Sam bought a car valued at $7700. One year later the car’s value had decreased by 2 /7. What is the new value of the car?
You just multiply $7700 directly by 5/7 to reach the final answer. $7700 x 5/7 = $5500
In case a country has a balance of payment deficit and wants to correct it, one way could be to increase its exports. To do that, a country would devalue its currency which would mean that the prices of the products it exports will lower in the international market. When prices are lowered, the demand for exports will increase and so will the quantity purchased hence the balance of payment deficit will be rectified. Do you think that this stance is correct and if not, how can it work the opposite way i.e. worsen the balance of payment deficit.
The key to this question is not look for to increase the quantity purchased due to a price change but to see if the revenue increases due to a price change (as Revenue = Price X Quantity). Obviously lowering the price would encourage consumers to buy more of that product but the country would be interested to see its final revenue (if it increase or not increased). To determine which effect would occur, we can utilize the concept of price elasticity. It states that if a product is price elastic, then a price increase will lead to decline in total revenue, therefore the price should not be increased. Similarly if the product is price inelastic then its price should be increased to increase the total revenue from it. To conclude, you cannot just increase or decrease every product prices when trying to correct the balance of payment. Each product has to assessed individually according to its nature.
If I'm a company that would like to create its Income Statement and Balance Sheet and I have to record the depreciation charge of a range of Assets in these end-of-year documents, which Depreciation method would I like to apply to all of the assets? Should I randomly assign either the Straight-Line Method or Reducing Balance Method to all of the assets or is there any logic to what would I use?
I would like to see the nature of the assets that I own to be able to decide which method of depreciation I need to apply. Also it does not have to be one method for all assets. If an asset is likely to loose most of its value in its early years e.g. a machine, I'd go with the reducing balance method. Whereas, if it uniformly looses its value every year, like a vehicle then I would choose the Straight-Line Method.