Ayayai Corporation had the following stockholders’ equity accounts on January 1, 2020: Common Stock ($5 par) $500,000, Paid-in Capital in Excess of Par—Common Stock $200,000, and Retained Earnings $120,000. In 2020, the company had the following treasury stock transactions.

Ayayai Corporation uses the cost method of accounting for treasury stock. In 2020, the company reported net income of $30,000.

Prepare the stockholders’ equity section for Ayayai Corporation at December 31, 2020. (Enter the account name only and do not provide the descriptive information provided in the question.)

Gallatin Carpet Cleaning is a small, family-owned business operating out of Bozeman, Montana. For its services, the company has always charged a flat fee per hundred square feet of carpet cleaned. The current fee is $22.95 per hundred square feet. However, there is some question about whether the company is actually making any money on jobs for some customers—particularly those located on remote ranches that require considerable travel time. The owner’s daughter, home for the summer from college, has suggested investigating this question using activity-based costing. After some discussion, she designed a simple system consisting of four activity cost pools. The activity cost pools and their activity measures appear below:

The total cost of operating the company for the year is $347,000 which includes the following costs:

Resource consumption is distributed across the activities as follows:

Job support consists of receiving calls from potential customers at the home office, scheduling jobs, billing, resolving issues, and so on.

Required:

1. Prepare the first-stage allocation of costs to the activity cost pools.

2. Compute the activity rates for the activity cost pools.

3. The company recently completed a 200 square foot carpet-cleaning job at the Flying N Ranch—a 51-mile round-trip journey from the company’s offices in Bozeman. Compute the cost of this job using the activity-based costing system.

4. The revenue from the Flying N Ranch was $45.90 (200 square feet @ $22.95 per hundred square feet). Calculate the customer margin earned on this job.

Company is replacing existing equipment with new equipment which can replicate what the existing machine does and also support a new product line.

Old equipment was purchased 3 years ago for 100,000 and was being depreciated using a MACRS 5 year asset class depreciation schedule. It was expected to have a 15,000 salvage value at the end of year 5 when it was planned to be sold. The company is considering replacing it now with a new machine. The old machine can be sold today for 35,000.

New machine will cost 180,000 and is expected to have an economic life of 8 years but is expected to use the MACRS 5 year asset class depreciation schedule for tax purposes. It is expected to have a salvage value of 12% of the original equipment costs at the end of 8 years. The remaining operational years beyond the depreciation tax schedule will not have any depreciation expense but will continue to have operational impact.

The new machine will require an increase in working capital of 10,000 in the first year of the project and will be fully recovered at the end of the project.

The new equipment is expected to increase revenue by 40,000 per year and reduce costs by 5,000 per year before tax impact and consideration of depreciation impact of the new machine.

Cost of Capital is 10% and Tax Rate is 40%.

A: Base Case scenario

• Calculate the project’s NPV
• What is your recommendation?

B: Alternate Analysis Scenarios

• What if revenue impact was only 50% of projections for the first 4 years what would be the impact on NPV?
• What if cost reduction assumptions were not realized and no operational costs savings were achieved? What would the impact on NPV be?

On October 29, 2016, Lobo Co. began operations by purchasing razors for resale. Lobo uses the perpetual inventory method. The razors have a 90-day warranty that requires the company to replace any nonworking razor. When a razor is returned, the company discards it and mails a new one from Merchandise Inventory to the customer. The company's cost per new razor is $14 and its retail selling price is $70 in both 2016 and 2017. The manufacturer has advised the company to expect warranty costs to equal 8% of dollar sales. The following transactions and events occurred.

2016

2017

1.1 Prepare journal entries to record above transactions and adjustments for 2016.
  

1.2 Prepare journal entries to record above transactions and adjustments for 2017.
  

Monticello Company uses a perpetual inventory system and has a highly labour intensive production process, so it assigns manufacturing overhead based on direct labour cost. Monticello’s predetermined overhead application rate for 2017 was computed from the following data: Total estimated factory overhead $1,232,500 Total estimated direct labour cost $850,000 The following activities took place in the work in process inventory during June: WIP Inventory A/C June 1 Bal. 25,625 Direct Materials Used 127,400 Other transactions incurred:  Indirect material issued to production was $19,000  Total manufacturing labour incurred in June was $172,500, 80% of this amount represented direct labour.  Other manufacturing overhead costs incurred for June amounted to $170,375.  Two jobs were completed with total costs of $160,000 & $105,000 respectively. They were sold on account at a mark-up of 75% on cost. Required: i) ii) Compute Monticello’s predetermined manufacturing overhead rate for 2017. State the journal entries necessary to record the above transactions in the general journal: For direct materials used in June For indirect material issued to production in June For total manufacturing labour incurred in June To assign manufacturing labour to the appropriate accounts For other manufacturing overhead incurred For manufacturing overhead applied for June To move the completed jobs into finished goods inventory To sell the two completed jobs on account Calculate the manufacturing overhead variance for Monticello and state the journal entries necessary to dispose of the variance. What is balance on the Cost of Goods Sold account after the adjustment Determine the balance in work in process inventory on June 30.

Diaz Company owns a machine that cost $126,600 and has accumulated depreciation of $90,600. Prepare the entry to record the disposal of the machine on January 1 in each seperate situation. The machine needed extensive repairs and was not worth repairing. Diaz disposed of the machine, receiving nothing in return. Diaz sold the machine for $16,500 cash. Diaz sold the machine for $36,000 cash. Diaz sold the machine for $41,700 cash. 1. Record the disposal of the machine receiving nothing in return. 2. Record the sale of the machine for $16,500 cash. 3. Record the sale of the machine for $36,000 cash. 4. Record the sale of the machine for $41,700 cash.

Tony and Suzie graduate from college in May 2021 and begin developing their new business. They begin by offering clinics for basic outdoor activities such as mountain biking or kayaking. Upon developing a customer base, they’ll hold their first adventure races. These races will involve four-person teams that race from one checkpoint to the next using a combination of kayaking, mountain biking, orienteering, and trail running. In the long run, they plan to sell outdoor gear and develop a ropes course for outdoor enthusiasts.

On July 1, 2021, Tony and Suzie organize their new company as a corporation, Great Adventures Inc. The articles of incorporation state that the corporation will sell 38,000 shares of common stock for $1 each. Each share of stock represents a unit of ownership. Tony and Suzie will act as co-presidents of the company. The following transactions occur from July 1 through December 31.

The following information relates to year-end adjusting entries as of December 31, 2021.

1. Depreciation of the mountain bikes purchased on July 8 and kayaks purchased on August 4 totals $7,380.
2. Six months’ of the one-year insurance policy purchased on July 1 has expired.
3. Four months of the one-year rental agreement purchased on September 1 has expired.
4. Of the $1,900 of office supplies purchased on July 4, $320 remains.
5. Interest expense on the $30,000 loan obtained from the city council on August 1 should be recorded.
6. Of the $2,100 of racing supplies purchased on December 12, $180 remains.
7. Suzie calculates that the company owes $14,600 in income taxes.

Choose the appropriate accounts to be reported on the income statement. Select the 'adjusted' from the dropdown, which will then populate the balances in those accounts from the trial balance.

You are the Accountant for Duke Street, Inc. and your boss asks you to provide the bank with a profit forecast for the coming year. Sales and profitability have both been trending downward over the last five years. Technological advancements have made the current product less attractive. Duke has developed a new product consistent with their perceptions of consumer behavior. The company is requesting a loan from the bank to launch the new product; the loan is very necessary. The forecast that you provide to the bank will determine whether or not the bank issues the much needed loan.

Your boss is convinced that profits will be at least $500,000 – anything less than $500,000 and the bank will not approve the loan. Your analysis indicates three possible outcomes:

Outcome 1: If sales of the new product are extraordinary, then profits will exceed $500,000.

Outcome 2: If sales of the new product are modest, then the profits will be $100,000. This is most likely to occur.

Outcome 3: If the sales of the new product fail, then the company will experience a loss of $600,000

If the bank does not grant the loan, then the new product will not launch and bankruptcy is a real possibility for the company.

REQUIRED:

Include at least two sources, appropriately cited and referenced.

NOTE: The following questions are not in any particular order. ORGANIZE your discussion in a logical manner.

Discuss the ethical implications and demonstrate your decision-making processes for the above scenario. Below are questions that may help guide your discussion. The questions are a guide (a sentence or two answering each question is insufficient). You should provide a well-organized thoughtful discussion of the ethical situation and the business/organizational problem that the company faces.   

What ethical dilemma does the accountant face?

What business problem(s) does the company have?

Who are the potential stakeholders and how might they be affected by the decision of the accountant?

What choices does the accountant have? Evaluate the choices, i.e. who benefits or who is hurt by the choice(s).

What action would you recommend, i.e. how do you believe the business problem should be resolved? How should the ethical dilemma be resolved?

Going forward, what should the company do regarding organizational ethics?  

Shown below is activity for one of the products of Weasel:

January 1 balance, 220 units at $50 for a total of $11,000

Purchases: January 10-200 units at $42

                     January 20-500 units at $55

Sales: January 12-350 units

             January 28-425 units

a. Compute the ending inventory and cost of goods sold assuming Weasel uses FIFO.

b. Compute the ending inventory and cost of goods sold assuming Weasel uses LIFO and perpetual inventory system.

c. Compute the ending inventory and cost of goods sold assuming Weasel uses average cost and a perpetual inventory system.

d. Compute the ending inventory and cost of goods sold assuming Weasel uses LIFO and a periodic inventory system.

e. Compute the ending inventory and costs of goods sold assuming Weasel uses average cost and periodic inventory system.

Please Show all Work

Slide 22-12

Raintree Cosmetic Company sells its products to customers on a credit basis. An adjusting entry for bad debt expense is recorded only at December 31, the company’s fiscal year-end. The 2017 balance sheet disclosed the following:

Current assets;

          Receivables, net of allowance for uncollectible accounts of $33,000                $447,000

During 2018, credit sales were $1,765,000, cash collections from customers $1,845,000, and $38,000 in accounts receivable were written off. In addition, $3,300 was collected from a customer whose account was written off in 2017. An aging of accounts receivable at December 31, 2018, reveals the following:

Required:

1. Prepare summary journal entries to account for the 2018 write-offs and the collection of the receivable previously written off.
2. Prepare the year-end adjusting entry for bad debts according to each of the following situations:

1. Bad debt expense is estimated to be 4% of credit sales for the year.
2. Bad debt expense is estimated by computing net realizable value of the receivables. The allowance for uncollectible accounts is estimated to be 10% of the year-end balance in accounts receivable.
3. Bad debt expense is estimated by computing net realizable value of the receivables. The allowance for uncollectible accounts is determined by an aging of accounts receivable.

3. For situations (a)-(c) in requirement 2 above, what would be the net amount of accounts receivable reported in the 2018 balance sheet?

Complete the following questions by entering your answers below.

1. Prepare summary journal entries to account for the 2018 write-offs and the collection of the receivable previously written off. (If no entry is required for a transaction/event, write “No journal entry required” in the first account title.

1. Record accounts receivable written off during the year 2018.
2. Record entry to reinstate an account receivable previously written off.
3. Record collection of an account receivable previously written off.

2. Prepare the year-end adjusting entry for bad debts.

1. Bad debt expense is estimated to be 4% of credit sales for the year.
2. Bad debt expense is estimated by computing net realizable value of the receivables. The allowance for uncollectible accounts is estimated to be 10% of the year-end balance in accounts receivable.
3. Bad debt expense is estimated by computing net realizable value of the receivables. The allowance for uncollectible accounts is determined by an aging of accounts receivable.

Note: Enter debits before credits.

Net account receivable reported

a.______________________

b.______________________

c.______________________

rake Corporation is reviewing an investment proposal. The initial cost and estimates of the book value of the investment at the end of each year, the net cash flows for each year, and the net income for each year are presented in the schedule below. All cash flows are assumed to take place at the end of the year. The salvage value of the investment at the end of each year is equal to its book value. There would be no salvage value at the end of the investment’s life. Investment Proposal Year Initial Cost and Book Value Annual Cash Flows Annual Net Income 0 $105,600 1 69,300 $44,900 $8,600 2 42,500 40,600 13,800 3 20,600 35,200 13,300 4 6,700 29,600 15,700 5 0 24,200 17,500 Drake Corporation uses an 11% target rate of return for new investment proposals. Click here to view PV table. (a) What is the cash payback period for this proposal? (Round answer to 2 decimal places, e.g. 10.50.) Cash payback period years (b) What is the annual rate of return for the investment? (Round answer to 2 decimal places, e.g. 10.50.) Annual rate of return for the investment % (c) What is the net present value of the investment? (If the net present value is negative, use either a negative sign preceding the number eg -45 or parentheses eg (45). Round answer to 0 decimal places, e.g. 125. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Net present value $

On January 1, 2018, Instaform, Inc., issued 14% bonds with a face amount of $50 million, dated January 1. The bonds mature in 2037 (20 years). The market yield for bonds of similar risk and maturity is 16%. Interest is paid semiannually. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)

Required:
1-a. Determine the price of the bonds at January 1, 2018.
1-b. Prepare the journal entry to record their issuance by Instaform.
2-a. Assume the market rate was 12%. Determine the price of the bonds at January 1, 2018.
2-b. Assume the market rate was 12%. Prepare the journal entry to record their issuance by Instaform.
3. Assume Broadcourt Electronics purchased the entire issue in a private placement of the bonds. Using the data in requirement 2, prepare the journal entry to record the purchase by Broadcourt.

• Req 1A
• Req 1B
• Req 2A
• Req 2B
• Req 3

Determine the price of the bonds at January 1, 2018. (Enter your answer in whole dollars.)

2B

repare the journal entry to record their issuance by Instaform. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in whole dollars.)

2A

Assume the market rate was 12%. Determine the price of the bonds at January 1, 2018. (Enter your answer in whole dollars.)

2B

ransaction/event, select "No journal entry required" in the first account field. Enter your answers in whole dollars.)

3

Assume Broadcourt Electronics purchased the entire issue in a private placement of the bonds. Using the data in requirement 2, prepare the journal entry to record the purchase by Broadcourt. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in whole dollars.)

On September 1, 2016, Carolina Electronics Company has 1,000 Blu-ray players ready for sale. On October 1, 2016, 870 are sold, on account, at $125 each with a 1-year assurance-type warranty. Carolina estimates that the warranty cost on each Blu-ray player sold will probably average $8 per unit. During the final 3 months of 2016, Carolina incurred warranty costs of $3,800, and in 2017 warranty costs were $3,160. Required: 1. Prepare the journal entries for the preceding transactions. 2. Show how the preceding items would be reported on the December 31, 2016, balance sheet. 3. Prepare the journal entries for the preceding transactions using the modified cash basis method. 4. Next Level Which method produces the better measure of income? Why?