The entry increases the accumulated depreciation account, which represents the accumulated depreciation on the equipment.
1. Insurance Expense (Income Statement) $4,750
Prepaid Insurance (Balance Sheet) $4,750
The one-year fire insurance policy was purchased on October 1, but as of December 31, only three months of coverage remain. The adjusting entry reduces the prepaid insurance account by $4,750 ([$19,000/12 months] * 3 months) and records that amount as an expense for the current period.
2. Interest Expense (Income Statement) $595
Notes Payable (Balance Sheet) $595
The advance made to the chief financial officer accrues interest at 7% per year. Since the fiscal year-end is December 31, six months' worth of interest ([$17,000 * 7%] * [6/12]) needs to be accrued. The adjusting entry recognizes the interest expense and increases the notes payable balance.
3. Depreciation Expense (Income Statement) $6,700
Accumulated Depreciation (Balance Sheet) $6,700
The equipment purchased at the beginning of the year has a useful life of one year and no salvage value. Therefore, the annual depreciation expense is $13,400 ($67,000/1 year). Since the fiscal year-end is December 31, the adjusting entry recognizes half of the annual depreciation expense for the current period. The entry increases the accumulated depreciation account, which represents the accumulated depreciation on the equipment.
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The financial statement that reports revenues and expenses is the O A. Statement of changes in equity OB. Statement of financial position O C. Statement of income D. Statement of cash flow
The financial statement that reports revenues and expenses is the Statement of Income or the Income Statement.
The statement of income, also known as the income statement, reports a company's revenues and expenses for a specific period of time, such as a month or a year. It helps to show a company's profitability and indicates whether it is generating a profit or a loss. The statement of income is the first of the two primary financial statements that demonstrate a company's financial position.
The other financial statement is the balance sheet, which shows a company's financial position at a specific moment in time. To generate an accurate statement of income, all of a company's revenue sources and expenses should be recorded. Typically, revenues are reported first, followed by all expenses that are incurred to produce those revenues. The difference between total revenue and total expenses is the net income, which is a company's profit or loss.
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Firm X buys equipment for $7,000 and leases the equipment to firm A for $400 a year for six years. After six years, firm X expects to sell the asset for $7,500. What is the return that firm X earns on the lease? Use Appendix B and Appendix D to answer the question. Round your answer to the nearest whole number. %........?
The return that firm X earns on the lease, rounded to the nearest whole number, is approximately 141%.
To calculate the return that firm X earns on the lease, we need to determine the total cash inflows and outflows over the lease period. Firm X purchases the equipment for $7,000 and leases it to firm A for $400 per year for six years. At the end of the lease term, firm X expects to sell the asset for $7,500.
The total cash inflow from the lease would be the annual lease payment of $400 multiplied by the lease term of six years, resulting in $2,400. Additionally, the cash inflow from the sale of the asset would be $7,500. Thus, the total cash inflow for firm X is $2,400 + $7,500 = $9,900.
The initial cash outflow for the equipment purchase is $7,000. Therefore, the return on the lease can be calculated by dividing the total cash inflow ($9,900) by the initial cash outflow ($7,000) and multiplying by 100 to express it as a percentage.
Return on Lease = (Total Cash Inflow / Initial Cash Outflow) * 100 = ($9,900 / $7,000) * 100 ≈ 141%.
Therefore, the return that firm X earns on the lease, rounded to the nearest whole number, is approximately 141%.
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2. Consider two types of income support programs. One is a sort of "universal basic income": each individual gets a transfer of $48 per day whether or not they work, but they may still work at the market wage, if they wish, and they will continue to receive a $48 transfer in addition to any income they earn if they choose to work. The other is a "living wage" kind of program: all individuals who are working for a market wage less than $10 per hour are given a subsidy per hour worked to raise their effective hourly pay to $10 per hour (but they don't receive any other transfers). Suppose people have a total of 24 hours per day to allocate between labor and leisure. a. Diagram, on one graph, the budget constraints for choosing leisure and goods under these two different programs, with leisure on the horizontal axis and total income (available to be spent on goods) on the vertical axis. Assume that the market wage is $8 per hour. (10)
Budget constraints for leisure and goods consumption under universal basic income and living wage programs are illustrated in a graph.
The budget constraint represents the different combinations of leisure and goods that an individual can afford given their income and the prices of goods and leisure. Under the "universal basic income" program, each individual receives a transfer of $48 per day regardless of whether they work or not.
This means their total income available to be spent on goods is constant at $48. The budget constraint for this program would be a straight line parallel to the leisure axis, indicating that leisure is unaffected by the level of income.
On the other hand, under the "living wage" program, individuals who work for a market wage less than $10 per hour receive a subsidy per hour worked to raise their effective hourly pay to $10. This increases their total income as they work more hours.
The budget constraint for this program would be a upward-sloping line with a slope of $10, indicating that for each additional hour of leisure forgone, individuals receive an additional $10 to spend on goods.
By graphing both budget constraints on the same graph, we can compare the trade-offs between leisure and goods under the two programs.
The graph will show that the budget constraint for the "living wage" program lies above the budget constraint for the "universal basic income" program, indicating that individuals have a higher income and can afford more goods consumption if they choose to work under the "living wage" program.
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In December 2020, following an investigation by the Competition and Markets Authority (CMA), 2 UK-based companies who supply groundworks products to some of the nation’s largest construction firms, have been fined £15m for colluding illegally to reduce competition and maintain or increase prices for over 2 years. This involved sharing confidential information on future pricing and commercial strategy and monitoring each other’s prices.
a) Use economic theory to explain how firms can sustain collusion in the market when they interact repeatedly.
b) When does economic theory suggest that collusion is more likely to be successful?
c) How does information sharing and monitoring help sustain the collusion in the above case?
The UK-based companies supplies groundworks products to the construction firms. This issue would impact on market and economy of the companies which was analyzed by Competition and Markets Authority .
a) Firms can sustain collusion in the market when they interact repeatedly by relying on repeated games and the concept of reputation. In economic theory, repeated interaction allows firms to establish a pattern of behavior and build a reputation for being cooperative or retaliatory. Through repeated games, firms can develop a mutually beneficial strategy of collusion, where they agree to coordinate their actions to reduce competition and maintain higher prices. By establishing a reputation for punishing defectors and rewarding cooperation, firms can create a credible deterrent against cheating and sustain collusion over time.
b) Economic theory suggests that collusion is more likely to be successful under certain conditions. First, a small number of firms in the market increases the likelihood of collusion as coordination becomes easier with fewer participants. Second, when barriers to entry are high, such as significant capital requirements or technological expertise, it reduces the threat of new entrants disrupting the collusive agreement. Third, when demand is relatively stable, firms can more accurately predict market conditions and coordinate their actions accordingly. Lastly, when the costs of monitoring and enforcing the collusive agreement are low compared to the potential gains from collusion, firms are more likely to sustain the agreement.
c) Information sharing and monitoring play crucial roles in sustaining collusion. In the above case, the companies involved shared confidential information on future pricing and commercial strategy, which allowed them to align their actions and avoid undercutting each other's prices. This facilitated coordinated price increases and reduced competition in the market. Additionally, by monitoring each other's prices, the firms could quickly detect any deviations from the agreed-upon pricing strategy, enabling them to take corrective measures or apply sanctions if necessary. The combination of information sharing and monitoring acted as mechanisms to ensure compliance with the collusive agreement and maintain the desired market conditions.
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• One of the core job characteristics in the Job Characteristics Model of job enrichment is:
O a. affiliation.
O b. task division.
O c. power.
O d. skill variety.
• A politician is speaking in a public debate and employs make-up artists, fashion advisors, and speech trainers to improve her presentation and credibility. Her approach emphasises which component of persuasion?
O a. The message
O b. The source
O c. The context
O d. The recipient
• Which of the following situations is best analysed using equity theory?
O a. Cindy likes the people she works with
O b. Karen gets a good salary considering her needs
O c. Beth gets more money than Liz even though their jobs are essentially the same and both work equally hard
O d. Liz is happy with her job because it is challenging
• Intrinsic work rewards:
O a. result directly from task accomplishment.
O b. are controlled externally by supervisors.
O c. are controlled by co-workers.
O d. result directly from pay.
• Which of the following is a MBTI orientation?
O a. Locus of control
O b. Thinking verses feeling
O c. Conscientiousness
O d. Openness to experience
• Expresses similar traits to psychopathy but individuals develop these traits as a result of poor parenting and other environmental factors.
O a. Sadism
O b. Sociopathy
O c. Masochism
O d. Crimonopathy
• Bias (in relation to cognitive ability testing):
O a. Is none of the above.
O b. Is a statistical term relating to errors of prediction.
O c. Is a value judgement.
O d. Relates to the extent to which the test taker has had the opportunity to become familiar with the subject matter.
• Which does not describe someone with a Type A personality?
O a. Impatience with anything that interferes with goal attainment
O b. Workaholic tendencies
O c. Unlikely to react in a hostile or aggressive manner
O d. Constant feeling of time urgency
1. In the Job Characteristics Model of job enrichment, one of the core job characteristics is: d. skill variety.
2. A politician who employs make-up artists, fashion advisors, and speech trainers to improve her presentation and credibility emphasizes which component of persuasion: b. The source.
3. The situation that is best analyzed using equity theory is: c. Beth gets more money than Liz even though their jobs are essentially the same and both work equally hard.
4. Intrinsic work rewards: a. result directly from task accomplishment.
5. An MBTI orientation is: b. Thinking versus feeling.
6. The term that expresses similar traits to psychopathy but individuals develop these traits as a result of poor parenting and other environmental factors is: b. Sociopathy.
7. Bias in relation to cognitive ability testing: c. Is a value judgment.
8. Someone with a Type A personality is unlikely to react in a hostile or aggressive manner: c. Unlikely to react in a hostile or aggressive manner.
1. In the Job Characteristics Model, skill variety refers to the extent to which a job requires an employee to use a variety of different skills and abilities. It is one of the core characteristics that contribute to job enrichment and employee motivation.
2. When a politician employs make-up artists, fashion advisors, and speech trainers to improve her presentation and credibility, she is emphasizing the source component of persuasion. The source, in this case, refers to the person delivering the message and their perceived credibility, attractiveness, and expertise.
3. Equity theory focuses on perceptions of fairness in the distribution of rewards. In the given situation, Beth receiving more money than Liz, despite their similar jobs and effort, raises questions of fairness and is best analyzed using equity theory.
4. Intrinsic work rewards are internal rewards that individuals experience as a direct result of task accomplishment. These rewards can include feelings of achievement, satisfaction, enjoyment, and personal growth.
5. MBTI (Myers-Briggs Type Indicator) orientation refers to the preferences and tendencies identified by the MBTI personality assessment. One of the dimensions assessed by MBTI is thinking versus feeling, which reflects a person's preference for making decisions based on logical analysis or personal values and emotions.
6. Sociopathy is a term that describes individuals who exhibit similar traits to psychopathy but develop these traits as a result of poor parenting and environmental factors. It is distinct from sadism, masochism, and criminopathy.
7. Bias, in relation to cognitive ability testing, refers to a value judgment or subjective influence that can affect the accuracy or fairness of test results. It is not directly related to statistical errors of prediction or familiarity with the subject matter.
8. Type A personality traits include impatience with goal interference and a constant feeling of time urgency. However, individuals with Type A personality traits are more likely to react in a hostile or aggressive manner, making option c. "Unlikely to react in a hostile or aggressive manner" the answer that does not describe someone with a Type A personality.
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MGT 422
Read the following small case and answer the questions given at the end with solid explanation.
You have a long-standing consulting relationship with a large consumer products company. This company represents 50 percent of your consulting revenues and is clearly your most important client. The CEO has called to ask you to commit a significant amount of time over the next couple of months to assist with a large merger project. The company is merging with a large conglomerate whose primary business is the sale and distribution of tobacco products. The CEO is relying on you to assist in facilitating a smooth integration of the two companies. You promised yourself that because your father died of lung cancer, you would never work for a tobacco company.
Is there a way that you can accept the consulting assignment and still keep your promise to yourself? How will you handle this dilemma if you decide that you cannot work for the tobacco company?
When faced with this dilemma, there are a few possible approaches to consider:
1. Transparency and Discussion: Schedule a meeting with the CEO to have an open and honest conversation about your personal conflict of interest due to your father's experience with lung cancer. Explain your promise to yourself and the emotional significance it holds for you. Discuss potential alternative ways in which you can contribute to the merger project without directly working with the tobacco company. This could involve focusing on other aspects of the integration process or offering assistance in areas that do not involve tobacco-related products.
2. Team Delegation: If the CEO understands your conflict and agrees to explore alternative arrangements, you can suggest assigning a team member or another consultant from your firm to directly handle the aspects of the merger project related to the tobacco company. You can still contribute to the overall integration efforts by overseeing and coordinating the project, providing guidance to the assigned team member, and ensuring a smooth integration process.
3. Ethical Considerations: If the above options are not feasible, and working directly with the tobacco company goes against your personal values and promise to yourself, you may need to decline the consulting assignment. In such a case, it is important to explain your reasons sincerely to the CEO, emphasizing the personal conflict of interest and your commitment to maintaining your ethical principles. Offer assistance in finding a suitable replacement consultant who can fulfill the requirements of the project effectively.
Handling this dilemma requires careful consideration of your personal values, the impact of your decision on your professional relationship with the client, and the alternatives available to fulfill your commitments. By engaging in open communication, exploring alternative approaches, and staying true to your principles, you can navigate this situation with integrity and professionalism.
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