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Apple Inc. is the number one online music retailer through its iTunes music store. Apple sells iTunes gift cards in $15, $25, and $50 increments. Assume Apple sells $20.1 million in iTunes gift cards in November, and customers redeem $13.1 million of the gift cards in December.

Required:

1. & 2. Record the necessary entries in the Journal Entry Worksheet below. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field. Enter your answers in dollars, not in millions (i.e. 5.5 should be entered as 5,500,000).)

1. Record the receipt of cash for gift cards.

2. Record the revenue recognized from redemption of gift cards.

3. What is the ending balance in the Deferred Revenue account? (Enter your answer in dollars, not in millions. (i.e. 5.5 should be entered as 5,500,000).)

1. Shareholders invested £10,000 cash in the business in exchange for ordinary shares.

2. Purchased equipment for £5,000 cash.

3. Paid £400 cash for May office rent.

4. Paid £700 cash for supplies.     

5. Incurred £250 of advertising costs in the Beacon News on account.

6. Received £4,700 in cash from customers for repair service.

7. Declared and paid a £1,000 cash dividend.

8. Paid part-time employee salaries £1,000.

9. Paid utility bills £160.

10. Performed repair service worth £980 on account.

11. Collected cash of £120 for services billed in transaction (10). Instructions

Prepare a tabular analysis of the transactions, using the following column headings: Cash, Accounts Receivable, Supplies, Equipment, Accounts Payable, Share Capital, and Retained Earnings (with separate columns for Revenues, Expenses, and Dividends). Include margin explanations for any changes in Retained Earnings. Revenue is called Service Revenue.

The largest magazine publisher in the U.S., Pressworks Inc., acquired a cloud-based data science marketing company FlowData Stream for $220 million in January 2020. Pressworks Inc. is a legacy paper-based magazine publisher that has been in business for more than 50 years. Over the years, the company has been able to manage through the digital transformation of traditional print business, but it has not been easy. Over the last 8 years, Pressworks Inc. has downsized its print operations to manage expenses, while maintaining some major global fashion magazine brands. Several of Pressworks Inc’s print magazine customers have also begun to scale-back their print circulations while ramping up their digital transformations. Many of Pressworks Inc.’s traditional customers have questioned the company’s ability to skillfully transition from print to digital. FlowData Stream helps businesses of all sizes manage ad spend and maximize their online advertising budget on platforms including Google Ads, Bing, and Facebook. They develop complex, customized algorithms that provide several different data points that allow customers to better understand targeted buyers’ behavior. FlowData Stream has a strong computer science and engineering team that have consistently changed the way advertisers reach desired target markets. The company manages approximately one billion dollars in advertising spend for tens of thousands of companies across the world. FlowData Stream is estimated to generate $85 million in revenue and $25 million in earnings this year.

Given this information, answer the following question. Describe four different reasons why Pressworks Inc. would purchase FlowData Stream. Please discuss why these four reasons are of interest to Pressworks Inc

Question No 3. Tests Using Contingency Tables:

A researcher selected sample of customs from 4 companies and asked them if the companies care give warranty on sold items or not. Assume observed values from your own (fill the below table by assuming any values of your choice) and test the claim that the proportion of customers of each company who got warranty is the same for each company by choosing alpha of your own choice.  (Marks 2.5)

Red Canyon T-shirt Company operates a chain of T-shirt shops in the southwestern United States. The sales manager has provided a sales forecast for the coming year, along with the following information:

• Each T-shirt is expected to sell for $23.
• The purchasing manager buys the T-shirts for $9 each.
• The company needs to have enough T-shirts on hand at the end of each quarter to fill 33 percent of the next quarter’s sales demand.
• Selling and administrative expenses are budgeted at $96,000 per quarter plus 12 percent of total sales revenue.

Required:
1. Determine budgeted sales revenue for quarters 1, 2, and 3.
2. Determine budgeted cost of merchandise purchased for quarters 1, 2, and 3.
3. Determine budgeted cost of good sold for quarters 1, 2, and 3.
4. Determine selling and administrative expenses for quarters 1, 2, and 3.
5. Complete the budgeted income statement for quarters 1, 2, and 3.

Part 1:

Budgeted Sales Revenue : Quarter 1: Quarter 2: Quarter 3:

Part 2:

Budgeted cost of Merchandise Purchased : Quarter 1 : Quarter 2 : Quarter 3 :

Part 3

Budgeted cost of goods sold : Quarter 1: Quarter 2: Quarter 3 :   

Part 4

Budgeted Selling ad administrative expenses : Quarter 1: quarter 2 : Quarter 3 :

.

You have recently been hired by Swan Motors, Inc. (SMI), in its relatively new treasury management department. SMI was founded 8 years ago by Joe Swan. Joe found a method to manufacture a cheaper battery with much greater energy density than was previously possible, giving a car powered by the battery a range of 700 miles before requiring a charge. The cars manufactured by SMI are midsized and carry a price that allows the company to compete with other mainstream auto manufacturers. The company is privately owned by Joe and his family, and it had sales of $97 million last year. SMI primarily sells to customers who buy the cars online, although it does have a limited number of company-owned dealerships. Most sales are online. The customer selects any customization and makes a deposit of 20 percent of the purchase price. After the order is taken, the car is made to order, typically within 45 days. SMI’s growth to date has come from its profits. When the company had sufficient capital, it would expand production. Relatively little formal analysis has been used in its capital budgeting process. Joe 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 Joe 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. Joe wants you to use the pure play approach to estimate the cost of capital for SMI, and he has chosen Tesla Motors as a representative company. The following questions will lead you through the steps to calculate this estimate.

1.Most publicly traded corporations are required to submit 10Q (quarterly) and 10K (annual) reports to the SEC detailing their financial operations over the previous quarter or year, respectively. These corporate filings are available on the SEC website at www.sec.gov. Go to the SEC website, follow the “Search for Company Filings” link and the “Companies & Other Filers” link, enter “Tesla,” and search for SEC filings made by Tesla. Find the most recent 10Q and 10K and download the forms. Look on the balance sheet to find the book value of debt and the book value of equity. If you look further down the report, you should find a section titled either “Long-Term Debt” or “Long-Term Debt and Interest Rate Risk Management” that will list a breakdown of Tesla’s long-term debt.

2. To estimate the cost of equity for Tesla, go to finance.yahoo.com and enter the ticker symbol “TSLA.” Follow the various links to find answers to the following questions: What is the most recent stock price listed for Tesla? What is the market value of equity, or market capitalization? How many shares of stock does Tesla have outstanding? What is the beta for Tesla? Now go back to finance.yahoo.com and follow the “Bonds” link. What is the yield on three-month Treasury bills? Using a 7 percent market risk premium, what is the cost of equity for Tesla using the CAPM?

3. Go to www.reuters.com and find the list of competitors in the industry. Find the beta for each of these competitors, and then calculate the industry average beta. Using the industry average beta, what is the cost of equity? Does it matter if you use the beta for Tesla or the beta for the industry in this case?

4-You now need to calculate the cost of debt for Tesla. Go to finra-markets.morningstar .com/BondCenter/Results.jsp, enter Tesla as the company, and find the yield to maturity for each of Tesla’s bonds. What is the weighted average cost of debt for Tesla using the book value weights and the market value weights? Does it make a difference in this case if you use book value weights or market value weights?

5. You now have all the necessary information to calculate the weighted average cost of capital for Tesla. Calculate the weighted average cost of capital for SMI using book value weights and market value weights assuming SMI has a 35 percent marginal tax rate. Which cost of capital number is more relevant?

6. You used Tesla as a representative company to estimate the cost of capital for SMI. What are some of the potential problems with this approach in this situation? What improvements might you suggest?

During November, the following summary transactions were completed. Journalize the November Transactions.

Investment Theory:

For each of the following, indicate whether the statement is a violation of the Efficient Markets Hypothesis and, if so, of which form. Explain why. Your answers should be short and concise.

1. Stocks before large dividend increases have consistently positive abnormal returns. The dividend increase is publicly announced.

2. Company A announced its intention to hire Mr. X, a well-known specialist in the industry. Its stock price gradually rose over the two weeks following the announcement.

3. You observe significant positive serial correlation between non-overlapping market returns (e.g. weekly returns of security A are positively correlated with the returns the preceding week).

4. You observe significant negative serial correlation between non-overlapping market returns (e.g. monthly returns of security A are negatively correlated with the returns the preceding month).