On February 1, 2018, Cromley Motor Products issued 6% bonds, dated February 1, with a face amount of $80 million. The bonds mature on January 31, 2022 (4 years). The market yield for bonds of similar risk and maturity was 8%. Interest is paid semiannually on July 31 and January 31. Barnwell Industries acquired $80,000 of the bonds as a long-term investment. The fiscal years of both firms end 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 issued on February 1, 2018.
2-a. Prepare amortization schedules that indicate Cromley’s effective interest expense for each interest period during the term to maturity.
2-b. Prepare amortization schedules that indicate Barnwell’s effective interest revenue for each interest period during the term to maturity.
3. Prepare the journal entries to record the issuance of the bonds by Cromley and Barnwell’s investment on February 1, 2018.
4. Prepare the journal entries by both firms to record all subsequent events related to the bonds through January 31, 2020.

NOTE: I only need required3 and 4 for BarnWell

Prepare the journal entries by both firms to record all subsequent events related to the bonds through January 31, 2020. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in whole dollars.)

07/31/2018 Record the receipt of interest for Barnwell Company.

12/31/2018 Record the accrued interest for Barnwell Company.

01/31/2019 Record the receipt of interest for Barnwell Company.

07/31/2019 Record the receipt of interest for Barnwell Company

12/31/2019 Record the accrued interest for Barnwell Company.

01/31/2020 Record the receipt of interest for Barnwell Company

The MBA Decision

Ben Bates graduated from college six years ago with a finance undergraduate degree. Although he is satisfied with his current job, his goal is to become an investment banker. He feels that an MBA degree would allow him to achieve this goal. After examining schools, he has narrowed his choice to either Wilton University of Mount Perry College.   Although internships are encouraged by both schools, to get class credit for the internship, no salary can be paid. Other than internships, neither school will allow its students to work while enrolled in its MBA program.

Ben currently works at the money management firm of Dewey and Louis. His annual salary at the firm is $55,000 per year, and his salary is expected to increase at 3 percent per year until retirement. He is currently 28 years old and expects to work for 38 more years. His current job includes a fully paid health insurance plan, and his current average tax rate is 26%. Ben has savings account with enough money to cover the entire cost of his MBA program.

The Ritter College of Business at Wilton University is one of the top MBA programs in the country. The MBA degree requires two years of full-time enrollment at the university. The annual tuition is $63,000 payable at the beginning of each school year. Books and other supplies are estimated to cost $2,500 per year. Ben expects that after graduation from Wilton, he will receive a job offer for about $98,000 per year, with a $15,000 signing bonus. The salary at this job will increase at 4 percent per year. Because of the higher salary, his average income tax rate will increase to 31 percent.

The Bradley School of Business at Mount Perry College began its MBA program 16 years ago. The Bradley School is smaller and less well known than the Ritter College. Bradley offers an accelerated one-year program, with a tuition cost of $80,000 to be paid upon matriculation. Books and other supplies for the program are expected to cost $3,500. Ben thinks that he will receive an offer of $81,000 per year upon graduation, with a $10,000 signing bonus. The salary at this job will increase at 3.5 percent per year. His average tax rate at this level of income will be 29 percent.

Both schools offer a health insurance plan that will cost $3,000 per year, payable at the beginning of the year. Ben also estimates that room and board expenses will cost $20,000 per year at both schools. The appropriate discount rate is 6.5 percent.

Questions

1.            How does Ben’s age affect his decision to get an MBA

2.            What other, perhaps nonquantifiable, factors affect Ben’s decision to get an MBA?

3.            Assuming all salaries are paid at the end of each year, what is the best option for Ben from a strictly financial standpoint?

4.            Ben believes that the appropriate analysis is to calculate the future value of each option. How would you evaluate this statement?

5.            What initial salary would Ben need to receive to make him indifferent between attending Wilton University and staying in his current position?

6.            Suppose, instead of being able to pay cash for his MBA, Ben must borrow the money. The current borrowing rate is 5.4 percent. How would this affect his decision?

1. Pam earned a salary of $89,438 working as a CPA for a small firm. Pam recently was sickened by eating spoiled peanut butter. She successfully sued the manufacturer for her medical bills ($4380), her emotional distress ($8700—she now fears peanut butter), and punitive damages ($51,000). What amount must Pam include in her gross income? (Do not use commas or dollar signs.)

2. This year Ed celebrated his 25th year as an employee of Designer Jeans Company. He earned a salary of $150,000. Also, in recognition of his long and loyal service, the company awarded Ed a gold watch worth $238 and a $2540 cash bonus. What is Ed's gross income? (Do not use commas or dollar signs.)

3. Helen is a U.S. citizen and a CPA who moved to London, England, three years ago to work for a British company. This year, she spent the entire year in London and earned a salary of $141,600. Because she was required to live in London for her job, which has very high housing costs, Helen was paid a housing allowance equal to $36,153 for 2020 by the British company she worked for. She spent the entire housing allowance on a London apartment. What is Helen’s gross income for U.S. taxes? (See pp. 5-28 to 5-29) (Do not use commas or dollar signs.)

In 2020, a company has an accounts receivable of $20,000 for products that were delivered to the customer in 2020. It will be collected in 2021. The company has a tax rate of 30% and taxable income of $216,000 at the end of 2020. There were no deferred taxes at the beginning of 2020. What is the amount of income tax expense for 2020?

MBA - Managerial Economics

Explain the features of Perfect Competition with examples.

Thanks :)

Bling-Bling Jewellery Company Limited (“BB”) has been engaging in selling jewellery. It keeps a substantial amount of gem stones as inventory. The gem stones are recognized as raw material in the financial statements, and the amount of the gem stones is considered as material for the financial statements. Lee, Wong & Partners (“Lee Wong”) is the auditor of BB for its financial statements for the year ended 31 December 2020. Michael Lau, the CFO of BB, understands that Lee Wong also provides valuation services. He proposes to the audit partner to invite Lee Wong to provide an independent valuation report of the gem stones and the valuation fee would be around 30% of the proposed audit fee for the year ended 31 December 2020. Meanwhile, the proposed audit fee for the year ended 31 December 2020 would be reduced by 20%. If the audit fee is not reduced, BB may engage another audit firm to be the auditor of the company instead.

Required:

(a) Identify the ethical issues faced by Lee Wong and propose appropriate safeguards to respond to each ethical issue.

After Lee Wong finishes the audit for BB’s financial statements for the year ended 31 December 2019, Michael invites the audit team for dinner as a token of appreciation. A box of six red wines is served during the dinner and two bottles are consumed. Michael gives the remaining four bottles to the audit team after the dinner.

Required:

(b) Explain whether the audit team can accept the wine left over at the dinner.

Subsequent to the financial year ended 31 December 2020, BB has opened an online shop to attract more customers. However, there have been many news reports that customers receive fake gem stones when they purchase from the online shop. They feel cheated and would take legal action against BB. Before the case has been put to the court, the CEO has transferred all the assets of BB to a company controlled by his relative.

Required:

(c) Determine the areas that Lee Wong would consider in assessing whether to continue the existing audit engagement with BB.

[Total for Question: 24 marks]

How Facebook's founder aims to use his network? explain as clearly as possible!

Stephenson Real Estate Company was founded 25 years ago by the current CEO, Robert Stephenson. The company purchases real estate, including land and buildings, and rents the property to tenants. The company has shown a profit every year for the past 18 years, and the shareholders are satisfied with the company’s management. Prior to founding Stephenson Real Estate, Robert was the founder and CEO of a failed alpaca farming operation. The resulting bankruptcy made him extremely averse to debt financing. As a result, thecompany is entirely equity financed, with 8 million shares of common stock outstanding. The stock currently trades at $37.80 per share. Stephenson is evaluating a plan to purchase a huge tract of land in the southeastern United States for $85 million. The land will subsequently be leased to tenant farmers. This purchase is expected to increase Stephenson’s annual pretax earnings by $14.125 million in perpetuity. Jennifer Weyand, the company’s new CFO, has been put in charge of the project. Jennifer has determined that the company’s current cost of capital is 10.2 percent. She feels that the company would be more valuable if it included debt in its capital structure, so she is evaluating whether the company should issue debt to entirely finance the project. Based on some conversations with investment banks, she thinks that the company can issue bonds at par value with a 6 percent coupon rate. Based on her analysis, she also believes that a capital structure in the range of 70 percent equity/30 percent debt would be optimal. If the company goes beyond 30 percent debt, its bonds would carry a lower rating and a much higher coupon because the possibility of financial distress and the associated costs would rise sharply. Stephenson has a 23 percent corporate tax rate (state and federal).

QUESTIONS

1. If Stephenson wishes to maximize its total market value, would you recommend that it issue debt or equity to finance the land purchase? Explain.

2. Construct Stephenson’s market value balance sheet before it announces the purchase.

3. Suppose Stephenson decides to issue equity to finance the purchase.

a. What is the net present value of the project?

b. Construct Stephenson’s market value balance sheet after it announces that the firm will finance the purchase using equity. What would be the new price per share of the firm’s stock? How many shares will Stephenson need to issue to finance the purchase?

c. Construct Stephenson’s market value balance sheet after the equity issue but before the purchase has been made. How many shares of common stock does Stephenson have outstanding? What is the price per share of the firm’s stock?

d. Construct Stephenson’s market value balance sheet after the purchase has been made.

4. Suppose Stephenson decides to issue debt to finance the purchase.

a. What will the market value of the Stephenson company be if the purchase is financed with debt?

Which of the following is an example of U.S. foreign direct investment and by itself increases U.S. net capital outflow?

A. A Swiss bank buys bonds issued by a U.S. company.

B. A French restaurant opens and operates a restaurant in New York.

C. A U.S. electronics company opens and operates a new factory in India.

D. A U.S. pension fund buys bonds issued by the Japanese government.

The population of the United States has grown at different rates over ten-year increments as shown by the following table.

If the maximum supportable population of the U.S. is 600 million people, use the logistic model to predict the population (in millions of people) of the U.S. in 2020 by using the following years as data points. (Round your answers to one decimal place.)

(a) using 1930 and 1940 as data points

(b) using 1950 and 1960 as data points

The growth rate from part (a) is ________ (smaller than, larger than, equal to) the growth rate from part (b).