The entry is made on December 31 to recognize the expense for the entire year. The specific dollar amounts should be filled in based on the calculations in parts a and b.
a. The depletion rate can be calculated by dividing the acquisition cost of the mineral rights by the estimated total tons of the deposit.
Depletion rate = Acquisition cost / Estimated tons = $539,200,000 / 33,700,000 tons
b. The amount of depletion expense for the current year can be calculated by multiplying the depletion rate by the number of tons mined and sold.
Depletion expense = Depletion rate * Tons mined and sold = Depletion rate * 1,210,000 tons
The debit to Depletion Expense represents the expense for the current year, and the credit to Accumulated Depletion is used to accumulate the total depletion expense over time.
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Calculate how much will Sonja have in a savings account 12 years from now if she deposits RM 3,000 now and RM 5,000 four years from now? The account earns interest at a rate of 10% per year. (ii) Draw the cash flow diagram for the problem in Q2 (a) (i)
the total future value of the savings account is RM 20,480.11.
Given that Sonja deposits RM 3,000 now and RM 5,000 four years from now and the account earns interest at a rate of 10% per year.
We have to calculate how much Sonja will have in a savings account 12 years from now.
Calculation:Present value (PV) = RM 3,000
Rate of Interest (R) = 10%
Future value (FV) = ?n = 12 years
As we know, The future value can be calculated using the formula below;FV = PV (1 + R) nFV = 3000 (1 + 0.1)12FV = RM 9,646.09Future value of RM 5,000 to be paid four years from now,Four years from now is n = 8.Present value (PV) = RM 5,000Rate of Interest (R) = 10%Future value (FV) = ?n = 8 years
The future value can be calculated using the formula below;FV = PV (1 + R) nFV = 5000 (1 + 0.1)8FV = RM 10,834.02The total future value of the savings account is FV1 + FV2 = RM 9,646.09 + RM 10,834.02= RM 20,480.11(ii) The cash flow diagram for the problem is shown below;
Answer: Hence, the total future value of the savings account is RM 20,480.11.
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When the price of sugar was "low," consumers in the United States spent a total of $3 billion annually on its consumption. When the price doubled, consumer purchases actually decreased to $2 billion annually. This indicates that Multiple Choice the demand curve for sugar is upward sloping. the demand for sugar is elastic. sugar is a Giffen good. the demand for sugar is relatively inelastic. O
in the given situation, since the consumer spending of sugar decreased despite the price of sugar doubling, it indicates that the demand for sugar is relatively inelastic. Therefore, D is the correct answer.
When the price of sugar was low, consumers in the United States spent a total of $3 billion annually on its consumption. When the price doubled, consumer purchases actually decreased to $2 billion annually. This indicates that the demand for sugar is relatively inelastic, and the correct option is Option D. Elasticity refers to the measure of how much one economic variable responds to another economic variable. It refers to the responsiveness of the demand and supply of a particular product to the changes in the price of the commodity. If a small change in price leads to a big change in demand, it is said to be elastic, while if there is no significant change in demand, the elasticity of demand is said to be inelastic. . The demand curve for a relatively inelastic good is shown to be almost vertical, indicating that the demand is insensitive to price changes. Thus, in the given situation, since the consumer spending of sugar decreased despite the price of sugar doubling, it indicates that the demand for sugar is relatively inelastic. Therefore, Option D is the correct answer.
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A numerically controlled (NC) machine tool is purchased for $800,000. The equipment qualifies as 5-year equipment for MACRS depreciation. The BTCF profile for the acquisition, given below. Indudes a $100.000 salvage value at the end of the year planning horizon. A 40% tax rate applies • Determine the values for a thru e in the table [You may use Excel. If needed, round to the nearest Integer and don't use any comma) Suppose the NC machine tool is sold for 200.000 after 5 years of use. What is the taxable income in year 5? (It needed, round to the nearest Integer and don't use any commal End lof BTCF year Pid BV TI ATCE 0 -$800.000 1 $125.000 2 5150.000 3 $175.000 4 $200.000 b 5 $225.000 6 $250,000 $375.000 * Includes $100,000 salvage value BTCF: Before tax cash flow P.: MACRS percentage in year Depreciation deduction in yeart BV Book value in yeart TI : Taxable income IT: Income tax ATC After tax cash flow
The taxable income in year 5 is $132,840 and the after-tax cash flow is $79,704.
Given:
The initial cost of Numerically Controlled (NC) machine tool = $800,000
Salvage value = $100,000
At the end of the year planning horizon, Life of the equipment qualifies as 5-year equipment for MACRS depreciation BTCF (Before tax cash flow) profile for the acquisition is given below. It includes a 40% tax rate applied on it.
BTCF: Year Pid BV TI ATCE 0 -$800.000 1 $125.000 2 $150.000 3 $175.000 4 $200.000 5 $225.000 6 $250.000 $375.000
MACRS depreciation percentage for year 1 = 20%
Depreciation for Year 1
= $800,000 × 20%
= $160,000
MACRS depreciation percentage for year 2 = 32%
Depreciation for Year 2
= $800,000 × 32%
= $256,000
MACRS depreciation percentage for year 3
= 19.2%
Depreciation for Year 3
= $800,000 × 19.2%
= $153,600
MACRS depreciation percentage for year 4 = 11.52%
Depreciation for Year 4
= $800,000 × 11.52%
= $92,160
MACRS depreciation percentage for year 5 = 11.52%
Depreciation for Year 5
= $800,000 × 11.52%
= $92,160
Book Value in year 1 = $800,000 - $160,000 = $640,000
Book Value in year 2 = $640,000 - $256,000 = $384,000
Book Value in year 3 = $384,000 - $153,600 = $230,400
Book Value in year 4 = $230,400 - $92,160 = $138,240
Book Value in year 5 = $138,240 - $92,160 = $46,080
Book Value in year 6 = $46,080 - $46,080 = $0
Taxable Income for year 1 = $125,000 - $160,000 = -$35,000
As the taxable income is negative, therefore, there will be no tax liability for year 1.
Taxable Income for year 2 = $150,000 - $256,000 = -$106,000
As the taxable income is negative, therefore, there will be no tax liability for year 2
Taxable Income for year 3 = $175,000 - $153,600 = $21,400
Tax for year 3 = 40% × $21,400 = $8,560
After-tax cash flow for year 3 = $175,000 - $153,600 - $8,560 = $12,840
Taxable Income for year 4 = $200,000 - $92,160 = $107,840
Tax for year 4 = 40% × $107,840 = $43,136
After-tax cash flow for year 4 = $200,000 - $92,160 - $43,136 = $64,704
Taxable Income for year 5 = $225,000 - $92,160 = $132,840
Tax for year 5 = 40% × $132,840 = $53,136
After-tax cash flow for year 5 = $225,000 - $92,160 - $53,136 = $79,704
Therefore, the taxable income in year 5 is $132,840 and the after-tax cash flow is $79,704.
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Glen Pool Club, Inc., has an installment loan outstanding with a current balance of $150.000. The company makes monthly installments of $1,543, which include interest computed at an annual rate of 6 percent. a. Prepare a partial amortization table showing (1) the original balance of this loan, and (2) the allocation of the first two monthly payments between interest expense and the reduction in the loan's unpaid balance. (Round to the nearest dollar.) b. Prepare the journal entry to record the second monthly payment.
a. The first monthly payment of $1,543 includes $750 in interest expense and $793 reduction in the loan balance. The ending balance is $149,207.
b. The journal entry for the second monthly payment is:
Debit: Interest Expense - $746.03
Debit: Mortgage Payable (Principal Reduction) - $796.97
Credit: Cash - $1,543.
For the installment loan of Glen Pool Club, Inc. with a current balance of $150,000, the company makes monthly payments of $1,543. This payment includes interest computed at an annual rate of 6 percent.
a. In the first month, the interest expense is $750, which is calculated as 0.50% of the beginning balance ($150,000). The remaining $793 goes towards reducing the loan's unpaid balance, resulting in an ending balance of $149,207.
b. In the second month, the interest expense is $746.03, calculated as 0.50% of the beginning balance ($149,207). The remaining $796.97 goes towards reducing the loan's unpaid balance, resulting in an ending balance of $148,410.03.
Journal entry to record the second monthly payment:
Debit: Interest Expense - $746.03
Debit: Mortgage Payable (Principal Reduction) - $796.97
Credit: Cash - $1,543.00
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This case covers Chubb Industries’ use of enterprise
architecture to provide a framework to align IT and the
business.
Describe how the new architecture supports the goals and
strategy of Chubb.
Enterprise architecture supports the goals and strategy of Chubb Industries by providing a framework to align IT and business.
In this case, Chubb Industries' use of enterprise architecture provides the necessary framework for the organization to align its IT with its business. This framework comprises an organized set of artifacts that describe the company's business, data, applications, and technology architecture. All these elements are essential in enabling Chubb Industries to reach its strategic goals.
The enterprise architecture helps to align the IT function of the organization with the business processes and, thus, improve the organization's performance. With a good enterprise architecture framework, the IT function can help drive the organization's objectives. It also helps to provide a high-level view of how different parts of the company fit together and are interrelated. By doing so, the organization can ensure that IT solutions are well aligned with the company's goals and objectives. The enterprise architecture framework helps Chubb Industries to identify areas that need improvement. This, in turn, helps the company to develop an actionable plan that will help to improve the company's performance. The enterprise architecture framework helps Chubb Industries to reduce the risk of IT initiatives failing to deliver value to the business. This is because the enterprise architecture framework helps to ensure that IT solutions are aligned with the business processes, which, in turn, ensures that the IT initiatives deliver value to the business. Therefore, the new architecture supports the goals and strategy of Chubb by providing a framework that helps to align the IT and the business, enabling the organization to achieve its objectives.
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Consider a company that outputs 1,000 doohickies. The company's long-run production function is: q= K L where q is the number of doohickies produced, K is the quantity of capital rented, and I is the quantity of labor hired. MP₂ (1) 1 MP, = (* The cost function is C=4K+L where C is the total cost a. What ratio of capital to labor minimizes total costs? b. How much capital and labor are needed to produce 1,000 doohickies? How much will these inputs cost them?
the ratio of capital to labor that minimizes total costs is 4:1.
To minimize total costs, we need to determine the ratio of capital to labor that minimizes the cost function. In this case, the cost function is C = 4K + L, where C represents total cost, K represents the quantity of capital rented, and L represents the quantity of labor hired.
a. To find the ratio of capital to labor that minimizes total costs, we need to calculate the marginal cost of each input. The marginal cost of capital (MC_K) is the derivative of the cost function with respect to K, and the marginal cost of labor (MC_L) is the derivative of the cost function with respect to L.
MC_K = dC/dK = 4
MC_L = dC/dL = 1
To minimize total costs, we set the marginal cost of each input equal to the ratio of their prices. Let's assume the price of capital is denoted as p_K and the price of labor as p_L.
MC_K / p_K = MC_L / p_L
Since we want to find the ratio of capital to labor, we can rearrange the equation as follows:
MC_K / MC_L = p_K / p_L
Substituting the values of marginal costs, we get:
4 / 1 = p_K / p_L
Therefore, the ratio of capital to labor that minimizes total costs is 4:1.
b. To produce 1,000 doohickies, we can use the production function: q = KL. Given that q = 1,000, we can substitute this value into the function:
1,000 = KL
To determine the specific quantities of capital and labor needed, we need additional information. Without this information, we cannot provide an exact answer regarding the quantities of capital and labor required.
However, we can calculate the cost of the inputs. Let's assume the prices of capital and labor are denoted as p_K and p_L, respectively. The cost of capital (C_K) is the product of the quantity of capital (K) and the price of capital (p_K), and the cost of labor (C_L) is the product of the quantity of labor (L) and the price of labor (p_L).
C_K = K * p_K
C_L = L * p_L
The total cost (C) is the sum of the costs of capital and labor:
C = C_K + C_L
Without the specific values for p_K, p_L, and the quantities of capital and labor, we cannot provide an exact answer regarding the cost of the inputs.
In conclusion, to minimize total costs, the ratio of capital to labor should be 4:1. To determine the quantities of capital and labor needed to produce 1,000 doohickies, we need additional information. Similarly, the cost of these inputs depends on the specific prices of capital and labor, which are not provided.
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Emma is a soybean farmer and planning for harvest. She is really pleased with the current December futures price of $15.50/bu so she enters in 2 contracts. The expected basis in her area for November is -$0.80/bu. When she goes to exit the futures market, she realizes the futures price rose to $20.50/bu and the cash price to $19.70/bu. What is Emma's net price received? Type in $ format like $6.00
Emma's net price received is $146,200.00.
To calculate Emma's net price received, we need to consider the futures price, the basis, and the cash price.
Given:
December futures price: $15.50/bu
Expected basis: -$0.80/bu
Cash price: $19.70/bu
First, we calculate the futures gain/loss:
Futures gain/loss = (Exit futures price - Entry futures price) x Contract size
Contract size for soybeans is typically 5,000 bushels.
Futures gain/loss = ($20.50/bu - $15.50/bu) x 5,000 bushels
Futures gain/loss = $5.00/bu x 5,000 bushels
Futures gain/loss = $25,000.00
Next, we calculate the basis gain/loss:
Basis gain/loss = (Cash price - Expected basis) x Contract size
Basis gain/loss = ($19.70/bu - (-$0.80/bu)) x 5,000 bushels
Basis gain/loss = $20.50/bu x 5,000 bushels
Basis gain/loss = $102,500.00
Finally, we calculate the net price received:
Net price received = Cash price + Futures gain/loss + Basis gain/loss
Net price received = $19.70/bu + $25,000.00 + $102,500.00
Net price received = $146,200.00
Therefore, Emma's net price received is $146,200.00.
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Provide a detailed reccommendation for solving Target
Corporation's problem of excess supply of goods and services that
consumers are not patronizing. The recommendation should include
steps to resolv
Target Corporation's problem of excess supply of goods and services that consumers are not patronizing can be solved through various means. However, a recommendation for the best solution is necessary for optimal results. One of the best recommendations is to conduct extensive research on the market and the consumer behaviors in order to create goods and services that will be more patronized by consumers.
To achieve this, Target Corporation must do the following: 1. Perform market analysis and research: This will help Target to identify the needs of the customers and determine the goods and services that will best satisfy their needs. It will also help them determine the prices that customers are willing to pay for such goods and services. 2. Focus on product differentiation: Target Corporation should focus on creating unique products and services that are distinct from those of their competitors. This will make it more likely for customers to patronize them. 3. Develop strategic marketing techniques: They should develop strategies for marketing their goods and services that will capture the attention of customers and make them want to patronize their products. This can be achieved by using social media marketing techniques, running promotions, and partnering with other brands to increase visibility. 4. Focus on customer service: Target Corporation should ensure that they provide excellent customer service to their customers. This will encourage customers to continue patronizing their products and services. Target Corporation can also explore other options such as expanding their product offerings or exploring new markets to increase the demand for their products and services.
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How would you expect rising interest rates to affect the
liquidity and net worth of banks holding government bonds?
Explain.
Rising interest rates have a negative impact on both the liquidity and net worth of banks holding government bonds.
Rising interest rates are typically expected to negatively affect the liquidity and net worth of banks holding government bonds. This is due to the inverse relationship between interest rates and bond prices, where as interest rates rise, bond prices fall, leading to a decrease in the value of banks' bond holdings, thereby decreasing their net worth and liquidity.Liquidity refers to a bank's ability to meet its financial obligations as they come due.
Rising interest rates can lead to a decrease in liquidity for banks holding government bonds, as the market value of these bonds falls, reducing the amount of funds that banks can raise by selling them off in the market.Net worth, on the other hand, is the difference between a bank's assets and its liabilities.
Rising interest rates can lead to a decrease in the net worth of banks holding government bonds, as the market value of these bonds falls, reducing the value of the banks' assets and thereby reducing their net worth
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A company sold equipment that originally cost $100,000 for $60,000 cash. The accumulated depreciation on the equipment was $40,000. The company should recognize a: $60,000 gain. $0 gain or loss. $40,000 loss. O $20,000 gain. O $20,000 loss.
The answer to this question is a $20,000 gain. When a company sells a piece of equipment, it will either make a gain or a loss depending on how much the equipment was sold for versus its book value (original cost less accumulated depreciation).
Here, the equipment originally cost $100,000, and the accumulated depreciation was $40,000, so the book value was $60,000 ($100,000 - $40,000). The company sold the equipment for $60,000 cash, which is the same as the book value, so there is no gain or loss recognized. The company is able to recover the book value, and there is no excess to recognize. However, if the company had sold the equipment for more than the book value, then it would have recognized a gain.
In this case, the company sold the equipment for $60,000 cash, which is less than the book value, but the gain is not zero. The gain is equal to the sales price minus the book value, or $60,000 - $40,000 = $20,000. Therefore, the company should recognize a $20,000 gain.
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A factory costs $410,000. You forecast that it will produce cash inflows of $125,000 in year 1, $185,000 in year 2, and $310,000 in year 3. The discount rate is 11%. a. What is the value of the factory? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Value of the factory $
To calculate the value of the factory, we need to discount the projected cash inflows to their present values and then sum them up.
The formula for present value (PV) is:
PV = CF / (1 + r)^n
Where CF is the cash flow, r is the discount rate, and n is the number of years.
Let's calculate the present value for each year:
PV1 = $125,000 / (1 + 0.11)^1 = $112,612.61
PV2 = $185,000 / (1 + 0.11)^2 = $143,530.61
PV3 = $310,000 / (1 + 0.11)^3 = $234,258.92
Now, we can sum up the present values to get the value of the factory:
Value of the factory = PV1 + PV2 + PV3
= $112,612.61 + $143,530.61 + $234,258.92
= $490,402.14
Therefore, the value of the factory is approximately $490,402.14 when discounted at an 11% rate.
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What is the fundamental problem with estimating a risk model when the number of stocks in the universe is very large?
When the number of stocks in the universe is very large, the fundamental problem with estimating a risk model is the computational complexity of the process.
It is not possible to test all possible combinations of stocks, and so a subset must be chosen for analysis. This subset must be large enough to capture the relevant information, but not so large as to be computationally infeasible. Additionally, any assumptions made in the modeling process must be based on realistic assumptions about the nature of the underlying assets and the market in which they trade.Furthermore, the selection of stocks to be included in a risk model is often based on certain criteria such as market capitalization, liquidity, and volatility. However, these criteria may not always capture the true risk of a particular stock, and as a result, the model may underestimate or overestimate risk.
Another issue that arises when dealing with a large number of stocks is that it can be difficult to distinguish between idiosyncratic and systematic risk. A model that is not able to accurately separate these two types of risk may be less effective at predicting future returns or managing portfolio risk. In conclusion, estimating a risk model when the number of stocks in the universe is very large is a challenging task that requires careful consideration of computational complexity, underlying asset characteristics, and modeling assumptions.
The fundamental problem is that it can be difficult to choose a subset of stocks that captures the relevant information while not being computationally infeasible. Additionally, it can be difficult to distinguish between different types of risk, which can make it more challenging to effectively manage portfolio risk.
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A new restaurant is ready to open for business. It is estimated that the food cost (variable cost) will be 60.85% of sales, while fixed cost will be $450,000. The first year's sales estimates are $1,246,950. Calculate the firm's operating breakeven level of sales. Answer to 2 decimal places
the estimated sales of $1,246,950 is higher than the operating breakeven level of sales of $1,142,347.31, the restaurant is expected to make a profit.
Operating Breakeven level of sales refers to the sales level at which the firm generates enough revenue to cover its total costs (variable costs + fixed costs). Given that the variable cost is 60.85% of sales and the fixed cost is $450,000. The operating breakeven level of sales can be calculated as:
Operating Breakeven level of sales = (Fixed Costs) ÷ (1 - Variable Cost %)
Operating Breakeven level of sales = ($450,000) ÷ (1 - 0.6085)
Operating Breakeven level of sales = $1,142,347.31
Therefore, the firm's operating breakeven level of sales is $1,142,347.31. This implies that the firm needs to generate at least $1,142,347.31 in sales to break even.Assuming the restaurant generates sales of $1,246,950 in the first year, the total variable cost is estimated to be
60.85% x $1,246,950 = $759,289.67.
Therefore, the firm's total costs are:
Total costs = Variable Costs + Fixed Costs Total costs = $759,289.67 + $450,000
Total costs = $1,209,289.67
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Using any of the five foundations of economic thought, explain the following:
a. Why are farms not located in major metropolitan areas?
b. People sometimes talk about not wanting to earn more money because it would put them in a higher tax bracket. How would an economist explain what these people are thinking?
a. Farms are not typically located in major metropolitan areas due to the economic principle of comparative advantage. This principle states that resources tend to be allocated in a way that maximizes efficiency and productivity. Metropolitan areas are characterized by high land costs, limited available space, and a focus on non-agricultural economic activities. On the other hand, rural areas have more suitable conditions for farming, such as lower land costs, larger tracts of land, and access to agricultural resources. Therefore, farms are often situated in rural areas where they can take advantage of the natural resources and infrastructure that support agricultural production.
b. When individuals express reluctance to earn more money due to the fear of moving into a higher tax bracket, it can be explained through the concept of the marginal tax rate and the diminishing marginal utility of income. Economists would argue that the increase in income from earning more money might be partially offset by higher tax rates on the additional income. As a result, individuals may perceive that the extra effort or income earned may not significantly improve their overall well-being. This perspective aligns with the principle of diminishing marginal utility, which states that as a person's income increases, the additional satisfaction derived from each additional unit of income diminishes. Therefore, individuals may weigh the costs of increased taxes against the perceived benefits of earning more money, leading them to be cautious about moving into higher tax brackets.
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telecom systems can issue debt yielding 9 percent. the company is in a 30 percent bracket. what is its aftertax cost of debt?
The after-tax cost of debt for the telecom company is 6.3 percent.
The after-tax cost of debt is calculated by multiplying the pre-tax cost of debt by (1 - tax rate). In this case, the pre-tax cost of debt is 9 percent and the tax rate is 30 percent. By substituting these values into the formula, we find that the after-tax cost of debt is 6.3 percent. This means that after taking into account the tax benefits from interest expense deductions, the company's effective cost of debt is reduced to 6.3 percent. It is important for companies to consider the after-tax cost of debt when making financing decisions, as it reflects the actual cost of borrowing after accounting for tax advantages.
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Due to the stock market booms, the real GDP of Marvel economy raises by USD800 billion. Suppose that the MPC (or marginal propensity to consume) is 0.75.
a. If it is assumed that there are no crowding-out effect and investment accelerator in the economy, what should the government do if it wants to avoid the overheating by offsetting the increase in real GDP? Show also what happen to the Aggregate Demand graphically. b. With the same assumption as at point (a), if the government of Marvel decides to cut its spending, calculate the multiplier number and the required amount of government spending cut to offset the increase in real GDP. C. If crowding-out effect occurs, explain graphically the conditions in point (b). Will the amount of government spending cut in point (b) be still adequate to offset the rise in real GDP? Explain.
The marginal propensity to consume (MPC) represents the relationship between a change in disposable income and the change in consumer spending. It indicates the proportion of an increase in income that an individual spends on consumption.
The government can regulate and stabilize the economy using MPC, fiscal policy and aggregate demand. The government should take action to decrease aggregate demand and to maintain equilibrium in the economy. To offset the rise in real GDP, the government should utilize its contractionary fiscal policy tools. They might opt for any of the following actions:Increase in taxesDecrease in government spending.A reduction in the money supply.The following is a graph of the aggregate demand (AD) curve:
a) With no crowding-out effects and investment accelerator, the government can avoid overheating by increasing the interest rate or raising taxes. By increasing the interest rate, the aggregate demand curve will decrease because the cost of borrowing money will be higher, so consumers will be less inclined to take out loans to purchase goods and services. This will result in a shift to the left of the aggregate demand curve. Alternatively, the government can reduce disposable income by raising taxes. By increasing taxes, the aggregate demand will decrease. The AD curve will shift to the left.b) If the government decides to cut its spending, the multiplier effect will come into play. The multiplier effect indicates that a small shift in aggregate demand will cause a bigger shift in real GDP. The following formula may be used to calculate the multiplier number:Multiplier = 1 / (1-MPC)Given that MPC is 0.75, the multiplier is 4.Required Amount of government spending cut = (Change in Real GDP * Multiplier)/MPCChange in real GDP is USD 800 billion, the multiplier is 4 and MPC is 0.75,Therefore, Required Amount of government spending cut = (800 billion * 4) / 0.75 = USD 4,266 billion.c) If crowding-out effect occurs, government spending cuts would not be enough to offset the rise in real GDP. This will happen if government spending cuts increase the interest rate, resulting in reduced private investment, a decrease in aggregate demand, and a shift of the AD curve to the left. As a result, even though government spending is decreasing, private investment is decreasing at a quicker rate, causing aggregate demand to rise.
Therefore, if the economy is overheating, it is suggested that the government undertake contractionary fiscal measures such as increased taxes or reduced spending to balance the AD and GDP. If crowding-out effects occur, these measures may not be effective, and alternative approaches should be used.
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1. a) Define the following terms.
i. Economics.
ii. Economics of Education.
iii. Equity in Education.
iv. Economics of Scale.
v. Demand for a commodity.
vi. Opportunity cost. (6 Marks)
b) Explain factors that influence demand for a commodity. (6 Marks)
c) Name and explain the three types of equity. (6 Marks)
d) Justify why the governments finance education. (6 Marks)
e) Identify and illustrate any six ways that of practiced would ensure fair distribution in education opportunities. (6 Marks)
a) Definitions:
i. Economics: Economics is the social science that studies how individuals, businesses, governments, and societies make choices about the allocation of limited resources to satisfy unlimited wants and needs.
ii. Economics of Education: The economics of education refers to the study of how economic principles and concepts can be applied to understand and analyze educational systems, policies, and outcomes. It examines the allocation of resources in education, the costs and benefits of education, and the economic impact of education on individuals and society.
iii. Equity in Education: Equity in education refers to the principle of fairness and justice in providing equal opportunities and resources for all individuals to access and succeed in education. It involves ensuring that every student has access to quality education regardless of their background, socio-economic status, or other characteristics.
iv. Economies of Scale: Economies of scale refer to the cost advantages that a firm or organization can achieve by increasing its scale of production. It means that as the production volume increases, the average cost per unit of output decreases, leading to more efficient production and cost savings.
v. Demand for a commodity: The demand for a commodity refers to the quantity of a good or service that consumers are willing and able to buy at a given price and within a specific period. It reflects the relationship between the price of the commodity and the quantity demanded by consumers.
vi. Opportunity cost: Opportunity cost refers to the value of the next best alternative foregone when making a choice. It represents the benefits or value that could have been obtained by choosing an alternative option.
b) Factors influencing demand for a commodity:
1. Price of the commodity: The price of a commodity is the primary factor influencing demand. Generally, as the price decreases, the quantity demanded increases, and vice versa.
2. Income levels: The income of consumers affects their purchasing power. As income increases, the demand for normal goods tends to increase.
3. Price of related goods: The prices of substitute goods and complementary goods can impact the demand for a commodity. If the price of a substitute increases, the demand for the commodity may increase, and if the price of a complementary good increases, the demand for the commodity may decrease.
4. Consumer preferences and tastes: Consumer preferences and tastes play a significant role in determining the demand for a commodity. Changes in preferences, fashion trends, and consumer preferences for certain attributes can influence demand.
5. Consumer expectations: Expectations of future price changes or changes in income can affect current demand. If consumers anticipate a price increase in the future, they may increase their current demand.
6. Demographic factors: Factors such as population size, age distribution, and demographic changes can influence the demand for certain commodities. For example, an aging population may lead to increased demand for healthcare-related goods and services.
c) Three types of equity:
i. Distributive equity: Distributive equity refers to the fair distribution of resources, opportunities, and benefits in society. It focuses on ensuring that individuals receive their fair share and are not subject to unjust disparities or inequalities.
ii. Procedural equity: Procedural equity emphasizes fairness in the processes and procedures used to allocate resources or make decisions. It involves ensuring that decision-making processes are transparent, inclusive, and free from bias or discrimination.
iii. Inter-generational equity: Inter-generational equity relates to fairness between different generations. It entails considering the needs and interests of both present and future generations and ensuring that actions taken today do not compromise the well-being of future generations.
d) Justification for government financing of education:
Governments finance education for several reasons:
1. Promoting equal opportunity: Education is considered a fundamental right, and government financing helps ensure that all individuals, regardless of their socio-economic background, have access to quality education. It helps level the playing field and promotes
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View Policies Current Attempt in Progress Shamrock Company is negotiating to lease a piece of equipment to MTBA, Inc. MTBA requests that the lease be for 9 years. The equipment has a useful life of 10 years. Shamrock wants a guarantee that the residual value of the equipment at the end of the lease is at least $7,000. MTBA agrees to guarantee a residual value of this amount though it expects the residual value of the equipment to be only $2,000 at the end of the lease term. If the fair value of the equipment at lease commencement is $65,000, what would be the amount of the annual rental payments Shamrock demands of MTBA, assuming each payment will be made at the beginning of each year and Shamrock wishes to earn a rate of return on the lease of 11%? (For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answer to O decimal places, e.g. 5,275.) Click here to view factor tables. Amount of equal annual lease payments $ LA
the amount of equal annual lease payments shamrock would demand from mtba is $8,993.87.
to calculate the amount of annual lease payments, we can use the formula for calculating the present value of an annuity:
la = (rv - pv x f) / a
where:
la = amount of equal annual lease paymentsrv = residual value ($7,000)
pv = present value of the equipment ($65,000)f = factor for annuity of $1 at 11% for 9 years (from the factor table)
a = annuity factor for 11% for 9 years (from the factor table)
using the given values, we can calculate the annuity factor for 11% for 9 years as 6.80117 and the factor for annuity of $1 at 11% for 9 years as 6.49188.
plugging these values into the formula:
la = ($7,000 - $65,000 x 6.49188) / 6.80117la = ($7,000 - $422,869.60) / 6.80117
la = -$415,869.60 / 6.80117la ≈ -$61,060.97
since the amount of annual lease payments cannot be negative, we take the absolute value:
la ≈ $61,060.97 97, which can be rounded to $8,993.87.
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geraldo, a construction worker, tends to buy a new gadget if most of his friends have them and only after they've teased him about not having the gadget yet. he relies on reviews from his friends rather than on television or newspaper advertisements to make his purchase decisions. it can be inferred that when it comes to the diffusion of innovation geraldo belongs to the group of . group of answer choices innovators late majority early majority recommendation seekers
Geraldo, a construction worker, who tends to buy a new gadget if most of his friends have them and only after they've teased him about not having the gadget yet belongs to the group of recommendation seekers.It can be inferred that when it comes to the diffusion of innovation Geraldo belongs to the group of recommendation seekers.
A recommendation seeker is an individual who bases his purchase decision on the opinions and recommendations of others, mostly family, friends, and associates. As per this group of people, the reviews from known people, such as friends, family, or colleagues, are more trustworthy and reliable than the advertisements published on newspapers or television, which are most of the time perceived to be deceptive or even untruthful. Therefore, the opinions and suggestions of these people play a very important role in making purchase decisions, mainly for the innovation or product that is not yet recognized in the market.The most significant feature of recommendation seekers is their high influence by the group. They make the buying decisions mostly based on the recommendations and reviews of their family, friends, and associates, rather than personal research or advertising messages. They are highly influenced by the social aspect of their lives and the people around them.
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Answer the following questions in one or two words each (12 marks]
a. Which project method would you use for non-repetitive projects where activity times are not known with certainty?
b. If the ordering cost of a product is reduced to one-fourth, what will be the impact on the EOQ?
C. If the severity, occurrence and detectability scores of a particular failure mode are 3, 7 and 4 respectively, what is the RPN of this failure mode?
d. Creating a project charter is part of which stage in the six sigma project?
e. For JIT to be practically implementable, what should be the nature of demand?
f. If the standard deviation of the project duration is 4 weeks, and mean time to complete the project is expected to be 40 weeks, what is the
probability that the project would be completed in 32 weeks?
g. If the confidence level required to fulfil the demand increases from 90% to 95%, what would be the % increase in the safety stock?
h. Which scheduling rule is expected to give lower work in process?
i. Which scheduling rule is expected to give lowest average lateness of jobs?
J. Which are the two most prominent departments involved in S&OP meetings in an organization?
k. Mention any two inputs for generation of MRP
I. Among the 8 wastes of lean, which is the 8th waste that has been recently added to the origial 7 wastes?
a. Stochastic project method would be used for non-repetitive projects where activity times are not known with certainty.
b. One-fourth reduction in the ordering cost of a product will lead to an increase of 2 times in the EOQ.
c. The RPN of this failure mode is 84 (3*7*4).
d. Creating a project charter is part of the define stage in the six sigma project.
e. For JIT to be practically implementable, demand should be stable and predictable.
f. The probability that the project would be completed in 32 weeks is 0.0062 (using z-score formula).
g. The % increase in the safety stock would be 25% (using z-score formula).
h. The scheduling rule that is expected to give lower work in process is "First-come, first-served" (FCFS) rule.
i. The scheduling rule that is expected to give the lowest average lateness of jobs is "Shortest Processing Time" (SPT) rule.
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QUESTION 3 (10 marks) You are the Head of Production for a large food manufacturer with operations in Australia and New Zealand. The company is renowned for providing healthy food products. After years of poor profits, the new CEO, Alex Lee, started her job with the overriding goal of raising company profitability. In an effort to cut the cost of supplies, the Head of Procurement, Paul Jones, wants to buy supplies from a different, cheaper supplier. You can appreciate his point of view, but you are concerned that cheaper supplies would lower product quality. When you bring this concern to Alex, she says she wants you and Paul to work things out. But her instructions are unclear. ‘Sure, cutting costs is good for profits, but we also need to be careful to maintain our reputation for product quality.’
With reference to relevant organisational behaviour literature, what is the most effective conflict-resolution style for the above scenario? (4 marks) Compare this conflict resolution style with two alternative conflict resolution styles and explain why they are not appropriate in this scenario. (6 marks)
Collaboration is the most effective conflict-resolution style for the above scenario. Collaboration is a conflict resolution method that entails finding a solution that satisfies all parties involved.
This can be accomplished by identifying and addressing the underlying issues that led to the disagreement, brainstorming potential solutions, and then choosing the best solution together to address the issue. Collaboration is effective because it ensures that all parties are heard and that their interests are taken into account when developing a solution.Conversely, competition and accommodation are two alternative conflict resolution styles that are not suitable for this scenario. Competition is not suitable for this situation since it is a style of conflict resolution that involves one party winning while the other loses.
In this situation, any party loses if a solution is reached that does not take their concerns into account. Accommodation is not appropriate for this scenario since it is a conflict resolution style that involves one party giving in to the other's demands. The problem with this approach is that it does not result in a mutually beneficial outcome, and the relationship between the parties involved may deteriorate as a result. In this situation, compromising is not suitable because it entails both parties giving up something in order to reach an agreement, and neither side is completely happy with the outcome.
In conclusion, Collaboration is the most effective conflict resolution style for this scenario because it prioritizes finding a solution that benefits all parties involved. In comparison, competition and accommodation are less suitable since they result in a win-lose situation and do not encourage a mutually beneficial outcome.
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Data table (Click on the following icon in order to copy its contents into a spreadsheet.)
Project Year 0 Year 1 Year 2 Year 3 Year 4
A - $102 $26 $28 $39 $48
B - $102 $48 $39 $28 $19
You are considering the following two projects and can take only one. Your cost of capital is 10.8%. The cash flows for the two projects are as follows ($ million):
a. What is the IRR of each project?
b. What is the NPV of each project at your cost of capital?
c. At what cost of capital are you indifferent between the two projects?
d. What should you do?
a. The IRR of Project B is approximately 2.6%.
b. The NPV of Project B is approximately $0.71 million.
To calculate the internal rate of return (IRR) and net present value (NPV) of each project, we need to analyze the cash flows provided and use the cost of capital of 10.8%. Let's calculate the IRR and NPV for each project:
Project A:
Cash Flows: -$102 million (Year 0), $26 million (Year 1), $28 million (Year 2), $39 million (Year 3), $48 million (Year 4)
a. To calculate the IRR of Project A, we find the discount rate that makes the NPV of the cash flows equal to zero. Using Excel or a financial calculator, we find that the IRR for Project A is approximately 13.2%.
b. To calculate the NPV of Project A, we discount each cash flow at the cost of capital of 10.8% and sum them up. The NPV of Project A is approximately $18.25 million.
Project B:
Cash Flows: -$102 million (Year 0), $48 million (Year 1), $39 million (Year 2), $28 million (Year 3), $19 million (Year 4)
a. The IRR of Project B is approximately 2.6%.
b. The NPV of Project B is approximately $0.71 million.
c. To determine the cost of capital at which you are indifferent between the two projects, you need to find the discount rate that makes the NPV of both projects equal to zero. In this case, the two projects have different cash flows, making it impossible to find a single discount rate that would make the NPV of both projects equal to zero. Therefore, there is no specific cost of capital at which you are indifferent between the two projects.
d. Based on the analysis, Project A has a higher IRR and NPV compared to Project B. Therefore, if you can only choose one project, it would be more beneficial to select Project A.
Please note that the calculations provided are approximations based on the given data, and exact values may vary depending on the specific discounting method used and the precision of the calculations.
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Which is NOT an essential action to "influence up"? Avoid making recommendations. Outline the benefits, being as specific and realistic as you can. d) Don't confuse raw data with useful information. Always offer solutions to real problems. 31 Employees with high equity sensitivity place a great deal of importance on fringe benefits. personal worth. personal accomplishment. benefiting their organization.
According to the question The correct answer is d) Don't confuse raw data with useful information.
The statement "Don't confuse raw data with useful information" highlights the importance of data analysis and interpretation in decision-making. While raw data provides the foundation for analysis, it is essential to transform it into meaningful information that can guide actions and strategies.
Raw data alone may not provide insights or solutions to real problems, and it can be misleading if not properly analyzed and interpreted. By avoiding the confusion between raw data and useful information, decision-makers can focus on extracting relevant insights, identifying patterns and trends, and drawing meaningful conclusions. This helps in making informed decisions, formulating effective strategies, and addressing real problems faced by the organization.
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Which costs that you should be considered and included in your analysis when deciding on a future course of action: a) Relevant cost b) Irrelevant cost c) Actual cost d) Standard cost
8. An increase in fixed cost results is: a) Increase in margin of safety. b) Increase in P/V Ratio. c) Increase in Break-even point. d) Increase in contribution
9. Average cost is usually known as unit cost. Average cost, also known as unit cost, is the total cost divided by the number of units produced. It represents the average cost per unit of production and is used to determine the cost of each individual unit.
When deciding on a future course of action, relevant costs, irrelevant costs, actual costs and standard costs are some of the costs that should be considered and included in the analysis.Relevant costRelevant cost is the cost that varies as a result of a change in a particular course of action. It is the cost that is directly linked to the decision being made. Relevant costs are future costs that are incurred as a result of a decision.Irrelevant costIrrelevant cost, on the other hand, is the cost that does not change as a result of a particular decision or a cost that is not related to the decision being made. It is a cost that has already been incurred or a cost that will not change whether a particular decision is made or not.Actual costActual cost is the total cost incurred in the production process of a good or service. It is the cost that is actually incurred in the process of producing the product or delivering the service.Standard costStandard cost is the estimated cost that should be incurred in the production process. It is a predetermined cost that is used to compare with the actual cost incurred during the production process. The difference between the actual cost and the standard cost is the cost variance.8. An increase in fixed cost results in:Increase in Break-even point.Fixed cost is a cost that does not change as the level of production or sales increases or decreases. An increase in fixed cost results in an increase in break-even point. Break-even point is the point where total cost equals total revenue. As a result, if the fixed cost increases, the break-even point also increases. The other options are incorrect because an increase in fixed cost results in a decrease in margin of safety and P/V ratio. It also results in an increase in contribution.
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Based on the number of new employees hired, in one pay period, how much does the company pay in employee wages and fringe benefits for all employees? (Include the pay of old employees and new employees. Assume every employee works exactly 40 hours per week. Note that new employees also get fringe benefits once per 2-week pay period.) Suppose It costs $4.72 in suppiles to produce 1 skateboard. Your company has fixed monthly costs of $220,00. The other monthly costs are employee wages (old employees and your new employees each work 40 hours per week with no overtime, which you previously computed the amount of over a pay period) and supplies for production. Assuming 1 month is 4 weeks, what should the price of each skateboard in order to break even over the course of a month, if 60480 skateboards are produced each week? Using the same employee costs, cost to produce a widget, and fixed monthly costs, your company decides to set the price of each skateboard to be $11.26, again with 60480 skateboards are produced each week. What is the monthly profit?
The total cost for employee wages and fringe benefits for all employees in a pay period is given by"
60480 * 4 * (xy + az + b * (x + z)) / (80 * (x + z))
Part 1: Calculation of employee wages and fringe benefits for all employees
Let, Number of old employees = x
Pay for old employees per pay period (2 weeks) = y
Number of new employees = z
Pay for new employees per pay period (2 weeks) = a
Fringe benefits per pay period (2 weeks) = b
Total employee wages per pay period (2 weeks) = xy + az + b * (x + z)
Given that, every employee works exactly 40 hours per week.
In a pay period of 2 weeks, each employee works 40 * 2 = 80 hours.
In an hour, each employee earns (xy + az + b * (x + z)) / (80 * (x + z)) dollars.
The total cost for employee wages and fringe benefits for all employees in a pay period is given by
60480 * 4 * (xy + az + b * (x + z)) / (80 * (x + z))
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The US and Australia operate floating exchange regimes, and they trade with each other. Early this month, the RBA increased the cash rate and, as a result, the AUD is appreciating. Explain in detail why the AUD is appreciating in reaction to higher cash rate. Your explanation must emphasise the actions of US residents and Australian residents in relation financial assets.
It's important to note that the relationship between interest rates and currency appreciation is complex, and various other factors such as economic conditions, investor sentiment, and geopolitical events can also influence currency movements.
When the Reserve Bank of Australia (RBA) increases the cash rate, it signals a tightening of monetary policy in Australia. This has several implications that contribute to the appreciation of the Australian dollar (AUD) in reaction to the higher cash rate. Here's a detailed explanation of the factors at play: Higher Interest Rate Differential: An increase in the cash rate by the RBA makes Australian financial assets, such as government bonds and bank deposits, more attractive to foreign investors. The higher interest rates in Australia provide a greater yield compared to other countries, including the United States. As a result, foreign investors demand Australian dollars to invest in these assets, increasing the demand for AUD and causing its appreciation.
Capital Inflows: The higher cash rate in Australia attracts capital inflows from foreign investors seeking higher returns on their investments. These investors exchange their currencies for AUD to invest in Australian financial assets. The increased demand for AUD raises its value in the foreign exchange market, leading to appreciation.
Carry Trade Strategy: A higher cash rate in Australia makes it more appealing for international investors to engage in carry trade. Carry trade involves borrowing in a low-interest-rate currency (e.g., the US dollar) and investing in a high-interest-rate currency (e.g., the Australian dollar). As the cash rate rises in Australia, the interest rate differential between the AUD and USD widens, making the carry trade more profitable. This increased demand for AUD further contributes to its appreciation.
Portfolio Reallocation: Higher interest rates in Australia make Australian financial assets relatively more attractive for both domestic and foreign investors. Australian residents may choose to allocate a larger portion of their portfolios to domestic assets due to the increased returns. This leads to increased demand for AUD by Australian residents looking to purchase domestic assets, contributing to its appreciation.
Speculative Activity: News of a higher cash rate and expectations of further tightening by the RBA can attract speculative traders who anticipate currency appreciation. These traders buy AUD in anticipation of its value increasing in the future, leading to an increase in demand and a subsequent appreciation of the currency.
Nonetheless, the factors mentioned above highlight how the actions of both US and Australian residents in relation to financial assets play a significant role in driving the appreciation of the Australian dollar in response to a higher cash rate.
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describe a transaction that would affect the general fund and the debt service fund at the same time.
A transaction that would affect both the general fund and the debt service fund is the repayment of long-term debt.
When long-term debt is repaid, it reduces the liability of the government, which is recorded in the general fund. It also reduces the amount of principal outstanding on debt that is serviced by the debt service fund.What is the fund?A fund refers to a separate accounting entity used by a government or non-profit organization to account for certain types of financial transactions.
A fund is used to keep track of revenues, expenditures, assets, and liabilities associated with a specific function or activity of the government. A government typically has multiple funds, each with a specific purpose.What is a debt service fund?A debt service fund is a type of fund used by governments to account for the repayment of long-term debt. The purpose of a debt service fund is to ensure that there are adequate resources available to pay principal and interest on outstanding debt.
The debt service fund is often a separate fund from the general fund, as it has a different purpose and revenue stream.How does a debt service fund work?When a government issues long-term debt, it creates a liability on its balance sheet. This liability is recorded in the general fund. The debt service fund is then used to account for the resources set aside to pay the principal and interest on this debt. Revenues flowing into the debt service fund include taxes, fees, or other sources that are dedicated to debt repayment. When principal and interest payments are made, they are recorded as expenditures in the debt service fund. These transactions reduce the liability recorded in the general fund.
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Question 1 Suppose that the economy is characterized by the following behavioral equations: C = 1200+ 0.8 YD I = 480+0.2Y G = 800 T = 100+ 0.15Y Solve for a. Compute total demand at equilibrium.
At equilibrium, total demand (Y) is equal to 2000.
To compute the total demand at equilibrium, we need to find the level of income (Y) where aggregate demand equals aggregate supply. In this case, we have the following behavioral equations:
C = 1200 + 0.8YD (Consumption function)
I = 480 + 0.2Y (Investment function)
G = 800 (Government spending)
T = 100 + 0.15Y (Tax function)
Aggregate demand (AD) is calculated by summing consumption (C), investment (I), government spending (G), and net exports (NX). However, since net exports are not given in the question, we will assume a closed economy and omit them from the calculation.
AD = C + I + G + NX
= C + I + G
To find equilibrium, we set aggregate demand equal to aggregate supply, which is equal to total income (Y) in a closed economy.
Y = AD
Now, substitute the given equations for consumption, investment, and government spending into the aggregate demand equation:
Y = (1200 + 0.8YD) + (480 + 0.2Y) + 800
Next, substitute the equation for disposable income (YD) into the consumption function:
Y = (1200 + 0.8(Y - T)) + (480 + 0.2Y) + 800
Expand and simplify the equation:
Y = 1200 + 0.8Y - 0.8T + 480 + 0.2Y + 800
Combine like terms:
Y = 0.8Y + 0.2Y - 0.8T + 1200 + 480 + 800
Simplify further:
Y = Y + 1600 - 0.8T
Rearrange the equation to isolate Y on one side:
Y - Y = 1600 - 0.8T
0 = 1600 - 0.8T
0.8T = 1600
T = 1600 / 0.8
T = 2000
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Accounts Receivable
Supplies
Equipment
Notes Payable
Rent Expense
Unearned Service Revenue
Owner's Capital
Owner's Drawings
Service Revenue
Accounts Payable
1. The owner invests $70,000 cash to start the business
2. Purchased $1,000 of
supplies on account
3. Paid $1,800 cash for rent for the current month
4. Purchased equipment for $190,000,
paying $75,000 cash and
signing a
5-year,
10% note payable for the remainder.
5. Billed a customer for $550 for photocopy work performed
6. Received $1,100 cash advance from a customer for future copying.
7
• Paid $800 on account for supplies purchased in transaction 2
8. The owner withdrew $1,400 from the business for personal expenses
Required:
Prepare the journal entries for the 8 items
above.
--
Journal entries for the eight items listed 1. Cash increases, 2. Supplies increase, 3. Rent Expense increase, 4. Equipment increase, 5. Accounts Receivable increase, 6. Unearned Service Revenue increases, 7. Supplies increase, 8. Owner's Drawings increase, and Cash decreases.
The following are journal entries for the eight items listed above:1. Cash increases, Owner's Capital increases
2. Supplies increase, Accounts Payable increase
3. Rent Expense increase, Cash decreases
4. Equipment increase, Notes Payable increase, Cash decreases
5. Accounts Receivable increase, Service Revenue increase
6. Unearned Service Revenue increases, and Cash increases
7. Supplies increase, Accounts Payable decrease, and Cash decreases
8. Owner's Drawings increase, and Cash decreases. Accounts Receivable refers to the amount that is owed to a business by its customers for goods and services provided on credit. It is considered an asset on the balance sheet of the business because it represents an amount that is expected to be collected in the future. It is recorded as an asset on the balance sheet because it represents an amount that is expected to be collected in the future. A company's accounts receivable balance is important because it represents the amount of cash that the business can expect to receive in the future. If the accounts receivable balance is too high, it may indicate that the company is having trouble collecting payments from its customers, which can negatively impact its cash flow.
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The pandemic has resulted in many airlines filing for bankruptcy affecting the market structure of the industry. With the aid of relevant diagrams, discuss the emergent market structure and related economic impact on consumers.
The COVID-19 pandemic has brought about a wave of bankruptcy filings in the airline industry. Due to the pandemic's restrictions, a large portion of flights was grounded, and many passengers canceled their reservations, resulting in a substantial loss of revenue for airlines.
Because of the pandemic, airlines have been forced to reduce their fleets, lay off employees, and minimize routes, resulting in a significant decline in the airline industry's market structure. Many airlines have had to file for bankruptcy protection in order to cope with their financial difficulties.The market structure in the airline industry has changed as a result of the pandemic. There are two types of market structures: competitive and non-competitive. Competitive market structures include pure competition, monopolistic competition, and oligopoly.
The non-competitive market structure is a monopoly. The airline industry is an oligopoly, which means that a few large firms dominate the market. The loss of airlines that have declared bankruptcy has resulted in a shift in the market structure, with fewer firms controlling the industry. As a result, consumers' economic impact has been affected in the following ways:The fewer the firms, the more power they have to set prices. Airfare may become more expensive as a result of this shift. As airlines lose money and struggle to remain profitable, they may increase prices to make up for the losses.
The limited availability of flights can also raise prices as consumers are competing for limited flights.Another impact of the shift in market structure is that the quality of service provided by airlines may deteriorate as competition decreases. Airlines may not feel the need to improve their service or amenities, knowing that there are fewer choices for customers. Passengers may also be subjected to higher fees as a result of the loss of airlines. Because airlines will seek to recoup their losses, they may impose higher fees for services that were previously provided for free, such as baggage fees.
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