The wage for workers in a competitive market is initially $10 and rent, the cost of capital (also rented in a competitive market), is initially $5. Now suppose that wages decrease to $8 and rent decreases to $2.

a) Describe how the scale effect changes a firm's use of labor and capital.

b) Describe how the substitution effect changes a firm's use of labor and capital.

c) Overall will a firm hire more or fewer workers? Will a firm rent more or less capital?

d) Will a firm change its production technology given the changes in w and r?

A decentralized organization is one in which:

A local chain department store grants each of its store managers the authority to make buying decisions for their stores. Granting managers this kind of authority is found in which type of organization?

A local chain electronics store does not allow its store or district managers to make important decisions about their stores. The main role of store managers is to supervise employees and make sure day-to-day transactions run smoothly while district managers supervise store managers and report profitability data back to top-level management. Not allowing store or district managers decision-making authority is most likely to be found in which type of organization?

When a few individuals at the top of an organization retain decision-making authority, the organization is referred to as a(n):

Which of the following statements regarding the structure of organizations is false?

Which of the following is an advantage of decentralization?

Which of the following is not an advantage of decentralization?

Which of the following is often not a disadvantage of decentralization?

Which of the following is a disadvantage of decentralization?

"Responsibility accounting" is the concept that says:

A budget for a single unit of a product or service is called as a:

Which of the following statements is true regarding the budgeted cost for direct materials?

Variance analysis compares:

Which of the following statements is false regarding task analysis?

Task analysis:

A(n) ____ is attainable only when near-perfect conditions exist.

In most companies, machines break down occasionally and employees are often less than perfect. Which type of standard acknowledges these characteristics when determining the standard cost of a product?

Hathaway Inc. produces and sells golf umbrellas to local resorts. Hathaway anticipates April to be a busy month with the sale of 2,000 umbrellas. The company has prepared the following static budget for April:

During April, Hathaway actually produced and sold 2,300 umbrellas. What should be Hathaway's net operating income in April based on a flexible budget?

Hoppe Inc. manufactures widgets. Management has determined that each widget has a standard materials cost of $3.50 when 2.5 ounces of raw material at a cost of $1.40 per ounce are used. The static budget for the month of December showed an estimated production of 4,000 widgets in December. During December, 4,300 widgets were actually produced. The actual cost for each widget was $3.60 when 2.25 ounces of raw material at a cost of $1.60 per ounce were purchased and used. What should be the total direct materials cost according to Hoppe's flexible budget for December?

Violetta Inc. manufactures plastic storage boxes. Management has determined that each medium-sized box has a standard materials cost of $1.20 when 4 pounds of raw material at a cost of $.30 per pound are used. The static budget for the month of March showed an estimated production of 15,000 boxes in March. During March, 17,000 boxes were actually produced. The actual cost for each box was $1.56 when 3.9 pounds of raw material at a cost of $.40 per pound were purchased and used. What should be the total direct materials cost according to Violetta's flexible budget for March?

QUESTION 1

1. When the direct write-off method of recognizing bad debt expense used, which of the following accounts would NOT be used?

   		Bad Debt Expense
   		Accounts Receivable
   		Allowance for Bad Debts
   		All of the above are used in the direct write-off method

1 points   

QUESTION 2

1. When the allowance method of recognizing bad debt expense is used, the entries at the time of collection a a small account previously off would:

   		Increase net income
   		Increase Allowance for Bad Debts
   		Decrease net income
   		Decrease Allowance for Bad Debts

1 points   

QUESTION 3

1. Deuce Company uses the allowance method to estimate the losses form uncollectible receivables. Net sales for the year are $120,000 and the company estimates its bad debts as 1 percent of net sales. If there is already a $1,200 debit balance in Allowance for Bad Debts, how should be recorded as Bad Debt Expense?

   		$1,200
   		$2,400
   		$24,000
   		No entry is required

1 points   

QUESTION 4

1. Following are the account balances from the December 31 trial balance of Hark Company. If 10% of the Accounts Receivable is estimated to be uncollectible, the entry to record the estimate of bad debts would include a debit to Bad Debt Expense for:

   	DB
   Accounts Receivable	20,000
   Allowance fro Bad Debts	800
   Sales Revenue	135,000

   		$2,000
   		$2,080
   		$2,800
   		$1,200

1 points   

QUESTION 5

1. A promissory note dated Dec. 1, 2012 bearing interest at a rate of 8% and due in 60 days is sent ot a creditor. The face value of the note is $10,000. The entry for accrued interest at December 31, 2012 by the issuer of the note includes a:

   		Debit to interest expense of $67
   		A credit ot interest payable of $133
   		Credit to interest expense of $67
   		Debit to interest payable of $133

1 points   

QUESTION 6

1. The entry (or entries) requried to record a sales return by a customer when using the perpetual inventory method would consist of:

   		A debit to Sales Revenue and a credit to Accounts Receivable
   		A debit to Sales Returns and Allowances and a credit to Accounts Receivables
   		Debits to Sales Returns and Allowances and Inventory and credits to Accounts Receivable and Costs of Goods Sold
   		Debits to Sales Returns and Allowances and Cost of Goods Sold and credits to Accounts Receivable and Inventory

1 points   

QUESTION 7

1. Which of the following will result if the current year's ending inventory amount is understated in the cost of goods calculation:

   		Cost of goods sold will be overstated
   		Total assets will be overstated
   		Net income will be overstated
   		Both A and C

1 points   

QUESTION 8

1. Which of the following would be true if inventory costs were increasing?

   		LIFO would result in lower net income and lower ending inventory amounts than would FIFO
   		FIFO would result in lower net income and higher ending inventory amounts than would LIFO
   		LIFO would result in a lower net income amount but a higher ending inventory amount that would FIFO
   		None of the above

1 points   

QUESTION 9

1. Given the following sale and purchasing information, what is the ending iinventory, if the periodic FIFO costing alternative is used? The beginning inventory on hand was 100 units at $1 each.

   1st Purchase	700 units @ $2
   2nd Purchase	1,000 units @ $3
   3rd Purchase	500 units @ $4
   4th Purchase	500 units @ $5
   Total units purchased	2,700
   1st Sale	400 units @$7
   2nd Sale	750 units @$8
   3rd Sale	500 units @$9
   4th Sale	500 units @$10
   Total units sold	2,150

   		$400
   		$500
   		$1,250
   		$3,100

1 points   

QUESTION 10

1. Using the following purchases and sales, what is the ending inventory if the periodic LIFO costing alternative is used? The beginning inventory iis 100 units on hand at $2 each.

   1st Purchase	500 units @$2
   2nd Purchase	1,000 units @ $3
   3rd Purchase	500 units @ $4
   4th Purchase	500 units @ $5
   Total units purchased	2,500
   1st Sale	600 units @$7
   2nd Sale	750 units @$8
   3rd Sale	500 units @$9
   4th Sale	500 units @$10
   Total units sold	2,350

   		$400
   		$500
   		$1,250
   		$3,100

1 points   

QUESTION 11

1. Using the following information, what is the average cost per unit available for sale during the year if the periodic inventory method is used (round to nearest cent)? The beginning inventory on had was 100 units at $1 each.

   1st Purchase	500 units @$2
   2nd Purchase	1,000 units @ $3
   3rd Purchase	500 units @ $4
   4th Purchase	500 units @ $5
   Total units purchased	2,500
   1st Sale	600 units @$7
   2nd Sale	750 units @$8
   3rd Sale	500 units @$9
   4th Sale	500 units @$10
   Total units sold	2,350

   		$2.61
   		$3.10
   		$3.53
   		$3.31

1 points   

QUESTION 12

1. A firm had a beginning inventory balance of $1,000, net purchases of $35,000 and sales of $40,000. Its gross margin percentage was 25%. Using the gross margin method, the ending inventory balance is:

   		$1,000
   		$7,000
   		$6,000
   		$10,000

1 points   

QUESTION 13

1. Which of the following is NOT usually depreciated, depleted or amortized?

   		Furniture
   		Land
   		Mineral deposits
   		Patents

1 points   

QUESTION 14

1. Depreciation can best be described as a method of

   		Allocating the costs of assets over their useful life
   		Accumulating funds for the replacement of assets
   		Reducing the carrying cost of assets to current market value
   		Deriving tax benefits

1 points   

QUESTION 15

1. The book value of an asset is the:

   		Original cost of the asset
   		Market value of the asset
   		Total of all expenses associated with the asset
   		Acquisition cost of the asset less any accumulated depreciation on the asset

1 points   

QUESTION 16

1. On January 1, 2012 Powers Press purchased equipment at a cost of $6,300. The equipment had an estimated useful life of three years or 15,000 hours. The equipment will have a $600 salvage value at the end of its life. The depreciation expense for the year ending December 31, 2012 using the straight-line method would be:

   		$1,900
   		$1,883
   		$475
   		$471

1 points   

QUESTION 17

1. On January 1, 2006, Powers press purchased equipment at cost of $6,300. The equipment had an estimated useful life of three years or 15,000 hours. The equipment will have a $600 salvage value at the end of its life. The equipment was used for 3,250 hours in 2012. The depreciation epense for the year ending December 31, 2012 using the units of production method would be:

   		$1,900
   		$1,235
   		$3,250
   		$1,365

1 points   

QUESTION 18

1. On January 1, 2011, Kinnear Company purchased equipment at a cost of $20,000. The equipment had useful life of 5 years and a salvage value of $2,000. Kinnear Company use the straight-line depreciation method for all its assets. Given this information, if the company sells the equipment for $13,600 on December 31, 2006, it will have a(n):

   		$2,000 loss
   		$2,000 gain
   		$800 loss
   		$800 gain

1 points   

QUESTION 19

1. The balance sheet category "intangible assets" includes:

   		Patents, trademarks and franchises
   		Equipment, land and buildings
   		Investments, receivables and customer lists
   		Goodwill, inventory and furnishings

1 points   

QUESTION 20

1. On March 3, 2006, Binford Tools acquired the following assets from Mace Harware for $360,000. How much goodwill should be recorded for this transactions?

   	Book Value	Fair Market Value
   Accounts Receivable	58,000	33,000
   Inventory	92,000	76,000
   Equipment	139,000	182,000
   Patent	13,000	8,000

   		$61,000
   		$58,000
   		$39,000
   		0

                                THE BUSINESS SITUATION

                When Shelley Jones became president-elect of the Circular Club of Auburn, Kansas,

she was asked to suggest a new fundraising activity for the club. After a considerable

amount of research, Shelley proposed that the Circular Club sponsor a professional

rodeo. In her presentation to the club, Shelley said that she wanted a

fundraiser that would (1) continue to get better each year, (2) give back to the community,

and (3) provide the club a presence in the community. Shelley’s goal was to

have an activity that would become an “annual community event” and that would

break even the first year and raise $5,000 the following year. In addition, based on

the experience of other communities, Shelley believed that a rodeo could grow in

popularity so that the club would eventually earn an average of $20,000 annually.

                A rodeo committee was formed. Shelley contacted the world’s oldest and

largest rodeo-sanctioning agency to apply to sponsor a professional rodeo. The

sanctioning agency requires a rodeo to consist of the following five events:

Bareback Riding, Bronco Riding, Steer Wrestling, Bull Riding, and Calf Roping.

Because there were a number of team ropers in the area and because they

wanted to include females in the competition, members of the rodeo committee

added Team Roping and Women’s Barrels. Prize money of $3,000 would be paid

to winners in each of the seven events.

                Members of the rodeo committee contracted with RJ Cattle Company, a livestock

contractor on the rodeo circuit, to provide bucking stock, fencing, and

chutes. Realizing that costs associated with the rodeo were tremendous and that

ticket sales would probably not be sufficient to cover the costs, the rodeo committee

sent letters to local businesses soliciting contributions in exchange for

various sponsorships. Exhibiting Sponsors would contribute $1,000 to exhibit

their products or services, while Major Sponsors would contribute $600. Chute

Sponsors would contribute $500 to have the name of their business on one of the

six bucking chutes. For a contribution of $100, individuals would be included in

a Friends of Rodeo list found in the rodeo programs. At each performance the

rodeo announcer would repeatedly mention the names of the businesses and individuals

at each level of sponsorship. In addition, large signs and banners with

the names of the businesses of the Exhibiting Sponsors, Major Sponsors, and

Chute Sponsors were to be displayed prominently in the arena.

CaseA local youth group was contacted to provide concessions to the public and

divide the profits with the Circular Club. The Auburn Circular Club Pro Rodeo

Roundup would be held on June 1, 2, and 3. The cost of an adult ticket was set

at $8 in advance or $10 at the gate; the cost of a ticket for a child 12 or younger

was set at $6 in advance or $8 at the gate. Tickets were not date-specific. Rather,

one ticket would admit an individual to one performance of his or her choice—

Friday, Saturday, or Sunday. The rodeo committee was able to secure a location

through the county supervisors board at a nominal cost to the Circular Club. The

arrangement allowed the use of the county fair grounds and arena for a one week

period. Several months prior to the rodeo, members of the rodeo committee

had been assured that bleachers at the arena would hold 2,500 patrons. On

Saturday night, paid attendance was 1,663, but all seats were filled due to poor

gate controls. Attendance was 898 Friday and 769 on Sunday.

                The following revenue and expense figures relate to the first year of the rodeo.

Receipts

Contributions from sponsors $22,000

Receipts from ticket sales 28,971

Share of concession profits 1,513

Sale of programs 600

Total receipts $53,084

Expenses

Livestock contractor 26,000

Prize money 21,000

Contestant hospitality 3,341*

Sponsor signs for arena 1,900

Insurance 1,800

Ticket printing 1,050

Sanctioning fees 925

Entertainment 859

Judging fees 750

Port-a-patties 716

Rent 600

Hay for horses 538

Programs 500

Western hats to first 500 children 450

Hotel rooms for stock contractor 325

Utilities 300

Sand for arena 251

Miscellaneous fixed costs 105

Total expenses 61,410

Net loss $(8,326)

*The club contracted with a local caterer to provide a tent and food for the contestants. The

cost of the food was contingent on the number of contestants each evening. Information concerning

the number of contestants and the costs incurred are as follows:

Contestants Total Cost

Friday 68 $ 998

Saturday 96 1,243

Sunday 83 1,100

$3,341

On Wednesday after the rodeo, members of the rodeo committee met to

Discuss and critique the rodeo. Jonathan Edmunds, CPA and President of the

Circular Club, commented that the club did not lose money. Rather, Jonathan

said, “The club made an investment in the rodeo.”

                Answer each of the below question.

12. Rather than hire the local catering company to cater the contestant hospitality tent, members of the club are considering asking Shady’s Bar-B-Q to cater the event in exchange for a $600 Major sponsor spot. Several member of the club are opposed to this consideration arguing that the 2 major sponsor spots will take away from the money to be earned through other sponsors. Adrian Stein has explained to the members that the major sponsor signs for the arena cost only $48 each. In addition there is more than enough room to display 2 additional sponsors signs. What would you encourage the clue to do concerning the constant hospitability tent? Would your answer be different if the arena were limited in the number of addition signs that could be displayed? What kind of cost would we consider in this situation that would not be found on a financial statement?

Go through these two studies and write a three to five page analysis of the two healthcare facilities you have conducted the research.

In this concluding section of the paper, explain how the situations may be similar or how they are different. Things you want to compare can include but not limited to reimbursement, quality and availability of care, government regulations and how changes in healthcare system such as the Affordable Care Act (ACA) will impact healthcare management in the near future.

CASE STUDY #1: WESTCHESTER MEDICAL CENTER

INTERVIEW W/: Nurse manager from the ICU’s units

How does financing and reimbursement affect delivery of care?

There is a huge impact of the financing and reimbursement on the quality of the care delivered to the patients having some kind of insurance or the health policy. The financial and reimbursement status is taken as the regulator of the type of the care delivered to the patients in the healthcare system. Financial and reimbursement policies greatly affect the quality of the delivery of the care.

How does reimbursement differ in the delivery of outpatient vs inpatient care?

Yes, reimbursement differs in the delivery of the outpatient vs inpatient care. In case of the outpatient department the patient takes the prescription provided by the physician and has the medicine from the reliable source hence have minimum impact of the reimbursement policies on the other hand in case of in-patient care the patient is admitted in the hospital. He/she may be advised for the plenty of the diagnostic pathological tests, there is included the bed charges and other ambulatory services. Hence in case of the inpatient care there is huge impact of the reimbursement.

How do Managed Care and Integrated Systems impact the cost, access, and quality of health care delivery?

The managed care and integrated systems highly impact the cost access and quality of the healthcare delivery by utilizing the systematic plans regarding the delivery of the healthcare using the special provisions regarding the individual patient.

These evidence based practices are highly effective in reducing cost of care, along with maintaining the proper access of the care with the high quality concerns.

How has Legislative Health Policy impacted the delivery of care?

The legislative Health Policy had a great impact on the delivery of care as it governs the healthcare and insurance policies. There are various health policy reforms which have a direct impact on the quality of the care. These regulations are ensuring the good healthcare delivery to the population. Hence there is need to reform these healthcare policies time to time.

What is the future of health services delivery?

As per the future concerns of the health care service delivery, there is need to have a concern of the cost effectiveness and inclusion of novel health care technologies in the healthcare organizations. On the basis of these systematic concerns we can assure an effective health care delivery for the welfare of the mankind.

CASE STUDY #2: MONTEFIORE HOSPITAL

INTERVIEW W/: CEO Montefiore

How does financing and reimbursement affect delivery of care?

Health insurance affect health care delivery in the US that it makes providers less aware of the actual cost of health care it creates provider induced demand, this financing greatly influences how much health care is delivered.

How does reimbursement differ in the delivery of outpatient vs inpatient care?

Reimbursement varies most significantly by insurance company, more insurance companies do reimburse inpatient and outpatient serves very differently, but some smaller insurance companies may reimburse according to simple criteria, Medicare inpatient prospective payment system reimburses a weighted fee schedule of rates by diagnosis related group based upon the average cost of cost across the mations providers for that particular set of health issues, and Medicare outpatient reimbursement fits into one of two scenarios that is clinic( a freestanding primary ) and hospital( procedures performed wither at the hospital or at a clinic located within 35 miles of the hospital that own and operate the clinic) there reimbursed accordingly to the ambulatory payment classification.

How do Managed Care and Integrated Systems impact the cost, access, and quality of health care delivery?

Managed care and integrated systems has positive impact on the cost and access and quality of health care delivery.

My opinion:

How has Legislative Health Policy impacted the delivery of care?

Legislative health policy impacted the delivery of care: the health care delivery system continue to evolve by the market forces, and as do legal and regulatory changes resulting from health reform legislation.

What is the future of health services delivery?

The future of health service delivery: insurances drop individual plans because they do not comply with some of the mandates and employers cope by reducing worker hours and negotiating new health plans and the US healthcare system will continue to evolve but no one knows the destiny. The human services framework can barely be known as a framework. Or maybe it is a confounding cluster of exceedingly decentralized areas. Span of doctor bunches is growing, 37.12 percent of rehearsing doctors are still in solo or two man hones. The wellbeing design segment is getting some distance from structures that can encourage combination and coordination, with the piece of the overall industry of wellbeing upkeep associations falling and favored supplier associations. Furthermore, healing center division has been merging in numerous business sectors of the 5,000 network doctor's facilities, in excess of 3,500 have a place with some system or framework a large portion of these courses of action are centered on managerial instead of clinical joining.

WASHINGTON—The biggest U.S. banks will face restrictions on dividends and share buybacks for another three months, the Federal Reserve said Wednesday, citing the need to conserve capital during the coronavirus-induced downturn.

The Fed said it would maintain prohibitions on share buybacks and a cap on dividend payments by 33 banks with more than $100 billion in assets until the end of year. The restrictions, imposed for the third quarter, were due to expire Wednesday.

The action is intended to “ensure that large banks maintain a high level of capital resilience,” the central bank said in a statement. “The capital positions of large banks have remained strong during the third quarter while such restrictions were in place.”

In another sign of the uncertainty facing the industry and the broader economy, the Fed has required big banks to undergo a second round of so-called stress tests later this year, based on two coronavirus-related recession scenarios. Results of the tests, designed to ensure banks can continue to lend in a crisis, will be announced by the end of the year.

Banks are in a much stronger position now than they were during the financial crisis of 2008. But an analysis the Fed conducted this summer found that if the economy takes a long time to recover, banks could experience losses on a similar scale. It said at the time that limiting shareholder payouts would help keep banks healthy during the recession.

The biggest U.S. banks, including Bank of America Corp. and JPMorgan Chase & Co., had already voluntarily halted share buybacks through the second quarter. Buybacks are the main way U.S. banks return capital to shareholders. Under the dividend restrictions, banks won’t be able to make payouts that are greater than their average quarterly profit from the four most recent quarters.

The Fed’s restrictions come as many bank shares have plunged as the coronavirus pandemic took a toll on banks’ bread-and-butter lending businesses. Short-term interest rates near zero and tens of billions of dollars set aside to cover bad loans have cut into profits.  

Bank executives “are biting their tongues with the Fed, with fingers crossed they can buy back stock someday soon at these cheap prices,” said Christopher Marinac, director of research for Janney Montgomery Scott LLC.

The Fed’s decision to allow banks to continue paying dividends drew a dissent from Lael Brainard, an Obama appointee still on the Fed board, who has said allowing banks to deplete capital buffers could force them to tighten credit in a protracted downturn.

Some former U.S. regulators have said the Fed should order the largest banks to suspend payouts to preserve capital at a time of soaring unemployment and business disruption that may eclipse the 2008 financial crisis.

“If things work out well, banks can distribute income later on,” Janet Yellen, a former Fed chairwoman, told The Wall Street Journal this spring. “If not, they’ll have a buffer that will be needed to support the credit needs of the economy.”

The Fed committed earlier this month to support the economic recovery by setting a higher bar to raise interest rates and by signaling it expected to hold rates near zero for at least three more years.

In new projections released after a two-day policy meeting in mid-September, all 17 officials who participated said they expect to keep rates near zero at least through next year, and 13 projected rates would stay there through 2023.

1. Shareholders like dividends and share buy backs. Explain what dividends and share buy backs are and what limits the Federal Reserve has placed on bigShareholders like dividends and share buy backs. Explain what dividends a banks' ability to pay dividends and buy back shares, How do dividends and share buy backs affect a bank’s (or any corporation’s) resiliency, that is their ability to survive during an economic downturn.   (14 points. 7-8 sentences should be sufficient)
2. The Federal Reserve is concerned that paying large dividends and buying back shares may be imprudent for large banks and the economy at this time. Lael Brainard, a Federal Reserve official, and others felt the Federal Reserve should have imposed stricter limits than it did on the banks. What policy did Brainard want to see adopted?   Explain what Brainard is worried about and why – that is how would the economy be affected if Brainard’s fears come true? (10 points. 6-7 sentences)
3. Banks are frustrated (“biting their tongues with their fingers crossed”) about not being allowed right now to buy back their shares? What has happened to the banking business and bank shares that makes the present time an attractive time for banks to buy back their shares?   (9 points. 5-7 sentences.)

Fed Caps Big Banks’ Dividends, Halts Share Buybacks in Fourth Quarter

Central bank extends restrictions on dividends, buybacks, amid cloudy economic outlook

By

WASHINGTON—The biggest U.S. banks will face restrictions on dividends and share buybacks for another three months, the Federal Reserve said Wednesday, citing the need to conserve capital during the coronavirus-induced downturn.

The Fed said it would maintain prohibitions on share buybacks and a cap on dividend payments by 33 banks with more than $100 billion in assets until the end of year. The restrictions, imposed for the third quarter, were due to expire Wednesday.

The action is intended to “ensure that large banks maintain a high level of capital resilience,” the central bank said in a statement. “The capital positions of large banks have remained strong during the third quarter while such restrictions were in place.”

In another sign of the uncertainty facing the industry and the broader economy, the Fed has required big banks to undergo a second round of so-called stress tests later this year, based on two coronavirus-related recession scenarios. Results of the tests, designed to ensure banks can continue to lend in a crisis, will be announced by the end of the year.

Banks are in a much stronger position now than they were during the financial crisis of 2008. But an analysis the Fed conducted this summer found that if the economy takes a long time to recover, banks could experience losses on a similar scale. It said at the time that limiting shareholder payouts would help keep banks healthy during the recession.

The biggest U.S. banks, including Bank of America Corp. and JPMorgan Chase & Co., had already voluntarily halted share buybacks through the second quarter. Buybacks are the main way U.S. banks return capital to shareholders. Under the dividend restrictions, banks won’t be able to make payouts that are greater than their average quarterly profit from the four most recent quarters.

The Fed’s restrictions come as many bank shares have plunged as the coronavirus pandemic took a toll on banks’ bread-and-butter lending businesses. Short-term interest rates near zero and tens of billions of dollars set aside to cover bad loans have cut into profits.  

Bank executives “are biting their tongues with the Fed, with fingers crossed they can buy back stock someday soon at these cheap prices,” said Christopher Marinac, director of research for Janney Montgomery Scott LLC.

The Fed’s decision to allow banks to continue paying dividends drew a dissent from Lael Brainard, an Obama appointee still on the Fed board, who has said allowing banks to deplete capital buffers could force them to tighten credit in a protracted downturn.

Some former U.S. regulators have said the Fed should order the largest banks to suspend payouts to preserve capital at a time of soaring unemployment and business disruption that may eclipse the 2008 financial crisis.

“If things work out well, banks can distribute income later on,” Janet Yellen, a former Fed chairwoman, told The Wall Street Journal this spring. “If not, they’ll have a buffer that will be needed to support the credit needs of the economy.”

The Fed committed earlier this month to support the economic recovery by setting a higher bar to raise interest rates and by signaling it expected to hold rates near zero for at least three more years.

In new projections released after a two-day policy meeting in mid-September, all 17 officials who participated said they expect to keep rates near zero at least through next year, and 13 projected rates would stay there through 2023.

Shareholders like dividends and share buy backs. Explain what dividends and share buy backs are and what limits the Federal Reserve has placed on bigShareholders like dividends and share buy backs. Explain what dividends a banks' ability to pay dividends and buy back shares, How do dividends and share buy backs affect a bank’s (or any corporation’s) resiliency, that is their ability to survive during an economic downturn.   (14 points. 7-8 sentences should be sufficient)

The Federal Reserve is concerned that paying large dividends and buying back shares may be imprudent for large banks and the economy at this time. Lael Brainard, a Federal Reserve official, and others felt the Federal Reserve should have imposed stricter limits than it did on the banks. What policy did Brainard want to see adopted?   Explain what Brainard is worried about and why – that is how would the economy be affected if Brainard’s fears come true? (10 points. 6-7 sentences)

Banks are frustrated (“biting their tongues with their fingers crossed”) about not being allowed right now to buy back their shares? What has happened to the banking business and bank shares that makes the present time an attractive time for banks to buy back their shares?   (9 points. 5-7 sentences.)

You have been provided with accounting research tools. Use them to answer the following multiple choice questions. After you make your choice, tell me what theory you are basing your answer on, or what part of the codification applies to the question

6 Hudson Corp. operates several factories that manufacture medical equipment. The factories have a historical cost of $200 million. Near the end of the company’s fiscal year, a change in business climate related to a competitor’s innovative products indicated to Hudson’s management that the $170 million carrying amount of the assets of one of Hudson’s factories may not be recoverable. Management identified cash flows from this factory and estimated that the undiscounted future cash flows over the remaining useful life of the factory would be $150 million. The fair value of the factory’s assets is reliably estimated to be $135 million. The change in business climate requires investigation of possible impairment. Which of the following amounts is the impairment loss?

A) $15 million. B) $20 million. C) $35 million. D) $65 million.

7. Harold Co. received $10,000 in cash and a productive asset with a fair value of $90,000 from Saxon Co. In exchange, Harold transferred a similar productive asset to Saxon. The asset transferred to Saxon had a fair value of $100,000 and a carrying amount of $80,000. If the transaction lacks commercial substance, at what amount should Harold record its newly acquired productive asset?

A) $90,000 B) $80,000 C) $72,000 D) $70,000

8. Which of the following statements describes the proper accounting for losses when nonmonetary assets are exchanged for other nonmonetary assets?

A) A loss is recognized immediately because assets received should not be valued at more than their cash equivalent price.

B) A loss is deferred so that the asset received in the exchange is properly valued.

C) A loss, if any, which is unrelated to the determination of the amount of the asset received should be recorded.

D) A loss can occur only when assets are sold or disposed of in a monetary transaction.

9. When an exchange of inventory items between an enterprise and another entity is undertaken to serve the needs of the enterprise’s customers, the enterprise should record the inventory items received based on the

A) Carrying amount of the inventory items relinquished.

B) Fair value of the inventory items relinquished.

C) Carrying amount of the inventory items received.

D) Fair value of the inventory items received.

Sunshine Company is a calendar year accrual-basis taxpayer and is in its first year of operations. Sunshine Company had the following income, expense, and loss items for the current year: Sales $650,000 Corporate dividend (from 5% owned corporation) 60,000 Municipal bond interest 25,000 Long-term capital gain 0 Short-term capital loss (8,000) Cost of goods sold 320,000 Depreciation 65,000 Nondeductible fines 4,000 Advertising 7,000 Utilities 6,000 Rent 5,000 Furthermore, Sunshine’s liabilities (all recourse) increased from $0 on 1/1 to $300,000 on 12/31 of the current year. 1) Assume that Sunshine Company is owned by Alvin as a sole proprietorship. Alvin received $2,400 per month ($28,800 in total) from Sunshine Company as an owner’s draw. Additionally, Alvin took $55,000 out of Sunshine Company near the end of the year as a partial distribution of profits.

a) Calculate the net business income of Sunshine Company/Alvin that would be reported on Schedule C of Alvin’s Form 1040.

b) How much of the $2,400 per month ($28,800 total) and the $55,000 distribution would Alvin include as taxable income on his Form 1040?

c) What amount of Alvin’s income will be subject to self-employment tax?

d) Note that you do not need to complete Schedule C or other forms, but these form will be a useful guide in completing this portion of the assignment.

2) Assume that Sunshine Company is a c corporation. Alvin contributed $60,000 to purchase 60% of the stock while his wife’s best friend, Ann, contributed $40,000 to purchase the remaining 40% of the stock when the corporation was formed this year. Alvin received a $2,400 per month salary ($28,800 in total). Ann doesn’t work for the company so she received no salary. The company distributed some profits at the end of the year by paying out a $55,000 dividend.

a) Calculate Sunshine Corporation’s taxable income and income tax liability to be reported on Form 1120.

b) What amount and type of income must Alvin report on his individual Form 1040 tax return?

c) What amount of Alvin’s income will be subject to self-employment tax?

d) What is Alvin’s basis in his Sunshine stock at the end of this year?

e) Note that you do not need to complete Form 1120 but this form and related schedules will be a useful guide in completing this portion of the assignment

Brisbane Automotive manufactures trucks with its plant in Tai Po Industrial Estate. Brisbane employs about 200 workers. Negotiations are currently under way between the management and the labor union to form an agreement that would take effect from 1 January next year. The labor union proposed to have 20% salary increase to the production workers next year. However, the management is concerned that the increase in labor costs will eliminate most or all of its profits. Brisbane’s long-term plans call for expansion of the product line in the near future. Management is working with consultants on a new automated plant that will double present capacity. The estimated cost of the new plant is $15 million. Brisbane adopts double declining balance method for deprecation. When the new plant is to be operational in one year, the existing facility will be sold. The expected sales price of the old facility is $4 million at that time. The production activity in the new plant will be highly automated. If the new facility is undertaken, only 20 production workers will be required, as compared with 200 workers under the existing production system. The management suggests to use Net Present Value (NPV) method to evaluate the proposal of the new plant. Required rate of return is set to be 10%. There is no change in working capital requirement. In addition, Brisbane enjoys a special income tax waiver until 2028 (i.e. no income tax during the period).

REQUIRED:

1) Assume that the Net Present Value (NPV) of the new plant shows a negative amount. It seems that all Directors really buy the idea. Therefore, they have different suggestions with the intention to get a positive NPV:

a. The Marketing Director: We should use straight line depreciation method (instead of double declining balance method) which will generate lower expense. Therefore, the NPV value of the project will be improved.

b. The Design Director: The 10% required rate of return is too high. We should adjust down the required rate of return in order to generate a more favorable NPV result for the project.

c. The Production Director: We should take advantage of this high technology through automation. We should revise our analysis by considering these intangible benefits (such as greater flexibility in the production process, shorter manufacturing cycle times) to make the overall NPV positive.

Comment each of the above three suggestions.

2) Suggest and explain TWO non-quantifiable factors to the management for evaluating the proposal.