Touch Tronix, Inc

question 151

Multiple Choice

Touch Tronix, Inc. sells component parts to Advanced Communications, Inc. a cell phone manufacturer. During December 10, 2014, Touch Tronix, Inc. sold €1,020,000 of goods to Advanced Communications, Inc. on account for €1,320,000. Advanced Communications, Inc. was dissatisfied with 25% of the merchandise it receives due to inferior quality. On December 21, 2014, Advanced Communications, Inc. returns the goods to Touch Tronix, Inc. for credit. Which of the following is true regarding the statement of financial position and the income statement for Touch Tronix, Inc. at December 31, 2014?

• A) Assets will decrease by €75,000 and income will decrease by €75,000.
• B) Assets will decrease by €255,000 and income will decrease by €255,000.
• C) Assets will increase by €255,000 and income will decrease by €255,000. d Assets will increase by €330,000 and income will decrease by €330,000.

Recognize the importance of the cost of capital in evaluating investment opportunities.

Appreciate the concept of capital structure weights and their computation based on market values.

Grasp the impact of taxation on the cost of capital and investment decisions.

Understand the role of flotation costs in financing decisions.

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Definitions:

Overdraft

A payment by a bank on behalf of a customer for more than the customer has on deposit.

Agent

A person authorized to act on behalf of another and subject to the other’s control in dealing with third parties.

Depository Bank

A financial institution where deposits are made, held, and managed; also facilitates financial transactions for clients.

Settlement

An agreement reached between parties in a dispute, where usually one party agrees to provide compensation to the other, ending the dispute outside of court.