Saving, Investment, and the Financial System: By the Numbers

The financial system consists of banks, money markets, and government institutions that issue and manage money. Although the United States is the largest economy in the world, it does not have the largest banks in the world in terms of total assets.

Consider the accompanying tables which list the world’s ten largest banks in terms of assets in 2008 and 2017.

Top Banks in the World by Assets, 2008

Top Banks in the World by Assets, 2017

Consider how the list of the world's ten largest banks changed between 2008 and 2017. Calculate the total combined assets of the world’s top ten largest banks in each year. Then calculate what percentage of these assets were held by banks based in the U.S. and China. Round the percentages to whole numbers.

What were the total combined assets of the world’s ten largest banks in 2008? $________billion.

Of these total combined assets for the ten largest banks in 2008, what percentage was held by U.S. based banks? U.S. banks holdings:________%

Of these total combined assets for the ten largest banks in 2008, what percentage was held by Chinese based banks? Chinese bank holdings:_______%

Please enter a value for the total assets of the world’s ten largest banks in 2017. $_______billion.

Of these total combined assets for the ten largest banks in 2017, what percentage was held by U.S. based banks? U.S. banks' share:_____%

Of these total combined assets for the ten largest banks in 2017, what percentage was held by Chinese based banks? Chinese banks' share:______%

.Munoz Company is a retail company that specializes in selling outdoor camping equipment. The company is considering opening a new store on October 1, 2019. The company president formed a planning committee to prepare a master budget for the first three months of operation. As budget coordinator, you have been assigned the following tasks:

A: October sales are estimated to be $340,000, of which 40 percent will be cash and 60 percent will be credit. The company expects sales to increase at the rate of 20 percent per month. Prepare a sales budget.

B: The company expects to collect 100 percent of the accounts receivable generated by credit sales in the month following the sale. Prepare a schedule of cash receipts.

C: The cost of goods sold is 70 percent of sales. The company desires to maintain a minimum ending inventory equal to 20 percent of the next month’s cost of goods sold. However, ending inventory of December is expected to be $12,900. Assume that all purchases are made on account. Prepare an inventory purchases budget.

D: The company pays 70 percent of accounts payable in the month of purchase and the remaining 30 percent in the following month. Prepare a cash payments budget for inventory purchases.

E: Budgeted selling and administrative expenses per month follow:

*The capital expenditures budget indicates that Munoz will spend $146,600 on October 1 for store fixtures, which are expected to have a $29,000 salvage value and a two-year (24-month) useful life. Use this information to prepare a selling and administrative expenses budget.

F: Utilities and sales commissions are paid the month after they are incurred; all other expenses are paid in the month in which they are incurred. Prepare a cash payments budget for selling and administrative expenses.

G: Munoz borrows funds, in increments of $1,000, and repays them on the last day of the month. Repayments may be made in any amount available. The company also pays its vendors on the last day of the month. It pays interest of 2 percent per month in cash on the last day of the month. To be prudent, the company desires to maintain a $21,000 cash cushion. Prepare a cash budget.

B:

C:

D: October November December

Schedule of cash payment budget for inven. purchases:

Payment of current month;s accounts payable:

Payment for prior months accounts payable:

Total budgeted payment for inventory:

Your friend, Jane Lee, recently won the Lotto Max and is planning to sell her business and move to England. Jane owns the Vancouver Running Centre Inc. (Centre) that offers training and running clinics. She has provided you with the trial balance for the year ended October 31, 2018 (the company’s year-end).

Vancouver Running Centre Inc.

Unadjusted Trial Balance

October 31, 2020

Required:

She has asked you to review the trial balance and the additional information and prepare any adjusting journal entries you believe are necessary to ensure the accounts are complete and accurate in accordance with Generally Accepted Accounting Principles. Place your responses together with supporting calculations in the table provided. Explanations are not required.

1) The computer equipment is in excellent shape. It was purchased on July 1, 2019 and is expected to have a useful life of 4 years at which time it is expected to be sold for $4,000.

2) On February 1, 2020, Centre received and recorded in Revenue Earned a $20,000 cash advance from the Richmond School Board. The payment covers marathon training for the eight-month period starting July 1, 2020.

3) Each of Centre’s employees is paid $1,500 every two weeks – i.e.10 days of work. The six employees did not receive a pay cheque for the last seven working days of October 2020, as the bookkeeper was ill. The amounts were both recorded and paid upon her return on November 4, 2020.

4. Centre’s sales invoices for the last two weeks of October 2020 have not been prepared nor recorded. You estimate that $14,500 of services rendered during that period has not been recorded or billed to customers.

5. An inventory count completed at October 31, 2020 revealed inventory of $44,700.

6) On January 1, 2020 Centre purchased a two-year liability insurance policy for $4,800.

7) A letter from Centre’s landlord dated October 25, 2020 demands a total of $18,000 to be paid to cover the rent for the months of September to November 2020 inclusive. Centre’s monthly rent expense has been constant for the past three years.

8) Supplies on hand at October 31, 2020 are estimated at $3,500.

Estimated Income Statements, using Absorption and Variable Costing

Prior to the first month of operations ending October 31, Marshall Inc. estimated the following operating results:

The company is evaluating a proposal to manufacture 30,400 units instead of 27,200 units, thus creating an ending inventory of 3,200 units. Manufacturing the additional units will not change sales, unit variable factory overhead costs, total fixed factory overhead cost, or total selling and administrative expenses.

a. 1. Prepare an estimated income statement, comparing operating results if 27,200 and 30,400 units are manufactured in the absorption costing format. If an amount box does not require an entry leave it blank.

Feedback

a. 1. Recall that under absorption costing, the cost of goods manufactured includes direct materials, direct labor, and factory overhead costs. Both fixed and variable factory costs are included as part of factory overhead. Calculate unit cost for direct materials, direct labor, variable factory overhead, fixed factory overhead. Add together to get total unit cost. For 30,400 units, use the same unit costs for direct materials, direct labor, and variable overhead, but instead recalculate the fixed factory overhead and add this to obtain the unit cost at the 30,400 unit level. Sales - (cost of goods manufactured - Inventory, October 31) = Gross profit; gross profit - selling and administrative expenses = income from operations. Remember that the Inventory, October 31 adjustment will only be necessary at the 30,400 level.

a. 2. Prepare an estimated income statement, comparing operating results if 27,200 and 30,400 units are manufactured in the variable costing format. If an amount box does not require an entry leave it blank.

. You will find that there are discrepancies in some of our analysis tools when comparing investments in projects. NPV or discounted Payback, or MIRR are all ways to evaluate whether a project meets our need to be “profitable”, but how should they be used individually or in concert with the others?

Answer the following questions:

1. Consider the data below for a hypothetical economy. All figures are in billions of dollars.

Real Domestic       Aggregate                                                                                       Aggregate

    Output               Expenditures (C + Ig),                                                                   Expenditures (C + Ig + Xn),      

(GDP = DI)              Private, Closed Economy       Exports, X      Imports, M          Private, Open Economy

($ Billions)                     ($ Billions)                        ($ Billions)     ($ Billions)                ($ Billions)                                                                       

       200                               245                                   30                    15                         ________                   

       250                               280                                   30                    15                         ________            

       300                               315                                   30                    15                         ________

       350                               350                                   30                    15                         ________

       400                               385                                   30                    15                         ________            

       450                               420                                   30                    15                         ________

       500                               455                                   30                    15                         ________

1. Complete the above Table and clearly show your steps and calculations.

0. 2. With the completed Table in (a) above, determine the:
1. equilibrium GDP of the private, open economy. Clearly show your steps and calculations.

                                (ii)   net exports multiplier of the private, open economy. Clearly show your steps/calculations.

3. If full employment GDP for the open economy is $350 billion, will there be an inflationary expenditure gap or a recessionary expenditure gap in the economy? Why? What is the consequence of this expenditure gap on the economy?

2. Consider the following information for an economy:
                           Household Consumption, C = $40 billion + 0.8Y, where Y is real income ($ billion)

Planned Business Investment, Ig = $10 billion

Exports, X = $35 billion

Imports, M = $15 billion

Government Spending, G = $15 billion, and Taxes, T = $0.

        Determine the economy’s equilibrium real GDP or income. Clearly show your steps and calculations.

QUESTION THREE [20]

Additional Information:

(a) Inventory on hand at 28 February 2019 amounts to R 15 350.

(b) Depreciation must be provided as follows: Vehicles R 3 400

Equipment R 560

(c) The loan was granted on 1 March 2017 at 12% p.a., payable every three months.

Interest for the period 1 December 2018 to 28 February 2019 is payable on

1 March 2019.

(d) A store room was sublet from 1 June 2018 at R 1 050 per month.

(e) An amount of R120 was paid to Vesta Insurers as an advance premium for March 2019.

(f) An account of R1 350 was received from Prints Printers for the printing of

documents. This must still be recorded.

Required:

Prepare the Statement of Comprehensive Income (Income Statement) for the year ended 28 February 2019.

What criteria can be used to rank these projects? Which quantitative ranking method is better and why? Does the ranking differ from an inspection of cash flows? Finally what kinds of investments projects have similar cash flows?

On July 1, 2017, Riverbed Co. pays $20,160 to Marin Insurance Co. for a 4-year insurance policy. Both companies have fiscal years ending December 31. Journalize the entry on July 1 and the adjusting entry on December 31 for Marin Insurance Co. Marin uses the accounts Unearned Service Revenue and Service Revenue

I am facing a challenge with my account assignment, May you please help me.

July 1 Cash 20160

Unearned service 20160

Dec 31 Unearned service ?

service Revenue ?