The following information relates to questions 13 ...

The following scenario relates to questions 11 to 15.

The following information relates to an investment project which is being evaluated by the directors of Fence Co, a listed company. The initial investment, payable at the start of the first year of operation, is $3·9 million.

The directors believe that this investment project will increase shareholder wealth if it achieves a return on capital employed greater than 15%. As a matter of policy, the directors require all investment projects to be evaluated using both the payback and return on capital employed methods. Shareholders have recently criticised the directors for using these investment appraisal methods, claiming that Fence Co ought to be using the academically-preferred net present value method.

The directors have a remuneration package which includes a financial reward for achieving an annual return on capital employed greater than 15%. The remuneration package does not include a share option scheme.

What is the payback period of the investment project?

A.2·75 years

B.1·50 years

C.2·65 years

D.1·55 years

Which of the following statements about investment appraisal methods is correct?A.The return on capital employed method considers the time value of money

B.Return on capital employed must be greater than the cost of equity if a project is to be accepted

C.Riskier projects should be evaluated with longer payback periods

D.Payback period ignores the timing of cash flows within the payback period

Which of the following statements about Fence Co is/are correct?

(1) Managerial reward schemes of listed companies should encourage the achievement of stakeholder objectives

(2) Requiring investment projects to be evaluated with return on capital employed is an example of dysfunctional behaviour encouraged by performance-related pay

(3) Fence Co has an agency problem as the directors are not acting to maximise the wealth of shareholders

A.1 and 2 only

B.1 only

C.2 and 3 only

D.1, 2 and 3

Which of the following statements about Fence Co directors’ remuneration package is/are correct?

(1) Directors’ remuneration should be determined by senior executive directors

(2) Introducing a share option scheme would help bring directors’ objectives in line with shareholders’ objectives

(3) Linking financial rewards to a target return on capital employed will encourage short-term profitability and discourage capital investment

A.2 only

B.1 and 3 only

C.2 and 3 only

D.1, 2 and 3

Based on the average investment method, what is the return on capital employed of the investment project?

A.13·3%

B.26·0%

C.52·0%

D.73·5%

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The following scenario relates to questions 1–5

You are an audit senior of Viola & Co and are currently conducting the audit of Poppy Co for the year ended 30 June 20X6.

Materiality has been set at $50,000, and you are carrying out the detailed substantive testing on the year-end payables balance. The audit manager has emphasised that understatement of the trade payables balance is a significant audit risk.

Below is an extract from the list of supplier statements as at 30 June 20X6 held by the company and corresponding payables ledger balances at the same date along with some commentary on the noted differences:

Carnation Co

The difference in the balance is due to an invoice which is under dispute due to faulty goods which were returned on 29 June 20X6.

Lily Co

The difference in the balance is due to the supplier statement showing an invoice dated 28 June 20X6 for $70,000 which was not recorded in the financial statements until after the year end. The payables clerk has advised the audit team that the invoice was not received until 2 July 20X6.

The audit manager has asked you to review the full list of trade payables and select balances on which supplier statement reconciliations will be performed.

Which of the following items should you select for testing?

(1) Suppliers with material balances at the year end

(2) Suppliers which have a high volume of business with Poppy Co

(3) Major suppliers with nil balances at the year end

(4) Major suppliers where the statement agrees to the ledger

A.1 only

B.1, 2 and 3 only

C.2 and 4 only

D.1, 2, 3 and 4

Which of the following audit procedures should be performed in relation to the balance with Lily Co to determine if the payables balance is understated?

A.Inspect the goods received note to determine when the goods were received

B.Inspect the purchase order to confirm it is dated before the year end

C.Review the post year-end cashbook for evidence of payment of the invoice

D.Send a confirmation request to Lily Co to confirm the outstanding balance

Which of the following audit procedures should be carried out to confirm the balance owing to Carnation Co?

(1) Review post year-end credit notes for evidence of acceptance of return

(2) Inspect pre year-end goods returned note in respect of the items sent back to the supplier

(3) Inspect post year-end cash book for evidence that the amount has been settled

A.1, 2 and 3

B.1 and 3 only

C.1 and 2 only

D.2 and 3 only

The audit manager has asked you to review the results of some statistical sampling testing, which resulted in 20% of the payables balance being tested.

The testing results indicate that there is a $45,000 error in the sample: $20,000 which is due to invoices not being recorded in the correct period as a result of weak controls and additionally there is a one-off error of $25,000 which was made by a temporary clerk.

What would be an appropriate course of action on the basis of these results?

A.The error is immaterial and therefore no further work is required

B.The effect of the control error should be projected across the whole population

C.Poppy Co should be asked to adjust the payables figure by $45,000

D.A different sample should be selected as these results are not reflective of the population

To help improve audit efficiency, Viola & Co is considering introducing the use of computer assisted audit techniques (CAATs) for some audits. You have been asked to consider how CAATs could be used during the audit of Poppy Co.

Which of the following is an example of using test data for trade payables testing?

A.Selecting a sample of supplier balances for testing using monetary unit sampling

B.Recalculating the ageing of trade payables to identify balances which may be in dispute

C.Calculation of trade payables days to use in analytical procedures

D.Inputting dummy purchase invoices into the client system to see if processed correctly

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The following scenario relates to questions 1 to 5.

Herd Co is based in a country whose currency is the dollar ($). The company expects to receive €1,500,000 in six months’ time from Find Co, a foreign customer. The finance director of Herd Co is concerned that the euro (€) may depreciate against the dollar before the foreign customer makes payment and she is looking at hedging the receipt.

Herd Co has in issue loan notes with a total nominal value of $4 million which can be redeemed in 10 years’ time. The interest paid on the loan notes is at a variable rate linked to LIBOR. The finance director of Herd Co believes that interest rates may increase in the near future.

The spot exchange rate is €1·543 per $1. The domestic short-term interest rate is 2% per year, while the foreign short-term interest rate is 5% per year.

What is the six-month forward exchange rate predicted by interest rate parity?

A.€1·499 per $1

B.€1·520 per $1

C.€1·566 per $1

D.€1·588 per $1

As regards the interest rate risk faced by Herd Co, which of the following statements is correct?A.In exchange for a premium, Herd Co could hedge its interest rate risk by buying interest rate options

B.Buying a floor will give Herd Co a hedge against interest rate increases

C.Herd Co can hedge its interest rate risk by buying interest rate futures now in order to sell them at a future date

D.Taking out a variable rate overdraft will allow Herd Co to hedge the interest rate risk through matching

Which of the following hedging methods will NOT be suitable for hedging the euro receipt?A.Forward exchange contract

B.Money market hedge

C.Currency futures

D.Currency swap

Which of the following statements support the finance director’s belief that the euro will depreciate against the dollar?

(1) The dollar inflation rate is greater than the euro inflation rate

(2) The dollar nominal interest rate is less than the euro nominal interest rate

A.1 only

B.2 only

C.Both 1 and 2

D.Neither 1 nor 2

As regards the euro receipt, what is the primary nature of the risk faced by Herd Co?A.Transaction risk

B.Economic risk

C.Translation risk

D.Business risk

请帮忙给出每个问题的正确答案和分析，谢谢！

The following scenario relates to questions 11–15.

Helot Co develops and sells computer games. It is well known for launching innovative and interactive role-playing games and its new releases are always eagerly anticipated by the gaming community. Customers value the technical excellence of the games and the durability of the product and packaging.

Helot Co has previously used a traditional absorption costing system and full cost plus pricing to cost and price its products. It has recently recruited a new finance director who believes the company would benefit from using target costing. He is keen to try this method on a new game concept called Spartan, which has been recently approved.

After discussion with the board, the finance director undertook some market research to find out customers’ opinions on the new game concept and to assess potential new games offered by competitors. The results were used to establish a target selling price of $45 for Spartan and an estimated total sales volume of 350,000 units. Helot Co wants to achieve a target profit margin of 35%.

The finance director has also begun collecting cost data for the new game and has projected the following:

Which of the following statements would the finance director have used to explain to Helot Co’s board what the benefits were of adopting a target costing approach so early in the game’s life-cycle?

(1) Costs will be split into material, system, and delivery and disposal categories for improved cost reduction analysis

(2) Customer requirements for quality, cost and timescales are more likely to be included in decisions on product development

(3) Its key concept is based on how to turn material into sales as quickly as possible in order to maximise net cash

(4) The company will focus on designing out costs prior to production, rather than cost control during live production

A.1, 2 and 4

B.2, 3 and 4

C.1 and 3

D.2 and 4 only

The following financial information relates to YNM Co, which has a cost of equity of 12%. Assume that it is now 31 March 2011 and that the ordinary share price of YNM Co is $4·17 per share. YNM Co has been experiencing trading difficulties due to a continuing depressed level of economic activity:

Income statement information for recent years ending 31 March

Note: the statement of financial position takes no account of any dividend to be paid. The ordinary share capital of YNM Co has not changed during the period under consideration and the 8% bonds were issued in 1998.

Dividend and share price information

Financial objective of

YNM Co YNM Co has a declared objective of maximising shareholder wealth.

(1) To pay the same total cash dividend as in 2010

(2) To pay no dividend at all for the year ending 31 March 2011

Financing decision

YNM Co is also considering raising $50 million of new debt finance to support existing business operations.

Required:

(a) Analyse and discuss the recent financial performance and the current financial position of YNM Co, commenting on:

(i) achievement of the objective of maximising shareholder wealth;

(ii) the two dividend choices;

(iii) the proposal to raise $50 million of new debt finance. (13 marks)

(b) Discuss the following sources of finance that could be suitable for YNM Co, in its current position, to meet its need for $50m to support existing business operations:

(i) equity finance;

(ii) sale and leaseback. (6 marks)

(c) Explain the nature of a scrip (share) dividend and discuss the advantages and disadvantages to a company of using scrip dividends to reward shareholders. (6 marks)

The following information relates to a bank reconciliation. (i) The bank balance in the cashbook before taking the items below into account was $8,970 overdrawn. (ii) Bank charges of $550 on the bank statement have not been entered in the cashbook. (iii) The bank has credited the account in error with $425 which belongs to another customer. (iv) Cheque payments totalling $3,275 have been entered in the cashbook but have not been presented for payment. (v) Cheques totalling $5,380 have been correctly entered on the debit side of the cashbook but have not been paid in at the bank. What was the balance as shown by the bank statement before taking the items above into account?

A、$8,970 overdrawn

B、$11,200 overdrawn

C、$12,050 overdrawn

D、$17,750 overdrawn

The following information is relevant for questions 2 and 3. On 1 May 20X9 Marshall's cash book showed a cash balance of $224 and an overdraft of $336. During the week ended 6 May the following transactions took place. May 1 Sold $160 of goods to P Dixon on credit. May 1 Withdrew $50 of cash from the bank for business use. May 2 Purchased goods from A Clarke on credit for $380 less 15% trade discount. May 2 Repaid a debt of $120 owing to R Hill, taking advantage of a 10% cash discount. The payment was by cheque. May 3 Sold $45 of goods for cash. May 4 Sold $80 of goods to M Maguire on credit, offering a 12.5% discount if payment made within 7 days. May 4 Paid a telephone bill of $210 by cheque. May 4 Purchased $400 of goods on credit from D Daley. May 5 Received a cheque from H Larkin for $180. Larkin has taken advantage of a $20 cash discount offered to him. May 5 Sold $304 of goods to M Donald on credit. May 5 Purchased $135 of goods from Honour Co by cheque. May 6 Received a cheque from D Randle for $482. May 6 Purchased $100 of goods on credit from G Perkins. What is the total of the purchases day book?

A、$880

B、$823

C、$1,033

D、$958

Give answers to the following questions. Your grades will depend on your statements so try to organize your thoughts or ideas to the point but be brief at the same time.

A、2,800 units

B、2,900 units

C、3,000 units

D、3,200 units

Add punctuation marks to the following two paragraphs. In her essay (1) ______Rethinking the Work-Life Equation (2) _____ (3) ______ Susan Dominus points out that it takes more than just policies to make a workplace truly flexible and the whole office culture has to change (4)_____ She starts with her writing as the following (5) _____ Phyllis Moen(6) _____ a sociologist who was widowed when her two children were young, has made a career studying the challenges of working full time while raising a family(7) ______She was an early voice calling for the government to provide paid maternity leave and offer benefits for part(8) _____time workers(9) _______but eventually(10) ______ when she saw no signs of progress(11) ____ she began considering instead the ways that corporations could reconfigure work to address the realities of the modern employee(12) ______ who was more likely than ever to be a single parent or part of a dual-income couple(13) ____ (14) _____We wanted to do a field experiment at a corporation that reduced its hours(15) ____ (16) ____ she said(17) ______ (18) ______ but realized nobody would let us do that (19) _____We thought they would be more willing to experiment with giving workers more control(20) ____ (21)______