Many fast food restaurant chains, such as McDonald's, will occastionally discontinue restaurants in their system. What are some financial considerations in deciding to eliminate a store?

Explain Few Reasons Of budgeting. List The Three Approaches to Budget Preparation. Discuss Both the Positive and Negative Impact of Budgeting on the Behaviour of Individuals in the Organization”.

On January 1, 2020, Sheffield Company purchased 11% bonds, having a maturity value of $289,000 for $311,481.74. The bonds provide the bondholders with a 9% yield. They are dated January 1, 2020, and mature January 1, 2025, with interest received on January 1 of each year. Sheffield Company uses the effective-interest method to allocate unamortized discount or premium. The bonds are classified as available-for-sale category. The fair value of the bonds at December 31 of each year-end is as follows.

Riverbend Inc. received a $367,500 dividend from stock it held in Hobble Corporation. Riverbend's taxable income is $2,450,000 before deducting the dividends received deduction (DRD), a $60,500 NOL carryover, and a $138,000 charitable contribution. Use Exhibit 16-6. (Round your tax rates to 1 decimal place. Leave no answer blank. Enter zero if applicable.)

a. What is Riverbend’s deductible DRD assuming it owns 10 percent of Hobble Corporation?

b. Assuming the facts in part (a), what is Riverbend’s effective tax rate on the dividend?

c. What is Riverbend’s DRD assuming it owns 36 percent of Hobble Corporation?

d. Assuming the facts in part (c), what is Riverbend’s marginal tax rate on the dividend?

On January 2, 2018, Parrish Corporation purchased a tract of land (site no. 505) with a building for $2,000,000. Parrish also paid the following fees to complete the purchase:

Real estate broker’s commission $75,000

Legal fees                                              25,000

Title insurance                                      40,000

Back taxes (paid to clear a lien)      20,000

The closing statement indicated the fair value of the land was $1,700,000 and the building’s fair value was $300,000. Immediately after the purchase was finalized, the building was razed for a total cost of $200,000.

On March 1, 2018, Brock entered into a $3,000,000 fixed-price contract with Bob the Builder, Inc. for the construction of an office building on land site #505. The building was completed and occupied on October 31, 2019. Additional construction costs incurred in 2018 are as follows:

Architects fees for building plans and supervision of construction                              $150,000

Construction plans, specifications, blueprints, permits and inspections                       130,000

Parrish borrowed $2,500,00 on March 1, 2018 by issuing a note payable to L$L Financial Institution. The note is payable in 10 annual installments of $250,000 plus interest at a rate of 8%. Parrish’s weighted average accumulated expenditures for the construction project were as follows:

March 1 – December 31, 2018                                                                                              $1,100,000

January 1 – October 31, 2019                                                                                                   2,500,000

Parrish estimates that the building will have a 40-year useful life and a salvage value of $200,000. The building will be depreciated using the DDB method. The building is put into use on November 1, 2019.

Required:

1. Complete the schedule that shows the individual costs attributed to the Land account (#505).
2. Complete the schedule the shows the individual costs attributed to the Building account.
3. Compute depreciation expense for 2019 and 2020 for the Building.

Mast Corporation seeks your assistance in developing cash and other budget information for May, June, and July. At April 30, the company had cash of $11,000, accounts receivable of $869,000, inventories of $109,000, and accounts payable of $26,647. The budget is to be based on the following assumptions.

• Each month’s sales are billed on the last day of the month.
• Customers are allowed a 2 percent discount if payment is made within 10 days after the billing date. Receivables are recorded in the accounts at their gross amounts (not net of discounts).
• The billings are collected as follows: 70 percent within the discount period, 15 percent by the end of the month, and 12 percent by the end of the following month. Three percent is uncollectible.

Purchase data are as follows.

• Of all purchases of merchandise and selling, general, and administrative expenses, 63 percent is paid in the month purchased and the remainder in the following month.
• The number of units in each month’s ending inventory equals 125 percent of the next month’s units of sales.
• The cost of each unit of inventory is $8.
• Selling, general, and administrative expenses, of which $5,000 is depreciation, equal 15 percent of the current month’s sales.
• Actual and projected sales follow:

Required:

a. Compute the budgeted purchases in dollars for May.

budgeted purchases

  
b. Compute the budgeted purchases in dollars for June.

budgeted purchases

c. Compute the budgeted cash collections during May. (Do not round intermediate calculations.)

budgeted cash collections

d. Compute the budgeted cash disbursements during June. (Do not round intermediate calculations.)

budgeted cash disbursements

e. Compute the budgeted number of units of inventory to be purchased during July.

budgeted number of units

Haggstrom, Inc., manufactures steel fittings. Each fitting requires both steel and an alloy that allows the fitting to be used under extreme conditions. The following data apply to the production of the fittings:

The plant and equipment depreciation and miscellaneous costs are fixed and are based on production of 250,000 units annually. All other costs are variable. Plant capacity is 300,000 units annually. All other overhead costs are variable.

The following are forecast for year 2. Contract negotiations with the union are expected to lead to an increase in hourly direct labor costs of 4 percent, mostly in the form of additional benefits. Commodity prices, including steel, are expected to decline by 10 percent due to the economic slowdown. Alloy prices are expected to remain constant. Plant and equipment depreciation costs are expected to increase by 6 percent. All other unit overhead costs are expected to remain constant.

Haggstrom expects to sell 290,000 units in year 2. The current inventory of fittings is 20,000 units, and management would like to see a reduction of inventory of 10,000 units by the end of the year 2. Steel and alloy inventories will not change. Sales are approximately uniform over the year.

Required:

Prepare a production budget for the year 2.

expected sales

add: Desired ending inventory of finished goods

total needs

Less: Beginning inventory of finished goods

Units to be produced

Estimate the materials, labor, and overhead costs for year 2. (Do not round intermediate calculations.)

material costs

labor costs

overhead costs

Definition

Match the term with the appropriate stock option related definition.

Term Definition

Exercise price: _______ A. Period over which employees perform service—time between the grant date and the vesting date

Exercise period: _______ B. Value determined using an option pricing model

Service period: _______ C. Options where current stock price > exercise price

Fair value amount: _______ D. Options where current stock price < exercise price

Under water options: _______ E. Period employees may exercise their options—time between the vesting date and the expiration date

In the money options: _______ F. Predetermined price to purchase stock at a future date—also known as the strike price

Scenario:

On December 31, 2015, a Company reports the following amounts: Loss from Discontinued Operations, Net of Tax=$90,000; Net Income=$510,000; Weighted Average Number of Shares Outstanding=150,000 shares. Based on this information, complete the following table reporting per share amounts for Income from Continuing Operations, Loss from Discontinued Operations, Net of Tax, and Net Income.

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.