Prior to this week’s reading, how did you distinguish between the protection of individual privacy and intellectual property? From your experience why do you think there are intellectual property violations?

On January 1, 2018, the following information was drawn from the accounting records of Carter Company: cash of $225; land of $1,875; notes payable of $525; and common stock of $945. Required a. Determine the amount of retained earnings as of January 1, 2018. b. After looking at the amount of retained earnings, the chief executive officer (CEO) wants to pay a $325 cash dividend to the stockholders. Can the company pay this dividend? c. As of January 1, 2018, what percentage of the assets were acquired from creditors? d. As of January 1, 2018, what percentage of the assets were acquired from investors? e. As of January 1, 2018, what percentage of the assets were acquired from retained earnings? f. Create an accounting equation using percentages instead of dollar amounts on the right side of the equation. g. During 2018, Carter Company earned cash revenue of $520, paid cash expenses of $310, and paid a cash dividend of $51. (Hint: It is helpful to record these events under an accounting equation before preparing the statements.) g-1. Prepare an income statement dated December 31, 2018. g-2. Prepare a statement of changes in stockholders’ equity dated December 31, 2018. g-3. Prepare a balance sheet dated December 31, 2018. g-4. Prepare a statement of cash flows dated December 31, 2018. j. What is the balance in the Revenue account on January 1, 2019?

On January 1, 2018, the following information was drawn from the accounting records of Carter Company: cash of $400; land of $2,400; notes payable of $700; and common stock of $1,540.

Required

1. a. Determine the amount of retained earnings as of January 1, 2018.

2. b. After looking at the amount of retained earnings, the chief executive officer (CEO) wants to pay a $500 cash dividend to the stockholders. Can the company pay this dividend?

3. c. As of January 1, 2018, what percentage of the assets were acquired from creditors?

4. d. As of January 1, 2018, what percentage of the assets were acquired from investors?

5. e. As of January 1, 2018, what percentage of the assets were acquired from retained earnings?

6. f. Create an accounting equation using percentages instead of dollar amounts on the right side of the equation.

7. g. During 2018, Carter Company earned cash revenue of $660, paid cash expenses of $380, and paid a cash dividend of $58. (Hint: It is helpful to record these events under an accounting equation before preparing the statements.)

8. g-1. Prepare an income statement dated December 31, 2018.

9. g-2. Prepare a statement of changes in stockholders’ equity dated December 31, 2018.

10. g-3. Prepare a balance sheet dated December 31, 2018.

11. g-4. Prepare a statement of cash flows dated December 31, 2018.

12. j. What is the balance in the Revenue account on January 1, 2019?

On January 1, 2018, the following information was drawn from the accounting records of Carter Company: cash of $800; land of $3,500; notes payable of $600; and common stock of $1,000.

Required

a. Determine the amount of retained earnings as of January 1, 2018.

b. After looking at the amount of retained earnings, the chief executive officer (CEO) wants to pay a $1,000 cash dividend to the stockholders. Can the company pay this dividend?

c. As of January 1, 2018, what percentage of the assets were acquired from creditors?

d. As of January 1, 2018, what percentage of the assets were acquired from investors?

e. As of January 1, 2018, what percentage of the assets were acquired from retained earnings?

f. Create an accounting equation using percentages instead of dollar amounts on the right side of the equation.

g. During 2018, Carter Company earned cash revenue of $1,800, paid cash expenses of $1,200, and paid a cash dividend of $500. (Hint: It is helpful to record these events under an accounting equation before preparing the statements.)

g-1. Prepare an income statement dated December 31, 2018.

g-2. Prepare a statement of changes in stockholders’ equity dated December 31, 2018.

g-3. Prepare a balance sheet dated December 31, 2018.

g-4. Prepare a statement of cash flows dated December 31, 2018.

j. What is the balance in the Revenue account on January 1, 2019?

Consider two bonds, one issued in euros in Germany, and one issued in dollars in the US.

Assume that both government securities are one-year bonds – paying the face value of the bond

one year from now. The exchange rate, E, stands at 0.75 euros per dollar.

The face values and prices on the two bonds are given by:

US:
Face Value: $10,000 Price: $9,615.38

Germany:
Face Value: $10,000 euros : 9,433.96 euros

a.Compute the nominal interest rate on the bonds.

b. Compute the expected exchange rate next year consistent with uncovered interest parity.

c. If you expect the dollar to depreciate relative to the euro, which bond should you buy?

d. Assume that you are a US investor and you exchange dollars for euros and purchase the

German bond today. One year from now, it turns out that the exchange rate, E, is actually

0.72 (.72 euros buys one dollar). What is your realized rate of return in dollars compared to

the realized rate of return you would have made had you held the US bond?

Suppose you travel in a time machine to mid-2022 and you discover that the US economy has recovered from the COVID-19 pandemic, the US debt has reached $25 Trillion and that the Federal Reserve's balance sheet, thanks to 2020's quantitative easing has swelled to $7 Trillion. The economy has normalized and Trump's new Fed Chair is Judy Shelton. Further suppose that interest rates have normalized the economic growth is moderate and sustainable, and the CPI hovers around 2%. And, the US budget appears to be approximately balanced (i.e. a very small surplus or deficit) for the first time in many many years.

Considering stable and favorable economic conditions, the Federal Reserve appears poised to unwind their balance sheet with a goal of reducing it to $3 Trillion over a period of 24 months. Let us call this policy action "quantitative unwinding"

QUESTION: Ceterus paribus, what effect would the "quantitative unwinding" have on interest rates in the economy for from mid-2022 to mid-2024. Please support your answer with reasoning based on the principles of bond supply and demand and/or the loanable funds framework.

MCS 5 Transforming IT at Global Digital Imaging

“We are your images!” proclaimed the various posters showing different types of uses for images—from personal to professional photos, x-rays to ultrasound, brain scans to jaw scans—down the long hallway away from the boardroom. As Ray Henderson strode out to the elevator, the tagline evoked many images in his own head—images of the proud company he had joined as a fresh-faced university grad that had ranked high in the Fortune 1000 and whose products and technologies were used and copied all over the world. It also evoked images of the hideous debacle of the last few years as its executives struggled with the downward spiral of its business as competitors and cheaper digital products undermined its traditional revenue sources. At least I’m getting out while the getting is good, he thought.

In an effort to regroup, both financially and strategically, his company, World Heliographics (WH), had begun to sell off its assets. Unfortunately, Ray’s division, medical film, was among the first to go. As the CEO had just informed him, it had been sold to a successful private equity firm that would hold 100 percent of its assets and take an active role in its future activities. It would now become a separate business, Global Digital Imaging (GDI), and Ray would be expected to deliver significant value for its new owner–investor, VE Investments. “They have an experienced management team and a proven ability to build businesses,” the CEO told him. “If you can give them the returns they want, they will keep you on as President.”

As he stepped onto the elevator, Ray felt both exhilarated and apprehensive about this new opportunity. Mentally, he started an inventory of the new company’s assets. With operations in more than 150 companies, revenues of about $3 billion, and 12,000 staff, it was a substantial company in its own right. But operating independently of a much larger parent company created headaches in a number of areas, requiring the development of separate functions in HR, finance, facilities, and IT.

There was a lot to do in very little time, and soon GDI was a legal entity. On Day 1, Ray called his senior people together. “Our first priority is to run as a company independent from WH as quickly as possible,” he said. “We need to think like a young, agile company and not like a large, entrenched bureaucratic organization. Fortunately, we’ve got the transition team from VE Investments to help us.” And indeed, it was only a few months before complete separation was accomplished, that is, everywhere except IT.

“Why is this so difficult?” Ray grumbled to the temporary CIO, Fred Gamble. “We have a number of problems,” Fred said cautiously, observing the fire in Ray’s eyes. “Because legally, GDI didn’t officially exist until the actual divestiture took place, no contracts could be signed or service level agreements established until then. As a result, GDI has inherited a ‘mini WH’ IT function with all its flaws, so we now have a smorgasbord of technology.” Fred explained that all applications, data, and infrastructure had been purchased and replicated to create a parallel organizational structure just to keep the business running during divestment. “So this means that not only are our systems not integrated, they are not designed for our type of company,” Ray concluded bluntly.

The search for a new CIO began in earnest the next day. “I need an experienced and proven CIO to formulate a vision for a transformed IT function,” he told the search firm he hired to help him. “You understand IT much better than I do so find me someone who is able to undertake a challenging transformation on multiple fronts at once.” The winning candidate was Ben Perry, a career IT executive, who joined GDI one year after it was created. “I knew I had a mandate to transform IT,” recalled Ben later. “And I knew we had to make some big changes, but I underestimated just how big these changes were going to be. There were a number of things we had to fix. We were still tethered to WH through some technology. The plans to disconnect had slipped four or five times and there was now a major lack of confidence about this separation. Our systems were outdated and not designed for a company dealing with healthcare products for medical practitioners. Our costs were too high and unpredictable. We needed to get our costs under control in order to free up funds for new investments. We had 700 core applications and needed 200–300 at the most. We had multiple financial and email systems, no architecture or standards, and exact copies of every type of infrastructure and application that WH had. It was like the Wild West!”

“Ben walked into a mess,” agreed Henderson. “IT was an obstacle to our being able to operate effectively and efficiently. I knew that IT was the key to our future so we needed to both clean up our act and find how to better balance technology and business strategy to move us forward. We needed basic competencies so we could use IT to differentiate our company and get us better information.” He left it up to Ben to oversee the transformation and bring GDI’s business leaders on board. “Ben understood both leadership and technology. That combination is hard to find. That’s why he got the job. He had my support but, if I had to sell these changes myself, I wouldn’t have needed him,” explained Ray.

Ben’s transformation mandate and the reality of GDI’s situation pulled him in two different directions. On the day he arrived, for example, the entire data center crashed. Observing how it was handled made him realize, “Our IT organization is a minefield. We have a lot of tactical staff who spend their time firefighting and trying to deal with the different pieces of the organization, but it isn’t making anything better.” But that was just the beginning of IT’s problem, as he soon discovered. There was no alignment with business on either tactical or strategic goals, and though the entire executive suite complained constantly about IT, there were no processes in place, such as portfolio management and prioritization, that would help educate business leaders about how to make IT investment decisions and confirm the direction they wanted IT to go. There was a considerable lack of role clarity and accountability, and this problem was exacerbated by a matrixed organization structure with dotted lines going everywhere.

Resisting the urge to start fixing immediate problems, Ben spent his first few weeks information gathering and listening to business leaders, trying to understand their pain points. He also implemented a business partner survey, much to the consternation of his own staff. “What is he doing?” they complained to each other. “He’s not doing anything!” Ben resisted this implied criticism. “Our IT strategy and governance were non-existent,” Ben explained to his staff later. “I needed to be sure I understood the business’ issues and their root causes before I did anything else.”

Ben explained: “This is in keeping with what our executives want us to accomplish. Each component links IT activities directly to business concerns. It is important that we hold ourselves accountable to our new mission. But more on this later.”

Next up was the new organizational chart. Ben started with the appointment of Teresa Danton as Director of IT Strategy & Planning, the Project Management Office (PMO) and Governance. As Ben explained, her job was to support the new organizational design by bolstering the existing, ineffective PMO and introducing new governance practices that would eventually result in a comprehensive governance framework. “We need execution discipline to deliver business value through our IT programs and portfolios,” Ben stated. “We need to develop the standards and best practices to do this and acquire the tools and methodologies to streamline project delivery and enhance quality. In addition, Teresa will be responsible for time tracking and billing, project planning and reporting, and financial planning and tracking. She will also measure everything so we can report on our progress to the business. Governance is a critical success factor for our transformation.”

Next, the rest of the IT leadership team was revealed: a Director of Operations, whose goal was to run the key business systems as efficiently as possible by streamlining resources and reducing costs; a Director of Relationship Management, whose job was to move the IT culture from being order-takers to solution-providers and eventually strategic partners; a Director of Enterprise Architecture responsible for developing a technology roadmap and a transition plan to move the organization from its current technology state to its planned future state; a Director of Data Security & Privacy whose job was to organize, safeguard, and ensure the availability of all data assets in a manner that protected the privacy of individuals; and finally a Director of Application Development whose job was to acquire new systems through purchase or development to support the business through automation. Ben kept talent management—critical to IT transformation—for himself. “Spin-offs are dirty work when it comes to people,” Ben told his team. “You’ve already seen that not everyone at the senior management level was able to handle the changes involved and this is true for the rest of our staff as well. Some of our people will need to move to our outsourcers as we realign our contracts, but others simply do not have the right skills.”

For the next hour and a half, Ben dealt with questions and invited his leadership team to discuss their issues and concerns with their new assignments. “I want us all in agreement here,” he told them, “because my next job is convincing the business that we will be able to accomplish this mission.” All heads nodded in unison. Then he dropped the bomb! “And the first way we’re going to do this is to cut the cord with WH!,” he proclaimed, holding up a mouse with a dangling tail.

While the whole IT organization was engaged in the “cutting the cord” project, Ben started communicating his vision of IT’s mission and the new organizational structure to his business partners and to IT staff through a series of town hall meetings. But to really sell the business on the benefits of the IT transformation and obtain their cooperation, Ben needed something more concrete. At the next weekly directors’ meeting, he declared, “It is time to start delivering on our mission. We need to develop a plan of action.” Not only would the plan have to align with the overall mission, but it would have to address issues at three levels: strategic, tactical, and operational. Calling them “buckets,” Ben explained: “Bucket number one is building the basics. We have to stabilize and simplify our systems and operations. Bucket number two is table stakes. That is, we have to make sure we have the right strategic platform that will enable us to do business and match what our competition is doing. Bucket number three is building differentiators and targeting strategic innovation. I know that most of you can’t even begin to think about buckets two and three because you’re so busy dealing with day-to-day problems, but we need to make time to do some work in this area, so we are not just fighting fires.”

Ben concluded the meeting by tasking each of his directors to develop an integrated mission and execution plan for the next three years that would be consistent with the overarching vision for IT. “We need to present both a holistic understanding of the transformation involved and a step-by-step roadmap for how to get there. Each year, each of you should have activities in each of the three buckets I’ve identified,” he said. “Clearly, your first year or two will be heavily weighted in building the basics, but I want to see accomplishment in each bucket every year and, as we move into year three, I would expect most of the basics to be addressed and considerably more strategic innovation to be taking place. Furthermore, I expect every goal you identify to be measurable and linked to our mission. We will develop a scorecard for each of the goals of our mission and report quarterly to the business. You have a month. At that time, we will integrate your individual plans and pull everything together into a comprehensive three-year plan. This will keep us all on the same page. And you will each have clearly defined accountabilities.” He paused, “Any questions?”

Not surprisingly there were no questions. As everyone filed out of the room, Ben signaled to Teresa. “I wanted to talk with you about your role in this planning exercise. As I see it, governance is the critical part. Without effective governance, we have no insurance that the right decisions will be made by the right people in the right time frame in order to deliver the value we want. Before you share anything with the other directors, I’d like to review your governance ideas with you. If you let my assistant know as soon as you have something, we’ll book some time. Got to run.”

Back at her desk, Teresa fought the urge to panic. I can’t believe that Ben is expecting me to be the expert on governance, Teresa thought as she tried to figure out how to begin. Within a few minutes thanks to Google, Teresa learned that: IT governance is a framework of processes and structures that specify who makes decisions about and who is accountable for the IT function and its work.… It is not about what specific decisions are made or how groups are organized and led. Effective IT governance is designed to encourage desirable behavior in the use of IT that is consistent with an organization’s mission, strategy, and culture. (Weill 2004)

This last statement resonated with Teresa. All she had to do was to create a set of processes that would incentivize the right decision makers to make the right decisions! In fact, the often-used example of effective governance involved dividing leftover cake between two children. You let one child cut the cake and the other select a piece. And presto, all by itself the process guarantees an effective outcome.

Further investigation showed that a governance framework was somewhat more complex. It covered three levels: board, enterprise, and business unit. She also found that effective enterprise-level governance should address several elements including architecture, security and privacy, operations, strategic projects, IT capabilities, and data.

Discussion Questions

1. 1. Differentiate between “management” and “governance.”

2. 2. Create a set of governance processes at the enterprise level to ensure that strategic initiatives at GDI are prioritized, developed, implemented, and aligned with the business’ strategic vision.

Ali is a student at the University. He recently purchased a car for OMR5,000 to use it for going to the University. Ali also expects that other friends might ask for transportation from him. He expects a total monthly revenue of OMR50. He expects fuel cost to be OMR40 per month. One of Ali's friends is a taxi driver. He offered Ali to take him to University for a monthly fee of OMR10. Because he does not have to drive, Ali believes that he can perform online work that would earn him a monthly revenue of OMR30. What is the differential revenue in this scenario? Select one: O a. OMR40 O b. OMR50 O c. OMR20 O d. OMR10 O e. OMR30
2.The total prime cost of a product was OMR5,200. The variable manufacturing overhead is calculated based on the number of direct labor hours. The variable manufacturing overhead cost per hour is four times the direct labor cost per hour. The fixed manufacturing overhead was OMR2,000. Assuming that direct labor hours were 350 and that the direct labor cost was 30% of direct materials cost, how much is the total manufacturing cost? Select one: O a. OMR12,000 O b. OMR18,000 c. OMR7,200 O d. OMR26,000 O e. OMR28,000

You are a college student, and you have a friend at a rival university. The two of you compete in almost everything! One day, your friend boasted that students at her university are taller than the students at yours. You each gather a random sample of heights of people from your respective campuses. Your data are displayed below (units are inches).

Your friend's data: (checksum: 1213.5)

Your data: (checksum: 1301.2)

Construct a 95% confidence interval for the difference in mean height between the two college populations.

a) State the parameter of interest, and verify that the necessary conditions are present in order to carry out the inference procedure.

b) Find the estimate for the degree of freedom and the margin of error.

Degree of freedom:   

Margin of error:

c) Find the confidence interval: (,)

d) Interpret your 95% confidence interval in context.

e) Based on the confidence interval, is there evidence that the mean height at your friend's university is higher? Explain.

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