QUESTION 3

On 1 January 2018, MM Bhd acquired a fast food franchise for RM300,000. The legal life of the franchise is seven (7) years while the economic useful life is six (6) years. On 31 December 2018, the franchise was revalued at RM340,000. Due to the outbreak of the COVID-19 at the end of year 2019, sale of fast food from the franchise is declining. Impairment test conducted showed that the fair value of the franchise was RM250,000. At this date the current trend of the outbreak indicates further sale declining in the next six (6) months. The company adopts the revaluation model to record the franchise.

The company also has legal title to a soft drink brand which was acquired on 1 January 2019 at RM350,000. The brand product is expected to generate cash inflow indefintitely. However, there is no active market available for this type of soft drink. On 31 December 2019, impairment test conducted showed the recoverable amount of the brand was RM310,000.

Financial year end for the company is 31 December.

REQUIRED:

1. Prepare journal entries to record the accounting treatment related to the franchise of MM Bhd on 31 December 2018 and 31 December 2019.
2. Explain the accounting treatment for the soft drink brand of MM Bhd on 31 December 2019.

ABC Company produces a chemical. At the start of the year, they had the following cost information:

Direct material: (10 pounds @ $1.60)	$16.00
Direct labor: (0.75 hours @ $18.00)	$13.50
Variable overhead: (0.75 @ $4.00)	$3.00
Fixed overhead: (0.75 @ $3.00)	$2.25
Standard cost per unit	$34.75

ABC Company computes its overhead rates using practical volume, which is 72,000 units. The actual results are as follows:

a. Units produced: 70,000.

b. Direct materials purchased: 744,000 pounds @ $1.50 per pound.

c.   Direct materials used: 736,000 pounds.

d. Direct labor: 56,000 hours @ $17.90 per hour.

e. Fixed overhead: $214,000

f.   Variable overhead: $175,400

Required: You must show all your calculations for question 1 (below) to get credit.

1. Calculate all the following variances:

a. Direct materials price and efficiency variances.

b. Direct labor price and efficiency variances.

c.   Variable overhead price and efficiency variances.

d. Fixed overhead price and efficiency variances.

2. Record all the necessary journal entries for:

a. Materials purchases.

b. Materials used in production.

c.   Direct labor costs incurred in production.

d. Actual variable overhead costs incurred.

e. Variable overhead costs applied.

f.   Actual fixed overhead costs incurred.

g. Fixed overhead costs applied.

h. Recognition of variable overhead variances.

i.    Recognition of fixed overhead variances.

j.    Closing of all the variance accounts

Freight Terms

Determine the amount to be paid in full settlement of each of two invoices, (a) and (b), assuming that credit for returns and allowances was received prior to payment and that all invoices were paid within the discount period. If required, round the answers to the nearest dollar.

	Merchandise		Freight Paid by Seller		Freight Terms		Returns and Allowances
a.	$8,200		$300			FOB destination, 1/10, n/30	$1,600
b.	3,400		600			FOB shipping point, 2/10, n/30	900

a.	$fill in the blank 1
b.	$fill in the blank 2

Present Values

Use Present Value Tables or your calculator to complete the requirements below.

You have an opportunity to purchase a government security that will pay $217,000 in 5 years.

Required:

Round your answers to the nearest cent, if rounding is required.

1. Calculate what you would pay for the security if the appropriate interest (discount) rate is 6% compounded annually.
$

2. Calculate what you would pay for the security if the appropriate interest (discount) rate is 10% compounded annually.
$

3. Calculate what you would pay for the security if the appropriate interest (discount) rate is 6% compounded semiannually.
$

Tasman Products, Ltd., of Australia has a Maintenance Department that services the equipment in the company’s Forming Department and Assembly Department. The cost of this servicing is charged to the operating departments on the basis of machine-hours. Cost and other data relating to the Maintenance Department and to the other two departments for the most recent year are presented below. Data for the Maintenance Department follow: Budget Actual Variable costs for lubricants $ 331,800 * $ 425,340 Fixed costs for salaries and other $ 204,000 $ 219,400 *Budgeted at $21 per machine-hour. Data for the Forming and Assembly Departments follow: Percentage of Peak-Period Capacity Required Machine-Hours Budget Actual Forming Department 75% 10,500 12,500 Assembly Department 25% 5,300 4,300 Total 100% 15,800 16,800 The level of fixed costs in the Maintenance Department is determined by peak-period requirements. Required: Management would like data to assist in comparing actual performance to planned performance in the Maintenance Department and in the other departments. 1. How much Maintenance Department cost should be charged to the Forming Department and to the Assembly Department? 2. How much, if any, of the actual Maintenance Department costs for the year should be treated as a spending variance and not charged to the Forming and Assembly departments?

1. In auditing, What does “sheet to floor” procedures to test the existence of inventory. Discuss what is meant by a “sheet to floor” count and how it addresses the an assertion. Also discuss why it is important to address existence as part of the year-end inventory observation audit procedure.

2. discusses the use of “floor to sheet” procedures to test the completeness of inventory. Discuss what is meant by a “floor to sheet” count and how it addresses the completeness assertion. Also discuss why it is important to address completeness as part of the year-end inventory observation audit procedure.

The following information is available for Monty Corporation for 2019 (its first year of operations).

1.		Excess of tax depreciation over book depreciation, $41,200. This $41,200 difference will reverse equally over the years 2020–2023.
2.		Deferral, for book purposes, of $19,800 of rent received in advance. The rent will be recognized in 2020.
3.		Pretax financial income, $273,100.
4.		Tax rate for all years, 20%.

Compute taxable income for 2019.

Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2019.

Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2020, assuming taxable income of $303,700.

The following changes took place last year in Pavolik Company’s balance sheet accounts:

Asset and Contra-Asset Accounts				Liabilities and Stockholders' Equity Accounts
Cash	$	29	D	Accounts payable	$	89	I
Accounts receivable	$	33	I	Accrued liabilities	$	33	D
Inventory	$	76	D	Income taxes payable	$	38	I
Prepaid expenses	$	28	I	Bonds payable	$	276	I
Long-term investments	$	30	D	Common stock	$	132	D
Property, plant, and equipment	$	530	I	Retained earnings	$	109	I
Accumulated depreciation	$	109	I

D = Decrease; I = Increase.

Long-term investments that cost the company $30 were sold during the year for $64 and land that cost $63 was sold for $33. In addition, the company declared and paid $27 in cash dividends during the year. Besides the sale of land, no other sales or retirements of plant and equipment took place during the year. Pavolik did not retire any bonds during the year or issue any new common stock.

The company’s income statement for the year follows:

Sales					$	1,290
Cost of goods sold						572
Gross margin						718
Selling and administrative expenses						510
Net operating income						208
Nonoperating items:
Loss on sale of land	$	(30	)
Gain on sale of investments		34				4
Income before taxes						212
Income taxes						76
Net income					$	136

The company’s beginning cash balance was $146 and its ending balance was $117.

Required:

1. Use the indirect method to determine the net cash provided by operating activities for the year.

2. Prepare a statement of cash flows for the year.

Required 1 Required 2 Use the indirect method to determine the net cash provided by operating activities for the year. (Adjustment amounts that are to be deducted should be indicated with a minus sign.) Pavolik Company Statement of Cash Flows (partial) 0 $0 Required 2 Prepare a statement of cash flows for the year. (List any deduction in cash and cash outflows as negative amounts.) Pavolik Company Statement of Cash Flows Operating activities: Investing activities: 0 Financing activities: 0 0 Beginning cash and cash equivalents Ending cash and cash equivalents $0

ASSIGNMENT 10
Problem 10-1: Post transactions from General Journal to General Ledger.

Robert Carpenter began business as a licensed real estate broker on October 1, XXX1. During Oc­tober, Mr. Carpenter's part-time bookkeeper re­corded transactions in the General Journal. The General Ledger accounts were set up from the following chart of accounts. Post the transactions in the journal to the ledger accounts and compute the balance. Be sure to include the reference numbers in both the journal and ledger accounts.

Note: After posting, check your accuracy by calculating the balance of each general ledger account and entering each balance in the two-column form at the end. Remember, the debit balances must equal the credit balances, or you know you have made an error. Even when the debits and credits balance, it does not guarantee that you have made no errors; you can still have an error that it doesn’t indicate (i.e., like debiting the wrong account, posting the same wrong amount to both accounts, not posting an entire entry, etc.). However, if they equal, it usually means that you have not made a lot of errors.

Account Number   Account Name
111   Cash
115   Equipment
131   Building
132   Land
211   Accounts Payable - Keith
311   Robert Carpenter, Capital
312   Robert Carpenter, Drawing
411   Commission Income
511   Advertising Expense
512   Legal Expense
513   Salaries Expense
514   Telephone Expense
Problem 10-1: Journalize and post transactions.

On November 1, XXX1, Harry Simmons opened a tailor shop. His business had a number of transactions during the month of November. The General Ledger accounts were set up from the following chart of accounts. Using the chart of accounts below, complete the following activities for Henry Simmons:
a.   Journalize the transactions.
b.   Post the trans­actions to the ledger accounts.

Note: After posting, check your accuracy by calculating the balance of each general ledger account and entering each balance in the two-column form at the end. Remember, the debit balances must equal the credit balances, or you know you have made an error. Even when the debits and credits balance, it does not guarantee that you have made no errors; you can still have an error that it doesn’t indicate (i.e., like debiting the wrong account, posting the same wrong amount to both accounts, not posting an entire entry, etc.). However, if they equal, it usually means that you have not made a lot of errors.

Account Number   Account Name
111   Cash
112   Accounts Receivable - Brent
114   Supplies
118   Equipment
211   Accounts Payable - Rose
311   Harry Simmons, Capital
312   Harry Simmons, Drawing
411   Income
511   Advertising Expense
512   Rent Expense
513   Repairs Expense
514   Utilities Expense

November 1    Mr. Simmons deposited $10,000 cash in the Rockwall Bank to open the business.
November 3   He paid $225 cash for rent for the month.
November 5    He bought equipment worth $750 from Rose, Inc.; he paid $250 cash and charged $500 on account.
November 6    He bought supplies for $150 cash.
November 6    Mr. Simmons received income for the week of $215 in cash.
November 10    He paid $30 cash for advertisement in local paper.
November 12    Mr. Simmons received income for the week of $285 in cash.
November 14    He paid $40 cash for utilities expense.
November 15    He paid Rose $50 cash on account.
November 20    He paid $25 cash for equipment repairs.
November 23    He paid Rose $50 cash on account.
November 30    He withdrew $175 cash from the business for personal use.
November 30    Mr. Simmons sent a bill for services rendered to John Brent for $150.

Need assistance with horizontal and vertical analysis:

Accounting 1B

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Chapter 15 – Horizontal and Vertical Analysis

Page 1

Revenue and expense data for Tudor Technologies is as follows:

                                   2017    2016

Sales                    $650,000    $700,000

Cost of Goods Sold 425,000    342,000

Selling Expense      100,000     84,200

Administration Expense 50,000 48,400

Income Tax Expense       4,000 4,000

Prepare a properly formatted multi-step income statement in comparative form showing dollar

amounts and the vertical analysis (must be shown as a percent)

Tudor Technologies Inc.

Income Statement

For the Years Ended December 31, 2017 and 2016

                     

                                 2017                                                     2016                                         2017 Percent                                         2016 Percent

Sales $                                                 $

-                    ______________ ______________

=

-

- ______________ ______________

=Total Expenses ______________ ______________

- ______________ ______________

= Net Income $ $

Analysis:

The analysis indicates that the cost of goods sold as a percent of sales increase by __________%

between the two years. Selling and Administrative expenses (increased/decreased) by

_______%. Net income as a percent of sales (increased/decreased) by _______%.

Accounting 1B

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Chapter 15 – Horizontal and Vertical Analysis

Page 2

Below are the solvency and profitability ratios Elizabethan Enterprises Inc. for 2017 and 2016.

Indicate if 2017 was Better or Worse than 2016. Further indicate how Elizabethan Enterprises

did in comparison to their Industry.

A = Better

B = Worse

                       2017 2016 Better/Worse Industry Better/Worse

Current Ratio 10.0 9.8 11.0

Quick Ratio 8.0 8.2 7.5

Accounts Receivable Turnover 9.1 10.0 8.1

Number of Days’ Sales in Receivables 40.1 36.5 47.5

Inventory Turnover 12.0 11.8 15.0

Number of Days’ Sales in Inventory 30.4 30.9 24.3

Ratio of Liabilities to SE 15.4 13.2 16.0

Number of Times Interest Earned 4.0 3.8 4.5

Ratio of Sales to Assets 5.3 5.6 4.8

Rate Earned on Total Assets 6.5 6.8 5.3

Rate Earned on SE 6.2 4.5 7.5

Earnings per Share 2.5 2.3 3

Price-Earnings Ratio 10.2 10.5 10.6

Dividends per Share 0.4 0.6 0.3

1. Which of the following income statement figures would probably be the best indicator of a

company’s future performance?

a. Total revenues

b. Income from operations

c. Net income

d. Gross profit

2. Vertical analysis is also known as

a. perpendicular analysis.

b. common size analysis.

c. trend analysis.

d. straight-line analysis.

3. In a common size balance sheet, the 100 percent figure is

a. total current assets.

b. total property, plant and equipment.

c. total liabilities.

d. total assets.

Accounting 1B

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Chapter 15 – Horizontal and Vertical Analysis

Page 3

4. In a common size income statement, the 100% figure is

a. net income.

b. cost of goods sold.

c. gross profit.

d. net sales.

5. Cochran Corporation, Inc. has the following income statement (in millions):

COCHRAN CORPORATION, INC.

Income Statement

For the Year Ended December 31, 2017

Net Sales $240

Cost of Goods Sold 150

Gross Profit 90

Operating Expenses 65

Net Income $ 25

Using vertical analysis, what percentage is assigned to cost of goods sold?

a. 37%

b. 63%

c. 100%

d. 50%

6. Long-term creditors are usually most interested in evaluating

a. liquidity.

b. marketability.

c. profitability.

d. solvency.

7. A company with $60,000 in current assets and $35,000 in current liabilities pays a $1,000

current liability. As a result of this transaction, the current ratio and working capital will

a. both decrease.

b. both increase.

c. increase and remain the same, respectively.

d. remain the same and decrease, respectively.

8. A high accounts receivable turnover indicates

a. customers are making payments quickly.

b. a large portion of the company’s sales are on credit.

c. many customers are not paying their receivables.

d. the company’s sales have increased.

Accounting 1B

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Chapter 15 – Horizontal and Vertical Analysis

Page 4

9. Which one of the following would not be considered a liquidity ratio?

a. Current ratio

b. Inventory turnover

c. Average collection period

d. Return on assets

10. A company that is leveraged is one that

a. has a high earnings per share.

b. contains debt financing.

c. contains equity financing.

d. has a high current ratio.

11. The inventory turnover is calculated by dividing

a. cost of goods sold by the ending inventory.

b. cost of goods sold by the beginning inventory.

c. cost of goods sold by the average inventory.

d. average inventory by cost of goods sold.

12. A successful grocery store would probably have

a. a low inventory turnover.

b. a high inventory turnover.

c. zero profit margin.

d. low volume.

13. The following information is available for Patterson Company:

2017 2016

Accounts receivable $ 360,000 $ 340,000

Inventory 280,000 320,000

Net credit sales 3,150,000 2,600,000

Cost of goods sold 1,800,000 840,000

Net income 300,000 170,000

The accounts receivable turnover for 2017 is

a. 8.8 times.

b. 4.5 times.

c. 9.0 times.

d. 9.3 times.

14. The current ratio would be of most interest to

a. short-term creditors.

b. long-term creditors.

c. stockholders.

d. customers.

Accounting 1B

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Chapter 15 – Horizontal and Vertical Analysis

Page 5

15. The following information is available for Patterson Company:

2017 2016

Accounts receivable $ 360,000 $ 340,000

Inventory 280,000 320,000

Net credit sales 3,000,000 1,400,000

Cost of goods sold 1,800,000 840,000

Net income 300,000 170,000

The inventory turnover for 2017 is

a. 6.4 times.

b. 6.0 times.

c. 5.6 times.

d. 3.0 times.

16. All of the following are ways that a company's current ratio would decrease except

a. purchasing inventory on account.

b. adding equal amounts to the numerator and denominator.

c. paying off one-third of its accounts payable.

d. paying cash for new equipment.

Thank you!!

Required: Make necessary journal entries including the necessary adjusting entries, post them to their respective general ledger accounts and prepare only an adjusted trial balance. 1. Using the following information, complete the accounting cycle.

Jan 1, 2010 Sold Common Stock to raise capital in the amount of $800,000. Jan 1 Purchased Factory machinery for $50,000. The machinery has a life of 10 years, residual value of $10,000, and the company uses double declining balance method of depreciation. Jan 1 Purchased Office Supplies for $10,000 for cash Jan 1 Purchased Office Building for $400,000, making a down payment of $200,000 and giving a promissory note to be paid at once at the end of 5 years. The market interest rate at the time of the purchase is 8%. The office building has a life of 20 years, salvage value of $50,000, and the company uses straight line method of depreciation. Jan 5 Purchased Materials from William Martin for $100,000, term 3/10, EOM, FOB shipping point. The transportation incurred and paid is $2,000. Jan 6 Requisitioned for $70,000 direct materials which were put into production process. Jan 6 Requisitioned for $15,000 Indirect materials which were put into production process. Jan 7 Returned $5,000 of the materials to William Martin for defectiveness. Jan 10 Paid William Martin the amount due. Jan 10 Paid direct labor cost of $15,000. Jan 15 Paid indirect labor cost of $18,000. Jan 12 Paid other factory overhead of $45,000. Jan 31 Make necessary entries for depreciation adjustments for both machinery as well as office building. Additional Information: Applied 90% of the actual factory overhead to the production process. The over or under-applied overhead is considered immaterial and this information should be considered in determining how the over-or under-applied overhead would be disposed off. Jan 31 Paid selling expenses of $6,000 and administrative expenses of $8,000. Jan 31. The unused office supplies is $2,000 and the work in process at the end of the period is $6,000. Jan 31. Sold 60% of the goods available for sale at 200% of their cost for cash.

Kozma Company chart if accounts includes the following selected accounts: 101 Cash, 112 Accounts Receivable, 120 Inventories, 301 Owners Capital, 401 Sales Revenue, 414 Sales Discounts, 505 Cost of Goods Sold

On April 1st the accounts receivable ledger of Kozma Company showed the following balances: Morrow 1550, Rose 1200, Jennings Co 2900, and Dent 2200. The April transactions involving the receipt of cash as follows :

April : Apr. 1 The owner, T. Kozma, invested additional cash in the business $7,200.

4 Received check for payment of account from Dent less 2% cash discount.

5 Received check for $920 in payment of invoice no. 307 from Jennings Co.

8 Made cash sales of merchandise totaling $7,245. The cost of the merchandise sold was $4,347.

10 Received check for $600 in payment of invoice no. 309 from Morrow.

11 Received cash refund from a supplier for damaged merchandise $740.

23 Received check for $1,000 in payment of invoice no. 310 from Jennings Co.

29 Received check for payment of account from Rose.(No Cash Discounts Allowed)

Instructions

a) Journalize the transactions above in a six-column cash receipts journal with columns for cash DR. sales discount DR. Accounts Receivable CR. Sales revenue CR. Other Accounts CR. AND cost of goods sold DR/ inventory CR. Foot and cross foot the journal.

a) Balancing Totals $25,452

b) Insert the beginning balances in the accounts receivable control and subsidiary accounts, and post the April transactions to these accounts.

c) Prove the agreement of the control account and subsidiary account balances.

c) Accounts Receivable $1,930

Journalize transactions in cash payments journal, post to control account and subsidiary ledgers.

On January 1, 2018, Nguyen Electronics leased equipment from Nevels Leasing for a four-year period ending December 31, 2021, at which time possession of the leased asset will revert back to Nevels. The equipment cost Nevels $841,368 and has an expected economic life of five years. Nevels expects the residual value at December 31, 2021, will be $117,000. Negotiations led to the lessee guaranteeing a $174,000 residual value. Equal payments under the lease are $217,000 and are due on December 31 of each year with the first payment being made on December 31, 2018. Nguyen is aware that Nevels used a 9% interest rate when calculating lease payments.

Required:

1. Prepare the appropriate entries for both Nguyen and Nevels on January 1, 2018, to record the lease.
2. Prepare all appropriate entries for both Nguyen and Nevels on December 31, 2018, related to the lease.

The Kaumajet Factory produces two products - table lamps and desk lamps. It has two separate departments - Finishing and Production. The overhead budget for the Finishing Department is $700,050, using 359,000 direct labor hours. The overhead budget for the Production Department is $330,546 using 61,900 direct labor hours.

If the budget estimates that a desk lamp will require 5 hours of finishing and 8 hours of production, what is the total amount of factory overhead the Kaumajet Factory will allocate to desk lamps using the multiple production department factory overhead rate method with an allocation base of direct labor hours, if 10,000 units are produced?

a.$318,312

b.$166,480

c.$53,400

d.$524,700

on January 2nd 2016 the Jackson company purchased equipment to be used in its manufacturing process the equipment has an estimated life of 8 years and an estimated residual value of $30,625 expenditures made to acquire the assets were as follows

purchase price $154,000
Freight charges $2,000
installation charges $4,000

Jackson's policy is to use the double declining balance method of depreciation in the early years of the equipment's life and then switch to straight line halfway through the equipments life.

1. calculate depreciation for each year of the assets eight-year life

2. discuss the accounting treatment of the depreciation on the equipment