4. Consider each of the following activities separately, how much does it contribute to US GDP?

(a) Company X in the US bought steel from another US company, which costs $50,000. Company X used the steel to make cars, and sold them for $150,000 this year.

(b) Your kid mows the lawn for your neighbor, and your neighbor gives him $50 for his work.

(c) This year, you sold your house for $500,000, which was built 100 years ago. Your agent charges you $10,000 for the agent services.

(d) Your mom gave you $1,000 for your birthday. You put $500 in your savings account.

ABC Energy Corp. (the “Company”), an SEC registrant, operates three manufacturing facilities in the United States. The Company manufactures various household cleaning products at each facility, which are sold to retail customers. The U.S. government granted the Company emission allowances (EAs) of varying useable years (i.e., the years in which the allowance may be used) to be used between 2015 and 2030. Upon receipt of the EAs, the Company recorded the EAs as intangible assets with a cost basis of zero, in accordance with the Federal Energy Regulatory Commission (FERC) accounting guidance for EAs. The Company has a fiscal year end of December 31.

As background, in an effort to control or reduce the emission of pollutants and greenhouse gases, governing bodies typically issue rights or EAs to entities to emit a specified level of pollutants. Each individual EA has a useable year designation. EAs with the same useable year designation are fungible and can be used by any party to satisfy pollution control obligations. Entities can choose to buy EAs from, and sell EAs to, other entities. Such transactions are typically initiated through a broker. At the end of a compliance period, participating entities are required to either (1) deliver to the governing bodies EAs sufficient to offset the entity's actual emissions or (2) pay a fine. The Company currently emits a significant amount of greenhouse gases because of its antiquated manufacturing facilities. The Company plans to upgrade its facilities in 2024, which will decrease greenhouse gas emissions to a very low level. On the basis of the timing of the upgrade, the Company currently anticipates a need for additional EAs in fiscal years 2020–2024.

However, upon completion of the upgrade, the Company believes it will have excess EAs in fiscal years subsequent to 2024 because of reduced emissions as a result of the upgrade. The Company currently has forecasted the updates to its facilities will cost approximately $15 million. As the Company operates in a capital intensive industry, analysts and investors focus on a number of important ratios and measures, including working capital, capital expenditures, cash flows from operations, and free cash flow. As a result, the board of directors and management provide forward-looking guidance on these ratios and measures and expend great effort managing these results in light of the Company’s operational needs. The Company entered into the following two separate transactions in fiscal year 2020, which will impact the Company’s results as presented in the statement of cash flows, which the Company prepares under the indirect method.

            1. To meet its need for additional EAs in fiscal years 2020–2024, on April 2, 2020, the Company spent $6.5 million to purchase EAs with a useable year of 2023 from XYZ Manufacturing Corp.

2. In an effort to offset the costs of the April 2, 2020, purchase of 2023 EAs, the Company sold EAs with a useable year of 2026 to DEF Chemical Corp. for $5 million.

Required:

1. What is the appropriate classification in the statement of cash flows in the Company’s December 31, 2020, financial statements for its purchase of 2023 EAs from XYZ Manufacturing Corp.?

2. What is the appropriate classification in the statement of cash flows in the Company’s December 31, 2020, financial statements for its sale of 2026 EAs to DEF Chemical Corp.?

3. Should these cash flows be reported at gross amounts or net amounts in the 2020 statement of cash flows?

Be sure to cite appropriate authoritative support for your answer from the Accounting Standards Codification.

Regional Bank has been growing rapidly. In the past two years, it has acquired six smaller financial institutions. The long-term strategic plan is for the bank to keep growing and to “go public” within the next three to five years. FDIC regulators have told management that they will not approve any additional acquisitions until the bank strengthens its information security program. The regulators commented that Regional Bank’s information security policy is confusing, lacking in structure, and filled with discrepancies.

• What are some first steps for this project?
• Is it feasible to use any material from the original document?
• Should other materials should be requested?
• Is it wise to interview the author of the original policy?
• Who else should interviewed?
• Should the bank work toward ISO certification?
• Which ISO 27002:2013 domains and sections should be included?
• Would you use NIST’s Cybersecurity Framework (CIA security model) and related tools?
• Which methods of communication would be best for sending the policy?
• What other criteria should be considered?

Facts: Argent Corporation reports short-term obligations of $15,000,000 in the current liability section of its statement of financial position at December 31, 2020 (its year-end). This amount includes the current portion of 12% long-term debt in the amount of $10,000,000 (matures in March 2021). Management has stated its intention to refinance the 12% debt whereby no portion of it will mature during 2021. The financial statements are issued on March 25, 2021.

Question 1: Based solely on the above facts, would management be correct under US GAAP if they classified the $10,000,000 portion of the above debt as long-term as of 12/31/2020? Why or why not?

Question 2: Using the same fact pattern, now assume that Argent Corporation issues $13,000,000 of 10-year bonds to the public on January 18, 2021 and management uses the proceeds to liquidate the $10,000,000 short-term debt on February 8, 2021.

Question 3: Would the classification of the $10,000,000 debt at December 31, 2020 be the same under IFRS and US GAAP? Explain your answer.

Suppose that the IQs of university​ A's students can be described by a normal model with mean 140 and standard deviation 8 points. Also suppose that IQs of students from university B can be described by a normal model with mean 120 and standard deviation 11. ​

a) Select a student at random from university A. Find the probability that the​ student's IQ is at least 130 points. The probability is nothing. ​(Round to three decimal places as​ needed.) ​

b) Select a student at random from each school. Find the probability that the university A​ student's IQ is at least 10 points higher than the university B​ student's IQ. The probability is nothing. ​(Round to three decimal places as​ needed.)

​c) Select 3 university B students at random. Find the probability that this​ group's average IQ is at least 125 points. The probability is nothing. ​(Round to three decimal places as​ needed.) ​

d) Also select 3 university A students at random.​ What's the probability that their average IQ is at least 10 points higher than the average for the 3 university B​ students? The probability is nothing. ​(Round to three decimal places as​ needed.)

3. Suppose you are the manager of an airline company. As a recent MBA graduate, you decided to use all the knowledge you have acquired to improve the firm’s pricing decisions. To begin with, you search for a market survey company to find out the demand curve for flights. The market survey company sent you back a report stating that there are two distinct segments of consumers - tourists and business travelers – and that their demand curves are given by the following equations:

Market Demand for Tourists: Q = 500 – 2P + 2I

Market Demand for Business Travelers: Q = 1000 – P + I

Where Q is the quantity demanded (in thousands of tickets), P is the price for a ticket, and I is the median income of each segment of consumers.

Currently, the price for tourists is $200 and the price for business travelers is $500. Moreover, the median income of tourists is $50 and the median income of business travelers is $100.

a) Using the point slope elasticity formula, what is the price elasticity of demand for airline tickets at the current price and income level for each group of consumer? Hint: to answer this question you will need to accurately determine the slope of the two demand curves given the level of income for each group and find the quantity each group demands at the current price for the group given the income that each group has.

b) Based on your result in (a), do you think you should raise or lower the price paid by tourists? What about the price paid by business travelers?

c) To verify your answer in (b), set a new price for tourists that is $50 higher or lower than the original price of $200 and a new price for business travelers that is $50 higher or lower than the original price of $500. Make your determination of whether to raise or lower the price based on your answers in (b). Relative to the revenue accrued in each market segment with the original prices, what happens to the revenue accrued by the airline in each market segment with the new prices? Hint: If the revenue does not increase then you need to redo this problem by moving the price in the opposite direction!

d) Using the two-point elasticity formula (the arc elasticity formula), what is the price elasticity of demand when you go from the original price to the new price? In doing this problem hold income constant.

1. Which of the following results in a decrease in the investment account when applying the equity method?

a. Net income of the investor

b. Net income of the investee

c. Unrealized gain on intercompany inventory transfers for the current year

d. Dividends paid by the investor

e. Purchase of additional common stock by the investor during the current year

2. Which of the following is a characteristic of a business combination that should be accounted for as a purchase?

a. The combination must involve the exchange of equity securities only.

b The acquired subsidiary must be smaller in size than the acquiring parent.

c The two companies may be about the same size, and it is difficult to determine the acquired company and the acquiring company.

d The transaction may be considered to be the uniting of the ownership interests of the companies involved.

e The transaction clearly establishes an acquisition price for the company being acquired.

3. Under the partial equity method, the parent recognizes income when

a dividends are received from the investee.

b dividends are declared by the investee.

c it is earned by the subsidiary.

d the related contract is signed by the subsidiary.

e the related expense has been incurred.

The comparative balance sheets for 2021 and 2020 and the statement of income for 2021 are given below for Dux Company. Additional information from Dux’s accounting records is provided also.

Additional information from the accounting records:

1. A building that originally cost $184,000, and which was three-fourths depreciated, was sold for $7,000.
2. The common stock of Byrd Corporation was purchased for $5,000 as a long-term investment.
3. Property was acquired by issuing a 13%, seven-year, $48,000 note payable to the seller.
4. New equipment was purchased for $69,000 cash.
5. On January 1, 2021, bonds were sold at their $43,000 face value.
6. On January 19, Dux issued a 5% stock dividend (1,000 shares). The market price of the $10 par value common stock was $14 per share at that time.
7. Cash dividends of $31,000 were paid to shareholders.
8. On November 12, 12,500 shares of common stock were repurchased as treasury stock at a cost of $8,000.

Required:
Prepare the statement of cash flows for Dux Company using the indirect method.

Gear Company records $2,000 of depr

eciation under the sum-of-ye

ars’-digits method in

2019, the company’s first year

of operations. In 2020, the comp

any decides to change to the

straight-line method f

or accounting purposes. If the straight-l

ine method were used in 2019,

depreciation would have b

een $1,500. Depreciation in 2020 under

the straight-line method is

$1,800 (depreciated based on the

book value on January 1, 2020)

. The tax rate is 25%.

Income from continuing operati

ons before tax and before deducti

ng depreciation in 2020 is

$12,000.

REQUIRED:

Provide the 2020 entry to record t

his change and calculate 2020

net income.

Sandhill Growth Company is testing a number of new agricultural seeds that it has recently harvested. To stimulate interest, it has decided to grant five of its largest customers the unconditional right to return these products if not fully satisfied. The right of return extends for four months. Sandhill Growth sells these seeds on account for $1,700,000 (cost $600,000) on April 2, 2020. Customers are required to pay the full amount due by June 15, 2020. The company follows IFRS.

a)Prepare the journal entry for Sandhill Growth at April 2, 2020, assuming Sandhill Growth estimates returns of 20% based on prior experience

b)Assume that one customer returns the seeds on July 1, 2020. Prepare the journal entry to record this transaction, assuming this customer purchased $110,000 of seeds from Sandhill Growth.

c)Prepare the journal entry for Sandhill Growth at April 2, 2020, assuming Sandhill Growth estimates returns of 20% based on prior experience. Sandhill follows ASPE.

d)Assume that one customer returns the seeds on July 1, 2020.

Prepare the journal entry to record this transaction, assuming this customer purchased $110,000 of seeds from Sandhill Growth. Sandhill follows ASPE.

c)