On December 31, 2019, of the current year Smith Enterprises physically counted $1,500,000 of inventory. The following additional information is also available:

1. Smith Enterprises sold goods for $250,000 to Julia Corp. Smith Enterprises had originally purchased the goods for $175,000. The order was shipped to Julia FOB shipping point on December 28, 2019 and arrived at Julia's facility on January 2, 2020.

2. Smith purchased goods costing $40,000 from vendor Lemon Drop Company. Lemon Drop shipped the goods to Smith FOB shipping point on December 29, 2019 and the order was delivered on January 1, 2020 The shipment was a rush order that was supposed to arrive by December 31.

3. Smith sold goods for $250,000 to Nash Company. Smith had originally purchased the goods for $175,000. The order was shipped to Nash, FOB Destination on December 28, 2019 and arrived at Nash's facility on January 4, 2020.

4. Smith purchased goods costing $30,000 from vendor Razzles Company. Razzles shipped the goods to Smith FOB destination on December 30, 2019 and the order was delivered on January 3, 2020.

Question 1: For letter A, does Smith adjust or not adjust the physical count for the in-transit goods? Explain.

Question 2: For letter B, does Smith adjust or not adjust the physical count for the in-transit goods? Explain.

Question 3: For letter C, does Smith adjust or not adjust the physical count for the in-transit goods? Explain.

Question 4: For letter D, does Smith adjust or not adjust the physical count for the in-transit goods? Explain.

Question 5a: Consider the in-transit items described above and further assume that Smith’s general ledger reports a Merchandise Inventory balance at 12/31/2019 of $1,750,000. What adjusting entry should Smith prepare at 12/31/2019 to record this inventory shrink? (Make sure to provide the calculations for the number you use in your journal entry!)

Date: MM/DD/YY

Dr. Account………...XX

            Cr. Account…………...XX

Question 5b: Consider your entry in 5a, what could have caused this shrink?

Ivanhoe Company had the following information available at the end of 2020.

Prepare a statement of cash flows for Ivanhoe Company using the direct method accompanied by a reconciliation schedule. Assume the short-term investments are debt securities, classified as available-for-sale. (Show amounts in the investing and financing sections that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)

Henry Doyle the president of King’s sugar is evaluating the addition of a new sugar-processing mill, to make white sugar, and eliminate the need to buy white sugar from its competitor, Kennard’s sugar company. King’s sugar makes brown sugar only, but would need a mill to process the brown sugar into white sugar. Kennard’s company produces white sugar from the raw sugar cane. Doyle believes that the new mill will bring in additional revenues and reduce operating costs. The competitor had excess capacity of white sugar that it sells to other sugar mills. Therefore, building the new mill would compete with Kennard’s mill. The new mill will cost $20 million in addition to the working capital requirements. Henry Doyle is wondering whether the investment can be justified. The project is expected to be 6 years until 2025.

The construction of the mill will take two years. $18 million will be spent in 2019, and $2 million in 2020. It is expected that when the plant start operating fully in 2020, the company’s operating costs will be reduced because the savings will be derived from the cost differences of producing versus buying white sugar from Kennard’s mill. The cost savings will be $ 2.8 million in 2020 and $ 3.7 million for the next five years. The company uses 15 % as the cost of capital. The following are the financial projections for the new mill.

Net working capital (10% of incremental sales)

SG&A (5% sales)

Taxes 40%

Answer all of the questions.

1. What is the net present value (NPV) and internal rate of return (IRR) for the investment?
2. What is the payback period of the project?
3. Would you recommend that King’s sugar go ahead with making this investment? Why?

American customer satisfaction index: Starbucks in the U.S. 2006-2016

ABOUT THIS STATISTIC: This statistic shows the American customer satisfaction index scores of Starbucks in the United States from 2006 to 2016. Starbucks had an ACSI score of 75 in 2016.

Starbucks

The Starbucks Corporation is a coffeehouse chain based in Seattle which operates more than 25 thousand stores worldwide (as of 2016). Just over 50 percent (around 7,880) of all Starbucks stores were company-operated stores, from which Starbucks generates around 79 percent of its revenue. Around 5,292 stores are licensed stores. Starbucks, which became a publicly traded company on June 26, 1992, generated around 21.32 billion U.S. dollars in revenue in the 2016 fiscal year.

In its company-operated stores Starbucks generates 74 percent of revenue from the sale of beverages, 19 percent from food sales and three percent from the sale of packaged and single serve coffees. Another four percent of retail sales are attributable to coffee-making equipment and other merchandise.

The United States is Starbucks’ biggest and most important market. In 2016, revenues from Starbucks Americas segment amounted to more than 14 billion U.S. dollars. The

Americas segment comprises over 13,000 stores in the U.S., Canada, Mexico, Puerto Rico, Brazil Chile and other American countries with around 86 percent of those stores located in the United States. 2

13. Plot this set of data as a scatterplot in excel. Insert excel graph here:

14. Find the correlation coefficient.
15. Is it positive or negative?
16. What does the sign tell us?
17. What does the correlation imply about the relationship between the time and the satisfaction?

18. Is the correlation significant? Why or why not? (Answer in 1-2 complete sentences.) (Use the Pearson calculator).

20) Draw the trendline in excel. Can the regression line be used for prediction? No, it is too weak. Insert excel graph here:

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?

Salmone Company reported the following purchases and sales for its only product. Salmone uses a perpetual inventory system. Determine the cost assigned to cost of goods sold using LIFO.

$2,260

$3,180

$1,860

$3,580

$2,100

For several years Fister Links Products has held Microsoft bonds, considered by the company to be securities available-for-sale. The bonds were acquired at a cost of $500,000. At the end of 2018, their fair value was $610,000 and their amortized cost was $510,000. At the end of 2019, their fair value was $600,000 and their amortized cost was $520,000.

At what amount will the investment be reported in the December 31, 2019, balance sheet? What adjusting entry is required to accomplish this objective (ignore interest)?

(please explain how did you get the adjusting entry/ steps)

Parkette, Inc., acquired a 60 percent interest in Skybox Company several years ago. During 2017, Skybox sold inventory costing $188,000 to Parkette for $235,000. A total of 13 percent of this inventory was not sold to outsiders until 2018. During 2018, Skybox sold inventory costing $225,320 to Parkette for $262,000. A total of 30 percent of this inventory was not sold to outsiders until 2019. In 2018, Parkette reported cost of goods sold of $577,500 while Skybox reported $365,000. What is the consolidated cost of goods sold in 2018?

Salmone Company reported the following purchases and sales of its only product. Salmone uses a perpetual inventory system. Determine the cost assigned to ending inventory using LIFO.

Multiple Choice

$7,160

$6,960

$14,935

$7,640

$7,975

Salmone Company reported the following purchases and sales of its only product. Salmone uses a perpetual inventory system. Determine the cost assigned to ending inventory using LIFO. Date Activities Units Acquired at Cost Units Sold at Retail May 1 Beginning Inventory 150 units @ $10.00 5 Purchase 220 units @ $12.00 10 Sales 140 units @ $20.00 15 Purchase 100 units @ $13.00 24 Sales 90 units @ $21.00

Multiple Choice $2,980 $2,460 $2,860 $5,440 $2,590