In 2019, NB Inc.’s federal taxable income was $246,000. Compute the required installment payments of 2020 tax in each of the following cases:

Required:

1. NB’s 2020 taxable income is $556,000.
2. NB’s 2020 taxable income is $837,000.
3. NB’s 2020 taxable income is $1,390,000.
   

Ethics case: The financial officer of Suit Ltd believes that the yearly allowance for impaired receivables for Shirt Ltd should be $185 000. The CEO of Suit Ltd, nervous that the shareholders might expect the business to sustain its 10% growth rate, suggests that the financial controller increase the allowance for impairment to $285 000. The CEO thinks that the lower profit, which reflects a 7% growth rate, will be a more sustainable rate for Suit Ltd.

Required

(a) Who are the stakeholders in this case?
(b) Does the CEO’s request pose an ethical dilemma for the controller?
(c) Should the financial controller be concerned with Suit Ltd’s growth rate in estimating the allowance? Explain your answer.

Laramie Trucking's CEO is considering a change to the company's capital structure, which currently consists of 25% debt and 75% equity. The CFO believes the firm should use more debt, but the CEO is reluctant to increase the debt ratio. The risk-free rate, r_RF, is 5.0%, the market risk premium, RP_M, is 6.0%, and the firm's tax rate is 25%. Currently, the cost of equity, r_s, is 11.5% as determined by the CAPM. What would be the estimated cost of equity if the firm used 60% debt? (Hint: You must first find the current beta and then the unlevered beta to solve the problem.)

The Chief Executive Officer (CEO) is a top corporate manager whose primary job is to lead the day-to-day running of the corporation and whose primary goal is to maximize shareholder value. To incentivize CEOs, many large corporations have been compensating CEOs with various forms of pay-for-performance in addition to a fixed annual salary. According to some estimates, over the last two decades CEO compensation in the United States has on average increased by 600%, with a disproportionate increase in equity-based compensation (e.g. stock options). These increases in executive compensation, particularly stock options, have generated enormous controversy. The recent high-profile corporate scandals and financial market tsunami have led some observers to argue that the excessive focus on shareholder value maximization in general, and inadequately designed executive compensation in particular, have led to managerial gross misbehavior as well as short-termism. Some argue that rapid increases in executive compensation represent unmerited transfers of shareholder wealth to top executives with limited if any incentive effects, and at times have led to outright frauds. The problem is exacerbated when the CEO is also the chairman of the board of directors. The adverse effects of excessive CEO compensation are particularly severe in countries where institutional checks such as shareholder protection and shareholder activism are weak.

Required：

1. Discuss what the relative strengths and weakness of the corporate governance system are.

2. What respective roles can lawmakers, board of directors, top managers, shareholders, financial intermediaries and the financial media play to ensure a well-functioning financial market? Explain and elaborate each one.

3. Identify any potential conflicts of interest and suggest possible solutions.

Waterways Corporation is preparing its budget for the coming year, 2020. The first step is to plan for the first quarter of that coming year. The company has gathered information from its managers in preparation of the budgeting process.

Waterways likes to keep 10% of the next month’s unit sales in ending inventory. All sales are on account. 85% of the Accounts Receivable are collected in the month of sale, and 15% of the Accounts Receivable are collected in the month after sale. Accounts receivable on December 31, 2019, totaled $181,800.

Direct Materials

Direct materials cost 80 cents per pound. Two pounds of direct materials are required to produce each unit.

Waterways likes to keep 5% of the materials needed for the next month in its ending inventory. Raw Materials on December 31, 2019, totaled 11,220 pounds. Payment for materials is made within 15 days. 50% is paid in the month of purchase, and 50% is paid in the month after purchase. Accounts Payable on December 31, 2019, totaled $102,605.

Other Information

The Cash balance on December 31, 2019, totaled $100,000, but management has decided it would like to maintain a cash balance of at least $700,000 beginning on January 31, 2020. Dividends are paid each month at the rate of $2.50 per share for 4,720 shares outstanding. The company has an open line of credit with Romney’s Bank. The terms of the agreement requires borrowing to be in $1,000 increments at 9% interest. Waterways borrows on the first day of the month and repays on the last day of the month. A $540,000 equipment purchase is planned for February.

Axel Heckman is the engagement partner for the financial report audit of Sturfolks Equipment Ltd for the year ended 30 June 2018. The following material events or transactions have come to Axel’s attention beforeheisscheduledto issuehisreporton31August 2018:
(a) On 14 July 2018, Sturfolks Equipment settled and paid a personal injury claim of a former employee as a result of an accident that occurred in March 2017. The company has not previously recorded a liabilityfortheclaim. (b)On 17 July 2018, Sturfolks Equipment agreed to purchase for cash the outstanding shares of Recreational Equipment Ltd. This acquisition is likely to double the sales volume of Sturfolks Equipment. (c)On 20 July 2018, the directors became aware of broken glass found in their pre-packaged sandpits. This product had only been on sale for two weeks and had been purchased directly from the manufacturer, NSWPIT Ltd, an unrelated company in Thailand, one week prior to being introduced to the public.
Tutorial Question 3
(d) On 3 August 2018, a plant owned by Sturfolks Equipment was damaged in a flood, resulting in an uninsuredlossofinventory.
Required: For each of the above events or transactions, identify audit procedures that should have brought the item to the auditor’s attention, and determinethe treatmentrequiredinthe financial report fortheyearended30June2018.

110. Suppose that last month one U.S. dollar could be exchanged for one euro, while, today it takes two U.S. dollars to buy one euro. From this, we can conclude that:

a. the U.S. dollar has depreciated relative to the euro.

b. the euro has appreciated relative to the U.S. dollar.

c. the U.S. dollar has appreciated relative to the euro.

d. both the U.S. dollar and the euro have depreciated relative to each other.

e. Both A and B are true.

113. An increase in U.S. exports to Britain would occur if there was:

a. an increase in the demand for pounds.

b. a decrease in the supply of pounds.

c. an increase in the supply of dollars.

d. a decrease in the demand for dollars.

e. Both A and C are correct.

115. An increase in which of the following factors (from the perspective of the domestic country) would cause a depreciation of the domestic currency in the short run?

a. Foreign interest rate.

b. Relative price level.

c. Relative export demand.

d. All of the above.

e. None of the above.

3) The following table contains the U.S. totals for key international transactions in 2008, in billions of dollars. (20p)
Line (Credits +; debits -)
2 Exports of goods and services +$1,827
12 Income receipts +765
19 Imports of goods and services -2,523
29 Income payments -646
35 Unilateral current transfers, net -128
39 Capital account transactions, net +1
Financial Outflows:
41 U.S. official reserve assets -5
46 U.S. government assets, other than official reserve assets -530
50 U.S. private assets, net +534
Financial Inflows:
56 Foreign official reserve assets in the U.S. +487
63 Other foreign assets in the U.S. +47
a) Calculate the Balance on Current Account, and the Statistical Discrepancy.

b) Calculate the Official Settlements Balance.

c) In 2008, U.S. GDP was $14,441 billion. How much was Gross National Expenditure? How much was Gross National Disposable Income?