Gant Company purchased 20 percent of the outstanding shares of Temp Company for $71,000 on January 1, 20X6. The following results are reported for Temp Company:
  

  
Required:
Determine the amounts reported by Gant as income from its investment in Temp for each year and the balance in Gant’s investment in Temp at the end of each year assuming that Gant uses the following options in accounting for its investment in Temp:

A.Carries the investment at fair value.

B.Uses the equity method.

Do both methods for all three years

In the context of the world of business, explain what we mean by the term compliance. Relating to this, is anyone familiar with the Sarbanes-Oxley (SOX) legislation enacted by Congress in 2002? What was contained in this legislation, and what prompted it? Can you provide a specific example of one of the major points of this legislation? Why was it enacted? Separately, does the term compliance apply to any other areas of business besides the SOX legislation?

Port Company purchased 31,500 of the 105,000 outstanding shares of Sund Company common stock on January 1, 20X2, for $189,000. The purchase price was equal to the book value of the shares purchased. Sund reported the following:

Required:
Compute the amounts Port Company should report as the carrying values of its investment in Sund Company at December 31, 20X2, 20X3, and 20X4.

National Bank currently has $500 million in transaction deposits on its balance sheet. The current reserve requirement is 10 percent, but the Federal Reserve is decreasing this requirement to 8 percent.

Show the balance sheet of the Federal Reserve and National Bank if National Bank converts all excess reserves to loans, but borrowers return only 50 percent of these funds to National Bank as transaction deposits.

Show the balance sheet of the Federal Reserve and National Bank if National Bank converts 75 percent of its excess reserves to loans and borrowers return 60 percent of these funds to National Bank as transaction deposits.      

Mesa Company is authorized to issue 1,000,000 shares of its $5 par value common stock and 600,000 shares of its $10 par value preferred stock. During 2018 – its first year of business - the company earned $650,000 of net income and had the following select transactions. No dividends were declared or paid throughout the year. The net income and events below are the only ones that impact Stockholders’ Equity this year.

1. Issued 300,000 shares of common stock for $35 per share
2. Issued 100,000 shares of preferred stock for $55 per share
3. Reacquired 80,000 shares of common stock at $30 per shares
4. Reissued 20,000 shares from treasury for $33 per share
5. Reissued 10,000 shares from treasury for $35 per share
6. Reissued 20,000 shares from treasury for $25 per share
7. Reissued 5,000 shares from treasury for $27 per share

Required: Prepare journal entries OR a financial statements effects template to record the above transactions.

Transfer Pricing with Idle Capacity

Oriole, Inc., owns a number of food service companies. Two divisions are the Coffee Division and the Donut Shop Division. The Coffee Division purchases and roasts coffee beans for sale to supermarkets and specialty shops. The Donut Shop Division operates a chain of donut shops where the donuts are made on the premises. Coffee is an important item for sale along with the donuts and, to date, has been purchased from the Coffee Division. Company policy permits each manager the freedom to decide whether or not to buy or sell internally. Each divisional manager is evaluated on the basis of return on investment and residual income.

Recently, an outside supplier has offered to sell coffee beans, roasted and ground, to the Donut Shop Division for $4.30 per pound. Since the current price paid to the Coffee Division is $4.75 per pound, Ashleigh Tremont, the manager of the Donut Shop Division, was interested in the offer. However, before making the decision to switch to the outside supplier, she decided to approach Santigui Melendez, manager of the Coffee Division, to see if he wanted to offer an even better price. If not, then Ashleigh would buy from the outside supplier.

Upon receiving the information from Ashleigh about the outside offer, Santigui gathered the following information about the coffee:

^*Fixed overhead is based on $1,530,000 / 1,000,000 pounds.

Required:

1. Now, assume that the Coffee Division is currently selling 950,000 pounds. If no units are sold internally, total coffee sales will drop to 850,000 pounds. Suppose that Santigui refuses to lower the transfer price from $4.75 and the Donut Division purchases from the external supplier. Compute the effect on each division's profits and on the profits of the firm as a whole. Enter an increase in profits as a positive amount, and enter a decrease as a negative amount.

2. Refer to Requirement 1. What are the minimum and maximum transfer prices? Round your answers to the nearest cent.

Suppose that the transfer price is set at the maximum price less $1. Will the two divisions accept this transfer price?  

Compute the effect on the firm's profits and on each division's profits.

3. Suppose that the Coffee Division has operating assets of $2,000,000. Assume that the Coffee Division sells 850,000 pounds to outsiders and 100,000 pounds to the Donut Division at a price of $4.75 per pound. What is divisional ROI based on this situation? Enter your answer as a percentage, rounded to two decimal places. For example, the decimal value .03827 would be entered as "3.83" percent.
-----%

Now, refer to Requirement 2. What will divisional ROI be if the transfer price of the maximum price less $1 is implemented?
----- %

Each response should be about one paragraph long, describing the justification for your decision.

On October 1st, a customer orders a Roomba 980 robotic vacuum from iRobot. The product has a 14 day trial period, which begins on the date of delivery. If the customer does not want the product at the end of the trial period, he must return the product in its original packaging, in good condition, within 21 days of the delivery date, to receive a full refund. The Roomba 980 is delivered on October 5th. Are the revenue recognition criteria met or not met? Why or why not?

J. Lo’s Clothiers has forecast credit sales for the fourth quarter of the year:

Experience has shown that 35 percent of sales are collected in the month of sale, 65 percent are collected in the following month, and 0 percent are never collected.

Prepare a schedule of cash receipts for J. Lo’s Clothiers covering the fourth quarter (October through December).

Exercise 8-3 (Algo) Direct Materials Budget [LO8-4]

Two grams of musk oil are required for each bottle of Mink Caress, a very popular perfume made by a small company in western Siberia. The cost of the musk oil is $2.10 per gram. Budgeted production of Mink Caress is given below by quarters for Year 2 and for the first quarter of Year 3:

The inventory of musk oil at the end of a quarter must be equal to 20% of the following quarter’s production needs. Some 33,600 grams of musk oil will be on hand to start the first quarter of Year 2.

Required:

Prepare a direct materials budget for musk oil, by quarter and in total, for Year 2.

1. Geraldine Price, the manager of Household Products has asked Doreen Spencer to analyze the possibility of introducing a new product WS -500.   The product will have a useful life of six years after which the product will be replaced.

WS-500 will require special-purpose equipment costing $1,200,000. The useful life of the equipment is six years and an estimated terminal disposal price of $600,000.   The equipment qualifies for 25% CCA rate.

The product will be produced in a plant which is currently being leased to another business for $60,000 per year. The lease has 6 years remaining. The lease contains a cancellation clause whereby the landlord can obtain immediate possession of the premises upon payment of $42,000 cash.

The old plant has a book value of $300,000 and is being amortized for accounting purposes on a straight-line basis at $30,000 annually.

Certain nonrecurring market research studies and sales promotion activities will amount to a cost of $375,000 at the end of year 1. The entire amount is deductible in full for income tax purposes in the year expenditure.

Additions to working capital will require $260,000 at the outset and an additional $240,000 at the end of two years.

Net cash inflow from operations before amortization and income taxes is expected to be $480,000 in years 1 and 2, $720,000 in years 3 to 5, and $400,000 in year 6.

Tax rate is 25% and cost of capital is 16%

Required:

1. Recommend if Household Products recommend launching WS-500?

Home Depot sells a washer and dryer for $1,600 on April 1st. After successful completion of a credit check, the customer makes a down payment of $280 cash and agrees to pay an additional $110 per month for the next 12 months. The washer and dryer are delivered and installed on April 6th. Are the revenue recognition criteria met or not met? Why or why not?

Each response should be about one paragraph long, describing the justification for your decision.

Lavage Rapide is a Canadian company that owns and operates a large automatic car wash facility near Montreal. The following table provides data concerning the company’s costs: Fixed Cost per Month Cost per Car Washed Cleaning supplies $ 0.40 Electricity $ 1,300 $ 0.07 Maintenance $ 0.15 Wages and salaries $ 4,300 $ 0.20 Depreciation $ 8,100 Rent $ 1,800 Administrative expenses $ 1,600 $ 0.03 For example, electricity costs are $1,300 per month plus $0.07 per car washed. The company expects to wash 8,200 cars in August and to collect an average of $6.20 per car washed. The actual operating results for August appear below.

he actual operating results for August appear below.

Required:

Prepare a flexible budget performance report that shows the company’s revenue and spending variances and activity variances for August. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)

If a partner is contributing attributes to a partnership such as established clientele or a particular expertise, what methods can be used to record the contribution? Why did you choose this method? Provide examples of the journal entries you would use. Comment on your classmates choices.

stanmore Corporation makes a special purpose machine d4h using the textile industry stanmore has designed the d4h machine for 2017 to be distinct from its competitors it has been generally regarded as a superior machine stanmore presents the following data for 2016 and 2017

Is Stanmore's strategy one of product differentiation or cost leadership? explain briefly

What is the independence standard? Why is it important that users perceive auditors to be independent? Can an auditor be independent in fact, but not in appearance? Explain.