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Over [174]
3 years ago
14

ABC Appliance offers a warranty requiring an annual fee. The warranty may be purchased at the time of sale or at any time within

the first year after the appliance was purchased. The warranty fee after the date of purchase is twice the time-of-purchase fee. When asked why the fee was higher after the date of purchase, ABC's president said, "Buying a warranty is voluntary. We've noted that those who buy the warranty after the purchase date have a greater need for service." Charging the same rate or a lower rate after the date of purchase would expose ABC to what problem that also impacts private insurers?
Business
1 answer:
Tems11 [23]3 years ago
6 0

Answer: adverse selection

Explanation:

Adverse selection is a situation whereby the sellers possesses information that the buyers do not have. It may also be the other way round whereby the buyers have information which the sellers don't have regarding the quality of a product.

There is information failure between both parties; typically, it's usually the sellers who has more information. Therefore, base on the scenario above, charging same rate or lower rate after the date of the purchase would expose ABC to adverse selection problems.

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Answer: $227,700

Explanation:

The total recorded cost would include the actual cost of the equipment as well as every other cost that was incurred to transport the equipment and get it ready fir use.

Cost that will be recorded is therefore:

= Invoice cost + Installation cost + Delivery cost + Sales tax

= 190,000 + 20,000 + 4,000 + 13,700

= $227,700

3 0
3 years ago
Taylor Company neglected to amortize the discount on outstanding ten-year bonds payable. What is the effect of the failure to re
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Answer:

Taylor Company

The negligence to amortize the discount on outstanding ten-year bonds payable is the understatement of interest expense for each year.  This means that the interest expense will be the same for each year instead of increasing by the amortized discount amount.  The same applies to the bond carrying value, which will remain the same throughout the period.

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The discount on bonds payable is an additional interest expense, which is written off yearly over the bonds' maturity period through amortization.  It increases the amount of the periodic interest payment by the amortized discount.

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Misha Larkins [42]

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Cash reciepts form sale of investment such as stocks and bonds is classified as an investing activity. It is a positive investing activity because it involves inflow of cash.

This is not classified as an operating activity.

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