Consider;

1(i). Suppose the behavior of the broad-money supply process in the banking system of a

hypothetical economy is characterized by the following supply (Rs) and demand for cash

reserves (Rd) model [in which all the relevant variables are as defined in class]:

Rs = MB = Rd = C + BCRT (equilibrium condition);

BCRT = RR + ER (definition of total bank reserves)

C = 0.25D (currency holdings of the non-bank public)

RR = RRd + RRt [total desired cash reserves against bank deposits]

RRd = 0.05D (desired cash reserves against demand deposits)

RRt = 0.02T (desired cash reserves against term deposits)

T = 0.8D (definition of term deposits)

ER = ER d + ER t [total idle excess reserves held against bank deposits]

ER d = 0.002D (idle excess reserves held against demand deposits)

ER t = 0.001T (idle excess reserves held against term deposits).

Given that the economy is facing severe unemployment pressures, the government

implements an expansionary fiscal policy to stimulate the economy by decreasing taxes

and, as an indirect effect, the currency/deposit ratio (c), drops to 20%.

If the narrowly-defined money supply (M1) in existence is $2550 million, first, find the

initial monetary base and the value of the broadly defined money supply (M2) and, then,

calculate the percentage changes in the equilibrium values of the narrow (M1) and broad

money (M2) supplies because of the government's policy stance. Explain and illustrate

your answers with the appropriate diagrams, where necessary.

(ii) Calculate the percentage changes in the equilibrium values of both the narrowly

defined and broadly defined money supply if the central bank had used INSTEAD an

expansionary unconventional monetary policy by purchasing both private sector and

federal government securities in the financial market worth $500 million. Explain and

illustrate your answers with the appropriate diagrams, where necessary.

(iii) Which of the two policies will have the most effect on the equilibrium interest rate in

the short run? Why? Explain and illustrate your answers with the appropriate diagrams,

where necessary.

(iv) If BOTH POLICIES are used SIMULTANEOUSLY to deal with the problem in this

economy, calculate the percentage changes in (a) the monetary base; (b) total bank

reserves; (c) the narrow money supply; and (d) the broad money supply. Comment on

your answers.

1. The field of accounting that focuses on providing information for external decision makers is a. managerial accounting b. nonmonetary accounting cost accounting d. financial accounting 2. Joshua is the owner of Next Inc., a manufacturer and retailer of computer hardware. Joshua recently bought a new car as a gift for his daughter. Since Joshua paid for the car from the earnings of the business, he recorded it in the books of Next as an asset. Which of the following concepts or principles of accounting is Joshua violating? a. economic entity assumption b. cost principle C. going concern assumption d. monetary unit assumption 3. Which of the following statements would be most useful if an analyst wants to know the profitability of a company? a. balance sheet income statement c. statement of owner's equity d. statement of cash flows Which of the following sequences is the normal sequence of flow of accounting data? a. Source document - Journal - Ledger b. Source document - Ledger - Journal c. Journal - Source document - Ledger d. Ledger - Journal -> Source document 5. A business repays the amount borrowed on a note payable by cash. Which of the following accounts will be debited? a. Bank b. Notes Receivable C. Cash d. Notes PayableIndicate how each of the twelve items below would appear on a bank reconciliation. Assume an October 31 bank statement cutoff date. Your answers whoulb be adjustments to the "BANK" balance, "BOOK" or General Ledger balance or "NEITHER". 10 Automatic bank deduction for insurance payment not previously recorded on company books. 11 Automatic bank deposit of social security check not previously recorded on individual's books. 12 Someone else's check was accidentally included among our canceled checks and deducted from our account. 13 Check written for $162 was recorded in books as $126. 14 Deposit of $700 was recorded by bank as only $70. 15 Automatic transfer of funds from savings account to cover overdraft. 16 Check written for $37 was recorded in books as $73. 17 Deposit of $40 recorded by us as $400. 18 Our check for $66 recorded by bank as $76. 19 Our $15 check has not yet cleared after six-month expiration period. 20 October 20, we placed a stop payment on our check dated October 19. On October 20, we added back the amount to our books (ignore stop payment service charge).Problems: Problem 1 - worth 10 points Prepare a bank reconciliation for Wainwright, Martinez, & Garcia, LLC as of August 31 from the following information: (a.) The August 31 cash balance in the general ledger is $2,500. (b.) The August 31 balance shown on the bank statement is $1,967. (c.) Checks issued by the LLC, but not returned with the bank statement were No. 435 for $25 No. 448 for $90, and No. 449 for $60. (d.) A deposit made on August 31 for $750 was included in the general ledger balance but not in the bank statement balance. (e.) Interest credited to the account during August but not recorded on the company's books amounted to $40. (f.) A bank charge of $25 for printing new checks was made to the account during August. Although the company was expecting a charge, the amount was not known until the bank statement arrived. (g.) In the process of reviewing canceled checks, it was determined that a check which cleared the bank was issued to a supplier for the amount of $125 was recorded in the general ledger erroneously as a $152 cash disbursement. P 1.1 The reconciled balance at August 31 is (worth 4 points) a. $2,488 b. $3.425 C. $2,592 d. $2,542 e. $2,500 f. None of the above P 1.2 As a result of the reconciliation, the journal entry necessary to post into the general ledger would include (worth 2 points). a. A credit of $175 to accounts payable b. A credit of $40 cash c. A debit of $125 to accounts payable d. All of the above e. None of the above a. True 1.3 The error noted in letter g does not need to be posted into the general ledger. (worth 2 pointsk b. FalseQuestion 2 The following information relates to SADAGYADA LTD. for the month ended 3ist August, 2013. The following were the balances in the books of SADAGYADA LTD. in the beginning o the monthwere; Dr. Cr. Sales Ledger GHe 40,660 GHe 240 Purchases Ledger GHe 520 GHe 27,800 GHe Cash purchases 12,735 Returns inwards 1,938 Bad debts written off 853 Cheque payments to suppliers 64,320 Discount received 1,717 Cash sales 76,321 Debtor's chequesdishonoured 2,639 Purchases Returns 1,222 Credit sales 132,845 Discount allowed 3,699 Credit purchases 70,394 Set off between Sales Ledger and Purchases Ledger 2,850 Cheques received from debtors 144,820 Debit balances in Purchases Ledger at 315 December, 2013 563 Credit balances in Sales Ledger at 315t December, 2013 2,154 Provision for Doubtful debts 4,500 Required: (a) Prepare the Purchases Ledger Control Account and Sales Ledger Control Accounts as the December 2013. would appear in the General Ledger of SADAGYADA LTD.for the year ended 31 st10. The following bank reconciliation is presented for BRAVE Company for the month of October 2020. Balance per bank statement , Oct. 31, 2020 180,000 Add: Deposit in transit 40,000 Total 220,000 Less: outstanding checks 60,000 Bank credit recorded in error 10,000 70,000 Balance per books, October 31, 2020 150,000 Data per bank statement for the month of November, 2020: 1. November deposits including note for P 50,000 collected in behalf of Brave Company, P 275,000. 2. November disbursements (including NSF check for P 35,000 and service charges of P 1,500), P 220,000. All checks that were outstanding as of October 31, 2020 cleared through the bank in November, including the bank credit. In addition P 25,000 in checks were outstanding and deposits of P 35,000 were in transit as of November 30, 2020 REQUIRED: Compute the following: 1. Cash receipts per books during November 2. Cash disbursements per books during November 3. Unadjusted balance per ledger as of November 30, 2020 4. Correct cash balance as of November 30, 2020