On October 28, 2013, Mercedes Company committed to a plan to sell a division that qualified as a component of the entity according to GAAP regarding discontinued operations and was properly classified as held for sale on December 31, 2013, the end of the company’s fiscal year. The division’s loss from operations for 2013 was $1,920,000.
The division’s book value and fair value less cost to sell on December 31 were $3,010,000 and $2,310,000, respectively. What before tax amount(s) should Mercedes report as loss on discontinued operations in its 2013 income statement?
$700,000 impairment loss included in continuing operations and a $1,920,000 loss from discontinued operations.
Now that operations for outdoor clinics and TEAM events are running smoothly, Suzie thinks of another area for business expansion. She notices that a few clinic participants wear multiuse (MU) watches. Beyond the normal timekeeping features of most watches, MU watches are able to report temperature, altitude, and barometric pressure. MU watches are waterproof, so moisture from kayaking, rain, fishing, or even diving up to 100 feet won’t damage them. Suzie decides to have MU watches available for sale at the start of each clinic. The following transactions relate to purchases and sales of watches during the second half of 2013. All watches are sold for $313 each.
Jul.
17
Purchased 52 watches for $8,164 ($157 per watch) on account.
Jul.
31
Sold 37 watches for $11,581 cash.
Aug.
12
Purchased 42 watches for $6,762 ($161 per watch) cash.
Aug.
22
Sold 24 watches for $7,512 on account.
Sep.
19
Paid for watches ordered on July 17.
Sep
27
Received full payment for watches sold on account on August 22.
Oct.
27
Purchased 86 watches for $14,190 ($165 per watch) cash.
Nov.
20
Sold 109 watches for $34,117 cash.
Dec.
4
Purchased 102 watches for $17,544 ($172 per watch) cash.
Dec.
8
Sold 34 watches for $10,642 on account.
Late in December, the next generation of multiuse (MU II) watches is released. In addition to all of the features of the MU watch, the MU II watches are equipped with a global positioning system (GPS) and have the ability to download and play songs and videos off the internet. The demand for the original MU watches is greatly reduced. As of December 31, the estimated market value of MU watches is only $106 per watch.
a.
Record any necessary entry on December 31, 2013, related to this information.
b.
For what amount would MU inventory be reported in the December 31, 2013, balance sheet?
The operations vice president of First Bank of Eagle, Kristin Wu, has been interested in investigating the efficiency of the bank’s operations. She has been particularly concerned about the costs of handling routine transactions at the bank and would like to compare these costs at the bank’s various branches. If the branches with the most efficient operations can be identified, their methods can be studied and then replicated elsewhere. While the bank maintains meticulous records of wages and other costs, there has been no attempt thus far to show how those costs are related to the various services provided by the bank. Ms. Wu has asked your help in conducting an activity based costing study of bank operations. In particular, she would like to know the cost of opening an account, the cost of processing deposits and withdrawals, and the cost of processing other customer transactions.
The Avon branch of First Bank of Eagle has submitted the following cost data for last year:
Outback Corporation manufactures rechargeable flashlights in Brisbane, Australia. The firm uses an absorption costing system for internal reporting purposes; however, the company is considering using variable costing. Data regarding Outback’s planned and actual operations for 20×1 follow:
Budgeted Costs
Per Unit
Total
Actual Costs
Direct material
$
12.20
$
1,683,600
$
1,537,200
Direct labor
9.40
1,297,200
1,184,400
Variable manufacturing overhead
4.70
648,600
592,200
Fixed manufacturing overhead
4.90
676,200
688,200
Variable selling expenses
7.70
1,062,600
931,700
Fixed selling expenses
7.30
1,007,400
1,007,400
Variable administrative expenses
2.40
331,200
290,400
Fixed administrative expenses
3.10
427,800
433,800
Total
$
51.70
$
7,134,600
$
6,665,300
Planned Activity
Actual Activity
Beginning finished goods inventory in units
41,000
41,000
Sales in units
138,000
121,000
Production in units
138,000
126,000
The budgeted per unit cost figures were based on Outback producing and selling 138,000 units in 20×1. Outback uses a predetermined overhead rate for applying manufacturing overhead to its product. A total manufacturing overhead rate of $9.60 per unit was employed for absorption costing purposes in 20×1. Any overapplied or underapplied manufacturing overhead is closed to the Cost of Goods Sold account at the end of the year. The 20×1 beginning finished goods inventory for absorption costing purposes was valued at the 20×0 budgeted unit manufacturing cost, which was the same as the 20×1 budgeted unit manufacturing cost. There are no work in process inventories at either the beginning or the end of the year. The planned and actual unit selling price for 20×1 was $70.40 per unit.
Required:
Was Outback’s 20×1 income higher under absorption costing or variable costing?
It was higher under variable costing.
It was higher under absorption costing.
1.
Compute the value of Outback Corporation’s 20×1 ending finished goods inventory under absorption costing. (Do not round your intermediate calculations. Omit the “$” sign in your response.)
Finished goods inventory
$
2.
Compute the value of Outback Corporation’s 20×1 ending finished goods inventory under variable costing. (Do not round your intermediate calculations. Omit the “$” sign in your response.)
Finished goods inventory
$
3.
Compute the difference between Outback Corporation’s 20×1 reported income calculated under absorption costing and calculated under variable costing. (Do not round your intermediate calculations. Omit the “$” sign in your response.)
Outdoor Texas makes umbrellas, gazebos, and chaise lounges. The company uses a traditional overhead allocation scheme and assigns overhead to products at the rate of $30 per direct labor hour. The costs per unit for each product group in 2013 were as follows:
Umbrellas
Gazebos
Lawn Chairs
Direct material
$ 12
$ 120
$ 12
Direct labor
overhead
18
24
135
180
45
60
Total 54 435 117
Because profitability has been lagging and competition has been getting more intense, Outdoor Living is considering implementing an activity based costing system for 2014. In analyzing the 2013 data, management determined that all $12,030,000 of factory over head could be assigned to four basic activities: quality control, setups, material handling, and equipment operation. Data from 2013 on the costs associated with each of the four activities follows:
Quality Control
Setups
Material Handling
Equipment Operation
Total costs
$ 630,000
$ 600,000
$1,900,000
$14,970,000
$18,000,000
ManMagement determined that the following allocation bases and total 2013 volumes for each allocation base could have been useused for ABC:
Activity
Base
Volume
Quality control
Number of units produced
280,000
Setups
Number of setups
2,000
Material handling
Pounds of material used
4,000,000
Equipment operation
Number of machine hours
2,000,000
Volume measures for 2006 for each product and each allocation base were as follows:
Umbrellas
Gazebos
Chaise Lounges
Number of units
300,000
30,000
90,000
Number of setups
600
1,300
1,100
Pounds of material
1,200,000
3,000,000
1,800,000
Number of machine hours
600,000
1,100,000
1,300,000
a. How much direct labor time is needed to produce an umbrella, a gazebo, and a chaise lounge?
b. For 2013, determine the total overhead allocated to each product group using the traditional allocation based on direct labor hours.
c. For 2013, determine the total overhead that would have been allocated to each product group if activity based costing were used. Compute the cost per unit for each product group.
d. Louisiana Leisure has a policy of setting sales prices based on product costs. How would the sales prices using activity based costing differ from those obtained using the traditional overheadallocation?
The owner of a package delivery business is currently evaluating the choice between two different cost structures, based on how the delivery personnel are paid. One option (hereafter, “Alternative #1”) has relatively higher short term fixed costs, while the other option (hereafter, “Alternative #2”) has the reverse”that is, relatively higher variable costs in its cost structure. (For simplicity in this example we hold the delivery cost per package, that is, the selling price per unit is constant. Selling price is independent of the cost structure choice.) The following table contains pertinent information for creating the CVP model for each decision alternative:
Decision Inputs (Data)
Cost Structure Alternative #1
Cost Structure Alternative #2
Delivery price (i.e., revenue) per package
$60
$60
Variable cost per package delivered
$48
$30
Contribution margin per unit
$12
$30
Fixed costs (per year)
$600,000
$3,000,000
(1) What is meant by the term “short term profit planning” model, and how can such a model be used by management? (That is, in what sense can this model be used to facilitate planning, control, or decision making by managers of an organization?)
(2) What are the definitions of fixed costs, variable costs, contribution margin ratio, contribution margin per unit, and relevant range?
(3) What is the break even point, in terms of number of deliveries per year (or per month), for Alternative #1? For Alternative #2?
(4) How many deliveries would have to be made under Alternative #1 to generate a pre tax profit, ?B, of $25,000 per year?
(5) How many deliveries (per month or per year) would have to be made under Alternative #1 to generate a pre tax profit, ?B, equal to 15% of sales revenue?
(6) How many deliveries would have to be made under Alternative #2 to generate an after tax profit, ?A, of $100,0000 per year, assuming a tax rate of, say, 45%?
(7) Assume that for the coming year total fixed costs are expected to increase by 10% for each of the two alternatives. What is the new break even point, in terms of number of deliveries, for each decision alternative? By what percentage did the break even point change for each case? How do these figures compare to the percentage increase in budgeted fixed costs?
(8) Assume an average income tax rate of 40%. What volume (number of deliveries) would be needed to generate an after tax profit, ?A, of 5% of sales for each alternative?
(9) Consider the original data in the problem. Construct a graph for each of the two alternatives depicting pre tax profit, ?B, as function of volume (number of deliveries per year). Clearly label the profit equation for each alternative.
(10) Based on the graphs prepared in (9), which decision alternative do you think is the more profitable one for this business?
(11) Based on the original data and the graphs prepared above in (10), which decision alternative is more risky to the business? Explain. (Hint: Think about, and define in your answer, the notion of “operating leverage.”)
(12) Finally, in building your profit planning (i.e., CVP) model, the analyst makes a number of important assumptions. List the primary assumptions that underlie a conventional CVP analysis, such as the ones you conducted above.
The owner of a package delivery business is currently evaluating the choice between two different cost structures, based on how the delivery personnel are paid. One option (hereafter, “Alternative #1”) has relatively higher short term fixed costs, while the other option (hereafter, “Alternative #2”) has the reverse”that is, relatively higher variable costs in its cost structure. (For simplicity in this example we hold the delivery cost per package, that is, the selling price per unit is constant. Selling price is independent of the cost structure choice.) The following table contains pertinent information for creating the CVP model for each decision alternative:
Decision Inputs (Data)
Cost Structure Alternative #1
Cost Structure Alternative #2
Delivery price (i.e., revenue) per package
$60
$60
Variable cost per package delivered
$48
$30
Contribution margin per unit
$12
$30
Fixed costs (per year)
$600,000
$3,000,000
Assume an average income tax rate of 40%. What volume (number of deliveries) would be needed to generate an after tax profit, ?A, of 5% of sales for each alternative?
Peabody Enterprises prepared the following sales budget:
Month
Budgeted Sales
March
$6150
April
$13236
May
$12208
June
$14047
The expected gross profit rate is 40% and the inventory at the end of February was $10,000. Desired inventory levels at the end of the month are 20% of the next month’s cost of goods sold.
Performance Drinks, LLC is owned by Dave N. Port. Performance Drinks produces a variety of sports centered drinks. They began operations in 1993 shortly after Mr. Port graduated with his M.B.A.
That report is following:
PERFORMANCE DRINKS MONTHLY PROFIT REPORT
Basic
Hydration
Intensity
Post Workout
Total
REVENUE
Sales
$125,000
$120,000
$74,250
$93,000
$412,250
COSTS
Direct Materials
$40,000
$50,000
$31,000
$33,000
$154,000
Direct Labor
$25,000
$20,000
$10,000
$18,000
$73,000
Fringe Benefits on Direct Labor
$11,250.00
$9,000.00
$4,500.00
$8,100.00
$32,850.00
Manufacturing Overhead
$43,750.00
$35,000.00
$17,500.00
$31,500.00
$127,750.00
TOTAL COST
$120,000.00
$114,000.00
$63,000.00
$90,600.00
$387,600.00
GROSS MARGIN
$5,000.00
$6,000.00
$11,250.00
$2,400.00
$24,650.00
GROSS MARGIN RATIO
4.00%
5.00%
15.15%
2.58%
5.98%
Annual Volume:
100,000
80,000
45,000
60,000
285,000
Unit Price:
$1.25
$1.50
$1.65
$1.55
$1.45
Unit Cost:
$1.200
$1.425
$1.400
$1.510
$1.360
Since your primary area of focus is on the indirect costs you compile the following report which further details your overhead charges:
PERFORMANCE DRINKS MONTHLY MFG OHD COST REPORT
Monthly Charge
Indirect Labor
$55,000.00
Fringe Benefits on Indirect Labor
$24,750.00
Utilities
$5,000.00
Processing Equipment Depreciation
$10,000.00
Preventative Maintenance
$10,000.00
Information Technology
$23,000.00
Total
$127,750.00
Overhead Activities:
Using traditional costing methods, which support your absorption costing system, you base overhead allocation on direct labor cost. Furthermore, “fringe benefits” are a function of direct labor cost.
As a result of your many meetings to discuss company overhead you determine that the majority of your indirect costs are related to four primary activities. Those activities are equipment set ups, production runs, production management and machine hour capacity. “Production Management” refers to a number of items that are correlated to the number of products the company produces. Ultimately you determine that your key activities have the following usage patterns, as they pertain to the monthly overhead costs:
Monthly
Equipment
production
number
Machine
charge
set ups
rungs
of products
hour capacity
Indirect labor
55,000
20%
45%
15%
20%
Fringe Benefits on indirect labor
24750
20%
45%
15%
20%
Utilities
5,000
5%
65%
0%
30%
Processing Equipment Depreciation
10,000
0%
100%
0%
0%
Preventative Maintenance
10,000
40%
30%
0%
30%
Information technology
23,000
10%
15%
70%
5%
Upon reviewing budget data from the last budget cycle you discover that the monthly number of set ups was estimated to be 85. The number of production runs was estimated to be 250. That monthly machine hour capacity is presently at 20,000 machine hours. Lastly, Performance Drinks produces a total of four products.
After talking with the Plant Manger you create the following usage data relative to products and activities:
Activity
Basic
Hydration
Intensity
Post workout
set ups
15
15
50
5
Production runs
125
65
35
25
production Mgt
1
1
1
1
MACHINE HOUR CAPACITY
9000
4000
3000
4000
Requirements:
1. 1. Based on all of the date provided, compute the cost driver rates for each of the four activities.
2. 2. Compute the per unit product costs for each of the four products. Compute this cost using ABC allocation for overhead. Show the computation for each per unit product cost in detail.
Performance Products Corporation makes two products, titanium Rims and Posts. Data regarding the two products follow:
Direct
Labor Hours Annual
per unit Production
Rims
0.50
27,000
units
Posts
0.10
53,000
units
Additional information about the company follows:
a. Rims require $24 in direct materials per unit, and Posts require $16.
b. The direct labor wage rate is $11 per hour.
c. Rims are more complex to manufacture than Posts and they require special equipment.
d. The ABC system has the following activity cost pools:
Estimated Activity
Estimated
Activity
Activity Cost Pool (and activity measure)
Overhead Cost
Rims
Posts
Total
Machine setups (number of setups)
$
15,525
75
60
135
Special processing (machine hours)
$
72,000
3,600
0
3,600
General factory (direct labor hours)
$
206,800
13,500
5,300
18,800
1.
Compute the activity rate for each activity cost pool. (Round your final answers to 2 decimal places.)
Activity Cost Pool Activity Rate
Machine setups ?per setup
Special processing ?per setup
General factory ?per setup
rev: 02 15 2011
2.
Determine the unit product cost of each product according to the ABC system. (Do not round intermediate calculation. Round your final answers to 2 decimal places.)
Periodic Inventory by Three Methods; Cost of Merchandise Sold
The units of an item available for sale during the year were as follows:
Jan. 1
Inventory
50 units @ $106
Mar. 10
Purchase
70 units @ $116
Aug. 30
Purchase
10 units @ $122
Dec. 12
Purchase
70 units @ $124
There are 60 units of the item in the physical inventory at December 31. The periodic inventory system is used.
Hide
Determine the inventory cost and the cost of merchandise sold by three methods. Round interim calculations to one decimal and final answers to the nearest whole dollar.
Cost of Merchandise Inventory and Cost of Merchandise Sold
Mark Corporation produces two models of calculators. The Business model sells for $40, and the Math model sells for $20. The variable expenses are given below:
Business Model
Math Model
Variable production costs per unit
$16
$17
Variable selling and administrative expenses per unit
$ 8
$ 5
The fixed expenses are $76,000 per month. The expected monthly sales of each model are: Business, 1,100 units; Math, 600 units.
The contribution margin ratio for the Business model is: (Do not round intermediate calculations.)
Gramling Inc. is considering an investment in new operating equipment with a 15 year life. The new equipment will cost $300,000 and a one time cost of $15,000 will be incurred to remove the old equipment and install the new equipment. The old equipment that will be replaced originally cost $200,000 and has a current book value of $25,000. This old equipment will be sold for $8,000. The new equipment will be depreciated uniformly over its useful life. At the end of 15 years, this equipment will be removed and given to the local recycling center. The new equipment is expected to generate cash profits of $83,000 per year. Gramling uses an 11 percent hurdle rate (its market rate of interest) to evaluate long term projects and is subject to a 30 percent tax rate.
Required:
A. Should Gramling invest in this equipment?
B. Assuming that Gramling does invest in the equipment, which of the following financing options would be best, a 10 year noninterest bearing note (annual compounding) or a 10 year monthly installment note?
CT15.1. The Shepersky Corporation was authorized to issue 2,000,000 shares of $0.01 par value common stock and 200,000 shares of $50 par value, 10 percent preferred stock. To date, Shepersky has issued 600,000 shares of common stock and no preferred stock. Shepersky is contemplating the acquisition of a new piece of equipment and wants to issue stock to raise the $200,000 cash to finance its acquisition. The company is trying to decide whether to issue 10,000 shares of common stock or 4,000 shares of preferred stock.
Required:
A. Describe how the issue of each type of stock would affect the stockholders equity of Shepersky Corporation.
B. If Shepersky generates about $3,600,000 of net income each year and the new machine can generate an additional $40,000 of after tax income, how will the earnings of the common shareholders be affected if:
Martha was considering starting a new business. During her preliminary investigations, she incurred the following expenditures:
Salaries
$22,000
Travel
18,000
Professional fees
13,000
Interest on a short term note
4,000
Martha begins the business on July 1 of the current year.
a. Indicate whether the following expenditures qualify or do not qualify as startup costs.
‘
Salaries
Select Qualifies as startup cost Does not qualify as startup cost Item 1
‘
Travel
Select Qualifies as startup cost Does not qualify as startup cost Item 2
‘
Professional fees
Select Qualifies as startup cost Does not qualify as startup cost Item 3
‘
Interest on a short term note
Select Qualifies as startup cost Does not qualify as startup cost Item 4
b. In your calculations, round any division to 2 decimal places. Round your final answer to the nearest dollar. If Martha elects A?§ 195 treatment, the startup expenditure deduction for the current year is $ .
T CT14.2.Gramling Inc. is considering an investment in new operating equipment with a 15 year life. The new equipment will cost $300,000 and a one time cost of $15,000 will be incurred to remove the old equipment and install the new equipment. The old equipment that will be replaced originally cost $200,000 and has a current book value of $25,000. This old equipment will be sold for $8,000. The new equipment will be depreciated uniformly over its useful life. At the end of 15 years, this equipment will be removed and given to the local recycling center. The new equipment is expected to generate cash profits of $83,000 per year. Gramling uses an 11 percent hurdle rate (its market rate of interest) to evaluate long term projects and is subject to a 30 percent tax rate.Required:
A.Should Gramling invest in this equipment?
B.Assuming that Gramling does invest in the equipment, which of the following financing options would be best, a 10 year noninterest bearing note (annual compounding) or a 10 year monthly installment note?
The Martin Ready Mix Company purchases a new 10 Yard delivery truck for $138,000. The following information is also available.
Sales Taxes 9,500
Transit Insurance 500
Preparation Costs 1,000
Fleet Liability Insurance 750
Painting & Lettering 500
Weekly Driver’s Wages 100
Prep Team Wages 500
The estimated life of the truck is 5 years (from 1/1/XX), with a salvage value of $10,000. The truck was purchased for cash.
1.Calculate the cost of the truck that should be capitalized.
2.Summarize the entry to the accounting equation (by account title) and give the journal entry to record the capitalization of the truck.
Assets = Liabilities + Equity
3.Using the straight line depreciation method, calculate the depreciation expense that would be recorded for each year of the truck’s life.
4.Assume that half way through the fourth year the truck is sold for $60,000. Make the appropriate entry to the accounting equation (by account title) and give the journal entry to record the sale of the truck.
Materials used by the Truck Division of Goldman Motors are currently purchased from the outside suppliers at a cost of $310 per unit. However, the same materials are available from the Components Division. The Components Division has unused capacity and can produce the materials needed by the Truck Division at a variable cost of $250 per unit.
a) If a transfer price of $272 per unit is established and 25,000 units of materials are transfered, with no reduction in the Components Division’s current sales, how much would Goldman Motors’ total income from operations increase?
b) How much would the Truck Division’s income from operations increase?
c) How much would the Components Division’s income from operations increase?
Part 2
Based on Goldman Motor’s data from above, assume that a transfer price of $290 has been established and that 25,000 units of materials are transferred, with no reduction in the Components Division’s current sales.
a) how much would goldman motor’s total income from operations increase?
b) how much would the truck divisions income from operations increase?
c) how much would the components division’s income from operations increase?
d) if the negotiated price approach is used, what would be the range of acceptable transfer prices and why?
Mateus Inc. uses a job order costing system in which any underapplied or overapplied overhead is closed to cost of goods sold at the end of the month. In September the company completed job X86V that consisted of 25,000 units of one of the company’s standard products. No other jobs were in process during the month. The total manufacturing cost for job X86V according to its job cost sheet was $1,232,500. During the month, the actual manufacturing overhead cost incurred was $286,700 and the manufacturing overhead applied was $276,900. And during the month, 18,000 completed units from job X86V were sold. No other products were sold during the month.
The cost of goods sold that would appear on the income statement for September, after adjustment for any underapplied or overapplied overhead, is closest to:
Is it possible to derive the beginning plan assets from this information:The accumulated, vested and projected benefit obligation at December 31, 2012, amounted to $2,500,000, $3,250,000, and $3,500,000. I’m soing a pension worksheet.
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The accountant for Kings Corporation has developed the following information for the company’s defined benefit pension plan for 2013: Service cost $500,000 Actual return on plan assets 240,000 Annual contribution to the plan 900,000 Benefits paid to retirees 60,000 Settlement rate 10% The accumulated, vested and projected benefit obligation at December 31, 2012, amounted to $2,500,000, $3,250,000, and $3,500,000 . Instructions (a) Using the above information for Kings Corporation, complete the pension work sheet for 2013. Indicate (credit) entries by parentheses. Calculated amounts should be supported. (b) Prepare the journal entry to reflect the accounting for the company’s pension plan for the year ending December 31, 2013. Created with an evaluation copy of Aspose.Words. To discover the full versions of our APIs please visit: https://products.aspose.com/words/ 20 ?PAGE ?38? Test Bank for Intermediate Accounting, Fourteenth Edition 20 ?PAGE ?37? Accounting for Pensions and Postretirement Benefits Kings Corporation Pension Work Sheet—2013 —————————————————————————————————————————————————————————— General Journal Entries Memo Entries ————————————————————————————————————————————————————————— ——————————————————————————————————————————————————————————Bal., Dec. 31, 2012 —————————————————————————————————————————————————————————— —————————————————————————————————————————————————————————— —————————————————————————————————————————————————————————— —————————————————————————————————————————————————————————— —————————————————————————————————————————————————————————— —————————————————————————————————————————————————————————— —————————————————————————————————————————————————————————— —————————————————————————————————————————————————————————— —————————————————————————————————————————————————————————— Journal entry for 2013 Balance, Dec. 31, 2013 Created with an evaluation copy of…
MaxSystems Inc. sells computer hardware to end consumers. Its most popular model, the CX30 is sold as a bundle, which includes three hardware products: a personal computer (PC tower), 23 inch monitor, and a color laser printer. Each of these products is made in a separate manufacturing division of MaxSystems and can be purchased individually, as well as in a bundle. The ind. Selling prices and per unit costs are as follows:
Computer Component Ind. Selling Price per Unit Cost per Unit
PC Tower $1040 140
Monitor 260 84
Color Laser Printer 700 176
Computer Bundle Purchase Price 1200
Part 1
Allocate the revenue from the computer bundle purchase to each of the hardware products using the stand alone method based on the ind. selling price per unit
Part 2
Allocate the revenue from the computer bundle purchase to each of the hardware products using the stand alone method based on cost per unit.
Part 3
Allocate the revenue from the computer bundle purchase to each of the hardware products using the stand alone method based on physical units (that is, # of individual units of product sold per bundle)
Mccloe Corporation’s balance sheet and income statement appear below:
Mccloe Corporation Comparative Balance Sheet
Ending Balance
Beginning Balance
Assets:
Cash and cash equivalents
$ 68
$ 48
Accounts receivable
62
67
Inventory
88
67
Property, plant and equipment
585
570
Less: accumulated depreciation
273
267
Total assets
$530
$485
Liabilities and stockholders’ equity:
Accounts payable
$ 81
$ 62
Accrued liabilities
54
33
Income taxes payable
62
62
Bonds payable
89
154
Common stock
57
47
Retained earnings
187
127
Total liabilities and stockholders’ equity
$530
$485
Income Statement
Sales
$681
Cost of goods sold
425
Gross margin
256
Selling and administrative expenses
188
Net operating income
68
Gain on sale of plant and equipment
30
Income before taxes
98
Income taxes
36
Net income
$ 62
Cash dividends were $2. The company did not issue any bonds or repurchase any of its own common stock during the year. The net cash provided by (used in) financing activities for the year was:
Memofax, Inc., produces memory enhancement kits for fax machines. Sales have been very erratic, with some months showing a profit and some months showing a loss. The company’s contribution format income statement for the most recent month is given below:
Sales (13,300 units at $20 per unit)
$
266,000
Variable expenses
159,600
Contribution margin
106,400
Fixed expenses
118,400
Net operating loss
$
(12,000)
Required:
1.
Compute the company’s CM ratio and its break even point in both units and dollars.
CM ratio
40 %
Break even point in units
14800
Break even point in dollars
$ 296000
2.
The sales manager feels that an $7,700 increase in the monthly advertising budget, combined with an intensified effort by the sales staff, will result in a $71,000 increase in monthly sales. If the sales manager is right, what will be the effect on the company’s monthly net operating income or loss? (Use the incremental approach in preparing your answer.) (Input the amount as a positive value.)
(Click to select)Increase in net operating incomeIncrease in net operating lossDecrease in net operating lossDecrease in net operating income
$
3.
Refer to the original data. The president is convinced that a 10% reduction in the selling price, combined with an increase of $39,000 in the monthly advertising budget, will double unit sales. What will the new contribution format income statement look like if these changes are adopted? (Input all amounts as positive values except losses which should be indicated by minus sign. )
Contribution Income Statement
(Click to select)Net operating income (loss)Contribution marginFixed expensesVariable expensesSales
$
(Click to select)Contribution marginFixed expensesNet operating income (loss)SalesVariable expenses
(Click to select)SalesNet operating income (loss)Fixed expensesVariable expensesContribution margin
(Click to select)Contribution marginFixed expensesVariable expensesNet operating income (loss)Sales
(Click to select)Variable expensesSalesContribution marginFixed expensesNet operating income (loss)
$
4.
Refer to the original data. The company’s advertising agency thinks that a new package would help sales. The new package being proposed would increase packaging costs by $0.60 per unit. Assuming no other changes, how many units would have to be sold each month to earn a profit of $4,500? (Round your intermediate calculations to 2 decimal places and final answer to the nearest whole number.)
Sales units
5.
Refer to the original data. By automating, the company could slash its variable expenses in half. However, fixed costs would increase by $116,000 per month.
a.
Compute the new CM ratio and the new break even point in both units and dollars. (Do not round intermediate calculations. Round your final answers to the nearest whole number.)
CM ratio
%
Break even point in units
Break even point in dollars
$
b.
Assume that the company expects to sell 20,200 units next month. Prepare two contribution format income statements, one assuming that operations are not automated and one assuming that they are. (Input all amounts as positive values.)
Not Automated
Automated
Total
Per Unit
%
Total
Per Unit
%
(Click to select)Fixed expensesSalesContribution marginVariable expensesNet operating income (loss)
$
$
$
$
(Click to select)Variable expensesNet operating income (loss)Contribution marginFixed expensesSales
(Click to select)SalesFixed expensesContribution marginNet operating income (loss)Variable expenses
$
$
(Click to select)Net operating income (loss)Variable expensesFixed expensesSalesContribution margin
(Click to select)SalesNet operating income (loss)Fixed expensesContribution marginVariable expenses
Meyer Company uses a job order cost system with overhead applied to jobs on the basis of direct labor hours. The direct labor rate is $20 per hour, and the predetermined overhead rate is $15 per direct labor hour. The company worked on three jobs during April. Jobs A and B were in process at the beginning of April. Job A was completed and delivered to the customer. Job B was completed during April, but not sold. Job C was started during April, but not completed. The job cost sheets revealed the following costs for April:
Job A
Job B
Job C
Cost of Jobs in Process, 4/1/2013
$
11,600
$
1,200
$
”
Direct Materials Used
1,600
7,200
7,800
Direct Labor
9,200
7,200
2,600
Applied Manufacturing Overhead
?
?
?
Required:
If no other jobs were started, completed, or sold, determine the balance in each of the following accounts at the end of April:
a. Work in Process____ b. Finished Goods_____ c. COGS_____
Mink Manufacturing is unsure of whether to sell its product assembled or unassembled. The unit cost of the unassembled product is $60 and Mink would sell it for $130. The cost to assemble the product is estimated at $42 per unit and the company believes the market would support a price of $170 on the assembled unit. What decision should Mink make?
Sell before assembly, the company will be better off by $40 per unit.
Process further, the company will be better off by $58 per unit.
Process further, the company will be better off by $28 per unit.
Sell before assembly, the company will be better off by $2 per unit.
Mitchell Company had the following budgeted sales for the last half of last year:
Cash Sales
Credit Sales
July
$50,000
$150,000
August
$55,000
$170,000
September
$56,000
$130,000
October
$61,000
$156,000
November
$71,000
$200,000
December
$80,000
$460,000
The company is in the process of preparing a cash budget and must determine the expected cash collections by month. To this end, the following information has been assembled:
Collections on credit sales:
50% in month of sales
30% in month of following sales
20.0% in second month following sales
Assume that the accounts receivable balance on July 1 was $76,000. Of this amount, $50,000 represented uncollected June sales and $26,000 represented uncollected May sales. Given these data, the total cash collected during July would be:
Monica Gellar works in both the jewelry department and the hosiery department of a retail store. Gellar assists customers in both departments and arranges and stocks merchandise in both departments. The store allocates Gellar’s $30,000 annual wages between the two departments based on a sample of the time worked in the two departments. The sample is obtained from a diary of hours worked that Gellar kept in a randomly chosen two week period. The diary showed the following hours and activities spent in the two departments.
Selling in jewelry department
64 hours
Arranging and stocking merchandise in jewelry department
6 hours
Selling in hosiery department
14 hours
Arranging and stocking merchandise in hosiery department
12 hours
Idle time spent waiting for a customer to enter one of the selling departments
4 hours
Allocate Gellar’s annual wages between the two departments. (Round your percentage answers to 1 decimal place. Omit the “$” & “%” signs in your response.)
During the first month of its current fiscal year, Green Co. incurred repair costs of $21,000 on a machine that had 4 years of remaining depreciable life. The repair cost was inappropriately capitalized. Green Co. reported operating income of $153,000 for the current year.
Required:
a.
Assuming that Green Co. took a full year’s straight line depreciation expense in the current year, calculate the operating income that should have been reported for the current year.
b.
Assume that Green Co.’s total assets at the end of the prior year and at the end of the current year were $949,000 and $1,018,000, respectively. Calculate ROI (based on operating income) for the current year using the originally reported data and then using corrected data.
Original data % =
Corrected data % =
c. Indicate the effect of ROI on subsequent years if the erro is not corrected
Morgado Inc. has provided the following data to be used in evaluating a proposed investment project:
Initial investment
$300,000
Annual cash receipts
$95,000
Life of the project
5 year
Annual cash expenses
$60,000
Salvage value
$31,000
The company’s tax rate is 31%. For tax purposes, the entire initial investment will be depreciated over 8 years without any reduction for salvage value. The company uses a discount rate of 11%.
When computing the net present value of the project, what is the after tax cash flow from the salvage value in the final year?
In January 2012, the management of Stefan Company concludes that it has sufficient cash to permit some short term investments in debt and stock securities. During the year, the following transactions occurred.
Feb. 1
Purchased 400 shares of Superior common stock for $21,200, plus brokerage fees of $470.
Mar. 1
Purchased 630 shares of Pawlik common stock for $16,380, plus brokerage fees of $350.
Apr. 1
Purchased 40 $1,200, 8% Venice bonds for $48,000, plus $1,300 brokerage fees. Interest is payable semiannually on April 1 and October 1.
July 1
Received a cash dividend of $0.55 per share on the Superior common stock.
Aug. 1
Sold 100 shares of Superior common stock at $65 per share less brokerage fees of $170.
Sept. 1
Received a $2 per share cash dividend on the Pawlik common stock.
Oct. 1
Received the semiannual interest on the Venice bonds.
Oct. 1
Sold the Venice bonds for $48,000 less $1,300 brokerage fees.
At December 31, the fair value of the Superior common stock was $55 per share. The fair value of the Pawlik common stock was $25 per share.
In January 2013, Mitzu Co. pays $2,800,000 for a tract of land with two buildings on it. It plans to demolish Building 1 and build a new store in its place. Building 2 will be a company office; it is appraised at $600,000, with a useful life of 20 years and an $80,000 salvage value. A lighted parking lot near Building 1 has improvements (Land Improvements 1) valued at $630,000 that are expected to last another 21 years with no salvage value. Without the buildings and improvements, the tract of land is valued at $1,770,000. The company also incurs the following additional costs:
Cost to demolish Building 1 $347,400 Cost of additional land grading 187,400 Cost to construct new building (Building 3), having a useful life of 25 years and a $402,000 salvage value 2,242,000 Cost of new land improvements (Land Improvements 2) near Building 2 having a 20 year useful life and no salvage value 178,000
1. 1. Allocate the costs incurred by Mitzu to the appropriate columns and total each column.
Allocation of purchase price
Appraised value
Percent of total appraized value
X
Total cost of acquisition
=
Apportioned cost
Land
x
=
Building 2
x
=
Land improvements 1
x
=
Total
Land
Building 2
Building 3
Land Improvements 1
Land Improvements 2
Purchase Price
Demolition
Land grading
New Building (Construction cost)
New Improvements cost
Totals
1. Prepare a single journal entry to record all the incurred costs assuming they are paid in cash on January 1, 2013.
a. Record the costs of the plant assets.
2. Using the straight line method, prepare the December 31 adjusting entries to record depreciation for the 12 months of 2013 when these assets were in use.
a. Record the costs of the plant assets.
b. Record the year end adjusting entry for the depreciation expense of Building 3
c. Record the year end adjusting entry for the depreciation expense of Land Improvements 1.
d. Record the year end adjusting entry for the depreciation expense of Land Improvements 2
Janus Products, Inc., is a merchandising company that sells binders, paper, and other school supplies. The company is planning its cash needs for the third quarter. In the past, Janus Products has had to borrow money during the third quarter to support peak sales of back to school materials, which occur during August. The following information has been assembled to assist in preparing a cash budget for the quarter:
a.
Budgeted monthly absorption costing income statements for July’October are as follows:
July
August
September
October
Sales
$
34,000
$
64,000
$
54,000
$
40,000
Cost of goods sold
22,000
40,000
24,000
26,000
Gross margin
12,000
24,000
30,000
14,000
Selling and administrative expenses:
Selling expense
5,200
10,200
7,200
6,700
Administrative expense*
4,200
6,200
5,300
4,700
Total selling and administrative expenses
9,400
16,400
12,500
11,400
Net operating income
$
2,600
$
7,600
$
17,500
$
2,600
*Includes $1,200 depreciation each month.
b.
Sales are 25% for cash and 75% on credit.
c.
Credit sales are collected over a three month period with 10% collected in the month of sale, 70% in the month following sale, and 20% in the second month following sale. May sales totaled $27,000, and June sales totaled $33,000.
d.
Inventory purchases are paid for within 15 days. Therefore, 50% of a month’s inventory purchases are paid for in the month of purchase. The remaining 50% is paid in the following month. Accounts payable for inventory purchases at June 30 total $10,700.
e.
The company maintains its ending inventory levels at 70% of the cost of the merchandise to be sold in the following month. The merchandise inventory at June 30 is $15,400.
f.
Land costing $3,700 will be purchased in July.
g.
Dividends of $1,300 will be declared and paid in September.
h.
The cash balance on June 30 is $5,000; the company must maintain a cash balance of at least this amount at the end of each month.
i.
The company has an agreement with a local bank that allows it to borrow in increments of $1,000 at the beginning of each month, up to a total loan balance of $40,000. The interest rate on these loans is 1% per month, and for simplicity, we will assume that interest is not compounded. The company would, as far as it is able, repay the loan plus accumulated interest at the end of the quarter.
Required:
1.
Prepare a schedule of expected cash collections for July, August, and September and for the quarter in total.
2. Prepare the following for merchandise inventory:
a.
A merchandise purchases budget for July, August, and September.
b.
A schedule of expected cash disbursements for merchandise purchases for July, August, and September and for the quarter in total.
3. Prepare a cash budget for July, August, and September and for the quarter in total.
Joey’s Recording Studio rents studio time to musicians in 2 hour blocks. Each session includes the use of the studio facilities, a digital recording of the performance, and a professional music producer/mixer. Anticipated annual volume is 1,000 sessions. The company has invested $2,000,000 in the studio and expects a return on investment (ROI) of 16.5%. Budgeted costs for the coming year are as follows.
Per Session Total
Direct materials (tapes, CDs, etc) $60
Direct labor $400
Variable overhead $50
Fixed overhead $850,000
Variable selling and administrative expenses $40
Fixed selling and administrative expenses
$800,000
Instructions
(a) Determine the total cost per session.
(b) Determine the desired ROI per session.
(c) Calculate the mark up percentage on the total cost per session.
Juliette formed a new business to sell sporting goods this year. The business opened its doors to customers on June 1. Determine the amount of start up costs Juliette can immediately expense (not including amortization) this year in the following alternative scenarios:
a.
She incurred start up costs of $2,600.
b.
She incurred start up costs of $41,250.
c.
She incurred start up costs of $51,250.
d.
She incurred start up costs of $61,500.
e.
How would you answer parts (a) through (d) if she formed a partnership or a corporation and she incurred the same amount of organizational expenditures rather than start up costs (how much of the organizational expenditures would be immediately deductible)?
On July 1, 2008, Falk Company signed a contract to lease space in a building for 20 years. The lease contract calls for annual (prepaid) rental payments of $90,000 on each July 1 throughout the life of the lease and for the lessee to pay for all additions and improvements to the leased property. On June 25, 2013, Falk decides to sublease the space to Ryan & Associates for the remaining 15 years of the lease”Ryan pays $240,000 to Falk for the right to sublease and it agrees to assume the obligation to pay the $90,000 annual rent to the building owner beginning July 1, 2013. After taking possession of the leased space, Ryan pays for improving the office portion of the leased space at a $140,000 cost. The improvements are paid for by Ryan on July 5, 2013, and are estimated to have a useful life equal to the 21 years remaining in the life of the building
Prepare Ryan’s year end adjusting entries required at December 31, 2013
a. To amortize the $240,000 cost of the sublease
i. Record the year end adjusting entry for the amortization expense of the leasehold.
b. To amortize the office improvements
i. Record the year end adjusting entry for the amortization expense of the leasehold improvements
c. To record rent expense
i. Record the year end adjusting entry for the rent expense.
On July 1, Year 4, Ahmed signed an agreement to operate as a franchisee of Teacake Pastries, Inc., for an initial franchise fee of $240,000. On the same date, Ahmed paid $80,000 and agreed to pay the balance in four equal annual payments of $40,000 beginning July 1, Year 5. The down payment is not refundable, and no future services are required of the franchisor. Ahmed can borrow at 14% for a loan of this type.
Present value of $1 at 14% for 4 periods
0.59
Future amount of $1 at 14% for 4 periods
1.69
Present value of an ordinary annuity of $1
at 14% for 4 periods
2.91
Ahmed should record the acquisition cost of the franchise on July 1, Year 4, at
(This section contains 5 questions. Each question carries different point values).
Answer all 5 questions. Total points = 150
Question 1 (Chapter 8)
Brake Company utilizes the perpetual inventory method. Inventory information for Part # AB124 revealed the following for the month of May:
Required: Determine the value of ending inventory and gross profit under each of the following methods:
LIFO (12 points)
FIFO (6 points)
Average Cost (12 points)
TYPE YOUR SOLUTION TO QUESTION 1 HERE
May 1
Balance 245 units @ $8
May 10
Sold 210 @ $23.50
May 11
Purchased 800 units @ $9.50
May 16
Sold 300 @ $23
May 20
Purchased 770 units @ $11
May 26
Sold 350 @ $24.50
B. FIFO Perpetual
Date Purchases Sales Balance
May 1 245 units @ $8.00 = 1960
May 10 210 @ 23.50= 4935 210 units @ 23.50 = 4935
May 11 800 @$9.50= 7600
May 16 35 @ 8
May 20
May 26
Question 2 (Chapter 9)
Grande Incorporated, a window installation company, is preparing its annual financial statements for the year ended December 31, 2009 and the following information in dollars is available:
Raw Material
FIFO Cost
Replacement Cost
Sales Price
Aluminum
70,000
50,000
79,000
Cedar shake siding
84,000
90,000
81,000
Lowered glass doors
116,000
120,000
150,000
Thermal windows
110,000
150,000
145,000
Total
380,000
410,000
455,000
Selling Expenses are 15% of Sales.
Normal Profit Margin is 20% of Sales.
At December 31, 2009, the balance in Grande’s Raw Material inventory account was $380,000 and the Allowance to Reduce Inventory to Market had a credit balance of $50,000.
Required:
Prepare a table with the headings below (and a row for each type of raw material) and determine the proper balance in the Allowance to Reduce Inventory to Market account at December 31, 2009.
Raw Material
FIFO Cost
Replacement Cost
Ceiling
Floor
Deemed Market Value
Lower of Cost or Market
(20 points)
Determine the amount of gain or loss that would be recorded due to the change in the Allowance to Reduce Inventory to Market account. (5 points)
TYPE YOUR SOLUTION TO QUESTION 2 HERE
Raw Material
FIFO Cost
Replacement Cost
Ceiling
Floor
Deemed Market Value
Lower Cost of Market
Aluminum
70,000
50,000
Cedar Shake Siding
84,000
90,000
Lowered Glass Doors
116,000
120,000
Thermal Windows
110,000
150,000
Question 3 (Chapter 10)
Lola industries purchased the following assets and constructed a building as well. All of this was done during the current year.
Assets 1 and 2:
These assets were purchased as a lump sum for $110,000 cash. The following was gathered:
Description
Initial Cost on Seller’s Books
Depreciation to Date on Seller’s Books
Book Value on Seller’s Books
Appraised Value
Machinery
$100,000
$40,000
$60,000
$81,000
Office Equipment
70,000
25,000
45,000
44,000
Asset 3
Office Equipment was acquired by issuing 300 shares of $6 par value common stock. The stock had a market value of $14 per share.
Construction of Building
A building was constructed on land purchased last year at a cost of $150,000. Construction began on February 1 and was completed on November 1. The payments to the contractor were as follows:
Date
Payment
2/1
$100,000
6/1
380,000
9/1
460,000
11/1
120,000
To finance construction of the building, a $600,000 10% construction loan was taken out on February 1. The loan was repaid on November 1. The firm had $200,000 of other outstanding debt during the year at a borrowing rate of 7%.
Required: Record all of the applicable acquisition/construction entries for each of these assets. (45 points)
TYPE YOUR SOLUTION TO QUESTION 3 HERE
Question 4 (Chapter 11)
Rohan Company purchased equipment in January 2008 for $8,000,000 and had an estimated useful life of 6 years with a salvage value of $2,000,000. At December 31, 2010, new technology was introduced that would accelerate the obsolescence of Rohan’s equipment. Rohan’s controller estimates that expected future net cash flows on the equipment will be $4,900,000 and that the fair value of the equipment is $4,600,000. Rohan intends to continue using the equipment, but it is estimated that the remaining life is 2 years and new salvage value is $1,000,000. Rohan uses straight line depreciation.
Required:
Prepare the journal entry (if any) to record the impairment at December 31, 2010.
(10 points)
Prepare any journal entries for the equipment at December 31, 2011. (5 points)
TYPE YOUR SOLUTION TO QUESTION 4 HERE
Question 5 (Chapter 12)
On May 1, 2011, Walker Company (a US company) paid US$3,700,000 to acquire all of the common stock of Hayden Corporation (an Australian company), which now became a division of Walker. Hayden reported the following US$ balance sheet at the time of the acquisition:
Book Value $
Fair Value $
Current Assets
900,000
1,500,000
Noncurrent Assets
2,700,000
2,300,000
Current liabilities
(600,000)
(700,000)
Long term liabilities
(500,000)
(400,000)
At December 31, 2011, Hayden reports the following US$ balance sheet information:
Book Value $
Fair Value $
Current Assets
800,000
800,000
Noncurrent Assets (excluding Goodwill)
1,500,000
1,300,000
Current liabilities
(700,000)
(700,000)
Long term liabilities
(500,000)
(400,000)
During the annual impairment test conducted on December 31, 2011, it was determined that the fair value of the Hayden division as a whole was $2,400,000.
Required:
Compute the amount of goodwill recognized, if any, on May 1, 2011. (3 points)
Determine the impairment loss, if any, to be recorded on December 31, 2011. (3 points)
Determine the implied fair value of goodwill on December 31, 2011. (8 points)
On the assumption that the fair value of Hayden on December 31, 2010 was $1,650,000 instead of $2,400,000, determine the impairment loss, if any, to be recorded. (21 points)
TYPE YOUR SOLUTION TO QUESTION 5 HERE
Section B
(This section contains 2 questions, each worth 20 points).
Answer any 1 question. Total points = 20
Question 6 (Chapter 7)
Walter & Company has produced the following detailed aging of outstanding accounts receivable as at December 31, 2009.
Age (days)
$Amount Due
Probability of collection.
0 30
400,000
90%
31 – 60
200,000
75%
61 90
300,000
50%
91 180
100,000
25%
Over 180
200,000
10%
Required:
Prepare an aging analysis and show how accounts receivable and the related allowance for doubtful accounts would appear in the balance sheet at December 31, 2009. (7 points)
Prepare the necessary journal entry to update the allowance for doubtful accounts assuming that the balance prior to preparing the aging was a credit of $100,000. (3 points)
One of the customers, Janet, who was in the “Over 180” days category owed $60,000. On January 15, 2010, it was revealed that Janet was officially declared bankrupt and would only be able to repay a quarter of what she owed to any company. Prepare the journal entry to write off Janet’s uncollectible debt. (4 points)
On January 31, 2010, Janet won the lottery and on the same day she decided to repay all of her original debts to everyone whom she owed money. Prepare the journal entry to record Walter’s unexpected receipt of Janet’s payment. (6 points)
TYPE YOUR SOLUTION TO QUESTION 6 HERE
Question 7 (Chapter 7)
Jack’s Dance Company provided you with the following information, from which you are to prepare the 2009 October bank reconciliation as well the corresponding entries to make the books correct and complete:
Balance per bank – October 31, 2009 $217,000.08
Bank service charge for the month 73.00
NSF check (received from customer) returned with bank statement 1,780.95
Note collect by bank during the month 64,000.00
Interest on note collected during the month 12,800.00
Outstanding checks at month end 43,087.45
Deposits in transit at month end 23,754.90
Balance per company records – Oct 31, 2009 122,721.48
(20 points)
TYPE YOUR SOLUTION TO QUESTION 7 HERE
Balance per bank – October 31, 2009 $217,000.08
Deposits in transit at month end 23,754.90
240,754.98
Outstanding checks at month end 43,087.45
Correct Cash Balance 197,667.53
Balance per company records – Oct 31, 2009 122,721.48
Interest on note collected during the month 12,800.00
Note collect by bank during the month 64,000.00
199,594.48
NSF check (received from customer) returned with bank statement 1,780.95
Bank service charge for the month 73.00
Correct Cash Balance 197,667.53
Section C
(This section contains 2 questions, each worth 30 points).
Answer any 1 question, Total points = 30
Question 8 (Chapter 4)
Shown below is an income statement for 2010 that was prepared by a poorly trained bookkeeper of Howell Corporation.
Howell Corporation
INCOME STATEMENT
December 31, 2010
Sales $945,000
Investment revenue 19,500
Cost of merchandise sold (408,500)
Selling expenses (145,000)
Administrative expense (215,000)
Interest expense (13,000)
Income before special items 183,000
Special items
Loss on disposal of a component of the business (30,000)
Major casualty loss (extraordinary item) (70,000)
Net federal income tax liability (24,900)
Net income $ 58,100
Required
Prepare a multiple step income statement for 2010 for Howell Corporation that is presented in accordance with generally accepted accounting principles (including format and terminology). Howell Corporation has 50,000 shares of common stock outstanding and has a 30% federal income tax rate on all tax related items. Round all earnings per share figures to the nearest cent.
(30 points)
TYPE YOUR SOLUTION TO QUESTION 8 HERE
Howell Corporation
INCOME STATEMENT
December 31, 2010
Sales $945,000
Cost of Goods Sold 408,500
Gross Profit 536,500
Selling Expense $145,000
Administrative expense 215,000 360,000
Income from Operations 176,500
Other Revenue: Investment Revenue 19,500
196,000
Other Expenses: Interest Expense 13,000
Income from Continuing Operations before taxes 183,000
Income Taxes 54,900
Income from Continuing Operations 128,100
Loss from discontinued operations, net of applicable income tax of 9,000 21,000
Income before extraordinary Item 107,100
Extraordinary casualty loss, net of applicable income tax of $21,000 49,000
Net Income $58,100
Question 9 (Chapter 5)
The following balance sheet was prepared by the bookkeeper for Kraus Company as of December 31, 2010.
Kraus Company
Balance Sheet
as of December 31, 2010
Cash $ 80,000 Accounts payable $ 75,000
Accounts receivable (net) 52,200 Long term liabilities 100,000
Inventories 57,000 Stockholders’ equity 218,500
Investments 76,300
Equipment (net) 96,000
Patents 32,000
$393,500 $393,500
The following additional information is provided:
1. Cash includes the cash surrender value of a life insurance policy $9,400, and a bank overdraft of $2,500 has been deducted.
2. The net accounts receivable balance includes:
(a) accounts receivable—debit balances $60,000;
(b) accounts receivable—credit balances $4,000;
(c) allowance for doubtful accounts $3,800.
3. Investments include investments in common stock, trading $19,000 and available for sale $48,300, and franchises $9,000.
4. Equipment costing $5,000 with accumulated depreciation $4,000 is no longer used and is held for sale. Accumulated depreciation on the other equipment is $40,000.
Required:
Prepare a balance sheet in good form (stockholders’ equity details can be omitted.) (30 points)
Kazaam Company, a merchandiser, recently completed its calendar year 2011 operations. For the year, (1) all sales are credit sales, (2) all credits to Accounts Receivable reflect cash receipts from customers, (3) all purchases of inventory are on credit, (4) all debits to Accounts Payable reflect cash payments for inventory, and (5) Other Expenses are paid in advance and are initially debited to Prepaid Expenses. The company’s balance sheets and income statement follow.
KAZAAM COMPANY Comparative Balance Sheets December 31, 2011 and 2010
2011
2010
Assets
Cash
$
50,000
$
73,500
Accounts receivable
65,840
58,000
Merchandise inventory
277,500
252,000
Prepaid expenses
1,500
1,900
Equipment
158,000
106,000
Accum. depreciation”Equipment
(36,000)
(46,000)
Total assets
$
516,840
$
445,400
Liabilities and Equity
Accounts payable
$
61,990
$
114,000
Short term notes payable
10,000
7,000
Long term notes payable
67,500
48,250
Common stock, $5 par value
162,250
150,500
Paid in capital in excess of par, common stock
35,250
0
Retained earnings
179,850
125,650
Total liabilities and equity
$
516,840
$
445,400
KAZAAM COMPANY Income Statement For Year Ended December 31, 2011
Sales
$
583,000
Cost of goods sold
290,000
Gross profit
293,000
Operating expenses
Depreciation expense
$
20,000
Other expenses
132,800
152,800
Other gains (losses)
Loss on sale of equipment
5,500
Income before taxes
134,700
Income taxes expense
23,000
Net income
$
111,700
Additional Information on Year 2011 Transactions
a.
The loss on the cash sale of equipment was $5,500 (details in b).
b.
Sold equipment costing $47,250, with accumulated depreciation of $30,000, for $11,750 cash.
c.
Purchased equipment costing $99,250 by paying $30,000 cash and signing a long term note payable for the balance.
d.
Borrowed $3,000 cash by signing a short term note payable.
e.
Paid $50,000 cash to reduce the long term notes payable.
f.
Issued 2,350 shares of common stock for $20 cash per share.
g.
Declared and paid cash dividends of $57,500.
Required:
1.
Prepare a complete statement of cash flows; report its operating activities using the indirect method. (Amounts to be deducted should be indicated with a minus sign. Omit the “$” sign in your response.)
KAZAAM COMPANY Statement of Cash Flows For Year Ended December 31, 2011
Cash flows from operating activities
$
Adjustments to reconcile net income to net cash provided by operating activities:
Landram Corporation makes a product with the following standard costs:
Inputs
Standard Quantity or Hours
Standard Price or Rate
Direct materials
2.0 kilos
$7.00 per kilo
Direct labor
1.3 hours
$11.00 per hour
Variable overhead
1.3 hours
$3.00 per hour
In March the company produced 5,000 units using 10,310 kilos of the direct material and 2,290 direct labor hours. During the month, the company purchased 10,880 kilos of the direct material at a cost of $76,760. The actual direct labor cost was $38,241 and the actual variable overhead cost was $11,942.
The company applies variable overhead on the basis of direct labor hours. The direct materials price variance is computed when the materials are purchased.
Learning Team Assignments From the Readings Resources: Financial Accounting: Tools for Business Decision Making and Managerial Accounting: The Basis for Business Decisions
Prepare responses to the following assignment from the e texts:
A?· Ch. 23: Exercises 23.10 & 23.12 of Managerial Accounting: The Basis for Business Decisions
EXERCISE 23.10 Preparing a Flexible Budget LO6 The flexible budget at the 70,000 unit and the 80,000 unit levels of activity is shown below. 70,000 Units 80,000 Units 90,000 Units Sales $1,400,000 $1,600,000 Cost of goods sold 840,000 960,000 Gross profit on sales $560,000 $640,000 Operating expenses($90,000 fixed) 370,000 410,000 Operating income $190,000 $230,000 Income taxes (30% of operating income) 57,000 69,000 Net income $133,000 $161,000
Complete the flexible budget at the 90,000 unit level of activity. Assume that the cost of goods sold and variable operating expenses vary directly with sales and that income taxes remain at 30 percent of operating income.
Listed below are eight technical accounting terms introduced in this chapter.
Retail method
FIFO method
Lower of cost or market
Gross profit method
LIFO method
Specific identification
Flow assumption
Average cost method
Each of the following statements may (or may not) describe one of these technical terms. For each statement, indicate the term described, or answer “None” if the statement does not correctly describe any of the terms.
a.
A pattern of transferring unit costs from the Inventory account to the Cost of Goods Sold that may (or may not) parallel the physical flow of merchandise.
b.
The only flow assumption in which all units of merchandise are assigned the same per unit cost.
c.
The method used to record the cost of goods sold when each unit in the inventory is unique.
d.
The most conservative of the flow assumptions during a period of sustained inflation.
e.
The flow assumption that provides the most current valuation of inventory in the balance sheet.
f.
A technique for estimating the cost of goods sold and the ending inventory that is based on the relationship between cost and sales price during the current accounting period.
Speed World Cycles sells high performance motorcycles and motocross racers. One of Speed World’s most popular models is the Kazomma 900 dirt bike. During the current year, Speed World purchased eight of these cycles at the following costs:
Purchase Date
Units Purchased
Unit Cost
Total Cost
July 1
2
$
4,950
$
9,900
July 22
3
5,000
15,000
Aug. 3
3
5,100
15,300
8
$
40,200
On July 28, Speed World sold four Kazomma 900 dirt bikes to the Vince Wilson racing team. The remaining four bikes remained in inventory at September 30, the end of Speed World’s fiscal year.
Assume that Speed World uses a perpetual inventory system.
a(1)
Compute the cost of goods sold relating to the sale on July 28 and the ending inventory of Kazomma 900 dirt bikes at September 30, using average cost method.
Cost of goods sold
$
Ending inventory
$
a(2)
Compute the cost of goods sold relating to the sale on July 28 and the ending inventory of Kazomma 900 dirt bikes at September 30, using FIFO method.
Cost of goods sold
$
Ending inventory
$
a(3)
Compute the cost of goods sold relating to the sale on July 28 and the ending inventory of Kazomma 900 dirt bikes at September 30, using LIFO method.
Cost of goods sold
$
Ending inventory
$
b(1)
Which of the three cost flow assumptions will result in Speed World Cycles reporting the highest net income for the current year?
Average cost
LIFO
FIFO
b(2)
Which of the three cost flow assumptions will minimize the income taxes owed by Speed World Cycles for the year?
LIFO
Average cost
FIFO
b(3)
May Speed World Cycles use the cost flow assumption that results in the highest net income for the current year in its financial statements, but use the cost flow assumption that minimizes taxable income for the current year in its income tax return?
Listed here are the total costs associated with the 2011 production of 1,000 drum sets manufactured by NeatBeat. The drum sets sell for $470 each. (Assume there is no ending inventory in the year 2011.)
Costs
1.
Plastic for casing”$22,000
2.
Wages of assembly workers”$85,000.
3.
Property taxes on factory”$5,000
4.
Accounting staff salaries”$42,000
5.
Drum stands (1,000 stands outsourced)”$31,000
6.
Rent cost of equipment for sales staff”$24,000
7.
Upper management salaries”$155,000
8.
Annual flat fee for maintenance service”$19,000
9.
Sales commissions”$18 per unit
10.
Machinery depreciation”$42,000
Required:
1.
Classify each cost and its amount as (a) either fixed or variable and (b) either product or period. (The first cost is completed as an example.) (Leave no cells blank be certain to enter “0” wherever required. Omit the “$” sign in your response.)
Lyle and Kaye James are married, have two minor children, Jessica age 8 and Jerron age 4, and are filing a joint tax return in the current year. They are both employed. Lyle and Kaye, ages 38 and 37, respectively, have combined salaries of $240,000, from which $42,000 of federal income tax and $10,000 of state income tax are withheld. Lyle and Kaye own two homes. Their primary residence is located at 11620 N. Mount Ave., New Haven, Connecticut 22222, and their vacation home is on the beach in Fort Lauderdale, Florida. They often rent their vacation home to supplement their income. The following items are related to the James’ ownership of the two homes:
The James family used their Fort Lauderdale home 20 days during the year. They rented the vacation home 60 days during the year. Lyle and Kaye jointly purchase stock in various corporations and make the following transactions in the current year. (None of the stock qualifies as small business stock.)
Price Date Transaction Paid/Sold 2/15 Bought 50 shares of Lake common stock (they own no other Lake $1,000 stock) 5/14 Bought 100 shares of Bass common stock (they own no other Bass 3,000 stock) 5/24 Sold 25 shares of Lake common stock 250 5/27 Bought 50 shares of Lake common stock 900 Sold 50 shares of Bass common stock 1,750 7/12 Bought 100 shares of Bass common stock 2,800
The James’ have no other income or expense items. Lyle and Kaye’s Social Security numbers are 111 22 3333 and 444 55 6666, respectively. Jessica and Jerron’s Social Security numbers are 123 45 6789 and 888 99 1010. The James’ use the IRS method of allocating all expenses between personal and rental use.
File the James’ income tax return Form 1040, Schedules A, D, and E using the currently available forms and rates. Disregard any tax credits for which they may be eligible.
A machine can be purchased for $220,000 and used for 5 years, yielding the following net incomes. In projecting net incomes, double declining balance depreciation is applied, using a 5 year life and a $40,000 salvage value.
Year 1
Year 2
Year 3
Year 4
Year 5
Net incomes
$
12,000
$
42,000
$
92,000
$
67,000
$
192,000
Compute the machine’s payback period (ignore taxes). (Round your intermediate calculations to 3 decimal places and final answer to 2 decimal places.)
Payback period
years
A company must decide between scrapping or reworking units that do not pass inspection. The company has 18,000 defective units that cost $5.20 per unit to manufacture. The units can be sold as is for $2.50 each, or they can be reworked for $3.50 each and then sold for the full price of $9.90 each. If the units are sold as is, the company will also be able to build 18,000 replacement units at a cost of $5.20 each, and sell them at the full price of $9.90 each.
(1)
What is the incremental income from selling the units as scrap? (Omit the “$” sign in your response.)
Incremental income
$
(2)
What is the incremental income from reworking and selling the units? (Omit the “$” sign in your response.)
Incremental income
$ these are wrong
Xu Company is considering replacing one of its manufacturing machines. The machine has a book value of $38,000 and a remaining useful life of 5 years, at which time its salvage value will be zero. It has a current market value of $48,000. Variable manufacturing costs are $33,500 per year for this machine. Information on two alternative replacement machines follows.
Alternative A
Alternative B
Cost
$
121,000
$
115,000
Variable manufacturing costs per year
22,300
10,900
Calculate the total change in net income if Alternative A is adopted. (Input all amounts as positive values, except cash outflows and any negative total change in net income which should be indicated by a minus sign. Omit the “$” sign in your response.)
Alternative A: Increase or (Decrease) in Net Income
Cost to buy new machine
$
Cash received to trade in old machine
Reduction in variable manufacturing costs
Total change in net income
$
Calculate the total change in net income if Alternative B is adopted. (Input all amounts as positive values, except cash outflows and any negative total change in net income which should be indicated by a minus sign. Omit the “$” sign in your response.)
Alternative B: Increase or (Decrease) in Net Income
Cost to buy new machine
$
Cash received to trade in old machine
Reduction in variable manufacturing costs
Total change in net income
$
Should Xu keep or replace its manufacturing machine? If the machine should be replaced, which alternative new machine should Xu purchase?
Maher Inc. reported income from continuing operations before taxes during 2014 of $817,000. Additional transactions occurring in 2014 but not considered in the $817,000 are as follows.
1.
The corporation experienced an uninsured flood loss (extraordinary) in the amount of $92,400 during the year. The tax rate on this item is 46%.
2.
At the beginning of 2012, the corporation purchased a machine for $63,000 (salvage value of $10,500) that had a useful life of 6 years. The bookkeeper used straight line depreciation for 2012, 2013, and 2014 but failed to deduct the salvage value in computing the depreciation base.
3.
Sale of securities held as a part of its portfolio resulted in a loss of $61,700 (pretax).
4.
When its president died, the corporation realized $152,100 from an insurance policy. The cash surrender value of this policy had been carried on the books as an investment in the amount of $49,600 (the gain is nontaxable).
5.
The corporation disposed of its recreational division at a loss of $116,800 before taxes. Assume that this transaction meets the criteria for discontinued operations.
6.
The corporation decided to change its method of inventory pricing from average cost to the FIFO method. The effect of this change on prior years is to increase 2012 income by $62,760 and decrease 2013 income by $20,300 before taxes. The FIFO method has been used for 2014. The tax rate on these items is 40%.
Prepare an income statement for the year 2014 starting with income from continuing operations before taxes. Compute earnings per share as it should be shown on the face of the income statement. Common shares outstanding for the year are 120,800 shares. (Assume a tax rate of 30% on all items, unless indicated otherwise.) (Round earnings per share to 2 decimal places, e.g. 1.48 and all other answers to 0 decimal places, e.g. 5,275.)
The management of a business is concerned about its inability to obtain enough fully trained labour to enable it to meet its present budget projection.
Information concerning the three services offered by the business is as follows:
Service Alpha Beta Gamma Total
A??L000 A??L000 A??L000 A??L000
Variable cost
Materials 6 4 5 15
Labour 9 6 12 27
Expenses 3 2 2 7
Allocated fixed cost 6 15 12 33
Total cost 24 27 31 82
Profit 15 2 2 19
Sales revenue 39 29 33 101
The amount of labour likely to be available amounts to A??L20,000. All of the variable labour is paid at the same hourly rate. You have been asked to prepare a statement of plans ensuring that at least 50 per cent of the budgeted sales revenues are achieved for each service. The balance of labour is used to produce the greatest profit.
Required:
a) Prepare the statement, with explanations, showing the greatest profit available from the limited amount of skilled labour available, within the constraint stated. Hint: Remember that all labour is paid at the same rate.
b) What steps could the business take in an attempt to improve profitability, in the light of the labour shortage?
The BusinessSchool TAXATION Law & Practice Assignment Assignment Part 1 Schubert, Mahler and Tull are resident Australian seamen employed on the fishing trawler MV St Cecilia. Whilst on a routine fishing operation the captain of St Ceciliaheard a radio message thatSS Titan, an abandoned oil tankerabout 20 nautical miles to the south was drifting towards the Australian coast. The vessel was badly holed, leaking oil and with present currents and tidal situations it was drifting towards a coral reef a short distance from a stretch of environmentally sensitive coastline. If the tanker wrecked on the reef the environmental and economic consequences would be enormous. The captain sailed to the reported position of the stricken tanker. In the rough sea, the crew were unsuccessful in their attempt to attach a tow line. The captain then called for volunteers prepared to risk their lives in boarding the vessel and securing a tow line manually. Schubert and Mahler had previously worked on a salvage vessel and had some experience in operations of this type and they volunteered immediately. They displayed considerable bravery in swimming through rough seas, boarded the tanker and fixed a line. The heroic feat was recorded on video by Tull. Once the line was secure, St Ceciliatowed the tankeraway from the coastline and it was subsequently salvaged by the tug, Resurrection. Both Schubert and Mahler were awarded an Order of Australia medal by the Australian Government and $100,000 each from Lloyds of London, the insurer of SS Titan,who had been saved a billion dollar payout. In addition, Mahler entered into a contract to write an article for a magazine. He was paid $20,000 and an additional $10,000 for signing an agreement not to give interviews on television or to journalists. Schubert was offered $10,000 for his OA medal. He was in poor health at the time and required medical treatment so accepted the payment. Tull sold the video to Channel 9 for $8,000 and it was shown exclusively on that station throughout Australia. Later that year he was paid $50,000 to travel to the USA to provide technical advice on a proposed telemovie of the event tentatively entitled ‘Aqualung’. He plans to stay in the US indefinitely and pursue other filmmaking opportunities. Required 1 [Approximately 40% of marks] (a) Explain what is meant by ‘income by ordinary concepts’. (b) Advise what tax consequences arise in respect of the payments to Mahler, Schubert and Tull. You must refer to appropriate case law and applicable sections of the Income Tax Acts. Part 2 Ruby Engineering Pty Ltd [Ruby] was incorporated in 1990 and produced engine components used in the Australian car industry. In 2008 the business and company assets were sold to Diamond Ltd. Under the terms of the agreement, Ruby remained liable for any claims arising before 2008. The company used the funds to invest in real estate and shares. During the year ended 30 June 2013 Ruby incurred the following expenses: (a) Ruby has owned and rented a residential property since 2008. Rental income for the current year is $15,000. During the year the company replaced the old kitchen fittings, including cupboards that had deteriorated through water damage and wear and tear. The new cupboards were of the same type as the old ones and the kitchen layout was not altered substantially. The cost was $6,500. (b) In another of the rental properties a visitor to the tenants slipped on the steps and sustained injuries requiring medical attention. She claims one of the steps was loose and commenced legal proceedings against Ruby alleging her injuries were caused by the poor condition of the building. Ruby incurred legal expenses of $4,000 and the action has not been settled at 30 June. (c) In 2006 Ruby sold a batch of parts that were subsequently found to be defective. The buyer, an Australian car manufacturer lodged a claim for damages in the Federal Court. The claim was settled in November 2012 and Ruby paid $750,000 to the manufacturer. (d) The directors of Ruby were concerned about the claim in (c) and the effect it had on the year’s reported profit. They resolved to set aside a small amount of funds annually to meet any future claims. Accordingly, an amount of $100,000 was set aside in a provision in the accounts for the year ended 30 June. (e) In August 2012 Ruby decided to investigate the possibility of re entering the car parts manufacturing industry using a new type of alloy. An amount of $120,000 was paid to consultants investigating the proposal but the directors decided not to proceed at this time because the project did not appear commercially viable. Required 2. [Approximately 60% of marks] Advise the directors of Ruby Pty Ltd of the tax deductibility of the above amounts. You must make reference to appropriate authorities and legislation. CHECKLIST TO BE ATTACHED TO ASSIGNMENT Submitted an assignment that is your own work. (You may discuss the essay topics with others but you cannot copy another’s work, give your work to someone else to copy, or work closely with another student on how to structure or write the essay.) ? The assignment is no more than 2000 words long (excluding abstract, references, bibliography). ? Read and tried to address the criteria in the Course Description. ? Read and addressed the issues raised in the University’s Presentation of Academic Work ? Read Regulation 6.1.1, Plagiarism and asked questions if you are unsure about what it means. ? Referenced direct quotes (use quotation marks or indent) AND summarising from another person’s work in the body of the essay. (This includes internet sources). ? Indicated what referencing style you have chosen Harvard/APA and USED IT. ? Answered all parts to the question. ? Used headings (even though this is not a report, headings are encouraged to assist structure and flow). ? Proof read the assignment for spelling, punctuation and grammar errors. ? Where required, used relevant sections of legislation, legal rules/principles ? Where required, used cases to support your points or arguments. These cases can be obtained from textbooks, or the CCH online libraries, articles found via AGIS PLUS TEXT database etc. ? Put case citations in the body of the work as well as listing the case in the List of References. ? Discussed the issues as required and put arguments and gave your view. ? Used a range of resources. ? Included a title page with your name, student number, course code and name and lecturer’s name. ? Have a margin so comments can be added; put page numbers and your name and student number on each page. INSTRUCTIONS 1. See the Instructions and Assessment Criteria in theCourse Description and make sure you follow them! 2. Please answer all parts of the question 3. Attached to this document is a Checklist to be filled in by you and attached to your essay/assignment. Read this now before you start your research. If you have followed this checklist, there is a good chance you will do well. 4. All work presented for assessment in this course must comply with the format outlined in the University’s Presentation of Academic Work publication, available from the bookshop or on line at 5. All essays must be accompanied by a signed official cover sheet (‘Plagiarism Declaration Form’), available at www.ballarat.edu.au/ard/business/student_info_webct.shtml and lodged as appropriate for your campus. 6. You MUST reference in the body of the essay every time you use information from other people. This requires you to keep a track of where you are taking information from and then writing the reference up. You should use the APA style; and use the University’s new Presentation of Academic Work. The Library’s website also has a citation style guide site. If you plagiarise (intentionally OR unintentionally) you will be given zero: see Regulation 6.1.1 for more details. 7. DUE DATE: … Please check with the Course Description for details of where and when to submit your assignment. If you need an extension you must ask for one BEFORE the due date (unless this is impossible). 8. The assignment should not exceed approximately 2000 words. 9. The assignment is worth 25%.
65) It is necessary to calculate equivalent units of production in a department because
a physical count of units is impossible.
some units worked on in the department are not fully complete.
the physical units in the department are always 100% complete.
at times a department may use a job order cost system and then switch to a process cost system. 79) The Molding Department of Bonanza Industries has the following production data: beginning work process 30,000 units (60% complete), started into production 510,000 units, completed and transferred out 480,000 units, and ending work in process 60,000 units (40% complete). Assuming conversion costs are incurred uniformly during the process, the equivalent units for conversion costs are:
540,000.
570,000.
450,000.
504,000.
102) Sterling Company’s Assembly Department has materials cost at $4 per unit and conversion cost at $8 per unit. There are 15,000 units in ending work in process, all of which are 70% complete as to conversion costs. How much are total costs to be assigned to inventory?
$144,000
$84,400
$126,600
$180,000
105) The Packaging Department production process shows:
Units
Beginning Work in Process
10,000
Ending Work in Process
50,000
Total units to be accounted for
140,000
How many units were started into production in Department 1?
130,000
140,000
50,000
90,000
107) The Slicing Department shows the following information:
Units
Beginning Work in Process
20,000
Ending Work in Process
50,000
Units Transferred Out
11,000
How many total units are to be accounted for by the Slicing Department?
140,000
61,000
50,000
90,000
109) A process began the month with 3,000 units in the beginning work in process inventory and ended the month with 2,000 units in the ending work in process. If 12,000 units were completed and transferred out of the process during the month, how many units were started into production during the month?
10,000
13,000
12,000
11,000
118)A department had the following information for the month:
Total materials costs
$150,000
Conversion cost per unit
$3.00
Total manufacturing cost per unit
$5.00
What are the equivalent units of production for materials?
75,000
50,000
30,000
Cannot be determined.
123) Spitfire Industries has equivalent units of 4,000 for materials and for conversion costs. Total manufacturing costs are $160,000. Total materials costs are $120,000. How much is the conversion cost per unit?
$40
$30
$10
$8
135) A process cost system would be used by all of the following except a(n)
chemical company.
advertising company.
oil company.
computer chip company.
138) Equivalent units of production are a measure of
the work done in a period expressed in fully completed units.
units transferred out.
units in ending work in process.
units completed and transferred out.
141) In Valencia Manufacturing, the Assembly Department started 18,000 units and completed 21,000 units. If beginning work in process was 9,000 units, how many units are in ending work in process?
6,000
3,000
12,000
0
142) The total units to be accounted for is computed by adding
beginning units in process to units transferred out.
ending units in process to total units accounted for.
beginning units in process to units started into production.
ending units in process to units started into production.
143) In the Lockard Manufacturing Company, materials are entered at the beginning of the process. If there is no beginning work in process, but there is an ending work in process inventory, the number of equivalent units as to materials costs will be
less than the units started.
the same as the units started.
the same as the units completed.
less than the units completed
144) For the Assembly Department, unit materials cost is $8 and unit conversion cost is $12. If there are 8,000 units in ending work in process 75% complete as to conversion costs, the costs to be assigned to the inventory are
$136,000.
$160,000.
$120,000.
$144,000.
145) The total costs accounted for in a production cost report equal the
cost of units started into production.
cost of units completed and transferred out only.
cost of beginning work in process plus the cost of units completed and transferred out.
cost of units completed and transferred out plus the cost of ending work in process.
What is the value of the business’ sales revenue for the current and previous years? Calculate the percentage change in sales revenue
What is the business’ profit after tax for the current and previous years? Calculate the percentage change in profit after tax.
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Accounting Assignment Part I QUESTION MARKS MARK (office use only) 1 33 2 17 TOTAL 50 Question 1 (33 marks) Refer to the consolidated financial statements (including notes) in the 2012 annual report of JB Hi Fi Limited ( http://www.jbhifi.com.auwww.jbhifi.com.au ) and answer the following: What is the value of the business’ sales revenue for the current and previous years? Calculate the percentage change in sales revenue. (2 marks) What is the business’ profit after tax for the current and previous years? Calculate the percentage change in profit after tax. (2 marks) Compare the percentage changes calculated in 1. and 2. What information does this provide? (3 marks) What is the total value of inventory for the current and previous years? Calculate the percentage change in inventory. Comment on the inventory management by comparingthe percentage change in inventory with the percentage calculated in 1. (4 marks) Calculate inventory turnover for the current and previous years.What does the change in inventory turnover indicatewith respect to the profitability of the group? (4 marks) Have trade receivables increased or decreased over this year, and by how much? Is the figure reported gross or net receivables? (3 marks) What was the amount of bad debts written off for the current and previous years?What are the possible reasons for the change in the amount of bad debts written off?(3 marks) Calculate the average collection period for trade receivables for the current and previous years using the gross method. Comment on the credit control performance of the group?(Hint: if net credit sales is not available, total salescan be used as a substitute to calculate the average collection period. Assuming the proportion of cash to credit sales has remained constant.) (4 marks) Calculate appropriate profitability ratios for 2012 and 2011, and assess JB Hi Fi’s profit performance. (8 marks) Question 2 (17 marks) You are the accountant for ColourfulPollies…
This assignment is to be conducted between two to four people.
The assessment carries 20% of the total assessment for this subject.
The assignment is due week 9 (by Friday 24 th May). You are required to submit a soft copy to Safeassign (please note, only one member from the team) and a hard copy (which will be assessed and returned to you).
Word limit: Whilst there is not a maximum limit, the minimum is 1,000 words per person (please ensure each member’s contribution is clearly shown
Assignment requirements.
You are to research for an event (NOT BP Gulf of Mexico or Exxon Valdez as they are likely to be discussed with you) where a company created a situation where their legitimacy was compromised. Considering the aspects of PAT, System oriented theories and/or Social & Environmental, discuss the case. This should be in a report format, introducing the case, discussing the issues, how did they manage the situation, the conclusion (outcomes) as well as your recommendations and views. Note: the case must be within the past few years so that information is easily sourced.
Sources that you will find useful include;
Websites:
AASB (website of Australian Accounting Standards Board)
IASB (website of International Accounting Standards Board)
FASB (website of US based Financial Accounting Standards Board
ICAA (Institute of Chartered Accountants in Australia)
CPAA (Certified Practising Accountants Australia)
It is also recommended that you utilise Proquest and Google Scholar as well as Financial review, the Age and BRW (Business Review Weekly)
Marks will be given on the soundness of your argument, research conducted, quality of report (presentation, referencing) and the understanding of the issues. Each report will be assessed individually.
Report structure: should consist of summary, introduction, points of discussion and conclusion. Where you feel a number of theories are applicable and that is quite likely, ensure they are clearly identified.
Please ensure you attach a copy of the case study to your hard copy assignment.
All of the following documents are prepared for the federal government ACAT ID program’s Full Rate Production Decision Review, EXCEPT:
Economic Analysis
Life Cycle Cost Estimate (LCCE)
OSD CAPE Independent Cost Estimate (ICE)
2) Which one of the following is a function performed by the Component Cost Agency?
Preparing the program office estimate
Designating an independent activity to perform the Economic Analysis for an ACAT IA program
Preparing the Analysis of Alternatives for an ACAT ID program
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1) All of the following documents are prepared for the federal government ACAT ID program’s Full Rate Production Decision Review, EXCEPT: Economic Analysis Life Cycle Cost Estimate (LCCE) OSD CAPE Independent Cost Estimate (ICE) 2) Which one of the following is a function performed by the Component Cost Agency? Preparing the program office estimate Designating an independent activity to perform the Economic Analysis for an ACAT IA program Preparing the Analysis of Alternatives for an ACAT ID program
ACC 401 Midterm, Part 2 (Chapters 15, 16, 1, and 2)
ap__Book, Open Notes
1. Able, Baker, and Charley are partners with capital balances of $91411Q0,S10.0,„0011, and 31.5.0400, respectively. Profits and losses are shared in a 1:2:3 ratio, Baker decided to withdraw and the partnership revalued its assets, The value of inventory was decreased by $30,000 and the value of land was increased by S70,000. Able and Charley then agreed to pay Baker $200,000 for his withdrawal from the partnership.
Required: Prepare the journal entry to record Baker’s withdrawal under the bonus method.
CVP ANALYSIS AND PRICE CHANGES ARGENTINA PARTNERS IS CONCERNED ABOUT THE POSSIBLE EFFECT OF INFLAMATION ON ITS OPERATION, PRESENTLY, THE COMPANY SELLS 60,000 UNITS FOR $30 PER UNIT. THE VARIABLE PRODUCTION COSTS ARE $15, AND FIXED COSTS AMOUNT TO $700,000. PRODUCTION ENGINEERS HAVE ADVISED MANAGEMENT THAT THEY EXPECT UNIT LABOR COST TO RISE BY 15 PERCENT AND UNIT MATERIALS COST S TO RISE BY 10 PERCENT IN THE COMING YEAR. OF THE $15 VARIABLE COSTS, 50 PERCENT ARE FROM LABOR AND 25 PERCENT ARE FROM MATERIALS. VARIABLE OVERHEAD COSTS ARE EXPECTED TO INCREASE BY 20 PERCENT.
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CVP ANALYSIS AND PRICE CHANGES ARGENTINA PARTNERS IS CONCERNED ABOUT THE POSSIBLE EFFECT OF INFLAMATION ON ITS OPERATION, PRESENTLY, THE COMPANY SELLS 60,000 UNITS FOR $30 PER UNIT. THE VARIABLE PRODUCTION COSTS ARE $15, AND FIXED COSTS AMOUNT TO $700,000. PRODUCTION ENGINEERS HAVE ADVISED MANAGEMENT THAT THEY EXPECT UNIT LABOR COST TO RISE BY 15 PERCENT AND UNIT MATERIALS COST S TO RISE BY 10 PERCENT IN THE COMING YEAR. OF THE $15 VARIABLE COSTS, 50 PERCENT ARE FROM LABOR AND 25 PERCENT ARE FROM MATERIALS. VARIABLE OVERHEAD COSTS ARE EXPECTED TO INCREASE BY 20 PERCENT. SALES PRICES CANNOT INCREASE MORE THAN 10 PERCENT. IT IS ALSO EXPECTED THAT FIXED COSTS WILL RISE BY 5 PERCENT AS A RESULT OF INCREASED TAXES AND OTHER MISCELLANEOUSFIXED CHARGES. THE COMPANY WISHES TO MAINTAIN THE SAME LEVEL OF PROFIT IN REAL DOLLAR TERMS. IT IS EXPECTED THAT TO ACCOMPLISH THIS OBJECTIVE, PROFITS MUST INCREASE BY 6 PERCENT DURING THE YEAR. REQUIRED: COMPUTE THE VOLUME IN UNITS AND THE DOLLAR SALES LEVEL NECESSARY TO MAINTAIN THE PRESENT PROFIT LEVEL, ASSUMING THAT THE MAXIMUM PRICE INCREASE IS IMPLEMENTED. COMPUTE THE VOLUME OF SALES AND THE DOLLAR SALES LEVEL NECESSARY TO PROVIDE THE 6 PERCENT INCREASE IN PROFIT, ASSUMING THAT THE MAXIMUM PRICE INCREASE IS IMPLEMENTED. IF THE VOLUME OF SALES WERE TO REMAIN AT $60,000 UNITS WHAT PRICE INCREASE WOULD BE REQUIRED TO ATTAIN THE 6 PERCENT INCREASE PROFITS?
The objective of this assignment is to assess the investment conditions in the Australian economy form Top Down Fundamental Analysis.
Students should proceed to the Reserve Bank Website:
http://www.rba.gov.au/chart pack/
From here you can down load graphs of key economic indicators. Then using these graphs analyse the recent history of the Australian stock market and form a prediction as to the investment conditions in the current
Australian stock market.
The indicators must include the following:
World Economy
GDP Growth World
Australian GDP Growth and Inflation
Australian GDP Growth
Consumer Price Inflation
Interest Rates
Australian Bond Yields
Exchange Rates, Australian Dollar vs.:
US Dollar, Euro and Yen
You should be looking at these indicators and comparing them to what happened to the stock market shortly after. In your analysis include a definition and/or background information on each indicator that you are analyzing. At the end of your report state your conclusion as to whether or not your analysis shows that current investment conditions in the Australian stock market are favorable.
Report Required:
Prepare a report of no more than 10 pages outlining the above analysis and the selection of the resulting portfolio. Marks will be given for content not for length. Anything over 10 pages will not be marked.
Resources available
You should use the RBA website; this will give you easy access to graphs and reports on the Australian and world economies. You may also access additional information via the ‘Australian Financial Review’ newspaper or website, finance.yahoo.com; finance.google.com; Bloomberg.com; ft.com, www.asx.com.au, www.afr.com.au.
Notes:
1. Marks will be rewarded for in depth analysis.
2. A good place to start would be re reading Principals 4 investing in equity and chapter 7 of the textbook.
3.When writing the report, imagine that your audience are people that know nothing about finance or the financial markets. At each stage you will need to carefully explain what do are analysing and why.
Do not think that just because your lecturer will know what this indicator means that you do not have to define it.
Please be aware of PLAGERISM and COPYRIGHT rules.
Do NOT just include in your report pages of printouts from the RBA website or you will receive ZERO marks.
You must reference, see the guide in the Additional Readings folder on Blackboard.
Assignment Marking Guide
Introduction
Introduction (1 mark)
Overview of the Australian economy (1 mark)
Fundamental Analysis
Top down analysis
o Data gathering and presentation (6 marks)
o Analysis (10 marks)
Conclusion
Is the Australian share market good to invest in currently?
Why; this must be related back to the analysis and explanation! (2 marks)
Notes:
60% of the marks come from the analysis that the group must perform. If there is just secondary data in graphs, the assignment can only achieve 30% at most.
The assignment needs to read as if it is one person’s work. Marks will be deducted if the assignment is not coherent.
Even though there are not marks allocated for references; not including any will result in a mark of zero
Describe and evaluate the various approaches for setting transfer prices. How can the use of different approaches between the selling and buying divisions be reconciled?
The answer:
1. should not be less than 500 word
2. Use and indicate three references, one of them is Atrill, P. & McLaney, E. (2012) Management accounting for decision makers. 7th ed. Harlow, England : Pearson Education Ltd.( the referencing sector is not counted as part of the answer)
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Managing Finance (MNGFIN) Week 7: Measuring and controlling performance Advantages and disadvantages of divisional structure Textbook reading (Atrill & McLaney: Ch. 10) The global business environment has spawned some of the largest organisations ever, both in terms of financial size as well as physical reach. Such organisations are involved with myriad activities and operations—some similar, some completely unrelated. A difficult choice for decision makers within these companies is how to properly segment the organisation in a manner that ‘makes sense’ while also maximising performance. One of the most appropriate methods for structuring such large organisations is by division; this divisional structure has proven to be an adequate approach to measuring as well as controlling the operations within a company. There are no boilerplate rules that must be followed with regards to how an organisation is segmented; however, it has been fairly common to create and organise divisions based on products, services, or geographic location. By doing so, decision making is transferred from executive managers at the corporate headquarters to divisional managers, who are then given the responsibility of overseeing the activities and operations of the division and charged with allocated objectives in terms of profitability. This transfer of power is an important advantage of the divisional structure, as divisional managers are allowed more freedom in decision making. It is these individuals who are closer to the action, possess greater knowledge of specific conditions, and need the ability to make the vital decisions concerning the profitability of the division in a timely manner. With this power, divisional managers are also responsible for ensuring the performance of their division, creating a continuous motivating factor for such managers to meet certain standards. While the divisional structure carries certain advantages, it also has some…
The discount rate must be specified in advance for which of the following methods?
Option A
Option B
Option C
Option D
# 1.2 (2.5 pts.)
(Ignore income taxes in this problem.) The Valentine Company has decided to buy a machine costing $14,750. Estimated cash savings from using the new machine amount to $4,500 per year. The machine will have no salvage value at the end of its useful life of five years. If Valentine’s required rate of return is 10%, the machine’s internal rate of return is closest to:
10%
12%
14%
16%
# 1.3 (2.5 pts.)
(Ignore income taxes in this problem.) Lichty Car Wash has some equipment that needs to be rebuilt or replaced. The following information has been gathered concerning this decision:
Lichty uses the total cost approach and a discount rate of 10% in making capital budgeting decisions. Regardless of which option is chosen, rebuild or replace, at the end of five years Mr. Lichty plans to close the car wash and retire. If the new equipment is purchased, the present value of all cash flows that occur now is:
$(45,000)
$(39,000)
$(37,000)
$(34,000)
# 1.4 (2.5 pts.)
(Ignore income taxes in this problem.) The management of Rouleau Corporation is investigating automating a process. Old equipment, with a current salvage value of $10,000, would be replaced by a new machine. The new machine would be purchased for $240,000 and would have a 6 year useful life and no salvage value. By automating the process, the company would save $64,000 per year in cash operating costs. The simple rate of return on the investment is closest to:
10.0%
26.7%
10.4%
16.7%
# 1.5 (2.5 pts.)
(Ignore income taxes in this problem.) In order to receive $12,000 at the end of three years and $10,000 at the end of five years, how much must be invested now if you can earn 14% rate of return?
$12,978
$8,100
$13,290
$32,054
# 1.6 (2.5 pts.)
(Ignore income taxes in this problem.) The management of Pattee Corporation is considering three investment projects M, N, and O. Project M would require an investment of $25,000, Project N of $67,000, and Project O of $70,000. The present value of the cash inflows would be $28,750 for Project M, $73,700 for Project N, and $79,100 for Project O. Rank the projects according to the profitability index, from most profitable to least profitable.
O, M, N
O, N, M
M, O, N
N, M, O
# 1.7 (2.5 pts.)
A decrease in the discount rate:
will increase present values of future cash flows.
is one way to compensate for greater risk in a project.
will reduce present values of future cash flows.
responses a and b are both correct.
# 1.8 (2.5 pts.)
(Ignore income taxes in this problem.) Chow Company has gathered the following data on a proposed investment project:
The internal rate of return on the investment is closest to:
13%
15%
14%
12%
# 1.9 (2.5 pts.)
(Ignore income taxes in this problem.) Lichty Car Wash has some equipment that needs to be rebuilt or replaced. The following information has been gathered concerning this decision:
Lichty uses the total cost approach and a discount rate of 10% in making capital budgeting decisions. Regardless of which option is chosen, rebuild or replace, at the end of five years Mr. Lichty plans to close the car wash and retire. If the new equipment is purchased, the present value of the annual cash operating costs associated with this alternative is:
Points Possible: 125 Due Date: 5/19/2013 11:59:59 PM CT
Consider the following scenario:
The Ski Pro Corporation, which produces and sells to wholesalers a highly successful line of water skis, has decided to diversify to stabilize sales throughout the year. The company is considering the production of cross country skis.
After considerable research, a cross country ski line has been developed. Because of the conservative nature of the company management, however, Minnetonka’s president has decided to introduce only one type of the new ski for this coming winter. If the product is a success, further expansion in future years will be initiated.
The ski selected is a mass market ski with a special binding. It will be sold to wholesalers for $80 per pair. Because of availability capacity, no additional fixed charges will be incurred to produce the skis. A $100,000 fixed charge will be absorbed by the skis, however, to allocate a fair share of the company’s present fixed costs to the new product.
Using the estimated sales and production of 10,000 pairs of skis as the expected volume, the accounting department has developed the following cost per pair of skis and bindings:
Direct Labor: $35
Direct Material: $30
Total Overhead: $15
Total: $80
Ski Pro has approached a subcontractor to discuss the possibility of purchasing the bindings. The purchase price of the bindings from the subcontractor would be $5.25 per binding, or $10.50 per pair. If the Ski Pro Corporation accepts the purchase proposal, it is predicted that direct labor and variable overhead costs would be reduced by 10% and direct material costs would be reduced by 20%.
Write a 1–2 page paper, and create a spreadsheet that answers the following questions:
1. Should the Ski Pro Corporation make or buy the bindings? Show calculations to support your answer.
2. What would be the maximum purchase price acceptable to the Ski Pro Corporation for the bindings? Support your answer with an appropriate explanation.
3. Instead of sales of 10,000 pairs of skis, revised estimates show sales volume at 12,500 pairs. At this new volume, additional equipment, at an annual rental of $10,000 must be acquired to manufacture the bindings. This incremental cost would be the only additional fixed cost required even if sales increased to 30,000 pairs. (This 30,000 level is the goal for the third year of production.) Under these circumstances, should the Ski Pro Corporation make or buy the bindings? Show calculations to support your answer.
4. What qualitative factors (that is, issues with vendors, customers, or within the product itself) should the Ski Pro Corporation consider in determining whether they should make or buy the bindings?
Grading Criteria Percentage
Should the Ski Pro Corporation make or buy the bindings? 25%
What would be the maximum purchase price acceptable to the Ski Pro Corporation for the bindings? 20%
Under these circumstances, should the Ski Pro Corporation make or buy the bindings? 25%
What qualitative factors should the Ski Pro Corporation consider in determining whether they should make or buy the bindings? 30%
Problem 7 1A ShurShot Sports Inc. manufactures basketballs for the National Basketball Association (NBA). For the first 6 months of 2014, the company reported the following operating results while
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Problem 7 1A????ShurShot Sports Inc. manufactures basketballs for the National Basketball Association (NBA). For the first 6 months of 2014, the company reported the following operating results while operating at 80% of plant capacity and producing 119,600 units. ??Amount???Sales??$4,664,400???Cost of goods sold??3,750,272???Selling and administrative expenses??387,504???Net income??$526,624????Fixed costs for the period were cost of goods sold $1,080,800, and selling and administrative expenses $193,752.?? In July, normally a slack manufacturing month, ShurShot Sports receives a special order for 10,700 basketballs at $29 each from the Greek Basketball Association (GBA). Acceptance of the order would increase variable selling and administrative expenses $0.50 per unit because of shipping costs but would not increase fixed costs and expenses. ????????? ?? ?? HYPERLINK “javascript:void(0)” ? ? (a)???? ?? ? ??Prepare an incremental analysis for the special order. (Round all per unit computations to 2 decimal places, e.g. 15.25. Enter negative amounts using either a negative sign preceding the number e.g. 45 or parentheses e.g. (45).) ??Reject?Order??Accept?Order??Net Income?Increase?(Decrease)???Revenues??$??$??$???Cost of goods sold?????????Selling and administrative expenses?????????Net income??$??$??$?????????
ON 11/1/03 A US company sold merchandise to a Germany base company for 1,400,000 Krone. The receivable is denominated in Krone. On the transaction date, the spot rate for Krone was 1Krone=$0.14.
To protect itself against a weakening of the Krone, the US firm entered into a forward exchange contract to deliver 1,400,000 Krone on 01/30/04, the settlement date for the sale. The 90 day forward exchange rate specified in the contract was 1Krone= $0.139. Exchange rate on 12/31/03 and 01/30/04 were as follows:
Spot Rate Fwd Exchange
($1Krone) Rate ($/1Krone)
12/31/ 03 $0.135 $0.133 (30 day)
01/30/04 $0.137
Record all journal entries. (Show all computation) on the book of the US company on 11/01/2003, 12/2003 (Balance sheet date), and 01/03/04.
1. Assist Jack in his decision, prepare an analysis to compare the alternative given above. 25,000 bottles are needed each year. should the company buy or make the bottles? explain why? 2. suppose the company found an oversea supplier hat would sell the bottle for $8 dollars per bottle provided 30,000 bottles per year were purchased. Would you recommend the same as question 1? Explain and show computations to support your answer. Discuss options. 3. if some people wouldnt buy the bottles anymore because its made overseas, and market shows that the company would have to decrease its selling price from $49 to $47 in order to achieve its projected sale of 30,000 chemical compounds. with this new information should the comapny buy these container? explain why and why not? 4.what are 2 factors the company should consider before making this decision? explain why?
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A company sells a chemical compound for which it makes special plastic bottles. The equipment being used to make these containers is worn out and must be replaced. Jack, the managing director, believes that it would be cheaper if the company stopped making these bottles and accepted the price of $9 per bottle offered by an outside supplier. Thus a decision about whether to make or buy the containers needs to be made. The comapy current cost to manufacture one container (based on25,000 production and sales per year) is Direct materials $3.61 Direct labour 3.80 Variable overhead 0.80 Fixed overhead: General company overhead 2.25 Depreciation of equipment 1.34 3.59 Total cost per bottle $11.80 If the company decides to purchase new equipment, it would cost $262,500 and be depreciated over a useful life of 5 years. The new equipment is expected to be more efficient than the current equipment and thus direct labour and variable overheads would be reduced by 35 percent. These overheads are avoidable if the bottles are purchased. The direct materials cost per bottle and general company overhead would remain the same. The new equipment could make up to45,000 bottle per year and still remain within the relevant range. Alternatively the company would sign a 5 year contract to purchase bottle from the outside supplier at $9 per bottle.
Module 1 – Business Combination and Consolidation Stock Acquisition – Consolidated Financial Statements – AFTER Date of Acquisition Instructor Comment: The following lesson module was developed to assist students in their understanding of the corresponding subject matter in the course textbook. The following is not a replacement for the detailed presentation provided by the authors of the text, but instead is an attempt to provide students with a pragmatic direct review with heavy emphasis on process. My recommendation is to approach the course material in the following sequence. 1. Read/study the assigned corresponding sections of the text. 2. Read the “Chapter Review” (PowerPoint) posted in D2L. 3. Read/complete the corresponding instructor developed “Instructor Subject Matter Presentation” (THIS DOCUMENT) posted in D2L. 4. Complete the assigned text questions, exercises and problems (author recommended solutions for assigned odd exercises posted in D2L). 5. Review the corresponding instructor developed “Instructor Problem Solving Modules” posted in D2L. As discussed in ISMP #1 (Date of Acquisition) for stock acquisitions where significant influence and control exist, the acquirer (parent) is required by the SEC, for financial reporting purposes, to consolidate the acquired company (subsidiary). We discussed a 3 Step Process (below) to be followed in the creation of consolidated financial statements. The same 3 Step Process is applied in Stock Acquisition – After Date of Acquisition but involves increased complexity due to the fact that time has passed (ongoing operations of the acquired company must be consolidated). Unlike the accounting for stock acquisitions as of the date of acquisition (which required the preparation of the consolidated balance sheet only) the accounting for stock acquisitions after the date of acquisition require consolidation for all financial statements (income statement, statement of retained earnings, balance sheet and statement of cash flows). The focus of this ISMP will be on the income statement, statement of retained earnings and the balance sheet. 3 Step Process: Step 1 – Assess the Business Scenario Step 2 – Prepare the CAD Step 3 – Determine Workpaper Entries Note: Refer to ISMP #1 for further detail. The first two steps of the three step process are the same for stock acquisitions on the date of acquisition as they are for stock acquisitions after the date of acquisition. The key changes take place in Step 3. Step 3 Determine the Required Workpaper Entries • Complete Workpaper • Complete Financial Statement(s) To determine the required workpaper entries for stock acquisitions after the date of acquisition the method of accounting used by the parent company for the Investment in Subsidiary must be determined. The company has two accounting options for maintaining the investment in subsidiary account, the “Cost Method” or the “Equity Method.” The accounting method used dictates the workpaper entries required for consolidation. In either case, the resulting consolidated financial statements are identical. The key to accurate consolidated financial statements is the development and application of the appropriate workpaper entries. RECORDING AND MAINTAINING THE INVESTMENT IN SUBSIDIARY COST METHOD Recording the initial Investment in Subsidiary is the same whether the Cost Method or the Equity Method is applied. Account Debit Credit Investment in Subsidiary $1,000,000 *Cash $1,000,000 * The method of payment in this example is cash, but other sources of funds could also be used to pay for the investment (i.e. issuance of stock). Maintaining the Investment in Subsidiary is where significant differences exist between the Cost Method and Equity Method, creating the need for different workpaper entries. Maintaining the “Investment in Subsidiary” account using the Cost Method could be described as NOT maintaining the “Investment in Subsidiary” account. Under the Cost Method there is no adjustment to the “Investment in Subsidiary” account balance (with the exception of instances where a liquidating dividend occurs). Thus, the only investment related entry, after the initial investment (purchase) entry, is the recording of dividend income. When a dividend is received the parent company makes the following investment related entry: Account Debit Credit Cash $40,000 Dividend Income $40,000 As you can see by the entry above the investment in subsidiary account is not affected. Therefore, the balance of the investment in subsidiary remains at the initial investment cost recorded on the date of acquisition. EQUITY METHOD Recording the initial Investment in Subsidiary is the same whether the Cost Method or the Equity Method is applied. Account Debit Credit Investment in Subsidiary $1,000,000 *Cash $1,000,000 * The method of payment in this example is cash, but other sources of funds could also be used to pay for the investment (i.e. issuance of stock). Maintaining the “Investment in Subsidiary” account using the Equity Method of accounting could be described as a continuous effort to maintain an accurate valuation for reporting purposes. The Equity Method attempts to account for all income and dividends (based on the ownership %) recorded by the subsidiary. Essentially, the change in the investment in subsidiary balance reflects the true value of the investment assuming income less dividends is a true reflection of value change. Therefore, the investment related entries, after the initial investment (purchase) entry, is the recording of income and dividends. The recording of income is accounted for using the following entry (assume the subsidiary is 80% owned and had income of $250,000): Account Debit Credit Investment in Subsidiary $200,000 Equity in Subsidiary Income $200,000 Clearly, the above entry impacts the investment in subsidiary account balance (increasing the account balance by $200,000). The accounting for dividend declared and paid follows the same logic. If the parent company is receiving dividends, the parent is essentially taking value out of the investment. The recording of dividend received is accounted for using the following entry (assume the subsidiary is 80% owned and declared a dividend of $50,000): Account Debit Credit Cash $40,000 Investment in Subsidiary $40,000 Clearly, the above entry impacts the investment in subsidiary account balance (decreasing the account balance by $40,000). Q1. – Calculation – What it the “Investment in Subsidiary” account balance at the end of the year (in the example above) using the Cost Method and Equity Method? WORKPAPER ENTRIES – ELIMINATION OF THE INVESTMENT IN SUBSIDIARY The investment related entries (discussed above) must be taken into account when developing workpaper entries. The workpaper entries essentially eliminate the investment in subsidiary (key offset is the equity accounts of the subsidiary) which upon elimination allows for the consolidation of the parent and subsidiary, which combines the related income statement, statement of retained earnings, and balance sheet accounts of the parent and subsidiary. COST METHOD Workpaper entries required for the Cost Method must account for all of the investment entries made (or not made) to the investment in subsidiary account. In addition, for the Cost Method, the timing of the consolidation impacts the application of the workpaper entries. The two time periods are the Year of Acquisition and After Year of Acquisition. Cost Method Year of Acquisition – Is the first year of ownership of the subsidiary. Thus, if the subsidiary was purchased on January 1, 2010 and we are reporting for the year ending December 31, 2010, we would be reporting Year of Acquisition. Assume the following base information: COST METHOD USED BY PARENT REAL Entry De bit Credit Jan. 1, 2010 Investment in Subsidiary $ 500,000 Cash $ 500,000 Purchased 80% of subsidiary. Subsidiary Equity Position as of 1/ 1/ 2010: Common Stock $ 10,000 APIC $ 300,000 Retained Earnings $ 240,000 $ 550,000 CAD 80% Ownership 80% 20% 100% Parent NCI Total Implied Fair Value Given Up $ 500,000 $ 125,000 $ 625,000 Book Value Received $ 440,000 $ 110,000 $ 550,000 Difference $ 60,000 $ 15,000 $ 75,000 Land $ 60,000 $ 15,000 $ 75,000 Balance $ $ $ 100% 80% During 2010, Subsidiary declared dividends in the amount of $ 50,000 $ 40,000 During 2010, Subsidiary had net income in the amount of $ 250,000 $ 200,000 Subsidiary Retained Earnings as of 12/31/2009 was $ 240,000 For the Year of Acquisition –COST METHOD the following three workpaper entries are required: 1 Eliminate (parents share) of current year subsidiary dividend income. REAL Entry De bit Credit Cash $ 40,000 Dividend Income $ 40,000 Workpaper Entry (1) De bit Dividend Income $ 40,000 Dividend Declared Subsidiary $ Cre dit 40,000 2 Eliminate the Investment in Subsidiary account against (offset by) the subsidiary equity accounts. Workpaper Entry (2) De bit Cre dit A Common Stock Subsidiary $ 10,000 A APIC Subsidiary $ 300,000 B Retained Earnings Subsidiary $ 240,000 C Difference $ 75,000 D Investment in Subsidiary $ 500,000 E NCI $ 125,000 Notes: Remember, 100% of the sub’s equity account balances need to be eliminated. A No change from the date of acquisition. B We need to eliminate RE balance as of the beginnng of the current year. C Never changes. D Investment in Subsidiary (Investment Account Value at the Beg. Of the Current Year) E NCI (NCI Account Value at the Beg. Of the Current Year) Q2. – Short Answer The adjustment to the “Investment in Subsidiary” account is as of the beginning of the year. What is the logic or reason the adjustment is as of the beginning of the year? 3 Distribute the difference between implied and book value of the equity acquired. Workpaper Entry (3) De bit Cre dit Land $ 75,000 Difference $ 75,000 Cost Method After Year of Acquisition – Is the second year of ownership and beyond. Thus, if the subsidiary was purchased on January 1, 2010 (continuing with the same example) and we are reporting for the year ending December 31, 2013, we would be reporting After Year of Acquisition. Additional Data: 100% 80% During 2013, Subsidiary declared dividends in the amount of $ 100,000 $ 80,000 During 2013, Subsidiary had net income in the amount of $ 350,000 $ 280,000 Subsidiary Retained Earnings as of 12/31/2009 was $ 240,000 Subsidiary Retained Earnings as of 12/31/2012 was $ 450,000 Cost Method After Year of Acquisition the following workpaper entries are made: 1 Establish Reciprocity (catch up impact of parent’s share of the subsidiary’s income less dividends). Subsidiary’s Retained Earnings at the beginning of the current year (January 1, 2013) $ 450,000 Subsidiary’s Retained Earnings at acquisition (January 1, 2010) $ 240,000 Difference Represents the net earnings change (net income less dividends) $ 210,000 NET Earnings Change Parent’s Share 80% $ 168,000 Investment in Sub Workpaper Entry De bit Credit $ 42,000 NCI’s % is 20% Investment in Subsidiary $ 168,000 Retained Earnings 1/1 Current Year Parent $ 168,000 2 Eliminate (parents share) of current year subsidiary dividend income. REAL Entry De bit $ Credit 80,000 2013 Cash $ 80,000 Dividend Income $ De bit 80,000 Workpaper Entry Credit Dividend Income Dividend Declared Subsidiary $ 80,000 3 Eliminate the Investment in Subsidiary account against (offset by) the subsidiary’s equity accounts. At Acquisition Beg. Current Year CAD 80% Ownership 80% 20% 100% Common Stock $ Parent NCI Total Implied APIC $ 10,000 300,000 $ 10,000 $ 300,000 Fair Value Given Up Book Value Received Difference Land (1) Balance $ 500,000 $ $ 450,000 $ $ 50,000 $ $ 50,000 $ $ $ 125,000 50,000 75,000 75,000 $ 625,000 $ 550,000 $ 75,000 $ 75,000 $ Retained Earn. $ $ 240,000 550,000 $ 450, 000 Workpaper Entry De bit Credit $ 125,000 NCI (At acquisition) $ 42,000 NCI’s % of Net Earnings Change A Common Stock Subsidiary A APIC Subsidiary B Retained Earnings Subsidiary C Difference D Investment in Subsidiary E NCI $ 10,000 $ 300,000 $ 450,000 $ 75,000 $ 835,000 $ 668,000 $ 167,000 $ 835,000 $ 167,000 $ 500,000 Invest. in Sub (At acquisition) $ 168,000 Reciprocity Entry $ 668,000 Notes: Remember, 100% of the sub’s equity account balances need A No change from the date of acquisition. to be eliminated. B We need to eliminate RE balance as of the beginnng of the current year. C Never changes. D Investment in Subsidiary (Investment Account Value at the Beg. Of the Current Year + Reciprocity) E NCI (NCI Value at acquisition + NCI % of Subsidiary Net Earnings since acquisition) 4 Distribute the difference between implied and book value of the equity acquired. Land $ 75,000 Difference $ 75,000 Equity Method Year of Acquisition – Is the first year of ownership of the subsidiary. Thus, if the subsidiary was purchased on January 1, 2010 and we are reporting for the year ending December 31, 2010, we would be reporting Year of Acquisition. Review the following base data: EQUITY METHOD USED BY PARENT REAL Entry De bit Credit Jan. 1, 2010 Investment in Subsidiary $ 500,000 Cash $ 500,000 Purchased 80% of subsidiary Subsidiary Equity Position as of 1/ 1/ 2010: Common Stock $ 10,000 APIC $ 300,000 Retained Earnings $ 240,000 $ 550,000 CAD 80% Ownership 80% 20% 100% Parent NCI Total Implied Fair Value Given Up $ 500,000 $ 125,000 $ 625,000 Book Value Received $ 440,000 $ 110,000 $ 550,000 Difference $ 60,000 $ 15,000 $ 75,000 Land $ 60,000 $ 15,000 $ 75,000 Balance $ $ $ 100% 80% During 2010, Subsidiary declared dividends in the amount of $ 50,000 $ 40,000 During 2010, Subsidiary had net income in the amount of $ 250,000 $ 200,000 100% 80% During 2011, Subsidiary declared dividends in the amount of $ 125,000 $ 100,000 During 2011, Subsidiary had net income in the amount of $ 125,000 $ 100,000 100% 80% During 2012, Subsidiary declared dividends in the amount of $ 125,000 $ 100,000 During 2012, Subsidiary had net income in the amount of $ 135,000 $ 108,000 100% 80% During 2013, Subsidiary declared dividends in the amount of $ 100,000 $ 80,000 During 2013, Subsidiary had net income in the amount of $ 350,000 $ 280,000 Investment in Subsidiary RETAINED EARNINGS 80% Bal ance Subsidiary Retained Earnings as of 12/31/2009 was $ 240,000 $ 500, 000 as of 1/1/2010 Sub Income 2010 $ 250,000 $ 200,000 $ 200,000 Sub Dividend 2010 $ (50,000) $ (40,000) $ (40,000) Subsidiary Retained Earnings as of 12/31/2010 was $ 440,000 $ 660,000 as of 12/31/2010 Sub Income 2011 $ 125,000 $ 100,000 $ 100,000 Sub Dividend 2011 $ (125,000) $ (100,000) $ (100,000) Subsidiary Retained Earnings as of 12/31/2011 was $ 440,000 $ 660,000 as of 12/31/2011 Sub Income 2012 $ 135,000 $ 108,000 $ 108,000 Sub Dividend 2012 $ (125,000) $ (100,000) $ (100,000) Subsidiary Retained Earnings as of 12/31/2012 was $ 450,000 $ 668,000 as of 12/31/2012 Required: PREPARE THE WORKPAPER (and related workpaper entries)THAT WOULD BE MADE IN THE PREPARATION OF THE CONSOLIDATED FINANCIAL STATEMENTS ON DECEMBER 31, 2010 Equity Method Year of Acquisition the following workpaper entries are made: Using the above information, the workpaper entries for the Equity Method – Year of Acquisition are as follows: Equity Method Year of Acquisition the following workpaper entries are made: 1 Eliminate (parents share) of current year subsidiary income (Equity in Subsidiary Income). REAL Entry De bit Credit 2010 Investment in Subsidiary $ 200,000 Equity in Sub Income $ 200,000 Workpaper Entry (1) De bit Cre dit Equity in Sub Income $ 200,000 Investment in Subsidiary $ 200,000 2 Eliminate (parents share) of current year subsidiary dividends. REAL Entry De bit Credit 2010 Cash $ 40,000 Investment in Subsidiary $ 40,000 Workpaper Entry (2) De bit Cre dit Investment in Subsidiary $ 40,000 Dividend Declared Subsidiary $ 40,000 Q3. – True/False – The entry to eliminate subsidiary dividends (above) will reduce the subsidiary dividends to zero? Explain your answer. 3 Eliminate the Invest. in Subsidiary account against (offset by) the subsidiary equity accounts. 80% Ownership 80% 20% 100% Parent NCI Total Implied Fair Value Given Up $ 500,000 $ 125,000 $ 625,000 Book Value Received $ 440,000 $ 110,000 $ 550,000 Difference $ 60,000 $ 15,000 $ 75,000 Land $ 60,000 $ 15,000 $ 75,000 Balance $ $ $ Workpaper Entry (3) De bit Cre dit A Common Stock Subsidiary $ 10,000 A APIC Subsidiary $ 300,000 B Retained Earnings Subsidiary $ 240,000 C Difference $ 75,000 D Investment in Subsidiary $ 500,000 E NCI $ 125,000 At Acquisition Beg. Current Year RE Change Common Stock $ 10,000 $ 10,000 APIC $300,000 $ 300,000 Retained Earn. $240,000 $ 240, 000 $ $550,000 $ 550,000 Notes: Remember, 100% of the sub’s equity account balances need to be eliminated. A No change from the date of acquisition. B We need to eliminate RE balance as of the beginnng of the current year. C Never changes. D Investment in Subsidiary (Investment Account Value at the Beg. Of the Current Year) E NCI (NCI Account Value at the Beg. Of the Current Year ) Q4. – Short Answer Explain why the entry to eliminate the investment in subsidiary account is identical to the same entry for the Cost Method – Year of Acquisition? 4 Distribute the difference between implied and book value of the equity acquired. Workpaper Entry (4) De bit Cre dit Land $ 75,000 Difference $ 75,000 The following 3 Section workpaper has been developed to exhibit how the workpaper entries are utilized in the workpaper to arrive at correctly stated consolidated balances. Calc. and Input NCI Portion of Sub Income $ 215,000 20% NCI % $ 43,000 $ The Net Income calculated above is carried down to the Statement of Retained Earnings (blue line below). (3) 00 Equity Method After Year of Acquisition – Is the second year of ownership and beyond. Thus, if the subsidiary was purchased on January 1, 2010 (continuing with the same example) and we are reporting for the year ending December 31, 2013, we would be reporting After Year of Acquisition. The same journal entries are used for the Equity Method – Year of Acquisition and Equity Method – After Year of Acquisition. Required: PREPARE THE WORKPAPER (and related workpaper entries)THAT WOULD BE MADE IN THE PREPARATION OF THE CONSOLIDATED FINANCIAL STATEMENTS ON DECEMBER 31, 2013 Equity Method AFTER Year of Acquisition the following workpaper entries are made: 1 Eliminate (parents share) of current year subsidiary income (Equity in Subsidiary Income). REAL Entry De bit Credit 2013 Investment in Subsidiary $ 280,000 Equity in Sub Income $ 280,000 Workpaper Entry (1) De bit Cre dit Equity in Sub Income $ 280,000 Investment in Subsidiary $ 280,000 2 Eliminate (parents share) of current year subsidiary dividends. REAL Entry De bit Credit 2013 Cash $ 80,000 Investment in Subsidiary $ 80,000 Workpaper Entry (2) De bit Cre dit Investment in Subsidiary $ 80,000 Dividend Declared Subsidiary $ 80,000 3 Eliminate the Investment in Subsidiary account against (offset by) the subsidiary equity account s. CAD 80% Ownership 80% 20% 100% Parent NCI Total Implied Fair Value Given Up $ 500,000 $ 125,000 $ 625,000 Book Value Received $ 1 $ 110,000 $ 550,000 Difference $ 499,999 $ 15,000 $ 75,000 Land $ 499,999 $ 15,000 $ 75,000 Balance $ $ $ At Acquisition Beg. Current Year RE Change Common Stock $ 10,000 $ 10,000 APIC $300,000 $ 300,000 Retained Earn. $240,000 $ 450, 000 $ 210,000 $550,000 $ 760,000 Workpaper Entry (3) De bit Cre dit A Common Stock Subsidiary $ 10,000 A APIC Subsidiary $ 300,000 B Retained Earnings Subsidiary $ 450,000 C Difference $ 75,000 D Investment in Subsidiary $ 668,000 E NCI $ 167,000 $ 835,000 $ 835,000 $ 125,000 NCI (At acquisition) $ 42,000 NCI’s % of Net Earnings Change $ 167,000 $ 500,000 Investment in Sub (At acquisition) $ 168,000 RE Change @ 80% $ 668,000 Investment in Sub (At 12/31/12) Notes: Remember, 100% of the sub’s equity account balances need to be eliminated. A No change from the date of acquisition. B We need to eliminate RE balance as of the beginnng of the current year. C Never changes. D Investment in Subsidiary (Investment Account Value at the Beg. Of the Current Year) E NCI @ Acquisition + NCI % Ownership of Change in RE Q5. – Short Answer – Why is the credit to the Investment in Subsidiary for $668,000 the same as the entry (to eliminate the investment in subsidiary account) used in the Cost Method – After Year of Acquisition (both were for a $668,000 credit)? 4 Distribute the difference between implied and book value of the equity acquired. Workpaper Entry (4) De bit Cre dit Land $ 75,000 Difference $ 75,000 DIFFERENCES – ACCOUNTING FOR DEPRECIABLE ASSETS Assume that in the above example that the “Difference” between Fair Value Given Up and Book Value Received was due to the FMV of Equipment being greater than the related book value by $75,000 (instead of Land per above). Assumption: At purchase on January 1, 2010 the remaining useful life of the equipment (discussed in the preceding paragraph) of 10 years. The allocation of difference entry would be as follows: Note: The following entries would be necessary for the Cost Method and the Partial Equity Method. 2010 Entry Account Equipment Difference Debit $75,000 Credit $75,000 Depreciation Expense $ 7,500 Equipment $ 7,500 2011 Entry Account Equipment Difference Debit $75,000 Credit $75,000 Beg. Retained Earnings – Parent $ 6,000 Note 1 NCI $ 1,500 Depreciation Expense Equipment $ 7,500 $15,000 Note 1 – Impact of previous year depreciation expense on Parent RE and NCI (must be accounted for).
Accounting Fundamentals Final Assignment: Problem Set 35 points total: do any or all 1. (18 points) The following are Lozier’s 2010 and 2011 balance sheets and income statements for the years ended December 31, 2010 and December 31, 2011, respectively.
2010
2011
Cash
$ 200,000
$ 325,000
Accounts Receivable
400,000
450,000
Inventory
400,000
325,000
Intangible Assets
60,000
54,000
Total Assets
$1,060,000
$1,154,000
Accounts Payable
$ 396,000
$ 420,000
Short term Notes Payable
100,000
100,000
Common Stock
3,000
3,000
Retained Earnings
564,000
636,000
Total Liabilities and Owner’s Equity
$1,063,000
$1,159,000
2010
2011
Sales Revenue
$ 945,000
$1,190,000
Cost of Goods Sold
(400,000)
(500,000)
Advertising Expense
(20,000)
(25,000)
Office Supplies Expense
(10,000)
(13,000)
Interest Expense
(5,000)
(5,000)
Net Income
$ 510,000
$ 647,000
Required: 3 points each
Using an Excel spreadsheet, calculate the following ratios for 2010 and 2011:
1. Quick ratio
2. Accounts receivable turnover ratio
3. Average age of receivables. Assume a 360 day calendar year.
4. Inventory turnover ratio.
5. Calculate the average age of Lozier’s inventory for 2010 and 2011. Assume a 360 day calendar year.
6. Given your calculations in parts 1 5, what conclusions might you draw about Lozier’s business operations?
3. (8 points)
On January 1, 2010, LoCoco Corporation purchased a new assembly line for $100,000 cash and a $200,000, 10%, 5 year note payable. The assembly line has an estimated salvage value of $20,000 and an estimated useful life of 14 years.
Required:
Prepare a journal entry to record the acquisition of the assembly line.
Assume that LoCoco depreciates its assets using the straight line method.
Compute depreciation expense for 2010 and 2011. Prepare a journal entry to record 2011 depreciation expense.
Compute accumulated depreciation at the end of 2010 and 2011.
Compute the assembly line’s book value at the end of 2010 and 2011.
4. (3 points)
Pullam’s weekly 5 day payroll includes the following:
Gross Pay $28,000
Less: Payroll Deductions
FICA Taxes $2,200
Federal Income Tax Withholdings 2,000
State Income Tax Withholdings 1,800
Health Insurance Premiums 1,000 (7,000)
Net Payroll $21,000
Prepare the necessary journal entries for the payroll paid on Friday, December 27, 2011.
5. (6 points)
Ratio Analysis
The following are Brenham Corporation’s 2010 and 2011 balance sheets and income statements.
2010
2011
Cash
$120,000
$140,000
Accounts Receivable
190,000
215,000
Inventory
240,000
260,000
Buildings and Equipment
275,000
250,000
Intangible Assets
75,000
67,500
Total Assets
$900,000
$932,500
Accounts Payable
$400,000
$420,000
Bonds Payable (Long Term)
200,000
125,000
Common Stock
30,000
30,000
Additional Paid In Capital
175,000
175,000
Retained Earnings
95,000
182,500
Total Liabilities and Stockholders’ Equity
$900,000
$932,500
2010
2011
Sales
$1,000,000
$1,200,000
Cost of Goods Sold
(600,000)
(784,000)
Gross Profit
$400,000
$416,000
Advertising Expense
(25,000)
(65,000)
Depreciation Expense
(40,000)
(51,040)
Office Supplies Expense
(20,000)
(22,500)
Interest Expense
(40,000)
(30,000)
Provision for Income Tax Expense
(189,000)
(159,960)
Net Income
$86,000
$87,500
Calculate Brenham’s current ratio at Dec 31, 2010 and Dec 31, 2011.
Calculate Brenham’s working capital at Dec 31, 2010 and Dec 31, 2011.
Calculate Brenham’s debt to equity ratio at Dec 31, 2010 and Dec 31, 2011.
Presented below is the December 31 trial balance of New York Boutique.
NEW YORK BOUTIQUE
TrialBalance
December31
Debit
Credit
Cash
$ 18,500
Accounts Receivable
32,000
Allowance for Doubtful Accounts
$ ?700
Inventory, December 31
80,000
Prepaid Insurance
5,100
Equipment
84,000
Accumulated Depreciation—Equipment
35,000
Notes Payable
28,000
Common Stock
80,600
Retained Earnings
10,000
Sales Revenue
600,000
Cost of Goods Sold
408,000
Salaries and Wages Expense (sales)
50,000
Advertising Expense
6,700
Salaries and Wages Expense (administrative)
65,000
Supplies Expense
5,000
$754,300
$754,300
Instructions
(a)
Construct T accounts and enter the balances shown.
(b)
Prepare adjusting journal entries for the following and post to the T accounts. (Omit explanations.) Open additional T accounts as necessary. (The books are closed yearly on December 31.)
1.
Bad debt expense is estimated to be $1,400.
2.
Equipment is depreciated based on a 7 year life (no salvage value).
3.
Insurance expired during the year $2,550.
4.
Interest accrued on notes payable $3,360.
5.
Sales salaries and wages earned but not paid $2,400.
6.
Advertising paid in advance $700.
7.
Office supplies on hand $1,500, charged to Supplies Expense when purchased.
Case Studies (15% of the marks from this section) .Which carries Total of 80 marks.
NOTE: Each required question need to be answered which carries 10 marks each. Hence section B is 80 marks in total. However, 15% will be the weightage of this section. Whatever the student scores the marks will be converted to 15% from the total marks scored.
Ex: If a student scores 40/80 then (40/80)*15% = 7.5 marks.
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Accounting for Business Decisions –HI5001 Case Studies (15% of the marks from this section) .Which carries Total of 80 marks. NOTE: Each required question need to be answered which carries 10 marks each. Hence section B is 80 marks in total. However, 15% will be the weightage of this section. Whatever the student scores the marks will be converted to 15% from the total marks scored. Ex: If a student scores 40/80 then (40/80)*15% = 7.5 marks. Created with an evaluation copy of Aspose.Words. To discover the full versions of our APIs please visit: https://products.aspose.com/words/ Created with an evaluation copy of Aspose.Words. To discover the full versions of our APIs please visit: https://products.aspose.com/words/
BUACC 2613 Management Accounting 1 Semester 1, 2013 Assignment – Essay ( 1500 – 1800 word) Go to: ? HYPERLINK “http://papers.ssrn.com/sol3/papers.cfm?abstract_id=321520” ?http://papers.ssrn.com/sol3/papers.cfm?abstract_id=321520? “Budgeting Gamesmanship” – posted on your site. “Why Incentive Plans Cannot Work”—posted on your site. Critically review the above. Do you agree, partly agree or disagree with the issues raised in the above? Discuss your reason (s) for doing so. You need to support your viewpoint with carefully chosen and authoritative evidence. Bases of assessment?HD P F ??Technical component – accuracy in calculations. ???Essay: evidence of research ???Essay: a demonstration of critical evaluation of the issues. ???Essay format: As per The General Guide for the Presentation of Academic Work ???Expression clarity, style (formal and academic), coherence in writing, grammar, punctuation, spellings and sentence structure. Expression of your view (and not a catalogue of quotes/ others’ ideas) A logical flow of argument at both the paragraph level and the overall text level. Use of supporting arguments. Use of literature to support the argument.???Referencing procedure (within the text, and at the end of the text). Appropriately styled and punctuated bibliography. ? ??Overall Presentation – including cover page, line spacing, page numbering.??? Created with an evaluation copy of Aspose.Words. To discover the full versions of our APIs please visit: https://products.aspose.com/words/ ?PAGE ?? Created with an evaluation copy of Aspose.Words. To discover the full versions of our APIs please visit: https://products.aspose.com/words/ ? PAGE * MERGEFORMAT ?2?
ACC2014/BAB2204 1 SUNWAY UNIVERSITY BUSINESS SCHOOL BACHELOR OF SCIENCE (HONS) ACCOUNTING AND FINANCE ACADEMIC SESSION: MARCH – JULY 2013 ACC2014/BAB2204 FINANCIAL ACCOUNTING ASSIGNMENT DEADLINE: 31 MAY 2013 INSTRUCTIONS TO CANDIDATES 1. There are SIX (6) pages in this Assignment including the cover page. 2. This assignment will contribute 25% to your final grade. 3. The assignment must be typewritten on double line spacing, A 4 size paper and double sided. Work should be submitted with a cover sheet, which includes your name, unit number, tutor’s name, and the essay/group report topic. 4. You are requested NOT to use plastic binders (i.e. comb bind with plastic/ cardboard cover), just staple your work together in the top left hand corner. Help save our earth! 5. You are also required to submit a softcopy of your work through Turnitin. 6. This assignment is to be undertaken in a group of not more than two students. Marks will be allocated for content, presentation, and referencing. IMPORTANT Assignments must be submitted on their due dates. If an assignment is submitted after its due date, the following penalty will be imposed: ? One to two days late : 20% deducted from the total marks awarded. ? Three to five days late : 40% deducted from the total marks awarded. ? More than five days late : Assignment will not be marked. Example. A student scores 60 marks for an assignment that has a total mark of 100. If the assignment is submitted one day late, the marks awarded will be 48 marks (80% x 60). ACC2014/BAB2204 Assignment (Q) / MAR 2013 ACC2014/BAB2204 2 ASSIGNMENT 1 (SLO3): The Civil Aviation Authority Controlled Airspace – [50 MARKS] The Civil Aviation Authority (CAA) is going through a phase of corporatisation. In the past, the government funded the operations of the CAA on a recurrent basis. An increased demand for accountability has resulted in numerous administrative and operational changes taking place, with many having a direct impact on the accounting function. Major changes include the adoption of accrual accounting and the preparation of a balance sheet. The CAA, a corporation established by federal legislation, undertakes all aviation related functions on behalf of the federal government. These functions are self funded in that the CAA levies a yearly licence charge on all aircraft operating within its jurisdiction. In addition the CAA’s charter requires it to distribute a set percentage of yearly profit to the federal government in the form of a dividend. Jeremy, who is employed by the CAA as an Assistant Accountant, has recently been given the task of preparing an asset register to be used in the preparation of the CAA’s first set of annual reports, using the accrual method of accounting. In addition to his work duties, Jeremy is studying part time for the Bachelor of Business (Accounting) degree at Atlantis University of Technology. Recently Jeremy’s Lecturer in Financial Accounting Theory, Professor Gabrielle Lee, required students to examine and discuss a case study concerned with accounting for a hole in the ground to be used for waste disposal by a local government agency. The case study focused attention on what constitutes an asset and the associated problem of ascertaining a value for assets that did not have an acquisition cost. This particular case study so aroused Jeremy’s imagination that he spent a number of hours reading about the issues surrounding the definition, recognition and valuation of assets. As Jeremy commenced the task of preparing the asset register, he wondered, given the hole in the ground case study, whether the airspace controlled by the CAA should be included in the asset register. Jeremy arranged a meeting with Sarah, the CAA’s Financial Controller, and proposed that controlled airspace should be recognised as an asset. Sarah expressed surprise at the idea but given the recent changes to accounting concepts and standards, was prepared to accept a submission outlining the arguments for and against the proposal, together with a recommendation for consideration. Required: Prepare a 1,500 word submission for Sarah’s consideration detailing the arguments for and against the recognition of controlled airspace as an asset by the CAA. Your submission should make reference to the relevant provisions of the Conceptual Framework and other financial reporting standards as well as relevant academic literature. ACC2014/BAB2204 Assignment (Q) / MAR 2013 ACC2014/BAB2204 3 ASSIGNMENT 2 (SLO1): Convergence with International Financial Reporting Standards – [50 MARKS] The following article was published in the Star Online on 2 January 2013 and accessible from the following URL: http://biz.thestar.com.my/news/story.asp?file=/2013/1/2/business/12488671&sec=bus iness MASB’s move to fully converge with IFRS deemed positive The decision of the Malaysian Accounting Standards Board (MASB) to fully converge with the International Financial Reporting Standards (IFRS) set up by the International Accounting Standards Board (IASB) was a “good thrust”, according to a prominent accounting firm. BDO Malaysia head of audit Tang Seng Choon believes MASB’s move to fully converge with IFRS would help facilitate cross border fund raising activities. “It lends credibility to reported figures of our listed companies and enhances the Malaysian capital markets. Foreign investors would be confident that when they analyse financial results and positions of our listed companies, it would have been prepared and audited in accordance with international standards,” Tang said in an email interview with StarBiz. However, the full convergence with IFRS has been largely debated on, following Singapore’s decision to only converge partially with IFRS. Meanwhile, there are doubts if the United States would be converging with IFRS at all. “Research indicates that those jurisdictions which adopted IFRS in full have seen a reduction in the cost of capital. Those which adopt only part of IFRS or make changes to IFRS as issued by the IASB experience a reduction in confidence in the amounts reported in financial statements and a corresponding loss of advantage,” BDO International global head of IFRS Andrew Buchanan said. Australia’s partial convergence exemplified this loss of confidence. Australia had incorporated IFRS into its own accounting standards, but had eliminated a number of options. Although the Australian Financial Reporting Standards (FRS) was actually more restrictive than IFRS itself, the fact that the standards were not as issued by the IASB resulted in a loss of confidence internationally. Many Malaysian listed companies have already adopted the standards since Jan 1, 2012, with the exception of plantation operators and property developers due to issues arising from some of the standards. Both plantation operators and property developers are expected to adopt IFRS from Jan 1, 2014 onwards. Tang said the MASB had been engaging many parties that ACC2014/BAB2204 Assignment (Q) / MAR 2013 ACC2014/BAB2204 4 would be affected by IFRS by having discussions with plantation operators and property developers. “We are also aware that MASB has been proactively engaging the tax authorities, capital market regulators, accountants and auditors, and listed companies to facilitate a smooth transition into IFRS,” Tang said. He stressed the need for accountants to be continually updated with IFRS, and also exposure drafts that may be issued as IFRS in the future. This is because the implementation timeframe of new IFRS would be shorter. “There is always the lingering question on the tax implications arising from the implementation of IFRS,” he added. Moving forward, Tang highlighted three challenges the accounting industry is facing. The first is the acute shortage of experienced accountants in Malaysia, especially with the implementation of IFRS. “We are faced with not just the increased mobility of young Malaysian accountants, but also the need to re train existing accountants,” he said. As for private companies, the question that comes to mind is whether they too would need to apply IFRS, or IFRS for small and medium enterprises, which is essentially a “mini version” of IFRS, or to apply a reduced disclosure requirement regime. Required Prepare a 1,500 word article to critically discuss the implications of the convergence of financial reporting standards. Your article should address the issues raised in the above article specifically in relation to the benefits and barriers to convergence. Do you agree that it is a positive move for the MASB to fully converge with IFRS? Your article should make reference to the relevant academic and professional literature. ACC2014/BAB2204 Assignment (Q) / MAR 2013 ACC2014/BAB2204 5 MARKING CRITERIA The evaluation of a written assignment is subjective but the following marking criteria will provide a degree of consistency and clarity for both the examiner and students. There is no one correct answer required. Students’ need to show depth of understanding of the relevant issues, the ability to synthesise information from diverse and credible sources to formulate sustained arguments towards arriving at an appropriate conclusion related to the topic of interest. Therefore, extensive research beyond lecture notes and prescribed textbooks is expected. The essay should provide evidence of criticality expected of a second year undergraduate student. English expression, sentence construction, grammar and spelling are also indicators of the quality of the essay and report. The coherence and logical flow of ideas and arguments are also assessed. The format and presentation of the assignment should also be neat and professional. The assignments are marked out of 100 percent and then converted to 25 marks. The overall assessment criteria are presented in the table on the next page to provide further guidance on how the assignments are evaluated. ACADEMIC MALPRACTICE Plagiarism, whether inadvertent or deliberate, shall include the following: ? Word for word copying of sentences or whole paragraphs from one or more sources, or presenting substantial extracts from books, articles, thesis, other unpublished work such as working papers, seminar and conference papers, internal reports, computer software, lecture notes or tapes, without clearly indicating their origin. ? Using very close paraphrasing of sentences of whole paragraphs without due acknowledgement in the form of reference to the original. ? Submitting another student’s work in whole or in part. ? Use of other person’s ideas, work or research data without acknowledgement. Collusion, whether inadvertent or deliberate, shall include the following: ? Submitting an “individual assignment” that was jointly prepared by the candidate and any other third party, e.g. other students, family, professionals, or tutors/lecturers. ? Submitting a “group assignment” that was jointly prepared by the group and any external party, e.g. family, students from other subjects, or professionals. ? Copying each other’s work and passing it off as an individual effort. Please refer to Student Handbook for Diploma and Undergraduate Programmes or Blackboard for details about academic malpractice penalties. ACC2014/BAB2204 Assignment (Q) / MAR 2013 ACC2014/BAB2204 6 Table of Evaluation Criteria for Written Assignment Criteria Marks % Description Excellent 70 – 100 Work fulfilling the above criteria to an outstanding degree, in particular demonstrating excellence in sustained argument, critical thought and synthesis of material from diverse sources. Very good 60 – 69 Work demonstrating extensive knowledge and understanding of major content areas and issues; the ability to appropriately synthesise material from a range of sources; a well developed capacity for critical analysis of key issues and concepts; the ability to present a defensible personal perspective on issues; evidence of wide reading in relevant areas of the discipline; high quality presentation Good 50 – 59 Above average work demonstrating good knowledge and understanding of major content areas and issues; demonstration of some capacity for critical analysis; the ability to present a perspective on issues; evidence of reading in relevant areas of the discipline; high quality presentation. Average 40 – 49 Work of ‘average’ standard which demonstrates an average comprehension both of basic concepts and some issues, based on class work and some further reading in the area; some ability to compare key concepts and theoretical perspectives; average presentation, particularly in regard to structure, expression and referencing. Marginal 30 – 39 Work which shows a basic understanding of key elements of the subject matter at a descriptive level, based mainly on attendance at lectures; satisfactory presentation with some deficiencies in structure, expression and referencing. Poor 1 – 29 Work which shows little evidence of knowledge or understanding of the subject matter and is unsatisfactorily presented, particularly in regard to structure, expression and referencing. Very poor 0 Work which shows no evidence of knowledge or understanding of the subject matter.
E8 9 (Periodic versus Perpetual Entries) Chippewas Company sells one product. Presented below is information for January for Chippewas Company.
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441000 441000 61000 33000 46000 73000 51000 33000 46000 51000 130000 , , Page of , , 1/1/2012 100 6 1/4/2012 80 8 1/11/2012 150 6.5 1/13/2012 120 8.75 1/20/2012 160 7 1/27/2012 100 9 110 1/4/2012 640 640 1/11/2012 900 975 900 975 1/13/2012 900 1050 900 1050 1/20/2012 900 1120 900 1120 1/27/2012 900 900 900 900 1/31/2012 660 2035 2095 600 1/4/2012 900 900 1/11/2012 900 900 1/13/2012 900 900 1/20/2012 900 900 1/27/2012 900 900 , , Page of , , 55000 30000 1 9 3000 2 15 4000 3 19 2000 18200 1 5 2 7 3 2 1 2 3 1 2 3 Name: Course: Date: Instructions for the Microsoft Excel Templates by Rex A Schildhouse Be advised, the template workbooks and worksheets are not protected. Overtyping any data may remove it. Extensive detail and information is contained within the help function of Microsoft Excel and in the provided text. You should enter your name, date, instructor’s name, and course into the cells at the top of the page. This information will be printed on the top of each page if the template requires more than one page. Each template is set to print with File Name, Page # of # Page(s), the print date, and the print time to assist in assembly of multiple pages. If more than one page is required by the template, manual page breaks have been set to provide consistent presentation. All of the cells have been correctly formatted for presentation and should not require any adjustment. For example, if the text requires one, two, or three significant digits in a presentation, the template has been set for that presentation in the appropriate cells. In general, the yellow highlighted cells are the cells which work and effort should be presented. These entries may include date(s), account title(s), values, memorandum appropriate to the entry, or text answers to questions. And information or data which may be required by the solution will be…
the Study Guide effectivelyThe objectives of this Study Guide are to facilitate your progress through each of the topics and sub topics in the subject and to ensure that you have acquired the requisite understanding and knowledge of the concepts and techniques presented in each of the topics. Your expertise in management accounting and your ability to apply the knowledge gained from study of this subject are tested in the study tasks and review tasks, the compulsory assignments and final examination. You should use the Study Guide on an interactive basis and be guided in approaching and sequencing your studies for a topic and its sub topics by the activities presented. For each topic, the Study Guide contains:1.Essential reading – the required readings for the topic from the prescribed textbook and from the Reading section of your Study Guide. 2.Objectives the purpose of these is to clearly identify the concepts and procedures you should have mastered having read the required readings and attempted the study tasks. The learning objectives are task oriented, clearly identifying which aspects of the topics you need to be able to describe, discuss, calculate and/or apply.3.Commentary – the Commentary section provides a discussion of the content covered in each topic and sub topic, highlights some of the key issues in topics and provides further information or examples on the more problematic aspects of a topic. The Commentary also functions to show you how various parts of a topic and different topics fit together. The Commentary is supplementary to the required readings and is not a substitute for them. The Commentary section includes a range of activities that you need to perform including Reading, Study Tasks, From Theory to Practice activities and Review Tasks. 4.Summary – this section presents a brief recap of the topic and directs you to a Review task that follows.5.Self test exercises – these questions are grouped together at the end of every topic presented in the Study Guide. The questions can include a selection of multiple choice, completion statements, True/False and other questions from the Question Bank. The questions appear as Study Task and Review Task activities within the Commentary. 6.Self test solutions – fully worked solutions to each of the Self test questions, including those found in the Question Bank. The solutions are designed to provide you with immediate feedback on your self testing. 7.References – full citations for references made in the Commentary to books and journal articles, other than the set textbook or references provided in that textbook.
viii Facilitating your learningAs a guide, when you begin a new topic, consult the Objectives section first, then read the Commentary section until you come to an activity. Usually the first activity will be a requirement for you to Read certain pages of a chapter in the text. Complete this reading, then go back to the Commentary until you reach another activity. This next activity might require you to complete a Study Task, which will mean preparing an answer to one or more of the Self Test Questions. Once you have satisfactorily completed the activity, resume reading the Commentary until you come across the next activity and so on. However, depending on your learning style and personal preferences, you might not wish to attempt the study tasks as indicated by the Commentary. That’s not a problem, provided you attempt the self test exercises at the end of each topic. In doing so, it should help you monitor your progress in the subject. You should also make notes based on the Readings, Commentary and Self test questions. The learning objectives and commentary for each topic should assist and direct you in your note taking.
1 Part 1Models of choice, probability calculations and distributions
ACC513 Study Guide 2
3 Topic 1 Strategic management accounting and choice processes ObjectivesAt the end of this topic, you should be able to:•explain why management accounting has taken on a strategic emphasis;•describe the general principles of rational decision making;•distinguish between normative and descriptive models;•identify alternative models of choice and provide examples of situations when each model is an appropriate description of actual decision processes. CommentaryIn Topic 1 we begin by briefly reviewing the history of the development of management accounting. We show how changes in the business environment have led to the development of new management accounting techniques and practices to support strategic decision making. The rational decision model is introduced as the ideal approach to decision making, together with some alternative models of a more descriptive nature of actual choice processes in organisations. The case is made for managers to aim to be as rational as possible in making decisions. Development of management accounting The development of management accounting in the USA has been comprehensively described by Johnson and Kaplan (1987). They explain how the onset of the Industrial Revolution in the nineteenth century provided opportunities for entrepreneurs to benefit from economies of scale by combining and managing separate processes of production. For example, the textile industry consisted of the processes of spinning, weaving and finishing. Prior to the Industrial Revolution each of these had been carried out as separate businesses whose finished output was sold to the next operator in the chain. Now entrepreneurs could increase their profits by combining these processes within the one business. In order to manage such enterprises which combined two or more processes under their control, management had to hire workers. Wage contracts replaced piece rates, and production costs were accumulated, not so much to calculate the unit costs of production, but to control conversion costs and to motivate and evaluate the performance of supervisory managers. The US railroads and steel mills furthered the use of management accounting information for cost control purposes. Managers of steel mills collected the costs of each order (i.e., job costing), while the railroads calculated the costs per ton mile. In addition, because of the size of the railroad operations and task specialisation, division of management was introduced. This led to the use of cost information to assess the performance of these subordinate managers. The growth of large retail store chains also promoted the use of measures of performance of departmental managers, measures such as departmental gross margin and the rate of stock turnover
he objective of this assignment is to assess the investment conditions in the Australian economy form Top Down Fundamental Analysis.
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HA1022 Principles of Financial Markets Trimester 2 / 2013 ASSESSMENT CASE STUDY Work must be carried out in groups of 4 people. The objective of this assignment is to assess the investment conditions in the Australian economy form Top Down Fundamental Analysis. Students should proceed to the Reserve Bank Website:?http://www.rba.gov.au/chart pack/?From here you can down load graphs of key economic indicators. Then using these graphs analyse the recent history of the Australian stock market and form a prediction as to the investment conditions in the current Australian stock market. The indicators must include the following: ? World Economy o GDP Growth World ?? Australian GDP Growth and Inflation o Australian GDP Growth o Consumer Price Inflation ? Interest Rates o Australian Bond Yields? ? Exchange Rates, Australian Dollar vs: o US Dollar, Euro and Yen You should be looking at these indicators and comparing them to what happened to the stock market shortly after. In your analysis include a definition and/or background information on each indicator that you are analysing. At the end of your report state your conclusion as to whether or not your analysis shows that current investment conditions in the Australian stock market are favourable. Group Report Required: Each group should prepare a report of no more than 10 pages outlining the above analysis and the selection of the resulting portfolio. Marks will be given for content not for length. Anything over 10 pages will not be marked. Resources available You should use the RBA website; this will give you easy access to graphs and reports on the Australian and world economies. You may also access additional information via the ‘Australian Financial Review’ newspaper or website, finance.yahoo.com; finance.google.com; Bloomberg.com; ft.com, www.asx.com.au, www.afr.com.au. HA1022 Principles of Financial Markets T2 2013 …
Homework 4 Sazz Ltd. produces two products A and B in three production departments (assembling, painting and sales). It also has two service departments (maintenance and cleaning). Required: Distribute the overheads based on an adequate basis and calculate the planned overhead absorption rates using the sequential method (use the most appropriate sequence regarding interrelationships – use book for help): Direct labour hour rate for assembling department Machine hour rate for the painting department Rate per product for the sales department Round appropriately for currency values. Production Departments Service Departments Assembling Painting Sales Maintenance Cleaning Total Allocated overheads 40,000€ 20,000€ 30,000€ 50,000€ 60,000€ 200,000€ Rent, heat, light 78,000€ Depreciation 90,000€ Additional data Gross book value of equipment 55,000€ 45,000€ 110,000€ 25,000€ 65,000€ 300,000€ Floor space occupied in m² 3,000 4,000 5,000 2,000 1,000 15,000 Maintenance service hours 2,000 1,500 700 300 4,500 Direct labor hours 15,000h Machine hours 8,000h Number of products 2,000
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Homework 4 Sazz Ltd. produces two products A and B in three production departments (assembling, painting and sales). It also has two service departments (maintenance and cleaning). Required: Distribute the overheads based on an adequate basis and calculate the planned overhead absorption rates using the sequential method (use the most appropriate sequence regarding interrelationships – use book for help): Direct labour hour rate for assembling department Machine hour rate for the painting department Rate per product for the sales department Round appropriately for currency values. Production Departments Service Departments Assembling Painting Sales Maintenance Cleaning Total Allocated overheads 40,000€ 20,000€ 30,000€ 50,000€ 60,000€ 200,000€ Rent, heat, light 78,000€ Depreciation 90,000€ Additional data Gross book value of 55,000€ 45,000€ 110,000€ 25,000€ 65,000€ 300,000€ equipment Floor space occupied 3,000 4,000 5,000 2,000 1,000 15,000 in m² Maintenance service 2,000 1,500 700 300 4,500 hours Direct labor hours 15,000h Machine hours 8,000h Number of products 2,000
Module 1 – Business Combination and Consolidation Stock Acquisition – Consolidated Financial Statements Date of Acquisition Instructor Comment: The following lesson module was developed to assist students in their understanding of the corresponding subject matter in the course textbook. The following is not a replacement for the detailed presentation provided by the authors of the text, but instead is an attempt to provide students with a pragmatic direct review with heavy emphasis on process. My recommendation is to approach the course material in the following sequence. 1. Read/study the assigned corresponding sections of the text. 2. Read the “Chapter Review” (PowerPoint) posted in D2L. 3. Read/complete the corresponding instructor developed “Instructor Subject Matter Presentation” (THIS DOCUMENT) posted in D2L. 4. Complete the assigned text questions, exercises and problems (author recommended solutions for assigned odd exercises posted in D2L). 5. Review the corresponding instructor developed “Instructor Problem Solving Modules” posted in D2L. For stock acquisitions where significant influence and control exist, the acquirer (parent) is required by the SEC, for financial reporting purposes, to consolidate the acquired company (subsidiary). The development of consolidated financial statements is a complex process. In an effort to focus on the key aspects required for the accounting of consolidations we will apply a 3 Step Process. 3 Step Process: •Confirm business combination is a Stock Acquisition which requires consolidation •Determine where (timing) in the accounting process •% Ownership •Calcualate the Difference •Fair Value versus Book Value •Complete the Workpaper •Complete Financial Statement The application of the 3 Step Process will be demonstrated using a business case involving an acquisition. Business Case – Paper & Ink Corporation Paper & Ink Corporation is a manufacturer of computer paper and ink cartridges that supplies independent convenient stores, pharmacies, and hardware stores with a small inventory of personal computer (printer) supplies. These stores sell computer paper and ink cartridges to their customers, who are primarily individual consumers. Paper & Ink Corporation is able to keep their costs down by selling directly (not through a wholesaler) to the independent convenient stores, pharmacies, and hardware stores. Still, increasing direct competition from online wholesalers (independent convenient stores, pharmacies and hardware stores can order online as an alternative supplier) and the indirect competition from large computer supply stores (i.e. OfficeMax) has negatively impacted Paper & Ink Corporation’s sales (Paper & Ink Corporation is losing market share). After an extensive internal review the executive management team of Paper & Ink Corporation has determined that the company needs to diversify its product offerings to better differentiate themselves from their competition. Their idea is to add a new product line that will benefit both Paper & Ink Corporation and their customers. The key product that they have decided to add is ink refill capsules. The capsules come in two sizes: an individual (one ink cartridge refill) and a multiple (100 ink cartridge refill). The decision to add ink refill capsules was based on an internal review of the company’s strengths and weaknesses which is summarized in Exhibit A. Assume that on January 1, 2012 Paper & Ink Corporation (parent company) acquired 75% of the stock of Smooth Solutions (subsidiary company) for $31,000,000 (approximately 1.5X sales). Smooth Solutions stockholders have agreed to accept a combination of cash and Paper & Ink Corporation stock as payment. The stock price of Paper & Ink Corporation (market price per NASDAQ) at the market close on December 31, 2011 was $25/share. Purchase Price: $ 31,000,000 Payment: Cash $ 3,100,000 Stock $ 27,900,000 Mkt Price $ 25 # of Shares 1,116,000 The following are the financial statements (balance sheet) for the two companies immediately before the acquisition. BALANCE SHEET $ US Paper & Ink Corp. Smooth Solutions 12/31/2011 12/31/ 2011 Cash $ 5,550,000 $ 200,000 Short Term Investments $ 2,400,000 $ Accounts Receivable $ 5,500,000 $ 5,250,000 Inventory $ 10,000,000 $ 11,300,000 Equipment $ 19,325,000 $ 7,450,000 Trucks $ 4,200,000 $ 1,900,000 Trailers $ 2,400,000 $ 750,000 Other Assets $ 1,750,000 $ 1,150,000 Building $ 875,000 $ 750,000 Land $ 500,000 $ 425,000 Long Term Investments $ 4,500,000 $ Other Long Term Assets $ 1,200,000 $ 1,350,000 Goodwill $ $ Difference $ $ Total Assets $ 58,200,000 $ 30,525,000 Accounts Payable $ 7,250,000 $ 4,250,000 Other Current Liabilities $ 3,250,000 $ 2,150,000 Notes Payable $ 4,000,000 $ Credit Line $ 5,000,000 $ 7,000,000 Long Term Debt $ 5,400,000 $ 3,350,000 Other Long Term Liabilities $ $ Total Liabilities $ 24,900,000 $ 16,750,000 Common Stock (Par $.10) $ 250,000 $ 125,000 APIC $ 22,000,000 $ 11,500,000 RE $ 11,050,000 $ 900,000 Total Equity $ 33,300,000 $ 13,775,000 Total Liabilities and Equity $ 58,200,000 $ 30,525,000 •Confirm business combination is a Stock Acquisition which requires consolidation •Determine where (timing) in the accounting process Step 1 Assess the Business Scenario Assessing the business scenario can have many meanings. For now, we will focus on the accounting aspects of the transaction. In terms of the accounting, Paper & Ink Corporation is buying 75% of the stock of Smooth Solutions. Instructor Insight: It may not always be readily clear what type of transaction is taking place (asset acquisition or stock acquisition). Particularly, in instances where 100% of the acquisition target is purchased. In reality we would need more detailed information to know how each transaction would need to be accounted. For example, assuming Paper & Ink Corporation did purchase 100% of the stock of Smooth Solutions, will Paper & Ink Corporation retire the stock of Smooth Solutions which would likely result in the dissolution of Smooth Solutions as a legal entity. If this were the case, the transaction would be accounted for as an asset acquisition. If Paper & Ink Corporation held the stock (NOT retire the stock) Smooth Solutions would continue to exist as a separate legal entity. Thus, we know we would need to account for this transaction (business combination) as a stock acquisition. Based on the information provided, we have determined that we are dealing with a stock acquisition. We also need to determine what point in time we are in the transaction. In this scenario it appears we are just before the actual transaction “Date of Acquisition.” We know this is likely the case by both the description of events, “The following are the financial statements (balance sheet) for the two companies immediately before the acquisition.” In addition, when reviewing Paper & Ink Corporations balance sheet there is no investment in subsidiary account. Having determined that the actual transaction has yet to be recorded, we know that Paper & Ink Corporation will need to make the accounting entry at the time of the transaction. Thus, we will assume that the $31 million dollar payment to the shareholders of Smooth Solutions takes place. Therefore, Paper & Ink Corporation will need to make the following entry: Account De bit Credit Investment in Subsidiary (Smooth Solutions) $ 31,000,000 Cash $ 3,100,000 Common Stock (1,116,000 @ $.10) $ 111,600 APIC $ 27,788,400 To record the 75% stock acquisition of Smooth Solutions on January 1, 2012. APIC $ 416,826 Cash $ 416,826 To record stock registration fees for issuance of 1,116,000 common shares. Note – These are actual journal entries (REAL entries) that are made in Paper & Ink Corporation’s ledger at the time of acquisition. Q1. Short Answer Immediately after the above transaction what change(s) will be made on the respective books (ledger) of each company? Please explain why or why not changes are made to each company’s respective financial statement(s). Paper & Ink Corporation: Smooth Solutions: Q2. Calculations Show the calculations confirming the following balance sheet accounts have correctly stated balances (per the balance sheet below): Cash $ 2,033,174 Common Stock $ 361,600 APIC $49,371,574 Q3. Short Answer – Explain why the subsidiary company’s cash account was not impacted by the purchase transaction? BALANCE SHEET $ US Paper & Ink Corp Smooth Solutions 1/ 01/2012 1/01/2012 Cash $ 2,033,174 $ 200,000 Short Term Investments $ 2,400,000 $ Accounts Receivable $ 5,500,000 $ 5,250,000 Inventory $ 10,000,000 $ 11,300,000 Invesment in Subsidiary $ 31,000,000 $ Equipment $ 19,325,000 $ 7,450,000 Trucks $ 4,200,000 $ 1,900,000 Trailers $ 2,400,000 $ 750,000 Other Assets $ 1,750,000 $ 1,150,000 Building $ 875,000 $ 750,000 Land $ 500,000 $ 425,000 Long Term Investments $ 4,500,000 $ Other Long Term Assets $ 1,200,000 $ 1,350,000 Total Assets $ 85,683,174 $ 30,525,000 Accounts Payable $ 7,250,000 $ 4,250,000 Other Current Liabilities $ 3,250,000 $ 2,150,000 Notes Payable $ 4,000,000 $ Credit Line $ 5,000,000 $ 7,000,000 Long Term Debt $ 5,400,000 $ 3,350,000 Total Liabilities $ 24,900,000 $ 16,750,000 Common Stock (Par $.10) $ 361,600 $ 125,000 APIC $ 49,371,574 $ 11,500,000 RE $ 11,050,000 $ 2,150,000 Total Equity $ 60,783,174 $ 13,775,000 Total Liabilities and Equity $ 85,683,174 $ 30,525,000 Q4. True/False – The existing liability accounts on the subsidiary’s balance sheet will always equal fair value? Explain your answer. Q5. Short Answer – Explain how to account for assets and liabilities identified at the time of the acquisition but are not listed on the subsidiary company’s balance sheet? Q6. Multiple Choice – To calculate the total implied value of the acquired company the following data points are needed: a. % ownership acquired, fair value given up, and fair value received b. % ownership acquired, fair value received, book value received c. The implied value is based on an outside valuation of the acquired company. d. % ownership acquired and fair value given up •% Ownership • Calcualate the Difference • Fair Value versus Book Value Computation and Allocation of Difference (CAD) Schedule. % of ownership = 75% 25% 100% Non Contrilling Parent Interest (NCI) Total Implied Value Fair Value Given Up ? Book Value Received ? Difference Accounts Receivable Inventory Equipment Trucks Trailers Other Assets Building Land Other Long Term Assets Patent Rights Note 1 Customer List Note 2 Brand Names Note 3 $ 31,000,000 $ 10,331,250 $ 20,668,750 $ 10,333,333 $ $ 3,443,750 $ $ 6,889,583 $ $ $ $ $ $ $ $ $ $ $ $ $ 41,333,333 13,775,000 27,558,333 (500,000) (300,000) 2,550,000 (800,000) (200,000) (650,000) $ 250,000 1,575,000 (600,000) 1,000,000 500,000 2,000,000 4,825,000 Net Increase in Assets Contaminated Land Clean Up Estimate Note 4 Employee Lawsuit Note 5 Customer Lawsuit Note 6 Balance Goodwill Balance $ 800,000 $ 100,000 $ $ 250,000 $ $ 23,883,333 $ 23,883,333 $ 1,150,000 3,675,000 Net Increase in Liabilities Net Increase Note: Fair value differences are calculated on the schedule below. Fair Value vs. BALANCE SHEET Fair Value Report Book Value $ US Smooth Solutions Smooth Solutions Smooth Solutions 1/ 01/2012 1/ 01/2012 1/ 01/ 2012 Cash $ 200,000 $ 200,000 $ Short Term Investments $ $ $ Accounts Receivable $ 5,250,000 $ 4,750,000 $ (500,000) Inventory $ 11,300,000 $ 11,000,000 $ (300,000) Equipment $ 7,450,000 $ 10,000,000 $ 2,550,000 Trucks $ 1,900,000 $ 1,100,000 $ (800,000) Trailers $ 750,000 $ 550,000 $ (200,000) Other Assets $ 1,150,000 $ 500,000 $ (650,000) Building $ 750,000 $ 1,000,000 $ 250,000 Land $ 425,000 $ 2,000,000 $ 1,575,000 Long Term Investments $ $ $ Other Long Term Assets $ 1,350,000 $ 750,000 $ (600,000) Patent Rights Note 1 $ $ 1,000,000 $ 1,000,000 Customer List Note 2 $ $ 500,000 $ 500,000 Brand Names Note 3 $ $ 2,000,000 $ 2,000,000 Total Assets $ 30,525,000 $ 35,350,000 $ 4,825,000 Accounts Payable $ 4,250,000 $ 4,250,000 $ Other Current Liabilities $ 2,150,000 $ 2,150,000 $ Notes Payable $ $ $ Credit Line $ 7,000,000 $ 7,000,000 $ Long Term Debt $ 3,350,000 $ 3,350,000 $ Other Long Term Liabilities $ $ $ Contaminated Land Clean Up Estimate Note 4 $ 800,000 $ 800,000 Employee Lawsuit Note 5 $ 100,000 $ 100,000 Customer Lawsuit Note 6 $ $ 250,000 $ 250,000 Total Liabilities $ 16,750,000 $ 17,900,000 $ 1,150,000 Common Stock (Par $.10) $ 125,000 APIC $ 11,500,000 RE $ 900,000 Total Equity $ 13,775,000 Total Liabilities and Equity $ 30,525,000 • Complete the Workpaper • Complete Financial Statement Q7. True/False Workpaper entries are journal entries that are ultimately recorded in the parent company’s ledger. Explain your answer. As discussed in your reading, when significant influence and control exists, the equity investment must be consolidated into the company’s financial statements. Prior to creating consolidated financial statements the investors and creditors of Paper & Ink Corporation have a limited view of the company’s investment in Smooth Solutions. Simply, a $31 million dollar asset called Investment in Subsidiary. Not only is the investment difficult to assess, it represents more than 50% of Paper & Ink Corporation’s net assets. Clearly, the required accounting to consolidate the investment will better reflect the company’s financial (and economic) position. The consolidation process is simply an accounting method that results in a better presentation of a company’s financial statements. To determine the correct balance of the combined company’s accounts the accountant employs the use of a tool called a workpaper. The workpaper does the following: Parent Company Accounts + Subsidiary Company Accounts + Workpaper Entries = Parent & Subsidiary Company Consolidated Account Balances In addition, a separate account (NCI) must be created for those investors of the acquired company (subsidiary company) that did not sell their ownership (shares). This account is called the Noncontrolling Interest or NCI. A separate line item is required for the net value of the subsidiary held by the NCI shareholders in the Consolidated Financial Statements. This account is included the equity section of the consolidated balance sheet. The workpaper entries are basically the adjustments needed to arrive at a correctly stated consolidated account balance. Reminder: Workpaper entries are not real entries and therefore do not impact the respective company’s ledger. They are adjustment entries used in the workaper process to arrive at the correct consolidated balance(s). The inputs into the workpaper entry are driven from the CAD. Computation and Allocation of Difference (CAD) Schedule. % of ownership = 75% 25% 100% Non Controlling Parent Interest (NCI) Total Implied Value Fair Value Given Up ? $ 31,000,000 $ 10,333,333 $ 41,333,333 Book Value Received ? $ 10,331,250 $ 3,443,750 $ 13,775,000 Difference $ 20,668,750 $ 6,889,583 $ 27,558,333 Credit Investment in Subsidiary – Smooth Solutions $31,000,000 NCI $10,333,333 The CAD first compares the fair value given up to the book value received. The next question is to investigate whether there are any assets and liabilities that have a fair value that is different from book value. This information is used to both determine if there is goodwill (or gain) and to complete the 2nd part of the workpaper entry. The second workpaper entry is to properly allocate the difference account. Q8. – Prepare Entry Complete the workpaper entry to allocate the difference account. Account (2) Debit Credit Q9. True or False The balance sheet of Paper & Inc. Corp. has a line item “Investment in Subsidiary” with a balance of $31,000,000. This balance is the total implied value of the subsidiary. Explain your answer. Q10. Multiple Choice ??This investment in subsidiary account would be found in which section of the parent company balance sheet? a. Equity b. Liabilities c. Assets d. Not included in the balance sheet Once the workpaper entries are completed we can then complete the actual workpaper. The workpaper entry populates the workpaper and provides the necessary information to compute the consolidated balances. Consolidation Workpaper BALANCE SHEET $ US Paper & Ink Corp. Smooth Solutions Workpaper Entries and Noncontrolling Consolidated Parent Subsidiary Eliminations Interest Balances 1/01/2012 1/01/2012 De bit Credit Cash $ 2,033,174 $ 200,000 $ 2,233,174 Short Term Investments $ 2,400,000 $ $ 2,400,000 Accounts Receivable $ 5,500,000 $ 5,250,000 $ 500,000 (2) $ 10,250,000 Inventory $ 10,000,000 $ 11,300,000 $ 300,000 (2) $ 21,000,000 Invesment in Subsidiary $ 31,000,000 $ $ 31,000,000 (1) $ Equipment $ 19,325,000 $ 7,450,000 $ 2,550,000 (2) $ 29,325,000 Trucks $ 4,200,000 $ 1,900,000 $ 800,000 (2) $ 5,300,000 Trailers $ 2,400,000 $ 750,000 $ 200,000 (2) $ 2,950,000 Other Assets $ 1,750,000 $ 1,150,000 $ 650,000 (2) $ 2,250,000 Building $ 875,000 $ 750,000 $ 250,000 (2) $ 1,875,000 Land $ 500,000 $ 425,000 $ 1,575,000 (2) $ 2,500,000 Long Term Investments $ 4,500,000 $ $ 600,000 (2) $ 3,900,000 Other Long Term Assets $ 1,200,000 $ 1,350,000 $ 2,550,000 Patent Rights Note 1 $ $ 1,000,000 (2) $ 1,000,000 Customer List Note 2 $ $ 500,000 (2) $ 500,000 Brand Names Note 3 $ $ 2,000,000 (2) $ 2,000,000 Goodwill $ $ $ 23,883,333 (2) $ 23,883,333 Difference $ $ $ 27,558,333 (1) $ 27,558,333 $ Total Assets $ 85,683,174 $ 30,525,000 $ 113,916,507 Accounts Payable $ 7,250,000 $ 4,250,000 $ 11,500,000 Other Current Liabilities $ 3,250,000 $ 2,150,000 $ 5,400,000 Notes Payable $ 4,000,000 $ $ 4,000,000 Credit Line $ 5,000,000 $ 7,000,000 $ 12,000,000 Long Term Debt $ 5,400,000 $ 3,350,000 $ 8,750,000 Other Long Term Liabilities $ $ $ Contaminated Land Clean Up Estimate Note 4 $ 800,000 (2) $ 800,000 Employee Lawsuit Note 5 $ 100,000 (2) $ 100,000 Customer Lawsuit Note 6 $ $ $ 250,000 (2) $ 250,000 Total Liabilities $ 24,900,000 $ 16,750,000 $ 42,800,000 NCI $ 10,333,333 (1 $ 10,333,333 Common Stock (Par $.10) $ 361,600 $ 125,000 $ 125,000 (1) $ 361,600 Shares Issued and Outstanding $ 0.10 3,616,000 1,250,000 APIC $ 49,371,574 $ 11,500,000 $ 11,500,000 (1) $ 49,371,574 RE $ 11,050,000 $ 2,150,000 $ 2,150,000 (1) $ 11,050,000 Total Equity $ 60,783,174 $ 13,775,000 $ 71,116,507 Total Liabilities and Equity $ 85,683,174 $ 30,525,000 $ 113,916,507
Identify each of the company’s expenses (including cost of good sold) as either variable, fixed, or mixed.
Using the high low method, separate each mixed expense into variable and fixed elements. State the cost formula for each mixed expense.
Redo the company’s income statement at the 5,000 unit level of activity using the contribution format.
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4 12 Morris & Brown, Ltd Income Statements For the Three Months Ended September 30 July August September Sales in units 4000 4500 5000 Sales revenue A$400,000 A$450,000 A$500,000 Cost of good sold 240,000 270,000 300,000 Gross margin 160,000 180,000 200,000 Selling and administrative expenses: Advertising expense 21,000 21,000 21,000 Shipping expense 34,000 36,000 38,000 Salaries& commission 78,000 84,000 90,000 Insurance expense 6,000 6,000 6,000 Depreciate expense 15,000 15,000 15,000 Total selling& admin expens 154,000 162,000 170,000 Net operation income A$ 6000 A$ 18,000 A$30,000 (Note: Morrisey & Brown, Ltd. Australian formatted income statement has been recast in the format common in the United States. The Australian dollar is denoted here by A$.) Question: Identify each of the company’s expenses (including cost of good sold) as either variable, fixed, or mixed. Using the high low method, separate each mixed expense into variable and fixed elements. State the cost formula for each mixed expense. Redo the company’s income statement at the 5,000 unit level of activity using the contribution format. 2) 5 12 Menlo Company distributes a single product. The company’s sales and expenses for last month follow: Total Per Unit??Sales?$450,000?$30??Variable expenses?180,000?12??Contribution margin?270,000?18??Fixed expenses?216,000???Net Operating income?54,000??? What is the month break even point in units sold and in sales dollars? Without resorting to computations, what is the total contribution margin at the break even point? How many units would have to be…
Yummy Pop Ltd makes lollipops in two sizes, large and giant. The company sells these lollipops to convenience stores, fairs, schools for fundraisers, and in bulk on the Internet.
Summer is approaching and Yummy Pop is preparing its budget for the month of December 2013. The lollipops are hand made, mostly out of sugar and attached to wooden sticks. Expected sales are based on past experience.
Other information for the month of December follows:
Input prices
Direct materials
Sugar
$0.50 per kilogram (kg)
Sticks
$0.30 each
Direct manufacturing labour
$8 per direct manufacturing labour hour
Input quantities per unit of output
Direct materials
Large
Giant
Sugar
0.25 kg
0.5 kg
Sticks
1
1
Direct manufacturing labour hours (DMLH)
0.2 hour
0.25 hour
Set up hours per batch
0.08 hour
0.09 hour
Inventory information, direct materials
Sugar
Sticks
Beginning inventory
125 kg
350
Target ending inventory
240 kg
480
Cost of beginning inventory
$64
$105
Yummy Pop accounts for direct materials using a FIFO cost flow assumption.
Sales and inventory information, finished goods
Large
Giant
Expected sales in units
3000
1800
Selling price
$3
$4
Target ending inventory in units
300
180
Beginning inventory in units
200
150
Beginning inventory in dollars
$500
$474
Yummy Pop uses a FIFO cost flow assumption for finished goods inventory.
All the lollipops are made in batches of 10. Yummy Pop incurs manufacturing overhead costs, and marketing and general administration costs, but customers pay for shipping. Other than manufacturing labour costs, monthly processing costs are very small.
Yummy Pop uses activity based costing and has classified all overhead costs for the month of December as shown in the following chart:
Cost type
Denominator activity
Rate
Manufacturing:
Set up
Set up hours
$20 per set up hr
Processing
Direct manufacturing labour hours (DMLH)
$1.70 per DMLH
Non manufacturing:
Marketing and general administration
Sales revenue
10%
Required:
Prepare each of the following for December 2013:
Revenues budget
Production budget in units
Direct material usage budget and direct material purchases budget
Direct manufacturing labour cost budget
Manufacturing overhead cost budgets for processing and set up activities
Budgeted unit cost of ending finished goods inventory and ending inventories budget
Budgeted income statement.
PART 2
Go to: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=321520
http://www.bbrt.org/beyond budgeting/bb probleml
“Budgeting Gamesmanship” – posted on your site.
“Why Incentive Plans Cannot Work”—posted on your site.
Critically review the above. Do you agree, partly agree or disagree with the issues raised in the above? Discuss your reason (s) for doing so. You need to support your viewpoint with carefully chosen and authoritative evidence.
Examine the requirements for measuring assets at fair value in the following accounting standards:
IAS3/AASB 3 Business Combinations
IAS116/AASB116 Property, plant and equipment
IAS138/AASB138 Intangible assets
a. How can fair value be determined in each of the standards?
b. What impact would the differences in the methods allowed to determine fair value have on the financial reports?
c. Do you think the requirements for an active market in relation to intangibles assets is justified? What problems could occur if the active market requirement was not included for intangible assets?
Assessment criteria 1500 words max.
Excellent
(HD) Very Good
(D) Good
(C) Satisfactory
(P) Unsatisfactory
(F)
1. Introduction (10)
2. Body/Discussion (40)
Critical evaluation of topic
3. Recommendation/s (10)
Conclusion (5)
4. Examples (10)
6. Referencing, citations (5)
7. Evidence of reading, quality and quantity (10)
8. English expression, coherence, grammar and spelling. Logical flow of ideas (10)
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The Business School BUACC2603 – Corporate Accounting Semester 1, 2013 RESEARCH ASSIGNMENT Assessment weight: 25% Due Date: Week 10 Length: 1500 words Examine the requirements for measuring assets at fair value in the following accounting standards: IAS3/AASB 3 Business Combinations IAS116/AASB116 Property, plant and equipment IAS138/AASB138 Intangible assets a. How can fair value be determined in each of the standards? b. What impact would the differences in the methods allowed to determine fair value have on the financial reports? c. Do you think the requirements for an active market in relation to intangibles assets is justified? What problems could occur if the active market requirement was not included for intangible assets? Assessment criteria 1500 words max. ?Excellent (HD)?Very Good (D)?Good (C)?Satisfactory (P) ?Unsatisfactory (F)??1. Introduction (10)???????2. Body/Discussion (40) Critical evaluation of topic???????3. Recommendation/s (10) Conclusion (5)???????4. Examples (10)???????6. Referencing, citations (5)???????7. Evidence of reading, quality and quantity (10)???????8. English expression, coherence, grammar and spelling. Logical flow of ideas (10)???????
Sweet Limited, a New Zealand ice cream manufactory, is trying to develop a new flavour of ice cream. The marketing department conducted a survey in August 2011 to assess consumer preference for the best flavour(s). The survey result shows that hazel nuts toffee flavour is the most popular one in NZ and Australia. The cost of the survey is $20,000.
The production department needs to identify some possible suppliers for the hazel nuts and coffee beans used in producing toffee flavour ice cream. The traveling expenses in visiting possible suppliers and checking on quality of the raw materials amount to $30,000. These expenses were incurred during November 2011 to February 2012.
In April 2012, the production department produced some hazel nuts toffee ice cream for testing. The cost of producing these ice creams was $25,000. These ice creams are used for another marketing research. The second round research costs amount to $15,000. This time the consumers were asked to evaluate the taste and to determine how much they would like to buy it for. After a few more rounds of testing in May and June 2012, consumers show a satisfaction of the taste and they are willing to pay $8 per container (1 litre container). The cost of production is $2.5 per container. The overhead per container is $.50 cent. The marketing department estimates 1 million containers of hazel nuts toffee ice cream can be sold annually.
Sweet Limited’s balance date is 31March.
Required:
i) Discuss the accounting treatment of Research and Development costs, stating at which point the hazel nuts ice cream project should be capitalised? (Explain with reference to the applicable requirements from NZIAS 38) (3 marks)
ii) Provide journal entries for the income year 2011 and 2012 respectively. (2 marks)
Question 1 (b): Accounting for Goodwill and goodwill impairment
i) Briefly discuss the accounting treatment of purchased goodwill. (In your answer you should make reference to the relevant accounting standards) (2.5marks)
ii) Briefly explain impairment concept in relation to intangible assets, with reference to relevant accounting standards (2.5 marks)
Work in process, December 31, 2013 $ 2,400,000 Marketing, distribution, and customer service costs $108,000,000
Finished goods, January 1, 2013 $48,000,000 Purchases of direct materials $ 96,000,000
Accounts receivable, Dec. 31, 2013 $36,000,000 Direct manufacturing labour $ 48,000,000
Accounts payable, January 1, 2013 $48,000,000 Plant supplies used $ 7,200,000
Direct materials, January 1, 2013 $36,000,000 Property taxes on plant $ 1,200,000
Wong, manufacturing cost system uses a three part classification of manufacturing costs. There are two prime costs and one conversion cost: direct materials, direct manufacturing labour, and indirect manufacturing costs.
REQUIRED:
Identify the prime costs. Identify the conversion costs.
Prepare an income statement and a supporting schedule of cost of goods manufactured.
How would your answer to part 2 be modified if you were asked for a schedule of cost of goods manufactured and sold instead of a schedule of cost of goods manufactured? Be specific.
Accounting 3333.1
Assignment 1 – due May 13 – Beginning of class
PROBLEM 2 Chapter 3
The Firestone Company retails two products, a standard and a deluxe version of a luggage carrier. The budgeted income statement is as follows:
Standard Deluxe Carrier Carrier Total
Units sold 150,000 50,000 200,000
Revenues @ $20 and $30 per unit $3,000,000 $1,500,000 $4,500,000
Variable costs@ $14 and $18 per unit $2,100,000 $ 900,000 $3,000,000
Contribution margins@ $6 and $12 per unit $ 900,000 $ 600,000 $1,500,000
Fixed costs $1,200,000
Operating income $ 300,000
REQUIRED:
Compute the breakeven point in units, assuming that the planned revenue mix is maintained
Compute the breakeven point in units if
Only standard carriers are sold
Only deluxe carriers are sold
Suppose 200,000 units are sold, but only 20,000 are deluxe. Compute the operating income. Compute the breakeven point if these relationships persist in the next period. Compare your answers with the original plans and the answer in requirement 1. What is the major lesson of this problem?
Thisassignment is due the next 3 hours. Question 1 For each of the following situations, list one foundational principle or qualitative characteristic that is used in each of the following situations.
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Question 1 For each of the following situations, list one foundational principle or qualitative characteristic that is used in each of the following situations. Husky Inc. includes the activities of its subsidiaries in its financial statements. The CFO at Husky Inc. appreciates that financial information may be misrepresented or misinterpreted if all pertinent information is not included. Husky Inc. annual financial statements are audited by a public accounting firm. Husky Inc. prepares quarterly financial statements for its stakeholders. Husky Inc. assesses its ability to continue to operate for the foreseeable future. Husky Inc. allocates the cost of its property, plant and equipment over the period it expects to benefit from these assets. Husky Inc. is being sued my one of its employees who got injured while working. The lawsuit has been disclosed in the financial statements. Husky Inc. issues its quarterly financial reports within seven days after each quarter closes. Husky Inc. records revenue when risks and rewards are passed to its customer. Husky Inc. records the purchase of an intangible at its cash equivalent price. Question 2 John, the sole owner of a small accounting services company, has the following transactions during the month of January, its first month of operation. He named the company Premier Accounting Services Inc. John prepares financial statements on a monthly basis. Part A: Prepare the journal entry for each transaction. Jan 1 2013?Invested $20,000 cash and a $5,000 computer in the business in exchange for common shares. ??Jan 5?Purchased office supplies in the amount of $1,000. Husky Inc. paid cash and has a policy of initially recognizing office supplies in Supplies Inventory.??Jan 10?Performed accounting services for a customer and sent them an invoice in the amount of $2,500.??Jan 12?Hired an accounting assistant who started working on Jan 14.??Jan 15?Paid January and February’s rent in the amount of $500 per month.??Jan…
Alfred, a 33% profits and capital partner in Pizzeria Partnership, needs help in adjusting his tax basis to reflect the information contained in his most recent Schedule K 1 from the partnership. Unfortunately, the Schedule K 1 he recently received was for year 3 of the partnership, but Alfred only knows that his tax basis at the beginning of year 2 of the partnership was $23,000. Thankfully, Alfred still has his Schedule K 1 from the partnership for years 1 and 2.
Using the following information from Alfred’s year 1, year 2, and year 3 Schedule K 1, calculate his tax basis the end of year 2 and year 3.
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96. Alfred, a 33% profits and capital partner in Pizzeria Partnership, needs help in adjusting his tax basis to reflect the information contained in his most recent Schedule K 1 from the partnership. Unfortunately, the Schedule K 1 he recently received was for year 3 of the partnership, but Alfred only knows that his tax basis at the beginning of year 2 of the partnership was $23,000. Thankfully, Alfred still has his Schedule K 1 from the partnership for years 1 and 2.?Using the following information from Alfred’s year 1, year 2, and year 3 Schedule K 1, calculate his tax basis the end of year 2 and year 3.
A&A Corporation, a rapidly expanding specialist photocopier manufacturer, is in the process of formulating plans for next year. The director of marketing has completed her sales budget and is confident that sales estimates will be met or exceeded. The following budgeted sales figures show the growth expected and will provide the planning basis for other corporate departments. Budgeted sales in $ Budgeted sales in $ January February March April May June 1 800 000 2 000 000 1 800 000 2 200 000 2 500 000 2 800 000 July August September October November December 3 000 000 3 000 000 3 200 000 3 200 000 3 000 000 3 400 000 You, as a group of 4 students acting as FOUR assistant chief accountants, have been given the responsibility for formulating the cash budget, a critical element during a period of rapid expansion. The following information provided by operating managers will be used in preparing the cash budget: 1. A&A Corporation has experienced an excellent record in debtors’ collection and expects this trend to continue. 60% of billings are collected in the month after the sale and 40% in the second month after the sale. Uncollectable accounts are negligible and will not be considered in this analysis. 2. The purchase of raw materials is A&A’s largest expenditure; the cost of these items equals 50% of sales. Prior experience shows that 80% of creditors are paid by A&A one month after receipt of the purchased materials, and the remaining 20% are paid the second month after receipt. 3. Hourly wages depend on sales volume and are equal to 20% of the current month’s sales. These wages are paid in the month incurred. 4. General and administrative expenses are budgeted to be $2 640 000 for the year. The composition of these expenses is given below. All of these expenses are incurred evenly throughout the year except the property taxes. Property taxes are paid in four equal instalments in the last month of each quarter
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Qatar University College of Business and Economics Department of Accounting and Information System Management Accounting — ACCT 116 Group Project Spring 2013 SUBMISSION DEADLINE: THURSDAY 23 MAY 2013 Student Learning Outcomes: 1. Solve accounting relating problems; and 2. Work effectively in teams. A&A Corporation A&A Corporation, a rapidly expanding specialist photocopier manufacturer, is in the process of formulating plans for next year. The director of marketing has completed her sales budget and is confident that sales estimates will be met or exceeded. The following budgeted sales figures show the growth expected and will provide the planning basis for other corporate departments. Budgeted sales in $ Budgeted sales in $ January February March April May June 1 800 000 2 000 000 1 800 000 2 200 000 2 500 000 2 800 000 July August September October November December 3 000 000 3 000 000 3 200 000 3 200 000 3 000 000 3 400 000 You, as a group of 4 students acting as FOUR assistant chief accountants, have been given the responsibility for formulating the cash budget, a critical element during a period of rapid expansion. The following information provided by operating managers will be used in preparing the cash budget: 1. A&A Corporation has experienced an excellent record in debtors’ collection and expects this trend to continue. 60% of billings are collected in the month after the sale and 40% in the second month after the sale. Uncollectable accounts are negligible and will not be considered in this analysis. 2. The purchase of raw materials is A&A’s largest expenditure; the cost of these items equals 50% of sales. Prior experience shows that 80% of creditors are paid by A&A one month after receipt of the purchased materials, and the remaining 20% are paid the second month after receipt. 3. Hourly wages depend on sales volume and are equal to 20% of the current month’s sales. These wages are paid in the month incurred. 4. General and administrative expenses are…
According to Martin and Steele (2010, p.13), “The two principal professional associations in Australia – CPA Australia (the CPA) and the Institute of Chartered Accountants in Australia (the Institute) have indicated their awareness of the significance of issues of sustainability reporting and development of appropriate skill sets in word and in deed. The commitment of both organisations to sustainability principles has been shown by their adoption of, and support for, sustainability focused reporting approaches and by their opting to take up membership of the Accounting for Sustainability Forum”.
Martin A and Steele F (2010) Sustainability in Key Professions: Accounting. A report prepared by the Australian Research Institute in Education for Sustainability for the Australian Government Department of the Environment, Water, Heritage and the Arts.
In a two part essay:
Consider the above. Discuss the stance and initiatives of the Australian accounting profession on corporate social responsibility (CSR) and sustainability. Include your views on the role of accounting and the accountant on CSR and sustainability.
Discuss the way in which AGL has demonstrated its social and environmental accountability in the last two years.
NOTE: AGL has published an annual sustainability report since 2004 to communicate sustainability performance in the areas of customers, community, people, economic, climate change and environment.
Please note: good starting points for your research are: the textbook (Chapter 17); the IFAC’s International Guidance Document on Environmental Management Accounting and the websites of the CPA and ICAA. For example, go to: http://www.cpaaustralia.com.au/cps/rde/xchg/cpa site/hs.xsl/knowledge practice toolkit green accountingl
Please note the following:
Format: Essay
Contribution to overall assessment: 25%
Length: 2000 – 2500 words
Due date:??
Your work must comply with the University’s General Guide for the Presentation of Academic Work.http://www.ballarat.edu.au/current students/publications, policies and forms/general guide for the presentation of academic work
This is a group assignment. Each group needs to have 2 to 3 members in it. Please organise yourselves into groups.
Please make sure that names and ID numbers of all group members are stated on the cover sheet of your submission.
As this is a group assignment, each member of a group is awarded the same mark. Working in groups has its pros and cons. I am sure that you will hold constructive and energetic group discussions on the issues at hand. In case of any disagreements, you will be able to resolve them in a democratic and rational way. There will be times when you may have to agree to disagree with each other. Invariably different group members bring different skills to a project; it is up to you to make the best of it. I believe one can learn a lot by discussing the issues with one’s colleagues.
If you happen to find your group members are “not pulling their weight” or there are problems with any member’s commitment, then please try to resolve those issues amongst yourselves. Open and honest communication always helps. If you are unable to resolve these issues, you are most welcome to see me and we will try to sort out the problems together. Do this as soon as possible and certainly before the due date. (Please adapt this to suit your group). Best wishes Geeta
BUACC2614, Management Accounting 2
Semester 1, 2013
Group Assignment
Bases of assessment
HD P F
Content Identification of relevant issues. Research Selection of relevant material. A demonstration of critical evaluation of the material. Expression of your viewpoint (and not a catalogue of quotes/ others’ ideas).
Expression clarity, style (formal and academic), coherence in writing, grammar, punctuation, spellings and sentence structure. A logical flow of argument at both the paragraph level and the overall text level. Use of supporting arguments. Use of literature to support the argument.
Structure – Synopsis (stated the topic, reflected main arguments and identified conclusions reached). Introduction (clearly stated the essay question; outlined the plan for answering the question). Discussion in appropriately linked sections and paragraphs. Conclusion (no new material; reiterated the main line of argument).
Referencing procedure (within the text, and at the end of the text). Appropriately styled and punctuated bibliography.
Overall Presentation – including cover page, line spacing, page numbering.
Prepare a statement of comprehensive income (single statement format), a statement of financial position and a statement of changes in equity suitable for publication, including notes relevant to the financial statements where data are available. Round amounts to the nearest $1000.
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1 AF210 Financial Accounting Semester 1 2013 Assignment 2 (7.5%) 1. Due Date: Wednesday 29th May in the Lecture and on Moodle. Penalty at 10% per day. 2. Must be word processed, not hand written, word size 12 with ‘Times new roman’ font type and double spacing. 3. Each answer must be clearly marked by the designated question to which it corresponds. 4. Please list any references (books, articles, web based material) you use at the end of your assignment in alphabetical order, using the referencing style seen in academic articles (i.e. with in text references and bibliography, as in the Harvard referencing style). Question 1 The trial balance of Ace Limited at 30 June 2013 is as follows: $000 $000 Sales revenue 1,170 Dividend revenue 20 Revenue – sale of non current assets 150 Wages and salaries 250 Long service leave expense 15 Cost of goods sold 240 Depreciation expense – motor vehicles 10 Depreciation expense – buildings 10 Depreciation expense – plant 65 Expense – carrying amount of non current asset sold 100 Interest paid 65 Audit fees 35 Doubtful debts expense 30 Motor Vehicles 80 Cash at Bank 45 Land 535 Buildings 850 Plant 600 Accounts Receivable 90 Inventory – finished goods 100 Inventory – work in progress 40 Goodwill 75 Bills payable 50 Accounts payable 90 Accumulated depreciation – motor vehicles 24 Accumulated depreciation – plant 200 Accumulated depreciation – buildings 70 Accumulated impairment – goodwill 5 Provision for long service leave 75 Estimated uncollectible debts 10 Debentures 80 Unsecured notes 250 Paid up capital 750 Asset revaluation reserve 140 General reserves 70 2 Retained profits 191 Final dividends paid 9 Oct 2012 75 Interim dividends paid 10 April 2013 35 3,345 3,345 Other information: ? Income tax expense for the year amounted to $135,000. Income tax has not been paid to FIRCA as at balance date. ? Land is the only class of property, plant and equipment recognised using the revaluation model. It was revalued by an increment of…
The Pua Cheesecake Company supplies cheesecakes to three large supermarket chains throughout Australia. Management has become concerned about the rising costs associated with the processing and dispatch of orders. An activity analysis of the overhead identified the following customer related costs:
REQUIRED:
(a) Calculate the activity cost rate for each activity
(b)Assign the activity costs to each of the three customers
(c)Calculate the operating profit for each customer if the sales pattern for each is as follows: Customer 1 $300 000; Customer 2 $150 000; Customer 3 $200 000
(d)Advise the management of the Pua Cheesecake Company as to whether any changes should be made in its relationships with customers
TTACHED QUESTION
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Semester 1 2012 613A Prepare and Analyse Management Accounting Information Question 1 ACTIVITY BASED COSTING The Cheesecake Company supplies cheesecakes to three large supermarket chains throughout Australia. Management has become concerned about the rising costs associated with the processing and dispatch of orders. An activity analysis of theoverhead identified the following customer related costs: Required Calculate the cost rate for each activity Calculate the cost of each activity for the three supermarkets Question 2 STANDARD COSTING Lux Pty Ltd produces a single product, The company uses a standard costing system. Based on producing 15500 units of product per month, the standard cost specification forone unit of product is as follows: The Standard Cost $ Direct Material 5kg @ $0.25 per kg 1.25 Direct Labour 40 minutes @ $12.00 per hour 8.00 Factory overhead 1.5 hours @ $16.00 per machine hr24.00 33.25 The standard variable factory application rate was $10.00 per machine hour. Actual results for July were: Materials purchased 80,000kg at a cost of $19,200 Materials issued to production (used in production) 73,800kg Direct Wages paid 9,950 hours at $11.85 per hour Actual machine hours 22,200 Actual Factory Overhead incurred $310,750 Actual production 15,350 units of product Materials Price variance is based on issued material(not on purchased material) Required: Calculate all seven variances, and the Total Direct Material, Direct Labour and Overhead Variances.
RESEARCH ASSIGNMENT Length: 1500 words Examine the requirements for measuring assets at fair value in the following accounting standards: IAS3/AASB 3 Business Combinations IAS116/AASB116 Property, plant and equipment IAS138/AASB138 Intangible assets How can fair value be determined in each of the standards? What impact would the differences in the methods allowed to determine fair value ?have on the financial reports? Do you think the requirements for an active market in relation to intangibles assets is ?justified? What problems could occur if the active market requirement was no
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RESEARCH ASSIGNMENT Length: 1500 words Examine the requirements for measuring assets at fair value in the following accounting standards: IAS3/AASB 3 Business Combinations IAS116/AASB116 Property, plant and equipment IAS138/AASB138 Intangible assets How can fair value be determined in each of the standards? What impact would the differences in the methods allowed to determine fair value ?have on the financial reports? Do you think the requirements for an active market in relation to intangibles assets is ?justified? What problems could occur if the active market requirement was not included for intangible assets? Assessment criteria 1500 words max. ?Excellent (HD) ?Very Good (D) ?Good (C) ?Satisfactory (P) ?Unsatisfactory (F) ??1. Introduction (10) ???????2. Body/Discussion (40) Critical evaluation of topic???????3. Recommendation/s (10) Conclusion (5) ???????4. Examples (10) ???????6. Referencing, citations (5) ???????7. Evidence of reading, quality and quantity (10) ???????8. English expression, coherence, grammar and spelling. Logical flow of ideas (10) ??????? PLAGERISM WILL BE MARKED ZERO.
PRINCIPAL OF FINANCIAL MARKETS The objective of this assignment is to assess the investment conditions in the Australian economy form Top Down Fundamental Analysis. Students should proceed to the Reserve Bank Website: http://www.rba.gov.au/chart pack/ From here you can down load graphs of key economic indicators. Then using these graphs analyse the recent history of the Australian stock market and form a prediction as to the investment conditions in the current Australian stock market.
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PRINCIPAL OF FINANCIAL MARKETS The objective of this assignment is to assess the investment conditions in the Australian economy form Top Down Fundamental Analysis. Students should proceed to the Reserve Bank Website: http://www.rba.gov.au/chart pack/ From here you can down load graphs of key economic indicators. Then using these graphs analyse the recent history of the Australian stock market and form a prediction as to the investment conditions in the current Australian stock market. The indicators must include the following: World Economy GDP Growth World Australian GDP Growth and Inflation Australian GDP Growth Consumer Price Inflation Interest Rates Australian Bond Yields Exchange Rates, Australian Dollar vs.: US Dollar, Euro and Yen You should be looking at these indicators and comparing them to what happened to the stock market shortly after. In your analysis include a definition and/or background information on each indicator that you are analyzing. At the end of your report state your conclusion as to whether or not your analysis shows that current investment conditions in the Australian stock market are favorable. Report Required: Prepare a report of no more than 10 pages outlining the above analysis and the selection of the resulting portfolio. Marks will be given for content not for length. Anything over 10 pages will not be marked. Resources available You should use the RBA website; this will give you easy access to graphs and reports on the Australian and world economies. You may also access additional information via the ‘Australian Financial Review’ newspaper or website, finance.yahoo.com; finance.google.com; Bloomberg.com; ft.com, http://www.asx.com.auwww.asx.com.au, www.afr.com.au. Notes: 1. Marks will be rewarded for in depth analysis. 2. A good place to start would be re reading Principals 4 investing in equity and chapter 7 of the textbook. 3.When writing the report, imagine that your audience are people that know…
Required: 1) Visualise the computer data entry screens that could be used to capture data for the following business events in Mike’s business: a) Adding a new “member” (so they are able to hire movies) b) Adding a new “movie” (so it can be hired by members) c) Rental of “movies” (this screen could include a listing of multiple movies as a customer may hire several movies at a time) d) Return of rented “movies” (once again, this screen could include a listing of multiple movies). Draw a representation of one of these data entry screens (indicate to which of the business events, a, b, c, or d, your screen relates) 2) List the “data attributes” you think you would need to capture/store for each of these four business events. What entities do you think would be involved in these business events? Allocate the data attributes to these entities (tables). (Note: I expect that, at this stage, your tables may have “issues” in terms of their “logical” structure; that is, the tables have not yet been “normalized”.) 3) List your tables (from requirement 2) using the notation method shown to you during class. Normalise these tables to third normal form (3NF), explaining in detail each step in the process that you have undertaken in reaching your set of 3NF tables. 4) Based upon the 3NF tables that you have produced above, present the logical data structure for your database as a Data Structure Diagram using the notation method shown to you during class. 5) For three (3) possible reports (*) that could be generated from your “logical” database design, explain: a) what information you would include on that report b) in general terms, the purpose of that report, and c) how you have used the “links” between the tables in your database to extract the required information for that report. Note: (*) one report might be a daily listing of sales events!
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DEPARTMENT OF ACCOUNTING AND FINANCE FACULTY OF BUSINESS AND ECONOMICS MONASH UNIVERSITY AFW2851– Accounting Information Systems & Financial Modelling Assignment – Semester 1, 2013 Submission: Students may either complete this assignment individually, or in groups of TWO students only (definitely not in a group of 3) with one joint submission (in the latter case, with two signed assessment cover sheets attached to the front of the assignment). Assessment Value: 10% of subject assessment Word limit: N/A (although, I don’t expect students to be writing more than 1200 words, given that diagrams etc. are to be submitted) th Due Date: To be submitted by 4pm on Mon 20 May 2013 (week 11). Presentation standard: A Faculty of Business and Economics “Assessment Cover Sheet” is to be completed and attached to the front of your assignment by each member of your group. Only one submission is required for each group. Your assignment is to be typed with one and a half spacing. You should also include a bibliography (see note at end of question). Note: The assessment cover sheet is available under the “Forms” banner at: http://www.buseco.monash.edu.au/student/ Mike’s Movie Magic Mike has been operating a small sole trader “hire” business for movies on DVDs and blue ray disks (with customers visiting his store to physically hire DVDs and blue ray disks). Since opening his business three months ago, the “membership” (customers) of his business has grown rapidly and he is now struggling to keep track of the “hires” on a spreadsheet based system. Mike currently has approximately one thousand DVD and blue ray disks in his store and has multiple copies of many movies. When studios release new movies that Mike thinks will be popular for hire he typically will purchase ten to fifteen copies of the same movie across DVD and blue ray formats. Mike charges the same rate for DVD and blue ray hire, and has three categories of hire: ?…
Some of the information found on a detail inventory card for Slatkin Inc. for the first month of operations is as follows.
Received
Date # of units unit cost issued # of units balance, # of units
January 2 1,650 $3.91 1,650
January 7 1,150 500
January 10 1,050 $4.17 1,550
January 13 950 600
January 18 1,450 $4.30 750 1,300
January 20 1,100 200
January 23 1,750 $4.43 1,950
January 26 1,250 700
January 28 2,050 $4.56 2,750
January 31 1,750 1,000
From these data compute the ending inventory on each of the following bases. Assume that perpetual inventory records are kept in units only. (1) First in, first out (FIFO). (2) Last in, first out (LIFO). (3) Average cost.
FIFO LIFO Average Cost
Ending Inventory $ ??? $ ??? $ ???
If the perpetual inventory record is kept in dollars, and costs are computed at the time of each withdrawal, what amount would be shown as ending inventory under (1) FIFO, (2) LIFO and (3) Average cost?
An investor is comparing the following two bonds: a bond from ABC Corp which pays an interest rate of 9 percent per year and a municipal bond which pays an interest rate of 7.9 percent per year. The investor is in the 15 percent tax bracket. Which bond will give the investor a higher after tax interest rate and for which reason?
a) the ABC bond because it pays a 9 % interest rate, while the municipal pays 7.9%.
b)the ABC bond because it pays an equivalelnt after tax rate of 10.6%, while the municipal bond pays out an equivalent after tax rate of 9.3%.
c)the municipal bond because it pays an equivalent after tax rate of 9.3 percent, while the ABC bond pays out a 9 percent interest rate.
d) the municpal bond because it pays an equivalent after tax rate of 7.9%, while the ABC bond pays out an equivalent after tax rate of 7.65%.
IPER, INC. Condensed Balance Sheets December 31, 2014, 2013, 2012 (in millions)
2014
2013
2012
Current assets
$
679
$
898
$
743
Other assets
2,414
1,921
1,720
$
3,093
$
2,819
$
2,463
Current liabilities
$
563
$
804
$
711
Long term liabilities
1,522
988
833
Owners’ equity
1,008
1,027
919
$
3,093
$
2,819
$
2,463
WIPER, INC Selected Income Statement and Other Data For the year Ended December 31, 2014 and 2013 (in millions)
2014
2013
Income statement data:
Sales
$
3,051
$
2,914
Operating income (EBIT)
297
311
Interest expense
85
66
Net income
194
189
Other data:
Average number of common shares outstanding
41.4
46.8
Total dividends paid
$
51.0
$
52.4
a. Calculate return on investment, based on net income and average total assets, for 2014 and 2013.
b. Calculate return on equity for 2014 and 2013
c. Calculate working capital and the current ratio for each of the past three years. d. Calculate earnings per share for 2014 and 2013. e. If Wiper’s stock had a price/earnings ratio of 13 at the end of 2014, what was the market price of the stock? f. Calculate the cash dividend per share for 2014 and the dividend yield based on the market price calculated in part e . g. Calculate the dividend payout ratio for 2014.
h. Assume that accounts receivable at December 31, 2014, totaled $309 million. Calculate the number of days’ sales in receivables at that date.
i. Calculate Wiper’s debt ratio and debt/equity ratio at December 31, 2014 and 2013.
j. Calculate the times interest earned ratio for 2014 and 2013.
Jackie Chin Waste Management has a subsidiary that disposes of hazardous waste and a subsidiary that collects and disposes of residential garbage. Information related to the two subsidiaries follows:
Hazardous
Residential
Waste
Waste
Total assets
$12,000,000
$72,000,000
Noninterest bearing current liabilities
3,000,000
12,000,000
Net income
1,700,000
6,000,000
Interest expense
1,250,000
2,300,000
Required rate of return
8%
10%
Tax rate
35%
40%
Based on the limited information, which subsidiary is the best candidate for expansion? Answer
A.
Hazardous waste, because it has a higher residual income.
B.
Hazardous waste, because it has a higher return on investment
C.
Residential waste, because it has a higher residual income.
D.
Residential waste, because it has a higher return on investment
James Inc. is a computer software consulting company. Its three major functional areas are computer programming, information systems consulting, and software training. Kathy Coward, a pricing analyst in the Accounting Department, has been asked to develop total costs for the functional areas. These costs will be used as a guide in pricing a new contract. In computing these costs, Coward is considering three different methods of allocating overhead costs the direct method, the step method, and the reciprocal method. Coward assembled the following data on overhead from its two service departments, the Information Systems Department and the Facilities Department.
Information systems is allocated on the basis of hours of computer usage; facilities are allocated on the basis of floor space. Required: Allocate the service department costs to the user departments using the step method. Allocate Information Systems first and round to the nearest dollar. Provide total user department costs.
Account Balance and Financial Statement Classification Exercise
Summer 2013
For each of the following accounts, state its normal balance (debit or credit) and its category on a company’s classified financial statements as follows:
Current assets CA
Long term investments LTI
Property, plant and equipment PPE
Intangible assets IA
Current liabilities CL
Long term liabilities LTL
Stockholders’ equity SE
Sales Sales
Cost of goods sold CGS
Selling expenses Sell Ex
Administrative expenses Adm Ex
Other revenues and gains OR
Other expenses and losses OE
Income tax expense ITE
If the account is a contra account, place brackets around the account name. Assume the company is a retail store and has a December 31, 2012 year end.
Account
Normal Balance (DR or CR)
Financial Statement Classification
Accounts payable
Accounts receivable
Accumulated depreciation
Additional paid in capital in excess of par – common stock
Additional paid in capital in excess of par – preferred stock
The objective of this assignment is to assess the investment conditions in the Australian economy form Top Down Fundamental Analysis.
Students should proceed to the Reserve Bank Website:
http://www.rba.gov.au/chart pack/
From here you can down load graphs of key economic indicators. Then using these graphs analyse the recent history of the Australian stock market and form a prediction as to the investment conditions in the current
Australian stock market.
The indicators must include the following:
World Economy
GDP Growth World
Australian GDP Growth and Inflation
Australian GDP Growth
Consumer Price Inflation
Interest Rates
Australian Bond Yields
Exchange Rates, Australian Dollar vs.:
US Dollar, Euro and Yen
You should be looking at these indicators and comparing them to what happened to the stock market shortly after. In your analysis include a definition and/or background information on each indicator that you are analyzing. At the end of your report state your conclusion as to whether or not your analysis shows that current investment conditions in the Australian stock market are favorable. Report Required: Prepare a report of no more than 10 pages outlining the above analysis and the selection of the resulting portfolio. Marks will be given for content not for length. Anything over 10 pages will not be marked. Resources available You should use the RBA website; this will give you easy access to graphs and reports on the Australian and world economies. You may also access additional information via the ‘Australian Financial Review’ newspaper or website, finance.yahoo.com; finance.google.com; Bloomberg.com; ft.com, www.asx.com.au, www.afr.com.au. Notes: 1. Marks will be rewarded for in depth analysis. 2. A good place to start would be re reading Principals 4 investing in equity and chapter 7 of the textbook. 3.When writing the report, imagine that your audience are people that know nothing about finance or the financial markets. At each stage you will need to carefully explain what do are analysing and why. Do not think that just because your lecturer will know what this indicator means that you do not have to define it. Please be aware of PLAGERISM and COPYRIGHT rules. Do NOT just include in your report pages of printouts from the RBA website or you will receive ZERO marks. You must reference, see the guide in the Additional Readings folder on Blackboard. Assignment Marking Guide Introduction Introduction (1 mark) Overview of the Australian economy (1 mark) Fundamental Analysis Top down analysis o Data gathering and presentation (6 marks) o Analysis (10 marks) Conclusion Is the Australian share market good to invest in currently? Why; this must be related back to the analysis and explanation! (2 marks)
Schubert, Mahler and Tull are resident Australian seamen employed on the fishing trawler
MV St Cecilia. Whilst on a routine fishing operation the captain of St Cecilia heard a radio message that SS Titan, an abandoned oil tanker about 20 nautical miles to the south was drifting towards the Australian coast. The vessel was badly holed, leaking oil and with present currents and tidal situations it was drifting towards a coral reef a short distance from a stretch of environmentally sensitive coastline. If the tanker wrecked on the reef the environmental and economic consequences would be enormous.
The captain sailed to the reported position of the stricken tanker. In the rough sea, the crew were unsuccessful in their attempt to attach a tow line. The captain then called for volunteers prepared to risk their lives in boarding the vessel and securing a tow line manually. Schubert and Mahler had previously worked on a salvage vessel and had some experience in operations of this type and they volunteered immediately. They displayed considerable bravery in swimming through rough seas, boarded the tanker and fixed a line. The heroic feat was recorded on video by Tull.
Once the line was secure, St Cecilia towed the tanker away from the coastline and it was subsequently salvaged by the tug, Resurrection.
Both Schubert and Mahler were awarded an Order of Australia medal by the Australian Government and $100,000 each from Lloyds of London, the insurer of Titan, who had been saved a billion dollar payout.
In addition, Mahler entered into a contract to write an article for a magazine. He was paid $20,000 and an additional $10,000 for signing an agreement not to give interviews on television or to journalists.
Schubert was offered $10,000 for his OA medal. He was in poor health at the time and required medical treatment so accepted the payment.
Tull sold the video to Channel 9 for $8,000 and it was shown exclusively on that station throughout Australia. Later that year he was paid $50,000 to travel to the USA to provide technical advice on a proposed telemovie of the event tentatively entitled ‘Aqualung’. He plans to stay in the US indefinitely and pursue other filmmaking opportunities.
Required 1. [Approximately 40% of marks]
Explain what is meant by ‘income by ordinary concepts’.
Advise what tax consequences arise in respect of the payments to Mahler, Schubert and Tull.
You must refer to appropriate case law and applicable sections of the Income Tax Acts.
Purpose of the meeting? Why are they holding this meeting?
The purpose e of the second (week 2) meeting was to finalise which two topics each individual chose to discuss about later in the tutorial. Members during this meeting also discussed on how to contact each other encase someone has changed their topic in the meantime.
What type of meeting is this?
This was a formal meeting held in one of the library rooms. This is because the meeting was strictly held to formally discuss issues set.
Who will need to attend the meeting?
Week 2 meeting was held in the library and each member of the group attended (Denis, Josh and Jake, Daniel). It is very essential as we need to discuss any changes within the topics chosen prior.
Assign roles to group members (E.G. Chairperson, Secretary, members, minute taker, researchers etc.
For week one Daniel was the chairperson
The secretary person was Denis
The members was Josh
And Jake was the minute taker and researchers.
What is the agenda? List of items to be discussed?
The agenda of the meeting was to communicate effectively within the time we booked in the library. It was formally to discuss on the topics each person has chosen and to agree or disagree on whether it would be a suitable topic for the presentation. The issue also that was briefly discussed was on our timing. We needed each member to participate effectively within limited time to allow others to manage their slides in time for the other.
Are there any items that need approval? · Does a motion or vote need to be conducted on any actions? What is the process for this?
The approvals that needed attention was the topics each person has chosen, We briefly disagreed on some topics that were inappropriate within the list.
How would you set up this meeting? (round table, long rectangular seating, U shaped)
The meeting was held in the library room at City West Campus. It was booked only for our group member. There was a large square table for us to use with the ability to use only one computer which was also available. .
How long should this meeting go for? List of Actions for each member
The duration of the meeting was only for one hour as it did not need any more time. It was basically to give each member a topic to write and discuss about within their slide of the presentation later.
Schedule next meeting
Next meeting will also be held on Thursday in the same location for duration of one hour only. This is because it should be the time we need finalise the presentation and add all things together as a group, However, note this may change.
Business Ethics Loren Vranich, a doctor practicing under the corporate name Family Health Care, P.C., entered into a written employment contract to hire Dennis Winkel. The contract provided for an annual salary, insurance benefits, and other employment benefits. Another doctor, Dr. Quan, also practiced with Dr. Vranich. About nine months later, when Dr. Quan left the practice, Vranich and Winkel entered into an oral modification of their written contract whereby Winkel was to receive a higher salary and a profit sharing bonus. During the next year, Winkel received the increased salary. However, a disagreement arose, and Winkel sued to recover the profit sharing bonus. Under Montana law, a written contract can be altered only in writing or by an executed oral agreement. Dr. Vranich argued that the contract could not be enforced because it was not in writing. Does Winkel receive the profit sharing bonus? Did Dr. Vranich act ethically in raising the defense that the contract was not in writing? Winkel v. Family Health Care, P.C., 205 Mont. 40, 668 P.2d 208, Web 1983 Mont. Lexis 785 (Supreme Court of Montana) 10.7 ? HYPERLINK “http://online.vitalsource.com/books/9781256088080/content/id/pglossary 5” ?Acceptance? Peter Andrus owned an apartment building that he had insured under a fire insurance policy sold by J. C. Durick Insurance (Durick). Two months prior to the expiration of the policy, Durick notified Andrus that the building should be insured for $48,000 (or 80 percent of the building’s value), as required by the insurance company. Andrus replied that (1) he wanted insurance to match the amount of the outstanding mortgage on the building (i.e., $24,000) and (2) if Durick could not sell this insurance, he would go elsewhere. Durick sent a new insurance policy in the face amount of $48,000, with the notation that the policy was automatically accepted unless Andrus notified him to the contrary. Andrus did not reply. However, he did not pay the premiums on…
1. How do changes in volume affect the break even point?
2. What important information is conveyed by the margin of safety calculations in CVP analysis?
3. Why are fixed costs generally more relevant in long run decisions than short run decisions?
4. What is the relationship between scarce resources and an organization’s production capacity?
5. What are some factors that a company must consider when deciding to raise or lower sales prices on products?
6. Caron Company produces and sells two products: A and B in the ratio 3A to 5B. Selling prices for A and B are respectively, $1,200 and $240; respective costs are $480 $160. The company fixed costs are $1,800,000 per year.
Compute the volume of sales in units of each product needed to:
Required:
a. break even
b. earn $800,000 of income after income taxes, assuming a 30 percent tax rate.
c. earn 12 percent on sales revenue in before tax income.
d. earn 12 percent on sales revenue in after tax income, assuming a 30 percent tax rate.
7. Whitmore Corporation predicts it will produce and sell 40,000 units of its sole product in the current year. At that level of volume, it projects a sales price of $30 per unit, a contribution margin ratio of 40 percent, and fixed costs of $5 per unit.
Refer to Whitmore Corporation. What is the company’s projected breakeven point in dollars and units?
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1. How do changes in volume affect the break even point? 2. What important information is conveyed by the margin of safety calculations in CVP analysis? 3. Why are fixed costs generally more relevant in long run decisions than short run decisions? 4. What is the relationship between scarce resources and an organization’s production capacity? 5. What are some factors that a company must consider when deciding to raise or lower sales prices on products? 6. Caron Company produces and sells two products: A and B in the ratio 3A to 5B. Selling prices for A and B are respectively, $1,200 and $240; respective costs are $480 $160. The company fixed costs are $1,800,000 per year. Compute the volume of sales in units of each product needed to: Required:?a. break even b. earn $800,000 of income after income taxes, assuming a 30 percent tax rate. c. earn 12 percent on sales revenue in before tax income. d. earn 12 percent on sales revenue in after tax income, assuming a 30 percent tax rate. 7. Whitmore Corporation predicts it will produce and sell 40,000 units of its sole product in the current year. At that level of volume, it projects a sales price of $30 per unit, a contribution margin ratio of 40 percent, and fixed costs of $5 per unit. Refer to Whitmore Corporation. What is the company’s projected breakeven point in dollars and units?
Assignment File 1Assignment 1Due date: 31 May 2013Question 1 (30 marks)Read the following article, which is an extract from a press release by the Hong Kong Institute of CPAs, titled ‘Hong Kong Institute of CPAs’ budget submission asks government to use tax policies and budget measures to help families and lower income groups and boost support for SMEs and overall business competitiveness,’ and then answer the questions required.Hong Kong Institute of CPAsHong Kong, 10 January 2013The Hong Kong Institute of CPAs says that, financially, Hong Kong remains in a sound position. The Institute expects a budget surplus in excess of HK$25 billion for 2012–13 and fiscal reserves of about HK$695 billion by 31 March 2013. In its budget proposals for 2013–14, it calls on the government to offer more help to families and to increase the city’s international competitiveness.According to the Institute’s submission, one of the main concerns of the city’s taxpayers is keeping up with rising costs. The proposal suggests a range of measures to help families and individuals, including widening the marginal tax bands from HK$40,000 to HK$50,000, increasing child allowances from HK$63,000 to HK$70,000, allowing deductions for voluntary MPF contributions with an annual cap of HK$60,000, allowing deductions for private healthcare insurance premiums with an annual cap of HK$12,000, offering a rental payment deduction as an alternative to the home loan interest deduction, adjusting the price thresholds of different stamp duty rates in line with property price inflation, providing a waiver on property rates of up to HK$2,500 per quarter, and an electricity subsidy of HK$1,800 for the coming year.Florence Chan, chair of the Institute’s taxation faculty executive committee, says, ‘Lower and middle income groups face continuing pressure from rising costs. The Institute’s proposal would give a helping hand to families with children and other dependants, in relation to significant costs such as education, housing and health care. Families are the building blocks of the Hong Kong community and the heart of future generations, so tax measures devised to assist them should always be a priority,’ she adds.2 ACT B414 Taxation IThe Institute’s proposals also call for tax incentives focusing on the city’s international competitiveness. The recommendations include: a reduction of the corporate profits tax rate to 15% for companies with gross income not exceeding HK$2 million, a tax waiver on assessable profits up to HK$500,000, a business registration fee waiver, an extension of the profits tax exemption for offshore funds and exemptions for onshore funds meeting specific criteria, an extension of tax deductions for research and development and intellectual property usage, and tax concessions for regional headquarters and offices.
Required:a Discuss the objectives of a good tax system and the characteristics it should possess. (20 marks)b Comment on the proposals as submitted by the HKICPA and evaluate whether they are desirable or undesirable in terms of the ideal objectives and characteristics of a good tax system. (10 marks)Question 2 (30 marks)Mr Leung has been an active investor in properties in Hong Kong. In addition to his home in Causeway Bay, he owns the following three properties:Hung Hom flatThe Hung Hom flat was first rented to Ms Lam and subsequently to Mr Pok. The details of the leases are as follows:• Lease to Ms Lam: The lease was for a three year period from 1 January 2009 to 31 December 2011. The agreed rent was for $20,000 per month with Mr Leung being responsible for the rates of $2,500 per quarter and the management fee of $1,000 per month. However, Ms Lam vacated the property early on 31 May 2011 with four months of rent in arrears. In November 2011, Mr Leung found out that Ms Lam had gone to Shanghai and the Assessor was satisfied that the debt became irrecoverable. Mr Leung did not ask for any rental deposit at the time of signing the lease.• Lease to Mr Pok: The lease was for a five year period from 1 July 2011 to 30 June 2016. The agreed rent was for $15,000 per month. Mr Leung agreed to the lower monthly rent on condition that Mr Pok paid an initial premium of $60,000. Also, after his previous unhappy experience with Ms Lam, Mr Leung demanded a rental deposit of $30,000 from Mr Pok. He also required that Mr Pok pay the rates of $2,500 per quarter and the management fee of $1,000 per month. Mr Leung incurred repairs and decoration expenses of $30,000 in June 2011 prior to handing over the flat to Mr Pok.Assignment File 3Chai Wan flatThis property has been occupied by Mr Leung’s son since Mr Leung bought the property in 2009. His son contributed $30,000 a year to Mr Leung for Mr Leung’s living expenses for the years of assessment 2010/11 and 2011/12 respectively.Shenzhen flatThis property has been rented out to Mr Lee, a Hong Kong resident, at a monthly rent of HK$8,000 since 2009. The tenancy agreement was negotiated and signed in Hong Kong, and Mr Lee paid the monthly rent directly into Mr Leung’s bank account in Hong Kong. The monthly management fee of RMB$200 and other charges were paid by Mr Lee.Required:a Determine the Hong Kong property tax liabilities for Mr Leung for the years of assessment 2010/11 and 2011/12. Ignore provisional property tax and any tax waiver or refund. The standard tax rate for years of assessment 2010/11 and 2011/12 is 15%. (15 marks)b Provide a brief comment on the treatment of significant items where appropriate. (5 marks)c In December 2012, Mr Pok ran into financial difficulty and negotiated with Mr Leung on whether he could sublet part of the flat to relieve his financial burden. Mr Leung agreed. Explain whether Mr Pok would be chargeable to property tax in doing so and include in your answer the definition of ‘owners’ under Hong Kong property tax. (10 marks)Question 3 (25 marks)Fireplace Restaurant is a well established restaurant solely owned by Mr Lam. It makes up its accounts to 31 December annually.During the two years ended 31 December 2012, Fireplace Restaurant had the following transactions in respect of plant and machinery:i Tax written down values brought forward from year of assessment 2010/11:10% pool 100,00020% pool 200,00030% pool 300,000ii 1 February 2011 — Purchased additional tables and chairs for $360,000.4 ACT B414 Taxation Iiii 2 March 2011 — Installed a new air conditioning plant on hire purchase terms as follows:Cash price: $2,000,000Down payment: 10%Balance: by 12 equal monthly installments of $160,000 commencing 2 April 2011.iv 31 March 2011 — Sold an old air conditioning plant for $10,000. The plant was purchased in 2001 for $400,000 on hire purchase terms, with all instalments completely paid in early 2003.v 15 May 2011— Replaced kitchen utensils, crockery and cutlery for $180,000.vi 1 September 2011 — Sold a bunch of assets in the 30% pool for $75,000. The proceeds of the individual assets were all less than their respective costs, except for a washer, which was bought in 2009 for $4,000, and was sold for $5,000.vii 10 January 2012 — The sole proprietor, Mr Lam, donated his private car for the exclusive use of the business. The car was acquired in May 2010 for $250,000. Its second hand value as at 10 January 2012 was $70,000.viii 12 February 2012 — Mr Lam took some furniture for his personal use. The furniture was purchased for $25,000 three years ago and had a market value of $7,600 as at 12 February 2012.Required:In accordance with the relevant provisions of the Inland Revenue Ordinance, determine the depreciation allowances to which Mr Lam’s business, Fireplace Restaurant, is entitled for the years of assessment 2011/12 and 2012/13.Question 4 (15 marks)Mr Orlando is a US citizen and has been working in the Finance Department of Clever Inc. in Los Angeles since 2008. In April 2012, he was relocated to the Hong Kong office as the regional financial controller. In his new role, he has to travel to other Asian countries on a regular basis to review the financial and related matters. The Hong Kong subsidiary of Clever Inc. did not sign a new employment contract with him but did provide him with administative and support services he needed in carrying out his responsibilities. Mr Orlando’s salary was deposited into his bank account opened in Hong Kong right after his arrival in Hong Kong. Mr Orlando continues to work closely with his superior in the US on important direction and policy matters.Assignment File 5Required:a State the factors which are used by the IRD in determining the source of employment and discuss whether Mr Orlando’s employment should be considered as a Hong Kong employment or not. (10 marks)b Explain the significance of the source of employment in terms of taxability of employment income under Hong Kong salaries tax. (5 marks)
There are two questions and for both questions word limit is around 700 800.
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Case title: FTG Ltd Requirements: Read the case study and answer the following question. You need to show all your workings in table format whenever applicable. Identify clearly the question number that your answer is related to. Marks will be deducted for poorly set out or unclear presentation. Please print on one side of the paper only and use a font size of 12 and insert page numbers. Please use Word tables and not Excel worksheets. 1. Analyse the activity based system designed by Anne Abbott: (a) What are its strengths and weaknesses? (b) What changes would you make to it and why? 2. Would you recommend that FTG Ltd implement the activity based cost system (after making any modifications you recommended in your answer to question 1)? Justify your recommendation. marks) Case study — FTG Ltd The new C300 is currently budgeted to sell through the mass merchandiser chains for about $150 retail. I think this price is too high. We will only sell about 50,000 units a year at that price. I think we should drop our selling price from $90 to $80, and allow the merchandisers to drop their retail price to just under $135. At that price we should sell at least 40% more units, and since the variable cost is about $50, our overall profits will be higher. JIM BRUSH, SALES MANAGER I’m not sure we really know what our products cost. I would like to really make certain that we are making a profit at $80 before I agree to drop our price, because we will not be able to change prices again in the near future. JACK BRUSH, PRESIDENT Introduction The FTG Ltd a Victorian manufacturer of fireproof home and office safes, was founded in 1931 to produce insulated metal office safes. Over the years, additional metal products, including containers, files, and smaller safes, were introduced. Many of these products were aimed at the consumer as opposed to the office market. In 1994, a completely new class of products manufactured out of plastic was introduced. Due to their ease of…
Phillips Supply uses a periodic inventory system but needs to determine the approximate amount of inventory at the end of each month without taking a physical inventory. Phillips has provided the following inventory data:
Cost Price
Retail Selling Price
Inventory of merchandise, June 30
$
294,000
$
495,000
Purchases during July
222,000
402,000
Goods available for sale during July
$
516,000
$
897,000
Net sales during July
$
370,000
a.
Estimate the cost of goods sold and the cost of the July 31 ending inventory using the retail method of evaluation. (Round yourintermediate calculations to 4 decimal places.Omit the “$” sign in your response.)
The balance sheet of Phototec, Inc., a distributor of photographic supplies, as of May 31 is given below:
Phototec, Inc.
Balance Sheet
May 31
Assets
Cash $ 10,800
Accounts receivable 72,000
Inventory 36,000
Buildings and equipment, net of depreciation
601,200
Total assets $
720,000
Liabilities and Stockholders’ Equity
Accounts payable $ 86,400
Note payable 15,840
Capital stock 531,360
Retained earnings
86,400
Total liabilities and stockholders’ equity $
720,000
The company is in the process of preparing a budget for June and has assembled the following data:
a.
Sales are budgeted at $274,000 for June. Of these sales, $75,000 will be for cash; the remainder will be credit sales. One half of a month’s credit sales are collected in the month the sales are made, and the remainder is collected the following month. All of the May 31 accounts receivable will be collected in June.
b.
Purchases of inventory are expected to total $199,000 during June. These purchases will all be on account. Fifty percent of all inventory purchases are paid for in the month of purchase; the remainder are paid in the following month. All of the May 31 accounts payable to suppliers will be paid during June.
c. The June 30 inventory balance is budgeted at $35,000.
d.
Selling and administrative expenses for June are budgeted at $32,000, exclusive of depreciation. These expenses will be paid in cash. Depreciation is budgeted at $3,000 for the month.
e.
The note payable on the May 31 balance sheet will be paid during June. The company’s interest expense for June (on all borrowing) will be $700, which will be paid in cash.
f. New warehouse equipment costing $8,000 will be purchased for cash during June.
g.
During June, the company will borrow $21,000 from its bank by giving a new note payable to the bank for that amount. The new note will be due in one year.
1b.Prepare a cash budget for June. (Input all amounts as positive values except cash deficiency, repayments and interest which should be indicated by a minus sign. Omit the “$” sign in your response.)
2.Prepare a budgeted income statement for June. (Input all amounts as positive values. Omit the “$” sign in your response.)
3.Prepare a budgeted balance sheet as of June 30. (Be sure to list the assets and liabilities in order of their liquidity. Omit the “$” sign in your response.)
Points Possible:125 Due Date:5/12/2013 11:59:59 PM CT
Consider the following scenario:
Dr. Stephanie White, the Chief Administrator of Uptown Clinic, a community mental health agency, is concerned about the dilemma of coping with reduced budgets next year and into the foreseeable future but increasing demand for services. To plan for reduced budgets, she must first identify where costs can be cut or reduced and still keep the agency functioning. Below are some data from the past year.
Program Area
Costs
Administration
Salaries:
Administrator
$60,000
Assistant
$35,000
Two Secretaries
$42,000
Supplies
$35,000
Advertising and promotion
$9,000
Professional meetings/dues
$14,000
Purchased Services:
Accounting and billing
$15,000
Custodial
$13,000
Security
$12,000
Consulting
$10,000
Community Mental Health Services
Salaries (two social workers)
$46,000
Transportation
$10,000
Outpatient mental health treatment
Salaries:
Psychiatrist
$86,000
Two Social Workers
$70,000
In an Excel spreadsheet:
Provide a dollar range of costs to reduce budgets (worst and best case analysis).
She needs to cut $94,000 in cost. Prioritize those cuts that can be made without impacting the operation or quality care of the organization.
For more information on creating Excel Spreadsheets, please visit the Excel Lab.
In addition to the Excel spreadsheet required to support your responses, you must prepare an APA formatted paper that will address the following:
Describe how managerial accounting is different from cost accounting.
Describe the lean production philosophy.
Compare and contrast accounting principles in lean production to those of typical production.
Describe how you would advise Dr. White to prepare for reduced budgets.
Submitting your assignment in APA format means, at a minimum, you will need the following:
TITLE PAGE.Remember the Running head: AND TITLE IN ALL CAPITALS
ABSTRACT.A summary of your paper…not an introduction. Begin writing in third person voice.
BODY.The body of your paper begins on the page following the title page and abstract page and must be double spaced (be careful not to triple or quadruple space between paragraphs). The type face should be 12 pt. Times Roman or 12 pt. Courier in regular black type. Do not use color, bold type, or italics except as required for APA level headings and references. The deliverable length of the body of your paper for this assignment is 4 5 pages. In body academic citations to support your decisions and analysis are required. A variety of academic sources is encouraged.
REFERENCE PAGE.References that align with your in body academic sources are listed on the final page of your paper. The references must be in APA format using appropriate spacing, hang indention, italics, and upper and lower case usage as appropriate for the type of resource used. Remember, the Reference Page is not a bibliography but a further listing of the abbreviated in body citations used in the paper. Every referenced item must have a corresponding in body citation.
A&A Corporation, a rapidly expanding specialist photocopier manufacturer, is in the
process of formulating plans for next year. The director of marketing has completed
her sales budget and is confident that sales estimates will be met or exceeded. The
following budgeted sales figures show the growth expected and will provide the
planning basis for other corporate departments.
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Qatar University College of Business and Economics Department of Accounting and Information System Management Accounting — ACCT 116 Group Project Spring 2013 SUBMISSION DEADLINE: THURSDAY 23 MAY 2013 Student Learning Outcomes: 1. Solve accounting relating problems; and 2. Work effectively in teams. A&A Corporation A&A Corporation, a rapidly expanding specialist photocopier manufacturer, is in the process of formulating plans for next year. The director of marketing has completed her sales budget and is confident that sales estimates will be met or exceeded. The following budgeted sales figures show the growth expected and will provide the planning basis for other corporate departments. Budgeted sales in $ Budgeted sales in $ January 1 800 000 July 3 000 000 February 2 000 000 August 3 000 000 March 1 800 000 September 3 200 000 April 2 200 000 October 3 200 000 May 2 500 000 November 3 000 000 June 2 800 000 December 3 400 000 You, as a group of 4 students acting as FOUR assistant chief accountants, have been given the responsibility for formulating the cash budget, a critical element during a period of rapid expansion. The following information provided by operating managers will be used in preparing the cash budget: 1. A&A Corporation has experienced an excellent record in debtors’ collection and expects this trend to continue. 60% of billings are collected in the month after the sale and 40% in the second month after the sale. Uncollectable accounts are negligible and will not be considered in this analysis. 2. The purchase of raw materials is A&A’s largest expenditure; the cost of these items equals 50% of sales. Prior experience shows that 80% of creditors are paid by A&A one month after receipt of the purchased materials, and the remaining 20% are paid the second month after receipt. 3. Hourly wages depend on sales volume and are equal to 20% of the current month’s sales. These wages are paid in the month…
I need some help figureing out these problems for acct. I Chose to answer these on Marriott international inc. so please use the information for that company on here please. Please put this into excel so I can see how you used the formulas. The first three problems need to be completed on excel, the second three need to be completed in complete sentences based on the data from excel
Analysis: (use Excel to complete this section)
1. Provide common size analysis of your company’s income statement and balance sheet for the 2 most recent years (must be done using Excel with formulas).
2. Provide horizontal analysis of your company’s income statement and balance sheet, showing the dollar amount and percent of change using the 2 most recent years (you must use an Excel spreadsheet with formulas).
3. Perform ratio analysis on your company using the ratios listed on page 705 of your text (these must be in an Excel spreadsheet, using formulas to calculate the ratios). You should present them in a similar format as the text: group by category, list name of ratio, formula in words, and the ratio calculation. Give a short explanation of your conclusions about your company after each category of ratios (i.e. How liquid is your company? How efficiently is it using its assets? etc.).
1. Are you optimistic or pessimistic regarding the future of your chosen corporation? Explain.
2. Would you invest in the stock of the company? Explain.
3. Would you invest in the bonds of the company? Explain.
I need some serious help with this problem. 3 & 4 are stumping me bad right now. HELP!!
Use the following information to complete Rhonda Hill’s 2011 federal income tax return. If information is missing, use reasonable assumptions to fill in the gaps. ‘ The forms, schedules, and instructions can be found at the IRS Web site (www.irs.gov). The instructions can be helpful in completing the forms.
1.Rhonda Hill (unmarried) is employed as an office manager at the main office of Carter and Associates CPA firm. Rhonda lives in a home she purchased 20 years ago. Rhonda’s older cousin Mabel Wright lives with Rhonda in the home. Mabel is retired and receives $2,400 of Social Security payments each year. Mabel is able to save this money because Rhonda provides all of Mabel’s support. Rhonda also provided the following information: ‘ Rhonda does not want to contribute to the presidential election campaign. ‘ Rhonda lives at 1234 Blue Ridge Way, Tulsa, OK 74101. ‘ Rhonda’s birthday is 12/18/1957 and her Social Security number is 335 67 8910. ‘ Mabel’s birthday is 11/2/1944 and her Social Security number is 566 77 8899. ‘ Rhonda does not have any foreign bank accounts or trusts. 2. Rhonda received a Form W 2 from Carter and Associates (her employer) that contained the following information: ‘ Line 1 Wages, tips, other compensation: $72,000 ‘ Line 2 Federal income tax withheld: 9,300 ‘ Line 3 Social Security wages: 72,000 ‘ Line 4 Social Security tax withheld: 3,024 ‘ Line 5 Medicare wages and tips: 72,000 ‘ Line 6 Medicare tax withheld: 1,044 ‘ Line 16 State wages, tips, etc.: 72,000 ‘ Line 17 State income tax: 2,700 ‘ Carter and Associates address is 1234 CPA Way Tulsa, OK 74101; its FEIN is 91:0001002; and its State ID number is 123456678 3. Rhonda received $250 in interest from Tulsa City bonds, $120 interest from IBM bonds, and $15 from her savings account at UCU Credit Union. She also received a $460 dividend from Huggies Company and $500 from Bicker Corpo ration. Both dividends are qualified dividends. 4. Rhonda sold 200 shares of DM stock for $18 a share on June 15, 2011. She purchased the stock on December 12, 2006, for $10 a share. She also sold 50 shares of RSA stock for $15 a share on October 2, 2011. She purchased the stock for $65 a share on February 2, 2011. Stock basis amounts have been reported to the IRS. 5. The following is a record of the medical expense that Rhonda paid for herself during the year. The amounts reported are amounts she paid in excess of insur ance reimbursements. Insurance premiums $900 Prescription medications 100 Over the counter medications 250 Doctor and dentist visits 485 Eyeglasses 300 Physical therapy 200 6. Rhonda paid $2,800 in mortgage interest during the year to UCU credit union. She also paid $1,200 in real property taxes during the year. 7. Rhonda contributed $2,350 to Heavenly Church during the year. Heavenly Church’s address is 1342 Religion Way, Tulsa, OK 74101.
I can not get the July Trial balance to balance out. Also, I am not sure how to journal and ledger the purchase of Equipment in June for $12, 600 with three equal payments and the first payment due in July.
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Horizontal Balance Sheets July Inventory July Balance and Income Stateme July Trial Balance July Ledger June Inventory June Balance and Income Stateme June Trial Balance June Ledger Journal Assignment They purchase Furniture for the Ice Cream Shop on account for 10,000 on account, payable in 45 days. They purchase a laptop for $1200 on account to be used exclusively in keeping track of the accounting records. They purchase a QuickBooks software, to be used in Accounting, for $1500 on account payable in 45 days. They call a technician to install the Ice Cream equipment. Estimated bill of the technician is $700. At the end of the They hire two employees. Total salary cost for the two employees is $1500 a month, payable at the end of they purchase the following: Throughout the month, the Chicago Summers ice cream shop is able to generate a total of $6,000 in cash sales. Tracy is in charge of keeping the accounting records. She records all the economic events presented above by doing the following: Collected $7,000 in cash sales Preparing the journal entries, Completing the Balance Sheet and Income Statement for the month of June Assume you are doing Tracy’s job: Assume you are reviewing the Financial Statements and the analysis together with Victoria, Matt and Jean What are some of the conclusions? What should the company do to stay in business? Monthly rent of the space is $2000, payable on the first day of each month. June Transactions KENDALL SCHOOL OF BUSINESS Comprehensive Accounting Project It is estimated that the furniture will be used for 5 years, with no salvage value. It is estimated that the software will be used for 10 years. Setting up the shop Starting the Operations Inventory June’s financial statement Posting the appropriate journal entries in the T accounts Preparing the Trial balance for the month of June July Transactions Payment for the computer is due in 45 days. Estimated life of the laptop is 3…
Ian retired in June 2012 at the age of 69 (he turned 70 in August 2012). Ian’s retirement account was valued at $490,000 at the end of 2011 and $500,000 at the end of 2012. What is Ian’s required minimum distribution for 2013 under each of the following alternative scenarios?
Ian’s retirement account is a traditional 401(k) account.
Ian’s retirement account is a Roth 401(k) account.
Ignatenko’s Custom Electronics (ICE) sells and installs complete security, computer, audio, and video systems for homes. On newly constructed homes it provides bids using time and material pricing. The following budgeted cost data are available.
Time Charges
Material Loading Charges
Technicians’ wages and benefits
$128,000
Parts manager’s salary and benefits
$34,600
Office employee’s salary and benefits
26,112
8,885
Other overhead
13,760
36,660
Total budgeted costs
$167,872
$80,145
The company has budgeted for 6,400 hours of technician time during the coming year. It desires a $38.98 profit margin per hour of labor and a 100% profit on parts. It estimates the total invoice cost of parts and materials in 2014 will be $650,000.
Johnny is 20 years old and single. His parents properly claim him as a dependent on their joint tax return. During 2012, Johnny had the following income and expense items:
Wages from a part time job
$3,000
Interest income from her own savings account
2,500
State and local income taxes paid
800
State and local sales tax paid
200
Johnnys2012 taxable income is?
2)
Tammy (unmarried, age 56) claims her elderly mother (age 74) as a dependent. Tammy’s mother does not live with her, but Tammy pays for almost all of her mother’s household costs. If the mother has no gross income, the mother’s 2012 standard deduction is?
Immediately prior to the process of liquidation, partners Micco,Niccum, and Orwell have capital balances of $70,000, $20,000, and$30,000 respectively. There is a cash balance of $10,000,noncash assets total $160,000, and liabilities total $50,000. The partners share net income and losses in the ratio of 2:2:1.
Journalize the entries to record the liquidation outlined below,using Assets as the account title for the noncash assets andLiabilities as the account title for all creditors’ claims.
(a)
Sold the noncash assets for $80,000 in cash.
(b)
Divided the loss on realization.
(c)
Paid the liabilities.
(d)
Received cash from the partner with thedeficiency.
Lola industries purchased the following assets and constructed a building as well. All of this was done during the current year. Assets 1 and 2: These assets were purchased as a lump sum for $110,000 cash. The following was gathered: Description Initial Cost on Sel ler’s Books Depreciation to Date on Seller’s Books Book Value on Seller’s Books Appraised Value Machinery $100,000 $40,000 $60,000 $81,000 Office Equipment 70,000 25,000 45,000 44,000 Asset 3 Office Equipment was acquired by issuing 300 shares of $6 par value common stock. The stock had a market value of $14 per share. Construction of Building A building was constructed on land purchased last year at a cost of $150,000. Construction began on February 1 and was completed on November 1. The payments to the contractor were as follows: Date Payment 2/1 $100,000 6/1 380,000 9/1 460,000 11/1 120,000 To finance construction of the building, a $600,000 10% construction loan was taken out on Febru ary 1. The loan was repaid on November 1. The firm had $200,000 of other outstanding debt during the year at a borrowing rate of 7%. Required: Record all of the applicable acquisition/construction entries for each of these assets.
Garcia and Buffet, a local CPA firm, has budgeted 100 000 in fixed expenses per month for the tax department. It has also budgeted variable cost of 5 dollar per tax return prepared for supplies, 35 dollar per return for labour and 10 dollar per return for computer time. The firm expects revenue from tax return preparation to be 300 000, based on 2000 tax returns at 150 dollar each. During the current month, 1850 tax returns were actually prepared, at an average fee of 147 dollar each. Actual variable costs were 9100 dollar for supplies, 65 000 dollar for labour, and 18 000 for computer time. Actual fixed costs were 100 000 dollar.
Required
Prepare a flexible budget for the tax department of Garcia and Buffet for the current month.
Georgie is a U.S. citizen who is employed by Hawk enterprises, a global company. Beginning on June 1, 2013, George began working in london. He worked there until January 31, 2014, when he transferred to paris. He worked in Paris the remainder of 2014. His salary for the first five months of 2013 was $100,000 and it was earned in the United States. His salary for the remainder of 2013 was $175,000, and it was earned in London. George’s 2014 salary from Hawk was $300,000, with part being earned in London and part being earned in Paris. What is George’s gross income in 2013 and 2014? (Assume that the 2014 indexed amount is the same as the 2013 indexed amount).
Note: I am looking for the solution, not a copy paste job from a question or article similar to this. I will only award points for answer.
Gheorghe Moresan Lumber Company handles three principal lines of merchandise with these varying rates of gross profit on cost.
Lumber
25%
Millwork
30%
Hardware and fittings
40%
On August 18, a fire destroyed the office, lumber shed, and a considerable portion of the lumber stacked in the yard. To file a report of loss for insurance purposes, the company must know what the inventories were immediately preceding the fire. No detail or perpetual inventory records of any kind were maintained. The only pertinent information you are able to obtain are the following facts from the general ledger, which was kept in a fireproof vault and thus escaped destruction.
Lumber
Millwork
Hardware
Inventory, Jan. 1, 2014
$265,900
$93,470
$45,600
Purchases to Aug. 18, 2014
1,544,900
375,100
160,300
Sales to Aug. 18, 2014
2,064,500
538,590
261,240
Submit your estimate of the inventory amounts immediately preceding the fire.
Gipson Furniture factors $500,000 of receivables to Kwik Factors, Inc. Kwik Factors assesses a 3% service charge on the amount of receivables sold. Gipson Furniture factors its receivables regularly with Kwik Factors. What journal entry does Gipson make when factoring these receivables?
gold creek mining company has two competing proposals: a processing mill and an electric shovel. both pieces of equipment have an initial investment of $840,000. The net cash flows estimated for the two proposals are as follows:
………………………………..NET CASH FLOWS………………………..
Year…………….Processing Mill……………..Electric Shovel
1………………….$280,000…………………….$350,000
2………………….250,000……………………….325,000
3………………….250,000……………………….300,000
4………………….200,000……………………….300,000
5………………….150,000
6………………….125,000
7………………….100,000
8………………….100,000
The estimated residual value of the processing mill at the end of Year 4 is $350,000.
Determine which equipment should be favored, comparing the net present values of the two proposals and assuming a minimum rate of return of %15.
Green Realty Company received a check for $30,000 on July 1 which represents a 6 month advance payment of rent on a building it rents to a client. Unearned Rent Revenue was credited for the full $30,000. Financial statements will be prepared on July 31. Green Realty should make the following adjusting entry on July 31:
Gutierrez Company has four operating divisions. During the first quarter of 2014, the company reported aggregate income from operations of $199,700 and the following divisional results.
Division
I
II
III
IV
Sales
$248,400
$196,300
$499,900
$446,900
Cost of goods sold
202,500
190,300
302,200
246,900
Selling and administrative expenses
74,300
64,900
60,000
50,700
Income (loss) from operations
$ (28,400)
$ (58,900)
$137,700
$149,300
Analysis reveals the following percentages of variable costs in each division.
I
II
III
IV
Cost of goods sold
77%
90%
78%
77%
Selling and administrative expenses
38%
70%
49%
59%
Discontinuance of any division would save 50% of the fixed costs and expenses for that division.
Top management is very concerned about the unprofitable divisions (I and II). Consensus is that one or both of the divisions should be discontinued.
Compute the contribution margin for Divisions I and II:
Heller Corporation uses the weighted average method in its process costing system. Data concerning the first processing department for the most recent month are listed below:
Beginning work in process inventory:
Units in beginning work in process inventory
1,250
Materials costs
$10,200
Conversion costs
$9,700
Percent complete with respect to materials
65%
Percent complete with respect to conversion
30%
Units started into production during the month
13,300
Units transferred to the next department during the month
13,500
Materials costs added during the month
$142,404
Conversion costs added during the month
$224,741
Ending work in process inventory:
Units in ending work in process inventory
1,050
Percent complete with respect to materials
60%
Percent complete with respect to conversion
20%
The cost of ending work in process inventory in the first processing department according to the company’s cost system is closest to: (Round your cost per equivalent unit answers to 2 decimal places.)
The company’s net income (loss) for the year was $32,000 and its cash dividends were $6,500. It did not sell or retire any property, plant, and equipment during the year.
The company’s net cash used in investing activities is:
I got A right but I got B wrong. Please show your work so I can see where I went wrong!
Mark Price Company uses the gross profit method to estimate inventory for monthly reporting purposes. Presented below is information for the month of May.
Inventory, May 1
$ 175,500
Purchases (gross)
648,200
Freight in
31,600
Sales revenue
1,050,800
Sales returns
75,600
Purchase discounts
12,290
(a) Compute the estimated inventory at May 31, assuming that the gross profit is 30% of sales.
The estimated inventory at May 31
$
(b) Compute the estimated inventory at May 31, assuming that the gross profit is 30% of cost. (Round percentage of sales to 2 decimal places, e.g 78.74% and final answer to 0 decimal places, e.g. 6,225.)
The estimated inventory at May 31 $ ___________________
For each of the followig separate cases prepare adjusting entries required of financial statements for the year ended (date of) December 31, 2013. ( Assume that prepaid expenses are initially recorded in asset accounts and that fees collected in advance of work are initially recorded as liabilites.)
a) One third of the work related to $15,000 cash received in advance is performed this period.
b. Wages of $8000 are earned by workers but not paid as of December 31, 2013.
C. Depreciation on the company’s equipment for 2013 is $18,531.
d. THe Office Supplies accound had a $240 debit balance on Deceber 31, 2012. During 2013, $5,239 of office supplies are purchased. A physical count of supplies at December 31, 2013, shows $487 of supplies available.
e. The Prepaid Insurance account had a $4000 balance on December 31, 2012. AN analysis of insurance policies hsows that $1200 of unexpired insurance benefits remain at December 31, 2013.
f. The company has earned (but not recorded) $1050 of interest from investments in CDs for the year ended December 31, 2013. The interest revenue will be received on January 10, 2014.
The following annual account balances are taken from ProTeam Sports at December 31.
2011
2010
Accounts receivable
$
75,692
$
70,484
Net Sales
2,591,933
2,296,673 h
What is the number of days’ sales uncollected for the years 2010 and 2011? (Use 365 days a year. Do not round intermediate calculations and round your final answers to 1 decimal place.)
The following are the balances in the accounts for Joan Miller Advertising Agency as of January 31, 2010:
Debit
Credit
Cash
$1,720
Accounts Receivable
3,000
Art Supplies
1,300
Office Supplies
600
Prepaid Rent
400
Prepaid Insurance
440
Art Equipment
4,200
Accumulated Depreciation, Art eq.
$70
Office Equipment
3,000
Accumulated Depreciation Office Eq.
50
Accounts Payable
3,170
Unearned Art Fees
600
Wages Payable
180
Joan Miller, Capital
10,590
______
______
Totals
$14,660
14,660
During the month of February, the agency engaged in the following transactions:
Feb. 1 Received an additional investment of cash from Joan Miller, $6,000.
Feb. 2 Purchased additional office equipment with cash, $800.
Feb. 5 Received art equipment transferred to the business from Joan Miller, $1,400.
Feb. 6 Purchased additional office supplies with cash, $80
Feb. 7 Purchased additional art supplies on credit from Taylor Supply Company, $500.
Feb. 8 Completed the series of advertisements for Marsh Tire Company that began on January 31, and billed Marsh Tire Company for the total services performed, including the accrued revenues that had been recognized in January of $200 (see accounts receivable). The total bill is $800.
Feb. 9 Paid the secretary for two weeks’ wages, $600.
Feb. 12 Paid the amount due to Morgan Equipment for the office equipment purchased last month $1,500
Feb. 13 Accepted an advance fee in cash for artwork to be done for another agency, $1,800.
Feb. 14 Purchased a copier from Morgan Equipment for $2,100, paying $250 in cash and agreeing to pay the rest in equal payments over the next five months.
Feb. 15 Performed advertising services and accepted a cash fee, $1,050.
Feb. 16 Received payment on account from Ward Department Stores for services performed last month, $2,800.
Feb. 19 Paid amount due for the telephone bill that was received and recorded at the end of January , $70.
Feb. 20 Performed advertising services for Ward Department Stores and agreed to accept payment next month, $3,200.
Feb. 21 Performed art services for a cash fee, $580.
Feb. 22 Received and paid the utility bill for February, $110. Paid the secretary for two weeks’ wages, $600.
Feb. 26 Paid the rent for March in advance, $400.
Feb. 27 Received the telephone bill for February, which is to be paid next month, $80.
Feb. 28 Paid out cash to Joan Miller as a withdrawal for personal living expenses, $1,400.
At the end of February, adjustments are made for the following:
a. One month’s prepaid rent has expired. b. One month’s prepaid insurance has expired, $40. c. An inventory of art supplies reveals $720 of supplies are still on hand on February 28th. d. An inventory of office supplies reveals $300 in office supplies have been used in February. e. Depreciation on the Art equipment for February is calculated to be $90. f. Depreciation on the Office equipment for February is calculated to be $100. g. Art services performed for which payment has been received in advance total $1,400 h. Advertising services performed that will not be billed until March total $340. i. Three days’ worth of secretarial wages had accrued by the end of February.
Required 1. Prepare the general journal entries or enter into a worksheet the transactions completed in February 2010. 2. Prepare the general journal entries or enter into a worksheet the adjustments necessary at the end of February. 3. Prepare an Adjusted Trail Balance 4. Prepare in good form an income statement for the month of February 2010 5. Prepare in good form a statement of capitol for the month of February 2010 6. Prepare in good form a balance sheet as of February 28, 2010.
The following data are accumulated by Reynolds Company in evaluating the purchase of $141,800 of equipment, having a four year useful life:
Net Income
Net Cash Flow
Year 1
$33,000
$56,000
Year 2
20,000
43,000
Year 3
10,000
32,000
Year 4
(1,000)
22,000
Present Value of $1 at Compound Interest
Year
6%
10%
12%
15%
20%
1
0.943
0.909
0.893
0.870
0.833
2
0.890
0.826
0.797
0.756
0.694
3
0.840
0.751
0.712
0.658
0.579
4
0.792
0.683
0.636
0.572
0.482
5
0.747
0.621
0.567
0.497
0.402
6
0.705
0.564
0.507
0.432
0.335
7
0.665
0.513
0.452
0.376
0.279
8
0.627
0.467
0.404
0.327
0.233
9
0.592
0.424
0.361
0.284
0.194
10
0.558
0.386
0.322
0.247
0.162
a. Assuming that the desired rate of return is 10%, determine the net present value for the proposal. Use the table of the present value of $1 presented above. If required, round to the nearest dollar.
The following data have been extracted from the records of Riddle Co.:
July
December
Production level, in units
9,500
15,200
Variable costs
$
23,750
$
?
Fixed costs
?
38,600
Mixed costs
20,855
?
Total costs
$
83,205
$
107,088
Required:
(a)
Calculate the missing costs. (Do not round your intermediate calculations. Omit the “$” sign in your response.)
July
December
Production level, in units
9,500
15,200
Variable costs
$
23,750
$
Fixed costs
38,600
Mixed costs
20,855
Total costs
$
83,205
$
107,088
(b)
Calculate the cost formula for mixed cost using the high low method. (Do not round your intermediate calculations. Round your answer to 2 decimal places. Omit the “$” sign in your response.)
The following information is available for two different retailers, both of whom began business this year:
Cash flows from: (in 000’s)
New Co. A
New Co. B
Operating Activities
$ (50,000)
$ 40,000
Investing Activities
20,000
(90,000)
Financing Activities
40,000
60,000
Net increase in cash
$10,000
$10,000
Cash balance, Jan. 1
0
0
Cash balance, Dec. 31
$ 10,000
$ 10,000
Which company appears to be purchasing long term assets? Explain your response. 2. Which company would you expect to have future financial troubles? Why? 3. Which company would you expect to have the greater depreciation expense? Why?
The following information has been obtained for the Gocker Corporation.
1.
Prior to 2012, taxable income and pretax financial income were identical.
2.
Pretax financial income is $1,728,300 in 2012 and $1,439,500 in 2013.
3.
On January 1, 2012, equipment costing $1,288,000 is purchased. It is to be depreciated on a straightline basis over 5 years for tax purposes and over 8 years for financial reporting purposes. (Hint: Use the half year convention for tax purposes, as discussed in Appendix 11A.)
4.
Interest of $65,700 was earned on tax exempt municipal obligations in 2013.
5.
Included in 2013 pretax financial income is an extraordinary gain of $209,100, which is fully taxable.
6.
The tax rate is 38% for all periods.
7.
Taxable income is expected in all future years.
Part C
Prepare the bottom portion of Gocker’s 2013 income statement, beginning with “Income before income taxes and extraordinary item.”
Which of the following reflects the impact of a transaction where $330,000 cash was invested by stockholders in exchange for stock?
Assets and revenues each increased $330,000.
Stockholders’ equity and revenues each increased $330,000.
Stockholders’ equity and assets each increased $330,000.
Assets and liabilities each increased $330,000.
A corporation has $89,000 in total assets, $31,500 in total liabilities, and a $17,400 credit balance in retained earnings. What is the balance in the contributed capital account?
rev: 05 04 2011
$40,100
$57,500
$48,900
$74,900
When a company buys equipment for $151,000 and pays for one fourth in cash and the other three fourths is financed by a note payable, which of the following are the effects on the accounting equation?
Which of the following statements is most CORRECT?
a)One advantage of forward contracts is that they are default free.
b)Futures contracts generally trade on an organized exchange and are marked to market daily.
c)Goods are never delivered under forward contracts, but are almost always delivered under futures contracts.Lepage Co. has an expected D1 of $1.375, it’s expected constant divided growth rate is 6%, and it’s common stock currently sells for $22.50 per share. New stock can be sold to the public at the current price, but a flotation cost of 5% would be incurred. What would be the cost of equity equity from new common stock?
a)11.81%
b)12.43%
c)13.05%
d)13.71%
e)14.39%
Biemker Corporation has $500 million of total assets, it’s basic earning power is 15%, and it currently has no debt in its capital structure. The CFO is contemplating a recapitalization where it will issue debt at a cost of 10% and use the proceeds to buy back shares of the company’s common stock, paying book value. If the compnay proceeds with the recapitalization, it’s operating income, total assets, and tax rate will remain unchanged. Which of the following is most likely to occur as a result of the recapilization?
a)The ROA would increase
b)The ROA would remain unchanged
c) The basic earning power ratio would decline
d) The basic earning power ratio would increase
e) The ROE would increase
Which of the following statements is most CORRECT?
a)one advantage of forward contracts is that they are default free
b)futures contracts generally trade on an organized exchange and are marked to market daily
c)Goods are never delivered under forward contracts, but are almost always delivered under future contracts.
In each of the following transactions (a) through (c) for Romney’s Marketing Company, use the threestep process given below to record the adjusting entry at year end December 31, 2012. The process includes (1) determining if revenue was earned or an expense incurred, (2) determining whether cash was received or paid in the past or will be received or paid in the future, and (3) computing the amount of the adjustment.(Do not round intermediate calculations and round your final answers to the nearest dollar amount. Omit the “$” sign in your response.)
a.
Estimated electricity usage at $380 for December; to be paid in January 2013.
b.
On September 1, 2012, loaned $5,000 to an officer who will repay the loan principal and interest in one year at an annual interest rate of 14 percent.
c.
Owed wages to 10 employees who worked four days at $150 each per day at the end of December. The company will pay employees at the end of the first week of January 2013.
Oslo Company prepared the following contribution format income statement based on a sales volume of 1,000 units (the relevant range of production is 500 units to 1,500 units):
Sales
$
23,000
Variable expenses
13,000
Contribution margin
10,000
Fixed expenses
8,500
Net operating income
$
1,500
Required:
If the variable cost per unit increases by $.50, spending on advertising increases by $1,000, and unit sales increase by 250 units, what would be the net operating income? (Do not round intermediate calculations.)
Oslo Company prepared the following contribution format income statement based on a sales volume of 1,000 units (the relevant range of production is 500 units to 1,500 units):
Sales
$
25,100
Variable expenses
13,700
Contribution margin
11,400
Fixed expenses
7,752
Net operating income
$
3,648
Required:
What is the break even point in sales dollars? (Do not round intermediate calculations. Round your answer to the nearest dollar amount.)
Diego Company manufactures one product that is sold for $77 per unit in two geographic regions”the East and West regions. The following information pertains to the company’s first year of operations in which it produced 48,000 units and sold 43,000 units.
Variable costs per unit:
Manufacturing:
Direct materials
$
27
Direct labor
$
12
Variable manufacturing overhead
$
3
Variable selling and administrative
$
5
Fixed costs per year:
Fixed manufacturing overhead
$
864,000
Fixed selling and administrative expenses
$
456,000
The company sold 33,000 units in the East region and 10,000 units in the West region. It determined that $220,000 of its fixed selling and administrative expenses is traceable to the West region, $170,000 is traceable to the East region, and the remaining $66,000 is a common fixed cost. The company will continue to incur the total amount of its fixed manufacturing overhead costs as long as it continues to produce any amount of its only product.
Required:
What is the unit product cost under variable costing?
Morganton Company makes one product and it provided the following information to help prepare the master budget for its four months of operations:
(a)
The budgeted selling price per unit is $70. Budgeted unit sales for June, July, August, and September are 8,500, 16,000, 18,000, and 19,000 units, respectively. All sales are on credit.
(b)
Forty percent of credit sales are collected in the month of the sale and 60% in the following month.
(c)
The ending finished goods inventory equals 20% of the following month’s unit sales.
(d)
The ending raw materials inventory equals 10% of the following month’s raw materials production needs. Each unit of finished goods requires 5 pounds of raw materials. The raw materials cost $2.00 per pound.
(e)
Thirty percent of raw materials purchases are paid for in the month of purchase and 70% in the following month.
(f)
The direct labor wage rate is $13 per hour. Each unit of finished goods requires two direct labor hours.
(g)
The variable selling and administrative expense per unit sold is $1.70. The fixed selling and administrative expense per month is $66,000.
Frank is a resident of a state that imposes a tax on income. The following information pertaining to Frank’s state income taxes is available:
State income taxes withheld in 2012
$3,500
Refund of 2011 tax received in 2012
400
Deficiency assessed and paid in 2012 for 2010:
Tax
600
Interest
100
What amount should Frank use as state and local income taxes in calculating itemized deductions for his 2012 Federal tax return, assuming he elects to deduct state and local income taxes?
A.
$3,500
B.
$3,700
C.
$4,100
D.
$4,200
E.
None of the above
Charlie is a single taxpayer with income of $107,000 which includes $22,500 of interest income. Contributions to educational savings accounts are phased out between $95,000 and $110,000. What is the maximum contribution Charlie can make to an educational savings account?
A.
$2,250
B.
$2,000
C.
$1,600
D.
$400
E.
$ 0
Bill has a mortgage loan on his personal residence. He decides to pay 24 months of interest in advance on July 1, 2012. The total advanced interest payment is $72,000. How much of the advance interest payment can he deduct in 2012?
A.
$72,000
B.
$36,000
C.
$18,000
D.
Mortgage interest is not deductible.
E.
If a taxpayer makes an advance payment, he may not deduct any interest.
Matthew purchases a new principal residence in 2012 and pays points of $2,000 to obtain a mortgage loan. What is the proper tax treatment for the points paid?
A.
The points are a nondeductible personal expense
B.
The points must be amortized over the life of the loan
C.
The points are fully deductible in 2012
D.
The points must be capitalized into the cost of the residence
17. (4)On January 1, 2013, Moose Co. purchased for $360,000 a patent that had been granted two years earlier. On January 1, 2015, legal costs of $64,000 were incurred in a successful defense of the patent. Assuming the maximum period allowable is used for patent amortization, what is Moose’s patent amortization expense for 2015? 18. (4)D Company registered a patent on January 1, 2015. C Company purchased the patent from D Company for $450,000 on January 1, 2020, and began to amortize the patent over its remaining legal life. In early 2021, C Company determined that the patent’s economic benefits would last only until the end of 2025. What amount should C Company record for patent amortization in 2021? 19. (4)Boggs Company is looking to purchase the Grafton Company for $150,000 cash. The fair value of their equipment is $35,600, the fair value of their inventory is $20,000, their accounts receivable fair value is $24,500, and they have an unrecorded patent of $15,000. All other book values equal fair value as of January 1, 2015. Required: 1.) Compute the goodwill associated with the purchase of Grafton. 2.) Prepare the journal entry necessary at January 1, 2015 to record the purchase of Grafton. 3.) What if the purchase price was $69,000 would any goodwill be reported? 20. (4)Grier purchased Walters Company several years ago. Walters become a reporting unit of Griers. At the end of 2014, Grier had a net book value of $1.6 million which includes $400,000 of goodwill. A goodwill impairment test is done as part of the year end closing process. Grier estimates the fair value of Walters to be $1.4 million. The fair value of Walters identifiable net assets, excluding goodwill, is $1.3 million. Required: 1.) Determine if goodwill is impaired 2.) Prepare the journal entry required for the impairment if necessary. 21. (4)The Chambers Company was formed in early 2017. At the time of formation, Chamber spent the following amounts: accounting fees, $4,000; legal fees, $8,000; stock certificate costs, $3,000; initial franchise fee, $10,000; initial lease payment, $5,000; promotional fees, $3,000. Chamber intends to capitalize and amortize intangibles over the maximum allowable period in accordance with generally accepted accounting principles. Based on this strategy, what is Chambers’s expense associated with organization costs in 2017? 22. (4)The Wagner Company made the following expenditures for research and development early in 2014: $80,000 for materials, $100,000 for contract services, $80,000 for employee salaries, and $800,000 for a building with an expected life of 20 years to be used for current and future research projects. Wagner uses straight line depreciation. The company allocated $20,000 in overhead to research and development. What is Wagners’ research and development expense for 2014? 23. (4)On August 1, Gold Company exchanged a machine for a similar machine owned by Cowboy Company and also received $7,000 cash from Cowboy Company.Gold’s machine had an original cost of $70,000, accumulated depreciation to date of $34,500, and a fair market value of $60,000. Cowboy’s machine had a book value of $45,000 and a fair value of $53,000. Required: Prepare the necessary journal entry by Gold Company to record this transaction assuming
a.
Gold will use the newly acquired machine in the same manner as the old one.
b.
Gold’s use of the new machine will be substantially different from the old one.
Assignment : International Taxation and Foreign Tax Credits Assume you are a CPA working as a tax professional and are hired by a client who is a U.S. based taxpayer and is interested in expanding the business into foreign markets. Using the Internet, conduct research on the various tax impacts for U.S. companies that expand abroad. Write six (6) page papers in which you: 1. Based on your research, assess at least two (2) types of organizations that the taxpayer could establish abroad and the various tax impacts that these types of organization may cause. Provide support for your rationale. 2. Based on your research, develop a strategy for the client to repatriate earnings from the foreign markets and avoid or mitigate the U.S. tax impact on repatriation. Provide support for your rationale. 3. Based on your research, evaluate foreign tax credits and propose at least three (3) tax credits the client could use and the impact on the taxes. Provide examples with your rationale. 4. Based on your research, assess the impact that the accumulated earnings tax had on the client and how the tax could be avoided or mitigated. Provide examples with your rationale. 5. Based on your research, analyze the rules regarding potential U.S. and foreign sourced losses and propose scenario to your client that would best represent the proper treatment of those losses. Provide support for your rationale. 6. Use at least four (4) quality resources in this assignment. Note: Wikipedia and similar Websites do not qualify as quality resources. Your assignment must follow these formatting requirements: • Be typed, double spaced, using Times New Roman font (size 12), with one inch margins on all sides; citations and references must follow APA or school specific format. Check with your professor for any additional instructions. • Include a cover page containing the title of the assignment, the student’s name, the professor’s name, the course title, and the date. The cover page and the reference page are not included in the required assignment page length.
Financial Decision Making 1. A banquet operation, that can only do one banquet per day, has the following information: Sales Price $12.50, variable cost $5.85, daily fixed cost of $200. What is the profit or loss if we accept a potential booking for 50 guests for a price of $9.00? 2. What is the profit or loss if we refuse the booking? 3. The General Manager asks if this business facility should close for the off season. . Assume next year will be the same as last year. The business was open 12 months last year.
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Financial Decision Making 1. A banquet operation, that can only do one banquet per day, has the following information: Sales Price $12.50, variable cost $5.85, daily fixed cost of $200. What is the profit or loss if we accept a potential booking for 50 guests for a price of $9.00? 2. What is the profit or loss if we refuse the booking? 3. The General Manager asks if this business facility should close for the off season. . Assume next year will be the same as last year. The business was open 12 months last year. The off season is 3 consecutive months, with sales of $30,000. Last year’s information was: sales $600,000, Variable costs 360,000, and fixed costs of 192,000. What was last year’s profit or loss? 4. If they close for the off season, what would its annual profit or loss be? 5. You must decide whether to take a fixed lease or variable lease for a business location. The fixed lease is $42,600 annually. The variable lease is based on 6% of sales. You expect annual sales to be a minimum of $800,000. Which type of lease should you select? 6. Assuming you had picked a variable lease, how much would the payment have been on sales of $925,000? 7. A capital budgeting analysis is required from the following information: Old New Equipment Equipment Purchase cost & installation 60,000 Salvage at end of useful life 0 0 Useful life 10 years Depreciation method Straight line Annual operating expenses: Payroll & related expense $45,000 $28,000 Power expense 7,500 5,700 Supplies expense 2,500 2,000 Repairs expense 2,000 300 Depreciation 0 ? Total …
Instructions: Use Excel to do these problems and paste the answers into this Word Document Include all calculations.
What is the holding period return to an investor who bought 100 shares of Charter Oil nine months ago for $36 a share, received two $50 dividend checks, and sold the stock today at $38 a share?
What is the market price of a share of stock for a firm that pays dividends of $1.20 per share, has a P/E of 14, and a dividend payout ratio of 0.4?
A firm’s current ratio is 1.5, and its quick ratio is 1.0. If its current liabilities are $10,000, what are its inventories?
Determine the amount you would be wiling to pay for a $1,000 par value bond paying $80 interest each year (annual) and maturing in 12 years, assuming you wanted to earn a 9% rate of return.
Your grandparents put $1,000 into a saving account for you when you were born 30 years ago. This account has been earning interest at a compound rate of 7%. What is its value today?
An insurance company offers you and end of year annuity of $48,000 per year for the next 20 years. They claim your return on the annuity is 9%. What is the most you would be willing to pay today for this annuity?
1st bank offers you a car loan at an annual interest rate of 10% compounded monthly. What effective annual interest rate is the bank charging you?
Compute the risk premium for the stock of Omega Tools if the risk free rate is 6%, the expected market return is 12%, and Omega’s stock has a beta of .8.
Elephant Company common stock has a beta of 1.2. The risk free rate is 6% and the expected market rate of return is 12%. Determine the required rate of return on the security.
Instructions: Use Excel to do these problems and paste the answers into this Word Document Include all calculations.
1) An investment project requires a net investment of $100,000. The project is expected to generate annual net cash flows of $28,000 for the next 5 years. The firm’s cost of capital is 12%.
Part 1 Determine the payback period for the project.
Part 2 – Determine the payback period accounting for the present value of future cash flow (ie. Present value calculations). Should the project be done? After considering present value is the 100,000 investment recovered in 3 4 years, 4 5 years or over 5 years?
2) What is the IRR for a project that has a net investment of $14,600 and a single net cash flow of $25,750 in 5 years?
3) Red Lake Mines, Inc. is considering adoption of a new project requiring a net investment of $10 million. The project is expected to generate 5 years of net cash inflows of $5 million per year. In the project’s sixth, and final, year it is expected to have a net cash outflow of $1 million. What is the project NPV, using a discount rate of 12%?
4) Zimmer, a manufacturer of modular rooms, plans to expand its operations in Landshut, Germany. The expansion will cost $14.5 million and is expected to generate annual net cash flows of €2.15 million for a period of 12 years and then the operation will be sold for €1 million (net of taxes). The cost of capital for the project is 14%. Using a spot exchange rate of $1.25/€ as the forecast FX rate for the euro for the term of the project, compute the NPV of this expansion project.
5) Dupree Funds is considering the fees charged by two banks. First America charges a flat rate of $0.11 per payment and First Western requires a deposit of $500,000 (that does not pay interest to Dupree), plus $.05 per payment. What is the number of payments per year where the costs of the two banks will be equal? Assume Dupree’s cost of funds is 9%.
What is the annual tax shield to a firm that has total assets of $80 million and a net worth of $55 million, if the average interest rate on debt is 8.5% and the marginal tax rate is 35%?
Jason is interested in finding the breakeven point for a new pump it plans to produce. The price of the pump is $250 and the variable cost ratio is 50% of the price. Jason calculated that the fixed costs will be about $400,000. What is the breakeven point of operations?
Crown Honda purchased one of its most popular motorcycle models for 965,000 yen. The FX rate for the yen was 142 yen per dollar at the time of purchase, but then rose to 171.8 yen by the time payment was made. What was the dealer’s gain or loss on the change in rates?
Seduak has estimated the costs of debt and equity capital for various proportions of debt in its capital structure.
% Debt After tax cost of debt Cost of equity
0% 13.0%
10 5.4% 13.3
20 5.4 13.8
30 5.8 14.4
40 6.3 15.2
50 7.0 16.0
60 8.2 17.0
Based on these estimates, determine Seduak’s optimal capital structure
An extensive consultation paper has been provided to you related to the Conceptual Framework from the International Public Sector Accounting Standards Board.
As a group, you are to read the report, understanding its purpose and then discuss Phases 3 and 4 (Measurement as well as Presenting information in GPFR’s). NOTE: you are not required to discuss Phases 1 & 2.
This will require further research by your group to understand the background, a clear understanding of the relevance of each phase and a discussion as to where this will lead, what the likely outcomes are and why. You should consider and include the history and practices in Australia in your report, e.g. AASB and the structure that existed pre IASB. As a conclusion, you are to include what you have learned/understood from the paper and from your findings.
Assessment
Whilst it is expected that each submission will differ, assessment consideration will be based on the effort undertaken, the research and the understanding shown. Each assignment will be considered on the merits and quality of the submission. Poor presentation and referencing will draw mark deductions.
Please note: generally marks will be the same for all group members so it is important to ensure as a group, you are satisfied with your group members’ contribution.
You are an accountant at Yves Group Accountants & Investment Advisors. You have been approached by IMG Super Funds Management for your professional advice on investing in David Jones Ltd.
Evergreen Corporation (calendar year end) acquired the following assets during the current year (ignore A?§179 expense and bonus depreciation for this problem): (Use MACRS Table 1 and Table 2.)
Asset
Placed in Service Date
Original Basis
Machinery
October 25
$ 70,000
Computer equipment
February 3
10,000
Used delivery truck*
August 17
23,000
Furniture
April 22
150,000
*The delivery truck is not a luxury automobile.
a.
What is the allowable MACRS depreciation on Evergreen’s property in the current year?
b.
What is the allowable MACRS depreciation on Evergreen’s property in the current year if the machinery had a basis of $170,000 rather than $70,000?
Exercise 16 26 Multiple differences; multiple tax rates; balance sheet classification [LO16 1, 16 2, 16 4, 16 5, 16 6, 16 8] Case Development began operations in December 2013. When property is sold on an installment basis, Case recognizes installment income for financial reporting purposes in the year of the sale. For tax purposes, installment income is reported by the installment method. 2013 installment income was $600,000 and will be collected over the next three years. Scheduled collections and enacted tax rates for 2014’2016 are as follows:
Case also had product warranty costs of $80,000 expensed for financial reporting purposes in 2013. For tax purposes, only the $20,000 of warranty costs actually paid in 2013 was deducted. The remaining $60,000 will be deducted for tax purposes when paid over the next three years as follows:
2014 $ 20,000 2015 25,000 2016 15,000
Pretax accounting income for 2013 was $810,000, which includes interest revenue of $10,000 from municipal bonds. The enacted tax rate for 2013 is 30%.
Required: 1. Assuming no differences between accounting income and taxable income other than those described above, prepare the appropriate journal entry to record Case’s 2013 income taxes.
2.
What is Case’s 2013 net income?
3.How should the deferred tax amounts be classified in a classified balance sheet and at what amount?
Exercise 18 13 Cost flows in manufacturing L.O. C5
The following chart shows how costs flow through a business as a product is manufactured. Some boxes in the flowchart show cost amounts. Compute the cost amounts for the input boxes.
Uhura Company has decided to expand its operations. The bookkeeper recently completed the balance sheet presented below in order to obtain additional funds for expansion.
UHURA COMPANY BALANCE SHEET FOR THE YEAR ENDED 2014
Current assets
Cash
$232,850
Accounts receivable (net)
342,850
Inventory (lower of average cost or market)
403,850
Equity investments (trading) at cost (fair value $124,960)
144,960
Property, plant, and equipment
Buildings (net)
574,960
Equipment (net)
164,960
Land held for future use
179,960
Intangible assets
Goodwill
82,850
Cash surrender value of life insurance
92,850
Prepaid expenses
14,850
Current liabilities
Accounts payable
139,960
Notes payable (due next year)
127,850
Pension obligation
86,960
Rent payable
51,850
Premium on bonds payable
55,850
Long term liabilities
Bonds payable
504,960
Stockholders’ equity
Common stock, $1.00 par, authorized 400,000 shares, issued 292,850
292,850
Additional paid in capital
162,850
Retained earnings
?
Prepare a revised balance sheet given the available information. Assume that the accumulated depreciation balance for the buildings is $162,850 and for the equipment, $107,850. The allowance for doubtful accounts has a balance of $19,850. The pension obligation is considered a long term liability. (List Current Assets in order of liquidity. List Property, Plant and Equipment in order of Buildings and Equipment. Enter account name only and do not provide the descriptive information provided in the question.)
Exercise 6 25 Activity Analysis, Cost Behavior, and Cost Estimation
Jonathan Macintosh is a highly successful Pennsylvania orchard man who has formed his own company to produce and package applesauce. Apples can be stored for several months in cold storage, so applesauce production is relatively uniform throughout the year. The recently hired controller for the firm is about to apply the high low method in estimating the company’s energy cost behavior. The following costs were incurred during the past 12 months:
Month Pints of Applesauce Produced Energy Cost
January …………………………………………………. 35,000 ……………………………………….$23,400
February ……………………………………………….. 21,000 ………………………………………. 22,100
April ………………………………………………………24,000 ………………………………………. 22,450
May …………………………………………………….. 30,000 ………………………………………. 22,900
June …………………………………………………….. 32,000 ………………………………………. 23,350
July ………………………………………………………. 40,000 ………………………………………. 28,000
September …………………………………………….. 30,000 ………………………………………. 23,000
October ………………………………………………… 28,000 ………………………………….. 22,700
November …………………………………………….. 41,000 ………………………………….. 24,100
December …………………………………………….. 39,000 ………………………………………. 24,950
Required:
1. Use the high low method to estimate the company’s energy cost behavior and express it in
equation form.
2. Predict the energy cost for a month in which 26,000 pints of applesauce are produced.
Problem 7’37 Cost Volume Profit Analysis; Impact of Operating Changes
Houston based Advanced Electronics manufactures audio speakers for desktop computers. The following data relate to the period just ended when the company produced and sold 42,000 speaker sets:
Management is considering relocating its manufacturing facilities to northern Mexico to reduce costs.
Variable costs are expected to average $18 per set; annual fixed costs are anticipated to be $1,984,000.
(In the following requirements, ignore income taxes.)
2. Break even point: 32,000 units
Required:
1. Calculate the company’s current income and determine the level of dollar sales needed to double that figure, assuming that manufacturing operations remain in the United States.
2. Determine the break even point in speaker sets if operations are shifted to Mexico.
3. Assume that management desires to achieve the Mexican break even point; however, operations will remain in the United States.
a. If variable costs remain constant, what must management do to fixed costs? By how much
must fixed costs change?
b. If fixed costs remain constant, what must management do to the variable cost per unit? By
how much must unit variable cost change?
4. Determine the impact (increase, decrease, or no effect) of the following operating changes.
a. Effect of an increase in direct material costs on the break even point.
b. Effect of an increase in fixed administrative costs on the unit contribution margin.
c. Effect of an increase in the unit contribution margin on net income.
d. Effect of a decrease in the number of units sold on the break even point.
Exercise 9 28 Activity Based versus Traditional Costing (LO 9 4, 5, 6)
Rodent Corporation produces two types of computer mice, wired and wireless. The wired mice are designed as low cost, reliable input devices. The company only recently began producing the higher quality wireless model. Since the introduction of the new product, profits have been steadily declining. Management believes that the accounting system is not accurately allocating costs to products, particularly because sales of the new product have been increasing.
Management has asked you to investigate the cost allocation problem. You find that manufacturing overhead is currently assigned to products based on their direct labor costs. For your investigation, you have data from last year. Manufacturing overhead was $1,183,000 based on production of 340,000 wired mice and 84,000 wireless mice. Direct labor and direct materials costs were as follows:
Wired
Wireless
Total
Direct labor
$
1,043,000
$
379,000
$
1,422,000
Materials
800,000
677,000
1,477,000
Management has determined that overhead costs are caused by three cost drivers. These drivers and their costs for last year are as follows:
Activity Level
Cost Driver
Costs Assigned
Wired
Wireless
Total
Number of production runs
$
550,000
40
15
55
Quality tests performed
493,000
12
17
29
Shipping orders processed
140,000
100
40
140
Total overhead
$
1,183,000
Required:
(a)
How much overhead will be assigned to each product if these three cost drivers are used to allocate overhead? What is the total cost per unit produced for each product? (Round “Total Cost Per Unit” to 2 decimal places.)
(b)
How much overhead will be assigned to each product if direct labor cost is used to allocate overhead?What is the total cost per unit produced for each product? (Do not round intermediate calculations. Round “Overhead” to the nearest whole dollar and “Total Cost Per Unit” to 2 decimal places.)
Prepare the journal entries to liquidate Daydream Ltd.
HAMILTON LTD ‘ DAYDREAM LTD
Journal entries: Daydream Ltd
Liquidation Dr 1 000
Liquidation costs payable Cr 1 000
(Costs of liquidation)
Liquidation costs payable Dr 1 000
Cash Cr 1 000
(Payment of costs)
Liquidation account Dr 399 000
Cash Cr 9 000
Accounts receivable Cr 20 000
Land Cr 80 000
Plant Cr 240 000
Vehicles Cr 50 000
(Transfer of assets sold to liquidation account)
Accounts payable Dr 40 000
Loans Dr 60 000
Liquidation Cr 100 000
(Liabilities assumed by acquirer transferred
to liquidation account)
Retained earnings Dr 60 000
General reserve Dr 40 000
Liquidation Cr 100 000
(Transfer of reserves to liquidation account)
Shares in Hamilton Ltd Dr 280 000
Cash Dr 50 000
Liquidation Cr 330 000
(Consideration received)
Liquidation Dr 130 000
Shareholders distribution Cr 130 000
(Transfer of balance of liquidation account)
Share capital Dr 200 000
Shareholders distribution Cr 200 000
(Transfer of share capital to
shareholders distribution)
Shareholders distribution Dr 330 000
Shares in Hamilton Ltd Cr 280 000
Cash Cr 50 000
(Payment of consideration to shareholders)
So the question I have is, I dont understand what the liquidation account is in the journals? is it Liability, Owners equity or revenue? whys does it go up or down in debit or credit ? what effects of the assets and liabilities going into the account? So overall if you could give me a step by step explanation of these journals and what is happening, specifically the liquidation ones thats what Im after ?
Thanks,
below is the question this originally came from :
Exercise 9.6 LIQUIDATION OF THE ACQUIREE
*
Hamilton Ltd acquired all the assets and liabilities of Daydream Ltd, giving in exchange 100 000 shares, these having a fair value of $2.80 per share, and $50 000 cash.
At the acquisition date, the statement of financial position of Daydream Ltd was as follows:
Cash
$ 10 000
Accounts receivable
20 000
Land
80 000
Plant
240 000
Vehicles
50 000
$400 000
Accounts payable
$ 40 000
Loans
60 000
$100 000
Share capital
$200 000
General reserve
40 000
Retained earnings
60 000
$300 000
Costs of liquidation amounted to $1000.
Required
Prepare the journal entries to liquidate Daydream Ltd.
Please explain your answer in a bit of detail, as I’m trying to learn how to do the probelm as well as simply get the answer.
A recent accounting graduate from Marvel State University evaluated the operating performance of Fanning Company’s four divisions. The following presentation was made to Fanning’s Board of Directors. During the presentation, the accountant made the recommendation to eliminate the Southern Division stating that total net income would increase by $60,000. (See analysis below.)
Other Three Divisions
Southern Division
Total
Sales
$
2,000,000
$
480,000
$
2,480,000
Cost of Goods Sold
950,000
400,000
1,350,000
Gross Profit
1,050,000
80,000
1,130,000
Operating Expenses
800,000
140,000
940,000
Net Income
$
250,000
$
(60,000
)
$
190,000
For the other divisions, cost of goods sold is 80% variable and operating expenses are 70% variable. The cost of goods sold for the Southern Division is 30% fixed, and its operating expenses are 75% fixed. If the division is eliminated, only $15,000 of the fixed operating costs will be eliminated.
Prepare the analysis for new accountant’s recommendation. (Enter negative amounts using either a negative sign preceding the number e.g. 45 or parentheses e.g. (45). Do not leave any field blank. Enter 0 for the amounts.)
Fairfax Company uses weighted average process costing to account for its production costs. Direct labor is added evenly throughout the process. Direct materials are added at the beginning of the process. During September, the company transferred 735,000 units of product to finished goods. At the end of September, the goods in process inventory consists of 207,000 units that are 90% complete with respect to labor. Beginning inventory had $244,920 of direct materials and $69,098 of direct labor cost. The direct labor cost added in September is $1,312,852, and the direct materials cost added is $1,639,080.
7. value: 10.00 points
Problem 20 2A Part 1
Required:
1(a)
Determine the equivalent units of production with respect to direct labor.
Equivalent units
1(b)
Determine the equivalent units of production with respect to direct materials.
Equivalent units
check my workeBook Links (2)references
8. value: 10.00 points
Problem 20 2A Part 2
2.
Compute both the direct labor cost and the direct materials cost per equivalent unit. (Round your answers to 2 decimal place. Omit the “$” sign in your response.)
Per equivalent unit
Direct labor cost
$
Direct materials cost
$
check my workeBook Links (2)references
9. value: 10.00 points
Problem 20 2A Part 3
3(a)
Compute both direct labor cost and direct materials cost assigned to units completed and transferred out. (Round your per unit costs to 2 decimal places and final answers to the nearest dollar amount.)
Cost transferred out
Direct materials
$
Direct labor
$
3(b)
Compute both direct labor cost and direct materials cost assigned to ending goods in process inventory. (Round your per unit costs to 2 decimal places and final answers to the nearest dollar amount.)
The financial records of LeRoi Jones Inc. were destroyed by fire at the end of 2014. Fortunately, the controller had kept certain statistical data related to the income statement as follows.
1.
The beginning merchandise inventory was $97,300 and decreased 20% during the current year.
2.
Sales discounts amount to $22,500.
3.
30,800 shares of common stock were outstanding for the entire year.
4.
Interest expense was $24,400.
5.
The income tax rate is 30%.
6.
Cost of goods sold amounts to $527,000.
7.
Administrative expenses are 17% of cost of goods sold but only 8% of gross sales.
8.
Four fifths of the operating expenses relate to sales activities.
From the foregoing information prepare an income statement for the year 2014 in single step form. (Round earnings per share to 2 decimal places, e.g. 1.48 and all other answers to 0 decimal places, e.g. 2,520.)
Financial statements for Askew Industries for 2013 are shown below:
2013 Income Statement
($ in 000s)
Sales
$
8,800
Cost of goods sold
(6,200
)
Gross profit
2,600
Operating expenses
(1,900
)
Interest expense
(160
)
Tax expense
(216
)
Net income
$
324
Comparative Balance Sheets
Dec. 31
2013
2012
Assets
Cash
$
560
$
460
Accounts receivable
560
360
Inventory
760
560
Property, plant, and equipment (net)
1,600
1,700
$
3,480
$
3,080
Liabilities and Shareholders’ Equity
Current liabilities
$
860
$
610
Bonds payable
1,200
1,200
Paid in capital
560
560
Retained earnings
860
710
$
3,480
$
3,080
Calculate the following ratios for 2013. (Do not round intermediate calculations. Consider 365 days a year. The expected format for rounding is presented in each row of the table.)
Inventory turnover ratio (#.#) _____ times
Average days in inventory (#.##) ______ days
Receivables turnover ratio (#.#) _________ times Average collection period (#.##) ___________ days Asset turnover ratio (#.##) ______ times Profit margin on sales (#.##) Return on assets (#.##) _____ Return on shareholders’ equity (#.#) _____ equity multiplier (#.##) _____________ times return on shareholders’ equity (using the DuPont framework) (#.#) ____
Finney Inc. has conducted an analysis of overhead costs related to one of its product lines using a traditional costing system (volume based) and an activity ‘based costing system. Here are its results.
A firm makes six types of juice blends. They are A) Orange Pineapple, B) Orange Pineapple Mango, C) Orange Kiwi Strawberry, D) Orange Pineapple Strawberry Mango, and H) Pure Orange. The following table lists all the relevant data.
The ingredient availability is: Orange Juice = 28,000 gallons, Pineapple Juice = 140,000 gallons, Strawberry Juice = 130,000 gallons, Kiwi Juice = 100,000 gallons and Mango Juice = 80,000 gallons.
The sale price of the blends A through E are listed in the table above. Costs of the juices used the production of the blends are: Orange $1.20/gal, Kiwi $2.20/gal, Pineapple $1.30/gal, Strawberry = 1.70/gal and Mango is $2.80/gal. Note that you do not have any inventory of the juices and everything musts be bought.
Other restrictions:
1)Blend A has to be at least 10% of the total production
2)Blend B and C together cannot be more than 20% of the other four blends.
3)Blend F must account for at least 50% of the total of all blends.
4)Consumption of Kiwi Juice cannot exceed 30% of OJ consumption.
5)Consumption of Pineapple Juice cannot exceed 40% of OJ consumption.
Set this up as an Linear Program with the decision variable as quantities of the blends to be produced with the objective of maximizing profit. Use the names of variables as A, B, C, D, E and F.
Q1)Write down the complete LP in algebraic form
Q2)Solve it and provide the answer. Write the optimal solution in plain English.
Q3)Provide a picture copy of the xl screen to fit in one page showing the optimal solution.
The fiscal year ends December 31 for Lake Hamilton Development. To provide funding for its Moonlight Bay project, LHD issued 9% bonds with a face amount of $550,000 on November 1, 2013. The bonds sold for $502,815, a price to yield the market rate of 10%. The bonds mature October 31, 2033 (20 years). Interest is paid semiannually on April 30 and October 31.
1. What amount of interest expense related to the bonds will LHD report in its income statement for the year ending December 31, 2013?
2. What amount(s) related to the bonds will LHD report in its balance sheet at December 31, 2013?
3. What amount of interest expense related to the bonds will LHD report in its income statement for the year ending December 31, 2014?
4.
What amount(s) related to the bonds will LHD report in its balance sheet at December 31, 2014?
Students will be required to pull information on 2 publically traded companies in the same industry from the SEC Edgar Online Database for 2 years each (you will learn how to do this in class on April 25th). Students must hand in the following:
a)calculations either by hand, in word, or in excel (if in excel, you need to clearly show me the calculations without me having to click on a cell to find your formula) for AT LEAST 5 financial ratios (from Chapter 13) over 2 years for each company. They must be ratios to fulfill this requirement and NOT horizontal analysis. You can also do horizontal analysis if you want to make your paper better but it is not part of the requirement. Since this assignment must be submitted online, you can do it in an Excel file and upload it here, take photos and upload the work as a jpeg, submit it as a Word document, or use a scanner to scan it in. There is a lot of technology available to be able to do this. If those files are too big to attach, send them to my email at emdevos@utep.edu before the due date.
That means for each company, you have 5 ratios for each of the two years. Therefore, you hand in 20 ratios that you calculated: 5 for Firm A in 2010, 5 for Firm A in 2011, 5 for Firm B in 2010 and 5 for Firm B for 2011.
The ratios need to make sense. If I am doing an accounting firm, it would not make sense for me to calculate inventory turnover since they are not a manufacturer.
The firms need to be currently traded as of 2010 and 2011.
You may not use firms that do not file 10 K financial statements such as certain foreign firms that use IFRS. You must use firms that file in accordance with U.S. GAAP.
b) copy of the companies’ financial statements from their annual 10 ks where you highlight the numbers you used for your calculations in a). The numbers must be highlighted that you used in your calculations in part A. You can upload this as a Word document, a PDF, a photo, or scan it in. If it is too big to upload through this assignment link, you must email it to me at emdevos@utep.edu before the deadline.
c) a 2 5 page report that is double spaced with 12 pt. Times New Roman Font and normal margins.
In the written component that you hand in, you must i) tell me what you found when you calculated your ratios, ii) tell me which company is in better financial shape, and iii) make a recommendation if you would invest in one, both, or neither of the companies. Your recommendation must be supported by your calculations. You may use outside information as long as you also include the required components above and cite properly. The actual written part must be well written and cohesive.
Failure to hand in all the requirements will result in loss of points. We will discuss how to find publicly traded companies, how to find competitors in an industry, and how to pick good ratios to calculate in class on April 25th. I will put up a thread in Blackboard on the Discussion tab that will automatically open on April 25th at 4 pm where you can pick your firms. If will be first come, first serve once I put up that thread. Once a firm is picked, no one else may use that firm. You are responsible for checking the thread and making sure your firms are available, as well as checking on the SEC website if they are traded as of 2010 and 2011, and file their 10 Ks in accordance with GAAP. You will have until May 5th to claim your firms and verify all the information is there for you to do your calculations. If you change firms after that point, there will be a minimum 10 point loss. Therefore, check to make sure the information is available before claiming your firms. If you need help picking firms, please come see me. If you use a ratio that requires you to calculate an average, you may also need to pull up the prior fiscal year’s statements.
Make sure you have at least 3 attachments when you submit: your ratios, the highlighted portions of the financial statements from the 10Ks where you got your numbers, and your write up. If they do not attach here due to size issues of your files, make sure you submit your write up through this link and whatever doesn’t fit send to emdevos@utep.edu . Everything must be handed in before May 7th at 9 am. Anything handed in after that will not be accepted and you will not get credit for that work that was not submitted by the deadline.
You will be graded on: submitting the three required parts that you must give me (the calculation of the ratios, the highlighted financials, the write up), the quality of your write up (what you found when you calculated your ratios, which company is in better financial shape, would you invest in either company, one of the companies, neither of the companies), and your ability to communicate what you found.
I want this assignment to be done very carefully as it carries 25 marks,which will be added in my final exam. Plagiarism is strictly checked and prohibited with a software nowadays.so plzz avoid copying as much as possible.I have attached the question already with the requirements of material to be included.Hope to get the assignment on time….Try to use simple language as much as possible and straight to the point.
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? The Business School BULAW 3731 INCOME TAXATION – Law & Practice Assignment Semester 1 2013 ?? INSTRUCTIONS See the Instructions and Assessment Criteria in the Course Description and make sure you follow them! Please answer all parts of the question Attached to this document is a Checklist to be filled in by you and attached to your essay/assignment. Read this now before you start your research. If you have followed this checklist, there is a good chance you will do well. All work presented for assessment in this course must comply with the format outlined in the University’s Presentation of Academic Work publication, available from the bookshop or on line at ? HYPERLINK “http://www.ballarat.edu.au/generalguide” ?www.ballarat.edu.au/generalguide?. All essays must be accompanied by a signed official cover sheet (‘Plagiarism Declaration Form’), available at www.ballarat.edu.au/ard/business/student_info_webct.shtml and lodged as appropriate for your campus. You MUST reference in the body of the essay every time you use information from other people. This requires you to keep a track of where you are taking information from and then writing the reference up. You should use the Harvard/APA style; and use the University’s new Presentation of Academic Work. The Library’s website also has a citation style guide site. If you plagiarise (intentionally OR unintentionally) you will be given zero: see Regulation 6.1.1 for more details. DUE DATE: Thursday, 16 May 2013. Please check with the Course Description for details of where and when to submit your assignment. If you need an extension you must ask for one BEFORE the due date (unless this is impossible). The assignment should not exceed approximately 2000 words. The assignment is worth 25%. Assignment Part 1 Schubert, Mahler and Tull are resident Australian seamen employed on the fishing trawler MV St Cecilia. Whilst on a routine fishing operation the captain of St Cecilia heard a radio…
Each group member is required to submit 1,500 words .
Your hard copy will be handed back to you once marked.
The date of submission is Friday 4th May. As per your student handbook, late submissions will draw penalties.
It is to be in a report format, complete with correct referencing by following Harvard referencing system. Make sure about university plagiarisms policy if followed properly.
Assignment requirements.
An extensive consultation paper has been provided to you related to the Conceptual Framework from the International Public Sector Accounting Standards Board.
you need to read the report, understanding its purpose and then discuss Phases 3 and 4 (Measurement as well as Presenting information in GPFR’s). NOTE: you are not required to discuss Phases 1 & 2.
This will require you to understand the background, a clear understanding of the relevance of each phase and a discussion as to where this will lead, what the likely outcomes are and why. You should consider and include the history and practices in Australia in your report, e.g. AASB and the structure that existed pre IASB. As a conclusion, you are to include what you have learned/understood from the paper and from your findings.
Assessment
Whilst it is expected that each submission will differ, assessment consideration will be based on the effort undertaken, the research and the understanding shown. Each assignment will be considered on the merits and quality of the submission. Poor presentation and referencing will draw mark deductions.
Use some relevant references also to show the research.
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HA3011 Advanced Financial Accounting Assignment Instructions: Each group member is required to submit 1,500 words . Your hard copy will be handed back to you once marked. The date of submission is Friday 4th May. As per your student handbook, late submissions will draw penalties. It is to be in a report format, complete with correct referencing by following Harvard referencing system. Make sure about university plagiarisms policy if followed properly. Assignment requirements. An extensive consultation paper has been provided to you related to the Conceptual Framework from the International Public Sector Accounting Standards Board. you need to read the report, understanding its purpose and then discuss Phases 3 and 4 (Measurement as well as Presenting information in GPFR’s). NOTE: you are not required to discuss Phases 1 & 2. This will require you to understand the background, a clear understanding of the relevance of each phase and a discussion as to where this will lead, what the likely outcomes are and why. You should consider and include the history and practices in Australia in your report, e.g. AASB and the structure that existed pre IASB. As a conclusion, you are to include what you have learned/understood from the paper and from your findings. Assessment Whilst it is expected that each submission will differ, assessment consideration will be based on the effort undertaken, the research and the understanding shown. Each assignment will be considered on the merits and quality of the submission. Poor presentation and referencing will draw mark deductions. Use some relevant references also to show the research.
This assignment is to be completed in groups of three and comprises twenty per cent of the marks for this course.
Assessment Criteria:
Student work will generally be assessed in terms of the following criteria:
1. Effectiveness of communication ie readability, legibility, grammar, spelling, neatness, completeness and presentation will be a minimum threshold requirement for all written work submitted for assessment. Work that is illegible or incomprehensible and does not meet the minimum requirement will be awarded a fail grade.
2. Demonstrated understanding This will be evidenced by the student’s ability to be dialectical in the discussion of contentious issues.
3. Evidence of research This will be evidenced by the references made to the statutes, auditing standards, books, journal articles and inclusion of a bibliography.
Note:
1. All written work must conform with the University of Ballarat General Guide for the Presentation of Academic Work.
2. For all written work students must ensure that they submit their own original work. Any act of plagiarism will be severely penalised.
Plagiarism is presenting someone else work as your own and is a serious offence with serious consequences. As set out in the University Regulation 6.1.1, students who are caught plagiarising will, for a first offence, be given a zero mark for that task. A second offence will result in a failing grade for the course(s) involved and any subsequent offence will be referred to the Student Discipline Committee. Student must be aware of the University Regulation 6.1.1 Student Plagiarism, available at http://www.ballarat.edu.au/legislation/6.1.1 plagiarism. The link to the library website for more information is:http://www.ballarat.edu.au/library/assignment and research help/referencing
Students must:
fully reference the source(s) of all material, even if you have re expressed the ideas, facts or descriptions;
acknowledge all direct quotations; and
not submit work that has been researched and written by another person.
PART A (7.5 marks) (1000 words)
What are the significant and pervasive audit deficiencies within accounting firms? Discuss.
How can these deficiencies be rectified? Discuss.
PART B (7.5 marks) (1000 words)
A fierce battle is raging over coveted top rankings for accounting firms.
.
List the top 20 Australian accounting firms.
Where does their money come from? Discuss.
Most of the (Australia) nation’s top 20 fastest growing firms share two traits. Discuss.
PART C (5 marks) (750 words)
What are the duties to report information to ASIC by auditors?
What are the institutional arrangements and procedures for enforcing discipline against registered company auditors?
Should penalties for breaches of the financial reporting requirements of the Corporations Act be increased? Discuss or explain.
This assignment is based upon O’Leary Lab 4: Stock Portfolio Analysis and consists of two (2) parts – an Excel based assignment and a paper.
You have been assigned to evaluate the stock market performance of firms who manufacture accounting software products. Your evaluation will be based upon large and medium market firms. The firms are as follows:
Large Market Stocks:
Oracle Software (Oracle Corp: NASDAQ)
SAP (SAP AG: NYSE)
Medium Market Stocks:
Microsoft Great Plains (Microsoft: NASDAQ)
Small Market Stocks:
QuickBooks (Intuit: NASDAQ)
Peachtree (Sage Grp: LSE)
Part 1: Excel Spreadsheet Assignment
Scenario 1
You have been given $1,000,000 to invest the five (5) stocks. You must invest the $1,000,000 accordingly
No more than 35% of your investment will be in the Large Market stocks, with a minimum of 15% investment in any given stock
No more than 30% of your investments will be in the Medium Market stock, with a minimum of 15% investment in the stock
No more than 35% of your investment will be in the Small Market stocks , with a minimum of 15% investment in any given stock
The purchase date of the stock will be 6 months ago. Track your stocks’ daily performance for the 90 trading days following the purchase date. During this time, you will note the gains and losses each day. At the end of the 90 days’ tracking period, calculate your net gain (or loss) for each stock and your total investment at the end of the 90 days. Develop the appropriate charts that highlight your performance. You will create a minimum of two charts.
Note: Your purchase must be in whole shares. For example, you cannot purchase 100.5 shares. You must purchase either 100 or 101 shares. For this reason, you may not total to exactly $1,000,000, but you will come close.
Scenario 2
You are now skeptical of the Medium Market stock. With that, you will now invest your $1,000,000 accordingly
No more than 50% of your investment will be in the Large Market Stocks, with a minimum of 20% investment in any given stock
No more than 50% of your investment will be in the Small Market Stocks, with a minimum of 20% investment in any given stock
The purchase date of the stock will be six (6) months ago. Track your stocks’ daily performance for the 90 trading days following the purchase date. During this time, you will note the gains and losses each day. At the end of the 90 days’ tracking period, calculate your net gain (or loss) for each stock and your total investment at the end of the 90 days. Develop the appropriate charts that highlight your performance. You will create a minimum of two (2) charts.
Note: Your purchase must be in whole shares. For example, you cannot purchase 100.5 shares. You must purchase either 100 or 101 shares. For this reason, you may not total to exactly $1,000,000, but you will come close.
Scenario 3
You are now skeptical of the Large Market stock. With that, you will now invest your $1,000,000 accordingly
No more than 50% of your investment will be in the Medium Market stock, with a minimum 20% investment here
No more than 50% of your investment will be in the Small Market Stocks, with a minimum 20% investment here
The purchase date of the stock will be six (6) months ago. Track your stocks’ daily performance for the 90 trading days following the purchase date. During this time, you will note the gains and losses each day. At the end of the 90 days’ tracking period, calculate your net gain (or loss) for each stock and your total investment at the end of the 90 days. Develop the appropriate charts that highlight your performance. You will create a minimum of two (2) charts.
Note: Your purchase must be in whole shares. For example, you cannot purchase 100.5 shares. You must purchase either 100 or 101 shares. For this reason, you may not total to exactly $1,000,000, but you will come close.
Scenario 4
You are now a believer of only the Medium Market stock. With that, you will now invest your $1,000,000 into that stock.
The purchase date of the stock will be six (6) months ago. Track your stocks’ daily performance for the 90 trading days following the purchase date. During this time, you will note the gains and losses each day. At the end of the 90 days’ tracking period, calculate your net gain (or loss) for the stock and your total investment at the end of the 90 days. Develop the appropriate charts that highlight your performance. You will create a minimum of two (2) charts.
Note: Your purchase must be in whole shares. For example, you cannot purchase 100.5 shares. You must purchase either 100 or 101 shares. For this reason, you may not total to exactly $1,000,000, but you will come close.
Note
Do not worry about any commission fees or miscellaneous charges.
Assignment
Determine how much money you earned or lost with each stock on a daily basis.
Instructions on how to complete
There is no sample Excel workbook to use as part of the project, therefore you will create your own workbook. In creating your workbook, be sure to include the following data (however, other data will be stored in your scenario) in a columnar format.
Stock name
Stock symbol
Number of shares purchased / acquired
Stock price
Date of stock transaction
Start your scenario using the opening day price for each stock as your purchase price and use the closing stock price to calculate how much money you earned or lost each day.
At the end of your scenario, calculate the following for each stock in question.
The highest stock price for the period
The lowest stock price for the period
The average stock price for the period
The largest amount of profit (loss) earned for the period
The lowest amount of profit (loss) earned for the period
Track the stock for 90 consecutive days that the market is open.
Submit
One Excel workbook that contains each of the four (4) scenarios. You will need to use the appropriate Excel formulas and functions which will show the instructor how you derived your results.
Part II: Paper
Write a three to four (3 4) page paper that summarizes your findings from the four (4) scenarios as well as how using Microsoft Excel helped you with this process. Use the following outline:
1. Summarize the various accounting systems that each firm provides. Be sure to address the following for each firm: a. The various types of accounting systems it sells (e.g., Oracle sells Oracle Financials as well as PeopleSoft financials)
b. The industries that it markets itself to (e.g., most firms sell their products to banking firms, construction firms)
c. Explain how Wall Street views the firm. Is it positive? Negative? Why?
2. Analyze the results from the four (4) scenarios to determine how creditable your sources were and how your selection of sources
may have been improved.
3. Develop one (1) additional scenario that would have exceeded the results from your best scenario.
4. Determine how your findings could be used to better drive management decisions.
Your assignment must follow these formatting requirements:
Be typed, double spaced, using Times New Roman font (size 12), with one inch margins on all sides; citations and references must follow APA or school specific format. Check with your professor for any additional instructions.
Include a cover page containing the title of the assignment, the student’s name, the professor’s name, the course title, and the date. The cover page and the reference page are not included in the required assignment page length.
The specific course learning outcomes associated with this assignment are:
Discuss how automated accounting software can help management make better informed business decisions.
Organize information between Word and Excel to communicate to internal and external users.
Use technology and information resources to research issues in microcomputer applications for accountants.
Write clearly and concisely about microcomputer applications for accountants using proper writing mechanics.
Grading for this assignment will be based on answer quality, logic / organization of the paper, and language and writing skills. Click here to access the rubric for this assignment.
ACT360 Intermediate Accounting 2Portfolio Project The list provided below is divided into sections by modules to correspond with the reading and information in each module. It is strongly recommended that you complete each problem duringthe associated module. Then review the problems before the end of the course and submit the entire assignment when the Portfolio Project is due in Module 8.Submit the final delivery of your problem as one Word document. If you use Excel spreadsheets to answer the questions, please copy and paste the relevant sections into your document.You may submit only ONE document for the Portfolio Project. Please be sure all of your work is includedand clearly label your answers, using APA for formatting and citation as required.Your portfolio is due Sunday 11:59 pm MTNtime at the end of Module 8.Marks and SpencerGroupplc (M&S)Refer to the Marksand Spencer Group financial statements and the accompanying notes to answer the following questions. The financial statements of M&S can be accessed at:http://corporate.marksandspencer.com/documents/publications/2010/annual_report_2010Module 11)What cash outflow obligations related to the repayment of long term debt does M&S have over the next 5 years? 2)M&S indicates that it believes it has the ability to meet business requirements in the foreseeable future. Prepare an assessment of its liquidity, solvency, and financial flexibility using ratio analysis. 3)What is the par or stated value of M&S’s preference shares? 4)What is the par or stated value of M&S’s ordinary shares? 5)What percentage of M&S’s authorized ordinary shares was issued at April 3, 2010? 6)How many ordinary shares were outstanding at April 3, 2010, and March 28, 2009? Module 2Under M&S’s share based compensation plan, share options are granted annually to key managers and directors. 1)How many options were granted during 2010under the plan? 2)How many options were exercisable onMarch 29, 2010?
3)What number of diluted weighted average shares outstanding was used by M&S in computing earnings per share for 2009and 2010? What were M&S’s diluted earnings per share in 2009and 2010? 4)What other share based compensation plans does M&S have? 5)What investments does M&S report in 2010and where are these investments reported in its financial statements? 6)How are M&S’s investments valued? How does M&S determine fair value? 7)How does M&S use derivative financial instruments? Module 31)What amounts relative to income taxes does M&S report in its: a.2010income statement? b.29 March 2010balance sheet? c.2010statement of cash flows? 2)M&S’s provision for income taxes in 2009and 2010was computed at what effective tax rates? (See the notes to the financial statements.) 3)How much of M&S’s 2010total provision for income taxes was current tax expense, and how much was deferred tax expense? 4)What did M&S report as the significant components (the details) of its 29 March, 2010deferred tax assets and liabilities? Module 41)What kind of pension plan does M&S provide its employees? 2)What was M&S’s pension expense for 2009and 2010? 3)What is the impact of M&S’s 2010 pension plans on its financial statements? 4)What information does M&S provide on the target allocation of its pension assets? How do the allocations relate to the expected returns on these assets? Module 51)What types of leases are used by M&S? 2)What amount of finance leases was reported by M&S in total and for less than one year? Module 61)Were there changes in accounting policies reported by M&S during the two years covered by its income statements (2009–2010)? If so, describe the nature of the change and the year of change. 2)What types of estimates did M&S discuss in 2010? Module 71)Which method of computing net cash provided by operating activities does M&S use? What were the amounts of net cash provided by operating activities for the years 2009and 2010? Which two items were most responsible for the increase in net cash provided by operating activities in 2010? 2)What was the most significant item in the cash flows used for investing activities section in2010? 3)What was the most significant item in the cash flows used for financing activities section in 2010?
Question 1 Inherent Risk, Control Risk and Auditplanning (6% of total subject assessment)
You are the audit senior responsible for the audit of Delilah Ltd. You are currently planning the audit for the year ended 30 June 2012. During your initial planning meeting held with the financial controller, he told you of the following changes in the company’s operations:
(i) Due to the financial controller’s workload, the company has employed a treasurer. The financial controller is excited about the appointment because in the two months that the treasurer has been with the company he has realized a small profit for the company through foreign exchange transactions in yen.
(ii) Delilah has planned to close an inefficient factory in country New South Wales before the end of 2012. It is expected that the redeployment and disposal of the factory’s assets will not be completed until the end of the following year. However, the financial controller is confident that he will be able to determine reasonably accurate closure provisions.
(iii) To help achieve the budgeted sales for the year, Delilah is about to introduce bonuses for its sales staff. The bonuses will be an increasing percentage of the gross sales made, by each salesperson, above certain monthly targets.
(iv) The company is using a new general ledger software package. The financial controller is impressed with the new system, because management accounts are easily produced and allow detailed comparisons with budgets and prior period figures across product lines and geographical areas. The conversion to the new system occurred with a minimum of fuss. As it is a popular computer package, it required only minor modifications.
(v) As part of the conversion, the position of systems administrator was created. This position is responsible for all systems maintenance, including data backups and modifications. These tasks were the responsibility of the accountant.
(vi) The managing director has returned from the USA, where he signed a contract to import a line of clothing that has become the latest fashion fad in the USA. The company has not previously been engaged in the clothing industry.
Required:
For each of the scenarios above, identify which of the components of audit risk (inherent, control or detection risk) are affected. In your answer you will need to justify you choice. Format your answer as follows:
Part Inherent Risk or CR Justification
i
ii
iii
iv
Marking criteria
Marks will be awarded for responses to question 1 based on the extent to which you:
· Identify the component of audit risk affected
Justify your selection of the relevant component of audit risk
Question2 Internal Controls and Substantive Testing (6% of total subject assessment)
You are the auditor of PC Ltd., a company that produces low cost electronic goods to children and young adults. The audit has a year end of 30 th June 2012.
There are four main people involved with the acquisitions of inventory for PC Ltd. Ms Auburn is the purchases officer; Mr Brown is the Accounts Payable Clerk;Mr Crimson is the Financial Controller and Ms Dark is the Payments Officer.
The acquisitions system works as follows:
· Ms Auburn is responsible for purchases within PC ltd. There is a computerized inventory system and whenever the inventory level goes below a certain level, Ms Auburn prepares a purchases requisition to buy new stock from one of three suppliers that PC uses.
· Ms Auburn then prepares a three part prenumbered purchase order. Every Month Mr Crimson reviews a listing of purchase orders issued to ensure all have been accounted for. The original copy of the purchase order is sent to the vendor. The receiving department within PC is sent the second copy, which is then used as a receiving report. The third and final copy is kept on file within the purchases department along with the original purchases requisition.
· When the purchased goods arrive they are immediately sent to the receiving department where the receiving report (which is the second copy of the invoice) is filled out by the store room employee and authorized by the store room supervisor. A copy of this document is taken and kept in the store room. The original is sent to Mr Brown in accounts payable.
· When the supplier invoice is received it is forwarded to Mr Brown. He checks the price on the invoice compares the quantities to the details on the receiving report and checks the footings and calculations. Once this is done he enters the details of each invoice into the computer system that updates the purchases journal and accounts payable master file.
· The invoice is then sent to Mr Crimson for authorisation. Attached to the invoice is a copy of the materials purchase requisition and the receiving report. After Mr Crimson has approved the invoice for payment the documents are sent to the person responsible for cheque preparation in the accounting department (Ms Dark).
Required:
a) Identify three controls that operate within this system and state the potential errors they are aimed at preventing.
b) Describe two additional controls (or improvements to controls) that you would implement into this system and why.
c) Describe the substantive tests that you would perform on transactions in the acquisitions cycle of this system to gain adequate assurance over the assertions of completeness, cut off and accuracy.
Marking criteria
Marks will be awarded for responses to question 2 based on the extent to which you:
· Identify the relevant internal controls and the errors they are aimed at preventing.
· Describe two additional controls or improvements to the existing controls that you would implement and why.
· Describe the audit procedures you would perform in relation to the assertions identified in the question.
Question3 Analytical procedures and Substantive Testing (8% of total subject assessment)
Below are the financial statements and additional information for Tehran Ltd.
Balance Sheet
30/06/2012
30/06/2011
$’000
$’000
Current Assets
Cash
58
73
Receivables
4579
3928
Inventories
3624
2047
Total Current Assets
8261
6048
Non Current Assets
Property Plant & Equipment
28763
29417
Receivables
2000
2000
Total Non Current Assets
30763
31417
Total Assets
39024
37465
Current Liabilities
Bank Loan Secured
5000
7500
Accounts Payable
2500
2473
Provisions
643
610
Total Current Liabilities
8143
10583
Non Current Liabilities
Bank Loan Secured
22000
20000
Provisions
547
510
Total Non Current Liabilities
22547
20510
Total Liabilities
30690
31093
Net Assets
8334
6372
Shareholders Equity
Share Capital
5000
5000
Retained Profits
3334
1372
Total Shareholders Equity
8334
6372
Income Statement
30/06/2012
30/06/2011
$’000
$’000
Revenue
20007
19943
COGS
13305
15428
Gross Profit
6702
4515
Operating Expenses
3486
3047
Net Profit Before Tax
3216
1468
Tax
1254
572
Net Profit After Tax
1962
896
Retained Profits: Beginning
1372
476
Retained Profits: End
3334
1372
Tehran Ltd manufactures carpets. Approximately 80% of the company’s sales arise as a result of exports. When Tehran sells abroad the customers are billed in the currency of that country.
The main raw material used by Tehran is wool, which is purchased locally in Australia. You have been informed that the company’s profitability has improved due to a recent slump in wool prices.
With the exception of the managing director, Hank Largow, all of the management of Tehran are from Australia. Hank is on a five year contract which was put in place by Tehrans’ US parent company. Hank has a reputation for delivering results from subsidiaries which have not performed well in the past. Hank does not much like Australia and has every intention of returning to the US when his contract is finished. The US parent company was dissatisfied with the company’s 2011 performance and has paid close attention to the company’s performance in 2012.
The company operates a standard costing system and the finished goods inventory is valued at standard cost. Raw materials are valued at actual invoiced cost. No work in progress exists at year end. During 2012, production has been increased by 10% compared to 2011 levels. His has resulted in favourable absorption variances which have contributed to the improved profitability during 2012.
Tests on the compnay’s inventory and debtors controls in prior years have shown the systems to be reliable. The systems are capable of producing reports on the ageing of inventory and debtors and the sales history of individual profit lines.
Approximately 80% of the company’s receivables are overseas customers and the debt is denominated in foreign currency. Most of these customers are on 60 day credit terms.
Midway through the year a new financial controller, Mr Pink, was appointed after the previous financial controller resigned. Mr Pink has informed you that a number of customers have complained about the quality of Tehran’s products.
The property plant and equipment account is broken down as follows:
Property – factory building 27,000,000
Plant & Equipment (including vehicles) 1,763,000
28,763,000
Additions and disposals of fixed assets have not been substantial during 2012. The factory itself was acquired 6 years ago and since that time no independent valuation has been carried out. Hank has assured you that the current market value of the company is not less than $27,000,000.
The bank loans are secured by a fixed charge over the company’s buildings. A loan repayment of $5 million due on 30 th November 2012 was reduced to $500,000. Hank has stated that this was done with the agreement of the bank and that the bank is comfortable with the company’s performance. Hank also pointed out that the company has made all of its interest payments on time.
The non current receivable is an export market development grant from the federal government.
In prior years no serious differences between the auditors and the management have arisen. The audit has always been completed on time with an unqualified opinion issued.
Required:
a) Calculate the following ratios: Gross Margin, Net Profit Ratio, Return on total assets, Current Ratio, Quick Ratio, Inventory Turnover, Accounts Receivable turnover, Debt to Equity Ratio (NB, for inventory turnover and accounts receivable turnover, assume the balances for 2010 are the same as 2011).
b) Making reference to the ratios you calculated in part a) and the additional information provided, describe what you consider to be the risk factors that will impact on the audit of receivables and inventory.
c) What other risk factors (aside from those related to receivables and inventory) do you think will impact on the audit?
d) In respect to the accounts of Inventory, Accounts Receivable and Land and Buildings, outline the substantive procedures you would perform. (In your answer you will need to identify the audit assertion(s) most at risk for each of these accounts).
Sunrise Pharmaceuticals Pty Ltd is a combined manual and computerised practice set, produced primarily as a teaching aid to be used in association with introductory accounting texts and the international accounting standards. Part A of this practice set provides experience in manually recording and posting a variety of business transactions from information provided in source documents. This will assist students in gaining an understanding of the flow of data in an accounting system, as many of these processes are out of sight in a computerised accounting system. Completion of the practice set for a one month period should ensure a greater appreciation of: • the steps in the accounting cycle for a business • the use of special journals for processing data more efficiently • the use of subsidiary ledgers to remove detail from the general ledger • the steps in posting journals to the general ledger and subsidiary ledgers • the perpetual inventory system • the bank account reconciliation • balance day adjustments and the general ledger closing process • how the accounting cycle culminates in the preparation of financial statements • how the goods and services tax (GST) impacts on accounting • the variety of source documents • how to extract information from source documents to record transactions.
Part B of this practice set uses a list of transactions in place of source documents. It is designed to provide students with an understanding of a computerised accounting system, how it operates, how to set up a data file and enter opening balances, how to record transactions and how to produce useful reports using MYOB AccountRight Plus v19. MYOB is a popular, reasonably priced, ‘off the shelf, integrated computerised accounting package that is menu driven and user friendly. On completion of part B, students will appreciate how the same processes as those listed above for the manual practice set operate in a computerised environment. The ‘hands on’ methodology used in this practice set reinforces understanding of accounting fundamentals that are typically encountered in practice. The practice set is therefore suitable for students undertaking a course in accounting or those studying introductory computer based accounting information systems. There are no complex corporate transactions in this practice set beyond the calculation and payment of company tax. No dividends were paid during the period and tax effect accounting is beyond the scope of this practice set.
Note: In order to gain the most benefit from the practice set, it is recommended that part A be completed first, followed by part B. However, part A and part B can each be independently completed.
Raner, Harris, & Chan is a consulting firm that specializes in information systems for medical and dental clinics. The firm has two offices—one in Chicago and one in Minneapolis. The firm classifies the direct costs of consulting jobs as variable costs.
Assume that Minneapolis’ sales by major market are as follows:
Market
Minneapolis
Medical
Dental
Sales
$510,000
100%
$340,000
100%
$170,000
100%
Variable expenses
306,000
60%
221,000
65%
85,000
50%
Contribution margin
204,000
40%
119,000
35%
85,000
50%
Traceable fixed expenses
61,200
12%
17,000
5%
44,200
26%
Market segment margin
142,800
28%
$102,000
30%
$40,800
24%
Common fixed expenses not traceable to markets
15,300
3%
Office segment margin
$127,500
25%
The company would like to initiate an intensive advertising campaign in one of the two market segmentsduring the next month. The campaign would cost $6,800. Marketing studies indicate that such a campaign would increase sales in the Medical market by $59,500 or increase sales in the Dental market by $51,000.
Required:
Determine the increase in net operating income in each market if the advertising campaign were to be initiated in that market.(Omit the “$” sign in your response.)
1. Corresponds to CLO 1(a) Which of the following interrelationships is not important to understand when preparing financial statements: (Points : 1)
Total payments on the balance sheet should equal the cash payments for operating activities on the statement of cash flows. Net income from the income statement is used in the retained earnings statement. The ending retained earnings from the retained earnings statement is used in the stockholders’ equity section of the balance sheet. The cash on the balance sheet should be equal to the cash at the end of the period on the statement of cash flows.
2. Corresponds to CLO 1(b) Which of the following does not describe the balance sheet? (Points : 1)
The balance sheet presents a picture at a point in time of what a business owns and owes. The balance sheet reports the assets, liabilities, and stockholders’ equity at a specific date. The balance sheet reports the changes in assets, liabilities, and stockholders’ equity over a period of time. The balance sheet reports assets and claims to those assets at a specific point in time.
3. Corresponds to CLO 1(c) Tulsa Corporation began the year by issuing $50,000 of common stock for cash. The company recorded revenues of $200,000, expenses of $125,000, and paid dividends of $20,000. What was Tulsa’s net income for the year? (Points : 1)
$75,000 $105,000 $55,000 $200,000
4. Corresponds to CLO 1(d) What is the primary purpose of the statement of cash flows? (Points : 1)
To disclose a company’s financing activities. To report information about cash receipts and cash payments of a company. To determine the cash balance to be used on the balance sheet. To determine a company’s working capital.
5. Corresponds to CLO 2(a) Based on the following account balances, what is the total of the debit and credit columns of this company’s adjusted trial balance? Service Revenue…$4,500; Cash…$1,300; Unearned revenue…$3,400; Salary expense…$1,100; Common stock…$1,000; Equipment…$7,000; Prepaid insurance…$1,200; Depreciation expense…$700; Accumulated depreciation…$1,400; Retained earnings…$1,000. (Points : 1)
$8,100 $11,300 $12,000 $15,800
6. Corresponds to CLO 2(b) Given the following adjusted trial balance amounts, what is the net income for the year? Debit balances Cash…$10,000; Accounts receivable…$4,000; Short term investments…$10,000; Prepaid rent…$700; Property, plant, & equipment…$20,000; Salary expense…$6,000; Depreciation expense…$2,000; Rent expense…$3,500 Credit balances Accumulated depreciation…$6,000; Accounts payable…$2,600; Unearned revenue…$3,000; Common stock…$8,000; Retained earnings…$12,000; Service revenue…$24,000; Interest revenue…$600. (Points : 1)
$13,100 $10,100 $13,800 $12,400
7. Corresponds to CLO 2(c) Given the following adjusted trial balance amounts, what is the retained earnings ending balance to be reported on the statement of retained earnings? Debit balances Cash…$8,000; Accounts receivable…$12,000; Inventory…$13,000; Property, plant, & equipment…$30,000; Cost of goods sold…$21,000; Salary expense…$4,000; Depreciation expense…$3,000 Credit balances Accumulated depreciation…$9,000; Accounts payable…$5,000; Common stock…$35,000; Retained earnings…$12,000; Revenue…$30,000. (Points : 1)
$12,000 $14,000 $10,000 $17,000
8. Corresponds to CLO 2(d) Given the following adjusted trial balance amounts, total assets reported on the balance sheet is? Debit balances Cash…$20,000; Accounts receivable…$12,000; Equipment…$60,000; Supplies…$5,000; Expenses…$110,000. Credit balances Accumulated depreciation…$6,000; Accounts payable…$1,000; Common stock…$40,000; Retained earnings…$10,000; Revenue…$150,000. (Points : 1)
$141,000 $97,000 $91,000 $86,000
9. Corresponds to CLO 3(a) Intuition Company provided consulting services and billed the client $4,000. As a result of this transaction, (Points : 1)
assets increased by $4,000 equity increased by $4,000 assets and equity remained unchanged. both a and b.
10. Corresponds to CLO 3(b) Delbert Industries purchased inventory of $15,000 on account. The entry to record this purchase will include: (Points : 1)
a debit to Inventory and a credit to Accounts Payable. a debit to Inventory expense and a credit to Accounts Receivable. a debit to Accounts Payable and a credit to Inventory. a debit to Inventory and a credit to Cash.
11. Corresponds to CLO 3(c) During June 2013, its first month of operations, the owner of Jinx Enterprises invested cash of $25,000. Jinx had cash sales of $8,000, bought supplies of $600 on account, and paid expenses of $12,500. Assuming no other transactions impacted the cash account, what is the balance in Cash at June 30. (Points : 1)
12. Corresponds to CLO 3(d) Hemmingway Corporation paid salaries of $8,000 and advertising expense of $3,000. Which of the following journal entries correctly records these expenses? (Points : 1)
13. Corresponds to CLO 4(a) Which of the following statements is correct regarding accrued revenues and unearned revenues, before adjusting entries have been made? (Points : 1)
Accrued revenues have not been earned and unearned revenues have been earned. Accrued revenues have been paid and unearned revenues have not. Accrued revenues have not been recorded and unearned revenues have been recorded. Accrued revenues have been recorded and unearned revenues have been recorded.
14. Corresponds to CLO 4(b) Hudson Law Corporation received $5,500 cash for legal services to be rendered in the future. The full amount was credited to the liability account Unearned Service Revenue. At the end of the period, Hudson determines that $2,500 of the legal services have been rendered. The appropriate adjusting journal entry to be made at the end of the period is: (Points : 1)
debit Unearned Service Revenue, $3,000; credit Cash, $3,000. debit Unearned Service Revenue, $3,000; credit Service Revenue, $3,000. debit Unearned Service Revenue, $2,500; credit Service Revenue, $2,500. debit Service Revenue, $2,500; credit Unearned Service Revenue, $2,500.
15. Corresponds to CLO 4(c) Ace Corporation purchased office supplies costing $15,000 and debited Office Supplies for the full amount. At the end of the accounting period, a physical count of office supplies revealed $2,400 still on hand. The appropriate adjusting journal entry to be made at the end of the period is: (Points : 1)
16. Corresponds to CLO 4(d) On September 1, Northgate paid $18,000 to Evans Management Company for 12 months of rent beginning on September 1. The appropriate journal entry was made to record this transaction. If financial statements are prepared for the 9 months ended September 30, the adjusting entry to be made by Northgate is: (Points : 1)
17. Corresponds to CLO 5(a) Lennox Corporation purchased a new delivery truck for 60,000. The sales taxes are $4,800. The logo is painted on the side of the truck for $1,000. The truck’s annual license is $250. Annual insurance on the truck is $1,200. What should Lennox record as the cost of the new truck? (Points : 1)
$60,000 $64,800 $65,800 $67,250
18. Corresponds to CLO 5(b) On April 1, 2013, Ballard Corporation purchased equipment for $65,000. It is estimated that the equipment will have a $5,000 salvage value at the end of its 5 year useful life. If Ballard uses the straight line method of depreciation, what is the accumulated depreciation at December 31, 2013? (Points : 1)
$13,000 $12,000 $9,750 $9,000
19. Corresponds to CLO 5(c) Tyree Company purchased equipment with a cost of $90,000 and an estimated salvage value of $18,000. The equipment is expected to produce 150,000 units over its estimated useful life of 10 years. If Tyree uses the units of activity method, what is the depreciation cost per unit to be used in calculating depreciation? (Points : 1)
$1.67 $0.48 $2.08 $0.60
20. Corresponds to CLO 5(d) Kerns Company purchased equipment with a cost of $200,000 and an estimated salvage value of $10,000. The equipment has an estimated useful life of 10 years. If Kerns uses the double declining balance method, what is the annual depreciation rate to be used in calculating depreciation? (Points : 1)
5% 10% 20% 40%
21. Corresponds to CLO 6(a) Marshall Machinery made a sale for $80,000 on January 6. The customer is sent a statement on January 25 and payment is received on February 20. Marshall prepares January’s monthly internal financial statements on February 15. Marshall follows GAAP and applies the revenue recognition principle. When is the $80,000 considered to be earned? (Points : 1)
February 20 February 15 January 25 January 6
22. Corresponds to CLO 6(b) Mann Corporation’s employees worked overtime to complete an order that is sold on July 27. The office sends a statement to the customer on August 15, and payment is received on September 5. Mann follows GAAP. In what month should the overtime wages be expensed? (Points : 1)
either July or August, depending on when the pay period ends September August July
23. Corresponds to CLO 6(c) Sight Company had the following transactions during 2013: sales of $6,000 on account; collected $1,800 for services to be performed in 2014; paid $4,300 cash for 2013 salaries; purchased airline tickets for $500 in December for a trip to take place in 2014. What is Sight’s 2013 net income using accrual accounting? (Points : 1)
$1,700 $1,200 $3,500 $3,000
24. Corresponds to CLO 6(d) Lyme Corporation had the following transactions during 2013: sales of $10,000 on account; collected $5,500 for services to be performed in 2014; paid $3,000 cash for 2013 salaries; paid $800 for airline tickets for a trip to take place in 2014. What is Lyme’s 2013 net income using cash basis accounting? (Points : 1)
$11,700 $1,700 $6,200 $2,500
25. Corresponds to CLO 7(a) Ping Sports Company purchases $1,000 of merchandise on credit. Using the perpetual inventory approach, the journal entry to record this transaction would be: (Points : 1)
26. Corresponds to CLO 7(b) Gardner Corporation had sales of $2,400 on account on January 9, 2013. Gardner uses the periodic inventory method. The journal entry to record this transaction would include: (Points : 1)
a debit to Sales Revenue and a credit to Accounts Receivable. a debit to Accounts Receivable, a credit to Sales Revenue, a debit to Cost of Goods Sold, and a credit to Inventory. a debit to Accounts Receivable and a credit to Sales Revenue. a debit to Accounts Receivable, a credit to Sales Revenue, a debit to Cost of Goods Sold, and a credit to Purchases.
27. Corresponds to CLO 7(c) Rupert Hobby’s accounting records show the following for the year ending December 31, 2014: Purchase Discounts…$15,600; Freight in…$14,000; Purchases…$540,500; Beginning Inventory…$54,200; Ending Inventory…$58,600; Purchase Returns…$20,000. Using the periodic inventory system, what is the cost of goods sold? (Points : 1)
$573,100 $500,500 $536,100 $514,500
28. Corresponds to CLO 7(d) Bay Company sold $100,000 of merchandise in the month of April, 2013. Returns that month totaled $5,000. Bay Company uses the periodic method to determine ending inventory each December 31. For interim financial statements, cost of goods sold is estimated based on the previous year’s gross profit rate. If Bay Company’s gross profit rate for 2012 was 60%, what is the cost of goods sold for the month of April? (Points : 1)
$57,000 $60,000 $38,000 $40,000
29. Corresponds to CLO 8(a) We Love Pets, Inc. has the following inventory data: January 1, beginning inventory of 50 units at $25; January 10, purchases of 70 units at $27; January 25, purchases of 40 units at $28. A physical count of inventory on January 31 reveals that there are 45 units on hand. Using the FIFO inventory method, cost of goods sold for January is (Points : 1)
$3,135 $3,005 $2,875 $1,255
30. Corresponds to CLO 8(b) Party Retailers has the following inventory data: May 1, beginning inventory of 200 units at $10; May 14, purchases of 300 units at $12; May 23, purchases of 250 units at $15. A physical count of inventory on May 31 reveals that there are 225 units on hand. Using the LIFO inventory method, ending inventory for May is (Points : 1)
$2,300 $2,250 $7,050 $3,375
31. Corresponds to CLO 8(c) Halting Corporation has the following inventory data: September 1, beginning inventory of 430 units at $11; September 8, purchases of 350 units at $12; September 21, purchases of 460 units at $14. A physical count of inventory on September 30 reveals that there are 400 units on hand. Using the weighted average inventory method, rounding the unit cost to the nearest penny, what is cost of goods sold for September? (Points : 1)
$10,357 $4,960 $10,416 $4,932
32. Corresponds to CLO 8(d) Unleash Corporation is a retailer operating in an industry currently experiencing high inflation. Unleash wants to show the lowest cost of goods sold on its income statement in order to show higher profits. Which inventory costing method should Unleash use? (Points : 1)
FIFO because cost of goods sold represents the earliest costs. Average because cost of goods sold will represent an average amount. Specific identification because it involves the actual costs. LIFO because cost of goods sold represents the latest costs.
33. Corresponds to CLO 9(a) The following balance sheet and income statement data is available for Gold River Corporation: Current assets…$125,000; Total assets…$520,000; Net income…$345,000; Current liabilities…$80,000; Total liabilities…$150,000; Stockholders’ equity…$370,000; Average common shares outstanding… 10,000. What is Gold River’s current ratio? (Points : 1)
3.47 1.64 1.56 0.83
34. Corresponds to CLO 9(b) The following balance sheet data is available for Pinpoint Products: Current assets…$50,000; Property, plant, and equipment,…$70,000…Other assets…$10,000; Current liabilities…$30,000; Long term liabilities…$22,000; Stockholders’ equity…$78,000; Average common shares outstanding… 10,000. What is Pinpoint’s debt to total assets, shown as a percentage? (Points : 1)
60% 45% 67% 40%
35. Corresponds to CLO 9(c) The following balance sheet and income statement data is available for Frame Manufacturing: Total assets…$520,000; Total liabilities…$250,000; Stockholders’ equity…$270,000; Gross profit…$55,000; Net income…$40,000; Average common shares outstanding… 25,000. What is Frame Manufacturing’s earnings per share? (Points : 1)
$10.80 $3.50 $1.60 $2.20
36. Corresponds to CLO 9(d) The following financial information is available for Maroon Corporation: Sales revenue…$200,000; Cost of goods sold…$120,000; Operating expenses…$40,000. What is Maroon’s gross profit rate, shown as a percentage? (Points : 1)
20% 80% 60% 40%
37. Corresponds to CLO 10(a) Which of the following is not true about a company’s system of internal controls? (Points : 1)
Internal control procedures are designed to safeguard assets from employee theft. Internal control measures can eliminate all irregularities in the accounting process. Internal controls can be rendered ineffective by employee collusion. Large companies often assign internal auditors to continuously evaluate the effectiveness of the company’s internal control systems.
38. Corresponds to CLO 10(b) At Speedy Market, three cashiers handle cash sales from the same cash register drawer. Which of the following internal control principles does this violate? (Points : 1)
Segregation of duties Physical controls Human resource controls Establishment of responsibility
39. Corresponds to CLO 10(c) At Stone Pool Supplies, one person is responsible for the related activities of ordering merchandise, receiving goods, and paying for them. Which of the following internal control principles does this violate? (Points : 1)
Physical controls Segregation of duties Human resource controls Establishment of responsibility
40. Corresponds to CLO 10(d) At Pocket Protector Products, the treasurer of the company has not taken vacation for the past 4 years. Which of the following internal control principles does this violate? (Points : 1)
Human resource controls Physical controls Segregation of duties Establishment of responsibility
The TMA covers the cost accounting concepts and practices in the businesses. It is marked out of 100 and is worth 20% of the overall assessment component. It is intended to assess students’ understanding of some of the learning points within chapters 1 to 5. This TMA requires you to apply the course concepts. The TMA is intended to:
Assess students’ understanding of key learning points within chapters 1 to 5.
Increase the students’ knowledge about the reality of the cost and management accounting as a profession.
Develop students’ communication skills, such as memo writing, essay writing, analysis and presentation of material.
Develop the ability to understand and interact with the nature of the managerial accounting tools in reality.
Develop basic ICT skills such as using the internet.
The TMA:
The TMA requires you to:
Review various study chapters of ‘Cost Accounting’ Book and apply some of the concepts within it.
Conduct a simple information search using the internet.
Present your findings in not more than 1,200 words. The word count excludes headings, references, title page, and diagrams.
You should use a Microsoft Office Word and Times New Roman Font of 14 points.
You should read and follow the instructions below carefully. Each part of the process will carry marks for the assignment.
Criteria for Grade Distribution:
Criteria
Content
Referencing
Structure and Presentation of ideas
Total marks
Financial Reporting on the Internet (Analog Devices Inc.)
Marks
95
3
2
100
The TMA Questions
Financial Reporting on the Internet
(Analog Devices Inc.)
The internet is a good place to get information that is useful in your study of accounting. For example, you can find information about current events, professional accounting organizations, and specific companies that may support your study.
From the year 1965 to its milestone 40th anniversary year of 2005, Analog Devices has experienced a rich history of transitions and significant achievements. Follow ADI’s path to success – starting with its humble beginnings in the basement of a Cambridge, Massachusetts, apartment building – through the decades as it evolved into one of the world’s most prominent semiconductor industry franchises. Analog Devices is a world leader in the design, manufacture and marketing of a broad portfolio of high performance analog, mixed signal and digital signal processing integrated circuits (ICs) used in virtually all types of electronic equipment.
Access the Analog Devices Inc. web page at: www.analog.com. From Analog’s home page, choose “Investors Relations”, and then “Financial Information”, followed by clicking on “Annual Reports” to download 2012 annual report on Form 10 K (PDF).
Instructions:
Use the annual report to answer the following questions:
Is Analog’s 2012 Annual Report primarily a financial accounting document or a managerial accounting document? What evidence from the annual report supports your conclusion?
[8 Marks]
Why effective cost accounting is critical to Analog Devices success.
[8 Marks]
Write a report in no more than 500 words about Analog Devices Inc. This report should cover the following points:
Is it a service, merchandising, or manufacturing company? How can you tell? What is its primary product or service?
SMG&A.
Gross margin for each activity during the most three recent years (2012, 2011, and 2010).
Cost reduction efforts during 2012.
[Marks: 4 marks for each point = 16]
What is the amount of CoGS for the most three recent years (2012, 2011, and 2010)? What kinds of costs are included in the Cost of Sales account?
[6 Marks]
What categories of inventory Analog Devices shows on the balance sheet for the most two recent years (2012 and 2011)? Support your answer by suitable figures from the Analog Devices’ annual report.
[6 Marks]
Using the income statement (Consolidated Statements of Income, p. 43 of the 2012 annual report) and inventory information from the Consolidated Balance Sheets and notes, calculate the cost of finished goods manufactured for 2012 annual year.
[8 Marks]
“Value chain refers to the sequence of business functions in which customer usefulness is added to products or services of a company”. Provide evidence from the annual report of Analog Devices concerns about the value chain.
[12 Marks]
Recast the “Consolidated Statements of Income” in the contribution margin format using amounts from the 2012 year (Ignore tax). For this computation assume that 25% of cost of sales and operating expenses are fixed.
[10 Marks]
Briefly discuss the potential shortcoming of using direct labor hours or direct labor dollars as a primary cost driver in Analog Devices Inc.
[7 Marks]
Describe how activity based costing (ABC) can improve overhead allocations in Analog Devices Inc. that produce a diverse line of products.
[6 Marks]
Identify four cost drivers that Analog Devices Inc. might consider in allocating overhead using the activity based costing (ABC) of overhead allocation.
[8 Marks]
[Total Marks: 95 + 5 for general presentation and references]
In your answer, you should explain each point or inquire separately. Use the following headings (below) to make up the different sections of your answer:
PT3 form (Cover)
Available on LMS
Contents
Title and contents page
TMA
Financial Reporting on the Internet (The case of Analog Devices Inc.)
Reference list
Recorded according to the Harvard style Available on LMS
Jan. 1 Investors provided $2,500,000 of cash in exchange for stock of Fernandez Corporation. Jan. 1 Purchased combines (equipment) and trucks in exchange for $1,000,000 cash and a $3,000,000 note payable. Feb. 7 Purchased $40,000 of supplies on account that will be needed during the upcoming harvest. Mar. 3 Paid wages of $65,400. Apr. 1 Billed customers for services in the amount of $230,000. Apr. 11 Paid $30,000 toward the purchase of February 7. May 1 Purchased a $24,000 insurance policy. This transaction was recorded as prepaid insurance. June 6 Collected $210,000 on accounts receivable. June 9 Paid wages of $130,600. June 15 Paid $30,200 for fuel costs. June 20 Paid $12,500 for lodging costs incurred by crew. June 30 Paid $120,000 of interest and $80,000 to reduce the balance of the note payable. Aug. 1 Billed customers for services provided in the amount of $812,000. Sept. 3 Collected $715,000 on accounts receivable. Sept. 16 Purchased $25,000 of supplies on account. Sept. 25 Paid $61,200 for fuel costs. Oct. 20 Paid $8,100 for lodging costs incurred by crew. Nov. 3 Paid wages of $125,900. Dec. 15 Collected $100,000 as deposits from customers who contracted for 2012 harvesting services. Dec. 31 Declared and paid a $25,000 dividend to shareholders. Fernandez Corporation Jan 1. Cash 2,500,000 Capital Stock 2,500,000 Jan 1. Equipment 4,000,000 Notes Payable 3,000,000 Cash 1,000,000 Feb 7. Supplies 40,000 Accounts Payable 40,000 Mar 3. Wage Expense 65,400 Cash 65,400 Apr 1. Accounts Receivable 230,000 Revenue 230,000 Apr 11. Accounts Payable 30,000 Supplies Expense 30,000 May 1. Prepaid Insurance 24,000 Cash 24,000 Jun 6. Cash 210,000 Accounts Receivable 210,000 Jun 9. Wage Expense 130,600 Cash 130,600 Jun 15. Fuel Expense 32,000 Cash 32,000 Jun 20. Lodging Expense 12,500 Cash 12,500 Jun 30. Interest Payable 120,000 Cash 120,000 Jun 30. Notes Payable 80,000 Cash 80,000 Aug 1. Accounts Receivable 812,000 Revenue 812,000 Sep 3. Cash 715,000 Unearned Revenue 715,000 Sep 16. Supplies 25,000 Accounts Payable 25,000 Sep 25. Fuel Expense 61,200 Cash 61,200 Oct 20. Lodging Expense 8,100 Cash 8,100 Nov 3. Wage Expense 125,900 Cash 125,900 Dec 15. Cash 100,000 Deposits 100,000 Dec 31. Cash Dividends25,000 Dividends Payable 25,000 Dec 31. Dividends Payable 25,000 Cash 25,000 General Ledger Cash Accounts Payable Accounts Receivable Expenses Equipment Notes Payable Revenue Unearned Revenue Interest Payable Prepaid Insurance Stock Cash Dividends Dividends Payable Deposits
Boerkian Co. started 2011 with two assets: Cash of §26,000 (Stickles) and Land that originally cost §72,000 when acquired on April 4, 2008. On May 1, 2011, the company rendered services to a customer for §36,000, an amount immediately paid in cash. On October 1, 2011, the company incurred an operating expense of §22,000 that was immediately paid. No other transactions occurred during the year so an average exchange rate is not necessary. Currency exchange rates were as follows:
Assume Boerkian was a foreign subsidiary of a U.S. multinational company and the U.S. dollar was the functional currency of the subsidiary. Prepare a schedule of changes in the net monetary assets of Boerkian for the year 2011 and properly label the resulting gain or loss.
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C3.?Boerkian Co. started 2011 with two assets: Cash of §26,000 (Stickles) and Land that originally cost §72,000 when acquired on April 4, 2008. On May 1, 2011, the company rendered services to a customer for §36,000, an amount immediately paid in cash. On October 1, 2011, the company incurred an operating expense of §22,000 that was immediately paid. No other transactions occurred during the year so an average exchange rate is not necessary. Currency exchange rates were as follows:?? ??Assume Boerkian was a foreign subsidiary of a U.S. multinational company and the U.S. dollar was the functional currency of the subsidiary. Prepare a schedule of changes in the net monetary assets of Boerkian for the year 2011 and properly label the resulting gain or loss. ? ??
Investment is one of the most important aspect that is needed which helps in fulfilling
different future needs of the investor. There are different assets in which an investor can
invest so as to have a future benefits from the required investment. Every investment entails
an amount of some risk which is associated. Investment helps in promising the return of the
original amount along with an adequate return. So, investment is very important as it helps in
fulfilling different future needs of the investor
This report discusses and assesses the investment conditions in the Australian economy from
Top Down Fundamental Analysis.
First segment of report discusses the Annual Growth Rate of GDP in world Market. Annual
percentage growth rate of GDP at market prices based on constant local currency. Aggregates
are based on constant 2000 U.S. dollars. GDP is the sum of gross value added by all resident
producers in the economy plus any product taxes and minus any subsidies not included in the
value of the products. It is calculated without making deductions for depreciation of
fabricated assets or for depletion and degradation of natural resources.
Second section of report discusses the GDP in Australian market. The Gross Domestic
Product (GDP) in Australia expanded 0.6 percent in the second quarter of 2012 over the
previous quarter. Historically, from 1959 until 2012, Australia GDP Growth Rate averaged
0.89 Percent reaching an all time high of 4.50 Percent in March of 1976 and a record low of –
2.00 Percent in June of 1974. The Gross Domestic Product (GDP) growth rate provides an
aggregated measure of changes in value of the goods and services produced by an economy.
Australia’s economy is dominated by its services sector, yet its economic success is based on
abundance of agricultural and mineral resources. Australia’s comparative advantage in the
export of primary products is a reflection of the natural wealth of the Australian continent and
its small domestic market. The country is a major regional financial centre and a vital
component of the global financial system. This page includes a chart with historical data for Australia GDP Growth Rate.
The gross domestic product in Australia was up a seasonally adjusted 0.6 percent in the
second quarter of 2012. On a yearly basis, GDP expanded 3.7 percent, slowing from 4.3
percent in the previous three months.
In seasonally adjusted terms, the increase this quarter was driven by household final
consumption expenditure (adding 0.3 percentage points), total public gross fixed capital
formation (adding 0.2 percentage points) and net exports (adding 0.3 percentage points).
Pushing growth up, household consumption and spending on new vehicles were up almost 10
percent through the second quarter and 23 percent for the year. Nonetheless, the terms of
trade fell by 0.6% in the quarter and 7.1% for the year, a consequence of dipping export
prices as iron ore becomes cheaper. For this reason, the likelihood of a continued fall is very
much a possibility.
Final section of report details the Exchange Rates trend with up and down graph with the
affecting factors and it’s respond to market comparing Australian Dollar with US Dollar, Euro and Yen.
The exchange rate of Australia as compared to US dollar and yen has decreased by 0.0800 (.10%) and 0.0790(.10%) respectively. As on 20 th sep 2012, the day’s range of AUD US dollar was 0.9896 0.9965 whereas 52 week range was 0.9388 to 1.11080.
As per As per 20 th sep 2012, the day’s range of AUD JYP was 79.3710 80.0120 and a 52 week range of 72.0630 88.6420.
Fundamental Analysis: Investment Process: The portfolio of Investor can be said to be a collection of different investment assets. After establishing a portfolio the portfolio can be updates or rebalanced easily by buying new securities and selling the existing securities. The Top down portfolio construction generally starts with the allocation of assets followed by security analysis. Considering the sharpe ratio analysis, standard deviation and other statistical factors we can analyze that the best investment area is Bonds, large stock company and small stock company. (Refer Exhibits).
It is important to diversify your portfolio, so it is advised to focus on investing in different assets.
Asset Allocation: Asset allocation can be said as the process which focuses on analyzing the strategy for distributing the wealth of the investor among different countries and classes which will help in providing the best returns by strongly focusing on the attributes and characteristics of the asset and the returns that are likely to be earned from the same.
Sector Analysis of Australian Market:
The Australian stock market have improved as compared to the other stock markets of the world, the Australian stock market is highly related to the Japanese and US stock market as Japan is considered to be the second largest trading partner of Australia,. Considering the Australian market for 17 th May, we can see that the market started with a positive note but it fell by 0.2 or 8.1 points by the end of the day closing at 4157.4.
Sector Analysis:
Some of the main sectors of Australia are considered to be clean tech, consumer sector, financials sector, health and biotechnology, industrial and materials sector, resources sector and information technology and telecommunication sector. The clean technology sector has the market capital of $8 billion with 76 companies operating in the sector. The consumer sector is one of the distinguished sectors of Australia, with about $173.9 billion of market capital. This sector is led by Woolworths company which has the market cap of about $33758 million.
The financial sectors are the largest sector of Australia, with a market cap of $455.7 billion.
With a compulsory superannuation, Australia has 4 th largest pension fund pool in the world
which creates a favorable environment for banks and other financial institutions, One of the
biggest company in the financial sector is Common wealth bank with about $81517 million
of market capital followed by $66995 million for Westpac. Health care and biotechnology
Sector.
has about $49.1 billion of total market cap. Considering the market conditions, this sector has a strong potential for growth. The strongest player in this sector is CSL with a market cap of $17454 million. Metals and mining sector is one of the largest sector and includes different global giants like BHP Billiton, Rio Tinto which has a strong future potential for growth and success. This is one of the strongest sector which is reliant on the equity market and has high risk and return.
The three major sectors in which we are likely to invest are Healthcare sector, financial sector and Mining sector, as these are the major sectors which will result in the highest returns.
Company Analysis:
Commonwealth bank:
Commonwealth bank is one of the largest bank of Australia which has the incurred the cash profit of about 1.75billion. The shares of the company are being traded at $51.020. The share prices of the company has decreased recently but are expected to increase with the change in the economic conditions of the market.
CSL:
CSL is one of the biggest pharmaceutical company, whose shares are being traded at $36.810 and has witnessed a change of 0.65% decrease with the slow down in market as on 17 th May’ 2012, the prices of the stock are likely to increase which will give higher returns to the investor.
BHP Billiton:
BHP Billiton is one the biggest companies of Australia in miniral exploration and production. The company has a global presence and has witnessed strong growth in past years.
The stock of the company is being traded at 32.770 which is 0.86% higher than the previous day’s closing.
With a strong focus on investing in different stocks of different sectors the investor will be able to diversify the risk inherited.
Conclusion:
With a focus on diversification, the investor will be able to attain the required rate of return. He will focus on making a diverse portfolio which will help in minimizing his risk and focus on acquiring his present and future needs. Considering the market of Australia, the investor can invest in the Australian economy with a strong focus on diversification of the stock.
“International accounting standards are ‘unusable” from an investor’s viewpoint and make ‘global allocation of capital more complex instead of simplifying it”. Chief financial officers at large listed entities say. Millions of dollars have been spent adopting international financial reporting standards to help investors make like for like comparisons between companies in global capital markets. But CFO’s say they are useless and have driven financial disclosures to unmanageable levels…… Investors don’t open the 60 70 pages of IFRS account, they rely on investor reports and management briefing to understand a company’s numbers……. The criticism comes as the United States, the world’s largest capital market, decides whether to retire its domestic accounting standard (US GAAP) and adopt IFRS”. Australian Financial Review, 6/2/2012. In the light of the above statement; 1. Describe the IASB Conceptual Framework’s perspective of users and their decisions. 2. Which qualitative characteristics of financial reporting, as per the IASB Conceptual Framework, appear not to be satisfied by current reporting practices as per IFRS. 3. In your opinion, do corporate financial reports satisfy the central objective of financial reporting as identified in the Conceptual Framework? Discuss and give example to support your opinion.
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The Business School BUACC2606 – Corporate Accounting Semester 1, 2013 RESEARCH ASSIGNMENT Assessment weight: 25% Due Date: Week 10 Length: 2000 words Group Assignment: 2 people “International accounting standards are ‘unusable” from an investor’s viewpoint and make ‘global allocation of capital more complex instead of simplifying it”. Chief financial officers at large listed entities say. Millions of dollars have been spent adopting international financial reporting standards to help investors make like for like comparisons between companies in global capital markets. But CFO’s say they are useless and have driven financial disclosures to unmanageable levels…… Investors don’t open the 60 70 pages of IFRS account, they rely on investor reports and management briefing to understand a company’s numbers……. The criticism comes as the United States, the world’s largest capital market, decides whether to retire its domestic accounting standard (US GAAP) and adopt IFRS”. Australian Financial Review, 6/2/2012. In the light of the above statement; 1. Describe the IASB Conceptual Framework’s perspective of users and their decisions. 2. Which qualitative characteristics of financial reporting, as per the IASB Conceptual Framework, appear not to be satisfied by current reporting practices as per IFRS. 3. In your opinion, do corporate financial reports satisfy the central objective of financial reporting as identified in the Conceptual Framework? Discuss and give example to support your opinion.Assessment criteria 2000 words max. Excellent Very Good Good Satisfactory Unsatisfactory (HD) (D) (C) (P) (F) 1. Introduction (10) 2. Body/Discussion (40) Critical evaluation of topic 3. Recommendation/s (10) Conclusion (5) 4. Examples (10) 6. Referencing, citations (5) 7. Evidence of reading, quality and quantity (10) 8. English expression, coherence, grammar and spelling….
I want this assignment to be done very carefully as it carries 20 marks,which will be added in my final exam. Plagiarism is strictly checked and prohibited with a software nowadays.so plzz avoid copying as much as possible.….Do it in the simple way with simple writing as if it has been done by the student…plzz Don’t compromise with word limit. Hope to get the assignment on time.
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The Business School BUACC3741: Auditing Semester 1 2013 ASSIGNMENT This assignment is to be completed in groups of three and comprises twenty per cent of the marks for this course. Assessment Criteria: Student work will generally be assessed in terms of the following criteria: 1. Effectiveness of communication ie readability, legibility, grammar, spelling, neatness, completeness and presentation will be a minimum threshold requirement for all written work submitted for assessment. Work that is illegible or incomprehensible and does not meet the minimum requirement will be awarded a fail grade. 2. Demonstrated understanding This will be evidenced by the student’s ability to be dialectical in the discussion of contentious issues. 3. Evidence of research This will be evidenced by the references made to the statutes, auditing standards, books, journal articles and inclusion of a bibliography. Note: 1. All written work must conform with the University of Ballarat General Guide for the Presentation of Academic Work. 2. For all written work students must ensure that they submit their own original work. Any act of plagiarism will be severely penalised. Plagiarism is presenting someone else work as your own and is a serious offence with serious consequences. As set out in the University Regulation 6.1.1, students who are caught plagiarising will, for a first offence, be given a zero mark for that task. A second offence will result in a failing grade for the course(s) involved and any subsequent offence will be referred to the Student Discipline Committee. Student must be aware of the University Regulation 6.1.1 Student Plagiarism, available at ? HYPERLINK “http://www.ballarat.edu.au/legislation/6.1.1 plagiarism” ?http://www.ballarat.edu.au/legislation/6.1.1 plagiarism?. The link to the library website for more information is: ? HYPERLINK “http://www.ballarat.edu.au/library/assignment and research help/referencing”…
Chapter 6 and 7 Problems Please complete the following 8 exercises below in either Excel or a word document (but must be single document). You must show your work where appropriate (leaving the calculations within Excel cells is acceptable). Save the document, and submit it in the appropriate week using the Assignment Submission button. Chapter 6 Exercise 2 2. Schedule of cash collections Sugarland Company sells a single product and anticipates opening a new facility in Charlotte on May 1 of the current year.
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Chapter 6 and 7 Problems Please complete the following 8 exercises below in either Excel or a word document (but must be single document). You must show your work where appropriate (leaving the calculations within Excel cells is acceptable). Save the document, and submit it in the appropriate week using the Assignment Submission button. Chapter 6 Exercise 2 2. Schedule of cash collections ?Sugarland Company sells a single product and anticipates opening a new facility in Charlotte on May 1 of the current year. Expected sales during the first three months of activity are: May, $60,000; June, $80,000; and July, $85,000. Thirty percent of all sales are for cash; the remaining 70% are on account. Credit sales have the following collection pattern: ?Collected in the month of sale 60% Collected in the month following sale 35 Uncollectible 5 Prepare a schedule of cash collections for May through July. Compute the expected balance in Accounts Receivable as of July 31.? Chapter 6 Exercise 4?4. Production and cash outlay computations ?RPR, Inc., anticipates that 120,000 units of product K will be sold during May. Each unit of product K requires four units of raw material A. Actual inventories as of May 1 and budgeted inventories as of May 31 follow. ?1 May?31 May??Product K (Units)? 55,000 ? 60,000 ??Rate Materials A (Units)? 40,000 ? 37,000 ?? Each unit of raw material A costs $8; RPR pays for all purchases in the month of acquisition. Invoices that account for 80% of the cost of materials acquired will be paid within 10 days of receipt, entitling the company to a 2% cash discount. Determine the number of units of product K to be manufactured in May. Compute the May cash outlay for purchases of raw material A. ?July ?August ?September ??Beginning cash balance ?$10,000 ?$ ? ?$ ? ??Add: Cash receipts ?50,000?63,000?71,000??Deduct: Cash payments ? 64,000? 58,000? 64,000??Cash excess (deficiency) before financing?($4,000)?$…
Jane Whitfield, a sole proprietor, established the JW Flower Shop on January 2, 2010. The flowing transactions have occurred during the month of January:
Jan. 5. Jane deposited $ 15,000 in her business checking account. This is her
initial investment in the business.
Jan. 7. Jane purchased flower grooming equipment for $4,500. She paid $2,000 as a down payment and signed a note to pay the balance in two payments.
Jan. 10. Jane purchased a computer system for $2,500, cash.
Jan. 12. She sold flowers to a wedding ceremony in the amount of $4,500, but she
had to bill them. The invoice was to be paid by February, 2010.
Jan. 15. Jane purchased office supplies in the amount of $1,500.
Jan. 20. She received ½ of what she billed for flowers for the wedding ceremony
on Jan. 12th.
Jan. 22. She withdrew $2,000. for her personal use.
Jan. 25. She decided to pay one payment that she owed on her equipment purchase on Jan. 7th.
Jan. 31. Jane hired an assistant and paid the wages by the end of the month
in the amount of $1,500.
Jan 31. She had a total of $25,000 in cash sales for the month.
Adjusting entries – A1 she used 2/3 of the supplies by the end of the month,
A2 – depreciation on the grooming equipment $450.
Required:
A. Record the journal entries.
B. Set up necessary T Accounts and post the journal entries.
C. Prepare a trial balance for the period ended January 31, 2010.
D. Prepare an income statement for the period January 2010.
E. Prepare a statement of changes in capital for the period January 2010
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Jane Whitfield, a sole proprietor, established the JW Flower Shop on January 2, 2010. The flowing transactions have occurred during the month of January: Jan. 5. Jane deposited $ 15,000 in her business checking account. This is her ?initial investment in the business.??Jan. 7. Jane purchased flower grooming equipment for $4,500. She paid $2,000 as a down payment and signed a note to pay the balance in two payments.??Jan. 10. Jane purchased a computer system for $2,500, cash.??Jan. 12. She sold flowers to a wedding ceremony in the amount of $4,500, but she ?had to bill them. The invoice was to be paid by February, 2010.??Jan. 15. Jane purchased office supplies in the amount of $1,500. ??Jan. 20. She received ½ of what she billed for flowers for the wedding ceremony?on Jan. 12th.??Jan. 22. She withdrew $2,000. for her personal use.??Jan. 25. She decided to pay one payment that she owed on her equipment purchase on Jan. 7th.??Jan. 31. Jane hired an assistant and paid the wages by the end of the month?in the amount of $1,500.??Jan 31. She had a total of $25,000 in cash sales for the month.??Adjusting entries – A1 she used 2/3 of the supplies by the end of the month, ?A2 – depreciation on the grooming equipment $450.??Required:?A. Record the journal entries.?B. Set up necessary T Accounts and post the journal entries. C. Prepare a trial balance for the period ended January 31, 2010. D. Prepare an income statement for the period January 2010. E. Prepare a statement of changes in capital for the period January 2010
Hull & Hoboken began a partnership on 1 January 2013. Hull invests $63,000 cash and machinery with a fair value of $12,000, but which had originally cost Hull $8,000. Hoboken contributed office equipment with a fair value of $5,500 (original cost of $10,000) and $25,500 cash.
The partnership agreement states that income and losses will be distributed as follows:
Hoboken receives a bonus of 10% of profits if profits are greater than $20,000
Each partner receives interest of 8% on their average capital balances for the year.
Any remaining profit/loss is distributed 65% Hull and 35% Hoboken.
The partners have agreed not to make any withdrawals from the business for the first 5 years. This part of the agreement will be renegotiated in the 5th year of operations to take effect in the 6th and later years.
On 31 July Hull invested an additional $10,000 in the business and on 1 November Hoboken invested an additional $5,000 in the business.
In 2013 the partnership reported income of $23,000.
Prepare the journal entry(ies) to record the investments into the partnership by the partners [5]
Date
Account name
Debit
Credit
Prepare the income allocation table (follow format either from textbook page 630 or from page 9 of my chapter 14 notes posted in WebTycho conference). [10]
Cont’d
Numeric Problems
The Abrams, Bartle, and Creighton partnership began the process of liquidation with the following balance sheet:
Abrams, Bartle, and Creighton share profits and losses in a ratio of 3:2:5. Liquidation expenses are expected to be $12,000.
After the liquidation expenses of $12,000 were paid and the noncash assets sold, Creighton had a deficit of $8,000. For what amount were the noncash assets sold? [3]
The Abrams, Bartle, and Creighton partnership began the process of liquidation with the following balance sheet:
Abrams, Bartle, and Creighton share profits and losses in a ratio of 3:2:5. Liquidation expenses are expected to be $12,000.
If the noncash assets were sold for $234,000, what amount of the loss would have been allocated to Bartle? [3]
Problem 2
The following information relates to the Shand, Shereen and Shankle Partnership:
Partner Capital Balance P/L Ratio
Shand…………………………………………………………….. $205,000 25%
Shereen…………………………………………………………….. 88,000 40%
Shankle……………………………………………………………. 147,000 35%
Prepare the journal entries to record the admission of Shipshewana on 1 May 2014 under each of the independent scenarios.
The existing partners agree to admit Shipshewana to the partnership, giving him a 10% interest. Shipshewana will pay $50,000 to the partners personally (ie, the money is not paid into the partnership) and the goodwill approach is used. [9]
Date
Account name
Debit
Credit
The existing partners agree to admit Shipshewana to the partnership, giving him a 15% interest. Shipshewana will contribute $60,000 into the partnership and any goodwill is credited to Shipshewana. [9]
Date
Account name
Debit
Credit
Multiple Choice
Dancey, Reese, Newman, and Jahn were partners who shared profits and losses on a 4:2:2:2 basis, respectively. They were beginning to liquidate their business. At the start of the process, capital balances were as follows:
Which one of the following statements is true for a predistribution plan?[2]
The first available $16,000 would go to Newman. The next $12,000 would go $8,000 to Dancey and $4,000 to Newman. The following $32,000 would be shared by Dancey, Reese, and Newman. The total distribution would be $60,000 before all four partners share any further payments in their profit and loss sharing ratios.
The first $20,000 would go to Newman. The next $8,000 would go to Dancey. The next $12,000 would be shared by Dancey, Reese, and Newman. The total distribution would be $40,000 before all four partners share any further payments equally.
The first available $8,000 would go to Newman. The next $4,000 would be split equally between Dancey and Newman. The following $12,000 would be shared by Dancey, Reese, and Newman. The total distribution would be $24,000 before all four partners share any further payments in their profit and loss sharing ratios.
The first available $16,000 would go to Newman. The next $12,000 would go $8,000 to Dancey and $4,000 to Newman. The following $32,000 would be shared by Dancey, Reese, and Newman. The total distribution would be $60,000 before all four partners share any further payments equally.
The first available $8,000 would go to Newman. The next $4,000 would be split equally between Dancey and Newman. The following $12,000 would be shared by Dancey, Reese, and Newman. The total distribution would be $24,000 before all four partners share any further payments equally.
As the lead service for the Joint Armored Wheeled System (JAWS), the Marine Corps used RDT&E, Navy funds to develop the system. JAWS is currently in production and several hundred units have already been fielded. The Marine Corps purchased its units with the Marine Corps Procurement appropriation, while the Army purchased its units with its Weapons and Tracked Combat Vehicle Procurement, Army (W&TCV Procurement, Army) appropriation. A product improvement effort is underway to improve the reliability of JAWS. The fabrication and installation of the modification kits required to incorporate this product improvement into fielded JAWS should be funded with:
Marine Corps Procurement and W&TCV Procurement, Army
Marine Corps Procurement only
Research, Development, Test & Evaluation, Navy
Other Procurement, Navy
2) Your program has an RDT&E funded project scheduled to start in November 2011 which is expected to take 12 months to complete. The project is expected to cost a total of $12 million (then year dollars), with cost expected to be incurred at a rate of $1 million per month. Which two of the following are appropriate budget requests for this project? (Select all that apply)
Nada bahlas Dilemma You have twenty dollars. You meet a homeless person who tells you that, for that money, he could afford food for the next week. However, giving him the 20 dollars will mean that you cannot get to a meeting with a close friend you have not seen for several years, and who needs to speak to you about a personal matter.
Should you give the person the money, or keep it for yourself? Is it more important to help other people who are in need, or to live one’s life as fully as possible? No one will blame you if you do either option, but in either case harm will befall the person you do not expend the twenty dollars upon.
Solution As with most real word ethical problems, there is no ‘right’ solution to this dilemma, only justifications for taking either path. This is because life is a zero sum game – that is, in order for someone to gain something, someone else must lose something. There are many ways to perceive the problem.
There is, of course, a third option, in which one gives enough to the homeless person that their immediate needs are met, and still leave enough money to get to the friend, or at least a significant part of the distance, relying on the fact that you have a support network that will provide the additional resources that you require. This is a lateral solution, where you rely on facts not stated within the dilemma itself but reasonable to assume.
Exploration This dilemma is one of the basic questions of philosophy, and has been explored from every angle throughout history. Every society comes to its own broad answer, and every individual must also come to theirs. There is a natural human tendency towards altruism – it is the existence of social behaviour that led to our success as a species, after all, and gave us language and communication.
As with many functional ethical dilemmas, it does not fare well when considered in the world. In the idealised realms of philosophy, arguments are made based on theory alone. In the world, it is not even clear on what scale one’s help would be effective. For example, helping the friend may lead to them helping many other people; but the same could be true of the homeless person, though the help would be of a very different kind and have a very different effect. At the same time, it is unclear whether the money would not be wasted on the friend, whose personal problem may turn out to be trivial, or the homeless person, who may spend it outside of his core needs. As such, there is no utilitarian answer.
Psychology fares no better. According to Maslow’s Hierarchy of Needs, the most basic needs of the homeless person can be met with this capital, but a much higher order need may be met by helping the friend with their personal problem. Economically, this may be a better use of the twenty dollars, but it condemns someone to hunger for the sake of another person’s peace of mind.
Specific interpretations of individual ethical systems, rather than theories, may offer particular advice. Christian ethics, for example, would state it is better to help the beggar (if you are gnostic) and your friend (if you are dogmatic, concerned with spiritual welfare). There is the enlightened self interest of Enlightenment philosophers and Buddhism, wherein one devotes all of one’s resources to the common good in the knowledge that the relationship is reciprocate, or the Randian extreme self interest model where nothing is done except in one’s own immediate interest, and there is no social contract.
What all options and explanations share is that require making a value judgement that cannot be fixed by any reference, only by argument and belief.
A company has been paying $ 18,000 to a printer to print the monthly newsletter
company. The printing contract just expired but may be renewed for an additional 5 years. It anticipated that the new contract costs are 12% higher than the previous contract.
The company is also considering buying a system of “desktop publishing” a printer
high quality laser controlled by a high performance microcomputer. With the “software” appropriate, the newsletter could be developed and printed with quality equivalent to that of the printing. Also you can buy a special machine to print photos in the newsletter, so that the final product is similar to that provided by the commercial printer.
The provider of computing and printing equipment has provided the following cost estimates to the company:
Personal Computer $ 4.500
6,500 color laser printer
“Scanner” and photography system 5,000
“Software” 2500
Total Investment (“Cost Basis”) $ 18.500
Annual Costs of “Operation & Maintenance” $ 10.500
Year Depreciation Factor
1 20.00%
2 32.00%
3 19.20%
4 11.52%
5 11.52%
6 5.76%
The residual value (“salvage value”) of each piece of equipment after 5 years is estimated to be 10% of original investment cost (ie, the “Cost Basis”). The marginal rate of employer contributions is 34%. The equipment will be depreciated using “MACRS” under the category of five years, with depreciation factors according to the table above included. Any capital gain taxed at 15%
Questions:
a) Determine the cash flow “contributions after” for this investment.
b) Given a minimum acceptable performance (BROWN) of 5% and using the indicator
Present Value (PW) will justify the investment?
b) BONUS: Compute the internal rate of return (“IRR”) of this cash flow.
Answers
Show clearly how he approached the problem, and provide clear and orderly calculations. Use the following format to summarize his answer:
Just uploaded my homework assignment for extra credit.
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1.) Which of the following information is displayed in the P 21 budget exhibit? Select all that apply. Minimum, economical, and maximum production rates Listing of all items that will be purchased with advance procurement funds Delivery schedules for all Service`s procurements of a particular line item Contract award information for each applicable Work Breakdown Structure element 2) Which one of the following is NOT a primary input to the Planning Phase of the PPBE process? National Military Strategy (NMS ) Defense Planning Guidance (DPPG) National Security Strategy (NSS) Chairman’s Program Recommendation (CPR) 3) Which of the following are produced during the Programming Phase of the PPBE process? Select all that apply. Chairman’s Program Recommendation (CPR) Defense Planning Guidance (DPG) Chairman’s Program Assessment (CPA) Resource Management Decisions (RMDs) (programming phase annex) 4) For the FY 16 20 PPBE cycle, the Component budget submissions would be provided to OSD as part of the combined Program and Budget Review submission (POM/BES) in: May 2014 July/August 2014 September 2015 February 2015 5.) All of the following would likely trigger a question or adjustment by a budget analyst reviewing a budget request, EXCEPT: Program requesting funding for 13 months of deliveries for final production lot Procurement funding request did not use a learning curve Full funding of an RDT&E project lasting 24 months Request for Advance Procurement not approved by Milestone Decision Authority
Multiple Choice Question 45 Managerial accounting is applicable to A.service entities. B.manufacturing entities. C.not for profit entities. D.All of these. Multiple Choice Question 46 Management accountants would not be concerned with the impact of cost and volume on profits. determine cost behavior. prepare reports primarily for external users. assist in budget planning. Multiple Choice Question 54 A distinguishing feature of managerial accounting is general purpose reports. very detailed reports. quarterly and annual reports. external users.
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Multiple Choice Question 45????Managerial accounting is applicable to ?A.service entities.???B.manufacturing entities.???C.not for profit entities.???D.All of these. Multiple Choice Question 46????Management accountants would not ?be concerned with the impact of cost and volume on profits.???determine cost behavior.???prepare reports primarily for external users.???assist in budget planning.??Multiple Choice Question 54????A distinguishing feature of managerial accounting is ?general purpose reports.???very detailed reports.???quarterly and annual reports.???external users.??Multiple Choice Question 56????Planning is a function that involves ?hiring the right people for a particular job.???analyzing financial statements.???setting goals and objectives for an entity.???coordinating the accounting information system.??Multiple Choice Question 59????A manager that is establishing objectives is performing which management function? ?Directing???Planning???Constraining???Controlling??Multiple Choice Question 64????Both direct materials and indirect materials are ?sold directly to customers by a manufacturing company.???manufacturing overhead.???merchandise inventory.???raw materials.??Multiple Choice Question 65????The work of factory employees that can be physically and directly associated with converting raw materials into finished goods is ?indirect labor.???manufacturing overhead.???indirect materials.???direct labor.??Multiple Choice Question 66????Which one of the following would not be classified as manufacturing overhead? ?Indirect materials???Indirect labor???Direct materials???Insurance on factory building??Multiple Choice Question 67????Manufacturing costs include ?direct labor and manufacturing overhead only.???direct materials and manufacturing overhead only.???direct materials, direct labor, and manufacturing overhead.???direct materials and direct labor only.??Multiple Choice Question 69????Which one of the following is not a cost…
I). Astor City, a small city that is not required to have independent audit, voluntarily decided to have an audit of its financial records. Currently. the city generates $900,000 in revenues. Of the revenue generated, 10% is from state sources and 2% is from federal sources. Janice Murphy, a CPA who serves on the city council has orally agreed to conduct the audit for a small gratuitous fee. Murphy decided not to accept a hill fee since in the last three years she has gotten away from doing audit work and has concentrated her time on tax preparation and small business consulting. Murphy conducts the audit and presents the city with the following audit report: I haw audited the accompanying balance sheet of Astor City as of June 30, 20x I, and the related statements of revenue, expenditures and changes in find balance and cash flows for the year then ended. These financial statements are the responsibility of the city’s management. My responsibility is to express an opinion on these financial statements based on my audit.
I conducted my audit in accordance with generally accented auditing standards. Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as arduming the overall financial. tatement presentation. I believe that my audit provides a reasonable basis for my opinion.
In my opinion, thefinancial statements referred to above prevent Addy, in all material respects, the financial position of Astor City as of June 30, 2dr] , and the results of its operations and im cashfiomfor the year then ended in conformity with generally accepted accounting principles.
Janice Murphy November 3, 20×1
110 pts.I (a) At a minimum what audit standards apply to Astor City (GAAS, GAS or Single Audit Act)? Why? (b) Discuss any potential violations of the applicable audit standards.
Well, it’s been a busy day in your office. Here it is April 19, you’re just past tax season and two sets of ‘colorful’ clients have come in with tax problems seeking your advice.
Client One
Tony Stark has had a bad day. As Iron Man he was defeated by Batroc ze Lepair (he’s French, talks funny and is essentially a joke villain, hence Tony’s depression). Tony has decided he needs help and has agreed to form a partnership with Bruce Banner and Frank Castle called “Avenge This”.
As he is usually loaded (financially and otherwise) he will bankroll most of the operation. He will have a 70% capital interest, Bruce 20% (he has some income from inventions developed during his calmer moments—it’s not easy being green) and Frank will get 10% (he spends all of his money on equipment as he keeps breaking things—after all he is the ‘Punisher’.
They will allocate 45% of the income based upon capital accounts.
The balance of the profits will be allocated based upon services (super heroing is very labor intensive). The big hitters, Tony and Bruce will each get 40% and Frank 20% (of the remaining 55% of the profits). However, Tony is in a high tax bracket and has asked that the cost recovery deductions be allocated solely to him. Bruce and Frank agree. Both are in low tax brackets, Bruce has a large medical deduction for tranquilizers and Frank spends 90% of his income on ammunition (mostly to fend off fans who have seen his movies).
Despite their initial contributions, they will have to borrow some capital. Tony believes they can get financing on their headquarters with a qualified non recourse loan, but that the equipment financing may have to be recourse—Frank claims he would persuade the bank otherwise and Bruce, getting upset, rumbles something about ‘smashing through red tape’.
Tony has deep pockets but knows Bruce has anger issues and can spread destruction when capturing super villains. He suggests maybe they could form a LLC instead.
Tony knows he can’t deduct in excess of basis and that debt is sometimes counted as part of that. But, will there be a difference in how he is treated between a partnership and a LLC, and why? (He hasn’t got a budget together yet, so you won’t be able to calculate exact figures, he just needs to know what the issues would be).
What advice do you give them? Do you need any additional information for your opinion? If so, what do you need to know and why?
Client Two
In the afternoon, Ben Grimm comes to see you. Ben and his brother, Reilly, had formed “It’s Clobberin’ Time LLC” (taxed as a partnership) several years ago to provide superheroes with emotional problems an outlet (clients include Wolverine, Frank Castle and Bruce Banner [who has had aggression issues for years]).
Reilly advanced the financing as the facilities and ‘clobberable’ equipment is a material element of the operation, Ben the ‘celebrity’ status. Both he and Reilly provided significant services. Reilly owned a 40% interest and Ben 60%.
However, on August 1 (2011) Ben gave his daughter, Trudy, a 20% interest. Trudy is in school and does not work at the LLC.
The IRS is auditing last year’s “partnership” return for the year ending 7/31/2012, questioning two things:
Reilly died on September 15, 2012. While Ben and Reilly are on a calendar year for tax purposes, the LLC is on a fiscal year (yes, it was IRS approved, even Ben can’t clobber Uncle Sam) ending July 31. Ben is Reilly’s beneficiary and executor, but Reilly’s estate is still in administration.
Ben included Reilly’s share of the profits for the 7/31/2012 fiscal year on Reilly’s Form 1040 for 2012. This is Reilly’s final 1040.
Ben plans to put all of Reilly’s share of the income for the current fiscal year ending this July (7/31/2013) on the estate’s 2013 1041 (the tax return for the estate, which is also on a calendar year). The agreement provides that a deceased partner’s estate will get a distributive share for the year of death.
The IRS agent said something about ‘closing’ the tax year but Ben is pretty sure that isn’t right—there will still be two partners (Ben and Trudy) after Reilly died and Reilly only owned 40% (Ben was told by his old accountant that it took a 50% withdrawal to terminate a partnership for tax purposes).
Is Ben right? How should this be reported and why?
Ben had allocated the income for the 7/31/2012 return, 40% to Reilly, 40% to him and 20% to Trudy, according to their agreement.
The LLC had a profit of $165,000. Income for the year was allocated $66,000 to Reilly and $66,000 to Ben and $33,000 to Trudy.
The agent said that Reilly’s services were worth $40,000 and Ben’s $35,000.
He proposed to reallocate $10,000 from Trudy to Reilly and $5,000 from Trudy to Ben.
Ben (turning a bright orange) asks, “what is that Agent talking about?”
What should each of them really report for the 7/31/2012 fiscal year of the LLC?
ABC, Inc. is adopting IFRS for the first time, effective December 31, 2016. Their opening statement of financial position will be as of January 1, 2014. The IASB has issued a new standard that is effective as of January 1, 2016. Required: a. Explain whether: 1. ABC, Inc. should present all of their statements of financial position using the new standard; 2. ABC, Inc. should present their statement of financial position as of December 31, 2016, using the new standard and present their other statements of financial position using the old standard; or 3. ABC, Inc. should not use the new standard for any of their statements of financial position presented. b. What explicit statement is required in a set of IFRS first time adoption financial statements?
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Question 2 ABC, Inc. is adopting IFRS for the first time, effective December 31, 2016. Their opening statement of financial position will be as of January 1, 2014. The IASB has issued a new standard that is effective as of January 1, 2016. Required: Explain whether: ABC, Inc. should present all of their statements of financial position using the new standard; ABC, Inc. should present their statement of financial position as of December 31, 2016, using the new standard and present their other statements of financial position using the old standard; or ABC, Inc. should not use the new standard for any of their statements of financial position presented. What explicit statement is required in a set of IFRS first time adoption financial statements?
1. How does SOX affect the provision of attest and advisory services? (5 marks)
2. Compare and contrast the relative advantages and disadvantages of sequential, block, group, alphabetic and mnemonic codes. (5 marks)
3. Discuss the non accounting services that external auditors are no longer permitted to render to audit clients under SOX legislation. (5 marks)
4. Identify six classes of physical controls employed in the expenditure cycle and give one example of each. (5 marks)
PART B Case Study (from your textbook) (20 marks)
Part B1 Case Study (10 marks)
Chapter 3
Ethics, Fraud and Internal Control
Bern Fly Rod Company (pp. 138 139)
Required:
Analyze Bern’s situation and asses any potential internal control issues and exposures. Discuss some preventive measures this firm may wish to implement.HI 5019 Strategic Information Systems for Business and Enterprise Assignment 1 T1 13 Page2of2
Part B2 Case Study (10 marks)
Chapter 4
The Revenue Cycle
Spice is Right Imports (Stand Alone PC Based Accounting System)
(pp. 203 204)
Required:
1. Analyse the physical internal control weaknesses in the system. Model your response according to the six categories of physical control activities specified in the COSO internal control model.
2. Describe the IT controls that should be place in the system.
Illingham Packaging is a firm that manufactures and distributes corrugated cardboard containers. Much of its business isfocused on producing customized containers in small production runs. Over the past few years the demand for the company’s producthas been quite strong and recently the company has had to turn down some orders from its best customers due to lack of capacity. Thecompany is therefore considering expanding its capacity by purchasing a new machine, the CX700. Unfortunately, the addition of thismachine in Illingham’s plant will take several months and will partially disrupt production. The direct cost of CX700 is $1,760,000.The company has cash sufficient to purchase the machine at this price and so no outside financing is needed. If the company choosesnot to purchase the machine, it will immediately pay out this cash to shareholders in the form of dividends.
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1 FIN 300 Introduction to Finance Professor Wang Illingham Packaging, Inc. Illingham Packaging is a firm that manufactures and distributes corrugated cardboard containers. Much of its business is focused on producing customized containers in small production runs. Over the past few years the demand for the company’s product has been quite strong and recently the company has had to turn down some orders from its best customers due to lack of capacity. The company is therefore considering expanding its capacity by purchasing a new machine, the CX700. Unfortunately, the addition of this machine in Illingham’s plant will take several months and will partially disrupt production. The direct cost of CX700 is $1,760,000. The company has cash sufficient to purchase the machine at this price and so no outside financing is needed. If the company chooses not to purchase the machine, it will immediately pay out this cash to shareholders in the form of dividends. The following page gives forecasts of Illingham’s current balance sheet together with forecasts of Illingham’s income for the next ten years under the assumption that Illingham does not purchase the machine. Even without the new machine, overall capacity and sales will grow due to other planned improvements in the production process for its other products and divisions. It is mid 2012 and the firm has just completed a $50,000 feasibility study to analyze the CX700 proposal. The different functional groups within the firm have produced the following estimates: • Marketing : Increased sales of $10M per year. • Operations: Cost of goods sold = 70% of revenue ($7M per year), disruption caused by installation in 2012 will decrease sales by $5M, expansion will require increased inventory on hand of $1M during the life of the project. • Human Resources: Additional personnel (sales & admin) costs of $2M per year. • Accounting: CX700 will be depreciated straight line over the 10 year life of the machine, corporate tax rate is…
You are the audit senior responsible for the audit of Delilah Ltd. You are currently planning the audit for the year ended 30 June 2012. During your initial planning meeting held with the financial controller, he told you of the following changes in the company’s operations:
(i) Due to the financial controller’s workload, the company has employed a treasurer. The financial controller is excited about the appointment because in the two months that the treasurer has been with the company he has realised a small profit for the company through foreign exchange transactions in yen.
(ii) Delilah has planned to close an inefficient factory in country New South Wales before the end of 2012. It is expected that the redeployment and disposal of the factory’s assets will not be completed until the end of the following year. However, the financial controller is confident that he will be able to determine reasonably accurate closure provisions.
(iii) To help achieve the budgeted sales for the year, Delilah is about to introduce bonuses for its sales staff. The bonuses will be an increasing percentage of the gross sales made, by each salesperson, above certain monthly targets.
(iv) The company is using a new general ledger software package. The financial controller is impressed with the new system, because management accounts are easily produced and allow detailed comparisons with budgets and prior period figures across product lines and geographical areas. The conversion to the new system occurred with a minimum of fuss. As it is a popular computer package, it required only minor modifications.
(v) As part of the conversion, the position of systems administrator was created. This position is responsible for all systems maintenance, including data backups and modifications. These tasks were the responsibility of the accountant.
(vi) The managing director has returned from the USA, where he signed a contract to import a line of clothing that has become the latest fashion fad in the USA. The company has not previously been engaged in the clothing industry.
Required:
For each of the scenarios above, identify which of the components of audit risk (inherent, control or detection risk) are affected. In your answer you will need to justify you choice. Format your answer as follows:
Part Inherent Risk or CR Justification
i
ii
iii
iv
Question2 Internal Controls and Substantive Testing
You are the auditor of PC Ltd., a company that produces low cost electronic goods to children and young adults. The audit has a year end of 30 th June 2012.
There are four main people involved with the acquisitions of inventory for PC Ltd. Ms Auburn is the purchases officer; Mr Brown is the Accounts Payable Clerk;Mr Crimson is the Financial Controller and Ms Dark is the Payments Officer.
The acquisitions system works as follows:
· Ms Auburn is responsible for purchases within PC ltd. There is a computerised inventory system and whenever the inventory level goes below a certain level, Ms Auburn prepares a purchases requisition to buy new stock from one of three suppliers that PC uses.
· Ms Auburn then prepares a three part prenumbered purchase order. Every Month Mr Crimson reviews a listing of purchase orders issued to ensure all have been accounted for. The original copy of the purchase order is sent to the vendor. The receiving department within PC is sent the second copy, which is then used as a receiving report. The third and final copy is kept on file within the purchases department along with the original purchases requisition.
· When the purchased goods arrive they are immediately sent to the receiving department where the receiving report (which is the second copy of the invoice) is filled out by the store room employee and authorised by the store room supervisor. A copy of this document is taken and kept in the store room. The original is sent to Mr Brown in accounts payable.
· When the supplier invoice is received it is forwarded to Mr Brown. He checks the price on the invoice, compares the quantities to the details on the receiving report and checks the footings and calculations. Once this is done he enters the details of each invoice into the computer system that updates the purchases journal and accounts payable master file.
· The invoice is then sent to Mr Crimson for authorisation. Attached to the invoice is a copy of the materials purchase requisition and the receiving report. After Mr Crimson has approved the invoice for payment the documents are sent to the person responsible for cheque preparation in the accounting department (Ms Dark).
Required:
a) Identify three controls that operate within this system and state the potential errors they are aimed at preventing.
b) Describe two additional controls (or improvements to controls) that you would implement into this system and why.
c) Describe the substantive tests that you would perform on transactions in the acquisitions cycle of this system to gain adequate assurance over the assertions of completeness, cut off and accuracy.
This assignment has been designed to assess your ability to:
1. Understand the knowledge required by an auditor in preparing an audit strategy and audit plan.
2. Outline the types of and uses for analytical procedures.
3. Explain how the auditor undertakes an assessment of control risk and how this assessment impacts upon audit procedures.
Marking criteria
Marks will be awarded for responses to question 1 based on the extent to which you:
· Identify the component of audit risk affected
Justify your selection of the relevant component of audit risk
Marks will be awarded for responses to question 2 based on the extent to which you:
· Identify the relevant internal controls and the errors they are aimed at preventing.
· Describe two additional controls or improvements to the existing controls that you would implement and why.
· Describe the audit procedures you would perform in relation to the assertions identified in the question.
The Business SchoolBUACC2606–Corporate AccountingSemester 1, 2013RESEARCH ASSIGNMENT Assessment weight: 25% Due Date:Week 10Length:2000wordsGroup Assignment: 2 people“International accounting standards are ‘unusable” from an investor’s viewpoint and make ‘global allocation of capital more complex instead of simplifying it”. Chief financial officersat large listed entities say. Millions of dollars have been spent adopting international financial reporting standards to help investors make like for like comparisons between companies in global capital markets. But CFO’s say they are useless and have driven financial disclosures to unmanageable levels…… Investors don’t openthe 60 70 pages of IFRS account, they rely on investor reports and management briefing to understand a company’s numbers…….The criticism comes as the United States, the world’s largest capital market, decides whether to retireits domestic accounting standard (US GAAP) and adopt IFRS”.Australian Financial Review, 6/2/2012.In the light of the above statement;1.Describe the IASB Conceptual Framework’s perspective of users and their decisions.2.Which qualitative characteristics of financial reporting, as per the IASB Conceptual Framework, appear not to be satisfied by current reporting practices as per IFRS.3.In your opinion,do corporate financial reports satisfy the central objective of financial reporting as identified in the Conceptual Framework?Discuss and give example to support your opinion.
Assessment criteria2000words max.Excellent(HD)Very Good(D)Good(C)Satisfactory(P)Unsatisfactory(F)1. Introduction (10)2. Body/Discussion (40)Criticalevaluation of topic3. Recommendation/s (10)Conclusion (5)4. Examples (10)6. Referencing, citations (5)7. Evidence of reading, quality and quantity (10)8. English expression, coherence, grammar and spelling. Logical flow of ideas (10) 100/5= 25%
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The Business School BUACC2606 – Corporate Accounting Semester 1, 2013 RESEARCH ASSIGNMENT Assessment weight: 25% Due Date: Week 10 Length: 2000 words Group Assignment: 2 people “International accounting standards are ‘unusable” from an investor’s viewpoint and make ‘global allocation of capital more complex instead of simplifying it”. Chief financial officers at large listed entities say. Millions of dollars have been spent adopting international financial reporting standards to help investors make like for like comparisons between companies in global capital markets. But CFO’s say they are useless and have driven financial disclosures to unmanageable levels…… Investors don’t open the 60 70 pages of IFRS account, they rely on investor reports and management briefing to understand a company’s numbers……. The criticism comes as the United States, the world’s largest capital market, decides whether to retire its domestic accounting standard (US GAAP) and adopt IFRS”. Australian Financial Review, 6/2/2012. In the light of the above statement; 1. Describe the IASB Conceptual Framework’s perspective of users and their decisions. 2. Which qualitative characteristics of financial reporting, as per the IASB Conceptual Framework, appear not to be satisfied by current reporting practices as per IFRS. 3. In your opinion, do corporate financial reports satisfy the central objective of financial reporting as identified in the Conceptual Framework? Discuss and give example to support your opinion.Assessment criteria 2000 words max. Excellent Very Good Good Satisfactory Unsatisfactory (HD) (D) (C) (P) (F) 1. Introduction (10) 2. Body/Discussion (40) Critical evaluation of topic 3. Recommendation/s (10) Conclusion (5) 4. Examples (10) 6. Referencing, citations (5) 7. Evidence of reading, quality and quantity (10) 8. English expression, coherence, grammar and spelling….
Question: adjustment/elimination journal entries for consolidation at 30 June 2012.
1.On 1 July 2009, Julia Ltd acquired 60% of the issued capital of Gillard Ltd for $700,000 cash. The balance sheet of Gillard Ltd at the acquisition date showed: Share capital $400,000; Retained earnings $600,000. All assets and liabilities were recorded at fair value, except for an item of plant that was undervalued by $50,000. At that time it had a remaining life of 5 years and accumulated depreciation of $36,000.
2.On 1 January 2011 Gillard Ltd sold an item of plant to Julia Ltd for $60,000 when its carrying value in Gillard’s books was $50,000 (original cost $80,000 and original estimated life of 8 years). Julia Ltd still had the plant on hand at 30 June 2012.
For the year ended 30 June 2012:
1. Julia Ltd made sales of inventory to Gillard Ltd of $130,000, while Gillard Ltd sold $104,000 of inventory to Julia Ltd.
2. The opening inventory in Julia Ltd included stock of $84,000 acquired from Gillard Ltd, which had originally cost Gillard Ltd $70,000.
3. Closing inventories included the following intragroup purchases: Julia Ltd $67,200 (that had originally cost Gillard Ltd $56,000) and Gillard Ltd $24,000 (that had originally cost Julia Ltd $19,200).
4. On 1 July 2011 Julia Ltd sold an item of plant to Gillard Ltd for $100,000 when its carrying value in Julia’s books was $170,000 (original cost $212,500 and original estimated life of 10 years).
5.The management of Julia Ltd believes that the goodwill acquired from Gillard Ltd was impaired by $6,000 in the current year, following previous impairments totaling $20,000.
6. Gillard Ltd paid management fees and dividends to Julia Ltd.
7.The Julia Ltd has the following accounting policies which have been in place for many years:(i) Plant is depreciated straight line over its estimated life, with no residual value; (ii) Non controlling interest is measured at the proportionate share of the identifiable net assets of the subsidiary; and (iii) Revaluation adjustments on acquisition are to be made on consolidation only, not in the books of the subsidiary.
8.The company tax rate is currently 30% and it has been this rate for many years.
A company is a wooden product manufacturer specializing in wood kitchen and home products such as paper towel and napkin holders, coasters, canisters, dish racks, coat racks, and magazine holders. The company is looking to branch out into the garden market and wants to start by producing wooden bird houses or bird feeders. The company plant already possesses the machinery and a fabrication and assembly department to make the houses and feeders. The following information includes costs for each product and the projected numbers for the first month.
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A company is a wooden product manufacturer specializing in wood kitchen and home products such as paper towel and napkin holders, coasters, canisters, dish racks, coat racks, and magazine holders. The company is looking to branch out into the garden market and wants to start by producing wooden bird houses or bird feeders. The company plant already possesses the machinery and a fabrication and assembly department to make the houses and feeders. The following information includes costs for each product and the projected numbers for the first month. You are to present the product to the Board of Directors. The proposal should anticipate numbers for operating production for one year. In order for the product to be considered, the bird house has to be produced at a minimum of 4,300 units the first year. I. Product and Company Background Bird House Components: Wood and plastic Direct Materials: ? Wood: 0.80 ft. per unit of product; cost is $6.00 per foot ? Plastic: 0.50 lb. per unit of product; cost is $0.80 per pound ? Need: Wood 290ft ? Need: Plastic: 340 lbs. = 360 houses to sell at $22 per unit Direct labor requirements for the first month: Bird House ? Fabrication 0.20 hr. at $15 per hour ? Assembly 0.30 hr. at $11 per hour Below is the current financial information for the company. These numbers do not reflect the impact of the new product you plan to recommend. ? Revenue: $3,453,234 ? Operating Expenses: $ 1,984,342 ? Net Income: $1,468,892 Estimated factory overhead costs for the first month (current/unadjusted): ? Indirect factory wages $78,000 ? Power and light $7000 ? Depreciation of plant and equipment $19,300 ? Insurance and property tax $3,700 Estimated operating expenses for the first month (current/unadjusted): ? Sales salaries expense $58,000 ? Advertising expense $25,000 ? Office salaries expense $36,000 ? Depreciation expense office equipment $700 ? Telephone expense $832 ? Office supplies expense $300 II….
HI5019 Strategic Information Systems for Business and Enterprise (T1, 2013) Assignment (20% of Final Mark) The assignment has two parts namely Part A (20 marks) & B (20 marks). Part A will require you to answer four (4) questions. Part B will involve two (2) cases selected form your textbook, Accounting Information Systems 8th edition by James A. Hall. The assignment aims to develop an understanding of Accounting Information Systems structure and their use in the business setting.
HI5019 Strategic Information Systems for Business and Enterprise (T1, 2013)
Assignment (20% of Final Mark)
The assignment has two parts namely Part A (20 marks) & B (20 marks). Part A will require you
to answer four (4) questions. Part B will involve two (2) cases selected form your textbook,
Accounting Information Systems 8th edition by James A. Hall.
The assignment aims to develop an understanding of Accounting Information Systems structure
and their use in the business setting. The task is to answer questions relating to transaction
processing, ethics, fraud and internal control. This assignment itself includes several
assignments, each of which comprises a part of the students’ task. However, it is well
encouraged to include any additional information that students may think will be useful in
completing the task.
General Rules and Requirements:
Reports must be confined to 3,000 words (+/ 5%). As a minimum, a title page, table of contents
page (based on your report headings), introduction, conclusion and references should be
included. Font type should be Arial (size 11), paragraph spacing should be 1.5.
Note: Any additional material from external sources that you “copy and paste” into your report is
NOT included in the word limit. Also, ensure it is appropriately referenced.
PART A (20 marks)
1. How does SOX affect the provision of attest and advisory services? (5 marks)
2. Compare and contrast the relative advantages and disadvantages of sequential, block,
group, alphabetic and mnemonic codes. (5 marks)
3. Discuss the non accounting services that external auditors are no longer permitted to
render to audit clients under SOX legislation. (5 marks)
4. Identify six classes of physical controls employed in the expenditure cycle and give one
example of each. (5 marks)
Use Sox popular 190(Act)
Sarbanes oxley Act for above Question
……………………………………………………………………………
PART B Case Study (from your textbook) (20 marks)
Part B1 Case Study (10 marks)
Chapter 3
Ethics, Fraud and Internal Control
Bern Fly Rod Company (pp. 138 139)
Required:
Analyze Bern’s situation and asses any potential internal control issues and exposures. Discuss
some preventive measures this firm may wish to implement.
Part B2 Case Study (10 marks)
Chapter 4
The Revenue Cycle
Spice is Right Imports (Stand Alone PC Based Accounting System)
(pp. 203 204)
Required:
1. Analyse the physical internal control weaknesses in the system. Model your response
according to the six categories of physical control activities specified in the COSO
internal control model.
2. Describe the IT controls that should be place in the system.
How does SOX affect the provision of attest and advisory services? (5 marks)
2. Compare and contrast the relative advantages and disadvantages of sequential, block,
group, alphabetic and mnemonic codes. (5 marks)
3. Discuss the non accounting services that external auditors are no longer permitted to
render to audit clients under SOX legislation. (5 marks)
4. Identify six classes of physical controls employed in the expenditure cycle and give one
example of each. (5 marks)
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HI5019 Strategic Information Systems for Business and Enterprise (T1, 2013) Assignment (20% of Final Mark) The assignment has two parts namely Part A (20 marks) & B (20 marks). Part A will require you to answer four (4) questions. Part B will involve two (2) cases selected form your textbook, Accounting Information Systems 8th edition by James A. Hall. The assignment aims to develop an understanding of Accounting Information Systems structure and their use in the business setting. The task is to answer questions relating to transaction processing, ethics, fraud and internal control. This assignment itself includes several assignments, each of which comprises a part of the students’ task. However, it is well encouraged to include any additional information that students may think will be useful in completing the task. General Rules and Requirements: Reports must be confined to 3,000 words (+/ 5%). As a minimum, a title page, table of contents page (based on your report headings), introduction, conclusion and references should be included. Font type should be Arial (size 11), paragraph spacing should be 1.5. Note: Any additional material from external sources that you “copy and paste” into your report is NOT included in the word limit. Also, ensure it is appropriately referenced. PART A (20 marks) 1. How does SOX affect the provision of attest and advisory services? (5 marks) 2. Compare and contrast the relative advantages and disadvantages of sequential, block, group, alphabetic and mnemonic codes. (5 marks) 3. Discuss the non accounting services that external auditors are no longer permitted to render to audit clients under SOX legislation. (5 marks) 4. Identify six classes of physical controls employed in the expenditure cycle and give one example of each. (5 marks) Use Sox popular 190(Act) Sarbanes oxley Act for above Question …………………………………………………………………………… PART B Case Study (from your textbook) (20 marks) Part B1 Case Study (10 marks) Chapter…
1) Which of the following is NOT a primary input to the Programming Phase of the PPBE process? Combatant Commander’s Integrated Priority Lists (IPLs) Defense Planning Guidance (DPPG ) Chairman’s Program Recommendation (CPR) Fiscal Guidance (FG) 2) Which one of the following statements is TRUE concerning the R 1 budget exhibit? It provides a narrative justification for each RDT&E program element It contains information on related non RDT&E funding for acquisition programs It is prepared at the Component level It provides a tabular display of program milestones
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1) Which of the following is NOT a primary input to the Programming Phase of the PPBE process? Combatant Commander’s Integrated Priority Lists (IPLs) Defense Planning Guidance (DPPG ) Chairman’s Program Recommendation (CPR) Fiscal Guidance (FG) 2) Which one of the following statements is TRUE concerning the R 1 budget exhibit? It provides a narrative justification for each RDT&E program element It contains information on related non RDT&E funding for acquisition programs It is prepared at the Component level It provides a tabular display of program milestones 3) My program office has just completed analysis of the latest Contract Performance Report on its Cost Plus Award Fee contract with Cardinal Industries. The following information is available: Best Case EAC = $321 million Most Likely EAC = $340 million Worst Case EAC = $353 million Total Contract Fee (Base Fee + Award Fee) = $32 million Which one of the following represents the best estimate of the funding requirements for the Cardinal Industries contract? $372 million $353 million $385 million $340 million 4) Which one of the following contracts most likely would NOT require contract performance reporting by a Contract Performance Report (CPR)? Firm Fixed Price Procurement contract valued at $310 million (then year dollars) Cost Plus Fixed Fee RDT&E contract valued at $75 million (then year dollars) Fixed Price Incentive Fee Procurement contract valued at $450 million (then year dollars) Cost Plus Award Fee RDT&E contract valued at $82 million (then year dollars) 5) Which one of the following would likely trigger a question or adjustment by a budget analyst reviewing a budget request? Program’s obligations and expenditures are close to goals RDT&E program used a Procurement escalation index Procurement program budgeted on a full funding basis Budget request is consistent with the program’s current cost estimates and schedule 6) …
at the end of five years. The milling machine will have a $10,000 salvage value at the end of its life, and the special jigs and dies are worth only $300 as scrap metal at any time in their lives. The machine is classified as a seven year MACRS property, and the special jigs and dies are classified as a three year MACRS property. With the new milling ma chine, Wilson expects an additional annual revenue of $80,000 due to increased production. The addi tional annual production costs are estimated as fol lows: materials, $9,000; labor, $15,000; energy, $4,500; and miscellaneous O&M costs, $3,000. Wilson’s marginal income tax rate is expected to remain at 35% over the project life of 10 years. All dollar figures represent today’s dollars. The firm’s market interest rate is 18%, and the expected gen eral inflation rate during the project period is esti mated at 6%. (a) Determine the project cash flows in the absence of inflation. (b) Determine the internal rate of return for the pro ject in part (a). (c) Suppose that Wilson expects price increases during the project period: material at 4% per year, labor at 5% per year, and energy and other O&M costs at 3% per year. To compen sate for these increases in prices, Wilson is planning to increase annual revenue at the rate of 7% per year by charging its customers a higher price. No changes in salvage value are expected for the machine or the jigs and dies. Determine the project cash flows in actual dollars. (d) In part (c), determine the real (inflation free) rate of return of the project. (e) Determine the economic loss (or gain) in pre sent worth caused by inflation. ST11.3 Recent biotechnological research has made possible the development of a sensing device that implants living cells on a silicon chip. The chip is capable of detecting physical and chemical changes in cell processes. Proposed uses of the device in clude researching the mechanisms of disease on a cellular level, developing new therapeutic drugs, and substituting for animals in cosmetic and drug test ing. Biotech Device Corporation (BDC) has just perfected a process for mass producing the chip.
The following information has been compiled for the board of directors: • BDC’s marketing department plans to target sales of the device to the larger chemical and drug manufacturers. BDC estimates that annual sales would be 2,000 units if the device were priced at $95,000 per unit (in dollars of the first operating year). • To support this level of sales volume, BDC would need a new manufacturing plant. Once the “go” decision is made, this plant could be built and made ready for production within one year. BDC would need a 30 acre tract of land that would cost $1.5 million. If the decision were to be made, the land could be purchased on Decem ber 31, 2009. The building would cost $5 million and would be depreciated according to the MACRS 39 year class. The first payment of $1 million would be due to the contractor on De cember 31, 2010, and the remaining $4 million on December 31, 2011. • The required manufacturing equipment would be installed late in 2011 and would be paid for on December 31, 2011. BDC would have to pur chase the equipment at an estimated cost of $8 million, including transportation, plus a fur ther $500,000 for installation. The equipment would fall into the MACRS seven year class. • The project would require an initial investment of $1 million in working capital. This investment would be made on December 31, 2011. Then on December 31st of each subsequent year, net working capital would be increased by an amount equal to 15% of any sales increase expected dur ing the coming year. The investments in working capital would be fully recovered at the end of the project year. • The project’s estimated economic life is six years (excluding the two year construction period). At that time, the land is expected to have a market value of $2 million, the building a value of $3 million, and the equipthent a value of $1.5 mil lion. The estimated variable manufacturing costs would total 60% of the dollar sales. Fixed costs, excluding depreciation, would be $5 million for the first year of operations. Since the plant would begin operations on January 1, 2012, the first op erating cash flows would occur on December 31, 2012.
Required – a 5 minute presentation on a current item which is relevant to Taxation law.
A PowerPoint presentation is to be prepared and presented to your Lecture class in week 11 or 12.
You must be available to make your presentation in either week 11 or 12. It is also essential to receive a mark in this assignment you attend all presentations given – Failure to do so or in any disrupt presentations being given will result in a Zero grade.
Students will be called to give their presentations on a random basis. If a student is not available to give their presentation when called 50% of available marks will be forfeited, if a student is not available to give their presentation when called a second time all remaining marks will be forfeited.
You will be required to advise your presentation topic to the Lecturer in class in week 8. Failure to advise the topic in week 8 will result in the loss of 25% of available marks.
What can it be about Anything that is relevant to a contemporary Taxation Law issue.
What are my sources – News, Media, ATO etc.
Marks – The presentation will count as 20% of the overall course mark
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Presentation Required – a 5 minute presentation on a current item which is relevant to Taxation law. A PowerPoint presentation is to be prepared and presented to your Lecture class in week 11 or 12. You must be available to make your presentation in either week 11 or 12. It is also essential to receive a mark in this assignment you attend all presentations given – Failure to do so or in any disrupt presentations being given will result in a Zero grade. Students will be called to give their presentations on a random basis. If a student is not available to give their presentation when called 50% of available marks will be forfeited, if a student is not available to give their presentation when called a second time all remaining marks will be forfeited. You will be required to advise your presentation topic to the Lecturer in class in week 8. Failure to advise the topic in week 8 will result in the loss of 25% of available marks. What can it be about Anything that is relevant to a contemporary Taxation Law issue. What are my sources – News, Media, ATO etc. Marks – The presentation will count as 20% of the overall course mark
The requirements of the assignment is to produce a 1000 to 1500 word essay on your opinion of the Australian Taxation System which is based on your findings from the Australian newspapers and any other research you may want to undertake.
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Tax 231 Written Assessment Worth 15% Due Week 9 (Monday 5 pm) Henry told us in his guide to the Institutional Framework of Taxation in Australia that the Australian Taxation System is one of the most complex in the world and is made up of approximately 125 taxes including taxes such as Income Tax, Capital Gains Tax, Fringe Benefits Tax and Goods and Services Tax just to name a few. He also mentioned that there are many different organisations that play different and varied roles within this system to ensure its integrity and all Australians are equally treated with equity. The Australian Taxation System is embedded in the way of life for all Australian taxpayers, we pay tax on our income, we pay tax when we purchase goods and use services, we pay tax when we sell assets and this is just to name a few. It is important that you as a future tax professional understand how this system impacts on yourself and those around you and this can be seen from paying attention to media reports. You are required from week 1 to week 8 to review Australian newspapers such as the West Australian, Financial Review, The Australian, Sunday Times and various others for articles on Australian Tax. Please cut them out as they will need to be handed in with your assignment. If you do not have access to Australian Newspapers for examples you are an overseas student or have financial issues then you may use the Factiva Database within the Curtin Library. A factsheet on how to use this database in attached. After spending 8 weeks reading newspapers on the Australian Taxation System, you should have started to develop your own view of the system and how the system is used for different purposes. For example many consider that it is used as a political tool by governments and other political parties, that it is far too complex and the average Australian does not fully understand their taxation obligations, that the organisations that are responsible for administrating the system are…
Search any big company’s financial statements and according to these statements try to make analysis on the financial position of the company.I attached a fiancial analysis report for your referrence. Any report consists four parts: (1) calaulations of financial ratios; (2) description of the financial situation of the company;(3)Explain of the reasons for obvious changes;(4)suggustions and recommedations to improve the financial position.
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Review of SSP’s financial performance and position Profitability Overall SSP plc has increased turnover by nearly 15%, however, this appears to be at the expense of operating profit which has fallen by 20%. The company’s Return On Capital Employed (ROCE), which indicates how well the business has used the financial resources which have been invested in it, has fallen from 31.9% to 23.3%. Although the ROCE for 2004 in absolute terms appears quite satisfactory (it is certainly higher than the cost of capital), this ratio shows a decline from the previous years and must be further investigated. The gross profit margin (which effectively compares the cost of goods sold with the selling price) has been maintained at 60%. However, the net profit ratio (which measures operating profit as a proportion of sales) has fallen from 12.1% to 8.5%. This indicates that the fall in profitability is due to a disproportionate rise in expenses in relation to turnover. In particular, administrative expenses have increased by 26% which is more than the increase in sales. This overall drop in the profit margin will be a major factor in the drop in the ROCE and further analysis must be undertaken to ascertain what specific expenses were responsible. Liquidity All firms need liquid assets to meet day to day payments. Cash is the life blood of any business, no matter how large or small. If a business has no cash and no way of getting any cash, it will have to close down. The liquidity ratios highlight the ability of the firm to convert its assets to cash. SSP’s current ratio (which compares current assets with current liabilities) has improved from 1.56 to 1.78. However, the acid test ratio, which excludes stock values (which are seen as less ‘liquid’ than other current assets) has dropped from 0.76 to 0.64. It is not the absolute value of this ratio which might cause concern but the fact that it has fallen over the year. An examination of the constituent parts of this…
Obtain annual financial reports of BP (petrol company) for the period 2008 to 2011 inclusive. Do a financial analysis based on ‘Consolidated’ data and write a brief report from the perspective of financial analysts of the firm.
You may download financial statements from the following:
Prepare trend analyses and financial ratio analyses for a minimum of four years for the firm. Assess its profitability, asset efficiency, liquidity, capital structure and market performance.
Assessment criteria includes:
Correctness of financial statement analysis calculations
Report Presentation and referencing
Quality of report content
The report should be referenced where appropriate. Referencing should be in Harvard format.
Families First is a managed care plan that has been asked to submit a premium bid to ABC Company, a large manufacturer in its service area. The premium bid includes the primary care for all of the ABC employees. ABC has provided information about the age and gender of its employees, and Families First has identified average primary care utilization rates from its own databases. This information is shown below:
ABC Company
Average Primary Care Visits per Year
Age Band
Number of Males
Number of Females
Males
Females
20 29
285
325
2.10
3.18
30 39
96
100
2.60
3.52
40 49
53
57
3.28
3.93
50 59
36
36
4.14
4.43
60+
7
5
4.98
5.04
Each primary care physician can handle about 3,000 patient visits per year, for which he or she is paid $180,000.
Question
What primary care rate (PMPM) will Families First propose to ABC Company? Part 2
All America HMO pays its primary care physicians (PCPs) by capitation, but a percentage of the total capitated amount is withheld and distributed to individual PCPs based on aggregate PCP performance. The financial goal of importance to All America is to achieve total actual specialty care and hospital costs less than budgeted. To this end, All America provides a financial incentive to its PCPs to encourage careful referral of patients to these services. The financial incentive is based on the referral gain or loss, defined as the difference between the actual and budgeted specialty care and hospital cost. More specifically, All America uses the following risk sharing rules:
· If a total referral gain, then all of the total withhold is returned to the PCPs
· If a total referral loss
· If a total referral loss > total withhold, then none of the withhold is returned to the PCPs
Last year, All America’s capitation payment to the PCPs was $20 PMPM, but 15 percent of this amount was placed into the PCP risk pool. The budgeted amount for specialty and hospital costs was $50 PMPM. At the end of the year, the following data were recorded for the four All America PCPs:
Dr Smith
Dr Barney
Dr Wells
Dr Fargo
Number of patients
600
800
1,000
1,600
Actual referral costs
$504,000
$470,000
$590,000
$880,000
1. Calculate the total compensation of each PCP at the end of the year.
2. Were each of the PCPs fairly compensated? What incentives does this single risk pool based on aggregate PCP performance present to the individual PCPs? What should be investigated to assess the fairness of the PCP compensation?
To complete this assignment, download Problem Set 11 Pricing.xlsx, perform your calculations, answer the questions above, and save and submit the updated Excel file as your assignment file. The solved problem set should consist of a single, well organized document that contains your work. Solutions should be explained briefly using no more than a short paragraph.
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Helvetica,Bold” 2 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Helvetica,Bold” 2 Heat and power Other Insurance and taxes Total Budgeted Costs = ( Performance Report Difference Under (Over) Budget Based on actual production of units. Actual Totals × Flexible budget prepared. Flexible budget formula developed. Revised performance report prepared. Manager insight: Performance reports compared. Total variable overhead costs For April Total fixed overhead costs Fixed overhead Units Produced ) + Home Products Company Beverage Division Budgeted Costs* Costs 2. 1. * 3. 4. Variable overhead Direct materials Direct labor Variable Cost Total costs Indirect labor Depreciation Units Produced Cost Category Unit Monthly Flexible Budget Cost per Unit Supplies Chapter 9, P 2. Chapter 9, P 2. (Continued) Chapter 9: Page 383 Problem 2: Preparing a Flexible Budget and Evaluating Performance Chapter 8, C 4. (In millions of dollars) Worldwide: [ ( ) ] = Europe: Americas: Asia: Management Analysis: The case covers material from Chapters 6, 7 and 8 in weeks 4 and 5. Ebook: www. Coursesmart.com Login Username: lizabailey1212@gmail.com password: juicy2012 Ch.8 “Decision Analysis Using Excel Economic Value Added and Performance, located in Chapter 8 C4 on Page 341. ????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????
So your new accountant could practice the budgeting process in your for profit company, you want her to compare budgeting methods for two different kinds of entities.
You give her information for a for profit and for a nonprofit entity and ask her to complete the following:
Use the assumptions and data in the attached excel sheet. (there are two tabs)
1. complete next year’s budgeted figures for each entity within the same Excel worksheet (yellow cells)
2. include your reasoning for most of the budgeted figures (green cells)
Because of a bad recession, government grants were not cut by 50% but are eliminated completely for next year’s budget and fundraising efforts—despite an increase in expenses—did not improve at all.
oWrite a memo of300–400 words explaining what you would recommend that the museum manager do.
You are an accountant at Yves Group Accountants & Investment Advisors. You have been approached by IMG Super Funds Management for your professional advice on investing in David Jones Ltd.
Prepare a report for IMG Super Funds Management . Your report should include:
A description of the core business of the company including full details of its operating activities.
A discussion on any significant issues emerging from the Directors’ Report.
A discussion on company’s Corporate Governance Statement.
A discussion on company’s Sustainability Report.
A calculation of the key financial ratios and compare two years for 2011 and 2012
An overall assessment of the company and your recommendation on investing in the company.
Financial Ration:
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Accounting Concepts and Practices You are an accountant at Yves Group Accountants & Investment Advisors. You have been approached by IMG Super Funds Management for your professional advice on investing in David Jones Ltd. Required: Go to: http://www.davidjones.com.au/ /media/Files/Corporate/Presentations/2012/David%20Jones%202012%20Annual%20Report.ashxhttp://www.davidjones.com.au/ /media/Files/Corporate/Presentations/2012/David%20Jones%202012%20Annual%20Report.ashx http://www.google.com.au/search?q=woolworths&rls=com.microsoft:en au&ie=UTF 8&oe=UTF 8&startIndex=&startPage=1&rlz=1I7ADFA_enAU443&redir_esc=&ei=jniGT6H0FcGZiAfe3eTGBw and access the company’s annual report for 2012 Prepare a report for IMG Super Funds Management. Your report should include: A description of the core business of the company including full details of its operating activities. A discussion on any significant issues emerging from the Directors’ Report. A discussion on company’s Corporate Governance Statement. A discussion on company’s Sustainability Report. A calculation of the key financial ratios and compare two years for 2011 and 2012 An overall assessment of the company and your recommendation on investing in the company. Financial Ration: 1??????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????
Legal Stars pays its employees each week. Its employees’ gross pay is subject to these taxes.
Tax
Rate
Applied To
FICA—Social security
6.20
%
First $106,800
FICA—Medicare
1.45
All gross pay
FUTA
0.80
First $7,000
SUTA
2.15
First $7,000
The company is preparing its payroll calculations for the week ended August 25. Payroll records show the following information for the company’s four employees:
Current Week
Name
Gross Pay through 8/18
Gross Pay
Income Tax Withholding
Dale
$
105,300
$
2,000
$
252
Ted
36,650
900
99
Kate
6,750
450
54
Chas
1,050
400
36
In addition to gross pay, the company must pay one half of the $32 per employee weekly health insurance; each employee pays the remaining one half. The company also contributes an extra 8% of each employee’s gross pay (at no cost to employees) to a pension fund.
Required:
Compute the following for the week ended August 25. (Round your intermediate calculations and final answers to 2 decimal places. Leave no cells blank be certain to enter “0” wherever required. Omit the “$” sign in your response.)
Dale
Ted
Kate
Chas
1. Each employee’s FICA withholdings for Social Security.
$
$
$
$
2. Each employee’s FICA withholdings for Medicare.
3. Employer’s FICA taxes for Social Security.
4. Employer’s FICA taxes for Medicare.
5. Employer’s FUTA taxes.
6. Employer’s SUTA taxes.
7. Employee’s net (take home) pay.
8. Employer’s total payroll related expense for each employee.
Accounts Receivable turnover is expected to be 12 times 30 days of sales in accounts receivable out of a 360 day year (based upon sales and ending 2013 accounts receivable). This would be used to get ending accounts receivable on the 2013 balance sheet – day’s sales in accounts receivable is ending accounts receivable divided by average sales (sales for 2013 divided by 360 days). We can “back into” ending accounts receivables once we have estimated sales. Note that the turnover ratio changes so the turnover ratio at the end of 2012 may have been different than that expected at the end of 2013.
Gross Margin ratio is expected to be 40 percent.
Inventory Turnover is expected to be 12 times 30 days of cost of sales in ending inventory out of a 360 day year (based upon cost of goods sold and ending 2013 inventory). This would be used to get inventory on the 2013 balance sheet. See accounts receivable above for similar computations.
The cost of ending inventory is expected to be paid next month – ending accounts payable will be same as ending inventory. Or, to state in another way, accounts payable turnover is same as the inventory turnover. The assumption is that only inventory purchases flow through accounts payable – the assumption actually used by most manufacturing/merchandising companies when prepared the statement of cash flows.
Equipment was purchased on 1/1/13 for $20,000. Equipment has a five year life, no salvage value, and is depreciated using the straight line method. The old equipment is being depreciated on the same basis.
Salaries are expected to be $2,000 per month. It is expected that one half month will be owed on 12/31/13 because of when payday falls.
$30,000 in cash was borrowed on 12/31/13 by issuing a Note Payable.
Insurance costing $18,000 was purchased on 6/1/13 (the same time in which the policy purchased in 2012 expired the new policy was for 12 months).
The tax rate is 30 percent. Income taxes for the current year are payable during the first two months of the next year.
Dividends of $2,000 were paid during 2013.
Instructions
Prepare an Income Statement. After you are completed, a corrected Income Statement should be completed by your spreadsheet automatically with only a change in any of the assumptions that will be within spreadsheet one.
Prepare a Statement of Retained Earnings. This statement should automatically change if any of the assumptions are changed within spreadsheet one.
Prepare a Balance Sheet without cash yet known. Have the Balance Sheet for 12/31/12 (given in template) and 12/31/13 on the same schedule so that the differences can be easily computed for instruction 4. When you are finished, a corrected Balance Sheet for 2013 should automatically be computed by your spreadsheet with a change in any of the assumptions within spreadsheet one.
Prepare a Statement of Cash Flows on the direct method (do not include the indirect method of calculating operating cash flows). The Statement of Cash Flows should automatically change when any assumption is changed. The ending cash as shown on the statement of cash flows will then flow to the Balance Sheet.
On spreadsheet A have only the following:
Assumptions
Sales $200,000
Equipment Purchases $20,000
Salaries per Month $2,000
Twelve month insurance policy purchased $18,000
Dividends paid $2,000
Borrowings $30,000
Have the Income Statement and Retained Earnings Statement on spreadsheet B. Use spreadsheet C for the comparative Balance Sheet and Spreadsheet D for the Statement of Cash Flows.
When you believe your spreadsheets from instructions 1 through 4 are complete, then save that spreadsheet within a file. Reopen that file and make the following changes:
On the spreadsheet A for the assumptions change sales to $210,000, equipment purchases to 30,000, insurance purchased to $24,000, borrowings to $40,000, and dividends to $3,000. You should see all the financial statements change automatically to a new balanced balance sheet. If not, then you did not use a formula where needed within at least one cell. When the changes are complete, use the “save as” function and save in a new file with a different name.
Submit both files through the assignment function in blackboard by the due date.
Student Name: Student No: Calculator Make and Model _____________________________________________ (Failure to complete this section may delay the release of your grade.) UNIVERSITY OF SOUTHERN QUEENSLAND FACULTY OF BUSINESS COURSE NO: ACC2115/5215 COURSE NAME: Company Accounting/Corporate Accounting This examination carries 70% of the total Assessment for this course Examination: Examiner: Karyn Byrnes Current Deferred/ Supplementary Moderator: Marie Kavanagh Internal ? ? Time Allowed: Perusal: Ten (10) minutes External ? ? Working: Two (2) hours Examination Date: February 2010 Special Instructions: Communication of any kind about any matter between students by any means whatsoever is strictly prohibited from the time that students enter the examination room until they exit at the completion of the examination. This includes any temporary absence from the examination room during the examination. Any such communication will be deemed to be cheating and treated as serious academic misconduct under University Regulation 5.10. This is a RESTRICTED examination. Students are permitted: • to use non programmable calculators. Students must note the make and model of the calculator used in the space provided above. This may be checked by the examination supervisor. • to write on the blue examination paper during perusal. Students are not permitted: • to write in the answer booklet during perusal. • to write on the examination answer sheet during perusal. This examination consists of 2 parts: Part A – ten (10) multiple choice questions worth a total of 20 marks. Part B – four (4) practical questions worth a total of 80 marks. Please write your name and student number on all examination papers. Clearly number each question. All examination question papers must be submitted to supervisors at the end of every examination and returned to USQ. Any non USQ copyright material used herein is reproduced under the provisions of Section 200 (1) (b) of the Copyright Amendment Act 1980. ACC2115/5215 Company Accounting/Corporate Accounting Page 1 February 2010 Page 1 of 9 Part A Multiple Choice Questions This section consists of 10 questions worth 2 marks each. Total of 20 marks. Please record your answers on the examination answer sheet provided. Question 1 Jack Limited acquired a 20% investment in Spot Limited for $54 000. Spot Limited declared and paid a dividend of $25 000. Jack Limited does not prepare consolidated financial statements. The appropriate entry for Jack Limited to record this dividend is: a) DR Cash $5 000 CR Investment in associate $5 000 b) DR Investment in associate $5 000 CR Dividend revenue $5 000 c) DR Cash $10 800 CR Dividend revenue $10 800 d) DR Dividends received $10 800 CR Cash $10 800 Question 2 For the purposes of equity accounting for an investment in an associate, it is presumed that the investor has significant influence over the other entity where the investor holds: a) 20% or more of the voting power of the investee b) between 1% and 5% of the voting power of the investee c) 50% or more of the voting power of the investee d) between 5% and 10% of the voting power of the investee ACC2115/5215 Company Accounting/Corporate Accounting Page 2 February 2010 Page 2 of 9 Question 3 Dusty Limited acquired a 25% interest in Snowy Limited for $30 000 on 1 July 2009. Dusty Limited is part of a consolidated group. For the financial year ending 30 June 2010, Snowy Limited had generated a profit before tax of $45 000. Tax rate is 30%. At this date, Snowy Limited took the following action: • revalued assets up to fair value by $10 000 • declared a dividend of $5 000 The balance in the investor’s account ‘Shares in associate’, after equity accounting has been applied, is: a) $40 875 b) $38 375 c) $39 625 d) $37 875 Question 4 In relation to the order of priority of payment of debts upon liquidation, which statement is correct? a) deferred creditors rank before ordinary unsecured creditors b) deferred creditors rank before secured creditors c) preferential unsecured creditors rank before deferred creditors d) ordinary unsecured creditors rank before preferential unsecured creditors Question 5 When translating financial statements into the presentation currency the reserve transfers are: a) shown at the translated amount based upon the rates that were applicable when the transferred amounts were first recognized in equity b) not required to be translated c) shown at the translated amount based upon the average rates for the current period d) shown at the translated amount based upon the rates at the balance date Question 6 Where output is shared for jointly controlled assets, the preferred method of accounting for the venturer’s interest is the: a) line by line method b) consolidation method c) equity method d) one line method ACC2115/5215 Company Accounting/Corporate Accounting Page 3 February 2010 Page 3 of 9 Question 7 Which of the following is not a characteristic of a Joint Venture? a) contractual arrangement b) working capital c) joint control d) economic activity Question 8 According to AASB 127 Consolidated and Separate Financial Statements, non controlling interest is classified as: a) part of the equity of the group b) part of the equity of the parent entity c) a liability of the group d) a liability of the parent entity Question 9 IAS 31 Interests in Joint Ventures identifies three forms of joint venture. The key difference between the first two forms (jointly controlled operations and jointly controlled assets) and the third form (jointly controlled entities) is that: a) in the first two forms the venturers have an undivided interest in the assets of the joint venture b) the first two forms require the use of shared assets c) in the first two forms the venturers have an interest in the entity rather than the individual assets d) in the first two forms the entity controls the resources contributed by the venturers Question 10 As required by AASB 127 Consolidated and Separate Financial Statements, where there are transactions between members of the group, the effects of these transactions are: a) adjusted partially in direct proportion to the level of control held by the parent b) not adjusted in the consolidation process c) adjusted in full on consolidation d) adjusted in proportion to the equity held by the non controlling interests in the subsidiary End of Part A ACC2115/5215 Company Accounting/Corporate Accounting Page 4 February 2010 Page 4 of 9 Part B Practical Questions This section consists of 4 questions worth a total of 80 marks. Please record your answers in the answer booklet provided. Question 1 (20 Marks) Bathurst Ltd, an Australian company, acquired all of the shares of Sentosa Ltd a Singapore company for S$160,000 on 1 January 2010. At that date, Sentosa Ltd’s Statement of Financial Position was as follows: Sentosa Ltd Statement of Financial Position as at 1 January, 2010 Assets S$ Cash 20,000 Motor Vehicles (net) 40,000 Plant & Equipment (net) 180,000 Liabilities Creditors 30,000 Net assets $210,000 Shareholders’ equity Share capital 150,000 Retained earnings 60,000 Total equity $ 210,000 All the assets and liabilities were recorded at fair value. At 31 December 2010 the financial statements of Sentosa Ltd were as follows: Sentosa Ltd Statement of Comprehensive Income for the year ended 31 December, 2010 S$ Sales 93,750 Expenses 66,000 Profit $ 27,750 ACC2115/5215 Company Accounting/Corporate Accounting Page 5 February 2010 Page 5 of 9 Sentosa Ltd Statement of Financial Position as at 31 December, 2010 S$ Assets Cash 45,000 Motor Vehicles 65,000 Accumulated depreciation – Motor vehicles 16,250 Plant & Equipment 220,000 Accumulated depreciation – Plant & equipment 44,000 Liabilities Creditors 32,000 Net assets $237,750 Shareholders’ equity Share capital 150,000 Retained earnings 87,750 Total Equity $237,750 Additional information: Tax is not considered in this exercise. The exchange rates applicable are as follows: AUD $1 is equivalent to: AUD $1 S$ Opening rate (01/01/10) 1.30 Closing rate (31/12/10) 1.20 Average for 2010 1.25 Sales and expenses were incurred evenly throughout the 2010 year. Required: a) Translate the accounts of Sentosa Ltd into the presentation currency of Australian dollars (round to the nearest dollar). (12 marks) b) Verify the translation adjustment. (8 marks) ACC2115/5215 Company Accounting/Corporate Accounting Page 6 February 2010 Page 6 of 9 Question 2 (20 Marks) On 1 July 2008, Dove Ltd acquired 75% of the shares of Tail Ltd for $54,700. At this date the equity of Tail Ltd consisted of: Share capital $40,000 General reserve $ 5,000 Retained earnings $ 7,000 At the acquisition date, the assets and liabilities of Tail Ltd were recorded at fair value except for the Plant & Equipment: Carrying Amount Fair Value Plant & Equipment $180,000 $200,000 (cost $230,000) • The fair value of the non controlling interest (NCI) in Tail Ltd at 1 July 2008 was $19,000. • The tax rate is 30%. • During the year ended 30 June 2010, the goodwill was impaired by $2,000. • For the year ended 30 June 2010, Tail Ltd recorded an after tax profit of $25,000. • On 1 January 2009, Tail Ltd sold an item of plant to Dove Ltd for $150,000, recording a before tax profit of $20,000. • Both entities depreciate Plant & Equipment using the straight line method at 10% per annum. Required: a) Using the full goodwill method, prepare the acquisition analysis to determine the value of goodwill acquired at 1 July 2008. (5.5 marks) b) Prepare the consolidation worksheet journal entry to record this goodwill at 1 July 2008. (2 marks) c) Prepare the consolidation worksheet journal entry to record the impairment of goodwill during the year ended 30 June 2010. (2 marks) d) Calculate the NCI Share of Profit for the year ended 30 June 2010 and prepare the consolidation worksheet journal entry to record this NCI Share of Profit. (4 marks) e) Prepare the consolidation worksheet journal entry for the year ended 30 June 2010 that relates to the plant sold on 1 January 2009. (6.5 marks) ACC2115/5215 Company Accounting/Corporate Accounting Page 7 February 2010 Page 7 of 9 Question 3 (20 Marks) On the 30 June 2010 James Ltd went into voluntary liquidation. The Statement of Financial Position prepared on that date is as follows: JAMES LTD Statement of Financial Position as at 30 June 2010 Current Assets Cash 40,000 Accounts receivable 90,250 less: Allowance for doubtful debts 10,250 80,000 Inventory 157,500 277,500 Non current Assets Property, Plant & Equipment 420,000 less: Accumulated depreciation 88,000 332,000 Land 226,500 558,500 Total Assets $ 836,000 Current Liabilities Accounts payable 108,000 Other payables 40,250 148,250 Non current Liabilities Debentures 125,000 Mortgage on Land 212,500 337,500 Total Liabilities $ 485,750 Net Assets $ 350,250 Equity Share Capital: Preference: 25 000 shares fully paid to $2 50,000 Ordinary: 225 000 shares fully paid to $1 225,000 275,000 Retained Earnings 75,250 Total Equity $ 350,250 ACC2115/5215 Company Accounting/Corporate Accounting Page 8 February 2010 Page 8 of 9 Additional Information: a) Other assets realised: Inventory 135,000 Accounts receivable 65,000 Property, Plant & Equipment 335,000 b) The debentures are secured by a floating charge over the company’s assets. c) The land was sold by the mortgage holder for $204,250. d) The remuneration and expenses of the Liquidator totalled $4,500. e) Preference shares are preferential as to dividends and return of capital. There are no further rights available to the preference shareholders as per the company constitution. Required: Prepare all the necessary journal entries to wind up James Ltd. Payments to creditors must be shown in the correct order of priority. Question 4 (20 Marks) On 1 July 2008, Harry Ltd entered into a joint venture agreement with Haussen Ltd to form an unincorporated entity to produce a newly designed scooter. It was agreed that each party to the agreement would share the output equally. Harry Ltd’s initial contribution consisted of $750,000 cash and Haussen Ltd contributed plant and machinery that was recorded in their own records at $712,500. During the first year of operation both parties contributed a further $1,125,000 each. Each venturer depreciates plant and machinery at 10% per annum on cost. On 30 June 2009, the venture manager provided the following statements: Costs incurred for the year ended 30 June 2009 Wages 690,000 Supplies 1,050,000 Overheads 825,000 2,565,000 Cost of inventory 1,815,000 Work in progress at 30 June 2009 $ 750,000 ACC2115/5215 Company Accounting/Corporate Accounting Page 9 February 2010 Page 9 of 9 Receipts and Payments for the year ended 30 June 2009 Receipts: Original contributions 750,000 Additional contributions 2,250,000 3,000,000 Payments: Plant & Machinery (02/07/08) 300,000 Wages 675,000 Supplies 1,125,000 Overheads 787,500 Operating expenses 75,000 2,962,500 Closing Cash Balance $ 37,500 Assets and Liabilities at 30 June 2009 Assets Cash 37,500 Plant & Machinery 1,050,000 Supplies 150,000 Work in Progress 750,000 Total Assets $ 1,987,500 Liabilities Accrued wages 15,000 Accounts payable 112,500 Total Liabilities $ 127,500 Net Assets $ 1,860,000 Required: For the year ended 30 June 2009, prepare all journal entries in the records of Haussen Ltd in relation to the Joint Venture, assuming the line by line method of accounting is used. End of Examination
Student Name: Student No: Calculator Make and Model: (Failure to complete this section may delay the release of your grade.
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Student Name: Student No: Calculator Make and Model: (Failure to complete this section may delay the release of your grade.) UNIVERSITY OF SOUTHERN QUEENSLAND FACULTY OF BUSINESS COURSE NO: ACC2115 / ACC5215 COURSE NAME: Company Accounting / Corporate Accounting This examination carries 70% of the total Assessment for this course Examination: Examiner: Karyn Byrnes Deferred/ Current Moderator: Marie Kavanagh Supplementary Internal ? ? Time Allowed: Perusal: Ten (10) minutes External Working: Two (2) hours ? ? Examination Date: June 2009 Special Instructions: Communication of any kind about any matter between students by any means whatsoever is strictly prohibited from the time that students enter the examination room until they exit at the completion of the examination. This includes any temporary absence from the examination room during the examination. Any such communication will be deemed to be cheating and treated as serious academic misconduct under University Regulation 5.10. This is a RESTRICTED examination. Students are permitted: to use non programmable calculators. Students must note the make and model of the calculator used in the space provided above. This may be checked by the examination supervisor. to write on the blue examination paper during perusal. Students are not permitted: to write in the answer booklet during perusal. Please write your name and student number on all examination papers. This examination consists of 2 parts: Part A – consists of ten (10) multiple choice questions to be answered on the examination answer sheet provided. Part B – consists of four (4) practical questions to be answered in the answer booklet provided. Question 4 should be answered on the blue examination paper in the space provided. Clearly number each question. All examination question papers must be submitted to supervisors at the end of every examination and returned to USQ….
A.)A program in the Engineering and Manufacturing Development (EMD) phase has just been instructed to add some new electronic “black boxes” to the aircraft. The Program Executive Office needs a quick estimate of the cost impact these new additions that is as accurate as possible. The Program Office has access to a database of the costs of adding similar equipment to 15 other types of aircraft. What is the most appropriate cost estimating method for this situation?
Analogy
Engineering
Actual Cost
Parametric
B.)Which one of the following best describes DoD philosophy of budgeting for a Fixed Price Economic Price Adjustment contract?
Budget for the anticipated final negotiated price
Budget for the ceiling price
Budget for the target price
Budget for the estimated negotiated price and the maximum amount of the price adjustment clause
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(a). A program in the Engineering and Manufacturing Development (EMD) phase has just been instructed to add some new electronic “black boxes” to the aircraft. The Program Executive Office needs a quick estimate of the cost impact these new additions that is as accurate as possible. The Program Office has access to a database of the costs of adding similar equipment to 15 other types of aircraft. What is the most appropriate cost estimating method for this situation? Analogy Engineering Actual Cost Parametric (b) Which one of the following best describes DoD philosophy of budgeting for a Fixed Price Economic Price Adjustment contract? Budget for the anticipated final negotiated price Budget for the ceiling price Budget for the target price Budget for the estimated negotiated price and the maximum amount of the price adjustment clause
An extensive consultation paper has been provided to you related to the Conceptual Framework from the International Public Sector Accounting Standards Board.
As a group, you are to read the report, understanding its purpose and then discuss Phases 3 and 4 (Measurement as well as Presenting information in GPFR’s).NOTE: you are not required to discuss Phases 1 & 2.
This will require further research by your group to understand the background, a clear understanding of the relevance of each phase and a discussion as to where this will lead, what the likely outcomes are and why. You should consider and include the history and practices in Australia in your report, e.g. AASB and the structure that existed pre IASB. As a conclusion, you are to include what you have learned/understood from the paper and from your findings.
Reference
Reference is must and it should be in Harvard style referencing.
Department of Accounting & Taxation ACCT 331 Final Exam – Spring 2013 The case for the Final Exam, Winnbrook Day Care Center, is contained below. Please read it carefully, and please read all of the pages on the exam before beginning to answer any of the questions. Then answer the questions on the attached pages. The exam is open book. You may use whatever notes, books, and other materials you wish ( except those materials, including exam responses, of other students taking the exam).You must return the exam to Blackboard within four hours of downloading it. Please remember that you are bound by the honor system. You may not ask for assistance from any outside party including members of the class. Please sign the statement below stating that you have not asked for nor received any outside assistance. Please put your name and I.D. Number in the space below:
You may do scratch work on separate pages and outline your answers on separate pages – in fact, I encourage you to do so. Once you are ready to write out your answer, please confine it to the spaces indicated, and please write legibly and succinctly. Do not use separate pages or exceed the allotted space. Winnbrook Day Care Center
In September, 2007, Cheryl Johnson, manager of Winnbrook Day Care Center (Winnbrook), asked Edward Landers, a recent graduate of a nearby business school, for advice. Mr. Landers, seeing an opportunity to contribute to the community that had helped support his extra curricular activities while he attended college, agreed.
Background
Winnbrook Day Care Center was located in Newtown, Indiana, and was owned by a local corporation that wished to provide child care services to its employees. Until 2007, the corporation’s policy had been that Winnbrook should operate on approximately a breakeven basis: that is, the corporation did not intend to use its own funds to finance the operation, nor did it expect its employees to pay more than the center’s full cost for day care services. Winnbrook was one of seven day care centers in Newtown that had its own building. Many smaller centers were located in church basements or private homes. In 2007, Winnbrook’s enrollment was 50 children, all of whom were pre school. They attended for the full day, while their parents were at work, and took part in various activities. The center provided them with lunch.
Winnbrook operated in a two story building located on a large lot. The corporation owned both the building and the lot. The building was old and needed repair. According to a recent inspection by the city fire marshal, it was in violation of the fire code because, among other things, the second floor did not have two outside exits, not all the exit doors opened outward, smoke detectors and emergency lighting were missing, stairwells were not enclosed, and materials used in ceiling and walls were substandard. The city’s Department of Child Services had indicated that it would revoke Winnbrook’s license unless it either renovated the building or constructed a new one.
A local contractor, estimating the necessary repairs to the building would cost roughly $ 100,000, had recommended that Winnbrook construct a new building on the same lot. The cost would be $ 80,000, assuming that the parents would do much of the interior finishing on a volunteer basis. The $ 80,000 figure included demolition and removal of the old building after construction of the new one (the lot was large enough to accommodate this approach). Following construction, Winnbrook’s capacity would be 70 children.
Based on Ms. Johnson’s recommendation, the corporation’s CFO had decided to construct a new building, but she had indicated to Ms. Johnson that, beginning in 2008, the center should earn a return of about 10% on the cost of the building and land. The land had been purchased ten years earlier, along with the old building. The total cost was $ 60,000 of which the land represented about one third. Ms. Johnson had agreed, and construction began in January, 2007. The building was scheduled for occupancy in January, 2008 and had an economic life of twenty years.
FINANCIAL DATA
Most Winnbrook children were in low income families. In most cases, the corporation employed both parents. In 2006 and 2007, the center charged $ 35 per week, the lowest rates of any of the seven centers, where rates were as high as $ 50 per week. Centers at the top of the scale attracted children from higher income families. Most centers, including Winnbrook, operated at capacity.
For tax purposes, Winnbrook’s accounting system was separate from the corporation’s. Ms. Johnson had prepared an income statement for 2006. From bank deposits and checks, Mr. Landers, who had taken some introductory accounting courses in college, was able to prepare an estimated income statement for 2007. In addition, based on discussions with Ms. Johnson, Mr. Landers had prepared a budget for 2008, assuming the new building would be in use for the full year. The 2006 actual figures, Mr. Lander’s estimates for 2007, and the 2008 budget are all shown in Exhibit 1.
In preparing the 2008 budget, Mr. Landers made the following assumptions:
Winnbrook would charge a fee of $ 50 per week.
Seventy (70) children would enroll for forty (40) hours a week each.
There would be the equivalent of 6.5 hourly employees at $ 5 per hour (the same wage rate as in 2007). This was 2.5 FTEs (full time equivalent employees) more than in 2007, and was due to the planned increase in enrollment. In addition, Ms. Johnson planned to hire a business manager (salaried) to keep Winnbrook’s expenses under control. All employees worked 40 hours a week.
The center would be open the equivalent of 48 weeks a year. This was because during two weeks of the year, the corporation closed down and the employees were on vacation. In addition, the corporation was closed for another ten days (two weeks equivalent) during the year in conjunction with various national holidays, such as Labor Day, Columbus Day, and Thanksgiving.
Exhibit 1. Financial Data (Year Ending December 31)
2006 (Actual ) 2007(Estimated ) 2008(Budget )
Revenue (net of estimated bad debts) $ 70,000 $ 84,000 $ 168,000
Expenses:
Salaried employees $ 20,000 $ 22,000 $ 44,000
Hourly employees 34,350 38,400 62,400
Food 4,198 12,000 16,800
Utilities 1,954 1,670 2,100
Interest (1) 413 6,400 6,000
Supplies (2) 6,350 7,200 10,080
Repairs & Maint. 124 544 1,000
Insurance 504 651 2,000
Depreciation (3) 1,108 826 4,000
Total expenses 69,001 89,691 148,380 Income (Loss) $ 999 $ (5,691) $ 19,620
Notes:
2006 interest was for an automobile, which had been purchased on an installment loan. 2007 interest was for the automobile and the mortgage. 2008 interest was for the mortgage only, since the auto loan would be paid off by the end of 2007.
Child related supplies, such as crayons, paper, paints, clay.
Depreciation in 2006 and 2007 was for the automobile; in 2008, it was for the new building only.
Question 1 (15 points)
From the perspective of the corporation, what kind of responsibility center is Winnbrook ? (no more than five words) (5 points)
Give your reasoning. (no more than 100 words). (10 points)
Use variance analysis to explain the causes of the increase in revenue from 2007 to 2008. Show your computations neatly, and clearly label the appropriate variances.
Question 3 (20 points)
Using child weeks as the appropriate measure of volume (e.g., 1 child enrolled for 48 weeks = 48 child weeks), indicate whether each item below is fixed (F), variable (V), or other (O), and explain your reasoning. For variable items, your explanation should show the rate per child week. Use Mr. Lander’s 2007 estimated amounts as the basis for your computations.
F/V/O Explanation
Revenue
Salaried Employees
Hourly Employees
4. Food
Utilities
Interest
Supplies
Repairs
Insurance
Depreciation
Question 4 (5 points)
Use your analysis in Question 3 to set up a flexible budget formula for Winnbrook. Show your computations where necessary.
Question 5 (10 points)
How, if at all, would a flexible budget be of use to Ms. Johnson in the management of Winnbrook? (no more than 100 words)
Ms. Johnson’s budget for 2007 was based on an average attendance of 45 children per week, and had budgeted food costs totaling $ 8,640 for the year. Mr. Lander’s estimate of $ 12,000 was based on an average attendance of 50 children per week. Prepare a variance analysis to explain the increase in food costs between Ms. Johnson’s budget and Mr. Lander’s estimate .
Question 7 (5 points)
Prepare a brief (no more than 50 words) explanation to Ms. Johnson of why Mr. Lander’s estimated food costs for 2007 differ from her budget.
Question 8 (10 points) As a consultant to the corporation, you have been asked to recommend some non financial information that Ms. Johnson and the corporation could use to assess Winnbrook’s performance. List two items of non financial information, giving a very brief (no more than 50 words) explanation for each of why you chose it. Item # 1:
Item # 2:
Question 9 (15 points) Ms. Johnson has asked you for a recommendation as to what is the best course of action for her to take in this matter. Your answer should focus on identifying problems that you see in the 2008 budget and recommending a course of action to resolve the problem. (your answer should not exceed this page)
Alan (66) and Cheryl (63) Hoover are married, file a joint return, and live at 666 Real Tired Avenue,Willimantic, Connecticut 06626. Alan is an attorney. His Social Security number is 886 56 8935. Cheryl is asecond grade teacher. Her Social Security number is 200 40 8000. Alan’s office inthe home is 600 square feetand the total square footage of the house is 3,000 square feet. Alan and Cheryl purchased the house on January 6,2005 for $280,000, of which $ 40,000 is attributable to the land. They have a son, Ian (20), who lives with them, who they fully support, and who attended college full time foronly the Spring 2012 semester (January May). Ian earned $19,600 during the summer and fall. Cheryl’s motherThelma Gould (SS# 666 66 6666), who is age 71, lives with them for the entire tax year. Cheryl’s motherreceives $1,250 per month in social security benefits and has no other income or means of support except for herson in law Alan (Alan provides more than half her support)Additional information is as follows: Items: Amount•Alan – Gross earnings as self–employed attorney (Employer Federal ID number (EIN) 05 0678888) $110,000•Alan Estimated taxes paid in during year 4/15/12: $2,100….. 6/15/12: $2,100….. 9/15/12: $2,100….1/15/13: $2,135 8,435•Alan Estimated state income tax paid during year 4,730•Ordinary dividends from GE stock 15,950•Interest on J.C. Penny Corp. domestic bonds 3,300•Savings account interest—Pioneer Savings Bank 700•Series EE bonds that matured in 2012 (used to pay for Ian’s tuition, books and fees; ½ is interest) 6,100•Interest on New York municipal bonds 3,450•Cheryl – Salary as teacher 45,400•Cheryl Federaland FICA income tax withheld during year 8,473•Home mortgage interest 15,600•Sales tax paid 3,115 Alan’s Business Expenses Use of auto: (Bought 2/15/12 $25,000) **Travel expenses: Office in the home: Total miles 28,000 Hotel $3,700 Office supplies direct $890 Business miles 22,000 Meals $ 820 Telephone – direct $1,100 Parking $280 Entertainment of clients $1,080 Utlities – indirect $ 3,400Gas $9,000 Conference fee $1,000 Insurance indirect $1,600Insurance $1,200 Laundry $150 Repairs indirect $1,800 Depreciation –car ? Transportation $ 500 Depreciation home * ? *Depreciation rate for part use of home office is 2.461% Equipment cost*** $6,500 per IRS rules (direct) **There was no element of personal pleasure included in the travel. *** Equipment purchased 6/12/12Cheryl’s ExpensesProfessional dues $2,750Professional journals $1,500Uniform $1,650Alan’s ExpensesSalary to secretary $15,000FICA ?SUTA/FUTA 725ACC 416 Spring 2013 Silkoff Alan and Cheryl also own a duplex (8 Duped St, Willimantic, Ct 06226 that they managed themselves. Theproperty was purchased on 6/2/2008. It produced the following rental income and expenses (80% rental): Item Amount (1) Gross rental income $9,200(2) Mortgage interest 6,300(3) Insurance 600(4) Repairs and maintenance 1,050(5) Real Estate taxes 1,200(6) Utilities 1,850(7) Homeowners’ association dues 2,475 (8) Depreciation ?Contribution to a traditional IRA Alan $7,000Rental income (loss) on XYZ Limited Partnership – Cheryl 15,000Ordinary business income (loss) on ABC Limited Partnership Alan (6,000)Automobile registration fees (Alan $700; Cheryl $500) 1,200Property taxes on personal residence 5,200B Anthem Blue Cross health insurance premiums (Cheryl is not covered by employer provided medical insurance) 14,400Other medical expenses 2,470Tax preparation fees 1,750Charitable Contributions :Cash $9,000GE stock FMV 12,000 GE stock Adjusted basis 7,000Reported (to Willimantic Police Department) theft of Cheryl’s jewelry from her home. Purchased ten years ago at acost of $10,300; appraised value was $9,700. Insurance reimbursement was $2,000. ?Ian completed first semester at Metropolitan State College. Tuition, books and fees (SS# 223 22 1234) $4,630Alan’s stock trades yielded: Date purchased Date Sold Cost SoldLT 500 sh Chipotle 3/16/09 4/13/12 $8,600 $3,700 LT 200 sh Mattel 8/22/11 8/23/12 2,300 5,500 ST 100 sh United Airlines 3/18/11 2/5/12 2,000 1,000 ST 400 sh Apple 10/12/12 12/30/12 12,500 20,300 Required:Complete Alan and Cheryl Hoover’s federal tax return(Form 1040 only) for 2012. Use Form 1040, Schedules A,B,C,D, E, Forms 2106, 4562, 6251, 8828 and any other appropriate schedule(s) and form(s) you may need. Make realistic assumptions about any missing data. Do only the federal tax return.
Refer to the relevant case law and statute law in your answer. You must read the presentation guidelines in the subject outline. Your answer must NOT 3 A4 pages, excluding the bibliography.
Question
Alex is a tax resident of Australia. He is employed as a mechanic at Fix A Car Pty Ltd with a salary of $60,000 pa. In the course of his employment the company Alex received a car allowance of $5,000 and reimbursed him $200 for his parking expenses for the year ended 30 June 2012.
In the weekends Alex repairs automobiles in his workshop in his house backyard to supplement his income. His close relative Tony usually brings his car to Alex’s home for servicing every month. Being a close relative to Alex, he did not to charge Tony for all the work done. Tony who loves gardening in return does Alex a favor by maintaining Alex’s garden every weekend.
The recent economic downturn the Fix A Car Pty Ltd has to downsize. As a result Alex was made redundant and was offered a redundancy payment of $40,000. Alex has worked in that company for 5 years.
Required
Advise Alex on his tax implication on the income that he received. Discuss if Tony has any tax implication?
Rationale
This assignment has been designed so that you can:
gather and integrate your knowledge on the topics covered thus far;
investigate in depth the cases, rulings and legislation that are fundamental to taxation law;
demonstrate your ability to apply that knowledge to a hypothetical, practical situation;
exercise critical and reflective judgments;
demonstrate your ability to conduct research using provided materials as well as other legal resources;
develop your written skills; and
Demonstrate time management skills.
Students should be able to identify and apply legislation and case law to the issues identified as well as demonstrates the ability to analyses the issues fully and discusses the application of taxation principles
ASSESSMENT 2 on SHU week 41 – INDIVIDUAL REPORT 80%
Your chosen company* has recently appointed several new Non Executive Directors. They have jointly asked to be briefed on a range of topics.
You are required:
To prepare a report for your chosen company on one of the topics requested. The report should explore the topic from a general/theoretical perspective and from the specific position of your company. Including where appropriate examples from other companies.
The report should be in report format and add linked with your analysis maximum of 4,000 words. This does not include introductory pages containing names, content and executive summary. It also does not include appendices; however these must contain relevant information.
Note Please do the necessary calculations and attached the calculations and formulas on appendices
ASSESSMENT 2
TOPICS AVAILABLE:
Liquidity On BP (British petroleum)
*Please select a company from the London stock exchange under FTSE 350 (http://www.londonstockexchange.com/home/homepage)
The company needs to be approved by the module leader before the start of your assessment. You are not allowed to use companies used for assessment 1( i.e. Sainsburys plc, Tesco plc, Morrisons plc, Marks and Spencer plc, Debenhams plc, John Lewis Partnership) and NEXT plc.
APPENDIX 1
Referencing a quick guide
2765
Introduction
This leaflet sets out recommended practice for referencing and bibliographies, according to the Harvard Method. It is based on guidance from a range of British and international standards. More extensive information can be found on shuspace by searching for referencing. Accurate and consistent referencing is essential in all academic work. Whenever you refer to either the work or ideas of someone, or are influenced by another’s work, you must acknowledge this. If you make a direct quotation from someone’s work, this should be referred to accurately. You should acknowledge your source in two places
• in the main body of the text (citing references)
• in a bibliography or a reference list at the end of the piece of work
You are strongly advised to keep detailed records of all sources used, and to do this at the time you use them.
Citing references
Referring to someone else’s work or ideas in the text of your own work is known as ‘citing’. This should be acknowledged by quoting both the author’s last name (family name) and the date of the work in brackets.
This leads the reader to the bibliography, where the full reference appears. This is located at the end of your work. If the author’s name occurs naturally in the sentence, the year only is given in brackets. Page numbers should be included for direct quotations or reference to a particular part of an item.
For two or three authors, the names of all should be given. In the case of more than three authors, the first author only should be given, followed by et al. Collinson et al. (1992) … Rainer and Reiman (1989) take a different view … Gibbs (1992, p11) states that ‘students are …’ Gibbs (1992) believes students are active … In a recent study (Gibbs 1992), it is argued …
If you cannot identify the author, cite by the title.
Bibliography/reference list
A reference list should contain full and accurate references for each item you have quoted or referred to in the body of your text. A bibliography also includes any other works used in your research. All references should give enough information to easily trace the material used. According to the Harvard Method, references are
arranged in one alphabetical sequence, by name of author, followed by date of publication. If there is no
author, the item should be listed by title. If available, include the family name and full given name(s) of any authors or editors. When only initials are given, use the family name and initial(s). Not all resources have individuals as authors; an organisation, company or institution can be the author.
Books
The main elements you need are author(s), year, title, edition (other than first edition), place of publication (if
required) and publisher. You will usually find the relevant information on the book’s title page and back of the
title page. The reference should be as follows For multiple authors, reference all of them to a maximum of three. If there are more than three, you should use et al. after the first author’s name.
If a book has an editor or editors, indicate this by putting (ed.) or (eds.) after the name(s).
CROUCH, David, JACKSON, Rhona and THOMPSON,
Felix (eds.) (2005). The media and the tourist imagination: converging cultures. London, Routledge.
BROWN, Carol V., et al. (2009). Managing information technology. 6th ed., Upper Saddle River, Pearson
Education.
CHAPPELL, David and WILLIS, Andrew (2005). The architect in practice . 9th ed., Oxford, Blackwell.
the Dictionary of biology (2004) defines …
Journal, magazine and newspaper articles
To reference a journal or magazine article, include author(s), year, title of article, journal/magazine title (in
full), volume number, issue number and page numbers. For newspaper articles, give the date of the newspaper
instead of the volume/issue.
This information can be obtained from the cover and first pages of the journal, magazine or newspaper, but
will not necessarily appear on the pages inside (and therefore not on a photocopy you may have of an article).
Electronic sources
Referencing electronic sources can be difficult. Look for and provide as much of the information recommended
as possible. It is important to include the format of the material, eg [online], the date you accessed the material
and location, eg URL. A website can be updated at any time so you need to indicate exactly when you used it.
(a) Electronic books
Include author(s), year, title, [online], edition (other than first edition), place of publication (if required), publisher, information database or source, date accessed and location (URL).
MORGAN, Nigel and PRITCHARD, Annette (2001).
Advertising in tourism and leisure. [online]. Oxford,
Butterworth Heinemann. Book from NetLibrary last
accessed 19 June 2008 at: http://www.netlibrary.com/
(b) Electronic journal, magazine and newspaper
articles
Include author(s), year, title of article, [online], journal title, volume, issue number and page number(s),
information database or source (if applicable), date you accessed the material and location (URL). Use the URL for the database or homepage, as the URL for a particular article may not stay the same on return visits.
If the journal/magazine is electronic only ie has no print equivalent, there may be no page numbers and/or the
numbering may not be by volume and issue. Give as much information as you can. You may not be able to find page numbers for some electronic articles, even if there is a print equivalent.
(c) Other websites
Include author(s), year, title, [online], date you accessed the material and location (URL).If you cannot identify an author, reference the work by title.
Sheffield Botanical Gardens . (2008). [online]. Last
accessed 23 February 2008 at: http://www.sbg.org.uk/
CRICK, Bernard (2002). George Orwell: voice of a long generation . [online]. Last accessed 3 May 2008 at:http://www.bbc.co.uk/history/british/britain_wwtwo/orwell_01.shtml
TOIBIN, Colm (2006). Pure evil. [online]. The Guardian, 3 June. Last accessed 13 March 2008 at: http://www.guardian.co.uk/
CHARAVARYAMATH, Chandrashekhar and SINGH, Baljit (2006). Pulmonary effects of exposure to pig barn air. [online]. Journal of occupational medicine and toxicology, 1:10. Article from Biomed Central last accessed 26 June 2008 at: http://www.biomedcentral.com/
REITZIG, Markus (2004). Strategic management of intellectual property. [online]. MIT Sloan management review, 45 (3), 35 40. Article from Business Source Premier last accessed 18 February 2008 at: http://search.epnet.com/
Media
(a) Off air recordings
Programmes recorded from terrestrial and satellite TV onto DVD or video. Include title, year, format, channel
and date of screening.
(b) Training and commercial programmes
Give as much information as you can and indicate theformat.
(c) Feature films
Provide film title, year, format, director and production company.
Further help
More detailed help on referencing is given in the Guide to Referencing, including examples of how to reference
a wide range of resources. The guide is available from shuspace along with a range of other resources to help
with referencing, including guidance on how to recognise different types of resources.
1. Find the financial statements for NIKE and ADIDAS companies and calculate the following ratios for each (note whether a particular ratio is not applicable):
• Current Ratio
• Acid Test Ratio
• Debt Ratio
• Equity Ratio
• Accounts Receivable Turnover
• Days Sales uncollected
• Inventory Turnover
• Days Sales in Inventory
2. Write in DETAIL describing the difference between the two companies for 3 of the ratios calculated.
3. Prepare common size and trend percentages for the income statements for each company.
4. Write a DETAILED analysis and comparison of the income statement items and differences between the two. Be sure to explain why the common size statement is helpful in this analysis.
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NIKE VS. ADIDAS 1. Find the financial statements for NIKE and ADIDAS companies and calculate the following ratios for each (note whether a particular ratio is not applicable): • Current Ratio • Acid Test Ratio • Debt Ratio • Equity Ratio • Accounts Receivable Turnover • Days Sales uncollected • Inventory Turnover • Days Sales in Inventory 2. Write in DETAIL describing the difference between the two companies for 3 of the ratios calculated. 3. Prepare common size and trend percentages for the income statements for each company. 4. Write a DETAILED analysis and comparison of the income statement items and differences between the two. Be sure to explain why the common size statement is helpful in this analysis.
Question 1 “Even though environmental reporting is showing an increasing trend, a recent report by Jones et al. (2005) found low levels of sustainability reporting by Australian companies. They suggest that more accessible approaches and guidelines need to be developed so that entities can discharge a broader accountability than is currently reflected in reporting practices in the public and private sectors in Australia. Hence it is important to have some control mechanisms within the organisation to make sure that environmental information is disclosed properly” (Rao et al., 2013).
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Question 1 “Even though environmental reporting is showing an increasing trend, a recent report by Jones et al. (2005) found low levels of sustainability reporting by Australian companies. They suggest that more accessible approaches and guidelines need to be developed so that entities can discharge a broader accountability than is currently reflected in reporting practices in the public and private sectors in Australia. Hence it is important to have some control mechanisms within the organisation to make sure that environmental information is disclosed properly” (Rao et al., 2013). Rao, K. K. Tilt, C. A. and Lester, L. H. (2013). Corporate governance and environmental reporting: An Australian study. Corporate Governance, Vol. 12, No. 2, pp. 143 163. Required: Critically discuss the above statement and provide importance of environmental disclosure in the company annual reports. What are current regulatory requirements for environmental reporting in Australia? How do you think the environmental disclosure can be improved in Australia? Note 1: Word limit for Question 1 is 800. Note 2: Professional marks will be awarded for format, clarity and expression. Note 3: The presentation of Question 1 should include Introduction, Discussion, Conclusion and List of references.
Cost Analysis HOMEWORK 1) Your program has an RDT&E funded project scheduled to start in December 2010 which is expected to take 16 months to complete. The project is expected to cost a total of $16 million (then year dollars), with cost expected to be incurred at a rate of $1 million per month. It has been determined that no contractor is willing to accept a contract for less than the entire 16 months of effort. What is the correct amount to include in your budget request for this project? $10 million for FY10 and $6 million for FY11 $16 million for FY10 and $0 million for FY11 $10 million for FY11 and $6 million for FY12 $16 million for FY11 and $0 million for FY12 2) DoD’s Annual Funding policy states that the budget request for a fiscal year should be restricted to the budget authority necessary to cover all: costs of goods and services expected to be required during that fiscal year commitments expected to be made during that fiscal year expenditures expected to be made during that fiscal year outlays expected to be made during that fiscal year 3) What is the learning curve represented by the data in the following unit learning curve table? Unit Number Production Time 1 200 hours 2 162 hours 3 143.2 hours 4 131.2 hours 81% 88% 72% 92%
The management of Shatner Manufacturing Company is trying to decide whether to continue manufacturing a part or to buy it from an outside supplier. The part, called CISCO, is a component of the company’s finished product. The following information was collected from the accounting records and production data for the year ending December 31, 2014. 1. 8,000 units of CISCO were produced in the Machining Department. 2. Variable manufacturing costs applicable to the production of each CISCO unit were: direct materials $5.32, direct labor $4.12, indirect labor $0.45, utilities $0.43. 3. Fixed manufacturing costs applicable to the production of CISCO were:
Cost Item
Direct
Allocated
Depreciation
$1,980
$880
Property taxes
540
310
Insurance
950
580
$3,470
$1,770
All variable manufacturing and direct fixed costs will be eliminated if CISCO is purchased. Allocated costs will have to be absorbed by other production departments. 4. The lowest quotation for 8,000 CISCO units from a supplier is $83,231. 5. If CISCO units are purchased, freight and inspection costs would be $0.37 per unit, and receiving costs totaling $1,260 per year would be incurred by the Machining Department.
Prepare an incremental analysis for CISCO. (Enter negative amounts using either a negative sign preceding the number e.g. 45 or parentheses e.g. (45).)
ShurShot Sports Inc. manufactures basketballs for the National Basketball Association (NBA). For the first 6 months of 2014, the company reported the following operating results while operating at 80% of plant capacity and producing 119,700 units.
Amount
Sales
$4,788,000
Cost of goods sold
3,723,673
Selling
and administrative expenses
478,800
Net income
$585,527
Fixed costs for the period were cost of goods sold $1,079,500, and selling and administrative expenses $239,400. In July, normally a slack manufacturing month, ShurShot Sports receives a special order for 10,800 basketballs at $30 each from the Greek Basketball Association (GBA). Acceptance of the order would increase variable selling and administrative expenses $0.51 per unit because of shipping costs but would not increase fixed costs and expenses.
(a)
Prepare an incremental analysis for the special order
Volunteer Income Tax Assistance (VITA) is a great tax preparation service provided to lower income families. The IRS set up this service as a way to provide free tax work for those who generally could not afford to have their taxes prepared professionally. I’ve even offerd this service at the Muncie Ivy Tech location for the past 3 years.
The IRS expenses to run this service includes sending out all the training materials (which consists of a large text book plus other booklets), any forms each site may need, contracting out a professional tax software company to provide the software as well as many other costs. One would think if the IRS put this much money into a free service, they would expect quite a windfall of taxes to come in. However, just the opposite generally happens. During the first day we were open, I prepared about 7 returns and estimated the refunds of those to be about $20,000 in total. Why do you think the IRS goes to the trouble to provide this free service when most lower income individuals receive a refund?
Replay :250 words
Class : ACCT 105 income tax
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WHY VITA ??? Volunteer Income Tax Assistance (VITA) is a great tax preparation service provided to lower income families. The IRS set up this service as a way to provide free tax work for those who generally could not afford to have their taxes prepared professionally. I’ve even offerd this service at the Muncie Ivy Tech location for the past 3 years. The IRS expenses to run this service includes sending out all the training materials (which consists of a large text book plus other booklets), any forms each site may need, contracting out a professional tax software company to provide the software as well as many other costs. One would think if the IRS put this much money into a free service, they would expect quite a windfall of taxes to come in. However, just the opposite generally happens. During the first day we were open, I prepared about 7 returns and estimated the refunds of those to be about $20,000 in total. Why do you think the IRS goes to the trouble to provide this free service when most lower income individuals receive a refund? Replay :250 words Class : ACCT 105 income tax
Complete each of the six following activities. Each of the activities with the exception of number two and three are unrelated. This project is worth 200 points. 1. Journal entries for the year 2. Complete a Bank Reconciliation 3. Record the journal entries for the bank reconciliation 4. Prepare the Adjusting Entries 5. Complete the Balance Sheet using the information on the Post Closing Trial Balance 6. Determine the amount of Merchandise Inventory lost and prepare the entry to write off the lose.
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FINANCIAL ACCOUNTING Comprehensive Problem # 2 Journal entries Selected transactions completed by Fore Most Co. during its first fiscal year ending December 31 are as follows: Jan.2 Issued a check to establish a petty cash fund of $600. Mar. 15 Replenished the petty cash fund, based on the following summary of petty cash receipts: Office supplies, $189; miscellaneous selling expense, $125; miscellaneous administrative expense, $205. Cash on Hand is $75 Apr. 5 Purchased $9,000 of merchandise on account, terms 1/10, n130. The perpetual inventory system is used to account for inventory. May 5 Paid the invoice of April 5 after the discount period had passed. 10 Received cash from daily cash sales for $8,920. The amount indicated by the cash register was $8,960. June 2 Received a 60 day, 12% note for $60,000 on account. Aug. 1 Received amount owed on June 2 note, plus interest at the maturity date. 3 Received $900 on account and wrote off remainder owed on a $1,300 accounts receivable balance. (The allowance method is used in accounting for uncollectible receivables.) 28 Reinstated the account written off on August 3 and received $400 cash in full payment. Sept. 2 Purchased land by issuing a $90,000, 90 day note to Ace Development Co., which discounted it at 12%. Oct. 1 Traded office equipment for new equipment with a list price of $160,000. A trade in allowance of $30,000 was received on the old equipment that had cost $90,000 and had accumulated depreciation of $50,000 as of October 1. A 120 day, 12% note was issued for the balance owed. Nov. 30 Journalized the monthly payroll for November, based on the payroll data. Nov. 30 Journalized the employer’s payroll taxes on the payroll. Dec. 1 Journalized the payment of September 2 note at maturity. 30 The pension cost for the year was $45,000, of which $42,800 was paid to the pension plan trustee. ??????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????
Question 1 (20 marks) Explain each of the following terms with examples : a) Journal Entries b) Closing Entries c) Adjusting Entries d) Reversing Entries HINT : use examples of actual transactions to illustrate your answer.
Question 2 (20 marks) Technology has made the Accounting process easier. Do you agree or disagree with this statement? Discuss your answer with relevant justification. HINT : you may use references to the GAAPs and ethics as well as actual cases of fraud and security problems in corporations today. You may also give a scenario and compare.
Question 3 (60 marks) a) Chi chi & Fabio opened a wig shop on 1st February 2012. Following is the Unadjusted Trial Balance of “Let Your Hair Down” for the year ended 31st January 2013: Accounts Dr Cr RM RM Cash 9010 Accounts Receivable 2870 Sales 13770 Rent expense 4000 Advertising expense 50 Prepaid rent 6500 Prepaid advertising 500 Sales discounts 790 Capital – Chi chi 10000 Capital – Fabio 5000 Computers 4800 Electricity & water 67 Telephone expenses 51 Supplies 420 Accounts Payable 520 Interest Received 400 Discount Received 25 Electricity & water payable 67 Telephone expenses payable 26 Salary Expense 750 TOTALS 29808 29808 Additional information : i) Depreciation of the Computers is at 10% per annum. ii) Provision of bad debts for the year is estimated at RM280. iii) The employees were paid a bonus of 20% for the year. iv) Rent is at RM400 per month. v) Electricity & water payable was overpaid by RM40. Prepare journal entries to record the above. (20 marks) b) With reference to Question 3 a), Prepare the Income Statement for “Let Your Hair Down” for the year ended 31st January 2013. (20 marks) c) With reference to Question 3 a), prepare the Balance Sheet for “Let Your Hair Down” for the year ended 31st January 2013. (20 marks)
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BBM205/05 Business Accounting 1 Tutor Marked Assignment TWO (TMA2) (20%) Semester 1, January 2013 Instructions 1. This is an individual assignment and it covers knowledge acquired from throughout the Course Material and text. 2. There are THREE (3) questions in this assignment. Please answer ALL questions in this assignment. Total marks awarded for TMA2 is 100, which will contribute to 20% of the entire course assessment. 3. Evidence of plagiarism or collusion will be taken seriously and the University regulations will be applied strictly, henceforth please be familiar with the University’s definitions of plagiarism and collusion. You should not share your answers with others because any evidence of plagiarism or collusion found may result in ZERO mark being awarded to all involved and further disciplinary action taken. Kindly upload your TMA into Turnitin to obtain a report before submitting your TMA via the OAS. 4. Please take note that Turnitin submission is NOT the same as OAS submission. It is NOT compulsory to submit your Turnitin Originality Report to OAS anymore but you are still allowed to submit your Turnitin Originality Report to OAS if you choose to do so. However, you are required to use Turnitin to check the similarity index before you submit your TMA to the OAS. Bear in mind that when you submit your TMA to Turnitin for the second time; be informed that the system will usually take at least 24 hours to generate the report again. So, please plan your TMA submission wisely to prevent passing the deadline for submission. 5. For TMA submission, please attach (using “Insert Object”) your TMA and submit through the Online Assignment Submission (OAS) system. Make sure you check your WOU email after you have submitted your TMA as you will be notified in your WOU email if there is a failure of submission or file corruption. 16. Your assignment will be assessed on the factual answer provided based on your…
200 WordsAPA formatted references due May 6 3:00 a.m.
You have just been notified by your firm’s Managing Principal that another financial planner has decided to leave the firm. Some of her clients will be notified that you will be their new point of contact for their planning.
The former planner had a fairly diverse group of clients and you plan to meet with each of them to help better understand their financial situations and see if any of them could benefit from your specific approach to financial planning that comes from a taxation perspective.
The first client, Mr. and Ms. Hewitt, need assistance in understanding more about what is taxable and how their tax bracket keeps changing. Compose a professional note that explains the following:
The various types of income that is subject to taxation
A marginal tax bracket, how it is determined, and what it means
Assignment Type:Individual Project Deliverable Length:1 Excel file with 2 worksheets
Points Possible: 125 Due Date:5/12/2013 11:59:59 PM CT APA formatted reference Due: May 8th 3:00 a.m.
The accounting period has just ended and you—in the accounting department—are preparing journal entries for the transactions that took place during the month. Make sure to include entries that affect the COGS account.
Prepare the proper journal entries in an Excel file, including Notes, and properly update the T accounts affected by each of the following journal entries.
$50,000 of direct labor was expended.
$100,000 of direct materials were used.
$80,000 was spent on overhead expenses.
Using the predetermined overhead rate, $60,000 of overhead was charged to the period.
Was overhead underapplied or overapplied? Explain.
If there is anything left in the overhead account, what could be done with those dollars?
Based on this period’s results, do you think the predetermined overhead rate should be changed for the rest of the year? Why or why not?
Please submit your assignment.
The following grading criteria will be used:
Grading Guidelines
40%
Prepare the proper journal entries in an Excel file, including Notes, and properly update the T Accounts affected by each of the following journal entries.
$50,000 of direct labor was expended.
$100,000 of direct materials were used.
$80,000 was spent on overhead expenses.
Using the predetermined overhead rate, $60,000 of overhead was charged to the period.
30%
Was overhead underapplied or overapplied? Explain.
10%
If there is anything left in the overhead account, what could be done with those dollars?
20%
Based on this period’s results, do you think the predetermined overhead rate should be changed for the rest of the year? Why or why not?
Assignment Type:Individual Project Deliverable Length:1 Excel file Points Possible:125 Due Date:5/19/2013 11:59:59 PM CT APA formatted References Due: 05/08 3:00 a.m. The company’s CEO just returned from a seminar on management accounting and some new tools that can be used to assist in management of the business. One of the new tools she learned about is referred to as contribution format income statements.
It is time for the accounting department to prepare the month end income statement. In the past, the standard format income statement, as shown below, has been used. But for the first time, the CEO has asked that the contribution format be used instead.
While most of the different expense categories are easy to analyze, the utility expense seems to display characteristics of both variable costs and fixed costs. To help prepare this income statement format, the accounting department collected data from the past 12 months. This data included actual utility costs as compared to each month’s business volume. Some of it is shown below.
History of Utility Expenses
Utility Costs
Comment
January
$10,000
closed the entire month for repairs
February
$11,000
produced 5,000 widgets
March
$10,600
produced 3,000 widgets
April
$11,600
produced 8,000 widgets
Submit 1 Excel file including the following information:
Even when the plant was shut down for a month, what was the utility expense that month?
In February, what was the amount of utilities that was fixed, and what portion was variable?
Based on the rest of the data, what is the variable portion of utility costs per unit in February?
If June’s expected units produced are 9,000, what would the expected utility costs be? Show your calculations.
Prepare a contribution format income statement:
use this month’s standard formatted income statement below
use the History of Utility Expenses provided
show as many calculations as possible
Standard Format Income Statement
Comment
Sales
100,000
(COGS)
70,000
30% of these costs are fixed
Gross Profit
30,000
(S,G,A)
20,000
80% of these costs are fixed
Net Income
10,000
Please submit your assignment.
The following grading criteria will be used:
Grading Guidelines
15%
Even when the plant was shut down for a month, what was the utility expense that month?
15%
In February, what was the amount of utilities that was fixed, and what portion was variable?
15%
Based on the rest of the data, what is the variable portion of utility costs per unit in February?
15%
If June’s expected units produced are 9,000, what would the expected utility costs be? Show your calculations.
40%
Prepare a contribution format income statement:
use this month’s standard formatted income statement below
Assignment Type:Group Project Deliverable Length:200 words; 1 Excel file with 2 worksheets Points Possible:200 Due Date: 5/26/2013 11:59:59 PM CT APA Formatted References Due: May 12 3:00 a.m.
Individual Portion:
You are the accounting manager in a medium sized manufacturing company. The company’s first year just ended, and the accounting department is working on closing the books. You plan to present information about unit costs and profits, to the generalmanager (GM) in two different formats. One method uses variable costing, and the other uses absorption costing. The GM will need to choose one or the other for accounting purposes. Whatever method he chooses will have to remain the method going forward as the choice of the method could impact reported profitability and therefore taxes. (The IRS frowns on firms making accounting methodology changes that impact any period’s profits.)
You explain to the GM that if you choose to use the absorptive method, it will not only impact the reported profits of the year that just ended but will have an impact on the reported profits of the upcoming year, too. He doesn’t understand what this means and asks for a more detailed explanation.
In about 200 words, explain to him:
How absorption costing differs from variable costing
How the absorptive method will not only impact the reported profits of the year that just ended but will also have an impact on the reported profits of the upcoming year
Please add your file.
Group Portion:
As the accounting manager, you and your staff need to prepare year ending information to present to the company’s general manager. Prepare 1 Excel file with 2 worksheets showing the following calculations. Part A:
Part A Data
Budgeted and actual fixed costs
$1,000,000
Budgeted unit volume to be produced
10,000
Budgeted unit volume sold
10,000
Actual variable costs
$500,000
Actual unit volume sold
9,000
Beginning of year inventory
0
End of year inventory
1,000
Using the Part A data:
How many units of production were:
produced?
shipped?
left in inventory?
How much of the firm’s fixed costs stayed in inventory?
under variable costing?
under absorption costing?
Calculate the unit cost:
using variable costing.
using absorption costing.
Based on how much of the firm’s fixed costs stayed in inventory, how much of the firm’s fixed costs ended up on the year’s COGS and income statement?
under variable costing?
under absorption costing?
Under which method (variable or absorption costing), will reported profits be higher? Explain why.
Part B:
Part B Data
A firms cost structure is as follows:
Monthly fixed costs
$20,000
Variable cost/unit
$80
Selling price/unit
$100
Using the Part B data:
Calculate the firm’s break even point in units of production.
Predict the firm’s profitability if volume is 1,200 units.
Please add your file.
The following grading guidelines will be used:
Grading Guidelines
Individual Portion (200 words)
20%
Explain how absorption costing differs from variable costing.
40%
Explain how the absorptive method will not only impact the reported profits of the year that just ended but will have an impact on the reported profits of the upcoming year, too.
Group Portion (1 Excel file with 2 worksheets)
5%
How many units of production were:
produced?
shipped?
left in inventory?
5%
How much of the firm’s fixed costs stayed in inventory?
under variable costing?
under absorption costing?
5%
Calculate the unit cost:
using variable costing.
using absorption costing.
5%
Based on how much of the firm’s fixed costs stayed in inventory, how much of the firms fixed costs ended up on the year’s COGS and income statement?
under variable costing?
under absorption costing?
5%
Under which method (variable or absorption costing), will reported profits be higher? Explain why.
5%
Calculate the firm’s break even point in units of production.
10%
Predict the firm’s profitability if volume is 1,200 units.
Points Possible: 125 Due Date:6/2/2013 11:59:59 PM CT
APA Formatted ReferencesDue: May 13 2:00 a.m.
As the manager of the marketing department, you are being asked for the first time to develop a department budget. The accounting department has supplied you with the following projected information about how this year, 20XX, will end up for your department’s spending.
Expense category
20XX projected
Sales force base salary
200,000
Sales force commission
200,000
Sales force benefits
60,000
Trade show space rental
50,000
Free coupon expense
40,000
Note:
Sales
2,000,000
Before you begin the process, your manager and you have sat down to develop broad planning objectives for the upcoming year, which you will need to incorporate into the budget. These include
a doubling of trade show spending.
an increase of the sales force by 25%.
an expected sales volume increase of 10%.
an expected increase of 4% of all expenses due to inflation.
no anticipated selling price changes for next year.
You need to do the following:
for each of the listed expenses:
identify whether you would treat them as a fixed or variable cost
explain the reasoning for your classification
based on the historical information and the planning you did for new marketing programs for the upcoming year, prepare a budget for the upcoming year by completing the table:
In the 20XX+1 column, fill in budgeted figures.
In the next column, when appropriate, adjust that amount for inflation.
Complete the next column based on the projected volume increase.
In the last column, briefly explain how you arrived at the budgeted figure.
Expense category
20XX projected
20XX+1 with plan changes
20XX+1 with inflation changes
20XX+1 with volume impact
Explanation
Sales force base salary
200,000
Sales force commission
200,000
Sales force benefits
60,000
Trade show space rental
50,000
Free coupon expense
40,000
Note:
Sales
2,000,000
2,200,000
Please submit your assignment.
The following grading criteria will be used:
Grading Guidelines
20%
For each of the listed expenses:
identify whether you would treat them as a fixed or variable cost
explain the reasoning for your classification
20%
In the 20XX+1 column, fill in budgeted figures.
20%
In the next column, when appropriate, adjust that amount for inflation.
20%
Complete the next column based on the projected volume increase.
20%
In the last column, briefly explain how you arrived at the budgeted figure.
Chapter Two and Three Problems Please complete the following 7 exercises below in either Excel or a word document (but must be single document). You must show your work where appropriate (leaving the calculations within Excel cells is acceptable). Save the document, and submit it in the appropriate week using the Assignment Submission button. Chapter 2 Exercise 1 1.
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Chapter Two and Three Problems Please complete the following 7 exercises below in either Excel or a word document (but must be single document). You must show your work where appropriate (leaving the calculations within Excel cells is acceptable). Save the document, and submit it in the appropriate week using the Assignment Submission button. Chapter 2 Exercise 1 1. Issuance of stock Prepare journal entries to record the issuance of 100,000 shares of common stock at $20 per share for each of the following independent cases: Jackson Corporation has common stock with a par value of $1 per share. Royal Corporation has no par common with a stated value of $5 per share. French Corporation has no par common; no stated value has been assigned Chapter 2 Exercise 3 3. Analysis of stockholders’ equity Star Corporation issued both common and preferred stock during 20X6. The stockholders’ equity sections of the company’s balance sheets at the end of 20X6 and 20X5 follow. ?20X6 ?20X5 ??Preferred stock, $100 par value, 10% ?$580,000 ?$500,000 ??Common stock, $10 par value ?2,350,000?1,750,000??????Paid in capital in excess of par value ????Preferred ?24,000?— ??Common ?4,620,000?3,600,000??Retained earnings ?8,470,000?6,920,000??Total stockholders’ equity ?$16,044,000 ?$12,770,000 ?? Compute the number of preferred shares that were issued during 20X6. Calculate the average issue price of the common stock sold in 20X6. By what amount did the company’s paid in capital increase during 20X6? Did Star’s total legal capital increase or decrease during 20X6? By what amount? Chapter 2 Problem 1 1. Bond computations: Straight line amortization Southlake Corporation issued $900,000 of 8% bonds on March 1, 20X1. The bonds pay interest on March 1 and September 1 and mature in 10 years. Assume the independent cases that follow. Case A—The bonds are issued at 100. Case B—The bonds are issued at 96. Case C—The bonds are issued at 105. Southlake uses the…
Harvey is the owner of a successful wealth management firm, Harvey Advisors, Inc. He is in his mid 40’s and has yet to fulfill his dream of becoming the number one wealth management firm in the city of Houston, TX. Currently they are ranked #3 in the city but the difference between number two and number 3 is minimal. Harvey’s success stems from his ability to keep only the most talented employees who are capable of accomplishing more than others due to their work ethic and desire to be the best. Bruce is Harvey’s first employee, a 65 year old man, who has been with Harvey since the beginning of the company. One day Harvey learns that the top firm’s star manager, Matt, has left the firm due to personal differences and is in the market for a new job. When Harvey looks at his financial statements it is clear that he cannot offer Matt a job and maintain everyone on the staff. In order to hire him he will have to let go of somebody. After doing some cost/benefit analysis it is clear to Harvey that Bruce is most costly employee and he is no longer able to produce what he once was able to.
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Identify the problem. What is the environment? What is the situation? What are the options? Identify the people and groups affected by choosing one of the above options. Individuals: self, boss, client, subordinate, etc. Groups: company, public, family, profession, etc. Build a decision framework – What is going to be the basis for my decision? Consequentialism – looking for good results or least harm What will be the result of the decision for me personally? How are the above people and groups affected? Are they affected negatively or positively? Deontology – duty and obligation How deep is my obligation to each of the people and groups? How do I prioritize conflicting duties? Virtue ethics – Who am I? What fundamental principles are in play? What norms or traditions I practice are being challenged? What personal values that I hold are being affected or threatened? Am I being asked to do something that I don’t believe in? Am I being asked to ignore something that I feel must be addressed? Make a decision Base your decision on values that are supported by principles Make a commitment to the decision Take action Do what you feel is right for the right reasons Never mistake temptation for opportunity Let the chips fall where they may A person who ignores wrong becomes either an accomplice or the next victim Learn Accept responsibility for your decision and your actions Understand the difference between providing explanations and making excuses Listen to feedback so you can learn from everyone’s mistakes Incorporate changes where possible to avoid similar situations in the future??????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????
Harvey is the owner of a successful wealth management firm, Harvey Advisors, Inc. He is in his mid 40’s and has yet to fulfill his dream of becoming the number one wealth management firm in the city of Houston, TX. Currently they are ranked #3 in the city but the difference between number two and number 3 is minimal. Harvey’s success stems from his ability to keep only the most talented employees who are capable of accomplishing more than others due to their work ethic and desire to be the best. Bruce is Harvey’s first employee, a 65 year old man, who has been with Harvey since the beginning of the company. One day Harvey learns that the top firm’s star manager, Matt, has left the firm due to personal differences and is in the market for a new job. When Harvey looks at his financial statements it is clear that he cannot offer Matt a job and maintain everyone on the staff. In order to hire him he will have to let go of somebody. After doing some cost/benefit analysis it is clear to Harvey that Bruce is most costly employee and he is no longer able to produce what he once was able to.
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Harvey is the owner of a successful wealth management firm, Harvey Advisors, Inc. He is in his mid 40’s and has yet to fulfill his dream of becoming the number one wealth management firm in the city of Houston, TX. Currently they are ranked #3 in the city but the difference between number two and number 3 is minimal. Harvey’s success stems from his ability to keep only the most talented employees who are capable of accomplishing more than others due to their work ethic and desire to be the best. Bruce is Harvey’s first employee, a 65 year old man, who has been with Harvey since the beginning of the company. One day Harvey learns that the top firm’s star manager, Matt, has left the firm due to personal differences and is in the market for a new job. When Harvey looks at his financial statements it is clear that he cannot offer Matt a job and maintain everyone on the staff. In order to hire him he will have to let go of somebody. After doing some cost/benefit analysis it is clear to Harvey that Bruce is most costly employee and he is no longer able to produce what he once was able to.
Describe the objectives, standards of comparison, sources of information, and compensation issues in measuring financial performance. (pp. 708–714) LO2 Apply horizontal analysis, trend analysis, vertical analysis, and ratio analysis to financial statements. (pp. 715–722) LO3 Apply ratio analysis to financial statements in a comprehensive evaluation of a company’s financial performance.
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2008 2007 Helvetica,Bold” 2 2008 2007 Helvetica,Bold” 2 2008 2007 2008 2007 0 0 Helvetica,Bold” 2 2008 2007 Helvetica,Bold” 2 Chapter 16, C 5. All computations are for the years ended December 31, 2008 and December 29, 2007. Liquidity ratios and analysis of CVS (in millions). Current ratio = times Quick ratio + Receivable turnover ( ) ÷ Days’ sales uncollected days Inventory turnover Days’ inventory on hand Payables turnover Days’ payable * Cash includes short term investments. Chapter 16, C 5. (Continued) Profitability ratios and analysis of CVS (in millions). Profit margin Asset turnover times Return on assets Return on equity Long term solvency ratios and analysis of CVS (in millions) Debt to equity ratio Interest coverage ratio Cash flow adequacy ratios and analysis of CVS (in millions). Cash flow yield Cash flows to sales Cash flows to assets Free cash flow – Market strength ratios and analysis of CVS. Price/earnings (P/E) ratio Dividends yield * 2008: ** 2007: Name: Date: Course: * * + ** + * + * + ?????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????
HOLMES INSTITUTE FACULTY OF HIGHER EDUCATION HA3032 Auditing Trimester 1 / 2013 ASSIGNMENT 1 You are required to read the following statement issued by ICAA (Institute of Chartered Accountants in Australia and provide an essay of between 1,000 1,500 words (being the minimum and maximum). It should be properly referenced and must be primarily of your own work. Press release: Legislation to improve the quality and transparency of the auditing process has been introduced into the House of Representatives this week by Parliamentary Secretary to the Treasurer David Bradbury. The Corporations Legislation Amendment (Audit Enhancement) Bill 2012 is the result of a Treasury review of audit quality and extensive stakeholder consultation during 2011 on measures that are designed to enhance audit quality and ensure that Australia’s regulatory framework remains in line with international best practice. Measures in the Bill include: • Requiring audit firms to publish an annual transparency report if they conduct audits of 10 or more significant entities • Empowering ASIC to issue an audit deficiency report in relation to an individual audit firm if it identifies an audit deficiency in the auditor’s quality control system or the conduct of an audit that may be detrimental to the overall quality of the audit • Removing duplication of ASIC and Financial Reporting Council (FRC) audit inspection responsibilities so that ASIC continues its audit inspection program and the FRC focuses on providing strategic policy advice and reports on the quality of Australian audits. • Allowing ASIC to communicate directly with an audited body. • Allowing a two year extension to the five year auditor rotation requirement where it will not give rise to a conflict of interest and will prevent the loss of knowledge and experience where rotation could undermine the quality of the audit. ICAA report: Reforms to enhance Audit Quality Available from: www.chartered accountants.co.au/industry Topics/Audit and Assurance Other sources: AUASB website CPAA website Required: Discuss the following in your essay (approximately 1,000 words and no more than 1,500 please): What each of the above actually refers to and what it means. What is your view, giving a rational explanation to your view (you may use other sources to support your view, properly referencing). Why do you think that these measures were introduced? The due date for this assignment will be week 6 (must be lodged by 5.00pm on the Friday). Please note: a soft copy must be lodged on Safeassign by the due date and a hard copy provided to your lecturer.
Need resolution to problems 1. 2. 3. 4. 5. 6. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. Lee company has met all production requirements for
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1. 2. 3. 4. 5. 6. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. Lee company has met all production requirements for the month and has an opportunity to manufacture additional units with its excess capacity. Unit prices and costs for the product lines are below. Plain Regular Super Selling price $40 $55 $65 Direct Material 12 16 22 Direct labor @$20/hr 10 15 20 Variable Overhead 8 12 16 Fixed overhead 6 7 8 Variable overhead applied on the basis of labor dollars, whereas fixed overhead is applied on the baisis of machine hours. There is sufficient demand for the additional manufacture of all products. Required: If Lee company has excess capacity and can add more labor as needed (i.e neither machine labor s a constraint).. which productis the most attractive produce If Lee company has excess machine but a limited amount of labor time available,which product or products should be manufactured in excess capacity.
E & T Excavation Company is planning an investment of $425,700 for a bulldozer. The bulldozer is expected to operate for 2,000 hours per year for eight years. Customers will be charged $140 per hour for bulldozer work. The bulldozer operator costs $38 per hour in wages and benefits. The bulldozer is expected to require annual maintenance costing $20,000. The bulldozer uses fuel that is expected to cost $50 per hour of bulldozer operation.
Present Value of an Annuity of $1 at Compound Interest
Year
6%
10%
12%
15%
20%
1
0.943
0.909
0.893
0.870
0.833
2
1.833
1.736
1.690
1.626
1.528
3
2.673
2.487
2.402
2.283
2.106
4
3.465
3.170
3.037
2.855
2.589
5
4.212
3.791
3.605
3.352
2.991
6
4.917
4.355
4.111
3.784
3.326
7
5.582
4.868
4.564
4.160
3.605
8
6.210
5.335
4.968
4.487
3.837
9
6.802
5.759
5.328
4.772
4.031
10
7.360
6.145
5.650
5.019
4.192
Determine the net present value of the investment, assuming that the desired rate of return is 12%. Use the present value of an annuity of $1 table above. Round to the nearest dollar. If required, use the minus sign to indicate a negative net present value.
Present value of annual net cash flows
$
Less amount to be invested
$
Net present value
$
Determine the number of operating hours such that the present value of cash flows equals the amount to be invested. Round interim calculations and final answer to the nearest whole number. hours
E2 2: Stine Company uses a job order cost system. On May 1, the company has a balance in Work In Process Inventory of $3,500 and two jobs in process: Job No. 429 $2,000, and Job No. 430 $1,500. During May, a summary of source documents reveals the following.
Job Number Materials Requisitions Slips Labor Time Tickets
Stine Company applies manufacturing overhead to jobs at an overhead rate of 60% of direct labor cost. Job No. 429 is completed during this month.
(a) Prepare summary journal entries to record (i) the requisition slips, (ii) the time tickets, (iii) the assignment of manufacturing overhead to jobs, and (iv) the completion of Job No. 429.
(b) Post the entries to Work in Process Inventory, and prove the agreement of the control account with the job cost sheets. (Use a T Account).
The Edelweiss Hotel in Vail, Colorado, has accumulated records of the total electrical costs of the hotel and the number of occupancy days over the last year. An occupancy day represents a room rented out for one day. The hotel’s business is highly seasonal, with peaks occurring during the ski season and in the summer.
Month
Occupancy Days
Electrical Costs
January
3,180
$6,510
February
2,920
$6,261
March
3,780
$7,392
April
2,160
$5,569
May
650
$1,820
June
2,050
$5,261
July
4,050
$7,829
August
4,070
$7,896
September
1,780
$4,984
October
570
$1,596
November
1,580
$4,424
December
2,680
$5,908
Required:
1.
Using the high low method, estimate the fixed cost of electricity per month and the variable cost of electricity per occupancy day. (Round the “Variable cost per occupancy day” to 2 decimal places and the “Fixed cost” to the nearest dollar amount. Omit the “$” sign in your response.)
Fixed cost
$
per month
Variable cost
$
per occupancy day
2.
What other factors other than occupancy days are likely to affect the variation in electrical costs from month to month? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer.)
Seasonal factors like winter or summer.
Systematic factors like guests, switching off fans and lights.
At the end of the day, the cash register’s record shows $1,286, but the count of cash in the cash register is $1,263. The correct entry to record the cash sales for the day is:
At the end of its reporting year (December 31, 2010), Acme Inc. shows the following intangible assets on its books: $60,000 patent with estimated remaining useful life of 10 years, and $92,000 goodwill with an indefinite life. Before closing its books, the company evaluates its intangible assets and identifies a $20,000 impairment in the patent and a $32,000 impairment in goodwill. These amounts are the same for US GAAP and IFRS purposes. For IFRS, Acme Inc. does not revalue its intangible assets.
a. How will the impairment loss be recorded using US GAAP and for IFRS?
b. Assume that at the end of 2011, Acme Inc. determines the company has recovered $12,000 of the patent impairment and $16,000 of the goodwill impairment. How will this be recorded using US GAAP and IFRS?
c. Assume instead that at the end of 2011, Acme Inc. determines the company has recovered $18,000 of the patent impairment. How will this be recorded using US GAAP and IFRS?
d. Assume instead that at the end of 2011, Acme Inc. determines the company has recovered $24,000 of the patent impairment. How will this be recorded using US GAAP and IFRS?
Equipment purchased at the beginning of the fiscal year for $150,000 is expected to have a useful life of 5 years, or 15,000 operating hours, and a residual value of $30,000. Compute the depreciation for the first and second years of use by each of the following methods:
(a)
straight line
(b)
units of production (2,500 hours first year; 3,250 hours second year)
Why are noncash transactions, such as the exchange of common stock a building, included on a statement of cash flows? How are these noncash transactions disclosed?
Chapter 1 Exercise 1:
1. Classification of activities
Classify each of the following transactions as arising from an operating (O), investing (I), financing (F), or noncash investing/financing (N) activity.
________ Received $80,000 from the sale of land.
________ Received $3,200 from cash sales.
________ Paid a $5,000 dividend.
________ Purchased $8,800 of merchandise for cash.
________ Received $100,000 from the issuance of common stock.
________ Paid $1,200 of interest on a note payable.
________ Acquired a new laser printer by paying $650.
________ Acquired a $400,000 building by signing a $400,000 mortgage note.
Chapter 1 Exercise 4:
4. Overview of direct and indirect methods
Evaluate the comments that follow as being True or False. If the comment is false, briefly explain why.
Both the direct and indirect methods will produce the same cash flow from operating activities.
Depreciation expense is added back to net income when the indirect method is used.
One of the advantages of using the direct method rather than the indirect method is that larger cash flows from financing activities will be reported.
The cash paid to suppliers is normally disclosed on the statement of cash flows when the indirect method of statement preparation is employed.
The dollar change in the Merchandise Inventory account appears on the statement of cash flows only when the direct method of statement preparation is used.
Chapter 1 Exercise 6:
6. Equipment transaction and cash flow reporting
Property, plant, & equipment
Dec. 31, 20X4
Dec. 31, 20X3
Land
$94,000
$94,000
Equipment
652,000
527,000
Less: Accumulated depreciation
316,000
341,000
New equipment purchased during 20×4 totaled $280,000. The 20×4 income statement disclosed equipment depreciation expense of $41,000 and a $9,000 loss on the sale of equipment.
Determine the cost and accumulated depreciation of the equipment sold during 20X4.
Determine the selling price of the equipment sold.
Show how the sale of equipment would appear on a statement of cash flows prepared by using the indirect method.
Chapter 1 Problem 3:
3. Cash flow information: Direct and indirect methods
The comparative year end balance sheets of Sign Graphics, Inc., revealed the following activity in the company’s current accounts:
20X5
20X4
Increase / Decrease)
Current assets
Cash
$55,400
$35,200
$20,200
Accounts receivable (net)
83,800
88,000
4,200
Inventory
243,400
233,800
9,600
Prepaid expenses
25,400
24,200
1,200
Current liabilities
Accounts payable
$123,600
$140,600
($17,000)
Taxes payable
43,600
49,200
5,600
Interest payable
9,000
6,400
2,600
Accrued liabilities
38,800
60,400
21,600
Note payable
44,000
—
44,000
The accounts payable were for the purchase of merchandise. Prepaid expenses and accrued liabilities relate to the firm’s selling and administrative expenses. The company’s condensed income statement follows.
Classify each of the following transactions as arising from an operating (O), investing (I), financing (F), or noncash investing/financing (N) activity. a. ________ Received $80,000 from the sale of land. b. ________ Received $3,200 from cash sales. c. ________ Paid a $5,000 dividend. d. ________ Purchased $8,800 of merchandise for cash. e. ________ Received $100,000 from the issuance of common stock. f. ________ Paid $1,200 of interest on a note payable. g. ________ Acquired a new laser printer by paying $650. h. ________ Acquired a $400,000 building by signing a $400,000 mortgage note.
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Chapter One Problems Please complete the following 5 exercises below in either Excel or a word document (but must be single document). You must show your work where appropriate (leaving the calculations within Excel cells is acceptable). Save the document, and submit it in the appropriate week using the Assignment Submission button. Ch 1 Critical Thinking Question 5: Answer the following questions: Why are noncash transactions, such as the exchange of common stock a building, included on a statement of cash flows? How are these noncash transactions disclosed? Chapter 1 Exercise 1: 1. Classification of activities Classify each of the following transactions as arising from an operating (O), investing (I), financing (F), or noncash investing/financing (N) activity. ________ Received $80,000 from the sale of land. ________ Received $3,200 from cash sales. ________ Paid a $5,000 dividend. ________ Purchased $8,800 of merchandise for cash. ________ Received $100,000 from the issuance of common stock. ________ Paid $1,200 of interest on a note payable. ________ Acquired a new laser printer by paying $650. ________ Acquired a $400,000 building by signing a $400,000 mortgage note. Chapter 1 Exercise 4: 4. Overview of direct and indirect methods Evaluate the comments that follow as being True or False. If the comment is false, briefly explain why. Both the direct and indirect methods will produce the same cash flow from operating activities. Depreciation expense is added back to net income when the indirect method is used. One of the advantages of using the direct method rather than the indirect method is that larger cash flows from financing activities will be reported. The cash paid to suppliers is normally disclosed on the statement of cash flows when the indirect method of statement preparation is employed. The dollar change in the Merchandise Inventory account appears on the statement of cash flows only when the direct…
Complete the following 3 separate and unrelated research problems using the Checkpoint software included with your textbook. Be sure to cite all sources that support your overall conclusions according to APA format. Provide your answers in a Microsoft Word document and clearly label each part. Submit your portfolio project through the assignment link by Sunday midnight of Week 8.
Problem 1
Patrick Zimbrick and his son, Dan, own all of the outstanding stock of Osprey Corporation. Both Dan and Patrick are officers in the corporation and, together with their uncle, John, comprise the entire board of directors. Osprey uses the cash method of accounting and has a calendar year end. In late 2006, the board of directors adopted the following legally enforceable resolution (agreed to in writing by each of the officers):
Salary payments made to an officer of the corporation that shall be disallowed in whole or in part as a deductible expense for Federal income tax purposes shall be reimbursed by such officer to the corporation to the full extent of the disallowance. It shall be the duty of the board of directors to enforce payment in each such amount.
In 2007, Osprey paid Patrick $560,000 in compensation. Dan received $400,000. On an audit in late 2010, the IRS found the compensation of both officers to be excessive. It disallowed deductions for $200,000 of the payment to Patrick and $150,000 of the payment to Dan. The IRS recharacterized the disallowed payments as constructive dividends. Complying with the resolution by the board of directors, both Patrick and Dan repaid the disallowed compensation to Osprey Corporation in early 2011.
Dan and Patrick have asked you, their accountant, to determine how their repayments should be treated for tax purposes. Dan is still working as a highly compensated executive for Osprey while Patrick is retired and living off his savings.
Prepare 3 4 double spaced pages describing the results of your research and making recommendations to your client.
Use the online access code for the Checkpoint Student Edition to locate, cite, and discuss at least one source (e.g., tax law, case, and/or ruling) to support your conclusion.
(Partial list of research aids: Section 1341. Vincent E. Oswald. 49 T.C. 645 (1968)).
Problem 2
The accrual basis Four Winds Partnership owned and operated three storage facilities in Milwaukee, Wisconsin. The partnership did not have a section 754 election in effect when partner Suzanne sold her 25% interest to Paul for $250,000. The partnership has no debt. There are no section 197 assets, and no depreciation recapture potential exists on the storage facility buildings.
At the time of the transfer, the partnership’s assets bases and fair market values were as follows:
BasisFair Market Value
Cash
$50,000
$50,000
Accounts Receivable
$150,000
$150,000
Storage facility #1
$500,000
$200,000
Storage facility #2
$400,000
$500,000
Storage facility #3
$300,000
$100,000
Total assets
$1,400,000
$1,000,000
The value of two of the properties is less than the partnership’s basis because of downturns in the real estate market in the area. Paul’s share of the inside basis of partnership assets is $350,000, and his share of the fair market value of partnership assets is $250,000.
Write 3 4 double spaced pages that address each of the following requirements.
a. What adjustment is required regarding Paul’s purchase of the partnership interest? Must a section 754 election be made?
b. Using the basis allocation rules of section 755 and the Regulations thereunder, calculate the amount of the total adjustment to be allocated to each of the partnership’s assets.
c. Would an adjustment be required if the partnership was a venture capital firm and, instead of storage facilities, its three primary assets were equity interests owned in target firms? What requirements would have to be satisfied in order to avoid making a basis adjustment?
Use the online access code for the Checkpoint Student Edition to locate, cite, and discuss at least one source to support your conclusion.
Problem 3
The tax treatment of fringe benefits for more than 2% shareholder employees of S corporations is less favorable than that for non owners or employees of some other entities. What fringe benefits are subject to this limitation? What fringe benefits escape this limitation?
Write 1 2 double spaced pages that address these two questions. Use the online access code for the Checkpoint Student Edition to locate, cite, and discuss at least one source to support your conclusion.
In summary: the Portfolio Project that compiles all 3 problems should be submitted as a Word document that includes 3 4 double spaced pages on Problem 1, 3 4 double spaced pages on Problem 2 and 1 2 double spaced pages on Problem plus a reference list that cites at least three sources from the Checkpoint Student Edition research software with citations formatted according to APA Guidelines.
Martin S. Albert (SS # 111 11 1111) is 39 Years old and is married to Michele R. Albert (SS# 123 45 6789). The Albert’s live at 512 Ferry Road, Newport News, VA 23601. They file a joint return and have three dependent children (Oscar age 9, Charlene, age 13 and blind, and Jordan, age 21, have a par time job where he earned $9500 during the year. Oscar ssc# 342 23 2121, Charlene’s SS3# is 123 45 6788, and Jordan’s is 123 45 6787. Michelle appeared in commercial sales and earned $15,000 during the year. Martin and Michele also provided over 50% of the support for Michele’s cousin, Nicolas, who did not live with them the entire year.
In 2011, Martin and Michele had the following transactions:
Martin received $70,000 in salary from Red Steel Corporation, where he is a construction engineer. Withholding for Federal income tax was $18,000. The amounts withheld for FICA taxes were withheld.
Martin and Michele received $1200 of interest on Green, Inc. stock and $600 interest on Montgomery County (Virginia) school bonds.
In the prior year Michele was involved in an automobile accident and incurred $12,000 of medical expenses. Insurance paid $8,000 of the expenses, and Martin and Michele deducted the remaining $4,000 on their prior year’s return. During the year, Michele received a settlement from the other driver’s insurance company. She received $12,000 for her medical expenses, $65,000 as compensatory damages for physical injury, and $35,000 of punitive damages.
Michele received 10 shares of Applegate Corporation common stock as a stock dividend. The shares had a fair market value of $360 at the time Michele received them. She had the option of receiving cash equal to the value of the shares for half of the shares. She chose not to receive cash.
Martin paid $6,500 alimony to his former wife, Rose T. Morgan (SS# 123 45 6786)
Martin and Michele’s itemized deductions were as follows:
State income tax paid and withheld totaled $4,000
Real estate taxes on their principle residence were $3,500
Virginia sales taxes on consumer goods and services equal $3,700
Mortgage interest on their principle residence was $3,600
Cash Contributions to the church totaled $2,200
1) Compute the Albert’s net tax payable (or refund due) for 2011.
Cal Cookie Company (CCC) has 100 million shares of $1 par common stock authorized. The transactions below caused changes in CCC’s outstanding shares.
January 4, 2011: Repurchased and retired 1 million shares at $8 per share
June 25, 2011: Repurchased and retired 2 million shares at $2 per share.
Prior to the transactions, CCC’s shareholders’ equity included the following:
Common stock, 80 million shares at $1 par$80,000,000
Paid in Capital excess of Par$160,000,000
Retained Earnings120,000,000
Required
Record Entries for the above transactions
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Cal Cookie Company (CCC) has 100 million shares of $1 par common stock authorized. The transactions below caused changes in CCC’s outstanding shares. January 4, 2011: Repurchased and retired 1 million shares at $8 per share June 25, 2011: Repurchased and retired 2 million shares at $2 per share. Prior to the transactions, CCC’s shareholders’ equity included the following: Common stock, 80 million shares at $1 par $80,000,000 Paid in Capital excess of Par $160,000,000 Retained Earnings 120,000,000 Required Record Entries for the above transactions
Multiple Choice Question 77 Comprehensive income would not include unrealized gains on available for sale securities. dividends declared. discontinued operations. extraordinary gains and losses.
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Multiple Choice Question 77????Comprehensive income would not include ?unrealized gains on available for sale securities.???dividends declared.???discontinued operations.???extraordinary gains and losses.??Multiple Choice Question 78????Which of the following would be considered an “Other Comprehensive Income” item? ?unrealized loss on available for sale securities???extraordinary loss related to flood???gain on disposal of discontinued operations???net income?? Multiple Choice Question 88????Danner Corporation reported net sales of $600,000, $680,000, and $800,000 in the years 2011, 2012, and 2013, respectively. If 2011 is the base year, what percentage do 2013 sales represent of the base? ?33%???75%???133%???113%?? ??Multiple Choice Question 97????Assume the following sales data for a company: 2013?$900,000??2012?805,000??2011?700,000??If 2011 is the base year, what is the percentage increase in sales from 2011 to 2012? ?112%???29%???15%???129%??Multiple Choice Question 107????In a common size balance sheet, the 100 percent figure is ?total liabilities.???total assets.???total property, plant and equipment.???total current assets.??Multiple Choice Question 125????Which one of the following is not a characteristic generally evaluated in ratio analysis? ?Profitability???Marketability???Solvency???Liquidity??Multiple Choice Question 127????Short term creditors are usually most interested in assessing ?marketability.???solvency.???liquidity.???profitability.??Multiple Choice Question 128????A common measure of liquidity is ?return on assets.???receivables turnover.???profit margin.???debt to equity.??Multiple Choice Question 133????Long term creditors are usually most interested in evaluating ?solvency.???marketability.???liquidity.???profitability.?? ??Multiple Choice Question 129????A common measure of profitability is the ?return on common stockholders’ equity ratio.???debt to total assets.???current ratio.???current cash debt…
During 2012, Nilsen Company started a construction job with a contract price of $1,710,000. The job was completed in 2014. The following information is available.
You are to explore the annual report disclosures for one of the NZX 50 companies for 2012. You are required to choose the company. The annual reports are available online. The are the primary focus points for the assignment. (required to choose 3 topics for the assignment) Accounting concept accounting for income taxes, Earing per share, accounting for financial instruments, accounting for intragroup transaction, accounting for non controlling interest, Accounting for indirect Ownership interests (this all from Deegan, C. & Samkin, G. NewZealand Financial Accounting.
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You are to explore the annual report disclosures for one of the NZX 50 companies for 2012. You are required to choose the company. The annual reports are available online. The are the primary focus points for the assignment. (required to choose 3 topics for the assignment) Accounting concept accounting for income taxes, Earing per share, accounting for financial instruments, accounting for intragroup transaction, accounting for non controlling interest, Accounting for indirect Ownership interests (this all from Deegan, C. & Samkin, G. NewZealand Financial Accounting. 6th Edition.) how you consider accounting regulation and apply in the annual report The aim is for you to formulate an opinion about the quality of the disclosures for the NZX 50 company that you have chosen as your case study. To do this you will need to cite the relevant regulatory authorities for each topic and identify the level to which the regulations have been complied with and the manner in which the regulations have been disclosed. Organize your assignment with following layers 1. Your general view about the quality of the annual report taken as a whole. What is it that you see and read given the type of company that you have chosen. Provide a comment about how the report is organized. Identify anything unusual or different in the report. What is the general impression that is offered by the report? 2. Your specific disclosure analysis and discussion for the three topics that you have chosen. 3. For the assignment explore the topic using at least 5 academic references. These should be either: ?Refereed journal articles (not newspapers, magazine articles or internet sites) or ? specialized academic books (not undergraduate accounting or management textbooks). Note: Professional publications, newspaper, magazine and internet sources can be appropriately used but must be in addition to the 5 academic sources. Reference list using APA format. Length: 9 pages (including…
PAPER NO: 707 (S04 FINANCIALMANAGEMENTII QUESTION 4 n° ~ A firm wants to buy a new machine to replace an old machine bought two’ years ago for $720 000. The old machine is being depreciated for 6 years on straight line. Salvage value after 6 years is O. However the old machine can be sold today for $300 000. The firm has been claiming STAfor 2 years at 25% which is already included in the calculation of profit. The New Machine will cost $1.2 million and will require an additional $50 000 in Working Capital. The New Machine will last for 4 years and be depreciated to zero during that period and have a salvage value of $400 000. Cost of capital is 30%. Number of units Revenue Variable Cost Fixed Cost (include depreciation) Contribution Profit before Interest and Tax Interest . Profit before Tax Tax at 35% Old Machine 100 000 2400 000 (1 000 000) (500 000) 1 400 000 900 000 200 000 700 000 224 000 476 000 * NOTE: Contributions = (2 400 000 1 000 000) Calculate a) The initial Investment. b) The annual cash flow. c) The terminal cash flow. New Machine 125 000 3200 000 (1 300 000) (1 700 000) 1 900 000 1 200 000 300 000 900 000 315 000 585 000 (6 marks) (10 marks) (4 marks) Hints: Ignore non cash items and interest expense as a cash flow.
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, , PAPER NO: 707 (S04 FINANCIALMANAGEMENTII QUESTION 4 n° ~ A firm wants to buy a new machine to replace an old machine bought two’ years ago for $720 000. The old machine is being depreciated for 6 years on straight line. Salvage value after 6 years is O. However the old machine can be sold today for $300 000. The firm has been claiming STAfor 2 years at 25% which is already included in the calculation of profit. The New Machine will cost $1.2 million and will require an additional $50 000 in Working Capital. The New Machine will last for 4 years and be depreciated to zero during that period and have a salvage value of $400 000. Cost of capital is 30%. Number of units Revenue Variable Cost Fixed Cost (include depreciation) Contribution Profit before Interest and Tax Interest . Profit before Tax Tax at 35% Old Machine 100 000 2400 000 (1 000 000) (500 000) 1 400 000 900 000 200 000 700 000 224 000 476 000 * NOTE: Contributions = (2 400 000 1 000 000) Calculate a) The initial Investment. b) The annual cash flow. c) The terminal cash flow. New Machine 125 000 3200 000 (1 300 000) (1 700 000) 1 900 000 1 200 000 300 000 900 000 315 000 585 000 (6 marks) (10 marks) (4 marks) Hints: Ignore non cash items and interest expense as a cash flow.??????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????
On July 1, 2012, Spear Co. issued 3,000 of its 10%, $1,000 bonds at 99 plus accrued interest. The bonds are dated April 1, 2012 and mature on April 1, 2022. Interest is payable semiannually on April 1 and October 1. What amount did Spear receive from the bond issuance?
a. $3,045,000
b. $3,000,000
c. $2,970,000
d. $2,895,000
2. On January 1, 2012, Solis Co. issued its 10% bonds in the face amount of $4,000,000, which mature on January 1, 2022. The bonds were issued for $4,540,000 to yield 8%, resulting in bond premium of $540,000. Solis uses the effective interest method of amortizing bond premium. Interest is payable annually on December 31. At December 31, 2012, Solis’s adjusted unamortized bond premium should be
a. $540,000.
b. $503,200.
c. $486,000.
d. $406,000.
3. On July 1, 2011, Noble, Inc. issued 9% bonds in the face amount of $10,000,000, which mature on July 1, 2017. The bonds were issued for $9,390,000 to yield 10%, resulting in a bond discount of $610,000. Noble uses the effective interest method of amortizing bond discount. Interest is payable annually on June 30. At June 30, 2013, Noble’s unamortized bond discount should be
a. $528,100.
b. $510,000.
c. $488,000.
d. $430,000.
4. On January 1, 2012, Huff Co. sold $3,000,000 of its 10% bonds for $2,655,888 to yield 12%. Interest is payable semiannually on January 1 and July 1. What amount should Huff report as interest expense for the six months ended June 30, 2012?
a. $132,798
b. $150,000
c. $159,353
d. $180,000
5. On January 1, 2013, Doty Co. redeemed its 15 year bonds of $3,500,000 par value for 102. They were originally issued on January 1, 2001 at 98 with a maturity date of
January 1, 2016. The bond issue costs relating to this transaction were $210,000. Doty amortizes discounts, premiums, and bond issue costs using the straight line method. What amount of loss should Doty recognize on the redemption of these bonds (ignore taxes)?
Based on the Business Case presented on page 2 above, prepare a 500 – 750 word report. Organise your report by including the headings provided in the marking criteria on page 6. Your report needs to address the following: (a) Give a brief description of the Nossal Institute for Global Health (Nossal). (b) Outline how climate change is likely to affect Nossal’s business operations in developing countries. (c) Evaluate the social issues likely to impact on a business operating in a developing country. (d) Suggest ways that accountants can play in addressing climate change in a business environment. 2. Reference List: Includes any references you have used and cited in your report. You must use the Harvard referencing system as per the guide available from the UWS library website. (Note: the reference list is not included in the word count).
Using spreadsheet software, prepare a statement of adjusted taxable profit, and a tax computation statement for EFL, for the year ended 31 March 2013. Your tax computation statement should show the total tax payable, the residual income tax, and the terminal tax payable/(refundable) for the year. You should also determine the provisional tax payable for 2014, if any.
Using spreadsheet software, prepare a tax computation, for Jennifer Williams for the year ended 31 March 2013. Your computation should show the total tax payable, the residual income tax, and the terminal tax payable/(refundable) for the year. You should also determine the amount of provisional tax that Jennifer is obliged to pay for 2014, if any, as well as the due date for each installment.
Write a letter to Jennifer advising the reason why it is desirable, for tax purposes, for her to hold the parcel of Australian shares using a trust structure. What can she do to minimize the tax liability on income from the trust?
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Objective The objective of the assignment is to assess your competency to apply the associated tax rules to individuals and companies and to prepare the IR3 and IR4 tax returns. Instructions This assignment is based on a simulated scenario. You should read the scenario carefully before planning your response to the requirements that follow. You should decide on how much time you could reasonably allocate to the preparation of the assignment. Then divide this up so that you allow time for thinking about the topic, planning your response, completing the required tax returns, preparing and writing your answers and check the final version to hand in by the due date. Ignore GST for this assignment SCENARIO You have been working for a chartered accounting firm for five years after your graduation. Due to a personality clash with your supervisor, you decided to leave the firm, and to set up your own taxation practice. Being a registered tax agent, your core services are to prepare tax returns and provide tax advice to clients. Jennifer Williams, a new client of yours, is the owner manager of Elite Flowers Limited (EFL). EFL provides floral arrangements for both individuals and corporate clients for weddings and functions. Jennifer holds 80% of the shares in EFL and her partner, Bill Woods, holds the remaining equity interest in the company. Jennifer has provided you with the following information for the year ended 31 March 2013: An income statement for EFL (Appendix 1) Summary of tax payments for EFL (Appendix 2) Summary of income for Jennifer Williams (Appendix 3) Statutory information for EFL (Appendix 4) Personal information for Jennifer Williams (Appendix 5) You determine that the fees for your services, based on the estimated time cost, will be $1,500 for the company and $800 for Jennifer. Fee notes for both will be issued upon completion of the jobs. Jennifer’s father who lives in Australia, would like to give a parcel of…
The following information concerns production in the Forging Department for September. All direct materials are placed into the process at the beginning of production, and conversion costs are incurred evenly throughout the process. The beginning inventory consists of $52,400 of direct materials.
ACCOUNT Work in Process”Forging Department
ACCOUNT NO.
Date
Item
Debit
Credit
Balance
Debit
Credit
Sept.
1
Bal., 4,000 units, 80% completed
62,000
30
Direct materials, 36,000 units
464,400
526,400
30
Direct labor
46,250
572,650
30
Factory overhead
63,862
?
636,512
30
Goods finished, ? units
?
30
Bal., 3,200 units, 60% completed
?
Based on the above data, determine each of the following amounts.
If required, round your interim calculations to two decimal places. Round final answers (a c) to the nearest dollar.
a. Cost of beginning work in process inventory completed in September. $
b. Cost of units transferred to the next department during September. $
c. Cost of ending work in process inventory on September 30. $
d. Costs per equivalent unit of direct materials and conversion included in the September 1 beginning work in process. If required, round your answers to two decimal places.
Direct materials cost per equivalent unit
$
Conversion cost per equivalent unit
$
e. The September increase or decrease in costs per equivalent unit for direct materials and conversion from the previous month. If required, round your answers to two decimal places.
Increase or Decrease
Amount
Change in direct materials cost per equivalent unit
in the curerent year, Mike’s AGI is $50,000. Mike has no miscellaneous itemzed deductions other than employment related expenses listed below. Mike attends a professional trade association convention in Los Angeles. He spends three days at the meeting and tow days vactioning before the meeting. Mike was unable to obtain excursion airfare rates ( i.e. staying over a Staurday night) despite the fact that he was on vacation immediately before the meeting. Mike’s total expenses include the following:
Airfare $450.00
Meals ( $50 per day) 250.00
Hotel ($100 per day) 500.00
Entertainment of customers
(business is discussed) 500
Total $1,700.00
Mike’s empolyer reimburses hin for the business related expenses and, accordingly, Mike receives a reimbursement of $1,400.00 ($450.00 + 150 +300 +500).
a. How much can Mike deduct for employment related expenses?
b. How is the reimbursement reported on Mike’s tax return?
c. How much of the reimbursement may Mike’s employer deduct?
Darth Company sells three products. Sales and contribution margin ratios for the three products follow:
Product X
Product Y
Product Z
Sales in dollars
$25,000
$45,000
$105,000
Contribution margin ratio
39%
34%
9%
Given these data, the contribution margin ratio for the company as a whole would be: (Round your intermediate calculations to 2 decimal places. Round your answer to whole percentage.)
20%
37%
27%
it is impossible to determine from the data given.
DeAnne Company produces a single product. The company’s variable costing income statement for August appears below:
DeAnne Company Income Staement For the month ended August 31
Sales ($20 per unit)
$ 850,000
Variable expenses:
Variable cost of goods sold
510,000
Variable selling expense
85,000
Total variable expenses
595,000
Contribution margin
255,000
Fixed expenses:
Fixed manufacturing
140,120
Fixed selling and administrative
70,060
Total fixed expenses
210,180
Net operating income
$ 44,820
The company produced 35,030 units in August and the beginning inventory consisted of 8,770 units. Variable production costs per unit and total fixed costs have remained constant over the past several months.
Under absorption costing, the ending inventory for the month ended August 31 would be reported at:
Debra acquired the following new assets during 2013:
Date
Asset
Cost
April 11
Office Furniture
$40,000
July 28
Trucks
40,000
November 3
Computers
70,000
Debra does not elect immediate expensing under A?§ 179. She does take the additional first year depreciation.
If required, round your answers to the nearest dollar. Click here to access Table 8.1 andTable 8.2 of the textbook.
a. What MACRS convention applies to the assets? Select Mid quarter Mid month Half year Item 1
b. What class of property is each asset for MACRS? Select Furniture, seven year; trucks, five year; computers, five year Furniture, five year; trucks, three year; computers, three year Furniture, seven year; trucks, three year; computers, five year Furniture, five year; trucks, five year; computers, five year Item 2
As of December 31, 2012, NPR, Inc. has patents and trademarks on its balance sheet. NPR has decided it does not want to use the qualitative assessment option for impairment testing on its trademark for US GAAP. Neither asset has been previously impaired. Information for these assets as of December 31, 2012, is as follows
Remaining life
Original cost
Accumulated amortization*
Fair value
Selling costs
Present value of future cash flows
Summation of future, undiscounted cash flows
Patent
10 years
$200,000
$100,000
$80,000
$2,000
$85,000
$95,000
Trademark
Indefinite
$250,000
‘
$225,000
Insignificant
$220,000
$240,000
As of December 31, 2013, the fair value, selling costs and the present value of future cash flows of the patent had not changed. The sum of future undiscounted cash flows for the patent is now $90,000. The fair value of the trademark had increased to $230,000 and the present value of the future cash flows for the trademark has increased to $225,000. Selling costs are still insignificant. The sum of future cash flows is still $240,000.
Please provide any necessary calculations and journal entries for these assets on NPR Inc.’s balance sheet using both IFRS and US GAAP for 2012 and 2013.
a) The deferral of taxation on unrecognized gains from a nontaxable property transaction is
1. is generally accomplished by adjustments to the basis of the new or acquired property.
3. generally has no effect on the basis of the property.
4, results in a reduction of the basis of the acquired property by the amount of tax paid in a subsequent transfer of the property.
b)A gain is recognized in a nontaxable exchange to the extent that you receive property or cash. True or False
c)X owned an office building that he had purchased at a cost of $600,000 and that now had an adjusted basis of $400,000. In the current year, he traded it to a person who was not related to him for an apartment house having a fair market value of $500,000. The apartment house has 50 units and rents to individuals. The office building has 25 units and rents to Monty’s businesses. What is Mr. Monty’s recognized gain or loss on this exchange?
Department J had no work in process at the beginning of the period, 18,000 units were completed and transferred out during the period, 2,000 units were 30% completed at the end of the period, and the following manufacturing costs were debited to the departmental work in process account during the period (Assuming the company uses FIFO):
Direct materials (20,000 at $4)
$ 80,000
Direct labor
102,300
Factory overhead
37,200
Assuming that all direct materials are placed in process at the beginning of production, what is the total cost of the 18,000 units completed during the period? Answer
Three different plans for financing a $5,400,000 corporation are under consideration by its organizers. Under each of the following plans, the securities will be issued at their par or face amount, and the income tax rate is estimated at 40% of income.
Plan 1
Plan 2
Plan 3
10% bonds
_
_
$2,700,000
Preferred 10% stock, $40 par
_
$2,700,000
1,350,000
Common stock, $5.40 par
$5,400,000
2,700,000
1,350,000
Total
$ 5,400,000
$ 5,400,000
$ 5,400,000
1. Determine for each plan the earnings per share of common stock, assuming that the income before bond interest and income tax is $10,800,000. Enter answers in dollars and cents, rounding to the nearest cent.
2. Determine for each plan the earnings per share of common stock, assuming that the income before bond interest and income tax is $5,130,000. Enter answers in dollars and cents, rounding to the nearest cent.
3. Discuss the advantages and disadvantages of each plan.
Dillenbeck Printing Cor., a book printer, has provided the following data:
Titles Printed Press Setup Cost
FebruaryAc€¦.. 33 $3,170
MarchAc€¦Ac€¦. 34 $3,203
AprilAc€¦Ac€¦Ac€¦ 46 $3,688
MayAc€¦Ac€¦Ac€¦. 28 $2,996
JuneAc€¦Ac€¦Ac€¦. 44 $3,607
JulyAc€¦Ac€¦Ac€¦.. 42 $3,551
AugustAc€¦Ac€¦. 43 $3,586
SeptemberAc€¦39 $3,413
Management believes that the cost of the call center is a mixed cost that depends on the number of titles printed. (A specific book that is to be printed is called a “title”. Typically, thousands of copies will be printed of each title. Specific steps must be taken to setup the presses for printing each title for example, changing the printing plates. The costs of these steps are the press setup costs.)
Require:
Estimate the variable cost per title printed and the fixed cost per month using the least squares regression method
Discussion: 1 “Ethics in Management Accounting versus Financial Accounting”
Respond to the following:
From the e Activity, assess the effectiveness of the current Institute of Management Accountants (IMA) code of professional conduct in promoting ethical behavior and providing guidance for the dilemmas managerial accountants are confronted with today. In your assessment, compare the IMA code of conduct to the AICPA code of professional conduct and its effectiveness.
From the e Activity, assess the aspects of your job that are most likely to be challenged ethically and suggest how you will handle these situations.[200 words]
Discussion: 2 “Corporate Malfeasance” Respond to the following:
Evaluate the difficulties companies are faced in implementing a control framework against fraud under Sarbanes Oxley (SOX). In your evaluation, discuss how the external financial audit can assist in determining fraud.
Analyze how the SOX framework can prevent business model fraud in financial accounting and managerial accounting. Contrast the differences in the framework for financial accounting and managerial accounting. [200 words]
Can a sole proprietorship be described as a passthrough entity?
This year, Firm Q, a cash basis taxpayer, remitted $26,800 of FICA payroll tax to the federal government. However, the firm deducted only $13,400 FICA tax on its income tax return. Can you explain this apparent inconsistency?
Why is only one half of a sole proprietor’s self employment tax generally deductible in the computation of taxable income?
Mrs. G, Mr. Y, and Mrs. N want to become co owners of a business enterprise. Compare the extent of their personal liability for the debts incurred by the enterprise if they organize as:
a) A general partnership
b) A limited partnership
c) An LLC
d) An S corporation
Why are certain items of income, gain, deduction, or loss separately stated on a partnership or an S corporation tax return?
Four years ago, Mr. JB purchased 1,000 shares of UPF Inc., for $10,000. These shares represent a 30 percent equity interest in UPF, which is an S corporation. This year, UPF defaulted on a $120,000 debt to a major creditor.
a) To what extent can the creditor demand repayment of the debt from Mr. JB?
b) Would your answer change if UPF is a partnership in which Mr. JB is a 30 percent general partner?
c) Would your answer change if UPF is a partnership in which Mr. JB is a 30 percent limited partner?
d) Would your answer change if UPF is an LLC in which Mr. JB is a 30 percent member?
A dress company has the following standards to make one dress:
Standard Quantity
Standard Price
Direct materials
3 yards per unit
$7.50 per yard
Direct labor
1.5 hours per unit
$8.00 per hour
The company used 8,000 yards of material in order to make 2,500 dresses in April. The company purchased 8,200 yards at $7.75 per yard. How much is the direct materials quantity variance?
Duda Clinic uses the step down method to allocate service department costs to operating departments. The clinic has two service departments, Personnel and Information Technology (IT), and two operating departments, Family Medicine and Geriatric Medicine. Data concerning those departments follow:
Service Department
Operating Department
Personnel
IT
Family Medicine
Geriatric Medicine
Departmental costs
$ 86,088
$ 28,200
$ 329,090
$ 146,490
Employees
19
25
190
207
PCs
20
26
74
148
Personnel costs are allocated first on the basis of employees and IT costs are allocated second on the basis of PCs.
The total Geriatric Medicine Department cost after allocations is closest to:
E 14’5: Bonds; issuance; effective interest; financial statement effects
LO14’2
Myriad Solutions, Inc., issued 10% bonds, dated January 1, with a face amount of $320 million on January 1, 2013 for $283,294,720. The bonds mature on December 31, 2022 (10 years). For bonds of similar risk and maturity the market yield is 12%. Interest is paid semiannually on June 30 and December 31.
Required:
1. What would be the net amount of the liability Myriad would report in its balance sheet at December 31 2013?
2. What would be the amount related to the bonds that Myriad would report in its income statement for the year ended December 31, 2013
3. What would be the amount(s) related to the bonds that Myriad would report in its statement of cash flows for the year ended December 31, 2013?
A&E Company exchanged asset A to acquire asset B from PVP Company. PVP paid $60,000 cash to A&E in this exchange. The following information pertains to the exchange:
A&E
Asset A
PVP
Asset B
Cost
$2,700,000
$3,240,000
Accumulated depreciation
1,350,000
1,782,000
Fair market value
1,755,000
1,695,000
Cash given by PVP
60,000
Prepare journal entries using the answer sheet provided to record the exchange on the books of A&E company assuming the exchange lacks commercial substance:
EPS; nonconvertible preferred stock; treasury shares; shares sold; stock dividend; options; convertible bonds; contingently issuable shares LO4 through LO10 On December 31, 2008, Dow Steel Corporation had 600,000 shares of common stock and 300,000 shares of 8%, noncumulative, nonconvertible preferred stock issued and outstanding. Dow issued a 4% common stock dividend on May 15 and paid cash dividends of $400,000 and $75,000 to common and preferred shareholders, respectively, on December 15, 2009. On February 28, 2009, Dow sold 60,000 common shares.
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Problem 19 11 EPS; nonconvertible preferred stock; treasury shares; shares sold; stock dividend; options; convertible bonds; contingently issuable shares LO4 through LO10??On December 31, 2008, Dow Steel Corporation had 600,000 shares of common stock and 300,000 shares of 8%, noncumulative, nonconvertible preferred stock issued and outstanding. Dow issued a 4% common stock dividend on May 15 and paid cash dividends of $400,000 and $75,000 to common and preferred shareholders, respectively, on December 15, 2009. ??On February 28, 2009, Dow sold 60,000 common shares. Also, as a part of a 2008 agreement for the acquisition of Merrill Cable Company, another 23,000 shares (already adjusted for the stock dividend) are to be issued to former Merrill shareholders on December 31, 2010, if Merrill’s 2010 net income is at least $500,000. In 2009, Merrill’s net income was $630,000. ??In keeping with its long term share repurchase plan, 2,000 shares were retired on July 1. Dow’s net income for the year ended December 31, 2009, was $2,100,000. The income tax rate is 40%. ??As part of an incentive compensation plan, Dow granted stock options to division managers at December 31 of the current and each of the previous two years. Each option permits its holder to buy one share of common stock at an exercise price equal to market value at the date of grant and can be exercised one year from that date. Information concerning the number of options granted and common share prices follows: ?? Date Granted ?Options Granted ?Share Price ?? ?(adjusted for the stock dividend) ? ??December 31, 2007 ?8,000 ?$24 ??December 31, 2008 ?3,000 ?$33 ??December 31, 2009 ?6,500 ?$31 ?? The market price of the common stock averaged $32 per share during 2009. ??On July 12, 2007, Dow issued $800,000 of convertible 10% debentures at face value. Each $1,000 bond is convertible into 30 common shares (adjusted for the stock dividend). ?? Required: ??Compute Dow’s basic and diluted earnings per share for…
Ending inventory value with respect to absorption costing and variable costing: A) is less using variable costing B) is more using variable costing C) is the same D) none of the above The professional designation for the accountant that prepares reports that are used by parties external to the corporation is: A) C.P.A. B) C.M.A. C) C.F.A. D) C.L.U. Montson, Inc. produces a product requiring three square feet at $6 per square foot. If the desired ending inventory is $18,000 and the beginning inventory is $36,000, how many units must Montson produce to make direct materials purchases $54,000? A) 3,000 B) 4,000 C) 1,000 D) cannot tell from data given In order to determine the overhead volume variance you need the overhead flexible budget and the overhead applied to the units produced. True False Anson produces a product that requires 10 standard sq. ft. of plywood at $4 per sq.ft. If Anson produces 300 units and uses 3,100 sq. ft., the material price variance is: A) $12,400 B) $12,000 C) unable to tell from the data given D) none of the above Generally speaking, the hurdle rate impounds the risk of the firm. True False Ending inventory value with respect to absorption costing and variable costing: A) is more using absorption costing B) is less using absorption costing C) is the same D) none of the above The I.M.A. publishes generally accepted accounting principles. True False Activity based costing assists in the development of appropriate overhead costs. True False In order to determine the controllable overhead variance, you need the overhead application rate. True False The internal rate of return (IRR) is calculated from the undiscounted cash flows. True False How many equivalent units of conversion costs are in 20,000 physical units of product 10% complete? A) 200 B) 2,000 C) 20,000 D) cannot be determined from data given Direct Labor and Overhead are conversion costs. True False If production is less than sales, the net income with respect to absorption costing and variable costing: A) is the same B) variable costing yields higher net income C) variable costing yields lower net income D) none of the above If Ezra collects 80% of its credit sales in the month of the sale and 20% in the month after the sale, how much will Ezra collect in March on a $220,000 credit sale in January? A) $176,000 B) $44,000 C) $88,000 D) none of the above Tex’s applies an overhead rate of $10/unit based on 200 units. If Tex’s produces 210 units and has a flexible overhead budget of $1,900, the overhead volume variance is: A) 200 favorable B) 200 unfavorable C) 100 favorable D) 100 unfavorable In order to determine the overhead volume variance you need actual overhead costs. True False A discount factor A) is the reverse of compounding future cash flows. B) performs the reverse function of discounting interest rate. C) All of the above D) None of the above If production levels are greater than anticipated, overhead will be under or over absorbed. A) Over B) Under Colly, Inc. pays 20% of the cost of purchases in the month purchased and 60% in the month after and 20% in the month after that, how much cash will be disbursed in the month after a $108,000 purchase. A) $64,800 B) $21,600 C) $43,200 D) none of the above As production levels decrease the fixed cost per unit: A) decreases B) increases C) stays the same D) none of the above Even though there is a slight change in the sales mix, the breakeven point is the same. True False The human resources department would likely have a flexible budget. True False Variable costing is not GAAP. True False Direct Materials and Direct Labor are prime costs. True False An example of a period cost is: A) direct labor B) direct materials C) salesperson’s commission D) none of the above As the sales mix changes, so does the breakeven point. True False Hooks produces a product that requires 10 standard sq. ft./unit at a standard price of $6 per sq. ft. The actual cost per unit is: A) $60 B) $50 C) unable to tell from the data D) none of the above If production exceeds sales, the net income with respect to absorption costing and variable costing. A) is the same B) lower under absorption C) higher under absorption D) higher under variable A merchandising firm’s balance sheet reflects inventory of: A) raw materials B) work in process C) finished goods D) none of the above For capital budgeting purposes, an asset’s depreciable life is A) always equal to the time horizon of an evaluation. B) equal to the asset’s useful life. C) equal to the asset’s economic life. D) none of the above As production levels increase the variable cost per unit: A) increases B) decreases C) stays the same D) none of the above There is a fixed cost element in ending inventory using the variable costing approach. True False If there are no units in finished goods ending inventory and cost of goods manufactured is less than cost of goods sold, then there must be units in: A) finished goods beginning inventory B) work in process ending inventory C) work in process beginning inventory D) none of the above Lines, Inc. applies overhead at the standard rate of $20/units, based on anticipated production of 2,000 units. If Line’s actual overhead is $41,000, the overhead volume variance is: A) 1,000 favorable B) 1,000 unfavorable C) cannot tell from data given D) none of the above A budget is an integral part of the planning process. True False Overhead costs, in general, are: A) variable B) fixed C) semi variable D) none of the above The present value of cash flow allows an individual to assess A) the value of a present cash flow. B) the value of a stream of cash flows in terms of the best alternative. C) Both A and B D) Neither A nor B Overhead costs are inventoriable costs. True False If the sales price is $10/unit and, what are the variable costs per unit to give a contribution margin of $6. A) $4 B) $6 C) $10 D) none of the above The direct materials purchases budget is the first budget developed. True False Which of the following companies is in all likelihood, a process coster. A) paint manufacturer B) chair manufacturer C) boat manufacturer D) none of the above the advertising department would likely have a static budget true false If production equals sales and there are no beginning or ending inventories: A) variable costing gives a higher net income than absorption costing B) variable costing gives a lower net income than absorption costing C) net income is the same under each assumption D) none of the above The simple payback method ignores the time value of money. True False Most likely, the management accountant will report to the: A) C.E.O. B) C.F.O. C) Chief Legal Officer D) Marketing Director Total fixed costs increase as production increases. True False Activity based costing assists in the development of a standard for direct labor. True False If actual overhead costs are more than applied overhead costs, cost of goods sold will be understated. True False Salvage value A) in theory, is equal to the present value of the future cash flows of the asset. B) should not be used to justify marginal investments. C) is the best prediction of what an asset could be sold for at the end of the time horizon. D) All of the above E) None of the above The chief auditor has a dotted line relationship with the Board of Directors. True False A surrogate term for equivalent unit is “work done” on a physical unit. True False The capital expenditures budget is tied closely to the: A) Sales budget B) Purchases budget C) Cash receipts budget D) Cash expenditures budget The budgeted balance sheet is the last budget to be prepared. True False
Richard and Anna Wilson are married and file a joint return. Richard is 47 years of age and Anna is 46. Richard is employed by Telstar Corporation as its con troller and Anna is self employed as a travel agent. They have three children: Michael, age 22; Lisa, age 17; and Laura, age 14. Michael is a full time student at Rutgers University. Lisa and Laura both live at home and attend school full time. The Wilsons currently live at 3721 Chestnut Ridge Road, Montvale, New Jersey 07645, in a home they have owned since July 1990. Richard and Anna provided over half of the support of Anna’s mother, who currently lives in a nursing home in Mahwah, New Jersey. They also provided over half of the support of their son, Michael, who earned $4,750 during the summer as an accounting student intern for a national accounting firm. b. Richard received a Form W 2 from his employer reporting the following informa tion for 2011:
Richard M. Wilson, Social Security No. 294 38 6249:
Gross wages and taxable benefits Federal income taxes withheld F.I.C.A. taxes withheld: Social security Medicare State income taxes withheld $ 131,004000 “0 9146 1,850
The taxable benefits reported on his W 2 Form include $2,700 (based on the cur rently deductible standard auto mileage rate) for Richard’s personal use of the company car provided by his employer. c. Anna operates her business under the name “Wilson’s Travel Agency,” located at 7200 Treeline Drive, Montvale, NJ 07645. Anna has one full time employee, and her Federal employer identification number is 74 2638596. Anna uses the cash method of accounting for her business, and her records for 2011 show the following:
Fees and commissions $134,000 Expenses: Advertising 14,7255 Bank service charges Dues and subscriptions 560 Insurance 1,100 Interest on furniture loan 960 Professional services 700 Office rent 6,000 Office supplies 470 Meals and entertainment 1,000 Payroll taxes 2,170 Utilities and telephone 3,480 Wages paid to full time employee 22,800 Miscellaneous expenses 20
Automobile expenses and amounts paid to her children are not included in the above expenses. Anna paid her daughters Lisa and Laura $750 and $450, respec tively, for working part time during the summer. Since she did not withhold or pay any Federal income or employment taxes on these amounts, Anna is not certain that she is allowed a deduction. She does feel that the amounts paid to her children were reasonable, however. Anna purchased a new 2010 Honda Accord on November 20 of last year, and her tax accountant used the actual cost method in determining the deductible busi ness expenses for her 2010 Federal tax return. Because the deductible amount
Based on an analysis of the financial statements, the following information is available for the Dun Wrong Construction Company’s cash flows for the year ended December 31, 210X.
Cash sales for the year were $1,250,000.
Credit sales for the year were $2,000,000. 75% of the credit sales were collected in the current year.
Last year’s uncollectible accounts receivable were $35,000.
Accounts receivable decreased by $20,000.
Inventory increased by $10,000.
Accounts payable increased by $15,000.
Net income reported was $225,000.
Depreciation and amortization expenses reported were $75,000.
The book value of assets sold this year was $50,000. There was a $5,000 gain on the sale reported.
Cash payments to creditors, employees, etc. were $2,250,000.
The accrued expenses at year end were $10,000.
Income taxes accrued this year were $35,000.
Income taxes paid from last year’s profits were $30,000.
Fixed assets purchased this year were $240,000. 50% of the purchase was made in cash.
Note receivable collections for the year were $25,000 for the principal and $3,000 for the interest.
Bonds were exchanged for land and a building. The fair market value of bonds was $500,000. Interest is paid on an annual rate of *%, but is paid semi annual interest payment was made during the year.
Loan payments made to the bank were $50,000. This included interest in the amount of $4,500.
Dividends in the amount of $50,000 were declared on December 15th.
Dividends declared last year, but paid this year, was $25,000.
Cash and cash equivalents at the beginning of the year was $44,000.
Required: Prepare, in good form, a formal statement of cash flows, using the “Direct Method”
Problem #2
The bank statement for Steve’s Service, Inc., as of June 30 th, 201X, shows a balance of $54,780. The general ledger shows a balance of $68,757.
Other data”
Check #748 in the amount of $3,000 was originally recorded on the books for $4,500. The check was used to purchase office equipment.
A customer’s note dated March 25th was discounted on April 12th. The note was dishonored by the bank on June 29th. The bank charged Steve’s account $14,265, which included a service fee of $42.
The deposit of June 24th was recorded in the books in the amount of $2,895, but was corrected by the bank for the actual amount of $2,700. The difference was due to a book recording error on a customer’s check which was received on account.
Checks outstanding at the end of June amounted to $9,885.
Bank service charges for the month were $210.
A customer’s check, in the amount of $1,296, received from a “cash” sale was deposited on June 27th , but was returned by the bank on June 29th marked ”NSF”.
A deposit for $600 made on June 22nd, was credited by bank to another customer’s account. Steve’s Service properly recorded the deposit.
Receipts in the amount of $13,425 were recorded on June 30th, but not deposited into the account until July 1st.
A bank credit memo indicated that a customer had made an electronic funds transfer on June 29th to Steve’s account in the amount of $4,629. Steve’s did not record this deposit. The payment was on the customer’s account.
1. Prepare, in good form, the bank reconciliation as of November 30 th.
2. Prepare, in good form, the required adjusting journal entries.
Bonus Point: Prepare the adjusting journal entry using only one entry.
Problem #3
The total outstanding accounts receivable for the Do Right Corporation is $450,000 as of June 30 th, 200X. An evaluation of the customers’ accounts reflects an aging of the receivables as follows: Current $260,000; 1 to 30 days overdue $95,000; 31 to 60 days overdue $50,000; 61 to 90 days overdue $10,000; and over 90 days past due $35,000. Past history of the uncollectible accounts resulted in the following percentages: Current .5% (.005); 1 to 30 days overdue 5%; 31 to 60 days overdue 10%; 61 to 90 days overdue 20%, and over 90 days overdue 50%.
The trial balance, prior to the adjustment for this year’s estimate, reflects a debit balance of $30,000 in the Allowance for Doubtful Accounts. Management considers anything over (under) +/ $10,000 a material amount.
Required:
1) Prepare, in good form, an aging schedule for June 30 th.
2) Prepare the adjusting entry required at June 30 th.
3) Do you think the amount at June 30 th is inadequate (too low), or excessive (too high)? Explain.
4) If it is inadequate or excessive, how can management correct the problem?
Company Overview Southwest Airlines Co. (the “Company” or “Southwest”) is a major passenger airline that provides scheduled air transportation in the United States. The Company commenced service on June 18, 1971, with three Boeing 737 aircraft serving three Texas cities: Dallas, Houston, and San Antonio. The Company ended 2010 with 548 Boeing 737 aircraft serving 69 cities in 35 states throughout the United States, and has announced its plans to begin service in March 2011 to two new states and three new cities: Charleston, South Carolina; GreenvilleSpartanburg, South Carolina; and Newark, New Jersey. Based on the most recent data available fromthe U.S. Department of Transportation, as of September 30, 2010, the Company was the largest domestic air carrier in the United States, as measured by the number of originating passengers boarded. The Company principally provides point to point, rather than hub and spoke, service. This allows the Company to maximize the use of key assets, including aircraft, gates, and Employees, and also facilitates the Company’s ability to provide its markets with frequent, conveniently timed flights and low fares. The Company’s point to point service is discussed in more detail below under “Company Operations — Route Structure.” For the 38 consecutive year, the Company was profitable, earning $459 million.
Case Article: Read “Wainivesi seeks mining lease extension” by Rachna Lal, Fiji Sun 5th March, 2013.
[A copy of the article is attached on next page]
Required
Compile a BUSINESS REPORT based on the following questions, in light of reading the case article and relevant readings. In writing your answers, you may provide quotes from the article to support your answer.
Assume that you and your partner have been appointed as consultants and have been requested by the investors of Asia Pacific Resources Limited to provide them a business report in regards to the following:
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University of the South Pacific Faculty of Business and Economics School of Accounting and Finance AF101 – Introduction to Accounting and Financial Management Part 1 Major Assignment: BUSINESS REPORT Weighting: The total mark for this assignment is 100 marks and is worth 10% of your total assessment. Due date: 2 May Thursday 8.00 am – 12 midday at the School of Accounting & Finance office. ALL ASSIGNMENTS HANDED IN AFTER THIS TIME WILL BE REGARDED AS LATE ASSIGNMENTS. Instructions: This assignment requires students to compile a BUSINESS REPORT based on the attached news article and related questions. This assignment must be done in pairs; individual assignments will not be accepted. Preferably, you must select a person from within your tutorial group as your assignment partner. Your assignment MUST be word processed. Hand written assignments will NOT be accepted. Ensure that your names, ID No’s, tutor’s name and tutorial day and time are stated clearly on the cover page, which can be downloaded from Moodle. A penalty of 10% will be deducted each day or part thereof that the assignment is late. Check late assignment policy. Use proper in text referencing, footnotes and a bibliography. Plagiarized/copied assignments will be awarded a ZERO (0) mark. Font size of 12 should be used with single line spacing. Word limit for this assignment is 1500 words. All answers will have to be submitted into TURN IT IN on moodle on the due date. A submission box will be made available on moodle. Case Article: Read “Wainivesi seeks mining lease extension” by Rachna Lal, Fiji Sun 5th March, 2013. [A copy of the article is attached on next page] Required Compile a BUSINESS REPORT based on the following questions, in light of reading the case article and relevant readings. In writing your answers, you may provide quotes from the article to support your answer. Assume that you and your partner have been appointed as consultants and have been requested by the…
1. Meaning and Importance of Outsourcing (quest 1 and 2 did it just need to edit ) What is outsourcing?According to the articles ‘’ Outsourcing and the Contracting Of Responsibility’’ by Hira and Hira 2005,outsourcing is defined as instances where a company purchases goods or services performed within the organization structure of a company ‘’in house’’ from an outside supplier.Hence,in a simple form,outsourcing is often characterized as the hiring an outside company to handle all or part of an organization’s data processing activities.Today,outsourcing is widely used by companies especially small companies tend to outsource its computing,telecommunications, and software managements to accounting firms or firms that specialised in the specific areas. There are a number of significant factors identified in outsourcing.Firstly,outsourcing companies are able to have the best concentration on the task they are doing and outsource certain specific areas of work to expert in the field they are outsourcing.Thus,this promotes in saving for the costs of the company in doing the outsourcing.Alternatively,some companies choose to outsource offshore as well as onshore in order to maintain a low costs so that that they can keep the prices at a lower rate for consumers.Importance of outsource offshore can be seen from the finding where employees seems to do the task needs to be done.The recognition of the importance of outsourcing is seen in helping the countries development along in providing employment opportunities to the citizens.In the economic globally wide,it is said that outsourcing is important as we cant simply keep everything in this country which is not being realistic. Another importance of outsourcing is greatly determined in helping to level the field of the business and to make the business appear bigger than it is.This concept is certainly useful for small businesses that cant afford to maintain resources like the large companies.Therefore,by outsourcing,small business companies are able to compete with larger companies in having an increase of own efficiency and expertise access to the resources.At such,this help to increase the overall quality of the business in having an effective and efficient organization management. 2. Application Of Outsourcing in Accounting and their Implications on the profitability and quality of information of a company. In accounting,application of outsourcing is also known as a business process outsourcing where it is a form of outsourcing of accounting applications in assigning certain projects associated within the business operation to an outside entity.This is definitely done with an aim of maximizing the available resources to the organization in making sure that the task being done in a timely effective and efficient way.With this,small firm make use of application outsourcing without having stress on the internal resources of the company.At such,small firm will choose to outsource its bookkeeping needs,payroll,issue invoices and payments to the company’s vendors.The outsourcing of accounting application helps the small business to eliminate the need to pay salaries to the workers. Besides,application of outsourcing in accounting are widely used in the field of accounting especially in payroll accounting.Frequently, application of outsourcing in accounting are well known in small and medium size firm.This is certainly true where in small firm without any necessary department in dealing with the payroll or to address to the specific accounting matters.Consequently,this lead the small firm to outsource the quality of information without having any pressure related to payroll and the eased of paying salaries to workers.Also,the firm can rest in assure about the changes of the legislation without becoming a barrier in success in the competitive world as the payroll system is being done by the specialist.With the outsourcing in accounting,the company can focus on their performance while having their payroll being specialised outsource of profitability and quality information of the company. In terms of profitability,application of outsourcing can be said to lead to the fragmentation and disintegration of the supply chain of the company which result in an decrease of profitability of the company.This is supported by the fact that application of outsourcing invites new competitors into the industry of accounting.For instance,when more activities such as accounting payroll,marketing,branding being outsourced,the supply chain will changed from a single integrated process in having traditional way of management into a fragment and disintegrated process .Although outsourcing offer advantages such as asset utilization in reducing the expenses,the consequences of the implications lead to low profitability as there be highly competitive new and existing competitors in doing the benchmarking against industries,shorten the product cycles as well as low return on the invested capital by the investors of the company. Another implication of outsourcing in accounting can be seen where outsourcing affects the relationship between the company and the third party of the company.This is where in outsourcing companies usually shift the production and task to overseas where it lead to a great impact on the economy that will reverse all the gains from outsourcing resulting in a low profitability of the company.This will also lead to the political issues in outsourcing the information to the overseas.As a customers,they may end up boycotting the products just to cut the costs and to raise profits.At such,this will caused a huge disorder unstable issues to the economic as well as to the politics.For occurrence,people may end up supporting legislation which increase their cost of doing their business without caring about others community. Clearly,it can be seen that outsourcing brings implication on the quality of the information to be delivered to the consumers.Outsourcing of information are to be said that it helps to increase the quality of the information in term of having a more accurate and timeliness profitability.Moreover,the outsourcing of quality if information is a reliable process where it aim to save the indirect as well as the direct costs of the company.Likewise,outsourcing brings good implications on the quality of information where outsourcing attract many organisations to outsource by the comparison of wages for high quality and better training being provide.In the long run,this will help to increase the profitibility of the company and outsourcing help to achieve greater amount of savings for the organization. Not only that,outsourcing of quality information brings successful quality of improvement to the Total Quality Management of the organization.This set as an initiatitives in
BE23 3 Novak Corporation is preparing its 2012 statement of cash flows, using the indirect method. Presentedbelow is a list of items that may affect the statement. Using the code below, indicate how each itemwill affect Novak’s 2012 statement of cash flows.Code Letter EffectA Added to net income in the operating sectionD Deducted from net income in the operating sectionR I Cash receipt in investing sectionP I Cash payment in investing sectionR F Cash receipt in financing sectionP F Cash payment in financing sectionN Noncash investing and financing activityItems____ (a) Purchase of land and building. ____ (j) Increase in accounts payable.____ (b) Decrease in accounts receivable. ____ (k) Decrease in accounts payable.____ (c) Issuance of stock. ____ (l) Loan from bank by signing note.____ (d) Depreciation expense. ____ (m) Purchase of equipment using a note.____ (e) Sale of land at book value. ____ (n) Increase in inventory.____ (f) Sale of land at a gain. ____ (o) Issuance of bonds.____ (g) Payment of dividends. ____ (p) Retirement of bonds payable.____ (h) Increase in accounts receivable. ____ (q) Sale of equipment at a loss.____ (i) Purchase of available for sale investment. ____ (r) Purchase of treasury stock.
need someone to check my answer to exercise and provide detailed input. my answers are as follows:
Qeustion 1 ???Question 2 yes, if matieral prices go up, this makes the model 5200 less attractive since the matieral costs per unit are currently .40 vs .38 on model 2600.Question 3 If the price of labor goes up by 25% this makes the model 5200 even more attractive since it currently has a significantly lower labor cost per unit than model 2600.
The management of Thews Corporation is considering dropping product E28I. Data from the company’s accounting system appear below:
Sales $471,000
Variable expenses $212,000
Fixed manufacturing expenses $163,000
Fixed selling and administrative expenses $138,000
All fixed expenses of the company are fully allocated to products in the company’s accounting system. Further investigation has revealed that $83,000 of the fixed manufacturing expenses and $63,000 of the fixed selling and administrative expenses are avoidable if product E28I is discontinued.
Required:
a.What is the net operating income (loss) earned by product E28I according to the company’s accounting system?
b.What would be the effect on the company’s overall net operating income of dropping product E28I?
The net operating income would increase or decrease by how much $
Common fixed expenses totaled $292,000 and were allocated as follows: $155,000 to the Apparel business segment and $137,000 to the Accessories business segment.
Required:
Prepare a segmented income statement in the contribution format for the company. Omit percentages; show only dollar amounts
Hernandez Company had the following stock transactions during the year:
Issued 25,000 shares of $1 par common stock for $25,000.
Issued 20,000 shares of $1 par common stock for $22,000 cash.
Issued 22,000 shares of $1 par common stock for $21,000 cash.
Issued 2,000 shares of $50 par, 8% preferred stock for $100,000 cash.
Issued 1,000 shares of $50 par, 8% preferred stock for $49,000 cash.
Issued 1,000 shares of $50 par 8% preferred stock for $51,500
Issued 2,500 shares of no par common stock for $11,875 cash
Issued 1,500 shares of no par 7% preferred stock for $72,000 cash.
Question 2
Kris Kraft Stores had the following stock transactions during the year.
Issued 4,000 shares of no par common stock with a stated value of $10 per share for $40,000 cash.
Issued 6,000 shares of no par common stock with a stated value of $8 per share for $50,000 cash.
Issued 5,000 shares of no par 6% preferred stock with a stated value of $15 per share for $75,000 cash.
Issued 3,000 shares of no par 6% preferred stock with a stated value of $20 per share for $58,000 cash.
Issued 10,000 shares of $8 par common stock with a $9 fair market value for a building with an uncertain fair market value.
Issued 10,000 shares of $5 common stock for land with a fair market value of $50,000.
Issued 8,000 shares of $50 par, 8% preferred stock for land with a fair market value of $405,000.
Question 3
During the year ended December 21, 2013, Smith Company completed the following transactions:
04/15 Declared a semiannual dividend of $0.80 per share on preferred stock and $0.05 per share on common stock to shareholders of record on 05/05, payable on 05/10. Currently, 4,000 shares of $100 par preferred stock and 50,000 shares of $1 par common stock are outstanding.
05/05 Record date of record entry.
05/10 Paid cash dividends.
10/15 Declared semiannual dividend of $0.80 per share on preferred stock and $0.50 per share on common stock to shareholders of record on November 5, payable on November 20.
11/5 Record date of record entry.
11/20 Paid cash dividends
11/22 Declared a 10% stock dividend to shareholders of record on December 8, distributable on December 16. Market value of the common stock was estimated to be $8.
12/08 Record date of record entry.
12/16 issued certificated for common stock dividend.
12/20 Board of directors declared a two for one common stock split.
CompuDesk, Inc., makes an oak desk specially designed for personal computers. The desk sells for $200. Data for last year’s operations follow:
Units in beginning inventory
0
Units produced
9,700
Units sold
8,000
Units in ending inventory
1,700
Variable costs per unit:
Direct materials
$ 60
Direct labor
20
Variable manufacturing overhead
10
Variable selling and administrative
30
Total variable cost per unit
$ 120
Fixed costs:
Fixed manufacturing overhead
$
210,000
Fixed selling and administrative
430,000
Total fixed costs
$
640,000
Required:
1.
Assume that the company uses variable costing. Compute the unit product cost for one computer desk.(Omit the “$” sign in your response.)
Unit product cost
$
2.
Assume that the company uses variable costing. Prepare a contribution format income statement for the year. (Input all amounts as positive values except losses which should be indicated by a minus sign. Omit the “$” sign in your response.)
Variable Costing Income Statement
(Click to select)Fixed selling and administrativeVariable selling and administrativeNet operating income (loss)SalesContribution marginFixed manufacturing overheadVariable cost of goods sold
$
Variable expenses:
(Click to select)Fixed manufacturing overheadVariable cost of goods soldFixed selling and administrative expensesSalesNet operating income (loss)Variable selling and administrative expensesContribution margin
$
(Click to select)Contribution marginNet operating income (loss)SalesFixed selling and administrative expensesVariable cost of goods soldVariable selling and administrative expensesFixed manufacturing overhead
(Click to select)Fixed selling and administrative expensesFixed manufacturing overheadSalesVariable selling and administrative expensesVariable cost of goods soldNet operating income (loss)Contribution margin
Fixed expenses:
(Click to select)SalesNet operating income (loss)Variable selling and administrative expensesContribution marginVariable manufacturing overheadFixed selling and administrative expensesFixed manufacturing overhead
(Click to select)Contribution marginNet operating income (loss)Variable manufacturing overheadFixed manufacturing overheadFixed selling and administrative expensesSalesVariable selling and administrative expenses
(Click to select)Fixed selling and administrative expensesContribution marginFixed manufacturing overheadSalesVariable cost of goods soldNet operating income (loss)Variable selling and administrative expenses
$
3.
What is the company’s break even point in terms of units sold? (Round your answer to the nearest whole number.)
Computer equipment (office equipment) purchased 6 1/2 years ago for $170,000, with an estimated life of 8 years and a residual value of $10,000, is now sold for $60,000 cash. (Appropriate entries for depreciation had been made for the first six years of use.) Journalize the following entries:
(a)
Record the depreciation for the one half year prior to the sale, using the straight line method.
(b)
Record the sale of the equipment.
(c)
Assuming that the equipment had been sold for $30,000 cash, prepare the entry for (b) above to record the sale.
The constraint at Dalbey Corporation is time on a particular machine. The company makes three products that use this machine. Data concerning those products appear below:
Assume that sufficient time is available on the constrained machine to satisfy demand for all but the least profitable product. Up to how much should the company be willing to pay to acquire more of this constrained resource? (Round your intermediate calculations and final answer to 2 decimal places.)
In contribution margin analysis, the effect of a change in the number of units sold, assuming no change in unit sales price or unit cost, is referred to as the:
BIB Corporation’s capital structure consists of 250,000 shares of common stock. At December 31, 2011 an analysis of the accounts and discussions with company officials revealed the following information:
Accounts payable
$ 3,00,000
Accrued salary payable
5,000
Accumulated depreciation
9,00,000
Allowance for doubtful accounts
25,000
Bonds payable (maturity July 1, 2012)
22,61,000
Cash
3,00,000
Common stock
10,00,000
Copyright
5,00,000
Dividend revenue
40,000
Dividends declared
1,45,000
Earthquake loss (net of tax) (extraordinary item)
2,10,000
General and administrative expenses
7,50,000
Interest expense
50,000
Land
18,50,000
Loss on disposal of assets
35,000
Materials and supplies
2,00,000
Merchandise Inventory, December 31, 2011
6,25,000
Merchandise Inventory, January 1, 2011
7,60,000
Notes receivable
4,50,000
Plant and equipment
22,50,000
Purchase discounts
90,000
Purchases
32,10,000
Retained earnings, January 1, 2011
14,50,000
Revenue
55,00,000
Selling expenses
6,40,000
Unearned service revenue
22,000
The amount of income taxes applicable to ordinary income was $243,000, excluding the tax effect of the earthquake loss which amounted to $90,000.
Hint: Cost of goods sold needs to be calculated from info given herein
Prepare a Multiple Step Income Statement, including Earinings per Share
see the attach Tax Return Problem # 3 Nuga and Muriel Atewon are married and file a joint return in 2012.
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Tax Return Problem # 3 Nuga and Muriel Atewon are married and file a joint return in 2012. They live at 12345 Hemenway Avenue, Marlboro, MA, 01752. Nuga is a self employed tax preparer and his SSN is 412 34 5670. Muriel is a manager and her SSN is 412 34 5671. They had the following income and expenses for the year: Muriel’s W 2: Gross Wages $96,000 Social security tax 4,032 Medicare tax 1,392 Federal withholding tax 18,643 State withholding tax 4,800 Nuga was the sole proprietor of NAMA Tax Service, located at 123 Main Street, Marlboro, MA, 01752, and his business code is 541213. He had the following revenue and expenses: Revenue: $80,000 Expenses: Advertising 1,200 Insurance Expense 3,200 Telephone Expense 2,400 Office Rent Expense 18,000 Utilities Expense 4,800 Office Expense 5,000 Depreciation 6,041 must be allocated to the §1231 assets listed next Nuga had the following business assets: Office Furniture: Purchased for $4,950 on May 20, 2010. The equipment is being depreciated over 7 year MACRS 200% declining balance. Nuga sold it on May 15, 2012 for $4,000. Office Equipment: Purchased a copier for $13,800 on January 10, 2012. The copier is being depreciated over 5 year MACRS 200% declining balance. Nuga makes no elections for §179 or bonus depreciation. Computer & Equipment: Purchased a computer system for $8,900 on January 2, 2011. The computer is being depreciated over 5 year MACRS 200% declining balance. Nuga makes no elections for §179 or bonus depreciation. Nuga and Muriel had the following other sources of income and deductions: Interest from a CD in the amount of $1,385 Long term loss carryover from 2011 of $5,000 Real estate taxes of $8,042 Home mortgage interest of $14,458 Charitable contributions in cash over the year of $1,800; all receipts and acknowledgments were received from the charitable…
ABC began constructing a building on September 1, 2009 and completed it on December 31, 2009. Construction costs totaled $500,000. On September 1, 2009 a one year loan at 12% for $210,000 was obtained and immediately spent on the project. Additionally, at the beginning of the construction period ABC paid $120,000 to start the construction. The additional costs of the project were paid in equal installments at the end of each month with the first installment being paid September 30, 2009 and the last installment being made on December 31, 2009. The only other debt of the company was a 10% long term note payable of $15,000.
ABC Company entered into a contract with XYZ Company to construct a building for ABC. The contract called for work to begin on January 1, 2009 and for ABC to make an initial payment of $100,000 at that time. Another $200,000 was to be paid by ABC at the end of each three month period until and including December 31, 2009 when the building was to be completed, transferred to ABC and placed into service. All aspects of the contract were completed on schedule. ABC Co. borrowed $300,000 on April 1, 2009 to help finance this project at an interest rate of 6%. Throughout the construction period, ABC had $900,000 of additional long term debt outstanding at an average interest rate of 7%.
What is the average annual expenditure on the building for 2009?
$
$
How much interest should be capitalized for this building in 2009?
$
$
What should be in the building account on the December 31, 2009 balance sheet?
$
$
How much interest expense should have been included on the income statement as of December 31, 2009?
See attached pls, i believe this was already tackled!
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AMX Consolidated Balance sheets at Dec. 31 of year x2 x1 Cash and cash equivalents 17,210 10,380 Accounts receivable, gross 10,490 9,264 Less: Allowance for bad debts 1,840 1,620 Accounts receivable, net 8,650 7,644 Raw materials inventories 770 620 Work in progress inventories 924 914 Finished goods inventories 1,102 936 Total inventories 2,796 2,470 Prepaid marketing costs 9,120 8,812 Held for trading investments 1,196 1,224 Total current assets 38,972 30,530 Plant and equipment, at cost 34,280 23,408 Less: Accumulated depreciation 19,010 15,100 Plant and equipment, net 15,270 8,308 Land 8,900 7,120 Equipment under finance lease, net 6672 0 Goodwill, net 19,740 23,120 Available for sale investments 13,080 12,450 Held to maturity bonds 8652 8,800 Equity method investments (Delphia Corp.) 24,100 22,080 Other assets ? 10,820 Total assets 141,022 123,228 Accounts payable for raw materials 1,968 1,740 Current taxes payable 244 210 Salaries payable 5,500 4,860 Unearned revenue 14,030 12,388 Warranty liabilities 2,434 1,714 Other current liabilities 5,680 4,076 Current portion of long term loan 1,000 1,000 Total current liabilities 30,856 25,988 Long term loan 12,000 13,000 Lease liability 6974 0 Deferred tax liabilities 5,580 5,320 Other long term operating liabilities ? 8,950 Share capital, at par €1 1,200 1,100 Share premium 26,020 26,020 Unrealized gains (losses) from AFS investments 380 250 Retained profits 50,600 43,100 Total equity 78,200 69,970 Total liabilities & owners’ equity 141,022 123,228 How much was prepaid in x2 for marketing costs? (4) A. 9,180 B. 9,120 C. None of the above D. 9,474 E. 9,166 During year x2, 13,500 of raw materials (RM) was used in production. Compute purchases of RM. A. 13,650 B. None of the above C. 13,350 D. 13,422 E. 13,878 Compute the…
Outsourcing Assignment. Accounting System Outsourcing of Information Systems
Requirements:
Describe what outsourcing is and why its importance is increasing. Refer to 2 refereed journal articles.
Explain the applications of outsourcing in accounting and their implications on the profitability and quality of information of a company.
Considering the outsourcing of information systems of a telephone company and a commercial bank in Australia, describe how outsourcing can expose those companies to potential risks arising from information security and privacy issues.
Explain what preventive controls you would suggest to reduce the information security and privacy issues explained in 3) above.
Presentation:
Write a report addressing the above requirements. Marks will also be provided for an executive summary, a conclusion, grammar and references.
Word limit: 3,500 words (approximately).
Marking guideline and assignment submission criteria
Requirements
Description and analysis
Allocated marks
1
Meaning and importance of outsourcing.
5
2
Applications of outsourcing in accounting and their implications on the profitability and quality of information of a company.
5
3
Outsourcing of information systems of a commercial bank and a telephone company in Australia and potential information security and privacy issues.
6
4
Preventive controls to reduce the information security and privacy issues explained in 3) above.
4
Presentation
Executive summary. Conclusion. Grammar and punctuation. References in appropriate style (both in text and in the list of references).
3 2 2 3
Total marks
20% of the course.
30
Word limit
3,500 words (approximately)
s and Assurance Outsourcing of Information Systems Requirements: Describe what outsourcing is and why its importance is increasing.
Chapter 22 Handout ProblemPLEASE READ THESE INSTRUCTIONS ENTIRELY BEFORE STARTING THE PROBLEMS IN EXCEL?For this handout, you need to include your own labels and PROPER formatting for your homeworkanswers. Treat this as a report you would submit to youremployer. That means it must be neat, organized, and well documented. You mustalso use formulas within Excel to compute the values requested. (You should do this each time, not just when I say so.)Part of your grade will be based on your use of Excel formulas and on proper formatting and labeling. If you don’t use formulas for ALLcomputations, I will deduct points.I don’t want to see any formula where you enter a value instead of a cell reference.(For example, if there is $100 in cell B6, then you would use B6 in the formula, not $100. ?Keep this in mind: satisfy the grader. That means, make sure the grader can tell where the answer is, what the answer is, and how you got your answer.(Don’tjust type the formula in excel I need you to showme what your formula is in words). Also, use accounting relationships in your labeling, not something you would see in an algebra book. Youare making accounting reports. Your report must communicate what is being done where one can see everything if it was printed.TEACH the material to the reader.?Remember, if an excel spreadsheet is printed we can no longer see how an answer is computed. That is why I am asking for labeled computations.Again, labeled computations means you include the words and numbers you used to compute your answer. For example if I was showinghow to compute net income, thiswould be the schedule I would make showing my labeled computations:(remember, DO NOT put labels (words) and values (numbers) in the same cell –formulas to add or subtract, etc. do not work if you do.Sales$100,000Less: Cost of Goods Sold60,000Gross profit$40,000Less operating expenses30,000Net income$10,000?When you are showing a computation where one number is dividedby another amount, remember what you did in math class_numerator=answerdenominatorexample: Total costs are $3,000 and there are 200 units . What is the cost per unit? This is how you write the computationsTotal costs$ 3,000 =$15.00 per unit# units200 DO NOT write “divided by” in your labelsor do notwrite division as follows:Total Costs $3,000 #units_____ 20cost per unit $15.00Does notshow division
?Before sending saving your answer, click the print preview button on toolbar (between the printer icon and the spell check icon). This will show you how your document prints. Make sure your answers for each problem appear on one pagewide. In other words, for problem #1, all answers should appear on one page, not two pages. What happens is if you change with width of columns, you can push things to the right so some of the answer appears onthe next page. Check for that AND THEN FIX IT.We can’t print documents where some of the data in one page and maybe just one column is on another page.Your homework excel file is workbook consisting of 5 worksheets. Each problem appears on its own worksheet. Click on the file tab to access a particular problem.Problem #1Boston Co. is considering the production and sale of a new product with the following sales and cost data: unit sales price, $32; unit variable costs, $24; total fixed costs, $64,000; and projected sales, $290,000.Required:(include labeledcomputations on the answer sheet for each requirement): REMEMBER, USE FORMULAS IN EXCEL TO COMPUTE YOUR ANSWER. I WILL BE LOOKING FOR THOSE FORMULAS.Use a data area and reference the cells in the formulas. I want to be able to change your data and have the formulas still work. This is what is done in a “what if” situation. We change parameters and see the results without having to start all over each time we change some data.Remember, we still express our percentages with one decimal placeA.UnitContribution MarginB.Contribution Margin Rate (%)C.Break even in UnitsD.Break even in DollarsE.Margin of safety in dollarsF.Margin of safety percentage Problem #2A company has total fixed costs of $240,000. Its product sells for $160per unit and variable costs amount to $112per unit. The company wishes to earn net income of $150,000. How many units must be sold to achieve this target income? (Include your labeled computations on the answer sheet)
During the first few weeks of the semester, each student will be assigned a public company for which he or she will complete an audit risk analysis project no two students will be assigned the same company. Each student will assume the role of an audit manager of a public accounting firm who has been asked by an audit partner to assess the acceptability of the given company as an audit client and to write a memo summarizing this assessment. This is an “open ended” assignment, which means that you can choose to structure your memorandum in any way you deem appropriate. However, at a minimum, your memorandum should cover the following points. 3. Somewhere within the memorandum you will need to discuss the apparent financial condition of the firm and highlight key financial ratios, such as, the current ratio, return on assets, inventory turnover, etc. In particular, you should bring to the partner’s attention the ratios and trends that may be indicative of the future prospects of the firm (good or bad). For instance, if the return on sales percentage has plummeted in recent years, that fact should probably be brought to the attention of the partner (and, of course, you should provide some explanation as to why this sharp downturn has occurred). Both cross sectional and longitudinal analyses will be appropriate. Additionally, tabular summaries and exhibits (graphs, pie charts, time series charts, etc.) will be useful means to present quantitative data regarding the firm. Feel free to use all reference sources available in the library or online, such as, Disclosure, Dun & Bradstreet, Moody’s, Robert Morris & Associates, Standard & Poor’s, Value Line, WSJ Index, etc., in preparing your memorandum. Those online sources that supply comparative industry data will be particularly helpful. For a discussion of other factors to consider when evaluating a potential client, refer to any undergraduate auditing text. Grading criteria: thoroughness, accuracy (in interpreting the given firm’s factual data), coherent structure, conciseness, the degree to which your conclusion is supported by your analysis, grammar, and neatness. Class Presentation and Discussion of Audit Risk Projects: During the final two weeks of the semester, each student will be required to make a 15 minute PowerPoint presentation regarding his or her audit risk project. This presentation should provide an overview of the numbered items identified above and/or other appropriate information. Students will turn in a copy of their type written memo to the instructor at the beginning of the class in which they discuss their audit risk project. In addition to the type written memo, students should provide the instructor with the file of information from which the financial data for their report was drawn (e.g., an annual report, peer group data, URLs, etc.,).
Complete the monthly cash budgets for the second quarter for 2010 using the following format. Note that the ending cash balance for June is provided as a check figure.
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Chapter 14 (Cost Planning) Problem 14.16 part A only (LO8) Cash budget – comprehensive. Following are the budgeted income statements for the second quarter of 2010 for Marine Tech, Inc.: ?April?May?June??Sales………………………..?$224,000?$272,000?$304,000??Cost of goods sold*……………? 153,600? 182,400? 201,600??Gross Profit…………………?$ 70,400?$ 89,600?$102,400??Operating Expenses**……..? 35,200? 40,000? 43,200??Operating income………….?$ 35,200?$ 49,600?$ 59,200??* Includes all product costs (i.e., direct materials, direct labor, and manufacturing overhead). ** Includes all period costs (i.e., selling, general, and administrative expenses). The company expects about 40% of sales to be cash transactions. Of sales on account, 65% are expected to be collected in the first month after the sale is made, and 35% are expected to be collected in the second month after sale. Depreciation, insurance, and property taxes represent $19,200 of the estimated monthly cost of goods sold and $12,800 of the estimated monthly operating expenses. The annual insurance premium is paid in January, and the annual property taxes are paid in August. Of the remainder of the cost of goods sold and operating expenses, 90% are expected to be paid in the month in which they are incurred, and the balance is expected to be paid in the following month. Current assets as of April 1, 2010, consist of $22,400 and accounts receivable of $239,680 ($168,000 from March credit sales and $71,680 from February credit sales). Current liabilities as of April 1, consist of $28,800 of accounts payable for product costs incurred in March: $7,360 of accrued liabilities for operating expenses incurred in March: and a $76,000 , 12%, 120 day note payable that is due on April 17, 2010. An estimated income tax payment of $72,000 will be made in May. The regular quarterly dividend of $25,600 is expected to be declared in May and paid in June. Capital expenditures amounting to $27,520 will be made in…
You are required to read the following statement issued by ICAA (Institute of Chartered Accountants in Australia and provide an essay of between 1,000 1,500 words (being the minimum and maximum). It should be properly referenced and must be primarily of your own work. Press release: Legislation to improve the quality and transparency of the auditing process has been introduced into the House of Representatives this week by Parliamentary Secretary to the Treasurer David Bradbury. The Corporations Legislation Amendment (Audit Enhancement) Bill 2012 is the result of a Treasury review of audit quality and extensive stakeholder consultation during 2011 on measures that are designed to enhance audit quality and ensure that Australia’s regulatory framework remains in line with international best practice.
Measures in the Bill include:
Requiring audit firms to publish an annual transparency report if they conduct audits of 10 or more significant entities
Empowering ASIC to issue an audit deficiency report in relation to an individual audit firm if it identifies an audit deficiency in the auditor’s quality control system or the conduct of an audit that may be detrimental to the overall quality of the audit
Removing duplication of ASIC and Financial Reporting Council (FRC) audit inspection responsibilities so that ASIC continues its audit inspection program and the FRC focuses on providing strategic policy advice and reports on the quality of Australian audits.
Allowing ASIC to communicate directly with an audited body.
Allowing a two year extension to the five year auditor rotation requirement where it will not give rise to a conflict of interest and will prevent the loss of knowledge and experience where rotation could undermine the quality of the audit.
ICAA report: Reforms to enhance Audit Quality
Available from: www.chartered accountants.co.au/industry Topics/Audit and Assurance
Other sources:
AUASB website
CPAA website
Required:
Discuss the following in your essay (approximately 1,000 words and no more than 1,500 please):
What each of the above actually refers to and what it means.
What is your view, giving a rational explanation to your view (you may use other sources to support your view, properly referencing). Why do you think that these measures were introduced?
The due date for this assignment will be week 6 (must be lodged by 5.00pm on the Friday). Please note: a soft copy must be lodged on Safeassign by the due date and a hard copy provided to your lecturer.
Advanced Management Accounting 6395 Case Study Assignment Case: East River Manufacturing Questions: 1. What factors led to the need for an ABC system at the Tube Shop? (Maximum 150 words) 5 Marks 2. How did advancement in information technology help the Tube Shop in implementing its ABC/ABM? Explain through providing an example from the case. (Maximum 150 words) 5 Marks 3. “An ABC system suffers from practical deficiencies. In theory, it should be possible to trace all overheads, but in practice it is quite likely that there will be some costs that cannot be traced”. Is the Tube Shop facing this limitation with its ABC system? Explain (Maximum 150 words) 5 Marks 4. Much empirical literature on the ABC/ABM implementation process provides evidence of extreme resistance from employees especially from affected managers. Critically evaluate the development and the implementation process of ABC in Tube Shop and explain why the Tube Shop did not face any resistance from its employees and managers? (Maximum 500 words) 15 Marks Note 1: While putting forward your arguments in answering Question 4, you are expected to provide empirical evidences through referring to research works published in peer reviewed academic journals. There are no restrictions on how many peer reviewed articles you should refer to. Your research skills will be assessed through how you use references appropriately rather than how many references you list in the assignment. Please be reminded that there is a world limit in answering this question though.
PepsiCo is one of the largest food and beverage companies in the world. It manufactures and sells eighteen brands of beverages and snack foods and generates over $98 billion in retail sales. PepsiCo encompasses the Pepsi Cola, Frito Lay, Tropicana, Quaker, and Gatorade brands and offers products in over 200 countries. It currently holds 36 percent of the total snack food market share in the U.S. and 25 percent of the market share of the refreshment beverage industry. The company’s headquarters are in New York and employs over 200,000 people. In 2006, Michael D. White became the CEO of PepsiCo International, and in 2007 Indra K. Nooyi became the CEO of PepsiCo. PepsiCo has received many awards and recognitions over the years, including being ranked in the top 25 of the best global brands, ranking number four overall by Diversity Inc, and earning the Green Award by the Environmental Protection Agency.
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Daniels Fund Ethics Initiative University of New Mexico http://danielsethics.mgt.unm.edu This material was developed by Kendra Berch, Kimberly Montoya, and Jennifer Sawayda under the direction of O.C. Ferrell and Linda Ferrell. It is provided for the Daniels Fund Ethics Initiative at the University of New Mexico and is intended for classroom discussion rather than to illustrate effective or ineffective handling of administrative, ethical, or legal decisions by management. Users of this material are prohibited from claiming this material as their own, emailing it to others, or placing it on the Internet. Please call O.C. Ferrell at 505 277 3468 for more information. (2010) PepsiCo’s Journey PepsiCo’s Journey PepsiCo’s Journey PepsiCo’s Journey PepsiCo’s Journey PepsiCo’s Journey PepsiCo’s Journey PepsiCo’s Journey PepsiCo’s Journey PepsiCo’s Journey PepsiCo’s Journey PepsiCo’s Journey PepsiCo’s Journey PepsiCo’s Journey PepsiCo’s Journey PepsiCo’s Journey PepsiCo’s Journey TowardTowardToward TowardToward an Ethical an Ethical an Ethical an Ethical an Ethical an Ethical an Ethical an Ethical an Ethical an Ethical an Ethical and Socially Responsible Cultureand Socially Responsible Cultureand Socially Responsible Cultureand Socially Responsible Cultureand Socially Responsible Cultureand Socially Responsible Cultureand Socially Responsible Cultureand Socially Responsible Cultureand Socially Responsible Cultureand Socially Responsible Cultureand Socially Responsible Culture and Socially Responsible Cultureand Socially Responsible Culture and Socially Responsible Cultureand Socially Responsible Cultureand Socially Responsible Cultureand Socially Responsible Cultureand Socially Responsible Cultureand Socially Responsible Cultureand Socially Responsible Cultureand Socially Responsible Cultureand Socially Responsible Cultureand Socially Responsible Cultureand Socially Responsible Cultureand Socially Responsible Cultureand Socially Responsible Cultureand Socially Responsible…
A. What entry will be made at 12/31/2010 if the company estimates it’s bad debts to be 3% of sales?
B. What entry will be made at 12/31/2010 if the company estimates its bad debts to be 4% of accounts receivable.
C. What entry will be required to be made if during 2011 the company writes off $5,000 for Michaels Smith account balance which is deemed uncollectible?
Exercise 21 2 Northwest Company produces two types of glass shelving, rounded edge and squared edge, on the same production line. For the current period, the company reports the following data. Rounded Edge Squared Edge Total Direct materials …………………………………………………….. $19,000 $ 43,200 $ 62,200 Direct Labor ………………………………………………………….. 12,200 23,800 36,000 Overhead (300% of direct labor cost) ……………………. 36,600 71,400 108,000 Total cost ………………………………………………………………. $67,000 $138,400 $206,200 Quantity produced ……………………………………………….. 10,500 ft 14,100 ft Average cost per ft. ………………………………………………. $ 6.46 $ 9.82 Northwest’s controller wishes to apply activity based costing (ABC) to allocate the $108,000 of overhead costs incurred by the two product lines to see whether cost per foot would change markedly from that reported above. She has collected the following information. Overhead Cost Category (Activity Cost Pool) Cost Supervision …………………………………………………………………………………. $ 5,400 Depreciation of machinery ………………………………………………………….. 56,600 Assembly line preparation …………………………………………………………… 46,000 Total overhead …………………………………………………………………………….. $108,000 She has also collected the following information about the cost drivers for each category (cost pool) and the amount of each driver used by the two product lines. Overhead Cost Category _________________Usage ______________ (Activity Cost Pool) Driver Rounded Edge Squared Edge Total Supervision………………………………… Direct labor cost($) $12,200 $23,800 $36,000 Depreciation of machinery ……….. Machine hours 500 hours 1500 hours 2,000 hours Assembly line preparation ………… Setups (number) 40 times 210 times 250 times Use this information to (1) assign these three overhead cost pools to each of the two products using ABC, (2) determine average cost per foot for each of the two products using ABC, and (3) compare the average cost per foot under ABC with the average cost per foot under the current method for each product. For part 3, explain why a difference between the two cost allocation methods exists. Excel is a powerful spreadsheet tool and a must in the work place. Therefore I assign an Excel problem in all classes. By this level, I expect you to conceptualize the problem needs & design a functional spreadsheet to handle those needs or any modifications. A one page sheet should work. Make it simple, but looking very professional. Complete Exercise 21 2 by using an Excel spreadsheet. Please design your spreadsheet so that I can easily follow your thoughts & computations. Use formulas for any mathematics. Set up tables with problem data so that you can use cell addresses in formulas. You do not need to submit a separate formula page as I can view your formulas when grading.
EXERCISE 3 1 Fixed and Variable Cost Behavior [L01] Espresso Express operates a number of espresso coffee stands in busy suburban malls. The fixed weekly tpense of a coffee stand is $1,200 and the variable cost per cup of coffee served is $0.22. %quired: L Fill in the following table with your estimates of total costs and cost per cup of coffee at the indicated levels of activity for a coffee stand. Round off the cost of a cup of coffee to the nearest tenth of a cent.
Cups of Coffee Served in a Week
2,000 2,100 2,200 Fixed cost ? ? ? Variable cost ? ? ? Total cost ? ? ? Average cost per cup of coffee served ? ?
Does the average cost per cup of coffee served increase, decrease, or remain the same as the number of cups of coffee served in a week increases? Explain.
EXERCISE 3 2 Scattergraph Analysis [102] Oki Products. Ltd., has observed the following processing costs at various levels of activity over the last 15 months:
Schubert, Mahler and Tull are resident Australian seamen employed on the fishing trawler
MV St Cecilia. Whilst on a routine fishing operation the captain of St Cecilia heard a radio message that SS Titan, an abandoned oil tanker about 20 nautical miles to the south was drifting towards the Australian coast. The vessel was badly holed, leaking oil and with present currents and tidal situations it was drifting towards a coral reef a short distance from a stretch of environmentally sensitive coastline. If the tanker wrecked on the reef the environmental and economic consequences would be enormous.
The captain sailed to the reported position of the stricken tanker. In the rough sea, the crew were unsuccessful in their attempt to attach a tow line. The captain then called for volunteers prepared to risk their lives in boarding the vessel and securing a tow line manually. Schubert and Mahler had previously worked on a salvage vessel and had some experience in operations of this type and they volunteered immediately. They displayed considerable bravery in swimming through rough seas, boarded the tanker and fixed a line. The heroic feat was recorded on video by Tull.
Once the line was secure, St Cecilia towed the tanker away from the coastline and it was subsequently salvaged by the tug, Resurrection.
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? The Business School BULAW 3731 INCOME TAXATION – Law & Practice Assignment Semester 1 2013 ?? INSTRUCTIONS See the Instructions and Assessment Criteria in the Course Description and make sure you follow them! Please answer all parts of the question Attached to this document is a Checklist to be filled in by you and attached to your essay/assignment. Read this now before you start your research. If you have followed this checklist, there is a good chance you will do well. All work presented for assessment in this course must comply with the format outlined in the University’s Presentation of Academic Work publication, available from the bookshop or on line at ? HYPERLINK “http://www.ballarat.edu.au/generalguide” ?www.ballarat.edu.au/generalguide?. All essays must be accompanied by a signed official cover sheet (‘Plagiarism Declaration Form’), available at www.ballarat.edu.au/ard/business/student_info_webct.shtml and lodged as appropriate for your campus. You MUST reference in the body of the essay every time you use information from other people. This requires you to keep a track of where you are taking information from and then writing the reference up. You should use the Harvard/APA style; and use the University’s new Presentation of Academic Work. The Library’s website also has a citation style guide site. If you plagiarise (intentionally OR unintentionally) you will be given zero: see Regulation 6.1.1 for more details. DUE DATE: Thursday, 16 May 2013. Please check with the Course Description for details of where and when to submit your assignment. If you need an extension you must ask for one BEFORE the due date (unless this is impossible). The assignment should not exceed approximately 2000 words. The assignment is worth 25%. Assignment Part 1 Schubert, Mahler and Tull are resident Australian seamen employed on the fishing trawler MV St Cecilia. Whilst on a routine fishing operation the captain of St Cecilia heard a radio…
Attached find word problems with calculations for 1a and b, not sure what numbers to plug in for ending inventory for c.
Should I plug in same ending inventory numbers as 1a?
If not, please help and what is benefit for selecting this particular option where the production units remain the same for each month 67,000 in this particular case….??
ExamName___________________________________MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.1)Sarbanes Oxley was passed in response to which of the following?1)A)The mounting government deficitB)The accounting scandals of WorldCom and EnronC)The stock market crash of 2002D)The savings and loan bailout2)Which is NOT a provision of Sarbanes Oxley?2)A)Those who commit securities fraud may be sentenced to 25 years in prison.B)Accounting firms are allowed to provide both audit services and a full range of consultingservices to their public company clients.C)Auditors of public companies are under the scrutiny of the Public Company AccountingOversight Board.D)Public companies must issue an internal control report evaluated by an outside auditor.3)Which of the following items will NOT appear on the book side of the reconciliation?3)A)The bank collected a note receivable of $1,000.B)A deposit was in transit.C)The bank charged a service fee of $20.D)A nonsufficient funds check of $75 was returned to the bank.4)A check was written by a business for $205, but recorded in the cash payments journal as $502.How would this error be included on the bank reconciliation?4)A)A deduction on the bank sideB)An addition on the book sideC)A deduction on the book sideD)An addition on the bank side5)A check of $75 deposited by a company was returned to the bank for nonsufficient funds. Howwould this information be included on the bank reconciliation?5)A)An addition on the bank sideB)A deduction on the bank sideC)A deduction on the book sideD)An addition on the book side6)Check Number 6135 for $576 was incorrectly entered as $657. Which adjustment needs to bemade?6)A)Decrease the book balance.B)Increase the bank statement balance.C)Decrease the bank statement balance.D)Increase the book balance.7)The following information is available for Matt’s Unlimited Company for the current month. Whatis the adjusted book balance on the bank reconciliation?Book balance end of the month$5,575Outstanding checks584Deposits in transit2,500Service charges75Interest revenue257)A)$5,500B)$7,466C)$5,550D)$5,5251
8)A company received a bank statement showing a balance of $62,300. Reconciling items wereoutstanding checks of $1,450 and a deposit in transit of $8,500. What is the company’s adjustedbank balance?8)A)$69,350B)$70,850C)$60,850D)$72,2509)A company received a bank statement with a balance of $5,350. Reconciling items included abookkeeper error of $200 (a $300 check recorded as $500), two outstanding checks totaling $720, aservice charge of $15, a deposit in transit of $180, and interest revenue of $21. What is the adjustedbank balance?9)A)$4,610B)$5,016C)$4,810D)$4,63610)Which of the following would be included in a journal to record an NSF check?10)A)A debit to Accounts payable and a credit to CashB)A debit to Miscellaneous expense and a credit to CashC)A debit to Cash and a credit to Accounts receivableD)A debit to Accounts receivable and a credit to Cash11)In reconciling a bank statement, the bank balance is $1,800 and the checkbook balance is $1,205.Which of the following is the MOST probable reason why the bank balance is larger than the bookbalance?11)A)A deposit in transit was made at the end of the month.B)There are outstanding checks.C)The bank has deducted certain amounts for bank service charges.D)The company erroneously recorded a check for an amount less than actual.12)The following information is available for Andersen Company for the month ending June 30, 2008.•Balance per the bank statement is $10,241.43.•Balance per books is $9,745.06.•Check #506 for $1,948.52 and check #510 for $1,800.25 were not shown on the June 30 bankstatement.•A deposit in transit of $5,113.40 had not been received by the bank when the bank statementwas generated.•A bank debit memo indicated an NSF check in the amount of $79 written by Bruce Garrett toAndersen Company on June 13.•A bank credit memo indicated a note collected by the bank of $1,900 and interest revenue of$75 on June 20.•The bank statement indicated service charges of $35 ExamName___________________________________MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.1)Sarbanes Oxley was passed in response to which of the following?1)A)The mounting government deficitB)The accounting scandals of WorldCom and EnronC)The stock market crash of 2002D)The savings and loan bailout2)Which is NOT a provision of Sarbanes Oxley?2)A)Those who commit securities fraud may be sentenced to 25 years in prison.B)Accounting firms are allowed to provide both audit services and a full range of consultingservices to their public company clients.C)Auditors of public companies are under the scrutiny of the Public Company AccountingOversight Board.D)Public companies must issue an internal control report evaluated by an outside auditor.3)Which of the following items will NOT appear on the book side of the reconciliation?3)A)The bank collected a note receivable of $1,000.B)A deposit was in transit.C)The bank charged a service fee of $20.D)A nonsufficient funds check of $75 was returned to the bank.4)A check was written by a business for $205, but recorded in the cash payments journal as $502.How would this error be included on the bank reconciliation?4)A)A deduction on the bank sideB)An addition on the book sideC)A deduction on the book sideD)An addition on the bank side5)A check of $75 deposited by a company was returned to the bank for nonsufficient funds. Howwould this information be included on the bank reconciliation?5)A)An addition on the bank sideB)A deduction on the bank sideC)A deduction on the book sideD)An addition on the book side6)Check Number 6135 for $576 was incorrectly entered as $657. Which adjustment needs to bemade?6)A)Decrease the book balance.B)Increase the bank statement balance.C)Decrease the bank statement balance.D)Increase the book balance.7)The following information is available for Matt’s Unlimited Company for the current month. Whatis the adjusted book balance on the bank reconciliation?Book balance end of the month$5,575Outstanding checks584Deposits in transit2,500Service charges75Interest revenue257)A)$5,500B)$7,466C)$5,550D)$5,5251 8)A company received a bank statement showing a balance of $62,300. Reconciling items wereoutstanding checks of $1,450 and a deposit in transit of $8,500. What is the company’s adjustedbank balance?8)A)$69,350B)$70,850C)$60,850D)$72,2509)A company received a bank statement with a balance of $5,350. Reconciling items included abookkeeper error of $200 (a $300 check recorded as $500), two outstanding checks totaling $720, aservice charge of $15, a deposit in transit of $180, and interest revenue of $21. What is the adjustedbank balance?9)A)$4,610B)$5,016C)$4,810D)$4,63610)Which of the following would be included in a journal to record an NSF check?10)A)A debit to Accounts payable and a credit to CashB)A debit to Miscellaneous expense and a credit to CashC)A debit to Cash and a credit to Accounts receivableD)A debit to Accounts receivable and a credit to Cash11)In reconciling a bank statement, the bank balance is $1,800 and the checkbook balance is $1,205.Which of the following is the MOST probable reason why the bank balance is larger than the bookbalance?11)A)A deposit in transit was made at the end of the month.B)There are outstanding checks.C)The bank has deducted certain amounts for bank service charges.D)The company erroneously recorded a check for an amount less than actual.12)The following information is available for Andersen Company for the month ending June 30, 2008.•Balance per the bank statement is $10,241.43.•Balance per books is $9,745.06.•Check #506 for $1,948.52 and check #510 for $1,800.25 were not shown on the June 30 bankstatement.•A deposit in transit of $5,113.40 had not been received by the bank when the bank statementwas generated.•A bank debit memo indicated an NSF check in the amount of $79 written by Bruce Garrett toAndersen Company on June 13.•A bank credit memo indicated a note collected by the bank of $1,900 and interest revenue of$75 on June 20.•The bank statement indicated service charges of $35.What is the adjusted book balance?12)A)$7,884.06B)$11,109.69C)$11,606.06D)$7,971.292 $11,606.06D)$7,971.292
ExamName___________________________________MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.1)Sarbanes Oxley was passed in response to which of the following?1)A)The mounting government deficitB)The accounting scandals of WorldCom and EnronC)The stock market crash of 2002D)The savings and loan bailout2)Which is NOT a provision of Sarbanes Oxley?2)A)Those who commit securities fraud may be sentenced to 25 years in prison.B)Accounting firms are allowed to provide both audit services and a full range of consultingservices to their public company clients.C)Auditors of public companies are under the scrutiny of the Public Company AccountingOversight Board.D)Public companies must issue an internal control report evaluated by an outside auditor.3)Which of the following items will NOT appear on the book side of the reconciliation?3)A)The bank collected a note receivable of $1,000.B)A deposit was in transit.C)The bank charged a service fee of $20.D)A nonsufficient funds check of $75 was returned to the bank.4)A check was written by a business for $205, but recorded in the cash payments journal as $502.How would this error be included on the bank reconciliation?4)A)A deduction on the bank sideB)An addition on the book sideC)A deduction on the book sideD)An addition on the bank side5)A check of $75 deposited by a company was returned to the bank for nonsufficient funds. Howwould this information be included on the bank reconciliation?5)A)An addition on the bank sideB)A deduction on the bank sideC)A deduction on the book sideD)An addition on the book side6)Check Number 6135 for $576 was incorrectly entered as $657. Which adjustment needs to bemade?6)A)Decrease the book balance.B)Increase the bank statement balance.C)Decrease the bank statement balance.D)Increase the book balance.7)The following information is available for Matt’s Unlimited Company for the current month. Whatis the adjusted book balance on the bank reconciliation?Book balance end of the month$5,575Outstanding checks584Deposits in transit2,500Service charges75Interest revenue257)A)$5,500B)$7,466C)$5,550D)$5,5251
8)A company received a bank statement showing a balance of $62,300. Reconciling items wereoutstanding checks of $1,450 and a deposit in transit of $8,500. What is the company’s adjustedbank balance?8)A)$69,350B)$70,850C)$60,850D)$72,2509)A company received a bank statement with a balance of $5,350. Reconciling items included abookkeeper error of $200 (a $300 check recorded as $500), two outstanding checks totaling $720, aservice charge of $15, a deposit in transit of $180, and interest revenue of $21. What is the adjustedbank balance?9)A)$4,610B)$5,016C)$4,810D)$4,63610)Which of the following would be included in a journal to record an NSF check?10)A)A debit to Accounts payable and a credit to CashB)A debit to Miscellaneous expense and a credit to CashC)A debit to Cash and a credit to Accounts receivableD)A debit to Accounts receivable and a credit to Cash11)In reconciling a bank statement, the bank balance is $1,800 and the checkbook balance is $1,205.Which of the following is the MOST probable reason why the bank balance is larger than the bookbalance?11)A)A deposit in transit was made at the end of the month.B)There are outstanding checks.C)The bank has deducted certain amounts for bank service charges.D)The company erroneously recorded a check for an amount less than actual.12)The following information is available for Andersen Company for the month ending June 30, 2008.•Balance per the bank statement is $10,241.43.•Balance per books is $9,745.06.•Check #506 for $1,948.52 and check #510 for $1,800.25 were not shown on the June 30 bankstatement.•A deposit in transit of $5,113.40 had not been received by the bank when the bank statementwas generated.•A bank debit memo indicated an NSF check in the amount of $79 written by Bruce Garrett toAndersen Company on June 13.•A bank credit memo indicated a note collected by the bank of $1,900 and interest revenue of$75 on June 20.•The bank statement indicated service charges of $35.What is the adjusted book balance?12)A)$7,884.06B)$11,109.69C)$11,606.06D)$7,971.292
Please refer to the file titled “CASE Harlan Fdn.pdf” to find the case (along with necessary exhibits). The file titled “Assignment Template.xls” is the template to enter the answers. The file titled
“Assignment Instructions.pdf” is the instructions for the assignment. This should be straight forward, if you have any questions PLEASE ASK before doing the work!
Come On In Manufacturing produces two types of entry doors: Deluxe and Standard. The assignment basis for support costs (indirect costs) has been direct labor dollars. For 2010, Come On In compiled the following data for the two products:
Standard Deluxe
Sales units 400,000 units 50,000 units
Sales price per unit $475.00 $650.00
Direct material and labor costs per unit $130.00 $180.00
Manufacturing support costs per unit $120.00 $80.00
Last year, Come On In Manufacturing purchased an expensive robotics system to allow for more decorative door products in the deluxe product line. The CFO suggested that an ABC analysis could be valuable to help evaluate a product mix and promotion strategy for the next sales campaign. She obtained the following ABC information (indirect cost activities) for 2010:
Required:
a. Using the current system, what is the estimated value for the following?
1. Total cost of manufacturing one unit for each type of door?
2. Profit per unit for each type of door?
b. Using the current system, estimated manufacturing overhead costs per unit are less for the deluxe door ($80 per unit) than the standard door ($120 per unit). What is a likely
explanation for this? Direct your response in terms of the current allocation base used and how the recently adopted robotics system is changing the past cost allocation system.
c. Is there any logic in the number of set ups per type of product? (The Standard Product has 100 setups while the Deluxe Product has 400 setups).
d. Using the activity based costing data presented above,
1. Compute the cost driver rate for each overhead activity.
2. Compute the revised manufacturing overhead cost per unit for each type of entry door.
3. Compute the revised total cost to manufacture one unit of each type of entry door.
e. Is the deluxe door as profitable as the original data estimated? Why or why not?
Problem #2
Best Products Company makes two products, Product A and Product B. They are both made of plastic and metal. Information for the two products for the month of April is given in the following tables
:
Best Products accounts for direct materials using a FIFO cost flow assumption.
Pet Luggage uses a FIFO cost flow assumption for finished goods inventory.
Best Products uses an activity based costing system and classifies overhead into three activity pools:
Setup, Processing and Inspection. Activity rates for these activities are $130 per setup hour, $5 per machine hour, and $20 per inspection hour, respectively. Other information follows:
Nonmanufacturing fixed costs for March equal $32,000. The only variable nonmanufacturing costs are sales commission, equal to 1% of sales revenue.
Required:
Prepare the following for April:
1. Revenues budget
2. Production budget in units
3. Direct material usage budget and direct material purchases budget
4. Direct manufacturing labor cost budget
5. Manufacturing overhead cost budgets for each of the three activities
6. Budgeted unit cost of ending finished goods inventory and ending inventories budget
7. Cost of goods sold budget
8. Budgeted income statement (ignore income taxes).
Problem #3
Wilson’s Winter Woolens manufactures jackets and other wool clothing. A certain designed ski parka requires the following:
Direct materials standard: 2 square yards at $13.50 per yard
Direct manufacturing labor standard: 1.5 hours at $20.00 per hour
During the third quarter, the company made 1,500 parkas and used 3,150 square yards of fabric costing $39,375. Direct labor totaled 2,100 hours for $45,150.
Required:
a. Compute the direct materials price and efficiency variances for the quarter.
b. Compute the direct manufacturing labor price and efficiency variances for the quarter.
Discussion Questions
1. What is ABC Costing and how can it make a difference in the way a company prices its products?
2. Discuss the cost hierarchy categories. Why do we categorize cost this way?
3. Discuss the importance of making a budget.
4. Discuss the reason for budgeting in multinational companies.
5. Discuss the different types of Standards that are considered when dealing with variances.
6. What is a Flexible Budget? How is it realized? What is its function in term of variances? What is a Static Budget?
7. Discuss the three variance levels. What is the purpose of having these levels?
8. Discuss what is the significance of a Variable Overhead Flexible Budget Variance of $10,500 U?
Juicers Inc produces multiple fruit juices for the Caribbean market. You have been given responsibility forall planning and budgeting. The next operational planning meeting is two weeks away and they would likea master budget prepared for the next three months on the planning horizon. The accounting department hasprovided the following information.The company has a requirement that minimum cash balance of $40,000 each month. The juices are sold at$8 per liter. Recent forecast sales in units are as follows:January (actual) 80,000 June 240,000February (actual) 96,000 July 160,000March (actual) 112,000 August 144,000April 140,000 September 128,000May 180,000The large build up in sales before and up to the month of June is in preparation for the annual carnival.Ending inventories are supposed to be 80% of the next month sales in units. The juices cost $ 5. per unit toproduce.Purchases are paid for as follows, 50% in the month of purchase and the remaining 50% in the followingmonth. All sales are on credit with no discounts. The cash from the collection of sales is as follows, 25% iscollected in the month of sale, 50% one month later and the remaining 25% is collected 2 months after sale.The other operating expenses are as follows:VariableSales commissions $1 per juiceFixedSalaries and wages $88,000Utilities 56,000Insurance expired 4,800Depreciation 6,000Miscellaneous 12,000All operating expenses are paid in the month in cash except depreciation and insurance expired. Land ispurchased in May for $100,000. The company pays dividends the first month of each quarter of $48,000which were declared in the last month of the previous quarter. The unaudited balance sheet at the end of thelast quarter which ended March 31st 2012 is shown below.2AssetsCash $ 56,000Accounts receivable ($192,000 of February sales,$672,000 of March sales)864,000Inventory (126,000 units) 630,000Unexpired Insurance 57,600Fixed Assets (net of depreciation) 690,800Total Assets $2,298,400Liabilities and Stockholders’ EquityAccounts payable purchases 343,000Dividend payable 48,000Capital stock 1,200,000Retained Earnings 707,400Total Liabilities and Stockers’ equity $2,298,400The company can borrow money at 12% per annum interest rate. All borrowings must be at the beginningof the month and all repayments occur at the end of the month. Borrowing and repayment of principal mustbe in increments of $1,000.Prepare a master budget for the three months period ended June 30th 2012, including the following detailedbudgets:1. a) Sales budget by month and in totalb) A schedule of expected sales collection from sales and accounts receivable by month and intotalc) A purchases budget in units and in dollars. Show the budget by month and in total.d) A schedule of budgeted cash disbursement for purchases by month and in total.2. A cash budget. Show the budget by month and in total.3. A budgeted income statement for the three month period ended June 30th 2012. Use thecontribution margin format.4. A budgeted balance sheet as at June 30th 2012.
Plant wide overhead rate using direct labour hours:
Overhead Rate (formula) =
= $_______ per direct labor hour
Total manufacturing cost per unit for Job 110:
_________________________ $_______________
_________________________ ________________
_________________________ ________________
_________________________ ________________
Total Cost $_________________
Total cost/unit = ________________ = $__________ per unit
Plant wide Overhead Rate:
Using Machine Hrs (formula) =
= $_______ per machine hour
Overhead Rate:
Department A (formula) =
= $_______ per machine hour
Department B (formula) =
= $_______ per machine hour
Total manufacturing cost per unit for Job 110:
_________________________ $_______________
_________________________ ________________
_________________________ ________________
_________________________ ________________
_________________________ ________________
_________________________ ________________
Total Cost $_________________
Total cost/unit = ________________ = $__________ per unit
COMPREHENSIVE PROBLEM 5 THE GILSTER COMPANY (continued)
Bid price for Job 110 (plant wide rate):
Bid price for Job 110 (separate overhead rates):
The bids differ due to the differences in manufacturing overhead that are applied to the job using the two allocation methods. The overhead differences are due to
The allocation scheme employed in part b. would be recommended because the departmental overhead is due mostly to machine related expenses and the use of multiple overhead rates allows for allocation that more closely resembles the use of resources.
Department A ($______ x _________ machine hrs.) ________________
Department B ($______ x _________ machine hrs.) ________________
Total overhead applied $_________________
Under or over applied overhead:
Actual overhead was $_____________ ($_____________ + ____________ + _____________), so the amount over or under applied was $_____________ (_____________ _____________).
Effect of overhead proration vs. assignment to cost of goods sold:
Correcting the application by reducing cost of goods sold would increase net income for the current year by more than would have resulted if the correction was prorated between cost of goods sold and inventories.
COMPREHENSIVE PROBLEM 5
THE GILSTER COMPANY (concluded)
Incremental analysis:
The cost per unit calculated in part b ($______/unit) is more or less than the contractors price of $8 per unit. Assuming the capacity would be otherwise idle and not produce any other revenue, Glister would be better off _____________________________________________________________________________________________________________________________________________.
The incremental cost of buying the parts from the subcontractor would be:
$___________ ($______ x ___________units) which is more or less than the incremental profit earned by producing the other job.
Thus, total profits would increase or decrease by $___________ ($_________ $_________) if the subcontractor is used to produce the parts for Job 110 and Glister uses its _______________ _______________to produce the other job.
g. and h. are not required – the suggested solutions are completed below for your information.
Environmental considerations for Mexico:
As discussed in Chapter 15, legal/political, economic, cultural, and technological environmental categories affect international operations. In the economic category an important issue is exchange rate transaction risk, which would in part be determined by whether the contracts are denominated in U.S. dollars or Mexican pesos. In the legal/political category issues include NAFTA regulations and the general risk undertaken by doing business in a politically less stable environment. The impact of import duties and possibly higher shipping costs on profits should be considered. Finally, the skill level of the labor force in terms of producing a high quality product would also be a consideration.
Changes needed to use target costing:
To successfully implement target costing, Gilster would need to adopt a more customer oriented approach. The marketing department would need to determine what prices customers would be willing to pay for Gilster’s products. Including the entire value chain in the target costing process is required. In addition, target returns would need to be determined so that target costs could be calculated.
The category that is generally considered to be the best measure of a company’s ability to continue as a going concern is
cash flows from financing activities.
cash flows from operating activities.
usually different from year to year.
cash flows from investing activities.
Multiple Choice Question 59
Harden Corporation engaged in the following transaction. Assume that the Harden Corporation uses the indirect method to depict cash flows. Indicate where, if at all, long term debt retired with cash would be classified on the statement of cash flows.
Does not represent a cash flow.
Operating activities section.
Financing activities section.
Investing activities section.
Multiple Choice Question 60
Harden Corporation engaged in the following transaction. Assume that the Harden Corporation uses the indirect method to depict cash flows. Indicate where, if at all, interest paid on note would be classified on the statement of cash flows.
Financing activities section.
Does not represent a cash flow.
Operating activities section.
Investing activities section.
Multiple Choice Question 62
Harden Corporation engaged in the following transaction. Assume that the Harden Corporation uses the indirect method to depict cash flows. Indicate where, if at all, dividends received on securities held would be classified on the statement of cash flows.
Financing activities section.
Investing activities section.
Does not represent a cash flow.
Operating activities section.
Multiple Choice Question 63
Harden Corporation engaged in the following transaction. Assume that the Harden Corporation uses the indirect method to depict cash flows. Indicate where, if at all, income taxes paid would be classified on the statement of cash flows.
Investing activities section.
Does not represent a cash flow.
Financing activities section.
Operating activities section.
Multiple Choice Question 64
Harden Corporation engaged in the following transaction. Assume that the Harden Corporation uses the indirect method to depict cash flows. Indicate where, if at all, common stock issued for cash would be classified.
Operating activities section.
Does not represent a cash flow.
Investing activities section.
Financing activities section.
Multiple Choice Question 65
Harden Corporation engaged in the following transaction. Assume that the Harden Corporation uses the indirect method to depict cash flows. Indicate where, if at all, land purchased for cash would be classified on the statement of cash flows.
Financing activities section.
Does not represent a cash flow.
Operating activities section.
Investing activities section.
Multiple Choice Question 67
Harden Corporation engaged in the following transaction. Assume that the Harden Corporation uses the indirect method to depict cash flows. Indicate where, if at all, treasury stock purchased with cash would be classified on the statement of cash flows.
Investing activities section.
Operating activities section.
Financing activities section.
Does not represent a cash flow.
Multiple Choice Question 74
On the statement of cash flows, the cash flows from operating activities section would include
receipts from the sale of investments.
receipts from the issuance of capital stock.
payments for the acquisition of investments.
cash receipts from sales activities.
Multiple Choice Question 95
Which of the following is not typically a characteristic experienced by a company during the introductory phase of the corporate life cycle?
Cash from financing is positive.
Considerable cash will be used to purchase productive assets.
Cash used in operations will exceed cash generated by operations.
Cash from investing is positive.
Multiple Choice Question 96
Which of the following is not typically a characteristic experienced by a company during the growth phase of the corporate life cycle?
Cash from operations on the statements of cash flows will be less than net income on the income statement.
Cash from investing is positive.
Collections on accounts receivable will lag behind sales.
Cash from financing is positive.
Multiple Choice Question 101
If accounts receivable have increased during the period
revenues on an accrual basis are the same as revenues on a cash basis.
expenses on an accrual basis are greater than expenses on a cash basis.
revenues on an accrual basis are less than revenues on a cash basis.
revenues on an accrual basis are greater than revenues on a cash basis.
Multiple Choice Question 105
If accounts payable have increased during a period
revenues on an accrual basis are less than revenues on a cash basis.
expenses on an accrual basis are greater than expenses on a cash basis.
expenses on an accrual basis are less than expenses on a cash basis.
expenses on an accrual basis are the same as expenses on a cash basis.
Multiple Choice Question 107
In calculating cash flows from operating activities using the indirect method, a gain on the sale of equipment is
ignored because it does not affect cash.
not reported on a statement of cash flows.
deducted from net income.
added to net income.
Multiple Choice Question 114
In calculating net cash provided by operating activities using the indirect method, an increase in prepaid expenses during a period is
ignored because it does not affect expenses.
added to net income.
ignored because it does not affect income.
deducted from net income.
Multiple Choice Question 119
Which of the following would not be an adjustment to net income using the indirect method?
Depreciation Expense.
An increase in Land.
An increase in Prepaid Insurance.
Amortization Expense.
Multiple Choice Question 124
Using the indirect method, if equipment is sold at a gain, the
amount of the gain is deducted in the operating activities section.
sale proceeds received are deducted in the operating activities section.
sale proceeds received are added in the operating activities section.
amount of the gain is added in the operating activities section.
Multiple Choice Question 169
The cost of goods sold during the year was $275,000. Merchandise inventory decreased by $10,000 during the year and accounts payable decreased by $5,000 during the year. Using the direct method of reporting cash flows from operating activities, cash payments for merchandise total
$260,000.
$290,000.
$280,000.
$270,000.
Multiple Choice Question 172
Geary Company had credit sales of $1,400,000. The beginning accounts receivable balance was $80,000 and the ending accounts receivable balance was $280,000. Using the direct method of reporting cash flows from operating activities, what were the cash collections from customers during the period?
$1,480,000.
$1,400,000.
$1,200,000.
$1,600,000
Multiple Choice Question 175
Cash receipts from customers are greater than sales revenues when there is a(n)
Stein Frydenberg runs a taxable business. In the end of March 20×2 he starts to end the financial statements/accounting for 20×1. The trial balance of the accounts receivable in the balance sheet the 31 December 20×1 is 250 000 NOK including 25% VAT. The account receivables are stated at the nominal value and has the following composition:
Poor Payer AS 62 500 NOK
Air Castle AS 93 750 NOK
Per Olsen (12 500) NOK
Other receivables/claims 106 250 NOK
Total = 250 000 NOK
Frydenberg has provided the following information on the individual posts:
Poor Payer AS has payment problems. Stein Frydenberg expects Poor Payer AS will only pay 50% of the outstanding claim. The rest of the claim is uncertain and must be set aside as an expected requirement/demand.
Air Castle AS is bankrupt, the claim must be considered a confirmed loss.
The account of Per Olsen has a credit balance. The amount on the account is incorrect and concerns a payment of a previously written off receivable.
By prior experienceses Stein Frydenberg reckon some expected losses on the other receivables. 8000 NOK will be allocated to cover the expected losses in these receivables. The amount is calculated exclusive of VAT cage.
Question:
Make an evaluation of the account receivables in the financial statements per 31 December 20×1. How will the account receivables be recorded in the balance sheet per 31 December 20×1?
26.2
A company has on the 1 st of jult 20×1 recorded two long term loans/mortgages in the local commercial bank. One of the loans is in Norwegian kroner (NOK) and the other in foreign currency (euro). The covenants of the loan in NOK are the following;
Loan disbursed 600 000 NOK
Term loan with a maturity 4 years
Subsequent rate 8%
With a term loan the annual payments are equal. The interests and installments on the loan in NOK are to be paid annually on the 30 th of June, the first time June 30th 20×2.
The loan in foreign currency (euro) is recorded on the 31 st of December 20×1 and was the amount of 10 000 euros. The loan is free of interest and installment and is to be fully paid with maturity on the 31 st of December 20×5. The exchange rate was the following;
31.12.20×1 1 euro = 10 NOK
31.12.20×2 1 euro = 8 NOK
31.12.20×3 1 euro = 9 NOK
31.12.20×4 1 euro = 11 NOK
31.12.20×5 1 euro = 10 NOK
Question:
How would you manage the loans in the financial statements? Show your presentation in the income statement and balance sheet for the years 20×1 20×5.
26.6
Age Paulsen is the owner of the enterprise Paulsen Finance Service. The preliminary trial balance per 31 st of December 20×1 is displays the following:
Debit
Credit
Car Shares (unlisted) Prepaid rent Bank Deposits Capital Account Paulsen Private account Paulsen Loans in the bank Accrued “holiday payment” Accrued unpaid interests Revenue Sales shares Salary “Holiday payment” Employer fee Rent Various expenses Interest income Interest expense
The accruals at the end of the period is not included in the preliminary balance. An analysis of the individual accounts show the following:
1. The car was bought for 300 000 NOK. The economic life was the acquisition estimated to 5 years, while the residual value at the end of life was estimated to 50 000 NOK. The car is written off by use of a linear balance method.
2. The rent is 11 000 NOK per month and must be paid one month in advance.
3. The company has during the year acquired 200 listed shares for a total of 40 000 NOK. Later, 120 of them sold for 23 600 NOK. The sale price is recognized fully. The share price is per 31 st of December 20×1 220 kroner per share. The shares shall be valued in accordance with market principles.
4. The bank deposit has, according to the statement from the bank at the 31 st of December 20×1 a trial balance of 290 000 NOK. The accrued interests for December 20×1 are not recognized.
5. Interest and installment on the loan in the bank are payable in arrears on the 30 th of June every year. The interest rate is currently 9% per year.
6. The employer fee and “holiday payment” for the 6 th forward are not recorded. Holiday payment is calculated at a rate of 12% and employer fee at a rate of 14.1%.
Question:
Finalize the statements/accounting per 31 st of December 20×1 using the information above. The finalization is conducted in a tabular layout with columns for preliminary trial balance per 31 st of December 20×1, closing entries, income statement for 20×1 and balance sheet per 31 st of December 20×1.
You have been given the following information for Ethan Company as of June 1, 2010. Ethan Company purchased a parcel of land and then incurred specific costs for the construction of a new building. Below is a list of these costs:
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14000 9000 13000 650000 10000 5000 1500 9500 2000 2000 200000 5000 1900000 1725000 2800000 4000000 2000000 2000000 8000000 12625000 4600000 4225000 19300000 24575000 CSCUDGINGTON_APPLYING PROPER ASSET VALUATION_12APR2013 1725000 4000000 12625000 18350000 2000000 4225000 12125000 14000000 12125000 1875000 4/25/2010 2 1725000 4000000 12625000 1875000 2000000 4225000 14000000 Cost of Parking Lot and gates Cost of driveway Interest on the construction loan Cost of the building construction Cost of filling the building site Property Taxes for Jan 1,2010 to June 1, 2010 Proceeds from the sale of salvage materials Cost of razing building on lot Legal Fees to buy land Title Insurance Purchase price of land Cost of grading the lot Problem 1 1. Using Excel, determine the accounts that are affected by the above transactions and the final balance of each account. (Note: The interest on the construction loan will be applied to the cost of the land.) 2. Please prepare your solution in an Excel file. Problem 2 Accounts Book Value Fair Value Accounts Receivables Inventories Accounts Payable Property, Plant and Equipment Bonds Payable 1. Using Excel, prepare the journal entry to record the acquisition by Bullseye Company. 2. Submit your solution in same Excel file as for Problem 1. On April 25, 2010, Bullseye Company purchased all of the outstanding common stock of Vista Company, paying $14,000,000. The book values and fair values of Vista’s assets and liabilities acquired are shown below in dollar amounts: You have been given the following information for Ethan Company as of June 1, 2010. Ethan Company purchased a parcel of land and then incurred specific costs for the construction of a new building. Below is a list of these costs: Accounts receivables Property, Plant & Equipment Total fair value of gross assets Less: Liabilities Accounts payable Bonds payable Fair value of net assets Net Asset…
Complete all questions below. All workings, when appropriate, must be shown to substantiate your answers.
Question 1 [20 marks]
On 1 July 20×2, Tien Ltd purchased all of the issued shares of Chai Ltd for $150,000. At acquisition date, the shareholders’ equity of Chai Ltd consisted of share capital and retained earnings of $120,000 and $30,000 respectively.
At 30 June 20×4, two years after acquisition, the accounts of the two companies appear as follows:
Tien Ltd Chai Ltd $ $ Sales 250,000 110,000 Cost of sales: Opening inventory 1 July 20×3 23,000 9,000 Purchases 135,000 47,000 158,000 56,000 Closing inventory 30 June 20×4 25,000 10,000 133,000 46,000 Gross profit 117,000 64,000 Depreciation expenses 25,000 15,000 Rent expenses 4,000 Other expenses 42,000 30,000 Total expenses 67,000 49,000 50,000 15,000 Other income Profit on sale of equipment 7,000 Rent revenue 4,000 Total other income 11,000 Operating profit before tax 61,000 15,000 Income tax expense 19,000 5,000 Operating profit after tax 42,000 10,000 Retained earnings 1 July 20×3 30,000 35,000 Available for appropriation 72,000 45,000 Dividends paid 35,000 Retained earnings 30 June 20×4 37,000 45,000 Share capital 300,000 120,000 Creditors and borrowings 35,000 15,000 Other liabilities 60,000 5,000 432,000 185,000
Page 2 of 6
Assets Cash at bank 3,000 2,000 Accounts receivable 35,000 30,000 Inventory 25,000 10,000 Investment in Chai Ltd 150,000 Equipment 115,000 70,000 Accumulated depreciation (60,000) (21,000) Land and buildings (net) 144,000 79,000 Other assets 20,000 15,000 432,000 185,000
Additional information:
(a) The identifiable net assets of Chai Ltd were recorded at fair value at the date of acquisition.
(b) During the financial year, Chai Ltd paid rent of $4,000 to Tien Ltd.
(c) The opening stock of Chai Ltd includes unrealised profit of $2,000 on inventory transferred from Tien Ltd during the prior financial year. This entire inventory was sold by Chai Ltd to parties external to the group during the current financial year.
(d) Tien Ltd sold inventory to Chai Ltd for $15,000 during the year. This inventory had an original cost to Tien Ltd of $10,000. One half of this inventory was sold to external entities by Chai Ltd during the year.
(e) An item of equipment owned by Tien Ltd and originally acquired on 1 July 20×2 (cost of $30,000 and accumulated depreciation of $6,000) was sold to Chai Ltd for $25,000 on 1 July 20×3. Tien Ltd depreciated this asset at 20% per annum straight line on original cost. On acquiring the asset, Chai Ltd assessed that the equipment had a remaining economic life of four years and therefore has applied a 25% depreciation rate (straight line) from the date of transfer of the asset.
(f) The tax rate is 30%.
Required:
1. Prepare an acquisition analysis and the consolidation journal entries necessary to prepare consolidated accounts for the year ending 30 June 20×4 for the group comprising Tien Ltd and Chai Ltd.
2. Complete a detailed consolidation worksheet for the year ending 30 June 20×4.
Note: show all necessary workings, narrations are not required.
[adapted from: Dagwell, R., Wines, G. & Lambert, C. (2012). Corporate accounting in Australia: Pearson Australia]
Page 3 of 6
Question 2 [10 marks]
Puay Ltd has a 75% interest in Chye Ltd, which it acquired on 1 July 20×2. At 30 June 20×3, Puay Ltd had inventory of $80,000 which had been purchased from Chye Ltd at a profit of $15,000. The following transactions relate to the year ended 30 June 20×4:
(a) Chye Ltd sold inventory to Puay Ltd for $250,000. The inventory had cost Chye Ltd $200,000. Puay Ltd has this entire inventory on hand at year end.
(b) Puay Ltd sold inventory to Chye Ltd for $80,000. The inventory had cost Puay Ltd $55,000. Chye Ltd has half of this inventory on hand at year end.
(c) The operating profit after tax of Puay Ltd is $900,000 and for Chye Ltd is $800,000.
(d) The company tax rate is 30%. The directors have applied the impairment test of goodwill annually and determined that a write down of $10,000 is required for consolidation purposes as at 30 June 20×4.
Required:
Calculate the NCI in Chye Ltd’s operating profit after tax and Puay Ltd’s share of consolidated profit after tax for the year to 30 June 20×4.
[adapted from: Dagwell, R., Wines, G. & Lambert, C. (2012). Corporate accounting in Australia: Pearson Australia]
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QUESTION 3 [20 marks] Extracts from the statement of comprehensive income and consolidated statement of changes in equity of the Huihui Ltd Group for the year ended 30 June 2012 and its two most recent statements of financial position are set out below:
Huihui Ltd Group Consolidated statement of comprehensive income for the year ended 30 June 2012 $000 Revenues Sales revenue 26,500 Profit from sale of plant and equipment 50 26,550 Expenses from ordinary activities Cost of sales (19,500) Depreciation expense (850) Goodwill impairment (50) Bad debts (20) Other operating expenses (2,530) Profit before income tax 3,600 Income tax expense (2,700) Profit for the period 900 Non controlling interest 100 Parent interest 800
Huihui Ltd Group Consolidated statements of financial position as at 30 June 2012 2011 Assets $000 $000 Cash and cash equivalents 4,100 4,800 Trade receivables 4,300 4,900 Inventories 4,350 3,000 Property, plant and equipment 24,750 19,000 Less: Accumulated depreciation (5,400) (4,700) Goodwill 940 33,040 27,000 Current liabilities Trade and other payables 8,400 7,500 Income tax payable 2,700 1,500 Shareholders’ equity Issued share capital Parent equity interest 13,000 12,000 Non controlling interest 2,240 Retained profits Parent equity interest 5,800 6,000 Non controlling interest 900 33,040 27,000
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Huihui Ltd Group Statement of changes in equity for the year ended 30 June 2012 Issued capital Retained earnings Total PI NCI CFS $’000 $’000 $’000 $’000 $’000 Balance as at 1 July 2011 12,000 6,000 18,000 18,000 Share of retained earnings of new subsidiary* 1,000 1,000 Proceeds of share issue 1,000 1,000 2,240 3,240 Total comprehensive income for the year 800 800 100 900 Dividends paid (1,000) (1,000) (200) (1,200) Balance as at 30 June 2012 13,000 5,800 18,800 3,140 21,940
*includes NCI in acquired retained profits of Liu Ltd, i.e. 40% x $2.5m.
Additional information
(a) On 31 December 2011, Huihui Ltd acquired a 60% interest in Liu Ltd. Details of the acquisition are as follows:
$’000 Fair value of subsidiary net assets at date of acquisition Issued capital 6,000 Retained earnings at 31 December 2011 2,500 8,500 Represented by Cash and cash equivalents 3,700 Trade receivables 2,300 Property, plant and equipment 5,100 Trade and other payables (3,000) 8,100 Cost of acquisition – cash purchase price 5,850 Share of subsidiary net assets acquired at fair value (60%) (4,860) Goodwill on acquisition 990
(b) During the year to 30 June 2012, items of plant and equipment with a carrying amount of $350,000 (accumulated depreciation of $150,000) were sold for a total of $400,000.
Required:
Prepare the consolidated statement of cash flows of the Huihui Ltd group for the year ended 30 June 2012 in accordance with AASB107, using the direct method. Include a note that reconciles profit with cash flows from operating activities. Show all workings.
[Adapted from: Arthur, N., Luff, L, & Keet, P. (2012). Accounting for Corporate Combinations and Associations (7th ed.). Pearson Australia, NSW]
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Question 4 [10 marks]
On 1 July 20×1, Ren Ltd acquired a 30% interest in Wei Ltd at a cost of $120,000. The shareholders’ equity of Wei Ltd at the above date was:
$ Share capital – 160,000 ordinary shares of $1 fully paid 160,000 Retained earnings 80,000
All the identifiable net assets of Wei Ltd were recorded at fair value. Summarised information on profit and loss and appropriations of Wei Ltd as at 30 June 20×3 appears below: $ Operating profit before income tax 2,840,000 Income tax expense (1,360,000) Operating profit after income tax 1,480,000 Retained earnings at 1 July 20×2 128,000 1,608,000 Dividends paid (400,000) Retained earnings at 30 June 20×3 1,208,000
The directors have applied the impairment test and determined that a write down of $4,800 is required as at 30 June 20×3.
Additional information:
(a) The shareholders’ equity of Wei Ltd at 30 June 20×3 was:
$ Share capital 160,000 Revaluation surplus 240,000 Retained earnings 1,208,000
(b) At 30 June 20×3, Wei Ltd held inventory costing $200,000, which has been purchased from Ren Ltd. A profit of $80,000 before tax has been made on the sale.
(c) The tax rate is 30%.
Required: Assuming Ren Ltd does not prepare consolidated financial statements, prepare the journal entry in the books of Ren Ltd for the year ended 30 June 20×3 to equity account its investment in Wei Ltd.
[adapted from: Dagwell, R., Wines, G. & Lambert, C. (2012). Corporate accounting in Australia: Pearson Australia]
The cash budget was covered during Week 4 when we covered TCO D and you read Chapter 7. There is also a practice case study to work on. Your Professor will provide the solution to the practice case study at the end of Week 5. This case study should be uploaded by 11:59PM Mountain time of the Sunday ending Week 6 to the Week 6 Assignment Dropbox. You are encouraged to use the Excel template file provided in Doc Sharing.
The LBJ Company has budgeted sales revenues as follows:
April May June
Credit sales $94,000 $89,500 $75,000
Cash sales 48,000 75,000 57,000
Total sales $142,000 $164,500 $132,000
Past experience indicates that 30% of the credit sales will be collected in the month of sale and the remaining 70% will be collected in the following month.
Purchases of inventory are all on credit and 40% is paid in the month of purchase and 60% in the month following purchase. Budgeted inventory purchases are $195,000 in April, $135,000 in May, and $63,000 in June.
Other budgeted cash receipts: (a) sale of plant assets for $33,000 in May, and (b) sale of new common stock for $50,000 in June. Other budgeted cash disbursements: (a) operating expenses of $15,000 each month, (b) selling and administrative expenses of $10,150 each month, (c) purchase of equipment for $35,000 cash in May, and (d) dividends of $20,000 will be paid in June.
The company has a cash balance of $20,000 at the beginning of May and wishes to maintain a minimum cash balance of $20,000 at the end of each month. An open line of credit is available at the bank and carries an annual interest rate of 10%. Assume that all borrowing is done on the first day of the month in which financing is needed and that all repayments are made on the last day of the month in which excess cash is available. Also assume that there is no outstanding financing as of May 1.
Requirements:
1. Use this information to prepare a Cash Budget for the months of May and June, using the template provided in Doc Sharing.
2. What are the three sections of a Cash Budget, and what is included in each section?
3. Why is a Cash Budget so vital to a company?
4. What are the five basic principles of cash management that a company can follow in order to improve its chances of having adequate cash?
Grading Rubric for Cash Budget Case Study
Category
Points
%
Description
Documentation & Formatting
6
10%
Case Study Worksheet will be done in Excel and will contain formulas to receive maximum credit.
Organization & Cohesiveness
6
10%
A quality solution will include the content properly organized in accordance with the instructions provided. The cash budgets will be complete and the analysis will be consistent with the cash budgets presented.
Editing
6
10%
Quality work will be free of any mathematical, spelling, punctuation, or grammatical errors. Sentences and paragraphs (where appropriate)will be clear, concise, and factually correct.
Content
42
70%
A quality project will have all required work completed and will be correct.
Total
60
100%
A quality projectwill meet or exceed all of the requirements.
I have several questions that I would like assistance with regarding McDonalds and 10 K information. Please quote a price. Thanks.
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McDonalds 10K Questions Duchene Burch Using the following website I needs some help answering the questions. http://quote.morningstar.com/stock filing/Annual Report/2012/12/31/t.aspx?t=XNYS:MCD&ft=10 K&d=aa98bb6ce93b56156a6ebbd4d961c9a1 Cannot plagiarize so citations are needed. Review the balance sheet and income statement of your company. Answer questions below. Stockholder’s Equity what type of stock does your company issue (par value, no par, etc.)? Does it issue Preferred Stock? Does it hold any Treasury Stock? Dividends does your company pay dividends? If so, please comment. Liabilities does your company have any long term liabilities? If so, please comment. Investments does your company invest in other companies? If so, please comment. Regarding capital vs. operating leases and liabilities that do not appear on the balance sheet but only show up in the notes to financial statements. How much and when is the money due? Does McDonalds report any contingent liabilities in the notes to the financial statements? A contingent liability is something that may or may not occur such as a loss on a lawsuit. Search the terms “contingent liabilities” and “capital lease” in the SEC 10K Report. What inventory system does McDonalds use? You will likely find this information in the notes to the financial statements. Start with the first Financial Statement Note. You can also search for the word inventory. ? Regarding accounts receivable for McDonalds. Who owes the company money? What is the nature of the receivable (coupon payments, vendor rebates, or customer purchases are examples of the nature of the receivable)? Does the SEC 10 K disclose information on doubtful accounts? The balance sheet presentation shows the accounts receivable ‘net of allowance’ and the notes to the financial statement will provide details on these values. 3. What do we learn from reviewing the Income Statement for the SEC 10 K…
Comparative financial statements for Heritage Antiquing Services for the fiscal year ending December 31 appear on the following pa, The company did not issue any new common or preferred stock during the year. A total of 700 thousand shares of common stock were outstanding. The interest rate on the bond payable was 10,, the income tax rate was 40,, and the dividend per share of common stock was $0.75. The market value of the company’s common stock at the end of the year was $21. All of the company’s sales are on account.
Question #1 What is the total after tax annual cost of a machine producing bolts with a first cost of $45,000 and operating and maintenance costs of $0.22 per unit per day? It will be sold for $4,500 at the end of five years. Production volumes are 750 units per day. 250 days per year. The CCA rate is 30%, the after tax MARR is 20%. And the corporate income tax in 2012 is 40%. (Consider the Canadian Taxation System for your calculations. The formulation of the CTF and CSF factors is provided in chapter 8.8.3 and example 8.7 of the textbook.)
Question #2 An investment alternative in a project requires a capital cost of $102 millions completed at time zero. The investment will produce a stream of revenue of $50 millions per year over a 6 year period with operating cost of $20 millions per year. General inflation is 5% and the rate of taxation is 40%. Assume an individual project basis for taxation in which the capital expenditure can be fully depreciated over the duration of the project on a straight line base Calculate : (i) The annual after tax cash flows in a table after taking into account both taxation and inflation effects (in real/ constant dollars): (ii) The pay back period – based on annual after tax cash flows. You do not need to calculate the PW values
Question #3 A plant is considering the replacement of a piece of equipment in its materials handling system with a new piece. If the company’s cost of capital is 10%. Should the present asset be kept or replaced ?. state your recommendation. { TIP: calculate the EAC (Equivalent annual cost) of each of the two options } the following data are provided: Present asset Present salvage value : $10.000 Economic life : 1 Year Next Year’s operating and maintenance costs: $51,000 Salvage value in one year: $5,000 Replacement alternative Capital cost: $200.000 Economic Life: 8 years Operating and maintenance costs: Years 1 2: $15,000 per year Years 3 4: $20,000 per year Years 5 6: $25,000 per year Years 7 8: $30,000 per year Salvage value in 8 years : 25,000 Note: all calculations are approximated to the nearest $100 Option A= keep the old piece of equipment for one more year Option B= buy the new piece and sell the old piece of equipment
Question #4 A forecasted increase in metal prices has encouraged the ABC Resource Company to consider the expansion of the capacity in one of its mine operations in Northern Ontario. For this purpose, the following after –tax cash flow estimates have been made: Existing capacity: positive after tax annual cash flows of $12.5 millions over the remaining 10 year mine life. Expanded Capacity: $ 21.5 million capital expenditure now ( time 0 ), followed by positive annual cash flows of $20 million over the remaining & year mine life. (I) Determine the distribution of after tax cash flows, as well as the rate of return associated with the consider investment for expanding the production capacity. (II) If the company’s cost of capital is 30% and it is considering selling the mine. What should its minimum acceptable selling price be? What capacity option did you choose (existing or expanded) and why ? (III) What would your choice be (existing or expanded capacity if the ABC Resources company’s cost of capital is 20%?) Explain your answer.
Question #5 An industrial drill costs $60.000 to purchase and $10,000 to install seven years ago. The market value now is $33.000 and this will decline by 12% of current value each year for the next 3 years. Operating and maintenance costs are estimated to be $3400 this year, and are expected to increase by $500 per year. How much should the EAC (Equivalent annual cost) of a new drill be over its economic life to justify replacing the old one sometime in the next three years? The MARR is 10%
Question #6 (i) Describe the difference between the balance sheet and the income statement in financial statements of companies. (ii) Give two examples of intangible assets and two examples of fixed assets (iii) Which of the following represents a liability: (a) inventory (b) accounts payable (c) Retained earnings (d) accounts receivable (e) all of the above
1. List and discuss briefly the three standards of accountability
2. Discuss how establishing standards benefits the following management functions: Performance evaluation and decision making.
3. Explain the source of variable overhead spending and efficiency variances and how these variances are computed.
4. What role does the budgeting activity play in managerial compensation and performance evaluation?
5. Why will there frequently be a difference between the budgeted cost of material in the material purchases budget and the budgeted cash disbursement for material in the cash budget?
6. Garfield Company
Garfield Company applies overhead based on direct labor hours and has the following available for the current month:
Standard:
Direct labor hours per unit 5
Variable overhead per DLH $.75
Fixed overhead per DLH
(based on 8,900 DLHs) $1.90
Actual:
Units produced 1,800
Direct labor hours 8,900
Variable overhead $6,400
Fixed overhead $17,500
1. Refer to Garfield Company. Compute all the appropriate variances using the three variance approach.
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1. List and discuss briefly the three standards of accountability 2. Discuss how establishing standards benefits the following management functions: Performance evaluation and decision making. 3. Explain the source of variable overhead spending and efficiency variances and how these variances are computed. 4. What role does the budgeting activity play in managerial compensation and performance evaluation? 5. Why will there frequently be a difference between the budgeted cost of material in the material purchases budget and the budgeted cash disbursement for material in the cash budget? 6. Garfield Company Garfield Company applies overhead based on direct labor hours and has the following available for the current month: Standard: Direct labor hours per unit 5 Variable overhead per DLH $.75 Fixed overhead per DLH (based on 8,900 DLHs) $1.90 Actual: Units produced 1,800 Direct labor hours 8,900 Variable overhead $6,400 Fixed overhead $17,500 1. Refer to Garfield Company. Compute all the appropriate variances using the three variance approach.??????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????
1. List and discuss briefly the three standards of accountability
2. Discuss how establishing standards benefits the following management functions: Performance evaluation and decision making.
3. Explain the source of variable overhead spending and efficiency variances and how these variances are computed.
4. What role does the budgeting activity play in managerial compensation and performance evaluation?
5. Why will there frequently be a difference between the budgeted cost of material in the material purchases budget and the budgeted cash disbursement for material in the cash budget?
6. Garfield Company
Garfield Company applies overhead based on direct labor hours and has the following available for the current month:
Standard:
Direct labor hours per unit 5
Variable overhead per DLH $.75
Fixed overhead per DLH
(based on 8,900 DLHs) $1.90
Actual:
Units produced 1,800
Direct labor hours 8,900
Variable overhead $6,400
Fixed overhead $17,500
1. Refer to Garfield Company. Compute all the appropriate variances using the three variance approach.
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1. List and discuss briefly the three standards of accountability 2. Discuss how establishing standards benefits the following management functions: Performance evaluation and decision making. 3. Explain the source of variable overhead spending and efficiency variances and how these variances are computed. 4. What role does the budgeting activity play in managerial compensation and performance evaluation? 5. Why will there frequently be a difference between the budgeted cost of material in the material purchases budget and the budgeted cash disbursement for material in the cash budget? 6. Garfield Company Garfield Company applies overhead based on direct labor hours and has the following available for the current month: Standard:?Direct labor hours per unit 5?Variable overhead per DLH $.75?Fixed overhead per DLH? (based on 8,900 DLHs) $1.90 Actual:?Units produced 1,800?Direct labor hours 8,900?Variable overhead $6,400?Fixed overhead $17,500 1. Refer to Garfield Company. Compute all the appropriate variances using the three variance approach.
Executives in the multibillion dollar toy industry constantly search for the next big “hit,” a magical toy that will trigger a nationwide frenzy among youngsters compa rable to the mania sparked in recent decades by the Cabbage Patch Kids and Tickle Me Elmo. In more “ancient” times, the Silly Putty, the Slinky, and the Hoola Hoop prompted shouting matches and elbow to elbow combat among small armies of short tempered parents intent on acquiring the latest must have and hard to find toy as a birthday gift or Christmas present for little Suzie or tiny Tommy. During the mid 1990s, the popular television program that featured the Mighty Morphin Power Rangers produced a windfall of revenues and profits for Happi ness Express, Inc., a small New York—based company. Happiness Express had purchased licensing rights that allowed the company to market a wide range of Mighty Morphin Power Rangers toys and other merchandise. Unfortunately, simi lar to most toy fads, the Power Rangers craze soon subsided. To find a replace ment source of revenue for his company, Joseph Sutton, Happiness Express’s chief executive officer (CEO), turned to a member of the British royal family, Sarah Ferguson, the Duchess of York. Following her divorce from Prince Andrew, the second son of Queen Elizabeth II, the Duchess decided to try her hand at writing children’s books. Among the char acters she created was Budgie the Little Helicopter. Joseph Sutton acquired U.S. licensing rights for toys and other merchandise featuring Budgie. Sutton believed that Budgie would be a huge hit in the United States and generate large sales of toys and related merchandise linked to him and his small squadron of friends. In announc ing his company’s relationship with Sarah Ferguson, the ever optimistic and buoyant Sutton proclaimed that “Happiness is proud to represent Budgie the Little Helicopter and to help him make his flight to America.”1
“In Kids We Trust” Joseph Sutton and his older brother, Isaac, worked for years as sales representatives for various toy manufacturers. In 1989, the two brothers organized their own toy com pany, which they named Happiness Express, Inc. Joseph assumed the title of CEO, while his brother became the company’s chief operating officer (COO). Despite an initial investment of only $10,000, the Sutton brothers’ company quickly gained a toe hold in the fiercely competitive toy industry. Happiness Express catapulted from a few hundred thousand dollars of sales in its first year of operation to total revenues of more than 540 million for its fiscal year ended March 31, 1994. The Suttons’ business model involved identifying trendy characters introduced to children in the United States by television programs, major movies, books, and other publications. The brothers then purchased merchandise licensing rights for those characters from Disney, Nickelodeon, Universal Studios, Warner Brothers, and major publishing companies. Licensed merchandise manufactured by Happiness Express included plastic figurines, stuffed dolls, shoelaces, battery operated toothbrushes,
1. Business Wire (online), “Happiness Express Gets Product License for Her Royal Highness the Duchess of York’s ‘Budgie the Little Helicopter,— 14 February 1994.
Your task here is to assume the role of external auditor for the entity you chose for Task 2.
Explain and support your preliminary judgement about planning materiality for the entity you chose for Task 2. You are expected to come up with four different a dollar amounts – determined by using each of the Bases shown in the left hand column of the Table below and the % range specified in your text and then explaining which of the four amounts you believe to be most relevant to your chosen entity and their current operating environment.
We will be sure to illustrate this process using the Lakeside Company case as an example in one of the class sessions prior to the due date.
Completing the Tables below documents the support for your preliminary judgement; discussing why you chose your selected base amount and the impact of any qualitative factors on increasing or decreasing your selected amount.
Quantitative Considerations
(Planning) materiality is relative and so you need to choose an appropriate base. This base will vary depending on the nature of the client’s business and the focus of users when they make their economic decisions. Typical bases and percentages applied to the bases range from 0.5% up to 10% are listed in your text and ASA320 (noted above). Show the bases you evaluate and the % applied in the Table below – explain your choice of percentages AND briefly explain which base you believe is most appropriate in the bottom row of the Table (your explanation will wrap automatically).
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Assessment Task 3(c) Requirements and Template. Adapted from Exhibit 2 3, Lakeside Case 12th edition (2012). Your task here is to assume the role of external auditor for the entity you chose for Task 2. Explain and support your preliminary judgement about planning materiality for the entity you chose for Task 2. You are expected to come up with four different a dollar amounts – determined by using each of the Bases shown in the left hand column of the Table below and the % range specified in your text and then explaining which of the four amounts you believe to be most relevant to your chosen entity and their current operating environment. We will be sure to illustrate this process using the Lakeside Company case as an example in one of the class sessions prior to the due date. Completing the Tables below documents the support for your preliminary judgement; discussing why you chose your selected base amount and the impact of any qualitative factors on increasing or decreasing your selected amount. Quantitative Considerations (Planning) materiality is relative and so you need to choose an appropriate base. This base will vary depending on the nature of the client’s business and the focus of users when they make their economic decisions. Typical bases and percentages applied to the bases range from 0.5% up to 10% are listed in your text and ASA320 (noted above). Show the bases you evaluate and the % applied in the Table below – explain your choice of percentages AND briefly explain which base you believe is most appropriate in the bottom row of the Table (your explanation will wrap automatically). ? Base?$ amount?% range?$ range (% x $)?? ? Profit before tax????? ? Net revenue (sales)????? ? Total Assets????? ? Equity????? ? Explanation of your choices >>??? Qualitative Considerations Users may rank some misstatements more important than others. List any relevant qualitative factors from your chosen entity and indicate in the Table below how each impacts on the…
I have created the template…I just needs the answered filled in
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0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Helvetica,Bold” 2 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Arial,Bold” 2 Cyber Web Services Hire a New Designer for the Work to Ky To Outsourcing Cost to buy graphic design work Cost to do graphic design work in house Direct professional labor Service overhead Opportunity costs † ** per design hour design hours. Difference Incremental Analysis in Favor of Totals Company Outsourcing Decision Outsource * Total costs × Chapter 10, E 4. Management Analysis: Please do not input data in these cells Please input data only in these cells Less projected unit cost Target unit cost Production decision calculations: Production decision discussed 3. = + Projected total unit cost ) x ( Marketing Delivery Production and assembly Engineering * ) Materials handling Activity based costs hours Assembly labor Manufacturing labor Purchased parts cost Direct materials cost Projected unit cost of AutoDrill computed 2. ¸ Target cost = Target cost computed 1. Chapter 12, E 13 Chapter 10: Page 418 Exercise 4: Outsourcing Decision Chapter 12: Page 502 Exercise 13: Target Costing and Pricing Book: Ebook: WWW. Coursesmart.com Log in: lizabailey1212@gmail.com Password:juicy2012 * ** † ????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????
A) Your task here is to assume the role of external auditor
Explain and support your preliminary judgement about planning materiality for the entity you chose for Task 2. You are expected to come up with four different a dollar amounts – determined by using each of the Bases shown in the left hand column of the Table below and the % range specified in your text and then explaining which of the four amounts you believe to be most relevant to your chosen entity and their current operating environment.
We will be sure to illustrate this process using the Lakeside Company case as an example in one of the class sessions prior to the due date.
Completing the Tables below documents the support for your preliminary judgement; discussing why you chose your selected base amount and the impact of any qualitative factors on increasing or decreasing your selected amount.
Quantitative Considerations
(Planning) materiality is relative and so you need to choose an appropriate base. This base will vary depending on the nature of the client’s business and the focus of users when they make their economic decisions. Typical bases and percentages applied to the bases range from 0.5% up to 10% are listed in your text and ASA320 (noted above). Show the bases you evaluate and the % applied in the Table below – explain your choice of percentages AND briefly explain which base you believe is most appropriate in the bottom row of the Table (your explanation will wrap automatically).
Base
$ amount
% range
$ range (% x $)
Profit before tax
$A 457.10million
Net revenue (sales)
$A 2,029.70million
Total Assets
$A 14,533.90million
Equity
$A 8,227.40million
Explanation of your choices >>
Qualitative Considerations
Users may rank some misstatements more important than others. List any relevant qualitative factors from your chosen entity and indicate in the Table below how each impacts on the quantitative level of materiality you have justified in the Table above – make sure you check and apply the relationship between the materiality level and evidence (Hint: review section 4.2.2 of your text). One example is included as an illustration.
Items to be considered
Impact (increase or decrease) on materiality
e.g. New client in a new industry for A&C
e.g. Decrease materiality … increase evidence
Explain which of the items you consider to have the most impact >>
Preliminary Judgement about materiality
Combining the qualitative and quantitative considerations what is your judgement of the amount for the overall planning materiality level (in $) for STOCKLAND? Briefly explain how you combined the two considerations. (If the qualitative factors persuade you to “increase”/”decrease” the level of materiality you need to exercise your judgement by indicating by how much ($) and provide a brief explanation (justification/reasons).
Add your response here:
$
Brief Explanation of combination (below)
B) You have learned that ASA 315 stipulates analytical procedures be used as risk assessment procedures, while ASA 520 stipulates their use as substantive procedures. The standards also discuss the nature and purpose, extent of reliance on analytical procedures and subsequent investigation of unusual items identified.
Using the financial report/statements of the entity you chose for STOCKLAND:
identify and briefly explain three (3) ways you could use analytical procedures as risk assessment procedures,(5 marks)and
identify and briefly explain three (3) ways you could use analytical procedures assubstantive procedures during the audit.(5 marks)
This requires you to use the material from your chosen entity to illustrate the application of ASA 315 and ASA 520 in the application of Analytical Procedures to the audit process you have been learning about in the unit.You are being asked to provide examples to support your explanation.
On January 1 2013, Poulter Company Issues ten year 5100 000 5 percent note% at a once ot %t Interest is paid semi annually on June 30 and December 31 Required:
A) Prepare the following Journal entries in the lournal below 1 Provide the journal entry to record the issuance of the bonds on January 1, 2013. 2 Provide the journal entry to recognize the interest expense on June 30. 2013 using straight line amortization 3 Give the journal entry to record the repayment of the loan principal on December 31, 2022 8) What is the stated interest rate? Do the investors in this bond require a rate oi return greater than or less than the stated rate? Explain.
C) What is the value of the liability as of December 31.2013 (After the second interest payment date)?
The Carlquist Company makes and sells a product called Product K. Each unit of Product K sells for $40 dollars and has a unit variable cost of $34. The company has budgeted the following data for November:
‘
Sales of $1,267,200, all in cash.
‘
A cash balance on November 1 of $46,000.
‘
Cash disbursements (other than interest) during November of $1,276,400.
‘
A minimum cash balance on November 30 of $109,000.
If necessary, the company will borrow cash from a bank. The borrowing will be in multiples of $1,000 and will bear interest at 2% per month. All borrowing will take place at the beginning of the month. The November interest will be paid in cash during November.
The amount of cash needed to be borrowed on November 1 to cover all cash disbursements and to obtain the desired November 30 cash balance is:
Carr Company produces a single product. During the past year, Carr manufactured 30,030 units and sold 24,700 units. Production costs for the year were as follows:
Fixed manufacturing overhead
$420,420
Variable manufacturing overhead
$237,237
Direct labor
$126,126
Direct materials
$243,243
Sales totaled $1,272,050, variable selling expenses totaled $133,380, and fixed selling and administrative expenses totaled $195,195. There were no units in beginning inventory. Assume that direct labor is a variable cost.
The contribution margin per unit would be: (Do not round intermediate calculations.)
“I don’t understand this cost report at all,” exclaimed Jeff Mahoney, the newly appointed administrator of County Hospital. “Our administrative costs in the new pediatrics clinic are all over the map. One month the report shows $7,000 and the next month it shows $13,900. What’s going on?
Mahoney’s question was posed to Megan, the hospital’s director of cost management. “The main problem is that the clinic is experienced widely fluctuating patient loads during its first year. There appears to be confusion on the part of parents about what services we offer, when it’s appropriate to come to the clinic vs. the emergency room? That sort of thing. As the patient load varied we had to change our administrative staff frequently resulting in fluctuating costs.”
Mahoney asked Megan to pull some data together so that we can see how the cost behaves over a range of patient loads.
Here is the data:
Month
Patient Load
Administrative Cost
January
400
$6,000
February
500
$7,000
March
1,400
$13,900
April
900
$9,200
May
1,300
$11,900
June
1,000
$10,000
July
700
$9,400
August
300
$4,100
September
1,100
$10,200
October
1,500
$16,100
November
600
$8,300
December
1,200
$11,100
Megan does not believe the first year’s widely fluctuating patient load will be experienced in the upcoming year. She has estimated that the clinic’s relevant range of monthly activity in the future will be 600 to 1,200 patients.
Required:
1. 1.Draw a scatter graph of the clinic’s administrative costs for the year.
2. 2.Visually fit a curvilinear cost line to your plotted data.
3. 3.Mark the expected relevant range on the plot
4. 4.Visually fit a cost line to approximate the clinic’s estimated costs within the expected relevant range.
5. 5. Estimate the fixed and variable cost components within the relevant range.
6. 6.Express the estimate in #6 above as a mathematical equation.
7. 7. Use your equation to predict costs when there are a) 750 patients and b) 300 patients.
8. 8.Repeat items 5, 6 and 7 using the High Low Method.
9. 9. Repeat items 5, 6 and 7 using the Least Squares regression method, including a R2 value for your regression.
10. Write a memo to Jeff Mahoney comparing the cost estimates using the three different methods. Make a recommendation as to which method you would use and why. Make sure you address any limitations of the three models. Also make a recommendation as to how to improve cost estimation in the second year of operation based on modifications to the Least Squares Regression Model and the High Low Method.
Thank you in advance! Ive been working on this forever and cannot figure it our and please show work. Answers will not help me understand the problem without where they come from!!! THANK YOU THANK YOU
The cash account for Fit Bike Co. at August 1, 2014, indicated a balance of $12,190. During August, the total cash deposited was $28,100 and checks written totaled $33,010. Thebank statement indicated a balance of $12,550 on August 31. Comparing the bank statement, the canceled checks, and the accompanying memos with the records revealed the following reconciling items:
Checks outstanding totaled $7,440.
A deposit of $2,880, representing receipts of August 31, had been made too late to appear on the bank statement.
The bank had collected for Fit Bike Co. $2,080 on a note left for collection. The face of the note was $2,000.
A check for $580 returned with the statement had been incorrectly charged by the bank as $850.
A check for $640 returned with the statement had been recorded by Fit Bike Co. as $460. The check was for the payment of an obligation to Brown Co. on account.
Bank service charges for August amounted to $20.
A check for $900 from Murdock Co. was returned by the bank due to insufficient funds.
Cheng Furniture Company refinishes and reupholsters furniture. Cheng Furniture uses a job order cost system. When a prospective customer asks for a price quote on a job, the estimated cost data are inserted on an unnumberedjob cost sheet. If the offer is accepted, a number is assigned to the job, and the costs incurred are recorded in the usual manner on the job cost sheet. After the job is completed, reasons for the variances between the estimated and actual costs are noted on the sheet. The data are then available to management in evaluating the efficiency of operations and in preparing quotes on future jobs. On September 3, 2014, an estimate of $3,050 for reupholstering a sofa and loveseat was given to John Jobs. The estimate was based on the following data:
On September 6, the sofa and loveseat were picked up from the residence of John Jobs, 220 Apple Lane, Cupertino, CA, with a commitment to return it on October 31. The job was completed on October 28.
The relatedmaterials requisitions andtime tickets are summarized as follows:
Required:
Enter amounts as positive numbers.
1. Complete that portion of the job order cost sheet that would be prepared when the estimate is given to the customer.
2. Record the costs incurred, and complete the job order cost sheet.
JOB ORDER COST SHEET
Customer
John Jobs
Date
Sept. 3, 2014
Address
220 Apple Lane
Date wanted
Oct. 31, 2014
Cupertino, CA
Date completed
Oct. 28, 2014
Item
Reupholster sofa and loveseat
Job. No.
ESTIMATE
Direct Materials
Direct Labor
Summary
Amount
Amount
Amount
40 meters at $25
30 hours at $30
Direct Materials
Direct Labor
Factory Overhead
Total
Total
Total cost
ACTUAL
Direct Materials
Direct Labor
Summary
Mat. Req. No.
Description
Amount
Time Ticket No.
Description
Amount
Item
Amount
508
18 Meters at $ 25
H40
14 Hours at $ 30
Direct Materials
Direct Labor
510
25 Meters at $ 25
H43
20 Hours at $ 30
Factory Overhead
Total
Total
Total Cost
What is the best explanation for the variances between actual costs and estimated costs. (For this purpose, assume that three meters of materials were spoiled, the factory overhead rate has been proved to be satisfactory, and an inexperienced employee performed the work.)
The direct materials cost exceeded the estimate by $75 because 3 meters of materials were spoiled. The direct labor cost exceeded the estimate by $120 because an additional 4 hours of labor were used by an inexperienced employee.
Management didn’t provide enough direction to complete tasks on budget.
The direct materials cost exceeded the estimate by $75 because 3 meters of materials were spoiled.
The direct labor cost exceeded the estimate by $120 because an additional 4 hours of labor were used by an inexperienced employee.
C.J.’s Cookie Company produces chocolate chip cookies. Raw materials inventory includes a mix consisting of flour, sugar and chocolate chips at a standard cost of $5.00 per pound. C.J. Uses 1/20 of a pound of raw materials per cookie. C.J’s anticipates quarterly sales for the first 3 quarters of 2012 as follows:
Budgeted Sales, 1st quarter 2012………300,000 cookies
Budgeted Sales, 2nd quarter 2012……..400,000 cookies
Budgeted sales, 3rd quarter 2012………250,000 cookies
*materials needed for quarter 3 ………..16,250 lbs
Beginning finished goods inventory is 90,000 cookies. Beginning raw materials inventory is 6,000 pounds. Target raw materials is 40% of next quarter’s materials needs. Target finished goods inventory is 30% of next quarter’s sales.
Required:
Prepare a production budget and a direct materials budget of C.J’s Cookie Company for the first 2 quarters of 2012.
Clemente Co. owned all of the voting common stock of Snider Co. On January 2, 2011, Clemente sold some equipment to Snider for $125,000. The equipment had a cost of $140,000. At the time of the sale, the balance in accumulated depreciation was $40,000. The equipment had a remaining useful life of five years and a $0 salvage value. Straight line depreciation is used by both Clement and Snider. At what amount should the equipment (net of any depreciation) be included on the consolidated balance sheet dated 12/31/2011?
Most Company has an opportunity to invest in one of two new projects. Project Y requires a $305,000 investment for new machinery with a six year life and no salvage value. Project Z requires a $305,000 investment for new machinery with a five year life and no salvage value. The two projects yield the following predicted annual results. The company uses straight line depreciation, and cash flows occur evenly throughout each year.
Project Y
Project Z
Sales
$
385,000
$
325,000
Expenses
Direct materials
53,900
40,625
Direct labor
77,000
48,750
Overhead including depreciation
138,600
146,250
Selling and administrative expenses
28,000
29,000
Total expenses
297,500
264,625
Pretax income
87,500
60,375
Income taxes (32%)
28,000
19,320
Net income
$
59,500
$
41,055
1. Compute each project’s annual expected net cash flows.
Project Y | Project Z
Net Income: |
Depreciation Expense: |
Expected Net Cash Flows: |
2. Determine each project’s payback period.
“Numerator”/”Demominator” = Payback Period
Project Y / =
Project Z / =
3. Compute each project’s accounting rate of return.
“Numerator”/”Demominator” = Accounting Rate of Return
Project Y / =
Project Z / =
4.Determine each project’s net present value using 10% as the discount rate. Assume that cash flows occur at each year end.
Project Y
Chart values are based on: n= i=
Select Chart Amount X Table Factor = Present Value
Net Present Value =
Project Z
Chart values are based on: n= i=
Select Chart Amount X Table Factor = Present Value
If the sales volume decreases by 25%, the variable cost per unit increases by 15%, and all other factors remain the same, net operating income will: (Do not round intermediate calculations.)
A company purchases a delivery van by paying $8,500 cash and by signing a $28,500 note payable. Which of the following correctly describes the recording of the delivery van purchase?
Cash is debited for $8,500.
The delivery van account is debited for $28,500.
Notes payable is debited for $28,500.
The delivery van account is debited for $37,000.
Cadet Company paid an accounts payable of $1,500. This transaction should be recorded as follows on the payment date.
Cash
1,500
Cost of goods sold
1,500
Notes payable
1,500
Cash
1,500
Cash
1,500
Accounts payable
1,500
Accounts payable
1,500
Cash
1,500
Which of the following journal entries is correct when a business entity purchases land costing $48,000 by signing a one year note payable?
Comparative Statements of Retained Earnings for Renn Dever Corporation were reported as follows for the fiscal years ending December 31, 2011, 2012, and 2013.
2011 2012 2013
Balance at beginning of year
$
6878292
$
5532052
$
5644552
Net income (loss)
3,310,700
2,260,900
(112,500)
Deductions:
Stock dividend (34,900 shares)
244,000
Common shares retired, September 30 (110,000 shares)
214,660
Common stock cash dividends
891,950
700,000
0
Balance at end of year
$
9,053,042
$
6,878,292
$
5,532,052
Compute Renn Dever%u2019s earnings per share as it would have appeared in income statements for the years ended December 31, 2011, 2012, and 2013. (Round your answers to 2 decimal places.)
Complete the attached worksheet for 2011 for Green Company, given the following information, then prepare an income statement, statement of ownerAf?cA????1A????1s equity, and balance sheet:
Physical count of inventory on hand on December 31
Please complete the following for the communications company “CenturyLink” in an Excel spreadsheet:
1. Horizontal and vertical analysis of the Income Statements for the past three years (all yearly balances set as a percentage of total revenues for that year).
2. Horizontal and vertical analysis of the Balance Sheets for the past three years (all yearly balances set as a percentage of total assets for that year).
3. Ratio analysis (eight ratios of your choosing) for the past three years PLUS a measurement for the creditworthiness of your firm as measured by Altman’s Z score. Note that if you used your chosen firm for our ratio related discussion posts, then you MUST also present industry average ratios or current year competitor ratios for your ratio analysis. Comparing your firm’s ratios to a close competitor or an industry average ratio makes your analysis much more meaningful.
For a business that makes advance provision for uncollectible receivables
(a)
Journalize the entries to record the following:
(1)
Record the adjusting entry at December 31, the end of the fiscal year, to provide for doubtful accounts. The accounts receivable account has a balance of $800,000, and the contra asset account before adjustment has a debit balance of $600. Analysis of the receivables indicates doubtful accounts of $20,000.
(2)
In March of the following fiscal year, the $550 owed by Flake Co. on account is written off as uncollectible.
(3)
Eight months later, $200 of the Flake Co. account is reinstated and payment of that amount is received.
(4)
In October, $400 is received on the $600 owed by Doe Co. and the remainder is written off as uncollectible.
(b)
Based on the data in (a) (1) above, what is the net realizable value of the accounts receivable as reported on the balance sheet as of December 31?
(c)
Assuming that the business had been following the direct write off procedure in accounting for uncollectible receivables, journalize the entries to record the following:
(1)
Recorded the write off of account of Flake Co. [(a) (2) above].
(2)
Reinstated account of Flake Co. for $200 and recorded payment of that amount received [(a) (3) above].
(3)
Recorded the receipt of $400 from Doe Co. in (a) (4) above and wrote off the remainder owed as uncollectible.
Jane Whitfield, a sole proprietor, established the JW Flower Shop on January 2, 2010. The following transactions have occurred during the month of January:
Jan. 5. Jane deposited $ 15,000 in her business checking account. This is her initial investment in the business.
Jan. 7. Jane purchased flower grooming equipment for $4,500. She paid $2,000 as a down payment and signed a note to pay the balance in two payments.
Jan. 10. Jane purchased a computer system for $2,500, cash.
Jan. 12. She sold flowers to a wedding ceremony in the amount of $4,500, but she had to bill them. The invoice was to be paid by February, 2010.
Jan. 15. Jane purchased office supplies in the amount of $1,500.
Jan. 20. She received A??1 of what she billed for flowers for the wedding ceremony on Jan. 12th.
Jan. 22. She withdrew $2,000. for her personal use.
Jan. 25. She decided to pay one payment that she owed on her equipment purchase on Jan. 7th.
Jan. 31. Jane hired an assistant and paid the wages by the end of the month in the amount of $1,500.
Jan 31. She had a total of $25,000 in cash sales for the month.
Adjusting entries:
A1 she used 2/3 of the supplies by the end of the month, A2 ‘ depreciation on the grooming equipment $450.
Required
A. Record the journal entries
B. Set up necessary T Accounts and post the journal entries
C. Prepare a trail balance for the period ended January 31, 2010
D. Prepare an income statement for the period January 2010.
E. Prepare a statement of changes in capital for the period January 2010
Prepare a production budget in units, by month and in total, for the fourth quarter of 2010. (Amounts to be deducted should be indicated with minus sign.)
October
November
December
Total
Beginning inventory of finished goods
Units to be produced
Goods available for sale
Desired ending inventory of finished goods (30% of next month’s budgeted sales)
Quantity of goods sold
(d)
Prepare a materials purchases budget in pounds, by month and in total, for the fourth quarter of 2010.(Amounts to be deducted should be indicated with minus sign.)
October
November
December
Total
Beginning inventory of raw materials
Purchases of raw materials
Raw materials available for use
Desired ending inventory of raw materials (40% of next month’s estimated usage)
Quantity of raw materials to be used in production
Calculate the missing amounts for each of the following firms: (Do not round your intermediate calculations. Negative amount should be indicated by a minus sign. Round to the nearest whole number for the Units Sold column. For the remaining columns round your answers to 2 decimal places. Omit the “$” sign in your response.)
BagODonuts Company bought a used delievery truck on Jan 1, 2010 for $19,200. The van was expected to remanin in service 4 years(30,000 miles). BagODonuts account estimated that the trucks residual value would be $2,400 at the end of its useful life. The truck traveled 8,000 miles the first year 8,500 miles the second year, 5,500 miles the third year, and 8,000 miles in the fourth .
1. Calculate depreciation expense for the truck for each year (2010 2013) using the:
a. straight line method
b. Double declinging balance method
(round to the enarest two decimals after each step of the calculation)
2. Which method best tracks the wear and tear on the van?
3. Which method would BagODonuts prefer to use for income tax purpose? Explain in detail
The balances in the ledger of Good Landscape Services as of January 31, 2014 before adjustments are as follows:
Cash
$ 6,750
Retained Earnings
$22,925
Supplies
3,900
Dividends
3,425
Prepaid Insurance
8,400
Service Revenue
56,300
Equipment
41,750
Salary Expense
24,300
Accumulated Depreciation
9,950
Rent Expense
6,000
Capital Stock
6,850
Miscellaneous Expense
1,500
Adjustment data are as follows: supplies on hand, January 31, $900; insurance expired for January, $1,100; depreciation on equipment for January, $1,600; salaries accrued, January 31, $1,650.
(a)
Prepare a ten column work sheet for Good Landscape Services for January, 2014.
(b)
On the basis of the work sheet in (a), present the financial statements in good order note that the balance sheet should be classified.
(c)
On the basis of the work sheet in (a), journalize the closing entries as of January 31, 2014.
Barnes Corporation manufactures two models of office chairs, a standard and a deluxe model. The following activity and cost information has been compiled.
Number of Number of Number of
Product Setups Components Direct Labor Hours
Standard 22 8 375
Deluxe 28 12 225
Overhead costs $20,000 $40,000
Assume a traditional single rate costing system applies the total $60,000 of overhead costs based on direct labor hours. What is the total amount of overhead costs assigned to the standard model and how would that be journalized? (2 points)
Number of setups and number of components are identified as activity cost drivers for overhead. Assuming an activity based costing system is used, what is the number of setups amount of overhead costs assigned to the deluxe model? (2 points)
Number of setups and number of components are identified as activity cost drivers for overhead. Assuming an activity based costing system is used, what is the total amount of overhead costs assigned to the deluxe model and how would that be journalized? (3 points)
The company engaged in the following business activity in January:
Jan 15: Invested capital of $50,000. Jan 17: Paid $400 office rent for the remainder of January. Jan 20: Purchased office supplies for $200. The supplies will last for several months, and payment is not due until February 15th. Jan 25: Purchased office equipment for $15,000 cash. Jan 27: Performed consulting services and billed clients for $2,000. The entire amount will not be collected until February. Jan 31: Recorded a $100 utilities expense. Payment is not due until February 20th.
Guidelines for the assignment:
* Analyze and identify the accounts. * Classify the accounts. * Apply the rules of debit and credit. * Create a T account. * Pass the journal entry.
Record each of the above transactions in a general journal form.
Part 2:
Write down all the steps required for journalizing the following business transactions:
* On January 5th, Mr. David took $20,000 from his personal savings and deposited it to start a business account in the name of David Transport Service. * On January 6, David Transport Service issued check No. 506 for $2,000 to buy a computer system. * On January 10, David Transport Service paid $100 to Blue company for telephone charges. Memorandum 5. * On January 15, David Transport Service mailed check No. 507 for $500 toward the month’s rent. * On January 20, David wrote check No. 508 to withdraw $500 cash for personal use.
Basu Company produces two types of sleds for playing in the snow: basic sled and aerosled. The projected income for the coming year, segmented by product line, follows:
The selling prices are $30 for the basic sled and $60 for the aerosled.
1. Compute the number of units of each product that must be sold for Basu to break even. Round your answers to the nearest whole.
Basic
units
Aero
units
2. Assume that the marketing manager changes the sales mix of the two products so that the ratio is five basic sleds to three aerosleds. Compute the number of units of each product that must be sold for Basu to break even. Round your answers to the nearest whole.
Basic
units
Aero
units
3. Conceptual Connection: Refer to the original data. Suppose that Basu can increase the sales of aerosleds with increased advertising. The extra advertising would cost an additional $195,000, and some of the potential purchasers of basic sleds would switch to aerosleds. In total, sales of aerosleds would increase by 12,000 units, and sales of basic sleds would decrease by 5,000 units. Would Basu be better or worse off with this strategy? Round your answer to the nearest dollar. Select Better off Worse off Item 5 $
At the beginning of 2010, a corporation had assets of $670,000 and liabilities of $520,000. During 2010, assets increased $52,000 and liabilities increased $7,000. What was stockholders’ equity on December 31, 2010?
$475,000
$195,000
$715,000
$91,000
Which of the following properly describes the impact on the financial statements when a company reports wage expense of $8,700, of which $3,700 remains unpaid?
Net income decreased by $5,000.
Cash decreased by $8,700.
Net income decreased by $8,700.
Cash decreased by $3,700.
Which of the following properly describes the impact on the financial statements when a company incurs operating expenses of $8,100, of which $3,200 remains unpaid?
At the beginning of April, Warren Corporation’s assets totaled $247,000 and liabilities totaled $67,000. During April the following summarized transactions occurred:
Additional shares of stock were sold for $23,500 cash.
A building costing $102,000 was purchased using $13,500 cash and by signing an $88,500 long term note payable.
Short term investments costing $9,700 were purchased using cash.
$10,700 was lent to an employee; the employee signed a six month note in exchange for the loan.
How much are Warren’s total assets at the end of April?
Betty Jones files a return as a single taxpayer. Items of income received by Betty in 2011 were as follows.
Interest on savings account with Bank of America: $100 Interest on state income tax refund: $50 Gambling winnings: $4,800 Dividends from mutual life insurance company on life insurance policy: $1,000 Dividends from Better Auto Co. received on January 2, 2011: $875 The total dividends received on the life insurance policy do not exceed the aggregate of the premiums paid to the company.
(a) How much should Betty include in her 2011 taxable income as interest? (b) How much should Betty report as dividend income for 2011? (c) How much should Betty include in taxable “Other Income” for her state lottery winnings? (Points : 17)
Borwan Company uses the weighted average method in its process costing system. The Assembly Department started the month with 7,100 units in its beginning work in process inventory that were 70% complete with respect to conversion costs. An additional 81,000 units were transferred in from the prior department during the month to begin processing in the Assembly Department. There were 4,100 units in the ending work in process inventory of the Assembly Department that were 30% complete with respect to conversion costs. What were the equivalent units for conversion costs in the Assembly Department for the month?
Back in Boston, Steve has been busy creating and managing his new company, Teton Mountaineering (TM), which is based out of a small town in Wyoming. In the process of doing so, TM has acquired various types of assets. Below is a list of assets acquired during 2012:
Asset
Cost
Date Placed in Service
Office furniture
$10,000
02/03/2012
Machinery
560,000
07/22/2012
Used delivery truck*
15,000
08/17/2012
*Not considered a luxury automobile, thus not subject to the luxury automobile limitations.
During 2012, TM had huge success (and had no Af‚A?§179 limitations) and Steve acquired more assets the next year to increase its production capacity. These are the assets acquired during 2013:
Asset
Cost
Date Placed in Service
Computers & Info. System
$40,000
03/31/2013
Luxury AutoAf?cA????1
80,000
05/26/2013
Assembly Equipment
475,000
08/15/2013
Storage Building
400,000
11/13/2013
Af?cA????1 Used 100% for business purposes. Use 2012 limitations for 2013.
TM generated a taxable income in 2013 before any Af‚A?§179 expense of $732,500.
Compute maximum 2012 depreciation deductions including Af‚A?§179 expense (ignoring bonus depreciation).
Compute maximum 2013 depreciation deductions including Af‚A?§179 expense (ignoring bonus depreciation).
Compute maximum 2013 depreciation deductions including Af‚A?§179 expense, but now assume that Steve would like to take bonus depreciation.
Ignoring part (c), now assume that during 2013, Steve decides to buy a competitor’s assets for a purchase price of $350,000. Compute maximum 2013 cost recovery including Af‚A?§179 expense (ignoring bonus depreciation). Steve purchased the following assets for the lump sum purchase price.
Bowman Builders manufactures steel storage sheds for commercial use. Joe Bowman, president of Bowman Builders, is contemplating producing sheds for home use. The activities necessary to build an experimental model and related data are given in the accompanying table.
(a) What is the project completion date?
(Formulate an LP problem to crash this project to 10 weeks.
Brarin Corporation is a small wholesaler of gourmet food products. Data regarding the store’s operations follow:
‘
Sales are budgeted at $460,000 for November, $480,000 for December, and $470,000 for January.
‘
Collections are expected to be 45% in the month of sale, 54% in the month following the sale, and 1% uncollectible.
‘
The cost of goods sold is 80% of sales.
‘
The company would like to maintain ending merchandise inventories equal to 60% of the next month’s cost of goods sold. Payment for merchandise is made in the month following the purchase.
‘
Other monthly expenses to be paid in cash are $24,300.
‘
Monthly depreciation is $22,200.
‘
Ignore taxes.
The difference between cash receipts and cash disbursements in December would be:
On July 1, 2014, Seng Co. pays $15,900 to Nance Insurance Co. for a 2 year insurance contract. Both companies have fiscal years ending December 31.
For Seng Co., journalize the entry on July 1 and adjusting entry on December 31. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.)
Date
Account Titles and Explanation
Debit
Credit
July 1
Dec. 31
Show List of Accounts
Link to Text
For Seng Co., post the entries passed on on July 1 and on December 31.
After a brief illness, Bill died. Bill’s employer paid $20,000 to his widow. The corporation sent along a letter with the check indicating that $5,000 represented payment for Bill’s accrued vacation days and back wages. The balance was being awarded in recognition of Bill’s many years of loyal service. The company was obligated to pay the accrued vacation days and back wages, but the balance was discretionary.
A. 1) Is the employer entitled to deduct the $20,000 paid to Bill’s widow?
B. 2) Is Bill’s widow required to include the $20,000 in her gross income?
WHat section of the tax code support your conclusion?
Broze Company makes four products in a single facility. These products have the following unit product costs:
Products
A
B
C
D
Direct materials
$13.30
$9.20
$10.00
$9.60
Direct labor
18.40
26.40
32.60
39.40
Variable manufacturing overhead
3.30
1.70
1.60
2.20
Fixed manufacturing overhead
25.50
33.80
25.60
36.20
Unit product cost
$60.50
$71.10
$69.80
$87.40
Additional data concerning these products are listed below.
Products
A
B
C
D
Grinding minutes per unit
2.80
3.60
3.30
2.40
Selling price per unit
$75.10
$92.50
$86.40
$103.20
Variable selling cost per unit
$ 1.20
$ .20
$ 2.30
$ .60
Monthly demand in units
3,000
3,000
2,000
2,200
The grinding machines are potentially the constraint in the production facility. A total of 52,700 minutes are
available per month on these machines.
Direct labor is a variable cost in this company.
Up to how much should the company be willing to pay for one additional minute of grinding machine time if the company has made the best use of the existing grinding machine capacity? (Round your intermediate calculations and final answer to 2 decimal places.)
ACME Company sells computer components and plans on borrowing some money to expand. After reading a lot about earnings management, Bill, the owner of ACME, has decided he should try to accelerate some sales to improve his financial statement ratios. He has called his best customers and asked them to make their usual January purchases by December 31. Bill told the customers he would allow them, until the end of February, to pay for the purchases, just as if they had made their purchases in January. What do you think are the ethical implications of Bill’s actions? Which ratios will be improved by accelerating these sales?
I’d like to know what you think as far as if it is ethical or not. I know of companies that give customers net 30 or higher so if Bill gives them those terms is it really an ethics violation? Any insight is appreciated. Thanks!
Almo company manufactures and sells adjustable canopies that attach to motor homes and trailers. Almo developed its budget for the current year assuming that the canopies would sell at a price of $500 each. The variable expenses for each canopy were forecasted to be $300 and the annual fixed expenses were forecasted to be $210,000. Almo had targeted a profit of $510,000.
While Almo’s sales usually rise during the second quarter, the May financial statements reported that sales were not meeting expectations. For the first five months of the year, only 460 units had been sold at the established price, with variable expense as planned, and it was clear that the target profit for the year would not be reached unless some actions were taken. Almo’s president assigned a management committee to analyze the situation and develop several alternative courses of action. The following three alternatives were presented to the president, only one of which can be selected.
1.
Reduce the selling price by $40. The marketing department forecasts that with the lower price, 3,800 units could be sold during the remainder of the year.
2.
Lower variable expenses per unit by $30 through the use of less expensive materials. Because of the difference in materials, the selling price would have to be lowered by $35 and sales of 3,300 units for the remainder of the year are forecast.
3.
Cut fixed expenses by $15,000 and lower the selling price by 10 percent. Sales of 3,100 units would be expected for the remainder of the year.
Required:
a.
If no changes are made to the selling price or cost structure, estimate the number of units that must be sold during the year to break even.
Number of units
units
b.
If no changes are made to the selling price or cost structure, estimate the number of units that must be sold during the year to attain the target profit of $510,000.
Number of units
units
c.
Determine which of the alternatives Almo’s president should select to maximize profit.
1) Mrs. FB, who is in the 35 percent tax bracket, owns a residential apartment building that generates $80,000 of annual taxable income. She plans to create a family partnership by giving each of her two children a 20 percent equity in the building (she will retain a 60 percent interest.) Mrs. FB will manage the building and the value of her services is $15,000 per year. If Mrs. FBAf?cA????1A????1s children are in the 15 percent tax bracket, compute the tax savings from this income shifting arrangement.
2)
Mr. P and Mrs. Q are equal shareholders in Corporation PQ. Both shareholders have a 35 percent marginal tax rate. PQAf?cA????1A????1s financial records show the following:
Gross Income from Sales of Goods
$880,000
Operating Expenses
(410,000)
Interest Paid on Debt to Mr. P and Mrs. Q
(62,000)
Dividend Distributions:
Mr. P
(50,000)
Mrs. Q
(50,000)
a) Compute the combined income tax cost for PQ, Mr. P, and Mrs. Q. (Remember that interest is deductible to the corporation and dividends are not. Also, remember that dividends would be taxed at a 15% rate to P and Q shareholders if they have a regular tax rate of 35%.)
b) How would your computation change if the interest on the shareholder debt was $162,000 and the corporation paid no dividends?
3)
Mr. Z is the sole shareholder of TZ. He also owns the office building that serves as corporate headquarters. Last year, TZ paid $180,000 annual rent to Mr. Z for the use of the building. TZAf?cA????1A????1s marginal tax rate was 34 percent and Mr. ZAf?cA????1A????1s marginal tax rate was 35 percent. The revenue agent who audited TZAf?cA????1A????1s return concluded that the fair rental value of the office building was $125,000.
a) By what amount is Mr. ZAf?cA????1A????1s tax liability reduced?
b) By what amount is corporation TZAf?cA????1A????1s tax increased?
4)
During a recent IRS audit, the revenue agent decided that the FP family used their closely held corporation, Falco, to avoid tax at the shareholder level by accumulating earnings beyond the reasonable needs of the business. FalcoAf?cA????1A????1s taxable income was $900,000, it paid no dividends for the year, and it had no business need to retain any of this income. Compute FalcoAf?cA????1A????1s accumulated earnings tax assuming that:
a) It had accumulated $4 million of after tax income in prior years.
b) It had accumulated $129,000 after tax income in prior years. (Remember you are allowed a $250,000 Af?cA????1A????1no questions askedAf?cA????1A????1 accumulation.)
Firm A exchanged an old asset with a $20,000 tax basis for a new asset with a $32,000 FMV. Under each of the following assumptions, apply the generic rules to compute A’s realized gain, recognized gain, and tax basis in the new asset. (If the transaction does not involve qualified property, it would be treated like a normal sale.)
a) Old asset and new asset are not qualified property for nontaxable exchange purposes.
b) Old asset and new asset are qualified property for nontaxable exchange purposes.
c) Old asset and new asset are not qualified property for nontaxable exchange purposes. To equalize the values exchanged, Firm A paid $1,700 cash to the other party.
d) Old asset and new asset are qualified property for nontaxable exchange purposes. To equalize the values exchanged, Firm A paid $1,700 cash to the other party.
e) Old asset and new asset are not qualified property for nontaxable exchange purposes. To equalize the values exchanged, Firm A received $4,500 cash from the other party.
f) Old asset and new asset are qualified property for nontaxable exchange purposes. To equalize the values exchanged, Firm A received $4,500 cash from the other party.
Firm ML, a noncorporate taxpayer, exchanged residential rental property plus $15,000 cash for 20 acres of investment land with a $200,000 FMV. ML used the straight line method to compute depreciation on the residential rental property.
a) Assuming that Firm ML’s exchange was negotiated at arm’s length, what is the FMV of the rental property?
b) If the adjusted basis of the rental property is $158,000, compute Firm ML’s realized and recognized gain on the exchange.
c) Compute Firm ML’s basis in the 20 acres of investment land.
In 2004, SW purchased 1,000 shares of Delta stock. On May 20 of the current year, it sold these shares for $90 per share. In each of the following cases, compute SW’s recognized gain or loss on this sale. Also, in each case in which SW purchased 1,200 Delta shares in the current year along with selling the 1000 shares, compute its tax basis in the new shares.
a) SW’s cost basis in the 1,000 shares was $104 per share. It did not purchase any other Delta shares during the current year.
b) SW’s cost basis in the 1,000 shares was $104 per share. It purchased 1,200 shares of Delta on May 1 of the current year for $92 per share and held these 1,200 shares throughout the remainder of the year.
c) SW’s cost basis in the 1,000 shares was $104 per share. It purchased 1,200 shares of Delta on June 8 of the current year for $92 per share and held these 1,200 shares throughout the remainder of the year.
d) SW’s cost basis in the 1,000 shares was $79 per share. It purchased 1,200 shares of Delta on June 8 of the current year for $92 per share and held these 1,200 shares throughout the remainder of the year.
Mr. C, a self employed consultant, uses a room of his home as a business office. This room represents 10 percent of the home’s square footage. This year, Mr. C incurred the following expenses in connection with his home:
Home mortgage interest
$12,980
Property tax on residence
2,200
Homeowner’s insurance
1,475
Utilities
2,100
Furnace repairs
300
Mr. C purchased the home in 1998 for $225,000. For MACRS depreciation purposes, he allocated $185,000 to the building and $40,000 to the land.
Compute his home office deduction for the year.
This year, Ms. W’s sole proprietorship, WW Bookstore, generated $120,000 net profit. In addition, Ms. W recognized a $17,000 gain on the sale of business furniture and shelving, all of which was recaptured as ordinary income. The business checking account earned $960 interest income.
Which of these income items are subject to self employment tax?
Ms. J is a self employed attorney. This year, her net profit exceeded $250,000, which put her in the 35 percent tax bracket. Early in the year, Ms. J hired Mr. B as a paralegal and paid him a salary of $33,000.
Compute the employer payroll tax on Mr. B’s salary.
KLMN Partnership’s financial records show the following:
Gross receipts from sales
$670,000
Cost of goods sold
(460,000
Operating expenses
(96,800
Business meals and entertainment
(6,240
Realized loss on sale of equipment
(13,500
Charitable contribution
(1,500
Distribution to partners
(10,000
Compute KLMN’s ordinary business income for the year. (Remember the deduction limitation for business meals and entertainment and only ordinary expenses are deducted in deriving ordinary business income.)
Refer to the facts in the preceding problem. Mr. T is a 10 percent general partner in the KLMN Partnership. During the year, he received a $1,000 cash distribution from KLMN.
Compute Mr. T’s share of partnership ordinary income and separately stated items.
This year, individual X and individual Y formed XY Partnership. X contributed $50,000 cash, and Y contributed business assets with a $50,000 FMV. Y’s adjusted basis in these assets was only $10,000. The partnership agreement provides that income and loss will be divided equally between the two partners. Partnership operations for the year generated a $42,000 loss.
How much loss may each partner deduct currently and what basis will each partner have in her interest at the beginning of the next year?
Mr. B and Ms. G are equal general partners in the BG Partnership. Mr. B receives a $4,000 monthly guaranteed payment for services. This year, BG Partnership generated $95,000 business profit (before consideration of Mr. B’s guaranteed payments).
a) Compute each partner’s distributive share of BG’s ordinary business income.
b) Compute each partner’s net earnings from self employment (the amount subject to self employment tax).
c) How would your answers change if BG’s profit was only $32,000 instead of $95,000?
8.Zelda owns a 50% general interest in YZ Partnership. At the beginning of the current year, the adjusted basis in her partnership interest was $95,000. In the current year, YZ generated a $110,000 business loss, earned $15,000 dividend and interest income on its investments and recognized a $7,000 capital gain. YZ also made a $5,000 distribution to Zelda. Compute Zelda’s adjusted basis in the partnership at the end of the year.
This year, GHJ Inc. received the following dividends:
BP Inc. (a taxable California corporation in which GHJ holds a 2% stock interest)
$17,300
MN Inc. (a taxable Florida corporation in which GHJ holds a 52% stock interest
80,800
AB Inc. (a taxable Canadian corporation in which GHJ holds a 21% stock interest)
17,300
Compute GHJ Inc.’s dividend received deduction.
Corporation AB’s marginal tax rate is 15 percent and Corporation YZ’s marginal tax rate is 35 percent.
a) If both corporations are entitled to an additional $5,000 deduction, how much tax savings will the deduction generate for each corporation?
b) If both corporations are entitled to a $5,000 tax credit, how much tax savings will the credit generate for each corporation? (Assume that each corporation’s pre credit tax exceeds $5,000.)
In each of the following cases, compute the corporation’s regular tax.
a) Corporation A, which distributes frozen food products, has $160,000 taxable income.
b) Corporation B, a personal service corporation providing medical care, has $160,000 taxable income.
c) Corporation C, which develops and operates golf resorts, has $3.91 million taxable income.
d) Corporation D, which drills oil wells, has $16.8 million taxable income.
e) Corporation E, which distributes farm equipment, has $57 million taxable income.
On April 1, 2010, Jiro Nozomi created a new travel agency, Adventure Travel. The following transactions occurred during the company’s first month.
April 1
Nozomi invested $30,000 cash and computer equipment worth $20,000 in the business.
2
Rented furnished office space by paying $1,800 cash for the first month’s (April) rent. (Hint: Adventure Travel debited Rent Expense for this payment.)
3
Purchased $1,000 of office supplies for cash.
10
Paid $2,400 cash for the premium on a 12 month insurance policy. Coverage begins on April 11.
14
Paid $1,600 cash for two weeks’ salaries earned by employees.
24
Collected $8,000 cash on commissions from airlines on tickets obtained for customers.
26
Paid another $1,600 cash for two weeks’ salaries earned by employees.
27
Paid $350 cash for minor repairs to the company’s computer.
27
Paid $750 cash for this month’s telephone bill.
28
Nozomi withdrew $1,500 cash for personal use.
The company’s chart of accounts follows:
101
Cash
405
Commissions Earned
106
Accounts Receivable
612
Depreciation Expense”Computer Equip.
124
Office Supplies
622
Salaries Expense
128
Prepaid Insurance
637
Insurance Expense
167
Computer Equipment
640
Rent Expense
168
Accumulated Depreciation”Computer Equip.
650
Office Supplies Expense
209
Salaries Payable
684
Repairs Expense
301
J. Nozomi, Capital
688
Telephone Expense
302
J. Nozomi, Withdrawals
1 Prepare journal entries to record the transactions for April. The company records prepaid and unearned items in balance sheet accounts
2 Prepare an unadjusted trial balance as of April 30.
3 Use the following information to journalize and post adjusting entries for the month
4 Prepare the income statement and the statement of owner’s equity for the month of April and the balance sheet at April 30, 2010.
Aracel Engineering completed the following transactions in the month of June.
a.
Jenna Aracel, the owner, invested $215,000 cash, office equipment with a value of $5,100, and $61,000 of drafting equipment to launch the company.
b.
The company purchased land worth $50,000 for an office by paying $6,700 cash and signing a long term note payable for $43,300.
c.
The company purchased a portable building with $60,000 cash and moved it onto the land acquired in b.
d.
The company paid $2,100 cash for the premium on an 18 month insurance policy.
e.
The company completed and delivered a set of plans for a client and collected $9,500 cash.
f.
The company purchased $33,000 of additional drafting equipment by paying $11,000 cash and signing a long term note payable for $22,000.
g.
The company completed $16,000 of engineering services for a client. This amount is to be received in 30 days.
h.
The company purchased $1,150 of additional office equipment on credit.
i.
The company completed engineering services for $26,000 on credit.
j.
The company received a bill for rent of equipment that was used on a recently completed job. The $1,686 rent cost must be paid within 30 days.
k.
The company collected $7,000 cash in partial payment from the client described in transaction g.
l.
The company paid $2,300 cash for wages to a drafting assistant.
m.
The company paid $1,150 cash to settle the account payable created in transaction h.
n.
The company paid $1,165 cash for minor maintenance of its drafting equipment.
o.
Jenna Aracel withdrew $9,200 cash from the company for personal use.
p.
The company paid $1,700 cash for wages to a drafting assistant.
q.
The company paid $3,600 cash for advertisements on the Web during June.
Required:
1.
Prepare general journal entries to record these transactions using the following titles: Cash (101); Accounts Receivable (106); Prepaid Insurance (108); Office Equipment (163); Drafting Equipment (164); Building (170); Land (172); Accounts Payable (201); Notes Payable (250); J. Aracel, Capital (301); J. Aracel, Withdrawals (302); Engineering Fees Earned (402); Wages Expense (601); Equipment Rental Expense (602); Advertising Expense (603); and Repairs Expense (604).
Assume that a company issues a bond at 92 having a face value of $5,000 and a coupon interest rate of 6%. The bonds pays interest annually and has a five year maturity time frame, and bonds of similar rish are currently paying interest rates of 8%. The bonds issue price would be (blank) , it would make an annual interest payment on the bond in the amount of (blank),and at the end of five years, it would pay back the principal of $(blank). The total discount on the bond is $(blank). Because discounted bonds result in the company receiving less money up front, the bonds are actually costing the company more than just the periodic interest payments. For this reason, total interest expenses equals the sum of total interest paid over the life of the bond and total discount on the bond. Total interest expense on this bond is $(blank).
Assume Nortel Networks contracted to provide a customer with Internet infrastructure for $2,000,000. The project began in 2013 and was completed in 2014. Data relating to the contract are summarized below:
2013
2014
Costs incurred during the year
$
300,000
$
1,575,000
Estimated costs to complete as of 12/31
1,200,000
0
Billings during the year
380,000
1,620,000
Cash collections during the year
250,000
1,750,000
Required:
1.
Compute the amount of gross profit or loss to be recognized in 2013 and 2014 using the percentage of completion method.
2.
Compute the amount of gross profit or loss to be recognized in 2013 and 2014 using the completed contract method.
3.
Prepare a partial balance sheet to show how the information related to this contract would be presented at the end of 2013 using the percentage of completion method.
4.
Prepare a partial balance sheet to show how the information related to this contract would be presented at the end of 2013 using the completed contract method.
You are auditing Martha’s Prison Clothes, Inc., as of December 31, 2012. The inventory for orange jumpsuits shows 1,263 suits at $782 for a total of $987,666. When you look at the invoices for the jumpsuits, you see the following:
Inventory # Date Quantity Unit Price Total
12732 11/22/10 1,000 $765 $765,000
12844 12/03/10 800 777 621,600
12905 12/28/10 600 782 469,200
Required:
a. Determine the adjusting entry, if any, for the cost of inventory at December 31, 2012.
b. Would your answer to part (a) be different if you saw an invoice dated January 9, 2013, for 500 suits at $750?
The auditors of Steffey, LTD., decided to study the cash receipts and disbursements for the month of July of the current year under audit. They obtained the bank reconciliations and the cash journals prepared by the company accountants, which revealed the following:
June 30: Bank balance, $355,001; deposits in transit, $86,899; outstanding checks, $42,690; general ledger cash balance, $399,210.
July 1: Cash receipts journal, $650,187; cash disbursements journal, $565,397.
July 31: Bank balance, $506,100; deposits in transit, $51,240; outstanding checks, $73,340; general ledger cash balance , $484,000. Bank statement record of deposits: $835,846; of payments: $684,747.
Required:
Prepare a four column proof of cash covering the month of July of the current year. Identify problems, if any.
avadi Company makes a single product that is subject to wide seasonal variations in demand. The company uses a job order costing system and computes predetermined overhead rates on a quarterly basis using the number of units to be produced as the allocation base. Its estimated costs, by quarter, for the coming year are given below:
Quarter
First
Second
Third
Fourth
Direct materials
$
160,000
$
80,000
$
40,000
$
120,000
Direct labor
80,000
40,000
20,000
60,000
Manufacturing overhead
230,000
206,000
194,000
?
Total manufacturing costs (a)
$
470,000
$
326,000
$
254,000
$
?
Number of units to be produced (b)
120,000
60,000
30,000
90,000
Estimated unit product cost (a Af· b)
$
3.92
$
5.43
$
8.47
$
?
Management finds the variation in quarterly unit product costs to be confusing and difficult to work with. It has been suggested that the problem lies with manufacturing overhead because it is the largest element of total manufacturing cost. Accordingly, you have been asked to find a more appropriate way of assigning manufacturing overhead cost to units of product.
Required:
1 a.
Using the high low method, estimate the fixed manufacturing overhead cost per quarter and the variable manufacturing overhead cost per unit. (Round the “Variable manufacturing overhead per unit” to 2 decimal places.)
Quarter
First
Second
Third
Fourth
Direct materials
$
160,000
$
80,000
$
40,000
$
120,000
Direct labor
80,000
40,000
20,000
60,000
Manufacturing overhead
230,000
206,000
194,000
?
Total manufacturing costs (a)
$
470,000
$
326,000
$
254,000
$
?
Number of units to be produced (b)
120,000
60,000
30,000
90,000
Estimated unit product cost (a Af· b)
$
3.92
$
5.43
$
8.47
$
?
Using the high low method, estimate the fixed manufacturing overhead cost per quarter and the variable manufacturing overhead cost per unit.
Compute the total manufacturing cost and unit product cost for the fourth quarter
Estimate the total manufacturing overhead cost for the year and an annual predetermined overhead rate.
Axle and Wheel Manufacturing currently produces and sells 1000 axles per month. Its revenue is $125,000 per month. The following per unit data apply for sales to regular customers
Direct materials $30
Direct manufacturing labor $5
Variable manufacturing overhead $10
Fixed manufacturing overhead $40
Total manufacturing costs $85
1. What is the breakeven level in units and in dollars for Axle and Wheel?
2. The plant has capacity for 2,000 axles and is considering expanding production to 1,500 axles. What is the total monthly cost and operating income of producing 1500 axles?
3. What is the per unit cost when producing 1500 axles?
4. If Axle and Wheel wants an operating profit of approximately $104,000, how many axles would it have to manufacture and sell?
Aztec Company sells its product for $180 per unit. Its actual and projected sales follow.
All sales are on credit. Recent experience shows that 20% of credit sales is collected in the month of the sale, 50% in the month after the sale, 28% in the second month after the sale, and 2% proves to be uncollectible. The product’s purchase price is $110 per unit. All purchases are payable within 12 days. Thus, 60% of purchases made in a month is paid in that month and the other 40% is paid in the next month. The company has a policy to maintain an ending monthly inventory of 20% of the next month’s unit sales plus a safety stock of 100 units. The April 30 and May 31 actual inventory levels are consistent with this policy. Selling and administrative expenses for the year are $1,320,000 and are paid evenly throughout the year in cash. The company’s minimum cash balance at month end is $100,000. This minimum is maintained, if necessary, by borrowing cash from the bank. If the balance exceeds $100,000, the company repays as much of the loan as it can without going below the minimum. This type of loan carries an annual 12% interest rate. On May 31, the loan balance is $25,000, and the company’s cash balance is $100,000. (Round amounts to the nearest dollar.)
Required
Prepare a table that shows the computation of cash collections of its credit sales (accounts receivable) in each of the months of June and July.
Prepare a table that shows the computation of budgeted ending inventories (in units) for April, May, June, and July.
Prepare the merchandise purchases budget for May, June, and July. Report calculations in units and then show the dollar amount of purchases for each month.
Prepare a table showing the computation of cash payments on product purchases for June and July.
Prepare a cash budget for June and July, including any loan activity and interest expense. Compute the loan balance at the end of each month.
Refer to your answer to part 5. Aztec’s cash budget indicates the company will need to borrow more than $18,000 in June. Suggest some reasons that knowing this information in May would be helpful to management.
1. The Mentha company currently has the following statistics:
Days in accounts receivable 68
Operating cycle 148
What is Mentha’s days in inventory?
A
80.
B
68.
C
148.
D
Cannot be determined from the information given.
2. Lamberton Manufacturing Company has just completed its master budget. The budget indicates that the company’s operating cycle needs to be shortened. Thus, the company will likely attempt:
A
Stocking larger inventories.
B
Reducing cash discounts for prompt payment.
C
Tighten credit policies.
D
None of the above selections is correct.
3. Which of the following is not a potential benefit of using budgets?
A
Enhanced coordination of firm activities.
B
More motivated managers.
C
More accurate external financial statements.
D
Improved interdepartmental communication.
4. Which of the following is considered a financial budget estimate?
A
The manufacturing cost budget.
B
The cost of goods sold budget.
C
The operating expense budget.
D
The prepayments budget.
5. Benefits derived from budgeting do not include:
A
Improved relationship with shareholders.
B
Enhanced management responsibilities.
C
Improved coordination of activities.
D
Enhanced performance evaluations.
6. Flexible budgeting may be used for profit centers by applying cost volume profit relationships to the actual level of:
A
Units produced.
B
Resources consumed.
C
Costs incurred.
D
Sales achieved.
7. If the volume of output of a factory for the month of June is 50,000 units, while the budgeted output was 40,000 units:
A
Comparison of budgeted results and actual results will be misleading unless the company uses a flexible budget.
B
Actual fixed costs per unit may be expected to exceed budgeted levels.
C
Actual cost per unit will be higher than standard cost per unit.
D
Both total production costs and unit production costs should be approximately 25% above budgeted levels.
8. A cash budget is affected directly by each of the following except:
A
A capital expenditures budget.
B
A sales forecast.
C
A manufacturing cost budget.
D
A budgeted income statement.
9. The most widely used budgeting philosophy is the:
1. Prepare a schedule of cost of goods manufactured in good form
2. Prepare a schedule of Cost of goods Sold in good form
3. Prepare an income statement The company closes an underapplied or overapplied manufacturing overhead to costs of goods sold
4. What is the percent of gross margin and operating income
The P Ditty Company applies to overhead to jobs using a predeterminded overhead rate based on Direct labor hours. At the beginning of the year, the company estimated that it would work 21,000 direct labor hours and estimated it would incur $315,000 in manufacturing overhead cost. The following transactions were recorded for the year.
Raw Materials beginning balance $35,000 ending balance $11000
Work in process begin balance $87,000 ending bal $33000
Finished goods beginning balance $23,000 ending bal $17000
*Raw materials were purchased $359,000 *Raw materials were requistioned for use in production, $368,000 for direct and $15000 indirect
*Factory utility cost were $39,000 and utility cost for administrative is $2000
*Depreciation for the year was $89,000; of which $68,000 was for factory operations and $21000 was for selling and administrative activities.
*Manufacturing overhead costs were paid (property taxes, insurances, etc) in the amount of $123,000
*Labor costs were as follows : DIrect labor $451000 and Indirect labor was $37000; administrative salaries were $125,000.
*Selling costs $65000
*MOH was applied to jobs using the predetermined rate. The actual direct labor hours were 19000
*Sales for the year is $1404000
I did it but am not coming up with the correct answer. Please help!
1. The raw materials account of Franklin Inc. reflected the following changes during April:
Opening balance
500 units @ $10
Received
200 units @ $12
Issued
400 units
Issued
100 units
Received
300 units @ $15
Other costs during the month included the following:
Direct labor
$8,000
Factory overhead
6,000
One thousand units of product were completed, of which 800 were sold and 200 remained on hand. There was no beginning inventory in finished goods. The company uses a perpetual inventory system.
a.
Using FIFO, what are the end of month balances for each of the following accounts?
(1)
Raw Materials Inventory
(2)
Finished Goods Inventory
(3)
Cost of Goods Sold
b.
Using LIFO, what are the end of month balances for each of the following accounts?
1. Sierra Company incurs the following costs to produce and sell a single product. Variable costs per unit: Direct materials $9 Direct labor $10 Variable manufacturing overhead $5 Variable selling and administrative expenses $3 Fixed costs per year: Fixed manufacturing overhead $150,000 Fixed selling and administrative expenses $400,000 ________________________________________ During the last year, 25,000 units were produced and 22,000 units were sold. The Finished Goods inventory account at the end of the year shows a balance of $72,000 for the 3,000 unsold units. Compute the total cost of finished goods inventory using variable costing? Compute the total cost of finished goods inventory using absorption costing? At what dollar amount should the 3,000 units be carried in the inventory for external reporting purposes?
2. Whitman Company has just completed its first year of operations. The company’s absorption costing income statement for the year appears below: Whitman Company Income Statement Sales (35,000 units Af— $25 per unit) $875,000 Cost of goods sold (35,000 units Af— $16 per unit) 560,000 Gross margin 315,000 Selling and administrative expenses 280,000 Net operating income $35,000 ________________________________________
The company’s selling and administrative expenses consist of $210,000 per year in fixed expenses and $2 per unit sold in variable expenses. The $16 per unit product cost given above is computed as follows: Direct materials $5 Direct labor 6 Variable manufacturing overhead 1 Fixed manufacturing overhead ($160,000 Af· 40,000 units) 4 Absorption costing unit product cost $16 ________________________________________ Redo the company’s income statement in the contribution format using variable costing. Reconcile any difference between the net operating income on your variable costing income statement and the net operating income on the absorption costing income statement above.
3. During Heaton Company’s first two years of operations, the company reported absorption costing net operating income as follows: Year 1 Year 2 Sales ($25 per unit) $1,000,000 $1,250,000 Cost of goods sold ($18 per unit) 720,000 900,000 Gross margin 280,000 350,000 Selling and administrative expenses* 210,000 230,000 Net operating income $70,000 $120,000 *$2 per unit variable; $130,000 fixed each year. The company’s $18 unit product cost is computed as follows: Direct materials $4 Direct labor 7 Variable manufacturing overhead 1 Fixed manufacturing overhead ($270,000 Af· 45,000 units) 6 Absorption costing unit product cost $18
Forty percent of fixed manufacturing overhead consists of wages and salaries; the remainder consists of depreciation charges on production equipment and buildings. Production and cost data for the two years are: Year 1 Year 2 Units produced 45,000 45,000 Units sold 40,000 50,000 Prepare a variable costing contribution format income statement for each year. Determine the absorption costing and variable costing net operating income figures for each year. Year 1 Year 2 Variable costing net operating income for each year.
Add/(deduct): Fixed manufacturing overhead deferred in inventory under absorption costing Absorption costing net operating income.
4. Tami Tyler opened Tami’s Creations, Inc., a small manufacturing company, at the beginning of the year. Getting the company through its first quarter of operations placed a considerable strain on Ms. Tyler’s personal finances. The following income statement for the first quarter was prepared by a friend who has just completed a course in managerial accounting at State University. Tami’s Creations, Inc. Income Statement For the Quarter Ended March 31 Sales (28,000 units) $1,120,000 Variable expenses: Variable cost of goods sold $462,000 Variable selling and administrative 168,000 630,000 Contribution margin 490,000 Fixed expenses: Fixed manufacturing overhead 300,000 Fixed selling and administrative 200,000 500,000 Net operating loss $(10,000) Ms. Tyler is discouraged over the loss shown for the quarter, particularly because she had planned to use the statement as support for a bank loan. Another friend, a CPA, insists that the company should be using absorption costing rather than variable costing and argues that if absorption costing had been used the company would probably have reported a profit for the quarter. At this point, Ms. Tyler is manufacturing only one product, a swimsuit. Production and cost data relating to the swimsuit for the first quarter follow: Units produced 30,000 Units sold 28,000 Variable costs per unit: Direct materials $3.50 Direct labor $12.00 Variable manufacturing overhead $1.00 Variable selling and administrative $6.00 Requirement 1: Complete the following: (a) Compute the unit product cost under absorption costing. Unit product cost $ (b) Redo the company’s income statement for the quarter using absorption costing. (c) Reconcile the variable and absorption costing net operating income (loss) figures. : Fixed manufacturing overhead cost deferred in inventory under absorption costing Requirement 3: During the second quarter of operations, the company again produced 30,000 units but sold 32,000 units. (Assume no change in total fixed costs.) (a) Prepare a contribution format income statement for the quarter using variable costing. Sales $ Variable expenses: Variable cost of goods sold $ Variable selling and administrative expenses
Contribution margin Fixed expenses: Fixed manufacturing overhead Fixed selling and administrative expense (b) Prepare an income statement for the quarter using absorption costing. (c) Reconcile the variable costing and absorption costing net operating incomes. : Fixed manufacturing overh
1. (TCO 7) Elliot’s Escargots sells commercial and home snail extraction tools and serving pieces. Currently, the snail extraction line of products takes up approximately 50% of the company’s retail floor space. The CEO of Elliot’s wants to decide if the company should continue offering snail extraction tools or focus only on serving pieces. If the snail extraction tools are dropped, salaries and other direct fixed costs can be avoided and serving piece sales would increase by 13%. Allocated fixed costs are assigned based on relative sales.
Snail Extraction
Serving
Tools
Pieces
Total
Sales
$1,200,000
$800,000
$2,000,000
Less cost of goods sold
1,000,000
700,000
1,700,000
Contribution margin
200,000
100,000
300,000
Less direct fixed costs:
Salaries
175,000
175,000
350,000
Other
60,000
60,000
120,000
Less allocated fixed costs:
Rent
14,118
9,882
24,000
Insurance
3,529
2,471
6,000
Cleaning
4,117
2,883
7,000
Executive salary
76,470
53,530
130,000
Other
7,058
4,942
12,000
Total costs
340,292
308,708
649,000
Net income
($140,292)
($208,708)
$349,000
Prepare an incremental analysis in good form to determine the incremental effect on profit of discontinuing the snail extraction tool line. (Points : 6)
1. (TCO C) Sheahan Company recently acquired three businesses, recognizing goodwill in each acquisition. Acquired goodwill was allocated to the three reporting units: Penny, Nickel, and Dime. Sheahan provides the following information in performing the 2012 annual review for impairment:
Carrying Value
Fair Value
Valuation of Reporting Unit (including Goodwill)
Penny
Tangible Assets
$200,000
$225,000
$365,000
Trademarks
15,000
10,000
Licenses
62,000
75,000
Liabilities
17,000
17,000
Goodwill
85,000
?
Nickel
Tangible Assets
$185,000
$345,000
$330,000
Trademarks
20,000
35,000
Licenses
22,000
22,000
Goodwill
137,000
?
Dime
Tangible Assets
$95,000
$95,000
$185,000
Unpatented Technology
0
35,000
Customer List
44,000
44,000
Goodwill
655,000
?
Required: (A) Which of Sheahan’s reporting units require both steps to test for goodwill impairment?? (B) How much goodwill impairment should Sheahan report for 2012?
1. XYZ company has two service departments; Maintenance and Personnel and two producing departments, printing and developing. The maintenance department bills other departments based on the number of machine hours. In addition, the Personnel department bills the other departments based on the number of DL hours.
Additional data:
A?·The printing department uses 1000 machine hours per year and 500 DL hours per year.
A?·The developing department uses 3000 machine hours and 2000 DL hours per year.
A?·Maintenance uses 500 DL hours per year
A?·Personnel uses 1000 machine hours per year.
A?·Direct costs for the Maintenance department are $15,000
A?·Direct costs for the Personnel departments are $36,000.
Using the data above, please compute the amount of service costs that would be allocated under the Direct, Step Allocation, and reciprocal method.
For the step allocation method, the maintenance department will be allocated (assigned first). In other words, the maintenance department is the first department to bill the other departments under the Step Method.
2. Refer to the above data. What is the adjusted cash balance in the September 30 bank reconciliation?
A) $10,590.
B) $16,520.
D) $14,964
3. Silbey Inc. had accounts receivable of $200,000 and an allowance for doubtful accounts of $8,700 just before writing off as worthless an account receivable from Walley Company of $1,200. After writing off this receivable what would be the balance in Silbey’s Allowance for Doubtful Accounts?
B) $9,900 credit balance.
C) $7,500 credit balance.
D) $7,500 debit balance.
5. Vector Corporation invested $290,000 cash in available for sale marketable securities in early December. On December 31, the quoted market price for these securities is $307,000. Which of the following statements is correct?
A) Vector’s December income statement includes a $17,000 gain on investments.
B) If Vector sells these investments on January 2 for $300,000, it will report a loss of $7,000.
D) Vector’s December 31 balance sheet reports marketable securities at $307,000 and an Unrealized Holding Gain on Investments of $17,000.
6. On June 1, 2001, Swift Company acquired a 10%, ten month note receivable from a customer in settlement of an existing account receivable of $120,000. Interest and principal are due at maturity.
Refer to the above data. The proper adjusting entry at December 31, 2001, with regard to this note receivable includes a:
Answer
A) Debit to Cash of $7,000.
B) Debit to Notes Receivable of $12,000.
C) Credit to Interest Revenue of $12,000.
D) Debit to Accrued Interest Receivable of $7,000.
8. Refer to the above data. The proper adjusting entry at December 31, 2001, with regard to this note receivable includes a:
A) Debit to Cash of $7,000.
B) Debit to Notes Receivable of $12,000.
C) Credit to Interest Revenue of $12,000.
D) Debit to Accrued Interest Receivable of $7,000.
Use the following to answer questions 8 9:
On November 1, 2000, Raceway Corporation sold land priced at $700,000 in exchange for a 12%, six month note receivable.
8 Refer to the above data. Raceway’s balance sheet at December 31, 2000, includes which of the following as a result of the sale of land on November 1?
A) Notes Receivable of $700,000 and Interest Receivable of $14,000.
C) Notes Receivable of $700,000 and Interest Receivable of $42,000.
Notes Receivable of $700,000 only.
11. At the end of January, the unadjusted trial balance of Windsor, Inc. included the following accounts:
Debit Credit
Sales (80% represent credit sales) 500,000
Accounts Receivable 340,000
Allowance for Doubtful Accounts 800
Refer to the above data. Windsor uses the balance sheet approach in estimating uncollectible accounts expense, and aging the accounts receivable indicates the estimated uncollectible portion to be $7,400. What is the amount of uncollectible accounts expense recognized in Windsor’s income statement for January?
B). $6,600
C). $8,200
Some other amount
12. Deegan Industries has an accounts receivable turnover rate of 8. Which of the following statements is not true?
A). Deegan’s accounts receivable are more liquid than those of a business whose accounts receivable turnover rate is 5
B). Deegan waits approximately 46 days to make collections of its credit sales. (Use 365 days in a year.)
C). Deegan writes off accounts receivable as uncollectible if they are over 45 days old.
D). Deegan’s net credit sales are about eight times the amount of its average accounts receivable
If a 15%, 60 day note receivable is acquired from a customer in settlement of an existing account receivable of $5,000, the accounting entry for acquisition of the note will:
B). Include a debit to Notes Receivable for $5,062.50
C). Include a credit to Interest Revenue for $62.50.
D). Include a debit to Notes Receivable for $5,000 and no entry for interest
15. On June 1, 2009, Jensen Company acquired an 8%, ten month note receivable from a customer in settlement of an existing account receivable of $130,000. Interest and principal are due at maturity. The company has a December 31st year end. Jensen’s entry to record the collection of this note at maturity includes a:
A). Credit to Accrued Interest Receivable of $6,067
During 2012, Robby’s Camera Shop had sales revenue of $170,000, of which $75,000 was on credit. At the start of 2012, Accounts Receivable showed a $16,000 debit balance, and the Allowance for Doubtful Accounts showed a $900 credit balance. Collections of accounts receivable during 2012 amounted to $60,000.
Data during 2012 follows:
a.
On December 31, 2012, an Account Receivable (J. Doe) of $1,700 from a prior year was determined to be uncollectible; therefore, it was written off immediately as a bad debt.
b.
On December 31, 2012, on the basis of experience, a decision was made to continue the accounting policy of basing estimated bad debt losses on 1.5 percent of credit sales for the year.
Compute trend percents for the above accounts, using 2009 as the base year. (Round your answers to the nearest whole percent. Omit the “%” sign in your response.)
During 2014, Pretenders Furniture Company purchases a carload of wicker chairs. The manufacturer sells the chairs to Pretenders for a lump sum of $63,000 because it is discontinuing manufacturing operations and wishes to dispose of its entire stock. Three types of chairs are included in the carload. The three types and the estimated selling price for each are listed below.
Type
No. of Chairs
Estimated Selling Price Each
Lounge chairs
400
$104
Armchairs
300
92
Straight chairs
900
58
During 2014, Pretenders sells 130 lounge chairs, 120 armchairs, and 100 straight chairs.
What is the amount of gross profit realized during 2014? What is the amount of inventory of unsold straight chairs on December 31, 2014? (Round cost per chair to 2 decimal places, e.g. 78.25 and final answer to 0 decimal places, e.g. 5,845.)
24D company had 100 units costing $24 per unit in inventory at March 1. It purchased 300 units for $28 each on March 2. It purchased 100 units for $27 on March 30. 24D’s only sales for the month occurred when it filled a sales contract on March 31 resulting in sales of 140 units for $49. 24D’s inventory on March 31 shows 160 units in inventory.
Calculate Cost of goods sold for March and the March 31 ending inventory cost for each of the following methods:
A 25 room budget motel expects its occupancy next year to be 80 percent. The owners’ investment is $402,800. They want an after tax return on their investment of 15%. Tax rate is 25%. Interest on a long term mortgage is 10%. Present balance outstanding is $806,400. Depreciation rate on the building is 10% of the present book value of $700,200. Depreciation on the furnishings and equipment is at 20% of the consolidated present book value of $150,400. Other known fixed costs total $141,800 a year. At 80% occupancy rate, the motel’s operating expenses, wages, supplies, laundry, etc. are calculated to be $55,400 a year. The motel has other income from vending machines of $5,210 a year.
a. To cover all costs and produce the required net income after tax, what should the motel’s average room rate be next year?
b. If the motel operates at 30% double occupancy and has an $8.00 spread between its single and double rates, what will the single and double room rates be? Assume only one common room size, all with the same rates.
3. 1.)Ralston Company has income from operations of $75,000, invested assets of $360,000, and sales of $790,000.
Required:
Use the DuPont formula to calculate the rate of return on investment, and show (a) the profit margin, (b) the investment turnover, and (c) rate of return on investment.
2.)Dexter Company’s costs were over budget by $56,000. The Dexter Company is divided in two regions. The first region’s costs were over budget by $8,000.
Required: Determine the amount that the second region’s cost was over or under budget.
3.) The Harp Company produced 8,600 units of product that required 3.25 standard hours per unit. The standard variable overhead cost per unit is $4.00 per hour. The actual variance factory overhead was $111,000. Determine the variable factory overhead controllable variance.
4.)The Harp Company produced 8,600 units of a product that required 3.25 standard hours per unit. The standard fixed overhead cost per unit is $1.20 per hour at 29,000 hours, which is 100% of normal capacity. Determine the fixed factory overhead volume variance.
4. The Staff of Jefferson Medical Services has estimated the following net cash flows for a food services operation that it may open in its outpatient clinic:
Year Expected net cash flow
0 ($100,000)
1 30,000
2 30,000
3 30,000
4 30,000
5 30,000
5(salvage value) 20,000
The Year o cash flow is the net investment outlay, while the final amount is the terminal cash flow. (The clinic is expected to move to a new building in five years.) All other flows represent net operating cash flows. Jefferson’s corporate cost of capital is 10%.
a. What is the project’s IRR??
b. Assuming the project has average risk, what us its NPV??
c. Now assuming that operating cash flows in Year 1 through 5 could be as low as $20,000 or as high as $40,000. Furthermore, the salvage value cash flow at the end of Year 5 could be as low as $0 or as high as $30,000. What is the worst case and best case IRR?? The worst case and best case NPV?
5.The transactions completed by Franklin Company during January, its first month of operations, are listed below. Assume that Franklin Company uses the following journals: Cash Receipts (CR), Cash Payments (CP), Revenue (R), Purchases (P), and General (G). Assume that it uses Accounts Receivable and Accounts Payable Subsidiary Ledgers as well as a General Ledger. Indicate by letters which journal would be used for each transaction. Also indicate if the entry requires a posting to a subsidiary ledger.A. Cash Payments (CP)B. Purchases (P), subsidiary postingC. Revenue (R), subsidiary postingD. Cash Receipts (CR), subsidiary postingE. Cash Payments (CP), subsidiary postingF. Cash Receipts (CR)G. General (G)H. Revenue (R)I. Purchases (P)J. General (G), subsidiary postingABCDEFGHIJPurchased supplies on accountABCDEFGHIJPaid for the equipment purchased on accountABCDEFGHIJPurchased equipment on accountABCDEFGHIJIssued check for salaryABCDEFGHIJReceived a check from a customer for payment on accountABCDEFGHIJRecorded the adjustment for supplies used during the monthABCDEFGHIJIssued check for purchase of suppliesABCDEFGHIJPurchased a computer for cashABCDEFGHIJIssued an invoice to a customerABCDEFGHIJIssued check for a payment on accountABCDEFGHIJIssued check for rentABCDEFGHIJReceived cash for a saleABCDEFGHIJIssued check for advertising expense
CVP Analysis, Strategy SolarFlex is a small but very innovative manufacturer of cutting edge solar panels. A significant portion of the company’s success is due to technologically superior product design. SolarFlex has invented a flexible photovoltaic panel that utilizes solar energy much more efficiently than traditional panels. Due to its flexible properties, SolarFlex’s panels are also very resistant to weathering and the normal wear and tear associated with traditional panels. This has made Solar Flex panels especially popular among certain green minded companies and individual consumers. SolarFlex’s management team is made up of a number of high profile executives that have extensive experience in the energy industry. Many equity investors and analysts believe the firm is poised to experience exponential growth in the coming years because of the growing popularity of environmentally friendly products and green engineering. However, a number of key industry experts warn that the market for SolarFlex’s new technology is much riskier than what many believe. They point out that the market is always risky for high tech start ups, especially those with new and unproven technology. The regular price for SolarFlex’s main product, the Flex 1000 panel, is $600. The firm expects to sell 380,000 units in the coming year, and sales are expected to increase during the following years. Right now SolarFlex produces its Flex 1000 panel at a small factory it recently purchased and uses some equipment it purchased from a leading industry manufacturer, the rest of the equipment is on lease. Currently, SolarFlex manufactures about 62 percent of the parts in their photovoltaic panels. SolarFlex’s management team has decided that it must reconfigure its manufacturing process in order to remain competitive. They decide to implement a plan to increase the number of purchased parts (to about 82 percent) and to reduce the complexity of the manufacturing process. This would allow SolarFlex to remove the leased equipment and to raise some cash by selling some of the purchased uipment currently used in the plant. The per unit manufacturing costs for 380,000 units of Flex 1000 follow:
General, selling, and administrative variable costs are $25 per unit and total fixed costs are $2,050,000; these costs are not expected to differ for either the current or the proposed manufacturing plan.
1. Compute the contribution margin per unti and the breakeven point in units for the Flex 100 panel, both before and after the propsed reengineering project.
2. Determine the number of sales units at which SolarFlex would be indifferent between the current manufacturing plan and the proposed plan. 3. Explain briefly (a) SolarFlex’s strategy and (b) if SolarFlex should undertake the proposed reengineering plan? Using a spreadsheet, support your answer with sensitivity analysis and a discussion of short term and long term considerations. Your sensitivity analysis should show the amount of increments of 100,000 units.
4. Using the results obtained from the sensitivity anaylsis conducted in (3)above, construct (in a single graph) the profit volume equation for each of the two decision alternatives.
5. Calculate and interpret the degree of operating leverage (DOL) for each decision alternative at Q= 400,000 units and at Q= 600,000 units.
ABC Company buys a bond as an available for sale security. The bond has a face value of $100,000 and matures in 10 years. The coupon is 6% and interest is paid semiannually on July 1 and December 31. The market rate of interest is 4%. The bond was purchased on January 1, Year 1 for $116,351.43. The carrying value of the bond after amortization on Dec 31, Year 1 was $114,992.03. The FMV of the bond was $113, 925.00 on Dec 31, Year 1.
Record the entry for receipt of interest on July 1, Year 1. Show computations.
Make the appropriate adjusting journal entry for Dec 31, Year 1.
The carrying value of the bond after amortization on Dec 31, Year 2 was $113,465. 49. The FMV of the bond on Dec 31, Year 2 was $$113, 524.
Make the appropriate adjusting journal entry for Dec 31, Year 2.
An accountant made the following adjustments at December 31, the end of the accounting period:
a. Prepaid insurance, beginning, $700. Payments for insurance during the period, $2,100. Prepaid insurance, ending, $800.
b. Interest revenue accrued, $900.
c. Unearned service revenue, beginning, $800. Unearned service revenue, ending $300
d. Depreciation, $6,200.
e. Employees’ salaries owed for three days of a five day work week; weekly payroll, $9,000.
f. Income before income tax, $20,000. Income tax rate is $25%.
Requirements
1. Journalize the adjusting entries.
2. Suppose the adjustments were not made. Compute the overall overstatement or understatement of net income as a result of the omission of these adjustments.
In its first year of operations, Roma Co. earned $45,000 in revenues and received $37,000 cash from these customers. The company incurred expenses of $25,500 but had not paid $5,250 of them at year end. The company also prepaid $6,750 cash for expenses that would be incurred the next year. Calculate the first year’s net income under both the cash basis and the accrual basis of accounting.
Reveneues =? Expenses=? Net income=?
AND
During the year, Sereno Co. recorded prepayments of expenses in asset accounts, and cash receipts of unearned revenues in liability accounts. At the end of its annual accounting period, the company must make three adjusting entries: (1) accrue salaries expense, (2) adjust the Unearned Services Revenue account to recognize earned revenue, and (3) record services revenue earned for which cash will be received the following period. For each of these adjusting entries (1), (2), and (3), indicate the account to be debited and the account to be credited.
Adjust entries:
Accrue salaries expense.
Debit Credit
Adjust the Unearned Services Revenue account to recognize earned revenue.
Debit: Credit:
Record services revenue earned for which cash will be received the following period.
Zambrano Wholesale Corporation maintains its records on a cash basis. At the end of each year the company’s accountant obtains the necessary information to prepare accrual basis financial statements. The following cash flows occurred during the year ended December 31, 2013:
Cash receipts:
From customers
$
675,000
Interest on note
4,000
Loan from a local bank
100,000
Total cash receipts
$
779,000
Cash disbursements:
Purchase of merchandise
$
390,000
Annual insurance payment
6,000
Payment of salaries
210,000
Dividends paid to shareholders
10,000
Annual rent payment
24,000
Total cash disbursements
$
640,000
Selected balance sheet information:
12/31/12
12/31/13
Cash
$
25,000
$
164,000
Accounts receivable
62,000
92,000
Inventory
80,000
62,000
Prepaid insurance
2,500
?
Prepaid rent
11,000
?
Interest receivable
3,000
?
Note receivable
50,000
50,000
Equipment
100,000
100,000
Accumulated depreciation”equipment
(40,000
)
(50,000
)
Accounts payable (for merchandise)
110,000
122,000
Salaries payable
20,000
24,000
Notes payable
0
100,000
Interest payable
0
?
Additional information:
1.
On March 31, 2012, Zambrano lent a customer $50,000. Interest at 8% is payable annually on each March 31. Principal is due in 2016.
2.
The annual insurance payment is made in advance on April 30. The policy period begins on May 1.
3.
On October 31, 2013, Zambrano borrowed $100,000 from a local bank. Principal and interest at 6% are due on October 31, 2014.
4.
Annual rent on the company’s facilities is paid in advance on June 30. The rental period begins on July 1.
Required:
1.
Prepare an accrual basis income statement for 2013 (ignore income taxes).
. Lake Power Sports sells jet skis and other powered recreational equipment. Customers pay 1/3 of the sales price of a jet ski when they initially purchase the ski, and then pay another 1/3 each year for the next two years. Because Lake has little information about collectibility of these receivables, they use the installment method for revenue recognition. In 2012 Lake began operations and sold jet skis with a total price of $870,000 that cost Lake $435,000. Lake collected $290,000 in 2012, $290,000 in 2013, and $290,000 in 2014 associated with those sales. In 2013 Lake sold jet skis with a total price of $1,590,000 that cost Lake $954,000. Lake collected $530,000 in 2013, $450,000 in 2014, and $450,000 in 2015 associated with those sales. In 2015 Lake also repossessed $160,000 of jet skis that were sold in 2013. Those jet skis had a fair value of $60,000 at the time they were repossessed. In 2102, Lake would recognize realized gross profit of:
1. Bilkins Financial Advisors provides accounting and finance assistance to customers in the retail business. They have 4 professionals on staff, plus an office with 6 clerical staff. Total compensation, including benefits, for the professional staff runs about $576,000 per year, and they normally have about 8,000 billable hours per year. Professional staff keep detailed time sheets distributed by client number. Office and administrative costs total $754,000 a year. What is the cost allocation rate that Bilkins will use for office and administrative costs? 94.25/hr 36/hr 72/hr 74.13/hr 2. Falstaff Products estimates manufacturing overhead costs for the coming year at $500,000. Falstaff will allocate based on machine hours. Falstaff estimates 8,000 machine hours for the coming year. What is the predetermined manufacturing overhead rate?
62.5 per machine hour
.016 per machine hour
32 per machine hour
6.25 per machine hour
3. In job order costing, the journal entry to issue indirect materials to production should include which of the following?
Credit to Finished GOods inventory
Credit to Materials Inventory
Credit to Manufacturing Overhead
Credit to Work in Process Inventory
4. On January 1, 2012, Jackson Company’s work in process inventory account had a balance of $65,000. During 2012, materials requisitioned for use in production amounted to $70,000, of which $66,000 represented direct materials. Factory wages for the period were $209,000, of which $186,400 were for direct labor. Manufacturing overhead is allocated on the basis of 60% of direct labor cost. Actual overhead was $116,440. Jobs costing $353,240 were completed during 2012. The December 31, 2012, balance in work in process inventory is: 80000 72800 107200 76000 5. The entry to record the purchase of materials on account using a job order costing system would include a: Debit to materials inventory Debit to accounts payable Debit to work in process inventory Credit to materials inventory
6.Bilkins Financial Advisors provides accounting and finance assistance to customers in the retail business. They have 4 professionals on staff, plus an office with 6 clerical staff. Total compensation, including benefits, for the professional staff runs about $576,000 per year, and they normally have about 8,000 billable hours per year. Professional staff keep detailed timesheets distributed by client number. Office and administrative costs total $754,000 a year. What is the cost allocation rate that Bilkins will use for direct labor i.e. the cost of the professional staff?
75/hr
36
72
76
7. Which of the following is an industry that would use a process costing system rather than a job order costing system?
Custom furniture manufacturer
Music production studio
Paint manufacturer
Home remodeling contractor
8. LDR Manufacturing produces a pesticide chemical and uses process costing. There are three processing departments Mixing, Refining, and Packaging. On January 1, 2012, the first department, Mixing, had a zero beginning balance. During January, 40,000 liters of chemicals were started into production. During the month, 32,000 liters were completed, and 8,000 remained in process, partially completed. In the Mixing Department, all raw materials are added at the beginning of the production process, and conversion costs are applied evenly through the process.
At the end of the month, LDR calculated equivalent units. The ending inventory in the Mixing Department was 60% complete with respect to conversion costs. With respect to direct materials costs, how many equivalent units were calculated for the product that was completed, and how many equivalent units were calculated for the ending balance?
32,000 e.u and 4800 e.u
32,00 and 8000
19200 and 4800
40,000 and 8000
9. Inglesias Company just completed job number 12. See details below.
Direct labor cost: $840
Direct materials cost: $1,100
Machine hours for milling machinery: 7
Direct labor hours: 22
Predetermined manufacturing overhead allocation rate: $90 per machine hour
1) When a company assigns the costs of direct materials, direct labor, and both variable and fixed manufacturing overhead to products, that company is using
1. A company starts with accounts receivable of $64,899 and an allowance for doubtful accounts of $6,969. During the year, they have $706,436 of credit sales, $160,736 of cash sales and $5,232 of accounts written off. The company estimates that 3% of credit sales will be uncollectible. What is the AJE required at year end? (Do NOT enter any commas, dollar signs, etc. Just enter the number ROUNDED TO THE NEAREST DOLLAR)
2. A company starts with accounts receivable of $59,006 and an allowance for doubtful accounts of $6,520. During the year, they have $648,489 of credit sales, $201,335 of cash sales and $7,801 of accounts written off. The company estimates that $5,197 of accounts receivable will be uncollectible. What is the ending balance of the allowance account after all AJEs? (Do NOT enter any commas, dollar signs, etc. Just enter the number)
3. A company starts with accounts receivable of $66,097 and an allowance for doubtful accounts of $7,125. During the year, they have $629,878 of credit sales, $178,473 of cash sales and $5,125 of accounts written off. The company estimates that $6,911 of accounts receivable will be uncollectible. What is the AJE required at year end? (Do NOT enter any commas, dollar signs, etc. Just enter the number)
4. A company starts with accounts receivable of $63,598 and an allowance for doubtful accounts of $6,749. During the year, they have $746,607 of credit sales, $168,358 of cash sales and $7,634 of accounts written off. The company estimates that 3% of credit sales will be uncollectible. What is the ending balance of the allowance account after all AJEs? (Do NOT enter any commas, dollar signs, etc. Just enter the number ROUNDED TO THE NEAREST DOLLAR)
5. A company started with A/R of $57,980 and an allowance for uncollectible accounts of $171,024. During the year, they had credit sales of $898,555, cash sales of $3,823 and wrote off accounts receivable of $4,174. At year end, the company had A/R of $61,335. What were cash collections from customers on account?
1. The CRCR Corporation is doing budgets for the last quarter of its fiscal year, which ends on December 31. The company expects to make total sales by month of:
Sept
Oct
Nov
Dec
Jan
$50,000
$52,500
$63,000
$81,900
$32,760
Of total sales each month, 40% will be in cash. Remaining sales will be made on credit. The company expects to collect 55% of all credit sales in the month the sale was made and in time for the customer to take a 2.5% prompt payment sales discount. The company will collect an additional 40% of credit sales in the month after the sale. What is the expected balance in accounts receivable at the end of November?
1. As of December 31, 2000, Dalton Company has $7,240 cash in its checking account, as well as several other items listed below:
Bank credit card slips signed by customers $ 900
Money market fund balance 4,000
Investment in US Treasury bills 10,000
Checks received from customers, but not
yet deposited in the bank 700
Investment in ATT 10% bonds, maturing June 2001 15,000
What amount should be shown in Dalton’s December 31, 2000, balance sheet as “Cash and cash equivalents”?
A) $15,600.
B) $22,840
C) $37,840
D) $30,600
The Cash account in the ledger of Townhouse Co. shows a balance of $16,526 at September 30. The bank statement, however, shows a balance of $20,900 at the same date. The only reconciling items consist of a bank service charge of $6, a large number of outstanding checks totaling $5,930, and a deposit in transit.
2. Refer to the above data. What is the adjusted cash balance in the September 30 bank reconciliation?
Answer A) $10,590.
B) $16,520.
C) $14,970
D) $14,964
3. Silbey Inc. had accounts receivable of $200,000 and an allowance for doubtful accounts of $8,700 just before writing off as worthless an account receivable from Walley Company of $1,200. After writing off this receivable what would be the balance in Silbey’s Allowance for Doubtful Accounts?
Answer A) $8,700 credit balance.
B) $9,900 credit balance.
C) $7,500 credit balance.
D) $7,500 debit balance.
4. At the start of the current year, Acqua Corporation had a credit balance in the Allowance for Doubtful Accounts of $1,200. During the year a monthly provision of 2% of sales was made for uncollectible accounts. Sales for the year were $400,000, and $7,400 of accounts receivable were written off as worthless. No recoveries of accounts previously written off were made during the year. The year end financial statements should show:
A) Uncollectible accounts expense of $15,400.
B) Allowance for Doubtful Accounts with a credit balance of $1,800.
C) Allowance for Doubtful Accounts with a credit balance of $8,600.
D) Uncollectible accounts expense of $7,400.
5. Vector Corporation invested $290,000 cash in available for sale marketable securities in early December. On December 31, the quoted market price for these securities is $307,000. Which of the following statements is correct?
Answer A) Vector’s December income statement includes a $17,000 gain on investments.
B) If Vector sells these investments on January 2 for $300,000, it will report a loss of $7,000.
C) Vector’s December 31 balance sheet reports marketable securities at $290,000 and an Unrealized Holding Gain on investments of $17,000.
D) Vector’s December 31 balance sheet reports marketable securities at $307,000 and an Unrealized Holding Gain on Investments of $17,000.
.
6. On June 1, 2001, Swift Company acquired a 10%, ten month note receivable from a customer in settlement of an existing account receivable of $120,000. Interest and principal are due at maturity.
8. Refer to the above data. The proper adjusting entry at December 31, 2001, with regard to this note receivable includes a:
A) Debit to Cash of $7,000.
B) Debit to Notes Receivable of $12,000.
C) Credit to Interest Revenue of $12,000.
D) Debit to Accrued Interest Receivable of $7,000.
7. In order to achieve internal control over cash receipts:
A) The employee who handles checks received in the mail should not prepare the control listing.
B) The cashier should not deposit cash in the bank.
C) The salesclerk should not count the cash in the register at the end of the day.
D) The checks received in the mail from customers should not be sent to the accounting department to be recorded as cash receipts.
Use the following to answer questions 8 9:
On November 1, 2000, Raceway Corporation sold land priced at $700,000 in exchange for a 12%, six month note receivable.
8 Refer to the above data. Raceway’s balance sheet at December 31, 2000, includes which of the following as a result of the sale of land on November 1?
A) Notes Receivable of $700,000 and Interest Receivable of $14,000.
B) Notes Receivable of $742,000 and Interest Receivable of $14,000.
C) Notes Receivable of $700,000 and Interest Receivable of $42,000.
D) Notes Receivable of $700,000 only.
9. Refer to the above data. On May 1, 2001 (maturity date), the note is collected in full by Raceway Corporation. Assuming a fiscal year end of December 31, Raceway recognizes which of the following in its income statement for 2001 with regard to this note?
A) $742,000 sales revenue
B) $28,000 interest revenue.
C) $14,000 interest revenue
D) $42,000 interest revenue
10. When there is an Allowance for Doubtful Accounts in use, the writing off of an uncollectible accounts receivable will:
A). Reduce income
B) Reduce an expense
C). Not change income or total assets
D). Increase total assets
11. At the end of January, the unadjusted trial balance of Windsor, Inc. included the following accounts:
Debit Credit
Sales (80% represent credit sales) 500,000
Accounts Receivable 340,000
Allowance for Doubtful Accounts 800
Refer to the above data. Windsor uses the balance sheet approach in estimating uncollectible accounts expense, and aging the accounts receivable indicates the estimated uncollectible portion to be $7,400. What is the amount of uncollectible accounts expense recognized in Windsor’s income statement for January?
A). $7,400
B). $6,600
C). $8,200
D). Some other amount
12. Deegan Industries has an accounts receivable turnover rate of 8. Which of the following statements is not true?
A). Deegan’s accounts receivable are more liquid than those of a business whose accounts receivable turnover rate is 5
B). Deegan waits approximately 46 days to make collections of its credit sales. (Use 365 days in a year.)
C). Deegan writes off accounts receivable as uncollectible if they are over 45 days old.
D). Deegan’s net credit sales are about eight times the amount of its average accounts receivable
13. Randall, Inc. uses the allowance method supported by an aging of its accounts receivable to recognize uncollectible accounts expense in its financial statements. What method of recognizing this expense does Randall use in its income tax return?
A). It must use the same method
B). The direct write off method
C). Either the balance sheet or income statement approach is acceptable.
D). None, since uncollectible accounts expense is not deductible for income tax purposes
14. If a 15%, 60 day note receivable is acquired from a customer in settlement of an existing account receivable of $5,000, the accounting entry for acquisition of the note will:
A). Include a debit to Notes Receivable for $5,750
B). Include a debit to Notes Receivable for $5,062.50
C). Include a credit to Interest Revenue for $62.50.
D). Include a debit to Notes Receivable for $5,000 and no entry for interest
15. On June 1, 2009, Jensen Company acquired an 8%, ten month note receivable from a customer in settlement of an existing account receivable of $130,000. Interest and principal are due at maturity. The company has a December 31st year end. Jensen’s entry to record the collection of this note at maturity includes a:
A). Credit to Accrued Interest Receivable of $6,067
1. El Dorado Foods Inc. owns a chain of specialty stores in the Pacific Northwest. Recently, four of the stores have experienced declining profits due to market saturation in the area. As a result, management gathered data about possible impairment of the assets of the stores. The information gathered was as follows:
Book value: $17.5 million Fair value: $14.9 million Undiscounted sum of future cash flows: $16.5 million
Required: Determine the amount, if any, of the impairment loss that El Dorado must recognize on these assets.
$1 million
$1.6 million
$14.9 million
$2.6 million
2. Meca Concrete purchased a mixer on January 1 for a cost of $45,000. Straight line depreciation was used for years one and two based on an estimated eight year life and $3,000 estimated residual value. In the third year of use, Meca revised its estimate and now believes the mixer will have a total service life of only six years, and that the residual value will be only $2,000.
Required: Compute depreciation for the third year
$9,187.50
$7,375
$8,625
$8,125
3. First quarter credit sales totaled $700,000. The state sales tax rate is 4% and the local sales tax rate is 2%. The journal entry to record the sales shall include:
1) The file ‘SUV’ contains the overall miles per gallon (mpg) of 2010 family SUVs.
a) Compute the mean, median, and the mode.
b) Compute the variance, standard deviation, range, coefficient of variation, and Z scores.
c) Are the data skewed? If so, how?
2) The file ‘HotelUK’ contains the room service price (in $) paid by US travelers in six British cities in 2009.
a) Compute the first quartile, the third quartile, and the interquartile range.
b) Construct a boxplot and describe its shape.
3) The file ‘Energy’ contains the per capita energy consumption (in kilowatt hours), for each of the 50 states and the District of Columbia during a recent year.
a) Compute the mean, variance, and standard deviation for the population.
b) What proportion of these states has per capita energy consumption within + or ‘ 1 standard deviation of the mean, within + or ‘ 2 standard deviations of the mean, and within + or ‘ 3 standard deviations of the mean?
c) Compare your findings with what would be expected based on the empirical rule.
d) Repeat a) through c) with the District of Columbia removed. Have the results changed?
4) The file ‘Cereals’ lists the calories and sugar (disregard carbohydrates) in grams, in one serving of seven breakfast cereals.
a) Compute the covariance.
b) Compute the coefficient of correlation.
c) Which do you think is more valuable in expressing the relationship between calories and sugar ‘ the covariance of the coefficient of correlation? Explain.
d) Based on a) and b), what conclusions can you reach about the relationship between calories and sugar?
1. Which of the following properly describes the impact on the financial statements when a company reports wage expense of $8,100, of which $3,100 remains unpaid?
2.
Husky Company has provided the following information for its most recent year of operation:
Cash collected from customers totaled $91,200.
Cash borrowed from banks totaled $35,500.
Cash paid to employees totaled $34,000.
Cash paid for interest totaled $6,700.
Cash received from selling Husky stock to stockholders totaled $60,000.
Cash payments to banks for repayment of money borrowed totaled $9,400.
Cash paid for operating expenses totaled $9,800.
Land costing $38,000 was sold for $38,000 cash.
Cash paid for dividends to stockholders totaled $5,200.
How much was Husky’s cash flow from operating activities?
3.
During 2010, Rock Company’s cash balance increased from $81,000 to $92,500. Rock’s net cash flow from operating activities was $38,500 and its net cash flow from financing activities was $13,500. How much was Rock’s net cash flow from investing activities?
4.
Husky Company has provided the following information for its most recent year of operation:
Cash collected from customers totaled $89,400.
Cash borrowed from banks totaled $31,900.
Cash paid to employees totaled $32,200.
Cash paid for interest totaled $3,100.
Cash received from selling Husky stock to stockholders totaled $42,000.
Cash payments to banks for repayment of money borrowed totaled $7,600.
Cash paid for operating expenses totaled $8,000.
Land costing $20,000 was sold for $20,000 cash.
Cash paid for dividends to stockholders totaled $3,400.
How much was Husky’s cash flow from financing activities?
(a.) On November 30, after all transactions have been recorded, the balance in the company’s Cash account has a balance of $27,202.
This is the beginning balance per books
(b.) The company’s bank statement shows a balance on November 30 of $29,279.
This is the beginning balance per bank.
(c.) Outstanding checks at November 30 include check #3030 in the amount of $1,525 and check #3556 in the amount of $1,459
These are deductions from balance per bank
(d.) A credit memo included with the bank statement indicates that the bank collected $780 on a noninterest bearing note receivable for Avisa. The bank deducted a $10 collection fee, and credited the remainder of $770 to Avisa’s account. –
This is an addition to the balance per bookless the fee (e.) A debit memo included with the bank statement shows a $67 NSF check from a customer, J. Brown.—
This is a deduction to the balance perbook
(f.) A deposit placed in the bank’s night depository on November 30 totaled $1,675, and did not appear on the bank statement.—
This is an addition to the balance perbank
(g.) Examination of the checks on the bank statement with the entries in the accounting records reveals that check #3445 for the payment of an account payable was correctly written for $2,450, but was recorded in the accounting records as $2,540.—
This difference of 90 is an addition to the balance per book
1. Which of the following statements is correct regarding the taxation of C corporations?
Schedule M 2 is used to reconcile net income as computed for financial accounting purposes with taxable income reported on the corporation’s tax return.
The corporate return is filed on Form 1120S.
Corporations can receive an automatic extension of nine months for filing the corporate return by filing Form 7004 by the due date for the return.
A corporation with total assets of $7.5 million or more is required to file Schedule M 3.
None of the above.
Schedule M 1 of Form 1120 is used to reconcile financial net income with taxable income reported on the corporation’s income tax return as follows: net income per books + additions ‘ subtractions = taxable income. Which of the following items is a subtraction on Schedule M 1?
Book depreciation in excess of tax depreciation.
Excess of capital losses over capital gains.
Proceeds on key employee life insurance.
Income subject to tax but not recorded on the books.
None of the above.
In 2013, Bluebird Corporation had net income from operations of $100,000. Further, Bluebird recognized a long term capital gain of $30,000, and a short term capital loss of $45,000. Which of the following statements is correct?
Bluebird Corporation will have taxable income in 2013 of $100,000 and will have a net capital loss of $15,000 that can be carried back 3 years and forward 5 years.
Bluebird Corporation may use the capital loss to offset the capital gain and must carry the net capital loss of $15,000 forward five years as a short term capital loss.
Bluebird Corporation may deduct $33,000 of the capital loss in 2013 and may carry forward the remainder of the capital loss indefinitely to offset capital gains.
Bluebird Corporation will have taxable income in 2013 of $85,000.
None of the above.
During 2013, Sparrow Corporation, a calendar year C corporation, had operating income of $425,000, operating expenses of $280,000, a short term capital loss of $10,000, and a long term capital gain of $25,000. How much is Sparrow’s tax liability for 2013?
1. A gain is recognized on the disposal of plant assets when:
A) The sales price is greater than the residual value but less than the book value.
B) The sales price is less than both the book value and the residual value.
C) The sales price is greater than the book value and greater than the residual value.
D) The sales price is greater than the book value and less than the residual value.
2. Expenditures for research and development intended to lead to new products of commercial value:
Answer
A) Should be recorded as intangible assets and amortized during the years in which benefits are expected.
B) Should be charged to expense when incurred.
C) Should be capitalized only if patents are expected to be granted.
D) Should be classified as deferred charges.
3. The legal life of most patents is:
A) 5 years.
B) 20 years.
C) 40 years.
D) 50 years.
4. Silverado Company purchased equipment having an invoice price of $21,100. The terms of sale were 4/10, n/30, and Silverado paid within the discount period. In addition, Silverado paid a $155 delivery charge, $225 installation charge, and $947 sales tax. The amount recorded as the cost of this equipment is:
A) $21,583.
B) $20,636
C) $22,427
D) $21,480
5. Land and a warehouse were acquired for $890,000. What amounts should be recorded in the accounting records for land and for the warehouse if an appraisal showed the estimated values to be $400,000 for the land and $700,000 for the warehouse?
A) $400,000 for land; $490,000 for warehouse.
B) $400,000 for land; $700,000 for warehouse.
C) $323,960 for land; $566,040 for warehouse.
D) $240,000 for land; $700,000 for warehouse.
6. On March 2, 2009, Farlow Industries purchased a fleet of automobiles at a cost of $660,000. The cars are to be depreciated by the straight line method over six years with no salvage value. Farlow uses the half year convention to compute depreciation for fractional periods. The book value of the fleet of automobiles at December 31, 2010, will be:
A) $495,000.
B) $440,000.
C) $385,000
D) $400,000
7. Which of the following would not be amortized?:
A) Oil well
B) Copyright
C) Franchise fee
D) Patent
8. Del Rey Imports sold a depreciable plant asset for cash of $25,000. The accumulated depreciation amounted to $60,000, and a loss of $5,000 was recognized on the sale. Under these circumstances, the original cost of the asset must have been:
A) $55,000
B) $65,000
C) $80,000
D) $90,000
9. Total stockholders’ equity of Concord Company is $3,000,000. The fair market value of Concord’s net identifiable assets (assets less liabilities) is $4,000,000. Wheeler Corporation makes an offer to purchase Concord’s entire business for $4,800,000. In this situation:
A) Concord Company should report goodwill of $800,000 in its balance sheet.
B) Concord Company should report goodwill of $1,800,000 in its balance sheet.
C) Wheeler Corporation is willing to pay $1,800,000 for goodwill generated by Concord, and Wheeler will report this goodwill in its balance sheet if the purchase is finalized.
D) Wheeler Corporation is willing to pay $800,000 for goodwill generated by Concord, and Wheeler will report this goodwill in its balance sheet if the purchase is finalized.
10. Armstrong Company recently acquired a new computer system. Which of the following costs associated with the computer should not be debited to the Equipment account?
A. Insurance coverage purchased by United to cover the computer during shipment from the manufacturer
B. Wages paid to system programmers hired to prepare the new computer for use
C. Replacement of several circuit boards damaged during installation
D. Installation of new electrical power supplies required for the computer
11. The gain or loss on the disposal of a depreciable asset reported in financial statements often differs from that reported for income tax purposes. The principal reason for the difference is:
A. The cost of the asset is different for financial reporting and income tax purposes
B. The sales price of the asset is different for financial reporting and income tax purposes
C. Different depreciation methods have been used in financial statements and in income tax returns
D. The company has made an error the same amount of gain or loss should appear in the income tax return as in the financial statements.
12. If an asset is determined to be impaired, it should be:
A. depreciated only using the straight line method
B. written up to its historical cost
C. reclassified as a liability
D. written down to its fair market value
13. Responsibility for selection of the depreciation methods used in financial reporting rests with:
A. The FASB
B. The CPA firm that audits the company’s financial statements
C. Company management
D. The IRS
14. An accelerated depreciation method:
A. Results in reporting higher earnings every year
B. Depreciates an asset over a shorter life than does the straight line method
C. Recognizes more depreciation expense in the early years of an asset’s useful life and less in the later years
D. Is required for assets that become technologically obsolete before they physically wear out
On April 30, 2009, Charter Products purchased machinery for $88,000. The useful life of this machinery is estimated at 8 years, with an $8,000 residual value.
15. Refer to the above data. Assume that in its financial statements, Charter Products uses straight line depreciation and the half year convention. Depreciation expense recognized on this machinery in 2009 and 2010 will be:
1. A gain is recognized on the disposal of plant assets when:
A) The sales price is greater than the residual value but less than the book value.
C) The sales price is greater than the book value and greater than the residual value.
D) The sales price is greater than the book value and less than the residual value.
4. Silverado Company purchased equipment having an invoice price of $21,100. The terms of sale were 4/10, n/30, and Silverado paid within the discount period. In addition, Silverado paid a $155 delivery charge, $225 installation charge, and $947 sales tax. The amount recorded as the cost of this equipment is:
A) $21,583.
B) $20,636
D) $21,480
6. On March 2, 2009, Farlow Industries purchased a fleet of automobiles at a cost of $660,000. The cars are to be depreciated by the straight line method over six years with no salvage value. Farlow uses the half year convention to compute depreciation for fractional periods. The book value of the fleet of automobiles at December 31, 2010, will be:
A) $495,000.
B) $440,000.
D) $400,000
7. Which of the following would not be amortized?:
A) Oil well
B) Copyright
D) Patent
8. Del Rey Imports sold a depreciable plant asset for cash of $25,000. The accumulated depreciation amounted to $60,000, and a loss of $5,000 was recognized on the sale. Under these circumstances, the original cost of the asset must have been:
B) $65,000
C) $80,000
D) $90,000
9. Total stockholders’ equity of Concord Company is $3,000,000. The fair market value of Concord’s net identifiable assets (assets less liabilities) is $4,000,000. Wheeler Corporation makes an offer to purchase Concord’s entire business for $4,800,000. In this situation:
A) Concord Company should report goodwill of $800,000 in its balance sheet.
B) Concord Company should report goodwill of $1,800,000 in its balance sheet.
D) Wheeler Corporation is willing to pay $800,000 for goodwill generated by Concord, and Wheeler will report this goodwill in its balance sheet if the purchase is finalized.
12. If an asset is determined to be impaired, it should be:
A. depreciated only using the straight line method
On January 1, 2008, Parent Company acquired 90 percent ownership of Subsidiary Corporation, at underlying book value. The fair value of the noncontrolling interest at the date of acquisition was equal to 105 of the book value of the Subsidiary Corporation. On March 17, 2008, Subsidiary purchased inventory from Parent for $90,000. Subsidiary sold the inventory to an unaffiliated company for $120,000 on November 21, 2008. Parent had produced the inventory sold to Subsidiary for $62,000. The companies had no other transactions during 2008. What amount of cost of goods sold will be reported in the 2008 consolidated income statement?
A. $62,000
B. $120,000
C. $90,000
D. $58,000
2.On January 1, 2008, Parent Company acquired 90 percent ownership of Subsidiary Corporation, at underlying book value. The fair value of the noncontrolling interest at the date of acquisition was equal to 105 of the book value of the Subsidiary Corporation. On March 17, 2008, Subsidiary purchased inventory from Parent for $90,000. Subsidiary sold the inventory to an unaffiliated company for $120,000 on November 21, 2008. Parent had produced the inventory sold to Subsidiary for $62,000. The companies had no other transactions during 2008. What amount of consolidated net income will be assigned to the controlling shareholders for 2008?
1. The Linda Corporation is doing budgets for the last quarter of its fiscal year, which ends on December 31. The company expects to make sales by month are:
Sept
Oct
Nov
Dec
Jan
$25,000
$26,250
$31,500
$40,950
$16,380
The unit sales price is $0.50. The company plans to keep ending finished goods inventory equal to 20% of the following month’s production. What is the planned production for the month of November?
Terry Inc. manufactures machine parts for aircraft engines. CEO Bucky Walters is considering an offer from a subcontractor to provide 2,000 units of product OP89 for $120,000. If Terry does not purchase these parts from the subcontractor, it must continue to produce them in house with these costs:
Cost per unit
Direct Materials ……………….$28
Direct labor………………………18
Variable overhead……………..16
Allocated fixed overhead………..4
Required: Should Terry, Inc. accept the offer from the subcontractor? Why or why not? Include a consideration of financial and nonfinancial factors.
2) Disposal of Assets: A company has an inventory of 2,000 different parts for a line of cars that has been discontinued. The net book value (NBV) of this inventory is $50,000. The parts can be either remachined at a total additional cost of $25,000 and then sold for $30,000 or sold as is for $2,500.
Required: What should it do? Include a consideration of both financial and nonfinancial factors.
3) Replacement of an Asset: An uninsured boat costing $90,000 was wrecked the first day it was used. It can be either sold as is for $9,000 cash and replaced with a similar boat costing $92,000 or rebuilt for $75,000 and be brand new as far as operating characteristics and looks are concerned.
Required: What should be done? Include a consideration of both financial and nonfinancial factors.
Sundial, Inc., produces two models of sunglasses: AU and NZ. The sunglasses have the following characteristics:
AU
NZ
Selling price per unit
$
420
$
420
Variable cost per unit
$
120
$
210
Expected units sold per year
40,000
60,000
The total fixed costs per year for the company are $11,562,000
(a)
What is the anticipated level of profits for the expected sales volumes?
(b)
Assuming that the product mix is the same at the break even point, compute the break even point.
(c)
If the product sales mix were to change to four pairs of AU sunglasses for each pair of NZ sunglasses, what would be the new break even volume for Sundial, Inc.?
Supply costs at Lattea Corporation’s chain of gyms are listed below:
Client Visits
Supply Cost
March
11,649
$28,563
April
11,445
$28,397
May
11,977
$28,821
June
12,200
$28,896
July
11,709
$28,624
August
11,195
$28,223
September
11,989
$28,822
October
11,680
$28,580
November
11,828
$28,705
Management believes that supply cost is a mixed cost that depends on client visits. Using the high low method to estimate the variable and fixed components of this cost, those estimates would be closest to:(Round your Variable cost per unit to 2 decimal places.)
Sweeney & Associates, a large marketing firm, adjusts its accounts at the end of each month. The following information is available for the year ending December 31, 2011:
1.
A bank loan had been obtained on December 1. Accrued interest on the loan at December 31 amounts to $1,220. No interest expense has yet been recorded.
2.
Depreciation of the firm’s office building is based on an estimated life of 25 years. The building was purchased in 2007 for $320,000.
3.
Accrued, but unbilled, revenue during December amounts to $58,000.
4.
On March 1, the firm paid $1,300 to renew a 12 month insurance policy. The entire amount was recorded as Prepaid Insurance.
5.
The firm received $14,000 from the King Biscuit Company in advance of developing a six month marketing campaign. The entire amount was initially recorded as Unearned Revenue. At December 31, $3,000 had actually been earned by the firm.
6.
The company’s policy is to pay its employees every Friday. Since December 31 fell on a Wednesday, there was an accrued liability for salaries amounting to $1,800.
a.
Record the necessary adjusting journal entries on December 31, 2011. (Do not round your intermediate calculations. Round your answers to the nearest whole dollar. Omit the “$” sign in your response.)
Sweeten Company had no jobs in progress at the beginning of March and no beginning inventories. It started only two jobs during March”Job P and Job Q. Job P was completed and sold by the end of the March and Job Q was incomplete at the end of the March. The company uses a plantwide predetermined overhead rate based on direct labor hours. The following additional information is available for the company as a whole and for Jobs P and Q (all data and questions relate to the month of March):
Estimated total fixed manufacturing overhead
$
10,000
Estimated variable manufacturing overhead per direct labor hour
$
1.00
Estimated total direct labor hours to be worked
2,000
Total actual manufacturing overhead costs incurred
$
12,500
Job P
Job Q
Direct materials
$
13,000
$
8,000
Direct labor cost
$
21,000
$
7,500
Actual direct labor hours worked
1,400
500
Assume the ending raw materials inventory is $1,000 and the company does not use any indirect materials.
Required:
Prepare the journal entry to transfer costs from Work in Process to Finished Goods.
Swiss Velvet Chocolate Company processes chocolate into candy bars. The process begins by placing direct materials (raw chocolate, milk, and sugar) into the Blending Department. All materials are placed into production at the beginning of the blending process. After blending, the milk chocolate is then transferred to the Molding Department, where the milk chocolate is formed into candy bars. The following is a partial work in process account of the Blending Department at August 31, 2012 (below):
31….bal. ? units 1/5 done………………………………………………….?………………………
1. Prepare a cost of production report, and identify the missing amounts for Work in Process”Blending Department.
2. Assuming that the August 1 work in process inventory includes direct materials of $6,460, determine the increase or decrease in the cost per equivalent unit for direct materials and conversion between july and august.
***trying to figure out the ? (question marks) and #1 and #2
Tanya Fletcher owns undeveloped land (adjusted basis of $80,000, fair market value of $92,000) on the east coast. on 01/04/13, she exchanges it with her sister, Lisa for undeveloped land on the west coast and $3,000 cash. Lisa has an adjusted basis of $72,000 for her land and fair market value of $89,000. As the real estate market on the east coast is thriving on 9/01/14, Lisa sells the land she acquired for $120,000.
A. What are Tanya’s recognized gain or loss and adjusted basis for the west coast land on 01/04/13?
B. What are Lisa’s recognized gain or loss and adjusted basis for the east coast land on 01/04/13?
C. What are Lisa’s recognized gain or loss on 9/01/14 sale?
D. What effects does Lisa’s 2014 sale have on Tanya?
E. Write a letter to Tanya advising her on how she could avoid any recognizition of gain associated with the 01/01/13 exchange prior to her actual sale of land.
Techno enterprises is a manufacturer of microchips (referred to as chips). Its production process is complex and involves more than 100 steps, starting with production of small, round silicon wafers and ending with chips being put into individual packages that protect them and provide connections to the products for which the chips are developed. The company uses a process costing system and has always made the simplifying assumption that wafers in production, but not yet finished, are 50 percent complete with respect to conversion costs.
In the current year, the company has struggled due to a decline in computer sales and reduced demand for chips. To boost profit, the company has decided to start a very large number of wafers into production in the last few days of the year. Due to the use of ceramic carriers and other high performance features, the Techno Enterprises production process typically takes 30 days.
A. Explain why starting a large number of wafers into production will boost profit even though the chips that ultimately result from the wafers are ones that have not been sold or even completed. Is the company’s approach to boosting profit ethical?
Texas Product Corporation begins operation on April 1, 2012. The firm engages in the following transaction during April.
(1) Issues 20,000 shares of $5 par value common stock for $12 per share in cash.
(2) Issues 5,000 shares of $100 par value preferred stock at par value for cash.
(3) Gives $40,000 in cash and 5,000 shares of common stock in exchange for land and a building. The land appears at $25,000 and the building at $75,000 on the balance sheet.
(4) Acquires equipment costing $46,000. It makes cash payment of $8,000 and gives an 8% notes due in one year, for the balance.
(5) Pays transportation cost of $1,200 on equipment in (4).
(6) Pays installation cost of $1,800 on the equipment in (4).
(7) Acquire merchandise inventory costing $60,000 on account.
(8) Pays license fees of $1,300 for the year beginning May 1 in advance.
(9) Discovers that merchandise costing $1,900 from the acquisition in (7) is defective and returns it to the supplier for credit. The firm has not yet paid this account.
(10) Purchase a patent from its creator for $30,000.
(11) Signs an agreement to manufacture a specially designed machine for a customer for $60,000 to be delivered in January of next year. At the time of signing, the customer advances $12,000 of the contract price.
(12) Pays invoices totaling $40,000 from the purchases in (7).
Required:
a. Prepare journal entries and enter the transactions in T accounts. Indicate whether each account is an asset, a liability, or a stockholder’s equity item.
b. Prepare a balance sheet for Texas Product Corporation as of April 30, 2012.
Thermal Tent, Inc., is a newly organized manufacturing business that plans to manufacture and sell 50,000 units per year of a new product. The following estimates have been made of the company’s costs and expenses (other than income taxes):
Fixed
Variable per Unit
Manufacturing costs:
Direct materials
$
47
Direct labor
32
Manufacturing overhead
$
340,000
4
Period costs:
Selling expenses
1
Administrative expenses
200,000
Totals
$
540,000
$
84
a.
What should the company establish as the sales price per unit if it sets a target of earning an operating income of $260,000 by producing and selling 50,000 units during the first year of operations? (Hint: First compute the required contribution margin per unit.) (Omit the “$” sign in your response.)
Sales price per unit
$
b.
At the unit sales price computed in part a, how many units must the company produce and sell to break even? (Assume all units produced are sold.)
Break even sales volume
units
c.
What will be the margin of safety (in dollars) if the company produces and sells 50,000 units at the sales price computed in part a? Using the margin of safety, compute operating income at 50,000 units. (Omit the “$” sign in your response.)
Operating income
$
d.
Assume that the marketing manager thinks that the price of this product must be no higher than $94 to ensure market penetration. Will setting the sales price at $94 enable Thermal Tent to break even, given the plans to manufacture and sell 50,000 units?
Transaction Entries: Creative Designs, a firm providing art services for advertisers, began business on June 1. The following accounts in its general ledger are needed to record the transactions for June: Cash, Accounts receivable, supplies, office equipment, accounts payable, common stock, dividends, service fees earned, rent expense, utilizes expense, and salaries expense. Use journal entries to record the following transactions for June in the general Journal.
June
1 ‘ Lisa Ryan invested $12,000 cash to begin the business; she received common stock for her investment.
2 ‘ Paid rent for June, $950.
3 ‘ Purchased office equipment on account, $6,400.
6 ‘ Purchased art materials and other supplies costing $3,800; paid $1,800 down within the remainder due within 30 days.
11 ‘ Billed clients for services, $4,700.
17 ‘ Collected $3,250 from clients on account.
19 ‘ Paid $3,000 on account to office equipment company (see June 3 transaction)
Use the following information to answer the five questions in the quiz: Door & Window Co. was organized on August 1 of the current year. Projected sales for the next three months are as follows:
August $$120,000
September $200,000
October $230,000
1. The company expects to sell 40% of its merchandise for cash. Of the sales on account, 25% are expected to be collected in the month of the sale and the remainder in the following month.
What are the total credit sales for August:
a. $120,000
b. $72,000
c. $48,000
d. none of the above
2. What are the total credit sales for October:
a. $92,000
b. $120,000
c. $138,000
d. none of the above
3. What are the total cash collections for August?
a. $120,000
b. $72,000
c. $48,000
d. $66,000
4.What are the total cash collections for September?
a. $164,000
b. $80,000
c. $200,000
d. $120,000
5. What are the total cash collections for October?
Chapter 9 The Blazers Company began its operations in early 2014. The company carries five different types of inventory which are listed below along with other relevant data. The company values its inventory at the lower of cost or market. At December 31, 2014, Blazers has exactly one unit of each item in ending inventory.
Estimated Normal Profit Actual Replacement Selling Estimated Margin on Item Cost Cost Price Cost to Sell Selling Price
Tundra Services Company, a division of a major oil company, provides various services to the operators of the North Slope oil field in Alaska. Data concerning the most recent year appear below:
Sales
$
18,700,000
Net operating income
$
5,900,000
Average operating assets
$
36,500,000
Required:
1.
Compute the margin for Tundra Services Company. (Round your answer to 2 decimal places.)
****PLEASE SHOW YOUR WORK AS HOW YOU CAME TO THE SOLUTION, THANK YOU****
The following information is available regarding the total manufacturing overhead of Bursa Mfg. Co. for a recent four month period:
Machine Hours
Manufacturing Overhead
Jan.
5,600
$
310,000
Feb.
3,200
224,000
Mar.
4,900
263,800
Apr.
2,500
180,000
a 1
Use the high low method to determine the variable element of manufacturing overhead costs per machine hour. (Round your answer to 2 decimal places. Omit the “$” sign in your response.)
Manufacturing overhead cost
$
per machine hour
a 2
Use the high low method to determine the fixed element of monthly overhead cost. (Round your intermediate calculations to 2 decimal places. Omit the “$” sign in your response.)
Fixed element of manufacturing overhead
$
b.
Bursa expects machine hours in May to equal 5,300. Use the cost relationships determined in part a to forecast May’s manufacturing overhead costs. (Round your intermediate calculations to 2 decimal places. Omit the “$” sign in your response.)
Estimated manufacturing overhead
$
c.
Suppose Bursa had used the cost relationships determined in part a to estimate the total manufacturing overhead expected for the months of February and March. By what amounts would Bursa have over or underestimated these costs? (Negative amounts should be indicated by a minus sign. Round your intermediate calculations to 2 decimal places. Omit the “$” sign in your response.)
The year end unadjusted trial balance of Harmon Ave Brewing Corporation is reproduced on an
excel spreadsheet. The information below is relevant to the preparation of adjusting entries
needed to both properly match revenues and expenses for the period and reflect the proper
balances in the real and nominal accounts.
Instructions
You are the new accountant (and brew master) for Harmon Ave Brewing Corporation. The 2010
year has just come to an end and you need to prepare the financial statements for 2010. Before
preparing the financial statements, you need to adjust the books. You are to prepare adjusting
entries based on the following data and based on the information in the company’s year end
unadjusted trial balance. The trial balance numbers are preprinted on the spreadsheet.
Please record your adjustments in journal entry form including a brief explanation on the
separate journal entry sheet provided. Then enter the adjustments on the worksheet (in the
adjustment columns) and complete the additional columns with respect to the income statement
and balance sheet. Carefully key your adjustments and label all items. Please round all
computations to the nearest dollar.
(a) The adjustment to write off bad debts has already been made on the books. After an aging
of accounts receivable, it was estimated that three percent (3.0%) of the uncollected
accounts receivable will become uncollectible. You need to adjust the allowance for doubtful
accounts and bad debt expense.
(b) Depreciation on equipment is computed using the straight line method, with a five year life
and $0 salvage value. Please make the adjustment to record depreciation for 2010. All the
equipment was acquired on January 1 of 2009.
(c) In December 2010, a customer prepaid fees to Harmon Ave Brewing Corporation for
contract brewing services to be performed in December and January of 2011. The prepayment was in the amount of $1,800. The payment was recorded as fee revenue when it
was received. As of December 31, 2010, $950 dollars worth of these services have been
performed. This needs to be adjusted.
(d) The note payable was issued on October 1, 2010 bearing interest at 4% per year, due
March. 1, 2011. No payments of principal or interest have been made on this note. You
need to record interest payable as of December 31, 2010.
e) Inventories were counted on December 31, 2010. The inventory indicated $550 of brewing
supplies currently in stock. The inventory of merchandise indicated $3,200 of merchandise
inventory on hand. You need to adjust both the supplies and the merchandise inventory
accounts.
(f) Provisions of the brewery lease specify that lease payments (rent) must be made on or
before the last day of each month covering the rent for the following month. The monthly
payment for January 2011 was made on Dec. 31, 2010 and was charged to rent expense.
Brewery rent is $2,500 per month.
(g) Brewery workers are paid an in kind bonus each week based on achieving production goals.
You have calculated that each brewery worker is entitled to one keg of beer as their
productivity bonus for the final week of December 2010. Each keg has a value of $40 and
there are 15 workers eligible for the bonus. You need to accrue a liability (bonus payable)
for the value of the bonus owed as of December 31, 2010.
Proceed as follows:
1) Enter your year end adjustments to the journal entry worksheet
2) Post your adjustments from your journal entry worksheet to the worksheet
3) Complete the worksheet
4) Prepare the balance sheet as of 12/31/2010.
5) Prepare the income statement for the year ended 12/31/10
The most recent monthly contribution format income statement for Reston Company is given below
Reston Company
Income Statement
For the Month Ended May 31
Sales
$900,000
100%
Variable Expenses
408,000
45.3
Contribution margin
492,000
54.7
Fixed expenses
465,000
51.7
Net operating income
$27,000
3.0%
Management is disappointed with the company’s performance and is wondering what can be done to improve profits. By examining sales and cost records, you have determined the following:
a. The company is divided into two sales territories Central and Eastern. The Central Territory recorded $400,000 in sales and $208,000 in variable expenses during May. The remaining sales and variable expenses were recorded in the Eastern Territory. Fixed expenses of $160,000 and $130,000 are traceable in the Central and Eastern Territories respectively. The rest of the fixed expenses are common to the two territories.
b. The company is the exclusive distributor for two products Awls and Pows. Sales of awls and Pows totaled $100,000 and $300,000 respectively, in the Central Territory during May. Variable expenses are 25% of the selling price for Awls and 61% for Pows. Cost records show that $60,000 of the Central Territory’s fixed expenses are traceable to awls and $54,000 to Pows with the remainder common to the two products.
Required:
1. Prepare contribution format segmented income statements, first showing the total company broken down between sales territories and then showing the Central Territory broken down by product line. In addition, for the company as a whole and for each segment, show each item on the segmented income statement as a percent of sales.
2. Look at the statement you have prepared showing the total company segmented by sales territory. What points revealed by this statement should be brought to management’s attention?
3. Look at the statement you have prepared showing the Central Territory segmented by product lines. What points revealed by this statement should be brought to management’s attention?
Roebuck Industries produces two electronic decoders, P and Q. Decoder P is more sophisticated and requires more programming and testing than does Decoder Q. Because of these product differences, the company wants to use activity based costing to allocate overhead costs. It has identified four activity pools. Relevant information follows.
Activity Pools
Cost Pool Total
Cost Driver
Repair and maintenance on assembly machine
$
50,000
Number of units produced
Programming cost
84,000
Number of programming hours
Software inspections
6,000
Number of inspections
Product testing
8,000
Number of tests
Total overhead cost
$
148,000
Expected activity for each product follows.
Number of Units
Number of Programming Hours
Number of Inspections
Number of Tests
Decoder P
20,000
2,000
190
1,400
Decoder Q
30,000
1,500
60
1,100
Total
50,000
3,500
250
2,500
Assume that before shifting to activity based costing, Roebuck Industries allocated all overhead costs based on direct labor hours. Direct labor data pertaining to the two decoders follow.
Direct Labor Hours
Decoder P
15,000
Decoder Q
22,000
Total
37,000
Required:
a.
Compute the amount of overhead cost allocated to each type of decoder when using direct labor hours as the allocation base. (Do not round your intermediate calculations. Omit the “$” sign in your response.)
Product
Allocated Cost
Decoder P
$
Decoder Q
Total
$
b.
Determine the cost per unit for overhead when using direct labor hours as the allocation base and when using ABC. (Round your intermediate calculations and final answers to 2 decimal places.Omit the “$” sign in your response.)
Roehler Industrial has estimated that production for the next 5 quarters will be:
Production Information
Quarter 1, 2011 45,000 units
Quarter 2, 2011 41,000
Quarter 3, 2011 49,000
Quarter 4, 2011 38,000
Quarter 1, 2012 47,000
Finished units of production require 6 lbs of raw material per unit. The raw material cost is $5.00 per lb. There are 54,000 lbs of raw material on hand at the beginning of Quarter 1, 2012. Roehler desires to have 20% of next quarter’s material requirements on hand at the end of each quarter.
Required:
Prepaer quarterly direct materials purchases budgets for Roehler Industries for 2011.
Salter Mining Company purchased the Northern Tier Mine for $21 million cash. The mine was estimated to contain 2.5 million tons of ore and to have a residual value of $1 million.
During the first year of mining operations at the Northern Tier Mine, 50,000 tons of ore were mined, of which 40,000 tons were sold.
a. Prepare a journal entry to record depletion during the year. (Omit the “$” sign in your response.)
General Journal Debit Credit
b.
Show how the Northern Tier Mine, and its accumulated depletion, would appear in Salter Mining Company’s balance sheet after the first year of operations. (Input all amounts as positive values. Omit the “$” sign in your response.)
Seahorse Boats deposits all receipts in a night depository after banking hours. The data needed to reconcile the bank statement as of October 31, 2008, have been extracted from records and are as follows: From Seahorse’s records: Checking account balance as of September 30… $8,720.23 Cash received and deposited in October (detail below*) 4,735.45 Checks written during October (detail below**)… 4,828.88 Checkbook balance as of October 31… $8,626.80 *Date and amount of each deposit in October: October 3, $545.25; October 8, $842.00; October 11, $978.35; October 16, $658.05; October 19, $643.90; October 24, $352.62; October 28, $715.28… **Number and amount of each check issued in October: 750… $361.90; 751… $64.71; 752… $462.18; 753… $51.90; 754… $869.52; 755… $471.86; 756… $156.20; 757… $274.35; 758… $246.60; 759… Void; 760… $87.95; 761… $719.27; 762… $236.74; 763… Void; 764… $210.00; 765… $615.70 Then the problem continues on with the bank’s side of the reconciliation… From October’s bank statement: Balance as of September 30… $9,568.63 Deposits recorded in October (detail below*) $4,382.07 Checks chared to account in October (detail below**) $4,180.93 Other adjustments (detail below***) $1,387.80 Balance as of October 31… $11,157.57 *Date and amount of each deposit inOctober: October 1, $361.90; October 4, $545.25; October 9, $842.00; October 12, $978.35; October 17, $658.05; October 20, $643.90; October 25, $352.62. **Number and amount of each check in October: 740… $90.60; 747…$217.45; 748… $570.97; 750… $361.90; 751… $64.71; 752… $462.18; 753… $51.90; 754… $869.52; 755… $471.86; 756… $156.20; 757… $274.35; 758… $264.60; 760… $87.95; 762… $236.74 ***Description of each memo accompanying October’s bank statement: October 4: Bank debit memo for check returned because of insufficient funds… $64.20 October 12: Bank credit memo for note collected: Principal… $1,400.00; Interest… $60.00 October 30: Bank debit memo for service charges… $8.00 Checks 754 757 were for salaries; all other checks were for payments to suppliers on account. Assume that all errors are the depositors’ fault. BANKREC Bank Reconciliation Skye Boats Bank Reconciliation October 31, 2011 Balance per bank statement Additions by depositor not on bank statement: Deductions by depositor not on bank statement: Bank errors: Adjusted balance FORMULA1 Balance per books Additions by bank not recorded by depositor: Deductions by bank not recorded by depositor: Depositor’s errors: Adjusted balance FORMULA2 Difference between adjusted balances FORMULA3
During September 2012, the business completed the following transactions: a. Issued common stock and received cash of $13,000. b. Performed service for a client and received cash of $900. c. Paid off the beginning balance of accounts payable. d. Purchased supplies from OfficeMax on account, $600. e. Collected cash from a customer on account, $700. f. Received cash of $1,600 and issued common stock. g. Consulted for a new band and billed the client for services rendered, $5,500. h. Recorded the following business expenses for the month: 1. Paid office rent, $1,200. 2. Paid advertising, $600. i. Returned supplies to OfficeMax for $110 from item d, which was the cost of the supplies. j. Paid cash dividends of $2,000.
During September, Stutzman Corporation incurred $91,000 of actual Manufacturing Overhead costs. During the same period, the Manufacturing Overhead applied to Work in Process was $87,000.
The journal entry to record the application of Manufacturing Overhead to Work in Process would include a:
On October 1, 2013, Adria Lopez launched a computer services company called Success Systems, which provides consulting services, computer system installations, and custom program development. Adria adopts the calendar year for reporting purposes and expects to prepare the company’s first set of financial statements on December 31, 2013. The company’s initial chart of accounts follows.
Account
No.
Account
No.
Cash
101
A. Lopez, Capital
301
Accounts Receivable
106
A. Lopez, Withdrawals
302
Computer Supplies
126
Computer Services Revenue
403
Prepaid Insurance
128
Wages Expense
623
Prepaid Rent
131
Advertising Expense
655
Office Equipment
163
Mileage Expense
676
Computer Equipment
167
Miscellaneous Expenses
677
Accounts Payable
201
Repairs Expense ” Computer
684
Oct.
1
Adria Lopez invested $49,000 cash, a $26,000 computer system, and $9,000 of office equipment in the company.
2
The company paid $3,280 cash for four months’ rent. (Hint: Debit Prepaid Rent for $3,280.)
3
The company purchased $1,410 of computer supplies on credit from Harris Office Products.
5
The company paid $1,620 cash for one year’s premium on a property and liability insurance policy. (Hint: Debit Prepaid Insurance for $1,620.)
6
The company billed Easy Leasing $5,100 for services performed in installing a new Web server.
8
The company paid $1,410 cash for the computer supplies purchased from Harris Office Products on October 3.
10
The company hired Lyn Addie as a part time assistant for $120 per day, as needed.
12
The company billed Easy Leasing another $2,200 for services performed.
15
The company received $5,100 cash from Easy Leasing as partial payment on its account.
17
The company paid $800 cash to repair computer equipment that was damaged when moving it.
20
The company paid $1,713 cash for advertisements published in the local newspaper.
22
The company received $2,200 cash from Easy Leasing on its account.
28
The company billed IFM Company $5,608 for services performed.
31
The company paid $840 cash for Lyn Addie’s wages for seven days’ work.
31
Adria Lopez withdrew $2,600 cash from the company for personal use.
Nov.
1
The company reimbursed Adria Lopez in cash for business automobile mileage allowance (Lopez logged 1,000 miles at $0.22 per mile).
2
The company received $5,333 cash from Liu Corporation for computer services performed.
5
The company purchased computer supplies for $1,115 cash from Harris Office Products.
8
The company billed Gomez Co. $5,768 for services performed.
13
The company received notification from Alex’s Engineering Co. that Business Solutions’ bid of $4,450 for an upcoming project is accepted.
18
The company received $3,308 cash from IFM Company as partial payment of the October 28 bill.
22
The company donated $250 cash to the United Way in the company’s name.
24
The company completed work for Alex’s Engineering Co. and sent it a bill for $4,450.
25
The company sent another bill to IFM Company for the past due amount of $2,300.
28
The company reimbursed Adria Lopez in cash for business automobile mileage (1,200 miles at $0.22 per mile).
30
The company paid $1,680 cash for Lyn Addie’s wages for 14 days’ work.
30
Adria Lopez withdrew $1,200 cash from the company for personal use.
Required:
1.
2.
Prepare ledger accounts (in balance column format) and post the journal entries from requirement 1 to them.
Prepare journal entries to record each of the above transactions for Success Systems. (If no entry is required for a particular transaction, select “No journal entry required” in the first account field.)
Shelton Engineering completed the following transactions in the month of June.
a.
Shana Shelton, the owner, invested $105,000 cash, office equipment with a value of $6,000, and $45,000 of drafting equipment to launch the company in exchange for common stock.
b.
The company purchased land worth $54,000 for an office by paying $5,400 cash and signing a long term note payable for $48,600.
c.
The company purchased a portable building with $75,000 cash and moved it onto the land acquired in b.
d.
The company paid $6,000 cash for the premium on an 18 month insurance policy.
e.
The company completed and delivered a set of plans for a client and collected $5,700 cash.
f.
The company purchased $22,500 of additional drafting equipment by paying $10,500 cash and signing a long term note payable for $12,000.
g.
The company completed $12,000 of engineering services for a client. This amount is to be received in 30 days.
h.
The company purchased $2,250 of additional office equipment on credit.
i.
The company completed engineering services for $18,000 on credit.
j.
The company received a bill for rent of equipment that was used on a recently completed job. The $1,200 rent cost must be paid within 30 days.
k.
The company collected $7,200 cash in partial payment from the client described in transaction g.
l.
The company paid $1,500 cash for wages to a drafting assistant.
m.
The company paid $2,250 cash to settle the account payable created in transaction h.
n.
The company paid $675 cash for minor maintenance of its drafting equipment.
o.
The company paid $9,360 cash for dividends.
p.
The company paid $1,500 cash for wages to a drafting assistant.
q.
The company paid $3,000 cash for advertisements in the local newspaper during June.
Open the ledger accounts for the account titles referred in part 1 and post the journal entries from part 1 to the ledger accounts and enter the balance after each posting. (Record the transactions in given order.Leave no cells blank be certain to enter “0” wherever required. Input all amounts as positive values. Omit the “$” sign in your response.)
Slonaker Inc. has provided the following data concerning its maintenance costs:
Machine Hours
Maintenance Cost
April
5,800
$30,380
May
5,783
$30,290
June
5,765
$30,238
July
5,762
$30,234
August
5,718
$30,079
September
5,796
$30,361
October
5,811
$30,390
November
5,802
$30,379
December
5,786
$30,319
Management believes that maintenance cost is a mixed cost that depends on machine hours.
Required:
Estimate the variable cost per machine hour and the fixed cost per month using the high low method.(Round your “Variable cost” to 2 decimal places. Omit the “$” sign in your response.)
Slone Company sells TVs. The perpetual inventory was stated as $30,500 on the books at December 31, 2004. At the close of the year, a new approach for compiling inventory was used and apparently a satisfactory cut off for preparation of financial statements was not made. Some events that occurred are as follows.
1. TVs shipped to a customer January 2, 2005, costing $5,000 were included in inventory at December 31, 2004. The sale was recorded in 2005.
2. TVs costing $10,000 received December 30, 2004, were recorded as received on January 2, 2005.
3. TVs received during 2004 costing $4,600 were recorded twice in the inventory account.
4. TVs shipped to a customer December 28, 2004, f.o.b. shipping point, which cost $15,000, were not received by the customer until January, 2005. The TVs were included in the ending inventory.
5. TVs on hand that cost $6,100 were never recorded on the books.
Instructions
Compute the correct inventory at December 31, 2004.
Smithson Company uses a job order costing system and has two manufacturing departments”Molding and Fabrication. The company provided the following estimates at the beginning of the year:
Molding
Fabrication
Total
Machine hours
27,000
37,000
64,000
Fixed manufacturing overhead costs
$
720,000
$
210,000
$ 930,000
Variable manufacturing overhead per machine hour
$
5.00
$
5.00
During the year, the company had no beginning or ending inventories and it started, completed, and sold only two jobs”Job D 75 and Job C 100. It provided the following information related to those two jobs:
Job D 75:
Molding
Fabrication
Total
Direct materials cost
$
376,000
$
323,000
$
699,000
Direct labor cost
$
250,000
$
180,000
$
430,000
Machine hours
22,000
5,000
27,000
Job C 100:
Molding
Fabrication
Total
Direct materials cost
$
210,000
$
230,000
$
440,000
Direct labor cost
$
120,000
$
240,000
$
360,000
Machine hours
5,000
32,000
37,000
Smithson had no overapplied or underapplied manufacturing overhead during the year.
(Round all answer to two decimals places)
1.
Compute the predetermined plantwide overhead rate.
2.
Compute the total manufacturing costs assigned to Job D 75 and Job C 100.
3.
If Smithson establishes bid prices that are 120% of total manufacturing costs, what bid price would it have established for Job D 75 and Job C 100?
4.
What is Smithson’s cost of goods sold for the year?
Snappy Company has a job order costing system and uses a predetermined overhead rate based on direct labor hours to apply manufacturing overhead to jobs. Manufacturing overhead cost and direct labor hours were estimated at $69,000 and 30,000 hours, respectively, for the year. In July, Job #334 was completed at a cost of $2,010 in direct materials and $1,800 in direct labor. The labor rate is $6 per hour. By the end of the year, Snappy had worked a total of 35,500 direct labor hours and had incurred $79,350 actual manufacturing overhead cost.
If Job #334 contained 100 units, the unit product cost on the completed job cost sheet would be: (Round intermediate calculations to 2 decimal places.)
Sparkling Pools provides $1,000 of pool maintenance services during July and collects payment in August. The company performs $1,600 of pool maintenance services during July that were paid for in June. The company accepts an order to perform $500 of pool maintenance services in August and will be paid in the same month. Revenue should be credited for: Answer
$1,600 in June, $1,000 in July, and $500 in August.
St. Joseph’s Hospital uses a job order costing system for all patients who have surgery. The following information is available:
Budgeted indirect costs pre operating room: $84,000
Budgeted indirect costs operating room: $66,000
Budgeted indirect costs surgery recover floor: $600,000
Budgeted nursing hours pre operating room: 4,000
Budgeted nursing hours operating room: 1,000
Budgeted nursing hours surgery recovery floor 7,500
The cost driver for all indirect costs is nursing hours. The hospital uses a budgeted rate for indirect costs. A patient spent 8 hours in the pre operating room, 4 hours in the operating room and 96 hours the surgery recover floor. What amount of indirect costs will be applied to this patient?
Stanley and Jones Lawn Service Company (S&J) maintains its books on a cash basis. However, the company recently borrowed $170,000 from a local bank and the bank requires S&J to provide annual financial statements prepared on an accrual basis. During 2013, the following cash flows were recorded:
Cash collected from customers
$
390,000
Cash paid for:
Salaries
$
187,000
Supplies
32,000
Rent
16,000
Insurance
6,000
Miscellaneous
27,000
268,000
Net operating cash flow
$
122,000
You are able to determine the following information about accounts receivable, prepaid expenses, and accrued liabilities:
January 1, 2013
December 31, 2013
Accounts receivable
$
39,000
$
30,500
Prepaid insurance
0
2,700
Supplies
1,700
1,850
Accrued liabilities (for miscellaneous expenses)
3,100
4,200
In addition, you learn that the bank loan was dated September 30, 2013, with principal and interest at 6% due in one year. Depreciation on the company’s equipment is $17,000 for the year.
Required:
Prepare an accrual basis income statement for 2013. (Ignore income taxes.)
A statistical process analyst is responsible for assuring statistical control. In one process, a machine is supposed to drop 11.4 ounces of mints into a bag. (Assume that this process can be approximated by a normal distribution). The acceptable ranges for weights of the bags of mints are 11.25 ounces to 11.55 ounces, inclusive.An error with the release valve has caused the setting on the mint release machine to “shift”. Assume that the machine shift is filling the bags with a mean weight of 11.56 ounces and a standard deviation of 0.05 ounces. To check that the machine is placing the correct weight of mints into the bags, you randomly select three samples of five bags each and find the mean weight in ounces for each sample. While sampling individual bags You randomly select a bag of mints. What is the probability that the bag you select is not outside the acceptable range? (That is, you do not detect that the machine has shifted.) You randomly select 15 bags of mints. What is the probability that you select at least one bag that is not outside the acceptable range? While sampling groups of five You randomly select a sample of five bags. What is the probability that your sample of five bags has a mean that is not outside the acceptable range? (That is, you do not detect that the machine has shifted.) You randomly select three samples of five bags. What is the probability that you select at least one sample of five bags that has a mean that is not outside the acceptable range? Describe your solutions to each of these problems and explain whether taking 15 bags of mints in one sample or three samples of five bags each is the better way to test for a process that is out of statistical control.
Steller Manufacturing has two classes of distributors: JIT distributors and non JIT distributors. The JIT distributor places small, frequent orders and the non JIT distributor tends to place larger, less frequent orders. Both types of distributors purchase the same product. The customer activities and costs for the previous quarter are found below:
Activity
JIT
Non JIT
Sales Orders
400
25
425
Sales Calls
20
20
40
Service Calls
180
80
160
Average order size
75
1200
Manufacturing cost/unit
$40
$40
Customer Costs
Processing sales orders
$150,000
Selling Goods
$145,000
Servicing goods
$185,000
Total
$485,000
1) Calculate the activity rate for processing sales orders
a. $330.09 per order
b. $525 per order
c. $275.76 per order
d. $352.94 per order
e. $342.43 per order
2) Calculate the activity rate for selling goods
a. $3625 per sales call
b. $3550 per sales call
c. $2200 per sales call
d. $4800 per sales call
e. $9400 per sales call
3) Calculate the activity rate for servicing goods
a. $1089.00 per service call
b. $750.10 per service call
c. $675.50 per service call
d. $1,000.00 per service call
e. $711.54 per service call
4) Calculate the total customer cost for the JIT distributor
a. $487500
b. $341753
c. $600000
d. $250050
e. $448791
5) Calculate the total customer cost for the non JT distributor
In the file “Find Your Company” you will find the listed company you have been given for this course. Complete this assignment for the company you have been given. Please be careful to use the listed company you have been given. Your assignment will not be marked if you use a different company to the one you have been given; and you will be asked to resubmit your assignment using the right company.
Go to the website of your company, by clicking on the URL next to your company in the list of companies in the file “Find Your Company”. Then go to the Investor Relations section of the website. This section may be called, “Investors”, “Shareholder Information” or similar name.
In this section, go to your firm’s annual reports and save to your computer your firm’s latest annual report. For example, these may be dated 30 June 2012 or 31 March 2012. Do not use your firm’s interim financial statements or their concise financial statements.
Within your firm’s latest annual report, find its balance sheet.
Tip: Your firm’s balance sheet may be called a range of different names, such as Consolidated Statement of Financial Position.
From your firm’s balance sheet, list each item of equity and write your understanding of each item. Make sure you read carefully any footnotes for each item of equity and also look at your firm’s Statement of Changes in Equity. Also discuss any changes in each item of equity for your firm over the past year.
Were you able to help each other understand the aspects of each other’s equity in your firms’ balance sheets? Why or why not? What remaining questions do you have about your firm’s equity? What insights have you gained?
I need help on the assignment for the course of corporate accounting.Idid some of the part of the assignment and need help on the assignment.I am confused and stuck.Thanks.
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Corporate Accounting Assignment ( 35 Marks ) Objectives This assessment item relates to the course learning outcome 4: Analyse various aspects of disclosure and performance from a company’s annual report. Step 1 : 15 Marks In the file “Find Your Company” you will find the listed company you have been given for this course. Complete this assignment for the company you have been given. Please be careful to use the listed company you have been given. Your assignment will not be marked if you use a different company to the one you have been given; and you will be asked to resubmit your assignment using the right company. Go to the website of your company, by clicking on the URL next to your company in the list of companies in the file “Find Your Company”. Then go to the Investor Relations section of the website. This section may be called, “Investors”, “Shareholder Information” or similar name. In this section, go to your firm’s annual reports and save to your computer your firm’s latest annual report. For example, these may be dated 30 June 2012 or 31 March 2012. Do not use your firm’s interim financial statements or their concise financial statements. Within your firm’s latest annual report, find its balance sheet. Tip: Your firm’s balance sheet may be called a range of different names, such as Consolidated Statement of Financial Position. From your firm’s balance sheet, list each item of equity and write your understanding of each item. Make sure you read carefully any footnotes for each item of equity and also look at your firm’s Statement of Changes in Equity. Also discuss any changes in each item of equity for your firm over the past year. Were you able to help each other understand the aspects of each other’s equity in your firms’ balance sheets? Why or why not? What remaining questions do you have about your firm’s equity? What insights have you gained? Submit the following for Step 1: 1. Your firm’s latest annual report (either as a pdf or as…
Oral review for research proposal 700 words, MFinal report 5,000 words 10May,2013 0:00AMTopic: The valuation of listed property companies in HKOn Oral review stage, my teacher must require me to show1) Multi regression models state theregression equation(s) anddescribe in detail all the regression variables2) Secondary data (describe the sample used –List out which listed property companies will be collected, time period, variables, sources where you got the data, etc)Important:make sure have adequate data at least 130 record for analysis at final reportPls find attached file.
QUESTION 3 Wilson is preparing his bank reconciliation at 31 May 2005.
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QUESTION 3 Wilson is preparing his bank reconciliation at 31 May 2005. His bank statement shows a balance of $228 cash at the bank. The balance on the bank account in his general ledger is $113 (credit). He has noted the following reasons for the difference: Cheque number 958602 was incorrectly recorded in Wilson’s cash book as $760. The cheque was correctly debited on the bank statement on 2 May as $670. Bank charges of $428 were debited by the bank on 4 May. A customer’s cheque for $320 was returned by Wilson’s bank in May as the customer had insufficient funds in his account. Wilson has not recorded the return of the cheque in his records. The bank has incorrectly credited Wilson’s account with interest of $220. This is interest on a deposit account held by Wilson personally. The bank had not corrected the error by 31 May. A lodgement of $850 entered in Wilson’s cash book on 31 May was credited on the bank statement on 3 June. Five cheques have not yet been presented at the bank. These are: Cheque No. $ 956784 625 see note (vii) 956892 326 958452 469 958541 122 9586681 87 ––––– 1,629 ––––– Cheque number 956784 was lost in the post and was cancelled. Wilson has not recorded the cancellation of the cheque. Required: (a) Show Wilson’s general ledger bank account including the necessary correcting entries. (NB You MUST present your answer in a format which clearly indicates whether each entry is a debit or a credit) (6 marks) (b) Prepare a reconciliation of the bank statement balance to the corrected general ledger balance. (7 marks)
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Created with an evaluation copy of Aspose.Words. To discover the full versions of our APIs please visit: https://products.aspose.com/words/ Created with an evaluation copy of Aspose.Words. To discover the full versions of our APIs please visit: https://products.aspose.com/words/ Created with an evaluation copy of Aspose.Words. To discover the full versions of our APIs please visit: https://products.aspose.com/words/ Created with an evaluation copy of Aspose.Words. To discover the full versions of our APIs please visit: https://products.aspose.com/words/ Created with an evaluation copy of Aspose.Words. To discover the full versions of our APIs please visit: https://products.aspose.com/words/
J.B. Enterprises purchased a new molding machine for $85,000. The company paid $8,000 for shipping and another $7,000 to get the machine integrated with the company’s existing assets. J.B. must maintain a supply of special lubricating oil just in case the machine breaks down. The company purchased a supply of oil for $4,000. The machine is to be depreciated on a straight line basis over its expected useful life of 8 years. J.B. is replacing an old machine that was purchased 6 years ago for $50,000. The old machine was being depreciated on a straight line basis over a ten year expected useful life. The machine was sold for $15,000. J.B.’s marginal tax rate is 40%. What is the amount of the initial outlay?
You have been asked to select at least 3 out of 7 possible sites for oil exploration. Designate each site as S1, S2, S3, S4, S5, S6, and S7. The restrictions are:
Restriction 1. Evaluating sites S1 andS3 will prevent you from exploring site S7.
Restriction 2. Evaluating sites S2 or
S4 will prevent you from assessing site S5.
Restriction 3. Of all the sites, at least 3 should be assessed.
Assuming that Si is a binary variable, the constraint for the first restriction is
Your client, a physician, recently purchased a yacht on which he flies a pennant with a medical emblem on it. He recently informed you that he purchased the yacht and flies the pennant to advertise his occupation and thus attract new patients. He has asked you if he may deduct as ordinary and necessary business expenses the costs of insuring and maintaining the yacht. In search of an answer, consult RIA’s CHECKPOINT TAX available on line through the SNHU Shapiro Library. Explain the steps taken to find your answer.
I consulted RIA’s CHECKPOINT TAX available on line through the SNHU Shapiro Library and other sources. I realized that my client i.e. the physician was using his yacht as an advertisement medium to market his business and in return attract more customers. I regards to his question, the answer is that he should include all inclusive yacht’s expenses as ordinary and necessary business expenses. This should just be the same to any other cost incurred from any other advertisement method.
Which of the following groups constitute a controlled group? (Any stock not listed below is held by unrelated individuals each owning less than 1% of the outstanding stock.) For brother sister corporations, which definition applies?
a. Mark owns 90% of the single classes of stock of Hot and Ice Corporations.
b. Johnson and Carey Corporations each have only a single class of stock outstanding. The two controlling individual shareholders own the stock as follows:
Stock Ownership Percentages
Shareholder
Johnson Corp.
Carey Corp
David
60%
80%
Kelly
30%
0%
c. Red, Blue and ABC Corporations each have a single class of stock outstanding. The stock is owned as follows:
Stock Ownership Percentages
Shareholder
Blue Corp.
ABC Corp
Red
80%
50%
Blue
40%
Red Corporation’s stock is widely held by over 1,000 shareholders, none of whom owns directly or indirectly more than 1% of Red’s stock.
d. Helm, Oak, Walnut and Zinnia Corporations each have a single class of stock outstanding. The stock is owned as follows:
Q). During 2011, Comet Cares, Inc. decided to sell an unprofitable segment of its business. The sale of this segment qualifies as a discontinued operation for financial reporting purposes. However, at the end of 2011, Comet had yet to sell the segment. On December 31, 2011 the segment assets had a fair value minus anticipated costs to sell of $3,500,000 and a book value of $3,700,000. For the year, the segment reported an operating loss of $500,000. In January of 2012, Comet Cares sold the segment for $3,600,000. Operating losses in the first month of 2012 amounted to $45,000. Assume a 40% tax rate in both 2011 and 2012.
a) What is the after tax dollar value impact of the discontinued operation on 2011 Net Income (use ( ) for a decrease)?
$_________________________________
b) What is the after tax dollar value impact of the discontinued operation on 2012 Net Income (use ( ) for a decrease)?
You have been asked to prepare a December cash budget for Ashton Company, a distributor of exercise equipment. The following information is available about the company’s operations:
a. The cash balance on November 1 $6,000.
b. Actual sales for October and November are $80,000 and $60,000, respectively. Cash collections on sales are 30 percent in the month of sale and 65 percent in the month after the sale; 5 percent of sales are uncollected.c. General expenses budgeted for November are $25,000 (depreciation represents $2,000 of this month)d. Inventory purchases will total $30,000 in October and $40,000 in November. The company pays half of its inventory purchases in the month of purchase and for the other half the month after purchase.e. The company will pay $4,000 in cash for office furniture in November. Sales commissions for November are budgeted at $12,000.f. The company maintains a minimum ending cash balance of $4,000 and can borrow from the bank in multiples of $100. All loans are repaid after 60 days.
Q1. Since 1 August 2005, Adam Smith’s investment policy has been to lodge fixed (term) deposits at his local bank. The bank pays interest on the maturity date of the deposit. When a deposit matures, Smith’s policy is to relodge the whole sum (principle & interest) immediately for further period. He chooses the term of each deposit according to his assessment of the interest rates available at that time. Smith’s decisions to date are as follows:
Date Decision
1 August 2005 8 months deposit @ 9.15% pa
1 April 2006 6 months deposit @ 8.45% pa
1 October 2006 10 months deposit @ 8.16% pa
Calculate, as at 1 August 2007, the effective interest rate Smith has earned since he began this policy. (Assume that all months are of equal length). Briefly explain each step.
Q2 Harry Jones has invested one?third of his funds in Share 1 & two?thirds of his funds in Share 2. His assessment of each investment is as follows:
Item Share 1 Share 2 Expected return (%) 15.0 21.0 Standard deviation (%) 18.0 25.0 Correlation between the returns 0.5
(a) What are the expected return & the standard deviation of return on Harry’s portfolio?
(b) Recalculate the expected return & the standard deviation where the correlation between the returns is 0 and 1.0, respectively.
(c) Is Harry better or worse off as a result of investing in two securities rather than in one security?
If the dollar contribution margin per unit is increased by 10%, total fixed cost is decreased by 20%, and all other factors remain the same, net income will how much?
Question 2
Gardner Manufacturing Company produces a product that sells for $120. A selling commission of 10% of the selling price is paid on each unit sold. Variable manufacturing costs are $60 per unit. Fixed manufacturing costs are $20 per unit based on the current level of activity, and fixed selling and administrative costs are $16 per unit.
The contribution margin per unit is how much?
Question 3
Within the relevant range, the variable cost per unit:
The objectives of financial reporting are met in large part by a set of financial statements. Of the following which is not one of these statements?
Select one:
a. Statement of Cash Flows
b. Statement of Financial Position
c. Federal Income Tax Return
d. Income Statement
Question 2
The primary assurance that financial statements issued by management are complete and reliable is by:
Select one:
a. An audit performed by a certified public accountant
b. An audit performed by the IRS
c. Internal controls
d. Generally accepted accounting principles
Question 3
During the current year, the assets of The Big Dial increase by $132,000, and the liabilities increase by $80,000. As a result, owners’ equity:
Select one:
a. Increases by $52,000 during the year
b. Decreases by $52,000 during the year
c. Increases by $212,000 during the year
d. Is $52,000 at the end of the year
Question 4
A business purchases land and building, giving in exchange $225,000 cash and a note payable for $95,000. This transaction:
Select one:
a. Increases owners’ equity
b. Decreases total assets
c. Decreases total liabilities
d. Increases total assets
Question 5
The account balances for HydroTech as of May 31, 2001, are listed below in random order:
Accounts Payable…………$10,000
Accounts Receivable………12,000
Building………………………40,000
Cash…………………………..6,000
Equipment…………………..16,000
Land………………………….50,000
Notes Payable………………28,000
Capital Stock……………….86,000
Refer to the above data. The balance in the Asset account is:
Select one:
a. $86,000
b. $124,000
c. $144,000
d. Some other amount
Question 6
The account balances for HydroTech as of May 31, 2001, are listed below in random order:
Accounts Payable…………$10,000
Accounts Receivable………12,000
Building………………………40,000
Cash…………………………..6,000
Equipment…………………..16,000
Land………………………….50,000
Notes Payable………………28,000
Capital Stock……………….86,000
On June 3, HydroTech collected $7,000 of its accounts receivable and paid $4,000 of its accounts payable. In addition, $2,400 of additional stock was issued for cash.
Refer to the above data. On June 4, the balance in the Cash account is:
Select one:
a. Some other amount
b. $11,400
c. $9,000
d. $5,400
Question 7
The account balances for HydroTech as of May 31, 2001, are listed below in random order:
Accounts Payable…………$10,000
Accounts Receivable………12,000
Building………………………40,000
Cash…………………………..6,000
Equipment…………………..16,000
Land………………………….50,000
Notes Payable………………28,000
Capital Stock……………….86,000
On June 3, HydroTech collected $7,000 of its accounts receivable and paid $4,000 of its accounts payable. In addition, $2,400 of additional stock was issued for cash. On June 4, another $3,000 of stock was issued for cash.
Refer to the above data. On June 5, the balance in the Capital Stock Account is:
Select one:
a. $79,000
b. Some other amount
c. $81,400
d. $91,400
Question 8
The account balances for HydroTech as of May 31, 2001, are listed below in random order:
Accounts Payable…………$10,000
Accounts Receivable………12,000
Building………………………40,000
Cash…………………………..6,000
Equipment…………………..16,000
Land………………………….50,000
Notes Payable………………28,000
Capital Stock……………….86,000
On June 3, HydroTech collected $7,000 of its accounts receivable and paid $4,000 of its accounts payable. In addition, $2,400 of additional stock was issued for cash. One June 4, another $3,000 of stock was issued for cash. On June 5, new equipment costing $5,000 was acquired. A cash payment was made for $1,000 and a Note Payable of $4,000 was issued for the balance. In a trial balance prepared on June 5, the sum of the credit column is:
Note: Be sure to take into account all transactions from June 3, 4 and 5.
Select one:
a. $123,000
b. $125,000
c. $129,400
d. Some other amount
Question 9
The account balances for HydroTech as of May 31, 2001, are listed below in random order:
Accounts Payable…………$10,000
Accounts Receivable………12,000
Building………………………40,000
Cash…………………………..6,000
Equipment…………………..16,000
Land………………………….50,000
Notes Payable………………28,000
Capital Stock……………….86,000
On June 3, HydroTech collected $7,000 of its accounts receivable and paid $4,000 of its accounts payable. In addition, $2,400 of additional stock was issued for cash. One June 4, another $3,000 of stock was issued for cash. On June 5, new equipment costing $5,000 was acquired. A cash payment was made for $1,000 and a Note Payable of $4,000 was issued for the balance. The trial balance prepared on June 5, would, therefore, be as follows:
HydroTech
Trial Balance
June 5, 2001
Debit Credit
Cash 13,400
Accounts Receivable 5,000
Equipment 21,000
Land 50,000
Building 40,000
Accounts Payable 6,000
Notes Payable 32,000
Capital Stock 91,400
TOTAL 129,400 129,400
On June 6, the bookkeeper for HydroTech makes this entry:
Supplies 6,300
Cash 1,500
Accounts Payable 4,800
As a result of this transaction:
Select one:
a. Increases total assets $6,300
b. Decreases total assets
c. Involves the sale of supplies for $6,300
d. Increases liabilities
Question 10
On March 2, purchased auto cleaning supplies from Pip Boys for $240 on account. How would this transaction be recorded in the two column journal for MarcAf?cA????1A????1s Detailing?
Select one:
a. None of the above
b. Debit Supplies for 240, credit Accounts Receivable for 240
c. Debit Accounts Receivable for 240, credit Supplies for 240
d. Debit Supplies for 240, credit Accounts Payable for 240
Question 11
On March 4, collected an account receivable of $470 from a customer, At Your Service Limousines. How would this transaction be recorded in the two column journal for MarcAf?cA????1A????1s Detailing?
Select one:
a. None of the above
b. Debit Accounts Payable for 470, credit Cash for 470
c. Debit Accounts Receivable for 470, credit Cash for 470
d. Debit Cash for 470, credit Accounts Receivable for 470
Question 12
On March 5, Paid $320 in partial payment of an account payable to Sears for equipment purchased in February.How would this transaction be recorded in the two column journal for MarcAf?cA????1A????1s Detailing?
Select one:
a. Debit Accounts Payable for 320, Credit Cash for 320
b. Debit Accounts Receivable for 320, Credit Cash for 320.
c. Debit Cash for 320, Credit Accounts Payable for 320
d. Debit Equipment for 320, Credit Accounts Payable for 320
Question 13
On March 7, Issued capital stock in exchange for $2,500 cash. How would this transaction be recorded in the two column journal for MarcAf?cA????1A????1s Detailing?
Select one:
a. Debit Accounts Payable for 2,500, credit Drawing for 2,500
b. Debit Cash for 2,500, credit Capital Stock 2,500
c. Debit Accounts Receivable for 2,500, credit Capital Stock for 2,500.
d. Debit Capital Stock for 2,500, credit Cash for 2,500.
Question 14
On March 9, purchased office equipment from JeromeAf?cA????1A????1s Warehouse for $3,300; paid $1,000 cash and issued a note payable due in 90 days for the balance. How would this transaction be recorded in the two column journal for MarcAf?cA????1A????1s Detailing?
Select one:
a. Debit Office Equipment for 3,300, credit Cash for 1,000, credit Notes Payable for 2,300.
b. Debit Cash for 1,000, debit Accounts Receivable for 2,300, credit Office Equipment for 3,300.
c. Debit Cash for 1,000, debit Notes Payable for 2,300, credit Office Equipment for 3,300.
d. Debit Office Equipment for 3,300, credit Cash for 1,000, credit Notes Receivable for 2,300
Question 15
West Coast Potters purchased a kiln on February 1 for $7,200 which is guaranteed to have a useful life of 10 years. Assuming adjusting entries are prepared monthly, what is the book value of the kiln on June 30?
Select one:
a. $7,200
b. $6,480
c. $300.
d. $6,900.
Question 16
Village Square Cinema sells books of movie tickets for $100, which contain tickets to admission to 20 movies. During July, 50 books of tickets were sold for $5,000 and this amount was credited to Unearned Admissions Revenue. By the end of July, it was determined that 400 movie tickets had been used by customers who had purchased the ticket books. The July 31 adjusting entry is:
Select one:
a. Debit Admissions Revenue $2,000 and credit Unearned Admissions Revenue $2,000
b. Debit Unearned Admissions Revenue $4,000 and credit Admissions Revenue $4,000.
c. Debit Admissions Revenue $3,000 and credit Unearned Admissions Revenue $3,000.
d. Debit Unearned Admissions Revenue $2,000 and credit Admissions Revenue $2,000.
Question 17
A December 31 trial balance (before December adjustments) shows Office Supplies of $600 and Office Supplies Expense of $1,010. A December adjusting entry recorded office supplies expense of $170. After the December adjusting entries have been posted, what is the proper balance in the Office Supplies account on December 31?
Select one:
a. $840.
b. $770.
c. $1,180.
d. $430.
Question 18
Net income of Samurai Company was $40,000 before any year end adjusting entries were made. The following adjustments are necessary: interest accrued on a company savings account, $110; portion of insurance expiring, $300; portion of fees collected in advance now earned, $2,400. Net income as shown in the income statement for the current year should be:
Select one:
a. $42,210
b. $38,010
c. $41,990
d. $37,410
Question 19
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Question text
The adjusting entry to recognize interest owed by Bradley Tools to the bank for May was omitted in month end procedures. As a result of this error, BradleyAf?cA????1A????1s
Select one:
a. May net income is overstated and May 31 liabilities understated
b. May expenses are understated and May 31 ownerAfA?A??c??s equity understated.
c. May net income is understated and May 31 assets overstated.
d. May expenses are understated and May 31 assets overstated.
Question 20
The accountant for Timesure Inc. prepared the following trial balance at January 31, 2000, after one month of operations:
Debit Credit
Cash 5,400
Accounts Receivable 4,200
Unexpired Insurance 1,800
Office Equipment 18,000
Unearned Cosulting Fees 3,000
Capital Stock 15,300
Retained Earnings, January 1, 2000 0
Dividends 3,000
Consulting Fees Earned 25,000
Salaries Expense 7,400
Utilities Expense 1,400
Rent Expense 1,800
Supplies Expense 300
TOTALS 43,000 43,300
What adjusting journal entry should be made to record consulting services rendered to a client in January, not yet billed or recorded, $1,900?
Select one:
a. Debit Unearned Consulting Fees Earned for 1,900.and credit Consulting Fees Earned for 1,900.
b. Debit Cash for 1,900 and credit Consulting Fees Earned for 1,900.
c. Debit Accounts Receivable for 1,900 and credit Consulting Fees Earned for 1,900.
d. Debit Accounts Receivable for 1,900 and credit Unearned Consulting Fees Earned.for 1,900.
Question 21
The accountant for Timesure Inc. prepared the following trial balance at January 31, 2000, after one month of operations:
Debit Credit
Cash 5,400
Accounts Receivable 4,200
Unexpired Insurance 1,800
Office Equipment 18,000
Unearned Cosulting Fees 3,000
Capital Stock 15,300
Retained Earnings, January 1, 2000 0
Dividends 3,000
Consulting Fees Earned 25,000
Salaries Expense 7,400
Utilities Expense 1,400
Rent Expense 1,800
Supplies Expense 300
TOTALS 43,000 43,300
What adjusting journal entry should be made to record the posrtion of insurance expiring in January, $150?
Select one:
a. Debit Insurance Expense for 150 and credit Cash for 150.
b. None of the above.
c. Debit Insurance Expense for 150 and credit Unexpired Insurance for 150.
d. Debit Unexpired Insurance for 150 and credit Insurance Expense for 150.
Question 22
The accountant for Timesure Inc. prepared the following trial balance at January 31, 2000, after one month of operations:
Debit Credit
Cash 5,400
Accounts Receivable 4,200
Unexpired Insurance 1,800
Office Equipment 18,000
Unearned Cosulting Fees 3,000
Capital Stock 15,300
Retained Earnings, January 1, 2000 0
Dividends 3,000
Consulting Fees Earned 25,000
Salaries Expense 7,400
Utilities Expense 1,400
Rent Expense 1,800
Supplies Expense 300
TOTALS 43,000 43,300
What adjusting journal entry should be made to record the portion of Income Taxes Expense for January of $2,000.
Select one:
a. Debit Income Taxes Payable and credit Cash for 2,000.
b. Debit Income Taxes Expense for 2,000 and credit Income Taxes Payable for 2,000
c. Debit Prepaid Taxes and credit Cash for 2,000.
d. None of the above.
Question 23
Presented below is the adjusted trial balance of TWK, Inc. at December 31:
Debit Credit
Cash 10
Accounts Receivable 20
Equipment 200
Accounts Payable 15
Capital Stock 100
Retained Earnings 50
Dividends 5
Service Revenue 180
Salaries Expense 80
Depreciation Expense 20
Refer to the above data. Which accounts are closed to income summary?
Select one:
a. All accounts that are not nominal.
b. All accounts.
c. Revenues and expenses
d. Revenues, expenses, and dividends.
Question 24
Presented below is the adjusted trial balance of TWK, Inc. at December 31:
Debit Credit
Cash 10
Accounts Receivable 20
Equipment 200
Accounts Payable 15
Capital Stock 100
Retained Earnings 50
Dividends 5
Service Revenue 180
Salaries Expense 60
Depreciation Expense 20
Refer to the above data. What is the balance in income summary before it is closed to retained earnings?
Select one:
a. $100
b. $65
c. $180.
d. $75
Question 25
Presented below is the adjusted trial balance of TWK, Inc. at December 31:
Debit Credit
Cash 10
Accounts Receivable 20
Equipment 200
Accounts Payable 15
Capital Stock 100
Retained Earnings 50
Dividends 5
Service Revenue 180
Salaries Expense 80
Depreciation Expense 20
Supplies Expense 10
Refer to the above data. What is the balance in retained earnings at December 31?
1. Generally, revenue from sales should be recognized at a point when
Answer
a.
management decides it is appropriate to do so.
b.
the product is available for sale to the ultimate consumer.
c.
the entire amount receivable has been collected from the customer and there remains no further warranty liability.
d.
none of these.
2. What is the general approach as to when product costs are recognized as expenses?
Answer
a.
In the period when the expenses are paid.
b.
In the period when the expenses are incurred.
c.
In the period when the vendor invoice is received.
d.
In the period when the related revenue is recognized.
3. Recognition of expense related to amortization of an intangible asset illustrates which principle of accounting?
Answer
a.
Expense recognition.
b.
Full disclosure.
c.
Revenue recognition.
d.
Historical cost.
4. Which accounting assumption or principle is being violated if a company is a party to major litigation that it may lose and decides not to include the information in the financial statements because it may have a negative impact on the company’s stock price?
Answer
a.
Full disclosure.
b.
Going concern.
c.
Historical cost.
d.
Expense recognition.
5. Where is materiality not used in providing financial information?
Answer
a.
Applying the revenue recognition principle.
b.
Determining what items to include in the financial statements.
The questions that follow are based on Rule 101 of the AICPA Code of the Professional Conduct as it relates to independence and family relationships. Check yes if the situation violates the rules, no if it does not.
a. A partner’s dependent is a 5% limited partner in a firm client. Does the parent’s direct financial interest in the client impair the firm’s independence?
b. A partner assigned to a firm’s New York office is married to the president of a client for which the firm’s Connecticut office performs audit services. If the partner does not perform services out of or for the Connecticut office, cannot exercise significant influence over the engagement, and has no involvement with the engagement, such as consulting on accounting or auditing issues, is the firm’s independence impaired?
c. A CPA’s father acquired a 10% interest in his son’s audit client. The investment is material to the father’s net worth. If the son is aware of his father’s investment and the CPA participates in the audit engagement, is the firm’s independence impaired?
d. An audit partner has a brother who owns a 60% interest in an audit client, which is material to the brother’s net worth. If the partner participates in the audit engagement, but does not know about his brother’s investment, is the firm’s independence impaired?
Read and complete case study 10 10, “Eat at My Restaurant” in your text. Address the following elements, which are also “required” elements at the end of the case study:
Comment on the difference between net cash provided by operating activities and net income. Speculate on which number is likely to be the better indicator of long term profitability.
Comment on the data reviewed for each firm.
Do any of these firms appear to have a cash flow problem?
Your answers should be in an essay form with an introduction and conclusion; ensure you are addressing each element clearly and thoroughly, following these guidelines:
Requirement (a) of the problem should be answered in general terms; you do not need to consider the 3 firms in the case. However, you do need to make a choice and rationalize that choice.
When addressing requirement (b), you should make AT LEAST 4 observations on each firm, focusing on the cash flow ratios provided.
All information should be considered when answering requirement (c). Even if you don’t think any one company is in “trouble,” you should still choose a company and support your choice.
When the accounts of Daniel Barenboim Inc. are examined, the adjusting data listed below are uncovered on December 31, the end of an annual fiscal period.
1. The prepaid insurance account shows a debit of $5,280, representing the cost of a 2 year fire insurance policy dated August 1 of the current year.
2. On November 1, Rental Revenue was credited for $1,800, representing revenue from a subrental for a 3 month period beginning on that date.
3. Purchase of advertising materials for $800 during the year was recorded in the Advertising Expense account. On December 31, advertising materials of $290 are on hand.
4. Interest of $770 has accrued on notes payable.
Instructions
Prepare the following in general journal form.
(a) The adjusting entry for each item.
(b) The reversing entry for each item where appropriate.
Which accounting software features are likely to be most important for the following businesses? Search the Internet for an example of an AIS that you would recommend for each of these owners and include your rationale for that product.
a. A boutique shop that sells trendy ladies clothing
b. A small business specializing in custom golf clubs, replacement shafts for clubs, replacement grips for clubs, and similar repairs
c. A local CPA firm with 3 partners, 5 associates, and 2 administrative employees
d. A pet breeder that specializes in Burmese kittens
e. A business that sells and rents Segways in Washington, DC, that is located on Constitution Avenue, near the Lincoln Memorial
f. A high end men’s clothing business that has 4 stores that are all located in the same large metropolitan city (56 employees), and the owner is contemplating additional locations for stores in nearby cities
Wright Company employs a computer based data processing system for maintaining all company records. The current system was developed in stages over the past five years and has been fully operational for the last 24 months. When the system was being designed, all department heads were asked to specify the types of information and reports they would need for planning and controlling operations. The systems department attempted to meet the specifications of each department head. Company management specified that certain other reports be prepared for department heads. During the five years of systems development and operation, there have been several changes in the department head positions due to attrition and promotions. The new department heads often made requests for additional reports according to their specifications. The systems department complied with all of these requests. Reports were discontinued only on request by a department head, and then only if it was not a standard report required by top management. As a result, few reports were discontinued. Consequently, the information processing subsystem was generating a large quantity of reports each reporting period. Company management became concerned about the quantity of report information that was being produced by the system. The internal audit department was asked to evaluate the effectiveness of the reports generated by the system. The audit staff determined early in the study that more information was being generated by the information processing subsystem than could be used effectively. They noted the following reactions to this information overload:
?c Many department heads would not act on certain reports during periods of peak activity. The department heads would let these reports accumulate with the hope of catching up during subsequent lulls.
?c Some department heads had so many reports they did not act at all on the information, or they made incorrect decisions because of misuse of the information.
?c Frequently, actions required by the nature of the report data were not taken until the department heads were reminded by others who needed the decisions. These department heads did not appear to have developed a priority system for acting on the information produced by the information processing subsystem.
?c Department heads often would develop the information they needed from alternative, independent sources, rather than use the reports generated by the information processing subsystem. This was often easier than trying to search among the reports for the needed data.
Requirements:
1. Indicate whether each of the foregoing four reactions contributes positively or negatively to the Wright Company’s operating effectiveness. Explain your answer for each of the four reactions.
2. For each reaction that you indicated as negative, recommend alternative procedures the Wright Company could employ to eliminate this negative contribution to operating effectiveness.
You manage an auto service store. One of your major services is brake replacement. You purchase replacement parts at an average cost of $30 per set. Each set contains parts for four wheels and will repair one car. You charge an average of $100 per car for replacing worn brakes, including an average labor cost of $40. Your current volume for brake replacements is about 700 jobs per month. A new vendor has contacted you with an offer to sell you replacement parts at an average cost of $22.50 per set. After checking on the quality of these parts, you find that their average life is about two thirds that of the parts you are currently using.
Required
A. What are the short run profit implications of using the $22.50 brakes instead of the $30 brakes?
B. What are the long run profit implications?
C. What ethical issues should be considered in choosing which brakes to use?
Your state has recently decided to install an RFID system for its toll roads. The current plan is to sell non refundable transponders for $20 and allow users to deposit up to $1,000 in their accounts. To assist the IT personnel, the system’s planners want to develop a list of possible accounting transactions and system responses. Using your skills from earlier accounting classes, what debit and credit entries would you make for each of the following activities? (Feel free to develop your own accounts for this problem.)
a. A user buys a new transponder for $20.
b. A user adds $100 to his account.
c. A user discovers that a data entry clerk charges his credit card $1,000 instead of $100 when adding $100 to his account.
d. An individual leaves the state, turns in his transponder, and wants a cash refund for the $25.75 remaining in his account.
e. A good Samaritan turns in a transponder that he finds on the side of the road. There is a $10 reward for this act, taken from the owner’s account.
On January 1, 2010, the company had 50,000 share of common stock outstanding. During 2010, Zigland had the following transactions that affected its common stock account:
March 1: Issued 70,000 new shares at a price of $15 per share to raise additional capital.
April 1: Issued a 40% stock dividend when the share price was $16 per share.
June 1: Acquired 35,000 shares for the treasury at a cost of $18 per share.
August 1: Issued 80,000 new shares at a price of $14 per share.
November 1: Declared and issued a 3 for 1 stock split when the stock price was $21 per share.
December 1: Reissued 20,000 share of treasury stock at a price of $22 per share.
Compute the weighted average number of shares Zigland should use in computing earnings per share for 2010. Show your calculations.
1BAC41 ManagementInformation Systems, Semester 1/2013Assignment 1 (20%)Assignment specificationThis assignment is a group assignment, the numbers of students per group are 4students.There are two tasks to be done for this assignment, presentation and submitted document(in pdf format).The presentation of this assignment is due in week 6during the lecture and tutorial hrs. Every student need to present the work.There will be 15 minutes for each group presentation.The document is due to be submitted by April, Friday 12ndat 5pmthrough Moodle.The numbers ofwordslimitation are 1,500 words. The presentation mark is10% while the submitted document mark is10%.Notes1.The students need to submit their group members within week 3.2.The students need tonominatethe name of an Information System by no later than week 4(to ensure that each group does not work on the same Information System).3.Only one student will need to submit the assignmentthrough Moodle. Please put student ID and name of everyone in the group in an assignment cover page. Without the student ID and name, the assignment will not be marked. 4.If the assignment is submitted after the due date/time(after 5pm of April,Friday 12nd), 5% will be deducted per daylate(including the weekends).The assignment cannot be submitted after 5 days late.5.Each student need to present during the presentation day/time. No presentation mark will be given for any student who absence on that presentation day/time.6.The students are required to useOxford referencing style http://www.oxbridgewriters.com/study aids/referencing/oxford referencing.php
2Assignment questionsChoose one Information System (an example of this system is Australian tax return system, Net Bank, SAP, Supermarket Self Service Checkout System ) and research its use and benefits of an Information System. As part of your research, present the following answers1.What strategicobjectives this Information System address?2.In each strategicobjective (from answer 1), how does Information System improve business process?3.Who are the users of this system? What information the system producesto each user? What are the benefits ofthe information to each user?4.What are the challenges posed by the development/use of the system? (Examplesof the challengesare the issue of security, ethical).
Tom Emory and Jim Morris strolled back to their plant from the administrative offices of Ferguson & Son Manufacturing Company. Tom is manager of the machine shop in the company’s factory; Jim is manager of the equipment maintenance department.
The men had just attended the monthly performance evaluation meeting for plant department heads. These meetings had been held on the third Tuesday of each month since Robert Ferguson, Jr., the president’s son, had become plant manager a year earlier.
As they were walking, Tom Emory spoke: “Boy, I hate those meetings! I never know whether my department’s accounting reports will show good or bad performance. I’m beginning to expect the worst. If the accountants say I saved the company a dollar, I’m called ‘Sir,’ but if I spend even a little too much—boy, do I get in trouble. I don’t know if I can hold on until I retire.”
Tom had just been given the worst evaluation he had ever received in his long career with Ferguson & Son. He was the most respected of the experienced machinists in the company. He had been with the company for many years and was promoted to supervisor of the machine shop when the company expanded and moved to its present location. The president (Robert Ferguson, Sr.) had often stated that the company’s success was due to the high quality work of machinists like Tom. As supervisor, Tom stressed the importance of craftsmanship and told his workers that he wanted no sloppy work coming from his department.
When Robert Ferguson, Jr., became the plant manager, he directed that monthly performance comparisons be made between actual and budgeted costs for each department. The departmental budgets were intended to encourage the supervisors to reduce inefficiencies and to seek cost reduction opportunities. The company controller was instructed to have his staff “tighten” the budget slightly whenever a department attained its budget in a given month; this was done to reinforce the plant manager’s desire to reduce costs. The young plant manager often stressed the importance of continued progress toward attaining the budget; he also made it known that he kept a file of these performance reports for future reference when he succeeded his father.
Tom Emory’s conversation with Jim Morris continued as follows:
Emory:I really don’t understand. We’ve worked so hard to meet the budget, and the minute we do so they tighten it on us. We can’t work any faster and still maintain quality. I think my men are ready to quit trying. Besides, those reports don’t tell the whole story. We always seem to be interrupting the big jobs for all those small rush orders. All that setup and machine adjustment time is killing us. And quite frankly, Jim, you were no help. When our hydraulic press broke down last month, your people were nowhere to be found. We had to take it apart ourselves and got stuck with all that idle time.
Morris:I’m sorry about that, Tom, but you know my department has had trouble making budget, too. We were running well behind at the time of that problem, and if we had spent a day on that old machine, we would never have made it up. Instead, we made the scheduled inspections of the forklift trucks because we knew we could do those in less than the budgeted time.
Emory:Well, Jim, at least you have some options. I’m locked into what the scheduling department assigns to me and you know they’re being harassed by sales for those special orders. Incidentally, why didn’t your report show all the supplies you guys wasted last month when you were working in Bill’s department?
Morris:We’re not out of the woods on that deal yet. We charged the maximum we could to other work and haven’t even reported some of it yet.
Emory:Well, I’m glad you have a way of getting out of the pressure. The accountants seem to know everything that’s happening in my department, sometimes even before I do. I thought all that budget and accounting stuff was supposed to help, but it just gets me into trouble. It’s all a big pain. I’m trying to put out quality work; they’re trying to save pennies.
Review the case. Respond to the following:
Identify the problems that appear to exist in Ferguson & Son Manufacturing Company’s budgetary control system and explain how the problems are likely to reduce the effectiveness of the system. (approximately 1 page)
Explain how Ferguson & Son Manufacturing Company’s budgetary control system could be revised to improve its effectiveness. (approximately 1–2 pages)
Explain how the use of an activity based costing system could change the results of the budget, if utilized. (approximately 1 page)
As stated in the case, many employees have “quit trying” and have altered behavior on the job. Provide specific ways for how you would use a budget to change employee behavior and align goals in the organization. Explain how goal alignment can improve profitability and overall return to the shareholders of the company. (approximately 1 page)
Synthesize data to explain the concept of ROI and describe how the use of an activity based costing system can improve the company’s ROI and the potential impact on free cash flow. (approximately 1 page)
Write a 5–6 page report in Word format. Apply APA standards to citation of sources. Use the following file naming convention: LastnameFirstInitial_M6_A2.doc.
BySunday, April 14, 2013, deliver your assignment to theM6: Assignment 2 Dropbox.
This assignment is worth 300 points and will be graded using a rubric.Downloadand read the rubric to understand the expectations.
For assistance with any problems you may have when completing this assignment—OR—to offer your assistance to classmates, please use theProblems and Solutions Discussionarea located through the left side navigation link.
LASA 2—Manufacturing Budget Analysis
NOTE: If a component is absent, student receives a zero for that component.
Assignment Components
Unsatisfactory
(C to C)
Emerging
78 – 82%
(C+ to B )
Proficient
83 – 89%
(B to B+)
Exemplary
90 – 100 %
(A to A)
Score
To calculate score:
(% / 100) x max pts.
e.g.
(80% / 100) x 12 = 9.6
Identify the problems that appear to exist in the company’s budgetary control system and explain how the problems are likely to reduce the effectiveness of the system.
(CO 3)
Identification of the problems that appear to exist in the company’s budgetary control system is mostly unclear and incorrect.
Explanation of how the problems are likely to reduce the effectiveness of the system is mostly unclear and incorrect.
Identification of the problems that appear to exist in the company’s budgetary control system is only partially unclear and incorrect.
Explanation of how the problems are likely to reduce the effectiveness of the system is only partially unclear and incorrect.
Identification of the problems that appear to exist in the company’s budgetary control system is clear and correct.
Explanation of how the problems are likely to reduce the effectiveness of the system is clear and correct.
Identification of the problems that appear to exist in the company’s budgetary control system is clear and correct.
Explanation of how the problems are likely to reduce the effectiveness of the system is clear and correct.
In addition, several insightful examples are provided.
/66 pts.
Explain how the company’s budgetary control system could be revised to improve its effectiveness. (CO 3)
Explanation of how the company’s budgetary control system could be revised to improve its effectiveness is mostly unclear, incomplete, and incorrect.
Explanation of how the company’s budgetary control system could be revised to improve its effectiveness is only somewhat unclear, incomplete, and incorrect.
Explanation of how the company’s budgetary control system could be revised to improve its effectiveness is clear, complete, and correct.
Explanation of how the company’s budgetary control system could be revised to improve its effectiveness is clear, complete, and correct.
In addition, several insightful examples are provided.
/66 pts.
Explain how the use of an activity based costing system could change the results of the budget if utilized.
(CO 3,4)
Explanation of how the use of an activity based costing system could change the results of the budget if utilized is mostly unclear, incomplete, and incorrect.
Explanation of how the use of an activity based costing system could change the results of the budget if utilized is only somewhat unclear, incomplete, and incorrect.
Explanation of how the use of an activity based costing system could change the results of the budget if utilized is clear, complete, and correct.
Explanation of how the use of an activity based costing system could change the results of the budget if utilized is clear, complete, and correct.
In addition, several insightful examples are provided.
/44 pts
Identify ways of how one can use a budget to change employee behavior and align goals in the organization.
Explain how goal alignment can improve profitability and overall return to shareholders of the company. (CO 4)
Identification of ways that one can use a budget to change employee behavior and align goals in the organization is mostly unclear, incomplete, and incorrect.
Explanation of how goal alignment can improve profitability and overall return to shareholders of the company is mostly unclear, incomplete, and incorrect.
Identification of ways that one can use a budget to change employee behavior and align goals in the organization is only somewhat unclear, incomplete, and incorrect.
Explanation of how goal alignment can improve profitability and overall return to shareholders of the company is only somewhat unclear, incomplete, and incorrect.
Identification of ways that one can use a budget to change employee behavior and align goals in the organization is clear, complete, and correct.
Explanation of how goal alignment can improve profitability and overall return to shareholders of the company is clear, complete, and correct.
Identification of ways that one can use a budget to change employee behavior and align goals in the organization is clear, complete, and correct.
Explanation of how goal alignment can improve profitability and overall return to shareholders of the company is clear, complete, and correct.
In addition, several insightful examples are provided.
/44 pts
Synthesize data to explain the concept of ROI, how the use of an activity based costing system can improve the company’s ROI, and the potential impact on free cash flow. (CO 3,4,5)
Synthesis and explanation of the concept of ROI, how the use of an activity based costing system can improve the company’s ROI, and the potential impact on free cash flow is mostly unclear, incomplete, and incorrect.
Synthesis and explanation of the concept of ROI, how the use of an activity based costing system can improve the company’s ROI, and the potential impact on free cash flow is only partially unclear, incomplete, and incorrect.
Synthesis and explanation of the concept of ROI, how the use of an activity based costing system can improve the company’s ROI, and the potential impact on free cash flow is clear, complete, and correct.
Synthesis and explanation of the concept of ROI, how the use of an activity based costing system can improve the company’s ROI, and the potential impact on free cash flow is clear, complete, and correct.
In addition, several insightful examples are provided.
/50 pts
Write in a clear, concise, and organized manner; demonstrate ethical scholarship in accurate representation and attribution of sources; and display accurate spelling, grammar, and punctuation.
Writing is unclear and disorganized and rereading to solidify understanding is frequently necessary. Although an attempt at ethical scholarship is attempted, it is sloppy or incomplete throughout. Spelling, grammar, or punctuation errors severely interfere with readers’ comprehension.
Writing is somewhat clear and is somewhat organized, although rereading to solidify understanding is occasionally necessary. It demonstrates an attempt at ethical scholarship in accurate representation and attribution of sources, but errors are occasional or minor. Writing has good spelling, grammar, and punctuation, but errors somewhat interfere with readers’ comprehension.
Writing is generally clear and in an organized manner. It demonstrates ethical scholarship in accurate representation and attribution of sources; and generally displays accurate spelling, grammar, punctuation. Errors are few, isolated, and do not interfere with reader’s comprehension.
Writing is clear, concise, and in an organized manner; demonstrates ethical scholarship in accurate representation and attribution of sources; and displays accurate spelling, grammar, and punctuation.
On May 31, the inventory balances of Princess Designs, a manufacturer of high quality children’s clothing, were as follows: Materials Inventory, $21,360; Work in Process Inventory, $15,112; and Finished Goods Inventory, $17,120. Job order cost cards for jobs in process as of June 30 had these totals:
The predetermined overhead rate is 130 percent of direct labor costs. Materials purchased and received in June were as follows:
Direct labor costs for June were as follows:
Direct materials requested by production during June were as follows:
On June 30, Princess Designs sold on account finished goods with a 75 percent markup over cost for $320,000.
Required:
1. and 4. Using T accounts for Materials Inventory, Work in Process Inventory, Finished Goods Inventory, Overhead, Accounts Receivable, Payroll Payable, Sales, and Cost of Goods Sold, reconstruct the transactions in June. Determine the ending balances. If required, round any amount to the nearest dollar.
EQUIVALENT PRODUCTION: FIFO COSTING METHOD
Paper Savers Corporation produces wood pulp that is used in making paper. The following data pertain to the company’s production of pulp during September:
Compute the equivalent units of production for direct materials and conversion costs for September using the FIFO costing method.
Equivalent Units
Direct Materials _____________
Conversion Costs _____________
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http://west.cengagenow.com/ilrn/takeAssignment/takeAssignmentMain.do?invoker=assignmentsJOB ORDER COST FLOW On May 31, the inventory balances of Princess Designs, a manufacturer of high quality children’s clothing, were as follows: Materials Inventory, $21,360; Work in Process Inventory, $15,112; and Finished Goods Inventory, $17,120. http://west.cengagenow.com/ilrn/takeAssignment/takeAssignmentMain.do?invoker=assignmentsJob order cost cards for jobs in process as of June 30 had these totals: The predetermined overhead rate is 130 percent of direct labor costs. Materials purchased and received in June were as follows: Direct labor costs for June were as follows: Direct materials requested by production during June were as follows: On June 30, Princess Designs sold on account finished goods with a 75 percent markup over cost for $320,000. Required: 1. and 4. Using T accounts for Materials Inventory, Work in Process Inventory, Finished Goods Inventory, Overhead, Accounts Receivable, Payroll Payable, Sales, and Cost of Goods Sold, reconstruct the transactions in June. Determine the ending balances. If required, round any amount to the nearest dollar. http://west.cengagenow.com/ilrn/takeAssignment/takeAssignmentMain.doEQUIVALENT PRODUCTION: http://west.cengagenow.com/ilrn/takeAssignment/takeAssignmentMain.doFIFO COSTING METHOD Paper Savers Corporation produces wood pulp that is used in making paper. The following data pertain to the company’s production of pulp during September: Compute the equivalent units of production for direct materials and http://west.cengagenow.com/ilrn/takeAssignment/takeAssignmentMain.doconversion costs for September using the FIFO costing method. Equivalent Units Direct Materials _____________ Conversion Costs _____________??????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????
ACT350 Portfolio Project Page 1 of 2 Using these 2007 annual reports for The Coca Cola Company and PepsiCo, Inc., answer the following questions. Write these up in a Word document, clearly identifying your response to each lettered item. Show supporting calculations for the items lettered c, f, h, l, m, o, p, r, s and u. a. What are the primary lines of business of these two companies as shown in their notes to the financial statements? b. Which company has the dominant position in beverage sales? c. Which company has the greater percentage increase in total assets from 2006 to 2007? d. Which company had more depreciation and amortization expense for 2007? Provide a rationale as to why there is a difference in these amounts between the two companies. e. What type of income format(s) is used by these two companies? Identify any differences in income statement format between these two companies. f. What are the gross profits, operating profits, and net incomes for these two companies over the three year period 2005 2007? Which company has had better financial results over this period of time? g. What format(s) did these companies use to present their balance sheets? h. How much working capital did each of these companies have at the end of 2007? Speculate as to their rationale for the amount of working capital they maintain. i. What is the most significant difference in the asset structure of the two companies? What causes this difference? j. What were the two companies’ trends in net cash provided by operating activities over the period 2005 to 2007? k. What were the cash and cash equivalents reported by Coca Cola and PepsiCo at the end of 2007? What does each company classify as cash equivalents? l. What were the accounts receivable (net) for Coca Cola and PepsiCo at the end of 2007? Which company reports the greater allowance for doubtful accounts receivable (amount and percentage of gross receivable) at the end of 2007? m. What is the amount of inventory reported by Coca Cola at December 31, 2007, and by PepsiCo at December 29, 2007? What percent of total assets is invested in inventory by each company? n. What inventory costing methods are used by Coca Cola and PepsiCo? How does each company value its inventories? o. Compute and compare the inventory turnover ratios and days to sell inventory for Coca Cola and PepsiCo for 2007. Indicate why there might be a significant difference between the two companies. ACT350 Portfolio Project Page 2 of 2 p. What amount is reported in the balance sheets as property, plant, and equipment (net) of CocaCola at December 31, 2007, and of PepsiCo at December 29, 2007? What percentage of total assets is invested in property, plant, and equipment by each company? q. What depreciation methods are used by Coca Cola and PepsiCo for property, plant, and equipment? How much depreciation was reported by Coca Cola and PepsiCo in 2007, 2006, and 2005? r. Compute and compare the following ratios for Coca Cola and PepsiCo for 2007: Asset turnover, Profit margin on sales, and Rate of return on assets. s. What amounts for intangible assets were reported in their respective balance sheets by CocaCola and PepsiCo? What percentage of total assets is each of these reported amounts? t. On what basis and over what periods of time did Coca Cola and PepsiCo amortize their intangible assets? u. What were Coca Cola’s and PepsiCo’s net revenues (sales) for the year 2007? Which company increased its revenues more (dollars and percentage) from 2006 to 2007? v. Are the revenue recognition policies of Coca Cola and PepsiCo similar? Explain
The word count is taken from the beginning of the Introduction to the end of the Conclusions/Recommendations.
Learning Outcomes
LO1: Utilise information obtained from physical or web based resources in technical problem solving and presentations.
LO3: Communicate ideas and technical findings in a written format.
LO5: Demonstrate interpersonal communication skills to develop project outcomes.
Aim To use the skills learnt and practised in the module to produce a professional, formal report for a specified engineering audience.
Objective To demonstrate your ability to use professional writing and research methods and skills to gather and prepare information, and then write a formal report.
Your task To write a formal report, appropriate for an engineering context, based on personal investigation and/or research.
1 Topic
Investigate an engineering topic/problem/interest of your choice and compile a report. It is suggested that you choose a topic from civil engineering.
Examples of topics:
• Suggest ways to strengthen the structural integrity of a bridge after an earthquake
• Water treatment in Nelson, now and into the future
• Waste water disposal in Nelson, now and into the future
• What are the engineering aspects of the new Lower Matai River walkway in Nelson, north and south?
• The development of the Saxton Oval and the drainage issues encountered.
• Which road option for Nelson: Southern Link/Rocks Road/Tunnel?
2 Procedure/Research
You must provide evidence of having sourced information through primary or secondary research:
• primary research – face to face interview(s) with an appropriate expert(s) on your topic e.g. engineers from a variety of local businesses and/or government agencies
• secondary research – books, newspaper or magazine/periodical articles, brochures, pamphlets, online resources etc.
• primary research information should be reinforced by secondary research;
3 Length
Only the body of the report is included in the word count ((i) introduction, (ii) methodology/research plan, (iii) results, (iv) discussion of the results, (v) conclusions/recommendations), which should be 1400–1600 words in length.
Please place the word count at the bottom of the Conclusions/Recommendations page, below your signature.
4 Presentation
• The report must include at least five images in the results section of your report: graphical and symbolic technical engineering symbols, production tables, graphs, diagrams, charts, photographs, drawings etc.
• You must submit a draft of your report at least two weeks prior to the due date.
• The report should be typed using 12 point font and an easy to read font style. The abstract, introduction and conclusions/recommendation pages are to be double spaced. Other parts of the report should be single spaced.
• Full block style must be used; print only one side of each page.
• The report should be set out in the following order:
(i) cover page
(ii) title page
(iii) table of contents
(iv) glossary and abbreviations
(v) abstract
(vi) introduction
(vii) methodology or research plan
(viii) results
(ix) discussion of the results
(x) conclusions and recommendations
(xi) signage
(xii) references
(xiii) appendices.
• The report must contain all the sections required and must be assembled in the order outlined above.
• The report must be bound or fastened. It must include colour print. Every effort should be made to present the report in a professional manner. The report should look ‘pleasing to the eye’.
Parts of the Report
(i) Cover page
The cover page includes an appropriate title (not the research question), a subtitle if appropriate, an appropriate image and the student’s name (No page number).
(ii) Title Page
The title page includes the following details: (i) an appropriate title (not the research question), (ii) a subtitle if appropriate (iii) student’s name and ID number, (iv) tutor’s name,
(v) full name and number of the programme and module, (v) an appropriate image and (vi) the due date (Page number: Roman numeral ii).
(iii) Table of Contents
The headings of the formal report and their respective page numbers are listed accurately in the order that they appear in the report. A list of images is also included in the table of contents e.g. graphical and symbolic technical engineering symbols, production tables, graphs, diagrams, images, photographs, drawings etc. (Page number: Roman numeral iii)
(iv) Glossary & Abbreviations
The glossary is an alphabetical list of any technical terms that may not be familiar to your reader/s, together with their definitions. Abbreviations are words formed from the initial letters or parts of other words, e.g. CPEng – Chartered Professional Engineer (CPEng). Use the brackets when first used in text then use only the abbreviation. If you use a number of them then list them in the glossary.
(v) Abstract
An abstract is a microcosm of the entire report. It contains key information from each section; essential information only is given in brief. It covers the research highlights and gives the research problem and/or main objective of the report. It indicates the methodology used and presents the main findings and conclusions. Finally it states the actions that have been recommended. No more than one page in length. (Page number: Roman numeral iv)
(vi) Introduction – purpose, significance, scope and limitations.
The introduction explains the research question and its context. It explains the importance of the problem e.g. Why does it matter? Why is more information needed? Explains the reasons and goals for the study, and the limitations of the research. You want your reader to fully understand the significance of your research. No more than one page in length. (Page number: 1)
(vii) Methodology/Research Plan
The methodology or research plan explains how data was gathered and/or generated. It explains how data was analysed and assumes the reader understands the material. It does not include explanatory material. It is written in past tense using a passive voice. It is the research, and not your activities, that are of interest. The research plan must be developed in ordered steps or phases. Evaluation criteria may be listed and defined e.g. cost effectiveness, minimal disruption, durability etc. Limitations may be discussed and minor steps may be articulated. (Page number: beginning at #2)
(viii) Results of the study
The opening paragraph states the subject and purpose of the section. Results are described objectively. Supporting evidence may be included.
The results represent research findings textually and visually. At least five images are included in this section of the report. Images do not appear anywhere else in the report.
The text points out the most significant portions of research findings, indicates key trends or relationships and highlights expected and/or unexpected findings.
Visual representation of results; at least five images that are labelled and named appropriately e.g. graphical and symbolic technical engineering symbols, production tables, graphs, diagrams, charts, photographs, drawings etc.
(ix) Discussion of the Results
A discussion of the results starts with an opening paragraph that directs discussion. The results of the research are discussed. This section assesses and comments on the research results. An explanation comments on unexpected results, offering an hypothesis for them. Comparisons are made to literature e.g. Does your research confirm previous studies? Does it deviate from them? An explanation can be given of how information can be applied in a broader context.
(x) Conclusions/Recommendations
The conclusion discusses the following: What was learned through the research? What remains to be learnt? The weaknesses and shortcomings of the study and possible applications of the study.
The recommendations are put in bullet form to make them easier to read. Providing contact information can be used as a way of ending the report. Less than one page is needed for the conclusions and recommendations.
(xi) Signage
The report is formally signed, in blue or black pen, near the bottom of the conclusions/recommendations page. The date of completion is also included.
(xii) Referencing – secondary research only
The references are listed alphabetically. The list includes all books, magazines, journals, articles, brochures, pamphlets and online resources etc, listed according to APA Referencing guidelines. The reference list does not include primary research.
(xiii) Appendix/Appendices
The appendix/appendices include information that you want the reader to have or be aware of e.g. websites, graphs, diagrams etc.
MARKING SCHEDULE
Assessment 1: Report
Sections Marking criteria Mark Score
Presentation Report is bound and presented in a professional manner. 2
Submission Each section of the report is submitted in the order listed on pages 3 4 2
Title/cover pages The cover and title pages includes all criteria requested on p.3. 2
Title Title of report relevant and concise 2
Table of Contents Includes all report sections, images/visuals and page numbers. 2
Abstract
(one page only) (Key information from each section; essential information only.)
• Gives the research problem and/or main objective of the report.(2)
• Indicates the methodology used.(2)
• Presents the main findings and conclusions.(2)
• States the recommendations.(2) 8
Introduction
(one page only) • Explains the research problem and its context.(2)
• Explains the importance of the problem.(2)
• Explains the reasons and goals for the study.(2)
• Discusses the limitations of the research.(2) 8
Methodology or
Research Plan • Report is developed in ordered steps or phases.(5)
• Explains how data was gathered and/or generated.(5)
• Explains how data was analysed.(5)
(Written in past tense using a passive voice.) (deduct 2 if not in passive voice) 15
Results • Opening paragraph states the subject and purpose.(1)
• Results are described objectively. (4)
• Supporting evidence included.(4)
• Text points out significant research findings (2)
• Indicate key trends/relationships and highlights expected/unexpected findings.(4)
• Visual representation of results e.g. graphical and symbolic technical engineering symbols, production tables, graphs, etc.(5) 20
Discussion of Results • Starts with an opening paragraph that redirects discussion.(2)
• The results of the research are discussed.(5)
• Discusses unexpected results, offering an hypothesis for them.(5)
• Discusses how information can be applied in a broader context.(5)
(Comparisons are made to literature.) (Bonus 3)
• 17
Conclusions and
Recommendations
(one page only) • What was learned through the research?(2)
• What remains to be learnt?(2)
• What are the weaknesses and shortcomings of study?(2)
• What are the possible applications of the study? Future research. (2)
• The recommendations are listed in bullet form. (2)
(Contact information used to end the report.) 10
Signage Signed in blue or black pen on conclusions/recommendations page.
The word count is listed below the signage. 2
References Secondary sources listed alphabetically according to APA
Referencing guidelines. 4
Glossary Non familiar technical terms listed alphabetically, with definitions.(2)
Abbreviations.(2) 4
Appendix Appendices Information that you want the reader to have or be aware of. 2
Deductions Note 0.25 of a mark will be deducted for all punctuation, grammar, layout or spelling errors up to a maximum of 5 marks. However any deductions offset by a maximum of 5 marks for checking signature below.
Checking I have checked the written report from ……………………………..
Company Name : Coca Cola Your report should address the following: a) Introduction of the company. (200 words) b) Undertake a strategic analysis and evaluation of the company using SWOT and PEST. (800 words) Instructions for Written Assignment: 1. Assignment must be computer typed, double spaced and use Times New Roman font size 12. Leave a one inch margin on each side of the page and all pages must be numbered accordingly. 2. Start each section on a new page. Clearly label and explain all diagrams and graphs, if any. Page 2 of 2 3. Use the Harvard Referencing System to cite your references. A full list of references referred to in your assignment must be provided. 4. No excuses for acts of plagiarism and collusion will be entertained. A zero mark will be awarded if the evidence warrants an academic offense.
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Company Name : Coca Cola Your report should address the following: a) Introduction of the company. (200 words) b) Undertake a strategic analysis and evaluation of the company using SWOT and PEST. (800 words) Instructions for Written Assignment: 1. Assignment must be computer typed, double spaced and use Times New Roman font size 12. Leave a one inch margin on each side of the page and all pages must be numbered accordingly. 2. Start each section on a new page. Clearly label and explain all diagrams and graphs, if any. Page 2 of 2 3. Use the Harvard Referencing System to cite your references. A full list of references referred to in your assignment must be provided. 4. No excuses for acts of plagiarism and collusion will be entertained. A zero mark will be awarded if the evidence warrants an academic offense.
Written Assignment (700 750 Words) Audited financial statements play a key role in ensuring the credibility of financial information. However, the 2011 2012 ASIC Audit Inspection program revealed problems with audit quality. Available at: http://www.asic.gov.au/asic/pdflib.nsf/LookupByFileName/rep317 published 4 December 2012.pdf/$file/rep317 published 4 December 2012.pdf You are required to: 1. Summarise and critically evaluate the 2011 2012 ASIC Audit Inspection program report’s findings concerning audit quality. 2. Give your opinion on possible steps audit firms might take to overcome the problems with audit quality identified in the ASIC Audit Inspection? 3. Give your opinion on possible regulatory changes which might be introduced to improve audit quality. In particular, discuss the importance of pushing for mandatory audit firm rotation if audit quality continues to deteriorate.
Document Preview:
Written Assignment (700 750 Words) Audited financial statements play a key role in ensuring the credibility of financial information. However, the 2011 2012 ASIC Audit Inspection program revealed problems with audit quality. Available at: ? HYPERLINK “http://www.asic.gov.au/asic/pdflib.nsf/LookupByFileName/rep317 published 4 December 2012.pdf/$file/rep317 published 4 December 2012.pdf” ?http://www.asic.gov.au/asic/pdflib.nsf/LookupByFileName/rep317 published 4 December 2012.pdf/$file/rep317 published 4 December 2012.pdf? You are required to: Summarise and critically evaluate the 2011 2012 ASIC Audit Inspection program report’s findings concerning audit quality. Give your opinion on possible steps audit firms might take to overcome the problems with audit quality identified in the ASIC Audit Inspection? Give your opinion on possible regulatory changes which might be introduced to improve audit quality. In particular, discuss the importance of pushing for mandatory audit firm rotation if audit quality continues to deteriorate.
Why are noncash transactions, such as the exchange of common stock a building, included on a statement of cash flows? How are these noncash transactions disclosed?
Chapter 1 Exercise 1:
1. Classification of activities
Classify each of the following transactions as arising from an operating (O), investing (I), financing (F), or noncash investing/financing (N) activity.
________ Received $80,000 from the sale of land.
________ Received $3,200 from cash sales.
________ Paid a $5,000 dividend.
________ Purchased $8,800 of merchandise for cash.
________ Received $100,000 from the issuance of common stock.
________ Paid $1,200 of interest on a note payable.
________ Acquired a new laser printer by paying $650.
________ Acquired a $400,000 building by signing a $400,000 mortgage note.
Chapter 1 Exercise 4:
4. Overview of direct and indirect methods
Evaluate the comments that follow as being True or False. If the comment is false, briefly explain why.
Both the direct and indirect methods will produce the same cash flow from operating activities.
Depreciation expense is added back to net income when the indirect method is used.
One of the advantages of using the direct method rather than the indirect method is that larger cash flows from financing activities will be reported.
The cash paid to suppliers is normally disclosed on the statement of cash flows when the indirect method of statement preparation is employed.
The dollar change in the Merchandise Inventory account appears on the statement of cash flows only when the direct method of statement preparation is used.
Chapter 1 Exercise 6:
6. Equipment transaction and cash flow reporting
Property, plant, & equipment
Dec. 31, 20X4
Dec. 31, 20X3
Land
$94,000
$94,000
Equipment
652,000
527,000
Less: Accumulated depreciation
316,000
341,000
New equipment purchased during 20×4 totaled $280,000. The 20×4 income statement disclosed equipment depreciation expense of $41,000 and a $9,000 loss on the sale of equipment.
Determine the cost and accumulated depreciation of the equipment sold during 20X4.
Determine the selling price of the equipment sold.
Show how the sale of equipment would appear on a statement of cash flows prepared by using the indirect method.
Chapter 1 Problem 3:
3. Cash flow information: Direct and indirect methods
The comparative year end balance sheets of Sign Graphics, Inc., revealed the following activity in the company’s current accounts:
20X5
20X4
Increase / Decrease)
Current assets
Cash
$55,400
$35,200
$20,200
Accounts receivable (net)
83,800
88,000
4,200
Inventory
243,400
233,800
9,600
Prepaid expenses
25,400
24,200
1,200
Current liabilities
Accounts payable
$123,600
$140,600
($17,000)
Taxes payable
43,600
49,200
5,600
Interest payable
9,000
6,400
2,600
Accrued liabilities
38,800
60,400
21,600
Note payable
44,000
—
44,000
The accounts payable were for the purchase of merchandise. Prepaid expenses and accrued liabilities relate to the firm’s selling and administrative expenses. The company’s condensed income statement follows.
SIGN GRAPHICS INC.
Income Statement
for the Year Ended December 31, 20×5
Sales
$713,800
Less: Cost of goods sold
323,000
Gross profit
$390,800
Less: Selling & administrative expenses
$186,000
Depreciation expense
17,000
Interest expense
27,000
230,000
Add: gain on sale of land
$160,800
21,800
Income before taxes
$182,600
Income taxes
36,800
Net income
$145,800
Other data:
Long term investments were purchased for cash at a cost of $74,600.
Cash proceeds from the sale of land totaled $76,200.
Store equipment of $44,000 was purchased by signing a short term note payable. Also, a $150,000 telecommunications system was acquired by issuing 3,000 shares of preferred stock.
A long term note of $49,400 was repaid.
Twenty thousand shares of common stock were issued at $5.19 per share.
The company paid cash dividends amounting to $128,600.
Instructions:
Prepare the operating activities section of the company’s statement of cash flows, assuming use of:
The direct method.
The indirect method.
Prepare the investing and financing activities sections of the statement of cash flows.
Please complete the following 5 exercises below in either Excel or a word document (but must be single document). You must show your work where appropriate (leaving the calculations within Excel cells is acceptable). Save the document, and submit it in the appropriate week using the Assignment Submission button.
Ch 1 Critical Thinking Question 5:
Answer the following questions:
Why are noncash transactions, such as the exchange of common stock a building, included on a statement of cash flows? How are these noncash transactions disclosed?
Chapter 1 Exercise 1:
1. Classification of activities
Classify each of the following transactions as arising from an operating (O), investing (I), financing (F), or noncash investing/financing (N) activity.
________ Received $80,000 from the sale of land.
________ Received $3,200 from cash sales.
________ Paid a $5,000 dividend.
________ Purchased $8,800 of merchandise for cash.
________ Received $100,000 from the issuance of common stock.
________ Paid $1,200 of interest on a note payable.
________ Acquired a new laser printer by paying $650.
________ Acquired a $400,000 building by signing a $400,000 mortgage note.
Chapter 1 Exercise 4:
4. Overview of direct and indirect methods
Evaluate the comments that follow as being True or False. If the comment is false, briefly explain why.
Both the direct and indirect methods will produce the same cash flow from operating activities.
Depreciation expense is added back to net income when the indirect method is used.
One of the advantages of using the direct method rather than the indirect method is that larger cash flows from financing activities will be reported.
The cash paid to suppliers is normally disclosed on the statement of cash flows when the indirect method of statement preparation is employed.
The dollar change in the Merchandise Inventory account appears on the statement of cash flows only when the direct method of statement preparation is used.
Chapter 1 Exercise 6:
6. Equipment transaction and cash flow reporting
Property, plant, & equipment
Dec. 31, 20X4
Dec. 31, 20X3
Land
$94,000
$94,000
Equipment
652,000
527,000
Less: Accumulated depreciation
316,000
341,000
New equipment purchased during 20×4 totaled $280,000. The 20×4 income statement disclosed equipment depreciation expense of $41,000 and a $9,000 loss on the sale of equipment.
Determine the cost and accumulated depreciation of the equipment sold during 20X4.
Determine the selling price of the equipment sold.
Show how the sale of equipment would appear on a statement of cash flows prepared by using the indirect method.
Chapter 1 Problem 3:
3. Cash flow information: Direct and indirect methods
The comparative year end balance sheets of Sign Graphics, Inc., revealed the following activity in the company’s current accounts:
20X5
20X4
Increase / Decrease)
Current assets
Cash
$55,400
$35,200
$20,200
Accounts receivable (net)
83,800
88,000
4,200
Inventory
243,400
233,800
9,600
Prepaid expenses
25,400
24,200
1,200
Current liabilities
Accounts payable
$123,600
$140,600
($17,000)
Taxes payable
43,600
49,200
5,600
Interest payable
9,000
6,400
2,600
Accrued liabilities
38,800
60,400
21,600
Note payable
44,000
—
44,000
The accounts payable were for the purchase of merchandise. Prepaid expenses and accrued liabilities relate to the firm’s selling and administrative expenses. The company’s condensed income statement follows.
SIGN GRAPHICS INC.
Income Statement
for the Year Ended December 31, 20×5
Sales
$713,800
Less: Cost of goods sold
323,000
Gross profit
$390,800
Less: Selling & administrative expenses
$186,000
Depreciation expense
17,000
Interest expense
27,000
230,000
Add: gain on sale of land
$160,800
21,800
Income before taxes
$182,600
Income taxes
36,800
Net income
$145,800
Other data:
Long term investments were purchased for cash at a cost of $74,600.
Cash proceeds from the sale of land totaled $76,200.
Store equipment of $44,000 was purchased by signing a short term note payable. Also, a $150,000 telecommunications system was acquired by issuing 3,000 shares of preferred stock.
A long term note of $49,400 was repaid.
Twenty thousand shares of common stock were issued at $5.19 per share.
The company paid cash dividends amounting to $128,600.
Instructions:
Prepare the operating activities section of the company’s statement of cash flows, assuming use of:
The direct method.
The indirect method.
Prepare the investing and financing activities sections of the statement of cash flows.
ASSIGNMENT 2: ACCOUNTING FOR DECISION MAKINO DUE DATE: 16 APRIL 2013
1.1 QUESTION ONE (20 MARKS) REQUIRED Answer the questions below that are based on the cash flow statement provided hereafter: Calculate the following: 1.1.1 Interest income (2) 1.1.2 Cash and cash equivalents at the beginning of the year (2) 1.1.3 Carrying/Book value of the vehicles sold (2) 1.2 Apart from depreciation, name two other adjustments that would be needed to convert to cash from operations (R140 000). (2) 1.3 Comment on the following: 1.3.1 Decrease in inventory (2) 1.3.2 Increase in receivables (2) 1.3.3 Cash flow from investing activities (mention two significant points) (4) 1.3.4 The overall cash position of the company (mention two significant points) (4) INFORMATION
Mika Limited CASH FLOW STATEMENT FOR THE YEAR ENDED 30 NOVEMBER 2012 R Cash flows from operating activities 420 000 Profit before interest and tax/Operating profit 500 000 Adjustments to convert to cash from operations 140 000 Profit before working capital changes 640 000 Working capital changes 108 000 Decrease in inventory 160 000 Increase in receivables (220 000) Increase in payables 168 000 Cash generated from operations 748 000 Interest income Dividends paid (152 000) Income tax paid (216 000) Cash flow from investing activities (760 000) Non current assets purchased (820 000) Proceeds from sale of vehicles (sold at a profit of R100 000) 300 000 Increase in long term investments (340 000) Disposal of long term investments (disposed at a loss of R50 000) 100 000 Cash flow from financing activities 400 000 Proceeds from issue of ordinary shares 400 000 Net increase in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year 500 000
45
COURSE AND ASSIGNMENT HANDBOOK: JANUARY 2013 INTAKE
Problem #1 You must use an “Excel” spreadsheet for your answers. Be sure to show all computations in order to receive full credit. Avilon Corp, needs to raise a minimum of $50,000,000 for a major expansion. The Board of Directors is considering selling bonds to raise the required amount. The three options they are considering are as follows: #1) $50,000,000, 15 year, 6% bonds; interest paid semi annually; sold to yield 8%. #2) $50,000,000, 15 year, 6% bonds, interest paid semi annually; sold to yield 4%.
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Problem #1 You must use an “Excel” spreadsheet for your answers. Be sure to show all computations in order to receive full credit. Avilon Corp, needs to raise a minimum of $50,000,000 for a major expansion. The Board of Directors is considering selling bonds to raise the required amount. The three options they are considering are as follows: #1) $50,000,000, 15 year, 6% bonds; interest paid semi annually; sold to yield 8%. #2) $50,000,000, 15 year, 6% bonds, interest paid semi annually; sold to yield 4%. #3) $50,000,000, 15 year, 6% bonds, interest paid semi annually; sold to yield 6%. Required: 1) Compute the selling price of the bonds under the three different options. For option #1, prepare an amortization schedule using the effective interest method. Be sure to adjust the last payment’s interest, up or down, so that the bond carrying value equals $50,000,000. Indicate what option would be the best, and support your answer. Problem #2 You must use or an “Excel” spreadsheet for your answers. Sixnut, Incorporated has been authorized to issue 1,000,000 shares of $2 par common stock, and 50,000 shares of 6%, $100 par, cumulative, preferred stock. During the first six months of operation, the following transactions occurred related to the stock. Jul 1st Sold 150,000 shares of common stock for $10 per share, and 25,000 shares of preferred stock, sold at par. Jul 1st Issued 100,000 shares of common stock in exchange for the following assets: Land $250,000 Building 750,000 Equipment 300,000 Inventory 200,000 The market value of the stock was $15 per share. Sep 1st Sold 100,000 shares of common stock for $20 per share. Oct 31st Repurchased 30,000 shares of common stock for $25 per share. Sixnut has elected to use the cost method to account for the treasury stock. Nov 30th Re sold 20,000 shares of the treasury stock for $35 per share. Dec 31st Recorded net income for the first six months in the amount of…
The sales of Alpha Company in March were $92,000. The Balance sheet of Alpha Company (31 March 2008) is given below.
Current Assets:
Cash
23,000
Accounts receivable
27,600
Merchandise inventory
93,200
Unexpired insurance
4,140
Total Current Assets
147,940
Gross fixed assets
85,100
Accumulated depreciation
29,440
Net Fixed assets
55,660
Total Assets
203,600
Current Liabilities
Accounts payable
27,664
Accrued wages and commissions payable
5,835
Loan
0
Total Current Liabilities
33,499
Owner’s equity
170,101
Total equity and liabilities
203,600
•The projected sales in April and May are $110,000 and $184,000 respectively.
•Alpha sales are 70% cash and 30% credit, collected in the following month. It has no currently overdue accounts and anticipates none in the future.
•The company will purchase a second hand truck on 1 May 2008: $8,000
•Miscellaneous cash expenses: 5% of the current sales
•Rent: $4,600/month
•Insurance expense: paid once a year (beginning of January 2008) = $5,520;
•Depreciation expense: $1,150/month
•Tax rate: 0%
•Wages: $5650/month + 15% commission of sales/month
•70% of the wages made in a specific month are paid in that month, the rests are paid in the following month)
•The inventory policy of the company is to begin a month with a sufficient inventory to cover 80% of sales + $36,000 cushion
•Cost of Goods Sold: 65% of sales
•60% of the purchases made in a specific month are paid in that month, the rests are paid in the following month).
•Alpha borrowed from one of its founder at 1.5% interest/month for the next 2 years. Alpha borrows from and repays the founder at the end of the month. The agreement with this founder stipulates a $30,000 minimum cash balance in the venture’s checking account.
Construct Alpha’s cash budget, income statement, balance sheet and statement of cash flow for April 2008.
Based on the Business Case presented on page 2 above, prepare a 500 – 750 word report. Organise your report by including the headings provided in the marking criteria on page 6. Your report needs to address the following: (a) Give a brief description of the Nossal Institute for Global Health (Nossal). (b) Outline how climate change is likely to affect Nossal’s business operations in developing countries. (c) Evaluate the social issues likely to impact on a business operating in a developing country. (d) Suggest ways that accountants can play in addressing climate change in a business environment. 2. Reference List: Includes any references you have used and cited in your report. You must use the Harvard referencing system as per the guide available from the UWS library website. (Note: the reference list is not included in the word count)
Prepare financial statements. (LO 1,3), AP You are provided with the following information for Ramirez Enterprises, effective as of its April 30, 2014, year end.
Accounts payable
$? 834
Accounts receivable
810
Accumulated depreciation”equipment
670
Cash
1,270
Common stock
900
Cost of goods sold
1,060
Depreciation expense
335
Dividends
325
Equipment
2,420
Income tax expense
165
Income taxes payable
135
Insurance expense
210
Interest expense
400
Inventory
967
Land
3,100
Mortgage payable
3,500
Notes payable
61
Prepaid insurance
$?? 60
Retained earnings (beginning)
1,600
Salaries and wages expense
700
Salaries and wages payable
222
Sales revenue
5,100
Stock investments (short term)
1,200
Instructions
(a)
Prepare an income statement and a retained earnings statement for Ramirez Enterprises for the year ended April 30, 2014.
Net income
$2,230
(b)
Prepare a classified balance sheet for Ramirez Enterprises as of April 30, 2014.
Page Manufacturing Company uses the percentage of completion method of recognizing income on its long term projects. During 2006, Page agreed to make a specialized production system for $1,000,000. Information relating to the contract is as follows: December 31, 2006: Percentage of completion: 20%, Estimated total costs at completion: $750,000, Income recognized (cumulative): $50,000. December 31, 2007: Percentage of completion: 60%, Estimated total costs at completion: $800,000, Income recognized (cumulative): $120,000. Contract costs incurred during 2007 were Answer
Danville is going to invest $81,000 into the business to acquire a 30 percent ownership interest. Goodwill is to be recorded. What will be Danville’s beginning capital balance? (Round your final answer to the nearest whole dollar amount.)
Pearson Architectural Design began operations on January 2. The following activity was recorded in the company’s Work in Process account for the first month of operations:
Work in Process
Costs of subcontracted work
89,000
To completed projects
567,600
Direct staff costs
201,000
Studio overhead
321,600
Pearson Architectural Design is a service firm, so the names of the accounts it uses are different from the names used in manufacturing companies. Costs of Subcontracted Work is comparable to Direct Materials; Direct Staff Costs is the same as Direct Labor; Studio Overhead is the same as Manufacturing Overhead; and Completed Projects is the same as Finished Goods. Apart from the difference in terms, the accounting methods used by the company are identical to the methods used by manufacturing companies.
Pearson Architectural Design uses a job order costing system and applies studio overhead to Work in Process on the basis of direct staff costs. At the end of January, only one job was still in process. This job (the Krimmer Corporation Headquarters project) had been charged with $13,400 in direct staff costs
1. Compute the predetermined overhead rate that was in use during January.
2.
Complete the following job cost sheet for the partially completed Krimmer Corporation Headquarters project.
Job Cost Sheet Krimmer Corporation Headquarters Project As of January 31
You are engaged to perform an audit of the Giordani Corporation for the year ended December 31, 2011. You have decided to perform the following cutoff test for payables and accruals: Select all items greater than $25,000 for two business days before and after year end from the purchases journal and ensure that all transactions are recorded in the proper period.
During your firm’s observation of Giordani’s physical inventory you obtained the following cutoff information: the last receiving report number in 2011 was 49,745. Your audit work identified the following items for further investigation:
Selection from the December 2011 Purchase Journal
Date
RR#
Vendor Name
Amount
Explanation
a.
12/30
49,742
Allen Chem.
$
29,875
Chemicals purchased for manufacturing process.
b.
12/31
none
Khan Consulting
$
45,000
Payment for consulting services for the three month period beginning December 1, 2011. The $45,000 was charged to consulting expenses.
c.
12/31
49,742
Goff Materials
$
205,000
Raw materials used in the manufacturing process.
Selections from the January 2012 Purchase Journal
Date
RR#
Vendor Name
Amount
Explanation
d.
1/01
49,746
Temper Trucks
$
75,985
Purchase of a new forklift.
e.
1/02
49,743
Pack Products
$
42,000
Paper products used in manufacturing process.
f.
1/02
none
Telecom Inc.
$
32,450
December 2011 telephone bill.
Required:
For each of the six items provided in the table above, consider whether there is evidence of proper cutoff of payables and accruals (i.e., the transaction is recorded in the proper period). If the item is not properly recorded, prepare the necessary adjusting entries at December 31, 2011. (In cases where no entry is required, please select the option “No journal entry required” for your answer to grade correctly. Leave no cells blank be certain to enter “0” wherever required. Omit the “$” sign in your response.)
Prepare the following adjusting entries at December 31 for Karpai Ltd:
1.
Interest on notes receivable of $590 is accrued.
2.
Fees earned but unbilled total $1,880.
3.
Salaries earned of $1,290 have not been recorded.
4.
Bad debt expense for the year is $740.
Use the following account titles: Service Revenue, Accounts Receivable, Interest Income, Interest Receivable, Salaries and Wages Expense, Salaries and Wages Payable, Allowance for Doubtful Accounts, and Bad Debt Expense
Prepare an income statement for the month of March:
On March 1, 2013, Amy Dart began Dart Delivery Service, which provides delivery of bulk mailings to the post office, neighborhood delivery of weekly newspapers, data delivery to computer service centers, and various other delivery services using leased vans. On February 28, Dary invested $15,000 of her own funds in the firm and borrowed $6,000 from her father on a six month, non interest bearing note payable. The following information is available at March 31:
Prepare the necessary adjusting entries at December 31, 2013, for the Microchip Company for each of the following situations. Assume that no financial statements were prepared during the year and no adjusting entries were recorded. (If no entry is required for a particular transaction, select “No journal entry required” in the first account field.)
1.
On October 1, 2013, Microchip lent $86,000 to another company. A note was signed with principal and 7% interest to be paid on September 30, 2014.
2.
On November 1, 2013, the company paid its landlord $8,100 representing rent for the months of November through January. Prepaid rent was debited.
3.
On August 1, 2013, collected $14,100 in advance rent from another company that is renting a portion of Microchip’s factory. The $14,100 represents one year’s rent and the entire amount was credited to rent revenue.
4.
Depreciation on machinery is $5,200 for the year.
5.
Vacation pay for the year that had been earned by employees but not paid to them or recorded is $8,700.
6.
Microchip began the year with $2,700 in its asset account, supplies. During the year, $7,200 in supplies were purchased and debited to supplies. At year end, supplies costing $3,600 remain on hand.
Pretend your client is the owner of a privately held manufacturing company with two operational subsidiaries.
Your client wants to consider expanding his investment in Subsidiary 1, and he is willing to consider purchasing additional shares to expand his influence.
Your client is also considering reducing or eliminating his investment in Subsidiary 2.
Please respond to all of the following prompts in the class discussion section of your online course:
Your client has asked you to prepare a summary of the accounting issues he should consider in both the expansion of his investment in Subsidiary 1 and the reduction of his investment in Subsidiary 2.
Begin a discussion with your colleagues about the various accounting issues that must be considered.
Rank the importance of each issue for your client and discuss whether the issues should be considered separately or as part of the larger conversation.
Raise any timing issues that must be examined. Debate the most effective way to advise your client.
Problem 1: California Surplus Inc. qualifies to use the installment sales method for tax purposes and sold an investment on an installment basis. The total gain of $75000 was reported for financial reporting purposes in the period of sale. The installment period is 3 years; one third of the sale price is collected in 2012 and the rest in 2013. The tax rate was 35% in 2012, and 30% in 2013 and 30% in 2014. The accounting and tax data is shown below. Financial Accounting Tax Return 2012 (40% tax rate) Income before temporary difference $ 175,000 $ 175,000 Temporary difference $ 75,000 $ 25,000 Income $ 250,000 $ 200,000 2013 (35% tax rate) Income before temporary difference $ 200,000 $ 200,000 Temporary difference $ $ 25,000 Income $ 200,000 $ 225,000 2014 (35% tax rate) Income before temporary difference $ 180,000 $ 180,000 Temporary difference $ $ 25,000 Income $ 180,000 $ 205,000 Required:
1) Prepare the journal entries to record the income tax expense, deferred income taxes, and the income taxes payable for 2012, 2013, and 2014. No deferred income taxes existed at the beginning of 2012.
2) Explain how the deferred taxes will appear on the balance sheet at the end of each year. (Assume Installment Accounts Receivable is classified as a current asset.)
3) Show the income tax expense section of the income statement for each year, beginning with “Income before income taxes.” ?
Problem 2: The Ambrosia Corporation’s lead accountant shows the following info: On Jan 1, 2012, Ambrosia purchased a bottling machine for $800000 A) Straight line basis depreciation for 5 years for tax purposes B) Half year convention for 8 years for financial reporting (See Appendix 11A.) C) Tax exempt municipal bonds yielded interest of $150000 in 2013. D) Pretax financial income is $2300000 in 2012 and $2400000 in 2013. E) The company recognized an extraordinary gain of $150000 in 2013 (which is fully taxable). F) Taxable income is expected in future years with an expected tax rate of 35%. Required:
1) Compute taxable income and income taxes payable for 2013.
2) Prepare the journal entries for income tax expense, income taxes payable, and deferred taxes for 2013.
3) Prepare the deferred income taxes presentation for Dec 31, 2013 balance sheet.
Problem 2 17 Earnings per share and retained earnings [LO1, 3]
Quantum Technology had $640,000 of retained earnings on December 31, 2010. The company paid common dividends of $30,000 in 2010 and had retained earnings of $500,000 on December 31, 2009.
(a)
How much did Quantum Technology earn during 2010? (Omit the “$” sign in your response.)
Earnings available to common stockholders
$
(b)
What would earnings per share be if 40,000 shares of common stock were outstanding? (Round your answer to 2 decimal places. Omit the “$” sign in your response.)
Botox Facial Care had earnings after taxes of $280,000 in 2009 with 200,000 shares of stock outstanding. The stock price was $30.80. In 2010, earnings after taxes increased to $320,000 with the same 200,000 shares outstanding. The stock price was $40.00.
(a)
Compute earnings per share and the P/E ratio for 2009. The P/E ratio equals the stock price divided by earnings per share. (Enter only numeric values. Round intermediate calculations and EPS answer to 2 decimal places. Omit the “$” sign in your response.)
2009
Earnings per share
$
P/E ratio
(b)
Compute earnings per share and the P/E ratio for 2010. (Enter only numeric values.Round intermediate calculations andEPS answer to 2 decimal places. Omit the “$” sign in your response.)
2010
Earnings per share
$
P/E ratio
(c)
Give a general explanation of why the P/E ratio changed. (Round your intermediate calculations and final answers to 2 decimal places.Omit the “%” sign in your response.)
The stock price (Click to select) decreased increased by % while EPS only (Click to select) decreased increased %.
Problem 2 17 Earnings per share and retained earnings [LO1, 3]
Quantum Technology had $640,000 of retained earnings on December 31, 2010. The company paid common dividends of $30,000 in 2010 and had retained earnings of $500,000 on December 31, 2009.
(a)
How much did Quantum Technology earn during 2010? (Omit the “$” sign in your response.)
Earnings available to common stockholders
$
(b)
What would earnings per share be if 40,000 shares of common stock were outstanding? (Round your answer to 2 decimal places.Omit the “$” sign in your response.)
Problem 20 1A Production cost flow and measurement; journal entries L.O. P1, P2, P3, P4
[The following information applies to the questions displayed below.]
Edison Company manufactures wool blankets and accounts for product costs using process costing. The following information is available regarding its May inventories.
Beginning Inventory
Ending Inventory
Raw materials inventory
$
69,000
$
55,000
Goods in process inventory
401,000
542,500
Finished goods inventory
634,000
536,001
The following additional information describes the company’s production activities for May.
Raw materials purchases (on credit)
$
280,000
Factory payroll cost (paid in cash)
1,894,000
Other overhead cost (Other Accounts credited)
98,000
Materials used
Direct
$
217,000
Indirect
72,000
Labor used
Direct
$
1,104,000
Indirect
790,000
Overhead rate as a percent of direct labor
115
%
Sales (on credit)
$
4,000,000
The predetermined overhead rate was computed at the beginning of the year as 115% of direct labor cost.
rev: 11_02_2011
references
1. value:
2.00 points
Problem 20 1A Part 1
Required:
1(a)
Compute the cost of products transferred from production to finished goods. (Omit the “$” sign in your response.)
Cost of products transferred
$
1(b)
Compute the cost of goods sold. (Omit the “$” sign in your response.)
Pressler Corporation’s activity based costing system has three activity cost pools Machining, Setting Up, and Other. The company’s overhead costs, which consist of equipment depreciation and indirect labor, are allocated to the cost pools in proportion to the activity cost pools’ consumption of resources.
Equipment depreciation (total)
$
35,600
Indirect labor (total)
$
7,350
Distribution of Resources Consumption Across Activity Cost Pools
Machining
Setting up
Other
Equipment depreciation
0.20
0.50
0.30
Indirect labor
0.30
0.30
0.40
Costs in the Machining cost pool are assigned to products based on machine hours (MHs) and costs in the Setting Up cost pool are assigned to products based on the number of batches. Costs in the Other cost pool are not assigned to products.
MHs
Batches
Product S4
13,000
1,200
Product V6
4,200
1,600
Total
17,200
2,800
Additional data concerning the company’s products appears below:
Product S4
Product V6
Sales (total)
$
93,800
$
72,400
Direct materials (total)
$
31,800
$
27,700
Direct labor (total)
$
37,200
$
26,900
Required:
a.
Assign overhead costs to activity cost pools using activity based costing. (Omit the “$” sign in your response.)
Activity Cost Pools
Machining
Setting up
Other
Total
Equipment depreciation
$
$
$
$
Indirect labor
Total
$
$
$
$
b.
Calculate activity rates for each activity cost pool using activity based costing. (Round your answersto 2 decimal places. Omit the “$” sign in your response.)
Activity Rate
Machining
$
per MH
Setting up
$
per batch
c.
Determine the amount of overhead cost that would be assigned to each product using activity based costing. (Omit the “$” sign in your response.)
Product S4
Product V6
Machining
$
$
Setting up
Total
$
$
d.
Determine the product margins for each product using activity based costing. (Omit the “$” sign in your response.)
Product cost: ABC Company believes that it has an additional 5,000 machine hours available in the current facility before it would need to expand. ABC Company uses machine hours to allocate the fixed factory overhead, and units sold to allocate the fixed sales expenses. Bases on current research, ABC Company expects that it will take twice as long to produce the expansion product as it currently takes to produce its existing product.
a. What is the product cost for the expansion product under absorption and variable costing?
b. By adding this new expansion product, it helps to absorb the fixed factory and sales expenses. How much cheaper does this expansion make the existing product?
c. Assuming ABC Company wants a 40% gross margin for the new product, what selling price should it set for the expansion product?
d. Assuming the same sales mix of these two products, what are the contribution margins and break even points by product?
Suppose that Sea Shell oil company (SS) is pumping oil at a field off the coast of Nigeria. At this site, it has an extraction cost of $30 per barrel for the first 10 million barrels it pumps each year and then $60 per barrel for all subsequent barrels that it pumps each year, up to the site’s maximum capacity of 90 million barrels per year. LO4
Suppose the user cost is $50 per barrel for all barrels and that the current market price for oil is $90 per barrel. How many barrels will SS pump this year? What is the total accounting profit on the total amount of oil it pumps? What is the total economic profit on those barrels of oil?
What if the current market price for oil rises to $120 per barrel, while the user cost remains at $50 per barrel? How many barrels will SS pump and what will be its accounting profit and its economic profit?
If the current market price remains at $120 per barrel but the user cost rises to $95 per barrel, how many barrels will SS pump this year and what will be its accounting profit and its economic profit?
Prepare journal entries to record the issuance of 100,000 shares of common stock at $20 per share for each of the following independent cases:
Jackson Corporation has common stock with a par value of $1 per share.
Royal Corporation has no par common with a stated value of $5 per share.
French Corporation has no par common; no stated value has been assigned
Chapter 2 Exercise 3
3. Analysis of stockholders’ equity
Star Corporation issued both common and preferred stock during 20X6. The stockholders’ equity sections of the company’s balance sheets at the end of 20X6 and 20X5 follow.
20X6
20X5
Preferred stock, $100 par value, 10%
$580,000
$500,000
Common stock, $10 par value
2,350,000
1,750,000
Paid in capital in excess of par value
Preferred
24,000
—
Common
4,620,000
3,600,000
Retained earnings
8,470,000
6,920,000
Total stockholders’ equity
$16,044,000
$12,770,000
Compute the number of preferred shares that were issued during 20X6.
Calculate the average issue price of the common stock sold in 20X6.
By what amount did the company’s paid in capital increase during 20X6?
Did Star’s total legal capital increase or decrease during 20X6? By what amount?
Chapter 2 Problem 1
1. Bond computations: Straight line amortization
Southlake Corporation issued $900,000 of 8% bonds on March 1, 20X1. The bonds pay interest on March 1 and September 1 and mature in 10 years. Assume the independent cases that follow.
Case A—The bonds are issued at 100.
Case B—The bonds are issued at 96.
Case C—The bonds are issued at 105.
Southlake uses the straight line method of amortization.
Instructions:
Complete the following table:
Case A
Case B
Case C
Cash inflow on the issuance date
_______
_______
_______
Total cash outflow through maturity
_______
_______
_______
Total borrowing cost over the life of the bond issue
_______
_______
_______
Interest expense for the year ended December 31, 20X1
_______
_______
_______
Amortization for the year ended December 31, 20X1
_______
_______
_______
Unamortized premium as of December 31, 20X1
_______
_______
_______
Unamortized discount as of December 31, 20X1
_______
_______
_______
Bond carrying value as of December 31, 20X1
_______
_______
_______
Chapter 3 Exercise 1
1. Product costs and period costs
The costs that follow were extracted from the accounting records of several different manufacturers:
Weekly wages of an equipment maintenance worker
Marketing costs of a soft drink bottler
Cost of sheet metal in a Honda automobile
Cost of president’s subscription to Fortune magazine
Monthly operating costs of pollution control equipment used in a steel mill
Weekly wages of a seamstress employed by a jeans maker
Cost of compact discs (CDs) for newly recorded releases of Rush, Billy Joel, and Bryan Adams
Determine which of these costs are product costs and which are period costs.
For the product costs only, determine those that are easily traced to the finished product and those that are not.
Chapter 3 Exercise 2
2. Definitions of manufacturing concepts
Interstate Manufacturing produces brass fasteners and incurred the following costs for the year just ended:
Materials and supplies used
Brass $75,000
Repair parts 16,000
Machine lubricants 9,000
Wages and salaries Machine operators 128,000
Production supervisors 64,000
Maintenance personnel 41,000
Other factory overhead Variable 35,000
Fixed 46,000
Sales commissions 20,000
Compute:
Total direct materials consumed
Total direct labor
Total prime cost
Total conversion cost
Chapter 3 Exercise 5
5. Schedule of cost of goods manufactured, income statement
The following information was taken from the ledger of Jefferson Industries, Inc.:
Direct labor
$85,000
Administrative expenses
$59,000
Selling expenses
34,000
Work in. process
Sales
300,000
Jan. 1
29,000
Finished goods
Dec. 31
21,000
Jan. 1
115,000
Direct material purchases
88,000
Dec. 31
131,000
Depreciation: factory
18,000
Raw (direct) materials on hand
Indirect materials used
10,000
Jan. 1
31,000
Indirect labor
24,000
Dec. 31
40,000
Factory taxes
8,000
Factory utilities
11,000
Prepare the following:
A schedule of cost of goods manufactured for the year ended December 31.
An income statement for the year ended December 31.
Chapter 3 Problem 3
3. Manufacturing statements and cost behavior
Tampa Foundry began operations during the current year, manufacturing various products for industrial use. One such product is light gauge aluminum, which the company sells for $36 per roll. Cost information for the year just ended follows.
Per Unit
Variable Cost
Fixed Cost
Direct materials
$4.50
$ —
Direct labor
6.5
—
Factory overhead
9
50,000
Selling
—
70,000
Administrative
—
135,000
Production and sales totaled 20,000 rolls and 17,000 rolls, respectively There is no work in process. Tampa carries its finished goods inventory at the average unit cost of production.
Instructions:
Determine the cost of the finished goods inventory of light gauge aluminum.
Prepare an income statement for the current year ended December 31
On the basis of the information presented:
Does it appear that the company pays commissions to its sales staff? Explain.
What is the likely effect on the $4.50 unit cost of direct materials if next year’s production increases? Why?
The manufacturing division of an electronics company uses activity based costing. The company has identified three activities and the related cost drivers for indirect production costs. Activity Cost Driver Activity 1 Direct materials cost Activity 2 Direct labor cost Activity 3 Kilowatt hours Three types of products are produced. Direct costs and cost driver activity for each product for a month are as follows: Product A Product B Product C Direct materials cost $75,000 $50,000 $125,000 Direct labor cost $6,000 $1,000 $3,000 Direct labor hours 1,000 500 1,500 Kilowatt hours 150,000 200,000 150,000 Indirect production costs for the month are as follows: Activity 1 $12,000 Activity 2 20,000 Activity 3 16,000 Total $48,000 A) Compute the indirect production costs allocated to each product using the ABC system. B) Compute the indirect production costs allocated to each product using a traditional costing system. Assume indirect production costs are allocated to each product using the cost driver: direct labor hours.
On March 26, Sinker Industries received a special order request for 120 ten foot aluminum fishing boats. Operating on a fiscal year ending May 31, the company already has orders that will allow it to produce at budget levels for the period. However, extra capacity exists to produce the 120 additional boats. The terms of the special order call for a selling price of $675 per boat, and the customer will pay all shipping costs. No sales personnel were involved in soliciting the order. The ten foot fishing boat has the following cost estimates: direct materials, aluminum, two 4’X8′ sheets at $155 per sheet; direct labor, 14 hours at $15.00 per hour; variable overhead, $7.25 per direct labor hour; fixed overhead, $4.50 per direct labor hour; variable selling expenses, $46.50 per boat; and variable shipping expenses, $57.50 per boat.
1. Prepare an analysis for the management of Sinker Industries to use in deciding whether to accept or reject the special order. What decision should be made?
2. To make an $8,000 profit on this order, what would be the lowest possible price that Sinker Industries could charge per boat?
On March 31, 2013, the Herzog Company purchased a factory complete with machinery and equipment. The allocation of the total purchase price of $1,000,000 to the various types of assets along with estimated useful lives and residual values are as follows:
Asset
Cost
Estimated Residual Value
Estimated Useful Life in Years
Land
$
100,000
N/A
N/A
Building
500,000
none
25
Machinery
240,000
10% of cost
8
Equipment
160,000
$
13,000
6
Total
$
1,000,000
On June 29, 2014, machinery included in the March 31, 2013, purchase that cost $100,000 was sold for $80,000. Herzog uses the straight line depreciation method for buildings and machinery and the sum of the years’ digits method for equipment. Partial year depreciation is calculated based on the number of months an asset is in service.
Required:
1.
Compute depreciation expense on the building, machinery, and equipment for 2013.
2.
Prepare the journal entries to:
a) record the depreciation on the machinery sold on June 29, 2014
The Marchetti Soup Company entered into the following transactions during the month of June: (a) purchased inventory on account for $245,000 (assume Marchetti uses a perpetual inventory system); (b) paid $60,000 in salaries to employees for work performed during the month; (c) sold merchandise that cost $160,000 to credit customers for $300,000; (d) collected $280,000 in cash from credit customers; and (e) paid suppliers of inventory $225,000.
Prepare journal entries for each of the above transactions. (If no entry is required for a particular transaction, select “No journal entry required” in the first account field.)
1. Purchased inventory on account for $245,000 (assume Marchetti uses a perpetual inventory system) 2. Paid $60,000 in salaries to employees for work performed during the month 3. Sold merchandise to customers for $300,000 4. Merchandise that was sold cost $160,000 5. Collected $280,000 in cash from credit customers 6. Paid suppliers of inventory $225,000
The Marchetti Soup Company entered into the following transactions during the month of June: (a) purchased inventory on account for $185,000 (assume Marchetti uses a perpetual inventory system); (b) paid $48,000 in salaries to employees for work performed during the month; (c) sold merchandise that cost $136,000 to credit customers for $240,000; (d) collected $220,000 in cash from credit customers; and (e) paid suppliers of inventory $165,000.
Post the above transactions in the T accounts given below. Assume that the opening balances in each of the accounts is zero except for cash, accounts receivable, and accounts payable that had opening balances of $69,000, $51,000, and $30,000, respectively.
Beginning and ending balance for….
cash, inventory, sales revenue, salaries expense, accounts recievable, accounts payable, and costs of goods sold
Margaret O’Hara has been divorced for about two years. She is 28 years old and her address is 979 Adams Street, Jacksonville, FL 32202. Additional information about Ms. O’Hara is as follows:
Social security number: 412 34 5670
Date of birth: 6/1/1984
Alimony received = 24,000.00
W 2 for Margaret shows these amounts:
wages(box 1) = 38,000.00
Federal W/H(box 2) = 9,500.00
Social security wages (box 3) = 38,000.00
Social security W/H (box 4) = 1,596.00
Medicare wages (box 5) = 38,000.00
Medicare W/H (box 6) = 511.00
Margaret is a research assistant.
Prepare the tax return for Ms. O’Hara using the appropriate form. She does not want to contribute to the presidential election campaign.
Materials costs of $500,000 and conversion costs of $535,500 were charged to a processing department in the month of September. Materials are added at the beginning of the process, while conversion costs are incurred uniformly throughout the process. There were no units in beginning work in process, 100,000 units were started into production in September, and there were 8,000 units in ending work in process that were 40% complete at the end of September.
What was the total amount of manufacturing costs assigned to those units that were completed and transferred out of the process in September?
A)$977,500.
B)$1,035,500.
C)$1,063,000.
D)$460,000.
also, could you show me how you calculated the answer? Thank you
Missing Amounts from Balance Sheet andIncome Statement Data
One item is omitted in each of the following summaries of balance sheet and income statement data for the following four differentproprietorships. Enter the missing amounts. (Hint: First determine the amount of increase or decrease inowner’s equity during the year.)
We will need to create a level 1 diagram for the Record Activity Process using the Level 0 Diagram, PE Figure 6 2 on page 187.
Please note the textbook has an error on page 187, PE Figure 6 2; The diagram is labeled as Level 1 DFD but it is actually the Level 0 diagram decomposed from the Context Diagram, PE Figure 6 1 on page 186.
1. In developing the cash flows from operating activities, most companies in the U. S.
a. use the direct method.
b. use the indirect method.
c. present both the indirect and direct methods in their financial reports.
d. prepare the operating activities section on the accrual basis.
2. Madison Company reported net income of $100,000 for the year ended December 31, 2013. During the year, inventories decreased by $12,000, accounts payable decreased by $18,000, depreciation expense was $20,000 and a gain on disposal of equipment of $9,000 was recorded. Net cash provided by operating activities in 2013 using the indirect method was
a. $154,000.
b. $105,000.
c. $112,000.
d. $90,000.
3. Accounts receivable arising from sales to customers amounted to $85,000 and $75,000 at the beginning and end of the year, respectively. Income reported on the income statement for the year was $285,000. Exclusive of the effect of other adjustments, the cash flows from operating activities to be reported on the statement of cash flows is
a. $285,000.
b. $295,000.
c. $445,000.
d. $275,000.
4. The net income reported on the income statement for the current year was $240,000.
Depreciation was $50,000. Account receivable and inventories decreased by $10,000 and $30,000, respectively. Prepaid expenses and accounts payable increased, respectively, by $1,000 and $8,000. How much cash was provided by operating activities?
a. $301,000
b. $337,000
c. $321,000
d. $329,000
5. Winston Company reported net income of $50,000 for the year. During the year, accounts receivable decreased by $7,000, accounts payable increased by $3,000 and depreciation expense of $5,000 was recorded. Net cash provided by operating activities for the year is
a. $40,000.
b. $65,000.
c. $49,000.
d. $45,000.
6. Lending money and collecting the loans are
a. operating activities.
b. investing activities.
c. financing activities.
d. non cash investing and financing activities.
7. Indicate where the event paid income taxes would appear, if at all, on the statement of cash flows.
a. Operating activities section
b. Investing activities section
c. Financing activities section
d. Does not represent a cash flow
8. If a company reports a net loss, it
a. may still have a net increase in cash.
b. will not be able to pay cash dividends.
c. will not be able to get a loan.
d.will not be able to make capital expenditures
9. Accounts receivable arising from sales to customers amounted to $45,000 and $50,000 at the beginning and end of the year, respectively. Income reported on the income statement for the year was $160,000. Exclusive of the effect of other adjustments, the cash flows from operating activities to be reported on the statement of cash flows is
a. $160,000.
b. $165,000.
c. $205,000.
d. $155,000.
10. Using the indirect method, if equipment is sold at a gain, the
a. sale proceeds received are deducted in the operating activities section.
b. sale proceeds received are added in the operating activities section.
c. amount of the gain is added in the operating activities section.
d. amount of the gain is deducted in the operating activities section.
11. The statement of cash flows will not provide insight into
a. why dividends were not increased.
b. whether cash flow is greater than net income.
c. the exact proceeds of a future bond issue.
d. how the retirement of debt was accomplished
12. The category that is generally considered to be the best measure of a company’s ability to continue as a going concern is
a. cash flows from operating activities.
b. cash flows from investing activities.
c. cash flows from financing activities.
d. usually different from year to year.
13. The information to prepare the statement of cash flows usually comes from each of the following except
a. the comparative balance sheet.
b. the retained earnings statement.
c. additional information.
d. the current income statement.
14. Which of the following transactions does not affect cash during a period?
a. Write off of an uncollectible account
b. Collection of an accounts receivable
c. Sale of treasury stock
d. Exercise of the call option on bonds payable
15. Cash receipts from interest and dividends are classified as
The new CEO of a company takes over on December 10, 2013. He is promised a significant bonus for every percent he can increase net income in 2014 over 2013 results. Which of the following actions would aid the CEO in making 2014 net income results look more impressive? Answer
Overstating the cost of machinery purchased in 2014.
Prepaying 2014 expenses in 2013.
Deferring 2014 expenses to 2015 and accruing revenues in 2014 that don’t exist.
You are the new controller for Engineered Solutions. The company treasurer, Randy Patey, believes that as a result of pending legislation, the current 40% income tax rate will be decreased for 2014 to 35% and is uncertain which tax rate to apply in determining deferred taxes for 2013. Patey also is uncertain which differences should be included in that determination and has solicited your help. Your accounting group provided you the following information.
Two items are relevant to the decisions. One is the $50,000 insurance premium the company pays annually for the CEO’s life insurance policy for which the company is the beneficiary. The second is that Engineered Solutions purchased a building on January 1, 2012, for $6,000,000. The building’s estimated useful life is 30 years from the date of purchase, with no salvage value. Depreciation is computed using the straight line method for financial reporting purposes and the MACRS method for tax purposes. As a result, the building’s tax basis is $5,200,000 at December 31, 2013.
Required:
Write a memo to Patey that:
Identifies the objectives of accounting for income taxes.
Differentiates temporary differences and permanent differences.
Explains which tax rate to use.
Calculates the deferred tax liability at December 31, 2013.
As a new employee at Canyon rental, an outdoor outfitters and supply shop, your boss has asked you to look at the internal control system within the store. He is seeking a loan for expansion and must have his books audited. The auditor asked about his control procedures and documentation. He has no idea what the auditor is talking about. Your boss has asked you to do what you need to understand the system and has asked for a memo with your observations and recommendations by the end of the week. Through interviews and observation you notice the following:
Purchase orders, and sales invoices are not pre numbered due to the higher cost of printing the forms.
To save time the sales clerk enters the sales at the end of the day into the accounting records, prepares the deposit and delivers it to the bank.
The sales clerk a trusted and long term employee grants sales returns at her discretion.
The purchasing manager both orders merchandise and approves the payment for the order.
Betty Gamble, the bookkeeper has not taken a vacation in three years.
Checks are brought to the owner twice a week for signing. He is overwhelmed by all of the paperwork and has asked for the checks only on which he stamps his signature.
In your memo, give a summary of the elements of an effective internal control system. Comment on each of your observations and if there is a weakness provide a solution. Your memo should be 2 3 pages.
Newton Corporation uses a job order costing system and allocates manufacturing overhead at a rate of $25 per machine hour. During the period, the company used 600 machine hours and actually incurred manufacturing overhead costs of $14,500.
a.
Prepare the journal entry to record total manufacturing overhead allocated to jobs during the period. (Omit the “$” sign in your response.)
General Journal
Debit
Credit
choose one: depreciation expense, accounts rcvbl, manufacturing overhead, works in progress inventory, costs of good sold, salaries payable, cash, accts payable, rent expense, various accounts, salaries payable
choose one: same as above
b.
Prepare the journal entry to record actual overhead costs incurred during the period. (Omit the “$” sign in your response.)
General Journal
Debit
Credit
choose one: same as above
choose one: same as above
c.
Prepare the journal entry to close the Manufacturing Overhead account directly to Cost of Goods Sold at the end of the period. (Omit the “$” sign in your response.)
Nova company’s total over head cost at various level of activity are presented below: month machine hr total overhead cost april……..51,000……………..200,430 may……..41,000………………177,130 June……..61,000……………..223,730 July………71,000…………….247,030
Assume that the total overhead cost above consist of utilities, supervisory salaries and maintenance. The breakdown of these costs at the 60,000 machine hour level of activity is:
Utilities (variable)……………………………………49,000 supervisory salaries (fixed)…………………………..63,000 maintenance (mixed)………………………………..64,930 177,130 Nova managements want to break down the maintenance cost into variable and fixed cost elements. required: 1. Estimate how much of the $247,030 of overhead cost in July was maintenance cost. 2. using the high low method, estimate a cost formula for maintenance. 3. express the company’s total overhead cost in the linear equation form Y=a+bX 4. what total overhead cost would you expect to be incurred at an operating activity level of 46,000 machine hour?
Oaks Company had the following balances in its accounting records as of December 31, 2009:
Assets
Claims
Cash
$61,000
Accounts Payable
$25,000
Accounts Receivable
45,000
Common Stock
90,000
Land
27,000
Retained Earnings
18,000
Totals
$133,000
$133,000
The following accounting events apply to Oaks’s 2010 fiscal year:
Jan.
1
Acquired an additional $70,000 cash from the issue of common stock.
April
1
Paid $6,600 cash in advance for a one year lease for office space.
June
1
Paid a $3,000 cash dividend to the stockholders.
July
1
Purchased additional land that cost $25,000 cash.
Aug.
1
Made a cash payment on accounts payable of $13,000.
Sept.
1
Received $8,400 cash in advance as a retainer for services to be performed monthly during the next eight months.
Sept.
30
Sold land for $15,000 cash that had originally cost $15,000.
Oct.
1
Purchased $900 of supplies on account.
Dec.
31
Earned $80,000 of service revenue on account during the year.
31
Received $66,000 cash collections from accounts receivable.
31
Incurred $16,000 other operating expenses on account during the year.
31
Recognized accrued salaries expense of $5,000.
31
Had $250 of supplies on hand at the end of the period.
31
The land purchased on July 1 had a market value of $28,000.
Required:
Based on the preceding information, answer the following questions. All questions pertain to the 2010 financial statements. (Hint: Record the events in general ledger accounts under an accounting equation before answering the questions.)
a.
What two additional adjusting entries need to be made at the end of the year?
b.
What amount would be reported for land on the balance sheet?
c.
What amount of net cash flow from operating activities would Oaks report on the statement of cash flows?
d.
What amount of rent expense would Oaks report in the income statement?
e.
What amount of total liabilities would Oaks report on the balance sheet?
f.
What amount of supplies expense would Oaks report on the income statement?
g.
What amount of unearned revenue would Oaks report on the balance sheet?
h.
What amount of net cash flow from investing activities would Oaks report on the statement of cash flows?
i.
What amount of total expenses would Oaks report on the income statement?
j.
What total amount of service revenues would Oaks report on the income statement?
k.
What amount of cash flows from financing activities would Oaks report on the statement of cash flows?
l.
What amount of net income would Oaks report on the income statement?
m.
What amount of retained earnings would Oaks report on the balance sheet?
On October 10, a company paid $12,000 to its suppliers, of which $2,000 was for supplies received on October 10 and $10,000 was for supplies received and recorded during September. The $12,000 payment would be recorded as a: Answer
$10,000 debit to Supplies, a $2,000 debit to Accounts Payable, and a $12,000 credit to Cash.
$12,000 debit to Supplies and a $12,000 credit to Cash.
$12,000 debit to Supplies Expense and a $12,000 credit to Cash.
$2,000 debit to Supplies, a $10,000 debit to Accounts Payable, and a $12,000 credit to Cash.
Odd Wallow Drinks is considering adding a new line of fruit juices to its merchandise products. This line of juices has the following prices and costs:
Selling price per case (24 bottles) of juice
$
50
Variable cost per case (24 bottles) of juice
$
24
Fixed costs per year associated with this product
$
8,150,000
Income tax rate
40
%
Required:
(a)
Compute Odd Wallow Drinks’s break even point in units per year. (Round up your answer to the nearest whole unit.)
(b)
How many cases must Odd Wallow Drinks sell to earn $1,800,000 per year after taxes on the juice?(Round up your answer to the nearest whole number.)
Ok so here are the correct numbers to put in. I have the Traditional portion correct, I would like to see the ABC portion of this with these numbers worked out, because I’m at the end of the equation but with these numbers please:
Kunkel Company makes two products and uses a conventional costing system in which a single plantwide predetermined overhead rate is computed based on direct labor hours. Data for the two products for the upcoming year follow:
Mercon
Wurcon
Direct materials cost per unit
$
12.90
$
21.40
Direct labor cost per unit
$
5.40
$
3.50
Direct labor hours per unit
0.48
0.26
Number of units produced
21,000
72,000
These products are customized to some degree for specific customers.
Required:
1.
The company’s manufacturing overhead costs for the year are expected to be $696,960. Using the company’s conventional costing system, compute the unit product costs for the two products. (Do not round intermediate calculation. Round your final answers to 2 decimal places.)
Mercon
Wurcon
Unit product cost
$
$
2.
Management is considering an activity based costing system in which half of the overhead would continue to be allocated on the basis of direct labor hours and half would be allocated on the basis of engineering design time. This time is expected to be distributed as follows during the upcoming year:
Mercon
Wurcon
Total
Engineering design time (in hours)
2,300
2,100
4,400
Compute the unit product costs for the two products using the proposed ABC system. (Round your final answers to 2 decimal places.)
IV. Potential investments to accelerate profit: ABC company has the option to purchase additional equipment that will cost about $42,000, and this new equipment will produce the following savings in factory overhead costs over the next five years:
Year 1, $15,000 Year 2, $13,000 Year 3, $10,000 Year 4, $10,000 Year 5, $6,000
ABC Company uses the net present value method to analyze investments and desires a minimum rate of return of 12% on the equipment.
a. What is the net present value of the proposed investment (ignore income taxes and depreciation)?
b. Assuming a 5 year straight line depreciation, how will this impact the factory’s fixed costs for each of the 5 years (and the implied product costs)? What about cash flow?
c. Considering the cash flow impact of the equipment as well as the time value of money, would you recommend that ABC Company purchases the equipment? Why or why not?
James Company has two production departments called Mixing and Finishing. The maintenance department serves both production departments. budgeted fixed costs for the maintenance department are $30,000. Budgeted variable costs for the maintenance department are $5.00 per labor hour. Acutual maintenance department costs are $36,000 fixed and $100,000 variable. Other relevant data follow:
Mixing , Finishing
_______________________________
Capacity available 20,000 labor hours, 15,000 labors hours
Capacity used 15,000 labor hours, 9,000 Labros hours
The amount of avariable maintenance department costs allocated to the Mixing department shoud be ______________.?
The Jamesway Corporation had the following situations on December 2013.
1.
On December 20, 2013, Jamesway received a $6,000 payment from a customer for services to be rendered early in 2014. Service revenue was credited.
2.
On December 1, 2013, the company paid a local radio station $6,000 for 40 radio ads that were to be aired, 20 per month, throughout December and January. Prepaid advertising was debited.
3.
Employee salaries for the month of December totaling $36,000 will be paid on January 7, 2014.
4.
On August 31, 2013, Jamesway borrowed $75,000 from a local bank. A note was signed with principal and 6% interest to be paid on August 31, 2014.
Prepare the necessary adjusting entries at its year end of December 31, 2013. No adjusting entries were made during the year. (If no entry is required for a particular transaction, select “No journal entry required” in the first account field.)
The Jamesway Corporation had the following situations on December 2013.
1.
On December 20, 2013, Jamesway received a $4,100 payment from a customer for services to be rendered early in 2014. Service revenue was credited.
2.
On December 1, 2013, the company paid a local radio station $2,200 for 40 radio ads that were to be aired, 20 per month, throughout December and January. Prepaid advertising was debited.
3.
Employee salaries for the month of December totaling $17,000 will be paid on January 7, 2014.
4.
On August 31, 2013, Jamesway borrowed $50,000 from a local bank. A note was signed with principal and 6% interest to be paid on August 31, 2014.
If none of the adjusting journal entries were made, would assets, liabilities, and shareholders’ equity on the 12/31/13 balance sheet be higher or lower and by how much?
In January 2013, a new consulting firm recorded the following transactions:1. Issued stock to investors for $20,000 cash.2. Purchased $5,000 of equipment, paying 20% in cash and giving a promissory note for the balance.3. Received $9,000 in cash for consulting services performed in January.4. Bought $1,500 of supplies on account; all of the supplies were used in January.5. Provided consulting services for clients and billed them $16,000.6. Paid $750 toward the supplies purchased in #4.7. Paid $3,000 to employees for work performed in January.8. Received a bill for rent and utilities for January of $3,400. What is the amount of total revenue to be reported on the Income Statement for the month of January? Answer
Jarme company makes 2 products and is implementing an activity based cosing (ABC) system. Previously, all overhead had been applied on the basis of machine hours. The company produces 100,000 units of product D and 5,000 units of product F annually.
Cost Pool Driver & Level Cost in Pool Use of Driver by D Use of Driver by F
Job 434 was recently completed. The following data have been recorded on its job cost sheet:
Direct materials
$
47,000
Direct labor hours
630
labor hours
Direct labor wage rate
$
13
per labor hour
Machine hours
370
machine hours
Number of units completed
3,500
units
The company applies manufacturing overhead on the basis of machine hours. The predetermined overhead rate is $11 per machine hour.
Required:
Compute the unit product cost that would appear on the job cost sheet for this job. (Round your answer to 2 decimal places. Omit the “$” sign in your response.)
The Botanical Garden had the following transactions occur during its fiscal year. Record these events in journal entries
a. Pledges of $100,000 were made for the new perennial garden.
b. Unrestricted donations of $900,000 were received in cash.
c. Expenses of $10,000 were incurred to purchase plants for the new perennial garden
d. A special butterfly exhibit was held to generate additional donations for general operations. $100,000 in admission fees was received and attendees received a special butterfly pin that cost the garden $750.
e. Employees were paid $400,000 during the year (including fringe benefits).
f. Volunteers donated 10,000 hrs of service valued at &8/hour. However the garden would not have hired employees to do this work.
g. A violent storm broke several windows and local firms donated repairs and materials valued at $8000.
Best Eastern Bank, a rapidly growing retail bank in the New York City Metropolitan area, has established itself as a cost leader by charging low service fees to its customers. Best Eastern must reduce some of its Human Resources costs starting in 2013 in order to maintain low service fees and remain competitive. Two vendors have submitted proposals to Best Eastern Bank’s HR Department to help reduce new hire staffing costs through pre employment testing.
Best Eastern had 350 replacement hires in 2011 at an average cost of $4,500 per new employee (including all recruitment, selection, and training costs); this level of hiring and average cost/hire is expected to remain stable for each of the next three years unless a project is implemented. Use the data for Project A and Project B below to complete the following three tasks. Use 2011 hiring activity and average cost per hire as the basis for all projected savings.
Task 1: Calculate total project savings and total project costs for 2013, 2014, and 2015 for Projects A and B.
Task 2: Calculate net savings (utility), benefit/cost ratio, and ROI for Projects A and B
Task 3: Discuss at least TWO factors or issues that might cause projected net savings to be too high or too low.
Proposal A: this vendor is offering Best Eastern Bank a validated selection testing system that will reduce replacement hiring. A reduction is hiring will be possible because applicants with better knowledge, skills, and motivation will be hired. Under this proposal hiring will be reduced to 315 in 2013, to 275 in 2014, and to 250 in 2015. The licensing cost to use the testing method is $100 per applicant; the vendor estimates a test to hire yield ratio of 3 to 1 (33%).
Proposal B: This vendor proposes a validated selection test that will reduce new hire training costs by $1,000 per new hire because of more efficient selection for skills. This reduction in training costs will start in 2013 and continue through 2015. The selection test will cost $150 per applicant and assumes a test to hire yield ratio of 4 to 1 (25%). This proposal anticipates that Best Eastern Bank will continue to fill 350 positions per year 2013 through 2015.
King Cones leased ice cream making equipment from Liang Leasing. Liang earns interest under such arrangements at a 6% annual rate. The lease term is eight months with monthly payments of $10,000 at the end of each month. Liang purchased the equipment having an estimated useful life of four years at a cost of $300,000. Both the lessee and the lessor elected the short term lease option. Amortization is recorded at the end of each month on a straight line basis. Liang depreciates assets monthly on a straight line basis. What is the effect of the lease on King Cones’ earnings during the eight month term, ignoring taxes?
In the situation described in BE 15’30, what is the effect of the lease on Liang Leasing’s earnings during the eight month term, ignoring taxes?
Kleener Co. acquired a new delivery truck at the beginning of its current fiscal year. The truck cost $20,000 and has an estimated useful life of four years and an estimated salvage value of $4,800.
Requirement 1:
(a)
Calculate depreciation expense for each year of the truck’s life using Straight line depreciation. (Omit the “$” sign in your response.)
Depreciation expense
$
per year
(b)
Calculate depreciation expense for each year of the truck’s life using Double declining balance depreciation. (Omit the “$” sign in your response.)
Year
Depreciation Expense
1
$
2
$
3
$
Requirement 2:
Calculate the truck’s net book value at the end of its third year of use under each depreciation method.(Omit the “$” sign in your response.)
Depreciation method
Net book value
Straight line depreciation
$
Double declining balance depreciation
$
Requirement 3:
Assume that Kleener Co. had no more use for the truck after the end of the third year and that at the beginning of the fourth year it had an offer from a buyer who was willing to pay $6,320 for the truck. Should the depreciation method used by Kleener Co. affect the decision to sell the truck?
The ledger of a company has the following WIP account:
5/1 Balance 3,860 5/31 Transferred out ?
5/31 Materials 6,770
5/31 Labor 2,940
5/31 Overhead 2,270
5/31 Balance ?
Production records show that there were 510 units in the beginning inventory, 30% complete; 1,450 units started; and 1,580 units transferred out. The beginning WIP has material costs of 3,030 and conversion costs of 1,660. The units in ending enventory were 40% complete. Materials are entered at the beginning of the process.
a) How many units are in process at May 31? WIP, May 31…………..units
b) What is the unit material cost for May? The units materials cost for May $……. ( round to 3 decimal places)
c) What is the unit conversion cost for May ? ( round to 3 decimal places.)
Listed below are costs found in various organizations. For each cost item, indicate whether it would be variable or fixed with respect to the number of units produced and sold; and then whether it would be a selling cost, an administrative cost, or a manufacturing cost. If it is a manufacturing cost, indicate whether it would typically be treated as a direct cost or an indirect cost with respect to units of product.
Manufacturing (Product) Cost
Cost Item
Variable or Fixed
Selling Cost
Administrative Cost
Direct
Indirect
Ex.
Direct labor
Variable
Yes
Executive salaries
Fixed
Yes
Factory rent
Fixed
Yes
1.
Depreciation, executive jet.
2.
Costs of shipping finished goods to customers.
3.
Wood used in manufacturing furniture.
4.
Sales manager’s salary.
5.
Electricity used in manufacturing furniture.
6.
Secretary to the company president.
7.
Aerosol attachment placed on a spray can produced by the company.
Lyster Inc. has provided the following data for the month of August. There were no beginning inventories; consequently, the direct materials, direct labor, and manufacturing overhead applied listed below are all for the current month.
Work in Process
Finished Goods
Cost of Goods Sold
Total
Direct materials
$2,820
$17,650
$44,060
$64,530
Direct labor
1,950
16,300
42,280
60,530
Manufacturing overhead applied
1,940
9,940
26,920
38,800
Total
$6,710
$43,890
$113,260
$163,860
Manufacturing overhead for the month was underapplied by $1,400. The company allocates under applied manufacturing overhead among work in process, finished goods, and cost of goods sold at the end of the month on the basis of the overhead applied during the month in those accounts. The work in process inventory at the end of August after allocation of under applied manufacturing overhead for the month is:
One major difference between deferral and accrual adjustments is: Answer
accrual adjustments affect income statement accounts and deferral adjustments affect balance sheet accounts.
deferral adjustments increase net income and accrual adjustments decrease net income.
deferral adjustments are made under the cash basis of accounting and accrual adjustments are made under the accrual basis of accounting.
accounts affected by an accrual adjustment always go in the same direction (i.e., both accounts are increased or both accounts are decreased) and accounts affected by a deferral adjustment always go in opposite directions.
Hamleys toy store is on regent street in londan. it has a magic department near the main door. suppose that management is considering dropping the magic department, which has consistnatly shown an opertaing loss.the predicted income statemnts, in thousands of pounds,follow:
total general merchndise electronic prodcts magic department
the 300,000 pounds of magic department fixed expenses include the compensation of emplooyes of 120,000 pounds. these employes will be released if the magic department is abandoned. all of the magic department’s equipement is fully depreciated, so nono of the 300,000 pound pertains to such items. furthermore, disposel values of equipment will be exactly offset by the cost of removel and remodeling.
if the magic department is dropped, the manager will use the vacated space for either more general marchindise or more electronic products. the expansion of general merchandise would not entail hiring any additional salaried help, but more electronic products would requre an additional person at an annual cost of 30,000 pounds. the manager thinks that sales of general merchandise would increase by 250,000 pounds, and electronic products by 200,000 pounds. the manager’s modest predictions are partially based on the fact that she thinks the magic department has helped lure customers to the store and, improved overall sales. if the magic department is closed, that lure would be gone.
should the magic departmen be closed? explain, showing computations.
Hampton Textile Co., manufactures a variety of fabrics. All materials are introduced at the beginning of production; conversion cost is incurred evenly through manufacturing. The Weaving Department had 2,000 units of work in process on April 1 that were 30% complete as to conversion costs. During April, 9,000 units were completed and on April 30, 4,000 units remained in production, 40% complete with respect to conversion costs. The equivalent units of direct materials for April total:
A. 9,000.
B. 13,000.
C. 13,600.
D. 14,400.
E. 15,000.
44.)
EX/PR 4. (Use Hampton Textile Co Information) The equivalent units of conversion for April total:
Happy Company manufactures tape dispensers. The Assembly Department reported the follow data for the past month:
Units started and completed: 70,000
Units started and not complete : 10,000
Units in beginning inventory: 0
Direct materials costs: $560,000
Conversion costs: $240,000
The partially complete units at the end of the month were 100 percent complete with respect to materials and 60 percent complete with respect to conversion costs. The unit cost of direct materials is ________.
Haskins and Jones, Attorneys at Law, maintain its books on a cash basis. During 2013, the company collected $590,000 in fees from its clients and paid out $421,000 in expenses. You are able to determine the following information about accounts receivable, prepaid expenses, unearned fee revenue, and accrued liabilities:
January 1, 2013
December 31, 2013
Accounts receivable
$
71,000
$
67,000
Prepaid insurance
5,400
7,200
Prepaid rent
10,100
8,300
Unearned fee revenue
10,100
12,400
Accrued liabilities (for various expenses)
13,100
16,900
In addition, 2013 depreciation expense on furniture and fixtures is $26,500.
Hawn Company manufactures two models of pens, a standard model and a deluxe model. Three activites have been identified in the production of the pens. The following information is available:
Product: Number of setups: Number of Components: Number of direct Labor Hours:
Standard: 22, 8, 375
Deluxe 28, 12, 225
Cost Pool: Total Costs: Cost Driver:
Setup Costs: $30,000 Number of setups
Assembly Costs $36,000 Number of components
Labor Costs $9,000 Number of direct labor hours
If activity based costing is used, the seup cost assigned to the standard model is _______________.
Please help me with this Ex. E10 3. The chief executive officer of Richards Corp. attended a conference in which one of the sessions was devoted to variable costing. The CEO was impressed by the presentation and has asked that the folowing data of Richards Corp. be used to prepare comparative statements using variable costing and the company’s absortion costing. The data follow: Direct materias $90,000, Direct labor 120,000, variable factory overhead 60,000, fixed factory overhead 150,000, Fixed marketing and administrative expense 180,000. The factory produced 80,000 units during the period, and 70,000unit were sold for $70,000.
1. Prepare an income statement using variable costing?
2. Prepare an income statement using absorption costing. (Round unit costs to three decimal places.)?
What company policies or procedures would you recommend to prevent each of the following activities?
a. A clerk at the Paul Yelverton Company faxes a fictitious sales invoice to a company that purchases a large quantity of goods from it. The clerk plans to intercept that particular payment check and pocket themoney.
b. The bookkeeper at a construction company has each of the three owners sign a different paycheck for her. Each check is drawn from a separate account of the company.
c. A clerk in the human relations department creates a fictitious employee in the personnel computer file. When this employee’s payroll check is received for distribution, the clerk takes and cashes it.
d. A clerk in the accounts receivable department steals $250 in cash from a customer payment, then prepares a computer credit memo that reduces the customer’s account balance by the same amount.
e. A purchasing agent prepares an invoice for goods received from a fictitious supplier. She sends a check for the goods to this supplier, in care of her mother’s post office box.
f. A hacker manages to break into a company’s computer system by guessing the password of his friend—Champ, the name of the friend’s dog.
g. An accounts receivable clerk manages to embezzle more than $1 million from the company by diligently lapping the accounts every day for three consecutive years.
h. The company’s local area network administrator traces a virus to an individual who accidentally introduced it when he downloaded a computer game from the Internet.
i. A clerk at a medical lab recognizes the name of an acquaintance as one of those patients whose lab tests are ?~?~positive’’ for an infectious disease. She mentions it to a mutual friend, and before long, the entire town knows about it.
Heritage Gardens uses a job order costing system to track the costs of its landscaping projects. The company uses a job order costing system to track the costs of its landscaping projects. The table below provides data concerning the three landscaping projects that were in progress during May. There was no work in process at the beginning of May.
PROJECTS
Williams
Chandler
Nguyen
Designer Hours
200
80
120
Direct Materials
$ 4,800.00
$ 1,800.00
$ 3,600.00
Direct Labor
$ 2,400.00
$ 1,000.00
$ 1,500.00
Actual overhead costs were $16,000 for May. Overhead costs are applied to projects on the basis of designer hours since most of the overhead is related to the costs of the garden design studio. The predetermined overhead rate is $45 per
designer hour. The Williams and Chandler projects were completed in May; the Nguyen project was not completed by the end of the month. No other jobs were in process during May.
QUESTION 1 Compute the amount of overhead cost that would have been applied to each project during May. Show your work.
QUESTION 2 Determine the cost of goods manufactured for May. Show your work.
QUESTION 3 What is the accumulated cost of the work in process at the end of the month?Show your work.
QUESTION 4 Determine the underapplied or overapplied overhead for May.Show your work.
Hollywood Tabloid needs a new state of the art camera to produce its monthly magazine. The company is looking at two cameras that are both capable of doing the job and has determined the following:
Camera 1 costs $6,000. It should last for eight years and have annual maintenance cost of $300 per year. After eight years, the magazine can sell the camera for $300.
Camera 2 costs $5,500. It will also last for eight years and have maintenance costs of $900 in year three, $900 in year five, and $1,000 in year seven. After eight years, the camera will have no resale value. (FV of $1,PV of $1,FVA of $1, andPVA of $1) (Use appropriate factor(s) from the tables provided. Round your answers to 2 decimal places.)
Required:
1 a.
Assume that an interest rate of 9% properly reflects the discount rate in this situation and that maintenance costs are paid at the end of each year. Determine the total cost of cameras.
Hudson Company uses a job order costing system. The following transactions took place last year:
a. Raw materials were requisitioned for use in production, $40,000 (80% direct and 20% indirect). b. Factory utility costs incurred, $14,600. c. Depreciation recorded on plant and equipment, $28,000. Three fourths of the depreciation related to factory equipment, and the remainder related to selling and administrative equipment. d. Costs for salaries and wages were incurred as follows: Direct labor $40,000 Indirect labor $18,000
Sales Commissions $10,000 Administrative salaries $ 25,000 f. Insurance costs, $3,000 (80% relates to factory operations, and 20% relates to selling and administrative
activities). g. Miscellaneous selling and administrative expenses incurred, $18,000. h. Manufacturing overhead was applied to production. The company applies overhead on the basis of 150% of
direct labor cost. i. Goods that cost $130,000 to manufacture according to their job cost sheets were transferred to the finished
goods warehouse. j. Goods that had cost $120,000 to manufacture according to their job cost sheets were sold for $200,000.
QUESTION 1 Setermine the underapplied or overapplied overhead for the year. Show your work.
QUESTION 2 Prepare an income statement for the year. (Note: No calculations are required to determine the cost of goods sold before any adjustment for underapplied or overapplied overhead.)
Hults Corporation has provided data concerning the company’s Manufacturing Overhead account for the month of November. Prior to the closing of the overapplied or underapplied balance to Cost of Goods Sold, the total of the debits to the Manufacturing Overhead account was $68,800 and the total of the credits to the account was $60,800. Which of the following statements is true?
Manufacturing overhead applied to Work in Process for the month was $68,800.
Manufacturing overhead for the month was underapplied by $8,000.
Manufacturing overhead transferred from Finished Goods to Cost of Goods Sold during the month was $68,800.
Actual manufacturing overhead incurred during the month was $60,800.
I have completed some of them but I am unsure if I am doing it correctly, any help would be greatly appreciated.
1. You transfer land with a basis of $20,000 and cash of $6,000 and receive a building with a fair market value of $35,000.
How much is realized gain? ___9,000___How much is recognized gain? ___9,000___basis of the building? $11,000
You transfer land with a basis of $43,000 and receive a building with a fair market value of $35,000 and cash of $10,000.
How much is your realized gain? _____$2,000_________________
How much is your recognized gain? _____$10,000_______________
What is the basis of the building? ______(43,000 10,000+2,000)= $35,000______________
You transfer land with a basis of $25,000, which has a mortgage attached of $9,000 and receive a building with a fair market value of $50,000 and cash of $4,000. The new owner of the land assumes your mortgage.
How much is your realized gain? ______38,000________________
How much is your recognized gain? ____13,000________________
What is the basis of the building? ____25,000________________
You transfer land with a basis $35,000 which has a mortgage attached of $16,000 and receive a building with a fair market value of $85,000 and an attached mortgage of $19,000. You assume the other party’s mortgage and the other party assumes your mortgage.
How much is your realized gain? ______________________
How much is your recognized gain? ____________________
What is the basis of the building? ____________________
You transfer land with a basis of $33,000 and receive a building with a fair market value of $65,000 and an attached mortgage of $18,000 and securities with a fair market value of $7000 (basis of $5000). You assume the mortgage on the building.
Realized gain ______________________
Recognized gain ____________________
Basis of building ____________________
Basis of securities ____________________
You transfer land with a basis of $45,000 and securities with a fair market value of $4,000 (basis $1,000). You receive a building with a fair market value of $100,000 and an auto with a fair market value of $6,000.
Realized gain ________________________
Recognized gain ______________________
Basis of building ______________________
Basis of auto _________________________
You transfer land with a basis of $25,000 and securities with a fair market value of $3,000 (basis $7,000). You receive a building with a fair market value of $90,000 and an auto with a fair market value of $5,000.
Realized gain ________________________
Recognized gain ______________________
Basis of building ______________________
Basis of auto _________________________
You transfer land with a basis of $12,000 and receive a building with a fair market value of $7,000 and cash of $9,000.
Realized gain _______________________
Recognized gain _____________________
Basis of building _____________________
9. You bought some land for $60,000. You sold the land for a $40,000 down payment and an installment note of $130,000 to be received next year.
How much is the gross profit?__________________________
How much is the contract price?__________________________
How much is the gross profit percentage?____________________
How much taxable income should be reported in the year of sale?_____________________
10. You bought some land for $50,000. You had a mortgage of $14,000. You sold the land for a down payment of $30,000 plus an installment note of $90,000 to be received next year. The buyer assumed your mortgage.
How much is the gross profit?__________________________
How much is the contract price?__________________________
How much is the gross profit percentage?____________________
How much taxable income should be reported in the year of sale?_____________________
11. You bought some land for $25,000. You had a mortgage of $30,000. You sold the land for a down payment of $40,000 plus an installment note of $60,000 to be received next year. The buyer assumed your mortgage.
How much is the gross profit?__________________________
How much is the contract price?__________________________
How much is the gross profit percentage?____________________
How much taxable income should be reported in the year of sale?_____________________
12. You bought some equipment for $60,000. You had a mortgage of $45,000. You have taken depreciation of $20 000. You sold the equipment for a down payment of $25,000 plus an installment note of $80,000 to be received next year. The buyer assumed your mortgage.
How much is the gross profit?__________________________
How much is the contract price?__________________________
How much is the gross profit percentage?____________________
How much taxable income should be reported in the year of sale?_____________________
I need help with this assignment, thank you for helping.
Stanley Printing Company began operation in March with three custom orders. The following costs were incurred during the month.
Direct Materials: Direct Labor:
Job A1 $950 Job A1 $ 2,450 Job A2 750 Job A2 1,950 Job A3 500 Job A3 900 Manufacturing Overhead: Applied at the rate of 110% of direct labor dollars Actual Manufacturing Overhead incurred: $6,100
Jobs A1 and A2 were completed and sold during March. Job A3 was incomplete at the end of the month. Selling prices were as follows: Job A1, $9,400, and Job A2, $6,900.
a. Record the entries for all costs and revenues in T accounts. b. Verify the ending balance in the Work in Process Inventory account. c. Determine the amount of underapplied manufacturing overhead for March and transfer it to Cost of Goods Sold.
2. Swannworth Inc., expects its overhead costs for the coming fiscal period to be $78,300. Total direct labor charges should be 3,000 hours at $10 per hour plus 900 hours at $l5 per hour.
a. Compute the predetermined overhead rate, using direct labor dollars as the allocation base.
b. Ignoring the information given above, consider the following data, which are provided in anticipation of the coming accounting period. Using these data, prepare a schedule to determine the cost of one unit of product.
1. One unit of product requires .50 unit of material X, which costs $30 per unit, and 2 units of material Y, which costs $12 per unit.
2. One year’s interest on a loan for the office building leasehold improvements amounts to $6,400.
3. 80,000 units of sales are planned at $99 per unit.
4. One unit of product requires 1.5 hours of direct labor at $10 per hour plus .5 hour of direct labor at $15 per hour.
5. Administrative salaries should amount of $116,000 for the coming fiscal period.
The predetermined overhead rate is 110% of direct labor dollars
I’ve worked on this for hours now. Where ever I left a “?” is a number I am looking for. You can explain how you got it if you like because I am really wanting to learn this but if not thats fine. I have figured everything else out on this problem. Just can’t seem to piece it together. Thanks in advance, I really do appreciate it.
Sweeten Company had no jobs in progress at the beginning of March and no beginning inventories. It started only two jobs during March”Job P and Job Q. Job P was completed and sold by the end of the March and Job Q was incomplete at the end of the March. The company uses a plantwide predetermined overhead rate based on direct labor hours. The following additional information is available for the company as a whole and for Jobs P and Q (all data and questions relate to the month of March):
Estimated total fixed manufacturing overhead
$
10,000
Estimated variable manufacturing overhead per direct labor hour
$
1.00
Estimated total direct labor hours to be worked
2,000
Total actual manufacturing overhead costs incurred
$
12,500
Job P
Job Q
Direct materials
$
13,000
$
8,000
Direct labor cost
$
21,000
$
7,500
Actual direct labor hours worked
1,400
500
Required:
Assume the ending raw materials inventory is $1,000 and the company does not use any indirect materials. Prepare a schedule of cost of goods manufactured. (Input all amounts as positive values. Leave no cells blank be certain to enter “0” wherever required.)
Schedule of Cost of Goods Manufactured
Direct materials:
Raw materials inventory, beginning 0 Add: Purchase of raw materials ?
Total raw materials available ? Deduct: Raw Materials inventory, ending 1000
Raw materials used in production ? Direct Labor 28,500 Manufacturing overhead applied to work in process inventory 11,400
Total manufacturing costs ?
Add: Beginning work in process inventory 0 Total of manfacturing cost + Beginning work in process inventory (0+ Total Manufactring) Deduct Ending work in process inventory ? Cost of goods manufactured ?
Iacopi Corporation is a wholesaler that sells a single product. Management has provided the following cost data for two levels of monthly sales volume. The company sells the product for $172.50 per unit.
Sales volume (units)
4,000
5,000
Cost of sales
$307,600
$384,500
Selling and administrative costs
$321,200
$337,000
The best estimate of the total contribution margin when 4,300 units are sold is:
Identify how each of the following separate transactions affects financial statements. For the balance sheet, identify how each transaction affects total assets, total liabilities, and total equity. For the income statement, identify how each transaction affects net income. For the statement of cash flows, identify how each transaction affects cash flows from operating activities, cash flows from financing activities, and cash flows from investing activities. For increases, place a “1” in the column or columns. For decreases, place a “2” in the column or columns. If both an increase and a decrease occur, place “1y2” in the column or columns. The first transaction is completed as an example.
The inventory account of Olympic Sports Wear is as follows.
Merchandise inventory account balance $75,000
Physical inventory $71,500
Instruction:
Prepare the adjustment journal entry.
Part 2 (6 points):
The information relating to the inventory of Olympic Sports Wear is as follows:
Merchandise inventory accounts balance $75,000
Physical inventory $98,200
Instruction:
Prepare the adjustment journal entry.
Part 3 (6 points):
Olympic Sports Wear furnishes the following information:
On January 1, 2006, the supplies account has $7,200 balance
During the year, supplies are purchased for $5,000
On December 31, 2005, the supplies account has a closing balance of $2,200.
Instruction:
Prepare the adjusting journal entry.
Part 4 (6 points):
Olympic Sports Wear furnishes the following information:
An insurance policy is purchased on December 1, 2005 for three months (December through February). The premium amount for the quarterly period is $1,500.
The clerk debited the Prepaid Insurance account for $1500.
At the end of the account year (on March 31, 2006), only one month cost $500 has expired. The value of the unexpired insurance is $1,000.
Instruction:
Prepare the adjusting journal entries for the Prepaid Insurance Account.
Part 5 (6 points):
Olympic Sports Wear estimates its Annual Federal Income tax as $10,000. It has paid the tax in four installments of $2,500 each. However, at the end of the year, the actual tax amount is $11,200.
Therefore, the company needs to pay $1,200 to the government.
Guardian Devices, Inc., manufactures and sells commercial and residential security equipment.
The following selected investment transactions occurred during 2013:
Note 1. Investments are classified as available for sale. The investments at cost andfair value on December 31, 2012, are as follows:
Note 2. The Investment in Omaha Co. stock is anequity method investment representing 32% of the outstanding shares of Omaha Co.
The comparative unclassified balance sheets for December 31, 2013 and 2012 are provided below. Selected balances are missing. Determine the missing values. Enter all amounts as positive numbers. Do not round interim calculations. Round final answers to nearest dollar.
Here are some “hints”
a. Calculate the portfolio cost. Remember that there are four investments. b. Calculate requirement (c) first; then calculate the difference between requirement (a) and (c) to obtain this answer. c. Calculate the portfolio market value. Remember that there are four investments. d. Bond principal x interest rate x time held from Oct. 1 to Dec. 31 = interest. e. Beginning balance, $62,000, plus share of income (Omaha net income x percentage of share investment) minus share of dividends (total Omaha dividends x percentage of share investment). f. Beginning retained earnings from 2012 balance plus Guardian net income from 2013. g. Same as requirement (b).
Isabel Lopez started Biz Consulting, a new business, and completed the following transactions during its first year of operations.
I. Lopez invests $70,000 cash and office equipment valued at $10,000 in the business.
Purchased a $150,000 building to use as an office. Biz paid $20,000 in cash and signed a note payable promising to pay the $130,000 balance over the next ten years.
Purchased office equipment for $15,000 cash.
Purchased $1,200 of office supplies and $1,700 of office equipment on credit.
Paid a local newspaper $500 cash for printing an announcement of the office’s opening.
Completed a financial plan for a client and billed that client $2,800 for the service.
Designed a financial plan for another client and immediately collected a $4,000 cash fee.
Lopez withdrew $3,275 cash for personal use.
Received a $1,800 cash payment from the client described in transaction f.
Made a $700 cash payment on the equipment purchased in transaction d.
Paid $1,800 cash for the office secretary’s wages.
Items 1 through 16 represent a series of unrelated statements, questions, excerpts, and comments taken from various parts of an auditor’s working paper file. Below is a list of the likely sources of the statements, questions, excerpts, and comments. Select, as the best answer for each item, the most likely source. Select only one source for each item. A source may be selected once, more than once, or not at all.
A. Practitioner’s report on management’s assertion about an entity’s compliance with specified requirements.
B. Auditor’s communications on significant deficiencies and material weakness.
C. Audit inquiry letter to legal counsel.
D. Lawyer’s response to audit inquiry letter.
E. Audit committee’s communication to the auditor.
F. Auditor’s communication to those charged with governance (other than with respect to significant deficiencies and material weakness).
G. Report on the application of accounting principles.
H. Auditor’s engagement letter.
I. Letter for underwriters.
J. Accounts receivable confirmation request.
K. Request for bank cutoff statement.
L. Explanatory paragraph of an auditor’s report on financial statements.
M. Partner’s engagement review notes.
N. Management representation letter.
O. Successor auditor’s communication with predecessor auditor.
P. Predecessor auditor’s communication with successor auditor.
Items List of Sources
1.
During our audit we discovered evidence of the company’s failure to safeguard inventory from loss, damage, and misappropriation.
2.
The company considers the decline in value of equity securities classified as available for sale to be temporary.
3.
There have been no communications from regulatory agencies concerning noncompliance with or deficiencies in financial reporting practices.
4.
It is our opinion that the possible liability to the company in this proceeding is nominal in amount.
5.
As discussed in Note 4 to the financial statements, the company experienced a net loss for the year ended July 31, 2011, and is currently in default under substantially all of its debt agreements. In addition, on September 25, 2011, the company filed a prenegotiated voluntary petition for relief under Chapter 11 of the U.S. Bankruptcy Code. These matters raise substantial doubt about the company’s ability to continue as a going concern.
6.
During the year under audit, we were advised that management consulted with Gonzales & Ramirez, CPAs. The purpose of this consultation was to obtain another CPA firm’s opinion concerning the company’s recognition of certain revenue that we believe should be deferred to future periods. Gonzales & Ramirez’s opinion was consistent with our opinion, so management did not recognize the revenue in the current year.
7.
The company believes that all material expenditures that have been deferred to future periods will be recoverable.
8.
Our use of professional judgment and the assessment of audit risk and materiality for the purpose of our audit mean that matters may have existed that would have been assessed differently by you. We make no representation as to the sufficiency or appropriateness of the information in our working papers for your purposes.
9.
Indicate in the space provided below whether this information agrees with your records. If there are exceptions, please provide any information that will assist the auditor in reconciling the difference.
10.
Blank checks are maintained in an unlocked cabinet along with the check signing machine. Blank checks and the check signing machine should be locked in separate locations to prevent the embezzlement of funds.
11.
The company has insufficient expertise and controls over the selection and application of accounting policies that are in conformity with GAAP.
12.
The timetable set by management to complete our audit was unreasonable considering the failure of the company’s personnel to complete schedules on a timely basis and delays in providing necessary information.
13.
Several employees have disabled the antivirus detection software on their PCs because the software slows the processing of data and occasionally rings false alarms. The company should obtain antivirus software that runs continuously at all system entry points and that cannot be disabled by unauthorized personnel.
14.
In connection with an audit of our financial statements, please furnish to our auditors a description and evaluation of any pending or probable litigation against our company of which you are aware.
15.
The company has no plans or intentions that may materially affect the carrying value or classification of assets and liabilities.
16.
In planning the sampling application, was appropriate consideration given to the relationship of the sample to the assertion and to planning materiality?
The following data have been recorded for recently completed Job 674 on its job cost sheet. Direct materials cost was $2,127. A total of 32 direct labor hours and 256 machine hours were worked on the job. The direct labor wage rate is $20 per labor hour. The company applies manufacturing overhead on the basis of machine hours. The predetermined overhead rate is $27 per machine hour. The total cost for the job on its job cost sheet would be:
Which of the following equations is used to calculate the cost of goods sold during the period?
A. Beginning finished goods + cost of goods manufactured + ending finished goods.
B. Beginning finished goods ending finished goods.
C. Beginning finished goods + cost of goods manufactured.
D. Beginning finished goods + cost of goods manufactured ending finished goods.
E. Beginning finished goods + ending finished goods cost of goods manufactured.
General Cookware produces stainless steel pots in an assembly line process. Labor costs incurred during a recent period were: corporate executives, $100,000; assembly line workers, $80,000; security guards, $18,000; and plant supervisor, $30,000. The total of General Cookware’s direct labor cost was:
The accounting records of McCormick Company revealed the following costs:
Factory utilities
$ 34,000
Wages of assembly line personnel
125,000
Customer entertainment
50,000
Indirect materials used
18,000
Depreciation on salespersons’ cars
35,000
Production equipment rental costs
90,000
Costs that would be considered in the calculation of manufacturing overhead total:
Using the following data for April, calculate the cost of goods manufactured:
Direct MaterialsAc€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦.. $39,000
Direct LaborAc€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦ $19,000
Beginning work in process inventoryAc€¦Ac€¦. $14,000
Ending work in process inventoryAc€¦Ac€¦Ac€¦.. $12,000
The cost of goods manufactured was:
At a volume of 15,000 units, Riley Company reported sales revenues of $600,000, variable costs of $225,000, and fixed costs of $120,000. The company’s contribution margin ratio is:
A. 62.5%
B. 37.5%
C. 20%
D. 80%
E. a percent other than those given above.
A recent income statement of Harris Corporation reported the following data:
Sales revenue
$3,600,000
Variable costs
1,600,000
Fixed costs
1,000,000
If these data are based on the sale of 10,000 units, the break even point would be:
A. 2,000 units.
B. 2,778 units.
C. 3,600 units.
D. 5,000 units.
E. an amount other than those given above.
28. Tiverton, Inc. sells a single product for $20. Variable costs are $8 per unit and fixed costs total $120,000 at a volume level of 5,000 units. Assuming that fixed costs do not change, Tiverton’s break even sales would be:
[The following information applies to the questions displayed below.]
Rusties Company recently implemented an activity based costing system. At the beginning of the year, management made the following estimates of cost and activity in the company’s five activity cost pools:
Activity Cost Pool
Activity Measure
Expected Overhead Cost
Expected Activity
Labor related
Direct labor hours
$
264,000
30,000
DLHs
Purchase orders
Number of orders
$
59,000
750
orders
Product testing
Number of tests
$
180,000
1,200
tests
Template etching
Number of templates
$
320,000
8,000
templates
General factory
Machine hours
$
836,000
60,000
MHs
4. value:
12.50 points
Required:
1.
Compute the activity rate for each of the activity cost pools. (Round your answers to 2 decimal places.)
Activity Cost Pool
Activity Rate
Labor related
$
per
DLH
Purchase orders
$
per
order
Product testing
$
per
test
Template etching
$
per
template
General factory
$
per
MH
check my workreferencesebook & resources
5. value:
12.50 points
2.
The expected activity for the year was distributed among the company’s four products as follows:
Expected Activity
Activity Cost Pool
Product A
Product B
Product C
Product D
Labor related (DLHs)
7,600
10,700
4,100
9,600
Purchase orders (orders)
140
190
120
250
Product testing (tests)
110
520
220
450
Template etching (templates)
2,450
0
5,450
0
General factory (MHs)
12,900
17,500
13,100
17,500
Using the ABC data, determine the total amount of overhead cost assigned to each product. (Do not round intermediate calculations. Round your answers to the nearest dollar amount.)
The following information is available for Lock Safe Company, which produces special order security products and uses a job order cost accounting system.
April 30
May 31
Inventories
Raw materials
$
43,000
$
52,000
Goods in process
10,200
21,300
Finished goods
63,000
35,600
Activities and information for May
Raw materials purchases (paid with cash)
210,000
Factory payroll (paid with cash)
345,000
Factory overhead
Indirect materials
15,000
Indirect labor
80,000
Other overhead costs
120,000
Sales (received in cash)
1,400,000
Predetermined overhead rate based on direct labor cost
70
%
Compute the following amounts for the month of May using T accounts.
1.
Cost of direct materials used.
2.
Cost of direct labor used.
3.
Cost of goods manufactured.
4.
Cost of goods sold.*
5.
Gross profit.
6.
Overapplied or underapplied overhead.
*Do not consider any underapplied or overapplied overhead.
These are the accounts that are used t(that need to be filled in).
The following information is provided for adjustments prior to closing the books. Lopez and Knepp ask you to enter the adjustments into the spreadsheet, in the two columns to the right of the unadjusted trial balance. (CM2 uses a perpetual inventory system.)
(IM STUCK ON HOW TO THE THE JURNAL ENTRIES, I NEED HELP ON HOW TO DO THE PROPPER CORRECT JURNAL ENTRIES, AFTER THAT I CAN CONTINUE)
1. Wages earned by employees during December and to be paid in January are $33,875; associated payroll taxes on these wages are $2,710.
2. On July 1, a client paid CM2 $205,720 in advance for a year of consulting services.
3. You discover that a product sale was made and recorded in December for $128,600; the product had not yet been shipped. The cost of the product was $68,742.
4. Bad debt expense has been calculated to be $17,508 but has not yet been recorded.
5. The Prepaid Expense account has a balance of $22,774. This balance includes $11,200 for a two year insurance policy purchased on January 1, 2009.
6. Depreciation expense for the year is $82,620.
7. Interest expense accrued on its long term liabilities is $7,765.
8. On December 15, CM2 declared a dividend of $110,000, to be paid on January 15, 2010.
The following information relates to the City of Millersville for the fiscal year ending 12/31/13.
1. Total Fund Balance ‘ Unassigned at 1/1/13 $82,900
2. Estimated revenues of $2,774,000 a. Taxes $1,943,000
b. Licenses and permits $372,000 c. Intergovernmental revenue $378,000 d. Other financing sources ‘ sale of park land $81,000
3. Current year tax information a. Levy $2,005,000
b. Estimated uncollectible taxes $65,000 c. Collections from current year levy $1,459,000 d. All unpaid taxes at the end of the year are expected to be collected by 2/28/14
4. Revenues other than taxes actual a. Licenses and permits $373,000 b. Intergovernmental revenue $381,000 c. Other financing sources ‘ sale of park land $0
5. Appropriations of $2,693,000 for the following functions a. General government $557,000 b. Public safety $886,000 c. Public works $650,000
d. Parks and recreation $600,000
6. Total a. General government $422,100 b. Public safety $635,000 c. Public works $254,000 d. Parks and recreation $439,000
personnel costs of $1,750,100 charged to the following functions7.
Expenditure information a. Total purchase orders issued $931,000
i. General government $129,000 ii. Public safety $250,000
iii. Public works $392,000
iv. Parks and recreation $160,000 b. Actual amounts billed for purchase orders issued $850,500 (there were no
differences in the amounts billed and the amounts ordered) i. General government $123,700
ii. Public safety $236,200 iii. Public works $360,000 iv. Parks and recreation $130,600
c. Total paid on bills/invoices received for purchase orders issued against current year non payroll appropriations $754,900
i. General government $104,599 ii. Public safety $202,712
iii. Public works $317,853
iv. Parks and recreation $129,736 d. The City Council passes a resolution at the end of every year to commit fund
balance in the amount of any unfilled and outstanding purchase orders as of year end. There were no outstanding purchase orders at the end of the prior year.
Questions:
1. What is the amount of “Tax Revenues” for the year?
2. What is the balance of “Current Taxes Receivable” at the end of the year?
3. What is the amount of total “Revenues” for the year?
4. Are total “Revenues” over or under the amount budgeted?
5. By how much are total “Revenues” over or under budgeted amounts?
6. Of the total amount appropriated for the year, how much was appropriated for nonpayroll expenditures?
7. Of the total nonpayroll expenditures appropriated for the year, how much relate to “General Government”?
8. Of the total nonpayroll expenditures appropriated for the current year, how much relate to “Public Safety”?
9. Of the total nonpayroll expenditures appropriated for the year, how much relate to “Public Works”?
10. Of the total nonpayroll expenditures appropriated for the year, how much relate to “Parks & Recreation”?
11. What is the amount of total outstanding purchase orders at the end of the year?
12. Of the total amount of purchase orders outstanding at the end of the year, what amount relates to “General Government”?
13. Of the total amount of purchase orders outstanding at the end of the year, what amount relates to “Public Safety”?
14. Of the total amount of purchase orders outstanding at the end of the year, what amount relates to “Public Works”?
15. Of the total amount of purchase orders outstanding at the end of the year, what amount relates to “Parks & Recreation”?
16. What is the amount of total Accounts Payable at the end of the year?
17. What is the amount of total expenditures for the current year?
18. Of the total expenditures for the year, how much relate to “General Government”? 19. Of the total expenditures for the year, how much relate to “Public Safety”? 20. Of the total expenditures for the year, how much relate to “Public Works”? 21. Of the total expenditures for the year, how much relate to “Parks & Recreation”? 22. For the current year, are total actual expenditures over or under the amounts appropriated? 23. For the current year, are total actual expenditures for “General Government” over or under the amounts appropriated? 24. For the current year, are total actual expenditures for “Public Safety” over or under the amounts appropriated? 25. For the current year, are total actual expenditures for “Public Works” over or under the amounts appropriated? 26. For the current year, are total actual expenditures for “Parks & Recreation” over or under amounts appropriated? 27. What is the balance in total Fund Balance at the end of the current year? 28. What is the amount of Unassigned Fund Balance at the end of the current year?
The following information is for the standard and actual costs for the Happy Corporation.
Standard Costs: Budgeted units of production 16,000 (80% of capacity) Standard labor hours per unit 4 Standard labor rate $26 per hour Standard material per unit 8 lbs. Standard material cost $ 12 per lb. Budgeted fixed overhead $640,000 Standard variable overhead rate $15 per labor hour. Fixed overhead rate is based on budgeted labor hours at 80% capacity.
Actual Cost: Actual production 16,500 units Actual fixed overhead $640,000 Actual variable overhead $1,000,000 Actual labor 65,000 hours, total labor costs $1,700,000 Actual material purchased and used 130,000 lbs, total material cost $1,600,000 Actual variable overhead $1,000,000
1. Determine the Quantity Variance
a. 24,000 unfavorable b. 24,000 favorable c. 12,000 unfavorable d. 12,000 favorable
2. Determine the total direct materials cost variance
a $64,000 b. $24,000
c. $40,000 d. $16,000
3. Determine the Time Variance
a. $1,690,000 b. 26,000 c. 1,716,000 d. 3,407.000
4. Determine the Total Labor Cost Variance
a. 26,000 b. 10,000 c. 36,000 d. 16,000
5. Determine the total Factory Overhead Cost Variance
The following items and amounts are taken from the 2013 financial records of Cynatech. Prepare an income statement for the year ending December 31, 2013:
In each of the following situations, discuss the appropriateness of the journal entries in terms of generally accepted accounting principals. For purposes of your discussion assume that the financial statements, particularly net income will be used by the court in a divorce settlement for the company presiden’t wife.
1) Lucky Bamboo Inc thinks it should dispose of its excess land. While the book value is $50,000, current market value prices are depressed and only $25,000 is expected upon disposal. The following journal entry was made:
Debit: Loss of Disposal of Land 25,000 Credit: Land 25,000
2)Merchandise inventory that cost $630,000 was reported on the balance sheet at $690,000, which is the expected selling proice less estimated selling costs. The following entry was made to record this increase in value:
3)The company is being sued for $500,000 by a customer who claims damages for personal unjury that was apparently caused by a defective product. Company lawyers feel extremely confident that the company will have no liability for damages resulting from the situation. Nevertheless, the company decidees to make the folowing entry:
Debit: Loss from lawsuit450,000 Credit: liability for lawsuit 450,000
4)Because the general level of proces increased during the current year, lucky bamboo inc determined that there was a $16,000 understatement of depreciation expense on its equipment and decided to record it in its accounts. The following entry was made:
5)Lucky Bamboo Inc has been concerned about whether intangible assets could generate cash in case of liquidation. As a result, goodwill arising from a business acquisition during the current year and recorded at $800,000 was written off as follows:
Hickory Company manufactures two products”13,000 units of Product Y and 5,000 units of Product Z. The company uses a plantwide overhead rate based on direct labor hours. It is considering implementing an activity based costing (ABC) system that allocates all of its manufacturing overhead to four cost pools. The following additional information is available for the company as a whole and for Products Y and Z: (The total estimated overhead cost may not agree with the sum of allocated overhead costs to each product.)
Activity Cost Pool
Activity Measure
Estimated Overhead Cost
Expected Activity
Machining
Machine hours
$
246,000
12,000
MHs
Machine setups
Number of setups
$
137,500
250
setups
Production design
Number of products
$
89,000
2
products
General factory
Direct labor hours
$
357,000
14,000
DLHs
Activity Measure
Product Y
Product Z
Machining
7,500
4,500
Number of setups
40
210
Number of products
1
1
Direct labor hours
8,500
5,500
Required:
Using the plantwide overhead rate, how much manufacturing overhead cost is allocated to Product Y and Product Z?(Round your intermediate calculations to 2 decimal places and final answers to the nearest dollar amount.)
Product Y
Product Z
Manufacturing overhead allocated
Problem 3 12A Contrasting ABC and Conventional Product Costs [LO2, LO3, LO4]
Precision Manufacturing Inc. (PMI) makes two types of industrial component parts”the EX300 and the TX500. It annually produces 62,000 units of EX300 and 12,700 units of TX500. The company’s conventional cost system allocates manufacturing overhead to products using a plantwide overhead rate and direct labor dollars as the allocation base. Additional information relating to the company’s two product lines is shown below:
EX300
TX500
Total
Direct materials
$
368,325
$
164,550
$
532,875
Direct labor
$
122,000
$
43,500
$
165,500
The company is considering implementing an activity based costing system that distributes all of its manufacturing overhead to four activities as shown below:
Activity Cost Pool (and Activity Measure)
Manufacturing Overhead
Activity
EX300
TX500
Total
Machining (machine hours)
$
217,700
92,000
63,500
155,500
Setups (setup hours)
170,100
85
320
405
Product level (number of products)
92,150
1
1
2
General factory (direct labor dollars)
66,200
$
122,000
$
43,500
$
165,500
Total manufacturing overhead cost
$
546,150
Required:
1 a.
Compute the plantwide overhead rate that would be used in the company’s conventional cost system. (Round your answer to 2 decimal places.)
Predetermined overhead rate
$
per DL$
1 b.
Using the plantwide rate, compute the unit product cost for each product.(Do not round intermediate calculations. Round your answers to 2 decimal places.)
EX300
TX500
Unit product cost
$
$
2 a.
Compute the activity rate for each activity cost pool. (Round your answers to 2 decimal places.)
Activity Cost Pools
Activity Rate
Machining
$
per MH
Setups
$
per setup hr.
Product level
$
per product
General factory
$
per DL$
2 b.
Using the activity rates, compute the unit product cost for each product. (Do not round intermediate calculations. Round your answers to 2 decimal places.)
EX300
TX500
Unitproduct cost
$
$
Foundational 3 9
Hickory Company manufactures two products”14,000 units of Product Y and 6,000 units of Product Z. The company uses a plantwide overhead rate based on direct labor hours. It is considering implementing an activity based costing (ABC) system that allocates all of its manufacturing overhead to four cost pools. The following additional information is available for the company as a whole and for Products Y and Z: (The total estimated overhead cost may not agree with the sum of allocated overhead costs to each product.)
Activity Cost Pool
Activity Measure
Estimated Overhead Cost
Expected Activity
Machining
Machine hours
$
209,000
10,000
MHs
Machine setups
Number of setups
$
171,100
290
setups
Production design
Number of products
$
93,000
2
products
General factory
Direct labor hours
$
259,000
10,000
DLHs
Activity Measure
Product Y
Product Z
Machining
7,900
2,100
Number of setups
50
240
Number of products
1
1
Direct labor hours
8,900
1,100
Required:
Using the ABC system, how much total manufacturing overhead cost would be assigned to Product Y? (Round your intermediate calculations to 2 decimal places and final answers to the nearest dollar amount.)
Total manufacturing overhead cost
$
Foundational 3 3
Hickory Company manufactures two products”14,000 units of Product Y and 6,000 units of Product Z. The company uses a plantwide overhead rate based on direct labor hours. It is considering implementing an activity based costing (ABC) system that allocates all of its manufacturing overhead to four cost pools. The following additional information is available for the company as a whole and for Products Y and Z: (The total estimated overhead cost may not agree with the sum of allocated overhead costs to each product.)
Activity Cost Pool
Activity Measure
Estimated Overhead Cost
Expected Activity
Machining
Machine hours
$
203,000
10,000
MHs
Machine setups
Number of setups
$
121,900
230
setups
Production design
Number of products
$
87,000
2
products
General factory
Direct labor hours
$
379,500
15,000
DLHs
Activity Measure
Product Y
Product Z
Machining
7,300
2,700
Number of setups
50
180
Number of products
1
1
Direct labor hours
9,500
5,500
Required:
What is the activity rate for the Machining activity cost pool? (Round your answer to 2 decimal places.)
Franz began business at the start of this year and had the following costs: variable manufacturing cost per unit, $9; fixed manufacturing costs, $60,000; variable selling and administrative costs per unit, $2; and fixed selling and administrative costs, $220,000. The company sells its units for $45 each. Additional data follow.
Planned Production in units 10,000 Actual Production in unitsAc€¦..10,000 Number of units sold 8,500
There were no variances.
The net income (loss) under absorption costing is:
Fred’s Electrical, Inc. sells electrical parts to electrical contractors in the northwestern US. Fred’s customers mail their payments attached to the stub (i.e. remittance advice) from their monthly statement to Fred’s accounts receivable (AR) office. An AR clerk confirms that the check amount agrees with the amount on the RA and sends the checks to the cashier. The AR clerk prepares batch totals of the customer numbers, invoice numbers, and amount paid. The AR clerk then enters the batch totals and RAs into the computer, where the AR master data is updated to record the payment. The computer reconciles the batch totals, confirms job completion, and reports discrepancies, if any to the AR clerk.
a) Prepare a table of entities and activities b) Draw a context diagram c) Draw a physical data flow diagram d) Prepare an annotated table of entities and activities. Indicate on this table the groupings, bubble numbers, and bubble titles to be used in preparing a level 0 logical DFD. e) Draw a level 0 logical DFD
The General Fund of Middleville has presented you with the following trial balance as of June 30, 2011.
Debits Credits
Cash $ 40,000
Taxes Receivable Delinquent 142,000
Estimated Uncollectible Taxes Delinquent 9,100
Interest and Penalties Receivable 32,000
Vouchers Payable 24,000
Budgetary Fund Balance Reserve for Encumbrances 10,200
Fund Balance _________ 170,700
$ 214,000 $214,000
The information that is being presented to you pertains to the transactions for the city of Middleville for the fiscal year ended June 30, 2012.
1. The following budget was adopted by the city council:
Estimated Revenues:
Property Taxes $ 650,000
Fines and Penalties 44,000
Licenses and Permits 150,000
Federal Grant 85,000
929,000
Appropriations and Other Financing Uses
Public Safety 402,000
General Government 263,000
Public Works 102,000
Parks and Recreation 92,000
Transfers Out 34,000
893,000
2. Encumbrances outstanding at the end of the year were re opened.
3. Property taxes of $ 660,000 were levied. It is estimated that 2.5% of the property taxes levied are expected to be uncollectible/
4. Purchase orders issued for the 2012 fiscal year were as follows:
Public Safety, $ 395,000; General Government, $ 259,000; Public Works, $ 100,000; Parks and Recreation, $ 98,000.
5. Cash collected for the Federal Grant from the Federal Government, $ 94,000.
6. Cash collected and transferred in as follows:
Fines and Penalties 43,000
Licenses and Permits 164,000
7. Cash collected on property taxes were as follows: Current taxes, $559,000, Delinquent Taxes, $ 41,000 and $ 22,000 of interest and penalties were collected.
Gest Inc. has provided the following data for the month of November. The balance in the Finished Goods inventory account at the beginning of the month was $54,000 and at the end of the month was $40,400. The cost of goods manufactured for the month was $269,000. The actual manufacturing overhead cost incurred was $145,100 and the manufacturing overhead cost applied to Work in Process was $133,000. The adjusted cost of goods sold that would appear on the income statement for November is:
Gino’s Restaurant is a popular restaurant of Boston, Massachusetts. The owner of the restaurant has been trying to better understand costs at the restaurant and has hired a student intern to conduct an activity based costing study. The intern, in consultation with the owner, identified the following major activities:
Activity Cost Pool
Activity Measure
Serving a party of diners
Number of parties served
Serving a diner
Number of diners served
Serving drinks
Number of drinks ordered
A group of diners who ask to sit at the same table is counted as a party. Some costs, such as the costs of cleaning linen, are the same whether one person is at a table or the table is full. Other costs, such as washing dishes, depend on the number of diners served.
Data concerning these activities are shown below.
Serving a Party
Serving a Dinner
Serving Drinks
Total
Total cost
$ 33,000
$ 212,000
$ 73,000
$ 318,000
Total activity
6,000
parties
15,000
diners
10,000
drinks
Prior to the activity based costing study, the owner knew very little about the costs of the restaurant. She knew that the total cost for the month was $318,000 and that 15,000 diners had been served. Therefore, the average cost per diner was $21.20 ($318,000 Af· 15,000 diners = $21.20 per diner).
Required:
1.
Compute the activity rates for each of the three activities.(Round your answers to 2 decimal places.)
Cost per unit of activity
Serving a Party
$
per party
Serving a Diner
$
per diner
Serving Drinks
$
per drink
2.
According to the activity based costing system, what is the total cost of serving each of the following parties of diners? (Do not round intermediate calculations. Round your final answers to 2 decimal places.)
a.
A party of four diners who order three drinks in total.
b.
A party of two diners who do not order any drinks.
c.
A lone diner who orders two drinks.
Total
Party of four diners who order three drinks
$
Party of two diners who order no drinks
$
Party of one diner who orders two drinks
$
3.
Convert the total costs you computed in Requirement 2 above to costs per diner. In other words, what is the average cost per diner for serving each of the following parties? (Do not round intermediate calculations. Round your final answers to 2 decimal places.)
a.
A party of four diners who order three drinks in total.
b.
A party of two diners who do not order any drinks.
Green Rider makes three types of electric scooters. The company’s total fixed cost is $1,080,000,000. Selling prices, variable cost, and sales percentages for each type of scooter follow:
Selling Price Variable Cost
Percent of
Total Unit Sales
Mod $2,200 $1,900 30
Rad 3,700 3,000 50
X treme 6,000 5,000 20
a. What is Green Rider’s break even point in units and sales dollars?
b. If the company has an after tax income goal of $1 billion and the tax rate is 50 percent,
how many units of each type of scooter must be sold for the goal to be reached
at the current sales mix?
c. Assume the sales mix shifts to 50 percent Mod, 40 percent Rad, and 10 percent
X treme. How does this change affect your answer to (a)?
d. If Green Rider sold more X treme scooters and fewer Mod scooters, how would your answers to (a) and (b) change? No calculations are needed.
Greene, Inc., which uses a process costing system, transfers completed production from Department no. 1 to Department no. 2 for further work. Which of the following best describes the account that would be debited to record this transfer?
Tax Practice and Ethical Guidelines Statute of Limitations (LO. 5, 6)
In March 2012, Jim asks you to prepare his Federal income tax returns for tax years 2009, 2010, and 2011. In discussing this matter with him, you discover that he also has not filed for tax year 2008. When you mention this fact, Jim tells you that the statute of limitations precludes the IRS from taking any action as to this year.
Is Jim correct about the application of the statute of limitations?
(Select: Yes. The statue of limitations is three years from the due date of the return., No. There is no statute of limitations if a return is not filed., or No. The statue of limitations is six years from the due date of the return.)
If Jim refuses to file for 2008, should you prepare returns for 2009 through 2011?
Yes, because you can correctly reflect the tax liability for returns for 2009 through 2011.
SelectYesNo
No. You cannot correctly reflect the tax liability due to the omission for 2008.
From the dropdown box beside each adjusting entry, select the letter of the explanation A through I that best describes the journal entry (you can use letters more than once):
A.
To record receipt of unearned revenue.
B.
To record this period’s earning of prior unearned revenue.
From the dropdown box beside numbered balance sheet item, select the letter of its balance sheet classification. If the item should not appear on the balance sheet, choose the letter Z from the selection choices.
Dunbar Distribution markets CDs of numerous performing artists. At the beginning of March, Dunbar had in beginning inventory 2,500 CDs with a unit cost of $7. During March Dunbar made th following purchases of CDs.
March 5 2,000 @ $8
March 13 3,500 @ $9
March 21 5,000 @ $10
March 26 2,000 @ $11
During March 12,000 units were sold. Dunbar used a periodic inventory system.
a. Determine the cost of goods available for sale
b. Determine 1. the ending inventory and 2, the cost of goods sold under each of the assumed cost flow methods (FIFO, LIFO, and average cost). Prove te accuracy of the cost of goods sold under the FIFO and LIFO mehtods. (Note: for average cost, round cost per unit to three decimal places.)
c. Which cost flow method results in 1. the highest inventory amount for the balanc sheet abd 2. the highest cost of goods sold for the income statement?
E 10’1: Acquisition costs; land and building LO10’1 On March 1, 2013, Beldon Corporation purchased land as a factory site for $60,000. An old building on the property was demolished, and construction began on a new building that was completed on December 15, 2013. Costs incurred during this period are listed below: Demolition of building $4000.00
Architect fees (for new building) $12000.00
Legal fees for title investigation of land $2000.00
Property taxes on Land (For period beginning March 1, 2013) $3000.00
Construction costs $500,000.00
Interest on Construction loan $5000.00
Salvaged materials resulting from the demolition of the old building were sold for $2,000.
Required:
Determine the amounts that Beldon should capitalize as the cost of the land and the new building
E16 15 (Weighted Average Number of Shares) Gogean Inc. uses a calendar year for financial
reporting. The company is authorized to issue
9,000,000
shares of
$10
par common stock. At no time has Gogean issued any potentially dilutive securities. Listed below is a summary of Gogean’s common stock activities.
1. Number of common shares issued and outstanding at December 31, 2011
2,400,000
2. Shares issued as a result of a 10% stock dividend on September 30, 2012
240,000
3. Shares issued for cash on March 31, 2013
2,000,000
Number of common shares issued and outstanding at December 31, 2013
4,640,000
4. A 2 for 1 stock split of Gogean’s common stock took place on March 31, 2014
Instructions:
(a) Compute the weighted average number of common shares used in computing earnings per common share for 2012 on the 2013 comparative income statement.
Eagle Company makes the MusicFinder, a sophisticated satellite radio. Eagle has experienced a steady growth in sales for the past five years. However, Ms. Luray, Eagle’s CEO, believes that to maintain the company’s present growth will require an aggressive advertising campaign next year. To prepare for the campaign, the company’s accountant, Mr. Bednarik, has prepared and presented to Ms. Luray the following data for the current year, Year 1:
Variable costs:
Direct labor (per unit)
$
91
Direct materials (per unit)
38
Variable overhead (per unit)
19
Total variable costs (per unit)
$
148
Fixed costs (annual):
Manufacturing
$
383,000
Selling
299,000
Administrative
781,000
Total fixed costs (annual)
$
1,463,000
Selling price (per unit)
409
Expected sales revenues, Year 1 (25,000 units)
$
10,225,000
Eagle has an income tax rate of 35 percent.
Ms. Luray has set the sales target for Year 2 at a level of $11,861,000 (or 29,000 radios).
Required:
What is the projected after tax operating profit for Year 1?
What is the break even point in units for Year 1?
Ms. Luray believes that to attain the sales target (29,000 radios) will require additional selling expenses of $284,000 for advertising in Year 2, with all other costs remaining constant. What will be the after tax operating profit for Year 2 if the firm spends the additional $284,000?
You are engaged to audit the Ferrick Corporation for the year ended December 31, 2011. Only merchandise shipped by the Ferrick Corporation to customers up to and including December 30, 2011, has been eliminated from inventory. The inventory as determined by physical inventory count has been recorded on the books by the company’s controller. No perpetual inventory records are maintained. All sales are made on an FOB’shipping point basis. You are to assume that all purchase invoices have been correctly recorded.
The following lists of sales invoices are entered in the sales journal for the months of December 2011 and January 2012, respectively.
Sales Invoice Amount
Sales Invoice Date
Cost of Merchandise Sold
Date Shipped
December 2011
a.
$
3,000
Dec. 21
$
2,000
Dec. 31
b.
2,000
Dec. 31
800
Dec. 13
c.
1,000
Dec. 29
600
Dec. 30
d.
4,000
Dec. 31
2,400
Jan. 9
e.
10,000
Dec. 30
5,600
Dec. 29*
January 2012
f.
$
6,000
Dec. 31
$
4,000
Dec. 30
g.
4,000
Jan. 2
2,300
Jan. 2
h.
8,000
Jan. 3
5,500
Dec. 31
*Shipped to consignee.
Required:
Prepare necessary adjusting entries for the following events. (Omit the “$” sign in your response.)
Event
General Journal
Debit
Credit
a.
(Click to select) Accounts payable Common stock Cost of merchandise sold Accounts receivable Retained earnings Sales Cash Inventory
(Click to select) Inventory Accounts receivable Retained earnings Accounts payable Cash Common stock Cost of merchandise sold Sales
d.
(Click to select) Inventory Common stock Retained earnings Sales Accounts payable Cash Cost of merchandise sold Accounts receivable
(Click to select) Cash Inventory Accounts payable Sales Cost of merchandise sold Accounts receivable Common stock Retained earnings
e.
(Click to select) Common stock Sales Cost of merchandise sold Accounts receivable Accounts payable Inventory Cash Rent expense
(Click to select) Rent expense Common stock Inventory Cash Sales Cost of merchandise sold Accounts payable Accounts receivable
(Click to select) Common stock Rent expense Cost of merchandise sold Sales Accounts payable Cash Inventory Accounts receivable
(Click to select) Sales Cash Rent expense Inventory Common stock Accounts payable Cost of merchandise sold Accounts receivable
f.
(Click to select) Cash Inventory Sales Cost of merchandise sold Accounts payable Retained earnings Accounts receivable Common stock
(Click to select) Accounts receivable Inventory Cash Sales Cost of merchandise sold Accounts payable Retained earnings Common stock
h.
(Click to select) Rent expense Inventory Cash Depreciation expense Cost of merchandise sold Sales Common stock Accounts receivable
(Click to select) Inventory Cost of merchandise sold Rent expense Depreciation expense Cash Sales Accounts receivable Common stock
(Click to select) Inventory Sales Depreciation expense Accounts payable Cash Cost of merchandise sold Accounts receivable Prepaid rent
(Click to select) Cost of merchandise sold Inventory Accounts receivable Cash Sales Prepaid rent Accounts payable Depreciation expense
1. Employee salaries in the amount of $55,000 were incurred for the year. Of that amount, $50,000 had been paid in cash, the remainder was still owed to employees at the end of the year. Record the journal entry necessary at December 31, 2005 to account for both the paid and unpaid portion of salaries.
2. At the end of the year, $5,000 of the supplies remained on hand. Record the adjustment necessary at December 31, 2005.
3. The company paid $20,000 on their accounts payable during the year. Record the entry.
HOW WOULD WE PUT NUMBERS 1, 2 AND 3 IN JOURNAL ENTRIES??? THANKS FOR THE HELP
Roddickton Manufacturing Co. has gathered the following information to develop predetermined OH rates for 2013. The company produces a wide variety of energy saving products that are processed through two departments, Assembly (automated) and Finishing (labor intensive).
Budgeted total overhead: $600,400 in Assembly and $199,600 in Finishing
Budgeted total direct labor hours: 10,000 in Assembly and 40,000 in Finishing
Budgeted total machine hours: 76,000 in Assembly and 4,000 in Finishing
a. Compute a plantwide predetermined OH rate using direct labor hours. $ per DLH
b. Compute a plantwide predetermined OH rate using machine hours. $ per MH
c. Compute departmental predetermined OH rates using machine hours for Assembly and direct labor hours for Finishing. Round your answers to the nearest cent.
Assembly
$ per MH
Finishing
$ per DLH
d. Determine the amount of overhead that would be assigned to a product that required five machine hours in Assembly and one direct labor hour in Finishing using the answers developed in (a), (b), and (c). Round your answers to the nearest cent.
Effect of inventory cost flow on ending inventory balance and gross margin
Dugan Sales had the following transactions for jackets in 2013, its first year of operations:
Jan. 20
Purchased 80 units @ $15
=
$1,200
Apr. 21
Purchased 420 units @ $16
=
6,720
July 25
Purchased 250 units @ $20
=
5,000
Sept. 19
Purchased 150 units @ $22
=
3,300
During the year, Dugan Sales sold 830 jackets for $40 each.
Required
b. Record the above transactions in general journal form and post to T accounts using (1) FIFO, (2) LIFO, and (3) weighted average. Use a separate set of journal entries and T accounts for each method. Assume all transactions are cash transactions.
1. Answer the following questions about Company A: a. What is the amount of equity on December 31, 2010? b. What is the amount of equity on December 31, 2011? c. What is the amount of liabilities on December 31, 2011? 2. Answer the following questions about Company B: a. What is the amount of equity on December 31, 2010? b. What is the amount of equity on December 31, 2011? c. What is net income for year 2011? 3. Calculate the amount of assets for Company C on December 31, 2011. 4. Calculate the amount of owner investments for Company D during year 2011. 5. Calculate the amount of liabilities for Company E on December 31, 2010.
FastTec, which sells electronics in retail outlets and on the Internet, uses activity based budgeting in the preparation of its selling, general, and administrative expense budget. Which of the following costs would the company likely classify as a unit level expense on its budget?
A)MEDIA ADVERTISING B) RETAIL OUTLET SALES COMISSIONS C)SALARIES OF WEB SITE MAINTENCE PERSONNEL D) ADMINISTRATIVE SALARIES E) SALARY OF THE SALE MANAGER EPLOYED AT STORE NO 23
Courtney purchased and consumed 50,000 gallons of direct material that was used in the production of 11,000 finished units of product. According to engineering specifications, each finished unit had a manufacturing standard of five gallons. If a review of Courtney’s accounting records at the end of the period disclosed a material price variance of $5,000U and a material quantity variance of $3,000F, determine the actual price paid for a gallon of direct material.
A. $0.50.
B. $0.60.
C. $0.70.
D. An amount other than those shown above.
E. Not enough information to judge.
Consider the following information:
Direct material purchased and used, 80,000 gallons Standard quantity of direct material allowed for May production, 76,000 gallons Actual cost of direct materials purchased and used, $176,000 Unfavorable direct material quantity variance, $9,400
FireOut, Inc. manufactures steel cylinders and nozzles for two models of fire extinguishers: (1) a home fire extinguisher and (2) a commercial fire extinguisher. The home 1 model is a high volume (54,000 units), half gallon cylinder that holds 2 1/2 pounds of multipurpose dry chemical at 480 PSI. The commercial model is a low volume (10,200 units), two gallon cylinder that holds 10 pounds of multi purpose dry chemical at 390 PSI. Both products require 1.5 hours of direct labor for completion. Therefore, total annual direct labor hours are 96,300 or [1.5 hrs Af— (54,000 + 10,200)]. Expected annual manufacturing overhead is $1,493,400. Thus, the predetermined overhead rate is $15.51 or ($1,493,400 Af· 96,300) per direct labor hour. The direct materials cost per unit is $18.50 for the home model and $26.50 for the commercial model. The direct labor cost is $19 per unit for both the home and the commercial models. The company’s managers identified six activity cost pools and related cost drivers and accumulated overhead by cost pool as follows.
Activity Cost Pool
Cost Driver
Estimated Overhead
Expected Use of Cost Drivers
Expected Use of Drivers by Product
Home
Commercial
Receiving
Pounds
$70,600
335,000
215,000
120,000
Forming
Machine hours
146,700
35,000
27,000
8,000
Assembling
Number of parts
391,000
217,000
165,000
52,000
Testing
Number of tests
46,900
25,500
15,500
10,000
Painting
Gallons
51,100
5,258
3,680
1,578
Packing and shipping
Pounds
787,100
335,000
215,000
120,000
$1,493,400
Under traditional product costing, compute the total unit cost of both products. (Round your answers to 2 decimal places, e.g. 20.25.)
The floowing information relates to Franklin Freightways for its first year of operations (data in millions of dollars): Pretax accounting Income: $200
Pretax accounting income included: Overwight fines (no deductible for tax purposes) 5 Depreciation expense 70
Depreciation in the tax return usin MARCS 110
1.) Which of the following must Franklin Freightways disclose related to the income tax expense reported in the income statement, ($ in millions) A.) Only the current portion of tax epense of $66 B.) Only the total tax expense of $82 C.) Both the current portion of the tax expense of $66 and the deferred portion of the tax expense of $16 D.) None of the above
2.) Franklin’s net income ($ in millions) is: A.) $118 B.) $119.4
C.) $134
D.) $124
3.) Franklin’s taxable income ($ in millions) is: A.) $160
The following balances were taken from the books of Maria Conchita Alonzo Corp. on December 31, 2014.
Interest revenue
$94,500
Accumulated depreciation”buildings
$36,500
Cash
59,500
Notes receivable
163,500
Sales revenue
1,388,500
Selling expenses
202,500
Accounts receivable
158,500
Accounts payable
178,500
Prepaid insurance
28,500
Bonds payable
108,500
Sales returns and allowances
158,500
Administrative and general expenses
105,500
Allowance for doubtful accounts
15,500
Accrued liabilities
40,500
Sales discounts
53,500
Interest expense
68,500
Land
108,500
Notes payable
108,500
Equipment
208,500
Loss from earthquake damage (extraordinary item)
158,500
Buildings
148,500
Common stock
508,500
Cost of goods sold
629,500
Retained earnings
29,500
Accumulated depreciation”equipment
48,500
Assume the total effective tax rate on all items is 34%.
Prepare a multiple step income statement; 100,000 shares of common stock were outstanding during the year. (Round earnings per share to 2 decimal places, e.g. 1.48.)
Vargos property plant and equippment consists of a building costing 780000 and a salvage value of 60,000 with a 10 year life purhcased on 6/1/08 and a piece of equipment that cost 88,000 and a salvage value of 4000 with a 5 year life purhcased on 9/1/10. vargo incurred delivery and installation charges of 5000 on the equipment. vargo spent 25000 painting the buildng during 2012. on 1/1/12 vargo revised the estimate on the life of the building vargo now estimates that the building be in service until 12/31/19.
a.) on 10/1/12 vargo exchanged the piece of equipment for a similar piece of equipment with the eakin company. the transaction had o commercial substance. the fair value of equipment they gave up was 38000. the fair value of the equiment recieved from eakin was 33000. In addition to the equipment they receved 5000 in cash. Prepare journal entry to record the transaction on vargos book.
b.) Vargo considers the depreciation to be an administrative expense computer depreciation for both assets for 2012 using 150% declining balance method. vargo computes depreciation to the nearest month.
Cost and price data for the next fiscal quarter are as follows: Computer paper Napkins Place mats Poster board Estimated sales volume in units 30,000 120,000 45,000 80,000 Selling prices……………. $14.00 $7.00 $12.00 $8.50 Materials costs………… 6.00 4.50 3.60 2.50
Data with respect to production per machine hour and the variable cost per hour of producing each of the products are given as follows: Computer paper Napkins Place mats Poster board Units per hour 6 10 5 4 Variable overhead per hour $9.00 $6.00 $12.00 $8.00
1. From all original estimates given, prepare estimated contribution margins by product line for the next fiscal quarter. Also, show the contribution margins per unit. 2. Prepare contribution margins as in part (1) with all revisions included. 3. For the original estimates, compute each of the following: (a) Break even point for the given sales mix. (b) Margin of safety for the estimated sales volume. 4. For the revised estimates, compute each of the following: (a) Break even point for the given sales mix. (b) Margin of safety for the estimated sales volume. 5. Comment on Herbert’s concern about the variable cost of the place mats.
Daane Company had only one job in process on May 1. The job had been charged with $1,250 of direct materials, $4,220 of direct labor, and $5,950 of manufacturing overhead cost. The company assigns overhead cost to jobs using the predetermined overhead rate of $20.50 per direct labor hour.
During May, the following activity was recorded:
Raw materials (all direct materials):
Beginning balance
$ 13,200
Purchased during the month
$20,200
Used in production
$31,200
Labor:
Direct labor hours worked during the month
2,290
Direct labor cost incurred
$28,625
Actual manufacturing overhead costs incurred
$39,400
Inventories:
Raw materials, May 30
?
Work in process, May 30
$16,400
Work in process inventory on May 30 contains $2,750 of direct labor cost. Raw materials consist solely of items that are classified as direct materials.
The amount of direct materials cost in the May 30 work in process inventory account was: (Round intermediate calculations to 2 decimal places.)
The dean of the School of Natural Science is trying to decide whether to purchase a copy machine to place in the lobby of the building. The machine would add to student convenience, but the dean feels compelled to earn an 8 percent return on the investment of funds. Estimates of cash inflows from copy machines that have been placed in other university buildings indicate that the copy machine would probably produce incremental cash inflows of approximately $15,000 per year. The machine is expected to have a three year useful life with a zero salvage value.
Required:
a.
Use Present Value Table 1 in the Appendix to determine the maximum amount of cash the dean should be willing to pay for a copy machine. (Round “PV Factor” to 6 decimal places, other intermediate calculations and final answer to 2 decimal places. Omit the “$” sign in your response.)
Maximum amount
$
b.
Use Present Value Table 2 in the Appendix to determine the maximum amount of cash the dean should be willing to pay for a copy machine. (Round “PV Factor” to 6 decimal places, other intermediate calculations and final answer to 2 decimal places. Omit the “$” sign in your response.)
*PLEASE DEMONSTRATE YOUR WORK AS TO HOW YOU ACHIEVED THE ANSWER*
Kelp Company produces three joint products from seaweed. At the split off point, three basic products emerge: Sea Tea, Sea Paste, and Sea Powder. Each of these products can either be sold at the split off point or be processed further. If they are processed further, the resulting products can be sold as delicacies to health food stores. Cost and revenue information is as follows:
Sales Value and Additional Costs If Processed Further
Product
Pounds Produced
Sales Value at Split Off
Final Sales Value
Additional Cost
Sea Tea
9,000
$
60,000
$
90,000
$
35,000
Sea Paste
3,900
72,500
160,000
50,000
Sea Powder
2,000
70,000
85,000
14,000
a 1
Compute the Incremental benefit (cost) of further processing to these products. (Negative amounts should be indicated by a minus sign. Omit the “$” sign in your response.)
Sea Tea
Sea Paste
Sea Powder
Incremental benefit (cost)
$
$
$
a 2
Which products should Kelp process beyond the split off point?
Sea powder and sea paste
Sea tea and sea paste
Sea tea and sea powder
b.
At what price per pound would it be advantageous for Kelp Company to sell Sea Paste at the split off point rather than process it further? (Round your intermediate calculations and final answer to 2 decimal places. Omit the “$” sign in your response.)
Departmental overhead rates may not correctly assign overhead costs due to:
a.
the use of direct labor hours in allocating overhead costs to products rather than machine time or quantity of materials used.
b.
the high correlation between direct labor hours and the incurrence of overhead costs.
c.
overreliance on volume as a basis for allocating overhead costs where products differ regarding the number of units produced, lot size, or complexity of production
d.
difficulties associated with identifying cost pools for the first stage of the allocation process.
Winkle, Kotter, and Zale is a small law firm that contains 10 partners and 10 support persons. The firm employs a job order costing system to accumulate costs chargeable to each client, and it is organized into two departments the Research and Documents Department and the Litigation Department. The firm uses predetermined overhead rates to charge the costs of these departments t its clients. At the beginning of the current year, the firm’s management made the following estimates for the year:
The SciFi Theater Inc. was recently formed. It began operations in March 2012. The SciFi is unique in that it will show only triple features of sequential theme movies. On March 1, the ledger of The SciFi showed: Cash $16,000; Land $38,000; Buildings (concession stand, projection room, ticket booth, and screen) $22,000; Equipment $16,000; Accounts Payable $12,000; and Common Stock $80,000. During the month of March the following events and transactions occurred.
Mar. 2 Rented the three Star Wars movies (Star Wars®, The Empire Strikes Back, and The Return of the Jedi) to be shown for the first three weeks of March. The film rental was $10,000; $2,000 was paid in cash and $8,000 will be paid on March 10.
3 Ordered the first three Star Trek movies to be shown the last
10 days of March. It will cost $500 per night.
9 Received $9,900 cash from admissions.
10 Paid balance due on Star Wars movies rental and $2,900 on March 1 accounts payable.
11 Hired J. Carne to operate the concession stand. Carne agrees to pay The SciFi Theater 15% of gross receipts, payable monthly.
12 Paid advertising expenses $500.
20 Received $8,300 cash from customers for admissions.
20 Received the Star Trek movies and paid rental fee of $5,000.
31 Paid salaries of $3,800.
31 Received statement from J. Carne showing gross receipts from concessions of $10,000 and the balance due to The SciFi of
$1,500 for March. Carne paid half the balance due and will remit the remainder on April 5.
31 Received $20,000 cash from customers for admissions.
In addition to the accounts identified above, the chart of accounts includes: Accounts Receivable, Service Revenue, Sales Revenue, Advertising Expense, Rent Expense, and Salaries and Wages Expense.
Instructions
(a) Using T accounts, enter the beginning balances to the ledger.
(b) Journalize the March transactions, including explanations. SciFi records admission revenue as service revenue, concession revenue as sales revenue, and film rental expense as rent expense.
The Zuni Co. has the following accounts in its ledger: Cash; Accounts Receivable; Supplies; Office Equipment; Accounts Payable; Capital Stock; Dividends; Fees Earned; Rent Expense; Advertising Expense; Utilities Expense; Miscellaneous Expense. Journalize the following selected transactions in a journal. Show the effects of each transaction on the financial statements using the margin notation illustrated in this chapter.
Aug. 1 Paid rent for the month, $1,500.
2 Paid advertising expense, $700.
4 Paid cash for supplies, $1,050.
6 Purchased office equipment on account, $7,500.
8 Received cash from customers on account, $3,600.
12 Paid creditor on account, $1,150.
20 Paid dividends, $1,000.
25 Paid cash for repairs to office equipment, $500.
30 Paid telephone bill for the month, $195.
31 Fees earned and billed to customers for the month, $10,150.
This trial balance of Michels Co. does not balance.
?
Each of the listed accounts has a normal balance per the general ledger. An examination of the ledger and journal reveals the following errors:
1. Cash received from a customer on account was debited for $780, and Accounts Receivable was credited for the same amount. The actual collection was for $870.
2. The purchase of a printer on account for $340 was recorded as a debit to Supplies for $340 and a credit to Accounts Payable for $340.
3. Services were performed on account for a client for $900. Accounts Receivable was debited for $90 and Service Revenue was credited for $900.
4. A debit posting to Salaries and Wages Expense of $700 was omitted.
5. A payment on account for $206 was credited to Cash for $206 and credited to Accounts Payable for $260.
6. Payment of a $600 cash dividend to Michels’ stockholders was debited to Salaries and Wages Expense for $600 and credited to Cash for $600.
Three friends organized Rapid City Roller Rink on October 1, 2010. The following transactions occurred during the first month of operations:
October 1: Received contribution of $22,000 from each of the three principal owners of the new business in exchange for shares of stock.
October 2: Purchased land valued at $15,000 and a building valued at $75,000. The seller agreed to accept a down payment of $9,000 and a five year promissory note for the balance.
October 3: Purchased new tables and chairs for the lounge at the roller rink at a cost of $25,000, paying $5,000 down and agreeing to pay for the remainder in 60 days.
October 9: Purchased 100 pairs of roller skates for cash at $35 per pair.
October 12: Purchased food and drinks for $2,500 on an open account. The company has 30 days to pay for the concession supplies.
October 13: Sold tickets for cash of $400 and took in $750 at the concession stand.
October 17: Rented out the roller rink to a local community group for $750. The community group is to pay one half of the bill within five working days and has 30 days to pay the remainder.
October 23: Received 50% of the amount billed to the community group.
October 24: Sold tickets for cash of $500 and took in $1,200 at the concession stand.
October 26: The three friends, acting on behalf of Rapid City Roller Rink, paid a dividend of $250 on the shares of stock owned by each of them, or $750 in total.
October 27: Paid $1,275 for utilities.
October 30: Paid wages and salaries of $2,250.
October 31: Sold tickets for cash of $700 and took in $1,300 at the concession stand.
Required
1. Prepare a table to summarize the preceding transactions as they affect the accounting equation. Use the format in Exhibit 3 1. Identify each transaction with a date.
2. Record each transaction directly in T accounts using the dates preceding the transactions to identify them in the accounts. Each account involved in the problem needs a separate T account.
Tiffany Martin is an audit manager in a medium sized public accounting firm. Tiffany graduated from college seven years ago with a degree in accounting. She obtained her CPA certification soon after she joined the firm where she currently works. Tiffany is a financial auditor; she has had little training in auditing computerized information systems. The current engagement Tiffany is working on includes a complex information processing system with multiple applications. The financial accounting transactions are processed on server. The IT department employs 25 personnel, including programmers, systems analysts, a database administrator, computer operators, technical support personnel, and a director. Tiffany has not spoken with anyone in the department because she is fearful that her lack of technical knowledge relative to IT will cause some concern with the client. Because Tiffany does not understand the complexities of the computer processing environment, she is unable to determine what risks might result from the computerized system’s operations. She is particularly worried about unauthorized changes to programs and data that would affect the reliability of the financial statements. Tiffany has spoken to Dick Stanton, the partner who has responsibility for this audit client, about her concerns. Dick has suggested that Tiffany conduct more substantive testing than she would undertake in a less complex processing environment. This additional testing will hopefully ensure that there are no errors or fraud associated with the computer processing of the financial statements.
Requirements:
1. Do you think that Dick Stanton’s suggested approach is the most efficient way to control risks associated with complex computer environments?
2. How should Tiffany respond to Dick’s suggestion?
3. What can a public accounting firm, such as the one in which Tiffany works, do to ensure that audits of computerized accounting information systems are conducted efficiently and effectively?
4. Should Tiffany be allowed to conduct this audit given her limited level of skills? How might she acquire new skills?
To address the need for tighter data controls and lower support costs, the Ashley Company has adopted a new diskless PC system. It is little more than a mutilated personal computer described as a ?~?~gutless wonder.’’ The basic concept behind the diskless PC is simple: A LAN server based file system of high powered diskless workstations is spread throughout a company and connected with a central repository or mainframe. The network improves control by limiting user access to company data previously stored on desktop hard disks. Because the user can destroy or delete only the information currently on the screen, an organization’s financial data are better protected from user instigated catastrophes. The diskless computer also saves money in user support costs by distributing applications and upgrades automatically, and by offering online help.
Requirements:
1. What threats in the information processing and storage system do the diskless PC minimize?
2. Do the security advantages of the new system outweigh potential limitations? Discuss.
Tommy Hilfiger Corporation designs, sources, and markets men’s and women’s sportswear, jeanswear, and childrenswear under the Tommy Hilfiger trademarks. The company prides itself in producing distinctive designs that recognize tradition while adding a fresh, youthful perspective. The items reported on its income statement for a recent year (ended March 31) are presented here (dollars in thousands) in alphabetical order:
Cost of goods sold …………………………………..$1,012,156
Depreciation and amortization ………………………. 76,307
Interest expense ……………………………………… 31,756
Interest income ………………………………………. 3,577
Net revenue ………………………………………….. 1,875,797
Other selling, general, and administrative expenses …. 583,502
Provision for income taxes …………………………… 37,445
Weighted average shares outstanding ………………… 90,692
Required:
Prepare a multiple step consolidated income statement (showing gross profit, operating income, and income before income taxes). Include a presentation of basic earnings per share.
1. Liquidity ratios. Edison, Stagg, and Thornton have the following financial information at the close of business on July 10:
Edison Stagg Thornton
Cash $4,000 $2,500 $1,000
Short term investments 3,000 2,500 2,000
Accounts receivable 2,000 2,500 3,000
Inventory 1,000 2,500 4,000
Prepaid expenses 800 800 800
Accounts payable 200 200 200
Notes payable: short term 3,100 3,100 3,100
Accrued payables 300 300 300
Long term liabilities 3,800 3,800 3,800
a. Compute the current and quick ratios for each of the three companies. (Round calculations to two decimal places.) Which firm is the most liquid? Why?
2. Computation and evaluation of activity ratios. The following data relate to Alaska Products, Inc:
19X5 19X4
Net credit sales $832,000 $760,000
Cost of goods sold 440,000 350,000
Cash, Dec. 31 125,000 110,000
Average Accounts receivable 180,000 140,000
Average Inventory 70,000 50,000
Accounts payable, Dec. 31 115,000 108,000
a. Compute the accounts receivable and inventory turnover ratios for 19X5. Alaska rounds all calculations to two decimal places.
3. Profitability ratios, trading on the equity. Digital Relay has both preferred and common stock outstanding. The com¬pany reported the following information for 19X7:
Net sales $1,500,000
Interest expense 120,000
Income tax expense 80,000
Preferred dividends 25,000
Net income 130,000
Average assets 1,100,000
Average common stockholders’ equity 400,000
a. Compute the gross profit margin ratio, the return on equity and the return on assets, rounding calculations to two decimal places.
b. Does the firm have positive or negative financial leverage? Briefly ex¬plain.
4. Horizontal analysis. Mary Lynn Corporation has been operating for several years. Selected data from the 20X1 and 20X2 financial statements follow.
20X2 20X1
Current Assets $ 76,000 $ 80,000
Property, Plant, and Equipment (net) 99,000 90,000
Intangibles 25,000 50,000
Current Liabilities 40,800 48,000
Long Term Liabilities 143,000 160,000
Stockholders’ Equity 16,200 12,000
Net Sales 500,000 500,000
Cost of Goods Sold 332,500 350,000
Operating Expenses 93,500 85,000
Prepare a horizontal analysis for 20X1 and 20X2. Briefly comment on the results of your work.
5. Vertical analysis. Mary Lynn Corporation has been operating for several years. Selected data from the 20X1 and 20X2 financial statements follow.
20X2 20X1
Current Assets $ 76,000 $ 80,000
Property, Plant, and Equipment (net) 99,000 90,000
Intangibles 25,000 50,000
Current Liabilities 40,800 48,000
Long Term Liabilities 143,000 160,000
Stockholders’ Equity 16,200 12,000
Net Sales 500,000 500,000
Cost of Goods Sold 332,500 350,000
Operating Expenses 93,500 85,000
Prepare a vertical analysis for 20X1 and 20X2. Briefly comment on the results of your work.
6. Ratio computation. The financial statements of the Lone Pine Company follow.
LONE PINE COMPANY
Comparative Balance Sheets
December 31, 20X2 and 20X1 ($000 Omitted)
20X2 20X1
Assets
Current Assets
Cash and Short Term Investments $ 400 $ 600
Accounts Receivable (net) 3,000 2,400
Inventories 2,000 2,200
Total Current Assets $5,400 $5,200
Property, Plant, and Equipment
Land $1,700 $ 600
Buildings and Equipment (net) 1,500 1,000
Total Property, Plant, and Equipment $3,200 $1,600
Total Assets $8,600 $6,800
Liabilities and Stockholders’ Equity
Current Liabilities
Accounts Payable $1,800 $1,700
Notes Payable 1,100 1,900
Total Current Liabilities $2,900 $3,600
Long Term Liabilities
Bonds Payable 4,100 2,100
Total Liabilities $7,000 $5,700
Stockholders’ Equity
Common Stock $ 200 $ 200
Retained Earnings 1,400 900
Total Stockholders’ Equity $1,600 $1,100
Total Liabilities and Stockholders’ Equity $8,600 $6,800
LONE PINE COMPANY
Statement of Income and Retained Earnings
For the Year Ending December 31,20X2 ($000 Omitted)
Net Sales* $36,000
Less: Cost of Goods Sold $20,000
Selling Expense 6,000
Administrative Expense 4,000
Interest Expense 400
Income Tax Expense 2,000 32,400
Net Income $ 3,600
Retained Earnings, Jan. 1 900
$ 4,500
Cash Dividends Declared and Paid 3,100
Retained Earnings, Dec. 31 $ 1,400
*All sales are on account.
Instructions
Compute the following items for Lone Pine Company for 20X2, rounding all calcu¬lations to two decimal places when necessary:
Transactions related to revenue and cash receipts completed by Pinnacle Engineering
Services during the period April 2–30, 2012, are as follows:
Apr. 2. Issued Invoice No. 717 to Yee Co., $950.
3. Received cash from Auto Flex Co. for the balance owed on its account.
7. Issued Invoice No. 718 to Park Development Co., $530.
10. Issued Invoice No. 719 to Ridge Communities, $2,350.
Post revenue and collections to the accounts receivable subsidiary ledger.
Apr. 14. Received cash from Park Development Co. for the balance owed on April 1.
16. Issued Invoice No. 720 to Park Development Co., $325.
Post revenue and collections to the accounts receivable subsidiary ledger.
18. Received cash from Yee Co. for the balance due on invoice of April 2.
20. Received cash from Park Development Co. for invoice of April 7.
23. Issued Invoice No. 721 to Auto Flex Co., $790.
30. Recorded cash fees earned, $3,950.
30. Received offi ce equipment of $1,500 in partial settlement of balance due on
the Ridge Communities account.
Post revenue and collections to the accounts receivable subsidiary ledger.
Instructions
1. Insert the following balances in the general ledger as of April 1:
11 Cash ………………………$18,340
12 Accounts Receivable …….. 2,260
18 Office Equipment ……….. 34,700
41 Fees Earned ……………… —
2. Insert the following balances in the accounts receivable subsidiary ledger as of April 1:
Auto Flex Co. ………………….$1,460
Park Development Co. ………… 800
Ridge Communities ……………. —
Yee Co. ………………………… —
3. Prepare a single column revenue journal (p. 40) and a cash receipts journal (p. 36). Use the following column headings for the cash receipts journal: Fees Earned Cr., Accounts Receivable Cr., and Cash Dr. The Fees Earned column is used to record cash fees. Insert a check mark (() in the Post. Ref. column when recording cash fees.
4. Using the two special journals and the two column general journal (p. 1), journalize the transactions for April. Post to the accounts receivable subsidiary ledger, and insert the balances at the points indicated in the narrative of transactions. Determine the balance in the customer’s account before recording a cash receipt.
5. Total each of the columns of the special journals, and post the individual entries and totals to the general ledger. Insert account balances after the last posting.
6. Determine that the subsidiary ledger agrees with the controlling account in the general ledger.
7. Why would an automated system omit postings to a control account as performed in step 5 for Accounts Receivable?
Troy Ridgell incorporated Ridgell Consulting, an accounting practice, on May 1, 2012. During the first month of operations, these events and transactions occurred.
May 1 Stockholders invested $40,000 cash in exchange for common stock of the corporation.
2 Hired a secretary receptionist at a salary of $2,000 per month.
3 Purchased $800 of supplies on account from Fleming Supply Company.
7 Paid office rent of $1,400 for the month.
11 Completed a tax assignment and billed client $1,500 for services provided.
12 Received $4,200 advance on a management consulting engagement.
17 Received cash of $3,300 for services completed for Goodman Co.
31 Paid secretary receptionist $2,000 salary for the month.
31 Paid 50% of balance due Fleming Supply Company.
The company uses the following chart of accounts: Cash, Accounts Receivable, Supplies,
Accounts Payable, Unearned Service Revenue, Common Stock, Service Revenue, Salaries and Wages Expense, and Rent Expense.
Instructions
(a) Journalize the transactions, including explanations.
True Plumb Surveyors provides survey work for construction projects. The office staff use office supplies, while surveying crews use field supplies. Purchases on account completed by True Plumb Surveyors during August 2012 are as follows:
Aug. 1. Purchased field supplies on account from Wendell Co., $2,670.
3. Purchased office supplies on account from Lassiter Co., $290.
8. Purchased field supplies on account from Ready Supplies, $3,900.
12. Purchased field supplies on account from Wendell Co., $2,950.
15. Purchased office supplies on account from J Mart Co., $400.
19. Purchased office equipment on account from Accu Vision Supply Co., $7,350.
23. Purchased field supplies on account from Ready Supplies, $2,140.
26. Purchased office supplies on account from J Mart Co., $205.
30. Purchased field supplies on account from Ready Supplies, $2,750.
Instructions
1. Insert the following balances in the general ledger as of August 1:
14 Field Supplies ………………..$ 6,200
15 Office Supplies ……………… 1,490
18 Office Equipment …………… 19,400
21 Accounts Payable …………… 4,715
2. Insert the following balances in the accounts payable subsidiary ledger as of August 1:
Accu Vision Supply Co. …………………$3,600
J Mart Co. ………………………………… 690
Lassiter Co. ………………………………. 425
Ready Supplies …………………………… —
Wendell Co. ……………………………… —
3. Journalize the transactions for August, using a purchases journal (p. 30) similar to the one illustrated in this chapter. Prepare the purchases journal with columns for Accounts Payable, Field Supplies, Office Supplies, and Other Accounts. Post to the creditor accounts in the accounts payable ledger immediately after each entry.
4. Post the purchases journal to the accounts in the general ledger.
5. a. What is the sum of the balances in the subsidiary ledger at August 31?
b. What is the balance of the controlling account at August 31?
6. What type of e commerce application would be used to plan and coordinate suppliers?
Our company purchased all of the outstanding stock of another company, paying $2,700,000 cash. Our company assumed all of the liabilities of other company. Book values and fair values of acquired assets and liabilities were as follows.
Compute variances for the following items and indicate the effect of each variance by selecting “Favorable” or “Unfavorable”. (Input all amounts as positive values. Omit the “$” sign in your response.)
Consider the trial balance of DMN Corporation shown in Table 2.1. Based on that trial balance alone, which of the following income statement items would total $7,500? a. Revenue b. Gross profit c. Net income d. Net loss
5. Consider the trial balance of DMN Corporation shown in Table 2.1. Based on that trial balance alone, DMN’s income statement would report: a. Net income of $7,500. b. Net loss of $7,500. c. Net income of $1,300. d. Net loss of $1,300.
Here is Table 2.1 to solve the problems. Please show how you solve them as well as the answers. Thank you.
continuation of the Cookie Chronicle from Chapters 1 through 4.) CCC5 Because Natalie has had such a successful first few months, she is considering other opportunities to develop her business. One opportunity is to become the exclusive distributor of a line of fine European mixers. The current cost of a mixer is approximately $550, and Natalie would sell each one for $1,100. Natalie comes to you for advice on how to account for these mixers. Each appliance has a serial number and can be easily identified. Natalie asks you the following questions. 1. “Would you consider these mixers to be inventory? Or, should they be classified as supplies or equipment?” 2. “I’ve learned a little about keeping track of inventory using both the perpetual and the periodic systems of accounting for inventory. Which system do you think is better? Which one would you recommend for the type of inventory that I want to sell?” 3. “How often do I need to count inventory if I maintain it using the perpetual system? Do I need to count inventory at all?” In the end, Natalie decides to use the perpetual method of accounting for inventory, and the following transactions happen during the month of January. Jan. 4 She buys five deluxe mixers on account from Kzinski Supply Co. for $2,750, terms n/30. 6 She pays $100 freight on the January 4 purchase. 7 Natalie returns one of the mixers to Kzinski because it was damaged during shipping. Kzinski issues Cookie Creations credit for the cost of the mixer plus $20 for the cost of freight that was paid on January 6 for one mixer. 8 She collects the amount due from the neighborhood community center that was accrued at the end of December 2011. 12 She sells three deluxe mixers on account for $3,300, FOB destination, terms n/30. The mixers cost $570 each (including freight). 13 Natalie pays her cell phone bill previously accrued in the December adjusting journal entries. 14 She pays $75 of delivery charges for the three mixers that were sold on January 12. 14 She buys four deluxe mixers on account from Kzinski Supply Co. for $2,200, terms n/30. 17 Natalie is concerned that there is not enough cash available to pay for all of the mixers purchased. She issues additional common stock for $1,000. 18 She pays $80 freight on the January 14 purchase. 20 She sells two deluxe mixers for $2,200 cash. 28 Natalie issues a check to her assistant. Her assistant worked 20 hours in January and is also paid for amounts owing at December 31, 2011. Recall that Natalie’s assistant earns $8 an hour. 28 Natalie collects amounts due from customers in the January 12 transaction. 31 She pays Kzinski all amounts due. 31 Cash dividends of $750 are paid. As of January 31, the following adjusting entry data are available. 1. A count of brochures and posters reveals that none were used in January. 2. A count of baking supplies reveals that none were used in January. 3. Another month’s worth of depreciation needs to be recorded on the baking equipment bought in November. (Recall that the baking equipment has a useful life of 5 years or 60 months.) 4. One month’s worth of amortization (write off) needs to be recorded on the website. (Recall that the website has a useful life of 2 years or 24 months.) 5. An additional month’s worth of interest on her grandmother’s loan needs to be accrued. (The interest rate is 9%.) 6. One month’s worth of insurance has expired. 7. Natalie receives her cell phone bill, $75. The bill is for services provided in January and is due February 15. (Recall that the cell phone is used only for business purposes.) 2 chapter 5 Merchandising Operations and the Multiple Step Income Statement 8. An analysis of the unearned revenue account reveals that Natalie has not had time to teach any of these lessons this month because she has been so busy selling mixers. As a result there is no change to the unearned revenue account. Natalie hopes to book the outstanding lessons in February. 9. An inventory count of mixers at the end of January reveals that Natalie has three mixers remaining. Instructions Using the information that you have gathered and the general ledger accounts that you have prepared through Chapter 4, plus the new information above, do the following. (a) Answer Natalie’s questions. (b) Prepare and post the January 2012 transactions. (c) Prepare a trial balance. (d) Prepare and post the adjusting journal entries required. (e) Prepare an adjusted trial balance. (f) Prepare a multiple step income statement and retained earnings statement for the month ended January 31, 2012. (g) Prepare a classified balance sheet as of January 31, 2012.
Corazon Manufacturing Company has a purchasing department staffed by five purchasing agents. Each agent is paid $28,000 per year and is able to process 4,000 purchase orders. Last year, 17,800 purchase orders were processed by the five agents. Required: 1. Calculate the activity rate per purchase order. 2. Calculate, in terms of purchase orders, the: a. total activity availability b. unused capacity 3. Calculate the dollar cost of: a. total activity availability b. unused capacity 4. Express total activity availability in terms of activity capacity used and unused capacity. 5. What if one of the purchasing agents agreed to work half time for $14,000? How many purchase orders could be processed by four and a half purchasing agents? What would unused capacity be in purchase orders?
The core values for this course are integrity and excellence. Applying the values of integrity and excellence, discuss ethical considerations of accounting for business combinations in a manner that prevents misunderstanding in the questions below.
Business combinations have become an important strategic move by corporations for various reasons.
Discuss the various types of business combinations.
Why may companies seek to engage in business combinations?
Discuss the importance of understanding the GAAP behind business combinations before performing the accounting. Additionally, why is it important that accountants report the numbers as dictated by GAAP regardless of what they may be?
The cost of debt investments includes each of the following except
a. commissions
b. brokerage fees
c. accrued interest
d. the price paid
The consolidated worksheet shows Excess of cost over Book value of Subsidiary of $210,000. Management of the parent company determines that the market values for subsidiary company plant assets are $90,000 higher than book values. In the consolidated balance sheet, goodwill will be reported at
a. $210,000
b. $120,000
c. $0
d. $90,000
At December 31, 2013, Gammon Inc has these data on its security investments:
Security Cost Fair Value 12/31/13
Trading $140,000 $192,000
Non Trading $137,000 $125,000
If the non trading securities are held as long term investments, which of the following will be recorded to adjust the securities to fair value?
The Berridge Company is a discount tire dealer that operates 25 retail stores in a metropolitan area. The company maintains a centralized purchasing and warehousing facility and employs a perpetual inventory system. All purchases of tires and related supplies are placed through the company’s central purchasing department to take advantage of the quantity discounts offered by its suppliers. The tires and supplies are received at the central warehouse and distributed to the retail stores as needed. The perpetual inventory system at the central facility maintains current inventory records, which include designated reorder points, optimum order quantities, and balance on hand information for each type of tire or related supply.
The participants involved in Berridge’s inventory system include
(1) Retail stores,
(2) The inventory control department,
(3) The warehouse,
(4) The purchasing department,
(5) Accounts payable, and
(6) Outside vendors. The inventory control department is responsible for maintenance of the perpetual inventory records for each item carried in inventory. The warehouse department maintains the physical inventory of all items carried by the company’s retail stores. All deliveries of tires and related supplies from vendors are received by receiving clerks in the warehouse department, and all distributions to retail stores are filled by shipping clerks in this department. The purchasing department places every order for items needed by the company. The accounts payable department maintains the subsidiary ledger with vendors and other creditors. All payments are processed by this department. The documents used by these various departments are as follows:
Retail Store Requisition (Form RSR). The retail stores submit this document to the central warehouse whenever tires or supplies are needed at the stores. The shipping clerks in the warehouse department fill the orders from inventory and have them delivered to the stores. Three copies of the document are prepared; two of which are sent to the warehouse, and the third copy is filed for reference.
Purchase Requisition (Form PR). An inventory control clerk in the inventory control department prepares this document when the quantity on hand for an item falls below the designated reorder point. Two copies of the document are prepared. One copy is forwarded to the purchasing department, and the other is filed.
Purchase Order (Form PO). The purchasing department prepares this document based on information found in the purchase requisition. Five copies of the purchase order are prepared. The disposition of these copies is as follows: copy 1 to vendor, copy 2 to accounts payable department, copy 3 to inventory control department, copy 4 to warehouse, and copy 5 filed for reference.
Receiving Report (Form RR). The warehouse department prepares this document when ordered items are received from vendors. A receiving clerk completes the document by indicating the vendor’s name, the date the shipment is received, and the quantity of each item received. Four copies of the report are prepared. Copy 1 is sent to the accounts payable department, copy 2 to the purchasing department, and copy 3 to the inventory control department; Copy 4 is retained by the warehouse department, compared with the purchase order form in its files, and filed together with this purchase order form for future reference.
Invoices. Invoices received from vendors are bills for payment. The vendor prepares several copies of each invoice, but only two copies are of concern to the Berridge Company: the copy that is received by the company’s accounts payable department and the copy that is retained by the vendor for reference. The accounts payable department compares the vendor invoice with its file copy of the original purchase order and its file copy of the warehouse receiving report. Based on this information, adjustments to the bill amount on the invoice are made (e.g., for damaged goods, for trade discounts, or for cash discounts), a check is prepared, and the payment is mailed to the vendor.
Requirements
1. Draw a document flowchart for the Berridge Company using the symbols in Figure.
2. Could the company eliminate one or more copies of its RSR form? Use your flowchart to explain why or why not.
3. Do you think that the company creates too many copies of its purchase orders? Why or why not?
The bookkeeper for Biggio Corporation made these errors in journalizing and posting.
1. A credit posting of $400 to Accounts Receivable was omitted.
2. A debit posting of $750 for Prepaid Insurance was debited to Insurance Expense.
3. A collection on account of $100 was journalized and posted as a debit to Cash $100 and a credit to Accounts Payable $100.
4. A credit posting of $300 to Property Taxes Payable was made twice.
5. A cash purchase of supplies for $250 was journalized and posted as a debit to Supplies $25 and a credit to Cash $25.
6. A debit of $395 to Advertising Expense was posted as $359.
Instructions
For each error, indicate
(a) Whether the trial balance will balance; if the trial balance will not balance, indicate
(b) The amount of the difference, and
(c) The trial balance column that will have the larger total. Consider each error separately. Use the following form, in which error 1 is given as an example.
The bookkeeper for Fred Kelley’s dance studio made the following errors in journalizing and posting.
1. A credit to Supplies of $600 was omitted.
2. A debit posting of $300 to Accounts Payable was inadvertently debited to Accounts Receivable.
3. A purchase of supplies on account of $450 was debited to Supplies for $540 and credited to Accounts Payable for $540.
4. A credit posting of $680 to Interest Payable was posted twice.
5. A debit posting to Income Taxes Payable for $250 and a credit posting to Cash for $250 were made twice.
6. A debit posting for $1,200 of Dividends was inadvertently posted to Salaries and
Wages Expense instead.
7. A credit to Service Revenue for $450 was inadvertently posted as a debit to Service Revenue.
8. A credit to Accounts Receivable of $250 was credited to Accounts Payable.
Instructions
For each error, indicate
(a) Whether the trial balance will balance;
(b) The amount of the difference if the trial balance will not balance; and
(c) The trial balance column that will have the larger total. Consider each error separately. Use the following form, in which error 1 is given as anexample.
The bookkeeper for Riley, Inc., made the following errors:
a. A cash purchase of supplies of $357 was recorded as a debit to Supplies for $375 and a credit to Cash of $375.
b. A cash sale of $3,154 was recorded as a debit to Cash of $3,154 and a credit to Sales of $3,145.
c. A purchase of equipment was recorded once in the journal and posted twice to the ledger.
d. Cash paid for salaries of $4,100 was recorded as a debit to Salaries Expense of $4,100 and a credit to Accounts Payable of $4,100.
e. A credit sale of $8,300 was recorded correctly. However, the debit posting to Accounts Receivable was omitted.
Required:
Indicate whether or not the trial balance will balance after the error. If the trial balance will not balance, indicate the direction of the misstatement for any effected account (e.g., cash will be overstated by $50).
The Bridget Joyce Company is an office products distributor that must decide what to do with delinquent credit sales accounts. Mr. Bob Smith, the credit manager, divides accounts into the following categories:
(1) Accounts not past due,
(2) Accounts 30 days or less past due,
(3) Accounts 31 to 60 days past due,
(4) Accounts 61 to 90 days past due, and
(5) Accounts more than 90 days past due. For simplicity, assume that all transactions for each account fall neatly into the same category.
Mr. Smith decides what to do about these customer accounts based on the history of the account in general and also the activity during the account’s delinquency period. Sometimes, for example, the customer will not communicate at all. At other times, however, the customer will either write to state that a check is forthcoming or make a partial payment. Mr. Smith tends to be most understanding of customers who make partial payments because he considers such payments acts of good faith. Mr. Smith is less understanding of those customers who only promise to pay or who simply ignore follow up bills from the company.
Mr. Smith has four potential actions to take in cases of credit delinquency. First, he can simply wait (i.e., do nothing). Second, he can send an initial letter to the customer, inquiring about the problem in bill payment and requesting written notification of a payment schedule if payment has not already been made. Third, he can send a follow up letter indicating that a collection agency will be given the account if immediate payment is not forthcoming. Fourth, he can turn the account over to a collection agency. Of course, Mr. Smith prefers to use one of the first three actions rather than turn the account over to a collection agency, because his company only receives half of any future payments when the collection agency becomes involved.
a. Create a decision table for the Bridget Joyce Company and provide a set of reasonable decision rules for Mr. Smith to follow. For now, ignore the influence of a customer’s credit history.
b. Expand the decision table analysis you have prepared in question ?~?~a’’ to include the credit history of the customer accounts. You are free to make any assumptions you wish about how this history might be evaluated by Mr. Smith.
Tricklehammer Inc.(TI) is a private company incorporated 20 years ago dedicated to the construction of commercial property and selling tools related to the construction business. They have experienced financial difficulties over the past year, and need to obtain additional financing. They estimate a small profit before taxes of $23,000 in 2009, based on a preliminary draft of their financial statements prepared by the administrative staff. Due to the uncertainties of their financial position, creditors have insisted on covenants to maintain their debt to equity ratio at or below 2:1. Dividends are not allowed to be paid to shareholders until the loans have been repaid. Management has a bonus based on net income.
In the past the objective of the private company has been tax minimization. However as soon as their financial position improves they would like to have a public share offering.
It is January 2010. TI’s fiscal year end is December 31, 2009. The President of TI Bud Tricklehammer, an old school friend and the son of the company’s founder, has provided you (CGA) with the following accounting issues facing the company for 2009. “Hey, I am just a bricks and mortar man”, he said, shaking you warmly by the hand, “you college kids know how to cope with the new global environment with all these new fangled rules that they keep throwing at us. Peter, my head clerk, is very hard working and intelligent, but he just cannot keep up with all the changes that have taken place in the past few years. Aunt Agatha helps as much as she can. In fact she has given me an interest free loan of $200,000 to help us along. I would have to pay the banks at least 5%. But she is facing a tightening of her financial position, and I will have to return her money in a year or two.” He would like you to prepare a report outlining alternative accounting policies and your recommendations.
The following information has been collected by you:
TI does not accrue warranty expenses for their products. Based on the two year warranties given by the company you estimate that the company will have to pay $80,000 in warranties, split evenly over the next two years. The warranty liability was at the same level at the beginning of 2009.
TI issued $100,000 in $5 preferred shares on January 1, 2009. The 1,000 preferred shares must be redeemed, or bought back, at their $100 stated value per share, in 2010. The dividends are cumulative. If there are any dividends in arrears they must be paid before the redemption date. No dividends have been declared in 2009.
To conserve cash, an arrangement was made at the end of 2009 to exchange 4,000 common shares in TI for equipment from their supplier. The book value of the equipment was $200,000 and the listed selling price was $350,000. Similar equipment is sold for $300,000 if cash is paid. Common shares were last issued at $150 per share. TI recorded this share issue at $600,000, using the $150 price of the last issue.
TI uses the taxes payable method (tax expense = tax paid) of accounting for income taxes, not the future taxes asset liability method.
Again, to conserve cash, TI has reduced salaries to top management staff and issued stock options as compensation in 2009. TI provides only note disclosure of the stock options, which have been valued by options pricing models at $120,000, and vest at the end of 2010. The options may be exercised during 2011 2012.
At the end of 2009 TI bought back some of their own shares with a capital gain of $40,000. These shares are expected to be reissued when employee stock option plans are exercised. The gain from the repurchase has been included in other income.
In 2009 TI issued $200,000 in bonds with detachable warrants to make them more marketable. Every $1,000 bond has 5 warrants, each of which can be used to purchase one common share at a strike price of $160 per share during the exercise period 2011. Without the warrants the bonds would be issued at 95. The entire proceeds of the bond sale have been booked as a liability.
The pension is underfunded, although it does meet the provincial legislation for pension funding. The company books the annual fund contribution as pension expense. Actuarial data indicates that the Accrued Benefit Obligation at the beginning and end of 2009 was $800,000 and $850,000 respectively, whereas the value of the Plan Assets was $700,000 and $790,000 respectively.
On January 1, 2008 TI purchased a 3 year insurance policy for $30,000 on its offices and equipment, and expensed the entire amount in that year.
TI has been following the tax rules (CCA) for calculating depreciation expense, but would like to change to the straight line method because it better matches the pattern of benefits obtained from their long lived assets. UCC for the Property Plant and Equipment of the company at the beginning of 2009 was $600,000 and the book value would have been $650,000 if straight line depreciation had been used. In 2009 the depreciation expense and CCA was $60,000 and $50,000 respectively. No purchases of Property Plant and Equipment were made during 2009.
TI has had no collection problems from its clients, and feels that the current 2% of net sales applied to calculate bad debt expense is excessive, thinking that 1% would be more appropriate.
TI leases its specialized cranes, which have zero residual value when the construction project is finished. The leases are classified as operating leases. If they had been classified as capital leases there would be a balance of $120,000 and $130,000 at the beginning and end of 2009 in the leases payable account, and an additional $90,000 and $110,000 in property, plant and equipment on those dates.
TI uses the completed contract method to recognize revenue on its long term contracts. If the percentage of completion method had been used the company would have a taxable timing difference of $180,000 at the beginning of 2009. During 2009 the company had an additional $50,000 of non taxable gross profits, whilst there was a reversal of $10,000 of the timing difference from the previous year.
The company had total assets of $4,500,000 and liabilities of $3,000,000 at the beginning of 2009.
The income tax rate is 35%.
Required: Prepare the requested report, restating the financial statements for 2009 using IFRS rules. Comment on the firm’s performance, and its compliance with the debt covenant. Your discussion should identify recognition, measurement and disclosure issues, citing from the official IFRS rules to justify your recommendations.
Bud is an old buddy, but this is a professional report.
The Cuts n Curves Athletic Club is a state wide chain of full service fitness clubs that cater to the demographics of the state (about 60% of all adults are single). The clubs each have an indoor swimming pool, exercise equipment, a running track, tanning booths, and a smoothie caf´e for after workout refreshments. The Club in Rosemont is open seven days a week, from 6:00 a.m. to 10:00 p.m. Just inside the front doors is a reception desk where an employee greets patrons. Members must present their membership card to be scanned by the bar code reader, and visitors pay a $16 daily fee. When the employee at the desk collects cash for daily fees, he or she also has the visitor complete a waiver form. The employee then deposits the cash in a locked box and files the forms. At the end of each day the Club accountant collects the cash box, opens it, removes the cash, and counts it. The accountant then gives a receipt for the cash amount to the employee at the desk. The accountant takes the cash to the bank each evening. The next morning, the accountant makes an entry in the cash receipts journal for the amount indicated on the bank deposit slip. Susan Richmond, the General Manager at the Rosemont Club, has some concerns about the internal controls over cash. However, she is concerned that the cost of additional controls may outweigh any benefits. She decides to ask the organization’s outside auditor to review the internal control procedures and to make suggestions for improvement.
Requirements:
1. Assume that you are the outside (staff) auditor. Your manager asks you to identify any weaknesses in the existing internal control system over cash admission fees.
2. Recommend one improvement for each of the weaknesses you identified.
The Department of Taxation of one state is developing a new computer system for processing state income tax returns of individuals and corporations. The new system features direct data input and inquiry capabilities. Identification of taxpayers is provided by using the Social Security numbers of individuals and federal identification numbers for corporations. The new system should be fully implemented in time for the next tax season.
The new system will serve three primary purposes:
?c Data will be input into the system directly from tax returns through computer terminals located at the central headquarters of the Department of Taxation.
?c The returns will be processed using the main computer facilities at central headquarters.
The processing includes
(1) Verifying mathematical accuracy;
(2) Auditing the reasonableness of deductions, tax due, and so forth, through the use of edit routines as well as a comparison of the current year’s data with prior years’ data;
(3) Identifying returns that should be considered for audit by revenue agents of the department; and
(4) Issuing refund checks to taxpayers.
?c Inquiry service will be provided to taxpayers on request through the assistance of Tax Department personnel at five regional offices. A total of 50 computer terminals will be placed at the regional offices. A taxpayer will be able to determine the status of his or her return or to get information from the last three years’ returns by calling or visiting one of the department’s regional offices. The state commissioner of taxation is concerned about data security during input and processing over and above protection against natural hazards such as fires or floods. This includes protection against the loss or damage of data during data input or processing, and the improper input or processing of data. In addition, the tax commissioner and the state attorney general have discussed the general problem of data confidentiality that may arise from the nature and operation of the new system. Both individuals want to have all potential problems identified before the system is fully developed and implemented so that the proper controls can be incorporated into the new system.
Requirements:
1. Describe the potential confidentiality problems that could arise in each of the following three areas of processing and recommend the corrective action(s) to solve the problems:
(a) Data input,
(b) Processing of returns,
(c) Data inquiry.
2. The State Tax Commission wants to incorporate controls to provide data security against the loss, damage, or improper input or use of data during data input and processing. Identify the potential problems (outside of natural hazards such as fires or floods) for which the Department of Taxation should develop controls, and recommend possible control procedures for each problem identified.
The Dinteman Company is an industrial machinery and equipment manufacturer with several production departments. The company employs automated and heavy equipment in its production departments. Consequently, Dinteman has a large repair and maintenance department (R&M department) for servicing this equipment. The operating efficiency of the R&M department has deteriorated over the past two years. For example, repair and maintenance costs seem to be climbing more rapidly than other department costs. The assistant controller has reviewed the operations of the R&M department and has concluded that the administrative procedures used since the early days of the department are outmoded due in part to the growth of the company. In the opinion of the assistant controller, the two major causes for the deterioration are an antiquated scheduling system for repair and maintenance work, and the actual cost to distribute the R&M department’s costs to the production departments. The actual costs of the R&M department are allocated monthly to the production departments on the basis of the number of service calls made during each month. The assistant controller has proposed that a formal work order system be implemented for the R&M department. With the new system, the production departments will submit a service request to the R&M department for the repairs and/or maintenance to be completed, including a suggested time for having the work done. The supervisor of the R&M department will prepare a cost estimate on the service request for the work required (labor and materials) and estimate the amount of time for completing the work on the service request. The R&M supervisor will return the request to the production department that initiated the request. Once the production department approves the work by returning a copy of the service request, the R&M supervisor will prepare a repair and maintenance work order and schedule the job. This work order provides the repair worker with the details of the work to be done and is used to record the actual repair and maintenance hours worked and the materials and supplies used. Production departments will be charged for actual labor hours worked at a predetermined standard rate for the type of work required. The parts and supplies used will be charged to the production departments at cost. The assistant controller believes that only two documents will be required in this new system—a Repair/Maintenance Service Request initiated by the production departments and a Repair/Maintenance Work Order initiated by the R&M department.
Requirements
1. For the Repair/Maintenance Work Order document:
a. Identify the data items of importance to the repair and maintenance department and the production department that should be incorporated into the work order.
b. Indicate how many copies of the work order would be required and explain how each copy would be distributed.
2. Prepare a document flowchart to show how the Repair/Maintenance Service Request and the Repair/Maintenance Work Order should be coordinated and used among the departments of Dinteman Company to request and complete the repair and maintenance work, to provide the basis for charging the production departments for the cost of the completed work, and to evaluate the performance of the repair and maintenance department. Provide explanations in the flowchart as appropriate.
The following accounts are available for Haubstadt Shoe Works:
Accounts Payable
Accounts Receivable
Accumulated Depreciation, Building
Accumulated Depreciation, Equipment
Building
Cash
Common Stock
Cost of Goods Sold
Depreciation Expense, Building
Depreciation Expense, Equipment
Equipment
General and Administrative Expense
Interest Expense
Inventory
Long Term Notes Payable
Retained Earnings
Sales Revenue
Selling Expense
Required:
Using a table like the one below, indicate whether each account normally has a debit or credit balance and indicate on which of the financial statements (income statement, statement of retained earnings, or balance sheet) each account appears.
The LeVitre and Swezey Credit Union maintains separate bank accounts for each of its 20,000 customers. Three major files are the customer master file, the transaction file of deposits and withdrawal information, and a monthly statement file that shows a customer’s transaction history for the previous month. The following lists the bank’s most important activities during a representativemonth:
a. Customers make deposits and withdrawals.
b. Employers make automatic deposits on behalf of selected employees.
c. The bank updates its master file daily using the transaction file.
d. The bank creates monthly statements for its customers, using both the customer master file and the transactions file.
e. Bank personnel answer customer questions concerning their deposits, withdrawals, or
account balances.
f. The bank issues checks to pay its rent, utility bills, payroll, and phone bills. Draw a data flow diagram that graphically describes these activities.
The order writing department at the Winston Beauchamp Company is managed by Alan Most. The department keeps two types of computer files:
(1) A customer file of authorized credit customers and
(2) A product file of items currently sold by the company. Both of these files are direct access files stored on magnetic disks. Customer orders are handwritten on order forms with the Winston Beauchamp name at the top of the form, and item lines for quantity, item number, and total amount desired for each product ordered by the customer. When customer orders are received, Alan Most directs someone to input the information at one of the department’s computer terminals. After the information has been input, the computer program immediately adds the information to a computerized ?~?~order’’ file and prepares five copies of the customer order. The first copy is sent back to Alan’s department; the others are sent elsewhere. Design a system flowchart that documents the accounting data processing described here. Also, draw a data flow diagram showing a logical view of the system.
This is a practice case study to help you become familiar with how to create a comprehensive cash budget. The cash budget relates to TCO D and is discussed in Chapter 7. Your Professor will provide the solution by the end of Week 5 in Doc Sharing.
The actual case study assignment should be uploaded by 11:59PM Mountain time of the Sunday ending Week 6 to the Week 6 Assignment Dropbox. You are encouraged to use the Excel template file provided in Doc Sharing.
The Cambridge Company has budgeted sales revenues as follows:
Jan Feb Mar
Credit sales $45,000 $36,000 $27,000
Cash sales 27,000 76,500 58,500
Total sales $72,000 $112,500 $85,500
Past experience indicates that 60% of the credit sales will be collected in the month of sale and the remaining 40% will be collected in the following month.
Purchases of inventory are all on credit and 40% is paid in the month of purchase and 60% in the month following purchase. Budgeted inventory purchases are $97,500 in January, $67,500 in February, and $31,500 in March.
Other budgeted cash receipts: (a) sale of plant assets for $18,525 in February, and (b) sale of new common stock for $25,275 in March. Other budgeted cash disbursements: (a) operating expenses of $10,125 each month, (b) selling and administrative expenses of $18,750 each month, (c) dividends of $28,500 will be paid in February, and (d) purchase of equipment for $9,000 cash in March.
The company has a cash balance of $15,000 at the beginning of February and wishes to maintain a minimum cash balance of $15,000 at the end of each month. An open line of credit is available at the bank and carries an annual interest rate of 12%. Assume that all borrowing is done on the first day of the month in which financing is needed and that all repayments are made on the last day of the month in which excess cash is available. Also assume that there is no outstanding financing as of February 1.
Requirements:
1. Use this information to prepare a Cash Budget for the months of February and March, using the template provided in Doc Sharing.
Please note: This is not a graded assignment but your instructor will share the solution for this practice exercise by the end of Week 5. It is highly recommended that you try to build the cash budget on your own first.
The Palmer Company manufactures various types of clothing products for women. To accumulate the costs of manufacturing these products, the company’s accountants have established a computerized cost accounting system. Every Monday morning, the prior week’s production cost data are batched together and processed. One of the outputs of this processing function is a production cost report for management that compares actual production costs to standard production costs, and computes variances from standard. Management focuses on the significant variances as the basis for analyzing production performance. Errors sometimes occur in processing a week’s production cost data. The cost of the reprocessing work on a week’s production cost data is estimated to average about $12,000. The company’s management is currently considering the addition of a data validation control procedure within its cost accounting system that is estimated to reduce the risk of the data errors from 16% to 2%, and this procedure is projected to cost $800/week.
a. Using these data, perform a cost benefit analysis of the data validation control procedure that management is considering for its cost accounting system.
b. Based on your analysis, make a recommendation to management regarding the data validation control procedure.
The participants of such recreational activities as hang gliding, soaring, hiking, rock collecting, or skydiving often create local ?~?~birds of a feather’’ (affinity) organizations. Two examples are the Chicago sky divers (www.chicagoskydivers.com) or the soaring club of western Canada (www.canadianrockiessoaring.com). Many of these clubs collect dues from members to pay for club activities as well as the printing and mailing costs of monthly newsletters. Some of them maintain only minimal accounting information on manual pages or, at best, in spreadsheets.
a. What financial information are such clubs likely to collect and maintain?
b. Assuming that the club keeps manual accounting records, would you consider such systems ?~?~accounting information systems?’’ Why or why not?
c. Assume that the club treasurer of one such organization is in charge of all financial matters, including collecting and depositing member dues, paying vendor invoices, and preparing yearly reports. Do you think that assigning only one person to this job is a good idea? Why or why not?
d. What benefits would you guess might come from computerizing some or all of the club’s financial information, even if there are less than 100 members? For example, do you think that such computerization is likely to be cost effective?
required to submit a feasibility report. At a minimum level, your feasibility report should contain the following generic sections: _ Executive Summary _ Description of the problem _ Solution objectives _ Constraints _ Development plans _ Potential solutions _ Recommendations
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HA2042 – Accounting Information Systems Assignment 2 Due: 5pm Friday, Week 11 You are to prepare a submission to satisfy your client’s requirements as outlined below. You are required to investigate the issues at Pressure Hydraulics and provide a feasibility study into the improvement to their current business processes. You will need to conduct an investigation into the client’s problems and evaluate a solution to meet their business needs. Overview – Pressure Hydraulics Pressure Hydraulics is a locally owned business that currently has three service centres; Newcastle, Toronto and Maitland. Each service centre provides maintenance and specialised servicing of hydraulic systems as used in cars, trucks and earth moving equipment. The Maitland service centre also provides a specialty service to the mining industry where two purpose built trucks go onsite to service a range of mining equipment. The business has become quite profitable in the past years and its owner, Allan Taylor, has devised plans to expand by opening service centres at Coffs Harbour and Gosford. Allan has future plans for other service centres along the east coast of NSW. He also feels that the time is right to look at how IT can support the existing business and enable his future business plans. Currently, Allan spends a portion of each day at each service centre to monitor its operations. This is leaving little time to continue developing his business and he realises he will not be able to spend the same sort of time in the Coffs Harbour and Gosford service centres. Existing System Each service centre operates as an independent business, with eight technicians in the workshop (one of whom is a workshop foreman) and one office assistant. The office assistant takes phone calls from people requesting quotes for work or to have work done. For requests on quotes, the office assistant looks up a hard copy of a price book (known as The Price Book) and gives a verbal quote. Allan…
You’ve just been hired by ABC Company as the corporate controller. ABC Company is a manufacturing firm that specializes in making cedar roofing and siding shingles. The company currently has annual sales of around $1.2 million, a 25% increase from the previous year. The company has an aggressive growth target of reaching $3million annual sales within the next 3 years. The CEO has been trying to find additional products that can leverage the current ABC employee skillset as well as the manufacturing facilities.
As the controller of ABC Company, the CEO has come to you with a new opportunity that he’s been working on. The CEO would like to use the some of the shingle scrap materials to build cedar dollhouses. While this new product line would add additional raw materials and be more time intensive to manufacture than the cedar shingles, this new product line will be able to leverage ABC’s existing manufacturing facilities as well as the current staff. Although this product line will require added expenses, it will provide additional revenue and gross profit to help reach the growth targets. The CEO is relying on you to help decide how this project can be afforded Provide details about the estimated product costs, what is needed to break even on the project, and what level of return this product is expected to provide.
In order to help out the CEO, you need to prepare a six to eight page report that will contain the following information (including exhibits, but excluding your references and title page). Refer to the accompanying Excel spreadsheet (available through your online course) for some specific cost and profit information to complete the calculations.
Final Paper Spreadsheet
I. An overall risk profile of the companybased on current economic and industry issues that it may be facing.
II. Current company cash flow
a. You need to complete a cash flow statement for the company using the direct method.
b. Once you’ve completed the cash flow statement, answer the following questions:
i. What does this statement of cash flow tell you about the sources and uses of the company?
ii. Is there anything ABC Company can do to improve the cash flow?
iii. Can this project be financed with current cash flow from the company? Why or why not?
iv. If the company needs additional financing beyond what ABC Company can provide internally (either now or sometime throughout the life of the project), how would you suggest the company obtain the additional financing, equity or corporate debt, and why?
III. Product cost: ABC Company believes that it has an additional 5,000 machine hours available in the current facility before it would need to expand. ABC Company uses machine hours to allocate the fixed factory overhead, and units sold to allocate the fixed sales expenses. ABC Company expects that it will take twice as long to produce the expansion product as it currently takes to produce its existing product.
a. What is the product cost for the expansion product?
b. By adding this new expansion product, it helps to absorb the fixed factory and sales expenses. How much cheaper does this expansion make the existing product?
c. Assuming ABC Company wants a 40% gross margin for the new product, what selling price should it set forthe expansion product?
d. Assuming the same sales mix of these two products, what are the contribution margins and break even points by product?
IV. Potential investments to accelerate profit: ABC company has the option to purchase additional equipment that will cost about $42,000, and this new equipment will produce the following savings in factory overhead costs over the next five years:
Year 1, $15,000
Year 2, $13,000
Year 3, $10,000
Year 4, $10,000
Year 5, $6,000
ABC Company uses the net present value method to analyze investments and desires a minimum rate of return of 12% on the equipment.
a. What is the net present value of the proposed investment ignore income taxes and depreciation?
b. Assuming a 5 year straight line depreciation, how will this impact the factory’s fixed costs for each of the 5 years (and the implied product costs)? What about cash flow?
c. Considering the cash flow impact of the equipment as well as the time value of money, would you recommend that ABC Company purchases the equipment? Why or why not?
V. Conclusion:
a. What are the major risk factors that you see in this project?
b. As the controller and a management accountant, what is your responsibility to this project?
Presented below are the purchases and cash payments journals for Reyes Co. for its first month of operations.
In addition, the following transactions have not been journalized for July. The cost of all merchandise sold was 65% of the sales price.
July 1 The founder, D. Reyes, invests $80,000 in cash.
6 Sell merchandise on account to Ewing Co. $6,200 terms 1/10, n/30.
7 Make cash sales totaling $6,000.
8 Sell merchandise on account to S. Beauty $3,600, terms 1/10, n/30.
10 Sell merchandise on account to W. Pitts $4,900, terms 1/10, n/30.
13 Receive payment in full from S. Beauty.
16 Receive payment in full from W. Pitts.
20 Receive payment in full from Ewing Co.
21 Sell merchandise on account to H. Prince $5,000, terms 1/10, n/30.
29 Returned damaged goods to G. Clemens and received cash refund of $420.
Instructions
(a) Open the following accounts in the general ledger.
101 Cash
112 Accounts Receivable
120 Merchandise Inventory
127 Store Supplies
131 Prepaid Rent
201 Accounts Payable
301 Reyes, Capital
306 Reyes, Drawing
401 Sales
414 Sales Discounts
505 Cost of Goods Sold
631 Supplies Expense
729 Rent Expense
(b) Journalize the transactions that have not been journalized in the sales journal, the cash receipts journal (see Illustration 7 9), and the general journal.
(c) Post to the accounts receivable and accounts payable subsidiary ledgers. Follow the sequence of transactions as shown in the problem.
(d) Post the individual entries and totals to the general ledger.
(e) Prepare a trial balance at July 31, 2010.
(f) Determine whether the subsidiary ledgers agree with the control accounts in the general ledger.
(g) The following adjustments at the end of July are necessary.
(1) A count of supplies indicates that $140 is still on hand.
(2) Recognize rent expense for July, $500.
Prepare the necessary entries in the general journal. Post the entries to the general ledger.
(h) Prepare an adjusted trial balance at July 31,2010.
Recall from Case 4–21 in Chapter 4 that the Furry Friends Foundation is a nonprofit organization that finds homes for abandoned animals. The foundation has recently computerized some of its operations by storing its accounting data in a relational database. One reason for this was to enable it to more easily answer questions about donations. This portion of the case provides some examples of such questions and gives you practice creating database queries to answer them.
Requirements:
1. If you have not already done so, create the tables and relationships described in Case 4–21.
2. Using Access or similar software as required by your instructor, create three donations for yourself. You should donate to dogs in one contribution, cats in the second contribution, and unspecified (?~?~other’’) in the third contribution.
3. Create a query that selects all customers donating to cats. Print your results.
4. Create a query that selects all contributors who donated over $50. Print your results.
5. Create a query that selects all contributors who donated over $100 to dogs. Print your results.
Recall, from Chapter 8, the Hammaker Manufacturing Company (HMC) is located in Burke, Virginia, and manufactures specialty parts for Corvettes. The company implemented a new AIS with the help of a consulting firm. At the time, Hammaker was especially interested in collecting data about inventories. Then, HMC decided to accept the consulting firm’s recommendation to reengineer some processes in the production departments, rather than outsource these processes. Generally speaking, the BPR project is considered a success, based on the results that have been achieved—increased profits and more satisfied customers. To Denise’s credit, she kept the employees informed throughout the study phase so that they understood the need for change. As a result of employee involvement, many useful changes were made and no employees were terminated. Now, with increased profits and a very optimistic view of future growth, Hammaker meets with Denise and Lloyd to discuss the advantages and disadvantages of a new, more powerful AIS. Lloyd’s area of expertise is implementing ERPs, and he is eager to inform HMC about the advantages of selecting an XBRL enabled software solution for the firm.
Requirements:
1. What does it mean when software is ?~?~XBRL enabled’’?
2. Identify at least five advantages that Lloyd might discuss with Dick and Denise regarding an XBRL enabled software solution. Identify any disadvantages that might also be relevant for HMC.
3. Now, as the research assistant, develop a PowerPoint presentation for Lloyd to give to Dick and Denise explaining exactly what sorts of benefits they could realize with an XBRL enabled software solution. Be creative, and use diagrams and examples where appropriate.
Record each of the following transactions directly in T accounts using the numbers preceding the transactions to identify them in the accounts. Each account needs a separate T account.
1. Received contribution of $6,500 from each of the three principal owners of We Go Delivery Service in exchange for shares of stock.
2. Purchased office supplies for cash of $130.
3. Purchased a van for $15,000 on an open account. The company has 25 days to pay for the van.
4. Provided delivery services to residential customers for cash of $125.
5. Billed a local business $200 for delivery services. The customer is to pay the bill within 15 days.
6. Paid the amount due on the van.
7. Received the amount due from the local business billed in (5).
1. What factors led to the need for an ABC system at the Tube Shop? (Maximum 150 words)
5 Marks
2. How did advancement in information technology help the Tube Shop in implementing its ABC/ABM?Explain through providing an example from the case.(Maximum 150 words)
5 Marks
3. “An ABC system suffers from practical deficiencies. In theory, it should be possible to trace all overheads, but in practice it is quite likely that there will be some costs that cannot be traced”. Is the Tube Shop facing this limitation with its ABC system? Explain
(Maximum 150 words)5 Marks
4. Much empirical literature on the ABC/ABM implementation process provides evidence of extreme resistance from employees especially from affected managers. Critically evaluate the development and the implementation process of ABC in Tube Shop and explain why the Tube Shop did not face any resistance from its employees and managers? (Maximum 500 words)15 Marks
Note 1:
While putting forward your arguments in answering Question 4, you are expected to provide empirical evidences through referring to research works published in peer reviewed academic journals. There are no restrictions on how many peer reviewed articles you should refer to.Your research skills will be assessed through how you use references appropriately rather than how many references you list in the assignment.Please be reminded that there is a world limit in answering this question though.
1. she opened a checking account by depositing 50,000 and got stock certificate for 5,000 shares of common stock with no par value2. she signed a 1 yr rental and was required to pay 8,000 for rent for 4 months3. got insurance policy and paid 3,000 for 12 months coverage4.purchase computer system for 4,500 signed a notes payable for it , it has a estimated usefullifeof five yrs the residual value is 3005. signed a note payable to borrow 8,000 from wells fargo interest is 12% for the yr6.paid 700 for wrapping supplies7. paid 12,000 for furniture, 7 yr life residual value of 2008.paid delivery charge of 60, added to the computer equipment cost and depreciate with it also9. purchase 500 of office supplies10.purchase 6,000 of merchandise inventory shoes on account terms 2/15, n/3011. purchased 4,000 of merchandise inventory purses on account, no terms12.800 charge from lawyer13.sold merchandise for 5,000, shoes 2,000, purses 900, part FOB destination14. paid 100 to ship the merchandise15.purchase on account shoes for 3,000 terms, 2/15, n/3016. sales that totaled 7,500 cost of merchandise sold was 3,000 shoes 2,000 and purses 1,00017.registration fee of 10018. paid advertising expense 50019. paid the 4,00 for the purses from 11.20.sales totaling 8,500 cost ofmerchandisesold was 2,500 for shoes and 1,500 for purses21. paid balance for shoes (2 invoices)22. 175 for credit card service automatically deducted from checking account as a debit memo23.receivedbut did not pay utility bill for 35024. computer equipmentinstallment800, 300 for interest and 500 for principle25. sales for 4,500 cost of merchandise was 1,500 for shoes and 200 forpurses26.declared and paid a cash dividend of 500
Rosenthal Decorating, Inc., is a commercial painting and decorating contractor that began operations in January 2009. The following transactions occurred during the year:
a. On January 15, Rosenthal sold 500 shares of its common stock to William Hensley for $10,000.
b. On January 24, Rosenthal purchased $720 of painting supplies from Westwood Builders’ Supply on account.
c. On February 20, Rosenthal paid $720 cash to Westwood Builders’ Supply for the painting supplies purchased on January 24.
d. On April 25, Rosenthal billed Bultman Condominiums $12,500 for painting and decorating services performed in April.
e. On May 12, Rosenthal received $12,500 from Bultman Condominiums for the painting and decorating work billed in April.
f. On June 5, Rosenthal sent Arlington Builders a $9,500 bill for a painting job completed on that day.
g. On June 24, Rosenthal paid wages for work performed during the preceding week in the amount of $6,700.
Required:
1. Prepare a journal entry for each of the transactions listed above.
RV Oasis was started on April 1 by Taras Dankert. These selected events and transactions occurred during April.
Apr. 1 Stockholders invested $70,000 cash in the business in exchange for common stock. 4 Purchased land costing $50,000 for cash.
8 Purchased advertising in local newspaper for $1,200 on account.
11 Paid salaries to employees $2,700.
12 Hired park manager at a salary of $3,600 per month, effective May 1.
13 Paid $7,200 for a 1 year insurance policy.
17 Paid $600 cash dividends.
20 Received $6,000 in cash from customers for admission fees.
25 Sold 100 coupon books for $90 each. Each book contains ten coupons that entitle the holder to one admission to the park.
30 Received $7,900 in cash from customers for admission fees.
30 Paid $400 of the balance owed for the advertising purchased on account on April 8.
The company uses the following accounts: Cash, Prepaid Insurance, Land, Accounts Payable, Unearned Service Revenue, Common Stock, Dividends, Service Revenue, Advertising Expense, and Salaries and Wages Expense.
Instructions
Journalize the April transactions, including explanations. (Note: RV Oasis records admission revenue as service revenue.)
Selected transactions for Charlotte Corporation during its first month in business are presented below.
Sept. 1 Issued common stock in exchange for $20,000 cash received from investors.
5 Purchased equipment for $9,000, paying $3,000 in cash and the balance on account.
25 Paid $4,000 cash on balance owed for equipment.
30 Paid $500 cash dividend.
Charlotte’s chart of accounts shows: Cash, Equipment, Accounts Payable, Common Stock, and Dividends.
Instructions
(a) Prepare a tabular analysis of the September transactions. The column headings should be: Cash + Equipment = Accounts Payable + Stockholders’ Equity. For transactions affecting stockholders’ equity, provide explanations in the right margin,
(b) Journalize the transactions. Do not provide explanations.
A of Surat consigns goods to B of Jaipur to be sold at or above invoice price. B is entitled to get acommission of 8% on sales at invoice price plus 25% of any surplus price realized. B accepted a billof exchange drawn by A amounting to 50% of the invoice price.In the year 2010 goods consigned by A were invoiced at Rs. 2,50,000. These goods cost to A Rs.2,00,000 (including freight). Sales made by B during the year amounted to Rs. 2,35,000. At theend of the year, goods unsold with B represented an invoice value of Rs. 60,000. During the year,A had received from B Rs. 40,000 by bank drafts, certain remittances being in transit on 31st Dec.,2010. Prepare necessary ledger accounts in the books of both the parties. Also show how theconsignment stock will appear in the Balance Sheet.
Sentinel Security Services was established on March 15, 2012, to provide security services. The services provided during the remainder of the month are listed below.
Mar. 18. Issued Invoice No. 1 to Murphy Co. for $410 on account.
20. Issued Invoice No. 2 to Qwik Mart Co. for $290 on account.
24. Issued Invoice No. 3 to Goforth Co. for $625 on account.
27. Issued Invoice No. 4 to Carson Co. for $510 on account.
28. Issued Invoice No. 5 to Amber Waves Co. for $100 on account.
28. Provided security services, $90, to Qwik Mart Co. in exchange for supplies.
30. Issued Invoice No. 6 to Qwik Mart Co. for $140 on account.
31. Issued Invoice No. 7 to Goforth Co. for $245 on account.
Instructions
1. Journalize the transactions for March, using a single column revenue journal and a two column general journal. Post to the following customer accounts in the accounts receivable ledger, and insert the balance immediately after recording each entry: Amber Waves Co.; Carson Co.; Goforth Co.; Murphy Co.; Qwik Mart Co.
2. Post the revenue journal to the following accounts in the general ledger, inserting the account balances only after the last postings:
12 Accounts Receivable
14 Supplies
41 Fees Earned
3. a. What is the sum of the balances of the accounts in the subsidiary ledger at March 31?
b. What is the balance of the controlling account at March 31?
4. Assume Sentinel Security Services began using a computerized accounting system to record the sales transactions on April 1. What are some of the benefits of the computerized system over the manual system?
Simmons Corporation is a multi location retailing concern with stores and warehouses throughout the United States. The company is in the process of designing a new, integrated, computer based information system. In conjunction with the design of the new system, the management of the company is reviewing the data processing security to determine what new control features should be incorporated. Two areas of specific concern are
(1) Confidentiality of company and customer records, and
(2) Safekeeping of computer equipment, files, and data processing center facilities.
The new information system will be employed to process all company records, which include sales, purchases, the financial budget, customer, creditor, and personnel information. The stores and warehouses will be linked to the main computer at corporate headquarters by a system of remote terminals. This will permit data to be communicated directly to corporate headquarters or to any other location from each location within the terminal network. At the current time, certain reports have restricted distribution because not all levels of management need to receive them or because they contain confidential information. The introduction of remote terminals in the new system may provide access to these restricted data by unauthorized personnel. Simmons’s top management is concerned that confidential information may become accessible and be used improperly. The company’s top management is also concerned with potential physical threats to the system, such as sabotage, fire damage, water damage, or power failure. Should any of these events occur in the current system and cause a computer shutdown, adequate backup records are available so that the company could reconstruct necessary information at a reasonable cost on a timely basis. However, with the new system, a computer shutdown would severely limit company activities until the system could become operational again.
Requirements:
1. Identify and briefly explain the problems Simmons Corporation could experience with respect to the confidentiality of information and records in the new system.
2. Recommend measures Simmons Corporation could incorporate into the new system that would ensure the confidentiality of information and records in this new system.
3. What safeguards can Simmons Corporation develop to provide physical security for its
SSR Save is a national discount retail store chain with annual revenues of more than $1 billion. It’s a typical bricks and mortar operation with accounting software that records sales transactions in real time and tracks inventories on a perpetual basis. Management is considering an online store and will sell the same products as in the stores. Customers will be able to use credit cards only for online payments (vs. cash, credit card or debit card in the stores). The marketing manager is interested in learning about customers and using the information to improve both in store and online sales.
a. Contrast the sales process of their retail store operation with the sales process in an online store environment. Would any of the events in the process change?
b. At what points do you collect data about customers and sales transactions in the retail store? In the online environment?
c. What data might you collect about retail store and online customers to improve your profitability? What data might you collect to improve customer satisfaction?
d. How is the sales process different for a public accounting firm? What data can they collect to improve customer relationships and grow revenues?
Page 1 of 4 Task Option 1 Newsletter preparation The regulatory environment and financial reporting You are a member of a large accounting firm which is responsible for preparing financial reports, including statements and notes to the accounts; and for advising staff in client firms who are responsible for preparing financial reports. The firm only deals with large Australian companies listed on the Australian Stock Exchange. One of your key tasks is to monitor the changes and developments in the financial reporting environment and summarise them in a newsletter published quarterly. Required: Prepare a 2 page newsletter that identifies and summarises developments and changes in the financial reporting environment for the quarter from January to March 2013. Detailed guidelines for completing this question: 1. Monitoring of changes and developments This will involve regular monitoring of a number of sources over the required period. The sources should be varied in range, as you will need to identify and consider developments/changes relating to: Technical issues such as issue of new accounting standards, exposure drafts or other pronouncements or interpretations. Regulation and monitoring of financial reporting. Political influences or other potential developments (such as identification of any reporting failures) that could impact or may be of interest to staff (such as Enron or Parmalat failure). ‘Political’ does not only mean action from politicians – it would also include lobbying/actions by other groups to promote their own interests – for example there may be articles about companies, or particular interest groups such as Group of 100, saying that if certain accounting standards are introduced this will disadvantage or have a negative impact. You will need to consider both local (Australian) and international sources and developments. A section on ‘international’ items/developments must be included in the newsletter. This may not be restricted to the IASB. 2. Potential sources Given the scope of the potential influences on financial reporting you will need to monitor a range of sources. Below is a list of sources that may be of interest, note that this list is not exhaustive, students should search for sources outside of these. As this assignment considers current developments and, of course we do not know what changes/developments will occur during the period, the relative usefulness of specific individual sources cannot be predicted. Students should not rely on any one type of source, but a range of sources from each category, i.e. do not just look at websites, also check journals, newspapers etc. Examples of possible information sources include: (i) Websites such as those of: Australian Accounting Standards Board (AASB) Australian Securities and Investment Commission International Federation of Accountants Institute of Chartered Accountants in Australia CPA Australia International Accounting Standards Board Financial Accounting Standards Board Websites of large accounting firms. Page 2 of 4 (ii) Professional publications: In the Black (CPA) Charter (ICAA) (iii) Newspapers/journals 3. Contents The restriction of a 2 page summary means that you need to use your own judgement as to whether to include information about specific changes and developments and how much information to include. It is not intended that you provide complete details of changes/developments (although you may consider in particular cases that more detail is needed). The purpose of the newsletter is to alert staff to changes and developments that may impact on their work and provide enough information about these changes/developments to satisfy the following: For staff (the intended audience) to understand the nature of the development/change and its potential impact (so staff can decide whether they need to investigate further given the nature of their own work), Provide sufficient information for staff to be able to obtain further information on the development/change if they wish to, The newsletter should, where possible, be in your own words with sources adequately referenced using the appropriate referencing system. Some examples of significant items to be considered include: Revised or reissued accounting standards or interpretation (both national and international), ASIC reviews on financial reporting, New ASX disclosures for listed companies. Although it is required that you include all major developments/changes, not all developments/changes necessarily need to be included. You should also consider the interest and needs of your potential audience when selecting developments/changes to include and the purpose of the newsletter. You may decide to include additional sections that are sometimes found in such newsletters such as: ‘Query/question for the period’, Profile/interview of a person involved in financial reporting arena. Given the target audience, it would be assumed that they have a working knowledge of common terms and abbreviations (such as AASB, FASB) so abbreviations may be used. Don’t be afraid to be creative. The effectiveness of a newsletter is impacted by how interesting the readers find it. 4. What not to consider? Students need to take care that the developments and the changes considered and included in the newsletter are relevant to the objective, in particular the issues/developments that directly relate to the preparation of financial reports for large companies listed on the Australian stock exchange. The newsletter SHOULD NOT consider areas only INDIRECTLY related to the preparation of financial reports such as (and this is not an exhaustive list): Fraud, Auditing, Taxation, Other disclosures by listed companies such as: voluntary disclosures in the area of corporate social responsibility, voluntary Environmental disclosures. Page 3 of 4 Marking criteria Content Assessment will consider the adequacy of the range of changes/developments included such as: • Adequate identification and descriptions of key changes/ developments in period; • Adequate inclusion of international section/developments; and • Correctness of outlines of changes/developments. /30 Effectiveness for purpose This considers the effectiveness of the newsletter for the purposes set out in the question and involves consideration of issues such as: • Appropriate level of detail given intended purpose and audience; • Facilitates identification of relevant items by intended audience (e.g. attracts attention by titles/headings etc); • Provides effective summaries, and directions to staff to access further information where appropriate; • Attempts to maintain interest, including creativity and originality; and • Discriminates between significant and minor changes and facilitates identification and classification of these by the intended audience. /30 Presentation • appropriate use of language given the intended audience • good linkages and flow in sound structure • clarity of expression • grammar and spelling • appropriate referencing system /20 Evidence of reading • Adequacy of range of sources (such as professional bodies, international and government organisations, press) given purposes of assignment; • Evidence of adequate frequency of monitoring over period of assignment. /20 Presentation The following are to be observed for your newsletter preparation. In terms of overall presentation: 1. The top of the newsletter must include the title (you need to decide on what to call your newsletter) and details of the period the newsletter is considering. Page 4 of 4 2. The newsletter should not read as one continuous ‘essay’. It must include headings and subheadings that assist in identifying the nature of changes/developments and help to guide the reader, and also enable the reader to distinguish between items of interest and the relative importance of changes. 3. You must refer the reader to specific sources so that they are able to obtain more detailed information of the development/change. 4. The newsletter must be printed in minimum font of Times New Roman set at 11 points (You may wish to use larger fonts etc for headings etc). You may wish to set your newsletter out using columns but this is optional. Apart from minimum font size, there are no specific requirements in relation to line spacing, margins etc. However, you should note that simply reducing line spacings, margins to ‘fit more in’ may impact on the presentation and effectiveness of the newsletter. 5. There is no specific ‘word limit’. The newsletter must be no longer than 2 pages. In cases where the newsletter exceeds the 2 page limit, only the first 2 pages will be marked. In terms of referencing: 1. This assessment must include a bibliography rather than a reference list (this should not be part of your newsletter and to be given on a separate page). A bibliography includes all materials used in the preparation of your assignment, not just those referenced or cited within the paper. The reason a bibliography is required (rather than a reference list) is that this will provide an insight into the range and regularity of your monitoring activities which is part of the criteria for assessment. There is no specific number of readings required as it all depends on what had been published during your observation period. Assessments without a bibliography may not be accepted/marked and will be penalised. 2. The bibliography needs to include specific articles or readings of what you have actually accessed and read that is related to the area, not just a general link to a website or newspaper etc. Therefore if you use a source such as the AASB website, please reference every article that you read separately. 3. Do not attach actual articles/printouts of web sources etc to your assessment. You are only required to include details of these in the bibliography. 4. Remember that when citing electronic sources you must include the date accessed. If you are unsure how to cite and reference your readings check the referencing guides here. APA referencing style should be used for all citing format. You should only include sources related to the area e.g. if you to look at a particular publication but most of the articles relate to taxation issues. It would not be appropriate to include these articles in your bibliography as these are not directly related to the area of interest and you would not have ‘used’ these in preparing the newsletter. Please be reminded that plagiarism is regarded as a serious issue within the University system with severe consequences for students who have been found to have deliberately plagiarised, the minimum penalty being zero for the assignment. All students should ensure that they are familiar with the plagiarism policy and referencing requirements before commencing assessment.
Susan Taylor started her own consulting firm, Taylor Made Consulting Inc., on
May 1, 2012. The following transactions occurred during the month of May.
May 1 Stockholders invested $15,000 cash in the business in exchange for common stock.
2 Paid $600 for office rent for the month.
3 Purchased $500 of supplies on account.
5 Paid $150 to advertise in the County News.
9 Received $1,400 cash for services provided.
12 Paid $200 cash dividend.
15 Performed $4,200 of services on account.
17 Paid $2,500 for employee salaries.
20 Paid for the supplies purchased on account on May 3.
23 Received a cash payment of $1,200 for services provided on account on May 15.
26 Borrowed $5,000 from the bank on a note payable.
29 Purchased office equipment for $2,000 paying $200 in cash and the balance on account.
30 Paid $180 for utilities.
Instructions
(a) Show the effects of the previous transactions on the accounting equation using the following format. Assume the note payable is to be repaid within the year.
?
Include margin explanations for any changes in Retained Earnings.
(b) Prepare an income statement for the month of May 2012.
(c) Prepare a classified balance sheet at May 31,2012.
The Amato Theater is nearing the end of the year and is preparing for a meeting with its bankers to discuss the renewal of a loan. The accounts listed below appeared in the December 31, 2012, trial balance.
Additional information is available as follows.
1. The equipment has an estimated useful life of 16 years and a salvage value of $40,000 at the end of that time. Amato uses the straight line method for depreciation.
2. The note payable is a one year note given to the bank January 31 and bearing interest at 10%.
Interest is calculated on a monthly basis.
3. Late in December 2012, the theater sold 350 coupon ticket books at $50 each. One hundred fifty of these ticket books can be used only for admission any time after January 1, 2013. The cash received was recorded as Unearned Ticket Revenue.
4. Advertising paid in advance was $6,000 and was debited to Prepaid Advertising. The company has used $2,500 of the advertising as of December 31, 2012.
5. Salaries and wages accrued but unpaid at December 31, 2012, were $3,500.
Accounting
Prepare any adjusting journal entries necessary for the year ended December 31, 2012.
Analysis
Determine Amato’s income before and after recording the adjusting entries. Use your analysis to explain why Amato’s bankers should be willing to wait for Amato to complete its year end adjustment process before making a decision on the loan renewal.
Principles
Although Amato’s bankers are willing to wait for the adjustment process to be completed before they receive financial information, they would like to receive financial reports more frequently than annually or even quarterly. What trade offs, in terms of relevance and faithful representation, are inherent in preparing financial statements for shorter accounting timeperiods?
The annual report is considered by some to be the single most important printed document that companies produce. In recent years, annual reports have become large documents. They now include such sections as letters to the stockholders, descriptions of the business, operating highlights, financial review, management discussion and analysis, segment reporting, and inflation data as well as the basic financial statements. The expansion has been due in part to a general increase in the degree of sophistication and complexity in accounting standards and disclosure requirements for financial reporting. The expansion also reflects the change in the composition and level of sophistication of users. Current users include not only stockholders, but financial and securities analysts, potential investors, lending institutions, stockbrokers, customers, employees, and (whether the reporting company likes it or not) competitors. Thus, a report that was originally designed as a device for communicating basic financial information now attempts to meet the diverse needs of an expanding audience. Users hold conflicting views on the value of annual reports. Some argue that annual reports fail to provide enough information, whereas others believe that disclosures in annual reports have expanded to the point where they create information overload. The futures of most companies depend on acceptance by the investing public and by their customers; therefore, companies should take this opportunity to communicate well defined corporate strategies.
Requirements
1. The goal of preparing an annual report is to communicate information from a company to its targeted users.
(a) Identify and discuss the basic factors of communication that must be considered in the presentation of this information.
(b) Discuss the communication problems a company faces in preparing the annual report that result from the diversity its users.
2. Select two types of information found in an annual report, other than the financial statements and accompanying footnotes, and describe how they are useful to the users of annual reports.
3. Discuss at least two advantages and two disadvantages of stating well defined corporate strategies in the annual report.
4. Evaluate the effectiveness of annual reports in fulfilling the information needs of the following current and potential users:
(a) Shareholders,
(b) Creditors,
(c) Employees,
(d) Customers, and
(e) Financial analysts.
5. Annual reports are public and accessible to anyone, including competitors. Discuss how this affects decisions about what information should be provided in annual reports.
Kathryn Goldsmith is the chief accountant for Clean Sweep, a national carpet cleaning service with a December fiscal year end. As Kathryn was preparing the 2009 financial statements for Clean Sweep, she noticed several odd transactions in the general ledger for December.
For example, rent for January 2010, which was paid in December 2009, was recorded by debiting rent expense instead of prepaid rent. In another transaction, Kathryn noticed that the use of supplies was recorded with a debit to insurance expense instead of supplies expense. Upon further investigation, Kathryn discovered that the December ledger contained numerous such mistakes. Even with the mistakes, the trial balance still balanced.
Kathryn traced all of the mistakes back to a recently hired bookkeeper, Ben Goldsmith, Kathryn’s son. Kathryn had hired Ben to help out in the accounting department over Christmas break so that he could earn some extra money for school. After discussing the situation with Ben, Kathryn determined that Ben’s mistakes were all unintentional.
Required:
1. What ethical issues are involved?
2. What are Kathryn’s alternatives? Which would be the most ethical alternative to choose?
AS Industries has on January 1 st 20×1 purchased a new production facility a factory building. You are given the following information about the building:
• Cost 10 million NOK
• Economic life 10 years
• Depreciation Linear
• Residual value 0
During fall 20×5 the company made some improvements of the factory premises. The expenses were amounted to 5,000,000 NOK. The work was carried out and the new premises were adopted 01.01.20×6. The improvements did not affect the building’s total lifetime.
Question a:
Calculate the following for the years 20×1 20×10:
Balance per 1 January and 31 December
Annual depreciation
Question b:
How is the solution if the expenditure extends the lifetime of the building for three years?
20.13
In 20×1 AS Otta bought a lot for 3 million NOK. The lot was designed for use in the business and should be considered by the Accounting Act general principles. You are given the following information about the value development of the loy:
Value lot:
01.01.20×1 (buy): 3.0 million NOK
31.12.20×2: 1.8 million NOK
31.12.20×5: 2.6 million NOK
31.12.20×6: 3.5 million NOK
The value decrease in 20×2 were considered permanent.
Question:
Show the treatment of the lot in the income statement (result accounting) and balance sheet for the period 20×1 20X6.
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20.5 AS Industries has on January 1st 20×1 purchased a new production facility a factory building. You are given the following information about the building: • Cost 10 million NOK • Economic life 10 years • Depreciation Linear • Residual value 0 During fall 20×5 the company made some improvements of the factory premises. The expenses were amounted to 5,000,000 NOK. The work was carried out and the new premises were adopted 01.01.20×6. The improvements did not affect the building’s total lifetime. Question a: Calculate the following for the years 20×1 20×10: Balance per 1 January and 31 December Annual depreciation Question b: How is the solution if the expenditure extends the lifetime of the building for three years? 20.13 In 20×1 AS Otta bought a lot for 3 million NOK. The lot was designed for use in the business and should be considered by the Accounting Act general principles. You are given the following information about the value development of the loy: Value lot: 01.01.20×1 (buy): 3.0 million NOK 31.12.20×2: 1.8 million NOK 31.12.20×5: 2.6 million NOK 31.12.20×6: 3.5 million NOK The value decrease in 20×2 were considered permanent. Question: Show the treatment of the lot in the income statement (result accounting) and balance sheet for the period 20×1 20X6.??????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????
Krittersbegone Inc. was organized on July 1, 2010, by a group of technicians to provide termite inspections and treatment to homeowners and small businesses. The following transactions occurred during the first month of business:
July 2: Received contributions of $3,000 from each of the six owners in exchange for shares of stock.
July 3: Paid $1,000 rent for the month of July.
July 5: Purchased flashlights, tools, spray equipment, and ladders for $18,000, with a down payment of $5,000 and the balance due in 30 days.
July 17: Paid a $200 bill for the distribution of door to door advertising.
July 28: Paid August rent and July utilities to the landlord in the amounts of $1,000 and $450, respectively.
July 30: Received $8,000 in cash from homeowners for services performed during the month. In addition, billed $7,500 to other customers for services performed during the month. Billings are due in 30 days.
July 30: Paid commissions of $9,500 to the technicians for July.
Required
1. Prepare a table to summarize the preceding transactions as they affect the accounting equation. Ignore depreciation expense. Use the format in Exhibit 3 1.
2. Prepare a classified balance sheet dated July 31, 2010. From the balance sheet, what cash inflow and what cash outflow can you predict in the month of August? Who would be interested in the cash flow information? Why?
Listed below are 12 internal control procedures or requirements for the expenditure cycle (purchasing, payroll, accounts payable, and cash disbursements) of a manufacturing enterprise. For each of the following, identify the error or misstatement that would be prevented or detected by its use.
a. Duties segregated between the cash payments and cash receipts functions
b. Signature plates kept under lock and key
c. The accounting department matches invoices to receiving reports or special authorizations before payment
d. All checks mailed by someone other than the person preparing the payment voucher
e. The accounting department matches invoices to copies of purchase orders
f. Keep the blank stock of checks under lock and key
g. Use imprest accounts for payroll
h. Bank reconciliations performed by someone other than the one who writes checks and handles cash
i. Use a check protector
j. Periodically conduct surprise counts of cash funds
k. Orders placed with approved vendors only
l. All purchases made by the purchasing department
Lois Hale and Associates is a medium size manufacturer of musical equipment. The accounts payable department is located at company headquarters in Asbury Park, New Jersey, and it consists of two full time clerks and one supervisor. They are responsible for processing and paying approximately 800 checks each month. The accounts payable process generally begins with receipt of a purchase order from the purchasing department. The purchase order is held until a receiving report and the vendor’s invoice have been forwarded to accounts payable. At that time, the purchase order, receiving report, and invoice are matched together by an accounts payable clerk, and payment and journal entry information are input to the computer. Payment dates are designated in the input, and these are based on vendor payment terms. Company policy is to take advantage of any cash discounts offered. If there are any discrepancies among the purchase order, receiving report, and invoice, they are given to the supervisor for resolution. After resolving the discrepancies, the supervisor returns the documents to the appropriate clerk for processing. Once documents are matched and payment information is input, the documents are stapled together and filed in a tickler file by payment date until checks are issued. When checks are issued, a copy of the check is used as a voucher cover and is affixed to the supporting documentation from the tickler file. The entire voucher is then defaced to avoid duplicate payments. In addition to the check and check copy, other outputs of the computerized accounts payable system are a check register, vendor master list, accrual of open invoices, and a weekly cash requirements forecast.
Requirements
Draw a context diagram and data flow diagram similar to those in Figures for the company’s accounts payable process, using the symbols in Figure.
Problem 4 8 You were recently hired as the assistant treasurer for Victor, Inc. Yesterday, the treasurer was injured in a bicycle accident and is now hospitalized, unconscious. Your boss, Mr. Fernandes, just informed you that the financial statements are due today. Searching through the treasurer’s desk, you find the following notes:
a. Income from continuing operations, based on computations done so far, is $400,000. No taxes are accounted for yet. The tax rate is 30%.
b. Dividends declared and paid were $20,000. During the year, 100,000 shares of stock were outstanding.
c. The corporation experienced an uninsured $20,000 pretax loss from a freak hailstorm. Such a storm is considered to be unusual and infrequent.
d. The company decided to change its inventory pricing method from average cost to the FIFO method. The effect of this change is to increase prior years ’ income by $30,000 pretax. The FIFO method has been used for 2012. (Hint: This adjustment should be placed just prior to net income.)
e. In 2012, the company settled a lawsuit against it for $10,000 pretax. The settlement was not previously accrued and is due for payment in February 2013.
f. In 2012, the firm sold a portion of its long term securities at a gain of $30,000 pretax.
g. The corporation disposed of its consumer products division in August 2012, at a loss of $90,000 pretax. The loss from operations through August was $60,000 pretax.
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Problem 4 8 You were recently hired as the assistant treasurer for Victor, Inc. Yesterday, the treasurer was injured in a bicycle accident and is now hospitalized, unconscious. Your boss, Mr. Fernandes, just informed you that the financial statements are due today. Searching through the treasurer’s desk, you find the following notes: a. Income from continuing operations, based on computations done so far, is $400,000. No taxes are accounted for yet. The tax rate is 30%. b. Dividends declared and paid were $20,000. During the year, 100,000 shares of stock were outstanding. c. The corporation experienced an uninsured $20,000 pretax loss from a freak hailstorm. Such a storm is considered to be unusual and infrequent. d. The company decided to change its inventory pricing method from average cost to the FIFO method. The effect of this change is to increase prior years ’ income by $30,000 pretax. The FIFO method has been used for 2012. (Hint: This adjustment should be placed just prior to net income.) e. In 2012, the company settled a lawsuit against it for $10,000 pretax. The settlement was not previously accrued and is due for payment in February 2013. f. In 2012, the firm sold a portion of its long term securities at a gain of $30,000 pretax. g. The corporation disposed of its consumer products division in August 2012, at a loss of $90,000 pretax. The loss from operations through August was $60,000 pretax. Required: Prepare an income statement for 2012 using Microsoft Word or Excel, in good form, starting with income from continuing operations. Compute earnings per share for income from continuing operations, discontinued operations, extraordinary loss, cumulative effect of a change in accounting principle, and net income.
Question 1You have been asked to advise two entirely different businesses about the benefits and problems associated with what is termed the “traditional approach to budgeting and budgetary control”. One of the businesses operates in a very stable and static market place, where there is little change in either products or demand year on year, whereas the other business operates in a very dynamic, rapidly changing, innovative environment. If your findings suggest that the traditional approach is inappropriate for one or both of the businesses, please suggest and discuss some alternative approaches.The “traditional approach” typically involves the following processes:a) Development of assumptions and plans about the factors influencing next year’s budget in advance of the budget year starting;b) Approval of the budget before the commencement of the budget year;c) Once the budget year has started, there are monthly comparison reports which compares budget and actual performance on both a monthly and cumulative basis;d) Action being taken (where necessary) to correct large variances or differences.Question 2XYZ Limited is a medium sized manufacturing business which makes and sells products to a range of industrial customers who use XYZ’s products in their own products. The working capital of XYZ is typical of a manufacturing organisation in that at any point in time they have cash, trade receivables, inventories of raw materials,2work in progress and finished goods and trade payables. The Managing Director of XYZ Limited believes that all parts of the working capital cycle could be improved and has asked you to produce a report which discusses how each part of the working capital cycle could be improved and which critically evaluates the implications of the improvements on XYZ and other connected parties (for example trade receivables and trade payables).
Mulberry Services sells electronic data processing services to firms too small to own their own computing equipment. Mulberry had the following accounts and account balances as of January 1, 2009:
During 2009, the following transactions occurred (the events described below are aggregations of many individual events):
a. During 2009, Mulberry sold $690,000 of computing services, all on credit.
b. Mulberry collected $570,000 from the credit sales in transaction a and an additional $129,000 from the accounts receivable outstanding at the beginning of the year.
c. Mulberry paid the interest payable of $8,000.
d. Wages of $379,000 were paid in cash.
e. Administrative expenses of $90,000 were incurred and paid.
f. The prepaid rent at the beginning of the year was used in 2009. In addition, $28,000 of computer rental costs were incurred and paid. There is no prepaid rent or rent payable at year end.
g. Mulberry purchased computer paper for $13,000 cash in late December.
h. None of the paper was used by year end.
i. Advertising expense of $26,000 was incurred and paid.
j. Income tax of $10,300 was incurred and paid in 2009.
k. $10,000 of interest was paid on the long term loan.
Required:
1. Establish a ledger for the accounts listed above and enter the beginning balances.
Use a chart of accounts to order the ledger accounts.
2. Analyze each transaction. Journalize as appropriate. (Ignore the date since these events are aggregations of individual events.)
3. Post your journal entries to the ledger accounts. Add additional ledger accounts when needed.
4. Use the ending balances in the ledger accounts to prepare a trial balance.
a. Minimize the amount of taxes a company has to pay.
b. Permit an organization to keep track of its economic activities.
c. Report the largest amount of earnings to stockholders.
d. Reduce the amount of risk experienced by investors.
2. A primary purpose of all organizations in our society is to:
a. Make a profit.
b. Minimize the payment of taxes.
c. Provide employment for the largest number of workers possible.
d. Create value by transforming resources from one form to another.
3. Value is created when organizations:
a. Raise capital by borrowing funds from banks, individuals, or other businesses.
b. Pay cash to suppliers, employees, owners, and government.
c. Sell products or services at prices that exceed the value of resources consumed.
d. Invest in machinery.
4. Which of the following are features of the corporate form of business organization?
Mutual Agency Limited Liability
a. Yes Yes
b. Yes No
c. No Yes
d. No No
5. Tammy Faye invested $2,000 in a partnership. One year later, the partnership was sold, and cash from the sale was distributed to the partners. On that date, Tammy received a check for her share of the company in the amount of $2,250. What was Tammy’s return on investment?
a. $0
b. $250
c. $2,000
d. $2,250
6. Sternberg Enterprises developed a new type of roller skate that is very popular because of its high quality and reasonable price. Sternberg is losing money on the product, however, because several key production personnel recently resigned and replacements are not as skilled. Which of the following terms properly describe the firm?
Effective Efficient
a. Yes Yes
b. Yes No
c. No Yes
d. No No
7. The transformation of resources refers to:
a. The assessment of employee performance.
b. Converting resources from one form to a more valuable form.
c. Procedures designed to reduce a company’s risk.
d. Training methods by which unskilled workers become efficient and effective.
8. An investor is evaluating the potential investments described below. Past financial results of these two companies are judged to be indicative of future returns and risk.
Abercrombie Fitch
Year Profits Profits
A $16 $ 6
B 18 48
C 20 3
From the information provided, which investment appears to have the higher return and which the higher risk?
Highest Return Highest Risk
a. Abercrombie Abercrombie
b. Abercrombie Fitch
c. Fitch Abercrombie
d. Fitch Fitch
9. SEC stands for:
a. Securities Excellence Commission
b. Securities and Exchange Commission
c. Standard Executive Compensation
d. Salaried Executive’s Council
10. Ethical behavior is particularly important for accounting because:
a. Companies cannot detect unethical behavior.
b. If the reports are wrong, accountants may have to go to jail.
c. The SEC cannot carefully audit each company’s financial statements.
d. The reliability of accounting information depends on the honesty of those who prepare, report, and audit this information.
1. What organization is the primary standard setter in the United States?
a. Securities and Exchange Commission
b. Financial Accounting Standards Board
c. International Accounting Standards Board
d. American Institute of Certified Public Accountants
2. Which of the following is not a characteristic of useful information?
a. Relevance
b. Reliability
c. Conservatism
d. Comparability
3. Information that provides feedback about prior expectations is:
Relevant Reliable
a. YesYes
b. Yes No
c. No Yes
d. No No
4. Information that is representationally faithful is considered to be:
Relevant Reliable
a. Yes Yes
b. Yes No
c. No Yes
d. No No
5. Which of the following is not an assumption that underlies accounting?
a. Economic entity
b. Time period
c. Continuity (going concern)
d. Historical cost
6. Which principle requires that expenses be recorded and reported in the same period as the revenue that it helped generate?
a. Matching
b. Historical cost
c. Revenue recognition
d. Conservatism
7. Taylor Company recently purchased a piece of equipment for $2,000 which would be paid within 30 days after delivery. At what point would the event be recorded in Taylor’s accounting system?
a. When Taylor signs the agreement with the seller.
b. When Taylor receives the asset from the seller.
c. When Taylor receives an invoice (a bill) from the seller.
Nehru Gupta is the controller at the Acme Shoe Company, a large manufacturing company located in Franklin, Pennsylvania. Acme has many divisions, and the performance of each division has typically been evaluated using a return on investment (ROI) formula. The return on investment is calculated by dividing profit by the book value of total assets. In a meeting yesterday with Bob Burn, the company president, Nehru warned that this return on investment measure might not be accurately reflecting how well the divisions are doing. Nehru is concerned that by using profits and the book value of assets, division managers might be engaging in some short term finagling to show the highest possible return. Bob concurred and asked what other numbers they could use to evaluate division performance. Nehru said, ?~?~I’m not sure, Bob. Net income isn’t a good number for evaluation purposes. Because we allocate a lot of overhead costs to the divisions on what some managers consider an arbitrary basis, net income won’t work as a performance measure in place of return on investment.’’ Bob told Nehru to give some thought to this problem and report back to him.
Requirements
1. Explain what managers can do in the short run to maximize return on investment as calculated at Acme. What other accounting measures could Acme use to evaluate the performance of its divisional managers?
2. Describe other instances in which accounting numbers might lead to dysfunctional behavior in an organization.
3. Search the Internet and find at least one company that offers an information system (or software) that might help Nehru evaluate his company’s performance.
Neveranerror Inc. was organized on June 2, 2010, by a group of accountants to provide accounting and tax services to small businesses. The following transactions occurred during the first month of business:
June 2: Received contributions of $10,000 from each of the three owners of the business in exchange for shares of stock.
June 5: Purchased a computer system for $12,000. The agreement with the vendor requires a down payment of $2,500 with the balance due in 60 days.
June 8: Signed a two year promissory note at the bank and received cash of $20,000. June 15: Billed $12,350 to clients for the first half of June. Clients are billed twice a month for services performed during the month, and the bills are payable within ten days.
June 17: Paid a $900 bill from the local newspaper for advertising for the month of June.
June 23: Received the amounts billed to clients for services performed during the first half of the month.
June 28: Received and paid gas, electric, and water bills. The total amount is $2,700.
June 29: Received the landlord’s bill for $2,200 for rent on the office space that Neveranerror leases. The bill is payable by the 10th of the following month.
June 30: Paid salaries and wages for June. The total amount is $5,670.
June 30: Billed $18,400 to clients for the second half of June.
June 30: Declared and paid dividends in the amount of $6,000.
Required
1. Prepare a table to summarize the preceding transactions as they affect the accounting equation. Ignore depreciation expense and interest expense. Use the format in Exhibit 3 1.
2. Prepare the following financial statements:
a. Income statement for the month ended June 30, 2010
b. Statement of retained earnings for the month ended June 30, 2010
c. Classified balance sheet at June 30, 2010
3. Assume that you have just graduated from college and have been approached to join this company as an accountant. From your reading of the financial statements for the first month, would you consider joining the company? Explain your answer. Limit your answer to financial considerations only.
Newton Learning Centers was established on October 20, 2012, to provide educational services. The services provided during the remainder of the month are as follows:
Oct. 21. Issued Invoice No. 1 to J. Dunlop for $60 on account.
22. Issued Invoice No. 2 to K. Todd for $255 on account.
24. Issued Invoice No. 3 to T. Patrick for $55 on account.
25. Provided educational services, $100, to K. Todd in exchange for educational supplies.
27. Issued Invoice No. 4 to F. Mintz for $150 on account.
30. Issued Invoice No. 5 to D. Chase for $135 on account.
30. Issued Invoice No. 6 to K. Todd for $105 on account.
31. Issued Invoice No. 7 to T. Patrick for $70 on account.
Instructions
1. Journalize the transactions for October, using a single column revenue journal and a two column general journal. Post to the following customer accounts in the accounts receivable ledger, and insert the balance immediately after recording each entry: D. Chase; J. Dunlop; F. Mintz; T. Patrick; K. Todd.
2. Post the revenue journal and the general journal to the following accounts in the general ledger, inserting the account balances only after the last postings:
12 ……………..Accounts Receivable
13 ……………..Supplies
41 ……………..Fees Earned
3. a. What is the sum of the balances of the accounts in the subsidiary ledger at October 31?
b. What is the balance of the controlling account at October 31?
4. Assume Newton Learning Centers began using a computerized accounting system to record the sales transactions on November 1. What are some of the benefits of the computerized system over the manual system?
Novelty Gadgets is a marketer of inexpensive toys and novelties that it sells to retail stores, specialty stores, and catalog companies. As an accountant working for the company, you have been asked to design a product code for the company. In analyzing this problem, you have discovered the following:
a. The company has three major product lines:
(1) Toys and games,
(2) Party and magic tricks, and
(3) Inexpensive gifts. There are major subproducts within each of these product lines, and the number of these categories is 25, 18, and 113, respectively.
b. The company has divided its selling efforts into five geographic areas:
(1) The United States,
(2) The Far East,
(3) Europe and Africa,
(4) South America, and
(5) International (a catchall area). Each major geographic area has several sales districts (never more than 99 per area). Between 1 and 20 salespeople are assigned to each district.
c. As noted earlier, there are three major categories of customers, and certain customers can also purchase goods on credit. There are five different classes of credit customers and each rating indicates the maximum amount of credit the customer can have. Design a group code that Novelty Gadgets could use to prepare sales analysis reports. Be sure to identify each digit or position in your code in terms of both use and meaning.
A Comparative Analysis of Oracle Corporation and Microsoft Corporation Here is the link for the financial statements for Oracle Corporation for the fiscal year ending 2011. First, select 2011 using the drop down arrow labeled for Year on the right hand side of the page, and then select Annual Reports using the drop down arrow labeled Filing Type on the left hand side of the page. You should select the 10k dated 6/28/2011 and choose to download in PDF, Word, or Excel format.
Document Preview:
Here is the link for the financial statementsYour Course Project Financial Statement Analysis Project A Comparative Analysis of Oracle Corporation and Microsoft Corporation Here is the link for the financial statements for Oracle Corporation for the fiscal year ending 2011. First, select 2011 using the drop down arrow labeled for Year on the right hand side of the page, and then select Annual Reports using the drop down arrow labeled Filing Type on the left hand side of the page. You should select the 10k dated 6/28/2011 and choose to download in PDF, Word, or Excel format. ?HYPERLINK “http://www.oracle.com/us/corporate/investor relations/sec/indexl”?http://www.oracle.com/us/corporate/investor relations/sec/indexl? for Microsoft Corporation for the fiscal year ending 2011. You should select the 10k dated 7/28/2011 and choose to download in Word or Excel format. ?HYPERLINK “http://www.microsoft.com/investor/SEC/default.aspx?year=2011&filing=annual”?http://www.microsoft.com/investor/SEC/defaHYPERLINK “http://www.microsoft.com/investor/SEC/default.aspx?year=2011&filing=annual”uHYPERLINK “http://www.microsoft.com/investor/SEC/default.aspx?year=2011&filing=annual”lt.aspx?year=2011HYPERLINK “http://www.microsoft.com/investor/SEC/default.aspx?year=2011&filing=annual”&HYPERLINK “http://www.microsoft.com/investor/SEC/default.aspx?year=2011&filing=annual”amp;filing=annual? A sample Project template is available for download in Doc Sharing. The sample project compares the ratio performance of Tootsie Roll and Hershey using the 2009 financial statements of Tootsie Roll and Hershey provided in Appendix A and Appendix B of your textbook. ? ??Description??? ? ??This course contains a course project where you will be required to submit one draft of the Project at the end of Week 5 and the final completed Project at the end of Week 7. Using the financial statements for Oracle Corporation and Microsoft Corporation, respectively, you will…
On November 2, 2006, Nicole Oliver established an interior decorating business, Devon Designs. During the remainder of the month, Nicole completed the following transactions related to the business:
Nov. 2 Nicole transferred cash from a personal bank account to an account to be used for the business in exchange for capital stock, $15,000.
5 Paid rent for the period of November 5 to end of month, $1,750.
6 Purchased office equipment on account, $8,500.
8 Purchased a used truck for $18,000, paying $10,000 cash and giving a note payable for the remainder.
10 Purchased supplies for cash, $1,115.
12 Received cash for job completed, $7,500.
15 Paid annual premiums on property and casualty insurance, $2,400.
23 Recorded jobs completed on account and sent invoices to customers, $3,950.
24 Received an invoice for truck expenses, to be paid in December, $600.
29 Paid utilities expense, $750.
29 Paid miscellaneous expenses, $310.
30 Received cash from customers on account, $2,200.
30 Paid wages of employees, $2,700.
30 Paid creditor a portion of the amount owed for equipment purchased on November 6, $2,125.
30 Paid dividends, $1,400.
Instructions
1. Journalize each transaction in a two column journal, referring to the following chart of accounts in selecting the accounts to be debited and credited.
Cash ……………………………Capital Stock
Accounts Receivable …………..Dividends
Supplies ………………………..Fees Earned
Prepaid Insurance ……………..Wages Expense
Equipment …………………….Rent Expense
Truck …………………………..Utilities Expense
Notes Payable …………………Truck Expense
Accounts Payable ………………Miscellaneous Expense
2. Post the journal to a ledger of T accounts. For accounts with more than one posting, determine the account balance.
3. Prepare a trial balance for Devon Designs as of November 30, 2006.
Pasta House, Inc., was organized in January 2009. During the year, the following transactions occurred:
a. On January 14, Pasta House, Inc., sold Martin Halter, the firm’s founder and sole owner, 10,000 shares of its common stock for $7 per share.
b. On the same day, Bank One loaned Pasta House $30,000 on a 10 year note payable.
c. On February 22, Pasta House purchased a building and the land on which it stands from Frank Jakubek for $14,000 cash and a 5 year, $36,000 note payable. The land and building had appraised values of $10,000 and $40,000, respectively.
d. On March 1, Pasta House signed an $18,000 contract with Cosby Renovations to remodel the inside of the building. Pasta House paid $6,000 down and agreed to pay the remainder when Cosby completed its work.
e. On May 3, Cosby completed its work and submitted a bill to Pasta House for the remaining $12,000.
f. On May 20, Pasta House paid $12,000 to Cosby Renovations.
g. On June 4, Pasta House purchased restaurant supplies from Glidden Supply for $950 cash.
Required:
Prepare a journal entry for each of these transactions.
Assignment 1 Note: Prepare the answers to these assignment questions in Word and save them as one Word document on your hard drive. See the TX2 Assignment Submission/FAQ section for the recommended format and filename. When your file is complete and you are ready to submit it for marking, select your “TX2 Assignment Submission” section under the “My CGA” tab. Question 1 (20 marks) Important: Multiple choice questions are to be completed within the Online Learning Environment in your TX2 Assignment Submission section. This portion of the assignment will be automatically graded. Do not include your answers in your Word document as they will not be graded. Multiple choice (2 marks each) Marc is the son in law of Bernard. Bernard owns all the issued shares of Mammoth Inc., an import company whose taxation year ends December 31. In September 2011, Mammoth Inc. granted Marc a $10,000 loan, bearing interest at the market rate in effect at that time, so that he could purchase a snowmobile. Assuming that the loan is repaid in 2013 and Marc has always made his interest payments on time, what will be the tax consequences of this loan? a. 1. None. 2. Under section 80.4, Marc must include a taxable benefit in his income each year. 3. Bernard must include the amount of the loan in his 2011 income. 4. Marc must include the amount of the loan in his 2011 income. Sophie Anne wants to acquire a 20% interest in Bigprofit Inc. She must pay $250,000 to the corporation, which will issue her 10,000 voting and participating shares of the corporation, representing 20% of the voting and participating shares of the corporation after the issue. Why would Sophie Anne want shares of a separate class from that of the current shareholders, who had subscribed their shares for $10 each? b. 1. She wants the PUC of her shares to be $250,000. She does not want to dilute the ACB of her shares with that of the current shareholders. 2. 3. She wants to avoid having a taxable benefit conferred on her. She does not want to be taxed on the deemed dividend under subsection 84(4) that would result from the reduction of the PUC of her shares. 4. Caroline Murphy transfers to Fleury Inc., a corporation of which she is the sole shareholder, a piece of land having an FMV of $50,000 and an ACB of $20,000 in exchange for Class C shares having a PUC and an FMV of $75,000. No Class C shares were issued before the transaction. What are the tax consequences for Caroline? c. Course Schedule Course Modules Review and Practice Exam Preparation Resources http://www.mycgaonline.org/bbcswebdav/courses/TX2 2012/tx2.1112/as… 1 of 6 03/09/2012 10:29 PM A taxable benefit of $25,000 under section 15(1) and a taxable capital gain of $15,000 1. 2. A deemed dividend of $25,000 and a taxable capital gain of $27,500 A taxable benefit of $25,000 under subsection 15(1), a taxable capital gain of $27,500, and a deemed dividend of $25,000 3. 4. A deemed dividend of $25,000 and a taxable capital gain of $15,000 A corporation has two shareholders who each hold 50% of the common shares of the corporation. To one of them, who does not reside in Canada, the corporation sells a painting by a well known European artist for $10,000. The corporation had paid $15,000 for this painting several years ago. At the time of the sale, the painting is evaluated at $23,000. What are the tax consequences of the transaction? d. 1. The corporation incurs a deductible capital loss of $2,500. The corporation realizes a taxable capital gain of $4,000, and the shareholder has a taxable benefit of $5,000. 2. The shareholder has a deemed dividend of $13,000, and the corporation realizes a taxable capital gain of $4,000. 3. The shareholder has a taxable benefit of $5,000, and the corporation incurs a capital loss of $5,000. 4. When property is transferred under subsection 85(1), which one of the following conditions must be met? e. 1. The transferor must be a taxable Canadian corporation. 2. The transferor must be a Canadian resident. 3. The transferee must be a taxable Canadian corporation. 4. The transferee must be affiliated with the transferor. What condition must be met to benefit from a rollover as provided for in section 85 in the transfer of a building? f. 1. The building must be situated in Canada. 2. The building must be property owned for rental purposes. 3. The building must not be included in the transferor’s inventory. 4. The building must be the only property included in the prescribed class of property. In a rollover under section 85, that portion of the agreed amount that is attributed to the preferred share consideration, if any, is equal to the lesser of the FMV of the preferred shares after the disposition and which other amount? g. The amount by which the agreed amount exceeds the FMV of the common shares after the disposition 1. The amount by which the agreed amount exceeds the FMV of the property transferred to the corporation 2. The amount by which the agreed amount exceeds the ACB of the property transferred to the corporation 3. The amount by which the agreed amount exceeds the FMV of the non share consideration 4. Course Schedule Course Modules Review and Practice Exam Preparation Resources http://www.mycgaonline.org/bbcswebdav/courses/TX2 2012/tx2.1112/as… 2 of 6 03/09/2012 10:29 PM When calculating the cost of the consideration received by the transferor, the agreed amount for the transferred property must be distributed among the assets received by the transferor. In what order is this distribution done? h. 1. Non share consideration, preferred shares, common shares 2. Preferred shares, common shares, non share consideration 3. Common shares, preferred shares, non share consideration No order is stipulated by the ITA. However, the transferor must inform CRA of the order chosen. 4. In 2000, Martin acquired 100 Class A shares of Sultan Ltd. from Michelle for $20,000. Before the sale to Martin, Michelle was the sole shareholder of Sultan Ltd., and she held 500 Class A shares. Michelle had acquired the 500 shares on the incorporation of Sultan Ltd., when she paid $5,000 for the issue of 500 shares. Following a dispute between Martin and Michelle, Martin wants to withdraw from Sultan. According to an offer made to him, Sultan Ltd. will purchase his 100 Class A shares from him for $50,000. What would be the tax consequences for Martin if he accepted the offer? i. 1. A taxable capital gain of $15,000 2. A deemed dividend of $30,000 3. A deemed dividend of $49,000 and a deductible capital loss of $9,500 4. A deemed dividend of $45,000 and a taxable capital gain of $15,000 Zarra transferred a piece of land to her holding company, Zarra Holding Ltd. The land had an adjusted cost base of $1,000 and a fair market value of $25,000. As consideration for the transfer, Zarra received a $24,999 note and a preferred share redeemable for $1. Zarra filed an election under subsection 85(1) to have the transaction take place with no tax consequences, and the agreed amount on the form is equal to the adjusted cost base of $1,000. What will be the tax consequences of the transfer for Zarra? j. 1. None 2. A taxable capital gain of $11,999.50 3. A taxable capital gain of $12,000 4. A deemed dividend of $24,000 Question 2 (20 marks) The accounting firm that you work for has a policy of holding conference lunches for its accounting employees to help them maintain and improve their knowledge in the fields related to their work. Each in their turn, staff members are called upon to make a presentation on a topic that they have recently had to deal with in the performance of their work, so that their colleagues can learn from it. Knowing that you had to conduct a study in order to advise a client on a loan that he wanted to make to his daughter through the corporation that is wholly controlled by him, the head of the firm has asked you to make a short presentation next week on the subject of loans made by a private corporation to members of the principal shareholder’s family. Your presentation is to focus solely on family members who are not employees of the corporation. Required Course Schedule Course Modules Review and Practice Exam Preparation Resources http://www.mycgaonline.org/bbcswebdav/courses/TX2 2012/tx2.1112/as… 3 of 6 03/09/2012 10:29 PM a. (17 marks) Prepare the slides and notes for your presentation following the format below. Your presentation should be limited to a maximum of five slides. (3 marks) A team leader from the accounting firm that attended the presentation realizes that he has little knowledge of the subject. He might not be able to clearly identify this type of situation in an engagement with a client. What should the team leader do? b. Question 3 (23 marks) During 2011, Mary Todd transferred land to Sandy Development Ltd., a newly created corporation. The land was acquired a few years ago in order to build an income property on it. Mary is the sole shareholder of Sandy Development Ltd. The FMV of the land at the time of the transfer was $500,000 and its ACB was $120,000. Mary has a net capital loss carryforward of $25,000 (based on a 50% inclusion rate). Mary received the following consideration in the transfer: Note payable to Mary $ 120,000 3,500 Class A preferred shares issued for $100 each, having a par value of $100, and retractable at $100 350,000 3,000 common shares issued for $10 each 30,000 $500,000 No Class A preferred or common shares were issued prior to the transfer and no other shares have been issued since. Mary comes to consult you on the tax consequences of the transfer. She was told that it was possible to make an election for tax purposes so that there would be no tax consequences on the transfer. Mary gives you all the information with no verification on your part. Required a. (20 marks) In a letter addressed to Mary, give her your opinion on how the transfer should be carried out under subsection 85(1) so that she will have no immediate tax consequences and will benefit from all the available tax attributes. You should also tell her the PUC and ACB of the Class A preferred shares and the common shares that she has received and deal with the tax consequences on the eventual redemption of the 3,500 Class A preferred shares. (2 marks will be awarded for presentation, spelling, grammar and the professionalism of your written communication.) Course Schedule Course Modules Review and Practice Exam Preparation Resources http://www.mycgaonline.org/bbcswebdav/courses/TX2 2012/tx2.1112/as… 4 of 6 03/09/2012 10:29 PM b. (3 marks) Mary informs you that in 2013, she will make a capital contribution of $100,000 to Sandy Development Ltd. to enable it to purchase and develop other pieces of land. The banker for the corporation requires that the contribution be made in the form of a share issue and not in the form of a loan made by Mary to the corporation. What recommendation will you make to Mary in order for her to be able to withdraw the $100,000 without future tax consequences? Question 4 (37 marks) Sidney Rabinovitch, a client of long standing, has operated a business as a sole proprietor since 1996. Net business income has increased progressively and is presently approximately $90,000. Due to the reduced tax rates on the ABI of CCPCs, you have discussed the possibility of reducing his income taxes by transferring his business to a corporation. Based on your discussions, Sidney forms a new corporation. Sidney owns 100% of the common shares of this new corporation. Sidney decides to transfer all of his business assets to the new corporation. In your file, you find the following list of the assets and liabilities of the business as at January 31, 2011, the date of the fiscal year end. Cost FMV Accounts receivable $ 21,000 $ 16,000 Inventory 27,000 27,000 Investment in shares 10,000 6,000 Land 11,000 25,000 Building (UCC — $60,000) 80,000 150,000 Office furniture (UCC — $20,000)1 24,000 18,000 Goodwill (CEC)2 (3/4 × $4,000) 3,000 46,000 Accounts payable and accrued liabilities 20,000 Mortgage payable 65,000 1 Assume that there is only one property in the class. 2 Assume that no amount was deducted under paragraph 20(1)(b). On February 1, 2011, Sidney sells all his business assets to the new corporation for a price equal to FMV. The new corporation assumes all of Sidney’s business liabilities. The new corporation’s fiscal period will end on May 31. Required Plan the sale of assets by Sidney to the new corporation in such a way that he has minimum tax consequences and receives the maximum amount of non share consideration without any immediate tax liability. If shares are to be issued as consideration, assume that they are non voting retractable preferred shares, of a class in which no share is currently issued and with a legal capital and redemption value of $1 each. a. (23 marks) Select the agreed amount or POD for each class of property and explain the tax consequences for Sidney, if any. In addition, use a table presented as follows for property transferred under section 85: Course Schedule Course Modules Review and Practice Exam Preparation Resources http://www.mycgaonline.org/bbcswebdav/courses/TX2 2012/tx2.1112/as… 5 of 6 03/09/2012 10:29 PM Description of assets transferred Cost or ACB UCC or CEC FMV Agreed amount Liabilities assumed Notes Shares Total FMV b. (2 marks) Specify the cost and ACB of the consideration received by Sidney. c. (2 marks) Specify the PUC of the shares received by Sidney. d. (2 marks) Indicate the cost of the property acquired by the new corporation. e. (1 mark) Specify the deadline for the filing of the election form. f. (7 marks) Assume that it is now November 2015, and Sidney has asked you to review his tax files for the last several years. You discover that George Saint Jean, who is one of your partners in the firm and who advised Sidney on this transaction, still hasn’t filed Form T2057 for the rollover of the business to the corporation. Write an internal memorandum to your partners in which you discuss George’s conduct, setting out possible solutions and making recommendations on how the firm should proceed, including what it should do in relation to the client and George. 100 Course Schedule Course Modules Review and Practice Exam Preparation Resources http://www.mycgaonline.org/bbcswebdav/courses/TX2 2012/tx2.1112/as… 6 of 6 03/09/2012 10:29 PM
Prado Roberts Manufacturing is a medium sized company with regional offices in several western states and manufacturing facilities in both California and Nevada. The company performs most of its important data processing tasks, such as payroll, accounting, marketing, and inventory control, on a mainframe computer at corporate headquarters. However, almost all the managers at this company also have microcomputers, which they use for such personal productivity tasks as word processing, analyzing budgets (using spreadsheets), and managing the data in small databases. The IT manager, Tonya Fisher, realizes that there are both advantages and disadvantages of using different types of systems to meet the processing needs of her company. Although she acknowledges that many companies are racing ahead to install microcomputers and client/server systems, she also knows that the corporate mainframe system has provided her company with some advantages that smaller systems cannot match. Tonya knows that American companies annually purchase over $5 billion in used computers, primarily mainframes.
Requirements
1. Identify several advantages and disadvantages of operating a mainframe computer system that is likely to be present at Prado Roberts Manufacturing. Are these advantages and disadvantages likely to parallel those at other manufacturing companies?
2. Identify at least two factors or actions that companies experience or do to prolong the lives of their legacy systems. Are these factors or actions likely to apply to Prado Roberts Manufacturing?
3. Identify several advantages and disadvantages of microcomputer/client server systems. Would these advantages apply to Prado Roberts Manufacturing?
Bohemian Links Inc. produces sausages in three production departments”Mixing, Casing and Curing, and Packaging. In the Mixing Department, meats are prepared and ground and then mixed with spices. The spiced meat mixture is then transferred to the Casing and Curing Department, where the mixture is force fed into casings and then hung and cured in climate controlled smoking chambers. In the Packaging Department, the cured sausages are sorted, packed, and labeled. The company uses the weighted average method in its process costing system. Data for April for the Casing and Curing Department follow:
Percent Completed
Units
Mixing
Materials
Conversion
Work in process inventory, April 1
10
100%
60%
50%
Work in process inventory, April 30
10
100%
20%
10%
Mixing
Materials
Conversion
Work in process inventory, April 1
$
20,040
$
80
$
4,680
Cost added during April
$
157,560
$
13,736
$
118,860
Mixing cost represents the costs of the spiced meat mixture transferred in from the Mixing Department. The spiced meat mixture is processed in the Casing and Curing Department in batches; each unit in the above table is a batch, and one batch of spiced meat mixture produces a set amount of sausages that are passed on to the Packaging Department. During April, 86 batches (i.e., units) were completed and transferred to the Packaging Department.
Required:
1.
Determine the equivalent units of production for April for mixing, materials, and conversion. (Round your answers to 1 decimal place.)
Mixing
Materials
Conversion
Equivalent units of production
2.
Compute the costs per equivalent unit for April for mixing, materials, and conversion. (Round your intermediate calculation to 1 decimal place and final answers to the nearest whole dollar amount.)
Mixing
Materials
Conversion
Cost per equivalent unit
$
$
$
3.
Determine the total cost of ending work in process inventory and the total cost of units transferred to the Packaging Department in April. (Round your intermediate calculation to 1 decimal place and final answers to the nearest whole dollar amount.)
Mixing
Materials
Conversion
Total
Cost of ending work in process inventory
$
$
$
$
Cost of units transferred out
$
$
$
$
4.
Prepare a cost reconciliation report for the Casing and Curing Department for April. (Round your intermediate calculation to 1 decimal place and final answers to the nearest whole dollar amount.)
Cost Reconciliation
Costs to be accounted for:
(Click to select) Cost of units completed and transferred out Cost of beginning work in process inventory Cost of ending work in process inventory
$
(Click to select) Cost of ending work in process inventory Cost of units completed and transferred out Cost added to production during the period
Total cost to be accounted for
$
Costs accounted for as follows:
(Click to select) Cost of beginning work in process inventory Cost of ending work in process inventory Cost added to production during the period
$
(Click to select) Cost of units completed and transferred out Cost added to production during the period Cost of beginning work in process inventory
The Boston Culinary Institute is evaluating a classroom remodeling project. The cost of the remodel will be $300,000 and will be depreciated over 5 years using the straight line method. The remodeled room will accomodate 5 extra students per year. Each student pays annual tuition of $22,000. The before tax incremental cost of a student (e.g., the cost of food prepared and consumed by a student) is $2,000 per year. The company’s tax rate is 40% and the company requires a 12% rate of return on the remodeling project.
Required:
Assuming a 5 year time horizon, what is the internal rate of return of the remodeling project? Should the company invest in the remodel?
Cash flow per year:
Revenue [formula]
Less costs other than depreciation [formula]
Depreciation [formula]
Title [formula]
Title [formula]
Net income [formula]
Title [formula]
Cash flow [formula]
Annuity factor equals cost divided by annual cash flow: [formula]
For Excel to determine the internal interest rate you must provide a matrix of cash flows as follows:
Cash out: [amount]
Cash in year 1: [amount]
Cash in year 2: [amount]
Cash in year 3: [amount]
Cash in year 4: [amount]
Cash in year 5: [amount]
Excel internal rate of return (IRR) formula: [formula]
Brisky Corporation uses activity based costing to compute product margins. In the first stage, the activity based costing system allocates two overhead accounts equipment depreciation and supervisory expense to three activity cost pools Machining, Order Filling, and Other based on resource consumption. Data to perform these allocations appear below:
Overhead costs:
Equipment depreciation
$28,000
Supervisory expense
$14,100
Distribution of Resource Consumption Across Activity Cost Pools:
Activity Cost Pools
Machining
Order Filling
Other
Equipment depreciation
0.50
0.30
0.20
Supervisory expense
0.50
0.20
0.30
In the second stage, Machining costs are assigned to products using machine hours (MHs) and Order Filling costs are assigned to products using the number of orders. The costs in the Other activity cost pool are not assigned to products.
Activity:
MHs (Machining)
Orders (Order Filling)
Product I3
5,750
177
Product U8
21,600
960
Total
27,350
1,137
Finally, sales and direct cost data are combined with Machining and Order Filling costs to determine product margins.
Sales and Direct Cost Data:
Product I3
Product U8
Sales (total)
$63,800
$65,200
Direct materials (total)
$31,500
$16,100
Direct labor (total)
$19,300
$31,300
What is the product margin for Product I3 under activity based costing? (Round your intermediate calculations to 2 decimal places and final answer to the nearest dollar amount.)
Cardinal Paz Corp. carries an account in its general ledger called Investments, which contained debits for investment purchases, and no credits, with the following descriptions.
Feb. 1, 2012
Sharapova Company common stock, $106 par, 212 shares
$41,100
April 1
U.S. government bonds, 12%, due April 1, 2022, interest payable April 1 and October 1, 111 bonds of $1,000 par each
111,000
July 1
McGrath Company 12% bonds, par $53,000, dated March 1, 2012, purchased at 104 plus accrued interest, interest payable annually on March 1, due March 1, 2032
57,240
a) Prepare entries necessary to classify the amounts into proper accounts, assuming that all the securities are classified as available for sale
b) Prepare the entry to record the accrued interest and the amortization of premium on December 31, 2012, using the straight line method
c)The fair values of the investments on December 31, 2012, were:
d) The U.S. government bonds were sold on July 1, 2013, for $119,920 plus accrued interest. Give the proper entry
A cement manufacturer has supplied the following data:
Tons of cement produced and sold
248,000
Sales revenue
$1,041,600
Variable manufacturing expense
$417,000
Fixed manufacturing expense
$276,000
Variable selling and administrative expense
$79,000
Fixed selling and administrative expense
$216,000
Net operating income
$53,600
What is the company’s unit contribution margin?
The following information relates to Clyde Corporation which produced and sold 55,000 units last month.
Sales
$1,210,000
Manufacturing costs:
Fixed
$210,000
Variable
$185,500
Selling and administrative:
Fixed
$300,000
Variable
$ 45,500
There were no beginning or ending inventories. Production and sales next month are expected to be 45,000 units. The company’s unit contribution margin next month should be
Chesapeake Sailmakers uses job order costing. Manufacturing overhead is charged to individual jobs through the use of a predetermined overhead rate based on direct labor costs. The following information appears in the company’s Work in Process Inventory account for the month of June:
Debits to account:
Balance, June 1
$
7,200
Direct materials
13,000
Direct labor
9,200
Manufacturing overhead (applied to jobs as 150% of direct labor cost)
14,000
Total debits to account
$
43,400
Credits to account:
Transferred to Finished Goods Inventory account
33,200
Balance, June 30
$
10,200
a.
Assuming that the direct labor charged to the jobs still in process at June 30 amounts to $2,100, compute the amount of manufacturing overhead and the amount of direct materials that have been charged to these jobs as of June 30. (Omit the “$” sign in your response.)
Manufacturing overhead applied to jobs
$
Direct materials charged to jobs
$
b.
Prepare general journal entries to summarize: (Omit the “$” sign in your response.)
1.
The manufacturing costs (direct materials, direct labor, and overhead) charged to production during June.
2.
The transfer of production completed during June to the Finished Goods Inventory account.
3.
The cash sale of 90 percent of the merchandise completed during June at a total sales price of $46,000. Show the related cost of goods sold in a separate journal entry.
General Journal
Debit
Credit
1.
choose one: land, manufacturing overhead, work in progress inventory, direct labor, finish good inventory, sales, cash, materials inventory, accounts payable, materials inventory, rental equipment, wages expense, costs of goods sold,
Christina, who is single, purchased 100 shares of Apple Inc. stock several years ago for $3,500. During her year end tax planning, she decided to sell 50 shares of Apple for $1,500 on December 30. However, two weeks later, Apple introduced the iPhone 5, and she decided that she should buy the 50 shares (cost of $1,600) of Apple back before prices skyrocket.
a.
What is Christina’s deductible loss on the sale of 50 shares? What is her basis in the 50 new shares?
b.
Assume the same facts, except that Christina repurchased only 25 shares for $800. What is Christina’s deductible loss on the sale of 50 shares? What is her basis in the 25 new shares?
At the close of its first year of operations, December 31, 2007, Linn Company had accounts receivable of $540,000, after deducting the related allowance for doubtful accounts. During 2007, the company had charges to bad debt expense of $90,000 and wrote off, as uncollectible, accounts receivable of $40,000. What should the company report on its balance sheet at December 31, 2007, as accounts receivable before the allowance for doubtful accounts? Answer
Your company bought a 30 second advertisement that aired during the Super Bowl at a cost of $1.2 million. It is legally obligated to pay for the ad but has not yet done so. How does the purchase and use of the ad time affect your company’s balance sheet? Answer
It increases both assets and liabilities by $1.2 million.
It increases assets and decreases stockholders’ equity by $1.2 million each.
It does not affect the balance sheet.
It increases liabilities and decreases stockholders’ equity by $1.2 million each.
A company with a break even point at $900,000 in sales revenue and had fixed costs of $225,000. When actual sales were $1,000,000 variable costs were $750,000.
1. Determine the margin of safety expressed in dollars:
a. $1,000,000 b. $900,000 c. $100,000 d. $225,000
2. Determine the margin of safety expressed as a percentage of sales:
a. 10%
b. 90%
c. 1%
d. 9%
3. Determine the contribution margin ratio:
a. 35%
b. 25%
c. 30%
d. 15%
4. Determine the operating income:
a. $35,000
b. $25,000
c. $30,000
d. $15,000
5. Determine the total assets:
a. $1,000,000 b. $1,900,000 c. $2,225,000 d. Cannot determine from information given.
A company that has a fiscal year end of December 31: (1) on October 1, $30,000 was paid for a one year fire insurance policy; (2) on June 30 the company lent its chief financial officer $28,000; principal and interest at 6% are due in one year; and (3) equipment costing $78,000 was purchased at the beginning of the year for cash.
Prepare journal entries for each of the above transactions. (If no entry is required for a particular transaction, select “No journal entry required” in the first account field.)
1. On October 1, $30,000 was paid for a one year fire insurance policy
2. On June 30 the company lent its chief financial officer $28,000; principal and interest at 6 are due in one year
3. Equipment costing $78,000 was purchased at the beginning of the year for cash.
In Discussion Question 15 1 above, you discussed intranets and extranets, and identified the importance of each to accountants. Now, assume that you are a partner in a medium sized, local CPA firm. Your firm has 4 partners, 10 staff accountants, 1 research assistant, and an administrative assistant. Your firm is considered a technology leader in the local area and you consider this a competitive advantage for your firm. At the weekly staff meeting next Friday you want to discuss the topic of developing an intranet for the firm. To be sure everyone is prepared to discuss this topic, you want to develop a ?~?~talking paper,’’ which is a one page summary of salient points that you want to be sure you cover in your presentation to everyone. Assume you are the research assistant and the partner asks you to prepare this one page discussion aid.
In November 2011, after having incorporated Cookie Creations Inc., Natalie begins operations. She has decided not to pursue the offer to supply cookies to Biscuits. Instead, she will focus on offering cooking classes. The following events occur.
Nov. 8 Natalie cashes in her U.S. Savings Bonds and receives $520, which she deposits in her personal bank account.
8 Natalie opens a bank account for Cookie Creations Inc.
8 Natalie purchases $500 of Cookie Creations’ common stock.
11 Cookie Creations purchases paper and other office supplies for $95. (Use Supplies.)
14 Cookie Creations pays $125 to purchase baking supplies, such as flour, sugar, butter, and chocolate chips. (Use Supplies.)
15 Natalie starts to gather some baking equipment to take with her when teaching the cookie classes. She has an excellent top of the line food processor and mixer that originally cost her $550. Natalie decides to start using it only in her new business. She estimates that the equipment is currently worth $300, and she transfers the equipment into the business in exchange for additional common stock.
16 The company needs more cash to sustain its operations. Natalie’s grandmother lends the company $2,000 cash, in exchange for a two year, 9% note payable. Interest and the principal are repayable at maturity.
17 Cookie Creations pays $900 for additional baking equipment.
18 Natalie schedules her first class for November 29. She will receive $100 on the date of the class.
25 Natalie books a second class for December 5 for $150. She receives a $60 cash down payment, in advance.
29 Natalie teaches her first class, booked on November 18, and collects the $100 cash.
30 Natalie’s brother develops a website for Cookie Creations Inc. that the company will use for advertising. He charges the company $600 for his work, payable at the end of December. (Because the website is expected to have a useful life of two years before upgrades are needed, it should be treated as an asset called Website.)
30 Cookie Creations pays $1,200 for a one year insurance policy.
30 Natalie teaches a group of elementary school students how to make Santa Claus cookies. At the end of the class, Natalie leaves an invoice for $300 with the school principal. The principal says that he will pass it along to the business office and it will be paid some time in December.
30 Natalie receives a $50 invoice for use of her cell phone. She uses the cell phone exclusively for Cookie Creations Inc. business. The invoice is for services provided in November, and payment is due on December 15.
Instructions
(a) Prepare journal entries to record the November transactions.
(b) Post the journal entries to the general ledger accounts.
Jack Herron is an IT auditor with McGee LLP, a large national public accounting firm. His manager, Amanda McDermott, has assigned him to the Linz Company audit. The McGee financial auditors have requested that the IT auditors complete several auditing steps so that they may make a decision about the scope of their audit work. The IT auditors also need to evaluate IT controls to provide the financial auditors with information in order to garner an opinion on internal controls as part of Sarbanes Oxley compliance. The Linz Company manufactures automotive parts and supplies them to the largest auto makers. The company has approximately 600 employees and has manufacturing operations and offices in three locations. Linz uses a mid sized ERP software program for manufacturers that they acquired and implemented two years ago. Amanda has asked Jack to develop an audit program to examine logical access to the ERP system. According to the Security Administrator at Linz, each employee is assigned a unique User ID and password when they join the company. The company is very concerned about security, so there is no remote access to the ERP system. The ERP system requires that users change their passwords every six months. System and group settings assigned to each User ID determine what parts of the ERP systems are available to each user.
Requirements:
1. Explain how a deficiency in controls over User IDs and passwords might impact Linz’s financial statements.
2. Explain why auditing User IDs and passwords should be part of the overall IT audit program for Linz.
3. Describe at least four control procedures that Linz could have in place to ensure that only authorized users access the system and that user access is limited according to their responsibilities.
Jack Merritt is the controller for Universal Concrete Products (UCP), a manufacturing company with headquarters in Columbus, Ohio. UCP has seven concrete product plants located throughout the Midwest region of the United States. The company has recently switched to a decentralized organizational structure. In the past, the company did not try to measure profitability at each plant. Rather, all revenues and expenses were consolidated to produce just one income statement. Under the new organizational structure, each concrete manufacturing plant is headed by a general manager, who has responsibility for operating the plant like a separate company. Jack has asked one of his accountants, Scott McDermott, to organize a small group to be in charge of performance analysis. This group is to prepare monthly reports on performance for each of the seven plants. These reports consist of budgeted and actual income statements. Written explanations and appraisals are to accompany variances. Each member of Scott’s group has been assigned to one specific plant and is encouraged to interact with management and staff in that plant in order to become familiar with operations. After a few months, the controller began receiving complaints from the general managers at several of the plants. Common to many of these complaints is the observation that Scott’s staff members are interfering with operations and, in general, are ?~?~getting in the way.’’ In addition, the managers worry that someone is constantly ?~?~looking over their shoulders’’ to see if they are operating in line with budget. Two plant managers have pointed out that the work the performance analysis staff is trying to do should be done by them (i.e., explain the variances). As Andrew Boord, one of the most vocal plant managers, stated, ?~?~how can these accountants explain the variances when they don’t know anything about the industry? They don’t know what’s happening with our suppliers or our labor unions, and they haven’t got a clue about our relationships with our customers.’’
The president of Universal Concrete Products, Hector Eschenbrenner, has also complained about the new system for performance evaluation reporting. He claims that he is unable to wade through the seven detailed income statements, variances, and narrative explanations of all variances each month. As he put it, ?~?~I don’t have time for this and I think much of the information I am receiving is irrelevant!’’
Requirements
1. Do you think it is a good idea to have a special staff in charge of performance evaluation and analysis?
2. In a decentralized organization such as this one, what would seem to be the best approach to performance evaluation?
3. What information would you include in a performance evaluation report for Mr. Eschenbrenner?
Jay Beck works for the NSR Consulting Firm. His friend, Hank Henley, is the general manager and majority stockholder of the Pacific Worldwinds, a professional football team. Hank asked Jay to design an online, real time computer system for ?~?~the efficient operation of the football franchise.’’ Jay was quite confused because he could not think of any possible uses for an online, real time system within the operational activities of a football team (or any other type of athletic team). Assume that you are also employed at the consulting firm. Provide several suggestions to Jay concerning specific areas of athletic teams’ (football teams, baseball teams, etc.) information systems where an online, real time computer configuration might be beneficial to managerial decision making.
Joy Tiede opened Tiede Company, a veterinary business in Neosho, Wisconsin, on August 1, 2012. On August 31, the balance sheet showed: Cash $9,000; Accounts Receivable $1,700; Supplies $600; Equipment $5,000; Accounts Payable $3,600; Common Stock $12,000; and Retained Earnings $700. During September, the following transactions occurred.
Sept. 2 Paid $3,400 cash for accounts payable due.
5 Received $1,200 from customers in payment of accounts receivable.
8 Purchased additional office equipment for $5,100, paying $1,000 in cash and the balance on account.
13 Earned revenue of $10,600, of which $2,300 is paid in cash and the balance is due in October.
17 Paid a $600 cash dividend.
22 Paid salaries $900, rent for September $1,100, and advertising expense $250.
26 Incurred utility expenses for the month on account $220.
30 Received $5,000 from Hilldale Bank on a 6 month note payable.
Instructions
(a) Prepare a tabular analysis of the September transactions beginning with August 31 balances. The column headings should be: Cash + Accounts Receivable + Supplies + Equipment = Notes Payable + Accounts Payable + Common Stock + Retained Earnings + Revenues ?^? Expenses ?^? Dividends. Include margin explanations for any changes in Retained Earnings.
(b) Prepare an income statement for September, a retained earnings statement for September, and a classified balance sheet at September 30, 2012.
Kara and Scott Baker own a small retail company, Basic Requirements, with one store located in a small college town and a website through which customers can make purchases. The store sells traditional but up to date clothing for young women such as tee shirts, jeans, chinos, and skirts. The store has been open for ten years and the owners added the online shopping capability just last year. Online business has been slow, but Kara and Scott believe that as student customers graduate from the university they will use the online site to continue to have access to their favorite store from their college days. The store’s website has many features. It classifies clothing by type and customers can view items in various colors. To purchase an item, the user clicks on the icon depicting the desired product and adds it to an individual online shopping basket. The customer can view the basket and make a purchase at any time while browsing the site. When checking out at the site, a new customer must first register, providing billing and shipping information, as well as credit card data. Returning customers log in with the identification code and password they created when they registered. They also use that method to check on an order status. If a customer forgets their login information, they can simply click on a link to have it emailed to them. Once a user registers, Basic Requirements’ system will automatically add their email address to a file that they use to regularly send out emails about sales and other promotions. Kara and Scott are concerned about internal controls in their business. They especially worry because they know that their web access creates some special risks. They have asked one of their customers who is an accounting student at the university to evaluate the reliability of their information system, with respect to security, availability, and privacy.
Requirements:
1. Identify two security, availability, and privacy risks that Basic Requirements faces.
2. For each risk identified above, describe two internal controls Basic Requirements should use to protect against these risks.
3. The accounting student who is evaluating the reliability of Basic Requirements’ information system is interested in becoming an IT auditor. Describe some of the specific actions an IT auditor would take to verify that Kara and Scott have adequate controls in place concerning privacy.
Karleen’s Catering Service provides catered meals to individuals and businesses.
Karleen’s purchases its food ready to serve from Mel’s Restaurant. In order to prepare a realistic trial balance, the events described below are aggregations of many individual events during 2009.
a. During the year, Karleen’s paid office rent of $11,500.
b. Telephone expenses incurred and paid were $950.
c. Wages of $67,400 were earned by employees and paid during the year.
d. During the year, Karleen’s provided catering services:
On credit ………………….$142,100
For cash …………………… 21,700
e. Karleen’s paid $62,100 for food and beverage supplies purchased.
f. Karleen’s paid dividends in the amount of $4,000.
g. Karleen’s collected accounts receivable in the amount of $134,200.
Required:
1. Analyze the events for their effect on the accounting equation.
2. Prepare journal entries (ignore the date since these events are aggregations of individual events).
3. Post the journal entries to ledger accounts.
4. Prepare a trial balance. Assume that all beginning account balances at January 1, 2009, are zero.
Calvin Consulting initially records prepaid and unearned items in income statement accounts. Given this company’s accounting practices, which of the following applies to the preparation of adjusting entries at the end of its first accounting period?
The cost of unused office supplies is recorded with a debit to Supplies Expense and a credit to Office Supplies.
Unearned fees (on which cash was received in advance earlier in the period) are recorded with a debit to Consulting Fees Earned and a credit to Unearned Consulting Fees.
Earned but unbilled (and unrecorded) consulting fees are recorded with a debit to Unearned Consulting Fees and a credit to Consulting Fees Earned.
Unpaid salaries are recorded with a debit to Prepaid Salaries and a credit to Salaries Expense.
AND
The following information is taken from Brooke Company’s unadjusted and adjusted trial balances.
Unadjusted
Adjusted
Debit
Credit
Debit
Credit
Prepaid insurance
$
4,100
$
3,700
Interest payable
$
0
$
800
Given this information, which of the following is likely included among its adjusting entries?
A $400 debit to insurance expense and an $800 debit to interest payable.
A $400 debit to insurance expense and an $800 debit to interest expense.
A $400 credit to prepaid insurance and an $800 debit to interest payable.
AND
In its first year of operations, Roma Co. earned $45,000 in revenues and received $37,000 cash from these customers. The company incurred expenses of $25,500 but had not paid $5,250 of them at year end. The company also prepaid $6,750 cash for expenses that would be incurred the next year. Calculate the first year’s net income under both the cash basis and the accrual basis of accounting.
APPLY THE CONCEPTS: Calculate equivalent units of production
Recall that In the Doghouse has three processes. The frame, floor and interior walls of a batch of doghouses is built in process A at In the Doghouse. It is estimated that process A completes 35% of the production process. In process B, the insulation, exterior walls and roof base are added. It is estimated that process B completes the next 40% of the production process. The shingles are added and the exterior is stained in process C, which completes the production process.
Consider each of the following scenarios independently.
Scenario 1: Assume that two batches of doghouses were started and completed during the current month. The total cost incurred for the completed units is $4,924. Four more batches were also placed into production during the month. These four batches were completed through process A for a cost of $357.60. Determine the equivalent units for the current month and the unit cost for the current month. (Don’t forget that one batch is equal to ten doghouses.)
Step 1: Calculate equivalent units.
Units Completed
+ Units in EWIP X Percent Complete
Equivalent Units
Step 2: Calculate the per unit cost. (Round to the nearest cent.)
$
=
$
Scenario 2: Assume that three batches of doghouses were started and completed during the current month for a total cost of $7,386. Two more batches were also placed into production. These two batches were completed through process A and process B. The cost for those two batches is $3,684. Determine the equivalent units for the current month and the unit cost for the current month. (Don’t forget that one batch is equal to ten doghouses.)
Step 1: Calculate equivalent units.
Units Completed
+ Units in EWIP X Percent Complete
Equivalent Units
Step 2: Calculate the per unit cost. (Round to the nearest cent.)
$
=
$
Scenario 3: Assume that one batch of doghouses was started and completed during the current month. Use the cost table for each process determined back in the first section of this problem to determine the cost of the completed batch. Four more batches were also placed into production during the month. The four batches were completed through process A and process B as well as part of process C. At the end of the month, it is estimated that the four batches in ending Work in Process are 90% complete. The total costs for these four batches is $8,856, which includes the costs transferred from process A and process B and the costs incurred in process C as of the end of the month. Determine the equivalent units for the current month and the unit cost for the current month. (Don’t forget that costs listed in the table are for one batch of ten doghouses.)
Step 1: Calculate equivalent units.
Units Completed
+ Units in EWIP X Percent Complete
Equivalent Units
Step 2: Calculate the per unit cost. (Round to the nearest cent.)
During April, the production department of a process manufacturing system completed a number of units of a product and transferred them to finished goods. Of these transferred units, 60,000 were in process in the production department at the beginning of April and 240,000 were started and completed in April. April’s beginning inventory units were 60% complete with respect to materials and 40% complete with respect to labor. At the end of April, 82,000 additional units were in process in the production department and were 80% complete with respect to materials and 30% complete with respect to labor.
The production department had $850,000 of direct materials and $650,000 of direct labor cost charged to it during April. Also, its beginning inventory included $118,840 of direct materials cost and $47,890 of direct labor.
1&2.
Using the weighted average method, compute the direct materials cost and the direct labor cost per equivalent unit and assign April’s costs to the department’s output. (Round “Cost per EUP” to 2 decimal places.)
Assertions are expressed or implied representations by management that are reflected in the financial statement components. The auditor performs audit procedures to gather evidence to test those assertions.
Required:
Your client is All’s Fair Appliance Company, an appliance wholesaler. Select the most appropriate audit procedure from the following list and enter the number in the appropriate place on the grid. (An audit procedure may be selected once, more than once, or not at all.)
Audit Procedure:
1. Review of bank confirmations and loan agreements.
2. Review of drafts of the financial statements.
3. Select a sample of shipping documents, match them with related sales invoices, and determine that they have been included in the sales journal and accounts receivable subsidiary ledger.
4. Select a sample of shipping documents for a few days before and after year end.
5. Confirmation of accounts receivable.
6. Review of aging of accounts receivable with the credit manager.
Select the procedure that corresponds to each of the following situations:
a. Ensure that the entity has legal title to accounts receivable (rights and obligations). 1, 2, 3,4, 5 or 6 from the list above?
b. Determine that recorded accounts receivable include all amounts owed to the client (completeness). 1, 2, 3,4, 5 or 6 from the list above?
c. Verify that all accounts receivable are recorded in the correct period (cutoff). 1, 2, 3,4, 5 or 6 from the list above?
d. Ensure that the allowance for uncollectible accounts is properly stated (valuation and allocation). 1, 2, 3,4, 5 or 6 from the list above?
e. Confirm that recorded accounts receivable are valid (existence). 1, 2, 3,4, 5 or 6 from the list above?
Atkinson’s Reliable Tools make two products that use similar raw materials: #587Q and #253X. Estimated production needs for a unit of each product follow. #587Q #253X Steel (in pounds) 3 5 Wood (in board feet) 0.5 0.2 Direct labor (in hours) 2 3 Machine hours 0.5 0.7 Estimated sales in units by product for 2014 are 80,000 of #587Q and 30,000 of #253X. Additionally, estimated beginning and desired ending inventory quantities for 2014 are as follows. Beginning Ending #587Q (units) 800 640 #253X (units) 1,200 900 Steel (in pounds) 2,000 1,400 Wood (in board feet) 800 600 Overhead is applied to production at the rate of $15 per machine hour and the direct labor wage rate is $10.50 per hour. Prepare the production, purchases, direct labor, and overhead budgets for 2014.
Check points
Production totals for each column: 79,840 & 29,700 Purchases in pounds total 387,420 Purchases in board feed total 45,660 Cost of DL column totals: 1,676,640; 935,550 & 2,612,190 Cost of OH column totals: 598,800; 311,850 & 910,650
Austin Enterprises makes and sells three types of dress shirts. Management is trying to determine the most profitable mix. Sales prices, demand, and use of manufacturing inputs follow:
Basic
Classic
Formal
Sales price
$
32
$
66
$
180
Maximum annual demand (units)
20,200
10,200
29,900
Input requirement per unit
Direct material
0.70 yards
0.10 yards
0.70 yards
Direct labor
0.80 hours
1.80 hours
7.50 hours
Costs
Variable costs
Materials
$
18
per yard
Direct labor
$
14
per hour
Factory overhead
$
2
per direct labor hour
Marketing
10
% of sales price
Annual fixed costs
Manufacturing
$
36,200
Marketing
$
8,020
Administration
$
30,200
The company faces two limits: (1) the volume of each type of shirt that it can sell (see maximum annual demand) and (2) 30,200 direct labor hours per year caused by the plant layout.
Required:
a.
How much operating profit could the company earn if it were able to satisfy the annual demand?
b.
Which of the three product lines makes the most profitable use of the constrained resource, direct labor?
Classic
Basic
Formal
c.
Given the information in the problem so far, what product mix do you recommend?
Classic and Basic
Classic and Formal
Basic and Formal
d.
How much operating profit should your recommended product mix generate?
e.
Suppose that the company could expand its labor capacity by running an extra shift that could provide up to 10,200 more hours. The direct labor cost would increase from $14 to $18 per hour for all hours of direct labor used. What additional product(s) should Austin manufacture and what additional profit would be expected with the use of the added shift?
Babuca Corporation has provided the following production and total cost data for two levels of monthly production volume. The company produces a single product.
Production volume
12,500
units
14,000
units
Direct materials
$713,750
$799,400
Direct labor
$256,250
$287,000
Manufacturing overhead
$1,004,700
$1,027,350
The best estimate of the total cost to manufacture 13,300 units is closest to: (Do not round intermediate calculations.)
Babuca Corporation has provided the following production and total cost data for two levels of monthly production volume. The company produces a single product.
Production volume
6,000
units
8,500
units
Direct materials
$341,400
$483,650
Direct labor
$87,000
$123,250
Manufacturing overhead
$1,005,400
$1,040,150
The best estimate of the total variable manufacturing cost per unit is: (Do not round intermediate calculations.)
3. According to the text, data transcription would only be necessary for a computerized accounting information system.
5.Information processing personnel usually only use selective edit checks in data processing applications due to the cost of computer time necessary for editing.
7.The audit trail is easier to follow in an online computerized system as compared to a batch system.
17.A hash total is obtained by counting all documents or records to be processed.
5.Integrated accounting software programs process accounting transactions only.
21.It is relatively easy to determine the costs of an ERP system.
The Bags and Luggage Company had the following account balances as of January 1:
Direct Materials Inventory
$
9,200
Work in Process Inventory
78,400
Finished Goods Inventory
53,600
Manufacturing Overhead
0
During the month of January, all of the following occurred:
1.
Direct labor costs were $42,000 for 1,800 hours worked.
2.
Direct materials costing $35,750 and indirect materials costing $3,500 were purchased.
3.
Sales commissions of $16,500 were earned by the sales force.
4.
$26,000 worth of direct materials were used in production.
5.
Advertising costs of $6,300 were incurred.
6.
Factory supervisors earned salaries of $12,000.
7.
Indirect labor costs for the month were $3,000.
8.
Monthly depreciation on factory equipment was $4,500.
9.
Utilities expense of $7,800 was incurred in the factory.
10.
Luggage with manufacturing costs of $70,100 were transferred to finished goods.
11.
Monthly insurance costs for the factory were $4,200.
12.
$5,000 in property taxes on the factory were incurred and paid.
13.
Luggage with manufacturing costs of $89,000 were sold for $145,000.
a.
Assume If Bags and Luggage assigns manufacturing overhead of $34,400, what will be the balances in the Direct Materials, Work in Process, and Finished Goods Inventory accounts at the end of January?(Input all amounts as positive values. Omit the “$” sign in your response.)
b. As of January 31, what will be the balance in the Manufacturing Overhead account? (Input all amounts as positive values.Omit the “$” sign in your response.)
Manufacturing overhead
$
c.
What was Bags and Luggage’s operating income for January? (Input all amounts as positive values.Omit the “$” sign in your response.)
Bakker Corporation applies manufacturing overhead on the basis of direct labor hours. At the beginning of the most recent year, the company based its predetermined overhead rate on total estimated overhead of $72,160 and 2,200 estimated direct labor hours. Actual manufacturing overhead for the year amounted to $74,260 and actual direct labor hours were 2,050.
The predetermined overhead rate for the year was: (Round your answer to 2 decimal places.)
Bakker Corporation has provided the following production and average cost data for two levels of monthly production volume. The company produces a single product.
Production volume
8,500
units
9,500
units
Direct materials
$97.70
per unit
$97.70
per unit
Direct labor
$27.60
per unit
$27.60
per unit
Manufacturing overhead
$72.30
per unit
$68.30
per unit
The best estimate of the total variable manufacturing cost per unit is:
At the beginning of the current fiscal year, the balance sheet of Cummings Co. showed liabilities of $438,000. During the year, liabilities decreased by $72,000; assets increased by $154,000; and paid in capital increased by $20,000 to $380,000. Dividends declared and paid during the year were $124,000. At the end of the year, stockholders’ equity totaled $758,000.
Required:
Calculate net income or loss for the year. (Amounts to be deducted should be indicated with a minus sign.)
At the beginning of the year, manufacturing overhead for the year was estimated to be $269,620. At the end of the year, actual direct labor hours for the year were 22,800 hours, the actual manufacturing overhead for the year was $262,900, and manufacturing overhead for the year was overapplied by $15,260. If the predetermined overhead rate is based on direct labor hours, then the estimated direct labor hours at the beginning of the year used in the predetermined overhead rate must have been: (Round your intermediate calculations to 2 decimal places.)
Bella Beauty Salon’s unadjusted trial balance for the current year follows:
Bella Beauty Salon
Trial Balance
December 31
Additional information:
a. An insurance policy examination showed $1,400 of expired insurance.
b. An inventory count showed $280 of unused shop supplies still available.
c. Depreciation expense on shop equipment, $350.
d. Depreciation expense on the building, $2,220.
e. A beautician is behind on space rental payments, and this $200 of accrued revenue was unrecorded at the time the trial balance was prepared.
f. $800 of the Unearned Rent account balance was earned by year end.
g. The one employee, a receptionist, works a five day workweek at $50 per day. The employee was paid last week but has worked four days this week for which she has not been paid.
h. Three months’ property taxes, totaling $450, have accrued. This additional amount of property taxes expense has not been recorded.
i. One month’s interest on the note payable, $600, has accrued but is unrecorded.
Based on the above information, prepare the adjusting journal entries for Bella’s Beauty Salon.
Use the above information to prepare the adjusted trial balance for Bella’s Beauty Salon.
Beta Corporation purchased $120,000 worth of land by paying 12,000 cash and signing a $108,000 mortgage. Immediately prior to this transaction the corporation had assets, liabilities, and owners’ equity in the amounts of $152,000, $31,000, and $121,000 respectively. What is the total amount of Beta Corporation’s assets after this transaction has been recorded?
2. Dan’s Hardware is a small hardware store in the rural township of Twin Bridges. It rarely extends credit to its customers in the form of an account receivable. The few customers that are allowed to carry accounts receivable are long time residents of Twin Bridges, with a history of doing business at Dan’s Hardware. What method of accounting for uncollectible receivables should Dan’s Hardware use? Why?
4. After the accounts are adjusted and closed at the end of the fiscal year, Accounts Receivable has a balance of $673,400, and Allowance for Doubtful Accounts has a balance of $11,900. Describe how the accounts receivable and the allowance for doubtful accounts are reported on the balance sheet.
5. A firm has consistently adjusted its allowance ac count at the end of the fiscal year by adding a fixed percent of the period’s net sales on account. After seven years, the balance in Allowance for Doubtful Accounts has become very large in relationship to the balance in Accounts Receivable. Give two possible explanations.
7. Neptune Company issued a note receivable to Sailfish Company. (a) Who is the payee?
(b) What is the title of the account used by Sailfish Company in recording the note?
8. If a note provides for payment of principal of $85,000 and interest at the rate of 6%, will the interest amount to $5,100? Explain.
9. The maker of a $240,000, 6%, 90 day note receivable failed to pay the note on the due date of November 30. What accounts should be debited and credited by the payee to record the dishonored note receivable?
33.Harrisburg Company has set the following standards for one unit of its product:
Direct Material $36 per unit
Quantity = 4 pounds per unit
Price = $9 per pound
Direct Labor $63 per unit
Hours = 3 hours per unit
Rate = $21 per hour
Actual costs incurred in the production of 2,000 units were as follows:
Direct Material: $72,540 ($9.30 per pound)
Direct Labor: $120,840 ($21.20 per hour)
All materials purchased were used during the period.
REQUIRED: Compute the direct material price and quantity variances and the direct labor rate and efficiency variances. Indicate whether each variance is favorable or unfavorable. Use computations or goalpost format to show variances.
6 41 Compehensive budgeting problem: activity based costing, operating and financial budgets. Borkenstick makes a very popular undyed cloth sandal in one style, but in Regular and Deluxe. The Regular sandals have such soles and the Deluxe sandals have cloth covered wooden soles. Borkenstick is preparing its budget for June 2012 , and has estimated sales based on past experience.
OTHER INFORMATION FOR THE MONTH OF JUNE FOLLOWS:
Input Prices Direct Materials Cloth $3.50 per Yard Wood $5.00 per board foot Direct Manufacturing labor $10 per direct manufacturing labor hour
INPUT QUANTITIES PER UNIT OF OUTPUT(PER PAIR OF SANDALS) Direct Materials REGULAR DELUXE Cloth 1.3 Yards 1.5 Yards Wood 0 2 b.f Direct manufacturing labor hours (DMLH) 5 hours 7 hours Setup hours per batch 2 hours 3 hours
Inventory Information, Direct Materials Cloth Wood Beginning Inventory 610 Yards 800 b.f. Target ending inventory 386 yards 295 b.f Cost of beginning inventory $2,146 $4,040 Borkenstick accounts for direct materials using a FIFO cost flow assumption.
Sales and Inventory Information, Finished Goods REGULAR DELUXE Expected sales in units (pairs of sandals) 2000 3000 Selling Price $80 $130 Target ending inventory in units 400 600 Beginning inventory in units 250 650 Beginning inventory in dollars $15,500 $61,750
Borkenstick uses a FIFO cost flow assumption for finished goods inventory. All the sandals are made in bathces of 50 pairs of sandals. Borenstick incurs manufacturing overhead costs, marketing and general admin, and shipping costs. Besides materials and labor, manufacturing costs include setup, processing, and inspection costs. Borkenstick ships 40 pairs of sandals per shipment. Borkenstick uses activity based costing and has classified al overhead costs for the month of June as shown in the following chart.
COST TYPE Denominator Activity Rate Maufacturing Setup Setup hours $12 per setup hours Processing Direct manufacturing labor hours $1.20 per DMLH Inspection Number of pairs of sandals $0.90 per pair
Nonmanufacturing: Marketing and general administration Sales revenue 8% Shipping Number of shipments $10 per shipment
****Instructions:
2. Borkenstick’s balance sheet for May 31 follows. Use it and the following information to prepare a cash budget for Borkenstick for June. Round to dollars. *All sales are on account; 60% are collected in the month of the sale, 38% are collected the following month, and 2% are never collected and written off as bad debt.
*All purchases of materials are on account. Borkenstick pays for 80% of purchases in the month of purchase and 20% in the following month. *All other costs are paid in the month incurred, including the declaration and payment of a $10,000 cash dividend in June. *Borkenstick is making monthly interest payments of 0.5% (6% per year) on a $100,000 long term loan. *Borkenstick plans to pay the $7200 pf taxes pwed as pf May 31 in the month of June. Income tax expense for June is zero *30% of processing and setup costs, and 10% of marketing and general administration costs are depreciation
Borkenstick Balance Sheet as of May 31 ASSETS Liabilities and Equity Cash $6,290 Account payable $10,400 Account receivable $216,000 Taxes payable 7,200 Less: Allowance for bad debts 10,800 205,200 Interest payable 500 Inventories Long termdebt 100,000 Direct Materials 6,186 Common Stock 200,000 Finished Goods 77,250 Retained earnings 465,936 Fixed Assets $580,000 Total liabilities and equity $784,036 Less: Accumulated depreciation 90,890 489,110 Total Assets $784,036
Appendix The Case for Global Accounting Standards: Arguments and Evidence Ann Tarca Professor of Accounting, University of Western Australia. 1 Academic Fellow Research, IFRS Foundation Abstract This paper outlines the arguments for a common set of accounting standards and the forces that have promoted adoption of International Financial Reporting Standards (IFRS). Widespread use of IFRS since 2005 provides an opportunity for empirical investigation of the benefits of IFRS. I summarise results of studies that are relevant for assessing the role of IFRS in both developing and developed capital markets. Introduction The expected benefits of global accounting standards are compelling. The use of one set of high quality standards by companies throughout the world has the potential to improve the comparability and transparency of financial information and reduce financial statement preparation costs. When the standards are applied rigorously and consistently, capital market participants will have higher quality information and can make better decisions. Thus markets allocate funds more efficiently and firms can achieve a lower cost of capital. These arguments have been used to support the adoption of International Financial Reporting Standards (IFRS) for financial reporting for consolidated listed entities in European Union (EU) member states (EC1606/2002). Other jurisdictions have cited similar reasons for adoption of IFRS (see Brown, 2011), reflecting the demand for high quality standards that can improve the quality and comparability of financial reporting and promote the development of national capital markets and the integration of markets internationally. For the first time in history, we have substantial numbers of firms domiciled in different countries using common standards. Consequently we can collect evidence about the extent to which we observe benefits in capital markets. This paper presents research findings about the…
The accounting records of Speed Up Auto Parts on August 31, 2008, list the following amounts:
Cost of Goods Sold………….104,000
Sales Discounts……………..4,600
Equipment……………………..65,200
Salary Payable……………2,200
Accounts Payable………………..19,500
Cam Engine, Withdrawals……………….31,600
Sales Returns & Allowances…………..14,300
Selling Expenses……………………..21,400
Cash………………………………………….15,700
Inventory, Aug. 31, 2007……………………….40,000
Inventory, Aug. 31, 2008…………………………..43,200
Sales Revenue……………………………………….206,500
Notes Payable…………………………………………..6,100
Accumulated Depreciation, Equipment………17,700
Cam Engine, Capital…………………………………..66,000
General & Administrative Expenses……………15,100
Accounts Receivables……………………………….6,900
Requirements:
1. Prepare a multistep income statement to show the computation of Speed Up Auto Parts net sales revenue, gross profit, and net income for the year ended Aug. 31, 2008.
2. Cam Engine, owner of the business, strives to earn gross profit of $85,000 and net income of $45,000. Did Cam achieve these goals? Explain.
3. Compute the company’s gross profit percentage and rate of inventory turnover for 2008.
Knoxville Musical Sales, Inc. is located at 5500 Kingston Pike, Knoxville, TN 37919. The corporation uses the calendar year and accrual basis for both book and tax purposes. It is engaged in the sale of musical instruments with an employer identification number (EIN) of 75 2008006. The company incorporated on December 31, 2005 and began business on January 2, 2006. Table 1 contains the balance sheet information at January 1, 2010 and December 31, 2010. Table 2 contains the income statement for 2010. These schedules are presented on a book basis.
Table 1
Knoxville Musical Sales, Inc. %u2013 Book Balance Sheet Information
Knoxville Musical Sales, Inc. Book Income Statement 2010
Sales $ 9,000,000
Returns (225,000)
Net Sales $ 8,775,000
Beginning Inventory $ 2,250,000
Purchases 4,950,000
Ending inventory (3,150,000)
Cost of Goods Sold (4,050,000)
Gross Profit $ 4,725,000
Expenses
Amortization $ 0
Depreciation 142,833
Repairs 18,720
General insurance 49,500
Officer%u2019s life insurance 40,500
Officer%u2019s compensation 585,000
Other salaries 360,000
Utilities 64,800
Advertising 43,200
Legal & Accounting 45,000
Charitable contributions 27,000
Employment tax 56,250
State tax 67,500
Interest 189,000
Bad debts 41,783
Total Expenses (1,731,086)
Loss on exchange of truck (18,000)
Gain on sale of equipment 90,000
Interest on muni bonds 4,500
Net gain on stock sales 14,000
Dividend Income 10,800
Net income before FIT $ 3,095,214
Federal income tax (1,063,000)
Net income per books $ 2,032,214
Other information follows:
Estimated Tax Payments:
The corporation deposited estimated tax payments as follows:
April 15, 2010 $118,000
June 15, 2010 243,000
September 15, 2010 285,000
December 15, 2010 285,000
Total $931,000
Taxable income in 2010 was $2,200,000, and the 2010 tax was $748,000. The corporation earned its 2008 taxable income evenly throughout the year. Therefore, it does not use the annualization or seasonal methods. Form 2220 is not required.
Inventory and Cost of Goods Sold (Schedule A):
The corporation uses the periodic inventory method and prices its inventory using the lower of FIFO cost or market. Only beginning inventory, ending inventory and purchases should be reflected in Schedule A. No other costs or expenses are allocated to cost of goods sold. Note: the corporation is exempt from the uniform capitalization rules because average gross income fore the previous three years was less than $10 million.
Compensation of Officers (Schedule E):
(a) (b) (c) (d) (f)
Mary Travis 343 82 7091 100% 50% $265,000
John Willis 783 97 9105 100% 25% 160,000
Chris Parker 465 34 2245 100% 25% 160,000
Total $585,000
Bad Debts:
For tax purposes, the corporation uses the direct write off method of deducting bad debts. For book purposes, the corporation uses an allowance for doubtful accounts. During 2010, the corporation charged $36,000 to the allowance account, such amount representing actual write offs for 2010.
Additional Information (Schedule K):
Line 1b Accrual Line 11 Do not check box
2a 451140 12 Not applicable
2b Retail Sales 13 No
2c Musical Instruments
3 4 No
5 Yes, 50%
6 7 No
8 Do not check box
9 Fill in the correct amount
10 3
Organization Expenses:
The corporation incurred $6,000 of organizational expenditures on January 2, 2006. For book purposes, the corporation expensed the entire expenditure pursuant to Statement of Position 98 5. For tax purposes, the corporation elected under Section 248 to deduct $5,000 and to amortize the remainder over 180 months, with a full month%u2019s amortization taken for January 2006. The corporation reports this amortization in Part IV of Form 4562 and includes it in %u201COther Deductions%u201D on Form 1120, Line 26.
Capital Gains and Losses:
The corporation sold 100 shares of PDQ Corp. common stock on March 7, 2010 for $95,000. The corporation acquired the stock on December 15, 2008 for $65,000. The corporation also sold 75 shares of JSB Corp. common stock on September 17, 2010 for $62,000. The corporation acquired this stock on September 18, 2006 for $78,000. The corporation has an $8,000 capital loss carryover from 2009.
Fixed Assets and Depreciation:
For book purposes: The corporation uses straight line depreciation over the useful lives of assets as follows: Store building, 50 years; Equipment, 15 years (old) and 10 years (new); and Trucks, five years (old and new). The corporation takes a half year%u2019s depreciation in the year of acquisition and the year of disposition and assumes no salvage value. The book financial statements reflect these calculations. The designation %u201Cold%u201D refers to property placed in service before 2010, and the designation %u201Cnew%u201D refers to property placed in service in 2010.
For tax purposes: All assets are MACRS property as follows: Store building, 30 year nonresidential real property; Equipment, seven year property; Trucks, five year property. The corporation acquired the store building for $2.5 million and placed it in service on January 2, 2006. The corporation acquired two pieces of equipment for $200,000 (Equipment 1) and $400,000 (Equipment 2) and placed them in service on January 2, 2006. The corporation acquired the old trucks for $230,000 and placed them in service on July 18, 2008. The corporation did not make the expensing election under Section 179 on any property acquired before 2010 and elected not to claim bonus depreciation. Also, the corporation did not elect the straight line option or the alternative depreciation system under MACRS. Accumulated tax depreciation through December 31, 2009 on these properties is as follows:
Store Building $189,725
Equipment 1 112,540
Equipment 2 225,080
Trucks 119,600
On November 16, 2010, the corporation sold for $250,000 Equipment 1 that originally cost $200,000 on January 2, 2006. The corporation had no Section 1231 losses from prior years. In a separate transaction on November 17, 2010, the corporation acquired and placed in service a piece of equipment costing $440,000. These two transactions do not qualify as a like kind exchange under Section 1031. The new equipment is seven year property. The corporation made the Section 179 expensing election with regard to the new equipment.
Other Information:
%u2022 The corporation%u2019s activities do not qualify for U.S. production activities deduction.
%u2022 Ignore the AMT and accumulated earnings tax.
%u2022 The corporation received the $10,800 in dividends from taxable, domestic corporations of which Knoxville Musical Sales, Inc owns less than 20%.
%u2022 The corporation paid $90,000 in cash dividends to its shareholders during the year and charged the payment directly to retained earnings.
%u2022 The corporation issued the bonds payable at par. Thus, no premium or discount need be amortized.
%u2022 The corporation is not entitled any credits.
Required
Prepare the 2010 corporate tax return for Knoxville Musical Sales, Inc. along with any necessary supporting forms and schedules.
You have accumulated $4,150 and are looking for the best rate of return that can be earned over the next year. A bank savings account will pay 10%. A one year bank certificate of deposit will pay 12%, but the minimum investment is $7,150.
Required:
(a)
Calculate the amount of return you would earn if the $4,150 were invested for one year at 10%. (Round your answer to nearest whole number. Omit the “$” sign in your response.)
Amount of return
$
(b)
Calculate the net amount of return you would earn if $3,000 were borrowed at a cost of 20%, and then $7,150 were invested for one year at 12%. (Round your answer to nearest whole number. Omit the “$” sign in your response.)
Net amount of return
$
(c)
Calculate the net rate of return on your investment of $4,150 if you accept the strategy of part b.(Round your intermediate calculations to nearest whole dollar amount and final percentage answer to 2 decimal places. Omit the “%” sign in your response.)
A. begins with a forecast of products and services to be produced, and customers served.
B. ends with a forecast of products and services to be produced, and customers served.
C. parallels the flow of analysis that is associated with activity based costing.
D. reverses the flow of analysis that is associated with activity based costing.
E. is best described by choices “A” and “D” above.
A company that uses activity based budgeting performs the following:
1″Plans activities for the budget period. 2″Forecasts the demand for products and services as well as the customers to be served. 3″Budgets the resources necessary to carry out activities.
Which of the following denotes the proper order of the preceding activities?
A. 1 2 3.
B. 2 1 3.
C. 2 3 1.
D. 3 1 2.
E. 3 2 1.
May Production Company, which uses activity based budgeting, is in the process of preparing a manufacturing overhead budget. Which of the following would likely appear on that budget?
A. Batch level costs: Production setup.
B. Unit level costs: Depreciation.
C. Unit level costs: Maintenance.
D. Product level costs: Insurance and property taxes.
FastTec, which sells electronics in retail outlets and on the Internet, uses activity based budgeting in the preparation of its selling, general, and administrative expense budget. Which of the following costs would the company likely classify as a unit level expense on its budget?
A. Media advertising.
B. Retail outlet sales commissions.
C. Salaries of web site maintenance personnel.
D. Administrative salaries.
E. Salary of the sales manager employed at store no. 23.
York Corporation plans to sell 41,000 units of its single product in March. The company has 2,800 units in its March 1 finished goods inventory and anticipates having 2,400 completed units in inventory on March 31. On the basis of this information, how many units does York plan to produce during March?
A. 40,600.
B. 41,400.
C. 43,800.
D. 46,200.
E. Some other amount.
The following data relate to product no. 89 of Des Moines Corporation:
Direct material standard: 3 square feet at $2.50 per square foot Direct material purchased: 30,000 square feet at $2.60 per square foot Direct material consumed: 29,200 square feet Manufacturing activity: 9,600 units completed
The direct material quantity variance is:
A. $1,000F.
B. $1,000U.
C. $1,040F.
D. $1,040U.
E. $2,000F.
(Use #11 info) The direct material price variance is:
Adjsutment inforamtion is as follows: a. Supplies on hand as of June 30 2013, $450 b. Insurance premiums that expired during the year $2420 c. Depreciation on equipment during the year $1500 d. Included in the rent expense of $30000 is $1200 that is prepaid for july 201 e. Salaries accrued but not [paid at june 30 2013, $1440 f. Merchandise inventory on june 30 2013 $68864
Requirement: 1. As the acountant for Sport Connection, you have been asked prepare adjusting entries and finacial statment to complete the acounting cycle 2. Enter the formular in the appropriate cells on the workssheet. then enter the adjusting amount in th columns E and G.Also in column D or F, insert tge letter corresponding to the adjusting entry (a e). 3. Complete the income statement and balance sheet
Adjusting entries affect at least one balance sheet account and at least one income statement account. For the following entries, identify the account to be debited and the account to be credited. Indicate which of the accounts is the income statement account and which is the balance sheet account.
a.
Entry to record revenue earned that was previously received as cash in advance.
Alden Company has decided to use a contribution format income statement for internal planning purposes. The company has analyzed its expenses and has developed the following cost formulas
Cost of goods sold $20 per unit sold
advertising expense $170000 per quarter
sales commissions 5% of sales
Administrative salaries $80000 per quarter
shipping expense ?
Depreciation expense $50000 per quarter
Management has concluded that shipping expense is a mixed cost, containing both variable and fixed cost elements. Units sold and the related shipping expense over the last eight quarters are given below:
Year 1
First 16000 units sold $160000 shipping expense
second 18000 units sold $175000 shipping expense
third 23000 units sold $217000 shipping expense
fourth 19000 units sold $180000 shipping expense
Year 2
First 17000 units sold $170000 shipping expense
second 20000 units sold $185000 shipping expense
third 25000 units sold $232000 shipping expense
fourth 22000 units sold $208000 shipping expense
Management would like a cost formula derived for shipping expense so that a budgeted contribution format income statement can be prepared for the next quarter.
Required
Using the high low method, estimate a cost formula for shipping expense.
In the first quarter of Year 3, the company plans to sell 21000 units at a selling price of $50 per unit. Prepare a contribution format income statement for the quarter.
American Chip Corporation’s fiscal year end is December 31. The following is a partial adjusted trial balance as of December 31, 2013.
Account Title
Debits
Credits
Retained earnings
95,000
Sales revenue
900,000
Interest revenue
5,000
Cost of goods sold
495,000
Salaries expense
140,000
Rent expense
30,000
Depreciation expense
45,000
Interest expense
6,500
Insurance expense
7,500
Required:
Prepare the necessary closing entries at December 31, 2013. (If no entry is required for a particular transaction, select “No journal entry required” in the first account field.)
In the Doghouse produces wooden doghouses with shingled roofs. At the beginning of May, there were 300 units in BWIP with costs of $14,304. During the month, the company completed work on the BWIP and began production on 1,200 units. In the Doghouse incurred $96,000 in manufacturing costs during May. At the end of the month, 100 units of those started during the month were in EWIP. In the table to the below, account for the units for May.
Andrea Conaway opened Wonderland Photography on January 1 of the current year. During January, the following transactions occurred and were recorded in the company’s books:
Conaway invested $13,500 cash in the business.
2. Conaway contributed $20,000 of photography equipment to the business.
3. The company paid $2,100 cash for an insurance policy covering the next 24 months.
4. The company received $5,700 cash for services provided during January.
5. The company purchased $6,200 of office equipment on credit.
6. The company provided $2,750 of services to customers on account.
7. The company paid cash of $1,500 for monthly rent.
8. The company paid $3,100 on the office equipment purchased in transaction #5 above.
9. Paid $275 cash for January utilities.
Based on this information, the balance in the Andrea Conaway, Capital account reported on the Statement of Owner’s Equity at the end of the month would be:
LO.5 In each of the following independent situations, determine how much, if any, qualifies as a deduction for AGI under § 222 (qualified tuition and related expenses):
a. Sophia is single and is employed as an architect. During 2012, she spends $3,900 in tuition to attend law school at night. Her MAGI is $66,000.
b. John is single and is employed as a pharmacist. During 2012, he spends $2,400 ($2,100 for tuition and $300 for books) to take a course in herbal supplements at a local university. His MAGI is $60,000.
c. Hailey is married and is employed as a bookkeeper. She spends $5,200 for tuition and $900 for books and supplies pursuing a bachelor’s degree in accounting. Her MAGI is $40,000 on the separate return she files.
d. Eric spends $6,500 of his savings on tuition to attend Carmine State College. Eric is claimed as a dependent by his parents.
e. How much, if any, of the above amounts not allowed under § 222 might otherwise qualify as a deduction from AGI?
LO.3, 4 In 2009, John opened an investment account with Randy Hansen, who held himself out to the public as an investment adviser and securities broker. John contributed $200,000 to the account in 2009. John provided Randy with a power of attorney to use the $200,000 to purchase and sell securities on John’s behalf. John instructed Randy to reinvest any gains and income earned. In 2009, 2010, and 2011, John received statements of the amount of income earned by his account and included these amounts in his gross income for these years. In 2012, it was discovered that Randy’s purported investment advisory and brokerage activity was in fact a fraudulent investment arrangement known as a Ponzi scheme. In reality, John’s account balance was zero, the money having been used by Randy in his scheme. Identify the relevant tax issues for John.
LO.3, 4 Heather owns a two story building. The building is used 40% for business use and 60% for personal use. During 2012, a fire caused major damage to the building and its contents. Heather purchased the building for $800,000 and has taken depreciation of $100,000 on the business portion. At the time of the fire, the building had a fair market value of $900,000. Immediately after the fire, the fair market value was $200,000. The insurance recovery on the building was $600,000. The contents of the building were insured for any loss at fair market value. The business assets had an adjusted basis of $220,000 and a fair market value of $175,000. These assets were totally destroyed. The personal use assets had an adjusted basis of $50,000 and a fair market value of $65,000. These assets were also totally destroyed. If Heather’s AGI is $100,000 before considering the effects of the fire, determine her itemized deduction as a result of the fire. Also determine Heather’s AGI.
LO.2 Andrea entered into a § 529 qualified tuition program for the benefit of her daughter, Joanna. Andrea contributed $15,000 to the fund. The fund balance had accumulated to $25,000 by the time Joanna was ready to enter college. However, Joanna received a scholarship that paid for her tuition, fees, books, supplies, and room and board. Therefore, Andrea withdrew the funds from the § 529 plan and bought Joanna a new car. a. What are the tax consequences to Andrea of withdrawing the funds? b. Assume instead that Joanna’s scholarship did not cover her room and board, which cost $7,500 per academic year. During the current year, $7,500 of the fund balance was used to pay for Joanna’s room and board. The remaining amount was left in the § 529 plan to cover her room and board for future academic years. What are the tax consequences to Andrea and to Joanna of using the $7,500 to pay for the room and board?
(TCO D) Data for December concerning Dinnocenzo Corporation’s two major business segments Fibers and Feedstocks appear below:
Sales revenues, Fibers
$870,000
Sales revenues, Feedstocks
$820,000
Variable expenses, Fibers
$426,000
Variable expenses, Feedstocks
$344,000
Traceable fixed expenses, Fibers
$148,000
Traceable fixed expenses, Feedstocks
S156,000
Common fixed expenses totaled $314,000 and were allocated as follows: $129,000 to the Fibers business segment and $185,000 to the Feedstocks business segment.
Required:
Prepare a segmented income statement in the contribution format for the company. Omit percentages; show only dollar amounts.
Nutall Corporation is considering dropping product N28X. Data from the company’s accounting system appear below:
Sales
$ 650,000
Variable expense
$ 280,000
Fixed manufacturing expenses
$ 242,000
Fixed selling and administrative expense
$ 190,000
All fixed expenses of the company are fully allocated to products in the company’s accounting system. Further investigation has revealed that $195,000 of the fixed manufacturing expenses and $110,000 of the fixed selling and administrative expenses are avoidable if product N28X is discontinued.
Required: a. According to the company’s accounting system, what is the net operating income earned by product N28X? (Input the amount as a positive value. Omit the “$” sign in your response.)
$
b 1. What would be the effect on the company’s overall net operating income of dropping product N28X? (Input the amount as a positive value. Omit the “$” sign in your response.) Net operating income would be by $ . b 2. Should the product be dropped? Yes or No?
Barker Company has a single product called a Zet. The company normally produces and sells 87,000 Zets each year at a selling price of $42 per unit. The company’s unit costs at this level of activity are given below
Direct materials
$
8.50
Direct labor
9.00
Variable manufacturing overhead
3.80
Fixed manufacturing overhead
7.00
($609,000 total)
Variable selling expenses
4.70
Fixed selling expenses
6.50
($565,500 total)
Total cost per unit
$
39.50
A number of questions relating to the production and sale of Zets are given below. Each question is independent.
Required:
Assume that Barker Company has sufficient capacity to produce 108,750 Zets each year without any increase in fixed manufacturing overhead costs. The company could increase sales by 25% above the present 87,000 units each year if it were willing to increase the fixed selling expenses by $120,000.
(a)Calculate the incremental net operating income (Negative amount should be indicated with a minus sign. Do not round intermediate calculations.) Incremental net operating income $
b. Would the increased fixed selling expenses be justified?
Challenge Problem You have been asked to assess the impact of possible changes in reserve requirement components on the dollar amount of reserves required.
Assume the reserve percentages are set at 2 percent on the first $50 million of traction account amounts, 4 percent on the second $50 million, and 10 percent on transaction amounts over $100 million. First National Bank has transaction account balances of $100 million, while Second National Bank’s transaction balances are $150 million and Third National Bank’s transaction balances are $250 million.
a. Determine the dollar amounts of required reserves for each of the three banks.
b. Calculate the percentage of reserves to total transactions accounts for each of the three banks.
c. The Central Bank wants to slow the economy by raising the reserve requirements for member banks. To do so, the reserve percentages will be increased to 12 percent on transaction balances above $100 million.
Simultaneously, the 2 percent rate will apply on the first $25 million.
Calculate the reserve requirement amount for each of the three banks after these changes have taken place.
d. Show the dollar amount of changes in reserve requirement amounts for each bank. Calculate the percentage of reserve requirement amounts to transaction account balances for each bank.
e. Which of the two reserve requirement changes discussed in (c) causes the greatest impact on the dollar amount of reserves for all three of the banks?
f. Now assume that you could either (1) lower the transactions account amount for the lowest category from $50 million down to $25 million or
(2) increase the reserve percentage from 10 percent to 12 percent on transactions account amounts over $200 million. Which choice would you recommend if you were trying to achieve a moderate slowing of economic activity?
You are a summer intern at the office of a local tax preparer. To test your basic knowledge of financial statements, your manager, who graduated from your alma mater 2 years ago, gives you the following list of accounts and asks you to prepare a simple income statement using those accounts.
Depreciation 25
General and administrative expenses 22
Sales 345
Sales expenses 18
Cost of goods sold 255
Lease expense 4
Interest expense 3
a. Arrange the accounts into a well labeled income statement. Make sure you label and solve for gross profit, operating profit, and net profit before taxes.
b. Using a 35% tax rate, calculate taxes paid and net. profit after taxes.
c. Assuming a dividend of $1.10 per share with 4.25 million shares outstanding, calculate EPS and additions to retained earnings.
E2 2 Explain why the income statement can also be called a “”profit and loss statement.”” What exactly does the word “”balance”” mean in the title of the balance sheet? Why do we balance the two halves?
(TCO D) Biello Co. manufactures and sells medals for winners of athletic and other events. Its manufacturing plant has the capacity to produce 15,000 medals each month; current monthly production is 14,250 medals. The company normally charges $115 per medal. Cost data for the current level of production are shown below. Variable Costs
Variable Costs
Direct Materials
$969,000
Direct Labor
$270,750
Selling and Administrative
$270,075
Fixed Costs
Manufacturing
$370,550
Selling and Administrative
$89,775
The company has just received a special one time order for 600 medals at $102 each. For this particular order, no variable selling and administrative costs would be incurred. This order would also have no effect on fixed costs.
Required: Should the company accept this special order? Why?
Financial data for Beaker Company for last year appear below:
Beaker Company
Statements of Financial Position
Balance Balance
Assets:
Cash…………………………….. $50000 $70000
Accounts receivable……………. 20000 25000
Inventory……………………….. 30000 35000
Plant & Equipment (net)……….. 120000 110000
Investment in Cedar Company…. 80000 100000
Land (undeveloped)……………. 170000 170000
_____________________
Total Assets…………………….. $470000 $510000
______________________
Liabilities and owners’ equity:
Accounts payable……………….. $70000 $90000
Long term debt…………………. 250000 250000
Owners’ equity………………….. 150000 170000
____________________
Total Liabilities and owners’ equity $470000 $510000
____________________
Income Statement
Sales……………………………. $414000
Less operating expenses……….. 351900
______
Net operating income………….. $62100
Less interest and taxes:
Interest expense…………….. $30000
Tax expense…………………. 10000 40000
_____________
Net income……………………. $22100
The company paid dividends of $2,100 last year. The “”Investment in Cedar Company”” on the statement of financial position represents an investment in the stock of another company.
Required: a. Compute the company’s margin, turnover, and return on investment for last year.
b. The Board of Directors of Beaker Company has set a minimum required return of 20%. What was the company’s residual income last year?
LO.2 Donald was killed in an accident while he was on the job in 2012. At the time of his death, he had $40,000 in an accrued bonus that was paid to his wife, Darlene. His employer had provided Donald with group term life insurance of $240,000 (twice his annual salary), which was payable to his widow, Darlene, in a lump sum. Premiums on this policy totaling $4,500 had been included in Donald’s gross income under § 79. Donald’s employer also paid Darlene an amount equal to Donald’s three months’ salary of $30,000, which is what the employer does for all widows and widowers of deceased employees. Donald had purchased a life insurance policy (premiums totaled $70,000) that paid $200,000 in the event of accidental death. The proceeds were payable to Darlene, who elected to receive installment payments as an annuity of $20,000 each year for a 25 year period. She received her first installment this year. From the above information, what is Darlene’s gross income in 2012?
LO.2 Sally was an all state soccer player during her junior and senior years in high school. She accepted an athletic scholarship from State University. The scholarship provided the following: Tuition and fees $15,000 Housing and meals 6,000 Books and supplies 1,500 Transportation 1,200 a. Determine the effect of the scholarship on Sally’s gross income. b. Sally’s brother, Willy, was not a gifted athlete, but he received $8,000 from their father’s employer as a scholarship during the year. The employer grants the children of all executives a scholarship equal to one half of annual tuition, fees, books, and supplies. Willy also received a $6,000 scholarship (to be used for tuition) as the winner of an essay contest related to bioengineering, his intended field of study. Determine the effect of the scholarships on Willy’s and his father’s gross income.
LO.2 The UVW Union and HON Corporation are negotiating contract terms. Assume that the union members are in the 28% marginal tax bracket and that all benefits are provided on a nondiscriminatory basis. Write a letter to the UVW Union members explaining the tax consequences of the options discussed below. The union’s address is 905 Spruce Street, Washington, D.C. 20227. a. The company would impose a $100 deductible on medical insurance benefits. Most employees incur more than $100 each year in medical expenses. b. Employees would get an additional paid holiday with the same annual income (the same pay but less work). c. An employee who did not need health insurance (because the employee’s spouse works and receives family coverage) would be allowed to receive the cash value of the coverage.
LO.2 Tim is the vice president of western operations for Maroon Oil Company and is stationed in San Francisco. He is required to live in an employer owned home, which is three blocks from his company office. The company provided home is equipped with high speed Internet access and several telephone lines. Tim receives telephone calls and e mails that require immediate attention any time of day or night because the company’s business is spread all over the world. A full time administrative assistant resides in the house to assist Tim with the urgent business matters. Tim often uses the home for entertaining customers, suppliers, and employees. The fair market value of comparable housing is $9,000 per month. Tim is also provided with free parking at his company’s office. The value of the parking is $350 per month. Calculate the amount associated with the company provided housing and free parking that Tim must include in his gross income.
LO.2, 5 Rosa’s employer has instituted a flexible benefits program. Rosa will use the plan to pay for her daughter’s dental expenses and other medical expenses that are not covered by health insurance. Rosa is in the 25% marginal tax bracket and estimates that the medical and dental expenses not covered by health insurance will be within the range of $3,000 to $5,000. Her employer’s plan permits her to set aside as much as $5,000 in the flexible benefits account. Rosa does not itemize her deductions.
a. Rosa puts $3,000 into her flexible benefits account, and her actual expenses are $5,000. What is her cost of underestimating the expenses?
b. Rosa puts $5,000 into her flexible benefits account, and her actual expenses are only $3,000. What is her cost of overestimating her expenses?
c. What is Rosa’s cost of underfunding as compared to the cost of overfunding the flexible benefits account?
d. Does your answer in part (c) suggest that Rosa should fund the account closer to the low end or to the high end of her estimates?
LO.2 Lynn Swartz’s husband died three years ago. Her parents have an income of over $200,000 a year and want to ensure that funds will be available for the education of Lynn’s 8 year old son Eric. Lynn is currently earning $45,000 a year. Lynn’s parents have suggested that they start a savings account for Eric. They have calculated that if they invest $4,000 a year for the next 8 years, at the end of 10 years, sufficient funds will be available for Eric’s college expenses. Lynn realizes that the tax treatment of the investments could significantly affect the amount of funds available for Eric’s education. She asked you to write a letter to her advising about options available to her parents and to her for Eric’s college education. Lynn’s address is 100 Myrtle Cove, Fairfield, CT 06824.
LO.2 Starting in 2002, Chuck and Luane have been purchasing Series EE bonds in their name to use for the higher education of their daughter Susie, who currently is age 18. During the year, they cash in $12,000 of the bonds to use for freshman year tuition, fees, and room and board. Of this amount, $5,000 represents interest. Of the $12,000, $8,000 is used for tuition and fees, and $4,000 is used for room and board. Chuck and Luane’s AGI, before the educational savings bond exclusion, is $112,000. a. Determine the tax consequences for Chuck and Luane, who will file a joint return, and for Susie. b. Assume that Chuck and Luane purchased the bonds in Susie’s name. Determine the tax consequences for Chuck and Luane and for Susie. c. How would your answer to (a) change if Chuck and Luane file separate returns?
LO.2 Albert established a qualified tuition program for each of his twins, Kim and Jim. He started each fund with $20,000 when the children were five years old. Albert made no further contributions to his children’s plans. Thirteen years later, both children have graduated from high school. Kim’s fund has accumulated to $45,000, while Jim’s has accumulated to $42,000. Kim decides to attend a state university, which will cost $60,000 for four years (tuition, fees, room and board, and books). Jim decides to go to work instead of going to college. During the current year, $7,500 is used from Kim’s plan to pay the cost of her first semester in college. Because Jim is not going to go to college now or in the future, Albert withdraws the $42,000 plan balance and gives it to Jim to start his new life after high school.
a. During the period since the plans were established, should Albert or the twins have been including the annual plan earnings in gross income? Explain.
b. What are the tax consequences to Kim and Albert of the $7,500 being used for the first semester’s higher education costs?
c. Because of her participation in the qualified tuition program, Kim received a 10% reduction in tuition charges, so less than $7,500 was withdrawn from her account.
Is either Albert or Kim required to include the value of this discount in gross income? Explain. d. What are the tax consequences to Albert and Jim of Jim’s qualified tuition program being closed?
LO.3 How does the tax benefit rule apply in the following cases?
a. In 2010, the Orange Furniture Store, an accrual method taxpayer, sold furniture on credit for $1,000 to Sammy. The cost of the furniture was $600. In 2011, Orange took a bad debt deduction for the $1,000. In 2012, Sammy inherited some money and paid Orange the $1,000 he owed. Orange was in the 35% marginal tax bracket in 2010, the 15% marginal tax bracket in 2011, and the 35% marginal tax bracket in 2012.
b. In 2011, Marvin, a cash basis taxpayer, took a $2,000 itemized deduction for state income taxes paid. This increased his itemized deductions to a total that was $800 more than the standard deduction. In 2012, Marvin received a $1,600 refund when he filed his 2011 state income tax return. Marvin was in the 15% marginal tax bracket in 2011, but was in the 35% marginal tax bracket in 2012.
c. In 2011, Barb, a cash basis taxpayer, was in an accident and incurred $8,000 in medical expenses, which she claimed as an itemized deduction for medical expenses. Because of the 7.5% of AGI reduction, the expense reduced her taxable income by only $3,000. In 2012, Barb successfully sued the person who caused the physical injury and collected $8,000 to reimburse her for the cost of her medical expenses. Barb was in the 15% marginal tax bracket in both 2011 and 2012.
1.At a sales level of $97,000, Blue Company’s contribution margin is $17,000. If the degree of operating leverage is 8 at a $97,000 sales level, net operating income must equal:
2. Kendall Company has sales of 1,600 units at $50 a unit. Variable expenses are 35% of the selling price. If total fixed expenses are $42,000, the degree of operating leverage is:
3.
The following data pertain to last month’s operations:
1. You and your spouse bought a home on Jan 12, 1999 for $125,000. You used it as your principal residence until March 2, 2001 when you moved into an apartment. You sold the house on December 20, 2001 for $421,000 and paid $28,000 in sales commissions. How much is your realized gain?
How much is your recognized gain?
2. Nicki is single and 46 years old. She sells her principal residence (adjusted basis $100,000) that she purchased five years ago for $435,000.
a.What is the amount of Nicki’s recognized gain on the sale?
b. Assume instead that Nicki sells the residence for $445,000. What is the amount of Nicki’s recognized gain on the sale?
c. Assume instead that Nicki has been married to Mike for the entire time they have owned and lived in the home. If they sell the home for $585,000, what is the amount of their recognized gain on the sale?
16. Zeeb Corporation produces and sells a single product. Data concerning that product appear below:
Per Unit
Percent
of Sales
Selling price
$ 150
100%
Variable expenses
60
40%
Contribution margin
$ 90
60%
Fixed expenses are $355,000 per month. The company is currently selling 5,000 units per month.
The marketing manager believes that a $12,000 increase in the monthly advertising budget would result in a 160 unit increase in monthly sales. What should be the overall effect on the company’s monthly net operating income of this change?
Answer
Work
17. The contribution margin ratio of Thronson Corporation’s only product is 69%. The company’s monthly fixed expense is $455,400 and the company’s monthly target profit is $41,400.
Determine the dollar sales to attain the company’s target profit.
Vacaro corporation produces and sells a single prodcut . Data concerning appears below.
Per Unit Percent of sales
Selling price 140 100%
Variable expenses 28 20%
Contribution Margin $112 80%
Fiexed expenses are $293,000 per month. The company is currently selling 3000 units per month. Management is considering using a new component that would increase the unit variable cost by $13. Since the new component would increase the features of the company’s product, the marketing manager predicts that monthly sales would increase by 400 units. What should be the overall effect on the company’s monthly net operating income of this change?
The Wisbley Company is contemplating the purchase of a helicopter for its executives to use in their business trips. This helicopter could be either purchased or leased from the manufacturer. The useful life of the helicopter is four years. Data concerning these two alternatives follow: (Ignore income taxes in this problem.) The Wisbley Company is contemplating the purchase of a helicopter for its executives to use in their business trips. This helicopter could be either purchased or leased from the manufacturer. The useful life of the helicopter is four years. Data concerning these two alternatives follow: Picture If the helicopter is leased, it would be returned to the manufacturer in four years. Wisbley’s required rate of return is 22%. The present value of the cash outflows for repairs, assuming the helicopter is purchased, would be: Answer a. $(14,000) b. $(8,440) c. $(2,000) d. $(8,682)
As an experienced, knowledgeable accountant, you review the statement and determine the following facts. 1. Net sales consist of sales $972,000, less freight out on merchandise sold $20,000. 2. Other revenues consist of sales discounts $12,000 and interest revenue $4,000. 3. Selling expenses consist of salespersons’ salaries $88,000; depreciation on equip ment $4,000; sales returns and allowances $46,000; advertising $12,000; and sales commissions $10,000. All compensation should be recorded as Salaries and Wages Expense. 4. Administrative expenses consist of office salaries $54,000; dividends $14,000; utili ties $13,000; interest expense $3,000; and rent expense $20,000, which includes prepayments totaling $2,000 for the first month of 2015. The utilities represent utilities paid. At December 31, utility expense of $3,000 has been incurred but not paid. Instructions Prepare a correct detailed multiple step income statement. SHOW ALL WORK….SHOW ALL WORK thanks
Please write the steps out of how to find the answe
2. Kramer Company manufactures coffee tables and uses an activity based costing system to allocate all manufacturing conversion costs. Each coffee table consists of 20 separate parts totaling $240 in direct materials, and requires 5.0 hours of machine time to produce. Additional information follows:
Activity
Allocation Base
Cost Allocation Rate
Materials handling
Number of parts
$2.00 per part
Machining
Machine hours
$2.75 per machine hour
Assembling
Number of parts
$1.00 per part
Packaging
Number of finished units
$3.00 per finished unit
What is the total manufacturing cost per coffee table?
Depreciation on the company’s equipment for 2013 is computed to be $16,000.
b.
The Prepaid Insurance account had a $7,000 debit balance at December 31, 2013, before adjusting for the costs of any expired coverage. An analysis of the company’s insurance policies showed that $1,630 of unexpired insurance coverage remains.
c.
The Office Supplies account had a $390 debit balance on December 31, 2012; and $2,680 of office supplies were purchased during the year. The December 31, 2013, physical count showed $460 of supplies available.
d.
Three fourths of the work related to $13,000 of cash received in advance was performed this period.
e.
The Prepaid Insurance account had a $5,800 debit balance at December 31, 2013, before adjusting for the costs of any expired coverage. An analysis of insurance policies showed that $4,170 of coverage had expired.
f.
Wage expenses of $5,000 have been incurred but are not paid as of December 31, 2013.
Prepare adjusting journal entries for the year ended (date of) December 31, 2013, for each of these separate situations. Assume that prepaid expenses are initially recorded in asset accounts. Also assume that fees collected in advance of work are initially recorded as liabilities.
. Key ingredients in quality of relevance. 2. Traditional assumptions that influence the FASB’s conceptual framework. 3. The idea that information should represent what it purports to represent. 4. An important constraint relating to costs and benefits. 5. An example of conservatism 6. The availability of information when it is needed. 7. Recording an item in the accounting records. 8. Determines the threshold for recognition. 9. Implies consensus. 10. Transactions between independent parties. a) Cost effectiveness b) Representational faithfulness c) Recognition d) Verifiability e) Time periods f) Unrealized g) Completeness h) Timeliness i) Materiality j) Predictive value k) Economic entity l) Lower of cost or market rule m) Phrenology n) Arm’s length transactions Now that you have reviewed the terminology, for each situation listed below, indicate by letter the appropriate qualitative characteristic(s) or accounting concept(s) applied. A letter may be used more than once, and more than one characteristic or concept may apply to a particular situation. Explain why you chose your answer. Goodwill is recorded in the accounts only when it arises from the purchase of another entity at a price higher than the fair market value of the purchased entity’s identifiable assets. Land is valued at cost. All payments out of petty cash are debited to Miscellaneous Expense.
On the Go, Inc., produces two models of traveling cases for laptop computers: the Programmer and the Executive. The bags have the following characteristics:
Programmer
Executive
Selling price per bag
$
70
$
100
Variable cost per bag
$
30
$
40
Expected sales (bags) per year
8,000
12,000
The total fixed costs per year for the company are $819,000.
(a)
What is the anticipated level of profits for the expected sales volumes?
(b)
Assuming that the product mix is the same at the break even point, compute the break even point.
(c)
If the product sales mix were to change to nine Programmer style bags for each Executive style bag, what would be the new break even volume for On the Go?
. The resources a business owns are called (Points : 3) assets. liabilities. products. stockholders’ equity.2. Which of the following is an appropriate representation of the accounting equation? (Points : 3) Assets + liabilities = stockholders’ equity Assets = liabilities + stockholders’ equity Assets = liabilities Assets = liabilities + retained earnings3. The “rules” of accounting are called (Points : 3) income tax regulations. SEC regulations. Internet rules. Generally Accepted Accounting Principles.4. Gilbert, Inc. had the following account balances at September 30, 2010. What is Gilbert’s net income for the month of September? Accounts Payable$5,000Capital Stock$10,000Cash$14,300Equipment$15,400Fees Earned$54,400Miscellaneous Expense$18,200Rent Expense$4,150Retained Earnings$6,550Wages Expense$13,900 (Points : 3) $32,450 $27,450 $6,550 $18,1505. Which of the following accounts is a stockholders’ equity account? (Points : 3) Cash Capital Stock Prepaid Insurance Accounts Payable6. Hodges, Inc. had the following assets and liabilities as of September 30, 2011: Assets$56,327 Liabilities$28,416 What is the stockholders’ equity of Hodges as of September 30, 2011? (Points : 3) $0 $27,911 $84,743 Cannot be determined with this information7. Johnson, Inc. purchased land for cash. What effect does this transaction have on the following accounts: (Points : 3) Increase in Cash and decrease in Land Decrease in Cash and decrease in Land Increase in Cash and increase in Land Decrease in Cash and increase in Land8. The payment of a liability (Points : 3) decreases assets and stockholders’ equity. increases assets and decreases liabilities. decreases assets and increases liabilities. decreases assets and decreases liabilities. 9. Fees receivable would appear on the balance sheet as a(n) (Points : 3) asset. liability. fixed asset. unearned revenue.10. Deferred expenses (prepaid expenses) are items initially recorded as assets but are expected to become __________ over time. (Points : 3) Liabilities Assets stockholders’ equity Expenses11. Unearned rent, representing rent paid for the next six months’ occupancy, would be reported on the landlord’s balance sheet as a(n) (Points : 3) asset. liability. capital stock. revenue.12. On April 1, Tule, Inc. paid $3,600 for an insurance premium on a three year insurance policy. How does this transaction affect Tule’s accounts? (Points : 3) Increase insurance expense and decrease cash by $3,600 each Increase prepaid insurance and decrease cash by $3,600 each Increase unearned insurance and decrease cash by $3,600 each No effect at this time13. The difference between sales and cost of merchandise sold for a merchandising business is (Points : 3) sales. net sales. gross sales. gross profit.14. If the seller is to pay the delivery expense of delivering merchandise, the delivery terms are stated as (Points : 3) FOB shipping point. FOB destination. FOB n/30. FOB seller.15. Since merchandise inventory is normally sold within a year, how is it reported on the balance sheet? (Points : 3) As a revenue As the cost of merchandise sold It does not appear on the Balance Sheet As a current asset16. Which of the following would be subtracted from gross profit to reach operating income? (Points : 3) Operating expenses Other expenses Income taxes All of these17. Which of the following would be added to the balance per books on a bank reconciliation? (Points : 3) Service charges Outstanding checks Deposits in transit Notes collected by the bank18. The objectives of internal control are to (Points : 3) control the internal organization of the accounting department personnel and equipment. provide reasonable assurance that assets are safeguarded, information is processed accurately, and laws and regulations are complied with. prevent fraud and promote the social interest of the company. provide control over “internal use only” reports and employee internal conduct.19. The Sarbanes Oxley Act of 2002 requires companies and their independent accountants to (Points : 3) report on the financial activities of the company. report on any fraud and theft detected in the company. report on the state of the economy and likelihood of fraud. report on the effectiveness of the company’s internal controls.20. Which of the following elements of internal control focuses upon locating weaknesses and improving control effectiveness? (Points : 3) The control environment Risk assessment Control procedures Monitoring21. The two methods of accounting for uncollectible receivables are the allowance method and the (Points : 3) equity method. direct write off method. interest method. cost method.22. The two most widely used methods for determining the cost of inventory are (Points : 3) FIFO and LIFO. FIFO and average cost. LIFO and average cost. gross profit and average cost.23. In reference to a promissory note, the person who is to receive payment is called the (Points : 3) maker. payee. seller. payor.24. A 60 day, 12% note for $15,000 dated May 1 is received from a customer on account. The maturity value of the note is (Points : 3) $15,300. $15,000. $14,700. $16,800.25. A fully depreciated asset must be (Points : 3) removed from the books. kept on the books until sold or discarded. disclosed only in the notes to the financial statements. recognized on the income statement as a loss.26. All amounts paid to get an asset in place and ready for use are referred to as (Points : 3) capital expenditures. revenue expenditures. residual value. cost of an asset.27. A capital expenditure would appear on the (Points : 3) income statement under operating expenses. balance sheet under fixed assets. balance sheet under current assets. income statement under other expenses.28. If a fixed asset is sold and the book value is less than cash received, the company must (Points : 3) recognize a loss on the income statement under other expenses. recognize a loss on the income statement under operating expenses. recognize a gain on the income statement under other revenues. Gains and losses are not to be recognized upon the sell of fixed assets.29. If a corporation issues only one class of stock, it is called (Points : 3) common stock. treasury stock. no par stock. preferred stock.30. The charter of a corporation provides for the issuance of 100,000 shares of common stock. Assume that 60,000 shares were originally issued and 5,000 were subsequently reacquired. What is the number of shares outstanding? (Points : 3) 5,000 100,000 60,000 55,00031. Stockholders’ equity (Points : 3) is usually equal to cash on hand. includes paid in capital and liabilities. includes retained earnings and paid in capital. is shown on the income statement.32. Which statement below is NOT a reason for a corporation to buy back its own stock? (Points : 3) Resale to employees Bonus to employees For supporting the market price of the stock To increase the shares outstanding33. A bond indenture is (Points : 3) a contract between the corporation issuing the bonds and the underwriters selling the bonds. the amount due at the maturity date of the bonds. a contract between the corporation issuing the bonds and the bondholders. the amount for which the corporation can buy back the bonds prior to the maturity date.34. The charter of a corporation provides for the issuance of 100,000 shares of common stock. Assume that 40,000 shares were originally issued and 5,000 were subsequently reacquired. What is the number of shares outstanding? (Points : 3) 5,000 35,000 45,000 55,00035. A corporation has 50,000 shares of $100 par value stock outstanding. If the corporation issues a 4 for 1 stock split, the number of shares outstanding after the split will be (Points : 3) 200,000 shares. 50,000 shares. 250,000 shares. 12,500 shares.
One third of the work related to $15,000 cash received in advance is performed this period.
b.
Wages of $12,000 are earned by workers but not paid as of December 31, 2013.
c.
Depreciation on the company’s equipment for 2013 is $10,480.
d.
The Office Supplies account had a $370 debit balance on December 31, 2012. During 2013, $5,483 of office supplies are purchased. A physical count of supplies at December 31, 2013, shows $598 of supplies available.
e.
The Prepaid Insurance account had a $5,000 balance on December 31, 2012. An analysis of insurance policies shows that $3,200 of unexpired insurance benefits remain at December 31, 2013.
f.
The company has earned (but not recorded) $800 of interest from investments in CDs for the year ended December 31, 2013. The interest revenue will be received on January 10, 2014.
g.
The company has a bank loan and has incurred (but not recorded) interest expense of $4,000 for the year ended December 31, 2013. The company must pay the interest on January 2, 2014.
For each of the above separate cases, prepare adjusting entries required of financial statements for the year ended (date of) December 31, 2013. (Assume that prepaid expenses are initially recorded in asset accounts and that fees collected in advance of work are initially recorded as liabilities.)
Pablo Management has six part time employees, each of whom earns $130 per day. They are normally paid on Fridays for work completed Monday through Friday of the same week. They were paid in full on Friday, December 28, 2013. The next week, the six employees worked only four days because New Year’s Day was an unpaid holiday.
a.
Prepare the adjusting entry that would be recorded on Monday, December 31, 2013.
a.
On April 1, the company retained an attorney for a flat monthly fee of $2,000. Payment for April legal services was made by the company on May 12.
b.
A $940,000 note payable requires 8.2% annual interest, or $6,423 to be paid at the 20th day of each month. The interest was last paid on April 20 and the next payment is due on May 20. As of April 30, $2,141 of interest expense has accrued.
c.
Total weekly salaries expense for all employees is $13,000. This amount is paid at the end of the day on Friday of each five day workweek. April 30 falls on Tuesday of this year, which means that the employees had worked two days since the last payday. The next payday is May 3.
The above three separate situations require adjusting journal entries to prepare financial statements as of April 30. For each situation, present both the April 30 adjusting entry and the subsequent entry during May to record the payment of the accrued expenses. (Use 360 days a year. Do not round intermediate calculations and round your final answers to the nearest dollar amount.)
Ricardo Construction began operations on December 1. In setting up its accounting procedures, the company decided to debit expense accounts when it prepays its expenses and to credit revenue accounts when customers pay for services in advance. Prepare journal entries for items a through d and the adjusting entries as of its December 31 period end for items e through g.
a.
Supplies are purchased on December 1 for $3,900 cash.
b.
The company prepaid its insurance premiums for $2,490 cash on December 2.
c.
On December 15, the company receives an advance payment of $32,000 cash from a customer for remodeling work.
d.
On December 28, the company receives $5,600 cash from another customer for remodeling work to be performed in January.
e.
A physical count on December 31 indicates that the Company has $2,030 of supplies available.
f.
An analysis of the insurance policies in effect on December 31 shows that $530 of insurance coverage had expired.
g.
As of December 31, only one remodeling project has been worked on and completed. The $5,760 fee for this project had been received in advance.
1. During 2009, Company A (the Company) began researching and developing a new product. On June 30, 2010, the Company acquired Pills.com, Inc. Additionally, the Company determined the new product and products being developed by Pills.com, Inc. were technologically feasible and developed a business plan, including identifying a ready market for the product and finding a commitment of resources to produce the product for market. The Company has tracked costs as follows:
Cost
Amount
Research costs (January ‘ June 2010)
$13,000
Development costs (July ‘ December 2010)
$ 8,000
Training costs
$ 1,500
Legal fees for product patent
$ 2,000
Preproduction costs
$12,000
Marketing launch costs
$ 7,500
What amount will be included in intangible assets on the Company’s December 31, 2010, financial statements prepared in accordance with IFRS? What amount will be reported as intangible assets using US GAAP?
1. Early in 2010, Larsen Corporation purchased marketable securities at a cost of $90,000. In September, dividends of $6,600 were received; Larsen sold the securities in December at a gain of $5,600. How would these transactions be reported on Larsen’s statement of cash flows for 2010?
A.
$5,600 net cash provided by investing activities; $6,600 included in cash provided by operating activities.
B.
$12,200 net cash provided by investing activities.
C.
$95,600 cash provided by investing activities; $90,000 cash used in financing activities.
D.
$84,400 net cash used in investing activities; $95,600 cash provided by investing activities.
2. Haven Corporation issued $700,000 of 10 year bonds payable at par in 2005. During 2009 Haven paid $50,000 interest and an additional $233,333 to retire one third of the bonds at par. These activities would be reported in Haven’s statement of cash flows for 2009 as:
A.
$283,333 net cash provided by financing activities.
B.
$283,333 net cash used in financing activities.
C.
$233,333 net cash used in financing activities, and $50,000 cash disbursed for operating activities.
D.
$466,667 net cash provided by financing activities, and $50,000 cash disbursed for operating activities.
3. The completion of a computer by First Wireless, Inc. would require a debit to which of the following accounts?
A.
Cost of Goods Sold.
B.
Work in Process Inventory.
C.
Finished Goods Inventory.
D.
Materials Inventory.
4. If manufacturing overhead is materially over applied, it is best to close it to:
A.
Work in process inventory.
B.
Finished goods inventory.
C.
Cost of goods sold.
D.
Apportioned among work in process, finished goods, and cost of goods sold.
5. Which of the following would likely be the most appropriate cost driver to allocate machinery set up costs to products?
A.
Machine hours.
B.
Direct labor hours.
C.
Number of production runs.
D.
Repair work orders.
6. Manufacturing overhead is not:
A.
A product cost.
B.
An indirect cost.
C.
A manufacturing cost.
D.
A period cost.
7. An effective cost accounting system should match processes with the _____ used in order to maintain competitive advantage. Select the best answer to complete the sentence.
A.
sales
B.
shareholders
C.
resources
D.
disbursements
8. Which of the following is not a characteristic of a process costing system?
A.
The costs incurred in each process are accumulated in separate Work in Process Inventory accounts.
B.
It is suitable for mass produced operations.
C.
Costs are accumulated separately for each unit of production as it moves through the factory.
D.
The cost of a finished unit is the sum of the unit costs of performing each manufacturing process.
9. Per unit costs:
A.
Are relevant only when a company is engaged in manufacturing activities.
B.
Are determined in job order costing systems but cannot be computed when a process costing system is in use.
C.
Are relevant in manufacturing, merchandising, and service industries, regardless of the type of cost accounting system in use.
D.
Are determined by relating manufacturing costs to the number of units sold.
10. Process costing systems:
A.
Are used when companies produce homogeneous units.
B.
Does not have work in process accounts for each department.
1. Earnings per share should always be shown separately for
a. net income and gross margin. b. net income and pretax income.
c. income before extraordinary items. d. extraordinary items and prior period adjustments.
2. Which of the following is an advantage of the single step income statement over the multiple step income statement?
a. It reports gross profit for the year. b. Expenses are classified by function. c. It matches costs and expenses with related revenues. d. It does not imply that one type of revenue or expense has priority over another.
3. Which of the following is a required disclosure in the income statement when reporting the disposal of a component of the business?
a. The gain or loss on disposal should be reported as an extraordinary item. b. Results of operations of a discontinued component should be disclosed immediately below extraordinary items. c. Earnings per share from both continuing operations and net income should be disclosed on the face of the income statement. d. The gain or loss on disposal should not be segregated, but should be reported together with the results of continuing operations.
4. Which disclosure method do most companies use to display the components of other comprehensive income?
a. Combined statement of retained earnings b. Second income statement c. Combined statement of comprehensive income
d. As part of the statement of stockholders’ equity
5. In order to be classified as an extraordinary item in the income statement, an event or transaction should be
a. unusual in nature, infrequent, and material in amount. b. unusual in nature and infrequent, but it need not be material. c. infrequent and material in amount, but it need not be unusual in nature. d. unusual in nature and material, but it need not be infrequent.
Following are the transactions for Valdez Services.
a.
The company paid $12,200 cash for payment on a 16 month old liability for office supplies.
b.
The company paid $1,233 cash for the just completed two week salary of the receptionist.
c.
The company paid $39,200 cash for equipment purchased.
d.
The company paid $870 cash for this month’s utilities.
e.
Owner (Valdez) withdrew $4,500 cash from the company for personal use.
Examine the above transactions and identify those that create expenses for Valdez Services. (You may select more than one answer. Click the box with a check mark for correct answers and click to empty the box for the wrong answers.)
Transaction a.
Transaction b.
Transaction c.
Transaction d.
Transaction e.
Prepare general journal entries to record those transactions that created expenses in the above given order.
2)
Carmen Camry operates a consulting firm called Help Today. On August 31, the company’s records show the following accounts and amounts for the month of August. Use this information to prepare an August income statement for the business.
Cash
$
25,360
C. Camry, Withdrawals
$
6,000
Accounts receivable
22,360
Consulting fees earned
27,000
Office supplies
5,250
Rent expense
9,550
Land
44,000
Salaries expense
5,600
Office equipment
20,000
Telephone expense
860
Accounts payable
10,500
Miscellaneous expense
520
C. Camry, Capital, July 31
2,000
Owner investment made on August 4
100,000
3)
Carmen Camry operates a consulting firm called Help Today. On August 31, the company’s records show the following accounts and amounts for the month of August. Use this information to prepare an August statement of owner’s equity for Help Today.
Cash
$
25,360
C. Camry, Withdrawals
$
6,000
Accounts receivable
22,360
Consulting fees earned
27,000
Office supplies
5,250
Rent expense
9,550
Land
44,000
Salaries expense
5,600
Office equipment
20,000
Telephone expense
860
Accounts payable
10,500
Miscellaneous expense
520
C. Camry, Capital, July 31
2,000
Owner investment made on August 4
100,000
4) Business transactions completed by Hannah Venedict during the month of September are as follows.
a.
Venedict invested $60,000 cash along with office equipment valued at $25,000 in a new sole proprietorship named HV Consulting.
b.
The company purchased land valued at $40,000 and a building valued at $160,000. The purchase is paid with $30,000 cash and a long term note payable for $170,000.
c.
The company purchased $2,000 of office supplies on credit.
d.
Venedict invested her personal automobile in the company. The automobile has a value of $16,500 and is to be used exclusively in the business.
e.
The company purchased $5,600 of additional office equipment on credit.
f.
The company paid $1,800 cash salary to an assistant.
g.
The company provided services to a client and collected $8,000 cash.
h.
The company paid $635 cash for this month’s utilities.
i.
The company paid $2,000 cash to settle the account payable created in transaction c.
j.
The company purchased $20,300 of new office equipment by paying $20,300 cash.
k.
The company completed $6,250 of services for a client, who must pay within 30 days.
l.
The company paid $1,800 cash salary to an assistant.
m.
The company received $4,000 cash in partial payment on the receivable created in transaction k.
n.
Venedict withdrew $2,800 cash from the company for personal use.
Required:
1.
Prepare general journal entries to record these transactions using the following titles: Cash (101); Accounts Receivable (106); Office Supplies (108); Office Equipment (163); Automobiles (164); Building (170); Land (172); Accounts Payable (201); Notes Payable (250); H. Venedict, Capital (301); H. Venedict, Withdrawals (302); Fees Earned (402); Salaries Expense (601); and Utilities Expense (602).
1. Minimum lease payments for a lessee under IFRS include the following: Answer
Required payments specified under the lease agreement
Any amounts guaranteed by the lessee or by a related party to the lessee
Direct costs of the lessee necessary to consummate the lease
a. and b.
2. Which of the following factors typically is the most difficult to determine by a lessee when considering if the present value of the minimum lease payments at the beginning of the lease term is at least substantially all of the fair value of the leased asset? Answer
Fair value of the leased asset
Lessor’s implicit interest rate
Lessee’s incremental borrowing rate
Whether depreciable leased assets should be depreciated consistent with depreciation policies.
3. If a company is determining the present value of the minimum lease payments under a lease, what interest rate should be used as the discount rate using US GAAP? Answer
The lessor’s implicit interest rate if it is known.
The company’s incremental borrowing rate, even if the lessor’s implicit interest rate is known.
The lessor’s implicit interest rate if it is known and if it is lower than the company’s incremental borrowing rate.
The lessor’s implicit interest rate if it is known and if it is higher than the company’s incremental borrowing rate.
4. If a company is determining the present value of the minimum lease payments under a lease, what interest rate should be used as the discount rate using IFRS? Answer
The lessor’s implicit interest rate if it is known.
The company’s incremental borrowing rate, even if the lessor’s implicit interest rate is known.
The lessor’s implicit interest rate if it is known and if it is lower than the company’s incremental borrowing rate.
The lessor’s implicit interest rate if it is known and if it is higher than the company’s incremental borrowing rate.
5. Initial direct costs for capital/finance leases under US GAAP: Answer
For direct finance leases, these costs are capitalized as part of the net investment in the lease and amortized over the lease term so as to produce a constant periodic rate of return on the net investment.
For both sales type and direct finance leases, these costs are capitalized as part of the net investment in the lease and amortized over the lease term to produce a constant periodic rate of return on the net investment.
For both sales type and direct finance leases, these costs are added to the carrying value of the leased assets and depreciated over the lease term on the same basis as rental income, unless they are manufacturers or dealer lessors, in which case they must be expensed.
For sales type leases, these costs are expensed in the same period that the gain on the sale is recognized.
a. and d.
6. Initial direct costs for capital/finance leases under IFRS: Answer
These costs are capitalized as part of the net investment in the lease and amortized over the lease term to produce a constant periodic rate of return on the net investment.
These costs are added to the carrying value of the leased assets and depreciated over the lease term on the same basis as rental income.
These costs are added to the carrying value of the leased assets and depreciated over the life of the asset on the same basis as rental income.
These costs are immediately expensed for only manufacturers and dealer lessors.
b. and d.
7. The initial direct costs of an operating lease by a lessor: Answer
Are deferred and allocated over the lease term in proportion to the recognition of rental income using US GAAP.
Are first added to the carrying value of the leased asset using IFRS (excluding manufacturing and dealer lessors) and then recognized as expense over the lease term on the same basis as the rental income.
Are deferred and allocated over the lease term in proportion to the recognition of rental income using both US GAAP and IFRS.
Are immediately expensed using IFRS.
a. and b., although the end result is the same.
8. The interest rate implicit in a lease is the discount rate that, at the inception of the lease, causes the aggregate present value of the minimum lease payments and residual value to be equal to: Answer
The fair value of the asset.
The fair value of the asset plus a normal profit margin.
The fair value of the asset plus a guaranteed residual value.
The fair value of the asset plus any initial direct costs of the lessor.
1. Pharma, Inc. has identified a list of expenditures it believes to be intangible assets. Which items would be recognized as an asset using US GAAP? Which items would be recognized as an asset using IFRS?
a. Patent purchased from a competitor.
b. Legal fees to defend the purchased patent.
c. Research on potential formulas before technical feasibility has been reached.
d. Development of new formulas, after feasibility and business plans have been established.
e. Legal fees for a patent for the newly developed formula.
f. Customer list purchased from a competitor.
g. Goodwill included in the purchase of Pills.com, Inc.
h. Direct response advertising that meets the criteria in ASC 340 20 25 4.
i. Internally developed marketing plan for new drugs.
Jack%u2019s Lumber Yard receives 8,000 large trees each period that it subsequently processes into rough logs by stripping off the tree bark and leaves. Jack%u2019s then must decide whether to sell its rough logs (for use in log cabin construction) at split off or to process them further into refined lumber (for use in regular construction framing). Jack%u2019s normally sells logs for a per unit price of $495. Alternately, each log can be processed further into 800 feet of lumber at an additional cost of $0.05 per board foot. Also, lumber can be sold for $0.75 per board foot. (Note: One tree is equal to one rough log.)
1. What is the total contribution to income from selling the logs for log cabin construction? $
2. What is the total contribution to income from processing the logs into lumber? $
3. Should Jack’s continue to sell the logs or process them further into lumber?
How would you describe Sunset Boards’ cash flows for 2014?
This question is from Essentials of Corporate Finance 8th Edtion. Please don’t copy & paste answers that have previously been posted for the 7th edition as the figures have changed.
Superior Gaming, a computer enhancement company, has three product lines: audio enhancers, video enhancers, and connection speed accelerators. Common costs are allocated based on relative sales. A product line income statement for the year ended December 31, 2011 follows:
Audio
Video
Accelerators
Total
Sales
$1,045,000
$2,255,000
$2,200,000
$5,500,000
Less COGS
575,000
1,240,000
1,870,000
3,685,000
Gross margin
470,000
1,015,000
330,000
1,815,000
Less other var costs
53,000
69,000
20,000
142,000
Contribution margin
417,000
946,000
310,000
1,673,000
Less direct salaries
155,000
175,000
65,000
395,000
Less common fixed costs:
Rent
11,970
25,830
25,200
63,000
Utilities
4,370
9,430
9,200
23,000
Depreciation
5,890
12,710
12,400
31,000
Other admin costs
79,230
170,970
166,800
417,000
Net income
$160,540
$552,060
$31,400
$744,000
Since the profit for accelerators is relatively low, the company is considering dropping this product line. What is the incremental effect of dropping accelerators?
Your family members know you are taking this class and you learned about time value of money. Four of them came separately to ask questions relating to time value of money. Use the applicable interest table at the end of the book to compute the unknowns for your four relatives. Note that each is independent.
a.Your cousin asked how much he must contribute at the end of the each of the next eight years if he wants to accumulate $90,000 in his account by the end of the eighth year. Cousin told you the interest is compounded annually and the account will earn interest rate of 8%.
b.Your 40 year old Aunt plans to retire at age 65. She is getting a late start but wants to start contributing towards her retirement from now (age 40) through age 64. How much must she contribute each year if he plans to accumulate $500,000 by the time he retires; if he will earn 12% annual interest and interest is compounded annually?
c.Your sister owes $47,347 on her student loan. She wants to pay off before she retires. She has $20,000 today and she will invest the $20,000 in an account that pays 9% interest. How many years will it take for the $20,000 to grow so she can have enough money to pay off the $47,347 debt assume the debt amount is fixed?
d.Your uncle currently has a $27,600 loan. He plans to repay the loan in four years. She plans to invest $19,553 for the next four years and use the principal and interest balance in the account to pay off the loan. What rate of interest must your uncle earn annually so he can have enough to pay off the loan?
2.DT International (DT) intends to purchase equipment. To get the best price, DT asked for bids from vendors. Analysis shows that each equipment from the vendors is similar and has estimated useful life of 20 years.
Additionally, each equipment will have year end maintenance costs as follows:
Year 1 5 Year 6 15 Year 16 20
Cost per year $1,000 $2,000 $3,000
Below are the packages of three vendors:
Vendor 1: DT pays $55,000 cash at time of delivery and payments of $18,000 at end of each of the next 10 years. DT can elect to purchase a 20 year maintenance service agreement for $10,000 one time fee. The purchase agreement is optional but if purchased, DT won’t have to maintain the equipment for a fee for the useful life of the equipment. (Use PV of ordinary annuity table)
Vendor 2: Sales price is $380,000. Payment of $9,500 is payable semi annually for 20 years. Upon delivery, DT pays $9,500. Then, it makes remaining 39 payments starting 6 months after delivery. The annual maintenance for the next 20 years is included in the price. (Use PV of annuity due table; remember the payment is twice a year, so interest rate will be half of annual interest rate provided below).
Vendor 3: Sales price is $150,000. DT must pay the whole sales price at delivery. (Use PV of ordinary annuity table but take into consideration the years of the maintenance cost).
Required
Assume DT will pay for the maintenance contract with vendor 1 if selected and that vendor 2
will perform maintenance at no extra charge as indicated. Since Vendor 3 doesn’t offer maintenance, DT will pay for this based on the year end maintenance cost provided. Which vendor should DT select if its cost of funds is 10%? (Hint: calculate which one has the lowest PV of cash outflows).
3.A small business owner (Craig Osborn) has a defined benefit retirement plan for him and three employees. At retirement, Craig will get 50% of his last year before retirement’s annual salary while each employee will get 40% of his or her last year before retirement’s annual salary. The company will fund the plan by making 15 annual contributions. The plan’s compound annual interest rate is 12%. The plan will make annual payment to each participant at the beginning of each year for 20 years starting from retirement date.
She provides you the following salary and retirement information current as of January 1, 2015 (This is the date the 15 annual contributions to the plan starts).
Name Current Annual Salary Estimated Retirement Date
Craig Osborn $48,000 January 1, 2040
Dean Smith $36,000 January 1, 2045
Danny Aubrey $18,000 January 1, 2035
Pamela Langford $15,000 January 1, 2030
Each year end, Craig and his employees will have raises of 4%.
Required
a. What is the annual retirement benefit for each plan participant? (Round to the nearest dollar.) Hint: Craig will receive raises for 24 years, Dean will receive raises for 29 years, Danny will receive raises for 19 years, and Pamela will receive raises for 14 years.
b. What amount must be contributed to the plan at the end of 15 years to ensure that all benefits will be paid? (Round to the nearest dollar.) Hint: calculate the PV of annuity for each participant then total. Note that Craig will retire 10 years after contributions stop, Dean will retire 15 years after contributions stop, Danny will retire 5 years after contributions stop, and Pamela will retire the beginning of the year after contributions stop.
c. What is the required annual beginning of the year contributions? Recall that annual compounded interest rate is 12%.
Sutton Company produces head sets for computers, which it sells for $20 each. The variable cost to make each head set is $6. During April, 700 sets were sold. Fixed costs for April were $2 per unit for a total of $1,400 for the month. How much is the monthly break even level of sales in dollars for Sutton Company?
Sweeten Company had no jobs in progress at the beginning of March and no beginning inventories. It started only two jobs during March%u2014Job P and Job Q. Job P was completed and sold by the end of the March and Job Q was incomplete at the end of the March. The company uses a plantwide predetermined overhead rate based on direct labor hours. The following additional information is available for the company as a whole and for Jobs P and Q (all data and questions relate to the month of March):
Estimated total fixed manufacturing overhead: $10,000
estimated variable manufacturing overhead per direct labor hour: $1.00
estminated total labor hours to be worked: $2000
total actual manufacturing cost incurred: $12,500
JOB P:
Direct materials: $13,000
Direct labor cost: $21,000
Actual direct labor hours worked: 1,400
JOB Q:
Direct Materials: $8,000
Direct labor cost: $7,500
Actual direct labor hours worked: 500
1. What is the company’s predetermined overhead rate?
2. How much manufacturing overhead was applied to Job P and Q?
3. What is direct labor hourly wage rate?
4. If Job P included 20 units, what is its unit product cost? What is the total amount of manufacturing cost assigned to Job Q as of the end of March (including applied overhead?)
(TCO 7) Products Gamma and Delta are joint products. The joint production cost of the products is $800. Gamma has a market value of $500 at the split off point. If Gamma is further processed at an additional cost of $600, its market value is $1,400. Product Delta has a market value of $1,100 at the split off point. If Product Delta is further processed at an additional cost of $300, its market value is $1,400. Using the relative sales value method, calculate the joint product cost that would be allocated to Gamma and Delta. How do you know if one of the products should be further processed?
Answer found:
1.Net Present Value = Cash Inflow Outflow/(1+i)^t
=600000 300000/(1+0.09)^8
=$150559.8839
Company should not proceed with project as it’s NPV is just about half it’s initial investment.
Thrifty Markets, Inc., operates three stores in a large metropolitan area. The company%u2019s segmented absorption costing income statement for the last quarter is given below:
Thrifty Markets, Inc. Income Statement For the Quarter Ended March 31
Total
Uptown Store
Downtown Store
Westpark Store
Sales
$
2,900,000
$
1,100,000
$
600,000
$
1,200,000
Cost of goods sold
1,520,000
594,000
359,000
567,000
Gross margin
1,380,000
506,000
241,000
633,000
Selling and administrative expenses:
Selling expenses:
Direct advertising
114,800
32,000
40,000
42,800
General advertising*
17,000
6,448
3,517
7,035
Sales salaries
156,000
52,000
43,000
61,000
Delivery salaries
33,000
11,000
11,000
11,000
Store rent
207,000
69,000
62,000
76,000
Depreciation of store fixtures
46,010
17,500
8,700
19,810
Depreciation of delivery equipment
30,000
10,000
10,000
10,000
Total selling expenses
603,810
197,948
178,217
227,645
Administrative expenses:
Store management salaries
79,000
25,000
24,000
30,000
General office salaries*
46,000
17,448
9,517
19,035
Utilities
98,600
33,000
32,000
33,600
Insurance on fixtures and inventory
22,800
7,100
8,100
7,600
Employment taxes
37,200
11,100
12,800
13,300
General office expenses%u2014other*
21,000
7,966
4,345
8,689
Total administrative expenses
304,600
101,614
90,762
112,224
Total operating expenses
908,410
299,562
268,979
339,869
Net operating income (loss)
$
471,590
$
206,438
$
(27,979
)
$
293,131
*Allocated on the basis of sales dollars.
Management is very concerned about the Downtown Store%u2019s inability to show a profit, and consideration is being given to closing the store. The company has asked you to make a recommendation as to what course of action should be taken. The following additional information is available about the store:
a.
The manager of the store has been with the company for many years; he would be retained and transferred to another position in the company if the store were closed. His salary is $8,000 per month, or $24,000 per quarter. If the store were not closed, a new employee would be hired to fill the other position at a salary of $7,000 per month.
b.
The lease on the building housing the Downtown Store can be broken with no penalty.
c.
The fixtures being used in the Downtown Store would be transferred to the other two stores if the Downtown Store were closed.
d.
The company%u2019s employment taxes are 10% of salaries.
e.
A single delivery crew serves all three stores. One delivery person could be discharged if the Downtown Store were closed; this person%u2019s salary amounts to $9,000 per quarter. The delivery equipment would be distributed to the other stores. The equipment does not wear out through use, but it does eventually become obsolete.
f.
One-third of the Downtown Store%u2019s insurance relates to its fixtures.
g.
The general office salaries and other expenses relate to the general management of Thrifty Markets, Inc. The employee in the general office who is responsible for the Downtown Store would be discharged if the store were closed. This employee%u2019s compensation amounts to $6,000 per quarter.
Required:
1.
Prepare a schedule showing the change in revenues and expenses and the impact on the overall company net operating income that would result if the Downtown Store were closed. (Input all amounts as positive values. Round your intermediate and final answers to the nearest dollar amount. Omit the “$” sign in your response.)
(Click to select) Gross margin gained if the store is closed Gross margin lost if the store is closed
$
Less costs that can be avoided:
(Click to select) Employment taxes Store management salaries Sales salaries General office salaries Utilities Insurance on inventories General office expenses-other General advertising Store rent Direct advertising Delivery salaries
$
(Click to select) Delivery salaries Store management salaries Insurance on inventories General advertising Direct advertising Utilities Employment taxes Store rent General office expenses-other Sales salaries General office salaries
(Click to select) Sales salaries General office salaries Delivery salaries General office expenses-other Store rent Insurance on inventories Utilities Store management salaries Employment taxes Direct advertising General advertising
(Click to select) Store management salaries Insurance on inventories Direct advertising Store rent Utilities Sales salaries Delivery salaries General office salaries General advertising Employment taxes General office expenses-other
(Click to select) General office salaries Insurance on inventories Utilities General office expenses-other Store management salaries General advertising Sales salaries Delivery salaries Employment taxes Direct advertising Store rent
(Click to select) General advertising Sales salaries Utilities Store rent Direct advertising Delivery salaries Store management salaries Insurance on inventories General office expenses-other General office salaries Employment taxes
(Click to select) Store rent General office salaries Employment taxes Insurance on inventories Utilities Store management salaries Direct advertising General advertising Sales salaries Delivery salaries General office expenses-other
(Click to select) Sales salaries General advertising Store management salaries Store rent Direct advertising General office expenses-other Employment taxes Insurance on inventories Utilities Delivery salaries General office salaries
(Click to select) Sales salaries Store management salaries General advertising Store rent Direct advertising Insurance on inventories Employment taxes Delivery salaries General office expenses-other General office salaries Utilities
(Click to select) Increase in company net operating income Decrease in company net operating income
$
2.
Based on your computations in (1) above, what recommendation would you make to the management of Thrifty Markets, Inc.?
The Downtown Store should not be closed.
The Downtown Store should be closed.
3.
Assume that if the Downtown Store were closed, sales in the Uptown Store would increase by $300,000 per quarter due to loyal customers shifting their buying to the Uptown Store. The Uptown Store has ample capacity to handle the increased sales, and its gross margin is 46% of sales.
a.
Calculate the Net advantage of closing the Downtown Store. (Negative amount should be indicated with a minus sign.Round your intermediate and final answers to the nearest dollar amount.Omit the “$” sign in your response.)
Net advantage of closing the Downtown Store
$
b.
What recommendation would you make to the management of Thrifty Markets, Inc.?
Toying With Nature wants to take advantage of children’s current fascination with dinosaurs by adding several scale model dinosaurs to its existing product line. Annual sales of the dinosaurs are estimated at 80,000 units at a price of $6 per unit. Variable manufacturing costs are estimated at $2.50 per unit, incremental fixed manufacturing costs (excluding depreciation) at $47,000 annually, and additional selling and general expenses related to the dinosaurs at $52,000 annually.
To manufacture the dinosaurs, the company must invest $350,000 in design molds and special equipment. Since toy fads wane in popularity rather quickly, Toying With Nature anticipates the special equipment will have a three year service life with only a $20,000 salvage value. Depreciation will be computed on a straight line basis. All revenue and expenses other than depreciation will be received or paid in cash. The company’s combined federal and state income tax rate is 40 percent.
c.
Compute the following. Assume discounted at an annual rate of 15 percent. Use Exhibit 26 3 and26 4where necessary. (Round your “PV factors” to 3 decimal places, playback period to the nearest tenth of a year, the return on average investment to the nearest tenth of a percent, and the net present value to the nearest dollar. Omit the “$” & “%” signs in your response.)
Tracey Douglas is the owner and managing director of Heritage Garden Furniture, Ltd., a South African company that makes museum quality reproductions of antique outdoor furniture. Ms. Douglas would like advice concerning the advisability of eliminating the model C3 lawnchair. These lawnchairs have been among the company%u2019s best selling products, but they seem to be unprofitable.
A condensed absorption costing income statement for the company and for the model C3 lawnchair for the quarter ended June 30 follows:
All Products
Model C3 Lawnchair
Sales
R
3,150,000
R
325,000
Cost of goods sold:
Direct materials
784,000
124,500
Direct labor
705,000
74,500
Fringe benefits (15% of direct labor)
105,750
11,175
Variable manufacturing overhead
30,500
6,100
Building rent and maintenance
32,500
6,500
Depreciation
77,500
21,600
Total cost of goods sold
1,735,250
244,375
Gross margin
1,414,750
80,625
Selling and administrative expenses:
Product managers’ salaries
100,000
5,000
Sales commissions (10% of sales)
315,000
32,500
Fringe benefits (20% of salaries and commissions)
83,000
7,500
Shipping
145,000
37,225
General administrative expenses
466,500
46,900
Total selling and administrative expenses
1,109,500
129,125
Net operating income (loss)
R
305,250
R
(48,500)
The currency in South Africa is the rand, denoted here by R.
The following additional data have been supplied by the company:
a.
Direct labor is a variable cost.
b.
All of the company%u2019s products are manufactured in the same facility and use the same equipment. Building rent and maintenance and depreciation are allocated to products using various bases. The equipment does not wear out through use; it eventually becomes obsolete.
c.
There is ample capacity to fill all orders.
d.
Dropping the model C3 lawnchair would have no effect on sales of other product lines.
e.
Work in process and finished goods inventories are insignificant.
f.
Shipping costs are traced directly to products.
g.
General administrative expenses are allocated to products on the basis of sales. There would be no effect on the total general administrative expenses if the model C3 lawnchair were dropped.
h.
If the model C3 lawnchair were dropped, the product manager would be laid off.
Required:
1a.
Calculate the effect on the overall company’s net operating income if the Model C3 lawnchair is dropped? (Input the amount as a positive value. Omit the “R” sign in your response.)
(Click to select) Decrease Increase in net operating income
R
1b.
Would you recommend that the model C3 lawnchair be dropped?
No
Yes
2.
What would sales of the model C3 lawnchair have to be, at minimum, in order to justify retaining the product? (Omit the “R” sign in your response.)
Trikeco, a domestic corporation, manufactures mountain bicycles for sale both in the United States and Europe. Trikeco operates in Europe through Trike1, a wholly owned Italian corporation that manufactures a special line of mountain bicycles for the European market. In addition, Trike1 owns 100% of Trike2, a U.K. corporation that markets Trike1%u2019s products in the United Kingdom. At end of the current year, the undistributed earnings and foreign income taxes of Trike1 and Trike2 are as follows:
Trike1
Trike2
Post 1986 undistributed earnings …………
$90 million………..
$54 million
Post 1986 foreign income taxes ……………
$36 million………..
$27 million
During the current year, Trike2 distributed a $10 million dividend to Trike1, and Trike1 distributed a $10 million dividend to Trikeco. To simplify the computations, assume that neither dividend distributions attracted any Italian or U.K. withholding taxes, and that the dividend received by Trike1 was exempt from Italian taxation.
Compute Trikeco%u2019s deemed paid foreign tax credit, as well as the residual U.S. tax, if any, on the dividend Trikeco received from Trike1. Assume the U.S. tax rate is 35%.
%u201CI know headquarters wants us to add that new product line,%u201D said Fred Halloway, manager of Kirsi Products%u2019 East Division. %u201CBut I want to see the numbers before I make a move. Our division%u2019s return on investment (ROI) has led the company for three years, and I don%u2019t want any letdown.%u201D
Kirsi Products is a decentralized wholesaler with four autonomous divisions. The divisions are evaluated on the basis of ROI, with year end bonuses given to divisional managers who have the highest ROI. Operating results for the company%u2019s East Division for last year are given below:
Sales
$
22,950,000
Variable expenses
13,000,000
Contribution margin
9,950,000
Fixed expenses
8,022,200
Net operating income
$
1,927,800
Divisional operating assets
$
5,100,000
The company had an overall ROI of 18% last year (considering all divisions). The company%u2019s East Division has an opportunity to add a new product line that would require an investment of $3,100,000. The cost and revenue characteristics of the new product line per year would be as follows:
Sales
$ 9,300,000
Variable expenses
65% of sales
Fixed expenses
$ 2,613,300
Required:
1.
Compute the East Division%u2019s ROI for last year; also compute the ROI as it would appear if the new product line is added. (Round your intermediate calculations and final answers to 2 decimal places. Omit the “%” sign in your response.)
ROI
Present
%
New product line alone
%
Total
%
2.
If you were in Fred Halloway%u2019s position, would you accept or reject the new product line?
Accept
Reject
3.
Why do you suppose headquarters is anxious for the East Division to add the new product line?
Adding the new line would increase the company’s overall ROI.
Adding the new line would decrease the company’s overall ROI.
4.
Suppose that the company%u2019s minimum required rate of return on operating assets is 15% and that performance is evaluated using residual income.
a.
Compute the East Division%u2019s residual income for last year; also compute the residual income as it would appear if the new product line is added. (Omit the “$” sign in your response.)
USAco is a domestic corporation that manufactures products in the U.S. for distribution in the U.S. and abroad. During the current year, USAco derives a pre tax profit of $10 million, which includes $1 million of foreign source income derived from a country X sales office that is considered an unincorporated branch for U.S. tax purposes. The country X corporate income tax rate is 50% and the U.S. tax rate is 35%.
What would be the worldwide effective tax rate on the $1 million of foreign profits, assuming the U.S. taxes the worldwide income of domestic corporations, but allows an unlimited credit for foreign income taxes?
What would be the worldwide effective tax rate on the $1 million of foreign profits, assuming the U.S. allows a credit for foreign income taxes, but the credit is limited to the U.S. tax attributable to foreign source income?
How would your answer to part (b) change if the foreign tax rate was 30% rather than 50%?
Use the following information to answer questions 1 5. The following information is for employee William Heedy for the week ended March 15. Total hours worked: 48 Rate: $16 per hour, with double time for all hours in excess of 40 Federal income tax withheld: $200 United Fund deduction: $50 Cumulative earnings prior to current week: $6,400 Tax rates: Social security: 6% on maximum earnings of $106,800 Medicare tax: 1.5% on all earnings; on both employer and employee State unemployment: 3.4% on maximum earnings of $7,000; on employer Federal unemployment: 0.8% on maximum earnings of $7,000; on employer 1. What is WIlliam’s total earnings? (Points : 3) $640.00 $896.00 $256.00 $900.00 2. What is WIlliam’s total deductions? (Points : 3) $200.00 $50.00 $317.20 $250.00 3. What is William’s net pay? (Points : 3) $578.80 $640.00 $580.00 $600.00 4. What is the employers FICA based on Williams pay? (Points : 3) $70.00 $67.20 $20.40 $0 5. What is the employers Federal Unemployment based on Williams pay? (Points : 3) $0 $13.44 $7.00 $4.80
Use the following information to answer the five questions in the quiz: The estimated total factory overhead cost and total machine hours for Department 40 for the current year are $250,000 and 56,250 respectively. During January, the first month of the current year, actual machine hours used totaled 5,100 and factory overhead cost incurred totaled $22,000.
1. Determine the factory overhead rate based on machine hours: (Points : 3)
a. $4.44 per machine hour b $2.25 per machine hour c $4.31 per machine hour d $4.76 per machine hour
2.In the journal entry to apply factory overhead to production in Department 40 for January, we would have the following entry: (Points : 3)
a. Work in Process”Department 40 $21,981 Debit b. Work in Process”Department 40 $21,981 Credit c. Work in Process”Department 40 $22,644 Debit d. Work in Process”Department 40 $22,644 Credit
3. In the journal entry to apply factory overhead to production in Department 40 for January, we would have the following entry: (Points : 3)
a. Factory Overhead”Department 40 $21,981 Debit b. Factory Overhead”Department 40 $21,981 Credit c. Factory Overhead”Department 40 $22,644 Debit d. Factory Overhead”Department 40 $22,644 Credit
4. What is the balance of Factory Overhead”Department 40 at January 31? (Points : 3)
a. $644 Debit b. $644 Credit c. $22,644 Debit d. $22,644 Credit
5. Does the balance of Factory Overhead”Department 40 at January 31 represent overapplied or underapplied factory overhead? (Points : 3)
a. Overapplied factory overhead b. Underapplied factory overhead
c. Cannot determine with information given d. neither
Use this information to prepare a cash budget for the months of February and March
The Cambridge Company has budgeted sales revenues as follows.
Jan Feb Mar
Credit sales $45,000 $36,000 $27,000
Cash sales 27,000 76,500 58,500
Total sales $72,000 $112,500 $85,500
Past experience indicates that 60% of the credit sales will be collected in the month of sale and the remaining 40% will be collected in the following month.
Purchases of inventory are all on credit and 40% is paid in the month of purchase and 60% in the month following purchase. Budgeted inventory purchases are $97,500 in January, $67,500 in February, and $31,500 in March.
Other budgeted cash receipts: (a) sale of plant assets for $18,525 in February, and (b) sale of new common stock for $25,275 in March. Other budgeted cash disbursements: (a) operating expenses of $10,125 each month, (b) selling and administrative expenses of $18,750 each month, (c) dividends of $28,500 will be paid in February, and (d) purchase of equipment for $9,000 cash in March.
The company has a cash balance of $15,000 at the beginning of February and wishes to maintain a minimum cash balance of $15,000 at the end of each month. An open line of credit is available at the bank and carries an annual interest rate of 12%. Assume that all borrowing is done on the first day of the month in which financing is needed and that all repayments are made on the last day of the month in which excess cash is available. Also assume that there is no outstanding financing as of February 1.
Use the sample sizes and the number of deviations determined below.
Control Procedure
Parameters
1
2
3
4
Risk of incorrect acceptance
5 %
5 %
10 %
10 %
Tolerable deviation rate
4 %
5 %
7 %
8 %
Expected population deviation rate
1 %
2 %
3 %
4 %
Sample size (using tables)
156
181
94
98
Sample size (using ACL)
158
184
96
100
Determine the sample deviation rate, the computed upper deviation rate, and the auditor’s conclusion (i.e., testing results do or do not support operating effectiveness of the control) for each control procedure. (Leave no cell blank Be sure to enter “0” if required. Round your rates values to 1 decimal place. Omit the % sign in your response.)
In the Restin Company, maintenance costs are a mixed cost. At the low level of activity (160 direct labor hours), maintenance costs are $600. At the high level of activity (400 direct labor hours), maintenance costs are $1,100. Using the high low method, what is the variable maintenance cost per unit and the total fixed maintenance cost? Variable Cost Per Unit Total Fixed Cost
(Risk of material misstatement) Your client, a manufacturer of computer components, has experienced slowing demand for its product. Recently, it cut back from three shifts a day to two shifts a day, and the company has eliminated the backlog of orders that existed in prior years by providing financing to customers. Newspaper reports indicate that competition has taken significant business away from the client because a large investment in R&D has not resulted in improved products. Furthermore, a small handful of your client’s customers are experiencing financial difficulties because of slowing demand for your client’s products.
Required
Consider the implications of the above information for revenues. What assertions, if any, are likely to be misstated? As a result, what accounts are likely to be overstated or understated? Explain your reasoning.
Consider the implications of the above information for inventory. What assertions, if any, are likely to be misstated? As a result, what accounts are likely to be overstated or understated? Explain your reasoning.
Rockwell Company owns a single restaurant which has a cantina primarily used to seat patrons while they wait on their tables. The company is considering eliminating the cantina and adding more dining tables. Segmented contribution income statements are as follows and fixed costs applicable to both segments are allocated on the basis of sales.
Restaurant
Cantina
Total
Sales
$800,000
$200,000
$1,000,000
Variable costs
475,000
160,000
635,000
Direct fixed costs
50,000
15,000
65,000
Allocated fixed costs
212,500
37,500
250,000
Net Income
$ 62,500
($12,500)
$50,000
What financial effect will occur to profit if Rockwell eliminates the cantina but no more dining customers are served?
Rocky Mountain Corporation makes two types of hiking boots Xactive and the Pathbreaker. Data concerning these two product lines appear below:
Xactive Pathbreaker Selling price per unit . . . . . . . . . . . . . . . . . . . . . . . $127.00 $89.00 Direct materials per unit . . . . . . . . . . . . . . . . . . . . $64.80 $51.00 Direct labor per unit . . . . . . . . . . . . . . . . . . . . . . . $18.20 $13.00 Direct labor hours per unit . . . . . . . . . . . . . . . . . . 1.4 DLHs 1.0 DLHs Estimated annual production and sales . . . . . . . . 25,000 units 75,000 units
The company has a traditional costing system in which manufacturing overhead is applied to units based on direct labor hours. Data concerning manufacturing overhead and direct labor hours for the upcoming year appear below: Estimated total manufacturing overhead . . . . . . . . . . $2,200,000 Estimated total direct labor hours . . . . . . . . . . . . . . . . 110,000 DLHs
Required: 1.compute the product margins for the Xactive and the Pathbreaker products under the companys traditional costing system. 2. The company is considering replacing its traditional costing system with an activity based costing system that would assign its manufacturing overhead to the following four activity cost pools (the Other cost pool includes organization sustaining costs and idle capacity costs):
compute the product margins for the Xactive and the Pathbreaker products under the activity based costing system.
3. prepare a quantitative comparison of the traditional and activity based cost assignments. Explain why the traditional and activity based cost assignments differ.
S & X Co. is a retail store owned solely by Paul Turner. During the month of November, the equity accounts were affected by the following events: Nov. 9 Turner invested an additional $15,000 in the business. Nov. 15 Turner withdrew $1,500 for his salary for the first two weeks of the month. Nov. 30 Turner withdrew $1,500 for his salary for the second two weeks of the month. Nov. 30 S & X distributed $1,000 of earnings to Turner. a. Assuming that the business is organized as a sole proprietorship: 1. Prepare the journal entries to record the above events in the accounts of S & X. 2. Prepare the closing entries for the month of November. Assume that after closing all of the revenue and expense accounts the Income Summary account has a balance of $5,000. Hint: Record the investment in a separate capital account and the withdrawals (salary) in a separate drawing account. Close the drawing account into the capital account as part of the closing entries. b. Assuming that the business is organized as a corporation: 1. Prepare the journal entries to record the above events in the accounts of S & X. Assume that the distribution of earnings on November 30 was payment of a dividend that was declared on November 20. 2. Prepare the closing entries for the month of November. Assume that after closing all of the revenue and expense accounts (except Income Tax Expense) the Income Summary account has a balance of $2,000. Before preparing the closing entries, prepare the entries to accrue income tax expense for the month and to close the Income Tax Expense account to the Income Summary account. Assume that the corporate income tax rate is 30 percent. c. Explain the causes of the differences in net income between S & X as a sole proprietorship and S & X as a corporation. d. Describe the effects of the business operations on Turner’s individual income tax return, assuming that the business is organized as ( 1 ) a sole proprietorship and ( 2 ) a corporation. I ONLY NEED HELP WITH PART C AND D I DID THE OTHERS JUST FINE.
Schefter Mining operates a copper mine in Wyoming. Acquisition, exploration, and development costs totaled $8.2 million. Extraction activities began on July 1, 2011.
After the copper is extracted in approximately six years, Schefter is obligated to restore the land to its original condition, including constructing a park. The company’s controller has provided the following three cash flow possibilities for the restoration costs: The company’s credit adjusted, risk free rate of interest is 5%, and its fiscal year ends on December 31. Required: a. What is the initial cost of the copper mine? (Round computations to nearest whole dollar.) b. How much accretion expense will Schefter report in its 2011 income statement? c. What is the carrying value (book value) of the asset retirement obligation that Schefter will report in its 2011 balance sheet? d. Assume that actual restoration costs incurred in 2017 totaled $860,000. What
amount of gain or loss will Schefter recognize on retirement of the liability
Seattle, Inc., is contemplating a project that costs $180,000. Expectations are that annual cash revenues will be $70,000 and annual expenses (including depreciation) will total $30,000. The project has a six year useful life and a residual value of $30,000. Assume Seattle Inc. uses straight line method of depreciation.
Selected data from the financial statements of Italian Marble Co. and Brazil Stone Products for the year just ended follow. Assume that for both companies dividends declared were equal in amount to net earnings during the year and therefore stockholders’ equity did not change. The two companies are in the same line of business.
Italian Marble Co.
Brazil Stone Products
Total liabilities
$
200,000
$
100,000
Total assets
800,000
400,000
Sales (all on credit)
1,960,000
1,150,000
Average inventory
240,000
140,000
Average receivables
200,000
100,000
Gross profit as a percentage of sales
40
%
30
%
Operating expenses as a percentage of sales
36
%
25
%
Net income as a percentage of sales
3
%
5
%
a.
Compute the net income for each company. (Omit the “$” sign in your response.)
Italian Marble Co.
Brazil Stone Products
Net income
$
$
b.
Compute the net income as a percentage of stockholder’s equity for each company. (Round your answers to the nearest whole percent. Omit the “%” sign in your response.)
Italian Marble Co.
Brazil Stone Products
Net income as a percentage of stockholder’s equity
%
%
c.
Compute the accounts receivable turnover for each company. (Round your answers to the nearest whole number.)
Italian Marble Co.
Brazil Stone Products
Accounts receivable turnover
times
times
d.
Compute the inventory turnover for each company. (Round your answers to 1 decimal place.)
Selected financial data of two competitors, Home Depot and Lowe%u2019s, are presented here. (All dollars are in millions.) Suppose the data were taken from the 2014 financial statements of each company. Home Depot Lowe%u2019s Income Statement Data for Year Net sales $77,349 $48,283 Cost of goods sold 51,352 31,556 Selling and administrative expenses 18,570 12,022 Interest expense 696 239 Other income 74 45 Income taxes 2,410 1,702 Net income $ 4,395 $ 2,809 Home Depot Lowe%u2019s Balance Sheet Data (End of Year) Current assets $14,674 $ 8,686 Noncurrent assets 29,650 22,183 Total assets $44,324 $30,869 Current liabilities $12,706 $ 7,751 Long term liabilities 13,904 7,020 Total stockholders%u2019 equity 17,714 16,098 Total liabilities and stockholders%u2019 equity $44,324 $30,869 Net cash provided by operating activities $5,727 $4,347 Cash paid for capital expenditures $3,558 $4,010 Dividends paid $1,709 $428 Average shares outstanding 1,849 1,481 Instructions For each company, compute these values and ratios. (a) Working capital. (b) Current ratio. (Round to two decimal places.) (c) Debt to assets ratio. (d) Free cash flow. (e) Earnings per share. (f) Compare liquidity, profitability and solvency of the 2 companies
The shareholders’ equity of Kramer Industries includes the data shown below. During 2014, cash dividends of $150 million were declared. Dividends were not declared in 2012 or 2013.
($ in millions)
Common stock
$
200
Paid in capital”excess of par, common
800
Preferred stock, 10%, nonparticipating
100
Paid in capital”excess of par, preferred
270
Required:
Determine the amount of dividends payable to preferred shareholders and to common shareholders under each of the following two assumptions regarding the characteristics of the preferred stock. (Enter your answers in millions.)
Assumption A ” The preferred stock is noncumulative.
Tuna Company set the following standard unit costs for its single product.
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Tuna Company set the following standard unit costs for its single product.?? ? ? ?? Direct materials (27 Ibs. @ $4 per Ib.)?$?108.00 ?? Direct labor (8 hrs. @ $8 per hr.)? ?64.00 ?? Factory overhead—variable (8 hrs. @ $5 per hr.)? ?40.00 ?? Factory overhead—fixed (8 hrs. @ $7 per hr.)? ?56.00 ?? ???? Total standard cost?$?268.00 ?? ? ? ???? The predetermined overhead rate is based on a planned operating volume of 60% of the productive capacity of 40,000 units per quarter. The following flexible budget information is available.?? ?Operating Levels?? ??? ? ?50%? ?60%? ?70%?? Production in units? ?20,000 ? ?24,000 ? ?28,000 ?? Standard direct labor hours? ?160,000 ? ?192,000 ? ?224,000 ?? Budgeted overhead? ? ? ? ? ? ?? Fixed factory overhead?$?1,344,000 ?$?1,344,000 ?$?1,344,000 ?? Variable factory overhead?$?800,000 ?$?960,000 ?$?1,120,000 ???? During the current quarter, the company operated at 70% of capacity and produced 28,000 units of product; actual direct labor totaled 222,000 hours. Units produced were assigned the following standard costs:?? ? ? ?? Direct materials (756,000 Ibs. @ $4 per Ib.)?$?3,024,000 ?? Direct labor (224,000 hrs. @ $8 per hr.)? ?1,792,000 ?? Factory overhead (224,000 hrs. @ $12 per hr.)? ?2,688,000 ?? ???? Total standard cost?$?7,504,000 ?? ? ? ???? Actual costs incurred during the current quarter follow:?? ? ? ?? Direct materials (751,000 Ibs. @ $4.10)?$?3,079,100 ?? Direct labor (222,000 hrs. @ $7.75)? ?1,720,500 ?? Fixed factory overhead costs? ?1,968,679 ?? Variable factory overhead costs? ?1,843,019 ?? ???? Total actual costs?$?8,611,298 ?? ? ? ????? HYPERLINK “http://ezto.mhecloud.mcgraw hill.com/” o “Reference Information” ?references? ?1.?Compute the direct materials cost variance, including its price and quantity variances. (Do not round your intermediate calculations. Indicate the effect of each variance by…
Shaw%u2019s Garden was started on May 1 with an investment of $45,000 cash. Follow ing are the assets, liabilities, and common stock of the company on May 31, 2014, and the revenues and expenses for the month of May, its first month of operations. Accounts receivable $ 8,400 Notes payable $26,000 Service revenue 10,400 Salaries and wages expense 1,900 Advertising expense 1,800 Equipment 58,800 Accounts payable 4,400 Maintenance and repairs expense 2,100 Cash 10,800 Insurance expense 400 Common stock 45,000 No additional common stock was issued in May, but a dividend of $1,600 in cash was paid. Instructions (a) Prepare an income statement and a retained earnings statement for the month of May and a balance sheet at May 31, 2014. (b) Briefly discuss whether the company%u2019s first month of operations was a success. (c) Discuss the company%u2019s decision to distribute a dividend. SHOW ALL WORK
Shown below is activity for one of the products of Denver Office Equipment:
January 1 balance, 500 units @ $55 $27,500
Purchases:
January 10: 500 units @ $60
January 20: 1,000 units @ $63
Sales:
January 12: 800 units
January 28: 750 units
What is Denver Office Equipment%u2019s January 31 ending inventory and cost of goods sold for January, assuming Denver uses FIFO?
Answer
Ending inventory = $28,350; Cost of goods sold = $92,150
Ending inventory = $27,113; Cost of goods sold = $93,387
Ending inventory = $27,000; Cost of goods sold = $93,500
Ending inventory = $24,750; Cost of goods sold = $95,750
Per information provided in #29, what is Denver Office Equipment%u2019s January 31 ending inventory and cost of goods sold for January, assuming Denver uses LIFO and a perpetual inventory system? Answer
Ending inventory = $28,350; Cost of goods sold = $92,150
Ending inventory = $24,750; Cost of goods sold = $95,750
Ending inventory = $27,000; Cost of goods sold = $93,500
Ending inventory = $26,750; Cost of goods sold = $93,750
Per information provided in #29, what is Denver Office Equipment%u2019s January 31 ending inventory and cost of goods sold for January, assuming Denver uses average cost and a periodic inventory system? Answer
Ending inventory = $27,113; Cost of goods sold = $93,387
Ending inventory = $26,750; Cost of goods sold = $93,750
Ending inventory = $24,750; Cost of goods sold = $95,750
Ending inventory = $27,000; Cost of goods sold = $93,500
Per information provided in #29, what is Denver Office Equipment%u2019s January 31 ending inventory and cost of goods sold for January, assuming Denver uses LIFO and a periodic inventory system?
Answer
Ending inventory = $27,000; Cost of goods sold = $93,500
Ending inventory = $24,750; Cost of goods sold = $95,750
Ending inventory = $27,113; Cost of goods sold = $93,387
Ending inventory = $28,350; Cost of goods sold = $92,150
sinatra industries, inc. uses a job order cost system. The following data summarize the operations related to production for June 2012, the first month of operations:
a. materials purhcased on acct $32,760
b. materials requisitioned and factory labor used:
JOB… MATERIALS… FACTORY LABOR
301… $3,290… $3,080…
302… 4,025… 4,160…
303… 2,660… 2,080…
304… 9,030… 7,640…
305… 5,740… 5,810…
306… 4,170… 3,710…
for general factory use… 1,200… 4,550…
c. factory overhead costs incurred on account : $6,300
d. depreciation of machinery and equipment : $2,200
e. the factory overhead rate is $58 per machine hour. machine hours used:
JOB… MACHINE HOURS
301… 26
302… 38
303… 30
304… 80
305… 40
306… 26
total… 240
f. jobs completed: 301, 302, 303, and 305
g. jobs were shipped and customers were billed as follows:
Job 301 $9,150
Job 302 $12,350
Job 303 $16,600
INSTRUCTIONS>>>>>>
1. journalize the entries and record the summarized operations
2. post the appropriate entries to T accounts for Work in Process and Finished Goods, using the identifying letters as dates. Insert memo account balances as of the end of the month.
3. prepare a schedule of unfinished jobs to support the balance in the work in process account.
4. prepare a schedule of completed jobs on hand to support the balance in the finished goods account
Smythe Company Inc. had a beginning inventory of 200 units of Product ERV at a cost of $6 per unit. During the year, purchases were: Jan. 24 800 units at $7 Aug. 19 600 units at $ 9 Apr. 12 400 units at $8 Nov. 30 350 units at $10 Smythe Company uses a periodic inventory system. Sales totaled 1,900 units. Instructions
(a) Determine the cost of goods available for sale.
(b) Determine the ending inventory and the cost of goods sold under each of the assumed cost flow methods (FIFO, LIFO, and average cost). Prove the accuracy of the cost of goods sold under the FIFO and LIFO methods. (Round average unit cost to three decimal places.)
(c) Which cost flow method results in the lowest inventory amount for the balance sheet? The lowest cost of goods sold for the income statement?
Colson Company operates several stores and is a publicly traded company. The comparative balance sheet and income statement for Colson as of May 31, 2012, are shown below. The company is preparing its statement of cash flows.
COLSON COMPANY
Comparative Balance Sheet
As of May 31
2012
2011
Current Assets
Cash
$ 29,870
$ 19,780
Accounts receivable
76,750
56,980
Inventory
221,310
250,050
Prepaid expenses
9,120
7,012
Total current assets
337,050
333,822
Plant assets
Plants assets
596,980
502,400
Less accumulated
depreciation plant assets
151,250
124,890
Net plant assets
445,730
377,510
Total assets
$ 782,780
$ 711,332
Current Liabilities
Accounts payable
$ 122,680
$ 114,950
Salaries and wages payable
45,270
71,300
Interest payable
27,150
26,145
Total current liabilities
195,100
212,395
Long term debt
Bonds payable
71,320
102,200
Total liabilities
266,420
314,595
Stockholders’ equity
Common stock, $12 par
370,000
280,000
Retained earnings
146,360
116,737
Total stockholders’ equity
516,360
396,737
Total liabilities and stockholders’ equity
$ 782,780
$ 711,332
COLSON COMPANY
Income Statement
For the Year Ended May 31, 2012
Sales
$ 1,256,870
Cost of goods sold
724,430
Gross profit
532,440
Expenses
Salaries and wages expense
251,150
Interest expense
75,500
Depreciation expense
26,360
Other expenses
8,652
Total expenses
361,662
Operating income
170,778
Income tax expense
42,700
Net income
$ 128,078
The following is additional information concerning Colson’s transactions during the year ended May 31, 2012.
1. All sales during the year were made on account.
2. All merchandise was purchased on account, compromising the total accounts payable account.
3. Plant assets costing $94580 were purchase by paying $24680 in cash and issuing 6990 shares of stock.
4. The “other expenses” are related to prepaid items.
5. All income taxes incurred during the year were paid during the year.
6. In order to supplement its cash, Colson issued 2010 shares of common stock at par value.
7. Cash dividends of $98455 were declared and paid at the end of the fiscal year.
Instructions
a) Prepare a statement of cash flows for Colson Company for the year ended May 31, 2012, using the direct method of presentation. Be sure to support the statements with the appropriate calculations. (A reconciliation of net income to net cash is not required).
b) Using the indirect method, calculate only the net cash flow from operating activities for Colson Company for the year ended May 31, 2012.
Download a copy of the ACFE Compensation Guide for Anti fraud Professionals, which is available at no charge at: www.acfe.com/documents/2008 comp guide.pdf. Based on this resource, answer the following questions:
a. How many people participated in the 2008 survey?
b. What is the median total compensation for certified forensic examiners (CFEs) and for non CFEs?
c. What is the modal years of experience for CFEs and for non CFEs?
d. What is the modal highest level of education completed for CFEs and for non CFEs?
e. What is the median total annual compensation for females and males holding CFE certification and for CFEs versus non CFEs? How can you explain these differences?
f. Do fraud examiners earn more if they work in one type of industry (e.g., healthcare) than another? How about internal auditors?
g. Do anti fraud practitioners tend to earn more in some areas of the country than in others? If so, what explains these differences?
Draw a document flowchart to depict each of the following situations.
a. An individual from the marketing department of a wholesale company prepares five copies of a sales invoice, and each copy is sent to a different department.
b. The individual invoices from credit sales must temporarily be stored until they can be matched against customer payments at a later date.
c. A batch control tape is prepared along with a set of transactions to ensure completeness of the data.
d. The source document data found on employee application forms are used as input to create new employee records on a computer master file.
e. Delinquent credit customers are sent as many as four different inquiry letters before their accounts are turned over to a collection agency.
f. Physical goods are shipped back to the supplier if they are found to be damaged upon arrival at the receiving warehouse.
g. The data found on employee time cards are keyed onto a hard disk before they are processed by a computer.
h. The data found on employee time cards are first keyed onto a floppy diskette before they are entered into a computer job stream for processing.
i. A document flowchart is becoming difficult to understand because too many lines cross one another. (Describe a solution.)
j. Three people, all in different departments, look at the same document before it is eventually filed in a fourth department.
k. Certain data from a source document are copied into a ledger before the document itself is filed in another department.
During 2012, its first year of operations as a delivery service, Underwood Corp. entered into the following transactions.
1. Issued shares of common stock to investors in exchange for $100,000 in cash.
2. Borrowed $45,000 by issuing bonds.
3. Purchased delivery trucks for $60,000 cash.
4. Received $16,000 from customers for services provided.
5. Purchased supplies for $4,700 on account.
6. Paid rent of $5,200.
7. Performed services on account for $10,000.
8. Paid salaries of $28,000.
9. Paid a dividend of $11,000 to shareholders.
Instructions
Using the following tabular analysis, show the effect of each transaction on the accounting equation. Put explanations for changes to Stockholders’ Equity in the right handmargin.
English Garden Landscaping designs and installs landscaping. The landscape designers and office staff use office supplies, while field supplies (rock, bark, etc.) are used in the actual landscaping. Purchases on account completed by English Garden Landscaping during January 2012 are as follows:
Jan. 2. Purchased office supplies on account from Meade Co., $350.
5. Purchased office equipment on account from Peach Computers Co., $3,150.
9. Purchased office supplies on account from Executive Office Supply Co., $290.
13. Purchased field supplies on account from Yamura Co., $1,140.
14. Purchased field supplies on account from Naples Co., $2,680.
17. Purchased field supplies on account from Yamura Co., $1,050.
24. Purchased field supplies on account from Naples Co., $3,240.
29. Purchased office supplies on account from Executive Office Supply Co., $260.
31. Purchased field supplies on account from Naples Co., $1,000.
Instructions
1. Insert the following balances in the general ledger as of January 1:
14 Field Supplies …………………$ 5,920
15 Office Supplies ……………….. 750
18 Office Equipment …………….. 12,300
21 Accounts Payable …………….. 1,035
2. Insert the following balances in the accounts payable subsidiary ledger as of January 1:
Executive Office Supply Co. ……………..$340
Meade Co. ………………………………… 695
Naples Co. ………………………………… —
Peach Computers Co. ……………………… —
Yamura Co. ……………………………….. —
3. Journalize the transactions for January, using a purchases journal (p. 30) similar to the one illustrated in this chapter. Prepare the purchases journal with columns for Accounts Payable, Field Supplies, Office Supplies, and Other Accounts. Post to the creditor accounts in the accounts payable subsidiary ledger immediately after each entry.
4. Post the purchases journal to the accounts in the general ledger.
5. a. What is the sum of the balances in the subsidiary ledger at January 31?
b. What is the balance of the controlling account at January 31?
6. What type of e commerce application would be used to plan and coordinate suppliers?
Expert Consulting Services Inc. was organized on March 1, 2010, by two former college roommates. The corporation provides computer consulting services to small businesses. The following transactions occurred during the first month of operations:
March 2: Received contributions of $20,000 from each of the two principal owners of the new business in exchange for shares of stock.
March 7: Signed a two year promissory note at the bank and received cash of $15,000. Interest, along with the $15,000, will be repaid at the end of the two years.
March 12: Purchased $700 in miscellaneous supplies on account. The company has 30 days to pay for the supplies.
March 19: Billed a client $4,000 for services rendered by Expert in helping to install a new computer system. The client is to pay 25% of the bill upon its receipt and the remaining balance within 30 days.
March 20: Paid $1,300 bill from the local newspaper for advertising for the month of March.
March 22: Received 25% of the amount billed to the client on March 19.
March 26: Received cash of $2,800 for services provided in assisting a client in selecting software for its computer.
March 29: Purchased a computer system for $8,000 in cash.
March 30: Paid $3,300 of salaries and wages for March.
March 31: Received and paid $1,400 in gas, electric, and water bills.
Required
1. Prepare a table to summarize the preceding transactions as they affect the accounting equation. Use the format in Exhibit 3 1. Identify each transaction with the date.
2. Prepare an income statement for the month ended March 31, 2010.
3. Prepare a classified balance sheet at March 31, 2010.
4. From reading the balance sheet you prepared in (3), what events would you expect to take place in April? Explain your answer.
Refer to the financial statements of American Eagle Outfitters given in Appendix B at the end of this book. At the bottom of each statement, the company warns readers to ?oRefer to Notes to Consolidated Financial Statements.?? The following questions illustrate the types of information that you can find in the financial statements and accompanying notes.
Required:
1. What items were included as noncurrent assets on the balance sheet?
2. How much land did the company own at the end of the most recent reporting year?
3. What portion of current liabilities were ?oUnredeemed store value cards and gift certificates?? during the current year?
4. At what point were website sales recognized as revenue?
5. The company reported cash flows from operating activities of $302,193,000. However, its cash and cash equivalents increased by $357,281,000 for the year. Explain how that happened.
6. What was the highest stock price for the company during fiscal 2008?
7. Calculate the company’s ROA for fiscal 2008 and 2007. Did it increase or decrease? How would you expect the change in ROA to be reflected in the company’s share price?
Findlay Testing, Inc., provides water testing and maintenance services for owners of hot tubs and swimming pools. During September the following transactions occurred:
Sept. 1 Purchased chemical supplies for $1,750 cash
5 Paid office rent for September, October, and November; the rent is $800 per month
8 Purchased $710 of office supplies on account
13 Received $600 from Simon Kenton in response to a bill sent in August for testing his hot tub water
Sept. 18 Received $7,500 from Alexander Blanchard upon completion of overhaul of his swimming pool water circulation system. Since the job was completed and collected for on the same day, no bill was sent to Blanchard.
25 Billed the city of Bellefontaine $4,200 for testing the water in the city’s outdoor pools during September
30 Recorded and paid September salaries of $3,720
Required:
1. Prepare a journal entry for each transaction.
2. Post the journal entries to Findley Testing’s ledger accounts.
Following is a list of transactions entered into during the first month of operations of Gardener Corporation, a new landscape service. Prepare in journal form the entry to record each transaction.
April 1: Articles of incorporation are i?? led with the state, and 100,000 shares of common stock are issued for $100,000 in cash.
April 4: A six month promissory note is signed at the bank. Interest at 9% per annum will be repaid in six months along with the principal amount of the loan of $50,000.
April 8: Land and a storage shed are acquired for a lump sum of $80,000. On the basis of an appraisal, 25% of the value is assigned to the land and the remainder to the building.
April 10: Mowing equipment is purchased from a supplier at a total cost of $25,000. A down payment of $10,000 is made, with the remainder due by the end of the month.
April 18: Customers are billed for services provided during the first half of the month. The total amount billed of $5,500 is due within ten days.
April 27: The remaining balance due on the mowing equipment is paid to the supplier.
April 28: The total amount of $5,500 due from customers is received.
April 30: Customers are billed for services provided during the second half of the month. The total amount billed is $9,850.
April 30: Salaries and wages of $4,650 for the month of April are paid.
Listed below are the transactions for Hunter Marketing. Inc. for the month of July:
July 1 Hunter begins his marketing company and invests $50,000 cash. July 5 Purchases computers and office equipment on account from OfficeMax for $10,250. July 6 Pays rent for office space $800 for the month. July 6 Employs a secretary, Mary Jones. July 8 Purchases office supplies for cash $960. July 9 Receives $2,430 from customer for services performed. July 11 Pays miscellaneous office expenses $375. July 13 Bills customers $4,900 for serviced performed. July 15 Pays Office Max $3,500 on account. July 18 Withdraws $2,000 from business for personal use. July 20 Receives $1,900 from customers on account. July 23 Bills customers $6,320 for services performed. July 30 Pays the following expenses in cash: office salaries $2,300 and utilities $400.
Enter the transactions shown above in appropriate general ledger accounts (use T accounts). Use the following ledger accounts: Cash, Accounts Receivable, Supplies on Hand, Office Equipment, Accumulated Depreciation, Accounts Payable, Hunter Capital, Service Revenue, Rent Expense, Miscellaneous Office Expense, Office Salaries Expense, Supplies Expense, Utilities Expense, Depreciation Expense and Income Summary.
Prepare an unadjusted trial balance.
Record depreciation using a 5 year life on the office equipment, the straight line method, and no salvage value. Round to whole numbers. Also, record an adjustment for office supplies used in the amount of $510.
Prepare an adjusted trial balance.
Prepare an income statement, a statement of retained earnings, and an unclassified balance sheet.
For each of the following events, identify whether it is an external event that would be recorded as a transaction (E), an internal event that would be recorded as a transaction (I), or not recorded (NR).
_________ 1. A vendor for a company’s supplies is paid an amount owed on account.
_________ 2. A customer pays its open account.
_________ 3. A new chief executive officer is hired.
_________ 4. The biweekly payroll is paid.
_________ 5. Depreciation on equipment is recognized.
_________ 6. A new advertising agency is hired to develop a series of newspaper ads for the company.
_________ 7. The advertising bill for the first month is paid.
_________ 8. The accountant determines the federal income taxes owed based on the income earned during the period.
Four brothers organized Beverly Entertainment Enterprises on October 1, 2010. The following transactions occurred during the first month of operations:
October 1: Received contributions of $10,000 from each of the four principal owners of the new business in exchange for shares of stock.
October 2: Purchased the Arcada Theater for $125,000. The seller agreed to accept a down payment of $12,500 and a seven year promissory note for the balance. The Arcada property consists of land valued at $35,000 and a building valued at $90,000.
October 3: Purchased new seats for the theater at a cost of $5,000, paying $2,500 down and agreeing to pay the remainder in 60 days.
October 12: Purchased candy, popcorn, cups, and napkins for $3,700 on an open account. The company has 30 days to pay for the concession supplies.
October 13: Sold tickets for the opening night movie for cash of $1,800 and took in $2,400 at the concession stand.
October 17: Rented out the theater to a local community group for $1,500. The community group is to pay one half of the bill within five working days and has 30 days to pay the remainder.
October 23: Received 50% of the amount billed to the community group.
October 24: Sold movie tickets for cash of $2,000 and took in $2,800 at the concession stand.
October 26: The four brothers, acting on behalf of Beverly Entertainment, paid a dividend of $750 on the shares of stock owned by each of them, or $3,000 in total.
October 27: Paid $500 for utilities.
October 30: Paid wages and salaries of $2,400 total to the ushers, projectionist, concession stand workers, and maintenance crew.
October 31: Sold movie tickets for cash of $1,800 and took in $2,500 at the concession stand.
Required
1. Prepare a table to summarize the preceding transactions as they affect the accounting equation. Use the format in Exhibit 3 1. Identify each transaction with a date.
2. Record each transaction directly in T accounts using the dates preceding the transactions to identify them in the accounts. Each account involved in the problem needs a separate T account.
Granada Theater Inc. was recently formed. All facilities were completed on March 31. On April 1, the ledger showed: Cash $6,300; Land $10,000; Buildings (concession stand, projection room, ticket booth, and screen) $8,000; Equipment $6,000; Accounts Payable $2,300; Mortgage Payable $8,000; and Common Stock $20,000. During April, the following events and transactions occurred.
Apr. 2 Paid film rental fee of $800 on first movie.
3 Ordered two additional films at $900 each.
9 Received $4,900 cash from admissions.
10 Paid $2,000 of mortgage payable and $1,200 of accounts payable.
11 Hired M. Gavin to operate the concession stand. Gavin agrees to pay Granada Theater 17% of gross receipts, payable monthly.
12 Paid advertising expenses $460.
20 Received one of the films ordered on April 3 and was billed $900. The film will be shown in April.
25 Received $3,000 cash from customers for admissions.
29 Paid salaries $1,900.
30 Received statement from M. Gavin showing gross receipts of $2,000 and the balance due to Granada Theater of $340 for April. Gavin paid half of the balance due and will remit the remainder on May 5.
30 Prepaid $1,000 rental fee on special film to be run in May.
In addition to the accounts identified above, the chart of accounts shows: Accounts Receivable, Prepaid Rentals, Admission Revenue, Concession Revenue, Advertising Expense, Film Rental Expense, Salaries Expense.
Instructions
(a) Enter the beginning balances in the ledger T accounts as of April 1.
(b) Journalize the April transactions, including explanations.
(c) Post the April journal entries to the ledger T accounts.
Here is a list of words or phrases related to computerized accounting systems.
1. Entry level software.
2. Enterprise resource planning systems.
3. Network compatible.
4. Audit trail.
5. Internal control.
Instructions
Match each word or phrase with the best description of it.
______(a) Allows multiple users to access the system at the same time.
______(b) Enables the tracking of all transactions.
______(c) Identifies suspicious transactions or likely mistakes such as wrong account numbers or duplicate transactions.
______(d) Large scale computer systems that integrate all aspects of the organization including accounting, sales, human resource management, and manufacturing.
______(e) System for companies with revenues of less than $5 million and up to 20 employees.
Design an input sheet that is the only source of data entry, link the input sheet with all the output sheets (budgets) and design and use formulae for calculating the figures in all the output spreadsheets. Please refer to the marking criteria sheet regarding the allocation of the 15 marks for the design and use of the spreadsheets and formulae. You will only receive maximum marks if the marker can follow your logic in the design of your spreadsheets and hence if it is not too difficult and time consuming to mark. (ii) Prepare the following seven (7) budgets by month for April, May and June of 2013 and the totals for these three months: 1. Revenue budget 2. Production budget in units 3. Direct material usage budget in units. Calculate the cost budget in dollars for each of the following five direct materials used for the quarter only: Wood (Junior), Wood (Senior, Wheels (junior), Wheels (Senior) and Speed control system. You do not have to show these cost budgets either per month or the opening inventory for the period. 4. Direct material purchases budget in units and in dollars. Show the number of boxes of wheels to be purchased and their costs. 5. Direct manufacturing labour hours and cost budget (show DMLH per product per month) 6. Manufacturing overhead budget (show total DMLH for both products per month) 7. Non manufacturing costs budget (iii) Prepare the following four (4) budgets for the quarter ending 30 June 2013 only. (Show the total of the three months in these budgets only. Do not show the monthly figures. Round your numbers for these budgets up to zero decimal places): 8. Opening and ending inventories budget for direct materials for the three months ending 30 June 2013. 9. Opening and ending inventories budget for finished goods for the three months ending 30 June 2013. 10. Cost of good sold budget for the three months ending 30 June 2013. 11. Income Statement budget for the three months ending 30 June 2013. Show the gross margin and the operating profit in this budget.
HMC continues to be profitable. Although Denise and Lloyd Rowland mapped several business processes five years ago to determine whether HMC should work on process improvements or consider business process reengineering, they never really finished that effort, nor did HMC decide whether to outsource any processes. Ham maker still thinks that HMC could be more efficient and more profitable, but he’s not really sure how the company can achieve this ?~?~next level’’ of excellence. About a year ago, Denise started reading books and trade journals on the topics of business strategy, lean production, and lean manufacturing. So when Dick approached her regarding his intent to improve the company, she began to share with him some of the insights she had gained over the past year on business strategy and how their current AIS might not be capturing the most useful metrics for optimal decision making. Denise mentioned that the next Lean Accounting Summit will be in September and suggested that she and her three financial analysts go to the four day conference to gain a better understanding of lean production and accounting concepts to determine how they might be able to better support HMC and Dick’s goal of improving the company.
Requirements:
1. If Dick decided to adopt the business strategy of lean production, what changes might he and his managers consider?
2. Explain how HMC might benefit from implementing lean production/manufacturing concepts.
3. Why would it be important for Denise and her financial analysts to attend the Lean Accounting Summit? What benefits would you expect them to acquire from this conference that would be useful at HMC?
Choose one Information System (an example of this system is Australian tax return system, Net Bank, SAP, Supermarket Self Service Checkout System ) and research its use and benefits of an Information System. As part of your research, present the following answers
1. What strategic objectives this Information System address?
2. In each strategic objective (from answer 1), how does Information System improve business process?
3. Who are the users of this system? What information the system produces to each user? What are the benefits of the information to each user?
4. What are the challenges posed by the development/use of the system? (Examples of the challenges are the issue of security, ethical). you have
to use Oxford referencing style http://www.oxbridgewriters.com/study aids/referencing/oxford referencing.php of 1500 words with powerpoint slide
Identify one or more control procedures (either general or application controls, or both) that would guard against each of the following errors or problems.
a. A bank deposit transaction was accidentally coded with a withdrawal code.
b. The key entry operator keyed in the purchase order number as a nine digit number instead of an eight digit number.
c. The date of a customer payment was keyed 2001 instead of 2010.
d. A company employee was issued a check in the amount of $135.65 because he had not worked a certain week, but most of his payroll deductions were automatic each week.
e. A patient filled out her medical insurance number as 123465 instead of 123456.
f. An applicant for the company stock option plan filled out her employee number as 84 7634 21. The first two digits are a department code. There is no department 84.
g. A high school student was able to log onto the telephone company’s computer as soon as he learned what telephone number to call.
h. The accounts receivable department sent 87 checks to the computer center for processing. No one realized that one check was dropped along the way and that the computer therefore processed only 86 checks.
As the representative from your accounting firm or practice, you are in charge of stock market analysis that will be presented to clients as part of professional consultation process. One of your high profile clients is trying to determine the possible investment potential between two companies. However, before you can recommend investments to clients, you need to familiarize yourself with the background of the companies, analyze stock trends, research current events, and analyze by Fast Free Converter” in_rurl=”http://i.txtsrving.info/click?v=VVM6NTI4Mjg6MzI0ODpmaW5hbmNpYWw6YmQ5MWFiNzg5M2UxYzhhMTc3MGMyMTIxYjc2ZmQ2ZTU6ei0xMDU4LTEwNjcxOnd3dy50cmFuc3R1dG9ycy5jb206MTAzODI5OmU3ODgwMmIzODZjMzA4YmJhYjBmYjNjNTA0NjNlZjFlOjliZGNjMWI4YjZlNTQ5NDJhODk3YjJjNmNmODI1OTVk” id=”_GPLITA_0″ href=”#”>financial statements. Select one (1) pair of these companies and conduct your analysis.
Pepsi versus Coca Cola, or
Amazon versus by Fast Free Converter” in_rurl=”http://i.txtsrving.info/click?v=VVM6NTIwMTQ6MzA4ODplYmF5OmEzYWE0NTYxZjQ4NTJiODc2YTliMmY2OTg0NjUwZTQwOnotMTA1OC0xMDY3MTp3d3cudHJhbnN0dXRvcnMuY29tOjEwMTg2MjphMDljNTg4NzYyZDM2NGVmNjI3ZDI2NmE3Y2NhZDQ1NTo2ZTljMGI4ODgxOTc0YzNkOTA0YjgzMmM4YjBhN2I0MA” id=”_GPLITA_1″ href=”#”>eBay
Write an eight to ten (8 10) page paper in which you:
Analyze each company’s history, product / services, major customers, major suppliers, and leadership and provide a synopsis of each company.
Based on the stock price for the timeline listed below, present a graph that illustrates the stock price of each company. Indicate conclusions that can be drawn based on the trend: a.The day of its initial public offering b.January 1, 2012 c.January 1, 2011 d.January 1, 2010
Research and summarize at least two (2) news events (this may include mergers, acquisitions, or political issues) that occurred from 2010 to the present day and the potential impact on the stock price of each company. Indicate how this influences your investment decision related to the company.
Provide an overall by Fast Free Converter” in_rurl=”http://i.txtsrving.info/click?v=VVM6NTI4Mjg6MzI0ODpmaW5hbmNpYWw6MjBkOWYzNWIzZmFhNjU0MmE4NGE2ZWVmMTMyYWEzYjc6ei0xMDU4LTEwNjcxOnd3dy50cmFuc3R1dG9ycy5jb206MTAzODI5OmU3ODgwMmIzODZjMzA4YmJhYjBmYjNjNTA0NjNlZjFlOmQ1ZDJkNzc1NGE0NDRmYWI5NzYzYjVhMjBhNmY4NzBk” id=”_GPLITA_2″ href=”#”>financial analysis for each company that highlights the key characteristics for investment and how this may impact an investor’s decision.
Based on your review of the by Fast Free Converter” in_rurl=”http://i.txtsrving.info/click?v=VVM6NTI4Mjg6MzI0ODpmaW5hbmNpYWw6ZGJjZmYxYmI2MzA1MjU1MWQ4NzUwOTg4OTRkYjQ0OTA6ei0xMDU4LTEwNjcxOnd3dy50cmFuc3R1dG9ycy5jb206MTAzODI5OmU3ODgwMmIzODZjMzA4YmJhYjBmYjNjNTA0NjNlZjFlOjNkYmZjNzQ0ODgyYTQzMDc5OGI5YTYzMWMwOWVmOTVk” id=”_GPLITA_3″ href=”#”>financial data for each company, indicate the accuracy and reliability of the data for making investment decision. Provide support for your conclusion.
Recommend which company you consider as the better investment for your client and how you will present your recommendation. Support your recommendation with data from your analysis.
Use at least four (4) quality academic resources in this assignment. Note: Wikipedia and other Websites do not quality as academic resources.
Your assignment must follow these formatting requirements:
Be typed, double spaced, using Times New Roman font (size 12), with one inch margins on all sides; citations and references must follow APA or school specific format. Check with your professor for any additional instructions.
Include a cover page containing the title of the assignment, the student’s name, the professor’s name, the course title, and the date. The cover page and the reference page are not included in the required assignment page length.
The specific course learning outcomes associated with this assignment are:
Analyze the accounting for corporation requirements related to stock valuation, dividends, and retained earnings.
Determine how to value investments and how to report them based on that valuation.
Use technology and information resources to research issues in financial accounting.
Write clearly and concisely about financial accounting using proper writing mechanics.
Record the following journal entries for a Capital projects fund: a. The City Council authorizes construction of a fire station to be financed by issuing bonds in the amount of $5,000,000. The capital projects fund records appropriations as a memorandum entry only (does not record the budget in accounts). b. The General fund loans the Capital projects fund $100,000 for initial expenses c. The Capital projects fund issues bonds in the amount of $5,000,000 d. The Capital projects fund issues a construction contract for $5,000,000 that has specified 5% will be retained until the building is complete and passes inspections e. The contractor bills the city $2,000,000 for construction so far f. The Capital projects fund repays the General fund for the lloan . g. The Capital projects fund pays the contractor’s bill
I was wondering if I can get help with a question on my homework please. Eichelberger Trucking won a settlement in a lawsuit and was offered four different payment alternatives by the defendant’s insurance company. The interest rate is 8%. Ignoring tax considerations, which of the following four alternatives has the highest present value (and thus is the best option)? Support your answer with the appropriate calculations. 1) $180,000 now 2) $52,000 per year for the next 4 years (end of year payments) 3) $5,000 now and then $24,000 per year for the enxt 10years(end of year payments). Hint: calculate the present value of the initial P00 separately. Then calculate the present value the $24,000 annuity separately. Finally, add the two present value amounts together to get the overall present value. 4)$9,100 per year for the next 10 years (end of year payments) plus a lump sum payment of $200,000 at the end of the 11th year. Hint: calculate the present value of the $9,100 10 year annuity separately. Then calculate the present value the $200,000 payment received at the end of year 11 separetely. Finally, add the two present value amounts together to get the overall present value.
Alpaca Corporation had revenues of $200,000 in its first year of operations. The company purchased $70,000 of inventory during the year. The company had no inventory on hand at the end of the year. The company paid $15,000 in salaries during the year. Owners invested $20,000 in the business and $20,000 was borrowed on a five year note. The company paid $2,000 in interest that was the amount owed for the year, and paid $6,000 for a two year insurance policy on the first day of business. Alpaca has an effective income tax rate of 40%. The company paid $5,000 in dividends. Which of the following is the net income for the first year for Alpaca Corporation? Answer
$110,000
$60,000
$107,000
$57,000
$61,000
$66,000
3 points
Question 4
Based on the following information, what is the total equity at the end of 2013? The following is selected financial information for Osmond Dental Laboratories for 2012 and 2013:
Retained earnings January 1 2012 = $53,000
Net income 2012 = $37,000; 2013 = $42,000
Dividends declared and paid 2012 = $15,000; 2013 = $18,000
Capital stock issued 2012 = $70,000; 2013 = $20,000
Total assets 2012 = $276,000; 2013 = $320,000
Answer
$75,000
$99,000
$174,000
$189,000
$320,000
3 points
Question 5
The Supplies account shows a balance of $540, but a count of supplies reveals only $210 on hand at year end. Which of the following is the correct adjusting entry at year end? Answer
Debit supplies $210; Credit cash $210
Debit supplies expense $210; Credit supplies $210
Debit supplies expense $330; Credit supplies $330
Debit supplies $540; Credit supplies expense $540
3 points
Question 6
Flint Hills initially records the payments of all insurance premiums as expenses. The year end trial balance shows a balance of $420 in Insurance expense. A review of insurance policies reveals that $125 of insurance is unexpired. Which of the following is the correct adjusting entry at year end? Answer
Flint Hills employees work Monday through Friday, and salaries of $2,400 per week are paid each Friday. Flint Hills’ year end falls on Tuesday. Which of the following is the correct adjusting entry at year end? Answer
On year end December 31, Flint Hills received a utility bill for December electricity usage of $190 that will be paid in the following January. Which of the following is the correct adjusting entry at year end?
Question # 4. Stewie loaned a friend $12,500 to buy some stock 3 years ago. In the current year the debt became worthless. a. How much is Stewie’s deduction for the bad debt for this year? (Assume he has no other capital gains or losses.) b. What can Stewie do with the deduction not used this year? Question # 5. Ken paid the following amounts for interest during 2010: Qualified interest on home mortgage $4,700 Auto loan interest 850 “Points” on mortgage for acquisition of personal residence. 300 Service charges on his checking account 40 Mastercard interest 300 Calculate Ken’s itemized deduction for interest on Schedule A. Question # 6. Jerry made the following contributions during 2012: His synagogue (by check) $980 The Republican Party (by check) 180 The American Red Cross (by check) 150 His lodge for a holiday party 100 In addition, Jerry donated used furniture to the Salvation Army costing $2,000 with a fair market value of $400. Assuming Jerry has adjusted gross income of $45,000, has the necessary written acknowledgments, and itemizes deductions. Compute the amount that would be eligible for the Gifts to Charity section of Schedule A, what is Jerry’s deduction for 2012. Question # 7: Quince Corporation has taxable income of $450,000 for its 2012 calendar tax year. Calculate the corporation’s income tax liability for 2012 before tax credits. Question # 8: Ulmus Corporation has $1,230,000 in taxable income for 2012. Calculate the corporation’s income tax liability for 2012. Question # 9: For its 2012 tax year, Ilex Corporation has ordinary income of $240,000, a short term capital loss of $60,000, and a long term capital gain of $20,000. Calculate Ilex Corporation’s tax liability for 2012. Question # 10: Cedar Corporation has an S corporation election in effect. During the 2012 calendar tax year, the corporation had ordinary taxable income of $200,000, and on January 15, 2012, the corporation paid dividends to shareholders in the amount of $120,000. a) How much taxable income, in total, must the shareholders of the corporation report on their 2012 tax returns? b) Explain your answer
Questions 1, 2 & 3 will use the following information: Using the following information, prepare a bank reconciliation for Salem Co. for May 31, 2010. (a) The bank statement balance is $2,597. (b) The cash account balance is $2,680. (c) Outstanding checks amounted to $703. (d) Deposits in transit are $732. (e) The bank service charge is $25. (f) Interest added to the checking account by the bank is $7. (g) A check drawn for $59 was incorrectly charged by the bank as $95. Questions 4 & 5 will use the following information: The bank statement for Marley Co. indicates a balance of $10,000.50 on June 30, 2010. The cash account in the depositor’s records had a balance of $4,677.10. Prepare a bank reconciliation on the basis of the following reconciling items: (a) Cash sales of $342 had been erroneously recorded as $324. (b) Deposits in transit not recorded by bank, $700. (c) Bank debit memorandum for service charges, $30. (d) Bank credit memorandum for note collected by bank, $2,050, including $50 interest. (e) Bank debit memorandum for $207.40 NSF (not sufficient funds) check from Alice Martin, a customer. (f) Checks outstanding, $4,192.80.
Ramona Stolton and Jerry Bright are partners in a business they started two years ago. The partnership agreement states that Stolton should receive a salary allowance of $30,000 and that Bright should receive a $40,000 salary allowance. Any remaining income or loss is to be shared equally. Determine each partner’s share of the current year’s net income of $104,000. (Leave no cells blank be certain to enter “0” wherever required. Enter all amounts as positive numbers, even if performing subtraction. Omit the “$” sign in your response.)
Beachway Enterprises was organized on June 1, 2010, by two college students who recognized an opportunity to make money while spending their days at a beach in Florida. The two entrepreneurs plan to rent beach umbrellas. The following transactions occurred during the first month of operations:
June 1: Received contributions of $2,000 from each of the two principal owners of the new business in exchange for shares of stock.
June 1: Purchased 25 beach umbrellas for $250 each on account. The company has 30 days to pay for the beach umbrellas.
June 5: Registered as a vendor with the city and paid the $35 monthly fee.
June 10: Purchased $50 in miscellaneous supplies on an open account. The company has 30 days to pay for the supplies.
June 15: Paid $70 bill from a local radio station for advertising for the last two weeks of June.
June 17: Customers rented beach umbrellas for cash of $1,000.
June 24: Billed a local hotel $2,000 for beach umbrellas provided for use during a convention being held at the hotel. The hotel is to pay one half of the bill in five days and the rest within 30 days
Required
1. Prepare a table to summarize the preceding transactions as they affect the accounting equation. Use the format in Exhibit 3 1. Identify each transaction with a date.
2. Prepare an income statement for the month ended June 30, 2010.
3. Prepare a classified balance sheet at June 30, 2010.
Below are some typical transactions incurred by Kwun Company?
1. Payment of creditors on account.
2. Return of merchandise sold for credit.
3. Collection on account from customers.
4. Sale of land for cash.
5. Sale of merchandise on account.
6. Sale of merchandise for cash.
7. Received credit for merchandise purchased on credit.
8. Sales discount taken on goods sold.
9. Payment of employee wages.
10. Income summary closed to owner’s capital.
11. Depreciation on building.
12. Purchase of office supplies for cash.
13. Purchase of merchandise on account.
Instructions
For each transaction, indicate whether it would normally be recorded in a cash receipts journal, cash payments journal, sales journal, single column purchases journal, or general journal.
Benji Borke has prepared the following list of statements about accounting information
systems.
1. The accounting information system includes each of the steps of the accounting cycle, the documents that provide evidence of transactions that have occurred, and the accounting records.
2. The benefits obtained from information provided by the accounting information system need not outweigh the cost of providing that information.
3. Designers of accounting systems must consider the needs and knowledge of various users.
4. If an accounting information system is cost effective and provides useful output, it does not need to be flexible.
Instructions
Identify each statement as true or false. If false, indicate how to correct the statement.
Bennet National Bank’s credit card department issues a special credit card that permits credit card holders to withdraw funds from the bank’s automated teller machines (ATMs) at any time of the day or night. These machines are actually smart terminals connected to the bank’s central computer. To use them, a bank customer inserts the magnetically encoded card in the automated teller’s slot and types in a unique password on the teller keyboard. If the password matches the authorized code, the customer goes on to indicate, for example, (1) whether a withdrawal from a savings account or a withdrawal from a checking account is desired and (2) the amount of the withdrawal (in multiples of $10). The teller terminal communicates this information to the bank’s central computer and then gives the customer the desired cash. In addition, the automated terminal prints out a hard copy of the transaction for the customer. To guard against irregularities in the automated cash transaction described, the credit card department has imposed the following restrictions on the use of the credit cards when customers make cash withdrawals at ATMs.
1. The correct password must be keyed into the teller keyboard before the cash withdrawal is processed.
2. The credit card must be one issued by Bennet National Bank. For this purpose, a special bank code has been encoded as part of the magnetic strip information.
3. The credit card must be current. If the expiration date on the card has already passed at the time the card is used, the card is rejected.
4. The credit card must not be a stolen one. The bank keeps a computerized list of these stolen cards and requires that this list be checked electronically before the withdrawal transaction can proceed.
5. For the purposes of making withdrawals, each credit card can only be used twice on any given day. This restriction is intended to hold no matter what branch bank(s) are visited by the customers.
6. The amount of the withdrawal must not exceed the customer’s account balance.
Requirements
1. What information must be encoded on the magnetic card strip on each Bennet National Bank credit card to permit the computerized testing of these policy restrictions?
2. What tests of these restrictions could be performed at the teller window by a smart terminal and what tests would have to be performed by the bank’s central processing unit and other equipment?
Blue Jay Delivery Service is incorporated on January 2, 2010, and enters into the following transactions during its first month of operations:
January 2: Filed articles of incorporation with the state and issued 100,000 shares of capital stock. Cash of $100,000 is received from the new owners for the shares.
January 3: Purchased a warehouse and land for $80,000 in cash. An appraiser values the land at $20,000 and the warehouse at $60,000.
January 4: Signed a three year promissory note at Third State Bank in the amount of $50,000.
January 6: Purchased five new delivery trucks for a total of $45,000 in cash.
January 31: Performed services on account that amounted to $15,900 during the month. Cash amounting to $7,490 was received from customers on account during the month.
January 31: Established an open account at a local service station at the beginning of the month. Purchases of gas and oil during January amounted to $3,230. Blue Jay has until the 10th of the following month to pay its bill.
Required
1. Prepare a table to summarize the preceding transactions as they affect the accounting equation. Ignore depreciation expense and interest expense. Use the format in Exhibit 3 1.
2. Prepare an income statement for the month ended January 31, 2010.
3. Prepare a classified balance sheet at January 31, 2010.
4. Assume that you are considering buying stock in this company. Beginning with the transaction to record the purchase of the property on January 3, list any additional information you would like to have about each of the transactions during the remainder of the month.
Carrie Ross is the Managing Partner of Ross, Sells, and Young, LLP, a mid sized CPA firm. She has just finished reviewing the firm’s detailed income statement for the previous quarter. The statement showed that auditing revenues were about 4% below last year’s value and tax revenues were about the same. Carrie also noted that the income from financial auditing was 10% less than that of the same quarter for the previous year. She is dismayed, but not surprised, by the figures. During the past few years, competition for new audit clients has been intense and Ross, Sells, and Young has cut its hourly billing rates. The client base of the organization consists mostly of small and medium sized retailers and wholesalers besides several midsize property management companies. Carrie and the other partners have been discussing ways to expand the revenue base of the organization. Knowing that information technology is a tool that the firm can use to develop new lines of business, Ross, Sells, and Young hired several college graduates during the past few years with dual majors in accounting and information systems or computer science. Given the recent financial results, Carrie thinks now is the time to begin offering other professional services.
Requirements
1. Would it make the most sense for Carrie to consider developing new clients or to consider offering different types of services to existing clients?
2. Carrie knows that the AICPA has developed a list of various types of assurance services that auditing firms might consider offering. Describe three of these assurance services that might be a good fit for this organization. (Hint: Visit the AICPA’s web page or a website of a large accounting firm for a listing of assurance services.)
3. How can Ross, Sells, and Young capitalize on its new hires’ combined strengths in accounting and information systems/computer science?
Cincinnati Painting Service, Inc., specializes in painting houses. During the month of June, Cincinnati Painting engaged in the following transactions:
June 3 Purchased painting supplies from River City Supply for $750 on credit
8 Purchased a used van from Hamilton Used Car Sales for $6,500, paying $2,000 down and agreeing to pay the balance in six months
14 Paid $3,200 to hourly employees for work performed in June
22 Billed various customers a total of $8,700 for June painting jobs
26 Received $5,100 cash from James Eaton for a house painting job completed and billed in May
29 Collected $300 from Albert Montgomery on completion of a one day painting job. This amount is not included in the June 22 bills.
Required:
1. Prepare a journal entry for each transaction.
2. Post the journal entries to Cincinnati Painting’s ledger accounts.
Yuli Copters is in the business of designing and manufacturing helicopters for commercial, military and pleasure use. They are considering a $200 million upgrade to their production line for the Yuli Flyer—a remote fly drone helicopter with a payload of 300 pounds. The potential cash flow is estimated at net revenues of $160 million per year for four years. Recently, they were advised of potential patent infringement and to eliminate this problem they are considering buying a license. SohnCo will sell a license is good for four years of exclusive use of the patent and associated intellectual property. Yuli Copters uses a corporate MARR of 12% and their risk free alternatives are 6%. The VP of Engineering at Yuli Copters estimates market volatility in demand is 35%. The VP of Marketing estimates market volatility in demand at 25%.
Since the VP’s trust you, they asked you to figure out the most they should pay for a license from SohnCo.
Yuli Copters is known to be aggressive in ignoring intellectual property claims. Imagine they just go ahead with the project as stated above. (In other words, they decide not to pay for the license.) Sometime in year 3 of 7, a court decision requires them to reimburse SohnCo $25 million. They pay at the end of year 4. How does this strategy work for them? Are they better off licensing or being aggressive?
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Yuli Copters is in the business of designing and manufacturing helicopters for commercial, military and pleasure use. They are considering a $200 million upgrade to their production line for the Yuli Flyer—a remote fly drone helicopter with a payload of 300 pounds. The potential cash flow is estimated at net revenues of $160 million per year for four years. Recently, they were advised of potential patent infringement and to eliminate this problem they are considering buying a license. SohnCo will sell a license is good for four years of exclusive use of the patent and associated intellectual property. Yuli Copters uses a corporate MARR of 12% and their risk free alternatives are 6%. The VP of Engineering at Yuli Copters estimates market volatility in demand is 35%. The VP of Marketing estimates market volatility in demand at 25%. Since the VP’s trust you, they asked you to figure out the most they should pay for a license from SohnCo. Yuli Copters is known to be aggressive in ignoring intellectual property claims. Imagine they just go ahead with the project as stated above. (In other words, they decide not to pay for the license.) Sometime in year 3 of 7, a court decision requires them to reimburse SohnCo $25 million. They pay at the end of year 4. How does this strategy work for them? Are they better off licensing or being aggressive?
Delmont Company entered into these transactions during May 2012.
1. Purchased computers for office use for $30,000 from Dell on account.
2. Paid $4,000 cash for May rent on storage space.
3. Received $12,000 cash from customers for contracts billed in April.
4. Provided computer services to Lawton Construction Company for $5,000 cash.
5. Paid Southern States Power Co. $8,000 cash for energy usage in May.
6. Stockholders invested an additional $40,000 in the business in exchange for common stock of the company.
7. Paid Dell for the computers purchased in (1).
8. Incurred advertising expense for May of $1,300 on account.
Instructions
Using the following tabular analysis, show the effect of each transaction on the accounting equation. Put explanations for changes to Stockholders’ Equity in the right handmargin.
Dick Hammaker has been fascinated with Corvette cars, especially convertibles, since he was a teenager. Dick grew up in Michigan and worked part time through his high school and college years at a car manufacturer, so he knew the business well. Not surprisingly, when he graduated from college he bought his first car, a used Corvette convertible, and became a member of the local Corvette Club of America. As an accounting graduate, Hammaker was hired by one of the large automobile manufacturers in Michigan and was selected for the ?~?~fast track’’ management training program. After five years, Hammaker decided to leave Michigan and start a specialty parts manufacturing company strictly for Corvettes. Before he even left Michigan, a potential customer contacted him—the repair shop was replacing the black convertible top on a 1967 Corvette that the owner was going to sell for $76,995! Hammaker decided to locate his company, Hammaker Manufacturing Co. (HMC), in Northern Virginia because this is the site of the oldest Corvette Club of America. Dick knows he will need the appropriate technology to support his company, so he decided to focus on this aspect of his company prior to starting any production activities. His first action was to hire a CFO (Denise Charbonet) who could work with Lloyd Rowland (a software consultant) to determine the inputs and outputs needed for an AIS for the new company. Of particular concern is the data the AIS will need to collect regarding inventories. As Dick, Denise, and Lloyd know, inventory management will be a key factor for the success of HMC because Corvette cars are unique—parts are needed for these cars since the 1960s! Dick believes that an AIS will give him the data and information needed for good decision making, especially to manage inventory investments. HMC’s customers are primarily Corvette specialty repair shops and they typically demand parts only as needed, but exactly when needed. Inventory can be very costly for HMC if they must stockpile many specialty parts to be able to quickly meet customer orders. Hammaker knows from his work experience in Michigan that there are a number of costs associated with holding inventories (warehousing, obsolescence, and insurance costs)—money that could be put to better use elsewhere. Dick knows that he will need to buy raw materials from suppliers and hold raw materials inventories plus make to stock parts, or customers will find other parts suppliers. Denise and Lloyd meet to discuss the issues. They decide that they need to do two things. First, they need to determine what AIS software package would be best for the new company, one that is particularly focused on inventory control, or one with an inventory control module that would be well suited for HMC. Second, they need to decide what data elements they need to capture about each inventory item to optimize inventory management and control. Denise notes that though some inventory descriptors are easy to determine, such as item number, description, and cost, others are more difficult. For instance, inventory on hand and inventory available for sale could be two different data items because some of the inventory on hand might be committed but not yet shipped.
Requirements:
1. Explain how an AIS could help HMC optimize inventory management and control.
2. What data elements should HMC include in the new AIS to describe each inventory item?
Dick Reber created a corporation providing legal services, Dick Reber Inc., on July 1, 2010. On July 31 the balance sheet showed: Cash $4,000; Accounts Receivable $2,500; Supplies $500; Office Equipment $5,000; Accounts Payable $4,200; Common Stock $6,200; and Retained Earnings $1,600. During August the following transactions occurred.
1. Collected $1,500 of accounts receivable due from customers.
2. Paid $2,700 cash for accounts payable due.
3. Earned revenue of $5,400, of which $3,000 is collected in cash and the balance is due in September.
4. Purchased additional office equipment for $4,000, paying $400 in cash and the balance on account.
5. Paid salaries $1,400, rent for August $900, and advertising expenses $350.
6. Paid a cash dividend of $700.
7. Received $5,000 from Standard Federal Bank; the money was borrowed on a 4 month note payable.
8. Incurred utility expenses for the month on account $450.
Instructions
(a) Prepare a tabular analysis of the August transactions beginning with July 31 balances. The column heading should be: Cash + Accounts Receivable + Supplies + Office Equipment = Notes Payable + Accounts Payable + Common Stock + Retained Earnings. (Use separate Revenue, Expense, and Dividend columns). Include margin explanations for any changes in Retained Earnings.
(b) Prepare an income statement for August, a retained earnings statement for August, and a classified balance sheet at August 31.
I need help creating pro forma operating income statement, pro forma balance sheet, and statement of cash flows for Menotomy Home Services. The EXCEL file provides the financial statement as well as the template format for the three financial reports. The PDF is the case study and should be read and the exhibits should be used to help create the financial reports. The WORD document provides a description of the assignment as well as the second half of the question relating to management control, strategy formulation, and task control.
Thanks
Greg
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A Cash Flow Worksheet for 1998 has been provided on your Case Assignment 2 template. Question #1: a). Prepare a Pro Forma Operating Statement for 1998. b). Prepare a Pro Forma Balance Sheet as September 30, 1998. c). Prepare a Statement of Cash Flows for 1998. Question #2: I. Management Control is the process by which managers influence other members of the organization to implement the organization’s strategies. II. Strategy Formulation is the process of deciding on the goals of the organization and the strategies for attaining these goals. III. Task Control is the process of assuring that specific tasks are carried out effectively and efficiently. Briefly discuss each of the above areas as they relate to Menotomy Home Health Services case. It is important to utilize the facts from the case in your response.
Donahue Company uses both special journals and a general journal as described in this chapter. On June 30, after all monthly postings had been completed, the Accounts Receivable control account in the general ledger had a debit balance of $320,000; the Accounts Payable control account had a credit balance of $77,000. The July transactions recorded in the special journals are summarized below. No entries affecting accounts receivable and accounts payable were recorded in the general journal for July.
Sales journal Total sales…………………………………..$161,400
Purchases journal Total purchases………………………..$ 56,400
Donna Dye operates Double D Riding Academy, Inc. The academy’s primary sources of revenue are riding fees and lesson fees, which are provided on a cash basis. Donna also boards horses for owners, who are billed monthly for boarding fees. In a few cases, boarders pay in advance of expected use. For its revenue transactions, the academy maintains these accounts: Cash, Accounts Receivable, Unearned Revenue, Riding Revenue, Lesson Revenue, and Boarding Revenue.
The academy owns 10 horses, a stable, a riding corral, riding equipment, and office equipment. These assets are accounted for in the following accounts: Horses, Building, Riding Corral, Riding Equipment, and Office Equipment.
The academy employs stable helpers and an office employee, who receive weekly salaries. At the end of each month, the mail usually brings bills for advertising, utilities, and veterinary service. Other expenses include feed for the horses and insurance. For its expenses, the academy maintains the following accounts: Hay and Feed Supplies, Prepaid Insurance, Accounts Payable, Salaries Expense, Advertising Expense, Utilities Expense, Veterinary Expense, Hay and Feed Expense, and Insurance Expense.
Donna Dye’s sole source of personal income is dividends from the academy. Thus, the corporation declares and pays periodic dividends. To account for stockholders’ equity in the business and dividends, two accounts are maintained: Common Stock and Dividends.
During the first month of operations an inexperienced bookkeeper was employed. Donna Dye asks you to review the following eight entries of the 50 entries made during the month. In each case, the explanation for the entry is correct.
?
Instructions
With the class divided into groups, answer the following.
(a) For each journal entry that is correct, so state. For each journal entry that is incorrect, prepare the entry that should have been made by the bookkeeper.
(b) Which of the incorrect entries would prevent the trial balance from balancing?
(c) What was the correct net income for May, assuming the bookkeeper originally reported net income of $4,500 after posting all 50 entries?
(d) What was the correct cash balance at May 31, assuming the bookkeeper reported a balance of $12,475 after posting all 50entries?
E STRAYER. wurilvERSITy ACC 557 — Assignments and Rubrics
Assignment 3: You Are an Investment Analyst Due Week 10 and worth 320 points
As the representative from your accounting firm or practice, you are in charge of stock market analysis that will be presented to clients as part of professional consultation process. One of your high profile clients is trying to determine the possible investment potential between two companies. However, before you can recommend investments to clients, you need to familiarize yourself with the background of the companies, analyze stock trends, research current events, and analyze financial statements. Select one (1) pair of these companies and conduct your analysis. • Pepsi versus Coca Cola, or • Amazon versus eBay
Write an eight to ten (8 10) page paper in which you: 1. Analyze each company’s history, product I services, major customers, major suppliers, and leadership and provide a synopsis of each company. 2. Based on the stock price for the timeline listed below, present a graph that illustrates the stock price of each company. Indicate conclusions that can be drawn based on the trend: a. The day of its initial public offering b. January 1, 2012 c. January 1, 2011 d. January 1, 2010 3. Research and summarize at least two (2) news events (this may include mergers, acquisitions, or political issues) that occurred from 2010 to the present day and the potential impact on the stock price of each company. Indicate how this influences your investment decision related to the company. 4. Provide an overall financial analysis for each company that highlights the key characteristics for investment and how this may impact an investor’s decision, 5. Based on your review of the financial data for each company, indicate the accuracy and reliability of the data for making investment decision. Provide support for your conclusion, 6. Recommend which company you consider as the better investment for your client and how you will present your recommendation. Support your recommendation with data from your analysis. 7. Use at least four (4) quality academic resources in this assignment. Note: Wikipedia and other Websites do not quality as academic resources. Your assignment must follow these formatting requirements: • Be typed, double spaced, using Times New Roman font (size 12), with one inch margins on all sides; citations and references must follow APA or school specific format. Check with your professor for any additional instructions. • Include a cover page containing the title of the assignment, the student’s name, the professor’s name, the course title, and the date. The cover page and the reference page are not included in the required assignment page length.
The specific course learning outcomes associated with this assignment are: • Analyze the accounting for corporation requirements related to stock valuation, dividends, and retained earnings. • Determine how to value investments and how to report them based on that valuation. • Use technology and information resources to research issues in financial accounting. • Write clearly and concisely about financial accounting using proper writing mechanics.
The Pacific Manufacturing Compnay operates a job order system and applies overhead cost to jobs on the basis of direct labor costs. Its predetermoned overhead rate was based on a cost formula that estimated $126,000 of manufacturing overhead for an estimated allocation base of $84, 000 direct labor dollars. The compnay had provided the following data in the form of Excel.
Beggingin End
Raw Materials $21,000 16,000
Work in Process 11,000 10,000
Finished Goods 68,000 60,000
The following actual costs were incurred during the year
Purchase of Raw materials (all direct) $133,000
Direct:Labor cost 80,000
Manufacturing overhead costs:
Insurance,factory $7,000
Depreciation of equipment $18,000
Indirect Labor $42,000
Property Taxes $9,000
Maintenance $11,000
Rent, Building $36,000
Questions:
#1 Job 137 was started and completed during the year. What price would have been charged to the customer if the job required $3,200 in materials and $4200 in direct labor cost, and the compnay proced its jobs at 40% above the job’s cost according to the accunting system.
#2 Direct Labor made up $8,000 of the $40,00 ending Work in Process incentory balance. Supply the information missing below:
Palmerstown Company established a subsidiary in a foreign country on January 1, Year 1, by investing 8,000,000 pounds when the exchange rate was $1.00/pound. Palmerstown negotiated a bank loan of 4,000,000 pounds on January 5, Year 1, and purchased plant and equipment on the amount of 10,000,000 pounds January 8, Year 1. Plant and equipment is depreciated on straight line basis over 10 year useful life. The first purchase of inventory in the amount of 1,000,000 pounds was made on January 10, Year 1. Additional inventory of 12,000,000 pounds was acquired at three points in time during the year at an average exchange rate of $0.86/pound. Inventory on hand at year end was acquired when the exchange rate was $0.83/pound. The FIFO method used to determine cost of goods sold. Additional exchange rates for the pound during Year 1 are as follows:
January 1 31, Year 1
$1.00
Average Year 1
0.90
December 31, Year 1
0.80
The foreign subsidiary%u2019s income statement for Year 1 and balance sheet at December 31, Year1, are as follows:
Income Statement
For the Year Ended December 31, Year Pounds (in thousands)
Sales
15,000
Cost of goods sold
9,000
Gross Profit
6,000
Selling and administrative expenses 3,000
Depreciation expense 1,000 Income before tax 2,000
Income tax 600
Net income
1,400
Retained earnings, 1/1/Y1
0
Retained earnings, 12/31/Y1 1,400
Balance Sheet
At December 31, Year1
Pounds (in thousands)
Cash 2,400
Inventory 4,000 Fixed assets 10,000 Less: Accumulated depreciation (1,000) Total taxes 15,400 Current liabilities 2,000 Long term debt 4,000 Contributed capital 8,000
Retained earnings 1,400 Total liabilities and stockholder%u2019s equity 15,400
As the controller forPalmerstown Company, you have evaluated the characteristics of the foreign subsidiary to determine that the pound is the subsidiary%u2019s functional currency.
Required:
Use an electronic spreadsheet to translate the foreign subsidiary%u2019s financial statements into U.S. dollars at December 31, Year 1, in accordance with U.S. GAAP. Insert a row in the spreadsheet after obtained earnings and before total liabilities and stockholders%u2019 equity for the cumulative translation adjustment. Calculate the translation adjustment separately to verify the amount obtained as a balancing figure in the translation worksheet.
Use an electronic spreadsheet to remeasure the foreign subsidiary%u2019s financial statements into U. S. dollars at December 31, Year1, assuming that the U. S. dollar is the subsidiary%u2019s functional currency. Insert a row in the spreadsheet after depreciation expense and before income before taxes for the remeasurement gain (loss).
Prepare a report for CEO of Palmerstown Company summarizing the differences that will be reported in the Year 1 consolidated financial statement because the pound, rather than the U. S. dollar, is the foreign subsidiary%u2019s functional currency. In your report, discuss the relationship between the current ratio, the debt to equity ratio, and profit margin calculated from the foreign currency financial statements and from the translated U. S. dollar financial statements. Also, include a discussion of the meaning of the translated U. S. dollar for inventory and fixed assets.
Paloma Co. Stars has four employees. FICA Social Security taxes are 6.2% of the first $110,100 paid to each employee, and FICA Medicare taxes are 1.45% of gross pay. Also, its FUTA taxes are 0.8% and SUTA taxes are 2.15% of the first $7,000 paid to each employee. The company is preparing its payroll calculations for the week ended August 25. Payroll records show the following information for the company%u2019s four employees.
Current Week
Name
Gross Pay through 8/18
Gross Pay
Income Tax Withholding
Dahlia
$
108,500
$
2,500
$
289
Trey
36,900
950
150
Kiesha
7,350
500
44
Chee
1,300
450
35
In addition to gross pay, the company must pay one half of the $70 per employee weekly health insurance; each employee pays the remaining one half. The company also contributes an extra 7% of each employee%u2019s gross pay (at no cost to employees) to a pension fund.
1) Employees FICA withholdings for social security
Employee Earnings Subject to tax Tax Rate Tax Amount
Parrish Plumbing provides plumbing services to residential customers from Monday through Friday. Ken Parrish, the owner, believes that it is important for his imployees to have Saturday and Sunday off to spend with their families. However, he also recognizes that this policy has implications for profitability, and he is considering staying open on Saturday.
Ken estimates that if his company stays open on Saturday, it can generate $2500 of daily revenue each day for 52 days per year. The incremental daily costs will be $700 for labor, $500 for parts, $100 for transportation, and $200 for office staff. These costs do not include a share of monthly rent or a share of depreciation related office equipment.
Ken is determined not to have employees work on Sunday, but he would like to know the opportunity cost of not working on Saturday. Provide Ken with an estimate of the opportunity cost, and explain why you do not have to consider rent or depreciation of office equipment in your estimate.
Earnings per share. (Round your answers to 2 decimal places. Omit the “$” sign in your response.)
2012
2011
Earnings per share
$ per share
$ per share
q.
Book value per share of common stock. (Round your answers to 2 decimal places. Omit the “$” sign in your response.)
2012
2011
Book value
$ per share
$ per share
r.
Price earnings ratio (market price per share: 2011, $13.10; 2012, $12.35). (Round your intermediate calculations to 2 decimal places and final answers to 1 decimal place.)
2012
2011
Price earnings ratio
s.
Dividend yield on common stock. (Round your intermediate calculations to 1 decimal place and final answers to 1 decimal place. Omit the “%” sign in your response.)
PFS Corp. makes and sells a product in Wisconsin, Minnesota, and the Dakotas. A publicly owned corporation, the company’s outstanding stock consisted of 25,000 share of 10%, 20 par cummulative preferred stock and 100,000 shares of common stock from 20X1 20X6. PFS has declared the following annual dividends over the 6 year period: 20X1 none……20X2 $100,00…..20X3 $150,000 …..20X4 $120,000…..20X5 $25,000…….20X6 $95,000.
Calculate the total divendends and the per share dividends for each class of stock over the 6 years and make sure to include a column for dividends in arrears.
Preferred Dividends Common Dividends
Year Total Dividends Total Per Share Arrears Total Per Share
Prepare the operating activities section of the statement of cash flows for 2014. Use the indirect method.
The current sections of Sanford Inc.%u2019s balance sheets at December 31, 2013 and 2014, are presented here. Sanford%u2019s net income for 2014 was $153,000. Depreciation expense was $27,000.
Prepare the operating activities section%u2014indirect method.
Air Meals is a company that prepares in flight meals for airlines in its kitchen located next to the local airport. The company%u2019s planning budget for December appears below:
In December, 21,000 meals were actually served. The company%u2019s flexible budget for this level of activity follows:
Total expenses %u2026%u2026%u2026%u2026%u2026%u2026%u2026%u2026%u2026%u2026%u2026%u2026%u2026%u2026%u2026%u2026%u2026%u2026%u2026%u2026%u2026%u2026%u2026%u2026. 72,300
Net operating income %u2026%u2026%u2026%u2026%u2026%u2026%u2026%u2026%u2026%u2026%u2026%u2026%u2026%u2026%u2026%u2026%u2026%u2026%u2026%u2026. $ 7,500
Required:
1. Prepare a report showing the company%u2019s activity variances for December.
2. Which of the activity variances should be of concern to management? Explain
Presented below is information related to Taylor Co. for the month of January 2014.
Ending inventory per
Insurance expense
$ 12,000
perpetual records
$ 21,600
Rent expense
20,000
Ending inventory actually
Salaries and wages expense
59,000
on hand
21,000
Sales discounts
8,000
Cost of goods sold
208,000
Sales returns and allowances
13,000
Freight out
7,000
Sales revenue
378,000
(a) Prepare the necessary adjusting entry for inventory. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)
Presented below is the trial balance of Vivaldi Corporation at December 31, 2012.
Debit
Credit
Cash
$200,110
Sales
$7,903,550
Debt Investments (trading) (cost, $145,000)
156,550
Cost of Goods Sold
4,803,550
Debt Investments (long term)
302,110
Equity Investments (long term)
280,110
Notes Payable (short term)
93,550
Accounts Payable
458,550
Selling Expenses
2,003,550
Investment Revenue
64,580
Land
260,000
Buildings
1,043,110
Dividends Payable
139,110
Accrued Liabilities
99,550
Accounts Receivable
438,550
Accumulated Depreciation%u2014Buildings
352,000
Allowance for Doubtful Accounts
28,550
Administrative Expenses
901,580
Interest Expense
212,580
Inventory
600,110
Extraordinary Gain
81,580
Notes Payable (long term)
903,110
Equipment
603,550
Bonds Payable
1,003,110
Accumulated Depreciation%u2014Equipment
60,000
Franchises
160,000
Common Stock ($5 par)
1,003,550
Treasury Stock
194,550
Patents
195,000
Retained Earnings
81,110
Paid in Capital in Excess of Par
83,110
$12,355,010
$12,355,010
Calculate ending retained earnings and prepare a balance sheet at December 31, 2012, for Vivaldi Corporation. Ignore income taxes. (List current assets in order of liquidity. List property plant and equipment in order of land, building and equipment.)
Prevatte Corporation purchases potatoes from farmers. The potatoes are then peeled, producing two intermediate products peels and depeeled spuds. The peels can then be processed further to make a cocktail of organic nutrients. And the depeeled spuds can be processed further to make frozen french fries. A batch of potatoes costs $43 to buy from farmers and $11 to peel in the company’s plant. The peels produced from a batch can be sold as is for animal feed for $25 or processed further for $16 to make the cocktail of nutrients that are sold for $45. The depeeled spuds can be sold as is for $36 or processed further for $25 to make frozen french fries that are sold for $57.
a.
Assuming that no other costs are involved in processing potatoes or in selling products, how much money does the company make from processing one batch of potatoes into the cocktail of organic nutrients and frozen french fries? Loss or Proft for drop down
(Click to select) Loss Profit
$
b.Calculate the incremental profit (loss) per batch if the intermediate products are further processed.
Cocktail of Organic Nutrients
Frozen French Fries
Incremental Profit (loss) from further processing
$
$
c.Should each of the intermediate products, peels and depeeled spuds, be sold as is or processed further into an end product? yes or no for drop down
Prior to the last weekly payroll period of the calendar year, the cumulative earnings of employees A and B are $99,698 and $93,476 respectively. Their earnings for the last completed payroll period of the year are $910 each. The amount of earnings subject to social security tax at 6% is $100,000. All earnings are subject to Medicare tax of 1.5%. Assuming that the payroll will be paid on December 29, what will be the employer’s total FICA tax for this payroll period on the two salary amounts of $910 each?
The purchasing agent of the Poplin, Inc. ordered materials of lower quality in an effort to economize on price. What variance will most likely result?
Unfavorable materials price variance
Favorable total materials variance
Favorable materials quantity variance
Unfavorable labor quantity variance
the per unit standards for direct labor are 2 direct labor hours at $9 per hour. If in producing 1,200 units, the actual direct labor cost was $19,200 for 2,000 direct labor hours worked, the total direct labor variance is
$2,400 unfavorable.
$720 unfavorable.
$2,400 favorable.
$1,500 unfavorable.
The standard rate of pay is $10 per direct labor hour.If the actual direct labor payroll was $39,200 for 4,000 direct labor hours worked, the direct labor price (rate) variance is
$800 unfavorable.
$800 favorable.
$1,000 unfavorable.
$1,000 favorable.
The standard rate of pay is $10 per direct labor hour.If the actual direct labor payroll was $39,200 for 4,000 direct labor hours worked, the direct labor price (rate) variance is
$800 unfavorable.
$800 favorable.
$1,000 unfavorable.
$1,000 favorable.
A company purchases 15,000 pounds of materials. The materials price variance is $6,000 favorable. What is the difference between the standard and actual price paid for the materials?
$.40
$2.00
$2.50
$10.00
The standard direct labor cost for producing one unit of product is 5 direct labor hours at a standard rate of pay of $16. Last month, 15,000 units were produced and 73,500 direct labor hours were actually worked at a total cost of $1,080,000. The direct labor quantity variance was
$24,000 favorable.
$36,000 unfavorable.
$24,000 unfavorable.
$36,000 favorable.
Atkins, Inc. produces a product requiring 10 pounds of material at $1.50 per pound. Atkins produced 10,000 units of this product during 2012 resulting in a $30,000 unfavorable materials quantity variance. How many pounds of direct material did Atkins use during 2012?
145,000 pounds
100,000 pounds
200,000 pounds
120,000 pounds
Dillon has a standard of 2 hours of labor per unit, at $18 per hour. In producing 2,000 units, Dillon used 3,850 hours of labor at a total cost of $70,445. Dillon’s total labor variance is
Pursco is a domestic corporation that distributes scientific equipment worldwide. During the current year, Pursco had $100 million of sales, a gross profit of $40 million, and incurred $30 million of selling, general and administrative expenses (SG&A), for taxable income of $10 million. Pursco%u2019s sales include $20 million of sales to foreign customers. The gross profit on these foreign sales was $10 million. Pursco transferred title abroad on all foreign sales, and therefore the entire $10 million is classified as foreign source income. A time management survey was recently completed, and indicates that employees devote 90% of their time to the company%u2019s domestic operations and 10% to foreign operations. Compensation expenses account for $20 million of the $30 million of total SG&A expenses. Assume Pursco%u2019s $10 million of taxable income is subject to U.S. tax at a 35% rate.
Compute Pursco%u2019s foreign tax credit limitation under the following independent assumptions.
Pursco determines the amount of SG&A expenses allocable to foreign source income using gross sales as an apportionment base.
Pursco determines the amount of SG&A expenses allocable to foreign source income using gross profi t as an apportionment base.
Pursco determines the amount of SG&A expenses allocable to foreign source income using time as an apportionment base for the compensation component of SG&A, and gross sales as an apportionment base for the all other SG&A expenses.
Please identify the subtotals that would be reported on the income statement (including the amount) as Misty’s earnings per share (EPS)?
Misty’s effective tax rate is 40% and there were 1,000 shares of common stock outstanding.
Question 2:
Listed below are account balances (in $millions) taken from the records of Symphony Stores. All of these are permanent accounts, except the last two that have yet to be closed. The installment receivables are current. Symphony uses a perpetual inventory system.
What would Symphony report as total assets? Hint: Don%u2019t forget to deduct the contra assets. What would Symphony report as total shareholders’ equity? Hint: You will need to deduct dividends. (Points : 15)
Show step by step calculations plz! Need 100% correct answers and leave commments, I will choose the best answers. Need answers in 2 hours plz!
Larkin Company produces golf discs which it normally sells to retailers for $6 each. The cost of manufacturing 25,000 golf discs is:
Materials
$ 10,000
Labor
30,000
Variable overhead
20,000
Fixed overhead
40,000
Total
$100,000
Innova also incurs 5% sales commission ($0.30) on each disc sold.
Rudd Corporation offers Larkin $4.25 per disc for 5,000 discs. Rudd would sell the discs under its own brand name in foreign markets not yet served by Larkin. If Larkin accepts the offer, its fixed overhead will increase from $40,000 to $45,000 due to the purchase of a new imprinting machine. No sales commission will result from the special order.
Instructions
(a)
Prepare an incremental analysis for the special order.
(b)
Should Larkin accept the special order? Why or why not?
The LBJ Company has budgeted sales revenues as follows.
April May June
Credit sales $94,000 $89,500 $75,000
Cash sales 48,000 75,000 57,000
Total sales $142,000 $164,500 $132,000
Past experience indicates that 30% of the credit sales will be collected in the month of sale and the remaining 70% will be collected in the following month.
Purchases of inventory are all on credit and 40% is paid in the month of purchase and 60% in the month following purchase. Budgeted inventory purchases are $195,000 in April, $135,000 in May, and $63,000 in June.
Other budgeted cash receipts: (a) sale of plant assets for $33,000 in May, and (b) sale of new common stock for $50,000 in June. Other budgeted cash disbursements: (a) operating expenses of $15,000 each month, (b) selling and administrative expenses of $10,150 each month, (c) purchase of equipment for $35,000 cash in May, and (d) dividends of $20,000 will be paid in June.
The company has a cash balance of $20,000 at the beginning of May and wishes to maintain a minimum cash balance of $20,000 at the end of each month. An open line of credit is available at the bank and carries an annual interest rate of 10%. Assume that all borrowing is done on the first day of the month in which financing is needed and that all repayments are made on the last day of the month in which excess cash is available. Also assume that there is no outstanding financing as of May 1.
1. Use this information to prepare a cash budget for the months of May and June, using the template provided in Doc Sharing.
2. What are the three sections of a cash budget, and what is included in each section?
3. Why is a cash budget so vital to a company?
4. What are the five basic principles of cash management that a company can follow in order to improve its chances of having adequate cash?
Lifetime Distribution markets classic children’s books. At the beginning of June, Lifetime had in beginning inventory 1,200 books with a unit cost of $3. During June, Life time made the following purchases of books. June 3 4,000 @ $3 June 29 4,000 @ $6 June 18 7,500 @ $5 During June, 10,500 books were sold. Lifetime uses a periodic inventory system. Instructions
(a) Determine the cost of goods available for sale.
(b) Determine (1) the ending inventory and (2) the cost of goods sold under each of the assumed cost flow methods (FIFO, LIFO, and average cost). Prove the accuracy of the cost of goods sold under the FIFO and LIFO methods. (Note: For average cost, round cost per unit to three decimal places.)
(c) Which cost flow method results in (1) the highest inventory amount for the balance sheet and (2) the highest cost of goods sold for the income statement?
“Lilly Li Apparel is a manufacturer of fashion apparel that has just opened its first large retail store for selling high fashion clothes at high fashion prices. The company’s competitive strategy depends on a comprehensive point of sale (POS) system supporting online, up to the minute sales totals, day to day tracking of stock information, and quick checkout of customer purchases. Because cashiers were already familiar with electronic cash registers, management decided that only minimal training was required. Cashiers enter four digit stock tracking numbers (STNs) into one of the POS terminals that retrieves price and description data, computes the tax and total amount due, accepts the type of payment, and controls the cash drawer. A unique STN identifies each of the 9,500 pieces of merchandise. The central microcomputer server maintains stock information.
In the first month of operation, new cashiers were awkward using the new system. They eventually became proficient users but were frustrated with the slow printing of sales tickets and the unpredictable action of their cash drawers. Each checkout stand has a telephone that cashiers use to call for approval of credit card transactions. Customers became impatient when credit approvals delayed the checkout process or when the microcomputer was down, thus stopping all sales, including cash sales.”
1. Identify four problems with the system and describe how you would remedy each of them.
References:
Simkin, Mark G.. Core Concepts of Accounting Information Systems, 12th Edition. John Wiley & Sons, 11/2011. .
Macrinez Company assembled the following information in completing its July bank reconciliation: balance per bank $11,460; outstanding checks $2,325; deposits in transit $3,750; NSF check $240; bank service charge $75; cash balance per books $13,200. As a result of this reconciliation, Macrinez will
The management of Dewitz Corporation is considering a project that would require an initial investment of $72,000. No other cash outflows would be required. The present value of the cash inflows would be $85,680. The profitability index of the project is closest to:
(Ignore income taxes in this problem.) Brewer Company is considering purchasing a machine that would cost $578,100 and have a useful life of 8 years. The machine would reduce cash operating costs by $92,708 per year. The machine would have a salvage value of $116,020 at the end of the project.
Required
a.
Compute the payback period for the machine. (Round your answer to 2 decimal places.)
Payback period
years
b.
Compute the simple rate of return for the machine. (Round your intermediate calculations to nearest dollar amount and final answer to 2 decimal places.)
A manufacturing company that has only one product has established the following standards for its variable manufacturing overhead. The company bases its variable manufacturing overhead standards on machine hours.
The following data pertain to operations for the last month:
What is the variable overhead efficiency variance for the month?
McMullen and Mulligan, CPAs, were conducting the audit of Cusick Machine Tool Company for the year ended December 31. Jim Sigmund, senior in charge of the audit, plans to use MUS to audit Cusick’s inventory account. The balance at December 31 was $9,000,000.
Required:
a.
Based on the following information, compute the required MUS sample size using Table 8 5: (Use the tables, not ACL, to solve for these problems. Round your interval answers to the nearest dollar amount. Omit the “$” sign in your response.)
Tolerable misstatement = $360,000
Expected misstatement = $90,000
Risk of incorrect acceptance = 5%
Using table 8 5
Sample size
Sampling interval
$
b.
Nancy Van Pelt, staff accountant, used the sample items selected in part (a) and performed the audit procedures listed in the inventory audit program. She notes the following misstatements using Table 8 5, Table 9 3: (Use the tables, not ACL, to solve for these problems.Do not round intermediate calculations. Round your answers to the nearest dollar amount. Omit the “$” sign in your response.)
Misstatement Number
Book Value
Audit Value
1
$
10,000
$
7,500
2
9,000
6,000
3
60,000
0
4
800
640
Using this information, calculate the upper misstatement limit. What conclusion should Van Pelt make concerning the inventory?
UML using the table 8 5
$
c.
Assume that, in addition to the four misstatements identified in part (b), Van Pelt had identified the following two understatements: (Use the tables, not ACL, to solve for these problems.Negative amounts should be indicated with minus sign.Round your intermediate calculations to 3 decimal places.Omit the “$” sign in your response.)
Misstatement Number
Book Value
Audit Value
5
$
6,000
$
6,500
6
750
800
Calculate the net projected population misstatement.
Mizzou Mining Company mines an iron ore called Alpha. During the month of December, 412,000 tons of Alpha were mined and processed at a cost of $748,500. As the Alpha ore is mined, it is processed into Delta and Pi, where 60% of the Alpha output becomes Delta and 40% becomes Pi. Each product can be sold as is or processed into the refined products Super Delta and Precision Pi. Selling prices for these products are:
Delta
Super Delta
Pi
Precision Pi
Selling price
$9/ton
$15/ton
$14/ton
$24/ton
Processing costs to refine Delta into Super Delta are $2,472,000: processing costs to refine Pi into Precision Pi are $494,400.
Requirement 1:
(a)
What would be the incremental profit or loss per unit if Delta is refined into Super Delta? (Input the amount as positive value. Omit the “$” sign in your response.)
Incremental (Click to select) profit loss
$
(b)
What would be the incremental profit or loss per unit if Pi is refined into Precision Pi? (Omit the “$” sign in your response.)
Incremental (Click to select) profit loss
$
Requirement 2:
(a)
Should Delta be sold as is or refined into Super Delta?
(Click to select) Delta should be sold as is. Delta should be processed further and sold as Super Delta.
(b)
Should Pi be sold as is or refined into Precision Pi?
(Click to select) Pi should be processed further and sold as Precision Pi. Pi should be sold as is.
Requirement 3:
Identify any costs in the problem that are not relevant to this decision.
(Click to select) Processing costs to refine Delta into Super Delta are not relevant. The $748,500 cost incurred to produce the Alpha ore is not relevant. Processing costs to refine Pi into Precision Pi are $494,400 not relevant.
Requirement 4:
What is the maximum profit that Mizzou Mining Company can expect to earn from the production of the 412,000 tons of Alpha? (Omit the “$” sign in your response.)
(Mt. Hood Furniture%u2014PPS sampling problem) You have been assigned the task of testing the accuracy of the final inventory compilation for Mt. Hood Furniture. You may assume that you have separately observed the inventory and that you are satisfied that the inventory was accurately counted. However, you need to test that quantities were accurately transcribed to the final accumulation and valuation of inventory and that the inventory is correctly priced and accumulated. The table beginning on page 617 presents the audited values associated with Mt. Hood’s pricing and accumulation of all items in inventory.
The book values will be given to you by your professor. You may assume that you have performed the tests to determine the proper pricing for raw materials, work in process, and finished goods. The student should understand that the auditor will normally obtain this information only for the items included in the sample.
Required
Identify the audit objectives that are accomplished by this test.
Determine sample size based on the following audit judgments.
Tolerable misstatement is assessed at $325,000.
The risk of incorrect acceptance is assessed at 37 percent.
Anticipated misstatement is assessed at $100,000.
Develop a scenario that is consistent with setting the risk of incorrect acceptance at 37 percent.
Select a PPS sample of the above inventory population using the sample size determined in (2) above.
Explain the tests that you would perform to test the correctness of pricing of raw materials, work in progress, and finished goods. (The student may wish to consult Chapter 16.)
Determine the amount of projected population misstatement based on your sample.
Considering your quantitative and qualitative results, develop a statistical conclusion and an audit conclusion based on your sample.
Murray’s Fashions sold merchandise for $38,000 cash during the month of July. Returns that month totaled $800. If the company’s gross profit rate is 40%, Murray’s will report monthly net sales revenue and cost of goods sold of
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statements. Select one (1) pair of these companies and conduct your analysis. 
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