Suppose that in a closed economy GDP is 11,000, consumption is 7,500, and taxes are 2,000. What value
of government purchases would make national savings equal to 1,000 and at that value would the
government have a deficit or surplus?
a. 2,500, deficit
b. 2,500, surplus
c. 1,000, deficit
d. 1,000, surplus In a closed economy, if Y is 10,000, T is 1,000, G is 3,000, and C is 5,000, then
a. the government has a budget deficit and investment is 1,000
b. the government has a budget surplus and investment is 1,000
c. the government has a budget surplus and investment is 2,000
d. the government has a budget deficit and investment is 2,000 7th EditionN. Gregory Mankiw508 explanations
8th EditionN. Gregory Mankiw502 explanations
8th EditionN. Gregory Mankiw813 explanations
7th EditionMichael Parkin, Robin Bade533 explanations
ACCOUNTINGRocky owns and operates Balboa's Gym located in Philadelphia. The following transactions occur for the month of October:
$$
\begin{matrix}
\text{October 2} & \text{Receive membership dues for the month of October totaling $\$ 8,500$ .}\\
\text{October 5} & \text{Issue common stock in exchange for cash, $\$ 12,000$ .}\\
\text{October 9} & \text{Purchase additional boxing equipment for $\$ 9,600$ , paying one-half of the}\\
\text{ } & \text{amount in cash and the other one-half due by the end of the year.}\\
\text{October 12} & \text{Pay $\$ 1,500$ for advertising regarding a special membership rate available}\\
\text{ } & \text{during the month of October.}\\
\text{October 19} & \text{Pay dividends to stockholders, $\$ 4,400 .$}\\
\text{October 22} & \text{Pay liability insurance to cover accidents to members for the next six}\\
\text{ } & \text{months, starting November $1, \$ 6,900$ .}\\
\text{October 25} & \text{Receive cash in advance for November memberships, $\$ 5,600 .$}\\
\text{October 30} & \text{Receive, but do not pay, utilities bill for the month, $\$ 5,200$ .}\\
\text{October 31} & \text{Pay employees' salaries for the month, $\$ 7,300$ .}\\
\end{matrix}
$$
1. Record each transaction. 2. Identify the transactions involving cash. 3. Assuming the balance of cash at the beginning of October is $16,600, post each cash transaction to the Cash T-account and compute the ending cash balance. 4. Prepare a statement of cash flows for the month of October, properly classifying each of the cash transactions into operating, investing, and financing activities. 5. Verify that the net cash flows reported in the statement of cash flows equal the change in the cash balance for the month. ACCOUNTINGLetni Corporation engages in the manufacture and sale of semiconductor chips for the computing and communications industries. During the past year, operating revenues remained relatively flat compared to the prior year but management notices a big increase in accounts receivable. The increase in receivables is largely due to the recent economic slowdown in the computing and telecommunications industries. Many of the company's customers are having financial difficulty, lengthening the period of time it takes to collect on accounts. Below are year-end amounts.
$$
\begin{matrix}
\text{ } & \text{Operating} & \text{Accounts} & \text{Average} & \text{Accounts}\\
\text{Age Group} & \text{Revenue} & \text{Receivable} & \text{Age} & \text{Written Off}\\ \hline
\text{Two years ago} & \text{$\$ 1,300,000$} & \text{$\$ 150,000$} & \text{5 days} & \text{\$ 0}\\
\text{Last year} & \text{$1,600,000$} & \text{$160,000$} & \text{7 days} & \text{$1,000$}\\
\text{Current year} & \text{$1,700,000$} & \text{$330,000$} & \text{40 days} & \text{0}\\
\end{matrix}
$$
Paul, the CEO of Letni, notices that accounts written off over the past three years have been minimal and, therefore, suggests that no allowance for uncollectible accounts be established in the current year. Any account proving uncollectible can be charged to next year's financial statements (the direct write-off method). 1. Do you agree with Paul's reasoning? Explain. 2. Suppose that other companies in these industries have had similar increasing trends in accounts receivable aging. These companies also had very successful collections in the past but now estimate uncollectible accounts to be 25% because of the significant downturn in the industries. If Letni uses the allowance method estimated at 25% of accounts receivable, what should be the balance of Allowance for Uncollectible Accounts at the end of the current year? 3. Based on your answer in Requirement 2, for what amount will total assets and expenses be misstated in the current year if Letni uses the direct write-off method? Ignore tax effects.
