QUESTION #2 Part A Lunenberg Ltd, a publicly accountable enterprise, began business on January 1, 2015 and follows IFRS. Its pretax accounting income for the first two years was as follows: 2015 $ 80,000 2016 150,000

The following items caused the only differences between pretax accounting income and taxable income.

1. In 2015, the company collected $75,000 in rental revenue; of this amount, $25,000 was earned in 2015; the other $50,000 will be earned equally during 2016 and 2017. The full $75,000 was included in taxable income in 2015.

2. The company pays $5,000 in 2015and 2016 for membership in a local golf club.

3. In 2016, the company terminated a top executive and agreed to pay $30,000 severance pay. This will be paid $10,000 each year for three years, starting in 2016. The 2016 payment was made. The entire $30,000 was expensed in 2016 for book purposes.

For tax purposes, the severance pay is deductible only when it is paid.

The enacted tax rates at December 31, 2015 are: 2015 30% 2017 40% 2016 35% 2018 40%

Instructions:

(a) Calculate taxable income and income tax payable for 2015 and 2016

(b) Calculate the deferred income tax asset and/or liability at the end of 2015, and prepare the adjusting journal entries to record income taxes for 2015

Maria Company started its operations on March 1, 2018. The following transactions took place during the first month of operations:

March 1: Maria invests $1,840,000 cash to start the business.

March 4: Purchased furniture for $240,000, paying $100,000 in cash and sign a note for

               the remaining balance.

March 9: Purchased supplies for $12,200 on credit.

March 15: Paid $18,000 cash for March rent.

March 18: Paid $4,200 cash for office supplies purchased on March 9.

March 21: Services billed to customers amount to $104,000.

March 24: Received utility bills for $22,000 for the month of March.

March 27: Paid $64,000 cash for salaries.

March 30: Received $80,000 cash from customers in payment for services billed on

                 March 21.

March 31: Maria withdrew $15,000 from the business for personal use.

Required: ( Note the answers should be computerized )

1- Using a table, show the effect of the above transactions on the accounting equation.

2- Prepare Journal entries to record the above transactions.

3- Post to the appropriate ledger accounts.

4- Prepare the trial balance on March 31 2018.

5. Prepare the financial statements of Rose Company on March 31 2018.

In 2005, Jeff Bezos, Amazon’s CEO, introduced the company’s Amazon Prime membership service. For a $79 annual fee, a customer receives “free” (prepays might be more accurate) shipping on every single order the customer places during the year. Bezos acknowledged the Prime service would be "expensive for the company in the short term" but "more convenient for customers." Before introducing this program, you can be sure that the managerial accounting staff at Amazon went through a lot of differential analysis. Put yourself in their shoes and answer the following:

What would a differential analysis for adopting the “Amazon Prime” model need to consider?

Show an example of a differential analysis for adopting the “Amazon Prime” model.

What non-numeric considerations would need to be taken into account?

After reviewing the above would you advise Mr. Bezos for or against adopting the Amazon Prime model? Why?

On December 1, 2017, Prosen Distributing Company had the following account balances.

During December, the company completed the following summary transactions.

Write a one page by answering the following question Most importantly, be sure to use evidence, reason, argument, and/or examples to support your view

Corporation B is a publicly traded Fortune 500 company worth $50 billion. Corporation B has factories in the United States, in addition to Mexico and China. While Corporation B has a strong code of ethics, a recent internal audit found that Corporation B unjustly profited off labor in Mexico and China that was conducted under illegal conditions. This labor contributed substantially to the company’s 2012 profit of $6 billion, although the exact amount of profit it contributed is unknown. Corporation B also made part of its $6 billion profit from its factories in the United States, which met all state and federal labor standards. A government accountability office discovers the illegal labor conditions in China and Mexico. The result, is that Corporation B’s 2012 profit of $6 billion was made through just and unjust means. How should the government accountability office redress the injustice of profiting off labor performed under illegal conditions? (Make reference to the articles “Justice as Fairness”, and also, “Distributive Justice,”

Explain how you would calculate the economic value created by the USPS, taking into account the positive externalities it produces.

Here's a few comments: The USPS has had $45 billion or so in cumulative accounting losses over the past four decades or so (see its financials). Was what the USPS produced over the past four decades worth $45 billion to the taxpayers? Take a for-profit business like FedEx. We know the value of the company’s inputs; that’s easy, we can look at their expenses. Now, what is the value of what they produced? Let’s assume for a second that what they produced is a private good with no externalities. Let’s also assume that the value of its services to customers matched or exceeded the amount its customers paid for its services. This is a reasonable assumption, because if it weren’t the case, customers wouldn’t voluntarily engage in transactions with the company. So, what is the value of what FedEx produced? In this case, it would be its revenue plus the difference between what customers paid for Fedex’s services and the value they placed on those services. This difference is called consumer surplus. So the value of what FedEx produced in a given year would be its revenue plus the consumer surplus it generated. To see if they created any economic value, you would subtract expenses from this total.

Bonus questions: Where does profit enter this equation? Note the following: (Revenue + Consumer Surplus) - Expenses = (Revenue - Expenses) + Consumer Surplus = Profit/Loss + Consumer Surplus = Economic Value Created. Why isn't profit/loss, by itself, enough to determine if economic value has been created? Why isn't profit/loss enough to determine if an organization is "efficient" or not?

For example, assuming that everything stays the same with respect to its operations and its volume of business, how FedEx prices its goods and services doesn’t change the amount of economic value it creates. If FedEx raises its prices (and its volume of business stays the same), it may increase its profits, but it would reduce consumer surplus by the same amount, so it would be a wash. What if FedEx lowered its prices below its costs? It would lose money, but the decline in revenue would be offset by a corresponding increase in consumer surplus, so the economic value created by the company would, again, remain the same. In this example, assuming the volume of business stays the same, FedEx’s pricing decisions affect the allocation of value—i.e. how the value created by the company is split between itself and its customers—but it doesn’t effect the overall amount of value the company creates.

The USPS doesn’t produce a private good, like we assumed in the case of FedEx. What it produces is a merit good, defined as a good or service that has both private benefit and associated positive externalities. This adds another layer of complexity to a strategic assessment of the USPS.

Solve

x^3 -3x^2 +27 = 0(mod1125)

1. Two companies A and B are in the same industry with identical earnings per share for the last five years. Company A has a policy of paying 40% of earnings as dividends while company B pays a constant amount of dividends per share is lower than that of B. The following is data on earnings, dividend and market price for the two companies.

Required:

1. Payout ratio
2. Divided yield
3. Earning yield

Use Minitab to answer the questions. Make sure to copy all output from the Minitab:

The U.S. Bureau of Labor Statistics publishes a variety of unemployment statistics, including the number of individuals who are unemployed and the mean length of time the individuals have been unemployed. For November 1998, the Bureau of Labor Statistics reported that the national mean length of time of unemployment was 14.5 weeks.

The mayor of Chicago has requested the study on the status of unemployment in City of Chicago. A sample of 60 unemployed residents shows the sample mean is 15.7 and the sample standard deviation is 9.0. Test whether the length of time in Chicago is long than national average.

1) Let's think about the house price. According to the Case-Shiller Home Price Indices in August 2009, Chicago and San Francisco have following sample mean and population standard deviations (the sample mean was calculated by daily base, so the sample size was 30):

Using hypothesis test, prove if these house price indices are same.  (Setup a hypothesis, show your works to perform the test, and state your verdict)

2)             Some people argue that San Francisco has higher house price than that of Chicago. Prove/disprove the argument using a hypothesis test.

3)             Let’s assume the population standard deviations are unknown, and the sample standard deviation of for Chicago is 9.2 and that of San Francisco is 11.5. Some people argue that San Francisco has higher variability (higher variance) in house prices than that of Chicago. Setup a hypothesis, perform the test and prove/disprove the argument.

4.     Let’s consider a company’s growth rate of sales.

Find the sample mean and sample standard deviation using Minitab using descriptive statistics.

The store manager found that the average growth rate in 80s was 6.00%. Using the data, prove if the average growth rate for the sample period was same as that of 80s.

Prove if the average growth rate was less than 6%.