Linda Larue has arthritis. Her chiropractor advised her that she needed to swim daily to alleviate her pain and other symptoms. Consequently, Linda and her husband, Philo, purchased for $400,000 a new home that had a swimming pool, after selling their old home for $325,000. If the Larues had constructed a pool at their former residence, it would have cost $75,000 to build, and it would have increased the value of their home by $50,000.

Answer the following

Facts:

Issues:

Conclusions:

Authorities( only use the IRS code/ Reg):

Analysis and Summary:

Action to be taken:

Miss Yu is performing the audit on leases of TipuPte Ltd for the year ended 31 December 2016. From the ledger, Miss Yu noticed that there are three items. which are on lease, i.e. a van, a lathe machine and the oven. As part of the audit, Miss Yu would send standard confirmation letters to the lessors. Two days before the end of the fieldwork, Miss Yu received confirmation from the van's lessor. Miss Yu's client has short taken the van lease by $10,000. Miss Yu sent the second reminder confirmation and managed to receive the confirmation from the lathe machine's lessor. The lease would only start from 1 January 2017. Miss Yu has to yet receive any confirmation pertaining to the leasing of the oven.

Required

a. What should Miss Yu do in the future to make sure that the confirmation letter are received and answered promptly?

b. There are discrepancies to two of the items. What further action should Miss Yu take?

Bandar Industries Berhad of Malaysia manufactures sporting equipment. One of the company’s products, a football helmet for the North American market, requires a special plastic. During the quarter ending June 30, the company manufactured 3,600 helmets, using 2,268 kilograms of plastic. The plastic cost the company $14,969.

According to the standard cost card, each helmet should require 0.57 kilograms of plastic, at a cost of $7.00 per kilogram.

Required:

1. What is the standard quantity of kilograms of plastic (SQ) that is allowed to make 3,600 helmets?

2. What is the standard materials cost allowed (SQ × SP) to make 3,600 helmets?

3. What is the materials spending variance?

SkyChefs, Inc., prepares in-flight meals for a number of major airlines. One of the company’s products is grilled salmon in dill sauce with baby new potatoes and spring vegetables. During the most recent week, the company prepared 5,100 of these meals using 2,000 direct labor-hours. The company paid its direct labor workers a total of $28,000 for this work, or $14.00 per hour.

According to the standard cost card for this meal, it should require 0.40 direct labor-hours at a cost of $13.50 per hour.

Required:

1. What is the standard labor-hours allowed (SH) to prepare 5,100 meals?

2. What is the standard labor cost allowed (SH × SR) to prepare 5,100 meals?

3. What is the labor spending variance?

4. What is the labor rate variance and the labor efficiency variance?

Huron Company produces a commercial cleaning compound known as Zoom. The direct materials and direct labor standards for one unit of Zoom are given below:

During the most recent month, the following activity was recorded:

1. Nineteen thousand two hundred and fifity pounds of material were purchased at a cost of $1.70 per pound.

2. All of the material purchased was used to produce 2,500 units of Zoom.

3. 400 hours of direct labor time were recorded at a total labor cost of $5,200.

Required:

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

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

(For all requirements, 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. Round your intermediate calculations to the nearest whole dollar

Capital Rationing Decision for a Service Company Involving Four Proposals

Renaissance Capital Group is considering allocating a limited amount of capital investment funds among four proposals. The amount of proposed investment, estimated income from operations, and net cash flow for each proposal are as follows:

The company's capital rationing policy requires a maximum cash payback period of three years. In addition, a minimum average rate of return of 12% is required on all projects. If the preceding standards are met, the net present value method and present value indexes are used to rank the remaining proposals.

Required:

1. Compute the cash payback period for each of the four proposals.

2. Giving effect to straight-line depreciation on the investments and assuming no estimated residual value, compute the average rate of return for each of the four proposals. If required, round your answers to one decimal place.

3. Using the following format, summarize the results of your computations in parts (1) and (2) by placing the calculated amounts in the first two columns on the left and indicate which proposals should be accepted for further analysis and which should be rejected. If required, round your answers to one decimal place.

4. For the proposals accepted for further analysis in part (3), compute the net present value. Use a rate of 15% and the present value of $1 table above. Round to the nearest dollar.

5. Compute the present value index for each of the proposals in part (4). If required, round your answers to two decimal places.

On January 1, Park Corporation and Strand Corporation had condensed balance sheets as follows:

On January 2, Park borrowed $66,000 and used the proceeds to obtain 80 percent of the outstanding common shares of Strand. The acquisition price was considered proportionate to Strand’s total fair value. The $66,000 debt is payable in 10 equal annual principal payments, plus interest, beginning December 31. The excess fair value of the investment over the underlying book value of the acquired net assets is allocated to inventory (60 percent) and to goodwill (40 percent).

(1) On a consolidated balance sheet as of January 2, what should be the amount for current assets?

(2) On a consolidated balance sheet as of January 2, what should be the amount for non current assets?

At December 31, 2017, Novak Corporation reported the following plant assets. Land $ 3,198,000 Buildings $26,610,000 Less: Accumulated depreciation—buildings 12,712,050 13,897,950 Equipment 42,640,000 Less: Accumulated depreciation—equipment 5,330,000 37,310,000 Total plant assets $54,405,950 During 2018, the following selected cash transactions occurred. Apr. 1 Purchased land for $2,345,200. May 1 Sold equipment that cost $639,600 when purchased on January 1, 2011. The equipment was sold for $181,220. June 1 Sold land for $1,705,600. The land cost $1,066,000. July 1 Purchased equipment for $1,172,600. Dec. 31 Retired equipment that cost $746,200 when purchased on December 31, 2008. No salvage value was received. Collapse question part (a) Journalize the transactions. Novak uses straight-line depreciation for buildings and equipment. The buildings are estimated to have a 40-year useful life and no salvage value; the equipment is estimated to have a 10-year useful life and no salvage value. Update depreciation on assets disposed of at the time of sale or retirement. (Record entries in the order displayed in the problem statement. 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.)

“In my opinion, we ought to stop making our own drums and accept that outside supplier’s offer,” said Wim Niewindt, managing director of Antilles Refining, N.V., of Aruba. “At a price of $19 per drum, we would be paying $5.35 less than it costs us to manufacture the drums in our own plant. Since we use 60,000 drums a year, that would be an annual cost savings of $321,000.” Antilles Refining’s current cost to manufacture one drum is given below (based on 60,000 drums per year):

A decision about whether to make or buy the drums is especially important at this time because the equipment being used to make the drums is completely worn out and must be replaced. The choices facing the company are:

Alternative 1: Rent new equipment and continue to make the drums. The equipment would be rented for $168,000 per year.

Alternative 2: Purchase the drums from an outside supplier at $19 per drum.

The new equipment would be more efficient than the equipment that Antilles Refining has been using and, according to the manufacturer, would reduce direct labor and variable overhead costs by 20%. The old equipment has no resale value. Supervision cost ($42,000 per year) and direct materials cost per drum would not be affected by the new equipment. The new equipment’s capacity would be 140,000 drums per year.

The company’s total general company overhead would be unaffected by this decision. (Round all intermediate calculations to 2 decimal places.)

Required:

1. To assist the managing director in making a decision, prepare an analysis showing the total cost and the cost per drum for each of the two alternatives given above. Assume that 60,000 drums are needed each year.

a. What will be the total relevant cost of 60,000 drums if they are manufactured internally as compared to being purchased?

b. What would be the per unit cost of each drum manufactured internally? (Round your answer to 2 decimal places.)

c. Which course of action would you recommend to the managing director?

2a-1. What will be the total relevant cost of 120,000 drums if they are manufactured internally?

2a-2. What would be the per unit cost of drums?

2 a-3. What course of action would you recommend if 120,000 drums are needed each year?

2b-1. What will be the total relevant cost of 140,000 drums if they are manufactured internally?

2b-2. What would be the per unit cost of drums? (Round your answer to 2 decimal places.)

2b-3. What course of action would you recommend if 140,000 drums are needed each year?

Northwood Company manufactures basketballs. The company has a ball that sells for $25. At present, the ball is manufactured in a small plant that relies heavily on direct labor workers. Thus, variable expenses are high, totaling $15.00 per ball, of which 60% is direct labor cost.

Last year, the company sold 52,000 of these balls, with the following results:

Required:

1. Compute (a) last year's CM ratio and the break-even point in balls, and (b) the degree of operating leverage at last year’s sales level.

1-2. Due to an increase in labor rates, the company estimates that next year's variable expenses will increase by $3.00 per ball. If this change takes place and the selling price per ball remains constant at $25.00, what will be next year's CM ratio and the break-even point in balls?

2. Refer to the data in (1-2) above. If the expected change in variable expenses takes place, how many balls will have to be sold next year to earn the same net operating income, $199,000, as last year?

2-1. Refer again to the data in (1-2) above. The president feels that the company must raise the selling price of its basketballs. If Northwood Company wants to maintain the same CM ratio as last year (as computed in requirement 1a), what selling price per ball must it charge next year to cover the increased labor costs?

3. Refer to the original data. The company is discussing the construction of a new, automated manufacturing plant. The new plant would slash variable expenses per ball by 40.00%, but it would cause fixed expenses per year to double. If the new plant is built, what would be the company’s new CM ratio and new break-even point in balls?

4. Refer to the data in (3) above.

a. If the new plant is built, how many balls will have to be sold next year to earn the same net operating income, $199,000, as last year?

b. Assume the new plant is built and that next year the company manufactures and sells 52,000 balls (the same number as sold last year). Prepare a contribution format income statement and Compute the degree of operating leverage.

Describe benefit of training within industry in lean production practices?

Required information Problem 13-6AA Income statement computations and format LO A2 [The following information applies to the questions displayed below.] Selected account balances from the adjusted trial balance for Olinda Corporation as of its calendar year-end December 31, 2017, follow.

Debit Credit a. Interest revenue $ 15,000

b. Depreciation expense—Equipment. $ 35,000

c. Loss on sale of equipment 26,850

d. Accounts payable 45,000

e. Other operating expenses 107,400

f. Accumulated depreciation—Equipment 72,600

g. Gain from settlement of lawsuit 45,000

h. Accumulated depreciation—Buildings 176,500

i. Loss from operating a discontinued segment (pretax) 19,250

j. Gain on insurance recovery of tornado damage 30,120

k. Net sales 1,008,500

l. Depreciation expense—Buildings 53,000

m. Correction of overstatement of prior year’s sales (pretax) 17,000

n. Gain on sale of discontinued segment’s assets (pretax) 39,000

o. Loss from settlement of lawsuit 24,750

p. Income taxes expense ?

q. Cost of goods sold 492,500

Problem 13-6 Part 2

2a. What is the amount of income from continuing operations before income taxes?

2b. What is the amount of the income taxes expense?

2c. What is the amount of income from continuing operations?

“In my opinion, we ought to stop making our own drums and accept that outside supplier’s offer,” said Wim Niewindt, managing director of Antilles Refining, N.V., of Aruba. “At a price of $21 per drum, we would be paying $4.85 less than it costs us to manufacture the drums in our own plant. Since we use 50,000 drums a year, that would be an annual cost savings of $242,500.” Antilles Refining’s current cost to manufacture one drum is given below (based on 50,000 drums per year):

A decision about whether to make or buy the drums is especially important at this time because the equipment being used to make the drums is completely worn out and must be replaced. The choices facing the company are:

Alternative 1: Rent new equipment and continue to make the drums. The equipment would be rented for $157,500 per year.

Alternative 2: Purchase the drums from an outside supplier at $21 per drum.

The new equipment would be more efficient than the equipment that Antilles Refining has been using and, according to the manufacturer, would reduce direct labor and variable overhead costs by 20%. The old equipment has no resale value. Supervision cost ($52,500 per year) and direct materials cost per drum would not be affected by the new equipment. The new equipment’s capacity would be 105,000 drums per year.

The company’s total general company overhead would be unaffected by this decision.

Required:

1. Assuming that 50,000 drums are needed each year, what is the financial advantage (disadvantage) of buying the drums from an outside supplier?

2. Assuming that 75,000 drums are needed each year, what is the financial advantage (disadvantage) of buying the drums from an outside supplier?

3. Assuming that 105,000 drums are needed each year, what is the financial advantage (disadvantage) of buying the drums from an outside supplier?

On 1/1/2016, XYZ Corporation purchased 75% of the outstanding voting stock of Sally Corporation for $2,400,000 paid in cash.  On the date of the acquisition, Sally’s shareholders’ equity consisted of the following:

Common stock, $10 par                 $1,000,000

APIC                                                   600,000

Retained Earnings                               800,000

Total SE                                         $2,400,000

The excess fair value of the net assets acquired was assigned 10% to undervalued Inventory (sold in 2016), 40% to undervalued PPE assets with a remaining useful life of 8 years, and 50% to Goodwill.

Comparative trial balances of XYZ Corporation and Sally Corporation at December 31, 2020, are as follows:

Required:

Determine the amounts that would appear in the consolidated financial statements of XYZ Corporation and its subsidiary for each of the following items:

1. Goodwill at December 31, 2020. (2 points)
2. Income to Non-controlling interest for 2020. (3 points)
3. Consolidated retained earnings at December 31, 2019. (2 points)
4. Consolidated retained earnings at December 31, 2020. (2 points)
5. Controlling share of consolidated Net Income for 2020. (3 points)
6. Non-controlling interest at December 31, 2020. (3 points)

Question 1

The Kingsmill Furniture Company sells its products, offering 30 days’ credit to its customers. Uncollectible amounts are estimated to be equal to 2% of credit sales. At the end of the year, the allowance for doubtful accounts is adjusted based on an aging of accounts receivable. The company began 2017 with the following balances in its accounts:

Accounts receivable                $305,000

Allowance for doubtful accounts        (25,500)

During 2017, sales on credit were $1,300,000, cash collections from customers were $1,250,000 and actual write-offs of accounts were $25,000. An aging of accounts receivable at the end of 2017 indicates a required allowance of $30,000.

Required:

1. Determine the balances in accounts receivable and allowance for doubtful accounts at the end of 2017.

2. Determine the bad debt expense for 2017.

3. Prepare journal entries to accrue bad debts, write-off the receivables, and the year-end adjusting entry required to adjust the allowance for doubtful accounts to the required allowance of $30,000. Include explanations for each journal entry.

Packaging Solutions Corporation manufactures and sells a wide variety of packaging products. Performance reports are prepared monthly for each department. The planning budget and flexible budget for the Production Department are based on the following formulas, where q is the number of labor-hours worked in a month:

The Production Department planned to work 4,200 labor-hours in March; however, it actually worked 4,000 labor-hours during the month. Its actual costs incurred in March are listed below:

Required:

1. Prepare the Production Department’s planning budget for the month.

2. Prepare the Production Department’s flexible budget for the month.

3. Prepare the Production Department’s flexible budget performance report for March, including both the spending and activity variances.

1) Prepare the Production Department’s planning budget for the month.

2) Prepare the Production Department’s flexible budget for the month.

3) Prepare the Production Department’s flexible budget performance report for March, including both the spending and activity variances. (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.)

Presented below is the trial balance of Windsor Corporation at December 31, 2017.

Prepare a balance sheet at December 31, 2017, for Windsor Corporation. (Ignore income taxes). (List Current Assets in order of liquidity. List Property, Plant and Equipment in order of Land, Building and Equipment. Enter account name only and do not provide the descriptive information provided in the question.)