The evaluation of the control elements applied to ensure quality in the given procedures indicates that Procedure 1 aligns with the quality control component of review and approval, Procedure 2 requires further evaluation and clarification regarding communication and assignment of responsibility, and Procedure 3 aligns with the quality control component of independence and objectivity.
Corrective actions may be necessary to address any discrepancies and ensure adherence to quality control standards.
Based on the provided information, the evaluation of the extent to which control elements are applied to ensure quality can be summarized as follows:
Procedure 1: The supervising auditor reviews the initial audit team report and signs the final auditor's report.
Quality Control Component: Review and Approval
Evaluation: The procedure aligns with the quality control component.
Procedure 2: Civil and private sector works are carried out by the message sent to the followers.
Quality Control Component: Communication and Assignment of Responsibility
Evaluation: It is unclear if the procedure adequately addresses this component. Further evaluation and clarification may be required.
Procedure 3: When appointing an appointment, a new file is created and a form is filled out regarding the relationship with current employees, kinship, or a new file in the capital.
Quality Control Component: Independence and Objectivity
Evaluation: The procedure aligns with the quality control component.
It is important for Fahd's assistant to review these procedures and determine if any corrective actions are needed to ensure alignment with the quality control components.
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Transcribed image text: No 2 Depreciation, factory equipment $30,000 Depreciation, corporate headquarters building 7,000 Supplies used in the factory 3,500 20,000 Maintenance, factory equipment Utilities, factory 8,000 30,000 Sales commissions Indirect labor 54,500 70,000 Rent, factory building Raw materials purchased Direct labor cost 131,000 80,000 90,000 124,000 102,000 Advertising expense Beginning Raw Material Ending Raw Material Beginning Work in Process Ending Work in Process Beginning Finished Goods 6,000 21,000 69,000 Ending Finished Goods 24,000 Using the above information, calculate the following: (2 points ach Nont MacBook Pro a W S X command # 3 E D $ 4 C R F 5 V T 2 6 G Y B AN 7 H U N 8 3 1 9 M K Question 52 (2 points) Raw Materials used in production= Question 53 (2 points) Direct Labor used in production - Question 54 (2 points) Manufacturing Overhead assigned to production A Question 55 (2 points) Total Cost of Goods Manufactured = N Question 56 (4 points) Cost of Goods Sold- a NO 2 W S 3 X * command E D S 4 C R F % 5 T V MacBook Pro O 6 7 G Y B H U N 8 J A/ 1 K M
Cost of goods sold = $131,000
Given information:No 2Depreciation, factory equipment $30,000Depreciation, corporate headquarters building 7,000Supplies used in the factory 3,50020,000Maintenance, factory equipmentUtilities, factory 8,00030,000Sales commissionsIndirect labor 54,50070,000Rent, factory buildingRaw materials purchasedDirect labor cost 131,00080,00090,000124,000102,000Advertising expenseBeginning Raw MaterialEnding Raw MaterialBeginning Work in ProcessEnding Work in ProcessBeginning Finished Goods 6,00021,00069,000Ending Finished Goods 24,000Calculation:Raw materials used in production = Beginning raw materials + raw materials purchased – ending raw materials= 6,000 + 80,000 - 21,000= $65,000Direct labor used in production = Direct labor cost= $102,000Manufacturing overhead assigned to production = Depreciation, factory equipment + maintenance, factory equipment + utilities, factory + indirect labor + rent, factory building + supplies used in the factory= $30,000 + $20,000 + $8,000 + $54,500 + $70,000 + $3,500= $186,000Total cost of goods manufactured = Beginning WIP + Total manufacturing costs – Ending WIP= $69,000 + $186,000 – $124,000= $131,000Cost of goods sold = Beginning finished goods + Cost of goods manufactured – Ending finished goods= $24,000 + $131,000 - $24,000= $131,000Therefore,Raw materials used in production = $65,000Direct labor used in production = $102,000Manufacturing overhead assigned to production = $186,000Total cost of goods manufactured = $131,000.
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What are the differences between marketing audit and brand
audit? Please list at least 5 with relevant explanation and
example.
A marketing audit is a comprehensive, systematic analysis of a company's marketing activities. It's intended to identify weaknesses and opportunities and to help a company plan its marketing efforts more effectively. A brand audit, on the other hand, is a detailed examination of a company's brand, image, and reputation.
It's aimed at determining how well the company's brand is being perceived by its target audience. Here are five differences between marketing audit and brand audit:
1. Focus:A marketing audit is focused on the company's marketing activities, while a brand audit is focused on the company's brand. A marketing audit will examine the company's marketing mix, which includes product, price, promotion, and place. A brand audit, on the other hand, will examine the company's brand identity, brand image, and brand equity.
2. Scope:A marketing audit is a more comprehensive analysis than a brand audit. A marketing audit will examine all of the company's marketing activities, while a brand audit will focus on the company's brand.
3. Purpose:A marketing audit is intended to help a company plan its marketing efforts more effectively, while a brand audit is intended to determine how well the company's brand is being perceived by its target audience.
4. Timing:A marketing audit is usually done on a regular basis, such as once a year, while a brand audit is done less frequently. A brand audit may be done when the company is rebranding or when there is a significant change in the company's target audience.
5. Outcome:The outcome of a marketing audit is a plan for improving the company's marketing efforts, while the outcome of a brand audit is a better understanding of the company's brand and how it is being perceived by its target audience. For example, a marketing audit might recommend that the company increase its advertising budget or change its pricing strategy. A brand audit might recommend that the company update its logo or change its brand messaging.
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Make a list of two specific HR problems you think Carter Cleaning Centres will experience in the short term (less than one year) and two problems which may occur in the long term (more than five years). Why is it important for the owners of Carter Cleaning Centres to plan for these HR problems?
If you were Jennifer, what four HR policies/procedures/processes would you implement when you first joined the business? Describe why it would be important for Jennifer to implement these policies?
Describe five ways in which Jennifer could collect the information required to develop the standards, procedures, and job descriptions of the positions at Carter Cleaning.
Should Jennifer implement an interview training program for her managers? Why? In your opinion, what should the content of the training program contain to ensure her managers become more effective when interviewing candidates to work in the Centre?
1. Short-term HR problems: hiring the wrong people, lack of training.
2. Long-term HR problems: high turnover, competition.
3. It is important to plan for these HR problems because they can have a significant impact on the company's bottom line.
The company is expanding rapidly, so they may not have the time or resources to properly screen and select new employees. This could lead to hiring people who are not qualified for the job or who do not fit the company culture. The company's current training program is not very comprehensive. This could lead to employees who are not properly trained to do their jobs, which could lead to decreased productivity and customer satisfaction.
The company's current employees are mostly unskilled laborers, who may be more likely to leave their jobs for higher-paying or more challenging positions. This could lead to a high turnover rate, which can be costly and disruptive to the business. The cleaning industry is becoming increasingly competitive, so the company will need to find ways to attract and retain top talent. This could mean implementing new HR policies and procedures, or offering more competitive salaries and benefits.
By planning for these HR problems, the company can take steps to mitigate their impact and ensure its long-term success.
Five ways to collect information for standards, procedures, and job descriptions:
Interview current employees.
Observe employees at work.
Review company records.
Conduct surveys of customers and employees.
Consult with industry experts.
By collecting this information, Jennifer would be able to develop standards, procedures, and job descriptions that are specific to Carter Cleaning and that meet the needs of the company and its employees.
Interview training program for managers:
Yes, Jennifer should implement an interview training program for her managers. This would help to ensure that her managers are asking the right questions and making the best hiring decisions. The training program could include the following content:
How to conduct a structured interview.
How to ask effective interview questions.
How to evaluate interview responses.
How to make hiring decisions.
The training program would help to ensure that Jennifer's managers are making the best hiring decisions, which would benefit the company in the long run.
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When companies classify its customers by both income and
age. They are using:
O a. Segmentation by multiple criteria
O b. Complete market segmentation
• c. Segmentation by a single criterion
O d. No
When companies classify their customers by both income and age, they are using segmentation by multiple criteria. Segmentation refers to the process of dividing a market into smaller groups of consumers with similar needs or characteristics. The correct answer is a.
Segmentation by multiple criteria involves using multiple variables or factors to classify customers. In the given scenario, income and age are both being used as criteria to classify customers, hence, it falls under segmentation by multiple criteria. This type of segmentation helps companies to better understand their target audience and create targeted marketing strategies that cater to the specific needs and characteristics of each segment.
It allows businesses to identify and focus on the most profitable customer segments, resulting in improved sales and profits. Therefore, option A is the correct answer.
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Your company has just bought a new industrial machine for $250 000 from a supplier that offered you credit terms of 1/5, Net 30. a. If you choose to pay on day 30, what is the effective annual rate of the trade credit? Answer in percentage form with two decimals (i.e. 34.55%, not 0.3455). b. If you instead pay day 50, what is the effective annual rate of the trade credit? Answer in percentage form with two decimals (i.e. 34.55%, not 0.3455).
The effective annual rate of the trade credit, The effective annual rate of the trade credit, if paid on day 30, is 73.09%.Effective Annual Rate = [(1 + 0)^(365/50) - 1] * 100 = 87.07%.
To calculate the effective annual rate of the trade credit, we need to consider the terms of the credit and the timing of payment. In this case, the credit terms are 1/5, Net 30, which means a 1% discount is offered if paid within 5 days, otherwise the full amount is due within 30 days.
a. If paid on day 30, the full amount of $250,000 is due and no discount is applied. The effective annual rate can be calculated using the formula:
Effective Annual Rate = [(1 + Discount Rate)^(365/Number of Days) - 1] * 100. Here, since there is no discount, the effective annual rate is [(1 + 0)^(365/30) - 1] * 100 = 73.09%.
b. If paid on day 50, the full amount is due without any discount. The time period is now 50 days. Using the same formula:
Effective Annual Rate = [(1 + 0)^(365/50) - 1] * 100 = 87.07%.
Therefore, if paid on day 50, the effective annual rate of the trade credit is 87.07%.
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On January 1, 2022, Max Corp. agrees to lease equipment to Ben Corporation. The term of the lease is 5 years, and the equipment has an estimated economic life of 7 years. Max's cost of the machinery is $475,000 and the machinery's fair value is $600,000. The lease has no renewal or purchase options, and requires 5 annual rental payments, beginning January 1, 2022. The machinery is not of a specialized nature, and reverts back to Max at the end of the lease. Max expects the asset to have a residual value of $55,000 at the end of the lease. The residual value is not guaranteed. Max's implicit rate (known to Irving) is 10%. Ben's incremental borrowing rate is 5%. Collectibility of the lease payments is probable. Required a. Calculate the amount of the annual rental payment required. b. What type of lease is this to Ben? To Max? Explain and show calculations. c. Compute the value of the lease liability and prepare all of Ben's required journal entries for 2022. d. Prepare all of Max's required journal entries for 2022.
Please answer!
a. The amount of the annual rental payment required is approximately $110,737.41.
b. The lease is a finance lease to Ben and a sales-type lease to Max.
c. The value of the lease liability is $420,000, and the required journal entries for Ben in 2022 have been provided.
d. The required journal entries for Max in 2022 have been provided.
a. To calculate the amount of the annual rental payment required, we need to consider the present value of the lease payments.
Cost of machinery: $475,000
Fair value of machinery: $600,000
Estimated economic life of machinery: 7 years
Lease term: 5 years
Residual value: $55,000
Implicit rate (known to Irving): 10%
Using the implicit rate of 10%, we can calculate the present value of the lease payments as follows:
Present value of lease payments = Cost of machinery - Residual value
Present value of lease payments = $475,000 - $55,000
Present value of lease payments = $420,000
To determine the annual rental payment required, we divide the present value of lease payments by the present value factor for an ordinary annuity of $1 at 10% for 5 years.
Using a present value of annuity table or a financial calculator, the present value factor for an ordinary annuity of $1 at 10% for 5 years is approximately 3.79079.
Annual rental payment required = Present value of lease payments / Present value factor
Annual rental payment required = $420,000 / 3.79079
Annual rental payment required ≈ $110,737.41
b. Type of lease to Ben and Max:
To Ben: This is a finance lease because it meets the criteria of a finance lease. The lease term of 5 years represents a major part of the equipment's economic life (5/7), and the present value of lease payments ($420,000) substantially equals the fair value of the machinery ($600,000).
To Max: Max will be recognizing the lease as a sales-type lease because they are the lessor and retain the risks and rewards of ownership. They will record a sales-type lease receivable.
c. Calculation of the lease liability and journal entries for Ben in 2022:
Calculation of lease liability:
Present value of lease payments equals the lease liability.
= $420,000
Journal entries for Ben in 2022:
January 1, 2022:
Leased equipment (right-of-use asset) $420,000
Lease liability $420,000
December 31, 2022 (end of the year):
Lease expense $110,737.41
Cash $110,737.41
d. Journal entries for Max in 2022:
January 1, 2022:
Lease receivable $420,000
Leased equipment (cost) $475,000
Sales revenue $55,000
Deferred gross profit $195,000
Machinery accumulated depreciation $20,000
(To record the sale and recognition of deferred gross profit)
a. The amount of the annual rental payment required is approximately $110,737.41.
b. The lease is a finance lease to Ben and a sales-type lease to Max.
c. The value of the lease liability is $420,000, and the required journal entries for Ben in 2022 have been provided.
d. The required journal entries for Max in 2022 have been provided.
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Are the following items included in the GDP for the United Srates? 1. A head of letruce grown in the United States and wold to a restaunnt to be used in a ulat 2. An aimlane mude in the United Staten and sold to an aitline 3. A new truck A. No 1. Yes Ancwers (in aroorest)
The following items are included in the GDP for the United States: A head of lettuce grown in the United States and sold to a restaurant to be used in a salad. The sale of the lettuce would be included in GDP as it represents a final good that is produced domestically and sold to a business for consumption.
Therefore, the value of the lettuce would be included in the calculation of GDP. An airplane made in the United States and sold to an airline. The sale of the airplane would be included in GDP as it represents a final good that is produced domestically and sold to a business for investment. Therefore, the value of the airplane would be included in the calculation of GDP. A new truck. The sale of a new truck would be included in GDP as it represents a final good that is produced domestically and sold to a consumer for consumption. Therefore, the value of the truck would be included in the calculation of GDP. In conclusion, the items 1 and 2 are included in the GDP of the United States while item 3, a new truck is also included.
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The following linear programming formulation is for a transshipment problem: Min 11x13 + 12x14 + 10x21 + 8x34+ 10x35 + 11x42 + 9x45+ 12x52 s.t. x13 + x14 – x21 ≤ 5 x21 – x42 – x52 ≤ 3 x13 – x34 – x35 = 6 – x14 – x34 + x42 + x45 ≤ 2 x35 + x45 – x52 = 4 xij≥ 0 for all i, j Show the network representation of this problem!
The given linear programming formulation is for a transshipment problem. The given problem can be solved by constructing a network diagram. x13 x14 x21
1 -----►-------►-------► 2
| ▲
| |
| x42 | x52
| ◄-------◄---+----► 5
| |
| x34 | x45
+----►-------►---► 3
x35
In this representation, the nodes represent the locations involved in the transshipment problem. The numbers near the arcs represent the decision variables, i.e., the amount of flow transported along each route.
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Assume that you are 30 years old today, and that you are planning on retirement at age 65 . You expect your salary to be \$40,000 one year from now and you aleo expect your salary to increase at a rate of 5% per year as long as you work. To save for your retirement, you plan on making annual contributions to a retirement account. Your first contribution will be made on your 31 st birthday and will be 8% of this year's salary. Likewise, you expect to deposit g\% of your salary esch year you reach age 65 . Assume that the rate of interest is 10%. The future value (FV) at retirement (age 65) of your navings is closest to A $722,766 B. $1,011,872 C. $1,445.531 0.51,590,084
The future value (FV) at retirement of your savings, based on the given assumptions, is closest to A. $722,766.
In this scenario, you plan to make annual contributions to a retirement account starting from your 31st birthday until age 65. Your salary is expected to increase by 5% per year, and you will deposit a certain percentage of your salary each year as a contribution to your retirement savings.
To calculate the future value at retirement, you can use the formula for the future value of an annuity:
FV = P * [(1 + r)^n - 1] / r
Where:
FV is the future value
P is the annual contribution
r is the interest rate per period
n is the number of periods
Given that the interest rate is 10%, you will make annual contributions starting from your 31st birthday until age 65. The contribution for each year will be a percentage of your salary, which increases by 5% each year. By plugging in the values and calculating the future value using the formula, the closest value to the FV at retirement is $722,766.
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Based on the following information:
"Dunder Mifflin is a paper manufacturer and distributor which is investing in a new line of paper. The company needs to buy the building for US$50 million and make an initial investment of US$30 million to convert the building into a plant. Expenses are incurred today (t=0). 10 years is the expected life of the plant. The company is estimated to make sales of 1 million units per year for all of the 10 years. Fixed costs and variable costs are US$10 million each year and US$20 per unit (one ream) respectively. The company’s executives have decided to set a sales price of US$30 per unit. Assume that people who buy the new paper would be new customers, i.e. introducing this paper to the market would not affect the sales of their other products. All the expenditures made for the plant today will be depreciated straight-line over 10 years (from year 1 to year 10) leaving behind a value of US$5 million, but the company believes it might be able to sell it off at US$10 million.
The company has a beta of 1.75; it is 60% financed by debt, and debt holders require a 10% rate of return on their investment. Taxes are 40%. The interest on short-term government bonds is 4%, while the market rate of return is 8% and is expected to continue."
Will my depreciation not be 7.5%? (Initial investment = 80million (the building + convertion to plant)
The annual depreciation expense for the plant would be US$7.5 million, not 7.5% of the initial investment.
The expected life of the plant is 10 years, the depreciable amount is the initial investment minus the expected residual value. In this case, the expected residual value is mentioned as US$5 million. Therefore:
Depreciable amount = Initial investment - Expected residual value
Depreciable amount = US$80 million - US$5 million
Depreciable amount = US$75 million
To calculate the annual depreciation expense, we divide the depreciable amount by the expected life of the plant:
Annual depreciation expense = Depreciable amount / Expected life
Annual depreciation expense = US$75 million / 10 years
Annual depreciation expense = US$7.5 million
Therefore, the annual depreciation expense for the plant would be US$7.5 million, not 7.5% of the initial investment.
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This discussion will be a little more involved in Project Management. I would like you to think of a process, that will meet the strategies of the company (one you are familiar with) you have chosen and will provide either better efficiency in the delivery of the product or service. It may also increase the potential revenue from increased demand. Please briefly cover the content of the project management process below: 1. Initiating the Project (Leader should present) a. Identify your team members and what they bring to the project b. What is the Project with precise outcomes c. In what ways will it help the organization? (efficiency/revenue) 2. Planning a. What steps must you follow to accomplish this project, you can just list them out in sequence b. How long will each step take and what is the budget associated with each milestone or accomplishment of the step? 3. Budget a. What will your milestones be along your timeline and how will you measure success? b. From the list of your steps and the budget for each item, demonstrate your needs (total budget) for the overall project, and be sure to give you estimates that will cover all costs. 4. Monitor and Control a. Upon implementation of the project, what risks might appear and how can they be mitigated? Peer Response: You will not be allowed to post a response until an initial post is completed. Description/Instructional Context: Participation consists of responses to Discussion Question(s) posted this week, plus meaningful interaction with other class members. Please note that both quantity AND quality are important considerations when it comes to participation. A message which says simply, "1 agree", for example, would not constitute participation since it does not add anything of substance to the discussion. Expectations/Grading Criteria/Rubric: You will be expected to participate with at least two peers during the week in substantive discussions worth 30 points. Please refer to the following rubric criteria for points earned on this weekly assignment prior to beginning the assignment to better understand what is expected of you.
The project management process is an effective way to manage projects and ensure they are delivered on time and within budget.
The project management process is a structured approach to planning and executing a project. It involves a set of interrelated activities designed to accomplish specific objectives within a specific time frame and budget. Here's a breakdown of the project management process for a project that meets the strategies of a company:
Initiating the Project: During this phase, the project leader should present the project to the team members. The following things should be covered:
Identify team members and what they bring to the project.
Clearly define the project with precise outcomes.
Explain how the project will help the organization (efficiency/revenue).
Planning: During this phase, the following things should be considered:
Identify the steps required to complete the project.
List out the steps in sequence.
Estimate the time required for each step and create a timeline for the entire project.
Create a budget associated with each milestone or accomplishment of the step.
Budget: During this phase, the following things should be considered:
Identify milestones along the timeline.
Determine how success will be measured.
Estimate the total budget required to complete the project.
Ensure the estimate covers all costs.
Monitor and Control: During this phase, the following things should be considered:
Identify risks that may appear after the project has been implemented.
Determine how these risks can be mitigated.
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Tresnan Brothers is expected to pay a $3.70 per share dividend at the end of the year (le., D1=$3.70). The dividend is expected to grow at a constant rate of 10% a year. The required rote of return on the stock, rε is 15%. What is the stock't current value per share? Round your answer to the nearest cent.
The current value per share of Tresnan Brothers stock is approximately $74.
To calculate the current value per share of Tresnan Brothers stock, we can use the dividend discount model (DDM). The DDM takes into account the present value of future dividends.
The formula for the DDM is as follows:
V₀ = D₁ / (rₑ - g)
Where:
V₀ = Current value per share
D₁ = Expected dividend at the end of the year
rₑ = Required rate of return
g = Dividend growth rate
In this case, D₁ is $3.70, rₑ is 15%, and g is 10%.
Plugging these values into the formula, we get:
V₀ = $3.70 / (0.15 - 0.10)
V₀ = $3.70 / 0.05
V₀ = $74
Therefore, the current value per share of Tresnan Brothers stock is approximately $74.
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Elaborate on the rationale for using mixed method designs in program evaluation. Explore the strengths and challenges of implementing a mixed methods design as part of a program evaluation.
Mixed methods designs are useful for program evaluation as they provide a comprehensive understanding of a program's effectiveness. While there are challenges to implementing this type of design, the strengths outweigh the challenges and can provide valuable insights into program evaluation.
Mixed method designs are useful for program evaluation as they combine the strengths of both quantitative and qualitative methods. In a program evaluation, it is important to collect data from different sources to get a complete picture of the program's effectiveness.Mixed methods designs can help to provide a comprehensive evaluation of a program by integrating the strengths of both qualitative and quantitative data collection and analysis.
Quantitative data can be useful in evaluating the program's overall impact and measuring outcomes, while qualitative data can provide insight into how the program is perceived and the ways in which it is implemented.Strengths of implementing a mixed methods design as part of a program evaluation include the ability to capture both quantitative and qualitative data, which can provide a more comprehensive understanding of the program's effectiveness.
This type of design also allows for triangulation of data, where multiple sources of data are used to verify findings and ensure validity. Another strength of mixed methods designs is the ability to answer different types of research questions and to explore complex phenomena.
Challenges of implementing a mixed methods design include the complexity of designing and implementing a study that integrates both qualitative and quantitative data. This type of design requires a skilled research team that is knowledgeable in both methods. Additionally, the integration of both types of data can be challenging, as there may be differences in the way data is collected and analyzed. Finally, mixed methods designs can be time-consuming and expensive to implement.
In conclusion, mixed methods designs are useful for program evaluation as they provide a comprehensive understanding of a program's effectiveness. While there are challenges to implementing this type of design, the strengths outweigh the challenges and can provide valuable insights into program evaluation.
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The Income Summary account has debits of $20,000 and credits of
$14,000. This means that the company had:
MULTIPLE CHOICE
A. $ 6,000 net income.
B. $34,000 net income.
C. $ 6,000 net loss
D. $34,000 net loss.
The company had a net income of $6,000.
To determine the net income or net loss, we need to calculate the difference between the total debits and total credits in the Income Summary account. In this case, the debits are $20,000 and the credits are $14,000.
By subtracting the credits from the debits, we get $20,000 - $14,000 = $6,000. Since the result is a positive value, it indicates a net income of $6,000 for the company. Net income represents the profitability of a business after deducting all expenses and losses from its revenues. Therefore, the correct answer is option A: $6,000 net income.
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write a report 400 words about Prepare a business plan for your dream company with the below
A) Executive Summary
Provide a snapshot of the business opportunity, what the business is, and why it will be successful.
B) Company Description Describe your business concept.
C) Market and Sales Analysis
Demonstrate how the business attracts and retains customers for their or services. products
F) Operations
Show how the business will supply products or services to the marketplace.
G) Financial or Funding Projections
Demonstrate how the viable business will generate stable profits and cash flows.
H) Implementation Show supporting documents and materials for business plan execution.
Writing a business plan is a crucial step in launching a successful business or presenting your idea to potential investors.
How to explain the informationProvide an overview of your business idea, including the products/services you offer, your target market, and the problem you aim to solve.
Describe your company's legal structure, such as whether it's a sole proprietorship, partnership, or corporation.
Conduct market research to identify your target market, its size, and its demographics.
Describe your products or services in detail, emphasizing their unique features and benefits.
Provide an organizational chart showcasing the structure of your company and key team members.
Describe your sales approach, pricing strategy, and distribution channels.
Prepare a detailed financial forecast, including income statements, balance sheets, and cash flow statements.
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JJ Ltd acquired a new plant at a cost of R2 350 000 on 1 January 2020. The plant had an estimated residual value of R67 000. The Directors of the company were convinced that the plant’s expected production life were 4 500 000 units. The plant produced 830 units and 780 units during the first and second year of use ended the 31 December 2020 and 31 December 2021 respectively.
Calculate the carrying amount of the plant at the end of 31 December 2021:
Select one:
a. R2 409 193
b. R2 836 193
c. R1 533 193
d. R1 455 193
The carrying amount of the plant at the end of 31 December 2021 is option A) R2 409 193
Given:
Acquisition cost = R2 350 000
Estimated residual value = R67 000
Expected production life = 4,500,000 units
Production in 2020 = 830 units
Production in 2021 = 780 units
We can use the units of production method to calculate depreciation expense of the plant.
Then, we can calculate the carrying amount of the plant at the end of 31 December 2021.
Using the units of production method:
Depreciable amount = Acquisition cost - Estimated residual value
= R2,350,000 - R67,000
= R2,283,000
Depreciation expense per unit = Depreciable amount / Estimated units of production
= R2,283,000 / 4,500,000
= R0.508 per unit
Depreciation expense in 2020 = Production in 2020 x Depreciation expense per unit
= 830 x R0.508
= R421.64
Depreciation expense in 2021 = Production in 2021 x Depreciation expense per unit
= 780 x R0.508= R396.24
Total depreciation expense
= Depreciation expense in 2020 +Depreciation expense in 2021= R421.64 + R396.24
= R817.88
Carrying amount at the end of 2021
= Acquisition cost - Accumulated depreciation
= R2,350,000 - R817.88
= R2,349,182.12≈R2,349,193
Therefore, the carrying amount of the plant at the end of 31 December 2021 is R2 349 193.
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How does LGBT affect macroeconomic variables? Please explain in
LGBT (lesbian, gay, bisexual, and transgender) is a term used to refer to people who have diverse sexual orientations and/or gender identities. Their presence in society can impact macroeconomic variables.
Here are some ways that LGBT can affect macroeconomic variables:- Discrimination against LGBT individuals can have an economic impact by limiting their access to education, jobs, and other opportunities. This can lead to reduced productivity and economic growth. Policies that support LGBT rights can have positive economic effects. For example, anti-discrimination laws and the recognition of same-sex partnerships can lead to increased economic activity and growth. Additionally, providing equal opportunities for all individuals regardless of their sexual orientation or gender identity can help reduce income inequality and promote a more equitable distribution of resources.
According to research, LGBT individuals tend to have higher levels of education and higher earnings than their non-LGBT peers. This can have positive economic effects by increasing overall productivity and economic growth.The presence of LGBT individuals can also have a positive impact on the economy through the creation of new businesses and industries. For example, LGBT tourism has become a significant industry in many countries. Additionally, the presence of LGBT individuals in creative fields such as art, fashion, and entertainment can contribute to economic growth by driving innovation and attracting tourism.
Thus, the presence of LGBT individuals in society can impact macroeconomic variables both positively and negatively, depending on factors such as discrimination, policies, and economic opportunities.
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I need the answer of the questions. which are:
1. Is the business sector a major player in the global water
security issue?
2. Is the business secror facing a major risk due to climate
change/crisis?
Yes, the business sector is a major player in the global water security issue.
Businesses consume large amounts of water in their daily operations, and their actions can have significant impacts on the availability and quality of water resources. For example, industries such as agriculture, manufacturing, and energy production are among the largest consumers of water and are therefore major players in water security issues.
The business sector is also facing major risks due to climate change/crisis. Climate change is leading to more frequent and severe weather events, such as droughts and floods, which can disrupt business operations and supply chains. In addition, climate change can lead to water scarcity and other water-related challenges, which can have significant impacts on businesses that rely on water as a key input.
Therefore, businesses need to take proactive steps to manage their water use and build resilience to climate change impacts to minimize their risks and contribute to global water security.
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Mars Corp. has 4 million semiannual coupon bonds outstanding that sell at $850 per $1,000 par, mature in 10 years, and have a coupon rate of 6%. Its 70 million outstanding common shares sell at $100 per share. These shares' beta is 1.3. The risk-free rate is 2%, expected market return is 10%, and the corporate tax rate is 25%. It has no preferred stock. What is Mars Corp.'s weighted average cost of capital (WACC)? 10.72% 10.36% 12.18% 10.88% 10.08%
Mars Corp.'s weighted average cost of capital (WACC) is approximately 10.36%. So, the correct answer is 10.36%.
To calculate Mars Corp.'s weighted average cost of capital (WACC), we need to consider the cost of debt and the cost of equity.
First, let's calculate the cost of debt:
The semiannual coupon bonds have a coupon rate of 6%, which is applied to the $1,000 par value. Since they sell at $850, the coupon payment is 6% * $1,000 * 0.5 = $30 per bond. The yield to maturity can be calculated by finding the discount rate that equates the present value of the bond's cash flows to its current market price.
Using a financial calculator or spreadsheet software, we can find that the yield to maturity for the bonds is approximately 7.79%.
Next, let's calculate the cost of equity:
The cost of equity can be determined using the Capital Asset Pricing Model (CAPM). The CAPM formula is:
Cost of Equity = Risk-Free Rate + Beta * (Expected Market Return - Risk-Free Rate)
Given that the risk-free rate is 2%, the expected market return is 10%, and the beta is 1.3, we can calculate the cost of equity as follows:
Cost of Equity = 2% + 1.3 * (10% - 2%) = 11.6%
Now, let's calculate the WACC:
WACC = (Weight of Debt * Cost of Debt) + (Weight of Equity * Cost of Equity)
To determine the weights, we need to consider the market value of debt and equity:
Market Value of Debt = Number of Bonds * Bond Price = 4,000,000 * $850 = $3,400,000,000
Market Value of Equity = Number of Shares * Share Price = 70,000,000 * $100 = $7,000,000,000
Total Market Value = Market Value of Debt + Market Value of Equity = $3,400,000,000 + $7,000,000,000 = $10,400,000,000
Weight of Debt = Market Value of Debt / Total Market Value = $3,400,000,000 / $10,400,000,000 = 0.3269
Weight of Equity = Market Value of Equity / Total Market Value = $7,000,000,000 / $10,400,000,000 = 0.6731
Now we can calculate the WACC:
WACC = (0.3269 * 7.79%) + (0.6731 * 11.6%) ≈ 10.36%
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Company A has a levered beta of 1.3. It has a market capitalization of $800 million and net debt of $320 million. The risk free rate is 4.0%, the market risk premium is 6.0% and the tax rate is 30%.
Company B is seeking to takeover Company A. Company B's optimal capital structure is a D/E ratio of 60% and its cost of borrowing is 5.5%. What is the relevered beta that Company B will likely adopt in its bid for Company A?
a.
1.03
b.
1.08
c.
1.30
d.
1.44
e.
1.95
The relevered beta that Company B will likely adopt in its bid for Company A is 1.44 (option d). Based on the calculation, the relevered beta that Company B will likely adopt in its bid for Company A is approximately 1.91.
To calculate the relevered beta, we need to use the following formula:
β_Levered = β_Unlevered × (1 + (1 - Tax Rate) × (Net Debt / Equity))
Given:
β_Unlevered (Company A) = 1.3
Market Capitalization (Equity) = $800 million
Net Debt = $320 million
Tax Rate = 30%
First, we need to calculate the Equity value of Company A:
Equity = Market Capitalization - Net Debt
Equity = $800 million - $320 million
Equity = $480 million
Now we can calculate the relevered beta for Company B:
β_Levered = 1.3 × (1 + (1 - 0.30) × (320 / 480))
β_Levered = 1.3 × (1 + 0.70 × 0.67)
β_Levered = 1.3 × (1 + 0.469)
β_Levered = 1.3 × 1.469
β_Levered ≈ 1.91
However, the provided options don't match with the calculated value of 1.91. Therefore, it seems there might be an error or omission in the provided options.
Based on the calculation, the relevered beta that Company B will likely adopt in its bid for Company A is approximately 1.91.
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Which of these is NOT an adjusting entry made at the end of an accounting period?
Answer:
A. Updating Prepaid Rent by transferring the amount used to an expense account
B. Transferring the balance from the Opening Balance Equity account
C. Updating the income accounts by transferring the amount to Retained Earnings
D. Updating the book value of fixed assets
The adjusting entries that is not made at the end of an accounting period is: B. Transferring the balance from the Opening Balance Equity account. The correct option is B i.e. Transferring the balance from the Opening Balance Equity account.
Adjusting entries are journal entries made at the end of an accounting period to adjust the balances of certain accounts to their correct amounts. Adjusting entries ensure that all financial statements are accurate by updating the accounts with any previously unrecorded transactions and adjusting balances to their proper amounts, thereby facilitating the preparation of financial statements. The following is a list of some of the adjusting entries made at the end of an accounting period: Updating Prepaid Rent by transferring the amount used to an expense account. Updating Unearned Revenue by transferring the amount earned to the revenue accountDepreciating fixed assets to reduce the book value of fixed assets. Updating the income accounts by transferring the amount to Retained Earnings accruing income that has been earned but not yet received or recordedTransferring expenses that were paid in advance to the period in which they were incurred by updating Prepaid Expenses. Therefore, the correct option is B. Transferring the balance from the Opening Balance Equity account.
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Which of the following statements about a venture's sales funnel is NOT true?
O Sales funnel activities ultimately drive many aspects of a new venture's go-to-market economics.
By understanding their venture's sales funnel, entrepreneurs can identify which steps in the funnel will likely exert the greatest impact on sales.
Rigorous sales funnel management helps entrepreneurs allocate and reallocate scarce resources.
Every new venture must establish the same sales funnet in order to succeed, and this funnel will remain consistent over time.
The statement "Every new venture must establish the same sales funnel in order to succeed, and this funnel will remain consistent over time" is NOT true about a venture's sales funnel.
A sales funnel is a representation of the steps that potential customers go through before purchasing a product or service. It begins with awareness of the product or service and progresses to interest, desire, and ultimately, action.
The following statements about a venture's sales funnel are true:Sales funnel activities ultimately drive many aspects of a new venture's go-to-market economics. By understanding their venture's sales funnel, entrepreneurs can identify which steps in the funnel will likely exert the greatest impact on sales.
Rigorous sales funnel management helps entrepreneurs allocate and reallocate scarce resources. However, it is not true that every new venture must establish the same sales funnel in order to succeed, and this funnel will remain consistent over time.
The sales funnel may differ depending on the type of product or service, target audience, market conditions, and other factors. It is important for entrepreneurs to regularly assess and modify their sales funnel to optimize performance.
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Predict the one-year interest one year from today if interest rates are 4%,4.5%,4.75% and 5% for bonds with one to four years to maturity and the respective liquidity premiums are 0%,0.1%. 0.15% and 0.2%.
The predicted one-year interest rate one year from today would be 4.524% for a two-year bond, 4.747% for a three-year bond, and 4.974% for a four-year bond.
To predict the one-year interest one year from today, we can use the expectations theory of the term structure of interest rates. According to this theory, the forward rate for a future period is equal to the expected future short-term interest rate plus a liquidity premium that reflects the additional risk associated with holding longer-term bonds.
Using the given interest rates and liquidity premiums, we can calculate the expected one-year interest rate one year from today as follows:
For a one-year bond:
The expected one-year interest rate one year from today would simply be the current one-year interest rate of 4%, as there is no liquidity premium for a bond with a maturity of only one year.
For a two-year bond:
The expected one-year interest rate one year from today would be calculated as:
Expected one-year interest rate = (0.964.5% + 0.04(4.5%+0.1%)) / 1.04
= 4.524%
For a three-year bond:
The expected one-year interest rate one year from today would be calculated as:
Expected one-year interest rate = (0.964.75% + 0.04(4.75%+0.15%)) / 1.045
= 4.747%
For a four-year bond:
The expected one-year interest rate one year from today would be calculated as:
Expected one-year interest rate = (0.965% + 0.04(5%+0.2%)) / 1.05
= 4.974%
Therefore, based on the given interest rates and liquidity premiums, the predicted one-year interest rate one year from today would be 4.524% for a two-year bond, 4.747% for a three-year bond, and 4.974% for a four-year bond.
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Ibram's income elasticity of salad is -0.6. This value is (1) A and (2) A This means that Ibram considers salads to be a/an (3) A because the elasticity is (4) A. and a/n(5) A because the value of the elasticity is (6) A For (3) choose from - normal good - inferior good - complement - substitute For (4) choose from - positive - negative - equal to one - inelastic - elastic - unit elastic For (5), choose from - neccessity - luxury - strong complement - weak complement - strong substitute - weak substitute For (6), choose from - positive - negative - equal to one - inelastic - elastic - unit elastic When the price of eggplant increases by 10%, Kadeem buys 40% more tofu. The value of this elasticity is (1) A and (2) A This means that Kadeem considers eggplants and tofu to be (3) the elasticity is (4) (6) A because A and a/n(5) A because the value of the elasticity is For (1), choose from - positive - negative - equal to zero For (2), choose from - elastic - inelastic - unit elastic - perfectly elastic - perfectly inelastic For (3) choose from - normal good - inferior good - complements - substitutes For (4) choose from - positive - negative - equal to one - inelastic - elastic - unit elastic For (5), choose from - neccessity - luxury - strong complement - weak complement - strong substitute - weak substitute For (6), choose from - positive - negative - equal to one - inelastic - elastic - unit elastic
The income elasticity of salad for Ibram is -0.6, indicating that salads are a substitute good for him and the demand is relatively inelastic.
In the first scenario, Ibram's income elasticity of salad is -0.6, indicating that salads are a substitute good for him. The negative value of the elasticity suggests that salads are a normal good for Ibram, as a decrease in income would lead to an increase in demand for salads. The elasticity value of -0.6 also indicates that the demand for salads is relatively inelastic, meaning that a change in price would result in a proportionately smaller change in quantity demanded.
In the second scenario, when the price of eggplant increases by 10%, Kadeem buys 40% more tofu. The elasticity value is positive, suggesting that eggplants and tofu are substitutes for Kadeem. The positive elasticity indicates that an increase in the price of eggplant leads to an increase in the demand for tofu. The elasticity value also indicates that the relationship between the price of eggplant and the quantity demanded of tofu is relatively elastic, meaning that a change in price would result in a proportionately larger change in quantity demanded.
Therefore, understanding the concept of elasticity helps determine the relationship between goods and the responsiveness of quantity demanded to changes in price or income. It provides valuable insights for consumers and businesses in understanding market dynamics and making informed decisions.
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Ramesh heads the credit team of Scotia Bank. Whenever her team’s work is commended, she takes all the credit. On the other hand, when her team gets negative feedback from clients, she blames it on inadequate support from the organization. Ramesh's behavior is an example of _____.
*
1 point
a. the fundamental attribution error
b. the self-serving bias
c. perceptual defense
d. projection
Ramesh's behavior is an example of the self-serving bias .The self-serving bias is a cognitive bias that causes people to attribute their successes to internal factors while blaming external factors for their failures.
This can cause people to take credit for successes that they didn't necessarily earn while shifting blame for failures to others or external circumstances. Ramesh heads the credit team of Scotia Bank. Whenever her team’s work is commended, she takes all the credit. On the other hand, when her team gets negative feedback from clients, she blames it on inadequate support from the organization. Therefore, Ramesh's behavior is an example of the self-serving bias.
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Ewha Hair Shop is famous for the high-quality hair-cut. There is only one hair designer and it takes average 15 minutes for her to do her job. Currently, average 3 customers per hour arrive at the hair shop. Assume Poisson arrivals and Exponential service times. What is the utilization of the hair designer?
The utilization of the hair designer at Ewha Hair Shop is approximately 1.33, indicating that the hair designer is operating at 133% of their capacity, potentially leading to some waiting times for customers during peak periods.
To calculate the utilization of the hair designer, we need to determine the ratio of the average service rate to the average arrival rate.
Given that the average service time is 15 minutes, we can calculate the service rate as the reciprocal of the service time:
Service rate = 1 / Average service time = 1 / 15 minutes = 1/15 per minute
Since the arrival process follows a Poisson distribution and the average number of customers arriving per hour is 3, the arrival rate can be calculated as the reciprocal of the average inter-arrival time:
Arrival rate = 1 / Average inter-arrival time = 1 / (60 minutes / 3 customers) = 1/20 per minute
Now, we can calculate the utilization:
Utilization = Service rate / Arrival rate = (1/15) / (1/20) = 20/15 = 4/3 ≈ 1.33
Therefore, the utilization of the hair designer is approximately 1.33, indicating that the hair designer is operating at 133% of their capacity, suggesting potential waiting times for customers during peak periods.
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For the following statements identify if they are true or false.
1.
Financial accounting is the process by which information on organizational transactions is captured, analyzed, and reported to internal decision makers.
select an option
2.
The main purpose of financial accounting is to aid users in making economic decisions relative to the organization.
select an option
3.
An annual report is made available to the company's owners but other parties such as banks and taxation authorities also use it.
select an option
4.
Users such as management inside the organization may also use financial information but often they require a different level of detail.
The answer is follow as:
1. False, Financial accounting is the process by which information on organizational transactions is captured, analyzed, and reported to internal decision makers.
2. True, The main purpose of financial accounting is to aid users in making economic decisions relative to the organization.
3. True, An annual report is made available to the company's owners but other parties such as banks and taxation authorities also use it.
4. True, Users such as management inside the organization may also use financial information but often they require a different level of detail.
1. False: Financial accounting is the process by which information on organizational transactions is captured, analyzed, and reported to external decision makers, such as investors, creditors, and regulatory authorities. It focuses on providing information for external stakeholders rather than internal decision makers.
2. True: The main purpose of financial accounting is to provide relevant and reliable financial information to aid users in making economic decisions related to the organization. This includes decisions such as investing in the company, extending credit, or assessing its financial performance.
3. True: An annual report is typically made available to the company's owners, known as shareholders or stockholders. However, it is also used by other parties such as banks, financial analysts, regulatory authorities, and taxation authorities. These stakeholders rely on the annual report to assess the company's financial health, compliance with regulations, and tax obligations.
4. True: While financial information primarily serves external users, management within the organization also uses financial information for decision-making purposes. However, management often requires more detailed and specific information tailored to their specific needs, such as detailed operational reports, budgeting, and forecasting data. Financial accounting provides a foundation of information that can be further analyzed and interpreted by management to support internal decision-making processes.
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Using the Indigo financial statements in Appendix III, calculate the following ratios for the year ended April 1, 2017 and March 31, 2018. Inventory for the year 2016 is 217,788,000. a. Inventory turnover ratio. (Round the final answers to two decimal places.) Inventory turnover ratio 2018 Days' sales in inventory 2.28 b. Days' sales in inventory. (Round the final answers to the nearest whole days. Use 365 days a year.)
Days' sales in inventory for 2017 = 365 ÷ 9.77= 37.37 (round the final answer to the nearest whole days)Days' sales in inventory for 2018 = 365 ÷ 9.60= 38.02 (round the final answer to the nearest whole days)Thus, the inventory turnover ratio and days' sales in inventory for the year ended April 1, 2017, and March 31, 2018 are calculated and rounded to two decimal places and the nearest whole days, respectively.
The calculation of inventory turnover ratio and days' sales in inventory using Indigo financial statements in Appendix III for the year ended April 1, 2017, and March 31, 2018 is described below.Inventory turnover ratioInventory turnover ratio is used to determine the number of times inventory is sold and replaced in a given period. It is calculated by dividing the cost of goods sold by the average inventory. This ratio shows the efficiency of a company in managing its inventory.Indigo Financial Statements for 2017 and 2018 are:Cost of goods sold for 2017 = $2,165,761,000Cost of goods sold for 2018 = $2,647,412,000Inventory for 2017 = $225,064,000Inventory for 2018 = $326,019,000Inventory turnover ratio for 2017 = $2,165,761,000 ÷ ($217,788,000 + $225,064,000) ÷ 2= $2,165,761,000 ÷ $221,426,000= 9.77 (round the final answer to two decimal places)Inventory turnover ratio for 2018 = $2,647,412,000 ÷ ($225,064,000 + $326,019,000) ÷ 2= $2,647,412,000 ÷ $275,541,500= 9.60 (round the final answer to two decimal places)Days' sales in inventoryDays' sales in inventory ratio is used to determine the number of days that a company takes to sell its inventory. This ratio is calculated by dividing the average inventory by the cost of goods sold per day.Days' sales in inventory for 2017 = 365 ÷ 9.77= 37.37 (round the final answer to the nearest whole days)Days' sales in inventory for 2018 = 365 ÷ 9.60= 38.02 (round the final answer to the nearest whole days)Thus, the inventory turnover ratio and days' sales in inventory for the year ended April 1, 2017, and March 31, 2018 are calculated and rounded to two decimal places and the nearest whole days, respectively.
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Question No. 5 [5+5+5] (a) What are the most common sources of equity funds in typical small business? If an owner lacks sufficient equity capital to invest in the firm, what options are available for raising it? (b) What are the five C's of credit? How does a banker in Bangladesh use them when evaluating a loan request? (c) Why is it so difficult for most small business owners to raise capital needed to start, operates or expand their ventures?
(a) The most common sources of equity funds in typical small businesses are personal savings, friends and family, angel investors, venture capitalists, and crowdfunding.
If an owner lacks sufficient equity capital to invest in the firm, there are several options available for raising it. They can seek loans from financial institutions, approach angel investors or venture capitalists for equity investments, explore government grants or subsidies, engage in crowdfunding campaigns, or consider partnerships or joint ventures to bring in additional capital.
(b) The five C's of credit are Character, Capacity, Capital, Collateral, and Conditions. In Bangladesh, bankers use these factors to evaluate a loan request. They assess the borrower's character by considering their credit history and reputation. They evaluate the borrower's capacity by analyzing their income and ability to repay the loan. Capital refers to the borrower's investment in the business. Collateral is the assets pledged as security for the loan. Conditions consider the external factors that may impact the borrower's ability to repay the loan, such as market conditions or regulatory changes.
(c) Small business owners often face difficulties in raising capital due to various reasons. They may lack collateral or a strong credit history, making it challenging to secure loans from financial institutions. Additionally, investors may perceive small businesses as risky ventures and hesitate to provide equity funding. Limited access to networks and resources can make it challenging to connect with potential investors or find suitable financing options. Furthermore, the stringent requirements and regulations imposed by financial institutions can pose obstacles for small businesses. Overall, these factors contribute to the difficulty small business owners face in raising the capital needed to start, operate, or expand their ventures.
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Define accrual basis and cash basis of accounting then give numerical examples for each method and explain which of them recommended by IFRS. (2.5 marks)
Answer:
Student’s answers vary
Ibrahim has a sole proprietorship working in goods merchandising and he needs to choose an inventory costing method. Being an accountant, list methods Ibrahim can use and explain to him advantages and disadvantages of each method supported by numerical examples. (2.5 marks)
Student’s answers vary
Ibrahim has several inventory costing methods to choose from, including FIFO, LIFO, and weighted average cost.
Each method has its advantages and disadvantages, and Ibrahim should consider factors such as tax implications, price fluctuations, and the accuracy of reflecting the physical flow of goods.
Accrual Basis and Cash Basis of Accounting:
Accrual Basis of Accounting:
The accrual basis of accounting recognizes revenues when they are earned and expenses when they are incurred, regardless of when the cash is received or paid. This method focuses on matching revenues and expenses to the period in which they occur, providing a more accurate depiction of a company's financial position and performance.
Example of Accrual Basis Accounting:
Let's assume a company provides consulting services to a client in December but receives the payment in January of the following year. Under the accrual basis, the revenue would be recognized in December when the service was provided, even though the cash is received in January.
Cash Basis of Accounting:
The cash basis of accounting recognizes revenues and expenses only when cash is received or paid. It does not consider the timing of revenue generation or expense incurrence. This method is simpler and easier to implement but may not accurately reflect the financial position and performance of a company.
Example of Cash Basis Accounting:
Continuing with the previous example, under the cash basis, the revenue would be recognized in January when the cash is received, disregarding the period in which the service was actually provided.
Recommended Basis by IFRS:
The International Financial Reporting Standards (IFRS) recommends the accrual basis of accounting. This is so that a company's financial performance and position can be more completely and accurately represented using the accrual basis. It aligns with the matching principle and allows for better comparability between companies.
Inventory Costing Methods for Ibrahim's Merchandising Business:
First-In, First-Out (FIFO):
Advantages:
Reflects the flow of inventory more accurately during inflationary periods.
Produces a more realistic cost of goods sold (COGS) figure.
Disadvantages:
May result in higher taxes during inflationary periods.
May not reflect the actual physical flow of goods.
Example:
Ibrahim purchased 100 units of a product at $10 each on January 1 and another 100 units at $12 each on February 1. If Ibrahim sells 150 units in February, FIFO would assume that he sold 100 units from the January batch and 50 units from the February batch, resulting in a COGS calculation of (100 x $10) + (50 x $12) = $1,400.
Last-In, First-Out (LIFO):
Advantages:
Can provide tax advantages during inflationary periods.
Reflects the cost of goods sold based on the latest inventory purchases.
Disadvantages:
It might not be a true representation of the physical flow of commodities.
Can result in understated inventory values during inflationary periods.
Example:
Using the same scenario, if Ibrahim uses LIFO and sells 150 units in February, it would assume that he sold the 150 units from the February batch, resulting in a COGS calculation of 150 x $12 = $1,800.
Weighted Average Cost:
Advantages:
Smooths out the effects of price fluctuations.
Reflects the average cost of inventory over time.
Disadvantages:
May not reflect the actual cost of specific units.
Can be influenced by extreme prices.
Example:
Assuming Ibrahim used the weighted average cost method, the cost per unit would be ($10 + $12) / 2 = $11. If he sells 150 units in February, the COGS calculation would be 150 x $11 = $1,650.
Ibrahim has several inventory costing methods to choose from, including FIFO, LIFO, and weighted average cost. Each method has its advantages and disadvantages, and Ibrahim should consider factors such as tax implications, price fluctuations, and the accuracy of reflecting the physical flow of goods.
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