J.J. Heva Company is an American company that prepares its financial statements under US GAAP. In 2014, the company reported income of $5,000,000 wit stockholders’ equity of $40,000,000 on December 31, 2014. In anticipation of possible adoption of IFRS by the US companies, the management wishes to explore possible impacts of the conversion on the company’s financial statements. You are hired to prepare a reconciliation schedule to convert 2014 income as well as stockholders’ equity on December 31, 2014 from US GAAP basis to IFRS. The following information is provided by the company’s accounting department:

1. In 2012, the company’s pension plan was amended and consequently created a past service cost of $75,000.   Half of the past service cost was attributable to already vested employees who had an average remaining service life of 15 years, and half of the past service cost was attributable to non-vested employees who, on average, had two more years until vesting. The company has no retired employees.
2. In 2014, the company entered into a contract to provide engineering services to a long term customer over a 12-month period. The fixed price is $300,000 and the company    estimates with high degree of reliability that the project is 30 percent complete at the end of 2014.
3. The company publicly announced a restructuring plan in 2014 and created a valid expectation on the part of the employees to be terminated that the company will carry out the restructuring. The estimated cost of restructuring is $500,000. No legal obligation to restructure exists as of December 31, 2014.
4. Stock options were granted to key officers on January 1, 2014. The grant date fair value per option was $10, and a total of 9,000 options were granted. The options vest in equal installments over three years: one-third in 2013, one-third in 2014, and one-third in 2015. A straight line method is utilized to recognize compensation expense related to stock options.
5. On January 1, 2013, the company issued $10,000,000 of 5% bonds at par value that matures in five years on December 31, 2017. Costs incurred in issuing the bonds were $500,000. Interest is paid on bonds annually. Assume the effective interest rate is 6.193%.

Make sure your reconciliation statement is accompanied by an adequate explanation and reference for every one of your adjustments. Ignore income taxes.

Fantasy Fashions had used the LIFO method of costing inventories, but at the beginning of 2018 decided to change to the FIFO method. The inventory as reported at the end of 2017 using LIFO would have been $17 million higher using FIFO.

Retained earnings reported at the end of 2016 and 2017 was $237 million and $257 million, respectively (reflecting the LIFO method). Those amounts reflecting the FIFO method would have been $247 million and $269 million, respectively. 2017 net income reported at the end of 2017 was $25 million (LIFO method) but would have been $27 million using FIFO. After changing to FIFO, 2018 net income was $33 million. Dividends of $7 million were paid each year. The tax rate is 40%.
  
Required:
1. Prepare the journal entry at the beginning of 2018 to record the change in accounting principle.
2. In the 2018–2017 comparative income statements, what will be the amounts of net income reported for 2017 and 2018?
3. Prepare the 2018–2017 retained earnings column of the comparative statements of shareholders’ equity.
  

YOU ARE A STAFF ACCOUNTANT AUDITING A “PRIVATE COMPANY” AND FIND A MISREPRESENTATION DURING REVENUE RECOGNITION TESTING. WHO IS THE FIRST PERSON YOU SHOULD INFORM ABOUT YOUR FINDING. WHO ARE THE OTHER PARTIES YOU WILL INFORM ABOUT THE MISREPRESENTATION IF THE FIRST PARTY DOES NOTHING ABOUT THE MISREPRESENTATION.

Marin Products produces three products — DBB-1, DBB-2, and DBB-3 from a joint process. Each product may be sold at the split-off point or processed further. Additional processing requires no special facilities, and production costs of further processing are entirely variable and traceable to the products involved. Key information about Marin's production, sales, and costs follows.

The amount of joint costs allocated to product DBB-3 using the net realizable value method is (calculate all ratios and percentages to 2 decimal places, for example 33.33%, and round all dollar amounts to the nearest whole dollar):

Jamie and Cecilia Reyes are husband and wife and file a joint return. They live at 5677 Apple Cove Road, Boise, ID 83722. Jamie’s social security number is 412-34-5670 (date of birth 6/15/1967) and Cecilia’s is 412-34-5671 (date of birth 4/12/1969). They provide more than half of the support of their daughter, Carmen (age 23), social security number 412-34-5672 (date of birth 9/1/1993), who is a full-time veterinarian school student. Carmen received a $3,200 scholarship covering her room and board at college. She was not required to perform any services to receive the scholarship. Jamie and Cecilia furnish all of the support of Maria (Jamie’s grandmother), social security number 412-34-5673 (date of birth 11/6/1946), who is age 70 and lives in a nursing home. They also have a son, Gustavo (age 4), social security number 412-34-5674 (date of birth 3/14/2012). The Reyes and all of their dependents had qualifying health care coverage at all times during the tax year. Jamie’s W-2 contained the following information: Federal Wages (box 1) = $145,625.00 Federal W/H (box 2) = $ 16,112.25 Social Security wages (box 3) = $ 128,400.00 Social Security W/H (box 4) = $ 7,960.80 Medicare Wages (box 5) = $145,625.00 Medicare W/H (box 6) = $ 2,111.56 State Wages (box 16) = $145,725.00 State W/H (box 17) = $ 5,435.00 Page B-3 Other receipts for the couple were as follows: Dividends (all qualified dividends) $2,500 Interest income: Union Bank $ 220 State of Idaho—interest on tax refund 22 City of Boise school bonds 1,250 Interest from U.S. savings bonds (not used for educational purposes) 410 2015 federal income tax refund received in 2016 2,007 2015 state income tax refund received in 2016 218 Idaho lottery winnings 1,100 Casino slot machine winnings 2,250 Gambling losses at casino 6,500 Other information that the Reyeses provided for the 2016 tax year: Mortgage interest on personal residence $11,081 Loan interest on fully equipped motor home 3,010 Doctor’s fee for a face-lift for Mrs. Reyes 8,800 Dentist’s fee for a new dental bridge for Mr. Reyes 3,500 Vitamins for the entire family 110 Real estate property taxes paid $ 5,025 DMV fees on motor home (tax portion) 1,044 DMV fees on family autos (tax portion) 436 Doctors’ bills for grandmother 2,960 Nursing home for grandmother 10,200 Wheelchair for grandmother 1,030 Property taxes on boat 134 Interest on personal credit card 550 Interest on loan to buy public school district bonds 270 Cash contributions to church (all the contributions were in cash and none more than $250 at any one time) 6,100 Cash contribution to man at bottom of freeway off-ramp 25 Contribution of furniture to Goodwill—cost basis 4,000 Contribution of same furniture to listed above Goodwill—fair market value 410 Tax return preparation fee for 2015 taxes 625 Required Prepare a Form 1040,Schedule 1, Schedule A, and Schedule B, and Qualified Dividends for the completion of the Reyeses tax return. They do not want to contribute to the presidential election campaign and do not want anyone to be a third-party designee. For any missing information, make reasonable assumptions.

1. The table below summarizes the costs and benefits for a new online procurement system. Based on these estimates:
   1. Create a spreadsheet showing the Net Present Value for the costs and benefits listed. Use NPV values for the calculations below.
   2. Calculate the return on investment for this project.
   3. Calculate the payback period for this project.
   4. Calculate the internal rate of return for this project.
2. Based on these calculations would you recommend undertaking this project? Why? What factors other than financial metrics would you consider?
3. Identify 5 risks you think might impact this project and evaluate the importance of each of these risks?

Costs

Benefits

Reduce Operating Budget of $12,000,000 by 10% per year after year 3

SU Company signs an agreement on January 1, 2009, to lease equipment to Tiger Corporation. The following information relates to this agreement: The term of the non cancelable lease is 6 years with no renewal option. The equipment has an estimated economic life of 6 years. The cost of the asset to the lessor is $245,000. The fair value of the asset on January 1, 2009, is $245,000. The asset will revert to the lessor at the end of the lease term, at which time the asset is expected to have a residual value of $43,622, none of which is guaranteed. The agreement requires annual rental payments, beginning Jan. 1, 2009. Collectability of the lease payments is reasonably predictable. There are no important uncertainties surrounding the amount of costs yet to be incurred by the lessor. The lessor’s rate of return is 10% and is known to the lessee. The lessee’s borrowing rate is 12%.

Please show clearly how to get present value(s).

A.) Calculate the annual rent payment.

B.) Prepare an amortization table

C.) Prepare all of the journal entries for the lessor for 2009 and 2010.

1.) Morse company has a sales budge of 75,000 units in July, 85,000 units in August and 70,000 units in September. Morse requires ending finished goods inventories equal to 40 percent of the following months sales. How many units should be budgeted for production in August? Assume that the beginning finished goods inventory in August was equal to the budgeted level.

2.)David Enterprise manufactures a product that requires three gallons of chemical XU-20 per unit. The cost of XU-20 is $30.00 per gallon. Davis maintains an ending inventory of XU-20 equal to 70 percent of the following month's production usage. Planned production for Davis is as follows: 6,000 units in June, 5,500 units in July and 7,200 units in August. What would be the cost of XU-20 budgeted to be purchased in July? Assume that beginning inventory of XU-20 in July was equal to the budgeted level.

3.)Rocky's Industrial Tool supply Company forecasts the following Total sales figures for the next 4 months. April $300,000- May $360,000- June $400,000- July $420,000. Cash sales average 30 percent of total sales and credit sales represent 70 percent of total sales. Credit sales are collected 80 percent in the months following sale and 20 percent two months following sale. The total estimated cash received in July would be:

what is the implication from the modified gray framework for the use of a common set of financial reporting standards across all countries?

Please explain what you did

Splat Candies is planning on building a new gumball factory that will have an estimated construction cost of $44 million. One-quarter of the cost of construction will be spent in the first year, with the remainder spent in the second year. During the third year (first year of operation), the gumminess of the gumballs slows down production so that profit of only $8 million is achieved. After that, the net yearly profit is $12 million for 9 years. At the end of the 12-year project life, the factory is shut down and sold as scrap metal for $2 million. Assume MACRS depreciation with a 7 year recovery period, a 9% interest rate and a corporate tax rate of 29%.

(a) Make a table showing cash flow, depreciation charge, taxes paid and after-tax cash flows for the 12 year project life, plus the year after the project ends. Excel is very useful for this.

(b) What is the cumulative net present value of the plant? (Hint: see Towler example 9.4)

(c) Calculate overall after-tax ROI for the project.

(d) Determine the internal rate of return (IRR, which is the same as DCFROR) for the project.

Exhibit 4
County Hospital Cost Allocation Data

Support Departments Housekeeping Direct Cost Space (Sq. Ft)

Housekeeping $500,000 8,000

General Administration $750,000 12,000

Maintenance $600,000 15,500

TOTAL SUPPORT DEPTS. $1,850,000 35,000

Patient Service Departments Direct Cost Space (sq. ft) revenues

Medicine $800,000 10,000 $970,000

Surgery $1,200,000 20,000 $3,600,000

Outpatient Adult $560,000 15,000 $720,000

Outpatient Pediatrics $470,000 12,000 $630,000

Total Patient Service Depts. $3,030,000   57,000   $5,920,000

County Hospital Totals $4,880,000   92,500 $5,920,000

27. Assume that managers want to allocate housekeeping costs to the patient service departments. What is the value of the housekeeping cost pool? (2 points)

1. 8,000 sq feet

2. 57,000 sq feet

3. $500,000

4. $1,850,000

Page 7 of 8

28. Assume that space will be the cost driver and that managers want to use the direct cost allocation method. What is the total amount for the cost driver? (2 points)

1. 57,000 sq feet

2. 35,500 sq feet

3. 92,500 sq feet

4. None of the above

29. What is the appropriate allocation rate for the housekeeping cost pool if space is the cost driver and using the direct cost allocation method? (2 points)

1. $5.40 per sq foot

2. $14.08 per sq foot

3. $8.77 per sq foot

4. None of the above

30. Assuming that the cost driver for housekeeping costs is space and using the direct cost allocation method, what is the allocation of housekeeping costs to the Medicine Department? (2 points)

a. $ 87,720
b. $ 54,000
c. $ 140,800
d. None of the above

The income statement and additional data of Bayleaf Pty Ltd are as follows:

Income statement for the year ended 31 December 2016

Revenue:

Service Revenue R225 000

Dividend Revenue R6 300 (231 300)

Expenses:

Cost of goods sold R100 000

Salary Expense R52 000

Depreciation Expense R23 000

Advertising Expense R2 300

Interest Expense R2 400

Income tax expense R5 000 (R184 700)

Net income R46 600

Additional Data:

a) Acquisition of PPE was R170 000. Of this amount , R140 000 was paid in cash and R30 000 by signing a note payable

b) Proceeds from the sale of land totalled R48 000

c) Proceeds from issuance of shares totalled R31 000

d) Payment of long-term note payable was R16 000

e) Payment of dividends was R10 000

From the Balance Sheet:

Balance sheet as at 31 December

Currents Assets 2016 2015

Cash R32 000 R13 300

Accounts Receivable R41 000 R57 000

Inventory R48 000 R87 000

Prepaid expenses R9 100 R8 200

Current Liabilities

Accounts Payable R32 000 R17 000

Accrued liabilities R14 000 R43 000

Required:

1. Prepare Bayleaf 's statement of cash flow for year ended 31 December 2016, using indirect Method.

2. Evaluate Bayleaf's cash flow for the year ended 31 December 2016, including its free cash flow and cash realization ratio. In your evaluation, review all three categories of cash flows and give the reason for your evaluation.

3. When analyzing the cash flow patterns of the Company, what other three (3) important indicators of the health of the company 's cash flows do you look at?

BluStar Company has two service departments, Administration and Accounting, and two operating departments, Domestic and International. Administration costs are allocated on the basis of employees, and Accounting costs are allocated on the basis of number of transactions. A summary of BluStar operations follows.

Required:

a. Allocate the cost of the service departments to the operating departments using the direct method.
b. Allocate the cost of the service departments to the operating departments using the step method. Start with Administration.
c. Allocate the cost of the service departments to the operating departments using the reciprocal method.

All of the following are reported at fair value except

A. Trading securities

B. Held to maturity securities

C. Available for sale securities

D. All of these options are reported at fair value

On January 1 of the current year, Winters Corporation acquired 10% of the outstanding common stock of Summers Corporation for $420,000. For the current year, Summers Corporation reported net income of $80,000 and paid cash dividends of $25,000. At the end of the year, the carrying value of Winters’ investment in Summers Corporation would be