Answer:
This is a relatively old example, but it illustrates this principle quite well since it meant an extreme exogenous shock caused by a huge cost reduction.
During the 1970s, computers were huge and extremely expensive, until a guy named Steve Jobs showed up and developed the first PC (personal computer). Until then only large companies could afford using computers and their use was really limited to certain specific tasks.
But once the PCs were available, the computer market shifted completely. Instead of costing millions of dollars, the Apple 1 costed exactly $666.66. That was a radical shift in prices, and increasing the quantity demanded of PCs by millions. A few years later PCs could be found at most households and schools.
That changed the world completely since the resources that once were allocated to producing very big and extremely expensive PCs shifted to producing smaller and affordable units. That allocation efficiency benefited society as a whole, changing the whole world. Pcs also helped to increase productivity in a lot of different areas and created new sub segments like smartphones, tablets, etc.
Of course that not all the consequences were good for everybody, for example IBM was the largest computer and PC manufacturer back then, now it doesn't even manufacture PCs.
Answer:
$114,000
Explanation:
Given that,
Net credit sales = $2,250,000
Opening allowance for Doubtful Accounts = $36,000
Uncollectible accounts receivable written off = $90,000
Firstly, we need to find the excess amount to be adjusted to allowance for Doubtful Accounts. It is calculated as follows:
= Uncollectible accounts receivable written off - Opening allowance for Doubtful Accounts
= $90,000 - $36,000
= $54,000
Allowance amount:
= 10% of the balance in receivables
= 0.1 × $600,000
= $60,000
Therefore, the required adjustment to the Allowance for Doubtful Accounts at December 31, 2017 is determined by summing up the excess amount and allowance amount.
= Excess amount to be adjusted to allowance for Doubtful Accounts + Allowance amount
= $54,000 + $60,000
= $114,000
Answer:
It is the theory of Market Imperfections
Explanation:
Market imperfections theory is said to be when a trade theory is brought about from international markets where perfect competition does not exist. It occurs when at least, one of the assumptions for perfect competition is violated and this results to what we call an imperfect market.
Answer:
Explanation:
The journal entries are shown below:
1. Sales revenue A/c Dr $128,000
To Sales return and Allowances $128,000
(Being return sales is recorded)
The computation is shown below:
= Recorded sales × estimated returned percentage - experienced returns
= $10,600,000 × 8% - $720,000
= $848,000 - $720,000
= $128,000
2. Inventory A/c Dr $76,800 ($128,000 × 60%)
To Cost of goods sold $76,800
(Being returned cost of goods sold recorded)
