On 1/1/2016, XYZ Corporation purchased 75% of the outstanding voting stock of Sally Corporation for $2,400,000 paid in cash.  On the date of the acquisition, Sally’s shareholders’ equity consisted of the following:

Common stock, $10 par                 $1,000,000

APIC                                                   600,000

Retained Earnings                               800,000

Total SE                                         $2,400,000

The excess fair value of the net assets acquired was assigned 10% to undervalued Inventory (sold in 2016), 40% to undervalued PPE assets with a remaining useful life of 8 years, and 50% to Goodwill.

Comparative trial balances of XYZ Corporation and Sally Corporation at December 31, 2020, are as follows:

Required:

Determine the amounts that would appear in the consolidated financial statements of XYZ Corporation and its subsidiary for each of the following items:

1. Goodwill at December 31, 2020. (2 points)
2. Income to Non-controlling interest for 2020. (3 points)
3. Consolidated retained earnings at December 31, 2019. (2 points)
4. Consolidated retained earnings at December 31, 2020. (2 points)
5. Controlling share of consolidated Net Income for 2020. (3 points)
6. Non-controlling interest at December 31, 2020. (3 points)

13. When the rod shearing process at Newcastle Steel is ‘in control’ it produces rods with a mean length of 120 cm. Periodically, quality control inspectors select a random sample of 36 rods. If the mean length of sampled rods is too long or too short, the shearing process is shut down. The last sample showed a mean of 120.3 cm with a standard deviation of 0.9 cm. Using α = 0.05, the appropriate decision is _________.

    1. do not reject the null hypothesis and shut down the process

    2. do not reject the null hypothesis and do not shut down the process

    3. reject the null hypothesis and shut down the process

    4. reject the null hypothesis and do not shut down the process

In investing, we would like to know the overall trend of the market. Is the market trending up? Or, is it trending down? If the market is trending up, we want to be invested in stocks or Exchange Traded Funds (ETFs), such as DIA, SPY, QQQ, SSO, DDM, or QLD to name several. If the market is trending down, we really do not want to be in stocks, because we all know too well what happens to stock prices in a down market. In a down market, the best place to be is in a money-market fund or inverse Exchange Traded Funds (ETFs), such as DOG, DXD, SDS or QID to name several. Now, how does one determine if the market is trending up or down?

DUK stock has a Beta coefficient of 1.0. This means that if the Indianapolis-based market (index) LOSES 2.0% today (Monday, April 6, at 9:00 EDT), what will happen to DUK stock?

it will go down 1.0%

it will go down 2.0%

it will go down 100%

it will go down 200%

Question 361 pts

WISC stock has an Alpha of 1.5. If the index goes up, which of the following statements is most accurate?

WISC will go up 1.5%

WISC will go up 1.5 times more than the index

WISC will outperform the index by 1.5%

WISC will go down 1.5 times more than the index

Part A) For investment perspective you are analyzing the company which is working under the Fertilizer Sector Engro Fertilizer (EFERT). A long time ago, it was considered as one of the best company by investors due to high dividend payouts though investors are always willing to invest in this company. Two years ago, position of this company’s cashflows become worst which impact the overall profitability on the company and the financial health amid ongoing situation of worst financial board of directors taken decision to cut down the dividends payments to the shareholder and share price also gradually declining in the market. After recent financial results, board of directors showed their positive expectations for revival of the company where new strategies implement to boost the sales and re-gain its market share. You are again want to investment in this company after analyzing the historical dividends payout patterns. Which are mentioned below:

Further, you gathered the information pertaining to sales growth expectations and net margins which are analysis consensus for next 5 years.

Currently company’s sales for the year ended FY 2020 stood at 89.54mn. You will apply the dividend discount model to value the company after calculation of the dividends properly. For calculation of cost of equity you can use the CAPM model (hint: use risk free rate as a 5-years PIB yield and Risk premium upto 7% while beta can be calculated through statistical variance methodology as explained in the class). This calculated cost of equity you can input in your formula to find out the intrinsic value and use sustainable growth rate 5.5% for dividends growth). (at least 250 words write up required)

Part B) This party is linked with part A, use the data from the part A and sensitize the intrinsic value by changes in cost of equity and growth projections so how it will impact on the company’s intrinsic value.

Instructions:

You are required to calculate the intrinsic value of each part and then compared the calculated prices along with logical reason.

Your firm has been appointed for the first time to carry out the audit of Teejan Enterprises for the
year ending December 31, 2019. The entity is engaged in trading of office furnitures and operates
from 6 branches in various cities. Teejan Enterprises has been in operation for nearly 8 years and was
far bigger now than when it first started by its original owners. Teejan was originally owned by two
people who became husband and wife. As the years went by, they allowed three more friends to co-
own the business and the business soon become the size it is now. However, as the enterprise
becomes bigger, owners found it difficult to manage some basic areas of the business particularly the
control aspect. They simply don’t have the ability and could not find the right manager to handle all
six branches. As part of your initial assessment, you noticed significant adjustments in their
inventories. You communicated with their previous auditors and they revealed that those adjustments
in inventories were due to the un-reconciled balance of physical count of inventories. Moreover, you
also learned that two of the 6 branches will be closing down the following year. Recently, the
company directors are having closed-door meetings with a major competitor about merger and
acquisition. They are considering selling Teejan to a much bigger company. The management
expects the auditor to report on weaknesses in design and implementation of internal controls as well
as give some consultation advise on the management aspect on top of the usual audit of the financial
statements.
Required: Discuss matters that you would consider in developing the audit strategy for Teejan
Enterprises.

Question 3.

With COVID-19 causing havoc in countries all over Europe and the Americas, there had been a dramatic slow down in manufacturer orders from these countries in China. Many factories in the Dongguan corridor have been closed since Chinese New Year. Even factories that were opened were laying idle with minimum workers. With no income from their factory jobs, many female workers resorted to sell cosmetics in person and on Douyin.

An investment fund noticed this trend, did further research, and found that Revlon, a U.S. based cosmetic brand, is the preferred brand for these workers turned KOL (“Key Opinion Leader”). Upon further analysis, this fund is considering buying shares of Revlon.

These are selected financial information as collected by the analyst of this investment fund:

Share price                                                USD 12.75

Beta                                                                      1.08

2019:

Net income                                          -157.7 million

Total asset                                            2,981 million

Total Liabilities                                    3,245 million

Total Equity                                        -1,221 million

Shares outstanding                      53.3 million shares

1. Discuss and explain how the analyst can deal with Revlon’s negative earnings when performing valuation.
2. Discuss and explain how the analyst can deal with Revlon’s negative book value of equity when performing valuation.
3. Given the higher systematic risk of the market, do you expect Revlon shares to fluctuation more or less than the over market?
4. Calculate and interpret the following ratios for Revlon: ROE, ROE, debt to invested capital, debt to equity, EPS, and PE ratio.

Charlotte Company runs two candy stores, one in Gastonia and one in Concord. Operating income for each store is as follows: Gastonia Store Concord Store Total Revenue $200,000 $120,000 $ 320,000 Operating costs: Cost of goods sold 75,000 60,000 135,000 Rent (renewable each year) 12,000 7,000 19,000 Hourly wages 35,000 26,000 61,000 Depreciation of equipment 10,000 10,000 20,000 Utilities 4,000 3,000 7,000 Allocated corporate overhead 30,000 20,000 50,000 Total operating costs 166,000 126,000 292,000 Operating income (loss) $34,000 ($6,000) $28,000 The company’s management is contemplating closing the Concord Store because it has been consistently reporting a loss. The equipment has a zero disposal value. By closing down the Concord Store, the company can reduce overall corporate overhead costs by $5,000. 5. What will be the effect on Charlotte Company’s operating income if the Concord Store is closed? A) increase by $19,000 B) increase by $6,000 C) decrease by $19,000 D) decrease by $6,000 6. Refer to the original data. For the next year, the company is considering keeping the Concord Store open and adding a new store in Pineville. The budgeted revenues and costs for the Pineville Store are identical to the revenues and costs of the Concord Store except for (a) no new equipment will be purchased, but instead equipment will be rented for $10,000 per year and (b) opening the Pineville Store will increase corporate overhead costs by $12,000. If the Pineville store is open, what will be the company’s budgeted operating income for next year? A) $22,000. B) $30,000. C) $37,000. D) $10,000.

On January 2, 2011, Blueman Corporation was incorporated in the province of Ontario. It was authorized to issue an unlimited number of no-par value common shares, and 25,000 shares of no-par, $8, cumulative and non-participating preferred.   During 2011, the firm completed the following transactions:

Jan 8        Accepted subscriptions for 34,000 common shares at $12 per share. Down payment received on the subscribed shares was 50%.

Jan 30      Issued 10,000 preferred shares in exchange for the following assets: machinery with a fair market value of $50,000, a factory with a fair market value of $200,000, and land with an appraised value of $120,000.

Mar 15      Machinery with a fair market value of $85,000 was donated to the company.

Apr 25      Collected the balance of the subscriptions receivable on only 30,000 shares and issued common shares. A customer defaulted on the last payment on a subscription for 4,000 shares. The company policy is to issue the proportion paid up to date for customers that default.

June 30    Purchased 2,200 common shares at $18 per share. The shares were retired.

Dec 31     Declared sufficient cash dividends to allow a $1 per share dividend for outstanding common shares. The dividend is payable on January 10, 2012, to shareholders of record on January 5, 2012.

Dec 31     Closed the income summary to retained earnings. The income for the period was $225,000.

Required:

1. ( Prepare the journal entries to record the above transactions.
2. (Prepare the shareholders’ equity section of the balance sheet for Blueman Corporation at December 31, 2011.

In 2020, John and Emma, married filing joint taxpayers, have adjusted gross income of $430,000. Their AGI includes $10,000 of interest income. They have no dependents and have $50,000 of itemize deductions. What is their 2020 federal income tax?

A) $83,631 B) $83,829 C) $89,212 D) $89,404