Bankone issued 200 million worth of one-year CD liabilities in Brazilian reals at a rate of 6.5 percent. The exchange rate of U.S. dollars for Brazilian reals at the time of the transaction was 0.305/br1 (lG9-5)
a) Is Bankone exposed to an appreciation or depreciation of the U.S. dollar relative to the Brazilian real?
b) What will be the percentage cost to Bankone on this CD if the dollar depreciates relative to the Brazilian real such that the exchange rate of U.S. dollars for Brazilian reals is $0.325/Br 1 at the end of the year?
c)What will be the percentage cost to Bankone on this CD if the dollar appreciates relative to the Brazilian real such that the exchange rate of U.S. dollars for Brazilian reals is $0.285/Br 1 at the end of the year?
In: Finance
The U.S. nominal annual rate of interest is 3% and the European annual nominal rate of interest on the Euro is 2%. At the same time, the spot exchange rate is $1.20 per Euro and the real interest rate is 2% in both the U.S. and Europe.
In: Economics
Bankone issued $200 million worth of one-year CD liabilities in Brazilian reals at a rate of 6.50 percent. The exchange rate of U.S. dollars for Brazilian reals at the time of the transaction was $0.305/Br 1. (LG 9-5)
Is Bankone exposed to an appreciation or depreciation of the U.S. dollar relative to the Brazilian real?
What will be the percentage cost to Bankone on this CD if the dollar depreciates relative to the Brazilian real such that the exchange rate of U.S. dollars for Brazilian reals is $0.325/Br 1 at the end of the year?
What will be the percentage cost to Bankone on this CD if the dollar appreciates relative to the Brazilian real such that the exchange rate of U.S. dollars for Brazilian reals is $0.285/Br 1 at the end of the year?
In: Finance
While wages have risen somewhat and many commentators maintain that the U.S. unemployment rate is nearing its natural rate, U.S. labor force participation has fallen since the great recession of 2007-2009 and had not recovered since. Discuss one or more of the following prompts: From the current news, how would you evaluate the current condition of the U.S. labor market? Is it strong or weak? How would you reconcile the opposing views of the state of the U.S. labor market? What are the implications for the business you are currently working in? Provide a rationale to support your position and use relevant evidence from the textbook or other sources to substantiate your argument.
In: Economics
A U.S. electronics firm is considering moving its production to a plant in Mexico. Its estimated production function is q = L0.5K0.5. In the U.S., the wage, w is ten dollars, and the cost of capital, r is also ten dollars. In Mexico, the wages is half that in the U.S., but the firm faces the same cost of capital: w∗ = 5 and r = r∗ = 10. If the firm wants to produce q = 100 units of output, what amount of labor and capital will it choose to utilize in the U.S.? What amount of labor and capital will it choose to utilize in Mexico? What are the total costs of producing at each plant? (Hint: With q = L0.5K0.5, M PL = 0.5L−0.5K0.5 and M PK = 0.5L0.5K−0.5.)
In: Economics
Short Story: People in America often wonder why we pay higher prices for pharmaceutical drugs versus countries that have socialized medicine like Canada, Great Britain, and Sweden. Here is the dirty little secret. These socialist governments often threaten U.S. pharma firms that they will steal the patents or outright reverse engineer the drug to figure out the formula. If they do this then they will get the drugs fast and cheap while the U.S. pharma firms get stuck with the total cost of the billions they spent on research and development on these life-saving medicines. This is dirty.
These socialist governments then negotiate a deal with the U.S. pharma companies to get the drugs shipped to them at a cheaper price and Americans end up paying higher costs. In a sense, American capitalism is supporting government-run healthcare in these socialist nations.
Of course, U.S. pharma firms are not innocent angels either. They do their best to maintain the monopoly on their drugs for a full 20 years before they will allow the production of generic drugs by all pharma firms.
Many of the new drugs that have been invented over the last 30 years was because of the hard work of the U.S. government-funded National Institute of Health and the bright professors and students in our leading universities such as UC Irvine Medical Center, UC of San Francisco, etc… All of this activity is actually funded by the U.S. taxpayer.
Finally, because of the endless bureaucratic red tape and expensive testing rigor demanded by the U.S. Food & Drug Administration, the average cost to produce a new drug is about $2.2 billion.
Essay Question: What a mess! What ideas do you have for this Oligopoly market structure to get U.S. pharma drug prices lower for the average American?
In: Economics
Corporate Tax Payable
While for many years, Sweat Ltd. used a December 31 year end, a 2017 change in the nature of its business resulted in the Company requesting a change in their taxation year end to August 31. Based on the information provided, the CRA accepted this change.
The change will be implemented during 2017. Its Income Statement for the period January 1, 2017 through August 31, 2017, prepared in accordance with GAAP, is as follows:
Sweat Ltd.
Income Statement
8 Month Period Ending August 31, 2017
Sales (All Within Canada) $916,000
Cost Of Sales ( 485,000)
Gross Margin $431,000
Other Expenses (Excluding Taxes):
Wages And Salaries ($153,400)
Amortization ( 49,300)
Rent ( 56,700)
Interest Expense ( 5,500)
Foreign Exchange Loss ( 4,200)
Travel And Promotion ( 44,300)
Bad Debt Expense ( 5,400)
Warranty Expense ( 5,800)
Charitable Donations ( 3,100)
Other Operating Expenses ( 19,800) ( 347,500)
Operating Income $ 83,500
Gain On Sale Of Investments 3,900
Income Before Taxes $ 87,400
Other Information:
1. In determining the Cost Of Sales, the Company deducted a $17,800 reserve for inventory obsolescence.
2. Wages and salaries includes a $35,000 bonus to Sweat Ltd.’s CEO. Because she anticipates retiring at the end of 2018, this bonus will not be paid until January, 2019.
3. Amortization is on the furniture and fixtures and delivery vehicles. The capital cost of the furniture and fixtures is $147,000 and, at January 1, 2017, the Class 8 UCC balance is $79,800. During 2017, new furniture was acquired at a cost of $20,500. Old furniture with a capital cost of $14,200 was sold for $9,500.
On January 1, 2017, the Class 10 UCC balance was $103,400. There were no additions or disposals in this Class during the 8 month period ending August 31, 2017.
4. The interest expense relates to a line of credit that was used to finance seasonal fluctuations in inventory.
5. The foreign exchange loss resulted from financing costs related to the purchase of merchandise in the United Kingdom.
6. The travel and promotion expense consisted of the following items:
Business Meals And Entertainment $15,200
Hotels And Airfare 21,400
Golf Club Memberships 7,700
Total Travel And Promotion Expense $44,300
7. For accounting purposes, the Company establishes a warranty reserve based on estimated costs. On January 1, 2017, the reserve balance was $5,400. On August 31, 2017, a new reserve was established at $6,200.
8. The accounting gain on the sale of investments is equal to the capital gain for tax purposes.
9. During the period January 1, 2017 through August 31, 2017, the Company declared and paid dividends of $27,600.
10. On January 1, 2017, the Company has available an $18,700 non-capital loss carry forward and a $6,250 [(1/2)($12,500)] net capital loss carry forward.
Required: Calculate the minimum Net Income For Tax Purposes and Taxable Income for Sweat Ltd. for the 8 month period ending August 31, 2017. Indicate the amount and type of any carry forwards that will be available for use in future years.
In: Accounting
Presented here are the comparative balance sheets of Hames Inc.
at December 31, 2020 and 2019. Sales for the year ended December
31, 2020, totaled $1,700,000.
| HAMES INC. Balance Sheets December 31, 2020 and 2019 |
||||||||
| 2020 | 2019 | |||||||
| Assets | ||||||||
| Cash | $ | 63,000 | $ | 57,000 | ||||
| Accounts receivable | 285,000 | 266,000 | ||||||
| Merchandise inventory | 261,000 | 247,000 | ||||||
| Total current assets | $ | 609,000 | $ | 570,000 | ||||
| Land | 109,000 | 82,000 | ||||||
| Plant and equipment | 375,000 | 330,000 | ||||||
| Less: Accumulated depreciation | (195,000 | ) | (180,000 | ) | ||||
| Total assets | $ | 898,000 | $ | 802,000 | ||||
| Liabilities | ||||||||
| Short-term debt | $ | 54,000 | $ | 51,000 | ||||
| Accounts payable | 168,000 | 144,000 | ||||||
| Other accrued liabilities | 68,000 | 54,000 | ||||||
| Total current liabilities | $ | 290,000 | $ | 249,000 | ||||
| Long-term debt | 56,000 | 105,000 | ||||||
| Total liabilities | $ | 346,000 | $ | 354,000 | ||||
| Stockholders’ Equity | ||||||||
| Common stock, no par, 200,000 shares authorized, 80,000 and 50,000 shares issued, respectively | $ | 224,000 | $ | 162,000 | ||||
| Retained earnings: | ||||||||
| Beginning balance | $ | 286,000 | $ | 217,000 | ||||
| Net income for the year | 102,000 | 84,000 | ||||||
| Dividends for the year | (60,000 | ) | (15,000 | ) | ||||
| Ending balance | $ | 328,000 | $ | 286,000 | ||||
| Total stockholders’ equity | $ | 552,000 | $ | 448,000 | ||||
| Total liabilities and Stockholders’ equity | $ | 898,000 | $ | 802,000 | ||||
Required:
In: Accounting
Case A: Revenue Recognition for Products
Smooth Blend, Inc., a calendar year company, produces several blends of whiskey. Maturing whiskey is stored for 3 years in a large, dark aromatic warehouse owned by Smooth Blend. Smooth Blend sells the whiskey to Distributor Company at the beginning of the aging process (January 1, 2011). Distributor Company will pick up the whiskey at the end of the aging process (December 31, 2013) and take it to its facilities for bottling. Distributor Company pays the full purchase price to Smooth Blend on January 1, 2011 to protect itself against price increases.
In: Accounting
Case A: Revenue Recognition for Products
Smooth Blend, Inc., a calendar year company, produces several blends of whiskey. Maturing whiskey is stored for 3 years in a large, dark aromatic warehouse owned by Smooth Blend. Smooth Blend sells the whiskey to Distributor Company at the beginning of the aging process (January 1, 2011). Distributor Company will pick up the whiskey at the end of the aging process (December 31, 2013) and take it to its facilities for bottling. Distributor Company pays the full purchase price to Smooth Blend on January 1, 2011 to protect itself against price increases.
In: Accounting