Case Inc. is a construction company specializing in custom patios. The patios are constructed of concrete, brick, fiberglass, and lumber, depending upon customer preference. On June 1, 2020, the general ledger for Case Inc. contains the following data. Raw Materials Inventory $3,800 Manufacturing Overhead Applied $34,900 Work in Process Inventory $5,775 Manufacturing Overhead Incurred $30,800 Subsidiary data for Work in Process Inventory on June 1 are as follows. Job Cost Sheets Customer Job Cost Element Rodgers Stevens Linton Direct materials $700 $700 $1,000 Direct labor 300 600 600 Manufacturing overhead 375 750 750 $1,375 $2,050 $2,350 During June, raw materials purchased on account were $5,100, and all wages were paid. Additional overhead costs consisted of depreciation on equipment $900 and miscellaneous costs of $400 incurred on account. A summary of materials requisition slips and time tickets for June shows the following. Customer Job Materials Requisition Slips Time Tickets Rodgers $700 $900 Koss 2,200 800 Stevens 500 300 Linton 1,400 1,200 Rodgers 300 300 5,100 3,500 General use 1,600 1,200 $6,700 $4,700 Overhead was charged to jobs at the same rate of $1.25 per dollar of direct labor cost. The patios for customers Rodgers, Stevens, and Linton were completed during June and sold for a total of $20,600. Each customer paid in full. (a) Journalize the June transactions: (1) for purchase of raw materials, factory labor costs incurred, and manufacturing overhead costs incurred; (2) assignment of direct materials, labor, and overhead to production; and (3) completion of jobs and sale of goods. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) No. Account Titles and Explanation Debit Credit (1) di (To record purchase of raw materials) (To record factory labor costs paid) (To record manufacturing overhead costs incurred) (2) (To record assignment of direct materials) (To record assignment of factory labor) (To record assignment of manufacturing overhead) (3) (To record completion of jobs) (To record sale of goods) (To record the cost of goods sold) List of Accounts

Exercise 11-6 Martinez Company purchased equipment for $270,000 on October 1, 2017. It is estimated that the equipment will have a useful life of 8 years and a salvage value of $15,000. Estimated production is 40,800 units and estimated working hours are 19,700. During 2017, Martinez uses the equipment for 520 hours and the equipment produces 1,000 units. Compute depreciation expense under each of the following methods. Martinez is on a calendar-year basis ending December 31. (Round rate per hour and rate per unit to 2 decimal places, e.g. 5.35 and final answers to 0 decimal places, e.g. 45,892.) (a) Straight-line method for 2017 $ (b) Activity method (units of output) for 2017 $ (c) Activity method (working hours) for 2017 $ (d) Sum-of-the-years'-digits method for 2019 $ (e) Double-declining-balance method for 2018 $

Carlsville Company, which began operations in 2017, invests its idle cash in trading securities. The following transactions are from its short-term investments in trading securities. 2017 Jan. 20 Purchased 1,000 shares of Ford Motor Co. at $27 per share plus a $130 commission. Feb. 9 Purchased 2,500 shares of Lucent at $38 per share plus a $195 commission. Oct. 12 Purchased 800 shares of Z-Seven at $8.10 per share plus a $95 commission. Dec. 31 Fair value of the short-term investments in trading securities is $133,700. 2018 Apr. 15 Sold 1,000 shares of Ford Motor Co. at $30 per share less a $290 commission. July 5 Sold 800 shares of Z-Seven at $10.75 per share less a $100 commission. July 22 Purchased 1,700 shares of Hunt Corp. at $33 per share plus a $225 commission. Aug. 19 Purchased 1,900 shares of Donna Karan at $44.00 per share plus a $105 commission. Dec. 31 Fair value of the short-term investments in trading securities is $232,225. 2019 Feb. 27 Purchased 3,700 shares of HCA at $35 per share plus a $430 commission. Mar. 3 Sold 1,700 shares of Hunt at $28 per share less a $125 commission. June 21 Sold 2,500 shares of Lucent at $35.75 per share less a $37 commission. June 30 Purchased 1,300 shares of Black & Decker at $47.50 per share plus a $595 commission. Nov. 1 Sold 1,900 shares of Donna Karan at $44.00 per share less a $124 commission. Dec. 31 Fair value of the short-term investments in trading securities is $199,900. Required: Prepare journal entries to record these short-term investment activities for the years shown. On December 31 of each year, prepare the adjusting entry to record any necessary fair value adjustment for the portfolio of trading securities.

1) Cooper and Morton​, LLP, a law​ firm, is considering the replacement of its old accounting system with new software that should save $19,000 per year in net cash operating costs. The old system has zero disposal​ value, but it could be used for the next 12 years. The estimated useful life of the new software is 12 years with zero salvage​ value, and it will cost $190,000. The required rate of return is 14​%.

Requirements:

Identify the special challenge that small organizations face when implementing effective internal control systems.

You are required to research on globalisation and convergence of the IASB Conceptual framework and FASB GAAP. Provide at least 7 literature review of articles that has explored in the same area. Word limit is 1500 - 2000 words.

Northern Lights Company manufacture recreated painting products in a highly automated assembly plant in Yukon, North West Territories. Their automated system is in its first year of operation, and management is still unsure of the best way to estimate the overhead costs of operations for budgetary purposes. For the first six months of operations the following data were collected:

Required:

1) Compute a cost estimating equation for each independent variable (machine-hours and kilowatt-hours) using the high-low method.

2) For July the company ran the machines for 1,600 hours and used 2,075,000 kilowatt hours of power. The overhead costs totaled $95,000. Which driver was the best predictor for July?

On January 1, 2017, Buffalo Company purchased $290,000, 6% bonds of Aguirre Co. for $266,477. The bonds were purchased to yield 8% interest. Interest is payable semiannually on July 1 and January 1. The bonds mature on January 1, 2022. Buffalo Company uses the effective-interest method to amortize discount or premium. On January 1, 2019, Buffalo Company sold the bonds for $267,985 after receiving interest to meet its liquidity needs.

(Round answers to 0 decimal places, e.g. 2,500. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

You have just been hired by FAB Corporation, the manufacturer of a revolutionary new garage door opening device. The president has asked that you review the company’s costing system and “do what you can to help us get better control of our manufacturing overhead costs.” You find that the company has never used a flexible budget, and you suggest that preparing such a budget would be an excellent first step in overhead planning and control.

After much effort and analysis, you determined the following cost formulas and gathered the following actual cost data for March:

During March, the company worked 13,000 machine-hours and produced 7,000 units. The company had originally planned to work 15,000 machine-hours during March.

Required:

1. Calculate the activity variances for March.

2. Calculate the spending variances for March.

Sheridan Corporation manufactures car stereos. It is a division of Bonita Motors, which manufactures vehicles. Sheridan sells car stereos to Bonita, as well as to other vehicle manufacturers and retail stores. The following information is available for Sheridan's standard unit: variable cost per unit $41, fixed cost per unit $19, and selling price to outside customer $79. Bonita currently purchases a standard unit from an outside supplier for $73. Because of quality concerns and to ensure a reliable supply, the top management of Bonita has ordered Sheridan to provide 183,000 units per year at a transfer price of $39 per unit. Sheridan is already operating at full capacity. Sheridan can avoid $3 per unit of variable selling costs by selling the unit internally.

a) What is the minimum transfer price that Sheridan should accept?

b) What is the potential loss to the corporation as a whole resulting from this forced transfer?

Welsh Meds Plc Mini Case

Welsh Meds Plc is a small but rapidly growing biotechnology company in Cardiff with annual revenues of £115 million. Last year’s net income was £6.38 million. Founded in 2002 by Carwyn Thomas and Geraint Jones with the support of a venture capitalist, the firm’s success has been remarkable. After a three year development phase, thecompany’s breakthrough was brought about by a drug called Enzyme Shield that was designed to treat immune system deficiencies (ISD). To fund the substantial increase in production capacity, which the owners decided should remain in-house, Carwyn and Geraint took Welsh Meds public, thereby taking advantage of the favorable stock market conditions of 2006. By issuing 2.8 million shares at £19, £53.2 million of equity were raised. Two years ago, Welsh Meds made its first annual dividend payment of £0.40 which increased by 15% last year. Ten months ago, the company received the Drug Administration Authority’s approval the mass market Enzyme Shield Light, a derivative of its first drug was specifically targets ISD in younger children. As a result, last quarter company earnings are up 37%, compared to the previous quarter. Carwyn and Geraint are very optimistic about Welsh Meds’ future and wonder if it is time to reward its shareholders with either a special one-time dividend of £2.50 or an increase of the annual dividend by £1.00. William Stewart, the company’s CFO, however, suggests using half of the accumulated cash of £12 million to initiate a buy back. In addition, Mr. Stewart would like to reduce the company’s debt by 4 million, thereby maintaining a cash reserve of only £2 million. Recovering from the global financial crisis when shares of Welsh Med fell by more than half, its current share price £17.38 is still, down 32% from its peak £25.55 of summer 2007. However, Carwyn and Geraint are very optimistic that the economic recovery will continue and that their company’s share price will reach new highs within the next 2–3 years.

QUESTIONS

1. Do you think it was prudent to initiate annual dividend payments only 3 years after the IPO?

2. If a special one-time dividend was paid, how would it likely affect Welsh Meds’ share price?

3. Would the share price reaction be different if the annual dividend was raised by £1.00 instead?

4. What is the current dividend payout ratio and how would it change if the annual dividend was raised by £1.00?

5. Based on the current share price of £17.63, determine the company’s implied cost of capital according to the dividend discount model (DDM).

6. What do you think about the owner’s optimistic view that the share price will reach new highs in 2–3 years? Is a share price of £25.55 or higher realistic under the current dividend growth rate assumption?

7. Is the commonly used DDM that assumes a constant and perpetual growth rate applicable to Welsh Meds? Explain.

8. How would the suggested debt reduction affect the company’s P/E ratio, return on assets, and return on equity?

9. How would the suggested share repurchase affect the company’s P/E ratio, return on assets, and return on equity?

10. Would you regard a £2 million cash reserve as sufficient for Welsh Meds? Explain.

Imperial Jewelers manufactures and sells a gold bracelet for $406.00. The company’s accounting system says that the unit product cost for this bracelet is $265.00 as shown below:

Direct materials $ 144

Direct labor 81

Manufacturing overhead 40

Unit product cost $ 265

The members of a wedding party have approached Imperial Jewelers about buying 20 of these gold bracelets for the discounted price of $366.00 each. The members of the wedding party would like special filigree applied to the bracelets that would require Imperial Jewelers to buy a special tool for $464 and that would increase the direct materials cost per bracelet by $13. The special tool would have no other use once the special order is completed.

To analyze this special order opportunity, Imperial Jewelers has determined that most of its manufacturing overhead is fixed and unaffected by variations in how much jewelry is produced in any given period. However, $14.00 of the overhead is variable with respect to the number of bracelets produced. The company also believes that accepting this order would have no effect on its ability to produce and sell jewelry to other customers. Furthermore, the company could fulfill the wedding party’s order using its existing manufacturing capacity.

Required: 1. What is the financial advantage (disadvantage) of accepting the special order from the wedding party? 2. Should the company accept the special order?

(c) Concise Limited makes a component for one of the engines that it builds. It uses, on average, 2,000 of these components, steadily throughout the year. The component costs $16 per unit to make and it costs an additional $320 to setup the production process each time a batch of components is made. The holding cost per unit is 10% of the unit production cost. The company makes these components at a rate of 200 per week, and the factory is open for 50 weeks per annum. Calculate the Economic Batch Quantity EBQ. (d) List and explain seven key purposes of a budgeting system. (e) Briefly explain any four (4) approaches to budgeting

Amy, a single individual and sole shareholder of Brown Corporation, sold all of the Brown stock for $30,000. Amy's stock basis was $150,000. She had owned the stock for 3 years. Brown Corporation meets the Section 1244 requirements. 1) How much of an ordinary loss does Amy have? 2) How much of a capital loss does Amy have? 3) Do your answers above change if Amy is married? Explain how.

Given the following information:     

                                                                 Budget       Actual               

Units produced                                     20,000      22,000    

Materials (kg)                                         80,000      96,000                

Direct Labour (Hours)                         290,000     343,000                 

Material Costs                                    $800,000                    ?                

Direct Labour Costs                         $3,850,000     $4,557,800             

Variable Overhead Costs                $3,500,000     $4,400,000

Fixed Overhead Costs                      $1,600,000     $1,610,000

Other Information

Overhead is Allocated on Direct Labour Hours

During the year 99,000 kg of materials were purchased for $800,000

Beginning Inventory:  none

Ending Inventory:     3,000 kg

Required:

Prepare a flexible budget

Calculate the following variances

1. Material Rate
2. Material Efficiency
3. Labour Price            
4. Labour Efficiency
5. Variable Overhead Rate
6. Variable Overhead Efficiency
7. Fixed Overhead Rate
8. Fixed Overhead Production Volume