Plasma Storage Devices buys $10,000 ofequity securities, which it classifies asavailable-for-sale. After one year, the quotedmarket price of the securities drops thetotal investment value to $8,000. In thefollowing year, the quoted market price ofthe securities increases the totalinvestment value to $11,000, and Plasmathen sells the equity securities.write down the related entries.

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Answered: Plasma Storage Devices buys $10,000 of…

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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Use the following information for the next three problems. Floppy Company has an issue of convertible bonds with a $1,000 par value. Floppy’s bonds have a 10 percent coupon rate. They have a 10-year maturity, and are convertible into 100 shares of common stock. The yield to maturity on bonds of similar risk is 11 percent and the market price of the firm's common stock is currently $9.00. Based on this information, What is the conversion value of Floppy’s bond if it is selling at $970. What is its pure bond value? What is its conversion premium?
You want to short 1,000 shares of Tesla stock which is currently selling for $52. The dealer offers you a short position with an initial margin of 50% with a maintenance margin of 15%. The continuously compounded, annual interest rate is 3.5%, and the lender offers a rebate rate of 0.5% (cont. comp., annual). At what price do you receive a margin call? If the lender deposits your rebates into your margin account, at what price do you receive a margin call?
Consider a forward contract which allows you to buy/sell a non-dividend paying stock in three months. Assume the current stock price is $99.41 and the three-month risk free interest is 5.4 percent per year. What should be the forward price? Keep your answer to two decimal places.
Supper Accountants Inc plans to sell a bond to finance its plant. The face value of the bond is $100,000 and it will be due in 5 years. The bond is offered at 6% annual interest rate, although the market rate is 7%. Supper Accountants is expected to receive $95,900 in cash when the sales is completed. How much interest expense should Supper Accountants record for the first year? 6,000 5,754 7,000 6.173
A non-dividend-paying stock is currently selling for $50, and the risk-free rate of interest is 8% per annum with continuous compounding for all maturities. An investor has just taken a short position in a six-month forward contract on the stock. a. What is the forward price？ (sample answer: $25.45) b. What is the initial value of the forward contract? (sample answer: $25.45) c. Three months later, the price of the stock is $48 and the risk-free rate is still 8% per annum. What is the forward price now? (sample answer: $25.45) What is the value of the short position in the forward contract? (sample answer: $25.45 or -$25.45
An investor purchased a 182-day, $100,000.00 T-bill on its issue date for $98,838.39. After holding it for 109 days, she sold the T-bill for a yield of 2.28% (a) What was the original yield of the T-bill? (b) For what price was the T-bill sold? (c) What rate of return (per annum) did the investor realize while holding this T-bill? (a) The original yield of the T-bill was% (Round the final answer to two decimal places as needed. Round all intermediate values to six decimal places as needed) (b) The T-bill sold for $ (Round the final answer to the nearest cent as needed Round all intermediate values to six decimal places as needed) (e) The investor realized a rate of return of (Round the final answer to two decimal places as needed Round all intermediate values to six decimal places as needed.)

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