Alexander Corporation issued 20-year bonds at a discount in Year 1. Will Alexander's net income for Year 1 be higher, lower, or the same as it would have been had the bonds been issued at face value? Why?
What will be an ideal response?
Net income would be lower. A discount acts to increase borrowing cost from the stated interest rate to the effective rate, which is higher. Accordingly, a higher interest expense would yield a lower net income.
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Range Free Farms enters into a contract to sell Sara's Market a truckload of eggs. Range Free fails to deliver. Sara's Market A) ?must pay for the eggs to avoid a breach of contract
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Anchor Corporation has two service departments, Personnel and Engineering, and two operating departments. The costs of the Personnel Department are allocated to other departments on the basis of the number of employees in the departments. Departments and number of employees are as follows: EmployeesPersonnel Department10Engineering Department20Operating Department 175Operating Department 295Total employees200 Costs in the Personnel Department total $168,283 per year. Suppose the company uses the step-down method and Personnel Department costs are allocated first. The amount of the Personnel Department cost allocated to the Engineering Department would be closest to:
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