Periodic System— Using Knowledge of Financial Statement Relations to Compute Missing Accounts

The following information relates to Payleast Shoes Company. Assuming the company uses the periodic inventory system, solve for the missing amounts a through m for years 2020 through 2022.

• Do not use negative signs in your answers.
• Round gross profit percentage to the nearest whole percentage point.

Table: Rounded Depreciation Percentage by Recovery Year Using MACRS for First Four Property Classes

Percentage by recovery year

Recovery year 3 years 5 years 7 years 10 years

1 33% 20% 14% 10%

2 45 32 25 18

3 15 19 18 14

4 7 12 12 12

5 12 9 9

6 5 9 8

7 9 7

8 4 6

9 6

10 6

11 4

Total 100% 100% 100% 100%

a. Determine the after-tax cash outflows of Northwest Lumber under each alternative.

b. Find the present value of each after tax cash outflow stream, using the after-tax cost of debt.

c. Which alternative – lease or purchase – would you recommend? Why?

16-20 Options profit and losses

For each of the 100 share options shown in the following table, use the underlying stock price at expiration and other information to determine the amount of profit or loss an investor would have had, ignoring brokerage fees.

Option Types of options Cost of options Striking price per share Underlying stock price per share at expiration

A Call $200 $50 $55

B Call 350 42 45

C Put 500 60 50

D Put 300 35 40

E Call 450 28 26

Problem 1: How much time do Americans living in or near cities spend waiting in traffic, and how much does waiting in traffic cost them per year? The file Congestion includes this cost for 31 cities. (Source: Data extracted from “The high Cost of Congestion,” Time, October 17, 2011, p.18.)

1. a) Compute the mean, median, first quartile, and third quartile.

2. b) Compute the range, interquartile range, variance, and standard deviation.

3. c) Compute the covariance between the time spent sitting in traffic and the cost of sitting in

   traffic.

4. d) Computethecorrelationbetweenthetimespentsittingintrafficandthecostofsittingin

   traffic.

5. e) Based on the results of (a) through (d), what conclusions might you reach concerning the

   time spent waiting in traffic and the cost of waiting in traffic?

6. f) Create a histogram for each of the two variables: the time Americans living in or near cities

   spend waiting in traffic and the cost of waiting per year.

7. g) Create a scatter plot for the two variables and fit a straight line to the points. Show the

   equation of the fitted line.

Early in its fiscal year ending December 31, 2021, San Antonio Outfitters finalized plans to expand operations. The first stage was completed on March 28 with the purchase of a tract of land on the outskirts of the city. The land and existing building were purchased by paying $300,000 immediately and signing a noninterest-bearing note requiring the company to pay $700,000 on March 28, 2023. An interest rate of 8% properly reflects the time value of money for this type of loan agreement. Title search, insurance, and other closing costs totaling $30,000 were paid at closing.

At the end of April, the old building was demolished at a cost of $80,000, and an additional $60,000 was paid to clear and grade the land. Construction of a new building began on May 1 and was completed on October 29. Construction expenditures were as follows: (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)

San Antonio borrowed $4,800,000 at 8% on May 1 to help finance construction. This loan, plus interest, will be paid in 2022. The company also had a $6,250,000, 8% long-term note payable outstanding throughout 2021.

In November, the company purchased 10 identical pieces of equipment and office furniture and fixtures for a lump-sum price of $700,000. The fair values of the equipment and the furniture and fixtures were $520,000 and $280,000, respectively. In December, San Antonio paid a contractor $335,000 for the construction of parking lots and for landscaping.

Required:
1. Determine the initial values of the various assets that San Antonio acquired or constructed during 2021. The company uses the specific interest method to determine the amount of interest capitalized on the building construction. (Hint: Expenditures on March 28 and April 30 to acquire land on which to construct the building are included as part of accumulated expenditures for determining the amount of interest capitalized on the building. This means the interest capitalization period begins on March 28.)
2. How much interest expense will San Antonio report in its 2021 income statement?

Early in its fiscal year ending December 31, 2021, San Antonio Outfitters finalized plans to expand operations. The first stage was completed on March 28 with the purchase of a tract of land on the outskirts of the city. The land and existing building were purchased by paying $200,000 immediately and signing a noninterest-bearing note requiring the company to pay $600,000 on March 28, 2023. An interest rate of 8% properly reflects the time value of money for this type of loan agreement. Title search, insurance, and other closing costs totaling $20,000 were paid at closing.

At the end of April, the old building was demolished at a cost of $70,000, and an additional $50,000 was paid to clear and grade the land. Construction of a new building began on May 1 and was completed on October 29. Construction expenditures were as follows: (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)

San Antonio borrowed $3,000,000 at 8% on May 1 to help finance construction. This loan, plus interest, will be paid in 2022. The company also had a $5,250,000, 8% long-term note payable outstanding throughout 2021.

In November, the company purchased 10 identical pieces of equipment and office furniture and fixtures for a lump-sum price of $600,000. The fair values of the equipment and the furniture and fixtures were $455,000 and $245,000, respectively. In December, San Antonio paid a contractor $285,000 for the construction of parking lots and for landscaping.

Required:

1. Determine the initial values of the various assets that San Antonio acquired or constructed during 2021. The company uses the specific interest method to determine the amount of interest capitalized on the building construction. (Hint: Expenditures on March 28 and April 30 to acquire land on which to construct the building are included as part of accumulated expenditures for determining the amount of interest capitalized on the building. This means the interest capitalization period begins on March 28.)
2. How much interest expense will San Antonio report in its 2021 income statement?

Early in its fiscal year ending December 31, 2021, San Antonio Outfitters finalized plans to expand operations. The first stage was completed on March 28 with the purchase of a tract of land on the outskirts of the city. The land and existing building were purchased by paying $380,000 immediately and signing a noninterest-bearing note requiring the company to pay $780,000 on March 28, 2023. An interest rate of 8% properly reflects the time value of money for this type of loan agreement. Title search, insurance, and other closing costs totaling $38,000 were paid at closing.

At the end of April, the old building was demolished at a cost of $88,000, and an additional $68,000 was paid to clear and grade the land. Construction of a new building began on May 1 and was completed on October 29. Construction expenditures were as follows: (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)

San Antonio borrowed $6,300,000 at 8% on May 1 to help finance construction. This loan, plus interest, will be paid in 2022. The company also had a $7,050,000, 8% long-term note payable outstanding throughout 2021.

In November, the company purchased 10 identical pieces of equipment and office furniture and fixtures for a lump-sum price of $780,000. The fair values of the equipment and the furniture and fixtures were $572,000 and $308,000, respectively. In December, San Antonio paid a contractor $375,000 for the construction of parking lots and for landscaping.

Required:
1. Determine the initial values of the various assets that San Antonio acquired or constructed during 2021. The company uses the specific interest method to determine the amount of interest capitalized on the building construction. (Hint: Expenditures on March 28 and April 30 to acquire land on which to construct the building are included as part of accumulated expenditures for determining the amount of interest capitalized on the building. This means the interest capitalization period begins on March 28.)
2. How much interest expense will San Antonio report in its 2021 income statement?

Early in its fiscal year ending December 31, 2021, San Antonio Outfitters finalized plans to expand operations. The first stage was completed on March 28 with the purchase of a tract of land on the outskirts of the city. The land and existing building were purchased by paying $320,000 immediately and signing a noninterest-bearing note requiring the company to pay $720,000 on March 28, 2023. An interest rate of 8% properly reflects the time value of money for this type of loan agreement. Title search, insurance, and other closing costs totaling $32,000 were paid at closing.

At the end of April, the old building was demolished at a cost of $82,000, and an additional $62,000 was paid to clear and grade the land. Construction of a new building began on May 1 and was completed on October 29. Construction expenditures were as follows: (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)

San Antonio borrowed $5,100,000 at 8% on May 1 to help finance construction. This loan, plus interest, will be paid in 2022. The company also had a $6,450,000, 8% long-term note payable outstanding throughout 2021.

In November, the company purchased 10 identical pieces of equipment and office furniture and fixtures for a lump-sum price of $720,000. The fair values of the equipment and the furniture and fixtures were $615,000 and $205,000, respectively. In December, San Antonio paid a contractor $345,000 for the construction of parking lots and for landscaping.

Required:
1. Determine the initial values of the various assets that San Antonio acquired or constructed during 2021. The company uses the specific interest method to determine the amount of interest capitalized on the building construction. (Hint: Expenditures on March 28 and April 30 to acquire land on which to construct the building are included as part of accumulated expenditures for determining the amount of interest capitalized on the building. This means the interest capitalization period begins on March 28.)
2. How much interest expense will San Antonio report in its 2021 income statement?

CASE STUDY: The Nepalese Himalayas, A Protected Ecosystem?

In May of 2007 some 43 expeditions totalling 470 climbers summitted Mount Everest from both the Nepalese and Tibetan sides of the mountain. At one stage over 60 climbers were on or near the summit waiting (in some cases up to 1–2 hours) in order to get their chance to stand on the highest point in the world. If those 470 climbers had been asked why they chose to climb Mt Everest, somewhere in their answers would have been sentiments expressing a desire to experience one of the wildest places on earth. Technological innovations in mountaineering equipment, such as advanced clothing, bottled oxygen and the growth in the popularity of commercialized expeditions where clients are charged between US$40,000 and US$50,000 to be guided up the mountain will continue to attract hundreds of climbers as they attempt to fulfill a desire to experience one of the wildest places on earth. Research carried out in Sagarmatha (Mt Everest) National Park indicates that ecosystems above 4000 metres have been significantly impacted by tourism in the past 30 years. Impacts include the overharvesting of fragile alpine shrubs and plants for expedition and tourist lodge fuel, overgrazing, accelerated erosion, and uncontrolled lodge building. The present Nepalese government will continue to encourage tourism, as it is the country’s highest income earner.

YOUR ARGUMENT FOR OR AGAINST: A drastic reduction in expedition numbers and call for the complete banning, for 1 year, of climbing on all peaks over 8000 metres high. This reduction is necessary in trying to mediate a compromise between the conflicting needs of access, availability and presentability of an environmental or ecological product – wilderness – with those of the local population and the regenerative capacity of the ecosystem.

SUPPORT YOUR ARGUMENT WITH FACTS.

PARASITOLOGY QUESTION:

Amoeba case study

Calatagan is a third-class municipality in the province of Batangas, Philippines. It has a total population of 30,500 with a total of 8 barangays. The municipality’s major revenue comes from agriculture and aquaculture. A section of the population is employed in “Ang Pulo,” an island housing a mangrove forest conservation park located in the northeast. Some residents of Calatagan are settled along the major highway that connects it to neighboring municipalities, while some live further inland, usually near farms. Major streets are cemented but small streets are not. Deep well is the main source of water but there is one water distillery station serving three barangays in the municipality. In the summer of 2005, there were 950 cases of a rare eye infection in one barangay that affected residents of different ages. The infection is characterized by severe pain and reddening of the cornea. Antiviral drugs where administered but the patients’ condition did not improve. There were also 1500 reported cases of diarrhea by the RHU. Stool examination results from specimens submitted by patients revealed an increase in WBC count. Strange crystal-like structures were also seen under the microscope in some of the stool specimens. The mayor of Calatagan ordered an immediate investigation of the probable cause of the cases.

Questions to answer:

1. Identify the probable cause of the incidents in Calatagan, Batangas. Justify. (provide references for your answers)

2. What could have been the sources of infection of the residents in Calatagan? Describe the probable mode of infection for each identified cause. Cite examples and references.

3. Briefly provide a possible plan of action on how to control the cases in Calatagan.

PARASITOLOGY QUESTION:

Amoeba case study

Calatagan is a third-class municipality in the province of Batangas, Philippines. It has a total population of 30,500 with a total of 8 barangays. The municipality’s major revenue comes from agriculture and aquaculture. A section of the population is employed in “Ang Pulo,” an island housing a mangrove forest conservation park located in the northeast. Some residents of Calatagan are settled along the major highway that connects it to neighboring municipalities, while some live further inland, usually near farms. Major streets are cemented but small streets are not. Deep well is the main source of water but there is one water distillery station serving three barangays in the municipality. In the summer of 2005, there were 950 cases of a rare eye infection in one barangay that affected residents of different ages. The infection is characterized by severe pain and reddening of the cornea. Antiviral drugs where administered but the patients’ condition did not improve. There were also 1500 reported cases of diarrhea by the RHU. Stool examination results from specimens submitted by patients revealed an increase in WBC count. Strange crystal-like structures were also seen under the microscope in some of the stool specimens. The mayor of Calatagan ordered an immediate investigation of the probable cause of the cases.

Questions to answer:

1. Identify the probable cause of the incidents in Calatagan, Batangas. Justify. (provide references for your answers)

2. What could have been the sources of infection of the residents in Calatagan? Describe the probable mode of infection for each identified cause. Cite examples and references.

3. Briefly provide a possible plan of action on how to control the cases in Calatagan.