GDP is designed to assess the production of goods in a market economy by output. However, it is not efficient in accounting for public and private services that without output that are easily countable by the number of units produced. GDP is not also well suited in measuring improvements in the diversity and quality of goods and
services. It is also poor in estimating the depletion of resources. Finally, it doesn't also reflect the degradation
of the environment involved in the production process.
Answer:
(a) It will have multiple IRRs
(b) The MIRR calculated is 10.18% . Going by MIRR result , this project will only generate returns that is equal to cost of capital(10%) .If there are other avaible more viable projects, it should be rejected ( Please see attached computation).
Explanation:
(a) The multiple IRRs occurs when cash flows change sign and result in more than one value for the IRR.
Application of IRR to value an investment is only suitable when the project has normal cash flows, i.e a negative initial cash flow (i.e initial investment) followed by a series of positive cash flows.
In this scenario, we have negative cash flow of $6m in year 4 which occured after positive cash flow of $3.5m per year from year 1 to 3. This typically make IRR unreliable. To overcome this limitation , we can use Modified Internal Rate of Return (MIRR)
(b) Please see attached for more details.
Answer:
B) Subtract them from the bank balance.
Explanation:
When you are adjusting your bank statement you must subtract any outstanding checks and add any deposits in transit.
In this case, the checks that were written at the end of December will probably be cashed during the next months, but the company must adjust their bank balance because they know that the checks will eventually be cashed, sooner or later.
Answer:
a. Services performed but unbilled totals $600.
- Accrued revenue
- Accounts receivable was understated before the adjustment
b. Store supplies of $160 are on hand. The supplies account shows a $1,900 balance.
- Accrued expense
- Supplies was overstated before the adjustment
c. Utility expenses of $275 are unpaid.
- Accrued expense
- Utilities expense was understated before the adjustment
d. Service performed of $490 collected in advance.
- Unearned revenue
- Revenue was overstated before the adjustment
e. Salaries of $620 are unpaid.
- Accrued expense
- Wages expense was understated before the adjustment
f. Prepaid insurance totaling $400 has expired.
- Prepaid expense
- Insurance expense was understated
