Shown below is the stockholders' equity section of Flamingo Corporation's balance sheet at December 31, 2020:
|
Flamingo Corporation |
|
|
Statement of Stockholder's Equity |
|
|
December 31, 2020 |
|
|
Common stock, $3 par value, 200,000 shares authorized, ____ shares issued and _____ outstanding |
$360,000 |
|
Additional paid in capital – common stock |
$400,000 |
|
Additional paid in capital – stock options |
$42,000 |
|
Total Paid in Capital |
$760,000 |
|
Retained Earnings |
$1,600,000 |
|
Less: Treasury Stock (10,000 shares) |
($295,000) |
|
Total Stockholder’s Equity |
$2,065,000 |
Consider the following events in preparing a Statement of Stockholder’s Equity and earnings per share for the year 2021.
|
1/1/20 |
On January 1, 2019, the company granted 4 executive employees the option to purchase 12,000 shares (3,000 shares each) of common stock at $12 per share. The Black-Scholes option pricing model determines total compensation expense to be $63,000. The option becomes exercisable on December 31, 2021, after the employee completed three years of service. The market price of the company’s stock was $18 on January 1, 2019 and $30 on December 31, 2020 |
|
1/31/21 |
One of the executives who was granted the above options was fired and left the company. |
|
1/31/21 |
The company issued 1,000 shares of $3 par common stock in exchange for land. Although several real estate appraisers disagree on the value of the land in a range from $30,000 to $34,500, the company’s stock is currently selling on a stock exchange for $31 per share. |
|
4/1/21 |
The company purchased 2,000 common shares of treasury stock at $34 per share. |
|
5/1/21 |
The company reissued 8,000 shares of the treasury stock at $37 per share. |
|
6/1/21 |
The company reissued 2,600 shares of treasury stock at $32 per share. |
|
7/1/21 |
The company issued 3,000 shares of 5% cumulative convertible preferred stock, $100 par value, for $108 per share. Each share is convertible into 3 shares of common stock. |
|
12/1/21 |
The company declared a 10% stock dividend to all common stockholders of record. The market value of the common stock is $36 per share |
|
12/20/21 |
The board of directors declared the preferred stock dividend and a dividend of $.5 per share on the common stock. |
|
12/31/21 |
The market value of the company's common stock is $40 per share |
The company’s net income for 2021 is $1,235,000 -- BEFORE any of the above transactions.
Complete the following in EXCEL prepared in GOOD FORM and using formulas. Organize your analysis appropriately to:
• Prepare the company's Statement of Stockholder's Equity in good form
• Compute Earnings per Share
In: Accounting
Logitech Company had a current share price of $42.70, and the firm had 700,000 shares of stock outstanding. The CEO of the company is considering an investment project that he is confident will result in an NPV of $300,000. However, investors are pessimistic about the project's prospect and believe that the project would results in an NPV of -$140,000 instead. If the CEO decides to go ahead with the project and the negative NPV as expected by investors is realized, what would the new stock price be?
| A. |
$42.30 |
|
| B. |
$43.50 |
|
| C. |
$43.20 |
|
| D. |
$42.50 |
|
| E. |
$42.90 |
Husqvana Corporation is considering an investment project that generates a cash flow of $640,000 next year if the economy is favorable but generates only $260,000 if the economy is unfavorable. The probability of favorable economy is 60% and of unfavorable economy is 40%. The project will last only one year and be closed after that. The cost of investment is $420,000 and Husqvana Corporation plans to finance the project with $120,000 of equity and $300,000 of debt. Assuming the discount rates of both equity and debt are 0%. What is the expected cash flow to Husqvana Corporationâ s creditors if the company invests in the project?
| A. |
$384,000 |
|
| B. |
$300,000 |
|
| C. |
$284,000 |
|
| D. |
$0 |
|
| E. |
$260,000 |
Marcy Company had a current share price of $52.40, and the firm had 1,500,000 shares of stock outstanding. The company is considering an investment project that requires an immediate $12,600,000 investment but will produce a single cash flow of $25,800,000 after 5 years then close. If Marcy invests in the project, what would the new stock price be? Marcy' cost of capital is 12%. (Hint: calculate the project NPV then consider how the project NPV affects stock price)
| A. |
$52.51 |
|
| B. |
$52.74 |
|
| C. |
$53.07 |
|
| D. |
$53.42 |
|
| E. |
$53.76 |
Which one of the following is least likely to encourage managers to act in the best interest of shareholders?
| A. |
Shareholder election of the board of directors, who in turn select managers |
|
| B. |
Threat of a takeover by another firm |
|
| C. |
Linking manager compensation to share value |
|
| D. |
Compensating managers with fixed salaries |
|
| E. |
Compensating managers with stock options |
In: Finance
Whitenall Corporation produces and sells teeth whitening products. The company has created and patented a formula for a new whitener. The CEO wants to make sure the product is priced competitively. The company anticipates that it will sell 400,000 units of the product in the first year with the following estimated costs:
|
Product design and licensing |
$1,700,000 |
|
Direct materials |
4,000,000 |
|
Direct manufacturing labor |
1,600,000 |
|
Variable manufacturing overhead |
400,000 |
|
Fixed manufacturing overhead |
2,500,000 |
|
Fixed marketing |
3,000,000 |
Required:
1. The company believes that it can successfully sell the product for $45 a bottle. The company’s target operating income is 30% of revenue. Calculate the target full cost of producing the 400,000 units. Does the cost estimate meet the company’s requirements?
Group of answer choices
$33 per bottle, No doesn't meet target
$28.75 Yes does meet target
$35 per bottle, Yes does meet target
$15 per bottle, Yes does meet target
2. A component of the direct materials cost requires a very expensive bleaching agent. If the company could eliminate this one ingredient, the materials cost would decrease by 25%. However, this would require design changes of $300,000 to engineer a chemical equivalent of the ingredient. Will this design change allow the product to meet its target cost?
Group of answer choices
$30.50, Yes does meet target
$31.25 per bottle, No does not meet target
$33 per bottle. No does not meet target
$31.25 per bottle, Yes does meet target
3. The CEO does not believe that the formula should be altered for fear it will tarnish the company’s brand. She prefers that the company become more efficient in manufacturing the product. If fixed manufacturing costs can be reduced by $250,000 and variable direct manufacturing labor costs are reduced by $1 per unit, will Whitenall achieve its target cost?
Group of answer choices
$32.38 per bottle, Yes does meet target
$31.38 per bottle, Yes meets target
$33 per bottle, No does not meet target
$32.38 per bottle, No does not meet target
In: Accounting
America’s Gilded Age in the late nineteenth century began with a raft of innovations – railroads, steel production, oil extraction – but culminated in mammoth trusts owned by “robber barons” who used their wealth and power to drive out competitors, and then to corrupt American politics. We are now in a second Gilded Age – ushered in by semiconductors, software, and the Internet – and a handful of technology giants are the new robber barons. Facebook and Google now dominate the online advertising market, while the advertising revenue going to newspapers, network television, and other newsgathering agencies continues to decline. Google also hosts two-thirds of all Internet searches in the United States, and is so dominant that “to google” has long since become a commonly used verb. In 2006, Google acquired the world’s largest video-hosting site, YouTube. And Facebook, for its part, has acquired more than 70 companies over roughly 15 years, including potential competitors like Instagram and WhatsApp. Amazon, meanwhile, has become the first stop for one-third of all US consumers seeking to buy anything, including more than half of new books. Amazon’s scale translates into bargains for consumers, but it undermines supplier industries, including author royalties and publisher earnings. This consolidation at the leading edge of the US economy has created three big problems. The first concerns economic power. Here, the issue is not the classic one of consumer prices being higher than they’d be under competitive conditions; it is that Big Tech is inhibiting innovation. The incumbents’ size, must-use platforms (owing to network effects), wall-to-wall patents and copyrights, and fleets of lawyers to litigate potential rivals into submission have allowed them to create formidable barriers to new entrants. To be sure, large platforms like Amazon, Google, and Facebook have enabled creators to showcase and introduce new apps, songs, books, videos, and other content. But because of these platforms’ overwhelming bargaining power, they can take a large share of the profits. Partly as a result, the rate at which new jobcreating businesses are formed in the US has fallen by half since 2004. The second problem concerns political influence: massive concentrations of economic power tend to generate political clout that is easily abused. Because of its increasing size, the technology sector provides significant campaign contributions and maintains platoons of lobbyists and lawyers in Washington, DC. Google’s parent company, Alphabet, for example, is the one of the biggest lobbyists in the city. All this power gets results: tax loopholes, subsidies, regulatory exemptions, and other forms of government largesse that is unavailable to smaller firms. Hence, in 2018, Amazon paid no federal taxes, even as it held an auction to extort billions of dollars from states and cities eager to host its second headquarters. The company has also forced Seattle, its main headquarters, to scrap a plan to tax big corporations. That revenue would have been used to pay for homeless shelters for a growing population that can’t afford sky-high rents caused, in part, by Amazon. Big Tech’s political power also buys impunity. Facebook executives withheld evidence of malign Russian activity on their platform far longer than previously disclosed, but suffered no consequences. Perhaps more troubling, they employed a political opposition-research firm to discredit their critics. How long will it be before Facebook uses its own data and platform against its opponents and competitors? Google, too, has used its power to fend off criticism. It has quietly funded hundreds of university professors to write research papers justifying its market dominance, and it has threatened to cut funding to nonprofit think tanks that have criticized its economic and political power. The third problem concerns social power: the control over the flows of communications on which people rely to understand the world. The most obvious example is the news itself. By refusing to take responsibility for the accuracy of what appears on their platforms, the Big Tech firms are actively enabling demagogues, hatemongers, and con artists to exert unprecedented influence over society – perverting political discourse, encouraging bigotry, and even endangering children. The tech companies’ defense is that they are not publishers, but merely the proprietors of platforms and algorithms. But this claim is belied by their platforms’ powerful network effects. The more people participate, the more necessary the platform becomes for everyone else. If people want to know what’s happening in the world, they increasingly have little choice but to engage with YouTube, Facebook, or Twitter. Another aspect of Big Tech’s social power is its increasing capacity to pool and analyze data about all aspects of our lives, choices, and movements. This not only undermines our privacy; it challenges our very autonomy. Targeted advertising doesn’t merely respond to consumer needs and wants. It shapes our understanding of ourselves, our communities, and of the world. These three forms of power – economic, political, and social – are rooted in Big Tech’s increasing dominance over markets, information, and communications. And that dominance is a function of these companies’ size and scope. America responded to abuses of corporate power in the Gilded Age with antitrust laws that allowed the government to break up concentrated economic power. It is time to use antitrust again. Where breaking up Big Tech companies is impractical, those firms should at least be required to make their proprietary technology and data publicly available, and to share their platforms with smaller competitors. Such measures would impose few costs on the economy, given that these giants rely on scale rather than innovation. Moreover, the benefits of reducing Big Tech’s concentrated power would be significant. More competition would reduce the major platforms’ market leverage and political clout. It would also give people more choice about how to receive reliable information, and greater control over which aspects of their personal lives they share. In the second Gilded Age, as in the first, giant firms at the center of the US economy are distorting its market and its politics. Just as the problem is the same, so is the solution.
QUESTIONS:
1. In what ways have Google and Facebook become dominant in the technology sector?
2. How have the Big Tech created barriers to entry and consolidated their market power?
3. What has been the impact of the bargaining power of large platforms on new job-creating businesses?
4. Define the network effects and the positive network externalities. Explain why people all over the world would rely increasingly on YouTube, Facebook, or Twitter to reach the information?
5. What would be the new ways of dealing with the monopoly power attained by the Big Tech?
In: Economics
P18.8 Sarah Corp. reported the following differences between SFP carrying amounts and tax bases at December 31, 2019:
| Carrying Amount | Tax Base | |||
| Depreciable assets | $100,000 | $67,500 | ||
| Warranty liability (current liability) | 20,500 | –0– | ||
| Pension liability (long-term liability) | 38,800 | –0– |
The differences between the carrying amounts and tax bases were expected to reverse as follows:
| 2020 | 2021 | After 2021 | ||||
| Depreciable assets | $17,500 | $12,500 | $ 2,500 | |||
| Warranty liability | 20,500 | –0– | –0– | |||
| Accrued pension liability | 12,000 | 12,000 | 14,800 |
Tax rates enacted at December 31, 2019, were 31% for 2019, 30% for 2020, 29% for 2021, and 28% for 2022 and later years.
During 2020, Sarah Corp. made four quarterly tax instalment payments of $9,500 each and reported income before income tax on its income statement of $119,650. Included in this amount were dividends from taxable Canadian corporations of $5,800 (non-taxable income) and $25,000 of expenses related to the executive team's golf dues (non–tax-deductible expenses). There were no changes to the enacted tax rates during the year.
As expected, book depreciation in 2020 exceeded the capital cost allowance claimed for tax purposes by $17,500, and there were no additions or disposals of property, plant, and equipment during the year. A review of the 2020 activity in the Warranty Liability account in the ledger indicated the following:
| Balance, Dec. 31, 2019 | $20,500 | |
| Payments on 2019 product warranties | (21,200) | |
| Payments on 2020 product warranties | (6,300) | |
| 2020 warranty accrual | 30,480 | |
| Balance, Dec. 31, 2020 | $23,480 |
All warranties are valid for one year only. The Pension Liability account reported the following activity:
| Balance, Dec. 31, 2019 | $38,800 | |
| Payment to pension trustee | (72,000) | |
| 2020 pension expense | 60,000 | |
| Balance, Dec. 31, 2020 | $26,800 |
Pension expenses are deductible for tax purposes, but only as they are paid to the trustee, not as they are accrued for financial reporting purposes.
Sarah Corp. reports under IFRS.
Instructions
a. Calculate the Deferred Tax Asset or Deferred Tax Liability account at December 31, 2019, and explain how it should be reported on the December 31, 2019 SFP.
b. Calculate the Deferred Tax Asset or Deferred Tax Liability account at December 31, 2020.
c. Prepare all income tax entries for Sarah Corp. for 2020.
d. Identify the balances of all income tax accounts at December 31, 2020, and show how they will be reported on the comparative statements of financial position at December 31, 2020 and 2019, and on the income statement for the year ended December 31, 2020.
e. How would your responses to parts (a) and (d) change if Sarah Corp. followed the ASPE future/deferred income taxes method?
please use accelerated investment incentive, not half rule
In: Accounting
A University found that 27% of its graduates have taken an introductory statistics course. Assume that a group of 15 graduates have been selected.
In: Statistics and Probability
A University found that 27% of its graduates have taken an introductory statistics course. Assume that a group of 15 graduates have been selected.
In: Statistics and Probability
Fajar Factory wants to build a rice processing factory that will take a year to build. $5 million is spent right away and another $5 million is spent next year. The company CEO is expecting that the factory will lose $1 million in its first year of operation and lose another half a million in its second year of operation. with that initial investment, the factory is expected to produce 8000 rice packs per month and sold fo $30 per unit for nest 20 years. meanwhile, the production cost for pack is $20.
Calculate the fajar factory profit for a year ? Show how you calculate TC,TR, PROFIT
In: Economics
C&P Trading Inc. is considering a project, initial investment is $260,000. The company board of directors set the maximum requirements of return of pay back 3 years and has set the cost of capital is 10%, below is the cash flow: CF1= $75,800 , CF2= $78,960 , CF3= $82,278, CF4= $117,612.
In: Finance
Hoping to make his flight on time, Tom (the CEO of ABC Pty Ltd) signed a stack of paperwork on his desk without reading what he was signing. Unfortunately, one of the documents he signed authorised a high-risk investment which caused shareholders to lose millions of dollars.
Required:
(a) With reference to CA s 180, how does the court decide whether a director acted with care, skill and diligence?
(b) Analyse whether Tom breached his duty of care to the company.
(c) Analyse whether Tom qualifies for a defence under the business judgment rule. You must refer to relevant law
In: Economics