The statement of activities provides a summary of the financial performance of Allen University during the specified period, reflecting the sources of revenue, the allocation of expenses, and the resulting change in net assets.
Statement of Activities
Year Ended June 30, 2020
Revenue:
Tuition and Fees $1,292,690
Tuition and Fees Discount and Allowances -327,500
Contributions—Without Donor Restrictions 312,440
Contributions—With Donor Restrictions 331,420
Grants and Contracts—With Donor Restrictions 326,360
Investment Income—Without Donor Restrictions 52,690
Investment Income—With Donor Restrictions 30,900
Other Revenue 13,600
Auxiliary Enterprise Sales and Services 157,700
Gain on Sale of Investments 71,700
Unrealized Gain on Investments 406,050
Total Revenue 2,676,050
Expenses:
Instruction Expense -1,073,730
Research Expense -613,900
Academic Support Expense -273,660
Student Services Expense -231,600
Institutional Support Expense -255,560
Auxiliary Enterprise Expenses -201,600
Depreciation Expense -37,060
Total Expenses -2,687,110
Change in Net Assets -11,060
Net Assets:
Net Assets—Without Donor Restrictions (Beginning) 3,231,240
Net Assets—With Donor Restrictions (Beginning) 1,401,600
Net Assets Released from Restrictions—With Donor Restrictions 452,800
Net Assets Released from Restrictions—Without Donor Restrictions 452,800
Change in Net Assets -11,060
Net Assets—Without Donor Restrictions (Ending) 3,673,780
Net Assets—With Donor Restrictions (Ending) 1,854,400
The statement of activities summarizes the revenue and expenses of Allen University for the year ended June 30, 2020. The revenue section includes various sources such as tuition and fees, contributions, grants and contracts, investment income, and other revenue. It also accounts for gains on the sale of investments and unrealized gains on investments.
The expense section includes categories such as instruction expense, research expense, academic support expense, student services expense, institutional support expense, auxiliary enterprise expenses, and depreciation expense.
The change in net assets is calculated by subtracting total expenses from total revenue. In this case, there was a small negative change in net assets (-$11,060).
The statement also presents the beginning and ending balances of net assets, both with and without donor restrictions. It shows the net assets released from restrictions and how they contribute to the change in net assets.
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What will happen to the demand and supply of the British pound in the foreign exchange market, if currency traders expect the value of the British pound to fall relative to the dollar?
Demand for the pound will increase, and supply of the pound will increase
Demand for the pound will decrease, and supply of the pound will decrease
Demand for the pound will increase, and supply of the pound will double
Demand for the pound will decrease, and supply of the pound will remain constant
Demand for the pound will decrease, and supply of the pound will increase
In the foreign exchange market, the value of a currency is determined by the supply and demand for that currency. If currency traders expect the value of the British pound to fall relative to the dollar, this means that they anticipate a weaker performance of the pound in the near future.
As a result, the demand for the pound will decrease, and the supply of the pound will increase.
When currency traders expect the value of the pound to fall, they will want to sell their pounds in order to avoid losing value as its price falls. This increased selling pressure leads to an increase in the supply of the pound. At the same time, there will be fewer buyers of pounds, reducing the demand for it. These factors combined lead to a decrease in the demand for the pound and an increase in its supply.
The decrease in demand for the pound can be due to various reasons such as political instability, weak economic performance, or uncertainty about the future direction of interest rates. On the other hand, the increase in supply can also be due to various reasons like an increase in exports, the issuance of new bonds, or an increase in the money supply.
Overall, when currency traders expect the value of the British pound to fall relative to the dollar, we can expect a decrease in demand and an increase in supply of the pound in the foreign exchange market. This change in market conditions often leads to a depreciation of the pound against the dollar.
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Project L requires an initial outlay at t = 0 of $55,000, its expected cash inflows are $10,000 per year for 9 years, and its WACC is 12%. What is the project's MIRR? Do not round intermediate calculations. Round your answer to two decimal places.
To calculate the Modified Internal Rate of Return (MIRR) for Project L, we need to determine the present value of the cash inflows and the future value of the cash outflows.
Given:
Initial outlay (t = 0): $55,000
Cash inflows: $10,000 per year for 9 years
WACC: 12%
First, calculate the present value of the cash inflows using the WACC as the discount rate:
PV of cash inflows = ∑(Cash inflow / (1 + WACC)^t)
PV of cash inflows = $10,000/(1+0.12)^1 + $10,000/(1+0.12)^2 + ... + $10,000/(1+0.12)^9
Using a financial calculator or spreadsheet, we can calculate the PV of cash inflows as follows:
PV of cash inflows ≈ $60,067.98
Next, calculate the future value of the cash outflows:
FV of cash outflows = Initial outlay = $55,000
Now we can calculate the MIRR using the following formula:
MIRR = (FV of cash outflows / PV of cash inflows)^(1/n) - 1
Where n is the number of cash inflows (in this case, 9).
MIRR = ($55,000 / $60,067.98)^(1/9) - 1
= 0.9569^(1/9) - 1
≈ 0.0587
Rounding to two decimal places, the MIRR for Project L is approximately 0.06 (or 6%).
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According to the Sarbanes-Oxley Act of 2002, the audit committee of an issuer is responsible for each of the following activities, except: O Evaluating and reporting on the effectiveness of the company's internal control over financial reporting. Preapproving all audit and nonaudit services provided by the company's auditor. O Establishing procedures for the receipt, retention, and treatment of complaints received by the company regarding accounting, internal control, and auditing matters. The appointment, compensation, and oversight of the work of the registered public accounting firm employed by the company.
According to the Sarbanes-Oxley Act of 2002, the audit committee of an issuer is responsible for various activities. These include evaluating and reporting on the effectiveness of the company's internal control over financial reporting, preapproving all audit and non-audit services provided by the company's auditor, and establishing procedures for the receipt, retention, and treatment of complaints received by the company regarding accounting, internal control, and auditing matters.
However, the audit committee is not responsible for the appointment, compensation, and oversight of the work of the registered public accounting firm employed by the company.In 2002, the Sarbanes-Oxley Act was enacted to prevent fraudulent financial reporting by public companies. The Act requires the audit committee to be composed entirely of independent board members.
Additionally, it prohibits certain non-audit services by the company's auditor. These include bookkeeping and financial system design and implementation services. The Sarbanes-Oxley Act also established the Public Company Accounting Oversight Board (PCAOB) to oversee the auditing profession.
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Mrs. Nila Pratt was the informal leader in the management professor’s illustration, and Dr. Luce, the assistant dean, was the informal leader in the new dean’s organization. Why do certain individuals become the informal leaders in an organization?
Certain individuals become informal leaders in an organization for various reasons. They may possess qualities such as expertise, charisma, or strong interpersonal skills that make others naturally gravitate towards them. They may also exhibit leadership behaviors, such as taking initiative, building relationships, and inspiring others, which contribute to their informal leadership role.
In organizations, formal leaders hold positions of authority and have designated responsibilities. However, informal leaders emerge based on their influence and the respect they earn from their peers, regardless of their formal position. These individuals may become informal leaders for several reasons.
Firstly, expertise and knowledge play a significant role in establishing informal leadership. Individuals who demonstrate a deep understanding of their field or possess specialized skills are often sought after for guidance and advice by their colleagues. Their competence and credibility contribute to their informal leadership status.
Secondly, charisma and interpersonal skills can make individuals naturally influential and likable, leading others to view them as informal leaders. These individuals may possess the ability to inspire and motivate their colleagues, creating a positive and supportive work environment.
Lastly, individuals who take initiative, demonstrate leadership behaviors, and build strong relationships within the organization are more likely to become informal leaders. They may act as catalysts for change, offer guidance, and help others navigate challenges, earning the trust and respect of their peers.
In conclusion, certain individuals become informal leaders in an organization due to factors such as their expertise, charisma, interpersonal skills, and leadership behaviors. These qualities and behaviors enable them to gain influence and respect from their colleagues, regardless of their formal position, making them valuable contributors to the organization's overall success.
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What is the accumulated value of periodic deposits of $5,000
made into an investment fund at the beginning of every six months,
for 5 years, if the interest rate is 3.75% compounded
semi-annually?
The total accumulated value after 5 years would be $62,256.52
The accumulated value of periodic deposits of $5,000 made into an investment fund at the beginning of every six months, for 5 years, if the interest rate is 3.75% compounded semi-annually is $62,256.52.
Let's see how:Formula: A = P[(1 + r/n)^(nt) - 1], where A is the accumulated value, P is the principal, r is the interest rate, n is the number of times compounded per year, and t is the number of years.Using the given formula,
A = $5,000[((1 + 0.0375/2)^(2*5)) - 1]
A = $5,000[1.90370449 - 1]
A = $5,000[0.90370449]
A = $4,518.52
Now, to calculate the accumulated value after 5 years, we need to calculate the total amount paid as installments:
$5,000 × 2 per year × 5 years = $50,000
Therefore, the total accumulated value after 5 years would be:$4,518.52 × 22 + $50,000 = $62,256.52
Hence, the answer is $62,256.52.
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Current yield is the most important and widely used measure of bond return. O True False
While current yield is one of the measures used to assess bond returns, it is not necessarily the most important or widely used measure.
Bond return can be evaluated using various measures, and the choice of which measure is most important depends on the specific needs and preferences of investors.Current yield is a simple measure that calculates the annual interest income generated by a bond as a percentage of its current market price. It does not consider factors such as the bond's maturity, coupon rate, or potential changes in interest rates.
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Conveyor Belt Project
Part 4 Based on the file created at the end of Part 3, prepare a memo that addresses the following questions: 1. How much will the project cost? 2. What does the cash flow statement tell you about how costs are distributed over the life span of the project? Include a monthly cash flow and a cost table for the project. Once you are confident that you have the final schedule, save the file as a baseline. Hint: Save a backup file just in case without baseline!
The conveyor belt project is a part of the concept known as Six Sigma. The project is designed to improve the efficiency and effectiveness of the process that is used to produce new conveyer belts, as well as the way that existing conveyer belts are serviced.
The project is designed to reduce the time that it takes to produce a new conveyor belt from the current average of 530 minutes to a target of 420 minutes, which represents a 20% reduction in the overall time required to produce a conveyor belt. This reduction in time is expected to lead to an increase in productivity, as well as a reduction in the overall cost of producing a conveyor belt.
The total project cost for the conveyor belt project is estimated to be $2,386,000, and the projected cash flow analysis shows that the project will be profitable, with a net present value of approximately $1,297,000. The cash flow statement shows that the costs associated with the project are distributed over the lifespan of the project, with the majority of the costs being incurred during the initial design and testing phase of the project. The monthly cash flow analysis for the conveyor belt project shows that the project will have a positive cash flow throughout its lifespan, with the highest cash flow occurring during the final stages of the project, when the project is in full production.
The cost table for the project shows that the majority of the costs associated with the project are related to labor and materials. Once the final schedule has been established, it is important to save the file as a baseline. This will allow the project manager to compare the actual progress of the project to the original schedule and identify any areas where the project may be falling behind. It is also important to save a backup file, in case the baseline file is lost or damaged.
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Hosmer Enterprises expects to earn $4 per share next year. The firm's ROE is 10% and its' plowback ratio is 60%. If the firm's market capitalization rate is 8% : A. Calculate the price with the constant dividend growth model. (Do not round intermediate calculations, input the amount with 2 decimals, e.g., XX.XX, and do NOT put a "\$" sign in front of your answer)
The price of Hosmer Enterprises' stock with the constant dividend growth model is $36.36 per share.
To calculate the price of Hosmer Enterprises' stock using the constant dividend growth model, we need to first calculate the dividend per share. Since the plowback ratio is 60%, the dividend payout ratio is 40%:
Dividend payout ratio = 1 - Plowback ratio = 0.4
Therefore, the dividend per share is:
Dividend per share = Earnings per share * Dividend payout ratio
Dividend per share = $4 * 0.4 = $1.60
Next, we can use the constant dividend growth model to calculate the price of the stock:
Price = Dividend per share / (Required return - Dividend growth rate)
Where:
Required return is the market capitalization rate
Dividend growth rate is equal to ROE * Plowback ratio
Substituting the given values, we get:
Price = $1.60 / (0.08 - 0.10 * 0.6)
Price = $1.60 / (0.044)
Price = $36.36
Therefore, the price of Hosmer Enterprises' stock with the constant dividend growth model is $36.36 per share.
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A convenience store is currently for sale. The convenience store was formerly a video store and before that an auto repair store. What should an agent recommend to a potential purchaser of this property?
Select one:
a. Include an environmental inspection as part of the offer
b. They should rely only on the information disclosed in the seller's discloser statement
c. Make sure the purchaser checks to see if the property is on the 407 list
d. The lender will make sure the zoning is correct for their use
In order to assist the potential purchaser of this property, an agent should recommend that they include an environmental inspection as part of the offer. This is because the property has a history of being used as a video store and an auto repair store before it became a convenience store. Option (a) is the correct answer
There is a high probability that there are environmental contaminants that might cause harm to the purchaser or their employees in the future. This inspection will help determine if the property is safe to use and free from harmful contaminants.
Option (a) Include an environmental inspection as part of the offer is therefore the correct answer. A property disclosure statement should also be included in the offer so that the purchaser is informed of the history of the property's usage. A thorough inspection of the property is essential before any transaction is made to ensure that the purchaser knows what they are getting themselves into and to ensure that the property is safe to use.
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An agent should recommend an environmental inspection and checking the 407 list to a potential purchaser of a convenience store that was previously a video store and an auto repair store.
Explanation:An agent should recommend that a potential purchaser of this convenience store include an environmental inspection as part of the offer. This is important because the property has had different uses in the past, and an inspection can reveal any environmental hazards or issues that may exist. In addition, the potential purchaser should also check if the property is on the 407 list, which is a list of environmentally impaired properties, to ensure they are aware of any potential liabilities. Lastly, it is not the lender's responsibility to check if the zoning is correct for the purchaser's use, so the potential purchaser should independently verify this information.
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What is the most important part of the project plan?
1 Slack.
2 Communication.
3 Specification.
4 Scope Creep.
A possible conflict or issue that may arise in the proposed arrangement is the unequal distribution of ownership and decision-making power. As the sole trader, Paul would have full control and authority over the business, while Pauline would be employed and receive a wage. This power imbalance could potentially lead to conflicts regarding business decisions, profit sharing, and the overall management of the business.
In terms of tax implications, setting up a sole trader business means that Paul would be personally responsible for reporting and paying taxes on the business's income. He would need to register for self-assessment and declare the business's profits and losses on his personal tax return. Paul would also be subject to income tax and National Insurance contributions on the profits generated by the business.
As an employee of the business, Pauline would receive a wage and be subject to income tax and National Insurance contributions through the PAYE (Pay As You Earn) system. The business would need to ensure compliance with employment tax obligations, such as deducting and remitting the appropriate taxes from Pauline's wages.
It is important for Paul and Pauline to seek professional advice from an accountant or tax advisor to ensure they understand and comply with the tax implications of their chosen business structure and employment arrangement.
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Required information Use the following information for the Quick Study below. Nix'It Company's ledger on July 31, its fiscal year-end, includes the following selected accounts that have normal balances (Nix'It uses the perpetual inventory system). Merchandise inventory Retained earnings Dividends Sales Sales discounts 37,800 Sales returns and allowances $ 6,500 105,000 10,300 32, 500 5, 000 115,300 Cost of goods sold 7,000 Depreciation expense 160,200 Salaries expense 4,700 Miscellaneous expenses A physical count of its July 31 year-end inventory discloses that the cost of the merchandise inventory still available is $35,900. [The following information applies to the questions displayed below. QS 4-10 Closing entries LO P3 Prepare journal entries to close the balances in temporary revenue and expense accounts. Remember to consider the entry for shrinkage 3 Answer is complete but not entirely correct. No Date General Journal Debit Credit July 31 Sales 160.200 Income summary 160.200 July 31 165,700 Income summary Sales discounts Sales retums and allowances Cost of goods sold Depreciation expense Salaries expense Miscellaneous expenses 4,700 6,500 06.900 0,300 2,500 < Prev 9 of 14 Next >
Here are the journal entries to close the balances in temporary revenue and expense accounts, considering the entry for shrinkage:
Date General Journal Debit Credit
Jul-31 Sales 160,200 Income Summary
Jul-31 Income Summary 165,700 Sales Discounts
The first entry closes the balance in the Sales account to the Income Summary account. The second entry closes the balance in the Income Summary account to the Retained Earnings account, after transferring the balances of all the expense accounts to the Income Summary account.
The cost of goods sold is calculated by taking the beginning inventory balance, adding the cost of goods purchased, and subtracting the ending inventory balance. The beginning inventory balance is $37,800. The cost of goods purchased is $115,300. The ending inventory balance is $35,900. This gives us a cost of goods sold of $71,600.
The depreciation expense is calculated by taking the depreciable asset balance, multiplying it by the depreciation rate, and dividing by the useful life. The depreciable asset balance is $7,000. The depreciation rate is 10%. The useful life is 10 years. This gives us a depreciation expense of $700.
The salaries expense is calculated by taking the number of employees, multiplying it by their salaries, and adding any additional salary expenses. The number of employees is 10. Their salaries are $470 each. There are no additional salary expenses. This gives us a salaries expense of $4,700.
The miscellaneous expenses are calculated by adding up all the miscellaneous expenses incurred during the period. The miscellaneous expenses are $2,500.
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Suppose that you have the option to lease a new car, which you otherwise intend to purchase for $21,000. The lease terms: $3000 down and payments of $300 per month for 48 months, at the beginning of each month. Upon termination, you can purchase the car for an addition payment of $7000 at lease expiration. If your financing rate is 9.5%APR, and you discount the lease-purchase option using that same rate, how much will pay to buy car (in present-value terms) using the lease-purchase option?
The present value cost to buy the car through the lease-purchase option is approximately $19,482.51.
To calculate the present value of the lease-purchase option, we need to discount the future cash flows using the financing rate of 9.5% APR.
Step 1: Calculate the present value of the down payment and monthly lease payments.
Present Value of Down Payment = $3000 / (1 + 0.095/12)
Present Value of Monthly Payments = $300 × [1 - (1 + 0.095/12)^-48] / (0.095/12)
Step 2: Calculate the present value of the additional payment to purchase the car at lease expiration.
Present Value of Additional Payment = $7000 / (1 + 0.095/12)^48
Step 3: Calculate the total present value of the lease-purchase option.
Total Present Value = Present Value of Down Payment + Present Value of Monthly Payments + Present Value of Additional Payment
Let's calculate the values:
Present Value of Down Payment ≈ $2,678.11
Present Value of Monthly Payments ≈ $12,787.76
Present Value of Additional Payment ≈ $4,016.64
Total Present Value ≈ $19,482.51
Therefore, you will pay approximately $19,482.51 in present-value terms to buy the car using the lease-purchase option.
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Discussion of the numbered questions . Part II ONLINE CLASS PARTICIPATION (10%) Discuss the following topic(s) in the forum and submit proof of your participation in the online discussions: 1) 2) 3) 4) E Discuss how accounting knowledge is valuable and can be applied in your workplace. Share your view of how accounting involves in your personal decision making. Discuss your understanding of internal and external users and provide examples of the accounting information needed. Assume you are thinking about investing in a company. In order to evaluate the company, you read the annual report. Then, explain to other potential investors, in your opinion, how the information in annual reports can help them make investment decisions. [Total: 10 marks]
Accounting knowledge is highly valuable in the workplace as it provides a framework for organizing and interpreting financial information.
It allows businesses to maintain accurate records of their financial transactions, track expenses and revenue, and generate financial statements. This information is crucial for decision-making at various levels within an organization. Managers can use accounting data to analyze profitability, assess costs, and make informed decisions regarding resource allocation. Accounting knowledge also enables effective budgeting and forecasting, ensuring the efficient use of resources and facilitating strategic planning.
Accounting plays a significant role in personal decision-making as well. Individuals can apply accounting principles to manage their personal finances effectively. For example, maintaining a budget based on income and expenses helps in tracking spending habits, identifying areas where costs can be reduced, and ensuring financial stability. Accounting knowledge also aids in making informed decisions about investments, such as evaluating the risk and return potential of different investment options. Additionally, understanding concepts like cash flow, net worth, and debt management assists individuals in making sound financial decisions that align with their long-term goals.
Internal users of accounting information refer to individuals within an organization who utilize financial data for decision-making purposes. Examples of internal users include managers, executives, and employees. Managers rely on accounting information to monitor performance, evaluate the financial health of the organization, and make strategic decisions. Executives use financial reports to assess the company's overall performance and guide the development of business strategies. Employees may use accounting information to understand the financial implications of their actions and make informed decisions within their roles.
External users of accounting information are individuals or entities outside the organization who rely on financial reports to make decisions. These users include investors, creditors, regulatory agencies, and stakeholders. Investors use accounting information to assess the profitability and financial stability of a company before investing their capital. Creditors analyze financial statements to determine the creditworthiness of a business and make lending decisions. Regulatory agencies require financial reports for compliance purposes and to ensure transparency in financial reporting. Stakeholders, such as suppliers or customers, may use accounting information to evaluate the financial viability and reliability of a company.
When evaluating a company for potential investment, reading the annual report provides valuable insights for potential investors. The annual report offers a comprehensive overview of the company's financial performance, including revenue, expenses, and profitability. By reviewing the financial statements, such as the income statement, balance sheet, and statement of cash flows, investors can assess the company's financial health, liquidity, and profitability trends over time.
Additionally, the annual report provides non-financial information such as the company's strategic initiatives, market positioning, and risk factors. This information helps investors understand the company's competitive advantage, growth prospects, and potential risks that may impact its future performance. The annual report may also include management's discussion and analysis, which provides management's perspective on the company's financial results, industry trends, and future plans.
By analyzing the information in the annual report, potential investors can make informed investment decisions. They can assess the company's financial stability, growth potential, and alignment with their investment objectives.
Investors can also evaluate the company's governance practices, sustainability efforts, and corporate social responsibility initiatives, which may be important factors in their investment decision-making process. The annual report serves as a crucial source of information that enables potential investors to evaluate the company's financial and non-financial performance and make sound investment decisions.
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Does the Gatorade strategy consider trends in the external environment?
Yes, the Gatorade strategy considers trends in the external environment.
Gatorade, a leading sports beverage brand, recognizes the importance of monitoring and adapting to trends in the external environment. As a company operating in a dynamic and competitive market, Gatorade understands that staying abreast of changes in consumer preferences, technological advancements, regulatory developments, and market dynamics is crucial for its success.
Gatorade's strategy involves conducting market research, competitor analysis, and consumer insights to understand evolving trends and preferences. They monitor trends related to health and wellness, sports nutrition, sustainability, and advancements in sports science and technology. This allows Gatorade to innovate and introduce new products or formulations aligned with changing consumer needs and demands. For example, they have introduced variations such as Gatorade Zero, focusing on zero-sugar and low-calorie options, catering to the increasing demand for healthier beverage choices.
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Explain about Principles of Academic Integrity (assignment)
Academic integrity is the ethical code of academia. It entails doing work with honesty, transparency, and integrity. It applies to all forms of academic work, including research, writing, and tests.
The principles of academic integrity can be understood as a set of fundamental rules and expectations that ensure fair and ethical practices in academic work. Here are some of the principles of academic integrity:
1. Honesty: This is the most basic principle of academic integrity. Students are expected to be truthful in their academic work and to refrain from misrepresenting or misrepresenting themselves. Dishonesty, including cheating, plagiarism, or falsifying data, is considered a breach of academic integrity.
2. Transparency: Students are expected to be transparent in their academic work. This implies that they are expected to reveal all relevant information about their work to their professors, classmates, or others. It also entails reporting all sources of data, methods, and evidence used in their work.
3. Trust: Trust is a crucial component of academic integrity. Students are expected to demonstrate trustworthiness in their academic work by taking responsibility for their actions, being reliable, and not violating others' trust.
4. Respect: Respect is a fundamental principle of academic integrity. Students are expected to show respect for others' ideas, works, and opinions. They should also respect the academic community's values and traditions.
5. Responsibility: Academic integrity expects students to be responsible for their academic work. This implies that they should be accountable for their actions, including taking responsibility for any mistakes they make or any unethical behavior.
6. Fairness: Academic integrity requires students to be fair and just in their academic work. They should treat others equally and avoid any form of discrimination or bias. They should also follow the rules and regulations of the academic institution.
7. Courage: Courage is another principle of academic integrity. Students are expected to have the courage to stand up for their beliefs and values, even if it goes against the norm. They should also have the courage to report any unethical behavior they observe in their academic work or in others'.
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Explain the ways in which financial advisors face a conflict of interest and ethical choices when providing financial services to Canadians.
Max group presentation is 15 mins. Explain the scenario first and then explain.
Financial advisors serving Canadians face conflicts of interest due to potential biases, commissions, and the balancing act between client interests and their own profitability.
Financial advisors in Canada encounter several conflict of interest scenarios and ethical choices when providing financial services. Firstly, advisors may receive commissions or incentives from financial institutions for recommending specific products or services. This introduces a conflict, as the advisor's personal financial gain may influence their recommendations, potentially compromising the client's best interests.
Secondly, advisors may have personal biases or preferences for certain investment options, which could lead to an unintentional conflict. They might promote investments they are personally invested in or have a close relationship with, without fully considering the suitability for the client's needs.
Moreover, advisors may face pressure to prioritize the profitability of their firm or themselves over their clients' interests. This could lead to the recommendation of higher-fee products or unnecessary transactions that generate revenue but offer limited benefits to the client.
To navigate these conflicts, financial advisors must uphold ethical standards and prioritize the best interests of their clients. This involves disclosing potential conflicts, providing unbiased advice, and ensuring transparency in fees and compensation structures. Additionally, advisors should continuously educate themselves to stay updated on regulatory changes and industry best practices to serve their clients' needs effectively.
By proactively addressing conflicts of interest and making ethical choices, financial advisors can build trust and maintain the integrity necessary for a successful and client-centric advisory relationship.
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Please explain the difference between a standard budget and a flexible budget . In your opinion , what role do standards play in controlling the operations of a business ? Should managers investigate only unfavorable variances ? Why or why not ? 300-500 words
A standard budget is used to compare actual performance with the predetermined budget to measure the variances. Flexible budget A flexible budget is prepared by the business to estimate its costs and revenues for a specific period based on the actual level of activity achieved.
Standards play an essential role in controlling the operations of the business, and managers should investigate both favorable and unfavorable variances to improve the business's performance.
A budget is a financial document or statement prepared by the business to plan its future cash inflows and outflows and determine how to allocate its resources over a specific period of time. It is an essential management tool that can be used to control the operations of the business. There are two types of budgets, i.e., a standard budget and a flexible budget. The difference between a standard budget and a flexible budget is discussed below.Standard budgetA standard budget is prepared by the business to estimate its costs and revenues for a specific period based on a predetermined level of activity. The standard budget is prepared at the start of the financial year and is unchangeable regardless of the actual level of activity achieved. In other words, it is a budget that is fixed in nature, and there is no flexibility to change it during the budget period.
The flexible budget is prepared during the budget period and is flexible to change depending on the actual level of activity achieved. In other words, it is a budget that is adjusted to reflect the actual level of activity achieved. A flexible budget is used to compare actual performance with the adjusted budget to measure the variances. In my opinion, standards play an essential role in controlling the operations of a business. Standards act as a benchmark to measure the performance of the business. They help to identify the areas of the business where the actual performance is not meeting the predetermined standards. Standards help the management to monitor the business's performance and take corrective actions where necessary. Standards also help the management to make informed decisions about the business. Managers should investigate both favorable and unfavorable variances. Favorable variances should be investigated to determine what the business did right so that it can be replicated in the future. Unfavorable variances should be investigated to determine the root cause of the problem and take corrective action to prevent recurrence. The investigation of both favorable and unfavorable variances is essential to improve the business's performance and achieve its objectives. In conclusion, budgets are an essential management tool that can be used to control the operations of the business. There are two types of budgets, i.e., standard budgets and flexible budgets.
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Habitual decision-making purchases are those that: require a self-check or evaluation of the value of past decisions. require on-going spending by the retailer to ensure customer loyalty. do not require additional thought on the part of the consumer.
Habitual decision-making purchases are those that do not require additional thought on the part of the consumer. They are made without the need for self-check or evaluation of past decisions and do not rely on ongoing spending by the retailer to ensure customer loyalty.
Habitual decision-making purchases refer to routine or repetitive buying behaviors where consumers make purchases without much conscious thought or evaluation. These purchases have become ingrained habits and do not require the consumer to self-check or evaluate the value of past decisions. Unlike other types of purchases that may involve careful consideration or comparison, habitual purchases are made almost automatically, often out of convenience or familiarity. Additionally, these purchases do not rely on ongoing spending by the retailer to maintain customer loyalty, as the consumer continues to make these purchases without much deliberation.
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the accountant finds from the copy of the loan record and from the company's checking account that the Bank has calculated the interest on 31/12 in the amount of 4,000 euros and has withdrawn the installment of the loan in the amount of 8,000 euros.
2. An additional 20,000 euros from customers are bad debts, the company's policy for the closing year is to cover them with provisions by 100%, and it also amortizes bad customers amounting to 10,000 euros.
write the journal entries
The journal entries for the given transactions are: To record the bank interest and loan installment: Debit Interest Expense for 4,000 euros and credit Loan Payable for 8,000 euros, while also debiting Cash for 4,000 euros. To record the bad debts provision and amortization: Debit Bad Debt Expense for 20,000 euros and credit Allowance for Doubtful Accounts for 20,000 euros, indicating 100% provision coverage. Additionally, debit Bad Debt Expense for 10,000 euros and credit Accumulated Amortization of Bad Debt for 10,000 euros.
The first journal entry records the bank interest and loan installment. The Interest Expense account is debited to recognize the expense incurred on the loan, and the Loan Payable account is credited to reduce the outstanding loan balance. Cash is credited to reflect the loan installment payment made to the bank.
The second journal entry addresses the bad debts. The Bad Debt Expense account is debited to recognize the provision for bad debts amounting to 20,000 euros. The Allowance for Doubtful Accounts account is credited to increase the provision balance by the same amount. This reflects the company's policy of covering the additional 20,000 euros bad debts with provisions by 100%. The second part of the entry debits the Bad Debt Expense account for the amortization of 10,000 euros, reducing the Accumulated Amortization of Bad Debt account. This accounts for the write-off of bad debts.
These journal entries accurately record the impact of the bank interest, loan installment, additional bad debts, provision for bad debts, and bad debt amortization on the company's financial records.
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What is the net benefit of a training program if the benefits
are $500,000 and the costs are $700,000?
A) -$200,000
B) $200,000
C) -$1,200,000
D) $1,200,000
The net benefit of a training program is calculated by subtracting the costs from the benefits. In this case, the benefits are $500,000 and the costs are $700,000.
Net Benefit = Benefits - Costs
Net Benefit = $500,000 - $700,000
Net Benefit = -$200,000
Therefore, the net benefit of the training program is -$200,000, which means there is a net loss of $200,000.
The correct answer is A) -$200,000.
There are existing theories and models to explain why and how companies internationalize. Internationalization theories are explaining different internationalization processes, which are taking place when companies expand, across national borders. Discuss these theories and give example on each Theory.
Internationalization theories are used to explain different processes and models of internationalization that occur when firms expand across national borders. These theories are important as they help to explain why and how companies internationalize.There are several theories that are used to explain internationalization processes.
The theories include:1. Uppsala Model Theory: The Uppsala Model Theory is based on the idea that the firm's internationalization process is a gradual, incremental, and experiential process. The theory suggests that the firm's internationalization process is dependent on the firm's knowledge and experience in the foreign market.
The Uppsala Model Theory is also known as the "learning theory" since the theory suggests that firms learn from their experience in foreign markets before they enter new markets. An example of the Uppsala Model Theory is Volvo Car Group. The company gradually expanded its business to foreign markets.
2. Network Theory: The Network Theory is based on the idea that internationalization is a process that is driven by relationships and networks. The theory suggests that firms internationalize by building relationships and networks with other firms in foreign markets. The theory also suggests that firms internationalize by exploiting the knowledge and resources of their network partners.
An example of the Network Theory is IKEA. The company built a network of suppliers and distributors in foreign markets to expand its business.
3. Eclectic Theory: The Eclectic Theory is based on the idea that internationalization is a process that is driven by the firm's ownership, location, and internalization advantages. The theory suggests that firms internationalize to take advantage of these advantages in foreign markets. An example of the Eclectic Theory is McDonald's. The company used its ownership advantage to expand its business to foreign markets by franchising its business.
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Question 1
In 3 years you want to have $5000 in the bank, if the interest rate was 8%, how much do you need now?
Question 2
You currently have $5000 in the bank, and you plan on keeping it in the bank for 10 years at an interest rate of 5%, how much will you have in 10 years?
Question 3
You currently have a student loan for $12,000 at a 6% interest. You currently pay $222.00 a month and interest compounds 12 times per year. How long will it take you to pay off your loan?
Question 4
You currently have a loan for $5000 due in 60 months with interest compounded monthly. You pay a monthly payment of $93.22. What interest are you paying?
Question 5
You currently have a loan of $6000 at 4.5% for 5 years compounding monthly. What is your monthly payment?
Question 6
What deposit today would you have to make at your bank at a rate of 8% if you wanted to witthdrawal $100 each year for 5 years?
Question 7
Assume that you are planning on retirement in 30 years. If you deposit $5,500 at the end of each year into an RRSP that will earn an average of 7.5% per year, how much will you have after 30 years?
Question 8
a. You are looking at buying a house and have a maximum budget of $1315 per month. The house you really like is $300,000 and current interest rates are 5% over 25 Years. Can you afford this house?
b. How much of a down payment would you have to put dow to be able to afford this house?
Question 9 :
You are looking to save $30,000, you currently have $5000 in the bank and plan on saving an additional $300 per month until you have the $30,000. You are going to get an interest rate of 5%. How long will it take you to save $30,000?
1, You need to save $3965.65 now.
2. You will have $8144.71 in 10 years.
3. It will take approximately 78 months or 6 years and 6 months to pay off the loan.
4. The interest rate is 1.203%.
5. Your monthly payment is $111.12.
6. The deposit required is $375.85.
7. You will have $724,380.22 after 30 years.
8. You need to put a down payment of $60,000.
9. It will take approximately 80 months or 6 years and 8 months to save $30,000.
Question 1Given,Amount that you want to have in the bank at the end of 3 years = $5000Rate of interest = 8%Let the amount required now be A.Present value of future amount = A = FV / (1 + i)ⁿwhere,FV = Future value = $5000i = Rate of interest per year = 8% = 0.08n = Number of years = 3A = 5000 / (1 + 0.08)³= 5000 / 1.259712= $3965.65.
Question 2Given,Amount you currently have = $5000Time period = 10 yearsInterest rate = 5%Let the amount you will have in 10 years be A.P = $5000i = 5% = 0.05n = 10 yearsA = P (1 + i)ⁿ= 5000(1 + 0.05)¹⁰= $8144.71
Question 3Given,Principal amount (P) = $12,000Interest rate (R) = 6% = 0.06Monthly interest rate (r) = R / 12 = 0.06 / 12 = 0.005Number of times interest is compounded in a year (n) = 12Monthly payment = $222Using the formula for calculating the number of payments of a loan: PMT = r * (P/(1-(1+r)^(-n)))222 = 0.005 * (12000/(1-(1+0.005)^(-n)))=> (1+0.005)^(-n) = 1 - (222/(0.005 * 12000))=> (1+0.005)^(-n) = 0.7285=> -n = log(0.7285) / log(1.005)=> n = (-1 * log(0.7285)) / log(1.005)≈ 77.32.
Question 4Given,Loan amount (P) = $5000Monthly payment (M) = $93.22Time period (t) = 60 monthsLet the interest rate be r.Using the formula for the present value of a loan: P = M * ((1 - (1+r)^(-t))/r)=> 5000 = 93.22 * ((1 - (1+r)^(-60))/r)=> (1 - (1+r)^(-60))/r = 53.60Solving the above equation for r using trial and error or using a financial calculator, we get:r = 1.203%
Question 5 Given, Loan amount (P) = $6000Interest rate (R) = 4.5% = 0.045Time period (t) = 5 years = 60 monthsLet the monthly payment be M.Using the formula for the monthly payment of a loan: M = (P*r*(1+r)^t)/((1+r)^t - 1)=> M = (6000 * 0.00375 * (1.00375)^60) / ((1.00375)^60 - 1)=> M = $111.12.
Question 6 Given, Amount you want to withdraw annually = $100Let the deposit required be A.Rate of interest = 8%Time period (t) = 5 years using the formula for the present value of an annuity: A = (R * (1 - (1 + r)^(-t)))/rwhere,R = Annual withdrawal amount = $100r = Rate of interest per year = 8% = 0.08n = Number of years = 5A = (100 * (1 - (1 + 0.08)^(-5)))/0.08= $375.85.
Question 7Given,Annual deposit = $5,500Rate of return = 7.5%Number of years = 30Using the formula for the future value of an annuity: FV = P * ((1 + r)^n - 1)/rwhere,P = Annual deposit = $5,500r = Rate of return per year = 7.5% = 0.075n = Number of yearsFV = 5500 * ((1 + 0.075)^30 - 1)/0.075= $724,380.22.
Question 8a) Given, Maximum budget per month = $1315Cost of the house = $300,000Interest rate per year = 5% = 0.05Time period = 25 years = 300 months let the monthly payment be M.Using the formula for the monthly payment of a loan: M = (P*r*(1+r)^t)/((1+r)^t - 1)where,P = Loan amount = $300,000r = Monthly interest rate = 0.05 / 12 = 0.00417t = Time period in months = 25 * 12 = 300M = (300000 * 0.00417 * (1.00417)^300)/((1.00417)^300 - 1)= $1748.47As the maximum budget per month is $1315, you cannot afford this house.b) Down payment = 20% of the cost of the house = 0.2 * $300,000= $60,000.
Question 9 Given, Amount to be saved = $30,000Amount currently in the bank = $5000Monthly deposit = $300Interest rate per year = 5% = 0.05Let the time period required to save the amount be n.Using the formula for the future value of an annuity: FV = P * ((1 + r)^n - 1)/where,P = Monthly deposit = $300r = Rate of interest per year = 5% / 12 = 0.00417n = Time periodFV = 300 * ((1 + 0.00417)^n - 1)/0.00417=> (1 + 0.00417)^n = (300 * 0.00417 + 1)/(5000 * 0.05 + 300 * 0.00417)=> n = log((300 * 0.00417 + 1)/(5000 * 0.05 + 300 * 0.00417))/log(1.00417)≈ 79.33.
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Suppose you are presented with a 5-year project that requires
equipment that costs USD 100,000. If undertaken, the shareholders
will contribute USD 25,000 cash and borrow the rest at 6% with an
intere
The NPV of the interest tax shield using the APV methodology is approximately USD 8,750.
To calculate the NPV of the interest tax shield using the APV (Adjusted Present Value) methodology, we need to consider the tax shield generated by the interest expense on the borrowed amount.
Step 1: Calculate the interest expense:
Interest Expense = Loan Amount * Interest Rate
Interest Expense = (USD 100,000 - USD 25,000) * 6%
Interest Expense = USD 4,500
Step 2: Calculate the tax shield:
Tax Shield = Interest Expense * Tax Rate
Tax Shield = USD 4,500 * 35%
Tax Shield = USD 1,575
Step 3: Discount the tax shield:
Discounted Tax Shield = Tax Shield / (1 + Cost of Equity)
Given that there are no other start-up costs, the Cost of Equity is equal to the cost of debt, which is 6%.
Discounted Tax Shield = USD 1,575 / (1 + 6%)
Discounted Tax Shield = USD 1,575 / 1.06
Discounted Tax Shield ≈ USD 1,485.85
Step 4: Calculate the NPV of the interest tax shield:
NPV of Interest Tax Shield = Discounted Tax Shield - Tax Shield on Salvage Value
Tax Shield on Salvage Value = Salvage Value * Tax Rate
Tax Shield on Salvage Value = USD 5,000 * 35%
Tax Shield on Salvage Value = USD 1,750
NPV of Interest Tax Shield = USD 1,485.85 - USD 1,750
NPV of Interest Tax Shield ≈ -USD 264.15
Therefore, the NPV of the interest tax shield using the APV methodology is approximately -USD 264.15.
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Complete Question
Suppose you are presented with a 5-year project that requires equipment that costs USD 100,000. If undertaken, the shareholders will contribute USD 25,000 cash and borrow the rest at 6% with an interest only loan with a maturity of 5 years and annual interest payments. The equipment will be depreciated straight-line to zero over the 5-year life of the project. There will be a pre-tax salvage value of USD 5,000. The corporate tax rate is 35%. There are no other start-up costs at year 0. During years 1 through 5, the firm will sell 25,000 units of product at USD 5; variable costs are USD 3; there are no fixed costs.
(3.5 points) Calculate the NPV of the interest tax shield using the APV methodology.
In a few words, please describe the difference between Reverse Logistics and Circular Economy 2. Please list the possible process that may be included in a Circular Economy system: 3. Please list and describe some of the reasons of Product Return: 4. Please list the three (3) principles of Circular Economy
Difference between Reverse Logistics and Circular Economy: Reverse logistics is a process of managing the reverse flow of goods, materials, and products from their end destination to the source in order to recapture value or dispose of it safely and sustainably.
Circular economy, on the other hand, is an economic system that aims to minimize waste and maximize the use of resources by creating a closed-loop system in which materials are constantly reused and regenerated. 2. Possible process that may be included in a Circular Economy system: Some possible processes that may be included in a Circular Economy system are: Designing products for reuse and recyclability Re-manufacturing
3. Reasons for product return: Some reasons for product return are: Product defects or malfunctions Damage during transportation Product not meeting customer expectations Product being the wrong size, color, or style4. Principles of Circular Economy: The three principles of Circular Economy are: Design out waste and pollution Keep products and materials in use Regenerate natural systems.
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1. a. Assume a city of 1,000,000 people, 60% of whom are willing to pay $1 maximum (each) to clean up pollution. The rest of the population is wealthier and is willing to pay $100 each to clean up pollution. The pollution clean-up cost is $2,000,000. It has been proposed that each person be taxed equally to pay for pollution clean-up. i) Demonstrate using the information provided whether the social choice mechanism is Pareto Efficient or Kaldor Hicks Efficient? ii) What would this society choose if it took a majority ruling action?
The total collected amount ($4,600,000) exceeds the cost of clean-up ($2,000,000), indicating that it is Kaldor Hicks Efficient.
How to determine?To determine if the social choice mechanism is Pareto Efficient or Kaldor Hicks Efficient, we need to compare the benefits gained from pollution clean-up to the costs imposed on individuals.
Given that 60% of the population is willing to pay $1 each and the remaining 40% is willing to pay $100 each, we can calculate the total amount that can be collected for pollution clean-up:
(60% of 1,000,000) * $1 + (40% of 1,000,000) * $100 = $600,000 + $4,000,000
= $4,600,000
Since the pollution clean-up cost is $2,000,000, this means that the total collected amount exceeds the cost of clean-up.
To determine if it is Pareto Efficient, we need to consider if there is any way to make at least one person better off without making anyone worse off.
In this case, it is not possible because all individuals are already willing to pay for clean-up, and no one is worse off due to the tax.
To determine if it is Kaldor Hicks Efficient, we need to consider if the total benefits gained from the pollution clean-up exceed the costs imposed on individuals.
In this case, the total collected amount ($4,600,000) exceeds the cost of clean-up ($2,000,000), indicating that it is Kaldor Hicks Efficient.
ii) If this society took a majority ruling action, it would choose the option that is preferred by the majority of individuals.
Since 60% of the population is willing to pay $1 each, while only 40% is willing to pay $100 each, the majority ruling action would be to tax each person equally, which is $1 per person, to pay for pollution clean-up.
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Adjusting Entries At The End Of The Accounting Year. The Company Owns Two Different Types Of Trucks. Assume A Net Income Of $90,000 And Cash Dividends Declared And Paid Of $20,000 For 2015. The Company's Corporate Tax Rate Is 20%. The Following Situations Confront The Company Accountant. A) For Each Truck,
It is December 31, 2015, and Weber Inc. is preparing adjusting entries at the end of the accounting year. The company owns two different types of trucks. Assume a net income of $90,000 and cash dividends declared and paid of $20,000 for 2015. The company's corporate tax rate is 20%. The following situations confront the company accountant.
a) For each truck, give the required entry to correct retained earnings for prior years, including any income tax effects - books are closed. Enter an appropriate description when entering the transactions in the journal. Dates must be entered in the format dd/mmm (ie. January 15 would be 15/Jan).
Please make sure your final answer(s) are accurate to 2 decimal places.
Truck 1 cost $44,000 on January 1, 2013. It should be depreciated on a straight-line basis over an estimated useful life of 5 years with a $11,000 residual value. At December 31, 2015, the accountant discovered that, in error, the truck was never depreciated. Books are still open for 2015 therefore the correct current year depreciation expense has already been recorded for 2015 fiscal year.
Entry to correct the prior period error through retained earnings, including income tax effects - prior year books closed:
Truck 2 cost $32,000 on January 1, 2006. In error, the $32,000 truck cost was expensed in 2006. The truck should be depreciated on a straight-line basis over a estimated useful life of 10 years with a $14,000 residual value. Books are still open for 2015 therefore the correct current year depreciation expense has already been recorded for 2015 fiscal year.
Entry to correct the prior period error through retained earnings, including income tax effects - prior year books closed:
b) Assume that there was a balance of $50,000 in opening retained earnings on January 1, 2015 and that Weber Inc. follows ASPE. Present the statement of retained earnings for the year ended December 31, 2015. Please make sure your final answer(s) are accurate to 2 decimal places.
c) REQUIRED DISCLOSURES:
The statement of retained earnings requires a supplementary disclosure regarding any prior period correction involving income taxes. Report this disclosure below. Please make sure your final answer(s) are accurate to the nearest whole number.
a)The journal entry is:DateDescriptionDebitCredit31/DecDepreciation Expense(32,000 - 14,000) / 10 x 9 years ($14,400)(14,400)Retained Earnings - Prior Periods14,400.
b)Net income for 2015$90,000Less: Dividends declared and paid during 2015(20,000)Retained Earnings, December 31, 2015$120,000.
c)The total impact of correcting these errors on net income for 2015 was $26,400. The related tax effect is $5,280 ($26,400 × 20%).
a) For each truck, the required entry to correct retained earnings for prior years, including any income tax effects - books are closed. Dates must be entered in the format dd/mmm (ie. January 15 would be 15/Jan). Truck 1 cost $44,000 on January 1, 2013. It should be depreciated on a straight-line basis over an estimated useful life of 5 years with a $11,000 residual value. At December 31, 2015, the accountant discovered that, in error, the truck was never depreciated. Books are still open for 2015, therefore the correct current-year depreciation expense has already been recorded for the 2015 fiscal year. We'll have to correct the error in the prior period (2013, 2014) books. Therefore, the adjustments will affect the current year's income statement and retained earnings statement. The journal entry is:DateDescriptionDebitCredit31/DecDepreciation Expense44,000/5 years x 3 years ($26,400)(26,400)Retained Earnings - Prior Periods26,400
Truck 2 cost $32,000 on January 1, 2006. In error, the $32,000 truck cost was expensed in 2006. The truck should be depreciated on a straight-line basis over an estimated useful life of 10 years with a $14,000 residual value. Books are still open for 2015 therefore the correct current year depreciation expense has already been recorded for 2015 fiscal year. We'll have to correct the error in the prior period (2006 - 2014) books. Therefore, the adjustments will affect the current year's income statement and retained earnings statement.
b) The statement of retained earnings for the year ended December 31, 2015, is: Retained Earnings, January 1, 2015$50,000Add: Net income for 2015$90,000Less: Dividends declared and paid during 2015(20,000)Retained Earnings, December 31, 2015$120,000
c) The supplementary disclosure regarding any prior period correction involving income taxes in the statement of retained earnings is as follows: Note 1: Prior Period ErrorIn 2015, the company discovered that errors were made in the financial statements of 2013 and 2014. These errors had no impact on total assets, total liabilities, or total equity for any year. The correction of these errors has been recorded in the statement of retained earnings and has been disclosed in the notes to the financial statements. The amount of the correction was $26,400.
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outline the distinguishing features of the dornbusch
model.explain the impacts of an expansionary monetary policy in
this model.
The Dornbusch model is a model of a small, open economy, which is defined as an economy that is small enough that the exchange rate is determined in the international market for currencies and open enough that the country is not able to influence the international price level.
The distinguishing features of the Dornbusch model include: Flexible prices and nominal rigidities.
The assumption of perfect capital mobility, where there is free entry and exit of capital markets.
The assumption of perfect substitutability of domestic and foreign bonds. The assumption of perfect substitutability of domestic and foreign goods.
The Dornbusch model, a small, open economy, which is defined as an economy that is small enough that the exchange rate is determined in the international market for currencies and open enough that the country is not able to influence the international price level, assumes that the monetary policy has no effect on output, as the prices are assumed to be flexible.
Therefore, the expansionary monetary policy increases only the money supply, which raises the exchange rate, and causes a depreciation of the exchange rate in the short run, and appreciates the exchange rate in the long run.
In the short run, the expansionary monetary policy raises the money supply, which raises the exchange rate, and causes a depreciation of the exchange rate.
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Bhagvan and Adele each own 35% of BAT Ventures, a partnership On December 18, 2020, Bhagvan sells his interest to Tyrese, who is a 30% partner. On December 19, 2021, Adele sells her interest to Tyrese. When does the partnership terminate?
December 18, 2021
December 19, 2021
December 31, 2021
The partnership does not terminate.
The business relationship continues.
Tyrese buys both Adele's and Bhagvan's shares, but he doesn't do it in order to dissolve the partnership. The partnership is still going strong, and Tyrese is still the sole shareholder.
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Consider an asset that costs $565,000 and is depreciated straight-line to zero over its eight-year tax life. The asset is to be used in a five-year project; at the end of the project, the asset can be sold for $110,000. If the relevant tax rate is 21 percent, what is the aftertax cash flow from the sale of this asset? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Aftertax salvage value
The aftertax cash flow from the sale of the asset is $103,437.50.
To calculate the aftertax cash flow from the sale of the asset, we need to consider the tax implications on the gain or loss from the sale. Here are the steps to calculate the aftertax salvage value:
Determine the book value of the asset at the end of the project:
Book value = Initial cost - Depreciation taken over the project's duration
Book value = $565,000 - ($565,000 / 8 * 5) = $141,250
Calculate the gain or loss from the sale:
Gain or Loss = Sale price - Book value
Gain or Loss = $110,000 - $141,250 = -$31,250 (Negative value indicates a loss)
Calculate the tax on the gain or loss:
Tax = Tax rate * Gain or Loss
Tax = 0.21 * (-$31,250) = -$6,562.50 (Negative value indicates a tax benefit)
Calculate the aftertax salvage value:
Aftertax salvage value = Sale price + Tax
Aftertax salvage value = $110,000 - $6,562.50 = $103,437.50
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The current stock price for AAPL is $171.01 per share, the annualized interest rate is 3%, and the annualized drift for AAPL is 5%, with no dividend. Suppose you are constructing another portfolio by buying a European Call on AAPL with strike 180 and selling the European Call on AAPL with strike 185. Suppose the market actually has a volatility skew: sigma(K)=min{1,18K^-1}.
Calculate your portfolio Value.
The value of the portfolio can be calculated using the Black-Scholes formula.
How can the Black-Scholes formula be used to calculate the value of the portfolio?To calculate the value of the portfolio, we can use the Black-Scholes formula, which is a mathematical model used to calculate the theoretical price of options. The formula takes into account various factors such as the current stock price, strike price, time to expiration, interest rate, and volatility.
In this case, we are buying a European Call option with a strike price of 180 and selling a European Call option with a strike price of 185. The formula considers the difference between the two strike prices as well as the current stock price of AAPL.
The Black-Scholes formula is as follows:
\[
C = S \cdot N(d_1) - X \cdot e^{-rT} \cdot N(d_2)
\]
where:
- C is the price of the option
- S is the current stock price
- N is the cumulative distribution function of the standard normal distribution
- X is the strike price
- r is the annualized interest rate
- T is the time to expiration
- d1 and d2 are calculated as follows:
\[
d_1 = \frac{{\ln(S/X) + (r + \frac{{\sigma^2}}{2})T}}{{\sigma\sqrt{T}}}
\]
\[
d_2 = d_1 - \sigma\sqrt{T}
\]
where \(\sigma\) represents the volatility.
By plugging in the given values, such as the current stock price of AAPL, strike prices, interest rate, and the volatility skew formula, we can calculate the value of the portfolio.
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