Answer:
d. $36,000
Explanation:
In this question, we use the proportionate method to find out the salary in 2003 which is shown below:
= Salary in 1974 × (Price index in 2003 ÷ price index in 1974)
= $10,000 × (180 ÷ 50)
= $10,000 × 3.6
= $36,000
We considered the 1974 salary, the price index is 2003 and the price index in 1974 to find out the accurate salary of 2003
Answer:
The answers are,
Items not easily quantified in dollar terms are not reported in the financial statements.
Monetary Unit Assumption
Accounting information must be complete, neutral, and free from error.
Faithful representation
Personal transactions are not mixed with the company's transactions.
Entity Assumption
The cost to provide information should be weighed against the benefit that users will gain from having the information available.
Cost constraint
A company's use of the same accounting principles from year to year.
Consistency
Assets are recorded and reported at original purchase price.
Historical Cost
Accounting information should help users predict future events, and should confirm or correct prior expectations.
Relevance
The life of a business can be divided into artificial segments of time.
Periodicity assumption
The reporting of all information that would make a difference to financial statement users.
Full Disclosure principle
The judgment concerning whether an item's size makes it likely to influence a decision-maker.
Materiality
10. Assumes a business will remain in operation for the foreseeable future.
Going concern
12. Different companies use the same accounting principles
Comparability
Explanation:
Answer:
The seven differences between goods and services are:
- intangibility: goods are tangible products, e.g. you can touch them and hold them, while services are intangible, you can use them (e.g. you fly on a plane) and even measure how much they satisfy your needs, but you cannot touch flying, it is an action.
- ownership: you can buy a good, e.g. if you are rich enough you can buy an airplane, but when you purchase a plane ticket you are entitled to using a certain service, you are assigned a seat and you fly inside the airplane, but you do not own anything besides your personal belongings.
- involvement of consumers: consumers are not an active part in the production process of a good, while consumers are an essential part in the process of producing a service, e.g. you buy a ticket and you fly in the plane, no one else can fly for you.
- quality: mass produced goods tend to have a similar quality while the quality of services can vary a lot, e.g. your plane might be late, or you can get sick while flying, or you might enjoy your flight.
- customer evaluation: when you purchase a good, you can easily decide if the good satisfies your need completely or not, while a flight can be on time (good service) but there might have been a lot of turbulence (bad service).
- inventories are absent: goods can be stocked, services cannot. There are usually empty seats during a flight, but a seat not taken today cannot be added to the total number of seats available tomorrow.
- importance of time: if you purchase a good, it doesn't matter if you decide to use that good immediately or not, while a service is produced and consumed at the same time, e.g. the airline company is providing the flight service during the time that you are actually flying.
Answer:
D) Stock prices of companies that announce increased earning in January tend to outperform the market in February.
Explanation:
The above is consistent with the Efficient Market Hypothesis. All others are a direct contravention.
<em>The efficient market hypothesis (EMH), also known as the efficient market theory, is a hypothesis that states that the prices of shares contain all information and that consistent alpha generation is impossible.</em>
According to the hypothesis, stocks always trade at their fair value on exchanges, making it impossible for investors to purchase undervalued stocks or sell stocks for inflated prices.
This means that it should not be possible to outperform the overall market through professional stock selection or market timing.
The only way according to EMH that an investor can obtain better returns is by purchasing riskier investments.
By implication, this also means that it is not possible to "beat the market" consistently on a risk-adjusted basis since market prices should only react to new information.
You would note that in the option D, earning (which is a key driver for demand of stock) is announced in one month. The natural reaction would be for the demand for that stock to surge in the next month.
