12. Which of the following statements is (are) correct?
(x) The local oak table producer has an increase in inventory of 25 tables in 2012. In 2013 it sells all 25 tables to consumers. The value of increased inventory will be counted as part of GDP in 2012 and the value of the tables sold in 2013 will not increase GDP in 2013.
(y) A wheat farmer in Montana buys a new tractor made during the current period that was produced by a German company in the U.S. state of Iowa. As a result, U.S. investment and U.S. GDP increase, but German GDP is unaffected.
(z) A U.S. firm produces sweatshirts in the first quarter of 2010 and adds them to its inventory. In the second quarter of 2010 the firm sells the sweatshirts to consumers. If the firm does not add additional sweatshirts to inventory in the second quarter then investment, for the firm, decreases in the second quarter.
A. (x), (y) and (z)
B. (x) and (y) only
C. (x) and (z) only
D. (y) and (z) only
E. (x) only

13. Michigan Tea Company sold $18 million worth of tea it produced. In producing this tea it purchased $6 million worth of ingredients from foreign countries and paid $1 million to workers who reside in Canada but commute to the United States. How much did these transactions add to GDP of the United States?
A. $24 million
B. $18 million
C. $17 million
D. $12 million

14. Which of the following statements about nominal GDP is (are) correct?
(x) Betsy works at her home to produce goods and services for her family. Unpaid production of goods and services, by Betsy at her home, is not included in the calculation of gross domestic product (GDP).
(y) The value of illegally produced goods are included in GDP because the goods are traded in a market.
(z) Ross, a United States citizen, works only in Canada. The value added to production from his employment is included in Canadian GDP but not the GDP of the United States.
A. (x), (y) and (z)
B. (x) and (y) only
C. (x) and (z) only
D. (y) and (z) only
E. (z) only

E. $11 million

1. Which media headline describes a leftward shift of the LAS curve?

A) "Decreased consumer spending may lead to recession."

B) "Increased consumer spending is expected to lead to inflation, with no change in real GDP."

C) "Higher wage settlements may lead to inflation."

D) "Faster growth may be due to more women entering the labour force."

E) "Recent tornadoes destroyed factories in Edmonton and Calgary."

2. A positive supply shock from falling input prices shifts

A) both the SAS and AD curves rightward.

B) both the SAS and LAS curves leftward.

C) the SAS curve rightward but leaves the LAS curve unchanged.

D) the LAS curve rightward but leaves the SAS curve unchanged.

E) both the SAS and LAS curves rightward.

3 Aggregate quantity demanded increases if

A) the price level rises.

B) expectations become more optimistic.

C) government taxes decrease.

D) the price level falls.

E) interest rates fall.

Hillyard Company, an office supplies specialty store, prepares its master budget on a quarterly basis. The following data have been assembled to assist in preparing the master budget for the first quarter:

1. As of December 31 (the end of the prior quarter), the company’s general ledger showed the following account balances:

2. Actual sales for December and budgeted sales for the next four months are as follows:

3. Sales are 20% for cash and 80% on credit. All payments on credit sales are collected in the month following sale. The accounts receivable at December 31 are a result of December credit sales.

4. The company’s gross margin is 40% of sales. (In other words, cost of goods sold is 60% of sales.)

5. Monthly expenses are budgeted as follows: salaries and wages, $21,000 per month: advertising, $61,000 per month; shipping, 5% of sales; other expenses, 3% of sales. Depreciation, including depreciation on new assets acquired during the quarter, will be $43,060 for the quarter.

6. Each month’s ending inventory should equal 25% of the following month’s cost of goods sold.

7. One-half of a month’s inventory purchases is paid for in the month of purchase; the other half is paid in the following month.

8. During February, the company will purchase a new copy machine for $1,600 cash. During March, other equipment will be purchased for cash at a cost of $73,000.

9. During January, the company will declare and pay $45,000 in cash dividends.

10. Management wants to maintain a minimum cash balance of $30,000. The company has an agreement with a local bank that allows the company to borrow in increments of $1,000 at the beginning of each month. The interest rate on these loans is 1% per month and for simplicity we will assume that interest is not compounded. The company would, as far as it is able, repay the loan plus accumulated interest at the end of the quarter.

Required:

Using the data above, complete the following statements and schedules for the first quarter:

1. Schedule of expected cash collections:

2-a. Merchandise purchases budget:

2-b. Schedule of expected cash disbursements for merchandise purchases:

3. Cash budget:

4. Prepare an absorption costing income state

Audiophonics Limited manufactures and sells high-quality and durable ear buds for use with personal electronics that are custom moulded to each customer’s ear. Cost data for the product follow: Variable costs per unit: Direct materials $ 12 Direct labour 17 Variable factory overhead 7 Variable selling and administrative 6 Total variable costs per unit $ 42 Fixed costs per month: Fixed manufacturing overhead $ 235,400 Fixed selling and administrative 214,000 Total fixed cost per month $ 449,400 The product sells for $65 per unit. Production and sales data for May and June, the first two months of operations, are as follows: Units Produced Units Sold May 21,400 16,200 June 21,400 26,600 Income statements prepared by the Accounting Department using absorption costing are presented below: May June Sales $ 1,053,000 $ 1,729,000 Cost of goods sold: Beginning inventory 0 244,400 Add cost of goods manufactured 1,005,800 1,005,800 Goods available for sale 1,005,800 1,250,200 Less ending inventory 244,400 0 Cost of goods sold 761,400 1,250,200 Gross margin 291,600 478,800 Selling and administrative expenses 311,200 373,600 Operating income $ (19,600) ) $ 105,200 Required: 1. Determine the unit product cost under each of the following methods. 2. Prepare variable costing income statements for May and June using the contribution approach. (Do not leave any empty spaces; input a 0 wherever it is required.) 3. Reconcile the variable costing and absorption costing operating income figures. (Loss amounts should be indicated with a minus sign.)

Many companies paid dividends in 20YY and these payouts were attributed to the large cash build-up relative to the market values of many firms. Starbucks was an example of this phenomenon. After two years of poor performance and store closings, in the first quarter of 20YY, Starbucks announced its first dividend payout. They announced not only a 10 cent dividend per share but also announced they would begin to buy back their own shares. Most analysts believe Starbucks has passed the fast-growth stage and are entering a maturity period. What is Starbucks share repurchase and enhanced dividend saying about its future prospects?

Tami Tyler opened Tami’s Creations, Inc., a small manufacturing company, at the beginning of the year. Getting the company through its first quarter of operations placed a considerable strain on Ms. Tyler’s personal finances. The following income statement for the first quarter was prepared by a friend who has just completed a course in managerial accounting at State University.

Ms. Tyler is discouraged over the loss shown for the quarter, particularly because she had planned to use the statement as support for a bank loan. Another friend, a CPA, insists that the company should be using absorption costing rather than variable costing and argues that if absorption costing had been used the company probably would have reported at least some profit for the quarter.

At this point, Ms. Tyler is manufacturing only one product—a swimsuit. Production and cost data relating to the swimsuit for the first quarter follow:

Required:

1. Complete the following:

a. Compute the unit product cost under absorption costing.

b. What is the company’s absorption costing net operating income (loss) for the quarter?

c. Reconcile the variable and absorption costing net operating income (loss) figures.

3. During the second quarter of operations, the company again produced 31,600 units but sold 34,600 units. (Assume no change in total fixed costs.)

a. What is the company’s variable costing net operating income (loss) for the second quarter?

b. What is the company’s absorption costing net operating income (loss) for the second quarter?

c. Reconcile the variable costing and absorption costing net operating incomes for the second quarter.

req 3a

During the second quarter of operations, the company again produced 31,600 units but sold 34,600 units. What is the company’s variable costing net operating income (loss) for the second quarter?

req 3b

During the second quarter of operations, the company again produced 31,600 units but sold 34,600 units. What is the company’s absorption costing net operating income (loss) for the second quarter? (Round your intermediate calculations to 2 decimal places.)

req 3c

During the second quarter of operations, the company again produced 31,600 units but sold 34,600 units. Reconcile the variable costing and absorption costing net operating incomes (losses) for the second quarter.  (Losses and deductions should be entered as a negative.)

On January 1, 2015, the Mayfield Corporation issued $500 million of zero-coupon debentures, due December 31, 2025. The proceeds of the bond sale totaled approximately $192.772 million. Assuming semi-annual compounding, estimate the effective interest rate on the zero-coupon debentures. Calculate the interest expense incurred by the Mayfield Corporation during the first year that the debt was outstanding.

We Pay Insurance Co. will pay you $1,025 each quarter for 21 years. You want to earn a minimum interest rate of .82 percent per quarter. What is the most you are willing to pay today for these payments?