7. You are a member of the senior executive group at your company. The company has a reputation of compensating its executives at a very high level. In fact your own compensation appears to be at least 50% above that of your peers in like companies. Due to pressure from the founder who has a controlling interest in the company and now lives in another state the company is considering developing an incentive system for all employees who other than the executives are paid significantly below the levels of peer companies. You have been able to achieve this pay structure due to the limited other job opportunities in the immediate area. In addition to concentrating compensation at the top of the org chart most decisions are also made at the highest levels and little or no planning or financial information is shared outside this group. You recently received input from a group of investors who are very vocal and have accumulated a significant amout of stock in your company. They feel that overall employee pay, the salary and benefits line on the income statement, in total is excessive and they are demanding this issue be addressed. You have been considering stock options, profit sharing and cash bonuses as alternatives for an employee incentive system. 1) Given these facts and the culture in your company and the pressure from investors and the founder discuss these two alternatives for an incentive system.

2) Which would you recommend and how would you fund the program?

1. On January 1, 2020, Pantop Corporation acquired 85% of the outstanding common stock of Sunny Company for $527,000. There was no control premium.

The following information about Sunny Company on January 1, 2020 was available:

Pantop uses the complete equity method to account for its investment in Sunny. During 2020, Sunny had a net income of $80,000. The remaining useful life of the building was five years with no salvage value. Sunny uses straight line depreciation. Sunny’s cost of goods sold (FIFO) was $70,000 in 2020. On December 23, 2020, Sunny declared and paid $48,000 cash dividend to its shareholders. Goodwill was unimpaired as of December 31, 2020.

(i) Prepare journal entries for Pantop to record under the complete equity method of accounting the operating results of Sunny in 2020.

(ii) Prepare the working paper eliminating entries C, E, R, O and N (in journal entry format) for Pantop Corporation and subsidiary for the year ended December 31, 2020.

1. On January 1, 2020, Pantop Corporation acquired 85% of the outstanding common stock of Sunny Company for $527,000. There was no control premium.

The following information about Sunny Company on January 1, 2020 was available:

Pantop uses the complete equity method to account for its investment in Sunny. During 2020, Sunny had a net income of $80,000. The remaining useful life of the building was five years with no salvage value. Sunny uses straight line depreciation. Sunny’s cost of goods sold (FIFO) was $70,000 in 2020. On December 23, 2020, Sunny declared and paid $48,000 cash dividend to its shareholders. Goodwill was unimpaired as of December 31, 2020.

(i)  Prepare journal entries for Pantop to record under the complete equity method of accounting the operating results of Sunny in 2020.

(ii) Prepare the working paper eliminating entries C, E, R, O and N (in journal entry format) for Pantop Corporation and subsidiary for the year ended December 31, 2020.

As part of a rapidly growing firm located in the US, your CEO has asked you to find out more about US requirements for exporting. Using the following link, Export.Gov, describe what you find about common export documentation. Select at least one of the documents and describe its purpose in greater detail.

Maria is an investor and over the years has acquired and disposed of a number of assets. She has kept records of all these transactions. During the year ended 30 June 2020, Maria disposed of several assets. As a result of these disposals, she made a number of capital gains and losses:

Profit on sale of trading stock $15000   

Loss on Disposal of motor vehicle $(5000)

Gain on Disposal of vacant block of land (acquired 1/9/19) $17000

Gain on sale of shares $4525

Loss on sale of shares $(2630)

Loss on Disposal of the caravan (cost $25000) $(5000)

Loss on Disposal of the antique watch (cost $4000) $(560)

Gain on Disposal of the investment property (acquired 24/12/2004) $162000

Capital losses carried forward from previous years:

Loss on Disposal of painting $1200

Loss on Disposal of Shares $12000

All assets, other than the land, had been owned by Maria for more than 12 months and had been acquired since December 1999.

Required:

Calculate the net capital gain that Maria should include in her tax return for the year ended 30 June 2020 and any losses that can be carried forward to future years.

Assume today is March 16, 2016. Natasha Kingery is 30 years old and has a Bachelor of Science degree in computer science. She is currently employed as a Tier 2 field service representative for a telephony corporation located in Seattle, Washington, and earns $38,000 a year that she anticipates will grow at 3% per year. Natasha hopes to retire at age 65 and has just begun to think about the future.

Natasha has $75,000 that she recently inherited from her aunt. She invested this money in 30-year Treasury Bonds. She is considering whether she should further her education and would use her inheritance to pay for it.*

She has investigated a couple of options and is asking for your help as a financial planning intern to determine the financial consequences associated with each option. Natasha has already been accepted to both of these programs, and could start either one soon.

One alternative that Natasha is considering is attaining a certification in network design. This certification would automatically promote her to a Tier 3 field service representative in her company. The base salary for a Tier 3 representative is $10,000 more than what she currently earns and she anticipates that this salary differential will grow at a rate of 3% a year as long as she keeps working. The certification program requires the completion of 20 Web-based courses and a score of 80% or better on an exam at the end of the course work. She has learned that the average amount of time necessary to finish the program is one year. The total cost of the program is $5000, due when she enrolls in the program. Because she will do all the work for the certification on her own time, Natasha does not expect to lose any income during the certification.

Another option is going back to school for an MBA degree. With an MBA degree, Natasha expects to be promoted to a managerial position in her current firm. The managerial position pays $20,000 a year more than her current position. She expects that this salary differential will also grow at a rate of 3% per year for as long as she keeps working. The evening program, which will take three years to complete, costs $25,000 per year, due at the beginning of each of her three years in school. Because she will attend classes in the evening, Natasha doesn’t expect to lose any income while she is earning her MBA if she chooses to undertake the MBA.

1. Determine the interest rate she is currently earning on her inheritance by going to the U.S. Treasury Department Web site (treasury.gov) and selecting “Data” on the main menu. Then select “Daily Treasury Yiled Curve Rates” under the Interest Rate heading and enter the appropriate year, 2016, and then search down the list for March 16 to obtain the closing yield or interest rate that she is earning. Use this interest rate as the discount rate for the remainder of this problem. --> the identified rate for March 16th on a 30 year bond is 2.73
2. Create a timeline in Excel for her current situation, as well as the certification program and MBA degree options, using the following assumptions:
   • Salaries for the year are paid only once, at the end of the year.
   • The salary increase becomes effective immediately upon graduating from the MBA program or being certified. That is, because the increases become effective immediately but salaries are paid at the end of the year, the first salary increase will be paid exactly one year after graduation or certification.
3. Calculate the present value of the salary differential for completing the certification program. Subtract the cost of the program to get the NPV of undertaking the certification program.
4. Calculate the present value of the salary differential for completing the MBA degree. Calculate the present value of the cost of the MBA program. Based on your calculations, determine the NPV of undertaking the MBA.
5. Based on your answers to Questions 3 and 4, what advice would you give to Natasha? What if the two programs are mutually exclusive? That is, if Natasha undertakes one of the programs there is no further benefit to undertaking the other program. Would your advice be different?

* If Natasha lacked the cash to pay for her tuition upfront, she could borrow the money. More intriguingly, she could sell a fraction of her future earnings, an idea that has received attention from researchers and entrepreneurs; see M. Palacios, Investing in Human Capital: A Capital Markets Approach to Student Funding, Cambridge University Press, 2004.

a shareholder derivative suit was filed in the Delaware Courts alleging that the Facebook Board of Directors violated their duties to their shareholders by pay- ing its nonexecutive directors 43% more than "peers," despite its net income and revenues being 66% and 49% lower, respectively, than its peers. The peers named in the suit included Adobe, Amazon, Cisco, eBay, EMC, LinkedIn, Netflix, Qualcomm, SAP AG, The Walt Disney Company, VMware, and Yahoo!, Inc. The suit noted that in 2013, the Facebook Board paid its nonexec- utive members an average $461,000 per director, 43%, or $140,000 higher than the average per director compen- sation in Facebook's Peer Group. It further noted that the Board is free to grant its board members an unlimited amount of stock as part of their annual compensation under a 2012 equity incentive plan, with the only limit a $2.5 million share limit per director in a single year (worth approximately $145 million at the time of filing). The Facebook Board at the time consisted of eight individuals, six of whom were "outside" (i.e., nonem- ployee) directors including Lead Independent Director Donald Graham, and Directors Peter Thiel, Marc Andreessen, Reed Hastings, Erskine Boles and Desmond-Hellman. Inside directors included founder and CEO/Chairman Mark Zuckerberg and COO Sheryl Sandberg. The lawsuit alleged that all of the Directors approved the compensation and all of the nonexecutive directors received the compensation. The lawsuit claimed breach of fiduciary duty, waste of corporate assets, and "unjust enrichment." The issue of director compensation accelerated in late 2014, when Jan Koum, cofounder and CEO, joined the board and received a salary of $1, but stock awards worth over $1.9 billion, representing a sign-on award of $25 million restricted stock units when Facebook acquired WhatsApp. However, Face- book CEO Mark Zuckerberg allegedly approved the stock grants in a written affidavit, rather than at a stock- holder meeting—and with 60% of the voting power, he had the ability to approve whatever he wanted. The question remains as to whether Mark Zuckerberg failed to comply with Delaware corporate law, where the com- pany is incorporated, in circumventing shareholders by signing off on directors' stock grants instead of present- ing it at a shareholders' meeting.

Question:

1. Institutional Shareholder Services, a proxy advisory firm, has noted that there is “too much work and too much time” required of directors; could this justify higher director pay?

Please interview 3 individuals: a business owner, a co-worker (or just someone with a job), and a student. Get their perspective on the economy, the impact of several mega hurricanes and earthquakes on the US, Mexico and the Caribbean. Assume you're president or prime minister of your country, what programs would you implement to stimulate economic growth?

On 1/1/20, Polka Company acquired 80% of Jazz Company for $900,000. Jazz's retained earnings and capital stock accounts had balances of $500,000 each. An appraisal of Jazz's assets revealed that equipment was undervalued by $40,000. The equipment has a 5-year life and is being depreciated using the straight-line method. During 2020, Jazz reported $200,000 of net income. Assume that you are consolidating the balance sheets of Polka and Jazz on 12/31/20. Prepare the worksheet consolidation entries.