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In: Accounting
The Reliable Aircraft Company manufactures small, pleasure-use aircraft. Based on past experience, sales volume appears to be affected by changes in the price of the planes and by the state of the economy as measured by consumers' disposable personal income. The following data pertaining to Reliable's aircraft sales, selling prices, and consumers' personal income were collected:
|
Year |
Aircraft Sales |
Average Price |
Disposable Constant Income |
|---|---|---|---|
|
(Dollars) |
(In constant 2006 dollars, billions) |
||
| 2006 | 525 | 17,600 | 610 |
| 2007 | 450 | 8,000 | 610 |
| 2008 | 400 | 8,000 | 570 |
The arc price elasticity of demand between 2006 and 2007 is:
–0.36
0.21
0
0.36
Points:
Close Explanation
Explanation:
The arc income elasticity of demand between 2007 and 2008 is:
1.74
3.99
–3.99
0
Points:
Close Explanation
Explanation:
Assume that these estimates are expected to remain stable during 2009. Forecast 2009 sales for Reliable assuming that its aircraft prices remain constant at 2007 levels and that disposable personal income will increase by 7%. Also assume that the arc income elasticity you just computed is the best available estimate of income elasticity.
Aircraft Sales 2009 Forecast: selector 1
Points:
Close Explanation
Explanation:
Forecast 2009 sales for Reliable given that its aircraft prices will increase by 6% from 2008 levels and that disposable personal income will increase by 7%. Assume that the price and income effects are independent and additive and that the arc income and price elasticities you just computed are the best available estimates of these elasticities to be used in making the forecast.
Aircraft Sales 2009 Forecast: selector 1
In: Finance
Select one publicly listed company from a country that has adopted IFRS (not Australia).
Collect the most recent annual financial reports for their selected firm and then prepare a detailed report in which they:
• Critically analyze and explain about the selected firm.
• Critically analyze the national reporting and regulatory environment within which the selected firm operates.
• select two specific accounting items from the firm’s accounts and discuss the extent to which the company consistently applies the relevant international accounting standards.
• Discuss whether and how the use of IFRS is enforced within your chosen country.
• Evaluate whether the firm’s accounts are comparable with their key global competitors.
In: Accounting
Gutierrez Company, a publicly held corporation,
operates a regional chain of large drugstores. Each drugstore is
operated by a general manager and a controller. The general manager
is responsible for the day-to-day operations of the store, while
the controller is responsible for the budget and other financial
tasks. The general manager, Tracie Kappan, has been at Gutierrez
Company for several years. Employee turnover is high at Gutierrez
Company, just as it is in the retail industry in general. Kappan
just hired a new controller, Min Yang.
Yang was asked to prepare the master budget. Each
retail location prepares its master budget once a year and then
submits that budget to company headquarters for approval. Once
approved by headquarters, the master budget is used to evaluate the
store’s performance. These performance evaluations directly affect
the managers’ bonuses and whether additional company funds are
invested in that location.
When Yang was almost done preparing the budget, Kappan
instructed him to increase the amounts budgeted for labor and
supplies by 20%. When asked why, Kappan responded that this
budgetary cushion gives store management flexibility in running the
store. For example, because company headquarters tightly controls
operating funds and capital improvement funds, any extra money
budgeted for labor and supplies can be used to replace store
furnishings or to pay bonuses to help to retain good employees. She
explains that the chance of getting extra funds from company
headquarters is not good; this “cushion” is usually the only
opportunity to replace store décor or to pay bonuses to key
employees. Kappan also needs extra funds occasionally to make
“under the table” payments to employees as incentives to work extra
hours or to keep them from leaving for a higher-paying
job.
Yang feels conflicted. He is eager to please Kappan,
and he is wondering what he should do in this situation.
Requirements:
Using the IMA Statement of Ethical Professional Practice(Exhibit 1-7 pg.13 of the textbook) as an ethical framework, answer the following questions:
What are the ethical issue(s) in this
situation?
What are Yang’s responsibilities as a management
accountant?
Would your answer differ if Gutierrez Company were
instead owned by one individual instead of being publicly held? Why
or why not?
Would anyone be harmed if slack were to be built into
the budget? Why or why not?
Discuss the specific steps Yang should take in this
situation. Refer to the IMA Statement of Ethical Professional
Practice(Exhibit 1-7 pg.13 of the textbook) in your
response.(not less than 200 words)
In: Accounting
Concord Cosmetic Inc. (ACI), a cosmetic product manufacturer, is a publicly listed company. ACI is preparing earnings per share data for 2020. The following is a summary of the activity for ACI during 2020:
| 634,000 common shares issued and outstanding at December 31, 2019 |
| 94,000 common shares issued for cash on April 1, 2020 |
| Repurchased 58,800 common shares on June 1, 2020 |
| Two-for-one stock split on September 1, 2020 |
Required: weighted average number of shares outstanding for the
year ended December 31, 2020.
In: Accounting
(Weighted
average cost of
capital)
Crawford Enterprises is a publicly held company located in Arnold, Kansas. The firm began as a small tool and die shop but grew over its 35-year life to become a leading supplier of metal fabrication equipment used in the farm tractor industry. At the close of 2015, the firm's balance sheet appeared as follows:.
.At present the firm's common stock is selling for a price equal to its book value, and the firm's bonds are selling at par. Crawford's managers estimate that the market requires a return of
19
percent on its common stock, the firm's bonds command a yield to maturity of
8
percent, and the firm faces a tax rate of
33
percent.
a. What is Crawford's weighted average cost of capital?
b. If Crawford's stock price were to rise such that it sold at 1.5 times book value, causing the cost of equity to fall to
17
percent, what would the firm's cost of capital be (assuming the cost of debt and tax rate do not change)?
a. What is Crawford's weighted average cost of capital?
nothing %
(Round to two decimal places.)
Data Table
|
Cash |
$520,000 |
|||
|
Accounts receivable |
3,890,000 |
|||
|
Inventories |
6,600,000 |
Long-term debt |
$9,710,000 |
|
|
Net property, plant, and equipment |
18,622,000 |
Common equity |
19,922,000 |
|
|
Total assets |
$29,632,000 |
Total debt and equity |
$29,632,000 |
Cash $520,000 Accounts receivable 3,890,000 Inventories 6,600,000 Long-term debt $9,710,000 Net property, plant, and equipment 18,622,000 Common equity 19,922,000 Total assets $29,632,000 Total debt and equity $29,632,000
| + | ||||
| + | ||||
| + | ||||
| + | ||||
In: Finance
Gutierrez Company, a publicly held corporation,
operates a regional chain of large drugstores. Each drugstore is
operated by a general manager and a controller. The general manager
is responsible for the day-to-day operations of the store, while
the controller is responsible for the budget and other financial
tasks. The general manager, Tracie Kappan, has been at Gutierrez
Company for several years. Employee turnover is high at Gutierrez
Company, just as it is in the retail industry in general. Kappan
just hired a new controller, Min Yang.
Yang was asked to prepare the master budget. Each
retail location prepares its master budget once a year and then
submits that budget to company headquarters for approval. Once
approved by headquarters, the master budget is used to evaluate the
store’s performance. These performance evaluations directly affect
the managers’ bonuses and whether additional company funds are
invested in that location.
When Yang was almost done preparing the budget, Kappan
instructed him to increase the amounts budgeted for labor and
supplies by 20%. When asked why, Kappan responded that this
budgetary cushion gives store management flexibility in running the
store. For example, because company headquarters tightly controls
operating funds and capital improvement funds, any extra money
budgeted for labor and supplies can be used to replace store
furnishings or to pay bonuses to help to retain good employees. She
explains that the chance of getting extra funds from company
headquarters is not good; this “cushion” is usually the only
opportunity to replace store décor or to pay bonuses to key
employees. Kappan also needs extra funds occasionally to make
“under the table” payments to employees as incentives to work extra
hours or to keep them from leaving for a higher-paying
job.
Yang feels conflicted. He is eager to please Kappan,
and he is wondering what he should do in this situation.
Requirements:
Using the IMA Statement of Ethical Professional Practice(Exhibit 1-7 pg.13 of the textbook) as an ethical framework, answer the following questions:
What are the ethical issue(s) in this
situation?
What are Yang’s responsibilities as a management
accountant?
Would your answer differ if Gutierrez Company were
instead owned by one individual instead of being publicly held? Why
or why not?
Would anyone be harmed if slack were to be built into
the budget? Why or why not?
Discuss the specific steps Yang should take in this
situation. Refer to the IMA Statement of Ethical Professional
Practice(Exhibit 1-7 pg.13 of the textbook) in your
response.
(at least 200 words)
In: Accounting
Alpha Tunis LLC, a newly publicly listed company in San Diego, is currently valued at $100. Over the next two six-month periods, analysts forecast it will go up by 10% or down by 10%. The current risk free rate is 8% per year. Given that the current strike price is $100, based on the Binomial Option Pricing model,
(i) Estimate the value of one-year European call option. Clearly show the binomial trees as part of your calculations.
(ii) Estimate the value of one-year European put option. Clearly show the binomial trees as part of your calculations.
(iii) Demonstrate if the Put-Call parity hypothesis holds. Clearly show your workings.
Please use 4 decimal places in your workings.
In: Finance
Sandhill Holdings Inc., a publicly listed company in Canada,
ventured into construction of a mega-shopping mall in Edmonton,
which is rated as the largest shopping mall in North America. The
company’s board of directors, after much market research, decided
that instead of selling the shopping mall to a local investor who
had approached them several times with excellent offers that he
steadily increased during the year of construction, the company
would hold this property for the purposes of capital appreciation
and earning rental income from mall tenants. Sandhill Holdings
retained the services of a real estate company to find and attract
many important retailers to rent space in the shopping mall, and
within months of completion at the end of 2017, the shopping mall
was fully occupied.
According to the company’s accounting department, the total
construction cost of the shopping mall was $50 million. The company
used an independent appraiser to determine the mall’s fair value
annually. According to the appraisal, the fair values of the
shopping mall at December 31, 2017, and at each subsequent year end
were:
| 2017 | $50 million | |
| 2018 | $60 million | |
| 2019 | $65 million | |
| 2020 | $61 million |
The independent appraiser felt that the useful life of the shopping
mall was 20 years and its residual value was $8 million.
Note that the mall’s rental income and expenses would be the same
and thus can be omitted from the analysis for this exercise.
Prepare the necessary journal entries for 2018, 2019, and 2020 if it decides to treat the shopping mall as an investment property under IAS 40: Use fair value model. (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. Record journal entries in the order presented in the problem.)
|
Date |
Account Titles and Explanation |
Debit |
Credit |
__________
___________
_____________
Prepare the necessary journal entries for 2018, 2019, and 2020
if it decides to treat the shopping mall as an investment property
under IAS 40: Use Cost model. (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. Record journal entries
in the order presented in the problem.)
|
Date |
Account Titles and Explanation |
Debit |
Credit |
_________________
__________________
___________________
In: Accounting
In: Accounting