Blue Computing Company purchased some property, plant and equipment (PPE) on January 1, Year 1. The PPE cost $5,000,000 and has an estimated salvage value of $100,000. The useful life is 5 years. The units produced by the PPE will be: Year 1, 50,000 units; Year 2, 100,000 units; Year 3, 100,000 units; Year 4, 75,000 units; Year 5, 25,000 units. Please answer the following questions about this PPE.

1. The depreciation expense, for Year 3, under the straight-line method, is:

1. $980,000
2. $1,000,000
3. $1,225,000
4. $1,400,000

2. The depreciation expense, for Year 2, under the double-declining balance method, is:

1. $1,325,000
2. $1,216,000
3. $1,200,000
4. $1,120,000

3. The double-declining balance method of depreciation is:

1. Not advantageous for tax purposes
2. Called an accelerated method
3. Equivalent to the units of production method
4. Likely to give more depreciation expense over the life of the asset than will the straight-line method

4. The net book value, at the end of Year 4, under the units of production method, is:

1. $575,000
2. $100,000
3. $350,000
4. $450,000

5. The depreciation expense, for Year 5, under the units of production method, is:

1. $350,000
2. $357,143
3. $275,000
4. $415,133

On January 1, 2018, Corp X issued 3%, 3 ½ year Bonds to the public, and also signed a 3 and 1/2 -year lease with PH Corp. Payments of $10,000 on the lease are made at the end of the year for years 1,2 and 3 and ($5,000 in the last period; year 4.) There are no provisions for a bargain purchase or an extension of the lease term. The asset has a fair value of $35,000 and has a useful economic life of 4 years.

Corp. X is rated as a BBB rated company by Moody’s Investors-a rating company.

Additional Facts

1-BBB Market Interest rates:

Date of issue                         on 12/31/2019

Year 1     2%                               1.5%

Year 2    2.5%                            2.0%

Year 3    2.75%                          2.5%

Year 4    3,5%                             3.0%

Year 5     4.0%.                           4.0%

BTW There is no correct answer

Question 7

1-Calculate the market interest rate at date of issue?

2-Calculate the price of the bond at the date of issue?

3-What is the interest expense in Year 1.

4-What is the Balance Sheet value of Bonds payable on 12/31/19? Please provide 2 answers.

A Belgium subsidiary's beginning and ending trial balances appear below:

Exchange rates ($/€) are:

The subsidiary was acquired at the beginning of the year. Its sales, inventory purchases, and out-of-pocket selling and administrative expenses occurred evenly during the year. Equipment was purchased for €10,000 when the exchange rate was $1.23. Depreciation for the year includes €200 related to the equipment purchased during the year. The ending inventory was purchased at the end of the year, and the beginning inventory was purchased at the end of the previous year.

If the subsidiary's functional currency is the euro, what is the translation gain or loss for the year?

Select one:

A. $2,020 loss

B. $1,030 gain

C. $1,130 gain

D. $ 810 loss

O’Brien Company manufactures and sells one product. The following information pertains to each of the company’s first three years of operations:

During its first year of operations, O’Brien produced 99,000 units and sold 76,000 units. During its second year of operations, it produced 81,000 units and sold 99,000 units. In its third year, O’Brien produced 84,000 units and sold 79,000 units. The selling price of the company’s product is $71 per unit.

Required:

1. Assume the company uses variable costing and a FIFO inventory flow assumption (FIFO means first-in first-out. In other words, it assumes that the oldest units in inventory are sold first):

a. Compute the unit product cost for Year 1, Year 2, and Year 3.

b. Prepare an income statement for Year 1, Year 2, and Year 3.

O’Brien Company manufactures and sells one product. The following information pertains to each of the company’s first three years of operations:

During its first year of operations, O’Brien produced 91,000 units and sold 71,000 units. During its second year of operations, it produced 76,000 units and sold 91,000 units. In its third year, O’Brien produced 82,000 units and sold 77,000 units. The selling price of the company’s product is $77 per unit.

2. Assume the company uses variable costing and a LIFO inventory flow assumption (LIFO means last-in first-out. In other words, it assumes that the newest units in inventory are sold first):

a. Compute the unit product cost for Year 1, Year 2, and Year 3.

b. Prepare an income statement for Year 1, Year 2, and Year 3.

a. Year 0 cash flow____

Year 1 cash flow ____

Year 2 cash flow ____

Year 3 cash flow ____

b. NPV ______

Puma Technologies' shares are currently traded in the NYSE. Analysts following the company forecast the dividends next year as follows: + Scenario 1: with probability 0.4, dividends in year 1 is expected to be $0.5 per share. + Scenario 2: with probability 0.6, dividends in year 1 is expected to be $0.1 per share. With this forecast, the dividends are expected to grow at a rate of 10% for year 2 and stabilize at a constant growth rate of 4% thereafter (i.e., year 3 moving forward). With your understanding of the company, you require a discount rate of 15% for all of the future cash flows. NOTE: Round up the answers to two decimal points. Provide all of your derivation steps and formulas in each part.

a. (1 pts) Taking into account the probability in each scenario, calculate the expected dividends in year 1.

b. (2 pts) Calculate the expected dividends in year 2 and year 3.

c. (2 pts) Calculate the expected share price in year 2.

d. (2 pts) How much would you be willing to pay for a share of Puma Technologies today in year 0?

Profitability ratios

Real World Scenario

Ralph Lauren Corporation sells apparel through company-owned retail stores. Recent financial information for Ralph Lauren follows (in thousands):

Exercises Assume that the apparel industry average return on total assets is 8.0% and the average return on stockholders' equity is 10.0% for the year ended April 2, Year 3.

a. Determine the return on total assets for Ralph Lauren for fiscal Years 2 and 3. Round percentages to one decimal place.

b. Determine the return on stockholders' equity for Ralph Lauren for fiscal Years 2 and 3. Round percentages to one decimal place.

c. Evaluate the two-year trend for the profitability ratios determined in (a) and (b).

d. Evaluate Ralph Lauren's profit performance relative to the industry.

O’Brien Company manufactures and sells one product. The following information pertains to each of the company’s first three years of operations: Variable costs per unit: Manufacturing: Direct materials $ 30 Direct labor $ 16 Variable manufacturing overhead $ 4 Variable selling and administrative $ 2 Fixed costs per year: Fixed manufacturing overhead $ 550,000 Fixed selling and administrative expenses $ 140,000 During its first year of operations, O’Brien produced 97,000 units and sold 70,000 units. During its second year of operations, it produced 80,000 units and sold 102,000 units. In its third year, O’Brien produced 86,000 units and sold 81,000 units. The selling price of the company’s product is $79 per unit.

3. Assume the company uses absorption costing and a FIFO inventory flow assumption (FIFO means first-in first-out. In other words, it assumes that the oldest units in inventory are sold first):

a. Compute the unit product cost for Year 1, Year 2, and Year 3.

b. Prepare an income statement for Year 1, Year 2, and Year 3.

What is the net present value of the stadium project, which is a 3-year project where Fairfax Pizza would sell pizza in the baseball stadium? The project would involve an initial investment in equipment of 160,000 dollars today. To finance the project, Fairfax Pizza would borrow 160,000 dollars. The firm would receive 160,000 dollars from the bank today and would pay the bank 206,400 dollars in 3 years (consisting of an interest payment of 46,400 dollars and a principal payment of 160,000 dollars). Cash flows from capital spending would be 0 dollars in year 1, 0 dollars in year 2, and 10,000 dollars in year 3. Operating cash flows are expected to be 92,800 dollars in year 1, 91,200 dollars in year 2, and -51,200 dollars in year 3. The cash flow effects from the change in net working capital are expected to be -10,000 dollars at time 0; -9,000 dollars in year 1; 10,000 dollars in year 2; and 9,000 dollars in year 3. The tax rate is 10 percent. The cost of capital is 17.46 percent and the interest rate on the loan would be 8.86 percent.