1. Suppose the industry of all farms planting beans is now in a perfectly competitive longrun equilibrium, and all farms have zero fixed cost for planting. Recent regulation in the market of fertilizers raises the price of bean fertilizer and therefore the marginal and average costs of all the farms in this industry. Note that marginal and average cost curves both experience a parallel shift up by the same amount. Please use a graphic tool to analyze the following changes to each individual farm and to the entire industry:

(a) (8 points) Set up a diagram, for both individual firms and the industry, to show the longrun equilibrium before the fertilizer shortage. Clearly mark the market price (p), individual supply (q), and the industry supply (Q).

(b) (12 points) Suppose the fertilizer shortage takes place but the price for beans has not yet adjusted accordingly (no entry or exit either). How much will each existing farm produce (mark your answer as q1 on the same graph) and how much profit or loss are they getting (make with a shaded area on your graph)?

(c) (16 points) As time goes by, will this industry experience any entry or exit? How will the price start to adjust? Explain your answer. Mark on your graph the new long-run industry supply, the new equilibrium market price (p’), the new individual supply (q’), and the new industry supply (Q’).

2. Suppose one Japanese firm and one American firm dominate the US market of widgets. They share the same cost structure: TC = 250 + 40q. The only demand for widgets is in the US and is p = 100 – Q.

(a) (16 points) If these two firms compete in quantity at the same time, what is the Cournot equilibrium output, price, profit level by each firm?

(b) (12 points) Suppose the American firm acquires the Japanese firm and therefore becomes a monopoly in this market. Calculate the monopoly’s output, price, and Lerner Index. How much is the deadweight loss due to monopoly behavior?

Q–7. An American investor purchased 100 shares of a French beyond meat company on January 1, 2018 at €93.00 per share. e French company paid an annual dividend of €0.72 on December 31st, 2018 to all its shareholders. e stock was sold that day as well for €100.25. e exchange rate was € 0.68 per US dollar on January 1,2018 and €0.71 per US dollar on December 31, 2018. What is the investor’s total return in US dollars?

The Baron Basketball Company (BBC) earned $9 a share last year and paid a dividend of $6 a share. Next year, you expect BBC to earn $10 and continue its payout ratio. Assume that you expect to sell the stock for $140 a year from now. Do not round intermediate calculations. Round your answers to the nearest cent.

If you require 10 percent on this stock, how much would you be willing to pay for it? $

If you expect a selling price of $110 and require a 7 percent return on this investment, how much would you pay for the BBC stock? $

For the year ended 31 December 2016 a company earned a profit after interest and tax of
£480,000. The company’s share price is £12 per share. The following are extracts from the
company’s Statement of financial position at 31 December 2016:
Ordinary share capital (50p shares) £200,000
Retained earnings £380,000
Revaluation reserve £80,000
Long-term 10% Bank loan £48,000
The company’s price earnings (PE) number and return on equity for the period were:

The following information pertains to the payrolls of Warrs Company for November 2018:

Employees       Wage earned               Wage earned               Federal Income           State/local

                        By 10/31/2018 in November 2018     Tax                              Income Taxes

Jane                 $105,000                     $12,000                       $1,500                         $650

Tom                     60,000                      7,000 500 250

Bill                        6,000 1,200                          0                                   0

Actual state unemployment tax rate is 4%, while the federal unemployment tax rate is 1%. The taxable income limit for social security tax is $110,000/person, year, while the taxable income limit of SUTA and FUTA is $7,000/ person, year.

- Prepare the necessary journal entries for November payrolls of Warrs Company if salaries and wages are paid in cash after withholding all payroll taxes and dues.

Howard's company earned $320,000 in a year when it had an average of 40,000 ordinary shares outstanding. The ordinary shares sold at an average market price of $7.5 per share in the year. Also outstanding were 30,000 warrants that could be exercised to buy one ordinary share for $5 for each warrant exercised.

(a) Determine whether the warrant exercised lead to dilutive earnings per share.

(b) Compute the number of treasury shares that can be bought back through proceeds of warrants if exercised. How many related incremental shares that can be issued?

Owen Company forgot to accrue $3,000 of salaries its employees had earned at the end of 2019. It paid and expensed the salaries in 2020. It also, in 2019, recorded $4,000 of sales as an account receivable; however, the sale really did not take place until 2020, and it should have recognized the revenue in 2020. It collected the money from the sale early in 2020.

Provide the impact of the errors on the following:

Assets as of 12/31/19: $_____________ Overstated Understated

Assets as of 12/31/20: $_____________ Overstated Understated

Liabilities as of 12/31/19: $_____________ Overstated Understated

Net income for 2020: $_____________ Overstated Understated

During the year, Hepworth Company earned a net income of $59,225. Beginning and ending balances for the year for selected accounts are as follows:

There were no financing or investing activities for the year. The above balances reflect all of the adjustments needed to adjust net income to operating cash flows.

Required:

X

Amount Descriptions

Refer to the list below for the exact wording of an amount description within your Statement of Cash Flows.

X

Operating Cash Flows - Indirect Method

1. Prepare a schedule of operating cash flows using the indirect method. (Note: Use a minus sign to indicate any decreases in cash or cash outflows. Refer to the Amount Descriptions list provided for the exact wording of the answer choices for text entries.)

Final questions

2. Suppose that all the data used in Requirement 1 except the ending accounts payable and cash balances are not known. Assume also that you know that the operating cash flow for the year was $20,075. What is the ending balance of accounts payable?

3. Conceptual Connection: Hepworth has an opportunity to buy some equipment that will significantly increase productivity. The equipment costs $25,000. Assuming exactly the same data used for Requirement 1, can Hepworth buy the equipment using this year’s operating cash flows?

Company V earned a net profit margin of 25% on sales of $25 million in its most recently ended fiscal year. Capital investment was $2.5 million and depreciation was $3 million. Investment in working capital is 10% of sales every year. Assume the following:

• Sales, net income, cap ex, depreciation and interest expense are expected to grow 10% every year for the next five years
• After five years sales, net income, cap ex, depreciation and interest expense will decline to a stable growth rate of 4% per year

The tax rate is 36%. Company Z has 1.5 million shares of common stock outstanding. Company Z also has long-term debt paying 10% interest and it is trading at its par value of $30 million.

Calculate the value of the firm and its equity assuming the cost of capital is 15% during years 1-5 and 12% during the stable stage.

INSTRUCTIONS: A company has a centralized accounting system. Each individual department currently compiles its accounting paper transactions from its local accounting system. To eliminate the paper and increase efficiency, the Audit Manager of the company just asked you, IT auditor, to help him come up with a plan to implement an interface from each individual department’s accounting system to the centralized accounting system.

TASK: Prepare a memo to the Audit Manager naming and describing the most critical controls that you would recommend in this particular case. You are required to search beyond the chapter (i.e., IT literature and/or any other valid external source) to support your response. Include examples, as appropriate, to evidence your case point. Submit a word file with a cover page, responses to the task above, and a reference section at the end. The submitted file should be 5 pages long (double line spacing), including cover page and references. Be ready to present your work to the class.