Answer:
Check the explanation
Explanation:
The inflationary gap will be = Real GDP - Potential GDP, which will give you = $2,500 - $1,000 = $1,500.
The Federal government will have to lessen the actual GDP so as to close the gap since the actual GDP is bigger than the potential GDP. In this case, the Federal government will have to lower supply of money. So that it would have to sell securities to the banks. When the Federal government sells securities companies and private individuals, money is expected to flow from the banking system to the Federal government.
Here, multiplier = 1/reserve ratio = 1/20% = 1/0.20 = 5
So, in closing the space and lowering GDP by $1,500 trillion, the Federal government will have to sell securities worth $1,500 trillion/5 = $300 trillion.
Same question :
Kamau owned the patent of safety lock. Moses and Co. acquired the right to manufacture and sell
locks for seven years on the following terms:
a) Ofien0 and Co. to pay Kamau a royalty of Shs. 5 for each lock sold with a minimum ana
payment of Shs. 50,000. Accounts are to be settled annually on 31 December
n any year the royalty calculated on locks sold amounted to less than Shs. 50,000. Moses
and Co. is to have the right to deduct the deficiency from the royalty payable in excess of that
sum in the two following years. The number of locks sold was as follows:
Year ended 31s December:
2017 8,000
2018 9,000
2019 11,000
2020 18,000
Required:
Prepare the necessary ledger accounts to record the above royalty transactions in the books of Moses
and Co. which are closed annually on 31s December
i. Royalties Account
ii. Minimum Rent Account
ii. Short workings Account
iv. Kamau's Account
V. Profit and Loss Account
Answer:
The gross profit method of inventory valuation is not valid when
c. the gross margin percentage changes significantly during the year.
Explanation:
Gross Profit Method:
It is such method that is used to determine the value of ending inventory in a specific period.
- The option a, b and d are valid as this method is used when there is substantial increase in the quantity of inventory or in the cost of the inventory during the year. Moreover, it is also used to calculate the amount of ending inventory that is effected by a disaster such as fire, theft etc.
- The option c is not valid because it is not used when the gross margin percentage changes significantly during the year as gross profit method is only used to determine the amount of an ending inventory.