18. AltCoins Ltd, has just begun operating under ideal conditions of uncertainty. Its cash flows will depend on the state of the economy. On January 1, 2019, the company acquired plant and equipment that will last two years, with a nil salvage value. AltCoins financed the plant and equipment purchase by issuing common shares. In 2019, net cash flows will be $800 if the state of the economy is good and $600 if it is poor. In 2020, cash flows will rise to $1,200 if the economy is good and remain at $600 if it is bad. Cash flows are received at year-end. In each year, the probability that the economy is good is 0.6. The interest rate in the economy is 4 percent in both years. AltCoins pays a dividend of $70 at the end of 2020. Required a. How much did AltCoins Ltd. pay for its plant and equipment on January 1, 2019? b. In 2019, the economy is good. Prepare a current value-based balance sheet at the end of 2019 and an income statement for 2019. C. In North America, most property, plant, and equipment is usually accounted for under historical cost accounting, rather than at current value as above. Suggest why.

18. AltCoins Ltd, has just begun operating under ideal conditions of uncertainty. Its cash flows will depend on the state of the economy. On January 1, 2019, the company acquired plant and equipment that will last two years, with a nil salvage value. AltCoins financed the plant and equipment purchase by issuing common shares. In 2019, net cash flows will be $800 if the state of the economy is good and $600 if it is poor. In 2020, cash flows will rise to $1,200 if the economy is good and remain at $600 if it is bad. Cash flows are received at year-end. In each year, the probability that the economy is good is 0.6. The interest rate in the economy is 4 percent in both years. AltCoins pays a dividend of $70 at the end of 2020. Required a. How much did AltCoins Ltd. pay for its plant and equipment on January 1, 2019? b. In 2019, the economy is good. Prepare a current value-based balance sheet at the end of 2019 and an income statement for 2019. C. In North America, most property, plant, and equipment is usually accounted for under historical cost accounting, rather than at current value as above. Suggest why.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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