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MrMuchimi
3 years ago
8

Nidal Company reported inventory in the 2020 year-end balance sheet, using the FIFO method, as $185,000. In 2021, the company de

cided to change its inventory method to average cost. If the company had used the average cost method in 2020, ending inventory would have been $171,000. What adjustment would Nidal make for this change in inventory method
Business
2 answers:
Ksenya-84 [330]3 years ago
3 0

Answer:

Dr Retained earnings $14,000

Cr Inventory $14,000

Explanation:

There is a need to make adjustment to the inventory . Therefore,

Adjusted inventory

= New method of $171,000 - Old method of $185,000

= $14,000 decrease

It is to be noted that a lower inventory will have high costs associated with goods sold hence reduces profit/net income for the previous year by $14,000.

Also, the net income reports to retained earnings account hence decreases retained earnings.

Having made the above adjustment, we can assume that the average cost method was used for 2020 books.

salantis [7]3 years ago
3 0

Answer:

Dr Retained earnings for $14,000

Cr Inventory for $14,000

Explanation:

Calculation of the adjustment that Nidal would make for this change in inventory method

Based of the information given the adjustment will records the decrease in inventory of $14,000 which is calculated as ( Inventory of $185,000 − Ending inventory of $171,000) as well as the decrease in retained earnings, just as if average cost had been used in 2020.]

Therefore the adjustment that Nidal would make for this change in inventory method will be:

Dr Retained earnings for $14,000

Cr Inventory for $14,000.

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6 0
3 years ago
The Holmes Company's currently outstanding bonds have a 8% coupon and a 13% yield to maturity. Holmes believes it could issue ne
Marina86 [1]

Answer: 8.45%

Explanation:

From the question, we are informed that Holmes Company's currently has an outstanding bonds and has a 8% coupon and a 13% yield to maturity.

We are further told that Holmes believes it could issue new bonds at par that would provide a similar yield to maturity and that its marginal tax rate is 35%.

Holmes's after-tax cost of debt will therefore be calculated as:

= Yield to maturity × (1 - Marginal tax rate)

= 13% × (1 - 35%)

= 13% × (65%)

= 0.13 × 0.65

= 0.0845

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7 0
2 years ago
A school district's board of directors is deciding whether to use its funds for the construction of a new school or for repairs
vladimir2022 [97]
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3 0
3 years ago
You are asked to make comparisons of two pairs of countries. The first pair are the Latin American countries of Chile and Argent
aleksklad [387]

Answer:

Part a: According to Solow model higher per capita real GDP will be in Chile because of its highest saving rate.

Part b: The per capita capital stock or the labour ratio is the primary factor for these differences in the simple Solow model.

Explanation:

<em>Part a:</em>

According to Solow model higher per capita real GDP will be in Chile because of its highest saving rate.

In Solow model the GDP per capita is defined as

                                           y=k^{\alpha}=f(k)

Also the steady state path is given as

sf(k)=(s+n)k\\\frac{s}{s+n}=\frac{k^*}{f(k^*)}\\\frac{s}{s+n}=\frac{k^*^{\alpha-1}}{k^*}\\\frac{s}{s+n}={k^*^{\alpha-2}}

As all other parameters are same thus the country with higher value of s will have a higher per capita GDP.

According to the Solow model, higher saving rate means larger capital stock and high level of output at the steady state.

Higher saving rate leads to faster growth in Solow model. So there is higher per capita real GDP for the country that has higher saving rate.

<em>Part b:</em>

In Simple Solow Model, the steady state per Capita GDP, y^* is the function of the steady state per capita capital stock given as k^*

Now this indicates that

y^*=f(k^*)

where f is an increasing concave function i.e. f'>0 and f''<0

Thus the sole dependence of per capita GDP is on per capita capital stock.

Thus the per capita capital stock or the labour ratio is the primary factor for these differences in the simple Solow model.

6 0
2 years ago
Read 2 more answers
A company has a unit contribution margin of $50, fixed costs of $15,000 and a target profit of $20,000 after-tax. If the tax rat
sweet-ann [11.9K]

Answer:

The company must sell 800 units in order to earn the target.

Explanation:

This question requires us to calculate number of units required to be sold in order to acheive target profit. The answer can be calculated using simple break even calculation methodology.

To find number of units required to be sold we will divide sum of fixed cost and pre tax profit with contribution per unit.

Requires Sales = <em>(Fixed Cost + Pre tax profit)/ Unit contribution</em>

                         = (15,000+ (20,000/80%))/ 50 = 800 units

8 0
3 years ago
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