P company owns 70% of the outstanding stock of S company. On January 1, 2011, S company sold land to P company for $280,000. S had originally purchased the land on March, 20, 2007, for $330,000.

P company plans to construct a building on the land bought from S in which it will house new production machinery. The estimated useful life of the building and the new machinery is 20 years.

To Solve: Prepare all journal entries for P and S (from initial purchase of land from 3rd parties to sale between the related parties). In addition, prepare the w/p entry to eliminate the intercompany sale of land.

Net Present Value-Unequal Lives

Daisy’s Creamery Inc. is considering one of two investment options. Option 1 is a $69,000 investment in new blending equipment that is expected to produce equal annual cash flows of $21,000 for each of seven years. Option 2 is a $79,000 investment in a new computer system that is expected to produce equal annual cash flows of $27,000 for each of five years. The residual value of the blending equipment at the end of the fifth year is estimated to be $14,000. The computer system has no expected residual value at the end of the fifth year.

Assume there is sufficient capital to fund only one of the projects. Determine which project should be selected, comparing the (a) net present values and (b) present value indices of the two projects, assuming a minimum rate of return of 12%. Use the present value tables appearing above.

a. Determine the net present values of the two projects.

b. Determine the present value indices of the two projects. If required, round the present value index to two decimal places.

Which project should be selected? (If both present value indices are the same, either project will grade as correct.)

“In my opinion, we ought to stop making our own drums and accept that outside supplier’s offer,” said Wim Niewindt, managing director of Antilles Refining, N.V., of Aruba. “At a price of $19 per drum, we would be paying $5.45 less than it costs us to manufacture the drums in our own plant. Since we use 85,000 drums a year, that would be an annual cost savings of $463,250.” Antilles Refining’s current cost to manufacture one drum is given below (based on 85,000 drums per year):

A decision about whether to make or buy the drums is especially important at this time because the equipment being used to make the drums is completely worn out and must be replaced. The choices facing the company are:

Alternative 1: Rent new equipment and continue to make the drums. The equipment would be rented for $255,000 per year.

Alternative 2: Purchase the drums from an outside supplier at $19 per drum.

The new equipment would be more efficient than the equipment that Antilles Refining has been using and, according to the manufacturer, would reduce direct labor and variable overhead costs by 30%. The old equipment has no resale value. Supervision cost ($85,000 per year) and direct materials cost per drum would not be affected by the new equipment. The new equipment’s capacity would be 125,000 drums per year.

The company’s total general company overhead would be unaffected by this decision.

Required:

1. Assuming that 85,000 drums are needed each year, what is the financial advantage (disadvantage) of buying the drums from an outside supplier?

2. Assuming that 100,000 drums are needed each year, what is the financial advantage (disadvantage) of buying the drums from an outside supplier?

3. Assuming that 125,000 drums are needed each year, what is the financial advantage (disadvantage) of buying the drums from an outside supplier?

Zachary Moran manages the cutting department of Greene Adams Company. He purchased a tree-cutting machine on January 1, 2018, for $500,000. The machine had an estimated useful life of 5 years and zero salvage value, and the cost to operate it is $104,000 per year. Technological developments resulted in the development of a more advanced machine available for purchase on January 1, 2019, that would allow a 20 percent reduction in operating costs. The new machine would cost $290,000 and have a 4-year useful life and zero salvage value. The current market value of the old machine on January 1, 2019, is $260,000, and its book value is $400,000 on that date. Straight-line depreciation is used for both machines. The company expects to generate $285,000 of revenue per year from the use of either machine.

Required

1. Recommend whether to replace the old machine on January 1, 2019.

2. Prepare income statements for four years (2019 through 2022) assuming that the old machine is retained.

3. Prepare income statements for four years (2019 through 2022) assuming that the old machine is replaced.

Will you show me a horizontal analysis of the assets portion of this comparative balance sheet?

Munoz Company is a retail company that specializes in selling outdoor camping equipment. The company is considering opening a new store on October 1, 2019. The company president formed a planning committee to prepare a master budget for the first three months of operation. As budget coordinator, you have been assigned the following tasks:

Required

1. October sales are estimated to be $400,000, of which 45 percent will be cash and 55 percent will be credit. The company expects sales to increase at the rate of 20 percent per month. Prepare a sales budget.

2. The company expects to collect 100 percent of the accounts receivable generated by credit sales in the month following the sale. Prepare a schedule of cash receipts.

3. The cost of goods sold is 70 percent of sales. The company desires to maintain a minimum ending inventory equal to 20 percent of the next month’s cost of goods sold. However, ending inventory of December is expected to be $13,900. Assume that all purchases are made on account. Prepare an inventory purchases budget.

4. The company pays 80 percent of accounts payable in the month of purchase and the remaining 20 percent in the following month. Prepare a cash payments budget for inventory purchases.

5. Budgeted selling and administrative expenses per month follow:

*The capital expenditures budget indicates that Munoz will spend $180,600 on October 1 for store fixtures, which are expected to have a $39,000 salvage value and a two-year (24-month) useful life.

Use this information to prepare a selling and administrative expenses budget.

6. Utilities and sales commissions are paid the month after they are incurred; all other expenses are paid in the month in which they are incurred. Prepare a cash payments budget for selling and administrative expenses.

7. Munoz borrows funds, in increments of $1,000, and repays them on the last day of the month. Repayments may be made in any amount available. The company also pays its vendors on the last day of the month. It pays interest of 2 percent per month in cash on the last day of the month. To be prudent, the company desires to maintain a $31,000 cash cushion. Prepare a cash budget.

8. Prepare a pro forma income statement for the quarter.

9. Prepare a pro forma balance sheet at the end of the quarter.

10. Prepare a pro forma statement of cash flows for the quarter.

Hygeia Health expects to sell 500 units of Product A and 400 units of Product B each day at an average price of $18 for Product A and $30 for Product B. The expected cost for Product A is 41​% of its selling price and the expected cost for Product B is 61​% of its selling price. Hygeia Health has no beginning​ inventory, but it wants to have a five−day supply of ending inventory for each product. Compute the budgeted cost of goods sold for the next ​(seven−​day) week.​ (Round the answer to the nearest​ dollar.)

A. 72,870

B. 105,000

C. 55,050

D. 77,070

Identify a company that has implemented, Lean and report a significant quantitative measure of improvement.

Identify a company that has implemented, Six Sigma and report a significant quantitative measure of improvement.

Identify a company that has implemented, Lean Six Sigma and report a significant quantitative measure of improvement.

E7-7 (Algo) Analyzing and Interpreting the Financial Statement Effects of LIFO and FIFO LO7-2, 7-3 Skip to question [The following information applies to the questions displayed below.] Emily Company uses a periodic inventory system. At the end of the annual accounting period, December 31 of the current year, the accounting records provided the following information for product 2: Units Unit Cost Inventory, December 31, prior year 2,800 $ 13 For the current year: Purchase, April 11 8,960 14 Purchase, June 1 7,850 19 Sales ($52 each) 10,960 Operating expenses (excluding income tax expense) $ 189,000 E7-7 Part 2 2. Compute the difference between the pretax income and the ending inventory amount for the two cases.

1) A business purchases equipment in exchange for a note payable. This transaction results in

A) a debit to Notes Payable and a credit to Equipment B) an increase in liabilities C) no journal entry because no cash has been paid D) a debit to Equipment and a credit to Accounts Payable

2) Accumulated Depreciation is a(n) ________ account and carries a normal ________ balance.

A) liability; credit B) revenue; debit C) contra asset; credit D) expense; debit

3) Anthony Delivery Service has a weekly payroll of $35,000. December 31 falls on Tuesday and Anthony will pay its employees the following Monday (January 6) for the previous full week. Assume that Anthony has a five-day workweek and has an unadjusted balance in Salaries Expense of $885,000 at December 31. What is the December 31 balance of Salaries Expense after adjusting entries are recorded and posted?

A) $920,000 B) $906,000 C) $899,000 D) $885,000

4) The balances of select accounts of McMurray, Inc. as of December 31, 2018 are given below:
Notes Payable Nshort-term $1,300 Salaries Payable 3,000 Notes Payable Nlong-term 24,000 Accounts Payable 3,300 Unearned Revenue 1,000 Interest Payable 2,400
The Unearned Revenue is the amount of cash received for services to be rendered in January 2019. Interest Payable will be paid on February 5, 2019. What are the total long-term liabilities shown on the balance sheet at December 31, 2018?

A) $4,300 B) $24,000 C) $1,300 D) $3,000

5) A merchandiser reports sales revenue of $25,000 and sales discounts forfeited of $1,500. The merchandiser uses a perpetual inventory system. The first entry in the closing process would include _____.

A) a debit to Income Summary for $25,000 B) a debit to Income Summary for $26,500 C) a credit to Income Summary for $26,500 D) a credit to Income Summary for $25,000

6) Which of the following inventory valuation methods should be used for unique items?

A) first-in, first-out B) weighted-average C) specific identification D) last-in, first-out

nswer the following questions:

1. The launch of a new product is under consideration. Its unit variable costs will be £30 and it is estimated that incremental fixed costs of £250,000 will be incurred if production is commenced. Forecast sales are 50,000 units. At what level of price for the new product will the organisation break even? If the actual planned selling price is £48 per unit, what will be the organisation’s margin of safety?
   
2. The following information is about two organisations, A and B.

• Which firm has higher operating gearing?
• What is the expected net income of both firms?
• What would expected net income be for both firms if sales were a) 140,000 units and b) 180,000 units?
• Which firm is facing more risk in terms of its current sales predictions?

Be sure to demonstrate your numerical workings.

The net income reported on the income statement of CamilloX Inc. for the current year was $150,000. Depreciation recorded on equipment and building amounted to $45,000 for the year.  Balances of the current asset and current liability accounts at the beginning and end of the year are as follows:

Prepare the cash flows from operating activities section of the statement of cash flows using the indirect method.

Safe Inc. is a service firm that sells home security systems, which it installs and maintains. After the sales force makes initial contact with a new customer and completes the sale, setting up the new service requires two processes: (1) a home visit where the equipment is physically installed and (2) the remote connection from off-site at corporate headquarters. Given the different levels of skill and work required, Safe Inc. tracks costs separately for the Installation and Connection processes. Nevertheless, given the relative simplicity of these processes, Safe Inc. tracks them both on a single product cost report with one direct materials category for the equipment and two conversion cost categories for installation and connection services. Assume that all home installations are completed the same day they are started. After installation, there is sometimes a delay of up to two days before the remote connection is completed. However, in the ideal situation, both the home installation and connection are completed on the same day. What is Safe Inc.’s ending Cost of Contracts Completed and Incomplete Contracts for July, assuming it uses the FIFO costing method? Page 2 * The sales team closed 2,050 new security contracts during July. * Safe Inc. pays its suppliers $400, on average, to purchase one security system. However, the price experiences some variation due to fluctuations in suppliers cost of raw materials. * On average, the installation of each system requires approximately 3 labor hours and establishing and testing the connection requires 2 labor hours. However, Safe Inc. does encounter some variation across employees. * Labor and overhead costs for installation is approximately $20/hour. * Labor and overhead costs for connection costs approximately $35/hour. * Assume that the contracts outstanding at the beginning of July include $1,206 for equipment and $179 of installation costs. * Also assume that Safe Inc. actually incurs $816,270 for new equipment installed during July plus $119,652 of installation costs and $147,825 of connection-related costs. * At the beginning of July, Safe Inc. had 95 incomplete sales contracts. Of these incomplete contracts, 92 were awaiting both installation and connection and 3 had been installed but were still awaiting connection. * At the end of July, Safe Inc. had 120 incomplete sales contracts. Of these incomplete contracts, 114 jobs were awaiting both installation and connection and 6 jobs had been installed but were still awaiting connection.

2019 (Adjustment a) Dec. 31 Uncollectible Accounts Expense 4,290.00 Allowance for Doubtful Accounts 4,290.00 To record estimated loss from Uncollectible accounts based on 0.6% of net credit sales, $715,000 (Adjustment b) 31 Supplies Expense 3,700.00 Supplies 3,700.00 To record supplies used during the year (Adjustment c) 31 Insurance Expense 1,050.00 Prepaid Insurance 1,050.00 To record expired insurance on 1-year $4,200 policy purchased on Oct. 1 (Adjustment d) 31 Depreciation. Exp.—Store Equipment 13,300.00 Accum. Depreciation—Store Equip. 13,300.00 To record depreciation (Adjustment e) 31 Salaries Expense—Office 1,800.00 Salaries Payable 1,800.00 To record accrued salaries for Dec. 29–31 (Adjustment f) 31 Payroll Taxes Expense 137.70 Social Security Tax Payable 111.60 Medicare Tax Payable 26.10 To record accrued payroll taxes on accrued salaries: social security, 6.2% × 1,800 = $111.60; Medicare, 1.45% × 1,800 = $26.10 (Adjustment g) 31 Interest Expense 100.00 Interest Payable 100.00 To record accrued interest on a 4-month, 6% trade note payable dated Nov. 1: $10,000 × 0.06 × 2/12 = $100.00 (Adjustment h) 31 Interest Receivable 234.00 Interest Income 234.00 To record interest earned on 6-month, 8% note receivable dated Oct. 1: $7,800 × 0.12 × 3/12 = $234.00

Examine the above adjusting entries and determine which ones should be reversed. Show the reversing entries that should be recorded in the general journal as of January 1, 2020. (Record the entries in the order given. Round your answers to 2 decimal places.

The children's department of a major department store had $615,000 in merchandise at the beginning of the year During the year, $836,000 purchases were made. Assuming the yearend inventory was $573,200, what is the cost of goods sold? What was the total amount of merchandise available for sale?

According to the results, compare and contrast the cost elements associated with a retailer (or service-based business) and a manufacturer? What additional product costs must be recognized within a manufacturer? What additional factors must be recognized by a company that uses a JIT inventory system?