Answer:
Option (a) is correct.
Explanation:
Given that,
Net income = $600,000
Difference between fair value and carrying value = $112,500
70%-owned subsidiary of Pickle Corporation.
Non-controlling interest in net income:
= [Net income - Difference between fair value and carrying value] × 0.3
= [$600,000 - $112,500] × 0.3
= $487,500 × 0.3
= $146,250
a. What is its percentage rate of return? percent.
b. Is the firm earning an economic profit? .
If so, how large? percent.
c. Will this industry see entry or exit? .
d. What will be the rate of return earned by firms in this industry once the industry reaches long-run equilibrium? percent.
Answer:
10%
yes
2%
enter
8%
Explanation:
A perfect competition is characterized by many buyers and sellers of homogenous goods and services. Market prices are set by the forces of demand and supply. There are no barriers to entry or exit of firms into the industry.
In the long run, firms earn zero economic profit. If in the short run firms are earning economic profit, in the long run firms would enter into the industry. This would drive economic profit to zero.
Also, if in the short run, firms are earning economic loss, in the long run, firms would exit the industry until economic profit falls to zero.
Rate of return = (earnings of firms / amount invested) x 100
(15/150) x 100 = 10%
The firm is earning an economic profit because the rate of return is higher than the normal profit by 2%.
In the long run, firms would enter into the industry. This would reduce economic profit to zero and the firm would be earning only normal profit once long run equilibrium has been reached
Explanation:
While preparing the post closing trial balance, we record the permanent account while the temporary accounts are not records. So, the permanents accounts that are recorded are given below:
a. Accounts Receivable
b. Cash
c. Doug Woods, Capital
d. Equipment
e. Land
f. Salaries Payable
g. Unearned Rent
All other account balances reflects that they are temporary accounts. Hence, ignored it
The post-closing trial balance will typically include Accounts Receivable, Cash, Doug Woods, Capital, Equipment, Land, and Salaries Payable. It doesn't include temporary accounts which are closed at the end of the period.
The post-closing trial balance includes only the permanent or real accounts that have balances after the closing process. In the case of the accounts provided, the post-closing trial balance will usually include a. Accounts Receivable, b. Cash, e. Doug Woods, Capital, g. Equipment, h. Land, and i. Salaries Payable. Temporary or nominal accounts such as c. Depreciation Expense, d. Fees Earned, f. Doug Woods, Drawing, j. Unearned Rent, k. Wages Expense are closed at the end of the period and therefore, don't usually appear in the post-closing trial balance.
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Answer:
The Journal entries are as follows:
(i) General fund
Property taxes receivable current A/c Dr. $1,878,700
To Allowance for uncollectible current taxes $37,574
To Revenue $1,841,126
(To record general fund)
(ii) Governmental activities
Property taxes receivable current A/c Dr. $1,878,700
To Allowance for uncollectible current taxes $37,574
To Revenue $1,841,126
(To record governmental activities)
Workings:
Allowance for uncollectible current taxes:
= Real property taxes × percent of levy uncollectible
= $1,878,700 × 2%
= $37,574
Answer:
EOQ = 359 units
Number of order placed = 7.2 times
Explanation:
The Economic Order Quantity (EOG) is the order size that minimizes the balance of ordering cost and holding cost. At the EOQ, the carrying cost is equal to the ordering cost.
It is computed using he formulae below
EOQ = √ (2× Co× D)/Ch
C0- 500, Ch- 20, D- 2,580
EOQ= √ (2× 500× 2580)/20
=359.16
EOQ = 359 units
Number of order place d per year = Annual demand / order size
Number of order placed = 2,580/ 359
= 7.2 times
b. Du Pont analysis is based on the fact that return on equity (ROE) can be expressed as the sum of four other ratios.
c. It is relatively easy to interpret a ratio in the absence of comparative data.
d. There are no limitations to financial statement analysis, so analysts can always be confident of their conclusions.
e. None of the above statements is correct.
Answer:
The answer is e) None of the above statements is correct.
Explanation:
The current ratio, which measures the coverage of current assets against current liabilities, though used widely faces the limitation that it does not adequately reflect how well a company pays-off its short term debt. In simple terms, a high current ratio indicating how well a company pays short term debt is not forcefully appreciated in a given economic condition. as it is affected by elements such as time for collectinig bills. This is why to move in line with the going-concern principle, the acid test ratio is the best available measure of liquidity.
Du pont analysis is a form of financial ratio tools that comprises of 3 other financial ratios to provide better comprehension of the Return on Equity of a company. That is Net Profit Margin, Asset Turnover and Totat assets to Total equity ratios.
Interpretation of financial ratios requires the use of data so as to provide a comparison and determine the changes in the financial position of a company.
There are existing limitations to financial statement analysis such as the effect of inflation, the fact that data used for comparison is based on past information and it becomes to hard to predict the future. Considering these, analysts should rather be careful when communicating financial information.
The correct answer is 'b' - Du Pont's analysis is based on a relationship between ROE and three other ratios, not four. The statement 'a' isn't entirely true as the current ratio ignores the type and quality of current assets. Statements 'c' and 'd' are incorrect as analyzing a ratio without comparative data is misleading and limitations exist in financial statement analysis.
The correct statement about financial statement analysis is option 'b. Du Pont's analysis is based on the fact that return on equity (ROE) can be expressed as the product of three other ratios: the net profit margin, the total assets turnover, and the financial leverage ratio, not four. It's crucial to note that, while the current ratio can provide insight into a company's liquidity, it's not universally 'the best' measure because it fails to account for the nature and quality of current assets. Statements 'c' and 'd' are also incorrect; interpreting ratio data without comparative data lacks context and can be misleading, and financial statement analysis does have limitations such as not considering non-financial factors or possible manipulation of financial statements.
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Answer:
Shoe manufacturers are not operating at an corporate social responsibility level.
Explanation:
Corporate social responsibility is that kind of business model which is self regulating in the nature. This is also know as corporate citizenship , according to this model company's try to operate their business in such ways that do no harm to the environment or negatively affect the society but here the motto of the company's are to enhance the society, environment , and the customer satisfaction. Company's working on this approach try to be accountable for their actions towards the consumer and society . In this question shoe manufacturers are not operating at an corporate social responsibility level.
Answer: Ethical
Explanation: The shoe manufacturers who develop and market adult-styled shoes to this group are not operating at an ethical responsibility level of the pyramid of corporate social responsibility. The ethical aspect deals with going to great extents across legal requirements to meet the expectations of society. Social responsibility is the duty of business to do no harm to society. In other words, in their daily operations, the shoe makers were not concerned about the welfare of their customers and were not mindful of how their actions affected them later on. Therefore, they weren't operating at an ethical level.