Answer:
1. Deflation
-10%
2. In year 1 - 8 baskets
In year 2 - 8.9 baskets
3. The value of money increases
Explanation:
Deflation is a fall in general price levels. The price fell from $10 to $9. It indicates deflation has occured.
Inflation is a rise in price level.
Annual rate = (current year price - previous year price ) / previous year price
(9 - 10) / 10 = -0.1 = -10%
The annual change is negative because price level fell.
$80 would buy $80/$10 = 8 baskets of goods in year 1
$80 Will buy $80/$9 = 8.9 baskets of goods in year 2.
A fall in price levels increases the value of money because less money can buy the same basket of goods. Therefore, the purchasing power of money increases.
Answer:
net income of the investee is not considered earned by the investor until dividends are declared by the investee
Explanation:
Cost method can be regarded as
a method that is utilized when the influence of the investor over the investment that which he owns is just little or no influence , this could be typically described as owning less than 20% of the company. The investment will be recorded in the asset section of the balance sheet at historical cost. When an investment is made by an investing entity and the investment is having following two criteria, then the investment can be accounted for by the investor using the cost method.
Those criteria are;
1) There is no substantial influence by the investor over the investee.
2)There is no easily determinable fair value for the investment.
This cost method is best method when making a passive as well as long-term investment which doesn't result to influence over the company.
It should be noted that If the cost method is used to account for a long-term investment in common stock, then net income of the investee is not considered earned by the investor until dividends are declared by the investee
Answer:
a partnership business type
The company has declared a 100% stock dividend on its common stock will not be considered while calculating the earnings per common shares should be.
Earnings per share = Net Income / Number of equity shares.
where Net Income = $1,520,000
Common equity shares = 300,000
Earnings per share = $1,520,000 / 300,000
Earnings per share = $5.07
Therefore, earnings per common share for year 2015 for Rice Corporation is $5.07
Answer:
Journal Entries on May 3:
a. Debit Prepaid Insurance $16,000
Credit Insurance Expense $16,000
To reverse the error.
Debit Insurance Expense $16,000
Credit Cash Account $16,000
To correct the error.
b. Debit Drawings $9,600
Credit Wages Expense $9,600
To correct the error.
Explanation:
a) Data:
1. Insurance expense credited to Prepaid Insurance, instead of Cash account = $16,000
2. Drawings by Brian Phillips, the owner of the business recorded as Wages Expense.
b) The journal can also be used to correct errors in posting transactions. The process can involve first reversing the error and then correcting it, as done with case (a). This will involve using two entries. It can also involve simply involve correcting the error without reversion, as done with case (b).