2.    Costs are in hours/unit output. PLEASE SHOW ALL WORK/HOW YOU GOT YOUR ANSWERS.

a.    In which good does the U.S. and the U.K. have an absolute advantage? How can you tell?

                                U.S. ____________________                     U.K. ____________________    

b.    Fill in the opportunity cost of producing watches and rings in each country?

        U.S.                Watches__________ Rings___________              U.K.       Watches___________ Rings___________

c.     In which good does the U.S. and the U.K. have a comparative advantage?

                                U.S. ____________________                     U.K. ____________________    

d.    Find the price of rings in terms of watches (P_R= #W/R) for both the U.S. and the U.K. in the absence of trade.

                                U.S. ____________________                     U.K. ____________________    

e. Express the price limits for mutually advantageous trade. What does this result indicate?

Assume that Company A acquires 70% of Company for a cash price of $10 million when the share capital and reserves of Company B are:

Share capital $8 million

Retained earnings $2 million

$10 million

(a) What amount will be shown in the consolidated statement of financial position for goodwill pursuant to AASB 3 assuming that any non-controlling interest in the acquired is measured at fair value?

(b) What amount will be shown in the consolidated statement of financial position or goodwill pursuant to AASB 3 assuming that any non-controlling interest in the acquiree is measured at the non-controlling interest’s proportionate share of the acquiree’s identifiable new assets?

(c) What are some of the implications of allowing the group to have two options in accounting for goodwill on consolidation?

Doane Company has entered into two rental agreements. In each case the cash equivalent purchase price of the asset acquired is known and you wish to find the interest rate which is applicable to the rental payments.

Instructions:

Calculate the implied interest rate for the rental payments in each situation below:

Agreement A — Covers office equipment which could be purchased for $37,907.90. Doane Company has, however, chosen to rent the equipment for $10,000 per year, payable at the end of each of the next 5 years.

Agreement B — Applies to a machine which can be purchased for $48,448.20. Doane Company has chosen to rent the machine for $12,000 per year on a 5-year rental agreement. Payments are due at the beginning of each year.

Find a publicly traded company that has treasury stock on its balance sheet. Provide a link to the balance sheet in your post and explain the details of the treasury stock transactions based upon the amounts and disclosures found in the financial statements. Why do you think the company acquired the treasury stock? Do not choose a company that has already been reported on by one of your classmates. Participate in follow-up discussion by critiquing the posts provided by your classmates and defending their challenges to your post. Your initial post should be 250-500 words and should demonstrate solid academic writing skills. Please include proper citations in your discussion post. Points will be deducted if proper citations are not used.

Part 1: understanding the AS-AD framework

Understand how aggregate supply and aggregate demand determine macroeconomic equilibrium.

1) Draw AD and AS curves where macroeconomic equilibrium occurs at an output of $25 trillion. On your graph, indicate the equilibrium price level (you can assign an exact value). Indicate on the graph where macroeconomic equilibrium occurs. Make sure to label each part of the graph.

Part 2: applying the AS-AD framework

Evaluate the forces that shape the total quantity of goods and services that purchasers want to buy.

Evaluate the forces that shape the total quantity of goods and services that businesses want to supply.

2-1) For each of the following, using a graph to show the shift in aggregate demand and explain your reasoning.

a) How do poor numbers from several economic indicators (for example, today the retail sales for March 2020 were much lower and the manufacturing numbers were also lower) affect businesses?

b) Congress passes the relief package of $2 trillion dollars (Payment Protection Plan) and the Fed promised to add additional $2.3 trillion dollars the payments.

c) The U.S. government eliminates the tariffs it charges on goods imported from China (like recently medical supplies).

2-2) Illustrate how each of the following will impact aggregate supply and explain your reasoning.

a) The implementation of artificial intelligence in manufacturing.

b) The novel Coronavirus has put tens of millions workers out of work.

c) The U.S. dollar depreciates relative to the Chinese yuan.

2-3) Forecast how the economy will respond to changing conditions.

a) To combat the current recession, the U.S. government enacts expansionary fiscal policy (well, although the U.S. did announce some infrastructure projects, the example here isn't really a fact, I'm making up this policy for you to practice with the model.), which increase government spending by $2 trillion dollars. Illustrate the impact of this expansionary fiscal policy on the U.S. economy using an AS-AD graph. How will the price level change?

b) The Fed quickly announced a rate cut (the federal funds rate) to basically zero on March 13 amid concerns of a looming recession due to the novel Coronavirus. And the latest data on consumer confidence and business confidence dropped significantly. Forecast how prices and output will change by drawing an AS-AD graph, and explain your answers.

Dave Solomon is 59 years of age and is planning for his retirement. Dave is a barrister at a leading law firm. His gross salary for the 2019–2020 income year totals $345,000. He has decided to sell the majority of his assets as detailed below:

•  A two-storey residence at St Lucia, described in PoTL end of chapter question 11.6 (a)

•  A painting, described in PoTL end of chapter question 11.6 (b)

•  A parcel of shares, described in PoTL end of chapter question 11.6 (d).

•  A unit in a unit complex that he holds as a residential rental property investment. Davepurchased the unit ‘off plan’ on 1 January 2012 for $350,000. The unit was tenanted from that day. On 1 August 2019, Dave replaced the stove in the unit with a new one that cost him $1,800. He uses the diminishing value method for income tax purposes, and the effective life of the stove is 12 years. Dave sold the unit on 29 February 2020 for $450,000, and applies an apportionment of 0.2% on the sale of depreciating assets as set out in the ATO Rental properties Guide for rental property owners. During the 2019–2020 income year, Dave received rent totalling $16,800. By 30 June 2019, Dave had claimed Div 43 capital works deductions totalling $52,500.

  You are required to:

  Calculate Dave’s taxable income for the 2019–2020 income year. Show all your calculations and provide reasons for your answer, referencing relevant sections of the Income Tax Assessment Acts.

  Question 2

  Your client is a wealthy investor and property owner. Your client provides you with information (as detailed below) about various transactions that took place between 1 July 2019 and 30 June 2020.

1. 1) Warehouse: On 30 April 1985 your client acquired a large parcel of vacant land at Rocklea, a suburb in Brisbane with a significant number of commercial buildings. The purchase price was $180,000 and your client incurred $2,000 in legal fees and $18,000 in transfer duty when purchasing the land. In April 2000 your client signed a contract for the construction of a large warehouse on the land. The final construction cost was $1,000,000. The warehouse is used tohouse your client’s extensive motor vehicle collection. Your client signs the contract to sell the warehouse for $2,200,000 on 1 June 2020. Your client receives the proceeds on 1 July 2020. At the time of sale, an independent valuation revealed the land component of the sale price was $1,200,000. Your client paid $80,000 to insure the warehouse building against flood and fire damage.

2. 2) Boat: Your client owned a luxury motor cruiser that was moored at the Manly Yacht Club. Your client used the boat to go fishing over weekends and to cruise the waters of Moreton Bay. Your client purchased the vessel in late 2006 for $140,000 and sells the vessel on 1 June 2020 to a local boat broker for $90,000. During the period of ownership, your client paid a total of $25,000 in weekly mooring fees to the Manly Yacht club and also incurred $20,000 in repairs on the vessel.

3. 3) Dining Table: Your client acquires a large, hand crafted, English oak dining table for $8,000 in April 2001. The table is very old, having been constructed sometime during 1910 and was used by your client and his family in their formal dining room. Your client auctions the table on 2 April 2020 and it sells for a record price of $50,000. Your client pays $2,000 in auction fees. Duringyour client’s period of ownership they paid $3,000 to insure the table against loss or damage.

4. 4) Your client also has a capital loss carried forward from the 2017–2018 income year of $10,000.

You are required to:

Calculate which amount(s), if any, must be returned as assessable income for the 2019–2020 income year. Show all your calculations and provide reasons for your answer, referencing relevant sections of the Income Tax Assessment Acts.

Viking Trivia Company Chart of Account Titles (selected):

Assets: Prepaid Rent, Prepaid Advertising. Prepaid Insurance, Office Supplies, Inventory, Accumulated Depreciation

Liabilities: Interest Payable, Utilities Payable, Commissions Payable, Unearned Rent

Revenues: Rent Revenue, Interest Revenue

Expenses: Office Supplies Expense, Commissions Expense, Utilities Expense, Insurance Expense, Advertising Expense, Depreciation Expense, Interest Expense, Rent Expense

Review the following items and make the necessary adjusting entries using the account titles shown above as of December 31, 2019. If no entry is required, write N/A in all blanks for that item. Round all amounts to the nearest dollar.

a) On October 1, 2019, Viking Trivia Company paid $72,000 for a two-year lease on an office building. The payment was recorded as prepaid rent, and the lease commenced on the date of payment.

Debit Account  Debit Amount

Credit Account  Credit Amount

b) On December 1, 2019, Viking Trivia Company entered into a legally binding contract to purchase $40,000 of advertising. The advertising will begin on March 1, 2020 with payment due at that time.

Debit Account  Debit Amount

Credit Account  Credit Amount

c) On December 1, 2019, Viking Trivia Company rented some office space to a local telemarketer. Viking collected $5,400 rent for the period of December 1, 2019, to February 29, 2020. The cash collected was recorded as unearned rent.

Debit Account  Debit Amount

Credit Account  Credit Amount

d) During 2019, Viking Trivia Company purchased office supplies that cost $23,400. The purchase was recorded as office supplies inventory. At the beginning of 2019, the office supplies inventory was $3,600. At the end of 2019, a count showed unused office supplies amounting to $2,600.

Debit Account  Debit Amount

Credit Account  Credit Amount

e) For the week ended December 31, 2019, Viking Trivia Company sales employees earned $37,000 in commissions that will be paid in the next payroll on January 11, 2020.

Debit Account  Debit Amount

Credit Account  Credit Amount

f) On June 1, 2019, Viking Trivia Company borrowed $360,000 cash on a one-year, 6% note payable. The interest is payable on the due date, May 31, 2020.

Debit Account  Debit Amount

Credit Account  Credit Amount

g) On July 1, 2019, Viking Trivia Company paid $7,800 for six months’ property insurance coverage beginning on that date. The payment was debited to insurance expense on that date.

Debit Account  Debit Amount

Credit Account  Credit Amount

h) On October 1, 2019, Viking Trivia Company purchased office equipment that cost $44,000. The estimated life of the office equipment was five years with no residual value.

Debit Account  Debit Amount

Credit Account  Credit Amount

In 2016, Monsanto’s board accepted a $66 billion takeover offer from Bayer – Germany’s giant chemical and agricultural company. This takeover raises antitrust issues – creating one company with a large share of agricultural market for seeds and insecticides – that will require consideration by the U.S. government and the European Union. Discuss two or three of the key issues that Bayer's management considered in making this investment in the United States. Since the deal close Bayer's shares have lost $34 billion: was this a wise investment?

From your readings in the Special Module on foreign currency translation adjustments, summarize U.S. GAAP and IFRS differences on this topic and from the example in that module of one item that goes in Accumulated Other Comprehensive Income can you find such treatment in a company's equity section, either a US parent company or a foreign parent company?

I know the differences between GAAP and IFRS, Can anybody give an example that goes in Accumulated other comprehensive income? and find such treatment in a company's equity section?

Simmons Corp

Balance Sheet

As of December 31, 2019 and June 30, 2020

During 2020 to date (June 30, 2020), Simmons had the following transactions:

1. Provided services to customers on account for $1,000.
2. Paid cash for salaries of employees for $400 (includes amounts owed as of December 31, 2019).
3. Paid cash for utility bills of $100
4. Collected $30 cash from customers on account.
5. Paid $40 cash to suppliers on account.

Additional information:

1. The Note Payable bears interest at 6% per year, but no interest is due until the due date of the note, which is 2024.
2. The equipment, purchased in 2019, is being depreciated using the straight-line method with an estimated service life of 5 years and no estimated residual value.

1. Provide any adjusting entries needed to account for interest on the note payable and depreciation on the equipment through June 30, 2020.
2. Prepare an income statement for Simmons Corp for the period January 1 – June 30, 2020.
3. Enter the balances of balance sheet accounts as of June 30, 2020 in the balance sheet above. Don’t forget the closing entry needed to make the balance sheet balance!
4. In Simmons Corp.’s cash flow statement for the period January 1 – June 30, 2020, what would be the reported amounts of each of the following? (You do NOT have to prepare a cash flow statement)
5. Cash flows from operating activities:
6. Cash flows from investing activities
7. Cash flows from financing activities:
8. Based on the financial statements (income statement and balance sheet) that you prepared, and based on the cash flow information you determined in part (4), comment on the performance of the company, both from a profit and a cash flow perspective. Also comment on the company’s financial position (its ability to pay bills, e.g.).