Imagine you are a provider of portfolio insurance. You are establishing a four-year program. The portfolio you manage is currently worth 100 million dollars, and you promise to provide a minimum return of 0 %. The equity portfolio has a standard deviation of 25 % per year, and T-bills pay 5 % per year. Assume for simplicity that the portfolio pays no dividends (or that all dividends are reinvested).

a. What fraction of the portfolio should be placed in bills? What fraction in equity?

b. What should the manager do if the stock portfolio falls by 3 % on the first day of trading?

A review of the balance sheet of Peterson Inc. revealed the following changes in the account balances:

a. Increase in long-term investment

b. Increase in accounts receivable

c. Increase in common stock

d. Increase in long-term debt

e. Decrease in accounts payable

f. Decrease in supplies inventory

g. Increase in prepaid insurance

h. Decrease in retained earnings

Required:

Classify each change in the balance sheet account as a cash flow from operating activities, a cash flow from investing activities, a cash flow from financing activities, or a noncash investing and financing activity.

Duncan Company owns a machine with a cost of $75,000 and accumulated depreciation of$15,000 that can be sold for $54,000 less a 5% sales commission. Alternatively, Duncan Company can lease the machine to another company for three years for a total of$60,000, at the end of which there is no residual value. In addition, the repair, insurance, and property tax expense that would be incurred by Duncan Company on the machine would total $8,500 over the three years. Prepare a differential analysis on February 21 as to whether Duncan Company should lease (Alternative 1) or sell (Alternative 2) the machine.

Use the following abbreviations to indicate the journal in which you would record transactions a through n. J = General journal S = Sales journal CR= Cash receipts journal P = Purchases journal CP = Cash payments journal

Transactions: ___ a. Cash purchase of merchandise inventory ___b. Collection of dividend revenue earned on an investment ___ c. Prepayment of insurance ___ d. Borrowing money on a long-term note payable ___ e. Purchase of equipment on account __ f. Cost of goods sold along with a credit sale ___ g. Cash sale of merchandise inventory ___ h. Payment of rent

$$\begin{matrix} \text{Estimated uncollectible accounts based} & \text{}\\ \text{on aging accounts receivable} & \text{\$ 3,697.32}\\ \text{Accrued interest income} & \text{137.50}\\ \text{Merchandise inventory} & \text{45,058.15}\\ \text{Supplies inventory} & \text{126.00}\\ \text{Jalue of prepaid insurance} & \text{1,535.80}\\ \text{Annual depreciation expense- equipment} & \text{2,250.00}\\ \text{Accrued interest expense} & \text{277.58}\\ \text{Prepaid rent income earned} & \text{1,000.00}\\ \end{matrix}$$

Journalize the income tax adjustment and post it to the T accounts.

Two people decide to open a business reconditioning toner cartridges for copy machines. They rent a building for $7000/year and estimate that building maintenance, taxes, and insurance will cost$6500/year. Each person wants to make $12/h in the first year and will work 10 h per day for 260 days of the year. Assume that it costs$28 to restore a cartridge and that the restored cartridge can be sold for $45. Write a linear function for the total cost C to operate the business and restore n cartridges during the first year, not including the hourly wage the owners wish to earn.

Janice Wong receives an annual salary of $42,536, which is paid weekly. Her normal work week is 40 hours, and she is paid time and a half for all overtime. She is single and claims two withholding allowances. Her deductions include FICA, Medicare, federal withholding, state disability insurance, state withholding at 4.4%, credit union payments of$125, retirement deductions of $75, association dues of$12, and a Diabetes Association contribution of $25. Find the total gross earnings for a week in which she works 52 hours.

Paul's Plumbing charges a flat fee of $\$ 50$ per service call plus an hourly rate of $\$ 42.50$. This means that cost is a function of the hours the job takes to complete plus the flat fee.

(a) Write this relationship in equation form;

(b) find the cost of a service call that takes $2 \frac{1}{2} \mathrm{hr}$;

(c) determine the number of hours the job took if the charge came to $\$ 262.50$;

(d) determine the domain and range of the function in this context, if your insurance company has agreed to pay for all charges over $\$ 500$ for the service call.

Janice Wong receives an annual salary of $42,536, which is paid weekly. Her normal work week is 40 hours, and she is paid time and a half for all overtime. She is single and claims two withholding allowances. Her deductions include FICA, Medicare, federal withholding, state disability insurance, state withholding at 4.4%, credit union payments of$125, retirement deductions of $75, association dues of$12, and a Diabetes Association contribution of $25. Find the federal withholding using the percentage method for a week in which she works 52 hours.

From the following Company T adjusted trial balance, prepare the following:

D. Closing journal entries

$$\begin{array}{c} \textbf{Adjusted Trial Balance} \end{array}$$

$$\begin{array}{lcc} &\textbf{Debit}&\textbf{Credit}\\[5pt] \text{Cash}&\text{\$\hspace{5pt}24,000}\\ \text{Accounts Receivable}&\text{\hspace{10pt}14,900}\\ \text{Prepaid Insurance}&\text{\hspace{15pt}5,300}\\ \text{Land}&\text{\hspace{10pt}13,500}\\ \text{Accounts Payable}&&\text{\$\hspace{5pt}12,400}\\ \text{Salaries Payable}&&\text{\hspace{15pt}1,500}\\ \text{Common Stock}&&\text{\hspace{10pt}34,000}\\ \text{Retained Earnings}&&\text{\hspace{10pt}10,200}\\ \text{Dividends}&\text{\hspace{15pt}5,000}\\ \text{Service Revenue}&&\text{\hspace{10pt}56,300}\\ \text{Insurance Expense}&\text{\hspace{15pt}7,900}\\ \text{Salaries Expense}&\text{\hspace{10pt}39,000}\\ \text{Miscellaneous Expense}&\underline{\text{\hspace{15pt}4,800}}&\underline{\text{\hspace{39pt}}}\\ &\underline{\underline{\text{\$\hspace{1pt}114,400}}}&\underline{\underline{\text{\$\hspace{1pt}114,400}}}\\ \end{array}$$

$$\begin{matrix} \text{Estimated uncollectible accounts based} & \text{}\\ \text{on aging accounts receivable} & \text{\$ 3,796.00}\\ \text{Accrued interest income} & \text{80.00}\\ \text{Merchandise inventory} & \text{98,996.13}\\ \text{Supplies inventory} & \text{401.25}\\ \text{Jalue of prepaid insurance} & \text{600.00}\\ \text{Annual depreciation expense- equipment} & \text{7,345.00}\\ \text{Accrued interest expense} & \text{150.00}\\ \text{Prepaid rent income earned} & \text{2,000.00}\\ \end{matrix}$$

Journalize the income tax adjustment and post it to the T accounts.

Assuming the following Adjusted Trial Balance, create the Post-Closing Trial Balance that would result, after all closing journal entries were made and posted:

$$\begin{array}{c} \textbf{Adjusted Trial Balance} \end{array}$$

$$\begin{array}{lcc} &\textbf{Debit}&\textbf{Credit}\\[5pt] \text{Cash}&\text{\$\hspace{5pt}22,900}\\ \text{Prepaid Insurance}&\text{\hspace{15pt}4,000}\\ \text{Fixed Assets}&\text{\hspace{10pt}44,000}\\ \text{Notes Payable}&&\text{\$\hspace{5pt}40,000}\\ \text{Common Stock}&&\text{\hspace{10pt}25,000}\\ \text{Retained Earnings}&&\text{\hspace{10pt}48,350}\\ \text{Dividends}&\text{\hspace{10pt}22,000}\\ \text{Sales Revenue}&&\text{\hspace{5pt}150,000}\\ \text{Automobile Expense}&\text{\hspace{10pt}26,500}\\ \text{Insurance Expense}&\text{\hspace{10pt}20,000}\\ \text{Salaries Expense}&\text{\hspace{5pt}122,500}\\ \text{Supplies Expense}&\underline{\text{\hspace{15pt}1,450}}&\underline{\text{\hspace{39pt}}}\\ &\underline{\underline{\text{\$\hspace{1pt}263,350}}}&\underline{\underline{\text{\$\hspace{1pt}263,350}}}\\ \end{array}$$

Prince Distribution Inc. has an unfunded postretirement benefit plan. Medical care and life insurance benefits are provided to employees who render 10 years service and attain age 55 while in service. At the end of 2016, Jim Lukawitz is 31. He was hired by Prince at age 25 (6 years ago) and is expected to retire at age 62. The expected postretirement benefit obligation for Lukawitz at the end of 2016 is $50,000 and$54,000 at the end of 2017. Calculate the accumulated postretirement benefit obligation at the end of 2016 and 2017 and the service cost for 2016 and 2017 as pertaining to Lukawitz.

On January 14, the end of the first bi-weekly pay period of the year, Rockin Company’s payroll register displayed that its employees earned $14,000 of sales salaries. Withholdings from the employees’ salaries include FICA Social Security taxes at the rate of 6.2%, FICA Medicare taxes at the rate of 1.45%,$2,600 of federal income taxes, $309 of medical insurance deductions, and$120 of union dues. No employee earned more than $7,000 in this first period. Prepare the journal entry to record Rockin Company’s January 14 (employee) payroll expenses and liabilities.