Answer:
Pace Company
Computation and Allocation Schedule for the difference between book value and the value implied by the purchase price in the consolidated statements workpaper:
Book Value Fair Value Differential
Inventory $50,600 $68,800 $18,200
Other current assets 197,800 197,800 0
Marketable securities 100,100 125,300 25,200
Plant and equipment 305,900 330,200 24,300
Goodwill 9,300
Total $654,400 $722,100 $77,000
Before Goodwill:
Total $654,400 $722,100 $67,700
Explanation:
a) Data and Calculations:
Purchase of 20,000 of the 25,000 shares = 80% equity
Saddler Corporation’s:
Capital stock = $508,500
Retained earnings = $101,800
Total equity = $610,300
Purchase price = $533,300
Differential = $77,000
Saddler Corporation's Assets:
Book Value Fair Value Differential
Inventory $50,600 $68,800 $18,200
Other current assets 197,800 197,800 0
Marketable securities 100,100 125,300 25,200
Plant and equipment 305,900 330,200 24,300
Goodwill 9,300
Total $654,400 $722,100 $77,000
b) The Differential between the fair value of the net assets and the purchase price is allocated to Goodwill on acquisition.
Patterson Company owns 80% of the outstanding common stock of Stevens Company. On June 30, 2013, landcosting $500,000 is sold by one affiliate to the other for $800,000.Required:Prepare in general journal form the workpaper entries necessary because of the intercompany sale of land in theconsolidated financial statements workpaper for the year ended December 31, 2014, assuming that:A. Patterson Company purchased the land from Stevens Company.B. Stevens Company purchased the land from Patterson Company.
Answer:
1. Sale of land by Stevens (subsidiary) - Upstream transaction
General Journal
Date Particulars Debit Credit
31-Dec-14 Retained earnings A/c $240,000
(300,000*80%)
Non controlling interest $60,000
(300,000*20%)
To, Land $300,000
(Being profit on sale eliminated)
2. Sale by Patterson (holding) - Downstream transaction
Date Particulars Debit Credit
31-Dec-14 Retained earnings a/c $300,000
To, Land $300,000
(Being profit on sale earlier recognized by holding eliminated)
How would you respond to the argument that it is impossible to judge how successful a project like this one would have been unless you actually do it
Answer:
Explain forecasting
Explanation:
This implies that I will have to let the other person know that it possible to judge how successful a project would be by doing what is called forecasting.
Forecasting allows one to project to a reasonable extent what the success level of a project would be, especially in terms of it's revenue, overall expenses before the project is carried out. A good forecasting tool is Forecast web application which provides future estimates of budget and task duration.
ane is planning to offer a Groupon for inner tube rentals that she will distribute on hot, sunny, summer days by the river that runs through her town. Based on her past experience with Groupon, she has assigned the following probability distribution to the number of tubes she will rent on a randomly selected day. If Jane would like her expected revenue to be at least $300 per day, what should the Groupon price be? (Round your answer up to the nearest whole dollar amount.)
Probability assigned:|
x 30 60 120 180
P(x) .10 .40 .40 .10
Answer:
Jane
Price of Groupon for a revenue of $300 is:
$3
Explanation:
a) Data and Calculations:
Expected Sales volume:
Number of Tubes x 30 60 120 180
Probability P(x) .10 .40 .40 .10
Expected values 3 24 48 18
Total = 93 tubes
Groupon price = $300/93 = $3.23
b) Jane's price for each Groupon will be the rent revenue per day divided by the expected number of tubes to rent daily. The expected number of tubes is derived by multiplying each expected number of tubes by its probability and then summing up the results.
Lacy Technology transferred items with $12,600 of cost out of the Assembly Department because the items were finished and ready to be sold. What journal entries correctly reflects this transaction?
Answer:
Dr Finished Goods Inventory 12,600
Cr Work in Process - Assembly 12,600
Explanation:
Based on the information given we were told that the company transferred items that cost the amount of $12,600 from the Assembly Department because the items were finished and ready to be sold which means that the journal entries will be recorded as:
Dr Finished Goods Inventory 12,600
Cr Work in Process - Assembly 12,600
York's outstanding stock consists of 80,000 shares of noncumulative 7.5% preferred stock with a $5 par value and also 200,000 shares of common stock with a $1 par value. During its first four years of operation, the corporation declared and paid the following total cash dividends: 2015 total cash dividends $20,000 ; 2016 total cash dividends 28,000 ; 2017 total cash dividends 200,000 ; 2018 total cash dividends 350,000. Please explain how to journal this.
Answer:
dividends paid during 2015:
preferred stock dividends = $20,000, dividend per preferred stock = $0.25
common stock dividends = $0, dividend per common stock = $0
dividends paid during 2016:
preferred stock dividends = $28,000, dividend per preferred stock = $0.35
common stock dividends = $0, dividend per common stock = $0
dividends paid during 2017:
preferred stock dividends = $30,000, dividend per preferred stock = $0.375
common stock dividends = $170,000, dividend per common stock = $0.85
dividends paid during 2018:
preferred stock dividends = $30,000, dividend per preferred stock = $0.375
common stock dividends = $320,000, dividend per common stock = $1.60
Since the preferred stocks are not cumulative, any preferred dividends that are not paid during a year will not be paid in future years.
The following unadjusted trial balance is prepared at fiscal year-end for Nelson Company.
1.NELSON COMPANY Debit Credit
2. Cash $1,000
3. Merchandise Inventory 12,500
4. Store supplies. 5,800
5. Prepaid Insurance. 2,400
6. Store equipment. 42,900
7. Accumulated depreciation - Store equipment $15,250
8. Accounts payable 10,000
9.J. Nelson, Capital 32,000
10.J. Nelson, Withdrawal 2,200
11. Sales. 111,950
12. Sales discounts 2,000
13. Sales returns and allowances 2,200
14. Cost of goods sold 38,400
15. Depreciation expense- Store equipmen 0
16. Salaries expense 35,000
17. Insurance expense 0
18. Rent expense 15,000
19. Store supplies expense 0
20. Advertising expense 9,800
21. Totals $169,200 169,200
Nelson company uses a perpetual inventory system. It categorizes the following accounts as selling expenses:
Required:
1. Prepare adjusting journal entries to reflect each of the following:
a. Store supplies still available at fiscal year-end amount to $1,750.
b. Expired insurance, an administrative expense, for the fiscal year is $1,400.
c. Depreciation expense on store equipment, a selling expense is $1,525 for the fiscal year.
d. To estimate shrinkage, a physical count of ending merchandise inventory is taken. It shows $10,900 of inventory is still available at fiscal year-end.
2. Prepare a multiple-step income statement for fiscal year 2015.
3. Comple the statement of retained earnings and the balance sheet.
4. Compute the current ratio, acid-test ratio, and gross margin ratio as of January 31, 2015. (Round ratios to two decimals.)
Answer:
1)
a. Store supplies still available at fiscal year-end amount to $1,750.
Dr Supplies expense 4,050
Cr Supplies 4,050
b. Expired insurance, an administrative expense, for the fiscal year is $1,400.
Dr Insurance expense 1,400
Cr Prepaid insurance 1,400
c. Depreciation expense on store equipment, a selling expense is $1,525 for the fiscal year.
Dr Depreciation expense on store equipment 1,525
Cr Accumulated depreciation: store equipment 1,525
d. To estimate shrinkage, a physical count of ending merchandise inventory is taken. It shows $10,900 of inventory is still available at fiscal year-end.
Dr Cost of goods sold 1,600
Cr merchandise inventory 1,600
2) Income statement
Sales $111,950
Sales discounts $2,000 Sales returns and allowances $2,200Net sales $107,750
- Cost of goods sold $40,000
Gross profit $67,750
Operating expenses:Depreciation expense $1,525Salaries expense $35,000 Insurance expense $1,400 Rent expense $15,000 Store supplies expense $4,050 Advertising expense $9,800 $66,775Operating income $975
3) Statement of owner's equity (the company doesn't have retained earnings)
J. Nelson, Capital, at January 1, 202x $32,000
Net income 202x $975
Subtotal $32,975
- Withdrawals $2,200
J. Nelson, Capital, at December 31, 202x $30,775
Balance sheet
Assets:
Cash $1,000
Merchandise Inventory $10,900
Store supplies $1,750
Prepaid Insurance $1,000
Store equipment, net $26,125
Total assets $40,775
Liabilities + owner's equity:
Accounts payable $10,000
J. Nelson, Capital $30,775
Total liabilities + owner's equity $40,775
4) current ratio = $14,650 / $10,000 = 1.465
acid test ratio = $3,750 / $10,000 = 0.375
gross margin ratio = $67,750 / $107,750 = 0.629
Salah’s net income for the year ended December 31, Year 2 was $191,000. Information from Salah’s comparative balance sheets is given below. Compute the cash paid for dividends during Year 2. At December 31 Year 2 Year 1 Common Stock, $5 par value $ 506,000 $ 455,400 Paid-in capital in excess of par 954,000 858,400 Retained earnings 694,000 587,400
Answer:
Cash Dividends - Year 2 = $84400
Explanation:
The net income of the business is usually appropriated or used for two purposes at the end of the year. It is either used to pay dividends or is retained in the business and is added to the retained earnings or both.
Thus, to calculate the dividends paid by the business in a particular year, we can calculate the change in retained earnings and deduct it from the net income.
Change in retained earnings = Ending balance of retained earnings - Beginning balance of retained earnings
Change in retained earnings = 694000 - 587400
Change in retained earnings = $106600
Thus, out of the net income of $191000, $106600 were transferred to retained earnings. So, the amount of dividends paid for the year is,
Cash Dividends - Year 2 = 191000 - 106600 = $84400
As the leader of your newly formed 9-person team, one of your key concerns is that the team performs as a cohesive unit. Which of the following descriptions is most likely to indicate that your team is cohesive?
A. There is very little conflict between team members.
B. Team members prioritize the team’s goals over their own goals.
C. Whenever tackling a new team task, members typically divide into the same 3 subgroups.
D. Team members have no problem working independently or alone.
Answer:
b. Team members prioritize the team’s goals over their own goals.
Explanation:
Team cohesiveness is mostly seen in teams that perform highly. People in such teams are usually more likely to cooperate and they have an effective way of achieving their set objectives.
Team cohesiveness would have members of a team acting together rather than individually. It is an interpersonal relationship that is alive within members of the group and this pushes and motivates them to participate more and do what is necessary to achieve all of their objectives.
Pelican Cove Corporation is trying to decide whether to invest in equipment to manufacture a new product. If the investment project is accepted, sales revenue will increase by $65,000 per year and materials costs will increase by $16,000 per year. The equipment will cost $140,000 and is depreciable over 10 years using simplified straight line. The firm has a marginal tax rate of 34%. Calculate the firm's annual cash flows resulting from the new project. Group of answer choices
Answer:
The firm's annual cash flows resulting from the new project is $58,220
Explanation:
Increase in EBIT $81,000
(65,000 + 16,000)
Less: Depreciation $14,000
Profit before tax $67,000
Less: Tax at 34% $22,780
Net income $44,220
Add: Depreciation $14,000
Operating cash flows $58,220
Note: Depreciation = $140,000/10 years = $14,000
Company A was sued by Company B. The management of Company A feels that it is probable that it will have to pay the full amount to Company 8. What is the effect of this contingent event on Company A's accounting equation?
a. Increase liabilities and decrease stockholders' equity.
b. Increase assets and increase stockholders' equity.
c. No effect on the accounting equation.
d. Decrease assets and decrease liabilities.
Answer: a. Increase liabilities and decrease stockholders' equity.
Explanation:
Contingent Liabilities are obligations that the company may owe if a future event happens such as them being ruled against in a case in court.
Contingent Liabilities are to be recorded in the financial statements only when it is probable that it will happen and that the amount to be paid is reasonably estimable.
Company A's management feels like the loss is probable and that they would have to pay the full amount to company B which means that the loss is both likely and estimable.
Company A should therefore increase their liabilities and debit loss which will come from the Equity thereby reducing it.
Speedy Runner makes running shoes and they have gathered the following data for the month of October: Data Cash on 10/1 Expected Cash Collections Direct Materials Cash Disbursements Direct Labor Cash Disbursements MOH Cash Disbursements Operating Expenses Cash Disbursements Capital Expenditures Cash Disbursements Speedy Runner requires an ending cash balance of at least $12,000 and can borrow from a line of credit in $1,000 increments. How much will Speedy Runner need to borrow at the end of October?
Answer: $9,000
Explanation:
Speedy Runner will need to borrow the amount of cash disbursements that will exceed their cash receipts.
= Opening Cash + Cash Receipts - Cash Disbursements
= Opening Cash + Expected Cash Collections - Direct Labor Cash - Direct Materials Cash Disbursements - Operating Expenses Cash Disbursements - MOH Cash Disbursements - Capital Expenditures Cash Disbursements - Ending cash balance requirement
= 15,300 + 435,000 - 32,000 - 80,000 - 110,000 - 25,000 - 200,000 - 12,000
= $8,700
They can borrow in incremental terms of $1,000 so to cover the cash requirements they should borrow $9,000.
Merchant Company purchased property for a building site The costs associated with the property were:
Purchase price $191,000
Real estate commissions 16,600
Legal fees 2,400
Expenses of clearing the land 3,600
Expenses to remove old buildings2,600
What portion of these costs should be allocated to the cost of the land and what portion should be allocated to the cost of the new building?
a. $193,400 to Land; $25,200 to Building.
b. $207,600 to Land; $8,600 to Building.
c. $210,000 to Land; $2,600 to Building.
d. $216,200 to Land; $0 to Building.
e. $213,600 to Lane; $0 to Building.
Answer:
d. $216,200 to Land; $0 to Building.
Explanation:
Calculation of Cost of the land
Purchase price $191,000
Real estate commissions $16,600
Legal fees $2,400
Expenses of clearing the land $3,600
Expenses to remove old building $2,600
Cost of the land $216,200
Calculation of Cost of Building
0.
Under the allowance method, when writing off an account receivable, the journal entry to record the write-off includes a credit to:
Answer: credit to Accounts Receivable
Explanation:
Accounts Receivable is the payment that a particular company will get from the customers who have bought the company's product or services on credit.
Under the allowance method, when writing off an account receivable, the journal entry to record the write-off includes a credit to account receivables.
Charlie is a strategist who wants to decide on the appropriate strategy to help his firm "go global." Which of the following should Charlie consider while choosing his strategy?A) He must be aware of the fact that despite globalization and the emergence of the Internet, firm geographic location has actually maintained its importance.B) He should rely on his firm's business-level strategy as a clue to possible strategies pursued globally.C) He should remember that he has only one framework at his disposal to make global strategy decisions.D) He must remember that higher levels of control and a lower likelihood of any loss in reputation go along with less investment-intensive foreign entry modes.
Answer: A) He must be aware of the fact that despite globalization and the emergence of the Internet, firm geographic location has actually maintained its importance.
Explanation:
Charlie must consider that despite the fact that the internet and technology have made globalization more accessible, the location of a business remains very important hence the old saying "its all about location location location".
The firm's geographical location has an effect on stakeholders in the company such as customers, employees and suppliers. For the customers, even if the business was to rely on the internet and delivering goods, the location needs to be convenient enough to ship goods from.
The Suppliers as well need to be able to send the goods ordered for in a timely fashion and an improper location can hamper that. Even employees need a place to work in that is conducive for them in terms of logistics and a safe working environment. Charlie should definitely not forget about the importance of location.
You have been given the following return information for a mutual fund, the market index, and the risk-free rate. You also know that the return correlation between the fund and the market is 0.97.
Year Fund Market Risk-Free
2008 -15.2% -24.5% 1%
2009 25.1 19.5 3
2010 12.4 9.4 2
2011 6.2 7.6 4
2012 -1.2 -2.2 2
What are the Sharpe and Treynor ratios for the fund?
Answer:
Sharpe ratio = 0.20
Treynor ratio = –0.005
Explanation:
Note: See the attached excel file for the calculations of average rate of returns, standard deviations and beta used in the calculation below.
a. Calculation of Sharpe ratio
Sharpe ratio refers to a investment measurement that employed to measure the an investment actual that has been adjusted for the risk associated with the investment.
Sharpe ratio can be calculated using the following formula:
Sharpe ratio = (Average fund rate - Average Risk Free rate) / Standard deviation of fund rate = (5.46% - 2.40%) / 15.05% = 0.20
a. Calculation of Treynor ratio
Treynor ratio refers to investment measurement that is calculated to show the risk of certain investments after the volatility of the market has been taking into consideration.
Treynor ratio can be calculated using the following formula:
Treynor ratio = (Average market return rate - Average Risk Free rate) / Beta = (1.96% - 2.40%) / 87.53% = –0.005
Let M be the number of units to make and B be the number of units to buy. If it costs $2 to make a unit and $3 to buy a unit and 4000 units are needed, the objective function is
Min 2M + 3B
Min 4000 (M + B)
Max 2M + 3B
Max 8000M + 12000B
Answer:
Min 2M + 3B
Explanation:
Data provided in the question
Let us assume M denotes the making units
B denotes the buying units
So,
Making cost per unit = $2
And, the buying cost per unit = $3
And, the total number of units required = 4,000 units
Based on the above information, the objective function is Min 2M + 3B.
This indicates the minimum total cost
Hence, the correct option is A.
In trial balance, which accounts with normal balance is recorded at the credit side?
A company has 825 shares of $50 par value preferred stock outstanding, and the call price of its preferred stock is $63 per share. It also has 17,000 shares of common stock outstanding, and the total value of its stockholders' equity is $626,575. The company's book value per common share equals:
Answer:
Book Value Per Common Share = $33.80
Explanation:
Book Value Per Common Share = Stockholders' equity - Shares * Call Price per shares) / Shares of common stock outstanding
= ($626,575 - 825*63) / 17000
= ($626,575 - $51,975) / 17,000
= $574,600 / 17,000
= $33.80
A company's gross profit (or gross margin) was $129,650 and its net sales were $502,900. Its gross margin ratio is
Answer:
25.8%
Explanation:
A company gross profit is $129,650
The net sales is $502,900
Therefore, the gross margin ratio can be calculated as follows
Gross margin ratio= gross margin /net sales
= $129,650/$502,900
= 0.258×100
= 25.8%
Hence the gross margin ratio is 25.8%
A registered representative receives an order from a corporate issuer to buy 500,000 shares of that issuer's stock in the market, 5 minutes prior to market close. The registered representative should:
Answer: C. inform the company that this is a possible market manipulation under the Securities Exchange Act of 1934
Explanation:
The Securities Exchange Act of 1934 is meant to govern the actions of issuers and their affiliates engaging in trade in the open market. One reason for this is to prevent stock price manipulation.
SEC Act Rule 10b-18 might rule this transaction as a manipulative activity because it goes against the section of it that states that securities cannot be traded within 10 minutes of the stock market closing if that stock is an actively traded one. If it is not then the trade should not be executed within 30 minutes of market close.
The client should therefore be informed that by placing an order 5 minutes before close they could run afoul of this Act because buying such huge amounts at such a time could influence the price upwards for when the market reopens.
Your client in the 25% federal income tax bracket lives in a state where his earnings place him in the 6% bracket for state income tax purposes. If he were to purchase a 4% bond issued by a political subdivision of another state, his total tax-equivalent yield would be
Answer:
Slightly more than 5.33%.
Explanation:
In case when the municipal bond owned by an individual i.e. issued is not for interest free tax rate but also it is non tax on that particular state
So here the tax-equivalent yield is
= Purchase bond percentage ÷ (1 - tax rate)
= 0.04 ÷ (1 - 0.25)
= 5.33%
Hence, his total tax-equivalent yield is 5.33% i.e. calculated by applying the above formula
An organizationally-driven reason for outsourcing is that it can improve effectiveness by focusing on what the firm does best.
Answer:
True
Explanation:
Outsourcing is when a company gives some of its internal activities to an external party that takes the responsibility to get things done and one of the reasons for a company to do this is to get rid of activities that have to get done but that are not part of their core operations to be able to concentrate on their main activity and get those things done by experts which can help increase productivity. According to that, the answer is that the statement is true.
consider a bond that matures in 10 years it pay9% annual coupons and $100 at maturity is the required annual rate of return on the bond i s 8% then the bond will sell today for
Answer:
Bond Price today = $106.71008 rounded off to $106.71
Explanation:
To calculate the price of the bond, we need to first calculate the coupon payment per period. We assume that the interest rate provided is stated in annual terms. As the bond is an annual bond, the coupon payment, number of periods and r or YTM will be,
Coupon Payment (C) = 0.09 * 100 = $9
Total periods (n)= 10
r or YTM = 8% or 0.08
The formula to calculate the price of the bonds today is attached.
Bond Price = 9 * [( 1 - (1+0.08)^-10) / 0.08] + 100 / (1+0.08)^10
Bond Price = $106.71008 rounded off to $106.71
0.69 points eBookPrintReferences Check my work Check My Work button is now enabledItem 1Item 1 0.69 points Fresh Veggies, Inc. (FVI), purchases land and a warehouse for $410,000. In addition to the purchase price, FVI makes the following expenditures related to the acquisition: broker's commission, $21,000; title insurance, $1,100; and miscellaneous closing costs, $4,200. The warehouse is immediately demolished at a cost of $21,000 in anticipation of building a new warehouse. Determine the amount FVI should record as the cost of the land.
Answer:
$457,300
Explanation:
Calculation to determine the amount FVI should record as the cost of the land.
COST OF LAND
Land and warehouse $410,000
Add Expenditure:
Broker's commission $21,000
Title insurance $1,100
Miscellaneous closing costs $4,200
Warehouse demolished cost $21,000
Cost of land $457,300
Therefore the cost of land will be $457,300
Each extra worker produces an extra unit of output up to six workers. After six, no additional output is produced. Draw the total product of labor, average product of labor, and marginal product of labor curves.
Answer:
attached is the diagram
Explanation:
Each extra worker produces an extra unit of output, is said to be the marginal production of an extra worker employed
marginal production :
change in total production / change in labor = ΔTp / ΔL
Average production = Tp / L
Tp = total production , L = number of labor
To draw the Total product of labor , average product labor and marginal product labor curves starting from zero labor
0 worker : Total product = 0, average product labor = 0 , marginal = 0
1 worker : Total product = 1, average product = 1 , marginal = 0
2 worker : Total product = 2, average product = 1, marginal = 1
3 workers: total product = 3 average product = 1, marginal = 1
4 workers: Total product = 4, average product = 1, marginal = 1
5 workers : Total product = 5 average product = 1, marginal = 1
6 workers : total product = 6 average product = 1 , marginal = 1
7 workers : total product = 7 , average product = 0.85, marginal = 0
8 workers : total product = 8, average product = 0.75 marginal = 0
Your textbook discussed a model of a simple economy with four markets: labor, capital, energy, and food. Which of the following statements is inconsistent with a general equilibrium for this simple economy?
A. The household demand for energy equals the industry supply of energy.
B. The household demand for food equals the industry supply of food.
C. The household demand for labor equals the industry supply of labor.
D. The household supply of capital equals the industry demand for capital.
Answer:
The correct answer is the option C: The household demand for labor equals the industry supply of labor
Explanation:
To begin with, when it comes to the microeconomics theory the market of labor is considered to be as a factor of production market and from that point of view the labor is demanded by the companies to the households who are the ones who offered the labor due to the fact that the workers are the one who put their force to disposition of the companies. And that is why that it would be inconsistent to say that the household demand for labor will equals the industry supply of labor, because it is all the way around, the household supply of labor will equals the industry demand of it.
As the workforce becomes more diverse, why does performance appraisal become a more difficult process?
Answer:
Performance appraisal in a company with diverse workforce becomes difficult because of some cultural biases that may exist between the manager, who is doing the appraisal, and the diverse workforce. This problem becomes more acute if the manager is culturally biased and discriminatory by practise.
Explanation:
Company A can have a diverse workforce if it is made up of employees from culturally different places working together in the same workplace. Bias often arises due to human cultural nuisances. This becomes more obvious where managers are from some particular cultures while the employees are from mixed cultures. In such situations, the managers need to be retrained to enable them embrace cultural diversity in the workplace and in performance evaluation.
The key cause due to which the performance appraisal becomes problematic due to diversity in the workforce would be:
- Cultural bias
What is performance appraisal?
Performance appraisal is described as the process of reviewing the performances done by the employees in a particular organization to attain its goals and reward them accordingly.
When the workforce of a particular company or organization becomes exceedingly diverse, it becomes problematic to do performance appraisals.
The reason behind this is that this diversity gives rise to cultural biases and may result in discrimination.
Learn more about "Performance" here:
brainly.com/question/22735387
A written statement of what a job holder does, how it is done, under what conditions it is done, and why it is done is
Answer: Job description
Explanation:
A job description is a written statement that shows the responsibility of a worker in a particular organization. A job description can also include the details about the company such as the mission and vision of the company and its culture.
The job description is a written statement of what a job holder does, how it is done, under what conditions it is done, and why it is done.
Suppose that when your income increases by $300, your consumption expenditures increases by $240.
Your marginal propensity to consume (MPC) is _________ .
If your MPC was the same as the MPC for the economy as a whole, the expenditure multiplier for the economy would be ______________ .
Thus, a $4 million investment project would increase income by $ _________ million in total.
Answer:
The MPC is 0.8
The multiplier or k is 5
The increase in income would be $20 million.
Explanation:
The marginal propensity to consume (MPC) is the proportion of increased disposable income that consumers spend. It is a metric to quantify the induced consumption and how an increase in consumer spending occurs as a result of increase in income.
MPC is calculated as follows,
MPC = Change in consumer spending / change in income
MPC = 240 / 300
MPC = 0.8 or 80%
To calculate the multiplier, we simply use the following formula,
Multiplier or k = 1 / (1 - MPC)
k = 1 / (1 - 0.8)
k = 5
So, the expenditure multiplier for the economy would be 5.
To calculate the increase in income, we will multiply the investment amount by the expenditure multiplier.
Income increase = 4000000 * 5
Income increase = $20000000 or 20 million
Antitrust regulations would most likely require one of the following in order to determine whether or not a merger may enhance competition. Which one is it?
A. Highly complex analytical tools
B. Analysis using numerical tools
C. Obvious objective judgments
D. Readily qualified judgments
Answer: analysis using numerical tools
Explanation:
The main reason for the creation of Antitrust laws was to give power to the government to block some particular mergers and also break up the large firms to smaller ones.
Antitrust regulations would most likely require analysis using numerical tools in order to determine whether or not a merger may enhance competition.
