Explain all the reasons why a decrease in the price of a product would lead to an increase in purchases of the product.
Please
1. Include a graph with Quantity on one axis and $ sign on the other axis
2. Provide numerical examples and explanations
3. Include equations for the lines on your grap

Transcribed Image Text:

Pal Corporation acquired a 90 percent interest in Sor Corporation on January 1, 2011, for $270,000, at which time Sor's capital stock and retained earnings were $150,000 and $90,000, respectively. The fair value/book value differential is goodwill. Financial statements for Pal and Sor for 2012 are as follows (in thousands): Combined Income and Retained Earnings Statement for the Year Ended December 31, 2012 Sales Income from Sor Gain on land Cost of sales Operating expenses Net income Add: Retained earnings January 1 Less: Dividends Retained earnings, December 31 Pal $ 450 40 5 (200) (113) 182 202 (150) $ 234 Sor $190 (100) (40) 50 120 (20) $150 Balance Sheet at December 31, 2012 Cash Accounts receivable. Dividends receivable Inventories Land Buildings-net Machinery-net Investment in Sor Accounts payable Dividends payable Other liabilities Capital stock Retained earnings $ 133 180 18 60 100 280 330 303 $1,404 $ 200 30 140 800 234 $1.404 $14 100 36 30 80 140 $400 $50 20 30 150 150 $400 ADDITIONAL INFORMATION 1. Pal sold inventory items to Sor for $60,000 during 2011 and $72,000 during 2012. Sor's inventories at December 31, 2011 and 2012, included unrealized profits of $10,000 and $12,000, respectively. 2. On July 1, 2011, Pal sold machinery with a book value of $28,000 to Sor for $35,000. The machinery had a useful life of 3.5 years at the time of sale, and straight-line depreciation is used. 3. During 2012, Pal sold land with a book value of $15,000 to Sor for $20,000. 4. Pal's accounts receivable on December 31, 2012, includes $10,000 due from Sor. 5. Pal uses the equity method for its 90% interest in Sor. Pal Corporation acquired a 90 percent interest in Sor Corporation on January 1, 2011, for $270,000, at which time Sor's capital stock and retained earnings were $150,000 and $90,000, respectively. The fair value/book value differential is goodwill. Financial statements for Pal and Sor for 2012 are as follows (in thousands): Combined Income and Retained Earnings Statement for the Year Ended December 31, 2012 Sales Income from Sor Gain on land Cost of sales Operating expenses Net income Add: Retained earnings January 1 Less: Dividends Retained earnings, December 31 Pal $ 450 40 5 (200) (113) 182 202 (150) $ 234 Sor $190 (100) (40) 50 120 (20) $150 Balance Sheet at December 31, 2012 Cash Accounts receivable. Dividends receivable Inventories Land Buildings-net Machinery-net Investment in Sor Accounts payable Dividends payable Other liabilities Capital stock Retained earnings $ 133 180 18 60 100 280 330 303 $1,404 $ 200 30 140 800 234 $1.404 $14 100 36 30 80 140 $400 $50 20 30 150 150 $400 ADDITIONAL INFORMATION 1. Pal sold inventory items to Sor for $60,000 during 2011 and $72,000 during 2012. Sor's inventories at December 31, 2011 and 2012, included unrealized profits of $10,000 and $12,000, respectively. 2. On July 1, 2011, Pal sold machinery with a book value of $28,000 to Sor for $35,000. The machinery had a useful life of 3.5 years at the time of sale, and straight-line depreciation is used. 3. During 2012, Pal sold land with a book value of $15,000 to Sor for $20,000. 4. Pal's accounts receivable on December 31, 2012, includes $10,000 due from Sor. 5. Pal uses the equity method for its 90% interest in Sor.

Answer rating: 100% (QA)

The a decrease in the price of the product would lead to an increase in purchases of the pro... View the full answer