An article in The Globe and Mail, February 16, 2002, reported that IBM used the $300 million proceeds of a sale of one of its business units to reduce operating expenses in its fourth quarter 2001 income statement. This added about 8 cents per share to its fourth quarter earnings. As a result, IBM beat analysts' forecasts by 1 cent per share.

IBM defended its treatment by claiming that buying and selling businesses is a normal business practice, and that most of the sale proceeds related to intellectual property that it had developed. The article quotes a Merrill Lynch analyst as saying, "Our only concern is that the company could have done more to call out the magnitude of the transaction." According to the article, IBM's share price fell by 4% as a result of this news.

While not mentioned in this article, the SEC opened a preliminary inquiry into IBM's accounting practice, expressing concerns that IBM had let it be known that the reason for its higher operating earnings was tight cost controls, rather than the sale proceeds. This inquiry was subsequently dropped, but the SEC issued a bulletin reminding firms to report gains or losses on asset sales separately from operating costs.

Required

Explain why IBM's share price dropped following the Merrill Lynch analyst's comment and the news of the SEC's preliminary inquiry.

Answer:

The sale of business units are one time events that should not be common. If the only way that IBM can show profit is by selling business divisions, in a very short time it will run out of divisions to sell. A company's intrinsic value is given by its cash flows, especially the operating cash flow.

Functions of money and barter
Consider an economy in which money does not exist, so that agents rely on barter to carry out transactions. When the economy was small, barter seemed sufficient. However, the economy has now begun to grow.
If people in this economy trade three goods, the price tag of each good must list ______prices, and the economy requires_____prices for people to carry out transactions. Suppose that the number of goods people trade increases to 15. Then the price tag of each good must list___prices, and the number of prices that the economy requires increases to_____. Now suppose that our economy has a money. The government now issues a national currency and there is no longer any barter.
In this economy, money and currency are not the same because:____.
1. The fact that the government issues currency means that the currency will be accepted as money by all agents.
2. The fact that the currency is backed by the government means that it will never lose value and will remain a perfect unit of account.
3. Just because the government issues currency does not mean that the currency will be accepted as money, since it must be used as a medium of exchange, store of value and standard of value.
4. Just because the government issues currency does not mean that the currency will be accepted as money, and buyers and sellers still need barter to ensure that money does not lose its value.
Suppose now that our economy is suffering from rapid, ongoing increases in the cost of living. Which characteristic of money is directly negatively impacted in that economy?
1. Medium of exchange.
2. Double coincidence of wants.
3. Store of value.
4. Unit of account.

Debit and Credit Effects of Transactions
Lincoln Corporation was involved in the following transactions during the current year:
Lincoln borrowed cash from the local bank on a note payable.
Lincoln purchased operating assets on credit. Lincoln paid dividends in cash.
Lincoln purchased supplies inventory on credit.
Lincoln used a portion of the supplies purchased in Transaction d.
Lincoln provided services in exchange for cash from the customer.
A customer received services from Lincoln on credit.
The owners invested cash in the business in exchange for common stock.
The payable from Transaction d was paid in full.
The receivable from Transaction g was collected in full.
Lincoln paid wages in cash.
Indicate the effect on assets, liabilities and stockholders equity.

Conducting scenario analysis helps managers see the: potential changes in long-term debt over the course of a proposed project. impact an individual variable has on the outcome of a project. potential range of outcomes from a proposed project. distribution of funds for capital projects under conditions of hard rationing. possible range of market prices for a firm's stock over the life of a project.

Filer Manufacturing has 9 million shares of common stock outstanding. The current share price is $88, and the book value per share is $7. The company also has two bond issues outstanding. The first bond issue has a face value $80 million, a coupon of 5 percent, and sells for 98 percent of par. The second issue has a face value of $55 million, a coupon of 6 percent, and sells for 106 percent of par. The first issue matures in 20 years, the second in 8 years.
a. What are the company's capital structure weights on a book value basis? (Do not round intermediate calculations and round your answers to 4 decimal places, e.g., 32.1616.) Equity / Value Debt / Value
b. What are the company's capital structure weights on a market value basis? (Do not round intermediate calculations and round your answers to 4 decimal places, e.g., 32.1616.) Equity / Value Debt / Value
c. Which are more relevant? Market value weights or Book value weights

KB Homes is a nationwide home builder that develops entire communities of dozens and even hundreds of homes, in addition to, building custom homes for individual customers. While a Job Costing system is appropriate for the custom home building, their new controller is planning on using a Process Costing system for the large developments. She argues that because even large developments of 100 homes only offer three or four different floor plans and thus would be more efficient for tracking costs because of the homogeneity. Do you agree or disagree? Why?

Partial adjusted trial balance for Sheffield Corp. at December 31, 2017, includes the following accounts: Retained Earnings $17,000, Dividends $6,700, Service Revenue $36,300 Salaries and Wages Expense $14,000, Insurance Expense $1,880, Rent Expense $4,080, Supplies Expense $1,440, and Depreciation Expense $900. The balance in Retained Earnings is the balance as of January 1.Prepare a retained earnings statement for the year assuming net income is $10,400. List items that increase retained earnings first.

What unique things words separate you from other applicants Applying for this funding?

Fernando Co. will receive 5 million British pounds (£) tomorrow as a result of selling products to a British firm. Fernando has estimated the standard deviation of daily percentage changes of the British pound to be 1.1% over the last 100 days. Assume that these daily percentage changes are normally distributed. The expected daily percentage change for the British pound is 0.2% tomorrow. What is the maximum one-day loss based on the value-at-risk (VAR) method? Assume a 95% confidence interval.
a. 2.02%.
b. 1.82%.
c. 1.62%.
d. 1.10%.
e. none of these choices are correct.
Fernando Co. will receive 5 million British pounds (£) tomorrow as a result of selling products to a British firm. Fernando has estimated the standard deviation of daily percentage changes of the British pound to be 1.1 percent over the last 100 days. Assume that these daily percentage changes are normally distributed. The expected daily percentage change for the British pound is 0.2 percent tomorrow. What is the dollar value of the maximum potential loss Fernando Co. could incur if the current spot rate for the pound is $1.50?
a. $75,000.
b. $136,500.
c. $151,500.
d. $121,500.
e. none of these choices are correct.

Management of Plascencia Corporation is considering whether to purchase a new model 370 machine costing $523,000 or a new model 220 machine costing $482,000 to replace a machine that was purchased 7 years ago for $518,000. The old machine was used to make product 143L until it broke down last week Unfortunately, the old machine cannot be repaired. Management has decided to buy the new model 220 machine. It has less capacity than the new model 370 machine, but its capacity is sufficient to continue making product 143L Management also considered, but rejected, the alternative of simply dropping product 143L. If that were done, instead of investing $340,000 in the new machine, the money could be invested in a project that would return a total of $497,000. In making the decision to buy the model 220 machine rather than the model 370 machine, the sunk cost was:
A. $518,000
B. $482,000
C. $523,000
D. $497000

Which of the following are mechanisms that have evolved to mitigate potential agency problems?
I) Using the firm's stock options for compensation
II) Hiring bickering family members as corporate spies
III) Boards of directors forcing out underperforming management
IV) Security analysts monitoring the firm closely
V) Takeover threats

You work in the customer care division at Flannery Electronics. Mr. Gallegos, a longtime customer, is experiencing a problem with his home theater system and has submitted a letter requesting that Flannery Electronics either fix or replace his system at no cost. Unfortunately, Mr. Gallegos’s customer service and factory warranties expired three months ago. You must write to Mr. Gallegos and inform him that Flannery will be unable to honor his request.
1. Should the tone for this message be formal or informal?
A. Formal
B. Informal
2. Which communication channel would be most appropriate?
A. Phone call
B. Letter
C. Instant message
D. Face-to-face meeting

Think about the following products: cell phone, automobile, clothing, and social media site. Personally, how would you determine and assess the concept of value to the customer for each of these products? Which aspects, technical or social, have the most weight? Would you say that your analysis would be legitimate for others making the same decision?

the process in which derivatives are used to reduce risk exposure is called hedging or speculation

Plastic Company purchased 100 percent of Spoon Company's voting common stock for $657,000 on January 1, 20X4. At that date, Spoon reported assets of $707,000 and liabilities of $249,000. The book values and fair values of Spoon's assets were equal except for land, which had a fair value $118,000 more than book value, and equipment, which had a fair value $81,000 more than book value. The remaining economic life of all depreciable assets at January 1

What is one of the basic principles of economics?

A.) Society's resources are unlimited.
B.) People never put their own interests as their first priority.
C.) If people demand a product, then businesses are required to supply it.
D.) Society and its individuals have unlimited wants.

You decide to set aside $120 a month for your future. Assuming an interest rate of 6.35%, how much will you have after 25 years? How much more would you have if you invested for 30 years?

Luebke Incorporated has provided the following data for the month of November. The balance in the Finished Goods inventory account at the beginning of the month was $72,000 and at the end of the month was $32,000. The cost of goods manufactured for the month was $222,000. The actual manufacturing overhead cost incurred was $61,000 and the manufacturing overhead cost applied to Work in Process was $66,000. The company closes out any underapplied or overapplied manufacturing overhead to cost of goods sold. The adjusted cost of goods sold that would appear on the income statement for November is:

A firm now operates as a C-Corporation. The firm has earnings before taxes of $433,743 per year and pays out all its net earnings as dividends. The firm has a corporate tax rate is 24 percent. The firm has only one owner who faces a personal income tax rate of 27 percent. What is the spendable income for the owner of the C-Corporation

Part II: Article II, Section I of the U.S. Constitution provides that the president must "take care that the laws be faithfully executed." Presidents have used this authority to issue executive orders, which are orders to federal agencies that are a part of the executive branch and which contain detailed instructions on how laws enacted by Congress should be carried out.

Presidents are not specifically given the power to issue executive orders by the U.S. Constitution. Is it appropriate for the president to exercise powers that the Constitution does not specifically grant to him or her? Why, or why not?

Fred Moss, owner of Moss Interiors, is negotiating for the purchase of Zweifel Galleries. The following balance sheet of Zweifel is given in an abbreviated form below.

ZWEIFEL GALLERIES BALANCE SHEET AS OF DECEMBER 31, 2017
Assets Liabilities and Stockholders' Equity
Cash $100,000 Accounts payable $50,000
Land 70,000 Notes payable (long-term) 300,000
Buildings (net) 200,000 Total liabilities 350,000
Equipment (net) 175,000 Common stock $200,000
Copyrights (net) 30,000 Retained earnings 25,000 225,000
Total assets $575,000 Total liabilities and stockholders' equity $575,000

Moss and Zweifel agree that:
1. Land is undervalued by $30,000.
2. Equipment is overvalued by $5,000.

Zweifel agrees to sell the gallery to Moss for $350,000.

Required:
Prepare the entry to record the purchase of Zweifel Galleries on Moss's books.

The following data from the just completed year are taken from the accounting records of Mason Company:

Sales $660,000
Direct labor cost $81,000
Raw material purchases $140,000
Selling expenses $103,000
Administrative expenses $43,000
Manufacturing overhead applied to work in process $201,000
Actual manufacturing overhead costs $225,000

Inventories Beginning of Year End of Year
Raw materials $8,500 $10,500
Work in process $6,000 $21,000
Finished goods $79,000 $25,600

Required:
a. Prepare a schedule of cost of goods manufactured.
b. Prepare a schedule of cost of goods sold.

A distribution channel member that makes goods convenient for businesses
to buy is called a
A. wholesaler
B. warehouse
C. logistics manager
D. retailer

The trial balance for Lindor Corporation, a manufacturing company, for the year ended December 31, 2016, included the following income accounts: Account Title Debits Credits Sales revenue 2,300,000 Cost of goods sold 1,400,000 Selling and administrative expenses 420,000 Interest expense 40,000 Unrealized holding gains on investment securities 80,000 The trial balance does not include the accrual for income taxes. Lindor's income tax rate is 30%. One million shares of common stock were outstanding throughout 2016. Required: Prepare a single, continuous multiple-step statement of comprehensive income for 2016, including appropriate EPS disclosures.

You purchase a property with a Market Value of $520,000 in 2005 using 5-year Interest Only 90% Loan-to-Value financing. In 2010, the Market Value of the property drops to $460,000. You are considering refinancing. The Loan-to-Value you can get for refinancing is only 70%. How much Total Cash Out of Pocket would you need to have to go through with the refinancing and pay back the original loan Principal outstanding

Barrios Communications is a provider of satellite television services. It will install a satellite dish free of charge for any customer that agrees to a one-year service contract at a price of $50 per month. Installation costs Barrios $150. Customers typically remain with Barrios for much longer than the one year required, an average of 10 years (i.e., 9 years beyond their contractual obligation). Barrios enters into a contract under the terms described above on January 1, 20X1.
Required:
1. What amount of revenue should Barrios record related to the contract in 2019?
2. What amount of expense related to the contract should Barrios record related to the contract in 2019?

1. Write a hierarchical list of Excel components by size, starting with cells as the smallest

component and workbooks as the largest component.

At a local family bakery in Hyde Park, a neighbourhood of Chicago, Illinois, the marginal products of the first, second, and third sales clerks are 20, 17, and 11 customers served, respectively. The total product of the first two sales clerks is'\

As part of its hiring process, TE Electronics requires new employees to sign an agreement that requires arbitration in the event of any employment dispute. Jack applied and was hired by TE last summer. On his first day of employment, Jack signed the mandatory arbitration agreement. Jack is an Asian-American, and was recently passed over for promotion. Jack wants to file a charge of discrimination with the EEOC, but his supervisor says he cannot because of the arbitration agreement. Which of the following is true?

a. Jack can file a claim with the EEOC since the Title VII does not permit enforcement of the mandatory arbitration agreement
b. The EEOC can still investigate the matter and take action against TE Electronics it cannot obtain relief for Jack
c. The EEOC is not a party to the mandatory arbitration agreement so it can investigate the claim and can even pursue specific relief for jack including back pay, reinstatement and damages
d. With the mandatory arbitration agreement in place, the EEOC can not do any investigation of Jacks claim

ReNew Corporation raises funds to build renewable energy systems by issuing 3-year bonds with a coupon rate of 6% and a face value of $1,600. Assume that the market interest rate for a 3-year bond issued by a firm like ReNew is currently the same as the coupon rate. The price of each of these bonds is____ , which means that the bonds sell at ___. Suppose that the market interest rate for bonds that are similar to the ReNew bond has increased to 7%. The price of the ReNew bond changes to____ , which means that it sells at ____. Suppose that instead of rising, the market rate decreases from 6% to 4%. The new price of the bond changes to ___, which means that the bond sells at ___.

Morris Company applies overhead based on direct labor costs. For the current year, Morris Company estimated total overhead costs to be $432,000, and direct labor costs to be $2,160,000. Actual overhead costs for the year totaled $404,000, and actual direct labor costs totaled $1,880,000. At year-end, the balance in the Factory Overhead account is a: