On January 1, 20X1, Metro Plaza Inc. (MPI), a real estate company using IFRS, issued$1,000,000, 8%, five year bonds for a cash price of $1,250,000. Interest is payable semi-annually on June 30 and December 31. Each $100 bond includes 20 warrants. Each warrant can be exchanged for one common share of MPI at an exercise price of $10 per share. The market rate of interest is 6% for similar bonds without warrants and the fair market value of these bonds was determined to be $1,085,302. Required: 1) Prepare the appropriate journal entry to record the issue of the bonds on January 1, 20X1; 2) Prepare the appropriate journal entry required on December 31, 20X1; 3) How would the bonds be reported on the balance sheet at December 31, 20X1; 4) 30% of the warrants were exercised on July 1, 20X3 when the shares of MPI were being traded at $11,50. Prepare the appropriate journal entry or entries which the company should make on July 1, 20X3 to record this transaction. Note: You may find it useful and easier to answer this question by preparing a bond amortization table.

Question 3

A union can influence the demand for labor by:

requiring union fees.

raising union fees.

effective advertising that convinces customers to buy the "union label."

all of these.

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Question 4

The supply curve that monopsonists face is different from the supply curves that firms in competitive labor markets face because with a monopsony,

d and e.

the supply curve of labor is relatively flat.

offering a wage lower than the market wage means having no workers.

the employer faces the market supply curve.

the firm does not take the wage as given.

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Question 8

Marginal revenue product of labor measures the extra revenue generated to the firm from the employment of an additional worker.

True

False

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Question 11

Suppose there are 100 identical firms producing package delivery services. One of the firms finds that when it has to pay a wage rate of $7, it hires 20 delivery people. The firm charges an average price of $10 to deliver a package. From this information, we know that the package delivery industry is hiring a total of:

100 workers.

200 workers.

700 workers.

2,000 workers.

10,000 workers.

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1. The Spurling Brigade Company produces custom widgets for its customers. The company uses an activity-based costing system for its overhead costs. The company has provided the following data from its activity-based costing system.

   
   Activity Cost Pool         Total Cost       Total Activity

      Assembling……….....          $101,574        16,200 machine hours

      Job Support…………               32,724            1,800 jobs

      Customer support…...                 5,472 320 clients

      Other……………….              100,000 Not applicable                                        

   Total………………. $239,770
     
   The "Other" activity cost pool consists of costs of idle capacity & organization-sustaining costs. One particular customer, Vandal Inc., requested 32 jobs during the year for a total of 100 units, requiring a total of 192 machine hours. Each unit requires $0.40 in direct materials and $1.60 in direct labor. The customer was charged $2,200 for these jobs.
   Round off all calculations to the nearest whole cent.

2. A. Using ABC, compute the activity rate for the Assembling dept.

B. Using the same information for #10, compute the activity rate for Job Support.

C. Using the information for #10, compute the activity rate for Customer support.

D. Compute the total overhead cost charged to Vandal. Round to 2 decimal places.

E. Now compute the customer (gross) margin for Vandal Inc. rounding to 2 decimal places. Give as positive or negative number.

F. What is the (product) cost for Spurling to produce one unit for Vandal under ABC? Round to 2 decimal places. Give as positive number.

G. If Spurling used traditional costing instead of ABC and allocates based on machine hours, what would be the customer margin for Vandal Inc.? Give as positive or negative number. Round to 2 decimal places

Teledex Company manufactures product to customers’ specification and uses a job-order costing system. The company uses a plantwide predetermined overhead rate based on direct labor cost to apply its manufacturing overhead(assumed to be all fixed) to jobs. The following estimates were made at the beginning of the year. Department Fabricating Machining Assembly Total Plant Manufacturing overhead 350,000 400,000 90,000 840,000 Direct Labor 200,000 100,000 300,000 600,000 Jobs require varying amounts of work in the three departments. The coopers job, for example, would have required manufacturing costs in the three departments as follows: Department Fabricating Machining Assembly Total Plant Direct Materials 3,000 200 1,400 4,500 Direct Labor 2,800 500 9,500 Manufacturing overhead ? ? ? ? Required: 1. Using the company’s plantwide approach: a. Compute the plantwide predetermined overhead rate for the current year. b. Determine the amount of manufacturing overhead cost that would have been applied to the coopers job 2. Suppose that instead od using a plantwide predetermined overhead rate, the company had used departmental predetermined overhead rates based on direct labor cost. Under these conditions: a. Compute the predetermined overhead rate for each department for the current year. b. Determine the amount of manufacturing overhead cost that would have been applied to the Koopers job. 3. Explain the difference between the manufacturing overhead that would have been applied to the Koopers job. 4. Assume that it is customary in the industry to bid jobs 150% of total manufacturing cost (direct materials, direct labor and applied overhead). What was the company’s bid price on the Koopers Job using a plantwide predetermined overhead rate? What would the bid price have been if departmental predetermined overhead rate had been used to apply overhead cost?

Journal Entries and Trial Balance

On October 1, 2018, Jay Pryor established an interior decorating business, Pioneer Designs. During the month, Jay completed the following transactions related to the business:

Enter the following transactions on Page 2 of the two-column journal:

What would the jounal entries look like for the following events?

Project Evaluation This is a comprehensive project evaluation problem bringing together much of what you have learned in this and previous chapters. Suppose you have been hired as a financial consultant to Defense Electronics, Inc. (DEI), a large, publicly traded firm that is the market share leader in radar detection systems (RDSs). The company is looking at setting up a manufacturing plant overseas to produce a new line of RDSs. This will be a five-year project. The company bought some land three years ago for $4.5 million in anticipation of using it as a toxic dump site for waste chemicals, but it built a piping system to safely discard the chemicals instead. The land was appraised last week for $5.3 million. In five years, the aftertax value of the land will be $5.7 million, but the company expects to keep the land for a future project. The company wants to build its new manufacturing plant on this land; the plant and equipment will cost $32 million to build. The following market data on DEI’s securities are current:

DEI uses G.M. Wharton as its lead underwriter. Wharton charges DEI spreads of 8 percent on new common stock issues, 6 percent on new preferred stock issues, and 4 percent on new debt issues. Wharton has included all direct and indirect issuance costs (along with its profit) in setting these spreads. Wharton has recommended to DEI that it raise the funds needed to build the plant by issuing new shares of common stock. DEI’s tax rate is 35 percent. The project requires $1,300,000 in initial net working capital investment to get operational. Assume Wharton raises all equity for new projects externally.

1. Calculate the project’s initial Time 0 cash flow, taking into account all side effects.
2. The new RDS project is somewhat riskier than a typical project for DEI, primarily because the plant is being located overseas. Management has told you to use an adjustment factor of +2 percent to account for this increased riskiness. Calculate the appropriate discount rate to use when evaluating DEI’s project.
3. The manufacturing plant has an eight-year tax life, and DEI uses straight-line depreciation. At the end of the project (that is, the end of Year 5), the plant and equipment can be scrapped for $4.5 million. What is the aftertax salvage value of this plant and equipment?
4. The company will incur $6,800,000 in annual fixed costs. The plan is to manufacture 17,000 RDSs per year and sell them at $10,800 per machine; the variable production costs are $9,400 per RDS. What is the annual operating cash flow (OCF) from this project?
5. Finally, DEI’s president wants you to throw all your calculations, assumptions, and everything else into the report for the chief financial officer; all he wants to know is what the RDS project’s internal rate of return (IRR) and net present value (NPV) are. What will you report?