What are the cost incurred for the benefit of several business units called?

a-Direct cost

B-variable cost

C-product cost

D-indirect cost

ABC Company employs a periodic inventory system and sells its inventory
to customers for $23 per unit. ABC Company had the following inventory
information available for the month of May:

May 1    Beginning inventory 1,500 units @ $12 cost per unit
May 8    Sold 1,100 units
May 13   Purchased 1,700 units @ $21 cost per unit
May 18   Sold 1,000 units
May 21   Purchased 1,600 units @ $18 cost per unit
May 28   Sold 800 units
May 30   Purchased 1,200 units @ $20 cost per unit

During May, ABC Company reported operating expenses of $5,000 and had
an income tax rate of 36%.

Calculate the amount of net income reported on ABC Company's income
statement for May using the LIFO method.

Explain ways to acquire ownership for gifts and non-gifts. (Ch 48)

What is the scope of Art. 2 of the UCC? Under Art 2,

what are ‘goods’ and who is a ‘merchant’? (Ch 20)

HolmesWatson (HW) is considering what the effect would be of reporting its liabilities under IFRS rather than U.S. GAAP. The following facts apply:

1. HW is defending against a lawsuit and believes it is virtually certain to lose in court. If it loses the lawsuit, management estimates it will need to pay a range of damages that falls between $5,500,000 and $10,500,000, with each amount in that range equally likely.
2. HW is defending against another lawsuit that is identical to item (a), but the relevant losses will only occur far into the future. The present values of the endpoints of the range are $3,500,000 and $8,500,000, with the timing of cash flow somewhat uncertain. HW considers these effects of the time value of money to be material.
3. HW is defending against another lawsuit for which management believes HW has a slightly worse than 50/50 chance of losing in court. If it loses the lawsuit, management estimates HW will need to pay a range of damages that falls between $3,500,000 and $9,500,000, with each amount in that range equally likely.
4. HW has $10,500,000 of short-term debt that it intends to refinance on a long-term basis. Soon after the balance sheet date, but before issuance of the financial statements, HW obtained the financing necessary to refinance the debt.

   
Required:
1. For each item, indicate how treatment of the amount would differ between U.S. GAAP and IFRS.
2. Consider the total effect of items a–d. If HW’s goal is to show the lowest total liabilities, which set of standards, U.S. GAAP or IFRS, best helps it meet that goal?

(1) Please define TWO of the following terms.

• Activity Base (Driver)
• Fixed Costs
• High-Low Method
• Mixed Costs
• Relevant Range
• Variable Costs

(2) Consider McDonald’s for a moment and list an example of each of the following costs that would be incurred by a McDonald’s restaurant: (a) a fixed cost, (b) variable cost, and (c) mixed cost. Please be specific and explain why each is a good fit in that category.

(Note: For the variable cost on your list, please identify the activity base (driver))

Question 1

The table below shows the cost and revenue information of a firm.

(a) Complete the table above. [9 marks]

(b) Determine the price and output at equilibrium. [6 marks]

(c) Calculate the profit or loss at equilibrium. [4 marks]

(d) Is this firm in the short-run or long-run? Explain your answer. [5 marks]

(e) To what type of market structure does this firm belong? Why do you say so? [6 marks]

1. Which of the following statements about bonds and their prices is correct:

1. There is an inverse relationship between interest rates and price.  
2. When the coupon rate of the bond is greater than the required, market interest rate, the price of the bond is greater than the face value of the bond.
3. The bond with a greater term to maturity is affected to a greater extent by the change in the interest rate
4. All of the above
5. A) and B) only

2. Which of the following constitutes a difference between debt and equity?

1. The right to claim against the assets of the corporation in the case of bankruptcy
2. The entity issuing the security
3. The nature of accounting revenue underlying the security
4. Both B) and C)
5. None of the above

3. Which of the following describes the difference between the returns on debt and equity?

1. The return on debt is more variable than the return on equity
2. The return on debt is stipulated in the debt contract, whereas the return on equity is stipulated in the trust deed
3. The return on debt is stipulated in the trust deed, whereas the return on equity is varied at the discretion of management
4. The return on debt is not secure
5. None of the above

4. What is the Price of a Bond that pays a coupon interest rate of 13.5% p.a. with interest paid semi-annually, has four years to maturity and which has a Face value of $100. Market interest rates are 13.5% (Round to the nearest dollar).

1. $110
2. $100  
3. $105
4. $98
5. None of the above

5. The intrinsic value of an asset is:  

1. The asset’s minimum value.

B) The asking price for the asset.        

C) The asset’s replacement value.    

                        D) The assets’ future cash flows compounded by the required rate of return.   

E) None of the above

6. What is the Present Value of an asset that pays cash flows of $1.5 million per year for three (3) years if the cash flows commence in Year Three? The required rate of return is 10% p.a.

1. $3.08 million
2. $4.25 million  
3. $5.06 million
4. $3.73 million  
5. None of the above

7. The prospective P/E ratio:  

1. Is positively related to the payout ratio
2. Negatively related to the cost of equity
3. Positively related to the past dividend
4. All of the above
5. A) and B) only

8. What is the future value of a $2,000 invested for 15 years at an interest rate of 10% p.a. compounded quarterly? (Rounded to the nearest dollar).

1. $5,000
2. $7,600
3. $8,800
4. $6,180
5. None of the above

9. The value of a share is given by the present value of which cash flows?

1. The last dividend and future dividends
2. The most recent dividend and future dividends
3. The current dividend and future dividends
4. Future dividends only
5. None of the above

10. The interest rate is defined as:

1. The opportunity cost of selling real assets  
2. The cost of having money in the bank.
3. The cost of liquidity.  
4. The opportunity cost of buying real assets
5. None of the above

** Please show the all mathematical steps and the Financial Calculator step if possible, Thanks.

Question 1:

Ace Ltd is a listed parent company with interests in television stations, cinemas and newspapers. On 1 January 2014, Ace Ltd acquired 40% of the voting shares of Deuce Pty Ltd, a publisher of women magazines, for $1 620 000 cash. The acquisition gave Ace Ltd. significant influence over Deuce Ltd. The recorded net assets and contingent liabilities of Deuce Ltd as at the date of acquisition were represented by the following equity items:

                                  $000
Share Capital             1,000
Retained Earnings       600
General Reserve          200
Total                            1,800


Additional information:

(a)   At the date of acquisition, Deuce Ltd has created several magazine mastheads. The terms and conditions of the mastheads indicate they can be transferred to another party. The costs relating to the development of these mastheads had been written off by Deuce Ltd as expenses when incurred. Ace Ltd can reliably measure the fair value of the unrecognised mastheads at the date of acquisition at $300 000.

(b)   Ace Ltd has adopted an accounting policy for the Ace Ltd extended group whereby all intangible assets with a finite life are to be amortised on a straight-line basis over their useful lives. Ace Ltd expects the mastheads will provide future economic benefits for a period of 20 years.

(c)   During the year ended 31 December 2014 Deuce Ltd earned profit before tax of $900 000, incurred an income tax expense of $300 000 and paid a dividend of $100 000 on 30 September 2014.

(d)   On 1 July 2014 Deuce Ltd sold Ace Ltd a printing machine at an agreed value of $420 000. This equipment had a carrying amount of $120 000 to Deuce Ltd at the date of its transfer. The remaining useful life of the machine at the date of transfer is estimated to be 3 years.

(e)   Ace Ltd uses the cost method to account for its investment in Deuce Ltd in its separate financial statements as there is no quoted market price for Deuce Ltd. shares.

(f)   Ace Ltd has not recognised any impairment losses in relation to its investment in Deuce Ltd in its separate financial statements or its consolidated financial statements for the year ended 31 December 2014.

(g)   The company tax rate is 30%.

Required:

i)   Calculate the amount of goodwill on acquisition of Act Ltd’s interest in Deuce Ltd and related journal entry under cost method.

(ii)   Prepare the equity accounting consolidation adjusting entries required in Ace Ltd’s consolidated financial statements for the year ended 31 December 2014.

(iii)   Estimate the carrying value of Ace Ltd’s investment in Deuce Ltd the year ended 31

1.what is the challenge in budgeting if the business is a SKI resort and cash flows vary with the season. 2. as a new owner of an existing business what resources do you have to prepare a porforma cash budget. 3.Is there any volume limit that is impractical to achieve given the current fixed capital

As the vice president of engineering of the Best Company in Buffalo, you need to

make a decision regarding how a new product is to be manufactured. You have

been offered two specific proposals. Proposal A is to set up an assembly operation

in-house and to outsource the production of all subassemblies and parts

to supply chain partners. This proposal would need a front-end investment of

$2,000,000 for the assembly operations, an investment of $300,000 for the product

design and development efforts, and another $100,000 for managing and coordinating

the supply chain partners. The projected net profits for the products

manufactured by this method are $0, $300,000, $600,000, $900,000, $1,200,000,

and $600,000 in the first, second, third, fourth, fifth and sixth year, respectively.

There is no salvage value of the assembly equipment at the end of the sixth year,

at which time the sales of this product will be terminated. Interest is at 5.0%.

Proposal B is to build a production facility to manufacture all subassemblies

and assemble the products in-house. This proposal would need a front-end investment

of $3,000,000, which includes facility, equipment, engineering, and all other

required efforts. The projected net profits for the products manufactured by this

method are $200,000, $400,000, $800,000, $1,200,000, $1,000,000, and $600,000 for

the first, second, third, fourth, fifth, and sixth year, respectively. There is a salvage

value of $400,000 of the facility at the end of the sixth year. Interest is also at 5%.

Which proposal should you accept, and why?

SHOW INCOME STATEMENT AND ASSUME STRAIGHT LINE DEPRECIATION

You have recently graduated from your university and started work with an accounting firm. You meet an old school friend, Kim, for dinner—you haven’t seen each other for several years. Kim is surprised that you are now working as an auditor because your childhood dream was to be a ballet dancer. Unfortunately, your knees were damaged in a fall and you can no longer dance. The conversation turns to your work and Kim wants to know how you do your job. Kim cannot understand why an audit is not a guarantee the company will succeed. Kim also thinks that company managers will lie to you to protect themselves, and as an auditor you would have to assume that you cannot believe anything a company manager says to you.

Compose a letter to Kim explaining the concept of reasonable assurance, and how reasonable assurance is determined. Explain why an auditor cannot offer absolute assurance. Describe the concept of professional skepticism and how it is not the same as assuming that managers are always trying to deceive auditors. Explain to Kim why her perceptions are a perfect example of the expectations gap.

The following are BAC Bhd.’s year end statement of financial position and statement of profit and loss for 2016 and 2017:

Related items:

2017 Total dividends paid $70,075 ,   Stock price per share $15.60

2016 Total dividends paid $15.60 ,   Stock price per share $21.80

Required:

1. Calculate the after tax operating income (i.e. after-tax EBIT) for 2016 and 2017.   
2. Calculate the net working capital (NWC) that is supported by non-free sources for 2016 and 2017, and the changes in NWC between these two years.                             
3. What is free cash flow (FCF)? Calculate the FCF for 2017. Is a negative FCF always a bad sign?   
4. Calculate the following for the company for 2017:
   1. Earnings per share   
   2. Dividends per share   
   3. Book value per share

25.The following information is the same as the previous question.

A Company issued a bond payable with detachable warrants on the interest payment date as follows.

1 warrant = 1 share of $1 par value stock

What is the credit to additional paid in capital at the time the warrants are exercised on June 30, 20X1?

Sako Company’s Audio Division produces a speaker that is used by manufacturers of various audio products. Sales and cost data on the speaker follow:

Sako Company has a Hi-Fi Division that could use this speaker in one of its products. The Hi-Fi Division will need 10,000 speakers per year. It has received a quote of $37 per speaker from another manufacturer. Sako Company evaluates division managers on the basis of divisional profits.

Required:

1. Assume the Audio Division is now selling only 47,000 speakers per year to outside customers.

a. From the standpoint of the Audio Division, what is the lowest acceptable transfer price for speakers sold to the Hi-Fi Division?

b. From the standpoint of the Hi-Fi Division, what is the highest acceptable transfer price for speakers acquired from the Audio Division?

c. What is the range of acceptable transfer prices (if any) between the two divisions? If left free to negotiate without interference, would you expect the division managers to voluntarily agree to the transfer of 10,000 speakers from the Audio Division to the Hi-Fi Division?

d. From the standpoint of the entire company, should the transfer take place?

2. Assume the Audio Division is selling all of the speakers it can produce to outside customers.

a. From the standpoint of the Audio Division, what is the lowest acceptable transfer price for speakers sold to the Hi-Fi Division?

b. From the standpoint of the Hi-Fi Division, what is the highest acceptable transfer price for speakers acquired from the Audio Division?

c. What is the range of acceptable transfer prices (if any) between the two divisions? If left free to negotiate without interference, would you expect the division managers to voluntarily agree to the transfer of 10,000 speakers from the Audio Division to the Hi-Fi Division?

d. From the standpoint of the entire company, should the transfer take place?