The following condensed balance sheet is for the partnership of Miller, Tyson, and Watson, who share profits and losses in the ratio of 6:2:2, respectively:

a. Assuming no liquidation expenses, calculate the safe payments that can be made to partners at this point in time.

Problem 12-23 Make or Buy Decision [LO12-3]

Silven Industries, which manufactures and sells a highly successful line of summer lotions and insect repellents, has decided to diversify in order to stabilize sales throughout the year. A natural area for the company to consider is the production of winter lotions and creams to prevent dry and chapped skin.

After considerable research, a winter products line has been developed. However, Silven’s president has decided to introduce only one of the new products for this coming winter. If the product is a success, further expansion in future years will be initiated.

The product selected (called Chap-Off) is a lip balm that will be sold in a lipstick-type tube. The product will be sold to wholesalers in boxes of 24 tubes for $9 per box. Because of excess capacity, no additional fixed manufacturing overhead costs will be incurred to produce the product. However, a $139,500 charge for fixed manufacturing overhead will be absorbed by the product under the company’s absorption costing system.

Using the estimated sales and production of 155,000 boxes of Chap-Off, the Accounting Department has developed the following manufacturing cost per box:

The costs above relate to making both the lip balm and the tube that contains it. As an alternative to making the tubes for Chap-Off, Silven has approached a supplier to discuss the possibility of buying the tubes. The purchase price of the supplier's empty tubes would be $1.35 per box of 24 tubes. If Silven Industries stops making the tubes and buys them from the outside supplier, its direct labor and variable manufacturing overhead costs per box of Chap-Off would be reduced by 10% and its direct materials costs would be reduced by 20%.

Required:

1. If Silven buys its tubes from the outside supplier, how much of its own Chap-Off manufacturing costs per box will it be able to avoid? (Hint: You need to separate the manufacturing overhead of $1.90 per box that is shown above into its variable and fixed components to derive the correct answer.)

2. What is the financial advantage (disadvantage) per box of Chap-Off if Silven buys its tubes from the outside supplier?

3. What is the financial advantage (disadvantage) in total (not per box) if Silven buys 155,000 boxes of tubes from the outside supplier?

4. Should Silven Industries make or buy the tubes?

5. What is the maximum price that Silven should be willing to pay the outside supplier for a box of 24 tubes?

6. Instead of sales of 155,000 boxes of tubes, revised estimates show a sales volume of 191,000 boxes of tubes. At this higher sales volume, Silven would need to rent extra equipment at a cost of $56,000 per year to make the additional 36,000 boxes of tubes. Assuming that the outside supplier will not accept an order for less than 191,000 boxes of tubes, what is the financial advantage (disadvantage) in total (not per box) if Silven buys 191,000 boxes of tubes from the outside supplier? Given this new information, should Silven Industries make or buy the tubes?

7. Refer to the data in (6) above. Assume that the outside supplier will accept an order of any size for the tubes at a price of $1.35 per box. How many boxes of tubes should Silven make? How many boxes of tubes should it buy from the outside supplier?

Scenario 1:
Murphy & Johnson is a privately owned manufacturer of small motors for lawnmowers, tractors, and snowmobiles. The components of its financial statements are (1) income before taxes = $21 million, (2) total assets = $550 million, and (3) total revenues = $775 million. Murphy & Johnson's CPA firm uses the normal percentage for income before taxes for a public company for determining overall materiality.

a. Determine overall materiality, and determine tolerable misstatement. Explain your answer.

b. During the course of the audit, Murphy & Johnson’s CPA firm detected two misstatements that aggregated to an overstatement of income of $1.25 million. Evaluate the audit findings. Explain your answer.

Scenario 2:

Delta Investments provides a group of mutual funds for investors. The components of its financial statements are (1) income before taxes = $40 million, (2) total assets = $4.3 billion, and (3) total revenues = $900 million. Delta Investments' CPA firm uses the percentage applicable on total (net) assets for determining overall materiality.

a. Determine overall materiality, and determine tolerable misstatement. Explain your answer.

b. During the course of the audit, Delta’s CPA firm detected two misstatements that aggregated to an overstatement of income of $5.75 million. Evaluate the audit findings. Explain your answer.

Scenario 3:

Swell Computers is a public company that manufactures desktop and laptop computers. The components of the financial statements are: (1) income before taxes = $500,000, (2) total assets = $2.2 billion, and (3) total revenues = $7 billion. Swell Computers' CPA firm might use the lowest percentage for total assets for determining overall materiality, but they also consider qualitative factors.

a. Determine overall materiality and tolerable misstatement. Explain your answer.

b. During the course of the audit, Swell’s CPA firm detected one misstatement that resulted in an overstatement of income by $1.5 million. Evaluate the audit findings. Explain your answer.

Equipment is purchased at a cost of $80,000. As a result, annual cash revenues are expected to increase by $45,000; annual cash expenses are expected to increase by $12,000; straight-line depreciation is used; the asset has a seven-year life; the salvage value is $10,000. Assume the company is in a 34% tax bracket.

Determine the NPV assuming a minimum required rate of return of 8%?

Please kindly explain in detail how you arrived at your answers especially how you calculate the PV. Thank you

Required information

Problem 14-23 Preparing a master budget for retail company with no beginning account balances LO 14-2, 14-3, 14-4, 14-5, 14-6

[The following information applies to the questions displayed below.]

Finch 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:

Problem 14-23 Part 1

Required

1. October sales are estimated to be $340,000, of which 35 percent will be cash and 65 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 $12,500. Assume that all purchases are made on account. Prepare an inventory purchases budget.

4. The company pays 60 percent of accounts payable in the month of purchase and the remaining 40 percent in the following month. Prepare a cash payments budget for inventory purchases.

5. Budgeted selling and administrative expenses per month follow:

1. *The capital expenditures budget indicates that Finch will spend $133,000 on October 1 for store fixtures, which are expected to have a $25,000 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. Finch 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 $17,000 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.

Compute and Interpret Altman's Z-scores Following is selected financial information for Netflix, for 2018 and 2017. $ thousands, except per share data 2018 2017 Current assets $9,694,135 $7,669,974 Current liabilities 6,487,320 5,466,312 Total assets 25,974,400 19,012,742 Total liabilities 20,735,635 15,430,786 Shares outstanding 436,598,597 433,392,686 Retained earnings 2,942,359 1,731,117 Stock price per share 267.66 191.96 Sales 15,794,341 11,692,713 Earnings before interest and taxes 1,605,226 838,679 Compute and interpret Altman Z-scores for the company for both years. (Do not round until your final answer; then round your answers to two decimal places.) 2018 z-score = Answer 2017 z-score = Answer Which of the following best describes the company's likelihood to go bankrupt given the z-score in 2017 compared to 2018. The z-score in 2018 increased. Z-scores for both years are in the gray area indicating some risk of bankruptcy. The z-score in 2018 increased, which suggests the company's risk of bankruptcy has increased. The z-score in 2018 increased. Z-scores for both years indicate low bankruptcy potential in the short term. The z-score in 2018 decreased, which suggests the company's risk of bankruptcy has decreased.

[The following information applies to the questions displayed below.]

The following data pertain to Lawn Master Corporation’s top-of-the-line lawn mower.

To achieve a target price of $541 per lawn mower, the markup percentage is 12.7 percent on total unit cost.

Required:

1. What is the fixed selling and administrative cost allocated to each unit of Lawn Master’s top-of-the-line mower? (Do not round your intermediate computations. Round your final answer to the nearest dollar amount.)
2. For each of the following cost bases, develop a cost-plus pricing formula that will result in a target price of $541 per mower: (Round your percentage answers to 2 decimal places (i.e., .1234 should be entered as 12.34).)

Skip Company produces a product called Lem. The standard direct material cost to produce one unit of Lem is four quarts of raw material at $2.50 per quart. During May, 5,880 quarts of raw material were purchased at a cost of $14,112. All the purchased material was used to produce 1,400 units of Lem.

a. Compute the material price variance and material quantity variance for May.
Note: Do not use a negative sign with your answers.

b. Assume the same facts except that Skip Company purchased 8,400 quarts of material at the previously calculated cost per quart, but used only 5,880 quarts. Compute the material price variance and material quantity variance for May, assuming that Skip identifies variances at the earliest possible time.
Note: Do not use a negative sign with your answers.

c. Prepare the journal entries to record the material price and usage variances calculated in (b).
Note: List any multiple debits or any multiple credits in alphabetical order by account name.

Please answer all parts of the question.

Contribution Margin, Break-Even Sales, Cost-Volume-Profit Chart, Margin of Safety, and Operating Leverage

Belmain Co. expects to maintain the same inventories at the end of 20Y7 as at the beginning of the year. The total of all production costs for the year is therefore assumed to be equal to the cost of goods sold. With this in mind, the various department heads were asked to submit estimates of the costs for their departments during the year. A summary report of these estimates is as follows:

It is expected that 6,480 units will be sold at a price of $360 a unit. Maximum sales within the relevant range are 8,000 units.

Required:

1. Prepare an estimated income statement for 20Y7.

2. What is the expected contribution margin ratio? Round to the nearest whole percent.
%

3. Determine the break-even sales in units and dollars.

4. Construct a cost-volume-profit chart on your own paper. What is the break-even sales?
$

5. What is the expected margin of safety in dollars and as a percentage of sales?

6. Determine the operating leverage. Round to one decimal place.

Break-Even Sales and Sales Mix for a Service Company Zero Turbulence Airline provides air transportation services between Los Angeles, California; and Kona, Hawaii. A single Los Angeles to Kona round-trip flight has the following operating statistics: Fuel $5,640 Flight crew salaries 4,320 Airplane depreciation 2,040 Variable cost per passenger—business class 55 Variable cost per passenger—economy class 45 Round-trip ticket price—business class 555 Round-trip ticket price—economy class 295 It is assumed that the fuel, crew salaries, and airplane depreciation are fixed, regardless of the number of seats sold for the round-trip flight. If required round the answers to nearest whole number. a. Compute the break-even number of seats sold on a single round-trip flight for the overall product, E. Assume that the overall product is 20% business class and 80% economy class seats. Total number of seats at break-even seats b. How many business class and economy class seats would be sold at the break-even point? Business class seats at break-even seats Economy class seats at break-even seats

Mills Corporation acquired as a long-term investment $235 million of 8% bonds, dated July 1, on July 1, 2021. Company management has classified the bonds as an available-for-sale investment. The market interest rate (yield) was 6% for bonds of similar risk and maturity. Mills paid $270 million for the bonds. The company will receive interest semiannually on June 30 and December 31. As a result of changing market conditions, the fair value of the bonds at December 31, 2021, was $260 million.

1. & 2. Prepare the journal entry to record Mills’ investment in the bonds on July 1, 2021 and interest on December 31, 2021, at the effective (market) rate.
3. At what amount will Mills report its investment in the December 31, 2021, balance sheet?
4. Suppose Moody's bond rating agency upgraded the risk rating of the bonds, and Mills decided to sell the investment on January 2, 2022, for $280 million. Prepare the journal entries required on the date of sale.

4.1 Record the fair-value adjustment.

4.2 Record any reclassification adjustment.

4.3 Record the sale of the investment by Mills.

Board Company has a foreign subsidiary that began operations at the start of 2017 with assets of 139,000 kites (the local currency unit) and liabilities of 68,000. During this initial year of operation, the subsidiary reported a profit of 33,000 kites. It distributed two dividends, each for 5,700 kites with one dividend declared on March 1 and the other on October 1. Applicable exchange rates for 1 kite follow:

1. Assume that the kite is this subsidiary’s functional currency. What translation adjustment would Board report for the year 2017?

2. Assume that on October 1, 2017, Board entered into a forward exchange contract to hedge the net investment in this subsidiary. On that date, Board agreed to sell 270,000 kites in three months at a forward exchange rate of $0.72/1 kite. Prepare the journal entries required by this forward contract.

3. Compute the net translation adjustment for Board to report in accumulated other comprehensive income for the year 2017 under this second set of circumstances.

Bunnell Corporation is a manufacturer that uses job-order costing. On January 1, the company’s inventory balances were as follows:

The company applies overhead cost to jobs on the basis of direct labor-hours. For the current year, the company’s predetermined overhead rate of $16.25 per direct labor-hour was based on a cost formula that estimated $650,000 of total manufacturing overhead for an estimated activity level of 40,000 direct labor-hours. The following transactions were recorded for the year:

1. Raw materials were purchased on account, $510,000.
2. Raw materials used in production, $480,000. All of of the raw materials were used as direct materials.
3. The following costs were accrued for employee services: direct labor, $600,000; indirect labor, $150,000; selling and administrative salaries, $240,000.
4. Incurred various selling and administrative expenses (e.g., advertising, sales travel costs, and finished goods warehousing), $367,000.
5. Incurred various manufacturing overhead costs (e.g., depreciation, insurance, and utilities), $500,000.
6. Manufacturing overhead cost was applied to production. The company actually worked 41,000 direct labor-hours on all jobs during the year.
7. Jobs costing $1,680,000 to manufacture according to their job cost sheets were completed during the year.
8. Jobs were sold on account to customers during the year for a total of $2,800,000. The jobs cost $1,690,000 to manufacture according to their job cost sheets.

   TRANSACTION	GENERAL JOURNAL	DEBIT	CREDIT

Bonita Company sells 8% bonds having a maturity value of $1,420,000 for $1,312,340. The bonds are dated January 1, 2020, and mature January 1, 2025. Interest is payable annually on January 1.

Determine the effective-interest rate. (Round answer to 0 decimal places, e.g. 18%.)

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Set up a schedule of interest expense and discount amortization under the effective-interest method. (Round intermediate calculations to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 38,548.)