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Answer: Understatement, $30,900
Explanation:
There will be an UNDERSTATEMENT of McGinnis' net income for the most recent fiscal year of $30,900.
The Understatement arises because as of year end which is June 30th, McGinnis were not paid for their services that cost $40,900 and instead will only be paid on the 8th of the next month so it was not accounted for in the net income.
The reason the net income understatement is $30,900 and not $40,900 is because McGinnis will still have to account for the payment to it's employees. If in a five day week they earn $12,500, that would mean that they earn $2,500 a day (12,500/5). Seeing as June ended on a Thursday, that is a 4 day week which means $2,500*4= $10,000.
That $10,000 will reduce the net income by that amount.
The net effect is a $30,900 UNDERSTATEMENT.
Answer:
It will increase expense, thereby reducing the profit mentioned in the income statement and decrease the current asset (debtor) recorded in the balance sheet.
Explanation:
Bad Debt is an expense that is recorded when it is expected that the customer, who owes a debt to the business, might default in clearing their dues.
As such when the bad debt amount is increased it will result in a rise in expense and therefore the profit, as stated in the profit and loss (income statement) of the sole trader would decrease.
Moreover, it will also decrease the value of trade receivables (current assets) mentioned in the balance sheet. The following entry would be recorded:
Bad Debts (Dr) xxxxx
Trade Receivables (Cr) xxxxxx
Hence, the expenses will increase while the current asset will decrease.
Answer:
1) FV =7012.76
2) FV =26408
3) FV ==61565.31
4) FV =18416.24
Explanation:
The formula used for calculation of future value for given present investment is given as
FV = PV ( 1 + I )ⁿ
1) for PV = 5000, n = 5 year, I = 7%
FV = 5000*(1.07)^5
FV =7012.76
2) for PV = 7200, n = 15 year, I = 9%
FV= 7250*(1.09)^15
FV =26408
3) for PV = 9000, n = 33 year, I = 6%
FV= 9000*(1.06)^33
FV ==61565.31
4) for PV = 12000, n = 8 year, I = 5.5%
FV = 12000*(1.055)^8
FV =18416.24
