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3 years ago

Answer the following questions about the (real) inflation tax, assuming that the price level starts at 100.

Business

1 answer:

Rus_ich [418]3 years ago

7 0

Answer:

a) $900 after 1 year

b) $810 after 2 years

Explanation:

This deals with the time value of money concept. This states that money is worth more today than the same amount is worth sometime in the future. The real purchasing power is the nominal purchasing power discounted back as per the prevailing inflation rate.

For a)

$1000 after one year will be worth 1000 * 0.9 = $900 or a reduction of $100 as 1000 today is worth only 900 after 1 year.

For b)

The inflation rate discounts real purchasing power year over year so after 2 years the real purchasing power will be as follows,

Real purchasing power = 900 * 0.90 = $810 which is discounted by 10% inflation for 2 years.

Hope that helps.

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Explanation:

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zysi [14]

Answer:

a. True

Explanation:

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3 years ago

Question 14 of 20

charle [14.2K]

Answer:

Explanation:

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3 years ago

The Terme Corporation is contemplating the purchase of new equipment, which may potentially increase revenues by 25%. Currently,

vekshin1

Answer:

The increase in gross profit is $12,374.93

Explanation:

The increase in sales due to purchasing this new equipment is 25% of current sales figure of $750,000

increase in sales=$750,000*25%=$187,500

variable cost on the increase in sales is 55%=$187500 *55%=$103,125

The annual depreciation charge on the new equipment=cost of the new equipment-salvage value/useful life

cost of the new equipment is $357,500.37

salvage value is $0

useful life of the new equipment is 5 years

annual depreciation charge=($357,500.37-$0)/5=$ 71,500.07

Increase/(decrease) in annual gross profit=$187,000-$103,125-$ 71,500.07 =$12,374.93

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3 years ago

Gullett corporation had $44,000 of raw materials on hand on november 1. during the month, the corporation purchased an additiona

Zina [86]

Answer:

Dr Raw materials $93,000

Cr Accounts payable $93,000

Explanation:

Based on the information given we were told that during the month, the corporation had to purchased an additional raw materials of the amount of $93,000 which means that the journal entry to record the purchase of raw materials would include a:

Dr Raw materials $93,000

Cr Accounts payable $93,000

(To record purchase of raw materials)

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3 years ago