1.

Which of the following statements is not true?

2.

Which of the following examples best represents a passive dividend policy?

3.

Suppose a company pays out fully franked dividends of $140 each to investors with marginal tax rates 45%. The statutory company tax rate is 30%. How much tax will each investor pay on his/her franked dividend?

4.

Apple Computer initiated a cash dividend and stock split in 1987 to:

5.

Suppose an individual subject to a 30 per cent marginal rate of income tax has 2,500 shares in a company that is paying a partially franked dividend of 40 cents per share, with a franking ratio of 0.70 (i.e. 70%). The individual is a resident for taxation purposes. If the company tax rate is 30 per cent, the tax credit can the individual claim due to the partially franked dividends is:

6.

A capital loss occurs when:

7.

The buyer of a call option has the choice to exercise, but the writer of the call option has:

8.

Suppose a stock exists with a price of $17, and a put option on the stock exists with an exercise price of $32. What is the approximate minimum value of the put option?

9.

The merger of Westpac Bank and St George bank is an example of ________merger.

10

Mr. Martin buys a put option to sell 100 shares. The strike price=$70; Current stock price=$65, price of the put option to sell one share=$7. At the time of the expiration of the put option, the share price is $72. What is the total gain or loss of Mr. Martin?

QUESTION 1

1. The main issue in accounting for foreign currency transactions is:

   		how to distinguish between denomination currency or settlement currency.
   		how to translate the financial statements of a foreign operation.
   		how to treat any foreign exchange differences that arise when assets or liabilities are remeasured at the end of the reporting period using the closing rate.
   		how to record transactions with foreign operations.

0.1 points   

QUESTION 2

1. For a company that has an Australian A$ as its functional currency, which of the following is not a foreign currency transaction?

   		goods sold at prices denominated in UK pounds.
   		inventory sold to a customer in Hong Kong who pays in A$.
   		borrowing funds where amounts are payable in NZ$.
   		equipment sold at prices denominated in Japanese Yen.

0.1 points   

QUESTION 3

1. In determining an entity's functional currency, factors to be considered include which of the following?

   		The currency in which receipts from operating activities are usually retained.
   		The currency that mainly influences sales prices for goods and services.
   		The currency of the country whose competitive forces and regulations mainly determine the sales price of its goods and services.
   		All of the above.

0.1 points   

QUESTION 4

1. Which exchange rate is used at the end of the reporting period?

   		The closing rate.
   		The indirect rate.
   		The spot rate.
   		The ending rate.

0.1 points   

QUESTION 5

1. A realised exchange difference arises:

   		on remeasurement of a monetary liability at the end of the reporting period.
   		when the exchange rate changes between initial recognition and cash settlement.
   		on initial recognition of a monetary asset.
   		when the exchange rate changes between initial recognition and end of reporting period.

0.1 points   

QUESTION 6

1. At the date of the transaction, a foreign currency monetary item is initially recognised and measured using:

   		The closing rate.
   		US dollars.
   		The foreign currency monetary value.
   		Spot exchange rate.

0.1 points   

QUESTION 7

1. All of the following assets can be defined as ‘qualifying assets’ except:

   		manufacturing plants.
   		power generation facilities.
   		investment properties.
   		inventories purchased ready for sale.

0.1 points   

QUESTION 8

1. Which of the following statements is incorrect?

   		Borrowing costs are interest and other costs that an entity incurs in connection with the borrowing of funds.
   		Financial assets and inventories that are manufactured or otherwise produced over a short period of time, and assets that are ready for their intended use or sale when acquired, are qualifying assets.
   		Financial assets and inventories that are manufactured or otherwise produced over a short period of time, and assets that are ready for their intended use or sale when acquired, are not qualifying assets.
   		A qualifying asset is an asset that necessarily takes a substantial period of time to get ready for its intended use or sale.

0.1 points   

QUESTION 9

1. If an Australian (A$) company enters a forward exchange contract to buy US$20,000, then which of the following applies?

   		The company’s contractual obligation (at the forward rate) and contractual right (at the spot rate) are settled on a net basis.
   		The company has a contractual right to receive US$20,000 at the settlement date and that right is an asset fixed in A$ at the forward rate.
   		The company has a contractual obligation to deliver foreign currency at the settlement date and that obligation is realised at the spot rate.
   		The company’s forward contract will act as a hedge against a recognised asset.

0.1 points   

QUESTION 10

1. AASB121/ IAS 21 The Effects of Changes in Foreign Exchange Rates requires that the financial report disclose which of the following?

   		The net exchange differences recognised in OCI and accumulated in a separate component of equity.
   		The amount of exchange differences recognised in the profit or loss for the period other than those that relate to financial instruments measured at fair value through profit or loss.
   		Any change in functional currency and reason for change.
   		All of the above.

Sandhill Machinery Corporation, a private company following ASPE sold manufacturing equipment for $2,100 each. Each machine carried with it a 2-year warranty against manufacturing defects. From experience, Sandhill Machinery Corporation determined that each machine sold would average $253 in replacement parts. In 2020, the company sold 1,000 machines. Also in 2020, the company incurred $125,000 in total repair costs (the cost of replacement parts from inventory). Sandhill Machinery Corporation also sold an extended warranty for its machines. For $430, customers could purchase an extended warranty that extended the warranty on the machine for an additional 2 years. 800 of the customers that bought machines also purchased the extended warranty. Assume the revenue is earned evenly over the two-year contract. Using the Revenue Approach, prepare the journal entry to record the sale of the machines and extended warranties. (Ignore any cost of goods sold entry).Using the Revenue Approach, prepare the journal entry to record the warranty costs incurred during 2020.

Using the Revenue Approach, prepare the journal entry to record the year-end adjusting entries at December 31, 2020,for the assurance-type warranties assuming Sandhill’s year-end is December 31. Using the Revenue Approach, prepare the journal entry to record the year-end adjusting entries at December 31, 2022 for the service-type warranties. (Note: assume that the cost of repairs has already been recorded during 2022 and prepare any other adjusting entry needed). (

Example 6-2 John Jenkins earns $1,290 per week. The deductions from his pay were: FIT $116.00 FICA—OASDI 79.98 FICA—HI 18.71 State income tax 31.00 State disability insurance 9.03 Credit union deduction 40.00 Health insurance premium 47.50 Charitable contribution 5.00 John’s disposable earnings would be: $1,290.00 - $116.00 (FIT) - $79.98 - $18.71 (FICA deductions) - $31.00 (SIT) - $9.03 (disability insurance) = $1,035.28 Example 6-3 Huffman Company has a child support order outstanding on one of its employees (Charles Suffert—$170 per week). Charles Suffert's disposable income is $950 per week. A new garnishment is received for a $5,000 debt to a credit card company. The company would take an additional $237.50 out of Suffert's pay. Lesser of: 25% × $950 = $237.50 or $950 − (30 × $7.25) = $732.50 Kalen O'Brien earned $720 this week. The deductions from her pay were as follows: FIT $76.00 FICA-OASDI 44.64 FICA-HI 10.44 State income tax 36.00 State disability insurance 8.71 Health insurance premium 19.00 Credit union contribution 38.00 United Fund contribution 6.00 O'Brien's employer just received a garnishment order (credit card debt of $3,560) against her pay. Compute the following; round your answers to the nearest cent. a. O'Brien's disposable earnings: $____________ b. The amount of her pay subject to the garnishment: $___________

Example 6-2 John Jenkins earns $1,290 per week. The deductions from his pay were: FIT $116.00 FICA—OASDI 79.98 FICA—HI 18.71 State income tax 31.00 State disability insurance 9.03 Credit union deduction 40.00 Health insurance premium 47.50 Charitable contribution 5.00 John’s disposable earnings would be: $1,290.00 - $116.00 (FIT) - $79.98 - $18.71 (FICA deductions) - $31.00 (SIT) - $9.03 (disability insurance) = $1,035.28 Example 6-3 Huffman Company has a child support order outstanding on one of its employees (Charles Suffert—$170 per week). Charles Suffert's disposable income is $950 per week. A new garnishment is received for a $5,000 debt to a credit card company. The company would take an additional $237.50 out of Suffert's pay. Lesser of: 25% × $950 = $237.50 or $950 − (30 × $7.25) = $732.50 Kalen O'Brien earned $735 this week. The deductions from her pay were as follows: FIT $74.00 FICA-OASDI 45.57 FICA-HI 10.66 State income tax 36.75 State disability insurance 8.41 Health insurance premium 19.60 Credit union contribution 37.00 United Fund contribution 5.00 O'Brien's employer just received a garnishment order (credit card debt of $3,330) against her pay. Compute the following; round your answers to the nearest cent. a. O'Brien's disposable earnings: $ b. The amount of her pay subject to the garnishment: $

Always Fresh is in the business of delivering home meal kits. Noah the Chief Marketing Officer for Always Fresh wants to assess how much the firm is worth. To do so, Noah assesses transactional data for 2019 (Prior research in Finance has concluded that 1 year of transaction data is an acceptable amount of time to arrive at firm value).

Always Fresh has two SKU's (Stock keeping units) - individual meals and a bouquet of 10 meals. Each is delivered directly to the customer's doorsteps. To keep the operation lean, Always Fresh has followed a 100% digital business model by not owning any physical property. It has partnered with certified professionals across the country who source, pack, and ship the orders. The following is the transactional data for 2019.

For individual meal customers, Always Fresh spent USD 6.3 mn dollars in 2019 to acquire them. The retention rate for these customers is 15% per annum and Always Fresh makes a 30% margin on these orders.

For customers that order 10 meals, Always Fresh spent USD 2.1 mn dollars in 2019 to acquire them. The retention rate for these customers is 22% and Always Fresh makes a hefty 40% margin on these orders.

Based on the above information, you have to help Noah in computing the customer value Always Fresh.

You can assume the discount rate to be 2%. As time is not mentioned, you should assume time to be infinity.

Always Fresh is in the business of delivering home meal kits. Noah the Chief Marketing Officer for Always Fresh wants to assess how much the firm is worth. To do so, Noah assesses transactional data for 2019 (Prior research in Finance has concluded that 1 year of transaction data is an acceptable amount of time to arrive at firm value).

Always Fresh has two SKU's (Stock keeping units) - individual meals and a bouquet of 10 meals. Each is delivered directly to the customer's doorsteps. To keep the operation lean, Always Fresh has followed a 100% digital business model by not owning any physical property. It has partnered with certified professionals across the country who source, pack, and ship the orders. The following is the transactional data for 2019.

For individual meal customers, Always Fresh spent USD 6.3 mn dollars in 2019 to acquire them. The retention rate for these customers is 15% per annum and Always Fresh makes a 30% margin on these orders.

For customers that order 10 meals, Always Fresh spent USD 2.1 mn dollars in 2019 to acquire them. The retention rate for these customers is 22% and Always Fresh makes a hefty 40% margin on these orders.

Based on the above information, you have to help Noah in computing the customer value Always Fresh.

You can assume the discount rate to be 2%. As time is not mentioned, you should assume time to be infinity.

Provide positive feedback:

Powerful incentives can cause undesired behaviors. Suggest ways to solve this problem, using something you know a great deal about – academic performance. With incentives come the challenges of ethical, moral, and legal behavior having a diminished impact on the choices one makes to achieve the incentive. This effect was shown with outstanding in the banking sector during the 2008 economic meltdown. The large incentives offered to the people working in the financial sector drove large groups to conduct unethical and what became illegal operations that led to the collapse of the US housing market and had ripple effects throughout the world’s economies. In the scholastic arena, having training to educate students on what unethical and illegal behavior is a first step. Then by giving students the tools needed to verify that their work is not breaching these two things before turning their work in. And finally, by giving instructors and institutions the tools to check and verify a student’s work ins their own. This system works by e3ducating then having checks and balances in place to verify. How would you design a pay-performance system that uses powerful incentives to motivate behavior, yet keep the behavior from veering into the unethical? (Hint: You want to keep the powerful incentive effect of pay. So, don’t recommend eliminating incentive pay or reducing the size of the incentive component.) What’s left? The first step is offering an equal ability to all employees to obtain the incentive. This will involve training, mentoring, and the opportunity to have access to the incentives. Next the incentives must be set in a way that ensures the methods of reaching the incentives encourages employees to behave in a manner that is congruent to the company’s mission and culture. Lastly the methods employees use to reach the incentives must be able to be verified with a checks and balances by someone that the incentives will not effect. How do you ensure ethical behavior? This starts with the company and its core mission statement, then this has to be followed up with training on the standards, laws and expectations. Lastly the company must use checks and balances to verify the methods being used are following the ethical standards put in place. These checks must be conducted by someone who is not going to benefit from the manipulation of ethical judgment.

Required information

Problem 3-5A Preparing financial statements from the adjusted trial balance and computing profit margin LO P6, A1

[The following information applies to the questions displayed below.]
  
The adjusted trial balance for Chiara Company as of December 31 follows.

Problem 3-5A Part 1

Required:
1(a) Prepare the income statement for the year ended December 31.
1(b) Prepare the statement of owner's equity for the year ended December 31. [Note: R. Chiara, Capital at Dec. 31 of the prior year was $255,800.]
1(c) Prepare Chiara Company's balance sheet as of December 31.
  

1. HK Limited has 100 employees. Each employee earns two weeks of paid vacation per year. Vacation time not taken in the year earned can be carried over to two calendar years. Paid leave is first taken out of the balance brought forward from the previous year and then out of the current year’s entitlement (a FIFO basis). During 2019, 30 employees took both weeks’ vacation, but at the end of the year, 70 employees had vacation time carryover as follows:

During 2019, the average salary for employees is $5,000 per week.                       

2. The profit sharing plan requires HK Ltd. to pay 2% of its net profit to its two directors, Mr. Yau Wen and Ms. Shally Tin. The net profit for 2019 is $3,500,000. Mr. Wen will receive the bonus six months after the end of 2019, whereas Ms. Tin would be paid on July 2021 since she joined the company in March of 2019.                     

3. HK Ltd. agrees to pay a fixed contribution of 5% of employees’ salary to a retirement plan, subject to a cap of $1,250 per month for each employee. The contribution is paid monthly on or before the 10th of the following month. Out of the 200 employees, 160 employees earn an average monthly salary of $20,000.   The remaining employees earn more than $35,000 per month.   

Required:

Classify the nature of the employee benefit(s) above and explain the accounting treatment (provide journal entries if necessary)