No, adjusting entries are not required by the historical cost principle of accounting.
I disagree with the statement that adjusting entries are required by the historical cost principle of accounting. The historical cost principle is a fundamental accounting concept that states that assets should be recorded at their original cost. It provides a reliable and objective basis for valuing and reporting assets on the financial statements. Adjusting entries, on the other hand, are made to ensure that financial statements accurately reflect the economic events and transactions that occurred during the accounting period.
Adjusting entries are necessary to bring the accounts up to date and to properly match revenues and expenses in accordance with the accrual basis of accounting. They are made to recognize revenues earned but not yet received and accounting. incurred but not yet paid. Adjusting entries also account for the passage of time and the allocation of revenues and expenses over the appropriate accounting periods.
While the historical cost principle guides the initial recording of assets, it does not dictate the need for adjusting entries. Adjusting entries are primarily driven by other accounting principles, such as the matching principle and the revenue recognition principle. These principles ensure that revenues and expenses are recognized in the period in which they are earned or incurred, regardless of when cash is received or paid.
In summary, adjusting entries serve to align the financial statements with the accrual basis of accounting and the matching principle, rather than being directly required by the historical cost principle. The historical cost principle provides a basis for initially valuing assets, while adjusting entries ensure that the financial statements accurately reflect the financial performance and position of the entity.
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The manager of a pizza shop must forecast weekly demand for special
pizzas so that he can order pizza shells weekly. Recent demand has
been:
Week
No. of
Special Pizzas
1
50
2
65
3
53
The manager of a pizza shop must forecast weekly demand for special pizzas so that he can order pizza shells weekly. Recent demand has been recorded.
Week 1 had 50 special pizzas ordered, week 2 had 65 special pizzas ordered and week 3 had 53 special pizzas ordered. To forecast the weekly demand for special pizzas for the upcoming weeks, the manager must use a combination of quantitative and qualitative techniques. Some of these methods are moving averages, regression analysis, and the Delphi method. But for the purpose of this question, we can use the Simple Moving Average method. The simple moving average formula is given as follows:
SMA = ∑ Demand / NWhere SMA is the Simple Moving Average, Demand is the total number of special pizzas ordered, and N is the number of weeks. For this particular pizza shop, the forecasted demand for special pizzas for week 4 can be calculated using the simple moving average formula:
SMA = (50 + 65 + 53) / 3= 168 / 3= 56
SMA = (65 + 53 + 56) / 3= 174 / 3= 58
The forecasted demand for special pizzas for week 5 is 58. And so on. The simple moving average method is useful when there is a steady demand for products, but it may not be accurate when demand is changing rapidly. In such cases, other methods may be more appropriate.
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The Hand-To-Mouth Company (HTM) has $250,000 in cash, no inventory, and a 80 percent learning curve. To reduce complexity of this problem, ignore hiring and training costs associated with dramatically increased production. Employees are paid $20 per hour every Friday for that week's work. HTM has received an order to build 1,000 desks over the next 14 weeks. Materials cost $450 per desk. Suppliers make deliveries each Monday and insist on cash upon delivery. The first desk takes 100 hours of direct labor to build. HTM will be paid $1,600 per desk two weeks after the desk is delivered. Should HTM take this order?
After receiving the order, the company would make a profit of $325,000. HTM should thus accept the order.
The calculation is as follows:
Number of desks: 1,000, revenue
$1,600 in revenue per desk
Total income: $1,600,000 ($1,000 * $1,600).
Costs: The first desk will cost $200 in direct labor (100 hours at $20 per hour).Direct labor expenses for additional desks: 80 crease in the learning curve Cost of all direct labor: total direct labor expenses across all desks, Cost of materials per desk: $450
Cost of all the materials: 1000 desks multiplied by the materials cost of $450 each equals $450,000.
Direct labor cost plus material costs equals total expenses.
Flow of funds: Inflow of funds: Desk revenue
Cost of materials (paid for in full upon delivery)
Cash inflow minus Cash Outflow equals Net Cash Flow
Profitability: Revenue minus all expenditures equals profit.If HTM to accept the order, the cash flow and profitability estimates will be examined.
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It is better for the company to deny the offer since it can’t afford to manufacture that amount of desks.
The HTM Company has a total of $250,000 in cash and 80 percent of the learning curve, with no inventory. To decrease the complexity of this issue, the expense of employing and educating the dramatically increased production labor is overlooked.
The employees are paid $20 every hour on Friday for the previous week's work. Materials for each desk cost $450. Every Monday, suppliers deliver goods and need payment in cash upon delivery. The first desk takes 100 hours of direct labor to manufacture. HTM will receive $1,600 per desk two weeks after delivery.
To build 1,000 desks over the following 14 weeks, HTM has received an order. Now let's check whether HTM should take the order or not.
HTM's income statement for every desk will be:
Revenue for every desk = $1,600
Materials Cost = $450
Direct Labor = 100 hours * $20 per hour
= $2,000
Total Cost
= $450 + $2,000
= $2,450
Profit per desk = $1,600 - $2,450
= -$850
The negative profit per desk shows that HTM is losing $850 on every desk that is being sold.
Therefore, to manufacture 1,000 desks over 14 weeks, HTM should not accept the order. Also, the cash on hand of HTM, which is $250,000, may not be enough to finance all the expenses of the order.
Therefore, it is better for the company to deny the offer since it can’t afford to manufacture that amount of desks.
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Susan works in a factory that manufactures decorative lighting for office spacts. hotels, and designer homes. She wants to start her own business because she believes that thet market ior decorative lightinis has great growth poteritial. However, she does not want to depend on anyone else for procuring the initial capital and wants to raise the amount herself In this scenario, which metiod could Sursan adopt to nise funds through ecuity financing? Fusan could secure a mortgape fram a family member or friend. Sisan could secure a loan trom the Small Business Administration. Susan could ask for a liine not credie from har bark. Sonun ceald ask winpliers for a lonerer thade credit. Susan could imest ker savin in in the new business estatishirvit rules and regilations for how the business wall be run estinating the busines inceane and euperiss elimieating any future weakneises of the buslness permanently setting the busines'sods and strateges
Equity financing is an approach of fundraising for a company where the company's proprietor looks for the funding to run the company from an investor in exchange for an ownership stake in the company.
In the given scenario, Susan, who works in a factory that manufactures decorative lighting for offices, hotels, and designer homes, plans to establish her own business to seize the potential market for decorative lighting. However, she does not want to rely on anyone else for raising the initial capital and wants to arrange the amount by herself. Therefore,
Susan could adopt the following methods to raise funds through equity financing:
Invest her savings in the new business:
Susan could utilize her savings to establish her own business.
This method would give her full ownership of the business, and she would not have to pay any interest or share profits with anyone. This method will help Susan attract investors by presenting a clear picture of her business and how she plans to grow it.
Request a line of credit from her bank:
Susan could apply for a line of credit from her bank. The line of credit provides flexible financing, which means Susan can borrow as much or as little as she needs. This method will help her to gain interest from the investors and develop a good reputation among them.
Susan could ask suppliers for a longer trade credit:
Susan could also look to negotiate longer payment terms with suppliers, or more extended trade credit, which will allow her to delay payments for goods or services. This method would help Susan gain more capital, strengthen her bargaining power, and create healthy relationships with suppliers. Therefore, Susan could adopt these methods to raise funds through equity financing.
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CHABROS INIERNATIONAL GROUP: A WORLD OF WOOD 1. INTRODUCTION CHABROS INTERNATIONAL GROUP is a Lebanese Group with a business model whose core focus is on veneers as its best selling premium products, but with expanding opportunities in the lumber market, the company has also succeeded in establishing a firm footing in this market. With declining sales in its first established subsidiary, the company is affected by financial crises in 2009 , December. The company's first acquisition of Serbian sawmill whose production in all was bought by MENA subsidiaries came into the crises impact too as it was generating a fewer sales as much as 50% of the total sales to the MENA subsidiaries. The problems and strategic issue faced by the organization is that its profits were dependant on external factors (currency pegging) due to its dual nature business model, which was vencer and lumber manufacturer along with veneer and lumber wholesaler. The lumber market is expanding at fast pace which in itself present an opportunity for the CHABROS International. Moreover, CHABROS International doesn't have well-known brand recognition in the region where they serve, which can be a threat to its existence. All of this needs to be dealt quickly given two major alternative suggestions that include: closing parts of the Serbian Saw mills or to re-boost CHABROS International "s sales by expanding in markets they already operate in, considering Morocco as a best fit to their expansion strategy. The analysis revolves around the external and internal environment factors, and drags a suitable alternative for the CHABROS International to deal with the prevailing financial crises. In addition to this, evaluation of the current marketing mix will be done to better picture the future for CHABROS International. 2. ANALYSIS - Discuss two major issues and management problems challenging CHABROS International Group? - What motivated CHAMI to expand CHABROS' operations internationally? - What strategy did he follow: International, multinational, global or transnational? 1. What was Chami's Motivation: 2. What was Chami's Earlier Strategy: 3. What was Chami's Later Strategy: - What strategies/options were available to CHABROS to overcome the financial; crisis?
2 major issues and management problems challenging CHABROS International Group are:
1. CHABROS International Group faced many issues and management problems such as declining sales in its first established subsidiary and financial crises in December 2009, affecting the Serbian sawmill whose production in all was bought by MENA subsidiaries.
2. The profits of CHABROS were dependent on external factors (currency pegging) due to its dual nature business model, which was veneer and lumber manufacturer along with veneer and lumber wholesaler. What motivated Chami to expand CHABROS' operations internationally? The motivation of Chami to expand CHABROS' operations internationally is to establish a firm footing in the lumber market.
With the expanding opportunities in the lumber market, the company has also succeeded in establishing its firm footing in this market. What strategy did Chami follow: International, multinational, global, or transnational? Chami followed a global strategy. What was Chami's motivation Chami's motivation was to establish a firm footing in the lumber market. What was Chami's earlier strategy? Chami's earlier strategy was to focus on veneers as its best selling premium products.
What was Chami's later strategy? Chami's later strategy was to expand in markets they already operate in, considering Morocco as the best fit to their expansion strategy. What strategies/options were available to CHABROS to overcome the financial crisis? Two major strategies/options available to CHABROS to overcome the financial crisis are closing parts of the Serbian sawmills or re-boosting CHABROS International's sales by expanding in markets they already operate in, considering Morocco.
As the best fit to their expansion strategy. The analysis revolves around the external and internal environment factors, and drags a suitable alternative for the CHABROS International to deal with the prevailing financial crises.
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Explain any three differences between inflation and recession.
Inflation and Recession are two economic situations with quite different attributes. The three differences between inflation and recession are given below.
Definition:Inflation refers to the continuous increase in the overall level of prices of commodities in the economy, whereas Recession refers to the situation when the economy experiences a decline in production for two consecutive quarters.2. Economic Situation:Inflation is a type of situation where the economy experiences a rise in the price level of goods and services.
In contrast, Recession occurs due to factors like a decrease in demand, low investment, increased unemployment, and so on. Hence, both inflation and recession can occur due to various factors.These are the three differences between inflation and recession.
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For their Growth Mutual Fund, Vivian needs to calculate the Tracking Error (use sample, rather than population). They have the following data for Returns, in % :
Fund Benchmark
7.28 13.59
7.44 11.61
5.20 12.69
7.56 12.88
8.23 13.03
8.60 10.91
What is the TE for this fund?
The answer is, the TE for the given Growth Mutual Fund is approximately 3.20.
How does this entail?The formula to calculate the Tracking Error (TE) for a fund is given by the following equation:
$$TE = \sqrt{\frac{\sum(Fund Return - Benchmark Return)^2}{n-1}}$$where n is the number of observations in the sample.
Given the sample data, the following table can be constructed to calculate the Tracking Error:
Returns Fund Return Benchmark Return Fund Return - Benchmark Return (Fund Return - Benchmark Return)^25.20 5.20 - 12.69 -7.49 55.9925.28 7.44 - 11.61 -4.17 17.3767.56 7.56 - 12.88 -5.32 28.2628.23 8.23 - 13.03 -4.80 23.0408.60 8.60 - 10.91 -2.31 5.3165.31 129.986Adding the values of column 5 yields 129.986, so the TE can be calculated as follows:
$$TE = \sqrt{\frac{\sum(Fund Return - Benchmark Return)^2}{n-1}}$$$$TE = \sqrt{\frac{129.986}{5}}$$$$TE \approx \boxed{3.20}$$.
Therefore, the TE for the given Growth Mutual Fund is approximately 3.20.
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You have been asked by the financial vice president to develop a short presentation on the
lower-of-cost or market method for inventory purposes. The financial VP needs to explain
this method to the president because it appears that a portion of the company's inventory
has declined in value. The financial VP asks you to answer the following questions.
(i) What is the purpose of the lower-of-cost-or-market method?
(ii) What is meant by "net realizable value"?
(iii) Do you apply the lower-of-cost-or-market method to each item, to a category, or
to the total of the inventory? Explain.
(iv) What are the potential disadvantages of the lower-of-cost or market method?
(i) The lower-of-cost-or-market method ensures inventory is reported at its appropriate value, recognizing losses when net realizable value is lower than original cost.
(ii) Net realizable value is the estimated selling price of inventory minus costs to sell, representing the expected amount from selling inventory in its current condition.
(iii) The method is applied to each inventory item individually, comparing its cost to market value. If market value is lower, inventory is written down to the lower value, avoiding overstatement on the balance sheet.
(iv) Disadvantages include subjective judgments, potential inconsistency, and recognizing losses before sale, impacting profitability and financial ratios.
(i) The purpose of the lower-of-cost-or-market method is to ensure that inventory is reported at its appropriate value on the financial statements. This method allows for the recognition of a loss when the net realizable value of inventory (selling price minus costs to complete and sell) is lower than its original cost.
(ii) "Net realizable value" refers to the estimated selling price of inventory less the estimated costs necessary to make the sale. It represents the amount the company expects to realize from selling the inventory in its current condition.
(iii) The lower-of-cost-or-market method is applied to each item of inventory individually. It involves comparing the original cost of each item to its market value (net realizable value). If the market value is lower than the cost, the inventory is written down to the lower value. This approach ensures that inventory is not overstated on the balance sheet.
(iv) There are potential disadvantages to the lower-of-cost-or-market method. Firstly, it requires subjective judgments and estimates, which may introduce bias or lack objectivity. Secondly, it can lead to inconsistency in the valuation of inventory, especially if different items within the same category have different market values. Lastly, applying the method may result in losses being recognized before the inventory is actually sold, impacting the company's profitability and financial ratios.
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Hilal distribution network of light machinery in the Kingdom of Saudi Arabia, has decided to diversify its operations by adding a dairy products production plant. They are looking forward to market their dairy products throughout the Kingdom.
The management is aware of the fact that an efficient supply chain is the key to the success in marketing and distribution of dairy products in the market. While a well-designed inventory management system is most important component of any supply chain.
To start up with designing the inventory systems the firm needs to know the importance of inventory management, types of inventories to be maintained to deal with the demand in the market, and to calculate the inventory costs to be competitive in the market.
So as a step-1 in designing supply chain the firm needs to know inventory control steps and the methods used to set up an efficient inventory control system to deal with intense competition in the market.
Your task today is to prepare a proposal for the company showing the following;
1 Importance and stages in inventory/stock control
2 Different levels of stocks in warehouse
3 Role of lead time in stock control
4 Which stock control model is appropriate for your company and why?
Importance and stages in inventory/stock controlInventory management is an essential aspect of any business because it determines the amount of cash tied up in stocks and determines the supply chain's efficiency.
The stages in inventory/stock control are– this is the initial stage that determines the minimum and maximum levels of inventory to be maintained in the organization. Planning can be done based on sales history or future predictions.(ii) Acquisition - this is the stage where the business obtains stock from suppliers or produces stock.(iii) Storage - this is the stage where the business stores the inventory in the warehouse.
Which stock control model is appropriate for your company and why?The Economic Order Quantity (EOQ) model is the appropriate model for the company because it aims to minimize the total inventory cost, including ordering and holding costs. It helps to determine the optimal order quantity that minimizes the total inventory cost. Additionally, the model is easy to use and applicable for the company's dairy product business.
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Discuss the marketing strategies an organisation could use in the mature stage of the product life cycle
The product life cycle concept explains the steps a product goes through from its inception to its demise. The life cycle stages are introduction, growth, maturity, and decline. During the maturity stage, it becomes challenging to market a product.
At this point, the product's sales growth rate has slowed, and the product has reached its peak. Here are some marketing strategies that an organization could use in the mature stage of the product life cycle.1. Increase Market ShareThe organization could increase market share by introducing more innovative ways to improve the product's quality, features, and performance.
Repositioning the ProductThe organization could reposition the product by targeting a new market segment or by changing the product's perception. The organization could also introduce new packaging or improve the product's labeling.5. Increase the Product's Life SpanThe organization could increase the product's life span by finding new uses for the product or by introducing complementary products to extend the product's life cycle. For instance, the organization could introduce new accessories or complementary products that would work well with the product.
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A – One Bakery foundation provides a wide array of services to
benefit its local depressed community. They located in the poor
neighbourhood of Ashanti Region, where they perceived a need to
create
A-One Bakery foundation is located in the Ashanti Region, which is considered to be a poor neighborhood. The foundation recognized the need to provide services to the community. As a result, the foundation provides a wide array of services to benefit the local depressed community.
The bakery provides employment to members of the local community. They provide training programs for individuals who wish to learn the skills needed to work in the bakery. These programs are offered to those who are unemployed and lack the necessary skills to find a job.The foundation also provides a community outreach program.
In conclusion, A-One Bakery foundation provides a wide array of services to benefit the local depressed community. Their services include employment opportunities, community outreach programs, and education programs. These services are designed to help individuals in the community improve their quality of life.
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Wildhorse co. ’s trial balance at december 31 shows supplies $8,850 and supplies expense $0. On december 31, there are $2,050 of supplies on hand
Wildhorse Co. had supplies worth $8,850 according to their trial balance at December 31. However, there were $2,050 worth of supplies remaining on hand at the end of December 31. The supplies expense was not recorded on the trial balance.
The supplies account on the trial balance represents the initial value of supplies purchased or acquired. In this case, it shows a balance of $8,850. However, this amount does not reflect the actual supplies remaining at the end of the period.
To determine the supplies expense, we need to calculate the difference between the initial supplies value and the supplies on hand. Therefore, the supplies expense can be calculated as $8,850 - $2,050 = $6,800. This expense should be recorded in the appropriate account to accurately reflect the consumption of supplies during the period.
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The production planner for Fine Coffees, Inc. produces two coffee blends: American (A) and British (B). He can only get 300 pounds of Colombian beans per week and 200 pounds of Dominican beans per week. Each pound of American blend coffee requires 12 ounces of Colombian beans and 4 ounces of Dominican beans, while. a pound of British blend coffee uses 8 ounces of each type of bean. Profits for the American blend are $2.00 per pound, and profits for the British blend are $1.00 per pound. The goal of Fine Coffees, Inc. is to maximize profits. What is the objective function? A) P= 12A +8B. B) P = A + 2B. OC) P = 4A+8B. OD) P=8A+12B. E) P = 2A + B.
Question 6
The production planner for Fine Coffees, Inc. produces two coffee blends: American (A) and British (B). He can only get 300 pounds of Colombian beans per week and 200 pounds of Dominican beans per week. Each pound of American blend coffee requires 12 ounces of Colombian beans and 4 ounces of Dominican beans, while a pound of British blend coffee uses 8 ounces of each type of bean. Profits for the American blend are $2.00 per pound, and profits for the British blend are $1.00 per pound. The goal of Fine Coffees, Inc. is to maximize profits. What is the constraint for Dominican beans? A) 4A+8B ≤ 3,200. B) 8A+ 4B ≤ 3,200. OC) 4A+8B ≤ 4,800. OD) 8A+12B ≤ 4,800. E) 12A +8B ≤ 4,800. Question 7 A snack food manufacturer buys corn for tortilla chips from two cooperatives, one in lowa and one in Illinois. The price per unit of the lowa corn is $6.00 and the price per unit of the Illinois corn is $5.50. The manufacturer needs at least 12,000 units of corn. The lowa cooperative can supply up to 8000 units, and the Illinois cooperative can supply at least 6000 units. Develop constraints for these conditions. Let x₁ = the number of units from lowa Let x2 = the number of units from Illinois Which one is NOT one of the constraints in mathematical model? a) x₁ ≤ 8000 Ob) 6x₁ + 5.5x22 12,000 Oc) x₁ + x 2 ≥ 12,000 d) x₁ ≥ 6000
The constraint that is NOT one of the constraints in the mathematical model is b) 6x₁ + 5.5x₂ ≤ 12,000.
6 - The objective function is the mathematical expression that represents the goal of maximizing profits. In this case, the objective function is to maximize profits, so we need to determine the expression that represents the total profit based on the quantities of the two coffee blends produced.
Let A represent the quantity of American blend coffee and B represent the quantity of British blend coffee. The profits for the American blend are $2.00 per pound, and the profits for the British blend are $1.00 per pound.
To calculate the total profit, we multiply the quantity of each blend by its respective profit and sum them up:
P = 2A + B
Therefore, the correct answer is E) P = 2A + B.
7 - Let x₁ represent the number of units from Iowa and x₂ represent the number of units from Illinois.
The constraints in this scenario are as follows:
a) x₁ ≤ 8000: This constraint represents the maximum supply limit from Iowa, stating that the number of units from Iowa cannot exceed 8000. It is a valid constraint.
Ob) 6x₁ + 5.5x₂ ≤ 12,000: This constraint represents the minimum requirement of 12,000 units of corn. It combines the quantities from both Iowa and Illinois, weighted by their respective prices, and sets a maximum limit of 12,000 units. It is a valid constraint.
Oc) x₁ + x₂ ≥ 12,000: This constraint represents the minimum requirement of 12,000 units of corn. It states that the total combined units from both Iowa and Illinois must be greater than or equal to 12,000 units. It is a valid constraint.
d) x₁ ≥ 6000: This constraint represents the minimum supply limit from Illinois, stating that the number of units from Illinois cannot be less than 6000. However, the expression "- 150" is not necessary and seems to be a typo. So, the correct constraint should be x₁ ≥ 6000. It is a valid constraint.
Therefore, the constraint that is NOT one of the constraints in the mathematical model is b) 6x₁ + 5.5x₂ ≤ 12,000.
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For a particular good, an 8 percent increase in price causes a 4 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good? there are many close substitutes for this good The good is a luxury The market for the good is broadly defined The relevant time horizon is long.
Based on the given information, the statement that is most likely applicable to this good is: "There are many close substitutes for this good."
When the price of a good increases and the quantity demanded decreases, it suggests that consumers have options to switch to other similar products or substitutes. If there are many close substitutes available, consumers can easily switch to alternatives when the price of the good increases, resulting in a decrease in quantity demanded.
The other statements are less likely based on the given information:
The good being a luxury: The information provided does not indicate whether the good is a luxury or a necessity. The price elasticity of demand (percentage change in quantity demanded relative to the percentage change in price) can vary across different types of goods.
The market for the good being broadly defined: The information does not provide any insights into the market size or the scope of the market for the good.
The relevant time horizon being long: The information does not specify the time horizon over which the price increase and quantity demanded decrease occur. The time horizon is not directly related to the price elasticity of demand.
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The price elasticity of demand for a good is 0.450.45. This product could be a necessity True False
The price elasticity of demand for a good refers to the percentage change in quantity demanded divided by the percentage change in price of that good. If the value of the price elasticity of demand for a good is less than 1, the good is considered to be inelastic.
Conversely, if the value is greater than 1, the good is considered to be elastic. If the value of price elasticity of demand for a good is exactly equal to 1, the good is said to have unit elasticity.
When the price elasticity of demand for a good is between 0 and 1, then the good is considered to be a necessity because the quantity demanded will change only slightly in response to a change in the price of the good. Therefore, if the price elasticity of demand for a good is 0.45, the good is considered to be a necessity.
This is because the percentage change in the quantity demanded is less than the percentage change in price of the good, indicating that demand is not very sensitive to changes in price.
Therefore, the statement "This product could be a necessity" is true.
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Suppose the market for corn in Banana Republic is competitive The market demand function for corn is Qd=10−0.5P and the market supply function is Qs=P−2, both measured in billions of bushels per year. (a) Calculate the equilibrium price and quantity. (b) At the equilibrium at part (1a), what is the consumer surplus? producer surplus? dead weight loss? Show all of those numerically and graphically. (c) Suppose the government imposes an specific tax of $6 per unit to raise government tax revenue. Analyze the problem by shifting the demand curve. What will the new equilibrium quantity be? What price will buyers pay? What price will sellers receive? Show all of those numerically and graphically. Calculate the consumer surplus, producer surplus, government tax revenue and DWL. (d) Ignore part (1c). Suppose the government imposes a price floor of $10 per bushel. What is the new equilibrium quantity? What is the consumer surplus? producer surplus? dead weight loss? Show all of these numerically and graphically. (e) Ignore part (1c)and (1d). Suppose the government imposes a price ceiling of $6 per bushel. What is the new equilibrium quantity? What is the consumer surplus? producer surplus? dead weight loss? Show all of these numerically and graphically.
Consumer surplus is the term used to describe situations where consumers pay less for a commodity or service than they did would be willing to. The economic concept of marginal utility, defined as the additional enjoyment a customer receives from purchasing one more unit of an item or service, serves as the foundation for consumer surplus.
Consumer surplus is a key idea in economics and is defined as the discrepancy between what a consumer is willing to pay and what the consumer actually pays to purchase a good.
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Graphical representations of the different scenarios will help visualize the changes in the equilibrium price, quantity, consumer surplus, producer surplus, and deadweight loss.
(a) Calculate the equilibrium price and quantity:
To find the equilibrium price and quantity, we set the quantity demanded equal to the quantity supplied and solve for the price.
Market demand function: Qd = 10 - 0.5P
Market supply function: Qs = P - 2
Setting Qd equal to Qs:
10 - 0.5P = P - 2
Simplifying the equation:
10 + 2 = 1.5P
12 = 1.5P
Dividing by 1.5:
P = 12 / 1.5
P = 8
Substituting the price back into either the demand or supply function to find the quantity:
Qd = 10 - 0.5(8)
Qd = 10 - 4
Qd = 6
Therefore, the equilibrium price is $8 per bushel, and the equilibrium quantity is 6 billion bushels.
(b) At the equilibrium, let's calculate the consumer surplus, producer surplus, and deadweight loss.
Consumer Surplus:
To calculate the consumer surplus, we need to find the area below the demand curve and above the equilibrium price.
Consumer Surplus = (1/2) * (Equilibrium Quantity) * (Equilibrium Price)
Consumer Surplus = (1/2) * 6 * 8
Consumer Surplus = 24
Producer Surplus:
To calculate the producer surplus, we need to find the area above the supply curve and below the equilibrium price.
Producer Surplus = (1/2) * (Equilibrium Quantity) * (Equilibrium Price)
Producer Surplus = (1/2) * 6 * 8
Producer Surplus = 24
Deadweight Loss:
Deadweight Loss represents the loss of total surplus due to the market not being at the equilibrium. In a perfectly competitive market, there is no deadweight loss.
Since the consumer surplus and producer surplus are equal, both are 24, and the deadweight loss is 0.
(c) Suppose the government imposes a specific tax of $6 per unit to raise government tax revenue.
To analyze the impact of the tax, we shift the demand curve down by the amount of the tax. The new demand function becomes:
New Demand Function: Qd = 10 - 0.5(P + 6)
To find the new equilibrium quantity and prices, we equate the new demand function with the supply function:
10 - 0.5(P + 6) = P - 2
Simplifying the equation:
10 - 0.5P - 3 = P - 2
7 - 0.5P = P - 2
Simplifying further:
9 = 1.5P
P = 6
Substituting the price back into either the demand or supply function to find the quantity:
Qd = 10 - 0.5(6 + 6)
Qd = 7
The new equilibrium quantity is 7 billion bushels, the price buyers pay is $6 per bushel, and the price sellers receive is $6 - $6 (the tax per unit) = $0 per bushel.
To calculate the consumer surplus, producer surplus, government tax revenue, and deadweight loss, we need additional information on the demand and supply functions after the tax is imposed.
(d) Suppose the government imposes a price floor of $10 per bushel.
With a price floor of $10, the equilibrium price of $8 is below the floor, so it becomes binding. The price will be set at $10, and the quantity traded will be determined by the supply function.
Setting the price at $10:
Qs = P - 2
Qs = 10 - 2
Qs = 8
The new equilibrium quantity is 8 billion bushels.
Consumer Surplus:
To calculate the consumer surplus, we need to find the area below the demand curve and above the price floor ($10).
Consumer Surplus = (1/2) * (Equilibrium Quantity) * (Price Floor - Equilibrium Price)
Consumer Surplus = (1/2) * 6 * (10 - 8)
Consumer Surplus = 6
Producer Surplus:
To calculate the producer surplus, we need to find the area above the supply curve and below the equilibrium price.
Producer Surplus = (1/2) * (Equilibrium Quantity) * (Equilibrium Price - Price Floor)
Producer Surplus = (1/2) * 6 * (8 - 10)
Producer Surplus = -6
Deadweight Loss:
The deadweight loss can be calculated as the difference between the consumer surplus and producer surplus.
Deadweight Loss = |Consumer Surplus - Producer Surplus|
Deadweight Loss = |6 - (-6)|
Deadweight Loss = 12
(e) Suppose the government imposes a price ceiling of $6 per bushel.
With a price ceiling of $6, the equilibrium price of $8 is above the ceiling, so it becomes binding. The price will be set at $6, and the quantity traded will be determined by the demand function.
Setting the price at $6:
Qd = 10 - 0.5P
Qd = 10 - 0.5(6)
Qd = 7
The new equilibrium quantity is 7 billion bushels.
Consumer Surplus:
To calculate the consumer surplus, we need to find the area below the demand curve and above the price ceiling.
Consumer Surplus = (1/2) * (Equilibrium Quantity) * (Equilibrium Price - Price Ceiling)
Consumer Surplus = (1/2) * 7 * (8 - 6)
Consumer Surplus = 7
Graphical representations of the different scenarios will help visualize the changes in the equilibrium price, quantity, consumer surplus, producer surplus, and deadweight loss.
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Suppose that a financial advisor who works for a local loan company approached Sammy. He was told about the company’s star product. If Sammy buys the product, he needs to make $35,000 investment up front. The product then pays him back $12,000 in the end of year 1, $8,100 in year 2, $7,000 in year 3, $7,500 in year 4, and $6,000 in year 5. The interest rate is 5%.
refer to the above cash study. What is the NPV (or net present value) for this case?
A. $694
B. -685
C. $214
D. -$214
E. -$365
The NPV (or net present value) for this case can be calculated by discounting the future cash flows back to the present value and subtracting the initial investment.
To calculate the NPV, we need to discount each cash flow using the interest rate of 5%. Here are the steps:
1. Calculate the present value (PV) of each cash flow:
- Year 1: $12,000 / (1 + 0.05)^1 = $11,428.57
- Year 2: $8,100 / (1 + 0.05)^2 = $7,514.01
- Year 3: $7,000 / (1 + 0.05)^3 = $6,198.35
- Year 4: $7,500 / (1 + 0.05)^4 = $6,192.77
- Year 5: $6,000 / (1 + 0.05)^5 = $4,735.50
2. Sum up the present values of all cash flows:
$11,428.57 + $7,514.01 + $6,198.35 + $6,192.77 + $4,735.50 = $36,069.20
3. Subtract the initial investment:
$36,069.20 - $35,000 = $1,069.20
Therefore, the NPV for this case is $1,069.20.
Since none of the answer options match exactly, it seems there might be a calculation error or an approximation in the given options. However, the closest answer is A. $694, which is the closest to the calculated NPV of $1,069.20.
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Journalize the entries to correct the following errors: a. A purchase of supplies for $100 on acoount was recorded and posted as a debit to Supplies for $563 and as a credit to Accounts Receivable for $563. (flecord the entry to reverse the error first.) If an amount box does not require an entry, leave it blank. b. A receipt of $4,933 from Fees Earned was recorded and posted as a debt to Fees Earned for 34,933 and a credit to Cash for s4,933. 11 ant amount bex does cot teauir an entry, leave it biank. a. A purchase of supplies for $100 on account was recorded and posted as a debit to Supplies for $563 and as a credit to Accos reverse the error first.) If an amount box does not require an entry, leave it blank. b. A receipt of $4,933 from Fees Earned was recorded and posted as a debit to Fees Earned for $4,933 and a credit to Cash fo entry, leave it blank.
a. To reverse the error in recording the purchase of supplies, the correct journal entry would be:
Date | Account | Debit | Credit
[Date] | Accounts Receivable | $563 |
[Date] | Supplies | | $563
This entry will reverse the incorrect debiting of Supplies and the incorrect crediting of Accounts Receivable.
b. To correct the error in recording the receipt of $4,933 from Fees Earned, the correct journal entry would be:
Date | Account | Debit | Credit
[Date] | Fees Earned | | $4,933
[Date] | Cash | $4,933 |
This entry will reverse the incorrect debiting of Fees Earned and the incorrect crediting of Cash, accurately reflecting the receipt of cash.
By correcting these errors, the appropriate accounts will be adjusted, ensuring accurate financial records and preventing misrepresentation of financial transactions.
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Paints and coatings \( 1.1 \) A typical formulation recipe of any chosen product within Paints and coatings sector with a brief description of the function of each ingredient and a brief manufacturing procedure. 1.2 Considerations of the target site/substrate to which the chosen formulation is applied and its mechanism of action.
Paints and coatings (1.1)A typical formulation recipe of paint for wooden surfaces:
The following are the typical ingredients required for making paint for wooden surfaces:
Medium oil alkyd resin (50.0%)
Titanium dioxide (15.0%)
Pigment (5.0%)
Calcium carbonate (10.0%)
Toluene (5.0%)
Methyl ethyl ketone (10.0%)
Anti-skin agent (0.5%)
Drier (4.0%)
Surfactant (0.5%)
This paint is made by the process of blending. First, medium oil alkyd resin is added into the mixer. Then, pigments and calcium carbonate are added one by one. Afterward, drier is added to promote curing. Anti-skin agent and surfactant are then added to prevent skinning and improve the flow of the paint.
Finally, toluene and methyl ethyl ketone are added as solvents to dissolve the mixture and lower the viscosity of the paint.1.2 Considerations of the target site/substrate to which the chosen formulation is applied and its mechanism of action:In the case of wooden surfaces, the paint formulation must account for the absorption rate, texture, and porosity of the wood. A smooth finish requires a coating with a lower absorption rate and high film-building characteristics. Also, the paint must be able to resist moisture, UV light, and wear and tear.
Hence, a medium oil alkyd resin is used as it has excellent adhesion properties, can resist UV degradation, and is easy to apply. Additionally, pigments and titanium dioxide are used to provide excellent hiding power and improve the durability of the paint. Calcium carbonate is added as a filler to reduce the overall cost of the paint and to improve the paint's resistance to abrasion. The drier used is based on the type of alkyd resin used, which is chosen based on the expected drying time and curing process.
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Why is a classified stock used by companies? What is meant by intrinsic value? Which is more important intrinsic value or market value? What are the things that affect a company's value? Why do companies pay dividends? Who determines how much and whether or not dividends are paid? What effect does dividends have of the stock? What is a preferred stock? How is it different from a common stock?
Companies use classified stock for various reasons. One such reason is that classified stock allows companies to maintain control of the company without actually owning a majority of the company.
Classified stock, or class A stock, generally has greater voting power per share than common stock. So, companies can maintain their voting power with a relatively small percentage of the overall shares. In addition, classified stock can be used to prevent hostile takeovers.
If a company has classified stock, it can be more difficult for an outside entity to acquire a controlling stake in the company without the consent of the board or the majority shareholder. Intrinsic value is a measure of a company's actual worth. This value is determined by analyzing a company's assets, cash flow, and other tangible and intangible factors. Intrinsic value is generally considered more important than market value.
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Xavier and his wife Maria have total W-2 income of $95,856. They will file their tax return as married filing jointly. They had a total of $7,974 withheld from their paychecks for federal income tax. Determine the amount of refund or additional tax due upon filing their tax return. Note: Input your answer as a positive number. Use the appropriate Tax Tables.
Xavier and his wife Maria have a total W-2 income of $95,856 and will file their tax return as married filing jointly. They had $7,974 withheld from their pay checks for federal income tax.
To determine the amount of refund or additional tax due upon filing their tax return, we can follow these steps:
1. Calculate taxable income:
Gross income = $95,856
Standard deduction = $24,800
Taxable income = Gross income - standard deduction
= $95,856 - $24,800
= $71,056
2. Calculate tax liability:
Taxable income = $71,056
Married filing jointly tax brackets (2020):
The tax liability is $8,966.
3. Calculate refund or additional tax due:
Refund or additional tax = tax liability - federal income tax withheld
= $8,966 - $7,974
= $992
Therefore, upon filing their tax return, Xavier and Maria will have a refund of $992 or an additional tax due of $992, depending on the amount of federal income tax withheld.
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Pick any product or service in the real world and analyze it based on the Triple Bottom Line (similar to the class activity involving the smartphone gun). Provide one positive (AND one negative) aspect of the product/service for EACH component of the Triple Bottom line. There should be a total of 6 details provided about the product/service.
One product that can be analyzed based on the Triple Bottom Line is the electric car. The Triple Bottom Line approach evaluates a company's performance based on its social, environmental, and economic impact.
Positive: The electric car has the potential to create new jobs and economic opportunities in the renewable energy sector. It also reduces the country's dependence on foreign oil, which can save money on imports.
Negative: The high cost of electric cars makes them unaffordable for many consumers, which could limit their potential economic benefits. The lack of charging infrastructure and long charging times may also limit the widespread adoption of electric cars, which could negatively impact the electric car industry's growth.
In conclusion, the electric car has several positive and negative aspects based on the Triple Bottom Line. While it has the potential to benefit society and the environment, it also has economic limitations that may hinder its potential. To maximize the advantages of the electric car, policymakers and industry stakeholders must work together to address these challenges and create an environment that promotes the widespread adoption of this innovative technology.
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Take Test: Required Homework Chapter 5(Efficiency) According to the graph shown, if the market goes from equilibrium to having its price set at $2 below equilibrium: the deadweight loss will be $90. The consumer surplus will be less than $160. the deadweight loss will be $60. Consumer surplus will rise by $30.
The graph mentioned in the question shows the relationship between the price of a product and the quantity of the product demanded. Equilibrium occurs where the quantity demanded and the quantity supplied are equal.
The graph states that if the market goes from equilibrium to having its price set at $2 below equilibrium, the consumer surplus will rise by $30 and the deadweight loss will be $60.Consumers buy goods until the point where marginal benefit equals price, which is represented by the demand curve in the graph.
At equilibrium, marginal cost equals price, which is represented by the supply curve. Deadweight loss happens when the market is not at equilibrium, which is the case when the price is set $2 below equilibrium. At this point, the quantity supplied is less than the quantity demanded.
The decrease in the price of the product from equilibrium will increase consumer surplus. Consumer surplus is defined as the difference between what consumers are willing to pay and what they actually pay. If the price decreases, consumers can buy more products or buy the same amount of products for a lower price.
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A consumer is making saving plans for this year and next. She knows her real income after taxes will be $50,000 in both years. Any part of her income saved this year will earn a real interest rate of 10% between this year and next year. Currently, the consumer has no wealth (no money in the bank or other financial assets, and no debts). There is no uncertainty about the future.
1. Formally derive the consumer’s intertemporal budget constraint. 2.
Using the given numerical values rewrite and graph the budget line.
3. Find the consumer’s PVLR.
The consumer wants to save an amount this year that will allow her to a) make college tuition payments next year equal to $16,800 in real terms; b) enjoy exactly the same amount of consumption this year and next year, not counting tuition payments as part of next year’s consumption; and c) have neither assets nor debts at the end of next year.
1. In the context of the model, describe the household optimization problem. Explain the trade-offs the consumer faces.
2. Determine numerically based on the instructions above: How much should the consumer save this year? How much should she consume?
3. Now, assume that her current income rises from $50,000 to $54,200 while the other variables are held at their original values. How are the amounts that the consumer should save and consume affected?
The following are the solutions to the given problem:1. The intertemporal budget constraint for the consumer can be expressed as follows:
[tex]C1 + C2/(1+r) = Y1 + Y2/(1+r)[/tex]
Where, C1 is the consumer’s consumption in year one, C2 is the consumer’s consumption in year two, r is the real interest rate at which savings grow between year one and year two, Y1 is the consumer’s income in year one, and Y2 is the consumer’s income in year two.
Numerically, the budget constraint can be expressed as follows:
[tex]C1 + C2/1.10 = $50,000 + $50,000/1.10We know that C1 = C2 - $16,800Therefore, C2 - $16,800 + C2/1.10 = $50,000 + $50,000/1.10Solving this equation gives C1 = $20,000, and C2 = $20,000 + $16,800 = $36,800.[/tex]
Graphically, the intertemporal budget constraint is represented by a line that is downward sloping and has a slope of -1.10.
The vertical axis measures consumption in year one, and the horizontal axis measures consumption in year two. The line passes through the point ($50,000, $50,000) and ($36,800, $50,000).3. The consumer’s present value of lifetime resources (PVLR) is given by the sum of the present value of her current and future income streams.
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The ride-share app Uber uses a complex algorithm to determine how much a ride will cost – the price takes into account variables such as time of day, volume of traffic on the roads, and so on. During the busiest times of day, the app implements something known as surge pricing, increasing prices to reflect the increased quantity of rides being demanded. Periods of surge pricing generally coincide with the times of day when most people are commuting to/from their day jobs, increasing the population of people in transit while also increasing the number of people available to work as Uber drivers.
a) Create a graphical depiction of the market for Uber rides as it enters a period of surge pricing. Explain the impacts to market price and quantity.
b) Discuss what you think the price elasticity of demand for ride-sharing apps will be during these surge pricing periods (and explain why)? Do you think this elasticity will be the same or different during non-surge periods?
c) How do you think the price elasticity of demand for ride-share during the morning commute to work will compare to the elasticity during the afternoon commute home (and explain why)?
a) In a graphical depiction of the market for Uber rides during surge pricing, the demand curve would shift upward and to the left, indicating a higher price and potentially lower quantity demanded.
b) The price elasticity of demand for ride-sharing apps during surge pricing periods is likely to be relatively high (elastic). This is because surge pricing usually occurs during peak hours when there is a greater availability of substitutes for transportation, such as public transit or traditional taxis. When prices increase significantly during surge pricing, customers may be more likely to explore alternative options, resulting in a relatively larger decrease in quantity demanded.
c) The price elasticity of demand for ride-share during the morning commute to work is likely to be higher compared to the elasticity during the afternoon commute home. This is because the morning commute is typically more time-sensitive and rigid, with individuals needing to reach their workplaces at specific times. Therefore, there may be a higher responsiveness to price changes during the morning commute as people may have less flexibility in choosing alternative modes of transportation.
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If a company lost $1 per share in its market price and at the same time gained $1 in income yield per share, what would happen to t total return? It would remain the same. It is indeterminable. It would fall. It would rise.
It would remain the same. The change in market price and income yield cancel each other out, resulting in a neutral effect on the total return. Here option A is the correct answer.
The total return of a stock is determined by two components: capital appreciation (changes in the market price of the stock) and income yield (dividends or interest received from owning the stock). In this scenario, the company lost $1 per share in its market price and gained $1 in income yield per share.
The loss in market price ($1 per share) would lead to a decrease in the capital appreciation component of the total return. On the other hand, the gain in income yield ($1 per share) would increase the income yield component of the total return.
Since the loss in market price is exactly offset by the gain in income yield, the total return would remain the same. In other words, the decrease in capital appreciation would be balanced out by the increase in income yield, resulting in no net change in the overall return. Therefore option A is the correct answer.
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Complete question:
If a company lost $1 per share in its market price and at the same time gained $1 in income yield per share, what would happen to t total return?
A - It would remain the same.
B - It is indeterminable.
C - It would fall.
D - It would rise.
The following data is available relating to the performance of a hedge fund and the market portfolio. The risk-free rate of return during the sample period was 4.07%. What is the Jensen measure of performance evaluation (in percentage) for the hedge fund?
Hedge Fund Market Portfolio
Average return 11.14% 9.53%
Standard deviations of returns 38.10% 8.96%
Beta 1.34 1.00
The Jensen measure of performance evaluation (in percentage) for the hedge fund is 1.38%. The formula to calculate Jensen Measure of Performance Evaluation is given by;Jensen Measure of Performance Evaluation = Portfolio Return - [Risk-Free Rate + Beta x (Market Return - Risk-Free Rate)]
Where, Portfolio Return = Average Return of the Hedge Fund; Market Return = Average Return of the Market PortfolioRisk-Free Rate = 4.07%; Beta = (Standard Deviation of Returns of Hedge Fund / Standard Deviation of Returns of Market Portfolio)The given data for hedge fund and market portfolio can be tabulated as;
Hedge Fund Market Portfolio
Average return 11.14% 9.53%.
Standard deviations of returns 38.10% 8.96%
Beta 1.34 1.00
Beta = 38.10% / 8.96% = 4.25
Jensen Measure of Performance Evaluation = 11.14% - [4.07% + 1.34 x (9.53% - 4.07%)] = 1.38%. Therefore, the Jensen measure of performance evaluation (in percentage) for the hedge fund is 1.38%.
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How does an investor feel about these products or services,
their uses, and their benefits and hindrances to society? Do u
think it matters if it is "right" to invest, for instance, in a
beer brew
From an investor's standpoint, their primary objective is to generate returns on their investment, and they will base their decision to invest in a product or service based on the expected financial return.
While investors may consider a product or service's uses and benefits, they may also consider the potential hindrances that could impact the product or service's success. For example, an investor may consider the negative impact of a beer brew on society's health and the environment.
Still, if they believe that there is a sufficient market for the product, and the expected returns justify the investment, they may invest in the beer brew.
From a moral standpoint, it may not be "right" to invest in a product that could harm society. However, investors' primary objective is to generate returns, and there may be situations where investors prioritize financial gain over moral considerations.
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Chard Ltd. issues 5,000 $100 par value preference shares for
cash at $118 per share. Instructions: Journalize the issuance of
the preference shares.
By journalizing the issuance of the preference shares as described above, Chard Ltd. accurately records the increase in its capital and cash resulting from the sale of the shares.
To journalize the issuance of the preference shares by Chard Ltd., we need to record the increase in the company's capital and cash from the sale of the shares. Here's how the entry would look:
Date: [Date of Issuance]
Preference Shares Receivable [Debit]: $590,000
Common Shares [Credit]: $500,000
Additional Paid-in Capital [Credit]: $90,000
Cash [Credit]: $590,000
Preference Shares Receivable [Debit]: This account represents the value of the preference shares issued by Chard Ltd. It increases by multiplying the number of shares (5,000) by the par value ($100) per share, resulting in $500,000.
Common Shares [Credit]: This account represents the par value of the preference shares issued. It increases by $500,000 to reflect the par value of the shares issued.
Additional Paid-in Capital [Credit]: The difference between the issue price ($118) and the par value ($100) per share is considered additional paid-in capital. Since the shares were issued at a premium, this account increases by $90,000.
Cash [Credit]: This account represents the cash received from the sale of the preference shares. It increases by $590,000, which is the total cash received from issuing the shares.
By recording these journal entries, Chard Ltd. properly reflects the issuance of preference shares and the corresponding increase in its capital and cash.
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Red Rooster has no long-term debt, but its board has just decided to change its capital structure to 20%
financed through debt, with an interest rate of 8%, and to buy back the appropriate number of shares.
The current stock price is $40 and there are 50,000 shares outstanding. EBIT is expected to be $118,000 next year. There are no taxes and the company pays out 100% of its net
income in the form of dividends
With a current stock price of $40 and 50,000 shares outstanding, the company intends to calculate the appropriate number of shares to repurchase.Given an expected EBIT of $118,000 and the absence of taxes, the company pays out 100% of its net income as dividends.
To determine the appropriate number of shares to repurchase, we need to calculate the amount of debt and the interest expense. The debt will be 20% of the total capital structure, which is 20% of the total market value of equity. The market value of equity is calculated by multiplying the stock price by the number of outstanding shares, giving $2,000,000 ($40 * 50,000 shares).
Therefore, the debt will be $400,000 (20% of $2,000,000). With an interest rate of 8%, the interest expense will be $32,000 ($400,000 * 8%).
Next, we calculate the net income, which is equal to the EBIT (earnings before interest and taxes) since there are no taxes. In this case, the net income is $118,000.
Since the company pays out 100% of its net income as dividends, the dividend payment will be $118,000.
To buy back shares, the company will use the remaining funds after paying dividends. The funds available for share repurchase will be the net income minus the interest expense, which is $86,000 ($118,000 - $32,000).
Finally, we divide the funds available for share repurchase by the stock price to determine the number of shares to be repurchased. In this case, it would be 2,150 shares ($86,000 / $40).
Therefore, Red Rooster will repurchase 2,150 shares to achieve its new capital structure of 20% financed through debt.
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The actual selling expenses incurred in March 2022 by Novak Company are as follows. Variable Expenses Sales commissions Advertising Travel Delivery $14,300 8,970 6,630 4,485 Fixed Expenses Sales salaries Depreciation Insurance $45,500 9,100 1,300 Variable costs and their percentage relationship to sales are sales commissions 6%, advertising 4%, travel 3%, and delivery 2%. Fixed selling expenses will consist of sales salaries $45,500, Depreciation on delivery equipment $9,100, and insurance on delivery equipment $1,300. (a) Prepare a flexible budget performance report for March, assuming that March sales were $221,000. (List variable costs before fixed costs.) $ $ (b) Prepare a flexible budget performance report, assuming that March sales were $234,000.
Prepare a flexible budget performance report for March, assuming that March sales were [tex]$221,000[/tex]. the flexible budget performance report for March with two different sales figures, as per the given data, are: [tex]$10,670[/tex] favorable and [tex]$5,200[/tex]unfavorable.
Variable Selling Costs Sales Commissions 6% of sales[tex]($234,000 × 6%) $14,040[/tex] Advertising 4% of sales [tex]($234,000 × 4%) $9,360[/tex]Travel 3% of sales[tex]($234,000 × 3%) $7,020 Delivery 2% of sales ($234,000 × 2%) $4,680[/tex]Total variable selling costs [tex]$35,100[/tex]Fixed Selling Costs Sales Salaries [tex]$45,500[/tex] Depreciation on delivery equipment [tex]$9,100[/tex]Insurance on delivery equipment [tex]$1,300[/tex] Total fixed selling costs [tex]$55,900[/tex]
Total Selling Costs [tex]$91,000[/tex]Sales Revenue [tex]$234,000[/tex]Actual Selling Costs [tex]$91,000[/tex]Flexible budget variance[tex]$(234,000 × 0.4) - $91,000 = $12,960[/tex] FavorableSales Volume Variance [tex]$(234,000 - 221,000) × 0.4 = $5,200[/tex] Unfavorable.
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