Comparative balance sheets and the income statements for Ellis Corporation are presented below:

The following additional information is available for the year:

* During the year, the company sold long-term investments for $36,500 that had been purchased for $39,000.

* The company did not sell any property, plant, and equipment during the year or repurchase any of its own common stock.

* All sales were on credit.

* The company paid a cash dividend of $33,100.

* The company paid cash to retire $15,600 of bonds payable.

Required:

a. Using the indirect method, determine the net cash provided by (used in) operating activities.

b. Using the direct method, determine the net cash provided by (used in) operating activities.

c. Using the net cash provided by (used in) operating activities amount from either part a or b, prepare a statement of cash flows.

Tidwell Industries has the following overhead costs and cost drivers. Direct labor hours are estimated at 100,000 for the year.

Activity Cost Pool                Cost Driver          Est. Overhead           Cost Driver Activity

Ordering and Receiving         Orders                    $   120,000               500 orders

Machine Setup                     Setups                        297,000               450 setups

Machining                             Machine hours         1,500,000               125,000 MH

Assembly                              Parts                        1,200,000               1,000,000 parts

Inspection                             Inspections                 300,000               500 inspections

If overhead is applied using traditional costing based on direct labor hours, the overhead application rate is

a.   $9.60.

b.   $12.00.

c.   $15.00.

d.   $34.17.

In applying the high-low method, what is the unit variable cost?

Month                Miles                Total Cost

January             80,000               $192,000

February           50,000                 160,000

March               70,000                 158,000

April                  90,000                 260,000

a.   $2.88

b.   $2.50

c.   $3.20

d.   Cannot be determined from the information given.

Continue on previous question. In applying the high-low method, what is the fixed cost?

a.   $35,000

b.   $72,000

c.   $28,000

d.   $100,000

Required information

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

The following data refer to Twisto Pretzel Company for the year 20x1.

Nautical Creations is one of the largest producers of miniature ships in a bottle. An especially complex part of one of the ships needs special production equipment that is not useful for other products. The company purchased this equipment early in 2015 for $200,000. It is now early in 2019, and the manager of the Model Ships Division, Jeri Finley, is thinking about purchasing new equipment to make this part. The current equipment will last for four more years with zero disposal value at that time. It can be sold immediately for $40,000. The following are last year's total manufacturing costs, when production was 8,200 ships:

Direct materials $29,930
Direct labor 30,340
Variable overhead 13,120
Fixed overhead 36,490
Total $109,880

The cost of the new equipment is $145,000. It has a four year useful life with an estimated disposal value at that time of $50,000. The sales representative selling the new equipment stated, "The new equipment will allow direct labor and variable overhead combined to be reduced by a total of $1.95 per unit." Finley thinks this estimate is accurate, but also knows that a higher quality of direct material will be necessary with the new equipment, costing $0.25 more per unit. Fixed overhead costs will increase by $4,900. Finley expects production to be 8,650 ships in each of the next four years. Assume a discount rate of 5%. REQUIRED 1. What is the difference in net present values if Nautical Creations buys the new equipment instead of keeping their current equipment?

Swathmore Clothing Corporation grants its customers 30 days’ credit. The company uses the allowance method for its uncollectible accounts receivable. During the year, a monthly bad debt accrual is made by multiplying 2% times the amount of credit sales for the month. At the fiscal year-end of December 31, an aging of accounts receivable schedule is prepared and the allowance for uncollectible accounts is adjusted accordingly.

At the end of 2020, accounts receivable were $598,000 and the allowance account had a credit balance of $62,000. Accounts receivable activity for 2021 was as follows:

The company’s controller prepared the following aging summary of year-end accounts receivable:

Required:
1. Prepare a summary journal entry to record the monthly bad debt accrual and the write-offs during the year.
2. Prepare the necessary year-end adjusting entry for bad debt expense.
3-a. What is total bad debt expense for 2021?
3-b. How would accounts receivable appear in the 2021 balance sheet?

Carson Trucking is considering whether to expand its regional service center in​ Mohab, UT. The expansion requires the expenditure of $10,500,000 on new service equipment and would generate annual net cash inflows from reduced costs of operations equal to ​$3,000,000 per year for each of the next 9 years. In year 9 the firm will also get back a cash flow equal to the salvage value of the​ equipment, which is valued at ​$1.2 million. ​Thus, in year 9 the investment cash inflow totals $4,200,000. Calculate the​ project's NPV using a discount rate of 10 percent.

If the discount rate is 10 ​percent, then the​ project's NPV is ​$

Required information

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

Crunchem Cereal Company incurred the following actual costs during 20x1.

The firm’s predetermined overhead rate is 210 percent of direct-labor cost. The January 1 inventory balances were as follows:

What was the cost of goods sold for the year?

A selected Forecast Model showed the lowest MAD at the beginning of the year with $60.5. If the following three quarters reflected the following MAD:

Q2: $60.2 Q3: $75.4 Q4: $78.9
Would you stay using this model for the next year? Explain your answer.

Milo-Freeze Company manufactures and sells a product that has seasonal variations in demand, with peak sales coming in the third quarter. The following information concerns operations for Year 2- the coming year- and for the first two quarters of Year 3: a) The company’s single product sells for $10 per unit. Budgeted sales in units for the next six quarters are as follows: Year 2 Quarter Year 3 Quarter 1 2 3 4 1 2 Budgeted unit sales 40,000 60,000 100,000 50,000 70,000 80,000 b) Sales are collected in the following pattern: 75% in the quarter the sales are made, and the remaining 25% in the following quarter. On January 1, Year 2, the company’s balance sheet showed $65,000 in accounts receivable, all of which will be collected by the end of first quarter. Bad debts are negligible and can be ignored. c) The company desires an ending inventory of finished units on hand at the end of each quarter equal to 30% of the budgeted sales for the next quarter. On December 31, Year 1, the company had 12,000 units on hand. d) Six pounds of raw materials are required to complete one unit of product. The company requires an ending inventory of raw materials on hand at the end of each quarter equal to 10% of the production needs of the following quarter. On December 31, Year 1, the company had 23,000 pounds of raw materials on hand. e) The raw material costs $0.80 per pound. Purchases of raw material are paid for in the following pattern: 60% paid in the quarter the purchases are made, and the remaining 40% paid in the following quarter. On January 1, Year 2, the company’s balance sheet showed $81,500 in accounts payable for raw material purchases, all of which will be paid for in the first quarter of the year.

Prepare the following budgets and schedules for the year, showing both quarterly and total figures:

1. A sales budget.
2. A cash collections budget.
3. A production budget.
4. A direct materials budget.
5. Cash payments for purchases of materials schedule.

Essay Format 350-400 words : 1. Brief introduction 2. Main/detail explanation 3. Brief summary/conclusion

Question: Why do we need to follow GAAP rule that a deferred tax liability meets the definition of a liability? Explain in detail.

Mrs. O is negotiating to purchase a tract of land from DC Company, a calendar year taxpayer. DC bought this land six years ago for $480,000. According to a recent appraisal, the land is worth $800,000 in the current real estate market. According to DC’s director of tax, the company’s profit on the sale will be taxed at 35 percent if the sale occurs this year. However, this tax rate will definitely decrease to 21 percent if the sale occurs next year. Mrs. O is aware that DC would prefer the sale close next year. However, Mrs. O needs the land immediately to begin construction of a new retail outlet. She offers to pay $875,000 for the land with the stipulation that the sale close by December 31. Calculate the amount of after-tax cash for the each of the following alternatives. Should DC accept Mrs. O’s offer?

Fill in the blank options questions 16:

0.66:1

cost of goods available for sale

estimated cost of goods sold

FIFO

first-in, first-out

gross margin method

higher      

historical

last-in, first-out

less

LIFO

Lower

Merchandise Inventory

net sales

replacement

retail inventory method

Fill in the blank options questions 17:

$840

$957

$990

$1017

$1525.50

$3360

$3393

$3510

$32250

$32500

$54000

$55880

Fill in the blank options questions 18:

Overstated

understated

Fill in the blank options questions 19(1-3 Ending Inventory/Cost of Goods Sold):

$840

$957

$990

$1017

$1525.50

$3360

$3393

$3510

$32250

$32500

$54000

$55880

Fill in the blank options questions 20:

0.66:1

cost of goods available for sale

estimated cost of goods sold

FIFO

first-in, first-out

gross margin method

higher      

historical

last-in, first-out

less

LIFO

Lower

Merchandise Inventory

net sales

replacement

retail inventory method

Question 1: Capital Budgeting       

Monash Manufacturing Ltd is contemplating the purchase of a new fully automated machine to replace the old manually operated machine that has been operating in the factory for the last 6 years. The machine manufactures disk drives. When the new machine replaces the old machine, the old machine will be sold immediately (i.e. today). Both machines are fully depreciated over their expected lives using straight-line depreciation to a book value of zero. The new machine will also be sold at the end of its useful life. In addition, because the new machine will work faster than the old one, investment in raw materials and goods-in-progress inventories will increase by $5,000 initially (today), there are no further increases in inventory in years 1, 2 and 3 and the company will recover the initial additional $5,000 inventory outlay at the end of year 4. Revenues from the new machine will stay the same but the new machine will reduce maintenance costs by $16,000 per year. Because of the new machine, the company will need to pay an extra $16,000 in interest expense every year. Maintenance workers need special training to use the new machine because the new machine involves recent IT technology advancements. However, the company purchased a similar machine 5 months ago and at that time spent $12,000 training workers and workers need no further additional training to use the new machine. The cost of equity capital of the firm is 24% per annum and the weighted average cost of capital (WACC) of the firm is 20% per annum. The company’s marginal corporate tax rate is 30%. Information regarding the old machine and the purchase of the new machine is given in the table below.

1. What discount rate should Monash Manufacturing use to value this project? What assumption have you made about the risk of the project’s incremental cashflows?

2. Using the table provided below, identify the project’s incremental free cash flows. Be careful to clearly label the project’s (i) initial investment (t=0), (ii) operating free cash flows (t=1 to 3) and (iii) terminal free cash flow (t=4).

3. Do you recommend accepting or rejecting the decision to replace the old manually operated machine with the new fully automated machine? To obtain full credit you are required to justify your recommendation using appropriate capital budgeting decision techniques.

(Please ensure that you show all working, you can insert a scan or photograph of handwritten workings if you wish).

4. Monash Manufacturing has an independent computer replacement project with conventional cashflows. The project’s cashflows have more exposure to market risk than the cashflows of Monash Manufacturing’s average risk project. The net present value (NPV) of the computer replacement project is zero when discounted at 20%.   Determine whether Monash Manufacturing should accept or reject the computer replacement project. Justify your answer.

Selected current year-end financial statements of Cabot Corporation follow. (All sales were on credit; selected balance sheet amounts at December 31 of the prior year were inventory, $47,900; total assets, $179,400; common stock, $81,000; and retained earnings, $51,347.)

Required:
Compute the following: (1) current ratio, (2) acid-test ratio, (3) days' sales uncollected, (4) inventory turnover, (5) days' sales in inventory, (6) debt-to-equity ratio, (7) times interest earned, (8) profit margin ratio, (9) total asset turnover, (10) return on total assets, and (11) return on common stockholders' equity. (Do not round intermediate calculations.)

Sandra would like to organize BAL as either an LLC (taxed as a sole proprietorship) or a C corporation. In either form, the entity is expected to generate an 13 percent annual before-tax return on a $660,000 investment. Sandra’s marginal income tax rate is 37 percent and her tax rate on dividends and capital gains is 23.8 percent (including the 3.8 percent net investment income tax). If Sandra organizes BAL as an LLC, she will be required to pay an additional 2.9 percent for self-employment tax and an additional 0.9 percent for the additional Medicare tax. BAL’s income is not qualified business income (QBI) so Sandra is not allowed to claim the QBI deduction. Assume that BAL will distribute all of its after-tax earnings every year as a dividend if it is formed as a C corporation. (Round your intermediate computations to the nearest whole dollar amount.)

a. How much cash after taxes would Sandra receive from her investment in the first year if BAL is organized as either an LLC or a C corporation?

b. What is the overall tax rate on BAL’s income in the first year if BAL is organized as an LLC or as a C corporation?(Round your final answers to 2 decimal places.)