Here is a question that came up.
How is the price determined in a black market?
Economic Answer: The price is determined by supply and demand in a competitive market.
In a competitive market, the supply and demand determines the price. If the supply is more, the demand will be less and price will be lower. If the demand is more and the supply is less the price will be higher.
The other layman answer: Whatever the sellers asks for...
An interesting articles in New York Times:
Flesh Trade: Selling Kidneys for Money
http://www.nytimes.com/2006/07/09/magazine/09wwln_freak.html?_r=2&ex=1189569600&en=5baab363cbbfbb67&ei=5070&oref=slogin&oref=slogin
Saturday, December 1, 2007
Friday, October 5, 2007
Sunday, September 30, 2007
Accounting Formulas
Basic equations
B/S: Assets = Liabilities + Owners’ equity
I/S: Revenue – Cost of Goods Sold – SG&A – Tax = Net Income
C/F: Cash flow during the year = cash flow from operation + cash flow from investing + cash flow from financing
Statement of Owners’ equity: Retained earningst = Retained earningst-1+ NIt - Dividendt
Accounts Receivable
A/REB = A/RBB + Credit Sales – Cash Received – Write-off + Recovery
ADAEB = ADABB + Bad Debt Expense – Write-off + Recovery
Two methods for determining Allowance for Bad Debts
Percentage of (Credit) Sales
− Fixes the Bad Debt Expense recorded for the year
Aging Method
− Fixes the Ending Balance of Allowance for Bad Debts
− Bad Debt Expense is as a “Plug-in”
Relevant entries
Credit sales: Dr. A/R Cr. Revenue
Record bad debt expense: Dr. Bad debt expense Cr. ADA
When bad debt happens: Dr. ADA Cr. A/R
Recovery of bad debt: Dr. A/R Cr. ADA
Inventory
INVEB = INVBB +Purchase/Production – COGS
LIFO Reserve = cumulative difference in FIFO – LIFO inventory **or**
LIFO Reserve = Ending InvFIFO – Ending InvLIFO
Change in LIFO Reserve = COGSLIFO – COGSFIFO
PP&E
PPEEB = PPEBB + Acquisitions – Disposals
Straight-line depreciation = (Purchase price – salvage value) / Useful life
AccDepEB = AccDepBB + Depreciation – AccDepDisposal
MV / Proceeds from sales = (BV-AccDep) + gain/loss
Cash flow statement
• Indirect method differs from direct method only in the CFO session.
• CFO (indirect method) = NI + depreciation – (increase in operating non-cash current assets) + (increase in operating current liabilities) – gain from sale of PPE
• • • • • • • • • • • • • • • •
Accounting For Income Taxes
• Permanent Differences: Differences between financial statement (“pretax”) GAAP income and taxable income that will never be recaptured/reversed, e.g. Government Fines, Tax-Exempt Revenue.
• Temporary Timing Differences: Differences between pretax GAAP income and taxable income that will be recaptured/reversed at some point in the future. Temporary differences create Deferred Tax Liabilities or Deferred Tax Assets
• Deferred Tax Liabilities (DTL)
Taxable Income <> Pretax GAAP Income
Taxes Payable > GAAP Tax Expense
Taxpayer pays higher taxes today. An asset must be recorded to account for the value of lower taxes to be paid at some point in the future.
Assume depreciation is the only source of deferred tax expense, then deferred tax expense = change in DTL = (tax depreciation – book depreciation) * tax rate
• • • • • • • •
Marketable securities: recording of gains and losses (or price increase/decrease):
Sales of securities Price change – not sold yet
Trading securities IS – Realized gains/losses IS – Unrealized gains/losses
Available-for-sales IS - Realized gains/losses SE – Unrealized gains/losses
B/S: Assets = Liabilities + Owners’ equity
I/S: Revenue – Cost of Goods Sold – SG&A – Tax = Net Income
C/F: Cash flow during the year = cash flow from operation + cash flow from investing + cash flow from financing
Statement of Owners’ equity: Retained earningst = Retained earningst-1+ NIt - Dividendt
Accounts Receivable
A/REB = A/RBB + Credit Sales – Cash Received – Write-off + Recovery
ADAEB = ADABB + Bad Debt Expense – Write-off + Recovery
Two methods for determining Allowance for Bad Debts
Percentage of (Credit) Sales
− Fixes the Bad Debt Expense recorded for the year
Aging Method
− Fixes the Ending Balance of Allowance for Bad Debts
− Bad Debt Expense is as a “Plug-in”
Relevant entries
Credit sales: Dr. A/R Cr. Revenue
Record bad debt expense: Dr. Bad debt expense Cr. ADA
When bad debt happens: Dr. ADA Cr. A/R
Recovery of bad debt: Dr. A/R Cr. ADA
Inventory
INVEB = INVBB +Purchase/Production – COGS
LIFO Reserve = cumulative difference in FIFO – LIFO inventory **or**
LIFO Reserve = Ending InvFIFO – Ending InvLIFO
Change in LIFO Reserve = COGSLIFO – COGSFIFO
PP&E
PPEEB = PPEBB + Acquisitions – Disposals
Straight-line depreciation = (Purchase price – salvage value) / Useful life
AccDepEB = AccDepBB + Depreciation – AccDepDisposal
MV / Proceeds from sales = (BV-AccDep) + gain/loss
Cash flow statement
• Indirect method differs from direct method only in the CFO session.
• CFO (indirect method) = NI + depreciation – (increase in operating non-cash current assets) + (increase in operating current liabilities) – gain from sale of PPE
• • • • • • • • • • • • • • • •
Accounting For Income Taxes
• Permanent Differences: Differences between financial statement (“pretax”) GAAP income and taxable income that will never be recaptured/reversed, e.g. Government Fines, Tax-Exempt Revenue.
• Temporary Timing Differences: Differences between pretax GAAP income and taxable income that will be recaptured/reversed at some point in the future. Temporary differences create Deferred Tax Liabilities or Deferred Tax Assets
• Deferred Tax Liabilities (DTL)
Taxable Income <> Pretax GAAP Income
Taxes Payable > GAAP Tax Expense
Taxpayer pays higher taxes today. An asset must be recorded to account for the value of lower taxes to be paid at some point in the future.
Assume depreciation is the only source of deferred tax expense, then deferred tax expense = change in DTL = (tax depreciation – book depreciation) * tax rate
• • • • • • • •
Marketable securities: recording of gains and losses (or price increase/decrease):
Sales of securities Price change – not sold yet
Trading securities IS – Realized gains/losses IS – Unrealized gains/losses
Available-for-sales IS - Realized gains/losses SE – Unrealized gains/losses
Tuesday, September 18, 2007
freakonomics
This book is being recommended by other universities for their MBA Data Analysis Courses. This book is a an economist Steve Levitt. Interesting read. Sure on my List.
Friday, August 24, 2007
Tuesday, August 21, 2007
Phone Call
http://www.youtube.com/watch?v=J5z4Vs26-TI
This is being played by a radio station, the background laughter is from the radio guys.
This is being played by a radio station, the background laughter is from the radio guys.
Monday, August 20, 2007
Subscribe to:
Posts (Atom)