Answer:
An adjustment to retained earnings is necessary when when there is a change from LIFO to FIFO.
Calculating the effect on retained earnings:
- In the year 1 company followed LIFO and recorded ending inventory at $177500. Had it followed FIFO it would have recorded at $195000. So there would be increase in income of $17500 (195000 - 177500).
- In year 2 it followed LIFO and recorded opening inventory at $177500 and closing inventory at $355000 and thereby recording Net closing stock of $177500 (355000 - 177500). Had it followed FIFO it would have recorded a net stock of $195000.(390000-195000). So there would be increase in income by of $17500 (195000 - 177500).
So in total of 2 years there would be an increase of $35000 Net income i.e., Retained earnings and increase in stock value of $35000.
The journal entry is:
Inventory A/c Dr $35,000
To Retained earnings A/c $35,000
Explanation:
Answer:
Using the current capital structure
Ke = Rf + β(Risk premium)
Ke = 5 + 1.60(6)
Ke = 5 + 9.60
Ke = 14.60
Weighted cost of equity
= 14.60(20/100)
= 2.92%
Using the new debt-equity ratio
Ke = 5 + 1.60(6)
Ke = 5 + 9.6
Ke = 14.60%
Weighted cost of equity
Ke = 14.60(60/100)
Ke = 8.76%
Difference in cost of equity
= 2.92% - 8.76%
= -5.8%
Explanation:
There is need to calculate the cost of equity based on capital asset pricing model where Rf represents risk-free rate, Rp denotes risk-premium and β refers to beta. Then, we will calculate the weighted cost of equity by multiplying cost of equity by the proportion of equity in the capital structure. We will also calculate the new weighted cost of equity by multiplying the cost of equity the new proportion of equity in the capital structure. Finally, we will deduct the new weighted cost of equity from the old weighted cost of equity.
Answer:
b. Investors buy products in other countries.
Explanation:
Inflation causes higher cost of production for manufacturer which then charge high cost for the products. Thus, if there is inflation in US, product cost will skyrocket thus companies will buy products from other countries where the product might be at a cheaper cost.
Answer:
The cost per month is increasing at a rate $365.
Explanation:
Differentiation Formula
Given that,
A manufacturer of handcrafted wine racks has determined that the cost to produce x units per month is given by
.
Again given that,
the rate of changing production is 13 unit per month
i.e
To find the cost per month, we need to find out the value when production is changing at the rate 13 units per month and the production is 70 units.
Differentiating with respect to t
Plugging
[ plugging x=70]
=364
[ The unit of c is not given. Assume that the unit of c is dollar.]
The cost per month is increasing at a rate $365.