1. Write short notes on five issues that may be addressed by a company’s social responsibility report.

Johnson paid $325,000 to acquire 100% of Willis Corporation in a statutory merger. In addition, Johnson also agreed to pay the shareholders of Willis $0.40 in cash for every dollar in income from continuing operations of the combined entity over $75,000 in the first three years following acquisition. Johnson projects that there is a 20% (45%, 35%) probability that the income from continuing operations in the first three years following acquisition is $65,000 ($90,000, $115,000 respectively). Johnson uses a discount rate of 7%.

Information for Willis Corporation immediately before the merger was as follows:

Previously unreported items identified as belonging to Willis:

1. Show your determination of the contingent consideration.
2. Show your determination the goodwill to be reported in this acquisition.

The following selected transactions are from Garcia Company.

• Requirement
• General Journal
• General Ledger
• Trial Balance
• Schedule of Receivables
• Calculation of Interest

Examine the duties of the management of a company and any company's auditors with regard to any company's financial statement.

State the basic purpose of financial Reporting standards and explain the fundamental concepts of accounting recognized by SSAP 2.

Explain the concept of value-for-money, describing the problems which may arise in applying the VFM model and suggest how the problems might be overcome.

The Kollar Company has a defined benefit pension plan. Pension information concerning the fiscal years 2018 and 2019 are presented below ($ in millions):

Information Provided by Pension Plan Actuary:

1. Projected benefit obligation as of December 31, 2017 = $1,800.
2. Prior service cost from plan amendment on January 2, 2018 = $400 (straight-line amortization for 10-year average remaining service period).
3. Service cost for 2018 = $520.
4. Service cost for 2019 = $570.
5. Discount rate used by actuary on projected benefit obligation for 2018 and 2019 = 10%.
6. Payments to retirees in 2018 = $380.
7. Payments to retirees in 2019 = $450.
8. No changes in actuarial assumptions or estimates.
9. Net gain—AOCI on January 1, 2018 = $230.
10. Net gains and losses are amortized for 10 years in 2018 and 2019.

Information Provided by Pension Fund Trustee:

1. Plan asset balance at fair value on January 1, 2018 = $1,600.
2. 2018 contributions = $540.
3. 2019 contributions = $590.
4. Expected long-term rate of return on plan assets = 12%.
5. 2018 actual return on plan assets = $180.
6. 2019 actual return on plan assets = $210.

Required:
1. Calculate pension expense for 2018 and 2019.
2. Prepare the journal entries for 2018 and 2019 to record pension expense.
3. Prepare the journal entries for 2018 and 2019 to record any gains and losses and new prior service cost.
4. Prepare the journal entries for 2018 and 2019 to record the cash contribution to plan assets and benefit payments to retirees.

Giggles Comedy Emporium provides entertainment for birthday parties. Over the last year, Giggles has entertained at over 150 birthday parties. Giggles’ business is booming! The company has parties booked solid for the next six months. Customers generally must book 6-8 months in advance to secure a spot. Mark Spear, the owner of Giggles Comedy Emporium, however, is worried. His business is busy, his customers are extremely happy, his employees are happy, but he is barely breaking even. He cannot understand, with his business being so successful, why he is barely able to pay himself a wage. Mark has asked you to help him figure out what he is doing wrong.

The services provided at each party vary. Some customers only want a clown to perform and they handle the other party details themselves. Other customers want a full package – food, cake, entertainment, cleanup, party favours, decorations, and costumes for the kids. Mark has identified the following services that can be provided at a party.

• Clown: most, if not all, parties include a clown who performs for one hour at the party. Mark pays the clown $40 for each party.
• Food (excluding cake): when customers order food for their party through Giggles, Mark outsources this service to Carl’s Catering. Carl charges an average of $12 per child for food.
• Cake: Mark orders birthday cakes through his sister, Sarah, who has a small bakery and makes custom cakes for Giggles. Her smallest cake is 8” (which will serve up to 10 kids) and costs $40. She also makes a 10” cake for $60 (which serves 20 kids).
• Cleanup: Giggles also provides cleanup service. Cleaning staff are paid $15 per hour. Cleanup averages 2 hours per 20 kids.
• Party favours: Party favours can also be ordered through Giggles. These cost $5 per bag to assemble.
• Decorations: Giggles will also fully decorate a party. Decorating staff are paid $15 per hour and take one hour to decorate a party for 20 kids. Decorations cost an average of $50 for party of 20 kids.
• Costumes: Giggles also provides costumes for parties so the kids can dress up in a theme. On average, costumes cost $40 each and can be worn 25 times before needed to be replaced. Costumes are cleaned after every party at a cost of $5 each.  

Mark has set up a fee schedule for each service as follows:

During the two weeks, Mark catered 6 parties. Some details of the parties are shown below:

REQUIRED:

Calculate the customer-level operating income for each customer by preparing a customer profitability analysis. Rank the customers according to profitability.

Question 1

Clean-It-Up manufactures industrial dryers and washers. The following information is available for February:

REQUIRED:

1. Determine the sales-mix and sales-quantity variances.
2. Determine the market-share and market-size variances.
3. Discuss the potential causes of variance.

Contribution Margin Income Statement. Last month Kumar Production Company sold its product for $60 per unit. Fixed production costs were $40,000, and variable production costs amounted to $15 per unit. Fixed selling and administrative costs totaled $26,000, and variable selling and administrative costs amounted to $5 per unit. Kumar Production produced and sold 7,000 units last month.

Required:

1. Prepare a traditional income statement for Kumar Production Company.
2. Prepare a contribution margin income statement for Kumar Production Company.
3. Why do companies use the contribution margin income statement format?

1) If the direct write-off method of accounting for uncollectible receivables is used, what general ledger account is credited when a customer's account is written off as uncollectible?

a.Accounts Receivable

b.Uncollectible Accounts Payable

c.Bad Debt Expense

d.Allowance for Doubtful Accounts

2) If Modern Company received $3,650 from Connor Young Company on March 12 for the total amount of an account that had been written off on March 1, the entry to record the cash receipt after the account has been reinstated under the direct write-off method

a.includes a credit to Bad Debt Expense of $3,650.

b.is the same as it would be under the allowance method.

c.includes a debit to Allowance for Doubtful Accounts of $3,650.

d.includes a credit to Cash of $3,650.

3) If Modern Company received $3,650 from Connor Young Company on March 12 for the total amount of an account that had been written off on March 1, the entry to reinstate the account under the direct write-off method would include

a.a credit to Bad Debt Expense of $3,650.

b.a debit to Bad Debt Expense of $3,650.

c.a debit to Allowance for Doubtful Accounts of $3,650.

d.a credit to Cash of $3,650.

4) Days' sales in receivables is determined by dividing

a.Average Accounts Receivable by Sales.

b.365 by Accounts Receivable.

c.Average Accounts Receivable by Average Daily Sales.

d.None of these choices are correct.

5) Allowance for Doubtful Accounts will have

a.an unadjusted debit balance at the end of the period if the write-offs during the period were equal to the beginning balance.

b.an unadjusted debit balance at the end of the period if the write-offs during the period were less than the beginning balance.

c.an unadjusted credit balance at the end of the period if the write-offs during the period were more than the beginning balance.

d.an unadjusted credit balance at the end of the period if the write-offs during the period were less than the beginning balance.

6) A 90-day, 10% note for $9,000, dated April 15, is received from a customer on account. The face value of the note is

a.$8,100.

b.$9,225.

c.$9,000.

d.$9,900.

7) Under the allowance method, when a specific account is written off,

a.net income will decrease.

b.total assets will be unchanged.

c.total assets will decrease.

d.total assets will increase.

8) In the Current Assets section of the balance sheet, receivables are usually listed in order

a.of size.

b.alphabetically.

c.of due date.

d.that they can be turned into cash.

9) When analyzing accounts receivable, which of the following is not true?

a.Look for trends from year to year for accounts receivable turnover and days' sales in receivables.

b.Never look at accounts receivable turnover and days' sales in receivables ratios together because they could be misleading.

c.Companies may become less efficient in collecting receivables from one year to the next.

d.Companies may become more efficient in collecting receivables from one year to the next.

10) Financial statement data for the year ending December 31 for Gore Co. are as follows:

Determine accounts receivable turnover for the year.

a.6.75

b.3.46

c.7.08

d.6.91

11) Receivables are _________ on the __________, which are listed in order of ____________.

a.current liabilities; balance sheet; size.

b.current assets; balance sheet; liquidity.

c.current liabilities; balance sheet; due date.

d.current assets; balance sheet; importance.

Millard Corporation is a wholesale distributor of office products. It purchases office products from manufacturers and distributes them in the West, Central, and East regions. Each of these regions is about the same size and each has its own manager and sales staff.

The company has been experiencing losses for many months. In an effort to improve performance, management has requested that the monthly income statement be segmented by sales region. The company’s first effort at preparing a segmented income statement for May is given below.

Variable expenses:

Total variable expenses

Traceable fixed expenses:

Total traceable fixed expenses

Common fixed expenses:

Total common fixed expense

Net operating income (loss)

Cost-Volume-Profit Analysis

Suppose you have decided to start a business producing and selling a product of your choice from the following options: custom birthday cakes, lawn mowers or sport jackets.

For your essay, answer the following questions related to your product:

• Briefly describe the product you would produce and sell. What market will you target this product for? At what price would you sell your product? Make a projection of your sales in units for the first year of operations.
• Make a detailed list of the materials needed to make your product. (Use the textbook and/or outside research as necessary.) How much in materials will you need for the year? What is the cost of these materials?
• Make a list of expenses you would incur in your business venture. (Use the textbook and/or outside research as necessary.) Examples include rent, utilities, insurance, direct labor, manufacturing overhead costs and so on. Estimate the cost of each of these expenses per year.
• Classify all of your expenses as either fixed or variable, and calculate how many units of your product you would need to sell to break even.
• How much operating income would you like to earn in the first year? Calculate how many units you would need to sell to meet your target profit.
• How realistic is your potential venture? Do you think your target profit is achievable? Explain.

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 980 hours each month to produce 1,960 sets of covers. The standard costs associated with this level of production are:

During August, the factory worked only 1,000 direct labor-hours and produced 2,100 sets of covers. The following actual costs were recorded during the month:

At standard, each set of covers should require 2.5 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.)