Answer:
The correct answer is option A.
Explanation:
According to the classical theory, the quantity of money is directly related to price level. So, any shortage or surplus in the money market can be corrected by increasing or decreasing price level.
According to the liquidity preference theory, however, money is demanded for transactionary, precautionary and speculative motive. So, only price level does not affects the quantity of money. Interest rates also effect the demand for money.
So, option A is the correct answer.
Answer:
There is a change of $27,500 (decrease)
Explanation:
Cash realizable value is the amount of money that the company expects to receive from their accounts receivable after deducting all uncollectible accounts.
First, we must compute the change in gross accounts receivable from the transactions happened during the year.
Sales on account less collections less write-offs = change in Gross accounts receivable.
$866,000 - ($522,000 + $42,500) = $301,500 (increase in gross accounts receivable)
Finally, we can now compute the change in cash realization value by deducting uncollectible accounts to gross accounts receivable.
$301,500 - $329,000 = ($27,500)
The correct explanation is option (a), "short selling stock-index futures contracts".
<h3>What is short selling stock-index futures contracts?</h3>
When you buy a futures contract to "short sell," you are doing so with the intention of selling it later at a lower (ideally) price. Unlike the stock market, there is no requirement for financing.
The working of short selling stock-index future contracts is-
- The concept is to obtain anything you don't already own on loan, sell it, and then return it.
- Even though you will now receive the funds, you still owe the money you borrowed.
- You eventually have to return it.
- You make money if you can later purchase it for a lower price.
The future contract can be shorted by-
- By locking in a price through the directional hedge known as shorting the basis, any asset price changes are effectively eliminated until the futures contract expires.
- When shorting the basis, a long hedger prefers a narrowing in the basis.
To know more about the futures in contract, here
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Answer:
b. $22.500.
The estimate of bad debt expense is $22,500
Explanation:
Method of Bad Debt estimation = Percentage of credit sale
Bad Debt Expense = 3% of credit sale ($750,000)
Bad Debt Expense = 3% x $750,000
Bad Debt Expense = $22,500
Answer:
Depreciation expenses for 2007 is $8000
Explanation:
Depreciation/year = (Cost - Residual value)/ number of useful life
Depreciation 2007 = ($50,000-$10,000) / 5
= $40,000/5 = $8000
