The envelope method, notebook and pencil, and online

Because of a defect discovered in its seat belts in December Year 1, an automobile manufacturer believes it is probable that it

Anna [14]

Answer:

Contingent liabilities refer to those obligations which might arise in the near future based upon the happening or non happening of a certain event and it's outcome.

Such liabilities are recorded if there is likeliness of an event happening and when they can be reasonably quantified and estimated.

In the given case, the automobile manufacturer will probably be required to recall it's products. The amount can be estimated.

In such cases, such expense is to be recognized in the income statement and at the same time a liability for such expenses needs to be created in the balance sheet. Product recall refers to replacement of defective products by the manufacturer. It is similar to a warranty.

Reporting on Dec 31 would be as follows,

Warranty Expense A/C Dr. $2.5

To Warranty Liability $2.5

(being product recall liability for for 2.5 million created)

4 0

3 years ago

You get a sales report every month to show the products sold from each state. You notice the sales from California are down from

Lostsunrise [7]

Answer: This is an example of a DRILL DOWN report

Explanation:

Drill down means to seek out detailed additional information on a specific subject. It involves clicking on a subject, or link or object to reveal more detail about a particular information.

To drill down through a series of information means you want to get a specific information, it involves accessing information but starting first with the general options before proceeding through the database to get successive ideas on the subject matter. Most times people drill down on an information when they have only the summary, then they will "dig Futher" to get suitable information according to their logic.

6 0

3 years ago

_____ benefit(s) from large economies of scale, in which the costs of goods decrease as output increases. natural monopolies per

adelina 88 [10]

Natural monopolies benefit from large economies of scale, in which the costs of goods decrease as output increases.
A natural monopoly is a distinct type of monopoly that may arise when there are extremely high fixed costs of distribution, such as exist when large-scale infrastructure is required to ensure supply.

8 0

3 years ago

While reviewing reports, it is often helpful to see the originating transaction or document; you can do this by using a feature

Oksi-84 [34.3K]

Answer:

The process of recording, summarizing, and presenting financial information of a company in the form of financial statements.

Explanation:

8 0

2 years ago

Suppose the risk-free rate is 8%. The expected return on the market is 14%. Given this data, answer the following questions: If

Monica [59]

Answer:

Explanation:

a.) Return of stock;

CAPM; r = risk-free +Beta(Market return - risk-free )

risk free rate = 8% or 0.08 as a decimal

Beta = 0.6

Market return = 14% or 0.14

CAPM; r = 0.08 +0.6(0.14 - 0.08)

return ;r = 0.116 or 11.6%

b.) If return (r) is 20%;

CAPM; r = risk-free +Beta(Market return - risk-free )

return( r ) = 20% or 0.20 as a decimal

risk free rate = 8% or 0.08 as a decimal

Market return = 14% or 0.14

Beta = ?

0.20 = 0.08 +Beta(0.14 - 0.08)

0.20 - 0.08 = 0.06Beta

0.12 = 0.06Beta

Divide both sides by 0.06

0.12/0.06 = Beta

Beta = 2

c.) If a stock has a beta of 1.3 and a current return of 17%, what can you say about the stock’s current price?

Using CAPM, the return should be;

CAPM; r = risk-free +Beta(Market return - risk-free )

r = 0.08 +1.3(0.14 - 0.08)

r = 0.158 or 15.8%

Since the current return of 17%, is lower than the CAPM return of 15.8%, it means that the current stock price is undervalued

Direction? The stock is expected to go up eventually since there will be a higher demand in the market due to the lower price than the actual intrinsic value.

7 0

3 years ago