Bob and Melissa Grant are married and live in Lexington, Kentucky. The Grants have two children Jared age 15 and Alese age 12. The Grants would like to file a joint tax return for the year. The following information relates to the Grant’s tax year: • Bob’s Social Security number is 987-45-1234 • Melissa’s Social Security number is 494-37-4883 • Jared’s Social Security number is 412-32-5690 • Alese’s Social Security number is 412-32-6940 • The Grants’ mailing address is 95 Hickory Road, Lexington, Kentucky 40502. • Jared and Alese are tax dependents for federal tax purposes. Bob Grant received the following during the year: Employer Gross Wages Federal Income Tax Withholding State Income Tax Withholding National Storage $68,200 $8,100 $3,500 Lexington Little League $3,700 0 0 Melissa Grant received the following during the year: Employer Gross Wages Federal Income Tax Withholding State Income Tax Withholding Jensen Photography $23,600 $2,450 $1,225 All applicable and appropriate payroll taxes were withheld by Grants’ respective employers. The Grants also received the following during the year: Interest Income from First Kentucky Bank $150 Interest Income from City of Lexington, KY Bond $450 Interest Income from U.S. Treasury Bond $700 Interest Income from Nevada State School Board Bond $125 Workers’ Compensation payments to Bob $4,350 Disability payments received by Bob on account of injury $3,500 • National Storage paid 50% of the premiums on the policy and included the premium payments in Bob’s taxable wages. Bob paid the remaining 50% of the premium payments. Receipt of payment by Melissa as a result of a lawsuit for damages sustained in a car accident: • Medical Expenses $2,500 • Emotional Distress $12,000 • Punitive Damages $10,000 Total $24,500 Eight years ago, Melissa purchased an annuity contract for $88,000. This year, she received her first payment on the annuity. The payment amount was $15,000. The annuity started to pay on January 1 and she received a full first year’s payment. It will pay her $15,000 per year for ten years (beginning with this year). The $15,000 payment was reported to Melissa a form 1099-R for the current year (box 7 contained an entry of “7” on the form). The Grants did not own, control or manage any foreign bank accounts nor were they a grantor or beneficiary of a foreign trust during the tax year. The Grants paid or incurred the following expenses during the year: Dentist/Orthodontist (unreimbursed by insurance) $8,500 Doctors (unreimbursed by insurance) $ 625 Prescriptions (unreimbursed by insurance) $ 380 KY state tax payment made on 4/15/13 for 2012 liability $1,350 Real property taxes on residence $1,800 Vehicle property tax based upon age of vehicle $250 Mortgage interest on principal residence $8,560 Interest paid on borrowed money to purchase the City of Lexington, KY municipal bonds $400 Interest paid on borrowed money to purchase U.S. Treasury bonds $240 Contribution to the Red Cross $1,000 Contribution to Senator Rick Hartley’s Re-election Campaign $2,500 Contribution to First Baptist Church of Kentucky $6,000 Fee paid to Jones & Company, CPAs for tax preparation $200 In addition, Bob drove 6,750 miles commuting to work and Melissa drove 8,230 miles commuting to work. Both the Grants have represented to you that they maintained careful logs to support their respective mileage. The Grants drove 465 miles in total to receive medical treatment at a hospital in April. The Grants held a yard sale on May 15th. They collected $1,000 from the sale of their personal items. The Grants originally paid $6,000 for the items sold and the fair market value of the items at the date of sale was $1,500. During the year, the Grants sold the following stocks: Stock Sales Price Purchase Price Sales Date Purchase Date ABC Stock $5,000 $7,500 6/1/2013 5/1/2012 DEF Stock $7,000 $10,000 6/1/2013 1/15/2011 GHI Stock $6,000 $4,000 6/1/2013 11/15/2012 JKL Stock $5,000 $6,000 6/1/2013 10/31/2011 The Grants do not have any capital loss carryforwards from prior years. During the year, the Grants’ personal residence was burglarized on October 1 of the current year. The theft occurred during the day while both the Grants were at work and their children were at school. The Grants had the following personal property stolen: Item Purchase Date Fair Value on Date of Theft Tax Basis of Item Insurance Reimbursement Received Laptop computer and Printer 09/01/2012 3,000 3,000 500 Rifle 03/01/2010 2,000 2,500 500 TV/Projector 03/01/2010 5,000 13,000 1,000 2005 Honda Pilot 07/01/2011 4,000 6,500 500 Total 14,000 25,000 2,500 The Grants want to contribute to the Presidential Election Campaign. The Grants would like to receive a refund (if any) of any tax they may have overpaid for the year. Their preferred method of receiving the refund is by check.

Bob and Melissa Grant are married and live in Lexington, Kentucky. The Grants have two children Jared age 15 and Alese age 12. The Grants would like to file a joint tax return for the year.

The following information relates to the Grant’s tax year:

• Bob’s Social Security number is 987-45-1234
• Melissa’s Social Security number is 494-37-4883
• Jared’s Social Security number is 412-32-5690
• Alese’s Social Security number is 412-32-6940
• The Grants’ mailing address is 95 Hickory Road, Lexington, Kentucky 40502.
• Jared and Alese are tax dependents for federal tax purposes.

Bob Grant received the following during the year:

Employer Gross Wages Federal Income Tax Withholding State Income Tax Withholding
National Storage $68,200 $8,100 $3,500
Lexington Little League $3,700 0 0

Melissa Grant received the following during the year:

Employer Gross Wages Federal Income Tax Withholding State Income Tax Withholding
Jensen Photography $23,600 $2,450 $1,225

All applicable and appropriate payroll taxes were withheld by Grants’ respective employers.

The Grants also received the following during the year:

Interest Income from First Kentucky Bank $150
Interest Income from City of Lexington, KY Bond $450
Interest Income from U.S. Treasury Bond $700
Interest Income from Nevada State School Board Bond $125
Workers’ Compensation payments to Bob $4,350

Disability payments received by Bob on account of injury $3,500
• National Storage paid 50% of the premiums on the policy and included the premium payments in Bob’s taxable wages. Bob paid the remaining 50% of the premium payments.
Receipt of payment by Melissa as a result of a lawsuit for damages sustained in a car accident:
• Medical Expenses $2,500
• Emotional Distress $12,000
• Punitive Damages $10,000
Total $24,500

Eight years ago, Melissa purchased an annuity contract for $88,000. This year, she received her first payment on the annuity. The payment amount was $15,000. The annuity started to pay on January 1 and she received a full first year’s payment. It will pay her $15,000 per year for ten years (beginning with this year). The $15,000 payment was reported to Melissa a form 1099-R for the current year (box 7 contained an entry of “7” on the form).

The Grants did not own, control or manage any foreign bank accounts nor were they a grantor or beneficiary of a foreign trust during the tax year.

The Grants paid or incurred the following expenses during the year:

Dentist/Orthodontist (unreimbursed by insurance) $8,500
Doctors (unreimbursed by insurance) $ 625
Prescriptions (unreimbursed by insurance) $ 380
KY state tax payment made on 4/15/13 for 2012 liability $1,350
Real property taxes on residence $1,800
Vehicle property tax based upon age of vehicle $250
Mortgage interest on principal residence $8,560
Interest paid on borrowed money to purchase the City of
Lexington, KY municipal bonds $400
Interest paid on borrowed money to purchase
U.S. Treasury bonds $240
Contribution to the Red Cross $1,000
Contribution to Senator Rick Hartley’s Re-election Campaign $2,500
Contribution to First Baptist Church of Kentucky $6,000
Fee paid to Jones & Company, CPAs for tax preparation $200

In addition, Bob drove 6,750 miles commuting to work and Melissa drove 8,230 miles commuting to work. Both the Grants have represented to you that they maintained careful logs to support their respective mileage.

The Grants drove 465 miles in total to receive medical treatment at a hospital in April.

The Grants held a yard sale on May 15th. They collected $1,000 from the sale of their personal items. The Grants originally paid $6,000 for the items sold and the fair market value of the items at the date of sale was $1,500.

During the year, the Grants sold the following stocks:
Stock Sales Price Purchase Price Sales Date Purchase Date
ABC Stock $5,000 $7,500 6/1/2013 5/1/2012
DEF Stock $7,000 $10,000 6/1/2013 1/15/2011
GHI Stock $6,000 $4,000 6/1/2013 11/15/2012
JKL Stock $5,000 $6,000 6/1/2013 10/31/2011

The Grants do not have any capital loss carryforwards from prior years.
During the year, the Grants’ personal residence was burglarized on October 1 of the current year. The theft occurred during the day while both the Grants were at work and their children were at school. The Grants had the following personal property stolen:

Item Purchase Date Fair Value on Date of Theft Tax Basis of Item Insurance Reimbursement Received
Laptop computer and Printer 09/01/2012 3,000 3,000 500
Rifle 03/01/2010 2,000 2,500 500
TV/Projector 03/01/2010 5,000 13,000 1,000
2005 Honda Pilot 07/01/2011 4,000 6,500 500
Total 14,000 25,000 2,500

The Grants want to contribute to the Presidential Election Campaign. The Grants would like to receive a refund (if any) of any tax they may have overpaid for the year. Their preferred method of receiving the refund is by check.

FIN 540 – Homework Chapter 28 © 2013 Strayer University. All Rights Reserved. This document contains Strayer University Confidential and Proprietary information and may not be copied, further distributed, or otherwise disclosed in whole or in part, without the expressed written permission of Strayer University. FIN 540 Homework Chapter 28! Page 1 of 2! Directions: Answer the following five questions on a separate document. Explain how you reached the answer or show your work if a mathematical calculation is needed, or both. Submit your assignment using the assignment link in the course shell. Each question is worth five points apiece for a total of 25 points for this homework assignment. 1. Which of the following would cause average inventory holdings to decrease, other things held constant? a. The purchase price of inventory items decreases by 50 percent. b. The carrying price of an item decreases (as a percent of purchase price). c. The sales forecast is revised downward by 10 percent. d. Interest rates fall. e. Fixed order costs double. 2. During times of inflation, which of these inventory accounting methods is best for cash flow? a. LIFO, because the most expensive goods are recorded as being sold first, resulting in a higher cost of goods sold and a lower reported net income. b. Specific identification, because it correctly identifies the actual item sold and so the actual cost is recorded on the income statement. c. Weighted average, because it smoothes the reported cost of goods sold over time. d. It doesn’t matter which you use since cash flow is unaffected by the choice of inventory identification method. e. FIFO, because the cheapest goods are recorded as being sold first, resulting in lower cost of goods sold and higher reported net income. 3. Which of the following is true of the Baumol model? Note that the optimal cash transfer amount is C*. a. If the total amount of cash needed during the year increases by 20%, then C* will increase by 20%. b. If the average cash balance increases by 20%, then the total holding costs will increase by 20%. c. If the average cash balance increases by 20% the total transactions costs will increase by 20%. d. The optimal transfer amount is the same for all companies. e. If the fixed costs of selling securities or obtaining a loan (cost per transaction) increase by 20%, then C* will increase by 20%. 4. Which of the following is true of the EOQ model? Note that the optimal order quantity, Q, will be called EOQ. a. If the annual sales, in units, increases by 20%, then EOQ will increase by 20%. b. If the average inventory increases by 20%, then the total carrying costs will increase by 20%. c. If the average inventory increases by 20% the total order costs will increase by 20%. d. The EOC is the same for all companies. e. If the fixed per order cost increases by 20%, then EOQ will increase by 20%. FIN 540 – Homework Chapter 28 © 2013 Strayer University. All Rights Reserved. This document contains Strayer University Confidential and Proprietary information and may not be copied, further distributed, or otherwise disclosed in whole or in part, without the expressed written permission of Strayer University. FIN 540 Homework Chapter 28! Page 2 of 2! 5. Halliday Inc. receives a $2 million payment once a year. Of this amount, $700,000 is needed for cash payments made during the next year. Each time Halliday deposits money in its account, a charge of $2.00 is assessed to cover clerical costs. If Halliday can hold marketable securities that yield 5 percent, and then convert these securities to cash at a cost of only the $2 deposit charge, what is the total cost for one year of holding the minimum cost cash balance according to the Baumol model? a. $7,483 b. $187 c. $3,741 d. $374 e. $748

FIN 540 – Homework Chapter 28

© 2013 Strayer University. All Rights Reserved. This document contains Strayer University Confidential and Proprietary information

and may not be copied, further distributed, or otherwise disclosed in whole or in part, without the expressed written permission of

Strayer University.

FIN 540 Homework Chapter 28! Page 1 of 2!

Directions: Answer the following five questions on a separate document. Explain how you reached the

answer or show your work if a mathematical calculation is needed, or both. Submit your assignment using

the assignment link in the course shell. Each question is worth five points apiece for a total of 25 points

for this homework assignment.

1. Which of the following would cause average inventory holdings to decrease, other things held

constant?

a. The purchase price of inventory items decreases by 50 percent.

b. The carrying price of an item decreases (as a percent of purchase price).

c. The sales forecast is revised downward by 10 percent.

d. Interest rates fall.

e. Fixed order costs double.

2. During times of inflation, which of these inventory accounting methods is best for cash flow?

a. LIFO, because the most expensive goods are recorded as being sold first, resulting in a

higher cost of goods sold and a lower reported net income.

b. Specific identification, because it correctly identifies the actual item sold and so the actual

cost is recorded on the income statement.

c. Weighted average, because it smoothes the reported cost of goods sold over time.

d. It doesn’t matter which you use since cash flow is unaffected by the choice of inventory

identification method.

e. FIFO, because the cheapest goods are recorded as being sold first, resulting in lower

cost of goods sold and higher reported net income.

3. Which of the following is true of the Baumol model? Note that the optimal cash transfer amount is

C*.

a. If the total amount of cash needed during the year increases by 20%, then C* will

increase by 20%.

b. If the average cash balance increases by 20%, then the total holding costs will increase

by 20%.

c. If the average cash balance increases by 20% the total transactions costs will increase

by 20%.

d. The optimal transfer amount is the same for all companies.

e. If the fixed costs of selling securities or obtaining a loan (cost per transaction) increase by

20%, then C* will increase by 20%.

4. Which of the following is true of the EOQ model? Note that the optimal order quantity, Q, will be

called EOQ.

a. If the annual sales, in units, increases by 20%, then EOQ will increase by 20%.

b. If the average inventory increases by 20%, then the total carrying costs will increase by

20%.

c. If the average inventory increases by 20% the total order costs will increase by 20%.

d. The EOC is the same for all companies.

e. If the fixed per order cost increases by 20%, then EOQ will increase by 20%.

FIN 540 – Homework Chapter 28

© 2013 Strayer University. All Rights Reserved. This document contains Strayer University Confidential and Proprietary information

and may not be copied, further distributed, or otherwise disclosed in whole or in part, without the expressed written permission of

Strayer University.

FIN 540 Homework Chapter 28! Page 2 of 2!

5. Halliday Inc. receives a $2 million payment once a year. Of this amount, $700,000 is needed for

cash payments made during the next year. Each time Halliday deposits money in its account, a

charge of $2.00 is assessed to cover clerical costs. If Halliday can hold marketable securities that

yield 5 percent, and then convert these securities to cash at a cost of only the $2 deposit charge,

what is the total cost for one year of holding the minimum cost cash balance according to the

Baumol model?

a. $7,483

b. $187

c. $3,741

d. $374

e. $748

1. Suppose household saving is $20, the government spending deficit is $4, and investment is $20. a. What is national saving? b. What are net exports? c. What is net capital outflow? d. Does your answer to c indicate that the US is a net lender or a net borrower in international financial markets? 2. Suppose that an automobile costs $30,000 in the United States and 25,000 Euros in France. Further suppose that the exchange rate is .8 (one US dollar = .8 Euros). a. What is the real exchange rate? b. In which country is the automobile less expensive? c. Do your answers suggest that the US will have a trade surplus or a trade deficit with France? d. Does you answer to c suggest that US citizens will be borrowing money from France or lending money to France? e. Given the prices of the automobiles in France and the United States, what should the nominal exchange rate be in order to have purchasing power parity 3. If the inflation rate is 15% in France and 4% in the US, a) what is the percentage change in the exchange rate assuming there is purchasing power parity? b) your answer to a implies that the international value of the dollar is (rising, falling).

1. Suppose household saving is $20, the government spending deficit is $4, and investment is $20.
a. What is national saving? b. What are net exports?
c. What is net capital outflow?
d. Does your answer to c indicate that the US
is a net lender or a net borrower in international financial markets?

2. Suppose that an automobile costs $30,000 in the United States and 25,000 Euros in France. Further suppose that the exchange rate is .8 (one US dollar = .8 Euros).
a. What is the real exchange rate?
b. In which country is the automobile less expensive?
c. Do your answers suggest that the US will have a trade surplus or a trade deficit with France?
d. Does you answer to c suggest that US citizens will be borrowing money from France or
lending money to France?
e. Given the prices of the automobiles in France and the United States, what should the nominal exchange rate be in order to have purchasing power parity

3. If the inflation rate is 15% in France and 4% in the US,
a) what is the percentage change in the exchange
rate assuming there is purchasing power parity?
b) your answer to a implies that the international
value of the dollar is (rising, falling).

Fast Delivery is a small company that transports business packages betweenNew York andChicago. It operates a fleet of small vans that moves packages to and from a central depot within each city and uses a common carrier to deliver the packages between the depots in the two cities. Fast Delivery recently acquired approximately $6million of cash capital from it owners, and its president Don, is trying to identify the most profitable way to invest these funds. One manager believes that the money should be used to expand the fleet of city vans at a cost of $720.000. He argues that more vans would enable the company to expand its services into new markets, thereby increasing the revenue base. More specifically he expects cash inflow to increase by $280.00 per year. The additional vans are expected to have an average useful life of four years and a combined salvage value of $100,000. Operating the vans will require additional working capital of $40,000 which will be recovered at the end of the fourth year. In contrast, the company chief accountant, believes that the funds should be used to purchased large trucks to deliver the package between the depots in the two cities. The conversion process would produce continuing improvement in operating savings with reductions in cash outflow as the following. Year 1 $160,000 Year 2 $320,000 Year 3 $400,000 Year 4 $440,000 The large trucks are expected to cost $800,000 and to have a four-year useful life and a $80,000 salvage value. In additional to the purchase price of the trucks, up-front training cost are expected to amount to $16,000. Fast Delivery’s management has established a 16 percent desired rate of return. Required A. Determine the net present value of the two investment alternatives. B. Calculate the present value index for each alternative. C. Indicate which investment alternative you would recommend. Explain the choice.

Fast Delivery is a small company that transports business packages betweenNew York andChicago. It operates a fleet of small vans that moves packages to and from a central depot within each city and uses a common carrier to deliver the packages between the depots in the two cities. Fast Delivery recently acquired approximately $6million of cash capital from it owners, and its president Don, is trying to identify the most profitable way to invest these funds.

One manager believes that the money should be used to expand the fleet of city vans at a cost of $720.000. He argues that more vans would enable the company to expand its services into new markets, thereby increasing the revenue base. More specifically he expects cash inflow to increase by $280.00 per year. The additional vans are expected to have an average useful life of four years and a combined salvage value of $100,000. Operating the vans will require additional working capital of $40,000 which will be recovered at the end of the fourth year.

In contrast, the company chief accountant, believes that the funds should be used to purchased large trucks to deliver the package between the depots in the two cities. The conversion process would produce continuing improvement in operating savings with reductions in cash outflow as the following.

Year 1 $160,000

Year 2 $320,000

Year 3 $400,000

Year 4 $440,000

The large trucks are expected to cost $800,000 and to have a four-year useful life and a $80,000 salvage value. In additional to the purchase price of the trucks, up-front training cost are expected to amount to $16,000. Fast Delivery’s management has established a 16 percent desired rate of return.

Required

A. Determine the net present value of the two investment alternatives.

B. Calculate the present value index for each alternative.

C. Indicate which investment alternative you would recommend. Explain the choice.

More-power company has projected sales of 75,000 regular sanders and 30,000 mini-sanders for the next year.The projected income statement is as follows: Regular sanders mini-sanders Total Sales 3,000,000 1,800,000 4,800,000 Less:variable 1,800,000 900,000 2,700,000 expenses Contribution margin 1,200,000 900,000 2,100,000 Less:direct fixed 250,000 450,000 700,000 Product margin 950,000 450,000 1,400,000 Less:common fixed 600,000 expenses operating income 800,000 expenses 1.set up the given income statement on a spreadsheet.Then,substitute the following sales mixes, and calculate operating income. Regular sanders mini-sander a.75,000 37,500 b.60,000 60,000 c.30,000 90,000 d.30,000 60,000 2.Calculate the break-even units for each product for each of the preceding sales mixes.

More-power company has projected sales of 75,000 regular sanders and 30,000 mini-sanders for the next year.The projected income statement is as follows:
Regular sanders mini-sanders Total
Sales 3,000,000 1,800,000 4,800,000
Less:variable 1,800,000 900,000 2,700,000
expenses
Contribution margin 1,200,000 900,000 2,100,000
Less:direct fixed 250,000 450,000 700,000
Product margin 950,000 450,000 1,400,000
Less:common fixed 600,000
expenses
operating income 800,000
expenses

1.set up the given income statement on a spreadsheet.Then,substitute the following sales mixes, and calculate operating income.
Regular sanders mini-sander
a.75,000 37,500
b.60,000 60,000
c.30,000 90,000
d.30,000 60,000
2.Calculate the break-even units for each product for each of the preceding sales mixes.

On December 31, 2012, before the books were closed, the management and accountants of Madrasa Inc. made the following determinations about three depreciable assets. 1. Depreciable asset A was purchased January 2, 2009. It originally cost $500,000 and, for depreciation purposes, the straight-line method was originally chosen. The asset was originally expected to be useful for 10 years and have a zero salvage value. In 2012, the decision was made to change the depreciation method from straight-line to sum-of-the-years’ digits, and the estimates relating to useful life and salvage value remained unchanged. 2. Depreciable asset B was purchased January 3, 2008. It originally cost $243,000 and, for depreciation purposes, the straight-line method was chosen. The asset was originally expected to be useful for 15 years and have a zero salvage value. In 2012, the decision was made to shorten thetotallife of this asset to 9 years and to estimate the salvage value at $3,200. 3. Depreciable asset C was purchased January 5, 2008. The asset’s original cost was $154,900, and this amount was entirely expensed in 2008. This particular asset has a 10-year useful life and no salvage value. The straight-line method was chosen for depreciation purposes. Additional data: 1. Income in 2012 before depreciation expense amounted to $405,000. 2. Depreciation expense on assets other than A, B, and C totaled $50,100 in 2012. 3. Income in 2011 was reported at $349,000. 4. Ignore allincometax effects. 5. 129,200 shares of common stock were outstanding in 2011 and 2012. (a) Prepare all necessary entries in 2012 to record these determinations. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) No. Account Titles and Explanation Debit Credit 1. 2. 3. (To correct equipment expensed.) (To record depreciation.) Question 4 Accounts Receivable Accumulated Depreciation – Buildings Accumulated Depreciation – Equipment Accumulated Depreciation – Machinery Allowance for Doubtful Accounts Amortization Expense Bad Debt Expense Buildings Cash Commission Expense Commission Payable Construction in Process Copyrights Cost of Goods Sold Dealer’s Fund Reserve Debt Investments Deferred Tax Liability Depreciation Expense Dividend Revenue Due to Customer Equipment Equity Investments Equity Investments (Available-for-sale) Equity Investments (Equity Method) Fair Value Adjustment Fair Value Adjustment (Available-for-Sale) Finance Expense Gain on Disposal of Plant Assets Gain on Sale of Plant Assets Income Summary Insurance Expense Interest Receivable Interest Revenue Inventory Inventory on Consignment Inventory Over and Short Lawsuit Liability Lawsuit Loss Loss Due to Market Decline of Inventory Machinery Maintenance and Repairs Expense No Entry Prepaid Insurance Rent Receivable Rent Revenue Retained Earnings Revenue from Investment Salaries and Wages Expense Salaries and Wages Payable Sales Commission Expense Sales Commission Expense Payable Sales Commissions Payable Sales Revenue Sales Tax Expense Sales Taxes Payable Supplies Supplies Expense Trademarks Trucks Unearned Rent Revenue Unrealized Holding Gain or Loss – Equity Unrealized Holding Gain or Loss – Income Warranty Expense Warranty Liability

On December 31, 2012, before the books were closed, the management and accountants of Madrasa Inc. made the following determinations about three depreciable assets.

1. Depreciable asset A was purchased January 2, 2009. It originally cost $500,000 and, for depreciation purposes, the straight-line method was originally chosen. The asset was originally expected to be useful for 10 years and have a zero salvage value. In 2012, the decision was made to change the depreciation method from straight-line to sum-of-the-years’ digits, and the estimates relating to useful life and salvage value remained unchanged.

2. Depreciable asset B was purchased January 3, 2008. It originally cost $243,000 and, for depreciation purposes, the straight-line method was chosen. The asset was originally expected to be useful for 15 years and have a zero salvage value. In 2012, the decision was made to shorten thetotallife of this asset to 9 years and to estimate the salvage value at $3,200.

3. Depreciable asset C was purchased January 5, 2008. The asset’s original cost was $154,900, and this amount was entirely expensed in 2008. This particular asset has a 10-year useful life and no salvage value. The straight-line method was chosen for depreciation purposes.

Additional data:

1. Income in 2012 before depreciation expense amounted to $405,000.

2. Depreciation expense on assets other than A, B, and C totaled $50,100 in 2012.

3. Income in 2011 was reported at $349,000.

4. Ignore allincometax effects.

5. 129,200 shares of common stock were outstanding in 2011 and 2012.

(a)

Prepare all necessary entries in 2012 to record these determinations. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

No. Account Titles and Explanation Debit Credit

1.

2.

3.

(To correct equipment expensed.)

(To record depreciation.)

Question 4

Accounts Receivable

Accumulated Depreciation – Buildings

Accumulated Depreciation – Equipment

Accumulated Depreciation – Machinery

Allowance for Doubtful Accounts

Amortization Expense

Bad Debt Expense

Buildings

Cash

Commission Expense

Commission Payable

Construction in Process

Copyrights

Cost of Goods Sold

Dealer’s Fund Reserve

Debt Investments

Deferred Tax Liability

Depreciation Expense

Dividend Revenue

Due to Customer

Equipment

Equity Investments

Equity Investments (Available-for-sale)

Equity Investments (Equity Method)

Fair Value Adjustment

Fair Value Adjustment (Available-for-Sale)

Finance Expense

Gain on Disposal of Plant Assets

Gain on Sale of Plant Assets

Income Summary

Insurance Expense

Interest Receivable

Interest Revenue

Inventory

Inventory on Consignment

Inventory Over and Short

Lawsuit Liability

Lawsuit Loss

Loss Due to Market Decline of Inventory

Machinery

Maintenance and Repairs Expense

No Entry

Prepaid Insurance

Rent Receivable

Rent Revenue

Retained Earnings

Revenue from Investment

Salaries and Wages Expense

Salaries and Wages Payable

Sales Commission Expense

Sales Commission Expense Payable

Sales Commissions Payable

Sales Revenue

Sales Tax Expense

Sales Taxes Payable

Supplies

Supplies Expense

Trademarks

Trucks

Unearned Rent Revenue

Unrealized Holding Gain or Loss – Equity

Unrealized Holding Gain or Loss – Income

Warranty Expense

Warranty Liability

Eurobonds 1) Eurobonds versus Domestic Bonds – International Corporate Finance The dollar cost of debt for Coval Consulting, a U.S. research firm, is 7.5%. The firm faces a tax rate of 30% on all income, no matter where it is earned. Managers in the firm need to know its yen cost of debt because they are considering launching a new bond issue in Tokyo to raise money for a new investment there.The risk-free interest rates on dollars and yen are r$ = 5% and r¥ = 1%, respectively. Coval Consulting is willing to assume that capital markets are internationally integrated and that its free cash flows are uncorrelated with the yen-dollar spot rate.What is Coval Consulting’s after-tax cost of debt in yen? 2) Credit & Exchange Rate Risk -International Corporate FinanceSuppose the interest on Russian government bonds is 7.5%, and the current exchange rate is 28 rubles per dollar. If the forward exchange rate is 28.5 rubles per dollar, and the current U.S. risk-free interest rate is 4.5%, what is the implied credit spread for Russian government bonds? 3) Forward Market Hedge – Risk ManagementYou are a broker for frozen seafood products for Choyce Products. You just signed a deal with a Belgian distributor. Under the terms of the contract, in 1 year, you will deliver 4000 kg of frozen king crab for 100,000 euros. Your cost for obtaining the king crab is $110,000. All cash flows occur in exactly 1 year. a. Plot your profits in 1 year from the contract as a function of the exchange rate in 1 year for exchange rates from $0.75/€ to $1.50/€. Label this line Unhedged Profits. b. Suppose the 1-year forward exchange rate is $1.25/€ and that you enter into a forward contract to sell the euros you will receive at this rate. In the figure from part (a), plot your combined profits from the crab contract and the forward contract as a function of the exchange rate in one year. Label this line Forward Hedge. c. Suppose that instead of using a forward contract, you consider using options. A 1-year call option to buy euros at a strike price of $1.25/€ is trading for $0.10/€. Similarly, a 1-year put option to sell euros at a strike price of $1.25/€ is trading for $0.10/€. To hedge the risk of your profits, should you buy or sell the call or the put? d. In the figure from parts (a) and (b), plot your “all in” profits using the option hedge (combined profits of crab contract, option contract, and option price) as a function of the exchange rate in one year. Label this line Option Hedge. (Note: You can ignore the effect of interest on the option price.) e. Suppose that by the end of the year, a trade war erupts, leading to a European embargo on U.S. food products. As a result, your deal is cancelled, and you don’t receive the euros or incur the costs of procuring the crab. However, you still have the profits (or losses) associated with your forward or options contract. In a new figure, plot the profits associated with the forward hedge and the options hedge (labeling each line). When there is a risk of cancellation, which type of hedge has the least downside risk? Explain briefly.

Eurobonds
1) Eurobonds versus Domestic Bonds – International Corporate Finance The dollar cost of debt for Coval Consulting, a U.S. research firm, is 7.5%. The firm faces a tax rate of 30% on all income, no matter where it is earned. Managers in the firm need to know its yen cost of debt because they are considering launching a new bond issue in Tokyo to raise money for a new investment there.The risk-free interest rates on dollars and yen are r$ = 5% and r¥ = 1%, respectively. Coval Consulting is willing to assume that capital markets are internationally integrated and that its free cash flows are uncorrelated with the yen-dollar spot rate.What is Coval Consulting’s after-tax cost of debt in yen?

2) Credit & Exchange Rate Risk -International Corporate FinanceSuppose the interest on Russian government bonds is 7.5%, and the current exchange rate is 28 rubles per dollar. If the forward exchange rate is 28.5 rubles per dollar, and the current U.S. risk-free interest rate is 4.5%, what is the implied credit spread for Russian government bonds?

3) Forward Market Hedge – Risk ManagementYou are a broker for frozen seafood products for Choyce Products. You just signed a deal with a Belgian distributor. Under the terms of the contract, in 1 year, you will deliver 4000 kg of frozen king crab for 100,000 euros. Your cost for obtaining the king crab is $110,000. All cash flows occur in exactly 1 year.

a. Plot your profits in 1 year from the contract as a function of the exchange rate in 1 year for exchange rates from $0.75/€ to $1.50/€. Label this line Unhedged Profits.

b. Suppose the 1-year forward exchange rate is $1.25/€ and that you enter into a forward contract to sell the euros you will receive at this rate. In the figure from part (a), plot your combined profits from the crab contract and the forward contract as a function of the exchange rate in one year. Label this line Forward Hedge.

c. Suppose that instead of using a forward contract, you consider using options. A 1-year call option to buy euros at a strike price of $1.25/€ is trading for $0.10/€. Similarly, a 1-year put option to sell euros at a strike price of $1.25/€ is trading for $0.10/€. To hedge the risk of your profits, should you buy or sell the call or the put?

d. In the figure from parts (a) and (b), plot your “all in” profits using the option hedge (combined profits of crab contract, option contract, and option price) as a function of the exchange rate in one year. Label this line Option Hedge. (Note: You can ignore the effect of interest on the option price.)

e. Suppose that by the end of the year, a trade war erupts, leading to a European embargo on U.S. food products. As a result, your deal is cancelled, and you don’t receive the euros or incur the costs of procuring the crab. However, you still have the profits (or losses) associated with your forward or options contract. In a new figure, plot the profits associated with the forward hedge and the options hedge (labeling each line). When there is a risk of cancellation, which type of hedge has the least downside risk? Explain briefly.

To get started, go to http://www.bgfl.org/bgfl/custom/resources_ftp/client_ftp/ks3/ict/multiple_int/ to work through the Multiple Intelligences exercise. When you’ve finished, prepare your paper by addressing the following areas: 1. What were your top three “Intelligence” styles? 2. How do these styles impact your communication style and effectiveness? 3. How can you use your intelligence styles to be a better communicator in a business setting? 4. Given your communication strengths, how would you adapt to communicate with someone with a different intelligence style to ensure effective communication has taken place? Your paper should be 3-4 pages in length, excluding the Title page, Abstract page and References page. Additionally, your paper must follow APA guidelines and be supported by at least 2 peer-reviewed sources.

To get started, go to http://www.bgfl.org/bgfl/custom/resources_ftp/client_ftp/ks3/ict/multiple_int/ to work through the Multiple Intelligences exercise. When you’ve finished, prepare your paper by addressing the following areas:

1. What were your top three “Intelligence” styles?

2. How do these styles impact your communication style and effectiveness?

3. How can you use your intelligence styles to be a better communicator in a business setting?

4. Given your communication strengths, how would you adapt to communicate with someone with a different intelligence style to ensure effective communication has taken place?

Your paper should be 3-4 pages in length, excluding the Title page, Abstract page and References page. Additionally, your paper must follow APA guidelines and be supported by at least 2 peer-reviewed sources.

You jump out of your car at a location known to have one ATM, but a history of a line. Usually you can expect to wait 200 seconds from the time you arrive until leaving with the $$. Service time averages 35 seconds. Show all work! Formulas to use are: p=^/u, L=^W, W=1/u-^, Lq=pL, Wq=pW Questions are: What is the utilization of the server?_______% What is the expected time between people arriving to this system?_______seconds How long is the line expected to be upon arrival?________people What is the service rate of the server? _______people/second

You jump out of your car at a location known to have one ATM, but a history of a line. Usually you can expect to wait 200 seconds from the time you arrive until leaving with the $$. Service time averages 35 seconds. Show all work! Formulas to use are: p=^/u, L=^W, W=1/u-^, Lq=pL, Wq=pW

Questions are:
What is the utilization of the server?_______%
What is the expected time between people arriving to this system?_______seconds
How long is the line expected to be upon arrival?________people
What is the service rate of the server? _______people/second

Bio 161 June 2014 Extra Credit- Family Pedigree Project (up to 25 points) Due at the beginning of the final. For this project you will examine an autosomal or sex-linked trait and write a report explaining how it is passed in your family. Please follow these instructions: 1- The trait you chose must be Mendelian and you must have variation in your family. Your choices are: hitchhiker’s thumb, attached earlobe, cleft chin, crossing thumbs, tongue rolling, widow’s peak, Rh+ factor. 2- Write a typed introduction explaining why you chose this trait and how you collected the data (5 points) 3- Use standard symbols for the construction of the pedigree and identify yourself in it (5 points). 4- You must collect at least 3 generations (5 points). If you do not have access to three generations, you can predict one generation- what your parents or children would look like. You cannot predict more than one generation. If you are predicting future generations and do not have a spouse, make that person a homozygous recessive. Offspring should be two boys and two girls. 5- Write the genotype of each individual and if some can have more than one genotype, explain all possibilities (10 points). Example of a pedigree showing four generations. Note that generations are not labeled and genotype and phenotype are not explained.

Bio 161 June 2014
Extra Credit- Family Pedigree Project (up to 25 points)
Due at the beginning of the final.
For this project you will examine an autosomal or sex-linked trait and write a report explaining
how it is passed in your family. Please follow these instructions:
1- The trait you chose must be Mendelian and you must have variation in your family.
Your choices are: hitchhiker’s thumb, attached earlobe, cleft chin, crossing thumbs,
tongue rolling, widow’s peak, Rh+ factor.
2- Write a typed introduction explaining why you chose this trait and how you collected
the data (5 points)
3- Use standard symbols for the construction of the pedigree and identify yourself in it (5
points).
4- You must collect at least 3 generations (5 points). If you do not have access to three
generations, you can predict one generation- what your parents or children would look
like. You cannot predict more than one generation. If you are predicting future
generations and do not have a spouse, make that person a homozygous recessive.
Offspring should be two boys and two girls.
5- Write the genotype of each individual and if some can have more than one genotype,
explain all possibilities (10 points).

Example of a pedigree showing four generations. Note that generations are not labeled and genotype
and phenotype are not explained.