Answer: 0.70; 0.30
Explanation:
Marginal propensity to consume(MPC) is the additional spending by an economic agent due to a rise in income while the marginal propensity to save is the additional saving by someone due to rise in income.
Increase in income = $3,000
Increase in spending = $2,100
Increase in savings = $3,000 - $2,100 = $900
MPC = $2,100/$3,000
= 0.70
MPS = $900/$3,000
= 0.30
You are the international manager of a US business that has just invented a revolutionary new personal computer that can perform the same functions as existing PCs but costs only half as much to manufacture. Several patents protect the unique design of this computer. Your CEO has asked you to formulate a recommendation for how to expand into China. Evaluate the pros and cons of each alternative and suggest a course of action to your CEO (15 Points)
Answer:
1. Pro-Maintain tight oversight of technologies and manufacturing methods, build American employment that improve domestic reputation, and theoretically gain tax cuts.
2. Pro-Less start-up charges wanting to work to current manufacturers, possibly avoiding import-related taxes / punishments, and potentially taking advantage of brand recognition as well as financial acumen.
1. Con-Possibly increasing labour charges, logistics and delivery costs, customs duties or punishments on entry into the western europe territory , market stimulation expenses.
2. Con-Less power over production cycle and efficiency, knowledge sharing, less efficient workers.
In the context of situational analysis, the ________ includes the attitudes and reactions of the general public, social and business critics, and other organizations, such as the Better Business Bureau.A) political environmentB) social environmentC) competitive environmentD) legal environment
Answer:
political environment
Explanation:
Situational analysis involves using various methods to check a business organization both internally and externally. Such an analysis would be used to know the strength, environment and customers of this organization.
The political environment in situational analysis includes the reaction and attitude of the general public, as well as critics (both business and social) and other organizations.
Uchdorf Company invested $9,000,000 in a new product line. The life cycle of the product is projected to be 7 years with the following net income stream: $360,000, $360,000, $600,000, $1,080,000, $1,200,000, $2,520,000, and $1,444,000.
Required:
Calculate the ARR.
Answer:
Accounting rate of return = 24.10%
Explanation:
The accounting rate of return is the average annual income expressed as a percentage of the average investment.
The simple rate of return can be calculated using the two formula below:
Accounting rate of return
= Annual operating income/Average investment × 100
Average investment = (Initial cost + scrap value)/2
Average profit = Total profit over investment period / Number of years
Total profit = 360,000 + 360,000 + 600,000 +1,080,000, + 1,200,000 + 2,520,000 + 1,444,000 = 7,564,000.00
Average annual profit = 7,564,000/7 = 1,080,571.43
Average Investment = 9,000,000/2= 4500000
Accounting rate of return = 1,080,571.43 /4,500,000 × 100 = 24.10%
Accounting rate of return = 24.10%
Maxwell Feed & Seed is considering a project that has the following cash flow data. What is the project's IRR? Note that a project's projected IRR can be less than the WACC (and even negative), in which case it will be rejected.
Answer:
13.31%
Explanation:
some information is missing:
Year Cash flows
0 −$1,100
1 $450
2 $470
3 $490
the easiest way to calculate the IRR is by using a financial calculator, IRR = 13.31%
but if we don't have one at hand, the IRR is the discount rate at which a project's NPV = 0
1,100 = 450/(1 + r) + 470/(1 + r)² + 490/(1 + r)³
to simplify the formula we must use trial and error:
since we already know the real IRR, I will start with a close number like 10%
1,100 = 450/(1 + 0.1) + 470/(1 + 0.1)² + 490/(1 + 0.1)³
1,100 = 409.09 + 388.43 + 368.14
1,100 ≠ 1,165.66
since the NPV is still positive, we must increase the discount rate. following the example we can use 12%
1,100 = 450/(1 + 0.12) + 470/(1 + 0.12)² + 490/(1 + 0.12)³
1,100 = 401.79 + 374.68 + 348.77
1,100 ≠ 1,125.24
we must increase the discount rate even more to 13%
1,100 = 450/(1 + 0.13) + 470/(1 + 0.13)² + 490/(1 + 0.13)³
1,100 = 398.23 + 368.08 + 339.59
1,100 ≠ 1,105.90
we keep increasing the discount rate to 14%
1,100 = 450/(1 + 0.14) + 470/(1 + 0.14)² + 490/(1 + 0.14)³
1,100 = 394.74 + 361.65 + 330.74
1,100 ≠ 1,087.13
since now the NPV is negative, the discount rate must be between 13-14%
we continue this way until we finally reach 13.31%
Joe-Bob wants to buy a car and will need to take out a loan in order to make the purchase. His current monthly income is $3,500 per month. His mortgage payment is $900 per month, and his student loan payment is $350 per month. Note: You do not need to take taxes into consideration for this journal.
a. According to the affordability formulas given, can he afford to take out another loan?
b. When should he follow the affordability formulas?
c. In what cases should he not?
d. How could taking out the car loan impact his other priorities?
Answer:
A) according to the affordability formula Joe-Bob can take out another loan because his DTI is 36%
B) He should follow the affordability formula when he wants to take out loans
C) He should not follow DTI if he isn't taking out loans
D) Taking out a loan will negatively impact his other priorities if his DTI is very high or greater than 100%
Explanation:
using the affordability formula
The debt to income ratio = [tex]\frac{total debt}{gross income}[/tex]
total debt = mortgage payment + loan repayment = $900 + $350
= $1250
gross income = $3500
hence debt to income ratio = 1250 / 3500 = 0.3571 = 35.7%
A) according to the affordability formula Joe-Bob can take out another loan because his DTI is 36%
B) He should follow the affordability formula when he wants to take out loans
C) He should not follow DTI if he isn't taking out loans
D) Taking out a loan will negatively impact his other priorities if his DTI is very high or greater than 100%
a. According to the affordability formulas, Joe-Bob cannot afford to take out a car loan. His current DTI without the auto loan is almost 36%.
b. Joe-Bob should follow the affordability formulas to guide his decisions in taking a new loan.
c. Joe-Bob does not need to follow the affordability formulas when his debt to income ratio (DTI) is far below 36%. He can also avoid the affordability formulas when he has the prospect of increasing his monthly income.
d. If Joe-Bob takes out the car loan despite his poor rating on the affordability formulas, he may not afford to pay his bills for necessities.
Thus, Joe-Bob should not take on more loans now until he improves his income. An automobile will require routine maintenance and some repairs, including fuelling.
Data and Calculations:
Current monthly income = $3,500
Monthly mortgage payment = $900
Monthly student loan payment = $350
Total current debts = $1,250 ($900 + $350)
The Affordability Formula (Current Debt Payment to Income Ratio) =
35.7% ($1,250/$3,500 x 100)
The Affordability Rule states that Joe-Bob should not spend more than 36% of his monthly income repaying loans.
Learn more: https://brainly.com/question/20482529
American corporations vary in numerous and varied degrees from corporations of other countries. For example, in Japan, the government limits the highest wages a corporate officer may receive based as a multiple of what the lowest wage earner in the corporation receives. At one point, the highest paid employee of a Japanese corporation could receive only sixty (60) times the wage of the lowest paid employee of the corporation. Is this a wise regulation, or does this somehow limit the competitiveness of Japanese corporations
Answer with Explanation:
The wage restrictions would limit the competition of Japanese firms as the Executive Directors will be under under-paid and they will looking for jobs else where. This demotivation due to low pays would affect the competition of Japanese firms as the employee's productivity will also be lowered. The employees rather they are of Executive Level or they belong to lower level, they must be paid according to their performance. Their might be a fixed portion and a performance based portion which would erge the employee to work hard.
Liability for contracts formed by an agent depends on how the principal is classified and on whether the actions of the agent were authorized or unauthorized.a. Trueb. False
Answer:
True.
Explanation:
An agency can be defined as a mutual relationship existing between two parties, wherein a principal authorizes the agent to act as the principal's representative or on his behalf (fiduciary role) in dealing with third parties.
Liability for contracts formed by an agent depends on how the principal is classified and on whether the actions of the agent were authorized or unauthorized. This simply means that, the principal would be held responsible for the losses, legal claims and damages incurred by the agent, whether or not the agent's actions were authorized or unauthorized by the principal.
Hence, a principal is liable for acts or contracts entered into by an agent when he or she gives an agent either actual authority (power of attorney) or apparent authority.
intext:"A corporation issued 6,000 shares of its $2 par value common stock in exchange for land that has a market value of $84,000. The entry to record this transaction would include"
Answer:
Date Account Titles and Explanation Debit Credit
Land $84,000
Common stock $12,000
Paid in capital in excess of par value $72,000
Workings:
Amount of Common stock = Number of shares * Paid in capital per share
= 6,000 shares * $2
= $12,000
Amount of excess of paid in capital = Market value of land - Amount of common stock
= $84,000 - $12,000
= $72,000
An e-business can redefine its market by removing traditional marketplace intermediaries or by creating new ways to add value to business transactions.
a. True
b. False
Answer: True
Explanation:
An e-business is a kind of business whereby information is passed across on the internet. Since we live in a digital world, organizations now engage their customers online.
An e-business can redefine its market by removing traditional marketplace intermediaries or by creating new ways to add value to business transactions.
One of the potential pitfalls of real options analysis is that managers may have the incentive and know-how to game the system.
a. True
b. False
Answer:
True
Explanation:
This is true and a pitfall because managers particularly those in investment businesses can take actions that benefit themselves or act based on self interests. This is because they are open to incentives and also have the know how so they can easily make changes. This is bad for real options analysis. It is an agency issue. These people act without even considering the interests of the organization or that of their employers.
The manager of a savings and loan branch wants to estimate the average amount held in passbook savings accounts by the branch bank depositors. A random sample of 25 depositors is selected, and the results indicate a sample average of $4,750 and a sample standard deviation of $1,200. Given the 95% confidence interval estimates calculated above, if an individual had $4,000 ina passbook savings account, is this considered unusual?
a. Yes
b. Maybe
c. Do not know
d. No
Answer:
Correct answer:
d. No
Explanation:
This is because, from the random sample that was done, it shows that the average money held by customers falls within $3550 - $5950 which averages $4750 (Factoring in the standard deviation of $1200). Therefore, it is not considered unusual if an individual had $4000 since it falls within the range of amount held by most depositors and customers of the said bank.
Motorcycle Manufacturers, Inc. projected sales of 59,700 machines for the year. The estimated January 1 inventory is 6,410 units, and the desired December 31 inventory is 7,450 units. What is the budgeted production (in units) for the year? a.60,740 b.59,700 c.45,840 d.58,660
Answer:
Production= 60,740
Explanation:
Giving the following information:
Sales= 59,700
Beginning inventory= 6,410
Desired Ending inventory= 7,450
To calculate the production for the year, we need to use the following formula:
Production= sales + desired ending inventory - beginning inventory
Production= 59,700 + 7,450 - 6,410
Production= 60,740
Each year, public schools are rewarded with bigger budgets for achieving a rating of "excellent" or "recommended" and are punished for rating "needs improvement." These ratings are based on meeting thresholds on a broad set of measures such as attendance rates, graduation rates, standardized test scores, SAT scores, and so on. True or False: This funding structure incentivizes schools to seek out and serve lower-performing students. True False
Answer:
Each year, public schools are rewarded with bigger budgets for achieving a rating of "excellent" or "recommended" and are punished for rating "needs improvement." These ratings are based on meeting thresholds on a broad set of measures such as attendance rates, graduation rates, standardized test scores, SAT scores, and so on. True or False
This funding structure incentivizes schools to seek out and serve lower-performing students. True False
Explanation:
The funding structure is meant to encourage public schools for improved performance in all the performance measures. These performance measures are the means to judge whether proper application is being achieved with the funds provided by the government to such schools. They also encourage healthy competition among public schools when followed judiciously. Since they have some internal and external benchmarks, the performance measures are like a balanced scorecard for performance evaluation.
Consider a 10 year bond with a face value of $1000 that has a coupon rate of 5.3%, with semiannual payments. What is the coupon payment for this bond?
Answer:
$26.5
Explanation:
the question says that the bond has a face value equal to 1000 dollars
coupon rate = 5.3%
and that the bond pays semiannually. semiannually means that it pays after 6 months.
semi annual coupon payment formula is given by = coupon rate/2 multiplied by face value
= 5.3%/2 multiplied by 1000
= 0.0265 x 1000
= $26.5
therefore from this calculation, the coupon payment on the bond is $26.5 dollars in every six months or semiannually.
Delta Importers has a pure discount loan with a face value of $180,000 due in one year. The assets of the firm are currently worth $215,000. The shareholders in this firm basically own a ________ option on the assets of the firm with a strike price of
Answer: call; $180,000
Explanation:
Delta Importers has a pure discount loan with a face value of $180,000 due in one year. The assets of the firm are currently worth $215,000. The shareholders in this firm basically own a call option on the assets of the firm with a strike price of $180,000.
The equity of the firm is owned by the shareholders and it is identical to when a call option is being held and the strike price will be equal to the face value of $180,000.
Which phase of the HRIS system development life cycle involves identifying new needs and defining the system's scope
Answer:
Analysis phase
Explanation:
Human resource information system (HRIS) is a collection of systems and processes that provides an easy way to manage human resources, processes, and data of the organisation.
There are various processes in HRIS life cycle:
- Planning is the long range and short range forecast of resources that are to be used to implement HRIS.
- Analysis is the most important stage where needs to be met are identified.and scope is determined.
- Design is where blueprint is drafted
- Implementation is when tested and released live.
- Maintenance to fix bugs and improve the system
- Needs analysis
- Needs analysis planning
- Observation
- Exploration
- Evaluation
- Prioritisation
- Reporting
It will cost $3,000 to acquire a small ice cream cart. Cart sales are expected to be $1,400 a year for three years. After the three years, the cart is expected to be worthless as that is the expected remaining life of the cooling system. What is the payback period of the ice cream cart?
Answer:
2.14 years
Explanation:
Payback calculates the amount of time it takes to recover the amount invested in a project from it cumulative cash flows
Payback period = Amount invested / cash flows = $3,000 / $1,400 = 2.14 years
What is the expected annual capital gain yield for Orange Corp stock, based on the Constant Dividend Growth Model
Complete Question:
What is the expected annual capital gain yield for Orange Corp stock, based on the Constant Dividend Growth Model? The company plans to pay an annual dividend of of $4.12 per share in one year. The expected annual growth rate of the dividend is 12.9%, and the required rate of return for the stock is 16.63%. Answer as a percentage, 2 decimal places (e.g., 12.34% as 12.34).
Answer:
12.9%
Explanation:
As we know that:
Capital Gain Yield = (P1 - P0) / P0
Step 1: Find P0
Po = D1 / (Ke - g)
Here
D1 is $4.12 per share
Ke is 16.63%
g is 12.9%
By putting values, we have:
Po = $4.12 / (16.63% - 12.9%)
= $110.46
Step 2: Find P1
P1 = D2 / (Ke - g)
Here
D2 = D1 * (1 + 12.9%) = $4.12 per share * (1 + 12.9%) = $4.65
Ke is 16.63%
g is 12.9%
By putting values, we have:
Po = $4.65 / (16.63% - 12.9%)
= $124.70
Step3: Find Annual Capital Gain Yield
Capital Gain Yield = (P1 - P0) / P0
Now by putting values, we have:
Capital Gain Yield = ($124.7 - $110.46) / $110.46
= 12.9%
A gift-wrapping business is staffed by Kaitlyn, Rob, Sam, Susan and Sarah. The production by each of the staff members for an average eight-hour work day is as follows:
Assume that the standard or normal productivity in the organization is 10 minutes per package. What is Kaitlyn's efficiency?
Kaitlyn Rob Sam Susan Sarah
72 packages 55 packages 52 packages 52 packages 48 packages
a. 0.75 (75%)
b. 1.50(150%)
c. 9.0 packages per hour
d. 1.50 packages per hour
e. 9.0 minutes per package
Answer:
b. 1.50(150%)
Explanation:
Given that, the standard time per packages is 10 minutes
Then, the total time taken in eight hour shift is 8 * 60 = 480 minutes
The standard output = Total time taken / Standard time = 480/10 = 48 packages
Therefore, the efficiency of Kaitlyn = Kaitlyn's Output / Standard output
=72 / 48
= 1.5
Hence, the answer is 150% or 1.5
Board Company has a foreign subsidiary that began operations at the start of 2017 with assets of 155,000 kites (the local currency unit) and liabilities of 100,000. During this initial year of operation, the subsidiary reported a profit of 49,000 kites. It distributed two dividends, each for 7,300 kites with one dividend declared on March 1 and the other on October 1. Applicable exchange rates for 1 kite follow:
January 1, 2017 (start of business) $0.80
March 1,2017 0.78
Weighted average rate for 2017 0.77
October 1,2017 0.76
December 31, 2017 0.75
Required:
a. Assume that the kite is this subsidiary's functional currency. What transfation adjustment would Board report for the year 2017?
b. Assume that on October 1,2017, Board entered into a forward exchange contract to hedge the net investment in this subsidiary. On that date, Board agreed to sell 200,000 kites in three months at a forward exchange rate of $0.76/1 kite. Prepare the journal entries required by this forward contract.
c. Compute the net translation adjustment for Board to report in Accumulated Other Comprehensive Income for the year 2017 under this second set of circumstances.
Answer:
a. The Board would report translation adjustment of -$3,138.
b. See the journal entries and explanation below.
c. Net translation adjustment is -$1,138.
Explanation:
a. Assume that the kite is this subsidiary's functional currency. What translation adjustment would Board report for the year 2017?
Note: See the attached file for the calculation of translation adjustment.
The board would report a negative (debit) translation adjustment of $3,138. That is,
Translation adjustment = -$3,138
b. Assume that on October 1,2017, Board entered into a forward exchange contract to hedge the net investment in this subsidiary. On that date, Board agreed to sell 200,000 kites in three months at a forward exchange rate of $0.76/1 kite. Prepare the journal entries required by this forward contract.
Board Company
Journal Entries
Date Account titles and Explanation Debit ($) Credit ($)
01 Oct 17 (No entry)
12 Dec 17 Forward contract 2,000
Translation adjustment (positive) (w.1) 2,000
(To record forward contract change in the value to adjust translation adjustment.)
12 Dec 17 Foreign currency (kites) (w.2) 152,000
Cash 152,000
(To record 200,000 kites purchased at the spot rate of $0.76)
12 Dec 17 Cash 154,000
Foreign Currency (kites) 152,000
Forward contract 2,000
(To record 200,000 kites delivered, $154,000 received, and close the forward contract account.)
Workings:
w.1: Translation adjustment = Number of kites agreed to sell in three months * (Agreed exchange rate on October 1, 2017 per kite - Exchange rate on December 1, 2017) = 200,000 * (0.76 - 0.75) = $2,000
w.2: Foreign Currency (kites) = Number of kites agreed to sell in three months * Agreed exchange rate on October 1, 2017 per kite = 200,000 * 0.76 = $152,000
c. Compute the net translation adjustment for Board to report in Accumulated Other Comprehensive Income for the year 2017 under this second set of circumstances.
This can be calculated as follows:
Net translation adjustment = Negative translation adjustment in part a + Positive translation adjustment in part b (i.e. w.1) = -$3,138 + 2,000 = -$1,138
Therefore, net translation adjustment is -$1,138.
the price of envelopes was $3 a box, and Julie was willing to buy 10 boxes. Today, the price has gone up to $3.75 a box, and Julie is now willing to buy 8 boxes. Is Julie's demand for envelopes elastic or inelastic? What is Julie's elasticity of demand?
Answer:
Her elasticity of demand is the absolute value of -0.8, or 0.8. Julie's elasticity of demand is inelastic, since it is less than 1.
Explanation:
% Change in Quantity = (8 - 10)/(10) = -0.20 = -20%
% Change in Price = (3.75 - 3.00)/(3.00) = 0.25 = 25%
Elasticity = |(-20%)/(25%)| = |-0.8| = 0.8
When U.S. goods become more expensive relative to foreign goods, exports will __________ and imports will __________.
Answer:
fall, rise
Explanation:
US goods will become less expensive
7.. Getaway Travel Company reported net income for 2021 in the amount of $50,000. During 2021, Getaway declared and paid $2,000 in cash dividends on its nonconvertible preferred stock. Getaway also paid $10,000 cash dividends on its common stock. Getaway had 40,000 common shares outstanding from January 1 until 10,000 new shares were sold for cash on July 1, 2021. A 2-for-1 stock split was granted on July 5, 2021. What is the 2021 basic earnings per share
Answer:Earnings per share fOR 2021= 0.53
Explanation:
Earnings per share =Total earnings available to shareholders(Net income - preferred dividends )/Weighted Average Outstanding shares
Net income = $50,000
preferred dividend= $2,000
Total earnings available to common shareholders = $50,000 - $2000= $48,000
using a 2-1 stock spilt , outstanding shares= 40,000 x 2 + 10,000 x 6/12(jan- 1st july ) x 2 = 80,000 + 10,000 = $90,000
Earnings per share = $48,000/ $90,000 =0.53
Piedmont Hotels is an all-equity company. Its stock has a beta of 1.23. The market risk premium is 6.9 percent and the risk-free rate is 2.7 percent. The company is considering a project that it considers riskier than its current operations so it wants to apply an adjustment of 1.9 percent to the project's discount rate. What should the firm set as the required rate of return for the project
Answer:
The required rate of return for the project will be 13.087%
Explanation:
To calculate the required rate of return for the project, we must first calculate the required rate of return for the firm's equity. The required rate of return can be calculated using the CAPM or Capital Asset Pricing Model equation. The formula for required rate of return (r) under this model is,
r = rRf + Beta * rpM
Where,
rRF is the risk free raterpM is the risk premium on marketr = 0.027 + 1.23 * 0.069
r = 0.11187 or 11.187%
The discount rate that is usually used for an all equity firm is its required rate of return. Thus, the required rate of return for the project will be,
r = 0.11187 + 0.019
r = 0.13087 or 13.087%
The monetary value of a homemaker's time CANNOT be estimated by
A. comparing the value of the services to the spouse's wage rate.
B. measuring the marginal value of the services by the homemaker's wage rate received in a part-time job.
C. measuring the services in terms of current market prices.
D. measuring the value of the services by looking at the homemaker's opportunity costs.
Answer: measuring the services in terms of current market prices
Explanation:
Based on the information that has been provided in the question, it should be noted that the monetary value of a homemaker's time can be estimated by
comparing the value of the services to the spouse's wage rate, measuring the marginal value of the services by the homemaker's wage rate received in a part-time job and also measuring the value of the services by looking at the homemaker's opportunity costs.
Therefore, the option that measuring the services in terms of current market prices is not estimated.
Carr Company is considering two capital investment proposals. Estimates regarding each project are provided below: Project Soup Project Nuts Initial investment $400,000 $600,000 Annual net income 30,000 46,000 Net annual cash inflow 110,000 146,000 Estimated useful life 5 years 6 years Salvage value -0- -0- The company requires a 10% rate of return on all new investments. Present Value of an Annuity of 1 Periods 9% 10% 11% 12% 5 3.890 3.791 3.696 3.605 6 4.486 4.355 4.231 4.111 "The net present value for Project Nuts" is Group of answer choices
Answer:
NPV = $35,868.06
Explanation:
Net present value is the present value of after tax cash flows from an investment less the amount invested.
NPV for Project Nuts
NPV can be calculated using a financial calculator
Cash flow in year 0 = $-600,000
Cash flow each year from year 1 to 6 = 146,000
I = 10%
NPV = $35,868.06
To find the NPV using a financial calculator:
1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.
2. after inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction.
3. Press compute
A company is considering a project with a beta of 0.5 while the company’s beta is 2.0. How should the company adjust its WACC to reflect the riskiness of the project? g
Answer: decrease
Explanation:
The weighted average cost of capital is a vital calculation that is used in finance to know whether the return on an investment will meet or exceed exceed a project or an asset.
If a company is considering a project with a beta of 0.5 while the company’s beta is 2.0, to reflect the riskiness of the project, the WACC will be reduced.
On January 1, 2017, Marin Company purchased 12% bonds, having a maturity value of $320,000, for $344,260.74. The bonds provide the bondholders with a 10% yield. They are dated January 1, 2017, and mature January 1, 2022, with interest received on January 1 of each year. Marin Company uses the effective-interest method to allocate unamortized discount or premium. The bonds are classified as available-for-sale category. The fair value of the bonds at December 31 of each year-end is as follows. 2017 $342,000 2020 $330,700 2018 $329,700 2021 $320,000 2019 $328,700 (a) Prepare the journal entry at the date of the bond purchase. (b) Prepare the journal entries to record the interest revenue and recognition of fair value for 2017. (c) Prepare the journal entry to record the recognition of fair value for 2018.
Answer and Explanation:
The Journal entry is shown below:-
1. Debt Investment Dr, $344,260.74
To Cash $344,260.74
(Being cash paid is recorded)
2. Interest Receivable Dr, $38,400
To Debt Investment $3,973.93
To Interest Revenue $34,426.07
(Being interest received is recorded)
Fair Value Adjustment Dr, $1,713.19 ($342,000 -$340,286.81)
To Unrealized Holding Gain or Loss - Equity $1,713.19
(Being fair value adjustment is recorded)
3. Unrealized Holding Gain or Loss - Equity $7928.68
($335,915.49 - $329,700 + $1,713.19)
To Fair Value Adjustment 7,928.68
(Being unrealized loss or gain is recorded)
Working note
Book value of Interest Interest Amortization Book value
debt beginning Revenue Receivable (d = c - d) of debt
(a) b=(a × 10%) c at the end
($320,000 × 12%) (e - d)
$344,260.74 $34,426.07 $38,400 $3,973.93 $340,286.81
$340,286.81 $34,028.68 $38,400 $4,371.32 $335,915.49
If the Fed increases the discount rate, which of the following accurately describes the sequence of events that will follow in the banking system, finally leading to a decline in money supply?
A. Reserves ↓: Excess reserves ↓; Loans ↓; Deposits ↓; Money supply ↓
B. Loans ↓; Deposits ↓; Reserves ↓; Excess reserves ↓; Money supply ↓
C. Deposits ; Reserves: Excess reserves; Loans ↓; Money supply ↓
D. Excess reserves ↓; Reserves ↓; Loans ↓; Deposits ↓; Money supply ↓
Answer: A. Reserves ↓: Excess reserves ↓; Loans ↓; Deposits ↓; Money supply ↓
Explanation:
The discount rate is the rate at which the Fed lends money to banks and other depository type institutions. Normally banks have a reserve requirement that the Fed requires of them which states how much they are to leave with the Fed as a reserve. Banks tend to fall short of this reserve sometimes and so can borrow from the Fed to balance it off.
If the Fed increase the rate at which these banks can borrow, they will not want to do so thus leaving their Reserves at the Fed lower than it should be. They will then use their excess reserves which is money kept in reserve more than the Fed requires, to balance off their reserve at the Fed.
As a result of this reduction in their Excess reserve, they will have less money to give out as loans. With less loans being made, people will not have as much money to deposit after taking the loans. Money supply will then fall as a whole.
Tempe Office Services and Supplies (TOSS) provides various products and services in the Tempe Research Park, home to numerous high-tech and bio-tech companies. Making color copies is one of its most popular and profitable services. The controller performed a regression analysis of data from the Color Copy Department with the following results:
Intercept 238.6
R square 0.968
Number of observation 6
X coefficient 0.069
Required:
What is the variable cost per color copy for TOSS?
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