Dividends

Keener Company has had 800 shares of 8%, $100 par preferred stock and 44,000 shares of $5 stated value common stock outstanding for the last 3 years. During that period, dividends paid totaled $5,400, $31,000, and $35,400 for each year, respectively.

Required:

Compute the amount of dividends that Keener must have paid to preferred shareholders and common shareholders in each of the 3 years, given the following 3 independent assumptions:
If an amount is zero, enter "0".

1. Preferred stock is nonparticipating and noncumulative.

2. Preferred stock is nonparticipating and cumulative.

3. Preferred stock is fully participating and cumulative.

Oxford Company has two divisions. Thames Division, which has an investment base of $81,000,000, produces and sells 910,000 units of a product at a market price of $149 per unit. Its variable costs total $40 per unit. The division also charges each unit $71 of fixed costs based on a capacity of 1,000,000 units.

Lakes Division wants to purchase 260,000 units from Thames. However, it is willing to pay only $82 per unit because it has an opportunity to accept a special order at a reduced price. The order is economically justifiable only if Lakes can acquire Thames’ output at a reduced price.

Division managers are evaluated using residual income using a 12 percent cost of capital

Required:

a. What is the residual income for Thames without the transfer to Lakes?

residual income

b. What is Thames’s residual income if it transfers 260,000 units to Lakes at $82 each?

residual income

c. What is the minimum transfer price for the 260,000-unit order that Thames would accept if it were willing to maintain the same residual income with the transfer as it would accept by selling its 910,000 units to the outside market? (Round your answer to 2 decimal places.)

minimum transfer price

Toy Story Factory hires six workers to produce toys in the three divisions: “Toddle Toy”, “Girl Toy” and “Boy Toy”. The major decision is the allocation of the workers among the three divisions, so as to maximize the amount of toy produced. The following table shows the amount (unit) of toys that will be produced in a division as a function of the number of workers deployed in the corresponding division. For instance, when 2 workers are sent to the Boy Toy division, a total of 66 units of toy will be produced there.

If the factory wants to maximize the amount of toy produced, the maximum output will be [Answer] units of toys in total. (Integer, please.)

Answer T or F

1. The ending merchandise inventory for 2005 is the as the beginning merchandise inventory or 2006.
2. In a multi-step income statement the dollar amount for income from operations is always the same as net income.
3. Net sales are equal to sales minus cost of merchandise sold.
4. Gross profit minus selling expenses equals net income.
5. The form on the balance sheet in which asserts, liabilities, and owner’s equity are presented in a downward sequence is called the report form.
6. On the income statement in the single-step form, the total of all expenses is deducted from the total of all revenues.
7. The single-step income statement is easier to prepare, but a criticism of this format is that gross profit and income from operations are nor readily available.
8. Income that cannot be associated definitely with operations, such as gains from the sale of a fixed asset, is listed as Other Income on the multi-step income statement.
9. Under the perpetual inventory system, when a sale is made, both the retail and cost values are recorded.
10. Under perpetual inventory system, the cost of merchandise sold is recorded when sales are made.
11. If payment is due by the end of the month in which sale is made, the invoice terms are expressed as n/30.
12. When merchandise that was sold is returned, a credit to sales returns and allowances is made.
13. In perpetual inventory system, when merchandise is returned to the seller, Cost of Merchandise Sold is one to the accounts debited to record the transaction.
14. Sales return is a contra-revenue account.
15. Sales Discounts is a revenue account with a credit balance.
16. Sales to customers who use bank credit cards, such as MasterCard and Visa, are generally treated as credit sales.

Isaac Engines Inc. produces three products—pistons, valves, and cams—for the heavy equipment industry. Isaac Engines has a very simple production process and product line and uses a single plantwide factory overhead rate to allocate overhead to the three products. The factory overhead rate is based on direct labor hours. Information about the three products for 20Y2 is as follows:

The estimated direct labor rate is $20 per direct labor hour. Beginning and ending inventories are negligible and are, thus, assumed to be zero. The budgeted factory overhead for Isaac Engines is $235,200.

If required, round all per unit answers to the nearest cent.

a. Determine the plantwide factory overhead rate.
$ per dlh

b. Determine the factory overhead and direct labor cost per unit for each product.

c. Use the information provided to construct a budgeted gross profit report by product line for the year ended December 31, 20Y2. Include the gross profit as a percent of sales in the last line of your report, rounded to one decimal place.

d. What does the report in (c) indicate to you?

Valves have the   gross profit as a percent of sales. Valves may require a   price or   cost to manufacture in order to achieve a higher profitability similar to the other two products.

Trevorrow Corporation manufactures and sells a single product. The company uses units as the measure of activity in its budgets and performance reports. During June, the company budgeted for 5,600 units, but its actual level of activity was 5,560 units. The company has provided the following data concerning the formulas used in its budgeting and its actual results for June:

Data used in budgeting:

Actual results for June:

The overall revenue and spending variance (i.e., the variance for net operating income in the revenue and spending variance column on the flexible budget performance report) for June would be closest to:

Multiple Choice

A $6,442 F

B $6,442 U

C $7,002 F

D $7,002 U

PLEASE SHOW STEPS

Post Delivery Service acquired at book value 80 percent of the voting shares of Script Real Estate Company. On that date, the fair value of the noncontrolling interest was equal to 20 percent of Script’s book value. Script Real Estate reported common stock of $300,000 and retained earnings of $105,000. During 20X3, Post Delivery provided courier services for Script Real Estate in the amount of $23,000. Also during 20X3, Script Real Estate purchased land for $5,000. It sold the land to Post Delivery Service for $26,000 so that Post Delivery could build a new transportation center. Post Delivery reported $59,000 of operating income from its delivery operations in 20X3. Script Real Estate reported net income of $69,000 and paid dividends of $10,500 in 20X3.

Required:
a. Compute consolidated net income for 20X3.

b. Prepare all journal entries recorded by Post Delivery Service related to its investment in Script Real Estate assuming Post uses the fully adjusted equity method in accounting for the investment. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

c. Prepare all consolidation entries required in preparing a consolidation worksheet as of December 31, 20X3. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

A company has a targeted capital structure of 50% debt and 50% equity. Bond (debt) with face value (or principal amount) of $1200.00 paid 12% coupon annually, mature in 20 years and sell for $950.90. The company’s stock beta is 1.4, the risk free rate is 9% and market risk premium is 6%. The company has a constant growth rate of 6% and a just paid dividend of $3 and sells at $32 per share. If the company’s marginal, tax rate is 35% calculate:

1. What is the WACC using DDM?

2. If the flotation cost of new equity is 10%. What will be the company’s cost new equity capital?  

3. What would be the company’s WACC using the new capital?

On January 1, Year 6, Magnus Co. leased a machine to Fisher Co. The machine was acquired by Magnus on January 1, Year 1, for $200,000. The useful life of the machine was 20 years with no salvage value, and it was depreciated by Magnus using the straight-line method. The lease term is 10 years, and the present value of the lease payments to be made over the lease term was $90,000. Annual equal lease payments of $14,647 are payable at the end of each year starting December 31, Year 1. The discount rate for the lease is 10%. Fisher depreciates all of its assets using the straight-line method. Assume that both the remaining economic life of the machine and the salvage value did not change as a result of the lease.

For each of the following independent situations, enter in the designated cells below the appropriate amounts for the carrying amount of the right-of-use asset that should be reported in Fisher’s December 31, Year 6, balance sheet. Enter all amounts as positive values. Round all amounts to the nearest whole number. If no entry is necessary, enter a zero (0) or leave the cell blank.

Before approving credit the office manager calls the bank reference provided by Nocturnal, and learns that the company currently has a cash balance of $200. When she asks Nocturnal about the $11,800 discrepancy Nocturnal explains that the financial information includes the anticipated (but as yet unrealized) profit of $11,800 on a job under bid. Nocturnal`s accountant explains that the company keeps its books according to Contingent Reality Accounting Principles.

The office manager reviews financial statements for the company and adjusts them to GAAP:

Cash 200                          Short-term Liabilities   2,000

Total Assets 3,700             Total Liabilities     5,000

1) What is Nocturnal’s ratio of cash to short-term liabilities?

2) What is its Debt to Assets ratio?

3) What is Nocturnal’s stockholders’ equity?

4) Do lenders or owners appear to have a great interest in the assets of Nocturnal? Explain.

Osage, Inc., manufactures and sells lamps. The company produces only when it receives orders and, therefore, has no inventories. The following information is available for the current month:

Required:

Prepare a profit variance analysis for Osage, Inc., (Do not round intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable, or "U" for unfavorable. If there is no effect, do not select either option.)

On March 1, 2010, Packard Company purchased land for an office site by paying $600,000 cash. Packard began construction on the office building one year later on March 1, 2011. The following expenditures were incurred for construction on each of the respective dates: Date Amount March 1, 2011 $680,000 April 1, 2011 $352,000 May 1, 2011 $450,000 June 1, 2011 $520,000 The office was completed and ready for occupancy on July 1. To help pay for construction, $400,000 of common stock was issued on March 1, 2011. The only debts outstanding during 2011 was a $150,000, 11%, 6-year note payable dated January 1, 2011 and a $300,000, 13%, 10-year note payable dated July 1, 2009. Neither of these notes were paid off prior to their respective maturity dates. The amount of interest cost to be capitalized by Packard during 2011 is

Do you think organizations that have a fleet should have a replacement plan in place? Could fleet replacement plan benefit and save an organization cost and should tax implications be a part of that plan?

A donor gives the Museum, a nonprofit organization, a diary written by an important U.S. leader. The donor has the condition that the diary be used as the Museum's exhibition and that it never be sold. The diary was bought by the donor a few weeks ago at $250,000. How should the museum account for this gift? What are the options and why?

When an individual dies, their tax obligations are passed on through the estate. Also if the estate is to expensive a tax might be owed. Lets say I owned a business worth $100 million dollars and I have 25% stake in the company.

Lets say 100% of the what I own in the company will be taxable and I am married and it will be filed jointly.

Company's net income is $17.5 million.

If I was selling the company how much estate tax attributable would I be facing filing jointly?

Also any tax laws that you reccomend to ensure that what ever is owed is reduced?