A manufacturing company would want its capacity to lag demand under conditions where demand is expected to decrease in the future. This means that the company's capacity is lower than the demand for its products, so it is not producing more than it can sell.
On the other hand, a manufacturing company would want its capacity to lead demand under conditions where demand is expected to increase in the future. This means that the company's capacity is higher than the demand for its products, so it can produce more than it is currently selling. This helps the company prepare for future demand and avoid shortages.
In summary, a manufacturing company would want its capacity to lag demand when demand is decreasing, and lead demand when demand is increasing.
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New Product Development discussion; Review this chapter's opening vignette on True Buch Kombucha and gather additional information about this and other products in this category by going online to visit brand websites and social media sites. Also, review the latest news in this category. Present your ideas on how the online environment can be used to market True Buch Kombucha to consumers.
The online environment can be used to market True Buch Kombucha to consumers in a variety of ways. First, social media platforms can be used to create targeted ads that reach potential customers based on their interests and demographics.
Another way to market True Buch Kombucha online is through influencer marketing. This involves partnering with influencers or bloggers who have a large following and can promote the product to their audience. This can be an effective way to reach a wider audience and build brand awareness. Lastly, the company can use email marketing to communicate with customers and offer promotions or discounts. This can help to drive sales and build customer loyalty. Overall, the online environment offers a variety of tools and strategies for marketing True Buch Kombucha to consumers. By leveraging social media, influencer marketing, and email marketing, the company can reach a wider audience and build a strong brand presence online.
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A US-based speculator is considering the purchase of a three-month Japanese yen put option on ¥1,000,000, with a strike price of 97 cents per ¥100. The option is American-style, with a premium of 2 cents per ¥100. The current spot exchange rate is 98 cents per ¥100 and the three-month forward exchange rate is 99 cents per ¥100.
(a) (2 points) Suppose the speculator decides to purchase this contract. Does this decision indicate that the speculator holds a bullish or bearish view on the Japanese yen against the US dollar?
(b) (2 points) What are the current intrinsic value and time value of the option contract?
(c) (2 points) If the speculator holds the contract to expiration, determine his total profit/loss if the
spot price of the yen becomes 94 cents per ¥100 in three months.
(d) (4 points) If the speculator holds the contract to expiration, graph the put option’s cash flow (i.e. profit/loss) schedule in US cents per ¥100 purchased. Label on the graph the premium, strike price, and the break-even point of the option. Please also label the axes of the graph.
The graph shows that the speculator will make a profit if the spot price of the yen drops below the strike price of 97 cents per ¥100, and the profit increases as the spot price of the yen decreases. The maximum profit of 4 cents per ¥100 will be made when the spot price of the yen is 94 cents per ¥100. The speculator will make a loss if the spot price of the yen is above the strike price, and the loss increases as the spot price of the yen increases.
(a) The decision to purchase this contract indicates that the speculator holds a bearish view on the Japanese yen against the US dollar.
(b) The current intrinsic value of the option contract is 0, as the spot exchange rate is higher than the strike price. The current time value of the option is 2 cents per ¥100.
(c) If the spot price of the yen becomes 94 cents per ¥100 in three months, the speculator will make a total profit of 4 cents per ¥100 from the option contract.
(d) The graph of the put option’s cash flow schedule in US cents per ¥100 purchased can be seen below. The x-axis represents the spot price of the yen and the y-axis represents the option’s profit/loss. The premium of 2 cents per ¥100 is labeled as “Premium” on the graph, the strike price of 97 cents per ¥100 is labeled as “Strike Price” and the break-even point of the option is labeled as “Break-Even”.
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(a) The speculator holds a bearish view on the Japanese yen against the US dollar.
(b) The current intrinsic value of the option contract is zero
(c) If the spot price of the yen becomes 94 cents per ¥100 in three months, the speculator will exercise the option and sell the yen at the strike price of 97 cents per ¥100.
(d) The maximum loss is the premium paid for the option, and the maximum profit is unlimited.
(a) The speculator holds a bearish view on the Japanese yen against the US dollar. This is because he is buying a put option, which gives him the right to sell the yen at a fixed price in the future. If he believes that the yen will depreciate against the dollar, he can exercise the option and sell the yen at a higher price than the current market price.
(b) The current intrinsic value of the option contract is zero, because the spot exchange rate (98 cents per ¥100) is higher than the strike price (97 cents per ¥100). The time value of the option contract is the premium (2 cents per ¥100), which represents the cost of holding the option until expiration.
(c) If the spot price of the yen becomes 94 cents per ¥100 in three months, the speculator will exercise the option and sell the yen at the strike price of 97 cents per ¥100. His total profit will be the difference between the strike price and the spot price, minus the premium: (97 - 94) x ¥1,000,000 / 100 - (2 x ¥1,000,000 / 100) = $1,000.
(d) The put option’s cash flow schedule is shown in the graph below. The premium is represented by the horizontal line at -2 cents per ¥100, the strike price is represented by the vertical line at 97 cents per ¥100, and the break-even point is represented by the intersection of the two lines. The x-axis represents the spot price of the yen in US cents per ¥100, and the y-axis represents the profit/loss in US dollars.
| -
| -
| -
| -
| -
| -
| -
| -
| -
| -
---------------------|---------------------------
| 94 95 96 97 98 99
As the graph shows, the speculator will make a profit if the spot price of the yen falls below the break-even point of 95 cents per ¥100, and will incur a loss if the spot price of the yen rises above the break-even point. The maximum loss is the premium paid for the option, and the maximum profit is unlimited.
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You have $25,000 to invest and you need $80,000 for a down
payment and closing costs on a house. If you want to buy the house
in 7 years, what rate of interest do you need to earn?
Explanation:
Rate Needed: 12.3%

You have $25,000 to invest and you need $80,000 for a down payment and closing costs on a house. If you want to buy the house in 7 years, what rate of interest do you need to earn?
To calculate the required interest rate, we need to use the future value formula:
FV = PV x (1 + r)^n
Where: FV = future value (in this case, $80,000) PV = present value (in this case, $25,000) r = interest rate n = number of years
Substituting the values we have:
$80,000 = $25,000 x (1 + r)^7
Dividing both sides by $25,000 and taking the seventh root:
(80,000 / 25,000)^(1/7) = 1 + r
1.12315 = 1 + r
r = 0.12315 or 12.315%
Therefore, you would need to earn an interest rate of 12.315% to reach your goal of $80,000 in 7 years with an initial investment of $25,000.
You have $25,000 to invest and you need $80,000 for a down payment and closing costs on a house. If you want to buy the house in 7 years, you need to earn an interest rate of 14.66%
To find out the interest rate you need to earn to have $80,000 in 7 years, you can use the formula for compound interest: A = P(1 + r/n)^(nt), where A is the final amount, P is the principal amount, r is the annual interest rate, n is the number of times interest is compounded per year, and t is the number of years.
In this case, you want to find out the interest rate r, so you can rearrange the formula to solve for r:
A = P(1 + r/n)^(nt)
A/P = (1 + r/n)^(nt)
(A/P)^(1/nt) = 1 + r/n
(A/P)^(1/nt) - 1 = r/n
r = n[(A/P)^(1/nt) - 1]
Plugging in the given values:
r = 1[($80,000/$25,000)^(1/(1*7)) - 1]
r = 1[(3.2)^(1/7) - 1]
r = 0.1466 or 14.66%
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3. If a firm goes from zero debt to successively higher levels
of debt, why would you expect its stock price to rise at first,
then hit a peak, and then begin to decline?
A firm increases its debt levels, its stock price may rise at first, reach a peak, and then begin to decline.
The stock price of a firm is typically directly correlated to the amount of debt that a firm holds. As the debt of a firm increases, the stock price may initially rise due to increased financial leverage.
However, at a certain point, the increased debt can signal that the firm may be taking on too much risk, which could lead to a decrease in the stock price.
1. As the firm takes on more debt, it is able to leverage its assets to generate more profits. This leads to an increase in the stock price as investors see the potential for higher returns.
2. However, as the level of debt continues to increase, the firm becomes more risky. This is because the firm has to pay interest on the debt, which reduces the amount of profits available to shareholders. As a result, the stock price may hit a peak and then begin to decline.
3. Additionally, if the firm's level of debt becomes too high, it may face difficulty in meeting its debt obligations. This can lead to a decline in the stock price as investors become concerned about the firm's ability to repay its debt.
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Students are required to write a report covering the following:· Introduction: Should consist of the details of the industry, company, global cultural & diversity issues or any international business issues such as pertaining to managing international logistics or international banking or international suppliers or customers in general or during the pandemic faced by the organization and provide the necessary background for the global ramifications being addressed by the project.· Methodology: Should discuss the scientific approach taken to solve the problem. The details of the data sources, primary & secondary data collected & suitability of data to address the global diversity & challenges must be covered. The students may try to contact the embassies & other organizations to get an understanding of linguistic, cultural & legal requirements of doing business in a different part of the world & can frame their analysis, recommendations accordingly.· Analysis and results: Should include the procedure for the analysis conducted and the results of the said analysis using various statistical tools & procedures.· Recommendations and Implementation: Should include the recommendations made to the company and industry in general based on the analysis. The recommendations must offer potential solutions to the global issues identified.· International extrapolation and reflection of learnings: Should talk in depth about the international component of the project. This can be in the form of an extrapolation of how the problem could be addressed in a different country, for instance. The student should also reflect in this section the global insights gained from working on the project & how this experience potentially adds value to the skill sets acquired during the course of the complete program. Student may also add a section of how other companies are handling such issues or best practices to handle such issues.The project report should have 10-15 pages. The contents should be typed in Times New Roman font 12, justified, 1 ½ line space, 1-inch margin on all sides. All pages should be numbered. The Report should be of 8000-10000 words.
When writing a report covering global cultural and diversity issues or international business issues, it is important to include introduction, methodology, analysis and result. .
Your introduction should provide the necessary background information on the industry, company, and global ramifications being addressed by the project.
The methodology should discuss the scientific approach taken to solve the problem, along with details of the data sources, primary and secondary data collected, and their suitability for addressing the global diversity and challenges.
The analysis and results section should include the procedure for the analysis conducted and the results of said analysis, while the recommendations and implementation section should include recommendations made to the company and industry based on the analysis.
Finally, the international extrapolation and reflection of learnings section should talk in depth about the international component of the project and reflect on the global insights gained from working on the project.
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In the previous week, we have discussed planning budgets that are based on standards. How are standards developed and are they only useful for companies that manufacture products or do service type industries utilize standards? Please explain and give examples!
Standards are developed through a collaborative process involving input from various stakeholders, including industry experts, regulators, and consumers.
Standards are developed through various organizations and research-based studies that develop a level of quality, consistency, and safety for products and services. These standards are applicable to all types of businesses, from manufacturing and production to service-oriented industries, as they set guidelines for quality and safety that need to be met for the products or services being provided.
For example, the ISO (International Organization for Standardization) sets international standards for various industries such as construction and healthcare, and OSHA (Occupational Safety and Health Administration) has standards for workplace safety that apply to all types of businesses.
Overall, standards are an important tool for businesses of any type as they ensure that quality and safety measures are met and followed in order to ensure customer satisfaction and safety.
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Cost Cutting: Your company, is analyzing a potential opportunity to cut costs. It can spend $1,750,000 today on the purchase and $ 10,000 on the installation of a new automated processing line. The equipment will have a six-year life, at which time it can be sold for $278,000. The equipment qualifies as a Class 8 asset with a 20% CCA rate. Since the equipment was be purchased in 2017, it was subject to the half-year rule. The benefit of installing the new equipment is a reduction in labor costs of $700,000 per year. The new process will lead to an immediate increase in Net Working Capital (NWC) of $25,000, which will be recovered at the conclusion of the project. The firm has a 35% corporate tax rate and it wants a 18% return. Should they undertake this cost-cutting program?
1. What is the NPV for the project?
The NPV for the project is $1,009,182 and the NPV is positive, the company should undertake this cost-cutting program.
The NPV for the project can be calculated using the following steps:
Step 1: Calculate the initial investment, which includes the purchase and installation costs.
Initial investment = $1,750,000 + $10,000 = $1,760,000
Step 2: Calculate the annual depreciation using the CCA rate and half-year rule.
Depreciation = ($1,760,000 * 20%) * 0.5 = $176,000
Step 3: Calculate the annual tax savings from depreciation.
Tax savings = $176,000 * 35% = $61,600
Step 4: Calculate the annual cash flow from the reduction in labor costs and tax savings.
Cash flow = $700,000 + $61,600 = $761,600
Step 5: Calculate the present value of the annual cash flows using the 18% discount rate.
PV = $761,600 / (1 + 18%)^1 + $761,600 / (1 + 18%)^2 + $761,600 / (1 + 18%)^3 + $761,600 / (1 + 18%)^4 + $761,600 / (1 + 18%)^5 + $761,600 / (1 + 18%)^6 = $2,672,784
Step 6: Calculate the salvage value of the equipment at the end of its life.
Salvage value = $278,000 / (1 + 18%)^6 = $88,450
Step 7: Calculate the change in NWC at the end of the project.
Change in NWC = $25,000 / (1 + 18%)^6 = $7,948
Step 8: Calculate the NPV of the project by subtracting the initial investment from the sum of the present value of the cash flows, salvage value, and change in NWC.
NPV = $2,672,784 + $88,450 + $7,948 - $1,760,000 = $1,009,182
Therefore, the NPV for the project is $1,009,182. Since the NPV is positive, the company should undertake this cost-cutting program.
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PS this is for SOUTH AFRICA
New toys Ltd carries on business as a manufacturer of toys from its main branch in the Republic. The company also operates a depot in Botswana, where sales are made to customers living in Botswana. The Botswanan depot does not operate as an independent branch. New toys Ltd has been registered as a Category ‘A’ vendor. All amounts include VAT where appropriate. The following information is provided
Receipts:
February March
1. Cash sales made by the Republic branch to South African customers 199 300 182 200
Cash sales made by the Botswanan depot to Botswanan customers (these goods were forwarded to the depot on 10 January and were all sold by the end of March) 45 400 56 800
2. Insurance payment received on an insurance claim for trading stock stolen in the Republi 176 500 3. Interest received on a loan to a subsidiary company in the Republic 19 180 4. Cash received for the sale of an old machine to Mr Bell, the majority shareholder. Mr Bell is not a registered vendor. The machine originally cost R20 000 and had a book value of R5 000 on the date of sale. The open market value on the date of sale was R17 980. 16 900 expenses February March
1) wages and salareis 69 340 62 500
2) property rate on the business property 7 210 7 210
3) Electricity and water 6 583 6 355
4) telephone 6 412 6 070
5) raw materials purchased from other vendors 142 300 96 700
6) cost of entertaining important customer at cariouse restuartans in durban 6 868 6 412
7) purchase of a new single cab bakkie for use as a delivery vechile * cost 176 500 * Finance charges paid 14 050 8) Cash cost of a new montor car purchased for general use within the business 96 700 9) Petrol for delivery vechilcle and the new motor car 6 412 6526
10) maintenance of delivery cehicle and the new motor car 6 298 6412
11) new toys purchased three water bottles fo the cold water dispening machine in the staff cantee. These bottles cost R2 000 each and wer pid for in March 11 500 Required calculate the VAT payable by or refundable to New Toys Ltd in respect of its two - month tax period ended 31 March 2020.
( Show detailed workings of how you would deal with each item)
NB Round off your calculation to the nearest Rand.
The VAT payable or refundable for New Toys Ltd can be calculated by subtracting the input tax from the output tax for the two-month tax period ended 31 March 2020. The New Toys Ltd is entitled to a VAT refund of R282 for the two-month tax period ended 31 March 2020.
The output tax is the VAT charged on sales and the input tax is the VAT paid on purchases. The detailed workings for each item are shown below:
Output Tax:
1. Cash sales made by the Republic branch to South African customers: (199300 + 182200) x 15% = 57150
2. Cash sales made by the Botswanan depot to Botswanan customers: (45400 + 56800) x 15% = 15330
3. Insurance payment received on an insurance claim for trading stock stolen in the Republic: 176500 x 15% = 26475
4. Interest received on a loan to a subsidiary company in the Republic: 19180 x 15% = 2877
5. Cash received for the sale of an old machine to Mr Bell: 16900 x 15% = 2535
Total Output Tax = 57150 + 15330 + 26475 + 2877 + 2535 = 104367
Input Tax:
1. Wages and salaries: (69340 + 62500) x 15% = 19764
2. Property rate on the business property: (7210 + 7210) x 15% = 2163
3. Electricity and water: (6583 + 6355) x 15% = 1947
4. Telephone: (6412 + 6070) x 15% = 1872
5. Raw materials purchased from other vendors: (142300 + 96700) x 15% = 35250
6. Cost of entertaining important customer at various restaurants in Durban: (6868 + 6412) x 15% = 1992
7. Purchase of a new single cab bakkie for use as a delivery vehicle: (176500 + 14050) x 15% = 28583
8. Cash cost of a new motor car purchased for general use within the business: 96700 x 15% = 14505
9. Petrol for delivery vehicle and the new motor car: (6412 + 6526) x 15% = 1941
10. Maintenance of delivery vehicle and the new motor car: (6298 + 6412) x 15% = 1907
11. New toys purchased three water bottles for the cold water dispensing machine in the staff canteen: 11500 x 15% = 1725
Total Input Tax = 19764 + 2163 + 1947 + 1872 + 35250 + 1992 + 28583 + 14505 + 1941 + 1907 + 1725 = 104649
VAT Payable or Refundable = Output Tax - Input Tax = 104367 - 104649 = -282
Therefore, New Toys Ltd is entitled to a VAT refund of R282 for the two-month tax period ended 31 March 2020.
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If a corporation has earnings per share of $5 and the marketprice of the share is $50, then the price-earnings ratio will be:Select one:a. 55 b. 0.1 c. None of the choices d. 10
If a corporation has earnings per share of $5 and the market price of the share is $50,The price-earnings ratio will be 10. Option D.
The price-earnings ratio (P/E ratio) is a measure of the value of a company's stock. It is calculated by dividing the market price of a share by the earnings per share (EPS).
In this case, the market price of the share is $50 and the EPS is $5.
To calculate the P/E ratio, we use the following formula:
P/E ratio = Market price of share / Earnings per share
Plugging in the given values, we get:
P/E ratio = $50 / $5
P/E ratio = 10
Therefore, the price-earnings ratio for this corporation is 10. Option D.
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What would a restaurant manager consider when reviewing a recipe that a chef might not?
The three steps of the recipe standardization process are amount modification, product evaluation, and recipe verification. Verifying a recipe is carefully reading it, following it, assessing the yield, and noting any modifications.
What factors need to be taken into account to consistently produce high-quality products and standardized recipes?The name of the submitted recipe should match the name on the menu as closely as possible.
Total Yield is the number of servings, or parts, that a recipe yields, as well as frequently the recipe's overall weight or volume.
Portion size is the quantity or dimension of a single serving.
What specific details do a standard recipe contain that a regular recipe does not?An exact, quantifiable amount of each component and the technique of preparation required to reliably generate a high-quality result are specified in a standardized recipe. There includes a list of the precise steps to be taken, the equipment to be used, and the number and caliber of the ingredients.
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Evaluate the following statement from Article 2: "……it seemsShoprite is setting itself up to win in the long term throughprecision retailing…"
It seems that the statement from Article 2 is referring to Shoprite's strategy of precision retailing.
Precision retailing is a method of retailing that focuses on providing customers with the exact products and services they need, when they need them. This is achieved through a combination of data analysis, targeted marketing, and efficient supply chain management. By using precision retailing,
Shoprite is able to better understand and meet the needs of its customers, which can help to increase customer loyalty and sales.
Therefore, it is likely that Shoprite is setting itself up to win in the long term through precision retailing, as the statement from Article 2 suggests.
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Can you please help with a 3 year projection
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME - USD ($) shares in Thousands, $ in Thousands Feb. 03, 2019 Feb. 02, 2020 Jan. 31, 2021 Jan 31. 2022 Jan 31. 2022 Jan 31. 2024 Income Statement [Abstract] Net revenue $ 3,288,319 $ 3,979,296 $ 4,401,879 Cost of goods sold 1,472,032 1,755,910 1,937,888 Gross profit 1,816,287 2,223,386 2,463,991 Selling, general and administrative expenses 1,110,379 1,334,247 1,609,003 Amortization of intangible assets 72 29 5,160 Acquisition-related expenses 0 0 29,842 Income from operations 705,836 889,110 819,986 Other income (expense), net 9,414 8,283 (636) Income before income tax expense 715,250 897,393 819,350 Income tax expense 231,449 251,797 230,437 Net income 483,801 645,596 588,913 Other comprehensive income (loss), net of tax: Foreign currency translation adjustment (73,885) (7,773) 47,426 Comprehensive income $ 409,916 $ 637,823 $ 636,339 Basic earnings per share $ 3.63 $ 4.95 $ 4.52 Diluted earnings per share $ 3.61 $ 4.93 $ 4.50 Basic weighted-average number of shares outstanding (in shares) 133,413 130,393 130,289 Diluted weighted-average number of shares outstanding (in shares) 133,971 130,955 130,871
A 3-year projection of the consolidated statements of operations and comprehensive income for the given company can be done by forecasting the values of each item in the income statement based on the historical data and the expected trends in the future.
The projected values for each item can be calculated using different forecasting methods, such as the average growth rate, the percentage of revenue, or the regression analysis.
For example, the net revenue can be projected by applying the average growth rate of the past three years to the most recent year's revenue. The cost of goods sold can be projected as a percentage of the projected net revenue, based on the historical relationship between the two items.
The gross profit can be calculated by subtracting the projected cost of goods sold from the projected net revenue. The selling, general, and administrative expenses can be projected as a percentage of the projected net revenue, based on the historical relationship between the two items.
The amortization of intangible assets, acquisition-related expenses, and other income or expenses can be projected based on the expected future events and the historical trends. The income before income tax expense can be calculated by subtracting the projected expenses from the projected income from operations.
The income tax expense can be projected as a percentage of the projected income before income tax expense, based on the historical relationship between the two items. The net income can be calculated by subtracting the projected income tax expense from the projected income before income tax expense.
The other comprehensive income or loss can be projected based on the expected future events and the historical trends. The basic and diluted earnings per share can be calculated by dividing the projected net income by the projected basic and diluted weighted-average number of shares outstanding.
The projected values for each item in the income statement can be summarized in a table, as shown below:
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME - USD ($) shares in Thousands, $ in Thousands Feb. 03, 2019 Feb. 02, 2020 Jan. 31, 2021 Jan 31. 2022 (Projected) Jan 31. 2023 (Projected) Jan 31. 2024 (Projected) Income Statement [Abstract]
Net revenue $ 3,288,319 $ 3,979,296 $ 4,401,879 $ 4,858,071 $ 5,346,878 $ 5,882,566 Cost of goods sold 1,472,032 1,755,910 1,937,888 2,134,677 2,348,144 2,582,958 Gross profit 1,816,287 2,223,386 2,463,991 2,723,394 2,998,734 3,299,608
Selling, general and administrative expenses 1,110,379 1,334,247 1,609,003 1,899,903 2,214,894 2,556,383 Amortization of intangible assets 72 29 5,160 5,676 6,244 6,868 Acquisition-related expenses 0 0 29,842 32,826 36,108 39,719
Income from operations 705,836 889,110 819,986 784,989 741,488 696,638 Other income (expense), net 9,414 8,283 (636) (700) (770) (847) Income before income tax expense 715,250 897,393 819,350 784,289 740,718 695,791 Income tax expense 231,449 251,797 230,437 226,744 214,208 201,579
Net income 483,801 645,596 588,913 557,545 526,510 494,212 Other comprehensive income (loss), net of tax: Foreign currency translation adjustment (73,885) (7,773) 47,426 52,168 57,385 63,123 Comprehensive income $ 409,916 $ 637,823 $ 636,339 $ 609,713 $ 583,895 $ 557,335
Basic earnings per share $ 3.63 $ 4.95 $ 4.52 $ 4.28 $ 4.02 $ 3.78 Diluted earnings per share $ 3.61 $ 4.93 $ 4.50 $ 4.26 $ 4.00 $ 3.76 Basic weighted-average number of shares outstanding (in shares) 133,413 130,393 130,289 130,185 130,081 130,489
Diluted weighted-average number of shares outstanding (in shares) 133,971 130,955 130,871 130,787 130,703 131,111
The projected values are based on the assumptions and the forecasting methods used, and they may differ from the actual values in the future due to the uncertainty and the variability of the business environment.
Therefore, the projections should be updated and revised periodically to reflect the changes in the assumptions and the actual performance of the company.
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Which of the following describes an internal control procedure for payroll?
A. distributing paychecks to employees in person
B. choosing a weekly pay schedule because employees prefer it
C. requiring employees to cash their checks at a specific bank
D. providing a salary to commissioned employees
Answer: A. Distributing paychecks to employees in person
Explanation:
did it
What are the 4 types of business models?
Business model can be classified into 4 classes, such as direct sales, franchise, freemium, and also subscription.
The 4 types of business models are:
1. Direct sales: This model involves selling products or services directly to customers without the use of intermediaries. Examples of companies that use this model include Dell and Avon.
2. Franchise: In this model, a company licenses its business model and brand to a third party, who then operates the business under the original company's name. Examples of companies that use this model include McDonald's and Subway.
3. Freemium: This model involves offering a basic product or service for free, while charging for additional features or services. Examples of companies that use this model include Spotify and Dropbox.
4. Subscription: In this model, customers pay a recurring fee for access to a product or service. Examples of companies that use this model include Netflix and Birchbox.
Overall, these 4 types of business models are commonly used by companies to generate revenue and build successful businesses.
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Devon was surprised that his pay check was less than he had expected. His
paycheck was reduced because
had been withheld by his employer.
OA. incentives
B. commissions
C. gross pay
OD. deductions
The answer is C. Gross pay. Devon's paycheck was reduced because it had been withheld by his employer as gross payment.
"Gross pay" mean?Before any taxes, benefits, or other payroll deductions are done , an employee's gross salary is what they are paid. Net pay, often known as take-home pay, is the amount that is given after all withholdings have been taken into consideration.
Calculate my gross pay?Start by determining the total amount need for each pay period in order to see an employee's gross compensation. Hourly workers multiply their total hours worked by their hourly rate, plus any overtime. Employees on a salary split their yearly earnings by the number of pay periods.
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a) Marketing services is more difficult that marketing goods. Do you agree with this statement? Justify your answer using examples.
(10 Marks)
b) Companies increasingly view technology as a way to improve the customer experience. Do you agree with this statement? Outline some of the potential dangers companies face when replacing face to face service with machines and online service.
(15 Marks)
a) I do agree that marketing services is more difficult than marketing goods. b) I do agree that companies increasingly view technology as a way to improve the customer experience. Technology can help companies provide faster, more efficient, and more personalized service to their customers.
A) marketing services makes it harder to communicate the value and benefits of a service to potential customers. For example, it is easier to market a new smartphone by showing its features and capabilities in a commercial or advertisement, than it is to market a consulting service where the benefits are not as tangible or easily demonstrable.Another challenge with marketing services is that they are often more complex and customized than goods.
B)However, there are also potential dangers when replacing face-to-face service with machines and online service. One danger is that customers may feel less connected to the company and may not receive the same level of personalized service. For example, a customer may prefer to speak with a human representative rather than a chatbot, as they may feel that their concerns are being more adequately addressed.
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at and Daphne Carrigan are a married couple in their 40’s. They are Australian resident individuals for income tax purposes. The couple has two dependent children, Alex aged 6 and Payne aged 8. Pat and Daphne do not have private health cover. These are the facts relevant to their current income year:
Daphne is employed as a teacher at university. Her employer-issued PAYG payment, summary uploaded to her ATO profile, reflects the following:
Gross salary $20,000
PAYG withheld from her salary $380
Daphne owns shares in an ASX listed company. This company paid $3,600 into her bank account after declaring fully franked dividends. The company is liable to pay tax at the rate of 30%. Daphne’s franking credits in relation to these dividends total $1,542.86.
This table shows you the calculation of Daphne’s taxable income if the question required you to calculate her taxable income. Note that in order to meet the assessment criteria for ordinary income items, you must use section 6-5 ITAA97 and you must add the relevant characteristic that fits with the income item – we cover these in Topic 3. An answer for section 6-5 ITAA97 is incomplete if you don’t add a correct characteristic. To earn the mark for each item, all of the elements must be present in your answer. See the Topic 1 Learning guide that lists the remaining sections.
This is the calculation of Daphne’s taxable income for the 2020–2021 income year:
$
Mark
Salary, s 6-5 ITAA97 income from employment, or regular and periodic
20,000
½
Dividends, s 44 ITAA36
3,600
½
Franking credits, s 207-20 ITAA97
1,543
½
Taxable income
$25,143
Pat operates his own business called Carrigan Sports Management. This business acts as the manager for professional sports stars in several sporting codes to negotiate their contracts, and to find them sponsorship deals and paid public appearances. The business records of Carrigan Sports Management reflect the following for the income year:
Turnover, comprising of commission for services to clients, ordinary income, s 6-5 ITAA97, income from business $3,230,000
Tax deductible expenses including rent, council rates and taxes, electricity, telephone, internet charges, s 8-1 ITAA97 $1,235,000
Tax deductible salaries paid to staff, s 8-1 ITAA97 $650,000
Capital allowances, Div 328 ITAA97 (tax deductible depreciation) on office equipment and computers $145,000
During the income year, Pat remitted PAYG payments of $400,000 to the ATO in prepayment of his income tax liability arising from his business.
Pat also rented out a unit that he owns in a unit complex in St Lucia to a tenant. These are the relevant details:
Rent received, ordinary income, s 6-5 ITAA97, income from property $20,000
Tax deductible expenses for the rental property, s 8-1 ITAA97 $15,000
Tax deductible interest charged on the mortgage loan that Pat used to fund the purchase cost of the unit, s 8-1 ITAA97 $10,000
This table shows you the calculation of Pat’s taxable income if the question required you to calculate his taxable income.
$ Mark
Turnover, commission, s 6-5 ITAA97, ordinary income, income from business
$3,230,000
½
Expenses for rent, rates, electricity, telephone, internet, s 8-1 ITAA97
($1,235,000)
½
Salaries, s 8-1 ITAA97
($650,000)
½
Capital allowances, Div 328 ITAA97
($145,000)
½
Rent, s 6-5 ITAA97, ordinary income, income from property
$20,000
½
Expenses for the rental property, s 8-1 ITAA97
($15,000)
½
Interest, s 8-1 ITAA97
($10,000)
½
Taxable income
$1,195,000
You are required to:
Calculate Daphne’s tax payable or refundable. Provide all your calculations, explanations, formulas and bases for calculations.
Calculate Pat’s tax payable or refundable. Provide all your calculations, explanations, formulas and bases for calculations.
Daphne's Tax Payable or Refundable: Daphne's tax payable is $3694.86.
1. Calculate Daphne's taxable income:
Salary: $20,000
Dividends: $3,600
Franking credits: $1,543
Total taxable income: $25,143
2. Calculate Daphne's tax payable:
According to the 2020-2021 tax rates for individuals, Daphne's tax payable is calculated as follows:
$0 for the first $18,200 of taxable income
+ $3572 (19% of the amount over $18,200)
= $3572
3. Calculate Daphne's Medicare levy:
The Medicare levy is 2% of taxable income, so Daphne's Medicare levy is:
$25,143 x 0.02 = $502.86
4. Calculate Daphne's total tax liability:
Total tax liability = tax payable + Medicare levy
= $3572 + $502.86
= $4074.86
5. Calculate Daphne's tax refundable:
Tax refundable = PAYG withheld - total tax liability
= $380 - $4074.86
= -$3694.86
Therefore, Daphne's tax payable is $3694.86.
Pat's Tax Payable or Refundable:
1. Calculate Pat's taxable income:
Turnover: $3,230,000
Expenses for rent, rates, electricity, telephone, internet: -$1,235,000
Salaries: -$650,000
Capital allowances: -$145,000
Rent: $20,000
Expenses for the rental property: -$15,000
Interest: -$10,000
Total taxable income: $1,195,000
2. Calculate Pat's tax payable:
According to the 2020-2021 tax rates for individuals, Pat's tax payable is calculated as follows:
$0 for the first $18,200 of taxable income
+ $3572 (19% of the amount over $18,200)
+ $29,467 (32.5% of the amount over $45,000)
+ $157,225 (37% of the amount over $120,000)
+ $316,650 (45% of the amount over $180,000)
= $506,914
3. Calculate Pat's Medicare levy:
The Medicare levy is 2% of taxable income, so Pat's Medicare levy is:
$1,195,000 x 0.02 = $23,900
4. Calculate Pat's total tax liability:
Total tax liability = tax payable + Medicare levy
= $506,914 + $23,900
= $530,814
5. Calculate Pat's tax refundable:
Tax refundable = PAYG withheld - total tax liability
= $400,000 - $530,814
= -$130,814
Therefore, Pat's tax payable is $130,814.
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Lippborg Inc. is making good profits, even though growth is slowing down a bit. So far the company has not paid out cash to its shareholders, however the CFO wants to start paying dividend or to start a share repurchase program. What is the initial question and what should the CFO consider in order to decide on a possible pay out? Explain briefly.
The initial question that the CFO should consider is: "What is the best way to return value to shareholders?"
In order to decide on a possible payout, the CFO should consider the following factors:
1. Company's financial situation: The CFO should evaluate the company's current financial situation and future prospects to determine if the company can afford to pay out dividends or repurchase shares without jeopardizing its financial stability.
2. Shareholder preferences: The CFO should consider the preferences of the company's shareholders. Some shareholders may prefer dividends, while others may prefer share repurchases.
3. Tax implications: The CFO should also consider the tax implications of each option. Dividends are typically taxed at a higher rate than capital gains from share repurchases.
4. Market conditions: The CFO should consider the current market conditions and the impact that a dividend or share repurchase may have on the company's stock price.
Overall, the CFO should weigh the pros and cons of each option and make a decision that will maximize shareholder value while maintaining the company's financial stability.
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4. Types of credit card fees - Annual fees, transaction fees,late-payment fees, bounced-check fees, and over-the-limit fees
A credit card account may have many types of fees. Common types of fees include the annual fee, the transaction fee, the late-payment fee, the bounced-check fee, and the over-the-limit fee. these fees must be disclosed to applicants before they sign up for a credit card. fees are usually disclosed in a credit card disclosure box, similar to the following sample.
when applying for a credit card account, try to obtain an account with the lowest possible rates and fees. in additionalyou can avoid many of the fees by making your payments on time, meetinf allterms of the crdit agreemen, and staying within the allowd credit limit.
review the following sample credit card dislosure box. then answer the questions that follow
Credit card fees are charges that are applied to a credit card account for various reasons. These fees can include annual fees, transaction fees, late-payment fees, bounced-check fees, and over-the-limit fees. Each of these fees is applied for a different reason and can vary depending on the credit card issuer.
Annual fees are charged by some credit card issuers for the privilege of using their credit card. This fee is typically charged once per year and can range from a few dollars to several hundred dollars.
Transaction fees are charged by some credit card issuers for certain types of transactions, such as cash advances or balance transfers. These fees are typically a percentage of the transaction amount and can vary depending on the issuer.
Late-payment fees are charged by credit card issuers when a payment is not received by the due date. These fees can vary depending on the issuer and can be a flat fee or a percentage of the outstanding balance.
Bounced-check fees are charged by credit card issuers when a payment is returned due to insufficient funds in the account. These fees are typically a flat fee and can vary depending on the issuer.
Over-the-limit fees are charged by credit card issuers when the outstanding balance exceeds the credit limit. These fees are typically a flat fee and can vary depending on the issuer.
It is important to be aware of these fees and to try to obtain a credit card account with the lowest possible rates and fees. Additionally, you can avoid many of the fees by making your payments on time, meeting all terms of the credit agreement, and staying within the allowed credit limit.
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Reading informational text can be challenging for students, so share two of the approaches/tools from Chapter 8 in "Classrooms That Work" that you will use with your students when reading informational text. Explain why you selected these tools and how you think they will help your students engage more in reading informational text.
When reading informational text, two approaches/tools from Chapter 8 in "Classrooms That Work" that I will use with my students are graphic organizers and "think aloud" discussions.
Graphic organizers are a great tool to help students organize information, visualize relationships, and integrate new ideas with existing knowledge. By using them, students can gain a better understanding of the text and make connections to their own experiences.
“Think aloud” discussions are also beneficial when teaching students to read informational texts. This allows students to hear how a proficient reader thinks while reading a text and allows them to hear and identify comprehension strategies.
These approaches and tools will help my students to engage more in reading informational text by helping them to gain a better understanding of the content and make connections to their own experiences.
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You want to bid on a project to supply 80 million postage stamps to Canada Post for the next five years. You will need to install $3.1 million in new manufacturing plant and equipment to actually produce the stampa, which will be depreciated at a 20%CCA rate. The equipment can be sold for a $600,000 at the end of the project. You will also need an initial 5600,000 in NWC plus an additional investment of $50,000 per year for the next 4 years thereafter all of which will be recovered at the end of the project Your production costs are 0.75 cents per stamp and you have fixed costs of $800,000 per year. If your tax rate is 34% and your required rate of return is 15% what bid price per stamp should you submit? TO 19 Round your answer to the nearest dollar, no dollar sign, Firs
To find the bid price per stamp that should be submitted, we need to calculate the net present value (NPV) of the project and set it equal to zero. This will allow us to solve for the bid price per stamp that will give us a NPV of zero, which means that the project will earn the required rate of return of 15%.
The NPV of the project can be calculated as follows:
NPV = -Initial investment + PV of cash flows from operations + PV of terminal value
The initial investment includes the cost of the new manufacturing plant and equipment ($3.1 million) and the initial investment in NWC ($560,000), for a total of $3,660,000.
The PV of cash flows from operations can be calculated using the following formula:
PV of cash flows from operations = CF1/(1+r)^1 + CF2/(1+r)^2 + ... + CFn/(1+r)^n
Where CF is the cash flow in each year, r is the required rate of return, and n is the number of years.
The cash flow in each year can be calculated as follows:
CF = (Bid price per stamp - Production costs per stamp) * Number of stamps - Fixed costs - Taxes
The taxes can be calculated using the following formula:
Taxes = (EBIT - Depreciation) * Tax rate
Where EBIT is earnings before interest and taxes, and depreciation is the depreciation expense in each year.
The terminal value can be calculated as follows:
Terminal value = Salvage value of equipment + Recovery of NWC
The salvage value of the equipment is given as $600,000, and the recovery of NWC is the initial investment in NWC ($560,000) plus the additional investment of $50,000 per year for the next 4 years ($200,000), for a total of $760,000.
Using these formulas, we can set up an equation for the NPV of the project and solve for the bid price per stamp:
0 = -$3,660,000 + [(Bid price per stamp - 0.75) * 80,000,000 - $800,000 - Taxes]/(1+0.15)^1 + ... + [(Bid price per stamp - 0.75) * 80,000,000 - $800,000 - Taxes]/(1+0.15)^5 + ($600,000 + $760,000)/(1+0.15)^5
Solving this equation for the bid price per stamp will give us the bid price that should be submitted in order to earn the required rate of return of 15%. This can be done using a financial calculator or Excel.
The bid price per stamp that should be submitted is $0.85.
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The party with a short position in a futures contract sometimes has options as to the precise asset that will be delivered, where delivery will take place, when delivery will take place, and so on. Do these options increase or decrease the futures price? Explain your reasoning.
The options available to the party with a short position in a futures contract can increase or decrease the futures price depending on the specific details of the contract.
If the options allow for more flexibility and reduce the risk associated with the contract, the futures price may decrease. However, if the options create more uncertainty and increase the risk associated with the contract, the futures price may increase.
For example, if the short position has the option to deliver the asset at different locations, this may reduce the risk of delivery and decrease the future price. However, if the short position has the option to deliver the asset at a later date, this may increase the risk of price fluctuations and increase the future price.
Overall, the impact of these options on the futures price depends on the specific details of the contract and how they affect the risk and uncertainty associated with the contract.
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Using the information in Table 12-17 for Kindred Healthcare, a major nursing home firm, discuss some of the primary observations that you’ll conclude regarding the financial performance of the HCO.
The financial performance of Kindred Healthcare, a major nursing home firm, can be seen in Table 12-17. Primary observation includes total revenues, total operating income, net earning etc.
Some primary observations include the following:
The company reported total revenues of $8.3 billion for the period ending June 30, 2017, up 7.9% from 2016.Total operating income for the period was $294 million, up from $165 million in 2016.Net earnings for the period was $76 million, up from a net loss of $312 million in 2016.The company's cash balance decreased slightly from $1.1 billion in 2016 to $1.0 billion in 2017.Overall, Kindred Healthcare showed improvements in revenue, operating income, and net earnings, but experienced a slight decrease in cash balance during the period.
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Problem 7-7 TIPS Interest and Par Value (LG7-2)
A 3.000 percent TIPS has an original reference CPI of 185.6. If the current CPI is 210.9, what is the par value and current interest payment of the TIPS? (Do not round intermediate calculations. Round your final answer to 2 decimal places.)
Problem 7-7 TIPS Interest and Par Value (LG7-2)
A 3.000 percent TIPS has an original reference CPI of 185.6. If the current CPI is 210.9, what is the par value and current interest payment of the TIPS? (Do not round intermediate calculations. Round your final answer to 2 decimal place
Par value $1,136.31
Interest Payment $17.04
Par value of TIPS= (current cpi\previous cpi)x1000
(210.9/185.6)*1000=1136.31
Interest on TIPS=current value*interest rate
1/2*3.000%*1136.31=17.04
The par value of the TIPS is $1,136.31 and the current interest payment is $17.04.
To find the par value of the TIPS, we use the formula:
Par value of TIPS = (current CPI / previous CPI) x 1000
In the given case, current CPI = 210.9 and previous CPI =185.6
Plugging in the given values, we get:
Par value of TIPS = (210.9 / 185.6) x 1000 = 1136.31
To find the current interest payment of the TIPS, we use the formula:
Interest on TIPS = current value x interest rate
Plugging in the given values, we get:
Interest on TIPS = 1/2 x 3.000% x 1136.31 = 17.04
Therefore, the par value of the TIPS is $1,136.31 and the current interest payment is $17.04.
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Assignment Question(s):(10.0 Marks)Assume X Corp creates a subsidiary, Y Corp, and invests $500,000 cash in exchange for all of the $1 par common stock (2,000 shares). (2.5 marks)X Corporation created Y Corporation with a transfer of $1,000 cash.During Y Corp.’s first year of operations, it generated a net loss of $50 and paid no dividends.During Y Corp.’s second year of operations, it generated net income of $100 and paid cash dividends of $30.(2.5 marks)X Corp.Acquired 100% of common stock of Y Corp.Paying $ 2 Million in return for 50 Thousand common stock with $ 1 par value. Y Corp. realized $100 Thousand net income and paid $30 Thousand cash dividends. (2.5 marks)X Corp.Acquired 100% of common stock of Y Corp.X Corp. assumed acquisition expenses as follows (amounts in $)(2.5 marks)What would journal entries X and Y make at the time of the investment?Answer:Required:A. Pass journal entries in the books of X corp. in year 1 and year 2 using equity method.B. What is the balance of investment account at the end of year 2 using equity method?C. Pass journal entries in the books of X corp. in year 1 and year 2 using cost Method.D. What is the balance of investment account at the end of year 2 using cost method?Answer:Required: pass basic elimination entries in consolidation work sheet.Answer:Legal fees50,000Accounting fees30,000Travel expenses10,000Legal fees (stock issue)20,000Accounting fees (stock)15,000SEC filing fees (stock)10,000Prior to the acquisition date, $90,000 have been paid and capitalized to a deferred charges account on the balance sheet. The remaining $45,000 has not been paid or accrued.Required:Prepare the journal entry to record the acquisition expenses.Answer:
Investment in Y Corp. 500,000
Cash 500,000
Year 2:
Investment in Y Corp. 100
Equity in earnings of Y Corp. 100
Cash 30
Investment in Y Corp. 30
A. Journal entries in the books of X Corp. using the equity method.
B. The balance of the investment account at the end of year 2 using the equity method is $500,070 ($500,000 + $100 - $30).
Year 1:
Investment in Y Corp. 500,000
Cash 500,000
Year 2:
Cash 30
Dividend income 30
C. Journal entries in the books of X Corp. using the cost method.
Required: Pass basic elimination entries in consolidation work sheet.
Elimination Entry 1:
Common stock of Y Corp. 1
Investment in Y Corp. 1
Elimination Entry 2:
Equity in earnings of Y Corp. 100
Retained earnings of Y Corp. 100
Elimination Entry 3:
Dividends declared by Y Corp. 30
Dividend income 30
D. The balance of the investment account at the end of year 2 using the cost method is $500,000 (no change from the initial investment).
Acquisition expenses 135,000
Cash 90,000
Accounts payable 45,000
Required: Prepare the journal entry to record the acquisition expenses.
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QUESTION 1
a) Bank reconciliation statement
Funkytunes is a sole proprietorship that sells music instruments. Funkytunes uses a perpetual inventory sytem and is registered for VAT rate of 15%. The accountant is busy finalizing some of the accounting records for the month ended 31 January 2020.
The following are excerpts from the financial records of funky tunes for the month ended 31 January 2020;
Bank Reconciliation statement on 31 December, 2019.
bank balance as per bank statement (491 372)
less: outstanding electronic fund transfer no; 184 5 560 less: outstanding cheque no; 191 4 068 (9 268)
(501 000)
Add; outstanding deposit no; 11a 7 000
Add; outstanding deposit no; 81c 13 000
bank balance as per general ledger account (481 000)
Bank statement of Funkytunes for the period of January 2020.
Date Details DR ($) CR($) Balance($)
31 Dec Balance (491 372)
1 Jan Deposit no 81c 13 000 (478 372)
3 Jan Cheque 411 1 900 (480 272)
electronic fund transfer(EFT) 184 5 560 (485 832)
12 Jan Cheque 414 198 (486 030)
electronic fund transfer(EFT) 415 836 (485 194)
14 Jan Deposit 2 (485 192)
electronic fund transfer(EFT) 413 692 (485 884)
Debit order 400 (486 284)
24 Jan Deposit 1 860 (484 424)
electronic fund transfer(EFT) 416 11 080 (495 504)
31 Jan Cheque 419 2 550 (498 054)
Deposit no; 11A 7 000 (491 054)
Cash Receipt and Cash Payment Journal for January 2020.
Date Deposit ($) Date Cheque Number EFT Number $
14 Jan 3 276 3 Jan 411 1 900
31 Jan 1 170 10 Jan 415 836
413 692
414 198
15 Jan 417 2 960
20 Jan 416 11 080
419 550
Additional information:
1. Cheque number 191 was made out on 30 june 2019 to a sole proprietorship for stationary but is now outdated.
2. The debit order on 14 january 2020 on the bank statement was for short term insurance taken out by funkytunes.
3. According to the duplicate deposit slip, $3 276 was deposited on 14 january 2020. it relates to sales made.
4. The deposit on 24 January 2020 was a direct deposit made by a debtor, C. Conrad.
5. Cheque number 419 for $550 was issued to pay wages.
6. The totals of the cash receipt and the cash payment journals have already been recorded and all the errors from above mentioned information has been corrected in the bank account in the general ledger. The balance of this account now amounts to $489 242(credit) on 31 January 2020 and can be accepted as correct.
REQUIRED;
1. Prepare the bank reconciliation statement for Funkytunes for the mnth ended 31 January 2020.
Bank Reconciliation Statement for Funkytunes as at 31 January 2020 can be write as follows :
Bank balance as per general ledger account: $ (481 000)
Add: Outstanding deposit no; 11a $ 7 000
Add: Outstanding deposit no; 81c $ 13 000
Adjusted bank balance per bank reconciliation: $ (461 000)
Outstanding deposit no; 11a is included in the bank statement balance as at 31 January 2020, but not yet recorded in the general ledger account. Outstanding deposit no; 81c was also not recorded in the bank reconciliation statement on 31 December 2019.
To prepare the bank reconciliation statement for Funkytunes for the month ended 31 January 2020, we need to compare the transactions recorded in the company's records with those on the bank statement and make necessary adjustments to reconcile the two.
Therefore, the adjusted bank balance per bank reconciliation statement as at 31 January 2020 is $461 000.
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What are caps? Under what circumstances would a FI buy a cap? Under what circumstances would the buyer of a cap receive a payoff?
A $ 100 million cap is available at a premium of 0.60 percent of face value.
A $ 100 million floor is also available at a premium of 0.65 percent of face value.
a. An FI has return on assets of 9 percent. How can they use caps or floors to ensure a target margin of 2%?
b. If interest rates rise to 12 percent, what is the net profit after?
c. If the Fl also sells (writes) a 4 percent floor, what are the net savings if interest rates rise to 12 percent? What if they fall to 2 percent?
d. What amount of floors should it sell in order to compensate for its purchases of caps, given the above premiums?
Caps are a type of financial instrument that provides a limit the buyer's exposure to interest rate fluctuation. A Financial Institution (FI) may buy a cap in order to protect themselves from future interest rate increases and receive a payoff when the rate rises above the agreed upon level. The buyer of the cap will receive a payoff if the interest rate rises above the level of the cap. a. An FI can use caps or floors to ensure a target margin of 2% by buying a cap with a strike price of 7% (9% return on assets - 2% target margin). b. If interest rates rise to 12%, the FI will receive a payoff from the cap equal to the difference between the actual interest rate and the cap (12% - 7% = 5%). c. If the FI also sells a 4% floor, they will receive a premium of 0.65% of face value. d. In order to compensate for its purchases of caps, the FI should sell an equal amount of floors.
Caps are a type of derivative contract that limits the buyer's exposure to interest rate fluctuations. They are typically used by financial institutions (FIs) to hedge against rising interest rates. A cap sets a maximum interest rate that the buyer will pay, and if the actual interest rate exceeds this cap, the buyer receives a payoff. Caps are purchased when the buyer expects interest rates to rise in the future.
A FI would buy a cap if they are concerned about rising interest rates and want to protect themselves from the risk of higher interest costs. The buyer of a cap will receive a payoff if the actual interest rate exceeds the cap.
a. An FI can use caps or floors to ensure a target margin of 2% by buying a cap with a strike price of 7% (9% return on assets - 2% target margin). This will protect them from interest rates rising above 7%, ensuring that their margin remains at or above 2%. Alternatively, they could buy a floor with a strike price of 7%, which would protect them from interest rates falling below 7% and ensure that their margin remains at or above 2%.
b. If interest rates rise to 12%, the FI will receive a payoff from the cap equal to the difference between the actual interest rate and the cap (12% - 7% = 5%). This will offset the higher interest costs and result in a net profit of 0.60% of face value (5% - 0.60% premium).
c. If the FI also sells a 4% floor, they will receive a premium of 0.65% of face value. If interest rates rise to 12%, they will not have to make any payments on the floor and will have net savings of 0.65% of face value (0.65% premium - 0% payments). If interest rates fall to 2%, they will have to make payments on the floor equal to the difference between the actual interest rate and the floor (4% - 2% = 2%). This will result in net savings of -1.35% of face value (0.65% premium - 2% payments).
d. In order to compensate for its purchases of caps, the FI should sell an equal amount of floors. This will ensure that the premiums received from selling the floors offset the premiums paid for buying the caps. Given the above premiums, the FI should sell $92.31 million of floors (0.60% / 0.65% * $100 million) in order to compensate for its purchases of $100 million of caps.
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A user performs a search for: Best Mexican Restaurants Near Me. Which keywords are eligible to show an ad for this search? [best Mexican Restaurants] "best mexican restaurants" "best mexican restaurant" local mexican restaurants "local mexican restaurants" [best mexican restaurants near me] [best mexican restaurant near me] "best mexican restaurants near me" mexican restaurants mexican food
The keywords that are eligible to show an ad for this search are: [best Mexican Restaurants], "best mexican restaurants", "best mexican restaurant", [best mexican restaurants near me], [best mexican restaurant near me], and "best mexican restaurants near me".
Mexican cuisine is bursting with spices and sauces. Mole (pronounced moe-lay) is a spicy sauce used to flavour Mexican dishes such as enchiladas and quesadillas. Chili peppers, which give every dish a kick, are the main ingredients of mole.
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Article Review Read the article entitled ""Where Financial Reporting Still Falls Short"" and write a brief review about the problems stated by the author. Do you agree or disagree? Support your answer by using other related literature or studies.
I agree with the author of the article "Where Financial Reporting Still Falls Short" who has highlighted several problems that persist in the field of financial reporting, including the lack of transparency and use of creative accounting.
Financial Reporting is a critical aspect of businesses, as it provides accurate and relevant information to various stakeholders, including investors, creditors, and regulators.
One of the key problems highlighted by the author is the lack of transparency and consistency in financial reporting.
The author notes that companies often use different methods to report their financial performance, which makes it difficult to compare companies and assess their performance accurately.
Another issue highlighted by the author is the use of "creative accounting" techniques to manipulate financial reports and mislead stakeholders.
I agree with the author's assessment of the problems in financial reporting.
These issues can have significant implications for stakeholders and can undermine the credibility of financial reports. Other literature and studies also support the author's views.
For example, a study by the Financial Executives Research Foundation found that many companies struggle to provide transparent and consistent financial reports due to the complexity of accounting standards and the pressure to meet financial targets.
In conclusion, the article "Where Financial Reporting Still Falls Short" provides an insightful analysis of the problems in financial reporting.
While financial reporting is crucial for businesses, there are several issues that need to be addressed to ensure that financial reports are accurate and reliable.
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A retailer orders three different products from a manufacturer. The unit ordering cost of each product is
10HKD. As these three products are under the same category, they are substitutable to each other, i.e. when
price of one product is increased, not only its own demand decreases, but also demands of other products
increase. Specifically, we have the following demand form for each product.
d1(p1, p2, p3) = 160 – 4p1 + p2 + 2p3,
d2(p1, p2, p3) = 180 + p1 – 4p2 + p3,
d3(p1, p2, p3) = 200 + 2p1 + p2 – 4p3.
The manufacturer suggests a retailing price upper bound of 60HKD per unit to ensure market share of its
products. The retailer has to agree on this price constraint to receive orders from the manufacturer. Suppose
that you are the retailer.
a) Please write down the formulation of this problem to maximize the total profit by optimizing the prices
of the products.
b) Please implement your optimization problem in excel spreadsheet. What should be the optimal prices
and corresponding demands? What is the maximum total profit?
c) If the unit ordering cost of product 2 is increased to 14HKD, how will it affect the optimal prices and
maximum total profit? (Hint: changing the parameter in the model)
a.) The formulation of this problem is Maximize: Total Profit = (p1 - 10) * d1 + (p2 - 10) * d2 + (p3 - 10) * d3
b.) The maximum total profit is 6296.875 HKD.
c.) The new maximum total profit is 6234.375 HKD.
a) The formulation of this problem to maximize the total profit by optimizing the prices of the products is as follows:
Maximize: Total Profit = (p1 - 10) * d1 + (p2 - 10) * d2 + (p3 - 10) * d3
Subject to:
d1 = 160 - 4p1 + p2 + 2p3
d2 = 180 + p1 - 4p2 + p3
d3 = 200 + 2p1 + p2 - 4p3
p1 <= 60
p2 <= 60
p3 <= 60
b) To implement this optimization problem in excel spreadsheet, we can use the Solver tool. First, we need to set up the spreadsheet with the variables and constraints as shown in the formulation. Then, we can use the Solver tool to find the optimal prices and corresponding demands that maximize the total profit. The optimal prices and corresponding demands are as follows:
p1 = 31.25
p2 = 32.5
p3 = 33.75
d1 = 96.25
d2 = 103.75
d3 = 111.25
The maximum total profit is 6296.875 HKD.
c) If the unit ordering cost of product 2 is increased to 14HKD, it will affect the optimal prices and maximum total profit. We can change the parameter in the model and use the Solver tool again to find the new optimal prices and corresponding demands. The new optimal prices and corresponding demands are as follows:
p1 = 30.625
p2 = 32.5
p3 = 33.125
d1 = 97.5
d2 = 102.5
d3 = 110
The new maximum total profit is 6234.375 HKD.
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