Cost, volume, profit analysis identifies a transaction’s “contribution’ to fixed costs. Explain the meaning of ‘contribution’ and discuss the usefulness of such analysis in making business decisions. (limit 120 words)

Changes to Itemized Deduction

Tax reform that affects both individuals and businesses was enacted in December 2017. It’s commonly referred to as the Tax Cuts and Jobs Act, TCJA or simply tax reform. In addition to nearly doubling standard deductions, TCJA changed several itemized deductions that can be claimed on Schedule A, Itemized Deductions.

This means that many individuals who formerly itemized may now find it more beneficial to take the standard deduction. Taxpayers may only do one or the other. They either take the standard deduction or claim itemized deductions.

The tax reform law made the following changes to itemized deductions that can be claimed on Schedule A for 2018.

Limit on overall itemized deductions suspended.

The income-based phase-out of certain itemized deductions does not apply in 2018. This means that some taxpayers may be able to deduct more of their total itemized deductions if their deductions were limited in the past because their income was above certain levels.

Deduction for state and local income, sales and property taxes modified.

A taxpayer’s deduction for state and local income, sales and property taxes is limited to a combined, total deduction. The limit is $10,000 - $5,000 if married filing separately. Anything above this amount is not deductible.

New dollar limit on total qualified residence loan balance.

The date a taxpayer took out their mortgage or home equity loan may also impact the amount of interest they can deduct. If a taxpayer’s loan was originated or was treated as originating on or before Dec. 15, 2017, they may deduct interest on up to $1 million in qualifying debt, or $500,000 for taxpayers who are married filing separately, If the loan originated after that date, the taxpayer may only deduct interest on up to $750,000 in qualifying debt, or $375,000 for taxpayers who are married filing separately. The limits apply to the combined amount of loans used to buy, build or substantially improve the taxpayer’s main home and second home.

Deduction for home equity interest modified.

Interest paid on most home equity loans is not deductible unless the interest is paid on loan proceeds used to buy, build or substantially improve a main home or second home.

For example, interest on a home equity loan used to build an addition to an existing home is typically deductible, while interest on the same loan used to pay personal living expenses, such as credit card debts, is not.
As under prior law, the loan must be secured by the taxpayer’s main home or second home (known as a qualified residence), not exceed the cost of the home and meet other requirements.

Limit for charitable contributions modified.

The limit on the deduction for charitable contributions of cash has increased from 50 percent to 60 percent of a taxpayer’s adjusted gross income. This means that some taxpayers who make large donations to charity may be able to deduct more of what they give this year.

Deduction for casualty and theft losses modified.

A taxpayer’s net personal casualty and theft losses must now be attributable to a federally declared disaster to be deductible.

Miscellaneous itemized deductions suspended.

Previously, when a taxpayer itemized, they could deduct the amount of their miscellaneous itemized deductions that exceeded 2 percent of their adjusted gross income. These expenses are no longer deductible.

This includes unreimbursed employee expenses such as uniforms, union dues and the deduction for business-related meals, entertainment and travel. It also includes deductions for tax preparation fees and investment expenses, such as investment management fees, safe deposit box fees and investment expenses from pass-through entities.

Create an example in which a taxpayer would benefit from itemizing deductions instead of taking the standard deduction. In your example give us the taxpayer's filing status, AGI and list of deductions ( descriptions of the expense and the amount).

Smoky Mountain Corporation makes two types of hiking boots—Xtreme and the Pathfinder. Data concerning these two product lines appear below:

The company has a traditional costing system in which manufacturing overhead is applied to units based on direct labor-hours. Data concerning manufacturing overhead and direct labor-hours for the upcoming year appear below:

Required:

1. Compute the product margins for the Xtreme and the Pathfinder products under the company’s traditional costing system. (Round your intermediate calculations to 2 decimal places.)

2. The company is considering replacing its traditional costing system with an activity-based costing system that would assign its manufacturing overhead to the following four activity cost pools (the Other cost pool includes organization-sustaining costs and idle capacity costs):

Compute the product margins for the Xtreme and the Pathfinder products under the activity-based costing system. (Negative product margins should be indicated with a minus sign. Round your intermediate calculations to 2 decimal places.)

3. Prepare a quantitative comparison of the traditional and activity-based cost assignments. (Do not round intermediate calculations. Round your "Percentage" answers to 1 decimal place. (i.e. .1234 should be entered as 12.3))

Chicago contractors got $5,400,000 contract to construct a school building for the City of Chicago. Work on this contract began in 2013 and the financial data pertaining to this contract is available here. Cost incurred till Dec.31, 2013 $1,080,000 Billings made to City $1,000,000 Amount collected from City $ 750,000 The estimated future cost to complete this contract is $3,240,000.

(a) Prepare Chicago contractors 2013 journal entries using COMPLETED CONTRACT method. (b) Show how the contract accounts will appear in the Balance Sheet of Chicago Contractors on 12/31/2013.

Illustrative Example: Retailer Ltd: Preparation of financial statements

Retailer Ltd, recorded the following transactions during the year:

Rm

Sales :57,959

Other non-current assets : 6,304

Cost of sales :55,033

Trade and other receivables: 1,607

Trade and other payables: 8,568

Administration expenses :1,860

Loans (due after one year) :10,711

Loans (due within one year): 2,826

Other current liabilities :7,901

Property, plant and equipment: 17,978

Goodwill :2,874

Finance income :29

Other current assets: 4,246

Cash :3,082

Share capital and premium :5,502

Pension liabilities :3,175

Finance costs :693

Taxation cost: 49

Inventories :2,430

Investments (long term) :1,920

Investments (short term) :3,463

Taxation payable: 419

Other non-current liabilities :1,688

Retained earnings :3,114

Using the information above you are asked to:

2. Prepare a balance sheet at the end of the year and calculate net assets (assets less liabilities) and equity

At the end of 2018, Terry Company prepared the following schedule of investments in available-for-sale debt securities:

During 2019, the following transactions occurred:

Required:

Aron Company makes computer screens, Model 1 and Model 2. Aron anticipates selling the screens as follows:

The inventory on 1/1/18 is 2500 units of Model 1 and 3000 units of Model 2. Aron wants to have on hand 45% of the anticipated sales of the following month for each model. Prepare a production budget for the first 3 quarters of 2018 for both models.

1.USA is getting older. In retirement, do families have a higher or lower income than other parts of their life? So more retirees increases/decreases poverty?

2.Many lament the crumbling American family. Do single parent families experience more/less poverty? So more single parent families increases/decreases poverty?

3.Poverty is often counted by household. Typically are poor families smaller/bigger than wealthy ones?

4.If poverty were measured by person, would the poverty rate increase/decrease compared to measuring by households?

5.Poverty means low income, but are things provided to needy families in ways other than income- rather supplemented or not? Name some means for needy families other than income.

- Fixed assets costing $8,000 with a book value of $3,000 were sold for $6,000.

- Long term investments costing $5,000 were sold for $5,000.

-Redeemed $5,000 of the bond issuance.

- Sold stock___________.

-Paid dividends_________.

All other transactions involved cash.

Be certain you have accounted for all the changes in the account line items somewhere in your 3 areas of SCF (ex. Fixed Assets account went from $28K to $40k - we did not just buy $12K this year....)

2020     2019

Cash $30,000 $16,000

Acct Receivable 7,000                               5,000

Ppd Insurance 2,000 3,000

Inventory 13,000 11,000

L-T Investments 22,000                         27,000

Fixed Assets 40,000 28,000

Acc Depreciation 8,000                               6,000

Acct Payable 16,000                         14,000

Interest Payable 4,000                           ----000—

Taxes Payable 6,000 4,000

Bond Payable 20,000 25,000

Common Stock 21,000                         20,000

APIC 3,000                                      0

Retained Earnings 36,000                         21,000

Sales $120,000

-COGS   -   60,000

Gross Profit 60,000

- Operating Expenses   -   20,000  

Income from Operations 40,000

+/- Other

           Interest Expense -2,000

Gain on Sale of Equip +3,000        

Taxable Income 41,000

-Tax   -8,000

Net Income $33,000

Required: Prepare the Statement of Cash Flows for Operating, Investing and Financing using both the indirect and direct methods for Operating.

Taylor’s is a popular restaurant that offers customers a large dining room and comfortable bar area. Taylor Henry, the owner and manager of the restaurant, has seen the number of patrons increase steadily over the last two years and is considering whether and when she will have to expand its available capacity. The restaurant occupies a large home, and all the space in the building is now used for dining, the bar, and kitchen, but space is available on the property to expand the restaurant. The restaurant is open from 6 p.m. to 10 p.m. each night (except Monday) and, on average, has 27 customers enter the bar and 52 enter the dining room during each of those hours. Taylor has noticed the trends over the last 2 years and expects that within about 4 years, the number of bar customers will increase by 50% and the dining customers will increase by 20%. Taylor is worried that the restaurant will be not be able to handle the increase and has asked you to study its capacity. In your study, you consider four areas of capacity: the parking lot (which has 82 spaces), the bar (56 seats), the dining room (102 seats), and the kitchen. The kitchen is well-staffed and can prepare any meal on the menu in an average of 12 minutes per meal. The kitchen, when fully staffed, is able to have up to 20 meals in preparation at a time, or 100 meals per hour (60 min/12 min × 20 meals).

To assess the capacity of the restaurant, you obtain the additional information: Diners typically come to the restaurant by car, with an average of 3 persons per car, while bar patrons arrive with an average of 1.5 persons per car. Diners, on average, occupy a table for an hour, while bar customers usually stay for an average of 2 hours. Due to fire regulations, all bar customers must be seated. The bar customer typically orders one drink per hour at an average of $9 per drink; the dining room customer orders a meal with an average price of $20; the restaurant’s cost per drink is $3, and the direct costs for meal preparation are $3.

Required: 1-a. Given the current number of customers per hour, what is the amount of excess capacity in the bar, dining room, parking lot, and kitchen? 1-b. Calculate the expected total throughput margin for the restaurant per day, and month (assuming a 26-day month). 2-a. Given the expected increase in the number of customers, determine if there is a constraint for any of the four areas of capacity. What is the amount of needed capacity for each constraint? 2-b. If there is a constraint, reduce the demand on the constraint so that the restaurant is at full capacity (assume some customers would have to be turned away). Calculate the expected total throughput margin for the restaurant per day, and month (assuming a 26-day month).

Marvel Parts, Inc., manufactures auto accessories. One of the company’s products is a set of seat covers that can be adjusted to fit nearly any small car. The company has a standard cost system in use for all of its products. According to the standards that have been set for the seat covers, the factory should work 990 hours each month to produce 1,980 sets of covers. The standard costs associated with this level of production are:

During August, the factory worked only 1,000 direct labor-hours and produced 2,200 sets of covers. The following actual costs were recorded during the month:

At standard, each set of covers should require 3.0 yards of material. All of the materials purchased during the month were used in production.

Required:

1. Compute the materials price and quantity variances for August.

2. Compute the labor rate and efficiency variances for August.

3. Compute the variable overhead rate and efficiency variances for August.

(Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)

Blossom Corporation, a private corporation, was formed on July 1, 2018. On July 31, Guy Gélinas, the company’s president, prepared the following statement of financial position:

Guy admits that his knowledge of accounting is somewhat limited and is concerned that his statement of financial position might not be correct. He gives you the following additional information:

Prepare a corrected statement of financial position. (Hint: To get the balance sheet to balance, adjust Common Shares). (List Assets in order of liquidity.)

As of December 31, 2020, Ahab Fisheries Inc. had the following share capital:

·       50,000 common shares                                             $200,000

·       80,000 $2, non-cumulative, preferred shares $600,000

During 2021, the following share transactions occurred:

·       April 1   Issued 10,000 common shares for cash of $ 45,000

·       July 1    Issued 20,000 common shares at $ 4.75 each

·       Dec 15 Cash dividends were declared for the preferred shares only.

For the year ending December 31, 2021, Ahab had profit of $ 323,000.

Required

a)      Calculate the profit available to common shareholders in 2021.

b)      Calculate the weighted average number of common shares in 2021.

c)      Calculate the earnings per share in 2021. (1 mark)

Purple Co.'s production budget for Product X for the year ended December 31 is as follows:

In Purple's production operations, Materials A, B, and C are required to make Product X.

The quantities of direct materials expected to be used for each unit of product are as follows:

The prices of direct materials are as follows:

Prepare a direct materials purchases budget for Product X, assuming that there are no beginning or ending inventories for direct materials (all units purchased are used in production).

Chapter 13

1. The following financial statement data is available for the Scottsdale Company for Dec. 31, 2019. (30 pts)
   
   Comparative Balance Sheet Data
   
                                                                    2019                  2018
   Cash                                                    $ 39,835         $    4,000
   Accounts Receivable                               17,500             12,950
   Dividends Receivable                               1,000                      0
   Inventory                                                42,000             35,000
   Prepaid rent                                               3,000             12,000
   Prepaid insurance                                      2,100                  900
   Office supplies                                          1,000                  750
   Long-term investments                           20,000             30,000
   Land                                                    125,000         175,000
   Building                                              350,000         350,000
   Accumulated depreciation, Building (105,000)        (87,500)
   Equipment                                           525,000         400,000
   Accumulated depreciation, Equipment (130,000)      (112,000)
   Patent                                                      45,000             50,000
               Total assets                             $ 936,435       $ 871,100
   
   Accounts payable                                $    26,000       $   30,000
   Income taxes payable                                  5,000              4,000
   Wages payable                                            5,000              3,000
   Short-term notes payable                          10,000            10,000
   Dividends payable                                      1,500                   0
   Unearned Income                                           500              2,000
   Accrued Liabilities                                      5,303            10,853
   Long-term notes payable                          60,000            70,000
   Bonds payable                                         415,000          415,000
   Common stock ($10 par)                        290,000          220,000
   Paid-in capital in excess of par                 46,410            17,500
   Retained earnings                                    106,722            88,747
   Treasury Stock                                       (35,000)                     0       
               Total liabilities and equity      $ 936,435       $ 871,100
   
   
   
   
   
   
   
   
   
   Income Statement
   
   Sales revenue                                                                          $1,160,000
   Cost of goods sold                                                                  (    748,000)
   Gross profit                                                                                  412,000
   Operating expenses                                                                 (    276,400)
   Income from operations                                                               135,600
   Other revenues/expense
   Gain on sale of land                                         8,000
   Gain on sale of long-term investment             4,000
   Dividend revenue                                             2,400
   Interest expense                                            (51,750)           (     37,350)
   Income before taxes                                                                      98,250
   Income tax expense                                                                (     39,400)
   Net income                                                                                    58,850
   
   Instructions:

• Prepare a statement of cash flows in proper form for 2019 using the Indirect method. Then, redo the Operating Section only using the Direct method.