1. Trevonne had a $750,000 line of credit with Treyenne State bank. They had an outstanding balance of $150,000 at the beginning of 2020, paid $72,000 on the balance on January 28, 2020, borrowed an additional $165,000 on March 16, 2020. If the interest rate is seven percent compounded monthly, what is the balance on the line of credit as of March 31, 2020.

Target ROE problem You are given the following information regarding KTC for 2019: RETURN ON ASSETS = 7.5% NET PROFIT MARGIN = 6.0% DEBT EQUITY RATIO = 1.5x SALES = $550,000.00 GROSS PROFIT RATE = 50.0% TAX RATE = 34.0% 1) What must KTC project as its 2020's sales in order to generate an additional 5% Return on Equity above last year’s levels (2019’s ROE + 5%, not 2019’s ROE x 105%) 2) Prepare a projected 2020 Profit and Loss Statement and Balance Sheet (general categories are fine). 3) Calculate: 2020’s projected RETURN ON EQUITY (use the DuPont model) 2020’s projected RETURN ON ASSETS 2020’s projected NET PROFIT MARGIN 2020’s projected EQUITY MULTIPLIER 2020’s projected TOTAL ASSET TURNOVER 4) In addition to the above, determine the increase in sales necessary to also provide for dividends to be paid at the rate of 30% of 2020’s after-tax profits.

Target ROE problem

You are given the following information regarding KTC for 2019:

RETURN ON ASSETS = 7.5% NET PROFIT MARGIN = 6.0% DEBT EQUITY RATIO = 1.5x SALES = $550,000.00 GROSS PROFIT RATE = 50.0% TAX RATE = 34.0%

1) What must KTC project as its 2020's sales in order to generate an additional 5% Return on Equity above last year’s levels (2019’s ROE + 5%, not 2019’s ROE x 105%)

2) Prepare a projected 2020 Profit and Loss Statement and Balance Sheet (general categories are fine).

3) Calculate: 2020’s

projected RETURN ON EQUITY (use the DuPont model)

2020’s projected RETURN ON ASSETS

2020’s projected NET PROFIT MARGIN

2020’s projected EQUITY MULTIPLIER

2020’s projected TOTAL ASSET TURNOVER

4) In addition to the above, determine the increase in sales necessary to also provide for dividends to be paid at the rate of 30% of 2020’s after-tax profits.

Thorp Inc. maintains a defined benefit pension plan for its employees. Pension plan balances as at January 1, 2020 include:    

¹ These prior service costs are from 2019 and already included in PBO on January 1,2020.

Required:

1. Determine the pension expenses recognized in 2020.
2. Prepare the journal entries to reflect the accounting for the pension plan for 2020.
3. Prepare the ending balances (31 December 2020) for plan assets, PBO, and calculate net pension liability.
4. What will be the expected impact of the current pandemic (Covid-19) on PBO?  

The finance manager wants to prepare a cash budget for the July, 2020 through December, 2020 period.
The finance manager has received the following information from the marketing and operations
managers:
• The Sales were $140,000 in January, 2020 and then the sales grew by 2% each month in the first
three months (i.e., from February to April 2020) and by 5% in the next two months (i.e., in May
and June 2020). The sales are expected to grow by 1% each month thereafter.
• 45% of the Sales are collected in the same month. 30% of the sales are collected in the following
month. 24% of the sales are collected after two months and the remainder are not collected.
• The Purchases are 80% of each month’s sales and paid in the same month.
• Wages and Salaries are $25,000 each month and paid in the same month.
• Other administrative expenses are $15,000 and paid in the same month.
• Depreciation expense is $5,000 each month.
• An electrical device worth $30,000 will be purchased in October 2020. 50% of the amount due
will be paid immediately and the balance will be paid in November, 2020.
• The company had previously taken a loan of $200,000. The annual interest rate on the loan
amount is 4%. The interest is paid once a year in December each year. Assume that no principal
repayments are made in this period, only interest payments are made.
• The company pays rent of $3,500 quarterly (in March, June, September, and December each
year).

1. Determine the total cash inflows for each month from July 2020 to December 2020.
Show your work in Excel.

2. Determine the total cash outflows for each month from July 2020 to December 2020.
Show your work in Excel.

3. Determine the expected change in cash for each month from July 2020 to December 2020.
Show your work in Excel.

4. Describe in your own words some of the short-term borrowing options that the company may adopt.

On January 1, 2020, McGee Co. had the following balances:

         Projected benefit obligation                                                $7,800,000

         Fair value of plan assets                                                        7,800,000

Other data related to the pension plan for 2020:

         Service cost                                                                               315,000

         Contributions to the plan                                                         459,000

         Benefits paid                                                                             450,000

         Actual return on plan assets                                                     444,000

         Settlement rate                                                                                 9%

         Expected rate of return                                                                    6%

         No prior service cost, no prior OCI gains/losses

Required:

(a)    Prepare the journal entry to record pension expense, the contributions for 2020 and adjustments to Pension Asset/Liability and OCI (g/l).

(b) Answer the following questions:

(1) What is the plan assets balance on 12/31/2020?

(2) What is the Pension Benefit Obligation balance at December 31, 2020?

(3) What is the ending balance in the pension asset/liability at December 31, 2020?

(4)    What is Pension Expense for 2020?

A pension worksheet is provided to help you calculate and answer the questions, although you are not required to use it but feel free to fill it out here if you would like to. If you do, please make sure to answer the questions in the response area, do not expect to be graded only on what you might have included in the worksheet.

(a)    Prepare the journal entry to record pension expense, the contributions for 2020 and adjustments to Pension Asset/Liability and OCI (g/l).

(enter Journal entry here)

-->

(b) Answer the following questions. Type your response after each question:

(1) What is the plan assets balance on 12/31/2020? -->

(2) What is the Pension Benefit Obligation balance at December 31, 2020? -->

(3) What is the ending balance in the pension asset/liability at December 31, 2020? -->

(4)    What is Pension Expense for 2020? -->

Case Study - Kozmo, the online convenience store to shut down

Read out the case study given below and answer the questions that follow.  

New York-based Kozmo, the 3-year-old company announced that it would stop delivery service in all nine cities it operates. New York-based Kozmo, which dispatched legions of orange-clad deliverymen to cart goods to customers' doors, is the latest dot.com dream to evaporate in the market downturn. Amazon com, venture capital firm Flatiron Partners and coffee giant Starbucks were among the investors in Kozmo.

Kozmo said in December that investors promised a total of $30 million in private funding. But last month the company learned that an investor had backed out of a $6 million commitment. Kozmo executives had been working on a merger deal with Los Angeles-based PDQuick, another online grocer, sources said. The deal collapsed when funding that was promised to PDQuick did not materialize. Sources said Kozmo still has money but decided to close now and liquidate to ensure that employees could receive a severance package.

Just last month, Kozmo Chief Executive Gerry Burdo was upbeat about Kozmo's future, saying he was looking to steer Kozmo away from its Internet-only business model and toward a "clicks and bricks" approach. But some analysts say Kozmo's business model only made sense in the context of a densely packed city such as New York. Vern Keenan, a financial analyst with Keenan Vision, said the service had a chance to work in only a few other cities around the world, such as London, Stockholm or Paris. "This seemed like a dumb idea from the beginning," Keenan said. "This grew out of a New York City frame of mind and it simply didn't translate."

Kozmo was started by a pair of twenty-something former college roommates. They got the idea for the company on a night when they craved videos and snacks and wished a business existed that would deliver it to them. Kozmo offered free delivery and charged competitive prices when it launched in New York. Though customers loved the service, the costs of delivery were high.

After co-founder and former Chief Executive Joseph Park stepped down, Burdo slashed Kozmo's overhead, instituted a delivery fee and oversaw several rounds of layoffs. The company also closed operations in San Diego and Houston. Burdo said last month that profitability was not far away. The company had reached a milestone last December when it reported profits at one of its operations for the first time. Kozmo later saw two more operations reach profitability as a result of brisk holiday business.

Online delivery companies have been among the most ravaged by the Internet shakeout. Kozmo's rival in New York, Urban fetch, shuttered its consumer operations last fall. Online grocers such as Webvan and Peapod have also struggled, and smaller operations such as Streamline.com and ShopLink.com have dosed down. Peapod was days away from closing last year when Dutch grocer Royal Ahold agreed to take a majority stake.

From the very beginning, supply chain management was to be a core competency of Kozmo. The promising dot.com would deliver your order everything from the latest video to electronics equipment in less than an hour. The technology was superior, the employees were enthusiastic, the customers were satisfied. But eventually, Kozmo ran out of time and money.

Questions:

6. What are the pros and cons of online shopping grocery chain?

Case Study - Kozmo, the online convenience store to shut down

Read out the case study given below and answer the questions that follow.  

New York-based Kozmo, the 3-year-old company announced that it would stop delivery service in all nine cities it operates. New York-based Kozmo, which dispatched legions of orange-clad deliverymen to cart goods to customers' doors, is the latest dot.com dream to evaporate in the market downturn. Amazon com, venture capital firm Flatiron Partners and coffee giant Starbucks were among the investors in Kozmo.

Kozmo said in December that investors promised a total of $30 million in private funding. But last month the company learned that an investor had backed out of a $6 million commitment. Kozmo executives had been working on a merger deal with Los Angeles-based PDQuick, another online grocer, sources said. The deal collapsed when funding that was promised to PDQuick did not materialize. Sources said Kozmo still has money but decided to close now and liquidate to ensure that employees could receive a severance package.

Just last month, Kozmo Chief Executive Gerry Burdo was upbeat about Kozmo's future, saying he was looking to steer Kozmo away from its Internet-only business model and toward a "clicks and bricks" approach. But some analysts say Kozmo's business model only made sense in the context of a densely packed city such as New York. Vern Keenan, a financial analyst with Keenan Vision, said the service had a chance to work in only a few other cities around the world, such as London, Stockholm or Paris. "This seemed like a dumb idea from the beginning," Keenan said. "This grew out of a New York City frame of mind and it simply didn't translate."

Kozmo was started by a pair of twenty-something former college roommates. They got the idea for the company on a night when they craved videos and snacks and wished a business existed that would deliver it to them. Kozmo offered free delivery and charged competitive prices when it launched in New York. Though customers loved the service, the costs of delivery were high.

After co-founder and former Chief Executive Joseph Park stepped down, Burdo slashed Kozmo's overhead, instituted a delivery fee and oversaw several rounds of layoffs. The company also closed operations in San Diego and Houston. Burdo said last month that profitability was not far away. The company had reached a milestone last December when it reported profits at one of its operations for the first time. Kozmo later saw two more operations reach profitability as a result of brisk holiday business.

Online delivery companies have been among the most ravaged by the Internet shakeout. Kozmo's rival in New York, Urban fetch, shuttered its consumer operations last fall. Online grocers such as Webvan and Peapod have also struggled, and smaller operations such as Streamline.com and ShopLink.com have dosed down. Peapod was days away from closing last year when Dutch grocer Royal Ahold agreed to take a majority stake.

From the very beginning, supply chain management was to be a core competency of Kozmo. The promising dot.com would deliver your order everything from the latest video to electronics equipment in less than an hour. The technology was superior, the employees were enthusiastic, the customers were satisfied. But eventually, Kozmo ran out of time and money.

Questions:

2. Based on your reasoning, List the factors and reasons for Kozmo’s failure

we faced an unprecedented downfall in oil prices all around the world
during the first 5 months of 2020. Lots of industries have been affected and
supply chains have been altered consequently. Analyze how oil price fall can
affect industries in Canada post Covid-19 as an environmental force and explain
your response within the context of transportation industry bringing three major
reasons to support your answer.
2. Since 2010 housing market in BC is on the never ending price rise. Vancouver has
faced the highest price boom ever since then and the average rental apartments in
the city has risen to the unprecedented $2300.00 rent. Discuss the reasons behind
the price surges considering the balance of supply and demand in the market and
predict how the market will respond post Covid-19. Try to focus on the driving
forces behind the rise and the other current environmental factors which will or
may come to effect post Covid-19.

3. 2020 has been rough to world’s economy so far. NAFTA has turned to USMCA and
BREXIT happened at the turn of the decade. J. Bolsonaro a conservative figure
has come to power in Brazil and Parliament in Ottawa has seen more seats
slipped away from the Liberals towards the conservatives. All of these actions
have the common ground for nationalism and isolation right at the time we need
unity more than ever to fight the man made disasters such as climate change,
pollution, and the pandemic. Nations separating from each other and running for
their own good regardless of the overall goodwill of the international community.

Discuss how these actions and behaviours can cause havoc in international scale
and what will be the aftermaths of such actions.
4. July 2020 will be the month with fewer restrictions on airline industry. Seems like
airline industry has gained their ground back from the government and trying to
fill for the cumulated losses they faced during the pandemic. We will see more
number of international flights, either essential or nonessential, arriving at the
airports and potentially become a threat. What would be your stand in this balance
of power between the federal government and the airline industries thriving for
profit. Bring three major grounds for your reasoning considering the following
factors: airlines are not necessarily private corporations, federal government is
responsible for the health of the citizens and residents, federal government is
responsible to provide fair competition ground for the corporations to compete,
and there is no clear distinction between essential and non essential travel yet.