Dorsey Co. has expanded its operations by purchasing a parcel of land with a building on it from Bibb Co. for $89,000. The appraised value of the land is $24,000, and the appraised value of the building is $102,000. information Required:

a. Assuming that the building is to be used in Dorsey Co.’s business activities, what cost should be recorded for the land? (Do not round intermediate calculations.)

b. Indicate why, for income tax purposes, management of Dorsey Co. would want as little of the purchase price as possible allocated to land. (Select all that apply.) Land is a current asset. Land is not a depreciable asset. Land value will not reduce taxable income. Land is a depreciable asset. Land value reduces taxable income.

c. Indicate why Dorsey Co. allocated the cost of assets acquired based on appraised values at the purchase date rather than on the original cost of the land and building to Bibb Co. Appraised values are to be used because they represent the historical asset value. Appraised values are to be used because they represent the book value. Appraised values are to be used because they represent the asset's current value.

d. Assuming that the building is demolished at a cost of $11,000 so the land can be used for employee parking, what cost should Dorsey Co. record for the land?

Cash

budget—Basic

  Grenoble Enterprises had sales of

$49,600 in March and

$60,200in April. Forecast sales for​ May, June, and July are

$69,800​,$80,200​,and

$ 99 comma 500$99,500​,

respectively. The firm has a cash balance of

$ 4 comma 500$4,500

on May 1 and wishes to maintain a minimum cash balance of

$ 4 comma 500$4,500.

Given the following​ data, prepare and interpret a cash budget for the months of​ May, June, and July.

​(1) The firm makes

22 %22%

of sales for​ cash,

61 %61%

are collected in the next​ month, and the remaining

17 %17%

are collected in the second month following sale.  

​(2) The firm receives other income of

$ 2 comma 500$2,500

per month.  

​(3) The​ firm's actual or expected​ purchases, all made for​ cash, are

$ 50 comma 400$50,400​,

$ 69 comma 500$69,500​,

and

$ 79 comma 600$79,600

for the months of May through​ July, respectively.  

​(4) Rent is

$ 3 comma 500$3,500

per month.  

​(5) Wages and salaries are

12 %12%

of the previous​ month's sales.  

​(6) Cash dividends of

$ 2 comma 600$2,600

will be paid in June.  

​(7) Payment of principal and interest of

$ 3 comma 800$3,800

is due in June.  

​(8) A cash purchase of equipment costing

$ 5 comma 700$5,700

is scheduled in July.  

​(9) Taxes of

$ 6 comma 500$6,500

are due in June.

E16-16.  

(EPS: Simple Capital Structure)

(LO 4) On January 1, 2018, Wilke Corp. had 480,000 shares of common stock outstanding. During 2018, it had the following transactions that affected the common stock account.

February 1	Issued 120,000 shares
March 1	Issued a 10% stock dividend
May 1	Acquired 100,000 shares of treasury stock
June 1	Issued a 3-for-1 stock split
October 1	Reissued 60,000 shares of treasury stock

Instructions

(a)  

Determine the weighted-average number of shares outstanding as of December 31, 2018.

(b)  

Assume that Wilke Corp. earned net income of $3,456,000 during 2018. In addition, it had 100,000 shares of 9%, $100 par nonconvertible, noncumulative preferred stock outstanding for the entire year. Because of liquidity considerations, however, the company did not declare and pay a preferred dividend in 2018. Compute earnings per share for 2018, using the weighted-average number of shares determined in part (a).

(c)  

Assume the same facts as in part (b), except that the preferred stock was cumulative. Compute earnings per share for 2018.

(d)  

Assume the same facts as in part (b), except that net income included a loss from discontinued operations of $432,000 (net of tax). Compute earnings per share for 2018.

please explain detail ( i know the answer but i don't understand)

The following data are accumulated by Eco Labs, Inc. in evaluating two competing capital investment proposals:

	Testing Equipment		Vehicle
Amount of investment	$56,000			$40,000
Useful life	4 years			5 years
Estimated residual value	0			0
Estimated total income over the useful life	$8,400			$10,500

Determine the expected average rate of return for each proposal. If required, round your answers to one decimal place.

Testing Equipment	%
Vehicle	%

2. TurboCard credit card company offers a loyalty program to its credit card users whereby the credit card company gives the credit card user points for amounts purchased from merchants when using the credit card. These points may be accumulated and redeemed for a number of different goods or services, including cash-back. TurboCard separately enters into arrangements with merchants under which the credit card company provides the financing for the transaction between the merchant and the credit card user, in return for which the credit card company receives a stated fee from the merchant. When the credit card user uses the credit card to make a purchase from a merchant, TurboCard honors its agreement with the merchant and advances the merchant the funding for the amount of the transaction after deducting the fee to which the credit card company is entitled. However, as a result of that transaction, TurboCard now also has an obligation to the credit card user to provide the specified number of points in the loyalty program.

Required:

a. How many performance obligations are involved in these activities?

b. Assuming there are two performance obligations, how would revenue be recognized?

c. Assuming there is only one performance obligation, how would revenue be recognized?

Henrietta is self-employed and would like to know what kind of deduction she could get for her home office. She has gross income from her business of $150,000. Her total home square footage is 2,500. The square footage of her office is 150. Total utilities $600. Total home mortgage interest $10,000. Total real estate taxes $4,000.

a. Explain to Henrietta the options for calculating the home office deduction. b. Based on the information provided what would be Henrietta’s deduction? c. What information should you discuss with Henrietta regarding the requirements of taking this deduction?

QUESTION THREE Sally has decided to go into business to make and sell organic, home-made playdough that is safe for children if they eat it. Business is going well and she incorporates the business, calling it Funtime Pty Ltd (‘Funtime’). Sally appoints herself as the Managing Director, and her husband Brad as a second director. To ensure her privacy, the registered office of the company is the address of her accountant’s firm (a common service the firm provides for its clients). Sally works out that she needs $50,000 to renovate her kitchen at home and buy equipment so that she can make industrial quantities of play dough; $10,000 to buy plastic tubs and labels; and $25,000 to launch a marketing campaign blitz. She tells her family she needs more than $85,000 in capital for the company to be successful in the longer term. Ten of her family members join as shareholders and she issues them each with $20,000 in ordinary shares. Sally is working more than full-time on this venture and draws up a contract to ensure she can earn a salary, at $100,000 per annum, to fairly compensate her for her labour. Sally enters into many contracts with suppliers to obtain supplies, including with Flashy Ltd (‘Flashy’) for $25,000 to purchase online advertising and brochures. Also, she enters into a contract with Glamour Designs Pty Ltd (‘Glamour Designs’) to completely renovate her kitchen (and bathroom) at a cost of $75,000 in three monthly instalments. She explains to representatives of both companies that she is authorised to sign the contracts on behalf of the company. Sally takes out a business loan of $50,000 from the Which Banking Group Ltd (‘WBG’) on behalf of Funtime. She does not disclose to the bank that she is drawing a wage from the company but does agree to secure the loan against Funtime's capital equipment and inventory. On the loan documents Sally signs her name and carefully forges Brad’s signature as he was out of town that day. After nine months in business, the money is almost gone, and Sally is finding it hard to make ends meet. She misses the second payment instalment with Glamour Designs, and is unable to pay a month later when a follow up notice arrives. On 1 October 2020, Sally receives a statutory demand addressed to Funtime from Glamour Designs requiring “immediate payment” for the works done to date on her home. The statutory demand was sent by post to Sally’s home address and is accompanied by a signed letter enclosing a copy of the contract, but there are no specific details of how much is owing on the demand itself. Sally is beside herself with worry, and is not sure how she can find the money to pay all of her creditors. She doesn’t want to worry Brad, as he has already explained that he finds the monthly directors’ meetings pointless. Brad simply agrees with whatever Sally wants to do and is fond of saying, “do whatever you like, this is your company not mine”. Also, with his full-time job working for Flashy, he never had time to read the documentation relating to quotes. Although he did thank Sally for providing business with Flashy, as his boss gave him a surprise $2,500 bonus for securing the work.

REQUIRED: Respond to the above case study problem and answer all questions. Refer to relevant cases and statutory law in your answers as appropriate.

a) Explain to Sally whether the loan contract between Funtime and WBG is legally enforceable.

b) Advise Sally about Funtime’s options in responding to the statutory demand issued by Glamour Designs.

c) Advise Sally whether she or Brad have breached their duties as company directors, and whether any valid defences apply. (Assume all events took place in 2020).

Holly Springs, Inc. contracted with Coldwater Corporation to have constructed a custom-made lathe. The machine was completed and ready for use on January 1, 2018. Holly Springs paid for the lathe by issuing a $220,000 note due in three years. Interest, specified at 2%, was payable annually on December 31 of each year. The cash market price of the lathe was unknown. It was determined by comparison with similar transactions for which 6% was a reasonable rate of interest. Holly Springs uses the effective interest method of amortization. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided. Round your intermediate and final answers to the nearest whole dollar.) Required: 1. Prepare the journal entry on January 1, 2018, for Holly Springs’ purchase of the lathe. 2. Prepare an amortization schedule for the three-year term of the note. 3. Prepare the journal entries to record (a) interest for each of the three years and (b) payment of the note at maturity.

Smoky Mountain Corporation makes two types of hiking boots—the Xtreme and the Pathfinder. Data concerning these two product lines appear below: Xtreme Pathfinder Selling price per unit $ 120.00 $ 87.00 Direct materials per unit $ 65.20 $ 51.00 Direct labor per unit $ 11.20 $ 8.00 Direct labor-hours per unit 1.4 DLHs 1.0 DLHs Estimated annual production and sales 30,000 units 65,000 units The company has a traditional costing system in which manufacturing overhead is applied to units based on direct labor-hours. Data concerning manufacturing overhead and direct labor-hours for the upcoming year appear below: Estimated total manufacturing overhead $ 2,033,000 Estimated total direct labor-hours 107,000 DLHs Required: 1. Compute the product margins for the Xtreme and the Pathfinder products under the company’s traditional costing system. 2. The company is considering replacing its traditional costing system with an activity-based costing system that would assign its manufacturing overhead to the following four activity cost pools (the Other cost pool includes organization-sustaining costs and idle capacity costs): Estimated Overhead Cost Expected Activity Activities and Activity Measures Xtreme Pathfinder Total Supporting direct labor (direct labor-hours) $ 631,300 42,000 65,000 107,000 Batch setups (setups) 876,000 410 320 730 Product sustaining (number of products) 460,000 1 1 2 Other 65,700 NA NA NA Total manufacturing overhead cost $ 2,033,000 Compute the product margins for the Xtreme and the Pathfinder products under the activity-based costing system. 3. Prepare a quantitative comparison of the traditional and activity-based cost assignments.

Two partnerships of A & B and C&D began business on Jan 1^st 2017; each partnership owns one retail appliance store. The two partnerships agree to combine as of April 1^st 2017 to form a new partnership, ABCD Discount Stores. The two businesses agreed upon the following points:

1. Profit and loss ratios.

	A	B	C	D
Old Business Ratios	40%	60%	30%	70%
New Business Ratios	20%	30%	15%	35%

2. Capital investments. The opening capital investments for the new partnership are to be in the same ratio as the profit and loss sharing ratios for the new partnership. If necessary, certain partners may have to contribute additional cash, and others may have to withdraw cash to bring the capital investments into the proper ratio.
3. Accounts receivable. The partners agreed to set the new partnership’s allowance for bad debts at 3% of the accounts receivable contributed by A&B and 12% of the accounts receivable contributed by C&D.
4. Inventory. The new partnership’s opening inventory is to be valued by the FIFO method. B&M used the FIFO method to value inventory (which approximates its current value), and A&J used the LIFO method. The LIFO inventory represents 85% of its FIFO value.
5. Property and equipment. The partners agree that the building’s current value is approximately 70% of the building’s historical cost, as recorded on each partnership’s books.
6. Unpaid liability. After each partnership’s books were closed on 31^st March 2017, an unrecorded merchandise purchase of $1,500 by A&B was discovered. The merchandise had been sold by 31^st March 2017.
7. The 31^st March 2017 post closing trial balances of the partnerships was as follow.

Account	A&B Balance – 31st March 2017		C&D Balance – 31st March 2017
Cash	25,000		22,000
Accounts Receivable	200,000		250,000
Allowance for doubtful accounts		4,000		15,000
Inventory	175,000		119,000
Building & Equipment	107,000		169,000
Accumulated Depreciation		24,000		61,000
Accounts Payable		140,000		160,000
Notes Payable		100,000		120,000
A’s Capital		95,000
B’s, Capital		144,000
C’s Capital				65,000
D’s Capital				139,000
Totals	507,000	507,000	560,000	560,000

Required:

1. Prepare the journal entries to record the initial capital contribution after considering the effect of this information. Use separate entries for each of the combining partnerships.
2. Prepare a schedule computing the cash contributed or withdrawn by each partner to bring the initial capital balances into the profit and los sharing ratio.

“If a person owns 80% of the shares in a company then they can make any changes they like to the company’s constitution.” REQUIRED: Critically discuss, stating whether you agree or disagree with the above

The cash account for American Medical Co. at April 30 indicated a balance of $334,985. The bank statement indicated a balance of $388,600 on April 30. Comparing the bank statement and the accompanying canceled checks and memos with the records revealed the following reconciling items:

A.	Checks outstanding totaled $61,280.
B.	A deposit of $42,500, representing receipts of April 30, had been made too late to appear on the bank statement.
C.	The bank collected $42,000 on a $40,000 note, including interest of $2,000.
D.	A check for $7,600 returned with the statement had been incorrectly recorded by American Medical Co. as $760. The check was for the payment of an obligation to Targhee Supply Co. for a purchase on account.
E.	A check drawn for $240 had been erroneously charged by the bank as $420.
F.	Bank service charges for April amounted to $145.

	Instructions
1.	Prepare a bank reconciliation. Refer to the Amount Descriptions list provided for the exact wording of the answer choices for text entries. “Deduct:” or “Add:” will automatically appear if it is required.
2.	Journalize the necessary entries. The accounts have not been closed. Refer to the Chart of Accounts for exact wording of account titles.
3.	If a balance sheet is prepared for American Medical Co. on April 30, what amount should be reported as cash?

home / study / business / accounting / accounting questions and answers / background you are an experienced audit manager at samway baker fitzgerald (sbf), an accounting ...

Question: Background You are an experienced audit manager at Samway Baker Fitzgerald (SBF), an accounting f...

Background

You are an experienced audit manager at Samway Baker Fitzgerald (SBF), an accounting firm with offices in Orange, Wagga Wagga, Tamworth, Port Macquarie and Albury in NSW, Toowoomba in Queensland and Ballarat in Victoria. In the next 18 months, you hope to be promoted to partner at the Orange office. Although a medium-sized firm by national standards, SBF includes Australia’s largest regionally-based auditing practice. Most of SBF’s audit clients are in the mining, manufacturing and agriculture industries. For various reasons all of those industries are currently under pressure: mining from a downturn in commodity prices, manufacturing from fierce overseas competition, and agriculture from a devastating drought that continues to grip Eastern Australia.

It is a cold Thursday evening in July 2019 and you are meeting with your audit team to finalise the 30 June 2019 year-end audit for Far Faraway Pastoral Limited (FFA), a major agricultural company based in Orange, listed on the Australian Stock Exchange (ASX), and one of SBF’s largest clients by fee revenue. During the meeting, three of your audit seniors each bring a potential issue to your attention.

Samantha Gabrielle was responsible for reviewing FFA’s corporate governance arrangements and reports that ‘at 30 June 2019 the board of FFA comprises: CEO Bruce Blanch, the CFO Alexandra Rose and three non-executive directors: Kevin Oliver (a former executive at Macquarie Bank who has an 11 percent shareholding in FFA and is Chair of the Board), Matthew James (a retired farmer who was a major supplier to FFA), and Jacqueline Grace (an Orange-based orthopaedic surgeon).’

Steve Barker was responsible for reviewing the revenue cycle and argues that ‘an ASIC report on their recent review of the financial statements of some major agricultural companies now means that FFA’s method for recognising revenues on its sale of cattle is very questionable’. In the 30 June 2019 financial year just ended, cattle sales constituted nearly 50% of all revenue recorded by FFA. Steve reports that he has already discussed the matter with the senior partner on the FFA audit, Skye Martin, who said that the method has been used for 10 years and that no adjustments to the 30 June 2019 financial statements were to be made. Steve reports that he then told Skye Martin he accepted her decision but wanted to include a dissenting statement in the audit working papers. She refused to permit such a statement in the working papers but offered to write a letter to you as the FFA audit manager acknowledging full responsibility for the 30 June 2019 audit. Steve alleges that as he left his meeting with Skye Martin, she made some negative comments about your chances of being promoted to partner in the near future.

Kate Hammond was responsible for reviewing the operations of an FFA subsidiary based in Western Australia (WA), called TRC, that sells rural and farm supplies. You are aware that whilst TRC is the market leader in WA and has a strong balance sheet, it was making losses for the past two years. During the previous financial year ended 30 June 2018, TRC significantly upgraded its accounting information system to more effectively manage inventory sales. TRC hired a well-regarded IT consultant to undertake the upgrade which was completed on 31 March 2018.

As SBF did not have offices in WA, you organised an independent expert based in Perth to review and evaluate the accounting information system. The independent expert concluded that the system appeared reliable and that the changeover was correctly carried out. At 30 June 2018 year-end, this new system had been in place for 3 months, and TRC management reported that they were happy with the way it was operating. In early 2019, given drought pressures on its core business in Eastern Australia, FFA accepted an offer from WA-based agricultural company McCarran Pastoral, who already owned 15% of TRC, to sell their remaining 85% interest to them. The agreed sale price was $45.8m, equivalent to FFA’s 85% share of TRC’s net assets. The sale was finalised on 15 April 2019, but half the sale price is not due to be paid until 15 August 2019, after the 30 June 2019 audit of FFA has been completed.

Kate reports that significant errors in the changeover of the accounting information system back in March 2018 have only just been discovered in July 2019, more than 15 months later. The errors resulted in the inventory at TRC stores being misstated by $16.6m and net assets by the same amount. As a result McCarran Pastoral is planning to withhold most of its remaining settlement payment to FFA, and FFA is planning to sue SBF for negligence for its loss of that payment.

Required:

Question  

What should you do in response to the information provided by Steve Barker? With reference to the Code of Ethics for Professional Accountants, use the following American Accounting Association (AAA) Model template to guide your answer:

American Accounting Association Model	Decision-making process
1. Determine the facts	The facts are ...
2. Define the ethical issues
3. Identify the major principles, rules, and values
4. Specify the alternatives
5. Compare values and alternatives
6. Assess the consequences
7. Make your decision

"Shareholders will always prefer a cash dividend to a share dividend while the company prefers the reverse". Why might this be the case?

(Think about the journal entry for both.)

Mercer Asbestos Removal Company removes potentially toxic asbestos insulation and related products from buildings. There has been a long-simmering dispute between the company’s estimator and the work supervisors. The on-site supervisors claim that the estimators do not adequately distinguish between routine work, such as removal of asbestos insulation around heating pipes in older homes, and nonroutine work, such as removing asbestos-contaminated ceiling plaster in industrial buildings. The on-site supervisors believe that nonroutine work is far more expensive than routine work and should bear higher customer charges. The estimator sums up his position in this way: “My job is to measure the area to be cleared of asbestos. As directed by top management, I simply multiply the square footage by $2.50 to determine the bid price. Since our average cost is only $2.01 per square foot, that leaves enough cushion to take care of the additional costs of nonroutine work that shows up. Besides, it is difficult to know what is routine or not routine until you actually start tearing things apart.” To shed light on this controversy, the company initiated an activity-based costing study of all of its costs. Data from the activity-based costing system follow: Activity Cost Pool Activity Measure Total Activity Removing asbestos Thousands of square feet 850 thousand square feet Estimating and job setup Number of jobs 400 jobs Working on nonroutine jobs Number of nonroutine jobs 100 nonroutine jobs Other (organization-sustaining costs and idle capacity costs) None Note: The 100 nonroutine jobs are included in the total of 400 jobs. Both nonroutine jobs and routine jobs require estimating and setup. Costs for the Year Wages and salaries $ 308,000 Disposal fees 706,000 Equipment depreciation 90,000 On-site supplies 50,000 Office expenses 210,000 Licensing and insurance 410,000 Total cost $ 1,774,000 Distribution of Resource Consumption Across Activities Removing Asbestos Estimating and Job Setup Working on Nonroutine Jobs Other Total Wages and salaries 60 % 10 % 20 % 10 % 100 % Disposal fees 70 % 0 % 30 % 0 % 100 % Equipment depreciation 40 % 5 % 25 % 30 % 100 % On-site supplies 70 % 20 % 10 % 0 % 100 % Office expenses 15 % 35 % 20 % 30 % 100 % Licensing and insurance 25 % 0 % 50 % 25 % 100 % Required: 1. Perform the first-stage allocation of costs to the activity cost pools. 2. Compute the activity rates for the activity cost pools. 3. Using the activity rates you have computed, determine the total cost and the average cost per thousand square feet of each of the following jobs according to the activity-based costing system. a. A routine 1,000-square-foot asbestos removal job. b. A routine 2,000-square-foot asbestos removal job. c. A nonroutine 2,000-square-foot asbestos removal job.