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Jillet Corporation began the year with inventory of 10,000 units of its only product. The units cost $8 each. The company uses a perpetual inventory system and the FIFO cost method. The following transactions occurred during the year: Purchased 50,000 additional units at a cost of $10 per unit. Terms of the purchases were 2/10, n/30. The company uses the gross method to record purchase discounts. The inventory was purchased f.o.b. shipping point and additional freight costs of $0.50 per unit were charged to Jillet. 1,000 units purchased during the year were returned to suppliers for credit. Jillet was also given credit for the freight charges of $0.50 per unit on the original purchase. The units were defective and were returned two days after they were received. The remaining inventory was paid within the discount period. (Hint: The discount applies only to inventory and not the freight.) Sales for the year totaled 45,000 units at $18 per unit. (Hint: The cost of the inventory sold includes the purchase cost of those units plus freight less purchase discount.) On December 28, Jillet purchased 5,000 additional units at $10 each. The goods were shipped f.o.b. destination and arrived at Jillet’s warehouse on January 4 of the following year. 14,000 units were on hand at the end of the year. Required: Determine ending inventory and cost of goods sold at the end of the year. Assuming that operating expenses other than those indicated in the above transactions amounted to $150,000, determine income before income taxes for the year. For financial reporting purposes, the company uses LIFO (amounts based on a periodic inventory system). Record the year-end adjusting entry for the LIFO reserve, assuming the balance in the LIFO reserve at the beginning of the year is $15,000. Determine the amount the company would report as income before taxes for the year under LIFO. Operating expenses other than those indicated in the above transactions amounted to $150,000.
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1A) The cost of goods sold under FIFO perpetual inventory is $440,150.
1B) The Ending Inventory under FIFO perpetual inventory is $144,550.
1C) The income before taxes under FIFO perpetual inventory is $219,850.
2A) The cost of goods sold under LIFO periodic inventory is $463,500.
2B) The Ending Inventory under LIFO periodic inventory is $124,920.
2C) The income before taxes under LIFO periodic inventory is $196,500.
2D) Adjusting journal entry for LIFO reserve:
Debit Cost of goods sold (FIFO) $8,350
Credit LIFO reserve $8,350
What is the difference between FIFO and LIFO methods?The FIFO is the first-in, first-out costing method that assumes that goods bought first are the first to be sold.
LIFO is the last-in, first-out costing method that assumes that the last goods bought are the first to be sold.
What is the difference between a periodic and perpetual inventory system?A periodic inventory system accounts for inventory at the end of the period.
A perpetual inventory system accounts for inventory at the inventory transaction date and not at the end of the accounting period.
Data and Calculations:Beginning inventory units = 10,000 units
Cost per unit = $8
Total beginning inventory value = $80,000 ($8 x 10,000)
Inventory system: Perpetual with FIFO cost method
Transaction Analysis:FIFO method/Perpetual Inventory System:Inventory $500,000 (50,000 units at $10) Accounts Payable $500,000
Terms 2/10, n/30.
Freight-in Expense $25,000 (50,000 x $0.50) Accounts Payable $25,000
Accounts Payable $10,000 Inventory $10,000
Accounts Payable $500 Freight-in Expense $500
Accounts Payable $514,500 Cash Discounts $9,800 Cash $504,700
Cost of goods sold $440,150 ($80,000 + $367,500 - $7,350) Cash Discount $7,350 Inventory $430,000 Freight-in Expense $17,500
Cash $810,000 Sales Revenue $810,000
Ending inventory cost = $144,550 {($10 x 14,000) + ($0.50 x 14,000) - $2,450}
Net income:Sales revenue $810,000
Cost of goods sold $440,150
Operating cost = $150,000
Income before taxes = $219,850
LIFO Method/Periodic Inventory:Cost of goods sold $463,500 ($10 x 45,000 + ($0.50 x 45,000) - $9,000) Cash Discount $7,350 Inventory $450,000 Freight-in Expense $22,500
Cash $810,000 Sales Revenue $810,000
Ending inventory cost = $124,920 {($10 x 4,000) + ($8 x 10,000) + ($0.50 x 10,000) - $800}
Net income:Sales revenue $810,000
Cost of goods sold $463,500
Operating cost = $150,000
Income before taxes = $196,500
LIFO reserve increase = $8,350 ($23,350 - $15,000)
New LIFO reserve = $23,350 ($463,500 - $440,150)
Thus, the LIFO reserve is the difference between the cost of goods sold under FIFO and LIFO costing methods.
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If the signature line on a Patriot Act or customer
ID form has the escrow officer's name printed on
it on the signature line, however, you as the
signing agent are the one who fills out the ID
form, who should sign the Patriot Act form?
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Since i am the signing agent who fills out the ID form, then, i am at responsibility to sign the Patriot Act form as well.
What is Patriot Act form?The Patriot Act/customer ID form is a form that help the government to fight the funding of terrorism and money laundering activities.
The Patriot Act/customer ID form is necessitated by the Federal law and its requires all financial institutions to obtain, verify, and record information that identifies every customer.
However, if the signature line on the Patriot Act has escrow officer's name printed on it on the signature line and i am the signing agent who fills out the ID form, then, i am at responsibility to sign the Patriot Act form as well.
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What are two issues you should look for while previewing a form letter?
spacing problems and paper quality problems
instances in which multiple sources are used and spacing problems
spacing problems and errors in recipient information
paper quality problems and errors in recipient information
its C
Answers
Answer:
spacing problems and paper quality problems
what is amazon company?
Answers
Answer:
Amazon is a company known for many things such as delivery, shopping online, videos (Amazon Prime), and other things of the such.
Explanation:
You are more than likely to see an Amazon delivery truck delivering you or your neighbors some packages!
In one paragraph explain how the US government protects the money you deposit in a bank
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Bank savings accounts, bank CDs, and money market mutual funds administered by brokerage firms like Fidelity are the most popular venues to save cash.
How will my money be safeguarded?The Financial Services Compensation Scheme (FSCS) is the principal form of defence. In case a bank failed, it was designed to protect people's savings
How is the money in a bank secured?One of the many advantages of holding an account with an FDIC-insured bank is deposit insurance, which is how the FDIC safeguards your funds in the unusual case of a bank failure. Every category of account ownership is covered by the basic insurance policy, which provides $250,000 per depositor, each insured bank.
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Landon Jewelers uses the perpetual inventory system. On April 2, Landon sold merchandise with a cost of $3,500 for $7,000 to a customer on account with terms of 3/15, n/30. The journal entry to record the cost of goods sold would be:
A.
Merchandise Inventory
3,500
Cost of Goods Sold
3,500
B.
Sales Revenue
3,500
Cost of Goods Sold
3,500
C.
Cost of Goods Sold
3,500
Merchandise Inventory
3,500
D.
Cost of Goods Sold
3,500
Accounts Receivable
3,500
Answers
Answer: C.
Cost of Goods Sold
3,500
Merchandise Inventory
3,500
Explanation:
A perpetual inventory system is a system thats uses records transactions that take place in real-time. Both the returns and the purchases are recorded immediately as they happen in the inventory account.
Under the perpetual inventory method, it should be noted that sales will be credited to the inventory while the purchases that are incurred will be debited to the inventory and it should be noted that the debit will be recorded in the account of the cost of goods sold.
Therefore based on the question, the journal entry to record the cost of goods sold would be:
Debit: Cost of goods sold $3500
Credit: Merchandise inventory $3500
Therefore, the correct option is C.
Let’s say Bob wants to offer an insurance package to his employees that will cover any outpatient surgery charges, tooth sealants, and glasses. His total annual cost for providing these insurance plans will be $
per employee for the year.
Let’s assume that Schmidt wants to cover his employees’ expenses in case of disability. He also wants to ensure that the family of an employee is provided for in the event of an employee’s loss of life. The total annual cost for providing these insurance plans will be $
per employee.
Answers
Answer: its 480$ per person
Explanation:
just got 100
What is the impact of war in international trade
Answers
The impact of war in international trade includes:
restriction of goods to the countriesconflict leading to non-agreement on tradelow or no trade relationship between countries.What is an international trade?This refers to the economic transactions that are made or took place between countries.
Hence, any military conflict impact on international trade by causing a restriction of goods to the countries, conflict leading to non-agreement on trade, low or no trade relationship between countries etc.
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Consider the following statements about the functions of the federal reserve and select all that are true (select all that apply)
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A. control and regulate the American financial industry ,B. credit cash to banks in emergency ,D. deal with the country's money supply and E . lend money to businesses that want to raise money.
What is a bank of the Federal Reserve?The United States of America's central bank or central banking system was established in 1913 to implement a Federal reserve act in response to previous financial panics that occurred prior to 1913.
Maintaining the United States' banking system is one of the Federal Reserve bank's primary responsibilities.
The selected options in the responses fall under the purview of the question and are a component of the Federal Reserve bank's operations. It manages the country's currency supply, lends money to businesses or the US government as project capital, regulates the banking systems of America, and lends money to banks in trouble to help them meet their obligations on time.
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Complete Question:
What are the responsibilities of the Federal Reserve? Check all that apply.
A. regulate and supervise the American banking industry
B. loan money to banks in a crisis
C. provide banking and loan services to individual Americans
D. manage the nation’s currency supply
E. loan money to corporations that want to raise capital .
explain idea generation concept
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Ngwenya (Pty) Ltd incurred the following legal expense during the 2022 year of assessment ended 28 February 2022: i) R7 000 legal costs for debt collection. ii) R22 000 legal costs relating to the drawing up of an agreement to purchase a piece of land. iii) R48 000 relating to a dispute with a client of Ngwenya (Pty) Ltd who sued the company for supplying incorrect goods. Ngwenya (Pty) Ltd's lawyers were successful in defending the company on this matter. Determine the amount that is deductible by Ngwenya (Pty) Ltd relating to legal fees. a. R7 000 b. R55 000 c. R77 000 d. R29 000
Answers
If the company incurred legal expense during the 2022. The amount that is deductible by Ngwenya (Pty) Ltd relating to legal fees is R29,000.
Legal expenses deductibleUsing this formula
Legal expenses deductible= Legal costs for debt collection+ Legal costs relating to the drawing up of an agreement
Let plug in the formula
Legal expenses deductible=R7 000 +R22,000
Legal expenses deductible=R29,000
Therefore the amount that is deductible by Ngwenya (Pty) Ltd relating to legal fees is R29,000.
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Stephen and Martha have spent months looking for their dream home. One day they saw it and fell in love with everything about the house, and they asked the realtor to draw up a purchase agreement, which they then signed. After signing the papers, they asked the realtor whether the house was in good shape. The realtor said it was. When the couple moved into the house, they realized that the basement had serious water problems and that the roof leaked. They now want to sue the realtor. What tort should they consider? If they sue the realtor for this tort, will they win? Why or why not? Explain.
Answers
Stephen and Martha can sue the realtor for the unethical behavior, by filing the claim with the association.
What claim can be file by the buyers against of the realtors for the unethical behavior?If buyer is handover with the property by giving the false statements by the realtors, then a complaint can be filled within 180 days from the day, it took place.
If complaint would be find valid by the grievance committee, the case will go to the hearing committee where the buyer can prove his claim by telling how Code of Ethics was violated.
If realtor found to be guilty, then he could be charged with the fine.
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Shale Remodeling uses time and materials pricing. It reports the following information:
Direct labor rate $ 145 per DLH
Non-materials-related overhead $ 115 per DLH
Materials-related overhead 10% of direct materials cost
Target profit margin (both conversion and direct materials) 20%
What price should the company quote for a job requiring four direct labor hours and $580 in materials?
Answers
Shale Remodeling should quote a price of $2,013.60 for this job.
How to calculate the priceDirect materials cost = $580
Materials-related overhead cost = 10% x $580
Materials-related overhead cost = $58
Total cost = direct labor cost + non-materials-related overhead cost + direct materials cost + materials-related overhead cost
Total cost = $580 + $460 + $580 + $58
Total cost = $1,678
Target profit margin = 20% of the selling price
Target profit margin = 20% of (selling price - total cost)
We can rearrange this formula to solve for the selling price:
Selling price = (target profit margin + 1) x total cost
Selling price = (0.20 + 1) x $1,678
Selling price = $2,013.60
Therefore, Shale Remodeling should quote a price of $2,013.60 for this job.
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The general ledger of the Fly-Buy-Nite (FBN) Engineering Company contained the following account balances. Construct an income statement. What is the net income before taxes and the net profit (or loss) after taxes? Amount($1,000s)Administrative expenses 2,750Sub-contracted services 15,000 Development expenses 900Interest expense 200Sales revenue 35,000 Selling expenses 4,500
Answers
Answer:
Fly-Buy-Nite (FBN) Engineering Company
Income Statement
Sales revenue 35,000
Less Expenses :
Administrative expenses 2,750
Sub-contracted services 15,000
Development expenses 900
Interest expense 200
Selling expenses 4,500 (23,350)
Net Income 11,650
Net Income before taxes is $11,650
Explanation:
The Income Statement shows operating results that is Profit or Loss resulting from trading operations of the company. Profit or Loss = Sales less Expenses.
What is an example of product marketing?
Answers
Answer:
airbnb is a good example.
Explanation:
it is a process of trying to sell something.
What is the rate if the base is 366 and the portion is 50
Answers
If base is 366 and quotient is 50 then the rate is 13.66%.
The given rate is calculated as follows: Rate = (Portion/Base) × 100Let's plug in the values to find the rate: Rate = (50/366) × 100= 13.66...% (rounded to two decimal places)Therefore, the rate if the base is 366 and the portion is 50 is 13.66%. In other words, the portion of 50 is 13.66% of the base of 366.To understand what rate is, let's look at an example: Imagine you have a bowl of fruit that contains 5 apples and 15 oranges. The rate of apples to the total fruit is (5/20) or 0.25, which is equivalent to 25% (since we multiply the decimal by 100 to get the percentage).The rate tells us how much of one thing there is in relation to the whole. In the example above, the rate of apples tells us that 25% of the fruit in the bowl is apples. Likewise, in the given problem, the rate of 13.66% tells us that 13.66% of the base of 366 is equal to the portion of 50.
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TRUE OR FALSE - ACCOUNTING (70 POINTS) - IF FALSE EXPLAIN WHY
1. If the adjusting entry to recognize expired auto insurance at the end of the period is inadvertently omitted, insurance expense will be understated and net income overstated.
2. The book value of an asset is the difference between the cost of an asset and the accumulated depreciation.
3. Accumulated depreciation is reported on the income statement.
4. A company depreciates its equipment $600 a year. The adjusting entry on December 31 is a: debit to Depreciation Expense, $600, and a credit to Accumulated Depreciation, $600.
5. Cash and other assets that are reasonably expected to be realized in cash, sold, or consumed less than one year after the balance sheet date are called current assets.
6. Manufacturing equipment is an example of a current asset.
7. Rent Expense is a permanent account and it appears on the balance sheet.
8. Assets, liabilities, and stockholders' equity accounts are permanent accounts and do not get closed at the end of the period.
Answers
2. True
3. False - Accumulated depreciation is a “contra asset” account
4. True
5. True
6. False - More than 12 months is long term
7. False - Temporary and it appears on the income statement
8. True
7 habits of stephen coveys sharpening the saw
what is something you'd work on improving if you had the time?
what is the best way to balance your brain? body? heart? soul?
what are some ways you can keep your sw sharp while in school and then also in your profession?
Answers
Take some time each day to reflect on how you can be better in all aspects of your life, Make sure to set aside time to exercise.
What is life ?Life is a journey that is unique to each individual. It is filled with highs and lows, successes and failures, joys and sorrows. Life is an opportunity to learn, grow, and experience new things. It is an adventure that can be filled with purpose and meaning, or filled with aimless wandering. Life is a funny thing - it can be taken for granted, but it is also precious and should be cherished.
Eating a healthy and balanced diet is essential for keeping your saw sharp, make sure to get enough sleep each night,reading helps to keep your mind sharp by exposing you to new ideas, make sure to set aside time to relax and unwind and staying connected.
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You need some money today and the only friend you have that has any is a miser. He agrees to loan you the money you need, if you make payments of $30 a month for the next six months. In keeping with his reputation, he requires that the first payment be paid today. He also charges you 2 percent interest per month. How much total interest is he charging?
Answers
Answer:
$8.6
Explanation:
Calculation for How much total interest is he charging
First step is to calculate the present value (PV) using financial calculator by using this formula
PV=PV(Rate,Nper,PMT,FV,Type)
Rate represent Interest Rate
Nper represent Period
PMT represent Payment
FV represent Future Value
Type = 1 which represent the annuity due reason been that the 1st payment is to be made today
Let plug in the formula
Rate = 2%
Nper = 6
PMT = $30
FV = 0
Type = 1
Hence,
PV = PV(2%,6,30,0,1)
PV= $171.40
Since we have known the PV the last step is to calculate the total interest
Using this formula
Total interest =( PMT*Nper)-PV
Let plug in the formula
Total interest = ($30*6) - $171.40
Total interest = $180 - $171.40
Total interest = $8.6
Therefore the amount of the total interest he will be charging is $8.6
Answer:
$8.6
Explanation:
I/Y = Rate = 2.0
PMT = -$30
N = 6
Future Value = $0.00
First we need to set the calculator to annuity due and calculate the CPT PV. We get the Value of loan, $171.40
Interest payment = PMT x 6 - Present value of loan
Interest payment = $30*6 - $171.40
Interest payment = $180 - $171.40
Interest payment = $8.6
Thus, the total interest he is charging is $8.6
Match each term in Column A with its definition in
Column B.
(Column A)
1. business cycles
2. recession
3. expansion
4. Great Depression employment in U.S. history
5. trough
6. economic indicator
7. peak
(Column B) a. the worst period of business decline and un-employment in U. S. history b. the lowest point of the business cycle c. periodic changes in business activity d. the period of decline in a business cycle e. a statistic that describes the state of the nation’s economy f. the period of prosperity in a business cycle g. the period of recovery in a business cycle.
Answers
Answer:
1. c
2. d
3. g
4. a
5. b
6. e
7. f
Explanation:
took quiz and made a 100
[The following information applies to the questions displayed below.]
On January 1, 2024, Splash City issues $320,000 of 8% bonds, due in 15 years, with interest payable semiannually on June 30 and December 31 each year.
Assuming the market interest rate on the issue date is 9%, the bonds will issue at $293,938.
2. Record the bond issue on January 1, 2024, and the first two semiannual interest payments on June 30, 2024, and December 31, 2024.
(Interest Expense does not equal 12800)
Answers
To record the bond issue on January 1, 2024, and the first two semiannual interest payments on June 30, 2024, and December 31, 2024, we need to consider the issuance of the bonds and the accrual of interest expense.
1. Bond Issue on January 1, 2024:
Date Account Debit Credit
--------------------------------------------------------
January 1, 2024 Cash $293,938
Bonds Payable $320,000
To record the issuance of $320,000 face value bonds at a discounted price of $293,938.
2. Semiannual Interest Payment on June 30, 2024:
Date Account Debit Credit
--------------------------------------------------------
June 30, 2024 Interest Expense $14,400
Cash $14,400
To record the semiannual interest payment ($320,000 * 8% / 2 = $12,800) for the period from January 1, 2024, to June 30, 2024.
3. Semiannual Interest Payment on December 31, 2024:
Date Account Debit Credit
--------------------------------------------------------
December 31, 2024 Interest Expense $14,400
Cash $14,400
To record the semiannual interest payment ($320,000 * 8% / 2 = $12,800) for the period from July 1, 2024, to December 31, 2024.
Please note that the interest expense amount mentioned in the question might be incorrect. Based on the information provided, the interest expense should be $12,800 for each semiannual interest payment, resulting in a total of $25,600 for the year 2024.
you exercise for 30 minutes twice each day what's approximate percentage of your day is been on exercise?
Answers
Answer:
30+30 =1 hour 1 hour out of 24 or 4.1%
Explanation:
A great way to ontain hands-on training in a real work environment is to complete a(n)
Answers
Answer:
It's c, apprenticenship
1. Critical thinking requires setting high standards for yourself. True or false
Answers
Answer:
True
Explanation:
A company that accepts responsibility for a problem and does all that society expects to solve that problem is using:
a defensive strategy.
a proactive strategy.
an accommodative strategy.
a reactive strategy.
A tobacco company taking a reactive stance to the claims that smoking causes cancer would:
1. stop selling cigarettes as they are harmful to your health and actively warn consumers about the dangers of tobacco use.
2. create an advertising campaign, suggesting that breathing secondhand smoke was less dangerous than drinking milk.
3. sponsor advertisements on the impact that smoking can have on your health.
4. place a warning label on cigarette packages about the dangers of smoking.
Generally, there ___ a trade-off between being socially responsible and economic performance.
Answers
A company that accepts responsibility for a problem and does all that society expects to solve that problem is using: an accommodative strategy.
What is a Reactive Strategy?This refers to the type of strategy that a person uses to respond to issues when they happen.
Hence, we can see that a tobacco company taking a reactive stance to the claims that smoking causes cancer would: 4. place a warning label on cigarette packages about the dangers of smoking.
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who is the eskom manger
Answers
Answer:
André de Ruyter is the CEO
Theoretically, how should a business choose between borrowing and equity in its capital structure?
Answers
A business needs to choose between the financing options available, generally there are two options available to a company that is equity and borrowing. A company needs to choose a perfect ratio between the two, Ideal is 40% borrowing and 60% Equity.
What is Borrowing or Debt?Borrowing the financing option that a company have, this is also known as the debt, in a debt the company asks for loan from financial institutions who provide loan to the company at a certain percentage of interest that the company will have to bear as a finance cost, the business will pay this cost to the debtor every year as per the agreed terms.
Ideally a company should never cross 50% of borrowing of the total capital, this makes the investment too risky and the debtors will then as a result increase the interest percentage.
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do Businesses operate separately from society as a whole.
Answers
Businesses do not operate separately from society as a whole. In fact, businesses are an integral part of society and their operations can have significant impacts on various aspects of society, including the economy, the environment, and social issues.
Firstly, businesses are a key contributor to the economy of a society. They generate income, create jobs, and drive innovation, which in turn fuels economic growth and development. The success of businesses is closely tied to the health and well-being of the economy, and vice versa.
Secondly, businesses can have significant impacts on the environment. Their operations can result in pollution, depletion of natural resources, and other negative environmental effects. As such, businesses have a responsibility to operate in a sustainable manner, reducing their environmental impact and promoting sustainable practices.
Thirdly, businesses can also have an impact on social issues such as inequality, discrimination, and human rights. For example, businesses may choose to operate in a way that promotes diversity and inclusivity, or they may take steps to ensure that their operations do not contribute to human rights abuses or other negative social impacts.
In conclusion, businesses are an important part of society and their operations are closely interconnected with various aspects of society. As such, businesses have a responsibility to operate in a way that takes into account their impact on society as a whole, including the economy, the environment, and social issues. This is why many businesses are increasingly adopting corporate social responsibility (CSR) policies and practices, which aim to ensure that their operations are sustainable, socially responsible, and contribute positively to society.
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Let MAC1 = 100 – 10E and MAC2 = 50 – 10E. Graph each function and compute the aggregate MAC curve. Let MD = 30E, compute the socially efficient equilibrium. For the equations given above, suppose the government sets the pollution level at four units. What are the net social costs of this policy?
Suppose a technological change occurs that reduces the marginal costs of abatement for polluter 1 in the above equation to that of polluter 2. How does this affect the socially efficient level of pollution? Solve numerically and graphically.
Answers
If the marginal costs of abatement for polluter 1 become equal to polluter 2, it does not impact the socially efficient level of pollution. The level is still determined by equating Marginal Damage with the Aggregate MAC.
To graph each function, we can plot MAC1 and MAC2 on a graph with the quantity of emissions (E) on the x-axis and the marginal abatement cost (MAC) on the y-axis.
For MAC1: MAC1 = 100 - 10E
For MAC2: MAC2 = 50 - 10E
To compute the aggregate MAC curve, we add the individual MAC curves together. So, Aggregate MAC = MAC1 + MAC2.
Aggregate MAC = (100 - 10E) + (50 - 10E) = 150 - 20E
Now, let's calculate the socially efficient equilibrium by setting the Marginal Damage (MD) equal to the Aggregate MAC.
MD = Aggregate MAC
30E = 150 - 20E
Simplifying the equation, we get:
50E = 150
E = 3
Therefore, the socially efficient equilibrium occurs when the quantity of emissions (E) is 3.
Now, let's calculate the net social costs of the policy when the government sets the pollution level at four units.
Net social costs = Aggregate MAC - MD
Net social costs = (150 - 20(4)) - (30(4))
Net social costs = 110 - 120
Net social costs = -10
The net social costs of this policy would be -10, indicating a net benefit to society.
If a technological change occurs that reduces the marginal costs of abatement for polluter 1 to that of polluter 2, it means that MAC1 will become equal to MAC2.
Setting MAC1 equal to MAC2:
100 - 10E = 50 - 10E
Simplifying the equation, we find that E can have any value, as both sides are equal.
Graphically, this change would mean that MAC1 and MAC2 become parallel lines on the graph, with the same slope and intercept. The socially efficient level of pollution would still be determined by equating MD with the aggregate MAC.
In conclusion, if the marginal costs of abatement for polluter 1 become equal to polluter 2, it does not affect the socially efficient level of pollution. The socially efficient level is still determined by equating the Marginal Damage with the Aggregate MAC, regardless of the marginal costs of individual polluters.
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Suppose you've just inherited $10,000 from a relative. You're trying to decide whether to put the $10,000 in a non-interest-bearing checking account so that you can use it whenever you want (that is, hold it as money), or to use it to buy a U.S. Treasury bond. Suppose the interest rate on the bond is 5% per year.
a) What would be the opportunity cost of holding the $10,000 as money?
b) Suppose the interest rate fell to 2% per year. What would happen to the opportunity cost of holding the $10,000 as money?
c) What does this previous analysis suggest about the market for money?
Answers
Answer:
a) What would be the opportunity cost of holding the $10,000 as money?
To find the answer, we use the future value of an investment formula to find the value of the investment in the treasury bond.
FV = PV (1 +i)^n
Where:
FV = future valuePV = present valuei = interest raten = number of compounding periodsNow, we simply replace the values into the formula:
FV = 10,000 (1 + 0.05)^1
FV = 10,500
The opportunity cost is the $500 in interest that you would receive if you bought the treasury bond.
b) Suppose the interest rate fell to 2% per year. What would happen to the opportunity cost of holding the $10,000 as money?
We use the same formula to find the answer:
FV = 10,000 (1 + 0.02)^1
FV = 10,200
The new opportunity cost is $200, so the opportunity cost would fall by $300.
c) What does this previous analysis suggest about the market for money?
Because money loses value in time due to inflation, it's always best to save the cash in an interest-bearing account, because the interest earned offsets the lose of value.