The primary emphasis in statutory accounting is supposedly on financial conservatism. However, some statutory techniques violate this principle. Discuss three ways in which statutory accounting is ultraconservative and two areas where the principle of conservatism is violated.

Rodriguez Company pays $320,000 for real estate plus $16,960 in closing costs. The real estate consists of land appraised at $207,000; land improvements appraised at $69,000; and a building appraised at $184,000.

Required:
1. Allocate the total cost among the three purchased assets.
2. Prepare the journal entry to record the purchase.

Allocate the total cost among the three purchased assets. (Round your "Apportioned Cost" answers to 2 decimal places.)

• Record the costs of lump-sum purchase.

Note: Enter debits before credits.

1. what control best prevents the receipt of items in the warehouse that are not ordered?

a. reconciliation of PO's to Receiving report

b. Bar-code scanners

c. receiving should have approved purchase order before receiving inventory\

2. what control prevents paying the same invoice twice?

a. only treasury should do cash disbursements

b. only pay original invoices

c. reconcile vender invoices to vendor payments

3. what control best prevents paying for items ordered, but yet received?

a. all receiving reports should be prenumbered

b. reconcile PO to Receiving report before making payment

c. all PO's should be prenumbered

Shamrock Leasing Company signs a lease agreement on January 1, 2017, to lease electronic equipment to Pharoah Company. The term of the non-cancelable lease is 2 years, and payments are required at the end of each year. The following information relates to this agreement:

1. Pharoah has the option to purchase the equipment for $17,500 upon termination of the lease. It is not reasonably certain that Pharoah will exercise this option.

2. The equipment has a cost of $150,000 and fair value of $199,000 to Shamrock Leasing. The useful economic life is 2 years, with a residual value of $17,500.

3. Shamrock Leasing desires to earn a return of 5% on its investment. 4. Collectibility of the payments by Shamrock Leasing is probable.

Prepare the journal entries on the books of Shamrock Leasing to reflect the payments received under the lease and to recognize income for the years 2017 and 2018.

The following are selected account balances from Penske Company and Stanza Corporation as of December 31, 2021:

Note: Parentheses indicate a credit balance.

On January 1, 2021, Penske acquired all of Stanza’s outstanding stock for $929,000 fair value in cash and common stock. Penske also paid $10,000 in stock issuance costs. At the date of acquisition, copyrights (with a six-year remaining life) have a $616,000 book value but a fair value of $706,000.

1. As of December 31, 2021, what is the consolidated copyrights balance?

2. For the year ending December 31, 2021, what is consolidated net income?

3. As of December 31, 2021, what is the consolidated retained earnings balance?

4. As of December 31, 2021, what is the consolidated balance to be reported for goodwill?

1)         On October 1, 20X1, Kelly Company leased a boat from Grant Company. The lease is noncancelable and requires five equal annual payments of $50,000 each. The lease payments are due each October 1, beginning October 1, 20X1. The boat is recorded on Grant’s books at $207,542, which is equal to its fair value. Grant expects that the boat’s residual value at the end of the lease term will be $10,000, but it is not guaranteed by Kelly. However, Kelly has an option to purchase the boat for $10,000 at the end of the lease term. At the inception of the lease, the boat has a remaining economic life of six years with a $2,500 estimated salvage value at the end of its life. Both firms use the straight-line method of amortization and have December 31 year-ends for financial reporting purposes. The interest rate used by Grant Company to calculate the annual lease payment is 12%, and known by Kelly. Collection of the lease payments is reasonably predictable by Grant.  

Required:

Complete the following table for Grant’s and Kelly’s December 31, 20X1 income statements:

Be sure to show and clearly label all calculations.

Ayayai Corp.’s unadjusted trial balance at December 1, 2017, is presented below.

The following transactions occurred during December.

Adjustment data:

A) Prepare journal entries for the transactions listed above and adjusting entries. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Record journal entries in the order presented in the problem.)

B) Prepare an adjusted trial balance at December 31, 2017.

C) Prepare a 2017 income statement.

D) Prepare a 2017 retained earnings statement. (List items that increase retained earnings first.)

E)  Prepare a December 31, 2017, balance sheet. (List Current Assets in order of liquidity. List Property, Plant and Equipment in order of Land, Buildings and Equipment.)

Internal Audit

The PIXEL Company performs its expenditure cycle activities using its integrated ERP system as follows:

 Employees in any department can enter purchase requests for items they note as being either out of stock or in small quantity.

 The company maintains a perpetual inventory system.

 Each day, employees in the purchasing department process all purchase requests from the prior day. To the extent possible, requests for items available from the same supplier are combined into one larger purchase order in order to obtain volume discounts. Purchasing agents use the Internet to compare prices in order to select suppliers. If an Internet search discovers a potential new supplier, the purchasing agent enters the relevant information in the system, thereby adding the supplier to the approved supplier list. Purchase orders above $10,000 must be approved by the purchasing department manager. EDI is used to transmit purchase orders to most suppliers, but paper purchase orders are printed and mailed to suppliers who are not EDI capable.

 Receiving department employees have read-only access to outstanding purchase orders. Usually, they check the system to verify existence of a purchase order prior to accepting delivery, but sometimes during rush periods they unload trucks and place the items in a corner of the warehouse where they sit until there is time to use the system to retrieve the relevant purchase order. In such cases, if no purchase order is found, the receiving employee contacts the supplier to arrange for the goods to be returned.

 Receiving department employees compare the quantity delivered to the quantity indicated on the purchase order. Whenever a discrepancy is greater than 5%, the receiving employee sends an email to the purchasing department manager. The receiving employee uses an online terminal to enter the quantity received before moving the material to the inventory stores department.

 Inventory is stored in a locked room. During normal business hours an inventory employee allows any employee wearing an identification badge to enter the storeroom and remove needed items. The inventory storeroom employee counts the quantity removed and enters that information in an online terminal located in the storeroom.

 Occasionally, special items are ordered that are not regularly kept as part of inventory, from a specialty supplier who will not be used for any regular purchases. In these cases, an accounts payable clerk creates a one-time supplier record.  All supplier invoices (both regular and one-time) are routed to accounts payable for review and approval. The system is configured to perform an automatic 3- way match of the supplier invoice with the corresponding purchase order and receiving report.  Each Friday, approved supplier invoices that are due within the next week are routed to the treasurer’s department for payment. The cashier and treasurer are the only employees authorized to disburse funds, either by EFT or by printing a check. Checks are printed on dedicated printer located in the treasurer’s department, using special stock paper that is stored in a locked cabinet accessible only to the treasurer and cashier. The paper checks are sent to accounts payable to be mailed to suppliers.

 Monthly, the treasurer reconciles the bank statements and investigates any discrepancies with recorded cash balances.

Required: a. Identify at least five activities (or sub-processes) within the expenditure process described above. (3 points)

b. Identify five risks associated with the five activities identified on a. (5 points)

c. Propose a control for each risk identified on b. (5 points)

Note:

Present your answer in a risk/ control matrix reduced to only three-column table with these headings: Activity (or Sub-processes), Risks, and Controls.

Amelia Inc. is considering the purchase of a new piece of equipment. The cost savings from the equipment would result in an annual increase in net income of $200,900. The equipment will have an initial cost of $1,200,900 and have an 8 year life. The salvage value of the equipment is estimated to be $200,900. The hurdle rate is 10%. Ignore income taxes. (Future Value of $1, Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1.) (Use appropriate factor from the PV tables.)

What is the accounting rate of return? (Round your answer to 2 decimal places.)



b. What is the payback period? (Round your answer to one decimal place.)



c. What is the net present value? (Do not round intermediate calculations and round your final answer to the nearest dollar amount.)



d. What would the net present value be with a 13% hurdle rate? (Do not round intermediate calculations and round your final answer to the nearest dollar amount.)



e. Based on the NPV calculations, in what range would the equipment’s internal rate of return fall? (Round your answer to 2 decimal places.)

Tybee Industries Inc. uses a job order cost system

A type of cost accounting system that provides for a separate record of the cost of each particular quantity of product that passes through the factory.

. The following data summarize the operations related to production for January, the first month of operations:

Boxer Company plans to sell 500,000 units of finished product in July 20x1. Management (1) anticipates a growth rate in sales of 10% per month thereafter and (2) desires a monthly ending finished-goods inventory (in units) of 80% of the following month's estimated sales. There are 400,000 completed units in the June 30, 20x1 inventory.
Each unit of finished product requires four pounds of direct material at a cost of $1.90 per pound. There are 2,000,000 pounds of direct material in inventory on June 30, 20x1.

Required:
Prepare a production budget for the quarter ended September 30, 20x1. Note: For both part "A" and part "B" of this problem, prepare your budget on a quarterly (not monthly) basis. Independent of your answer to part "A," assume that Boxer plans to produce 1,280,000 units of finished product for the quarter ended September 30. If the firm desires to stock direct materials at the end of this period equal to 25% of current production usage, compute the cost of direct material purchases for the quarter.

Prepare a production budget for the quarter ended September 30, 20x1. Note: Prepare your budget on a quarterly (not monthly) basis.

Independent of your answer to part "A," assume that Boxer plans to produce 1,280,000 units of finished product for the quarter ended September 30. If the firm desires to stock direct materials at the end of this period equal to 25% of current production usage, compute the cost of direct material purchases for the quarter.

The production department of Zan Corporation has submitted the following forecast of units to be produced by quarter for the upcoming fiscal year:

In addition, 6,000 grams of raw materials inventory is on hand at the start of the 1st Quarter and the beginning accounts payable for the 1st Quarter is $2,880.

Each unit requires 8 grams of raw material that costs $1.20 per gram. Management desires to end each quarter with an inventory of raw materials equal to 25% of the following quarter’s production needs. The desired ending inventory for the 4th Quarter is 8,000 grams. Management plans to pay for 60% of raw material purchases in the quarter acquired and 40% in the following quarter. Each unit requires 0.20 direct labor-hours and direct laborers are paid $11.50 per hour.

Required:

1.&2. Calculate the estimated grams of raw material that need to be purchased and the cost of raw material purchases for each quarter and for the year as a whole.

3. Calculate the expected cash disbursements for purchases of materials for each quarter and for the year as a whole.

4. Calculate the estimated direct labor cost for each quarter and for the year as a whole. Assume that the direct labor workforce is adjusted each quarter to match the number of hours required to produce the estimated number of units produced.

A machine costing $214,400 with a four-year life and an estimated $18,000 salvage value is installed in Luther Company’s factory on January 1. The factory manager estimates the machine will produce 491,000 units of product during its life. It actually produces the following units: 122,100 in 1st year, 123,200 in 2nd year, 120,600 in 3rd year, 135,100 in 4th year. The total number of units produced by the end of year 4 exceeds the original estimate—this difference was not predicted. (The machine must not be depreciated below its estimated salvage value.)

  
Required:

Compute depreciation for each year (and total depreciation of all years combined) for the machine under each depreciation method. (Round your per unit depreciation to 2 decimal places. Round your answers to the nearest whole dollar.)

Compute depreciation for each year (and total depreciation of all years combined) for the machine under each Straight-line depreciation.

Compute depreciation for each year (and total depreciation of all years combined) for the machine under each Units of production.

• Compute depreciation for each year (and total depreciation of all years combined) for the machine under each Double-declining-balance.

  	DDB Depreciation for the Period End of Period Year Beginning of Period Book Value Depreciation Rate Depreciation Expense Accumulated Depreciation Book Value 1 % $0 2 % 0 3 % 0 4 % 0 $0

A firm is deciding to implement a new project: Investment costs are $1 million and anticipated cash flows are 300,000 for 5 years.

If the cost of capital (hurdle rate) is 12%, a) should the firm do the project? SHOW WORK

b) What determines the cost of capital? (word answer)

QUESTION 1

1. Even though an investee may be an associate of an investor, if the shares of that associate are traded in an active market, AASB128 Investment in Associates and Joint Ventures requires the application of the:

   		market valuation.
   		consolidation method.
   		equity method.
   		valuation made by an independent evaluator.

QUESTION 2

1. Indicia of an investor’s incapacity to exert significant influence over the policy-making decisions of an investee include:

   		the existence of a small group of ‘non-investor’ shareholders representing the majority of voting power in the investee.
   		the investor attempting to gain, but not gaining, board representation.
   		the investor attempting to gain, but not gaining, the financial information necessary to calculate its equity in the fair value of the investee’s net assets at the date of acquisition, or its equity in the post-acquisition earnings of the investee.
   		all of the above.

QUESTION 3

1. The accounting method applied to investments in associates, known as the equity method, is also known as the:

   		significant influence method.
   		multi-line consolidation method.
   		entity method of consolidation.
   		one-line consolidation method.

QUESTION 4

1. Goodwill acquired in an associate is:

   		amortised across its useful life.
   		carried as a separate asset in the accounting records of the investor.
   		written off immediately against the carrying amount of the investment.
   		not subject to amortisation.

QUESTION 5

1. Red Limited acquired a 30% investment in Blue Limited for $1,000,000. Blue declared and paid a dividend of $20,000 during the current year. Red Limited prepares consolidated financial statements. Which of the following is the appropriate entry for Red Limited to record this dividend?

   		DR    Dividends payable                   $6,000                CR                  Cash                                 $6,000
   		DR    Dividend revenue         $6,000                CR                  Investment in associate      $6,000
   		DR    Cash                                        $6,000                CR                  Dividend revenue         $6,000
   		DR    Cash                                           $6,000                CR                  Investment in associate      $6,000