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?

Ivanhoe Corporation has collected the following information after its first year of sales. Sales were $1,600,000 on 100,000 units, selling expenses $220,000 (40% variable and 60% fixed), direct materials $510,000, direct labor $290,200, administrative expenses $278,000 (20% variable and 80% fixed), and manufacturing overhead $366,000 (70% variable and 30% fixed). Top management has asked you to do a CVP analysis so that it can make plans for the coming year. It has projected that unit sales will increase by 10% next year.

Compute (1) the contribution margin for the current year and the projected year, and (2) the fixed costs for the current year. (Assume that fixed costs will remain the same in the projected year.)

(1)       Contribution margin for current year       $
Contribution margin for projected year     $
(2)       Fixed Costs $

Compute the break-even point in units and sales dollars for the current year.

1) Break-even point in units units
2) Break-even point in dollars $

If the company meets its target net income number, by what percentage could its sales fall before it is operating at a loss? That is, what is its margin of safety ratio? (Round answer to 1 decimal place, e.g. 10.5.)

1) Margin of safety ratio %

The adjusted trial balance for Ivanhoe Company is given below.

Prepare the closing entries for the temporary accounts at August 31. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.)

List of Accounts

• Accounts Payable
• Accounts Receivable
• Accumulated Depreciation-Buildings
• Accumulated Depreciation-Equipment
• Advertising Expense
• Amortization Expense
• Buildings
• Cash
• Common Stock
• Depreciation Expense
• Dividends
• Equipment
• Income Summary
• Income Tax Expense
• Income Taxes Payable
• Insurance Expense
• Interest Expense
• Interest Payable
• Interest Receivable
• Interest Revenue
• Land
• Maintenance and Repairs Expense
• Mortgage Payable
• No Entry
• Notes Payable
• Prepaid Advertising
• Prepaid Cleaning
• Prepaid Insurance
• Prepaid Rent
• Property Tax Expense
• Property Taxes Payable
• Rent Expense
• Rent Revenue
• Retained Earnings
• Salaries and Wages Expense
• Salaries and Wages Payable
• Sales Revenue
• Service Revenue
• Supplies
• Supplies Expense
• Ticket Revenue
• Unearned Rent Revenue
• Unearned Sales Revenue
• Unearned Service Revenue
• Unearned Ticket Revenue
• Utilities Expense
• Website

Wasabi Pte Ltd makes separate journal entries for all cost accounting-related activities. It uses a standard costing system for all manufacturing items. For the month of April 2016, the following activities have taken place:

Actual Direct Manufacturing Materials Purchased $300,000
Direct Manufacturing Materials Used At Standard Price 250,000
Direct Materials Price Variance 10,000 Unfavourable
Direct Materials Efficiency Variance 15,000 Favourable
Direct Manufacturing Labour Rate Variance 6,000 Favourable
Direct Manufacturing Labour Efficiency Variance 4,000 Unfavourable
Direct Manufacturing Labour Payable 172,000

The estimated fixed overhead costs for 2016 is $324,000. The company uses direct labour hours for fixed overhead allocation and anticipates 10,800 hours during the year for 540,000 units. An equal number of units are budgeted for each month. During April 2016, 48,000 units were produced and $28,000 was spent on fixed overhead.

Required:

i. Describe how the above is tracked through the accounting system by posting the necessary journal entries to record all direct cost variances for the month.
ii. Calculate all fixed overhead variances for April 2016

Mahugh Corporation, which has only one product, has provided the following data concerning its most recent month of operations:

Required:

a. What is the unit product cost for the month under variable costing? (Do not round intermediate calculations.)

b.  What is the unit product cost for the month under absorption costing?

c.  Prepare a contribution format income statement for the month using variable costing.

d.  Prepare an income statement for the month using absorption costing.

e.  Reconcile the variable costing and absorption costing net operating incomes for the month

Cost of Production Report

Hana Coffee Company roasts and packs coffee beans. The process begins by placing coffee beans into the Roasting Department. From the Roasting Department, coffee beans are then transferred to the Packing Department. The following is a partial work in process account of the Roasting Department at July 31:

Required:

1. Prepare a cost of production report, and identify the missing amounts for Work in Process—Roasting Department. If an amount is zero, enter "0". When computing cost per equivalent units, round to two decimal places.

2. Assuming that the July 1 work in process inventory includes $8,330 of direct materials, determine the increase or decrease in the cost per equivalent unit for direct materials and conversion between February and July. If required, round your answers to the nearest cent.

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Straight-Line Depreciation

A building acquired at the beginning of the year at a cost of $85,300 has an estimated residual value of $3,300 and an estimated useful life of 10 years. Determine the following: