On October 15, 2016, Koala, Inc. issued a 10 year bond (with a typical $1000 face value) that had an annual coupon value of $60.  [We are assuming that the 2020 coupon has just been redeemed.]

• Initially, the bond was sold for the premium price of $1,025.
• On October 15, 2020, this bond was selling for only $975.
• The market rate of interest for a riskless corporate bond, of this maturity, was 4.5% on October 15, 2016, which reflects market expectations about future rates of inflation.
• The market rate of interest for a riskless corporate bond, of this maturity, was 4.0% on October 15, 2020, which reflects market expectations about future rates of inflation.

1.  What was the nominal yield on this bond on October 15, 2016?  [To 1 decimal place.]

2.  What was the current yield on this bond on October 15, 2016?  [To 2 decimal places.]

3.  What was the yield to maturity for this bond on October 15, 2016?  [To 3 decimal places.]

4.  What was the risk premium for this bond on October 15, 2016?  [To 3 decimal places.]

5.  What was the nominal yield on this bond on October 15, 2020?  [To 1 decimal place.]

6.  What was the current yield on this bond on October 15, 2020?  [To 2 decimal place.]

7.  What was the yield to maturity for this bond on October 15, 2020?  [To 3 decimal places.]

8.  What was the risk premium for this bond on October 15, 2020?  [To 3 decimal places.]

9.  It is now October 15, 2020 and suddenly the Federal Reserve announces a massive program to reduce inflation.  Instantly, the market rate of interest for a riskless corporate bond that would apply to this bond, falls from 4.0% to 2.5%.  If there is no change in the risk premium expected for this Koala, Inc. bond, what will be this bond’s yield to maturity?  [To 3 decimal places.]

Return on Investment, Financial Leverage, and DuPont Analysis
The following tables provide information from the recent annual reports of HD Rinker, AG.

a. Calculate HD Rinker’s return on equity (ROE) for fiscal years 2016, 2015, and 2014.
Round answers to one decimal place (i.e., 0.2568 = 25.7%). Do not round until your final answer.

b. Calculate HD Rinker’s return on assets (ROA) and return on financial leverage (ROFL) for each year.
Round answers to one decimal place (i.e., 0.2568 = 25.7%). Do not round until your final answer.

c. Use the DuPont formulation in the Business Insight on page 230 to analyze the variations in HD Rinker's ROE over this period. Calculate net profit margin, asset turnover, and financial leverage.
Do not round until your final answer. Round answers to one decimal place (i.e., 0.2568 = 25.7%).

Williams Electronics design and manufacturer specialized in switches for the telecomunication industry. The accounting records of the business reflect the following data at December 31, 2016

inventory 1/1/2016 31/12/2016

Raw material $260,000. $230,000.

Work in progress $332,300. $218,800

Finished goods $1,075,200. $615,000.

Other Information

Sales revenue $5,765,000

Factory supplies 45,000

Director factory labour 750,000

Raw materials purchased 540,000

Plant janitorial service 52,000

Depreciation: Plant & Equipment 165,000

Total ultiities 550,000

Plant supervisory's salary 480,000

R & D for graphic designs 70.500

Insurance on Plant & Equipment 120,000

Delivery truck driver's wages 175,000

Depreciation: Delivery truck 52,000

Property taxes 300,000

Administration wages & salaries 840.150

Advertising expenses 1% of sales revenue

!. of the total utilities, 70% relates to manufacturing and 30% relates to general and administrative costs

2. the property taxes should be shared: 60% manufacturing & 40% general & administrative costs

Required

a) Calculate the raw material used by Williams Electronics.

b) What is the total manufacturing overhead cost incurred by Williams Electronic during the period?

c) Determine the prime cost & conversion cost of the product manufactured

d) Prepare a schedue of cost of goods manufactured for the year ended December 31, 2016, clearing showing total manufacturing costs & total manufacturing costs to account for

e) Prepare an income statement for the year ended December 31, 2016 clearly showing the calculation of Costs of Goods sold. List the non-production overheads in order of size starting with the largest

f) Given that the company manufactured 1,500 switches in 2016, compute the company's unit product cost for the year

g) briefly explain the differences between a product cost and period cost

Exercise 17-27

On August 15, 2016, Marigold Co. invested idle cash by purchasing a call option on Counting Crows Inc. common shares for $594. The notional value of the call option is 660 shares, and the option price is $66. The option expires on January 31, 2017. The following data are available with respect to the call option.

Prepare the journal entries for Marigold for the following dates.

(Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Statement of Cash Flows (Direct Method) The Wolff Company’s income statement and comparative balance sheets at December 31 of 2016 and 2015 are shown below:

Cash dividends of $36,000 were declared and paid during 2016. Plant assets were purchased for cash and bonds payable were issued for cash. Bond interest is paid semi‑annually on June 30 and December 31. Accounts payable relate to merchandise purchases.

Required
a. Calculate the change in cash that occurred during 2016.
b. Prepare a statement of cash flows using the direct method.
c. Compute free cash flow.
d. Compute the operating‑cash‑flow‑to‑current‑liabilities ratio. Round to two decimal points.
e. Compute the operating‑cash‑flow‑to‑capital‑expenditures ratio. Round to two decimal points.

a. Change in Cash during 2016 $Answer AnswerIncreaseDecrease

The records of Shen Inc. show the following data for the years ended March 31:

After the company’s March 31, 2018, year end, the accountant discovers two errors:

(a)

For each of the three years, prepare both incorrect and corrected income statements through to income before income tax.

INCORRECT

CORRECT

Some recent financial statements for Smolira Golf, Inc., follow.

Smolira Golf has 11,000 shares of common stock outstanding, and the market price for a share of stock at the end of 2016 was $82.
  
What is the price–earnings ratio? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
  
Price–earnings ratio             times
  
What is the price–sales ratio? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
  
Price–sales ratio             times
  
What are the dividends per share? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
  
Dividends per share            $
  
What is the market-to-book ratio at the end of 2016?

Dowell Company produces a single product. Its income statements under absorption costing for its first two years of operation follow.

Additional Information

1. Sales and production data for these first two years follow.

2. Variable cost per unit and total fixed costs are unchanged during 2016 and 2017. The company's $31 per unit product cost consists of the following.

3. Selling and administrative expenses consist of the following.

1. Complete income statements for the company for each of its first two years under variable costing. (Loss amounts should be entered with a minus sign.)

2. What are the differences between the absorption costing income and the variable costing income for these two years? (Loss amounts should be entered with a minus sign.)