Porto Berhad is an all-equity firm. The company is considering the following projects:

The T-bill rate is 9 percent and the expected return on the market is 12 percent.

a.Evaluate which projects have higher expected return than the firm’s 12 percent cost of capital

b. Assess which projects would be incorrectly accepted or rejected if the firm’s overall cost of capital were used as a hurdle rate.

Pension funds pay lifetime annuities to recipients. If a firm expects to remain in business

indefinitely, its pension obligation will resemble a perpetuity. Suppose, therefore, that you are

managing a pension fund with obligations to make perpetual payments of RM 2 million per year

to beneficiaries. The yield to maturity on all bonds is 16%.

c. If the duration of 5 year maturity bonds with coupon rates of 12% (paid annually) is 4 years and the duration of 20 year maturity bonds with coupon rates of 6% (paid annually) is 11 years, how much of each of these coupon bonds (in market value) will you want to hold to both fully fund and immunize your obligation?

(d) What will be the par value of your holdings in the 20 year coupon bond?

3 Fraley Chemical Company accounts for its production activities using first-in, first-out (FIFO) process costing. Inventory records for the process show a January 1 work-in-process inventory of 10,000 gallons, 80 percent complete as to materials and 40 percent complete as to conversion. The January 31 inventory consisted of 15,000 gallons, 60 percent complete as to materials and 20 percent complete as to conversion. In January, 40,000 gallons were completed and transferred to the finished goods inventory. Costs in the Work-in-Process Inventory account in January are as follows: Materials Conversion Total Costs in beginning inventory $ 1,920 $ 672 $ 2,592 Costs added this period 8,405 5,694 14,099 Total cost to be accounted for $10,325 $6,366 $16,691 a. Using first-in, first-out (FIFO) process costing, calculate the equivalent units (in gallons) for January. b. Using first-in, first-out (FIFO) process costing, calculate the cost per equivalent unit for January. (keep answers to 3 decimal points for calculation of part c) c. Using first-in, first-out (FIFO) process costing, calculate the cost of the 40,000 gallons that were completed and transferred out in January. Show your calculations.

Proposal #1 would extend trade credit to some customers that previously have been denied credit because they were considered poor risks.   Sales are projected to increase by $150,000 per year if credit is extended to these new customers. Of the new accounts receivable generated, 7% are projected to be uncollectible. Additional collection costs are projected to be 3% of incremental sales (whether they actually end up collected or not), and production and selling costs are projected to be 80% of sales. Your firm expects to pay a total of 40% of its income after expenses in taxes.

1)Compute the incremental income after taxes that would result from these projections:

2)Compute the incremental Return on Sales if these new credit customers are accepted:

If the receivable turnover ratio is expected to be 3 to 1 and no other asset buildup is needed to serve the new customers…

3)Compute the additional investment in Accounts Receivable

4)Compute the incremental Return on New Investment

5)If your company requires a 20% Rate of Return on Investment for all proposals, do the numbers suggest that trade credit should be extended to these new customers? Explain.

Pay Incentives and Fraudulent Activity

Many management contracts include pay incentives. Are these incentives an invitation to commit fraud? Who determines whether management has achieved its goals? Are there certain types of incentives that would be less likely to be associated with fraud associated?

The Smith & Jones Company is considering either the purchase or lease of a new machine details as follows:                                                                                    

                Purchase Cost of new machine                                                 $97,000                

                Annual Maintenance Costs payable at start of year               $10,000

                                                Only payable if machine is purchased.                                 

                Machine Useful Life  5 years                                                 

Salvage Value at end of 5th year                                         $8,000   (taxed at 30%)                                 

Alternatively the machine can be leased with lease payments covering all capital and operating costs details as follows.               

                Annual Lease Payment                 $29,200 payable at the start of the year

                Term of lease                                                    5 years                                                 

Cash savings associated with the acquisition of the machine are expected to be $50,000 per annum.

Other details:

                Company's Cost of Capital                                            8%                                                                         

                Corporate Tax Rate                                                     30%                                                                       

  Required:   

Should the Company LEASE the Equipment? Please show the formular. Thanks

Salmone Company reported the following purchases and sales of its only product. Salmone uses a periodic inventory system. Determine the cost assigned to ending inventory using LIFO.

Jordan and Taylor are beginning to understand break-even analysis.

Selling price to Yumminess at $10 per tin. The cost is $8 per tin, which includes $6 of direct material and $1.50 of direct labor. Annual manufacturing overhead is estimated at $100,000 for the expected sales of 200,000 tins. Operating expenses are projected to be $80,000 annually.

After looking over the costs for manufacturing overhead and operating expenses, you approximate that 85% of manufacturing overhead and 20% of operating expenses are variable costs.They are now discussing options with adjustments to costs and sales. As long as they keep bringing brownies, you keep turning out numbers.

1. Jordan and Taylor are considering an advertising campaign for $40,000 annually. They expect this to increase sales by 5%. What would be the new net income? (5 points)

2. Yumminess wants to feature Chocolate Attack Brownies as a monthly special. The predicted sales volume is 50,000 tins. Yumminess wants Jordan and Taylor to cut their selling pricing by 10%, citing that the volume will more than make up the difference. What will be the break-even point in tins during this sale? (5 points)

3. Yumminess wants to feature Chocolate Attack Brownies as a monthly special. The predicted sales volume is 50,000 tins. Yumminess wants Jordan and Taylor to cut their selling pricing by 10%, citing that the volume will more than make up the difference. What net income can Jordan and Taylor expect during this offer? (5 points)

Listed below are types of errors or fraud that might occur in financial statements. Although a number of audit procedures might detect an error or fraud, select the most likely effective audit procedure to each error or fraud item. Replies may be used more than once.

Audit Procedure

Activity-Based Product Costing

Roberts Company produces two weed eaters: basic and advanced. The company has four activities: machining, engineering, receiving, and inspection. Information on these activities and their drivers is given below.

Required:

1. Calculate the four activity rates.

2. Calculate the unit costs using activity rates. Round your answers to the nearest cent.

Calculate the overhead cost per unit. Round your answers to the nearest cent.

3. If consumption ratios instead of activity rates were used to assign costs instead of activity rates, show the cost assignment for the inspection activity.

Mears Production Company makes several products and sells them for an average price of $75. Mears' accountant is considering two different approaches to estimating the firm's total monthly cost function, account analysis and high-low. In both cases, she used units of production as the independent variable. For the account analysis approach, she developed the cost function by analyzing each cost item in June, when production was 1,900 units. The following are the results of that analysis:

For the high-low method, she developed the cost function using the same data from June and data from May, when production was 2,350 units and total costs were $43,350.

After developing the two cost functions, the accountant used them to make predictions for the month of October, when production was expected to be 2,250 units.

REQUIRED [ROUND UNIT COSTS TO THE NEAREST CENT AND TOTAL COSTS TO THE NEAREST DOLLAR.]

Part A
1. Using account analysis, what was the accountant's estimate of total fixed costs for October?    

2. Using account analysis, what was the accountant's estimate of total variable costs for October?   

Part B
1. Using the high-low method, what was the accountant's estimate of total fixed costs for October?    

2. Using the high-low method, what was the accountant's estimate of variable costs per unit for October?   

Under current U.S. GAAP, assets that have been donated to a company are recorded at fair value. By basing your argument on the conceptual framework, argue in favor of the current GAAP treatment for donated assets.

We are considering hiring a catering company. Currently, we are preparing meals for employees. The following is the cost of preparing a meal: Food $3.00 Labor 2.00 Fixed overhead 1.00 Total $6.00 The caterer has quoted a price of $5.50 per meal. Please help us to determine whether we should buy meals from this catering company.

Company A can order meals for its employees from a catering company or prepare meals on-site. Use the information in the exhibit to complete the following items.

The following trial balance of Blues Traveler Corporation does not balance.

BLUES TRAVELER CORPORATION TRIAL BALANCE APRIL 30, 2017

1. Cash received from a customer on account was recorded (both debit and credit) as $1,380 instead of $1,830.

2. The purchase on account of a computer costing $3,200 was recorded as a debit to Office Expense and a credit to Accounts Payable.

3. Services were performed on account for a client, $2,250, for which Accounts Receivable was debited $2,250 and Service Revenue was credited $225.

4. A payment of $95 for telephone charges was entered as a debit to Office Expense and a debit to Cash.

5. The Service Revenue account was totaled at $5,200 instead of $5,280. Instructions From this information prepare a corrected trial balance.

Instructions

From this information prepare a corrected trial balance.

Transactions The selected transactions below were completed by Silverado Delivery Service during February: Indicate the effect of each transaction on the accounting equation by choosing the appropriate letter from the following list: Increase in an asset, decrease in another asset. Increase in an asset, increase in a liability. Increase in an asset, increase in owner's equity. Decrease in an asset, decrease in a liability. Decrease in an asset, decrease in owner's equity. 1. Received cash from owner as additional investment, $25,000. 2. Purchased supplies for cash, $750. 3. Paid rent for February, $3,000. 4. Paid advertising expense, $1,500. 5. Received cash for providing delivery services, $16,800. 6. Billed customers for delivery services on account, $32,500. 7. Paid creditors on account, $1,400. 8. Received cash from customers on account, $23,770. 9. Determined that the cost of supplies on hand was $275 and $475 of supplies had been used during the month. 10. Paid cash to owner for personal use, $5,000.

Ridgecrest Company manufactures plastic storage crates and has the following information available for the month of April: Work in process, April 1 (100% complete for materials, 47% for conversion) 23,600 units Direct materials $ 20,000 Conversion cost $ 23,000 Number of units started 49,400 units April costs Direct materials $ 61,800 Conversion cost $ 98,800 Work in process, April 30 (100% complete for materials, 22% for conversion) 17,000 units Required: Using the weighted-average method of process costing, complete each of the following steps: 1. Reconcile the number of physical units worked on during the period. 2. Calculate the number of equivalent units. 3. Calculate the cost per equivalent unit. (Round your answers to 5 decimal places.) 4. Reconcile the total cost of work in process. (Use Cost per Equivalent Unit rounded to 5 decimal places and your final answers to the nearest whole dollar amount.)