The intangible assets section of Salmiento Corporation’s balance sheet at Decem-
ber 31, 2010, is presented here.
Patents ($60,000 cost less $6,000 amortization) $54,000
Copyrights ($36,000 cost less $25,200 amortization) 10,800
Total $64,800
The patent was acquired in January 2010 and has a useful life of 10 years. The copyright
was acquired in January 2004 and also has a useful life of 10 years. The following cash
transactions may have affected intangible assets during 2011.
Jan. 2 Paid $45,000 legal costs to successfully defend the patent against in-
fringement by another company.
Jan.–June Developed a new product, incurring $210,000 in research and development
costs. A patent was granted for the product on July 1, and its useful life is
equal to its legal life. Legal and other costs for the patent were $20,000.
Sept. 1 Paid $40,000 to a quarterback to appear in commercials advertising
the company’s products. The commercials will air in September and
October.
Oct. 1 Acquired a copyright for $200,000. The copyright has a useful life and
legal life of 50 years.
Instructions
(a) Prepare journal entries to record the transactions.
(b) Prepare journal entries to record the 2011 amortization expense for intangible assets.
(c) Prepare the intangible assets section of the balance sheet at December 31, 2011.
(d) Prepare the note to the financial statements on Salmiento Corporation’s intangible
assets as of December 31, 2011.

​Discussion 1 (finance 101 )

Apple's Jobs Takes Leave as Weight Loss Said to​ Continue; Cook Takes Over

Lead​ Story-Dateline: Satariano,​ Adam, Peter​ Burrows, and Joseph​ Galante,

​

"Apple's Jobs Takes Leave as Weight Loss Said to​ Continue; Cook Takes​ Over," Bloomberg.com,

Summary: Key Points in the Article

Apple Computer CEO Steve Jobs announced he was taking a leave of absence for health reasons. Jobs has been fighting cancer and also recently underwent a liver transplant. Even though the computer giant is in good hands with Chief Operating Officer Tom Cook taking over the stock price fell by​ US$6.40, or nearly two​ percent, on the news.

Jobs is widely known as a visionary and a micromanager. Under his leadership Apple has transformed the computing industry. While​ Jobs' health outlook is unknown many investors are betting on his recovery and return. Those who bought Apple stock when Jobs stepped down in 2004 for health reasons made a nice profit when he returned to the helm.  

Question                                                                                                                               2 Marks

“When a financial manager makes good or bad financial decisions the impact of these decisions will be reflected in the​ company's Stock price”.

Do you agree with the decision taken in the above case? What decisions you will take to improve the stock price of Apple Computers in this situation?

With double-digit annual percentage increases in the cost of health insurance, more and more workers are likely to lack health insurance coverage (USA Today, January 23, 2004). The following sample data provide a comparison of workers with and without health insurance coverage for small, medium, and large companies. For the purposes of this study, small companies are companies that have fewer than 100 employees. Medium companies have 100 to 999 employees, and large companies have 1000 or more employees. Sample data are reported for 50 employees of small companies, 75 employees of medium companies, and 100 employees of large companies. Health Insurance Size of Company Yes No Total Small 31 19 50 Medium 68 7 75 Large 90 10 100 Conduct a test of independence to determine whether employee health insurance coverage is independent of the size of the company. Use = .05. Use Table 12.4. Compute the value of the 2 test statistic (to 2 decimals). The p value is What is your conclusion? The USA Today article indicated employees of small companies are more likely to lack health insurance coverage. Calculate the percentages of employees without health insurance based on company size (to the nearest whole number). Small % Medium % Large % Based on the percentages calculated above, what can you conclude?

With double-digit annual percentage increases in the cost of health insurance, more and more workers are likely to lack health insurance coverage (USA Today, January 23, 2004). The following sample data provide a comparison of workers with and without health insurance coverage for small, medium, and large companies. For the purposes of this study, small companies are companies that have fewer than 100 employees. Medium companies have 100 to 999 employees, and large companies have 1000 or more employees. Sample data are reported for 50 employees of small companies, 75 employees of medium companies, and 100 employees of large companies.

Conduct a test of independence to determine whether employee health insurance coverage is independent of the size of the company. Use a = .05.

Compute the value of the x² test statistic (to 2 decimals).

Find the p-value

What is your conclusion?

The USA Today article indicated employees of small companies are more likely to lack health insurance coverage. Calculate the percentages of employees without health insurance based on company size (to the nearest whole number).
Small:

Medium:

Large:

Based on the percentages calculated above, what can you conclude?

With double-digit annual percentage increases in the cost of health insurance, more and more workers are likely to lack health insurance coverage (USA Today, January 23, 2004). The following sample data provide a comparison of workers with and without health insurance coverage for small, medium, and large companies. For the purposes of this study, small companies are companies that have fewer than 100 employees. Medium companies have 100 to 999 employees, and large companies have 1000 or more employees. Sample data are reported for 50 employees of small companies, 75 employees of medium companies, and 100 employees of large companies

Health Insurance

Size of Company

Yes

No

Total

Small

38

12

50

Medium

61

14

75

Large

90

10

100

Conduct a test of independence to determine whether employee health insurance coverage is independent of the size of the company. Use

= .05. Use Table 12.4.

Compute the value of the

2 test statistic (to 2 decimals).

The p value is

What is your conclusion?

The USA Today article indicated employees of small companies are more likely to lack health insurance coverage. Calculate the percentages of employees without health insurance based on company size (to the nearest whole number).

Small

%

Medium

%

Large

%

Based on the percentages calculated above, what can you conclude?

Sachs Brands' defined benefit pension plan specifies annual retirement benefits equal to: 1.3% × service years × final year's salary, payable at the end of each year. Angela Davenport was hired by Sachs at the beginning of 2004 and is expected to retire at the end of 2038 after 35 years' service. Her retirement is expected to span 18 years. Davenport's salary is $91,000 at the end of 2018 and the company's actuary projects her salary to be $285,000 at retirement. The actuary's discount rate is 9%. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) At the beginning of 2019, the pension formula was amended to: 1.40% × Service years × Final year's salary The amendment was made retroactive to apply the increased benefits to prior service years. Required: 1. What is the company's prior service cost at the beginning of 2019 with respect to Davenport after the amendment described above? 2. Since the amendment occurred at the beginning of 2019, amortization of the prior service cost begins in 2019. What is the prior service cost amortization that would be included in pension expense? 3. What is the service cost for 2019 with respect to Davenport? 4. What is the interest cost for 2019 with respect to Davenport? 5. Calculate pension expense for 2019 with respect to Davenport, assuming plan assets attributable to her of $110,000 and a rate of return (actual and expected) of 10%.

China's Galanz built a new complex at the expected cost of 2 billion yuan in order to produce 12 million air-conditioning units annually. The site was completed in 2004.
1 Make the following assumptions:

•The actual investment cost is either 1.9, 2.0, or 2.1 billion yuan, with respective probabilities of 0.25,0.50, and 0.25.
•The plant operates for 15 years, with the salvage value being either 50 million, 0, or-100 million(remediation costs) yuan at that time, with probabilities of 0.20,0.50, and 0.30, respectively.
•Finally, the net cash flow resulting from operations and sales is 60 yuan per unit. The number of units sold in each year is either 9 (0.1), 10 (0.2), 11 (0.3), or 12 (0.4) million. The figures in
parentheses represent the probabilities of the given level of production.

Assume that these are the only relevant cash flows and the interest rate is 18% per year.

a) Find an expression for the present worth (PW).

b) Find the expected value of the PW(if possible).

c) Find the standard deviation of the PW(if possible).

d)Find Pr(PW >0) (if possible).

e)Perform 200 simulations, and find the sample mean, standard deviation, as well as the probability that the investment will have a positive PW (point & interval estimates). Finally, summarize your process (which will naturally include all the appropriate steps) and results

Use the information below for ABC Co. to answer the following questions.

Balance Sheet                                      December 31

2005                   2004    

Assets

Cash                                                                                                        $  20,000            $  10,000

Accounts receivable                                                                                  160,000              110,000

Inventories 80,000                50,000

Prepaid Rent                                                                                               15,000 10,000

Investments                                                                                              100,000                75,000

Plant assets                                                                                               210,000              250,000

Accumulated depreciation (65,000)             (60,000)

         Total $520,000            $445,000

Liabilities and Stockholders' Equity

Accounts payable                                                                                    $  50,000            $  40,000

Interest payable 20,000                  5,000

Income tax payable                                                                                       5,000                10,000

Note payable                                                                                             130,000              140,000

Common stock                                                                                         155,000              100,000

Retained earnings 160,000              150,000

         Total $520,000            $445,000

Income Statement

For the Year Ended December 31, 2005

Sales                                                                                                                                   $800,000

Cost of goods sold                                                                                                                480,000

Gross Profit                                                                                                                            320,000                        

Operating expenses (including Depreciation Expense) 120,000

Interest expense 20,000

Income tax expense 25,000

         Total 165,000

Income before Gains and Losses                                                                                           155,000

Gain on sale of plant assets                                                                                                      5,000   

Net income $  160,000

Additional information:

Accounts payable pertain to the purchase of inventory.

Plant assets were sold for $40,000. The cost of the plant assets was $40,000.

All dividends are cash.

For the year 2005:

1. Cash received/collected from customers is:

2. Purchases for the year is:

3. Cash paid to suppliers is:

4. Depreciation expense is:

5. Cash paid for operating expenses is:

6, Cash paid for interest is:

PBO Calculations, Service Costs & Gains/Losses on PBO (Adapted from Chapter 17, P2-P5)
Sachs Brands defined benefit pension plan specifies annual retirement benefits equal to:
1.5% * Service Years * Final Year’s Salary
Payable at the end of each year. Trom Specht was hired by Sachs at the beginning of 2004 and
is expected to retire at the end of 2038, after 35 years’ of service. Her retirement is expected to
span 18 years. Specht’s salary is $120,000 at the end of 2020 and the company’s actuary
projects her salary to be $210,000 at retirement. The actuary’s discount rate is 8%.
Instructions:
5. What is the 2020 PBO for with respect to Specht?
At the beginning of 2021, the pension formula was amended to:
1.75% * Service Years * Final Year’s Salary
6. What is the company’s prior service cost at the beginning of 2021, with respect to
Specht?
7. How much of the prior service cost should be amortized during 2021 (remember that
the change was at the beginning of 2021)?
8. What is the service cost for 2021 with respect to Specht?
9. What is the interest cost for 2021 with respect to Specht?
10. What is the 2021 PBO for with respect to Specht?
At the end of 2021 (beginning of 2022), changing economic conditions caused the actuary to
reassess the applicable discount rate. It was decided that 7% is the appropriate rate.
11. What is the effect of this change in the discount rate?

Question 1: A bank A offers its depositors an interest rate of 16.6% compounded semi annually. Bank B also gives its depositors an interest rate of 16% compounded annually. Determine the effective interest rate for each bank and give your recommendation.

Question 2: Ama is considering these three investment projects with the following details: Investment A requires a cash of $70 million at 12.6% compounded semiannually for 5 years. Investment B requires a cash of $65 million at 10% compounded quarterly for 5 years. Investment C requires a cash of $ 45 million at 9.6% compounded monthly for 5 years. Determine the amount of each investment and the interest earned. Recommend one investment plan for Ama and give reason(s) for your choise.

Question 3: You have opened a savings account with bank WAT at the beginning of the year 2001 that pays 15% interest. You deposited $ 5million into the account the very day it was opened. You traveled to UK and came back in November, 2004. There was no withdrawal from your account. You were informed that, with effect from 1^st January 2005, your savings will earn an interest of 12% compounded quarterly. You deposited additional $7million at the beginning of 2005. You requested for your account statement at the end of 2008 financial year. What was your total amount, if there were no bank charges and withdrawals.