FINC 355 RETIREMENT AND ESTATE PLANNING HOMEWORK 4
DIRECTIONS: Here is the Homework #4 Assignment. Use the Homework #4 Answer Sheet for your responses to the questions. When you have completed Homework #4 submit the Answer Sheet to your Homework #4 Assignment Folder. Please submit your Homework #4 in MS Word format with the following file name: LastNameFirstInitial_Homework04AnswerSheet.docx. For example, if you name is John Smith, the file name of your Answer Sheet should be SmithJ_Homework04AnswerSheet.docx. 1- Ocatagon Industries has an age-weighted profit sharing plan that uses a fixed age-weighted
formula for allocating employer contributions. The plan covers 50 employees. The owner and two key employees are highly compensated, each earning $500,000 per year. Average pay for the rank-and-file employees is $35,000 per year. This year, the company allocated $1,000 to each employee’s retirement account. The tax implications of such an allocation include which of the following?
a. because the plan is top-heavy, Ocatagon cannot receive a tax deduction until an employee withdraws funds from his or her retirement account
b. participant does not pay income tax on employer contributions and earnings until the plan participant withdraws the funds
c. plan distributions for hardship withdrawals made to employees before age 59 1/2 are tax free
e. a and c
2- Allen Industries has a money purchase benefit plan that is integrated with Social Security. The integration level is $30,000. Employer contributions are 15% above and 10% below the integration level. Bill Wheaton earns $75,000 this year. Allen Industries will contribute $_____ to Bill’s money purchase plan this year:
a. $9,750 b. $4,500 c. $6,750 d. $3,000 e. none of the above
3- A disadvantage of profit sharing plans is that
a. employee bears the investment risk b. actuarial costs make the plan expensive to administer c. there is no predictable level of employer funding under the plan d. a and b e. a and c
FINC 355 RETIREMENT AND ESTATE PLANNING HOMEWORK 4
4- All of the following are true regarding money purchase plans, except
a. most money purchase plan benefit formulas use a factor related to the employee’s service that favors owners and key employees
b. nondiscrimination regulations provide a safe harbor for money purchase plans c. a plan benefit formula can be integrated with Social Security d. forfeitures, unvested amounts left behind by employees in their plans, can be used to
reduce future employer contributions e. money purchase plan funds are generally invested in a pooled account managed by
the employer or a fund manager selected by the employer
5- If employer contributions to a profit sharing plan are based on a discretionary provision, all of the following are true, except
a. the employer can determine each year the amount to be contributed b. the employer can omit a contribution c. if too many years go by without an employer contribution, the IRS will likely claim that
the plan has been terminated d. when a qualified plan is terminated, all nonvested amounts in participants’ accounts
are forfeited. e. all of the above are true
6- Evergreen Semiconductors, Inc., is a young and innovative company with 25 employees between 24 and 35 years of age. Turnover has averaged about 2% per year for the 9- year old company. Profit has been intermittent. The owners believe that a substantial investment will need to be made in new equipment next year. Which of the following retirement savings plans is best for Evergreen?
a. money purchase plan b. target benefit plan c. nonqualified deferred compensation plan d. defined benefit plan e. profit sharing plan
7- John Wald has participated in his company’s profit sharing plan for the past 15 years and currently has an account balance of $250,000. Last month, his 12-year-old son had to have an emergency appendectomy. Complications extended his hospital stay to a week. Right before the accident, John used all of the family savings to purchase a new car. John must pay a $2,000 deductible and an additional $5,000 for medical expenses not covered under his medical plan. If John withdraws $7,000 from his profit sharing plan,
a. he is in big trouble because withdrawals from a profit sharing plan are not allowed by law
b. he must pay income tax and a 10% penalty on the amount withdrawn c. he must pay income tax but face only a 5% penalty for early withdrawal because it is
a hardship withdrawal
FINC 355 RETIREMENT AND ESTATE PLANNING HOMEWORK 4
d. all withdrawals from a profit sharing plan are penalty free, but income tax must be paid
e. he would pay income tax, but no early withdrawal penalty to the extent the medical expenses are tax-deductible
8- Which of the following is (are) true regarding an ESOP or stock bonus plan?
a. participant’s accounts are stated in terms of stock b. employer contributions to employee accounts can be in stock or cash c. stockholders must be given the right to vote on all issues d. a and b e. a and c
9- Sandy Beech earns $40,000 as a guide for Tropical Tours, Inc. Tropical Tours typically contributes 10% of profit to its profit sharing plan. Total payroll for Tropical Tours is $120,000. This year, Tropical Tours will contribute $21,000 to its profit sharing plan. Sandy’s share this year will be
a. $3,000 b. $4,000 c. $7,000 d. $12,000 e. need more information to calculate
10- Which of the following types of businesses can have an ESOP or stock bonus plan?
a. S corporation b. professional corporation c. incorporated business d. a and c e. b and c
11- An advantage of a profit sharing plan from the employer’s point of view includes which of the following?
a. employer contributions to the plan are discretionary b. plan can benefit long-term employees c. nonvested benefits can be reallocated to remaining employees d. allows integration with Social Security e. all of the above
12- Stock bonus plans and ESOPs share many characteristics, but ESOPs have some unique characteristics. Which of the following characteristics is (are) unique to an ESOP?
FINC 355 RETIREMENT AND ESTATE PLANNING HOMEWORK 4
a. accounts of employees over 55 must be offered diversification b. employer’s ability to borrow to leverage ownership c. tax-free treatment of appreciated company stock distributed to a retiree d. a and b e. b and c
13- The owner of Whitney Corporation, Inc., earned $250,000 in 2013. In the same year, three highly compensated employees earned $100,000 each. The remaining 30 line workers earn about $20,000 each, for a total payroll of $600,000 for this group of workers. Whitney Corporation made the maximum allowable contribution to each employee’s money purchase plan in 2013. In 2013, what was the total amount that Whitney Corporation contributed to their money purchase plan?
a. $51,000 b. $150,000 c. $225,000 d. $276,000 e. $318,000
14- An ESOP enables the employer company to borrow money on a favorable basis. All of the following are true about ESOP loans, except
a. the ESOP trustee borrows money from a lending institution, such as a bank b. the trustee uses the loan proceeds to purchase stock of the employer from the
employer corporation or from principal shareholders c. the employer makes tax-deductible contributions to the ESOP in amounts sufficient
to enable the trustee to pay off the principal and interest of the loan to the lender d. the leveraging feature of an ESOP loan distinguishes an ESOP from a regular stock
bonus plan e. all of the above are true
15- Which of the following is (are) true regarding the tax implications of having a money purchase plan?
a. employer contributions and plan earnings are tax-deferred for the employee b. employers beginning a new plan are eligible for a $2,500 business tax credit in the
first year to help with startup costs c. the employer tax deduction is limited to 25% of total payroll of the employees
covered under the plan d. only a and b e. only a and c
16- Harris Corporation has a savings plan for employees. Last year, Harris made non-elective contributions amounting to 4% of compensation to all employee accounts. By doing this, Harris has met the contribution requirements for a safe harbor test.
a. true b. false
FINC 355 RETIREMENT AND ESTATE PLANNING HOMEWORK 4
17- The stock of Vagabond Corporation is not publicly traded. Vagabond has an ESOP. A.
Wanderer, an employee
a. can expect that stock valuations will be made by an independent appraiser b. can demand that distributions from the ESOP be made in the form of employer stock c. can exercise a “put option” d. all of the above e. only a and b
18- Jane Tally has a thrift/savings plan with her employer. She knows
a. her contribution to the plan is voluntary and made with after-tax dollars b. 100% of her contribution to her account is vested immediately c. her employer’s contributions to her account must comply with Internal Revenue Code
requirements for qualified plans d. all of the above e. only a and b
19- Which of the following is (are) true regarding elective deferrals in a Section 401(k)?
a. elective deferrals are not subject to Social Security and Federal Unemployment payroll taxes
b. elective deferrals are always made on an after-tax basis c. if the company elects to have a safe harbor plan, elective deferrals must meet the
actual deferral percentage test d. account funds can be withdrawn without a premature distribution penalty if the
employee becomes disabled or dies e. since employees elect the amount of funds to defer, nondiscrimination tests do not
apply to elective deferrals
20- Last year, employee contributions and employer matching contributions amounted to 4% of compensation for all nonhighly compensated employees at Addison Corporation, a 400- employee company. Which of the following options allow Addison to preserve a nondiscriminatory plan during this plan year?
a. satisfying the requirements of a safe harbor 401(k) plan b. keeping the average ratio of nonhighly compensated employee contributions to
highly compensated employee contributions at or below 4% to 6% c. making sure employee contributions meet the requirements for a SIMPLE 401(k)
plan d. a and b e. a and c
Problem P1-4A
Name: | |||||||||
Course: | |||||||||
Date: | |||||||||
P1-4A – Prepare a cost of goods manufactured schedule, a partial income statement, and a partial balance sheet | |||||||||
Managerial Accounting, 6th Edition, by Weygandt, Kieso, and Kimmel | |||||||||
Primer on Using Microsoft Excel in Accounting by Rex A Schildhouse | |||||||||
Problem P1-4A The following data were taken from the records of Clarkson Company for the year ended June 30, 2014: | |||||||||
Raw Materials Inventory, 7/1/13 | $48,000 | Factory Machinery Depreciation | 16,000 | ||||||
Raw Materials Inventory, 6/30/14 | 39,600 | Factory Utilities | 27,600 | ||||||
Finished Goods Inventory, 7/1/13 | 96,000 | Office Utilities Expense | 8,650 | ||||||
Finished Goods Inventory, 6/30/14 | 75,900 | Sales | 534,000 | ||||||
Work in Process, 7/1/13 | 19,800 | Sale Discounts | 4,200 | ||||||
Work in Process, 6/30/14 | 18,600 | Plant Manager's Salary | 58,000 | ||||||
Direct labor | 139,250 | Factory Property Taxes | 9,600 | ||||||
Indirect Labor | 24,460 | Factory Repairs | 1,400 | ||||||
Account Receivable | 27,000 | Raw Materials Purchases | 96,400 | ||||||
Factory Insurance | 4,600 | Cash | 32,000 | ||||||
Instructions: | |||||||||
(a) Prepare a cost of goods manufactured schedule. (Assume all raw materials used were direct materials.) | |||||||||
CLARKSON COMPANY | |||||||||
Cost of Goods Manufactured Schedule | |||||||||
For the Year Ended June 30, 2014 | |||||||||
Title | Amount | ||||||||
Title | |||||||||
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Title | Formula | ||||||||
Less: Title | Amount | ||||||||
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Title | Formula | ||||||||
Title | Formula | ||||||||
Title | Formula | ||||||||
Less: Title | Amount | ||||||||
Title | Formula | ||||||||
(b) Prepare an income statement through gross profit. | |||||||||
CLARKSON COMPANY | |||||||||
(Partial) Income Statement | |||||||||
For the Year Ended June 30, 2014 | |||||||||
Sales Revenues | |||||||||
Title | Amount | ||||||||
Title | Amount | ||||||||
Title | Formula | ||||||||
Cost of goods sold | |||||||||
Title | Amount | ||||||||
Title | Formula | ||||||||
Title | Formula | ||||||||
Title | Amount | ||||||||
Title | Formula | ||||||||
Title | Formula | ||||||||
(c) Prepare the current assets section of the balance sheet at June 30, 2014. | |||||||||
CLARKSON COMPANY | |||||||||
(Partial) Balance Sheet | |||||||||
June 30, 2014 | |||||||||
Assets | |||||||||
Current assets | |||||||||
Title | Amount | ||||||||
Title | Amount | ||||||||
Title | |||||||||
Title | Amount | ||||||||
Title | Amount | ||||||||
Title | Amount | Formula | |||||||
Total current assets | Formula | ||||||||
FileName: &F, Tab: &A, Page &P of &N, &D, &T
Problem P2-5A
Name: | |||||||||
Course: | |||||||||
Date: | |||||||||
P2-5A – Analyze manufacturing accounts and determine missing amounts | |||||||||
Managerial Accounting, 6th Edition, by Weygandt, Kieso, and Kimmel | |||||||||
Primer on Using Microsoft Excel in Accounting by Rex A Schildhouse | |||||||||
Problem P2-5A Rodman Corporation's fiscal year ends on November 30. The following accounts are found in its job order cost accounting system for the first month of the fiscal year. | |||||||||
Raw Materials Inventory | |||||||||
12/01/14 | BB | (a) | 12/31/14 | Requisitions | 16,850 | ||||
12/31/14 | Purchases | 19,225 | |||||||
12/31/14 | EB | 7,975 | |||||||
Work in Process Inventory | |||||||||
12/01/14 | BB | (b) | 12/31/14 | Jobs completed | (f) | ||||
12/31/14 | DM | (c) | |||||||
12/31/14 | DL | 8,800 | |||||||
12/31/14 | Overhead | (d) | |||||||
12/31/14 | EB | (e) | |||||||
Finished Goods Inventory | |||||||||
12/01/14 | BB | (g) | 12/31/14 | COGS | (i) | ||||
12/31/14 | Completed jobs | (h) | |||||||
12/31/14 | EB | (j) | |||||||
Factory Labor | |||||||||
12/31/14 | Factory wages | 12,025 | 12/31/14 | Wages assigned | (k) | ||||
Manufacturing Overhead | |||||||||
12/31/14 | Ind matls | 1,900 | 12/31/14 | Ovrhd applied | (m) | ||||
12/31/14 | Ind labor | (l) | |||||||
12/31/14 | Oth overhead | 1,245 | |||||||
Other data: | |||||||||
1. On December 1, two jobs were in process: Job No. 154 and Job No. 155. These jobs had combined direct materials | |||||||||
costs of | $9,750 | and direct labor costs of | $15,000 | Overhead was applied at a rate that was | 75% | ||||
of direct labor costs. | |||||||||
2. During December, Job No. 156, 157, and 158 were started. On December 31, Job No. 158 was unfinished. This job had | |||||||||
charges for direct materials | $3,800 | and direct labor | $4,800 | plus manufacturing overhead. All jobs, | |||||
except Job No. 158, were completed in December. | |||||||||
3. On December 1, Job No. 153 was in the finished goods warehouse. It had a total cost of | $5,000 | On | |||||||
December 31, Job No. 157 was the only job finished that was not sold. It had a cost of | $4,000 | ||||||||
4. Manufacturing overhead was | $230 | overapplied in December. | |||||||
Instructions: | |||||||||
List the letters (a) through (m) and indicate the amount pertaining to each letter. | |||||||||
(a) | Formula | Text or formula as desired | |||||||
(b) | Formula | Text or formula as desired | |||||||
(c) | Formula | Text or formula as desired | |||||||
(d) | Formula | Text or formula as desired | |||||||
(e) | Formula | Text or formula as desired | |||||||
(f) | Formula | Text or formula as desired | |||||||
(g) | Formula | Text or formula as desired | |||||||
(h) | Formula | Text or formula as desired | |||||||
(i) | Formula | Text or formula as desired | |||||||
(j) | $4,000 | = $4,000 Given in other data | |||||||
(k) | Formula | Text or formula as desired | |||||||
(l) | Formula | Text or formula as desired | |||||||
(m) | Formula | Text or formula as desired | |||||||
FINC 355: RETIREMENT AND ESTATE PLANNING
HOMEWORK #3 ANSWER SHEET
DIRECTIONS: Here is the Homework #3 Answer Sheet that you should submit to your Homework #3 Assignment Folder.
Please submit your Homework #3 in MS Word format with the following file name: LastNameFirstInitial_Homework03AnswerSheet.docx. For example, if you name is John Smith, the file name of your Answer Sheet should be SmithJ_Homework03AnswerSheet.docx.
If you have any questions or comments, please do not hesitate to contact me.
NAME: _____________________________________
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FINC 440 ASSIGNMENT
Assignment
Dividend Discount Model Valuation:
1. Dividend Discount Model Valuation - Using the constant growth dividend discount model formula prepare a valuation estimate of the common stock of the company that you selected. What are your findings?
2. What are the principal assumptions used in the analysis? How do you defend them?
3. How does the estimated intrinsic value compare to the current market value of the stock? What explains the difference?
4. Do you believe that the dividend discount model is a useful approach to valuation? Why or why not?
OR
RELATIVE VALUATION: 1. Prepare a comparison of financial ratios and rank the companies you compare [see spreadsheet]
2. How would you estimate your company value given the ranking in relation to comparable companies?
3. Which ratios are preferred for ranking?
4. Compare your ranking method and ratios to the Value Line System for ranking? www.valueline.com
FINC 355 WEEK 4
1. Discuss when an employer might want to establish a target benefit plan or a profit sharing plan rather than a money purchase plan.
2. Discuss the rationale behind the different vesting schedules and explain why an employer might choose one vesting schedule over another
FINC 440 WEEK 4
1. Estimating Growth –
The textbook (Chapter 11 – first page) explains that there are three ways to estimate growth rates for earnings, revenues, and dividends. These include (1) the growth rate of the firm’s past earnings, (2) obtain the information from analysts, and (3) estimate the rates from the firm’s fundamentals. Using each of these methods, what is your estimate of the growth rate for the company that you elected to study?
2. Estimating Terminal Value –
Analysts normally must calculate a terminal value of a firm when preparing a discounted cash flow valuation. The textbook (Chapter 12 – first two pages) explains that there are three ways to prepare this estimate, which include (1) assuming a liquidation value of the firm’s assets in the terminal year, (2) applying a multiple to earnings, revenues or book value, and (3) assuming the free cash flows will grow at a constant rate forever (a stable growth rate). Using each of these methods, what is your estimate of the terminal value for the company that you elected to study?
3. Present Dividend Discount Model Valuation –
Post the results of the Dividend Discount Model Valuation or Ranking Relative Valuation that you prepared for this week’s assignment that is to be submitted to the Assignment Folder.
4. Most Important Things Learned –
What are the most important things you learned from the study of this week’s readings and assignments?
3. Which ratios are preferred for ranking?
4. Compare your ranking method and ratios to the Value Line System for ranking? www.valueline.com