Required information

[The following information applies to the questions displayed below.]

Forten Company, a merchandiser, recently completed its calendar-year 2017 operations. For the year, (1) all sales are credit sales, (2) all credits to Accounts Receivable reflect cash receipts from customers, (3) all purchases of inventory are on credit, (4) all debits to Accounts Payable reflect cash payments for inventory, and (5) Other Expenses are paid in advance and are initially debited to Prepaid Expenses. The company’s income statement and balance sheets follow.

Additional Information on Year 2017 Transactions

1. Net income was $114,975.
2. Accounts receivable increased.
3. Inventory increased.
4. Prepaid expenses decreased.
5. Accounts payable decreased.
6. Depreciation expense was $20,750.
7. Sold equipment costing $46,875, with accumulated depreciation of $30,125, for $11,625 cash. This yielded a loss of $5,125.
8. Purchased equipment costing $96,375 by paying $30,000 cash and (i.) by signing a long-term note payable for the balance.
9. Borrowed $4,000 cash by signing a short-term note payable.
10. Paid $50,125 cash to reduce the long-term notes payable.
11. Issued 2,500 shares of common stock for $20 cash per share.
12. Declared and paid cash dividends of $50,100.

  
Required:
Prepare a complete statement of cash flows using a spreadsheet; report its operating activities using the indirect method. (Enter all amounts as positive values.)

FORTEN COMPANYSpreadsheet for Statement of Cash FlowsFor Year Ended December 31, 2017Analysis of ChangesDecember 31, 2016DebitCreditDecember 31, 2017Balance sheet—debitCash$73,500$49,800Accounts receivable50,625Inventory251,800Prepaid expenses1,875Equipment108,000$485,800$49,800Balance sheet—creditAccumulated depreciation—Equipment$46,000Accounts payable114,675Short-term notes payable6,000Long-term notes payable48,750Common stock, $5 par value150,250Paid-in capital in excess of par value, common stock0Retained earnings120,125$485,800$0Statement of cash flowsOperating activitiesInvesting activities Financing activitiesNon cash investing and financing activitiesPurchase of equipment financed by long-term note payable$0$0

According to SFAC No. 1, financial statements should provide information that is useful for investors’ decision making. Paragraph 37 of SFAC No. 1 states that financial reporting should provide information to help users access the amounts, timing and uncertainty of prospective cash flows. Paragraph 43 of SFAC No. 1 states that the primary focus of financial reporting is providing information about an enterprise’s performance based on measures of earnings and earnings components.

Present arguments that the income statement, not the statement of cash flow, is the most important financial statement to prospective investors.

The author makes a compelling argument why we should get rid of the tipped salary of $2.13 per hour for tipped employees. What do you think of the author's argument? Do you think we should get rid of the special salary for tipped employees? Do you think the salary originally originated from discriminatory practices? How would your resolve the issue?

Mills Corporation acquired as a long-term investment $260 million of 5% bonds, dated July 1, on July 1, 2018. Company management has positive intent and ability to hold the bonds until maturity. The market interest rate (yield) was 3% for bonds of similar risk and maturity. Mills paid $300.0 million for the bonds. The company will receive interest semiannually on June 30 and December 31. As a result of changing market conditions, the fair value of the bonds at December 31, 2018, was $280.0 million.

Required:
1. & 2. Prepare the journal entry to record Mills’ investment in the bonds on July 1, 2018 and interest on December 31, 2018, at the effective (market) rate.
3. At what amount will Mills report its investment in the December 31, 2018, balance sheet?
4. Suppose Moody’s bond rating agency upgraded the risk rating of the bonds, and Mills decided to sell the investment on January 2, 2019, for $315 million. Prepare the journal entry to record the sale.

Gyrdir ehf. manufactures and sells one type of leather belts for 2,500 kr. piece. Production for each belt, all variable, amounts to 1,000 kr. Gyrdir is planning to rent a booth on the forthcoming fashion show in the Exhibition Hall. Gyrdir ehf. can choose between the following rental terms for the sales booth:

1. to pay only a fixed rent before the show, kr. 501,000.

2. to pay a fixed amount of kr. 400,000 and an additional 10% of sales revenue.

3. to pay 20% of the sales revenue but no fixed amount.

Requested:

a) What does Gyrdir ehf. have to sell many multiple belts to reach a break-even point, based on

which of these three options?

b) What choice should Gyrdir ehf. choose if he expects to sell 800 belts at the show? Show

calculations to justify the choice.

Andretti Company has a single product called a Dak. The company normally produces and sells 83,000 Daks each year at a selling price of $58 per unit. The company’s unit costs at this level of activity are given below:

A number of questions relating to the production and sale of Daks follow. Each question is independent.

Required:

1-a. Assume that Andretti Company has sufficient capacity to produce 116,200 Daks each year without any increase in fixed manufacturing overhead costs. The company could increase its unit sales by 40% above the present 83,000 units each year if it were willing to increase the fixed selling expenses by $150,000. What is the financial advantage (disadvantage) of investing an additional $150,000 in fixed selling expenses?

1-b. Would the additional investment be justified?

2. Assume again that Andretti Company has sufficient capacity to produce 116,200 Daks each year. A customer in a foreign market wants to purchase 33,200 Daks. If Andretti accepts this order it would have to pay import duties on the Daks of $3.70 per unit and an additional $26,560 for permits and licenses. The only selling costs that would be associated with the order would be $2.10 per unit shipping cost. What is the break-even price per unit on this order?

3. The company has 500 Daks on hand that have some irregularities and are therefore considered to be "seconds." Due to the irregularities, it will be impossible to sell these units at the normal price through regular distribution channels. What is the unit cost figure that is relevant for setting a minimum selling price?

4. Due to a strike in its supplier’s plant, Andretti Company is unable to purchase more material for the production of Daks. The strike is expected to last for two months. Andretti Company has enough material on hand to operate at 25% of normal levels for the two-month period. As an alternative, Andretti could close its plant down entirely for the two months. If the plant were closed, fixed manufacturing overhead costs would continue at 40% of their normal level during the two-month period and the fixed selling expenses would be reduced by 20% during the two-month period.

a. How much total contribution margin will Andretti forgo if it closes the plant for two months?

b. How much total fixed cost will the company avoid if it closes the plant for two months?

c. What is the financial advantage (disadvantage) of closing the plant for the two-month period?

d. Should Andretti close the plant for two months?

5. An outside manufacturer has offered to produce 83,000 Daks and ship them directly to Andretti’s customers. If Andretti Company accepts this offer, the facilities that it uses to produce Daks would be idle; however, fixed manufacturing overhead costs would be reduced by 30%. Because the outside manufacturer would pay for all shipping costs, the variable selling expenses would be only two-thirds of their present amount. What is Andretti’s avoidable cost per unit that it should compare to the price quoted by the outside manufacturer?

On January 1, 20X1, Pride, Inc. acquired 80% of the outstanding voting common stock of Strong Corp. for $364,000. On this date, equipment (with a five-year life) was undervalued on Strong's books by $35,000. Any remaining excess was attributable to goodwill. As of December 31, 20X1, the financial statements appeared as follows:

During 20X1, Pride bought inventory for $112,000 and sold it to Strong for $140,000; 60% of these goods were unsold on December 31, 20X1. Only half of this purchase had been paid for by Strong by the end of the year.

What is the consolidated total for equipment (net) at December 31, 20X1?

A.) $952,000.

B.) $1,058,400.

C.) $1,069,600.

D.) $1,064,000.  

E.) $1,066,800.

On January 1, 20X1, Pride, Inc. acquired 80% of the outstanding voting common stock of Strong Corp. for $364,000. On this date, equipment (with a five-year life) was undervalued on Strong's books by $35,000. Any remaining excess was attributable to goodwill. As of December 31, 20X1, the financial statements appeared as follows:

During 20X1, Pride bought inventory for $112,000 and sold it to Strong for $140,000; 60% of these goods were unsold on December 31, 20X1. Only half of this purchase had been paid for by Strong by the end of the year.

What is the consolidated total for inventory at December 31, 20X1?

A.) $336,000.

B.) $280,000.

C.) $364,000.

D.) $347,200.

E.) $349,300.

Presented below are several figures reported for Post Inc. and Mitchell Co. as of December 31, 20X2:

Post Inc. acquired 80% of Mitchell Co.'s outstanding common stock on January 1, 20X1. The entire difference between the amount paid and the fair value of Mitchell's net assets is attributed to a previously unrecorded patent with a fair value of $112,500. The patent is being amortized over 20 years. During 20X1, Mitchell sold Post inventory costing $60,000 for $70,000. 30% of this inventory was not sold to external parties until the following year. During the second year, Mitchell sold inventory costing $90,000 to Post for $115,000. Of this inventory, 25% remained unsold on December 31, 20X2.

What is the amount of consolidated cost of goods sold for 20X2?

A.) $440,000

B.) $331,250

C.) $328,250

D.) $321,750

E.) $443,250

On January 1, 20X1, Pride, Inc. acquired 80% of the outstanding voting common stock of Strong Corp. for $364,000. On this date, equipment (with a five-year life) was undervalued on Strong's books by $35,000. Any remaining excess was attributable to goodwill. As of December 31, 20X1, the financial statements appeared as follows:

During 20X1, Pride bought inventory for $112,000 and sold it to Strong for $140,000; 60% of these goods were unsold on December 31, 20X1. Only half of this purchase had been paid for by Strong by the end of the year.

What is the consolidated total of non-controlling interest appearing in the balance sheet on 12/31/20X1?

A.) $100,800.

B.) $97,440.

C.) $93,800.

D.) $120,400.

E.) $117,040.

Comprehensive General Fund Review

The Wayne City Council approved and adopted its general fund budget for 2020. The budget contained the following amounts:

During 2020, various transactions and events occurred which affected the general fund. The legal budgetary basis is used.

Required
For items 1–40, indicate whether the item should be debited (D), credited (C), or is not affected (N) in the general fund.

a. Items 1–5 involve recording the adopted budget

b. Items 6–10 involve recording the 2020 property tax levy. It was estimated that $500,000 would be uncollectible.

c. Items 11–15 involve recording encumbrances at the time purchase orders are issued.

d. Items 16–20 involve recording expenditures that had been previously encumbered in the current year.

e. Items 21–25 involve recording the transfer made to the Library debt service fund. No previous entries were made regarding this transaction.

f. Items 26–40 involve recording the closing entries (other than encumbrances) for 2020.

John and Jessica are married and have one dependent child, Liz. Liz is currently in college at State University. John works as a design engineer for a manufacturing firm while Jessie runs a craft business from their home. Jessica’s craft business consists of making craft items for sale at craft shows that are held periodically at various locations. Jessica spends considerable time and effort on her craft business and it has been consistently profitable over the years. John and Jessica own a home and pay interest on their home loan (balance of $220,000) and a personal loan to pay for Lizzie’s college expenses (balance of $35,000).

Neither John and Jessica is blind or over age 65, and they plan to file as married-joint. Based on their estimates, determine John and Jessica’s AGI and taxable income for the year and complete pages 1 and 2 of Form 1040 (through taxable income, line 43) and Schedule A. Assume that the employer portion of the self-employment tax on Jessie’s income is $808. Joe and Jessie have summarized the income and expenses they expect to report this year as follows:

Reporting Alternatives and International Harmonization Accounting procedures for business combinations historically have differed across countries. Pooling-of-interests, for many years a preferred method in the United States, was not acceptable in most countries. In some countries, accounting standards permit goodwill to be written off directly against stockholders’ equity at the time of a business combination.

Should U.S. companies care about accounting standards other than those that are generally accepted in the United States? Explain.

1. Name 3 new tax law changes as it relates to Individual Tax Payers?
2. Name 3 new tax law changes as it relates to Corporate Tax Payers?
3. What is the new “Pass thru” tax deduction? Which entities does it apply to?
4. Do you think that by reducing the corporate tax rate it will help or hurt the United States?

White Diamond Flour Company manufactures flour by a series of three processes, beginning with wheat grain being introduced in the Milling Department. From the Milling Department, the materials pass through the Sifting and Packaging departments, emerging as packaged refined flour.

The balance in the account Work in Process-Sifting Department was as follows on July 1:

The following costs were charged to Work in Process-Sifting Department during July:

During July, 15,500 units of flour were completed. Work in Process-Sifting Department on July 31 was 1,100 units, 4/5 completed.

Chart of Accounts

1. Difend Cleaners has been considering the purchase of an industrial dry-cleaning machine. The existing machine may be sold for $100,000. The new machine will cost $350,000 and an additional cash investment in working capital of $100,000 will be required. The investment is expected to net $110,000 in additional cash inflows during the first year of acquisition and $250,000 each additional year of use. The new machine has a three-year life, and zero disposal value. Income taxes are not considered in this problem. The working capital investment will not be recovered at the end of the asset's life.
   
   What is the net present value of the investment, assuming the required rate of return is 20%? Would the company want to purchase the new machine?

A) $(62,600); yes

B) $(59,880); no

C) $59,880; yes

D) $62,600; no

2. Referring to the same facts for Difend Cleaners, what is the net present value of the investment, assuming the required rate of return is 10%? Would the company want to purchase the new machine?

A) $144,240 ; yes

B) $180,000 ; yes

C) $(180,000); no

D) $(144,240); no

1) Total marks: 10 marks

Mr Howe a junior partner of CPA fir, Dewey, CHeatem and Howe (DCH) is very excited about the opprtunities created by fair value relvaluation of non current assets. hr believes that there is an enormous opportunities for large firms to increase their book profits via the gains from such revaluations.

Required:

Mr Tu Dewie has asked you to review the AASB rules on the fair market revaluation of non current assets and to assess what profit enhancing opportunities may arise because of those rules.

Alternative Production Procedures and Operating Leverage
Assume Paper Mate is planning to introduce a new executive pen that can be manufactured using either a capital-intensive method or a labor-intensive method. The predicted manufacturing costs for each method are as follows:

Paper Mate's market research department has recommended an introductory unit sales price of $40. The incremental selling costs are predicted to be $500,000 per year, plus $2 per unit sold.

(a) Determine the annual break-even point in units if Paper Mate uses the:
1. Capital-intensive manufacturing method.

2. Labor-intensive manufacturing method.

(b) Determine the annual unit volume at which Paper Mate is indifferent between the two manufacturing methods.

2. Compute operating leverage for each alternative at a volume of 250,000 units. Round your answers two decimal places.

Capital-Intensive operating leverage

Labor-Intensive operating leverage