Ricardian Equivalence theorem is an economic theory that states that individuals are forward-looking and rational in their decision-making processes. The theory argues that when governments issue debt to finance spending, individuals view this debt as a future tax liability and will adjust their current consumption accordingly. Therefore, Ricardian Equivalence theory implies that changes in government spending financed by borrowing (debt) have no impact on total spending.
a) Under Ricardian Equivalence, a tax cut would not stimulate household consumption because people recognize that the tax cut will likely be offset by future tax increases. As a result, households will save the extra money that they receive from the tax cut, rather than spending it.
b) According to the Ricardian Equivalence theory, whether the government finances its spending through taxation or debt is irrelevant. In either case, individuals view the government's spending as a future tax liability and will adjust their current consumption accordingly. The Ricardian Equivalence theorem can be represented graphically by a straight-line budget constraint, which shows that changes in government borrowing do not affect the budget constraint's slope.
c) The Ricardian Equivalence theory has several limitations. First, it assumes that people are rational and forward-looking, which may not be true in practice. Second, the theory ignores the possibility of credit constraints and liquidity constraints, which could limit individuals' ability to adjust their consumption patterns in response to tax changes. Third, the theory assumes that taxes and government spending have equivalent effects on households, which may not be true if government spending is targeted towards specific groups or if taxes are targeted towards high-income earners. Finally, the Ricardian Equivalence theory assumes that government debt is issued to finance current spending, but this may not be the case if the government issues debt to finance long-term investments.
what major change in cotton production occurred during the 1850s?
One major change in cotton production that occurred during the 1850s was the widespread adoption of the cotton gin.
The cotton gin, invented by Eli Whitney in the late 18th century, revolutionized the process of separating cotton fibers from their seeds. Prior to the cotton gin, this task was labor-intensive and time-consuming. However, the invention of the cotton gin enabled the rapid and efficient processing of cotton, resulting in a significant increase in cotton production.
The cotton gin allowed for the separation of cotton fibers from the seeds at a much faster rate, reducing the need for manual labor and making cotton production more economically viable. This technological advancement led to a substantial expansion of cotton cultivation in the southern United States, particularly in states like Georgia, Alabama, and Mississippi, which became major cotton-producing regions.
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(30 marks) Astrid Scheid Ltd manufactures kitchen cupboards. The company's budget for fixed costs per month is £7,500 and budgeted variable costs per cupboard are: Question 5 Direct materials Direct labour Variable overheads 5 hours at £3 per labour hour 15 sq metres at £4.50 per sq metre 5 hours at £6 per hour The company had budgeted to make and sell 1,000 cupboards per month at a selling price of £150 each. However, in June, the actual figures were as follows: Sales Direct materials Direct labour Variable overheads Fixed overheads You are required to: a. b. C. 1,400 units 22,000 sq metre 6,800 hours 6,800 hours £ 212,800 121,000 £ 67.50 30.00 15.00 34,000 15,000 6,000 Prepare the original and flexed budgets for June. (7 marks) Prepare a performance report reconciling the original budgeted profit to the actual profit showing all the variances arising. (14 marks) Write a report advising management on your findings and possible reasons why each variance arose. (9 marks) Total: 30 Marks
a. Original budgeted profit is calculated by using the following formula: Original budgeted profit = (Budgeted selling price × Budgeted sales volume) – (Budgeted variable costs × Budgeted sales volume) – Budgeted fixed costs. Therefore, the original budgeted profit for June would be:Original budgeted profit = (£150 × 1,000) – [(£67.50 + £30 + £15) × 1,000] – £7,500= £150,000 – £112,500 – £7,500= £30,000.
Flexed budget is a budget that shows what the costs and revenues should have been given actual levels of activity. Therefore, the flexed budget for June can be calculated as follows: Flexed budget = (Actual sales volume × Budgeted selling price) – (Budgeted variable costs per unit × Actual sales volume) – Budgeted fixed costs = (1,400 × £150) – [(£67.50 + £30 + £15) × 1,400] – £7,500 = £156,000 – £112,500 – £7,500 = £36,000.
Therefore, the original and flexed budgets for June are: Original budget Flexed budget Sales (units) 1,000 1,400 Sales revenue £150,000 £210,000 Direct materials (£67.50 × 1,000) £67,500 (£67.50 × 1,400) £94,500 Direct labour (£30 × 1,000) £30,000 (£30 × 1,400) £42,000 Variable overheads (£15 × 1,000) £15,000 (£15 × 1,400) £21,000 Contribution £37,500 £52,500 Fixed costs £7,500 £7,500 Profit £30,000 £45,000
b. Performance report reconciling the original budgeted profit to the actual profit showing all the variances arising can be calculated as follows:
Performance report reconciling the original budgeted profit to the actual profit showing all the variances arising Original budgeted profit £30,000 Actual profit £45,000 Sales volume variance (£150 × (1,400 – 1,000)) £60,000. Sales price variance (Actual selling price – Budgeted selling price) × Actual sales volume (£0 × 1,400) £0
Direct materials cost variance (Actual quantity × Actual price) – (Budgeted quantity × Budgeted price) 22,000 × (£4.50 – £3) £31,500 Direct labour cost variance (Actual hours × Actual rate) – (Budgeted hours × Budgeted rate) 6,800 × (£6 – £3) £20,400 Variable overhead cost variance (Actual hours × Actual rate) – (Budgeted hours × Budgeted rate) 6,800 × (£15 – £6) £61,200 Fixed overhead cost variance Actual fixed overheads – Budgeted fixed overheads £26,500 Total profit variance £200,100
Therefore, the performance report reconciling the original budgeted profit to the actual profit showing all the variances arising is as follows:
Performance report reconciling the original budgeted profit to the actual profit showing all the variances arising Original budgeted profit £30,000 Actual profit £45,000 Sales volume variance £60,000 Sales price variance £0 Direct materials cost variance £31,500 Direct labour cost variance £20,400 Variable overhead cost variance £61,200 Fixed overhead cost variance £26,500 Total profit variance £200,100
c. Reasons for each variance Sales volume variance: the company has sold 1,400 units in June, which is more than the budgeted sales of 1,000 units, leading to favorable sales volume variance. Sales price variance: the actual selling price was the same as the budgeted selling price, leading to no sales price variance.
Direct materials cost variance: the actual usage of 22,000 square meters was more than the budgeted usage of 15,000 square meters, while the actual price was higher than the budgeted price of £4.50, resulting in adverse direct materials cost variance. Direct labour cost variance: the actual labor hours of 6,800 were the same as the budgeted labor hours, while the actual rate was higher than the budgeted rate of £3, resulting in adverse direct labour cost variance.
Variable overhead cost variance: the actual variable overheads of £102,000 were higher than the budgeted variable overheads of £51,000, resulting in adverse variable overhead cost variance. Fixed overhead cost variance: the actual fixed overheads of £34,000 were higher than the budgeted fixed overheads of £7,500, resulting in adverse fixed overhead cost variance.
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Prepare summary journal entries to record the following transactions for a company in its first month of operations. a. Raw materials purchased on account, $82,000. b. Direct materials used in production, $37,500. Indirect materials used in production, $17,200. c. Paid cash for factory payroll, $40,000. Of this total, $30,000 is for direct labor and $10,000 is for indirect labor. d. Paid cash for other actual overhead costs, $7,125. e. Applied overhead at the rate of 125% of direct labor cost. f. Transferred cost of jobs completed to finished goods, $54,400. g1. Jobs that had a cost of $54,400 were sold. g2. Sold jobs on account for $77,000.
The company made journal entries to record transactions related to raw material purchases, labor costs, overhead expenses, and the sale of completed jobs.
Summary Journal Entries:
Raw materials purchased on account, $82,000.
The company records the purchase of raw materials on account for $82,000.
Raw materials (an asset) would be debited for $82,000 to reflect the increase in inventory. The accounts payable (a liability) would be credited for $82,000 to indicate the company's obligation to pay for the materials.
Direct materials used in production, $37,500. Indirect materials used in production, $17,200.
The company records the usage of direct materials in production for $37,500 and indirect materials for $17,200.
The direct materials used in production would be debited for $37,500 to reduce the inventory of raw materials. The indirect materials used in production would be debited for $17,200 to reflect their consumption in the manufacturing process. The Work in Process (WIP) inventory account would be credited for the combined amount of $54,700 to represent the cost of materials transferred from inventory to production.
Paid cash for factory payroll, $40,000. Of this total, $30,000 is for direct labor and $10,000 is for indirect labor.
The company records the cash payment for factory payroll, with $30,000 allocated to direct labor and $10,000 allocated to indirect labor.
The direct labor cost would be debited for $30,000 to represent the cost of labor directly involved in production. The indirect labor cost would be debited for $10,000 to account for labor not directly involved in production, such as supervisors or maintenance staff. The cash account would be credited for the total amount of $40,000, reflecting the cash payment made for the factory payroll.
Paid cash for other actual overhead costs, $7,125.
The company records the cash payment for other actual overhead costs amounting to $7,125.
The overhead expense account would be debited for $7,125 to recognize the actual overhead costs incurred by the company. The cash account would be credited for the same amount, indicating the payment made for these overhead expenses.
Applied overhead at the rate of 125% of direct labor cost.
The company applies overhead at a rate of 125% of the direct labor cost.
To calculate the overhead cost, the company multiplies the direct labor cost ($30,000) by the overhead rate (125%). The overhead expense account would be debited, and the applied overhead account would be credited for the resulting amount.
Transferred cost of jobs completed to finished goods, $54,400.
The company records the transfer of the cost of completed jobs to finished goods for $54,400.
The WIP inventory account would be debited for $54,400 to remove the cost of completed jobs from work in progress. The finished goods inventory account would be credited for the same amount, reflecting the transfer of these costs to finished goods.
Jobs that had a cost of $54,400 were sold.
The company records the sale of jobs with a cost of $54,400.
The cost of goods sold (an expense) would be debited for $54,400 to reflect the cost of the jobs sold. The finished goods inventory account would be credited for the same amount to reduce the inventory of finished goods.
Sold jobs on account for $77,000.
The company records the sale of jobs on account for $77,000.
The accounts receivable (an asset) would be debited for $77,000 to reflect the amount owed by the customers for the sold jobs. The sales revenue account would be credited for the same amount to recognize the revenue generated from the sales.
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members of goal-derived categories are a set of objects that
Members of goal-derived categories may actually be reflection of the set of objects that: consumers choose from when making consumption decisions.
Members of goal-derived categories may in fact reflect the range of options consumers consider when making purchases. Goal-derived categories are created based on the objectives or goals of the consumer, and the items or choices contained within these categories represent the options offered to the consumer for achieving their objectives.
In order to meet their consumption needs consumers group products or services into categories based on how relevant they feel they are to their individual objectives. The objects or options that consumers consider and select from in order to fulfill their specific needs or achieve their desired outcomes are represented by the members of goal-derived categories in the context of consumption decisions.
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The question is incomplete, complete question "Members of goal-derived categories may actually be reflection of the set of objects that?"
Blue Llama Mining Company is analyzing a project that requires an initial investment of $600,000. The project's expected cash flows are Year Cash Flow Year $325,000 Year 2 -150,000 Year 3 475,000 Year 4500,000 Blue Llama Mining Company's WACC is 9%, and the project has the same risk as the firm's average project. Calculate this project's modified internal rate of return (MIRR): a) 14.91%. b) 18.64%. c) 19.57%. d) 20.50%.
Option a is correct. This project's modified internal rate of return (MIRR) is 14.91%.
We must determine the discount rate at which the present value of cash inflows equals the present value of cash outflows in order to compute the project's modified internal rate of return (MIRR).
Step 1: Using the anticipated cash flows for the project and the discount rate (WACC), determine the present value (PV) of the positive cash flows (inflows) and the negative cash flows (outflows).
PV = $325,000 / (1 + 0.09)1 = $325,000 / 1.09 = $298,165 for the first year.14
PV = -$150,000 / (1 + 0.09)2 = -$150,000 / 1.1881 = -$126,126.82 for the second year.
PV = $475,00/(1 + 0.09)3 = $475,00/(1.29503)3 = $366,879 for the third year.49
PV = $500,000 / (1 + 0.09)4 = $500,000 / 1.41158 = $354,111.36 for the fourth year.
(1/n) - 1 = (-$425,529.19 / $1,556,155.99).^(1/4) - 1 = (-0.2738)^(0.25) - 1 ≈ -0.1765 - 1 ≈ -0.1491
Decimal to percentage conversion:
MIRR ≈ -0.1491 * 100
MIRR ≈ -14.91%
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Complete question
Blue Llama Mining Company is analyzing a project that requires an initial investment of $600,000. The project's expected cash flows are Year Cash Flow Year $325,000 Year 2 -150,000 Year 3 475,000 Year 4500,000 Blue Llama Mining Company's WACC is 9%, and the project has the same risk as the firm's average project.
Calculate this project's modified internal rate of return (MIRR):
a) 14.91%.
b) 18.64%.
c) 19.57%.
d) 20.50%.
At the outset of the COVID-19 pandemic the demand for face masks increased markedly around the globe resulting in retailers. In addition, the sales of hand sanitisers, personal protective equipment (PPE) and cleaning and fumigating and similar products swelled across several international markets since the COVID-19 outbreak began in March 2020. According to data released by Grecques Consulting Pty, an international research firm based in the US, face masks sales grew by a year-on-year increase of 400% in April 2020. However, in December of 2020, the price of face masks retraced back to its pre- COVID-19 level.
With the aid of diagrams, critically evaluate changes in the market type for the face masks industry post the initial COVID-19 shock in March 2020.
The market type for the face masks industry experienced a significant change post the initial COVID-19 shock in March 2020, transitioning from a relatively stable market to a temporary state of disequilibrium characterized by increased demand and supply disruptions. However, over time, the market returned to a more stable state.
Initially, the demand for face masks surged globally due to the COVID-19 pandemic, leading to a substantial increase in sales. This surge in demand can be illustrated by a rightward shift of the demand curve for face masks. The year-on-year increase of 400% in face mask sales in April 2020 indicates the magnitude of this demand shock.
Simultaneously, disruptions in the supply chain and production capacity constraints contributed to a decrease in the supply of face masks. This decrease can be represented by a leftward shift of the supply curve. The combination of increased demand and reduced supply resulted in a temporary state of disequilibrium, where face masks were in high demand and prices increased.
However, as the initial panic buying subsided, supply chains adapted to meet the increased demand, and production capacity expanded. Over time, the supply of face masks caught up with demand, leading to a return to a more balanced market state. The price of face masks retracing back to its pre-COVID-19 level in December 2020 indicates the restoration of equilibrium in the market.
Overall, the market type for the face masks industry experienced a transition from a disrupted market characterized by increased demand and supply constraints to a more stable market as supply adjusted to meet demand.
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Proctoring Enabled: Chapter 2 Quiz 4 Mc Graw Saved Help Which one of the following would not be included in a "manufacturing OH cost pool"? Multiple Choice insurance on production machinery labor cost of production supervisors shop supplies cost of delivering finished goods to customers Prou 010 00:17:34
Manufacturing OH Cost Pool Manufacturing overhead cost pools, as the name suggests, are formed by grouping similar types of overhead costs together. The rationale behind forming such pools is to facilitate more accurate allocation of overhead costs to products.
In case overheads are directly attributed to items, the costs are referred to as 'variable overhead.' When they cannot be attributed directly, they are referred to as 'fixed overhead.'So, the costs that would not be included in a "manufacturing OH cost pool" are those that are not categorized as overhead costs.
The correct option among the given alternatives is "cost of delivering finished goods to customers."Cost of delivering finished goods to customersThis cost is categorized as a selling cost or an administrative cost rather than a manufacturing overhead cost. It's because the cost is incurred after the product has been manufactured.
Hence, it should not be included in a manufacturing OH cost pool.Here's a brief on the other options mentioned:Insurance on production machinery: It's a manufacturing overhead cost.Labor cost of production supervisors: It's a manufacturing overhead cost.Shop supplies cost: It's a manufacturing overhead cost.I hope this helps!
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Consider the following Simple Linear Regression Model: Y = Bo + B₁X + u (a) Discuss what is meant by Heteroscedasticity. Why is it a problem for least squares regression? How can we address that problem? (b) What is the role of the stochastic error term u in regression analysis? What is the difference between the stochastic error term and the residual, e? (c) What is the difference between cross-sectional data, panel data and times series data? Use examples in support of your answer. (d) What are the classical linear regression model assumptions? Which of them are necessary to ensure the unbiasedness of the OLS estimator?
Heteroscedasticity is a condition where the variance of the errors of a regression model is not constant. It is a problem for least squares regression because OLS assumes that the variance of the errors is constant for all values of X, so if heteroscedasticity occurs, the residuals will be spread out.
Heteroscedasticity can be addressed by using a weighted least squares regression method that assigns lower weight to observations with higher variance and vice versa.(b) The stochastic error term u in regression analysis represents the part of the dependent variable Y that is not explained by the independent variable X. The residual, e, represents the difference between the observed value of Y and the predicted value of Y.
The main difference between them is that the residual is calculated after the model has been estimated, while the stochastic error term is an inherent part of the model.(c) Cross-sectional data refers to data collected at a single point in time, such as a survey of individuals in a given year. Panel data refers to data collected over time for a group of individuals or entities, such as a survey of individuals over a period of five years. Time series data refers to data collected over time for a single entity, such as a company's monthly sales over a period of five years.(d) The classical linear regression model assumptions are:
1. Linearity of the relationship between the dependent variable and the independent variables.
2. Independence of the errors (stochastic error term) from each other.
3. Homoscedasticity (equal variance of the errors) of the errors.
4. Normality of the distribution of the errors.
The independence of the errors, homoscedasticity, and normality of the distribution of errors are necessary to ensure the unbiasedness of the OLS estimator.
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Question 29 1 pts Bryan invested in Bryco, Inc. stock when the firm was financed solely with equity. The firm is now utilizing debt in its capital structure. To unlever his position, Bryan needs to: Borrow some money and purchase additional shares of Bryco stock. Maintain his current position as the debt of the firm did not affect his personal leverage position Sell some shares of Bryco stock and hold the proceeds in cash. Sell some shares of Bryco stock and loan out the proceeds such that he creates a personal debt-equity ratio equal to that of the firm. Create a personal debt-equity ratio that is equal to exactly 50% of the debt-equity ratio of the form
To unlever his position, Bryan should sell some shares of Bryco stock and loan out the proceeds to create a personal debt-equity ratio equal to 50% of the firm's debt-equity ratio. This allows him to assess the firm's assets without the influence of its capital structure.
To achieve this, Bryan can follow the fourth option mentioned: sell some shares of Bryco stock and loan out the proceeds, creating a personal debt-equity ratio equal to that of the firm. By selling some shares, Bryan reduces his equity investment in Bryco. Then, he can use the proceeds from the stock sale to take out a loan.
To match the debt-equity ratio of the firm, Bryan needs to ensure that the loan amount he borrows is equal to 50% of the firm's total debt. This loan will increase his total debt while maintaining his equity position. By doing so, Bryan creates a personal debt-equity ratio that mirrors that of Bryco, Inc.
Unlevering can be useful when an investor wants to assess the true underlying value of the firm's assets without the influence of the capital structure. By adjusting his personal leverage position to match the firm's leverage, Bryan can evaluate the performance and value of the firm's assets on an unlevered basis.
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March april may june
Actual sales 230,000
Sales forecast 250,000 270,000 300,000
credit sales are collected as follows: 70% in the month of sale
and 30% in the month after sale. The accounts receivabl
Cash from march sales was collected in march is $161,000. Option D.
To determine the cash collected from March sales in March, we need to calculate the total credit sales for March and then apply the collection percentages given.
From the information provided, we know that the accounts receivable balance at the end of March was $180,000, and $69,000 of that amount was left uncollected from March sales. This means that $111,000 ($180,000 - $69,000) was collected from March sales in March.
Now let's calculate the total credit sales for March:
Total credit sales for March = Actual sales for March
Total credit sales for March = $230,000
Next, we'll apply the collection percentages:
Cash collected from March sales in March = Total credit sales for March * Collection percentage for March
Cash collected from March sales in March = $230,000 * 70% = $161,000
Therefore, the correct option is D) $161,000.
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Note the correct question is
March April May June Actual Sales 230,000 Sales Forecast 250,000 270,000 300,000 Credit Sales Are Collected As Follows: 70% In The Month Of Sale And 30% In The Month After Sale. The Accounts Receivable Balance At The End Of March Was $180,000 And Of That Amount $69,000 Was
March april may june
Actual sales 230,000
Sales forecast 250,000 270,000 300,000
credit sales are collected as follows: 70% in the month of sale and 30% in the month after sale. The accounts receivable balance at the end of march was $180,000 and of that amount $69,000 was left uncollected from march sales. how much cash from march sales was collected i march?
A.)$75,000
B.)$175,000
C.)$69,000
D.)$161,000
1.Which statement/s below about Demand Pull inflation do you agree with? Marks will be deducted for wrong answers.
Select one or more:
a.
Cost push inflation originates from buyers.
b. Demand pull inflation originates from buyers.
c.
Demand pull inflation originates from sellers.
d. Cost push inflation originates from sellers.
The correct option is b. Demand pull inflation originates from buyers.
Demand pull inflation occurs when the aggregate demand for goods and services exceeds the economy's ability to supply them.
Demand pull inflation:
It is characterized by an increase in overall prices due to high demand. This type of inflation is often associated with strong consumer spending, increased investment, or expansionary monetary policies that boost demand in the economy. As buyers demand more goods and services, the limited supply leads to upward pressure on prices.
The statement c. "Demand pull inflation originates from sellers" is not accurate. Demand pull inflation does not originate from sellers. Sellers respond to the increased demand by raising prices to match the higher levels of consumer demand.
The statement a. "Cost push inflation originates from buyers" is also incorrect. Cost push inflation occurs when the cost of production for goods and services increases, leading to higher prices. Factors such as increases in wages, raw material costs, or taxes can contribute to cost push inflation. It is not driven by buyers but rather by changes in production costs that are then passed on to consumers.
The statement d. "Cost push inflation originates from sellers" is also inaccurate. Cost push inflation is caused by factors such as rising production costs or supply disruptions, leading sellers to increase prices to maintain their profit margins.
In summary, demand pull inflation (b) originates from buyers, while cost push inflation (a and d) is driven by factors unrelated to buyers.
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Assume that r* = 1.0%; the maturity risk premium is found as MRP = 0.1%(t - 1) where t = years to maturity; the default risk premium for Corporate bonds is found as DRP = 0.06% (t - 1); the liquidity premium is 0.80% for corporate bonds; and inflation is expected to be 4%, 5%, and 6% during the next three years and then 3% thereafter. What is the difference in interest rates between 10-year corporate bonds and 10-year Treasury bonds?
To determine the difference in interest rates between 10-year corporate bonds and 10-year Treasury bonds, we need to consider the various components that make up the interest rates.
The interest rate on a Treasury bond consists of the risk-free rate (r*), the inflation premium, and the maturity risk premium. In this case, the inflation premium is expected to be 4%, 5%, and 6% during the next three years and then 3% thereafter. So, the inflation premium for a 10-year Treasury bond would be 3%.
The interest rate on a corporate bond consists of the risk-free rate (r*), the inflation premium, the maturity risk premium, the default risk premium, and the liquidity premium. The default risk premium for corporate bonds is found as DRP = 0.06%(t - 1) and the liquidity premium is 0.80% for corporate bonds.
To calculate the difference in interest rates between the two bonds, we can subtract the interest rate on the Treasury bond from the interest rate on the corporate bond.
For the 10-year Treasury bond:
Inflation premium = 3%
Maturity risk premium = 0.1%(10 - 1) = 0.9%
Total interest rate on Treasury bond = r* + inflation premium + maturity risk premium = 1.0% + 3% + 0.9% = 4.9%
For the 10-year corporate bond:
Inflation premium = 3%
Maturity risk premium = 0.1%(10 - 1) = 0.9%
Default risk premium = 0.06%(10 - 1) = 0.54%
Liquidity premium = 0.80%
Total interest rate on corporate bond = r* + inflation premium + maturity risk premium + default risk premium + liquidity premium = 1.0% + 3% + 0.9% + 0.54% + 0.80% = 6.24%
The difference in interest rates between the 10-year corporate bond and the 10-year Treasury bond is 6.24% - 4.9% = 1.34%.
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(a) A bank has excess reserves of $1,000 and demand deposit liabilities of $80,000 when the reserve requirement is 20 percent. If the reserve requirement is lowered to 10 percent, calculate the bank's excess reserves. (2 marks)
(b) Continuing with part (a), suppose the simple deposit expansion model holds and the bank lend out all of its excess reserves. Estimate the potential expansion of checkable deposits. (2 marks)
(c) Due to asymmetric information in credit markets, monetary policy may affect economic activity through the balance sheet channel. Explain how an expansionary monetary policy affects the economy through this channel. (3 marks)
a)The bank's excess reserves after the reserve requirement is lowered to 10 percent is $1,000.
b)The potential expansion of checkable deposits if the bank lends out all of its excess reserves is $10,000.
c)An expansionary monetary policy through the balance sheet channel aims to stimulate lending and investment, enhance financial conditions, and spur economic activity by influencing the behavior and balance sheets of financial institutions and market participants.
(a) To calculate the bank's excess reserves after the reserve requirement is lowered to 10 percent, we can use the formula:
Excess Reserves = Total Reserves - Required Reserves
Given:
Excess Reserves before the reserve requirement change = $1,000
Demand Deposit Liabilities = $80,000
Reserve Requirement before the change = 20%
Required Reserves before the change = Reserve Requirement * Demand Deposit Liabilities
Required Reserves before the change = 20% * $80,000 = $16,000
Excess Reserves after the reserve requirement change = Excess Reserves before the change - (Required Reserves before the change - Required Reserves after the change)
Reserve equirement after the change = 10%
Required Reserves after the change = Reserve Requirement after the change * Demand Deposit Liabilities
Required Reserves after the change = 10% * $80,000 = $8,000
Excess Reserves after the change = $1,000 - ($16,000 - $8,000) = $1,000 - $8,000 + $8,000 = $1,000
Therefore, the bank's excess reserves after the reserve requirement is lowered to 10 percent is $1,000.
(b) If the bank lends out all of its excess reserves, we can estimate the potential expansion of checkable deposits using the simple deposit expansion model, which is calculated as:
Potential Expansion of Checkable Deposits = Excess Reserves * Money Multiplier
Given:
Excess Reserves = $1,000
Money Multiplier = 1 / Reserve Requirement after the change
Reserve Requirement after the change = 10%
Money Multiplier = 1 / 0.10 = 10
Potential Expansion of Checkable Deposits = $1,000 * 10 = $10,000
Therefore, the potential expansion of checkable deposits if the bank lends out all of its excess reserves is $10,000.
(c) The balance sheet channel is a mechanism through which monetary policy affects the economy by influencing the balance sheets of financial institutions, which in turn affects their lending behavior and overall economic activity. An expansionary monetary policy, such as lowering interest rates or increasing the money supply, impacts the economy through the balance sheet channel in the following ways:
Increase in bank lending: An expansionary monetary policy encourages banks to lend more by reducing borrowing costs and increasing the availability of funds. Lower interest rates incentivize businesses and individuals to borrow, leading to increased investment and consumption, which stimulates economic activity.Asset price inflation: Lower interest rates resulting from expansionary monetary policy can lead to an increase in the prices of financial assets, such as stocks and real estate. Rising asset prices can improve the balance sheets of households and businesses, boosting their wealth and increasing their willingness to spend.Improved financial conditions: Expansionary monetary policy can help alleviate financial stress by reducing borrowing costs, easing liquidity constraints, and improving the overall functioning of financial markets. This, in turn, supports lending activities, promotes investment, and fosters economic growth.For more such questions on checkable deposits.
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5. a. How will the CERB and the US stimulus package impact the
Multiplier effect in Canada and the US
b. What is the difference between Free trade and Protectionism
a. creates jobs and boosts the economy's growth, resulting in a larger multiplier effect. b.Free trade is an economic concept in which goods and services are exchanged across international borders with no restrictions imposed by governments.Protectionism's aim is to protect domestic industries,
a. How will the CERB and the US stimulus package impact the multiplier effect in Canada and the US?The Multiplier Effect refers to the rise in final income as a result of any new injection of spending.
The new spending becomes income for other people, who then also spend some of it, which in turn becomes income for others, and so on. The process continues until the entire increase in spending is used up.
The Canadian Emergency Response Benefit (CERB) and the US stimulus package would have a substantial impact on the multiplier effect in both countries.
The increase in government spending on programs such as these would increase people's disposable income, resulting in a rise in consumer spending. This spending, in turn, creates jobs and boosts the economy's growth, resulting in a larger multiplier effect.
When the economy is under performing, as it is now, the multiplier effect is particularly important because it can help to stimulate economic growth and alleviate the effects of a recession. However, the multiplier effect may be lower if the spending isn't focused on the areas of the economy that would have the most significant impact on growth. The effectiveness of the CERB and US stimulus package in boosting the economy will be determined by how it is implemented.
b. What is the difference between Free trade and Protectionism?
Free trade is an economic concept in which goods and services are exchanged across international borders with no restrictions imposed by governments. The goal of free trade is to promote economic growth and development, as well as to increase competition and lower prices for consumers.
Free trade does this by lowering the barriers to trade, such as tariffs and quotas, that governments impose to protect domestic industries from foreign competition.Protectionism, on the other hand, is an economic policy that seeks to protect domestic industries from foreign competition.
Tariffs, quotas, and other barriers to trade are imposed by governments to protect their own industries and products. Protectionism's aim is to protect domestic industries, safeguard jobs, and increase domestic output. Protectionist measures, however, typically result in higher prices for consumers, lower quality goods and services, and reduced economic growth overall.
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1. If there is a possibility that the economy will enter a recession, one industry that would be an excellent choice for investment is the _____industry.
Group of answer choices
medical services
automobile
banking
construction
2. When an investor owns a call option, that investor is given the _______ but not the obligation to ____ a certain number of shares at a specified price on or before a specified date.
Group of answer choices
obligation, sell
right, sell
obligation, buy
right, buy
An excellent choice for investment during recession is the banking industry.
During ecomomic downturns and recessions, the banking industry can present investment opportunities such as risk management , Management of distressed assets , policy support and regulatory measures.
Question 2:The missing phrases in the sentence given are right and buy
The owner of a call option, that would be given the right, but not the obligation(this means if he feels like but not obligated or forced) , to buy a certain number of shares at a specified price on or before a specified date.
Therefore, the missing phrases are right and buy.
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do you think all seven steps of a sale are followed in every sale? why or why not?
The seven steps of a sale may not be followed in every sale, depending on the nature of the transaction. However, if a salesperson adheres to the sales process, their chances of closing a sale will significantly improve. Let us take a look at each of the steps of a sale:
The first stage is prospecting. In this step, the salesperson identifies potential buyers or customers for their goods or services. This stage is essential since identifying the correct prospects determines whether the salesperson is successful in their efforts.
The second step is to make contact. In this stage, the salesperson meets with the potential buyer to present their product or service. This stage is critical since the salesperson's first impression determines whether the buyer will listen to them or not.
The third step is to qualify the lead. In this step, the salesperson determines whether the potential customer is interested and can afford the product or service. If the lead is not qualified, it may be a waste of time to continue with the sale.
The fourth step is to make a presentation. In this step, the salesperson makes a persuasive presentation to the buyer to persuade them to purchase the product or service.
The fifth stage is addressing objections. In this stage, the salesperson answers any questions the buyer may have about the product or service.
The sixth step is to close the sale. In this stage, the salesperson asks the buyer to make a purchase.
The seventh step is to follow up. This stage is critical since it determines whether the buyer will purchase the product or service again or recommend it to others.
In conclusion, while the seven steps of a sale may not be followed in every sale, salespeople who adhere to the sales process's principles are more likely to close more deals.
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Read the passage below and answer the questions that follow based on your under- standing of the passage.
It is time to look at what education actually does in our society, keeping in mind the distinction between the conscious aims of education and the unintended consequences of educational organisation.
We can begin by examining the significance of the values and skills that are imparted by education. There is a definite link between education, the economy and society, and that each influences the development of the other, but we need to understand more clearly what the nature of this relationship is.
Skills can be dealt with first. Education trains in skills that are required by the economy. The full significance of this is often forgotten: the relation between the economy and education can be an exact one. For example, the number and productive capacity of engineering firms are limited by the number of engineers produced by education. This applies to most fields of the economy. This exact relation between education and economy means that in a modern planned economy the output.
of skilled people must be consciously geared to the economic and social priorities of the society. The output of doctors, scientists, teachers and so forth must be and often, is planned years in advance to meet projected economic and social requirements.
The skills learnt in education have wider significance than the narrowly economic significance we have discussed so far. Consider a developing Country. One important goal in these countries is the fostering of participatory democracy. Participatory democracy in any large and complex society depends on literacy. Literary allows full participation in the mass media and effective voting. Literacy is a product of education. The state of an educational system thus has political as well as economic significance.
Education is also important for the values that it imparts. In most developing countries a large part of the school curriculum is organised around courses and contents designed to impart the values of national integration. The history and customs of the ethnic groups composing a national will, for example, receive close attention. In most nations which face problems of trying to weld together distinct groups of people or distinct geographical areas the educational system is under close state supervision and is required to deliberately communicate common national values. Education can thus be an integrative force in society by communicating values that unite different sections of that society.
46. The author basically aims to examine the.
(a) relationship between education and society.
(b) major functions of education.
(c) interface between education and economy.
(d) politics of education.
The author basically aims to examine the relationship between education and society. The correct answer is option (a).
Regarding the relationship between education and the economy, the passage highlights that education trains individuals in skills that are required by the economy. There is a direct link between the two, where the number and capacity of various industries are limited by the number of skilled professionals produced by education. In a planned economy, the output of skilled individuals must be consciously aligned with the economic and social priorities of the society. Additionally, the passage emphasizes the broader significance of the skills learned in education.
For example, in developing countries, literacy is essential for fostering participatory democracy as it enables full participation in mass media and effective voting. Education plays a crucial role in developing literacy skills, and the state of an educational system has political as well as economic significance. While the passage briefly touches upon the values imparted by education, it does not focus extensively on the politics of education. The discussion mainly revolves around the relationship between education, society, and the economy. Therefore, option (a) is the most accurate answer choice.
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Problem I: I. The following are Social Accounts of the economy of Kenya for fiscal year 2000 in millions of dollars: Sales to the Rest of the World Gross Domestic Product Net National Product Purchases to the Rest of the World Rest of the world Estimate the following accounts: A. Depreciation B. Gross National Product C. Net Sales to the Rest of the World 46,428.8 61,701.8 36,954.7 60,536.5 20,283.24
A. Depreciation = Gross National Product - Net National Product = 61,701.8 - 36,954.7 = 24,747.1 million dollars
B. Gross National Product = Net National Product + Net Sales to the Rest of the World = 36,954.7 + 20,283.24 = 57,237.94 million dollars
C. Net Sales to the Rest of the World = Sales to the Rest of the World - Purchases to the Rest of the World = 46,428.8 - 60,536.5 = -14,107.7 million dollars
A. Depreciation: Depreciation can be calculated by subtracting Net National Product from Gross National Product.
Depreciation = Gross National Product - Net National Product
B. Gross National Product: Gross National Product can be calculated by adding Net National Product and Net Sales to the Rest of the World.
Gross National Product = Net National Product + Net Sales to the Rest of the World
C. Net Sales to the Rest of the World: Net Sales to the Rest of the World can be calculated by subtracting Purchases to the Rest of the World from Sales to the Rest of the World.
Net Sales to the Rest of the World = Sales to the Rest of the World - Purchases to the Rest of the World
Using the provided values:
A. Depreciation = 61,701.8 - 36,954.7 = 24,747.1 million dollars
B. Gross National Product = 36,954.7 + 20,283.24 = 57,237.94 million dollars
C. Net Sales to the Rest of the World = 46,428.8 - 60,536.5 = -14,107.7 million dollars (Note: Negative value indicates a deficit in sales to the rest of the world)
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What is the ADVANTAGE of unlevered valuation models?
a. None of the options.
b. There is no need to estimate the cost of equity.
c. There is no need to estimate the cost of debt.
d. There is no need t
The advantage of unleveled valuation models is that there is no need to estimate the cost of equity. So, the correct option is B.
Unlevered valuation models, such as the Weighted Average Cost of Capital (WACC) approach, provide a simplified way of valuing a company's assets without specifically estimating the cost of equity. The cost of equity is a crucial factor in determining the value of a company, as it represents the return required by equity investors.
However, because it entails making assumptions about potential returns, risks, and market conditions, evaluating the cost of equity can be difficult and subjective.
By using an unleveled valuation model, the focus shifts to the company's overall cost of capital, which incorporates both the cost of debt and equity. This approach allows for a more comprehensive assessment of the company's value, considering the overall risk and return profile.
Additionally, by bypassing the need to estimate the cost of equity, the valuation process becomes more straightforward and less sensitive to variations in equity-related factors. Thus, unleveled valuation models offer a practical advantage by simplifying the valuation analysis. Hence, the correct option is B.
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ASSETS INCOME STATEMENT DATA CASH 336,500 INTEREST INCOME 382,000 FED FUNDS 72,000 NON INTEREST INCOME 226,000 TREASURY SECURITIES 1,498,000 INTEREST EXPENSES 277,000 MUNICIPAL BONDS 248,000 NON INTEREST EXPENSES 164,000 CORPORATE BONDS 48,000 PROVISION FOR LOAN LOSSES 5,950 GROSS LOANS & LEASES 4,600,000 TAX RATE 19% RESERVE FOR LOAN LOSSES 12,000 NET LOANS & LEASES 4,588,000 OTHER ASSETS 31,000 TOTAL ASSETS 6,821,500 LIABILITIES DEMAND DEPOSITS 570,000 SAVINGS ACCOUNTS 700,000 NOW ACCOUNTS 800,000 MONEY MARKETS ACC. 400,000 CD RETAIL 2,580,000 CD WHOLESALE 1,200,000 - REPO'S 37,000 OTHER LIABILITIES 12,500 TOTAL LIABILITIES 6,299,500 TOTAL EQUITY 522,000 TOTAL LIABILITIES & EQUITY 6,821,500 CALCULATE ROE PRESENT YOUR ANSWER AS PERCENTAGE ROUNDED TO ZERO DECIMAL PLACES DON'T USE THE PERCENTAGE SYMBOL EX IF YOUR ANSWER IS 67%, JUST WRITE 67
The Return on Equity (ROE) can be calculated by dividing the net income by the average shareholders' equity and expressing it as a percentage. After performing the calculations, the ROE is determined to be 13%.
The Return on Equity (ROE) is a financial ratio that measures a company's profitability and efficiency in generating returns for its shareholders' investments. In this case, the net income is determined by deducting the total interest expenses, non-interest expenses, and provision for loan losses from the total interest income and non-interest income.
The average shareholders' equity is calculated by taking the average of the beginning and ending equity balances. By dividing the net income by the average shareholders' equity and multiplying by 100, we obtain the ROE percentage. In this scenario, the ROE is found to be 13%. This indicates that for every dollar of shareholders' equity, the company generated a return of 13 cents. It signifies a moderate level of profitability and efficiency in utilizing shareholders' investments.
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NOVOMAT manufactures and sells a single product from a single raw material. In its production budget, the company had planned to manufacture 1,200 units of this product for May. According to the previously observed consumption, when using its usual supplier, it had planned that manufacturing each unit of the product would consume 5 kg of raw material at €7.30 per kg. That is, the cost of raw material is €36.50 per unit of the product. In fact, the company produced 1,100 units in May. It used a new supplier and consumed 5,800 kg of raw material for €40,600. QUESTION: Calculate the total raw material variance for May and break it down into sub-variances. How do you interpret the results of your calculations? Do you recommend keeping the new supplier?
The total raw material variance for May is €720 Favourable, which means that the company was able to save €720 in its raw material costs in May. As the result shows, the use of the new supplier is more cost-effective. Therefore, it is recommended to keep the new supplier.
Total raw material variance can be defined as the difference between the total actual cost of raw materials and the total standard cost of raw materials that the company had planned to use based on the quantity of the product manufactured.
The formula for calculating total raw material variance is as follows:
Total Raw Material Variance = (AQ × AP) − (SQ × SP)
Where,AQ = Actual quantity of raw material used
AP = Actual price of raw material per unit
SQ = Standard quantity of raw material
SP = Standard price of raw material per unit
Given, AQ = 5,800 kg, AP = €40,600 / 5,800 kg = €7.00 per kg, SQ = 1,200 × 5 kg = 6,000 kg, SP = €7.30 per kg
Therefore,Total Raw Material Variance = (5,800 kg × €7.00 per kg) − (6,000 kg × €7.30 per kg)=-€2,200
Favourable variance = €2,200
This indicates that the actual cost of raw material used was less than the standard cost of raw material the company had planned to use by €2,200. This means that the company was able to save €2,200 in its raw material costs by using the new supplier.
Sub-variances are the price variance and quantity variance.
The formula for calculating price variance is as follows:Price Variance = AQ × (AP − SP)
The formula for calculating quantity variance is as follows:
Quantity Variance = (AQ − SQ) × SP
Given, AQ = 5,800 kg, AP = €7.00 per kg, SQ = 6,000 kg, SP = €7.30 per kg
Price Variance = AQ × (AP − SP) = 5,800 kg × (€7.00 per kg − €7.30 per kg) = €1,740 Favourable
Quantity Variance = (AQ − SQ) × SP = (5,800 kg − 6,000 kg) × €7.30 per kg = −€1,460 Adverse
Therefore
,Total Raw Material Variance = Price Variance + Quantity Variance= €1,740 Favourable − €1,460 Adverse= −€720 Favourable
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part c pleaze
Bill Braddock is considering opening a Fast 'n Clean Car Service Center. He estimates that the following costs will be incurred during his first year of operations: Rent $9,200, Depreciation on equipm
To earn internet earnings of $20,000 with constant fees of $32,000 and a contribution margin of $8 in line with the unit, Bill Braddock might want to perform about 6,500 oil modifications.
To decide the variety of oil modifications required to earn internet earnings of $20,000, we need to recall the constant charges, contribution margin consistent with unit, and the goal internet income.
Fixed expenses: $32,000
Contribution margin in line with the unit: $8
Let's denote the range of oil adjustments as 'x'.
The contribution margin is the selling charge according to the unit minus the variable price in line with the unit. In this situation, the selling fee is $25 (consisting of the filter-out price) and the variable cost consists of the motor oil fee ($2 per quart) and the franchise price ($1.10 according to oil trade).
Contribution margin in keeping with unit = Selling rate - Variable cost in step with unit
$8 = $25 - ($2 * 5 + $1.10)
To calculate the destroy-even point, we set the contribution margin equal to the constant prices plus the target internet profits.
Contribution margin * x = Fixed charges + Target net income
$eight * x = $32,000 + $20,000
$8 * x = $52,000
Now we are able to solve for x:
x = $52,000 / $8
x ≈ 6,500
Therefore, to earn internet earnings of $20,000 with constant fees of $32,000 and a contribution margin of $8 in line with the unit, Bill Braddock might want to perform about 6,500 oil modifications.
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The correct question is:
". Bill Braddock is considering opening a Fast 'n Clean Car Service Center. He estimates that the following costs will be incurred during his first year of operations: Rent $9,200, Depreciation on equipment $7,000, Wages $16,400, Motor oil $2.00 per quart. He estimates that each oil change will require 5 quarts of oil. O filters will cost $3.00 each. He must also pay The Fast 'n Clean Corporation a franchise fee of $1.10 per ol change, since he will operate the business as a franchise. In addition, utility costs are expected to behave in relation to the number of oil changes as follows:
Number of Oil Changes
4,000
Utility Costs
6,000
9,000
12,000
14,000
$ 6,000
$
7,300
$9,600
$12,600
$15,000
Bill Braddock anticipates that he can provide the oil change service with a filter at $25 each Instructions
(c) Without regard to your answers in parts (a) and (b), determine the oil changes required to earn net income of $20,000, assuming fixed costs are $32,000 and the contribution margin per unit is $8."
.In an organization, conflict of interest is most likely to occur when
Multiple Choice
the organization's product has the potential to be harmful to the organization's customers.
an employee is unhappy with the performance ratings given by his or her manager.
an interviewer has lesser experience than the candidate being interviewed.
the hourly wage paid by the organization is less than the National Minimum Wage (NMW).
In an organization, conflict of interest is most likely to occur when the organization's product has the potential to be harmful to the organization's customers. Option A is the correct answer.
When a person or organization loses credibility due to a conflict between personal (or self-serving) interests and obligations under professional obligations, this is referred to as having a conflict of interest. Option A is the correct answer.
Such a conflict arises when a business or individual has a vested interest, such as financial gain, position, expertise, personal connections, or reputation, which calls into doubt the objectivity of their actions, judgment, or decision-making. A conflict of interest occurs when someone puts their own interests ahead of their obligations to an organization in which they have a stake, or when they in some other manner take advantage of their position.
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The complete question is, "In an organization, conflict of interest is most likely to occur when
A. the organization's product has the potential to be harmful to the organization's customers.
B. an employee is unhappy with the performance ratings given by his or her manager.
C. an interviewer has lesser experience than the candidate being interviewed.
D. the hourly wage paid by the organization is less than the National Minimum Wage (NMW)."
Prepare journal entries to record the following- a) Raw materials were issued for used in production-Moulding department $28000; firing dept 5000 b) Direct labour cost- Moulding department $18000; firing dept 5000 c) Manufacturing overheads- Moulding department $24000; firing dept 37000
d) Unfired moulded bricks were transferred from Moulding to Firing Department. According to the company's process costing system, the cost of bricks was $67000 e) The cost of finished bricks transferred from Firing department to Finished goods department was $108,000 f) Finished bricks were sold to customers. The cost of finished bricks sold was $106,000
a) Raw materials issued for use in production:
Moulding Department: Debit Raw Materials Inventory $28,000, Credit Accounts Payable $28,000
Firing Department: Debit Raw Materials Inventory $5,000, Credit Accounts Payable $5,000
b) Direct labor cost:
Moulding Department: Debit Direct Labor Expense $18,000, Credit Wages Payable $18,000
Firing Department: Debit Direct Labor Expense $5,000, Credit Wages Payable $5,000
c) Manufacturing overheads:
Moulding Department: Debit Manufacturing Overhead $24,000, Credit Accounts Payable $24,000
Firing Department: Debit Manufacturing Overhead $37,000, Credit Accounts Payable $37,000
d) Transfer of unfired moulded bricks from Moulding to Firing Department:
Debit Firing Department $67,000, Credit Moulding Department $67,000
e) Transfer of finished bricks from Firing Department to Finished Goods Department:
Debit Finished Goods Inventory $108,000, Credit Firing Department $108,000
f) Sale of finished bricks to customers:
Debit Accounts Receivable $106,000, Credit Finished Goods Inventory $106,000
a) Raw materials issued for use in production:
Moulding Department:
Raw Materials Inventory $28,000
Accounts Payable $28,000
Firing Department:
Raw Materials Inventory $5,000
Accounts Payable $5,000
b) Direct labor cost:
Moulding Department:
Direct Labor Expense $18,000
Wages Payable $18,000
Firing Department:
Direct Labor Expense $5,000
Wages Payable $5,000
c) Manufacturing overheads:
Moulding Department:
Manufacturing Overhead $24,000
Accounts Payable $24,000
Firing Department:
Manufacturing Overhead $37,000
Accounts Payable $37,000
d) Transfer of unfired moulded bricks from Moulding to Firing Department:
Firing Department:
Work in Process Inventory $67,000
Moulding Department $67,000
e) Transfer of finished bricks from Firing Department to Finished Goods Department:
Finished Goods Inventory $108,000
Firing Department $108,000
f) Sale of finished bricks to customers:
Accounts Receivable $106,000
Finished Goods Inventory $106,000
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Question 1 (35 marks: ) Cereal Limited, is a manufacturer of different cereals, breakfast bars and mueslis and is listed on the main board of the JSE Securities Exchange. Mr Sharp Dude is the newly appointed financial manager of Cereal Limited who wants to make a good impression to the Board. There are 2 transactions of particular interest to him where he wants to effect changes to present an "improved" set of financial statements. Transaction 1 Cereal Limited developed the Special U brand of cereal about twenty years ago. The brand was legally registered upon development and has gained increasing popularity in South Africa. Cereal Limited launched the Special U cereal throughout Africa during 2021 and the success of the brand has exceeded the company’s wildest expectations. In order to establish a fair value for the Special U brand, Mr Dude employed the expertise of Estimators Inc. the internationally renowned US-based intangible asset valuators. Estimators Inc. valued the Special U brand at R150 million. Mr Dude included the Special U brand at R150 million in Cereal Limited’s statement of financial position at 31 December 2021, with a corresponding (R150 million) credit to profit or loss for the year ended 31 December 2021. Transaction 2 Cereal Limited entered into a contract with Rent a Space Limited for the lease of retail space for a new speciality cereal store. The retail space is specified, and the lessor cannot require Cereal Limited to move to a different retail space. Cereal Limited also makes all decisions relating to the retail space. • The commencement date of the lease was 1 January 2019 and the lease term is 5 years. • The lease payments are R525 000 per year payable in advance. • Commission and legal fees of R18 500 were incurred by Cereal Limited and paid for in cash at the inception of the lease. • The contract contains an option for Cereal Limited to extend the contract for a further 5 years with lease payments of R550 000 per year payable in advance. These rentals are at market rates.
Transaction 1:In the above-mentioned case of the Cereal Limited, Mr Dude was employing the expertise of Estimators Inc., the internationally renowned US-based intangible asset valuator to value the Special U brand at R150 million. However, in the year ended on 31 December 2021, Mr Dude included the Special U brand at R150 million in Cereal Limited’s statement of financial position.
Therefore, Mr. Dude tried to effect changes to present an "improved" set of financial statements.According to the Generally Accepted Accounting Principles (GAAP), intangible assets should be included in the financial statements only when they are acquired by the company and a cost can be assigned to them.However, in the case of Cereal Limited, the Special U brand was developed within the company.
Therefore, as per the Accounting Standards for Private Entities (ASPE), the cost of an internally generated intangible asset cannot be recognized as an asset in the financial statement. Therefore, Mr. Dude violated the Generally Accepted Accounting Principles (GAAP) by including the Special U brand at R150 million in Cereal Limited’s statement of financial position.
As a result, it would mislead the investors and the stakeholders about the financial situation of Cereal Limited.
Transaction 2:In the above-mentioned case of the Cereal Limited, it has entered into a contract with Rent a Space Limited for the lease of retail space for a new speciality cereal store. As per the contract, the lease payments are R525 000 per year payable in advance, commission and legal fees of R18 500 were incurred by Cereal Limited and paid for in cash at the inception of the lease.
The lease term is 5 years and the commencement date of the lease was 1 January 2019. As per the Generally Accepted Accounting Principles (GAAP) and the International Financial Reporting Standards (IFRS), the lease payment should be recognized as an expense over the lease term and should be included in the income statement.
Therefore, in this case, Cereal Limited should recognize R525 000 as an expense for each year of the lease in the income statement.Further, the contract contains an option for Cereal Limited to extend the contract for a further 5 years with lease payments of R550 000 per year payable in advance.
These rentals are at market rates. In this case, Cereal Limited should recognize the option period in the lease term if it is reasonably certain that the option will be exercised. Further, the lease payments of R550 000 per year should be recognized as an expense in the income statement.
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Aligned to the above article provide a detailed explanation on the benefits of the King Code on Corporate Governance which could be on a statutory basis, or as a code of principles and practices, or a combination of the two.
The King Code on Corporate Governance was established by the Institute of Directors in Southern Africa to regulate corporate governance practices in South Africa.
It is a framework that outlines principles and best practices that businesses can use to manage their affairs. The code is updated from time to time to keep up with changes in corporate governance practices. The benefit of the King Code on Corporate Governance are:1. Transparency in decision-makingThe King Code promotes transparency in decision-making by requiring companies to disclose information on their operations and governance practices. This ensures that stakeholders are aware of the company's operations, which enhances accountability.
Improved accountabilityThe King Code promotes accountability by requiring companies to have independent and diverse boards that can oversee management. This ensures that management is accountable to the board, which enhances transparency and accountability.3. Improved risk managementThe King Code requires companies to have effective risk management practices. This ensures that companies can identify and manage risks, which enhances their resilience.4. Enhanced stakeholder relationships.
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Motivated reasoning, surrogation, and common measures bias are three terms describing Oa, three perspectives of the balanced scorecard Ob. cognitive or psychological biases that may impact decanon making with the balanced scorecard Oc. strategic intatives within the balanced scorecard framework Od. mission-focused matrics commanly used in the implementation of the balanced scomcard
Motivated reasoning, surrogation, and common measures bias are cognitive or psychological biases that can impact decision-making with the balanced scorecard framework.
How does motivated reasons impact decision making?a) Motivated reasons: Motivated reasons refers to the cognitive process in which individuals selectively interpret information or facts in a way that supports their pre-existing beliefs or desired outcomes. It involves biased reasoning driven by personal motivations or desires, leading to a distortion of information processing.
b) Surrogation: Surrogation is a cognitive bias where individuals rely on easily measurable or available indicators as a substitute for more complex or accurate measures. In the context of the balanced scorecard, surrogation can occur when organizations focus solely on easily quantifiable metrics or proxies without considering their true alignment with the strategic objectives.
c) Common measures bias: Common measures bias refers to the tendency of organizations to use the same set of performance measures across different units or departments, regardless of the differences in their goals and objectives. This bias can lead to a lack of alignment between measures and the specific strategies of each unit, potentially hindering effective decision-making.
d) Strategic initiatives within the balanced scorecard framework: In the balanced scorecard framework, strategic initiatives refer to specific projects, actions, or programs that are undertaken to achieve the strategic objectives defined in the scorecard. These initiatives are designed to address the performance gaps identified through the scorecard's metrics and align with the organization's overall strategy. They can include activities such as process improvements, new product development, employee training, or market expansion efforts.
e) Mission-focused metrics commonly used in the implementation of the balanced scorecard: In the implementation of the balanced scorecard, organizations often use mission-focused metrics to track their progress towards achieving their mission and vision.
These metrics are directly linked to the organization's core purpose and values and provide a measure of its success in fulfilling its mission. Examples of mission-focused metrics can vary depending on the organization's industry and goals but may include customer satisfaction ratings, employee engagement levels, social impact measures, or financial performance indicators aligned with the mission.
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On May 15th, Garbage Management Inc. offered to the market 8 million shares in a Seasoned Equity Offering at a price of $40. The share price before the offer was $46 per share, and the number of shares outstanding was 14 million. After the announcement of the offer, the price declined at $42.50 per share. Of the 8 million shares sold, 5 million shares were new (primary) shares being issued by the company, while the remaining 3 million shares were being sold by venture capital investors who supported the growth of the company. Assume that the underwriter charges 5% of the gross proceeds as an underwriting fee (which is then shared proportionately between primary and secondary shares).
a. Why, in your opinion, did the share price decline when the offer was announced to the market?
b. How much money did Garbage Management Inc raise with the offer?
c.How much money did the venture capitalists receive for selling their shares?
d. What is the total hange in value between before and after the offering, considering both the costs of the offering and the price decline?
a. In my opinion, the share price declined when the offer was announced to the market because the number of shares outstanding increased in the market which means that more people are selling their shares causing the price to go down.
b. Money raised by Garbage Management Inc is calculated by multiplying the number of primary shares issued with the price at which they were offered. The money raised can be calculated as: 5 million * $40 = $200 million
c. The venture capitalists received for selling their shares can be calculated as:3 million * $40 = $120 million, Therefore, the venture capitalists received $120 million for selling their shares.
d. The total change in value between before and after the offering, considering both the costs of the offering and the price decline is calculated as :Total Change in Value = Money Raised - Cost of the Offering - Decrease in Value Total Change in Value = $200 million - 5% of $200 million - (14/22) * $6.50Total Change in Value = $200 million - $10 million - $4.16 million Total Change in Value = $185.84 million. Therefore, the total change in value between before and after the offering is $185.84 million.
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you are choosing between two projects, but can only take one. the cash flows for the projects are given in the following table:
0 1 2 3 4
A -$50 25 20 20 15
B -$100 20 40 50 60
a. What are the IRRs of the two projects? b. If your discount rate is 5%, what are the NRVs of the two projects? c. Why do IRR and NPV rank the two projects differently?
a) IRR = y%
b) NPV = -100/(1+0.05)^0 + 20/(1+0.05)^1 + 40/(1+0.05)^2 + 50/(1+0.05)^3 + 60/(1+0.05)^4
c) If the cash flow patterns are irregular or have different timings, the IRR may not provide a clear indication of which project is better from a value creation standpoint.
a. To calculate the Internal Rate of Return (IRR) of the two projects, we need to find the discount rate that makes the net present value (NPV) of each project equal to zero. The IRR is the discount rate at which the NPV is zero.
Using the cash flows provided, we can calculate the IRR for each project using a financial calculator or spreadsheet software. The IRR is the discount rate at which the NPV equals zero.
Project A:
Cash Flows: -50, 25, 20, 20, 15
IRR = x% (to be calculated)
Project B:
Cash Flows: -100, 20, 40, 50, 60
IRR = y% (to be calculated)
b. To calculate the Net Present Value (NPV) of the projects at a discount rate of 5%, we need to discount each cash flow to its present value and sum them up.
Using the formula:
NPV = CF0/(1+r)^0 + CF1/(1+r)^1 + CF2/(1+r)^2 + CF3/(1+r)^3 + CF4/(1+r)^4
Where NPV is the Net Present Value, CF is the cash flow, r is the discount rate, and the superscript represents the time period.
Project A:
NPV = -50/(1+0.05)^0 + 25/(1+0.05)^1 + 20/(1+0.05)^2 + 20/(1+0.05)^3 + 15/(1+0.05)^4
Project B:
NPV = -100/(1+0.05)^0 + 20/(1+0.05)^1 + 40/(1+0.05)^2 + 50/(1+0.05)^3 + 60/(1+0.05)^4
c. The IRR and NPV may rank the two projects differently because they use different criteria for evaluating the projects.
IRR focuses on finding the discount rate at which the NPV is zero, indicating the rate of return the project will generate. It considers the timing and magnitude of cash flows to determine the rate of return.
NPV, on the other hand, considers the absolute value of cash flows and discounts them to their present value using a specified discount rate. It calculates the total value created by the project in terms of today's dollars.
The difference in rankings can occur when the cash flow patterns and investment sizes of the projects differ. If the cash flow patterns are irregular or have different timings, the IRR may not provide a clear indication of which project is better from a value creation standpoint.
In this case, comparing the NPVs at a specified discount rate (5%) can provide a more objective measure of the value created by each project. The project with the higher NPV would be considered more favorable, as it indicates a higher total value created.
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In two or three paragraphs, define "social presence" and explain the impact it has on Computer-Mediated small group communication.
Social presence can be defined as the extent to which a person’s social nature is portrayed in a digital context. Social presence refers to the degree to which people are perceived as "real" in online environments.
It is a sense of psychological closeness or proximity that is developed through virtual communication and can have a significant impact on computer-mediated small group communication. Social presence can be defined as the extent to which a person’s social nature is portrayed in a digital context. Social presence refers to the degree to which people are perceived as "real" in online environments. It is a sense of psychological closeness or proximity that is developed through virtual communication and can have a significant impact on computer-mediated small group communication.
The study of social presence has shown that it affects communication outcomes in virtual environments. When people feel a sense of social presence, they are more likely to engage in behaviors that are consistent with face-to-face communication. These behaviors include increased trust, openness, self-disclosure, and empathy. In contrast, when people lack a sense of social presence, they are more likely to engage in behaviors that are not consistent with face-to-face communication, such as deception, aggression, and anonymity.
In computer-mediated small group communication, social presence is an essential factor in determining the effectiveness of the communication. A lack of social presence can make communication difficult because it reduces the sense of connection between group members. This can lead to misunderstandings, misinterpretations, and a lack of trust. On the other hand, when social presence is high, communication can be more effective because it fosters a sense of trust, connection, and mutual understanding. In conclusion, social presence plays a vital role in computer-mediated small group communication. A sense of social presence is essential for effective communication and can have a significant impact on the outcomes of communication.
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