Sunblocker Corp. (see PA7-1) is considering outsourcing production of the umbrella tote bag included with some of its products. The company has received a bid from CarryAll Co. to produce 8,000 units per year for $6 each. Sunblocker has the following information about its own production of the tote bags: Sunblocker has determined that all variable costs could be eliminated by dropping production of the tote bags, but none of the fixed overhead is avoidable. At this time, Sunblocker has no specific use in mind for the space currently dedicated to producing the tote bags. Required: 1. Determine the impact this decision would have on Sunblocker's annual income. 2. Should Sunblocker buy the tote bags from CarryAll or continue to make them? 3. Suppose that the space Sunblocker currently uses to make the bags could be utilized by a new product line that would generate $10,000 in annual profits. Does this change your recommendation to Sunblocker? If so, how?

Sunblocker Corp. (see PA7-1) is considering outsourcing production of the umbrella tote bag included with some of its products. The company has received a bid from CarryAll Co. to produce 8,000 units per year for $6 each. Sunblocker has the following information about its own production of the tote bags:

Sunblocker has determined that all variable costs could be eliminated by dropping production of the tote bags, but none of the fixed overhead is avoidable. At this time, Sunblocker has no specific use in mind for the space currently dedicated to producing the tote bags.

Required:

1.		Determine the impact this decision would have on Sunblocker's annual income.
2.		Should Sunblocker buy the tote bags from CarryAll or continue to make them?
3.		Suppose that the space Sunblocker currently uses to make the bags could be utilized by a new product line that would generate $10,000 in annual profits. Does this change your recommendation to Sunblocker? If so, how?

 

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Ocean Atlantic Co. is a merchandising business. The account balances for Ocean Atlantic Co. as of July 1, 2012 (unless otherwise indicated), are as follows:

Ocean Atlantic Co. is a merchandising business. The account balances for Ocean Atlantic Co. as of July 1, 2012 (unless otherwise indicated), are as follows:

 
Part 1: On your own paper, in the working papers, or using a spreadsheet, enter the balances of each of the accounts in the appropriate balance column of a four-column account. Write Balance in the item section, and place a check mark (√) in the Posting Reference column. Journalize the transactions for July below.
Part 2: Post the journal to the general ledger you created in Part 1, extending the month-end balances to the appropriate balance columns after all posting is completed. In this problem, you are not required to update or post to the accounts receivable and accounts payable subsidiary ledgers.
For a compound transaction, if an amount box does not require an entry, leave it blank or enter "0".

Part 3:
NOTE:  You must complete parts 1 and 2 before completing part 3.
Prepare an unadjusted trial balance. If an amount box does not require an entry, leave it blank or enter "0".
Part 4 and 6:
Note: You must complete parts 1, 2 and 3 before attempting to complete part 4 and part 6. Part 5 is an optional work sheet.
4.  At the end of July, the following adjustment data were assembled. Analyze and use these data to complete Part 6.

 
6.  Journalize the adjusting entries. For a compound transaction, if an amount box does not require an entry, leave it blank or enter "0". Post the adjusting entries to the paper, work sheet, or spreadsheet you used in parts 1 and 2.
Part 5: Optional work sheet
Enter the unadjusted trial balance on a 10-column end-of-period spreadsheet (work sheet), and complete the spreadsheet using the following adjustment data.

 
If an amount box does not require an entry, leave it blank or enter "0".
Part 7:
You must complete parts 1, 2, 3, 4 and 6 before completing part 7. Part 5 is the optional work sheet.
Prepare an adjusted trial balance. If an amount box does not require an entry, leave it blank or enter "0".
Part 8:
You must complete parts 1, 2, 3, 4, 6 and 7 before attempting to complete part 8.
Note: part 5 is optional.
 
1.  Prepare an income statement.
2.  Prepare a statement of owner's equity.
3.  Prepare a balance sheet.
Part 9:
You must complete parts 1, 2, 3, 4, 6, 7 and 8 before attempting to complete part 9. Part 5 is optional.
Journalize the closing entries. Then post the journal to the general ledger you created in part 1. In this problem, you are not required to update or post to the accounts receivable and accounts payable subsidiary ledgers. Indicate closed accounts by inserting a line in both balance columns opposite the closing entry. Insert the new balance in the owner's capital account.
If an amount box does not require an entry, leave it blank or enter "0".
Part 10:
You must complete parts 1, 2, 3, 4, 6, 7, 8 and 9 before attempting to complete part 10. Part 5 is optional.
Prepare a post-closing trial balance. If an amount box does not require an entry, leave it blank or enter "0".


                                       


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1. Suppose you know a company's stock currently sells for $50 per share and the required return on the stock is 15 percent. You also know that the total return on the stock is evenly divided between a capital gains yield and a dividend yield. Required:If it's the company's policy to always maintain a constant growth rate in its dividends, what is the current dividend per share?rev: 09_18_2012 $3.82 $3.49 $6.98 $3.75 $3.31 3. You expect to receive $18,000 at graduation in two years. You plan on investing it at 10 percent until you have $92,000. How long will you wait from now? (Do not round your intermediate calculations.)rev: 09_17_2012 21.41 years 19.12 years 15.12 years 21.03 years 17.12 years 6. You want to have $2 million in real dollars in an account when you retire in 50 years. The nominal return on your investment is 10 percent and the inflation rate is 5.5 percent. What real amount must you deposit each year to achieve your goal? (Do not round your intermediate calculations.)rev: 09_18_2012 $12,061.84 $1,718.35 $12,664.93 $12,544.31 $11,458.74 9. The appropriate discount rate for the following cash flows is 9 percent compounded quarterly.Year Cash Flow 1 $800 2 800 3 0 4 1,000 ________________________________________Required:What is the present value of the cash flows?rev: 09_17_2012 $2,115.71 $2,143.85 $2,101.82 $580.47 $2,059.78 10. Teddy's Pillows has beginning net fixed assets of $469 and ending net fixed assets of $546. Assets valued at $317 were sold during the year. Depreciation was $38. What is the amount of net capital spending? $115 $39 $432 $77 $267 13. Find the EAR in each of the following cases.Required:(a) 6% compounded quarterly (b) 6% compounded monthly (c) 17% compounded daily (d) 13% with infinite compounding 18. A firm has sales of $4,650, costs of $2,450, interest paid of $160, and depreciation of $455. The tax rate is 35 percent. What is the value of the cash coverage ratio? 6.44 17.81 13.75 9.28 10.91 27. Grohl Co. issued 8-year bonds a year ago at a coupon rate of 11 percent. The bonds make semiannual payments. If the YTM on these bonds is 9 percent, what is the current bond price?rev: 09_18_2012 $1,102.23 $1,070.96 $1,464.03 $718.96 $1,112.23 CLICK HERE TO GET THE ANSWER !!!! 1. Suppose you know a company's stock currently sells for $50 per share and the required return on the stock is 15 percent. You also know that the total return on the stock is evenly divided between a capital gains yield and a dividend yield. Required: If it's the company's policy to always maintain a constant growth rate in its dividends, what is the current dividend per share? rev: 09_18_2012 $3.82 $3.49 $6.98 $3.75 $3.31 3. You expect to receive $18,000 at graduation in two years. You plan on investing it at 10 percent until you have $92,000. How long will you wait from now? (Do not round your intermediate calculations.) rev: 09_17_2012 21.41 years 19.12 years 15.12 years 21.03 years 17.12 years 6. You want to have $2 million in real dollars in an account when you retire in 50 years. The nominal return on your investment is 10 percent and the inflation rate is 5.5 percent. What real amount must you deposit each year to achieve your goal? (Do not round your intermediate calculations.) rev: 09_18_2012 $12,061.84 $1,718.35 $12,664.93 $12,544.31 $11,458.74 9. The appropriate discount rate for the following cash flows is 9 percent compounded quarterly. Year Cash Flow 1 $800 2 800 3 0 4 1,000 ________________________________________ Required: What is the present value of the cash flows? rev: 09_17_2012 $2,115.71 $2,143.85 $2,101.82 $580.47 $2,059.78 10. Teddy's Pillows has beginning net fixed assets of $469 and ending net fixed assets of $546. Assets valued at $317 were sold during the year. Depreciation was $38. What is the amount of net capital spending? $115 $39 $432 $77 $267 13. Find the EAR in each of the following cases. Required: (a) 6% compounded quarterly (b) 6% compounded monthly (c) 17% compounded daily (d) 13% with infinite compounding 18. A firm has sales of $4,650, costs of $2,450, interest paid of $160, and depreciation of $455. The tax rate is 35 percent. What is the value of the cash coverage ratio? 6.44 17.81 13.75 9.28 10.91 27. Grohl Co. issued 8-year bonds a year ago at a coupon rate of 11 percent. The bonds make semiannual payments. If the YTM on these bonds is 9 percent, what is the current bond price? rev: 09_18_2012 $1,102.23 $1,070.96 $1,464.03 $718.96 $1,112.23 CLICK HERE TO GET THE ANSWER !!!!

1.
Suppose you know a company's stock currently sells for $50 per share and the required return on the stock is 15 percent. You also know that the total return on the stock is evenly divided between a capital gains yield and a dividend yield.
   
Required:
If it's the company's policy to always maintain a constant growth rate in its dividends, what is the current dividend per share?

rev: 09_18_2012
 
$3.82
 
$3.49
 
$6.98
 
$3.75
 
$3.31
3.
You expect to receive $18,000 at graduation in two years. You plan on investing it at 10 percent until you have $92,000.
How long will you wait from now? (Do not round your intermediate calculations.)

rev: 09_17_2012
 
21.41 years
 
19.12 years
 
15.12 years
 
21.03 years
 
17.12 years
6.
You want to have $2 million in real dollars in an account when you retire in 50 years.
The nominal return on your investment is 10 percent and the inflation rate is 5.5 percent.
What real amount must you deposit each year to achieve your goal? (Do not round your intermediate calculations.)

rev: 09_18_2012
 
$12,061.84
 
$1,718.35
 
$12,664.93
 
$12,544.31
 
$11,458.74
9.
The appropriate discount rate for the following cash flows is 9 percent compounded quarterly.

Year    Cash Flow
 1           $800              
 2             800              
 3          0              
 4     1,000              
________________________________________

Required:
What is the present value of the cash flows?

rev: 09_17_2012
 
$2,115.71
 
$2,143.85
 
$2,101.82
 
$580.47
 
$2,059.78
10.
Teddy's Pillows has beginning net fixed assets of $469 and ending net fixed assets of $546.
Assets valued at $317 were sold during the year. Depreciation was $38. What is the amount of net capital spending?
 
$115
 
$39
 
$432
 
$77
 
$267
13.
Find the EAR in each of the following cases.
Required:
(a)    6% compounded quarterly
    
(b)    6% compounded monthly
    
(c)    17% compounded daily
    
(d)    13% with infinite compounding
    
18.
A firm has sales of $4,650, costs of $2,450, interest paid of $160, and depreciation of $455.
The tax rate is 35 percent. What is the value of the cash coverage ratio?
 
6.44
 
17.81
 
13.75
 
9.28
 
10.91
27.
Grohl Co. issued 8-year bonds a year ago at a coupon rate of 11 percent.
 The bonds make semiannual payments. If the YTM on these bonds is 9 percent, what is the current bond price?

rev: 09_18_2012
 
$1,102.23
 
$1,070.96
 
$1,464.03
 
$718.96
 
$1,112.23

                                        


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Joanna Richards owns DVD-Online, Inc. DVD-Online is in its second year of business and has a December 31 yearend. The company is Web-based, offering DVD rentals to online customers for a fixed monthly fee. For $30 per month, a customer receives DVDs each month, one at a time as the previous one is returned. No matter how many DVDs a customer uses, the fee is fixed at $30 per month. Customers sign a contract for a year, so DVD-Online recognizes $360 sales revenue each time a customer signs up for the service.

ACC 201-03, Spring 2013

Writing Assignment - 10% of Final Grade

Case

Joanna Richards owns DVD-Online, Inc. DVD-Online is in its second year of business and has a December 31 yearend. The company is Web-based, offering DVD rentals to online customers for a fixed monthly fee. For $30 per month, a customer receives DVDs each month, one at a time as the previous one is returned. No matter how many DVDs a customer uses, the fee is fixed at $30 per month. Customers sign a contract for a year, so DVD-Online recognizes $360 sales revenue each time a customer signs up for the service.

 

Although DVD-Online is not publicly traded, Joanna does put the company’s financial statements on the company’s Web page for customers to see. She is also planning to send the financial statements to a new vendor that has lower pricing for bulk purchases. Further, the business is growing rapidly and Joanna needs to secure a loan from the bank. She knows that the company needs to show a positive net income to secure the loan.

 

The following transactions occurred in December:

 

·        On December 20^th a customer purchased 10 one-year service contracts as gifts for family members. The customer selected for the service to begin January 1^st and went ahead and paid $3,600 to cover a full year of service for each contract. Joanna was excited to receive the cash and recorded the sales revenue on December 20^th.

·        Joanna purchased $10,000 of new DVD inventory on December 15^th with 30 day terms for payment. She has begun promoting the new arrivals on the company’s website, but does not record the new DVD’s in her accounting records since she has not yet paid for the DVD’s.

·        Joanna employs one administrative assistant, two sales people, and a web-site developer. She pays them on the 5^th of each month for working the prior month. She does not record their salaries until she pays the employees.

 

Joanna has heard about GAAP, but she does not see any reason to follow these accounting principles.

 

Questions for Essay Response:

1.      A stakeholder of a company is defined as any party interested in the operations of a business, including owners, lenders, employees, suppliers, customers, and government agencies. Who would you select as the three most important stakeholders of DVD-Online? Why?

2.      Explain how DVD-Online would account for December transactions if it did follow US GAAP and what impact, if any, each transaction would have on net income if recorded following US GAAP.

3.      Do you think Joanna should use US GAAP? Why or why not?

4.      Do you think Joanna has any incentive and/or pressure to record the transactions as described above versus recording them using US GAAP? Explain.

5.      What are the ethical issues in this case and what is the appropriate course of action? Explain.

Grading

The writing assignment is worth 10% of your final grade.  The assignment will be graded equally on two components; content and writing.  Half of the writing assignment grade will be based on how well you answer the questions in your own words and half of the grade will be based on your writing (grammar, spelling, sentence structure, etc).  Any information contained in your essay that is incorrect will result in points being deducted so be sure your responses are appropriate.  Be sure to address all of the questions.  The grading rubric that will be used is as follows:

 

1.      Appropriately identifies stakeholders and properly explains selections.

Poor________       Fair________    Good________    Very Good________    Excellent________       

        (2 points)               (4 points)             (6 points)                        (8 points)                    (10 points)

 

2.      Correctly explains how DVD-Online would account for the December transactions under US GAAP and the effect (if any) to net income.

Poor________       Fair________    Good________    Very Good________    Excellent________       

        (2 points)               (4 points)             (6 points)                            (8 points)                      (10 points)

 

3.      Addresses question 3 and provides an appropriate explanation.

Poor________       Fair________    Good________    Very Good________    Excellent________       

        (2 points)               (4 points)             (6 points)                            (8 points)                     (10 points)

 

4.      Addresses question 4 above and provides an appropriate supporting explanation.

Poor________       Fair________    Good________    Very Good________    Excellent________       

        (2 points)               (4 points)             (6 points)                            (8 points)                    (10 points)

 

5.      Addresses question 5 above and provides an appropriate supporting explanation.

Poor________       Fair________    Good________    Very Good________    Excellent________       

        (2 points)               (4 points)             (6 points)                            (8 points)                    (10 points)

 

6.      Quality of Writing.  This includes grammar, spelling, and the ability to write the essay in a coherent, concise, and effective manner.

Poor________       Fair________    Good________    Very Good________    Excellent________       

    (10 points)           (20 points)            (30 points)               (40 points)                             (50 points)

 

Tips for doing well on the assignment:

1.      Your response should be professional, fact-based, and unemotional. 

2.      Proofread your essay!  I cannot stress this enough. 

3.      Have someone else proofread your essay, preferably someone who has not read the assigned article so they can determine whether everything is properly explained. 

4.      I encourage you to use UNCG resources such as the writing center http://www.uncg.edu/eng/writingcenter/  to help you with your writing or to proofread your essay. 

5.      Make sure your spelling and grammar are correct. 

6.      Avoid using clichés (i.e. “Honesty is the best policy”) and exaggerations in your writing and try not to make any judgments of character (i.e. “Jane Smith is a very unethical person”). 

7.      Do not use citations.  Use your own words to answer the questions.

8.   It is YOUR responsibility to ensure that your essay is successfully submitted through SafeAssign and that you submit the correct, final version of your essay. Email submissions will not be accepted.

9.   Any disputes regarding essay grading must be submitted to me in writing for consideration.

 

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