Customer Corp. entered into a five-year lease agreement with Supplier Ltd, on 1 July 2019. The lease is for a number of spa baths. Supplier Ltd acquired the spa baths on 1 July 2019, at the fair value of $1,009,850. Customer Corp. uses the spa baths at a club. The baths are expected to have an economic life of seven years, after which time they will have no residual value. There is a bargain purchase option that Customer Corps will be able to, and is expected to, exercise at the end of the fifth year, for $100,000.

There are to be five annual payments of $250,000, due at the end of each fiscal year (i.e., on 30 June each year). Customer Corp. is responsible for the insurance and maintenance of the equipment. The equipment is to be depreciated on a straight-line basis. The interest rate implicit in the lease is 10% per year. The lease can be cancelled by Customer Corp. upon payment of a penalty of $700,000.

REQUIRED:                                       

(1)    What type of lease is this for Supplier Ltd? Provide justifications for your classification considering the criteria in AASB 16 – ‘Leases’.

(2)    Prepare the journal entries, including narrations, for Supplier Ltd from 1 July 2019 to 30 June 2020 to record the lease arrangement consistent with AASB 16 – ‘Leases’.

(3) For Customer Corp. the contract contains a lease. Prepare the journal entries, including narrations, for Customer Corp. from 1 July 2019 to 30 June 2020 to record the lease arrangement consistent with AASB 16 – ‘Leases’

Hurricane Harvey caused a net loss of $127 Billion. Let us assume that in any given year the net loss would be the same for the next 10 years (Jan 1, 2020 to Dec 31, 2029) if a Harvey like hurricane were to recur in Houston and adjoining areas. However, if certain investments are made in 2019 to mitigate risks and enhance resilience in the region, the expected loss can be reduced significantly. Let us assume that scientists, engineers and policy experts have worked together to estimate that if the investments are indeed made in 2019 the net loss would reduce to 10% (i.e., $12.7 Billion expected net loss per year over the period from 2020 to 2029 if a hurricane like Harvey were to recur) but additional investments of $ 6.35 Billion would be needed each year to maintain the investments. At the end of 2029 the salvage value of the investments would be 20% of the cost of the original investment. Other than this salvage value there would be no other costs or gains expected after the 10-year period. According to a Presidential tweet at the time, Harvey was a 500-year event. Assuming this probability assessment to be accurate, what present (2019) investment would be justified from a net present worth perspective? Please feel free to make any appropriate assumptions but try to state them clearly.

The following list includes all of the account balances from Blue and White Company's general ledger on December 31, 2020, after all the adjusting entries have been posted. The accounts are listed in alphabetical order, and all accounts have a normal balance. This was Blue and White Company's first year in business.

Instructions: Using the information provided above, prepare a multiple-step income statement, statement of owner's equity, and classified balance sheet for Blue and White Company for the fiscal year ending December 31, 2020. Enter your answer in the space provided below on Connect. The accounts in your financial statements should be in the proper format, but you do not need to align amounts in neat columns. DO NOT ABBREVIATE ACCOUNT TITLES.

FIN 503

Fall 2020

Chapter 3

Assignment 3

Please answer all questions. Do not leave any question unanswered. Show your calculations. Submit the homework through LMS only. Typed answers are preferred but not required. Assignment is due on 11/10/2020 at 11:55 PM

Project X involves a new type of graphite composite in-line skate wheel. We think we can sell 6,000 units per year at a price of $1,000 each.

Variable costs will run about $400 per unit, and the product should have a four-year life.    

Fixed costs for the project will run $450,000 per year. Further, we will need to invest a total of $1,250,000 in manufacturing equipment. This equipment is seven-year MACRS property for tax purposes. In four years, the equipment will be worth about half of what we paid for it. We will have to invest $1,150,000 in net working capital at the start. After that, net working capital requirements will be 25 percent of sales.

First prepare a pro forma income statement for each year.

Next calculate operating cash flow.

Finish the problem by determining total/project cash flow and then calculating NPV assuming a 28 percent required return.

Use a 34 percent tax rate throughout.

Case study 5:

Scenario 1:

ABC S.A.O.G was incorporated with an authorized capital of 300 million shares, ordinary shares of 500 baiza each. The company has in issue 100 million shares. On 15-january-2017 the company has repurchased 8 million shares at the rate of 3.250 each after the completion of all the requirements posed by capital market Authority-CMA. The company re issued such shares in the march 2018 @ rate of 4.000 R.O per share. The general rules set by CMA is that the company cannot repurchase more than 10% of its share capital at one time and there should be a minimum gap of 2 years between any repurchase. On 13-february-2020, the company again has repurchased 10 million shares at the rate of R.O 4.550 each.

Analyse the above situation and answer the following questions:

1. Explain in your own words impact of each repurchase on company’s share capital? Justify it with proper calculations? (1.5 marks-Min 75 words)
2. Has the company carried out the procedure of repurchase within the guidelines of CMA or not? Justify your answer with necessary data? (1.5 marks-Min 75 words)
3. What is the impact on corporation’s financial statements if all of such repurchased stock is reissued in the year 2020 @ R.O 4.000 each (2 marks-Min 100 words)

PBO Calculations, Service Costs & Gains/Losses on PBO (Adapted from Chapter 17, P2-P5)
Sachs Brands defined benefit pension plan specifies annual retirement benefits equal to:
1.5% * Service Years * Final Year’s Salary
Payable at the end of each year. Trom Specht was hired by Sachs at the beginning of 2004 and
is expected to retire at the end of 2038, after 35 years’ of service. Her retirement is expected to
span 18 years. Specht’s salary is $120,000 at the end of 2020 and the company’s actuary
projects her salary to be $210,000 at retirement. The actuary’s discount rate is 8%.
Instructions:
5. What is the 2020 PBO for with respect to Specht?
At the beginning of 2021, the pension formula was amended to:
1.75% * Service Years * Final Year’s Salary
6. What is the company’s prior service cost at the beginning of 2021, with respect to
Specht?
7. How much of the prior service cost should be amortized during 2021 (remember that
the change was at the beginning of 2021)?
8. What is the service cost for 2021 with respect to Specht?
9. What is the interest cost for 2021 with respect to Specht?
10. What is the 2021 PBO for with respect to Specht?
At the end of 2021 (beginning of 2022), changing economic conditions caused the actuary to
reassess the applicable discount rate. It was decided that 7% is the appropriate rate.
11. What is the effect of this change in the discount rate?

The following three defense stocks are to be combined into a stock index in January 2019 (perhaps a portfolio manager believes these stocks are an appropriate benchmark for his or her performance). Assume the index is scaled by a factor of 10 million; that is, if the total value of all firms in the market is $5 billion, the index would be quoted as 500.

PART 1

a. Calculate the initial value of the index if a value-weighting scheme is used. (Round your answer to 2 decimal places.)

b. What is the rate of return on this index for the year ending December 31, 2019? For the year ending December 31, 2020? (A negative value should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.)

PART 2

You are going to value Lauryn’s Doll Co. using the FCF model. After consulting various sources, you find that Lauryn's has a reported equity beta of 1.5, a debt-to-equity ratio of .4, and a tax rate of 21 percent. Based on this information, what is the asset beta for Lauryn’s?

Mark worked as route manager for United Trucks Pty Ltd in Queensland from 2003-17. A term of his contract was that if he should leave the company, he could not engage in the trucking industry in Queensland for five years. In 2018 he registered a company called Sunshine Trucks Pty Ltd. Mark owns 99% of the shares in the company. The other 1% is owned by his brother, Greg, whom he elected as sole director and CEO. Sunshine Trucks operates from Townsville and carries goods all over Queensland. Greg also signs a contract on behalf of the company, taking out a loan of $ 2 million from Grasping Bank in 2018 as start-up capital. The company did well during 2018, 2019 and the first half of 2020, but in July 2020 was not able to repay a loan instalment of $ 100 000 owing to Grasping Bank Ltd. Mark comes to you for advice after receiving two letters: One from United Trucks Pty Ltd requiring Sunshine Trucks Ltd to cease operating in Queensland, the other from Grasping Bank Ltd threatening to sue him for $ 100 000. Advise him, citing all relevant legal authority. Please note that you should assume that the restraint of trade clause in the contract that Mark had with United Trucks is valid under the law of contract. You should therefore not discuss that issue.

Advice Mark using ILAC.

.

Chapter 5 Discussion No unread replies. No replies. In previous chapters, we have learned about the role of public health, social determinants and behavior and social theories related to health. This week, we are broadening our discussion to include how law, health policy and ethics impact health, quality of life and health outcomes. In this context, you will gain a better perspective of the role of public health and the overall goal of improving health, including the importance of multi-sectoral collaboration. After you view the videos, reflect on the four goals of Healthy People 2020: Improve quantity and quality of life Eliminate health disparities and achieving true health equity Protect health throughout all stages of life Make environments healthier through a better understanding of the true social determinants approach to health Using the above framework for the list of health issues below, first discuss what factors such as social determinants, law, and ethics impact or affect the issue. Describe how public health initiatives, such as Healthy People 2020 and multi-sectoral efforts can improve health outcomes pertaining to the issue. Your post must be at minimum two paragraphs (five sentences per paragraph) in APA format (in text citations and bibliography). Your must respond to at least one other student. Your post is due by

1.a Sheridan Inc. manufactures cycling equipment. Recently, the vice president of operations of the company has requested construction of a new plant to meet the increasing demand for the company’s bikes. After a careful evaluation of the request, the board of directors has decided to raise funds for the new plant by issuing $3,088,700 of 14% term corporate bonds on March 1, 2020, due on March 1, 2035, with interest payable each March 1 and September 1, with the first interest payment on September 1st, 2020. At the time of issuance, the market interest rate for similar financial instruments is 12%.

As the controller of the company, determine the selling price of the bonds. (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 458,581.) Selling price of the bonds = ?

1.b

Shamrock Corporation, having recently issued a $20,069,100, 15-year bond issue, is committed to make annual sinking fund deposits of $616,800. The deposits are made on the last day of each year and yield a return of 10%.

Future value of an ordinary annuity = ?

1. c Under the terms of his salary agreement, president Chris Walters has an option of receiving either an immediate bonus of $55,000, or a deferred bonus of $70,000 payable in 10 years.

Ignoring tax considerations and assuming a relevant interest rate of 4%, which form of settlement should Walters accept?

Present value of deferred bonus = ?