Antioch Company makes eBook readers. The company had the following amounts at the beginning of 2018: Cash, $671,000; Raw Materials Inventory, $67,000; Work in Process Inventory, $24,000; Finished Goods Inventory, $61,000; Common Stock, $601,000; and Retained Earnings, $222,000. Antioch experienced the following accounting events during 2018. Other than the adjusting entries for depreciation, assume that all transactions are cash transactions.

Paid $31,000 of research and development costs.

Paid $59,000 for raw materials that will be used to make eBook readers.

Placed $89,000 of the raw materials cost into the process of manufacturing eBook readers.

Paid $73,000 for salaries of selling and administrative employees.

Paid $101,000 for wages of production workers.

Paid $90,000 to purchase equipment used in selling and administrative offices.

Recognized depreciation on the office equipment. The equipment was acquired on January 1, 2018. It has a $10,000 salvage value and a eight-year life. The amount of depreciation is computed as [(Cost – salvage) ÷ useful life]. Specifically, ($90,000 – $10,000) ÷ 8 = $10,000.

Paid $154,000 to purchase manufacturing equipment.

Recognized depreciation on the manufacturing equipment. The equipment was acquired on January 1, 2018. It has a $26,000 salvage value and a eight-year life. The amount of depreciation is computed as [(Cost – salvage) ÷ useful life]. Specifically, ($154,000 – $26,000) ÷ 8 = $16,000.

Paid $49,000 for rent and utility costs on the manufacturing facility.

Paid $76,000 for inventory holding expenses for completed eBook readers (rental of warehouse space, salaries of warehouse personnel, and other general storage cost).

Completed and transferred eBook readers that had total cost of $245,000 from work in process inventory to finished goods.

Sold 830 eBook readers for $428,000.

It cost Antioch $132,800 to make the eBook readers sold in Event 13.

Prepare a schedule of cost of goods manufactured and sold for the year. (Amounts to be deducted should be indicated with a minus sign.)

Prepare a formal income statement for the year.

Prepare a balance sheet for the year.

Antioch Company makes eBook readers. The company had the following amounts at the beginning of 2018: Cash, $660,000; Raw Materials Inventory, $67,000; Work in Process Inventory, $35,000; Finished Goods Inventory, $47,000; Common Stock, $590,000; and Retained Earnings, $219,000. Antioch experienced the following accounting events during 2018. Other than the adjusting entries for depreciation, assume that all transactions are cash transactions.

1. Paid $29,000 of research and development costs.

2. Paid $64,000 for raw materials that will be used to make eBook readers.

3. Placed $98,000 of the raw materials cost into the process of manufacturing eBook readers.

4. Paid $69,000 for salaries of selling and administrative employees.

5. Paid $102,000 for wages of production workers.

6. Paid $66,000 to purchase equipment used in selling and administrative offices.

7. Recognized depreciation on the office equipment. The equipment was acquired on January 1, 2018. It has a $16,000 salvage value and a five-year life. The amount of depreciation is computed as [(Cost – salvage) ÷ useful life]. Specifically, ($66,000 – $16,000) ÷ 5 = $10,000.

8. Paid $157,000 to purchase manufacturing equipment.

9. Recognized depreciation on the manufacturing equipment. The equipment was acquired on January 1, 2018. It has a $21,000 salvage value and a eight-year life. The amount of depreciation is computed as [(Cost – salvage) ÷ useful life]. Specifically, ($157,000 – $21,000) ÷ 8 = $17,000.

10. Paid $54,000 for rent and utility costs on the manufacturing facility.

11. Paid $77,000 for inventory holding expenses for completed eBook readers (rental of warehouse space, salaries of warehouse personnel, and other general storage cost).

12. Completed and transferred eBook readers that had total cost of $255,000 from work in process inventory to finished goods.

13. Sold 820 eBook readers for $421,000.

14. It cost Antioch $155,800 to make the eBook readers sold in Event 13.

c-1 Prepare a schedule of cost of goods manufactured and sold for the year. c-2. Prepare a formal income statement for the year. c-3. Prepare a balance sheet for the year.

Antioch Company makes eBook readers. The company had the following amounts at the beginning of 2018: Cash, $667,000; Raw Materials Inventory, $62,000; Work in Process Inventory, $36,000; Finished Goods Inventory, $61,000; Common Stock, $603,000; and Retained Earnings, $223,000. Antioch experienced the following accounting events during 2018. Other than the adjusting entries for depreciation, assume that all transactions are cash transactions.

Paid $26,000 of research and development costs.

Paid $61,000 for raw materials that will be used to make eBook readers.

Placed $83,000 of the raw materials cost into the process of manufacturing eBook readers.

Paid $63,000 for salaries of selling and administrative employees.

Paid $98,000 for wages of production workers.

Paid $139,000 to purchase equipment used in selling and administrative offices.

Recognized depreciation on the office equipment. The equipment was acquired on January 1, 2018. It has a $19,000 salvage value and a six-year life. The amount of depreciation is computed as [(Cost – salvage) ÷ useful life]. Specifically, ($139,000 – $19,000) ÷ 6 = $20,000.

Paid $118,000 to purchase manufacturing equipment.

Recognized depreciation on the manufacturing equipment. The equipment was acquired on January 1, 2018. It has a $28,000 salvage value and a nine-year life. The amount of depreciation is computed as [(Cost – salvage) ÷ useful life]. Specifically, ($118,000 – $28,000) ÷ 9 = $10,000.

Paid $58,000 for rent and utility costs on the manufacturing facility.

Paid $76,000 for inventory holding expenses for completed eBook readers (rental of warehouse space, salaries of warehouse personnel, and other general storage cost).

Completed and transferred eBook readers that had total cost of $244,000 from work in process inventory to finished goods.

Sold 1,000 eBook readers for $434,000.

It cost Antioch $170,000 to make the eBook readers sold in Event 13.

c-1. Prepare a schedule of cost of goods manufactured and sold for the year. (Amounts to be deducted should be indicated with a minus sign.)

c-2. Prepare a formal income statement for the year.

c-3. Prepare a balance sheet for the year.

Antioch Company makes eBook readers. The company had the following amounts at the beginning of 2018: Cash, $673,000; Raw Materials Inventory, $65,000; Work in Process Inventory, $23,000; Finished Goods Inventory, $53,000; Common Stock, $594,000; and Retained Earnings, $220,000. Antioch experienced the following accounting events during 2018. Other than the adjusting entries for depreciation, assume that all transactions are cash transactions.

1. Paid $23,000 of research and development costs.

2. Paid $58,000 for raw materials that will be used to make eBook readers.

3. Placed $85,000 of the raw materials cost into the process of manufacturing eBook readers.

4. Paid $78,000 for salaries of selling and administrative employees.

5. Paid $106,000 for wages of production workers.

6. Paid $179,000 to purchase equipment used in selling and administrative offices.

7. Recognized depreciation on the office equipment. The equipment was acquired on January 1, 2018. It has a $19,000 salvage value and a eight-year life. The amount of depreciation is computed as [(Cost – salvage) ÷ useful life]. Specifically, ($179,000 – $19,000) ÷ 8 = $20,000.

8. Paid $188,000 to purchase manufacturing equipment.

9. Recognized depreciation on the manufacturing equipment. The equipment was acquired on January 1, 2018. It has a $28,000 salvage value and a eight-year life. The amount of depreciation is computed as [(Cost – salvage) ÷ useful life]. Specifically, ($188,000 – $28,000) ÷ 8 = $20,000.

10. Paid $63,000 for rent and utility costs on the manufacturing facility.

11. Paid $74,000 for inventory holding expenses for completed eBook readers (rental of warehouse space, salaries of warehouse personnel, and other general storage cost).

12. Completed and transferred eBook readers that had total cost of $248,000 from work in process inventory to finished goods.

13. Sold 810 eBook readers for $425,000.

14. It cost Antioch $145,800 to make the eBook readers sold in Event 13.

1. c-1. Prepare a schedule of cost of goods manufactured and sold for the year. (Amounts to be deducted should be indicated with a minus sign.)

2. c-2. Prepare a formal income statement for the year.

3. c-3. Prepare a balance sheet for the year.

In 2007, Consumer Report published a report of bacterial contamination of chicken sold in the US. They purchased 523 broiler chickens from various kinds of food stores, and tested them for bacteria that causes food-borne illnesses. Results indicated that 83% of chickens were infected with Campylobacter.

1. Construct a 95% confidence interval.

2. Explain what your confidence interval says about chicken sold in the US.

3. A spokesperson for the US Department of Agriculture dismissed the report, saying, “That’s 500 samples out of 9 billion chickens slaughtered a year…With the small numbers they tested, I don’t know that one would want to change one’s buying habits.” Is this criticism valid? Explain.

b. Find one aspect of this week’s material that is relevant to college, career, or everyday life. Provide some detail on how it could be important.

Your firm has a $10,000 par value U.S. Treasury bond with 30 years to maturity, annual coupon rate of 3.00% with semiannual coupon payments. Assume that the market annual yield to maturity on 30-year “T” bonds, found in the US Treasury Yield curve, is 3.04%.

What should the asked price (price you would pay) be for the bond?

Assume: YTM from US Treasury Yield Curve = 3.04% or semiannual rate = 1.52%

         Hint:

V_B =

If the 30 US Treasury Bond rate jumps immediately to 4.5%, what is the new price for the 30-year “T” bond? How much, in percent, would you lose or gain if you had purchased the bond in part A.

V_B = 150 (32.748953) + 10,000(0.263149)

      =$4,912.34 + 2,631.49= $7,543.83

Gain/Loss%=(price@ r= 4.5%) - (price@ r= 3.14%)/(p

The United States claims that Canada subsidizes the production of softwood lumber and that imports of lumber damage the interests of US producers.  The United States has imposed a high tariff on Canadian imports to counter the subsidy.  Canada is thinking of retaliating by refusing to export water to California.  The following table shows the payoff matrix for the simultaneous game that Canada and the US are playing

a.       What is the US’ optimal strategy? Why?

b.       What is Canada’s optimal strategy? Why?

c.       What is the outcome of the game? Explain.

d.       Is this game like a Prisoner’s Dilemma game or different in some crucial way? Explain.

e.       Which country would benefit more from a free trade agreement (where only the strategy of “no tariff” is allowed)?

Shipping R US (LESSEE) leased an ocean-liner freighter from Viking Ships (LESSOR). The lease is non-cancelable, requires beginning of the year (annuity due) payments for three years and at the end of the lease lessee returns the ship to the lessor. Shipping R US's incremental borrowing rate is 6%, but knows that Viking Ships used a 3.5% present value discount rate in determining the present value of the three annual lease payments, which total $6,000,000. Viking Ships manufactured the ocean-liner freighter, the freighter's fair value at the beginning of the lease is $5,500,000 and its estimated useful life is 10 years. Shipping R US is required to pay all executor costs, such as insurance, maintenance and taxes and did not guarantee the residual value of the ocean-liner freighter. Shipping R US uses the straight-line depreciation method for all of its depreciable assets.

For the Disney Company, provide a brief detail of the lawsuit. Because the Beef lawsuit is included in the footnote, what does this tell you about the company belief regarding the merit of the lawsuit?

14 Commitments and Contingencies

Commitments

The Company has various contractual commitments for broadcast rights for sports, feature films and other programming, totaling approximately $51.0 billion, including approximately $0.4 billion for available programming as of October 1, 2016, and approximately $48.7 billion related to sports programming rights, primarily college football (including bowl games and the College Football Playoff) and basketball, NBA, NFL, MLB, US Open Tennis, various soccer rights, the Wimbledon Championships and the Masters golf tournament.

The Company has entered into operating leases for various real estate and equipment needs, including retail outlets and distribution centers for consumer products, broadcast equipment and office space for general and administrative purposes. Rental expense for operating leases during fiscal years 2016, 2015 and 2014, including common-area maintenance and contingent rentals, was $847 million, $859 million and $883 million, respectively.

The Company also has contractual commitments for two new cruise ships, creative talent and employment agreements and unrecognized tax benefits. Creative talent and employment agreements include obligations to actors, producers, sports, television and radio personalities and executives.

Contractual commitments for broadcast programming rights, future minimum lease payments under non-cancelable operating leases, cruise ships, creative talent and other commitments totaled $60.8 billion at October 1, 2016, payable as follows:

Certain contractual commitments, principally broadcast programming rights and operating leases, have payments that are variable based primarily on revenues and are not included in the table above.

The Company has non-cancelable capital leases, primarily for land and broadcast equipment, which had gross carrying values of $464 million and $469 million at October 1, 2016 and October 3, 2015, respectively. Accumulated amortization related to these capital leases totaled $216 million and $196 million at October 1, 2016 and October 3, 2015, respectively. Future payments under these leases as of October 1, 2016 are as follows:

Contractual Guarantees

The Company has guaranteed bond issuances by the Anaheim Public Authority that were used by the City of Anaheim to finance construction of infrastructure and a public parking facility adjacent to the Disneyland Resort. Revenues from sales, occupancy and property taxes from the Disneyland Resort and non-Disney hotels are used by the City of Anaheim to repay the bonds. In the event of a debt service shortfall, the Company will be responsible to fund the shortfall. As of October 1, 2016, the remaining debt service obligation guaranteed by the Company was $316 million, of which $51 million was principal. To the extent that tax revenues exceed the debt service payments in subsequent periods, the Company would be reimbursed for any previously funded shortfalls. To date, tax revenues have exceeded the debt service payments for the Anaheim bonds.

Legal Matters

Beef Products, Inc. v. American Broadcasting Companies, Inc. On September 13, 2012, plaintiffs filed an action in South Dakota state court against certain subsidiaries and employees of the Company and others, asserting claims for defamation arising from alleged false statements and implications, statutory and common law product disparagement, and tortious interference with existing and prospective business relationships. The claims arise out of ABC News reports published in March and April 2012 about a product, Lean Finely Textured Beef, that was included in ground beef and hamburger meat. Plaintiffs’ complaint sought actual and consequential damages in excess of $400 million (which in March 2016 they asserted could be as much as $1.9 billion), statutory damages (including treble damages) pursuant to South Dakota’s Agricultural Food Products Disparagement Act, and punitive damages. Trial is set for June 2017. At this time, the Company is not able to predict the ultimate outcome of this matter, nor can it estimate the range of possible loss.

The Company, together with, in some instances, certain of its directors and officers, is a defendant or codefendant in various other legal actions involving copyright, breach of contract and various other claims incident to the conduct of its businesses.

Management does not believe that the Company has incurred a probable material loss by reason of any of the above actions.

Long-Term Receivables and the Allowance for Credit Losses

The Company has accounts receivable with original maturities greater than one year related to the sale of television program rights and vacation ownership units. Allowances for credit losses are established against these receivables as necessary.

The Company estimates the allowance for credit losses related to receivables from the sale of television programs based upon a number of factors, including historical experience and the financial condition of individual companies with which we do business. The balance of television program sales receivables recorded in other non-current assets, net of an immaterial allowance for credit losses, was $0.9 billion as of October 1, 2016. Fiscal 2016 activity related to the allowance for credit losses was not material.

The Company estimates the allowance for credit losses related to receivables from sales of its vacation ownership units based primarily on historical collection experience. Estimates of uncollectible amounts also consider the economic environment and the age of receivables. The balance of mortgage receivables recorded in other non-current assets, net of a related allowance for credit losses of approximately 4%, was $0.7 billion as of October 1, 2016. Fiscal 2016 activity related to the allowance for credit losses was not material.

QUESTION 1

(the interest rates)

You are a senior financial analyst and have been asked to analyse recent developments in the Euro era and the U.S markets and advise the top management on the economic conditions in both markets. You have collected data on the euro area yields of the central government bonds and the U.S. treasury bond yields. For this purpose, you have downloaded the following data from the European Central Bank and the U.S Federal Reserve Bank on 24^th September 2020 (Mo = month, Yr = Year):

REQUIRED:

1. Considering both yield rates on 24^th September 2020, depict the yield curves charts and describe the implied market outlook in the Euro area and the U.S. market to the top management.

[4 marks].

QUESTION 1 (continued)

2. Calculate the market price of each bond on 24^th September 2020 that issued by North Polar Ltd., a European company specialises in manufacturing semiconductors, using the yield curve data provided in the table above. What is the current total value of minimum application?

[4 marks]

3. Suppose the Australian government has announced tax cuts for the business sector. Using the loanable funds model, explain how this will impact the supply of and demand for loanable funds and the interest rate in Australia. (Explain your answer using diagrams).