Problem 5-1A Perpetual: Alternative cost flows LO P1 [The following information applies to the questions displayed below.] Warnerwoods Company uses a perpetual inventory system. It entered into the following purchases and sales transactions for March. Date Activities Units Acquired at Cost Units Sold at Retail Mar. 1 Beginning inventory 70 units @ $50.40 per unit Mar. 5 Purchase 210 units @ $55.40 per unit Mar. 9 Sales 230 units @ $85.40 per unit Mar. 18 Purchase 70 units @ $60.40 per unit Mar. 25 Purchase 120 units @ $62.40 per unit Mar. 29 Sales 100 units @ $95.40 per unit Totals 470 units 330 units Problem 5-1A Part 1 Required: 1. Compute cost of goods available for sale and the number of units available for sale. 2. Compute the number of units in ending inventory. Compute gross profit earned by the company for each of the four costing methods. For specific identification, the March 9 sale consisted of 50 units from beginning inventory and 180 units from the March 5 purchase; the March 29 sale consisted of 30 units from the March 18 purchase and 70 units from the March 25 purchase. (Round weighted average cost per unit to two decimals and final answers to nearest whole dollar.)

Gladstone Company tracks the number of units purchased and sold throughout each accounting period but applies its inventory costing method at the end of each period, as if it uses a periodic inventory system. Assume its accounting records provided the following information at the end of the annual accounting period, December 31.

Assuming that for Specific identification method (item 1d) the March 14 sale was selected two-fifths from the beginning inventory and three-fifths from the purchase of January 30. Assume that the sale of August 31 was selected from the remainder of the beginning inventory, with the balance from the purchase of May 1.

Required:

1. Compute the amount of goods available for sale, ending inventory, and cost of goods sold at December 31 under each of the following inventory costing methods: (Round intermediate calculations to 2 decimal places and final answers to the nearest whole dollar amount.)

1. 2-a. Of the four methods, which will result in the highest gross profit?

• Last-in, first-out

• Weighted average cost

• First-in, first-out

• Specific identification

1. 2-b. Of the four methods, which will result in the lowest income taxes?

• Last-in, first-out

• Weighted average cost

• First-in, first-out

• Specific identification

Consider a corporate bond with refunding protection and a different corporate bond with call protection. Briefly describe a situation in which a company might call a bond but not refund the bond. In other words, describe a situation in which a bond is **Called but not refunded***

Q1. Discuss in your words the purpose of a bank reconciliation. (1 point)

Q2. Prepare general journal entries for the following transactions of this company for the current year: (2 points).

Q3. A company purchased mining property containing 7,350,000 tons of ore for SAR 1,837,500. In 2009 it mined and sold 857,000 tons of ore and in 2010 it mined and sold 943,000 tons of ore. (2 points).

a. Calculate the depletion expense for 2009 and 2010.

b. What was the book value of the property at the end of 2010?

Q4. Define liabilities and explain in your words the differences between current and long-term liabilities. (2 points).

On January 1, 2016, Lamb Services issued $200,000, 9%, four-year bonds. Interest is paid semiannually on June 30 and December 31. The bonds were issued at $193,537 when the market rate was 10%.

Required:

1. Prepare an amortization schedule that determines interest at the effective interest rate.

2. Prepare an amortization schedule by the straight-line method.

3. Prepare the journal entries to record interest expense on June 30, 2018, by each of the two approaches.

Both Bond A and Bond B have 8.4 percent coupons and are priced at par value. Bond A has 7 years to maturity, while Bond B has 18 years to maturity.

a. If interest rates suddenly rise by 1.2 percent, what is the percentage change in price of Bond A and Bond B? (A negative value should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.)

b. If interest rates suddenly fall by 1.2 percent instead, what would be the percentage change in price of Bond A and Bond B? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.)

Lenitnes Company is considering an investment in technology to improve its operations. The investment will require an initial outlay of $265,000 and will yield the following expected cash flows. Management requires investments to have a payback period of 3 years, and it requires a 10% return on its investments. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the table provided.)

Required:
1. Determine the payback period for this investment.
2. Determine the break-even time for this investment.
3. Determine the net present value for this investment.

Choose a company. Use that company's operations to give three (3) examples of possible accounts receivable customers, and three (3) examples of possible makers of notes receivables in that company.

Emma has provided to you a listing of the transactions she has undertaken throughout the financial year to assist you in completing her 2015 income tax return. Sale of a block of land for $1,000,000: Emma purchased the land as an investment in 1991. The purchase price was $250,000, plus $5,000 in stamp duty, $10,000 in legal fees. To fund the purchase, she took out a loan on which she paid interest totalling $32,000. During the period of ownership her council rates, water rates and insurance totalled $22,000. In January 2005 a dispute occurred with a neighbour over the use of the land and legal fees incurred amounted to $5,000 in resolving this dispute. Before putting the property on the market $27,500 was spent to remove a number of large dangerous pine trees that were on the land. Advertising, legal fees and agent’s fees on the sale of the land were $25,000. Sale of Emma’s 1000 shares in Rio Tinto for $50.85 per share: Emma paid brokerage fee of 2% on the sale. Emma initially purchased the shares for $3.5 per share in 1982. Sale of a stamp collection Emma had purchased, from a private collector, in January 2015 for $60,000: Emma sold the collection at auction for $50,000. Auction fees totalled $5,000 for the sale. Sale of a grand piano for $30,000: It was initially bought for $80,000 in 2000. HI6028 Taxation Theory, Practice and Law Individual Assignment T2.2019 5 Advise Emma of the capital gain tax (CGT) consequences of her transitions. Ignore indexation. Your answer must include references to relevant tax law and or cases.

Consolidated Worksheet and Balance Sheet on the Acquisition Date (Equity Method)Consolidated Worksheet and Balance Sheet on the Acquisition Date (Equity Method) Peanut Company acquired 90 percent of Snoopy Company's outstanding common stock for $270,000 on January 1, 20X8, when the book value of Snoopy's net assets was equal to $300,000. Peanut uses the equity method to account for investments. Trial balance data for Peanut and Snoopy as of January 1, 20X8, are as follows:

Peanut Company Snoopy Company

Assets  

Cash 55,000 20,000   

Accounts Receivable 50,000 30,000  

 Inventory 100,000 60,000   

Investment in Snoopy Stock 270,000  

 Land 225,000 100,000   

Buildings & Equipment 700,000 200,000   

Accumulated Depreciation  (400,000)  (10,000)

Total Assets 1,000,000 400,000

Liabilities & Stockholders' Equity   

Accounts Payable 75,000 25,000   

Bonds Payable 200,000 75,000   

Common Stock 500,000 200,000   

Retained Earnings  225,000 100,000

Total Liabilities & Equity 1,000,000 400,000

Required: Prepare the journal entry on Peanut's books for the acquisition of Snoopy on January 1, 20X8.

Prepare a consolidation worksheet on the acquisition date, January 1, 20X8, in good form.

Prepare a consolidated balance sheet on the acquisition date, January 1, 20X8, in good form.

Income Statements under Absorption Costing and Variable Costing

Joplin Industries Inc. manufactures and sells high-quality sporting goods equipment under its highly recognizable J-Sports logo. The company began operations on May 1 and operated at 100% of capacity (61,600 units) during the first month, creating an ending inventory of 5,600 units. During June, the company produced 56,000 garments during the month but sold 61,600 units at $115 per unit. The June manufacturing costs and selling and administrative expenses were as follows:

a. Prepare an income statement according to the absorption costing concept for June.

b. Prepare an income statement according to the variable costing concept for June.

c. What is the reason for the difference in the amount of income from operations reported in (a) and (b)?

Under the   method, the fixed manufacturing cost included in the cost of goods sold is matched with the revenues. Under  , all of the fixed manufacturing cost is deducted in the period in which it is incurred, regardless of the amount of inventory change. Thus, when inventory decreases, the   income statement will have a lower income from operations.

Lane Company manufactures a single product that requires a great deal of hand labor. Overhead cost is applied on the basis of standard direct labor-hours. The budgeted variable manufacturing overhead is $2.40 per direct labor-hour and the budgeted fixed manufacturing overhead is $384,000 per year.

The standard quantity of materials is 4 pounds per unit and the standard cost is $4.00 per pound. The standard direct labor-hours per unit is 1.5 hours and the standard labor rate is $12.20 per hour.

The company planned to operate at a denominator activity level of 60,000 direct labor-hours and to produce 40,000 units of product during the most recent year. Actual activity and costs for the year were as follows:

Required:

1. Compute the predetermined overhead rate for the year. Break the rate down into variable and fixed elements.

2. Prepare a standard cost card for the company’s product.

3a. Compute the standard direct labor-hours allowed for the year’s production.

3b. Complete the following Manufacturing Overhead T-account for the year.

4. Determine the reason for any underapplied or overapplied overhead for the year by computing the variable overhead rate and efficiency variances and the fixed overhead budget and volume variances.

Prepare journal entries to record the December transactions in the General Journal Tab in the excel template file "Accounting Cycle Excel Template.xlsx". Use the following accounts as appropriate: Cash, Accounts Receivable, Supplies, Prepaid Insurance, Equipment, Accumulated Depreciation, Accounts Payable, Wages Payable, Common Stock, Retained Earnings, Dividends, Service Revenue, Depreciation Expense, Wages Expense, Supplies Expense, Rent Expense, and Insurance Expense. 1-Dec Began business by depositing $7000 in a bank account in the name of the company in exchange for 700 shares of $10 per share common stock. 1-Dec Paid the rent for the current month, $600 . 1-Dec Paid the premium on a one-year insurance policy, $720 . 1-Dec Purchased Equipment for $4800 cash. 5-Dec Purchased office supplies from XYZ Company on account, $300 . 15-Dec Provided services to customers for $5800 cash. 16-Dec Provided service to customers ABC Inc. on account, $3100 . 21-Dec Received $1700 cash from ABC Inc., customer on account. 23-Dec Paid $170 to XYZ company for supplies purchased on account on December 5 . 28-Dec Paid wages for the period December 1 through December 28, $4760 . 30-Dec Declared and paid dividend to stockholders $200 . #2. Post all of the December transactions from the “General Journal” tab to the T-accounts under the “T-Accounts” tab in the excel template file "Accounting Cycle Excel Template.xlsx". Assume there are no beginning balances in any of the accounts. #3. Compute the balance for each T-account after all of the entries have been posted. These are the unadjusted balance as of December 31. #4. Prepare the unadjusted trial balance under the “Unadjusted Trial Balance” tab in the excel template file "Accounting Cycle Excel Template.xlsx" . Provide the total of the credit column from the Unadjusted Trial Balance #5. Record the following four transactions as adjusting entries under the “General Journal” tab. 31-Dec One month’s insurance has been used by the company $60. 31-Dec The remaining inventory of unused office supplies is $90. 31-Dec The estimated depreciation on equipment is $80. 31-Dec Wages incurred from December 29 to December 31 but not yet paid or recorded total $510. #6. Post all of the adjusting entries to the T-accounts under the “T-Accounts” tab. Compute the balance for each T-account after all of the adjusting entries have been posted. These are the adjusted balance as of December 31. #7. Prepare the adjusted trial balance under the “Adjusted Trial Balance” tab as of December 31 in the excel template file "Accounting Cycle Excel Template.xlsx" . Provide the following accounts balances from the Adjusted Trial Balance: Cash Accounts Receivable Supplies Prepaid Insurance Equipment Accumulated Depreciation Accounts Payable Wages Payable Common Stock Retained Earnings #8. Prepare Income Statement, Statement of Stockholder’s Equity, and Classified Balance Sheet under the “Financial Statements” tab for the month ended December 31, 20XX in the excel template file "Accounting Cycle Excel Template.xlsx". Provide the following amount from the Income Statement: Service Revenue Depreciation Expense Wages Expense Supplies Expense Rent Expense Insurance Expense Net Income Provide the following account balance from the Statement of Stockholders' Equity: Dividends Provide the following account balances from the Balance Sheet: Current Assets Long-Term Assets Total Liabilities Total Stockholder’s Equity Cash #9. Record the closing entries under the “General Journal” tab. #10. Post all of the closing entries to the T-accounts under the “T-Accounts” tab. Compute the balance for each T-account after all of the closing entries have been posted. Provide the ending balance of Cash at December 31 from the T-account Provide the balance of the Retained Earnings T-account after closing entries have been posted. Does the ending balance of the Retained Earnings T-account agree with the balance of Retained Earnings on the Balance Sheet? Check Point: Total Assets $ 10,120.00

When should a company prepare budgets? What are the advantages of preparing budgets?

3. The partnership has four partners A 2% partner, individual calendar year. B 51% partner, corporation, 6/30 fiscal year. C 30% partner, corporation, 6/30 fiscal; D 17% corporation, 6/30 fiscal. What taxable years may the partnership use under the following alternative situations?
(a) What taxable year(s) may the partnership use?
(b) Suppose C and D use the 4/30 fiscal year instead.
(c) Suppose A is 22%, B is 31%, and C and D use the 4/30 fiscal year.