Albuquerque, Inc., acquired 36,000 shares of Marmon Company several years ago for $900,000. At the acquisition date, Marmon reported a book value of $980,000, and Albuquerque assessed the fair value of the noncontrolling interest at $100,000. Any excess of acquisition-date fair value over book value was assigned to broadcast licenses with indefinite lives. Since the acquisition date and until this point, Marmon has issued no additional shares. No impairment has been recognized for the broadcast licenses.

At the present time, Marmon reports $1,110,000 as total stockholders’ equity, which is broken down as follows:

Common stock ($11 par value)	$	440,000
Additional paid-in capital		460,000
Retained earnings		210,000
Total	$	1,110,000

View the following as independent situations:

1. a. & b. Marmon sells 8,000 and 5,000 shares of previously unissued common stock to the public for $30 and $20 per share. Albuquerque purchased none of this stock. What journal entry should Albuquerque make to recognize the impact of this stock transaction? (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round your intermediate calculations.)

During the year, Hepworth Company earned a net income of $59,225. Beginning and ending balances for the year for selected accounts are as follows:

	Account
	Beginning	Ending
Cash	$108,000	$125,600
Accounts receivable	66,600	99,150
Inventory	36,800	52,500
Prepaid expenses	27,200	29,400
Accumulated depreciation	81,900	92,500
Accounts payable	45,300	54,425
Wages payable	26,000	15,100

There were no financing or investing activities for the year. The above balances reflect all of the adjustments needed to adjust net income to operating cash flows.

Required:

1.	Prepare a schedule of operating cash flows using the indirect method.
2.	Suppose that all the data used in Requirement 1 except the ending accounts payable and cash balances are not known. Assume also that you know that the operating cash flow for the year was $20,075. What is the ending balance of accounts payable?
3.	Conceptual Connection: Hepworth has an opportunity to buy some equipment that will significantly increase productivity. The equipment costs $25,000. Assuming exactly the same data used for Requirement 1, can Hepworth buy the equipment using this year’s operating cash flows?

X

Amount Descriptions

Refer to the list below for the exact wording of an amount description within your Statement of Cash Flows.

Amount Descriptions
Decrease in accounts payable
Decrease in accounts receivable
Decrease in inventory
Decrease in wages payable
Depreciation expense
Increase in accounts payable
Increase in accounts receivable
Increase in inventory
Increase in wages payable
Net cash from operating activities
Net income
Net loss

X

Operating Cash Flows - Indirect Method

1. Prepare a schedule of operating cash flows using the indirect method. (Note: Use a minus sign to indicate any decreases in cash or cash outflows. Refer to the Amount Descriptions list provided for the exact wording of the answer choices for text entries.)

Hepworth Company

Schedule of Operating Cash Flows

1	Cash flows from operating activities:
2
3	Add (deduct) adjusting items:
4
5
6
7
8
9
10

Final questions

2. Suppose that all the data used in Requirement 1 except the ending accounts payable and cash balances are not known. Assume also that you know that the operating cash flow for the year was $20,075. What is the ending balance of accounts payable?

3. Conceptual Connection: Hepworth has an opportunity to buy some equipment that will significantly increase productivity. The equipment costs $25,000. Assuming exactly the same data used for Requirement 1, can Hepworth buy the equipment using this year’s operating cash flows?

The Sunbelt Corporation has $44 million of bonds outstanding that were issued at a coupon rate of 12.175 percent seven years ago. Interest rates have fallen to 11.50 percent. Mr. Heath, the Vice-President of Finance, does not expect rates to fall any further. The bonds have 18 years left to maturity, and Mr. Heath would like to refund the bonds with a new issue of equal amount also having 18 years to maturity. The Sunbelt Corporation has a tax rate of 36 percent. The underwriting cost on the old issue was 3.3 percent of the total bond value. The underwriting cost on the new issue will be 1.5 percent of the total bond value. The original bond indenture contained a five-year protection against a call, with a call premium of 8 percent starting in the sixth year and scheduled to decline by one-half percent each year thereafter (consider the bond to be seven years old for purposes of computing the premium). Use Appendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods. Assume the discount rate is equal to the aftertax cost of new debt rounded up to the nearest whole percent (e.g. 4.06 percent should be rounded up to 5 percent).

a. Compute the discount rate. (Do not round intermediate calculations. Input your answer as a percent rounded up to the nearest whole percent.)
Discount Rate:_____________

b. Calculate the present value of total outflows. (Do not round intermediate calculations and round your answer to 2 decimal places.)
PV of total outflows:_________

c. Calculate the present value of total inflows. (Do not round intermediate calculations and round your answer to 2 decimal places.)
PV of total inflows:_______

d. Calculate the net present value. (Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places.)
Net present value:_______
e. Should the Sunbelt Corporation refund the old issue?
Yes or No

Washington County’s Board of Representatives is considering the construction of a longer runway at the county airport. Currently, the airport can handle only private aircraft and small commuter jets. A new, long runway would enable the airport to handle the midsize jets used on many domestic flights. Data pertinent to the board’s decision appear below.

Cost of acquiring additional land for runway	$	78,000
Cost of runway construction		265,000
Cost of extending perimeter fence		50,270
Cost of runway lights		42,000
Annual cost of maintaining new runway		21,000
Annual incremental revenue from landing fees		50,000

In addition to the preceding data, two other facts are relevant to the decision. First, a longer runway will require a new snowplow, which will cost $165,000. The old snowplow could be sold now for $16,500. The new, larger plow will cost $14,000 more in annual operating costs. Second, the County Board of Representatives believes that the proposed long runway, and the major jet service it will bring to the county, will increase economic activity in the community. The board projects that the increased economic activity will result in $72,000 per year in additional tax revenue for the county.

In analyzing the runway proposal, the board has decided to use a 10-year time horizon. The county’s hurdle rate for capital projects is 11 percent.

Use Appendix A for your reference. (Use appropriate factor(s) from the tables provided.)

Required:

1. 1. Prepare a net-present-value analysis of the proposed long runway.

QUESTION ONE

1. Briefly explain the following types of errors:

(i) Error of commission                                                                                          

(ii) Error of principle                                                                                              

(iii) Complete reversal of entries                                                                             

(iv) Compensating errors                                                                                        

2. The trial balance of Amanda Ltd as at 30 April 2018 did not balance. On investigation, the following errors were discovered:
   1. A loan of Sh.2,000,000 from one of the directors has been correctly entered in the cashbook but posted to the wrong side of the loan account.
   2. The purchase of a motor vehicle on credit fro Sh.2,860,000 had been recorded by debiting the supplier’s account and crediting the motor expenses account.
   3. A cheque for Sh.80,000 from Ogola, a customer to whom goods are regularly supplied on credit, was correctly entered in the cashbook but was posted to the credit of bad debts recovered account in the mistaken belief that it was a receipt from Agola, a customer whose debt had been written off three years earlier.
   4. In reconciling the company’s cash book with the bank statement, it was found that bank charges of Sh.38,000 had not been entered in the company’s records.
   5. The totals of the cash discount columns in the cashbook for the month of April 2018 had not been posted to the respective discount accounts.

The figures were:

	Sh.
Discounts allowed	184,000
Discounts received	397,000

6. The company had purchased some plant on 1 March 2017 for Sh.1,600,000. The payment was correctly entered in the cashbook but was debited to the plant repairs account. Depreciation on such plant is provided for at the rate of 20% per annum on cost.

Required:

(i) Journal entries with narrations to correct the above errors.                                

(ii) Suspense accounts showing the original difference                                            

                                                                                                                        

1.Sweet Company’s outstanding stock consists of 2,000 shares of cumulative 4% preferred stock with a $100 par value and 11,000 shares of common stock with a $10 par value. During the first three years of operation, the corporation declared and paid the following total cash dividends.

Dividend Declared

Year 1 $ 3,000

Year 2 $ 7,000

Year 3 $ 37,000

The total amount of dividends paid to preferred and common shareholders over the three-year period is:

Multiple Choice

A.$24,000 preferred; $23,000 common.
B.$15,000 preferred; $32,000 common.
C.$8,000 preferred; $39,000 common.
D.$19,000 preferred; $28,000 common.
E.$16,000 preferred; $31,000 common.

2.Torino Company has 2,400 shares of $10 par value, 4.5% cumulative and nonparticipating preferred stock and 24,000 shares of $10 par value common stock outstanding. The company paid total cash dividends of $500 in its first year of operation. The cash dividend that must be paid to preferred stockholders in the second year before any dividend is paid to common stockholders is:

Multiple Choice

A.$1,660.
B.$580.

C.$2,160.

D$1,080.
E.$500.

3.Global Corporation had 41,000 shares of $20 par value common stock outstanding on July 1. Later that day the board of directors declared a 25% stock dividend when the market value of each share was $25. The entry to record the dividend declaration is:

Multiple Choice

A.Debit Retained Earnings $205,000; credit Common Stock Dividend Distributable $205,000.

B.Debit Retained Earnings $256,250; credit Common Stock Dividend Distributable $256,250.

C.Debit Retained Earnings $256,250; credit Common Stock Dividend Distributable $205,000; credit Paid-In Capital in Excess of Par Value, Common Stock $51,250.

D.Debit Retained Earnings $256,250; credit Cash $256,250.

E.No entry is made until the stock is issued.

4.A corporation issued 5,700 shares of $10 par value common stock in exchange for some land with a market value of $84,000. The entry to record this exchange is:

A.Debit Land $84,000; credit Common Stock $57,000; credit Paid-In Capital in Excess of Par Value, Common Stock $27,000.

B.Debit Land $84,000; credit Common Stock $84,000.

C.Debit Land $57,000; credit Common Stock $57,000.

D.Debit Common Stock $57,000; debit Paid-In Capital in Excess of Par Value, Common Stock $27,000; credit Land $84,000.

E.Debit Common Stock $84,000; credit Land $84,000.

5.A corporation declared and issued a 20% stock dividend on October 1. The following information was available immediately prior to the dividend:

Retained earnings $ 690,000

Shares issued and outstanding 54,000

Market value per share $ 21

Par value per share $ 5

The amount that contributed capital will increase (decrease) as a result of recording this stock dividend is:

Multiple Choice

A.$54,000.

B.$(54,000).

C.$0.

D.$226,800.

E.$(226,800).

Cost, volume, profit analysis identifies a transaction’s “contribution’ to fixed costs. Explain the meaning of ‘contribution’ and discuss the usefulness of such analysis in making business decisions. (limit 120 words)

Changes to Itemized Deduction

Tax reform that affects both individuals and businesses was enacted in December 2017. It’s commonly referred to as the Tax Cuts and Jobs Act, TCJA or simply tax reform. In addition to nearly doubling standard deductions, TCJA changed several itemized deductions that can be claimed on Schedule A, Itemized Deductions.

This means that many individuals who formerly itemized may now find it more beneficial to take the standard deduction. Taxpayers may only do one or the other. They either take the standard deduction or claim itemized deductions.

The tax reform law made the following changes to itemized deductions that can be claimed on Schedule A for 2018.

Limit on overall itemized deductions suspended.

The income-based phase-out of certain itemized deductions does not apply in 2018. This means that some taxpayers may be able to deduct more of their total itemized deductions if their deductions were limited in the past because their income was above certain levels.

Deduction for state and local income, sales and property taxes modified.

A taxpayer’s deduction for state and local income, sales and property taxes is limited to a combined, total deduction. The limit is $10,000 - $5,000 if married filing separately. Anything above this amount is not deductible.

New dollar limit on total qualified residence loan balance.

The date a taxpayer took out their mortgage or home equity loan may also impact the amount of interest they can deduct. If a taxpayer’s loan was originated or was treated as originating on or before Dec. 15, 2017, they may deduct interest on up to $1 million in qualifying debt, or $500,000 for taxpayers who are married filing separately, If the loan originated after that date, the taxpayer may only deduct interest on up to $750,000 in qualifying debt, or $375,000 for taxpayers who are married filing separately. The limits apply to the combined amount of loans used to buy, build or substantially improve the taxpayer’s main home and second home.

Deduction for home equity interest modified.

Interest paid on most home equity loans is not deductible unless the interest is paid on loan proceeds used to buy, build or substantially improve a main home or second home.

For example, interest on a home equity loan used to build an addition to an existing home is typically deductible, while interest on the same loan used to pay personal living expenses, such as credit card debts, is not.
As under prior law, the loan must be secured by the taxpayer’s main home or second home (known as a qualified residence), not exceed the cost of the home and meet other requirements.

Limit for charitable contributions modified.

The limit on the deduction for charitable contributions of cash has increased from 50 percent to 60 percent of a taxpayer’s adjusted gross income. This means that some taxpayers who make large donations to charity may be able to deduct more of what they give this year.

Deduction for casualty and theft losses modified.

A taxpayer’s net personal casualty and theft losses must now be attributable to a federally declared disaster to be deductible.

Miscellaneous itemized deductions suspended.

Previously, when a taxpayer itemized, they could deduct the amount of their miscellaneous itemized deductions that exceeded 2 percent of their adjusted gross income. These expenses are no longer deductible.

This includes unreimbursed employee expenses such as uniforms, union dues and the deduction for business-related meals, entertainment and travel. It also includes deductions for tax preparation fees and investment expenses, such as investment management fees, safe deposit box fees and investment expenses from pass-through entities.

Create an example in which a taxpayer would benefit from itemizing deductions instead of taking the standard deduction. In your example give us the taxpayer's filing status, AGI and list of deductions ( descriptions of the expense and the amount).

Smoky Mountain Corporation makes two types of hiking boots—Xtreme and the Pathfinder. Data concerning these two product lines appear below:

	Xtreme			Pathfinder
Selling price per unit	$	140.00			$	99.00
Direct materials per unit	$	72.00			$	53.00
Direct labor per unit	$	24.00			$	12.00
Direct labor-hours per unit		2.0	DLHs			1.0	DLHs
Estimated annual production and sales		20,000	units			80,000	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	$	1,980,000
Estimated total direct labor-hours		120,000		DLHs

Required:

1. Compute the product margins for the Xtreme and the Pathfinder products under the company’s traditional costing system. (Round your intermediate calculations to 2 decimal places.)

  

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				Activity
Activities and Activity Measures	Overhead Cost					Xtreme			Pathfinder			Total
Supporting direct labor (direct labor-hours)	$	783,600				40,000			80,000			120,000
Batch setups (setups)		495,000				200			100			300
Product sustaining (number of products)		602,400				1			1			2
Other		99,000				NA			NA			NA
Total manufacturing overhead cost	$	1,980,000

Compute the product margins for the Xtreme and the Pathfinder products under the activity-based costing system. (Negative product margins should be indicated with a minus sign. Round your intermediate calculations to 2 decimal places.)

3. Prepare a quantitative comparison of the traditional and activity-based cost assignments. (Do not round intermediate calculations. Round your "Percentage" answers to 1 decimal place. (i.e. .1234 should be entered as 12.3))

Chicago contractors got $5,400,000 contract to construct a school building for the City of Chicago. Work on this contract began in 2013 and the financial data pertaining to this contract is available here. Cost incurred till Dec.31, 2013 $1,080,000 Billings made to City $1,000,000 Amount collected from City $ 750,000 The estimated future cost to complete this contract is $3,240,000.

(a) Prepare Chicago contractors 2013 journal entries using COMPLETED CONTRACT method. (b) Show how the contract accounts will appear in the Balance Sheet of Chicago Contractors on 12/31/2013.

Illustrative Example: Retailer Ltd: Preparation of financial statements

Retailer Ltd, recorded the following transactions during the year:

Rm

Sales :57,959

Other non-current assets : 6,304

Cost of sales :55,033

Trade and other receivables: 1,607

Trade and other payables: 8,568

Administration expenses :1,860

Loans (due after one year) :10,711

Loans (due within one year): 2,826

Other current liabilities :7,901

Property, plant and equipment: 17,978

Goodwill :2,874

Finance income :29

Other current assets: 4,246

Cash :3,082

Share capital and premium :5,502

Pension liabilities :3,175

Finance costs :693

Taxation cost: 49

Inventories :2,430

Investments (long term) :1,920

Investments (short term) :3,463

Taxation payable: 419

Other non-current liabilities :1,688

Retained earnings :3,114

Using the information above you are asked to:

2. Prepare a balance sheet at the end of the year and calculate net assets (assets less liabilities) and equity

At the end of 2018, Terry Company prepared the following schedule of investments in available-for-sale debt securities:

Company	Amortized Cost	12/31/18 Fair Value	Cumulative Change in Fair Value
Morgan Company	$30,000	$29,200	$(800)
Nance Company	50,000	53,200	3,200
Totals	$80,000	$82,400	$2,400

During 2019, the following transactions occurred:

July 1	Purchased Oscar Company debt securities with a par value of 100,000 for $98,000. The securities carry an annual interest rate of 10%, mature on July 1, 2024, and pay interest seminannually on July 1 and December 31. Terry uses the straight-line method to amortize any discounts or premiums.
Oct. 11	Sold all of the Morgan Company securities for $28,000 plus interest of $1,400.
Dec. 31	Received interest of $6,000 on the Nance Company and Oscar Company debt securities, and the following yearend total market values were available: Nance Company debt securities, $54,000; Oscar Company debt securities, $96,000.

Required:

1.	Prepare journal entries to record the preceding information.
2.	Show how the preceding items are reported on Terry’s December 31, 2019, balance sheet. Assume all investments are noncurrent.

Aron Company makes computer screens, Model 1 and Model 2. Aron anticipates selling the screens as follows:

	Unit of	Units of
	Model 1	Model 2
Quarter ending 3/31	5,000	6,000
Quarter ending 6/30	4,500	5,500
Quarter ending 9/30	5,500	6,500
Quarter ending 12/31	6,000	7,000

The inventory on 1/1/18 is 2500 units of Model 1 and 3000 units of Model 2. Aron wants to have on hand 45% of the anticipated sales of the following month for each model. Prepare a production budget for the first 3 quarters of 2018 for both models.

1.USA is getting older. In retirement, do families have a higher or lower income than other parts of their life? So more retirees increases/decreases poverty?

2.Many lament the crumbling American family. Do single parent families experience more/less poverty? So more single parent families increases/decreases poverty?

3.Poverty is often counted by household. Typically are poor families smaller/bigger than wealthy ones?

4.If poverty were measured by person, would the poverty rate increase/decrease compared to measuring by households?

5.Poverty means low income, but are things provided to needy families in ways other than income- rather supplemented or not? Name some means for needy families other than income.

- Fixed assets costing $8,000 with a book value of $3,000 were sold for $6,000.

- Long term investments costing $5,000 were sold for $5,000.

-Redeemed $5,000 of the bond issuance.

- Sold stock___________.

-Paid dividends_________.

All other transactions involved cash.

Be certain you have accounted for all the changes in the account line items somewhere in your 3 areas of SCF (ex. Fixed Assets account went from $28K to $40k - we did not just buy $12K this year....)

2020     2019

Cash $30,000 $16,000

Acct Receivable 7,000                               5,000

Ppd Insurance 2,000 3,000

Inventory 13,000 11,000

L-T Investments 22,000                         27,000

Fixed Assets 40,000 28,000

Acc Depreciation 8,000                               6,000

Acct Payable 16,000                         14,000

Interest Payable 4,000                           ----000—

Taxes Payable 6,000 4,000

Bond Payable 20,000 25,000

Common Stock 21,000                         20,000

APIC 3,000                                      0

Retained Earnings 36,000                         21,000

Sales $120,000

-COGS   -   60,000

Gross Profit 60,000

- Operating Expenses   -   20,000  

Income from Operations 40,000

+/- Other

           Interest Expense -2,000

Gain on Sale of Equip +3,000        

Taxable Income 41,000

-Tax   -8,000

Net Income $33,000

Required: Prepare the Statement of Cash Flows for Operating, Investing and Financing using both the indirect and direct methods for Operating.