Western World Inc. issues $30,000,000 of convertible bonds with each $1,000 bond convertible into 15 shares of the company’s $1 par common stock. The bonds are issued at 102 on January 1, 2019 and pay interest in Jan and July and mature on January 1, 2024. On July 1, 2020, 30% of the bonds are converted when the stock price is $80 per share and 30% of the bond premium has been amortized.

Record the following transactions:

a. Bond as issuance

b. Conversion of $30,000,000 in bonds to common stock.

1. Distinguish between managerial and financial accounting
   • Primary Users of Reports
   • Types and frequency of reports (examples)
   • Purpose of Reports ( examples)
2. What is the value chain? example

Houston-based Advanced Electronics manufactures audio speakers for desktop computers. The following data relate to the period just ended when the company produced and sold 43,000 speaker sets:

Management is considering relocating its manufacturing facilities to northern Mexico to reduce costs. Variable costs are expected to average $18.00 per set; annual fixed costs are anticipated to be $1,988,000. (In the following requirements, ignore income taxes.)

Required:

1. Calculate the company’s current income and determine the level of dollar sales needed to double that figure, assuming that manufacturing operations remain in the United States.
2. Determine the break-even point in speaker sets if operations are shifted to Mexico.
3. Assume that management desires to achieve the Mexican break-even point; however, operations will remain in the United States.
   1. If variable costs remain constant, by how much must fixed costs change?
   2. If fixed costs remain constant, by how much must unit variable cost change?
4. Determine the impact (increase, decrease, or no effect) of the following operating changes.

Current Attempt in Progress

The condensed financial statements of Oriole Company for the years 2016 and 2017 are presented as follows. (Amounts in thousands.)

Compute the following ratios for 2017 and 2016. (Round current ratio and inventory turnover to 2 decimal places, e.g. 1.83 and all other answers to 1 decimal place, e.g. 1.8 or 12.6%.)

Sonia Inc. entered into a contract with Lala Inc. on July 1, 2018 to construct an office building. The total contract price for construction of the building is $400,000. The building was completed on December 31, 2020. Sonia’s fiscal year end is December 31.

Below is related information of Sonia Inc. regarding this construction:

Please answer each of the following questions and clearly label which question you are answering. You can prepare it in Word, in Excel, or handwrite it. Once completed, upload the completed Word or Excel document or a picture of the handwritten work (22 points).

Please use the percentage-of-completion method for items 1-5.

1. Prepare journal entries for the actual construction costs incurred and billings made in 2018. (4 points)

1. Calculate the amount of revenue and gross profit or loss to be recognized in 2018. Please show supporting calculations. (5 points)

1. Prepare the adjusting journal entry for 2018 to record revenue recognition and gross profit/loss. (3 points)

1. Prepare a partial balance sheet for 2018 relating to the contract. You do NOT need to include Cash and Accounts Receivable in your answer. Be sure to indicate whether an item is an asset or liability. Please show supporting calculations. (3 points)

1. Calculate the amount of revenue and gross profit or loss to be recognized in 2019. Please show supporting calculations. If needed, round the percentage calculation to the fourth decimal (e.g. 22.36%) and round the dollar amount to the whole dollar. (5 points)

Please use the completed contract method for item 6.

1. Using the completed contract method, how much revenue would be recognized in 2018? (2 points)

Budgets: Discussion question

RD Ltd. is in the process of preparing its budgets for 2020. The company produces and sells a single product, Z, which currently has a selling price of £100 for each unit.

The budgeted sales units for 2020 are expected to be as follows:

The company expects to sell 7,000 units in January 2021.

The selling price for each unit will be increased by 15% with effect from 1 March 2020.

1,000 units of finished goods are expected to be in stock at the end of 2019. It is company policy to hold a closing stock balance of finished goods equal to 20% of the following month’s sales.

Each unit of Z produced requires 3 kgs of material X, which currently costs £5 for each kg. The price for each kg is expected to increase by 10% on 1 June 2020.

Stock of raw material at the end of 2019 is expected to be 3,750 kgs. The company wishes to avoid any stock-outs and requires the closing stock of raw materials to be set at 20% of the following month’s production requirements.

A purchase of fixed asset will be made in March, £50,000 – payment will be made in four equal installments starting in June. Opening cash balance of £20, 000.

The production of each unit of Z requires 4 hours of skilled labour and 2 hours of unskilled labour. Skilled labour is paid at a rate of £10 for each hour and unskilled labour at £8 for each hour. Each worker is expected to work 40 hours each week, 48 weeks each year.

Taxation on 2019’s profit will be paid in March and this am­­­­ounts to £15, 000. Fixed overhead including depreciation of £550 is £3,000 per month and this is expected to increase in May to £3,500.

Required:

Prepare the following budgets for the first six months of 2020.

(a) The sales budget (in value)                                   

(b) The production budget (in units)                        

(c) The material usage budget (in value)                

(d) The material purchase budget (in value)         

(e) The direct labour budget (in hours)                                                   

(f) Cash budget                                                                

Corrigan Enterprises is studying the acquisition of two electrical component insertion systems for producing its sole product, the universal gismo. Data relevant to the systems follow.

Corrigan’s selling price is $65 per unit for the universal gismo, which is subject to a 15 percent sales commission. (In the following requirements, ignore income taxes.)

Required:

1. How many units must the company sell to break even if Model 6754 is selected? (Do not round intermediate calculations and round your final answer up to nearest whole number.)

2. Calculate the net income of the two systems if sales and production are expected to average 49,000 units per year.

3. Which of the two systems would be more profitable? Model No. 675 or   Model No. 4399

4. Assume Model 4399 requires the purchase of additional equipment that is not reflected in the preceding figures. The equipment will cost $410,000 and will be depreciated over a five-year life by the straight-line method. How many units must Corrigan sell to earn $959,000 of income if Model 4399 is selected? As in requirement (2), sales and production are expected to average 49,000 units per year. (Do not round intermediate calculations and round your final answer up to nearest whole number.)

5. Ignoring the information presented in part (4), at what volume level will the annual total cost of each system be equal? (Do not round intermediate calculations and round your final answer up to nearest whole number.)

Disk City, Inc. is a retailer for digital video disks. The projected net income for the current year is $1,920,000 based on a sales volume of 290,000 video disks. Disk City has been selling the disks for $16 each. The variable costs consist of the $6 unit purchase price of the disks and a handling cost of $2 per disk. Disk City’s annual fixed costs are $400,000.

Management is planning for the coming year, when it expects that the unit purchase price of the video disks will increase 30 percent. (Ignore income taxes.)

Required:

1. Calculate Disk City’s break-even point for the current year in number of video disks. (Round your final answer up to nearest whole number.)
2. What will be the company’s net income for the current year if there is a 10 percent increase in projected unit sales volume?
3. What volume of sales (in dollars) must Disk City achieve in the coming year to maintain the same net income as projected for the current year if the unit selling price remains at $16? (Do not round intermediate calculations. Round your final answer to the nearest whole number.)
4. In order to cover a 30 percent increase in the disk’s purchase price for the coming year and still maintain the current contribution-margin ratio, what selling price per disk must Disk City establish for the coming year? (Do not round intermediate calculations. Round your final answer to 2 decimal places.)

2.        Shauna Coleman is single. She works as an architectural designer for Streamline Design (SD).For 2018, she correctly calculated her AGI to be $107,000. However, she wasn’t sure how to compute the rest of her taxable income. She provided the following information with hopes that you could use it to determine her 2018 federal income tax return.

a.           Shauna paid $4,680 for medical expenses for care from a broken ankle sustained in a biking accident. Blake, Shauna’s boyfriend, drove Shauna (in her car) a total of 115 miles so that she could receive care for the broken ankle.

b.          Shauna paid a total of $3,400 in health insurance premiums during the year (not through an exchange). SD did not reimburse any of this expense. Besides the health insurance premiums and the medical expenses for her broken ankle, Shauna had Lasik eye surgery last year and she paid $3,000 for the surgery (she received no insurance reimbursement). She also incurred $450 of other medical expenses for the year.

c.           SD withheld $1,800 of state income tax, $7,495 of Social Security tax, and $14,500 of federal income tax from Shauna’s paychecks throughout the year.

d.          In 2018, Shauna was due a refund of $250 for overpaying her 2017 state taxes. On her 2017 state tax return that she filed in April of 2018, she applied the overpayment towards her 2018 state tax liability. She wasn’t sure but she estimated that her state tax liability for 2018 will be $2,300.

e.           Shauna paid $3,200 of property taxes on her personal residence. She also paid $500 to the developer of her subdivision, because he had to replace the sidewalk in certain areas of the subdivision.

f.            Shauna paid a $200 property tax based on the state’s estimate of the value of her car.

g.           Shauna has a home mortgage loan in the amount of $220,000 that she secured when she purchased the home. The home is worth about $400,000. Shauna paid interest of $12,300 in interest on the loan this year.

h.          Shauna made several charitable contributions throughout the year. She contributed stock in ZYX Corp. to the Red Cross. On the date of the contribution, the FMV of the donated shares was $1,000 and her basis in the shares was $400. Shauna originally bought the ZYX Corp. stock in 2008. Shauna also contributed $300 cash to State University and religious artifacts she has held for several years to her church. The artifacts were valued at $500 and Shauna’s basis in the items was $300. Shauna had every reason to believe the church would keep them on display indefinitely. Shauna also drove 200 miles doing church-related errands

i             Shauna paid $250 in investment advisory fees and another $150 to have her tax return prepared (that is, she paid $150 in 2018 to have her 2017 tax return prepared).

j.            Shauna is involved in horse racing as a hobby. During the year, she won $2,500 in prize money (which she is including in income) and incurred $10,000 in expenses. She has never had a profitable year with her horse racing activities, so she acknowledges that this is a hobby for federal income tax purposes.

k.              Shauna sustained $2,000 in gambling losses over the year (mostly horse-racing bets) and   only had $200 in winnings (which she is including in income)

Required: Determine Shauna’s 2018 taxable income starting with Adjusted Gross Income of $107,000 reported on line 7 of Form 1040 and complete page 2 of Form 1040 through Taxable Income, line 10. Also complete Schedule A, Itemized Deductions.

On June 1, 2017, Griffin Company issued $294,000 of 20-year, 7% bonds at 112. The bonds were dated June 1, 2017, and pay interest on June 1 and December 1. Griffin Company uses the straight-line method to amortize the discount or premium. Required: Assuming that the entry to amortize the discount or premium to date has been made, what is the carrying value of the bonds on December 31, 2023?

Pick ONE of the following options: Develop an ad campaign for a company/product/service related to your employment (note that if your employment is B2B in nature, most B2B doesn’t involve much advertising. They tend to use other promotional elements. So keep that in mind), OR Develop an ad campaign for your very own local tanning salon OR sporting goods store that’s been in business for just over one year To try to develop demand for your company/product/service -- OR to resuscitate your ailing store -- you've decided to conduct an ad campaign. Following the steps outlined in the Lecture from Chapter 18, provide a detailed description of your campaign. Be sure to mention each of the areas listed below. Also be sure that you are focusing on strategies for this specific ad campaign -- not simply your advertising or marketing in general. Do not use any current advertising campaign! NOTE: If you select your current employer who uses a differentiated strategy, select only one specific target market for this campaign. Introduction Please start by giving a brief explanation of the product/service/store you are advertising. Step 1 -- target market of this specific ad campaign Provide a geographic, demographic, and psychographic description of your target. I am looking for an insightful description of your target. Step 2a -- objective of this specific ad campaign Be sure you identify what you want this ad campaign to accomplish. Which of the types of advertising (informative, persuasive or reminder) will you be using and why? Step 2b -- focus of campaign What will be the focus of your ads – product-focused or institutional? Why? (NOTE: In addition to your text, see the lecture for clarification of these terms). Step 3 –- determine your budget Think about the size of your business, overall sales and success. You don’t need a specific budget number but discuss how these areas will affect how much you are able to spend and whether that potentially eliminates some types of media. Step 4a –- convey the message (Be creative!) Develop a unique selling proposition (USP) for the campaign. Make sure to provide an explanation of your rationale for the USP. Step 4b -- appeal Will you use an informational or emotional appeal? Why? Step 5a & b -– media types and vehicles. Describe which media types you will use and why. List the specific media vehicles for each type. A media vehicle is the specific communication tool. For instance if magazine is the media type, then Sports Illustrated or Cosmopolitan is the media vehicle; if TV is the media type then Food Network or “FOX2 News at 10pm” is the vehicle (it can be a cable network or a specific program). Step 5c -– media schedule How will you schedule your media? (continuous, pulsing, flighting)? Explain how your budget will help you make this decision. Step 6 -- IMC – integrating your ad with the rest of the promotional tools Identify and discuss other, non-advertising promotions you will use to coordinate with this ad campaign. Are there personal selling, sales promotions/incentives, public relations and/or social media efforts you’d like to include? (Keep being creative!) Really explore social media strategies using the information from Chapter 3. NOTE: In your book, step 6 is creating the ad but we are substituting IMC in this activity. Step 7 –- evaluating your campaign This is maybe one of the most important steps. How will you evaluate the effectiveness of your campaign? How will you know if it “worked?” How will you know if you should repeat the campaign, or completely revamp it? You can use some of the methods talked about in the lecture or your book.

Current Attempt in Progress

The comparative statements of Sandhill Co. are presented here.

All sales were on account. Net cash provided by operating activities for 2017 was $229,000. Capital expenditures were $137,000, and cash dividends were $61,400.

Compute the following ratios for 2017. (Round all answers to 2 decimal places, e.g. 1.83 or 1.83%.)

The following totals are used to create a CVP Income Statement for Frederick Company for FY2018:

Frederick Company utilizes a JIT production system and there are no Raw Materials, Work-in-Process or Finished Goods inventories. Use this information to determine the FY 2016 breakeven point in units. Round and enter as a whole number.

Mello Manufacturing Company is a diversified manufacturer that manufactures three products (Alpha, Beta, and Omega) in a continuous production process. Senior management has asked the controller to conduct an activity-based costing study. The controller identified the amount of factory overhead required by the critical activities of the organization as follows:

The activity bases identified for each activity are as follows:

The activity-base usage quantities and units produced for the three products were determined from corporate records and are as follows:

Each product requires 40 minutes per unit of machine time.