?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

Equipment was acquired at the beginning of the year at a cost of $38,500. 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 $750.

a. What was the depreciation for the first year?
$

b. Assuming the equipment was sold at the end of year 2 for $8,900, determine the gain or loss on the sale of the equipment.
$  Loss

Feedback

Book value is the asset cost minus accumulated depreciation. In the first year, the balance in the accumulated depreciation account is zero.

Compare the book value to the sale price. If the book value is more than the sale price, the equipment was sold for a loss. If the book value is less than the sale price, the equipment was sold for a gain.

c. Journalize the entry to record the sale. If an amount box does not require an entry, leave it blank.

Prior to adjustment at the end of the year, the balance in Trucks is $298,988 and the balance in Accumulated Depreciation—Trucks is $101,200. Details of the subsidiary ledger are as follows:

A. Determine the depreciation rates per mile and the amount to be credited to the accumulated depreciation section of each of the subsidiary accounts for the miles operated during the current year.

**Only need help with credit accumulated depreciation**

B. Journalize the entry on Dec. 31 to record depreciation for the year. Refer to the Chart of Accounts for exact wording of account titles.

Enoch's endowment this year is such that he is a buyer of good 2 and a seller of good 1. If the price of good 2 decreases before he can buy or sell any of his original endowment, will he remain a buyer of good 2 or switch to become a seller of good 2?

You are given the following for TG Inc. for the last year:

1. What was its last year’s net income?

   	A.	2,610
   	B.	4,500
   	C.	5,910
   	D.	(730)
   	E.	(100)
   	F.	2,460

QUESTION 6

1. What was the TG Inc.’s operating cash flow last year?

   	A.	8,350
   	B.	(730)
   	C.	7,400
   	D.	(100)
   	E.	5,760
   	F.	2,610

QUESTION 7

1. What was the TG Inc.’s cash flow from assets last year?

   	A.	(780)
   	B.	(880)
   	C.	(100)
   	D.	5,750
   	E.	5,910
   	F.	2,610

QUESTION 8

1. What was the TG Inc.’s cash flow to creditors last year?

   	A.	5,910
   	B.	5,750
   	C.	(780)
   	D.	(100)
   	E.	2,610
   	F.	(880)

QUESTION 9

1. What was the TG Inc.’s cash flow to stockholders?

   	A.	(100)
   	B.	5,750
   	C.	(880)
   	D.	2,610
   	E.	(780)
   	F.	5,910

Charlie was hired by Ajax this year as a corporate executive and a member of the board of directors. During the current year, Charlie received the following payments or benefits paid on his behalf.

a. Charlie uses the cash method and calendar year for tax purposes. Calculate Charlie’s gross income for the current year.

Gross income

b. Suppose that Ajax agrees to pay Charlie an additional $110,000 once Charlie completes five years of employment. Will this agreement alter Charlie’s gross income this year relative to your part (a) answer?

Yes

No

c. Suppose that in exchange for his promise to remain with the firm for the next four years, Ajax paid Charlie four years of director’s fees in advance. Will this arrangement alter Charlie’s gross income this year relative to your part (a) answer?

• Yes

• No

d. Assume that in lieu of a year-end bonus Ajax transferred 1,050 shares of Bell stock to Charlie as compensation.  Further assume that the stock was listed at $59 per share and Charlie would sell the shares by year-end, at which time he expected the price to be $68 per share. What would be the value of compensation and gain on sale which would be included in Charlie’s gross income?

Value of compensation

gain on sale

    
e. Suppose that in lieu of a year-end bonus Ajax made Charlie’s house payments (a total of $30,600). What would be the value of house payments which would be included in Charlie’s gross income?

Income