Universal Leasing leases electronic equipment to a variety of businesses. The company’s primary service is providing alternate financing by acquiring equipment and leasing it to customers under long-term sales-type leases. Universal earns interest under these arrangements at a 12% annual rate.
  
The company leased an electronic typesetting machine it purchased for $44,900 to a local publisher, Desktop Inc. on December 31, 2017. The lease contract specified annual payments of $9,626 beginning January 1, 2018, the beginning of the lease, and each December 31 through 2019 (three-year lease term). The publisher had the option to purchase the machine on December 30, 2020, the end of the lease term, for $26,700 when it was expected to have a residual value of $30,700, a sufficient difference that exercise seems reasonably certain. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)

Required:
1. Show how Universal calculated the $9,626 annual lease payments for this sales-type lease.
2. Prepare an amortization schedule that describes the pattern of interest revenue for Universal Leasing over the lease term.
3. Prepare the appropriate entries for Universal Leasing from the beginning of the lease through the end of the lease term.

Requirement 1:

Requirement 2:

Lease Amortization Table

Requirement 3:

- Recored the lease?

- Record cash received (January 1, 2018)

- Record cash received (December 31, 2018)

- Record cash received (December 31, 2019)

- Record cash received (December 30, 2020)

GetMyFood, Inc. has developed an application for cell phones aimed toward consumers who live in more rural areas where there are few delivery options for take-out food.   The app connects local taxi drivers with the larger restaurant food delivery services in nearby areas to extend the range of home meal delivery service.

The company expects to generate revenues of $2000 (figures in thousands) in the first year (2020) with a general costs of services sold of $1200 (figures in thousands.) The company expects to see a sharp increase in the revenues earned after the first year as the new service gains recognition but believes that the life-cycle of the product will be relatively short as market research has shown that the business model will be most successful in areas that are more rural but still relatively close to larger population centers. Given the general demographic trend in population growth, the company believes that their target market will diminish over time as more standard delivery services become available.  

The company estimates the following growth rate for revenue, costs, and SG&A over the next five years:

The have also forecasted the following items for working capital:

Taxes are assumed to be 34% per year. The initial outlay for software development is estimated to be $1000.

You have been hired as a financial consultant to determine the estimated free cash flows to the firm for GetMyFood, Inc.

An increase of tariff on steel in the US will increase domestic steel production and will reduce the quantity of steel imports in the US. Domestic producers of steel in the US will be better off, and domestic consumers of steel in the US will be worse off. With a tariff, the sum of the producers’ and the consumers’ surplus in the US steel market will decrease by an amount referred to as a deadweight loss. Is it true? Please explain, why?

6. You are interested in an International Portfolio made up of US and Canadian securities. The return on US is 15% and the return on Canada is 20%. The standard deviation of returns for US is 30% while that of Canada is 20%. If the correlation between US and Canada is -1, obtain the relevant weights for US and Canada to construct an international portfolio with zero risk. Compute the expected return on such a portfolio.

1. A university was studied last fall to see if male students studied for a different amount of time than females during the week. The following data was collected and now, we need to be able to perform analysis on this data in order to help this university understand their student population and what changes they may be able to put into effect.

a) Perform an appropriate significance test and interpret it.

III.    Texas Southern University ‘s housing department has collected the following information for the

          Past 8 semesters.

a)Compute the regression equation.

b)Interpret a and b in the context of this problem.

Happy Place Inc. is a company that manufactures and sells outdoor benches. For planning and control purposes they utilize a quarterly master budget, which is usually developed at least six months in advance of the budget year. Their fiscal year end is December 31.

During the spring of 2019, Linda Dempster, the Happy Place controller, spent some time putting together a sales forecast for the next budget year (January to December, 2020). In June, Linda’s numbers really came in as she won the jackpot in the lottery. Shortly thereafter, the President of Happy Place received Linda’s letter of resignation, which she sent from Bermuda.   

The President, desperately needing the budget completed, has approached you, a management accounting student, for help in preparing the budget for the coming fiscal year. Your conversations with the president and your investigations of the company’s records have revealed the following information:

1. Linda’s sales forecast consisted of these few lines:

         For the year ended December 31, 2019: 26,000 units at $310.00 each*

   For the year ended December 31, 2020: 30,000 units at $310.00 each

   For the year ended December 31, 2021: 32,000 units at $310.00 each

*Expected sales for the year ended December 31, 2019 are based on actual sales to date and budgeted sales for the duration of the year.

2. History has shown that sales are seasonal, with 58% of sales occurring in the second quarter, 32% in the third quarter, 4% in the first quarter, and the remaining 6% in the last quarter.

3. Because sales are seasonal, Happy Place must rent an additional storage facility from March to June to house the additional finished benches on hand. The only related cost is a flat $2,200 per month, payable at the beginning of the month.

4. Sales are on a cash and credit basis, with 88% collected during the quarter of the sale, and 12% the following quarter.

5. Happy Place has negotiated a line of credit with the bank such that they can borrow up to $675,000, in increments of $5,000, at an interest rate of 4%. Assume all borrowing takes place at the beginning of the quarter (interest is paid for the full quarter when borrowing takes place) and repayment takes place at the end of the quarter (interest is paid for the full quarter that repayment is made.)

6. From previous experience, management has determined that an ending finished goods inventory equal to 10% of the next quarter’s sales is required to meet customer demand. Opening finished goods inventory consists of 120 benches.

7. The primary raw material used is 4x6 cedar boards. Each bench averages 60

linear feet of wood (including a wastage allowance), which the company purchases for $1.50 per linear foot. Happy Place finds it necessary to maintain an inventory balance equal to 12% of the following quarter’s production needs of cedar as a precaution against stock-outs. Opening raw materials inventory consists of 20,304 linear feet of cedar. Happy Place pays for 85% of a quarter’s purchases in the quarter of purchase and 15% in the following quarter.

Each bench also requires a cast iron frame, which the company purchases pre-made from Cheatle Forge. The frames are readily available at a cost of $100, are purchased as needed and paid for at the time of purchase.

8. Beginning accounts payable will consist of $22,673 arising from the estimated direct material purchases for Q4, 2019 of $151,157.

9. While much of the wood cutting process is automated, the assembly process is labour intensive. Employees are paid an average of $25 per hour, including the employer’s portion of employee benefits. All payroll costs are paid in the period in which they are incurred.

Each bench spends a total of 90 minutes in production.

10. Due to the company’s concentration on a single product, manufacturing overhead is allocated based on volume (i.e. the units produced). The variable overhead manufacturing rate is $12.00 per unit, consisting of: Utilities--$2.75; Indirect Materials--$5.25; Plant maintenance--$2.00; and Other--$2.00

11. The fixed manufacturing overhead costs for the entire year are as follows:

Training and development                 $     9,000

Property and business taxes                   36,000

Supervisor’s salary                                120,000

Depreciation on equipment                    117,000

Insurance                                                 60,000

Other                                                        34,200

                                                            $ 376,200

• The property and business taxes are paid on June 30 of each year.

• The annual insurance premium is paid at the beginning of October each year.

• All other “cash-related” fixed manufacturing overhead costs are incurred evenly over the year and paid as incurred.

• Happy Place uses the straight-line method of depreciation.

12. Selling and administrative expenses are $22 per unit sold and $18,000 per month. These costs are paid in the quarter in which they occur.

13. During the fiscal year ended December 31, 2020, Happy Place will be required to make quarterly income tax installment payments of $35,000. Outstanding income taxes from the year ended December 31, 2019 must be paid in April 2020. Income tax expense is estimated to be 20% of net income. Income taxes for the year ended December 31, 2020, in excess of installment payments, will be paid in April, 2021.

14. Happy Place is planning to acquire additional manufacturing equipment for $152,000 cash. 40% of this amount is to be paid in January 2020, the rest, in February 2020. The manufacturing overhead costs in 11. already include the extra depreciation.

15. Happy Place Inc. has a policy of paying dividends at the end of each quarter. The president tells you that the board of directors is planning on continuing their policy of declaring dividends of $25,000 per quarter.

16. A listing of the estimated balances in the company’s ledger accounts as of December 31, 2019 is given below:

REQUIRED:

1. Prepare a Quarterly Manufacturing Overhead Budget for Happy Place for the year ended December 31, 2020

During most of the 1800s the US government only protected copyrights for US citizens. In particular, books written by British authors, which were very popular in the US, could be printed and sold by US publishers without paying royalties to British authors. Because the US did not enforce copyright for British authors, the United Kingdom did not enforce copyright for US authors, meaning that British publishers could print and sell books by US authors without paying any royalties to them. It was well understood, however, that if the US government would begin to enforce copyright for British authors, the British would reciprocate, and enforce copyright for US authors.

Consider the position of a US Congressman in the late 1800s, considering a bill that would extend copyright protection to British authors (and gain British protection for US authors in return). Assume that his goal is to improve the overall welfare of US citizens. He understands that extending copyright to works of British authors will raise the price that US citizens have to pay for those books. He also understands that the purpose of copyright is to encourage the production of creative works (in this case, works of literature as well as nonfiction scholarship, like science, philosophy and history), by making it more lucrative to be an author of creative works. So, he has to consider the marginal impact of this bill on the supply of new books by English language authors, both British and American.

a. Below are two facts. Say whether each one of these facts would make him more or less likely to vote for the bill, and explain why. (Think in terms of how each of these facts affects the marginal benefits to US citizens and/or the marginal costs to US citizens of a policy honoring British copyrights, and getting the British to honor US copyrights in return.)

(i). Works by British authors are very popular in the US, and US scientists, engineers, and school teachers rely heavily on the scholarly works produced by the British.

(ii). American literature has never been very popular in Britain, and the US, as a young and largely agrarian nation, does not produce much research.

b. A group of American authors of fiction sends a letter to the Congressman, trying to affect his vote. Would you expect this group to support or oppose the bill? Explain (Hint: Books by British authors are notably cheaper at US bookstores than books by American authors).

Peace Computer Corporation acquired 75 percent of Symbol Software Company's stock on January 2, 20X3, by issuing bonds with a par value of $77,750 and a fair value of $95,250 in exchange for the shares. Summarized balance sheet data presented for the companies just before the acquisition follow:

Prepare a consolidated balance sheet immediately following the acquisition.