1. Determining transaction costsKyoko has decided to replace her old deck, because it is rotting away and has lots of splinters. She is looking for a contractor to build her a new deckand is willing to pay up to $12,000. Jacques, a contractor, is willing to build Kyoko a new deck for as little as $6,000.Kyoko finds Jacques through an online ad. Jacques paid $165 to post the ad online. Kyoko and Jacques agree on a price of $8,000 for the new deck.Kyoko pays a law firm $270 to write up a contract stating that Jacques will build Kyoko a new deck for $8,000.The transaction costs associated with this trade are $

Transaction cost, economic losses that can result from arranging market relationships on a…

Answered: 1. Determining transaction costs Kyoko…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Which one of the following statements is false? Group of answer choices A.Bill drives 20 each way between his home to his office – 40 miles round trip each day. During the day he drives to a client site. He drives a total of 63 miles that day. He may deduct the cost of 43 miles. B.Commuting expenses may be deductible if you are transporting tools. C.A consultant works out of her home. She may deduct the cost of driving to a client’s place of business. D.The expenses of driving between your regular job and a second job are deductible.
The following is an excerpt from a conversation between Mark Loomis and Krista Huff. Mark is debating whether to buy a stereo system from Tru-Sound Systems, a locally owned electronics store, or Wholesale Stereo, an online electronics company.Mark: Krista, I don’t know what to do about buying my new stereo.Krista: What’s the problem?Mark: Well, I can buy it locally at Tru-Sound Systems for $1,175.00. However, Wholesale Stereo has the same system listed for $1,200.00.Krista: What’s the big deal? Buy it from Tru-Sound Systems.Mark: It’s not quite that simple. Wholesale Stereo charges $49.99 for shipping and handling. If I have Wholesale Stereo send it next-day air, it’ll cost $89.99 for shipping and handling.Krista: So?Mark: But, that’s not all. Tru-Sound Systems will give an additional 2% discount if I pay cash. Otherwise, they will let me use my VISA, or I can pay it off in three monthly installments. In addition, if I buy it from Tru-SoundSystems, I have to pay 9% sales tax. I won’t…
Charles wants to renovate the bathroom and kitchen in his home, and he hires Veronica to do this work. They enter into a contract after agreeing to a cost of $40,000. However, once Veronica starts work, she realizes that it will cost $15,000 extra to complete the work that she promised. To show good faith to Charles, Veronica tells him that she will split the added cost with Charles and asks Charles for an additional $7,500. Charles refuses to pay the additional $7,500, and Veronica threatens to stop work on the renovation. After fearing that another contractor will probably charge much more, Charles calls Veronica and tells her he’ll pay the additional $7,500. After the renovations are completed, Charles refuses to pay the additional $7,500, despite agreeing to it. Veronica sues Charles. Who wins? Please explain.
Amy is trying to decide whether or not it would be beneficial to employ the services of a real estate broker in order to facilitate the sale of her home. She has estimated that the marketing costs and opportunity cost associated with time spent dealing with prospective buyers amounts to $5,000. If Amy were to sell the house on her own for $200,000, but a broker would have been able to negotiate a higher price of $208,556, what commission rate should Amy have been willing to accept from a real estate broker to make her indifferent between selling the house on her own and hiring a real estate broker? 2.4% ● 3.1% 5.0% 6.5%
Mary had a contract with Brick, whereby Brick will paint her Home for $2,000 TT. Brick regrettably got another job for a larger amount of money and told Mary that he cannot paint her house anymore. Mary is furious and has contacted her lawyer to sue Brick for breach of contract. Jeb contacted Mary soon thereafter and agreed to paint her house for $2,500 TT. Mary is however concerned that if she sues Brick, she may not be able to get any recourse via damages because she has not lost anything. Based on the rules of governing the payment of damages in the event of a breach of contract. Using IRAC please advise Mary on what she has to establish to be paid damages, clearly identifying each rule.
John Covington, a college student, wants to start a small-scale painting business during his off-school hours. To economize the start-up business, he decides to purchase some used painting equipment. He has two mutually exclusive options: (B1) Do most of the painting by himself by limiting his business to only residential painting jobs or (B2) purchase more painting equipment and hire some helpers to do both residential and commercial painting jobs. He expects option B2 will have a higherequipment cost but provide higher revenues as well. In either case, he expects to fold the business in three years when he graduates from college.The cash flows for the two mutually exclusive alternatives are given as follows: With the knowledge that both alternatives are revenue projects, which project would John select al MARR = 10%? (Nole that both projects are profitable at 10%.)
Answer the question based on what you have learned on a legal basis. Facts: You offered to sell your automobile to Wil for P100,000.00. After inspecting the automobile, Wil offered to buy it for P80,000.00. This offer was accepted by you. The next day, you offered to deliver the automobile, but Wil being short of funds, secured postponement of the delivery, promising to pay the price “upon arrival of the steamer". The steamer however never arrived because it was wrecked by a typhoon and sank somewhere off the Coast of Samar. Question: Is there a perfected contract in this case? Why or why not? Answer:
The computer in May’s office is down, and May has been asked to immediately provide an equation to estimate the future purchase cost for part #696. May grabs a calculator and uses the high-low method to estimate a cost equation. What equation does she get?
Lorenzo, the owner of a local poster shop, comes to you for help. While his shop has been breaking even for the past two years, it has not been able to generate a profit. For him to keep the shop open, he needs to earn at least $12,000 in operating income next year. You agree to help Lorenzo and ask him for some current information about his products' selling price and costs. You tell him you will work through some possible scenarios that might involve changing his sales price to generate the number of units sold needed to reach his target profit. Lorenzo shares the following information with you as you ponder different scenarios to help your client. Selling price $7.50 Cost for paper, per unit $0.70 Cost for printing, per unit $1.10 Cost for film, per unit $0.60 Staff salaries $48,000.00 Other operating costs $12,120.00 Using Lorenzo's data and proper Excel formulas, first, plan to get an understanding of Lorenzo's financial situation based on breakeven. Then look at…
Susan plans on selling her mugs. She has created two scenarios and wants to know which will provide her the better profit. In order to help her figure this out, she asks you to figure out when the two options are the same. Option 1: Sells at a local store. It costs her $445 for a shelf at the store, but it's in an upscale neighborhood that gets lots of foot traffic so she can sell the mugs for $30 in profit. Option 2: Sell at the local farmers market. It costs her $100 for a booth, but busy can vary quite a bit. She figures she call sell the mugs for a $7 profit. When are the two options the same?
One of Natalie’s friends, Curtis Lesperance, runs a coffee shop where he sells specialty coffees and prepares and sells muffins and cookies. He is eager to buy one of Natalie’s fine European mixers, which would enable him to make larger batches of muffins and cookies. However, Curtis cannot afford to pay for the mixer for at least 30 days. He asks Natalie if she would be willing to sell him the mixer on credit. Natalie comes to you for advice. She asks you to address the questions below. Curtis has given me a set of his most recent financial statements. What calculations should I do with the data from these statements, and what questions should I ask him after I have analyzed the statements? How will this information help me decide if I should extend credit to Curtis? Is there an alternative other than extending credit to Curtis for 30 days? I am thinking seriously about being able to have my customers use credit cards. What are some of the advantages and disadvantages of letting my…
One of Natalie’s friends, Curtis Lesperance, runs a coffee shop where he sells specialty coffees and prepares and sells muffins and cookies. He is eager to buy one of Natalie’s fine European mixers, which would enable him to make larger batches of muffins and cookies. However, Curtis cannot afford to pay for the mixer for at least 30 days. He asks Natalie if she would be willing to sell him the mixer on credit. Natalie comes to you for advice. She asks the following questions. “Curtis has given me a set of his most recent financial statements. What calculations should I do with the data from these statements, and what questions should I ask him after I have analyzed the statements? How will this information help me decide if I should extend credit to Curtis?” “Is there an alternative other than extending credit to Curtis for 30 days?” “I am thinking seriously about being able to have my customers use credit cards. What are some of the advantages and disadvantages of letting my…

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