QUESTION 3 21 MARKS Beetroots (Pty) Ltd is a company that buys fresh veggies in bulk, and sells it direct to the public after packaging it in smaller quantities. The following cost data is available for six months: Month Kg Veggies Total cost January 200kg R3,800 February 500kg R8,600 March 900kg R14,300 April 350kg R5,950 May 780kg R12,800 June 800kg R13,200 The Financial Manager is of the opinion that the total cost for the month is related to the quantity of veggies that is packaged (measured in kilograms). REQUIRED: MARKS 3.1 Compile a cost formula (cost function) by making use of the High-Lowmethod. 5 3.2 Compile a cost formula (cost function) by making use of the Least Squares-method (Simple Regression Analysis). Show all calculations. 8 3.3 Explain why there is a difference between the cost formula according to the High-Low-method and the cost formula according to the Least Squares-method, and advise the best method to use. 4 3.4 Calculate the budgeted cost for July and August according to both cost formulas if the expected quantity of veggies that will be packaged is 950kg and 1,020kg respectively. 4

Intermediate Accounting II

   Teri Inc., in its first year of operations, has the following differences between the book basis and tax basis of its assets and liabilities at the end of 20x0.

Book Basis                   Tax Basis

Equipment (net)                        $400,000                      $340,000

Estimated warranty liability      $200,000                      $ -0-

It is estimated that the warranty liability will be settled in 20x1. The difference in equipment (net) will result in taxable amounts of $20,000 in 20x1, $30,000 in 20x2, and $10,000 in 20x3. The company has taxable income of $520,000 in 20x0. As of the beginning of 20x0, its enacted tax rate is 34% for 20x0-20x2, and 30% for 20x3. Teri expects to report taxable income through 20x3.

Prepare the journal entry to record income tax expense, deferred income taxes, and income tax payable for 20x0.

Sales Mix and Break-Even Sales

Data related to the expected sales of laptops and tablets for Tech Products Inc. for the current year, which is typical of recent years, are as follows:

The estimated fixed costs for the current year are $3,894,000.

Required:

1. Determine the estimated units of sales of the overall (total) product, E, necessary to reach the break-even point for the current year.
units

2. Based on the break-even sales (units) in part (1), determine the unit sales of both laptops and tablets for the current year.

3. Assume that the sales mix was 60% laptops and 40% tablets. Compare the breakeven point with that in part (1). Why is it so different?
units

The break-even point is   in this scenario than in part (1) because the sales mix is   toward the product with the higher   of product.

1. Compute regular depreciation for the following qualified assets. Ignore bonus depreciation and section 179.

• a.) Business equipment purchased in February for $40,000 which has salvage value of $4,000.
• b.) Business car purchased in May for 22,000 which has a salvage value of $3,000.
• c.) Business equipment purchased in May for $150,000 has a salvage value of $15,000.
• d.) Business car purchased in April for $42,000 with a salvage value of $5,000.
• e.) Compute depreciation for residential real estate purchased in January for $390,000 with a salvage value of $50,000.

23. On January 1, 2019, Mancunian Corp. purchased 10% bonds, with a $200,000 face value, for $218,492.52. This price implies an 8% yield to Mancunian. The bonds pay interest on December 31 of each year. Mancunian uses the effective-interest method and classifies the bonds as available for sale securities.

The fair value of the bonds on December 31, 2019 equals $217,200. The fair value of the bonds on December 31, 2020 equals $208,340.

Prepare the journal entries to:

1. Record the purchase of the bonds on January 1, 2019.

2. Record receipt of interest on December 31, 2019.

3. Record the fair value adjustment on December 31, 2019.

4. Record receipt of interest on December 31, 2020.

5. Record the fair value adjustment on December 31, 2020.

6. Record the sale of these bonds on January 1, 2021 for $209,000. cash.

Valentine Accessories Plus produces brass handles for the furniture industry in a four-stage process –Mixing, Moulding, Polishing and Packaging. Costs incurred in the Polishing Department during January are summarized as follows: WIP - Polishing Process A/C January 1 Bal. Transfer from Moulding Direct Materials Added Direct Labour Manufacturing Overhead 20,000 $ 0 1,310,000 391,600 638,000 307,400 Normal losses are estimated to be 2½% of input during the period. Inspection takes place during the processing operation, at which point damaged handles are separated from good handles and sold as scrap to local furniture manufacturers at $85 each. At inspection, 2,000 handles were rejected as scrap. These units had reached the following degree of completion: Transfer from Moulding 100% Direct material added 40% Conversion costs 20% Work-in-progress at the end of January was 4,000 handles and had reached the following degree of completion: Transfer from Moulding 100% Direct material added 80% Conversion costs 50% Direct materials added and conversion costs are incurred uniformly throughout the process. Required: (a) Compute the equivalent units and cost per equivalent units for direct materials (From Moulding & Direct materials added) and conversion costs. (b) Compute the:  cost of the unexpected losses  total cost of the handles completed and transferred out of the Packaging Department  cost of ending work in process inventory in the Polishing Department (c) Complete the Work in Process Inventory – Polishing Process T-account, clearly showing the ending balance. (d) Prepare the journal entries for the:  assignment of direct materials, direct labour incurred and the manufacturing overhead applied to the Polishing Process  cost of the units completed and transferred out to the Packaging Process (e) Given that 30% of the unexpected losses were as a result of pilferage, calculate Valentine Accessories true loss for the Polishing Department.

On July 1, 2016, Killearn Company acquired 142,000 of the outstanding shares of Shaun Company for $15 per share. This acquisition gave Killearn a 40 percent ownership of Shaun and allowed Killearn to significantly influence the investee's decisions.

As of July 1, 2016, the investee had assets with a book value of $5 million and liabilities of $890,000. At the time, Shaun held equipment appraised at $245,000 above book value; it was considered to have a seven-year remaining life with no salvage value. Shaun also held a copyright with a five-year remaining life on its books that was undervalued by $800,000. Any remaining excess cost was attributable to goodwill. Depreciation and amortization are computed using the straight-line method. Killearn applies the equity method for its investment in Shaun.

Shaun's policy is to declare and pay a $1 per share cash dividend every April 1 and October 1. Shaun's income, earned evenly throughout each year, was $614,000 in 2016, $654,600 in 2017, and $704,200 in 2018.

In addition, Killearn sold inventory costing $145,800 to Shaun for $243,000 during 2017. Shaun resold $102,000 of this inventory during 2017 and the remaining $141,000 during 2018.

1. Determine the equity income to be recognized by Killearn during each of these years.

2. Compute Killearn's investment in Shaun Company's balance as of December 31, 2018.

(For all requirements, enter your answers in whole dollars and not in millions.)

Dividing Partnership Net Income Required: Steve King and Chelsy Stevens formed a partnership, dividing income as follows: Annual salary allowance to King of $101,750. Interest of 7% on each partner's capital balance on January 1. Any remaining net income divided to King and Stevens, 1:2. King and Stevens had $77,600 and $90,040, respectively, in their January 1 capital balances. Net income for the year was $185,000. How much is distributed to King and Stevens? Note: Compute partnership share to two decimal places. Round final answers to the nearest whole dollar.

King: $

Stevens: $

The Typhoon Company uses straight-line depreciation. It lowers an estimated salvage value, resulting in a depreciation expense higher than previous year amounts. In addition to the recording of depreciation for the current year

1. a) A restatement of financial statements and a credit to Accumulated Depreciation

2. b) A restatement of financial statements and a debit to Accumulated Depreciation

3. c) No restatement of financial statements and a credit to Accumulated Depreciation

4. d) No restatement of financial statements and a debit to Accumulated Depreciation

5. e) No restatement of financial statements and a no entry to Accumulated Depreciation

is it the changing in accounting estimate? or change due to an accounting error?

to the changing accounting estimate, do we need to A restatement of financial statements and journal entry

to change due to an accounting error, do we need to A restatement of financial statements and journal entry

how to represent the current and the previous year?

Millco, Inc., acquired a machine that cost $544,000 early in 2016. The machine is expected to last for eighth years, and its estimated salvage value at the end of its life is $75,000. Required:

a. Using straight-line depreciation, calculate the depreciation expense to be recognized in the first year of the machine's life and calculate the accumulated depreciation after the fifth year of the machine's life. Depreciation expense Accumulated depreciation

b. Using declining-balance depreciation at twice the straight-line rate, calculate the depreciation expense for the third year of the machine's life.

c. What will be the net book value of the machine at the end of its eighth year of use before it is disposed of, under each depreciation method? Straight-line depreciation Declining-balance depreciation

Dorsey Co. has expanded its operations by purchasing a parcel of land with a building on it from Bibb Co. for $89,000. The appraised value of the land is $24,000, and the appraised value of the building is $102,000. information Required:

a. Assuming that the building is to be used in Dorsey Co.’s business activities, what cost should be recorded for the land? (Do not round intermediate calculations.)

b. Indicate why, for income tax purposes, management of Dorsey Co. would want as little of the purchase price as possible allocated to land. (Select all that apply.) Land is a current asset. Land is not a depreciable asset. Land value will not reduce taxable income. Land is a depreciable asset. Land value reduces taxable income.

c. Indicate why Dorsey Co. allocated the cost of assets acquired based on appraised values at the purchase date rather than on the original cost of the land and building to Bibb Co. Appraised values are to be used because they represent the historical asset value. Appraised values are to be used because they represent the book value. Appraised values are to be used because they represent the asset's current value.

d. Assuming that the building is demolished at a cost of $11,000 so the land can be used for employee parking, what cost should Dorsey Co. record for the land?

Cash

budget—Basic

  Grenoble Enterprises had sales of

$49,600 in March and

$60,200in April. Forecast sales for​ May, June, and July are

$69,800​,$80,200​,and

$ 99 comma 500$99,500​,

respectively. The firm has a cash balance of

$ 4 comma 500$4,500

on May 1 and wishes to maintain a minimum cash balance of

$ 4 comma 500$4,500.

Given the following​ data, prepare and interpret a cash budget for the months of​ May, June, and July.

​(1) The firm makes

22 %22%

of sales for​ cash,

61 %61%

are collected in the next​ month, and the remaining

17 %17%

are collected in the second month following sale.  

​(2) The firm receives other income of

$ 2 comma 500$2,500

per month.  

​(3) The​ firm's actual or expected​ purchases, all made for​ cash, are

$ 50 comma 400$50,400​,

$ 69 comma 500$69,500​,

and

$ 79 comma 600$79,600

for the months of May through​ July, respectively.  

​(4) Rent is

$ 3 comma 500$3,500

per month.  

​(5) Wages and salaries are

12 %12%

of the previous​ month's sales.  

​(6) Cash dividends of

$ 2 comma 600$2,600

will be paid in June.  

​(7) Payment of principal and interest of

$ 3 comma 800$3,800

is due in June.  

​(8) A cash purchase of equipment costing

$ 5 comma 700$5,700

is scheduled in July.  

​(9) Taxes of

$ 6 comma 500$6,500

are due in June.

E16-16.  

(EPS: Simple Capital Structure)

(LO 4) On January 1, 2018, Wilke Corp. had 480,000 shares of common stock outstanding. During 2018, it had the following transactions that affected the common stock account.

Instructions

(a)  

Determine the weighted-average number of shares outstanding as of December 31, 2018.

(b)  

Assume that Wilke Corp. earned net income of $3,456,000 during 2018. In addition, it had 100,000 shares of 9%, $100 par nonconvertible, noncumulative preferred stock outstanding for the entire year. Because of liquidity considerations, however, the company did not declare and pay a preferred dividend in 2018. Compute earnings per share for 2018, using the weighted-average number of shares determined in part (a).

(c)  

Assume the same facts as in part (b), except that the preferred stock was cumulative. Compute earnings per share for 2018.

(d)  

Assume the same facts as in part (b), except that net income included a loss from discontinued operations of $432,000 (net of tax). Compute earnings per share for 2018.

please explain detail ( i know the answer but i don't understand)

The following data are accumulated by Eco Labs, Inc. in evaluating two competing capital investment proposals:

Determine the expected average rate of return for each proposal. If required, round your answers to one decimal place.

2. TurboCard credit card company offers a loyalty program to its credit card users whereby the credit card company gives the credit card user points for amounts purchased from merchants when using the credit card. These points may be accumulated and redeemed for a number of different goods or services, including cash-back. TurboCard separately enters into arrangements with merchants under which the credit card company provides the financing for the transaction between the merchant and the credit card user, in return for which the credit card company receives a stated fee from the merchant. When the credit card user uses the credit card to make a purchase from a merchant, TurboCard honors its agreement with the merchant and advances the merchant the funding for the amount of the transaction after deducting the fee to which the credit card company is entitled. However, as a result of that transaction, TurboCard now also has an obligation to the credit card user to provide the specified number of points in the loyalty program.

Required:

a. How many performance obligations are involved in these activities?

b. Assuming there are two performance obligations, how would revenue be recognized?

c. Assuming there is only one performance obligation, how would revenue be recognized?