Refer to the stock options on Apple in the Figure 2.10. Suppose you buy an October expiration call option with exercise price $105.

APPLE [Underlying Stock Price = $101.05]

Expiration Strike Call Put

September 95 6.20 0.21

October 95 6.35 0.33

September 100 2.20 1.18

October 100 2.62 1.55

September 105 0.36 4.35

October 105 0.66 4.75

a-1. If the stock price in October is $106, will you exercise your call?

a-2. What is the net profit/loss on your position? (Negative amount should be indicated by a minus sign.)

(Click to select)Net lossNet profit            $

a-3. What is the rate of return on your position? (Round your answer to 2 decimal places.)

Rate of return             %

b-1. Would you exercise the call if you had bought the October call with the exercise price $95?

b-2. What is the net profit/loss on your position? (Input the amount as a positive value.)

(Click to select)Net lossNet profit            $

b-3. What is the rate of return on your position? (Round your answer to 2 decimal places.)

Rate of return             %            

c-1. What if you had bought an October put with an exercise price of $105 instead? Would you exercise the put at a stock price of $105?

c-2. What is the rate of return on your position? (Negative value should be indicated by a minus sign. Round your answer to 2 decimal places.)

Rate of return             %

Question 4

The October 31 bank statement of Spooky Halloween Costumes Ltd. (SHC) has just arrived from TD Bank. To prepare the SHC bank reconciliation, you gather the following data:

•     SHC’s Cash account shows a balance of $2,256.14 on October 31.
•     The October 31 bank balance is $4,023.05.
•     The bank statement shows that SHC earned $38.19 of interest on its bank balance during

October. This amount was added to SHC’s bank balance.

•     SHC pays utilities of $250 and insurance of $100 by EFT.
•     The following SHC cheques did not clear the bank by October 31:

•     The bank statement includes a donation of $850, electronically deposited to the bank for SHC.
•     The bank statement lists a $10.50 bank service charge.
•     On October 31, the SHC treasurer deposited $16.15, which will appear on the November bank

statement.

•     The bank statement includes a $300 deposit that SHC did not make. The bank added $300 to

SHC’s account for another company’s deposit.

•     The bank statement includes two charges for returned cheques from donors. One is a $395

cheque received from a donor with the imprint “Unauthorized Signature.” The other is a nonsufficient funds cheque in the amount of $146.67 received from a client.

1.    Prepare the bank reconciliation for SHC.
2.    Journalize the October 31 transactions needed to update SHC’s Cash account. You do not need to

include an explanation for each entry.

Preparing a Cash Budget

La Famiglia Pizzeria provided the following information for the month of October:

1. Sales are budgeted to be $167,000. About 85% of sales is cash; the remainder is on account.
2. La Famiglia expects that, on average, 70% of credit sales will be paid in the month of sale, and 28% will be paid in the following month.
3. Food and supplies purchases, all on account, are expected to be $102,000. La Famiglia pays 25% in the month of purchase and 75% in the month following purchase.
4. Most of the work is done by the owners, who typically withdraw $6,000 a month from the business as their salary. (Note: The $6,000 is a payment in total to the two owners, not per person.) Various part-time workers cost $7,300 per month. They are paid for their work weekly, so on average 90% of their wages are paid in the month incurred and the remaining 10% in the next month.
5. Utilities average $5,950 per month. Rent on the building is $4,100 per month.
6. Insurance is paid quarterly; the next payment of $1,400 is due in October.
7. September sales were $181,500 and purchases of food and supplies in September equaled $130,000.
8. The cash balance on October 1 is $2,147.

Required:

If required, round your answers to the nearest dollar.

1. Calculate the cash receipts expected in October.
$

2. Calculate the cash needed in October to pay for food purchases.
$

3. Prepare a cash budget for the month of October.

1. Preparing a Cash Budget

   La Famiglia Pizzeria provided the following information for the month of October:

   1. Sales are budgeted to be $161,000. About 85% of sales is cash; the remainder is on account.
   2. La Famiglia expects that, on average, 70% of credit sales will be paid in the month of sale, and 28% will be paid in the following month.
   3. Food and supplies purchases, all on account, are expected to be $113,000. La Famiglia pays 25% in the month of purchase and 75% in the month following purchase.
   4. Most of the work is done by the owners, who typically withdraw $6,000 a month from the business as their salary. (Note: The $6,000 is a payment in total to the two owners, not per person.) Various part-time workers cost $7,300 per month. They are paid for their work weekly, so on average 90% of their wages are paid in the month incurred and the remaining 10% in the next month.
   5. Utilities average $5,950 per month. Rent on the building is $4,100 per month.
   6. Insurance is paid quarterly; the next payment of $1,200 is due in October.
   7. September sales were $181,500 and purchases of food and supplies in September equaled $130,000.
   8. The cash balance on October 1 is $2,147.

   Required:

   If required, round your answers to the nearest dollar.

   1. Calculate the cash receipts expected in October.
   $

   2. Calculate the cash needed in October to pay for food purchases.
   $

   3. Prepare a cash budget for the month of October.

   La Famiglia Pizzeria
   Cash budget
   For the month of October
   Beginning balance	$
   Cash receipts
   Cash available	$
   Less:
   Payments for food and supplies purchases	$
   Owners' draw
   Workers' wages
   Utilities
   Rent
   Insurance
   Total disbursements	$
   Ending balance	$

Question 4

The October 31 bank statement of Spooky Halloween Costumes Ltd. (SHC) has just arrived from TD Bank. To prepare the SHC bank reconciliation, you gather the following data:

•     SHC’s Cash account shows a balance of $2,256.14 on October 31.
•     The October 31 bank balance is $4,023.05.
•     The bank statement shows that SHC earned $38.19 of interest on its bank balance during

October. This amount was added to SHC’s bank balance.

•     SHC pays utilities of $250 and insurance of $100 by EFT.
•     The following SHC cheques did not clear the bank by October 31:

•     The bank statement includes a donation of $850, electronically deposited to the bank for SHC.
•     The bank statement lists a $10.50 bank service charge.
•     On October 31, the SHC treasurer deposited $16.15, which will appear on the November bank

statement.

•     The bank statement includes a $300 deposit that SHC did not make. The bank added $300 to

SHC’s account for another company’s deposit.

•     The bank statement includes two charges for returned cheques from donors. One is a $395

cheque received from a donor with the imprint “Unauthorized Signature.” The other is a nonsufficient funds cheque in the amount of $146.67 received from a client.

1.    Prepare the bank reconciliation for SHC.
2.    Journalize the October 31 transactions needed to update SHC’s Cash account. You do not need to

include an explanation for each entry.

Preparing a Cash Budget

La Famiglia Pizzeria provided the following information for the month of October:

1. Sales are budgeted to be $162,000. About 85% of sales is cash; the remainder is on account.
2. La Famiglia expects that, on average, 70% of credit sales will be paid in the month of sale, and 28% will be paid in the following month.
3. Food and supplies purchases, all on account, are expected to be $103,000. La Famiglia pays 25% in the month of purchase and 75% in the month following purchase.
4. Most of the work is done by the owners, who typically withdraw $6,000 a month from the business as their salary. (Note: The $6,000 is a payment in total to the two owners, not per person.) Various part-time workers cost $7,300 per month. They are paid for their work weekly, so on average 90% of their wages are paid in the month incurred and the remaining 10% in the next month.
5. Utilities average $5,950 per month. Rent on the building is $4,100 per month.
6. Insurance is paid quarterly; the next payment of $1,100 is due in October.
7. September sales were $181,500 and purchases of food and supplies in September equaled $130,000.
8. The cash balance on October 1 is $2,147.

Required:

If required, round your answers to the nearest dollar.

1. Calculate the cash receipts expected in October.
$

2. Calculate the cash needed in October to pay for food purchases.
$

3. Prepare a cash budget for the month of October.

Preparing a Cash Budget

La Famiglia Pizzeria provided the following information for the month of October:

Sales are budgeted to be $166,000. About 85% of sales are cash; the remainder are on account.

La Famiglia expects that, on average, 70% of credit sales will be paid in the month of sale, and 28% will be paid in the following month.

Food and supplies purchases, all on account, are expected to be $113,000. La Famiglia pays 25% in the month of purchase and 75% in the month following purchase.

Most of the work is done by the owners, who typically withdraw $6,000 a month from the business as their salary. (Note: The $6,000 is a payment in total to the two owners, not per person.) Various part-time workers cost $7,300 per month. They are paid for their work weekly, so on average 90% of their wages are paid in the month incurred and the remaining 10% in the next month.

Utilities average $5,950 per month. Rent on the building is $4,100 per month.

Insurance is paid quarterly; the next payment of $1,600 is due in October.

September sales were $181,500 and purchases of food and supplies in September equaled $130,000.

The cash balance on October 1 is $2,147.

Required:

If required, round your answers to the nearest dollar.

1. Calculate the cash receipts expected in October.
$

2. Calculate the cash needed in October to pay for food purchases.
$

3. Prepare a cash budget for the month of October.

Preparing a Cash Budget

La Famiglia Pizzeria provided the following information for the month of October:

1. Sales are budgeted to be $161,000. About 85% of sales is cash; the remainder is on account.
2. La Famiglia expects that, on average, 70% of credit sales will be paid in the month of sale, and 28% will be paid in the following month.
3. Food and supplies purchases, all on account, are expected to be $96,000. La Famiglia pays 25% in the month of purchase and 75% in the month following purchase.
4. Most of the work is done by the owners, who typically withdraw $6,000 a month from the business as their salary. (Note: The $6,000 is a payment in total to the two owners, not per person.) Various part-time workers cost $7,300 per month. They are paid for their work weekly, so on average 90% of their wages are paid in the month incurred and the remaining 10% in the next month.
5. Utilities average $5,950 per month. Rent on the building is $4,100 per month.
6. Insurance is paid quarterly; the next payment of $1,400 is due in October.
7. September sales were $181,500 and purchases of food and supplies in September equaled $130,000.
8. The cash balance on October 1 is $2,147.

Required:

If required, round your answers to the nearest dollar.

1. Calculate the cash receipts expected in October.
$

2. Calculate the cash needed in October to pay for food purchases.
$

3. Prepare a cash budget for the month of October.

Preparing a Cash Budget

La Famiglia Pizzeria provided the following information for the month of October:

Sales are budgeted to be $163,000. About 85% of sales is cash; the remainder is on account.

La Famiglia expects that, on average, 70% of credit sales will be paid in the month of sale, and 28% will be paid in the following month.

Food and supplies purchases, all on account, are expected to be $108,000. La Famiglia pays 25% in the month of purchase and 75% in the month following purchase.

Most of the work is done by the owners, who typically withdraw $6,000 a month from the business as their salary. (Note: The $6,000 is a payment in total to the two owners, not per person.) Various part-time workers cost $7,300 per month. They are paid for their work weekly, so on average 90% of their wages are paid in the month incurred and the remaining 10% in the next month.

Utilities average $5,950 per month. Rent on the building is $4,100 per month.

Insurance is paid quarterly; the next payment of $1,300 is due in October.

September sales were $181,500 and purchases of food and supplies in September equaled $130,000.

The cash balance on October 1 is $2,147.

Required:

If required, round your answers to the nearest dollar.

1. Calculate the cash receipts expected in October.
$

2. Calculate the cash needed in October to pay for food purchases.
$

3. Prepare a cash budget for the month of October.

Preparing a Cash Budget

La Famiglia Pizzeria provided the following information for the month of October:

1. Sales are budgeted to be $154,000. About 85% of sales is cash; the remainder is on account.
2. La Famiglia expects that, on average, 70% of credit sales will be paid in the month of sale, and 28% will be paid in the following month.
3. Food and supplies purchases, all on account, are expected to be $113,000. La Famiglia pays 25% in the month of purchase and 75% in the month following purchase.
4. Most of the work is done by the owners, who typically withdraw $6,000 a month from the business as their salary. (Note: The $6,000 is a payment in total to the two owners, not per person.) Various part-time workers cost $7,300 per month. They are paid for their work weekly, so on average 90% of their wages are paid in the month incurred and the remaining 10% in the next month.
5. Utilities average $5,950 per month. Rent on the building is $4,100 per month.
6. Insurance is paid quarterly; the next payment of $1,500 is due in October.
7. September sales were $181,500 and purchases of food and supplies in September equaled $130,000.
8. The cash balance on October 1 is $2,147.

Required:

If required, round your answers to the nearest dollar.

1. Calculate the cash receipts expected in October.
$

2. Calculate the cash needed in October to pay for food purchases.
$

3. Prepare a cash budget for the month of October.