Question 4 [27]

The following bank reconciliation statement was prepared by the bookkeeper of Veggie Stores for January 2020. The financial year of the business ends in January each year.

Required:

1. Is the opening balance of R35 000 as per the bank statement a debit or a credit balance on the bank statement? Explain your answer.                                                                         (2)
2. Explain why the business has entered cheque no. 9753 in the bank reconciliation statement.                                                                                                                                       (3)
3. The business has made three other errors. Identify the amounts relating to these errors and explain why they are errors. Specify the corrective action that should be taken to correct these errors.                                                                                                                            (9)
4. Prepare a corrected bank reconciliation statement for January 2020.                         (7)
5. The owner is concerned about the outstanding deposit of R12 900. Explain why he is concerned.                                                                                                                     (2)
6. Propose TWO steps the owner should take to prevent things such as those described in Question 4.5 above from occurring again in the future.                                                (4)

Complete question 4.3 and 4.4 specifically in format below

4.3

                                                                                                                                                        (9)

4.4

                                                                                                                                                        (7)

The following information is available about Ancora Co. (Ancora): 1. Ancora's cash balance on December 31, 2019, was $70,000. 2. Actual sales for November and December 2019, and expected sales for January and February 2020, are as follows: November 2019 December 2019 January 2020 February 2020 (actual) (actual) (estimate) (estimate) Cash sales $ 75,000 $ 90,000 $ 60,000 $ 50,000 Credit sales 560.000 650,000 480,000 430,000 Sales on account are collected over a three-month period at the following rate: 30% collected in the month of sale, 50% collected in the month following sale and 17% collected in the second month following sale. The remaining 3% is uncollectable and is written off 3. Ancora's gross profit on sales is 35%. 4. Ancora's policy is to hold inventory at the end of the month equal to 40% of next month's budgeted sales. Inventory purchases in a given month are paid for as follows: 30% are paid in the month of purchase and 70% in the month following 5. Selling and administrative expenses are budgeted at $400,000 for January 2020. This amount includes $120,000 for depreciation 6 Equipment costing $150 000 was expected to be purchased for cash during January 2020 7 On December 15, 2019. Ancora declared a $100.000 dividend to be paid on January 15, 2020 8 Ancora must maintain a minimum cash balance of $50.000 An open line of credit is available from Ancora's bank. REQUIRED: Prepare Ancora's cash budget for the month of Jan 2020 and calculate Ancora's budgeted account receivable and accts payable closing balance at Jan 31, 20.

PLEASE PROVIDE TYPE WRITTEN ANSWER AND NOT HAND-WRITTEN SINCE IT'S HARD TO UNDERSTAND HAND WRITING.

Mr Ahmed Kumar runs a snack distribution business located in the Light Industrial area in Lusaka. The following list of balances was extracted from his ledger as at 31 March, 2020; the end of his most recent financial year.

K

Capital                                                                                                83,887

Sales                                                                                                  259,870

Trade accounts payable                                                                 19,840

Returns outwards                                                                             13,407

Allowance for doubtful debts                                                          512

Discounts allowed                                                                            2,306

Discounts received                                                                          1,750

Purchases                                                                                         135,680

Returns inwards                                                                               5,624

Carriage outwards                                                                           4,562

Drawings                                                                                           18,440

Carriage inwards                                                                              11,830

Rent, rates and insurance                                                              25,973

Heating and lighting                                                                         11,010

Postage, stationery and telephone                                               2,410

Advertising                                                                                        5,980

Salaries and wages                                                                         38,521

Bad debts                                                                                          2,008

Cash in hand                                                                                    534

Cash at bank                                                                                    4,440

Inventory as at 1^st April 2019                                                         15,654

Trade accounts receivable                                                             24,500

Fixtures and fittings - at cost                                                          120,740

Prov. for depreciation on fixtures and fittings – 31/03/2020     63,020

Depreciation                                                                                     12,074

The following additional information as at 31^st March, 2020 is available:

(a) Inventory at the close of business was valued at K17,750

(b) Insurances have been prepaid by K1,120

(c) Heating and lighting is accrued by K1,360

(d) Rates have been prepaid by K5,435

(e) The allowance for doubtful debts is to be adjusted so that it is 3% of trade accounts receivable.

Required:

For the year 2020, prepare Mr Kumar’s:

1. Unadjusted Trial Balance as at 31^st March, 2020.

                                                                                                                              [10 Marks]

2. General Journal recording the adjustments highlighted above.

                                                                                                                              [10 Marks]

3. Trading, Profit or Loss statement for the year ended 31^st March, 2020.

[10 Marks]

4. Statement of financial position as at 31^st March, 2020.

                                                                                                                              [10 Marks]

[Total: 40 Marks]

A firm wants to finance an investment that would produce an annual EBIT of $415,000 by issuing 850 ten-year zero-coupon bonds (each with $1,000 face value) that will be charged a market interest rate of 8%. Suppose the bonds will be issued on January 1, 2020 and will mature on December 31, 2029.

Assume EBIT is constant over time at $415,000 and the tax rate is 35%. Shown below are income statement templates for the years 2020 and 2029. You do not have to fill these in for credit on the exam, however, feel free to use them as guides for determining how the choice of financing will affect the firm's tax liability for these years. Specifically, determine

a) How much the firm saves in taxes in 2020 and how much the firm saves in taxes in 2029 by having this 10-year bond on its books (relative to the case without any borrowing)? (Don't worry about discounting these tax savings back to the present, just consider the nominal dollar amounts.)

b) How much the firm saves in taxes in 2020 and 2029 in present value terms by having this 10-year bond on its books (again, relative to the case without any borrowing). Assume that January 1, 2020 is the "present," the discount rate is 8%, and the taxes would be paid on December 31 of the statement year.

Income statement for 2020 (Jan 1 - Dec 31, 2020)

Income statement for 2029 (Jan 1 - Dec 31, 2029)

Interpreting Acquisition Footnote with In-Process Research and Development

On October 3, 2017, Gilead Sciences, Inc. (Gilead) acquired 100% of the outstanding common stock

of Kite Pharma, Inc. (Kite). According to Gilead’s December 31, 2017 Securities and Exchange Com-

mission Form 10-K, “[t]he acquisition of Kite was accounted for as a business combination using the

acquisition method of accounting.” The following excerpt is from Note 5 (i.e., Acquisitions) of Gilead’s

2017 10-K:

The following table summarizes the preliminary acquisition date fair values of assets acquired and

liabilities assumed, and the consideration transferred (in millions):

Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 652

Identifiable intangible assets

Indefinite-lived intangible assets—IPR&D . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,950

Outlicense acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91

Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,606)

Other assets acquired (liabilities assumed), net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81

Total identifiable net assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,168

Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,987

Total consideration transferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $11,155

a. What did Gilead need to demonstrate for the Kite acquisition to qualify as a business

combination? (In answering this question, ignore the information in part d of this problem.)

b. Given the individual identifiable net assets acquired, describe why business combination

accounting might seem unusual for the Kite acquisition. (In answering this question, ignore the

information in part d of this problem.)

c. For this question only, assume the Kite acquisition qualified as an asset acquisition that is not a

business combination. How would the accounting for the acquisition of Kite’s net assets differ?

d. According to Gilead’s 2017 10-K, in October 2017, after the acquisition date of Kite, the “FDA

approv[ed] Yescarta for the treatment of adult patients with relapsed or refractory DLBCL after

two or more lines of systemic therapy.” (This technology was technically considered unproven

and presented as part of in-process research and development at the balance acquisition date.)

The footnote states that the fair value of the technology for this proven Yescarta therapy is $6,200

million. If this technology was proven and patented, how will the above-presented information in

the acquisition footnote change in the December 31, 2017 financial statements of Gilead?

Activity description

A program must be carried out in MATLAB or OCTAVE that acquires and analyzes (continuously or online) the voice signal that is acquired from the sound card of the PC (microphone input) or a signal that is acquired with an acquisition card of data (ex. NI DAQCard).

The program must continuously perform the functions: signal acquisition, spectral analysis of the acquired signal, graphs in the time domain and graphs in the frequency domain (magnitude and phase spectrum).

The program should display the following graphs:

1) Original signal in the time domain

2) Original signal in the frequency domain (magnitude and phase)

Program 1: Initially do not acquire the signal from the PC sound card, instead create a synthetic signal in the MATLAB workspace, for example a signal composed of the sum of two or more sinusoids of different amplitude, frequency and phase . The signal must be visualized in time (oscillations) and the frequency analysis (magnitude spectrum) must show the presence of the original frequencies. It is important to assume a certain sampling frequency and a duration of the synthetic signal.

Program 2: After this works, start with a static version of the voice signal analyzer (ie the input signal is only a defined time window, for example three seconds), i.e. program 2 is an improved version of program version 1 where instead of a synthetic signal the signal that is acquired with the sound card is used in a time range of for example 3s. Note that this frequency is acquired at a certain sampling frequency. Finally, make the necessary adaptations and changes to the version 1 program so that it works online or continuously.

Questions to answer:
1) What is the analysis in the frequency domain of a signal? What differences exist with respect to time domain
2) What is the FFT?
3) What type of signals (continuous or discrete) are being used in the program? Explain your answer.
4) Explain what the frequency spectrum of a signal is (remember that the frequency spectrum is two graphs).
5) According to the project, generally what type of signals do we find in nature (continuous or discrete) and what type of signals do computer systems use (continuous or discrete)?

Below are info on one of the firm's client. Your Senior Manager has asked you to draft an internal memo discussing the implications of the client. Make sure to discuss Issue, Conclusion, Analysis. The manager has also provided you with some sources to start your research for the client.

John Patrick was hired six years ago by the XOEye Corporation to serve as the CEO for the company. As part of his employment contract, the corporation had agreed to purchase his residence at FMV in event the company decided to fire him. Last year, XOEye, unsatisfied with Patrick’s performance, fired him and purchased the residence for $350,000. XOEye immediately listed the house with a real estate agency. Soon after the purchase the real estate market in the area experienced a serious decline, especially in higher-priced homes. XOEye sold the house this year for $270,000 and paid selling expenses of $12,000. How should the XOEye Corporation treat the $92,000 loss?
A partial list of sources is:
• § 1221
• Rev. Rul. 82-204, 1982-2 C.B. 192
• Azar Nut Co. v. CIR, 67 AFTR 2d 91-987, 91-1 USTC ¶50,257 (5th Cir. 1991)

For all the following, consider the company, XYZ Inc.

a.         It’s preferred stock pays a dividend of $1.00. If you require a return of 10 percent, what is the most you would pay for their preferred stock today?

b.         Preferred stock is ok, but you really want common stock because of the growth potential. Consider that XYZ just paid a regular dividend of $4. If the required return on equity is 20 percent, what is the most you’d pay for their common stock if you expect the dividend to grow at 10 percent per year?  

c.         After the market closed today, XYZ announced that it will reduce its dividend next year by 75% and by 50% the following year (based on the $4 just paid). Growth is expected to bounce back 50% in the third year, then resume its 10% annual growth rate indefinitely. What is the most you would pay for XYZ common stock when the market opens tomorrow morning?

d.         Closely examine the model you are using to calculate the stock value. List five (5) major factors that the company can control that directly influence the value of its stock in this model. That is, as CEO what can you control?

You are a pricing analyst for QuantCrunch Corporation, a company that recently spent $15,000 to develop a statistical software package. To date, you only have one client. A recent internal study revealed that this client’s demand for your software is Qd = 300 – 0.2P and that it would cost you $1,000 per unit to install and maintain software at this client’s site. The CEO of your company recently asked you to construct a report that compares (1) the profit that results from charging this client a single (profit-maximizing) per-unit price with (2) the profit that results from charging $1,450 for the first 10 units and $1,225 for each additional unit of software purchased.

What type of pricing strategy is (1)? Third-degree pricing strategy Per-unit pricing strategy First-degree pricing strategy Second-degree pricing strategy

What type of pricing strategy is (2)? First-degree pricing strategy Third-degree pricing strategy Per-unit pricing strategy Second-degree pricing strategy

Between pricing strategy (1) and (2), which is more profitable? Strategy (2) Strategy (1)

True or False: You could earn more profits using a two-part pricing strategy.

a. You are the manager of a logistic company. The profit of your company depends on the number of parcels delivered in an hour. You cannot directly monitor the drivers who help transport parcels, however. You are now considering two possible payment schemes to the drivers. Scheme A: a fixed hourly wage. Scheme B: a fixed payment on parcels transported in an hour. i. Which scheme would you suggest to your CEO? Briefly explain your answer. ii. Can you suggest a possible scheme that is better than Schemes A & B? Briefly explain your suggestion. b. The 2008 Global Financial Crisis hit the Chinese economy staggeringly and adversely. The small and medium-sized enterprises (SMEs) in China were under imminent threat. In response to this crisis and to help SMEs in particular, the People’s bank of China (the Chinese central bank) launched an expansionary monetary policy in large scale. Owing to this policy, the growth rate of credit shot up. However, it was found that most of the credit went to the large companies instead of the SMEs in China. Why Chinese banks prefer making loans to large Chinese companies rather than to Chinese SMEs? Briefly explain your answer based on asymmetric information in the financial market.