Answer:
At the beginning of lecture, Dr.McCarty says that the US economy is built to serve:________.
b. People who own things
Explanation:
The U.S. economy, which is a mixed economy, exhibits both capitalism and socialism characteristics. While it allows economic freedom to people who own things (capitalists), occasionally, the government intervenes to achieve public good by imposing some restrictions and licensing. The government is also involved in some economic development, especially as it relates to education, roads, and healthcare. As a mixed economy, the government uses monetary and fiscal policies to rein in some of the excesses of capitalism.
viết lý do chọn đề tài hay về chiến lược xúc tiến của công ty grab
Answer:
đồ án phân tích việc thực hiện chiến lược marketing của Grab tại Việt Nam ... soát ... lược giá (Price) 18 1.3.3 Chiến lược phân phối .20 1.3.4 Chiến lược Xúc tiến hỗn ... lược cấp công ty Tổng tài sản Grab Singapore 2014 - 2015 Doanh thu Grab ... lý Trong trình học tập hướng dẫn thầy Đỗ Thanh Tùng em hoàn thành đề tài .
Tony's marginal income tax rate is 24%, and he pays FICA tax on his entire salary (7.65%). Tony's employer offered him a choice between $5,000 additional salary or a nontaxable fringe benefit. Tony would have to pay $3,600 to purchase the benefit directly. Which of the following statements is true? (answers rounded to the nearest whole dollar)A. The fringe benefit and the additional salary have the same after-tax value.B. The fringe benefit is worth $83 more than the additional salary.C. The additional salary is worth $300 more than the fringe benefit.D. None of the above is true.
Answer: The fringe benefit is worth $182 more than the additional salary.
Explanation:
The Fringe benefit is valued at $3,600.
The additional salary after taxes is:
= 5,000 - (5,000 * 24%) - (5,000 * 7.65%)
= 5,000 - 1,200 - 382.5
= $3,418
The Fringe benefit is worth more than the salary by:
= 3,600 - 3,418
= $182
Options are more probably for a variant of this question.
If the Federal Reserve conducts a $10 million open-market sale and the reserve requirement is 20%, the maximum change in the money supply is: a decrease of $10 million. a decrease of $8 million. an increase of $10 million. a decrease of $50 million.
Answer:
a decrease of $50 million.
Explanation:
Calculation to determine what the maximum change in the money supply is:
Using this formula
Maximum change in the money supply=Federal Reserve /Reserve requirement
Let plug in the formula
Maximum change in the money supply=$10/20%
Maximum change in the money supply=$50 million Decrease
Therefore the maximum change in the money supply is: a decrease of $50 million.
How should you ideally start a negotiation discussion?
A.
displaying how sharp and aggressive you can be in negotiations
B.
being unbiased and open-minded
C.
revealing your interest in the product
D.
revealing your budget and the highest price you can pay
Answer:
the answer is c
Explanation:
to get the convo started you should pin point what it is exactly what you like
The supplies account had a balance of $880 at the beginning of the year and was debited during the year for $3,846, representing the total of supplies purchased during the year. If $2,797 of supplies are on hand at the end of the year, the supplies expense to be reported on the income statement for the year is
Answer:
the supplies expense to be reported on the income statement for the year is $1,929
Explanation:
The computation of the supplies expense to be reported on the income statement for the year is as follows:
= Beginning supplies account balance + purchase of supplies - closing supplies
= $880 + $3,846 - $2,797
= $1,929
Hence, the supplies expense to be reported on the income statement for the year is $1,929
A convertible bond is selling for $967, matures in 15 years, has a $1,000 face value, pays interest semiannually, and has a coupon rate of 8 percent. Similar non-convertible bonds are priced to yield 4.25 percent per six months. The conversion ratio is 20. The stock currently sells for $47.50 a share. Calculate the convertible bond's option value.
a. $2.92.
b. $7.27.
c. $1.48.
d. $2.03.
Answer:
D) $8.95
Explanation:
Calculation to determine the convertible bond's option value.
First step is to calculate the Straight bond value
Straight bond value = [.08($1,000)/2]PVIFA4.25%, 30 + $1,000/1.042530
Straight bond value = $958.05
Second step is to calculate the Conversion value
Conversion value = 20($47.50)
Conversion value = $950
Now let determine the convertible bond's option value using this formula
Bonds Option value = Bond value – MAX[Straight bond value, Conversion value]
Let plug in the formula
Bond Option value = $967 − MAX[$958.05, 950]
Bond Option value =$967-$958.05
Bond Option value = $8.95
Therefore the convertible bond's option value is $8.95
The Wildhorse Company has disclosed the following financial information in its annual reports for the period ending March 31, 2017: sales of $1.484 million, cost of goods sold of $803,000, depreciation expenses of $175,000, and interest expenses of $89,575. Assume that the firm has an average tax rate of 35 percent. Compute the cash flows to investors from operating activity.
Answer: $535,251.25
Explanation:
Cash flow to investors from operating activities is calculated by:
= EBIT + Depreciation - Taxes
EBIT = Sales - Cost of goods sold - Depreciation
= 1,484,000 - 803,000 - 175,000
= $506,000
Taxes = Tax rate * (EBIT - Interest)
= 35% * (506,000 - 89,575)
= $145,748.75
Cash flow to investors = 506,000 + 175,000 - 145,748.75
= $535,251.25
The Jackson-Timberlake Wardrobe Co. just paid a dividend of $1.40 per share on its stock. The dividends are expected to grow at a constant rate of 5 percent per year indefinitely. Investors require a return of 12 percent on the company's stock. a. What is the current stock price
Answer:
Missing word "What will the stock price be in three years?"
a. Current price = D0*(1+g)/(Ke-g)
Current price = 1.4*(1+0.05) / (0.12-0.05)
Current price = 1.4*1.05 / 0.07
Current price = 1.47 / 0.07
Current price = $21
b. Current price = D0*(1+g)/(Ke-g)
Current price = 1.4*(1+0.05)^4 / (0.12-0.05)
Current price = 1.4*1.05^4 / 0.07
Current price = 1.4*1.21550625 / 0.07
Current price = 1.70171 / 0.07
Current price = 24.310143
Current price = $24.31
Hart, an individual, bought an asset for $500,000 and has claimed $100,000 of depreciation deductions against the asset. Hart has a marginal tax rate of 32 percent.
a1. What is the amount and character of Hart's recognized gain or loss if the asset is tangible personal property sold for $550,000?
a2. Due to this sale, what tax effect does Hart have for the year?
Answer and Explanation:
The computation is shown below:
a. The amount and the character of the gain or loss is
Sale value of the property $550,000
Less: (Purchase value - depreciation) $400,000
Total gain recognized $150,000
Ordinary income recapture is $100,000
remaining 1231 gain or loss $50,000
b.
Section 1231 Gain = $50,000
, Rate of tax on $100,000 i.e. 32% = $32000
Rate of tax on $50000 i.e. 15% = $7500
So,
The Total tax liability is
= $32,000 + $7,500
= $39,500
arett Motors is trying to decide whether it should keep its existing car washing machine or purchase a new one that has technological advantages (which translate into cost savings) over the existing machine. Information on each machine follows: Old machine New machine Original cost $9,000 $20,000 Accumulated depreciation 5,000 0 Annual cash operating costs 9,000 4,000 Current salvage value of old machine 2,000 Salvage value in 10 years 500 1,000 Remaining life 10 yrs 10 yrs Refer to Jarett Motors. The $4,000 of annual operating costs that are common to both the old and the new machine are an example of a(n) Select one: a. opportunity cost b. irrelevant cost c. future avoidable cost d. sunk cost
Answer:
Jarett Motors
The $4,000 of annual operating costs are an example of an
a. opportunity cost
Explanation:
a) Data and Calculations:
Old machine New machine
Original cost $9,000 $20,000
Accumulated depreciation 5,000 0
Annual cash operating costs 9,000 4,000
Current salvage value of old machine 2,000
Salvage value in 10 years 500 1,000
Remaining life 10 yrs 10 yrs
b) The annual operating costs are an example of opportunity cost because the alternative with the old machine will incur an annual operating cost of $9,000 instead of $4,000 with the new machine. This will translate to a forgone benefit of $5,000 ($9,000 - $4,000) in cost saving if the new machine is purchased.
The main disadvantage of an emissions tax is that :______.a) the total pollution reduction from an emissions tax cannot be known for sure. b) firms lack the flexibility to pursue different technologies. c) firms do not have an incentive to reduce pollution. d) firms cannot behave in an economically-efficient manner. e) differences among firms are not incorporated into the policy.
Answer:
.a) the total pollution reduction from an emissions tax cannot be known for sure.
Explanation:
The broad form of taxes by government on greenhouse gases , these is
✓an emissions tax: this tax is been put on the company due to the quantity that is been produced by entity. This emmision tax is imposed as a result of green house effect gas that is been produced during operation of companies example of this carbon tax, since the effect of the green house is felt in weather events, this tax is on goods or services which is known to be greenhouse gas-intensive, for instance carbon tax on gasoline. It should be noted that the main disadvantage of an emissions tax is that the total pollution reduction from an emissions tax cannot be known for sure.
Which of the following is an example of investment? A. a person depositing $ 100 a week to her savings account B. a person's annual medical checkup C. the purchase of new buses by Greyhound D. a student increasing his human capital by attending college
Answer:
C. the purchase of new buses by Greyhound
Explanation:
The investment is the amount that should be invested in order to generate the income
So as per the given situation,the option C is correct as if we puchase the new buses so there is a big investment but after investing into it it generated the income on daily basis
So this should be the example of the investment
Lesco's is evaluating a project that has a different level of risk than the overall firm. This project should be evaluated: Group of answer choices
Answer:
3. using a beta commensurate with the project's risks.
Explanation:
In the case when the project is evaluated so there is the different type of the risk instead of the total firm so here the project should be evaluated via beta commensurate alonhg with the risk of the project. As each and very project has the different level of risk also there is a different between the beta as if we compared to the beta of the market, beta of the firm etc
Hence, the above represent the answer
If total liabilities decreased by $27,275 during a period of time and stockholders' equity increased by $34,366 during the same period, the amount and direction (increase or decrease) of the period's change in total assets is a a.$7,091 decrease b.$27,275 increase c.$27,275 decrease d.$7,091 increase
Answer:
d.$7,091 increase
Explanation:
From the accounting equation, assets = liabilities + equity. If the total liabilities decrease by $27,275, the assets will also decrease by $27,275. Similarly, when stockholders' equity increased by $34,366, the amount of assets will increase by the same amount. The net increase in assets will be $7,091, which is the difference between the increase in stockholders' equity and the decrease in liabilities ($34,366 - $27,275).
Based on the details of the scenario, determine what will most likely occur. Melinda has a contract to pay 13% interest on a personal loan for 5 years. She decides the rate is unfair and files a complaint in court. Contract is valid Contract will be modified Contract is voided Contract is voided, subject to investigation
Answer: Contract will be modified
Explanation:
Melinda has already gotten into the contract so going to the courts will not void it as she still has to perform her part of the contract.
The best the court can do is to modify the contract so that she no longer has to pay the exorbitant interest rates of 13% that she is paying. Even if there was to be an investigation, she still wouldn't get the contract voided because she still needs to fulfill her part so it will just be modified.
The contract will be modified.
Given that,
Melinda has a contract to pay 13% interest on a personal loan for 5 years. She decides the rate is unfair and files a complaint in court.Based on the information, the following things should be considered:
Since Melinda received the contract so here it is not a void contract because she have to perform her part.Also, the contract should be modified due to this she is not able to pay 13%Therefore, the contract should be modified.
Learn more: brainly.com/question/20421012
Using these data from the comparative balance sheet of Blossom Company, perform vertical analysis. (Round percentages to 1 decimal place, e.g. 12.5%.) Dec. 31, 2017 Dec. 31, 2016 Amount Percentage Amount Percentage Accounts receivable $ 497,000 Enter percentages % $ 435,000 Enter percentages % Inventory $ 735,000 Enter percentages % $ 555,000 Enter percentages % Total assets $3,101,000 Enter percentages % $2,758,000 Enter percentages %
Answer:
For 2017
Account receivable % = Account Receivable/Total Assets x 100
Account receivable % = $ 497,000/$ 3,101,000 * 100
Account receivable % = 0.16027088 * 100
Account receivable % = 16.0%
Inventory % = Inventory/Total Assets *100
Inventory % = $ 735,000/$ 3,101,000 * 100
Inventory % = 0.2370203 * 100
Inventory % = 23.7 %
Total Assets = $3,101,000 = 100%
For 2016
Account receivable % = Account Receivable/Total Assets * 100
Account receivable % = $ 435,000/$ 2,758,000 * 100
Account receivable % = 0.15772298 * 100
Account receivable % = 15.8%
Inventory % = Inventory/Total Assets * 100
Inventory % = $555,000/$ 2,758,000 * 100
Inventory % = 0.20123277 * 100
Inventory % = 20.1%
Total Assets = $2,758,000 = 100 %
Record the following transactions for Sparkyâs Pet Shop.
August 1 Purchased $6,000 of merchandise on account, terms 2/10, n/30.
3 Returned $1,500 of merchandise purchased on August 1 due to defects.
7 Recorded cash sales for the first week of August, $9,750; cost of the merchandise was $4,000.
10 Made sale on account to a local breeder for $500, terms 1/10 net 30; cost of the merchandise was $200.
11 Paid for the merchandise purchased on August 1, less return.
Required:
Journalize the above transactions.
Answer:
August 1
Dr Finished goods inventory $6,000
Cr Accounts Payable $6,000
Aug 3
Dr Accounts Payable $1,500
Cr Finished goods inventory $1,500
Aug 7
Dr Cash $9,750
Cr Sales Revenue$9,750
Aug 7
Dr Costs of goods sold $4,000
Cr Finished goods inventory $4,000
Aug 10
Dr Accounts receivable $500
Cr Sales revenue $500
Aug 10
Dr Costs of goods sold $200
Cr Finished goods inventory $200
Aug 11
Dr r Accounts receivable $4,500
Cr Finished goods inventory $90
Cr Cash $4,410
Aug 20
Dr Cash $495
Dr Sales discount $5
Cr Accounts receivable $500
Explanation:
August 1
Dr Finished goods inventory$6000
Cr Accounts Payable $6,000
Aug 3
Dr Accounts Payable $1,500
Cr Finished goods inventory $1,500
Aug 7
Dr Cash$9,750
Cr Sales Revenue$9,750
Aug 7
Dr Costs of goods sold $4000
Cr Finished goods inventory $4000
Aug 10
Dr Accounts receivable $500
Cr Sales revenue $500
Aug 10
Dr Costs of goods sold $200
Cr Finished goods inventory $200
Aug 11
Dr r Accounts receivable $4,500
Cr Finished goods inventory $90
[($6,000-$1,500)*2%]
Cr Cash $4,410
($4,500-$90)
Aug 20
Dr Cash $495
(99%*500)
Dr Sales discount $5
(1%*$500)
Cr Accounts receivable $500
Which of the following would have an inventory of municipal security secondary market positions?
Preferred stock has a par (face) value of $80. The annual dividend is $6.00 per share. Investors in this preferred stock have a required rate of return equal to 8%. Compute the current price of a share of the preferred stock.
Round to the second decimal place.
Answer: $75
Explanation:
Using the Gordon Growth Model:
Price of stock = Next year dividend / (Required return - growth rate)
Growth rate is 0% as dividend does not change per year.
Price of stock = 6 / 8%
= $75
The GDP price index in the United States in 2016 was about 106 , and real GDP in 2016 was $17.7 trillion (2012 dollars). The GDP price index in the United States in 2018 was about 110 , and real GDP in 2018 was $18.6 trillion (2012 dollars). Calculate nominal GDP in 2016 and in 2018 and the percentage increase in nominal GDP between 2016 and 2018 .
Answer:
9.05%
Explanation:
in nominal dollars, the 2016 GDP was $17.7 trillion x 1.06 = $18.762 trillion
in nominal dollars, the 2018 GDP was $18.6 trillion x 1.1 = $20.46 trillion
the percentage increased in nominal GDP between 2016 and 2018 was ($20.46 trillion - $18.762 trillion) / $18.762 trillion = 0.0905 ≈ 9.05%
Cherry Corporation, a calendar year C corporation, is formed and begins business on April 1 of the current year. In connection with its formation, Cherry incurs organizational expenditures of $54,000.
Required:
Determine Cherry Corporationâs deduction for organizational expenditures for 2015.
[tex]\huge\bold{Question}[/tex]
Prove that [tex]\sqrt{n} [/tex] is not a rational number, if n is not perfect square.
[tex]\huge{\underline{\underline{\mathrm{\red{AnswEr}}}}}[/tex] [tex]\huge\bold\blue{=}[/tex]
[tex]\sqrt{4} [/tex]= 2 where 2 is a rational number . Here n is perfect square the [tex]\sqrt{n} [/tex] is rational number
[tex]\sqrt{5} [/tex] = 2.236.. is not rational number But it is irrational number.here n is not a perfect square the [tex]\sqrt{n} [/tex] is irrational number
So [tex]\sqrt{n} [/tex] is not irrational number if n is perfect square.
Dividends at FSL are expected grow at a rate of negative 5.4% per year (the dividends are getting smaller). The stock just paid a dividend of $3.93 per share, and investors require a return of 13% to invest in the company. What is the expected price of the stock next year?
Answer:
$21.37
Explanation:
g = -5.4%
D0 = $3.93
D1 = D0 (1+g)
D1 = 3.93*(1-0.054)
D1 = 3.93*0.946
D1 = 3.71778
Investors require a return (ke) of 12%
P0 = D1/(ke - g)
P0 = 3.71778 / (12% - (-5.4%)
P0 = 3.71778 / (12% + 5.4%)
P0 = 3.71778 / 17.4%
P0 = 3.71778 / 0.174
P0 = 21.3665517
P0 = $21.37
So, the expected price of the stock next year is $21.37.
Pat is on the Board of Directors for Zony, a consumer electronics manufacturer. Pat has been an excellent board member by providing leadership and expertise to the Zony Board. Zamzung is a consumer electronics manufacturer and direct competitor to Zony. Zamzung believes Pat would be a good addition to their Board of Directors. Zamzung asks Pat to join the Board of Zamzung. Can Pat be on the Board of Directors of both Zony and Zamzung?
Answer: No. Pat cannot be on the Board of Directors of both Zony and Zamzung.
Explanation:
No, Pat cannot be on the Board of Directors of both Zony and Zamzung. The Clayton Act prohibits this as Pat can have superior power and high control of the industry.
Pat can also face ethical issues such as internal tactics or sharing of information or conflict regarding decision making. Pat being on the Board of Directors of both Zony and Zamzung will lead to an unfair competition in the market as well.
Metlock, Inc. uses a periodic inventory system. Details for the inventory account for the month of January 2017 are as follows: Units Per unit price Total Balance, 1/1/2017 270 $5.0 $1350 Purchase, 1/15/2017 140 ..5 672 Purchase, 1/28/2017 140 ..5 700 An end of the month (1/31/2017) inventory showed that 220 units were on hand. How many units did the company sell during January 2017?
Answer:
330 units
Explanation:
Particulars Units
Opening 270 Units
Add: Purchases 140 Units
Add :Purchases 140 Units
Total 550 Units
Less: Closing 220 Units
Sales 330 Units
So, the total units the company sold during January 2017 is 330 units.
) Jack asked Jill to marry him, and she has accepted under one condition: Jack must buy her a new $ Rolls-Royce Phantom. Jack currently has $ that he may invest. He has found a mutual fund with an expected annual return of % in which he will place the money. How long will it take Jack to win Jill's hand in marriage? Ignore taxes.
Answer: 47.8 years
Explanation:
Jack is trying to make up to $330,000 from $50,680 at a rate of 4% in the future so the relevant formula is a future value formula.
330,000 = 50,680 * ( 1 + 4%) ^ number of years
1.04 ^ number of years = 330,000 / 50,680
1.04 ^ N = 6.5114
Use the Natural logarithm, In, to solve for N
N * In (1.04) = In (6.5114)
N * 0.0392 = 1.87356
N = 1.87356/ 0.0392
= 47.8 years
the role of manager to organization is to?
Answer:
A manager has to perform functions like planning, organizing, staffing, directing and controlling. All these functions are essential for running an organization smoothly and achieving enterprise objectives. Planning is required for setting goals and establishing strategies for coordinating activities.
The assets and liabilities of a company are $86,600 and $44,499, respectively. Stockholders' equity should equal a.$44,499 b.$131,099 c.$86,600 d.$42,101
Answer:
d.$42,101
Explanation:
We use the accounting equation to determine the Equity Balance
Accounting Equation States :
Assets = Equity + Liabilities
also,
Equity = Assets - Liabilities
therefore,
Equity = $86,600 - $44,499 = $42,101
thus
Stockholders' equity should equal $42,101
Master Corp. issued 8%, $80,000 bonds on February 1, 2020. The bonds pay interest semiannually each July 31 and January 31 and were issued to yield 7%. The bonds mature January 31, 2030, and the company uses the effective interest method to amortize bond discounts or premiums.
Required:
a. Prepare journal entries on the following dates.
1. February 1, 2020—Issuance of bonds.
2. July 31, 2020—Interest payment.
3. December 31, 2020—Interest accrual.
4. January 31, 2021—Interest payment. b. Indicate how the balance sheet and income statement of Master
b. Corp. for the year ended December 31, 2020, would reflect these transactions.
c. What is the total cost of financing assuming that the bonds remain outstanding for the full term?
d. What is the total cost of financing assuming that the bonds remain outstanding for the full term if the straight-line interest method was used to amortize the premium?
e. If the company were to have instead amortized the premium using the straight-line interest method, would interest expense recognized be lower or higher in 2020?
f. If the company were to have instead amortized the premium using the straight-line interest method, would interest expense recognized be lower or higher in 2030?
Answer:
Master Corp.
a. Journal Entries:
1. Feb. 1, 2020:
Debit Cash $85,685
Credit 8% Bonds Payable $80,000
Credit Bonds Premium $5,685
To record the issuance of bonds at premium.
2. July 31, 2020:
Debit Interest Expense $2,999
Debit Bonds Premium $201
Credit Cash $3,200
To record the first payment of interest on the bonds and amortization of premium.
December 31, 2020:
Debit Interest Expense $2,493
Debit Bonds Premium $174
Credit Interest Payable $2,667
To accrue interest expense and bonds payable.
4. January 31, 2021:
Debit Interest Expense $499
Debit Bonds Premium $34
Debit Interest Payable $2,667
Credit Cash $3,200
To record the payment of interest.
b. Balance Sheet as of December 31, 2020:
Liabilities:
Bonds Payable $80,000
Bonds Premium $5,310 ($5,685 - 201 - 174)
Income Statement for the year ended December 31, 2020:
Interest Expense $5,492
c. The total cost of financing the bonds for full term is $58,315.04.
d. The total cost of financing is $58,315.04
e. Interest expense would have remained the same.
f. The interest expense would have remained the same as it is not dependent on the premium amortization method used.
Explanation:
a) Data and Calculations:
February 1, 2020:
Face value of issued bonds = $80,000
Price of issued bonds = $85,685
Premium on bonds = $5,685
N (# of periods) 20
I/Y (Interest per year) 8
PMT (Periodic Payment) = $ 3,200
Results:
PV = $85,684.96
Sum of all periodic payments = $64,000.00
Total Interest $58,315.04
July 31, 2020:
Cash payment = $3,200 ($80,000 * 4%)
Interest Expense 2,999 ($85,685 * 3.5%)
Premium amortized $201
December 31, 2020:
Interest Payable = $2,667 ($80,000 * 4% * 5/6)
Interest expense = $2,493
Premium amortized $174
January 31, 2021:
Interest Expense $499
Bonds Premium $34
Interest Payable $2,667
The accountant for TI Company is preparing the company's statement of cash flows for the fiscal year just ended. The following information is available: Retained earnings balance at the beginning of the year $163,000 Cash dividends declared for the year 50,800 Net income for the year 98,000 What is the ending balance for retained earnings?a. $261,000.
b. $14,200.
c. $210,200.
d. $282,000.
e. $112,200.
Answer:
$210,200
Explanation:
The retained earning at the beginning of the year is $163,000
The cash dividend is $50,800
The net income is $98,000
Therefore the ending balance for retained earning can be calculated as follows
= 163,000+98,000-50,800
= 261,000-50800
= 210,200
Hence the ending balance for retainerd earnings is $210,200
Taxes on labor have the effect of encouraging Group of answer choices workers to work more hours. the elderly to postpone retirement. second earners within a family to take a job. unscrupulous people to take part in the underground economy.
Answer:
unscrupulous people to take part in the underground economy.
Explanation:
Taxes are levies that a government collects from individuals and businesses. It is compulsory and is used to raise revenue from services, goods, or income.
When income earned by labour is taxed it reduces the the moral of employees to work and earn legally.
Some may now turn to the underground economy to earn more money.
The underground economy is made up of illegal activities that fail to meet reporting standards of the government. That is either transactions are made on goods that are illegal or income earned is not subject to government taxation.