Answer:
1X= 5/7Y
1Y= 7/5Y
Explanation:
Relative price of product of X in terms of product Y is the price of product X expressed a fraction of product of Y, that is $10/$14=5/7,and it is expressed in standard terms 1X=5/7Y
The relative price of product Y in terms of product X is $14/$10=7/5 and also can be expressed in standard format as IY=7/5Y
All in all, product the relative price of product Y seems to be higher than the relative price of product x
So in this case, you would need to find the present value (PV) of the monthly payments. With the information given, you would have a PV= 195,413.08, which is less than the lump sum payment. In this case, you would take the 1 time payment.
Another way to look at this is to calculate the future value (FV) of both payouts. For the lump sum payment, you would assume the same interest rate (6%) and at the end of the same 20 years period, your investment would be worth 662,040.90 while the monthly payment option would be worth 646,857.25
Explanation:
The journal entry are as follows
On April 20
Sales returns A/c Dr $3,000
To Account receivable A/c $3,000
(Being the sales returned of goods is recorded)
While recording this given transaction, we debited the sales return account and credited the account receivable account so that the proper posting could be done
