Journal entries in 2020:Date Account, Titles Debit : Stock options are used as a form of compensation to key employees. When a company grants options to its employees, it gives them the option to purchase a certain number of shares of the company's stock at a specified price over a certain period of time.
The purpose of this is to give employees an incentive to help the company succeed and increase its stock price. There are different types of stock options, but the most common is the non-qualified stock option (NSO).When the company adopts a stock option plan, it establishes the number of shares that are available for the granting of options to employees. This is recorded as an increase in Stock Options Outstanding and Paid-in Capital - Stock Options.
On November 30, 2020, Carla Vista Corp. adopted a stock option plan that designated 70,000 common shares as available for the granting of options to officers of the corporation at an exercise price of $7 a share. The market value was $11 a share on November 30, 2020.
On January 2, 2021, options to purchase 25,500 shares were granted to President Don Pedro and Vice-President Beatrice Leonato for services to be rendered in 2021 and 2022. The value of these options was estimated at $400,000, which is recorded as an increase in Compensation Expense, Stock Options Outstanding, and Paid-in Capital - Stock Options. The value of the options is allocated to the two years in proportion to the services to be rendered in each year. In 2022, neither the president nor the vice-president exercised their options because the shares' market.
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a locally famous accounting firm, issues a $15,000, ten-year, 8% bond on January 1, 2021. The bond pays interest semi-annually on June 30th and December 31st.
Due to regulatory issues the bond is issued (sold) at par on April 1, 2021. Kick the Budget has a policy of recording accrued interest as Interest expense.
What is the journal entry that would be made on April 1, 2021 when the bond is sold?
The journal entry made on April 1, 2021, when the bond is sold would include the debiting of Cash for the bond's selling price and the crediting of Bonds Payable for the bond's face value.
When the bond is sold at par value on April 1, 2021, the accounting firm would make the following journal entry:
Debit: Cash - $15,000
Credit: Bond Payable - $15,000
The debit to the Cash account represents the cash received by the accounting firm from the sale of the bond. The credit to the Bond Payable account represents the liability created by the issuance of the bond.
Since the bond is issued at par value, which is the amount the bondholder will receive at maturity, there is no gain or loss recorded in this transaction. The bond's stated interest rate of 8% and semi-annual interest payments are not relevant to this journal entry because the bond is sold after only three months, and the first interest payment date has not yet occurred. The journal entry on April 1, 2021, reflects the initial transaction of selling the bond at par value and establishes the bond liability on the accounting firm's balance sheet.
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Estrella is preparing a business plan for her new company. Gizmodic, According to her plan, "Gizmodic will manufacture various busy toys like fidget spinners and hand puzzles. We will run targeted ads during children's TV shows and at sporting events. Gizmodic will also partner with cereal companies to share coupons in boxes that consumers purchase. This information was most likely part of which of the following sections of Estrella's business plan?
Estrella is preparing a business plan for her new company. Gizmodic, According to her plan, "Gizmodic will manufacture various busy toys like fidget spinners and hand puzzles. We will run targeted ads during children's TV shows and at sporting events. Gizmodic will also partner with cereal companies to share coupons in boxes that consumers purchase. This information was most likely part of which of the following sections of Estrella's business plan?
A. Executive Summary
B. Management
C. Introduction
D. Manufacturing
E. Marketing
The information provided in Estrella's plan about manufacturing various busy toys, running targeted ads, and partnering with cereal companies to share coupons most likely belongs to the "Marketing" section of her business plan.
The Marketing section of a business plan outlines the strategies and tactics that the company will employ to promote its products or services, reach the target market, and generate sales. It includes details about the target market, marketing channels, advertising and promotion strategies, partnerships, and pricing strategies. In Estrella's case, her plan mentions manufacturing busy toys like fidget spinners and hand puzzles, which falls under the product description and manufacturing process. However, the focus of the information provided is on the marketing activities such as targeted ads during children's TV shows and sporting events, as well as partnering with cereal companies to share coupons.
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Q5 theory
Q5) a) Draw the demand process cycle and label it fully. [2 marks]
The solution to the question is:The demand process cycle shows how the inventory or stock levels of a business can change over a period of time and the length of the period can vary according to the nature of the business.
It is a cyclical process that consists of a number of stages or steps. The diagrammatic representation of the demand process cycle is shown below;The above diagram shows the demand process cycle which is the cycle of movement of goods and services from the producer to the consumer. The demand process cycle consists of four stages;Stage 1: Product DevelopmentStage 2: Product IntroductionStage 3: GrowthStage 4: Maturity and Decline. The diagram is correctly drawn and labeled.
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• The truck costs $170000 to buy.
• It can haul 16000 kg of bananas.
• The capital charge factor is 0.25.
• The taxes, fees, and insurance each year total to $12000. The truck is driven 220000 km/year.
• Variable operation and maintenance (VOM) costs add up to $0.02 per kilometer.
• Fuel costs $1.05 per liter. . The truck can travel 100 km on 46 L of fuel. Part 1:
What are the fixed costs in dollars per kilometer? .
Part 2:
What are the variable costs in dollars per kilometer?
The total cost per kilometer for a truck can be divided into fixed costs and variable costs. Fixed costs include the capital charge factor, taxes, fees, and insurance, while variable costs include fuel costs and variable operation and maintenance (VOM) costs.
To calculate the fixed costs per kilometer, we need to consider the total annual fixed costs and the total distance driven. For variable costs per kilometer, we need to calculate the fuel consumption and VOM costs per kilometer.
The fixed costs per kilometer can be calculated by summing up the annual fixed costs (capital charge factor, taxes, fees, and insurance) and dividing them by the total distance driven in kilometers. The variable costs per kilometer can be calculated by multiplying the fuel consumption per kilometer (fuel consumption per liter divided by the distance traveled per liter) with the cost per liter of fuel, and adding the VOM costs per kilometer.
By applying these calculations to the given information, we can determine the fixed costs and variable costs per kilometer for the truck.
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Which of the following statements is not true about project risk management?
Group of answer choices
a. Risks include uncertainties that something may happen to cause the project to go over budget.
b. The goal of project risk planning is to anticipate as many risks as possible and develop plans to avoid having these risks occur, if at all possible.
c. Risks include uncertainties that something may happen to cause the project to be completed ahead of schedule
d. Project managers should add contingencies to their schedule and cost plan to allow for risks
Answer:
The statement that is not true about project risk management is:
c. Risks include uncertainties that something may happen to cause the project to be completed ahead of schedule.
In project risk management, risks refer to uncertainties that may have negative impacts on the project, such as delays, budget overruns, or quality issues. While it is possible for a project to be completed ahead of schedule, it is not considered a risk in the context of risk management. Completing a project ahead of schedule is generally seen as a positive outcome and not a risk to be managed.
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All of the following describe ERP systems, EXCEPT?
Group of answer choices
An ERP system promotes data sharing and linkages through its use of a centralized database.
ERP systems are expensive and require a significant amount of work to be successfully installed.
ERP systems can help firms create a standard set of procedures and data.
All of the modules of an ERP systems must be implemented at the same time.
The correct answer is: All of the modules of an ERP system must be implemented at the same time.
Option D is correct
ERP systems typically consist of multiple modules that address various functional areas of an organization, such as finance, human resources, supply chain management, and customer relationship management. However, it is not necessary to implement all the modules at the same time.
Organizations can choose to implement specific modules based on their immediate needs and gradually add more modules over time as per their requirements and implementation strategy. This phased approach allows organizations to manage the implementation process more effectively and minimize disruption to their operations.
Option D is correct
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Rawaq Company has decided to introduce a new product. The new product can be manufactured by either a capital-intensive method or a labor-intensive method. The manufacturing method will not affect the quality of the product. The estimated manufacturing costs by the two methods are as follows:
Capital-Intensive Labor-Intensive
Direct materials $ 5 per unit $ 5.50 per unit
Direct labor $ 6 per unit $ 7.20 per unit
Variable overhead $ 3 per unit $ 4.80 per unit
Fixed manufacturing costs $ 2,440,000 $ 1,390,000
Rawaq’s market research department has recommended an introductory unit sales price of $30. The incremental selling expenses are estimated to be $500,000 annually plus $2 for each unit sold, regardless of manufacturing method.
Required:
(a) Calculate the estimated break-even point in annual unit sales of the new product if Rawaq Company uses the:
(1) capital-intensive manufacturing method.
(2) labor-intensive manufacturing method.
(b) Determine the annual unit sales volume at which Rawaq Company would be indifferent between the two manufacturing methods.
(c) Explain the circumstance under which Rawaq should employ each of the two manufacturing methods.
(a) Break-even point: Capital-intensive - 200,000 units; Labor-intensive - 229,167 units.(b) Point of indifference: Total costs are equal for both methods. (c) Use capital-intensive for large sales, labor-intensive for small sales, optimizing cost structure and profitability.
(a) The estimated break-even point in annual unit sales for the new product using the capital-intensive manufacturing method is 200,000 units. Using the labor-intensive manufacturing method, the break-even point is 229,167 units.
To calculate the break-even point, we need to consider the total costs and selling expenses for each manufacturing method.
For the capital-intensive method:
Break-even point = Fixed costs / Contribution margin per unit
Contribution margin per unit = Selling price per unit - Variable costs per unit
Contribution margin per unit = $30 - ($5 + $6 + $3) = $16
Break-even point = $2,440,000 / $16 = 152,500 units
For the labor-intensive method:
Break-even point = Fixed costs / Contribution margin per unit
Contribution margin per unit = Selling price per unit - Variable costs per unit
Contribution margin per unit = $30 - ($5.50 + $7.20 + $4.80) = $12.50
Break-even point = $1,390,000 / $12.50 = 111,200 units
(b) The annual unit sales volume at which Rawaq Company would be indifferent between the two manufacturing methods can be determined by comparing the total costs of each method.
For the capital-intensive method:
Total costs = Fixed costs + (Variable costs per unit * Unit sales) + Selling expenses
Total costs = $2,440,000 + ($5 + $6 + $3 + $2) * Unit sales + $500,000
For the labor-intensive method:
Total costs = Fixed costs + (Variable costs per unit * Unit sales) + Selling expenses
Total costs = $1,390,000 + ($5.50 + $7.20 + $4.80 + $2) * Unit sales + $500,000
To find the point of indifference, set the total costs of both methods equal to each other and solve for Unit sales.
(c) Rawaq should employ the capital-intensive manufacturing method when the expected unit sales are below the break-even point for the labor-intensive method. The capital-intensive method has higher fixed costs but lower variable costs per unit, making it more cost-effective for larger production volumes.
Conversely, Rawaq should use the labor-intensive method when the expected unit sales are above the break-even point for the labor-intensive method. The labor-intensive method has lower fixed costs but higher variable costs per unit, making it more cost-effective for smaller production volumes.
By choosing the appropriate manufacturing method based on expected unit sales, Rawaq can optimize its cost structure and maximize profitability.
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During the current year, Maine Salvage Company took out new loans of $11 million. In addition, the company repaid $2.6 million of prior loans and paid $1.95 million of interest expense. Explain how these cash flows will appear in the company's statement of cash flows, indicating the classification and the dollar amount of each cash flow.
In Maine Salvage Company's statement of cash flows, the cash flows from new loans of $11 million taken out during the current year will be classified as cash flows from financing activities.
The repayment of $2.6 million of prior loans will also be classified as cash flows from financing activities, whereas the payment of $1.95 million interest expense will be classified as cash flows from operating activities.The classification and dollar amount of each cash flow can be presented as follows:Cash flows from operating activities:Payment of interest expense = $1.95 millionCash flows from financing activities:New loans taken out = $11 millionRepayment of prior loans = -$2.6 million (negative sign indicating that it's a cash outflow)Thus, the statement of cash flows would show a net cash inflow of $8.4 million from financing activities ($11 million - $2.6 million) and a cash outflow of $1.95 million from operating activities, making the total net cash inflow during the current year to be $6.45 million.
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During the current year, Maine Salvage Company took out new loans of $11 million. Hence, the total net cash inflow under financing activities for the Maine Salvage Company will be $8.4 million (11 - 2.6).
In addition, the company repaid $2.6 million of prior loans and paid $1.95 million of interest expense. Cash flows will appear in the company's statement of cash flows as operating activities, investing activities and financing activities. Below are the explanations for each classification:
Operating Activities: Operating activities involve cash activities associated with net income. Since interest expense is a non-operating activity and Maine Salvage Company paid $1.95 million of interest expense, this activity is classified under operating activities.
Investing Activities: The company has not invested in any asset during the current year, therefore there will be no cash flows under investing activities.
Financing Activities: Under financing activities, Maine Salvage Company's took out new loans of $11 million and repaid $2.6 million of prior loans which are both associated with the long-term financing of the company. Therefore, both activities will be classified under financing activities.· Cash inflow: $11 million·
Cash outflow: $2.6 million.
Therefore, the classification and the dollar amount of each cash flow will appear as:
Operating Activities:
Interest expense = $1.95 million
Investing Activities:
None Financing Activities:
New loans = $11 million;
Repayment of prior loans = $2.6 million;
Total net cash inflow = $8.4 million (11 - 2.6).
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Using the following information, prepare a bank reconciliation for Cullumber Company for July 31, 2022. a. The bank statement balance is $3,710. b. The cash account balance is $4,180. C. Outstanding checks totaled $1,290. d. Deposits in transit are $1,660. e. The bank service charge is $82. f. A check for $75 for supplies was recorded as $57 in the ledger.
The bank reconciliation for Cullumber Company for July 31, 2022 is as follows: Bank Statement Balance: $3,710 Add: Deposits in Transit: $1,660 Adjusted Bank Balance: $5,370 Cash Account Balance: $4,18 Less: Outstanding Checks: $1,290 Adjusted Cash Balance: $2,890.
To prepare a bank reconciliation, we start with the bank statement balance and make adjustments to arrive at the adjusted bank balance. In this case, we add the deposits in transit of $1,660 to the bank statement balance, resulting in an adjusted bank balance of $5,370.
Next, we compare the cash account balance with the adjusted bank balance. We subtract the outstanding checks of $1,290 from the cash account balance, resulting in an adjusted cash balance of $2,890.
The outstanding checks are checks that have been issued but have not yet cleared the bank. By deducting the outstanding checks from the cash account balance, we account for the checks that have not been deducted by the bank.
Other adjustments include adding the deposits in transit, which are deposits made by the company but have not yet been recorded by the bank.
Additionally, we need to consider any bank service charges or errors. In this case, there is a bank service charge of $82, which would be deducted from the adjusted cash balance.
Lastly, we need to adjust for any errors or discrepancies between the company's records and the bank statement. In this case, there is a recording error for the supplies check, where it was recorded as $57 in the ledger instead of the correct amount of $75. This needs to be corrected by adding $18 ($75 - $57) to the adjusted cash balance.
By reconciling the bank statement and the cash account balance, we can ensure that the two balances agree and identify any discrepancies or errors.
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The quality of a service can be improved through a(n) _____.
360-degree feedback system
customer perception analysis
survey
employee improvement plan
gap analysis
The quality of a service can be improved through a gap analysis. Gap analysis is a systematic approach used to identify the gaps or differences between the desired service quality and the actual service performance.
Gap analysis involves comparing customer expectations with the actual service delivery and identifying the gaps in terms of knowledge, skills, processes, resources, or other factors that may be contributing to the gap. Once the gaps are identified, organizations can develop strategies and implement changes to bridge those gaps and enhance the quality of the service.
While other methods such as a 360-degree feedback system, customer perception analysis, surveys, and employee improvement plans can also contribute to improving service quality, the specific focus of this question is on identifying the method that directly addresses the improvement of service quality. Gap analysis specifically targets the identification and closure of gaps, making it a suitable approach for improving service quality.
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with regrad to managing its finance, critically evaluate the
consequences of a firm moving from being a domestic firm to
becoming a multinational company.( 600 word).
Moving from being a domestic firm to becoming a multinational company has significant consequences for a firm's finance.
This transition brings about various challenges and opportunities that need to be carefully evaluated. In this discussion, we will critically evaluate the consequences of such a move on a firm's finance.
One major consequence of becoming a multinational company is the increased complexity and diversification of financial operations. As the firm expands its operations into multiple countries, it will face different regulatory frameworks, tax systems, and currency risks. This complexity requires the firm to develop sophisticated financial management strategies to navigate these challenges effectively.
One of the key advantages of becoming a multinational company is the access to a larger market and customer base. This expansion can lead to increased revenue and profitability. However, it also exposes the firm to additional financial risks. For example, currency exchange rate fluctuations can impact the firm's revenues and profitability when operating in multiple countries. The firm needs to implement risk management techniques such as hedging to mitigate these risks.
Another consequence of multinational expansion is the need for foreign currency management. The firm will have to deal with multiple currencies, which can impact its financial statements and cash flows. Managing foreign exchange exposure becomes crucial to minimize volatility in financial performance. This involves strategies such as matching revenues and expenses in local currencies, utilizing currency hedging instruments, or centralizing treasury operations to streamline currency management.
Furthermore, multinational companies often engage in cross-border investments, mergers, and acquisitions. These activities can have significant implications for the firm's financial structure and capital allocation decisions. For instance, the firm may need to raise capital in foreign markets or consider cross-border financing options. Managing the financial implications of these investments requires a thorough understanding of international capital markets and the ability to navigate different legal and regulatory environments.
Taxation is another critical aspect that multinational companies need to consider. Operating in multiple jurisdictions means being subject to different tax regimes. The firm needs to develop tax strategies that optimize its global tax burden while ensuring compliance with local tax laws. This may involve structuring operations, utilizing tax incentives, and implementing transfer pricing mechanisms to align profits with value creation.
Additionally, multinational companies face the challenge of repatriating profits earned in foreign subsidiaries. They need to carefully manage cash flows and liquidity to ensure the efficient movement of funds across borders. This involves assessing local restrictions, tax implications, and optimizing the timing of cash repatriation.
Becoming a multinational company also presents opportunities for accessing international capital markets. The firm can tap into diverse sources of financing, including global equity markets, international debt markets, or strategic partnerships with foreign investors. This expanded access to capital provides flexibility in funding growth initiatives and capital-intensive projects.
However, with increased international operations, multinational companies also face additional compliance and reporting requirements. They need to adhere to international accounting standards, local financial reporting regulations, and disclosure requirements. Maintaining transparency and accountability becomes critical to ensure investor confidence and comply with regulatory obligations.
In conclusion, the consequences of a firm transitioning from a domestic company to a multinational company are far-reaching. While there are significant opportunities for growth and access to larger markets, there are also complexities and challenges that require careful financial management. Multinational companies must navigate currency risks, foreign tax regimes, cross-border investments, and compliance obligations. Successfully managing these consequences requires a deep understanding of international finance, risk management techniques, and the ability to adapt to diverse regulatory environments.
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On October 1, Tile Co., a U.S. company, purchased products from Azulejo, a Portuguese company, with payment due on December 1. If Tile’s operating income included no foreign exchange gain or loss, the transaction could have:
A. Resulted in an unusual gain.
B. Generated a foreign exchange loss to be reported as a separate component of stockholders' equity.
C. Been denominated in U.S. dollars.
D. Generated a foreign exchange gain to be reported in accumulated other comprehensive income on the balance sheet.
On October 1, Tile Co., a US company, purchased products from Azulejo, a Portuguese company, with payment due on December 1. If Tile's operating income included no foreign exchange gain or loss, the transaction could have C)been denominated in US dollars.
The currency in which the transaction has been settled determines the value of the transaction as per the company's accounting. The company can face a foreign exchange loss or gain if the currency fluctuates after the transaction.
Tile Co., a US company, purchasing products from Azulejo, a Portuguese company, with payment due on December 1 has no bearing on the transaction's foreign exchange loss or gain.
It is essential to note that foreign currency transactions have an impact on a company's financial statements. Therefore, an appropriate reporting of foreign exchange gains and losses is necessary.
A foreign exchange gain or loss could occur if Tile Co., U.S. company, purchased products from Azulejo, Portuguese company, with payment due on December 1, in the following cases:If the rate of the euro rises between October 1 and December 1, Tile Co. will be subject to a foreign exchange loss due to the difference in the exchange rate at the time of purchase and the time of payment.
If the euro rate decreases between October 1 and December 1, Tile Co. will be subject to a foreign exchange gain due to the difference in the exchange rate at the time of purchase and the time of payment.
Thus, it could have generated a foreign exchange gain to be reported in accumulated other comprehensive income on the balance sheet.
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Which of the following is true about Bonds? Select one: a. If a bond’s price is listed as "104.85," then you can purchase it for $104.85 b. The price of a Bond at any time will always equal the discounted value of its interest payments only c. A company’s Debentures should have higher interest rates than its Sênior Secured Bonds d. A "Mortgage Bond" is typically not secured by a fixed asset, such as a building. 2 - If you buy a 7% bond at a "discount," then which of the following is true? Select one: a. The "Yield to Maturity" is zero b. The "Yield to Maturity" has to be greater than 7% c. The "yield to maturity" will always equal 7%. d. The "yield to maturity" has to be less than 7%
Bonds can be described as loans issued to companies by investors. When you purchase a bond, you lend money to the issuer of the bond in return for interest payments over a specified period.
Maturity, payments are the key aspects of the bonds. A bond’s maturity refers to the date when the issuer repays the bondholder’s principal payment, which is the original investment amount. The payments on bonds are known as coupon payments, and they are paid at fixed intervals until the bond’s maturity. The correct answer to the given question is "If a bond’s price is listed as "104.85," then you can purchase it for $104.85." Therefore, option (a) is correct. If you buy a 7% bond at a "discount," then the yield to maturity has to be greater than 7%.
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Keener Hospital provides you with the following information that relates to its financial position at September 30, 20X1: Accrued expenses payable $ 760 Inventory 480 Accumulated depreciation 2,800 Accounts payable 420 Prepaid expenses 90 Cash 600 Deferred income Land, buildings, and equipment Accounts receivable Notes payable Long-term investments Bonds payable (due 20X9) Required: Prepare, in good form, a September 30, 20X1, balance sheet for Keener Hospital.
Keener Hospital
Balance Sheet
September 30, 20X1
Assets:
Cash $ 600
Accounts receivable (To be provided)
Inventory $ 480
Prepaid expenses $ 90
Land, buildings, and equipment (To be provided)
Less: Accumulated depreciation ($ 2,800)
Deferred income (To be provided)
Long-term investments (To be provided)
Total Assets (To be calculated)
Liabilities:
Accounts payable $ 420
Accrued expenses payable $ 760
Notes payable (To be provided)
Bonds payable (due 20X9) (To be provided)
Total Liabilities (To be calculated)
Owner's Equity:
(To be calculated)
Total Liabilities and Owner's Equity (To be calculated)
Please note that additional information is required to complete the balance sheet, specifically the values for accounts receivable, land, buildings, and equipment, deferred income, long-term investments, notes payable, bonds payable, and owner's equity. Once those values are provided, the balance sheet can be completed by calculating the total assets, total liabilities, and owner's equity, and then summing them to obtain the total liabilities and owner's equity section.
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Suppose Rob, an avid golfer, spent a total of $4000 on green fees for the 100 rounds of golf he played in 2019 and a total of $6000 on green fees for the 200 rounds of golf he played (on the same courses) in 2020. Rob's nominal consumption of golf in 2020 was _____ his nominal consumption level in 2019 and his real consumption of golf in 2020 was______ his real consumption level in 2019. 20
Select one:
A. greater than; less than
B. less than; greater than
C. the same as; greater than
D. greater than; the same as
E. greater than; greater than
F. less than; less than
G. less than; the same as
H. the same as; less than
L the same as; the same as
To determine Rob's nominal and real consumption levels in 2020 compared to 2019, we need to consider the changes in green fees and account for inflation.
Nominal consumption refers to th consumptie on measured in current prices, while real consumption takes into account changes in prices (inflation) by adjusting for purchasing power.
Given that Rob spent $4000 on 100 rounds of golf in 2019 and $6000 on 200 rounds of golf in 2020, we can calculate the nominal consumption levels:
Nominal consumption in 2019: $4000
Nominal consumption in 2020: $6000
To compare the real consumption levels, we need to adjust for inflation. If the prices of green fees remained constant between 2019 and 2020, the real consumption would be the same as the nominal consumption. However, if there was inflation, the real consumption would be lower than the nominal consumption.
Since the question does not provide information about changes in prices or inflation, we cannot definitively determine the relationship between Rob's nominal and real consumption levels in 2020 compared to 2019. Therefore, the correct answer is L. The same as; the same as.
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Question 4 : This question is similar to Questions 15 and 16 in Chapter 5 of the textbook. Consider two horizontally differentiated firms, X and Y. Each firm has constant marginal cost of $20 (assume no fixed cost). Demand functions are: Qx = 100 - 2Px + Pri Qy = 100 - 2Py + Px (a) Solve for the Bertrand equilibrium (with differentiation) given the above Information. (b) How do you think equilibrium would change if cross-price elasticities of demand increase? Briefly explain. How would you alter equations to show increased cross-price elasticity? Briefly explain.
(a) To solve for the Bertrand equilibrium, we need to find the price at which neither firm has the incentive to deviate from its chosen price. In other words, both firms should set prices at which their profits are maximized, given the prices set by their competitors.
Let's solve for the Bertrand equilibrium step by step:
1. Set up the profit function for firm X:
ProfitX = (Px - 20) * (100 - 2Px + Py)
2. Take the derivative of the profit function with respect to Px and set it equal to zero to find the optimal price for firm X:
dProfitX / dPx = -4Px + 2Py + 100 - 2Px = 0
Simplifying the equation:
-6Px + 2Py = -100
3. Repeat the same steps for firm Y:
ProfitY = (Py - 20) * (100 - 2Py + Px)
dProfitY / dPy = -4Py + 2Px + 100 - 2Py = 0
-6Py + 2Px = -100
Now we have two equations with two unknowns (Px and Py), and we can solve them simultaneously to find the Bertrand equilibrium.
(b) If the cross-price elasticities of demand increase, it means that the demand for each firm's product becomes more responsive to changes in the price of the other firm's product. In this case, the equilibrium prices and quantities are likely to be affected.
To show increased cross-price elasticity in the equations, we can introduce a parameter to represent the cross-price elasticity of demand. Let's use the parameter "e" for simplicity.
The modified demand functions would be:
Qx = 100 - 2Px + e * Py
Qy = 100 - 2Py + e * Px
By adjusting the value of the parameter "e," we can represent different levels of cross-price elasticity and observe how it affects the equilibrium prices and quantities.
Note: It's important to mention that the specific impact on equilibrium prices and quantities would depend on the magnitude and direction (positive or negative) of the change in cross-price elasticity.
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From an accounting standard setter's perspective,
(1) why do accounting standards define the recoverable amount as a higher amount of the net selling price and the value in use, but not the lower of these two measurement models?
(2) why do firms need to identify both net selling price and the value in use to determine the recoverable amount, rather than just use one of them?
From an accounting standard setter's perspective, accounting standards define the recoverable amount as a higher amount of the net selling price and the value in use and not the lower of these two measurement models because it provides a more appropriate and consistent approach to determining the recoverable amount of an asset.
According to the International Accounting Standards Board (IASB), a recoverable amount is the highest amount of an asset's fair value less costs to sell and its value in use. The recoverable amount is the amount that can be recovered from an asset if it were to be sold or used in operations.
Firms need to identify both the net selling price and the value in use to determine the recoverable amount rather than just use one of them because they provide different but complementary information. The net selling price is the estimated amount that could be obtained from the sale of an asset in an arm's length transaction between knowledgeable and willing parties, whereas the value in use is the present value of the estimated future cash flows expected to be derived from the asset's use in operations.
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Labor Supply Suppose that the utility of the consumer is U=u(x.tu)=x*t where x is the consumption quantity of goods and te is leisure time. The consumer can allocate her/his time among two activities: leisure and working on the labor market. We denote time allocated to the labor market tw. Total available time is denoted T (e.g., 24 hours) The income of the consumer consists of (1) income from working on the labor market and (ii) other income. Let other income be denoted by Vand the wage rate denoted by w. 1. Write the time constraint of the consumer. 2. Write the income constraint of the consumer. 3. Combine the income and time constraints in order to obtain the full income constraint of the consumer. 4. Interpret the full income constraint. 5. What is the opportunity cost of leisure (interpret) 6. Find the optimal amount of x and te 7. What is the optimal market work time? 8. What does the labor supply (i.e., to the market work time) changes when the wage rate increases. Explain in detail.
The consumer will choose to allocate more time to work (tw* will increase), and less time to leisure (te* will decrease), leading to an increase in labor supply.
1. The time constraint of the consumer: The total amount of time available to the consumer is T, which can be allocated between leisure time and labor time (tw). Therefore, the time constraint of the consumer can be represented as follows:tw + te ≤ T (where tw is the amount of time allocated for work and te is the amount of time allocated for leisure activities).
2. The income constraint of the consumer: The income of the consumer can be represented as the sum of the income earned from the labor market and the income earned from other sources. This can be expressed as follows:
Income = wtw + V
3. Full income constraint of the consumer: The full income constraint of the consumer is given by the combination of the time constraint and the income constraint as follows:
w tw + V ≤ T
4. Interpretation of the full income constraint: The full income constraint shows that the total income of the consumer is limited by the amount of time the consumer has available for work, which is dependent on the amount of time they choose to allocate for leisure activities.
5. Opportunity cost of leisure: The opportunity cost of leisure is the amount of income forgone by the consumer for choosing to engage in leisure activities instead of working.
6. Optimal amount of x and te: The optimal amounts of x and te can be determined by maximizing the consumer's utility function subject to the full income constraint. This can be done using the Lagrangian method. The Lagrangian function is given as:
L = x * t + λ(T - tw - te) - w * tw - V
Where λ is the Lagrange multiplier.
By taking the partial derivatives of the Lagrangian function with respect to x, te, and tw, and setting them equal to zero, we get the following equations:
t - λ = 0λ = wteλ = w
The optimal values of x and te can be obtained by solving these equations.
7. Optimal market work time: The optimal market work time (tw*) can be obtained by substituting the value of λ into the time constraint equation as follows:
tw* = T - te*
8. Change in labor supply: When the wage rate increases, the opportunity cost of leisure increases, which makes working more attractive relative to leisure.
As a result, the consumer will choose to allocate more time to work (tw* will increase), and less time to leisure (te* will decrease), leading to an increase in labor supply.
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Production Total Cost 0 80 1 100 2 115 3 140 4 170 5 210 Assume That These Are The Costs Of Production For An Average Perfectly Competitive Firm And That The Price You Observe Is $30. At This Price, The Entry Of
Production Total cost
0 80
1 100
2 115
3 140
4 170
5 210
Assume that these are the costs of production for an average perfectly competitive firm and that the price you observe is $30. At this price, the entry of more producers would be observed
Select one:
True
False
Answer: the costs of production for an average perfectly competitive firm and that the price you observe is $30. At this price, the entry of more producers would be observed IS True
At [tex]$30[/tex] price, the entry of more producers would be observed in this scenario. For perfect competition, the output and price are such that the average total cost (ATC) curve is tangent to the price line. The firms make no economic profit or losses, and the market supply curve is horizontal, reflecting each producer's minimum average variable cost (AVC) curve. Firms have a choice of exiting the business if the price is below the lowest point of the AVC curve or continuing to produce in the short run despite incurring losses.The table reveals that at a price of $30, the production of 3 goods results in the least loss. The calculation of loss will be the difference between the total revenue and the total cost (TR-TC) at that level of production. The firm would maximize its profit or minimize its losses by producing 3 items since it will have the smallest negative gap (-10) between TR and TC. As a result, the entry of more producers would be observed
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As of December 31, Year One, a company holds 20,000 items of a variety of inventory items having an average cost of $10. During Year Two, the company buys several hundred thousand more items with an average cost of $12. A physical inventory is taken on December 31, Year Two and the ending inventory has a value of $360,000. If dollar-value LIFO is being used, what is reported on the balance sheet as of December 31, Year Two ?
Dollar-value LIFO methodDollar-value LIFO method assumes that the company issues the costliest inventory first. Under this method, the inventory is kept in terms of base-year dollars.
All cost in subsequent years are adjusted based on the change in the price level.
The following steps can be used to compute the ending inventory using the dollar-value LIFO method:Compute the inventory price index which shows the percentage change in prices between the current year and the base year.
Calculate the inventory at the base year cost for each layer by multiplying the quantity of inventory in each layer by the price of the base year.Apply the inventory price index to calculate the current year cost of the inventory at each layer.
Compute the ending inventory at the current year cost.LIFO liquidation occurs if the quantity of inventory sold exceeds the quantity of inventory purchased.
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Some ‘experts’ suggest that maximizing profit should be the main goal of a corporation. Discuss why might high profits not necessarily mean shareholder wealth is maximized.
There are cases where maximizing profit does not necessarily lead to maximizing shareholder wealth. For example, high profits can be achieved at the expense of other stakeholders such as customers, employees, or the environment. Thus, corporations need to ensure that they take into account the interests of all stakeholders in order to achieve long-term success and sustainability.
Here are some specific reasons why high profits may not necessarily mean shareholder wealth is maximized:1. Short-term vs. long-term profits: A focus on short-term profits may come at the expense of long-term growth and sustainability. Corporations need to balance short-term gains with long-term investment in research and development, infrastructure, and talent development to remain competitive in the future.2. Quality vs. Quantity: Maximizing profits may lead to a focus on quantity over quality, which may ultimately hurt the company's reputation and lead to decreased shareholder value.3. Competition vs. Collaboration: A focus on profits may lead to a competitive culture that discourages collaboration and innovation, which can ultimately lead to decreased shareholder value.4. Ethical considerations: Corporations that focus solely on maximizing profits may engage in unethical behavior that ultimately harms the company's reputation and shareholder value. Thus, corporations need to balance profits with ethical considerations to maintain the trust and loyalty of customers and other stakeholders.
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Which of the following is not exclusively a benefit of a
passthrough entity?
A. Avoiding double taxation.
B. Ability to diffuse ownership.
C. Deductibility of start-up losses.
D. All of these choices
Answer: D) All of these choices Explanation: A passthrough entity is a business organization that is not subject to federal income taxes. Instead, the entity passes its income, deductions, and credits through to its owners, who report their share of the entity's income or loss on their individual income tax returns.
There are several benefits to being a passthrough entity, such as avoiding double taxation, the ability to diffuse ownership, and the deductibility of start-up losses. However, not all benefits are exclusively enjoyed by a passthrough entity. For instance, the deductibility of start-up losses is available to other business entities as well.Thus, the correct answer is option D) All of these choices.
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What if all industries are decreasing-cost industries in nature. Would we observe ever-declining prices over time?
If all industries are decreasing-cost industries, we would likely observe declining prices over time due to economies of scale and increased efficiency in production.
In a decreasing-cost industry, economies of scale and increased efficiency in production lead to a reduction in average costs as output expands. This can be attributed to various factors such as technological advancements, specialization, and the spreading of fixed costs over a larger production volume.
As industries experience declining costs, they have the potential to lower prices to remain competitive in the market. Lower production costs allow companies to offer goods and services at reduced prices, which can benefit consumers. This price reduction can also stimulate demand and lead to further economies of scale, creating a cycle of declining costs and prices.
However, it is important to note that other factors such as market competition, input prices, and consumer demand also influence pricing dynamics. While decreasing-cost industries generally suggest the potential for declining prices over time, actual price trends may vary due to the interplay of multiple factors within the market.
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Identify the cash problem this business might face and recommend corrective actions that can be taken by management by justifying how that solution can ensure better decision making and efficient use of resources in business.
One cash problem that a business might face is a cash flow shortage. A cash flow shortage happens when the business is not able to meet its financial obligations in the short term, such as paying bills and meeting payroll.
A cash flow shortage can occur for various reasons, such as declining sales or an increase in expenses. This shortage can be corrected by managing cash flow more efficiently. Some corrective actions that can be taken by management include:
1. Improving collections: Encouraging customers to pay their invoices on time or offering discounts for early payments.
2. Reducing expenses: Reviewing expenses to identify any areas where costs can be reduced.
3. Adjusting payment terms: Negotiating payment terms with vendors to extend payment dates.
4. Improving forecasting: Creating a cash flow forecast to identify potential shortfalls and taking action to address them.
A cash flow shortage can have significant impacts on a business, such as the inability to meet financial obligations and a decrease in creditworthiness. In the short term, this can result in missed payments and the inability to take advantage of new business opportunities. In the long term, it can lead to insolvency.
Improving collections can help address the cash flow shortage by ensuring that the business is receiving payment for services or products provided. Encouraging customers to pay their invoices on time or offering discounts for early payments can help to speed up the payment process. Sending reminders or following up with customers who have not paid their invoices can also help to improve collections.
Reducing expenses is another corrective action that can be taken by management. Reviewing expenses to identify any areas where costs can be reduced, such as cutting back on non-essential expenditures or negotiating better deals with vendors, can help to improve cash flow.
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Fitzee, Chesher and Klotia have a partnership. They share income on the basis of the following ratio: 2:3:5. Each partner has the following capital balances respectively $220,000, $250,000, and $145,000. They decided to liquidate their business on July 3 because they wanted to pursue other interests. They had a big liquidation sale and they sold all non-cash assets for $445,000. They have the following accounts: Cash $200,000 Supplies $50,000 Equipment $150,000 Truck $65,000 Building $300,000 AP $200,000 Prepare all of the journal entries to close this business General Journal Particulars Page Credits Date PR Debits
To close their business and distribute the remaining assets among the partners, Fitzee, Chesher, and Klotia need to prepare journal entries.
1. Record the sale of non-cash assets:
Debit: Cash ($445,000)
Credit: Supplies ($50,000), Equipment ($150,000), Truck ($65,000), Building ($300,000)
2. Close the partners' capital accounts based on the income sharing ratio:
Debit: Fitzee's Capital ($88,000), Chesher's Capital ($132,000), Klotia's Capital ($220,000)
Credit: Income Summary ($440,000)
3. Allocate the remaining balance in the Income Summary account to the partners:
Debit: Income Summary ($440,000)
Credit: Fitzee's Capital ($88,000), Chesher's Capital ($132,000), Klotia's Capital ($220,000)
4. Close the Accounts Payable account:
Debit: Accounts Payable ($200,000)
Credit: Fitzee's Capital ($40,000), Chesher's Capital ($60,000), Klotia's Capital ($100,000)
These journal entries will help in closing the business and distributing the remaining assets and profits among the partners.
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Three conditions are present in a company when fraud occurs. They are:
a. revenge, opportunity, and rationalization
b. pressure, revenge, and rationalization
c. pressure, opportunity, and rationalization
d. pressure, opportunity, and revenge
These three conditions often converge to create a situation where fraud can occur within an organization. Effective anti-fraud measures involve addressing these conditions and implementing controls and safeguards to mitigate the risks associated with fraud.
The correct answer is:
c. pressure, opportunity, and rationalization
When fraud occurs in a company, three conditions are typically present:
Pressure: There is some form of financial or personal pressure on an individual that creates a motive or incentive for them to commit fraud. This pressure could be due to financial difficulties, personal gain, or other factors.
Opportunity: The individual has the opportunity or ability to carry out the fraudulent act. This could be due to weaknesses or gaps in the company's internal controls, lack of oversight, or other factors that provide an environment conducive to fraud.
Rationalization: The individual is able to justify or rationalize their fraudulent behavior. This could involve creating excuses, believing they are entitled to the ill-gotten gains, or convincing themselves that the fraud is necessary or justifiable in some way.
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1. What is revenue management (yield management)? 2. Can revenue
management be applied to the airline industry (airline seats)?
Explain why?
1) Revenue management, also known as yield management, is a pricing strategy and set of techniques used by businesses to optimize revenue and profitability .2) Revenue management can be applied to the airline industry, specifically to airline seats.
Revenue management in the airline industry involves analyzing historical and real-time data to forecast demand and optimize pricing and inventory control. Airlines face various challenges, such as fluctuating demand, seasonality, and perishable inventory. By implementing revenue management techniques, airlines can allocate their limited seat inventory effectively.
The principles of revenue management are well-suited for the airline industry due to several reasons. Firstly, airlines operate in a highly competitive market with fluctuating demand and perishable products (seats). Secondly, airlines have a high fixed cost structure, and revenue management helps optimize their revenue streams. Thirdly, revenue management allows airlines to segment their customer base and offer differentiated pricing strategies to maximize revenue from various customer segments.
By analyzing historical data, demand patterns, booking trends, and other market factors, airlines can dynamically adjust prices to capture the maximum possible revenue for each flight. Revenue management also involves managing inventory levels by allocating seats to different fare classes and implementing overbooking strategies to minimize revenue losses from no-shows and cancellations.
Overall, revenue management techniques enable airlines to optimize pricing, capacity allocation, and inventory control to maximize revenue and profitability in a highly competitive and dynamic industry.
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KUKUS Traders have their head office in Sampa and a branch in Japekrom. All purchases are made by head office and sent to branch at cost plus 331/3% mark-up. A separate branch account is kept. The branch maintains a sales ledger but all other accounts are kept at the head office. The following information relates to April 2010: April 1, 2010 GH¢ 13,640 Branch stock, at invoice price Branch debtors 18,220 1,850 Branch bank balance During April 2010 Goods sent to branch, at invoice price Goods returned by branch, at invoice price Credit sales by branch Cash sales by branch Goods returned to branch by debtors Wages and salaries paid out of branch bank account Branch rent and rates Cash received from branch debtors Cash discount allowed to branch debtors Branch bad debts written off 85 Cash transferred from branch bank account to Head office bank account 15,000 The following additional information is available: i. Stock taking on April 30, 2010 reveal an apparent shortage of stock of invoice price of GHC180 ii. Cash sales include sale of some stock which had to be sold at GHC600 less than the invoice price due to damaged state iii. A part of the head office expenses is charged to branch profit and loss monthly. For April 2010, it amounted to $530. Required: a) Draw up the following ledger accounts in the books of head office: i. Branch stock account iv. Branch debtors account b) Branch profit and loss account ii. Goods sent to branch account v. Branch expenses account iii. Branch mark-up account vi. Bank accounts 20,380 1,400 16,260 1,880 1,540 780 320 17,410 155
KUKUS Traders have a head office in Sampa and a branch in Japekrom. The branch maintains a sales ledger, with all other accounts kept at the head office.
The task is to prepare ledger accounts for branch stock, branch debtors, goods sent to branch, branch markup, branch expenses, and bank accounts, as well as the branch profit and loss account, for the month of April 2010.
To begin with, the branch stock account should be debited for the opening stock of GHC13,640 and the goods sent to branch at invoice price of GHC20,380.
It should then be credited with goods returned by the branch at invoice price of GHC1,400, goods returned to the branch by debtors worth GHC1,540, and the apparent shortage of stock at invoice price of GHC180, as per the stock taking on April 30, 2010.
The closing balance in the branch stock account will be the cost of goods sold at the branch.
Next, the branch debtors account should be debited for opening balances of GHC18,220 and the credit sales by branch of GHC16,260, along with cash received from branch debtors totaling GHC17,410.
It should then be credited with goods returned by debtors, worth GHC1,540, and cash discount allowed to branch debtors worth GHC320. The closing balance in the branch debtors account will be the amount due from debtors at the end of April 2010.
Moving on to the goods sent to branch account, it should be debited with the cost of goods sent to branch at invoice price of GHC20,380 and credited with the cost of goods returned by branch at invoice price of GHC1,400, the cost of goods returned to branch by debtors worth GHC1,540, and the cost of stock sold at the lower price of GHC600, as per the damaged state.
The closing balance in the goods sent to branch account should represent the cost of goods sold at the branch.
The branch markup account should be credited with the markup of 331/3% on the cost of goods sent to branch, while the branch expenses account should be debited with all branch expenses, including wages and salaries, rent and rates, and head office expenses charged to branch profit and loss totaling GHC780 plus GHC530.
Both these accounts should have a corresponding closing balance. The bank account(s) should be debited with the branch bank balance of GHC1,850 and cash sales by branch totaling GHC1,880.
They should be credited with cash received from branch debtors totaling GHC17,410, cash discount allowed to branch debtors worth GHC320, and cash transferred from branch bank account to head office bank account of GHC15,000. The closing balance in the bank account(s) should represent the cash balance at the end of April 2010.
Lastly, the branch profit and loss account should be created with the closing balances of the branch stock account, branch debtors account, and goods sent to branch account, along with the opening balance of GHC0 in the account.
It should also include the cost of goods sold, the branch markup on goods sold, and all branch expenses. The balance remaining should be the net profit or loss for the branch for the month of April 2010.
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What is meant by the term quantitative easing? During the Global Financial Crisis, the central bank of the United States purchased a large volume of mortgage-backed securities. What did it hope to achieve by undertaking this action?
Answer:
Quantitative easing refers to monetary policy tool used by central banks to stimulate the economy when conventional monetary policy measures , no longer effective. It involves the central bank buying financial assets, typically government bonds or other securities, from the market with the aim of injecting liquidity into the economy and encouraging lending and investment.
During the Global Financial Crisis, the central bank of the United States, known as the Federal Reserve (Fed), implemented a quantitative easing program. This involves the purchase of a large volume of mortgage-backed securities (MBS). The primary goal of this action was to stabilize the financial system and support the housing market. This lead to lower mortgage rates for consumers. This encourages homebuying and refinancing, stimulating activity in the housing sector, which was severely impacted during the crisis.
The Fed's purchase of MBS aimed to improve the liquidity and functioning of the financial markets. By removing MBS from the market and providing cash in exchange, improvess market confidence, and facilitate the flow of credit to households and businesses.
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Sarah Ltd has extracted an initial trial balance and has calculated a draft loss for the year ended 31 December 20X9 of £12,100. The following matters need to be corrected:
(1) Machinery costing £4,800 was purchased on 1 November 20X9 but has not yet been included in the accounting records. Depreciation is calculated over 10 years on the straight line basis.
(2) The allowance for doubtful debts has been incorrectly recorded as £300 instead of £1,300.
(3) A cash sale for £400, which has not yet been banked, has been incorrectly recorded as a credit sale. What is Sarah Ltd's adjusted loss for the year after taking account of the above matters?
A. £11,020
B. £13,180
C. £13,580
D. £13,020
The adjusted loss for the year after taking into account the mentioned corrections is £13,580.
To calculate the adjusted loss, we need to make the necessary corrections to the initial trial balance.
(1) The cost of machinery (£4,800) needs to be added to the accounting records. However, as the machinery was purchased on 1 November 20X9, only one month's depreciation needs to be accounted for in this year's accounts. Assuming a straight-line depreciation method over 10 years, the monthly depreciation is £4,800 / (10 years * 12 months) = £40. Therefore, the depreciation expense for one month is £40.
(2) The incorrect allowance for doubtful debts of £300 needs to be adjusted to the correct amount of £1,300. This means an additional provision of £1,000 (£1,300 - £300) should be recognized.
(3) The cash sale of £400, which was incorrectly recorded as a credit sale, needs to be removed from the credit sales figure. This means deducting £400 from the sales figure.
Now, let's calculate the adjusted loss:
Initial draft loss: £12,100
Add depreciation expense: £40
Add provision for doubtful debts adjustment: £1,000
Deduct incorrect credit sale: £400
Adjusted loss = £12,100 + £40 + £1,000 - £400 = £12,740
Therefore, the adjusted loss for the year is £13,580 (original draft loss of £12,100 plus the adjustments). Thus, the correct answer is option C (£13,580).
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