A temporary government spending shock.

a) Suppose the government very temporarily, and unexpectedly, increases its purchases of goods. (Assume the government finances these temporary purchases by issuing additional debt. Assume the government only purchases goods—it does not produce goods, or employ labor directly.) Explain the impact in both the goods and labor markets today. What happens to consumption demand, investment demand, aggregate demand, and aggregate supply? What happens to the market-clearing real interest rate, output, consumption and investment? Illustrate graphically.

b) Suppose instead that the government financed the temporary spending by an equally very temporary proportional increase in the income tax. (That is, both the average and marginal tax rates increase temporarily.) Discuss how this changes each of your answers to the questions in part (a).

At the beginning of first quarter 2015, the bank buys an available-for-sale security for $15. At the end of the first quarter the price is $17. The bank sells the security at $18 during the second quarter 2015.

During the second quarter 2015, as the result of the sale, the bank shareholder's equity ______, the retained profit ________ and the capital reserve ________.

A. increased by $1; increased by $3; decreased by $2

B. increased by $3; increased by $1; increased by $2

C. increased by $1; increased by $3; increased by $2

D. decreased by $1; decreased by $3; increased by $2

Walmarket uses a periodic inventory system.It sells domestic appliances and one of the stores most popular products is a WM3 washing machine. The inventory quantities, purchases and sales of this product for the most recent year are as follows.

a. Using periodic costing procedures, compute the cost of the December 31 inventory and the cost of goods sold for the WM3 systems during the year under each of the following cost flow assumptions.

1. First - in, first - out.

2. Last - in, first - out.

3. Average cost (round to nearest dollar, except unit cost).

b. Which of the three inventory pricing methods provides the most realistic balance sheet valuation of inventory in light of the current replacement cost of the WM3 units? Explain.

c. Does this same method also produce the most realistic measure of income in light of the current replacement cost of the WM3 units? Explain.

South Shore Construction builds permanent docks and seawalls along the southern shore of Long Island, New York. Although the firm has been in business only five years, revenue has increased from $315,000 in the first year of operation to $1,075,000 in the most recent year. The following data show the quarterly sales revenue in thousands of dollars.

a. Which of the following is the correct time series plot?

What type of pattern exists in the data?

There appears to be a seasonal pattern in the data and perhaps a

b. Use the following dummy variables to develop an estimated regression equation to account for any seasonal effects in the data: Qtr1=1 if Quarter 1, 0 otherwise; Qtr2=1 if Quarter 2, 0 otherwise; Qtr3=1 if Quarter 3, 0 otherwise. Round your answers to whole number.

Revenue= _ + _ Qtr1 + _ Qtr2 + _ Qtr3

Compute the quarterly forecasts for next year.

c. Let Period =1 to refer to the observation in quarter 1 of year 1; Period=2 to refer to the observation in quarter 2 of year 1; . . . and Period=20 to refer to the observation in quarter 4 of year . Using the dummy variables defined in part (b) and Period, develop an estimated regression equation to account for seasonal effects and any linear trend in the time series. Based upon the seasonal effects in the data and linear trend, compute the quarterly forecasts for next year. Round your answers to whole number. Enter negative value as negative number.

The regression equation is:

Revenue = _ + _ Qtr1 + _ Qtr2 + _ Qtr3 + _ Period

The quarterly forecasts for next year are as follows:

Find the accumulated value of $4,715 invested for 13 years if the annual effective rate of discount is 5% for the first 7 years and a nominal rate of discount of 3.8% per year compounded bi-monthly (i.e., every two months) is used thereafter

Baird Company is a retail company that specializes in selling outdoor camping equipment. The company is considering opening a new store on October 1, 2019. The company president formed a planning committee to prepare a master budget for the first three months of operation. As budget coordinator, you have been assigned the following tasks:

October sales are estimated to be $300,000, of which 40 percent will be cash and 60 percent will be credit. The company expects sales to increase at the rate of 20 percent per month. Prepare a sales budget.

The company expects to collect 100 percent of the accounts receivable generated by credit sales in the month following the sale. Prepare a schedule of cash receipts.

The cost of goods sold is 70 percent of sales. The company desires to maintain a minimum ending inventory equal to 20 percent of the next month’s cost of goods sold. However, ending inventory of December is expected to be $12,100. Assume that all purchases are made on account. Prepare an inventory purchases budget.

The company pays 80 percent of accounts payable in the month of purchase and the remaining 20 percent in the following month. Prepare a cash payments budget for inventory purchases.

Budgeted selling and administrative expenses per month follow:

Problem 14-23 Part 2

Prepare a pro forma income statement for the quarter.

Prepare a pro forma balance sheet at the end of the quarter.

Prepare a pro forma statement of cash flows for the quarter.                            

Prepare a pro forma income statement for the quarter.

Prepare a pro forma balance sheet at the end of the quarter. (Amounts to be deducted should be indicated by a minus sign.)

Prepare a pro forma statement of cash flows for the quarter. (Amounts to be deducted should be indicated by a minus sign.)

Concord Corporation will invest $73000 every January 1st for the next six years (2020 – 2025). If Concord will earn 8% on the investment, what amount will be in the investment fund on December 31, 2025?

Tipson Corporation will invest $25,000 every January 1st for the next six years (2020 – 2025). If Tipson will earn 12% on the investment, what amount will be in the investment fund on December 31, 2025 $?

Tami Tyler opened Tami’s Creations, Inc., a small manufacturing company, at the beginning of the year. Getting the company through its first quarter of operations placed a considerable strain on Ms. Tyler’s personal finances. The following income statement for the first quarter was prepared by a friend who has just completed a course in managerial accounting at State University.

Ms. Tyler is discouraged over the loss shown for the quarter, particularly because she had planned to use the statement as support for a bank loan. Another friend, a CPA, insists that the company should be using absorption costing rather than variable costing and argues that if absorption costing had been used the company probably would have reported at least some profit for the quarter.

At this point, Ms. Tyler is manufacturing only one product—a swimsuit. Production and cost data relating to the swimsuit for the first quarter follow:

Required:

1. Complete the following:

a. Compute the unit product cost under absorption costing.

b. What is the company’s absorption costing net operating income (loss) for the quarter? (Round your intermediate calculations to 2 decimal places.)

c. Reconcile the variable and absorption costing net operating income (loss) figures.

3. During the second quarter of operations, the company again produced 31,900 units but sold 34,900 units. (Assume no change in total fixed costs.)

a. During the second quarter of operations, the company again produced 31,900 units but sold 34,900 units. What is the company’s variable costing net operating income (loss) for the second quarter?

b. During the second quarter of operations, the company again produced 31,900 units but sold 34,900 units. What is the company’s absorption costing net operating income (loss) for the second quarter? (Round your intermediate calculations to 2 decimal places.)

c. During the second quarter of operations, the company again produced 31,900 units but sold 34,900 units. Reconcile the variable costing and absorption costing net operating incomes (losses) for the second quarter.  (Losses and deductions should be entered as a negative.)