1.If a company uses accrual basis accounting, accrued revenues differ from deferred revenues in that accrued revenues are

a) recorded as liabilities before the cash is collected from customers.

b) recorded as liabilities before they are recognized as revenue earned.

c) recognized as revenue earned after cash is collected from customers.

d) recognized as revenue earned before cash is collected from customers.

e) journalized only when cash is collected from customers.

2. A company paid $24,000 for six months of rent beginning June 1.   The company recorded its payment as prepaid rent. If it prepares financial statements dated June 30, the adjusting entry to be made by the company is

a) debit Rent Expense for $24,000 and credit Prepaid Rent for $24,000.

b) debit Rent Expense for $4,000 and credit Prepaid Rent for $4,000.

c) debit Prepaid Rent for $4,000 and credit Cash for $4,000.

d) debit Prepaid Rent for $4,000 and credit Rent Expense for $4,000.

e) debit Rent Expense for $20,000 and credit Prepaid Rent for $20,000.

FOR1. Open file Nuclear Power. Select data for Canada. Address the following questions.

a. Provide a plot of the data over time in the space below. (2 pts)

[plot here]

b. Choose an appropriate forecasting model and forecast for the next 3 periods (provide forecast in the table below). Explain model selection approach. (8 pts)

c. Using the same data, forecast the next 3 periods in the time series using the 5-period moving average and indicate the values below. (3 pts)

d. Using the same data, forecast for the next 3 periods in the time series using the single exponential smoothing technique with a smoothing constant of 0.3 and indicate the values below. (3 pts)

e. Compare results from models b, c and d. Which forecast model do you recommend to use for the next 3 periods? Justify your recommendation (6 pts)

DATA:

• This Individual Case Study Assignment should be around 1,000 words in total and should be submitted in the form of a business report (approximately 500 words for each part).

Individual Case Study Assignment Part A

BLC Ltd. is a medium-sized UK manufacturing company based in Liverpool.

The company is seeking to expand its operations with the establishment of an office block to house the marketing and human resources staff in Manchester. The company has narrowed the choice to two alternatives with the following net cash flow information being available:

Items to keep in mind:

• The company’s current cost of capital is 10%.
• For this assignment, ignore taxation.

Required

As the company accountant is currently on holiday, you are required to:

• By calculating net present value, internal rate of return and payback, advise the company which option they should take.

• Critically evaluate the other qualitative factors that might be taken into account in this decision.

Individual Case Study Assignment Part B

BLC Ltd. has revenue of £500 million and sells all of its goods on credit to a variety of different wholesale customers. At the moment the company offers a standard credit period of 30 days. However, 70% of its customers (by revenue) take an average of 70 days to pay, while the other 30% of customers (by revenue) pay within 30 days. The company is considering offering a 2% discount for payment within 30 days and estimates that 80% of customers (by revenue) will take up this offer (including those that already pay within 30 days).

The Managing Director has asked the credit controller if the cost of this new policy would be worth offering. The company has a £80 million overdraft facility that it regularly uses to the full limit due to the lateness of payment and the cost of this overdraft facility is 15% per annum.

The credit controller also estimates that bad debt level of 2% of revenue would be halved to 1% of revenue as a result of this new policy.

Required

1. Calculate the approximate equivalent annual percentage cost of a discount of 2%, which reduces the time taken by credit customers to pay from 70 days to 30 days.
2. Calculate the value of trade receivables under the existing scheme and the proposed scheme at the year-end.
3. Evaluate the benefits and costs of the scheme and explain with reasons whether the company should go ahead and offer the discount. You should also consider other factors in this decision. (Hint: You need to work out the cost of the discount compared to the interest on the overdraft saved and bad debt reduction.)

In the introduction to this chapter, we described the situation faced by The Gap, Inc. (GPS). We learned that the retail clothing chain had grown dramatically over the first two decades of its existence but had fallen on difficult times in 2007. Assume that you have been hired as a new management trainee by the corporate offices of Gap in the spring of 2009 and that you report directly to the director of sales and marketing. Although your job is not specifically in finance, your boss is a major contributor to the firm’s overall financial success and wants you to familiarize yourself with the firm’s recent financial performance. Specifically, she has asked that you review the following income statements for the years 2005–2008. You are to review the firm’s revenue, gross profit, operating income, and net income trends over these four years.

Gap, Inc.
Income Statements (US$ millions, except per share data), 2005–2008

After contemplating the assignment, you decide to calculate the gross profit margin, operating profit margin, and net profit margin for each of these years. It is your hope that by evaluating these profit margins you will be able to pinpoint any problems that the firm may be experiencing.

Finally, your boss points out that the firm may need to raise additional capital in the near future and suggests that you review the firm’s past financing decisions using both the firm’s balance sheets and its statements of cash flows. Specifically, she asks that you summarize your assessment of the firm’s use of debt financing over these four years.

Gap, Inc.
Balance Sheets (US$ millions, except per share data), 2005–2008

Legend:

Treasury stock —shares of a firm’s common stock that had previously been issued to the public but that have been repurchased in the equity market by the firm.

Gap, Inc.
Statements of Cash Flows (US$ millions, except per share data), 2006–2008

The comparative balance sheets for 2018 and 2017 and the statement of income for 2018 are given below for Dux Company. Additional information from Dux’s accounting records is provided also. DUX COMPANY Comparative Balance Sheets December 31, 2018 and 2017 ($ in 000s) 2018 2017 Assets Cash $ 37 $ 22 Accounts receivable 46 51 Less: Allowance for uncollectible accounts (4 ) (3 ) Dividends receivable 6 5 Inventory 59 52 Long-term investment 19 12 Land 74 42 Buildings and equipment 223 254 Less: Accumulated depreciation (27 ) (54 ) $ 433 $ 381 Liabilities Accounts payable $ 15 $ 24 Salaries payable 6 8 Interest payable 8 6 Income tax payable 9 11 Notes payable 32 0 Bonds payable 99 72 Less: Discount on bonds (4 ) (7 ) Shareholders' Equity Common stock 212 202 Paid-in capital—excess of par 23 22 Retained earnings 43 43 Less: Treasury stock (10 ) 0 $ 433 $ 381 DUX COMPANY Income Statement For Year Ended December 31, 2018 ($ in 000s) Revenues Sales revenue $ 217 Dividend revenue 5 $ 222 Expenses Cost of goods sold 122 Salaries expense 27 Depreciation expense 9 Bad debt expense 1 Interest expense 10 Loss on sale of building 7 Income tax expense 19 195 Net income $ 27 Additional information from the accounting records: A building that originally cost $48,000, and which was three-fourths depreciated, was sold for $5,000. The common stock of Byrd Corporation was purchased for $7,000 as a long-term investment. Property was acquired by issuing a 12%, seven-year, $32,000 note payable to the seller. New equipment was purchased for $17,000 cash. On January 1, 2018, bonds were sold at their $27,000 face value. On January 19, Dux issued a 4% stock dividend (1,000 shares). The market price of the $10 par value common stock was $11 per share at that time. Cash dividends of $16,000 were paid to shareholders. On November 20,000 shares of common stock were repurchased as treasury stock at a cost of $10,000. Required: Prepare the statement of cash flows for Dux Company using the indirect method. (Do not round intermediate calculations. Amounts to be deducted should be indicated with a minus sign. Enter your answers in thousands. (i.e., 10,000 should be entered as 10).))

McEwan Industries sells on terms of 3/10, net 20. Total sales for the year are $1,643,000; 40% of the customers pay on the 10^th day and take discounts, while the other 60% pay, on average, 74 days after their purchases. Assume 365 days in year for your calculations.

1. What is the days sales outstanding? Round your answer to two decimal places.
   ________ days
2. 
   
3. What is the average amount of receivables? Round your answer to the nearest cent. Do not round intermediate calculations.
   $_______
4. 
   
5. What is the percentage cost of trade credit to customers who take the discount? Round your answers to two decimal places.
   _________ %
6. 
   
7. What is the percentage cost of trade credit to customers who do not take the discount and pay in 74 days? Round your answers to two decimal places. Do not round intermediate calculations.

   Nominal cost:	%
   Effective cost:	%

8. 
   
9. What would happen to McEwan’s accounts receivable if it toughened up on its collection policy with the result that all nondiscount customers paid on the 20^th day? Round your answers to two decimal places. Do not round intermediate calculations.
   Days sales outstanding (DSO) = _______days
   
   Average receivables = $_________

Objective: demonstrate knowledge in captive insurers, in relation to enterprise risk management.

You are the risk manager of for Paymore ShoeSource, a large, publicly traded, and expensive shoe store chain. Your boss tells you that you that Paymore is planning to set up a broad insurance captive. Overhearing the conversation, a coworker who is not familiar with captives interrupts the conversation with a number of questions. Please answer the following questions for the coworker.

Generally, why would a large company such as Paymore (that is assumed to be risk neutral) purchase insurance?

What is an insurance captive?

Why might the company want to insure through a captive rather than through a traditional insurer? List two reasons.

a)

b)

What is the structure of a “broad” captive? Please use a diagram to illustrate your answer.

Based on the structure just described, does a broad captive represent a contract of insurance defined by the IRS? Discuss the requirements of an insurance contract and argue whether or not a broad captive meets these requirements.

what is 3 3/4 ÷ 27/16=

Crovo Corporation uses customers served as its measure of activity. During December, the company budgeted for 42,000 customers, but actually served 44,000 customers. The company has provided the following data concerning the formulas used in its budgeting and its actual results for December:

Data used in budgeting:

Actual results for December: