You are given the following information and are asked to use the T-accounts in order to report the statement of financial position (balance sheet) and the income statement:

The capital structure of a business is made of 3,200,000 ordinary shares outstanding at par value of $5 each and capital reserves of $400,000. It also has a million dollar ($1,000,000) long-term loan to be paid in fine (a.k.a. “bullet loan” with the principle amount due at the end of the loan period few years from now) at 10% interest per year. The actual interest payments made over the current reporting period amount at $76,124. The company issues an extra 1,000,000 of its ordinary shares at par value of $5 each and raises $6,000,000 of additional capital.

The reported opening inventory balance is $366,059 and the company purchases a total of $7,570,321 worth of inventories for cash and further $8,765,350 worth of inventory on credit.

The company's fixed assets include land and buildings reported at the end of the previous accounting period at $9,670,500 and is depreciated using the straight-line method over 20 years. The company has also invested $7.5 million in machinery during the current year adding them to the $6 million of reported fittings and fixtures from the previous accounting period. All this equipment is depreciated with a straight-line method over 5 years. In addition, the company owns trademarks and patents worth $1,722,120 which are not subject to depreciation.

In terms of expenses since January 1 of the current year the company rents a warehouse at a monthly fee of $10,000. The total amount of rent paid in cash during the current reporting period is $150,000. The total electricity expenses for the year amount to $134,789 paid in cash with the fourth quarter bill of $28,476 to be paid shortly after year’s end. The general expenses for the year sum up to $4,356,967 paid in cash.

The revenue from sales over the current reporting period to credit customers amounts at $10,098,636 with reported cost of sales $5,673,822. Another $10,500,735 worth of goods have been sold with immediate cash payment for $15,655,322 during the year.

The trade credit balances are as follows: the opening trade payable balance reported is $1,343,287 and the opening trade receivables balance is $1,063,328. During the accounting period the company has paid in cash $6,704,749 for its accounts payable to suppliers. Meanwhile credit customers have paid the company $7,007,564 of cash for sales on credit.

In terms of overdraft granted from the bank the company starts the current reporting period with an overdraft position of $78,720.

The fiscal position of the firm is such that the corporate tax rate is 33%. Half of the taxation amount is paid during the year. The remaining half is due shortly after year’s end.

The management has decided to plow back in the business all the profit for the year. No dividends are to be paid

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Question: Amanda Monaco has just inherited her father’s company. Prior to his death, Mr. Monaco was the sol...

Amanda Monaco has just inherited her father’s company. Prior to his death, Mr. Monaco was the sole stockholder, and he left the entire company to his only daughter. Although Amanda has worked for the firm for many years as a commercial artist, she does not feel qualified to manage the operation. She has considered selling the firm while it is still a viable operation and before her father’s absence causes the value of the firm to deteriorate. Amanda realizes that selling the firm will result in losing control, but her father granted her a long-term contract that guarantees employment or a generous severance package. Furthermore, if Amanda were to sell for cash, she should receive a substantial amount of money, so her financial position would be secure.   

Even though Amanda would like to sell out, she has enough business sense to realize that she does not know how to place an asking price (a value) on the firm. The IRS had established a value on her father’s stock of $100 a share, and since he owned 100,000 shares, the value of the company for estate tax purposes was $10,000,000. Amanda thought that was a reasonable amount but decided to consult with Sophie Ryer, the CPA who completed the estate tax return.

Ryer suggested that the firm could be valued using a discounted cash flow method in which the current and future dividends are discounted back to the present to determine the value of the firm. She explained to Amanda that this technique, the dividend-growth model, is an important theoretical model used for the valuation of companies. In addition, she suggested that the price/earnings ratio of similar firms may be used as a guide to the value of the firm. Amanda asked Ryer to prepare a valuation of the stock based on P/E ratios and the dividend-growth model. While Amanda realized that she could get only one price, she requested range of values from an optimistic price to a mini mum, rock-bottom value.

To aid the valuation process Ryer assembled the following information. The firm earned $8.50 a share and distributed 60 percent in cash dividends during its last fiscal year. This payout ratio had been maintained for several years, with 40 percent of the earnings being retained to finance future growth.The per-share earnings for the past five years were as follows:

Year

20X1 20X2 20X3 20X4 20X5

Earnings per share

$6.70 7.40 7.85 8.20 8.50

Publicly held firms in the industry have an average P/E ratio of 12, with the highest being 17 and the lowest 9. The betas of these firms tend to be less than 1.0, with 0.85 being typical. While the firm is not publicly held, it is similar in structure to other firms in the industry. It is, however, perceptible smaller than the publicly held firms. The Treasury bill rate is currently 5.2 percent, and most financial analysts anticipate that the market as a whole will average a return of 6 to 6.5 percent greater than the Treasury bill rate.

Amanda has come to you to help devise a financial plan after the company is sold. Such a plan would encompasses the construction of a well diversified diversified portfolio with sufficient resources to meet temporary needs for cash. You do not want to blindly accept the IRS estate value of $10,000,000. Obviously, if the firm could be sold for more, that would be beneficial to your client. In addition, you want an indication of the value Ryer may place on the firm, so you resolve to answer the following questions

If the estate tax rate is 35%, what is the implication of valuation if less than $100 per share?

Are births equally likely in each month of the year? Perform a complete test of hypothesis using the data below from 2006. Please show calculator or excel steps used. Total: 4,265,555 January: 340,297 Feburary: 319,235 March: 356,786 April: 329,809 May: 355,437 June: 358,251 July: 367,934 August: 387,798 September: 374,711 October: 367,354 November: 351,832 December: 356,111

4. Former Vice President Al Gore says this about global warming in his 2006 book and film, An Inconvenient Truth:

“We can no longer afford to view global warming as a political issue – rather, it is the biggest moral challenge facing our global civilization”

c. What actions are recommended for individuals who are interested in helping to reduce the problems caused by global warming?

Given the year end prices of the following stocks, estimate the expected return of a portfolio of 30% AAA and 70% BBB. Enter your answer as a percent without the % sign. Round your final answer to two decimals.

Find the average annual growth rate of the dividends for each firm listed in the following table.

find the average annual growth rate of the dividends for each firm listed in the following table.
firm.     2006.   2007.   2008.   2009.   2010.    2011
loewen $1.00 $1.05. $1.10. $1.20 $1.25.    $1.30
Morse.   $1.00. $0.90. $0.80. $1.10. $1.20.   $1.35
huddle. $1.00 $2.00. $3.50. $3.75. $3.80.   $4.25
meyer.    $2.00. $2.00. $2.00. $2.70. $2.80. $2.90

1) Making rent payments in advance is an example of a(n):

A) Accrued revenue.

B) Accrued expense.

C) Deferred revenue.

D) Prepaid expense.

2) A company purchased $270,000 in supplies during the year. The supplies account increased by $10,000 during the year to an ending balance of $66,000. For what amount was the adjusting entry to supplies expense?

A) $300,000.

B) $280,000.

C) $260,000.

D) $240,000.

16. Total profit for a firm is calculated as

17. In the short run, if the price is less than average variable cost, a firm operating in a competitive market will

18. When a restaurant stays open for lunch service even though few customers patronize the restaurant for lunch, which of the following principles is (are) best demonstrated?

19. In the long run, a firm will enter a competitive industry if

20. Which of the following statements is not correct?