What do you understand by impairment of long-lived tangible asset?

Expenditures made to extend an asset's life are called revenue expenditures.

True False

Arnez Company’s annual accounting period ends on December 31, 2017. The following information concerns the adjusting entries to be recorded as of that date.

1. An analysis of the company's insurance policies provided the following facts.
     

Bledsoe Corporation has provided the following data for the month of November:

Additional information:

Any underapplied or overapplied manufacturing overhead is closed out to cost of goods sold.

Required:

Please prepare a Schedule of Cost of Goods Manufactured and a Schedule of Cost of Goods Sold.

Comfy Corporation manufactures furniture in several divisions, including the patio furniture division. The manager of the patio furniture division plans to retire in two years.
The manager receives a bonus based on the division’s ROI, which is currently 7%.
One of the machines that the patio furniture division uses to manufacture the furniture is rather old,
and the manager must decide whether to replace it. The new machine would cost $35,000 and would last
10 years. It would have no salvage value. The old machine is fully depreciated and has no trade-in value.
Comfy uses straight-line depreciation for all assets. The new machine, being new and more efficient, would
save the company $5,000 per year in cash operating costs. The only difference between cash flow and net
income is depreciation. The internal rate of return of the project is approximately 7%. Comfy Corporation’s
weighted-average cost of capital is 5%. Comfy is not subject to any income taxes.
1. Should Comfy Corporation replace the machine? Why or why not?
2. Assume that “investment” is defined as average net long-term assets (that is, after depreciation) during the year. Compute the project’s ROI for each of its first five years. If the patio furniture manager is
interested in maximizing his bonus, would he replace the machine before he retires? Why or why not?
3. What can Comfy do to entice the manager to replace the machine before retiring?

On 11 August 2020, Vanya Ho entered into a contract with Diego Toh to renovate her school, The Umbrella Learning Centre and to set up the internet system for the school’s online lessons starting in October. They agreed to the total sum of $100,000 with a 10% deposit of $10,000 to be paid on the signing of the contract. $20,0000 was to be paid upon the design being approved by Vanya Ho. The balance of $70,000 was to be paid on the completion of the renovation works. The contract provided that Diego Toh was to complete the renovation works and handover the school to Vanya Ho not later than 20 September 2020. The design was approved by Vanya Ho on 18 August 2020. Diego Toh proceeded with the renovation which was completed on 19 September 2020. Vanya inspected the renovation work on 20 September 2020. She was not pleased with the internet system when she tested the wifi connection. The wifi signals were weak and created issues for running the online lessons. Diego Toh explained that his electricians have gone back to Malaysia and would only be back early 2021. He insisted that the renovation works including the setting up of the internet system were in accordance with the design as approved by Vanya. On 21 September, Vanya Ho called an independent electrician, Klaus Soh, to inspect and advise on internet system. Klaus Soh explained that the internet system was poorly set-up. He quoted $2,000 to rectify the defects which could be completed by 25 September 2020. On 22 September, Diego Toh contacted Vanya Ho and demanded payment of the balance amount of $70,000. Vanya Ho refused to pay the balance and insisted that Diego Toh rectify the internet system by 26 September 2020.

(b) Diego Toh would like to claim the full amount of $70,000. Discuss the LEGAL PRINCIPLES concerning the performance of the contract, APPLY the legal principles, and CONCLUDE on whether Diego Toh could discharge the contract with Vanya Ho and claim the full amount of $70,000.

Use the following information to answer the questions relating to Mugudia:

Mugudia and Daughters Company is a wholesale seed distributor. The records reflected the following for January Year 1. All purchases and sales were made in cash.

a. Calculate January Year 1 cost of goods sold for Mugudia, assuming that Mugudia uses the FIFO cost flow assumption and a perpetual inventory system.

b. Calculate January Year 1 ending inventory for Mugudia, assuming that Mugudia uses the LIFO cost flow assumption and a perpetual inventory system.

c. Calculate January Year 1 gross profit assuming that Mugudia uses the LIFO cost flow assumption and a periodic inventory system.

d. Calculate January Year 1 cost of goods sold for Mugudia, assuming that Mugudia uses the periodic inventory system and a weighted-average cost flow assumption.

Problem 6-5 (LO 3) Consolidated income statement, affiliated firm for tax. On January 1, 2015, Dawn Corporation exchanges 12,000 shares of its common stock for an 80% interest in Mercer Company. The stock issued has a par value of $10 per share and a fair value of $25 per share. On the date of purchase, Mercer has the following balance sheet: Common stock ($2 par). . . . . . . . . . . . . . . . . . . . $ 20,000 Paid-in capital in excess of par . . . . . . . . . . . . . . 50,000 Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . 100,000 Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . $170,000 On the purchase date, Mercer has equipment with an 8-year remaining life that is undervalued by $100,000. Any remaining excess cost is attributed to goodwill. There are intercompany merchandise sales. During 2016, Dawn sells $20,000 of merchandise to Mercer. Mercer sells $30,000 of merchandise to Dawn. Mercer has $2,000 of Dawn goods in its beginning inventory and $4,200 of Dawn goods in its ending inventory. Dawn has $2,500 of Mercer goods in its beginning inventory and $3,000 of Mercer goods in its ending inventory. Dawn’s gross profit rate is 40%; Mercer’s is 25%. Required Required 364 Part 1 COMBINED CORPORATE ENTITIES AND CONSOLIDATIONS Copyright 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. On July 1, 2015, Dawn sells a machine to Mercer for $90,000. The book value of the machine on Dawn’s books is $50,000 at the time of the sale. The machine has a 5-year remaining life. Depreciation on the machine is included in expenses. The consolidated group meets the requirements of an affiliated group under the tax law and files a consolidated tax return. The corporate tax rate is 30%. The original purchase is not structured as a nontaxable exchange. Dawn uses the cost method to record its investment in Mercer. Since Mercer has never paid dividends, Dawn has not recorded any income on its investment in Mercer. The two companies prepare the following income statements for 2016: Dawn Corporation Mercer Company Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,000,000 $600,000 Less cost of goods sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 800,000 375,000 Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 200,000 $225,000 Less expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80,000 185,000 Income before tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 120,000 $ 40,000 Prepare a determination and distribution of excess schedule. Prepare the 2016 consolidated net income in schedule form. Include eliminations and adjustments. Provide income distribution schedules to allocate consolidated net income (after tax) to the controlling and noncontrolling interests.

Odessa, Inc., manufactures one model of computer desk. The following data are available regarding units shipped and total shipping costs:

Required:
1. Prepare a scattergraph of Odessa’s shipping cost and draw the line you believe best fits the data.



3. Using the high-low method, calculate Odessa’s total fixed shipping costs and variable shipping cost per unit.



4. Perform a least-squares regression analysis on Odessa’s data. (Use Microsoft Excel or a statistical package to find the coefficients using least-squares regression. Round your answers to 2 decimal places.)



5. Using the regression output, create a linear equation (y = a + bx ) for estimating Odessa’s shipping costs.

Lansing, Inc. provides the following information for one of its department’s operations for June (no new material is added in Department T):

The ending inventory has 3,900 units, which are 60 percent complete with respect to Department T costs and 100 percent complete for prior department costs.

Required:

a. Complete the production cost report using the weighted-average method. (Round "Cost per equivalent unit" to 2 decimal places.)

In this discussion, explain why inherent risk is set for audit objectives for segments (classes of transactions, balances, and presentation and disclosure) rather than for the overall audit.

What is the effect on the amount of evidence the auditor must accumulate when inherent risk changes from medium to high for an audit objective?

Provide examples to illustrate your answer.

Starry Point Music is a not-for-profit organization that brings guest artists to the city. Starry just leased a concert hall for next year's performances, lease payments are $1,000 per month for all 12 months of the year. The society has two types of performances: solo artists and small ensembles. The amount that will be charged for tickets for each type of performance is $320 for solo artists and $420 for ensembles. The only variable costs are marketing and hourly wages and those are estimated at $20 per ticket for both types of performances. The society has scheduled twice as many ensemble performances as solo artists. In addition to the lease costs for the concert hall, the only other fixed cost is the salary of he Artistic Director at $98,000per year. How many tickets for each type of performance must be sold for the Society to break even?

Auto Lavage is a Canadian company that owns and operates a large automatic carwash facility near Quebec. The following table provides data concerning the company’s expected costs:

For example, electricity costs are $3,450 per month plus $0.30 per car washed. The company expects to wash 9,900 cars in October and to collect an average of $7.80 per car washed.

Auto Lavage’s actual level of activity was 10,000 cars. The actual revenues and expenses for October are given below:

Prepare a flexible budget performance report for October. (Indicate the effect of each variance by selecting "F" for favourable, "U" for unfavourable, and "None" for no effect (i.e., zero variance).)

2. Prepare a comprehensive performance report for October. Assume that the static budget for October was based on an activity level of 9,900 cars. (Indicate the effect of each variance by selecting "F" for favourable, "U" for unfavourable, and "None" for no effect (i.e., zero variance).)

Lansing, Inc. provides the following information for one of its department’s operations for June (no new material is added in Department T):

The ending inventory has 3,500 units, which are 60 percent complete with respect to Department T costs and 100 percent complete for prior department costs.

Required:

Complete the production cost report using FIFO. (Round "Cost per equivalent unit" to 2 decimal places.)

do the report for Accounting for issuance of convertible securities