Treasure Corp. is a public company and has 100,000 common shares outstanding and 15,000 cumulative $2 preferred shares outstanding. In 2020, the company reported income from continuing operations before income tax of $2,830,000. Additional transactions not considered in the $2,830,000 are as follows: 1. In 2020, Treasure Corp. sold equipment for $65,000. The machine had originally cost $60,000 and had accumulated depreciation to date of $45,000. 2. The company sold one of its subsidiaries during the current year. Assume that this transaction meets the criteria for discontinued operations. The loss on 2020 operations of this subsidiary was $60,000 before tax. The loss from disposal of the subsidiary was $7,000 before tax. 3. Treasure purchased new computers for $20,000 cash at the end of 2020 to take advantage of a supplier promotion. By doing so, the company saved $4,000. 4. At year end, the company reviewed its accounts receivable and determined that a $6,700 of accounts receivable that had been outstanding since May appeared unlikely to be collected. No allowance for doubtful accounts was previously set up. 5. An internal audit discovered that amortization (depreciation) expense on a patent had been erroneously missed for both 2019 and 2020. The patent had a cost of $120,000 and has an 8-year useful life. 6. The company had an unrealized gain of $41,000 (not taxable) on their FV-OCI investment. Instructions: a. Make a list with one to six and for each of the 6 points, indicate if the transaction would effect Continuing Operations, Discontinued Operations, Other Comprehensive Income or N/A and by what before-tax amount, positive or negative. E.g. “8. Discontinued +53,000” b. Taking into account the above information, prepare a Statement of Financial Performance for the year 2020, starting with income from continuing operations before income tax. Calculate earnings per share as it should be shown on the face of the income statement (The preferred share dividends are $30,000). Assume a total effective tax rate of 30% on all points, unless otherwise indicated. c. Not all information is created equal. Using an example from the information provided in points 1 through 6, explain how the quality of earning information could have shortcomings. Be clear but concise and limit your answer to two to three sentences.

You work as an analyst for an institution located in Riyadh, Kingdom of Saudi Arabia (or KSA).

The Saudi Arabia’s Monetary Authority, KSA’s Central Bank, has recently released a report on the regulation of the quantity of money in the country for the upcoming Year 2021.

In answering the questions that follow: show all relevant formulas and calculations. Keep two decimal points.   

As part of the report, Saudi’s Central Bank created a reference value for money growth between 2020 and 2021, according to which they expect real growth to stay between -4.2% and -6.3%, inflation rate to be between 3.9% and 5.8%, and velocity growth to range between -1.8% and -3.1%.

Using the averages for the figures provided above, calculate KSA’s estimated money growth rate. (2 points)

Suppose that the Central Bank’s report also states that between 2019 and 2020, due to the anticipated inflation in the MENA region brought on by 2020, the Saudi Arabian Monetary Authority is planning to DECREASE the country’s ‘M2’ from SR 230 billion to SR 205 billion (SR = Saudi Riyal).

According to the report, between 2020 and 2021, the KSA’s measure of velocity is expected to stay constant at 3.25.  

Using the Quantity Theory of Money, calculate the percentage change in the KSA’s nominal GDP. (1.5 points)

*** Note: Question 4(b) is not related to Question 4(a).   

The report states that, due to the anticipated deflation in the MENA region brought on by EXPO 2020, between 2020 and 2021, the Saudi Consumer Price Index is expected to DECREASE from 185 to 155.

Using Fisher’s Equation, determine the impact of this change on the level of the nation’s real GDP. (1.5 points)

*** Note: Question 4(c) is a continuation from Question 4(b) and is not related to Question 4(a).

BECN 250 – Money and Banking – Formulas

CPI = Cost of Basket in Current YearCost of Basket in Base Year × 100%

GDP deflator= Nominal GDPReal GDP

Inflation rate 1= New CPI - Old CPIOld CPI ×100% = New Cost of Basket - Old Cost of BasketOld Cost of Basket × 100%

Percentage change = New - OldOld ×100%

% Δ M + % Δ V = % Δ P + % Δ Y = % Δ Nominal GDP   

Money growth + Velocity growth = Inflation + Real growth

The following trial balance relates to Atlop Sdn Bhd at 31 March 2020 :

The following notes are relevant :

8

1. Non current assets :

On 1 April 2019, the director decided that the financial statements would show an improved position if land and building were revalued to market value. At the date, an independent valuer valued the land at RM12 million and the building at RM35 million and these valuations were accepted by the directors. The remaining life of the buildings at that date was 14 years. Atlop does not make a transfer to retained profit for excess depreciation. Ignore deferred tax on the revaluation surplus.

Plant and equipment is depreciated at 20% per annum using the reducing balance method and time apportioned appropriate. All depreciation is charged to cost of sales but none has yet been charged on any non current asset for the year ended 31 March 2020.

2. Atlop estimates that an income tax provision of RM27.2 million is required for the year ended 31 March 2020 and at that date the liability to deferred tax is RM9.4 million. The movement on deferred tax should be taken to profit or loss. The balance on current tax in the trial balance represents the under/over provision of the tax liability for the year ended 31 March 2019.

Required :

1. Prepare the statement of profit or loss and other comprehensive income for Atlop for the year ended 31 March 2020.

2. Prepare the statement of financial position of Atlop as at 31 match 2020.

c) Prepare the changes on equity on related column only.

The income statement, balance sheets, and additional information for Great Adventures, Inc., are provided below.

Additional Information for 2020:

1. Borrowed $560,000 in January 2020. Made 12 monthly payments during the year, reducing the balance of the loan by $37,716.

2. Issued common stock for $1,200,000.

3. Purchased 10,000 shares of treasury stock for $12 per share.

4. Reissued 5,000 shares of treasury stock at $13 per share.

5. Declared and paid a cash dividend of $115,000.

Required:

Prepare the statement of cash flows for the year ended December 31, 2020, using the indirectmethod. (List cash outflows as negative amounts.)

The Statements of Financial Position for Lexington Limited as at 30 June 2019 and 30 June 2020 are provided below:

Question One continued on the next page

QUESTION ONE (CONTINUED)

The Statement of Financial Performance for Lexington Limited for the financial year ended 30 June 2020 is provided below:

Additional Information:

1. An interim dividend was declared and paid. A final dividend of $15,000 was declared.
2. New machinery costing $85,000 was purchased for cash during the year.
3. A machine having an original cost of $57,500 was sold for cash during the year. Accumulated depreciation of the machine sold was $48,500 at the point of sale.
4. Other Operating Expenses include depreciation expense of $46,500.
5. Additional shares were issued for cash during the year.
6. All sales and purchases are on credit throughout the year ending 30 June 2020.
7. Accounts payable reflects inventory purchases on credit from suppliers.

REQUIRED:

1. Prepare a fully classified Statement of Cash Flows for Lexington Ltd for the year ended 30 June 2020 using the direct method. Show all workings.

      (b) Compare and contrast the information provided from a Statement of Cash Flows as compared to information contained in the Statement of Financial Position and Statement of Financial Performance. (word limit 150).

QUESTION ONE

The Statements of Financial Position for Lexington Limited as at 30 June 2019 and 30 June 2020 are provided below:

Question One continued on the next page

QUESTION ONE (CONTINUED)

The Statement of Financial Performance for Lexington Limited for the financial year ended 30 June 2020 is provided below:

Additional Information:

1. An interim dividend was declared and paid. A final dividend of $15,000 was declared.
2. New machinery costing $85,000 was purchased for cash during the year.
3. A machine having an original cost of $57,500 was sold for cash during the year. Accumulated depreciation of the machine sold was $48,500 at the point of sale.
4. Other Operating Expenses include depreciation expense of $46,500.
5. Additional shares were issued for cash during the year.
6. All sales and purchases are on credit throughout the year ending 30 June 2020.
7. Accounts payable reflects inventory purchases on credit from suppliers.

REQUIRED:

1. Prepare a fully classified Statement of Cash Flows for Lexington Ltd for the year ended 30 June 2020 using the direct method. Show all workings.

      (b) Compare and contrast the information provided from a Statement of Cash Flows as compared to information contained in the Statement of Financial Position and Statement of Financial Performance. (word limit 150).

Monty Corporation has provided the following information for the year ended December 31, 2020.

Additional Information:

Calculate taxable income and taxes payable for 2020.

Prepare the journal entries to record 2020 income taxes (current and future). (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

You have two samples of covalently closed, circular DNA (ccc dsDNA)—one relaxed and one slightly negatively supercoiled—and you want to visualize the DNA using gel electrophoresis. You add a small amount of ethidium bromide to each sample. Each cccDNA contains the same number of base pairs. Interestingly, you see that the relaxed cccDNA sample migrates faster in the gel than the negatively supercoiled cccDNA sample. Which of the following is a valid explanation for the results? Select one choice from the list below (A-D) and explain your answer. A. The treatment with ethidium relaxed the negatively supercoiled cccDNA and positively supercoiled the relaxed cccDNA. B. The treatment with ethidium caused both cccDNAs to become positively supercoiled. C. The treatment with ethidium caused both cccDNAs to become relaxed. D. The treatment with ethidium decreased the linking number of the negatively supercoiled cccDNA and increased the linking number of the relaxed cccDNA.

18. Consider the following closed economy:

C = 60 +0.8(Y-T)

I = 150-1000i

G = 250

T = 200

Ms/P = 100

Md/P = 40+0.1Y-1000i

a. Derive the IS and LM functions.

b. Find the equilibrium interest rate and the equilibrium level of income.

c. Suppose we change this model such that investment is assumed to be completely interest inelastic: that is, investment does not depend on the rate of interest or we have I=150. Write the new equations for the IS and LM schedules and illustrate them graphically. What is the new equilibrium value of income?

d. How would an increase in money stock affect equilibrium values of Y and i under (c) above? Illustrate and explain your answer.

In the early 1990’s Heinz Pet Products, makers of 9-Lives cat food, closed eight smaller plants and centralized operations at its factory in Bloomsburg, Pennsylvania. It expanded the Bloomsburg factory from 250,000 square feet to 1 million, and increased the use of other resources by the same proportion. Output at that factory increased from 3 million cases a year to 65 million. From this information we know that the factory experienced

Select one:

a. diseconomies of scale, and average total cost rose.

b. economies of scale, and average total cost rose.

c. diseconomies of scale, and average total cost fell.

d. economies of scale, and average total cost fell.

If a typical individual were to go to the circus performance after performance, the marginal utility of each additional performance would

Select one:

a. increase, at a decreasing rate.

b. eventually decline.

c. decline at first, but eventually rise.

d. remain unchanged.

The Mr. Coffee coffeemaker was introduced in 1971, the first automatic drip coffeemaker on the market. It was immensely successful and highly profitable. Today many companies produce automatic drip coffeemakers and consumers perceive only slight differences between them. With this additional competition, Mr. Coffee’s profits are no better than those of other small appliances.

With only the information given above, an economist would probably explain the drop in Mr. Coffee’s profits as follows:

Select one:

a. Mr. Coffee must have experienced an increase in some important cost of production, resulting in a drop in profits.

b. Consumer taste for coffee must have declined, leading to a shift to the left in the demand for coffee makers.

c. Mr. Coffee’s high profits must have attracted new firms into the market for coffeemakers.

d. The government must have taxed away Mr. Coffee’s excess profits.

Hurricanes in 2005 that hit the natural gas producing areas of the U.S. Gulf Coast caused

Select one:

a. neither the supply curve nor the demand curve for natural gas to shift in 2005; there was a movement along the curves.

b. only the supply curve for natural gas to shift to the left in 2005.

c. only the demand curve for natural gas to shift to the left in 2005.

d. both the supply curve and the demand curve for natural gas to shift to the left in 2005.