Jordan purchased 400 shares of GE at $16 per share. The price has dropped to $11 and he is disappointed in his purchase, but he is determined not to sell until the price again reaches $16. His decision is based on A. representativeness. B. overconfidence. C. loss aversion. D. belief perserverance.
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- Suppose you were a CPA and you had invested in IBM when IBM was not one of your firm's clients. Two years later, after IBM's stock price had fallen considerably, your firm won the IBM audit contract. You will be involved in working with the IBM audit. You know that your firm's rules require that you sell your shares immediately. If you do sell immediately, you will sustain a large loss. Do you think this is fair? What would you do?Darwin Corporation's attorney has provided the following summaries of three lawsuits against Darwin: • Lawsuit A: The loss is probable and the loss can be reasonably estimated. • Lawsuit B: The loss is reasonably possible and the loss cannot be reasonably estimated. • Lawsuit C: The loss is reasonably possible and the loss can be reasonably estimated. Which of the following statements is incorrect? Multiple Cholce There Is a 70% chance that lawsult A will result In a future economic sacrifice for Darwin. Lawsult A Is reported on the balance sheet as a llability. A disclosure note Is not requlred for lawsult B. A disclosure note Is requlred for lawsult C.Robin Smith is considering buying shares in Mah Company. The company has reported an increase in net income this year. On careful reading of the notes to the financial statements, Robin learns that the company had a LIFO liquidation this year. Robin understands what caused the liquidation but has asked you for advice about how to interpret it. Required: 2. Could a LIFO liquidation profit create ethical issues?
- Nancy John, a bright, female investment analyst about to give a major presentation to a group of bankers supporting a corporate acquisition. After walking in and meeting the bankers before you give the presentation, you're asked by your boss to "be a dear and serve them coffee." Imagine the insult and awkwardness of such a situation-what do you do? Do you carry through with the task, sacrificing your dignity or doing something wrong because you can't afford to lose the job? Or do you speak up? A group of Swiss occupational health researchers have recently started a program of research on illegitimate tasks, or tasks that violate "norms about what can reasonably be expected from a given person" in a job. Question: 1. What do you think of this situation? 2. What might cause supervisors and managers within organizations to allocate these kinds of tasks? 3. Can you explain it based on 'positive reinforcement' behavior and suggest some suggestion?On April 30, White sold land with a book value of $600,000 to Black for its fair value of $800,000. Black gave White a 12 percent, $800,000 note secured only by the land. At the date of sale, Black was in a very poor financial position and its continuation as a going concern was very questionable. white should...... a. Use the cost recovery method of accounting b. Record the note at its discounted value c. Record a $200,000 gain on the sale of the land d. Increase the allowance for uncollectibles for the full amount of the noteHuxley lost $400 in the stock market. According to behavioral economics research, how much of a gain would he have to experience to offset the feeling of loss and have no net change in utility?.
- Edward, an accountant, is hired by C Ltd to prepare a report on the financial strength of C Ltd. Edward is informed that the purpose of the report is to persuade H Ltd to buy all C Ltd’s shares. Edward prepares the report but carelessly fails to identify that C Ltd is not profitable. Which of the following is accurate concerning Edward’s potential liability for negligent misstatement: Select one: a. Edward will not be liable to H Ltd because there was no contract between him and H Ltd b. Edward will not be liable because his advice was prepared for C Ltd, not H Ltd c. Edward will be liable because the advice was prepared specifically for the purpose of persuading H Ltd to acquire shares in C Ltd, and it was reasonable for H Ltd to rely on Edward's advice. d. Edward will not be liable because it was not reasonable for H Ltd to rely on his advice.Donna currently owns a large position in Facebook. She originally purchased the stock at $39.50 per share. However, since the last presidential election, she has been concerned about the issues of privacy and risks associated with potential investigations that the company is exposed to. The stock is currently near the all-time high again. She is concerned about losing value because she is going on a two-week vacation and will not be able to initiate trades at that time. She would prefer to sell her stock if the price drops to $165.00. What type of trading strategy can she use to protect her gains? O Place a limit order to sell at $165 now. O Place a stop-loss order at $165 now. O Place a price alert to notify you when the stock trades near $165, so you can place a market order. O Place a price alert to notify you when the stock trades near $165, so you can place a limit order.Smart owns multiple Burger restaurants. After months of struggling, one of the restaurants just must be closed, Smart knows that this loss will already cause a decrease in his reported net earnings, he decides to go ahead and charge a majority of the company's expenses to this business unit shut down. This is an example of ………. in earning Management
- Stadler is an ambitious young executive who has recently been appointed to the position of financial director of Paradis plc, a small listed company. Stadler, regards this appointment as a temporary one, enabling him, to gain experience before moving to a larger organisation. His intention is to leave Paradis plc in three years' time, with its share price standing high. As a consequence, he is particularly concerned that the reported profits of Paradis plc should be as high as possible in his third and final year with the company. Paradis plc has recently raised 6350,000 from a rights issue, and the directors are considering three ways of using these funds. Three projects (A, B, and C) are being considered, each involving the immediate purchase of equipment costing S350,000. One project only can be undertaken and the equipment for each project will have a useful life equal to that of the project, with no scrap value. Stadler favours project C because it is expected to show the highest…Penco Ltd’s board of directors are looking into expanding the company’s business operations. Before investing in a new product, the board conducted one focus group, and based on this one bit of feedback, invested $5m of company funds to develop the product. Within two years, the company had lost $8m due to poor sales. Shareholders are furious and wish to hold directors personally liable for this loss. Analyse the likely outcome for directors if shareholders were to accuse the board of breaching CA s 180.Anita and Duncan had been partners for many years in a mercantile business. Their relationship deteriorated to the point at which Anita threatened to bring an action for an accounting and dissolution of the firm. Duncan then offered to buy Anita’s interest in the partnership for $250,000. Anita refused the offer and told Duncan that she would take no less than $360,000. A short time later, James approached Duncan and informed him he had inside information that a proposed street change would greatly benefit the business and that he, James, would buy the entire business for $1 million or buy a one-half interest for $500,000. Duncan made a final offer of $350,000 to Anita for her interest. Anita accepted this offer, and the transaction was completed. Duncan then sold the one-half interest to James for $500,000. Several months later, Anita learned for the first time of the transaction between Duncan and James. What rights, if any, does Anita have against Duncan?