Grouper Corp. has the following portfolio of securities acquired for trading purposes and accounted for using the FV-NI model at September 30, 2017, the end of the company’s third quarter:

Investment Cost Fair Value 48,000 common shares of Yuen Inc. $273,600 $192,000 3,300 preferred shares of Monty Ltd. 125,400 132,000 1,400 common shares of Oakwood Inc. 126,000 125,300

On October 8, 2017, the Yuen shares were sold for $5.70 per share. On November 16, 2017, 3,000 common shares of Patriot Corp. were purchased at $43.90 per share. Grouper pays a 1% commission on purchases and sales of all securities. At the end of the fourth quarter, on December 31, 2017, the fair values of the shares held were as follows: Monty $102,200; Patriot $117,000; and Oakwood $142,100. Grouper prepares financial statements every quarter. Assume Grouper follows IFRS 9 and does not recognize dividends and other investment income accounts separately. Required:

a) Prepare the journal entries to record the sale, purchase, and adjusting entries related to the portfolio for the fourth quarter of 2017.

b) Indicate how and where the investments would be reported on the December 31, 2017 statement of financial position.

Bagus Industri Bhd. is preparing a cash budget for the second quarter of 2008. The following are its sales figures:

ACTUAL SALES (RM) YEAR 2008                         FORECASTED SALES (RM) YEAR 2008                                                               

January                       160,000                                   April                 225,000

February                     140,000                                   May                 250,000

March                          190,000                                   June                210,000

July                   220,000

a) The company collects 30 percent of its sales in the month of the sale, 30 percent in the month following the sale, and the remaining 40 percent two months following the sale.

b) Purchases of raw material are 75 percent of the month sales and are made one month in advance of the expected sale.

c) Payments for purchases are made in the month of sales.

d) A new machine will be installed and paid in May. The price is RM30.000

e) Insurance payments of RM10,000 are made at the end of each quarter.

f) Fixed monthly expenses are:

    Rent - RM12,000

    Utilities - RM20.000

    Depreciation - RM 7,500

g) Tax payments of RM26.500 are made at the beginning of each quarter.

h) Dividends of RM30.000 will be received in May.

i) Ending cash balance for March is RM38.500.Minimum cash balance of RM25.000 must be maintained at all times.

From the information provided above, prepare a cash budget for the second quarter. ( 20 Mark)

Crane Enterprises is a boutique guitar manufacturer. The company produces both acoustic and electric guitars for rising and established professional musicians. Betty Harris, the company’s sales manager, prepared the following sales forecast for 2022. The forecasted sales prices include a 5% increase in the acoustic guitar price and a 10% increase in the electric guitar price, to cover anticipated increases in raw materials prices.

C)

The efficient market hypothesis is interpreted in a weak form, a semi-strong form, and a strong form. First, explain the efficient market hypothesis. Then, differentiate between the three forms. Which form is most commonly accepted?

Why? Do agree? Disagree?

Why? What evidence did you find to support your opinion?

1. The State of Florida currently budgets $10,000/year for two goods—voting machines (which cost $1,000 each) and voter education programs (which cost $500 each). Their wise governor, Jeb, knows his constituency well enough to know their indifference map over the two goods. Now, consider bundle A which consists of 5 voting machines and 10 education programs. The slope of Florida's indifference curve at bundle A is –3 (assume voting machines are on the horizontal axis).

a. Is this combination of goods the optimal bundle of goods for the State of Florida?

b. If so, explain why. If not, carefully explain how Florida can re-arrange its expenditures (i.e., choose another bundle) to reach a higher level of utility (you do not need to determine exactly which bundle they would choose).

c. Show how a $5,000 grant from the federal government would affect Florida's budget constraint. d. Suppose the federal government restricts the state to spend this $5,000 grant on voting machines only. Re-draw the state's budget constraint, reflecting this requirement.

2. Suppose that the demand curve of a good is vertical over a given range of prices. Draw the corresponding indifference curves and budget lines (assume the indifference curves of this good meets the four assumptions of preference, and the budget line is linear). Is this good a normal good? (Hint: draw the diagram of the process of getting a demand curve, figure out what substitution effect and income effect should be, and whether income effect is positive or negative.)

3. Jeff has a monthly income of $400, which he spends each month on dinners (which cost $20 each) and movies. He finds that he maximizes his utility by spending half his income on dinners and ha lf on movies. His marginal rate of substitution at this bundle of goods is 0.4 (measured with dinners on the horizontal axis).

a. Given this information, what is the price of movies?

b. Draw Jeff's budget constraint and indifference curve at this optimal bundle. Label both axes appropriately.

c. Write an equation—in slope- intercept form—for Jeff's budget constraint.

d. What is the opportunity cost, in terms of dinners, of an additional movie? e. Now suppose the price of dinners changes to $25. Show on your diagram how the budget constraint will change. Can Jeff still afford his initial bundle from part b?

Go to the Yahoo! Finance Web site. Review the overview/main pages for the four public companies whose names your professor will provide to you. Boeing (BA); International Business Machines Corp. (IBM); Parker Hannifin Corp (PH); Walt Disney Co. (DIS) Research the four firms using either Key Statistics or Financials from the overview/main pages for the stocks on Yahoo! Finance Web site. Compute and compare the following financial ratios for the four firms for their most recent fiscal years:< > Note: In Key Statistics under the heading "Valuation Measures" there are numbers for both Trailing P/E ratios and Forward P/E ratios. Most commonly, in calculating both ratios the corporation's current stock price is divided by its earnings per share (EPS). The difference is that Trailing P/E ratios use reported EPS for the past year, specifically the past/trailing 12 months (ttm), and Forward P/E ratios use estimated EPS for the upcoming 4 quarters. Also, in interpreting some of the other statistics provided, please note that "yoy" is an acronym for "year-on-year" and "mrq" is an acronym for "most recent quarter."

Current Ratio (X)

Sales/Total Assets (percent) or Total asset turnover

Times interest earned (X)

Total Debt/Equity (percent)

Net Income / Net Sales (percent) or Return on Sales (ROS)

Net Income / Total Assets (percent) or Return on Assets (ROA)

Net Income / Common Equity (percent) or Return on Equity (ROE)

P/E or P/E Ratio (X)

You are a senior auditor of the accounting firm QTP Partners. Your audit team is currently planning the 2018 audit of GreenHome Limited, a medium sized listed company that manufactures and sells household appliances such as televisions, refrigerators and washing machines. The company has many stores in shopping centres across Australia. This is the second year your accounting firm is engaged to perform the audit for this client. The financial year under audit ends on 30th June 2019. Past audit work and initial inquiries this year have revealed the following information.

GreenHome Ltd (hereafter referred to as “the company” or “the audit client”) had several years of stable profit growth because it focused on manufacturing energy saving appliances. The manufacturing costs and selling prices of such products are higher than those of traditional products sold by competitors. However, as consumers have become more conscious of environmental issues, there is a niche market for your audit client’s products. However, since February 2018, your audit client’s main competitor, BetterLiving Limited, which is substantially larger in size than GreenHome, gradually introduced a new range of energy saving appliances that are similar to your audit client’s products. Although the competitor’s products are still inferior to your audit client’s products in terms of energy efficiency, the competitor is able to sell its products at lower prices due to economy of scale. This development has had an obvious impact on the audit client’s sales, which declined by 20% in the previous financial year.

In response to BetterLiving Ltd’s new products, the CEO of GreenHome launched an intensive advertising campaign throughout the 2018 financial year to emphasise that GreenHome’s products are both more energy efficient and more durable. A substantial amount of money was spent on the advertising campaign. When the advertising campaign was proposed to the board of directors in July 2018, one of the directors asked the CEO whether the company has any scientific evidence to show that its products are more durable than the competitor’s products. The CEO said no formal study was conducted but the company’s product designers and the staff in the manufacturing department both think the company’s products are of better quality than the competitor’s. The directors were not given any written report of such opinions.

In August 2018, The CEO obtained the directors’ permission to invest a lot of money into new product development because the CEO argued that the company needs to develop better products to maintain its competitive advantage. The CEO also reported to the directors that the depreciation of the Australian dollar keeps increasing the costs of raw materials and components imported from overseas. As the competitor is selling similar products at lower prices, the CEO believes it is not feasible to increase selling prices. Instead, in September 2018, the CEO asked the manufacturing department to switch to cheaper but lower quality raw materials and components. When the directors questioned whether this change will make the products less durable and thus render the key message of the company’s advertising campaign (that the company has more durable products) misleading, the CEO said the company’s products are still of good quality. The CEO also said selling slightly less durable products can help improve long- term sales because customers need to replace the products more frequently.

To help fund increasing operating costs including advertising and research and development costs, the audit client took out a $5 million bank loan in August 2018 to be repaid after 3 years. One of the conditions in the debt contract requires the audit client’s return on assets ratio (calculated as net profit divided by total assets) to be above 7% for the duration of the loan.

In May 2018, the board of directors approved a new remuneration (pay) package for the CEO for the 2018 financial year to motivate the CEO to lead the company out of its difficulties. Based on the new package, about 20% of the CEO’s remuneration would be paid with the company’s shares, and a special cash bonus will be paid if the company returns to positive profit growth for the 2019 financial year. The CEO believes it is important that all employees of the company should be aware of the company’s situation so the CEO e-mailed all employees in November 2018 to encourage them to help improve revenues and cut costs as better profit performance will reduce the necessity of staff cuts.

The audit client’s accounting department is separate from other operating departments. Only the accounting staff has access to the accounting system. The CEO does not have direct access to the accounting records. The CEO needs to consult with the chief accountant about any proposed changes to the accounting records. If the chief accountant agrees that an adjustment is appropriate, the chief accountant would then make the change in the computer system.

The computer systems for sales, inventory management and accounting are integrated.
However, access to different systems is restricted to authorised staff via individual passwords so that only sales staff has access to the sales computer system, and only accounting staff has access to the accounting system, etc.

When customers make an order in store, sales staff enters the details for a sales invoice into the sales computer system. The sales system then sends the details of the sales invoice to the inventory management system. The warehouse staff uses this information to prepare delivery documents. Customers are required to sign a paper copy of the delivery document upon receipt of the appliances they ordered. Sales invoices and delivery documents are serially numbered. The original copy of the customer-signed delivery document is then sent to the accounting department while the warehouse staff keeps a duplicate copy of the document. At the end of each day, the warehouse manager gives authorisation in the inventory management system to process sales transactions for which delivery has been made. The system then updates the perpetual inventory records, and sends the sales transactions to the accounting system. The accounting staff checks the sales invoices in the accounting system against the signed delivery documents before giving authorisation for the accounting system to record the sales in the accounting records. The accounting staff is required to regularly check recent sales transactions to see whether there are duplicate or missing sales invoice numbers, and whether each sales transaction has both a sales invoice number and a delivery document number.

The audit client usually offers 1-year free warranty for most of its products. The rate of faulty products used to be quite stable between the financial years 2014 to 2017. In July 2018, to improve sales after the competitor introduced new products, the audit client’s CEO changed the warranty policy and started offering 2-year free warranty for products worth more than $500.

When warranty costs are incurred, the accounting staff checks the reasonableness of the cost for the type of technical problem reported against an official list of common technical faults and related costs. The company uses the provision method to record warranty expenses.

The audit client prepares monthly reports to show actual warranty costs for different types of products. Quarterly meetings are held to discuss the reasonableness of these costs and whether product design should be changed to reduce the rate of faulty products. These meetings are attended by senior managers from departments such as manufacturing, sales, accounting, research and development, and technical support and maintenance departments. Records of these meetings are sent to the CEO for review. The reports in the last few months of the financial year show that after the company started using lower quality materials and components to manufacture its products, the rate of faulty products and the costs of repair/refund have both increased.

At the end of the financial year, the CEO and the chief accountant meet to discuss major accounting issues such as appropriate accounting estimates to be reported in current year financial statements. Data such as the monthly warranty costs reports are used for such decisions. Discussions in these meetings are documented by a secretary. The chief accountant told the auditor that the accounting estimate for warranty expense takes into consideration other information such as sales volume for different products in the current year and the frequency of faults reported for different products.

The CEO and the chief accountant have worked together for the company over the last five years. They have been friends for many years before they started working for this company. Both of them have friendly and charismatic personalities and can be very persuasive. They usually get on well with the board of directors and the auditors. The audit client’s board of directors consists of a majority of independent directors. The independent directors attended most of the board meetings.

Extracts of the audit client’s financial ratios for the last few years are provided below.

Sales growth is calculated as the difference between current period sales and prior period sales divided by prior period sales, i.e. (Sales t – Sales t-1) / Sales t-1.

Profit growth is calculated as the difference between current period profit and prior period profit divided by prior period profit, i.e. (Profit t – Profit t-1) / Profit t-1.

Return on assets ratio = Net profit divided by total assets. Warranty expense is an accounting estimate.

Required

For the (A) occurrence general audit objective of the sales revenue account, and (B) thevaluation assertion (i.e., the accuracy general audit objective) of the provision for warranty account, answer all of the following questions in accordance with the Australian Auditing Standards. You need to perform your analysis using the facts in the case study.

For each of the two audit objectives of the accounts specified above:

1. (2) Assess control risk for each of the general audit objectives of the accounts given above. In your answer, identify existing internal controls that are relevant to the specified general audit objectives, and briefly explain how each internal control can prevent/detect misstatements for the specified general audit objectives for sales and provision for warranty.

A game works as follows: each player rolls one dice (let's call it ''n''). After both players have made the first roll, they have the choice to leave or not. If a player exits, he automatically looses; if not, he rolls a second time (let's call this second roll "m'') and receives n^m points . The player with the most points wins, in case of a tie no one wins.
a) Give the fundamental space of the two throws.
b) Give the fundamental space of the number of points obtained.
c) Show that a player should automatically withdraw if n = 1.
e) Let n₁ and n₂ be the value of n of the first and second player (respectively). Knowing that n₁ = 2 and n₂ = 3, what is the probability that the first player wins?
d) Knowing that the first player will pull out automatically if n₁ = 1, half the time if n₁ < n₂ and never otherwise, what is the probability that the first player will win?
probability of the first player pulling out?

There is 2 players in the game.

7. Michael Jackson's Strings uses the conventional retail method to estimate ending inventory. Cost data for the most recent quarter is shown below:

Cost       Retail

Beginning inventory        $46,000               $63,000

Net purchases    154,000               215,000

Net markups                      22,000

Net markdowns                35,000

Net sales                            220,000

To the nearest thousand, estimated ending inventory using the conventional retail method is

  A. $30,000.

   B. $32,000.

   C. $34,000.

   D. $37,000.

8.   Mario Brothers Company adopted the dollar-value LIFO inventory method on January 1, 2015. In applying the LIFO method, Mario Brothers uses internal cost indexes and the multiple-pools approach. The following data were available for Inventory Pool No. 3 for the two years following the adoption of LIFO:

Ending Inventory

At Current           At Base

Year       Cost       Year Cost             Cost Index

1/1/2015             $300,000             $300,000             1.00

12/31/2016         345,600               320,000               1.08

12/31/2017         420,000               350,000               1.20

Under the dollar-value LIFO method, the inventory at December 31, 2016, should be:

A. $351,600.                         D. $357,600.

   B. $600,120.                       C. $350,000.

9.   Thatch Fencing Company sold $46,000 of fencing to Southeast Water District #45 on April 12 of the current year with terms 1/15, n/60. Thatch uses the gross method of accounting for cash discounts.

What entry would Thatch make on April 12?

A.

Accounts receivable        45,540

Sales                     45,540

    B.

Accounts receivable        46,000

Sales                     46,000

    C.

Accounts receivable        46,000

Sales                     45,540

Sales discounts                 460

    D.

Accounts receivable        45,540

Sales discounts                 460

Sales                     46,0004

10.   Lingua Company reported the following pretax data for its first year of operations.

Net sales             7,340

Cost of goods available for sale   5,790

Operating expenses         1,728

Effective tax rate              40%

Ending inventories:

If LIFO is elected               618

If FIFO is elected               798

What's Lingua's net income if it elects LIFO?

A. $264

   B. $440

   C. $620

   D. $372

11.   When using the gross profit method to estimate ending inventory, it's not necessary to know

   A. net purchases.

   B. beginning inventory.

   C. net sales.

   D. cost of goods sold.

12.   Tannis Design began 2015 with accounts receivable of $115,000. All sales are made on credit. Sales and cash collections from customers for the year were $780,000 and $700,000, respectively. Cost of goods sold for the year was $450,000. What was Tannis's receivables turnover ratio (rounded) for 2015?

   A. 4.00

   B. 2.90

   C. 6.78

   D. 5.03

13.   San Juan Company had the following account balances at December 31, 2015, before recording bad debt expense for the year:

Accounts receivable        $1,400,000

Allowance for uncollectible accounts (credit balance)       22,000

Credit sales for 2015       1,950,000

San Juan is considering the following approaches for estimating bad debts for 2015:

Based on 3% of credit sales

Based on 6% of year-end accounts receivable

What amount should San Juan charge to bad debt expense at the end of 2015 under each method?

   A. Percentage of credit sales: $58,500; percentage of accounts receivable: $62,000

   B. Percentage of credit sales: $117,000; percentage of accounts receivable: $95,000

   C. Percentage of credit sales: $58,500; percentage of accounts receivable: $84,000

   D. Percentage of credit sales: $36,500; percentage of accounts receivable: $62,000