During Year 1 and Year 2, Agatha Corp. completed the following transactions relating to its bond issue. The corporation’s fiscal year is the calendar year. Year 1 Jan. 1 Issued $330,000 of 8-year, 8 percent bonds for $324,000. The annual cash payment for interest is due on December 31. Dec. 31 Recognized interest expense, including the straight-line amortization of the discount, and made the cash payment for interest. Dec. 31 Closed the interest expense account. Year 2 Dec. 31 Recognized interest expense, including the straight-line amortization of the discount, and made the cash payment for interest. Dec. 31 Closed the interest expense account. Required a-1. When the bonds were issued, was the market rate of interest more or less than the stated rate of interest? a-2. If Agatha had sold the bonds at their face amount, what amount of cash would Agatha have received? b. Prepare the liabilities section of the balance sheet at December 31, Year 1 and Year 2. c. Determine the amount of interest expense that will be reported on the income statements for Year 1 and Year 2. d. Determine the amount of interest that will be paid in cash to the bondholders in Year 1 and Year 2.

Please answer both.

High-Low Method for a Service Company

Boston Railroad decided to use the high-low method and operating data from the past six months to estimate the fixed and variable components of transportation costs. The activity base used by Boston Railroad is a measure of railroad operating activity, termed "gross-ton miles," which is the total number of tons multiplied by the miles moved.

Determine the variable cost per gross-ton mile and the total fixed cost.

Break-Even Sales and Sales Mix for a Service Company

Zero Turbulence Airline provides air transportation services between Los Angeles, California, and Kona, Hawaii. A single Los Angeles to Kona round-trip flight has the following operating statistics:

It is assumed that the fuel, crew salaries, and airplane depreciation are fixed, regardless of the number of seats sold for the round-trip flight.

a. Compute the break-even number of seats sold on a single round-trip flight for the overall enterprise product, E. Assume that the overall product mix is 10% business class and 90% economy class tickets.

b. How many business class and economy class seats would be sold at the break-even point?

The following facts pertain to a non-cancelable lease agreement between Alschuler Leasing Company and McKee Electronics, a lessee, for a computer system.

The collectability of the lease payments is probable by the lessor. The asset will revert to the lessor at the end of the lease term. The straight-line depreciation method is used for all equipment. The following amortization schedule has been prepared correctly for use by both the lessor and the lessee in accounting for this lease. The lease is to be accounted for properly as a finance lease by the lessee and as a sales-type lease by the lessor.

a) Assuming the lessee's accounting period ends on September 30, answer the following questions with respect to this lease agreement.

1. What items and amounts will appear on the lessee's income statement for the year ending September 30, 2018?

2. What items and amounts will appear on the lessee's balance sheet at September 30, 2018?

3. What items and amounts will appear on the lessee's income statement for the year ending September 30, 2019?

4. What items and amounts will appear on the lessee's balance sheet at September 30, 2019?

b) Assuming the lessee's accounting period ends on December 31, answer the following questions with respect to this lease agreement.

1. What items and amounts will appear on the lessee's income statement for the year ending December 31, 2017?

2. What items and amounts will appear on the lessee's balance sheet at December 31, 2017?

3. What items and amounts will appear on the lessee's income statement for the year ending December 31, 2018?

4. What items and amounts will appear on the lessee's balance sheet at December 31, 2018?

High Country, Inc., produces and sells many recreational products. The company has just opened a new plant to produce a folding camp cot that will be marketed throughout the United States. The following cost and revenue data relate to May, the first month of the plant’s operation:

Management is anxious to assess the profitability of the new camp cot during the month of May.

Required:

1. Assume that the company uses absorption costing.

a. Determine the unit product cost.

b. Prepare an income statement for May.

2. Assume that the company uses variable costing.

a. Determine the unit product cost.

b. Prepare a contribution format income statement for May.

Laker Company reported the following January purchases and sales data for its only product.

The Company uses a perpetual inventory system. For specific identification, ending inventory consists of 230 units, where 200 are from the January 30 purchase, 5 are from the January 20 purchase, and 25 are from beginning inventory.

Required:

1. Complete comparative income statements for the month of January for Laker Company for the four inventory methods. Assume expenses are $1,350, and that the applicable income tax rate is 40%. (Round your Intermediate calculations to 2 decimal places.)

2. Which method yields the highest net income?

• Specific identification

• Weighted average

• LIFO

• FIFO

3. Does net income using weighted average fall between that using FIFO and LIFO?

• Yes

• No

4. If costs were rising instead of falling, which method would yield the highest net income?

• FIFO

• LIFO

• Specific identification

• Weighted average

Equivalent Units and Related Costs; Cost of Production Report; Entries

Dover Chemical Company manufactures specialty chemicals by a series of three processes, all materials being introduced in the Distilling Department. From the Distilling Department, the materials pass through the Reaction and Filling departments, emerging as finished chemicals.

The balance in the account Work in Process—Filling was as follows on January 1:

The following costs were charged to Work in Process—Filling during January:

During January, 58,800 units of specialty chemicals were completed. Work in Process—Filling Department on January 31 was 5,100 units, 50% completed.

Required:

1. Prepare a cost of production report for the Filling Department for January. If an amount is zero, enter "0". If required, round your cost per equivalent unit answers to two decimal places.

3. Determine the increase or decrease in the cost per equivalent unit from December to January for direct materials and conversion costs. If required, round your answers to two decimal places.

4. The cost of production report may be used as the basis for allocating product costs between   and  . The report can also be used to control costs by holding each department head responsible for the units entering production and the costs incurred in the department. Any differences in unit product costs from one month to another, such as those in part (3), can be studied carefully and any significant differences investigated.

Merrill Corp. has the following information available about a potential capital investment:   

Assume straight line depreciation method is used.  


Required:
1. Calculate the project’s net present value. (Future Value of $1, Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1.) (Use appropriate factor(s) from the tables provided. Do not round intermediate calculations. Round the final answer to nearest whole dollar.)

         

2. Without making any calculations, determine whether the internal rate of return (IRR) is more or less than 7 percent.

    

   

3. Calculate the net present value using a 13 percent discount rate. (Future Value of $1, Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1.) (Use appropriate factor(s) from the tables provided. Do not round intermediate calculations. Round the final answer to nearest whole dollar.)

       

4. Without making any calculations, determine whether the internal rate of return (IRR) is more or less than 13 percent.

    

On August 15, 2017, Jarvis Company issued 50,000 options on the shares of RBC (Royal Bank Corporation). Each option gives the option holder the right to buy one share of RBC at $60 per share until March 16, 2018. Jarvis received $25,000 for issuing these options. At the company’s year-end of December 31, 2017, the options contracts traded on the Montreal Exchange at $.40 per contract. On March 16, 2018, RBC shares closed at $58 per share, none of the options were exercised, so the options had to be removed and any gain or loss earned thus far reported.

Required:

Record all journal entries related to these call options.

Selected data derived from the income statement and balance sheet of National Beverage Co. for a recent year are as follows:

Required:

P6-6A. Goods in Transit The Yankee Wholesale Company sells merchandise to a variety of retailers. Yankee uses different freight terms with its various customers and suppliers. All sales are made on account.

Required

For each of the following transactions, indicate which company has ownership of the goods in transit:

a. Yankee sold merchandise to X-Mart stores, with shipping terms of F.O.B shipping point.

b. Yankee purchased merchandise from Zendo Manufacturing Company, with shipping terms of F.O.B. destination.

c. Yankee Sold merchandise to Mary's boutique, with shipping terms of F.O.B destination.

d. Sunshine Manufacturing Company sold merchandise to Yankee, with shipping terms of F.O.B. shipping point.

e. Yankee purchased merchandise from Warfield Manufacturing Company, with freight terms of F. O. B shipping point.

f. Stevenson Stores purchased merchandise from Yankee, with shipping terms of F.O.B shipping point.

P6-7A. Lower-of-Cost-or-Net Realizable Value Method The Vandy Company had the following inventory at year-end:

   Unit Price

   Quantity Cost Net Realizable Value

Fans

Model X1...................................................................................300 $18    $19

Model X2..................................................................................250    23 24

Model X3..................................................................................450    29 25

Heaters

Model B7...................................................................................500    24 30

Model B8...................................................................................290 35    32   

Model B9...................................................................................100 41    37

Required

a. Determines the value of ending inventory after applying the lower-of-cost-or-net realizable value method to each item of inventory.

b. Would the net income be lower under the cost method or the lower-of-cost-or-net realizable value method?

Maher Corporation, which has only one product, has provided the following data concerning its most recent month of operations:

Required:

a. What is the unit product cost for the month under variable costing?

b. What is the unit product cost for the month under absorption costing?

c. Prepare a contribution format income statement for the month using variable costing.

d. Prepare an income statement for the month using absorption costing.

e. Reconcile the variable costing and absorption costing net operating incomes for the month.

Consolidation at date of acquisition (purchase price greater than book value, acquisition journal entries
Assume that the parent company acquires its subsidiary by exchanging 50,000 shares of its $1 par value Common Stock, with a fair value on the acquisition date of $30 per share, for all of the outstanding voting shares of the investee. In its analysis of the investee company, the parent values all of the subsidiary’s assets and liabilities at an amount equaling their book values except for an unrecorded Trademark with a fair value of $120,000, an unrecorded Video Library valued at $300,000, and Patented Technology with a fair value of $60,000.

a. Prepare the journal entry that the parent makes to record the acquisition.

b. Given the following acquisition-date balance sheets of the parent and the subsidiary, prepare the consolidation entries.

c. Prepare the consolidation spreadsheet.

d. Where were the intangible assets on the parent or subsidiary’s balance sheets?

A.)On the parent's balance sheet embedded in the equity investment account. On the subsidiary's balance sheet, each intangible asset is listed.

B.)On the parent's balance sheet embedded in the equity investment account. After the consolidation process is complete, each intangible asset is listed on the consolidated balance sheet.

C.)On the subsidiary's balance sheet embedded in retained earnings. After the consolidation process is complete, each intangible asset is listed on the consolidated balance sheet.

Cash Flow Issues

• Explain cash-flow issues relevant to reimbursement of providers.
• Compare the risks to payer and provider of each reimbursement methodology.
• Examine the concept of positive cash flow in relation to claims processing.

Reimbursement issues

• Explain timely payment, with examples.
• Describe recoupment, with examples.
• Examine the concept of difficult economics in relation to a healthcare provider

Prepare in good form:

an Income Statement, Statement of Owner’s Equity

2. Classified Balance Sheet,

3. Calculate the Current Ratio and prepare the Closing Entries in a general journal

Question #1 – 35 Marks

The following is the adjusted trial balance for Reid Tax and Accounting Services for the year ended December 31, 2017

Reid Tax and Accounting Services Adjusted Trial Balance December 31, 2017

Account Title Dr Cr
Accounts payable 6,300
Accounts Receivable 9,000
Accumulated Depreciation Building 41,000
Accumulated Depreciation Equipment $4,200
Building    350,000
Cash $98,000
Depreciation expense, building 7,000
Depreciation expense, equipment 800
Insurance expense 5,200
Interest payable 2,000
Land 700,000
Long-term note payable 52,000
Fred Reid, Capital 1,010,000
Fred Reid, Withdrawals 200,500
Office equipment 8,000
Office supplies 3,300
Prepaid Insurance 9,000
Prepaid Rent 15,000
Rent expense 6,000
Salaries expense 89,000
Salaries payable 14,500
Service fees earned 370,800
Totals $1,500,800 $1,500,800

Additional Information:
• A $10,000 installment on the long-term note payable is due within one year.
• Fred Reid invested $40,000 into her business during the year

Required:

1. Prepare in good form, an Income Statement, Statement of Owner’s Equity and a Classified Balance Sheet for the year ended December 31, 2017. – 26 Marks

2. Calculate the Current Ratio at December 31, 2017 – 4 Marks

3. Prepare the Closing Entries at December 31, 2017.in a general journal – 5 Marks

On October 31, 2017, Lexington Corp. declared and issued a 12% common stock dividend. Prior to this dividend, Lexington had 302,000 shares of $0.001 par value common stock issued and outstanding. The fair value of Lexington's common stock was $16.75 per share on October 31, 2017. As a result of this stock dividend, the company's total stockholders' equity please explain in details