There is an old business saying that “You shouldn’t be in business if your company doesn’t earn higher than bank rates.” This means that if a company is to succeed, its return on assets should be significantly higher than its cost of borrowing. Why is this so important?
Answer to relevant QuestionsWhat is the meaning of the term loss contingency? Give several examples. How are loss contingencies presented in financial statements? Explain.Red & Blue Company sold bonds at 97 on an interest payment date for $500,000. Assuming the bonds will be retired in 10 years and interest is paid annually, calculate the amount of cash that will be received and paid by Red & ...Magnum Plus, Inc., is a manufacturer of hunting supplies. The following is a summary of the company’s annual payroll-related costs:Wages and salaries expense (of which $2,200,000 was withheld from employees’ pay and ...On July 1, Pine Region Dairy leased equipment from Farm America for a period of three years. The lease calls for monthly payments of $2,500 payable in advance on the first day of each month, beginning July 1.Prepare the ...On September 1, 2011, Park Rapids Lumber Company issued $80 million in 20-year, 10 percent bonds payable. Interest is payable semiannually on March 1 and September 1. Bond discounts and premiums are amortized at each ...
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