Group 7 Section 2

Group Project 2

1. Let’s try to find out how inflation affect nominal interest rates. To do so:

a. Plot the three-month U.S. Treasury bill rate (FRED code: TB3MS) from 1960 to the present. What long-run pattern do you observe? What may have caused this pattern?

b. Plot the inflation rate based on the percent change from a year ago of the U.S. consumer price index (FRED code: CPIAUCSL) from 1960 to the present.

How does U.S. inflation history reflect your explanation in part (a)?  

(Hint: adjust the observation date range so you can start the series from 1960)

2. Above, you saw the impact of inflation in the U.S. on short-term U.S. Treasury bill rates. Now examine similar data for Brazil.

a. Plot the Brazilian Treasury bill rate (FRED code: INTGSTBRM193N). Notice the range of values and compare them with the range in the U.S. Treasury bill plot from Problem 1 above.  

b. Plot the inflation rate based on the percent change from a year ago of the Brazilian consumer price index (FRED code: BRACPIALLMINMEI). Comment on the inflation rate in Brazil.  

c. Then, download the Brazilian CPI data using a quarterly frequency. Put it in a spreadsheet by clicking on the relevant tab on the top left part of the screen (you may need to widen the spreadsheet column to see the data.) The unit should be: Index 2010=100. This is the CPI index, not the inflation rate, that is. What happens to the index in the 1990–1994 period?

[Hint: to get quarterly instead of monthly frequencies go in the “Edit Graph” tab and select the appropriate frequency. See below. Once you do that, then download the data to a spreadsheet using the “Download” tab]

Question 10.1 (1 point) Suppose that the distribution of income in a certain tax bracket is approximately normal with a mean of $53,183.88 and a standard deviation of $1,799.608. Approximately 18.56% of households had an income greater than what dollar amount? Question 11 options: 1) We do not have enough information to calculate the value. 2) 54,793.14 3) 51,574.62 4) 2,842,851 5) 2,949,219 Question 12 (1 point) According to a survey conducted by Deloitte in 2017, 0.4609 of U.S. smartphone owners have made an effort to limit their phone use in the past. In a sample of 89 randomly selected U.S. smartphone owners, what is the probability that greater than 46 will have attempted to limit their cell phone use in the past? Question 10.2 options: 1) 0.0241 2) 0.1703 3) 0.8779 4) 0.0483 5) 0.1221 Question 10.3 (1 point) According to a survey conducted by Deloitte in 2017, 0.4702 of U.S. smartphone owners have made an effort to limit their phone use in the past. In a sample of 54 randomly selected U.S. smartphone owners, what is the probability that between 22 and 29 (inclusively) will have attempted to limit their cell phone use in the past? Question 13 options: 1) 0.1383 2) 0.7244 3) 0.2756 4) 1.0844 5) 0.0132 Question 10.4 (1 point) According to a survey conducted by Deloitte in 2017, 0.44 of U.S. smartphone owners have made an effort to limit their phone use in the past. In a sample of 87 randomly selected U.S. smartphone owners, approximately __________ owners, give or take __________, will have attempted to limit their cell phone use in the past. Assume each pick is independent. Question 14 options: 1) 4.63 , 38.28 2) 38.28 , 21.40 3) 87 , 4.63 4) 38.28 , 0.44 5) 38.28 , 4.63

1. Which of the following is true regarding women's mobility?

2. According to Beller and Hout, how does the U.S. compare to other rich societies (e.g., German, UK, Sweden) in terms of occupational mobility?

3. Gender inequality has been a pervasive feature of most societies throughout history. Our quick look in class at the gender composition of key economic and political positions in the U.S., in Indiana, and in Bloomington reveals that:

Question 22

A Belgium subsidiary's beginning and ending trial balances appear below: Dr (Cr) January 1 December 31 Cash, receivables € 1,500 € 1,200 Inventories 3,000 3,500 Plant & equipment, net 30,000 39,000 Liabilities (18,500) (27,200) Capital stock (4,000) (4,000) Retained earnings, beginning (12,000) (12,000) Sales revenue -- (15,000) Cost of sales 9,500 Out-of-pocket selling & administrative expenses -- 4,000 Depreciation expense -- 1,000 Total € 0 € 0 Exchange rates ($/€) are: Beginning of year $1.25 Average for year 1.22 End of year 1.20 The subsidiary was acquired at the beginning of the year. Its sales, inventory purchases, and out-of-pocket selling and administrative expenses occurred evenly during the year. Equipment was purchased for €10,000 when the exchange rate was $1.23. Depreciation for the year includes €200 related to the equipment purchased during the year. The ending inventory was purchased at the end of the year, and the beginning inventory was purchased at the end of the previous year. If the subsidiary's functional currency is the euro, what is its exposure to translation gains and losses as of the beginning of the year? Select one: A. € 16,000 B. €(17,000) C. € 1,500 D. €(18,500)

Question 23

A Belgium subsidiary's beginning and ending trial balances appear below: Dr (Cr) January 1 December 31 Cash, receivables € 1,500 € 1,200 Inventories 3,000 3,500 Plant & equipment, net 30,000 39,000 Liabilities (18,500) (27,200) Capital stock (4,000) (4,000) Retained earnings, beginning (12,000) (12,000) Sales revenue -- (15,000) Cost of sales 9,500 Out-of-pocket selling & administrative expenses -- 4,000 Depreciation expense -- 1,000 Total € 0 € 0 Exchange rates ($/€) are: Beginning of year $1.25 Average for year 1.22 End of year 1.20 The subsidiary was acquired at the beginning of the year. Its sales, inventory purchases, and out-of-pocket selling and administrative expenses occurred evenly during the year. Equipment was purchased for €10,000 when the exchange rate was $1.23. Depreciation for the year includes €200 related to the equipment purchased during the year. The ending inventory was purchased at the end of the year, and the beginning inventory was purchased at the end of the previous year. If the subsidiary's functional currency is the U.S. dollar, what is its exposure to remeasurement gains and losses at the end of the year? Select one: A. € 16,000 B. €(27,200) C. € 16,500 D. €(26,000)

In 2014, the 11th United States Court of Appeals ruled in favor of Chiquita Brands, a Cincinnati–based multinational marketer and distributor of food products—widely known for its Chiquita banana brand—which had been accused by 4000 Colombians of supporting paramilitary soldiers who had killed or tortured their relatives. The court ruled on technical grounds that the Colombians could not sue the company under the laws they had cited. “The Alien Tort Statute does not apply extraterritorially,” wrote Judge David Sentelle, and “the Torture Victim Protection Act only applies to actual people, not to corporations.”

The Colombians had sought $7.86 billion in damages, on the basis that Chiquita was responsible for the deaths of 393 victims at the hands of a paramilitary group called the United Self-Defense Forces of Colombia that Chiquita had funded through their payments. The lawsuits pointed specifically to a 1997 massacre in which 49 people were tortured, dismembered, and decapitated and another incident in 2000 in which 36 more people were killed.

The lawsuit was ironic, because Chiquita had originally made the payments to the paramilitary group to protect its Colombian employees from harm—not to put people at risk. However, once the payments had been made, Chiquita had no control over what the outlaw group did with the funds—which it had apparently used to terrorize other people in the community. “The principle upon which this lawsuit is brought,” said the Colombians’ attorney Jonathan Reiter, “is that when you put money into the hands of terrorists, when you put guns into the hands of terrorists, then you are legally responsible for the atrocities, the murders and the tortures that those terrorists commit.”

Chiquita’s problems began in the early 2000s, when the United Self-Defense Forces of Colombia attempted to extort substantial payments from the company to help fund the group’s operations. The paramilitary group made it clear that if the company did not make the payments Chiquita’s employees would be at risk. The company’s managers took these threats seriously, because they were aware that in 1995 the paramilitary group had been responsible for bombing Chiquita’s operations and murdering 17 banana workers, who had been gunned down on a muddy soccer field.

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Chiquita’s mission emphasized a strong sense of ethical performance and social responsibility. It stated that it wanted “to help the world’s consumers broaden mindsets about nutrition and bring healthy, nutritious, and convenient foods that taste great and improve people’s lives.” Therefore, it was not surprising that Chiquita’s management also wanted to protect its employees and ensure their safety while working for the company. In a handwritten note, a Chiquita executive said that such payments were the “cost of doing business in Colombia.” The company agreed to make the payments demanded by the paramilitary group, but hid the payments through a series of questionable accounting actions. From 1997 through 2004 Chiquita paid monthly “protection payments” totaling more than $1.7 million.

After the September 11, 2001, terrorist attack in the United States, the U.S. Government declared the Colombian paramilitary group to be a terrorist organization. In February 2003, a Chiquita employee informed a senior Chiquita officer that the company’s protection payments were illegal under the new U.S. terrorism laws. Chiquita officials met with their attorneys in Washington, DC, and were advised to stop the payments to the terrorist group. Yet the company continued to make the protection payments, amounting to an additional $825,000.

In the minds of the Chiquita’s executives, stopping the payments would risk the lives of their employees. Chiquita’s executives also considered but rejected the option of withdrawing operations from Colombia. But in a surprising move in April 2003, Chiquita decided to disclose to the Department of Justice that the company was still making payments to the Colombian paramilitary group. The company told the government that the payments were made under the threat of violence against them and their employees.

The Justice Department informed Chiquita that these payments were illegal, yet the company continued to make the payments. In 2007 Chiquita Brands International pleaded guilty to one count of the criminal charge of engaging in transactions with a designated global terrorist group and agreed to pay a $25 million fine.

In explaining its actions, a company spokesperson stated that “Chiquita and its employees were victims and that the actions taken by the company were always motivated to protect the lives of our employees and their families.” He added, “Our company had been forced to make protection payments to safeguard our workforce. It is absolutely untrue for anyone to suggest that these payments were made for any other purpose.”

Sources: “Chiquita Brands International Pleads Guilty to Making Payments to a Designated Terrorist Organization and Agrees to Pay $25 Million Fine,” U.S. Department of Justice Press Release, March 19, 2007, www.justice.gov/opa/pr/2007/March/07_nsd_161.html; “Colombian Families’ Suit Says Chiquita Liable for Torture, Murder,” CNN.com, February 14, 2007, www.cnn.com/2007/US/law/11/14/chiquita.lawsuit; “Chiquita Sued Over Colombian Paramilitary Payments,” The Sacramento Bee, May 30, 2011, www.sacbeee.com; and “US Appeals Court Says Colombians Cannot Sue Chiquita,” BBC News, July 24, 2014, www.bbc.com/news/world-latin-america-28469357.

Discussion Questions

1. Do you agree with the 11th U.S. Court of Appeals ruling that cleared Chiquita of any liability for the victims killed by the paramilitary group that Chiquita funded? Construct an ethical argument that supports your view.

2. Using each of the four methods of ethical reasoning (see Figure 5.6), was it ethical or not for Chiquita to pay the terrorist organization when payments were demanded in the early 2000s?

3. Should the U.S. ban against supporting terrorist groups, imposed after the September 11, 2001, attacks in the United States, be applied in this situation? Why or why not?

4. Is there anything that Chiquita could have done to protect its employees adequately without paying the terrorists?

5. Should Chiquita be assessed a penalty that puts the firm out of business for their actions?

    Please answer all questions in question 1 and question 2.

    Your submission must include a bibliography.

    The word limit for question 1 and 2 combined is 1500 words.

Question 1

Angus is a 44-year-old high school teacher who wishes to invest his savings of $100,000 by building up a blue-chip share portfolio. Angus was a keen observer of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry in 2019 and has strong views about corporate ethics and the remuneration of directors. Angus wants to exercise his vote as a shareholder to ensure that company directors are not being overpaid. He is also keen to ensure there is proper corporate governance and the directors are managing the company efficiently and ethically. Angus is unsure whether he should buy shares in a public company or a proprietary company. He is also unclear about what class of share/s would best suit his particular investment interests. Angus seeks your professional advice. Required

Answer the following questions for Angus. Support your answer with relevant statute law and/or case law.

a) What is a share and what class, or classes of shares would be most suitable for Angus?

b) On what issues do shareholders have a right to vote and how many votes do they have?

c) How are shares purchased or acquired in a public/proprietary company?

d) Should Angus buy shares in a public company or a proprietary company? Why?

Question 2“

If a company is in financial difficulty, a secured creditor or the court may put the company into receivership.” REQUIRED

Answer the following questions in relation to receivership. Please support your analysis with relevant legislation and/or case law.

a) Who/what is a receiver? Who appoints a receiver and why?

b) What is the effect of the receiver’s appointment on

· the company;

· the directors;

· shareholders;

· secured creditors; and

· unsecured creditors?

The company was established with authorized capital 300 000$, of which 200 000$ were in cash, 60 000$ was in Building, 40 000$ was in equipment. The company has employees with salary      15 000$. During the week the company acquired a car for company needs, by the price 20 000$ and paid in cash the full amount. Then it obtained office supplies from Intellect LLC by the price 2000$, but paid 20% in cash. In order to get familiar to the publicity, the company arranged several interviews with one of the channels, and for this cause preliminary rented a room (which included snack and service) in PLAZA, and paid in advance in cash the amount 8000$ for the whole month. The company was supplied with goods from Craft LLC by the price 100 000$, plus freight-in charges in the amount of 3000$. During the check, there were found out that some goods are damaged, and some are provided incorrectly against the invoice. The damaged goods amounting to 6000$ were returned to Craft LLC, and despite of fact that there was incorrectness in provision of some goods, the company considered them still eligible for sale, but claimed allowance for them in the amount of 4000$. Craft LLC agrees and states that if our company makes the payment for the goods in 15 days, it will get an additional 10% discount on the price. Our company makes the payment during the discounting period. During the month company makes sales amounting to 220 000$ to Barnes LLC and send them invoice. During the transportation some of the goods were damaged and Barnes LLC returned to us 6000$ worth of damaged goods that costed 2500$, and paid in cash just            110 000$. Ending inventory at the end of the month was 15 000$. The utility expenses were 500$, commissions to staff were 10 000$. Al the expenses were paid out. Prepare relevant transactions, Balance and Income statement.

You have recently been appointed management accountant for Rugby Coffee Mugs Pty Ltd. The company commenced its operations on 1 July 2019 manufacturing one size coffee mugs with individual club names and club logos of rugby union clubs playing in the New South Wales, Queensland, Victoria and Western Australia local rugby union competition. The company currently does not have any management accounting controls and part of your appointment involves improving the company’s manufacturing internal control systems to facilitate the projection, monitoring and if need be the taking immediate action to ensure that the company’s internal manufacturing performance is efficient thereby ensuring that the company’s profitability is maximised. Given the urgency of the situation, you have decided to propose to the company’s chief financial officer that you establish a budget and standard costing system against which actual performance will be measured in quantitative and qualitative terms. Additionally, you will prepare a static budget for the month of March 2020, subsequent to which you will prepare a flexible budget for the month of March 2020 against which the actual performance in March 2020 will be measured, and an explanation of specific variations in performance against the static and flexible budget. A report to the chief financial officer will include the following:

1. Initial memorandum explaining the key issues relating to the establishment of budgets and a standard costing system.

2. A static budget for the month of March 2020.

3. Flexible budget responding to the actual performance in the month of March 2020.

4. A table showing the variance between the actual performance and the static and flexible budgets for the month of March 2020.

5. An explanation of specific variations in actual performance against the static and flexible budgets.

PART A Required Prepare a report to the company’s chief financial officer explaining the following:

1. Four reasons for implementing a standard costing system.

2. The steps you will follow in developing a flexible budget. 3.

The key difference between a static budget and a flexible budget.

4. The arguments for and against using ideal standards.

5. The reason why the managers will find a flexible-budget analysis more informative than a static-budget analysis.

6. How might the production manager gain insight into the causes of a flexible-budget variance for direct materials?

4 PART B

You have developed the following standard costs and budget for the month of March 2020:

Average selling price per coffee mug $8.20

Direct materials - Direct materials cost per gram $0.036 -

Number of grams per coffee mug 100

Direct manufacturing labour - Direct manufacturing labour cost per hour $15.00 -

Average labour productivity rate (coffee mugs per hour) 100

Sales commission cost per coffee mug $0.72

Fixed overhead $990,000

Budgeted sales for March in units 700,000

Budgeted hours - 700,000 units / 100 units per hour 7,000

The following are the actual results for March 2020:

▪ Unit sales and production were 90% of budget.

▪ Actual average selling price per coffee mug was $8.30.

▪ Actual direct materials cost per gram was $0.039.

▪ Direct materials used amounted to 100 grams per coffee mug.

▪ Actual direct manufacturing labour cost was $15.20 per hour.

▪ Productivity dropped to 90 coffee mugs per hour.

▪ Actual sales commissions were $0.70 per coffee mug.

▪ Fixed overhead costs were $20 000 above budget.

Required Prepare a report to the company’s chief executive officer showing the following for March 2020:

1. Static-budget and actual operating profit.

2. Static-budget variance for operating profit. (1 mark)

3. Detailed flexible-budget operating profit and variance with actual results.

4. Net total flexible-budget variance for operating profit.

5. Net total sales-volume variance for operating profit.

6. Price and efficiency variances for direct materials.

7. Price and efficiency variances for direct manufacturing labour.

8. Net flexible-budget variance for direct manufacturing labour. (1 mark)

4 PART C Required: Prepare a report to the company’s chief financial officer addressing the following:

1. Identification of three possible causes of the total direct materials variance.

2. Explanation of three possible reasons for the total direct labour variance.

3. Explanation of how your variance analysis will help in continuous improvement.

4. Explanation of why might an analyst examining variances in the production area look beyond that business function for explanations of those variances?

5. Commentary on the following statement made by a plant manager: ‘Meetings with my management accountant are frustrating. All he wants to do is pin the blame on someone for the various variances he reports.’

6. Explanation of why is it important that the managers do not evaluate variances in isolation? (3marks)

From a corporation’s point of view, does the tax treatment of dividends and interest paid favor the use of debt financing or equity financing?

Equity financing

Debt financing

Suppose a firm in the 40% federal-plus-state tax bracket needs to pay $1 in dividends to its shareholders. What is the pretax income it should have to pay this dividend?

$1.00

$1.67

Cute Camel Woodcraft Company owns 248,500 shares in the Lazy Zebra Furniture. If Lazy Zebra has 350,000 shares of common stock outstanding, can Cute Camel file a single income tax return that reports the incomes and expenses of both companies?

No, because Cute Camel Woodcraft Company’s ownership stake in Lazy Zebra is less than or equal to 40%, whereas 50% or more is required by the U.S. Tax Code.

No, because Cute Camel Woodcraft Company’s ownership stake in Lazy Zebra is less than or equal to 79%, whereas 80% or more is required by the U.S. Tax Code.

Yes, because Cute Camel Woodcraft Company’s ownership stake in Lazy Zebra is greater than or equal to 80%, as required by the U.S. Tax Code.

The Internal Revenue Service prohibits the improper   of dividends, which refers to a corporation’s retention of undistributed profits to assist shareholders in avoiding their personal income tax on dividends. The IRS imposes a penalty if corporations accumulate more than   .

Suppose you want to invest $10,000. You have two options:

Assume that your decision is based solely on your tax situation. If everything else is the same for both bonds, at what tax rate would you be indifferent between these two bond investments?

18.60%

22.00%

20.00%

25.60%

For your personal portfolio, you purchased 1,000 shares of a foreign manufacturing company for $43.00 per share and sold it for $54.00 per share after 18 months. How will your gain or loss be treated when you file your taxes?

As a capital gain that will be taxed at the current ordinary income tax rate

As a capital gain that will be taxed at the capital gains tax rate

Sylvia Sweet opened Sweet Angels, Inc. on June 1, 2020. During June, the following transactions were completed:

Adjustment Data:

A. Services performed for customers through June 30, 2020, but unbilled and uncollected were $1,500.

B. Cleaning Angels used the allowance method to estimate bad debts. Cleaning Angels estimates that 3% of its month-end receivables will not be collected.

C. Record 1 month of depreciation for the floor equipment. Use the straight-line method, an estimated life of 5 years, and $400 salvage value.

D. Record 1 month of insurance expense.

E. An inventory count shows $350 of supplies on hand at June 30th.

F. Record services performed for the customer who paid in advance on June 17th.

G, Accrue for wages owed through June 30, 2020.

H. Accrue for interest expense for one month.

I. Sylvia estimates a 20% income tax rate. (Hint: Prepare an income statement up to “income before taxes” to help with the income tax calculation.)

Instructions:

1. Journalize the June transactions.
2. Post to ledger accounts.
3. Prepare a Trial Balance as of June 30, 2020.
4. Journalize the adjusting entries. (Round all amounts to whole dollars.)
5. Post the adjusting entries to the ledger accounts.
6. Prepare an Adjusted Trial Balance as of June 30, 2020.
7. Journalize the closing entries.
8. Post the Closing Entries to the ledger accounts.
9. Prepare a Post-Closing Trial Balance on June 30, 2020