On August 1, 2017, Dahomey Corp

question 60

Multiple Choice

On August 1, 2017, Dahomey Corp.purchases a new machine.The company makes a $6,000 cash down payment, and agrees to pay four monthly instalments of $9,000 each, starting September 1, 2017, signing a non-interest bearing note to this effect.The cash equivalent price of the machine is $36,000.As well, Dahomey pays installation costs of $1,000.The recorded cost of the machine should be

• A)$7,000.
• B)$37,000.
• C)$42,000.
• D)$43,000.

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Definitions:

Debt Ratio

A financial ratio that measures the extent of a company's leverage, calculated by dividing total liabilities by total assets.

Profit Margin

Profit margin is a financial metric that measures the percentage of profit a company retains after subtracting its costs from its revenue, reflecting the overall profitability of the business.

Equity Multiplier

A financial ratio indicating how much of a company's assets are financed by stockholder's equity, illustrating the degree of financial leverage used.

Times-Interest-Earned (TIE) Ratio

Determined by dividing earnings before interest and taxes by the interest charges. This ratio measures the extent to which operating income can decline before the firm is unable to meet its annual interest costs.