1. Price controls usually result in a. inefficient market.
2. The price floor will usually result in a c. surplus.
3. The price ceiling will result in a b. shortage.
4. In practice, rent controls are typically set d. below the equilibrium rent.
Price controls, whether in the form of price ceilings (maximum price) or price floors (minimum price), tend to disrupt the natural equilibrium of supply and demand in a market. When price controls are implemented, they can distort the pricing mechanism and prevent prices from adjusting to their equilibrium levels. This often leads to market inefficiencies because it hinders the ability of buyers and sellers to engage in mutually beneficial transactions. In an inefficient market, there is a misallocation of resources and a loss of overall economic welfare.A price floor is a minimum price set by the government above the equilibrium price. When a price floor is set above the equilibrium, it creates a surplus in the market. This means that the quantity supplied exceeds the quantity demanded at that higher price. Sellers are willing to supply more goods or services at the artificially high price, but buyers are not willing to purchase them in the same quantities. Consequently, excess supply or surplus is created, which can lead to a buildup of unsold goods or services.A price ceiling is a maximum price set by the government below the equilibrium price. When a price ceiling is set below the equilibrium, it creates a shortage in the market. This means that the quantity demanded exceeds the quantity supplied at that lower price. Buyers are willing to purchase more goods or services at the artificially low price, but sellers are not willing to supply them in the same quantities. As a result, excess demand or shortage is created, leading to a situation where consumers are unable to obtain the desired quantity of goods or services at the capped price.Rent controls are a form of price ceiling imposed on rental properties. When rent controls are implemented, they are typically set below the equilibrium rent level. This means that the maximum allowable rent is lower than what would naturally occur in a free market. By setting rent controls below the equilibrium rent, policymakers aim to protect tenants and keep housing affordable. However, this often leads to unintended consequences such as reduced investment in rental properties, deterioration of housing quality, and limited availability of rental units in the long run.To learn more about surplus, Visit:
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MISININ Y At the end of the current year, the owner's equity in LaRose Corporation is $188,000. During the year, the assets of the business had decreased by $90,000, and the liabilities had increased
To determine the change in owner's equity in LaRose Corporation, we can use the following formula:
The information provided indicates changes in owner's equity, assets, and liabilities in LaRose Corporation. Here is a breakdown of the given information: Owner's equity at the end of the current year: $188,000 Change in assets during the year: Decreased by $90,000 Change in liabilities during the year: Increased by $10,00 To calculate the initial owner's equity, we need to adjust for the changes in assets and liabilities: Initial Owner's Equity = Ending Owner's Equity + Change in Assets - Change in Liabilities Initial Owner's Equity = $188,000 + (-$90,000) - $10,000 Initial Owner's Equity = $188,000 - $90,000 - $10,000 Initial Owner's Equity = $188,000 - $100,000 Initial Owner's Equity = $88,000 Therefore, the initial owner's equity in LaRose Corporation at the beginning of the year was $88,000.
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This competency assessment assesses the following Outcome(s): Course Outcomes for Unit 4 Assignment: LS311-2: Discuss the relationship of torts to risk management. GEL-6.06: Apply research to create original insights and/or solve real-world problems. You are working at eHarbour and learn that eHarbour's computer system has been attacked by a computer virus from a cybercriminal. An employee of eHarbour inadvertently opened an email with an attachment that appeared to come from the State of Florida Division of Corporations for business registration renewals. The names, addresses, phone numbers, credit card information, and other personal information of all eHarbour customers have been compromised in the data breach. In your role working as a paralegal or legal assistant for eHarbour, draft a memorandum to Daniel Hudson, the eHarbour general counsel, analyzing potential civil liability for negligence under Florida state law for the data breach. In the memorandum, specifically discuss the elements for negligence and the reasonable person standard. In addition, analyze any potential affirmative defenses that may apply Use the memorandum template found here MEMORANDUM Date: [today's date] To: Daniel Hudson From: [student name] Re: Potential Liability for Data Breach Introduction [Provide an introduction in this section.] Liability for Negligence [Discuss potential liability for negligence under Florida law in this section. The tort of negligence occurs "when someone suffers injury because of another's failure to live up to a required duty of care" (Miller, 2016, p. 81). To maintain an action for negligence, a plaintiff must establish "that the defendant owed a duty, that the defendant breached that duty, and that this breach caused the plaintiff damages" Fla. Dep't of Corr. v. Abril, 969 So. 2d 201, 204 (Fla. 2007). Defenses [Discuss potential defenses in this section.] Conclusion [Give a brief conclusion in 1-2 sentences.]
MEMORANDUM
Date: [today's date]
To: Daniel Hudson
From: [student name]
Re: Potential Liability for Data Breach
Introduction
In light of the recent data breach at eHarbour resulting from a cybercriminal attack, this memorandum analyzes the potential civil liability for negligence under Florida state law. Specifically, it examines the elements for negligence and the application of the reasonable person standard. Additionally, potential affirmative defenses relevant to the situation are discussed.
Liability for Negligence
Under Florida law, negligence arises when an individual fails to fulfill a required duty of care, resulting in injury to another party (Miller, 2016, p. 81). To establish a claim for negligence, the plaintiff must demonstrate the following elements:
Duty: The defendant, in this case, eHarbour, owed a duty of care to its customers to protect their personal information from unauthorized access and data breaches.
Breach: The data breach occurred due to an employee's inadvertent act of opening an email attachment that appeared to be from the State of Florida Division of Corporations. It could be argued that eHarbour breached its duty by not implementing adequate safeguards and training to prevent such incidents.
Causation: It must be shown that eHarbour's breach of duty was the direct cause of the data breach and subsequent compromise of customer information.
Damages: The data breach resulted in the exposure of sensitive customer data, including names, addresses, phone numbers, and credit card information. The affected customers may suffer financial losses, identity theft, or other harm as a result.
Defenses
In potential defense against negligence claims, eHarbour may consider the following:
Contributory Negligence: If customers were found to have acted negligently by, for example, using weak passwords or sharing personal information, their actions might be considered contributory negligence, reducing eHarbour's liability.
Assumption of Risk: If customers were aware of the potential risks associated with sharing personal information online and still willingly engaged with eHarbour's services, they might be deemed to have assumed the risk of a data breach, limiting eHarbour's liability.
Conclusion
Based on the analysis, eHarbour may face potential civil liability for negligence under Florida state law for the data breach. To establish a successful defense, eHarbour should gather evidence demonstrating the implementation of reasonable security measures and proper training to mitigate the risk of cyberattacks. Prompt notification and assistance to affected customers should also be prioritized to mitigate damages and maintain goodwill.
References:
Miller, R. L. (2016). Business Law Today, Comprehensive: Text and Cases: Diverse, Ethical, Online, and Global Environment (10th ed.). Cengage Learning.
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Providing for Doubtful Accounts
At the end of the current year, the accounts receivable account has a debit balance of $1,066,000 and sales for the year total $12,080,000.
The allowance account before adjustment has a credit balance of $14,400. Bad debt expense is estimated at 3/4 of 1% of sales.
The allowance account before adjustment has a credit balance of $14,400. An aging of the accounts in the customer ledger indicates estimated doubtful accounts of $46,100.
The allowance account before adjustment has a debit balance of $5,900. Bad debt expense is estimated at 1/4 of 1% of sales.
The allowance account before adjustment has a debit balance of $5,900. An aging of the accounts in the customer ledger indicates estimated doubtful accounts of $49,000.
Determine the amount of the adjusting entry to provide for doubtful accounts under each of the assumptions (a through d) listed above.
a. $fill in the blank 1
b. $fill in the blank 2
c. $fill in the blank 3
d. $fill in the blank 4
The accounts receivable account has a debit balance of $1,066,000 and sales for the year total $12,080,000.The allowance account before adjustment has a credit balance of $14,400. Bad debt expense is estimated at 3/4 of 1% of sales.
The allowance account before adjustment has a credit balance of $14,400.
Aging of the accounts in the customer ledger indicates estimated doubtful accounts of $46,100.The allowance account before adjustment has a debit balance of $5,900. Bad debt expense is estimated at 1/4 of 1% of sales.
The allowance account before adjustment has a debit balance of $5,900.
Aging of the accounts in the customer ledger indicates estimated doubtful accounts of $49,000.Now, let's compute the adjusting entries for doubtful accounts:
a. Assuming the bad debt expense is estimated at 3/4 of 1% of sales.
A. Adjusting entry to provide for doubtful accounts: = (3/4% × $12,080,000) − $14,400 = $57,800. The main answer is $57,800.
b. Assuming the allowance account before adjustment has a credit balance of $14,400.The aging of the accounts in the customer ledger indicates estimated doubtful accounts of $46,100.
B. Adjusting entry to provide for doubtful accounts: = $46,100 − $14,400 = $31,700.
c. Assuming the allowance account before adjustment has a debit balance of $5,900.The bad debt expense is estimated at 1/4 of 1% of sales.
C. Adjusting entry to provide for doubtful accounts: = (1/4% × $12,080,000) + $5,900 = $35,200. The main answer is $35,200. The detailed answer is provided above.d. Assuming the allowance account before adjustment has a debit balance of $5,900.The aging of the accounts in the customer ledger indicates estimated doubtful accounts of $49,000.
D. Adjusting entry to provide for doubtful accounts: = $49,000 − $5,900 = $43,100. The main answer is $43,100.
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T/F: In the context of relative valuation, it makes sense to use the equation PE = 13+ (2x g) to adjust a company's PE ratio for differences in growth (g). (Assuming statistical significance.)
False. The equation PE = 13 + (2 × g) is not an appropriate method to adjust a company's PE ratio for differences in growth (g) in the context of relative valuation.
The given equation, PE = 13 + (2 × g), does not accurately capture the relationship between a company's PE ratio and its growth rate. The PE ratio is a measure of how much investors are willing to pay for each dollar of earnings generated by a company. While growth can influence the PE ratio, it is not appropriate to assume a fixed linear relationship between the two variables.
Valuation models typically consider various factors, such as industry norms, market conditions, and company-specific characteristics, to determine an appropriate valuation multiple. In the context of relative valuation, it is more common to use techniques like comparable company analysis or discounted cash flow analysis to adjust for differences in growth rates among companies.
The equation PE = 13 + (2 × g) oversimplifies the complex relationship between PE ratio and growth, and its arbitrary nature makes it an unreliable method for adjusting valuations. It is crucial to employ more robust and comprehensive valuation methodologies to ensure accurate and meaningful assessments of a company's relative value.
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The sales budget is O A. a projection of financial position at the end of the budget period B. an estimate of expected sales revenue at the end of the budget period OC. an estimate of the quantity and cost of direct materials to be purchased O D. a projection of anticipated cash flows
The correct option for the given question is option (B) an estimate of expected sales revenue at the end of the budget period. A sales budget is a fundamental part of a company’s budgeting process. It is a financial plan that indicates the expected sales revenue of a business during a given period.
The sales budget is usually prepared in advance for a fiscal year or as the need arises in the company’s planning process.The primary purpose of the sales budget is to estimate how much revenue a company will generate from its sales activities. It is used to plan and allocate resources to meet the projected sales target.
This budget will help the company in taking strategic decisions. It provides a roadmap for the company to meet its sales target and to plan the production accordingly.The sales budget helps the management to take decisions related to investments, employment of resources, and other areas that may affect the sales of a company.
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Jamie runs a small car and campervan rental business. Anticipating an increase in the
number of tourists once the New Zealand borders fully reopen, Jamie considers
significantly expanding her car and campervan rental business. Before making such an
important step, she wants to understand the resources required. Jamie has carefully
studied existing rental car and campervan operators (RCO) and read several research
papers to estimate the required number of staff, branches, and cars in her fleet.
She has learned that the demand for rental cars and campervans in New Zealand is
highly seasonal. Demand increases sharply from Labour Day in late October and remains
high until Easter in April but stays relatively low throughout the rest of the year. The
only exception is another spike in demand for rental cars (though not campervans)
during the winter break and Matariki Festival.
Jamie has also found it curious that other RCOs use different models to manage their
vehicle fleet. Some choose to lease their vehicles from large international manufacturers,
such as Toyota or Suzuki. The minimum lease term is six months, and most RCOs
choose to lease most of their vehicles from October through April and then return them
to the manufacturer. This means they only keep a very low number of vehicles for the
rest of the year. Other RCOs choose to purchase all of their vehicles instead of leasing
them. These companies then use them for several years before selling them and
purchasing newer vehicles.
As Jamie plans to store more vehicles soon, she contracts KiwiShade Ltd. to install a
number of new steel carports on a vacant plot she owns. Jamie pays the full amount of
$52 000 in advance. Jamie informs Kiwishade Ltd. that the car ports need to be installed
as soon as possible as her current lease for a small garage is expiring and she needs to
safely store her current rental fleet. Kiwishade Ltd. begins to install the carports but then
finds a more profitable job and abandons the installation of Jamie’s carports. This means
they have only partly installed the roof panels of the carports. Jamie does not contract a
new company to complete the work. In the meantime, she starts storing her existing car
fleet under the semi-completed carports.
A few weeks later MetService issues a heavy rainfall and hail alert. Several days later the
projected storm rolls through the area and causes heavy hail damages to two of Jamie’s
cars. The repairs have been estimated to cost $5000 and will take a week to complete.
During this time Jamie will be unable to rent out the vehicles. The daily rental fee for the
vehicles is $150 each.
Question:
With consideration of the four principles in relation to the award of damages,
determine the type and level of damages that Jamie could sue Kiwishade Ltd for.
Jamie could potentially sue KiwiShade Ltd for damages related to breach of contract and consequential damages. The specific damages that Jamie could claim include the cost of incomplete installation and the loss of rental income due to hail damage.
In this scenario, Jamie entered into a contract with KiwiShade Ltd to install carports on her property. However, KiwiShade Ltd abandoned the installation before completing it. As a result, Jamie has incurred financial losses and damages. According to the four principles of awarding damages, Jamie could seek compensation for the harm caused by KiwiShade Ltd's breach of contract. Firstly, Jamie can claim damages for the incomplete installation of the carports. Since she paid the full amount in advance and KiwiShade Ltd failed to fulfill their obligation, Jamie could seek reimbursement for the cost of the unfinished work, which in this case is $52,000. Secondly, Jamie can claim consequential damages for the hail damage to her cars. The hailstorm caused significant damage, resulting in a repair cost of $5,000 and a week of rental income loss. Jamie can include these expenses as consequential damages caused by KiwiShade Ltd's failure to complete the carport installation on time, leaving her vehicles exposed to the storm. Overall, Jamie can sue KiwiShade Ltd for the cost of incomplete installation ($52,000) and consequential damages for the hail damage ($5,000 repair cost plus one week of rental income loss). The exact level of damages would be determined by the court based on the evidence and circumstances of the case.
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When a merchant advertises their product the courts generally presume that: O
Merchants are held responsible for their product descriptions, and the statements they make about the product are deemed to be true in most cases.
When a merchant advertises their product the courts generally presume that the product description is an affirmation of fact.The presumption is that the statement made by the merchant, even though not literally true, constitutes an affirmation of fact. It is up to the merchant to disprove that the statement is misleading or false. The terms and warranties given by merchants or sellers are usually interpreted to be affirmations of fact.The merchant or seller is expected to present the product as it is. The courts assume that merchants have more experience and knowledge about the goods they are selling than the ordinary consumer does, and so the statements made by the merchant are viewed as more reliable.
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E
4) The number of defects that occur per unit of product follows a Poisson distribution (binomial) with a mean of 4 defects per unit. What is the standard deviation of this distribution?
the standard deviation of the given Poisson distribution is 2.
In Poisson distribution, the mean equals to the variance of the distribution.the standard deviation is the square root of the variance.The formula for variance is:Variance (σ²) = Mean (μ)The given mean of defects per unit is 4.Therefore, the standard deviation is:Standard deviation = sqrt (Mean)σ = sqrt (4)σ = 2Therefore, This is the required solution.x
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If we observe that every increase in income of $120 million generates an increase in consumption of $70 million, What is the simple multiplier?
Given that every increase in income of $120 million generates an increase in consumption of $70 million.We are to find the simple multiplier.
The Simple multiplier is defined as the ratio of change in income to the corresponding change in spending, in response to a given change in spending. It represents the number of times in which a unit change in autonomous expenditure translates into an eventual change in real output. The simple multiplier is calculated using the formula:Simple multiplier = ΔY/ΔZwhereΔY is the change in real income, andΔZ is the autonomous change in aggregate expenditure.Given that every increase in income of $120 million generates an increase in consumption of $70 million.
From the above equation,ΔY = $120 millionandΔZ = $70 million Substituting the above values in the formula for calculating the simple multiplier, we have;Simple multiplier = ΔY/ΔZ = $120 million / $70 million = 12/7.The simple multiplier is 12/7.
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When Congress was constructing the intellectual property system, why did they choose to adopt such a significant departure (the grant of monopolies) from the economic theory that forms the basis of our economic system?
Answer:
When Congress was constructing the intellectual property system, they chose to adopt the grant of monopolies as a departure from the economic theory for several reasons:
Explanation:
Encouragement of Innovation: The primary objective of intellectual property laws, such as patents and copyrights, is to encourage innovation and creativity. By granting exclusive rights to inventors and creators, Congress aimed to provide them with an incentive to invest time, resources, and effort into developing new ideas, inventions, and artistic works. The grant of monopolies ensures that individuals or companies have a limited period of exclusive control over their creations, allowing them to profit from their innovation and be motivated to continue producing new and valuable intellectual property.
Balancing Private and Public Interests: The intellectual property system aims to strike a balance between the interests of creators and the broader public. By granting temporary monopolies, Congress sought to reward inventors and creators for their efforts while also ensuring that the public benefits from the dissemination of knowledge and the advancement of technology and culture. The exclusivity granted by intellectual property rights allows creators to have a period of exclusive control, but it also ensures that eventually, the knowledge or work will enter the public domain, benefiting society as a whole.
Economic Considerations: The grant of monopolies through intellectual property rights also serves economic purposes. It provides a means for creators and inventors to monetize their innovations, attracting investment and facilitating economic growth. By allowing individuals or companies to profit from their intellectual property, it incentivizes research and development, encourages entrepreneurship, and fosters competition and innovation within industries.
Incentivizing Disclosure and Knowledge Sharing: One of the underlying principles of the intellectual property system is the idea of disclosure. By granting exclusive rights, inventors and creators are encouraged to disclose their innovations to the public in exchange for the monopoly. This disclosure helps disseminate knowledge, facilitates further research and development, and enables others to build upon existing ideas, fostering progress and advancement.
While the grant of monopolies may deviate from certain economic principles, such as perfect competition and free market dynamics, it is a deliberate departure designed to address specific societal and economic objectives related to innovation, creativity, and the balance between private and public interests.
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Daily Enterprises is purchasing a $10.3 million machine. It will cost $52,000 to transport and install the machine. The machine has a depreciable life of five years using straight-line depreciation and will have no salvage value. The machine will generate incremental revenues of $4.1 million per year along with incremental costs of $1.1 million per year. Daily's marginal tax rate is 35%. You are forecasting incremental free cash flows for Daily Enterprises. What are the incremental free cash flows assocuated with the new machine?
The Incremental Free Cash Flow (IFCF) assocuated with the new machine is -$7.762 Million.
Given:
Initial Cost of Machine (IC)= $10.3 Million
Cost of Transporting and Installing (TC)= $52,000
Incremental Revenue (IR)= $4.1 Million per year
Incremental Costs (ICo) = $1.1 Million per year
Machine's Depreciable Life = 5 years
Salvage Value of the Machine = 0
Marginal Tax Rate of Daily's Enterprises = 35%.
To find:
Incremental Free Cash Flow (IFCF)
Calculation of Depreciation of the Machine:
Depreciation of the Machine = (IC – SV) / n
Where, n = Depreciable Life, SV = Salvage Value
Depreciation of the Machine = (IC – SV) / n= ($10.3 Million – 0) / 5= $2.06 Million per year
Calculation of Incremental Earnings before Tax (IEBT):
Incremental Earnings before Tax (IEBT) = IR – ICo – Depreciation of the Machine
IEBT = IR – ICo – Depreciation of the Machine
= $4.1 Million – $1.1 Million – $2.06 Million
= $0.84 Million
Calculation of Tax Paid:
Taxes Paid = IEBT x Tax Rate
= $0.84 Million x 35%
= $0.29 Million
Calculation of Incremental Net Income (INI):
Incremental Net Income (INI) = IEBT – Taxes Paid
INI = IEBT – Taxes Paid
= $0.84 Million – $0.29 Million
= $0.55 Million
Calculation of Incremental Free Cash Flow (IFCF):
Incremental Free Cash Flow (IFCF) = INI + Depreciation of the Machine – Incremental Capital Expenditure (ICE)
IFCF = INI + Depreciation of the Machine – ICE
Where,
ICE = IC + TC – SV
= $10.3 Million + $52,000 – $0
= $10.352 Million
IFCF = $0.55 Million + $2.06 Million – $10.352 Million
= -$7.762 Million
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FILL THE BLANK. "Question 66
______ is the total of an employee’s pay and
benefits.
Salary
Compensation
Income
Take-home pay
Question 67
The developmental performance appraisal focuses on an"
Compensation is the total of an employee's pay and benefits. correct answer is Compensation. The developmental performance appraisal focuses on an employee's future performance.
Salary compensation is the total amount of compensation that a worker receives, including bonuses, incentives, and benefits. In other words, it is the amount of money that an employee earns for the work they do, which may include several incentives and benefits.
Question 67: The developmental performance appraisal focuses on an employee's future performance. The purpose of the developmental appraisal is to identify an employee's strengths and weaknesses, as well as their potential for growth and development. This type of appraisal is intended to provide employees with feedback that will help them improve their performance and develop their skills.
In conclusion, compensation refers to the total amount of pay and benefits that an employee receives, while developmental performance appraisal focuses on an employee's potential for growth and development. It is essential to have a fair compensation system and a well-designed performance appraisal system to help companies retain their employees and increase their productivity.
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Window Shine Ltd. was incorporated on July 1, 2020, and purchased an existing business on the same date. The purchase included the following assets: Delivery trucks Goodwill $53,200 15,400 15,000 Franchise Immediately after incorporation, the company moved into leased premises, having signed a lease for three years with an option to renew for an additional three. Rental payments of $2,000 per month began in July. The premises required alterations, and in July, the company incurred costs of $24,000 for these. The franchise that was purchased for $15,000 has a remaining legal life of five years. At the end of the five-year period, the franchise may be renewed at a nominal cost only if the franchiser is satisfied with the performance of the franchisee. The company's fiscal year-end is June 30, 2021. A brief financial statement for this first year of operations is below. Revenue $124,000 Expenses: Wages Office $26,000 4,000 24,000 24,000 Duilding improvements Rent Delivery expense 4,000 Incorporation costs 3,000 Amortization/depreciation (truck) 15,960 Amortization of goodwill 5,000 Amortization of franchise 5,000 Other 12,000 122,960 $ 1,040 Net income for the year Required: Determine the corporation's net income from business for tax purposes for the taxation year ending June 30, 2021. NOTE: Assume new vehicle acquired prior to Apr 19, 2021. Net Income per financial statements $ 1,040 Building improvements ▼ $ 24,000 Amortization: Truck $ 15,960 Amortization: goodwill $ 5,000 Amortization: Franchise $ 5,000 CCA: Truck $ (23,940) CCA: Goodwill $ (1,155) CCA: Franchise $
To determine the corporation's net income from business for tax purposes for the taxation year ending June 30, 2021, we need to calculate the adjustments related to building improvements, amortization, and capital cost allowance (CCA).
Here's the calculation:
Net Income per financial statements $ 1,040
Building improvements:
Add: Building improvements (capital expenditure) $ 24,000
Amortization:
Add: Amortization of truck $ 15,960
Add: Amortization of goodwill $ 5,000
Add: Amortization of franchise $ 5,000
CCA:
Deduct: CCA of truck $ (23,940)
Deduct: CCA of goodwill $ (1,155)
Deduct: CCA of franchise $
Net Income for tax purposes = Net Income per financial statements + Building improvements + Amortization - CCA
Net Income for tax purposes = $1,040 + $24,000 + $15,960 + $5,000 + $5,000 - $23,940 - $1,155 - CCA
Please note that the CCA for the franchise is not provided in the given information. You would need to determine the appropriate CCA rate for the franchise and calculate the deduction accordingly.
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At the beginning of the year, Blue Chipmunk Foodstuffs, Inc. had an unlevered value of $9,000,000. It pays federal and state taxes at the marginal rate of 35%, and currently has $3,500,000 in debt capital in its capital structure. and the levered value of According to MM Proposition I with taxes, Blue Chipmunk Foodstuffs is allowed to recognize a tax shield of the firm is ... a. $7,775,000. b. $12,500,000 c. $5,500,000. d. $10,225,000.
The statement according to MM Proposition I with taxes, Blue Chipmunk Foodstuffs is allowed to recognize a tax shield of the firm is option (d) $10,225,000.
The Modigliani-Miller Proposition I with taxes states that the value of the levered firm is equal to the value of the unlevered firm plus the present value of the tax shields.
The formula for calculating the tax shield is:T = TC * D Where:T is the value of the tax shield Tc is the corporate tax rateD is the amount of debt capital.
Using this formula, we can calculate the value of the tax shield for Blue Chipmunk Foodstuffs, Inc. as follows :T = 0.35 * $3,500,000T = $1,225,000
The unlevered value of the company is $9,000,000, and the value of the tax shield is $1,225,000, so the levered value of the company is:
V_L = V_U + T= $9,000,000 + $1,225,000V_L = $10,225,000
Therefore, according to MM Proposition I with taxes, Blue Chipmunk Foodstuffs is allowed to recognize a tax shield of the firm is $10,225,000.
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The following data gives the number of rainy days in June for 64 US cities: Number of Rainy Days: Number of Cities: 0 10 12 2 22 13 6 1 5 Please solve the mean, median, mode and the standard deviation. Solve the skewness. You can solve by using weighted categories, because there is grouped data, and N = 64. Draw a histogram for the data. Label both axes in full, with correct numbers.
The x-axis represents the number of rainy days, and the y-axis represents the number of cities. Each category will be represented by a bar with a height corresponding to its frequency.
To solve for the mean, median, mode, standard deviation, and skewness of the given data, we will first organize the data into a frequency distribution table using the provided categories and corresponding frequencies:
Number of Rainy Days Number of Cities
0 10
1 12
2 22
3 13
4 6
5 1
To find the mean, we will calculate the weighted average using the formula:
Mean = (Σ(fx)) / (Σf)
Where Σf represents the sum of frequencies, and Σ(fx) represents the sum of the product of each category value and its corresponding frequency.
Calculating the mean:
Mean = (010 + 112 + 222 + 313 + 46 + 51) / (10 + 12 + 22 + 13 + 6 + 1) = 2.046
The median is the middle value in the data set. Since the data is already arranged in ascending order of rainy days, the median is the 32nd value. In this case, the median is 2.
The mode is the value that appears most frequently in the data set. In this case, the mode is 2 since it has the highest frequency of 22.
To find the standard deviation, we will use the formula for the weighted standard deviation:
Standard Deviation = sqrt((Σ(f(x-mean)^2)) / (Σf))
Calculating the standard deviation:
Standard Deviation = [tex]sqrt(((0-2.046)^2 * 10 + (1-2.046)^2 * 12 + (2-2.046)^2 * 22 + (3-2.046)^2 * 13 + (4-2.046)^2 * 6 + (5-2.046)^2 * 1) / (10 + 12 + 22 + 13 + 6 + 1))[/tex] = 1.451
Skewness measures the asymmetry of the data distribution. We can use the following formula to calculate the skewness:
Skewness =[tex](Σ(f(x-mean)^3)) / (N * standard deviation^3)[/tex]
Calculating the skewness:
Skewness = [tex]((0-2.046)^3 * 10 + (1-2.046)^3 * 12 + (2-2.046)^3 * 22 + (3-2.046)^3 * 13 + (4-2.046)^3 * 6 + (5-2.046)^3 * 1) / (64 * 1.451^3) = -0.085[/tex]
To draw a histogram, we will use the given categories and frequencies. The x-axis represents the number of rainy days, and the y-axis represents the number of cities. Each category will be represented by a bar with a height corresponding to its frequency.
(Note: As a text-based AI model, I cannot directly generate visual images. However, you can create a histogram using the provided data and labels, representing the x-axis and y-axis accordingly.)
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María and Bob form Robin Corporation. María transfers property worth $272,500 with a basis of $95,375 for 70 shares in Robin Corporation. Bob receives 30 shares for property worth $109,000 with a basis of $21,800 and legal services worth $10,900 in organizing the corporation. If there is no gain or loss, enter "0" for the amount.
María has a gain of $177,125 and her adjusted basis per share in Robin Corporation is $2,530.36. Bob has a gain of $87,200 and his adjusted basis per share is $3,623.33, including the value of legal services.
How to calculate gains and loss in the formation of Robin Corporation?To determine the gain or loss for each party in the formation of Robin Corporation, we need to calculate the differences between the fair market value (FMV) of the property transferred and the adjusted basis.
For María:
- Property transferred worth $272,500 with a basis of $95,375
- Gain or loss = FMV - Basis
= $272,500 - $95,375
= $177,125 gain
For Bob:
- Property transferred worth $109,000 with a basis of $21,800
- Gain or loss = FMV - Basis
= $109,000 - $21,800
= $87,200 gain
Since the question states that there is no gain or loss, we need to adjust the share values accordingly.
For María:
- María receives 70 shares in Robin Corporation.
- The adjusted basis per share = Gain / Number of shares
= $177,125 / 70
= $2,530.36 per share
For Bob:
- Bob receives 30 shares in Robin Corporation.
- The adjusted basis per share = (Gain + Value of legal services) / Number of shares
= ($87,200 + $10,900) / 30
= $3,623.33 per share
Therefore, the adjusted basis per share for María is $2,530.36, and for Bob is $3,623.33.
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The Covid-19 global pandemic has disrupted supply chains worldwide. This supply chain disruption would have impacted procurement in an organisation.
Any of the following procurement areas could be impacted from Covid-19 outbreak:
• supply of products and/or services the organisation has outsourced,
• commodity procurement,
• global sourcing,
• capital procurement or
• project procurement.
Refer back to the organisation for your answer to Question 1(b).
(a) First, describe which procurement areas of the organisation were impacted by Covid-19. Then, examine how to manage any conflict and dispute in buyer- supplier relations, arising from the procurement area(s) impacted in the organisation.
(b) Develop a plan to manage Supply Side Risk, based on the experience learned from the Covid-19 pandemic for the organisation.
The supply chain disruption caused by the Covid-19 pandemic has had a significant impact on the procurement process. Organizations have been affected, with procurement areas such as commodity procurement, project procurement, capital procurement, global sourcing, and supply of products and/or services the organization has outsourced all impacted.
(a)The Covid-19 pandemic has affected the supply chain across the globe, which has led to the disruption of the procurement process. In the organization, the following procurement areas were impacted by Covid-19 outbreak:Supply of products and/or services the organization has outsourced.Commodity procurement.Global sourcing.Capital procurement or.Project procurement.The conflict and dispute in buyer-supplier relations, arising from the procurement area(s) impacted in the organization can be managed by following ways:
Supplier Relationship Management (SRM)Strategic ProcurementCollaborative ContractingProcurement Data AnalyticsRisk ManagementCompliance ManagementEffective Communication(b)Plan to manage Supply Side Risk based on the experience learned from the Covid-19 pandemic for the organization:
Identify risk exposure and tolerance levelAssess critical suppliersDevelop and implement contingency plans and strategiesMonitor suppliersImplement a supplier qualification and selection programEnhance supplier communication and collaborationExplore supply chain financing optionsEstablish strategic partnerships with suppliersDevelop and maintain a diversified supply chainThe conflict and dispute in buyer-supplier relations, arising from the procurement area(s) impacted in the organization, can be managed by employing measures such as effective communication, compliance management, strategic procurement, procurement data analytics, risk management, and supplier relationship management (SRM).
To manage Supply Side Risk based on the experience learned from the Covid-19 pandemic for the organization, the organization can employ measures such as supplier qualification and selection program, exploring supply chain financing options, enhancing supplier communication and collaboration, identifying risk exposure and tolerance level, assessing critical suppliers, developing and implementing contingency plans and strategies, establishing strategic partnerships with suppliers, and developing and maintaining a diversified supply chain.
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Find out what are the characteristics of workers representation
model in Japan given its employment relations and industrial
relations system. Provide references to the Findings.
The characteristics of the worker representation model in Japan is that it has a high degree of unionization and a strong connection between unions and management, and it emphasizes the importance of enterprise unions. The Japanese labor market also has a focus on lifetime employment, where workers remain with a single firm for the entirety of their career.
In Japan, worker representation is achieved through enterprise unions, which are composed of workers from a single company. These unions engage in collective bargaining with management to negotiate wages, benefits, and working conditions. The enterprise union system promotes a sense of shared responsibility between management and labor and encourages cooperation between the two parties.There is also a focus on lifetime employment in Japan, which means that workers remain with a single company for the entirety of their career.
Japan's worker representation model is unique compared to other industrialized nations due to its strong emphasis on enterprise unions, lifetime employment, and mutualism between labor and management. According to a 2020 report by the Ministry of Health, Labour, and Welfare, the unionization rate in Japan was 16.5% in 2019. This high degree of unionization is due in part to the enterprise union system, which emphasizes the importance of collective bargaining and cooperation between labor and management.The enterprise union system is composed of unions that represent workers from a single company. These unions engage in collective bargaining with management to negotiate better wages, benefits, and working conditions.
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Bridgeport Co. is building a new hockey arena at a cost of
$2,680,000. It received a downpayment of $500,000 from local
businesses to support the project, and now needs to borrow
$2,180,000 to complet
Bridgeport Co. is building a new hockey arena at a cost of $2,680,000. The company received a down payment of $500,000 from local businesses to support the project.
Bridgeport Co. needs to borrow $2,180,000 to complete the project. In order to finance this project, Bridgeport Co. can obtain a loan from the bank, issue bonds, or use some other means of financing. To obtain a loan, the company would need to apply for a loan from a bank. The bank would assess the company's creditworthiness before granting the loan.
The company would need to provide financial statements and other documents to prove its ability to repay the loan. The bank would then set the terms of the loan, such as the interest rate, repayment schedule, and other conditions. If Bridgeport Co. decides to issue bonds to finance the project, it would need to work with an investment bank to underwrite the bonds.
The investment bank would help Bridgeport Co. determine the terms of the bonds and sell them to investors. The interest rate on the bonds would depend on the creditworthiness of the company and the terms of the bond issue. In addition, Bridgeport Co. could use other methods of financing, such as equity financing or crowdfunding. Regardless of the method chosen, the company needs to carefully consider the terms and conditions of the financing and make sure it has a plan to repay the funds.
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a. Discuss the Fisher effect. b. Distinguish between "nominal GDP" and "real GDP".
a. The Fisher effect is an economic theory that describes the relationship between nominal interest rates, inflation, and real interest rates.
b. Nominal GDP and real GDP are two different measures used to analyze and understand an economy's output, but they capture different aspects of economic performance.
a. According to the Fisher effect, there is a direct link between changes in expected inflation and changes in nominal interest rates, while real interest rates remain relatively stable.
The theory suggests that when inflation expectations increase, nominal interest rates also increase to compensate for the expected loss in purchasing power of money. In contrast, when inflation expectations decrease, nominal interest rates decrease as well. However, the real interest rate, which represents the purchasing power of money after accounting for inflation, is assumed to remain relatively constant.
b. Nominal GDP refers to the total value of goods and services produced in an economy within a specific period, typically a year, without adjusting for inflation. It reflects the current prices of goods and services and includes the impact of price changes over time. Nominal GDP provides a measure of the overall economic activity in terms of current market values.
Real GDP, on the other hand, takes into account changes in prices by adjusting for inflation. Real GDP represents the value of goods and services produced in an economy using constant prices from a base year. By removing the influence of price changes, real GDP provides a measure of the actual physical output or production of an economy over time, allowing for meaningful comparisons across different periods.
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1) The IS curve illustrates:
a. How much GDP grows as a result of both the direct and ripple
effects flowing from an extra dollar of spending
b. The current real interest rate, which is shaped by mone
The IS (Investment-Saving) curve is a graphical representation in macroeconomics that shows the relationship between real interest rates and real GDP (gross domestic product). Option (b) is the correct explanation for the IS curve.
The IS curve illustrates the relationship between the real interest rate and the level of real GDP in an economy. It represents the equilibrium in the goods market, where planned investment equals planned saving. The real interest rate is an important determinant of investment, as it affects the cost of borrowing and the expected return on investment.
When the real interest rate decreases, borrowing becomes cheaper, and businesses are more likely to invest, leading to an increase in the level of real GDP. Conversely, when the real interest rate increases, borrowing becomes more expensive, and investment decreases, leading to a decrease in real GDP.
The IS curve also takes into account other factors that influence planned investment and saving, such as fiscal policy, consumer spending, and business expectations. It shows the different combinations of real interest rates and real GDP where the goods market is in equilibrium.
In summary, the IS curve illustrates the relationship between the real interest rate and real GDP, capturing the impact of interest rates on investment and its subsequent effects on aggregate demand and economic output.
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Ahmed and Ali are partners in a small business. Their partnership agreement states that net income is divided based on annual salaries of $20 000 for Ahmed and $25 000 for Ali, and an income ratio of 3:2. Calculate the net income allocation and record the journal entry, based on the following unrelated situations: (a) net income of $100 000 (b) net loss of $4 000. 2. Business partners Baliva, Masi, and Romalati have a partnership agreement that outlines a detailed formula for sharing profits and losses. Baliva, Masi, and Romalati earn annual salaries of $60 000, $70 000, and $80 000 respectively. They also earn a fixed percentage of interest on their capital balances which are $50 000, $50 000, and $70 000 respectively. Any remaining income is allocated using an income ratio of 30%, 30% and 40% respectively. Calculate the net income allocation and record the journal entry under the following unrelated situations: (a) net income of $400 000, and 7% on capital balances (b) net income of $50 000, and 5% on capital balances. A B С D E E F G H J к L 1 General Journal Particulars Page Credit 2 Date Debit Ahmed Ali Total 3 a) 4 5 6 7 CALCULATIONS (a) Income Ratio Net Income Income Distribution Salary Net Income allocated PRIOR to ratio application Net Income to be allocated based on Income ratio Share of income based on income ratio Total allocation of net income 8 b) 9 10 11 12 Ahmed Ali Total 13 14 15 16 (b) Income Ratio Net Loss Income Distribution Salary Net Income allocated PRIOR to ratio application Net Income to be allocated based on income ratio Share of income based on income ratio Total allocation of net income 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 А A B с D E F G 1 j K M 1 General Journal Particulars Page Credit 2 Date Debit Ballya Masl Romalati Total 3 al 4 5 6 H CALCULATIONS Scenario (a) Balance in Capital account, January 1 Income Ratio Net Income Income Distribution Salary Interest Allowance Net Income allocated PRIOR to ratio application Net Income to be allocated based on income ratio Share of income based on income ratio Total allocation of net income 7 8 8 9 b) 10 11 12 13 Baliva Masi Romalati Total Scenario (b) Balance in Capital acoount, January 1 Income Ratio Net Income Income Distribution Salary Interest Allowance Net Income allocated PRIOR to ratio application Net Income to be allocated based on Income ratio Share of income based on income ratio Total allocation of net income 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43
To calculate the net income allocation and record the journal entries for the given situations, let's address each situation separately:
a) Net income of $100,000:
Calculate the income distribution based on the partnership agreement:
Ahmed's salary: $20,000
Ali's salary: $25,000
Income ratio: 3:2
Ahmed's share: (3/5) * (Net Income - Salaries)
Ali's share: (2/5) * (Net Income - Salaries)
Ahmed's share: (3/5) * ($100,000 - $20,000) = $48,000
Ali's share: (2/5) * ($100,000 - $25,000) = $30,000
Journal entry to allocate net income:
Date | Particulars | Debit | Credit
[Date] | Ahmed's Share | | $48,000
[Date] | Ali's Share | | $30,000
[Date] | Ahmed's Salary | $20,000 |
[Date] | Ali's Salary | $25,000 |
[Date] | Retained Earnings | $7,000 |
b) Net loss of $4,000:
Calculate the income distribution based on the partnership agreement:
Ahmed's salary: $20,000
Ali's salary: $25,000
Income ratio: 3:2
Ahmed's share: (3/5) * (Net Loss - Salaries)
Ali's share: (2/5) * (Net Loss - Salaries)
Ahmed's share: (3/5) * (-$4,000 - $20,000) = -$12,000
Ali's share: (2/5) * (-$4,000 - $25,000) = -$9,000
Journal entry to allocate net loss:
Date | Particulars | Debit | Credit
[Date] | Ahmed's Share | $12,000 |
[Date] | Ali's Share | $9,000 |
[Date] | Ahmed's Salary | $20,000 |
[Date] | Ali's Salary | $25,000 |
[Date] | Retained Earnings | | $-4,000
For the second part of your question, regarding Business partners Baliva, Masi, and Romalati, please provide the formula or breakdown of profit sharing and the percentages for interest on capital balances, as it seems to be missing from the given information.
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How the 15sues can be resolved Bob, a senior buyer with the company has been participating in a rewards program from one of your main suppliers, Bob has been receiving gifts, under the rewards program, for his personal use based on the amount of merchandise he is buying from the supplier for company use. Dangers and Negative impacts of the Issues How the issues Can Be Resolved
The situation described raises several issues that need to be addressed. Here are the dangers and negative impacts of the issues and possible resolutions:
1. Conflict of interest: Bob's participation in a rewards program from a main supplier creates a conflict of interest as he is receiving personal benefits based on the company's purchasing decisions. This can compromise his objectivity and decision-making in favor of the supplier.
Resolution: The company should establish clear policies and guidelines regarding conflicts of interest. Bob should be required to disclose his participation in such rewards programs, and if necessary, recuse himself from supplier-related decision-making processes.
2. Breach of ethical standards: Accepting gifts from suppliers can be perceived as unethical and can raise concerns about favoritism or potential bribery. It may damage the company's reputation and integrity.
Resolution: The company should have a strict policy prohibiting employees from accepting gifts or incentives from suppliers. This policy should be communicated clearly to all employees, including Bob. Training and awareness programs can help reinforce ethical standards and emphasize the importance of maintaining impartiality.
3. Legal implications: Depending on the jurisdiction and applicable laws, receiving gifts or incentives from suppliers could violate anti-bribery or anti-corruption regulations, leading to legal consequences for both Bob and the company.
Resolution: The company should ensure compliance with relevant laws and regulations related to gifts, bribery, and conflicts of interest. Legal counsel should be consulted to review existing policies and provide guidance on any necessary updates or actions.
4. Fair procurement practices: Bob's involvement in the rewards program raises concerns about the fairness and transparency of the company's procurement processes. It may undermine the principles of fair competition and equal opportunities for suppliers.
Resolution: The company should establish a robust procurement policy that emphasizes fair competition, transparency, and equal treatment of suppliers. Procurement decisions should be based on objective criteria, such as quality, price, and delivery, rather than personal benefits received by employees.
5. Reputational risk: If the information about Bob's participation in the rewards program becomes public, it can damage the company's reputation and erode trust among stakeholders, including other suppliers and customers.
Resolution: The company should be proactive in addressing the issue internally and taking appropriate corrective actions. Open and transparent communication with stakeholders, along with a commitment to ethical practices, can help mitigate reputational risks.
It is essential for the company to establish and enforce policies, provide training and awareness programs, and foster a culture of integrity and ethical behavior to address these issues effectively. Regular monitoring and auditing can ensure compliance and help identify and rectify any potential misconduct promptly.
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Wyoming Real Estate purchased a building for $600,000 in 2002. At the end of 2014, when it had a book value of $450,000, it was appraised for $1,000,000. A potential buyer offered $900,000. Wyoming rejected the offer. What amount should is recorded on Wyoming’s records at the end of 2014 in the account called Buildings?
a. $1,000,000
b. $900,000
c. $600,000
d. $450,000
The amount recorded on Wyoming's records at the end of 2014 in the account called Buildings would be: $600,000
The book value of the building at the end of 2014 is $450,000, which represents the historical cost of the building minus accumulated depreciation. Although the building was appraised for $1,000,000, the appraisal value does not impact the recorded amount on Wyoming's books. The potential buyer's offer of $900,000 is also not relevant to the recording of the building's value on Wyoming's records. The original cost of $600,000 is the amount that should be recorded for the Buildings account.
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NetFlix has experienced nearly a 70% decline
in its stock price in 2022. As discussed in class,
a. What is your explanation for this crisis at
NetFlix?
b. How would recruiting a more diverse
workforce help in improving the
firm performance of NetFlix? Explain
with specific business examples.
c. What policies would you suggest to NetFlix
management that would
empower more diverse workgroups for
developing new products and strategies
that would reverse its profitability crisis.
Explain with specific business examples.
a. All these factors combined led to a decrease in Netflix's profitability and a 70% decline in its stock price in 2022.
b. A more diverse workforce can help Netflix better understand these issues and create content that is more sensitive to them.
c. Mentorship and sponsorship programs, Diversity and inclusion training for employees, Employee resource groups, and Data collection and analysis
a. The most probable reason for the crisis at Netflix is the high competition in the streaming market. New players such as Disney+, Amazon Prime, and Hulu have entered the market and taken up market shares from Netflix. Furthermore, the cost of content is increasing, and the cost of attracting new subscribers is also increasing. In addition, the pandemic caused a decrease in new productions, resulting in a decrease in Netflix's original content supply. All these factors combined led to a decrease in Netflix's profitability and a 70% decline in its stock price in 2022.
b. Recruiting a more diverse workforce can help improve the performance of Netflix in several ways. First, a diverse workforce can bring different perspectives, experiences, and ideas to the table, which can lead to more innovative and creative solutions. By doing so, Netflix can create new content and find new opportunities to grow its business. Second, a diverse workforce can help Netflix better understand its diverse audience and create content that appeals to different cultures and regions. For example, Netflix can use local talent to create content for a specific region, which would be more attractive to the audience. Third, a diverse workforce can help Netflix better navigate social and cultural issues. Netflix has faced some criticism over the years for its portrayal of some social and cultural issues. A more diverse workforce can help Netflix better understand these issues and create content that is more sensitive to them.
c. To empower more diverse workgroups for developing new products and strategies that would reverse its profitability crisis, the following policies could be suggested to Netflix management:
1. Diversity and inclusion training for employees: This would help Netflix employees better understand the importance of diversity and inclusion in the workplace.
2. Mentorship and sponsorship programs: Netflix can create mentorship and sponsorship programs to help diverse employees grow and advance in their careers.
3. Employee resource groups: Netflix can create employee resource groups that bring together employees who share common interests or backgrounds. For example, an LGBTQ+ resource group could help Netflix better understand this demographic and create content that appeals to them.
4. Data collection and analysis: Netflix can collect data on its diverse workforce and analyze it to identify areas where it needs to improve. This would help Netflix better understand its diversity and create policies that are tailored to its needs.
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Westhaven Company uses straight-line depreciation and issues financial statements every December 31. On October 1, 2021, the company paid $80,000 cash for new equipment. The equipment had an estimated useful life of five years and an estimated salvage value of $20,000. What amount of depreciation expense will Westhaven Company record in 2021? A) $3.000. B) $16.000. C) $4,000. D) $8,000.
The correct answer is option A, $3,000. Westhaven Company has a new equipment on October 1, 2021, and the cost of the new equipment is $80,000. The new equipment has an estimated useful life of 5 years and an estimated salvage value of $20,000. It is pertinent to note that Westhaven Company uses straight-line depreciation and issues financial statements every December 31.
Based on this information, the depreciation expense for the year 2021 will be calculated thus:Depreciation Expense per year = (Cost of the new equipment - Estimated Salvage Value) / Estimated Useful LifeCost of the new equipment = $80,000Estimated Salvage Value = $20,000Estimated Useful Life = 5 yearsUsing the above formula.
Depreciation Expense = ($80,000 - $20,000) / 5 years Depreciation Expense = $12,000 / 5 yearsDepreciation Expense = $2,400. However, the depreciation expense for 2021 will not be for the whole year since the company started using the new equipment on October 1, 2021.
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Consider activity A of project X. The least time that A requires for completion is 5 days, the longest time is 17 days, and the most likely is 8 days. Find the expected time needed to complete activity A.
The expected time for completing activity A of project X is determined using the PERT (Program Evaluation and Review Technique) formula. This formula considers three time estimates: the optimistic estimate (5 days), the most likely estimate (8 days), and the pessimistic estimate (17 days).
To calculate the expected time, the formula (Optimistic time + 4 × Most likely time + Pessimistic time) ÷ 6 is used.
By plugging in the given values, the expected time is calculated as (5 + 4 × 8 + 17) ÷ 6, which equals 7.5 days.
Therefore, the expected time required to complete activity A is 7.5 days.
However, since the expected time is generally rounded to the nearest whole number, in this case, it would be rounded to 8 days.
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Risk pooling is an important concept in supply chain management, as it is utilized to deal with demand uncertainty. (15 pt) (1) Explain how a risk pooling strategy can be utilized to deal with demand uncertainty. (10pt) (2) Provide an example in which a risk pooling strategy is utilized effectively to deal with demand uncertainty (5 pt)
The cost of managing inventory is also reduced.(2) An example in which a risk pooling strategy is utilized effectively to deal with demand uncertainty is in the fashion industry. Here, retailers need to anticipate the consumer demand for the latest styles of clothes. With a risk pooling strategy, retailers can combine their demands for certain products with the other retailers in the same region, resulting in an overall smoothed demand. This helps to reduce the overall inventory cost for the retailers as the cost of holding stock is reduced. It also reduces the risk of running out of stock and lost sales.
A risk pooling strategy can be utilized to deal with demand uncertainty by combining the demand of multiple independent retailers or distributors in the supply chain. This results in a reduced variability in the overall demand and the safety stock of inventory can also be reduced. Since the safety stock is the additional inventory kept to protect against stockout, when the demand variability is reduced, the safety stock level required is also reduced, reducing the overall inventory cost. Risk pooling strategy results in the smoothing of demand which helps to reduce stock-out costs, as there is less chance of running out of stock as a result of fluctuating demand. The cost of managing inventory is also reduced.(2) An example in which a risk pooling strategy is utilized effectively to deal with demand uncertainty is in the fashion industry. Here, retailers need to anticipate the consumer demand for the latest styles of clothes. With a risk pooling strategy, retailers can combine their demands for certain products with the other retailers in the same region, resulting in an overall smoothed demand. This helps to reduce the overall inventory cost for the retailers as the cost of holding stock is reduced. It also reduces the risk of running out of stock and lost sales.
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Facts:
You have been hired by a small privately held firm to analyze its accounts receivable department and assess how its internal accounting controls could be improved. The company operates a table manufacturing facility.
The owner is a "hands on" individual and is at the business every day. However, the owner has no involvement in the accounting function.
The only employee in accounts receivable is Nancy, an employee of 15 years. Nancy opens all cash receipts, credits the clients’ accounts and deposits the money at the bank.
Required: Part 4 Item A
Answer the two questions below; be sure to explain your reasoning.
What internal control related risks does this company face?
What changes, if any, should be made?
The company in question faces several internal control related risks in its accounts receivable department.
The primary risk is the lack of segregation of duties. Nancy, the only employee in the accounts receivable department, has control over all aspects of the cash receipts process, including opening the mail, crediting client accounts, and making bank deposits. This lack of segregation of duties creates an opportunity for potential fraud or errors to go undetected, as there is no independent verification or oversight.
Another risk is the absence of management involvement in the accounting function. While the owner is present at the business every day, they have no direct involvement in the accounting processes. This lack of oversight and review increases the risk of unauthorized transactions, misappropriation of funds, or errors in financial records.
To address these risks and improve internal controls, several changes should be made. Firstly, the company should implement a system of segregation of duties. This can be achieved by having multiple employees involved in the accounts receivable process, with clear separation of responsibilities such as cash receipts handling, accounts crediting, and bank deposits. This segregation of duties ensures that no single individual has complete control over the entire process and provides checks and balances.
Additionally, regular management involvement and review of the accounting function are crucial. The owner should actively participate in the oversight and review of financial transactions, reconciliations, and reports. This involvement helps to detect and prevent potential errors or fraudulent activities, providing an additional layer of control.
Implementing these changes will strengthen the company's internal controls, minimize the risk of fraud or errors, and enhance the reliability and integrity of its accounts receivable processes.
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During a particular week six months ago, suppose that the price of a 1 pound slab of Scottish Coho salmon at your local grocery store was $20; currently the price is $25/lb. The manager informs you that 100 pounds were sold during a particular week six months ago when the price was $20/lb. while 80 pounds were sold this week.
Calculate the price elasticity of demand (point formula, not midpoint/arc formula—consult the textbook). Based solely on your calculation, is the demand relatively elastic or relatively inelastic?
If the grocery store is a price setter, should it increase or decrease the price of salmon to increase its revenue? Only consider this one good—keep it simple. Answer in a few sentences
The price elasticity of demand is -0.8.
To calculate the price elasticity of demand using the point formula, we can use the following formula:
Elasticity = [(Q2 - Q1) / Q1] / [(P2 - P1) / P1]
Where:
Q1 = Initial quantity demanded (100 pounds)
Q2 = Final quantity demanded (80 pounds)
P1 = Initial price ($20/lb)
P2 = Final price ($25/lb)
Using the given values, we can plug them into the formula:
Elasticity = [(80 - 100) / 100] / [($25 - $20) / $20]
= [-0.20] / [0.25]
= -0.8
Since the elasticity value is negative, we can conclude that the demand for Scottish Coho salmon is relatively elastic. This means that a 1% increase in price will result in a more than 0.8% decrease in quantity demanded.
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