emilypena887University of Houston - Downtown
Assume that Cane expects to produce and sell 115,000 Alphas during the current year. One of Cane's sales representatives has found a new customer that is willing to buy 30,000 additional Alphas for a price of $160 per unit. If Cane accepts the customer’s offer, it will decrease Alpha sales to regular customers by 14,000 units.
Bessrawl Corporation is a U.S.-based company that prepares its consolidated financialstatements in
accordance with U.S. GAAP. The company reported income in 2020 of $1,000,000 and
stockholders’ equity at December 31, 2020, of $8,000,000.
The CFO of Bessrawl has learned that the U.S. Securities and Exchange Commission is
considering requiring U.S. companies to use IFRS in preparing consolidated financial statements.
The company wishes to determine the impact that a switch to IFRS would have on its financial
statements and has engaged you to prepare a reconciliation of income and stockholders’ equity from
U.S. GAAP to IFRS. You have identified the following five areas in which Bessrawl’s accounting
principles is based on U.S. GAAP differ from IFRS.
2. Property, plant, and equipment
3. Intangible assets
4. Research and development costs
5. Sale-and-leaseback transaction
Bessrawl provides the following information with respect to each of these accounting differences.
At year-end 2020, inventory had a historical cost of $250,000, a replacement cost of $180,000, a net
realizable value of $190,000, and a normal profit margin of 20 percent.
Property, Plant, and Equipment
The company acquired a building at the beginning of 2019 at a cost of $2,750,000. The building
has an estimated useful life of 25 years, an estimated residual value of $250,000, and is being
depreciated on a straight-line basis. At the beginning of 2020, the building was appraised and
determined to have a fair value of $3,250,000. There is no change in estimated useful life or residual
value. In a switch to IFRS, the company would use the reevaluation model in IAS 16 to determine
the carrying value of property, plant, and equipment subsequent to acquisition.
As part of a business combination in 2017, the company acquired a brand with a fair value of
$40,000. The brand is classified as an intangible asset with an indefinite life. At year-end 2020, the
brand is determined to have a selling price of $35,000 with zero cost to sell. Expected future cash
flows from continued use of the brand are $42,000 and the present value of the expected future cash
flows is $34,000.
Research and Development Costs
The company incurred research and development costs of $200,000 in 2020. Of this amount, 40
percent related to development activities subsequent to the point at which criteria had been met
indicating that an intangible asset existed. As of the end of the 2020, development of the new
product had not been completed.
In January 2018, the company realized a gain of the sale-and-leaseback of an office building in the
amount of $150,000. The lease is accounted for as an operating lease, and the term of the lease is
a) Prepare a reconciliation schedule to convert 2020 income, and December 31, 2020, stockholders’
equity from a U.S. GAAP basis to IFRS. Ignore income taxes. Prepare a note to explain each
adjustment made in the reconciliation schedule.
b) Discuss each relevant accounting standards with references to journal article(s) by using
disclosure examples of companies.
Which of the following is not true about the Polish virtuoso pianist, Frederic Chopin?
A. The composer Franz Liszt was fond of Chopin's compositions known as the "Polonaises."
B. Chopin was not deeply attached to his home country, Poland.
C. Chopin wrote his first Polonaise when he was eight years old.
The poverty line is based on cash income, which means it does not take into account government programs that provide assistance to the poor in a non-cash form, like Medicaid (health care for low-income individuals and families) and food aid. Also, low-income families can qualify for federal housing assistance. Should the poverty line be adjusted to take the value of such programs into account?
Robert Schumann's Fantasie in C Major had the Romantic period characteristics of being more complex (it was difficult to play) and of expressing
A. the same, simple form as pieces from the Baroque period.
B. the publisher's opinion on how it should sound.
C. deep emotions (specifically, Schumann's yearning for his sweetheart, Clara).
The government subsidizes a wide variety of programs intended to help the poor, including social insurance and poverty programs, such as income assistance programs.
Which of the following are examples of cash transfer programs? Check all that apply.
A. TANF (Temporary Assistance for Needy Families)
_____ 30. The major social assistance program in the U.S. is:
a. Social Security.
b. Temporary Assistance to Needy Families(TANF)(previously AFDC)
c. Low Income Public Housing.
d. Supplementary Security Income.
e. Food Stamps.
_____ 31. The program that provides funds to single-parent households is called:
a. Temporary Assistance to Needy Families(TANF)
b. Social Security.
e. Supplementary Security Income.
______ 32. In a labor contract negotiation, a mediator:
a. Represents the union side.
b. Represents the management side.
c. Represents neither side.
d. Can call a strike.
e. Can force both sides to agree to a contract.
_____ 33. Which of the following is considered to be an in-kind transfer payment?
a. Food stamps
b. Social security
1.) The minimum feasible long-run average cost for firms in a perfectly competitive industry is $58 per unit. IF every firm in the industry currently is producing an output consistent with a long-run equilibrium, calculate the marginal cost incurred by each firm and the market price.
Marginal cost is $___ and market price is $___ .
How I calculate this?
2.) A perfectly competitive increasing cost industry is in long-run equilibrium. Due to a change in tastes and preferences, there is a decrease in demand. Which of the following best describes the effect on the industry?
The price will
A.) decrease, firms will produce more, profits will decrease, and more firms will enter until profit returns to zero.
B.) decrease, firms will produce less, profits will increase, and more firms will enter until profit returns to zero.
C.) decrease, firms will produce less, profits will be below zero, and firms will exit until profit returns to zero.
D.) increase, firms will produce more, profits will increase, and more firms will enter until profit returns to zero.
Answer the following questions pertaining to monopolist production.
1) If a monopolist is producing in the inelastic portion of its demand curve, which of the following will occur if the monopolist decreases its price?
a. Marginal revenue will decrease, but profits will increase.
b. Marginal revenue will increase, but profits will decrease.
c.Total revenue will decrease, but profits will increase.
d.Both total revenue and profits will decrease.
e. Both total revenue and profits will increase.
2) Which of the following statements is true for a perfectly competitive firm but not true for a monopoly?
a.The firm's price is equal to its average revenue.
b.The firm cannot affect the market price for its good.
c.It is difficult for other firms to enter the industry.
d. The demand for the firm's product is unit elastic.
e.The firm must lower its price in order to sell more of its product.
3) Monopolies are inefficient for which of the following reasons?
a. They produce too little of the good.
b.They produce too much of the good.
c. They do not produce an output level at which marginal cost equals marginal revenue.
d. The marginal cost of producing the good is too low.
e. The firm is too large.
4) Which of the following is necessarily true of the profit-maximizing equilibrium of a monopolist who sets a single price?
a. Price equals average total cost.
b. Price is greater than the marginal cost.
c. Average total cost is at its minimum level.
d. Marginal revenue is greater than marginal cost.
e. Marginal cost is minimized.
1. When a fine caterer produces 30 catered meals, its marginal cost and average variable cost each equal $10. Therefore, assuming normally shaped cost curves, at 29 meals:
a) its marginal cost is less than $10 and its average variable cost is more than $10.
b) its marginal cost and its average variable cost are each equal to $10.
c) its marginal cost is greater than $10 and its average variable cost is less than $10.
d) its marginal cost and its average variable cost are each greater than $10.
2. Suppose Cyd knows the average total cost of producing 9 scones is $5, while the average total cost of producing 10 scones is $5.20. What is the marginal cost of the 10th scone?
3. Kaile Cakes produces 10 cakes per day. The marginal cost of the tenth cake is $24, and the average total cost of 10 cakes is $6. The average total cost of 9 cakes is:
4. The marginal cost curve is the mirror image of the:
a) average product curve.
b) marginal product curve.
c) total product curve.
d) average total cost curve.
Consider a market with many firms that have different cost structures.
Unless shutdown or exit is optimal, every firm expands production until ___________.
marginal product is maximized.
B. marginal revenue, marginal cost, and price are all equal
(MR = MC = P)
C. marginal revenue is equal to the minimum of the short-run average total cost.
D. marginal cost is minimized.
To construct the supply curve in a market with many firms with different cost structures, the ___________.
individual supply curves for each firm are added together.
individual average variable cost curves are added together.
minimums of theâ firms' marginal cost curves are linked together.
minimums of theâ firms' long-run average total cost curves are linked together.
The equilibrium price is the ___________.
âlong-run average total cost of the last entrant into the market.
the average marginal cost of the firms.
the long-run average total cost of the first entrant into the market.
minimum of the average variable cost of the smallest firm in the market.
In terms of economic profits, early market entrants earn
economic profits and the last entrant earns
A perfectly competitive firm will choose to shut down when the (price (marginal revenue)/ average total cost) intersects the marginal cost curve below the ( total cost curve average variable cost curve ).
Therefore, the short-run supply curve for a perfectly competitive firm is represented by __________.
A. the portion of the average variable cost curve below marginal cost. B. the portion of the average variable cost curve above marginal cost. C. the portion of the marginal cost curve above the average total cost. D. the portion of the marginal cost curve above average variable cost.
In the long run, the supply curve for a perfectly competitive firm is represented by __________.
A. the portion of the marginal cost curve above the average total cost. B. the portion of the marginal cost curve above average variable cost. C. the portion of the average variable cost curve below marginal cost. D. the portion of the average variable cost curve above marginal cost.
(1) With a given plant size, an increase in output will NOT result in an increase in,
a. average variable cost
c.total fixed cost
d.average fixed costs
(2) The change in total variable cost which accompanies one extra unit of output
b.the average variable cost
c.the average total cost
d.the average fixed cost
(3) When the total product is rising,
a. variable cost must be declining
b. the marginal cost must be positive
c. the marginal product must be negative.
d. fixed cost must be rising
(4) For a perfectly competitive firm,
a. price is less than marginal revenue
b.there is no relationship between price and marginal revenue
c. price is greater than marginal revenue
d.price equals marginal revenue
10-When marginal cost is greater than average total cost,
A. Average total cost must be increasing with output
B. Average variable cost must be decreasing with output
C. Average fixed cost must be increasing with output
D. Marginal cost must be increasing with output
11-If a firm's demand curve falls below its AVC curve, then the firm should
A. Shut down now
B. Operate in the short run but not the long run
C. Set price = marginal cost
D. Shutdown in the long-run
12- The demand curve facing a perfectly competitive firm is
A. Upward sloping
B. Perfectly inelastic
C. Downward sloping
D. Perfectly elastic
13-If the demand curve falls below the ATC curve but lies above AVC, then the firm should
A. Should shut down
B. Operate in the short run but not the long run
C. Set price = marginal cost
D. Operate in the short run and the long run
14-At the output where MC = ATC = P, the perfectly competitive firm
A. Should shutdown
B. Has no economic profit
C. Is not profit maximizing
D. Should raise output
6. Power Printers Total Costs (per hour)
If the price of a printer is $50 in this perfectly competitive industry, what is the profit-maximizing rate of output?
7. Which of the following is NOT true in a perfectly competitive market?
a. There is free entry and exit into the industry.
b. Each firm produces a differentiated product.
c. Each firm faces a perfectly elastic demand curve.
d. Price is equal to marginal revenue at every output level for the firm.
8. A perfectly competitive firm should always continue to operate in the short run as long as:
a. P < ATC at the rate of output where MR = MC.
b. P < AVC at the rate of output where MR = MC.
c. MR > AVC at the rate of output where MR = MC.
d. MR > AFC at the rate of output where MR = MC.
9. A firm that makes zero economic profits:
a. Must eventually go bankrupt.
b. Should shut down.
c. Incurs a loss, but should not shut down.
d. Covers all its costs, including a provision for normal profit.
10. A monopoly firm is different from a competitive firm in that:
A. There are many substitutes for the monopolistâs product whereas the competitive firmâs demand curve is perfectly elastic.
B. The monopolistâs demand curve is perfectly inelastic, whereas the competitive firmâs demand curve is perfectly elastic.
C. The monopolist can influence the price in the market, whereas the competitive firm is a price taker.
D. All of the above