The following are Waterway Corp.’s comparative balance sheet accounts at December 31, 2020 and 2019, with a column showing the increase (decrease) from 2019 to 2020.

Additional information:

Prepare a statement of cash flows for Waterway Corp. for the year ended December 31, 2020, using the indirect method. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)

Suppose you are the CEO of a company and one of your manager confessed to kiting $1,000. What is kiting? How do your company do to prevent it? How would you respond to the confession?

1. PSI, Inc.’s financial executives have been arguing about the proper way to record the patent they acquired four (4) years ago. The patent was originally purchased for $212,500. At the time of the purchase, PSI’s management believed that the patent would benefit the company for 10 years, after which is would be worthless. Using this information, they have amortized the patent to its current value of $127,500, which is currently shown on the company’s Balance Sheet.After attending a recent conference, the CFO determined that the current market value of the patent is only $115,000, not the full $127,500. Since PSI is having a good year this year, she

2. 3believes it would be agood idea to write down the patent to its current market value. The CEO disagrees. He believes that there is a good chance the patent will earn them at least the carrying value of $127,500 before it becomes obsolete. The CFO’s response was that based on the drop in market value and that there is only a chance that the patent will earn enough to cover the carrying value, it really should be written down to at least market value. The CEO replied that he didn’t care about market value. The value on the books should be based on management’s belief that the asset really will return its carrying value, at least it probably will.QuestionsAnswer allof the following questions:If an impairment is recognized, how much should be impaired?What would the journal entry be to record the impairment?Should PSI record the impairmentthis year?

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1. Catherine’s the new CEO of an exercise equipment company and she wants to know if her time as CEO has affected the return rates of treadmills. Before she became CEO, 8% of treadmills were returned. What’s the null and alternative hypotheses of any tests she runs?

2. Imagine you were testing if a new battery lasts longer than the industry standard. You perform the appropriate hypothesis test with an unbiased sample and found statistical signifance at 99.9% confidence. It would be a mistake to claim that you “proved” this new batter lasts longer. Why?

It is January 1st 2020, on the day before, December 31st 2019, Alamo Co. reported a net income
of 4,009,000 dollars. To this date the company is unlevered and its real EBITDA is constant.
The company acquired the year before (on January 1st 2019) a new plant for 36,000,000
dollars, that the fiscal law allowed to depreciate straight line either in 3 (Plan 1) or 6 years
(Plan 2). All other assets are fully depreciated. Today, the company announces a
recapitalization in which it will issue risky debt and retire equity for an amount of 65,000,000
dollars. The company then plans to keep a constant debt level. Before the announcement, the
unlevered equity return is 7.65%. Assume that the inflation rate is 2.5%, that the debt beta is
0, that the expected market return is 8.00%, that the risk free rate is 4.50% and that the tax
rate is 30%. Finally assume that the depreciation tax shield is as risky as the company’s debt.
a) What is the depreciation plan chosen by the firm? Why?
b) What is the return experienced by the shareholders immediately after the
recapitalization announcement (but before the recapitalization is carried out)?
c) What is the beta of levered equity?

Q1 Using the company's overall cost of capital to evaluate a project's cash flows is problematic in that the company is a collection of projects, with the possibility that each project has a different level of risk than the other projects currently working for the company.

Select one:

True

False

Q2) The three principal ways in which venture capital companies exit venture-backed companies are

Select one:

a. selling to a strategic buyer, buying out the founder, and offering shares to the public.

b. selling to a strategic buyer, selling to a financial buyer, and buying out the founder.

c. selling to a strategic buyer, selling to a financial buyer, and offering shares to the public.

d. None of the options.

Q3) A company is planning to issue 2.5 million ordinary shares and the underwriting spread is 8%. Following due diligence, the offer price has been set to $20 per share. Suppose that the offer has not been as successful as expected and only 95% of the shares have been sold. In such situation, considering stand-by arrangement, what will be the proceeds available to the underwriter?

Select one:

a. $1 million

b. $1.5 million

c. $3.8 million

d. $2 million

Q4) The use of debt financing

Select one:

a. increases agency costs.

b. decreases agency costs.

c. may both increase and decrease the agency costs.

d. has no effect on agency costs.

Question 2: Porter, a public limited company, is the parent of a listed group of companies which have a year end of 30 April 2020. Porter’s functional currency is the pound (£) and presents its individual and consolidated financial statements in £. The statements of financial position for two entities as at 30 April 2020 are presented below:

Additional information

1. Porter acquired 75% of Belobe on 1 May 2019 for £9,150,000 when the retained reserves of Belobe were 3,155,000 Crowns. The functional currency of Belobe is Crowns.

2. The group policy is to value non-controlling interest at the proportionate share of the fair value of the net assets at acquisition.

3. Belobe made a profit of 3,575,000 Crowns for the year ended 30 April 2020.

4. The exchange rates between the £ and Crowns are as follows:

1 May 2019 £1: 0.69 Crowns

30 April 2020 £1: 0.62 Crowns

Average rate for the year ended 30 April 2020: £1: 0.64 Crowns

YOU ARE REQUIRED TO:

(a) Prepare the consolidated statement of financial position for the Porter group as at 30 April 2020.

(b) Prepare a reconciliation of the consolidated retained reserves figure showing the exchange gains and losses.

(c) Explain your calculation of goodwill and the treatment of exchange differences on goodwill for the year ended 30 April 2020. Your answer should refer to the relevant International Financial Reporting Standards (IAS/IFRS).(maximum word count 200 words) TOTAL 50 MARKS

ABC Energy Corp. (the “Company”), an SEC registrant, operates three manufacturing facilities in the United States. The Company manufactures various household cleaning products at each facility, which are sold to retail customers. The U.S. government granted the Company emission allowances (EAs) of varying useable years (i.e., the years in which the allowance may be used) to be used between 2015 and 2030. Upon receipt of the EAs, the Company recorded the EAs as intangible assets with a cost basis of zero, in accordance with the Federal Energy Regulatory Commission (FERC) accounting guidance for EAs. The Company has a fiscal year end of December 31.

As background, in an effort to control or reduce the emission of pollutants and greenhouse gases, governing bodies typically issue rights or EAs to entities to emit a specified level of pollutants. Each individual EA has a useable year designation. EAs with the same useable year designation are fungible and can be used by any party to satisfy pollution control obligations. Entities can choose to buy EAs from, and sell EAs to, other entities. Such transactions are typically initiated through a broker. At the end of a compliance period, participating entities are required to either (1) deliver to the governing bodies EAs sufficient to offset the entity's actual emissions or (2) pay a fine. The Company currently emits a significant amount of greenhouse gases because of its antiquated manufacturing facilities. The Company plans to upgrade its facilities in 2024, which will decrease greenhouse gas emissions to a very low level. On the basis of the timing of the upgrade, the Company currently anticipates a need for additional EAs in fiscal years 2020–2024.

However, upon completion of the upgrade, the Company believes it will have excess EAs in fiscal years subsequent to 2024 because of reduced emissions as a result of the upgrade. The Company currently has forecasted the updates to its facilities will cost approximately $15 million. As the Company operates in a capital intensive industry, analysts and investors focus on a number of important ratios and measures, including working capital, capital expenditures, cash flows from operations, and free cash flow. As a result, the board of directors and management provide forward-looking guidance on these ratios and measures and expend great effort managing these results in light of the Company’s operational needs. The Company entered into the following two separate transactions in fiscal year 2020, which will impact the Company’s results as presented in the statement of cash flows, which the Company prepares under the indirect method.

          1. To meet its need for additional EAs in fiscal years 2020–2024, on April 2,         2020, the Company spent $6.5 million to purchase EAs with a useable year of       2023 from XYZ Manufacturing Corp.

2. In an effort to offset the costs of the April 2, 2019, purchase of 2023 EAs, the Company sold EAs with a useable year of 2026 to DEF Chemical Corp. for $5 million.

Required:

1. What is the appropriate classification in the statement of cash flows in the Company’s December 31, 2020, financial statements for its purchase of 2023 EAs from XYZ Manufacturing Corp.?

2. What is the appropriate classification in the statement of cash flows in the Company’s December 31, 2020, financial statements for its sale of 2026 EAs to DEF Chemical Corp.?

3. Should these cash flows be reported at gross amounts or net amounts in the 2020 statement of cash flows?

Be sure to cite appropriate authoritative support for your answer from the Accounting Standards Codification.

Problem 3.  You currently make $100,000 a year and expect your salary increase by 10% a year for 20 years.   You are considering an MBA which will cost you $120,000 for the entire education. If you take the MBA, you will have to pay the full tuition today (all upfront) and you will make zero earnings at the end of years 1 and 2.  However, after graduation you’ll have an opportunity to join a premier investment bank, which promises $130,000 a year, which will grow by 15% for 18 years after graduation.  Is the MBA a good deal? Assume a constant discount rate of 15%.  What if rates fall to 10%?  What if rates rise to 17%, how does your answer change?  Show your detailed spreadsheet calculations (Alt#2). Note: salary is paid at the end of each year.

Taxation Questions

Q1: Anna converted cryptocurrency into $27,200 Australian dollars in October 2019. To complete the transaction, she incurred $950 in transaction fees. Therefore, Anna received $26,250 in cash. Anna had acquired the cryptocurrency in September 2018 for $9,200 Australian dollars

Determine the taxable capital gain (loss) on the sale of the Cryptocurrency. Briefly justify your answer/show all workings

Q2:

Anna sold shares she held in a construction company in March 2020 for $182,000. She had purchased the shares for $37,200 in December 1986. Anna has indicated that she has carried forward losses from prior years of $180,000 relating to a prior disposal of shares and land.

Determine the capital gain on the sale of the Shares. Briefly justify your answer/show all workings