A construction company needs enough money to purchase a new tractor-trailer in 6 years at a cost of $450,000.

If the company sets aside $175,000 in year 2, $125,000 in year 3, and $75,000 in year 4, how much will the company have to set aside in year 5 to have the money needed in year 6?

Assume investments earn 8% per year compounded semi-annually.

What is the value of the individual cash flow at year = 1?

What semi-annual interest rate do you use to solve for the unknown cash flow in year 5?

What is the numerical value for the amount of funding the company have to set aside in year 5 to have the money needed in year 6?

Joseph’s Engineering Ltd need to acquire new equipment and it can either take a loan or have a lease option. The loan funds of $100 000 at 8.2% p.a. after tax, compounded semi-annually for 2 years. The company has three directors in the business and they pay individual income tax at an average rate of 35%. Inland Revenue Department (Tax office) allows depreciation at the rate of 50% p.a. on this equipment. Advise the company which is the better deal, the loan or a 2 year lease with four equal payments of $26,674 starting with the first payment at the signing of the contract. Assume that corporate tax rate is 28% for simplicity’s sake the tax benefits from each lease payment and the tax benefits forgone for depreciation are received without time lag in each half-year period. Required: a. Which method of financing would you recommend? Why? (Hint: Show analysis of cash flow) b. List potential benefits associated with leasing?

Simulation Individual Tax AICPA Released: U.S. Taxation

Based on the data provided, enter the approriate values in the form 1040 from Line 7 through Line 22..

Information

Trevor and Jordan Riley were married during the year 2017. Following is additional information pertaining to the Riley family for the year 2017:

1. Prior to her marriage to Trevor, Jordan received $5,000 in alimony and $12,600 in child support.
2. The Rileys earned $10,000 in ordinary interest and $8,500 in municipal bond interest.
3. Trevor’s wages were $85,000, and Jordan’s were $62,000.

4. The Rileys received a $2,000 security deposit on the rental property they actively manage. They are required to return the amount to the tenant. In addition, the Rileys received $20,000 in gross receipts from the rental property. The expenses for the residential rental property were:

Bank mortgage interest                                    $5,000
Real estate taxes                                     2,600
Insurance                                               1,700
Depreciation                                           3,200

5. In January, as part of a sweepstakes contest, Jordan won a week’s stay valued at $3,000 at a luxurious hotel in Hawaii. Trevor and Jordan spent their honeymoon at that hotel.
6. The Rileys had no capital loss carryovers from prior years. During the year, the Rileys had the following stock transactions:

       Date Acquired Date Sold    Sales Price    Cost Basis
Buster Co.   2/1/2016         3/17/2017   $15,000          $5,000
Copper lnc. 2/18/2017       4/1/2017        8,000            4,000

Requirement: complete the Rileys’ 2017 Form 1040, Schedule A, Schedule D and Schedule E.

Please complete the line 7 through the line 22 on Form 1040.

Please complete the line 1 through line 16 on Schedule D.

Please complete the line 3 through line 26 on Schedule E.

WG is one of the world’s leading makers of mobile phones, with market share of approximately 20%.Unlike any of its major competitors, it is based in Narnia, a high-cost, developed country. Narnia has very limited natural resources, but has developed significant expertise over the decades in high-end precision engineering and efficient use of materials. WG is quoted on the Narnian stock exchange, where it is the largest company by market capitalisation. It has a wide shareholder base including most Narnian institutional investors and private individuals. Its largest three shareholders are institutions who each own around 2% of the company.WG was founded in the 1960s to make telephone equipment and in the 1990s managers made a strategic decision to focus on the then-tiny mobile phone market. This was partly attributable to the Narnian government being among the first to fully deregulate their telecoms market, which lead to lower call costs. Narnia and its neighbouring countries are also fairly rural, and its populations were enthusiastic early adopters of mobile phones. WG was given a particular boost in 1995 when the transmission standard they had pioneered was adopted as the basis for calls by the government in Narnia and many other governments around the world. Serving a rapidly growing market, WG quickly gained economies of scale that allowed cheaper production than competitors emerging later. WG then exploited these to open up export markets all over the world,enhancing their advantage further. Unlike many of its competitors, who subcontract their manufacturing to others, WG assembles most of its own handsets. Its factories are mostly in Narnia, where it benefits from the highly educated population and the presence of high-quality local suppliers to carry out increasingly high-tech manufacturing processes. Narnia has very good communication links, which helps suppliers to deliver rapidly. Technology is advancing all the time and WG regularly launches new, more sophisticated devices, most recently a suite of smartphones. However, the fastest-growing demand is for cheaper, basic models which just carry out voice calls and text messaging. This demand is driven by users in developing countries, who are concerned to keep costs down, but also want the status of using a well-known brand such as WG. WG has invested significant resources in building up a local sales presence in these markets, which allows it to spot trends and produce phones tailored to local tastes and languages. Competition in the industry is intense, and has become more so due to a recent global economic downturn. The Narnian government has also announced new anti-pollution measures that will result in large-scale manufacturers having to pay more than previously to dispose of their waste products. Shortly afterwards, WG announced that they will increase the proportion of handsets manufactured in lower-cost countries from 15% to 40% over the next three years. Component manufacturers announced plans to follow them to the new locations. This will involve cutting over 1,000 jobs in Narnia. A spokesman for the Narnian government called the decision “disappointing”. A trade union official said, “WG has increasingly been putting pressure on its suppliers to lower costs and respond more quickly to market fluctuations. This has made it unprofitable for them to operate in Narnia and lead to decisions like this”. Required:

(a) Analyse WG’s environment using two appropriate models

(b) Discuss the main stakeholders in WG and how management could try to retain their support as it seeks to reduce costs.

Tiyumba Co is a new client of Anwaar and Co, an audit firm. Tiyumba Co runs a spa, trading as Tiyumba.
The spa is open to non-members and members. Members pay an annual membership fee that entitles them
to 50% off spa rates for individual treatments and sessions. The spa employs lifeguards, masseuses, beauty
therapists and nursery nurses for its crèche facilities. In addition, there is also administrative staff,
including a finance controller, who reports to the managing director, Ibrahim Osman (who is also the
major shareholder).
The spa has been in business five years, but this is the first time it has required an audit. Its major local
competitor is Doobia, a large members-only spa, which started business two years ago. Anwaar and Co
has just been invited to tender for the audit of the company which owns Doobia.
The finance controller at Tiyumba is Mma Fatima. She was employed 18 months ago, since then she has:
• Instituted control procedures outlined in a controls manual;
• Formalised a budgeting system so that budgets are now prepared and approved annually; and
• Identified the need for an audit to Ibrahim Osman.
Mma Fatima introduced Anwaar and Co to Ibrahim through her husband, Anthony Davidson, who is a
manager at Anwaar and Co. The audit engagement partner assigned to Tiyumba is Carol Lamb. Since
agreeing audit terms with Anwaar and Co, Ibrahim has:
• Invited Carol to advertise to employees of Anwaar and Co a staff membership rate, which is 50%
of standard membership rates and then entitles the member to 75% off spa rates
• Asked Carol if she will sit on the board of directors at Tiyumba Co as a non-executive director
• Asked Carol if the firm will confirm the figures on an insurance claim to be submitted in respect of
a fire in the treatment centre just prior to the year end
Required:
(a) (i) Explain the ethical threats which may affect the independence of Anwaar and Co’s audit of
Tiyumba Co; and
(ii) For each threat explain how it might be avoided.
(b) Explain five procedures you would carry out to obtain an understanding of Tiyumba Co in order to
conduct the first year audit.
(c) Explain the benefits of a company having an audit committee.

1. According to official statistics in the United States, a family is considered to live in poverty if its money income:

A. is below three times an average family's minimum food budget.

B. is below the income earned by 90 percent of all Americans.

C. is below the income earned by 80 percent of all Americans.

D. and all government transfers are below three times an average family's minimum food budget.

2. The minimum food budget used to determine the poverty line was determined in the:

A. 1960s but has been recalculated every decade to account for rising standards of living.

B. 1960s and is not recalculated to account for rising standards of living.

C. 1930s but has been recalculated every decade to account for rising standards of living.

D. 1930s and is not recalculated to account for rising standards of living.

3. Today, the Gini coefficient of income inequality for the United States is about .5. In 1975, it had been about .4. What do these numbers tell us?

A. Wealth is distributed less equally than income.

B. The number of rich people has fallen.

C. Income has become more unequally distributed.

D. The official definition of poverty has changed.

4. John Rawls's views on income distribution and fairness can best be described by the statement:

A. The lesser individuals' duty should be to work for the well-being of the brightest individuals.

B. A high level of income inequality is necessary to sustain the arts, beauty, education, and civilization.

C. Society's goal should be to maximize the welfare of the least well-off, but some inequality is necessary to meet this goal.

D. Property rights should be equally distributed, and the market should determine the distribution of income.

A company has an EPS of US$12 per share. It pays out its entire earnings as dividend. It has a growth rate of zero and a required return on equity of 8 percent per annum. Assuming all cashflows are perpetuities, what will be the price of the company’s stock?

Select one:

a. USD83.43

b. USD155.00

c. USD85.00

d. USD150.00