Two independent companies, Bayer and Monsanto are in the chemical and pharmaceutical industries. Each owns a piece of laboratory equipment used in research and development of new products, but each would like the other firm’s equipment. They agree to exchange the equipment. An appraiser was hired, and from her report and the companies' records, the following information was obtained: Bayer’s Equipment Monsanto's Equipment Cost $826,000 $460,000 Accumulated depreciation $250,000 $100,000 Fair value based upon appraisal $720,000 $630,000 The exchange was made and based on the difference in appraised fair values. Monsanto paid $90,000 to Bayer.

1 a Prepare the entries on both companies' books assuming the exchange had no commercial substance.

1 b Also prepare the journal entries on both companies’ books assuming the exchange had commercial substance.

Lance-Hefner Specialty Shoppes decided to use the dollar-value LIFO retail method to value its inventory. Accounting records provide the following information:

Related retail price indexes are as follows:

Required:

Ending inventory at retail:____

Ending inventory at cost:____

Cost of Goods sold:____

Mayfair Co. allows select customers to make purchases on credit. Its other customers can use either of two credit cards: Zisa or Access. Zisa deducts a 3.0% service charge for sales on its credit card. Access deducts a 2.0% service charge for sales on its card. Mayfair completes the following transactions in June.

Required:
Prepare journal entries to record the preceding transactions and events. (The company uses the perpetual inventory system.) (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your final answers to the nearest whole dollar.)

Kansas Instruments manufactures two models of pocket calculators. Per unit of the Basic model sells for $5.50, has direct material cost of $1.25 and requires 0.25 hours of labour to produce. Each calculator of the Scientist model sells for $7.50, has direct material cost of $1.63 and takes 0.375 hours to produce.

Each labour hour costs Kansas Instruments $6 and labour is currently very scarce, even though the demand for the company’s calculators is very high. The company is currently producing 8,000 Basic calculators and 4,000 Scientist calculators each month. Fixed costs per month amount to $24,000.

Kansas Instruments has received a request from an overseas potential customer to manufacture a batch of calculators made to specific requirements. The overseas customer is offering the company a contract worth $35,000 for this order. The production manager has estimated the following facts with respect to this special order:

• The labour time required for this contract would be 1,200 hours.
• The material cost would be $9,000 (excluding the cost of a special component not normally used by the company for manufacturing its regular calculators).
• The special components could either be purchased from a supplier for $2,500 or produced internally using materials that would cost $1,000 and additional labour time of 150 hours.

Required:

Advise the management of Kansas Instruments on the appropriate course of action.

Holl Corporation has provided the following data for November. Denominator level of activity 5,500 machine-hours Budgeted fixed manufacturing overhead costs $ 68,750 Standard machine-hours allowed for the actual output 5,800 machine-hours Actual fixed manufacturing overhead costs $ 67,650 Required: a. Compute the budget variance for November. b. Compute the volume variance for November. (Input all amounts as positive values.)

Budget Variance: ______ ______

Volume Variance: _______ _______

Decision support is defined as any combination of learning activities designed to facilitate the personal diagnosis, treatment, self-management, and cure of illness. Describe the scientific rationale for this Definition?

1. An aging schedule shows a required balance in Allowance for Doubtful Accounts of $9,500. If there is a credit balance in the allowance account of $3,500 prior to adjustment, the adjustment amount is $6,000.

True

False

2. The maturity value of a $5,000 note is $5,250. If $100 of the interest has been accrued prior to maturity, the entry at maturity should include a credit to Interest Income for $150.

True

False

3.  Allowance for Doubtful Accounts is an expense account, and its normal balance is debit.

True

False

4. The principal amount of a 12%, 3-year, note receivable is $300,000 and is dated January 1, 2017. The interest income to be recognized on December 31, 2017 is $12,000.

True

False

5.  When a non-current asset is disposed of before full depreciation, a loss occurs.

True

False

6. Cost of goods sold is the difference between cost of goods available for sale and ending inventory.

True

False

The following data pertaining to the cash transactions and bank account of Kim Company for September, Year 4, are available to you:
Cash balance per accounting records , Sep 30 Year 4                                                  Sh67,500
Cash balance per accounting bank statement, Sep 30 Year 4                                       308,383
Bank service charge for September                                                                                       1,100
Debit memo for printed cheques delivered by the bank                                                       300
Deposit of Sep 30 not recorded by bank until Oct 1                                                          48,700
Outstanding cheques, Sep 30, Year 4                                                                                   81,283
Proceeds of a bank loan on Sep 30 not recorded in the accounting records
( interest payable on maturity)                                                                                            300,000
Proceeds from Note Receivable , principal amount sh8,000                                              8,100
Cheque no 1012 to a creditor entered in the accounting records as sh 18,791;
Deducted in the bank statement in the correct amount                                                   17,891
Stolen cheque lacking an authorized signature deducted from Kim’s account in
Error                                                                                                                                            86,700
Cheque from a debtor returned by the bank marked NSF                                               12,600

Required:
Prepare a bank reconciliation as at September 30, Year 4
Prepare journal entry(ies) to adjust the accounting records

E10-5 Calculating Return on Investment, Residual Income, Determining Effect of Changes in Sales, Expenses, Invested Assets, Hurdle Rate on Each [LO 10-4, 10-5]

Solano Company has sales of $520,000, cost of goods sold of $380,000, other operating expenses of $51,000, average invested assets of $1,650,000, and a hurdle rate of 8 percent.


Required:
1. Determine Solano’s return on investment (ROI), investment turnover, profit margin, and residual income. (Do not round your intermediate calculations. Enter your ROI and Profit Margin percentage answer to the nearest 2 decimal places, (i.e., 0.1234 should be entered as 12.34%). Round your Investment Turnover answer to 4 decimal places.)

     

2. Several possible changes that Solano could face in the upcoming year follow. Determine each scenario’s impact on Solano’s ROI and residual income. (Note: Treat each scenario independently.) (Enter your ROI percentage answers to 2 decimal places, (i.e., 0.1234 should be entered as 12.34%.))

   a. Company sales and cost of goods sold increase by 40 percent.      

         
       
    b. Operating expenses decrease by $10,500.        
      
                

   c. Operating expenses increase by 20 percent.

                

    d. Average invested assets increase by $310,000.

                

    e. Solano changes its hurdle rate to 14 percent.

        

Minden Company is a wholesale distributor of premium European Chocolates. The Company’s balance sheet as of April 30th is given below:

The company is in the process of preparing a budget for May and has assembled the following data:

1. Sales are budgeted at $200,000 for May. Of these sales, $60,000 will be for cash; the remainder will be credit sales. One-half of a months credit sales are collected in the month the sales are made, and the remainder is collected in the following month. All of April 30 accounts receivable will be collected in May.

2. Purchases of Inventory are expected to total 120,000 during May. These purchases will all be on account. 40% of all purchases are paid for in the month of purchase; the remainder are paid the following month. All of the April 30 accounts payable to suppliers will be paid during May.

3. The May 31 inventory balance is budgeted at $40,000.

4. Selling and administrative expenses for May are budgeted at $72,000, exclusive of depreciation. These expenses will be paid in cash. Depreciation is budgeted at $2,000 for the month.

5. The note payable on the April 30th balance sheet will be paid during Mat, with $100 in interest. (All of the interest relates to May)  

6. New refrigerating equipment costing $6,500 will be purchased for cash during May.

7. During May, the company will borrow $20,000 from its bank by giving a new note payable to the bank for that amount. The new note will be due in one year.

Required:

1. Calculate the expected cash collections for May.

2. Calculate the expected cash disbursements for merchandise purchases for May.

3. Prepare a cash budget for May

4. Using Schedule 9 as your guide, prepare a budgeted income statement for May

5. Prepare a budgeted balance sheet as of May 31

On January 1, 2016, when its $30 par value common stock was selling for $80 per share, Metlock Corp. issued $11,700,000 of 8% convertible debentures due in 20 years. The conversion option allowed the holder of each $1,000 bond to convert the bond into five shares of the corporation’s common stock. The debentures were issued for $12,636,000. The present value of the bond payments at the time of issuance was $9,945,000, and the corporation believes the difference between the present value and the amount paid is attributable to the conversion feature. On January 1, 2017, the corporation’s $30 par value common stock was split 2 for 1, and the conversion rate for the bonds was adjusted accordingly. On January 1, 2018, when the corporation’s $15 par value common stock was selling for $135 per share, holders of 30% of the convertible debentures exercised their conversion options. The corporation uses the straight-line method for amortizing any bond discounts or premiums.

Prepare the entry to record the original issuance of the convertible debentures. Prepare the entry to record the exercise of the conversion option, using the book value method.

Weez Ltd is a GST registered retailer of widgets with monthly accounting periods. The following is the unadjusted trial balance at 28 February 2018, the end of the financial year. Important: the balances in the temporary accounts reflect February events only. No other account names are available in the General Ledger. Additional information follows the trial balance.

Weez Ltd

Unadjusted Trial Balance

28 February 2018

Additional Information:

1. The recoverable amount of the $20,000 of accounts receivable shown on the unadjusted trial balance is $18,000.
2. The investment in debentures pay interest quarterly at a 6% annual rate. The next interest payment date is 1 March 2018.
3. In October 2017, Weez Ltd prepaid its store rent for the entire year, effective the beginning of November 2017. The yearly rent is $31,050, including GST.
4. The computer equipment has a useful life of five years, a residual value of $1,000, and is being depreciated using the declining balance method at 2X the straight-line rate. The balance in Accumulated Depreciation represents three months of depreciation. (Weez Ltd calculates a 12 month block of depreciation and then apportions the expense monthly.)
5. Dividends of $5,000 were declared and paid to Weez Ltd shareholders in February.
6. The February payroll totals $32,000 for 20 days of work for that month. The 20 days include two days worked the end of February that will be paid in March. Included in the $32,000 is $8,000 of PAYE and other withholdings.
7. Weez Ltd uses the periodic inventory system and debits Inventory for all of its merchandise purchases. It then counts the inventory remaining at the end of each month and applies FIFO in order to calculate Cost of Goods Sold for the month. The $50,000 balance of Inventory on the trial balance (shown net of GST) consists of the following:

• Beginning inventory (as at 1 February 2018) of 2,000 widgets at $2 each;
• 6,000 units purchased at $3 each on 10 February;
• 10,000 units purchased at $2.50 each on 16 February;
• 1,000 units purchased at $3 each on 25 February.

An inventory count on 28 February showed that 1,500 widgets remained on hand.

8. The inventory count did not include the items shipped as the result of a 27 February sale of 500 widgets at $11.50 each, including GST, terms 2/10 net 30. Weez Ltd shipped the widgets on 28 February, FOB shipping point, to arrive at the buyer’s place of business in early March. Weez Ltd has not yet recorded the sale.
9. Weez Ltd offers a one year warranty and estimates that as at 28 February, the amount owing for the next 12 months is $30,000. GST does not apply to warranty work.
10. Income tax payable is estimated at 30% of pre-tax profit.

Required:

Prepare a Statement of Comprehensive Income for Weez Ltd for the month ending 28 February 2018

explain the relationship between the SEC and the various private sector standard setting bodies that have, over time, been relied upon to set accounting standards.

You have been asked to prepare a December cash budget for Ashton Company, a distributor of exercise equipment. The following information is available about the company’s operations: a.The cash balance on December 1 is $55,400. b.Actual sales for October and November and expected sales for December are as follows: October November December Cash sales $ 69,400 $ 88,400 $ 96,800 Sales on account $ 445,000 $ 596,000 $ 625,000 Sales on account are collected over a three-month period as follows: 20% collected in the month of sale, 60% collected in the month following sale, and 18% collected in the second month following sale. The remaining 2% is uncollectible. c.Purchases of inventory will total $340,000 for December. Thirty percent of a month’s inventory purchases are paid during the month of purchase. The accounts payable remaining from November’s inventory purchases total $173,500, all of which will be paid in December. d.Selling and administrative expenses are budgeted at $510,000 for December. Of this amount, $55,100 is for depreciation. e.A new web server for the Marketing Department costing $83,000 will be purchased for cash during December, and dividends totaling $18,500 will be paid during the month. f.The company maintains a minimum cash balance of $20,000. An open line of credit is available from the company’s bank to increase its cash balance as needed. Required: 1. Calculate the expected cash collections for December. 2. Calculate the expected cash disbursements for merchandise purchases for December. 3. Prepare a cash budget for December. Indicate in the financing section any borrowing that will be needed during the month. Assume that any interest will not be paid until the following month.

Problem)

Fraud Scheme - Purchasing Agent:

A purchasing agent for a large hardware retailer has sole discretion in selecting vendors for the parts and supplies sold by the company. The agent directs a disproportionate number of purchase orders to a supply company owned by the agent’s brother-in-law, which charges above-market prices for its products. The agent’s relationship with the supplier is unknown to his employer.

Required:

What type of fraud is this, and what controls can be implemented to prevent or detect the fraud?