Revenue sharing contract refers to the negotiation between the supplier and the retailer to share the revenue by selling a product. In the case of a revenue-sharing contract, the supplier provides the product free of charge to the retailer, and both firms get a certain percentage of the revenue earned. the correct answer is option (D)
The percentage of revenue sharing can differ based on mutual agreement. The given demand for the product is D(p) = 100-50p. The cost incurred by the supplier to produce one unit of the product is 0.5, which means w = 0. To find the value of p, the retailer needs to maximize his own profit.Profit of retailer = (Revenue - Cost) × QuantityCost = 0.5 × quantity (as w = 0)Revenue = p × quantity × 0.3 (retailer's share) + p × quantity × 0.7 (supplier's share).
Retailer's profit = (0.3p - 0.5) × quantity Equation can be written as P = 0.3p - 0.5To maximize the retailer's profit, we need to differentiate the above equation with respect to p and equate it to zero.dP/dp = 0.3, which implies that 0.3p - 0.5 = 0, and 0.3p = 0.5p = 5/3p = $1.67Therefore, the value of p that maximizes the retailer's profit is $1.67 or 1.5.
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1.Do you think that the EV market in the US will continue to grow at the current rate given the trend of deregulation and relaxation of CAFE standards suggested by the current administration?
2. How do you think the European EV market differs from the US EV market? What are the differences within various regions of Europe?
3. How can/should automakers address the driver distraction issue when using Advanced Driver Assistance Systems (ADAS)? What should they be doing?
Please site sources
The growth of the electric vehicle (EV) market in the US depends on various factors, including government policies, consumer demand, technological advancements, and infrastructure development.
The European electric vehicle (EV) market differs from the US EV market in several ways, including government policies, consumer preferences, infrastructure development, and market dynamics.
Automakers can take several measures to address the issue of driver distraction when using Advanced Driver Assistance Systems (ADAS).
Infrastructure refers to the fundamental physical and organizational systems and facilities that support the functioning of a society, economy, or organization. It includes the essential structures, networks, and services necessary for the operation of various sectors, such as transportation, communication, energy, water supply, and waste management. Infrastructure plays a crucial role in enabling economic growth, facilitating trade and commerce, and improving the quality of life for individuals and communities.
Examples of infrastructure include roads, bridges, airports, seaports, railways, telecommunications networks, power grids, dams, water treatment plants, and public buildings. These physical assets are typically constructed, operated, and maintained by governments or private entities in collaboration with regulatory bodies.
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XYZ company is looking for a 4-months term source of $800,000 to supplement working capital. Which source below should the company choose? The bank A accepts loans at annual nominal rate of interest of 15% a year. The bank B accepts loans at discount interest rate of 14% a year. The bank C accepts a loan with interest rate of 10% per year and deposits rate at 12%
XYZ Company should choose Bank C as the source for their 4-month term loan of $800,000 to supplement working capital.
To determine the most suitable source for XYZ Company's 4-month term loan of $800,000, we need to compare the costs associated with each option. Let's calculate the costs for each bank:
Bank A:
Annual nominal rate of interest: 15%
Loan term: 4 months
The formula to calculate the cost of borrowing using the annual nominal rate is:
Cost = Principal * Annual Nominal Rate * Time
Cost = $800,000 * 15% * (4/12) = $40,000
Bank B:
Discount interest rate: 14%
Loan term: 4 months
The formula to calculate the cost of borrowing using the discount interest rate is:
Cost = Principal * Discount Rate
Cost = $800,000 * 14% = $112,000
Bank C:
Loan interest rate: 10%
Deposit rate: 12%
Loan term: 4 months
The cost of borrowing from Bank C can be calculated by subtracting the interest earned on the deposit from the interest paid on the loan. Since the deposit rate is higher than the loan rate, the cost of borrowing would be negative, meaning XYZ Company would actually earn interest.
Cost = Principal * Loan Interest Rate - Principal * Deposit Rate
Cost = $800,000 * 10% - $800,000 * 12%
Cost = -$16,000
Based on the calculations, Bank C offers the most favorable terms for XYZ Company as they would earn an interest of -$16,000. This means that the company would actually receive an additional $16,000 in interest by borrowing from Bank C and simultaneously depositing the funds at the higher deposit rate.
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Healthcare Finance: An Introduction to Accounting and Financial Management.
What is wrong with this statement: "The clinic’s cash balance for 2015 was $150,000, while its net income on December, 31, 2015, was $50,000."
The statement "The clinic’s cash balance for 2015 was $150,000, while its net income on December 31, 2015, was $50,000" is incorrect because it confuses the cash balance with net income and implies that they are the same.
The cash balance represents the amount of cash available to the clinic at a specific point in time, while net income is the difference between revenues and expenses over a period of time. These two terms are distinct and serve different purposes in financial reporting.
The cash balance reflects the actual amount of cash held by the clinic at the end of a period, such as December 31, 2015. It includes cash on hand, in bank accounts, and other liquid assets. It represents the clinic's liquidity and its ability to meet its short-term financial obligations.
On the other hand, net income is a measure of the clinic's profitability over a specific period, typically a year. It is calculated by subtracting all expenses, including taxes, from the clinic's total revenues. Net income is reported on the income statement and provides information about the clinic's financial performance.
Therefore, the statement is incorrect because it incorrectly equates the cash balance with net income, which are distinct financial metrics. The cash balance represents the amount of cash available, while net income reflects the clinic's profitability after accounting for all expenses.
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Mr. James K. Silber, an avid international investor, just sold a share of Nestlé, a Swiss firm, for SF4,890. The share was bought for SF2,700 a year ago. The exchange rate is SF2.00 per U.S. dollar now and was SF2.16 per dollar a year ago. Mr. Silber received SF310.00 as a cash dividend immediately before the share was sold. Compute the rate of return on this investment in terms of U.S. dollars. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
Rate of return %:
The rate of return on Mr. Silber's investment in Nestlé, in terms of U.S. dollars, is 69.44%.
To calculate the rate of return, we need to consider the initial investment, the cash dividend received, and the final selling price of the share. The initial investment in Swiss francs was SF2,700, and the cash dividend received was SF310.00. Therefore, the total amount invested was SF2,700 + SF310.00 = SF3,010.00.
To convert the initial investment and cash dividend into U.S. dollars, we need to consider the exchange rates. The exchange rate a year ago was SF2.16 per U.S. dollar, and the current exchange rate is SF2.00 per U.S. dollar. Thus, the initial investment in U.S. dollars was SF2,700 / SF2.16 = $1,250.00, and the cash dividend received was SF310.00 / SF2.16 = $143.52.
The selling price of the share in Swiss francs was SF4,890.00, which can be converted to U.S. dollars using the current exchange rate: SF4,890.00 / SF2.00 = $2,445.00.
To calculate the rate of return, we need to find the difference between the total amount received (selling price + cash dividend) and the initial investment, divided by the initial investment, and then multiplied by 100. In this case, the rate of return is (($2,445.00 + $143.52) - $1,250.00) / $1,250.00 * 100 = 69.44%.
Therefore, Mr. Silber's rate of return on this investment, in terms of U.S. dollars, is 69.44%.
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(a)Briefly describe the purpose of depreciation in formulating accounting statements, and illustrate two widely used methods of calculating it, together with the circumstances in which each might be appropriate (5 Marks) (b) A Company depreciates its plant at the rate of 25 per cent per annum straight line method for each month of ownership. 2016 Bought plant costing K 2 600 000 on 1 January Bought plant costing K 2 100 000 on 1 October 2018 Bought plant costing K 2 800 000 on 1 September 2019 Sold plant which had been bought for K 2 600 000 on 1 January 2016 for the sum of K 810 000 on 31 August 2019. From the above details prepare for each of the years 2016,2017,2018 and 2019 (a) the plant account, (6 Marks) (b) the provision for depreciation account (9 Marks) (c) the plant disposal account (5 Marks)
(a) The purpose of depreciation in formulating accounting statements is to write-off the cost of tangible assets over their useful life in a systematic and logical manner. The two widely used methods of calculating depreciation are:the straight-line method and the diminishing balance method. Straight-line method and Diminishing balance method.
(b) Provision for Depreciation Account Date Description Debit Credit Aug 31 Depreciation 1,040,000 Plant Disposal Account Date Description Debit Credit Aug 31 Cash 810,000 Accumulated Depreciation Depreciation Expense 1,040,000 Gain on Disposal(230,000)
(c) The gain on disposal arises when the disposal price is greater than the net book value of the asset sold.
(a) The purpose of depreciation in formulating accounting statements is to write-off the cost of tangible assets over their useful life in a systematic and logical manner. This is done in order to recognize the reduction in the economic usefulness of an asset as it is used to generate income.The two widely used methods of calculating depreciation are:the straight-line method and the diminishing balance method.Straight-line method: Under the straight-line method, the cost of an asset is divided equally over its estimated useful life. The straight-line method is most appropriate for assets that experience a steady reduction in economic usefulness over time.Diminishing balance method: The diminishing balance method applies a fixed percentage to the net book value of an asset each year. This method is appropriate for assets that experience a more rapid decline in economic usefulness in the early years of their life and a slower decline in later years.
(b)2016:Plant Account Date Description Debit Credit Jan 1 Plant 2,600,000 Oct 1 Plant 2,100,000 Sept 1 Plant 2,800,000 Aug 31 Plant 1, depreciation(1/25 * 2,600,000) (104,000)Depreciation Expense Account Date Description Debit Credit Aug 31 Depreciation 1,040,000 Provision for Depreciation Account Date Description Debit Credit Aug 31 Depreciation 1,040,000 Plant Disposal Account Date Description Debit Credit Aug 31 Cash 810,000 Accumulated Depreciation Depreciation Expense 1,040,000 Gain on Disposal(230,000)
(c)The plant disposal account for 2019 shows a gain on disposal of K 230,000. The gain on disposal arises when the disposal price is greater than the net book value of the asset sold.
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If true check box Preferred stockholders are entitled to receive their dividend before any dividend can be given to common stockholders. Dividends in arrears are not reported as a liability. A company declares dividend out of its retained earnings. When cash dividend is declared, it immediately causes an increase in retained earnings of the company. Treasury stock can be reported as an asset in the balance sheet of the company. The purpose of separately reporting the amounts for unusual and/or infrequent items and discontinued operations is to assist users of the income statement in making forecasts of future earnings. If a company shuts down 90% of its pizza parlors, it will report discontinued operations for the year.
A dividend is a payment made by a company to its stockholders, usually as a distribution of profits. The declaration and payment of dividends are decided by the company's board of directors, which is responsible for ensuring that dividends are paid only out of the company's profits.
The board of directors must also consider the interests of the company's stockholders and balance them with the company's financial health.Preferred stockholders are entitled to receive their dividend before any dividend can be given to common stockholders. Dividends in arrears are not reported as a liability. A company declares dividend out of its retained earnings. When cash dividend is declared, it immediately causes an increase in retained earnings of the company. Treasury stock can be reported as an asset in the balance sheet of the company.
The purpose of separately reporting the amounts for unusual and/or infrequent items and discontinued operations is to assist users of the income statement in making forecasts of future earnings. If a company shuts down 90% of its pizza parlors, it will report discontinued operations for the year.
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Justify your answer why the given example for the closing entry
with a balancing amount of 1,175,000 is a Trial Balance. Explain
Please.
nt ") se CTG. ENTRIES ASSETS RRENT ASSETS: ounts Receivable P10.000 h Supplies P3,500 paid Insurance paid Rent P30,000 P25,000 TAL CURRENT A. P545,850 ED ASSETS: niture & Fixtures P40,000 ice Building
The provided example is not a Trial Balance because it only lists selected accounts and their respective balances, without including all the accounts from the accounting system.
A Trial Balance is a statement that lists all the general ledger accounts along with their respective debit or credit balances. It is used to ensure that the total debits equal the total credits in the accounting records.
In the given example, only a few accounts from the assets section are mentioned, such as Accounts Receivable, Supplies, Insurance, and Rent. The balances of these accounts are provided, but it does not include other essential accounts like Cash, Inventory, Prepaid Expenses, and other asset accounts.
A complete Trial Balance would include all the asset accounts, liability accounts, equity accounts, revenue accounts, and expense accounts. It allows for the verification of the accuracy of the bookkeeping entries by ensuring that the debits equal the credits.
Therefore, the provided example does not qualify as a Trial Balance due to its incomplete nature and the absence of a comprehensive listing of all accounts and their balances.
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when it comes to economic growth, nations with low-income economies grow slower than high-income countries. true/false
The statement, "When it comes to economic growth, nations with low-income economies grow slower than high-income countries," is true.
This statement is backed by empirical evidence, which indicates that countries with low levels of income growth slower compared to countries with high-income levels.What is economic growth?Economic growth is the process by which a nation's economy expands. It is characterized by an increase in the production of goods and services. Economic growth is critical in enhancing the living standards of the citizens of a nation. The growth of an economy is typically measured in Gross Domestic Product (GDP), which is the total value of goods and services produced in an economy over a specific period.Less developed or low-income economies experience slower economic growth rates compared to high-income countries. High-income economies are usually characterized by industrialization, technological advancements, a highly skilled workforce, and robust financial institutions. These factors work together to accelerate economic growth.
However, in low-income economies, these factors are usually missing, making it difficult to achieve rapid economic growth. Therefore, low-income economies grow slower compared to high-income countries.
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The statement that nations with low-income economies grow slower than high-income countries is true.
Economies that are low-income tend to grow slowly as they face many challenges that contribute to their slow growth and development. High-income countries, on the other hand, have high productivity levels, technological advancements, and efficient resource allocation mechanisms, which make it easier for them to achieve economic growth and development.
In addition, high-income countries have advanced infrastructure, efficient systems of government, and political stability, which also contribute to their fast economic growth and development. Countries with low-income economies also have to deal with challenges such as political instability, corruption, lack of access to capital, and poor infrastructure. All these factors make it harder for them to achieve fast economic growth and development.
Furthermore, low-income countries often depend on primary industries such as agriculture and mining, which are subject to fluctuations in global commodity prices. This makes it harder for these countries to achieve sustainable economic growth as they are susceptible to external shocks.
In conclusion, the statement that nations with low-income economies grow slower than high-income countries is true, as low-income economies face many challenges that hinder their growth and development.
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Dennis receives $10,000 during the current tax year from Blanca for some office space in Anaheim, California. The rent covers five months, from September 1 of the current year to January 31 of the following year. How much should Dennis report as taxable rental income in the current tax year?
Dennis receives $10,000 during the current tax year from Blanca for some office space in Anaheim, California. The rent covers five months, from September 1 of the current year to January 31 of the following year.
The amount of taxable rental income Dennis should report in the current tax year is $8,333.33 (rounded to the nearest cent).Here's how to calculate it: Firstly, find the number of days that Dennis rented the office space during the current tax year, which is September 1 to December 31, or a total of 122 days.
Secondly, divide the total rent by the total number of days in the lease: $10,000 / 153 days = $65.36 per day. Thirdly, multiply the daily rent by the number of days that Dennis rented the office space during the current tax year: $65.36 x 122 days = $7,974.92 (rounded to the nearest cent).Finally, the amount of taxable rental income for the current tax year is the total rent paid for the period covered by the current tax year, which is $7,974.92, minus any allowable expenses and deductions, if applicable. Therefore, the amount of taxable rental income Dennis should report in the current tax year is $7,974.92 (rounded to the nearest cent).
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Maria is preparing a capital budgeting analysis of the purchase of a new building for her company. What has she forgotten to include in the capital investment figure?
Land $125,000
Improvements $50,000
Landscaping $25,000
Furniture $45,000
Infrastructure $75,000
Total $320,000
a)The cost of electricity.
b)The cost of employee training.
c) The cost of the building.
d) The cost of raw materials.
Maria has forgotten to include the cost of the building itself in the capital investment figure. The given information provides the costs for various components such as land, improvements, landscaping, furniture, and infrastructure.
In order to accurately calculate the capital investment for the purchase of a new building, it is essential to include the cost of the building itself. The provided information only includes the costs associated with other components like land, improvements, landscaping, furniture, and infrastructure. However, the cost of the building is a significant component that should be included in the capital investment figure.
To complete the capital budgeting analysis, Maria should gather the specific cost of the building and include it in the total capital investment. This would ensure that all relevant expenses related to the acquisition of the new building are accounted for in the analysis. Without including the cost of the building, the capital investment figure would be incomplete and may not provide an accurate representation of the total investment required for the project.
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Problem 7-22 Adoption Expenses (LO 7.7) Carl and Jenny adopt a Korean orphan. The adoption takes 2 years and two trips to Korea and is finalized in 2021. They pay $7,000 in 2020 and $7,500 in 2021 for
Carl and Jenny incurred adoption expenses of $7,000 in 2020 and $7,500 in 2021 for adopting a Korean orphan. They may be eligible to claim a tax credit for these expenses.
Adoption expenses can be eligible for a tax credit under certain conditions. In the case of Carl and Jenny, they adopted a Korean orphan, and the adoption process took two years and involved two trips to Korea. The adoption was finalized in 2021.
To claim a tax credit for adoption expenses, there are a few requirements that need to be met. First, the adoption must be a legally recognized adoption. In this case, since the adoption was finalized, it satisfies this requirement. Second, the expenses must be directly related to the adoption process. The costs of the two trips to Korea and the fees associated with the adoption would likely qualify as eligible expenses.
The maximum allowable adoption tax credit for 2020 and 2021 is $14,440 per child. However, the actual credit amount that Carl and Jenny can claim depends on their income and the amount of expenses they incurred. It is important for them to consult with a tax professional or refer to the official IRS guidelines to determine the specific credit amount they can claim.
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This is a 2-period binomial model. (6-month+6-month = 1 year) [conti. = continuously compounded/discounted; option's underlying asset = 1 share of the stock] [i] What is the fair value of a European c
The fair value of a European call option in a 2-period binomial model cannot be determined without specific information about the stock prices, strike price, interest rate, and probabilities associated with the up and down movements.
In a 2-period binomial model, the fair value of a European call option can be determined by calculating the expected payoffs at expiration and discounting them back to the present value. The specific values required to calculate the fair value include the stock prices at each period, the strike price of the option, the risk-free interest rate, and the probabilities associated with the up and down movements of the stock price. Without these values, it is not possible to provide a specific fair value for the European call option.
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Exercise 5-5 Recording journal entries for merchandise sales transactions-perpetual LO3 Help Me SOLVE IT Journalize each of the following transactions assuming a perpetual inventory system. Fob. 1 Sold merchandise with a cost of $1,500 for $2,100; terms 2/10, 1/30, FOB destination 2. Paid $225 to ship the merchandise sold on Fooruary 1. 3 The customer of Fobruary 1 rotumod half of the amount purchased because it was the incorrect product; it was returned to inventory. 4 Sold merchandise to a customer for $3,800 (cost of sales $2.280); terms 2/10, 1/30, FOB destination 11 Collected the amount owing from the customer of February 1. 23 Sold merchandise to a customer for cash of $1,200 (cost of sales $720). 28 The customer of Fobruary 4 paid the amount owing.
To journalize the transactions assuming a perpetual inventory system, we need to record the relevant details of each transaction. Here are the journal entries for the given transactions:
1. January 1:
Accounts Receivable 2,100
Sales Revenue 2,100
Cost of Goods Sold 1,500
Inventory 1,500
2. February 2:
Freight Expense 225
Cash 225
3. February 3:
Inventory 750
Accounts Payable 750
4. February 4:
Accounts Receivable 3,800
Sales Revenue 3,800
Cost of Goods Sold 2,280
Inventory 2,280
5. February 11:
Cash Amount Owing
6. February 23:
Cash 1,200
Sales Revenue 1,200
Cost of Goods Sold 720
Inventory 720
7. February 28:
Cash Amount Owing
"Amount Owing" in entries 5 and 7 represents the specific amount owed by the customer and should be replaced with the actual dollar amount received. These entries record the sales, returns, cost of goods sold, and related transactions for the given period in a perpetual inventory system.
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Oriole, Inc., sells its products with a two-year warranty. The estimated product warranty is 2% of sales. Assume that Oriole had sales of $322,000 during May this year. On June 8, a customer received warranty repairs requiring $86 of parts and $90 of labor. Required: 1. Record the adjusting entry to accrue warranty expense on May 31. 2. Record the journal entry for the warranty work provided in June. Account Title Debit Credit
Adjusting Entry (May 31):
Warranty Expense was debited for $6,440, and Warranty Liability was credited for the same amount.
Journal Entry (June):
Warranty Liability was debited for $176, Inventory credited for $86, and Salaries Expense was credited for $90.
The adjusting entry to accrue warranty expense on May 31 would be as follows:
Warranty Expense $6,440
Warranty Liability $6,440
In this entry, the Warranty Expense account is debited for $6,440, representing 2% of the sales made in May ($322,000 x 2%). The Warranty Liability account is credited for the same amount, creating a liability for future warranty claims.
The journal entry for the warranty work provided in June would be as follows:
Warranty Liability $176
Inventory (Parts) $86
Salaries Expense $90
In this entry, the Warranty Liability account is debited for the amount of warranty work provided in June, which is $176 ($86 for parts + $90 for labor). The Inventory account is credited for $86 to reduce the value of parts used for the repair, and the Salaries Expense account is credited for $90 to record the cost of labor incurred for the warranty repair.
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You are evaluating the stock price of Kroger, a grocery store chain. It has forward earnings per share of $3.22. You notice that its competitor Safeway has a P/E ratio of 13.4. What is a good estimate of Kroger's stock price? The stock price will be S
The price-to-earnings ratio (P/E ratio) is an essential valuation metric that shows how much investors are willing to pay for each dollar of earnings.
It is calculated by dividing the market value per share by the earnings per share. A lower P/E ratio indicates that a company's stock is undervalued relative to its earnings. A higher P/E ratio indicates that a company's stock is overvalued in comparison to its earnings. Given the question, Kroger's forward earnings per share is $3.22, and its competitor Safeway has a P/E ratio of 13.4. Hence, to estimate Kroger's stock price, we need to calculate its P/E ratio. This can be done using the formula: P/E Ratio = Stock Price / Earnings per Share, Rearranging the formula, we get:
Stock Price = P/E Ratio * Earnings per Share
We can estimate Kroger's P/E ratio as follows:
P/E Ratio = Safeway's P/E Ratio = 13.4
Therefore, Kroger's stock price can be estimated as:
Stock Price = P/E Ratio * Earnings per Share
Stock Price = 13.4 * $3.22
Stock Price = $43.05
Therefore, a good estimate of Kroger's stock price based on Safeway's P/E ratio of 13.4 and Kroger's forward earnings per share of $3.22 is $43.05.
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If crime is defined as an economic "bad" rather than an economic "good" then why isn’t the optimal amount of crime simply equal to zero? Be specific.
Note: in general terms, as an economic "bad" less is preferable to more.
In economics, crime is seen as an economic "bad" rather than an economic "good." Crime is a type of negative externality, which is a cost imposed on society beyond the immediate victim of the crime. As a result, the optimal amount of crime is not zero, but rather, the amount of crime that balances the benefits and costs of reducing crime.
According to the economic theory of deterrence, crime rates decrease when the expected cost of committing a crime exceeds the expected benefit of committing that crime. Therefore, an optimal level of crime is achieved when the expected benefit of crime equals the expected cost of crime.
For example, if a community invests in better policing and the cost of committing a crime goes up, it becomes less profitable to commit a crime, resulting in lower crime rates. However, the cost of reducing crime also needs to be taken into consideration.
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In terms of cross-cultural values, people in the United States
tend to have relatively high individualism, a medium
achievement-nurturing orientation, and medium power distance.
True or False
The statement is True. In terms of cross-cultural values, people in the United States tend to have relatively high individualism, a medium achievement-nurturing orientation, and medium power distance.
Orientation refers to the process of familiarizing individuals with their new environment, whether it be a workplace, educational institution, or any other setting. It typically involves providing information, guidance, and support to help individuals understand the expectations, policies, procedures, and culture of the organization or institution they are joining. Orientation programs aim to help new members integrate smoothly, adapt to their roles, and become productive contributors.
These programs may include introductions to key personnel, tours of the facility, training on specific tasks or systems, and the provision of relevant resources. Orientation plays a crucial role in facilitating the acclimatization process, reducing uncertainty and anxiety, and fostering a positive and inclusive atmosphere for newcomers.
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Innovations Corp (IC) uses the percentage of credit sales method
to estimate bad debts each month and then uses the aging method at
year-end. During November 2020, IC sold services on account for
$101
a. the estimated bad debt expense for November 2020 is $3,030. b. the probability of non-collection increases, and higher percentages are applied to estimate the bad debts.
Innovations Corp (IC) uses the percentage of credit sales method to estimate bad debts each month and then uses the aging method at year-end. During November 2020, IC sold services on account for $101,000. The company estimates that 3% of credit sales will become uncollectible.
a. Calculate the estimated bad debt expense for November 2020.
To calculate the estimated bad debt expense for November 2020, we multiply the credit sales for the month by the estimated percentage of bad debts.
Credit sales for November 2020 = $101,000
Estimated percentage of bad debts = 3%
Estimated bad debt expense for November 2020 = $101,000 * 3% = $3,030
Therefore, the estimated bad debt expense for November 2020 is $3,030.
b. Explain how the aging method is used at year-end to estimate bad debts.
The aging method is used at year-end to estimate bad debts by analyzing the aging of accounts receivable. The accounts receivable are categorized based on their age, typically into different time periods (e.g., 30 days, 60 days, 90 days, etc.). For each category, a specific percentage is applied to estimate the likelihood of non-collection.
This percentage is determined based on historical data or industry averages, reflecting the expected collectability of accounts based on their age. Typically, as accounts receivable get older, the probability of non-collection increases, and higher percentages are applied to estimate the bad debts.
Once the percentages are determined for each age category, the total accounts receivable balance is multiplied by the respective percentages. The sum of these calculations gives the estimated bad debt expense for the year.
The aging method provides a more accurate estimation of bad debts as it takes into account the specific aging profile of the accounts receivable. It recognizes the increased risk associated with older receivables and adjusts the estimate accordingly.
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What is the total cost of producing 160 units of output at the new prices? 4) Consider the following information: Q=K²L MPL=K² MPK=2KL w=$8, r=$10, TC=$800 a. Find K, L, and Q*. For parts B through E, refer to the above setup. Change only the one variable listed. b. Now suppose that TC-$400. Find K, L, and Q*. c. Now suppose that w-$4. Find K, L, and Q. d. Now suppose that r=$20. Find K, L, and Q". e. Now suppose that TC-$1,600. Find K, L, and Q*. For parts F through H, ignore TC-$800. Instead, the firm is subject to an output constraint. The firm must produce 1,000 units, so Q=K2L=1,000. f. Find K, L, and TC". g. Now suppose that w-$4. Find K, L, and TC*. h. Now suppose that r-$20. Everything else remains as in the original specification, with the output constraint of Q=K2L=1,000. Find K, L, and TC*.
To calculate the values of K, L, and Q* for the given scenarios, we'll use the provided information and equations:
a. Find K, L, and Q*:
Given:
Q = K^2L
MPL = K^2
MPK = 2KL
w = $8
r = $10
TC = $800
To find K, we can equate MPL (marginal product of labor) with the wage rate:
K^2 = 2L * $8
K^2 = 16L
To find L, we can use the production function and MPK (marginal product of capital) equation:
2KL = $10
L = $10 / (2K)
Substituting the value of L into the equation for Q:
Q = K^2L = K^2 * ($10 / (2K))
Q = 5K
Therefore, the values are:
K = ?
L = ?
Q* = ?
b. Now suppose TC = $400:
Given:
TC = $400
We can set up the cost equation and substitute the given TC value:
TC = wL + rK
$400 = $8L + $10K
To find K, we can rearrange the equation:
$10K = $400 - $8L
K = ($400 - $8L) / $10
Substituting the value of K into the production function:
Q = K^2L = (($400 - $8L) / $10)^2L
Therefore, the values are:
K = (($400 - $8L) / $10)
L = ?
Q* = (($400 - $8L) / $10)^2L
c. Now suppose w = $4:
Given:
w = $4
We can use the equation MPL = w to find K:
K^2 = 2L * $4
K^2 = 8L
To find L, we can substitute the value of K into the production function:
Q = K^2L = (8L)^2L
Q = 64L^3
Therefore, the values are:
K = ?
L = ?
Q = 64L^3
d. Now suppose r = $20:
Given:
r = $20
To find K, we can equate MPK (marginal product of capital) with the rental rate:
2KL = $20
L = $20 / (2K)
To find L, we can substitute the value of K into the production function:
Q = K^2L = K^2 * ($20 / (2K))
Q = 10K
Therefore, the values are:
K = ?
L = ?
Q = 10K
e. Now suppose TC = $1,600:
Given:
TC = $1,600
We can set up the cost equation and substitute the given TC value:
TC = wL + rK
$1,600 = $8L + $10K
To find K, we can rearrange the equation:
$10K = $1,600 - $8L
K = ($1,600 - $8L) / $10
Substituting the value of K into the production function:
Q = K^2L = (($1,600 - $8L) / $10)^2L
Therefore, the values are:
K = (($1,600 - $8L) / $10)
L = ?
Q = (($1,600 - $8L) / $10)^2L
f. Find K, L, and TC" given Q = K^2
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Redtail Hawk Company is evaluating two possible investments in depreciable plant assets. The company uses the straight – line method of depreciation. The following information is available: Initial capital investment Estimated useful life Estimated residual value Estimated annual net cash inflow Required rate of return Investment A $39,000 7 years $10,000 $6,000 13% Investment B $160,000 7 years $19,000 $20,000 11% How long is the payback period for Investment A? O A. 0.6 years B. 6.5 years C. 8 years OD. 3.9 years
The payback period for Investment A is **3.9 years**.
The payback period is calculated by dividing the initial capital investment by the annual net cash inflow. In this case, the initial capital investment for Investment A is $39,000, and the annual net cash inflow is $6,000. Dividing $39,000 by $6,000 gives us a payback period of approximately 6.5 years.
However, we need to consider the estimated residual value as well. The estimated residual value is subtracted from the initial capital investment to determine the net investment. In this case, the estimated residual value for Investment A is $10,000. So, the net investment is $39,000 - $10,000 = $29,000. Now, we divide the net investment by the annual net cash inflow to calculate the adjusted payback period. $29,000 divided by $6,000 gives us approximately 4.83 years. Rounding it up, the adjusted payback period for Investment A is approximately 3.9 years.
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Question 2 Alpha and Beta are in partnership sharing profits and losses 5:3. Under the terms of the partner- ship agreement, the partners are entitled to interest on capital at 6 per cent per annum and Alpha is entitled to a salary of £4,000 and Beta £3,500. Interest is charged on drawings and the amounts of interest are given below. No interest is charged or allowed on current account balances. The partners' capitals at 1 December 2020 were: Alpha £50,000 and Beta £80,000. The net trading profit of the firm before dealing with partners' interest or salaries for the year ended 30 November 2021 was £40,000. Interest on drawings for the year amounted to Alpha £800, Beta £600. At 1 December 2020, there was a credit balance of £2,000 on B's current account, while Alpha's current account balance was a debit of £1,000. Drawings for the year to 30 June 2020 amounted to £15,000 for Alpha and £18,000 for Beta. Required: a. Prepare, for the year to 30 November 2021 the profit and loss appropriation account. (10 Marks) b. Prepare, for the year to 30 November 2021 the partners' current accounts. (7 Marks) c. Why do many partnerships take account of 'interest on capital' and 'interest on drawings'? (3 Marks) d. Alpha's beginning current account had a debit balance. What does this signify? (2Marks) e. List three characteristics and restrictions that limited partners have on their role in the partnership (3 Marks)
Profit and Loss Appropriation Account for the year to 30 November 2021 Particulars Amount Particulars Amount Profit and Loss Account 40,000 Interest on Capital: Alpha 50,000 × 6% £3,000 Beta 80,000 × 6%£4,800 Total Interest£7,800 Less Salary:Alpha£4,000 Beta£3,500 Total Salary£7,500 Net Profit (Balancing figure)£24,700£32,200 B/f to Partners' Current Account (5:3)£19,320£12,880 Note: The interest on drawings is not considered since the drawings are lesser than the interest on capital.
Partners' Current Account as at 30 November 2021 Alpha Beta Alpha Beta ££££ To Balance b/d 1,0002,000 By Balance b/d(1,000)(2,000)To Interest on Capital 3,0004,800 To Share of profit (5/8 x 24,700)15,4389,262 To Salary 4,0003,500 To Drawings (15,000) (18,000)By B/f from Profit and Loss Appropriation Account 19,32012,880 By Interest on Drawings (800) (600)To Balance c/d 23,95813,74224,95814,74223,95813,742 Note: Interest on current account balances is not considered.
Many partnerships take account of 'interest on capital' and 'interest on drawings' since it helps in the following ways:Interest on Capital: It is paid by the firm to the partners on the capital invested by them. It helps to induce the partners to invest more capital in the business. It also helps the firm to get additional funds without raising the interest-bearing debt. The partners get a fixed return on their investment in the firm.Interest on Drawings: When a partner withdraws more than his/her share of profits, it is considered as 'drawings.' Interest is charged on drawings since it helps to discourage the partners from withdrawing more than their share of profits. It also helps to compensate the firm for the loss of funds. If interest on drawings is not charged, the firm will be deprived of the use of these funds and hence will not be able to earn any return from them.
Alpha's beginning current account had a debit balance of £1,000. This signifies that Alpha withdrew more than his share of profits or drew against his/her capital account. Since interest is not charged or allowed on current account balances, Alpha is not liable to pay any interest on the debit balance. The amount will be shown as a negative figure in Alpha's current account.
The characteristics and restrictions of limited partners are as follows:Characteristics: They are passive investors who provide capital to the partnership and share profits and losses. They do not participate in the day-to-day management of the partnership. Their liability is limited to the extent of their capital contribution. They cannot withdraw their capital during the life of the partnership.Restrictions: They cannot bind the partnership or act on behalf of the partnership. They cannot be a part of the general partnership agreement. If they become involved in the management of the partnership, they lose their limited liability protection. They are not entitled to participate in the management of the partnership.
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Besides fashion items (clothes and accessories), what other products are candidates for secondhand markets, or reused one of more times (offer rationales for your choices). [Limit your discussion to items that have not been traditionally been used secondhand as of yet.]
Books and media, secondhand electronics, furniture, automobiles, camping and outdoor gear, and household appliances are all candidates for secondhand markets, or reused one or more times. This is due to the high cost of new products, the abundance of options for buying used, and the high-quality of the products when they are well-maintained or restored to their original condition.
Apart from fashion items, the following products are candidates for secondhand markets or reused one or more times:Books and Media: Used books and media have been popular for years, but the market for them has only grown with the advent of online sales and ebooks. There is no need for physical inventory space, shipping, or production costs, allowing companies to offer these products at a low price.Secondhand Electronics: The market for used electronics is growing, thanks to the high cost of new products and the abundance of options for buying used. This sector is booming because of the fast pace of technological progress, which results in newer devices becoming outdated within months after they are released.Furniture: Used furniture is an excellent option for individuals looking for high-quality pieces at a low cost. This is especially true of items that have been well-maintained or restored to their original condition. Automobiles: Used cars are one of the biggest sellers in the secondhand market. Customers who want a car but cannot afford a new one can buy used cars. Additionally, they can purchase high-end models that they would not be able to afford new, giving them more options in their price range.Camping and Outdoor Gear: Many outdoor enthusiasts choose to sell their camping gear after just a few uses. As a result, it's possible to purchase high-quality, gently used gear at a fraction of the cost of a new one.Household appliances: In recent years, demand for used household appliances has increased. Many people, particularly those moving into their first apartments, are eager to save money on appliances such as refrigerators, ovens, and dishwashers, which can cost thousands of dollars when purchased new.
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Laureen Mauer's salary a year ago was $50,000. If inflation during the year was 4 percent in Tampa where she lives, how much of a decine in her purchasing p occurred? Enter the dollar answer as a posi
To calculate the decline in Laureen Mauer's purchasing power, we need to account for the inflation rate.
Given that the inflation rate was 4 percent, we can calculate the decrease in her purchasing power as follows: Inflation in dollars = Salary a year ago * Inflation rate = $50,000 * 0.04 = $2,000 Therefore, Laureen Mauer's purchasing power declined by $2,000.Subtract the increase in prices from the initial salary to find the decline in purchasing power: Decline in purchasing power = Salary a year ago - Increase in prices Decline in purchasing power = $50,000 - $2,000 Decline in purchasing power = $48,000.
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Calder Pastoral Pty Ltd (Calder) is a large agricultural conglomerate with two subsidiaries: Desmond Downs Pty Ltd which runs a number of cattle stations in outback Western Australia and ARG Pty Ltd (ARG) a rural supplies company for which it generally sells franchises but sometimes operates directly. • Not long after the installation of its new accounting system in November 2021, Calder's long-standing CFO (Ava McMaster) died suddenly and has yet to be replaced, leaving other members of the senior leadership team to undertake her duties as best they can. Calder has also experienced considerable staff turnover in its accounts payable department, including the departure of the accounts payable manager in October 2021, causing some delays in the processing of payments. . In December 2021 the Australian Taxation Office (ATO) undertook a desk audit and raised a number of issues but to date, no assessment has been issued. Calder's tax advisers are following up on these matters. • As part of its cost-cutting program, Calder has decided to abolish its internal audit department from 1 April 2022, 3 months before year-end. Required With reference to relevant audit standards: 1. identify the issues that would influence the scope of the audit engagement 2. explain the likely impact of each issue on the audit plan
The issues that would influence the scope of the audit engagement for Calder Pastoral Pty Ltd include the sudden death of the CFO, staff turnover in the accounts payable department, unresolved issues raised by the Australian Taxation Office (ATO), and the decision to abolish the internal audit department.
Each of these issues has a potential impact on the audit plan.
1. The sudden death of the CFO and subsequent absence of a replacement can significantly impact the audit engagement.
The CFO plays a crucial role in financial oversight and controls, and their absence may result in a lack of continuity and expertise in financial reporting and internal control processes.
The staff turnover in the accounts payable department can lead to delays in payment processing, affecting the completeness and accuracy of financial records.
This issue may require additional scrutiny and testing of accounts payable transactions to ensure their proper recording and classification.
The unresolved issues raised by the ATO indicate potential tax compliance concerns.
The audit plan needs to address these issues by conducting thorough testing and verification of tax-related transactions and ensuring compliance with tax laws and regulations.
The decision to abolish the internal audit department can have a significant impact on the audit engagement.
Internal auditors provide independent assessments of internal controls and risk management processes.
Without an internal audit function, the external auditor may need to perform additional procedures to compensate for the loss of internal oversight, leading to an increased scope of the audit.
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Q When you ask entity staff for a process description and you are provided with a process flow diagram, what would be your next step? Select the three responses. Ignore it and create your own process flow diagram to comply with the existing audit documentation and requirements of AAM. Read it and try to understand the flow of the process, seeking clarification with entity staff as necessary before using it as the basis for audit documentation. File the process flow diagram as audit documentation of the business process. Create a narrative to describe what you learned from the process flow diagram. Identify control activities in the process flow diagram that may not be documented in the process description of the client Read it and try to understand the flow of the process, seeking clarification with e as necessary before using it as the basis for audit documentation. File the process flow diagram as audit documentation of the business process. Create a narrative to describe what you learned from the process flow diagram. Identify control activities in the process flow diagram that may not be documented process description of the client Add Audit specific Elements to the process description of the client
The three appropriate responses would be to read and understand the flow of the process diagram, seek clarification if needed, and then file it as audit documentation.
When provided with a process flow diagram instead of a process description, the next steps would include:
Read it and try to understand the flow of the process, seeking clarification with entity staff as necessary before using it as the basis for audit documentation. The first step is to carefully review the process flow diagram to grasp the sequence and steps involved in the process. This helps in understanding how activities are connected and the overall flow. If there are any ambiguities or uncertainties, seeking clarification from the entity staff is crucial to ensure accurate understanding.
Identify control activities in the process flow diagram that may not be documented in the process description of the client. While examining the process flow diagram, it is important to compare it with the existing process description to identify any discrepancies or additional control activities that may not be documented in the client's description. This step ensures that all relevant controls are considered during the audit process.
File the process flow diagram as audit documentation of the business process. Create a narrative to describe what you learned from the process flow diagram. As part of audit documentation, the process flow diagram should be retained for reference. Additionally, creating a narrative that summarizes the understanding gained from the diagram is beneficial. This narrative can include key process steps, control activities, potential risks, and other observations that help in documenting the audit findings accurately.
Therefore, the three appropriate responses would be to read and understand the flow of the process diagram, seek clarification if needed, and then file it as audit documentation. Additionally, creating a narrative to summarize the understanding and identifying control activities not documented in the client's process description are important steps for the audit process.
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the key organizational level associated with inventory management is
The key organizational level associated with inventory management is the operational level.
Inventory management involves the day-to-day activities and decisions related to maintaining and controlling the inventory levels within an organization.
It is primarily concerned with the efficient and effective management of inventory to meet customer demands while minimizing costs and maximizing profitability.
At the operational level, inventory managers are responsible for tasks such as:
Demand Forecasting: Collaborating with sales and marketing teams to forecast customer demand and determine the required inventory levels to meet that demand.
Inventory Planning: Developing inventory plans and strategies based on demand forecasts, lead times, production schedules, and other relevant factors. This includes determining reorder points, safety stock levels, and order quantities.
Procurement and Replenishment: Coordinating with suppliers to ensure timely delivery of inventory items. This involves placing purchase orders, tracking shipments, and managing relationships with suppliers.
Inventory Control: Monitoring inventory levels, conducting regular stock audits, and implementing controls to prevent stockouts, overstocking, or obsolete inventory. This includes using inventory management systems and software to track and analyze inventory data.
Warehouse Management: Overseeing the storage, handling, and movement of inventory within warehouses or distribution centers. This includes optimizing warehouse layouts, implementing inventory tracking systems, and ensuring efficient picking, packing, and shipping processes.
Inventory Performance Analysis: Analyzing key inventory metrics such as stock turnover, fill rate, carrying costs, and stockouts to evaluate the effectiveness of inventory management strategies. This helps identify areas for improvement and supports decision-making related to inventory optimization.
While inventory management activities are carried out at various levels within an organization, the operational level is primarily responsible for executing the day-to-day inventory management processes and ensuring the availability of inventory to meet customer demands.
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Consider Bob’s company described in Problem 3. Assume that flower pot production is a perfectly competitive industry. For each of the following questions, explain your answers.
a) What is Bob’s break-even price? What is his shut-down price?
b) Suppose the price of a flower pot is $2. What should Bob do in the short run?
c) Suppose the price of a flower pot is $7. What is the profit-maximizing quantity of flower pots that Bob should produce? What will his total profit be? Will he produce or shut down in the short run? Will he stay in the industry or exit in the long run?
d) Suppose instead that the price of a flower pot is $20. Now what is the profit-maximizing quantity of flower pots that Bob should produce? What will his total profit be now? Will he produce or shut down in the short run? Will he stay in the industry or exit in the long run?
a) Bob's break-even price is the price at which his total revenue equals his total cost, resulting in zero profit. It is the minimum price at which Bob needs to sell his flower pots to cover all his costs. His shut-down price, on the other hand, is the price below which Bob would prefer to shut down his production temporarily rather than continue operating at a loss. It is the price that does not cover his variable costs, leading to negative profits.
b) If the price of a flower pot is $2, Bob should continue operating in the short run as long as the price covers his variable costs. Even though he may incur losses in the short run, as long as the price is above his variable costs, he can minimize his losses by continuing production and covering a portion of his fixed costs.
c) If the price of a flower pot is $7, Bob should produce the quantity where his marginal cost equals the price, as this maximizes his profit. To determine the profit-maximizing quantity, Bob should compare the price with his marginal cost curve. His total profit would be the difference between total revenue and total cost at that quantity. If he can cover both his variable and fixed costs and generate positive profit, he should continue producing in the short run. In the long run, his decision to stay in the industry or exit would depend on the overall profitability and competitiveness of the market.
d) If the price of a flower pot is $20, Bob should produce the quantity where his marginal cost equals the price to maximize his profit. As the price is higher, Bob can potentially generate higher profits compared to the previous scenario. His total profit would be the difference between total revenue and total cost at that quantity. If he can cover both his variable and fixed costs and generate positive profit, he should continue producing in the short run. In the long run, Bob's decision to stay in the industry or exit would depend on the sustainability of the high price and profitability of the market.
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Outsourcing : .... a utilizes the efficiency which comes with specialization b.lets the outsourcing firm focus on its key success factors c. All of the above are true of outsourcing. d. None of the above are true of outsourcing.
The correct option is c. Outsourcing is all of the above are true of outsourcing.
Outsourcing is when a company hires an external entity to perform a business process, rather than having an internal department or employee manage it. Outsourcing allows a firm to benefit from specialized expertise and resources, allowing it to concentrate on its core business activities.
Outsourcing allows a firm to concentrate on its core business activities by outsourcing non-core or support functions, a company can focus its internal resources and attention on its core competencies and strategic activities. Instead of spreading resources thin across various areas, the company can prioritize its main areas of expertise, leading to increased efficiency and effectiveness. This can result in better overall performance and competitive advantage.
Therefore, all of the above statements are true about outsourcing. It provides the opportunity to tap into external expertise, gain access to specialized resources, and enables a company to concentrate on its core business activities.
So, all of the above is true of outsourcing.
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xamine the deductibility of these items listed below:
1. Expenses amounting to $1,800 incurred by a Melbourne Surgeon attending an International Congress of Surgeons in Hobart, including: registration fee $650, hotel expense $850 and fares $300.
2. $120,000 paid to construct a building, completed on 1 May of the current year, for use solely in relation to advanced robotics research relating to the company’s products. Would your answer be different if the building was to be used half for advanced robotics research and half for quality control testing?
3. Registration charges and fees of $1,750 in connection with the grant of a patent and the registration of a copyright. The patent and copyright are for a period of 20 years A donation of $95 paid by a taxpayer to a local ambulance center (which provided free ambulance service), on the stipulation that the taxpayer would be given, under a reciprocal arrangement among ambulance centers, free ambulance service in any locality in which the taxpayer subsequently resided.
5. Jimmy is an air traffic controller employed by the Department of Aviation. Jimmy holds a pilot’s license and during the current income year incurs $3,500 expenses in keeping up the flying hours necessary for the retention of that license and $2,800 expenses in obtaining a higher grade of license. There is no statutory or contractual requirement on controllers to obtain a flying license and the holding of a pilot’s license and ongoing flight training are not essential prerequisites for promotion. However, the Department of Aviation acknowledges that flying qualifications and experience help controllers to keep to date with developments in their field and increase their knowledge and ability in their job.
Required:
For each of the five items, discuss whether the following are allowable as deductions under s8 1 or any of the specific deduction provisions of ITAA 1997, excluding Division 40 and 43 of ITAA 1997. Number each of your responses.
The expenses incurred by the surgeon for attending the international congress may be allowable as deductions under section 8-1 of the ITAA 1997.
which allows deductions for expenses incurred in gaining or producing assessable income. Attending the congress can be seen as a means of maintaining professional knowledge and skills, which is essential for the surgeon's profession. The registration fee, hotel expense, and fares can be considered necessary and directly related to the surgeon's professional development and income-earning activities. $120,000 paid to construct a building for advanced robotics research:
The $120,000 paid to construct a building for advanced robotics research may be allowable as a deduction under section 8-1 of the ITAA 1997. The expenditure is incurred in relation to the company's products and can be considered as directly connected to the company's income-earning activities. However, if the building is to be used half for advanced robotics research and half for quality control testing, a portion of the expenses may be apportioned between the two uses, and only the portion related to advanced robotics research would be deductible.
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Discuss the legal position of intention as one of the important elements in the formation of a contract. Support your answer with relevant cases.
Intention is a vital element in the formation of a contract. The parties involved must have the intention to create a legal relationship for a contract to be binding. The cases of Balfour v Balfour and Jones v Padavatton illustrate this principle in contract law.
Intention is one of the important elements in the formation of a contract. The legal position of intention will be discussed in detail in this answer and supported with relevant cases.
According to the English law of contract, intention is a vital element that is required for a contract to be considered legally binding. In other words, the parties involved must have the intention to create a legal relationship. If they do not have this intention, the agreement is not considered a contract.
The case of Balfour v Balfour is a classic example of the principle of intention in contract law. In this case, a husband promised to pay his wife a monthly allowance of £30 while he was away working in Ceylon. Unfortunately, the couple separated, and the husband stopped the payments. The wife sued the husband for breach of contract, but the court ruled against her, stating that there was no intention to create a legally binding agreement as it was a domestic arrangement between husband and wife.
Another case that illustrates the principle of intention is Jones v Padavatton. In this case, the mother promised to give her daughter £200 per month while she was studying at the London School of Economics. However, the mother stopped the payments, and the daughter sued her for breach of contract. The court held that there was an intention to create a legally binding agreement because the mother had made the offer in writing and signed it.
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The material aspects that govern the concept of intention is: The parties cannot sue each other in the absence of intention. If the intention to create legal relations is absent then the contract is a mere promise. The contract will not have a binding effect if there is no intention to create legal relations.
What does Intention mean?
A person obliquely intends those consequences that are virtually certain to emerge from his actions and which he knows are virtually certain to do so. A person directly intends those consequences that he seeks to bring about by his actions, whether or not they will be likely to follow.
A contract must contain several characteristics in order to be legitimate and recognised by the common law, including an offer, acceptance, consideration, the desire to establish legal relations, authority and ability, and certainty. A contract cannot be enforceable by the courts and is not legally binding without these components.
Legal purpose denotes that the parties to a contract must have intended for it to be a legally binding one.
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