Answer:
C. Net income and stockholders' equity are both overstated.
Explanation:
In the income statement , ending inventory is deducted from the addition of the beginning inventory and net purchases to arrive at the cost of goods sold. Therefore, the cost of goods can be stated as an equation stated as follows:
Cost of goods sold = Beginning inventory + Net purchases - Ending inventory
From the above equation, it can be observed that if the ending inventory is overstated, cost of goods sold will be understated by that amount.
Since gross income is determined by deducting cost of goods sold from the net sales, an understated cost of goods sold will result in an overstated gross income and subsequently overstated net income.
Since net income is one of the components of the stockholders' equity, an overstated net income will leads to an overstated stockholders' equity.
Therefore, the correct option is C. Net income and stockholders' equity are both overstated.
Answer:
Explanation:
1. What is the total payments (income) to factors of Better-bald Inc.?
Payments to factors of Better-bald Inc. = Rent+Wages+Interest payment+Profits = 450+300+100+750 = $1600
2. What is the total payments (income) to factors of Sweeter Sweaters Inc.?
Payments to factors of Sweeter Sweater Inc = Rent+Wages+Interest payment+Profits = 500+550+50+800 = $1900
3. If we use income method to calculate GDP, we need to sum the payment to factor of production by the entreprises in the economy who employ the factor of production.
The given economy has three enterprises: Better-bald, Sweater Sweaters, Sheepnip. Payment to factor of production are already calculated for 2 of them. Therefore, we there is a need to calculate for the Sheeping Co.
Payment to factors by Sheeping Co = 700 + 400 + 1000 + 100 = $2200
So GDP = $1600 + $1900 + $2200 = $5700
Answer:
The ease with which resources move from one industry to another.
Explanation:
An economy is a function of how money, means of production and resources (raw materials) are carefully used to facilitate the demands and supply of goods and services to meet the unending needs or requirements of the consumers.
Basically, there are four (4) main types of economy and these are;
I. Mixed economy.
II. Command economy.
III. Traditional economy.
IV. Pure capitalism economy.
Pure capitalism also referred to as free-enterprise system or free market can be defined as a type of economy in which prices, products and services are being determined by the market rather than the government. Thus, a pure capitalism is devoid (free) of government regulations, interference or control because the market (enterprises) are the ones who are saddled with the responsibility of determining the market forces.
Simply stated, a pure capitalism is a type of economy that is completely driven by demand and supply of goods and services.
Hence, a characteristic that has allowed the economy of the United States of America to change the mix of output in response to customer demand is the ease with which resources move from one industry to another due to pure capitalism or its free-enterprise system.
Answer: Borrowers after 1970 had more debt due to lower paying jobs
Explanation:
After the second world war, the world underwent a period of economic growth especially in the United States. The government was spending massive amounts on the economy and companies were investing to take advantage of an economy with very high consumption.
This led to higher paying jobs for citizens who were able to borrow money knowing that they had the capacity to pay back.
This changed after 1970 because the jobs became less lucrative than before. People however kept borrowing even though they could not afford it as much leading to a general rise in consumer debt.
