-Please review the the following case and answer the three questions .

.....................Motorola has sent G.I. Quick from the United States to an economically developing nation called Developia, to develop the market for a promising Motorola product, the new X-4 Chip. There are two other multinational companies in direct competition with Motorola for the Developian domestic chip market, namely Red Hotand Blue Lightning.

Quick in not only a fine manager but also a brilliant technologist. He has spent the better part of a year in the new host country and has made considerable progress. He knows that Motorola has a much better product to offer, and has made this persuasively clear to prospective local buyers. He is working especially hard to ensure that the top officials of a large Developian company, namely Supremo, Inc., will give a large order for X-4s to Motorola, rather than buy from Red Hot or Blue Lightning.

The fact is, though, that at present Supremo buys some products of this type from Motorola, some from Red Hot and some from Blue Lightning. The Ostensible reason for this is that Supremo wants to spread its business among three suppliers as a hedge against possible failure of supply – even though, according to rumor, it regards the X-4 as superior on all major counts. Still, G.I. persists in his dogged efforts to make Motorola Supremo’s sole supplier.

One day G.I is called in by Mal Diidh, Supremo’s vice president of purchasing. Mal tells G.I. that he is willing to cancel business with Red Hot and Blue Lightning, as he clearly sees that Motorola offers a better product. Then he adds a vague statement that G.I. has trouble interpreting, but which seems to mean that discreet, covert “friendship gifts” are a rather common business practice in Developia. Quick begins to suspect that Mal might have accepted under-the-table gifts from the two other companies. Slowly, subtly, Mal seems to indicate that if G.I. will provide a gift of about 8 percent of the sale price, Motorola will become his exclusive supplier. If Motorola refuses, however, he will keep the present Motorola contract at its existing level, but expand his business with Red Hot and Blue Lightning, who seem to “understand our Developian culture quite well.”

Please answer the following questions:

1.         What is the issue?

2.         What would you recommend that G.I. Quick do?

3.         Are there any risks to Motorola and Quick if he agreed to provide the friendship gift?

On February 1, 2018, Arrow Construction Company entered into a three-year construction contract to build a bridge for a price of $8,570,000. During 2018, costs of $2,190,000 were incurred with estimated costs of $4,190,000 yet to be incurred. Billings of $2,690,000 were sent, and cash collected was $2,440,000. In 2019, costs incurred were $2,690,000 with remaining costs estimated to be $3,885,000. 2019 billings were $2,940,000 and $2,665,000 cash was collected. The project was completed in 2020 after additional costs of $3,990,000 were incurred. The company’s fiscal year-end is December 31. Arrow recognizes revenue over time according to percentage of completion. Required: 1. Compute the amount of revenue and gross profit or loss to be recognized in 2018, 2019, and 2020 using the percentage of completion method? 2a. Prepare journal entries for 2018 to record the transactions described (credit "various accounts" for construction costs incurred). 2b. Prepare journal entries for 2019 to record the transactions described (credit "various accounts" for construction costs incurred). 3a. Prepare a partial balance sheet to show the presentation of the project as of December 31, 2018. 3b. Prepare a partial balance sheet to show the presentation of the project as of December 31, 2019.

Lewis Company's chart of accounts includes the following selected accounts.

On 1 June the accounts receivable ledger of Lewis Company showed the following balances: Bernard & Son $3 500, Festa Company $1 900, Grima Bros. $1 600, and Massis Company $1 300. The June transactions involving the receipt of cash were as follows.

Instructions
(a) Journalise the transactions above in a six-column cash receipts journal with columns for Cash Dr., Discounts Allowed Dr., Accounts Receivable Cr., Sales Cr., Other Accounts Cr., and Cost of Sales Dr./Inventory Cr. Foot and crossfoot the journal.

(b) Insert the beginning balances in the Accounts Receivable control and subsidiary accounts, and post the June transactions to these accounts.

Company Z has 2.55 million shares of common stock authorized with a par value of $1 and a market price of $61. There are 1.275 million outstanding shares and 0.31875 million shares held in treasury stock.

Required:

1. Prepare the journal entry if the company declares and distributes a 10% stock dividend.
2. Show the effect of the 10% stock dividend on assets, liabilities, and stockholders' equity.
3. Prepare the journal entry if the company declares and distributes a 100% stock dividend.
4. Show the effect of the 100% stock dividend on assets, liabilities, and stockholders' equity.

What are the different inventory accounts? What types of costs are factored into a retailer’s inventory accounts and what types of costs are factored into a manufacturer’ inventory accounts?

What factors might influence a company’s management selection of a one inventory cost flow assumption versus another?

Describe the situations in which the gross profit method of estimating inventory would be useful.

What does valuation imply and why is it particularly important to inventory? What special concerns should companies address as they valuate inventory?

Sharon Inc. is headquartered in State X and owns 100 percent of Carol Corp., Josey Corp., and Janice Corp., which form a single unitary group. Assume sales operations are within the solicitation bounds of Public Law 86-272. Each of the corporations has operations in the following states:

Compute the following for State X assuming a tax rate of 15 percent. (Use an equally weighted three-factor apportionment. Round all apportionment factors to 4 decimal places. Round other answers to the nearest whole dollar amount. Leave no answer blank. Enter zero if applicable.)

a. Calculate the State X apportionment factor for Sharon Inc., Carol Corp., Josey Corp., and Janice Corp.
b. Calculate the business income apportioned to State X.
c. Calculate the taxable income for State X for each company.
d. Determine the tax liability for State X for the entire group.

Kitchen Magician, Inc. has assembled the following data pertaining to its two most popular products.

Past experience has shown that the fixed manufacturing overhead component included in the cost per machine hour averages $27. Kitchen Magician’s management has a policy of filling all sales orders, even if it means purchasing units from outside suppliers.

Required:

1. If 80,000 machine hours are available, and management desires to follow an optimal strategy, how many units of each product should the firm manufacture? How many units of each product should be purchased?
2. With all other things constant, if management is able to reduce the direct material for an electric mixer to $22 per unit, how many units of each product should be manufactured? Purchased?

Dunlop Company purchased a machine on January 1, 2014, for $44,000,000. At the time the machine had an estimated useful life of 10 years and no residual value. On December 31, 2017, the accountant found that the entry for depreciation expense was omitted in 2015. The Board of Directors informed the accountant that the company plans to switch to straight line depreciation starting with the year 2017. The company presently uses the sum of the years’digits method. Prepare the general journals entries that should be made on December 31, 2017 to record these events. (Ignore tax effects)

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The balance sheet of the Jackson Company is presented below:

    Jackson Company Balance Sheet

    March 31, 2014

    (Millions of Dollars)

    Current assets     $12     Accounts payable     $6

    Fixed assets     18     Long-term debt     12

    Total     $30     Common equity     12

            Total     $30

For the year ending March 31, 2014, Jackson had sales of $35 million. The common stockholders received all net earnings of the firm in the form of cash dividends, leaving no funds from earnings available to the firm for expansion (assume that depreciation expense is just equal to the cost of replacing worn-out assets).

Construct a pro forma balance sheet for March 31, 2015 for an expected level of sales of $45 million. Assume current assets and accounts payable vary as a percent of sales, and fixed assets remain at the present level. Use notes payable as a source of discretionary financing.  (3 pts.)

4) Explain and give examples of spontaneous financing. (1 pt.)

5) Explain, giving examples, discretionary financing.  (1 pt.)

6) Explain the difference between operating lease and capital lease. (2 pts.)

7) Discuss 2 reasons why companies engage in mergers.  (2 pts.)

Mastery Problem: Activity-Based Costing

WoolCorp

WoolCorp buys sheep’s wool from farmers. The company began operations in January of this year, and is making decisions on product offerings, pricing, and vendors. The company is also examining its method of assigning overhead to products. You’ve just been hired as a production manager at WoolCorp.

Currently WoolCorp makes two products: (1) raw, clean wool to be used as stuffing or insulation and (2) wool yarn for use in the textile industry.

The company would like you to evaluate its costing methods for its raw wool and wool yarn.

Single Plantwide Rate

WoolCorp is currently using the single plantwide factory overhead rate method, which uses a predetermined overhead rate based on an estimated allocation base such as direct labor hours or machine hours. The rate is computed as follows:

Single Plantwide Factory Overhead Rate = (Total Budgeted Factory Overhead) ÷ (Total Budgeted Plantwide Allocation Base)

WoolCorp has been using combing machine hours as its allocation base.

The company would like to consider activity-based costing. In order to understand their current system better, you evaluate WoolCorp’s current method of costing for raw wool and wool yarn. The production staff has compiled the following information for you on the production of 550 pounds of either raw wool or wool yarn:

In the following table, use combing machine hours as the allocation base for assigning overhead costs to each product. When required, round your answers to the nearest dollar.

Single Plantwide Factory Overhead Rate: $ per combing hour

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Activity-Based Costing

In order to compare WoolCorp’s current method with activity-based costing, you interview the production staff and compile the following information, which relates to the costs for raw wool and wool yarn.

In the following table, compute and enter the activity rate for each of the three activities. If required, round your answers to the nearest cent.

In the following table, allocate the costs of sorting, cleaning, and combing based on the rates of activity consumed by each product’s process. When required, round your answers to the nearest dollar.

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Final Question

After reviewing your work on the Single Plantwide Rate and Activity-Based Costing panels, which of the costing method would you recommend to WoolCorp, and why?

Activity-based costing method, because it recognizes differences in how each product uses factory overhead activities, yielding more accurate product costs.

Edom Company, the lessor, enters into a lease with Davis Company to lease equipment to Davis beginning January 1, 2016. The lease terms, provisions, and related events are as follows:

Required:

Quick Fix Ltd is a manufacturing company engaged in the production of adhesives. The company has not performed well over the past three financial years.

In order to improve on the poor past profits, the board approved a R1 000 000 advertising promotion during the year ended 31 December 2018 in order to generate increased sales in the future. The advertising promotion took place (and was paid for) during December 2018.

The accountant insists on recognizing the R1 000 000 payment as an asset at 31 December 2018. His reasoning is that future sales will increase as the number of customers grows due to the advertising campaign.

Required:

Discuss whether you agree with the accountant, making reference to the framework. Provide an alternate treatment if you disagree.   (20)

Cherokee Inc. is a merchandiser that provided the following information:

Required:

1. Prepare a traditional income statement.

2. Prepare a contribution format income statement.

____8.  Which of the following is NOT a characteristic of bonds?

Secured bonds

Coupon bonds

Variable bonds

Serial bonds

All of these

____9.  The total interest expense associated with a bond issue is the sum of the actual

 interest payments:

Plus any related bond discount

Plus any related bond premium

Minus any related bond discount

Minus any related bond premium

Both A and D

___10.  The amount at which bonds payable should be shown on the balance sheet is their face value:

Plus any related un-amortized bond discount

Minus any related un-amortized bond discount

Plus any related un-amortized bond premium

Minus any related un-amortized bond premium

Both A and C