Accounting Made Easy: Assignment Support for Every Module

Published: 1 year ago

Accounting Made Easy: Assignment Support for Every Module

12. Find the APR, or stated rate, in each of the following cases:

Calculating APR. Find the APR, or stated rate, in each of the following cases:

13. Look at Exercise 33.2. Compute the opportunity costs of producing sweaters and wine in both...

Look at Exercise 33.2. Compute the opportunity costs of producing sweaters and wine in both France and Tunisia. Who has the lowest opportunity cost of producing sweaters and who has the lowest opportunity cost of producing wine? Explain what it means to have a lower opportunity cost.

Exercise 33.2

Brazil can produce 100 pounds of beef or 10 autos; in contrast the United States can produce 40 pounds of beef or 30 autos. Which country has the absolute advantage in beef? Which country has the absolute advantage in producing autos? What is the opportunity cost of producing one pound of beef in Brazil? What is the opportunity cost of producing one pound of beef in the United States?

14. 23. To continue with Sundanci, Abbey Naylor, CFA, has been directed to determine the value of...

23.   To continue with Sundanci, Abbey Naylor, CFA, has been directed to determine the value of Sundanci’s stock using the Free Cash Flow to Equity (FCFE) model. Naylor believes that Sundanci’s FCFE will grow at 27% for two years and 13% thereafter. Capital expenditures, depreciation, and working capital are all expected to increase proportionately with FCFE.

a.   Calculate the amount of FCFE per share for the year 2000, using the data from Table 23A.

b.   Calculate the current value of a share of Sundanci stock based on the two-stage FCFE model.

c.     i. Describe one limitation of the two-stage DDM model that is addressed by using the two-stage FCFE model.

ii. Describe one limitation of the two-stage DDM model that is not addressed by using the two-stage FCFE model.

15. EXERCISE 7–4 Compute Activity Rates and Assign to a Cost Object [LO3] (This exercise is a...

EXERCISE 7–4 Compute Activity Rates and Assign to a Cost Object [LO3]

(This exercise is a continuation of Exercise 7–3; it should be assigned only if Exercise 7–3 is also assigned.) The ABC system at MovieTime contains the following activity cost pools and activity rates this year:

Activity data have also been supplied for the leather recliner product  line:

Required:

1.              Using the first-stage allocation from Exercise 7–3 and the above data, compute the activity rates for the ABC system. (Use Exhibit 7–8 as a guide). Round to the nearest whole cent.

2.              Determine the total overhead cost that would be assigned to the leather recliner product line using the ABC system.

16. ENRON AND ARTHUR ANDERSEN LLP LO 1, 2, 5 1-48 Enron was an energy company based in Houston, Texas...

1-48

Enron was an energy company based in Houston, Texas that made energy trades. It was

formed in 1985 with the merger of Houston Natural Gas and InterNorth. After an aggressive expansion plan that involved risky financing transactions outside the original, fundamental business model of the company, Enron was billions of dollars in debt. Enron concealed this debt through hidden transactions with related party partnerships, fraudulent accounting, and illegal loans. Enron is considered to be one of the largest and most important financial reporting frauds in history. The company ultimately filed for bank- ruptcy in 2001.

One of the reasons that Enron was able to get away with the fraud for some time was because of a low quality audit by its exter- nal audit firm, Arthur Andersen. Prior to the failure of Enron in 2001, Arthur Andersen had been involved in two other major audit failures. These failed audits, related to frauds at Waste Manage- ment (1996) and Sunbeam (1997), should have raised red flags for management and any outside observers that some of the   audit firm’s internal quality assurance processes were not working. When the federal government uncovered Enron’s fraud along with the string of poor quality audits at Arthur Andersen, the government forced the audit firm out of  business.

Internal documentation at Arthur Andersen showed that there were conflicts between the auditors and the audit committee of Enron, and that even though there were many individuals con- cerned about the accounting and disclosure practices at Enron, nothing was done by Andersen to report these problems. In fact, the leading partner on the audit, David Duncan, actively worked to ensure that Enron’s fraudulent financial reporting went uncovered. It appears that Duncan was motivated by the fact that Arthur Andersen was earning enormous consulting fees on the Enron engagement; Enron was a hugely important client for him   person-

ally and for the Houston office of Arthur Andersen. Together, these conflicts of interest clouded his independent judgment and profes- sional skepticism.

Around the time that Enron declared bankruptcy in late 2001, Arthur Andersen personnel in the Houston office began aggressively destroying documentation relating to the Enron engagement. This action enabled the federal government to file charges against Arthur Andersen that ultimately led to the downfall of the audit firm. The Sarbanes-Oxley Act of 2002 was enacted partially in response to the Enron fraud and the revelation of the poor audit conducted  by Arthur Andersen, which is why this case is of particular historical relevance. Considering these facts, answer the following  questions:

a.       Members of Enron management were the individuals who per- petrated the financial statement fraud. Given this, why do you think auditors were held responsible when they are not the ones actually making the fraudulent journal entries?

b.       Explain why the consulting fees and importance of Enron to David Duncan and the Houston office of Arthur Andersen might have affected Duncan’s independence, and thus the qual- ity of the audits he supervised.

c.       Describe the likely users of Enron’s audited financial state- ments. How were these various user groups likely affected by the fraud?

d.       How might the sequential list of frauds perpetrated by Arthur Andersen clients (Waste Management, Sunbeam, and finally Enron) have affected the decision by the SEC and federal prose- cutors to aggressively seek Arthur Andersen’s legal demise?

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17. Exercise 9-34 Sales Budget Refer to the information regarding Stillwater Designs above. Required:...

Exercise 9-34  Sales Budget

Refer to the information regarding Stillwater Designs above.

Required:

1.       Prepare a sales budget for each quarter of 2014 and for the year in total. Show sales by product and in total for each time period.

2.       CONCEPTUAL CONNECTION How will Stillwater Designs use this sales budget?

18. Exercise 12-27 Transfer Pricing Refer to the information for Aulman Inc. above. Required: 1....

Exercise 12-27 Transfer Pricing

Refer to the information for Aulman Inc.  above.

Required:

1.       Which division sets the maximum transfer price? Which division sets the minimum transfer price?

2.       Suppose the company policy is that all transfers take place at full cost. What is the transfer price?

3.       CONCEPTUAL CONNECTION Do you think that the transfer will occur at the company- mandated transfer price? Why or why not?

19. Marlene Bellamy purchased 3000 shares of Writeline Communications Limited at $5.50 per share using...

Marlene Bellamy purchased 3000 shares of Writeline Communications Limited at $5.50 per share using a margin loan to finance 50% of the purchase. She held the shares for exactly four months and sold them without any brokerage costs at the end of that period. During the four-month holding period, the shares paid $0.15 per share in cash dividends. Marlene was charged 9% annual interest on the margin loan. The maximum loan to value ratio allowed by the margin lender was 75%.

a. Calculate the initial value of the transaction, the margin loan balance and the equity position on Marlene’s transaction.

b. For each of the following share prices, calculate the actual margin loan to value percentage and indicate whether Marlene’s margin loan account would have excess equity or be subject to a margin call.

i. $4.50

ii. $7

iii. $3.30

c. Calculate the dollar amount of (i) dividends received and (ii) interest paid on the margin loan during the four-month holding period

d. Use each of the following sale prices at the end of the four-month holding period to calculate Marlene’s annualised rate of return on the Writeline Communications share transaction.

i. $5

ii. $6

iii. $7

Q

20. A retailing entity uses the Internet to execute and record its purchase transactions. The entity’s...

A retailing entity uses the Internet to execute and record its purchase transactions. The entity’s auditor recognizes that the documentation of details of transactions will be retained for only a short period of time. To compensate for this limitation, the auditor most likely would

1. Compare a sample of paid vendors’ invoices to the receiving records at year-end.


2. Plan for a large measure of tolerable misstatement in substantive tests.


3. Perform tests several times during the year, rather than only at year-end.


4. Increase the sample of transactions to be selected for cutoff tests.

21. Cost-based pricing assumes costs:

1. Cost-based pricing assumes costs:2. The last price a consumer paid or what they expect to pay is their:3. Marketers of new and innovative products or services are more likely to use a price skimming strategy if:4. While the manufacturers of the first electric cars charged relatively high prices to innovators and early adopters, they had to use a price skimming strategy because of:5. The ____________ occurs when firms find the unit cost drops as increased volume is sold.6. The primary reasons manufacturers offer seasonal discounts to retailers are to more easily plan production schedules and:7. Mona is selling her artwork at a local festival. Her art is selling well, but t-shirts she had made up with her artwork are not selling. She decides to offer a package price for her art with a t-shirt included. Mona is using:8. Retailers might offer targeted coupons to loyal customers using kiosk-type technology and ____________.9. If a telecommunications company drastically cut their price for cellular phone service in order to eliminate local competitors, the company could be charged with:10. It is the responsibility of ___________________ to determine the ethical approach to setting prices so consumers find value and the firm can make a profit.11. For a price skimming strategy to work, the product or service must:12. In addition to merchandise and payments, information flows throughout a supply chain. Which of the following is NOT a good characterization of the flow of information in a supply chain?13. International supply chains add layers of complexity to the flow of information, merchandise and payments. Neiman Marcus has been able to develop expedited shipments through customs, which gives it an advantage in having the most up-to-date merchandise, by _____________________.14. Today, when a customer orders merchandise from an online vendor, he or she immediately receives a confirmation message by e-mail. Usually within a day or two, a second message arrives stating that the order is in the mail. This is a type of a(n):15. If two companies use an electronic data interchange (EDI) to negotiate prices, specify product details, display pictures of new products, and offer sales promotions, the EDI is being used for the ____________ function in the four P's of marketing.16. An effective CPFR system manages:17. _______________ have dramatically reduced the time and labor associated with checking and receiving merchandise.18. At the BMW plant in Spartanburg, South Carolina, suppliers deliver parts every four hours when the plant is in operation and are responsible for removing any packaging or pallets used to deliver their products. BMW uses a ______________ inventory control system.19. After installing a(n)_______________ in their JIT system, Chocolate Tree, a retail chocolate store, was able to reduce lead time between the recognition that an order needed to be placed and the arrival of the needed merchandise.20. With more frequent shipments associated with QR systems, a retailer is:21. RFID offers the participants in the supply chain a powerful tool for tracking inventories and reducing handling. The main reason why it has NOT BEEN more widely adopted is:22. One of retailers' most fundamental activities is providing the right mix of merchandise and services.A) TrueB) False23. Retailers like Wal-Mart, Home Depot, and Kroger dictate to their suppliers all of the following EXCEPT:24. Some companies want to get its products into as many outlets as possible, understanding that the more exposure it gets, the more of its products it will sell. If this is consistent with the company's overall strategy, it will choose __________________.25. Retailers that offer a broad variety of merchandise, limited services and low prices are known as ______________________.26. Category killers are also known as:27. Many retail golf stores have driving ranges, some with visual imaging of famous golf courses. These driving ranges allow:28. Which of the following retail stores would emphasize personal selling the most as part of the firm's promotional efforts?29. Traditionally, retailers treated all their customers:30. Jordan directs her salespeople to increase their "share of wallet." Jordan is directing her salespeople to:31. Because the Internet offers little opportunity to touch, feel or try on merchandise before purchasing it, on-line retailers must addresses customers' need by ______________.32. ______________________ is the term used to describe when retailers use some combination of stores, catalogs and the Internet to sell merchandise.33. Which of the following is NOT one of the reasons a firm might employ electronic channels in multichannel retailing?34. As the old cliché claims, the three most import things in retailing are:35. Though a picture may be worth a thousand words, the most important facet of encoding is not what is received but what is sent.A) TrueB) False36. If there is a difference between the message that is sent and the message that is received, it is probably due to noise.A) TrueB) False37. Even the best marketing communication can be wasted if the sender does not gain the attention of the consumer.A) TrueB) False38. "Top-of-mind awareness" is when consumers indicate they know the brand when the name is presented to them.A) TrueB) False39. Commercial speech is defined as anything contained in a commercial.A) TrueB) False40. Gerald knows which IMC communication channels are available and knows how he will measure the results of his IMC efforts. To implement his IMC efforts, Gerald also needs to:41. The right communication channel to use in IMC is:42. The sender of an IMC message hopes the receiver is:43. National manufacturers and retailers pay a service company to monitor television ads around the country to ensure that their ads are seen in their entirety during the time frames that had been purchased. This service company helps avoid the IMC noise problem associated with:44. Which of the following is NOT one of the steps in the AIDA model?45. The IMC communications process:46. Integrated marketing communications include all of the following except:47. New technologies like PDAs, podcasts, and cell phones allow greater potential for ___________________ IMC efforts.48. Companies can gain a competitive advantage using the Internet to:49. Research has shown that IMC can make communications expenditures more effective and efficient by:50. Competitive parity, percentage-of-sales, and affordable budget are types of ________________________ IMC budgeting.

22. Brief Exercise 2-7 Selected transactions for the Joel Berges Company are presented in journal...

Brief Exercise 2-7

Selected transactions for the Joel Berges Company are presented in journal form below.

Post the transactions to T-accounts and determine each account’s ending balance. (Post entries in the order presented in the problem statement.)

23. Specialty Toysa

Specialty Toys- Specialty Toys, Inc. sells a variety of new and innovative children's toys. Management learned that the preholiday season is the best time to introduce a new toy, because many families use this time to look for new ideas for December holiday gifts. When Specialty discovers a new toy with good market potential, it chooses an October market entry date. In order to get toys in its stores by October, Specialty places one-time orders with its manufacturers in June or July of each year. Demand for children's toys can be highly volatile. If a new toy catches on, a sense of shortage in the marketplace often increases the demand to high levels and large profits can be realized. However, new toys can also flop, leaving Specialty stuck with high levels of inventory that must be sold at reduced prices. The most important question the company faces is deciding how many units of a new toy should be purchased to meet anticipated sales demand. If too few are purchased, sales will be lost; if too many are purchased, profits will be reduced because of low prices realized in clearance sales. For the coming season, Specialty plans to introduce a new product called WeatherTeddy. This variation of a talkingteddy bear is made by a company in Taiwan. When a child presses Teddy's hand,the bear begins to talk. A built-in barometer selects one of five responses that predict the weather conditions. The responses range from "It looks to be a very nice day! Have fun" to "I think it may rain today. Don't forget your umbrella." Tests with the product show that, even though it is not a perfect weather predictor, its predictions are surprisingly good. Several of Specialty's managers claimed Teddy gave predictions of the weather that were as good as many local television weather forecasters. As with other products, Specialty faces the decision of how many Weather Teddy units to order for the upcoming holiday season. Members of the management team suggested order quantities of 15,000, 18,000, 24,000, or 28,000 units. The wide range of order quantities indicates considerable disagreement concerning the market potential. The product management team asks you for an analysis of the stock-out probabilities for various order quantities, an estimate of the profit potential, and to help make an order quantity recommendation. Specialty expects to sell Weather Teddy for $24 based on a cost of $16 per unit. If inventory remains after the holiday season, Specialty will sell all surplus inventories for $5 per unit. After reviewing the sales history of similar products, Specialty's senior forecaster predicted an expected demand of 20,000 units with a .95 probability that demand would be between 10,000 units and 30,000 units. Management Report-Prepare a managerial report that addresses the following issues and recommends an order quantity for the Weather Teddy product. 1. Use the sales forecaster's prediction to describe a normal probability distribution that can be used to approximate thedemand distribution. Sketch the distribution and show its mean and standard deviation. 2. Compute the probability of a stock-out for the order quantities suggested by members of the management team. 3. Compute the projected profit for the order quantities suggested by the management team under three scenarios: worst case in which sales = 10,000 units, most likely case in which sales = 20,000 units and best case in which sales = 30,000 units. 4. One of Specialty's managers felt that the profit potential was so great that the order quantity should have a 70% chance of meeting demand and only a 30% chance of any stock-outs. What quantity would be ordered under this policy, and what is the projected profit under the three sales scenarios? 5. Provide your own recommendations for an order quantity and note the associated profit projections. Provide a rationale for your recommendation.

24. All jobs at Frankfurt Inc., which uses a job order costing system, go through two departments...

All jobs at Frankfurt Inc., which uses a job order costing system, go through two departments (Fabrication and Assembly). Overhead is applied to jobs based on machine hours in Fabrication and on direct labor hours in Assembly. In December 2012, corporate management estimated the following production data for 2013 in setting its predetermined OH rates