Claude Scales, a Commercial Fisherman, Bought a New Navigation System

question 53

Short Answer

Claude Scales, a commercial fisherman, bought a new navigation system for $10,000 from Coast Marine Electronics on March 20. He paid $2,000 in cash and signed a conditional sales contract requiring a payment on July 1 of $3,000 plus interest on the $3,000 at a rate of 8%, and another payment on September 1 of $5,000 plus interest at 8% from the date of the sale. The vendor immediately sold the contract to a finance company, which discounted the payments at its required return of 12% simple interest. What proceeds did Coast Marine receive from the sale of the contract?

Recognize different types of monopolies and understand the reasons why certain monopolies, such as natural monopolies, are more economically efficient when undivided.

Identify and understand barriers to entry in a market, including government franchises, patents, economies of scale, and the ownership of a scarce resource.

Comprehend how network externalities impact market concentration and efficiency.

Understand the conditions under which a monopoly maximizes its profits, including how to determine optimal output levels and pricing strategies.

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Definitions:

Mining Rights

Legal permissions granted to extract minerals, oil, or gas from the land, potentially involving leasing or ownership arrangements.

Depletion Expense

The process of transferring the cost of natural resources to an expense account.

Accumulated Depletion

The total amount of resource extraction accounted for as an expense over time, reducing the asset's value.

Straight-Line Method

An approach for calculating depreciation of an asset, which spreads the cost evenly over its useful life.