DF: ACCOUNTING PRINC 14E WPNGEC 1 SEM
DF: ACCOUNTING PRINC 14E WPNGEC 1 SEM
14th Edition
ISBN: 9781119709947
Author: Weygandt
Publisher: WILEY
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Chapter 7, Problem 2Q
To determine

Accounting information system: Accounting information system refers to the system which processes and collects the information about all the financial data included in the business which is used by the financial decision makers. This information system is used in both manual and computerized systems of accounting.

To Explain: Principles to be followed in accounting information system

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Financial Accounting 5.2
Morgan & Co. is currently an all-equity firm with 100,000 shares of stock outstanding at a market price of $30 per share. The company's earnings before interest and taxes are $120,000. Morgan & Co. has decided to add leverage to its financial operations by issuing $750,000 of debt at an 8% interest rate. This $750,000 will be used to repurchase shares of stock. You own 2,500 shares of Morgan & Co. stock. You also loan out funds at an 8% interest rate. How many of your shares of stock in Morgan & Co. must you sell to offset the leverage that the firm is assuming? Assume that you loan out all of the funds you receive from the sale of your stock.
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