Researchers investigated the speed with which consumers decide to purchase a product. The researchers theorized that consumers with last names that begin with letters later in the alphabet will tend to acquire items faster than those whose last names begin with letters earlier in the alphabet - called the last name effect. MBA students were offered tickets to a basketball game. The first letter of the last name of respondents and their response times were noted. The researchers compared the response times for two​ groups: (1) those with last names beginning with a​ letter, A-​I, and​ (2) those with last names beginning a​ letter, R-Z. Summary statistics for the two groups are provided in the accompanying table. Complete parts a and b below. Sample Size A-I: 18 R-Z: 18 Mean Response Time (Minutes) A-I: 23.26 R-Z: 16.82 Standard Deviation (Minutes) A-I: 9.87 R-Z: 8.49

A. Construct a 90% Confidence Interval for the difference between the true mean response times for MBA students in the two groups.

B. Based on the interval, part A, which group has the shorter mean response time? Does this result support the researchers' last name effect theory? Explain.

Your clients, both just turned 40, will retire when they turn 62. They have a current salary at an annual rate of ($10,000*salary scalar + $100,000), being paid equally at the end of each month. They expect a 3% raise in their salary every year until they retire. They deposit 12% of their monthly salary in their 401(k) account that generates an annual rate of return of 10%, compounded daily. In addition, their employer matches their contribution with 5% of their monthly salary to the same 401(k) account.

Q1. Determine the cash flows pattern of the monthly contributions to the 401(k) account within each year; and calculate and explain precisely your choice of interest rate, i.e., EAR/EPR/PER, used in your analysis. Also, calculate the yearend value of the 401(k) contributions for each year. Verify your work for Years 1 and 2 only with either the formula or the financial calculator approach!

Q2. Determine the pattern of the year-end values of the 401(k) contributions across years; and calculate and explain precisely your choice of interest rate, i.e., EAR/EPR/PER, used in your analysis. Also, calculate their 401(k) account balance upon their retirement. Verify your work with the formula approach!

At the end of each year, your clients will receive a bonus of 15% of their annual salary. Your clients commit to deposit part of their annual bonus, $14,000, in a 529 Plan account each year for financing their daughter’s, who just turned 12, college education. They will keep contributing to the 529 account until their daughter finishes college. Any remaining amount from the annual bonus check will be deposited in an IRA account. The 529 Plan account and the IRA account are expected to generate annual rates of return of 8% and 10%, respectively. And both accounts are compounded daily.

Q3. Determine the cash flows pattern of their contributions to the IRA account; and calculate and explain precisely your choice of interest rate, i.e., EAR/EPR/PER, used in your analysis. Also, calculate their IRA account balance upon their retirement.

Q4. Determine the cash flows pattern of their contributions to the 529 Plan account; and calculate and explain precisely your choice of interest rate, i.e., EAR/EPR/PER, used in your analysis. Also, calculate the 529 Plan account balances at the time their child starts college. Verify your work with either the formula or the financial calculator approach!

Currently, annual college expenses are running at $30,000, and are expected to grow at an annual rate of 5%. Their daughter will enter college when she turns 18, and complete the degree program in five years. Your clients expect their daughter to be responsible for 30% of her college expenses via the work-study program. All annual college expenses will be due at the beginning of each year. Your clients will tap into the 529 Plan account for paying their daughter’s college expenses.

Q5. Will there be sufficient funding in the 529 account for financing their daughter’s college expenses? If not, when will the funding run out of money? Support your answer numerically by showing the annual balances of the 529 Plan account through their daughter’s college years.

With a positive balance in the 529 account at their daughter’s college graduation, your clients will partially support her graduate study with money left in the 529 account. Their daughter plans to work for three years before returning to graduate school for an MBA. Currently, annual expenses for a highly competitive full-time 2-year MBA program are running at $55,000, and are expected to grow at an annual rate of 4%. Your clients will offer assistance to their daughter’s pursuit of graduate education through the 529 account at one-third of the annual expenses during her MBA study.

Q6. Will there be sufficient funding in the 529 account for subsidizing their daughter’s MBA program’s expenses? If not, when will the funding run out of money? Support your answer numerically numerically by showing the annual balances of the 529 Plan account through her MBA study.

If there is money left (i.e., positive balance) in the 529 account after their daughter’s MBA study, your client will transfer the balance to their IRA account.

Q7. How large will be the nest egg upon the retirement of your clients? In other words, calculate the combined balance of the 401(k) account and their IRA account when they retire.

Question 3
The Waterloo Group of Grantly and its investee companies Clo and Donte at 31 May 2020 are shown below:
Draft Income Statements for the year ended 31 May 2020
Grantly Clo Donte
R000 R000 R000
Revenue 1,138 488 149
Cost of sales (576) (214) (59)
_____ _____ _____
Gross profit 562 274 90
Other operating expenses (138) (54) (40)
_____ _____ _____
Profit from operations 424 220 50
Interest payable (38) (44) (14)
_____ _____ _____
Profit before tax 386 176 36
Taxation (54) (24) (6)
_____ _____ _____
Profit for the year 332 152 30
_____ _____ _____
Draft Statements of financial position as at 31 May 2020
Grantly Clo Donte
R000 R000 R000 R000 R000 R000
Non-current
assets
PPE 690 812 712
Investments 1,950 - -
____ ____ ____
2,640 812 712
Current
assets
Inventories 700 594 56
Receivables 1,000 180 130
Cash and
cash
equivalents 375 25 15
____ ____ ____
2,075 799 201
____ ____ ____
4,715 1,611 913
____ ____ ____
Equity
Share capital (R1
ordinary shares) 1,875 600 500
Reserves 1,125 690 160
____ ____ ____
3,000 1,290 660
Non-current
liabilities
7% Loan note 300 200 50
Current
liabilities
Trade
Payables 1,350 101 188
Taxation 65 20 15
____ ____ ____
1,415 121 203
____ ____ ___
4,715 1,611 913
____ ____ ____
Additional information
● During the year Grantly acquired a new asset with a fair value of R100,000 under a finance lease. The
lease agreement states payments of R20,000 must be paid for six years on 31 May each year, starting on 31 May 2020. At the end of the six year period legal title of the asset will pass to Grantly.
● Grantly believes the only accounting entry he must make in relation to this asset is for the R20,000 payment he has made and he has treated this as an operating expense.
● Grantly acquired 600,000 ordinary shares in Clo on 1 June 2016 for R1,550,000 when the reserves of Clo were R200,000.
● At the date of acquisition of Clo, the fair value of its property was R375,000 higher than its book value and considered to have a remaining life of 10 years.
● Grantly acquired 150,000 ordinary shares in Donte on 1 June 2019 for R400,000 when the reserves of Donte were R90,000. The fair values of assets of Donte were the same as their net book value at that date. Depreciation should be treated as an operating expense.
● Grantly manufactures a component used by Clo and Donte. Grantly sells this component at a margin of 25% and sold goods to Clo for R52,000 during the year. None of these goods had been sold by Clo at 31 May 2020. Grantly sold goods to Donte for R80,000 and Donte had sold all of these goods at 31 May 2020.
● The receivables of Grantly include R60,000 in respect of amounts owing by Clo and R35,000 in respect of amounts owing by Donte. The corresponding balances in the payables of Clo and Donte are R40,000 (Clo) and R35,000 (Donte). On 30 May 2020 Clo had sent a cheque to Grantly for R20,000.
● The impairment test on goodwill applied to Clo showed goodwill is being impaired by 10% per annum on a straight line basis. There has been no impairment for Donte.
Requirements:
(a) Prepare the calculations for the adjustments required to be made in the accounts of Grantly for the year ended 31 May 2020, to account for the finance lease in note (i). You should apply the sum of the digits method when calculating the finance cost and prepare all workings to the nearest thousand.
You should assume these calculations will have no effect on taxation.

(b) Prepare the consolidated statement of comprehensive income and consolidated statement of financial position of the Waterloo group at 31 May 2020, incorporating the calculations you have made in requirement (a) above.
Question 4
YZ is a manufacturing entity which produces and sells a range of products. YZ’s trial balance at 30 September 2020 is shown below:
Note R000 R000
Administrative expenses 910
Borrowings @ 7% per year 3,000
Buildings at cost at 30 September 2019 3,400
Cash and cash equivalents 130
Cash received on disposal of machinery (i) 8
Cost of raw materials purchased in year to 30 September 2020 2,220
Direct production labour costs 670
Distribution costs 515
Equity dividend paid 170
Equity shares R1 each, fully paid at 30 September 2020 (xi) 1,700
Income tax (viii) 30
Inventory of finished goods at 30 September 2019 (vii) 190
Inventory of raw materials at 30 September 2019 (vii) 275
Land at valuation at 30 September 2019 (ii) 9,000
Loan interest paid 210
Plant and equipment at cost at 30 September 2019 (i) 3,900
Production overheads (excluding depreciation) 710
Provision for deferred tax at 30 September 2019 (ix) 430
Accumulated depreciation at 30 September 2019:
Buildings (iii) 816
Plant and equipment (iv) 2,255
Patent (v) 526
Retained earnings at 30 September 2019 3,117
Revaluation reserve at 30 September 2019 1,800
Sales revenue 9,820
Share premium 100
Trade payables 940
Trade receivables 1,130 _____
23,986 23,986
Additional information:
i) During the year YZ disposed of obsolete machinery for R8,000. The cash received is included
in the trial balance. The obsolete machinery had originally cost R35,000 and had
accumulated depreciation of R32,000.
ii) On 30 September 2020 YZ revalued its land to R9,500,000.
iii) Buildings are depreciated at 2% per annum on the straight line basis. Buildings depreciation
should be treated as an administrative expense. No buildings were fully depreciated at 30
September 2019.
iv) Plant and equipment is depreciated at 25% per annum using the reducing balance method
and is treated as a production overhead.
v) The patent for one of YZ’s products was purchased on 1 October 2017. The patent had a
useful life of 10 years when it was purchased and is being amortised on a straight line basis
with no residual value anticipated. Amortisation of the patent is treated as cost of sales when
charged to the income statement. Research is carried out on a continuous basis to develop
the patented process and ensure that the product range continues to meet customer
demands. The patent figure in the trial balance is made up as follows:
R000
Original cost of patent 420
less amortisation to 30 September 2019 (84)
336
Research costs incurred in the year to 30 September 2020
Total
190
526
vi) YZ’s accounting policy for amortisation and depreciation is to charge a full year in the year of
acquisition and none in the year of disposal.
vii) Inventory of raw materials at 30 September 2020 was R242,000. Inventory of finished goods
at 30 September 2020 was R180,000.
viii) The directors estimate the income tax charge on the year’s profits at R715,000. The balance
on the income tax account represents the under-provision for the previous year’s tax charge.
ix) The deferred tax provision is to be reduced by R47,000.
x) YZ entered into a non-cancellable 4 year operating lease on 1 October 2019, to acquire
machinery to replace the old machinery sold. Under the terms of the lease YZ will pay no rent
for the first year. R8,000 is payable for each of 3 years commencing on 1 October 2020. The
machine is estimated to have a useful economic life of 10 years.
xi) During the year YZ issued 200,000 R1 equity shares at a premium of 50%. The total
proceeds were received before 30 September 2020 and are reflected in the trial balance
figures.
Required:
Prepare YZ’s statement of comprehensive income and a statement of changes in equity for the year to 30 September 2020 and a statement of financial position at that date, in accordance with the requirements of International Financial Reporting Standards. (All workings should be to the nearest R000).
Notes to the financial statements are not required, but all workings must be clearly shown. Do not prepare a statement of accounting policies. (Total for Question Three = 25 marks)
Total 100 marks

XYZ company is a well-known property and construction company in the USA. XYZ company has embarked on an expansion plan to increase its income. XYZ issued the following debt security to raise the needed funds. the accounting periods ends on 31 December.

On 1 June 2020, XYZ company issued 12% bonds dated 1 June 2020, with a principal amount of $60,000,000. The bonds will mature on 30 May 2025. On the issuance date, for bonds of similar risk and maturity, the market yield is 10%. interest paid semiannually on 1 June and 1 December. on 1 October 2021 ABC company redeemed half of the bond payable at a price of $30,150,000 including accrued interest.

Required:

1) Prepare the journal entry to record the bond payables. show all computations.

2)Compute the gain/loss on the redemption of bond payable. prepare journal entries to record the redemption of bond payables.

3)Prepare a partial statement of financial position for XYZ company, to show presentation of bond payables as at 31 December 2021. show all computations.

Megatronics Corporation, a massive retailer of electronic products, is organized in four separate divisions. The four divisional managers are evaluated at year-end, and bonuses are awarded based on ROI. Last year, the company as a whole produced a 15 percent return on its investment.

During the past week, management of the company’s Northeast Division was approached about the possibility of buying a competitor that had decided to redirect its retail activities. (If the competitor is acquired, it will be acquired at its book value.) The data that follow relate to recent performance of the Northeast Division and the competitor:

Management has determined that in order to upgrade the competitor to Megatronics’ standards, an additional $125,000 of invested capital would be needed.

Required:

1. Compute the current ROI of the Northeast Division and the division’s ROI if the competitor is acquired.

2. If divisional management is being evaluated on the basis of ROI, will the Northeast Division likely pursue acquisition of the competitor?

3-a. Compute the ROI of the competitor as it is now and after the intended upgrade.

3-b. If ROI is used as the basis for evaluation, would Megatronics Corporation likely be in favor of the acquisition of the competitor?

4. Calculate the Northeast Division's ROI after acquisition of competitor but before upgrading.

5-a. Assume that Megatronics uses residual income to evaluate performance and desires a 12 percent minimum return on invested capital. Compute the current residual income of the Northeast Division and the division’s residual income if the competitor is acquired.

5-b. If divisional management is being evaluated on the basis of residual income, will the Northeast Division likely pursue acquisition of the competitor?

Compute the current ROI of the Northeast Division and the division’s ROI if the competitor is acquired. (Round your answers to 2 decimal places (i.e., .1234 should be entered as 12.34).)

Compute the ROI of the competitor as it is now and after the intended upgrade.

Calculate the Northeast Division's ROI after acquisition of competitor but before upgrading. (Round your answer to 2 decimal place. (i.e., .1234 should be entered as 12.34).)

Assume that Megatronics uses residual income to evaluate performance and desires a 12 percent minimum return on invested capital. Compute the current residual income of the Northeast Division and the division’s residual income if the competitor is acquired.

Bernie is a former executive who is retired. This year Bernie received $185,000 in corporate bond interest and $17,700 of social security payments. What amount must Bernie include in his gross income?

Multiple Choice

• $202,700

• $185,000

• $0

• $193,850

• $200,045

Bernie is a former executive who is retired. This year Bernie received $185,000 in corporate bond interest and $17,700 of social security payments. What amount must Bernie include in his gross income?

Multiple Choice

• $202,700

• $185,000

• $0

• $193,850

• $200,045

Screening for early detection of lung cancer is a new concept. How do you feel about performing this screening for clients who are current or former smokers?

What would you advise a man over 50 who is reluctant to be screened for prostate cancer?

“The attraction of the CAPM is that it offers powerful and intuitively pleasing predictions about how to measure risk and the relation between expected return and risk”. Critically assess the former statement. Do you think multi-factor models might perform better? Why or why not?

Considering the audiences for drug prevention and treatment what recommendations would you suggest for the following groups:

a. Current Non-Users

b. Early Experimenters

c. Recreational/Non-Addicted Users

d. Problem Users/Addicted Users

e. Former Users