Investments are reported at fair value when a company has a significant influence over another company in which it invests. True False

Consolidated financial statements combine the separate financial statements of the purchasing company and the acquired company into a single set of financial statements. True False

When the investor has insignificant influence, the receipt of cash dividends is recorded as dividend revenue. True False

When significant influence exists, the investment should be accounted for by the equity method. True False

Bond investments are long-term assets that earn interest revenue, while bonds payable are long-term liabilities that incur interest expense. True False

Airbus sold an aircraft, A400, to Delta Airlines, a U.S. company, and billed $30 million payable in six months. Airbus is concerned with the euro proceeds from international sales and would like to control exchange risk. The current spot exchange rate is $1.05/€ and six-month forward exchange rate is $1.10/€ at the moment. Airbus can buy a six-month put option on U.S. dollars with a strike price of €0.95/$ for a premium of €0.02 per U.S. dollar. Currently, six-month interest rate is 2.5% in the euro zone and 3.0% in the U.S.

1. Compute the guaranteed euro proceeds from the American sale if Airbus decides to hedge using a forward contract.
2. If Airbus decides to hedge using money market instruments, what action does Airbus need to take? What would be the guaranteed euro proceeds from the American sale in this case?      
3. If Airbus decides to hedge using put options on U.S. dollars, what would be the ‘expected’ euro proceeds from the American sale? Assume that Airbus regards the current forward exchange rate as an unbiased predictor of the future spot exchange rate.
4. At what future spot exchange rate do you think Airbus will be indifferent between the option and money market hedge?

You have the following scenario:

Your company is incorporating Cloud technologies to service their online clients and internal employees for data storage. The CIO is a former manager that worked into a job as the IT director before he was promoted to CIO for your small company of fewer than 70 employees. Since that time, expansion has indicated that your company needed these Cloud services to better support your internal and external clients. It has been working fairly well, with few problems from your Cloud provider.

Last week, the CIO had a discussion with your Cloud provider and they mentioned to him the term "Cloud bursting", which has him worried. He doesn't know what it is or how it could affect your company but wants some information from you, the systems administrator for your company. Research "Cloud bursting" and in a memo, outline what "Cloud bursting" is, how it may affect your company, and what you have in place to guard against lost time or money if it should happen. You will need to make some assumptions as you may not have all the information you need to give him an educated reply. Make sure any assumptions you make are listed within the memo.

Managing Transaction Exposures Assume the following information:

• Spot rate: CHF/USD = 0.7142
• 90-day forward rate: CHF/USD = 0.7114
• USD 90-day interest rate: 3.75% (APR)
• CHF 90-day interest rate: 5.33% (APR)

The option data for July contracts is given the table below.

A. U.S. Company ABC, which exports to Switzerland, expects to receive CHF 450,000 in 90 days. Should Company ABC use currency derivatives to hedge transaction risk? If yes, which derivatives should Company ABC use? Please use a contingency graph to support your choices and computation. If no, please explain why
B. U.S. Company XYZ, which imports Swiss watches, needs to pay CHF 750,000 in 90 days. Should Company XYZ use currency derivatives to hedge transaction risk? If yes, which derivatives should Company XYZ use? Please use a contingency graph to support your choices and computation. If no, please explain why

E4.1 (LO 1, 3) The trial balance columns of the worksheet for Dixon Company at June 30, 2020, are as follows.

Dixon Company

Worksheet

For the Month Ended June 30, 2020

Trial Balance

Account Titles Dr. Cr.

Cash 2,320

Accounts Receivable 2,440

Supplies 1,880

Accounts Payable 1,120

Unearned Service Revenue 240

Owner’s Capital 3,600

Service Revenue 2,400

Salaries and Wages Expense 560

Miscellaneous Expense 160

7,360 7,360

Other data:

1. A physical count reveals $500 of supplies on hand.

2. $100 of the unearned revenue is still unearned at month-end.

3. Accrued salaries are $210.

Instructions Enter the trial balance on a worksheet and complete the worksheet.

PLEASE explain how to get the answer

Dollar-Value LIFO Retail

The following information is obtained from Burger Company's records. Burger uses the dollar-value LIFO retail method.

The company adopted LIFO on January 1, 2019, when the cost and retail values of the inventory were $40,000 and $100,000, respectively. Burger experienced the following price indexes:

Required

Compute the cost of the ending inventory for 2019. Round the cost-to-retail ratio out to three decimal places. Round computations and final answers to the nearest dollar.

Compute the cost of the ending inventory for 2020. Round the cost-to-retail ratio out to three decimal places. Round computations and final answers to the nearest dollar.

Compute the cost of the ending inventory for 2021. Round the cost-to-retail ratio out to three decimal places. Round computations and final answers to the nearest dollar.

Outback Outfitters is a manufacturer of recreational equipment. It has been experiencing an average growth rate of 20% in sales over the past 5 years. It is August 31 and the financial controller has just prepared the company’s budgeted income statement for next year. The company has no sales force of its own and outsourcing its selling and marketing functions to an independent sales agents. The commission paid to the agent is 12% on sales for all the different products the company sold. The statement follows:

When the financial controller handed the statement to the CEO, the CEO informed the controller that the sales agent demanded an increase in the commission rate to 16% next year to cover the increasing expenses in marketing and selling the products of Outback Outfitters.

The CEO concerns that the sales agent might ask for further increase in the commission rate in the future and would like to set up its own sales team. He asks the help of the financial controller and he gathers the following information for setting up the sales team:

Commission rate to own sales team 8%

Required:

a. Prepare a contribution margin income statement for next year at the 16% commission rate.

b. Calculate the contribution margin ratio and break-even in dollar sales for next year assuming:

(1) Commission rate remains at 12%.

(2) Commission rate is increased to 16%.

c. Determine the volume of sales under 16% commission rate that would be required to generate the same net operating income under the 12% commission rate. Compute the margin of safety percentage under 16% commission rate.

d. Calculate the contribution margin ratio, break-even dollar sales and margin of safety if the company employs its own sales team.

e. Determine the volume of sales at which the net operating income would be equal regardless of whether the company sells through agents at 16% commission rate or employs its own sales team.

f. What is meant by the term operating leverage? Calculate the degree of operating leverage that the company would expect to have for next year assuming the company (1) sells through agents at 16% commission rate and (2) employs its own sales team.

g. Based on the data in (a) through (f) above, make a recommendation as to whether the company should continue to use sales agent (at 16% commission rate) or employ its own sales team. Give reasons for your answer.

Sax Co. sells insurance, and it has recently become a listed company. In accordance with corporate governance guidelines, the finance director of Sax is reviewing the company’s corporate governance practices.

Bill Bassoon is the chair of Sax. Bill vacated the CEO position last year to become the chair of the board, and a new CEO has not yet been found. Bill is unsure if Sax needs more non-executive directors. There are currently six members on the board, which consists of four executive directors and two non-executive directors. He is considering appointing one of his brothers, who is a retired chief executive of a manufacturing company, as a non-executive director. Bill wants to ensure the board focuses on the strategic direction of Sax and not the day-to-day decision-making. To do this, he has reduced the number of board meetings.
The finance director, Jessie Oboe, is considering setting up an audit committee, but has not undertaken this task yet as she is very busy. A new board director was appointed nine months ago. He has yet to undertake his board training as this is normally provided by the chief executive and this role is still vacant.

There are many shareholders and therefore the directors believe that it is impractical and too costly to hold an annual general meeting of shareholders. Instead, the board has suggested sending out the financial statements and any voting resolutions by email; shareholders can then vote on the resolutions via email.

Which of the following are corporate governance weaknesses with Sax? Multiple answers, please explain

The CEO of Garneau Cinemas is considering making a movie and must decide between a comedy and a thrillerlong dashit ​doesn't have the production space to make both. The comedy is expected to cost ​$20 million up front​ (at t​ = 0). After​ that, it is expected to make ​$13 million in the first year​ (at t​ = 1) and ​$4 million in each of the following two years​ (at t​ = 2 and t​ = 3). In the fourth year​ (at t​ = 5), it is expected that the movie can be sold into syndication for ​$2 million with no further cash flows back to Garneau Cinemas. The thriller is expected to cost ​$35 million up front​ (at t​ = 0). After​ that, it is expected to make ​$15 million in the first year​ (at t​ = 1) and ​$3 million in each of the following four years​ (at t​ = 2,​ 3, 4, and​ 5). In the sixth year​ (at t​ = 6), it is expected that the movie can be sold into syndication for ​$30 million with no further cash flows back to Garneau Cinemas. The cost of capital is 10​%, and Garneau usually requires projects to have a payback within four years. Determine each​ project's payback and​ NPV, and advise the CEO what she should do.

The payback for the comedy is? years, and the NPV of the comedy is ?

The payback for the thriller is ? ​years, and the NPV of the thriller is ?

​(Round to two decimal places as​ needed.)

Advise the CEO. Choose the correct answer below.

A. Since the thriller has the higher​ NPV, it should be selected.

B. Since the comedy has the higher​ NPV, it should be selected.

C. Since one project has a negative​ NPV, the other project should be selected even though it has a payback greater than four years. If that​ project's longer payback period is​ unacceptable, then neither project should be accepted.

D. Since only one of the projects has a payback period of less than four​ years, it should be selected. Projects that pay the company back quicker are always preferable to projects that do not pay the company back as quickly.