QUESTION 1

A. EQUIP Bhd is a supplier of factory machinery. Categorise each of the following leases into operating or finance lease and briefly explain your choice.

(i) A 5-year lease of custom-made machinery to AGRO Sdn Bhd. The useful life of the machine is 10 years.

(ii) An 8-year lease of four machines to BURGA Enterprise. The useful life of the machine is 10 years.

(iii) A 5-year lease of four machines to CARTEL Bhd. The useful life of the machine is 10 years. At the end of the lease, the ownership will be transferred to CARTEL Bhd.

(iv) A 4-year lease of a machine to DUGRO Bhd for RM12,000 yearly. The fair value of the machine is RM40,000.

B. Briefly explain the concept of lease under Al-Ijarah Thumma Al-Bai (AITAB).

C. Briefly explain the concept of financial instrument under Sukuk Mudharabah.

A. EQUIP Bhd is a supplier of factory machinery. Categorise each of the following leases into operating or finance lease and briefly explain your choice.

(i) A 5-year lease of custom-made machinery to AGRO Sdn Bhd. The useful life of the machine is 10 years.

(ii) An 8-year lease of four machines to BURGA Enterprise. The useful life of the machine is 10 years.

(iii) A 5-year lease of four machines to CARTEL Bhd. The useful life of the machine is 10 years. At the end of the lease, the ownership will be transferred to CARTEL Bhd.

(iv) A 4-year lease of a machine to DUGRO Bhd for RM12,000 yearly. The fair value of the machine is RM40,000.

B. Briefly explain the concept of lease under Al-Ijarah Thumma Al-Bai (AITAB).

C. Briefly explain the concept of financial instrument under Sukuk Mudharabah.

QUESTION 2

QUESTION 2

On 1 January 2018 FILHO Bhd enters into a 6-year contract to lease a machinery to PKNP Bhd. The followings are the information of the lease:

(i) The cost of the equipment is RM150,000, useful life is 8 years and the residual value is estimated at RM30,000.

(ii) Annual lease payments of RM25,000 are made at the end of each year.

(iii) The implicit interest rate is 9 percent.

(iv) The residual value guaranteed by PKNP is RM20,000.

Required:

For FILHO Bhd

1. On 1 January 2018, determine the value of:

1. Investment in lease
2. Cost of sales of the lease
3. Revenue from the lease
4. Gross profit from the lease

2. Show the journal entry on 31 December 2018.
3. Determine the value of the investment in lease on 31 December 2019.

For PKNP Bhd

4. Show the journal entry on 1 January 2018.
5. Assuming the company uses straight line method of depreciation, show all the journal entries on 31 December 2018.
6. Determine the value of lease liability and carrying amount of lease machinery on 31 December 2019

QUESTION 3

QUESTION 3

LEGO Berhad subscribes 1,000 units of bond issued by TRIUMP Berhad on 1 July 2018 at RM7,606.92 per unit. The face value of the bond is RM8,000 per unit with 10 percent coupon rate payable on 30 June and 31 December every year. The bond will mature on 30 June 2021. The current effective rate of interest is 12 percent.

Required:

Using amortised cost method,

1. Show the journal entry on 1 July 2018.
2. Prepare the amortised cost table for the bond.
3. Show the journal entry on 31 December 2018.

Additional information:

The total transaction cost on the subscription of bond is RM8,000 and the fair value of the bond as at 31 December 2018 is RM7,810 per unit.

Required:

Using fair value through profit or loss method,

4. Show the journal entry on 1 July 2018.
5. Show the journal entry on 31 December 2018.

Using fair value through other comprehensive income method,

6. Show the journal entry on 1 July 2018.

Show the journal entry on 31 December 2018

Your company is a global seller or home furnishings called Worldwide Home Stuff Unlimited (WHSU). (Yes, they need some more creative people in their company.) Complete a seven-year planning model for WHSU for the period 2016 through 2022. Use the structure shown at the end of this assignment. Proceed as follows:

1. Take the 2016, 2017, and 2018 values from the data at the end of this assignment. Enter the ACTUAL VALUES even for the various lines that can be calculated from other lines (e.g., the Gross Profit or the EBT).

2. Place all growth rates and other input variables at the top left corner of the worksheet. Use formulas and/or functions to perform all necessary calculations.

   Important Note: Most or all of the growth factors and other input values you will be using in this model are calculated in steps 3 through 7 below. So put the formulas for calculating these values in the appropriate cells at the top left corner of the worksheet.

3. Starting with 2019 and beyond, for the following line-items (a thru d below), assume a constantPERCENTAGE growth from one year to the next—e.g., from 2018 to 2019. That percentage change is equal to the Average Annual Percentage Change from 2016 to 2018. Calculate this value by averaging the percentage change from 2016 to 2017 and the percentage change from 2017 to 2018.

   1. Net Sales/Sales Revenue

   2. Selling, General, and Administrative (SG&A)

   3. Depreciation and Amortization

   4. Other Expenses

4. Starting with 2019 and beyond, assume that Advertising will change by the same dollar amount (not the same percentage) from one year to the next—e.g., from 2018 to 2019. That amount is equal to the Average Annual Change (in dollars) between 2016 and 2018.

5. Starting with 2018 and beyond, assume that Rent Expense will be unchanged (that is, constant) from one year to the next, so the values in 2019 through 2022 will be the same as the 2018 value.

6. Assume that the Cost of Goods Sold (CGS) as a percentage of Net Sales/Sales Revenue (that is, the ratio of CGS to Net Sales) will be constant in years 2018 through 2022 and equal to the percentage in 2018. You will need to calculate that percentage (ratio).

7. Assume that the tax rate will be constant in years 2018 through 2022 and equal to the tax rate in 2018. You will need to calculate that value (that is, the tax expense as a percentage of the EBT).

2

8. Note that your formulas should allow for the possibility that your company may lose money in any given year (whether or not it is not the case with the current data).

9. Be sure to note somewhere on the spreadsheet that all figures are in millions.

10. Format financial data with commas (but no decimal places), using dollar signs only for the Net Sales/Sales Revenue, Gross Profit, Total Expenses, Earnings Before Taxes, and Net Income lines. Format growth rates as percentages. Properly format all columns and numbers.

11. When creating the spreadsheet, be sure to copy cell formulas rather than entering similar formulas many times (for example, you can use the autofill handle to copy cell formulas from year to year).

12. Use Excel to place a footer on your spreadsheet with your last name and section (e.g., Jones—INSY 2299 RZQ—where you substitute your last name for Jones and your section for RZQ).

Be sure to follow these instructions carefully!

The local news provided poll results from 2000 adults who interview job applicants. The results showed that 35% of the adults said their biggest issue with interviewers is them not knowing company history. The margin of error was given as +/- 4 percentage points. Answer the following questions:
a. What important piece of information was omitted from the statement above?
b. What is meant by the statement that "the margin of error is +/- 4 percentage points"?
c. What are the values of?
d. If the confidence level is 95%, what is the value of?

In a poll of 555 randomly selected students, 40% stated that they enjoyed statistics. Answer the following questions:
a. Identify the number of students who say that they enjoy statistics? Round to the nearest whole student if necessary.
b. Construct a 95% confidence interval estimate of the percentage of all students who say that they enjoy statsitics.
c. Can we safely conclude that majority of students enjoy statistics? Explain.

The following information provided below shows the output from the results of performing a confidence interval for a population mean. Answer the following questions:
Confidence Interval:

a. Identify the best point estimate of
b. Find the degrees of freedom.
c. Find the critical value that corresponds to n = 40.

The cholesterol levels of 40 women were sampled and a 95% confidence interval estimate was obtained below. The units of measurement for the interval below are
917.562 < < 2254.129
a. Identify the confidence interval. Include the appropriate units of measure.
b. Write a statement that correctly interprets the confidence intervale estimate of σ.

You want to estimate the mean amount of time college students spend on the Internet each month. How many college students must you survey to be 95% confident that your sample mean is within 15 minutes of the population mean? Assume that the standard deviation of the population of monthly time spent on the Internet is 210 minutes.

Three firms carry inventories that differ in size. Firm A’s inventory contains 2000 itemns, firm B’s inventory contains 5,000 items, and firm C’s inventory contains 10,000 items. The population standard deviation for the cost of the items in each firms’ inventory is 144, A statistical consultant recommends that each firm take a sample of 150 items from its inventory to provide statistically valid estimates of the average cost per item.

1. Using the finite population correction factor if needed, compute the standard error for each of the three firms given a sample of size 150. (round to 2 decimal points)

Falcor. Falcor is the U.S.-based automotive parts supplier which was spun-off from General Motors in 2000. With annual sales of over $26 billion, the company has expanded its markets far beyond the traditional automobile manufacturers in the pursuit of a more diversified sales base. As part of the general diversification effort, the company wishes to diversify the currency of denomination of its debt portfolio as well. Assume Falcor enters into a $50 million 7-year cross currency interest rate swap to do just that – pay euro and receive dollars. Using the data in Exhibit 8.12, solve the following:

a. Calculate all principal and interest payments in both currencies for the life of the swap.

b. Assume that three years later Falcor decides to unwind the swap agreement. If 4-year fixed rates of interest in euros have now risen to 5.35% and 4-year fixed rate dollars have fallen to 4.40%, and the current spot exchange rate of $1.02/€, what is the net present value of the swap agreement? Explain the payment obligations of the two parties precisely?

U2 is a famous band with studio albums that span the 1980’s, 1990’s, and 2000’s.  Suppose you have a friend who has not heard of this band but wants to become familiar with their music. Here is a summary of their studio album recordings:

Year Released            Album Name                                                                   Number of Songs

1980                            Boy                                                                                    11

1981                            October                                                                             11

1983                            War                                                                                   10

1984                            Unforgettable Fire                                                             10

1987                            The Joshua Tree                                                                11

1988                            Rattle and Hum                                                                 17

1991                            Achtung Baby                                                                   12

1993                            Zooropa                                                                             10

1997                            Pop                                                                                    12

2000                            All That You Can't Leave Behind                                     11

2004                            How to Dismantle an Atomic Bomb                                11

2009                            No Line on the Horizon                                                    11

2014                            Songs of Innocence                                                           11

                                    TOTAL                                                                            148

Suppose your friend does not have time to listen to every track on their albums, and instead wants to take a sample of their songs to listen to in order to familiarize himself with the music.

Your friend decides he has time to listen to about 40 songs (give or take a few as needed) and wants those songs to be representative of the group’s music.

1. Suppose your friend created an online poll and asked people to name their favorite U2 song, and he listened to the 40 songs that got the most votes.  What do you think of this approach in this situation?  Explain.

2. Explain briefly how your friend could choose a simple random sample of 40 songs from U2.

3. Suppose your friend is concerned with the possibility of the simple random sample choosing too many songs from one era of the band (and therefore not giving a good representation of their music overall).   What sampling approach would you recommend for him now?  Explain briefly.

4. Suppose your friend believes strongly that you have to listen to an entire album to really get the sense of the band’s music, because “each album is like its own story”.  What sampling method would you suggest to your friend now?   Explain a few specifics of how your friend could conduct this approach.

5. Which approach in parts (a) through (d) would you recommend overall?  Explain your choice.

Hello:

Please explain one major global financial crisis that occurred after the year 2000. Please do not explain the U.S. Housing Crisis of 2007 or the Russian Crisis of 2014. I have a lot of information on these two crisis already. Please I have some information but not enough. Please explain the strengths and weaknesses and the root cause of this financial crisis.

Please list a reference for this financial crisis.

Thank you,

Judy M. Robinson

(a) Create a sampling distribution for the sample mean using sample sizes n=2. Take N=2000 repeated sample sizes of 2, and observe the histogram of the sample means. What shape does this sampling distribution have?

The sampling distribution is normal

The sampling distribution is triangular

The sampling distribution is skewed right

The sampling distribution is uniform

(b) Now take N = 2000 repeated samples of size 8. Explain how the variability and the shape of the sampling distribution changes as n increases from 2 to 8.

The sampling distribution is more uniform, and the variability is smaller

The sampling distribution is more uniform, and the variability is larger

The sampling distribution is more normal, and the variability is larger

The sampling distribution is more normal, and the variability is smaller

(c) Now take N= 2000 repeated samples of size 25. Explain how the variability and the shape of the sampling distribution changes as n increases from 2 to 25.

The sampling distribution is more normal, and the variability is much smaller

The sampling distribution is more uniform, and the variability is much smaller

The sampling distribution is more normal, and the variability is much larger

The sampling distribution is more uniform, and the variability is much larger

(d) Compare the results from parts a through c to the displayed example curves.

The distribution from Q1 matches the displayed curve for n=30​, but the distributions in Q1 and Q3 are more uniform than the displayed curves.

The distribution from Q1 matches the displayed curve for n=2, but the distributions in Q2 and Q3 are more uniform than the displayed curves.

The distributions from parts Q1through Q3 go in reverse order from the displayed curves.

The distributions from Q1 through Q3 roughly match the displayed curves.

(e) Explain how the central limit theorem describes what has been observed in this problem.

The sampling distribution of the mean became more and more normal as the sample size decreased from 30 to 8 to 2​, which the central limit theorem says should happen.

The sampling distribution of the mean became more and more uniform as the sample size decreased from 30 to 8 to 2​, which the central limit theorem says should happen.

The sampling distribution of the mean became more and more uniform as the sample size increased from 2 to 8 to 30​, which the central limit theorem says should happen.

The sampling distribution of the mean became more and more normal as the sample size increased from 2 to 8 to 30​, which the central limit theorem says should happen.

The options below the questions are my choices.

Between 2000 and 2012, Gap, Inc. (Gap) ceded its world leadership position in specialty fashion retailing to Inditex of Spain and H&M of Sweden. These two companies, each less than a quarter of Gap’s size in 2000, were now setting the pace in the global mass fashion market, and Gap appeared to be falling ever further behind. In the intervening twelve years, three CEOs had struggled to turn around the fading brand. While several temporary profit boosts appeared to herald a recovery, a sustained rally remained elusive. Mickey Drexler, Gap’s CEO since 1983, who had been responsible for Gap’s rise to global prominence, was fired in 2002 after two years of double digit, same-store sales declines and a 75% drop in the stock price. 1 His successor, Paul Pressler, appeared to have engineered a remarkable recovery, but was fired in 2007 after disappointing sales and another slump in profits. His replacement, Glenn Murphy, fresh from a successful turnaround at a Canadian drug-store chain, promised tighter price controls, lower administrative costs, and a leaner, more aggressive Gap. He cut costs and drove up earnings per share, but sales continued to decline. After four years of troubles, Murphy brought in former J. Crew President, Tracy Gardner, to consult with the Gap brand and he began a bold program to close one fifth of Gap’s North American store base. In 2012, sales had lifted 8%, same-store sales were strongly positive for all of Gap’s domestic sub-brands, and the company’s share price had lifted nearly 50% from the prior year. After 12 years of poor performance, had Glenn Murphy finally discovered the answers to Gap’s problems?  Mickey Drexler: 2000-2002 After Gap, Inc. “misjudged fashion trends in 2000,” its sales growth rate slowed to 18%, below the historical average, and operating profits fell 20% to $1.4 billion.3 CEO Mickey Drexler, was confident that this stumble was a short term problem, but 2001 results suggested otherwise. Sales lifted only 1%, operating profits plunged anther 70% to $426 million and the company made a net loss. 2002 saw sales rise 4% and operating profits recover to $1.0 billion, but comparable stores sales continued to fall. Gap’s stock price decreased from a high of $53.75 in February 2000 to $14 in May 2002.4 Several top designers and senior executives left the company “disillusioned with how bureaucratic the organization had become.” Analysts noted that, while Gap had made “button-down shirts, chinos and basic cotton T-shirts the boomer uniform,” it was struggling to resonate as well with some members of Generation Y (those born in the late 1970s to early 1990s) who were “looking for individuality, not conformity.”6Chairman Don Fisher had had enough. The night before the Gap board meeting on May 22, 2002, Steve Jobs, a board member, called Mickey Drexler to warn him that the board was planning to fire him the next morning. Drexler entered the board meeting aggressively and a board member later described it as “a very emotional scene.”Despite his shock and disappointment, Drexler quickly recovered. In 2003, he became the CEO of J. Crew, a quality basic clothing chain which was incurring heavy losses. Within two years, he had returned it to profitability and, within five, he had more than doubled sales. Paul Pressler: 2002-2007 Paul S. Pressler replaced Drexler as the CEO of Gap, Inc. Pressler had spent 15 years with The Walt Disney Company and ended his tenure there as the chairman of Walt Disney Parks and Resorts. The press noted the difference in the two men’s leadership styles: whereas Drexler “flew by the seat of his khakis,” relying on his honed intuition to direct apparel development, Pressler was researchoriented and left decisions about apparel to Gap, Inc.’s designers. 8 Pressler stated, “I had to demonstrate to everyone that the general manager is here to lead the people—not pick the buttons.”9 Pressler moved quickly to close 200 underperforming stores, slow the rate of new openings, and reduce excess inventory, 10 resulting in a “spectacular turnaround” in 2003. 11 Between 2002 and 2003, operating profits rose 87% to $1.8 billion, marginally beating the all-time record set in 1999. Gap Brand Pressler hired Canadian Pina Ferlisi as executive vice president of product design in March 2003 to define the division’s style aesthetic. Before joining Gap, Inc., Ferlisi worked at Perry Ellis, Tommy Hilfiger, and Theory; she also helped launch the successful Marc by Marc Jacobs line. Her Gap design team was located in New York City and included Vice President of Women’s Design Louise Trotter, who formerly worked at Calvin Klein, and Vice President of Accessories Design Emma Hill, who previously held a similar post at Marc Jacobs. Both Trotter and Hill hailed from the U.K. Scores of consumer and employee insights indicated that female Gap customers felt that the brand’s offerings were too androgynous and boxy. Hence, Ferlisi made the women’s lines more feminine and focused on fabric and fit. Banana Republic For years, Banana Republic had a reputation of being “a purveyor of chic basics—casual office wear in black or beige”27—i.e., an upscale Gap. However, under the direction of President Marka Hansen, the division focused on making its product assortment more fashionable and trendy, minimizing the overlap between Gap and Banana, and catering to 25- to 30-year-old professionals . Hansen explained, “What’s the hook or differentiation? . . . It’s an affordable, covetable luxury . . . . We’re bringing fashion to a wider audience. Old Navy Under President Jenny Ming, Old Navy continued its focus on families, rolling out underwear, maternity, and infant lines to raise margins.32 The division expanded to Canada in Pressler’s first year as CEO and it targeted Hispanics with its first Spanish television spot at the end of 2003. The company’s localization strategy was tested in select Old Navy stores in 2004, and the company planned to extend the program to all Old Navy outlets in 2005. Forth & Towne Gap, Inc. established five test stores for Forth & Towne in Chicago and New York by fall 2005. Under Gary Muto’s leadership, the firm positioned Forth & Towne to appeal to women aged 35– 50. Gap Online Toby Lenk, a 1987 Harvard MBA, headed the company’s online division, Gap, Inc. Direct. In 2004, Gap, Inc. was the largest U.S. online apparel retailer with sales of over $500 million. It was “redesign[ing] and rebuild[ing] all of [its] websites from the ground up” to enhance visitors’ online shopping and to improve online and in-store integration.47 Lenk noted that 35% of the company’s Web site visitors were pre-shoppers preparing for store visits, and 13% of those who entered a Gap, Inc. store had visited the store’s online site beforehand. The firm’s new e-commerce platform would allow the sites to take back orders and preorders. Lenk explained, “This means we will never have to walk a sale on a basic item, and at the same time it will allow us to run our basic inventory much tighter.”48 The company planned to have most of the Web site enhancements completed by the 2005 holiday season. Marketing Along with reworking Gap’s main brands, Pressler also overhauled Gap’s public image and publically positioned its divisions as lifestyle brands. The CEO remarked, “We need to bring more theatrics, storytelling and consistency [to retail]. If you can’t tell me what a Gap dinner party, Banana Republic car or Old Navy vacation looks like, then we haven’t built our stories.”49 Pressler had also been focused on differentiating the brands and “upgrading the marketing functions at all of Gap’s brands, including the hires of new head marketers at all three units.”50 Recent Gap-brand TV advertising featured actors and singers. The company paid 40-year-old actress Sarah Jessica Parker, former Sex and the City star, $38 million to appear in television and print ads for three seasons during 2004–2005. It replaced Parker with 17-year-old British soul singer Joss Stone as its Gap spokes-model in the summer of 2005.51 In an effort to tout its “vastly expanded variety of fits” in jeans, the company planned to use more nontraditional types of advertising—i.e., “guerrilla marketing and grassroots tactics,” according to Jeff Jones, executive vice president of marketing at Gap. After lackluster results in 2005 and six consecutive quarters of declining same-store sales, Pressler pointed to 2006 as a key year to prove Gap’s recovery and justify his rebranding efforts.60 Pressler noted, “We are acting with a tremendous sense of urgency to win back customers.”61 Pressler also increased the annual cash dividend 78% for 2006 and the board authorized a further $500 million for a share repurchase program, $250 of which would be repurchased in Q1 and Q2 of 2006. Fisher: Interim CEO, 2007 Although Fisher was interim CEO for less than a year, he made a number of moves that undid much of Pressler’s previous work. Less than a week after firing Pressler, he cut many of Pressler’s hires from Disney. Cynthia Harriss, the president of Gap U.S., was replaced by Marka Hansen, the previous president of Banana Republic and an employee since 1987. Fisher also closed all Forth & Towne stores by the end of June, taking a pretax charge of $40 million.67 Although Forth & Towne has been open since 2005, financials were never disclosed for the brand. Fisher also began to reduce Gap’s workforce to bring down expenses, cutting a “relatively small percentage” of the 150,000 workers. Glenn Murphy: 2007-2012 On July 26, 2007, Gap appointed Glen Murphy, as the new CEO. Since 2001, he had been the CEO of Shoppers Drug Mart, a Canadian drugstore chain. Murphy’s first major move as CEO was to cut expenses and control inventory discounting. Quarter three profit for 2007 lifted 26% due to lower marketing spending and better product margins. In 2008, Spain’s Inditex overtook Gap, Inc. as the world’s largest specialty apparel retailer, reaching $3.3 billion in sales for the first quarter of 2008 compared to Gap’s $3.25 billion.86 With over 200 designers and rapid supply chains that could produce and stock hot items within weeks. Problems returned in 2011. Sales remained steady at $14.5 billion, but operating profits fell 27% to $1.4 billion. Murphy hired former J. Crew President, Tracy Gardner, to consult with the Gap brand. Gap announced plans to shut more than one fifth of its North American stores over the next two years and aimed to shrink the U.S. store base to 700 by the end of 2013.91 Murphy noted that China was Gap’s biggest market for further growth. However, by the end of 2012, Murphy’s strategy appeared to be working. Sales lifted 8% to $15.6 billion, a six-year high, and operating profit recovered to $1.9 billion. Store closings lifted sales per store in the North American Gap to $3.7 million (from a low of $3.3 million in 2009) and comparable store sales were strongly positive for all of Gap’s North American divisions. Gap had also made significant steps toward streamlining its production and engaging more closely with trending fashions. By 2012, Gap had cut its lead time from more than nine months in the early 2000s to less than four months for key items.96 Across all lines, production time had been cut by nearly one third. 97 In January Gap acquired Intermix Inc. for $130 million, which promised expansion into the luxury market as well as greater access to of-the-moment fashion pieces. Although Intermix didn’t manufacture its own clothing, it has established relationships with a variety of high street designers. What else could Murphy do to restore Gap’s leading position in fashion retailing? Would Murphy’s international and online focus be enough to sustain this turnaround?

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What is the case about?

What are the important events that occurred in the case?

What can we learn from reading the case?

What advice do you have for the leaders in the case and/or company in the case?