East Coast Warehouse Club   

Frank​ O'Connor, CFO of East Coast Warehouse​ Club, was reviewing notes from the annual​ shareholders' meeting the week before. Most of the meeting was​ routine: greetings from the CEO and chairman of the​ board, review of last​ year's results, plans for the coming​ year, election of directors​ (no surprises), ratification of the​ auditors, and so on. The only unexpected incident occurred during a​ question-and-answer period with the CFO when a major institutional shareholder asked if and when the company expected to start paying dividends. The question was met with loud applause and a few cheers of​ "Hear, hear!" Frank​ answered, not quite​ truthfully, that the matter was being discussed internally and was on the agenda for the next board of​ directors' meeting. In any​ case, it was on the agenda now.

When the directors met the following​ month, they looked over a report they had asked the CFO to compile on the pros and cons of instituting dividends. The report first provided a review of the​ company's financial situation. A recent economic downturn and high energy prices had been devastating for other​retailers, but had actually been good for East Coast because​ hard-pressed consumers looked for the lowest prices on everything from groceries to computers to automobile tires and batteries. East Coast had recently added gas pumps to many locations and could sell gasoline for a few cents less per gallon than other retailers. The gas business was​ thriving, and company research showed that gas sales brought customers to the stores for other purchases. On the other​ hand, East​ Coast's growth policy had become cautious. Its extensive real estate holdings were losing value in a declining​ market, and the company was unwilling to build stores so close together that it would be competing with itself or so far from its regional base that distribution would become inefficient. Ten percent of total assets were now in cash and​ short-term investments. ​ Long-term debt had fallen from 38% of assets a few years ago to less than 22%.

Cash flow from operations was more than double the investment in new assets.

There was no question that East Coast could pay a​ dividend, but should​ it? Frank wondered what some of his bright young staffers long dash—several of whom had used East​ Coast's generous education benefits to obtain MBA —would have to say about this​ question, so he put it on the agenda for the regular Wednesday afternoon staff meeting.

Questions

1.  The following is a partial list of comments made by staffers at the meeting. To help Frank make a​ decision, identify the dividend policy or theory each reflects and comment on its usefulness.

a. ​ "What difference does it make if we pay dividends or​ not? Shareholders can always sell a few shares and make their own​ dividends." ​ Response: ​ "That works for the big​ shareholders, but what about the little​ guys?"

b. ​ "From a tax​ perspective, our shareholders would be better off paying the capital gains tax than paying the tax on​ dividends."

c. ​ "Stock prices go up and down due to market factors we​ can't control. A dividend is something you can count​ on."

d.  ​"Some of our shareholders want dividends. You heard that at the​ shareholders' meeting." ​ Response: ​ "That's right, ​ but, of​ course, maybe some of them​ don't. They might prefer that we try to grow the business​ faster."

e. ​ "Our business has been doing​ well, but​ we're in tough times. A lot of retailers are​ hurting, and the market is down. By paying a​ dividend, we send a message to our shareholders that we expect to stay strong for the foreseeable​ future."

f.  ​"Before we think of paying​ dividends, we should be sure we have enough cash to cover our operating expenses and capital​ budget." ​ Response: ​ "That's right, and once we start paying​ dividends, we will never be able to cut​ them."

2.  When Frank thought he had gathered enough ideas about dividend theory and​ policy, he asked the following​ question: ​ "Let's say we decide that our shareholders want some kind of distribution. ​ What's the best way to do​ it?" Evaluate the merits of the following suggestions.

a. ​ "How about a 20% or 30% stock​ dividend? They will feel as if​ they're getting​ something, and it​ won't use any​ cash."

Question One

Given the following account information for Howard Corporation, prepare a balance sheet in report form for the company as of December 31, 2020. All accounts have normal balances. Assume Howard uses IFRS.

       Equipment........................................................................................         60,000

       Interest Expense..............................................................................           2,400

       Interest Payable...............................................................................              600

       Retained Earnings, beginning..........................................................       113,200

       Dividends..........................................................................................         50,400

       Land..................................................................................................       137,320

       Accounts Receivable.......................................................................       102,000

       Bonds Payable.................................................................................         78,000

       Accumulated other comprehensive income ………………………..         19,000

       Notes Payable (due in 6 months)....................................................         29,400

       Common Stock................................................................................         70,000

       Accumulated Depreciation—Equip..................................................         10,000

       Prepaid Advertising..........................................................................           5,000

       Service Revenue..............................................................................       341,400

       Buildings...........................................................................................         80,400

       Supplies............................................................................................           1,860

       Income Taxes Payable....................................................................           3,000

       Utilities Expense...............................................................................           1,320

       Advertising Expense........................................................................           1,560

       Salaries and Wages Expense..........................................................         53,040

       Salaries and Wages Payable...........................................................              900

       Accumulated Depr. Bldg..................................................................         20,000

       Cash.................................................................................................         45,000

       Depreciation Expense......................................................................           8,000

       Investment in Bonds to be held to maturity …………………………      100,000

       FV-OCI Investments (Fair value = 16,000)………………………….                12,000

       FV-NI Investments ……………………………………………………           3,200

       Assets held for sale ……………………………………………..                 22,000

Cash is comprised of $50,000 at RBC and a bank overdraft of $5,000 at BMO.

Question 2

The controller of Nebula Corporation has provided you with the following information:

Nebula Corporation

Income Statement

For the Year Ended December 31, 2020

Net sales..................................................................................................                        620,000

Operating expenses................................................................................                        410,000

Income from operations..........................................................................                        210,000

Other revenues and expenses

       Gain on sale of equipment............................................................... 30,000

       Interest expense............................................................................... 8,000               22,000

Income before income taxes...................................................................                        232,000

Income taxes...........................................................................................                          92,800

Net income..............................................................................................                        139,200

Nebula Corporation

Comparative Account Information

Relating to Operations

For the Year Ended December 31, 2020

                                                                           2020                            2019

Accounts receivable                                        56,000                         40,000

Prepaid insurance                                             5,000                           6,000

Accounts payable                                           59,000                         47,000

Interest payable                                                   600                           1,500

Income taxes payable                                       4,200                           6,000

Unearned revenue                                          20,000                         14,000

Instructions

1. Prepare a statement of cash flows (for operating activities only) for the year ended December 31, 2020, using the direct method.
2. Prepare a statement of cash flows (for operating activities only) for the year ended December 31, 2020 using the indirect method.

The first half of 2020 has been very challenging for the Australian banking sector with major bush fires, then several severe storms (e.g. Canberra hailstorm) and now the COVID-19 outbreak and shutdown of the Australian economy. We have discussed, how the impact these events—particularly COVID-19—has had on the banks as well as how the banks and regulators have responded to the challenges.
You are the team leader of the Strategy and Operations team at the Commonwealth Bank of Australia. The CEO and Board has asked you to write a series of three short memos outlining the impact that COVID-19 has had on the bank and your recommendations for operations in the next 6 to 12 months. Each of the memos will focus on one fundamental risk and should be written independent of the other memos so that each memo is self-contained (e.g. when reading memo 1, you do NOT need to read the memos 2 and 4 to understand memo 1).

Question 1
Write a memo outlining the impact that COVID-19 has had on interest rate risk for the bank. Suggest some strategies the bank can use to manage this risk in the next 6-12 months.

The first half of 2020 has been very challenging for the Australian banking sector with major bush fires, then several severe storms (e.g. Canberra hailstorm) and now the COVID-19 outbreak and shutdown of the Australian economy. We have discussed, how the impact these events—particularly COVID-19—has had on the banks as well as how the banks and regulators have responded to the challenges.

You are the team leader of the Strategy and Operations team at the Commonwealth Bank of Australia. The CEO and Board have asked you to write a series of three short memos outlining the impact that COVID-19 has had on the bank and your recommendations for operations in the next 6 to 12 months. Each of the memos will focus on one fundamental risk and should be written independently of the other memos so that each memo is self-contained (e.g. when reading memo 1, you do NOT need to read the memos 2 and 4 to understand memo 1).

Question
Write a memo outlining the impact that COVID-19 has had on credit risk for the bank. Suggest some strategies the bank can use to manage this risk in the next 6-12 months. (Full Details)

The first half of 2020 has been very challenging for the Australian banking sector with major bush fires, then several severe storms (e.g. Canberra hailstorm) and now the COVID-19 outbreak and shutdown of the Australian economy. We have discussed, how the impact these events—particularly COVID-19—has had on the banks as well as how the banks and regulators have responded to the challenges.
You are the team leader of the Strategy and Operations team at the Commonwealth Bank of Australia. The CEO and Board has asked you to write a series of three short memos outlining the impact that COVID-19 has had on the bank and your recommendations for operations in the next 6 to 12 months. Each of the memos will focus on one fundamental risk and should be written independent of the other memos so that each memo is self-contained (e.g. when reading memo 1, you do NOT need to read the memos 2 and 4 to understand memo 1).

Question 3
Write a memo outlining the impact that COVID-19 has had on liquidity risk for the CBA. Suggest some strategies the bank can use to manage this risk in the next 6-12 months.

The first half of 2020 has been very challenging for the Australian banking sector with major bush fires, then several severe storms (e.g. Canberra hailstorm) and now the COVID-19 outbreak and shutdown of the Australian economy. We have discussed, how the impact these events—particularly COVID-19—has had on the banks as well as how the banks and regulators have responded to the challenges.

You are the team leader of the Strategy and Operations team at the Commonwealth Bank of Australia. The CEO and Board has asked you to write a series of three short memos outlining the impact that COVID-19 has had on the bank and your recommendations for operations in the next 6 to 12 months. Each of the memos will focus on one fundamental risk and should be written independent of the other memos so that each memo is self-contained (e.g. when reading memo 1, you do NOT need to read the memos 2 and 4 to understand memo 1).

Question
Write a memo outlining the impact that COVID-19 has had on liquidity risk for the CBA. Suggest some strategies the bank can use to manage this risk in the next 6-12 months. (Full Deatils)

The first half of 2020 has been very challenging for the Australian banking sector with major bush fires, then several severe storms (e.g. Canberra hailstorm) and now the COVID-19 outbreak and shutdown of the Australian economy. We have discussed, how the impact these events—particularly COVID-19—has had on the banks as well as how the banks and regulators have responded to the challenges.

You are the team leader of the Strategy and Operations team at the Commonwealth Bank of Australia. The CEO and Board have asked you to write a series of three short memos outlining the impact that COVID-19 has had on the bank and your recommendations for operations in the next 6 to 12 months. Each of the memos will focus on one fundamental risk and should be written independently of the other memos so that each memo is self-contained (e.g. when reading memo 1, you do NOT need to read the memos 2 and 4 to understand memo 1).

Question
Write a memo outlining the impact that COVID-19 has had on credit risk for the bank. Suggest some strategies the bank can use to manage this risk in the next 6-12 months.

Each scenario below gives some information about price elasticity of demand for a firm. Use this information to answer the following questions.?

Round answers to two places after the decimal where applicable.

Honest Abe's Used Cars estimates the price elasticity of demand for their cars to be 2.10 .

Last month, Abe tried a new marketing scheme which decreased the number of cars sold by 67 %.

Abe must have prices. Abe's prices

must have changed by %

Therefore, Abe's total revenue

At Webs-R-Us, a website design company, the new manager has decided to increase the price of Webs-R-Us services by 75 %.

If Webs-R-Us has a price elasticity of demand at 0.70 , we can expected the number of websites designed to The number of websites will change by % Therefore, Webs-R-Us's total revenue will

Laker Company reported the following January purchases and sales data for its only product.

The Company uses a perpetual inventory system. For specific identification, ending inventory consists of 280 units, where 260 are from the January 30 purchase, 5 are from the January 20 purchase, and 15 are from beginning inventory.

Exercise 6-3 Perpetual: Inventory costing methods LO P1

Required:
1. Complete the table to determine the cost assigned to ending inventory and cost of goods sold using specific identification.
2. Determine the cost assigned to ending inventory and to cost of goods sold using weighted average.
3. Determine the cost assigned to ending inventory and to cost of goods sold using FIFO.
4. Determine the cost assigned to ending inventory and to cost of goods sold using LIFO.