World oil prices have been rapidly swinging over the last few years, in part because of the declining value of the U.S. dollar, changes in supply and demand, and OPEC’s attempts to manage output in order to maintain higher prices. (OPEC stands for the Organization of Petroleum Exporting Countries)

As the president of an oil producing and exporting company in Alberta:

• Explain how you may use hedging to protect your company’s income.
• Share a recent publication with your fellow students and your instructor.

5.

Easton Company prepares annual adjusting entries only. During the third quarter of Fiscal Year 2018, Easton Company acquired the following trading securities:

On November 10th, Easton Company sold the Y Company stock for $31 per share. On December 15th, Z Company paid dividends of $0.12 per share. The following were the year-end market values:

What the total dollar values that Easton Company should record for the Unrealized Gain or (Loss) on Trading Securities for 2018? Enter a Loss as a negative number.

6.

Arundel Company uses aging to estimate uncollectibles.  At the end of the fiscal year, December 31, 2018, Accounts Receivable has a balance that consists of:

The current unadjusted Allowance for Uncollectible Accounts balance is a debit balance of $2,000 and the Bad Debt Expense accounts has an unadjusted balance of zero. After the adjusting entry is made, what will be the dollar balances in the Allowance for Doubtful Accounts? Round to nearest whole dollar.

long-term debt and stockholders’ equity by examining the financial statements of Procter & Gamble Company for the fiscal year ended June 30, 2015. The goal is to contribute to your financial literacy and enable you to engage in just-in-time learning. Should a situation present itself sometime in the future when you need to acquire additional depth of knowledge, you will have an initial familiarity that will enable you to seek out the additional knowledge you require. These are complex topics; to complicate matters further, the nature of some securities is such that it is hard to make the distinction between what is debt and what is equity.

You can access the financial statements for Procter & Gamble Company for the year ended June 30, 2015, in many ways, including by visiting the company website. To access the 10-K, go to the website for the Securities and Exchange Commission (sec.gov). Then select “Filings” and “Company Filings Search.” Enter "Procter & Gamble" in the search box that appears. You will arrive on a page detailing all the filings; type "10-K" in the “Filing Type” box at the top of the page, and the filings will be re-sorted so that the 10-K filings are at the head of the listing

Debt:

1. As of June 30, 2015, what is the dollar amount of the current portion of the long-term debt that is due within a year following the June 30, 2015, issue date of the financial statement?
2. What is a debenture?
3. Has the company issued any debentures? If so, what is the dollar amount of debentures owed on the issue date of the financial statement?
4. The disclosures indicate that some of the long-term debt is denominated in the euro rather than the U.S. dollar. Explain how the practice of issuing debt in a currency other than your domestic currency (assume the U.S. dollar is the domestic currency for Procter & Gamble) creates an exposure to gains and losses related to exchange fluctuations?

A company has started a phone service that uses overseas doctors to provide emergency medical consultations. The responding doctors are based in a country with low wages but with a highly skilled pool of physicians. Responding to each call takes on average 15 minutes. At any given moment in time, there are 4 doctors overseas on duty. Calls arrive every 5 minutes on average and standard deviation of the inter-arrival time is 5 minutes. If no doctor is available overseas, the call is rerouted to the U.S. where a local physician answers the question. A local physician is always available to take a call. In this case, the firm pays $50 to the local physician.​

Now assume that the demand has increased to 20 calls per hour for the overseas doctors. Responding to each call still takes on average 15 minutes. At any given moment in time, there are 4 doctors overseas on duty. The coefficient of variation of customers’ inter-arrival time is 1. If no doctor is available overseas, the call is rerouted to the U.S. where a local physician answers the question.

Q18. What is the number of calls directed to the doctors in the US every hour?

Q19. The company has set a new goal to direct no more than 2 calls per hour to the doctors in the US. How many doctors do they need overseas?

6. Which of the following is an example of systematic risk?
(a) The earnings of a company drop.
(b) The chief executive officer resigns.
(c) A legal suit against a company for environmental pollution.
(d) Changes in the level of interest rates.
(e) The development of a new product line.

7. Suppose a company had earnings per share of $2 over the past year. The industry average PE ratio is 10. Use this information to value this company’s stock price.
(a)$5 (b) $8 (c) $10 (d) $20 (e) $25

8. Which one of the following portfolios should have the most systematic risk?
(a) 50 percent invested in U.S. Treasury bills and 50 percent in a market
index mutual fund
(b) 20 percent invested in U.S. Treasury bills and 80 percent invested in a
stock with a beta of .80
(c) 10 percent invested in a stock with a beta of 1.0 and 90 percent invested
in a stock with a beta of 1.40
(d) 100 percent invested in a mutual fund which mimics the overall market
(e) 100 percent invested in U.S. Treasury bills

9. Which of the following is correct if markets have weak form efficiency?
I) If markets are efficient in the weak form, then it is impossible to make consistently superior profits by using trading rules based on past returns
II) If the markets are efficient in the weak form, then prices will adjust immediately to public information
III) If the markets are efficient in the weak form, then prices reflect all information
(a) I only (b) II only (c) I and II only (d) II and III only (e) I and III only

10. The market rate of return is 12 percent and the risk-free rate of return is 3 percent. Lexant stock has 3 percent less systematic risk than the market and has an actual return of 12 percent. This stock:
(a) is underpriced.
(b) is correctly priced.
(c) will plot below the security market line.
(d) will plot on the security market line.
(e) will plot to the right of the overall market on a security market line graph.

Software Provider (the “Company”) supports and sells computer software. The Company accepts cryptocurrencies (e.g., Bitcoin, Ether, Ripple) as payment for the sale of its computer software. The Company holds its cryptocurrencies partially for investment (e.g., expectation that they will appreciate in value) and partially to use in the future to purchase goods or services.

Cryptocurrency is a new type of value and payment method that is different from fiat currency (e.g., U.S. dollars and foreign currencies). Presently, cryptocurrencies have no government backing or recognition by a central authority as legal tender. Their value is only supported by supply and demand.

Cryptocurrencies do not have a physical form but exist as immutable distributed ledgers (electronic records) maintained on public blockchains. They are different than electronic instances of cash, such as an online bank account, in that they are not linked to a physical currency.

Bitcoin and other similar “coins” use cryptography (e.g., use of codes to secure communications) to control the security and creation of these coins, which led to the term “cryptocurrencies.”

Cryptocurrencies are usually obtained by purchasing or receiving them on a peer-to-peer basis. That is, they can be received directly from a counterparty in exchange for an asset or service or they can be purchased in exchange for a fiat currency, often from an exchange that specializes in cryptocurrencies.

For a cryptocurrency to function as a means of peer-to-peer exchange, a ledger needs to be maintained for tracking ownership of the cryptocurrency. For cryptocurrencies, this electronic ledger is maintained using blockchain. There are many copies of this ledger and many ledger keepers. Distributing the processing allows many users to each play a small part in the maintenance of the ledger system; this means that the security of the system does not rely on a few individuals.

The amount of coins for a particular cryptocurrency that are in circulation is tightly controlled. For example, for Bitcoin there is a limit on the number of coins that can exist. New Bitcoins are only created as payment to processors (called “miners”) for providing the service of validating and distributing an electronic ledger of these transactions to those involved in maintaining the blockchain.

Required:

1. How should the Company’s holdings of cryptocurrency be classified in the statement of financial position under U.S. GAAP?

2. How should the holdings of cryptocurrency be initially and subsequently measured under U.S. GAAP?

What are the paragraphs in ASC FASB where these answers are found?

Classification of Cryptocurrency Holdings (Adapted)

Software Provider (the “Company”) supports and sells computer software. The Company accepts cryptocurrencies (e.g., Bitcoin, Ether, Ripple) as payment for the sale of its computer software. The Company holds its cryptocurrencies partially for investment (e.g., expectation that they will appreciate in value) and partially to use in the future to purchase goods or services.

Cryptocurrency is a new type of value and payment method that is different from fiat currency (e.g., U.S. dollars and foreign currencies). Presently, cryptocurrencies have no government backing or recognition by a central authority as legal tender. Their value is only supported by supply and demand.

Cryptocurrencies do not have a physical form but exist as immutable distributed ledgers (electronic records) maintained on public blockchains. They are different than electronic instances of cash, such as an online bank account, in that they are not linked to a physical currency.

Bitcoin and other similar “coins” use cryptography (e.g., use of codes to secure communications) to control the security and creation of these coins, which led to the term “cryptocurrencies.”

Cryptocurrencies are usually obtained by purchasing or receiving them on a peer-to-peer basis. That is, they can be received directly from a counterparty in exchange for an asset or service or they can be purchased in exchange for a fiat currency, often from an exchange that specializes in cryptocurrencies.

For a cryptocurrency to function as a means of peer-to-peer exchange, a ledger needs to be maintained for tracking ownership of the cryptocurrency. For cryptocurrencies, this electronic ledger is maintained using blockchain. There are many copies of this ledger and many ledger keepers. Distributing the processing allows many users to each play a small part in the maintenance of the ledger system; this means that the security of the system does not rely on a few individuals.

The amount of coins for a particular cryptocurrency that are in circulation is tightly controlled. For example, for Bitcoin there is a limit on the number of coins that can exist. New Bitcoins are only created as payment to processors (called “miners”) for providing the service of validating and distributing an electronic ledger of these transactions to those involved in maintaining the blockchain.

1. How should the Company’s holdings of cryptocurrency be classified in the statement of financial position under U.S. GAAP?

2. How should the holdings of cryptocurrency be initially and subsequently measured under U.S. GAAP?

Al’s Car Wash purchased a piece of equipment on October 1, 2018, for $27,000. The equipment has a useful life of four years and a residual value of $2,000. Compute the depreciation for 2020, accumulated depreciation at the end of 2020, and book value at the end of 2020 using the straight-line method.

Given the following four subsequent events (unrelated) for the December 31, 2019 year-end:

1. On January 15, 2020, a major customer declared bankruptcy.
2. On January 25, 2020 a fire destroyed a major suppliers building that warehouses inventory .
3. On January 4^, 2020, an investment analyst downgraded the stock of the auditee.

            The audit report date is February 15, 2020.

Required:

      State clearly the type of subsequent event (Type I or Type II), if any, and the required impact on the financial statements.

Singularity Products began business on January 1, 2020. During 2020, Singularity recorded the following:

Purchases of inventory, at cost: $400,000
Purchases of inventory, at retail value: $800,000
Net Markups: $200,000
Net Markdowns: $400,000
Sales: $500,000

a. Calculate the balance in ending inventory on December 31, 2020 if Singularity uses the Retail
Inventory – Conventional Method to value inventory. (7 points)

b. What amount of gross profit will Singularity report on its 2020 Income Statement? (7 points)