It is the end of the fiscal year for Company A, a manufacturing company. Looking at the projected income for the year, it looks like income will be too low for anyone to get bonuses. The controller, Shelly Game', is looking over accounting records to make sure that everything is correct for annual income statements. Currently, the accounting department has $50,000 of depreciation expenses associated with computer hardware and software used to calculate product cost, WIP, FGI, and COGS. Since this is part of Accounting expenses, these costs are classified as period costs and recorded as part of Selling and Administrative expenses.

Game' is considering proposing that these costs be classified as manufacturing overhead rather than period costs. This change would move these costs to FGI, and make income for the year high enough for employees to get bonuses.

Looking at the IMA Statement of Ethical Professional Practice (in the prologue of the text), discuss what the ethical issues are in this situation? What are Game's responsibilities as a management accountant?

Prior to adjustment at the end of the year, the balance in Trucks is $302,210 and the balance in Accumulated Depreciation—Trucks is $100,920. Details of the subsidiary ledger are as follows: Estimated Accumulated Depreciation at Miles Operated Truck No. Cost Residual Value Useful Life Beginning of Year During Year 1 $83,960 $15,360 245,000 miles — 20,600 miles 2 51,050 5,930 300,800 miles $14,700 33,800 miles 3 77,486 12,910 201,800 miles 62,180 8,100 miles 4 89,714 22,010 241,800 miles 24,040 22,500 miles A. Determine for each truck the depreciation rate per mile and the amount to be credited to the accumulated depreciation section of each subsidiary account for the miles operated during the current year. Keep in mind that the depreciation taken cannot reduce the book value of the truck below its residual value. Round rate per mile answers to the nearest cent. B. Journalize the entry on December 31 to record depreciation for the year. Refer to the Chart of Accounts for exact wording of account titles.

Complete the horizontal analysis below:

Year 2                                     Year 1                                     Amount Change                   Percentage Change

$88, 338                                $92,147                                                 ???                                          ???

A. ($3,809), 4.1%

B. $3,809, 4.1%

C. $180,485, 51.1%

D. $8,300, 15%

E. None of these

a. What is the convexity of a 10 year bond with a coupon of 6% and a yield of 7.82%?

b. For the 11th coupon, what is the present value times t times t+1?

c. A bond has a MD of 6.50 years and trades at a price of 118.08. The YTM is 3.40%. Its CX factor is 50.68. Using MD and CX, what is the new price when the YTM increases to 5.1%?

a. What is the convexity of a 10 year bond with a coupon of 6% and a yield of 7.82%?

b. For the 11th coupon, what is the present value times t times t+1?

c. A bond has a MD of 6.50 years and trades at a price of 118.08. The YTM is 3.40%. Its CX factor is 50.68. Using MD and CX, what is the new price when the YTM increases to 5.1%?

?Suppose that you are in the fall of your senior year and are faced with the choice of either getting a job when you graduate or going to law school. Of? course, your choice is not purely financial. ? However, to make an informed decision you would like to know the financial implications of the two alternatives. ? Let's assume that your alternatives are as? follows:??

If you take the? "get a? job" route you expect to start off with a salary of $40,000 per year. There is no way to predict what will happen in the? future, your best guess is that your salary will grow at 5 percent per year until you retire in 40 years. As a law? student, you will be paying ?$25,000 per year tuition for each of the 3 years you are in graduate school. ? However, you can then expect a job with a starting salary of $70,000 per year. ? Moreover, you expect your salary to grow by 7 percent per year until you retire 35 years later.???Clearly, your total expected lifetime salary will be higher if you become a lawyer. ? However, the additional future salary is not free. You will be paying 25,000 in tuition at the beginning of each of the 3 years of law school. In? addition, you will be giving up a little more than $126,000 in lost income over the three years of law? school: $40,000 the first? year, $42,000 the second? year, and $44,100 the third year.

a.??To start your analysis of whether to go to law? school, calculate the present value of the future earnings that you will realize by going directly to? work, assume a discount rate of 3 percent.

b.??What is the present value today of your future earnings if you decide to attend law? school, assuming a discount rate of 3 ?percent? Remember that you will be in law school for 3 years before you start to work as a lawyer. ? (Hint: assume that you are paid at the end of each year so that your first salary payment if you decide to go to law school occurs 4 years from? now.)

c.??If you pay your law school tuition at the beginning of each? year, what is the present value of your? tuition, assuming a discount rate of 3 ?percent?

At the beginning of this year, a group of lawyers and accountants in Calgary decided to join efforts in providing one-stop legal and accounting consulting services to industry and the government. The group established a consulting company, rented office space, and hired both professional and clerical staff.

      Following several initial organizational meetings, the partners decided to divide the operation into three parts: the Consulting Department, the Legal Department, and the Accounting Department.

     The consulting department deals directly with the clients, providing two somewhat distinct services, accounting consulting (AC) and legal consulting (LC). In its first full month of operations, this department recorded its own identifiable costs as $20,000, with 30% attributed to accounting consultations and 70% to legal work. Billings to clients amounted to $40,000 and $25,500 for accounting and legal consultations, respectively. This department made use of the other two departments’ services in preparing work for the external clients.

     The accounting and legal departments provided professional services for each other and for the consulting department on the basis of time according to the following schedule:

The accounting department incurred $10,000 in costs in the first month, and the legal department incurred $15,000. Neither department directly bills external clients.

     Having completed the first month’s activity, the partners are ready to evaluate the performance of the group and of the individual areas.

Required:
1.Prepare an income statement for each consulting branch using the direct allocation method.

2. Prepare an income statement for each consulting branch using the the step-down method.

3. Recommend one of the two methods to the partners and justify your choice.

• Direct allocation method

• Step-down method

• Direct allocation method

• Step-down method

Sale of Equipment Equipment was acquired at the beginning of the year at a cost of $34,000. The equipment was depreciated using the double-declining-balance method based on an estimated useful life of ten years and an estimated residual value of $660. a. What was the depreciation for the first year? b. Assuming the equipment was sold at the end of year 2 for $7,860, determine the gain or loss on the sale of the equipment.

6: The key distinguishing feature of the ________________ is that securities of up to a year in maturity are traded there.

     a. money market

     b. primary market

     c. capital market

     d. secondary market

7: Which of the following would not be an indirect transfer?

     a. M&I Bank takes in deposits from Bill and Teresa. M&I uses most of the

money to make a loan to Josephine.

     b. Northwestern Mutual Life Insurance sells a life insurance policy to

Sharon. The premium received by Northwestern is invested in corporate bonds.

     c. Jerry buys mutual fund shares from Vanguard Mutual Funds. Vanguard uses

the money to purchase stocks.

     d. Jennifer lends $11,000 to George. George is scheduled to pay off the

loan by making 60 equal monthly payments, covering principal and interest.

8: With a(n) _____________________ transaction, no new funds are generated for

the original issuer of the security.

     a. capital market

     b. secondary market

     c. capital market

     d. indirect

9: The actual amount of U.S. dollars received on a foreign investment depends on

__________________ between the U.S. dollar and the foreign currency.

     a. economies of scale

     b. transmission mechanism

     c. speculation

     d. the exchange rate

10: A(n) __________________ is a security whose payoffs are linked to other,

previously issued securities.

     a. secondary security

     b. primary security

     c. over-the-counter security

     d. derivative security