ECON 2105 Lecture 14: BMRI_LKTT_Juni_2016

At 8:30 AM, Washington DC time, on Friday, February 5, 2016, the Bureau of Labor Statistics (BLS) made the following announcement:

THE EMPLOYMENT SITUATION -- January 2016

Total nonfarm payroll employment increased by 151,000 in January, and the unemployment rate was little changed at 4.9 percent, the U.S. Bureau of Labor Statistics reported today. Job gains occurred in several industries led by retail trade, food services, and drinking places, health care, and manufacturing. Employment declined in private educational services, transportation and warehousing, and mining.

9a) How does the BLS determine the unemployment rate for January 2016?

9b) How does the BLS determine the employment rate?

Right after the BLS announced the employment level and the unemployment rate for January 2016, a bunch of Wall Street analysts offered their opinions about what Ms. Janet Yellen, the Chairman of the Federal Reserve Bank, next steps would be. The majority of the analysts stated that Ms. Yellen will keep current interest rates as they are in March 2016 and will raise rates in the third quarter of 2016. Their opinions are based on the following:

However, other analysts believe that Ms. Yellen will not change the current level of interest rates until the end of 2016 due to the economic slowdown and uncertainties in Europe, China, and other Asian countries.

9c) Please provide your opinions on which direction Ms. Yellen should take and why?

1. Prepare the necessary adjusting entries at December 31, 2015, for the Jasper Company for each of the following situations. Assume that no financial statements were prepared during the year and no adjusting entries were recorded.

a. A two-year fire insurance policy was purchased on August 1, 2015, for $12,000. The company debited prepaid insurance for the entire amount.

b. Depreciation on equipment totalled $20,000 for the year.

c. Employee salaries of $27,000 for December will be paid in early January 2016.

d. On October 1, 2013, the company lent $50,000 to a customer. The customer signed a note that requires principal and interest at 8% to be paid on September 30, 2016.

e. In July, the company purchased supplies for $4,500. The entry was recorded as a debit to supplies expense. Supplies on hand at the end of the year totalled $2,200. No supplies had been previously purchased.

Assuming that we are in December 2016, we have the following information about a company that sells shirts and shoes (the data is in thousands of dollars). The company has a second warehouse (B) to save their products. In the Real Estate market, the rental of this store is $900 per month, or what is the same as $10.800 per year. Finally, if the owner wouldn’t have inherited this business, he would have earned $25.000 a year as an employee (assume that the owner inherited the company and, therefore, had to give up his job).

Find for each year

a) the explicit cost (explicit cost) and the implicit cost (implicit cost).