National Orthopedics Co. issued 8% bonds, dated January 1, with a face amount of $600,000 on January 1, 2016. The bonds mature on December 31, 2019 (4 years). For bonds of similar risk and maturity the market yield was 12%. Interest is paid semiannually on June 30 and December 31. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: 1. Determine the price of the bonds at January 1, 2016. 2. Prepare the journal entry to record their issuance by National on January 1, 2016. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) 3. Prepare an amortization schedule that determines interest at the effective rate each period. 4. Prepare the journal entry to record interest on June 30, 2016. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) 5. Prepare the appropriate journal entries at maturity on December 31, 2019. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Fit & Slim (F&S) is a health club that offers members various gym services.

Required:
1. Assume F&S offers a deal whereby enrolling in a new membership for $700 provides a year of unlimited access to facilities and also entitles the member to receive a voucher redeemable for 25% off yoga classes for one year. The yoga classes are offered to gym members as well as to the general public. A new membership normally sells for $720, and a one-year enrollment in yoga classes sells for an additional $500. F&S estimates that approximately 40% of the vouchers will be redeemed. F&S offers a 10% discount on all one-year enrollments in classes as part of its normal promotion strategy.

1. a. & b. Indicate below whether each item is a separate performance obligation. For each separate performance obligation you have indicated, allocate a portion of the contract price.
c. Prepare the journal entry to recognize revenue for the sale of a new membership.

2.  Assume F&S offers a “Fit 50” coupon book with 50 prepaid visits over the next year. F&S has learned that Fit 50 purchasers make an average of 40 visits before the coupon book expires. A customer purchases a Fit 50 book by paying $500 in advance, and for any additional visits over 50 during the year after the book is purchased, the customer can pay a $15 visitation fee per visit. F&S typically charges $15 to nonmembers who use the facilities for a single day.

a. & b. Indicate below whether each item is a separate performance obligation. For each separate performance obligation you have indicated, allocate a portion of the contract price.
c. Prepare the journal entry to recognize revenue for the sale of a new Fit 50 book.

Indicate below whether each item is a separate performance obligation. For each separate performance obligation you have indicated, allocate a portion of the contract price.

Prepare the journal entry to recognize revenue for the sale of a new membership. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Indicate below whether each item is a separate performance obligation. For each separate performance obligation you have indicated, allocate a portion of the contract price.

Prepare the journal entry to recognize revenue for the sale of a new Fit 50 book. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

The table below shows aggregate demand and aggregate supply schedules in a hypothetical economy, Acadia.

a. Draw a graph showing Acadia's AD₀, AD₁, AS₀ and AS₁. Using the tools given below plot only the endpoints of the demand curves AD₀ and AD₁. Plot all 5 points for each supply curve, AS₀ and AS₁.

b. Initially AD₀ and AS₀ are the relevant schedules.

   The equilibrium price level is  and equilibrium real output is $  billion.

   If the price level is 125 then real output is $  billion, real expenditures are $  billion, and there is an unintended  (Click to select)  decrease  increase  in inventories. This pushes the price level  (Click to select)  down  up  .

   If the price level is 110 then real output is $  billion, real expenditures are $  billion, and there is an unintended  (Click to select)  decrease  increase  in inventories. This pushes the price level  (Click to select)  down  up  .

c. Now aggregate demand shifts from AD₀ to AD₁ while aggregate supply remains at AS₀.

   Aggregate demand has undergone a(n)  (Click to select)  decrease  increase  . As a result the equilibrium price level  (Click to select)  decreases  stays the same  increases  and has a value of  while equilibrium real output  (Click to select)  decreases  stays the same  increases  and has a value of $  billion.

d. Now aggregate supply shifts from AS₀ to AS₁, while aggregate demand remains at AD₀.

   Aggregate supply has undergone a  (Click to select)  short-run decrease  short-run increase  long-run decrease  long-run increase  . As a result the equilibrium price level  (Click to select)  decreases  stays the same  increases  and has a value of  while equilibrium real output  (Click to select)  decreases  stays the same  increases  and has a value of $  billion.

Materials Variances

Manzana Company produces apple juice sold in gallons. Recently, the company adopted the following material standard for one gallon of its apple juice:

     Direct materials 128 oz. @ $0.04 = $5.12

During the first week of operation, the company experienced the following results:

1. Gallon units produced: 21,000.
2. Ounces of materials purchased and used: 2,750,000 ounces at $0.045.
3. No beginning or ending inventories of raw materials.

Required:

Note: Enter favorable values as negative numbers. Enter unfavorable values as positive numbers.

1. Compute the materials price variance.
$ Unfavorable

2. Compute the materials usage variance.
$ Unfavorable

3. During the second week, the materials usage variance was $4,000 unfavorable and the materials price variance was $21,000 unfavorable. The company purchased and used 2,420,000 ounces of material during this week. How many gallons of juice were produced? If required, round your answer to nearest whole value.
gallons

What was the actual price paid per ounce of materials? Round your answer to the nearest cent.
$ per ounce

You are now ready to play the part of the manager of the public transit system. Your finance officer has just advised you that the system faces a deficit. Your board does not want you to cut service, which means that you cannot cut costs. Your only hope is to increase revenue. Would a fare increase boost revenue? You consult the economist on your staff who has researched studies on public transportation elasticities. She reports that the estimated price elasticity of demand for the first few months after a price change is about −0.3, but that after several years, it will be about −1.5. Explain why the estimated values for price elasticity of demand differ. Compute what will happen to ridership and revenue over the next few months if you decide to raise fares by 5%. Compute what will happen to ridership and revenue over the next few years if you decide to raise fares by 5%. What happens to total revenue now and after several years if you choose to raise fares?

HSA, a local hospital system has set up a new vaccination facility for a virus that is causing serious illness in the region.

The total cost for the set up is $300,000. The hospital system services patients with all types of insurance. They would like to make $10,000 extra income at the end of the year. In terms of the number of patients, they have Medicare (30%), and Medicaid (25%), Managed Care Type I (5%), Managed Care type II (35%), and Uninsured (5%).

The first three categories have fixed payment rates, for Medicare $180, Medicaid $170, and Managed care Type I $225. The other two pay based on the hospital charges (or prices). Managed Care Type 2 pays 80% of the charges and the Uninsured pay on an average 10% of the charges.

The expected annual volume is 2000.

1. Determine the price (charges) the hospital system can charge for the vaccination to obtain the desired extra income.
2. Using the price obtained in part (a) compute the total income the hospital can get, and show that with the targeted price, it can get the $10,000 extra income.

Imagine that you are the CEO of Moet Hennessy Louis Vuitton SE (LVMH). You have just received share price valuation estimates for a potential buyout target, Rimowa, from two of your top financial analysts. You have confidence in their estimates because they have taken FIN 305 from the Shidler College of Business. Both analysts used the discounted cash flow (DCF) model to estimate the share price resulting in a valuation of $50, by the first analyst and $60, by the second analyst. Part I: Identify two possible causes for the significant difference in valuation and briefly explain how each possible cause affected the DCF model’s share price estimate. Part II: You made a buyout offer of $55 a share and Rimowa’s CEO rejected it. The German luxury luggage brand Rimowa is crucial to LVHM’s strategic expansion into brands that have heritage and a unique position. As the CEO of LVHM what would you do to meet LVHM’s strategic objective while minimizing the cost to acquire Rimowa? Briefly defend your recommendation.

1a. Staind, Inc., has 7 percent coupon bonds on the market that have 15 years left to maturity. The bonds make annual payments. If the YTM on these bonds is 10 percent, what is the current bond price? (note: when the face value is not given for a bond, assume it is $1,000)

1b. Ackerman Co. has 7 percent coupon bonds on the market with ten years left to maturity. The bonds make annual payments. If the bond currently sells for $1,040.37, what is its yield to maturity (YTM)?

1c. Kiss the Sky Enterprises has bonds on the market making annual payments, with 6 years to maturity, and selling for $850. At this price, the bonds yield 10.0 percent. What must the coupon rate be on the bonds? (Note: first find the coupon payment, then the coupon rate. The face value of $1,000 x coupon rate = coupon payment).

1d. Grohl Co. issued 15-year bonds a year ago at a coupon rate of 9 percent (APR). The bonds make semiannual payments. If the YTM on these bonds is 10 percent (APR), what is the current bond price?