Hummus Company began operations on January 1, Year 1. Selected ending balances for Year 1 are:

Accounts receivable, $5,600

Allowance for doubtful accounts, $790

Hummus Company experienced the following events during Year 2:

              Earned $225,000 of revenue on account

              Collected $175,000 cash from accounts receivable

              Paid in advance a one-year lease for office rent, $12,000; rental period began May 1, Year 2

Salary expense was $45,000, of which $40,000 had been paid at the end of Year 2

              Operating expenses were $125,000, of which $100,000 had been paid at the end of Year 2

              Wrote off $2,000 of uncollectible accounts

Adjusted the accounting records to reflect management’s belief that 3% of sales on account will be

uncollectible. Hummus Company uses the allowance method for accounting for bad debts.

Collected $500 from accounts that had been previously written off

(3 points) Question 1 – What is Hummus Company’s net income for Year 2?

(3 points) Question 2 – What is the net realizable value that Hummus Company will report on its Year 2 balance sheet (after all adjusting entries have been made)?

It is a strategic management

Question 1: Discuss the business-level and corporate-level strategies of Apple, as discussed in the articles below. Why is Apple pursuing these strategies? Be sure to discuss competitive pressures from Sony as it pursues its strategy. Compel your response with data from the articles.

Article 1:

THE NEWEST NUMBERS ARE IN —While iPhone sales remain stagnant, Apple services hit $10 billion in revenue

Apple announced on its earnings call today that it had surpassed its revenue estimates for Q4 2018. The iPhone maker boasted $62.9 billion in revenue, slightly more than the $60-62 billion it previously estimated, as well as $14.1 billion in profit, up from $11.5 billion in the previous quarter.

"We're thrilled to report another record-breaking quarter that caps a tremendous fiscal 2018, the year in which we shipped our two billionth iOS device, celebrated the 10th anniversary of the App Store, and achieved the strongest revenue and earnings in Apple's history,” Apple CEO Tim Cook said in a statement.Ars Technica

Apple sold 46.8 million iPhones, 9.6 million iPads, and 5.2 million Macs in the final quarter of 2018. While that represents a 14 percent increase in iPhone sales when compared to last quarter, it's about the same number of iPhones sold this time last year. However, year-over-year revenue from iPhone sales was up by 29 percent, thanks to the increase in iPhone prices.

This quarter saw the reveal of the iPhone XS and XS Max, but only a fraction of those sales contribute to these numbers because of the handsets' late release date. The YoY increase mostly comes from the $1,000 iPhone X, which has been the best-selling iPhone since its launch in September 2017. The X continues to sell well enough that Apple moved roughly the same number of iPhones and made nearly 30 percent more. Now, the average sale price for an iPhone is $793, up drastically from $618 in the same quarter last year.

Apple's services business, a constant bright spot in recent quarters, hit a revenue milestone in Q4 2018: $10 billion (it's $9.98 billion to be exact, but Apple rounded up). That's an increase of 27 percent from Q4 2017, in which services including iCloud, Apple Music, the App Store, and others brought in $7.9 billion in revenue.

When asked about how Apple plans to continue growing its services business, CFO Luca Maestri highlighted the "exponential trajectory" of all of Apple's services from Apple Music to the Apple Store to Apple Pay. Maestri also called out Apple's "very large and growing" install base, which is currently at an all-time high. With so many users within the Apple ecosystem, the company now has the opportunity to monetize more services, improve existing services, and add new ones like Apple's Search Ad business on the App Store. Maestri said that the company is on track to double its fiscal 2016 services revenue by 2020.

iPad numbers were lackluster: unit sales were down 16 percent from last quarter, and revenue was down 14 percent as well. That might be due to all the rumors leading up to this week's "special event" in which Apple released the new iPad Pros. Those devices feature all-new designs, a new Apple Pencil, and higher prices to boot. Meanwhile, Mac sales brought in 39 percent more revenue than last quarter, thanks in part to sales of the updated MacBook Pros and the back-to-school season overall.

Apple's "other products" category, which includes the Apple Watch, AirPods, Apple TV, HomePod, and others, saw a 13 percent sequential increase and a 31 percent increase from this time last year. Cook praised the wearables segment (Apple Watch, AirPods, and Beats devices) numerous times on today's call, although Apple still doesn't provide individual product sales numbers for the devices included in that category.

Cook said the company saw an "overwhelmingly positive" response to the Apple Watch Series 4, which debuted in September alongside the iPhone XS and XS Max. When asked about Apple's future in the health care space, Cook said that health is an "area of major interest" for Apple as the company looks to add more health products and services into its business.

Notably, Apple will start treating all of its hardware like it does the "other products" category we're used to seeing in its earnings reports. Apple stated that it will no longer report unit sales for iPhones, iPads, and Macs in future reports. Maestri said that unit sales are "not representative of the underlying strength of our business." Analysts and investors often look to those numbers to determine how well certain devices have sold in comparison to previous quarters and years, and they help calculate average selling prices per product. Apple clearly wants to highlight how much it's making from product sales, without also showing that some devices, like the iPhone, may not be selling as many units as some expected.

Both Apple and investors are looking forward to the first quarter of 2019, which will include holiday sales and more data about iPhone XS, XS Max, and XR sales. Apple set its sights high: it estimates Q1 2019 revenue to be between $89 and $93 billion.

Article 2 - Sony:

Pioneer of Walkman targets premium market dominated by Bose and Beats

TOKYO -- When Ichiro Takagi took over Sony Corp.'s audio business seven years ago, he found the staff took pride in being the global No. 1 in headphones, in terms of units sold. But he was appalled at how many were $10 headphones sold for minimal profit at grocery stores. "What's the point of that? Where's our brand image?" Mr. Takagi recalls telling employees. Fast forward to this fall and the international electronics show in Berlin, where Mr. Takagi was showing off the latest version of his flagship product, a $350 pair of noise-canceling wireless headphones.

The premium-price headphone market has been largely dominated by Bose, the industry pioneer popular with frequent fliers, and Beats, the fashion-savvy brand acquired by Apple Inc. for $3 billion in 2014. All share the challenge of wooing listeners who already get free earbuds with their smartphones.

Sony said in May it has 11% of the headphone market in terms of revenue, the third-largest slice. It didn't name the top two companies.

The audio business -- where Sony has been a player since the 1950s -- is a prime example of how it got back to profitability in recent years, even in a traditional hardware business that once looked like a lost cause. For the year that ended in March, sales for the audio unit rose for the first time in 20 years after having fallen some 80% from the peak.

More important for Chief Executive Kenichiro Yoshida, the home-electronics division, including audio and televisions (another former money loser), posted operating profit of nearly $800 million for the year, helping Sony achieve record overall profit. Mr. Yoshida is hoping roughly to match that record in the current fiscal year: Quarterly earnings coming Tuesday will give a progress report. The rise of Spotify Technology SA and other music services has been good for headphone makers, increasing the time consumers spend listening on the go. Streaming companies such as Spotify and France-based Deezer offer high-resolution services that have expanded the market for higher-quality headphones costing hundreds or even thousands of dollars. Recent product releases by Sony include a $280 pair of earphones; an $8,500 portable music player targeted at audiophiles goes on sale in December, with a gold-plated volume controller and a battery system designed to reduce noise.

In the first generation of portable MP3 music players, "the quality of the music sources was poor," Sony audio executive Yoshinori Matsumoto said. "We couldn't push high-end listening devices because they would highlight the coarseness." Now, better technology has "made high-quality music more accessible both to customers and creators," he said.

Audio has paralleled Sony's highs and lows through its 72-year history. The Walkman in 1979 set off a revolution in portable electronic devices, with Sony in the lead. But in the 2000s, Sony let Apple and the iPod seize the dominant position. By 2011, the Tokyo company was nearly giving up on its old hardware products. "The attitude of management at that time was like, 'If you're so-so, that's fine,' " Mr. Takagi, the audio-unit chief, said. That changed under then Chief Executive Kazuo Hirai, who took over in 2012, and Mr. Yoshida, who was chief financial officer under Mr. Hirai and became CEO this year. They pushed the audio team to drop cheap products and focus on a few high-end models.

Mr. Takagi says the new management scrapped an organizational chart that had separate groups of engineers focusing on subcategories like car audio. "I told them to look around the whole industry to come up with products that consumers are willing to pay extra for," he said.

Sony says the $350 headphones can detect the owner's facial shape, hairstyle and presence of glasses, as well as pressure changes in an airplane, all to optimize the noise-canceling feature. "Our latest model is distinctly the best in terms of noise-canceling technology," says Mr. Takagi, who is in the habit of visiting electronics stores to eavesdrop on what customers are saying to salespeople. "It's obvious if you ask your ears."

Another Sony rival, especially for younger customers, is Beats. Mr. Matsumoto says the competition has led Sony to stress fashion as well as sound quality. "In China, headphones have become part of the outfit for young people, and they have to have a style that people want to wear all the time, even when they are not listening," he said.

Mr. Takagi said there is more innovation to come, such as headsets that stream music from the internet on their own without having to be hooked up to a smartphone. "Audio will remain a profitable business so long as we keep listening to music," Mr. Takagi said. "If we remain as a strong and respected player in the industry, then the whole company will be too because audio is the origin of Sony."

Blossom Company sells goods that cost $325,000 to Pina Colada Company for $415,000 on January 2, 2020. The sales price includes an installation fee, which is valued at $44,200. The fair value of the goods is $380,800. The goods were delivered on March 1, 2020. Installation is considered a separate performance obligation and was completed on June 18, 2020. Under the terms of the contract, Pina Colada Company pays Blossom $275,000 upon delivery of the goods and the balance at the completion of the installation.

Using the five-step process for revenue recognition, determine when and how much revenue would be recognized by Blossom. Assume IFRS is followed.

Prepare the journal entries for Blossom on January 2, March 1, and June 18, 2020.

America’s Gilded Age in the late nineteenth century began with a raft of innovations – railroads, steel production, oil extraction – but culminated in mammoth trusts owned by “robber barons” who used their wealth and power to drive out competitors, and then to corrupt American politics. We are now in a second Gilded Age – ushered in by semiconductors, software, and the Internet – and a handful of technology giants are the new robber barons. Facebook and Google now dominate the online advertising market, while the advertising revenue going to newspapers, network television, and other newsgathering agencies continues to decline. Google also hosts two-thirds of all Internet searches in the United States, and is so dominant that “to google” has long since become a commonly used verb. In 2006, Google acquired the world’s largest video-hosting site, YouTube. And Facebook, for its part, has acquired more than 70 companies over roughly 15 years, including potential competitors like Instagram and WhatsApp. Amazon, meanwhile, has become the first stop for one-third of all US consumers seeking to buy anything, including more than half of new books. Amazon’s scale translates into bargains for consumers, but it undermines supplier industries, including author royalties and publisher earnings. This consolidation at the leading edge of the US economy has created three big problems. The first concerns economic power. Here, the issue is not the classic one of consumer prices being higher than they’d be under competitive conditions; it is that Big Tech is inhibiting innovation. The incumbents’ size, must-use platforms (owing to network effects), wall-to-wall patents and copyrights, and fleets of lawyers to litigate potential rivals into submission have allowed them to create formidable barriers to new entrants. To be sure, large platforms like Amazon, Google, and Facebook have enabled creators to showcase and introduce new apps, songs, books, videos, and other content. But because of these platforms’ overwhelming bargaining power, they can take a large share of the profits. Partly as a result, the rate at which new jobcreating businesses are formed in the US has fallen by half since 2004. The second problem concerns political influence: massive concentrations of economic power tend to generate political clout that is easily abused. Because of its increasing size, the technology sector provides significant campaign contributions and maintains platoons of lobbyists and lawyers in Washington, DC. Google’s parent company, Alphabet, for example, is the one of the biggest lobbyists in the city. All this power gets results: tax loopholes, subsidies, regulatory exemptions, and other forms of government largesse that is unavailable to smaller firms. Hence, in 2018, Amazon paid no federal taxes, even as it held an auction to extort billions of dollars from states and cities eager to host its second headquarters. The company has also forced Seattle, its main headquarters, to scrap a plan to tax big corporations. That revenue would have been used to pay for homeless shelters for a growing population that can’t afford sky-high rents caused, in part, by Amazon. Big Tech’s political power also buys impunity. Facebook executives withheld evidence of malign Russian activity on their platform far longer than previously disclosed, but suffered no consequences. Perhaps more troubling, they employed a political opposition-research firm to discredit their critics. How long will it be before Facebook uses its own data and platform against its opponents and competitors? Google, too, has used its power to fend off criticism. It has quietly funded hundreds of university professors to write research papers justifying its market dominance, and it has threatened to cut funding to nonprofit think tanks that have criticized its economic and political power. The third problem concerns social power: the control over the flows of communications on which people rely to understand the world. The most obvious example is the news itself. By refusing to take responsibility for the accuracy of what appears on their platforms, the Big Tech firms are actively enabling demagogues, hatemongers, and con artists to exert unprecedented influence over society – perverting political discourse, encouraging bigotry, and even endangering children. The tech companies’ defense is that they are not publishers, but merely the proprietors of platforms and algorithms. But this claim is belied by their platforms’ powerful network effects. The more people participate, the more necessary the platform becomes for everyone else. If people want to know what’s happening in the world, they increasingly have little choice but to engage with YouTube, Facebook, or Twitter. Another aspect of Big Tech’s social power is its increasing capacity to pool and analyze data about all aspects of our lives, choices, and movements. This not only undermines our privacy; it challenges our very autonomy. Targeted advertising doesn’t merely respond to consumer needs and wants. It shapes our understanding of ourselves, our communities, and of the world. These three forms of power – economic, political, and social – are rooted in Big Tech’s increasing dominance over markets, information, and communications. And that dominance is a function of these companies’ size and scope. America responded to abuses of corporate power in the Gilded Age with antitrust laws that allowed the government to break up concentrated economic power. It is time to use antitrust again. Where breaking up Big Tech companies is impractical, those firms should at least be required to make their proprietary technology and data publicly available, and to share their platforms with smaller competitors. Such measures would impose few costs on the economy, given that these giants rely on scale rather than innovation. Moreover, the benefits of reducing Big Tech’s concentrated power would be significant. More competition would reduce the major platforms’ market leverage and political clout. It would also give people more choice about how to receive reliable information, and greater control over which aspects of their personal lives they share. In the second Gilded Age, as in the first, giant firms at the center of the US economy are distorting its market and its politics. Just as the problem is the same, so is the solution.

QUESTIONS:

1. In what ways have Google and Facebook become dominant in the technology sector?

2. How have the Big Tech created barriers to entry and consolidated their market power?

3. What has been the impact of the bargaining power of large platforms on new job-creating businesses?

4. Define the network effects and the positive network externalities. Explain why people all over the world would rely increasingly on YouTube, Facebook, or Twitter to reach the information?

5. What would be the new ways of dealing with the monopoly power attained by the Big Tech?

Following the outbreak of the Novel Coronavirus (COVID 19), CPC a pharmaceutical company is considering introducing a new vaccine unto the market to help fight the virus. This will require the injection of huge capital to the tune of GH¢40,000,000 for the purchase of the equipment for production. It will cost CPC an additional GH¢ 5,500,000 to set up the production facility and install that equipment for production. Mr. Smart, the CEO of CPC believes that the vaccine could be manufactured in a building owned by the firm and located in East Legon. This vacant building and the land can be sold for GH¢ 1,500,000 after taxes. CPC will finance the production of the vaccine (including initial working capital investment) by issuing 2000,000 new common stocks at GH¢ 20 per share from its existing shareholders. A total of GH¢ 15,000,000 is expected to be raised from the rights issue. It expects to finance the remaining from the issue of a 5-year bond with a before-tax yield to maturity (YTM) of 12%. Mr. Qwesi, the Finance Director has estimated the beta of the project to be 2.5 and the average return for stocks traded on the Ghana Stock Exchange to be 10% while the rate on Government of Ghana traded Treasury bills is 5%. The successful production of the vaccine will generate additional cash flows for CPC. The Production and Marketing department has presented the information in the table below:

Again the following information should be taken note of:

• Feasibility studies cost the company GH¢2,000,000
• Test marketing expenses amounts to GH¢1,000,000
• The research into the discovery of the vaccine costs GH¢5,000,000
• Variable cost will increase by 5% per annum
• Selling price will increase by 10% per annum
• Marketing expense will be 5% of sales revenue per year
• Overhead cost will be fixed at GH¢6000,000 per year
• The project will last for five (5) years (2021-2025)
• Charge depreciation using the straight-line method
• Salvage value for equipment is GH¢2,000,000
• CPC falls within the 25% tax bracket
• An initial working capital investment of GH¢10,000,000 will be made. Subsequently, net working capital at the end of each year will be equal to 10 percent of sales for that year. In the final year of the project, net working capital will decline to zero as the project is wound down. In other words, the investment in working capital is to be completely recovered by the end of the project’s life
• The introduction of this new vaccine is expected to lead to 10,000 units per annum drop in sales of vaccines for other types of corona virus by. The selling price per unit of existing products is GH¢100 while the variable cost is GH¢70. This has no tax implications for the new vaccine.  
• The project will be financed with debt and equity

Required:

1. Evaluate the project using the NPV and Profitability index and recommend whether CPC should go ahead with the production of the vaccine.                                              
2. Discuss three (3) qualitative factors that the Management of CPC might have to consider and how these factors are expected to influence the decision of Management with regards to the

production of the vaccine.                                                                                     

3. Under what circumstances will you prefer profitability index to NPV as project evaluation

techniques.                                                                                                             

Explain why sunk costs should not be included in a capital budgeting analysis, but opportunity costs and externalities should be included.

Following the outbreak of the Novel Coronavirus (COVID 19), CPC a pharmaceutical company is considering introducing a new vaccine unto the market to help fight the virus. This will require the injection of huge capital to the tune of GH¢40,000,000 for the purchase of the equipment for production. It will cost CPC an additional GH¢ 5,500,000 to set up the production facility and install that equipment for production. Mr. Smart, the CEO of CPC believes that the vaccine could be manufactured in a building owned by the firm and located in East Legon. This vacant building and the land can be sold for GH¢ 1,500,000 after taxes. CPC will finance the production of the vaccine (including initial working capital investment) by issuing 2000,000 new common stocks at GH¢ 20 per share from its existing shareholders. A total of GH¢ 15,000,000 is expected to be raised from the rights issue. It expects to finance the remaining from the issue of a 5-year bond with a before-tax yield to maturity (YTM) of 12%. Mr. Qwesi, the Finance Director has estimated the beta of the project to be 2.5 and the average return for stocks traded on the Ghana Stock Exchange to be 10% while the rate on Government of Ghana traded Treasury bills is 5%. The successful production of the vaccine will generate additional cash flows for CPC. The Production and Marketing department has presented the information in the table below:
Again the following information should be taken note of:
 Feasibility studies cost the company GH¢2,000,000
 Test marketing expenses amounts to GH¢1,000,000
 The research into the discovery of the vaccine costs GH¢5,000,000
 Variable cost will increase by 5% per annum
 Selling price will increase by 10% per annum
 Marketing expense will be 5% of sales revenue per year
 Overhead cost will be fixed at GH¢6000,000 per year
 The project will last for five (5) years (2021-2025)

2020

Variable cost per unit of the product
GH¢150
Selling price per unit
GH¢350

Quantity
400,000units perannum

Page 2
 Charge depreciation using the straight-line method
 Salvage value for equipment is GH¢2,000,000
 CPC falls within the 25% tax bracket
 An initial working capital investment of GH¢10,000,000 will be made. Subsequently,
net working capital at the end of each year will be equal to 10 percent of sales for that year. In the final year of the project, net working capital will decline to zero as the project is wound down. In other words, the investment in working capital is to be completely recovered by the end of the project’s life
 The introduction of this new vaccine is expected to lead to 10,000 units per annum drop in sales of vaccines for other types of corona virus by. The selling price per unit of existing products is GH¢100 while the variable cost is GH¢70. This has no tax implications for the new vaccine.
 The project will be financed with debt and equity
Re quire d:
a. Evaluate the project using the NPV and Profitability index and recommend whether CPC should go ahead with the production of the vaccine.
b. Discuss three (3) qualitative factors that the Management of CPC might have to consider and how these factors are expected to influence the decision of Management with regards to the production of the vaccine.
c. Under what circumstances will you prefer profitability index to NPV as project evaluation techniques.
d. Explain why sunk costs should not be included in a capital budgeting analysis, but
opportunity costs and externalities should

QUESTION 1 Following the outbreak of the Novel Coronavirus (COVID 19), CPC a pharmaceutical company is considering introducing a new vaccine unto the market to help fight the virus. This will require the injection of huge capital to the tune of GH¢40,000,000 for the purchase of the equipment for production. It will cost CPC an additional GH¢ 5,500,000 to set up the production facility and install that equipment for production. Mr. Smart, the CEO of CPC believes that the vaccine could be manufactured in a building owned by the firm and located in East Legon. This vacant building and the land can be sold for GH¢ 1,500,000 after taxes. CPC will finance the production of the vaccine (including initial working capital investment) by issuing 2000,000 new common stocks at GH¢ 20 per share from its existing shareholders. A total of GH¢ 15,000,000 is expected to be raised from the rights issue. It expects to finance the remaining from the issue of a 5-year bond with a before-tax yield to maturity (YTM) of 12%. Mr. Qwesi, the Finance Director has estimated the beta of the project to be 2.5 and the average return for stocks traded on the Ghana Stock Exchange to be 10% while the rate on Government of Ghana traded Treasury bills is 5%. The successful production of the vaccine will generate additional cash flows for CPC. The Production and Marketing department has presented the information in the table below:

2020 Variable cost per unit of the product GH¢150

Selling price per unit GH¢350

Quantity 400,000units per annum

Again the following information should be taken note of:

 Feasibility studies cost the company GH¢2,000,000

 Test marketing expenses amounts to GH¢1,000,000

 The research into the discovery of the vaccine costs GH¢5,000,000

 Variable cost will increase by 5% per annum

 Selling price will increase by 10% per annum

 Marketing expense will be 5% of sales revenue per year

 Overhead cost will be fixed at GH¢6000,000 per year

 The project will last for five (5) years (2021-2025)

 Charge depreciation using the straight-line method

 Salvage value for equipment is GH¢2,000,000

 CPC falls within the 25% tax bracket

 An initial working capital investment of GH¢10,000,000 will be made. Subsequently, net working capital at the end of each year will be equal to 10 percent of sales for that year. In the final year of the project, net working capital will decline to zero as the project is wound down. In other words, the investment in working capital is to be completely recovered by the end of the project’s life

 The introduction of this new vaccine is expected to lead to 10,000 units per annum drop in sales of vaccines for other types of corona virus by. The selling price per unit of existing products is GH¢100 while the variable cost is GH¢70. This has no tax implications for the new vaccine.

 The project will be financed with debt and equity Required: a. Evaluate the project using the NPV and Profitability index and recommend whether CPC should go ahead with the production of the vaccine. b. Discuss three (3) qualitative factors that the Management of CPC might have to consider and how these factors are expected to influence the decision of Management with regards to the production of the vaccine. c. Under what circumstances will you prefer profitability index to NPV as project evaluation techniques. d. Explain why sunk costs should not be included in a capital budgeting analysis, but opportunity costs and externalities should be included. (Total: 20 marks)

Slow Roll Drum Co. is evaluating the extension of credit to a new group of customers. Although these customers will provide $522,000 in additional credit sales, 14 percent are likely to be uncollectible. The company will also incur $18,000 in additional collection expenses. Production and marketing costs represent 71 percent of sales. The firm is in a 25 percent tax bracket. No other asset buildup will be required to service the new customers. The firm has a desired return of 10 percent. Assume the average collection period is 60 days.  

a. Compute the return on incremental investment. (Input your answer as a percent rounded to 2 decimal places. Use a 360-day year.)
Return on incremental investment _____%

b. Should credit be extended to the new group of the customer?

Division A manufactures electronic circuit boards. The boards can be sold either to Division B of the same company or to outside customers. Last year, the following activity occurred in Division A:

  
Sales to Division B were at the same price as sales to outside customers. The circuit boards purchased by Division B were used in an electronic instrument manufactured by that division (one board per instrument). Division B incurred $210 in additional variable cost per instrument and then sold the instruments for $600 each.