Sheffield Inc. was authorized to issue 100000 £10 par value ordinary shares. As of December 31, 2020, the company had issued 54000 shares at an average price of £22 per share. During 2020, the company felt that the shares were undervalued so it purchased 9800 treasury shares at £16 per share. When the share price rebounded later in the year, the company sold 4200 of the treasury shares for £24 per share. Retained earnings was £1666000 at December 31, 2020.

Total equity at December 31, 2020 is

£2697200.

£2994000.

£2764400.

£2798000.

Westerville Company reported the following results from last year’s operations:

Sales	$	1,000,000
Variable expenses		300,000
Contribution margin		700,000
Fixed expenses		500,000
Net operating income	$	200,000
Average operating assets	$	625,000

This year, the company has a $120,000 investment opportunity with the following cost and revenue characteristics:

Sales	$	200,000
Contribution margin ratio		60	% of sales
Fixed expenses	$	90,000

The company’s minimum required rate of return is 15%.

13.	If the company pursues the investment opportunity and otherwise performs the same as last year, what residual income will it earn this year?

Comprehensive Master (Operating) Budget

Bee Gee Distributors, a wholesale company, is considering whether to open a new distribution center near Bowling Green, Ohio. The center would open January 1, 2020. The economic outlook is reasonable, but extensive advance planning is required if such a commitment is to be made. As a part of the planning process, The Board of Directors requires a Master (i.e. Operating) Budgetfor the center’s first quarter of operations(i.e. January, February & March of 2020).  In order to prepare anybudget, management must make reasonable assumptions about expected sales, inventory levels and cash flows.  

SALES BUDGET: “What is the Profit Plan?”

        ** It all starts with a sales forecast **

a.     January sales are estimated to be $400,000 of which $100,000 (25%) will be cash and $300,000 will be on credit.  Management expects the above sales pattern to continue with an overall grow rate of 10% per month.  Prepare a sales budget.

b.     The company expects to collect 100% of the accounts receivable in the month following the month of the sale.  Prepare a schedule of expected cash receipts.

c.     Use the information developed above in requirements a and bto determine the amount of accounts receivable on the March 31 pro forma balance sheet and the amount of sales on the first quarter pro forma income statement.

_____________________________________________________________________

PURCHASES BUDGET: “What are our total needs, less what do we have”?

d.     Cost of goods sold will be 60% of sales.  Company policy is to budget an ending inventory balance equal to 25% of the next month’s projected cost of goods sold.  Prepare an inventory purchases budget.

Note: For March analysis needs, Aprilcost of goods sold is expected to be $314,000.

e.     All inventory purchases are on account.  The company pays 70% of accounts payable in the month of purchase. It pays the remaining 30% in the following month.  Prepare a schedule of expected cash payments for inventory purchases.

f.     Use the information developed above in requirements d and eto determine the amount of cost of goods sold on the first quarter pro forma income statement and the amounts of ending inventory and accounts payable on the March 31 pro forma balance sheet.

ADMINISTRATIVE & SALES EXPENSE BUDGET:

g.     Budgeted monthly selling and administrative expenses are:

Salary Expense	$24,000
Sales Commissions	5% of Sales
Supplies Expense	2% of Sales
Utilities	$ 1,400
Depreciation on New Equipment (see note below*)	?
Rent	$ 3,600
Miscellaneous	$    900

         *The capital expenditures budget shows that Bee Gee must purchase $100,000 of equipment on January 1 to establish the new center.  Since the equipment supplier allows a thirty-day trial period, assume Bee Gee will pay for the equipment in January (i.e. by 1/31).  Using Straight-line depreciation, the equipment is expected to have a 10-year useful life and a $10,000 salvage value.  

            SELLING AND ADMINISTRATIVE EXPENSE BUDGET:

h.     Sales commissions and utilities are paid in the month after the month in which they are incurred.  All other expenses are paid in the month in which they are incurred.  Prepare a schedule of cash payments for selling and administrative expenses.

Please do E,F,G,H

Kubin Company’s relevant range of production is 21,000 to 25,000 units. When it produces and sells 23,000 units, its average costs per unit are as follows:

  

	Average Cost per Unit
Direct materials	$	8.10
Direct labor	$	5.10
Variable manufacturing overhead	$	2.60
Fixed manufacturing overhead	$	6.10
Fixed selling expense	$	4.60
Fixed administrative expense	$	3.60
Sales commissions	$	2.10
Variable administrative expense	$	1.60

Required:

1. For financial accounting purposes, what is the total amount of product costs incurred to make 23,000 units?

2. For financial accounting purposes, what is the total amount of period costs incurred to sell 23,000 units?

3. For financial accounting purposes, what is the total amount of product costs incurred to make 25,000 units?

4. For financial accounting purposes, what is the total amount of period costs incurred to sell 21,000 units?

Preparing a Direct Materials Purchases Budget

Tulum Inc. makes a Mexican chocolate mix sold in 4-pound boxes. Planned production in units for the first 3 months of the coming year is:

January	24,700
February	22,000
March	30,200

Each box requires 4.2 pounds of chocolate mix and one box. Company policy requires that ending inventories of raw materials for each month be 10% of the next month’s production needs. That policy was met for the ending inventory of December in the prior year. The cost of 1 pound of chocolate mix is $1.50. The cost of one box is $0.10.

Required:

1. Calculate the ending inventory of chocolate mix in pounds for December of the prior year and for January and February. What is the beginning inventory of chocolate mix for January?

Ending inventory for December	fill in the blank 1791c200405a046_1 pounds
Ending inventory for January	fill in the blank 1791c200405a046_2 pounds
Ending inventory for February	fill in the blank 1791c200405a046_3 pounds
Beginning inventory for January	fill in the blank 1791c200405a046_4 pounds

2. Prepare a direct materials purchases budget for chocolate mix for the months of January and February.

Tulum Inc.
Direct Materials Purchases Budget - Chocolate mix in Pounds:
For the Months of January and February
	January	February
Production in units	fill in the blank f5189304407200e_1	fill in the blank f5189304407200e_2
Pounds per unit	fill in the blank f5189304407200e_3	fill in the blank f5189304407200e_4
Pounds for production	fill in the blank f5189304407200e_5	fill in the blank f5189304407200e_6
Desired ending inventory	fill in the blank f5189304407200e_7	fill in the blank f5189304407200e_8
Needed	fill in the blank f5189304407200e_9	fill in the blank f5189304407200e_10
Less: Beginning inventory	fill in the blank f5189304407200e_11	fill in the blank f5189304407200e_12
Purchases	fill in the blank f5189304407200e_13	fill in the blank f5189304407200e_14
Price per pounds	$fill in the blank f5189304407200e_15	$fill in the blank f5189304407200e_16
Dollar purchases	$fill in the blank f5189304407200e_17	$fill in the blank f5189304407200e_18

3. Calculate the ending inventory of boxes for December of the prior year and for January and February. Round your answers to the nearest whole unit.

Ending inventory for December	fill in the blank feb385003fcbfb9_1 units
Ending inventory for January	fill in the blank feb385003fcbfb9_2 units
Ending inventory for February	fill in the blank feb385003fcbfb9_3 units

4. Prepare a direct materials purchases budget for boxes for the months of January and February.

Tulum Inc.
Direct Materials Purchases Budget - Boxes
For the Months of January and February
	January	February
Production in units	fill in the blank 1d53d301c01306a_1	fill in the blank 1d53d301c01306a_2
Boxes per unit	fill in the blank 1d53d301c01306a_3	fill in the blank 1d53d301c01306a_4
Boxes for production	fill in the blank 1d53d301c01306a_5	fill in the blank 1d53d301c01306a_6
Desired ending inventory	fill in the blank 1d53d301c01306a_7	fill in the blank 1d53d301c01306a_8
Needed	fill in the blank 1d53d301c01306a_9	fill in the blank 1d53d301c01306a_10
Less: Beginning inventory	fill in the blank 1d53d301c01306a_11	fill in the blank 1d53d301c01306a_12
Purchases	fill in the blank 1d53d301c01306a_13	fill in the blank 1d53d301c01306a_14
Price per box	$fill in the blank 1d53d301c01306a_15	$fill in the blank 1d53d301c01306a_16
Dollar purchases	$fill in the blank 1d53d301c01306a_17	$fill in the blank 1d53d301c01306a_18

Revenues generated by a new fad product are forecast as follows:

   

Year	Revenues
1	$60,000
2	30,000
3	20,000
4	10,000
Thereafter	0

   

Expenses are expected to be 50% of revenues, and working capital required in each year is expected to be 10% of revenues in the following year. The product requires an immediate investment of $54,000 in plant and equipment.

   

a.	What is the initial investment in the product? Remember working capital.

   

Initial investment

$

    

b.

If the plant and equipment are depreciated over 4 years to a salvage value of zero using straight-line depreciation, and the firm’s tax rate is 20%, what are the project cash flows in each year? (Enter your answers in thousands of dollars. Do not round intermediate calculations. Round your answers to 2 decimal places.)

   

Year	Cash Flow
1	$
2
3
4

    

c.	If the opportunity cost of capital is 10%, what is project NPV? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places.)

    

NPV

$

   

d.	What is project IRR? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

IRR

%

Paulis Kennel uses tenant-days as its measure of activity; an animal housed in the kennel for one day is counted as one tenant-day. During February, the kennel budgeted for 2,500 tenant-days, but its actual level of activity was 2,480 tenant-days. The kennel has provided the following data concerning the formulas used in its budgeting and its actual results for February:

Data used in budgeting:

	Fixed element per month			Variable element per tenant-day
Revenue		-		$	35.30
Wages and salaries	$	2,500		$	5.90
Food and supplies		400			13.80
Facility expenses		8,900			3.40
Administrative expenses		7,800			0.40
Total expenses	$	19,600		$	23.50

Actual results for February:

Revenue	$	85,654
Wages and salaries	$	16,992
Food and supplies	$	33,084
Facility expenses	$	16,682
Administrative expenses	$	8,732

The activity variance for net operating income in February would be closest to:

Garrison 16e Rechecks 2018-06-07

Multiple Choice

• $236 U

• $264 F

• $236 F

• $264 U

Preparation of a complete master budget

The management of Zigby Manufacturing prepared the following estimated balance sheet for March, 2015:

ZIGBY MANUFACTURING
Estimated Balance Sheet
March 31, 2015
ASSETS
Cash..........................................................		$ 40,000
Accounts receivable................................		342,248
Raw materials inventory.......................... Finished goods inventory........................		98,500    325,540
Total current assets.................................		806,288
Equipment................................................	$600,000
Less accumulated depreciation..............	150,000	450,000
Total assets..............................................		$1,256,288
LIABILITIES AND EQUITY
Accounts payable....................................		$    200,500
Short-term notes payable....................................		12,000
Taxes payable..........................................		0
Total current liabilities.............................		212.500
Long-term note payable........................... Common stock.........................................	$335,000	500,000
Retained earnings....................................	208,788
Total stockholders’ equity.......................		543,788
Total liabilities and equity........................		$1,256,288

To prepare a master budget for April, May, and June of 2015, management gathers the following information:

• Sales for March total 20,500 units. Forecasted sales in units are as follows: April, 20,500; May, 19,500; June, 20,000; and July, 20,500. Sales of 240,000 units are forecasted for the entire year. The product's selling price is $23.85 per unit and its total product cost is $19.85 per unit

• Company policy calls for a given month's ending raw materials inventory to equal 50% of the next month's materials requirements. The March 31 raw materials inventory is 4,925 units, which complies with the policy. The expected June 30 ending raw materials inventory is 4,000 units. Raw materials cost $20 per unit. Each finished unit requires 0.50 units of raw materials.

• Company policy calls for a given month's ending finished goods inventory to equal 80% of the next month's expected unit sales. The March 31 finished goods inventory is 16,400 units, which complies with the policy.

• Each finished unit requires 0.50 hours of direct labor at a rate of $15 per hour.

• Overhead is allocated based on direct labor hours. The predetermined variable overhead rate is $2.70 per direct labor hour. Depreciation of $20,000 per month is treated as fixed factory overhead.

• Sales representatives' commissions are 8% of sales and are paid in the month of the sales. The sales manager's monthly salary is $3,000.

• Monthly general and administrative expenses include $12,000 administrative salaries and 0.9% monthly interest on the long-term note payable.

• The company expects 30% of sales to be for cash and the remaining 70% on credit. Receivables are collected in full in the month following the sale (none is collected in the month of the sale).

• All raw materials purchases are on credit, and no payables arise from any other transactions. One month's raw materials purchases are fully paid in the next month.

• The minimum ending cash balance for all months is $40,000. If necessary, the company borrows enough cash using a short-term note to reach the minimum. Short-term notes require an interest payment of 1% at each month-end (before any repayment). If the ending cash balance exceeds the minimum, the excess will be applied to repaying the short-term notes payable balance.

• Dividends of $10,000 are to be declared and paid in May.

• No cash payments for income taxes are to be made during the second calendar quarter. Income tax will be assessed at 35% in the quarter and paid in the third calendar quarter.

• Equipment purchases of $130,000 are budgeted for the last day of June.

Required

Prepare the following budgets and other financial information as required. All budgets and other financial information should be prepared for the second calendar quarter, except as otherwise noted below. Round calculations up to the nearest whole dollar, except for the amount of cash sales, which should be rounded down to the nearest whole dollar.

1. General and administrative expense budget.
2. Cash budget.

Check  

(2) Units to produce: April, 19,700; May, 19,900

(3) Cost of raw materials purchases, April, $198,000

(5) Total overhead cost, May, $46,865

(8) Ending cash balance: April, $83,346; May, $124,295

(10) Budgeted total assets, June 30: $1,299,440

Dahlia is in the 32 percent tax rate bracket and has purchased the following shares of Microsoft common stock over the years: Date Purchased Shares Basis 7/10/2008 500 $ 20,000 4/20/2009 400 18,320 1/29/2010 600 20,160 11/02/2012 350 13,720 If Dahlia sells 1,100 shares of Microsoft for $66,000 on December 20, 2018, what is her capital gain or loss in each of the following assumptions? (Do not round intermediate calculations.)

a. She uses the FIFO method.

Dahlia is in the 32 percent tax rate bracket and has purchased the following shares of Microsoft common stock over the years:

Date Purchased	Shares	Basis
7/10/2008	500	$	20,000
4/20/2009	400		18,320
1/29/2010	600		20,160
11/02/2012	350		13,720

If Dahlia sells 1,100 shares of Microsoft for $66,000 on December 20, 2018, what is her capital gain or loss in each of the following assumptions? (Do not round intermediate calculations.)

b. She uses the specific identification method and she wants to minimize her current year capital gain.

   

List the four health care funding methods used in Canada. State the health care funding method used in your jurisdiction and describe the payroll implication, if any.

Transaction 4
The owners paid $2,500 for website advertising. They were able to get a good deal because one of the company's owners also owns stock in the website company. The owners also paid $5,500 for some advertising in local newspapers. [Note: Combine both transactions into one entry].

Account:               Dollar amount:   

Account:   Dollar amount:   

Account: Dollar amount:   

Account: Dollar amount:   

Account: Dollar amount:   

Account options: Cash, Accounts Receivable, Inventory, Prepaid Rent, Fixtures and Equipment, Accounts Payable, Interest Payable, Wages Payable, Notes Payable, Paid-in Capital, Retained Earnings, Leave Blank

Skidmore Music Company had the following transactions in March: Sold instruments to customers for $16,100; received $11,600 in cash and the rest on account. The cost of the instruments was $8,500. Purchased $4,300 of new instruments inventory; paid $1,500 in cash and owed the rest on account. Paid $700 in wages to employees who worked during the month. Received $3,200 from customers as deposits on orders of new instruments to be sold to the customers in April. Received a $280 bill for March utilities that will be paid in April.
		Cash Basis Income Statement Accrual Basis Income Statement Revenues Revenues Cash sales Sales to customers Customer deposits Expenses Expenses Inventory purchases Cost of sales Wages paid Wages expense Utilities expense Net income Net income

Fictitious information is provided below. Answer both required questions. **Be sure to show your work in detail. Not doing so will result in reduced or no credit given.

For the year recently completed, TeamLogicIT had net income of $35,000. Balances in the company's current asset and current liability accounting for the beginning and ending of the year were as follows:

	End of Year	Beginning of Year
Current assets:
Cash and cash equivalents	$30,000	$40,000
Accounts receivable	$125,000	$106,000
Inventory	$213,000	$180,000
Prepaid expenses	$6,000	$7,000
Current liabilities:
Accounts payable	$210,000	$195,000
Accrued liabilities	$4,000	$6,000
Income taxes payable	$34,000	$30,000

Also, the accumulated depreciation account had total credits of $20,000 during the year. TeamLogicIT did not record any gains or losses during the year.

**Based on the above and in consideration of the indirect method, determine the net cash provided by operating activities for the year.

Using the following information ... to forecast the incremental expected Profit or Loss from the new clinic.

Generic Hospital is contemplating the opening of a clinic in an underserved rural community. The marketing people project 5,000 office visits in year one with an average charge of $100 per clinic visit. The consensus is that half of the visits will be Medicare patients with an average payment of $50 per visit. Thirty percent (30%) of the visits are expected to be from patients insured with BC with the expectation for payment set at 80% of the average charge. Another 15% of the patients will have some form of Medicaid coverage with an expected payment of $20 per visit. The remaining patients are expected to be bad debt and charity care with no payment. The expenses consist of $120,000 for salary and benefits. This covers one nurse practitioner and one all purpose assistant. The office lease, insurance, and other fixed costs are projected to be $60,000 per year. The hospital would borrow $20,000 (Debt) from the Bank to buy used Equipment to outfit the office. The interest on the loan would be $1,500 in year one. The equipment to outfit the space cost $20,000 and has an expected useful life of 5 years. The variable cost for such items as supplies, forms, and postage is estimated at $10.00 per visit. Assuming no allocation of any corporate overhead, compute the forecasted year 1 profit or loss.

(do not to confuse Balance Sheet items with those needed to prepare a forecasted P&L)

IAS 16, Property, Plant and Equipment allows companies to choose either the cost model or the revaluation model to measure the carrying amount of property, plant and equipment subsequent to its initial recognition as an asset.

Discuss how you should account for revaluation gains and losses when the valuation model is used. In addition, explain how the reversals of the revaluation gains and losses should be reported.