7.  An intercompany sale took place whereby the book value exceeded the transfer price of a depreciable asset. Which statement is true for the year following the sale?

a A worksheet entry is made with a debit to retained earnings for an upstream transfer.

b A worksheet entry is made with a debit to retained earnings for a downstream transfer.

c A worksheet entry is made with a debit to investment in the subsidiary for a downstream transfer.

d A worksheet entry is made with a credit to retained earnings for an upstream transfer.

e No worksheet entry is necessary.

8. A net asset balance sheet exposure exists, and the foreign currency depreciates. Which of the following statements is true?

a There is no translation adjustment.

b There is a negative translation adjustment.

c There is a positive translation adjustment.

d There is a transaction loss.

e There is a transaction gain.

9. Cline, Watters, and Nettles formed a partnership on January 1, 20X1, with investments of $100,000, $150,000, and $200,000, respectively. For division of income, they agreed to

(1) an interest of 10% of the beginning capital balance each year;
(2) an annual compensation of $10,000 to Watter; and
(3) sharing the remainder of the income or loss in a ratio of 20% for Cline and 40% each for Watters and Nettles.

Net income was $150,000 in 20X1 and $180,000 in 20X2. Each partner withdrew $1,000 for personal use every month during 20X1 and 20X2.

What was Watters's capital balance at the end of 20X1?

a $150,000

b $160,000

c $165,000

d $201,000

e $213,000

Differential Analysis for a Discontinued Product

The condensed product-line income statement for Suffolk China Ware Company for the month of May is as follows:

Fixed costs are 12% of the cost of goods sold and 41% of the selling and administrative expenses. Suffolk China Ware assumes that fixed costs would not be materially affected if the Cups line were discontinued.

a. Prepare a differential analysis dated May 31 to determine if Cups should be continued (Alternative 1) or discontinued (Alternative 2). If an amount is zero, enter "0". For those boxes in which you must enter subtracted or negative numbers use a minus sign.

b. Should the Cups line be retained? Explain.
Yes or No

As indicated by the differential analysis in part (a), the income will __________ by $______ if the Cups line is discontinued.

______     8.      Assume the offer price for an IPO is set at $25 per share and the shares issued in the IPO is 10 million. The lead underwriter, however, sells 11.5 million shares to investors at the $25 offer price, planning to use the overallotment option, if needed, to satisfy its short position. Assume that the IPO firm’s stock starts trading on the stock exchange at either $23 per share or $27 per share. In which of these two possible stock prices will the lead underwriter most likely exercise its overallotment option?

A. If the stock starts trading at $23 per share.

B. If the stock starts trading at $27 per share.

______     1.      The following are four dates that are related to a firm’s regular quarterly cash dividend equal to $1 per share. Assume you want to receive the $1 dividend, but you don’t currently own the stock. What is the latest day that you can buy the stock and still ensure that you will receive the $1 dividend? (Assume all the days listed below and all the days given in the possible answers are business days in which the stock market is open.)

______     2.      Assume a company pays a $2.5 dividend. The stock’s price is $20 per share on the day before the stock’s ex-dividend day and $19 on the ex-dividend date. What is the stock’s return for this one-day period?

Diego Company manufactures one product that is sold for $73 per unit in two geographic regions—the East and West regions. The following information pertains to the company’s first year of operations in which it produced 56,000 units and sold 51,000 units.

The company sold 38,000 units in the East region and 13,000 units in the West region. It determined that $300,000 of its fixed selling and administrative expense is traceable to the West region, $250,000 is traceable to the East region, and the remaining $122,000 is a common fixed expense. The company will continue to incur the total amount of its fixed manufacturing overhead costs as long as it continues to produce any amount of its only product.

14. Diego is considering eliminating the West region because an internally generated report suggests the region’s total gross margin in the first year of operations was $79,000 less than its traceable fixed selling and administrative expenses. Diego believes that if it drops the West region, the East region's sales will grow by 5% in Year 2. Using the contribution approach for analyzing segment profitability and assuming all else remains constant in Year 2, what would be the profit impact of dropping the West region in Year 2?

15. Assume the West region invests $46,000 in a new advertising campaign in Year 2 that increases its unit sales by 20%. If all else remains constant, what would be the profit impact of pursuing the advertising campaign?

13. Prepare a contribution format segmented income statement that includes a Total column and columns for the East and West regions.

51-54. Eve, age 65 and single with no dependents, provided the following information for her 2018 income tax return: Gross income $55,000 Capital loss $ 4,000 Total itemized deductions $ 4,400

Eve's capital loss deduction to reach AGI is: a. $0. b. $3,000. c. $4,000. d. None of the above.

Eve's standard deduction, if it is used, is: a. $1,600. b. $13,600. c. $1,000. d. $12,000. e. None of the above.

Eve's personal exemption is: a. $4,150. b. $0. c. $5,750. d. $4,050. e. None of the above.

Eve's taxable income is: a. $38,400. b. $40,000. c. $40,050. d. $40,150. e. None of the above.

On January 1, 2017, Indigo Company purchased 12% bonds, having a maturity value of $320,000, for $344,260.74. The bonds provide the bondholders with a 10% yield. They are dated January 1, 2017, and mature January 1, 2022, with interest received on January 1 of each year. Indigo Company uses the effective-interest method to allocate unamortized discount or premium. The bonds are classified as available-for-sale category. The fair value of the bonds at December 31 of each year-end is as follows.

(Round answers to 2 decimal places, e.g. 2,525.25. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Wells Technical Institute (WTI), a school owned by Tristana Wells, provides training to individuals who pay tuition directly to the school. WTI also offers training to groups in off-site locations. Its unadjusted trial balance as of December 31, 2017, follows. WTI initially records prepaid expenses and unearned revenues in balance sheet accounts. Descriptions of items a through h that require adjusting entries on December 31, 2017, follow. Additional Information Items An analysis of WTI's insurance policies shows that $3,071 of coverage has expired. An inventory count shows that teaching supplies costing $2,662 are available at year-end 2017. Annual depreciation on the equipment is $12,285. Annual depreciation on the professional library is $6,142. On November 1, WTI agreed to do a special six-month course (starting immediately) for a client. The contract calls for a monthly fee of $2,500, and the client paid the first five months' fees in advance. When the cash was received, the Unearned Training Fees account was credited. The fee for the sixth month will be recorded when it is collected in 2018. On October 15, WTI agreed to teach a four-month class (beginning immediately) for an individual for $3,540 tuition per month payable at the end of the class. The class started on October 15, but no payment has yet been received. (WTI's accruals are applied to the nearest half-month; for example, October recognizes one-half month accrual.) WTI's two employees are paid weekly. As of the end of the year, two days' salaries have accrued at the rate of $100 per day for each employee. The balance in the Prepaid Rent account represents rent for December. WELLS TECHNICAL INSTITUTE Unadjusted Trial Balance December 31, 2017 Debit Credit Cash $ 26,038 Accounts receivable 0 Teaching supplies 10,013 Prepaid insurance 15,023 Prepaid rent 2,004 Professional library 30,043 Accumulated depreciation—Professional library $ 9,014 Equipment 70,087 Accumulated depreciation—Equipment 16,025 Accounts payable 34,565 Salaries payable 0 Unearned training fees 12,500 Common stock 15,000 Retained earnings 48,693 Dividends 40,059 Tuition fees earned 102,148 Training fees earned 38,055 Depreciation expense—Professional library 0 Depreciation expense—Equipment 0 Salaries expense 48,071 Insurance expense 0 Rent expense 22,044 Teaching supplies expense 0 Advertising expense 7,010 Utilities expense 5,608 Totals $ 276,000 $ 276,000 3-a. Prepare Wells Technical Institute's income statement for the year 2017. 3-b. Prepare Wells Technical Institute's statement of owner's equity for the year 2017. 3-c. Prepare Wells Technical Institute's balance sheet as of December 31, 2017.

Protrade Corporation acquired 80 percent of the outstanding voting stock of Seacraft Company on January 1, 2017, for $408,000 in cash and other consideration. At the acquisition date, Protrade assessed Seacraft's identifiable assets and liabilities at a collective net fair value of $535,000 and the fair value of the 20 percent noncontrolling interest was $102,000. No excess fair value over book value amortization accompanied the acquisition.

The following selected account balances are from the individual financial records of these two companies as of December 31, 2018:

Protrade sells Seacraft a building on January 1, 2017, for $82,000, although its book value was only $51,000 on this date. The building had a five-year remaining life and was to be depreciated using the straight-line method with no salvage value.
Determine balances for the following items that would appear on consolidated financial statements for 2018:

Buildings (net)

Operating expenses

Net income attributable to non-controlling interest

Kurtz Fencing Inc. uses a job order cost system. The following data summarize the operations related to production for March, the first month of operations:

1. Journalize the entries to record the summarized operations. Record each item (items a-f) as an individual entry on March 31. Record item g as 2 entries. Refer to the Chart of Accounts for exact wording of account titles.

PAGE 10

JOURNAL

2. Post the appropriate entries to T accounts for Work in Process and Finished Goods, using the identifying letters as transaction codes. Insert memo account balances as of the end of the month. For grading purposes enter transactions in alphabetical order. Determine the correct ending balance. The ending balance label is provided on the left side of the T account even when the ending balance is a credit. The unused cell on the balance line should be left blank.

3. Prepare a schedule of unfinished jobs to support the balance in the work in process account. Refer to the list of Amount Descriptions for the exact wording of the answer choices for text entries.

4. Prepare a schedule of completed jobs on hand to support the balance in the finished goods account. Refer to the list of Amount Descriptions for the exact wording of the answer choices for text entries.

Sabel Co. purchased assembly equipment for $836,000 on January 1, 2018. Sabel’s financial condition immediately prior to the purchase is shown in the following horizontal statements model.

The equipment is expected to have a useful life of 380,000 miles and a salvage value of $38,000. Actual mileage was as follows:

Required

1. Compute the depreciation for each of the five years, assuming the use of units-of-production depreciation.
2. Assume that Sabel earns $248,000 of cash revenue during 2018. Record the purchase of the equipment and the recognition of the revenue and the depreciation expense for the first year in a financial statements model like the preceding one. The first event is recorded as an example.
3. Assume that Sabel sold the equipment at the end of the fifth year for $40,400. Calculate the amount of gain or loss on the sale.

Answer:

A-

B.

C.

Assume that Sabel sold the equipment at the end of the fifth year for $40,400. Calculate the amount of gain or loss on the sale.

Alberta Gauge Company, Ltd., a small manufacturing company in Calgary, Alberta, manufactures three types of electrical gauges used in a variety of machinery. For many years the company has been profitable and has operated at capacity. However, in the last two years, prices on all gauges were reduced and selling expenses increased to meet competition and keep the plant operating at capacity. Second-quarter results for the current year, which follow, typify recent experience.

Alice Carlo, the company’s president, is concerned about the results of the pricing, selling, and production prices. After reviewing the second-quarter results, she asked her management staff to consider the following three suggestions:

• Discontinue the R-gauge line immediately. R-gauges would not be returned to the product line unless the problems with the gauge can be identified and resolved.
• Increase quarterly sales promotion by $420,000 on the Q-gauge product line in order to increase sales volume by 15 percent.
• Cut production on the E-gauge line by 50 percent, and cut the traceable advertising and promotion for this line to $120,000 each quarter.

Jason Sperry, the controller, suggested a more careful study of the financial relationships to determine the possible effects on the company’s operating results of the president’s proposed course of action. The president agreed and assigned JoAnn Brower, the assistant controller, to prepare an analysis. Brower has gathered the following information.

• All three gauges are manufactured with common equipment and facilities.
• The selling and administrative expense is allocated to the three gauge lines based on average sales volume over the past three years.
• Special selling expenses (primarily advertising, promotion, and shipping) are incurred for each gauge as follows:

• The unit manufacturing costs for the three products are as follows:

• The unit sales prices for the three products are as follows:

• The company is manufacturing at capacity and is selling all the gauges it produces.

Required:

1. 2. Use the operating data presented for Alberta Gauge Company and assume that the president’s proposed course of action had been implemented at the beginning of the second quarter.

2. a. Calculate the net impact on income before taxes for each of the three suggestions.

3. b-1. Calculate contribution margin for R-gauge

4. b-2. Was the president correct in proposing that the R-gauge line be eliminated?

5. c-1. Calculate the contribution per direct-labor dollar for Q-gauge and E-gauge.

6. c-2. Was the president correct in promoting the Q-gauge line rather than the E-gauge line?

The accounts receivable listing of Houmans Inc. shows the following on December 31, 2018. The general ledger showed a $350 credit balance in Allowance for Doubtful Accounts before adjustment Name of customer Invoice date Amount Cycles Inc. May 5, 2018 $950 First Corporation August 12, 2018 500 First Corporation December 10, 2018 550 Garron Inc. December 15, 2018 200 Heartwell Inc. September 15, 2018 480 Heartwell Inc. July 5, 2018 915 Leash Inc. March 5, 2018 575 Sign Corporation November 15, 2018 825 Spares Inc. November 18, 2018 325 Summer Corporation October 10, 2018 650 Required: 1. Prepare an aging of accounts receivable at December 31, 2018 2. Compute estimated loss based on the following: Age (days) Estimated Loss Percentage 1-30 2% 31-60 3% 61-90 5% 91-120 12% 121-150 15% Over 150 50% 3. Prepare journal entry to record the bad debt expense for the year.

Activity Rates and Activity-Based Product Costing

Hammer Company produces a variety of electronic equipment. One of its plants produces two laser printers: the deluxe and the regular. At the beginning of the year, the following data were prepared for this plant:

In addition, the following information was provided so that overhead costs could be assigned to each product:

Required:

1. Calculate the overhead rates for each activity. If required, carry your answers out to the nearest cent.

2. Calculate the per-unit product cost for each product. Round your answers to the nearest whole dollar.

Please answer these questions and give an explanation as to the answer:

Question 1

Question 2

Gaston Co. reports the following cash activities for the year:

Question 3

Question 4

Question #1. The comparative balance sheets of Sloan Company reveal that the accounts receivable (before deducting allowances) increased by $25,040 in 2013. During the same time period, the allowances for uncollectible accounts increased by $3,200. If Sloan wrote off $420 in 2013 and bad debts expense was 1.6% of sales, how much cash was collected from customers during the year? Show all your work.

Question #2. Peugeot spent €3,775,000 or research and development for a new transmission on its newest models. €1,200,000 was research expenses, and the rest was development costs, with 60% of that being incurred after technological feasibility was reached in August 1. Peugeot’s fiscal year begins on February 1. Assume that the new transmission has an economic life of 8 years, at which time it will be replaced by a newer transmission. Give me the journal entries for the 1st and 2nd year for this transmission R&D under IFRS. Show your work.  

Question #3. Monkey Business, an import business, builds special-order yachts. They decide to build one for a customer for at a cost $2,500,000. It will take 2 years (they start building in June 1, 2007) to build with total costs of $1,900,000: costs of $320,000 in 2007; $1,200,000 in 2008; and the remainder in 2009 (assume they stick to budget). The customer puts a deposit down of $500,000 and pays the remainder in 4 installments, each due every 6 months. For each year (2007, 2008, and 2009) compute the revenue expense, and gross profits reported for this construction project. Assume they do not have a written contract but based on this customer having purchased several yachts in the past, they believe he will pay for the boat in a timely manner. Show all your work.

Question #4. SAS Computers owns a patent on a computer processor. The processor was developed and capitalized at a cost of €2,100,000 in the beginning of 2015. It was expected to be economically useful for 7 years and have no residual value. At the beginning of 2018, a new processor was developed, making the old processor worth €900,000 (independent appraiser) with €200,000 total cost to sell. The present value of the processor’s future cash flows, given the development of the newer processor, is estimated to be €870,000. At this point, it is expected to have a useful life of 4 years with no residual value. Is the processor impaired in 2018? If it is impaired, prepare the to record the loss. Also prepare the journal entry for amortization in 2018. Show your work.  

Question #5. Paris Cosmetics wishes to secure a reliable source of a key component in its eyeshadows and its management is considering two alternative investments. Melonine produces 3 times the supply Paris Cosmetics needs but the only way to guarantee the supply it needs is to purchase the entire ordinary shares of Melonine. They can sell the rest to other manufacturers. JeanPaul produces twice as much of the component that Paris Cosmetics needs and Paris Cosmetics would only have to buy 40% of JeanPaul ordinary shares to insure it could buy 50% of JeanPaul’s output. The table that follows gives the balance sheet information for all 3 companies, prior to the investment by Paris Cosmetics. For the questions below, assume Paris Cosmetics would be able to buy Melonine’s shares at €830,000 and JeanPaul at $240,000. Melonine’s plant assets were appraised at €200,000, with all of its remaining assets and liabilities being appraised at values approximating their book values. Produce consolidated balance sheet for Paris Cosmetics immediately after the acquisition of Melonine and JeanPaul (use the equity method).

Purchase of Melonine

Purchase JeanPaul

Question #6. On January 1, 2015, Paris Cosmetics buys a shop in London for £350,000. They only intend on owning it 5 years because they hope to move to a larger building which is currently being designed and built. They believe the shop they currently own will be worth £250,000 in 5 years. Every year, they reappraise the building. The building is determined to be worth £310,000 on Jan.1, 2016, £305,000 on Jan. 1, 2017, £300,000 on Jan. 1, 2018, £270,000 on Jan. 1, 2019, and is sold for £250,000 on Jan. 1, 2020. The estimates of the residual value and useful life have never changed over the life of the building. Show the effects of the building on both the balance sheet and income statement using the Reevaluation. Method Model.

Statement of Financial Position

Net Income

Overall Effects

Depreciation Expense:

Gain (Loss):

Net Income:

OCI:

Comprehensive Income: