Answer:
I. National Income Accounting:
National income accounts are an accounting framework is useful in measuring economic activity.
A. Three approaches—all produce the same measurement of the production of the economy.
1. product approach: how much output is produced
2. income approach: how much income is created by production
3. Expenditure approach: how much purchasers spend
B. Why all three approaches are the same: Assumes no unsold goods (at this point) then the market values of goods and services produced must equal the amount buyers spend to purchase them (product approach=expenditure approach). What the seller receives (income) must equal what is spent (expenditure).
II. Gross Domestic Product (GDP)
A. GDP vs. GNP
GNP= output produced by domestically owned factors or production. (By our people)
GDP= includes production produced by foreign owed factors of production within the countries border and excludes domestically owned production in foreign countries. (On our soil)
1. GDP = GNP – net factor payment from abroad (NFP)
2. How big is the difference?
B. Product approach: The market value of all final goods and services produced within a nation during a fixed period of time.
1. Market value: allows comparison between different goods. Has some problems – ignores some goods. underground economy, and government services.
2. Final goods and service: Treatment of inventories; Capital goods; Avoids double counting; Value added.
3. New production: Ignores goods produced in previous periods
C. Expenditure approach: Total spending on final goods and services produced within a nation during a specified period of time.
1. Income expenditure identity and four categories of spending: Consumption (C), Investment (I), government purchases of goods and services (G) and net exports (NX)
Y = C + I + C + NX
2. Consumption(C): Spending by domestic households on final goods and services
a. Consumer durable goods: Long lasting goods
b. Nondurable goods used up quickly
c. Services
3. Investment (I): Spending on new capital goods by business
a. Business fixed investment
b. Residential fixed investment
c. Inventory investment: Changes in the amount of unsold goods, goods in progress and new materials
4. Government purchases of goods and services (G):
a. State and local vs. Federal spending
b. Transfers and interest payments on debt are not counted. They are counted in total government expenditure which is not the same as government purchases of goods and services.
5. Net exports (NX): exports minus imports
a. Need to subtract imports since they are counted in C. I and G can add goods produced within the country purchased by foreign interests (exports).
D. Income approach adds up income received by producers, including profits and taxes paid to the government
1. Income generated by production
a. National income =
compensation of employees
+ proprietors income
+ rental income of persons
+ corporate profits
+ net interest
+ taxes on production
+ business transfers
+ surplus of gov enterprises
b. National income + statistical discrepancy = Net National Product (NNP)
Note: This changed a couple years ago. If you have an old addition, you may see the indirect business tax. It is no long used in this equation!
c. NNP + depreciation = GNP
d. GNP – NFP = GDP
2. Income of private sector and government
a. Private disposable income = income of private sector = private sector income earned at home (Y or GDP) and abroad (NFP) + payments from the government sector (transfers TR and interest on debt INT) – taxes paid to government (T) = Y + NFP + TR + INT – T
b. Government net income = T- TR – INT
III. Saving and Wealth
A. Wealth Difference between assets and liabilities
B. Measures of aggregate savings
1. Saving = current income – current spending; saving rate = saving/current income
2. Private saving (Spvt) Spvt = Y + NFP – T + TR + INT – C
3. Government Saving (Sgovt) Sgovt = T – TR- INT – G
a. Government saving = Government budget surplus (deficit = -Sgovt)
4. National Saving= private saving + government saving
S = Spvt + Sgovt = Y + NFP - C – G = GNP - C – G
C. The uses of private saving
1. S = I + (NX + NFP) = I + CA
CA = NX + NFP = current account balance
2. The use of savings identity
Spvt = I – Sgovt + CA
If the budget deficit increases one or a combination of the following happen
1) private saving must rise
2) investment must fall
3) the current account balance must fall
IV. Prices Indexes, Inflation and Interest Rates
A. Nominal vs. Real variables
Nominal Variables – Measures the economic variable in terms of the current market value.
Real Variable—Measure the variable valued at the prices in a base year.
B. Real vs. Nominal: Calculation the differences
Examples Small country only produces base balls and baseball bats
Explanation:
What should be Alicia's first step? What should be Alicia's first step? Multiple Choice set goals for hiring new staff check with her colleagues in the industry for possible new hires forecast labor supply and demand within the company once video work starts take out a recruitment ad in the local newspaper get together with company execs for a planning session
The complete question reads;
As you read the following case, think about how Alicia Brooks, HR manager at Edu-Films, needs to take a balanced approach to hiring the right amount of staff for the company's next big project. In this exercise, please read the mini-case and answer the questions that follow. Edu-Films is a small design company that writes and produces videos for the elementary and high school education market. The company is in the final stages of negotiating a new contract with a U.S. publisher to create 40 videos for a new K-12 math series, and the videos need to be available by the spring of 2017. Business for Edu-Films has been slow over the past three years, and the company has kept staff levels to a minimum. Mindful of the company's flat fiscal results over the last couple of years but understanding that new hires must be ready to go once the agreement is signed, HR manager Alicia Brooks must put together a cohesive hiring plan.
1). What should be Alicia's first step?
A). Check with her colleagues in the industry for possible new hires.
B). Get together with company execs for a planning session.
C). Set goals for hiring new staff.
D). Forecast labor supply and demand within the company once video work starts.
E). Take out a recruitment ad in the local newspaper.
Answer:
C). Set goals for hiring new staff.
Explanation:
A goal refers to expected results or achievement which requires effort. Remember we are told, "the videos need to be available by the spring of 2017". Meeting this deadline should be the ultimate goal, and so Alicia's first step should be to set goals for hiring new staff.
By so doing she can get the expected results.
A scatter graph is used to test the assumption that the relationship between cost and activity level is ________. A. curvilinear B. cyclical C. unpredictable D. linear
Answer:
Option D (linear) is the right approach.
Explanation:
The scatter graph seems to be a graphic method to determine the relationship regarding expense and degree of operation. It could be used to evaluate the expense behavior of adjusting this same degree of operation. It is being used to verify the system suitability or linearity statement that is true.Some other decisions taken are not relevant to the situation in question. Although it is indeed the best option.
Here are selected data for Boston Bracing Company: Estimated manufacturing overhead $236,800 Factory utilities $30,200 Estimated labor hours 35,000 Indirect labor $22,400 Actual direct labor hours 36,000 Sales commissions $53,700 Estimated direct labor cost $320,000 Factory rent $47,700 Actual direct labor cost $320,200 Factory property taxes $28,100 Factory depreciation $66,000 Indirect materials $33,000 If the company allocates manufacturing overhead based on direct labor cost, what are the allocated manufacturing overhead costs?
Answer:
Allocated MOH= $236,948
Explanation:
Giving the following information:
Estimated manufacturing overhead $236,800
Estimated direct labor cost $320,000
Actual direct labor cost $320,200
First, we need to calculate the predetermined overhead rate:
Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base
Predetermined manufacturing overhead rate= 236,800/320,000
Predetermined manufacturing overhead rate= $0.74 per direct labor dollar
Now, we can allocate overhead:
Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base
Allocated MOH= 0.74*320,200
Allocated MOH= $236,948
________ is what is left after a firm pays its variable costs and fixed costs
Profit is what is left after a firm plays its variable costs and fixed costs.
he following cost data pertain to the operations of Brentwood Department Stores, Inc., for the month of May: Corporate legal office salaries $ 69,000 Shoe Department cost of sales-Brentwood Store $ 87,000 Corporate headquarters building lease $ 86,000 Store manager's salary-Brentwood Store $ 14,700 Shoe Department sales commissions-Brentwood Store $ 8,700 Store utilities-Brentwood Store $ 13,700 Shoe Department manager's salary-Brentwood Store $ 4,700 Central warehouse lease cost $ 11,700 Janitorial costs-Brentwood Store $ 11,700 The Brentwood Store is just one of many stores owned and operated by the company. The Shoe Department is one of many departments at the Brentwood Store. The central warehouse serves all of the company's stores. What is the total amount of the costs listed above that are NOT direct costs of the Brentwood Store
Answer:
The total amount of the costs listed above that are NOT direct costs of the Brent-wood Store is $166,700
Explanation:
The total amount of the costs listed above that are NOT direct costs of the Brent-wood Store is as listed below:
Details Amount
Corporate Legal Office Salaries $69,000
Corporate Headquarters Building lease $86,000
Central Warehouse lease cost $11,700
Total non-direct cost of the store $166,700
Which of the following is an example of an equity investment?
(Select the best answer.)
A company bond
A company's stock
A government bond
A loan
Answer:
A company's stock
Explanation:
There are two main capital structure i.e. debt and the equity. The debt is the loan which is to be borrowed by the individual or a company in order to raise a capital. While the other one is equity in which it shows the ownership stake in the company also it involves the securities than should be traded in the stock markets
While going through the options given, the second option is correct as other options are the examples of debt and the same is not considered for an equity investment
house alarm system when he moved to his new home in Seattle. For security purposes, he has all of his mail, including his alarm system bill, mailed to his local UPS store. Although the alarm system is activated and the company is aware of its physical address, Richardson receives repeated offers mailed to his physical address, imploring him to protect his house with the system he currently uses. What do you think the problem might be with that company's database
Answer:
it appears there's no database differentiation
Explanation:
Remember, we are told Richardson had already set up his house alarm system when he moved to his new home in Seattle, meaning he had subscribed to the service.
However, because the company's database does not differentiate customers who had activated their alarm system and set their billing to be sent to their local UPS store, it has caused Richardson security concern to still see repeated offers mailed to his physical address.
"Consider a C corporation. The corporation earns $13 per share before taxes. After the corporation has paid its corresponding taxes, it will distribute 0% of its earnings to its shareholders as a dividend. The corporate tax rate is 42%, the tax rate on dividend income is 27%, and the personal income tax rate is set at 20%. What are the shareholder's earnings from the corporation after all corresponding taxes are paid?"
Answer:
$1.41144
Explanation:
Assuming that distribution of its earning to its shareholder is 30% as against the 0% which is likely a mistake because the tax rate on dividend income of 27% is also given in the question
Earning before tax $13
Less: Corporation tax $5.46
($13 * 42%)
Earnings after tax $7.54
Dividend distribution = $7.54 * 30% = $2.262
After tax dividend = $2.262 * (1-0.27) = $2.262 * 0.78 = $1.7643
Shareholder earnings after Income tax = $1.7643 * (1 - 0.20) = $1.7643 * 0.80 = $1.41144
Therefore, the Shareholder earnings from the Corporation assuming the distribution of its earning to its shareholder is 30% is $1.41144
Price elasticity of demand is an important tool for managers in in a selling environment in deciding what to put on sale. Assume you are the District Manager of a grocery chain which sells everything like Ralphs or Albertsons. What will you put on sale in your district during the Valentine's Day week
Answer:
The manager of the grocery chain should put two types of products:
1) products that are staple in Valentine's Day, because they are very likely to be sold in large numers.
2) products that have low price elasticity, or that are relatively inelastic, because these products will be sold in important quantities even if theirprices are moderately increased, bringing more profit to the firm.
Flannigan Company manufactures and sells a single product that sells for $320 per unit; variable costs are $176. Annual fixed costs are $927,000. Current sales volume is $4,260,000. Flannigan Company management targets an annual pre-tax income of $1,185,000. Compute the dollar sales to earn the target pre-tax net income.
Answer:
Break-even point (dollars)= $4,693,333.33
Explanation:
Giving the following information:
Selling price= $320 per unit
Unitary variable costs= $176
Annual fixed costs= $927,000
Desired profit= $1,185,000
To calculate the sales in dollars required, we need to use the break-even point in dollars formula:
Break-even point (dollars)= (fixed costs + desired profit) / contribution margin ratio
Break-even point (dollars)= (927,000 + 1,185,000) / [(320-176) / 320]
Break-even point (dollars)= 2,112,000 / 0.45
Break-even point (dollars)= $4,693,333.33
A company is considering two designs for a machine in its manufacturing line. The first, called machine A, will cost $160000 in fixed costs and will cost $80 per unit in variable costs, for each unit it produces. The second, called B, will cost $270000 in fixed costs and will cost $2 per unit in variable costs, for each unit it produces. At what volume of production will the two machines cost the same
Answer:
The indifference point is 1,410 units
Explanation:
Giving the following information:
Machine A:
Fixed costs= $160,000
Unitary variable cost= $80
Machine B:
Fixed costs= $270,000
Unitary variable cost= $2
First, we need to structure the total cost formula for each machine:
Machine A= 160,000 + 80x
Machine B= 270,000 + 2x
x= number of units
Now, we equal both formulas and isolate x:
160,000 + 80x = 270,000 + 2x
78x = 110,000
x= 110,000/78
x= 1,410 units
The indifference point is 1,410 units
A company rents office space for $10,000. The company hasn’t yet recorded payment as an expense in the financial statements because it hasn’t started using the premises.
You want to accumulate $1 million by your retirement date, which is 25 years from now. You will make 25 deposits in your bank, with the first occurring today. The bank pays 7% interest, compounded annually. You expect to receive annual raise of 3%, which will offset inflation, and you will let the amount you deposit each year also grow by 3% (i.e., your second deposit will be 3% greater than your first, the third will be 3% greater than the second, etc.). How much must your first deposit be if you are to meet your goal
Answer:
First deposit will be $11,213.87
Explanation:
To derive how much the first deposit must be, the deposit can be derived by using payment formula for growing annuity
P = FV x (r - g) / [(1 + r)^n - (1 + g)^n]
When FV = $1,000,000
r = 7%
g = 3%
n = 25
Hence, First payment will be:
P = 1,000,000 * (7% - 3%) / (1.07^25 - 1.03^25)
P = 1,000,000 * 4% / 5.427433 - 2.093778
P = 40,000 / 3.333655
P = 11998.842
P = $11,998.84
However, this formula is applicable when the payments are made at the end of the year. In this case the payments are upfront, occurring today. We need to adjust this first payment to reflect the early payment.
Hence, first payment = $11,998.84 / (1 + 7%)
First payment = $11,998.84 / (1 + 0.07)
First payment = $11,998.84 / 1.07
First payment = 11213.8691588785
First payment = $11,213.87
Your strengths represent the best you have to offer in ______ others.a) controlling.
b) influencing.
c) manipulating.d) controlling and manipulating.
At the annual shareholders meeting of the company you work for, the CEO points out that after a record year of cash flow, the company plans to spend significant amounts of that cash in a stock repurchase program. What is one reason the Board of Directors and executive leadership of a company would use its excess cash flow to buy back its own shares?
Answer:
increase their ownership amount of the company
Explanation:
The main reason why shareholders would do this is to increase their ownership amount of the company. Each company only has a certain number of shares available, the entirety of this amount makes up the entire company. The more shares you own, the more of the company you own. Therefore, when there is excess cash flow many shareholders buyback more of their stocks in order to own more of the company, which they think will continue to grow and bring them more profits.
Allo Foundation, a tax-exempt organization, invested $200,000 in cost-saving equipment. The equipment has a five-year useful life with no salvage value. Allo estimates that the annual cash savings from this project will amount to $65,000. On investments of this type, Allo's required rate of return is 12%.The net present value of the project is closest to: Select one: a. $34,300 b. $36,400 c. $90,000 d. $125,000
Answer:
Net Present Value = $ 34,310.45
Explanation:
The Net present Value (NPV ) is the difference between the present value PV of cash inflows and the PV of cash outflows. A positive NPV implies a good investment decision and a negative figure implies the opposite.
NPV of an investment
NPV = PV of Cash inflows - PV of cash outflow
The cash inflow is an annuity.
PV of annuity= A× 1 -(1+r)^(-n)/r
A- Annual cash flow ,- 65,000 r - discount rate - 12%, number of years- 5
Present Value of cash inflow =65,000 × (1- (1.12)^(-5)/0.12 = 234,310.45
Initial cost = 200,000
Net Present Value = - 234,310.45 -200,000 = 34,310.45
Net Present Value = $ 34,310.45
Which of the following is NOT considered a step in activity-based costing?
A. Trace or allocate overhead costs to activity cost pools.
B. Identify and classify the major activities involved in the manufacture of specific products.
C. Identify a single overhead rate as the predetermined overhead rate.
. The overhead traced or allocated to the activity cost pools is assigned to products using cost drivers.
Answer: C. Identify a single overhead rate as the predetermined overhead rate.
Explanation:
Activity based costing works by assigning indirect and overhead costs to the activities that caused the costs to be incurred and then assigning those activities to the products those activities helped produce such that indirect and overhead costing is more accurate.
The steps involved include, tracing and allocating overhead costs to activity coat pools, identifying and classifying the major activities involved in the manufacture of specific products, and assigning overhead costs to products based on cost drivers.
It does not include identifying a single overhead rate as the predetermined overhead rate. This is a step is in Standard Costing.
A company purchased a building for $900,000 by obtaining a 30-year mortgage payable. Assume the lending arrangement specifies that the company will pay $20,000 of the principal over the first year, $30,000 in the second year, and the remainder evenly over the final 28 years. What amount of the $900,000 would be classified as a long-term liability at the time the mortgage payable is obtained
Answer:
A total of $880,000 would be classifiad as a long-term liability.
Explanation:
Long-term liabilities are also known as non-current liabilities.
Long-term liabilities consist of all the liabilities that are not due within a year, in other words, that can be paid off for a period of time longer than six months.
In this case, only $20,000 of principal of a total of $900,000 are paid over the first year. The remaining principal payment of $880,000 (plus any interest), is to be paid over the next 29 years, and for this reason, these payments will be recorded in the balance sheet as long-term or non-current liabilities.
How is the change in cash classified on the statement of cash flows?
a. It is found in the investing activities section of the statement.
b. It is found in the operating activities section of the statement.
c. It is found in the financing activities section of the statement.
d. It is the sum of the investing, operating, and financing activities sections.
Answer:
d. It is the sum of the investing, operating, and financing activities sections.
Explanation:
Change in cash classified on the statement of cash flows is derived by the sum of the Investing cash flow activities + Operating cash flow activities Financing cash flow activities. The balance gotten is known as Net cash flow for the particular period.
Why is a facility location so important to manufacturers
Sampson Corp. had 500,000 shares of common stock outstanding at the beginning of the year. The average market price was $20. On April 1, Sampson issued 100,000 shares of $1000 par value 10 percent preferred stock. On July 1, Sampson issued 200,000 warrants to purchase 10 shares of common stock each at $22 per share. On October 1, Sampson repurchased 60,000 of common stock as treasury stock for $15 per share (EPS) was:
a. 515,000.
b. 600,000.
c. 485,000.
Answer:
c. 485,000
Explanation:
[(500,000 × 12) − (60,000 × 3)] / 12 = 485,000
In October 2014, Anheuser Busch InBev (AB InBev) acquired 100 percent of the common stock of SABMiller Group by paying $103,136 million in total consideration. On the acquisition date, the total fair value assigned to tangible and intangible assets acquired (excluding goodwill) was $61,896 million, while the total fair value assigned to liabilities assumed was $31,165 million. What is the value of goodwill recognized in AB InBev's consolidated financial statements as a result of the SABMiller Group acquisition?
Answer:
the value of goodwill recognized in AB InBev's consolidated financial statements is $70,405.
Explanation:
Goodwill is the excess of the Purchase consideration over the Fair Value of the Net assets taken over.
Calculation of Goodwill
Purchase Consideration $103,136
Less Fair Value of Net Assets taken over :
Fair Value of Assets $61,896
Fair Value of Liabilities ($31,165) ($30,731)
Goodwill $70,405
g If oil executives read in the newspaper that massive new oil supplies have been discovered under the Pacific Ocean but will likely only be useful in 10 years, what is likely to happen to the supply of oil today? What is the likely equilibrium impact on the price and quantity of oil today?
Answer:
a. What is likely to happen to the supply of oil today?
The supply of oil will increase today because the oil executives will no longer be worried about limiting supply on account of the current reserves running out because the oil reserves discovered that will be ready in 10 years will become the new supply source when the current reserves run out.
b. What is the likely equilibrium impact on the price and quantity of oil today?
As the supply oil will increase in the present, the Equilibrium quantity will increase.
With an increase in the equilibrium quantity, prices will decrease as oil will no longer be as scarce.
The adjusted trial balance of Pacific Scientific Corporation on December 31, 2021, the end of the company’s fiscal year, contained the following income statement items ($ in millions): sales revenue, $2,200; cost of goods sold, $1,440; selling expense, $215; general and administrative expense, $205; interest expense, $45; and gain on sale of investments, $85. Income tax expense has not yet been recorded. The income tax rate is 25%. Assume the company’s accountant prepared a multiple-step income statement. a. What amount would appear in that statement for operating income? b. What amount would appear in that statement for nonoperating income?
Answer:
A. $340 million
B. $40 million
Explanation:
A. Calculation for the amount that would appear in that statement for operating income
Sales revenue $2,200
Less: Cost of goods sold ($1,440)
Selling expense ($215)
General and administrative expense ($205)
Operating income $340 million
Therefore the amount that would appear in that statement for operating income will be $340 million
B. Calculation for the amount that would appear in that statement for non operating income
Interest expense $45
Less Gain on sale of investments $85
Non-operating income $40 million
Therefore the amount that would appear in that statement for nonoperating income will be $40 million
You manage an equity fund with an expected risk premium of 10% and a standard deviation of 14%. The rate on Treasury bills is 6%. Your client chooses to invest $60,000 of her portfolio in your equity fund and $40,000 in a T-bill money market fund. What is the reward-to-volatility (Sharpe) ratio for the equity fund
Answer: 0.71
Explanation:
The following can be deduced from the question:
Expected risk premium = 10%
Standard deviation = 14%.
Treasury bills rate = 6%.
The expected return of equity will be:
= 10% + 6%
= 16%
The reward to voltality ratio is calculated as:
(expected return - risk free rate )/standard deviation
= (16% -6%)/14%
= 10%/14%
=0.1/0.14
= 0.71
Apple Tree Enterprises allocated overhead based on direct material cost and has a predetermined overhead rate of 160%. During the current period, direct labor cost is $67,000 and direct materials cost is $73,000. In the current period, determine the amount of overhead to be applied by Apple Tree Enterprises.
Answer:
Allocated MOH= $116,800
Explanation:
Giving the following information:
predetermined overhead rate= 160% of direct material
Direct materials= $73,000
To calculate the allocated overhead, we need to use the following formula:
Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base
Allocated MOH= 1.6*73,000
Allocated MOH= $116,800
Identify whether a debit or credit yields the indicated change for each of the following accounts %
a. To increase Prepaid Rent
b. To decrease Prepaid Parking
c. To increase Repairs Expense
d. To increase Commission Revenue
e. To decrease Rent Payable
f. To decrease Supplies
g. To increase Unearned Revenue
h. To decrease Equipment
i. To increase Retained Eamings
j. To increase Store Supplies
Answer:
a. To increase Prepaid Rent ⇒ DEBIT, since this is an asset account, in order to increase it you must debit it.
b. To decrease Prepaid Parking ⇒ CREDIT, since this is an asset account, in order to decrease it you must credit it.
c. To increase Repairs Expense ⇒ DEBIT, since this is an expense account, in order to increase it you must debit it.
d. To increase Commission Revenue ⇒ CREDIT, since this is a revenue account, in order to increase it you must credit it.
e. To decrease Rent Payable ⇒ DEBIT, since this is a liability account, in order to decrease it you must debit it.
f. To decrease Supplies ⇒ CREDIT, since this is an asset account, in order to decrease it you must credit it.
g. To increase Unearned Revenue ⇒ CREDIT, since this is a liability account, in order to increase it you must credit it.
h. To decrease Equipment ⇒ DEBIT, since this is an asset account, in order to increase it you must debit it.
i. To increase Retained Earnings ⇒ CREDIT, since this is an equity account, in order to increase it you must credit it.
j. To increase Store Supplies ⇒ DEBIT, since this is an asset account, in order to increase it you must debit it.
39. You expect to receive $5,000 in 25 years. How much is it worth today if the discount rate is 5.5%?
Answer:
PV= $1,311.17
Explanation:
Giving the following information:
Future Value (FV)= $5,000
Number of periods (n)= 25 years
Interest rate (i)= 5.5% compounded annually
To calculate the present value (PV), we need to use the following formula:
PV= FV / (1+i)^n
PV= 5,000 / 1.055^25
PV= $1,311.17
Which account would be listed on a post-closing trial balance?
a. Sales Revenue
b. Depreciation Expense
c. Retained Earnings
d. Income Tax Expense.
Answer: c. Retained Earnings
Explanation:
The post-closing trial balance reflects balance sheet items that do not have a $0 balance in them when a period has ended and is prepared after the temporary accounts have been closed off. The purpose is to make sure that the debits equal the credits.
As there are no temporary accounts, all income statement items will have been closed off and moved to the Retained earnings account which will reflect the total for the income statement for the year. The only account that will be listed in the post-closing trial balance therefore will be the Retained earnings account.
Philip Morris expects the sales for his clothing company to be $670,000 next year. Philip notes that net assets (Assets − Liabilities) will remain unchanged. His clothing firm will enjoy a 9 percent return on total sales. He will start the year with $270,000 in the bank. What will Philip's ending cash balance be?
Answer:
the ending cash balance is $330,300
Explanation:
The computation of the ending cash balance is shown below:
Ending cash balance = Opening cash balance + Profit
= $270,000 + (9% × $670,000)
= $270,000 + $60,300
= $330,300
We simply added the opening cash balance and the profit so that the ending cash balance could come
Hence, the ending cash balance is $330,300