Question

In: Economics

1. Identify whether each of the following is a debit or a credit in the country...

1. Identify whether each of the following is a debit or a credit in the country of Freedonia’s BOP and indicate where the item would be classified.

a. Freedonian firms export $250 million worth of goods.

b. Freedonian citizen’s purchase $50 million worth of tickets on US Airways flights.

c. A Freedonian firm purchases a shoe factory in Mexico for $30 million.

d. Freedonia receives $5 million in foreign aid from the United States.

e. Freedonian citizens deposit $15 million in a Citibank account in New York.

f. Freedonia imports $220 million worth of goods.

g. Freedonian firms borrow $45 million by issuing bonds in

the United States.

h. U.S. firms earn (and repatriate) $5 million in profits from

operations in Freedonia.

i. The Freedonia central bank buys $10 million in U.S.

Treasury bills.

2. In the previous example, suppose that these are all of the

entries in Freedonia’s BOP table. Calculate the value of errors

and omissions.

Solutions

Expert Solution

a. Freedonian firms export $250 million worth of goods.

Reason- Credit, Merchandise export. Since it is export money flows in the country, hence it is credit. Goods→Merchandise.

b. Freedonian citizen’s purchase $50 million worth of tickets on US Airways flights.

Reason- Debit, Import services. Purchase of flight tickets means import of services. Money goes out of the country, hence it is debit.

c. A Freedonian firm purchases a shoe factory in Mexico for $30 million.

Reason- Debit, financial outflow. Purchase of factory is FDI.Money goes out of the country, hence it is debit.

d. Freedonia receives $5 million in foreign aid from the United States.

Reason- Credit, unilateral transfer. Foreign aid is transfer of money in the country hence it is credited.

e.Freedonian citizens deposit $15 million in a Citibank account in New York.

Reason- Debit, Financial outflow. Deposit in a foreign bank is outflow of money.Money goes out of the country, hence it is debit.

f. Freedonia imports $220 million worth of goods.

Reason- Debit, Merchandise importt. Since it is import money flows out of the country, hence it is debit. Goods→Merchandise.

g. Freedonian firms borrow $45 million by issuing bonds in

the United States.

Reason- Credit, financial inflow. Freedonian firm borrows money from US hence money flow in the country. It is credit.

h. U.S. firms earn (and repatriate) $5 million in profits from

operations in Freedonia.

Reason- Debit, income payments. US firms take money earned in Freedonia to US. Hence it is debit.

i. The Freedonia central bank buys $10 million in U.S.

Treasury bills.

Reason- Debit, financial outflow. Freedonian bank buys US bond so money goes out, i.e. financial outflow. Therefore it is debit entry.

Rahul Sunny answered 10 months ago

Next > < Previous

Related Solutions

For each item below, indicate whether a debit (DR) or a credit (CR) applies. _____

For each item below, indicate whether a debit (DR) or a credit (CR) applies. _____ a. Decrease in Accounts Payable _____ b. Decrease in Land _____ c. Increase in Retained Earnings _____ d. Increase in Unearned Revenue _____ e. Decrease in Notes Payable _____ f. Increase in Building _____ g. Increase in Wages Expense _____ h. Decrease in Office Supplies _____ i. Increase in Service Revenue _____ j. Increase in Common Stock

Indicate whether Paid-in Capital in Excess of Par is a debit or credit account and whether...

Indicate whether Paid-in Capital in Excess of Par is a debit or credit account and whether it is closed or not closed each period. Select one: a. Debit, closed b. Debit, not closed c. Credit, closed d. Credit, not closed The coupon (stated) rate of interest is used to determine: Select one: a. The discount or premium recorded when the bond is issued. b. The amount of cash interest the bond issuer pays to the investor on the interest payment...

Explain how each of the following transactions generates a credit and a debit in the American...

Explain how each of the following transactions generates a credit and a debit in the American balance of payments accounts and described (BRIEFLY) how each entry would be classified: An American buys a share of German stock, paying by writing a check on an account with a Swiss bank. The Korean government carries out an official foreign exchange intervention in which it uses dollars held in an American bank to buy Korean currency from its citizens A tourist from Detroit...

For each of the following accounts, signify DEBIT or CREDIT to indicate the normal balance of...

For each of the following accounts, signify DEBIT or CREDIT to indicate the normal balance of the account. 1 Accounts recievable Multiple Choice Answer Options: 2 Credit card expense a. Credit 3 bad debt expense b. Debit 4 allowance for doubtful debts 5 Notes receivable (due in 180 days) 6 interest revenue 7 depreciation expense 8 building 9 equipment 10 accumulated depreciation 11 Loss of disposal of equipment 12 Gain on disposal of equipment 13 Sales revenue 14 Patent 15...

The following algorithm is widely used for checking whether a credit or debit card number has...

The following algorithm is widely used for checking whether a credit or debit card number has been entered correctly on a website. It doesn't guarantee that the credit card number belongs to a valid card, but it rules out numbers which are definitely not valid. Here are the steps: Check that the long number has exactly 16 digits. If not, the long number is not valid. If the long number has 16 digits, drop the last digit from the long...

Identify the debit or credit for the following transactions. Remember, every single transaction has at least...

Identify the debit or credit for the following transactions. Remember, every single transaction has at least one debit and at least one credit. However, I just want you to identify what is requested. 1,Sold merchandise on account. Identify the sale entry debit 2 Wages were accrued but not paid at December 31, year-end. Identify the adjusting entry credit. 3. Adjusting entry to record depreciation of office equipment. Identify the credit. 4. Fees were earned but not billed at December 31,...

1. Which of the following applications of the rules of debit and credit is true? a....

1. Which of the following applications of the rules of debit and credit is true? a. Increase Accounts Payable with a credit and the normal balance is a debit b. Decrease Cash with a debit and the normal balance is a credit c. Decrease Prepaid Insurance with a credit and the normal balance is a credit d. Increase Equipment with a debit and the normal balance is a debit 2. A debit signifies a decrease in a. drawing b. revenues...

DEBIT AND CREDIT ANALYSIS: Complete the following statements using either “debit” or “Credit” The cash account...

DEBIT AND CREDIT ANALYSIS: Complete the following statements using either “debit” or “Credit” The cash account is increased with a ___________Debit________ The common stock account is increased with a ____________Credit________ The equipment account is increased with a ____________________ The cash account is decreased with a ____________________ The accounts payable account is increased with a ___________Credit_________ The revenue account Delivery Fees is increased with a ____________________ The asset account Accounts...

throughout the list, label each as either debit, credit or no entry for the following prompt....

throughout the list, label each as either debit, credit or no entry for the following prompt. "A hardware distributor ships an order of nails on account to Naperville True Value Store. Match the accounts to the correct debit and credit entries." 1. cost of goods sold 2. inventory 3. revenue 4. accounts receivable 5. freight 6. discounts, returns and allowances 7. accounts payable 8. cash

ACCOUNT Work in Process—Baking Department ACCOUNT NO. Date Item Debit Credit Balance Debit Credit Mar. 1...

ACCOUNT Work in Process—Baking Department ACCOUNT NO. Date Item Debit Credit Balance Debit Credit Mar. 1 Bal., 7,200 units, 4/5 completed 12,528 31 Direct materials, 129,600 units 168,480 181,008 31 Direct labor 49,490 230,498 31 Factory overhead 27,838 258,336 31 Goods finished, 131,400 units 249,372 8,964 31 Bal. ? units, 3/5 completed 8,964 a. Based on the above data, determine each cost listed below. Round "cost per equivalent unit" answers to the nearest cent. 1. Direct materials cost per equivalent...

Subjects