Answer:
The effect of this error on 2003 ending working capital is that it overstated the ending 2003 working capital.
The error does not have effect on the 2004 ending retained earnings balance.
Explanation:
Let the amount of the commission expense be xxxx.
At the end of 2003, the journal entries should have been as follows:
Debit Commission expense for xxxx
Credie Commission payable for xxxx
Also, we have:
Working capital = Current assets – Current liabilities ………… (1)
From equation (1), current liabilities are understated because commission payable which was not recorded is an item under current liabilities. Since the current liabilities are understated, that indicates that the working capital in equation is overstated. Therefore, the effect of this error on 2003 ending working capital is that it overstated the ending 2003 working capital.
When the 2003 commission expense in the entries above was paid in 2004, it would have been recognized as an expense. This made the error to counterbalance. This implies that the 2004 ending retained earnings balance is still correct despite that there are errors in the earnings of the two years. Therefore, the error does not have effect on the 2004 ending retained earnings balance.
Answer:
The firm's sustainable growth rate is 13%.
Explanation:
The firm's sustainable growth rate can be calculated using the following formula:
Sustainable growth rate = Retention Rate * Return on Equity ............. (1)
Where;
Dividend payout ratio = 30%, or 0.30
Retention rate = 1 - dividend payout ratio = 1 - 0.30 = 0.70
Shareholder's equity = Total assets - Total debt = $913,600 - $424,500 = $489,100
Return on equity = Net income / Shareholder's equity = $94,000 / $489,100 = 0.19
Substituting the relevant values into equation (1), we have:
Sustainable growth rate = 0.70 * 0.19 = 0.13, or 13%
Therefore, the firm's sustainable growth rate is 13%.
A student who is checking account will be classified as a Basic type of account according to the agreement
Explanation:
There are many types of account checking and they are classified into different types in this case a student who is checking a account according to the agreement is classified as basic
The other different types of account checking is the special premium and the premier and they have various different types of functions according to that they work
Answer:
The expected real interest rate on the loan is 5%.Suppose that when Sally pays back the loan after one year, the actual inflation rate turns out to be 2%. The actual real interest rate on the loan is 8%.
a. If the inflation rate turned out to be higher than expected, then: the real interest rate would be lower than expected.
b. But if inflation turned out to be lower than expected, then: the real interest rate would be higher than expected.
Explanation:
Expected real interest rate = nominal interest rate - expected inflation = 10% - 5% = 5%
Actual interest rate = nominal interest rate - actual inflation rate = 10% - 2% = 8%
Answer: True.
Explanation:
The periodic review model for probabilistic demand explains that the order quantity at any review point comprises of all outstanding order to reach the replenishment level and amount needed for inventory when lead time is longer than review period.
