Question 11
--/40
View Policies
Current Attempt in Progress
Flounder Inc., a greeting card company, had the following statements prepared as of December 31, 2020.
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FLOUNDER INC. |
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12/31/20 |
12/31/19 |
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Cash |
$5,900 |
$6,900 |
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Accounts receivable |
61,400 |
50,800 |
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Short-term debt investments (available-for-sale) |
35,000 |
17,800 |
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Inventory |
40,000 |
59,400 |
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Prepaid rent |
5,000 |
3,900 |
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Equipment |
155,200 |
129,000 |
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Accumulated depreciation—equipment |
(35,000 |
) |
(25,000 |
) |
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Copyrights |
45,600 |
49,900 |
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Total assets |
$313,100 |
$292,700 |
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Accounts payable |
$46,300 |
$39,800 |
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Income taxes payable |
3,900 |
6,100 |
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Salaries and wages payable |
7,900 |
3,900 |
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Short-term loans payable |
8,000 |
10,100 |
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Long-term loans payable |
60,100 |
68,400 |
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Common stock, $10 par |
100,000 |
100,000 |
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Contributed capital, common stock |
30,000 |
30,000 |
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Retained earnings |
56,900 |
34,400 |
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Total liabilities & stockholders’ equity |
$313,100 |
$292,700 |
Question 11 --/40 View Policies Current Attempt in Progress Flounder Inc., a greeting card company, had the following statements prepared as of December 31, 2020.
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In: Accounting
Nominal GDP was $21,329.8 billion in Q2 of 2019 and fell to $19,520.1 billion in Q2 in 2020. Real GDP was $19,020.6 for Q2 in 2019 and $17,302.5 for Q2 in 2020, where 2012 was the base year. Compute the percentage change in the GDP deflator during this period.
In: Economics
The senior management of SFU and UBC were deeply concerned about the enrollment for Fall 2020 in March because of the pandemic. However, it turned that the enrollment went up by 5 – 10% for Fall 2020. Please explain this phenomenon using concepts from this course.
In: Accounting
Haaland Company depreciates an asset with an original cost of $8,000 over 5 years using the sum-of-the-years digits’ method of depreciation. The asset was purchased on July 1, 2020 and the depreciation expense for 2020 is $1,250. What is the estimated salvage value of the asset?
In: Accounting
Jen and Larry’s Frozen Yogurt Company
In 2019, Jennifer (Jen) Liu and Larry Mestas founded Jean and Larry’s Frozen Yogurt Company, which was based on the idea of applying the microbrew or microbatch strategy to the production and sale of frozen yogurt. Jen and Larry began producing small quantities of unique flavors and blends in limited editions. Revenues were $600,000 in 2019 and were estimated to be $1.2 million in 2020.
Because Jen and Larry were selling premium frozen yogurt containing premium ingredients, each small cup of yogurt sold for $3, and the cost of producing the frozen yogurt averaged $1.50 per cup. Administrative expenses, including Jen and Larry’s salary and expenses for an accountant and two other administrative staff, were estimated at $180,000 in 2020. Marketing expenses, largely in the form of behind-the-counter workers, in-store posters, and advertising in local newspapers, were projected to be $200,000 in 2020.
An investment in bricks and mortar was necessary to make and sell the yogurt. Initial specialty equipment and the renovation of an old warehouse building in lower downtown (known as LoDo) occurred at the beginning of 2019. Additional equipment needed to make the amount of yogurt forecasted to be sold in 2020 was purchased at the beginning of 2020. As a result, depreciation expenses were expected to be $50,000 in 2020. Interest expenses were estimated at $15,000 in 2020. The average tax rate was expected to be 25% of taxable income.
Calculate the EBDAT breakeven point for 2020 in terms of survival revenues for Jen and Larry’s Frozen Yogurt Company. How many cups of frozen yogurt would have to be sold to reach EBDAT breakeven?
Show what would happen to the EBDAT breakeven point in terms of survival revenues if the cost of producing a cup of yogurt increased to $1.60 but the selling price remained at $3.00 per cup. How would the EBDAT breakeven change if production costs declined to $1.40 per cup when the yogurt selling price remained at $3.00 per cup?
In: Finance
CHAPTER 18
ALLIED TESTING COMPANY MANUFACTURES AND SELLS THERMOMETERS THAT DETECT BODY TEMPERATURE. IT IS EXPECTING AN INCREASE IN SALES DUE TO THE CORONAVIRUS PANDEMIC. ALLIED HAS APPLIED FOR A LOAN TO FUND EXPANSION AND THE BANK IS REQUIRING FINANCIAL INFORMATION.
2020 ACTIVITY
NET REVENUE FOR THE YEAR $2,700,000
SELLING EXPENSES $ 200,000
ADMINISTRATIVE EXPENSES $ 110,000
BEGINNING FINISHED GOODS INVENTORY $ 40,000
ENDING FINISHED GOODS INVENTORY $ 60,000
BEGINNING WORK IN PROCESS INVENTORY $ 20,000
ENDING WORK IN PROCESS INVENTORY $ 100,000
BEGINNING DIRECT MATERIALS $ 250,000
DIRECT MATERIALS PURCHASED DURING MONTH $ 740,000
ENDING DIRECT MATERIALS $ 80,000
DIRECT LABOR FOR THE MONTH $ 220,000
PLANT UTILITIES FOR THE MONTH $ 27,000
PLANT INSURANCE FOR THE MONTH $ 19,000
PLANT MAINTENANCE FOR THE MONTH $ 30,000
PLANT DEPRECIATION FOR THE MONTH $ 24,000
REQUIRED:
CHAPTER 18
ALLIED TESTING COMPANY MANUFACTURES AND SELLS THERMOMETERS THAT DETECT BODY TEMPERATURE. IT IS EXPECTING AN INCREASE IN SALES DUE TO THE CORONAVIRUS PANDEMIC. ALLIED HAS APPLIED FOR A LOAN TO FUND EXPANSION AND THE BANK IS REQUIRING FINANCIAL INFORMATION.
2020 ACTIVITY
NET REVENUE FOR THE YEAR $2,700,000
SELLING EXPENSES $ 200,000
ADMINISTRATIVE EXPENSES $ 110,000
BEGINNING FINISHED GOODS INVENTORY $ 40,000
ENDING FINISHED GOODS INVENTORY $ 60,000
BEGINNING WORK IN PROCESS INVENTORY $ 20,000
ENDING WORK IN PROCESS INVENTORY $ 100,000
BEGINNING DIRECT MATERIALS $ 250,000
DIRECT MATERIALS PURCHASED DURING MONTH $ 740,000
ENDING DIRECT MATERIALS $ 80,000
DIRECT LABOR FOR THE MONTH $ 220,000
PLANT UTILITIES FOR THE MONTH $ 27,000
PLANT INSURANCE FOR THE MONTH $ 19,000
PLANT MAINTENANCE FOR THE MONTH $ 30,000
PLANT DEPRECIATION FOR THE MONTH $ 24,000
REQUIRED:
In: Accounting
Answer for 8 and 9
On October 15, 2016, Koala, Inc. issued a 10 year bond (with a typical $1000 face value) that had an annual coupon value of $60. [We are assuming that the 2020 coupon has just been redeemed.]
1. What was the nominal yield on this bond on October 15, 2016? 6% [To 1 decimal place.]
2. What was the current yield on this bond on October 15, 2016?5.36% [To 2 decimal places.]
3. What was the yield to maturity for this bond on October 15, 2016? 5.679% [To 3 decimal places.]
4. What was the risk premium for this bond on October 15, 2016? 1.179% [To 3 decimal places.]
5. What was the nominal yield on this bond on October 15, 2020?6% [To 1 decimal place.]
6. What was the current yield on this bond on October 15, 2020?6.15% [To 2 decimal place.]
7. What was the yield to maturity for this bond on October 15, 2020?6.346% [To 3 decimal places.]
8. What was the risk premium for this bond on October 15, 2020? [To 3 decimal places.]
9. It is now October 15, 2020 and suddenly the Federal Reserve announces a massive program to reduce inflation. Instantly, the market rate of interest for a riskless corporate bond that would apply to this bond, falls from 4.0% to 2.5%. If there is no change in the risk premium expected for this Koala, Inc. bond, what will be this bond’s yield to maturity? [To 3 decimal places.]
In: Finance
| 1. | On January 1, 2020, Riverbed signed an agreement to operate as a franchisee of Copy Service Inc., for an initial franchise fee of $75,000. Of this amount, $35,000 was paid when the agreement was signed and the balance is payable in four annual payments of $10,000 each, beginning January 1, 2022. The agreement provides that the down payment is not refundable and no future services are required of the franchisor. The present value at January 1, 2020, of the four annual payments discounted at 7% (the implicit rate for a loan of this type) is $33,872. The agreement also provides that 5% of the franchisee’s revenue must be paid to the franchisor each year. The franchisor requires that Riverbed provide it with some form of assurance verifying the revenue amount used to determine the 5% payment. Riverbed’s revenue from the franchise for 2020 was $760,000. Riverbed estimates that the franchise’s useful life will be 10 years. | |
| 2. | Riverbed incurred $45,000 in experimental costs in its laboratory to develop a patent, and the patent was granted on January 2, 2020. Legal fees and other costs of patent registration totalled $13,600. Riverbed estimates that the useful life of the patent will be 6 years. | |
| 3. | A trademark was purchased from Shanghai Company for $28,700 on July 1, 2017. The legal costs to successfully defend the trademark totalled $8,160 and were paid on July 1, 2020. Riverbed estimates that the trademark’s useful life will be 14 years from the acquisition date. |
Assume that Riverbed reports using ASPE. Prepare a schedule showing the intangible assets section of Riverbed’s statement of financial position at December 31, 2020. (Round answers to 0 decimal places, e.g. 5,275. Enter account name only and do not provide descriptive information.)
| Riverbed Corporation Intangible Assets December 31, 2020 |
||
| $ | ||
| Total Intangible Assets | $ | |
Compute the total amount of expenses resulting from the transactions that would appear on Riverbed’s income statement for the year ended December 31, 2020.
In: Accounting
Jen and Larry’s Frozen Yogurt Company
In 2019, Jennifer (Jen) Liu and Larry Mestas founded Jean and Larry’s Frozen Yogurt Company, which was based on the idea of applying the microbrew or microbatch strategy to the production and sale of frozen yogurt. Jen and Larry began producing small quantities of unique flavors and blends in limited editions. Revenues were $600,000 in 2019 and were estimated to be $1.2 million in 2020.
Because Jen and Larry were selling premium frozen yogurt containing premium ingredients, each small cup of yogurt sold for $3, and the cost of producing the frozen yogurt averaged $1.50 per cup. Administrative expenses, including Jen and Larry’s salary and expenses for an accountant and two other administrative staff, were estimated at $180,000 in 2020. Marketing expenses, largely in the form of behind-the-counter workers, in-store posters, and advertising in local newspapers, were projected to be $200,000 in 2020.
An investment in bricks and mortar was necessary to make and sell the yogurt. Initial specialty equipment and the renovation of an old warehouse building in lower downtown (known as LoDo) occurred at the beginning of 2019. Additional equipment needed to make the amount of yogurt forecasted to be sold in 2020 was purchased at the beginning of 2020. As a result, depreciation expenses were expected to be $50,000 in 2020. Interest expenses were estimated at $15,000 in 2020. The average tax rate was expected to be 25% of taxable income.
Show what would happen to the EBDAT breakeven point in terms of survival sales if an additional $30,000 was spent on advertising in 2020 while the other fixed costs remained the same, production costs remained at $1.50 per cup, and the selling price remained at $3.00 per cup.
Now assume that, due to competition, Jen and Larry must sell their frozen yogurt for $2.80 per cup in 2020. The cost of producing the yogurt is expected to remain t $1.50 per cup and cash fixed costs are forecasted to be $395,000 ($180,000 in administrative, $200,000 in marketing, and $15,000 in interest expenses). Depreciation expenses and the tax rate are also expected to remain the same as projected in the initial discussion of Jen and Larry’s venture. Calculate the EBDAT breakeven point in terms of survival breakeven revenues.
In: Finance
Q3 Foreign currency translation A: 20 marks
On January 1, 2020, in an effort to diversify, Bauman Corp. (a Canadian company that sells decorative cedar branches), purchased 80% of Noskova Inc, an American company that manufacturers nitrous oxide, for US$50,000.
Noskova’s book values approximated its fair values on that date except for plant and equipment, which had a fair value of US$30,000 with a remaining life expectancy of 5 years. A goodwill impairment loss of US$1,000 occurred during 2020. Noskova’s January 1, 2020, Balance Sheet is shown below (in U.S. dollars):
|
Current Monetary Assets |
$50,000 |
|
Inventory |
$40,000 |
|
Plant and Equipment |
$25,000 |
|
Total Assets |
$115,000 |
|
Current Liabilities |
$45,000 |
|
Bonds Payable (maturity: January 1, 2026) |
$20,000 |
|
Common Shares |
$30,000 |
|
Retained Earnings |
$20,000 |
|
Total Liabilities and Equity |
$115,000 |
The following exchange rates were in effect during 2020:
|
January 1, 2020: |
US $1 = CDN $1.3250 |
|
Average for 2020: |
US $1 = CDN $1.3350 |
|
Date when Ending Inventory Purchased: |
US $1 = CDN $1.34 |
|
December 31, 2020: |
US $1 = CDN $1.35 |
Sales, purchases and other expenses occurred evenly throughout
the year.
Dividends declared and paid December 31, 2020.
The financial statements of Bauman (in Canadian dollars) and
Noskova (in U.S. dollars) are shown below:
Balance Sheets
|
Bauman |
Noskova |
|
|
Current Monetary Assets |
$42,050 |
$65,000 |
|
Inventory |
$60,000 |
$50,000 |
|
Plant and Equipment |
$23,500 |
$20,000 |
|
Investment in Martin (at Cost) |
$66,250 |
|
|
Assets |
$191,800 |
$135,000 |
|
Current Liabilities |
$50,000 |
$48,000 |
|
Bonds Payable (maturity: January 1, 2026) |
$35,000 |
$20,000 |
|
Common Shares |
$60,000 |
$30,000 |
|
Retained Earnings |
$30,000 |
$20,000 |
|
Net Income |
$28,800 |
$27,000 |
|
Dividends |
($12,000) |
($10,000) |
|
Liabilities and Equity |
$191,800 |
$135,000 |
|
Income Statements |
Larmer |
Martin |
|
Sales |
$80,000 |
$50,000 |
|
Dividend Income |
$10,800 |
|
|
Cost of Sales |
($40,000) |
($15,000) |
|
Depreciation |
($10,000) |
($5,000) |
|
Other expenses |
($12,000) |
($3,000) |
|
Net Income |
$28,800 |
$27,000 |
Translate Noskova’s 2020 Income Statement into Canadian dollars if the functional currency is the Canadian dollar (i.e. the same functional currency as the parent).
In: Accounting