Which of he following best describes our use of HPR in our stock valuation?

A. HPR is the fair return on the stock

B. HPR is our best guess of the market's required return on the stock given its current price.

C. HPR is the guaranteed return on the stock.

D. HPR is the historical return on the stock

A stock's one year target price estimate comes from:

Should the government raise the minimum wage? Explain your answer. Your targeted audience are the Shareholders of your company ABC Technologies. The CEO stated he wants to increase minimum wage from $10.00 to $17.00, but the Shareholders are concerned that is not a smart move financially. Be sure to cite pros/cons; laws involved, living wages, etc. This is a current ongoing debate in America as some companies are raising the wage while others not so much. What impact will this have on the consumer?

I will appreciate the help!!

Prepare necessary adjusting entries to correct the errors on all issues (ii) to (v) in the financial statements of GHL for the year ended 31 March 2020 in accordance with relevant HKFRSs.  

(ii) At 1 April 2019 there was a deferred tax liability of $6.6 million in the statement of financial position and no adjustments have been made to this figure at 31 March 2020. This deferred tax liability was solely in relation to the differences between the carrying amount ($90 million) and the tax based ($57 million) of plant and equipment. At 31 March 2020 these figures were $96 million and $54 million respectively for the carrying amount and tax base of plant and equipment. The applicable income tax is 20%. GHL accounts for plant and equipment using cost model under HKAS 16 ‘Property, Plant and Equipment’.

The first tax loss carried forward in respect of the year ended 31 March 2020 is $24 million. GHL has reliable budgets for a total taxable profit of $12 million for the next two financial years. Tax losses can be carried forward indefinitely under the tax law. Fanny used the full amount of tax loss to determine the deferred tax amount and has been reflected in the draft financial statements.

(iii) On 31 March 2020 GHL issued $15 million 5% convertible bonds at par. Interests on the bonds are payable annually in arrears with first payment on 31 March 2021. Issue costs payable to professional advisers were $600,000. The bond can, at the choice of the holders, be redeemed at par on 31 March 2023; or converted on 31 March 2023 into ordinary shares in GHL at the rate of three ordinary shares for every $10 bond held.

In the draft financial statements, the proceeds from the bond issue have been recognized as bonds payable. The issue costs have been classified as an administrative expense. Cash received and paid has been recognized. No other entries have been made. The prevailing market interest rate for similar bonds for equivalent risk, but without conversion rights, is 8% per annum.

(iv) On 1 April 2019, GHL entered into a sale and leaseback agreement for its manufacturing plant. The plant was originally acquired by GHL on 31 March 2009 for $8,910,000, at which point the plant had a useful life of 30 years with no residual value. The sale proceeds of plant from the sale and leaseback agreement were $11.25 million, which is higher than the fair value of the plant of $9.0 million. The plant was leased back on a 20-year lease from 1 April 2019 at an annual rental of $1,105,350 to be paid annually in arrears at 31 March 2020. The sale satisfies HKFRS 15 "Revenue from Contracts with Customers", however, she insisted to account for it as a financing arrangement. The first lease rental is paid and charged to the statement of profit or loss. The sales proceed was treated as a financial liability. The incremental borrowing rate is 15% per annum.  

(v) GHL purchased a factory site in Malaysia on 1 April 2019 with intention for industrial use. Land prices in the area had increased significantly in the years immediately prior to 31 March 2020. Nearby sites had been acquired and converted into residential use. It is felt that, should the GHL's site also be converted into residential use, the factory site would have a market value of $27 million. $1.5 million of costs are estimated to be required to demolish the factory and to obtain planning permission for the conversion. GHL was not intending to convert the site at 1 April 2019 and had not sought planning permission at that date. The current replacement cost and carrying amount of the factory site are correctly calculated as $25.1 million and $28 million respectively as at 31 March 2020 before revaluation. Fanny did not reflect the change in fair value of the factory site even the factory site is measured using the revaluation model under HKAS 16.

The company purchased furniture on April 1, 2020 for $5,630.

On the same date, furniture with an original cost of $119,961, was sold for $66,438.

Calculate the maximum impact on business income for the year from furniture and other miscellaneous tangible capital assets.

On January 1, 2020, A Company issues $600,000, 12-year, 12%, semi-annual bonds. On the issue date, the market rate is 14%.

Determine the amount of cash received from the Issuance of the Bond. (4 Steps Must Show)

6.

The stockholders' equity account balances of Kay Corporation
for 2020 are given below:

                                     January 1      December 31
Common stock ......................   648,000         720,000
Paid-in capital – common stock ....   540,000         594,000
Treasury stock ....................   160,000          36,800
Paid-in capital – treasury stock ..     5,000            ?
Retained earnings .................   425,000            ?

The common stock account at January 1 consisted of 54,000 shares
that were outstanding at a $12 par value per share.

The treasury stock account at January 1 consisted of 10,000 shares
that had been re-acquired at a $16 cost per share.

During 2020, Kay Corporation entered into the following transactions:

March 23     Re-issued 2,400 of the treasury shares for $22 per share

June 9       Re-issued 3,700 of the treasury shares for $13 per share

August 15    Issued 6,000 shares of previously un-issued common stock

November 2   Re-issued 1,600 of the treasury shares for $14 per share

December 18  Declared and paid a $3.75 dividend per share on the
             outstanding shares of common stock

Kay Corporation reported a net income of $293,760 for 2020.

Calculate the retained earnings account balance at December 31, 2020.

The separate condensed balance sheet of Patrick Corporation and its wholly-owned subsidiary, Sean Corporation, are as follows:

Additional Information:
* On December 31, 2020, Patrick acquired 100% of Sean’s voting stock in exchange for $460,000.
* At the acquisition date, the fair values of Sean’s assets and liabilities equaled their carrying amounts, respectively, except that the fair value of certain items in Sean’s inventory were $25,000 more than their carrying amounts.

1. In the December 31, 2020, consolidated balance sheet of Patrick and its subsidiary, what amount
of total assets should be reported?

2. In the December 31, 2020, consolidated balance sheet of Patrick and its subsidiary, what amount
of total stockholders’ equity should be reported?

The comparative statement of financial position of Blue Spruce Corporation as at December 31, 2020, follows:

Net income of $37,900 was reported and dividends of $12,500 were declared and paid in 2020. New equipment was purchased, and equipment with a carrying value of $4,800 (cost of $11,900 and accumulated depreciation of $7,100) was sold for $8,100.

Central University of Illinois has a newly appointed president, Catherine Husker. This has been a challenging budget year due to the difficulties of getting a state budget passed in the State Legislature. It appears from all reports that the budget that may get passed will be only 90% of last year’s state appropriations for the University. This means the University will have to cut their own operating budget for next year because of the State’s expected reduction in appropriations to higher education.

Husker just had a meeting with the athletic director of the university, Gareth Connor, to discuss the budget for the athletic department. Central University has been a men’s football and basketball powerhouse for the last several decades. However, the women’s athletic program has had less success. Last year, though, the women’s basketball team was one of the team’s selected to participate in the NCAA Women’s Basketball Competition through an “at-large bid” due to their outstanding season.

Connor and Husker discussed the 2018 Athletic Department budget, which Connor believed was the final draft. The meeting did not go well. In fact, it went terribly.   Husker discussed four grave concerns she had about the Athletic Department budget and requested Connor to review and revise the budget in light of her concerns below. Draft II of the budget is due in two weeks time.

Concern 1: The Athletic Department is budgeting a loss of over $3 million. Given the tight fiscal position of the university, this outcome is unacceptable to Husker. A budgeted loss of $1 million is the most she will tolerate for 2018. By 2019 the Athletic Department has to operate with a balanced budget. She tells Connor this is nonnegotiable.

Concern 2: The low allocation of money to the women’s athletic program. Fox Valley News, a tabloid television show, recently ran a program titled “It’s a Man’s World at Central University Athletics’ Program.” Husker said Connor is treating woman athletes as “third-class citizens.”

Concern 3: The low academic performance of the men’s football athletes, many of whom have full scholarships. She notes that the local TV news recently ran an interview with three football-team students, only one of which “exemplified the high academic credentials she wants Central to showcase to the world.” As for the other two students, she calls one student “incoherent” and another “incapable of stringing sentences together.”

Concern 4: The outrageous salary paid to “Bull” Mason, the football coach. She notes it is twice that of the highest paid academic person on campus, a Nobel Prize winner. Moreover, Mason receives other payments from his “Football the Central Way” summer program for high school students.

Below is Draft I of the Athletic Department budget:

Central University 2017 Athletic Department Budget ($ millions)

Revenues:

            Men’s athletic programs                              $10.350

            Women’s athletic programs                            0.780

            Other (endowment income, gifts)     3.400          $14.530

Costs:

         Men’s athletic programs                              $11.040

            Women’s athletic programs                            2.800

            Other (non-assigned to programs)*              3.700          17.540

Operating Income                                                                            $( 3.010)

*Other non-assigned programs include rugby, soccer and volleyball

Men’s Athletic Programs:

                                    Football          Basketball         Swimming     Other       Total

Revenues                  $8.600           $1.500               $0.100        $0.150   $10.350

Costs                          7.400                2.700                  0.300           0.640     11.040

Full Scholarships            37                    21            6                      4          68

Women’s Athletic Programs:

                                                            Basketball         Swimming     Other       Total

Revenues                                          $0.600               $0.080        $0.100   $ 0.780

Costs                                                    1.800                  0.200           0.800       2.800

Full Scholarships                                     11            4                      2          17

REQUIRED:

Connor will be holding a half-day meeting with key officials of the Athletic Department (of which your team are some of these key officials) to discuss the university president’s concerns. In order for your team of officials to be prepared to discuss the concerns of the president at this meeting, please answer the following questions prior to the meeting.

Questions:

Who are the stakeholders? (Worth 4 pts.)

The Athletic Department is operating at a loss. What are some of the ways the Department can increase revenues? Are there any potential pitfalls or problems with any of your ideas? (Worth 6 pts.)

2. A computer company looking for a new location for a plant has determined three criteria to use to rate cities. Pair-wise comparisons are given below.

(b) Calculate the consistency ratio.