The recent collapse in the banking sector caused many banks to close and many others to merge with other banks, in some cases from very different parts of the country. How would these changes have affected the historical connections that many borrowers and lenders had? And how would those changes have affected the capital structure of most firms?

Net Present Value Method, Present Value Index, and Analysis

United Bankshores, Inc. wishes to evaluate three capital investment proposals by using the net present value method. Relevant data related to the proposals are summarized as follows:

Required:

1. Assuming that the desired rate of return is 15%, prepare a net present value analysis for each proposal. Use the present value of $1 table above. If required, use the minus sign to indicate a negative net present value. If required, round to the nearest dollar.

2. Determine a present value index for each proposal. If required, round your answers to two decimal places.

3. Which proposal offers the largest amount of present value per dollar of investment?

Sail Away takes special orders to manufacture sail boats for high end customers. Complete the job cost sheets for Sail Away for September based on the following information. Prepare journal entries to record the transactions as well as post to the job cost sheets.

a. Purchased raw materials on credit, $145,000.
b. Materials requisitions: Job 240, $48,000; Job 241, $36,000; Job 242, $42,000; indirect materials were $12,000.
c. Paid $130,000 for factory wages.
d. Time tickets used to charge labor to jobs: Job 240, $40,000; Job 241, $30,000; Job 242, $35,000, indirect labor is $25,000.
e. The company incurred the following additional overhead costs: depreciation of factory building, $70,000; depreciation of factory equipment, $60,000; expired factory insurance, $10,000; utilities and maintenance cost of $20,000 were paid in cash. (Hint: Be careful – Cash is not your only credit).
f. Applied overhead to all three jobs. The predetermined overhead rate is 190% of direct labor cost.
g. Transferred jobs 240 and 242 to Finished Goods Inventory.
h. Sold job 240 for $300,000 for cash.
i. Closed the under- or over-applied overhead account balance.

• What do you really think about the accounting profession?
• What might you find most challenging or interesting about taking an accounting course?
• Need some inspiration from what others have said or found challenging about accounting?

As stated in the Executive Summary of the Journal of Accountancy article, three of the most common complaints made against small to midsize CPA firms involve failure to return client records on a timely basis, failure to exercise due professional care and conflicts of interest. Select one of these issues and discuss why you feel it is the most important.

On January 1, 2016, you deposited $5,300 in a savings account. The account will earn 9 percent annual compound interest, which will be added to the fund balance at the end of each year. Required: 1. What will be the balance in the savings account at the end of 7 years? (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. Round your final answers to 2 decimal places.) 2. What is the total interest for the 7 years? (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. Round your final answers to 2 decimal places.) 3. How much interest revenue did the fund earn in 2016 and in 2017? (Round your final answers to 2 decimal places.)

Viejol Corporation has collected the following information after its first year of sales. Sales were $1,600,000 on 100,000 units, selling expenses $200,000 (40% variable and 60% fixed), direct materials $508,000, direct labor $290,400, administrative expenses $278,000 (20% variable and 80% fixed), and manufacturing overhead $380,000 (70% variable and 30% fixed). Top management has asked you to do a CVP analysis so that it can make plans for the coming year. It has projected that unit sales will increase by 10% next year.

If the company meets its target net income number, by what percentage could its sales fall before it is operating at a loss? That is, what is its margin of safety ratio?

1. Rachel was recently hired by Moncton Express Inc (MEI) to assist its payable clerk in bringing the accounts up to date. Rachel was asked to record the following transactions:

August 15: MEI purchased a new inventory monitoring system. MEI issued a $6,000 non-interest bearing note payable, due on October 15.

August 18: MEI borrowed $10,000 from the bank in the form of a demand note. MEI authorizes the bank to take the interest payments from its bank account. Interest is payable on the last day of each month at 4% per annum.

August 21: MEI purchased $8,000 of inventory, plus HST, on account. The terms offered are 3/10, net 45.

September 20: MEI purchased a waste management system. MEI issues an $8,000, non-interest bearing note payable due in one year.

September 23: MEI purchases $3,000 of inventory, plus HST, on account. The terms offered are 3/10, net 45.

September 24: Rachel pays the August 21 and September 23 invoices.

September 30: Rachel accrues for unbilled utilities totalling $1,700.

Other information:

• MEI uses the gross method to record accounts payable
• MEI’s year-end is December 31, and interim statements are normally prepared on a monthly basis.
• MEI’s latest interim statements are for the month ended July 31. The necessary accruals were made at that time, except that MEI only records depreciation expense at year-end.
• The market rate of interest for MEI’s short-term borrowings is 5%.

Required:

Prepare journal entries to record the documented events and the necessary accruals for the months of August and September.   Calculate interest accruals based on the number of days, rather than months. Round your answers to the nearest dollar.

Patrick Corporation acquired 100 percent of O’Brien Company’s outstanding common stock on January 1, for $796,500 in cash. O’Brien reported net assets with a carrying amount of $448,000 at that time. Some of O’Brien’s assets either were unrecorded (having been internally developed) or had fair values that differed from book values as follows: Book Values Fair Values Trademarks (indefinite life) $ 102,000 $ 299,000 Customer relationships (5-year remaining life) 0 96,600 Equipment (10-year remaining life) 359,000 329,000 Any goodwill is considered to have an indefinite life with no impairment charges during the year. Following are financial statements at the end of the first year for these two companies prepared from their separately maintained accounting systems. O’Brien declared and paid dividends in the same period. Credit balances are indicated by parentheses. Patrick O'Brien Revenues $ (1,815,000 ) $ (856,000 ) Cost of goods sold 484,000 396,000 Depreciation expense 104,100 95,400 Amortization expense 28,200 0 Income from O'Brien (348,280 ) 0 Net income $ (1,546,980 ) $ (364,600 ) Retained earnings 1/1 $ (764,000 ) $ (312,000 ) Net income (1,546,980 ) (364,600 ) Dividends declared 154,000 92,000 Retained earnings 12/31 $ (2,156,980 ) $ (584,600 ) Cash $ 238,000 $ 121,000 Receivables 322,000 68,400 Inventory 202,000 168,000 Investment in O'Brien 1,016,780 0 Trademarks 518,000 79,800 Customer relationships 0 0 Equipment (net) 944,000 276,000 Goodwill 0 0 Total assets $ 3,240,780 $ 713,200 Liabilities $ (683,800 ) $ (28,600 ) Common stock (400,000 ) (100,000 ) Retained earnings 12/31 (2,156,980 ) (584,600 ) Total liabilities and equity $ (3,240,780 ) $ (713,200 ) Which investment method did Patrick use to compute the $348,280 income from O'Brien? Determine the totals to be reported for this business combination for the year ending December 31. Verify the totals determined in part (b) by producing a consolidation worksheet for Patrick and O’Brien for the year ending December 31. Patrick Corporation acquired 100 percent of O’Brien Company’s outstanding common stock on January 1, for $796,500 in cash. O’Brien reported net assets with a carrying amount of $448,000 at that time. Some of O’Brien’s assets either were unrecorded (having been internally developed) or had fair values that differed from book values as follows: Book Values Fair Values Trademarks (indefinite life) $ 102,000 $ 299,000 Customer relationships (5-year remaining life) 0 96,600 Equipment (10-year remaining life) 359,000 329,000 Any goodwill is considered to have an indefinite life with no impairment charges during the year. Following are financial statements at the end of the first year for these two companies prepared from their separately maintained accounting systems. O’Brien declared and paid dividends in the same period. Credit balances are indicated by parentheses. Patrick O'Brien Revenues $ (1,815,000 ) $ (856,000 ) Cost of goods sold 484,000 396,000 Depreciation expense 104,100 95,400 Amortization expense 28,200 0 Income from O'Brien (348,280 ) 0 Net income $ (1,546,980 ) $ (364,600 ) Retained earnings 1/1 $ (764,000 ) $ (312,000 ) Net income (1,546,980 ) (364,600 ) Dividends declared 154,000 92,000 Retained earnings 12/31 $ (2,156,980 ) $ (584,600 ) Cash $ 238,000 $ 121,000 Receivables 322,000 68,400 Inventory 202,000 168,000 Investment in O'Brien 1,016,780 0 Trademarks 518,000 79,800 Customer relationships 0 0 Equipment (net) 944,000 276,000 Goodwill 0 0 Total assets $ 3,240,780 $ 713,200 Liabilities $ (683,800 ) $ (28,600 ) Common stock (400,000 ) (100,000 ) Retained earnings 12/31 (2,156,980 ) (584,600 ) Total liabilities and equity $ (3,240,780 ) $ (713,200 ) Which investment method did Patrick use to compute the $348,280 income from O'Brien? Determine the totals to be reported for this business combination for the year ending December 31. Verify the totals determined in part (b) by producing a consolidation worksheet for Patrick and O’Brien for the year ending December 31. Patrick Corporation acquired 100 percent of O’Brien Company’s outstanding common stock on January 1, for $796,500 in cash. O’Brien reported net assets with a carrying amount of $448,000 at that time. Some of O’Brien’s assets either were unrecorded (having been internally developed) or had fair values that differed from book values as follows: Book Values Fair Values Trademarks (indefinite life) $ 102,000 $ 299,000 Customer relationships (5-year remaining life) 0 96,600 Equipment (10-year remaining life) 359,000 329,000 Any goodwill is considered to have an indefinite life with no impairment charges during the year. Following are financial statements at the end of the first year for these two companies prepared from their separately maintained accounting systems. O’Brien declared and paid dividends in the same period. Credit balances are indicated by parentheses. Patrick O'Brien Revenues $ (1,815,000 ) $ (856,000 ) Cost of goods sold 484,000 396,000 Depreciation expense 104,100 95,400 Amortization expense 28,200 0 Income from O'Brien (348,280 ) 0 Net income $ (1,546,980 ) $ (364,600 ) Retained earnings 1/1 $ (764,000 ) $ (312,000 ) Net income (1,546,980 ) (364,600 ) Dividends declared 154,000 92,000 Retained earnings 12/31 $ (2,156,980 ) $ (584,600 ) Cash $ 238,000 $ 121,000 Receivables 322,000 68,400 Inventory 202,000 168,000 Investment in O'Brien 1,016,780 0 Trademarks 518,000 79,800 Customer relationships 0 0 Equipment (net) 944,000 276,000 Goodwill 0 0 Total assets $ 3,240,780 $ 713,200 Liabilities $ (683,800 ) $ (28,600 ) Common stock (400,000 ) (100,000 ) Retained earnings 12/31 (2,156,980 ) (584,600 ) Total liabilities and equity $ (3,240,780 ) $ (713,200 ) Which investment method did Patrick use to compute the $348,280 income from O'Brien? Determine the totals to be reported for this business combination for the year ending December 31. Verify the totals determined in part (b) by producing a consolidation worksheet for Patrick and O’Brien for the year ending December 31. Patrick Corporation acquired 100 percent of O’Brien Company’s outstanding common stock on January 1, for $796,500 in cash. O’Brien reported net assets with a carrying amount of $448,000 at that time. Some of O’Brien’s assets either were unrecorded (having been internally developed) or had fair values that differed from book values as follows: Book Values Fair Values Trademarks (indefinite life) $ 102,000 $ 299,000 Customer relationships (5-year remaining life) 0 96,600 Equipment (10-year remaining life) 359,000 329,000 Any goodwill is considered to have an indefinite life with no impairment charges during the year. Following are financial statements at the end of the first year for these two companies prepared from their separately maintained accounting systems. O’Brien declared and paid dividends in the same period. Credit balances are indicated by parentheses. Patrick O'Brien Revenues $ (1,815,000 ) $ (856,000 ) Cost of goods sold 484,000 396,000 Depreciation expense 104,100 95,400 Amortization expense 28,200 0 Income from O'Brien (348,280 ) 0 Net income $ (1,546,980 ) $ (364,600 ) Retained earnings 1/1 $ (764,000 ) $ (312,000 ) Net income (1,546,980 ) (364,600 ) Dividends declared 154,000 92,000 Retained earnings 12/31 $ (2,156,980 ) $ (584,600 ) Cash $ 238,000 $ 121,000 Receivables 322,000 68,400 Inventory 202,000 168,000 Investment in O'Brien 1,016,780 0 Trademarks 518,000 79,800 Customer relationships 0 0 Equipment (net) 944,000 276,000 Goodwill 0 0 Total assets $ 3,240,780 $ 713,200 Liabilities $ (683,800 ) $ (28,600 ) Common stock (400,000 ) (100,000 ) Retained earnings 12/31 (2,156,980 ) (584,600 ) Total liabilities and equity $ (3,240,780 ) $ (713,200 ) Which investment method did Patrick use to compute the $348,280 income from O'Brien? Determine the totals to be reported for this business combination for the year ending December 31. Verify the totals determined in part (b) by producing a consolidation worksheet for Patrick and O’Brien for the year ending December 31. Patrick Corporation acquired 100 percent of O’Brien Company’s outstanding common stock on January 1, for $796,500 in cash. O’Brien reported net assets with a carrying amount of $448,000 at that time. Some of O’Brien’s assets either were unrecorded (having been internally developed) or had fair values that differed from book values as follows: Book Values Fair Values Trademarks (indefinite life) $ 102,000 $ 299,000 Customer relationships (5-year remaining life) 0 96,600 Equipment (10-year remaining life) 359,000 329,000 Any goodwill is considered to have an indefinite life with no impairment charges during the year. Following are financial statements at the end of the first year for these two companies prepared from their separately maintained accounting systems. O’Brien declared and paid dividends in the same period. Credit balances are indicated by parentheses. Patrick O'Brien Revenues $ (1,815,000 ) $ (856,000 ) Cost of goods sold 484,000 396,000 Depreciation expense 104,100 95,400 Amortization expense 28,200 0 Income from O'Brien (348,280 ) 0 Net income $ (1,546,980 ) $ (364,600 ) Retained earnings 1/1 $ (764,000 ) $ (312,000 ) Net income (1,546,980 ) (364,600 ) Dividends declared 154,000 92,000 Retained earnings 12/31 $ (2,156,980 ) $ (584,600 ) Cash $ 238,000 $ 121,000 Receivables 322,000 68,400 Inventory 202,000 168,000 Investment in O'Brien 1,016,780 0 Trademarks 518,000 79,800 Customer relationships 0 0 Equipment (net) 944,000 276,000 Goodwill 0 0 Total assets $ 3,240,780 $ 713,200 Liabilities $ (683,800 ) $ (28,600 ) Common stock (400,000 ) (100,000 ) Retained earnings 12/31 (2,156,980 ) (584,600 ) Total liabilities and equity $ (3,240,780 ) $ (713,200 ) Which investment method did Patrick use to compute the $348,280 income from O'Brien? Determine the totals to be reported for this business combination for the year ending December 31. Verify the totals determined in part (b) by producing a consolidation worksheet for Patrick and O’Brien for the year ending December 31.

Wagner Company developed the following standard costs for its product for 2011:

Direct Materials - 4 pounds at $4.50 per pound
Direct Labor - 2 hours at $10.50 per hour

Based on their flexible budget, budgeted Manufacturing Overhead costs are $80,000 of fixed costs plus variable costs of $4 per direct labor hour. Normal capacity is set at 20,000 units of product OR 40,000 DIRECT LABOR HOURS. (20,000 units x 2 labor hours per unit)

Actual costs for 2011 were as follows:

a. 19,000 units of product were actually produced
b. Direct labor costs were $362,700 for 37,200 direct labor hours actually worked.
c. Actual direct materials purchased and used during the yeear cost $361,900 for 77,000 pounds.
d. Total actual manufcaturing overhead costs were $227,000.

Compute the following yearly variances for Wagner company for 2011 and indicate whether the variance is favorable (F) or unfavorable (U)

Use the following format for all variances: (Example: 1,000 U)

1. Direct Materials Price Variance

Compute the Direct Materials Quantity Variance

Compute the total Direct Materials Variance.

Compute the Direct Labor Price Variance

Compute the Direct Labor Quantity Variance

Compute the total Direct Labor Variance

Compute the Variable Overhead Controllable Variance

Compute the Fixed Overhead Volume Variance

Compute the total Manufacturing Overhead Variance

Compute the total cost variance and indicate if favorable or unfavorable.

The following selected transactions were completed during August between Summit Company and Beartooth Co.:

Part A:

A high quality of earnings is indicated by:

Part B:

The Horseshoe Company has cash of $50,000 accounts receivable of $100,000; inventory of $250,000, prepaid insurance of $200,000 and current liabilities of $300,000. What is their working capital?

Part C:

In evaluating the quality of a company's earnings, which of the following factors is LEAST important?

SCG makes wall units. For the year, the following details have been budgeted. Output, 10,000 units; factory overheads $1,250,000, of which 60% is variable. Each wall unit should take 2.5 hours of direct labor to produce. SCG produced 9,500 units with 24,000 DLH used and $1,175,000 actual overhead was incurred. Overhead is allocated based on direct labor hours (DLH). What is SCG's total overhead absorbed? $1,200,000 $1,187,500 $1,175,000 $1,250,000

What are the advantages and disadvantages of each of the periodic and perpetual inventory systems? Why?

Aaron Heath is seeking part-time employment while he attends school. He is considering purchasing technical equipment that will enable him to start a small training services company that will offer tutorial services over the Internet. Aaron expects demand for the service to grow rapidly in the first two years of operation as customers learn about the availability of the Internet assistance. Thereafter, he expects demand to stabilize. The following table presents the expected cash flows:

In addition to these cash flows, Aaron expects to pay $21,300 for the equipment. He also expects to pay $3,200 for a major overhaul and updating of the equipment at the end of the second year of operation. The equipment is expected to have a $1,300 salvage value and a four year useful life. Aaron desires to earn a rate of return of 9 percent. (PV of $1 and PVA of $1) (Use appropriate factor(s) from the tables provided.)

Required

1. Calculate the net present value of the investment opportunity. (Negative amount should be indicated by a minus sign. Round intermediate calculations and final answer to 2 decimal places.)

2. Indicate whether the investment opportunity is expected to earn a return that is above or below the desired rate of return and whether it should be accepted.