 12% 14% 16% 6 4.111 3.889 3.685 8 4.968 4.639 4.344 10 5.650 5.216 4.833 12 6.194 5.660 5.197
Answer:
Option of the new extruder is better by $14,411.16
Explanation:
The present value of each option needs to be determined in order that the cheaper option in present value terms can be recommended.
Present value of new extruder=$50,000/(1+12%)^0+$5000/(1+12%)^1+$5000/(1+12%)^2+$5000/(1+12%)^3+$5000/(1+12%)^4+$5000/(1+12%)^5+$5000/(1+12%)^6-$3000/(1+12%)^6=$ 69,037.14
The discount factor each year=1/(1+r)^n where is 12% discount rate and n is the year
resent value of old extruder=$30,000/(1+12%)^0+$13,000/(1+12%)^1+$13000/(1+12%)^2+$13000/(1+12%)^3+$13000/(1+12%)^4+$13000/(1+12%)^5+$13000/(1+12%)^6=$ 83,448.30
The first option is better since it has a lower preset value of costs of $ 69,037.14
Difference in PVs= 83,448.30-69,037.14=$14,411.16
If he goes to college, he will spend $22,000 on tuition, $11,000 on room and board, and $1,700 on books. If he does not go to college, he will earn $12,000 working in a store and spend $6,000 on room and board. Taio's cost of going to college is
Answer:
$40,700
Explanation:
To determine Taio's cost of going to college you need to find the economic cost that involves all the costs that you need to cover to receive a benefit and the opportunity costs that refer to what you would have received if you had chosen a different alternative. According to this, Taio's cost is equal to all the acounting costs related to going to college plus the opportunity costs that are the benefits lost from the other option which was not going to college.
Accounting costs= $22,000+$11,000+$1,700= $34,700
Opportunity costs= $12,000-$6,000= $6,000
Taio's cost of going to college is equal to the acount costs plus the opportunity costs:
$34,700+$6,000= $40,700
Break-Even Sales Currently, the unit selling price of a product is $370, the unit variable cost is $300, and the total fixed costs are $1,001,000. A proposal is being evaluated to increase the unit selling price to $410. a. Compute the current break-even sales (units). units b. Compute the anticipated break-even sales (units), assuming that the unit selling price is increased and all costs remain constant. units
Answer:
a. 14,300 units
b. 9,100 units
Explanation:
a. For computation of current break-even sales (units) first we will find out the contribution margin per unit which is shown below:-
Contribution margin per unit = Selling price per unit - Variable cost
= $370 - $300
= $70
Current break-even sales (units) = Fixed cost ÷ Contribution margin per unit
= $1,001,000 ÷ $70
= 14,300 units
b. For computation of anticipated break-even sales (units) first we will find out the contribution margin per unit which is shown below:-
Contribution margin per unit = Selling price per unit - Variable cost
= $410 - $300
= $110
Anticipated break-even sales (units) = Fixed cost ÷ Contribution margin per unit
= $1,001,000 ÷ $110
= 9,100 units
So, we have applied the above formula.
Luis and Amy are programmers employed by X Corp. They work in cubicles next to each other. Both have M.Sc. degrees in computer science (Luis also has a Ph.D. in philosophy). They are about the same age, and have been with the company since its birth. Luis codes games, while Amy codes a variety of projects. Although their work is different, both jobs require the same skill level. Luis makes $100,000 a year, while Amy makes $80,000. If Amy sues X Corp. because of the pay differential, what must she show? What might the company argue in defense? Who should win?
Answer:
If Amy sues X Corp. because of the pay differential, what must she show?
The Equal Pay Act of 1963 prohibits discrimination in payment on the basis of gender (and race and origin also). In this case, Amy must prove that her work requires the same skills as Luis's and that it provides the same value to the company. They both have a master's degree in computer science, but she must also show that Luis's Ph.D. is not important to their work.
What might the company argue in defense?
The company might argue two things:
That Luis has a higher education degree, since he has a Ph.D. That Luis's work is more specialized since he codes games, while Amy codes different projects. They would have to prove that the games that Luis codes are much more profitable and valuable to the company than the work Amy does.Who should win?
If their work is similar, then Amy should win. If they are basically both doing the same job and require the same skills, therefore, the salary should be the same.
But if Luis's work is much more relevant and profitable for the company, then Amy would lose. If this is true, they might have to change Luis's compensation and reduce his salary but increase bonus compensation. This is true in all companies (or the vast majority of), e.g. the quarterback receives the highest salary since his job is more important for the team.
Exercise 4-7 (Algo) Income statement presentation; discontinued operations; restructuring costs [LO4-1, 4-3, 4-4] Esquire Comic Book Company had income before tax of $1,650,000 in 2021 before considering the following material items: Esquire sold one of its operating divisions, which qualified as a separate component according to generally accepted accounting principles. The before-tax loss on disposal was $405,000. The division generated before-tax income from operations from the beginning of the year through disposal of $630,000. The company incurred restructuring costs of $70,000 during the year. Required: Prepare a 2021 income statement for Esquire beginning with income from continuing operations. Assume an income tax rate of 25%. Ignore EPS disclosures. (Amounts to be deducted should be indicated with a minus sign.)
Answer:
Net income = $1,353,750
Note: See the income statement below.
Explanation:
Before preparing the income statement, the following calculations are done first:
Income from operations of discontinued component = Income before-tax generated by the division - Before-tax loss on disposal = $630,000 - $405,000 = $225,000
Income from continuing operations = Income before tax - Restructuring costs = $1,650,000 - $70,000 = $1,580,000
The income statement can now be prepared as follows:
Esquire Comic Book Company
Partial Income Statement
For the year ended December 31, 2021
Details $
Income from continuing operations 1,580,000
Discontinued operations gain (loss):
Income from discontinued component 225,000
Total income before tax 1,805,000
Tax expenses (1,805,000.00 * 25%) (451,250)
Net income 1,353,750
The Federal Reserve System (the 'Fed') was created by the Federal Reserve Act, passed by Congress in 1913, and began operations in 1914. Like all central banks, the Federal Reserve is a government agency. All of the following statements are true about the Fed except:
a. the Federal Reserve is the "lender of last resort.
b. it promotes public goals such as economic growth, low inflation, and the smooth operation of financial markets.
c. it focuses on making a profit like commercial banks.
d. it has the power to supervise and regulate banks.
Answer:
b. it promotes public goals such as economic growth, low inflation, and the smooth operation of financial markets.
Explanation:
This is generally what the federal reserve does, and they try to stop both deflation and inflation
Chen Inc.'s cash balance in the accounting records, before receiving the bank statement, at June 30th was $16,170. During June the company recorded $10,000 of deposits but the bank only showed $7,900 on the June statement. Some of the company's deposits were made on the last day of the month. The company's records also showed that the company wrote checks totalling $3,600 that had not yet cleared the bank. The June 30th bank statement showed a balance of $16,750. The company was surprised to see that the bank statement showed the following items that the company was not aware of until the bank statement arrived: NSF check for $935, bank fee of $10, and interest income totalling $25. What is the total amount of cash that should be reported on Chen Inc.'s balance sheet at June 30th?
a. $15,250
b. $17,120
c. $14,670
d. $17,850
Answer:
The total amount of cash that should be reported on Chen Inc., balance sheet at June 30th is $15,250
The answer is option A.
Explanation:
The total amount of cash that should be reported on Chen Inc., balance sheet at June 30th is as follows:
$ $
Balance as per bank statement at June 30 16,750
Add: Deposit in transit ($10,000 - $7,900) 2,100
Less:
Outstanding Checks 3,600
Adjusted Cash Balance $ 15,250
Balance as per accounting records at June 30 16,170
Add: Interest Income 25
Less:
NSF Checks 935
Bank Fees 10 945
Adjusted Cash Balance $ 15,250
Nenn Co.'s allowance for uncollectible accounts was $190,000 at the end of 2024 and $200,000 at the end of 2023. For the year ended December 31, 2024, Nenn reported bad debt expense of $26,000 in its income statement. What amount did Nenn debit to the appropriate account in 2024 to write off actual bad debts?
Answer:
The amount Nenn debited to write off of actual bad debt is $36,000
Explanation:
Allowance for Uncollectible beginning = $200,000
Allowance for Uncollectible at the end = $190,000
Bad debt expense reported = $26,000
Amount Nenn debited to write off of actual bad debt = $200,000 + $26,000 - $190,000 = $36,000
Drivers of the growth of international acquisitions include all of the following except:_________.
1. the need to grow the business to compete with other global firms.
2. to acquire assets and resources needed to compete.
3. a faster way to develop a presence in the local market.
4. the desire to develop all of the required resources internally.
Answer:
the desire to develop all of the required resources internally.
Explanation:
Jamal just inherited some money from a distant cousin overseas. He would like to put some of it in a bond and is looking at two choices. Bond A has five years to maturity, a semiannual coupon of 6% and a face value of $1,000. Bond B has ten years to maturity, an annual coupon of 4% and a face value of $1,000. Jamal knows that the rate expected in the marketplace for investments similar to these is 5%.
1. What is the present value of the coupon stream on each bond?
2. What is the present value of the face value on each bond?
3. What is the total value of each bond?
4. If Jamal sees the two bonds in the Wall Street Journal and they are both priced at 99, which bond should he buy?
Answer:
i. = $262.56 , = $308.87
ii. = $781.198 , = $613.91
iii. Bond A = $1,043.76 , Bond B = $922.78
Explanation:
(i) Present Value of Coupon Payment
Bond A :- Semiannual Coupon Amount = $1,000 * 6% * 6 / 12 = $30
Total Semiannual Period = 5 * 2 = 10
Semiannual Interest = 5% / 2 = 2.5%
Present Value of Coupon Payment = $30 * PVAF (2.5% , 10)
= $30 * 8.752
= $262.56
Bond B :- Annual Coupon Amount = $1,000 * 4% = $40
Annual Periods = 10
Annual Interest = 5%
Present Value of Coupon Payment = $40 * PVAF ( 5% , 10)
= $40 * 7.72
= $308.87
(ii) Present Value of Face Value of Bond
Bond A = $1,000 * PVF (2.5% , 10 periods)
= $1,000 * 0.7812
= $781.198
Bond B = $1,000 * PVF (5% , 10)
= $1,000 * 0.6139
= $613.91
(iii) Total Value of Each Bond
Bond A = $262.56 + $781.198 = $1,043.76
Bond B = $308.87 + $613.91 = $922.78
(iv)If Jamal sees the two bonds in the Wall Street Journal and they are both priced at 99, he should consider:
If the Bond Current Price is lower than Bond Fair Price then he should Buy the Bond
If the Bond Current Price is higher than Bond Fair Price then he should not buy the bond
Market Price of Bond = $99
He should buy Bond A But not Bond B