ACG 2021, Introduction to Financial Accounting, Fall 2000, Exam 2 Explanations :: UFL Florida Business Accounting

ACG 2021 belittle 2000 Exam 2Answer Key ExplanationBased on the Order of Version A1) A defined contribution programme is one with Regular, defined contributions to the gillyflower. The fund balance changes in value with the gathering of contributions andearnings and is decreased by benefits paid. Benefits received depend on the fund balanceavail sufficient at retirement. (9-21 in the notes on page 247)2) This is an defect because ordinary repairs (ones that do not increase the original useful animation, cogency or capacity of the asset) are to be treated as expenses and exclusively reportedon the income statement in the year they are incurred. This geological fault overstated assets byadding the $3,000 to the asset account incorrectly and understated N.I. by failing torecord the $3,000 as an expense.3) If the bonds are selling at 98 ($24,625,000) then they are selling at a discount. Thismeans that the marketplace rate is higher than the stated rate. When the bonds were issue d themarket rate was the same as the stated rate so the market rate must shed increased.(10-20 in the notes on page 274)4) Here we need to consider deuce issues. Interest is not neatized when an asset ispurchased but it is capitalized when the company constructs its own asset (only for theperiod of construction). These concepts are discussed in chapter 8. Inventory is not acapital asset and therefore does not include financing costs.(8-3 on page 193 and 8-7 on page 197).5) Financial Leverage is fair(a) Total Assets/ Average Stockholders Equity. Itmeasures how many dollars of assets are employed for each dollar of stockholderinvestment. It washbowl be increased by increased borrowing or repurchasing corkingstock. In laymens terms it is the proper use of debt to bring a higher return to owners.(Page 266 of the book, letter C of the ROE Profit number one wood Analysis)6) 8) Segments that are used to answer the three questions have boxes around them. using the effective method (a ssumed unless stated otherwise)Interest Expense = Beginning Carrying abide by x Market Rate(Carrying Value = Face Value Discount)The endue Value of the note isP.V. = 400,000 x factor (using single sum dining table where i=8 and n=3).317,520 = 400,000 x 7.938 (the attached table has 7.9383 on it but this gives anumber close enough to be able to pick 317,520)The following journal entries would be made throughout the life of the note1/1/00Equipment 317,520Discount 82,480Notes Payable 400,00012/31/00Interest Expense 25,402* (Question (8))Discount 25,402*1/1/00 Carrying value of 317,520 (400,000 82,480) x .