Sam Strother and Shawna Tibbs are senior vice presidents of Mutual of Seattle. They are co-directors of the company's pension fund management division, with Strother having responsibility for fixed income securities (primarily bonds) and Tibbs responsible for equity investments. A major new client, the Northwestern Municipal Alliance, has requested that Mutual of Seattle present an investment seminar to the mayors of the cities in the association, and Strother and Tibbs, who will make the actual presentation, have asked you to help them. To illustrate the common stock valuation process, Strother and Tibbs have asked you to analyze the Temp Force Company, an employment agency that supplies word processor operators and computer programmers to businesses with temporarily heavy workloads. You are to answer the following questions.

a. Describe briefly the legal rights and privileges of common stockholders.

b. (1) Write out a formula that can be used to value any stock, regardless of its dividend pattern. (2) What is a constant growth stock? How are constant growth stocks valued? (3) What happens if a company has a constant g that exceeds its rs? Will many stocks have expected g > rs in the short run (i.e., for the next few years)? In the long run (i.e., forever)?

c. Assume that Temp Force has a beta coefficient of 1.2, that the risk-free rate (the yield on T-bonds) is 7.0%, and that the market risk premium is 5%. What is the required rate of return on the firm's stock?

d. Assume that Temp Force is a constant growth company whose last dividend (D0, which was paid yesterday) was $2.00 and whose dividend is expected to grow indefinitely at a 6% rate. (1) What is the firm's expected dividend stream over the next 3 years? (2) What is the firm's current intrinsic stock price? (3) What is the stock's expected value 1 year from now? (4) What are the expected dividend yield, the expected capital gains yield, and the expected total return during the first year?

After reading the chapter chapter 7 content folder answer one of the following questions. 1. Describe the characteristics of a proprietary funds? Explain the difference between an Enterprise Fund and an Internal Service Fund? 2. When is it required to establish an enterprise fund? How does a enterprise fund show up in the Governmental Wide financial statements both the statement of Net Assets and Statements of Activities? 3. List at least 5 differences between a proprietary fund and a general fund?

Worley Company buys surgical supplies from a variety of manufacturers and then resells and delivers these supplies to hundreds of hospitals. Worley sets its prices for all hospitals by marking up its cost of goods sold to those hospitals by 9%. For example, if a hospital buys supplies from Worley that cost Worley $100 to buy from manufacturers, Worley would charge the hospital $109 to purchase these supplies.

For years, Worley believed that the 9% markup covered its selling and administrative expenses and provided a reasonable profit. However, in the face of declining profits, Worley decided to implement an activity-based costing system to help improve its understanding of customer profitability. The company broke its selling and administrative expenses into five activities as shown:

Worley gathered the data below for two of the many hospitals that it serves—University and Memorial (each hospital purchased medical supplies that had cost Worley $32,000 to buy from manufacturers):

Required:

1. Compute the total revenue that Worley would receive from University and Memorial.

2. Compute the activity rate for each activity cost pool.

3. Compute the total activity costs that would be assigned to University and Memorial.

4. Compute Worley’s customer margin for University and Memorial. (Hint: Do not overlook the $32,000 cost of goods sold that Worley incurred serving each hospital.)

Silver Company makes a product that is very popular as a Mother’s Day gift. Thus, peak sales occur in May of each year, as shown in the company’s sales budget for the second quarter given below:

From past experience, the company has learned that 20% of a month’s sales are collected in the month of sale, another 75% are collected in the month following sale, and the remaining 5% are collected in the second month following sale. Bad debts are negligible and can be ignored. February sales totaled $270,000, and March sales totaled $300,000.

Required:

1. Prepare a schedule of expected cash collections from sales, by month and in total, for the second quarter.

2. What is the accounts receivable balance on June 30th?

Complete this question by entering your answers in the tabs below.

• Required 1
• Required 2

What is the accounts receivable balance on June 30th?

Complete this question by entering your answers in the tabs below.

• Required 1
• Required 2

Prepare a schedule of expected cash collections from sales, by month and in total, for the second quarter.

Samuel and Darcy are partners. The partnership capital for Samuel is $50,000 and that of Darcy is $60,000. Josh is admitted as a new partner by investing $50,000 cash. Josh is given a 20% interest in return for his investment. The amount of the bonus to the old partners is ______________ ? Record journal entries to record the following separate transactions related to issuing stock: On February 20, a company issues 10,000 shares of $4 par value common stock in exchange for services rendered to help with incorporation. The services are valued at $50,000. On March 1, a company issues 42,500 shares of $4 par value common stock for $297,500. On September 10, a company issues 20,000 shares of $20 par value preferred stock for $28 per share. Date Account Debit Credit For each of the following separate (unrelated) dividend transactions, prepare the journal entry:

Question a)

Mr. Jones purchased 250 shares of Ruth Limited on February 1 of the current year for $20 per share. On May 1 of the current year, he purchased 100 more shares for $25 per share. On June 20 of the current year, Mr. Jones sells 100 shares for $15 per share. His allowable capital loss on June 20 is $643.00.

Question c)

Which of the following is not included in ITA 53 as an adjustment to the adjusted cost base of an asset?

Required information

[The following information applies to the questions displayed below.]

Arndt, Inc., reported the following for 2018 and 2019 ($ in millions):

1. Expenses each year include $30 million from a two-year casualty insurance policy purchased in 2018 for $60 million. The cost is tax deductible in 2018.
2. Expenses include $3 million insurance premiums each year for life insurance on key executives.
3. Arndt sells one-year subscriptions to a weekly journal. Subscription sales collected and taxable in 2018 and 2019 were $32 million and $31 million, respectively. Subscriptions included in 2018 and 2019 financial reporting revenues were $19 million ($8 million collected in 2017 but not recognized as revenue until 2018) and $27 million, respectively. Hint: View this as two temporary differences—one reversing in 2018; one originating in 2018.
4. 2018 expenses included a $14 million unrealized loss from reducing investments (classified as trading securities) to fair value. The investments were sold in 2019.
5. During 2017, accounting income included an estimated loss of $5 million from having accrued a loss contingency. The loss was paid in 2018 at which time it is tax deductible.
6. At January 1, 2018, Arndt had a deferred tax asset of $5 million and no deferred tax liability.

Required:
1. Which of the five differences described are temporary and which are permanent differences?Required:

3. Compute the deferred tax amounts that should be reported on the 2018 balance sheet. (Enter your answers in millions (i.e., 10,000,000 should be entered as 10).)

PANTHER CORPORATION Expected Account Balances for December 31, Year 2

Cash $ 5,600

Accounts receivable 328,000

Inventory (January 1, Year 2) 300,000

Plant and equipment 560,000

Accumulated depreciation $ 172,000

Accounts payable 188,000

Notes payable (due within one year) 208,000

Accrued payables 101,000

Common stock 360,000

Retained earnings 514,600

Sales revenue 2,480,000

Other income 52,000

Manufacturing costs Materials 831,000

Direct labor 881,000

Variable overhead 581,000

Depreciation 28,000

Other fixed overhead 39,000

Marketing Commissions 96,000

Salaries 72,000

Promotion and advertising 196,000

Administrative Salaries 72,000

Travel 14,000

Office costs 44,000

Income taxes - Dividends 28,000 $ 4,075,600

$ 4,075,600 Adjustments for the change in inventory and for income taxes have not been made. The scheduled production for this year is 400,000 units, and planned sales volume is 350,000 units. Sales and production volume was 250,000 units last year. The company uses a full-absorption costing and FIFO inventory system and is subject to a 40 percent income tax rate.

The actual income statement for last year follows:

PANTHER CORPORATION Statement of Income and Retained Earnings For the Budget Year Ended December 31, Year 1 Revenues

Sales revenue $ 1,900,000

Other income 80,000 $ 1,980,000 Expenses

Cost of goods sold

Materials $ 540,000

Direct labor 552,000

Variable overhead 352,000

Fixed overhead 56,000 $ 1,500,000

Beginning inventory 300,000 $ 1,800,000

Ending inventory 300,000 $ 1,500,000

Selling Salaries $ 62,000

Commissions 68,000

Promotion and advertising 134,000 264,000

General and administrative Salaries $ 64,000

Travel 9,500 Office costs 40,000 113,500

Income taxes 41,000 1,918,500

Operating profit 61,500

Beginning retained earnings 481,100

Subtotal $ 542,600

Less dividends 28,000

Ending retained earnings $ 514,600

Required: Prepare a budgeted income statement and balance sheet using Excel template.

Headland Company borrowed $42,000 on November 1, 2017, by signing a $42,000, 9%, 3-month note. Prepare Headland’s November 1, 2017, entry; the December 31, 2017, annual adjusting entry; and the February 1, 2018, entry. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.

Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Jed wants to borrow ​$1000 from you. He is proposing to repay you with three annual payments of ​ $324.59 starting immediately. In​ addition, he will make a final​ lump-sum payment of ​$150 three years from today. What rate of return are you earning on the​ loan?

Youtus Enterprise is an Australian sole proprietorship business which is managed and controlled by The Laba family. With a good background in accounting and finance, Mr. Laba maintains the firm’s books of accounts in addition to the management of the day-to-day operations of the firm. The two sons of Mr. Laba provide additional assistance in their capacity as the sales and product development managers of Youtus. As a family business with a sole proprietorship status, Mr Laba has resigned himself to the constitution of a board of directors of five (5) members with only one independent director. Board meetings are held twice yearly where decisions are made based on majority rule. Youtus Enterprise produces sport gear for elite sport athletes with a focus on the delivery of high-quality running shoes, soccer boots among others. The production process being outsourced to firms in China and Bangladesh, Youtus takes care of the product development process to ensure that high-quality designs are created to produce items of great quality. The firm currently has ten (10) warehouses and three (3) retail centres across Australia. In 2014, Youtus started its online sales to help widen its market base internationally. Although the online sales figures have been growing steadily, Mr. Laba and his sons intend to invest more in online sales technology to boost online sales in the coming years. Furthermore, management of Youtus is considering an expansion of its product line with the introduction of two new soccer boots; Youtus Light and Youtus Flex. In its ten (10) years of operation, Youtus Enterprise has experienced an annual growth in sales of over 20% with a return on equity of 12.5%. The continual good performance of Youtus Enterprise is attributable to its production of high-quality products and great customer care. Over the past four (4) years, Youtus’ brand loyalty and recognition has soared among its customers and seem to rival that of other well-established brands within its industry. Premised on these positive market indicators, proposals have been put forward to revamp operation and undertake massive expansion for further growth in the future. In consultation with the investment advisers of the firm, the management of Youtus came up with two options which could be exploited for attaining its business expansion. Since capital is the most critical resource for the business expansion, the management of Youtus has been advised to consider either an equity funding option or debt funding process. Under the equity funding option, Youtus must change from sole proprietorship business to a company limited by shares and further sell 40% of its share to the public in an Initial Public Offer (IPO). Additionally, Youtus has been advised to constitute a more diverse and independent board for an effective corporate governance. Furthermore, Youtus must revamp its information system particularly accounting information system for better corporate reporting. Additionally, it has also been mentioned that a chief financial officer must be employed to manage financial and reporting issues of the firm. On the other hand, under the debt financing option, Youtus can maintain its original business status and secure a bank loan for its expansion strategy. However, management has been notified that cost of funding is likely to be very high even though interest expense would be deductible for tax purposes. Although Youtus must streamline its information system for better reporting, securing the services of chief financial officer is not deemed to be very crucial. The investment advisers also indicated that there is possibility for some changes to be made in regulation relating to foreign subcontracting by Australian firms. With the Australian government seeking to protect its local manufacturing industry, Australian firms with foreign subcontractors are likely to be adversely affected if the new policy is approved by the parliament. As a part of the growth strategy for Youtus Enterprise, management is considering the acquisition of specialised design making machinery for its customised design making process. The item of machinery is intended to help streamline the five-stage customised design making process into a three-stage process with minimal resource wastage. In line with this vision, management of Youtus has negotiated a 5-year lease contract with Souyos Limited to acquire an item of machinery which has been specially altered to suit the unique needs of Youtus Enterprise. The lease contract requires an advance payment of $45,000 and subsequent annual payments of $85,000 at the end of each financial year. Youtus Enterprise has the option to buy the item of machinery at price below its market value at the end of the lease term. The machinery is expected to have an economic useful life of 6-years. With reference to the case study above, provide critical response to the following questions in a report format: Required: 1) Discuss the three possible reasons why Youtus Enterprise require a better accounting information system, an effective corporate governance and a change in business status under the equity financing option in the context of positive accounting theory perspective. 2) Why is the cost of funding under the debt option expected to be higher than the cost of funding under the equity method of financing. 3) (a) Youtus Enterprise has decided to find a means to influence the outcome of the proposed regulation in its favour. Provide a theoretical justification for the firm’s action in relation to the possible regulatory changes. (b) Cite and illustrate a practice example/s of corporate intervention in public policy formulation. 4) (a) With reference to the agency theory, and assuming the lease liability increases the debt-to equity ratio of Youtus Enterprise, present an argument on whether equity shareholders are better off or adversely affected. (b) On what basis is Youtus Enterprise likely not to capitalise this lease agreement.

Headland Company borrowed $42,000 on November 1, 2017, by signing a $42,000, 9%, 3-month note. Prepare Headland’s November 1, 2017, entry; the December 31, 2017, annual adjusting entry; and the February 1, 2018, entry. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Ratchet Company uses budgets in controlling costs. The August 2020 budget report for the company’s Assembling Department is as follows. RATCHET COMPANY Budget Report Assembling Department For the Month Ended August 31, 2020 Difference Manufacturing Costs Budget Actual Favorable Unfavorable Neither Favorable nor Unfavorable Variable costs Direct materials $48,000 $47,000 $1,000 Favorable Direct labor 54,000 51,200 2,800 Favorable Indirect materials 24,000 24,200 200 Unfavorable Indirect labor 18,000 17,500 500 Favorable Utilities 15,000 14,900 100 Favorable Maintenance 12,000 12,400 400 Unfavorable Total variable 171,000 167,200 3,800 Favorable Fixed costs Rent 12,000 12,000 –0– Neither Favorable nor Unfavorable Supervision 17,000 17,000 –0– Neither Favorable nor Unfavorable Depreciation 6,000 6,000 –0– Neither Favorable nor Unfavorable Total fixed 35,000 35,000 –0– Neither Favorable nor Unfavorable Total costs $206,000 $202,200 $3,800 Favorable The monthly budget amounts in the report were based on an expected production of 60,000 units per month or 720,000 units per year. The Assembling Department manager is pleased with the report and expects a raise, or at least praise for a job well done. The company president, however, is unhappy with the results for August because only 58,000 units were produced. (a) State the total monthly budgeted cost formula. (Round cost per unit to 2 decimal places, e.g. 1.25.) The formula is $ + variable costs of $ per unit. (b) Prepare a budget report for August using flexible budget data. (List variable costs before fixed costs.) RATCHET COMPANY Assembling Department Flexible Budget Report For the Month Ended August 31, 2020 Difference Budget Actual Costs Favorable Unfavorable Neither Favorable nor Unfavorable $ $ $ $ $ $ In September, 64,000 units were produced. Prepare the budget report using flexible budget data, assuming (1) each variable cost was 10% higher than its actual cost in August, and (2) fixed costs were the same in September as in August. (List variable costs before fixed costs.) RATCHET COMPANY Assembling Department Flexible Budget Report For the Month Ended September 30, 2020 Difference Budget Actual Costs Favorable Unfavorable Neither Favorable nor Unfavorable $ $ $ $ $ $