Chapter 14 -Long term Liabilities

Problem 14-2

(Issuance and Redemption of bonds) Venezuela Co. is building a new hockey arena at a cost of $2,500,000. It received a down payment of $50,000 from local businesses to support the project, and now needs to borrow $2000,000 to complete the project. It therefore decides to issue $2000,000 of 10.5%, 10-year bonds. These bonds were issued on January 1, 2016 and pay interest annually on each January 1. The bond yield 10%.

Instructions: a) prepare a journal entry to record the issuance of bonds on January 1. 2016

b) prepare a bond amortization schedule up to and including January 1, 2020 using the effective interest method.

c) Assume that on July 1, 2019, Venezuela Co. redeems half of the bonds at a cost of $1,065,000plus the accrued interest. Prepare the journal entry to record this redemption.

CASE STUDY: WEARABLE TECHNOLOGY COMPETITION PROJECT

Case Study Information

This year, a symposium of wearable technology manufacturers are sponsoring a contest. The contest is open to anyone who wants to participate. Because of new technological advances in wearable technology, manufacturers are looking for new and innovative product and software solutions.

Sarah is a senior student in the engineering technology program at Sheridan, and she is very interested in wearable technology production and supporting applications. She is very interested in everything related to the wearable technology industry, from fitness devices to gear to assist in medical diagnosis. She is determined to participate in this contest and win it. She applied for and was awarded a grant for $7,000 through Sheridan College to work on this wearable technology project. She can use the money to pay for any special hardware or software that Sheridan could also use after the contest.

The college has a wrist band that can be used to monitor and record various physiological functions of the patient wearing it. Sarah has recruited a doctor who specializes in sleeping disorders to work with the team to track patient’s vitals as they sleep. The software to interpret the data stream still has to be developed. She could also award small stipends ($500 per person) to people who help on the project. Sarah knows that she will have to convince several people to donate their time and energy to help her make a great wearable technology in time for the contest, just 10 months away.

The first-prize winner in each category received $250,000 and the opportunity to participate in a major wearable technology contest. There were also prizes of $75,000 and $25,000 for second and third place. Sarah really wants to use her computer and project management skills in the wearable technology industry, so even if she didn’t win a prize, she wants to gain valuable experience to help find a job after graduation.

Part 1: Project Integration Management

Tasks:

1. Prepare a project charter for the Wearable Technology Competition Project. (pp210-211) Assume the project will take 10 months to complete (use any year you wish, starting September 1st with final submission due July 1st) and the total budget is $7,000 plus unlimited volunteer hours. Sarah estimates that she will spend about 20 hours per week on this project and serve as the lead technical person. She’s asked you to be the project manager, and she’ll work closely with you. Use the project charter template and examples of project charters in Chapters 3 and 4 as guidelines. Assume that the project sponsor is Sarah. Include the main roles for other major stakeholders (doctor, students, faculty, and staff at Sarah’s university willing to volunteer their time).

Question 1:

Assume that it is now January 1, 2010. ABC is experiencing is using all the earnings for expansion and therefore, has no dividends. The company will pay a dividend of $1.5 coming 4 years from today. The dividends are expected to grow at a super-normal growth rate of 20% for year 5 and year 6, after which the company achieves a long run growth rate of 6%. Stockholders require a return of 12%.

a. Calculate ABC's non-constant dividends from year 1 to year 6. Also make a time-line.

b. Calculate ABC's horizon value.

c. Calculate the value of the stock today, P̂0.

d. Calculate the expected dividend yield, capital gains yield, and total return expected for 2010.

Question 1:

Assume that it is now January 1, 2010. ABC is experiencing is using all the earnings for expansion and therefore, has no dividends. The company will pay a dividend of $1.5 coming 4 years from today. The dividends are expected to grow at a super-normal growth rate of 20% for year 5 and year 6, after which the company achieves a long run growth rate of 6%. Stockholders require a return of 12%.

a. Calculate ABC's non-constant dividends from year 1 to year 6. Also make a time-line.

b. Calculate ABC's horizon value.

c. Calculate the value of the stock today, P̂0.

d. Calculate the expected dividend yield, capital gains yield, and total return expected for 2010.

A 2010 study asserts that the number of hours that the average college student studies each week has been steadily dropping (The Boston Globe, July 4, 2010). In fact, the researchers state that, in the U.S., today’s undergraduates study an average of 14 hours per week. Suppose an administrator at a local university wants to show that the average study time of students at his university differs from the national average. He takes a random sample of 35 students at is university and finds that the average number of hours spent studying per week is 16.3. Assume that the population standard deviation is 7.2 hours. At 0.05 level of significance, what is the test statistics for testing the hypotheses H0: µ = 14 versus H1: µ ≠ 14?

Long-lived assets

Make necessary journal entries

1. On Jan 1, 2010 Hampton purchased equipment at a cost of $400,000! installation cost is $20,000. The equipment has a 10 year life and an expected salvage value at the end of 10 yrs. of 20,000

2. On Dec 31, 2010 Hampton determined that the fair value of the equipment was 390,000. No impairment loss is incurred.

3. On Jan 1st, 2011 Hampton revised the useful life of the computers to a total of 14 years to replace the original assumption of 10 years and the salvage value to $30,000

4. On Dec 31,2011 Hampton determined that the fair value of the equipment was $320,000 and an impairment loss is incurred.

5. On March 31, 2012 Hampton sold the equipment for $320,000

ACT and SAT scores are both known to be normally distributed. In 2017, the mean and standard deviation for the ACT were μ=20 and σ=6, respectively. The mean and standard deviation for the SAT were μ=1060 and σ=200, respectively. a. What ACT score would place a student in the same percentile as a student who scored 1310 on the SAT in 2010? (In other words, what ACT score is "equivalent" to an SAT score of 1310?) Round your answer to the nearest integer. b. What SAT score would place a student in the same percentile as a student who scored 14.6 on the ACT in 2010? (In other words, what SAT score is "equivalent" to an ACT score of 14.6?) Round your answer to the nearest integer.

The null, Ho, indicates that there is either no relationship or a positive relationship between Amazon’s growth over the past ten years and number of Best Buy brick and mortar locations.  The alternative, H1, seeks to prove that there is a negative relationship between the variables, Amazon and Best Buy brick and mortar locations. In other words, Amazon’s growth is negatively impacting Best Buy by forcing store location closures. Using a 95% confidence interval, construct a test of hypothesis using the following data:

Neuroinvasive West Nile virus refers to a severe disease that affects a person’s nervous system. It is spread by the Culex species of mosquito. In the United States in 2010 there were 629 reported cases of neuroinvasive West Nile virus out of a total of 1021 reported cases, and there were 486 neuroinvasive reported cases out of a total of 712 cases reported in 2011. Can we conclude that the 2011 proportion of neuroinvasive West Nile virus cases is significantly more than the 2010 proportion of neuroinvasive West Nile virus cases? If you conduct hypothesis testing, you have to consider:

Group of answer choices

a test of two proportions

a test of two independent means

a test of a single mean

a test of a single proportion.