Vince says that the present value of $500 to be received one year from today if the interest rate is 8 percent is more than the present value of $500 to be received two years from today if the interest rate is 4 percent. Terri says that $500 saved for two years at an interest rate of 3 percent has a larger future value than $500 saved for one years at an interest rate of 6 percent. a. Both Vince and Terri are correct. b. Only Vince is correct. c. Only Terri is correct. d. Neither Vince nor Terri is correct.

Answer:

A

Explanation:

To determine if Vince is right, we have to determine the present value of the amounts

Present value is the sum of discounted cash flows

500 / 1.08 = $462.96

500 / (1.04^2) = $462.28

 $462.96 > $462.28 Vince is right

To determine if Terri is right, we have to determine the future value of the amounts

The formula for calculating future value:

FV = P (1 + r)^n

FV = Future value  

P = Present value  

R = interest rate  

N = number of years

500 x (1.03)^2 = $530.45

500 x (1.06) = $530

$530.45 > $530 Terri is right

they are both correct

gooQS 8-1 Cost of plant assets LO C1 Kegler Bowling buys scorekeeping equipment with an invoice cost of $160,000. The electrical work required for the installation costs $16,800. Additional costs are $3,360 for delivery and $11,530 for sales tax. During the installation, the equipment was damaged and the cost of repair was $1,550. What is the total recorded cost of the scorekeeping equipment

Analyzing and Interpreting Restructuring Costs and Effects
General Electric (GE) reports the following footnote disclosure (excerpted) in its 2018 10-K relating to its restructuring program. Restructuring actions are an essential component of our cost improvement efforts to both existing operations and those recently acquired. Restructuring and other charges relate primarily to workforce reductions, facility exit costs associated with the consolidation of sales, service and manufacturing facilities, the integration of recent acquisitions, and other asset writedowns. We continue to closely monitor the economic environment and may undertake further restructuring actions to more closely align our cost structure with earnings and cost reduction goals. 2018 2017 2016 $0.9 $1.2 $1.3 1.8 1.9 1.3 Workforce reductions Plant closures & associated costs and other asset write-downs Acquisition/disposition net charges Other 0.8 0.8 0.6 0.1 0.2 0.3 Total $3.6 $4.1 $3.5 For 2018, restructuring and other charges were $3.5 billion of which approximately $1.4 billion was reported in cost of products/services and $2.1 billion was reported in selling, general and administrative expenses (SG&A). These activities were primarily at Power, Corporate and Oil & Gas. Cash expenditures for restructuring and other charges were approximately $2.0 billion for the twelve months ended December 31, 2018. (a) Which of the following in NOT an example of a common non-cash charge associated with corporate restructuring activities? Olnventory revaluations Severance paid to employees O Fixed-asset write-downs Olmpairment charges on intangible assets (b) Using the financial statement effects template, show the effects on financial statements of the (1) 2018 restructuring charge of $3.6 billion, and (2) 2018 cash payment of $2.0 billion. Use negative signs with answers, when appropriate. Enter answers in billions. Balance Sheet (in $ billions) Income Statement Noncash Contributed Earned Transaction Cash Asset + Assets Liabilities Capital Capital Revenue Expenses = Net Income (1) (2) + + (c) Assume that instead of accurately estimating the anticipated restructuring charge in 2018, the company overestimated them by $30 million. (1) How would this overestimation affect financial statements in 2018? OOverstates the expense and understates pretax income by $30 million. The restructuring liability on the 2018 balance sheet will be overstated by $30 million. OUnderstates the expense and overstates pretax income by $30 million. The restructuring liability on the 2018 balance sheet will be overstated by $30 million. OOverstates the expense and understates pretax income by $30 million. The restructuring liability on the 2018 balance sheet will be understated by $30 million. OUnderstates the expense and understates pretax income by $30 million. The restructuring liability on the 2018 balance sheet will be overstated by $30 million. (2) How would this overestimation affect financial statements in 2019 when severance costs are paid in cash? OThe cash paid out in 2019 will be more than the 2018 accrual. Any excess (the $30 million) would increase expense (decrease profit) in 2019. OThe overestimation from 2018 will have no effect on the 2019 balance sheet or income statement. OThe cash paid out in 2019 will be less than the 2015 accrual. Any excess (the $30 million) would increase expense (decrease profit) in 2019. OThe cash paid out in 2019 will be less than the 2018 accrual. Any excess (the $30 million) would reduce expense (increase profit) in 2019.

A firm has production function y = f(x1, x2) = x 1^1/3 x 2 ^2/3 , where y is the amount of output, x1, x2 are the amount of input 1 and 2 respectively.
(a) Suppose the firms chooses to produce with inputs x1^0 , x2^0 . Calculate the marginal product with respect to input 1 and input 2. (Express them in terms of x1^0 , x2^0 .)
(b) What’s the firm’s technical rate of substitution given input level x1^0 , x2^0 ?
(c) Suppose the prices for input 1 and input 2 are are respectively w1 = 8, w2 = 2. The market price for the output is p = 50. In order to produce a fixed level of output y 0 = 8, what’s the optimal amount of each input that the firm chooses to use for production?

Danks Corporation purchased a patent for $405,000 on September 1, 2019. It had a useful life of 10 years. On January 1, 2021, Danks spent $99,000 to successfully defend the patent in a lawsuit. Danks feels that as of that date, the remaining useful life is 5 years. What amount should be reported for patent amortization expense for 2021?

Aster Inc. has developed a new digital three-tier food steamer. Though the product comes with a self-explanatory manual, the controls and the operation of the appliance have to be explained to the customer on a one-to-one basis, in great detail. Which of the following elements of the promotional mix is Aster most likely to rely on to sell its products?

a. Advertising
b. Sales promotion
c. Public relations
d. Personal selling

Management of Wee Ones (WO), an operator of day-care facilities, wants the company's profit to be subdivided by center. The firm's accountant has provided the following data: Center Budgeted Revenue Actual Revenue Budgeted Direct Costs Actual Direct Costs Downtown $ 320,000 $ 340,200 $ 300,000 $ 300,000 Irvine 560,000 534,600 510,000 440,000 H. Beach 720,000 745,200 690,000 740,000 Totals $ 1,600,000 $ 1,620,000 $ 1,500,000 $ 1,480,000 WO's advertising, which is handled by the home office, is not reflected in the preceding figures and amounted to $60,000. Assume that management used the allocation base that is most influenced by advertising effort and consistent with sound managerial accounting practices. How much advertising would be allocated to the Irvine center