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1 year ago

indicators that the local currency is also the functional currency include all of the following except:

1 answer:

6 0

Indicators that the local currency is also the functional currency include all of the following except the parent typically provides the financing or provides a guarantee.

A functional currency is one that is utilized in the main economic setting in which a company conducts business. This is the setting in which an entity generates and spends money most frequently. When defining the functional currency of an entity, the following key considerations should be taken into account:

The principal currency influencing retail prices (usually the currency in which prices are denominated and settled).

The money of the nation whose laws and competition have the biggest impact on retail pricing.

The principal currency affecting labor expenses and other costs of goods sold (usually the currency in which prices are denominated and settled).

The currency in which an entity keeps its operating receipts and the currency in which debt and equity instruments are issued are less important deciding factors.

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Answer:

a) Market Value = $100 million × $20 = $2,000 million = $2 billion

Market value of equity would remain same = $2 billion

b) Market value would remain same after recap. Only market capitalization would reduce to half.

Market value of equity = 1 billion

c) Buying back shares increases the stock price which demonstrates the faith of the company in its work. But creditors have capital gains.

d) After recap and cash flow firm total value has increased to $2 billion + $100 Million = $2.1 billion and market value of equity has increased from $20 to $22 . ($1000 + $100)/50 = $22.

e) Equity shareholders have gained due to increase in there share value

Explanation:

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3 years ago

In countries where inflation is expected to be high, interest rates also will be high, because investors want compensation for t

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Answer:

Fisher effect

Explanation:

Fisher effect is the effect in the economic theory that is established by the economist Irving Fisher, which states the relationship among the inflation and both nominal and the real interest rates.

This effect state that the real rate of interest equals to the nominal rate of interest deduct the expected inflation rate.

So, the relationship which is mentioned in the question is the fisher effect as it state the rate of interest that reflect the expectations likely the future inflation rates.

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3 years ago

Below are various transactions that a local corporation had occur during the month. For each transaction, indicate the transacti

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Answer:

Explanation:

As per accounting equation,

Assets = Liabilities + Owners Equity

Following would be the effect of the transactions:

A. Received $50,000 in cash from sale of common stock

This transaction would increase the assets as cash is an asset at the same time it would increase capital or owners equity by the same amount.

So this will cause an increase in amount on both sides by $50,000

B. Borrowed $20,000 from the local bank by signing a note promising to pay loan plus interest in 2 years

This would result into an increase in the liability by the money borrowed at the same time would increase cash balance i.e the assets.

Thus it will increase the accounting equation by $20,000.

C. Paid $8000 for the purchase of an equipment

This increases the assets balance at the same time reduces the cash balance. Since both equipment and cash are assets, the net effect of the transaction on equation would be NO EFFECT.

D. Provided services to customer on account

This would increase debtors or accounts receivables balance and at the same time would increase sales.

So the effect would be an increase on the assets side of the equation. Also since this represents a credit sale, this would increase the profits which would form part of reserves which in turn increases the owners equity.

Thus, an increase in assets and owners equity which shall increase the equation by $5000

E. Received $ 5000 from customers above

This shall increase cash balance and at the same time reduce debtors balance by $5000. Since both are assets, the transaction will have NO EFFECT.

F. Paid $1,200 for one years worth of insurance in advance

Premium paid in advance is a prepaid expense and an asset. This shall increase prepaid expenses and at the same time reduce cash by the same time so it will have NO EFFECT on the equation.

G. Paid $800 to employees for salaries

This reduces the profits by $800 i.e owners equity and at the same time reduce cash (an asset).

So the equation will decrease by $800.

H. Purchased supplies costing $1,400 on account

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