Answer:
March 1
Cash $299,000 (debit)
Common Stock $129,000 (credit)
Share Premium $170,000 (credit)
April 1
Cash $71,000 (debit)
Common Stock $71,000 (credit)
April 6
Inventory $40,000 (debit)
Machinery $140,000 (debit)
Common Stock $42,000 (credit)
Share Premium $48,000 (credit)
Note Payable $90,000 (credit)
Explanation:
Any cash paid in in excess of the par value for par value share is Accounted for in the Share Premium reserve.
No Par Value share do not have a Share Premium Reserve.
Listed below are certain costs (or discounts) incurred in the purchase or construction of new plant assets. Indicate whether the costs should be expensed or capitalized (included in the cost of the plant assets on the balance sheet.) For costs that should be included in plant assets. Indicate in which category of plant assets (Equipment. Building. or Land) the related costs should be recorded on the balance Sheet.
a. Invoice cost to purchase Equipment
b. Sales tax on new equipment purchased
c. Cost to lay foundation for a new building
d. Repair costs to fix new equipment damaged by the crew that unpacked it
e. Charges incurred to train employees to use new equipment
f. Construction costs for a new building to be used in operations
g. Attorney fees incurred to complete the purchase documents for a new plant warehouse
h. Freight costs to ship the equipment From the manufacturer to the warehouse
Answer:
a. Capitalized : Equipment
b. Expensed
c. Capitalized : Building
d. Expensed
e. Capitalized : Equipment
f. Capitalized : Building
g. Capitalized : Building
h. Capitalized : Equipment
Explanation:
The Cost of Property, Plant and Equipment item according to IAS 16 includes, the Purchase Cost and any cost directly incurred in putting the assets in location and condition intended for use by management.
The costs exclude amounts collected in tax on behalf of third parties
Also not Capital expenditures increase the earning ability of the asset whilst revenue expenditure is the maintenance of such asset.
All of the following items should be considered when setting an export price
except
A. The tariff rate and value-added tax.
B. Transportation costs.
C. Prices of substitutes in foreign markets.
D. Repatriation restrictions
Answer:
D. Repatriation restrictions should not affect the prices of commoditiesExplanation:
Repatriation has to do with the conversion of foreign currency to home based currency. this is done in a bid to carry out international transaction effectively
while these items affects the prices of export
A. The tariff rate and value-added tax.
B. Transportation costs.
C. Prices of substitutes in foreign markets.
A food truck operator originally produced hamburgers and hotdogs. To serve the tastes of their various customers, the hot dog vendor decides to start producing turkey dogs and ham sandwiches as well. Since the new products were introduced, average costs rose dramatically. The vendor is experiencing
Answer:
Diseconomies of scope
Explanation:
Diseconomies of scope is when average cost increases as a result of joint production of goods and services.
If Sweet Catering had recorded transactions using the Accrual method, how much net income (loss) would they have recorded for the month of May? If there is a loss, enter it with parentheses or a negative sign.
Answer:
-$1,390
Explanation:
The computation of net income using the accrual method is shown below:-
Net income = Received cash meals to customers + Served a banquet account - Received and paid electricity bill - Accrued salary expense - Prepaid insurance expired
= $470 + $1,530 - $250 - $3,000 - $140
= -$1,390
Therefore for computing the net income using the accrual method we simply applied the above formula.
Richman Company purchased $900,000 of 8%, 5-year bonds from Carlin, Inc. on January 1, 2022, with interest payable on July 1 and January 1. The bonds sold for $937,422 at an effective interest rate of 7%. Using the effective interest method, Richman Company decreased the Available-for-Sale Debt Securities account for the Carlin, Inc. bonds on July 1, 2022 and December 31, 2022 by the amortized premiums of $3,186 and $3,294, respectively. At December 31, 2022, the fair value of the Carlin, Inc. bonds was $954,000. What should Richman Company report as other comprehensive income in the 2022 Comprehensive Income Statement
Answer:
$23,058
Explanation:
For calculation of Other comprehensive income first we will find out the total amortized premiums which is shown below:-
Total amortized premiums = 3,186 + 3,294
= $6,480
Other comprehensive income = Fair value on December 31, 2022 - (Selling price of bonds - Total amortized premiums)
= $954,000 - ($937,422 - $6,480)
= $954,000 - $930,942
= $23,058
We simply applied the above formula.
Hicks Health Clubs, Inc., expects to generate an annual EBIT of $750,000 and needs to obtain financing for $1,200,000 of assets. Its tax bracket is 40%. If the firm uses short-term debt, its rate will be 7.5%, and if it uses long-term debt, its rate will be 9%. By how much will their earnings after taxes change if they choose the more aggressive financing plan instead of the more conservative plan
Answer:
Hicks Health Clubs, Inc. earnings after taxes will change by minus $10,800 if they choose the more aggressive financing plan instead of the more conservative plan.
Explanation:
Note: I experienced a difficulty submitting the explanation here. Kindly find attached the full answer and explanation in the attached Microsoft word document.
Consider Figure 9.2 on page 205 of our textbook. Suppose P0 is $10 and P1 is $11. Suppose a new firm with the same LRAC curve as the incumbent tries to break into the market by selling 4,000 units of output. Estimate from the graph what the new firm's average cost of producing output would be. If the incumbent continues to produce 6,000 units, how much output would be supplied to the market by the two firms? Estimate what would happen to the market price as a result of the supply of both the incumbent firm and the new entrant. Approximately how much profit would each firm earn ?
Answer:
The 10,000 units of output that will be supplied by the two firms to the market.
Profit that each firm would earn will be higher than previous.
Explanation:
The firm selling 4,000 units at the price of $10 per unit. If the output is increased to 6,000 units the price will increase to $11 per unit. If the new 6,000 units are produced along with the previous 4,000 units then the total output supplied by the two firms will be 10,000 units (6,000 + 4,000). The supply of goods in the market will increase so price will fall and the revenue for the firms will decline but they can benefit with sales volume and their profit can increase.
The 10,000 units of output will be supplied by the two firms to the market.
The profit that each firm would earn will be higher than the previous.
Calculation of the number of units and profits:Here the firm sells 4,000 units at the price of $10 per unit. And, in the case when the output is increased to 6,000 units the price will increase to $11 per unit.
And, In the case when the new 6,000 units are produced along with the previous 4,000 units so the total output supplied by the two firms will be 10,000 units.
The supply of goods in the market should increase due to which the price will fall and the revenue for the firms will decline however they can benefit with sales volume and their profit can increase.
learn more about profit here: https://brainly.com/question/18476577
Choose an example of a type of new company you could start, and then use this company idea to answer the questions below. You might choose to open a hair salon, a babysitting service, a record store, or many other things. This can be the same type of company you chose in assignment 8, or it can be different.
a. Describe the type of company you chose.
b. If you needed to get funding for your company, would you prefer to get debt funding or equity funding? Explain why you would prefer this type.
Answer:
Find the explanation below.
Explanation:
1. The company I chose to operate would be Celebrity Hair Salon. The Celebrity Hair Salon is a standard salon with comfortable furnishings and state-of-the-art equipment intended to tend to the needs of celebrities. Clients are expected to make appointments for their services which the salon strictly adheres to.
2. I would prefer to fund this new business through debt financing. Debt funding entails borrowing funds from Creditors with the intention of paying back at a later time with the attached interest. Equity funding entails giving an investor a certain percentage of the company's returns thus making him a co-owner of the company. This affords him the right to make decisions for the business. Detaching the investor from this business is difficult because it requires buying him out.
I would prefer debt financing because I wish to retain sole ownership of the business. I can also go through some government agencies to obtain funds at lower interest rates. Moreso, there is a fixed debt repayment plan that I can set a target to meet until the debt is paid. Finally, I can regain my freedom after the payment is completed, thus regaining my business and not entitling me to anyone.
On December 31, 2021, Larry's Used Cars had balances in Accounts Receivable and Allowance for Uncollectible Accounts of $66,000 and $900, respectively. During 2022, Larry's wrote off $2,275 in accounts receivable and determined that there should be an allowance for uncollectible accounts of $5,500 at December 31, 2022. Bad debt expense for 2022 would be:
Answer:Bad debts expense = $6,875
Explanation:
A bad debt expense is recognized when a customer cannot pay its financial obligations therefore the account receivable will no longer be collectible
Beginning uncollectible accounts= $900
Ending allowance for uncollectible accounts = $5,500
Amounts written off = $2,275
Ending allowance for uncollectible accounts =Begining uncollectible accounts + current bad debts expense - amounts written off in 2022
$5,500= $900 + bad debts expense - $2,275
current bad debts expense for 2022= $5,500 - $900 + $2,275 = $6,875
Can also be illustrated as
ACCOUNTS
Begining uncollectible accounts $900
Amounts written off (less) - $2,275
Bad debts expense(add) + $6,875
Ending allowance for uncollectible accounts $5,500
As a sysadmin, you will find yourself doing business with a variety of third-party vendors. Which of these are likely to be rented or bought from a vendor? Check all that apply.
Available Options are:
Fax machines
Printers
Smartphones
Video or audio conferencing machines
Answer:
All of the above except Printers
Explanation:
The reason is that printers are very important part of administration work so its more likely that we already have one. However it is possible that we don't have any fax machine, smartphones and video or audio conferencing machines as these are rarely used by the administration. So Printers will not be bought oor rented.
3. Berkshire Hathaway A shares are trading at $120,000. What split ratio would it need to bring its stock price down to $50
Jamison Company purchased the assets of Booker Company at an auction for $4,200,000. An independent appraisal of the fair value of the assets is listed below:
Land $1,425,000
Building 2,100,000
Equipment 1,575,000
Trucks 2,550,000
Assuming that specific identification costs are impracticable and that Jamison allocates the purchase price on the basis of the relative fair values, what amount would be allocated to the Trucks?
A. $1,400,000
B. $2,100,000
C. $2,520,000
D. $2,550,000
Answer:
A. $1,400,000
Explanation:
Amount to be allocated = Auction price / Total individual price * Truck price
Auction price = $4,200,000
Total individual price = $1,425,000 + $2,100,000 + 1,575,000 + $2,550,000 = $7,650,000
Truck price = $2,550,000
Amount to be allocated = ($4,200,000 / $7,650,000) * $2,550,000
Amount to be allocated = $1,400,000
False Value Hardware began 2021 with a credit balance of $32,900 in the refund liability account. Sales and cash collections from customers during the year were $730,000 and $690,000, respectively. False Value estimates that 7% of all sales will be returned. During 2021, customers returned merchandise for credit of $18,000 to their accounts.
Answer:
Closing balance = $66,OOO
Explanation:
DATA
Opening balance in allowance for sales return = 32,900
Sales = 730,000
Cash Collection= 690,000
Estimated sales return = 7% of all sales = 51100
Merchandise return for credit = 18,000
We can calculate the closing balance in the allowance for sales return account by adding estimated returns and deducting merchandise return from opening balance.
Closing balance = Opening balance + Estimated sales return - Merchandise return for credit
Closing balance = $32,900 + $51,100 - $18,000
Closing balance = $66,OOO
Answer the question on the basis o the amounts of all nonlabor resources are fixed.
No. of workers Units of output
0 0
1 40
2 90
3 126
4 150
5 165
6 180
Assume that Number of Us Out Diminishing marginal returns become evident with the addition of the:________,
A) sixth worker.
B) fourth worker.
C) third worker.
D) second worker
Answer:
B
Explanation:
Dinmishing marginal returns occurs when as more units of labour is added, marginal output declines.
marginal output is change in total output as more units of labour are employed.
Marginal output = total output 2 - total output 1
total output = number of workers x units of output
International trade promotes economic growth when it allows any two countries to grow (in their combined production) beyond (above) their pre-trade production possibilities curve (PPC).
a. True
b. False
Answer: True
Explanation:
The Production Possibilities Curve (PPC) is meant to illustrate how a country produces goods and services given the limited resources it has. The curve represents the various amounts that have to be traded off of 2 goods to produce more or less of one good.
The Curve shows that it is best that a country produces those goods that is good at producing so that it can produce more of it and then trade with the rest of the world for the goods it isn't too efficient at producing. If both countries involved in the trade are able to grow beyond (above) their pre-trade production possibilities curve then the trade would have promoted economic growth.
True or False: Your friend thinks that the stock price of KnowItAll Corp. will decline. He decides to write and sell an option without buying the stock. He says that he will buy the stock when his option buyer exercises the option. This is an example of a naked option. This statement is
Answer:
True
Explanation:
In the case of naked options, the seller does not own any stock which is underlying Also the payoff related call option shows the difference between the price of the stock and the strike price
Therefore in the given situation, since he decides to write and sell without purchasing the stock but the purchased could be done when the option is exercised
So by the above explanation, the given statement is true
Larned Corporation recorded the following transactions for the just completed month.
a. $85,000 in raw materials were purchased on account.
b. $83,000 in raw materials were used in production. Of this amount, $73,000 was for direct materials and the remainder was for indirect materials.
c. Total labor wages of $120,500 were paid in cash. Of this amount, $102,800 was for direct labor and the remainder was for indirect labor.
d. Depreciation of $195,000 was incurred on factory equipment.
Record the above transactions in journal entries. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
Answer:
a. $85,000 in raw materials were purchased on account.
Dr Raw materials inventory 85,000
Cr Accounts payable 85,000
b. $83,000 in raw materials were used in production. Of this amount, $73,000 was for direct materials and the remainder was for indirect materials.
Dr Work in process 73,000
Dr Manufacturing overhead 10,000
Cr Raw materials inventory 85,000
c. Total labor wages of $120,500 were paid in cash. Of this amount, $102,800 was for direct labor and the remainder was for indirect labor.
Dr Work in process 102,800
Dr Manufacturing overhead 17,700
Cr Cash 120,500
d. Depreciation of $195,000 was incurred on factory equipment.
Dr Manufacturing overhead 195,000
Cr Accumulated depreciation - factory equipment 195,000
If the contribution margin ratio is 0.4, targeted operating income is $70,000, and targeted sales volume in dollars is $250,000, then total fixed costs are ________.
Answer:
$30,000
Explanation:
For the computation of total fixed cost first we need to compute the contribution margin ratio which is shown below:-
Contribution margin ratio = Contribution margin ÷ Sales
0.4 = Contribution margin ÷ $250,000
Contribution margin = $250,000 × 0.4
= $100,000
Total fixed expenses = Contribution margin - operating income
= $100,000 - $70,000
= $30,000
So, we have applied the above formula.
The Sisyphean Company's common stock is currently trading for $ 28 per share. The stock is expected to pay a $ 2.9 dividend at the end of the year and the Sisyphean Company's equity cost of capital is 12%. If the dividend payout rate is expected to remain constant, then the expected growth rate in the Sisyphean Company's earnings is closest to:
Answer:
1.24%
Explanation:
The Sisyphean company's common stock is currently being traded at $28 per share
The dividend is $2.9
The company's equity cost of capital is 12%
= 12/100
= 0.12
Therefore, the expected growth rate is calculated as follows
Growth rate= Equity cost of capital-(Dividend/Current price)
= 0.12-(2.9/28)
= 0.12-0.103571
= 0.01243×100
= 1.24%
Hence the expected growth rate is Sisyphean company's earning is closest to 1.24%
A company manufactures and sells two products: Product A1 and Product C4. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below:
Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours
Product A1 500 2.0 1,000
Product C4 200 1.0 200
Total direct labor-hours 1,200
The direct labor rate is $27.40 per DLH. The direct materials cost per unit is $281 for Product A1 and $267 for Product C4. The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity:
Estimated Expected
Activity Cost Pools Activity Measures Overhead Cost Product C1 Product M2 Total
Labor-related DLHs $558,452 7,200 7,700 14,900
Production orders Orders 75,240 500 600 1,100
General factory MHs 886,410 4,400 4,600 9,000
$1,520,102
The total cost per unit of Product C4 under activity-based costing is closest to: ____________
Answer:
Unitary cost= $4,207.85
Explanation:
Giving the following information:
Product C4:
Production= 200 units
Direct labor hours per unit= 1
Total DLH= 200
The direct labor rate is $27.40 per DLH.
The direct materials cost per unit is $267
Activity Cost Pools - Overhead Cost - Product C4 - Total
Labor-related DLHs $558,452 - 7,700 - 14,900
Production orders Orders $75,240 - 600 - 1,100
General factory MHs $886,410 - 4,600 - 9,000
First, we need to calculate the predetermined overhead rate for each activity:
Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base
Labor-related= 558,452/14,900= $37.48 per DLH
Production orders= 75,240/1,100= $68.4 per order
General factory= 886,410/9,000= $98.49 per machine hour
Now, we can allocate overhead to C4 as a whole:
Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base
Labor-related= 37.48*7,700= $288,596
Production orders= 68.4*600= $41,040
General factory= 98.49*4,600= $453,054
Total= $782,690
Finally, the total cost and cost per unit:
Total cost= 200*267 + 200*27.4 + 782,690
Total cost= $841,570
Unitary cost= 841,570/200= $4,207.85
Trez Company began operations this year. During this first year, the company produced 100,000 units and sold 80,000 units. The absorption costing income statement for this year follows.
Sales 80,000 units x 45 per unit $3,600,000
Cost of goods sold
- Beginning inventory $__________0
- Cost of goods manufactured (100,000 units x $25 per unit) $2,500,000
- Cost of good available for sale $2,500,000
Ending inventory (20,000 x 25) $500,000
Cost of goods sold $2,000,000
Gross margin $1,600,000
Selling and administrative expenses $580,000
Net income %1,020,000
a. Selling and administrative expenses consist of $400,000 in annual fixed expenses and $2.25 per unit in variable selling and administrative expenses.
b. The company's product cost of $25 per unit is computed as follows:
Direct materials $4 per unit
Direct labor $11 per unit
Variable overhead $4 per unit
Fixed overhead ($600,000/ $100,000 units) $6 per unit
Required:
Prepare an income statement for the company under variable costing.
Answer:
Income statement for the company under variable costing
Sales (80,000 units x $45) $3,600,000
Less Cost of Sales
Beginning inventory $0
Cost of goods manufactured (100,000 units x $19) $1,900,000
Cost of good available for sale $1,900,000
Less Ending inventory (20,000 x $19) ($380,000) ($1,520,000)
Contribution $2,080,000
Less Period Costs
Fixed Manufacturing Overhead ($600,000)
Selling and administrative expenses - Fixed ($400,000)
Selling and administrative expenses - Variable ($180,000)
Net Income / (loss) $900,000
Explanation:
Under Variable Costing.
1.Product cost = Variable Manufacturing Costs Only
Therefore, Product cost = $4 + $11 + $ 4
= $19
2.Period Cost = Fixed Manufacturing Overheads + Non - Manufacturing Costs
work cell at Chris Ellis Commercial Laundry has a workstation with two machines, and each unit produced at the station needs to be processed by both of the machines. (The same unit cannot be worked on by both machines simultaneously.) Each machine has a production capacity of 5 units per hour. The throughput time of the work cell=nothing minutes per unit (enter your response as a whole number).
What is the process time of the work cell in minutes per unit?
Answer:
24 minutes
Explanation:
The computation of the process time of the work cell is shown below:
Throughput time is the time that is needed to produced a finished good product. It involves the manufacturing process time and the time for converting the raw material into a finished product
Therefore
Throughput time = [1 unit × (60 min ÷ 5 units)] × 2
= 24 minutes
If the actual budget deficit is $180 billion, the economy is operating $400 billion above its potential, and the marginal tax rate is 13 percent, what are the structural deficit or surplus and the cyclical deficit or surplus
Answer:
Structural Deficit $232 billion
Cyclical Deficit $52 billion
Explanation:
Calculation for the Structual deficit and the cyclical deficit
STRUCTURAL DEFICIT
Using this formula
Structural Deficit =Actual budget +(Economy Operating amount×Marginal tax rate)
Let plug in the formula
Structural Deficit =$180 billion +($400 billion ×0.13)
Structural Deficit =$180 billion +$52 billion
Structural Deficit =$232 billion
CYCLICAL DEFICT
Using this formula
Cyclical Deficit = Economy Operating amount *Marginal tax rate
Let plug in the formula
Cyclical Deficit=$400 billion ×0.13
Cyclical Deficit=$52 billion
Therefore Structural Deficit is $232 billion while Cyclical Deficit is $52 billion.
You purchase a bond with an invoice price of $1,410. The bond has a coupon rate of 6.8 percent, and there are 3 months to the next semiannual coupon date. What is the clean price of the bond? Assume a par value of $1,000.
Answer:
clean price = $1,393
Explanation:
The clean price of the bond does not include any accrued interests. The invoice price = clean price + accrued interests
invoice price = $1,410accrued interests = $1,000 x 0.068 x 3/12 = $17clean price = invoice price - accrued interests = $1,410 - $17 = $1,393
The Edmonton Company is issuing $50,000 face value, 10% bonds with detachable stock warrants. The value of the bonds without the warrants is $40,000 and the value of the warrants is a total of $10,000. The bonds with the warrants sold for $55,000. The journal entry to record the sale will include:
Answer:
Assuming that the warrants are detachable, the journal entry should be:
Dr Cash 55,000
Cr Bonds payable 40,000
Cr Paid-in capital stock warrants 11,000
Cr Premium on bonds payable 4,000
The value of the warrants must be recorded separately under the paid-in capital stock warrants account, and any excess amount will be allocated proportionally between that account and the as a premium on bonds payable account.
A suplier who requires payment with in 10 days, should be most concerned with which one of the following ratios when granting credit?
a. Current Cash
b. Debt-equity
c. Quick
Answer: E) Cash
Explanation:
The Supplier should be most concerned with the Cash Ratio when granting credit. The Cash Ratio measures the amount of Cash in addition to the amount of Cash equivalent assets that the company has against it's current Liabilities in other to see if the company can be able to pay off it's Current Liabilities with it's current Cash and Cash Equivalents.
The Supplier will therefore be concerned with this ratio to see if the company is indeed able to pay back within 10 days before they can be able to grant credit.
hen a monopolist is able to sell its product at different prices, it is engaging in a. distribution pricing. b. quality-adjusted pricing. c. arbitrage. d. price discrimination.
Answer:
Price discrimination
Explanation:
Price discrimination is charging customers differently for the same product.
Price discrimination is a type of selling strategy where customers are charged for same goods and services. The seller charges based on what they think that the user is likely to pay.
Milani, Inc., acquired 10 percent of Seida Corporation on January 1, 2017, for $197,000 and appropriately accounted for the investment using the fair-value method. On January 1, 2018, Milani purchased an additional 30 percent of Seida for $600,000 which resulted in significant influence over Seida. On that date, the fair value of Seida's common stock was $2,000,000 in total. Seida's January 1, 2018 book value equaled $1,850,000, although land was undervalued by $120,000. Any additional excess fair value over Seida's book value was attributable to a trademark with an 8-year remaining life. During 2018, Seida reported income of $300,000 and declared and paid dividends of $110,000. Prepare the 2018 journal entries for Milani related to its investment in Seida.
Answer:
Milani, Inc.
January 1, 2018:
Debit Investment in Seida $600,000
Credit Cash Account $600,000
To record the purchase of an additional 30% of Seida.
December 31, 2018:
Debit Investment in Seida $120,000
Credit Net Income $120,000
To record the share in the net income of Seida.
Debit Cash Account $44,000
Credit Cash Dividend Received $44,000
To record the company's share in the dividend paid by Seida.
Debit Cash Dividend Received $44,000
Credit Investment in Seida $44,000
To record the dividend received from Seida.
Explanation:
The cash dividend received from Seida will reduce Milani, Inc.'s investment value in Seida, just as the 40% share in the net income increased the investment value.
These journal entries have been used to debit and credit accounts as transactions occur. A journal plays an important role in recording transactions in the accounting system as it is usually the initial record of any transaction. It also shows the accounts debited or credited with a short narration that explains each transaction.
__________________ are ways that a nation can draw up regulations, inspections, and paperwork to make it more costly or difficult to import products.
Answer: Nontariff barriers
Explanation:
Nontariff barriers are trade barriers that are used whereby the import and export of goods and services are restricted. It should be noted that the restriction is not by tariffs but can include include embargoeds, quotas, sanctions, and levies.
The main reason for trade barriers are to generate revenue for the government and also to protect the local industries.
Paulo owns a few shares of stock in a large and diversified firm. He realizes that the CEO of the company is responsible for a multi-billion dollar business, but is upset with what he feels is excessive compensation for the chief executive officer, particularly since the firm has reported losses for the past two years. Paulo's concerns are:
Answer: likely to be well-founded since CEO compensation at many U.S. companies has actually increased even when the company performed poorly
Explanation:
The options to the question are:
A. unfounded, since laws in the United States prevent firms from paying large salaries or bonuses to executives when a firm reports a loss.
B. based on an erroneous conclusion, because CEO pay is always based on a formula tied to the company's profits and losses.
C.likely to be well-founded since CEO compensation at many U.S. companies has actually increased even when the company performed poorly.
D. not entirely unfounded, but he needs to realize that the pay received by most chief executives must be reinvested in the company if it's unprofitable for three years in a row.
From the question, we are informed that Paulo owns a few shares of stock in a large and diversified firm na that he noticed that the CEO of the company is responsible for a multi-billion dollar business, but is upset with what he feels is excessive compensation for the CEO particularly since the firm has reported losses for the past two years.
Paulo's concerns are likely to be well-founded since CEO compensation at many U.S. companies has actually increased even when the company performed poorly.