Henry Hawkins Industries of Batavia, Ohio, manufactures and sells one product. The company assembled the following projections for its first year of operations:

During its first year of operations Henry Hawkins expects to produce 25,000 units and sell 20,000 units. The budgeted selling price of the company’s only product is $66 per unit.

Required:

(answer each question independently by referring to the original data):

1. Assuming that Henry Hawkins' projections are accurate, what will be its absorption costing net operating income (loss) in its first year of operations?

2. Henry Hawkins is considering investing in a higher quality raw material that will increase its direct materials cost by $1 per unit. It estimates that the higher quality raw material will increase sales by 1,000 units. What will be the company’s revised absorption costing net operating income (loss) if it invests in the higher quality raw material and continues to produce 25,000 units?

3. Henry Hawkins is considering raising its selling price by $1.00 per unit with an expectation that it will lower unit sales by 1,500 units. What will be the company’s revised absorption costing net operating income (loss) if it raises its price by $1.00 and continues to produce 25,000 units?

4. Assuming that Henry Hawkins' projections are accurate, what will be its variable costing net operating income (loss) in its first year of operations?

5. Henry Hawkins is considering investing in a higher quality raw material that will increase its direct materials cost by $1 per unit. It estimates that the higher quality raw material will increase sales by 1,000 units. What will be the company’s revised variable costing net operating income (loss) if it invests in the higher quality raw material and continues to produce 25,000 units?

6. Henry Hawkins is considering raising its selling price by $1.00 per unit with an expectation that it will lower unit sales by 1,500 units. What will be the company’s revised variable costing net operating income (loss) if it raises its price by $1.00 and continues to produce25,000 units?

7. What is Henry Hawkins' break-even point in unit sales? What is its break-even point in dollar sales?

8. What is the company’s projected margin of safety in its first year of operations?

GHI Ltd. manufactures two different chairs, Trippo and Trappo, for which the following information is available:

Costs per unit                              Trippo                Trappo

Direct materials                               75                     90

Direct labour                                  60                     80

Variable overhead                              105                    128

Fixed overhead                                 90                     112

Total costs per unit                          330                    410

Price                                          360                    450

Units sold                               1,500 units            1,000 units

The average wage rate including fringe benefits is 20 per hour. The plant has a maximum capacity of 10,000 direct labour hours for each period. The current production uses only 8,500 direct labour hours of the capacity. GHI Ltd. can hire additional direct labour up to its maximum capacity of 10,000 labour hours.

a)    A new customer has offered to buy 400 units of Trippo if GHI Ltd.     lowers its price to 300 per unit. How many labour hours will be required to produce 400 units of Trippo?

b)    How much will GHI’s profit increase or decrease if it accepts this

proposal? (Assume all other prices will remain as before.)

c)    The next period the same customer wants to buy 600 units of Trippo    at the same price (300 per unit). He underscores that he will find      another supplier if GHI is not able to deliver 600 units to that      price. How much will the profits increase or decrease if it accepts this proposal?

The sales manager of GHI Ltd. wants to keep this new customer because this is a well-known business. Thus, he thinks that the prices to the other customers could be increased a little in order to compensate for the lower price that is achieved regarding the new customer. He wants to have a piece of advice from you.

d)    What is your advice? Please underpin your suggestions.

Nouveaux Toys Inc., manufactures plastic rubber ducks. In June, Nouveaux reported the following data:

1. All direct materials are added at the beginning of the process.
2. Beginning work-in-process consisted of 3,000 units, 30 percent complete with respect to direct labor and overhead. Costs in beginning inventory included direct materials, $450; and conversion costs, $138.
3. Costs added to production during the month were direct materials, $950; and conversion costs, $2,174.50.
4. Inspection takes place at the end of the process. Malformed units are discarded. During normal operations, 0.5% of the units started will end up being malformed and discarded.
5. During the month, 7,000 units were started and 8,000 good units were transferred out to Finishing. All other units finished were malformed and discarded. There were 1,000 units that remained in ending work in process, 55 percent complete.
6. Remember to round your decimal points to four places for cost/EU rates.

Required:

1. Prepare a physical unit flow schedule.
2. Calculate the 1) cost of goods transferred out, 2) ending work-in-process, and 3) loss due to spoilage using the weighted average method.
3. Prepare the journal entries to record 1) and 3) above. Reconcile these journal entries with beginning work in process to ensure that ending work in process matches 2).
4. Calculate the 1) cost of goods transferred out, 2) ending work-in-process, and 3) loss due to spoilage using the FIFO method.
5. Prepare the journal entries to record 1) and 3) above. Reconcile these journal entries with beginning work in process to ensure that ending work in process matches 2).
6. Assume instead that inspection takes place when units are 40 percent complete. How does this change the number of units spoiled? How does this change the number of units that were abnormal spoilage v. normal spoilage?

Q2

You have been asked by the management of Mok Ltd to assist with the preparation of the income tax entries for the year ended 30 June 2018. The company reported a profit before tax for the year to 30 June 2018 of $900 000. The company’s statements of financial position include assets and liabilities as follows:

(a) The company is entitled to claim a tax deduction of 125% on development costs when incurred.

(b) Interest revenue of $10 000 is included in the profit for the year to 30 June 2018.

(c) Expenses included in profit for the year to 30 June 2018 are as follows:

   parking and other fines $10 000

   depreciation expense for plant $70 000

   doubtful debts expense $25 000

   amortisation of development asset $50 000

   long-service leave expense $36 000.

(d) Accumulated depreciation on plant for tax purposes is $280 000 on 30 June 2018 and $180 000 on 30 June 2017. There have been no acquisitions or disposals of plant during the current year.

(e) The corporate tax rate is 30%.

Required

Complete the current tax and deferred tax worksheets of Mok Ltd and prepare the tax entries for 30 June 2018.

Any amount received or accrued by a taxpayer from an educational policy, which has
been expended for providing education or training at a recognised educational
institution of a child or stepchild is exempt according to Section 16(1)(ab).
On the last day of the year of assessment, the child or stepchild is not required to be? a) Not over the age of 26 years b) Living with the parents c) All of the above d) None of the above

6. In the case Lategan v CIR (CPD 1926), the word accrued was held to mean: a) ‘’accrued to” b) “to which he has become entitled” c) “received on his own behalf” d) “received for his benefit”

7. Jackson Samuel is a 27-year old writer who is a Namibian resident. He paid a royalty of
N$ 100 000 by Crazy Films for the right to use one of his copyrighted books in the next
film.
The royalty payment received will be included in Jackson’s Gross Income for the year. a) False b) True

8. What is the tax treatment of the royalties received? a) Included in Gross Income only b) Included in Gross Income and then Exempt c) Not Taxable d) Specifically deductible

Page 12 of 25


9. Mrs Martha retires and is paid a pension retirement of N$10 000 per month from a fund
in Botswana. She has spent the last 9 years of her 16 years of service in Namibia. What
is the amount deemed to be Namibian source income for the specific year of
assessment? a) N$ 5 625 b) N$ 90 000 c) N$ 67 500 d) N$ 17 778

10. The onus is on the tax payer to prove that certain amounts are of a capital nature. If
there is a dispute and the case goes to court, the court will take into account certain
factors in reaching a decision. Which of the following is not a factor to consider? a) The intention of the taxpayer b) The objective of the taxpayer c) The period the assets are held d) The type of asset held

11. Ms Charon has been working in Namibia for the past 5 months. She is an employee of a
company operating in Britain and was sent to Namibia to supervise the opening of the
company’s new branch in Oshakati. The salary that she has earned for the five months is
taxable in Namibia. a) True b) False

12. Sara Maneti has recently retired after a long career in the mining industry of Namibia.
Upon retirement, she received N$ 250 000 lump sum from her employer. She used N$
180 000 to purchase an annuity from a foreign insurance company.

Page 13 of 25

What amount should the lump sum from employer be in order to be taxable in three
equal instalments, starting in the year of payment and two following years? a) Over N$ 500 000 b) Over N$ 300 000 c) Over N$ 200 000 d) Under N$ 300 000

13. The following is a requirement for the lump sum from employer exemption. a) The person attained the age of fifty b) Termination of service due to criminal conviction c) Termination of service due to end of employment contract d) The minister is satisfied that the person is retrenched

14. An employee receives housing benefits provided in terms of approved housing schemes.
Where the remuneration of the employee does not exceed N$ 15 000 per annum, the
housing benefit is exempted as follows: a) One third of the benefit is exempt b) Benefit is fully exempted c) Benefit does not qualify for exemption d) Two third of the benefit is exempt

15. Where an employee’s remuneration exceeds N$ 15 000 per annum but not N$ 30 000
the housing benefit is reduced by Y% in the formula
? = 100−
? 150
Where X in the formula represents: a) Remuneration less housing benefit b) Employee’s remuneration c) Amount of housing benefit d) Excess of employee’s remuneration

Page 14 of 25

16. According to Section 16(1)(q), alimony refers to any amount … a) Received by a spouse married in community of property b) Received by a spouse married out of community of property c) Received by a spouse of behalf of a child d) Received from a former spouse after divorce settlement

17. Which of the following is not a characteristic of an annuity? a) Repetitive cash payment b) Annual payment c) Chargeable against a person d) Continuous payment

18. 65-year old John Smith retired in January 2020. He received N$ 200 000 lump sum from
his employer. Some of his receipts for the year also included N$ 8 000 withdrawal
benefit from a pension fund, N$ 300 000 retirement benefit from a provident fund and
N$ 2 000 war pension. After retirement, John continued running the business that he
had started a few years ago. During the year, the business earned N$ 90 000 in profits.
Which one of the above does not constitute John’s income for the year of assessment
ending 29 February 2020? a) Business profits b) Withdrawal benefit from pension fund c) War pension d) Retirement benefit from provident fund

19. If John had deposited N$ 100 000 of his lump sum into a NamPost saving account and
earned interest on the savings account, the interest received by John would not be
taxable. a) False b) True

Page 15 of 25


20. Specifically included in John’s Gross Income should be any amount, excluding all
voluntary award, received or accrued in respect of services rendered or to be rendered. a) True b) False

21. Lucas Josephat is a Namibian resident employed as a salesperson at Build-In Wholesaler
in Ongwediva. During the 2019 year of assessment he won a prize for being its most
productive salesperson of the year. The prize was valued at N$ 20 000 (this amount was
also the cost of this prize to his employer). Why will the prize received not be included in
his gross income for the year of assessment ending 2019? a) Not arising out of an operation of business b) Closely connected with his employment c) Constitute a receipt of a capital nature d) Benefit of his employment

22. Desmond Xaweb 68-year old pensioner owns three tuck shops in Kunene Region. He has
lived his whole life in Namibia and has never left the country. Desmond is also the
owner of a house located a few kilometres outside Okahandja. After his death in January
this year, Desmond’s grandson, Dion, inherited the house. The house was valued at N$ 2
500 000 by an independent real estate evaluator. After facing cash flow problems, Dion
decided to sell the house for N$ 2 000 000 during the same year. Will the proceeds from
the sale of house by Dion be considered of income nature? a) True b) False   

Page 16 of 25

23. Under which circumstances will the receipts from the house sold by Dion be considered
of capital nature? a) If he had not inherited the property b) If he had a scheme of selling the property for profit c) If his intention was that of speculation or investment d) If he did not enter into an extensive advertising campaign to sell it

24. Lisa Kutako, a property developer living and trading in Pretoria, inherited a block of flats
in Windhoek on 3 March 2019, valued at N$ 8 000 000, from aunt who lived in Outjo.
Since Lisa was at that time selling two other blocks of flats under sectional title, she
immediately applied for sectional title rights on her inherited property. By 29 February
2020, she had sold all the flats in her inherited property for N$ 9 000 000.
Where will Lisa be taxed on the receipts from the flats sold? a) South Africa b) Namibia c) All of the above d) None of the above

25. All exemptions are first included in gross income and thereafter deducted. Funds of
certain associations and enterprises are fully exempted from paying income tax due to
their nature of operation. Which of the following Namibian associations do not qualify
for such an exemption? a) Namibia Stock Exchange b) Teachers’ Union of Namibia c) Hope Village d) GIPF

Page 17 of 25

26. After a few years of learning about the tax effects of different investment options,
Martha Nami, 34-year old woman married in community of property, decided to buy
treasury bills. Based on their tax implications, why did Martha decide to purchase them? a) All expenses incurred are deductible b) Interest earned does not constitute of income c) All of the above d) None of the above

27. During the 2019 year of assessment, Gina Garises earned N$ 75 000 taxable income.
What is the applicable normal tax rate for her? a) 29% of the amount by which the taxable income exceeds N$ 50 000 b) 25% of the amount by which the taxable income exceeds N$ 50 000 c) 29% of the amount by which the taxable income exceeds N$ 40 000 d) 27% of the amount by which the taxable income exceeds N$ 40 000

28. The newly appointed non-executive director of Metro Small Company, Shawn Wilson, is
a Namibian resident who lives and works in Outapi. Upon his appointed to the office, he
receives an annual housing allowance of N$ 20 000 and a travel allowance of N$ 15 000
along with the right to use of the company car that has a market value of N$ 178 000.
Which of the above are fringe benefits? a) The housing and travel allowances b) The right to use the company car c) None of the above mentioned benefits d) Only the travel allowance and the right to use the company car

29. Goldie-Locks is a licenced gold producer headquartered in Toronto, Canada. Founded in
2010, today, Goldie-Locks has three operating gold mines located in various countries
including the Philippines, Namibia, and Congo. In 2020, Goldie-Locks forecasts
consolidated gold production of between 1,000,000 and 1,055,000 ounces.

Page 18 of 25

In which country will the income of Goldie-Locks be taxed? a) Philippines b) Congo c) Canada d) All of the above

30. If Goldie-Locks is to be taxed in Namibia, what will be the applicable flat tax rate for
such a mining company? a) 37.5% b) 35 % c) 50.% d) 18.%

31. DiaNam is a Namibian owned licensed diamond company that performs land-based
prospecting (exploration), mining and rehabilitation operations in the southwest coast
of the country. What is the applicable tax flat rate for DiaNam? a) 37.5% b) 35 % c) 50.% d) 18.%

32. Mate-Rial is a textile manufacturing company that was registered at the Ministry of
Trade and Industry in October 2013. With a factory located in Gobabis, the company
employs over 300 local residents. During the 2019 year of assessment, hired five
Malaysian textile specialist to assist it with the production of a new synthetic leather
fabric in order to abide to its vegan cruelty-free policy.
What is current the applicable flat rate for manufacturing company in Namibia? a) 37.5% b) 34 % c) 50.% d) 18.%

Page 19 of 25

33. Grace Wandje is a local business woman who lives in Khorixas. She is a teacher at a
primary school in her area and owns property as well as other small businesses. If her
income for the year of assessment ended 29 February 2020 is as follows; what will be
her gross income for the year ended 29 February 2020?
Salary 80 000
Rent received 20 000
Dividends received 4 000
Bet win on result of soccer match 1 000
Profit on sale of shares held as trading stock 4 000
Loss of profits insurance claim 2 000
Interest received 2 000
Restraint of trade payment 8 000
N$125 000
a) N$ 112 000 b) N$ 125 000 c) N$ 117 000 d) N$ 122 000

Problem 1.

Emily Elizabeth opened Clifford’s Pet Toy Warehouse on July 1, 2020. Clifford’s Pet ToyWarehouse extends credit terms of 2/10, n/30 to all of its customers. During July the following transactions occurred.

July

1 Issued 100,000 shares of common stock for $100,000 cash.

2 Paid $1,800 cash on 1-year insurance policy effective July 1.

3 Purchased pet toys on account for $1,900 from Cleo Toy Company, terms 2/10, n/30.

4 Purchased supplies for $900 on account from Norman Supply.

5 Sold pet toys on account to the Jetta’s Pet Shop for $1,200. The cost of the pet toys sold was $720.

6 Purchased a used delivery truck from Howard Motors for $9,000, paying $2,000 cash and the balance via loan from Howard Motors.

7 Received $100 credit for pet toys returned to Cleo Toy Company.

9 Paid Cleo Toy Company in Full.

15 Received payment in full from Jetta’s Pet Shop.

17 Sold pet toys on account to Charley’s Pet Store for $1,400. The cost of the pet toys sold was $840.

18 Repaid Howard Motors $1,000 cash toward the amount owed on truck and paid $500 toward the amount owed on supplies.

20 Purchased toys on account for $700 from Mac Toy Maker, terms 1/15, n/30.

21 Paid $2000 cash for employee salaries.

24 Received payment in full from Charley’s Pet Store.

26 Sold pet toys on account to T-Bone for $1300. The cost of the pet toys sold was $780.

27 Granted T-Bone $130 credit for pet toys costing $80 that were returned.

29 Paid $260 for delivery truck repairs.

30 Declared and paid $600 cash dividend.

31 Paid Mac Toy Maker in full.

Problem 1: Instructions

(a) Journalize the July transactions for Clifford’s Pet Toy Warehouse.

(b) Prepare a trial balance at July 31. (Hint: you might want to post your journal entries to ledger – i.e., “T” – accounts.)

(c) Consider the following and prepare adjusting journal entries if necessary

(note: if no entry is needed, explicitly say so).

1. On July 31st, FedEx picked up from Clifford’s Pet Toy Warehouse pet toys that Jetta’s Pet Shop agreed to purchase from Clifford’s for $1100 (the cost of the pet toys was $660). Payment terms for the sale were the usual 2/10, n/30 and the contract specified FOB shipping point. (Clifford’s did not make any entries in its records for this sale.)

2. On July 31st, FedEx picked up from Cleo Toy Company pet toys that Clifford’s Pet Toy Warehouse agreed to purchase for $2200. Payment terms of the purchase were 2/10, n/30 and the contract specified FOB shipping point. (Clifford’s did not make any entries in its records for this purchase.)

3. Depreciation on the truck for the month of July was $200 and interest owed to Howard Motors was $50.

4. One-twelfth of the insurance expired.

5. An inventory count shows $360 of supplies on hand at July 31.

5. Income taxes owed to the government at July 31 were $400.

(d) Prepare an adjusted trial balance. (Hint: you might want to post your adjusting entries to ledger – i.e., “T” – accounts.)

(e) Prepare a multi-step income statement for Clifford’s Pet Toy Warehouse for July. (Hint: start with Net Sales.)

(f) Prepare a single-step income statement for Clifford’s Pet Toy Warehouse for July.

(g) Explain which income statement (multi-step or single-step) will Emily Elizabeth and other

users would prefer for Clifford’s Pet Toy Warehouse and why.

(h) Calculate the Gross Profit Ratio (also known as the Gross Margin Ratio) as well as the Profit Margin Ratio. Given the ratios you calculated, explain why you believe Clifford’s
decision to pay shareholders a $600 dividend was a good or bad idea.

For each of the scenarios described below identify 2 control procedures that could have prevented the problem and explain why each of the controls would have helped.

a) you manage a sales firm, and you give laptops to all salespeople. salespeople can input orders and submit them electronically while on the road. you have had a few problems with this system. In one instance an order for 5 pcs was input b the salesperson as 500 pcs. in another case, the salesperson failed to input a delivery address.

b) a computer programmer from the payroll department created a fake employee number and entered this employee in the payroll database. she then prepared paychecks for this fake employee using the payroll systems and sent them to her own po box address.

c) two brothers have lived in Texas all of their lives. joe worked for a local retailer in the account payable department, and John owned the local hardware store. the brothers created several dummy companies that sold fictitious merchandise to the retailer. joe had the retailer pay for this merchandise, and then he wrote off the missing goods as damaged inventory.

An investor company owns 30% of the common stock of an investee company. The investor has significant influence over the investee, and acquired its equity interest in the investee on January 1, 2018 for $525,000. On the date of acquisition, the investee’s stockholders equity was $1,500,000, and the fair values of the investee’s individual net assets were equal to their reported book values. During the year ended December 31, 2018, the investee reported net income of $50,000 and dividends of $10,000. During the year ended December 31, 2019, the investee reported net income of $60,000 and dividends of $15,000. The investor routinely sells inventory to the investee at a 25% profit margin. At December 31, 2018 and 2019, the investee held inventories purchased from the investor for $30,000 and $40,000, respectively. (At the end of each period, all of these inventories are sold by the investee to unaffiliated companies in the next period.)

What is the balance in the Equity Investment account on December 31, 2019?

Select one:

a. $ 525,000

b. $ 547,500

c. $ 550,500

d. $ 570,000

SecuriCorp operates a fleet of armored cars that make scheduled pickups and deliveries in the Los Angeles area. The company is implementing an activity-based costing system that has four activity cost pools: Travel, Pickup and Delivery, Customer Service, and Other. The activity measures are miles for the Travel cost pool, number of pickups and deliveries for the Pickup and Delivery cost pool, and number of customers for the Customer Service cost pool. The Other cost pool has no activity measure because it is an organization-sustaining activity. The following costs will be assigned using the activity-based costing system:

The distribution of resource consumption across the activity cost pools is as follows:

Required:

Complete the first stage allocations of costs to activity cost pools.

Madam Bose has been in business for many years as sole trader. His cash at hand on 1^st October, 2018 was N750,000 but there was no bank account.The following transactions took place during the month of October, 2018.

Oct 1   Opened bank account and paid in cash                                              N750,000

Oct 4   Rented premises and paid for 2 months by cheque                            N30,000

Oct 7   Bought furniture and fitting by cheque                                              N90,000

Oct 11 Purchased goods for sale by cheque                                                   N120,000

Oct 14 Cash sales                                                                                            N525,000

Oct 16 Received cheque from Badmus on account of September sales        N123,000

Oct 19 Paid cash into bank                                                                             N190,000

Oct 20 Purchased goods from Gabriel & sons on credit N150,000

Oct 20 Cash sales                                                                                            N111,250

Oct 26 Paid cash into bank                                                                             N111,250

Oct 28 Sold goods on credit to Stephens & co                                              N270,000

Oct 29 Paid Gabriel & sons on account by cheque                                        N75,000

Oct 30 Paid salaries by cash                                                                           N81,550

Oct 30 Paid electricity bill by cheque                                                             N13,500

Oct 31 Paid sundry expenses by cash                                                             N6,000

Required: Prepare the two-column cash book of Madam Bose Enterprises for the month of October 2018.

Write a short reflection paper (1-2 paragraphs) explaining why having (and enforcing) a code of conduct is important in the accounting career field. Make this a scholarly paper, properly formatted, spell checked, etc. This must be more than a "in my opinion" type of analysis.  

1. Complete the balance sheet for the business for 2016 and 2017.

2. In which year do you think the balance sheet is better?

Hi-Tek Manufacturing, Inc., makes two types of industrial component parts—the B300 and the T500. An absorption costing income statement for the most recent period is shown: Hi-Tek Manufacturing Inc .

Hi-Tek produced and sold 60,400 units of B300 at a price of $19 per unit and 12,800 units of T500 at a price of $40 per unit. The company’s traditional cost system allocates manufacturing overhead to products using a plantwide overhead rate and direct labor dollars as the allocation base. Additional information relating to the company’s two product lines is shown below:

The company has created an activity-based costing system to evaluate the profitability of its products. Hi-Tek’s ABC implementation team concluded that $51,000 and $105,000 of the company’s advertising expenses could be directly traced to B300 and T500, respectively. The remainder of the selling and administrative expenses was organization-sustaining in nature. The ABC team also distributed the company’s manufacturing overhead to four activities as shown below:

Required:

1. Compute the product margins for the B300 and T500 under the company’s traditional costing system.

2. Compute the product margins for B300 and T500 under the activity-based costing system.

3. Prepare a quantitative comparison of the traditional and activity-based cost assignments.

1.What account is credited when a company receives donated assets? What is the rationale for this choice?

2. In what situations is interest capitalized?