Computerised shipping documents

Fremantle Fisheries(FF) operates a fleet of fishing boat out of three ports in Western Australia– Fremantle, Bunbury and Geraldton. Each port has its own fishing fleet and all seafoodcaught is sold through the Fish Marketing Board, a board established by the stategovernment. The accounting procedures for all sales to the Board are centralised and handledby a computerised accounting system at FF’s head office in Perth. The majority of thecompany’s employees work on the fishing boats, and are paid bonuses from head office,depending on the volume, type and quality of seafood caught. This means that head officemust be able to identify the source of each shipment sent to the Board.John Dorey, who was originally based in Geraldton and handled the accounting procedures atGeraldton before computerisation, is now based in Perth as manager of the computerisedaccounting system. His father and two sisters are still based in Geraldton and work for thecompany on the fishing boats, as do many friends of the family.Shipping documents are sent to the Perth head office from all three ports, and the sources ofthe shipment is clearly marked in the top right-head corner of the documents. Occasionally,however, details of the source are missing, and it is not easy to trace the source quickly.Dorey, in his capacity as manager of the system, is keen to keep the system fully operationaland up to date, and has instructed the keyboard operator to insert any one of three Geraldtonsource codes, namely those of his father and two sisters, whenever the source code is missingfrom the shipping document. The keyboard operator knows that the codes given are thosebelonging to his boss’s family, but nevertheless complies with the request for fear that non-compliance may lead to his own dismissal.Required

A, who are the stakeholders in this situation?

B, what are the ethical issues involved here as a result of Dorey’s request and the action takenby the keyboard operator?

C. if you were the keyboard operator, what action (if any) would you take to prevent this situation occurring? Why?

Following are the individual financial statements for Gibson and Davis for the year ending December 31, 2018:

	Gibson				Davis
Sales	$	(847,000	)		$	(470,000	)
Cost of goods sold		390,000				207,000
Operating expenses		271,000				77,000
Dividend income		(24,000	)			0
Net income	$	(210,000	)		$	(186,000	)
Retained earnings, 1/1/18	$	(753,000	)		$	(491,000	)
Net income		(210,000	)			(186,000	)
Dividends declared		80,000				40,000
Retained earnings, 12/31/18	$	(883,000	)		$	(637,000	)
Cash and receivables	$	254,100			$	83,000
Inventory		544,000				310,000
Investment in Davis		603,900				0
Buildings (net)		536,000				680,000
Equipment (net)		408,000				445,000
Total assets	$	2,346,000			$	1,518,000
Liabilities	$	(833,000	)		$	(541,000	)
Common stock		(630,000	)			(340,000	)
Retained earnings, 12/31/18		(883,000	)			(637,000	)
Total liabilities and stockholders' equity	$	(2,346,000	)		$	(1,518,000	)

Gibson acquired 60 percent of Davis on April 1, 2018, for $603,900. On that date, equipment owned by Davis (with a five-year remaining life) was overvalued by $84,000. Also on that date, the fair value of the 40 percent noncontrolling interest was $402,600. Davis earned income evenly during the year but declared the $40,000 dividend on November 1, 2018.

1. Prepare a consolidated income statement for the year ending December 31, 2018.

2. Determine the consolidated balance for each of the following accounts as of December 31, 2018:

• Goodwill
• Equipment (net)
• Common stock
• Buildings (net)
• Dividends declared

Shearwater Council owns and operates an animal shelter that performs three services: housing and finding homes for stray and unwanted animals, providing health care and neutering services for the animals, and pet training services. One facility is dedicated to housing animals waiting to be adopted. A second facility houses veterinarian services. A third facility houses the director, his staff, and several dog trainers. This facility also has several large meeting rooms that are frequently used for classes given by the animal trainers. The trainers work with all of the animals to ensure that they are relatively easy to manage. They also provide dog obedience classes for adopting families.

Estimated annual costs for the animal shelter and its services are as follows:

Director and staff salaries $ 60 000

Animal shelter employees’ salaries 100 000

Veterinarians and technicians 150 000

Animal trainers 40 000

Food and supplies 125 000

Building-related costs 200 000

On average, 75 animals per day are housed at the facility or about 27 375 (75 × 365) animal days in total. In addition, the trainers offer about 125 classes during about 30 weeks throughout the year. On average, 10 families attend each class. Last year the veterinarian clinic experienced 5000 animal visits.

One of the director’s staff members just graduated from an accounting program and would like to set up an ABC system for the shelter so that the director can better understand the cost for each of the shelter’s services. He gathers the following information:

Square footage for each facility:

Animal shelter 5000 square feet

Director and training 3000 square feet

Veterinarian clinic 2000 square feet

Percentage of trainer time used in classes 50%

Supplies used for veterinarian services $75 000

REQUIRED:

A. Identify cost pools and assign costs to them, considering the three cost objects of interest.

B. Determine a cost driver for each cost pool and explain your choice.

C. Calculate the allocation rates for each cost pool and cost driver. Interpret the allocation rate for each cost pool (i.e., explain what it means).

arris Inc. had the following transactions:

1. On May 1, Harris purchased parts from a Japanese company for a U.S. dollar equivalent value of $6,200 to be paid on June 20. The exchange rates were

May 1	1 yen	=	$	0.0070
June 20	1 yen	=		0.0075

2. On July 1, Harris sold products to a Brazilian customer for a U.S. dollar equivalent of $10,400, to be received on August 10. Brazil’s local currency unit is the real. The exchange rates were

July 1	1 real	=	$	0.20
August 10	1 real	=		0.22

Required:
a. Assume that the two transactions are denominated in U.S. dollars. Prepare the entries required for the dates of the transactions and their settlement in U.S. dollars. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

b. Assume that the two transactions are denominated in the applicable local currency units of the foreign entities. Prepare the entries required for the dates of the transactions and their settlement in the local currency units of the Japanese company (yen) and the Brazilian customer (real). (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your intermediate calculations and final answers to nearest whole number.)

May	1	Paid rent for May, $5,000.
	3	Purchased merchandise on account from Martin Co., terms 2/10, n/30, FOB shipping point, $36,000.
	4	Paid freight on purchase of May 3, $600.
	6	Sold merchandise on account to Korman Co., terms 2/10, n/30, FOB shipping point, $68,500. The cost of the merchandise sold was $41,000.
	7	Received $22,300 cash from Halstad Co. on account.
	10	Sold merchandise for cash, $54,000. The cost of the merchandise sold was $32,000.
	13	Paid for merchandise purchased on May 3.
	15	Paid advertising expense for last half of May, $11,000.
	16	Received cash from sale of May 6.
	19	Purchased merchandise for cash, $18,700.
	19	Paid $33,450 to Buttons Co. on account.
	20	Paid Korman Co. a cash refund of $13,230 for returned merchandise from sale of May 6. The invoice amount of the returned merchandise was $13,500, and the cost of the returned merchandise was $8,000.

I've done May 1st-4th

You have been examining the books of a new client. Included on their previously unaudited financial statements was a balance of $299,032 for a long-term Patent as of 12/31/2017. When examining the ledger, you found these entries:

• An “acquisition” entry of $274,982:
• Legal costs incurred in the preparation of the application for the patent: $6,450 during 2016
• Leal costs incurred in successfully defending the validity of the patent: $17,600 during 2017

Bilboa Freightlines, S.A., of Panama, has a small truck that it uses for intracity deliveries. The truck is worn out and must be either overhauled or replaced with a new truck. The company has assembled the following information:

	Present Truck			New Truck
Purchase cost new	$	32,000		$	40,000
Remaining book value	$	19,000			-
Overhaul needed now	$	18,000			-
Annual cash operating costs	$	16,500		$	14,000
Salvage value-now	$	8,000			-
Salvage value-five years from now	$	7,000		$	6,000

    

If the company keeps and overhauls its present delivery truck, then the truck will be usable for five more years. If a new truck is purchased, it will be used for five years, after which it will be traded in on another truck. The new truck would be diesel-operated, resulting in a substantial reduction in annual operating costs, as shown above.

The company computes depreciation on a straight-line basis. All investment projects are evaluated using a 11% discount rate.

Click here to view Exhibit 13B-1 and Exhibit 13B-2, to determine the appropriate discount factor(s) using tables.

Required:

1. What is the net present value of the “keep the old truck” alternative?

2. What is the net present value of the “purchase the new truck” alternative?

3. Should Bilboa Freightlines keep the old truck or purchase the new one?

(Appendix 4B) Direct Method of Support Department Cost Allocation

Stevenson Company is divided into two operating divisions: Battery and Small Motors. The company allocates power and general factory costs to each operating division using the direct method. Power costs are allocated on the basis of the number of machine hours and general factory costs on the basis of square footage. Support department cost allocations using the direct method are based on the following data:

	Support Departments				Operating Divisions
	Power		General Factory		Battery		Small Motors
Overhead costs	$160,000		$430,000		$163,000		$84,600
Machine hours	2,000		2,000		7,000		3,000
Square footage	1,000		1,500		10,000		20,000
Direct labor hours					18,000		60,000

Required:

1. Calculate the allocation ratios for Power and General Factory. (Note: Carry these calculations out to four decimal places, if necessary.)

	Power	General Factory
Battery
Small Motors

2. Allocate the support service costs to the operating divisions. Round all amounts to the nearest dollar. Use a minus sign to indicate a subtraction. For those boxes in which no entry is required, leave the box blank or enter zero ("0").

Support Departments

Operating Divisions

Power

General Factory

Battery

Small Motors

Direct costs

$

$

$

$

Allocate:

Power

General Factory

Total

$

$

$

$

3. Assume divisional overhead rates are based on direct labor hours. Calculate the overhead rate for the Battery Division and for the Small Motors Division. Round your answers to the nearest cent.

Battery overhead rate	$
Small Motors overhead rate	$

PLEASE EXPLAIN STEP BY STEP. THANK YOU!

1. Target Costing

   Laser Impressions, Inc., manufactures color laser printers. Model J20 presently sells for $375 and has a total product cost of $300, as follows:

   Direct materials	$220
   Direct labor	60
   Factory overhead	20
   Total	$300

   It is estimated that the competitive selling price for color laser printers of this type will drop to $360 next year. Laser Impressions has established a target cost to maintain its historical markup percentage on product cost. Engineers have provided the following cost-reduction ideas:

   1. Purchase a plastic printer cover with snap-on assembly, rather than with screws. This will reduce the amount of direct labor by 9 minutes per unit.
   2. Add an inspection step that will add six minutes per unit of direct labor but reduce the materials cost by $8 per unit.
   3. Decrease the cycle time of the injection molding machine from four minutes to three minutes per part. Thirty percent of the direct labor and 45% of the factory overhead are related to running injection molding machines.

   The direct labor rate is $25 per hour.

   a. Determine the target cost for Model J20 assuming that the historical markup on product cost and selling price are maintained. Round your final answer to two decimal places.
   $

   b. Determine the required cost reduction. Enter as a positive number. Round your final answer to two decimal places.
   $

   c. Evaluate the three engineering improvements together to determine if the required cost reduction (drift) can be achieved. Enter all amounts as positive numbers. Do not round interim calculations but round your final answers to two decimal places.

   1. Direct labor reduction	$
   2. Additional inspection	$
   3. Injection molding productivity improvement	$
   Total savings	$

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Shaker Stairs Co. designs and builds factory-made premium wooden stairways for homes. The manufactured stairway components (spindles, risers, hangers, hand rails) permit installation of stairways of varying lengths and widths. All are of white oak wood. Budgeted manufacturing overhead costs for the year 2017 are as follows.

Overhead Cost Pools		Amount
Purchasing		$73,800
Handling materials		82,080
Production (cutting, milling, finishing)		211,000
Setting up machines		96,250
Inspecting		96,000
Inventory control (raw materials and finished goods)		127,680
Utilities		270,000
Total budgeted overhead costs		$956,810

For the last 4 years, Shaker Stairs Co. has been charging overhead to products on the basis of machine hours. For the year 2017, 100,000 machine hours are budgeted.

Jeremy Nolan, owner-manager of Shaker Stairs Co., recently directed his accountant, Bill Seagren, to implement the activity-based costing system that he has repeatedly proposed. At Jeremy Nolan’s request, Bill and the production foreman identify the following cost drivers and their usage for the previously budgeted overhead cost pools.

Activity Cost Pools		Cost Drivers		Expected Use of Cost Drivers
Purchasing		Number of orders		600
Handling materials		Number of moves		8,000
Production (cutting, milling, finishing)		Direct labor hours		100,000
Setting up machines		Number of setups		1,250
Inspecting		Number of inspections		6,000
Inventory control (raw materials and finished goods)		Number of components		168,000
Utilities		Square feet occupied		90,000

Steve Hannon, sales manager, has received an order for 250 stairways from Community Builders, Inc., a large housing development contractor. At Steve’s request, Bill prepares cost estimates for producing components for 250 stairways so Steve can submit a contract price per stairway to Community Builders. He accumulates the following data for the production of 250 stairways.

Direct materials		$103,700
Direct labor		$112,100
Machine hours		14,600
Direct labor hours		5,100
Number of purchase orders		60
Number of material moves		800
Number of machine setups		100
Number of inspections		450
Number of components		16,000
Number of square feet occupied		8,000

Compute the predetermined overhead rate using traditional costing with machine hours as the basis. (Round answer to 2 decimal places, e.g. 12.25.)

Predetermined overhead rate

$

per machine hour

What is the manufacturing cost per stairway under traditional costing? (Round answer to 2 decimal places, e.g. 12.25.)

Cost per stairway

$

Calculate activity-based overhead rate for each activity. (Round answers to 2 decimal places, e.g. 12.25.)

Activity		Overhead Rate
Purchasing		$	per order
Handling materials		$	per move
Production		$	per D/L hour
Setting up machines		$	per setup
Inspecting		$	per inspection
Inventory control		$	per component
Utilities		$	per sq. ft.

Caluclate total overhead assigned under ABC.

Total overhead assigned

$

What is the manufacturing cost per stairway under the proposed activity-based costing? (Round answer to 2 decimal places, e.g. 12.25.)

Total cost per stairway

$

On January 1, 2017, the Mount Rogers City water department leases a truck under a noncancelable lease agreement meeting the requirements for classification as a capital lease. The present value (8% interest) of the minimum lease payment is $45000, and the lease calls for five annual lease payments of $10435 every January 1, beginning in 2017. The leased truck has a five year life and no salvage. 1. Prepare journal entries for the first year of the lease. 2. How would the lease be reflected in the Statement of Cash Flows prepared for the enterprise fund for the year ending December 31, 2017?

Calculating EVA Brewster Company manufactures elderberry wine. Last year, Brewster earned operating income of $188,000 after income taxes. Capital employed equaled $2.6 million. Brewster is 45 percent equity and 55 percent 10-year bonds paying 7 percent interest. Brewster’s marginal tax rate is 40 percent. The company is considered a fairly risky investment and probably commands a 13-point premium above the 4 percent rate on long-term Treasury bonds. Jonathan Brewster’s aunts, Abby and Martha, have just retired, and Brewster is the new CEO of Brewster Company. He would like to improve EVA for the company. Compute EVA under each of the following independent scenarios that Brewster is considering. Required: Use a spreadsheet to perform your calculations and round all interim and percentage figures to four decimal places. If the EVA is negative, enter your answer as a negative amount. 1. No changes are made; calculate EVA using the original data. $ 2. Sugar will be used to replace another natural ingredient (atomic number 33) in the elderberry wine. This should not affect costs but will begin to affect the market assessment of Brewster Company, bringing the premium above long-term Treasury bills to 11 percent the first year and 8 percent the second year. Calculate revised EVA for both years. EVA Year 1 $ Year 2 $ 3. Brewster is considering expanding but needs additional capital. The company could borrow money, but it is considering selling more common stock, which would increase equity to 80 percent of total financing. Total capital employed would be $3,800,000. The new after-tax operating income would be $370,000. Using the original data, calculate EVA. Then, recalculate EVA assuming the materials substitution described in Requirement 2. New after-tax income will be $370,000, and in Year 1, the premium will be 11 percent above the long-term Treasury rate. In Year 2, it will be 8 percent above the long-term Treasury rate. (Hint: You will calculate three EVAs for this requirement.) EVA Year 1 $ Year 1 (11% premium) $ Year 2 (8% premium) $

Overhead Variances, Four-Variance Analysis, Journal Entries

Laughlin, Inc., uses a standard costing system. The predetermined overhead rates are calculated using practical capacity. Practical capacity for a year is defined as 1,000,000 units requiring 200,000 standard direct labor hours. Budgeted overhead for the year is $750,000, of which $300,000 is fixed overhead. During the year, 900,000 units were produced using 190,000 direct labor hours. Actual annual overhead costs totaled $800,000, of which $294,700 is fixed overhead.

Required:

1. Calculate the fixed overhead spending and volume variances.

Fixed Overhead Spending Variance	$	Favorable
Fixed Overhead Volume Variance	$	Favorable

2. Calculate the variable overhead spending and efficiency variances.

Variable Overhead Spending Variance	$	Unfavorable
Variable Overhead Efficiency Variance	$	Favorable

3. Prepare the journal entries that reflect the following:

1. Assignment of overhead to production
2. Recognition of the incurrence of actual overhead
3. Recognition of overhead variances
4. Closing out overhead variances, assuming they are not material

Note: Close the variances with a debit balance first. For compound entries, if an amount box does not require an entry, leave it blank or enter "0".

a.	Fixed Overhead Control
	Variable Overhead Control
	Miscellaneous Accounts
b.	Work in Process
	Fixed Overhead Control
	Variable Overhead Control
c.	Fixed Overhead Volume Variance
	Variable Overhead Spending Variance
	Variable Overhead Efficiency Variance
	Fixed Overhead Spending Variance
	Fixed Overhead Control
	Variable Overhead Control
d.	Cost of Goods Sold
	Fixed Overhead Spending Variance
	Variable Overhead Spending Variance
	Variable Overhead Efficiency Variance
	Fixed Overhead Spending Variance
	Cost of Goods Sold

interstate Manufacturing is considering either replacing one of its old machines with a new machine or having the old machine overhauled. Information about the two alternatives follows. Management requires a 10% rate of return on its investments. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.)

Alternative 1: Keep the old machine and have it overhauled. If the old machine is overhauled, it will be kept for another five years and then sold for its salvage value.

Cost of old machine	$	108,000
Cost of overhaul		156,000
Annual expected revenues generated		93,000
Annual cash operating costs after overhaul		37,000
Salvage value of old machine in 5 years		17,000

Alternative 2: Sell the old machine and buy a new one. The new machine is more efficient and will yield substantial operating cost savings with more product being produced and sold.

Cost of new machine	$	296,000
Salvage value of old machine now		45,000
Annual expected revenues generated		107,000
Annual cash operating costs		25,000
Salvage value of new machine in 5 years		11,000

1. What is treasury stock? Explain and discuss some of the reasons a corporation may purchase treasury stock.

2. What is a stock dividend? Describe and discuss reasons why a company would choose to give dividends in the form of stock rather than cash. In your response explain how issuance of a stock dividend affects the accounting records.