Required information
Problem 7-5A Determine depreciation under three methods (LO7-4)
[The following information applies to the questions displayed below.]
University Car Wash built a deluxe car wash across the street from
campus. The new machines cost $246,000 including installation. The
company estimates that the equipment will have a residual value of
$27,000. University Car Wash also estimates it will use the machine
for six years or about 12,000 total hours. Actual use per year was
as follows:
Year Hours Used
1 2,800
2 1,900
3 2,000
4 2,000
5 1,800
6 1,500
Problem 7-5A Part 2
2. Prepare a depreciation schedule for six years using the double-declining-balance method. (Do not round your intermediate calculations.)
In: Accounting
Student Enterprises sells two sizes of wall posters, a large 3- by 4-foot poster and a smaller 2- by 3- foot poster. The profit earned from the sale of each large poster is $3; each smaller poster earns $2. The firm, although profitable, is not large; it consists of one art student, Ahmed, at the University of Punjab. Because of her classroom schedule, Ahmed has the following weekly constraints: (1) up to three large posters can be sold, (2) up to five smaller posters can be sold, (3) up to 10 hours can be spent on posters during the week, with each large poster requiring 2 hours of work and each small one taking 1 hour. With the semester almost over, Ahmed plans on taking a three-month summer vacation to Lahore and doesn?t want to leave any unfinished posters behind. Find the integer optimal solution that will maximize her profit
In: Operations Management
Quick Air S.L. was founded 10 years ago by friends Peter Smith and Javier Benet. The company has manufactured and sold light airplanes over this period, and the company’s products have received high reviews for safety and reliability. The company has a niche market in that it sells primarily to individuals who own and fly their own airplanes. Peter and Javier have decided to expand their operations. They instructed their newly hired financial analyst, Laura Sanchez, to enlist an underwriter to help sell $35 million in new 10-year bonds to finance construction. Laura has entered into discussions with Sandra Harper, an underwriter from the firm of Castle & Partners, about which bond features Quick Air should consider and what coupon rate the issue will likely have.
Although Laura is aware of the bond features, she is uncertain about the costs and benefits of some features, so she isn’t sure how each feature would affect the coupon rate of the bond issue. You are Sandra’s assistant, and she has asked you to prepare a memo to Laura describing the effect of each of the following bond features on the coupon rate of the bond. She would also like you to list any advantages or disadvantages of each feature.
QUESTIONS:
In: Finance
11. One reform idea that is often floated in the US is the use of Medical Savings Accounts (MSA’s) in conjunction with high-deductible insurance plans (sometimes called catastrophic coverage). Individuals could deposit pre-tax dollars into their MSA and use the money to pay for out-of-pocket medical expenses. If unused, the MSA money simply becomes savings for the individual.
1. What is a high-deductible plan?
2. What are the pros and cons of such a plan?
In: Economics
5. You ask your recent MBA hire to evaluate the attractiveness of an investment in a piece of computer equipment you've been interested in. He gives you the following report. (Assume that he at least collected all the figures correctly.) The equipment cost $150,000 and will be straight-line depreciated over 5 years. It will replace an existing system -- that would otherwise be used for the five years -- which has been fully depreciated and could be sold for $3,000. It requires the use of software, which the firm has recently purchased for $20,000. The equipment will improve efficiency, which will allow you to cut costs by $60,000/year. The maintenance of the product requires the time of 1/10th of an employee with salary $30,000 and who generates $50,000 of profits to the firm. An additional $5,000 must be reserved for operations. You know that you can sell this product after 5 years for $50,000. Your firm is taxed at 30%. Last year, your firm had a price increase of 15%. You also know that firms who are only in this no-growth business are trading at a P-E multiple of 10. You receive the following analysis with a recommendation against the investment:
0 1 2 3 4 5
--- --- --- --- --- ---
Cost Savings 60 60 60 60 60
Maintenance -3 -3 -3 -3 -3
Buy Eqpt -150 50
Sell Old 3
OppCost of
150K at 15% -22 -22 -22 -22 -22
Depreciation -20 -20 -20 -20 -20
Software -20
--------------------------------------------------
EBIT -167 15 15 15 15 65
Taxes 4.5 4.5 4.5 4.5 19.5
--------------------------------------------------
Net CF -167 11 11 11 11 46
IRR<0<Required 15% return. Is this analysis correct? If not, where did your MBA go wrong? Redo the analysis to determine whether you should invest in the new equipment.
In: Finance
Halford v. Seed Hawk Inc. 2006 FCA 275 (CanLII) 275 D.L.R. (4th) 556; 54 C.P.R. (4th) 130 (F.C.A.)
James Halford was a university-trained farmer who invented a device for putting seeds and fertilizer into the ground in one operation. It was a relatively simple device but he was granted a patent for it. Norbert Beaujot, an engineer and part-time farmer, developed a similar device and incorporated a company to commercially exploit it. Halford sued. Beaujot had seen the Halford device in operation before he developed his own, but the machine he developed was quite different although it accomplished the same thing.
What is the nature of Halford’s complaint?
Explain the arguments for both sides and the likely outcome.
What is the appropriate remedy if Halford is successful?
In: Operations Management
Question Preparing a bank reconciliation
The Cash account of Guard Dog Security Systems reported a balance of $2,540 at December 31, 2018. There were outstanding checks totaling $400 and a December 31 deposit in transit of $100. The bank statement, which came from Park Cities Bank, listed the December 31 balance of $3,340. Included in the bank balance was a collection of $510 on account from Brendan Ballou, a Guard Dog customer who pays the bank directly. The bank statement also shows a $30 service charge and $20 of interest revenue that Guard Dog earned on its bank balance. Prepare Guard Dog’s bank reconciliation for December 31.
In: Accounting
Lori Longpie is an employee who is paid monthly. For the month of January of the current year, she earned a total of $8,260. The FICA tax for social security is 6.2% and the FICA tax rate for Medicare is 1.45%. The FUTA tax rate of .6% and the SUTA tax rate of 5.4% are applied to the first $7,000 of an employee's pay. The amount of federal income tax withheld from her earnings was $1,325.17. She also had union dues of $50 withheld from her pay. Complete the following: Calculate her net pay, showing all components. Calculate the employer’s payroll taxes due. Prepare the journal entries required by #1 and #2
In: Accounting
Mitch Marner has the following information related to his
various investments as of
December 31, 2019:
Cash dividends received from investment in common shares of
Canadian
Resident public corporations……………………………………………………………..24,016
Cash dividends received from common shares in US corporations
(net of $3,016
of foreign withholding taxes; all in Canadian
dollars)………………………………….17,000
Interest earned on 2018 personal income tax assessment………………………………416
Interest earned on joint bank account with his spouse (spouse
contributes
equally)……………………………………………………………………………………....1,750
Interest earned on his investment account (not joint) with his
investment
Broker…………………………………………………………………………………………..900
Interest on short-term investments:
$20,000 term deposit taken out November 30, 2019 (interest at
maturity in
six months)
Accrued interest from December 1 to December 31, 2019………………85
$200,000 GIC purchased November 1, 2018 (interest payable at
maturity on
October 31, 2021)
Accrued interest from November 1, 2018 to October 31,
2019…….16,000
Accrued interest from January 1, 2019 to December 31,
2019…….16,214
Government of Canada Treasury Bills purchased for $9,009 on
January 3,
2019
Amount received on maturity on December 31,
2019………...……..10,000
Rental details from operation of two separate rental
properties:
Property A
Property B
Gross rental revenue……………………………………………$
31,000
$ 45,000
Utilities……………………………………………………………. 5,000 8,000
Property taxes…………………………………………………… 2,400 3,500
Repairs……………………………………………………………
1,500
4,800
Mortgage interest………………………………………………..
20,000
32,000
Opening UCC…………………………………………………….
368,209
520,225
Interest expenses paid during 2019:
Interest on vacant land (purchased in 2014, the land does not
generate any income)……………………………………………………………10,000
Interest on bank line of credit used for investing in shares
described above………………………………………………………………....50,000
Interest on loan to acquire an automobile for his daughter
for
her 18th birthday…………………………………………………………………..3,216
Required:
Based on the above, Mitch has asked you to calculate his income for
the year. He would
also like you to comment on the income tax implications of items
not included in your
calculations.
it is a canadian taxation laws.
In: Accounting
A company is considering constructing a new factory and is considering funding it by issuing a corporate bond to the value of $9m. The bond would have a term to maturity of 12 years, a coupon rate of 3.0% and the bond would be sold into the market at expected yield of 2.8%. Show how an immunisation portfolio could be constructed from the bonds below if the CB cut interest rates by 0.50% over the next year. Show how this strategy would work and explain the nature of the risk and how the protection is created.
2.3% US Treasury 2030, @ Yield to Maturity of 1.50%
2.5% US Treasury 2030, @ Yield to Maturity of 1.67%
3.2% USTreasury 2035, @ Yield to Maturity of 1.71%
3.6% US Treasury 2038, @ Yield to Maturity of 1.73%
2.5% US Treasury 2039, @ Yield to Maturity of 1.74%
5.5% USTreasury 2042, @ Yield to Maturity of 1.78%
In: Finance