Aurora Corporation operated without insurance coverage for the first month of 2019. Then, on February 1, 2019, the company paid
the $4,800 premium on a two-year insurance policy with benefits beginning on that date. The company uses the accrual basis. How much insurance expense will be reported on the company's income statement for the year ended December 31, 2019? a) $200 b) $2,200 c) $4.600 d) $4,800
Option "D" is the correct answer for the following :
All of these answers are correct.
Withheld Income Tax: A withholding tax is a sum an individual withholds in wages of the workforce and charges directly to the state. The balance deferred is a deduction against the employee's taxes throughout the year.
Deposits Receiver Form Customer: A consumer deposit is a cash charged by a buyer to a supplier for which the business has not yet purchased a product or service in return. The organization is obligated to provide products or services specified or to refund the money.
Deferred Revenue: Deferred revenue is a responsibility, as it indicates non-earned sales that cover products or services due to a client. As the product or service is distributed over time, compensation on the consolidated financial statements is remembered proportionally.
A. reduction in the effective tax rate on capital will increase the desired investment relative to the desired savings level which will increase the interest rate in the market. Hence, IS curve will shift up to the right. This is shown in the figure in attached file
When the curve shifts up to the right, the real interest and the output level increase as a result.
Output increases because of a higher investment level in the economy and real interest rate increases because of a higher money demand due to a higher output (income). This is the short-run effect of a reduction in the efecctive tax rate on capital. The short-run equilibrium is at ‘E2’.
In the long-run, a higher output will increase the employment level in the economy which will increase the cost of production for the firms. As a result, the price level rises and the LM curve shifts up to the left. The final equilibrium is at ‘E3’, where the interest rates are even higher and the output level is back to the original level.
B. An increase in the expected inflation rate (πe) will decrease the demand for money and the money demand curve will shift downwards to the left. As a result, the real interest rate level in the market will decrease. Hence, the LM curve will shift down to the right.
The real interest rate will decrease and the output level will increase. The equilibrium in the short-run is attained at ‘E2’.
Eventually, the price level also increases due to an increase in the expected inflation rate and the LM curve shifts (up to the left) back to its original position and the original equilibrium level will be restored.
C. An equilibrium in the labor market leads to a full-employment level (N*) and the full employment level (Y*).
An increase in the labor supply will decrease the real wage rate in the market and increase employment.
A rise in the employment causes the output to increase and there will be a shift in the full employment line/curve to the right.
To restore the equilibrium, the price level declines which will shift the LM curve down to the right. Since output has increased and the real interest rate declined, consumption and investment will get a boost and both variables will increase.
Therefore, the real wage rate, real interest rate, and the price level decline; and employment, output, consumption, and investment will increase.
Portugal : Shoes Opportunity Cost ; Sweden : Rye Opportunity Cost
Trade gainful if : Portugal gets > 3 rye per shoes; Sweden gets > 1/11 shoes per rye
Gainful Terms of Trade : '7 ryes per per shoes', 10 ryes per shoes'.
Shoes Rye Trade off Ratio (Rye:Shoes )
Portugal 1 3 1:3 or 0.33:1 (1/3 = 0.33)
Sweden 1 11 1:11 or 0.09:1 (1/11= 0.09)
Portugal & Sweden have less opportunity cost & hence comparative advantage than each other, in shoes & rye respectively. Portugal will export shoes to Sweden (importer). Sweden will export rye to Portugal (Importer). Trade will be gainful if they get exchange ratio better than domestic exchange ratio - Portugal gets more than 3 ryes per shoes, Sweden gets more than 1/11 shoes per rye.
'2 ryes per shoes' & '1 rye per shoes' : are not gainful trade ratios for Portugal, as it is getting more i.e 3 ryes per shoes at its own domestic ratio.
'7 ryes per per shoes' is gaining trade ratio for:
Portugal: As it gets 7 i.e more than 3 ryes per shoes.
Sweden : As it gets 0.14 = (1/7) i.e more than 0.09 ryes per shoes
'10 ryes per shoes' is gaining trade ratio for:
Portugal : As it gets 10 i.e more than 3 pairs of ryes per shoes
Sweden : As it gets 0.10 = (1/10) i.e more than 0.09 ryes per shoes