Williams                                               Roberts

Cash                                      160,000                                                 50,000

Inventory                            550,000                                                 160,000

Equipment                          1,500,000                                             670,000

      Totals                             2,210,000                                             880,000

Totals Liabilities 740,000 280,000

c/s $20 par                          600,000                                                 300,000

other contr cap                 375,000                                                 105,000

retained earnings             495,000                                                 195,000

       totals                             2,210,000                                             880,000

inventory has a FMV of 170,000 for Roberts and the equipment has a FMV of 715,000. The book value and FMV of liabilities are the same. Assuming Williams wishes to acquire Roberts for cash in an asset acquisition, determine the following cutoff amounts:

1. Purchase price above which Williams would record goodwill?
2. Purchase price which Williams would record a 60,000 gain?
3. Purchase price below which Williams would obtain a bargain?
4. Purchase price which Williams would record 85,000 of goodwill?

Brazen, Ltd. has $75,000 to invest. The company is trying to decide between two different projects.  The alternatives are:

Project A Project B

The working capital needed for project B will be released at the end of six years for investment elsewhere. Brazen’s discount rate is 12%.

Required:

Which project (if either) would you recommend that the company pursue? Show all calculations in excel using the net present value format. Must show a schedule that reflects each of the six years (as modeled in class and outlined in the PowerPoint presentation). Prepare separate calculations for each project.

Check for the question with "Cash flows estimation and capital budgeting:" in this test and answer the following questions (show your work in details here):

a. What is the initial cash outlay? (4 pts.)
b. What is the free cash flow for year 1? (4 pts)
c. What is the additional Year-3 cash flow (i.e, the after-tax salvage and the return of working capital – also called terminal value)? (4 pt)

(please show your work in details and highlight your answers)

Cash flows estimation and capital budgeting:
You are the head of finance department in XYZ Company. You are considering adding a new machine to your production facility. The new machine’s base price is $10,100.00, and it would cost another $3,280.00 to install it. The machine falls into the MACRS 3-year class (the applicable MACRS depreciation rates are 33.33%, 44.45%, 14.81%, and 7.41%), and it would be sold after three years for $2,150.00. The machine would require an increase in net working capital (inventory) of $780.00. The new machine would not change revenues, but it is expected to save the firm $29,185.00 per year in before-tax operating costs, mainly labor. XYZ's marginal tax rate is 39.00%.

If the project's cost of capital is 16.75%, what is the NPV of the project?

Round your answer to two decimal places. For example, if your answer is $345.667 round as 345.67 and if your answer is .05718 or 5.718% round as 5.72.

Prices of zero-coupon bonds reveal the following pattern of forward rates:

In addition to the zero-coupon bond, investors also may purchase a 3-year bond making annual payments of $50 with par value $1,000.

a. What is the price of the coupon bond? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Price=

b. What is the yield to maturity of the coupon bond? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Yield to maturity= %

c. Under the expectations hypothesis, what is the expected realized compound yield of the coupon bond? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Realized compound yield= %

d. If you forecast that the yield curve in 1 year will be flat at 9.0%, what is your forecast for the expected rate of return on the coupon bond for the 1-year holding period? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Holding period return= %

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

Allied Merchandisers was organized on May 1. Macy Co. is a major customer (buyer) of Allied (seller) products.

Prepare the appropriate journal entries for Macy Co. to record each of the May transactions. Macy is a retailer that uses the gross method and a perpetual inventory system, and purchases these units for resale. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Part B

GH Artist Supply, Inc. is a new company that specializes in panels and frames for artists.

In a new product line, GH managers plan to create new, eco-friendly panels in three sizes: large, medium, and small.

The current budget plan for the first year of operations provides the following information:

Required

Two managers within GH are arguing about the best way to calculate the break-even point in this multi-product scenario. Each has their own method they would like to use.

Compute the break-even point using the two common methods used for multi-product scenarios.

For each method, describe the assumption that is unique to that method.

Determine the amount of sales (units) that would be necessary under Break-Even Sales Under Present and Proposed Conditions Darby Company, operating at full capacity, sold 74,250 units at a price of $126 per unit during the current year. Its income statement for the current year is as follows: Sales $9,355,500 Cost of goods sold 4,620,000 Gross profit $4,735,500 Expenses: Selling expenses $2,310,000 Administrative expenses 2,310,000 Total expenses 4,620,000 Income from operations $115,500 The division of costs between fixed and variable is as follows: Variable Fixed Cost of goods sold 70% 30% Selling expenses 75% 25% Administrative expenses 50% 50% Management is considering a plant expansion program that will permit an increase of $756,000 in yearly sales. The expansion will increase fixed costs by $75,600, but will not affect the relationship between sales and variable costs. Required: 1. Determine the total variable costs and the total fixed costs for the current year. Enter the final answers rounded to the nearest dollar. Total variable costs $ 43.56 Total fixed costs $ 43.56 2. Determine (a) the unit variable cost and (b) the unit contribution margin for the current year. Enter the final answers rounded to two decimal places. Unit variable cost $ 43.56 Unit contribution margin $ 3. Compute the break-even sales (units) for the current year. Enter the final answers rounded to the nearest whole number. units 4. Compute the break-even sales (units) under the proposed program for the following year. Enter the final answers rounded to the nearest whole number. units 5. Determine the amount of sales (units) that would be necessary under the proposed program to realize the $115,500 of income from operations that was earned in the current year. Enter the final answers rounded to the nearest whole number. units 6. Determine the maximum income from operations possible with the expanded plant. Enter the final answer rounded to the nearest dollar. $ 7. If the proposal is accepted and sales remain at the current level, what will the income or loss from operations be for the following year? Enter the final answer rounded to the nearest dollar. $ Income 8. Based on the data given, would you recommend accepting the proposal? In favor of the proposal because of the reduction in break-even point. In favor of the proposal because of the possibility of increasing income from operations. In favor of the proposal because of the increase in break-even point. Reject the proposal because if future sales remain at the current level, the income from operations will increase. Reject the proposal because the sales necessary to maintain the current income from operations would be below the current year sales.

Windward Corporation uses the Specific Identification inventory method.

The Company has the following inventory items and costs for the Period.

Beginning inventory of 3 units purchased for $4,100 each.
January 20, purchase 2 units for $4,200 each.
February 3, purchase 3 units for $4,500 each.
February 14, sold 5 units for $5,800 each (3 units from the beginning Inventory and 2 units from the February 3rd purchase)
1. What is the total cost of the units in inventory at March 31? $
2. What is the total Sales for the quarter ending March 31? $
3. What is the Cost of Goods Sold for the quarter ending March 31? $
4.What is Gross Margin for the quarter ending March 31? $

2. CDM Corporation erroneously included $24,600 of goods on consignment from another company in ending inventory.

What effect does this have on the following items? (determine the amount and use a positive number to designate an overstated amount and a negative number to designate an understated amount).

a. Ending Inventory $ ???
b. Cost of Goods Sold $ ????
c. Gross Margin $ ???
d. Net Income$ ???

Question: Briefly describe modern portfolio theory and relate it to the approaches supported by Walt and Shane. Be sure to mention diversifiable risk, undiversifiable risk, and total risk, along with the role of beta.

Walt Davies and Shane O’Brien are district managers for Lee, Inc. Over time, as they moved through the firm’s sales organization, they became close friends. Walt, who is 33 years old, currently lives in Princeton, New Jersey. Shane, who is 35, lives in Houston, Texas. Recently, they were discussing various company matters, as well as bringing each other up to date on their families, when the subject of investments came up. Each had always been fascinated by the stock market, and now that they had achieved some degree of financial success, they had begun actively investing.

As they discussed their investments, Walt said he thought the only way an individual who does not have hundreds of thousands of dollars can invest safely is to buy mutual funds. He emphasized that to be safe, a person needs to hold a broadly diversified portfolio and that only those with a lot of money and time can achieve independently the diversification that can be readily obtained by purchasing mutual fund shares.

Shane disagreed. He said, “Diversification! Who needs it?” He thought that what one must do is look carefully at stocks possessing desired risk-return characteristics and then invest all one’s money in the single best stock. Walt told him he was crazy. He said, “You’re just gambling.” Shane disagreed, explaining how his stockbroker had acquainted him with beta. Shane said that the higher the beta, the more risky the stock, and therefore the higher its return. By looking up the betas for potential stock investments on the Internet, he can pick stocks that have an acceptable risk level for him. Shane explained that with beta, one does not need to diversify; one merely needs to be willing to accept the risk reflected by beta.

The conversation continued, with Walt indicating that although he knew nothing about beta, he didn’t believe one could safely invest in one stock. Shane continued to argue that betas apply not just to a single stock but also to mutual funds. He said, “What’s the difference between a stock with a beta of, say, 1.2 and a mutual fund with a beta of 1.2? They have the same risk and should provide similar returns.”

As Walt and Shane discussed their differing opinions relative to investment strategy, they began to get angry. Neither was able to convince the other that he was right. Their voices now raised, they attracted the attention of the company’s vice president of finance, Elinor Green, who was nearby. She came over and said she had overheard their argument and thought that, given her expertise on financial matters, she might be able to resolve their disagreement. After hearing their views, Elinor responded, “I have some good news and some bad news for each of you. There is some validity to what each of you says, but there also are some errors in each of your explanations. Walt is right that diversification reduces risk. Shane is right that a mutual fund and a stock having the same beta should produce the same return.” Just then, the company president interrupted them, needing to talk to Elinor immediately. Elinor apologized for having to leave and offered to continue their discussion later that evening.

COUNTRY: USA!!

For the following liability accounts, propose a substantive audit procedure (either an analytical test or a test of details) to test the year end balance of the following various liability accounts listed below. As an example - to audit the liability account mortgage interest payable at year-end, you would check to see when the last interest payment was, and then based upon the loan balance and interest rate and the number of days to year-end, you could compute an interest payable amount. Alternately, you could take the amount of mortgage interest expense for the year and divide by 12. That should be the maximum mortgage interest payable at year end. Here are the 5 liability accounts I would like you to propose audit procedures for:

1. Sales tax payable

2. Accrued wages

3. Accrued employer match for medicare/social security payroll taxes

4. Accrued employee portion of payroll taxes, including income tax withheld.

5. Utilities payable

BE SPECIFIC and descriptive about the audit procedures you propose.

Here is some additional information that you will need:

Sales tax is paid monthly.

Payroll is paid every two weeks.

The last payroll paid covered the two weeks ending 12/24, and was paid on 12/31.

Payroll taxes associated with the 12/31 payroll will be paid the first week of January.

As auditor, you have access to completed payroll records and government payroll tax form filings. Please note: you CANNOT suggest a review of subsequent payment of these liabilities.

PLEASE DO ALL, WILL GIVE A THUMBS UP! :)

The DMV

The Division of Motor Vehicles (DMV) is part of the State Department of Transportation (DOT). The purpose of that department is to ensure the safety and free flow of people and goods throughout the State by ensuring that there is a reliable system of transportation and motor vehicle services. This mission is accomplished by funding the maintenance of the existing transportation infrastructure, by adding to and improving the infrastructure, and by otherwise operating a transportation system that minimizes congestion and promotes safety and the economic growth of the State. Among the key functions served by the DOT are:

● driver licensing and insurance

● vehicle inspection

● bridge and highway construction and maintenance

● public transit The current year budget for the DOT is $874 million.

Of that amount, $96 million is budgeted to be spent on the DMV, which has the following objectives:

● to provide customer-friendly, efficient motor vehicle services;

● to regulate drivers and motor vehicles to deter unlawful acts and protect the public safety;

● to further protect public safety by identifying vehicle safety problems; and

● to further protect the public by ensuring that all drivers carry insurance. T he State is currently preparing its budget for the coming fiscal year, which runs from September 1 through August 31.

As the director of the DMV, you are responsible for three major areas:

● licensing, registration, and inspection of motor vehicles;

● driver licensing; and

● compulsory insurance.

A major issue for the coming year will be the overhaul of the driver’s license program to include the latest enhanced digitized security technology. To cover this increased cost, the DMV is planning to charge $5 more for new drivers’ licenses and license renewals. This charge is not enough to fully cover the cost of the new licenses, but raising fees was a political hot potato during the last session of the state assembly, and the Governor would be reluctant to propose any further increase to that fee. Another major initiative being planned for the DMV for the coming year is a centralized computer system to verify that all registered vehicles are insured. Once the system is in place, the DMV will be able to check insurance coverage not only when a vehicle is registered, but also when law enforcement officers stop a vehicle, when the vehicle has its biannual safety inspection, and at other times. The system will require an initial capital investment of $3 million and operating costs of $1.30 per inquiry. It is expected that there will be 1 million uses of the system spread evenly during the coming year. None of the capital investment cost appears as part of the operating budget for the coming year. To comply with the State’s 2011 Clean Air Act, the auto inspection program must be modified. The DMV has estimated that it will cost $7.2 million to equip the state vehicle testing centers with the necessary equipment for the new, stricter test. None of this cost will be part of the operating budget for the DMV. The DMV also expects to issue more licenses per month early in the year, as drivers try to avoid the extra cost and documentation requirements associated with the new higher security licenses. It expects to issue 923,456 licenses using the old technology, spread evenly throughout the first four months of the year, and 843,023 licenses using the new digitized technology, spread evenly throughout the last eight months of the year. There are expected to be 342,587 vision tests, 847,129 written driving tests, and 429,222 road tests in total for the year. These tests are expected to occur in the same proportion as the number of licenses issued each month. It is expected that there will be 962,135 vehicle registrations and 1,106,455 annual vehicle inspections, and these will occur evenly throughout the year. Note that the vehicle inspection number includes re-inspections for vehicles that fail their initial inspection.

The sources of revenue for the DMV are as follows:

● auto license fees: $25 for the old-style license and $30 for the new improved digitized license with all security features;

● vehicle registration fees: $53 per vehicle registered, on average;

● vehicle inspection fees: $35 for failing the inspection—otherwise no fee. It is expected that 15 percent of the total number of vehicle registrations will result in inspection failures and re-inspections;

● state appropriation—for any balance not funded by fees; and

● transportation trust fund—for capital acquisitions.

The costs of running your department consist of personnel expenses, materials and supplies, and a variety of purchased services. Personnel costs have a fixed administrative component of $6.5 million per year that is not affected by the DMV’s service volume. Administrators are paid evenly throughout the year. Other personnel costs average $2 per transaction, regardless of transaction type, including issuance of an auto license, vehicle registration, vehicle inspection, or administration of any type of test. Materials and supplies cost $.30 per transaction. These costs are incurred each month in direct relation to the number of transactions for the month. The $2 personnel and $.30 materials and supplies cost per transaction are not required for insurance inquiries. Other departmental overhead costs include heat, electricity, and rent. Those costs are fixed at $8 million, and are paid evenly throughout the year.

Additionally, the DMV pays outside contractors on the following fee schedule:

● $17 per vehicle inspected

● $2 per vision test

● $15 per road test

● $5 per written test

● $25 per license plate (30 percent of all vehicle registrations require new license plates)

● $10 per driver’s license (old style) and $37 per license (new digitized licenses) The director of the DOT is hoping that DOT’s financial situation will allow for expanded subsidies of public transportation. As such, she is hoping that each division of the DOT will at least break-even, if not show a profit. Although you realize that the DMV will receive a state subsidy to operate if needed, you know that your boss would be unhappy if such a subsidy is needed for your division. Using a computer spreadsheet, prepare a budget for the DMV for the coming year, based on the information you currently have. If the budget shows a deficit, you may need to make some adjustments, so use formulas for your calculations. That way you will be able to make changes in your worksheet and easily calculate updated results. Specifically, 1. Prepare a monthly operating budget for the DMV for the fiscal year ending August 31. Determine the operating surplus and deficit for each month and for the year as a whole. Use one page or worksheet in your spreadsheet to list all of the base information, and another for the operating budget. [Hint: It may be easier to prepare the budget if you add a third page or worksheet to calculate the number of transactions each month.

(Please use excel and show the equations)

Blue Bird Corporation has the following inventory items and costs for the month.
1 unit purchased Jan 15 at a cost of $50.
1 unit purchased Jan 20 at a cost of $54.
1 unit purchased Jan 24 at a cost of $56
On January 26, the company sold 2 units for $70 each. The company uses the LIFO (Last In First Out) inventory method.
a. What is the Cost of Goods Sold for the month? $
b. What is Gross Margin for the month? $
c. What is ending inventory for the month? $

2. Framer Inc. has the following inventory items and costs for the month.
1 unit purchased Jan 15 at a cost of $60.
1 unit purchased Jan 20 at a cost of $45.
1 unit purchased Jan 24 at a cost of $54
On January 26, the company sold 2 units for $70 each. The company uses the Weighted Average inventory method.
a. What is the Cost of Goods Sold for the month? $
b. What is Gross Margin for the month? $
c. What is ending inventory for the month? $

Problem 1: Record the Journal Entry or Entries for the following transactions assuming a perpetual inventory system is used.

1. XYZ Corp. is a retailer and they purchase 10,000 books for $25,000 dollars on account from ABC Corp.

2. Assume the terms of the sale described in #1 are FOB shipping point, XYZ Corp. pays Just-In-Time Logistics $2,200 for shipping.

3. XYZ Corp. purchases 3,600 calculators for $130,000 dollars from ABC Corp. under the terms 2/10, n/30 on March 1, 20X5. On March 8, 20X5 XYZ Corp. paid ABC Corp. in full.

4. XYZ Corp. purchases 300 keyboards from ABC Corp. for $24,000 on account on October 5, 20X4. On October 17, 20X4 XYZ Corp. discovered that $800 of the calculators (from the purchase in #3) were defective and returned them to ABC Corp.

5. XYZ Corp. sells 500 pencil cases to ABC Corp. at a selling price of $12, the cases had an original cost of $8.

6. Assume that after the sale described in #5 ABC Corp. returned 25 pencil cases to XYZ Corp. Assume the cases are still like new and XYZ places them back into inventory.

7. On April 15, 20X4, XYZ Corp. sells 500 cases of staples to State University on account for $1,500 with the payment terms 2/10, n/30 and the staples had a cost of $925. State University pays XYZ Corp. in full on April 24, 20X4.

Leading Indicators and Lagging Indicators both play an important role in Performance Evaluation. From the various indicators covered in this module (or other measures not addressed in the module), select four that serve a lagging indicators and four that serve as leading indicators, and briefly defend your choice. (Note: identify one leading and lagging indicator for each category shown below. Financial - Common Size Analysis. Lagging Indicator Leading Indicator Financial - Ratio Analysis. Lagging Indicator Leading Indicator Balanced Scorecard – Internal Business Processes. Lagging Indicator Leading Indicator Balanced Scorecard – Learning & Growth. Lagging Indicator Leading Indicator?