Fundamental Financial Accounting Concepts, 9th Edition
Fundamental Financial Accounting Concepts, 9th Edition
9th Edition
ISBN: 9780078025907
Author: Thomas P Edmonds, Christopher Edmonds, Frances M McNair, Philip R Olds
Publisher: McGraw-Hill Education
Question
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Chapter 7, Problem 4AE

a)

To determine

Record the events for 2016 in T-accounts.

b)

To determine

Ascertain the following amounts

  1. 1. Net income for 2016.
  2. 2. Net cash flows from operating activities for 2016.
  3. 3. Balance of accounts receivables at the end of 2016.
  4. 4. Net realizable value of accounts receivables at the end of 2016.

c (a)

To determine

Record the events for 2017 in T-accounts.

c (b)

To determine

Ascertain the following amounts

  1. 1. Net income for 2017.
  2. 2. Net cash flows from operating activities for 2017.
  3. 3. Balance of accounts receivables at the end of 2017.
  4. 4. Net realizable value of accounts receivables at the end of 2017.

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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. General Accounting 52
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Chapter 7 Solutions

Fundamental Financial Accounting Concepts, 9th Edition

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