Principles of Financial Management

Question 1 Assume that you have $10,000 to invest in a term deposit. In this situation, explain which of the three (3) deposits listed below (a. – c.) you would select if the selection strategy is totally depend on the higher percentage per annum (per year). a 90-day deposit that has a maturity value of $10,250. a 130-day deposit that has a maturity value of $10,390. a 145-day deposit that has a maturity value of $10,420. Question 2  Calculate the opportunity cost of an invoice that specifies the following conditions, as shown below (a. – c.): conditions: 1.25/10, n/30. conditions: 1.25/10, n/60. conditions: 1.5/10, n/60. Question 3 As a small software developer firm, you have approached the AXZ Bank to obtain…

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TAKULAH, Fitbit, Dainty and Compaq

Question 1 TAKULAH Traders Ltd purchased a machine for $650 000 and there was an accumulated depreciation balance of $110 000 at 30 June 2022. Its fair value is assessed at this time, with its first revaluation as $450 000. The machine’s useful life is expected to be 5 more years and the residual value to be $50 000. On 1 July 2023 the asset’s fair value is $460 000 and the residual value and useful life are expected to be unchanged (that is, there is 4 years of remaining life). Required: Provide the journal entries necessary to account for all the above transactions and events up to 1 July 2023, in accordance with AASB 116 if the revaluation is undertaken.…

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Tik Tok, Trackit and Perfumes Ltd

Question 1 Tik Tok Company manufactures customized coffee tables. The following relates to Job No. X10, an order for 150 coffee tables:   Direct materials used $22 800 Direct labour hours worked 600 Direct labour rate per hour $16.00 Machine hours used 400 Applied factory overhead rate per machine hour $30.00   Required: What is the total manufacturing cost for Job No. X10? Calculate the cost per coffee table for Job No. X10? List two uses of this unit cost information to the managers at Tik Tok Company.   Question 2 TikTok Electronics manufactures an aluminium fibre tripod model “TRI-X”  which sells for $1,600. The production cost computed per unit under traditional costing for each model in 2019 was as follows:…

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Master Ltd acquired its shares in Chef Ltd at 1 January 2022

The financial information for Master Ltd and its 100% owned subsidiary, Chef Ltd, for the period ended 31 December 2022 is as follows:   Master Ltd Chef Ltd Sales revenue $ 70 000 $ 67 000 Dividend revenue 13 000 0 Gain on sale of property, plant and equipment 13 000 15 000 Other income 14 000 16 000 Total income 110 000 98 000 Cost of sales 30 000 26 000 Other expenses 11 000 7 000 Total expenses 41 000 33 000 Profit before income tax 69 000 65 000 Income tax expense 10 200 7 200 Profit for the period 58 800   57 800 Retained earnings (1/1/22) 22 000 15 000 80 800 72 800 Interim dividend…

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Helena, Adam Ltd, Mason Ltd and Megamart Ltd

Question 1 The unadjusted trial balance of Helena’s Hire Cars is shown below (ignore GST). Helena’s Hire Cars Trial Balance As at 30 June 2019 Account Debit Credit Cash at bank 18,140 Accounts receivable 21,340 Office supplies 640 Prepaid advertising 3,880 Hire cars 93,600 Accumulated Depreciation – hire cars 39,400 Accounts payable 10,800 Unearned hire fees 2,260 Helena, Capital 68,340 Helena, Drawings 20,600 Hire fees revenue 98,700 Wages expense 50,620 Fuel and oil expense 10,680 219,500 219,500   Additional information Petrol purchased on credit for $680 and used during the last week in June has not been paid for or recorded. A physical count showed office supplies totalling $340 were still on hand at 30 June. Depreciation for 1 year on…

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An investor age 35 deposits $10000

An investor age 35 deposits $10000 in a fund earning 7% compound interest until retirement at age 65. Find the amount of interest earned (calculations by hand) : Between ages 35 and 45 Between ages 45 and 55 Between ages 55 and 65 Jim loans 10000$ to Amenda immediately, 5000$ in 3 years and 1000$ in 4 years. Amenda repays Jim with two equal payments of Y $; one payment of Y at the end of the fifth year and one payment of Y at the end of the sixth year, assuming a nominal interest rate of 6%, compounded monthly. (a) Draw a time diagram of the cash flows. 0                     1                     2                     3                     4                     5                     6 (b) Evaluate Y . Billy…

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Accounting for Corporate Entities – Morning Star & Aileen Ltd

  A different version of this question is available here.   Question 1 Morning Star Ltd was registered on 1 July 2020, as a company with a constitution limiting the shares that could be offered to 5 000 000 Ordinary shares (including all classes) and 2 000 000 preference shares. The company issued a prospectus dated 1 July 2020 inviting the public to apply for 3 000 000 Ordinary A class shares at $3.00 per share. The terms of the shares on issue are $1.50 on application, $1.00 on allotment and $0.50 to be called within six months of allotment before 31 December 2020. If the issue is oversubscribed the directors will make a pro-rata issue of shares and the excess…

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Jaguar Ltd, P Ltd, Aqua Ltd, Jessica Ltd and Liala Ltd

Question 1 Jaguar Ltd purchased a machine on 1 July 2016 at the cost of $640,000. The machine is expected to have a useful life of 5 years (straight-line basis) and no residual value.  For taxation purposes, the ATO allows the company to depreciate the asset over 4 years. The profit before tax for the company for the year ending 30 June 2017 is $600,000. To calculate this profit the company has deducted $60,000 entertainment expense, and $80,000 salary expense that has not yet been paid.  Also the company has included $70,000 interest as income that the company has not yet received. The tax rate is 30%. Required: Calculate the company’s taxable profit and hence its tax payable for 2017. Determine…

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On 1 July 2021 Scarecrow Ltd issues convertible notes

On 1 July 2021 Scarecrow Ltd issues convertible notes with a face value of $6 million. The convertible notes have a 20-year term and mature on 30 June 2041. Interest is payable semiannually in arrears, on 31 December and 30 June each year, and the coupon rate of interest is 7.5% p.a. At around the same point in time, companies with a similar credit rating issue debt securities without a conversion option with a coupon rate of 10% p.a., payable semiannually. 1. Explain why the coupon rate to holders of the convertible notes is less than the rate of return offered to investors in the debt securities of other similar companies. 2. Determine the debt and equity components of the convertible…

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LagendaBhd has a building in Arang Batuwhich it rents out

LagendaBhd has a building in Arang Batuwhich it rents out. It accounts for investment property using the cost model. The building was bought 15years ago at a cost of RM20 million and the estimated useful life was determined on purchase to be 50 years. Due to ecological changes, the area is prone to floods. The fair value of the building at the end of the current year was RM7million. The present value of the flow of rental is RM5.6mil, taking a market interest rate of 12%.   Required: (i) Review whether or not the asset needed to be impaired. (ii) In year 2020, the market interest rate dropped to 5%. Evaluate the effect of the change in interest rate on the…

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Yume International is the New Zealand largest food

Yume International is the New Zealand largest food & beverage wholesaler to cafes and convenience stores in Australia. You are provided with the information related to its customer details, product details, and costs and revenue information sheet. Yume International has partnered with three shipping companies who ships the products to its Australian customers on time. You are a junior accountant and your Senior Accounts Manager wants you to summarise this data in a meaningful way. Required: PART- A: Complete missing information in costs and revenue information sheet (highlighted in yellow colour) PART B: Pivot Table and Recommended Charts Calculate gross profit for each customer along with product name and payment type using Pivot Table; categorising the columns by salesperson Calculate sales revenue by each…

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PROJECT EVALUATION AND SENSITIVITY ANALYSIS

PROJECT EVALUATION AND SENSITIVITY ANALYSIS Assume that your group is working for financial department of a company, which is considering a potential project with a new product that is expected to sell for an average price of $25 per unit. Launching this project will require the company to choose either one of the following equipment: – Equipment A with the cost of $1 500 000 and zero residual value after four years. The company expects it can sell 250 000 unit per year at this price for a period of 4 years with this equipment – Equipment B with the cost of $2 000 000 and zero residual value after four year. The company expects it can sell 270 000 unit…

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