Questions
Please write a short paragraph about your interest in pursuing a M.B.A. degree at XYZ UNIVERSITY.

Please write a short paragraph about your interest in pursuing a M.B.A. degree at XYZ UNIVERSITY.

In: Economics

What are the theoretical framework and conceptional framework for "Student’s satisfaction with the education services provided...

What are the theoretical framework and conceptional framework for "Student’s satisfaction with the education services provided by the University" research?

In: Psychology

Please describe Sarbanes-Oxley legislation. How it may have an effect on the University Flea Market

Please describe Sarbanes-Oxley legislation.

How it may have an effect on the University Flea Market

In: Operations Management

Why work?” discuss the role “life energy” plays in going to university and choosing a meaningful...

Why work?” discuss the role “life energy” plays in going to university and choosing a meaningful career.

In: Economics

Are production and productivity correlated? (b)Provide examples of internal and external failure costs relevant to a...

Are production and productivity correlated?

(b)Provide examples of internal and external failure costs relevant to a university.

In: Operations Management

What do we mean by “purple pricing” as Northwestern University games? sports facility management

What do we mean by “purple pricing” as Northwestern University games? sports facility management

In: Operations Management

Sax Company signs a lease agreement dated January 1, 2019, that provides for it to lease...

Sax Company signs a lease agreement dated January 1, 2019, that provides for it to lease computers from Appleton Company beginning January 1, 2019. The lease terms, provisions, and related events are as follows:

1. The lease term is 5 years. The lease is noncancelable and requires equal rental payments to be made at the end of each year. The computers are not specialized for Sax.
2. The computers have an estimated life of 5 years, a fair value of $300,000, and a zero estimated residual value.
3. Sax agrees to pay all executory costs directly to a third party.
4. The lease contains no renewal or bargain purchase options.
5. The annual payment is set by Appleton at $83,222.92 to earn a rate of return of 12% on its net investment. Sax is aware of this rate. Sax’s incremental borrowing rate is 10%.
6. Sax uses the straight-line method to record depreciation on similar equipment.

Required:

1. Next Level Examine and evaluate each capitalization criteria and determine what type of lease this is for Sax.
2. Calculate the amount of the asset and liability of Sax at the inception of the lease (round to the nearest dollar).
3. Prepare a table summarizing the lease payments and interest expense.
4.

Prepare journal entries for Sax for the years 2019 and 2020.

All transactions on this page must be entered (except for post ref(s)) before you will receive Check My Work feedback.

PAGE 2019

GENERAL JOURNAL

Score: 23/88

DATE ACCOUNT TITLE POST. REF. DEBIT CREDIT

1

2

3

4

5

6

7

Record the right-of-use asset and the lease liability on January 1. Use the Summary of Lease Payments and Interest Expense Schedule to determine amounts for the payment and amortize the right-of-use asset using the straight-line method on December 31.

4b. Prepare journal entries for Sax for the year 2020.

Question not attempted.

PAGE 2020

GENERAL JOURNAL

DATE ACCOUNT TITLE POST. REF. DEBIT CREDIT

1

2

3

4

5

In: Accounting

A mature company on Beverage and Food Industry, with stable earnings expects to have earnings per...

A mature company on Beverage and Food Industry, with stable earnings expects to have earnings per share (EPS) of 30 AED in the coming year and its current stock price is 280 AED. The management must decide between the following alternatives: Pay all of its earnings as dividends and abandon the new investment in Dubai or Cut its dividend payout rate to 75% and implement the Dubai Project. If the second policy is followed there is a divergence in the estimation of the Return on New Investment.

(i). Pay all of its earnings as dividends. Because of the status of the company and its strength in the market, the CEO believes that cash flow from operations is sufficient to continue to reinvest in growth, though has to abandon Dubai Project for next year, and decided to pay out all of its earnings to investors. Besides that, current economic conditions are weak due to the crisis, and the CEO is more willing to pay dividends than to enter a program of share buybacks.

(ii). Cut its dividend payout rate to 75%. On the other hand, the company’s manager has negative expectations regarding the recent financial crisis and advise to cut dividends even if this is not consistent with its long-run growth in earnings. He believes that it is better to reinvest some of the earnings to open new stores in Dubai, a project that will last 2 years and hence, it is advisable to safeguard its financial reserves for future expenses. If the firm follows this program the return on investment is expected to be 17%. Suppose that the required rate of return is the same as calculated in Question (2) above.

(iii). Expected return on New investment is 9% rather than 17%. Financial crisis is severe and persist. The manager of the company estimates that in this case the return on the new investment will be 9% rather than 17%.

Questions:

(9) What do you advise the firm given the above scenarios, firm’s conditions, and economic situation?

(iv). Taking into consideration the market’s systematic risk. Our firm has a beta factor (systematic risk) quite low, equal to 0.67. This is expected as our firm belongs to Beverage and Food industry. The economy’s risk-free rate is 6% and the market’s return is 10%.

Questions:

(10) Estimate the risk premium.

(11) Estimate the required rate of return using CAPM.

(12) Estimate the price of the stock under alternative (ii) using your answer to Q (7). How do you explain the difference in price found in Question (4)?

(13). What should be your final estimation of the firm’s stock price?

In: Finance

Profit center responsibility reporting for a service company Red Line Railroad Inc. has three regional divisions...

Profit center responsibility reporting for a service company

Red Line Railroad Inc. has three regional divisions organized as profit centers. The chief executive officer (CEO) evaluates divisional performance, using operating income as a percent of revenues. The following quarterly income and expense accounts were provided from the trial balance as of December 31:

Revenues—East $1,400,000
Revenues—West 2,000,000
Revenues—Central 3,200,000
Operating Expenses—East 800,000
Operating Expenses—West 1,350,000
Operating Expenses—Central 1,900,000
Corporate Expenses—Shareholder Relations 300,000
Corporate Expenses—Customer Support 320,000
Corporate Expenses—Legal 500,000
General Corporate Officers' Salaries 1,200,000

The company operates three support departments: Shareholder Relations, Customer Support, and Legal. The Shareholder Relations Department conducts a variety of services for shareholders of the company. The Customer Support Department is the company’s point of contact for new service, complaints, and requests for repair. The department believes that the number of customer contacts is a cost driver for this work. The Legal Department provides legal services for division management. The department believes that the number of hours billed is a cost driver for this work. The following additional information has been gathered:

   East    West    Central
Number of customer contacts 1,500 2,800 5,700
Number of hours billed 750 1,750 1,500

Required:

1. Prepare quarterly income statements showing operating income for the three divisions. Use three column headings: East, West, and Central.

Red Line Railroad Inc.
Divisional Income Statements
For the Quarter Ended December 31
East West Central
Revenues $ $ $
Operating expenses
Operating income before support department allocations $ $ $
Support department allocations:
Customer Support $ $ $
Legal
Total support department allocations $ $ $
Operating income $ $ $

2. What is the profit margin of each region? Round percentages to the nearest whole number.

Division Profit Margin
East Region %
West Region %
Central Region %

Identify the most successful region according to the profit margin.

3. What would you include in a recommendation to the CEO for a better method for evaluating the performance of the regions?

  1. A better divisional performance measure would be return on investment, residual income as these methods consider the assets used by the division.
  2. The current performance measures are based on the operating income per dollar of earned revenue. This method meets the requirement.
  3. A better divisional performance measure would be return on investment, and residual income as these methods consider the dollar revenue earned by the division.

In: Accounting

Consider the following situation as if you were Ian. Ian was a senior analyst at a...

Consider the following situation as if you were Ian.

Ian was a senior analyst at a major hotel company. Although Ian worked mostly in corporate headquarters, he would occasionally travel to the field where he met with front-line employees and learned what was on their minds.

On a trip to Portland, Ian had the chance to speak with two people working at the front desk about what it was like to work at the hotel. Daniel, the younger of the two had joined the staff recently; Ellen, the other employee (and Daniel’s supervisor), had been with the company for almost 15 years. Both employees seemed particularly interested in talking with Ian because they rarely got a chance to talk directly to anyone from headquarters.

As the three discussed changes in the hospitality industry, Ellen and Daniel complained about their company’s aggressive cost control initiatives, spearheaded by the charismatic but frugal CEO, whose policies were occasionally unpopular. After a few more minutes of conversation, Ellen casually said, “The CEO is so tight with a buck, I wonder if he is Jewish.”

As a Jewish person, Ian did not know how to react. He had never actually experienced anything like this before, especially in a professional setting. Ian’s instinct was not to be combative or hostile, but he felt a bit like a deer caught in the headlights. Daniel looked a little surprised at his supervisor’s remark, but, laughing, he quickly changed the subject. Smiling, Ian made an excuse to end or discussion and walk away.

The next day Ian woke up still bothered by Ellen’s remark. While checking out, he saw Daniel at the front desk. Ian mentioned to him that he may want to tell his supervisor to watch her remarks about other peoples’ ethnicity, to which Daniel replied, “I know what you mean because I am Puerto Rican, but I think that she meant it as a joke.” Ian could see that Daniel just wanted to smooth the issue over.

On the ride to the airport, Ian kept thinking about what he might do. Should he report Ellen to Human Resources? The company had a process in place for such matters, but he was worried. Ian did not know who he was dealing with; maybe Ellen would retaliate if he said something, especially since she would know who filed the complaint. Plus, Ian was not sure what the consequences would be – he didn’t want to get her fired. Ian only wanted Ellen to know how offensive the comments were.

As a team, consider what steps Ian should take.

What are the concerns facing Ian?

In: Operations Management