The Typhoon Company uses straight-line depreciation. It lowers an estimated salvage value, resulting in a depreciation expense higher than previous year amounts. In addition to the recording of depreciation for the current year

1. a) A restatement of financial statements and a credit to Accumulated Depreciation

2. b) A restatement of financial statements and a debit to Accumulated Depreciation

3. c) No restatement of financial statements and a credit to Accumulated Depreciation

4. d) No restatement of financial statements and a debit to Accumulated Depreciation

5. e) No restatement of financial statements and a no entry to Accumulated Depreciation

is it the changing in accounting estimate? or change due to an accounting error?

to the changing accounting estimate, do we need to A restatement of financial statements and journal entry

to change due to an accounting error, do we need to A restatement of financial statements and journal entry

how to represent the current and the previous year?

Millco, Inc., acquired a machine that cost $544,000 early in 2016. The machine is expected to last for eighth years, and its estimated salvage value at the end of its life is $75,000. Required:

a. Using straight-line depreciation, calculate the depreciation expense to be recognized in the first year of the machine's life and calculate the accumulated depreciation after the fifth year of the machine's life. Depreciation expense Accumulated depreciation

b. Using declining-balance depreciation at twice the straight-line rate, calculate the depreciation expense for the third year of the machine's life.

c. What will be the net book value of the machine at the end of its eighth year of use before it is disposed of, under each depreciation method? Straight-line depreciation Declining-balance depreciation

Dorsey Co. has expanded its operations by purchasing a parcel of land with a building on it from Bibb Co. for $89,000. The appraised value of the land is $24,000, and the appraised value of the building is $102,000. information Required:

a. Assuming that the building is to be used in Dorsey Co.’s business activities, what cost should be recorded for the land? (Do not round intermediate calculations.)

b. Indicate why, for income tax purposes, management of Dorsey Co. would want as little of the purchase price as possible allocated to land. (Select all that apply.) Land is a current asset. Land is not a depreciable asset. Land value will not reduce taxable income. Land is a depreciable asset. Land value reduces taxable income.

c. Indicate why Dorsey Co. allocated the cost of assets acquired based on appraised values at the purchase date rather than on the original cost of the land and building to Bibb Co. Appraised values are to be used because they represent the historical asset value. Appraised values are to be used because they represent the book value. Appraised values are to be used because they represent the asset's current value.

d. Assuming that the building is demolished at a cost of $11,000 so the land can be used for employee parking, what cost should Dorsey Co. record for the land?

Cash

budget—Basic

  Grenoble Enterprises had sales of

$49,600 in March and

$60,200in April. Forecast sales for​ May, June, and July are

$69,800​,$80,200​,and

$ 99 comma 500$99,500​,

respectively. The firm has a cash balance of

$ 4 comma 500$4,500

on May 1 and wishes to maintain a minimum cash balance of

$ 4 comma 500$4,500.

Given the following​ data, prepare and interpret a cash budget for the months of​ May, June, and July.

​(1) The firm makes

22 %22%

of sales for​ cash,

61 %61%

are collected in the next​ month, and the remaining

17 %17%

are collected in the second month following sale.  

​(2) The firm receives other income of

$ 2 comma 500$2,500

per month.  

​(3) The​ firm's actual or expected​ purchases, all made for​ cash, are

$ 50 comma 400$50,400​,

$ 69 comma 500$69,500​,

and

$ 79 comma 600$79,600

for the months of May through​ July, respectively.  

​(4) Rent is

$ 3 comma 500$3,500

per month.  

​(5) Wages and salaries are

12 %12%

of the previous​ month's sales.  

​(6) Cash dividends of

$ 2 comma 600$2,600

will be paid in June.  

​(7) Payment of principal and interest of

$ 3 comma 800$3,800

is due in June.  

​(8) A cash purchase of equipment costing

$ 5 comma 700$5,700

is scheduled in July.  

​(9) Taxes of

$ 6 comma 500$6,500

are due in June.

E16-16.  

(EPS: Simple Capital Structure)

(LO 4) On January 1, 2018, Wilke Corp. had 480,000 shares of common stock outstanding. During 2018, it had the following transactions that affected the common stock account.

Instructions

(a)  

Determine the weighted-average number of shares outstanding as of December 31, 2018.

(b)  

Assume that Wilke Corp. earned net income of $3,456,000 during 2018. In addition, it had 100,000 shares of 9%, $100 par nonconvertible, noncumulative preferred stock outstanding for the entire year. Because of liquidity considerations, however, the company did not declare and pay a preferred dividend in 2018. Compute earnings per share for 2018, using the weighted-average number of shares determined in part (a).

(c)  

Assume the same facts as in part (b), except that the preferred stock was cumulative. Compute earnings per share for 2018.

(d)  

Assume the same facts as in part (b), except that net income included a loss from discontinued operations of $432,000 (net of tax). Compute earnings per share for 2018.

please explain detail ( i know the answer but i don't understand)

The following data are accumulated by Eco Labs, Inc. in evaluating two competing capital investment proposals:

Determine the expected average rate of return for each proposal. If required, round your answers to one decimal place.

2. TurboCard credit card company offers a loyalty program to its credit card users whereby the credit card company gives the credit card user points for amounts purchased from merchants when using the credit card. These points may be accumulated and redeemed for a number of different goods or services, including cash-back. TurboCard separately enters into arrangements with merchants under which the credit card company provides the financing for the transaction between the merchant and the credit card user, in return for which the credit card company receives a stated fee from the merchant. When the credit card user uses the credit card to make a purchase from a merchant, TurboCard honors its agreement with the merchant and advances the merchant the funding for the amount of the transaction after deducting the fee to which the credit card company is entitled. However, as a result of that transaction, TurboCard now also has an obligation to the credit card user to provide the specified number of points in the loyalty program.

Required:

a. How many performance obligations are involved in these activities?

b. Assuming there are two performance obligations, how would revenue be recognized?

c. Assuming there is only one performance obligation, how would revenue be recognized?

Henrietta is self-employed and would like to know what kind of deduction she could get for her home office. She has gross income from her business of $150,000. Her total home square footage is 2,500. The square footage of her office is 150. Total utilities $600. Total home mortgage interest $10,000. Total real estate taxes $4,000.

a. Explain to Henrietta the options for calculating the home office deduction. b. Based on the information provided what would be Henrietta’s deduction? c. What information should you discuss with Henrietta regarding the requirements of taking this deduction?

QUESTION THREE Sally has decided to go into business to make and sell organic, home-made playdough that is safe for children if they eat it. Business is going well and she incorporates the business, calling it Funtime Pty Ltd (‘Funtime’). Sally appoints herself as the Managing Director, and her husband Brad as a second director. To ensure her privacy, the registered office of the company is the address of her accountant’s firm (a common service the firm provides for its clients). Sally works out that she needs $50,000 to renovate her kitchen at home and buy equipment so that she can make industrial quantities of play dough; $10,000 to buy plastic tubs and labels; and $25,000 to launch a marketing campaign blitz. She tells her family she needs more than $85,000 in capital for the company to be successful in the longer term. Ten of her family members join as shareholders and she issues them each with $20,000 in ordinary shares. Sally is working more than full-time on this venture and draws up a contract to ensure she can earn a salary, at $100,000 per annum, to fairly compensate her for her labour. Sally enters into many contracts with suppliers to obtain supplies, including with Flashy Ltd (‘Flashy’) for $25,000 to purchase online advertising and brochures. Also, she enters into a contract with Glamour Designs Pty Ltd (‘Glamour Designs’) to completely renovate her kitchen (and bathroom) at a cost of $75,000 in three monthly instalments. She explains to representatives of both companies that she is authorised to sign the contracts on behalf of the company. Sally takes out a business loan of $50,000 from the Which Banking Group Ltd (‘WBG’) on behalf of Funtime. She does not disclose to the bank that she is drawing a wage from the company but does agree to secure the loan against Funtime's capital equipment and inventory. On the loan documents Sally signs her name and carefully forges Brad’s signature as he was out of town that day. After nine months in business, the money is almost gone, and Sally is finding it hard to make ends meet. She misses the second payment instalment with Glamour Designs, and is unable to pay a month later when a follow up notice arrives. On 1 October 2020, Sally receives a statutory demand addressed to Funtime from Glamour Designs requiring “immediate payment” for the works done to date on her home. The statutory demand was sent by post to Sally’s home address and is accompanied by a signed letter enclosing a copy of the contract, but there are no specific details of how much is owing on the demand itself. Sally is beside herself with worry, and is not sure how she can find the money to pay all of her creditors. She doesn’t want to worry Brad, as he has already explained that he finds the monthly directors’ meetings pointless. Brad simply agrees with whatever Sally wants to do and is fond of saying, “do whatever you like, this is your company not mine”. Also, with his full-time job working for Flashy, he never had time to read the documentation relating to quotes. Although he did thank Sally for providing business with Flashy, as his boss gave him a surprise $2,500 bonus for securing the work.

REQUIRED: Respond to the above case study problem and answer all questions. Refer to relevant cases and statutory law in your answers as appropriate.

a) Explain to Sally whether the loan contract between Funtime and WBG is legally enforceable.

b) Advise Sally about Funtime’s options in responding to the statutory demand issued by Glamour Designs.

c) Advise Sally whether she or Brad have breached their duties as company directors, and whether any valid defences apply. (Assume all events took place in 2020).

Holly Springs, Inc. contracted with Coldwater Corporation to have constructed a custom-made lathe. The machine was completed and ready for use on January 1, 2018. Holly Springs paid for the lathe by issuing a $220,000 note due in three years. Interest, specified at 2%, was payable annually on December 31 of each year. The cash market price of the lathe was unknown. It was determined by comparison with similar transactions for which 6% was a reasonable rate of interest. Holly Springs uses the effective interest method of amortization. (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. Round your intermediate and final answers to the nearest whole dollar.) Required: 1. Prepare the journal entry on January 1, 2018, for Holly Springs’ purchase of the lathe. 2. Prepare an amortization schedule for the three-year term of the note. 3. Prepare the journal entries to record (a) interest for each of the three years and (b) payment of the note at maturity.

Smoky Mountain Corporation makes two types of hiking boots—the Xtreme and the Pathfinder. Data concerning these two product lines appear below: Xtreme Pathfinder Selling price per unit $ 120.00 $ 87.00 Direct materials per unit $ 65.20 $ 51.00 Direct labor per unit $ 11.20 $ 8.00 Direct labor-hours per unit 1.4 DLHs 1.0 DLHs Estimated annual production and sales 30,000 units 65,000 units The company has a traditional costing system in which manufacturing overhead is applied to units based on direct labor-hours. Data concerning manufacturing overhead and direct labor-hours for the upcoming year appear below: Estimated total manufacturing overhead $ 2,033,000 Estimated total direct labor-hours 107,000 DLHs Required: 1. Compute the product margins for the Xtreme and the Pathfinder products under the company’s traditional costing system. 2. The company is considering replacing its traditional costing system with an activity-based costing system that would assign its manufacturing overhead to the following four activity cost pools (the Other cost pool includes organization-sustaining costs and idle capacity costs): Estimated Overhead Cost Expected Activity Activities and Activity Measures Xtreme Pathfinder Total Supporting direct labor (direct labor-hours) $ 631,300 42,000 65,000 107,000 Batch setups (setups) 876,000 410 320 730 Product sustaining (number of products) 460,000 1 1 2 Other 65,700 NA NA NA Total manufacturing overhead cost $ 2,033,000 Compute the product margins for the Xtreme and the Pathfinder products under the activity-based costing system. 3. Prepare a quantitative comparison of the traditional and activity-based cost assignments.

Two partnerships of A & B and C&D began business on Jan 1^st 2017; each partnership owns one retail appliance store. The two partnerships agree to combine as of April 1^st 2017 to form a new partnership, ABCD Discount Stores. The two businesses agreed upon the following points:

1. Profit and loss ratios.

2. Capital investments. The opening capital investments for the new partnership are to be in the same ratio as the profit and loss sharing ratios for the new partnership. If necessary, certain partners may have to contribute additional cash, and others may have to withdraw cash to bring the capital investments into the proper ratio.
3. Accounts receivable. The partners agreed to set the new partnership’s allowance for bad debts at 3% of the accounts receivable contributed by A&B and 12% of the accounts receivable contributed by C&D.
4. Inventory. The new partnership’s opening inventory is to be valued by the FIFO method. B&M used the FIFO method to value inventory (which approximates its current value), and A&J used the LIFO method. The LIFO inventory represents 85% of its FIFO value.
5. Property and equipment. The partners agree that the building’s current value is approximately 70% of the building’s historical cost, as recorded on each partnership’s books.
6. Unpaid liability. After each partnership’s books were closed on 31^st March 2017, an unrecorded merchandise purchase of $1,500 by A&B was discovered. The merchandise had been sold by 31^st March 2017.
7. The 31^st March 2017 post closing trial balances of the partnerships was as follow.

Required:

1. Prepare the journal entries to record the initial capital contribution after considering the effect of this information. Use separate entries for each of the combining partnerships.
2. Prepare a schedule computing the cash contributed or withdrawn by each partner to bring the initial capital balances into the profit and los sharing ratio.

“If a person owns 80% of the shares in a company then they can make any changes they like to the company’s constitution.” REQUIRED: Critically discuss, stating whether you agree or disagree with the above

The cash account for American Medical Co. at April 30 indicated a balance of $334,985. The bank statement indicated a balance of $388,600 on April 30. Comparing the bank statement and the accompanying canceled checks and memos with the records revealed the following reconciling items:

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Question: Background You are an experienced audit manager at Samway Baker Fitzgerald (SBF), an accounting f...

Background

You are an experienced audit manager at Samway Baker Fitzgerald (SBF), an accounting firm with offices in Orange, Wagga Wagga, Tamworth, Port Macquarie and Albury in NSW, Toowoomba in Queensland and Ballarat in Victoria. In the next 18 months, you hope to be promoted to partner at the Orange office. Although a medium-sized firm by national standards, SBF includes Australia’s largest regionally-based auditing practice. Most of SBF’s audit clients are in the mining, manufacturing and agriculture industries. For various reasons all of those industries are currently under pressure: mining from a downturn in commodity prices, manufacturing from fierce overseas competition, and agriculture from a devastating drought that continues to grip Eastern Australia.

It is a cold Thursday evening in July 2019 and you are meeting with your audit team to finalise the 30 June 2019 year-end audit for Far Faraway Pastoral Limited (FFA), a major agricultural company based in Orange, listed on the Australian Stock Exchange (ASX), and one of SBF’s largest clients by fee revenue. During the meeting, three of your audit seniors each bring a potential issue to your attention.

Samantha Gabrielle was responsible for reviewing FFA’s corporate governance arrangements and reports that ‘at 30 June 2019 the board of FFA comprises: CEO Bruce Blanch, the CFO Alexandra Rose and three non-executive directors: Kevin Oliver (a former executive at Macquarie Bank who has an 11 percent shareholding in FFA and is Chair of the Board), Matthew James (a retired farmer who was a major supplier to FFA), and Jacqueline Grace (an Orange-based orthopaedic surgeon).’

Steve Barker was responsible for reviewing the revenue cycle and argues that ‘an ASIC report on their recent review of the financial statements of some major agricultural companies now means that FFA’s method for recognising revenues on its sale of cattle is very questionable’. In the 30 June 2019 financial year just ended, cattle sales constituted nearly 50% of all revenue recorded by FFA. Steve reports that he has already discussed the matter with the senior partner on the FFA audit, Skye Martin, who said that the method has been used for 10 years and that no adjustments to the 30 June 2019 financial statements were to be made. Steve reports that he then told Skye Martin he accepted her decision but wanted to include a dissenting statement in the audit working papers. She refused to permit such a statement in the working papers but offered to write a letter to you as the FFA audit manager acknowledging full responsibility for the 30 June 2019 audit. Steve alleges that as he left his meeting with Skye Martin, she made some negative comments about your chances of being promoted to partner in the near future.

Kate Hammond was responsible for reviewing the operations of an FFA subsidiary based in Western Australia (WA), called TRC, that sells rural and farm supplies. You are aware that whilst TRC is the market leader in WA and has a strong balance sheet, it was making losses for the past two years. During the previous financial year ended 30 June 2018, TRC significantly upgraded its accounting information system to more effectively manage inventory sales. TRC hired a well-regarded IT consultant to undertake the upgrade which was completed on 31 March 2018.

As SBF did not have offices in WA, you organised an independent expert based in Perth to review and evaluate the accounting information system. The independent expert concluded that the system appeared reliable and that the changeover was correctly carried out. At 30 June 2018 year-end, this new system had been in place for 3 months, and TRC management reported that they were happy with the way it was operating. In early 2019, given drought pressures on its core business in Eastern Australia, FFA accepted an offer from WA-based agricultural company McCarran Pastoral, who already owned 15% of TRC, to sell their remaining 85% interest to them. The agreed sale price was $45.8m, equivalent to FFA’s 85% share of TRC’s net assets. The sale was finalised on 15 April 2019, but half the sale price is not due to be paid until 15 August 2019, after the 30 June 2019 audit of FFA has been completed.

Kate reports that significant errors in the changeover of the accounting information system back in March 2018 have only just been discovered in July 2019, more than 15 months later. The errors resulted in the inventory at TRC stores being misstated by $16.6m and net assets by the same amount. As a result McCarran Pastoral is planning to withhold most of its remaining settlement payment to FFA, and FFA is planning to sue SBF for negligence for its loss of that payment.

Required:

Question  

What should you do in response to the information provided by Steve Barker? With reference to the Code of Ethics for Professional Accountants, use the following American Accounting Association (AAA) Model template to guide your answer: