You are the manager of the only firm worldwide that specializes in exporting fish products to Japan. Your firm competes against a handful of Japanese firms that enjoy a significant first-mover advantage. Recently, one of your Japanese customers has called to inform you that the Japanese legislature is considering imposing a quota that would reduce the number of pounds of fish products you are permitted to ship to Japan each year. Your first instinct is to call the trade representative of your country to lobby against the import quota.

Is following through with your first instinct necessarily the best decision?

a. Yes - a quota restrains your sales and will ultimately hurt your bottom line.

b. No - a quota may actually increase the profits of the follower.

c. No - a quota won't have any effect on a follower.

d. Yes - a quota will force the price to be lower and ultimately lower your profits.

You plan to purchase a $160,000 house using a 15-year mortgage obtained from your local credit union. The mortgage rate offered to you is 6 percent. You will make a down payment of 10 percent of the purchase price.

a. Calculate your monthly payments on this mortgage.
b. Construct the amortization schedule for the first six payments.
  

A-Calculate your monthly payments on this mortgage. (Do not round intermediate calculations. Round your answer to 2 decimal places. (e.g., 32.16))

b- Construct the amortization schedule for the first six payments. (Do not round intermediate calculations. Round your answers to 2 decimal places. (e.g., 32.16))

50. How does a business measure the cost of property, plant and equipment?

1. List three examples of items paid to the purchaser that is part of the total cost of land?    
2. A piece of machinery equipment has a purchase price of $10,000. We also paid $1,000 commission, $1,200 for sales tax, and $300 for repair work from damaged when unloading. What is the amount to be debited to the Equipment account?
   

.

50. What is depreciation and how is it computed?

1. Use the following information regarding a piece of equipment to answer the following questions:

                        Cost of machine is $20,000
                   Useful life is 4 years or 15,000 machine hours
                   Residual value is $5,000

1. What is the depreciation expense for the first year using the straight-line method?
   
   
   

Assume the equipment was used 3,000 hour the first year of operations. What is the depreciation expense for the first year based on machine hours using the units of production method?

Tiyumba Co is a new client of Anwaar and Co, an audit firm. Tiyumba Co runs a spa, trading as Tiyumba.
The spa is open to non-members and members. Members pay an annual membership fee that entitles them
to 50% off spa rates for individual treatments and sessions. The spa employs lifeguards, masseuses, beauty
therapists and nursery nurses for its crèche facilities. In addition, there is also administrative staff,
including a finance controller, who reports to the managing director, Ibrahim Osman (who is also the
major shareholder).
The spa has been in business five years, but this is the first time it has required an audit. Its major local
competitor is Doobia, a large members-only spa, which started business two years ago. Anwaar and Co
has just been invited to tender for the audit of the company which owns Doobia.
The finance controller at Tiyumba is Mma Fatima. She was employed 18 months ago, since then she has:
• Instituted control procedures outlined in a controls manual;
• Formalised a budgeting system so that budgets are now prepared and approved annually; and
• Identified the need for an audit to Ibrahim Osman.
Mma Fatima introduced Anwaar and Co to Ibrahim through her husband, Anthony Davidson, who is a
manager at Anwaar and Co. The audit engagement partner assigned to Tiyumba is Carol Lamb. Since
agreeing audit terms with Anwaar and Co, Ibrahim has:
• Invited Carol to advertise to employees of Anwaar and Co a staff membership rate, which is 50%
of standard membership rates and then entitles the member to 75% off spa rates
• Asked Carol if she will sit on the board of directors at Tiyumba Co as a non-executive director
• Asked Carol if the firm will confirm the figures on an insurance claim to be submitted in respect of
a fire in the treatment centre just prior to the year end
Required:
(a) (i) Explain the ethical threats which may affect the independence of Anwaar and Co’s audit of
Tiyumba Co; and
(ii) For each threat explain how it might be avoided.
(b) Explain five procedures you would carry out to obtain an understanding of Tiyumba Co in order to
conduct the first year audit.
(c) Explain the benefits of a company having an audit committee.

Swifty’s Nut House is a processor and distributor of a variety of different nuts. The company buys nuts from around the world and roasts, seasons, and packages them for resale. Swifty’s Nut House currently offers 15 different types of nuts in one-pound bags through catalogs and gourmet shops. The company’s major cost is that of the raw nuts; however, the predominantly automated roasting and packing processes consume a substantial amount of manufacturing overhead cost. The company uses relatively little direct labor.

Some of Swifty’s nuts are very popular and sell in large volumes, but some of the newer types sell in very low volumes. Swifty’s prices its nuts at cost (including overhead) plus a markup of 50%. If the resulting prices of certain nuts are significantly higher than the market price, adjustments are made. Although the company competes primarily on the quality of its products, customers are price conscious.

Data for the annual budget include manufacturing overhead of $7,077,000, allocated on the basis of each product’s direct labor cost. The annual budgeted direct labor cost totals $1,769,250. Based on the sales budget and raw materials standards, purchases and use of raw materials are expected to total $9,000,000 for the year.

The unit raw material and direct labor costs of a one-pound bag of two of the company’s products follows.

Swifty’s controller believes that the traditional costing system may be providing misleading cost information, so she has developed the following analysis of the annual budgeted manufacturing costs.

Data regarding the annual production of cashews and chestnuts follow. There will be no Raw Materials Inventory for either type of nuts at the beginning of the year.

(a)

Correct answer iconYour answer is correct.

Using the current costing system, calculate the cost and selling price of one pound of cashews and one pound of chestnuts. (Round predetermined overhead rate to 0 decimal places, e.g. 25% and final answers to 2 decimal places, e.g. 15.25.)

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Attempts: 1 of 3 used

(b)(i)

Correct answer iconYour answer is correct.

Calculate ABC rates.

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Attempts: 1 of 3 used

(b)(ii)

Using an activity-based costing approach and the information provided, calculate the cost and selling price of one pound of cashews and one pound of chestnuts. (Round all rates and final answers to 2 decmial places, e.g. 15.25.)

Background Information: Cipper Corporation is authorized to issue an unlimited number of no par value common shares, and has 100 000 shares outstanding. The business has the following balances in its shareholders' equity accounts:

As you can see, the company has enough in its Retained Earnings account to declare a dividend. The board of directors has decided to either pay a $1 per share cash dividend or issue one share for every four shares each shareholder owns. The current market price is $4 per share.

Value of Cash Dividend: 100 000 outstanding shares x $1 = $100 000

Value of Stock Dividend: 100 000 / 4 = 25 000 shares @ $4 each = $100 000

What effect does each scenario have on total shareholders' equity?

Required: Assume that you own 800 shares in Cipper Corporation. Calculate the dividend you would receive from a cash dividend and from a stock dividend. As a shareholder, which would you prefer? Explain why in as much detail as possible.

Adam owns Chipcorp, a company that makes computer chips. It sold 700 chips to Widgetcorp and exported 1,000 chips abroad. The price of a chip is $100. Chipcorp bought silicon wafers from abroad for its production process worth $70,000. Also Chipcorp employs an engineer, Becca, at a salary of $60,000.

Clarice owns Widgetcorp, a company that makes widgets. Widgetcorp sold 650 widgets to domestic consumers and exported 50 widgets abroad. The price of a widget is $220. Widgetcor employs only Drew, a designer, with a salary $45,000. (All the manufacturing is done by robots.)

Suppose that the country imported 5,000 burgers from Barland at a price of $7 per burger. (The burgers are consumed by the Techland residents.)

a.) Find GDP using the expenditure approach.

b.) Find GDP using the income approach.

c.) Find GDP using the production (value-added) approach.

d.) Suppose that next year everything stays the same with the exception that Chipcorp buys a new chip fabrication machine from abroad at a price of $20,000. Recompute GDP using the expenditure approach. (Hint: the machine will be used for some time, so it is not an intermediate good. What kind of a purchase is it?)

Question Workspace

رThe treasurer of Miller Co. has readnon the Internet that the stock price of
Wade Inc. is about to take off . In order to profit from this potential
development, Miller Co. purchased a call option on Wade common shares
on July 7, 2020, for $400. The call option is for 250shares (notional value),
and the strike price is $50. (The market price of a share of Wade stock on
that date is $50.) The option expires on January 31, 2021. The following
data are available with respect to the call option.
Date Market Price of Wade Shares Time Value of
Call
September 30, 2020 $55 per share
$100
December 31, 2020 45 per share
40
January 4, 2021 47 per share
33
Instructions
Prepare the journal entries for Miller Co. for the following dates.
a. July 7, 2020—Investment in call option on Wade shares.
b. September 30, 2020—Miller prepares financial statements.
c. December 31, 2020—Miller prepares financial statements.
d. January 4, 2021—Miller settles the call option on the Wade shares.

Consider an industry consisting of two firms which produce a homogeneous commodity. The industry demand function is Q= 100 − P, where Q is the quantity demanded and P is its price. The total cost functions are given as C₁ = 50q₁ for firm 1, and C₂ = 60q₂ for firm 2, where Q =q₁ + q₂. a. Suppose both firms are Cournot duopolists. Find and graph each firm's reaction function. What would be the equilibrium price, quantity supplied by each firm and their profits? b. Now suppose the firms start acting as Stackelberg duopolists. Suppose in particular that firm 1 acts as the leader, whereas firm 2 acts as the follower. Find the new equilibrium price, quantity produced by each firm and the profits. Comment on equilibrium price, total output and total surplus in comparison to the Cournot equilibrium. c. Suppose the two firms merge into one firm. Compare the profits in this case with those under the Cournot conditions assumed in (a) above. d. If the firms got into a Bertrand competition, what is likely to happen? You do not need to solve the problem; just explain verbally.