Task: Read the case study below and answer the following questions.
Case Study: The Reveton Ransomware Attacks
In August 2012, the Internet Crime Complaint Center (IC3), a partnership between the FBI and the National White Collar Crime Center, was inundated with reports of a new type of cybercrime. Victims across the United States reported that while searching the Internet, their computers locked up, and they received the following message, purportedly from the FBI: “This operating system is locked due to the violation of the federal laws of the United States of America! (Article 1, Section 8, Clause 8; Article 202; Article 210 of the Criminal Code of U.S.A. provides for a deprivation of liberty for four to twelve years.)” The message then accused the victim either of visiting pornography Web sites or of distributing copyrighted content. Victims were told they could unlock their computers and avoid prosecution by paying a fine of $200 within 72 hours of receiving the message. The message came replete with the official FBI logo.
The incident pointed to a steep rise in ransomware attacks. Ransomware is malware that disables a computer or smartphone until the victim pays a fee, or ransom. Unlike other viruses, the Reveton version of ransomware is not activated by opening a file or an attachment. Rather it is an example of “drive-by malware,” viruses that download automatically when a user visits an infected Web site.
The FBI immediately issued an alert, but within a month, cybersecurity experts had identified 16 variants of the ransomware. These viruses had infected 68,000 unique IP addresses. It is estimated that on an average day, about 170 victims paid the $200 fee and received valid unlock codes. The compromised computers could not be fixed through the installation or updating of antivirus software because the computer was locked. Because so many home PC owners fail to back up their systems regularly, many victims faced losing a significant amount of data. The $200 fee itself was low enough to encourage payment. A visit to a professional IT service to repair the damage could potentially cost the same amount and take more time to resolve. A quick payment through a prepaid money card system, such as MoneyPak, could save the victim a lot of trouble.
The United States was not the first country to be hit by these attacks. In early 2012, criminal gangs targeted France, Germany, and the United Kingdom. Ransomware attacks first broke out in Russia in 2009. Since that time, they have spread to almost every country on the globe, hitting the United States and Japan especially hard. Symantec, an IT security company, estimates that gangs are extorting over $5 million per year from online victims. The rise of ransomware attacks is, no doubt, due in part to their success. In France, for example, almost 4 percent of victims coughed up the ransom money during a non-Reveton scam.
The Reveton ransomware is delivered by the popular Russian-language Citadel malware toolkit. The latest version of Citadel can also grab passwords from Web browsers and change Web sites to trick users into handing over their login information.
In December 2012, the United Kingdom arrested three people they believed were involved in the Reveton ransomware attacks. Finding the perpetrators, however, is unusual and is not the most effective way to combat this crime. Law enforcement agencies and IT security companies have urged the public to take measures to prevent themselves from falling victim to such attacks—by keeping software such as Java, Acrobat Reader, Adobe Flash, Windows, and their browser software updated. An early Reveton ransomware attack made use of a vulnerability in a version of Java that had just been patched a month prior. Computer users can also avoid infections by using security software that identifies suspicious Web sites, and by not clicking online ads from dubious companies. Perhaps, however, the best way to avoid the spread of these attacks is to encourage victims to report the crime and to refuse to comply with the ransom demands.

Questions for the Homework
1-Why are ransomware attacks on the rise?
2-What can you do to prevent ransomware attacks on your own computer?
3-How do you think victims should respond to ransomware attacks?
4-Do the victims have an ethical obligation to future victims? If yes, why? If no, why?

The world today is changing and HR will have challenges relating to technology. Discuss your opinion on having all classes online and not face-to-face from a student standpoint. Should COVID-19 shutdown encourage mote eLearning and fully MBA online degrees? How would HR handle these issues with faculty and staff?

PLEASE ANSWER AND MAKE A SOLUTION.

1. The capital accounts of Kamprad, Inc. on December 31, 2019, were as follows:

Preference share capital, 20,000 shares, $20 par = $400,000
Share premium - preference = 160,000
Ordinary share capital, 50,000 shares, $80 par = 4,000,000
Share premium – ordinary = 600,000
Retained earnings = 360,000

During the year ending December 31, 2010, the following summarizes the transactions affecting the shareholders’ equity

April 30 - 1,000 preference shares were retired at $25 per share.

June 15 - 2,000 treasury shares, ordinary, were purchased at $85 per share.

June 30 - A two-for-one ordinary share split was declared.

July 31 - 800 treasury shares were reissued at $50 per share.

Dec. 31 – Profit for 2010 was $300,000.

What was the total share premium on December 31, 2020?

a. $760,000        c. $755,000

b. $766,000        d. $761,000

2. Black Corporation was organized on January 3, 2020. Black was authorized to issue 50,000 ordinary shares with a par value of P$10 per share. On January 4, Black issued 30,000 ordinary shares at $25 per share. On July 15, Black issued an additional 10,000 shares at $20 per share. Black reported income of $33,000 during 2020. In addition, Black declared a dividend of $0.50 per share on December 31, 2020. The amount reported on Black Corporation's December 31, 2020, balance sheet as shareholders' equity was

a. $400,000        c. $550,000

b. $950,000        d. $963,000

3. White Corporation was incorporated on June 1, 2020 with an authorized 200,000, no-par, ordinary shares, stated value $10 and 10,000, 9% par value $30, preference shares. Transactions affecting company’s equity as of July 31, 2020 were as follows:

June 1 - 50,000 ordinary shares were issued at $10.

June 5 - Assets with a total appraised value of $600,000 were acquired in exchange for 50,000 ordinary shares.

June 15 - Subscriptions were received for 100,000 ordinary shares at $15 and for 5,000 preference shares at $35.

June 25 - Payments in full for the ordinary and preference shares subscribed June 15 were received and the corresponding shares were issued.

The total shareholders’ equity as of July 31, 2020 is

a. $2,875,000        c. $2,750,000

b. $2,300,000        d. $2,775,000

1.    One of the most remarkable associations in macroeconomics relates GDP growth to unemployment or the so-called Okun’s Law (see p.293-294 in Burda&Wyplosz textbook). This empirical regularity describes inverse relationship between the change in unemployment and the change in GDP growth. Resulting negative coefficient has been repeatedly confirmed for different countries and different periods. Your task is to:

a)    Propose a modified version about how the GDP is related to the labour market. Specifically, make a formal/theoretical statement (similar to the textbook, so read the corresponding section) on how the employment rate is related to the output growth, write it down and then check the relationship with data (Finland).

b)    Find the employment rate time-series (for people aged 15-74) and the real GDP growth (all for Finland only) and retrieve a set of 40 most recent quarterly observations of both variables. Arrange the data and plot the relationship on a graph. What is the coefficient between the variables, so you need to add the trend-line relationship between the variables?

c)    Make a conclusion about how the model (Okun’s relationship) fits the Finnish data.

Important Vocab

Based on the vocab & videos in Chapter 8 complete the following:

What is GDP?

• Currency value of all _____________ goods and services produced

_________________ in a given period

• Total income of a nation
• Measure of nation‟s economic well-being
• Measure of a nation‟s ______________________ from one period to the next
• Most commonly calculated via ____________________

Four components of GDP expenditures

• Consumption: $ amount of goods and services purchased by__________________
  • ONLY counts goods produced in the _____________
  • Examples: __________________________________

• Investment: $ amount spent by business on productive resources and purchases of _________ by consumers! - New machines, new factories, research
  • ____________________________ also counts

• Government: $ amount spent ____________________provided goods and services
  • Example: ______________________________________

• Net exports = _______________________________

Exports: ________________________________________

Imports:________________________________________

GDP = _____ + _____ + _____ + _____

What’s NOT included in GDP?

• Intermediate goods            ¨ Financial transactions
• Used goods            ¨ Household production
• Underground production (black    ¨ Transfer payments market)           

What GDP does not tell us:

• Does not measure ___________________
• Does not measure non-monetary output or transactions (e.g., barter, household activities) ¨ Does not take into account desirable externalities, such as ________________

_________________________________

• Does not measure social well-being
• Correlates to standard of living but is _______________________________

*NOTE: I don't really know what subject this would be considered. It's from my business law class.

Outsourcing specialized operational tasks has become a common practice. When outsourcing involves the transfer of personal information, issues of security and privacy are raised. Customers may consent to the collection of personal data without realizing that their information could be shared with another company located halfway around the world and subject to different disclosure and protection rules. In recognition of international privacy concerns, the Organization for Economic Co-operation and Development (OECD) created guidelines to enhance privacy protection during trans-border data exchanges. Guideline 10 suggests that personal data should not be used or disclosed without the consent of the owner or authority of law.

Canadian outsourcing to the United States has become even more controversial since the enactment of the USA PATRIOT Act.15 This legislation allows US law-enforcement officials to obtain personal records or information from any source in the country without the data owner knowing. As a result, there have been several Canadian challenges of personal data outsourcing to the United States. In B.C.G.E.U. v. British Columbia (Minister of Health), union members argued that the Ministry of Health was violating patients’ rights to privacy under section 7 of the Charter by outsourcing physician billing data that contained personal patient information to a private U.S. company.16 The BC Supreme Court disagreed, holding that as long as the contractual arrangement authorized under the Canada Health Act ensured that a reasonable expectation of privacy was protected, the practice was acceptable. Since then BC., Nova Scotia, and Alberta passed legislation that restricts public (not private) sector trans-border outsourcing.17

The Privacy Commissioner rejected a similar complaint against the Canadian Imperial Bank of Commerce. The bank outsourced the processing of credit card transactions to an American company. The specific confidentiality and security contained in the outsourcing agreement were approved by the Office of the Superintendent of Financial Institutions, and this satisfied the Commissioner. Both decisions turned on the specific terms of the outsourcing agreement and prior regulatory approval of the terms.

When considering sending sensitive information across the border and outsourcing to American firms, businesses should:

• Undertake a security analysis of the American company prior to contracting;

• Inform the affected customer data owner;

• Include specific confidentiality, security, and reporting provisions in the outsourcing agreement;

• Seek regulatory approval of the agreement, if available; and

• Regularly audit the privacy practices of the outsourcing company.

Increased privacy concerns can be anticipated as the transnational public cloud computing industry replaces user owned software, desks, and laptops as the primary custodians of personal information. “By 2017, enterprise spending on cloud computing will amount to a projected $235.1 billion, triple the $78.2 billion spent in 2011. ….(in 2014) global business spending for infrastructure and services related to

the cloud will reach an estimated $174.2 billion, up 20 percent from the amount spent in 2013.”

Question (1): Are there certain types of information that should remain within Canadian borders? If Canadian data is at greater risk of disclosure when transferred to the United States, why not ban all public and private outsourcing to the United States? Discuss.

Question (2): How can personal information be protected when stored on a transnational cloud server?

Blades, Inc. Case Decisions to Use International Financial Markets As a financial analyst for Blades, Inc., you are reasonably satisfied with Blades’ current setup of exporting “Speedos” (roller blades) to Thailand. Due to the unique arrangement with Blades’ primary customer in Thailand, forecasting the revenue to be generated there is a relatively easy task. Specifically, your customer has agreed to purchase 180,000 pairs of Speedos annually, for a period of 3 years, at a price of THB4,594 per pair. The current direct quotation of the dollar-baht exchange rate is $.024. The cost of goods sold incurred in Thailand (due to imports of the rubber and plastic components from Thailand) runs at approximately THB2,871 per pair of Speedos, but Blades currently only imports materials sufficient to manufacture about 72,000 pairs of Speedos. Blades’ primary reasons for using a Thai supplier are the high quality of the components and the low cost, which has been facilitated by a continuing depreciation of the Thai baht against the U.S. dollar. If the dollar cost of buying components becomes more expensive in Thailand than in the United States, Blades is contemplating providing its U.S. supplier with the additional business. Your plan is quite simple; Blades is currently using its Thai-denominated revenues to cover the cost of goods sold incurred there. During the last year, excess revenue was converted to U.S. dollars at the prevailing exchange rate. Although your cost of goods sold is not fixed contractually as the Thai revenues are, you expect them to remain relatively constant in the near future. Consequently, the baht-denominated cash inflows are fairly predictable each year because the Thai customer has committed to the purchase of 180,000 pairs of Speedos at a fixed price. The excess dollar revenue resulting from the conversion of baht is used either to support the U.S. production of Speedos if needed or to invest in the United States. Specifically, the revenues are used to cover cost of goods sold in the U.S. manufacturing plant, located in Omaha, Nebraska. Ben Holt, Blades’ CFO, notices that Thailand’s interest rates are approximately 15 percent (versus 8 percent in the United States). You interpret the high interest rates in Thailand as an indication of the uncertainty resulting from Thailand’s unstable economy. Holt asks you to assess the feasibility of investing Blades’ excess funds from Thailand operations in Thailand at an interest rate of 15 percent. After you express your opposition to his plan, Holt asks you to detail the reasons in a detailed report.

1.)Construct a spreadsheet to compare the cash flows resulting from two plans. Under the first plan, net baht-denominated cash flows (received today) will be invested in Thailand at 15 percent for a 1-year period, after which the baht will be converted to dollars. The expected spot rate for the baht in 1 year is about $.022 (Ben Holt’s plan). Under the second plan, net baht-denominated cash flows are converted to dollars immediately and invested in the United States for 1 year at 8 percent. For this question, assume that all baht-denominated cash flows are due today. Does Holt’s plan seem superior in terms of dollar cash flows available after 1 year? Compare the choice of investing the funds versus using the funds to provide needed financing to the firm.

Each change occurs during 2021 before any adjusting entries or closing entries were prepared. Assume the tax rate for each company is 25% in all years. Any tax effects should be adjusted through the deferred tax liability account.

1. Fleming Home Products introduced a new line of commercial awnings in 2020 that carry a one-year warranty against manufacturer’s defects. Based on industry experience, warranty costs were expected to approximate 2% of sales. Sales of the awnings in 2020 were $2,900,000. Accordingly, warranty expense and a warranty liability of $58,000 were recorded in 2020. In late 2021, the company’s claims experience was evaluated, and it was determined that claims were far fewer than expected: 1% of sales rather than 2%. Sales of the awnings in 2021 were $3,400,000, and warranty expenditures in 2021 totaled $77,350.
2. On December 30, 2017, Rival Industries acquired its office building at a cost of $880,000. It was depreciated on a straight-line basis assuming a useful life of 40 years and no salvage value. However, plans were finalized in 2021 to relocate the company headquarters at the end of 2025. The vacated office building will have a salvage value at that time of $640,000.
3. Hobbs-Barto Merchandising, Inc., changed inventory cost methods to LIFO from FIFO at the end of 2021 for both financial statement and income tax purposes. Under FIFO, the inventory at January 1, 2021, is $630,000.
4. At the beginning of 2018, the Hoffman Group purchased office equipment at a cost of $264,000. Its useful life was estimated to be 10 years with no salvage value. The equipment was depreciated by the sum-of-the-years’-digits method. On January 1, 2021, the company changed to the straight-line method.
5. In November 2019, the State of Minnesota filed suit against Huggins Manufacturing Company, seeking penalties for violations of clean air laws. When the financial statements were issued in 2020, Huggins had not reached a settlement with state authorities, but legal counsel advised Huggins that it was probable the company would have to pay $140,000 in penalties. Accordingly, the following entry was recorded:

Late in 2021, a settlement was reached with state authorities to pay a total of $284,000 in penalties.

6. At the beginning of 2021, Jantzen Specialties, which uses the sum-of-the-years’-digits method, changed to the straight-line method for newly acquired buildings and equipment. The change increased current year net earnings by $379,000.

Required:
For each situation:
1. Identify the type of change.
2. Prepare any journal entry necessary as a direct result of the change, as well as any adjusting entry for 2021 related to the situation described.
  

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 8 million shares of common stock outstanding. The stock currently trades at $37.80 per share. Stephenson is evaluating a plan to purchase a huge tract of land in the southeastern United States for $85 million. The land will subsequently be leased to tenant farmers. This purchase is expected to increase Stephenson’s annual pretax earnings by $14.125 million in perpetuity. Jennifer Weyand, the company’s new CFO, has been put in charge of the project. Jennifer has determined that the company’s current cost of capital is 10.2 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 6 percent coupon rate. From 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 23 percent corporate tax rate (state and federal).

1. If Stephenson wishes to maximize its total market value, would you recommend that it issue debt or equity to finance the land purchase? Explain.

2. Suppose Stephenson decides to issue debt to finance the purchase. What will the market value of the Stephenson Real Estate Company be if the purchase is financed with debt?

3. What is the price per share of the firm’s stock? (Hint: Stock price per share = Total equity / # of outstanding shares)