Question 1 – Periodic Inventory System
Amna's Jewelry Store purchased three diamond and emerald bracelets during March. The price of diamonds has fluctuated wildly during the month, causing the supplying firm to change the price of the bracelets it sells to Amna's Jewelry Store.
a. On March 5, the first bracelet cost $4,600.
b. On March 15, the second bracelet cost $5,100.
c. On March 20, the third bracelet cost $3,500.
Suppose Jayne's Jewelry Store sold two of these bracelets for $7,000 each.
Required:
1. Using FIFO, what is the cost of goods sold for these sales and what is the value of ending inventory? What is the gross profit?
2. Using LIFO, what is the cost of goods sold for these sales and what is the value of ending inventory? What is the gross profit?
3. Using weighted average cost, what is the cost of goods sold and what is the value of ending inventory? What is the gross profit?

On July 31, the end of the first month of operations, Rhys Company prepared the following income statement, based on the absorption costing concept: Sales (20,000 units) $1,200,000 Cost of goods sold: Cost of goods manufactured $930,000 Less ending inventory (4,000 units) 155,000 Cost of goods sold 775,000 Gross profit $425,000 Selling and administrative expenses 112,000 Income from operations $313,000

a. Prepare a variable costing income statement, assuming that the fixed manufacturing costs were $72,000 and the variable selling and administrative expenses were $51,000. In your computations, round unit costs to two decimal places and round final answers to the nearest dollar.

b. Reconcile the absorption costing income from operations of $313,000 with the variable costing income from operations determined in (a).

Beaver Ltd. is a retail company that sells sporting goods. It has a customer loyalty program that allows customers to earn points based on sales made. These points can be accumulated and used for future purchases. One customer loyalty point is awarded for every $1 of purchases. During March 20X4, the company recorded sales of $1,725,000 to customers who were accumulating points. The stand-alone value of these goods sold was $1,725,000. Beaver has also determined that each point has a fair value of $0.017. The loyalty account had a balance of $870,000 at the beginning of March. During the month of March, customers used 1,200,000 points to purchase goods in the store.

Required:
Prepare the entries for the above transactions for the month of March 20X4. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round intermediate calculations and round your final answers to nearest whole dollar.)

How do interest rates affect our lives?

Interest rates are one way to express the price, or cost, of money obtained from someone else. For example, your credit card lends you money every time you make a purchase. Think about how interest rates affect your personal financial behavior with regard to spending and saving. Think also about the relationship between changing interest rates and longer-term interest-bearing securities (bonds, mortgages, etc.), and how interest rates affect our lives in general.

Answer all of the questions below in your own words. There are no wrong answers, but you must justify your opinions. Your answers must be well thought out, and well-written.

Would appreciate a brief response to each of the bullet points.

• What do you think will happen with interest rates in the coming years? Do you expect them to continue to rise, and what economic conditions might influence these changes?
• A credit score is a number ranging from 300 to 850 that essentially represents the probability that someone will pay their bills and are widely used by lenders to determine the interest rate that you will pay (for example, on a car or home loan) and your credit limit. Do you know your credit score? You do not need to disclose it, but what can you do to improve it?
• What is the current rate (approximately) for a 30-year fixed-rate mortgage? How will rising or falling interest rates affect a future home purchase? In what situation might you prefer a variable rate mortgage?
• Suppose that you inherited some 2.25% US Treasury bonds from your grandfather that mature in 2027. Although they were originally purchased at par (and will mature at $1,000), they currently have a market value of around $950 each. If you believe that interest rates will continue to rise, should you sell, hold, or try to buy more? Explain why.

Mini-Quiz

1, The efforts to revive the economy in 2009 through 2011 were drawn from?

(A)new tools of monetary policy. (B)the traditional tools of monetary policy. (C)all of the options are correct. (D)discretionary fiscal policy.

2, The elements of the stimulus package adopted in 2009 that allowed states to continue to make their unemployment compensation payments, despite having exhausted their funds, should be considered

(A)non-discretionary fiscal policy. (B)neither discretionary nor nondiscretionary fiscal policy programs. (C)discretionary fiscal policy. (D)monetary policy.

3, Monetary policy designed to counteract a reduction in aggregate demand might include

(A)a reduction in short-term interest rates. (B)a reduction in the money stock. (C)increased government infrastructure spending. (D)an increase in individual income tax rates.

4, The recession of 2007-2009 started

(A)with the financial collapse. (B)rather mildly in late 2007. (C)abruptly in 2007 with higher gasoline prices. (D)in 2006.

5, In the years immediately prior to 2005 in the U.S.,

(A)home prices were constant. (B)bankers were confident that home prices would decrease in 2005. (C)home prices were rising briskly. (D)home prices were falling precipitously.

6, A person using a discount rate, or 0%, is going to consider the concept of sustainability

(A)just a fancy term oil and gas companies use to argue for increased rights to drill. (B)as overly weighting the future. (C)as unwisely focusing on the present. (D)as wise.

7, The fish in the ocean would be considered a

(A)sustainable natural resource. (B)renewable natural resource. (C)limited natural resource. (D)sequestered natural resources.

8, Which issue type of environmental problem is least-easily solved?

(A)One that is entirely confined to a single community. (B)One that is entirely confined to a single property owned by an individual. (C)One that is global. (D)One that is entirely confined to a single country.

1. Some firms eventually experience problems with their capacity to produce output as their output levels increase. For these firms,

   	a.	supply is less elastic at low levels of output and more elastic at high levels of output.
   	b.	market power is substantial.
   	c.	supply is more elastic at low levels of output and less elastic at high levels of output.
   	d.	supply is perfectly inelastic.

1 points   

QUESTION 2

1. Scenario 5-4
   Milk has an inelastic demand, and beef has an elastic demand. Suppose that a mysterious increase in bovine infertility decreases both the population of dairy cows and the population of beef cattle by 50 percent.

   Refer to Scenario 5-4. Total consumer spending on milk will

   	a.	increase, and total consumer spending on beef will increase.
   	b.	decrease, and total consumer spending on beef will increase.
   	c.	increase, and total consumer spending on beef will decrease.
   	d.	decrease, and total consumer spending on beef will decrease.

1 points   

QUESTION 3

1. The price elasticity of demand for a good is computed to be approximately 2. Which of the following events is consistent with a 0.1 percent increase in the price of the good?

   	a.	The quantity of the good demanded decreases from 200 to 100.
   	b.	The quantity of the good demanded decreases from 250 to 150.
   	c.	The quantity of the good demanded decreases by 0.05 percent.
   	d.	The quantity of the good demanded decreases by 0.2 percent.

1 points   

QUESTION 4

1. Using the midpoint method, the price elasticity of demand for a good is computed to be approximately 0.75. Which of the following events is consistent with a 10 percent decrease in the quantity of the good demanded?

   	a.	an increase in the price of the good from $10 to $17.50
   	b.	a 13.33 percent increase in the price of the good
   	c.	an increase in the price of the good from $7.50 to $10
   	d.	a 7.5 increase in the price of the good

David Palmer identified the following bonds for investment: 1) Bond A: A $1 million par, 10% annual coupon bond, which will mature on July 1, 2025. 2) Bond B: A $1 million par, 14% semi-annual coupon bond (interest will be paid on January 1 and July 1 each year), which will mature on July 1, 2031. 3) Bond C: A $1 million par, 10% quarterly coupon bond (interest will be paid on January 1, April 1, July 1, and October 1 each year), which will mature on July 1, 2026. The three bonds were issued on July 1, 2011. (Each Part is Independent)

(a) If Bond B is issued at face value and both Bond B and Bond A are having the same yield to maturity (EAR), calculate the market price of Bond A on July 1, 2011. [Note: Full mark would only be given to correct answer of which the values of those variables not provided in the question directly are derived.]

(b) David purchased the Bond C on January 1, 2014 when Bond C was priced to have a yield to maturity (EAR) of 10.3812891%. David subsequently sold Bond C on January 1, 2016 when it was priced to have a yield to maturity (EAR) of 12.550881%. Assume all interests received were reinvested to earn a rate of return of 3% per quarter (from another investment account), calculate the current yield, capital gain yield and the 2-year total rate of return (HPY) on investment for David on January 1, 2016. [Hint: Be careful with how many rounds of coupons has David received during the holding period and thus how much interests (coupons and reinvestment of coupons) he has earned in total during the 2-year holding period.]

(c) David purchased Bond B on a coupon payment day. Bond B is priced to have a yield to maturity (EAR) of 12.36% and its market value is $1,101,058.953 on the date of purchase. Find the remaining life until maturity (in terms of 6-month period or year) of Bond B.

David Palmer identified the following bonds for investment:

1. Bond A: A $1 million par, 10% annual coupon bond, which will mature on July 1, 2025.
2. Bond B: A $1 million par, 14% semi-annual coupon bond (interest will be paid on January 1 and July 1 each year), which will mature on July 1, 2031.
3. Bond C: A $1 million par, 10% quarterly coupon bond (interest will be paid on January 1, April 1, July 1, and October 1 each year), which will mature on July 1, 2026.

The three bonds were issued on July 1, 2011.

(Each Part is Independent)

1. If Bond B is issued at face value and both Bond B and Bond A are having the same yield to maturity (EAR), calculate the market price of Bond A on July 1, 2011. [Note: Full mark would only be given to correct answer of which the values of those variables not provided in the question directly are derived.]                                                                       

2. David purchased the Bond C on January 1, 2014 when Bond C was priced to have a yield to maturity (EAR) of 10.3812891%. David subsequently sold Bond C on January 1, 2016 when it was priced to have a yield to maturity (EAR) of 12.550881%. Assume all interests received were reinvested to earn a rate of return of 3% per quarter (from another investment account), calculate the current yield, capital gain yield and the 2-year total rate of return (HPY) on investment for David on January 1, 2016. [Hint: Be careful with how many rounds of coupons has David received during the holding period and thus how much interests (coupons and reinvestment of coupons) he has earned in total during the 2-year holding period.]                                                                                                      

3. David purchased Bond B on a coupon payment day. Bond B is priced to have a yield to maturity (EAR) of 12.36% and its market value is $1,101,058.953 on the date of purchase. Find the remaining life until maturity (in terms of 6-month period or year) of Bond B.       

As the quarter is coming to a close, reflect back on the concepts and learning experiences which have occurred, and answer the following:

What did you learn from this course that you did not already know?

How will you apply what you learned to your patient care?