A mature company on Beverage and Food Industry, with stable earnings expects to have earnings per share (EPS) of 30 AED in the coming year and its current stock price is 280 AED. The management must decide between the following alternatives: Pay all of its earnings as dividends and abandon the new investment in Dubai or Cut its dividend payout rate to 75% and implement the Dubai Project. If the second policy is followed there is a divergence in the estimation of the Return on New Investment.

(i). Pay all of its earnings as dividends. Because of the status of the company and its strength in the market, the CEO believes that cash flow from operations is sufficient to continue to reinvest in growth, though has to abandon Dubai Project for next year, and decided to pay out all of its earnings to investors. Besides that, current economic conditions are weak due to the crisis, and the CEO is more willing to pay dividends than to enter a program of share buybacks.

(ii). Cut its dividend payout rate to 75%. On the other hand, the company’s manager has negative expectations regarding the recent financial crisis and advise to cut dividends even if this is not consistent with its long-run growth in earnings. He believes that it is better to reinvest some of the earnings to open new stores in Dubai, a project that will last 2 years and hence, it is advisable to safeguard its financial reserves for future expenses. If the firm follows this program the return on investment is expected to be 17%. Suppose that the required rate of return is the same as calculated in Question (2) above.

Questions:

(5) Justify the dividend policy of the firm for both cases (i) and (ii).

(6) What would be the total return of a stockholder under conditions (ii)?

(iii). Expected return on New investment is 9% rather than 17%. Financial crisis is severe and persist. The manager of the company estimates that in this case the return on the new investment will be 9% rather than 17%.

Questions:

(7) What effect would this change have on the company’s stock price?

(8) Should the company implement the new investment project and open new stores in Dubai?

“Today, less than two decades after the arrival of the internet, Google and Facebook together command more advertising dollars than all print media on the planet.In 2017, Google’s ad campaign revenue totalled over $95 billion, while Facebook’s reached more than 39 billion. Taken together, this is roughly 25% of all global advertising expenditure.Fuelled by open source e-commerce platforms, mobile devices, and advances in online payment infrastructure, social media marketing has replaced virtually the entire traditional advertising industry. That took fewer than fifteen years.And the numbers are huge. In 2018, the global advertising industry surpassed $550 billion, driving Google’s valuation north of $700 billion and Facebook’s above $500 billion.All this value is fuelled by our searches: our likes and dislikes, what we desire, who our friends are, and what we (and they) are clicking on these days.But with a blitzkrieg of technologies converging on the industry, advertising will continue to change. It’s likely to get a little more invasive and a lot more personal.”

Peter Diamandis, co-founder Singularity University

1. Elaborate on how the advent of social media particularly has dramatically changed the world of advertising.
2. Find and present three (3) successful digital global campaigns. Give information about the brand, its target group, the media & executions employed, but most importantly the business and communication impact of these campaigns.
3. How do you think Advertising will be transformed in the not so distant future? What role Artificial Intelligence (AI) systems like Jarvis*, Virtual/Augmented Reality (VR/AR) or  Hyper-Personalisation could play?

Omega Coffee Shop enters into a contract with Software Wizards Co. on May 15, 2020, to deliver 100 bags of ground coffee beans to Software on June 1. Software agrees to pay $1,000 for the coffee beans, which cost Omega $6 each. Omega delivers the bags of coffee beans on June 1, 2020, and receives payment from Software on June 20, 2020.

Prepare the journal entries for Omega Coffee Shop related to this contract.

Wasatch Corp. (WC) received a $200,000 dividend from Tager Corporation (TC). WC owns 15 percent of the TC stock. Compute WC’s deductible DRD in each of the following situations:

a. WC’s 2020 taxable income (loss) without the dividend income or the DRD is $10,000.

b. WC’s 2020 taxable income (loss) without the dividend income or the DRD is $(10,000).

c. WC’s 2020 taxable income (loss) without the dividend income or the DRD is $(101,000).

Dreamland Security Services Inc. had the following account balances as of January 1, 2020:

* Terms: Notes Payable with Trust Bank - $15,000 - 1 yr. at 6% int. rate began on 10/1/19.

During 2020 Dreamland Security Services experienced the following transactions:

1. On January 1, 2020, Dreamland purchased land for $10,000 and a building for $90,000. The land was paid for with cash. The building was paid for with $5,000 cash and the remainder was financed with a 10-year notes payable.

2. Paid the accounts payable balance from 2019.

3. Purchase $500 of supplies on account.

4. Purchased 100 alarm systems (inventory) on account at a cost of $200 each.

5. Paid $6,000 of advertising expense during the year.

6. Sold 95 alarm systems for $400 each. All sales were on account. (Note - Be sure to compute cost of goods sold using the FIFO cost flow method.)

7. Paid $7,500 of utilities expense for the year.

8. Billed $65,000 of monitoring services on account for the year.

9. Replenished the petty cash fund on June 30. The fund had $25 cash remaining and receipts of $90 for yard mowing and $35 for postage.

10. After numerous attempts to collect from customers, the company wrote off $650 of uncollectible accounts receivable.

11. Collected $83,000 of accounts receivable during the year.

12. On July 1, 2020, issued $25,000 of 5 percent, five year bonds. The bonds were issued at 98.

13. On October 1, 2020, paid the note and interest owed to Trust Bank (See Beg. Balance in Notes Payable). (Note - Record Interest Expense for January-September)

14. Paid employees a total of $20,000 for salaries for the year. Federal income taxes withheld amounted to $2,200. The net amount of salaries was paid in cash. (Note - $20,000 is the gross salary amount and the actual amount paid in cash will be less due to the federal income taxes withheld. Ignore employer taxes.)

15. Paid the Federal Income Taxes withheld from salaries.

16. Paid the annual installment on the note used to finance the purchase of the building. The note had an interest rate of 5 percent and annual payments of $11,008.

17. Paid a dividend of $10,000 to the shareholders.

Adjustments:

18. There was $275 of supplies on hand at the end of the year.

19. Recognized the expired rent for the office building for the year.

20. Recognized the uncollectible accounts expense for the year using the allowance method. Dreamland estimates that 2 percent of sales on account will not be collected.

21. Recognized depreciation expense on the equipment. The equipment has a six-year life and a $2,500 salvage value. The company uses straight-line depreciation for the equipment. The equipment was purchased in 2018 and a full year of depreciation was taken in 2018 and in 2019. (Only record 2020 depreciation.)

22. Recognized depreciation expense on the service truck. The service truck has a five-year life and an $8,000 salvage value. The company uses double-declining-balance for the service truck. The truck was purchased in 2018 and a full year of depreciation was taken in 2018 and in 2019. (Only record 2020 depreciation.)

23. Recognized depreciation expense on the building. The building has a 40-year life and a $50,000 salvage value. The company uses straight-line depreciation for the building.

Required:

a. Record the above transactions in general journal form. Round all amounts to nearest whole dollar.

b. Prepare a trial balance.

Part B Short answer questions

Assume you are the financial controller of a new established company. The CEO has asked your choice of accounting policy regarding the measurement of intangible assets at the time of recognition and after the acquisition.

Required:

State your choice of accounting policy regarding the measurement of intangible assets at the time of recognition and after the initial acquisition. Explain the reason (s) of your choice (s). You should provide comments regarding the choice of accounting method.      

As the Data Manager (DM) on the “TES-100” project, the CEO has decided to proceed with the study and wants you to consider using the new savvy company system of remote data entry/electronic data capture. Review the current literature (i.e. internet) regarding this topic and decide if this study would be RDE/EDC appropriate, then write a 2-3 page paper or 20-25 slides on why you have made the decision you have made including pros and cons.

uring the past year, Jim Hunt, CEO of KMP Corporation, read about several different frauds occurring in his industry. As a result of these recent frauds, Jim would like to know if fraud is present in his company. As Jim's new assistant, he has asked you to help him determine whether or not fraud is occurring. In preparation for the investigation, Jim has asked you to create a list of five types of fraud symptoms and briefly define and discuss each type.

You are the Director of Global Compliance for a U.S. company that just created a revolutionary new portable personal computer (PPC) that is half the size of a laptop, performs the same functions as existing laptop computers but costs only half as much to manufacture. Several patents were filed and approved protect the unique design of this computer. Your CEO asked you to formulate a recommendation for how to expand into South America. Evaluate the pros and cons if you were to set up a wholly owned subsidiary in South America.

Plug Products owns 80 percent of the stock of Spark Filter Company, which it acquired at underlying book value on August 30, 20X6. At that date, the fair value of the noncontrolling interest was equal to 20 percent of the book value of Spark Filter. Summarized trial balance data for the two companies as of December 31, 20X8, are as follows:

On January 1, 20X8, Plug's inventory contained filters purchased for $77,000 from Spark Filter, which had produced the filters for $57,000. In 20X8, Spark Filter spent $117,000 to produce additional filters, which it sold to Plug for $158,053. By December 31, 20X8, Plug had sold all filters that had been on hand January 1, 20X8, but continued to hold in inventory $47,416 of the 20X8 purchase from Spark Filter.

What is the consolidated net income? I'm coming up with 126,790 but that's not correct