The following transactions pertain to 2018, the first-year operations of Gibson Company. All inventory was started and completed during 2018. Assume that all transactions are cash transactions. Acquired $12,000 cash by issuing common stock. Paid $4,700 for materials used to produce inventory. Paid $2,400 to production workers. Paid $900 rental fee for production equipment. Paid $350 to administrative employees. Paid $400 rental fee for administrative office equipment. Produced 400 units of inventory of which 360 units were sold at a price of $25 each.

Required Prepare an income statement and a balance sheet in accordance with GAAP.

Bob is worried about his job security, and has started to venture into a new startup. Perhaps surprisingly, he is able to take his startup to IPO within a 5-year period (please allow me to dream). The firm has just announced its first dividend of $3/share and the firm’s dividend is expected to grow extremely fast for 4 years in a row at 30% each year. However, Bob expects that the company will only grow at 5% after that forever. Expected return (discount rate) for stocks is 12%. Please use the dividend discount model to price the stock at t=0.

A stock will pay no dividends for the next 3 years. Four years from now, the stock is expected to pay its first dividend in the amount of $2.1. It is expected to pay a dividend of $2.9 exactly five years from now. The dividend is expected to grow at a rate of 5% per year forever after that point. The required return on the stock is 14%. The stock's estimated price per share exactly TWO years from now, P2 , should be $______. Do not round any intermediate work, but round your final answer to 2 decimal places (ex: $12.34567 should be entered as 12.35). Margin of error for correct responses: +/- .10.

The Frush Corporation has two different bonds currently outstanding. Bond M has a face value of $30,000 and matures in 20 years. The bond makes no payments for the first six years, then pays $1,900 every six months over the subsequent eight years, and finally pays $2,200 every six months over the last six years. Bond N also has a face value of $30,000 and a maturity of 20 years; it makes no coupon payments over the life of the bond. The required return on both these bonds is 12 percent compounded semiannually. What is the current price of Bond M and Bond N?

The following transactions pertain to 2018, the first-year operations of Solomon Company. All inventory was started and completed during 2018. Assume that all transactions are cash transactions.

Acquired $4,400 cash by issuing common stock.

Paid $710 for materials used to produce inventory.

Paid $1,910 to production workers.

Paid $882 rental fee for production equipment.

Paid $120 to administrative employees.

Paid $116 rental fee for administrative office equipment.

Produced 340 units of inventory of which 260 units were sold at a price of $13 each.

Required

Prepare an income statement and a balance sheet in accordance with GAAP.

PERCENTAGE OF COMPLETION METHOD AttiK Construction Company currently has a long-term construction project. The project has a contract price of $130,000,000 with total estimated costs of $100,000,000. AttiK appropriately uses the percentage of completion method. After 2 years of construction, the following costs have been accumulated: Actual cost incurred, Year 1 $30,000,000 Total estimated costs remaining after Year 1 70,000,000 Actual cost incurred, Year 2 50,000,000 Total estimated cost remaining after Year 2 20,000,000 Determine the gross profit for each of the first 2 years of the construction contract.

1. a) Mulwa Ltd a manufacturing company produced 10,000 units of 2kg unga product during the first quarter of 2013. The following additional information is also provided

• Direct material – ksh 8
• Direct labour - ksh 4
• Variable manufactury – 2
• Fixed manufacturing cost – ksh 36,000
• Selling and administration cost – ksh 5,000
• Selling price – ksh 20 per cent
• Closing stock at the end of the period = 1000 units.

Required:

1. Determine the unit production cost of the product using marginal and absorption costing methods                                                     
2. Prepare an income statement for the period using absorption and marginal cost techniques.                                                              

Inflation Issues

• Does the base basket used to create the CPI precisely reflect your individual choices? If the answer is no, do the inflation rates calculated using the CPI represent the changes in purchasing power that you actually experience?
• Do you substitute between goods as one becomes more expensive, i.e., would you buy more of a less expensive good if the price of your first choice rose significantly? If the answer is yes, does the CPI inflation rate represent the decrease in purchasing power that you actually experienced?
• Based on your answers to the above, does the choice of the market basket matter?

Sales price P15 per unit

Variable costs:

SG&A P2 per unit

Production P4 per unit

Fixed costs (total cost incurred for the

year):

SG&A P14,000

Production P20,000

During the first year, Sherrill Corporation manufactured 5,000 units and sold 3,800. There was no beginning or ending work-in-process inventory.

1. How much income before income taxes would be reported if Stanley uses absorption costing?

2. How much income before income taxes would be reported if variable costing was used?

3. Show why the two costing methods give different income amounts

Betsy Birdsong, an interior designer, has made plans to definitely retire in three years. She has begun to downsize her business and is moving out of the 2,000 square foot commercial condominium she owns in a prestigious business park. Betsy does not wish to sell at this time, so she has decided to offer the condominium as a lease-purchase option. While she hasn't decided on a purchase price, she is adamant about the lease term:   a three-year lease with a two-year option (for the first two years only).  

What is your opinion as to why she would require such a lease term?