Consider a two-period, small, open, endowment economy without investment and government expenditures, but with durable consumption goods. Purchases of durable consumption goods in period 1, denoted C1, continue to provide utility in period 2. The utility of households in period 2 depends on purchases of durable consumption goods in period 2 , denoted C2, and on the un-depreciated stock of durables purchased in period 1. Durable consumption goods are assumed to depreciate at the rate δ ∈ [0, 1]. Household preferences are described by the following utility function
U =ln(C1)+ln(C2 +(1−δ)C1)
Assume that the world interest rate is given by r, the endowment in period one is denoted by Y1 and the endowment in period 2 is denoted by Y2. Finally assume that the initial asset position, B1, is zero.
(a) [1 points] State the household’s budget constraints in periods 1 and 2.
(b) [2 points] Find the equilibrium values of consumption and net exports in both periods. Will households smooth consumption over time? Provide intuition.
Assume that the world interest rate is r = 0.1 per year, that the endowment in period one is Y1 = 1, and that the endowment in period 2 is Y2 = 1.1.
(c) [1 points] Assume now that δ = 1. Find the equilibrium values of consumption and net exports in periods 1 and 2.
(d) [1 points] Suppose the country experiences a boom in period 1. Specifically, output in period 1 increases from 1 to 2 (Y1 = 2). The output shock is temporary in the sense that output in period 2 is unchanged. Continue to assume that δ = 1, that is, that consumption is nondurable. Are net exports in period 1 countercyclical, that is, does the change in net exports have the opposite sign as the change in GDP? Why or why not. Find the change in net exports in period 1.
(e) [3 points] Continue to assume that Y1 increases in period 1 from 1 to 2. But now do not impose that δ = 1. How much durability does one need to ensure that the response of net exports in period 1 is countercyclical. Provide intuition for your answer.
In: Economics
Exercise 23-6 On January 1, 2017, the Hardin Company budget committee has reached agreement on the following data for the 6 months ending June 30, 2017. Sales units: First quarter 5,300; second quarter 6,000; third quarter 7,800 Ending raw materials inventory: 40% of the next quarter’s production requirements Ending finished goods inventory: 25% of the next quarter’s expected sales units Third-quarter production: 7,360 units. The ending raw materials and finished goods inventories at December 31, 2016, follow the same percentage relationships to production and sales that occur in 2017. 3 pounds of raw materials are required to make each unit of finished goods. Raw materials purchased are expected to cost $4 per pound. Prepare a production budget by quarters for the 6-month period ended June 30, 2017. HARDIN COMPANY Production Budget Quarter 1 2 Year : : LINK TO TEXT Prepare a direct materials budget by quarters for the 6-month period ended June 30, 2017. HARDIN COMPANY Direct Materials Budget Quarter 1 2 Six Months : : $ $ $ $ $
In: Accounting
Please explain this article
THE U.S. ECONOMY GREW at a modest but still-steady rate at the end of 2018, slowing considerably after sky-high midyear growth.
Gross domestic product, a broad measure of goods and services produced in the U.S., rose at a seasonally adjusted annual rate of 2.6 percent in the final quarter of last year, according to initial numbers released
It's a significant dip from blockbuster reports earlier this year, when fallout from the Republican tax cut bill helped boost GDP growth to 4.2 percent in the second quarter and 3.4 percent in the third quarter, but experts say the growth is still a steady, albeit muted, showing.
The growth was driven by an uptick in consumer spending, particularly on motor vehicles and nondurable goods like prescription drugs, as well as health care services. Business investments, especially in intellectual property products, also fueled the growth.
Housing investments, however, dipped, counteracting other contributions. Retail sales also dropped in December.
GDP growth for the year hit 2.9 percent, the highest annual rate since 2015, whose number it matched.
In: Economics
The Grilton Tire Company manufactures racing tires for bicycles. Grilton sells tires for $50 each. Grilton is planning for next year by developing a master budget by quarters. Grilton’s balance sheet for December 31, 2016 follows:
GRILTON TIRE COMPANY
Balance Sheet
December 31, 2016
Assets
Current Assets:
Cash $ 39,000
Accounts Receivable 40,000
Raw Materials Inventory 2,400
Finished Goods Inventory 8,700
Total Current Assets $ 90,100
Property, Plant and Equipment:
Equipment 177,000
Less: Accumulated Depreciation (42,000) 135,000
Total Assets $225,100
Liabilities
Current Liabilities:
Accounts Payable $ 8,000
Stockholder’s Equity
Common Stock, no par $ 130,000
Retained Earnings 87,100
Total Stockholder’s Equity 217,100
Total Liabilities and Stockholder’s Equity $225,100
Other data for Grilton Tire Company:
a. Budgeted Sales are 1,500 for the first quarter and expected to increase by 200 tires per quarter. Cash Sales are expected to be 30% of total sales, with the remaining 70% of sales on account.
b. Finished Goods Inventory on December 31, 2016 consists of 300 tires at $29 each.
c. Desired ending Finished Goods Inventory is 40% of the next quarter’s sales; first quarter sales for 2018 are expected to be 2,300 tires and second quarter sales for 2018 are expected to be 2,500. FIFO inventory costing method is used.
d. Direct Materials cost is $8 per tire.
e. Desired ending Raw Materials Inventory is 30% of the next quarter’s direct materials needed for production.
f. Each tire requires 0.40 hours of direct labor; direct labor costs average $16 per hour.
g. Variable manufacturing overhead is $2 per tire produced.
h. Fixed manufacturing overhead includes $4,500 per quarter in depreciation and $26,780 per quarter for other costs, such as utilities, insurance, and property taxes.
i. Fixed selling and administrative expenses include $8,000 per quarter for salaries; $1,800 per quarter for rent; $1,200 per quarter for insurance; and $500 per quarter for depreciation.
j. Variable selling and administrative expenses include supplies at 2% of sales.
k. Capital expenditures include $45,000 for new manufacturing equipment, to be purchased and paid in the first quarter.
l. Cash receipts for sales on account are 60% in the quarter of sale and 40% in the quarter following the sale; December 31, 2016, Accounts Receivable is received in the first quarter of 2017.
m. Direct materials purchases are paid 70% in the quarter purchased and 30% in the following quarter; December 31, 2016, Accounts Payable is paid in the first quarter of 2017.
n. Direct labor, manufacturing overhead, and selling and administrative costs are paid in the quarter incurred.
o. Income tax expense is projected at $3,500 per quarter and is paid in the quarter incurred.
p. Grilton desires to maintain a minimum cash balance of $35,000 and borrows from the local bank as needed in increments of $1,000 at the beginning of the quarter; principal repayments are made at the beginning of the quarter when excess funds are available and in increments of $1,000; interest is 6% per year and paid at the beginning of the quarter based on the amount outstanding from the previous quarter.
Requirments:
1. Prepare a budgeted Income Statement for the year of 2017.
2. Prepare a cash budget for the year of 2017.
In: Accounting
The Gessing Tire Company manufactures racing tires for bicycles. Gessing sells tires for $85 each. Gessing is planning for the next year by developing a master budget by quarters. Gessing’s balance sheet for December 31, 2018, follows:
Gessing Tire Company
Balance sheet
December 31, 2018
Current Assets:
Cash $ 52,000
Accounts Receivable 35,000
Raw Materials Inventory 1,900
Finished Goods Inventory 2,400
________
Total Current Assets $ 91,300
Property, Plant, and Equipment:
Equipment 142,000
Less: Accumulated Depreciation (50,000) 92,000
_________ ________
Total Assets $ 183,300
==============
Liabilities
Current Liabilities:
Accounts Payable $10,000
Stockholder’s Equity
Common Stock, no par $ 110,000
Retained Earnings 63,300
_________
Total Stockholders’ Equity 173,300
_______
Total Liabilities and Stockholder’s Equity $ 183,300
========
Other data for Gessing Tire Company:
Read the requirments:
Tire Company
Budgeted income statement
For the year ended december 31, 2019
Sales revenue
Cost of goods sold
Gross profit
Selling and administrative expenses
Operating income
Interest expense
Income before income taxes
Income tax expense
Net income
December 31, 2019
Current Assets:
Cash
Accounts Receivable
Raw Materials Inventory
Finished Goods inventory
Total Current assets
Property, plant and equipment:
Equipment
Less: Accumulated Depreciation
Total Assets
Liabilities
Current liabilities:
Accounts Payable
Stockholders’ Equity
Common stock, no par
Retained earnings
Total stockholders’ equity
Total liabilities and stockholders’ equity
In: Accounting
ABC Inc. has compiled the following data in order to put together their first quarter operating budget for 20XX:
|
January |
February |
March |
April |
|
|
Sales (units) |
50,000 |
55,000 |
40,000 |
30,000 |
Additional information:
ABC sells each unit for $200.
Company policy is to have 30% of next month’s sales (in units) in ending finished goods inventory. This policy was met in December.
Company policy is to have 25% of next month’s production needs in ending raw materials inventory. The production needs for April is 120,000. This policy was met in December.
It takes four pounds of material to produce each unit and the cost is $5.00/pound.
Required:
1. Prepare a sales budget for the January, February and March and for the first quarter in total.
2. Prepare a production budget for January, February and March and for the first quarter in total.
3. Prepare a direct materials purchases budget for January, February and March and for the first quarter in total.
In: Accounting
ABC Inc. has compiled the following data in order to put together their first quarter operating budget for 20XX:
|
January |
February |
March |
April |
|
|
Sales (units) |
50,000 |
55,000 |
40,000 |
30,000 |
Additional information:
ABC sells each unit for $200.
Company policy is to have 30% of next month’s sales (in units) in ending finished goods inventory. This policy was met in December.
Company policy is to have 25% of next month’s production needs in ending raw materials inventory. The production needs for April is 120,000. This policy was met in December.
It takes four pounds of material to produce each unit and the cost is $5.00/pound.
Required:
1. Prepare a sales budget for the January, February and March and for the first quarter in total.
2. Prepare a production budget for January, February and March and for the first quarter in total.
3. Prepare a direct materials purchases budget for January, February and March and for the first quarter in total.
In: Accounting
ABC Inc. has compiled the following data in order to put together their first quarter operating budget for 20XX:
|
January |
February |
March |
April |
|
|
Sales (units) |
50,000 |
55,000 |
40,000 |
30,000 |
Additional information:
ABC sells each unit for $200.
Company policy is to have 30% of next month’s sales (in units) in ending finished goods inventory. This policy was met in December.
Company policy is to have 25% of next month’s production needs in ending raw materials inventory. The production needs for April is 120,000. This policy was met in December.
It takes four pounds of material to produce each unit and the cost is $5.00/pound.
Required:
1. Prepare a sales budget for the January, February and March and for the first quarter in total.
2. Prepare a production budget for January, February and March and for the first quarter in total.
3. Prepare a direct materials purchases budget for January, February and March and for the first quarter in total.
In: Accounting
At the end of the second quarter of 20X1, Malta Corporation
assembled the following information:
Required:
a. Calculate the expected effective annual tax rate at the end of
the second quarter for Malta.
b. Prepare the income statement for the second quarter of 20X1. Your solution should include a computation of income tax (or benefit) for the first and second quarters.
In: Accounting
Does the expenditure approach to computing GDP measure U.S. spending on all goods, U.S. spending on only U.S. goods, or U.S. and foreign spending on only U.S. goods? Explain your answer.
In: Economics