E) Aaron, Deanne, and Keon formed the Blue Bell General Partnership at the beginning of the current year. Aaron and Deanne each contributed $110,000 and Keon transferred an acre of undeveloped land to the partnership. The land had a tax basis of $70,000 and was appraised at $180,000. The land was also encumbered with a $70,000 nonrecourse mortgage for which no one was personally liable. All three partners agreed to split profits and losses equally. At the end of the first year Blue Bell made a $7,000 principal payment on the mortgage. For the first year of operations, the partnership records disclosed the following information:Sales revenue $470,000Cost of goods sold $410,000Operating expenses $70,000Long-term capital gains $2,400§1231 gains $900Charitable contributions $300Municipal bond interest $300Salary paid as a guaranteed payment to Deanne (not included inexpenses)

a.Compute the adjusted basis of each partner’s interest in the partnership immediately after the formation of the partnership.b.List the separate items of partnership income, gains, losses, and deductions that the partners must show on their individual income tax returns that include the results of the partnership’s first year of REVIEW QUESTIONSoperations.c.What are the partners’ adjusted bases in their partnership interests at the end of the first year of operations

(1) Playing with data: Download quarterly, seasonally adjusted data on US real GDP, personal consumption expenditures, and gross private domestic investment for the period 1947q1 - 2010q2. You can download these series from the Bureau of Economic Analysis (BEA) or the St. Louis Fed FRED database.

(a) Take the natural logarithm of each series (ì=ln(series)î in Excel) and plot each against time. Which series appears to move around the most? Which series appears to move around the least?

(b) The growth rate of a random variable, x, between dates t 1 and t is deÖned as: g x t = xt xt1 xt1 Calculate the growth rate of each of the three series (using the raw series, not the logged series) and write down the average growth rate of each series over the entire post-war sample period. Are the average growth rates of each series approximately the same?

(c) We argued in class that the Örst di§erence of the log is approximately equal to the growth rate: g x t ln xt ln xt1 Compute the approximate growth rate of each series this way. Comment on the quality of the approximation.

(d) The standard deviation of a series of random variables is a measure of how much the variable jumps around about its m (Excel command ì=stdev(series)î). Take the time series standard deviations of the growth rates of the three series mentioned above and rank them in terms of magnitude.

(e) The National Bureau of Economic Research (NBER) declares business cycle peaks and troughs (i.e. recessions and expansions) through a subjective assessment of overall economic conditions. A popular deÖnition of a recession ñnot the one used by the NBER ñis a period of time in which real GDP declines for at least two consecutive quarters. Use this consecutive quarter decline deÖnition to come up with your own recession dates for the entire post-war period. Compare the dates to those given by the NBER (just google ìNBER recession datesîto Önd those dates).

(f) The most recent recession is dated by the NBER to have begun in the fourth quarter of 2007. Compute the average growth rate of real GDP for the period 2003q1 - 2007q3. Compute a counterfactual time path of real GDP if it had grown at that rate over the period 2007q4-2010q2. Use that counterfactual simulation to speculate (intelligently) on the welfare cost of business cycles.

Allen Products​ LP, wants to do a scenario analysis for the coming year. The pessimistic prediction for sales is $ 900,000​; the most likely amount of sales is $ 1,118,000​; and the optimistic prediction is $ 1,288,000. ​Allen's income statement for the most recent year is shown here

Allen Products, Inc. Income Statement for
the Year Ended December 31, 2019  
Sales revenue   $937,400
Less: cost of good sold   436,828
Gross profits   $500,572
Less: operating expenses   245,599
Operating profits   $254,973
Less: interest expense   30,934
Net profit before taxes   $224,039
Less: taxes (rate 25%)   56,010
Net profits after taxes   $168,029

a. Use the ​percent-of-sales method, the income statement for December​ 31,2019​, and the sales revenue estimates to develop​ pessimistic, most​ likely, and optimistic pro forma income statements for the coming year.

b. Explain how this method could result in overstatement of profits for the pessimistic case and understatement of profits for the most likely and optimistic cases.

c. Restate the pro forma income statements prepared in part a. to incorporate the following assumptions about the costs:

$252,497 of the cost of goods sold is​ fixed; the rest is variable. $193,516 of the operating expenses is​ fixed; the rest is variable. All the interest expense is fixed.​

d. Compare your findings in part c. to your findings in part a. Do your observations confirm your explanation in part b​?

Use the ​percent-of-sales method, the income statement for December​ 31, 2019, and the sales revenue estimates to develop​ pessimistic, most​ likely, and optimistic pro forma income statements for the coming year.

Complete the pro forma income statement for the year ending December​ 31, 2020 that is shown below​ (pessimistic scenario): ​ (Round the percentage of sales to one decimal place and the pro forma income statement accounts to the nearest​ dollar.)

Today you decide to invest $10,000 in an investment account that earns 2% every quarter. Five years from today $ ____________ will have accumulated in the account. (Round to the nearest penny.)

At what substrate concentration would an enzyme with Km of 5mM operate at one-quarter its maximum rate? Give your answer in units of mM to 1 decimal place.

Performance Lawn Equipment (PLE)

PLE, headquartered in St. Louis, Missouri, is a privately-owned designer and producer of traditional lawn mowers used by homeowners. Annual sales are approximately $180 million. Both end users and institutions (organizations) are important customers for PLE. This case is ONLY about organizations (such as retail outlets) that buy from PLE. There are two type of organizations that are PLE customers: (1) dealerships or retail stores that in-turn sell to end-customers, and (2) organizations that buy products to use in their operations (such as golf courses or professional lawn care businesses). A purchasing manager in such organizations makes the decisions about which brand of lawn mowers to buy and how many to buy.

Elizabeth Burke has recently joined the PLE management team to oversee production operations. She has asked you to analyze results of a survey of purchasing managers in PLE’s institutional customers.

The worksheet Purchasing Survey in the Performance Lawn Care database provides data obtained from a survey of purchasing managers of institutional customers. Respondents rated PLE on the following seven attributes:

Delivery speed-the amount of time it takes to deliver the product once an order is confirmed

Price level-the perceived level of price charged by PLE

Price flexibility-the perceived willingness of PLE representatives to negotiate price on all types of purchases

Manufacturing image-the overall image of the manufacturer

Overall service-the overall level of Service necessary for maintaining a satisfactory relationship between PLE and the purchaser

Sales force image—the overall image of the PLE’s Sales force

Product quality-perceived level of quality

Responses to these Seven Variables were obtained using a graphic rating Scale, where a 10-centimeter line was drawn between endpoints labeled "poor and 'excellent." Respondents indicated their perceptions using a mark on the line, which was measured from the left endpoint. The result was a scale from 0 to 10 rounded to One decimal place.

Two measures were obtained that reflected the outcomes of the respondent's purchase relationships with PLE:

Usage level-how much of the firm's total product is purchased from PLE, measured on a 100-point Scale, ranging from 0% to 100%

Satisfaction level-how satisfied the purchaser is with past purchases from PLE, measured on the same graphic rating scale as perceptions 1 through 7

The data also include four characteristics of the responding firms:

Size of firm-size relative to others in this market (O = Small; 1 = large)

Purchasing structure-the purchasing method used in a particular company (1 = centralized procurement, 0 = decentralized procurement)

Industry-the industry classification of the purchaser l = retail (stores that resell to end consumers such as Home Depot), 0 = private (nonresale, Such as a profession lawn care business)

Buying type-a Variable that has three categories (1 = new purchase, 2 = modified rebuy, 3 = Straight rebuy)

Elizabeth Burke would like to understand what she learned from this data.

Cluster Analysis:

Apply cluster analysis to analyze the data to create a segmentation of institutional customers. For example, can PLE segment customers into groups with similar perceptions about the company? Do not use “Usage level” or “Satisfaction level” in making the clusters. Check to see if the clusters differ on usage level and satisfaction or not. Which clusters have high usage and satisfaction and which ones do not? Suggest actions management can take to increase usage and satisfaction for the different clusters.

Regression Analysis:

Can regression models provide insight about the drivers of satisfaction and usage level? What are the most important variables that need to be influenced to increase satisfaction and usage level? Suggest ways management can do so.

Summarize your results in a report to Ms. Burke.

Karantika Ltd operates at capacity and makes glass-topped coffee table. At the end of 2019, Karantika Ltd’s management accountant gathered the following data to prepare budgets for the first six months 2020:

1. Units sales per quarter and the selling price per unit are estimated as follows:

Unit sales Price per unit

January 2,700 $400

February 2,600 $400

March 2,800 $550

April 2,600 $550

May 2,650 $500

June 2,600 $500

July 3,000 $500

August 3,000 $550

Sales on November 2019 were 2,500 units and on December 2,400 units at a selling price of $450.

20% of sales are cash sales and 80% are credit sales. From experience, Karantika Ltd collected 40% of credit sales within the month of sale, 30% in the following month and 25% in two months after the month of sale. 5% of credit sales is uncollectable. The bad debt is calculated at the end of six month.

2. The beginning inventories (BI) on 1 January 2020 and the desired ending inventories (EI) at the end of each month are as follows:

3. Materials and labour requirements

Direct materials:

Wood: 2 board meters (b.m.) per table

Glass: 1 sheet per table

Direct manufacturing labour: 4 hours per table

4. Costs of direct materials and labour:

Wood: $16 per b.m.

Glass: $22 per sheet

Direct labour: $25 per labour-hour

5. Direct materials are purchased in the month of production and are paid 60% in the month of purchase and 40% in the following month. Wages and salaries are paid monthly.
6. Variable manufacturing overhead is $25 per direct manufacturing labour-hour. There is also $210,000 in fixed manufacturing overhead costs per month. Fixed costs include $40,000 depreciation of factory equipment. The fixed manufacturing overhead rate is based on the number of units produced budgeted every six months, at the beginning of each semester, calculated dividing the budgeted fixed overhead costs by the budgeted number of units produced for the semester. Variable and fixed costs are paid in the month incurred.
7. Sales commissions are paid monthly at the rate of 10% of month’s sales revenue. There is $160,000 in fixed non-manufacturing costs (administrative expenses) budgeted per month including $20,000 depreciation costs of office equipment. Variable and fixed non-manufacturing costs are paid in the month incurred.
8. Karantika Ltd has estimated the following payments in the first semester 2020:

January: Loan for $40,000 plus interest payable at 31 December 2019 for $2,000 were paid on 2 January 2020.

End of January: Dividends $100,000

Beginning of May: Purchase of land $200,000

Beginning of June: Purchase of equipment for $300,000. Estimated of useful life 5 year with zero residual value.

9. Karantika Ltd maintain a 18% open line of credit for $400,000. Interests are paid at the end of each month. Karantika Ltd maintains a minimum cash balance of $20,000. The company borrows on the first day of the month and repays loans on the last day of the month, both in multiples of $1,000. The income tax is 30%.
10. Karantika Ltd’s balance sheet at 31 December 2019 is as follows:

*At the beginning of the year there is no allowance of doubtful debt

** Account payable is from the direct material purchase.

Required:

Prepare a monthly master budget for Karantika Ltd’s for the first semester 2020. The following component budgets must be included ( round the number with two decimals):

1. Sales revenue budget
2. Production budget (in units)
3. Direct materials usage and purchases budget for each direct materials and total direct materials (in units and dollars)
4. Direct manufacturing labour budget
5. Manufacturing overhead budget
6. Manufacturing overhead rate for the semester
7. Ending finished goods inventory budget (unit cost and total cost) at June 2020.
8. Selling and administrative expenses budget
9. Cash budget
10. Cost of goods sold at 30 June 2020
11. Budgeted income statement for the first semester 2020
12. Budgeted balance sheet as of 30 June 2020 (including separately the two direct materials inventory)

Note. There is no beginning and ending balance of WIP in each month.

Karantika Ltd operates at capacity and makes glass-topped coffee table. At the end of 2019, Karantika Ltd’s management accountant gathered the following data to prepare budgets for the first six months 2020: Units sales per quarter and the selling price per unit are estimated as follows: Unit sales Price per unit January 2,700 $400 February 2,600 $400 March 2,800 $550 April 2,600 $550 May 2,650 $500 June 2,600 $500 July 3,000 $500 August 3,000 $550 Sales on November 2019 were 2,500 units and on December 2,400 units at a selling price of $450. 20% of sales are cash sales and 80% are credit sales. From experience, Karantika Ltd collected 40% of credit sales within the month of sale, 30% in the following month and 25% in two months after the month of sale. 5% of credit sales is uncollectable. The bad debt is calculated at the end of six month. The beginning inventories (BI) on 1 January 2020 and the desired ending inventories (EI) at the end of each month are as follows: BI (1/1/19) EI (end of each month) Tables:500 (at $210/unit) 20% of following month estimated sales Wood: 1,400 b.m. 25% b.m. needed for next month’s budgeted production (units) Glass 500 sheets 20% sheets needed for next month’s budgeted production (units) Materials and labour requirements Direct materials: Wood: 2 board meters (b.m.) per table Glass: 1 sheet per table Direct manufacturing labour: 4 hours per table Costs of direct materials and labour: Wood: $16 per b.m. Glass: $22 per sheet Direct labour: $25 per labour-hour Direct materials are purchased in the month of production and are paid 60% in the month of purchase and 40% in the following month. Wages and salaries are paid monthly. Variable manufacturing overhead is $25 per direct manufacturing labour-hour. There is also $210,000 in fixed manufacturing overhead costs per month. Fixed costs include $40,000 depreciation of factory equipment. The fixed manufacturing overhead rate is based on the number of units produced budgeted every six months, at the beginning of each semester, calculated dividing the budgeted fixed overhead costs by the budgeted number of units produced for the semester. Variable and fixed costs are paid in the month incurred. Sales commissions are paid monthly at the rate of 10% of month’s sales revenue. There is $160,000 in fixed non-manufacturing costs (administrative expenses) budgeted per month including $20,000 depreciation costs of office equipment. Variable and fixed non-manufacturing costs are paid in the month incurred. Karantika Ltd has estimated the following payments in the first semester 2020: January: Loan for $40,000 plus interest payable at 31 December 2019 for $2,000 were paid on 2 January 2020. End of January: Dividends $100,000 Beginning of May: Purchase of land $200,000 Beginning of June: Purchase of equipment for $300,000. Estimated of useful life 5 year with zero residual value. Karantika Ltd maintain a 18% open line of credit for $400,000. Interests are paid at the end of each month. Karantika Ltd maintains a minimum cash balance of $20,000. The company borrows on the first day of the month and repays loans on the last day of the month, both in multiples of $1,000. The income tax is 30%. Karantika Ltd’s balance sheet at 31 December 2019 is as follows: ASSETS LIABILITIES Cash 32,000 Accounts payable ** 64,000 Accounts receivable * 700,200 Interest payable 2,000 Inventory: Wood 22,400 Loan payable 40,000 Inventory: Glass 11,000 SHAREHOLDER’S EQUITY Inventory: Finished goods 105,000 Share capital 801,600 Plant and equipment, net 450,000 Retained earnings 413,000 Total assets 1, 320,600 Total Liabilities and Shareholder’s equity 1,320,600 *At the beginning of the year there is no allowance of doubtful debt ** Account payable is from the direct material purchase. Required: Prepare a monthly master budget for Karantika Ltd’s for the first semester 2020. The following component budgets must be included ( round the number with two decimals): Sales revenue budget Production budget (in units) Direct materials usage and purchases budget for each direct materials and total direct materials (in units and dollars) Direct manufacturing labour budget Manufacturing overhead budget Manufacturing overhead rate for the semester Ending finished goods inventory budget (unit cost and total cost) at June 2020. Selling and administrative expenses budget Cash budget Cost of goods sold at 30 June 2020 Budgeted income statement for the first semester 2020 Budgeted balance sheet as of 30 June 2020 (including separately the two direct materials inventory) Note. There is no beginning and ending balance of WIP in each month. Can you please
do the cash disbursements, cash collections manufacturing overhead
budget, cash budget?