Thomas Railroad Company organizes its three divisions, the North (N), South (S), and West (W) regions, as profit centers. The chief executive officer (CEO) evaluates divisional performance, using income from operations as a percent of revenues. The following quarterly income and expense accounts were provided from the trial balance as of December 31:

Revenues—N Region $912,100

Revenues—S Region 1,105,800

Revenues—W Region 1,975,400

Operating Expenses—N Region 578,000

Operating Expenses—S Region 658,100

Operating Expenses—W Region 1,194,600

Corporate Expenses—Dispatching 470,400

Corporate Expenses—Equipment Management 214,500

Corporate Expenses—Treasurer’s 138,700

General Corporate Officers’ Salaries 306,300

The company operates three service departments: the Dispatching Department, the Equipment Management Department, and the Treasurer’s Department. The Dispatching Department manages the scheduling and releasing of completed trains. The Equipment Management Department manages the railroad cars inventories. It makes sure the right freight cars are at the right place at the right time. The Treasurer’s Department conducts a variety of services for the company as a whole. The following additional information has been gathered:

North South West

Number of scheduled trains 4,900 5,900 8,800

Number of railroad cars in inventory 800 1,300 1,200

Required:

1. Prepare quarterly income statements showing income from operations for the three regions. Use three column headings: North, South, and West. Do not round your interim calculations.

Thomas Railroad Company

Divisional Income Statements

For the Quarter Ended December 31

North South West

Revenues $ $ $

Operating expenses Income

from operations before

service department charges $ $ $

Service department charges:

Dispatching $ $ $

Equipment Management

Total service department charges $ $ $

Income from operations $ $ $

2. What is the profit margin of each division? Round to one decimal place.

Region

Profit Margin

North Region %

South Region %

West Region %

Identify the most successful region according to the profit margin.

3. What would you include in a recommendation to the CEO for a better method for evaluating the performance of the divisions?

a. The method used to evaluate the performance of the divisions should be reevaluated.

b. A better divisional performance measure would be the rate of return on investment (income from operations divided by divisional assets).

c. A better divisional performance measure would be the residual income (income from operations less a minimal return on divisional assets).

d. None of these choices would be included.

e. All of these choices (a, b & c) would be included.

Thomas Railroad Company organizes its three divisions, the North (N), South (S), and West (W) regions, as profit centers. The chief executive officer (CEO) evaluates divisional performance, using income from operations as a percent of revenues. The following quarterly income and expense accounts were provided from the trial balance as of December 31:

The company operates three service departments: the Dispatching Department, the Equipment Management Department, and the Treasurer’s Department. The Dispatching Department manages the scheduling and releasing of completed trains. The Equipment Management Department manages the railroad cars inventories. It makes sure the right freight cars are at the right place at the right time. The Treasurer’s Department conducts a variety of services for the company as a whole. The following additional information has been gathered:

Required:

1. Prepare quarterly income statements showing income from operations for the three regions. Use three column headings: North, South, and West. Do not round your interim calculations.

2. What is the profit margin of each division? Round to one decimal place.

Identify the most successful region according to the profit margin.
North

3. What would you include in a recommendation to the CEO for a better method for evaluating the performance of the divisions?

1. The method used to evaluate the performance of the divisions should be reevaluated.
2. A better divisional performance measure would be the rate of return on investment (income from operations divided by divisional assets).
3. A better divisional performance measure would be the residual income (income from operations less a minimal return on divisional assets).
4. None of these choices would be included.
5. All of these choices (a, b & c) would be included.

You are the CEO of Broadway Medical Center.  Mrs. Sarah Jones is admitted to your hospital preparing to give birth and in a great deal of pain. According to her medical records, her unborn child is suffering from a heart defect and must be operated on quickly to save the life of the child. The surgery that must be done is expensive and can only be performed by a pediatric cardiologist, fetal surgeon, and their medical teams. Mrs. Jones insurance will not pay for the care, and is currently in a legal battle over Mrs. Jones insurance status.  This surgery is extremely dangerous, risky, and will cost the hospital millions in the short term.  The fact is that there is only a 50% chance that the procedure will work.

Knowing all of this, how do you treat Mrs. Jones situation?

What are the legal and ethical issues?

How do you deal with the insurance company and reimbursement?

Can you put any pressure on the insurance company?

The below transactions concerns Ford Company for the year 2012:

1. On May31^st,2012, Ford company purchased a long-term investment related to Motro Companyfor $12 millionas trading securities, of 8% quoted bonds. On the same date the business acquired $15million of Cora Company shares as available-for sale security and purchased Treasury bonds for $3 million, from Samsuc Company hoping to generate profit in short period of time.

2. On November 15^th, 2012, Ford company sold the Samsuc Treasury bonds for $4 million.

3. On December 31^st, 2012, record the necessary adjusting entry(s) and closing entries related to the investments. The market prices of the investments are:

Motro Company      $11.5 million

Cora Company          $16 million

Samsuc Company     $5 million

Required:

1. Record transaction number (3) presenting the necessary adjusting entries.
2. Indicate any amounts that Ford would report in its 2012 statement of financial position and income statement as result of these investments.

What does it mean biologically to be human? How can evolution explain both the unity and diversity of human phenotypes? Use specific examples of evidence and some version of the following terms in your answer: neutral genetic variation, evolution, natural selection, drift/bottleneck/founder effect, migration, mutation, and species/population/lineage.

Question 2:

Sunny Ltd., a hand sanitizer manufacturer, has prepared its financial statements for the year ended at December 31, 2019. On February 28, 2020, the board of directors authorized to issue the financial statements to shareholders. The following events have occurred:

1. On December 1, 2019, the board of directors decided to issue $50,000,000, 9% convertible bonds for the purpose of expanding business in other countries. The conversion rate is fixed at 50 shares for bond with face value of $1,000. The convertible bonds are offered to the public on January 15, 2020. The market interest rate for a similar bond without conversion option is at 12%.                                                                                        [3 marks]
2. On October 23, 2019, Sunny signed a contract to sell 10,000 hand sanitizer to a local store at a price of $200 each. However, due to the increase in the cost of materials, the estimated cost of making one hand sanitizer has been increased to $250. Sunny has to deliver the hand sanitizer to its customer on January 30, 2020.                                                      [4 marks]

3. Under the terms of the sales contract, Sunny undertakes to recall its new formulated sanitizer, for its manufacturing defects within six months from the date of sale. The accountants estimated that 5% of the sanitizer will be returned for refund. In January 2020, Sunny discovered a serious problem in the manufacturing process of the new formulated sanitizer. Because of this, Sunny expected that 20% of the sanitizer sold in 2019 will be returned for refund.    [4 marks]

4. On December 15, 2019, a group of customers reported that the hand sanitizer that they bought in 2019 caused them have serious skin infection problems. They filed a lawsuit against Sunny on December 20, 2019. The company’s attorney said that it was probable that Sunny would be liable for the case. However, the amount of damage could not be estimated.        [4 marks]

5. On February 12, 2020, the above lawsuit case was settled for the amount of $2,500,000.                                                                                                     [4 marks]
6. Sunny has retail stores in China doing poorly. On February 15, 2020, Sunny estimated that those stores might report a loss of $1,500,000 in 2020.                                 [4 marks]

7. In May 2019, Sunny had legal disputes with Coco Limited. Unable to reach out-of-court settlement with Coco, Sunny sued Coco for compensation for damages in August 2018.         In November 2019, Sunny heard good news about the lawsuit in which the company sued Coco. Sunny’s lawyer is confident that the company will win the case and will receive about $120,000 in compensation for damages from Coco in early 2020. Sunny recognized the gain and receivable from litigation of $120,000 in year 2019.                                 [4 marks]

8. On March 1, 2020, a customer owing $600,000 to Sunny filed for bankruptcy. The financial statements include an allowance for doubtful debts pertaining to this customer only of $30,000.                                                                                          [3 marks]

Required:

For each of the above event, state the correct accounting treatments in accordance with Hong Kong Accounting Standards for the year ended at December 31, 2019. If it is an event after the reporting period, identify whether it is an adjusting or non-adjusting event. Give reasons for your answer.

Sunny Ltd., a hand sanitizer manufacturer, has prepared its financial statements for the year ended at December 31, 2019. On February 28, 2020, the board of directors authorized to issue the financial statements to shareholders. The following events have occurred:

1. On December 1, 2019, the board of directors decided to issue $50,000,000, 9% convertible bonds for the purpose of expanding business in other countries. The conversion rate is fixed at 50 shares for bond with face value of $1,000. The convertible bonds are offered to the public on January 15, 2020. The market interest rate for a similar bond without conversion option is at 12%.                                                                                       [3 marks]

2. On October 23, 2019, Sunny signed a contract to sell 10,000 hand sanitizer to a local store at a price of $200 each. However, due to the increase in the cost of materials, the estimated cost of making one hand sanitizer has been increased to $250. Sunny has to deliver the hand sanitizer to its customer on January 30, 2020.                                                      [4 marks]

3. Under the terms of the sales contract, Sunny undertakes to recall its new formulated sanitizer, for its manufacturing defects within six months from the date of sale. The accountants estimated that 5% of the sanitizer will be returned for refund. In January 2020, Sunny discovered a serious problem in the manufacturing process of the new formulated sanitizer. Because of this, Sunny expected that 20% of the sanitizer sold in 2019 will be returned for refund.        [4 marks]

4. On December 15, 2019, a group of customers reported that the hand sanitizer that they bought in 2019 caused them have serious skin infection problems. They filed a lawsuit against Sunny on December 20, 2019. The company’s attorney said that it was probable that Sunny would be liable for the case. However, the amount of damage could not be estimated. [4 marks]

5. On February 12, 2020, the above lawsuit case was settled for the amount of $2,500,000.                                                                                                    [4 marks]
6. Sunny has retail stores in China doing poorly. On February 15, 2020, Sunny estimated that those stores might report a loss of $1,500,000 in 2020.                                       [4 marks]

7. In May 2019, Sunny had legal disputes with Coco Limited. Unable to reach out-of-court settlement with Coco, Sunny sued Coco for compensation for damages in August 2018. In November 2019, Sunny heard good news about the lawsuit in which the company sued Coco. Sunny’s lawyer is confident that the company will win the case and will receive about $120,000 in compensation for damages from Coco in early 2020. Sunny recognized the gain and receivable from litigation of $120,000 in year 2019.                                       [4 marks]

8. On March 1, 2020, a customer owing $600,000 to Sunny filed for bankruptcy. The financial statements include an allowance for doubtful debts pertaining to this customer only of $30,000. [3 marks]

Required:

For each of the above event, state the correct accounting treatments in accordance with Hong Kong Accounting Standards for the year ended at December 31, 2019. If it is an event after the reporting period, identify whether it is an adjusting or non-adjusting event. Give reasons for your answer.

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?  

Week 6 Assignment: Case Study: Stephenson Real Estate Recapitalization

Stephenson Real Estate Company was founded 25 years ago by the current CEO, Robert Stephenson. The company purchases real estate, including land and buildings, and rents the property to tenants. The company has shown a profit every year for the past 18 years, and the shareholders are satisfied with the company’s management. Prior to founding Stephenson Real Estate, Robert was the founder and CEO of a failed alpaca farming operation. The resulting bankruptcy made him extremely averse to debt financing. As a result, the company is entirely equity financed, with 11 million shares of common stock outstanding. The stock currently trades at $48.50 per share. Stephenson is evaluating a plan to purchase a huge tract of land in the southeastern United States for $45 million. The land will subsequently be leased to tenant farmers. This purchase is expected to increase Stephenson’s annual pretax earnings by $10 million in perpetuity. Kim Weyand, the company’s new CFO, has been put in charge of the project. Kim has determined that the company’s current cost of capital is 10.5 percent. She feels that the company would be more valuable if it included debt in its capital structure, so she is evaluating whether the company should issue debt to entirely finance the project. Based on some conversations with investment banks, she thinks that the company can issue bonds at par value with a coupon rate of 7 percent. Based on her analysis, she also believes that a capital structure in the range of 70 percent equity⁄30 percent debt would be optimal. If the company goes beyond 30 percent debt, its bonds would carry a lower rating and a much higher coupon because the possibility of financial distress and the associated costs would rise sharply. Stephenson has a 40 percent corporate tax rate (state and federal). If Stephenson wishes to maximize its total market value, would you recommend that it issue debt or equity to finance the land purchase? Explain. Review Stephenson's market value balance sheet before it announces the purchase. Suppose Stephenson decides to issue equity to finance the purchase. What is the net present value of the project? Review Stephenson's market value balance sheet after it announces that the firm will finance the purchase using equity. What would be the new price per share of the firm's stock? How many shares will Stephenson need to issue to finance the purchase? Review Stephenson's market value balance sheet after the equity issue but before the purchase has been made. How many shares of common stock does Stephenson have outstanding? What is the price per share of the firm's stock? Review Stephenson's market value balance sheet after the purchase has been made. Suppose Stephenson decides to issue debt to finance the purchase. What will the market value of the Stephenson company be if the purchase is financed with debt? Review Stephenson's market value balance sheet after both the debt issue and the land purchase. What is the price per share of the firm's stock? Which method of financing maximizes the per-share stock price of Stephenson's equity? In a 2-3 page analysis, answer the questions provided at the end of the case study. Be sure to support your analysis with appropriate calculations and critical thought.

Market balance sheet info: Before the land purchase: Assets=$533,500,000 Total Assets: $533,500,000 Equity=$533,500,000 Debt & Equity=$533,500,000

Market balance sheet after purchase of land: Old Assets=$533,500,000

Will need calculations for new balance sheet including NPV and Equity. Will also need calculations for the change in stock value and how much stock would need to be issued to purchase land. The remaining questions will follow a similar format in which you create Market Value Balance Sheets and calculations.

the beginning of 2020, Browne Corporation had the following stockholders’ equity balances in its general ledger:

Common Stock, $10 Par Value $500,000

Paid-In Capital in Excess of Par 1,500,000

In Capital, Treasury Stock 100,000

Paid-In Capital, Stock Options 80,000

Retained Earnings 100,000

Treasury Stock (15,000 shares) (270000)

Total Stockholders’ Equity 2,010,000

The paid-in capital from stock options relates to options granted on 1/1/16 to the CEO as incentive compensation. As of 1/1/20, the remaining expected benefit period is three years; expense has been and will be recorded evenly over the benefit period.

January 2: Purchased 10,000 shares of its common stock for $16 per share. Browne uses the cost method of accounting for treasury stock transactions.

February 1: Declared and distributed a 30% stock dividend on common stock outstanding when the market price of the stock was $24 per share.

April 1: Issued 20,000 shares of $50 par, noncumulative, convertible 6% preferred stock for $60 per share, where one share of preferred stock is convertible into two shares of common stock.

July 1: 2,000 shares of treasury stock that had been purchased in a prior year for $22 per share were re-issued for $20 per share.

August 1: Holders of 8,000 shares of the preferred stock converted their shares into common stock when the market value of the common stock was $22 per share. Taylor uses the book value method of accounting for conversions.

October 1: Declared and paid a cash dividend of $2 per share on the outstanding common stock.

November 1: investors used ten percent of the outstanding stock option to purchase 1,000 common share. Brown received $25,000 from investors

December 1: Declared and distributed a property dividend of land to preferred shareholders. The land had a fair value of $75,000 and a carrying value of $60,000.

December 31: Recorded 2020 compensation expense related to the stock options.

The 2020 Final Net Income, including the effects of any net income items listed above (and the 2020 tax effects on net income items), was $1,000,000. There were 500,000 shares authorized for both preferred and common stock. Required All journal entries for the item above 12/30/20 stockholders equity section

Required All journal entries for the item above

12/30/20 stockholders equity section