A firm has an excess cash flow of $4.8m. It had 3m shares outstanding and was considering paying a cash dividend, corresponding to a 40% payout. The stock traded in the market at $88.00 per share. Assume that the average investor holds 176 shares of the company’s stock.

Note: The term “k” is used to represent thousands (× $1,000).

Required: What would be the average portfolio value after a re-purchase scenario?

$Answer Do not round intermediate calculations. Input your answer in thousands ($k) rounded to 3 decimal places (for example: 28.31k).

Roth Corp. wants to raise $4.6 million via a rights offering. The company currently has 490,000 shares of common stock outstanding that sell for $35 per share. Its underwriter has set a subscription price of $27 per share and will charge the company a 4 percent spread. If you currently own 7,000 shares of stock in the company and decide not to participate in the rights offering, how much money can you get by selling your rights? (Do not round your intermediate calculations.)

Net Present Value Method—Annuity

Jones Excavation Company is planning an investment of $125,000 for a bulldozer. The bulldozer is expected to operate for 1,000 hours per year for five years. Customers will be charged $90 per hour for bulldozer work. The bulldozer operator costs $30 per hour in wages and benefits. The bulldozer is expected to require annual maintenance costing $7,500. The bulldozer uses fuel that is expected to cost $15 per hour of bulldozer operation.

a. Determine the equal annual net cash flows from operating the bulldozer.

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a. Subtract the operating expenses (hourly fuel and labor costs, multiplied by the operating hours, plus the annual maintenance costs) from the revenues (operating hours multiplied by the hourly revenue).

b. Determine the net present value of the investment, assuming that the desired rate of return is 10%. Use the table of present value of an annuity of $1 table above. Round to the nearest dollar.

c. Should Jones invest in the bulldozer, based on this analysis?
Yes , because the bulldozer cost is  less than  the present value of the cash flows at the minimum desired rate of return of 10%.

d. Determine the number of operating hours such that the present value of cash flows equals the amount to be invested. Round interim calculations and final answer to the nearest whole number.
hours

3. Selected accounts from the December 31, 2015, adjusted trial balance of the Hodges Company are shown below.

On December 31, 2015 the inventory was $18,000.

Required: Prepare a 2015 income statement for the Hodges Company.

ANSWER:

Conscious Capitalism - Bikes Simulation I am sure individually each of you are happy/unhappy about the performance on certain measure(s) (net profit, market share, balanced scorecard, cumulative balanced scorecard, revenue, expense, cost, etc) of your team/company.  Individually identify the performance criteria on which your company is performing below expectation and on which it's performing above expectation. Also, provide reasons for each of them. Next, describe if you personally could have done anything to help the performance. (Also, your response needs to be at least 3 paragraphs)

Consider each of the transactions below. All of the expenditures were made in cash.

The Edison Company spent $23,000 during the year for experimental purposes in connection with the development of a new product.

In April, the Marshall Company lost a patent infringement suit and paid the plaintiff $7,500.

In March, the Cleanway Laundromat bought equipment. Cleanway paid $17,000 down and signed a noninterest-bearing note requiring the payment of $23,500 in nine months. The cash price for this equipment was $36,000.

On June 1, the Jamsen Corporation installed a sprinkler system throughout the building at a cost of $39,000.

The Mayer Company, plaintiff, paid $23,000 in legal fees in November, in connection with a successful infringement suit on its patent.

The Johnson Company traded its old machine with an original cost of $12,900 and a book value of $6,300 plus cash of $10,200 for a new one that had a fair value of $13,300. The exchange has commercial substance.

Prepare journal entries to record each of the above transactions. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Ethical dilemmas have always surrounded businesses. For example, Jeffrey is a Senior Auditor working for a large commercial bank. He just realized Bob, the company’s vice president of marketing, has been using his expense account to purchase salacious materials online using his office computer; in addition, there are hotel bills charged to the account that cannot be explained by travel receipts. Jeffrey suspects the VP is having an affair with someone in the company. Jeffery is a CPA and the company where he works is publically traded. The CPA code-of-ethics and company policy requires Jeffrey to report the violation. Nevertheless, Bob is Jeffrey’s first cousin! Reporting the violation could destroy relations between Jeffrey’s mother and his aunt, Bob’s mother. What can Jeffrey do as a senior auditor to set the ethical standards in the company that he is working in? Which of the ethical theories best explains Jeffrey’s moral dilemma? How can one of the six theories you learned about in this chapter help Jeffrey to justify whistle blowing or help him to rationalize not whistle blowing?

Stanley & Sons Inc. (the “Company”) assists clients by designing and implementing solutions that reduce the overall costs of its customers’ supply chains. The Company provides Just-In-Time (JIT) inventory management of spare parts used in its customers’ manufacturing processes to reduce cycle times and lower inventory-related costs. The Company entered into a supply management contract (the “Agreement”) with Tadduni Partners (the “Customer”), an unrelated third party, to provide spare parts management services, including sourcing, procurement, repair, transport and delivery, and warehouse management. The key terms of the agreement are as follows: Purchase Process • A Customer provides the Company with a plan at the beginning of the year with a forecast of spare parts that it needs as part of its manufacturing process. On the basis of this plan, the Company purchases spare parts from third-party vendors and ships the spare parts directly to the Customer’s location. The Agreement states that the Customer determines the product and service specifications and that no changes or modifications can occur without the Customer’s consent. The Company purchases spare parts directly from vendors. Note that although the Company purchased the spare parts according to the plan, the Customer is not obligated or committed to purchase these spare parts. • The Company directly purchases from third-party vendors; the Customer is not involved in the purchasing process. Vendors name the Company in their invoices; the Customer is not named in the invoice. The Company is responsible for all payments to its vendors in purchasing the spare parts. • When space parts are purchased by the Company, the vendor ships the spare parts directly to the Customer’s warehouse; however, the Customer does not purchase and obtain title to the spare parts in its warehouse until it issues a purchase order (P.O.) to the Company. At this point, the title of the inventory for which a P.O. has been authorized transfers from the Company to the Customer. • The Company is responsible for the quality of the product sold to the Customer, who has the right to return any defective product to the Company. • Purchase of spare parts by the Company is generally made in advance of receiving a P.O. from the Customer, and the Company is obligated to pay the vendors within the agreed-upon payment terms irrespective of whether the spare parts are sold to the Customer or payment is collected from the Customer. • The Company has latitude in vendor selection and negotiates pricing with its vendors. The Company sets the price it charges the Customer on the basis of the Company’s cost plus a predetermined mark-up. If the Company is able to achieve certain cost savings for the Customer (on the basis of its ability to negotiate pricing with its vendors), it is entitled to bonus payments that are based on a percentage of such savings. Therefore, the better the Company does in negotiating savings for the Customer, the greater the margin it earns on each sale. • Spare parts inventory that is not purchased by the Customer as part of the P.O. process (because parts are obsolete or requirements have changed) remain the property of the Company. If the Company is not able to sell the inventory to other parties, the Customer will reimburse the Company for 50 percent of the cost of the unsold parts. Warehouse Operations • The spare parts are held in the Customer’s warehouse, allowing immediate access to the spare parts, which avoids the cost of storage for the Company. • Although inventory is held in the Customer’s warehouse, risk of loss or damage remains with the Company, and insurance is paid for by the Company. • The Company has dedicated employees stationed at each Customer’s warehouse. These employees handle the day-to-day issues with spare parts received into the warehouse. • The Company’s and Customer’s inventory systems are interfaced, allowing the Company to monitor stock levels. Shipping Terms • As noted above, the spare parts are shipped directly from the vendors to the Customer’s warehouse. The Company retains title and risk of loss during shipping and at the Customer’s warehouse until a P.O. is issued by the Customer to purchase the spare parts. After the Customer issues the P.O., the title transfers, and the Company recognizes revenue. Company Fee • The Company receives 5.5 percent as a “consumption fee” for spare parts that are consumed (i.e., purchased) by the Customer from the warehouse. In addition, as noted above, the Company earns other fees according to its ability to negotiate favorable pricing on the spare parts.

Required: On the basis of the case facts, should the Company (Stanley & Sons Inc.) record revenue from the arrangement on a gross or net basis? Provide an analysis supporting your conclusion based on US GAAP (section 606) and IASB IFRS.

Delta Oil Company uses the successful-efforts method to account for oil exploration costs. Delta started business in 2014 and prepared the following income statements: DELTA OIL COMPANY Income Statements For the Years Ended December 31, 2014 - 2015 1 2014 2015 2 Revenue $1,000,000.00 $3,000,000.00 3 Other expenses 400,000.00 1,300,000.00 4 Exploration expenses 120,000.00 238,000.00 5 Income before income taxes $480,000.00 $1,462,000.00 6 Income tax expense (30%) 144,000.00 438,600.00 7 Net income $336,000.00 $1,023,400.00 8 Earnings per share $3.36 $10.23 The company chose to change to the full-cost method at the beginning of 2016. Under the full-cost method, Delta capitalizes all exploration costs of the Oil and Gas Properties asset account on its balance sheet. It determines the exploration and amortization expense amounts under the full-cost method to be as follows: 2014 2015 2016 Exploration expense $0 $0 $0 Amortization expense 8,000 18,200 42,000 In addition, Delta reported revenue of $9,000,000 and other expenses of $4,200,000 in 2016. With the 2016 financial statements, the company issues comparative statements for the previous 2 years. Required: 1. Prepare the journal entry to reflect the change. 2. Prepare the comparative income statements and the comparative statements of retained earnings for 2016, 2015, and 2014. Notes to the financial statements are not necessary. 3. Next Level Discuss the advantages and disadvantages of accounting for a change in this manner.