What amount must be deposited in an account that earns 10% on January 1, 2017 if an investor wants to withdraw $5,000 January 1 of each year beginning on January 1, 2018 with the last withdrawal being made on January 1, 2021? What if the withdrawals take place on December 31 of each year starting on December 31, 2017 until December 31, 2020? What if withdrawals of $2,500 occur every six months on June 30 and Dec 31 of each year starting on June 30, 2017 until December 31, 2020?

Trainor Corporation purchased equipment at a cost of $500,000. The equipment has an estimated residual value of $50,000 and an estimated life of 5 years, or 10,000 hours of operation. The equipment was purchased on January 1, 2020 and was used 2,500 hours in 2020 and 2,100 hours in 2021. On January 1, 2022, the company decided to sell the equipment for $315,000. Trainor Corporation uses the units-of- production method to account for the depreciation on the equipment.

Based on this information, the entry to record the sale of the equipment will show a gain of:

Select one:

A. $45,000

B. $72,000

C. $5,000

D. $22,000

Brief Exercise 18-11 b (Essay)

The following data are taken from the financial statements of Colby Company.

(b)

What conclusions about the management of accounts receivable can be drawn from the accounts receivable turnover and the average collections period.

On April 9, Statistics Canada published Labour Force Statistics for March 2020. Between February and March, 2020, employment fell by 5.3% nationwide. Last year, instead, the change in employment between February and March 2019 was 0%.

Using the model discussed in the lecture notes on chapter 6, discuss the impacts that this change in employment will have on GDP, consumption, national saving, the trade balance and the real exchange rate.

Remember that Canada is a small open economy currently running a small trade deficit.

There is no need to upload graphs in this question, simply discuss the impacts in words.

Green Acres Farms just purchased a tractor on January 1, 2020.

The total purchase price (cost) was $600,000.

They expect to use the tractor for 5 years and sell for $100,000.

Assume according to MACRS, they can depreciate tractors for 3 years using 150% declining balance.

Complete the following depreciation questions.

PART A

Fill in the economic depreciation table using the straight-line method.

A new van costs $25,000, has an estimated useful life of five years and an estimated salvage value of $5,000 at the end of that time. It is expected that the van will be driven 100,000 miles during its useful or service life.

The Nation Express Company purchases this van on April 1, 2019. During 2019 the van is driven 13,000 miles and during 2020 it was driven 21,000 miles. On January 1, 2021, the van is sold for $7,000.

Calculate the depreciation expense for 2019 and 2020 using:

1. Straight-line

2. Double-declining-balance

3. Units-of-production

On January 2, 2020, Pharoah Corp. issues a $8–million, five–year note at LIBOR, with interest paid annually. To protect against the cash flow uncertainty related to interest payments that are based on LIBOR, Pharoah entered into an interest rate swap to pay 8% fixed and receive LIBOR based on $8 million for the term of the note. The LIBOR rate for the first year is 7.6%. The LIBOR rate is reset to 8.7% on January 2, 2021. Pharoah follows ASPE and uses hedge accounting. On December 31, 2020, the fair value of the swap decreased by $13,500: it increased by $4,000 on December 31, 2021. Assume that the criteria for hedge accounting under ASPE are met.

Prepare the journal entries to recognize the swap, assuming the company follows hedge accounting under IFRS

December 31, 2020( to decrease the value of the contract)

December 31,2020 (To record the fix under hedge accounting)

December 31,2022( To record the value of the contract)

December 31, 2022(k To record the fix under hedge accounting)

Question 6

Zoy plc is listed on the Hong Kong Stock Exchange and currently has 1m issued ordinary shares.

Over the last 5 years the following dividends have been paid at the end of each year:

The dividends are expected to increase from 2020 at the same rate as they have historically and then by 4% per annum for periods after 2023.

The cost of equity of Zoy is unknown but the company has a beta of 0.9 and the rate of return on government securities is 0.6% per annum. The equity risk premium is estimated to be 6% per annum.

Required:

1. Calculate the value of Zoy plc using the dividend valuation model. Assume the 2020 dividend has just been paid.

(12 marks)

2. Discuss whether using future cash flows to value a company is more useful than using the net asset value from the balance sheet.

(8 marks)

5. Tricolo Corporation made a total of $80 million in revenue in 2020. They spent $4.3 million in wages to their staff, $2 million in interest payments to bondholders, $0.5 million in dividends to shareholders, $300,000 in office supplies that were used within the year and $800,000 in capital assets (lasted for more than 1 year). Assume a real interest rate of 3%.

a. What was their taxable income for 2020:
If they were allowed to expense all capital assets? b. What was their taxable income for 2020:

If their capital assets all have a tax life of 4 years and straight-line depreciation?

c. What would be the present value of total tax savings if they were able to expense all of the capital assets as in part a relative to the depreciation given in part b. (assume a real interest rate of 3% and a flat tax rate of 20% for corporations)

d. What are two different ways in which the Corporate Income Tax is not just a “profits tax”. How does this tax create deadweight loss?