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

arris Company manufactures and sells a single product. A partially completed schedule of the company’s total costs and costs per unit over the relevant range of 59,000 to 99,000 units is given below: Required: 1. Complete the above schedule of the company’s total costs and costs per unit. 2. Assume that the company produces and sells 89,000 units during the year at a selling price of $8.45 per unit. Prepare a contribution format income statement for the year.

Hall Corp. purchases a new machine on October 1, 2018. Year end is December 31.

Purchase price 100,000

Residual Value 5,000

Useful life 3 years

Estimated working hours during useful life 7,500

Machine usage in 2018 1,500

Machine usage in 2019 3,750

Machine usage in 2020 2,250

1. Calculate depreciation expense using the activity method for 2018

2. Prepare Hall Corp's journal entry to record 2018 depreciation on December 31, 2018

3. Calculate depreciation expense using the activity method for 2019

4. Prepare Hall Corp's journal entry to record 2019 depreciation on December 31, 2019

5. Calculate depreciation expense using the activity method for 2020

6. Prepare Hall's journal entry to record 2020 depreciation on December 31, 2020

A share of stock with a beta of 0.72 now sells for $47. Investors expect the stock to pay a year-end dividend of $2. The T-bill rate is 3%, and the market risk premium is 6%. If the stock is perceived to be fairly priced today, what must be investors’ expectation of the price of the stock at the end of the year? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Walton Corporation estimated its overhead costs would be $22,700 per month except for January when it pays the $138,000 annual insurance premium on the manufacturing facility. Accordingly, the January overhead costs were expected to be $160,700 ($138,000 + $22,700). The company expected to use 7,100 direct labor hours per month except during July, August, and September when the company expected 9,100 hours of direct labor each month to build inventories for high demand that normally occurs during the Christmas season. The company’s actual direct labor hours were the same as the estimated hours. The company made 3,550 units of product in each month except July, August, and September, in which it produced 4,550 units each month. Direct labor costs were $23.90 per unit, and direct materials costs were $10.70 per unit.

a. Calculate a predetermined overhead rate based on direct labor hours.

b.Determine the total allocated overhead cost for January, March, and August.

c.Determine the cost per unit of product for January, March, and August.

d.Determine the selling price for the product, assuming that the company desires to earn a gross margin of $21.60 per unit.

Custom Automobile Restoration Shop (CARS) is a small shop dedicated to high-quality restorations of vintage cars. Although it will restore an automobile that a customer already owns, usually the shop buys an old vehicle, restores it, and then sells it in a private party sale or at a classic-car auction. The shop has been in existence for 10 years, but for the sake of simplicity, assume it has no beginning inventories for 2017. Five automobile restoration projects were worked on during 2017. By the end of the year, four of these projects were complete and three of them had been sold.

The following selected data are from CARS' 2017 budget:

The following information relates to production events during 2017:

• Raw materials were purchased for $217,100.
• Materials used in production totaled $209,600; $15,900 of these were considered indirect materials costs. The remaining $193,700 of direct materials costs related to individual restoration jobs as follows:

  Job Number	Direct Materials Cost
  701	$	44,300
  702		36,300
  703		43,000
  704		40,600
  705		29,500

• Labor costs incurred for production totaled $184,900. The workers are highly skilled craftsmen who require little supervision. Therefore, all of these costs were considered direct labor costs and related to individual restoration jobs as follows:

  Job Number	Direct Labor Cost
  701	$	41,000
  702		43,000
  703		49,500
  704		31,000
  705		20,400

• Paid factory rent of $30,300.
• Recorded depreciation on factory equipment of $13,100.
• Made $5,800 of payments to outside vendors for maintenance of factory equipment.
• Paid factory utilities costs of $4,300.
• Applied manufacturing overhead using a predetermined rate of $18.00 per machine hour. The 3,790 machine hours that were used relate to each job as follows:

  	Machine
  Job Number	Hours Worked
  701	780
  702	850
  703	920
  704	890
  705	350

• Completed all restoration jobs except Job 705 and transferred those projects to finished goods.
• Sold three jobs for the following amounts:

  Job Number	Sales Price
  701	$	127,000
  702		119,200
  703		111,700

• Closed the Manufacturing Overhead account to transfer any overapplied or underapplied overhead to the Cost of Goods Sold account.

Required

1. Assume CARS had used direct labor hours (versus machine hours) as its cost driver. Compute its predetermined overhead rate. (Round your answer to 2 decimal places.)

2. Determine the ending balance in Raw Materials Inventory.

3. Determine the ending balance in Finished Goods Inventory.

4. Determine the ending balance in Work in Process Inventory.

5. Determine the costs of goods manufactured.

6. Determine the amount of Cost of Goods Sold.

7. Determine the amount of gross margin that was earned on Jobs 701, 702, and 703.

8. Determine the amount of overapplied or underapplied overhead that existed at the end of the year.

(For all requirements, round your intermediate calculations to 2 decimal places.)

What are assets, liabilities, and new worth/net assets and Do GAAP have a preference between cash and accrual bases of accounting? Explain.