Describe the role of scenario analysis within the discipline of risk management. (10)

Donnie Hilfiger has two classes of stock authorized: $1 par preferred and $0.01 par value common. As of the beginning of 2021, 320 shares of preferred stock and 4,200 shares of common stock have been issued. The following transactions affect stockholders’ equity during 2021:

Donnie Hilfiger has the following beginning balances in its stockholders’ equity accounts on January 1, 2021: Preferred Stock, $320; Common Stock, $42; Additional Paid-in Capital, $77,000; and Retained Earnings, $30,900. Net income for the year ended December 31, 2021, is $11,200.

Required:

1. Record each of these transactions. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field.)

2. Select whether each of the following transactions increases ( + ) or decreases ( − ) total assets, total liabilities, and total stockholders' equity. (If none of the categories apply for a particular item, leave the cell blank.)

On September 1, the board of directors of Colorado Outfitters, Inc., declares a stock dividend on its 27,000, $18 par, common shares. The market price of the common stock is $47 on this date.

Required:
1. 2. & 3. Record the necessary journal entries assuming a small (10%) stock dividend, a large (100%) stock dividend, and a 2-for-1 stock split. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field.)

Required information [The following information applies to the questions displayed below.] Gabi Gram started The Gram Co., a new business that began operations on May 1. The Gram Co. completed the following transactions during its first month of operations. May 1 G. Gram invested $44,500 cash in the company in exchange for its common stock. 1 The company rented a furnished office and paid $2,200 cash for May’s rent. 3 The company purchased $4,590 of office equipment on credit. 5 The company paid $730 cash for this month’s cleaning services. 8 The company provided consulting services for a client and immediately collected $5,200 cash. 12 The company provided $2,500 of consulting services for a client on credit. 15 The company paid $790 cash for an assistant’s salary for the first half of this month. 20 The company received $2,500 cash payment for the services provided on May 12. 22 The company provided $3,600 of consulting services on credit. 25 The company received $3,600 cash payment for the services provided on May 22. 26 The company paid $4,590 cash for the office equipment purchased on May 3. 27 The company purchased $80 of advertising in this month’s (May) local paper on credit; cash payment is due June 1. 28 The company paid $790 cash for an assistant’s salary for the second half of this month. 30 The company paid $300 cash for this month’s telephone bill. 30 The company paid $300 cash for this month’s utilities. 31 The company paid $1,600 cash in dividends to the owner (sole shareholder). 2.1. Prepare income statement for May. 2.2. Prepare statement of retained earnings for May. 2.3. Prepare Balance Sheet for May 31. 3. Prepare statement of cash flows for May. (Cash outflows should be indicated with a minus sign.)

Major League Apparel has two classes of stock authorized: 4%, $10 par preferred, and $1 par value common. The following transactions affect stockholders’ equity during 2021, its first year of operations:

Required:

1. Record each of these transactions. (If no entry is required for a particular transaction, select "No Journal Entry Required" in the first account field.)

2. Prepare the stockholders’ equity section of the balance sheet as of December 31, 2021. Net income for the year was $479,000. (Amounts to be deducted should be indicated by a minus sign.)

Utes acquires 90% of Cougar on January 1st 20X1 for $810K (the underlying book value). At the time of the acquisition Cougar’s Retained Earnings was $400K and Common Stock was $500K. During the year, Ute sold $450,000 of inventory to Cougar. The inventory originally cost Ute $270,000. At the end of the year, Cougar had $90,000 of that inventory on hand. The remainder had been sold to an outside party. Including the sale of the intercompany inventory to an outside party, Cougar had net income of $250K and no dividends were paid during the year. At the date of acquisition Ute’s accumulated depreciation was $35K and Cougar’s was $25K. a- Ute accounts for Cougar under the fully adjusted equity method. Prepare all equity method adjustments that will be necessary for the entire year ending December 31, 20X1. b- Prepare all Elimination Entries at December 31, 20X1 c) What is the consolidated ending inventory at December 31st 20X1

The stockholders’ equity section of Velcro World is presented here.

Based on the stockholders' equity section of Velcro World, answer the following questions. Remember that all amounts are presented in thousands.

Required:

1. How many shares of preferred stock have been issued? (Enter you answer in total number of shares, not in thousands.)

2. How many shares of common stock have been issued? (Enter you answer in total number of shares, not in thousands.)

3. If the common shares were issued at $23 per share, at what average price per share were the preferred shares issued?

4. If retained earnings at the beginning of the period was $243 million and $23 million was paid in dividends during the year, what was the net income for the year? (Enter your answer in million (i.e., 5,000,000 should be entered as 5).)

5. What was the average cost per share of the treasury stock acquired?

Green Grow Inc. (GGI) manufactures lawn fertilizer. Because of the product’s very high quality, GGI often receives special orders from agricultural research groups. For each type of fertilizer sold, each bag is carefully filled to have the precise mix of components advertised for that type of fertilizer. GGI’s operating capacity is 22,000 one-hundred-pound bags per month, and it currently is selling 20,000 bags manufactured in 20 batches of 1,000 bags each. The firm just received a request for a special order of 5,000 one-hundred-pound bags of fertilizer for $130,000 from APAC, a research organization. The production costs would be the same, but there would be no variable selling costs. Delivery and other packaging and distribution services would cause a one-time $2,500 cost for GGI. The special order would be processed in two batches of 2,500 bags each.Page 447 (No incremental batch-level costs are anticipated. Most of the batch-level costs in this case are short-term fixed costs, such as salaries and depreciation.) The following information is provided about GGI’s current operations: Sales and production cost data for 20,000 bags, per bag: Sales price $40 Variable manufacturing costs 17 Variable selling costs 3 Fixed manufacturing costs 12 Fixed marketing costs 4 No marketing costs would be associated with the special order. Because the order would be used in research and consistency is critical, APAC requires that GGI fill the entire order of 5,000 bags. Required What is the total relevant cost of filling this special sales order, rounded to nearest whole dollar? What would be the change in operating income (to nearest whole dollar) if the special order is accepted? What is the break even selling price per unit for the special sales order (i.e., what is the selling price that would result in a zero effect on operating income)? Round answer to 2 decimal places. Prepare comparative income statements, using the contribution format, for both the current situation and assuming the special order is accepted at the break even price determined in requirement 3. Suppose that after GGI accepts the special order, it finds that unexpected production delays will not allow it to supply all 5,000 units from its own plants and meet the promised delivery date. It can provide the same materials by purchasing them in bulk from a competing firm. The materials would then be packaged in GGI bags to complete the order. GGI knows the competitor’s materials are very good quality, but it cannot be sure that the quality meets its own exacting standards. There is not enough time to carefully test the competitor’s product to determine its quality. What should GGI do? Specifically, discuss ethical and strategic issues associated with the decision.

Arndt, Inc., reported the following for 2018 and 2019 ($ in millions):
PLEASE FILL IN THE BLANKS

1. Expenses each year include $40 million from a two-year casualty insurance policy purchased in 2018 for $80 million. The cost is tax deductible in 2018.
2. Expenses include $3 million insurance premiums each year for life insurance on key executives.
3. Arndt sells one-year subscriptions to a weekly journal. Subscription sales collected and taxable in 2018 and 2019 were $38 million and $67 million, respectively. Subscriptions included in 2018 and 2019 financial reporting revenues were $35 million ($13 million collected in 2017 but not recognized as revenue until 2018) and $43 million, respectively. Hint: View this as two temporary differences—one reversing in 2018; one originating in 2018.
4. 2018 expenses included a $29 million unrealized loss from reducing investments (classified as trading securities) to fair value. The investments were sold in 2019.
5. During 2017, accounting income included an estimated loss of $7 million from having accrued a loss contingency. The loss was paid in 2018 at which time it is tax deductible.
6. At January 1, 2018, Arndt had a deferred tax asset of $8 million and no deferred tax liability.

2. Prepare a schedule that reconciles the difference between pretax accounting income and taxable income. Using the schedule, prepare the necessary journal entry to record income taxes for 2018.

Prepare a schedule that reconciles the difference between pretax accounting income and taxable income. (Amounts to be deducted should be indicated with a minus sign. Enter your answers in millions (i.e., 10,000,000 should be entered as 10).)

The following facts relate to Novak Corporation. 1. Deferred tax liability, January 1, 2017, $62,400. 2. Deferred tax asset, January 1, 2017, $20,800. 3. Taxable income for 2017, $109,200. 4. Cumulative temporary difference at December 31, 2017, giving rise to future taxable amounts, $239,200. 5. Cumulative temporary difference at December 31, 2017, giving rise to future deductible amounts, $98,800. 6. Tax rate for all years, 40%. No permanent differences exist. 7. The company is expected to operate profitably in the future. a. Compute the amount of pretax financial income for 2017. b. Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2017 c. Prepare the income tax expense section of the income statement for 2017, beginning with the line “Income before income taxes. d. Compute the effective tax rate for 2017

Discuss the difference between direct costs and allocated costs and why allocated costs are important to include in project costs. Further, and regarding allocated costs, disucss how an organization determines costs to be allocated and the basis of the allocation methodology (i.e. choice of the cost allocation base).

• Based on your study and analysis of the financial reporting requirements for companies listed on a public stock exchange as outlined in the Sarbanes-Oxley Act (see Student Guide to the Sarbanes-Oxley Act), evaluate the adequacy of the financial reports and disclosures. In your assessment, assume the perspective of at least two different financial stakeholders. Explain how the financial reporting requirements benefit the specific stakeholders and identify any gaps or opportunities to improve the integrity of external financial reporting.

Marigold Corp. has a deferred tax asset account with a balance of $139,680 at the end of 2016 due to a single cumulative temporary difference of $349,200. At the end of 2017, this same temporary difference has increased to a cumulative amount of $413,300. Taxable income for 2017 is $764,700. The tax rate is 40% for all years. At the end of 2016, Marigold Corp. had a valuation account related to its deferred tax asset of $42,400.

a. Record income tax expense, deferred income taxes, and income taxes payable for 2017, assuming that it is more likely than not that the deferred tax asset will be realized in full.

b. Record income tax expense, deferred income taxes, and income taxes payable for 2017, assuming that it is more likely than not that none of the deferred tax asset will be realized

Wheeling Company is a merchandiser that provided a balance sheet as of September 30 as shown below:

The company is in the process of preparing a budget for October and has assembled the following data:

1. Sales are budgeted at $380,000 for October and $390,000 for November. Of these sales, 35% will be for cash; the remainder will be credit sales. Forty percent of a month’s credit sales are collected in the month the sales are made, and the remaining 60% is collected in the following month. All of the September 30 accounts receivable will be collected in October.

2. The budgeted cost of goods sold is always 45% of sales and the ending merchandise inventory is always 30% of the following month’s cost of goods sold.

3. All merchandise purchases are on account. Thirty percent of all purchases are paid for in the month of purchase and 70% are paid for in the following month. All of the September 30 accounts payable to suppliers will be paid during October.

4. Selling and administrative expenses for October are budgeted at $79,600, exclusive of depreciation. These expenses will be paid in cash. Depreciation is budgeted at $2,440 for the month.

Required:

1. Using the information provided, calculate or prepare the following:

e. A budgeted balance sheet at October 31.

2. Assume the following changes to the underlying budgeting assumptions:

(1) 50% of a month’s credit sales are collected in the month the sales are made and the remaining 50% is collected in the following month, (2) the ending merchandise inventory is always 10% of the following month’s cost of goods sold, and (3) 20% of all purchases are paid for in the month of purchase and 80% are paid for in the following month. Using these new assumptions, calculate or prepare the following:

a. The budgeted cash collections for October.

b. The budgeted merchandise purchases for October.

c. The budgeted cash disbursements for merchandise purchases for October.

d. Net operating income for the month of October.

e. A budgeted balance sheet at October 31.

Questions 6, and 7 refer to the following information:

At the end of the year, a company offered to buy 4,740 units of a product from X Company for a special price of $11.00 each instead of the company's regular price of $18.00 each. The following information relates to the 65,000 units of the product that X Company made and sold to its regular customers during the year:

Fixed cost of goods sold for the year were $124,150, and fixed period costs were $68,250. Variable period costs include selling commissions equal to 3% of revenue.

6. Profit on the special order is

7. Assume the following two changes for the special order: 1) variable cost of goods sold will decrease by $0.73 per unit, and 2) there will be no selling commissions. What would be the effect of these two changes on the special order profit?

PLEASE ANSWER BOTH

#6 = NOT 20,856

#7 = NOT 5024