a) At the end of the current year, the taxpayer has a home-equity loan of $90,000. The value of the residence is $286,000, while the amount of acquisition indebtedness on the home is $125,000. Interest on how much of the home equity loan is indebtedness on the deductible?

b) A taxpayer donates a capital asset (basis of $16,000, value of $12,000) to a public charity on October 29th, 2014. She had acquired the property on December 2013. What is the value of the contribution?

Toronto Stock Exchange. In a meeting with investment analysts at the beginning of the year, Jones had predicted that the company’s earnings would grow by 20% this year. Unfortunately, sales have been less than expected for the year, and Jones concluded within two weeks of the end of the fiscal year that it would ultimately be impossible to report an increase in earnings as large as predicted unless some drastic action were taken. As a result, Jones ordered that wherever possible, expenditures should be postponed to the new year—including cancelling or postponing orders with suppliers, delaying planned maintenance and training, and cutting back on end-of-year advertising and travel. Also, Jones ordered the company’s controller to carefully scrutinize all costs that are currently classified as period costs and reclassify as many as possible as product costs. The company is expected to have substantial inventories of work in process and finished goods at the end of the year.

Required:

1. Why would reclassifying period costs as product costs increase this period’s reported earnings?

2. Do you believe Adam Jone's actions to be ethical? Why, or why not? (Be descriptive and explain)

A home is purchased for 395,000 with a 10% down payment and a 30 year amortized mortgage charging 3.6% compounded monthly find: a) the amount borrowed, b) the size of the monthly mortgage payment and c) the total interest paid over 30 years?

. Variance Analysis

Sourpatch company is a manufacturer of a custom engraved hammers. For the year 2021, the weekly budget was as follows.

• Sales revenue $64,000: 2,000 hammers × price $32
• Variable costs:
  • Direct materials $10,000: 2,000 hammers ×1 lbs per hammer×price $5/lb
  • Direct labour $50,000: 2,000 hammers× 5 hour per hammer× rate $5/hour
  • no variable overhead
• Fixed costs: $3,000
• Profit: $1,000

The actual performance of the week was as follows.

• Sales revenue $70,400: 2,200 hammers × price $32
• Variable costs:
  • Direct materials $13,200: 2,200 hammers ×1 lbs per hammer×price $6/lb
  • Direct labour $46,200: 2,200 hammers× 3 hour per hammer× rate $7/hour
  • no variable overhead
• Fixed costs: $8,000
• Profit: $8,000

Required:

1) Compute the following variances

a) Spending and Volume Variances of Materials

b) Spending and Volume Variances of Labour

c) Spending and Volume Variances of Fixed Overhead

c) Materials Quantity Variance

d) Materials Price Variance

e) Labour Efficiency Variance

f) Labour Rate Variance

2) SourPatch company hired an experienced engineer and asked her to re-organize the production process. How could hiring an experienced engineer and their new production process explain the variances? Please comment on individual components of variances, their relations to other variances, and overall impact on profitability.

More time on the Internet: A researcher polled a sample of

1097

adults in the year

2010

, asking them how many hours per week they spent on the Internet. The sample mean was

9.42

with a standard deviation of

13.23

. A second sample of

1031

adults was taken in the year

2012

. For this sample, the mean was

10.63

with a standard deviation of

14.47

. Assume these are simple random samples from populations of adults. Can you conclude that the mean number of hours per week spent on the Internet increased between

2010

and

2012

? Let

μ1

denote the mean number of hours spent on the Internet in

2010

and

μ2

denote the mean number of hours spent on the Internet in

2012

. Use the  

=α0.05

level and the

P

-value method with the table.

Part 1 of 6

Your Answer is correct

State the appropriate null and alternate hypotheses.

Part 2 of 6

Your Answer is correct

Compute the test statistic. Round the answer to three decimal places.

=t

−2.01

Part: 2 / 6

2 of 6 Parts Complete

Part 3 of 6

Your Answer is incorrect

How many degrees of freedom are there, using the simple method?

The cash flows of a firm next year will be either $250 or $1,750 in two equally probable scenarios. The firm dissolves at the end of the year and discount rates are zero. The firm has debt with face value $500 and maturity one year (no coupon).

1. What is the value of the firm? What is the value for shareholders? What is the value of bondholders?

2.. Suppose that the firm decides to invest in a safer asset that transforms its payoffs to 500$ and 1, 500$. What is the change in the wealth of shareholders and bondholders?

3. Suppose that the firm decides to invest in a riskier asset that transforms its payoffs to 0$ and 2, 000$. What is the change in the wealth of shareholders and bondholders?

Lost with this, please explain how to come to answers!

Closing the Balances in The Variance Accounts at the End of the Year

Yohan Company has the following balances in its direct materials and direct labor variance accounts at year-end:

Unadjusted Cost of Goods Sold equals $1,570,000, unadjusted Work in Process equals $316,000, and unadjusted Finished Goods equals $190,000.

Required:

1. Assume that the ending balances in the variance accounts are immaterial and prepare the journal entries to close them to Cost of Goods Sold. Note: Close the variances with a debit balance first. If an amount box does not require an entry, leave it blank or enter "0".

What is the adjusted balance in Cost of Goods Sold after closing out the variances?

$

2. What if any ending balance in a variance account that exceeds $11,000 is considered material? (a) Close the immaterial variance accounts to Cost of Goods Sold. (b) Prorate the largest of the labor variances among Cost of Goods Sold, Work in Process, and Finished Goods on the basis of prime costs in these accounts. (c) Prorate the largest of the material variances among Cost of Goods Sold, Work in Process, and Finished Goods on the basis of prime costs in these accounts. The prime cost in Cost of Goods Sold is $1,050,000, the prime cost in Work in Process is $160,800, and the prime cost in Finished Goods is $131,000. If an amount box does not require an entry, leave it blank or enter "0".

Note: Round all interim calculations to three decimal places, and round your final answers to the nearest dollar. Adjust credit entry for rounding to ensure debits equal credits in journal entry.

What are the adjusted balances in Work in Process, Finished Goods, and Cost of Goods Sold after closing out all variances?

You are the sole bondholder in a firm that will be liquidated next year. Your main concern is that you will not be paid back the $200M you are owed at that time. The current market value of the firm is $225M, although it is unknown what the market value will be next year.

a)Provide the payoff diagram for the bondholder with the final market value of the firm on the x-axis.

b)The financial manager of the firm is currently considering a project that will cause the market value of the firm to be equal to either $450M or nothing next year with equal probability.Assume that the bondholders and shareholders have to maintain their positions until firm liquidation next year. What is the expected payoff to bondholders and shareholders next year under this project? (Hint:Use the table below.)

c)If you were to completely protect yourself against the state of the world where the firm does not pay you back, would you buy a (call or put)option on the final market value of the assets of the firm, and at what strike price?

d)This option youpurchase has a price of only $40M. You decide to borrow the $40M, in order to pay for the option, at a 10% interest rate. The loan plus interest must be repaid in one year. What is your total expected payoff (bond + option –loan repayment) in one year?(Hint:Use the table below.)

Firms that go bankrupt are typically unable to fully repay all bondholders. Bondholders can protect themselves from this by entering into “Credit Default Swaps”, in which they pay a third counterparty a fee (or a sequence of fees over time), and in exchange the third counterparty will repay the bondholders instead in the event that the firm goes bankrupt (you also hand over the bond to that third counterparty). “Credit Default Swaps” are, in essence, the option that you purchased in part (c).

The table below shows your stock positions at the beginning of the year, the dividends that each stock paid during the year, and the stock prices at the end of the year.

What is your portfolio dollar return and percentage return?

What is the outlook for Verizon Communication Inc. for the year 2020 and beyond in terms of growth, opportunities or challenges for the business in the Telecom industry.