Use the Following Data for an Ice-Cream Vendor at a Local

question 42

Essay

Use the following data for an ice-cream vendor at a local fair:
(A)Calculate the vendor's value added.
(B)Profits are revenue minus costs.Capital income consists of profits,rents,and interest.Show that the value added equals capital income plus labor income paid by the vendor.
(C)Suppose that at a similar fair,the temperature is cooler and revenues fall to $1,500,but the prices of intermediate inputs,rental fees,and wages and salaries do not change.What happens to value added and profits in this case?

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Definitions:

Equity Method

An accounting approach for recording investments in other entities, where the investment's value is adjusted based on the investor's share of the investee's profits or losses.

Dividends

Payments made by a corporation to its shareholder members, distributed from the company's profits.

Investment

The allocation of resources, usually financial, in expectation of a future return.

IFRS

stands for International Financial Reporting Standards, which are a set of accounting standards developed by the IASB that aim to bring consistency to accounting language, practices, and statements globally.