Questions
Selected comparative financial statements of Korbin Company follow: KORBIN COMPANY Comparative Income Statements For Years Ended...

Selected comparative financial statements of Korbin Company follow:

KORBIN COMPANY Comparative Income Statements For Years Ended December 31, 2017, 2016, and 2015

2017 2016 2015 Sales $ 392,189 $ 300,449 $ 208,500 Cost of goods sold 236,098 189,884 133,440 Gross profit 156,091 110,565 75,060 Selling expenses 55,691 41,462 27,522 Administrative expenses 35,297 26,440 17,306 Total expenses 90,988 67,902 44,828 Income before taxes 65,103 42,663 30,232 Income taxes 12,109 8,746 6,137 Net income $ 52,994 $ 33,917 $ 24,095 KORBIN COMPANY Comparative Balance Sheets December 31, 2017, 2016, and 2015 2017 2016 2015 Assets Current assets $ 53,162 $ 41,593 $ 55,599 Long-term investments 0 900 3,460 Plant assets, net 100,263 106,488 64,372 Total assets $ 153,425 $ 148,981 $ 123,431 Liabilities and Equity Current liabilities $ 22,400 $ 22,198 $ 21,600 Common stock 71,000 71,000 53,000 Other paid-in capital 8,875 8,875 5,889 Retained earnings 51,150 46,908 42,942 Total liabilities and equity $ 153,425 $ 148,981 $ 123,431

2. Complete the below table to calculate income statement data in common-size percents.

3. Complete the below table to calculate the balance sheet data in trend percents with 2015 as the base year.

In: Accounting

Sharp Company manufactures a product for which the following standards have been set: Standard Quantity or...

Sharp Company manufactures a product for which the following standards have been set:

Standard Quantity
or Hours
Standard Price
or Rate
Standard
Cost
Direct materials 3 feet $ 5 per foot $ 15
Direct labor ? hours ? per hour ?

During March, the company purchased direct materials at a cost of $43,335, all of which were used in the production of 2,425 units of product. In addition, 4,000 direct labor-hours were worked on the product during the month. The cost of this labor time was $28,000. The following variances have been computed for the month:

Materials quantity variance $ 3,750 U
Labor spending variance $ 2,780

U

Labor efficiency variance $ 780

U

Required:

1. For direct materials:

a. Compute the actual cost per foot of materials for March.

b. Compute the price variance and the spending variance.

2. For direct labor:

a. Compute the standard direct labor rate per hour.

b. Compute the standard hours allowed for the month’s production.

c. Compute the standard hours allowed per unit of product.

In: Accounting

Marvel Parts, Inc., manufactures auto accessories. One of the company’s products is a set of seat...

Marvel Parts, Inc., manufactures auto accessories. One of the company’s products is a set of seat covers that can be adjusted to fit nearly any small car. The company has a standard cost system in use for all of its products. According to the standards that have been set for the seat covers, the factory should work 990 hours each month to produce 1,980 sets of covers. The standard costs associated with this level of production are:

Total Per Set
of Covers
Direct materials $ 39,798 $ 20.10
Direct labor $ 5,940 3.00
Variable manufacturing overhead (based on direct labor-hours) $ 3,168 1.60
$ 24.70

During August, the factory worked only 1,000 direct labor-hours and produced 2,200 sets of covers. The following actual costs were recorded during the month:

Total Per Set
of Covers
Direct materials (7,400 yards) $ 40,700 $ 18.50
Direct labor $ 8,140 3.70
Variable manufacturing overhead $ 3,960 1.80
$ 24.00

At standard, each set of covers should require 3.0 yards of material. All of the materials purchased during the month were used in production.

Required:

1. Compute the materials price and quantity variances for August.

2. Compute the labor rate and efficiency variances for August.

3. Compute the variable overhead rate and efficiency variances for August.

(Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)

In: Accounting

Tshepo and Onalenna are two graduates who were employed by a big company in Pikwe. after...

Tshepo and Onalenna are two graduates who were employed by a big company in Pikwe. after gaining some experience, they gace in to the temptation to go it alone. They approached a company consultant in town who advised that they could open their own company with the two as directors sharing 50:50. Their first major business was through a tender for construction of an oil pipeline from Maun to Franscis town. This tender was valued at P50 million. After receiving their first payment, they all over suddenly become spent thrift. They settled for expensive procurement of cars, houses; which they billed on the company. As a consequence taxes bagan to fall due and government pressed them to account for the monies they had received. Fearing they might be prosecuted, they withdraw all the money and migrate to South Africa. The company has been betrayed and so are the employees and the government.

required :

In relation to company law, explain the doctrine of separate legal personality and illustrate the effect of the doctrine on the liability of owners of the company  

In: Accounting

Albuquerque, Inc., acquired 36,000 shares of Marmon Company several years ago for $900,000. At the acquisition...

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.)

In: Accounting

During the year, Hepworth Company earned a net income of $59,225. Beginning and ending balances for...

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?

In: Accounting

The Sunbelt Corporation has $44 million of bonds outstanding that were issued at a coupon rate...

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

In: Accounting

Washington County’s Board of Representatives is considering the construction of a longer runway at the county...

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.

In: Accounting

QUESTION ONE Briefly explain the following types of errors: (i) Error of commission                            &n

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                                                                                        

  1. 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

  1. 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                                            

                                                                                                                        

In: Accounting

1.Sweet Company’s outstanding stock consists of 2,000 shares of cumulative 4% preferred stock with a $100...

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).

In: Accounting

Cost, volume, profit analysis identifies a transaction’s “contribution’ to fixed costs. Explain the meaning of ‘contribution’...

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)

In: Accounting

Changes to Itemized Deduction Tax reform that affects both individuals and businesses was enacted in December...

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).

In: Accounting

Smoky Mountain Corporation makes two types of hiking boots—Xtreme and the Pathfinder. Data concerning these two...

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))

In: Accounting

Chicago contractors got $5,400,000 contract to construct a school building for the City of Chicago. Work...

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.

In: Accounting

Illustrative Example: Retailer Ltd: Preparation of financial statements Retailer Ltd, recorded the following transactions during the...

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

In: Accounting