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1. A company is considering on investing one of the following alternatives. The tax rate is 50%. Suppose that no tax is paid if the taxable income is non-positive and switching between depreciation methods is allowed. Given that after-tax MARR is 10% and no budget limit exists, determine which alternative, if any, should be selected. A First Cost (8) -30,000 Annual Revenues ($) 30,000 Annual Expenses ($) 5,000 Depreciation Method Double Declining Balance Recovery period 5 Salvage Value (8) 10,000 -60,000 35,000 5,000 Straight Line 10 5,000 (a) if the alternatives are independent? (b) if the alternatives are mutually exclusive?

2.Larry has been the chief financial officer (CFO) of Maxima Auto Service for the past 10 years. The company has reported profits each year it's been in business. However, this year has been a tough one. Increased competition and the rising costs of labor have reduced the company's profits. On December 30, Larry informs Robert, the company's president and Larry's closest friend for the past 10 years, that it looks like the company will report a net loss (total expenses will be greater than total revenues) of about $50,000 this year.

The next day, December 31, while Larry is preparing the year-end reports, Robert stops by Larry's office to tell him that an additional $75,000 of revenues needs to be reported and that the company can now report a profit. When Larry asks about the source of the $75,000, Robert tells him, "Earlier in the month some customers paid for auto services with cash, and with this cash I bought additional assets for the company. That's why the $75,000 never showed up in the bank statement. I just forgot to tell you about this earlier." When Larry asks for more specifics about these transactions, Robert mumbles, "I can't recall where I placed the customer sales invoices or the purchase receipts for the assets, but don't worry; I know they're here. We've been friends for a lot of years and you can trust me. Now, let's hurry and finish those reports and I'll treat you to dinner tonight at the restaurant of your choice."

Required:

Discuss the ethical dilemma Larry faces: What is the issue? Who are the parties affected? What factors should Larry consider in making his decision?

Each analysis will include a minimum of four sections:

1.  Ethical situation and people who will be affected

2. Options for alternative courses of action

3. The impact of each option on the stakeholders

4. Decision and reasoning underlying the decision.

3.Purchase with Forward Exchange Contract and Intervening Fiscal Year-End Pumped Up Company purchased equipment from Switzerland for 140,000 francs on December 16, 20X7, with payment due on February 14, 20X8. On December 16, 20X7, Pumped Up also acquired a 60-day forward contract to purchase francs at a forward rate of SFr 1 = $.67. On December 31, 20X7, the forward rate for an exchange on February 14, 20x8, is SFr 1 = $.695. The spot rates were: December 16, 20X71 SFr = $.68 December 31, 20X7 1 SFr= .70 February 14, 20x8 1 SFr = .69 Partl Assume that the forward contract is not designated as a hedge but is entered into to manage the company's foreign currency-exposed accounts payable.

Prepare journal entries for Pumped Up to record the purchase of inventory; all entries associated with the forward contract; the adjusting entries on December 31, 20X7; and entries to record the revaluations and payment on February 14, 20X8.

b. What is the foreign currency transaction to be reported in Pumped Up's 20X7 income statement?

c. What is the foreign currency transaction to be reported in Pumped Up's 20X8 income statement?

d. What is the total foreign currency transaction to be reported for Pumped Up, 20X7 and 20X8 combined?

e. Gross profit to be reported in 20X8 income statement is _______?

f. Overall effect of these transactions on net income in 20X7 and 20X8 combined = ?

4.Thermal Rising, Inc., makes paragliders for sale through specialty sporting goods stores. The company has a standard paraglider model, but also makes custom-designed paragliders. Management has designed an activity-based costing system with the following activity cost pools and activity rates: Activity Cost Pool Activity Rate Supporting direct labor $ 18 per direct labor-hour Order processing $ 196 per order Custom design processing $ 270 per custom design Customer service $ 436 per customer Management would like an analysis of the profitability of a particular customer, Big Sky Outfitters, which has ordered the following products over the last 12 months: Standard Model Custom Design Number of gliders 16 2 Number of orders 2 2 Number of custom designs 0 2 Direct labor-hours per glider 27.50 32.00 Selling price per glider $ 1,700 $ 2,310 Direct materials cost per glider $ 446 $ 570 The company’s direct labor rate is $22 per hour. Required: Using the company’s activity-based costing system, compute the customer margin of Big Sky Outfitters. (Round your intermediate calculations and final answer to the nearest whole dollar amount. Loss amounts should be entered with a minus sign.)