Which system gives you the most economic freedom?

In a given amount of time John can produce either 40 pounds of vegetables or 10 pounds of chicken. In the same amount of time Ge

aleksandrvk [35]

Answer:

Ten pounds of chicken to trade for at least 40 pounds of vegetables but not more than 50 pounds of vegetables

Explanation:

Vegetables Chicken Trade Off Ratio

John 40 10 4:1 (40/10) or 1:0.25 (10/40)

George 25 5 5:1 (25/5) or 1:0.20 (5/25)

John has comparative advantage in Chicken and George has comparative advantage in Veggies because :

John's chicken opportunity cost, in veggies < George (4<5). George's veggies opportunity cost, in chicken < John (0.20<0.25).
George is more (5X) productive in veggies than chicken, than John (4X). John is less unproductive in chicken than veggies (1/4th), compared to George (1/5th).

So, John will sell Chicken to George & George will sell veggies to John. Gains from trade are when each get trade ratio better than their their own trade off ratio.

It implies: John gets >' 4 pounds veggies per chicken pound' and George gets > '0.20 pound chicken per veggie pound'.
Unitary method:- '1chicken : 4veggies' = '10chickens : 40veggies' and '0.20chicken : 1veggie' = '10chickens : 50 veggies' .

7 0

3 years ago

The Borio Company had an asset with an $8 book value and a $7 market value; it decided to distribute the asset as a property div

ankoles [38]

Answer:

The net income will decrease and also the total assets will also decrease

Explanation:

Here, we want to know the combined effect on net income and total assets of company that made a decision of distributing assets as a property dividend.

As the asset value is down the entry is asset (credit) and loss on asset (debit)

This will effect the net income as it will come down and total assets value also come down

7 0

3 years ago

ABC Company owns 30% of the outstanding shares of Teal Company. At the beginning of the current year, the carrying value of Teal

BabaBlast [244]

Answer:

$69,000

Explanation:

Percentage of shares owned by ABC in Teal's company = 30%

This is an example of equity method investment , and a portion of the attributable income at the end of the year is earned and added to the initial stock.

Attributable income is the remaining income after dividends have been settled.

Workings

The opening carrying value of the shares on ABC balance sheet = 60,000

Profit made at the end of the period = 40,000

Dividends paid = 10,000

Attributable income to share holders = 40000-10000 = 30,000

ABC portion of attributable profit = 30000*30% = 9,000

Carrying value at the end of the year = opening carrying value + portion of the attributable profit

=60000+9000=69000

6 0

3 years ago

Bower Company purchased Lark Corporation’s net assets on January 3, 20X2, for $632,000 cash. In addition, Bower incurred $9,000

Vitek1552 [10]

Answer:

Preparation of Journal Entries

Date Particulars Dr($) Cr($)

January 3, 20x2 Cash & Receivables 57,000

Inventory 165,000

Buildings & Equipment 307,000

Patent 203,000

Account Payable 20,000

Purchase Consideration 632,000

Gain on Purchase Bargain 80,000

(Being purchase of Lark

Corporation`s net assets)

Recording of merger costs.

(Debit) Cash $9,000

(Credit) Merger Expenses $9,000

Recording of acquisition of Lark Corporation`s net assets

(Debit) Investment in Lark`s net asset $712,000

(Credit) Cash $632,000

(Credit) Gain on Purchase Bargain $80,000

Explanation:

When acquiring another business, net asset (Total Assets - Total Liabilities) is valued at fair value (sometimes called market value, not book value. Hence, the reason why the fair value of Lark`s assets and liabilities was used in the calculation above. So the net assets ($57,000+$165,000+$307,000+$203,000 - $20,000) = $712,000.

After, calculating the net assets of the Lark, the purchase consideration given by Bower Company has to be removed from the net asset, in order to get the goodwill or gain on purchase bargain on the acquisition. The formula is Purchase consideration - Net assets of the target company = Goodwill (Gain on purchase bargain). If the purchase consideration is higher than the net assets, then goodwill is obtained. If the purchase consideration is lower than net assets acquired then, gain on purchase bargain is obtained.

In Bower`s case, gain on purchase bargain is obtained because net assets is greater than purchase consideration ($632,000 - $712,000).

Merger cost

Merger cost is not considered as part of purchase consideration. The merger cost is taken to income statement of Bower Corporation as expense.

3 0

3 years ago

Diamond Computer Company has been purchasing carrying cases for its portable computers at a purchase price of $59 per unit. The

Gemiola [76]

Answer:

Part(a) Differential analysis as at February 24

Make (Alternative 1) :

Direct Materials $35.00

Direct labor $18.00

Variable Overheads $2.70

Fixed Overheads $0.00

Total Make Costs $55.70

Buy (Alternative 2) :

Total Purchase Cost $59.00

(b) On the basis of the data presented, would it be advisable to make the carrying cases or continue buying them?

It is clear that from comparison of the cost of Purchase and the Cost of Making the Carrying Cases, the Cost of Making the Carrying Cases is lower than the Cost of Purchasing the Cases by $3.30

It is thus advisable to make carrying cases instead of buying them

Explanation:

Total Make Costs;

The Factory fixed overheads are irrelevant to this decision hence they were ignored in the make cost calculations.

5 0

3 years ago