a) There are different rules for different investments. Would it not be easier if there were just one way to record investments? What is the value-added by the separation if you were the manager reviewing the financial statements? Is there an ethical implication to this evaluation?

b) The CEO of the company asks the question: Is vertical or horizontal analysis better? How do you respond? Which ratios would you identify as the top three that would supplement the analysis? Is there an ethical reasoning that supports your choices?

On August 7th, 2018, Elon Musk claimed on Twitter that he had secured funding to take Tesla private. On that day, Tesla stock price jumped up from $342 to $380 per share. Why did the financial market react positively to that news? What happened to the short sellers of Tesla stocks during that time? Recall that Musk is the founder of Tesla and was involved with the corporation’s day-to-day operations.

HARLAND CORP has been in existence for 45 years. Over the past, 6 years the stock price has stagnated and remained between $22.15 and $22.82. The CEO, who started the company, believes that the stock price needs to be higher, and the best way to do that is to pay a dividend to increase the demand for the stock. The company has never paid a dividend in their history. The CEO needs to determine what type of dividend policy to follow, and how much the first dividend should be, so he comes to you for advice. He provides you with the following historical information as it relates to the company’s earnings per share (as an aside, dividends per share should not exceed EPS unless the firm is liquidating):

YEAR                                                      EPS

                2017                                                       $2.36

                2016                                                       $2.12

                2015                                                       $0.81

                2014                                                       $2.01

                2013                                                       $2.09

                2012                                                       $2.44

                2011                                                       $2.31

                2010                                                       $2.01

You are to prepare a brief memo (1 page, single-spaced) as to what dividend policy you recommend, why you recommend it, what initial dividend amount you recommend, and why you recommend that amount.

3 types of dividend are Dividend policy does no matter (Miller and Modigliani), Dividend policy matter (the bird in the hand). Dividend policy matter (the tax)

HARLAND CORP has been in existence for 45 years. Over the past, 6 years the stock price has stagnated and remained between $22.15 and $22.82. The CEO, who started the company, believes that the stock price needs to be higher, and the best way to do that is to pay a dividend to increase the demand for the stock. The company has never paid a dividend in their history. The CEO needs to determine what type of dividend policy to follow, and how much the first dividend should be, so he comes to you for advice. He provides you with the following historical information as it relates to the company’s earnings per share (as an aside, dividends per share should not exceed EPS unless the firm is liquidating):

YEAR                                                      EPS

                2017                                                       $2.36

                2016                                                       $2.12

                2015                                                       $0.81

                2014                                                       $2.01

                2013                                                       $2.09

                2012                                                       $2.44

                2011                                                       $2.31

                2010                                                       $2.01

You are to prepare a brief memo (1 page, single-spaced) as to what dividend policy you recommend, why you recommend it, what initial dividend amount you recommend, and why you recommend that amount.

3 types of dividend policy (Stable dividend policy, constant dividend policy, and residual dividend policy)

10.An unethical act:

A.Is always illegal as well

B.Is not necessarily illegal

C.Must, at minimum, violate a government regulation

D.Is determined for the accounting profession by the FASB

11.You are an Accountant for a growing tech company and ready for IPO. During year end you are responsible for accruing revenues to prepare the financial statement. Accrual entries are subjective as it’s an estimate of what is anticipated to be received. CEO or company is counting on you to do the “right thing” so to meet analysts’ expectations. If you applied utilitarian method to make your decision which one of the following most closely applies ?

A.Accrue revenue. While it’s technically not proper GAAP accounting, it will benefit the shareholders and CEO.

B.None of the above

C.Accrue revenue because it’s the right thing to do.

D.Don’t accrue revenue because it won’t benefit anyone

12.The AICPA’s Code of Professional Conduct establishes:

A.The rules for resolving technical judgments in achieving a fair presentation of financial statements.

B.The normative rules of ethical behavior that guide professional accountants.

C.The rules of conduct for conducting audits, but no other forms of attestation.

D.The rules of conduct for structuring and conducting audits and other attestation engagements.

On November 14, Thorogood Enterprises announced that the public and acrimonious battle with its current CEO had been resolved. Under the terms of the deal, the CEO would step down from his position immediately. In exchange, he was given a generous severance package. Given the information below, calculate the cumulative abnormal return (CAR) around this announcement. Assume the company has an expected return equal to the market return. (A negative value should be indicated by a minus sign. Leave no cells blank - be certain to enter "0" wherever required. Do not round intermediate calculations. Round your answers to 1 decimal place.)

The accounting profit before tax of Subang Ltd for the year ended 30 June 2020 was $320,000.

It included the following revenue and expense items:

Legal expenses 62 500

Interest expense 10 000

Bad debt expense 15 000

Depreciation expense – Plant & equipment 26 250

Entertainment Expense 2 500 Audit fee 40 000 Interest revenue 15 000 Rent revenue 10 000 Exempt income 37 500 Additional information: 1. Interest receivable at 30 June 2020 is $12,500 (2019: $15,000). Interest payable at 30 June 2020 is $500 (2019: $3,000). Interest is assessable on receipt and deductible when paid. 2. The company raised an accrual liability of $17 500 for audit work performed and not paid by 30 June 2020 (2019: $15,000). Fees for audit work are not deductible unless the audit work has been performed and paid. 3. Rent revenue relates to a contract where the annual rent is received in advance. The unearned revenue liability at 30 June 2020 is $10,000 (2019: $7,500). Rent is assessable when received. 4. Legal expenses include $25,000 related to capital transactions that are not deductible. 5. The bad debts expense relates to an account that has been written off. 6. Plant and equipment is as follows: 30 June 2020 30 June 2019 Plant & Equipment $175 000 $75 000 Accumulated depreciation 48 750 22 500 126 250 52 500 Question 1 is continued on the next page ACCY200 (MT) / Page 4 of 6 Question 1 continued 7. Tax depreciation for 30 June 2020 is $35,000. The tax written down value of plant and equipment at 30 June 2020 is $110,000 (2019: $45,000). 8. The deferred tax balances at 30 June 2019 are; deferred tax liability $6,750 and deferred tax asset $12,300. 9. The company tax rate is 30%. Required: a) Prepare the current tax worksheet and the journal entry to recognise the current tax as at 30 June 2020. b) Prepare the deferred tax worksheet and any necessary journal entries to adjust deferred tax accounts for 30 June 2020.

Laura Leasing Company signs an agreement on January 1, 2020, to lease equipment to Vaughn Company. The following information relates to this agreement.

Prepare all of the journal entries for the lessee for 2020 to record the lease agreement, the lease payments, and all expenses related to this lease. Assume the lessee’s annual accounting period ends on December 31. (For calculation purposes, use 5 decimal places as displayed in the factor table provided and round answers to 2 decimal places, e.g. 5,265.25. Credit account titles are automatically indented when the amount is entered. Do not indent manually. Record journal entries in the order presented in the problem.)

Ayayai Corp., a public company incorporated on June 28, 2019, set up a single account for all of its intangible assets. The following summary discloses the debit entries that were recorded during 2019 and 2020 in that account:

INTANGIBLE ASSETS-AYAYAI
July
1,   2019       8-year franchise; expiration date of June 30, 2027       $42,000
Oct.
1           Advance payment on office lease (2-year lease)
28,000
Dec.   31
Net loss for 2019 including incorporation fee, $1,000; related legal fees of organizing, $5,100;
expenses of recruiting and training staff for start-up of new business, $3,700       17,000
Feb.
15,   2020       Patent purchased (10-year life)
74,400
Mar.   1           Direct costs of acquiring a 5-year licensing agreement
75,000
Apr.   1           Goodwill purchased (indefinite life)
278,400
June   1           Legal fee for successful defence of patent (see above)
12,815
Dec.   31           Costs of research department for year
75,000
31           Royalties paid under licensing agreement (see above)
2,775

The new business started up on July 2, 2019. No amortization was recorded for 2019 or 2020. The goodwill purchased on April 1, 2020, includes in-process development costs that meet the six development stage criteria, valued at $173,000. The company estimates that this amount will help it generate revenues over a 10-year period.

(a)

Prepare the necessary entries to clear the Intangible Assets account and to set up separate accounts for distinct types of intangibles. Make the entries as at December 31, 2020, and record any necessary amortization so that all balances are appropriate as at that date. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Round answers to 0 decimal places, e.g. 5,275.)

Date
Account Titles and Explanation
Debit
Credit
Dec. 31, 2020

(To clear Intangible Assets account)
Dec. 31, 2020

(To correct for amortization on franchises)
Dec. 31, 2020

(To correct for rent payments)
Dec. 31, 2020

(To record amortization
expense on patents)
Dec. 31, 2020

(To record amortization
expense on licences)
Dec. 31, 2020

(To record amortization expense
on development cost)