I think it would be b cause when the work is done you cant hire new workers to do what is already done
Answer:
Option C). This is a capital lease because it meets at least one of the four capital lease criteria.
Explanation:
In the following situations, the lease transactions are called Finance Lease.
i) The lessee will get the ownership of leased asset at the end of the lease term.
ii) The lessee has an option to buy the leased asset at the end of lease term at price, which is lower than its expected fair value at the date on which option will be excercised.
iii) The lease term covers the major part of the life of asset.
iv) At the beginning of lease term, Present value of minimum lease rental covers substantially the initial fair value of the leased asset.
In the given question, Present value of minimum lease rental amounting to $ 78 million covers substantially 94 % portion of the initial fair value of leased asset. Accordingly, last condition / last situation mentioned above to treat lease as finance lease is satisfied in the given question. In other words, out of four capital lease criteria mentioned above, fourth criteria / fourth condition (At the beginning of lease term, Present value of minimum lease rental covers substantially the initial fair value of the leased asset) is satisfied in this given question.
Present value of minimum lease rental as a percentage of initial fair value of leased asset :-
= (78 Million / 83 Million ) * 100
= 0.94 * 100
= 94 % (approx).
Lease in given question is capital lease because it meets at least one of the four capital lease criteria.
C. They should take advice from experts if they lack knowledge about certain aspects of their business.
Solution :
a. Ink used for screen printing --- Variable
b. Warehouse rent of $8,000 per month plus $0.50 per square foot of storage used --- Mixed
c. Thread --- Variable
d. Electricity costs of $0.038 per kilowatt-hour --- Variable
e. Janitorial costs of $4,000 per month ---- Fixed
f. Advertising costs of $12,000 per month ---- FIXED
g. Accounting salaries --- FIXED
h. Color dyes for producing different colors of T-shirts ----- Variable
i. Salary of the production supervisor ---- FIXED
j. Straight-line depreciation on sewing machines ----- Fixed
k. Salaries of internal pattern designers ----- FIXED
l. Hourly wages of sewing machine operators ------ Variable
m. Property taxes on factory, building, and equipment ----- Fixed
n. Cotton and polyester cloth ---- VARIABLE
o. Maintenance costs with sewing machine company (the cost is $2,000 per year plus $0.001 for each machine hour of use.) ---- Mixed
Answer:
[AD = C + I + G] = [AS = Y]
S = I
Explanation:
Economy is at equilibrium when : Aggregate Demand = Aggregate Supply
Aggregate Demand [AD] is the total value of goods & services, all sectors of an economy are planning to buy, during a period of time.
Assuming 3 sector Economy having : Households, Firms, Government
AD = Consumption (C) + Investment ( I ) + Net Govt. Expenditure (NG = G-T)
Aggregate Supply [AS] is the total value of goods & services, all producers of economy are planning to sell, during a period of time. Total value of goods & services is distributed among all production factors as factor incomes. And, Income is either saved or consumed.
AS = National Income [ Y ] = Consumption (C) + Saving (S)
So, Equilibrium : [AD =C + I + NG] = [ AS = Y] → ∴ C + I + NG = Y
[AD = C + I + NG] = [ AS = C + S] → ∴ C + I + NG = C + S
Assuming : leakage (tax) = injection (govt expenditure) ; NG = G-T = 0
So, C + I = C + S → ∴ I = S
