1. What is treasury stock? Explain and discuss some of the reasons a corporation may purchase treasury stock.

2. What is a stock dividend? Describe and discuss reasons why a company would choose to give dividends in the form of stock rather than cash. In your response explain how issuance of a stock dividend affects the accounting records.

Pureform, Inc., uses the FIFO method in its process costing system. It manufactures a product that passes through two departments. Data for a recent month for the first department follow: Units Materials Labor Overhead Work in process inventory, beginning 65,000 $ 68,500 $ 5,700 $ 21,400 Units started in process 617,000 Units transferred out 610,000 Work in process inventory, ending 72,000 Cost added during the month $ 1,484,100 $ 268,290 $ 327,910 The beginning work in process inventory was 75% complete with respect to materials and 60% complete with respect to labor and overhead. The ending work in process inventory was 55% complete with respect to materials and 35% complete with respect to labor and overhead. Required: 1. Compute the first department's equivalent units of production for materials, labor, and overhead for the month. 2. Compute the first department's cost per equivalent unit for materials, labor, overhead, and in total for the month. (Round your answers to 2 decimal places.)

Direct Labor and Direct Materials Variances, Journal Entries

Jameson Company produces paper towels. The company has established the following direct materials and direct labor standards for one case of paper towels:

During the first quarter of the year, Jameson produced 45,000 cases of paper towels. The company purchased and used 135,700 pounds of paper pulp at $0.38 per pound. Actual direct labor used was 91,000 hours at $12.10 per hour.

Required:

Instructions for parts 1 and 2: If a variance is zero, enter "0" and select "Not applicable" from the drop down box.

1. Calculate the direct materials price and usage variances.

2. Calculate the direct labor rate and efficiency variances.

3. Prepare the journal entries for (1) the direct materials price variance, (2) the direct materials usage variance, and (3) the direct labor variances. If an amount box does not require an entry, leave it blank or enter "0".

On January 1, 2017, Fisher Corporation purchased 40 percent (90,000 shares) of the common stock of Bowden, Inc. for $980,000 in cash and began to use the equity method for the investment. The price paid represented a $48,000 payment in excess of the book value of Fisher's share of Bowden's underlying net assets. Fisher was willing to make this extra payment because of a recently developed patent held by Bowden with a 15-year remaining life. All other assets were considered appropriately valued on Bowden's books.

Bowden declares and pays a $90,000 cash dividend to its stockholders each year on September 15. Bowden reported net income of $400,000 in 2017 and $348,000 in 2018. Each income figure was earned evenly throughout its respective year.

On July 1, 2018, Fisher sold 10 percent (22,500 shares) of Bowden's outstanding shares for $338,000 in cash. Although it sold this interest, Fisher maintained the ability to significantly influence Bowden's decision-making process.

Prepare the journal entries for Fisher for the years of 2017 and 2018. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round intermediate calculations. Round your final answers to the nearest whole dollar.)

• 1 Record cost of 90,000 shares of Bowden Company.

• 2 Record the annual dividend declared and received from Bowden.

• 3 Record accrue 2017 income based on 40% ownership of Bowden.

• 4 Record amortization of $48,000 excess patent fair value [indicated in problem] over 15 years.

• 5Record the entry to accrue ½ year income of 40% ownership.

• 6Record ½ year amortization of patent to establish correct book value for investment as of 7/1/18.

• 7Record 22,500 shares of Bowden Company sold; investment basis computed below.

• 8Record annual dividend declared and received.

• 9 Record ½ year income based on remaining 30% ownership.

• 10Record ½ year of patent amortization.

Pot Limited (Ltd) uses a perpetual inventory system. The company concluded the following transactions for material PSR 1 during April 2018:

Required:

Using the FIFO method of inventory valuation, calculate the cost of material PSR1 issued to production during April 2018.                

The following information is available to reconcile Branch Company’s book balance of cash with its bank statement cash balance as of July 31, 2017.

1. On July 31, the company’s Cash account has a $25,648 debit balance, but its July bank statement shows a $27,964 cash balance.
2. Check No. 3031 for $1,510 and Check No. 3040 for $747 were outstanding on the June 30 bank reconciliation. Check No. 3040 is listed with the July canceled checks, but Check No. 3031 is not. Also, Check No. 3065 for $531 and Check No. 3069 for $2,278, both written in July, are not among the canceled checks on the July 31 statement.
3. In comparing the canceled checks on the bank statement with the entries in the accounting records, it is found that Check No. 3056 for July rent expense was correctly written and drawn for $1,280 but was erroneously entered in the accounting records as $1,270.
4. The July bank statement shows the bank collected $5,500 cash on a noninterest-bearing note for Branch, deducted a $28 collection expense, and credited the remainder to its account. Branch had not recorded this event before receiving the statement.
5. The bank statement shows an $805 charge for a $795 NSF check plus a $10 NSF charge. The check had been received from a customer, Evan Shaw. Branch has not yet recorded this check as NSF.
6. The July statement shows a $8 bank service charge. It has not yet been recorded in miscellaneous expenses because no previous notification had been received.
7. Branch’s July 31 daily cash receipts of $6,652 were placed in the bank’s night depository on that date but do not appear on the July 31 bank statement.

Problem 6-4A Part 1

Required:

1. Prepare the bank reconciliation for this company as of July 31, 2017.

D5 Assume that your company sells portable housing to both general contractors and the government. It sells jobs to contractors on a bid basis. A contractor asks for three bids from different manufacturers. The combination of low bid and high quality wins the job. However, jobs sold to the government are bid on a cost-plus basis. This means the price is determined by adding all costs plus a profit based on cost at a specified percent, such as 10%. You observe that the amount of overhead applied to government jobs is higher than that applied to contract jobs. These allocations concern you. Point: Students could compare responses and discuss differences in concerns with allocating overhead. Required Write a half-page memo to your company’s chief financial officer outlining your concerns with overhead allocation.

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Quick Fix Ltd is a manufacturing company engaged in the production of adhesives. The company has not performed well over the past three financial years.

In order to improve on the poor past profits, the board approved a R1 000 000 advertising promotion during the year ended 31 December 2018 in order to generate increased sales in the future. The advertising promotion took place (and was paid for) during December 2018.

The accountant insists on recognizing the R1 000 000 payment as an asset at 31 December 2018. His reasoning is that future sales will increase as the number of customers grows due to the advertising campaign.

Required:

1.1 Discuss whether you agree with the accountant, making reference to the framework. Provide an alternate treatment if you disagree.   (20)

1.2 One of the most important characteristics that a set of financial statements should have is reliability. Explain, in terms of the framework, how to ensure that a set of financial statements is reliable.   (5)

1. What are the components of an ordinary and necessary business expense?

2. List 4 examples of ordinary and necessary business expenses a business can

generally take.

3. List 4 examples of business expenses that are not ordinary and necessary business

expenses.

4. Define depreciation.

5. On January 1, 2018, John Inc., purchased for $10,000, a copier to use in its

business. The copier is a 5-year property. John Inc. elects to use the straight-line

method of depreciation. What is the amount of John Inc.’s depreciation for 2018?

Marko Company sold spray paint equipment to Spain for 4,000,000 pesetas (P) on October 1, with payment due in six months. The exchange rates were

Required:
a. Did the dollar strengthen or weaken relative to the peseta during the period from October 1 to December 31? Did it strengthen or weaken between January 1 and April 1 of the next year?

b. Prepare all required journal entries for Marko as a result of the sale and settlement of the foreign transaction, assuming that its fiscal year ends on December 31. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Describe (150 to 180 words) how the assigning of numbers in the Chart of Accounts can assist in identifying accounts particularly with regard to organisations with many locations.

Sydney Steelworks is engaged in a costing dispute with Public Works Canada. The company has a cost-plus contract to supply specialty steel that has no evident market price. The contract calls for Sydney to be reimbursed for its manufacturing costs plus 35%. An independent shipper hauls the steel from the Sydney plant to the various construction sites.

The variable cost of manufacturing the steel is $200 per ton, which is not in dispute. The issue concerns the allocation of fixed manufacturing costs to this product. The current annual fixed manufacturing cost at Sydney is $300,000,000. The plant is operating at 40% of practical capacity, which is measured in tons. Sydney computes the fixed manufacturing overhead rate by dividing the fixed manufacturing cost by the planned level of operations. This has resulted in charging this contract a rate of $120 per ton for fixed manufacturing costs.

Cost analysts at Public Works have objected, citing industry evidence that, on average, steel companies are using 70% of their practical capacity.

Required:

1. Compute the contract price per ton using Sydney’s approach.
2. Compute the contract price per ton if Sydney uses average industry capacity to compute the fixed manufacturing overhead rate.
3. If you were hired to arbitrate this dispute, how would you resolve it?
4. If you were a Public Works Canada auditor, what would you recommend based on this experience?

Pina Colada Corp. purchased equipment on January 1, 2021 for $148,500. It is estimated that the equipment will have a $8,250 salvage value at the end of its 5-year useful life. It is also estimated that the equipment will produce 165,000 units over its 5-year life.

Answer the following independent questions.

Compute the amount of depreciation expense for the year ended December 31, 2021 using the straight-line method of depreciation.

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If 16,000 units of product are produced in 2021 and 24,000 units are produced in 2022, what is the book value of the equipment at December 31, 2022? The company uses the units-of-activity depreciation method.

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If the company uses the double-declining-balance method of depreciation, what is the balance of the Accumulated Depreciation—Equipment account at December 31, 2023?

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There was only one current agency conflict that I found and that was the improperly handling of customers’ accounts by the San Francisco bank Wells Fargo. In this case, the employees of this bank opened accounts and transferred funds that were not wanted by the customers. In doing so the employees were rewarded with compensation due to selling products and opening accounts (Competitive Enterprise Institute). Possible solutions to resolving problems within the agency are to audit any work done by management, investors and analysts need to monitor anyone that is performing poorly, get rid of upper management that is not performing properly, and vote for a new board of directors if shareholders are not satisfied with results. If managers focus on the shareholders interest rather than their own then most of these problems can be solved.

On July 1, Year 1, Danzer Industries Inc. issued $68,000,000 of 20-year, 11% bonds at a market (effective) interest rate of 14%, receiving cash of $54,404,080. Interest on the bonds is payable semiannually on December 31 and June 30. The fiscal year of the company is the calendar year.

Required:

For all journal entries: If an amount box does not require an entry, leave it blank.

1. Journalize the entry to record the amount of cash proceeds from the issuance of the bonds.

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2. Journalize the entries to record the following:

a. The first semiannual interest payment on December 31, Year 1, and the amortization of the bond discount, using the interest method. (Round to the nearest dollar.)

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b. The interest payment on June 30, Year 2, and the amortization of the bond discount, using the interest method. (Round to the nearest dollar.)

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3. Determine the total interest expense for Year 1.
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