The ABC Company bought a new machine on October 1, 2014 for $110,000. It planned to keep the truck for four years at which time it expected to sell the truck for $30,000. The company elected to amortize the truck for financial reporting purposes using the declining balance method with an annual rate of 30%. The company has a December 31 year-end and a corporate income tax rate of 40%. For tax reporting purposes, you may pick one of the following:

·       The company US-based and is required to determine tax depreciation for reporting to the taxation authority using the MACRS 10-year category, or

·       The company is Canadian-based and is required to determine capital cost allowance for reporting to the taxation using a CCA pool rate of 20%.

     Calculate the following for both the years 2014 and 2015:

A.   The depreciation expense for the truck that would be shown on the company's income statement

B.   The amount of tax depreciation (US) or CCA (Canada) that would be claimed, and

C.   the change in deferred taxes.

Charles Dow was the original editor of the Wall Street Journal. He was the originator of​ "Dow Theory," which holds that the prices of transportation​ stocks, such as Heartland​ Express, can predict changes in the price of industrial​ stocks, such as ExxonMobil. An article in the Wall Street Journal refers to Dow Theory as the​ "granddaddy of technical​ analysis."

​Source: Spencer​ Jakab, "Keep on Trucking Despite Dow​ Theory," Wall Street Journal​, July​ 16, 2012.

Dow Theory is considered technical analysis rather than fundamental analysis because it​ _______.

A. requires complicated computer programs to generate its results

B. requires analysis of multiple stocks to generate its results

C. relies on forecasting future profits of firms in order to forecast future stock prices

D. relies on patterns of past stock prices to predict future stock prices

Would an investor be able to earn an​ above-average return on her stock investments by selling industrial stocks whenever she saw declines in transportation stocks and buying industrial stocks whenever she saw increases in transportation​ stocks?

A. ​Yes, the long history associated with this theory illustrates its ability to guarantee​ above-average returns.

B. ​No, this strategy neglects all available information except for past stock prices.

C. ​No, this strategy only focuses on expected future returns and neglects past performance.

D. ​Yes, rational expectations theory predicts that investors employing technical analysis are likely to earn​ above-average returns

​?[Related to the Chapter Opener​] The chapter opener states that​ "many investors who bought stocks in 2000 and held them through 2010 found that they had received a negative real return on their investment over the​ 10-year period." Why would investors have invested in stocks during those years if they received a negative real​ return?

A. Investors may have used rational expectations to predict continued growth in the markets.

B. Investors may have believed the high rate of returns from the 1980s would continue.

C. Investors may have used adaptive expectations to formulate their future stock price forecasts.

D. All of the above.

An article in the Economist noted that while economic growth in China was​ slowing, stocks have more than doubled in value. The article stated that unlike in developed countries where large institutional investors buy the overwhelming majority of the stock​ purchased, in China​ 90% of buying is done by individual investors. It described the demand for stock by these investors as a mania.

​Source: A Crazy ​Casino, Economist​, May​ 26, 2015.

What does the article mean when it describes stock buying by individual investors as a​ mania?

A. Investors are purchasing stock irrationally.

B. Investors are crazy.

C. Investors are enthusiastic about purchasing stock.

D. The demand for stock is incredibly high.

? Individual investors would be More likely to exhibit this behavior than institutional investors.

An article in the Economist in 2016 noted that since​ 2000, an investor in the United Kingdom would have earned a higher return from buying British government bonds than from buying stock issued by British firms. The article concluded​ that: There has been a negative equity risk premium this century.

​Source: Stocks for the Long ​Run? Economist​, January​ 13, 2016.

?Equity premium represents the additional return investors must receive in order to invest in stocks.

?Why might the equity risk premium in the United Kingdom have been negative during this​ period?

A. Banks were paying high interest rates on bonds.

B. The returns on bonds outpaced the returns on stocks.

C. Investors fled to other countries.

D. The returns on stocks outpaced the returns on bonds.

​?[Related to Making the​ Connection] Economist Peter Temin of MIT argues​ that, If the crash of 1929 was an important independent shock to the​ economy, then the crash of 1987 should have been equally disastrous.

​Source: Peter​ Temin, Lessons from the Great Depression​, ​Cambridge, MA: MIT University​ Press, 1989 p. 41.

Which of the following events would be considered important independent shock to an economy​?

A. A stock market crash.

B. The breakout of war in the Europe.

C. Inflation.

D. An increase in the Federal Funds rate.

?What reason might Temin give to support his argument that what happened to the economy following the crash of 1987 is evidence against the crash of 1929 being an important shock to the​ economy?

A. Economic conditions were more severe after the crash of 1929 even though the decline in the market in 1987 was twice as large as the decline in the market in 1929.

B. The market decline in 1929 was twice as large as the market decline in 1987.

C. The market decline in 1987 was twice as large as the market decline in 1987.

D. Economic conditions were more severe after the crash of 1987 because the decline in the market was twice as large as in 1929.

Christina Romer would argue that the impact of the crash of 1929 was more severe because of its effect on consumer confidence as well as the lack of regulations in place at the time.

The business writer Michael Lewis has quoted Michael​ Burry, a fund​ manager, as​ saying: "I also immediately internalized the idea that no school could teach someone how to be a great investor. If that were​ true, it'd be the most popular school in the​ world, with an impossibly high tuition. So it must not be​ true." Do you agree with​ Burry's reasoning?

Source​: Michael​ Lewis, The Big​ Short: Inside the Doomsday Machine​, New​ York: W.W.​ Norton, 2010, p. 35.

A. ​No, according to the adaptive markets​ hypothesis, attempting to beat average market returns is a futile exercise.

B. ​Yes, according to the adaptive markets​ hypothesis, if you could derive an adaptive model to forecast stock​ returns, it is possible to earn infinitely high profits.

C. ​No, according to the efficient markets​ hypothesis, attempting to beat average market returns is a futile exercise.

D. ​Yes, according to the efficient markets​ hypothesis, if you could derive an efficient model to forecast stock​ returns, it is possible to earn infinitely high profits.

[Related to Making the​ Connection] A column in the Wall Street Journal​, asks the​ question: Are capital gains so different from earned income that they should be taxed at a different ​rate?

​Source: Scott Sumner and Leonard E.​ Burman, It Fair to Tax Capital Gains at Lower Rates Than Earned ​Income? Wall Street Journal​, March​ 1, 2015.

What is a capital​ gain?

A. A distribution of profit to investors.

B. The increase in capital from one year to the next.

C. An increase in the price of a stock.

D. A profit from the sale of an investment.

In what way are capital gains taxed differently than salary and wage​ income?

A. Capital gains are adjusted to account for inflation.

B. Salary and wage income is subject to deductibles.

C. Salary and wage income is taxed at a lower rate than capital gains.

D. Capital gains are taxed at a lower rate than salary and wage income.

One economic argument for taxing capital gains differently than other income is that investors have to pay taxes on their nominal gain without an adjustment for inflation.

Macro Postlude Extra Credit 2 for home work 2

Q1: Keeping in mind that investments come in the form of fixed and variable, why then do firms endeavor to continuously replace labor with capital? (1)

Q2: Why don’t economists, in the aggregate, advocate the use of price controls as means of governing prices in the short term (in other words, what do price controls in reality do that’s adversary)? (1)

Q3: Which of the following would be included in the US GDP: (1)

1. Clean up after fires caused by storms
2. Depositing checks at the local bank
3. A Chinese firm building train cars in Springfield, MA
4. Dividends earned on a preferred Amazon stock
5. An estate sale in a big city
6. B & D
7. C & D
8. All of the above

This information relates to the Cash account in the ledger of Oriole Company.

          Balance September 1—$17,190; Cash deposited—$64,000
          Balance September 30—$18,390; Checks written—$62,800

The September bank statement shows a balance of $17,290 at September 30 and the following memoranda.

At September 30, deposits in transit were $5,053 and outstanding checks totaled $2,698.

Prepare the bank reconciliation at September 30, 2017. (List items that increase balance as per bank & books first.)

eTextbook and Media

List of Accounts

Prepare the adjusting entries at September 30, assuming the NSF check was from a customer on account. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

SoakNSun Swim Park sells individual and family tickets. With a​ ticket, each person receives a​ meal, three​ beverages, and unlimited use of the swimming pools. SoakNSun has the following ticket prices and variable costs for 2018​:

SoakNSun expects to sell one individual ticket for every three family tickets. SoakNSun​'s total fixed costs are $61,875.

Requirement 1. Compute the​ weighted-average contribution margin per ticket.

Complete the table below to calculate the​ weighted-average contribution margin. ​(Round the​ weighted-average contribution margin per unit to the nearest​ cent.)

Requirement 2. Calculate the total number of tickets SoakNSun must sell to break even.Start by selecting the formula and entering the amounts to calculate the total number of tickets SoakNSun must sell to break even. ​(Abbreviations used: Weighted avg. CM​ = weighted-average contribution margin. Complete all answer boxes. For items with a zero​ value, enter​ "0".)

Requirement 3. Calculate the number of individual tickets and the number of family tickets the company must sell to break even.

You are the CEO of a major US equipment manufacturer that sells its industrial construction equipment worldwide. You have seen shrinking profits in the past 5 years due to competition from Chinese equipment manufacturers and your Board of Directors and shareholders are looking to you for profit improvement. You have been approached by the Mexican government to open a factory in Juarez (just across the border from El Paso, Texas) and the Mexican government will subsidize the facility construction if you can create 200 new jobs. Opening this facility in Mexico will mean a reduction of union workers in the US plant, but will save the company $20 million a year in labor costs. On the other hand, the US government is considering a Border Adjustment Tax on parts you produce in Mexico and bring back to the US plant for final assembly. The total costs of this Tax is unknown but it could be up to 40% of the value of items produced in the new Mexican facility.

On top of this, you are looking to expand your global sales presence into third world regions such as Central Africa, South East Asia, Central America and other regions that need construction equipment to expand their infrastructure and improve their local economies. Your Global Sales and Marketing teams have advised that Chinese manufacturers are also targeting these same regions. This same team also advises that the market potential in these regions could expand sales by 50% and profits by 15% over the next 3 years.

Keeping in mind that it is the fiduciary responsibility of all leaders of for-profit corporations to maximize shareholder value, start a thread that begins with your decision to open, or not to open, a facility in Mexico and explain, in detail, your reasoning.

Many individuals who receive a stimulus check as a result of COVID- 19 will receive a $1200 direct deposit. Individuals earning between 75k and 99k will only receive a fraction of the $1200 deposit. Suppose Debra earned below 75k in 2018 and 2019 and receives a $1200 direct deposit stimulus. Use the IS-LM curves as well as the AD-AS curves to show the impacts on the macroeconomy. Be sure to label all axes and curves. In one or more paragraphs explain what should happen when we assume COVID-19 causes an initial shock to the macroeconomy first and then show how Debra’s deposit moves the economy from that state of shock in some way when the required reserve ratio is 0.2. Also, discuss the impact on all variables and economic agents. Be sure to indicate the direction of movement for all variables. (25 points)

5. For each random variable defined here, describe the set of possible values for the variable, and state whether the variable is discrete. (

a) X = number of unbroken eggs in a randomly chosen standard egg carton

(b) Y = number of students on a class list for a particular course who are absent on the first day of classes

(c) Z = number of times a golfer has to swing at a golf ball before hitting it

(d) A = length of a randomly selected rattlesnake

(e) B = amount of royalties earned from the sale of a first edition of 10,000 textbooks (f) C = the pH of a randomly chosen soil sample

(g) D = the tension (psi) at which a randomly selected tennis racket has been strung (h) E = the total number of coin tosses required for three individuals to obtain a match (HHH or TTT)