A corporation has decided to replace an existing machine with a newer model. The old machine had an initial purchase price of $35,000, and has $20,000 in accumulated depreciation. If the 40% tax rate applies to the corporation and the old asset can be sold for $10,000, what will be the tax effect of the […]
Date: September 19th, 2020
The Gadget Company manufactures a wrist watch for spy agencies. The watch has a built-in cell phone, Geiger counter, compass, magnet and garroting wire. Forecasted sales are shown on the top row of the table. Forecasted cash inflows and outflows are also shown in the table. The cash balance at the end of May is […]
Date: September 19th, 2020
Bill Sharpe, owner of Sharper Knives Inc, is closing his business at the end of the current fiscal year. His sole asset, the knife-sharpening machine, is three years old. A depreciation table for the asset is shown below. Bill has agreed to sell the machine at the end of the year for $100,000. What is […]
Date: September 19th, 2020
The Hope Education Credit may only be taken for the first two years of post secondary education Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
Operating cash flow (OCF) is calculated by adding back depreciation to the net operating profit after taxes. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
Initech has 7 million shares of common stock outstanding and 50,000 bonds outstanding. The bonds pay semi-annual coupons at an annual rate of 9.05%, have 6 years to maturity and a face value of $1,000 each. The common stock currently sells for $30 a share and has a beta of 1. The bonds sell for […]
Date: September 19th, 2020
Lending institutions typically attempt to foreclose on a mortgage whenever a borrower falls behind in payments. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
Ray Stokes is raising capital for a new company called NO Balloons Inc. NO Balloons will manufacture and sell festive balloons. Because of the shortage of helium, the balloons will be filled with nitrous oxide instead. NO Balloons plans to finance the business with common equity and long-term debt. It plans to sell 12 million […]
Date: September 19th, 2020
Droids-R-Us Inc (DRU), is considering the installation of a new production line to make service mechanoids. The cost of the new manufacturing equipment is $2.2 million. The machines are classified as 7-year properties. (MACRS rates are provided in the table, below.) The machines will be purchased at the beginning of 2014. (DRU uses a mid-year […]
Date: September 19th, 2020
Capital gains can arise from the sale of any capital asset, but capital losses are limited to investment assets. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
