Answer:
One behavioral bias that might explain why Schlicksup was prepared to take the risk of blowing the whistle in this case is Reducing Regrets.
Explanation:
The only sin of Schlicksup was that he "was an accountant at Arthur Andersen (he auditing firm that was criminally indicted in the Enron scandal and went out of business)." Self-convinced that he was going to get fired from Caterpillar, he then wanted to blow the whistle by 2008, which he should have done before being employed in Caterpillar, anyway. He is surely suffering from the bias of reducing his regrets. This makes him to be emotionally involved and to reach wrong conclusions that might not be based on facts. He did not even ask himself if he was involved directly in the Enron-Arthur Andersen scandal. Even if he was directly involved, has he not expressed remorse for his former actions to enable him to move on in life? Schlicksup is simply going to illogical lengths to avoid having to own the feeling of regret.
Answer:
Explanation:
Future value after 24 months = 1200
present value = 1000
Let monthly rate of interest = r
1000 = 1200/( 1+r )²⁴
( 1+r )²⁴ = 1200/1000
( 1+r )²⁴ = 1.2
taking log on both sides
24 log( 1+r ) = log 1.2
24 log( 1+r ) = .07918
log( 1+r ) = .003299
( 1+r ) = 1.007625
r = .007625
monthly rate of interest in percent = .7625%
II Option
Future value after 24 months = 1220
present value = 1020 - 20 = 1000
Let monthly rate of interest = r
1000 = 1220/( 1+r )²⁴
( 1+r )²⁴ = 1220/1000
( 1+r )²⁴ = 1.22
taking log on both sides
24 log( 1+r ) = log 1.22
24 log( 1+r ) = .086359
log( 1+r ) = .003598
( 1+r ) = 1.008319
r = .008319
monthly rate of interest in percent = .8319%
b )
Effective annual rate of uncle = (1.007625)¹² -1
= 1.09543 - 1 = .09543
In percent = 9.543 %
Effective annual rate of greedy friend = ( 1.008319)¹² -1
= 1.1045 -1
= 10.45 %
c ) The first one is cheaper so it is preferable.
Answer:
Accrual Basis
Explanation:
The cash accounting basis only treats transactions only as and when cash is paid or received. It ceases to recognize liabilities, debtors, investments etc. Which limits the amount of information available to the users.
With the Accrual Basis, it provides very useful information to the users, such as investments made, the capital position of the entity the risk associated with investing in the entity considering the credit rating of the entity through its Liability to Asset computation. Accrual basis also help the user know the quality of management staff available, since information such as Creditors collection period and Turnover rate. Which can tell how efficient the management is working. In addition the Accrual basis includes the cash basis because of the preparation of the cash flow statement.
