1.4
According to the Organization for Economic Cooperation and Development (OECD), labor productivity increased and unemployment also increased in Australia from 2013 to 2014. Explain why an increase in labor productivity and an increase in unemployment are not likely to coincide in the long run. Can you think of any explanation for these changes to simultaneously occur in the long run?
2.4
In 2017, the CEO of Google, Sundar Pichai, earned $1,333,557 in total compensation (salary, bonuses, and other compensation) and Cristian Samper, the president and CEO of the non-profit Wildlife Conservation Society, earned $1,320,978. How can a non-profit organization like the Wildlife Conservation Society justify compensating its chief executive at a similar level to the CEO of a successful for-profit company like Google?
In: Economics
A race car company developed a new car battery that has a longer life span than that of a traditional battery. From the date of purchase of a race car, the distribution of the life span of the new battery is approximately normal with mean 30 months and standard deviation 8 months. For the price of $50, the company offers a two-year warranty on the new battery for customers who purchase a race car. The warranty guarantees that the car will be replaced at no cost to the customer if the battery no longer works within 24 months from the date of purchase.
(a) In how many months from the date of purchase is it expected that 25 percent of the batteries will no longer work? Show work.
(b) Suppose one customer who purchases the warranty is selected at random. What is the probability that the customer selected will require a replacement within 24 months from the date of purchase because the battery no longer works? Show your work and label your answer with appropriate probability notation.
(C). The company has a gain of $50 for each customer who purchases a warranty but does not require a replacement. The company has a loss (negative gain) of $150 for each customer who purchases a warranty and does require a replacement. What is the expected value of the gain for the company for each warranty purchased? Show work
In: Statistics and Probability
You have recently been hired by Bio Lux Company, in its relatively new treasury management department. Bio Lux was founded five years ago by Jessica Parker. Jessica found a method to produce high quality shampoo using natural ingredients. The shampoo produced by Bio Lux is in a good position to compete with other more established shampoo producers. The company is privately owned by Jessica Parker and her family, and it had sales of $12 million last year.
Bio Lux primarily sells its products through a wholesaler who distributes the products through its network of retailers throughout the country. Bio Lux’s growth to date has come from its innovation, quality, and low costs. When the company had sufficient capital, it would expand production. Relatively little formal analysis has been used in its capital budgeting process. Jessica has just read about capital budgeting techniques and has come to you for help. For starters, the company has never attempted to determine its cost of capital, and Jessica would like you to perform the analysis. Because the company is privately owned, it is difficult to determine the cost of equity for the company. Jessica wants you to use a similar company to estimate the cost of capital (WACC) for Bio Lux, and she has chosen Procter & Gamble as a representative company. The following questions will lead you through the steps to calculate this estimate.
1. To estimate the cost of equity for Procter & Gamble, go to finance.yahoo.com and enter the ticker symbol “PG.” Follow the various links at this website to find answers to the following questions:
a) What is the most recent stock price (and provide the associated date) listed for Procter & Gamble?
b) What is the market value of equity, or market capitalization?
c) How many shares of stock does Procter & Gamble have outstanding?
d) What is the beta for Procter & Gamble?
e) Now go back to finance.yahoo.com and follow the “Bonds” link. What is the yield on three-month Treasury bills? Using a 6 percent market risk premium, what is the cost of equity for Procter & Gamble using the CAPM?
In: Accounting
Boswell and Johnson form a partnership on May 1, 2016. Boswell contributes cash of $51,000; Johnson conveys title to the following properties to the partnership:
Book Value Fair Value
Land $ 15,500 $ 29,000
Building and equipment 35,500 37,000
The partners agree to start their partnership with equal capital balances. No goodwill is to be recognized.
According to the articles of partnership written by the partners, profits and losses are allocated based on the following formula:
Boswell receives a compensation allowance of $1,200 per month.
All remaining profits and losses are split 70:30 to Johnson and Boswell, respectively.
Each partner can make annual cash drawings of $4,000 beginning in 2017.
Net income of $11,500 is earned by the business during 2016.
Walpole is invited to join the partnership on January 1, 2017. Because of her business reputation and financial expertise, she is given a 40 percent interest for $55,000 cash. The bonus approach is used to record this investment, made directly to the business. The articles of partnership are amended to give Walpole a $2,000 compensation allowance per month and an annual cash drawing of $8,000. Remaining profits are now allocated:
Johnson 50 %
Boswell 10
Walpole 40
All drawings are taken by the partners during 2017. At year-end, the partnership reports an earned net income of $29,000.
On January 1, 2018, Pope (previously a partnership employee) is admitted into the partnership. Each partner transfers 10 percent to Pope, who makes the following payments directly to the partners:
Johnson $ 6,413
Boswell 7,650
Walpole 9,012
Once again, the articles of partnership must be amended to allow for the entrance of the new partner. This change entitles Pope to a compensation allowance of $1,000 per month and an annual drawing of $3,000. Profits and losses are now assigned as follows:
Johnson 40.0 %
Boswell 12.0
Walpole 38.0
Pope 10.0
For the year of 2018, the partnership earned a profit of $51,000, and each partner withdrew the allowed amount of cash.
Determine the capital balances for the individual partners as of the end of each year: 2016 through 2018.
ENDING BALANCES
Boswell Johnson Walpole Pope
2016 68,670 59,830 0 0 *These Are Correct*
2017
2018
In: Accounting
Boswell and Johnson form a partnership on May 1, 2016. Boswell contributes cash of $53,000; Johnson conveys title to the following properties to the partnership:
| Book Value |
Fair Value |
|||
| Land | $ | 16,500 | $ | 31,000 |
| Building and equipment | 36,500 | 39,000 | ||
The partners agree to start their partnership with equal capital balances. No goodwill is to be recognized.
According to the articles of partnership written by the partners, profits and losses are allocated based on the following formula:
Net income of $12,500 is earned by the business during 2016.
Walpole is invited to join the partnership on January 1, 2017. Because of her business reputation and financial expertise, she is given a 40 percent interest for $57,000 cash. The bonus approach is used to record this investment, made directly to the business. The articles of partnership are amended to give Walpole a $3,000 compensation allowance per month and an annual cash drawing of $12,000. Remaining profits are now allocated:
| Johnson | 50 | % |
| Boswell | 10 | |
| Walpole | 40 | |
All drawings are taken by the partners during 2017. At year-end, the partnership reports an earned net income of $35,000.
On January 1, 2018, Pope (previously a partnership employee) is admitted into the partnership. Each partner transfers 10 percent to Pope, who makes the following payments directly to the partners:
| Johnson | $ | 5,943 |
| Boswell | 7,862 | |
| Walpole | 10,076 | |
Once again, the articles of partnership must be amended to allow for the entrance of the new partner. This change entitles Pope to a compensation allowance of $700 per month and an annual drawing of $5,000. Profits and losses are now assigned as follows:
| Johnson | 41.0 | % |
| Boswell | 13.0 | |
| Walpole | 36.0 | |
| Pope | 10.0 | |
For the year of 2018, the partnership earned a profit of $56,000,
and each partner withdrew the allowed amount of cash.
Determine the capital balances for the individual partners as of the end of each year: 2016 through 2018.
In: Accounting
Boswell and Johnson form a partnership on May 1, 2016. Boswell contributes cash of $69,000; Johnson conveys title to the following properties to the partnership:
| Book Value |
Fair Value |
|||
| Land | $ | 24,500 | $ | 47,000 |
| Building and equipment | 44,500 | 55,000 | ||
The partners agree to start their partnership with equal capital balances. No goodwill is to be recognized.
According to the articles of partnership written by the partners, profits and losses are allocated based on the following formula:
Net income of $20,500 is earned by the business during 2016.
Walpole is invited to join the partnership on January 1, 2017. Because of her business reputation and financial expertise, she is given a 40 percent interest for $73,000 cash. The bonus approach is used to record this investment, made directly to the business. The articles of partnership are amended to give Walpole a $4,000 compensation allowance per month and an annual cash drawing of $16,000. Remaining profits are now allocated:
| Johnson | 50 | % |
| Boswell | 10 | |
| Walpole | 40 | |
All drawings are taken by the partners during 2017. At year-end, the partnership reports an earned net income of $47,000.
On January 1, 2018, Pope (previously a partnership employee) is admitted into the partnership. Each partner transfers 10 percent to Pope, who makes the following payments directly to the partners:
| Johnson | $ | 7,999 |
| Boswell | 11,590 | |
| Walpole | 13,756 | |
Once again, the articles of partnership must be amended to allow for the entrance of the new partner. This change entitles Pope to a compensation allowance of $700 per month and an annual drawing of $7,000. Profits and losses are now assigned as follows:
| Johnson | 42.0 | % |
| Boswell | 14.0 | |
| Walpole | 34.0 | |
| Pope | 10.0 | |
For the year of 2018, the partnership earned a profit of $69,000,
and each partner withdrew the allowed amount of cash.
Determine the capital balances for the individual partners as of the end of each year: 2016 through 2018.
In: Accounting
Boswell and Johnson form a partnership on May 1, 2016. Boswell contributes cash of $60,000; Johnson conveys title to the following properties to the partnership:
|
Book Value |
Fair Value |
|||
| Land | $ | 20,000 | $ | 38,000 |
| Building and equipment | 40,000 | 46,000 | ||
The partners agree to start their partnership with equal capital balances. No goodwill is to be recognized.
According to the articles of partnership written by the partners, profits and losses are allocated based on the following formula:
Boswell receives a compensation allowance of $800 per month.
All remaining profits and losses are split 60:40 to Johnson and Boswell, respectively.
Each partner can make annual cash drawings of $8,000 beginning in 2017.
Net income of $16,000 is earned by the business during 2016.
Walpole is invited to join the partnership on January 1, 2017. Because of her business reputation and financial expertise, she is given a 40 percent interest for $64,000 cash. The bonus approach is used to record this investment, made directly to the business. The articles of partnership are amended to give Walpole a $3,000 compensation allowance per month and an annual cash drawing of $16,000. Remaining profits are now allocated:
| Johnson | 45 | % |
| Boswell | 15 | |
| Walpole | 40 | |
All drawings are taken by the partners during 2017. At year-end, the partnership reports an earned net income of $38,000.
On January 1, 2018, Pope (previously a partnership employee) is admitted into the partnership. Each partner transfers 10 percent to Pope, who makes the following payments directly to the partners:
| Johnson | $ | 6,398 |
| Boswell | 10,196 | |
| Walpole | 11,104 | |
Once again, the articles of partnership must be amended to allow for the entrance of the new partner. This change entitles Pope to a compensation allowance of $600 per month and an annual drawing of $7,000. Profits and losses are now assigned as follows:
| Johnson | 41.0 | % |
| Boswell | 13.0 | |
| Walpole | 36.0 | |
| Pope | 10.0 | |
For the year of 2018, the partnership earned a profit of $53,000,
and each partner withdrew the allowed amount of cash.
Determine the capital balances for the individual partners as of the end of each year: 2016 through 2018.
|
||||||||||||||||||||||||||
In: Accounting
Boswell and Johnson form a partnership on May 1, 2016. Boswell contributes cash of $57,000; Johnson conveys title to the following properties to the partnership:
| Book Value |
Fair Value |
|||
| Land | $ | 18,500 | $ | 35,000 |
| Building and equipment | 38,500 | 43,000 | ||
The partners agree to start their partnership with equal capital balances. No goodwill is to be recognized.
According to the articles of partnership written by the partners, profits and losses are allocated based on the following formula:
Net income of $14,500 is earned by the business during 2016.
Walpole is invited to join the partnership on January 1, 2017. Because of her business reputation and financial expertise, she is given a 40 percent interest for $61,000 cash. The bonus approach is used to record this investment, made directly to the business. The articles of partnership are amended to give Walpole a $2,000 compensation allowance per month and an annual cash drawing of $10,000. Remaining profits are now allocated:
| Johnson | 52 | % |
| Boswell | 8 | |
| Walpole | 40 | |
All drawings are taken by the partners during 2017. At year-end, the partnership reports an earned net income of $35,000.
On January 1, 2018, Pope (previously a partnership employee) is admitted into the partnership. Each partner transfers 10 percent to Pope, who makes the following payments directly to the partners:
| Johnson | $ | 7,725 |
| Boswell | 8,874 | |
| Walpole | 9,988 | |
Once again, the articles of partnership must be amended to allow for the entrance of the new partner. This change entitles Pope to a compensation allowance of $1,300 per month and an annual drawing of $4,000. Profits and losses are now assigned as follows:
| Johnson | 43.0 | % |
| Boswell | 15.0 | |
| Walpole | 32.0 | |
| Pope | 10.0 | |
For the year of 2018, the partnership earned a profit of $58,000,
and each partner withdrew the allowed amount of cash.
Determine the capital balances for the individual partners as of the end of each year: 2016 through 2018.
In: Accounting
The director of admissions at the University at the University of Maryland, University College is concerned about the high cost of textbooks for the students each semester. A sample of 25 students enrolled in the university indicates that x(bar) = $315.40 and s = $43.20.
A mean that is not in a confidence interval is rejected by the confidence interval, and we say the evidence against the mean is significant. At the 0.10 level of significance, is there evidence against mean $300?
In: Math
Cullumber Company had the following selected
transactions.
| Feb. 2 | Purchases supplies from Supplies R Us on account for $2,000. | |
| 10 | Cash register sales total $33,700, plus 5% GST and 8% PST. | |
| 15 | Signs a $27,300, six-month, 6%-interest-bearing note payable to MidiBank and receives $27,300 in cash. | |
| 21 | The payroll for the previous two weeks consists of salaries of $39,000. All salaries are subject to CPP of $1,800 and EI of $730 and income tax of $6,900. The salaries are paid on February 28. The employer’s payroll expense is also recorded. | |
| 28 | Accrues interest on the MidiBank note payable. | |
| 28 | Accrues the required warranty provision because some of the sales were made under warranty. Of the units sold under warranty, 270 are expected to become defective. Repair costs are estimated to be $30 per unit. | |
| 28 | Pays employees the salaries for the pay period ending February 21. | |
| Mar. 1 | Remits the sales taxes to the Province and GST to the Receiver General for the February 10 sales. | |
| 2 | Makes the payment to Supplies R Us from the February purchase. | |
| 15 | Remits the payroll taxes owing from the February 21 payroll to the Receiver General. |
Journalize the February and March transactions.
In: Accounting