Financial Accounting
14th Edition
ISBN: 9781305088436
Author: Carl Warren, Jim Reeve, Jonathan Duchac
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Question
Chapter 13, Problem 2CP
To determine
Discuss whether Person L is behaving in a professional manner.
Expert Solution & Answer
Trending nowThis is a popular solution!
Students have asked these similar questions
A friend of yours, a non-accounting student in the JRSSB, has asked for your advice about a potential
investment. Your friend is considering purchasing shares in Aurora Cannabis Inc., a company with its
head office in Leduc, Alberta, that is publicly traded on the Toronto Stock Exchange and other exchanges
(symbol ACB). The company's primary business is the production, distribution, and sale of cannabis
related products in Canada and internationally. Your friend thinks this company might be a good
investment, as the share price is quite low, but is not sure how to interpret certain parts of the financial
statements. In particular, your friend has read note 9 (Biological Assets) and is having difficulty
understanding the meaning of this information. (The note disclosure is included as an appendix to this
document.)
Required: Write a memo to your friend that answers the following questions about the Aurora Cannabis
Inc. financial statements. (30 marks)
1) How does the accounting for…
Recently, you were contacted by a friend who was
thinking of signing a Joint Venture agreement to
fund a new shopping center to be built in
Melbourne. Along with several other investors,
each party will invest $25,000 to the venture in
order to pay for the building and construction work.
Your friend knows several of the other investors and
is looking forward to working closely with the other
investors on this new project, however your friend
feels very strongly about keeping his business
affairs completely separate from those of other
investors.
Required: What advice and/ or warning would you
give your friend before signing the Joint Venture
contract? You must refer to legislation and/ or case
law and clearly define all business structures that
may impact on the advice you give your friend.
Durant Limited is a construction company based in Malawi and has presence in almost seven countries in sub-Saharan Africa . Because of the aggressive government construction programs in the region, the company has seen an increase in its orders and has reached a point where a significant amount of finance is needed to source future growth. The board recently decided to list the business on the Johannesburg Stock Exchange and is currently examining the full implications of this decision on its operations. The Board Chairperson has argued that a stock exchange listing may alter the way in which the business views their dividend policy. However, the CEO has insisted that the dividend policy is unimportant as the pattern of dividend has no effect on shareholder wealth. Key data on the dividend policy adopted is as follows:
Financial year end
Profit after tax (K'000)
Ordinary dividends (K'000)
Ordinary shares in issue (K'000)
2013
1,140
480
1,500
2012
990
550
2,200
2011
1,232
1,056…
Chapter 13 Solutions
Financial Accounting
Ch. 13 - Of two corporations organized at approximately the...Ch. 13 - A stockbroker advises a client to buy preferred...Ch. 13 - A corporation with both preferred stock and common...Ch. 13 - An owner of 2,500 shares of Simmons Company common...Ch. 13 - Prob. 5DQCh. 13 - A corporation reacquires 60,000 shares of its own...Ch. 13 - The treasury stock in Discussion Question 7 is...Ch. 13 - What are the three classifications of restrictions...Ch. 13 - Prob. 9DQCh. 13 - What is the primary purpose of a stock split?
Ch. 13 - National Furniture Company has 25,000 shares of...Ch. 13 - Prob. 1PEBCh. 13 - On August 26, Mountain Realty Inc. issued for cash...Ch. 13 - Entries for issuing stock On January 22, Zentric...Ch. 13 - The declaration, record, and payment dates in...Ch. 13 - Entries for cash dividends The declaration,...Ch. 13 - Olde Wine Corporation has 250,000 shares of 40 par...Ch. 13 - Entries for stock dividends Antique Buggy...Ch. 13 - Prob. 5PEACh. 13 - Prob. 5PEBCh. 13 - Using the following accounts and balances, prepare...Ch. 13 - Prob. 6PEBCh. 13 - Prob. 7PEACh. 13 - Prob. 7PEBCh. 13 - Prob. 8PEACh. 13 - Prob. 8PEBCh. 13 - Triple Z Inc., a developer of radiology equipment,...Ch. 13 - Dividends per share Lightfoot Inc., a software...Ch. 13 - On April 20, Gallatin County Rocks Inc., a marble...Ch. 13 - On May 15, Helena Carpet Inc., a carpet...Ch. 13 - On July 11, American Lift Corporation, a...Ch. 13 - Prob. 6ECh. 13 - Issuing stock Willow Creek Nursery, with an...Ch. 13 - Occupational Products Inc., a wholesaler of office...Ch. 13 - Entries for cash dividends The declaration,...Ch. 13 - Entries for stock dividends Senior Life Co. is an...Ch. 13 - Mystic Lake Inc. bottles and distributes spring...Ch. 13 - Prob. 12ECh. 13 - Treasury stock transactions Biscayne Bay Water...Ch. 13 - Reporting paid-in capital The following accounts...Ch. 13 - Stockholders Equity section of balance sheet The...Ch. 13 - Stockholders Equity section of balance sheet...Ch. 13 - Sumter Pumps Corporation, a manufacturer of...Ch. 13 - Stockholders Equity section of balance sheet List...Ch. 13 - The stockholders equity T accounts of I-Cards Inc....Ch. 13 - Prob. 20ECh. 13 - Prob. 21ECh. 13 - Selected dividend transactions, stock split...Ch. 13 - Prob. 23ECh. 13 - Pacific Gas and Electric Company is a large gas...Ch. 13 - For a recent year, OfficeMax and Staples are two...Ch. 13 - Sunbird Theatre Inc. owns and operates movie...Ch. 13 - Stock transactions for corporate expansion On...Ch. 13 - The following selected accounts appear in the...Ch. 13 - Morrow Enterprises Inc. manufactures bathroom...Ch. 13 - Selected transactions completed by Primo Discount...Ch. 13 - Prob. 1PBCh. 13 - Prob. 2PBCh. 13 - Selected stock transactions Diamondback Welding ...Ch. 13 - Nav-Go Enterprises Inc. produces aeronautical...Ch. 13 - Prob. 5PBCh. 13 - Prob. 1CPCh. 13 - Prob. 2CPCh. 13 - Prob. 3CPCh. 13 - Prob. 4CPCh. 13 - Prob. 5CP
Knowledge Booster
Similar questions
- Sam Strother and Shawna Tibbs are vice presidents of Mutual of Seattle Insurance Company and co-directors of the company’s pension fund management division. An important new client, the North-Western Municipal Alliance, has requested that Mutual of Seattle present an investment seminar to the mayors of the represented cities, and Strother and Tibbs, who will make the actual presentation. C) How does one determine the value of any asset whose value is based on expected future cash flows? D)How is the value of a bond determined? What is the value of a 10-year, $1,000 par value bond with a 10% annual coupon if its required rate of return is 10%? E) What would be the value of the bond described in Part d if, just after it had been issued, the expected inflation rate rose by 3 percentage points, causing investors to require a 13% return? Would we now have a discount or a premium bond?arrow_forwardThe Windsor Foundation, a U.S.-based, not-for-profit charitable organization, has a diversified investment portfolio of $100 million. Windsor’s board of directors is considering an initial investment in emerging market equities. Robert Houston, treasurer of the foundation, has made the following comments:a. “For an investor holding only developed market equities, the existence of stable emerging market currencies is one of several preconditions necessary for that investor to realize strong emerging market performance.”b. “Local currency depreciation against the dollar has been a frequent occurrence for U.S. investors in emerging markets. U.S. investors have consistently seen large percentages of their returns erased by currency depreciation. This is true even for long-term investors.”c. “Historically, the addition of emerging market stocks to a U.S. equity portfolio such as the S&P 500 index has reduced volatility; volatility has also been reduced when emerging market stocks are…arrow_forwardThe Dragons (from CBC's Dragon's Den) are considering a venture from an Albertan entrepreneur. His proposal requires the Dragons to invest $500,000 immediately. Based on market conditions, the product is estimated to have year-end profits of $100,000//$200,000//$300,000//$200,000//and finally $100.000. The Dragons will invest only if the internal rate of return exceeds their cost of capital lof 20%. Should they invest?arrow_forward
- Big Rock’s directors are looking to expand into a new suite of services. Although they are doing quite well in their existing lines of business, analysts have identified some new areas for development. One of these is expansion into manufacturing prefabricated homes. However, this venture requires a large amount of funding. To raise additional funds to finance this new project, the company is considering issuing a new bond. Required: a. Explain what a corporate bond is, b. Outline the characteristics of the bond market, d. Explain the benefits of issuing bonds to raise financing.arrow_forwardA financial services company is considering a new investment in a new technology platform for investment management. The company has identified a fintech startup that is seeking funding at a valuation of $5 million. The company expects to receive a dividend of $200,000 per year over a five year term and sells it equity stake at a valuation of $10 million. What is the expected return on investment if the financial services company invests $2 million in the fintech startuparrow_forwardHi there can you please assist on the following question below You are the financilal manager of competitive investment company in south africa. you have been presented with two possible investments: Pink limited and purple limited as shown below. you have been supplied with the following information regarding the two companies Pink Limited Purple Limited Earnings before interest and tax R 3 000 000 R 4 000 000 Long term interestbearing debt R 500 000 R 800 000 Earnings attribute to shareholders R 2 124 000 R2 822 400 Tax rate 28% 28% Share capital R 2 00 000 R 5000 000 Number of ordinary shares issued 200 000 400 000 Number of ordinary shares authorised 1 000 000 500 000 Current market price of the share R 30 R 20 Dividend per share R 5 R 3 As a financial manager you are very concerned about the dividend yiled and dividend payout ratioas these will be your indicator of return on your investments Q.1.1 Calculate the dividend yiled for both companies Q.1.2.…arrow_forward
- Mr. Chua in his plan for expansion by putting up a branch of his grocery near Cubao, has decided to take the third option. Incorporating under the business name, “Chua Groceries, Inc. “He figures that he needs a subscribed and paid-up capital of P 100 million to be submitted to the Securities and Exchange Commission (Sec). He has only P 50 million cash in the bank. He invited two close friends to chip in the balance of P 50 million to make up for the balance. Mr. Chua wants to be elected as president and his wife as treasurer of the company. His two friends would be elected vice-president and corporate secretary, respectively. While Mr. Chua, his wife and son, the manager of the planned branch of the grocery store would control the day-to-day operations of the company, he does not feel comfortable with the 50-50 sharing of the capital. What if relations with his two friends turn sour in the future? Aggressive and ambitious that Mr. Chua is, what worries him is if he further…arrow_forwardSam Strother and Shawna Tibbs are vice-presidents of Mutual of Seattle Insurance Company and co-directors of the company's pension fund management division. A major new client, the Northwestern Municipal Alliance, has requested that Mutual of Seattle present an investment seminar to the mayors of the represented cities, and Strother and Tibbs, who will make the actual presentation, have asked you to help them by answering the following questions. What is the yield to maturity (YTM) on a 10-year, 9 percent annual coupon, $1,000 par value bond that sells for $887.00? How about it sells for $1,134.20? What does the fact that a bond sells at a discount or at a premium tell you about the relationship between investors’ YTM and the bond's coupon rate? 2. How does the calculation for valuing a bond change if semiannual payments are made? Find the value of a 10-year, semiannual payment, a 10 percent coupon bond if investor’s required rate of return is 13%.arrow_forwardMr. Chua in his plan for expansion by putting up a branch of his grocery near Cubao, has decided to take third option: incorporating under the business name, “Chua Groceries, Inc.” He figures that he needs a subscribed and paid up capital of P100 million to be submitted to the Securities and Exchange Commission (SEC). He has only P50 million cash in the bank. He invited two close friends to chip in the balance. Mr. Chua wants to be elected as president and his wife as treasurer of the company. His two friend would be elected vice-president and corporate secretary, respectively. While Mr. Chua, his wife and son, the manager of the planned branch of the grocery store, would control the day-to-day operations of the company, he does not feel comfortable with the 50-50 sharing of the capital. What it relations with his two friends turn sour in the future? Aggressive and ambitious that Mr. Chua is, what worries him is if he further expands the grocery business in the future and the two…arrow_forward
- Big Rock’s directors are looking to expand into a new suite of services. Although they are doing quite well in their existing lines of business, analysts have identified some new areas for development. One of these is expansion into manufacturing prefabricated homes. However, this venture requires a large amount of funding. To raise additional funds to finance this new project, the company is considering issuing a new bond. a. Explain what a corporate bond is,b. Outline the characteristics of the bond market,d. Explain the benefits of issuing bonds to raise financing.arrow_forwardAquafin LLC is a company formed in the year 2000 and listed in the Muscat Securities Exchange. The company has primarily engaged in the manufacture of water purifiers and its accessories. Recently, the company has expanded its operation by taking a forward integration move. Adding on, the company is planning to start two more factories in Oman and the Senior manager (finance) Mr. Miyan Ahmed has asked to identify the possible sources of funds for the same. As per the estimate submitted by SMA team (Strategic Management Accounting team), the company requires 100,000 OMR to proceed with the proposed investments. By considering facts and figures given below you are asked to evaluate the Proposed Capital structure by answering the given questions. Abstract of the Capital structure developed by Mr. Miyan Ahmed, ACCA Source of capital Amount in OMR Equity share capital( 5000 shares at OMR 10 each) 50,000 Reserve and surplus 10,0000 12% preference shares 20,000 9…arrow_forwardOutdoor Adventure Company is considering raising additional capital for further expansion. The company wants to finance a new business venture into guided trips down the Amazon River in South America. Additionally, the company wants to add another building on their land to offer more services for local customers. 1 (Click the icon to viewing the financing information.) More Info Read the requirements. Requirement 1. Will the bonds issue at face value, a premium, or a discount? Outdoor Adventure Company plans to raise the capital by issuing $1,200,000 of 9%, six-year bonds on January 2, 2020. The bonds pay interest semiannually on June 30 and December 31. The company receives $1,198,320 when the bonds are issued. Outdoor Adventure's bonds will be issued at because The company also issues a mortgage payable for $500,000 on January 2, 2020. The proceeds from the mortgage will be used to construct the new building. The mortgage requires annual payments of $25,000 plus interest for twenty…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
