Business

Assume the MPC is 0.75. Assume there is a multiplier effect and that the total crowding-out effect is $6 billion. An increase in government purchases of $10 billion will shift aggregate demand to the

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Assume the MPC is 0.75. Assume there is a multiplier effect and that the total crowding-out effect is $6 billion. An increase in government purchases of $10 billion will shift aggregate demand to the a. left by $24 billion. b. right by $34 billion. c. left by $36 billion. d. right by $36 billion EXPERT ANSWER

The demand and supply functions of a good are given by: P= -3QD + 60 P = 2Qs + 40 respectively (a) If the government decides to impose a tax of £t per good, show that the equilibrium quantity is given by: Q = 4 – 1/50 and write down a similar expression for the equilibrium price. [4 marks] (b) If it is known that the equilibrium quantity is 3, find the value of t. How much of this tax is paid by the firm? [3 marks] (c) If, instead of imposing a tax, the government provides a subsidy of £5 per good, find the new equilibrium price and quantity. [3 marks]

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EXPERT ANSWER Given, Demand equation, P = 60 – 3Qd and Supply equation, P = 2Qs + 40 In equilibrium, demand = supply Thus, 60 – 3Q = 2Q + 40 which gives Q = 4 and P = 48 (a) We know, the government imposes a tax of $t per unit. Therefore, new supply equation becomes: …

The demand and supply functions of a good are given by: P= -3QD + 60 P = 2Qs + 40 respectively (a) If the government decides to impose a tax of £t per good, show that the equilibrium quantity is given by: Q = 4 – 1/50 and write down a similar expression for the equilibrium price. [4 marks] (b) If it is known that the equilibrium quantity is 3, find the value of t. How much of this tax is paid by the firm? [3 marks] (c) If, instead of imposing a tax, the government provides a subsidy of £5 per good, find the new equilibrium price and quantity. [3 marks] Read More »

Exercise 2: Alpha Co purchased 1,450,000 ordinary shares in Beta Co in 20X0, when the general reserve of Beta stood at $400,000 and there were no retained earnings. The statements of financial position of the two companies as at 31 December 20X4 are set out below. ASSETS Alpha $’000 Beta $’000 Non-Current Asset: Property Plant and Equipment Investment in Beta at cost 8,868 1,450 10,318 1,787 0 1,787 Current Asset Inventories Receivables Cash 1,983 1,462 25 3,470 13,788 1,425 1,307 16 2,748 4,535 Total Equity and Liabilities Share capital (50c ordinary shares) 5,500 1,000 General reserve 1,200 800 Retained earnings 485 100 Total Equity 7,185 1,900 Non-Current Liabilities Borrowings 10% 4,000 Borrowings 15% 500 Total non-current liabilities 4,000 500 Current Liabilities Bank overdraft 1,176 840 Trade payables 887 1,077 Taxation 540 218 Total current liabilities 2,603 2,135 Total liabilities 6,603 2,635 Total equity and liabilities 13,788 4,535 At the end of the reporting period the current account of Alpha with Beta was agreed at $23,000 owed by Beta. This account is included in the appropriate receivable and trade payable balances shown above. There has been no impairment of goodwill since the date of acquisition. It is the group’s policy to value the non-controlling interest at its proportionate share of the fair value of the subsidiary’s net assets Required: (a) Prepare a consolidated statement of financial position for the Alpha Beta Group. (b) Show the alterations necessary to the group statement of financial position if the intragroup balance owed by Beta to Alpha represented an invoice for goods sold by Alpha to Beta at a mark-up of 15% on cost, and still unsold by Beta at 31 December 20X4.

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EXPERT ANSWER Answer (a): CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 20X4 Assets Amount ($’000) Non-current Property, plant, and equipment 10,655.0 Goodwill (Working note-1) 435.0 11,090.0 Current assets Inventories 3,408.0 Receivables (1,462 + 1,307 – 23) 2,746.0 Cash 41.0 6,195.0 Total assets 17,285.0 Equity and liabilities Equity attributable to owners of the parent: …

Exercise 2: Alpha Co purchased 1,450,000 ordinary shares in Beta Co in 20X0, when the general reserve of Beta stood at $400,000 and there were no retained earnings. The statements of financial position of the two companies as at 31 December 20X4 are set out below. ASSETS Alpha $’000 Beta $’000 Non-Current Asset: Property Plant and Equipment Investment in Beta at cost 8,868 1,450 10,318 1,787 0 1,787 Current Asset Inventories Receivables Cash 1,983 1,462 25 3,470 13,788 1,425 1,307 16 2,748 4,535 Total Equity and Liabilities Share capital (50c ordinary shares) 5,500 1,000 General reserve 1,200 800 Retained earnings 485 100 Total Equity 7,185 1,900 Non-Current Liabilities Borrowings 10% 4,000 Borrowings 15% 500 Total non-current liabilities 4,000 500 Current Liabilities Bank overdraft 1,176 840 Trade payables 887 1,077 Taxation 540 218 Total current liabilities 2,603 2,135 Total liabilities 6,603 2,635 Total equity and liabilities 13,788 4,535 At the end of the reporting period the current account of Alpha with Beta was agreed at $23,000 owed by Beta. This account is included in the appropriate receivable and trade payable balances shown above. There has been no impairment of goodwill since the date of acquisition. It is the group’s policy to value the non-controlling interest at its proportionate share of the fair value of the subsidiary’s net assets Required: (a) Prepare a consolidated statement of financial position for the Alpha Beta Group. (b) Show the alterations necessary to the group statement of financial position if the intragroup balance owed by Beta to Alpha represented an invoice for goods sold by Alpha to Beta at a mark-up of 15% on cost, and still unsold by Beta at 31 December 20X4. Read More »

Vietnam imports steel and exports coal. China applies an export subsidy on coal that VN also exports. What happens to VN’s TOT and Why?

Business, Operational Management / By

Vietnam imports steel and exports coal. China applies an export subsidy on coal that VN also exports. What happens to VN’s TOT and Why? EXPERT ANSWER Seaborne warm coal shippers stayed careful of regard to the speed of progress of Vietnam’s new force plants and the circumstance of when they were probably going to come …

Vietnam imports steel and exports coal. China applies an export subsidy on coal that VN also exports. What happens to VN’s TOT and Why? Read More »

A company want to analyze moisture content of wheat flour before using to make bread. A technician use the rapid moisture analyzer to measure the moisture content of the flour. After analyzing, the machine showed the data of 11.2%. So how much amounts of water do we need to add to the flour to increase the moisture content to 68% for breadmaking?

Business, Economics / By

A company want to analyze moisture content of wheat flour before using to make bread. A technician use the rapid moisture analyzer to measure the moisture content of the flour. After analyzing, the machine showed the data of 11.2%. So how much amounts of water do we need to add to the flour to increase …

A company want to analyze moisture content of wheat flour before using to make bread. A technician use the rapid moisture analyzer to measure the moisture content of the flour. After analyzing, the machine showed the data of 11.2%. So how much amounts of water do we need to add to the flour to increase the moisture content to 68% for breadmaking? Read More »

1) A firm is considering replacement of an equipment, whose first cost is Rs. 4,000 and the scrap value is negligible at the end of any year. Based on experience, it was found that the maintenance cost is zero during the first year and it increases by Rs. 200 every year thereafter. (Compute for first 10 years of service to arrive at a conclusion) (a) When should the equipment be replaced if the discount rate is 0%? (b) When should the equipment be replaced if the discount rate is 12%?

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EXPERT ANSWER

Q-1 What are the challenges being faced by Imtiaz supermarket?

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Q-1 What are the challenges being faced by Imtiaz supermarket? Q-2 Did these challenges effect customer satisfaction? Explain how with examples Q-3 What could be possible solutions for these challenges? What do you recommend being an entrepreneur? Q-4 what sort of benefits would it bring to Imtiaz Super Market? EXPERT ANSWER Q1) Imtiaz Super Market …

Q-1 What are the challenges being faced by Imtiaz supermarket? Read More »

In your opinion, in which industries could the UK, Italy and Australia be considered ‘key’ countries?

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In your opinion, in which industries could the UK, Italy and Australia be considered ‘key’ countries? EXPERT ANSWER Solution: In my opinion key industries are the ones in which the country has a specific advantage and has been instrumental in recent past. Some of the prominant industries in the US, Australia, and Italy are mentioned …

In your opinion, in which industries could the UK, Italy and Australia be considered ‘key’ countries? Read More »

The Ottey Corporation issued 10-year, $4,000,000 par, 7% callable convertible subordinated debentures on January 2, 2010. The bonds have a par value of $1,000, with interest payable annually. The current conversion ratio is 14 : 1, and in 2 years it will increase to 18 : 1. At the date of issue, the bonds were sold at 98. Bond discount is amortized on a straightline basis. Ottey’s effective tax was 35%. Net income in 2010 was $7,500,000, and the company had 2,000,000 shares outstanding during the entire year.

Business, Economics / By

The Ottey Corporation issued 10-year, $4,000,000 par, 7% callable convertible subordinated debentures on January 2, 2010. The bonds have a par value of $1,000, with interest payable annually. The current conversion ratio is 14 : 1, and in 2 years it will increase to 18 : 1. At the date of issue, the bonds were …

The Ottey Corporation issued 10-year, $4,000,000 par, 7% callable convertible subordinated debentures on January 2, 2010. The bonds have a par value of $1,000, with interest payable annually. The current conversion ratio is 14 : 1, and in 2 years it will increase to 18 : 1. At the date of issue, the bonds were sold at 98. Bond discount is amortized on a straightline basis. Ottey’s effective tax was 35%. Net income in 2010 was $7,500,000, and the company had 2,000,000 shares outstanding during the entire year. Read More »

E13.13 (LO 3) (Contingencies) Presented below are three independent situations. Answer the question at the end of each situation. 1. During 2020, Salt-n-Pepa Inc. became involved in a tax dispute with the IRS. Salt-n-Pepa’s attorneys have indicated that they believe it is probable that Salt-n-Pepa will lose this dispute. They also believe that Salt-n-Pepa will have to pay the IRS between $900,000 and $1,400,000. After the 2020 financial statements were issued, the case was settled with the IRS for $1,200,000. What amount, if any, should be reported as a liability for this contingency as of December 31, 2020? 2. On October 1, 2020, Jackson Chemical was identified as a potentially responsible party by the Environmental Protection Agency. Jackson’s management along with its counsel have concluded that it is probable that Jackson will be responsible for damages, and a reasonable estimate of these dam- ages is $5,000,000. Jackson’s insurance policy of $9,000,000 has a deductible clause of $500,000. How should Jackson Chemical report this information in its financial statements at December 31, 2020? 3. Etheridge Inc. had a manufacturing plant in Sudan, which was destroyed in the civil war. It is not certain who will compensate Etheridge for this destruction, but Etheridge has been assured by gov- ernmental officials that it will receive a definite amount for this plant. The amount of the compen- sation will be less than the fair value of the plant, but more than its book value. How should the contingency be reported in the financial statements of Etheridge Inc.?

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EXPERT ANSWER (1) As per FASB, when based on a given range on contingency that may occur for reasons such as DISPUTES and a particular amount within the given range is very likely to become a liability than such amount should be accrued. However when such an estimate of a particular amount within the given …

E13.13 (LO 3) (Contingencies) Presented below are three independent situations. Answer the question at the end of each situation. 1. During 2020, Salt-n-Pepa Inc. became involved in a tax dispute with the IRS. Salt-n-Pepa’s attorneys have indicated that they believe it is probable that Salt-n-Pepa will lose this dispute. They also believe that Salt-n-Pepa will have to pay the IRS between $900,000 and $1,400,000. After the 2020 financial statements were issued, the case was settled with the IRS for $1,200,000. What amount, if any, should be reported as a liability for this contingency as of December 31, 2020? 2. On October 1, 2020, Jackson Chemical was identified as a potentially responsible party by the Environmental Protection Agency. Jackson’s management along with its counsel have concluded that it is probable that Jackson will be responsible for damages, and a reasonable estimate of these dam- ages is $5,000,000. Jackson’s insurance policy of $9,000,000 has a deductible clause of $500,000. How should Jackson Chemical report this information in its financial statements at December 31, 2020? 3. Etheridge Inc. had a manufacturing plant in Sudan, which was destroyed in the civil war. It is not certain who will compensate Etheridge for this destruction, but Etheridge has been assured by gov- ernmental officials that it will receive a definite amount for this plant. The amount of the compen- sation will be less than the fair value of the plant, but more than its book value. How should the contingency be reported in the financial statements of Etheridge Inc.? Read More »