BuyCo, Inc. holds 22 percent of the outstanding shares of Marqueen company and appropriately applies the equity method of accounting. Excess cost amortization (related to a patent) associated with this investment amounts to $11,700 per year. For 2017, Marqueen reported earnings of $116,000 and declares cash dividends of $34,000. During that year, Marqueen acquired inventory for $45,000, which it then sold to BuyCo for $90,000. At the end of 2017, BuyCo continued to hold merchandise with a transfer price of $26,000.

1. What Equity in Investee Income should BuyCo report for 2017?

2. How will the intra-entity transfer affect BuyCo's reporting in 2018?

3. If BuyCo had sold the inventory to Marqueen, how would the answers to (a) and (b) have changed?

4. 	a. Equity in investee income b. Equity accrual for 2018 will be Yes or No    c. If the inventory was sold, would your answers above change? Yes or No

Lou Barlow, a divisional manager for Sage Company, has an opportunity to manufacture and sell one of two new products for a five-year period. His annual pay raises are determined by his division’s return on investment (ROI), which has exceeded 20% each of the last three years. He has computed the cost and revenue estimates for each product as follows:

The company’s discount rate is 18%.

Click here to view Exhibit 13B-1 and Exhibit 13B-2, to determine the appropriate discount factor using tables.

Required:

1. Calculate the payback period for each product.

2. Calculate the net present value for each product.

3. Calculate the internal rate of return for each product.

4. Calculate the project profitability index for each product.

5. Calculate the simple rate of return for each product.

6a. For each measure, identify whether Product A or Product B is preferred.

6b. Based on the simple rate of return, Lou Barlow would likely:

During the most recent year, Boston (PTY) Ltd has produced the following data:

Required:

1. How many units are in ending inventory

2. Using absorption costing, calculate the per unit -product cost. What is the value of ending inventory?

3. Using variable costing, calculate the per unit -product cost. What is the value of ending inventory?

4. Prepare an income statement using variable costing.

5. Prepare an income statement using absorption costing.

Income recognition for a contractor. On October 15, 2010, Flanikin Construction Company contracted to build a shopping center at a contract price of $180 million. The schedule of expected and actual cash collections and contract costs is as follows:

Year Cash collections from Customers Estimated and Actual Cost Incurred

2010 $36,000,000 $12,000,000

2011 45,000,000 36,000,000

2012 45,000,000 48,000,000

2013 54,000,000 24,000,000

   $180,000,000 $120,000,000

A) Calculate the amount of revenue, expense, and net income for each of the four years under the following revenue recognition methods:

(1)    Percentage-of-completion method.

(2)    Completed contract method.

B) Show the journal entries Flanikin will make in 2010, 2011, 2012, and 2013 for this contract. Flanikin accumulates contract costs in a Contract in Process account. Although the costs involve a mixture of cash payments, credits to assets, and credits to liability accounts, assume for purposes of this problem that all costs are recorded as credits to Accounts Payable.

C) Which method do you believe provides the better measure of Flanikin Construction Company’s performance under the contract? Why?

Can somebody please show me how to calculate this in EXCEL. Step by step excel calculations need to be shown with screenshots. Thank you.

Jan 1, 2017, Ky Corporation issues $4,000,000 of 10 percent, five year bonds at 92.79. Interest is paid ANNUALLY, and the effective interest rate of 12% is used for amortization.

What amount was received for the bonds?

Make Journal entries for the Jan 1 issuance of the bond and the first two interest transactions: December 31, 2017 (accrual) and Dec 31, 2018 (accrual).

The Ste. Marie Division of Pacific Media Corporation just started operations. It purchased depreciable assets costing $43.0 million and having a four-year expected life, after which the assets can be salvaged for $8.6 million. In addition, the division has $43.0 million in assets that are not depreciable. After four years, the division will have $43.0 million available from these nondepreciable assets. This means that the division has invested $86.0 million in assets with a salvage value of $51.6 million. Annual depreciation is $8.6 million. Annual operating cash flows are $21.7 million. In computing ROI, this division uses end-of-year asset values in the denominator. Depreciation is computed on a straight-line basis, recognizing the salvage values noted. Ignore taxes. Required: a. & b. Compute ROI, using net book value and gross book value for each year. (Enter your answers as a percentage rounded to 1 decimal place (i.e., 32.1).)

Arlington Clothing, Inc., shows the following information for its two divisions for year 1: Lake Region Coastal Region Sales revenue $ 4,160,000 $ 13,070,000 Cost of sales 2,691,300 6,535,000 Allocated corporate overhead 249,600 784,200 Other general and administration 553,900 3,755,000 Required: a. Compute divisional operating income for the two divisions. Ignore taxes. (Enter your answers in thousands of dollars rounded to 1 decimal place.) b-1. What are the gross margin and operating margin percentages for both divisions? (Enter your answers as a percentage rounded to 2 decimal places (i.e., 32.12).) b-2. How well have these divisions performed? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer.) The gross margin percentage is higher in Lake Region. Divisional income is greater in Coastal Region. The gross margin percentage is higher in Coastal Region. Corporate overhead appears to be allocated on the basis of revenues. The operating margin is greater in Lake Region. Divisional income is greater in Lake Region.

Silven Industries, which manufactures and sells a highly successful line of summer lotions and insect repellents, has decided to diversify in order to stabilize sales throughout the year. A natural area for the company to consider is the production of winter lotions and creams to prevent dry and chapped skin.

After considerable research, a winter products line has been developed. However, Silven’s president has decided to introduce only one of the new products for this coming winter. If the product is a success, further expansion in future years will be initiated.

The product selected (called Chap-Off) is a lip balm that will be sold in a lipstick-type tube. The product will be sold to wholesalers in boxes of 24 tubes for $11 per box. Because of excess capacity, no additional fixed manufacturing overhead costs will be incurred to produce the product. However, a $99,000 charge for fixed manufacturing overhead will be absorbed by the product under the company’s absorption costing system.

please just answer 5,6,7

Using the estimated sales and production of 110,000 boxes of Chap-Off, the Accounting Department has developed the following manufacturing cost per box:

The costs above relate to making both the lip balm and the tube that contains it. As an alternative to making the tubes for Chap-Off, Silven has approached a supplier to discuss the possibility of buying the tubes. The purchase price of the supplier's empty tubes would be $1.70 per box of 24 tubes. If Silven Industries stops making the tubes and buys them from the outside supplier, its direct labor and variable manufacturing overhead costs per box of Chap-Off would be reduced by 10% and its direct materials costs would be reduced by 20%.

Required: (do not do 1-4, please begin at question 5)

1. If Silven buys its tubes from the outside supplier, how much of its own Chap-Off manufacturing costs per box will it be able to avoid? (Hint: You need to separate the manufacturing overhead of $2.30 per box that is shown above into its variable and fixed components to derive the correct answer.)

2. What is the financial advantage (disadvantage) per box of Chap-Off if Silven buys its tubes from the outside supplier?

3. What is the financial advantage (disadvantage) in total (not per box) if Silven buys 110,000 boxes of tubes from the outside supplier?

4. Should Silven Industries make or buy the tubes?

5. What is the maximum price that Silven should be willing to pay the outside supplier for a box of 24 tubes?

6. Instead of sales of 110,000 boxes of tubes, revised estimates show a sales volume of 150,000 boxes of tubes. At this higher sales volume, Silven would need to rent extra equipment at a cost of $60,000 per year to make the additional 40,000 boxes of tubes. Assuming that the outside supplier will not accept an order for less than 150,000 boxes of tubes, what is the financial advantage (disadvantage) in total (not per box) if Silven buys 150,000 boxes of tubes from the outside supplier? Given this new information, should Silven Industries make or buy the tubes?

7. Refer to the data in (6) above. Assume that the outside supplier will accept an order of any size for the tubes at a price of $1.70 per box. How many boxes of tubes should Silven make? How many boxes of tubes should it buy from the outside supplier?

The Walton Toy Company manufactures a line of dolls and a sewing kit. Demand for the company’s products is increasing, and management requests assistance from you in determining an economical sales and production mix for the coming year. The company has provided the following data:

The following additional information is available:  

1. The company’s plant has a capacity of 94,500 direct labor-hours per year on a single-shift basis. The company’s present employees and equipment can produce all five products.

2. The direct labor rate of $10 per hour is expected to remain unchanged during the coming year.

3. Fixed manufacturing costs total $585,000 per year. Variable overhead costs are $3 per direct labor-hour.

4. All of the company’s nonmanufacturing costs are fixed.

5. The company’s finished goods inventory is negligible and can be ignored.

Required:

1. How many direct labor hours are used to manufacture one unit of each of the company’s five products?

2. How much variable overhead cost is incurred to manufacture one unit of each of the company’s five products?

3. What is the contribution margin per direct labor-hour for each of the company’s five products?

4. Assuming that direct labor-hours is the company’s constraining resource, what is the highest total contribution margin that the company can earn if it makes optimal use of its constrained resource?

5. Assuming that the company has made optimal use of its 94,500 direct labor-hours, what is the highest direct labor rate per hour that Walton Toy Company would be willing to pay for additional capacity (that is, for added direct labor time)?

Auditing case 2:

audit planning and risk assessment of a scooter trader

Ivy Bishnoi is preparing a report for the engagement partner of an existing client, Scooter Ltd., an importer of scooters and other low-powered motorcycles. Ivy has been investigating certain aspects of Scooter Ltd.’s business given the change in economic conditions over the past 12 months. She has found that Scooter Ltd.’s business, which experienced rapid growth over its first five years in operation, has slowed significantly during the last year. Initially, sales of scooters were boosted by good economic conditions and solid employment growth, coupled with rising gas prices. Consumers needed transport to get to work and the high gas prices made the relatively cheap running costs of scooters seem very attractive. In addition, the low purchase price of a small motorcycle or scooter, at between $3,000 and $8,000, meant that almost anyone who had a job could obtain a loan to buy one.

However, Ivy has found that the sales of small motorcycles and scooters have slowed significantly and that all importers of these products, not just Scooter Ltd., are being adversely affected. The onset of an economic recession has restricted employment growth, and those people who still have jobs are less certain of continued employment. In addition, the slowdown in the world economy has caused oil prices to fall, further reducing demand for this type of economical transport. Ivy has also discovered that, due to the global financial crisis, the finance company used by Scooter Ltd.’s customers to finance. the purchase of scooters and motorcycles has announced that it will not be continuing to provide loans for any type of vehicle with a purchase price of less than $10,000.

Required:

(a) Identify the issues that potentially have an impact on the audit of Scooter Ltd.

(b) Explain how each issue affects the audit plan by identifying the risks and the financial statement accounts that require closer examination

Source: Campbell et. al (2013), Cloud 9 Pty Ltd: An Audit Case Study, Canada:

Case 1 Cost-Volume-Profit (CVP) analysis + marginal analysis

You are the manager in Bright company that produces paper bags for food shops and supermarkets. You are provided with following information:

• Bright company is able to produce 60,000 packs of bags.
• Its current sale volume is 50,000 packs of bags per year. This has achieved its maximum sale force.
• Current selling price is $10 per pack of bags.
• Variable costs in total are $200,000;
• Fixed costs are $ 125,000.

A newly established shop has approached you, informing a willingness of purchasing 5,000 packs of bags per year at a price of $6 for each bag. If this proposal is accepted, unit variable costs would remain the same however fixed costs would increase by $6,000 per year.

Required:

1. Discuss whether this proposal is worthwhile from a financial point of view.

2. Analyze, if your competitor in the paper industry knows the above cost and price information, what action(s) may the competitor take to beat you in the market.

what needs to consider when determining property reversionary value? using DCF

Flounder Inc. owns and operates a number of hardware stores in the New England region. Recently, the company has decided to locate another store in a rapidly growing area of Maryland. The company is trying to decide whether to purchase or lease the building and related facilities.

Purchase: The company can purchase the site, construct the building, and purchase all store fixtures. The cost would be $1,861,400. An immediate down payment of $406,400 is required, and the remaining $1,455,000 would be paid off over 5 years at $354,200 per year (including interest payments made at end of year). The property is expected to have a useful life of 12 years, and then it will be sold for $508,400. As the owner of the property, the company will have the following out-of-pocket expenses each period.

Property taxes (to be paid at the end of each year)    $41,860

Insurance (to be paid at the beginning of each year) 26,960

Other (primarily maintenance which occurs at the end of each year) 17,170

   $85,990

Lease: First National Bank has agreed to purchase the site, construct the building, and install the appropriate fixtures for Flounder Inc. if Flounder will lease the completed facility for 12 years. The annual costs for the lease would be $266,320. Flounder would have no responsibility related to the facility over the 12 years. The terms of the lease are that Flounder would be required to make 12 annual payments (the first payment to be made at the time the store opens and then each following year). In addition, a deposit of $104,900 is required when the store is opened. This deposit will be returned at the end of the 12th year, assuming no unusual damage to the building structure or fixtures.

Compute the present value of lease vs purchase. (Currently, the cost of funds for Flounder Inc. is 11%.)

Adden Company signs a lease agreement dated January 1, 2016, that provides for it to lease heavy equipment from Scott Rental Company beginning January 1, 2016. The lease terms, provisions, and related events are as follows: 1. The lease term is 4 years. The lease is noncancelable and requires annual rental payments of $20,000 to be paid in advance at the beginning of each year. 2. The cost, and also fair value, of the heavy equipment to Scott at the inception of the lease is $68,036.62. The equipment has an estimated life of 4 years and has a zero estimated residual value at the end of this time. 3. Adden agrees to pay all executory costs. 4. The lease contains no renewal or bargain purchase option. 5. Scott’s interest rate implicit in the lease is 12%. Adden is aware of this rate, which is equal to its borrowing rate. 6. Adden uses the straight-line method to record depreciation on similar equipment. 7. Executory costs paid at the end of the year by Adden are: 2016 2017 Insurance, $1,500 Insurance, $1,300 Property taxes, $6,000 Property taxes, $5,500 Required: 1. Next Level Examine and evaluate each capitalization criteria and determine what type of lease this is for Adden. 2. Prepare a table summarizing the lease payments and interest expense for Adden. 3. Prepare journal entries for Adden for the years 2016 and 2017.

Cordova manufactures three types of stained glass window, cleverly named Products A, B, and C. Information about these products follows:

Cordova currently is limited to 60,000 labor hours per month. Cordova’s marketing department has determined the following demand for its products:

Required:
Given the company’s limited resource and expected demand, compute how many units of each product Cordova should produce to maximize its profit. (Enter the products in the sequence of their preferences; the product with first preference should be entered first. Round your answers to the nearest whole number.)