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nalin [4]
3 years ago
13

One problem with the consumer price index stems from the fact that, over time, consumers tend to buy larger quantities of goods

that have become relatively less expensive and smaller quantities of goods that have become relatively more expensive. This problem is called ____.
Business
1 answer:
BigorU [14]3 years ago
4 0

Answer:

SUBSTITUTION BIAS

Explanation:

Substitution bias occurs when a customer decides to purchase a substitute of a good after the prices becomes cheaper than the goods they normally purchase. It rises as a problem in price index due to the fact that customers/buyers can decide to change or substitute goods at an instant because of changes in prices. In situations like this, customers tend to avoid the whole increase in prices by changing to cheaper substitutes. Substitution generally is a consumer changing or substituting an expensive product for a cheaper one due to changes in prices. This usually leads to inflation rate been overestimated or overstated.

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Consider the recorded transactions below.
AnnZ [28]

Answer:

1. T-accounts:

Accounts                           Debit        Credit

Accounts Receivable

Balance                           $4,200

Service Revenue              8,400

Cash                                                 10,200

Accounts                           Debit        Credit

Service Revenue

Accounts Receivable                         8,400

Accounts                           Debit        Credit

Supplies

Balance                              $400

Accounts Payable            2,300

Balance c/d                                       $2,700

Accounts                           Debit        Credit

Accounts Payable

Balance                                            $3,500

Supplies                                             2,300

Cash                                $3,700

Balance c/d                      $2,100

Accounts                           Debit        Credit

Cash Account

Balance                           $3,400

Accounts Receivable      10,200

Advertising                                       $1,000

Accounts Payable                              3,700

Deferred Revenue            1,100

Balance c/d                                    $10,000

Accounts                           Debit        Credit

Advertising Expense

Cash                                  1,000

Accounts                           Debit        Credit

Accounts Payable

Cash                                3,700

Accounts                           Debit        Credit

Deferred Revenue

Balance                                             $300

Cash                                                   1,100

Balance c/d                      $1,400

Explanation:

a) Data:

General Entries:

Accounts                           Debit        Credit

1. Accounts Receivable   8,400

Service Revenue                                  8,400

2. Supplies                      2,300

Accounts Payable                                2,300

3. Cash                           10,200

Accounts Receivable                         10,200

4. Advertising Expense   1,000

Cash                                                     1,000

5. Accounts Payable      3,700

Cash                                                    3,700

6. Cash                            1,100

Deferred Revenue                              1,100

b) The beginning balance of each account before the transactions is:

Cash, $3,400

Accounts Receivable, $4,200

Supplies, $400

Accounts Payable, $3,500

Deferred Revenue, $300

6 0
2 years ago
You are given the following information for Watson Power Co. Assume the company’s tax rate is 24 percent. Debt: 14,000 6.3 perce
Alenkinab [10]

Answer:

10.18%

Explanation:

The computation of the WACC is shown below:

But before that following calculation is to be done

The value of debt is

= 14000 × $1,000 × 107%

= $14,980,000

The value of equity is

= 470,000 × $65

= $30,550,000

The value of preferred stock is

= 20,500 × $86

= $1,763,000

Now

value of total capital is

= $14,980,000  + $30,550,000 + $1,763,000

= $47,293,000

Now we find the cost of debt using excel function i.e.

= RATE(nper,pmt,pv,fv)) × 2

= RATE(29 × 2,1000 × 6.3% ÷ 2,-1000 × 107%,1000)) ×2

= 5.80%

Now  

Cost of common stock is

= 5.2% + 1.16 × 7%

= 13.32%

cost of preferred stock is

= (100 × 4.1%) ÷ 86

= 4.77%

Now finally  

WACC = weight of debt × cost of debt ×(1 - tax rate) + weight of equity × cost of equity + weight of preferred stock ×cost of preferred stock

= ($14,980,000 ÷ $47,293,000) × 5.80% × (1  - 24%)+($30,550,000 ÷ $47,293,000) × 13.32% + ($1,763,000 ÷ $47,293,000) ×4.77%

= 10.18%

5 0
2 years ago
Are cities around the world doing a disservice to their citizens or their visitors, or both, by banning uber outright from opera
Ne4ueva [31]

Answer:

In my opinion they can be a big problem because if you can not use the uber in some community it's useless but they are banning ubers because the taxis business are loosing money and the uber is replacing the taxi business.

There is an own opinion question, so try to answer by yourself

4 0
3 years ago
Kingston Co. uses the percentage-of-receivables basis to record bad debt expense. It estimates that 1% of accounts receivable wi
love history [14]

Answer:

Kingston Co.

Adjusting Journal Entry to record bad debt expense for the year:

Account Titles and Explanation   Debit    Credit

Bad Debts Expense                    $2,700

Allowance for Doubtful Accounts           $2,700

To record bad debt expense for the year and bring the allowance for doubtful accounts to a credit balance of $4,200.

Explanation:

a) Data and Analysis:

Accounts receivable at the end of the year = $420,000

Allowance for doubtful accounts (credit balance) = $1,500

Estimated uncollectible = 1% of account receivable

New credit balance for allowance for doubtful accounts = $4,200

Adjustment to increase the allowance for doubtful accounts to the above new balance = $2,700 ($4,200 - $1,500)

Bad Debts Expense $2,700 Allowance for Doubtful Accounts $2,700

5 0
2 years ago
greene co. has pretax book income for the year ended december 31, 2019 in the amount of 265000 and has a tax rate of 30%. Deprec
Gennadij [26K]

Answer:

Pre-tax book income $265,000

Less depreciation additional charge $14,500

Taxable income $250,500

Tax liability at 30% = $75,150

8 0
2 years ago
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