Answer:
Home Country Benefit
b - inflows of foreign earnings.
The Company operating in the Host Country will send some of it's profits back to it's Home Country and this will be treated as Foreign Earnings.
f-skills that can be leveraged internationally.
The Home Country will gain skills from their experience in the Host Country. These skills can then be used to be competitive on the global market.
Home Country Cost
a- loss of jobs
The Home Country would lose the jobs that it's companies created in the Host Country. These are jobs that could have employed people in the Home Country but now employ people in the Host Country.
h-Host country limits profit expatriation
In order that they don't lose too much money to the Home Country, the Host Country might come up with laws that limit the amount of money that can be taken out from the country this limiting the amount of foreign Earnings that the Home country gets.
Host Country Benefit
c-substitute for imports
The products that the companies founded by FDI are producing could have been products that the Host Country used to import. Now that the goods are being made in the Host Country, there will be no need for imports.
e-increase in direct and indirect employment
The companies founded by FDI in the Host Countries will create employment for people in the company which is direct employment. Many auxiliary services such as drivers and caterers as an example will also spring up to take care of these newly employed folk thereby creating indirect employment.
i-transfer of new technology
The Company formed from FDI will bring with them technology from the Home Country that could be very beneficial to the Host Country.
Host Country Costs.
- Outflow of earnings from a foreign subsidiary
The Companies established through FDI will send some of their profits back to their home Countries. This means that the earnings would leave the Host Country instead of being reinvested in them.
d-loss of economic independence
These FDI companies tend to get very influential and powerful in the Host Country and can sometimes dictate policies. This would mean the companies have significant control over the resources of the Host Country which will lead to a loss of Economic independence. This is the main reason most people believe that China is interested in Africa.
g-loss of local Entrepreneurship
These companies created by FDI will bring with them better technology and capital that will enable them to be very competitive in the local Economy. This will discourage local Entrepreneurs who do not have the economic nor the financial backing to challenge the companies without making huge losses.
Todd can afford to pay $375 per month for the next 7 years in order to purchase a new car. The interest rate is 6.5 percent compounded monthly. What is the most he can afford to pay for a new car today
Answer:
The most he can afford to pay = $25,260.07
Explanation:
The most he can afford to pay is the present value of the $375 per month discounted at the interest rate of return of 6.5% p.a
PV = A× (1- (1+r)^(-n))/r
PV = ?, A- 375, r- 6.5/12= 0.541% n= 12×7 = 84
PV = 375× (1- (1.00541)^(-84) )/0.00541= 25260.071
The most he can afford to pay = $25,260.07
Note: the monthly interest rate needed to be computed by dividing 6.5% by 12 and the number of months in 7 years is 7 × 12 = 84
Assume that Corn Co. sold 7,500 units of Product A and 2,500 units of Product B during the past year. The unit contribution margins for Products A and B are $33 and $56, respectively. Corn has fixed costs of $328,000. The break-even point in units is
Answer:
Break-even point (units)= 8,464 units
Explanation:
Giving the following information:
Assume that Corn Co. sold 7,500 units of Product A and 2,500 units of Product B during the past year. The unit contribution margins for Products A and B are $33 and $56, respectively. Corn has fixed costs of $328,000.
First, we need to calculate the proportion of sales:
Product A= 7,500/10,000= 0.75
Product B= 2,500/10,000= 0.25
Now, using the following formula, we can determine the break-even point in units:
Break-even point (units)= Total fixed costs / Weighted average contribution margin
Break-even point (units)= 328,000/ (0.75*33 + 0.25*56)
Break-even point (units)= 328,000/38.75
Break-even point (units)= 8,464 units
Valuing my degree. I went to LSUS for 2 years and did not work. It cost me $35,000 per year (tuition and living). When I graduated I will make $80,000 per year. If I did not get my MHA, I would make $40,000 a year. I would not have been out-of-pocket any money. Regardless, of my decision, I expect to earn 2% increase in salary every year. Inflation will be around 3%. I am currently 30 and I want to retire at age 65. Was going to school worth it? Answer: Yes – the present value of my degree is $851,673 Answer: No – I missed a lot of good TV shows Answer: No – I had to spend $35,000 for three years.
Brazil is almost self-sufficient in ethanol. Brazilian ethanol is made from sugar and costs 83cents per gallon whereas U.S. ethanol, made from corn, costs $1.14 per gallon. The United States has set a zero quota on imports of ethanol, so it does not import ethanol. Source: The New York Times, April 12, 2006 Which country has a comparative advantage in producing ethanol? Explain why both the United States and Brazil can gain from specialization and trade.
Answer:
Brazil has comparative advantage in Ethanol.
Both US & Ethanol can gain from trade, if they specialise in their good of comparative advantage & import the other at lower opportunity cost.
Explanation:
Comparative advantage is when an economy can produce a good with lesser opportunity cost than other economy.
Brazil can produce ethanol at lower opportunity cost, as it uses lesser resources to produce Ethanol, compared to US.
So, Brazil has comparative advantage in producing ethanol. Both US & Brazil can gain from specialisation : As, US can get more ethanol at lesser than domestic opportunity cost. And, Brazil can also gain from trade by importing the good in which US has better opportunity cost & comparative advantage, in exchange of exported ethanol. It would imply Brazil would get more of the other good at lesser than domestic opportunity cost.
Felinas Inc. produces floor mats for cars and trucks. The owner, Kenneth Felinas, asked you to assist him in estimating his maintenance costs. Together, Mr. Felinas and you determined that the single best cost driver for maintenance costs was machine hours. Below are data from the previous fiscal year for maintenance expense and machine hours:
Month Maintenance Expense Machine Hours
1 $ 3,480 2,380
2 3,670 2,480
3 3,850 2,580
4 3,980 2,610
5 3,980 2,460
6 4,400 2,620
7 3,970 2,600
8 3,780 2,570
9 3,500 2,390
10 3,120 2,260
11 2,960 1,650
12 3,240 2,250
Using the high-low method, total monthly fixed cost is calculated to be:__________
a. $296.
b. $224.
c. $460.
d. $162.
e. $552.
Answer:
Fixed costs= 510
Explanation:
Giving the following information:
Month Maintenance Expense Machine Hours
1 $ 3,480 2,380
2 3,670 2,480
3 3,850 2,580
4 3,980 2,610
5 3,980 2,460
6 4,400 2,620
7 3,970 2,600
8 3,780 2,570
9 3,500 2,390
10 3,120 2,260
11 2,960 1,650
12 3,240 2,250
To calculate the fixed costs, we need to use the following formulas:
Variable cost per unit= (Highest activity cost - Lowest activity cost)/ (Highest activity units - Lowest activity units)
Variable cost per unit= (4,400 - 2,960) / (2,620 - 1,650)
Variable cost per unit= $1.484536
Fixed costs= Highest activity cost - (Variable cost per unit * HAU)
Fixed costs= 4,400 - (1.484536*2,620)
Fixed costs= $510
Fixed costs= LAC - (Variable cost per unit* LAU)
Fixed costs= 2,960 - (1.484536*1,650)
Fixed costs= 510
The inventory data for an item for November are: Nov. 01 Inventory 16 units at $22 04 Sale 9 units 10 Purchase 29 units at $23 17 Sale 17 units 30 Purchase 24 units at $24 Using a perpetual system, what is the cost of merchandise sold for November if the company uses LIFO? a.$1,013 b.$743 c.$589 d.$582
Answer:
Cost of goods sold $ 589
Explanation:
Under the LIFO inventory system units of inventory are priced using the price of the most recent batch purchased and this continues in turn.
The total value of purchases = (16 × $22) + ( 29 × $2) + (24 × $24)= $1,595
The cost of goods sold can worked out as follows:
Nov 4th - 9 × $22 = 198
Nov 17th - 17× $23 = 391
Cost of goods sold = (198+ 391 )=$ 589
Cost of goods sold $ 589
On March 31, 2018, Easy Rental Agency Inc.'s trial balance included the following selected unadjusted account balances. The company's year end is December 31 and it adjusts its accounts quarterly
Debit Credit
Prepaid insurance $14,740
Supplies 2,900
Equipment 22,100
Accumulated depreciation-equipment 5,680
Unearned revenue 9,730
Loan payable, due 2020 20,000
Rent revenue 30,900
Salaries expense 14,500
An analysis of the accounts shows the following:
1. The equipment, which was purchased on January 1, 2017, is estimated to have a useful life of four years. The company uses straight-line depreciation.
2. One third of the unearned revenue related to rent is still unearned at the end of the quarter.
3. The loan payable has an interest rate of 6%. Interest is paid on the first day of each following month and was last paid March 1, 2018.
4. Supplies on hand total $940 at March 31.
5. The one-year insurance policy was purchased for $14,740 on January 1.
6. Income tax is estimated to be $2,600 for the quarter.
Prepare the quarterly adjusting entries required at March 31.
Answer:
1)
Dr Depreciation expense 1,226
Cr Accumulated depreciation 1,226
2)
Dr Unearned revenue 6,487
Cr Rent revenue 6,487
3)
Dr Interest expense 600
Cr Accrued interest 600
4)
Dr Supplies expense 1,960
Cr Supplies 1,960
5)
Dr Insurance expense 3,618
Cr Prepaid insurance 3,618
6)
Dr Income tax expense 2,600
Cr Income tax payable 2,600
Explanation:
March 31, 2018
Prepaid insurance $14,740 - 3,618
Supplies 2,900 - 1,960
Equipment 22,100
Accumulated depreciation-equipment 5,680 + 1,226
Unearned revenue 9,730 - 6,487
interest payable 600
Income tax payable 2,600
Loan payable, due 2020 20,000
Rent revenue 30,900 + 6,487
Salaries expense 14,500
depreciation expense 1,226
interest expense 600
Supplies expense 1,960
Insurance expense 3,618
Income tax expense 2,600
1. The equipment, which was purchased on January 1, 2017, is estimated to have a useful life of four years. The company uses straight-line depreciation.
depreciation per year = $22,100 / 4 = $5,525
depreciation expense up to March 31, 2018:
$5,525 x 1.25 = $6,906.25 ≈ $6,906
adjustment entry = $6,906 - $5,680 = $1,226
Dr Depreciation expense 1,226
Cr Accumulated depreciation 1,226
2. One third of the unearned revenue related to rent is still unearned at the end of the quarter.
adjusting entry = 9,730 - (9,730 x 1/3) = $6,486.67 ≈ $6,487
Dr Unearned revenue 6,487
Cr Rent revenue 6,487
3. The loan payable has an interest rate of 6%. Interest is paid on the first day of each following month and was last paid March 1, 2018.
interest per month = $20,000 x 6% x 1/12 = $600
Dr Interest expense 600
Cr Accrued interest 600
4. Supplies on hand total $940 at March 31.
adjusting entry = $2,900 - $940 = $1,960
Dr Supplies expense 1,960
Cr Supplies 1,960
5. The one-year insurance policy was purchased for $14,740 on January 1.
insurance expense per quarter = $14,470 x 3/12 = $3,617.50 ≈ $3,618
Dr Insurance expense 3,618
Cr Prepaid insurance 3,618
6. Income tax is estimated to be $2,600 for the quarter.
Prepare the quarterly adjusting entries required at March 31.
Dr Income tax expense 2,600
Cr Income tax payable 2,600
Denominator hours for May 15,000 Actual hours worked during May 14,000 Standard hours allowed for May 12,000 Flexible budget fixed overhead cost $45,000 Actual fixed overhead costs for May $48,000 Danske Company had total underapplied overhead of $15,000. Additional information is as follows: Variable Overhead: Applied based on standard direct labor hours allowed $42,000 Budgeted based on standard direct labor hours 38,000 Fixed Overhead: Applied based on standard direct labor hours allowed $30,000 Budgeted based on standard direct labor hours 27,000 What is the actual total overhead for the period?
Answer:
$87,000
Explanation:
As per given data
Actual hours = 15,000 hours
Standard hours = 14,000 hours
Standard hours allowed = 12,000 hours
Flexible budget fixed overhead cost = $45,000
Actual fixed overhead costs = $48,000
Underapplied overhead = $15,000
Variable Overhead:
Applied based on standard direct labor hours allowed = $42,000
Budgeted based on standard direct labor hours = 38,000 hours
Fixed Overhead:
Applied based on standard direct labor hours allowed = $30,000
Budgeted based on standard direct labor hours = 27,000 hours
Total Overhead is the sum of all the variable and fixed overheads applied to the products and under / over applied overheads.
Applied overheads are the amount of overheads applied using actual activity and standard rate.
Actual Overheads = Applied variable overheads + Applied fixed overheads + under applied overheads
Placing values in the formula
Actual Overheads = $42,000 + $30,000 + $15,000
Actual Overheads = $87,000
Accounts Receivable Analysis A company reports the following: Sales $1,182,600 Average accounts receivable (net) 43,800 Determine (a) the accounts receivable turnover and (b) the number of days' sales in receivables. Round interim calculations to the nearest dollar and final answers to one decimal place. Assume a 365-day year. a. Accounts receivable turnover b. Number of days' sales in receivables days
Answer:
a. The account Receivable Turnover is 27 times
b. 13.52 days approximately
Explanation:
1. Account Receivable Turnover = Net sales / Average Account Receivables
Account Receivable Turnover = $1,182,600 / $43,800
Account Receivable Turnover = 27 times
The account Receivable Turnover is 27 times
2. Number of days' sales in receivables days = (Average Account Receivables * 365 days) / Net sales
=(43,800 * 365) / 1,182,600
=13.5185
=13.52 days approximately
Leona Figueroa is a new employee in the payroll department of Octolium Computers. After working at the company for one week, she asks you why it is so important to submit new hire documentation. What guidance will you offer her
Answer:
The hiring documents of an employee are very important because they allow to legalize and consider as approved the function or work that a worker is going to perform.
Explanation:
The new employee recruitment documentation allows us to check if it is really possible to carry out the hiring for that the documents must be complete as for example there must be a support of the identity document of the employee, a support of the social security as well as the number of affiliation, and a home support. After verification and compliance with these requirements, we proceed to contract.
1. Investment in the business= $17,010
2. Borrow cash= $7620
3. Purchase equipment= the list price was $8700 but the final price was $8300
4. Revenues earned = $298,600, the cash has been collected from the customers for all revenue earned
5. Expenses incurred= total $210,900 during the same year, all expenses paid in cash
6. Dividens= end of each quarter, the company distributed cash to stockholders, the sum of those quarterly distributions was $15,000
Consider the following transactions for Thomas Company and their effect ont he accounting equation. Determine the new balance for each component of the accounting equation from the transactioon. If an amount box does not require an entry, leave it blank.
Transaction Assets =Liabilities Stockholders' Equity
Beginning $0 $0 $0
1. Investment in the business $17,160 17160
2. Borrow cash $7940 7940 7940
3. Purchase equipment 8600 7940 660
4. Revenues earned 29860 0 29860
5. Expenses incurred 210800 103660
6. Dividends 14200 88460
Answer & Explanation:
Assets = Capital + Liabilities
1) Investment Cash (+17...) (+17160)
2) Borrowings Cash (+7...) Loan (+7...)
3) Purchase Cash (-price paid) + Gain
Equip (+final price) (final - price paid)
4) Revenue Cash (+298...) Income (+298...)
5) Expense Cash (-210...) Expense (-210...)
3)* Price paid = 8700 or 8600 , Final price = 8300 or 7940 , Gain (Discount received) = 8700 - 8300 ie 400 (or) 8600 - 7940 = 660
On January 1, Year 1, the Accounts Receivable balance was $21,000 and the balance in the Allowance for Doubtful Accounts was $1,900. On January 15, Year 1, an $530 uncollectible account was written-off. What is the net realizable value of accounts receivable immediately after the write-off
Answer:
$19,100
Explanation:
Accounts receivable represents amount owed to a business by its customers for products or services offered. It is payable in the future.
When collection is uncertain the amount is put in doubtful account.
If an amount is confirmed to be uncollectible it is written off as a loss
In this scenario we are calculating realisable value after write-off
Account receivable after write-off = Account receivable balance - Uncollectible amount
Account receivable after write-off= 21,000 - 530= $20,470
Allowance balance after write-off= Doubtful account - Uncollectible account
Allowance balance after write-off= 1,900 - 530 = $1,370
Net realisable value after write-off= 20,470 - 1,370= $19,100
Fremont Computer Company has been purchasing carrying cases for its portable computers at a purchase price of $89 per unit. The company, which is currently operating below full capacity, charges factory overhead to production at the rate of 60% of direct labor cost. The unit costs to produce comparable carrying cases are expected to be as follows:
Direct materials $16
Direct labor 20
Factory overhead (25% of direct labor) 5
Total cost per unit $41
If Fremont Computer Company manufactures the carrying cases, fixed factory overhead costs will not increase and variable factory overhead costs associated with the cases are expected to be 5% of the direct labor costs.
Required:
a. Prepare a differential analysis dated September 30 to determine whether the company should make (Alternative 1) or buy (Alternative 2) the carrying case.
b. Assuming there were no better alternative uses for the spare capacity, it would ______________ to manufacture the carrying cases. Fixed factory overhead is________to this decision.
Answer:
A.Total cost 41 93 (52)
B. It would be much better to manufacture the carrying cases .
While Fixed factory overhead is less important to this decision.
Explanation:
Fremont Computer Company Differential Analysis
Make Alternative 1: Buy Alternative 2:
Differential effect on net income
Alternative 1 : Alternative 2: Differential effect
Purchase Price - 89 (89)
Direct material 16 - 16
Direct labor 20 - 20
Variable 1 - 1
manufacture overhead (20×5%)
Fixed (5-1) 4 4 -
manufacture overhead
Total cost 41 93 (52)
The Company should choose Alternative 1
which is Make carrying case
B. It would be much better to manufacture the carrying cases.
While Fixed factory overhead is less important to this decision.
Therefore in make or buy decision the selling price of the product will be less important because the selling price was not provided which means it does not have effect on the decision of buy or make.
Ready Ride is a trucking company. It provides local, short-haul, and long-haul services. It has developed the following three cost pools.
Activity Cost Pool Cost Drivers Estimated Overhead Estimated Use
of Cost Driver per Activity
Loading and unloading Number of pieces $85,785 90,300
Travel Miles driven 468,000 585,000
Logistics Hours 65,520 3,120
Compute the activity-based overhead rates for each pool.
Activity Cost Pool Activity-Based overhead Rate
Loading and unloading per piece
Travel per mile
Logistics per hour
Determine the overhead allocated to Job XZ3275 which has 150 pieces, requires 200 miles of driving, and 0.75 hours of logistics.
Answer:
Total allocation= $318.25
Explanation:
Giving the following information:
Loading and unloading: Number of pieces - $85,785 - 90,300
Travel: Miles driven - $468,000 - 585,000
Logistics: Hours - $65,520 - 3,120
Determine the overhead allocated to Job XZ3275 which has 150 pieces, requires 200 miles of driving, and 0.75 hours of logistics.
First, we need to calculate the estimated overhead rate for each activity:
Estimated manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base
Loading and unloading= 85,785/90,300= $0.95 per piece
Travel= 468,000/585,000= $0.8 per mile
Logistics= 65,520/3,120= $21 per hour
Finally, we can allocate overhead to Job XZ3275:
Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base
Loading and unloading= 0.95*150= $142.5
Travel= 0.8*200= $160
Logistics= 21*0.75= $15.75
Total allocation= $318.25
Describe the procedure of preparing vision and mission statement of an organisation
13) Baxter & Baxter has total assets of $710,000. There are 45,000 shares of stock outstanding with a market value of $28 a share. The firm has a net profit margin of 7.1 percent and a total asset turnover of 1.29. What is the price-earnings ratio?
Answer:
19.38
Explanation:
Baxter & Baxter
Market value share/ Percentage of profit margin ×(Total assets ×Total asset turnover)/Outstanding shares
Where:
Market value shares=28
Percentage of profit margin =71%
Total assets =710,000
Total asset turnover=1.29
Outstanding shares =45,000
Hence:
Price-earnings ratio =
$28/[0.071 ×($710,000 ×1.29)]/45,000
=19.38
Bandar Industries Berhad of Malaysia manufactures sporting equipment. One of the company’s products, a football helmet for the North American market, requires a special plastic. During the quarter ending June 30, the company manufactured 3,100 helmets, using 2,077 kilograms of plastic. The plastic cost the company $13,708. According to the standard cost card, each helmet should require 0.62 kilograms of plastic, at a cost of $7.00 per kilogram.
Required:
1. What is the standard quantity of kilograms of plastic (SQ) that is allowed to make 3,100 helmets?
2. What is the standard materials cost allowed (SQ × SP) to make 3,100 helmets?
3. What is the materials spending variance?
4. What is the materials price variance and the materials quantity variance? (For requirements 3 and 4, indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values. Do not round intermediate calculations.)
Answer:
1. 1,922
2. $13,454
3. $254 Unfavorable
4. 831 Favorable
$1,085 Unfavorable
Explanation:
1. The computation of standard quantity of kilograms of plastic is shown below:-
Standard quantity of kilograms allowed = Helmets manufactured × Required kilograms of plastic
= 3,100 × 0.62
= 1,922
2. The computation of standard materials cost allowed is shown below:-
Standard cost allowed for actual output = Standard quantity of kilograms allowed × Cost per kilogram
= 1,922 × $7
= $13,454
3. The computation of materials spending variance is shown below:-
Materials spending variance = Plastic cost - Standard cost allowed for actual output
= $13,708 - $13,454
= $254 Unfavorable
4. The computation of materials price variance and the materials quantity variance is shown below:-
Materials price variance = Plastic cost - (Plastic in kilograms × Cost per kilograms)
= $13,708 - (2,077 × $7)
= 831 Favorable
Materials quantity variance = Cost per kilograms × (Plastic in kilograms - Standard quantity of kilograms allowed)
= $7 × (2,077 - 1,922)
= $1,085 Unfavorable
So, we have applied the above formulas.
Describe other options teachers and their union have in resolving the impasse before opting for a strike? For each point illustrate your discussion with examples from Pacific island countries (PICs)
Answer: The other options include; dialogue; notification; peaceful protest and ultimatum.
Explanation: 1) Dialogue: Dialogue refers to a discussion between the two opposing parties. The teachers or their union may opt for a round table discussion to negotiate on the issue and its possible resolution.
2) Peaceful protest: A protest is an expression of strong opposition or disapproval of something. This is an option that can be exercised in a peaceful way by demonstration the grievance.
3) Notification or Ultimatum: Notification involves an information on when an option either expires or is to be exercised while an ultimatum is a demand that can be followed up with penalty or threat. This is also an option used by Pacific Island Countries in resolving the impasse before resulting to strike.
Consider the role of management accounting in relation to the company for which you work (or have worked). Discuss how the principles of management accounting can be utilized. What specific managerial accounting activities would be useful?
Answer:
Role of management accounting :
1. provide internal information on operations
2. help in decision making
Utilization of management accounting principles
1. make or buy decisions
2. continuing or discontinuing of operations
Useful managerial Accounting Activities
1. planning
2. deciding on the alternative causes of action
Explanation:
Role of Management Accounting is to provide managers with information related to their operations.This includes the costs and revenue incurred, the deviations from the planned costs and revenue and profit targets.
This information would help to control costs and revenues or make certain decisions of continuing or discontinuing operating of a product or segment.
Thus managerial accounting activities that are useful are planning, deciding on the alternative causes of action, implementation, monitoring and control
The role of management accounting in a company is to analyze financial information for a period to assist managers in the decision-making process for achieving organizational goals.
The management accounting principles defined by the American Institute of CPAs (AICPA) are:
InfluenceRelevanceValueConfidenceThrough the four global principles, management accounting activities such as strategic definition, control and direction will be managed more effectively.
The availability of data and information will provide greater support for the creation of value through greater vision of organizational environments, transparency and reliability to attract investments.
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When a central bank increases bank reserves by $1, the money supply rises by more than $1. The amount of extra money created when the central bank increases bank reserves by $1 is called the money multiplier.
a. The money multiplier is generally greater than 1 because:
1. in a fractional-reserve banking system, each dollar bill is spent more than once (velocity is larger than 1), thereby increasing the money supply by more than $1.
2. in a fractional-reserve banking system, each dollar of reserves can support more than one dollar of deposits, thereby increasing the money supply by more than $1.
3. in a 100 percent reserve banking system, each dollar of reserves supports exactly one hundred dollars of deposits, thereby increasing the money supply by $100.
4. when a central bank increases bank reserves by $1, deposits are automatically increased by $1 as well, thereby increasing the money supply by $2.
The money multiplier is equal to 1 when:
1. reserves < deposits.
2. reserves > deposits.
3. reserves = deposits.
b. The initial money supply is $1,500, of which $700 is currency held by the public. The desired reserve-deposit ratio is 0.1. Calculate the increase in the money supply associated with increases in bank reserves of $10. What is the money multiplier in this economy? Assume that individuals do not change their currency holdings.
c. A general rule for calculating the money multiplier is:
1. 1/(deposit ratio-desired reserve).
2. 1/deposit ratio.
3. 1/desired reserve.
4. 1/(desired reserve-deposit ratio).
d. Suppose the Fed wanted to reduce the money multiplier, perhaps because it believes that change would give it more precise control over the money supply. In order to achieve its goal, the Fed would:
1. decrease the ratio of reserves to deposits.
2. increase reserve requirements.
3. increase the money supply.
4. decrease reserve requirements.
Answer: a. 2. in a fractional-reserve banking system, each dollar of reserves can support more than one dollar of deposits, thereby increasing the money supply by more than $1.
3. reserves = deposits.
b. $900.
Multiplier is 10
c. 4. 1/(desired reserve-deposit ratio).
d. 2. increase reserve requirements.
Explanation:
a. In fractional-reserve banking system, $1 of deposits can be used to create more than $1 in money supply as the money is continuously deposited into other bank accounts. This enables the money to keep increasing until it theoretically reaches a certain amount determined by the money Multiplier.
If the money Multiplier is equal to 1 which is a very rare occasion, this means that the amount required in reserves is equal to the deposits. $1 of deposits will yield a $1 in money supply increase.
b. The desired reserve-deposit ratio is 0.1. For every $1, 0.1 goes to reserves.
If bank reserves have increased by $10 then that means that deposits are,
0.1x = 10
x = $100
Deposits not in reserve are,
= 0.9 * 100
= $90
The money Multiplier can be calculated with the formula,
= 1/(desired reserve-deposit ratio)
= 1/0.1
= 10
Increase in money supply is therefore,
= $90 * 10
= $900
c. As earlier mentioned, option D is the general rule for calculating the money Multiplier.
= 1/(desired reserve-deposit ratio)
d. If the Fed increases the reserve requirement, the effect would be a reduction in the money supply because the denominator is now higher.
For instance, reserve requirement of 0.1 vs 0.2.
At 0.1, the money supply would be,
= 1/0.1
= 10
At 0.2, the money supply would be,
= 1/0.2
= 5
The higher the reserve requirement, the lower the Multiplier.
Portions of the financial statements for Peach Computer are provided below.PEACH COMPUTERIncome StatementFor the year ended December 31, 2021Net sales $ 1,875,000 Expenses: Cost of goods sold $ 1,080,000 Operating expenses 590,000 Depreciation expense 53,000 Income tax expense 43,000 Total expens 1,766,000 Net income $ 109,000 PEACH COMPUTERSelected Balance Sheet DataDecember 312021 2020 Increase (I)orDecrease (D)Cash $ 105,000 $ 86,500 $ 18,500 (I)Accounts receivable 45,300 50,500 5,200 (D)Inventory 78,000 56,500 21,500 (I)Prepaid rent 3,300 5,600 2,300 (D)Accounts payable 48,000 38,500 9,500 (I)Income tax payable 5,300 11,500 6,200 (D)Required:Prepare the operating activities section of the statement of cash flows for Peach Computer using the direct method. (List cash outflows and any decrease in cash as negative amounts.)
Answer:
Cash flow from Operating Activities
Cash Receipts from Customers $1,880,200
Cash Paid to Suppliers and Employees ($1,679,700)
Cash Generated from Operations $ 200,500
Income taxes paid ($49,200)
Cash flow from Operating Activities $ 151,300
Explanation:
Cash Receipts from Customers Calculation
Net sales $ 1,875,000
Add Decrease in Accounts receivable $ 5,200
Cash Receipts from Customers $1,880,200
Cash Paid to Suppliers and Employees
Cost of goods sold $ 1,080,000
Add Operating Expenses
Operating expenses $ 590,000
$1,670,000
Increase in Inventory $ 21,500
Decrease in Prepaid rent ($ 2,300)
Increase in Accounts payable ($ 9,500)
Cash Paid to Suppliers and Employees $1,679,700
Income taxes paid Calculation
Open an Income taxes Payable T - Account as follows :
Debits :
Closing Balance $ 5,300
Cash (Balancing figure) $49,200
Totals $54,500
Credit :
Opening Balance $ 11,500
Income Statement $43,000
Totals $54,500
Variable costs as a percentage of sales for Lemon Inc. are 62%, current sales are $563,000, and fixed costs are $189,000. How much will operating income change if sales increase by $39,200
Answer:
Effect on income= $14,896 increase
Explanation:
Giving the following information:
Variable costs= 62% of sales
Current sales are $563,000
Fixed costs are $189,000.
Sales increase by $39,200.
To calculate the effect on income, we need to use the following formula:
Effect on income= sales increase*contribution margin ratio
Effect on income= 39,200*(1 - 0.62)
Effect on income= $14,896 increase
Prove:
Actual income= 563,200*0.38 - 189,000= 25,016
New income= 602,400*0.38 - 189,000= 39,912
Difference= $14,896 increase
Suppose that the government implements expansionary fiscal policy that raises aggregate demand, but the policy is unanticipated. According to new classical theory, in the short run the price level would ____________ and Real GDP would ______________. In the long run, new classical theory would predict that the price level would ______________ compared to its original long-run equilibrium level and that Real GDP would ____________.
Answer:
Rise;rise;rise;remain unchanged.
Explanation:
The new classical theory also known as the neoclassical economic theory is one that repudiates and tends to restructure the John M. Keynes theory of macroeconomics, popularly referred to as the Keynesian Macroeconomics theory.
The new classical theory argues that efficient demand and supply is the most important feature or key behind the level of output, pricing, and consumption of goods and services by the people at a specific period of time in a country. Also, the new classical theory assumes that the wages of the employees in a country is flexible in contrast to the Keynesian macroeconomic theory.
Suppose that the government implements expansionary fiscal policy that raises aggregate demand, but the policy is unanticipated. According to new classical theory, in the short run the price level would rise and Real Gross Domestic Product (GDP) would rise. In the long run, new classical theory would predict that the price level would rise compared to its original long-run equilibrium level and that Real Gross Domestic Product (GDP) would remain unchanged.
A series of five constant-dollar (or real-dollar) uniform payment of $897.63 is made begining at the end of first year. Assume that the general inflation rate is 18.3% and the market interest rate is 18.3% during this inflationary period.
The equivalent present worth of the series is:_________.
Answer:
The equivalent present worth of the series is $4,182.21
Explanation:
Fix periodic payments for a specific period of time are annuity payment and the payments made at the start of each period is known as advance annuity.
As per given data
Inflation per year = 18.3% / 5 = 3.66%
numbers of period = 5 years
Payment per period = $897.63
Use following formula to calculate the present value of annuity payments
PV of annuity = P x ( 1 - ( 1 + r )^-n / r
Where
P = Payment per period = $897.63
r = rate in of interest = 3.66%
n = numbers of periods = 5 years
Placing values in the formula
Equivalent present worth of the series = $897.63 + $897.63 x ( 1 - ( 1 + 3.66% )^-(5-1) / 3.66% )
Equivalent present worth of the series = $4,182.21
A company has a net income of $190,000, a profit margin of 9.40 percent, and an accounts receivable balance of $106,351. Assuming 72 percent of sales are on credit, what is the company's days' sales in receivables?
Answer:
The company's days' sales in receivables is 22 days
Explanation:
In order to calculate the company's days' sales in receivables we would have to calculate first the total sales with the following formula:
Total Sales = Net Income / Profit Margin
= $190,000/9.4%=$2,021,276
Hence, Credit Sales = $2,021,276*0.85= $1,718,085
Accounts receivable turnover ratio = Credit sales / Accounts Receivable
= $1,718,085 /$106,351
= 16.15485
Therefore, Days sales in receivables = 365/16.15485= 22.59 days
The company's days' sales in receivables is 22 days
On April 17, 2021, the Loadstone Mining Company purchased the rights to a coal mine. The purchase price plus additional costs necessary to prepare the mine for extraction of the coal totaled $4,950,000. The company expects to extract 990,000 tons of coal during a four-year period. During 2021, 249,000 tons were extracted and sold immediately.Required:
1. Calculate depletion for 2021.
2. Is depletion considered part of the product cost and included in the cost of inventory?
Answer:
1. Depletion for 2021 will be derived if the "tons which were extracted and sold immediately" is divided by "the Depletion per ton"
Depletion for 2021 = Extracted and sold tons in 2021 / depletion per ton
Depletion for 2021 = 249,000 tons * $5 per tons
Depletion for 2021 = $1,245,000
Where as the depletion per ton is be derived when the purchase price plus additional costs necessary is divided extract of tons of coals during the 4 year period.
Depletion per ton = $4,950,000 / 990000
Depletion per ton = $5 per ton
2. Depletion is not considered as part of product cost. It is shown as expense on income statement and reduced from the value of natural resource. So it is equivalent to depreciation of assets.
According to WSJ article, companies like Apple, Deere, and Walt Disney recently issued new bonds on the market, totaling $27 billion offering on a single day on Sep. 3. What explains such an increased activity in a corporate bond market
Answer: Fall in Benchmark Interest Rates.
Explanation:
This activity was caused by a Refinancing Drive. Refinancing is when entities get a new loan with a lower interest rate and pay off the older loan with a higher interest rate so that they can pay at the lower rate.
Bond interest rates are usually fixed so when interest rates in a country fall, bond holders don't benefit from that. One option they have to take advantage of that is to go on a Refinancing Drive and issue new bonds at those lower rates and then pay off the older ones.
That is what Apple, Deere, and Walt Disney have done.
Exercise 11-6 Net present value LO P3 A new operating system for an existing machine is expected to cost $520,000 and have a useful life of six years. The system yields an incremental after-tax income of $150,000 each year after deducting its straight-line depreciation. The predicted salvage value of the system is $10,000. A machine costs $380,000, has a $20,000 salvage value, is expected to last eight years, and will generate an after-tax income of $60,000 per year after straight-line depreciation. Assume the company requires a 10% rate of return on its investments. Compute the net present value of each potential investment. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.)
Answer:
NPV of investment 1: $509,131
NPV of investment 2: $269,513
Explanation:
initial investment -$520,000
6 year useful life, depreciation per year = ($520,000 - $10,000) / 6 = $85,000
free cash flow per year = $150,000 + $85,000 = $235,000
free cash flow last year = $235,00 + $10,000 = $245,000
NPV = -$520,000 + $235,000/1.1 + $235,000/1.1² + $235,000/1.1³ + $235,000/1.1⁴ + $235,000/1.1⁵ + $245,000/1.1⁶ = -$520,000 + $213,636 + $194,215 + $176,559 + $160,508 + $145,917 + $138,296 = $509,131
initial investment -$380,000
8 year useful life, depreciation per year = ($380,000 - $20,000) / 6 = $60,000
free cash flow per year = $60,000 + $60,000 = $120,000
free cash flow last year = $120,00 + $20,000 = $140,000
NPV = -$380,000 + $120,000/1.1 + $120,000/1.1² + $120,000/1.1³ + $120,000/1.1⁴ + $120,000/1.1⁵ + $120,000/1.1⁶ + $120,000/1.1⁷ + $140,000/1.1⁸= -$380,000 + $109,091 + $99,174 + $90,158 + $81,962 + $74,501 + $67,737 + $61,579 + $65,311 = $269,513
Sarah has a toothache. She believes it may be due to her not having regular dental checkups in the past. She now wants to find a dentist, but does not have one that she has used in the past. Because dentistry has __________ properties, Sarah plans to ask her friends for a recommendation for a dentist they like to be sure that she finds a good one.
Answer:
Credence properties
Explanation:
Dentistry has a Credence property because it is a Service provided by medical specialized professionals. medical diagnoses and legal services have credence properties, or characteristics. A consumer may find a service with Credence property impossible to evaluate even after purchase and consumption. To reduce this uncertainty, service consumer like Sarah turns to personal sources of information like her friends during the purchase decision process
Use the starting balance sheet, income statement, and the list of changes to answer the question. Gulf Shipping Company Balance Sheet As of December 31, 2019 (amounts in thousands) Cash 38,000 Liabilities 22,000 Other Assets 27,000 Equity 43,000 Total Assets 65,000 Total Liabilities & Equity 65,000 Gulf Shipping Company Income Statement January 1 to March 31, 2020 (amounts in thousands) Revenue 5,100 Expenses 2,800 Net Income 2,300 Between January 1 and March 31, 2020: 1. Cash decreases by $100,000 2. Other Assets do not change 3. Paid-In Capital does not change 4. Dividends paid of $400,000 What is the value for Liabilities on March 31, 2020?
Answer:
the value for Liabilities on March 31, 2020 is $22,000
Explanation:
Liabilities are current obligations of the entity that arose as a result of past events, the settlement of which will results in the outflow of cash from the entity.
To calculate the value for Liabilities on March 31, 2020, make adjustments to the liability balance that exists at the start of the year with movement that qualify as liabilities as defined above.
Opening balance as at 1 January 2020 = $22,000
Movements in liabilities = $0
Balance as at March 31, 2020 = $22,000
Conclusion :
The liabilities value on March 31, 2020 remains at $22,000
