EuroUSA Bank (a fictitious name) is a dealer in the currency market. It posts bid prices for euros of $1.5000 and ask (or offer) prices for euros of $1.5010 in three months’ time. The following companies decide to trade forward contracts with the EuroUSA bank at the above prices. All payments are due in three months.

• A US company has bought a machine worth 3 million euros from a German manufacturer.
• A French company will buy 1.5 million euros worth of grains from the USA and sell them in France.
• A German importer will buy 2 million euros worth of computer parts from the USA.
• An Italian company has sold 1 million euros worth of designer clothes in New York; the company will take the money back to Italy after three months.

1. What is the amount on which EuroUSA has market risk exposure after three months?

1. 0.5 million euros
2. 1 million euros
3. 4 million euros
4. 7.5 million euros
5. None of these answers are correct.

2. How much profithas the EuroUSA Bank locked in?

1. 3,500 dollars
2. 3,500 euros
3. 4,000 dollars
4. 4,000 euros
5. None of these answers are correct.

A pharmacutical company is testing a new allergy medication. They will consider the drug to be effective if the percentage of patients in the treatment group whose symptoms get better is 15% more than the percentage of patients in the control group whose symptoms get better. For example, if 10% of patients in the control get better, and 30% of patients in the treatment group get better, they will consider the drug to be effective, since 30% - 10% = 20% > 15%.

After collecting data from 32 subjects who received the medication and 32 who did not, they find that a 95% confidence interval for the difference in the treatment and control group is (15%, 16%).

Interpret these findings: Select your answer from one of the following options.

• a.The company cannot determine whether the drug is effective, but the confidence interval includes 15%, so they should collect more data.
• b.The company cannot determine whether the drug us effective from this sample, but the confidence interval includes 15%, so they should collect more data.
• c.The company should consider the drug effective, because the average difference in the treatment and control is greater than 15%.

a.

a. For May 2020, the cost of Direct Materials transferred into the Filling Dept. of a liquid soap company is $20,200. Direct Labor cost incurred for the same department is unknown, and Factory Overhead cost applied to production is 80% of Direct Labor cost. The total cost of finished goods transferred out of the Filling Dept. is $85,600. The cost of beginning work in process (WIP) inventory in the Filling Dept. on May 1 was $12,000 and the ending balance in WIP Inventory-Filling on May 31 is $6,000. Calculate the cost of Direct Labor incurred by the Filling Dept. during May 2020.

b. The following data is taken from the production budget for the year: Beginning finished goods units 11,000; Units to be produced in the first quarter 82,000; First quarter sales units 58,000; Sales units budgeted for the second quarter 68,000. Second quarter finished goods inventory is budgeted at 12,000 units. Calculate units to produce in the second quarter.

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Update the balance sheet above to reflect the transactions below, which occur on January 6, 2020

1. Buy $15,000 worth of manufacturing supplies on credit
2. Issue $85,000 in stock
3. Borrow $63,000 from a bank
4. Pay $5,000 owed to a supplier
5. Receive payment of $12,000 owed by a customer
6. Purchase equipment for $44,000 in cash
7. Pay $7,000 owed to a supplier

What is the final amount in Accounts Receivable?

We Chat Ltd has Cash at Bank balance as per the company’s record of $10,665 debit as at 29^th February 2020. The bank statement balance from Citigroup Bank showed a credit balance of $9,450. A comparison of the statement with the cash account revealed the following:

1.     Unpresented cheques at 29 February totalled $5,405, and outstanding deposits were $6,900.

2.     Included with the cheques paid was a cheque issued by Click and Go Ltd to M. Phelps for $450 that was incorrectly charged to We Chat Ltd by the bank.

3.     The bank statement included a debit entry of $90 for the printing of additional company cheques.

4.     Included on the bank statement was a credit entry of $820 indicating the collection of a note receivable for We Chat Ltd by the bank on 15 February

Required

a.     Prepare a bank reconciliation at 29^th February based on the provided information.

b.     Prepare the necessary adjusting entries as at 29^th February 2020

Red Squirrel Ltd. provides audited financial statements to its creditors and is required to maintain certain covenants based on its debt to equity ratio and return on assets. In addition, management at Red Squirrel Ltd. receive a bonus partially based on revenues for the year. Additional information related to Red Squirrel Ltd. is shown below:

1.      Depreciation expense on the building for the year was $45,000. Since the building was increasing in value during the year, the controller decided not to record any depreciation expense in the current year.

2.      An order for $61,500 was received from a customer on December 29, 2020 for products on hand. This order was shipped f.o.b. shipping point on January 3rd, 2021. The company made the following entry in December (prior to yearend of 2020):

Accounts Receivable    61,500

     Sales Revenue                      61,500

Please comment on the appropriateness of Red Squirrel’s accounting procedures and their impact on the company’s financial statement users for both scenarios, applying the conceptual framework.

Red Squirrel Ltd. provides audited financial statements to its creditors and is required to maintain certain covenants based on its debt to equity ratio and return on assets. In addition, management at Red Squirrel Ltd. receive a bonus partially based on revenues for the year. Additional information related to Red Squirrel Ltd. is shown below: 1. Depreciation expense on the building for the year was $45,000. Since the building was increasing in value during the year, the controller decided not to record any depreciation expense in the current year. 2. An order for $61,500 was received from a customer on December 29, 2020 for products on hand. This order was shipped f.o.b. shipping point on January 3rd, 2021. The company made the following entry in December (prior to yearend of 2020): Accounts Receivable 61,500 Sales Revenue 61,500 Please comment on the appropriateness of Red Squirrel’s accounting procedures and their impact on the company’s financial statement users for both scenarios, applying the conceptual framework.

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Update the balance sheet above to reflect the transactions below, which occur on January 6, 2020

1. Sell product for $25,000 with historical cost of $20,000

What is the final amount in Retained Earnings?

Note: Transaction amounts are provided in dollars but the balance sheet units are thousands of dollars.

Please specify your answer in the same units as the balance sheet (i.e., enter the number from your updated balance sheet)

1. On March 31, 2020, if the balance in Bonds Payable is $3,000,000 and the balance in Unamortized Premium on Bonds Payable (Premium on Bonds Payable) is $100,000, what is the amount for the carrying value of the bonds at March 31, 2020?

2. STATEMENT OF CASH FLOW: Company A has a net income of 1,000,000, depreciation of 500,000, a decrease in accounts receivable of 300,000, and an increase in accounts payable of 100,000. Using the indirect method, what is the amount for net cash flow from operating activities?

3. In which comparison between the market rate and the stated rate are the bonds issued at a discount?

Given the following account information for Leong Corporation, prepare a balance sheet in report form for the company as of December 31, 2020 and answer the question below and other questions from the same balance sheet. All accounts have normal balances. Equipment 80,000 Interest Expense 5,000 Interest Payable 1,200 Retained Earnings 12/31/2020 259,180 Dividends 60,800 Land 142,150 Accounts Receivable 88,000 Bonds Payable 100,000 Notes Payable (due in 6 months) 30,000 Common Stock 50,000 Accumulated Depreciation - Equip. 20,000 Prepaid Advertising 6,000 Service Revenue 350,900 Buildings 90,600 Supplies 2,100 Income Taxes Payable 4,000 Utilities Expense 7,500 Advertising Expense 3,560 Salaries and Wages Expense 58,210 Salaries and Wages Payable 2,470 Accumulated Depr. - Bld. 12,000 Cash 70,000 Depreciation Expense 14,000 In the company’s balance sheet, how much were total liabilities?