In 2017, Keenan Company paid dividends totaling $3,600,000 on net income of $10.8 million. Note that 2017 was a normal year and that for the past 10 years, earnings have grown at a constant rate of 10%. However, in 2018, earnings are expected to jump to $14.4 million and the firm expects to have profitable investment opportunities of $8.4 million. It is predicted that Keenan will not be able to maintain the 2018 level of earnings growth because the high 2018 earnings level is attributable to an exceptionally profitable new product line introduced that year. After 2018, the company will return to its previous 10% growth rate. Keenan’s target capital structure is 40% debt and 60% equity.

a. Calculate Keenan’s total dividends for 2018 assuming that it follows each of the following policies: 1. Its 2018 dividend payment is set to force dividends to grow at the long-run growth rate in earnings. 2. It continues the 2017 dividend payout ratio. 3. It uses a pure residual dividend policy (40% of the $8.4 million investment is financed with debt and 60% with common equity). 4. It employs a regular-dividend-plus-extras policy, with the regular dividend being based on the long-run growth rate and the extra dividend being set according to the residual dividend policy.

b. Which of the preceding policies would you recommend? Restrict your choices to the ones listed but justify your answer.

c. Assume that investors expect Keenan to pay total dividends of $9,000,000 in 2018 and to have the dividend grow at 10% after 2018. The stock’s total market value is $180 million. What is the company’s cost of equity?

d. What is Keenan’s long-run average return on equity?

e. Does a 2018 dividend of $9,000,000 seem reasonable in view of your answers to parts c and d? If not, should the dividend be higher or lower? Explain your answer.

Assume Nortel Networks contracted to provide a customer with Internet infrastructure for $2,050,000. The project began in 2018 and was completed in 2019. Data relating to the contract are summarized below:

20182019

Costs incurred during the year$304,000 $1,595,000

Estimated costs to complete as of 12/31 1,216,000  0

Billings during the year 385,000  1,630,000

Cash collections during the year 252,000  1,755,000

Required:
1. Compute the amount of revenue and gross profit or loss to be recognized in 2018 and 2019 assuming Nortel recognizes revenue over time according to percentage of completion.
2. Compute the amount of revenue and gross profit or loss to be recognized in 2018 and 2019 assuming this project does not qualify for revenue recognition over time.
3. Prepare a partial balance sheet to show how the information related to this contract would be presented at the end of 2018 assuming Nortel recognizes revenue over time according to percentage of completion.
4. Prepare a partial balance sheet to show how the information related to this contract would be presented at the end of 2018 assuming this project does not qualify for revenue recognition over time.

• Required 1
• Required 2
• Required 3
• Required 4

Compute the amount of revenue and gross profit or loss to be recognized in 2018 and 2019 assuming Nortel recognizes revenue over time according to percentage of completion. (Loss amounts should be indicated with a minus sign. Use percentages as calculated and rounded in the table below to arrive at your final answer.)

The Frost Company has accumulated the following information relevant to its 2018 earnings per share. 1. Net income for 2018, $150,000. 2. Bonds payable: On January 1, 2018, the company had issued 10%, $200,000 bonds. Each $1,000 bond is currently convertible into 20 shares of ordinary share. To date, no bonds have been converted. 3. Bonds payable: On January 31, 2018, the company had issued $540,000 of 5.8% bonds. Each $1,000 bond is currently convertible into 11 shares of ordinary share. To date, no bonds have been converted. 4. Preference share: On July 1, 2017, the company had issued 3,800 shares of $7.5 preference share at $108 per share. Each share of preference share is currently convertible into 2.45 shares of ordinary share. To date, no preference share has been converted and no additional shares of preference share have been issued. The current dividends have been paid. 5. Ordinary share: At the beginning of 2018, 25,000 shares were outstanding. On July 1, 7,000 additional shares were issued. On September 1, a 20% bonus issue was declared and issued. On November 1, 2,000 shares were repurchased by the company. 6. Share options: Options to acquire ordinary share at a price of $33 per share were outstanding during all of 2018. Currently, 4,000 shares may be acquired. TO date, No options have been exercised. 7. Miscellaneous: Stock market prices on ordinary share averaged $41 per share during 2018, and the 2018 ending stock market price was $40 per share. The corporate income tax rate is 30%. Required: Compute the basic and diluted earnings per share for 2018 (Round to 2 decimal places).

A partial trial balance of Julie Hartsack Corporation is as follows on December 31, 2018. Dr. Cr. Supplies $2,700 Salaries and wages payable $1,500 Interest Receivable 5,100 Prepaid Insurance 90,000 Unearned Rent 0 Interest Payable 15,000 Additional adjusting data: 1. A physical count of supplies on hand on December 31, 2018, totaled $1,100. 2. Through oversight, the Salaries and Wages Payable account was not changed during 2018. Accrued salaries and wages on December 31, 2018, amounted to $4,400. 3. The Interest Receivable account was also left unchanged during 2018. Accrued interest on investments amounts to $4,350 on December 31, 2018. 4. The unexpired portions of the insurance policies totaled $65,000 as of December 31, 2018. 5. $28,000 was received on January 1, 2018, for the rent of a building for both 2018 and 2019. The entire amount was credited to rent revenue. 6. Depreciation on equipment for the year was erroneously recorded as $5,000 rather than the correct figure of $50,000. 7. A further review of depreciation calculations of prior years revealed that equipment depreciation of $7,200 was not recorded. It was decided that this oversight should be corrected by a prior period adjustment.Pass the necessary adjusting entries for the following taking into account income tax effects (40% tax rate) and assuming that the books have been closed. (Round answers to 0 decimal places, e.g. 5,275. 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.) 1. Depreciation on equipment for the year was erroneously recorded as $5,000 rather than the correct figure of $50,000. 2. A further review of depreciation calculations of prior years revealed that equipment depreciation of $7,200 was not recorded. It was decided that this oversight should be corrected by a prior period adjustment.

(Industry)                                 Kingston, 2018            Kingston, 2019

i.          Gross Profit Margin (50%)                                      48.9%                          48.9%

ii.         Operating Profit Margin (15%)                                15.1%                          13.3%

iii.        Net Profit Margin  (8%)                                           10.6%                            9.3%

iv.        Return on Assets  (10%)                                          14.5%                          12.5%

v.         Return on Equity  (20%)                                          24.1%                          20.3%

vi.        Current Ratio  (1.5)                                                    1.63                             1.62

vii.       Quick Ratio  (1.0)                                                      1.00                             1.04

viii.      Debt to Total Asset  (0.5)                                             .4                                 .39

ix.        Times Interest Earned  (25)                                      15.5X                          14.6X

x.         Average Collection Period (45 days)                       53.5days                      61.6days

xi.        Inventory Turnover  (8)                                             8.18X                          8.62X

xii.       Total Asset Turnover  (1.6)                                        1.4X                            1.3X

Discuss the financial strengths and weaknesses of Kingston based on the ratios provided here.

Comment on whether a lender would be willing to extend a new loan to this company. Please distinguish between the concerns of a lender considering short-term financing versus providing long term loans to a company.  Please specify which ratios would be of most interest to each lender.

1.    Calculate the vertical analysis of the following data.

Income Statement

2. From the following Balance sheet of A Co. Ltd., you are required to prepare a Schedule of Changes in Working Capital

3. The following is the Balance Sheet of a company as on 31st March:

Calculate

1. Current Assets Ratio
2. Quick Ratio
3. Inventory to Working capital
4. Debt to Equity Ratio

4. Ali, Rehman and Zara are partners sharing profits and losses in the ratio of 7:4:2. They admit Mariam into partnership and give him 1/6th share of profits. Find the new profit-sharing ratio

Note: Answers kindly in word or excel format for the 4 Questions

1.In October of 2017 Bruce, a cash basis CPA, contracted to perform an audit for $2,000 and to prepare the corporate tax return for $1,000. The contract called for payment January 31 of 2018. The client called Bruce on December 31, 2017, and offered him $1,500. Bruce accepted and the client mailed him a check on December 31, 2017. What amount must Bruce include in his 2017 tax return?

2. Bobby is age 62, single, and claimed as a dependent by his daughter on her tax return. During the current year, Bobby received Social Security payments of $6,000, interest on a bank account of $3,500, and $2,300 from a part-time job. What is Bobby’s taxable income?

3.Sally is 92 years old and single and claimed by her daughter as a dependent. During the tax year she received $1,900 in interest from her savings account, $1,500 in interest from State of New York general obligation bonds, and $8,000 distributions from a Roth IRA. What is her gross income?

4.George, age 21 is a full-time student at the University and is claimed as a dependent by his parents he had earned income of $2000 from a part-time job. In addition he had $950 interest from a savings account. He had total itemized deductions of $200 in the current year. What is George’s taxable income this year?

Texas Rex sells t-shirts. Expected sales for each quarter is 1000, 1200, 1500, and 2000 t-shirts at $10.00 each. They anticipate no price change.

The Direct Materials Budget tells management how much must be bought to support production and the cost of those purchases.

Plain t-shirts cost $3.00 each, and ink (for the screen printing) cost $0.20 per ounce. The factory needs one plain t-shirt and five ounces of ink for each logoed t-shirt that it produces. Texas Rex’s policy is to have 10% of the following quarter’s needs in ending inventory. The factory has 58 plain t-shirts and 390 ounces of ink on hand on January 1. At the end of the year, the desired ending inventory is 106 plain t-shirts and 530 ounces of ink.

Texas Rex, Inc.

Direct Materials Budget

For the year ending December 31, 2018

Plain t-shirts:                      Q1                          Q2                          Q3                          Q4                          Total

Units to be Produced

Direct Materials per unit_______            _______             ________           _______             ________

Production Needs          

Desired Ending Inv.         _______             _______             ________           _______             ________

Total Needs

Less Beginning Inv.          _______             _______             ________           _______             ________

Direct Materials

To be Purchased

Cost per t-shirt                  _______             _______             ________           _______             ________

Total T-shirt Purchase

Cost

Ink:                                        Q1                          Q2                          Q3                          Q4                          Total

Units to be Produced

Direct Materials per unit_______            _______             ________           _______             ________

Production Needs          

Desired Ending Inv.         _______             _______             ________           _______             ________

Total Needs

Less Beginning Inv.          _______             _______             ________           _______             ________

Direct Materials

To be Purchased

Cost per ounce                 _______             _______             ________           _______             ________

Total Ink Purchase Cost

Total Cost of

All Direct Materials