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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

Feedback

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.

Feedback

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

n 2017, Frost Company, which began operations in 2015, decided to change from LIFO to FIFO because management believed that FIFO better represented the flow of their inventory. Management prepared the following analysis showing the effect of this change:

Frost reported net income of $2,500,000, $2,400,000, and $2,100,000 in 2015, 2016, and 2017, respectively. The tax rate is 30%.

Required:

Sweets R Us Pty Ltd. is a large confectionary company that manufactures a range of standard sweet products and some specialty products for the Australian market. Most of the company’s production is in standard chocolate goods and they offer personalised packaging for promotional or fundraising purposes. They also provide uniquely moulded and decorated chocolate items for special events such as grand finals. You have been allocated the role of assessing the controls in the Purchases, Accounts Payable and Payments system, and have obtained the following details:

Raw material ordering process

1. To maintain and control product quality a limited number of trusted suppliers are used.
2. The production manager oversees raw material inventory. Orders are placed based on current production orders and quantities of raw material currently on hand with next day delivery where possible.
3. No formal purchase order system is used.

Raw material warehousing procedures

1. The warehouse personnel are trusted, long-term employees.
2. One of the warehousing staff ensures that all goods received, primarily raw materials, are in good order and signs the couriers’ delivery dockets in acknowledgment of materials received.
3. Movement of in and out of the warehouse is not recorded, but the production manager monitors stock levels and movements daily.

Accounts payable system

1. Supplier invoices are received in the accounts department via email and printed. The details are entered into the accounts payable system by the accounts payable clerk, who then stamps the invoice as processed. The computer system automatically calculates the payment due date based on the supplier's credit terms that have been entered into the system.
2. As there are only a few suppliers each week, the accounts payable clerk validates the outstanding invoices via a phone call with the production manager. The production manager has an excellent memory for what he has ordered, and the deliveries received.
3. The computer system automatically generates a weekly list of invoices due for payment. The accounts payable clerk flags the invoices for cheques to be processed as direct deposits are not used. The system does allow the user to exclude an invoice from the payment run. The accounts payable ledger and general ledger are automatically updated once the payment runs are complete.
4. The cheques are forwarded to the financial controller for signature. Supporting documentation is only attached to the cheques for non-major suppliers. The financial controller calls the production manager to verify the review process (step 2) has taken place, and other payments are verified to the attached invoice. If the financial controller is not available the accounts payable clerk usually has the cheques signed by the marketing manager. The payables clerk avoids asking the CEO to sign cheques as he asks too many questions. Any supporting documentation to the cheque is signed to avoid duplicate payment.
5. Monthly statements are received from the suppliers. However, the accounts payable clerk does not believe statement reconciliations are necessary.

1. Identifies and explains ten (10) control weaknesses associated with the purchases, accounts payable and payments system outlined above.
2. Identifies and explains the account balance assertions for raw material inventory and accounts payable that are most impacted by control weaknesses.
3. Recommends and justifies a control improvement for each of the weaknesses identified in requirement one.

Summarize what recidivism research reveals about the success of the prison in achieving deterrence and rehabilitation. Summarize the research findings on recidivism rates among offenders on probation. How do the recidivism rates of parolees and probationers compare?

Cost of Goods Sold, Profit margin, and Net Income for a Manufacturing Company

The following information is available for Gonzalez Manufacturing Company for the month ending July 31, 2016:

For the month ended July 31, 2016, determine Gonzalez's (a) cost of goods sold, (b) gross profit, and (c) net income.

Labels & Amount descriptions

Finished goods inventory, July 1, 2016

Finished goods inventory, July 31, 2016

Sales

Selling Expenses

Cost of finished goods available for sale

Cost of goods manufactured

Cost of goods sold

Gross profit

Administrative expenses

Net Income

Less administrative expenses

Less Finished goods inventory, July 1, 2016

Less Finished goods inventory, July 31, 2016

1. (a)

   Gonzalez Manufacturing Company
   Cost of Goods Sold
   July 31, 2016
   	$
   	$
   	$

   (b)

   Gonzalez Manufacturing Company
   Gross Profit
   July 31, 2016
   	$
   	$

   (c)

   Gonzalez Manufacturing Company
   Net Income
   July 31, 2016
   		$_________
   Operating expenses:
   	$ ______
   	______
   Total operating expenses		______
   		$______

Kubin Company’s relevant range of production is 23,000 to 27,500 units. When it produces and sells 25,250 units, its average costs per unit are as follows:

Required:

1. If 23,000 units are produced and sold, what is the variable cost per unit produced and sold?

2. If 27,500 units are produced and sold, what is the variable cost per unit produced and sold?

3. If 23,000 units are produced and sold, what is the total amount of variable cost related to the units produced and sold?

4. If 27,500 units are produced and sold, what is the total amount of variable cost related to the units produced and sold?

5. If 23,000 units are produced, what is the average fixed manufacturing cost per unit produced?

6. If 27,500 units are produced, what is the average fixed manufacturing cost per unit produced?

7. If 23,000 units are produced, what is the total amount of fixed manufacturing overhead incurred to support this level of production?

8. If 27,500 units are produced, what is the total amount of fixed manufacturing overhead incurred to support this level of production?

Jupiter Computer Company has been purchasing carrying cases for its portable computers at a purchase price of $78 per unit. The company, which is currently operating below full capacity, charges factory overhead to production at the rate of 40% of direct labor cost. The fully absorbed unit costs to produce comparable carrying cases are expected to be as follows:

If Jupiter Computer Company manufactures the carrying cases, fixed factory overhead costs will not increase and variable factory overhead costs associated with the cases are expected to be 10% of the direct labor costs.

Required:

A. Prepare a differential analysis, dated July 19 to determine whether the company should make (Alternative 1) or buy (Alternative 2) the carrying case. Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. For those boxes in which you must enter subtracted or negative numbers use a minus sign. If there is no amount or an amount is zero, enter "0". A colon (:) will automatically appear if required.

B. On the basis of the data presented, would it be advisable to make the carrying cases or to continue buying them? Explain.

Assuming there were no better alternative uses for the spare capacity, it would __________ (Pick one | "not be advisable" OR "be advisable") to manufacture the carrying cases because the cost savings would be $4 per unit. Fixed factory overhead is _________ (Pick one | "relevent" OR "irrelevent") because it will continue whether the carrying cases are purchased or manufactured.

Measures of liquidity, The ability of a company to make its periodic interest payments and repay the face amount of debt at maturity.Solvency, and The ability of a firm to generate earnings.Profitability

The comparative financial statements of Marshall Inc. are as follows. The market price of Marshall common stock was $ 61 on December 31, 20Y2.

Required:

Determine the following measures for 20Y2, rounding to one decimal place, except for dollar amounts, which should be rounded to the nearest cent. Use the rounded answer of the requirement for subsequent requirement, if required. Assume 365 days a year