Questions by guadalupe20 - Page 26
Tanner-UNF Corporation acquired as a long-term investment $240 million of 6% bonds, dated July 1, on July 1, 2024. Company management has the positive intent and ability to hold the bonds until maturity, but when the bonds were acquired, Tanner-UNF decided to elect the fair value option for accounting for its investment. The market interest rate (yield) was 8% for bonds of similar risk and maturity. Tanner-UNF paid $200 million for the bonds. The company will receive interest semiannually on June 30 and December 31. As a result of changing market conditions, the fair value of the bonds at December 31, 2024, was $210 million. Required: 1. How would this investment be classified on Tanner-UNF's balance sheet? 2. to 4. Prepare the journal entry to record Tanner-UNFs investment in the bonds on July 1, 2024, interest on December 31, 2024, at the effective (market) rate, and fair value changes as of December 31, 2024. 5. At what amount will Tanner-UNF report its investment in the December 31, 2024, balance sheet? 6. Suppose Moody's bond rating agency downgraded the risk rating of the bonds motivating Tanner-UNF to sell the investment on January 2, 2025, for $190 million. Prepare the journal entries to record the sale.
The Willie Company has provided the following information: Operating expenses were $345,000; Income from operations was $415,000; Net sales were $1,100,000; Interest expense was $71,000; Loss from sale of investments was $87,000; Income tax expense was $58,000. What was Willie's gross profit? Multiple Choice $818,000.$340,000. $760,000. $689,000.
Nintendo just demonstrated their new Nintendo Switch at E3. Nintendo spent $5 milliondeveloping the new device, $1 million each on three other prototypes, and an additional $100 million in research and development (their R&D expense for the one year ending December 30th, 2021 was $1 billion).The project will officially begin (t=0) in January 2023. At the end of 2027 (t=5), Nintendo expects this Nintendo Switch project to end and make way for OLED Nintendo Switch. The tooling and equipment required for producing the device will cost $2.5 billion. The tooling and equipment is classified as a seven-year asset and will be depreciated using Modified ACRS depreciation (.1429, .2449, .1749, .1249, .0893, .0892, .0893, .0446); no bonus depreciation will be used. The estimated market value of the tooling and equipment at the end of the project is $100 million.Nintendo plans to make millions of Switches. Their goal is to get 700,000 of them produced and sold in the first 5 years. In year one, Nintendo thinks they can sell 60,000 Switch. The following four years they expect quantity sold to grow by 40% per year. Nintendo believes that the Switch will sell for $20,000. Nintendo doesnt have much experience producing OLED Switch. Nintendo thinks the variable costs will be $13,000. Fixed costs $9.5 million per year.Net working capital for the OLED Nintendo Switch project will be 10% of sales and will occur with the timing of the cash flows for the year. Nintendos tax rate is 11% and they have a required return of 22%.Nintendo also thinks to include charging cable which might only include in 50% of Nintendo Switch. While a charging cable usually sells for $50, Nintendo will offer a discount of 20% if you buy a charging cable with your switch. Variable costs for the charging cable are $10. There are no fixed costs, investments in NWC, or capital expenditures associated.In this casea) What is the payback period?b) What is the profitability index?c) What is the IRR?d) What is the NPV?