In January 2020, the management of Oriole Company concludes that it has sufficient cash to permit some short-term investments in debt and stock securities. During the year, the following transactions occurred.

At December 31, the fair value of the Muninger common stock was $56 per share. The fair value of the Tatman common stock was $24 per share.

a.

Journalize the transactions and post to the accounts Debt Investments and Stock Investments. (Use the T-account form.) (Record journal entries in the order presented in the problem. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No entry" for the account titles and enter 0 for the amounts.)
b.

Prepare the adjusting entry at December 31, 2020, to report the investment securities at fair value. All securities are considered to be trading securities. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No entry" for the account titles and enter 0 for the amounts.)
c.

Show the balance sheet presentation of investment securities at December 31 2020

d.

give the statement classification of each income statement account.

Morning Star Ltd was registered on 1 July 2020, as a company with a constitution limiting the shares that could be offered to 5 000 000 Ordinary shares (including all classes) and 2 000 000 preference shares. The company issued a prospectus dated 1 July 2020 inviting the public to apply for 3 000 000 Ordinary A class shares at $3.00 per share. The terms of the shares on issue are $1.50 on application, $1.00 on allotment and $0.50 to be called within six months of allotment before 31 December 2020.

If the issue is oversubscribed the directors will make a pro-rata issue of shares and the excess application money will be applied to allotment and calls before any refunds will be given.

On 15 July, the directors also decided to issue 500 000 non-voting Ordinary B shares as fully paid to the promoters for a payment of $2.00 per share.

On 30 July, applications for the Ordinary A class shares closed. Applications for 4 500 000 shares in total had been received with applicants for 3 000 000 shares paying the full price and 1 500 000 shares paying only the application fee.

On 1 August, the Ordinary A class shares were allotted on a pro-rata basis with all allotment money owed paid by the 30 August.

The company paid share issue costs of $10,000 for the issuing of Ordinary A shares on 1 September. The share issue costs related to legal expenses associated with the share issue and fees associated with the drafting and advertising of the prospectus and share issue.

The call on the Ordinary A shares was made on 15 Septmber and due by 30 September. All call money was received except for the call on 100 000 shares. The directors met and forfeited the shares on 15 October. On 30 October, the forfeited shares were reissued at $2.40 fully paid to $3.00. Costs associated with reissuing the forfeited shares totalled $4,000. The remaining money was refunded to the defaulting shareholders on 15 November.

On 1 January 2021, Morning Star Ltd issued via a private placement semi-annual coupon debentures (which pay interest every 6 months) with a nominal value of $700,000. The debenture term is three years and the coupon rate is 8% per year. The market requires a rate of return of 10% per year. The money came in and the debentures were allotted on the same date. The first interest payment will occur on 30 June 2021.

On the same day (1 January), Monring Star issued 50,000 options for class A shares with an exercise price of $2.5 each. It costs $0.50 per option. These options expires on 30 June 2021.

The company issued via a private placement 400,000 redeemable preference shares of $2.00 each on 30 June 2021. The shares offer a fixed dividend of 7 per cent per annum. The shares are later redeemed to non-voting Ordinary Class B shares at the choice of the shareholders on 30 June 2022.

By 30 June 2021, 40,000 options were exercised. The remaining options are lapsed.

Prepare an extract of the statement of change in equity to show the composition and movement of the ordinary shares account of Morning Star Ltd as at 30 June 2021 and 30 June 2022. Please provide the opening balance, change in share capital and closing balance of each classes of shares.

The Orange Company purchased equipment on June 1, 2020. Assuming the cost of the equipment is $70,000, the residual value is $6,000, a useful life of 4 years and the use of the diminishing balance method using 2 times the straight line rate. The company's year end is December 31. Round all answers to the nearest dollar.

1) What is depreciation expense for the year ended December 31, 2020? $ Answer

2) What is the depreciation rate (%)? Answer %

3) What is accumulated depreciation for the year ended December 31, 2022? $ Answer

4) What is the carrying value of the asset for the year ended December 31, 2024? Answer

5) What is depreciation expense for the year ended December 31, 2024? $ Answer You were asked to prepare the journal entry to record the sale of the above equipment on December 31, 2022. Is it a gain or loss if the equipment was sold for $10,000? Answer How much is the gain or loss? $ Answer

ETHICS 445

Scenario

It is 2020, and General Foryota Company opens a plant in which to build a new mass-produced hover-craft. This hover-craft will work using E-85 Ethanol, will travel up to 200 mph, and will reduce pollution worldwide at a rate of 10 percent per year. It is likely that when all automobiles in the industrial world have been changed over to hovercrafts, emission of greenhouse gasses may be so reduced that global warming may end and air quality will become completely refreshed.

However, the downside is that during the transition time, GFC's Hover-Vee (only available in red or black), will most likely put all transportation as we know it in major dissaray. Roadways will no longer be necessary, but new methods of controlling traffic will be required. Further, while the old version of cars are still being used, Hover-vee's will cause accidents, parking issues, and most likely class envy and warfare. The sticker price on the first two models will be about four times that of the average SUV (to about $200,000.) Even so, GFC's marketing futurists have let them know that they will be able to pre-sell their first three years of expected production, with a potential waiting list which will take between 15 and 20 years to fill.

The Chief Engineer (CE) of GFC commissions a study on potential liabilities for the Hover-vees. The preliminary result is that Hover-vees will likely kill or maim humans at an increased rate of double to triple over automobile travel because of collisions and crashes at high speeds -- projected annual death rates of 100,000 to 200,000. However, global warming will end, and the environment will flourish.

The U. S. Government gets wind of the plans. Congress begins to discuss the rules on who can own and operate Hover-vees. GFC's stock skyrockets. The Chief Engineer takes the results of the study to the Chief Legal Counsel (CLC), and together they agree to bury the study, going forward with the production plans. The Chief Project Manager (CPM), who has read the study and agreed to bury it, goes ahead and plans out the project for the company, with target dates and production deadlines.

Somebody sent a secret copy of the report to you at your home address. It has no information in it at all, except for the report showing the proof of the increase in accidents and deaths. The report shows, on its face, that the CE, CLC, CPM, and your Congressional Representative have seen copies of this report. On the front there are these words typed in red: They knew — they buried this. Please save the world!

As an Engineer on the GFC team, I feel a very loyal tie to my boss and my company/country. I have mortgage, and family to feed. It is likely if I blow the whistle on this report, I will lose my job and my livelihood. I'm not even sure who wrote the study in the envelope or who actually sent it to me.

Utilizing my profession's code of ethics, what should be my first step?

Who should I talk to first?

should I go to the press?

should I go to your boss?

Should I react at all?

What professional ethics codes with international scope can I use to see the guidance given for dilemmas such as this.

1. List a bacterial pathogen which causes disease by the production of toxins and provide a therapeutic strategy to treat the disease.

2. List a bacterial pathogen which can be directly acquired from an animal (alive or dead), describe the disease and explain why it would be difficult to eradicate the disease.

Determining the Optimal Product Mix with One Constrained Resource and a Sales Constraint

Comfy Fit Company manufactures two types of university sweatshirts, the Swoop and the Rufus, with unit contribution margins of $5 and $15, respectively. Regardless of type, each sweatshirt must be fed through a stitching machine to affix the appropriate university logo. The firm leases seven machines that each provides 1,000 hours of machine time per year. Each Swoop sweatshirt requires 6 minutes of machine time, and each Rufus sweatshirt requires 30 minutes of machine time.

Assume that a maximum of 50,440 units of each sweatshirt can be sold.

Required:

If required, round your answers to the nearest whole number.

1. What is the contribution margin per hour of machine time for each type of sweatshirt?

2. What is the optimal mix of sweatshirt?

3. What is the total contribution margin earned for the optimal mix?
$

Determining the Optimal Product Mix with One Constrained Resource and a Sales Constraint

Comfy Fit Company manufactures two types of university sweatshirts, the Swoop and the Rufus, with unit contribution margins of $5 and $15, respectively. Regardless of type, each sweatshirt must be fed through a stitching machine to affix the appropriate university logo. The firm leases seven machines that each provides 1,000 hours of machine time per year. Each Swoop sweatshirt requires 6 minutes of machine time, and each Rufus sweatshirt requires 30 minutes of machine time.

Assume that a maximum of 50,950 units of each sweatshirt can be sold.

Required:

If required, round your answers to the nearest whole number.

1. What is the contribution margin per hour of machine time for each type of sweatshirt?

2. What is the optimal mix of sweatshirt?

3. What is the total contribution margin earned for the optimal mix?
$

If your formulas are correct, you should get the correct answers to the following questions.

(a) What is the net operating income (loss) in Year 1 under absorption costing?

(b) What is the net operating income (loss) in Year 2 under absorption costing?

(c) What is the net operating income (loss) in Year 1 under variable costing?

(d) What is the net operating income (loss) in Year 2 under variable costing?

Make a note of the absorption costing net operating income (loss) in Year 2.

At the end of Year 1, the company’s board of directors set a target for Year 2 of net operating income of $20,000 under absorption costing. If this target is met, a hefty bonus would be paid to the CEO of the company. Keeping everything else the same from part (2) above, change the units produced in Year 2 to 4,400 units.

(a) Would this change result in a bonus being paid to the CEO?

(b) What is the net operating income (loss) in Year 2 under absorption costing?

(c) Would this doubling of production in Year 2 be in the best interests of the company if sales are expected to continue to be 2,400 units per year?

Maben Company was started on January 1, Year 1, and experienced the following events during its first year of operation:

1. Acquired $34,000 cash from the issue of common stock.

2. Borrowed $36,000 cash from National Bank.

3. Earned cash revenues of $52,000 for performing services.

4. Paid cash expenses of $47,000.

5. Paid a $1,400 cash dividend to the stockholders.

6. Acquired an additional $24,000 cash from the issue of common stock.

7. Paid $9,000 cash to reduce the principal balance of the bank note.

8. Paid $57,000 cash to purchase land.

9. Determined that the market value of the land is $80,000.

A) Record the preceding transactions in the horizontal statements model. Also, in the Cash Flows column, classify the cash flows as operating activities (OA), investing activities (IA), financing activities (FA), or net change in cash (NC). If the element is not affected by the event, leave the cell blank. The first event is shown as an example. (Enter any decreases to account balances and cash outflows with a minus sign. Not all cells will require entry.)

B) Determine the amount of total assets that Maben would report on the December 31, Year 1, balance sheet

C) Identify the asset source transactions and related amounts for Year 1.

D) Determine the net income that Maben would report on the Year 1 income statement.

E ) Determine the net cash flows from operating activities, investing activities, and financing activities that Maben would report on the Year 1 statement of cash flows. (Enter cash outflows as negative amounts.)

F) Determine the percentage of assets that were provided by investors, creditors, and earnings. (Round your answers to 2 decimal places.)

G) What is the balance in the Retained Earnings account immediately after Event 3 is recorded?

How E-bay failed in China? Sep 12, 2010 By Helen H.Wang and China Tracker This weekend, eBay’s CEO John Donahoe shared the stage with Alibaba’s maverick founder Jack Ma at his annual Alifest conference in Hangzhou, China. Gady Epstein, Forbes Beijing bureau chief, has an intriguing blog post about how Donahoe wished a happy birthday to Jack Ma who not only defeated eBay in China, but also “encroaches on eBay’s home turf.” Since Epstein referenced my recounting of the eBay-Alibaba battle, I thought it might serve readers well to provide an excerpt here from my book The Chinese Dream: In 2004, eBay had just entered China and was planning to dominate the China market. Alibaba was a local Chinese company that helped small- and medium-sized enterprises conducting business online. Most people in the West had barely heard about it. When eBay entered the China market, Jack Ma, founder and CEO of Alibaba, was alarmed that “someday, eBay would come in our direction.” He knew too well that there was no clear distinction between small businesses and individual consumers in China. As a defensive strategy, Ma decided to launch a competing consumer-to-consumer (C2C) auction site, not to make money, but to fend off eBay from taking away Alibaba’s customers. A new Web site named Taobao—meaning “digging for treasure”—was launched free of charge for individuals buying and selling virtually any consumer goods, from cosmetics to electronic parts. In 2004, I visited Alibaba at its headquarters in Hangzhou. It is located on a campus of three ten-story buildings in the northeastern part of Hangzhou, about a ten-minute taxi drive from West Lake. In the lobby, a flat panel TV was streaming video clips of Jack Ma speaking at various public events where his admirers, most of them in their twenties, were cheering him like a rock star. While visiting Alibaba’s headquarters in Hangzhou, I felt the same “insanely great” energy of entrepreneurship as I felt in Silicon Valley. When I asked a senior manager at Alibaba whether the company was worried that it would be bought by eBay, I was blown away by the answer: “We will buy eBay!” EBay, on the other hand, began its most aggressive campaigns to dominate the market and thwart competitors. Soon after Taobao was launched, eBay signed exclusive advertising rights with major portals Sina, Sohu, and Netease with the intention of blocking advertisements from Taobao. In addition, eBay injected another $100 million to build its China operation, now renamed “eBay EachNet,” and was spreading its ads on buses, subway platforms, and everywhere else. Ma fought back cleverly. Knowing that most small business people would rather watch TV than log on to the Internet, Ma secured advertisements for Taobao on major TV channels. In 2004, one could easily feel the heat of fierce competition between eBay EachNet and Taobao. When I was taking a taxi in Shanghai, I noticed the ads of eBay EachNet on the back of the driver’s seat; when I checked into my hotel, I heard the ads for Taobao popping up on TV almost every half hour. Since its name means “digging for treasure” in Chinese, it attracted a lot of attention by a smart play on words. While most people in the West had never heard of Taobao, its name was heard loud and strong in China. Nevertheless, most industry observers were suspicious about Taobao’s future, particularly its sustainability. Unlike eBay EachNet, which charged its sellers for listing and transaction fees, Taobao was free to use. Neither Ma nor any members from the management team gave a definite timeline as to how long this “free period” was going to last. “Free is not a business model,” the doubters said. Some thought Ma was crazy and nicknamed him “Crazy Ma.” No doubt Crazy Ma was changing the game. Taobao got a quick start with its free listings and continued to gain momentum as more and more users switched from eBay EachNet to Taobao. According to a Morgan Stanley report, Taobao was more customer focused and user friendly than eBay EachNet. With most users not sophisticated about auctions, the majority of Taobao’s listings were for sales. Only 10 percent of its listings were for auctions, while eBay EachNet had about 40 percent of its listings for auctions. Taobao had also better terms for its customers: it offered longer listing periods (fourteen days) and let customers extend for one more period automatically. EBay EachNet did not have this flexibility. Taobao’s listings appeared to be more customer-centric while eBay EachNet’s listings more product-centric. For example, Taobao’s listings were organized into several categories, such as “Men,” “Women,” and so on, while eBay EachNet stuck to its global platform, grouping users into “Buyers” and “Sellers.” At that time, China had about three hundred million cell phone users versus ninety million Internet users. Taobao offered instant messaging and voice mail to mobile phones for buyers and sellers because Chinese users were cell-phone savvy rather than computer savvy. It was clear that Taobao had an upper hand against its global counterpart because it really understood Chinese customers. As a result, Taobao had higher customer satisfaction than eBay EachNet. According to iResearch, a Beijing-based research firm, the user satisfaction level was 77 percent for Taobao versus 62 percent for eBay EachNet. The experience of competing with eBay gave Ma tremendous confidence. He was determined to win: “eBay may be a shark in the ocean, but I am a crocodile in the Yangtze River. If we fight in the ocean, we lose—but if we fight in the river, we win.” By March 2006, Taobao had outpaced eBay EachNet and became the leader in China’s consumer-to-consumer (C2C) market, with 67 percent market share in terms of users, while eBay EachNet had only 29 percent market share. “The competition is over,” Ma exclaimed. “It’s time to claim the battlefield.” On December 20, 2006, Meg Whitman, eBay's then CEO, flew to Shanghai to take part in a press conference to announce a new joint venture with Beijing-based Internet portal Tom Online, which provides wireless value-added multimedia services. It was, in reality, a formal announcement of eBay’s withdrawal from the online auction market in China. EBay shut down its China site, eBay EachNet, and took a back seat to a company with only $173 million in revenue and no experience in the online auction business. Jack Ma represents a new generation of savvy Chinese competitors who should not be underestimated. They study their markets and bring to bear their local knowledge. They learn from their competition and from their own mistakes as they move up the competitive landscape. The case of Alibaba provides an invaluable lesson for multinationals to succeed in China market: First, eBay failed to recognize that the Chinese market and the business environment are very different from that of the West. EBay sent a German manager to lead the China operation and brought in a chief technology officer from the United States. Neither one spoke Chinese or understood the local market. It was eBay’s biggest mistake. Second, because the top management team didn’t understand the local market, they spent a lot of money doing the wrong things, such as advertising on the Internet in a country where small businesses didn’t use the Internet. The fact that eBay had a strong brand in the United States didn’t mean it would be a strong brand in China. Third, rather than adapt products and services to local customers, eBay stuck to its “global platform,” which again did not fit local customers’ tastes and preferences.

Retrieved from: https://www.forbes.com/sites/china/2010/09/12/how-ebay-failed-in-china/#b53cbc35d57a

Question 1:

a) To enter the Chinese market, Ebay spent a lot on advertising yet it failed. What was the problem with their advertising strategy?

b) At its start, what strategy helped Taobao gain more customers than ebay?

c) Certainly, entering a foreign market with a large capital is important, but does it guarantee success?

d) Many other foreign companies failed in China although they were successful in their home countries. Amazon’s failure in China is a very recent example. What are the reasons behind their failure?

e) What are your recommendations for businesses wanting to enter the Chinese market?