Answer:
A. $70,000
Explanation:
From the information given, we discover that
Gross profit from sporting goods business = $100,000
Subtract: other Expenses = 11500
Subtract: Building depreciation expenses (10000 × 55%) = 5500
Subtract: Mortgage Interest (10000 × 55%) = 5500
Subtract: Depreciation on vehicle used for business = 3000
Less: Utilities for Ground Floor = 4500
Net Self employment Income = $70,000
Note that 55% is used for ground floor, it is calculated as 100 - 45% used by tenant, therefore, for business purpose 55% will be taken.
Answer:
Answer is A.$70,000
Refer below.
Explanation:
The final value is $70,000.
Tim and Tammy are updating their financial plan and are concerned that they might not have enough life insurance coverage for their family, which includes two children, ages 4 and 10. They have determined that their annual income is $53,000 and their net worth is now $150,000. What is the amount of life insurance they should carry using the easy method?
Answer:
The amount of life insurance is $259700
Explanation:
Easy method for calculating amount of life insurance is a method for families with both spouses working, in good health, with average debt, and not more than three children. It gives an estimate of 7 years of income at 70%. Using easy method, the formula is given as:
life insurance requirement = Annual income × 7 years × 70%
Given that Annual income = $53000
amount of life insurance = $53000 × 7 years × 70% = $259700
Currently, our system is characterized by a lack of fit between what the customer wants and what the SCM system is best able to provide. As a result, which of the following would apply? I. The only way to restore fit is for the firm to change the market segment it is going after. II. Unless something is done, our firm will not be the most effective and efficient long-term supplier. III. Any firm can successfully counter such inconsistencies through the use of patents and aggressive advertising. I only. II only. III only. I and II only. I, II, and III.
Answer:
II only
Explanation:
As a result of lack of fit between what the customer wants and what the Supply Chain Management (SCM) system is best able to provide, unless something is done, the firm will not be the most effective and efficient long-term supplier.
The firm has to remove the bottlenecks between what the customer wants and the supply chain management, so as to be the most effective and efficient long-term supplier of goods and services.
Sheridans Company bought Special Products Division in Year 17 and appropriately recorded $743000 of goodwill related to the purchase. On December 31, Year 18, the fair value of Special Products Division is $5700000 and it is carried on Sheridan s books for a total of $4800000, including the goodwill. An analysis of Special Products Division s assets indicates that goodwill of $599000 exists on December 31, Year 18. What goodwill impairment should be recognized by Sheridans in Year 18
Answer:
$0
Explanation:
Base on the scenario been described in the question, we need to know the goodwill impairment
Goodwill is created in business accounting when an purchasing entity acquires another entity and the price is more than the fair market value of its assets.
To know the Goodwill impairment, we use the following method
Since $5,700,000 > $4,800,000
$0 impairment
Andrew agrees to paint Rosalene's house for $500. Two days after he starts the job, he decides that $500 isn't enough money. He refuses to finish the job, unless Rosalene agrees to pay him $100 more. What legal principle applies to this fact situation?
A. The acceptance of additional money to settle a disputed claim is supported by consideration.
B. A past obligation is sufficient consideration for a new promise.
C. Andrew was already obligated to paint the house. He gives no additional consideration in return for Rosalene's promise to pay more money.
D. Rosalene has made a promise in exchange for a forbearance.
Answer:
C. Andrew was already obligated to paint the house. He gives no additional consideration in return for Rosalene's promise to pay more money.
Explanation:
In this scenario Andrew had already agreed to do the painting for $500, so he is obligated to do the job or breach the contract.
He does not have a legal backing to make a counter deal in the middle of the job.
If Roseline decides to pay an extra $100 she does so without any obligations. She may or may not pay and Andrew is still obligated to complete the work.
A country's economic data indicates that there has been a substantial reduction in the financial capital available to private sector firms. Which of the following most likely had the greatest influence on this economy?
A. especially large and sustained household saving
B. increased borrowing by private firms
C. reduction in influx of funds for foreign financial investors
D. especially large and sustained government borrowing
Answer:
D. especially large and sustained government borrowing
Explanation:
When a government spends more than it collects in taxes, it runs a budget deficit. When the government starts borrowing large sums too much, it can substantially facilitate the reduction in the financial capital available to private sector firms, as well as lead to trade uncertainties and even financial crises.
Net credit sales for the month are $670000. The accounts receivable balance is $170000. The allowance is calculated as 10% of the receivables balance using the percentage-of-receivables basis. If the Allowance for Doubtful Accounts has a credit balance of $9800 before adjustment, what is the balance after adjustment
Answer:
$177,200
Explanation:
Net realizable value of the accounts receivable can be found by the following formula, which is:
Net Accounts receivables (Step3) = Closing Accounts receivables before adjustment (Step1) -/+ Increase or decrease in Allowance for doubtful debts (Step2)
Step 1: Closing Accounts receivables before adjustment
Closing Accounts receivables before adjustment is $170,000.
Step 2: Increase or decrease in Allowance for doubtful debts
Opening Allowance for Accounts receivables is $9800
Change in Allowance for doubtful debts is the difference of the Closing Allowance calculated and Opening Allowance Value in the account.
Which means:
Allowance for the Year = Closing Allowance calculated - Opening Allowance Value
Allowance for the Year = 10% of $170,000 - $9,800
Allowance for the Year = $17,000 - $9,800 = $7,200
Step 3: Net Accounts receivables
By putting the values we have:
Net Accounts Receivables = $170,000 + $7,200 = $177,200
You purchased 250 shares of a particular stock at the beginning of the year at a price of $68.12. the stock paid a dividend of $.85 per share, and the stock price at the end of the year was $76.45. required: what was your dollar return on this investment? (do not round intermediate calculations. round your answer to 2 decimal places (e.g., 32.16).)
Answer:
$9.18
Explanation:
Return on Investment is the actual profit / gain received on investment. In case of Investment in the stock the dividend and price appreciation is included in the return.
We will calculate the return on the investment in accounts.
Return = Dividend Received + ( Market Price of Stock - Initial price )
Return = Dividend Received + ( Market Price at the end of the year - Price at the beginning of the year )
Return = $0.85 + ( $76.45 - $68.12 )
Return = $0.85 + $8.33
Return = $9.18
Cherokee Cable Corporation, sells heavy wire cable to large construction companies around the country. Customers pay shipping from a central warehouse in Dallas. Recently, a new competitor in Atlanta has been taking away some of Cherokee Cable's southern customers. If Cherokee Cable wants to compete in those distant markets, but not increase the cost of its product to other customers, it would probably switch to _________.a. zone pricing.
b. specifying "F.O.B. Dallas" in its contracts.
c. uniform delivered pricing.
d. freight absorption pricing.
e. None of the above would help Cherokee Cable Corporation with its problem.
Answer:
The correct answer is d. freight absorption pricing.
Explanation:
The freight absorption pricing means Cherokee must charge the price increase by a factor so that the customer does not perceive that they are paying a higher price for the cables. This strategy is effective when you want to compete directly in the market, achieving sustained demand behavior. If Cherokee Cable does nothing in this situation, it is most likely that it will lose a large part of the market due to product price issues.
Answer:
D) freight absorption pricing.
Explanation:
Freight absorption pricing strategy is a type of geographic pricing strategy, where the company absorbs some or all of the freight costs for specific geographical markets.
In this case, Cherokee Cable knows that they are having trouble in southern states near Georgia, so they will probably start absorbing some of the freight costs to clients located in those states. The problem wire cable sellers face is that besides being heavy loads, they are also large, so the freight costs are probably high. The Atlanta competitor has the advantage of being closer, and therefore, the total costs for the clients are much lower.
Valiant Petro products refines crude oil to produce gasoline and kerosene. Joint costs incurred during the month of May were $1,800,000. Gasoline requires further processing to be marketable and hence a further processing cost of $100,000 was incurred. Kerosene also requires further processing to be marketable and hence a further processing cost of $200,000 was incurred. Gasoline was sold at $4 per gallon and kerosene at $3.50 per gallon. During the month of May, 500,000 gallons of gasoline and 600,000 gallons of kerosene were processed. What is the production cost per gallon of gasoline for the month of May using the NRV method? Assume there was no beginning inventory.
Answer: $1,400,000
Explanation:
Joint cost = $1,800,000
Further processing cost(Gasoline) =$100,000
Further processing cost(kerosene) =$200,000
Price of gasoline = $4 per gallon
Price of kerosene = $3.50 per gallon
Processed gasoline in May = 500,000
Processed kerosene in May = 600,000
Allocation of joint cost(Gasoline) = (Total cost × share ratio)
Share ratio = further processing cost of component ÷ total further processing cost
[$1,800,000 × ( 100000 ÷ 300000)]
($1,800,000 × 0.33333333) = 599,999.999
Net realizable value = (Final sales price - processing cost)
[ $(500,000×4) - $600,000]
$2,000,000 - $600,000
$1,400,000
Production cost of gasoline is $1,400,000
A regional airline owns 10 aircraft and employs 20 pilots. The airline makes an average of three trips per day with each of its 10 aircraft. The aircraft and their ground crews are idle part of the day. Minimum rest requirements for its pilots mean that if the airline wants to increase its flights, it must hire more pilots. The decision to hire more pilots is:
Answer:
a short-run decision because the number of aircraft is held constant while the labor input is changed.
Explanation:
In the short run, at least one variable or factor of production is fixed and cannot be changed. In the long run, all factors of production can be changed.
In this case, the number of aircraft is the fixed factor of production (capital) while labor is variable because more pilots can be hired. Regulation state that pilots must rest a certain amount of time in between flights, so if you want to increase the amount of flights you need to hire more pilots and cabin crews since regulations do not require planes to rest.
Final answer:
The decision to hire more pilots is necessary for the regional airline to increase its flights and meet the demand. Hiring more pilots allows the airline to expand its operations and potentially increase revenue.
Explanation:
The decision to hire more pilots to increase flights is a strategic decision for the regional airline. Since each aircraft makes an average of three trips per day, there is a limit to the number of flights the airline can offer with its current pilot workforce. If the airline wants to increase its flight frequency, it needs to hire more pilots to comply with the minimum rest requirements. By hiring more pilots, the airline can expand its operations, offer more flights, and potentially increase its revenue.
Consider this scenario: A major software company finds that code has been executed on an infected machine in its operating system. As a result, the company begins working to manage the risk and eliminates the vulnerability 12 days later. Which of the following statements best describes the companyâs approach? A. The company effectively implemented data classification. B. The company effectively implemented quality control. C. The company effectively implemented patch management. D. The company effectively implemented quality assurance.
Answer:
C. The company effectively implemented patch management.
Explanation:
The company's approach is an implemented patch management.
Patch management is the process of acquiring, testing, evaluating and installing code changes or patches on an existing software, in order to ensure that systems stay updated on existing patches and evaluating the appropriate patches across the network.
Basically, it helps to fix software bugs and vulnerabilities by upgrading applications so as to prevent hacking.
Answer: C. The company effectively implemented patch management.
Explanation: Patch management should be implemented, since it was the machine's operating system that was affected.
Patch management is a process done to help test, acquire and install multiple batches that is code changes on a software tools and on existing application on a computer, to enable it stay on existing patches and determine which patch is appropriate.
Patch management is important and patches are created when a company is experiencing data breach, it is done to ensure other business data remains safe and when patches are apply quickly it lessen the risk of affecting the business.
The substitution effect: a) predicts that taxpayers will work harder to pay for consumer products when tax rates increase. b) is one of the effects considered in static forecasting. c) results in the government collecting more aggregate tax revenue than under the income effect. d) is typically more descriptive for taxpayers with lower disposable income. e) None of the choices are correct.
Answer:
Option E. None of the choices are correct.
Explanation:
The substitution effect refers to the situation whereby there is a decrease in sales for a particular product due to the fact that consumers are switching to cheaper alternatives when its price rises.
The substitution effect arises purely out of the need for consumers to be frugal. If a producer raises the price of their commodities, some consumers will opt for a cheaper alternative. For example, if beef prices go up, many consumers will switch to chicken.
A manufacturer can also experience the substitution effect when faced with a price hike for an essential raw material needed for production, he/she may switch to cheaper resources.
Rayray Records' stock currently sells for $105.00 per share. The dividend is projected to increase at a constant rate of 5.00% per year. The required rate of return on the stock, rs, is 9.00%. What is the stock's expected price 3 years from today
Answer:
$121.55
Explanation:
Given;
Stock price per share = $105
Required rate of return = 9%
Constant rate of dividend growth = 5%
As per Gordon's Growth Model, the equation for count of the stock cost dependent on profit, cost of value capital (required pace of return) and consistent pace of profit development is:
Stock Price per share = D / (r-g)
where D = dividend
r = cost of equity capital (in this problem, we take the required rate of return)
g = growth rate of dividend
Substituting the values for Stock price per share = $105, r = 0.09, g = 0.05 we need to find dividend, D
105 = D / (0.09 - 0.05)
105 = D / 0.04
105 * 0.04 = D
D = $ 4.20
Now since dividend grows at a constant rate of 5%
Dividend at the end of 3rd year = Dividend * (1 + g)3
Dividend at the end of 3rd year = 4.20 * (1+0.05)3
= 4.20 * 1.053
= 4.862
Stock price per share at the end of the 3rd year = D / (r-g)
Stock price per share at the end of the 3rd year = 4.862 / (0.09 - 0.05) = 4.862 / 0.04 = $121.55
Paying the maximum charge for a hotel room is called the:
Answer:
Rack Rate
Explanation:
The reading says "A tourist may pay the rack rate (Maximum Charge) of $240/room"
Successfully starting and running a business requires drive. True ot False
Answer:
False
Explanation:
To run a business efficiently, any entrepreneur must have talent. The entrepreneur must also have clear goals along with talent. Achieving clear goals is much easier than achieving unknown goals. To run a business efficiently, any business should set its goals in advance and work accordingly.
So, the given phrase is wrong.
The purpose of a data warehouse is to ________. Select one: a. allow managers to run queries and reports themselves without having to know query languages or the structure of the underlying data b. increase the complexity of the data to be analyzed c. put key business information into the hands of more decision makers d. provide capabilities for discovering hidden predictive relationships in the data e. standardize the format of data retrieved from different systems
Answer: (C) Put key business information into the hands of more decision makers
Explanation:
The data warehouse is one of the type of data analysis system which is specifically used for analyzing purpose by collecting data from the different types of sources in an organization and then making a proper report for making various types of business related decisions.
The data warehouse is refers as the main core component or the element of the business intelligence The main purpose of the data warehouse is to making a important business information in the form of key to the decisions makers so that they can make various types of effective decisions.Therefore, Option (C) is correct answer.
B2B Advertising Group of answer choices is the only form of mass selling is also called sales promotion is concerned with promotion using samples, coupons, and contests involves direct spoken communication between sellers and potential customers. is any paid form of nonpersonal presentation of ideas, goods, or services by an identified sponsor.
Answer:
C. B2B advertising is concerned with promotion using samples , coupons, and contests.
Explanation:
Business to business advertising is a form of sales promotion which occurs between two businesses rather than between a business and consumers. It requires more skills and efforts as the target audience are usually the workers in the other organization. For example, a company that produces school uniforms, might take some samples of their products to a school while advertising.
A business employing this sort of advertising wants to promote its services or products to another organization. They could employ the use of samples, and coupons to make the marketing more effective.
The first facility consideration is to determine _______________________________. a. how close to source it should be. b. the size of each operation within the network. c. how close to the customer it should be. d. where competitors are located.
Answer:
Option B.
Explanation:
The first facility consideration is to determine the size of each operation within the network, this is to ensure that the facility where operations will be profitable to the business.
After determining the layout of the operations, attention is then shifted to the facility size of the operations within the distribution operation. Product handling functions include both receiving and shipping.
Answer:
B) the size of each operation within the network.
Explanation:
In facility management, the focus is set on improving the efficiency and effectiveness of the productive or support processes that are going to be carried out within a new facility. The demand and supply of the services or products offered by the facility must be analyzed in order to determine the optimal size of the facility.
For example, a company must determine the size of a new productive facility (factory) in order to meet the increase in demand of some product. If the factory is too large, there will be too much spare productive capacity, but if it is too small, it will not be able to meet the output demands.
This same concept applies to NIMS facility services, where the support facilities must have the right size to work properly, without being too large or too small. If it is too large, it will consume unnecessary resources, but if it's too small it will not be effective.
Sam is paying off his eight-year, $15,360 loan in semiannual installments. The loan has an interest rate of 9.58%, compounded semiannually, and a service charge of $1,294.64. Once the loan has been fully paid off, what percentage of the total finance charge will the service charge be
Answer:
Percentage of finance charge as service charge= 15.6%
Explanation:
Monthly installment = Loan amount /annuity factor
Annuity factor = (1- (1+r)^(-n))/r
r - semi-annul interest rate = 9.58%/2
n= number of period : 2×8 = 16
Annuity factor =( 1- (1.0479))^(-16)/0.0479
=11.0016
Monthly installment = 15,360 /11.00
=$1396.160
TotaL amount paid = 1396.160459× 16 =22,338.56
Interest charges = 22,338.56 - 15,360
= $6978.56
Percentage of total finance charge as service charge=
=1294.64/(1294.64+6978.567348)× 100
= 15.6%
Answer:
15.65%
Explanation:
we must determine the payment using the annuity formula:
present value = payment x {1 - (1 + r)⁻ⁿ / r]
present value = 15,360r = 9.58% / 2 = 4.79%n = 8 x 2 = 1615,360 = payment x {1 - (1 + 0.0479)⁻¹⁶ / 0.0479]
payment = 15,360 / {1 - 1.0479⁻¹⁶ / 0.0479] = 1,396.16
total payments = 1,396.16 x 16 = $22,338.56
interest charge = $22,338.56 - $15,360 = $6,978.56
total finance charge = $6,978.56 + $1,294.64 = $8,273.20
$1,294.64 / $8,273.20 = 0.1565 or 15.65%
QUESTION 5 Tamara has $500 she is looking to save for a class trip. She wants to earn the most possible interest and will not need access to her money for a full year. Which type of savings account will be best for Tamara?
A. Certificate of Deposit (CD)
B. Money Market Account
C. Savings Account
D. Checking Account
Answer:
The correct option is A,certificate of deposit
Explanation:
Money market account is an interest yielding account with commercial bank or other financial institution but can be accessed anytime by Tamara,hence it is not the best option available.
The same of funds being accessible is also applicable to saving and checking accounts,as a result it is only investment in certificate of deposit that meets Tamara's requirement,which implies option is the perfect option.
Which of the following statements is true? a An increase in the money supply lowers the equilibrium rate of interest. b The supply of money curve is downward sloping. c The supply of money curve is a horizontal line. d A decrease in the money supply lowers the equilibrium rate of interest. e The demand for money curve is a vertical line.
Answer:
a. An increase in the money supply lowers the equilibrium rate of interest.
Explanation:
An increase in the money supply lowers the equilibrium rate of interest therefore, making it less expensive for individuals to borrow according to the liquidity preference model developed by John Maynard Keynes.
Which method of setting advertising objectives specifies that all objectives should precisely define the target audience, the desired percentage change (in some specified measure of effectiveness), and the time frame in which that change is to occur?
Answer: DAGMAR
Explanation:
The DAGMAR is stand for the defining advertising goals for the measured advertising results and it is one of the type of business marketing framework which is typically used for establishing the main objective of the advertising.
According to the given question, the DAGMAR is one of the method that is used for specify the main aim of the advertising more precisely and this concept also used to defining the main target to the audience and the customer for the purpose of advertising the main products and brands in the market.
Therefore, DAGMAR is the correct answer.
In an alternative dispute resolution program (ADR), the concerned employee and supervisor have finished the peer review stage and have not reached a settlement. Which of the following is most likely the next stage in the ADR process? A panel of representatives from the same level will hear the case. A neutral third party from outside the organization will hear the case via a nonbinding process. The supervisor will seek legal support from the judiciary. A professional arbitrator from outside the organization will hear the case. The two will meet alone and attempt to arrive at a settlement.
Answer:
A neutral third party from outside the organization will hear the case via a nonbinding process.
Explanation:
Assuming in an alternative dispute resolution program (ADR), the concerned employee and supervisor have finished the peer review stage and have not reached a settlement.
The most likely next stage in the ADR process would be to invite a neutral third party such as a mediator or negotiator from outside the organization, who will hear the case via a nonbinding process.
Interest rates on 4-year Treasury securities are currently 5.4%, while 6-year Treasury securities yield 7.65%. If the pure expectations theory is correct, what does the market believe that 2-year securities will be yielding 4 years from now
Answer:
12.3%
Explanation:
In this question, we are asked to calculate what is believed a 2-year market security will be yielding, 4 years from now
To calculate this, we proceed mathematically;
2 year yield 4 years from now = [ ( 1 + 0.0765)^6 / ( 1 + 0.054)^4]^1/2 - 1
2 year yield 4 years from now = [ 1.5563 / 1.2341]^1/2 - 1 = 0.123
2 year yield 4 years from now = 0.123
2 year yield 4 years from now = 12.3%
During an exit interview, a manager discovers that the reason an employee is resigning is because of unlawful harassment from a co-worker. This is the first time the issue has been discussed; the employee did not file a complaint per the company policy before their resignation. The employee provides details of the harassment, including the names of witnesses, but requests that no action be taken. The employee just wants to move on and leave the entire situation behind. Now that you are aware of the alleged harassment, what should the manager do on behalf of the organization?
Answer:
See explanation below for answer.
Explanation:
The manager should embark on an investigation, in order to get to the bottom of the matter. The accusation must be treated seriously in order to make sure that the root cause of the problem is established, this will be done with the details of the harassment that the employee provides.
Also, the witnesses that the employee has mentioned must be questioned in order to establish the facts of the issue. The matter must be treated with the utmost urgency, in order to stop the issue from repeating itself, because this will affect the productivity of the affected employees if left unchecked.
Answer:
Refer below.
Explanation:
Treat the matter seriously and conduct an investigation, including interviewing witnesses.
The contentions that (1) many of the same standards of what's ethical and what's unethical resonate with peoples of most societies regardless of local traditions and cultural norms and (2) to the extent there is common moral agreement about right and wrong actions, common ethical standards are can be used to judge the conduct of personnel at companies operating in a variety of country markets and cultural circumstances are defining beliefs of:________.
A. the school of ethical relativism.
B. the school of ethical universalism.
C. integrated social contracts theory.
D. the School of Morally Correct Thinking and Behavior in Paris, France.
E. the Global Code of Ethical and Social Morality developed in 1925 at a worldwide convention of distinguished religious clerics.
Answer: (B) The school of ethical universalism
Explanation:
The ethical universalism is on of the type of ethical based concept in which their is one of the common moral agreement about the right and the wrong action on the basis of the given behavior across the various types of countries.
The importance of the ethical universalism is to provide the justice of equal right among all the people in the society and each person are treated in equal manner.
According to the given question, the school of ethical universalism is one of the common ethical standards which is used to judge the different types of cultural circumstances and the variety of markets. Therefore, The given cultural circumstances is basically defining the beliefs of the ethical universalism.
Therefore, Option (B) is correct answer.
The decision to keep or drop products or services involves strategic consideration of all the following except: The desired inventory levels of the product. Potential impact of the decision on the demand for the remaining products or services. Potential impact of the decision on employee morale. Potential impact of the decision on pricing of other products offered by the firm. Growth potential of the firm.
Answer:
The desired inventory levels of the product.
Explanation:
The desired inventory levels doesn't have anything to do with the fact that a product should be discontinued or not since it doesn't have any impact on the demand or price for remaining products.
The inventory level of a product can be changed or adjusted several times during a year depending on the expected sales. Sometimes very successful products have very seasonal sales, e.g. toys that are sold more on Christmas than any other time of the year.
Real GDP equals $200 billion, the government collects 20% of any increase in real GDP in the form of taxes, and the marginal propensity to consume is 0.8. If the government increases spending by $10 billion, real GDP will increase by:
A) $10 billion.
B) $20 billion.
C) $27.8 billion.
D) $50 billion.
Answer:
If he government increases spending by $10 billion, real GDP will increase by $27.8 billion. The right answer is C.
Explanation:
In order to calculate how much the real GDP will increase, we have to calculate the Expenditure multiplier with the following formula:
Expenditure Multiplier = [1/(1-MPC(1-tax)]
Expenditure Multiplier = [1/(1-0.8(1-0.2)]
Expenditure Multiplier = [1/(1-0.8(0.8)]
Expenditure Multiplier = [1/(0.36)]
Expenditure Multiplier = 2.778
So, an increase in G by $10 billion will increase real GDP by $10 x 2.778 = $27.8 billion.
Sean is forming his forecast based on the _________ model of inflation and Carlos is forming his forecast based on the __________ quantity theory adaptive expectations rational expectations expected real interest rate seignorage model of inflation.
Answer:
The correct answer is adaptive expectations; rational expectations.
Explanation:
Adaptive and rational expectations are forecasts that are made about the size of future economic variables.
Agents based on adaptive expectations based on past values. If one wanted to know the inflation rate for the coming years, the agents attributed previous data to lose it, which led to the use of macroeconomic models. If inflation were expected to be the same as the previous year, the desirable inflation would always be below the real one; in this case the errors will show a systematic bias.
In contrast, rational expectations assume that errors should be learned. If they show a systematic bias, the agents would make modifications to determine a more accurate forecast.
Park Co.'s wholly-owned subsidiary, Schnell Corp., maintains its accounting records in Pounds Sterling. Because all of Schnell's branch offices are in Germany, its functional currency is the Euro. Remeasurement of Schnell's 20X8 financial statements resulted in a $7,600 gain, and translation of its financial statements resulted in an $8,100 gain. What amount should Park report as a foreign exchange gain in its other comprehensive income for the year ended December 31, 20X8?A. $-0-
B. $7,600
C. $8,100
D. $15,700
Answer:
C) $8,100
Explanation:
A foreign exchange gain happens when one company engages in foreign trade or foreign direct investment and when they convert the foreign currency into domestic money, the final amount is larger than originally expected. This happens because the exchange rate is not fixed, and if the foreign currency appreciated, then a gain will result since more domestic money will be received. On the other hand, if the foreign currency depreciates, this will result in a loss.