List and describe the technologies used in this case study.

Based on the inputs below prepare a capital budget analysis for this Base Case using the Net Present Value, Internal Rate of Return, Profitability Index and Payback in years methods, determining whether the project is feasible. Please show your spreadsheet calculations and your final determinations of “go” or “no go” on the project.

Project Inputs:

WACC – Debt is 70% and Equity is 30% of this firm’s capital structure. Interest rate on the debt is 7.5%, firm’s tax rate is 22%. Firm’s beta is 1.50, Risk Free Rate is 3.0%, Market Return Rate is 9.0%.

Project Investment Outlay, Year 0 - $1,000,000

Project Investment Life – 10 years

Project Depreciation - $100,000 / year

Project Salvage Value - $30,000

Working Capital Base of Annual Sales – 10%

Expected inflation rate per year – 3.0%

Project Tax Rate – 30%

Units sold per year – 40,000

Selling Price per Unit, Year 1 - $40.00

Fixed operating costs per year excluding depreciation - $175,000

Manufacturing (Variable) costs per unit, Year 1 - $30.00

1. The following selected accounts appeared in the unadjusted trial balance of Hawthorne Industries: -

Additional data:

1. One-half of the revenue received in advance has been earned by December 31, 2019
2. The prepaid insurance represents three years premium on a policy providing coverage starting September 1, 2019
3. Since the last payday, employees have earned an additional $2,500 which has not yet been paid or recorded
4. The equipment has an estimated life of 10 years and no expected value at the end of its life
5. Services performed but unbilled and uncollected at year end amounted to $6,500
6. The prepaid rent relates to one-half of the year beginning on October 1, 2019

Prepare the necessary year-end adjusting entries as of December 31, 2019.

2. The unadjusted trial balance and information regarding adjusting entries for Becky’s Carpets, Inc., is given below. Prepare the financial statements for Becky’s Carpet Inc., after making the necessary adjustments

Becky’s Carpets, Inc.,

Unadjusted Trial Balance

December 31, 2019

Adjusting entry information:

1. Salaries earned but unpaid at the end of the year, $1,500
2. Insurance expired, 700
3. Depreciation expense, 800
4. Unearned service revenue earned during the year, $1,500
5. The inventory of supplies at year end was $3,400

3. Galarus company had the following trial balance as of December 31, 2019

Galarus Company

Trial Balance

December 31, 2019

Additional information:

1. Supplies used during the month, $450
2. Prepaid insurance expired during the month, $300
3. Depreciation on equipment for the month, $550
4. Unearned service revenue earned during the month, $2,200
5. Accrued salary expense at the end of the month, $650

Based on the trial balance and the additional data, prepare financial statements for the year ended December 31, 2019

Citrus Girl Company (CGC) purchases quality citrus produce from local growers and sells the produce via the Internet across the United States. To keep costs down, CGC maintains a warehouse, but no showroom or retail sales outlets. CGC has the following information for the second quarter of the year:

1. Expected monthly sales for April, May, June, and July are $220,000, $190,000, $310,000, and $90,000, respectively.

2. Cost of goods sold is 30 percent of expected sales.

3. CGC’s desired ending inventory is 20 percent of the following month’s cost of goods sold.

4. Monthly operating expenses are estimated to be:

Salaries: $30,000.

Delivery expense: 4 percent of monthly sales.

Rent expense on the warehouse: $4,500.

Utilities: $800.

Insurance: $175.

Other expenses: $260.

Required:

1. Compute the budgeted cost of purchases for each month in the second quarter.

2. Complete the budgeted income statement for each month in the second quarter.

Halvorson & Co., CPAs, was hired as the auditor for Machinetron, Inc., a company that manufactured highprecision, computer-operated lathes. The owner, Al Trent, hired Halvorson to conduct the upcoming audit and assist with an initial public offering registration with the SEC. Because Machinetron’s machines were large and complex, they were expensive. Each sale was negotiated individually by Trent, and the sales often transpired over several months. Improper recording of one or two machines could represent a material misstatement of the financial statements. The engagement partner in charge of the Machinetron audit was Bob Lehman, who had significant experience auditing manufacturing companies. He recognized the risk for improper recording of sales, and he insisted that his staff confirm all receivables at year end directly with customers. Lehman conducted his review of the Machinetron audit files the same day that Trent wanted to file the company’s registration statement for the initial public stock offering with the SEC. Lehman saw that a receivable for a major sale at year-end was supported by a fax, rather than the usual written confirmation reply. Apparently, relations with this customer were “touchy,” and Trent had discouraged the audit staff from communicating with the customer. At the end of the day, there was a meeting attended by Lehman, Trent, the underwriter of the stock offering, and the company’s attorney. Lehman indicated that a better form of confirmation would be required to support the receivable. After hearing this, Trent blew his stack. Machinetron’s attorney offered to write a letter to Halvorson & Co. stating that in his opinion, a fax had legal substance as a valid confirmation reply. Lehman, feeling tremendous pressure, accepted this proposal and signed off on an unmodified audit opinion. Any comments to Lehman?

Prepare adjusting entries.

A review of the ledger of Monkey Ltd at 30 June 2019 produced the following data relating to the preparation of annual adjusting entries:

1. Prepaid insurance $37260: the entity has separate insurance policies on its buildings and its motor vehicles. Policy B4564 on the building was purchased on 1 January 2018 for $33300. The policy has a term of 3 years. Policy A2958 on the vehicles was purchased on 1 July 2018 for $9510. This policy has a term of 2 years.

2. Subscriptionrevenue received inadvance $135200:theentitybegan sellingmagazine subscriptions on 1 April 2019 on an annual basis. The selling price of a subscription is $130. A review of subscription contracts reveals the following:
Subscription start date Number of subscriptions

1 April 200

1 May 300

1 June 540

1040
The annual subscription is for 12 monthly issues. The June magazine for all of the subscriptions had been delivered to the subscribers at 30 June 2019.

3. Bank loan $100000: the loan was taken out on 1 April at an annual interest rate of 6%.

4. Salaries payable: There are eight salaried employees. Salaries are paid every Friday for the current week. Four employees receive a salary of $1050 each per week, and three employees earn $1350 each per week. 30 June is a Tuesday. Employees do not work on weekends. All employees worked the last 2 days of June.

Required

(a) Prepare the adjusting journal entries at 30 June 2019.

(b) Explain why the business would not recognise the full subscription revenue when the customers sign up for the magazines and pay for the subscription.

uring the past year, Jim Hunt, CEO of KMP Corporation, read about several different frauds occurring in his industry. As a result of these recent frauds, Jim would like to know if fraud is present in his company. As Jim's new assistant, he has asked you to help him determine whether or not fraud is occurring. In preparation for the investigation, Jim has asked you to create a list of five types of fraud symptoms and briefly define and discuss each type.

Question 2

Norio Manufacturing uses powdered plastics (PPS) to manufacture a high-pressure board used in a digital equipment product, Flex 10. Information concerning its operation in June is as follows:

Assume that Norio does not maintain an inventory of materials, so that the amount of materials used is equal to the amount of materials purchased. The cost of PPS in the flexible budget for the number of units manufactured this period (rounded to nearest dollar) is:

Multiple Choice

• $396,720.

• $392,160.

• $554,496.

• $465,120.

• $516,800.

Lucky Company's direct labor information for the month of February is as follows:

The total standard direct labor cost allowed for February, rounded to the nearest dollar, was:

Multiple Choice

• $668,160.

• $682,560.

• $696,000.

• $710,400.

• $720,000.

Assume that TDW Corporation (calendar-year-end) has 2020 taxable income of $656,000 for purposes of computing the §179 expense. The company acquired the following assets during 2020: (Use MACRS Table 1, Table 2, Table 3, Table 4 and Table 5.)

a. What is the maximum amount of §179 expense TDW may deduct for 2020?

b. What is the maximum total depreciation, including §179 expense, that TDW may deduct in 2020 on the assets it placed in service in 2020, assuming no bonus depreciation? (Round your intermediate calculations and final answer to the nearest whole dollar amount.)

Springer Anderson Gymnastics prepared its annual financial statements dated December 31. The company reported its inventory using the LIFO inventory costing method but did not compare the cost of its ending inventory to its market value (replacement cost). The preliminary income statement follows:

Assume that you have been asked to restate the financial statements to incorporate the LCM/NRV rule. You have developed the following data relating to the ending inventory:

Required:

1. Restate the income statement to reflect LCM/NRV valuation of the ending inventory. Apply LCM/NRV on an item-by-item basis.
2. Compare the LCM/NRV effect on each amount that was changed in the preliminary income statement in requirement 1.
   1. LIFO cost, LCM/NRV basis and amount of increase (decrease) for ending inventory, cost of goods sold, gross profit, income from operations, income tax expense, net income

1. C has the following investments it bought during 2012. C still owns the stocks as of 12-31-14.

Original               Fair Value          

Cost        12-31-12       12-31-13       12-31-14

Jungle stock $20,000       $21,000       $24,000       $27,000

Regal stock $40,000       $41,000       $35,000       $42,000

Evan stock $14,000       $15,000       $17,000       $13,000

Leia stock $36,000       $37,000       $55,000

None of the stocks pay C a dividend. On 04-14-14, C sold all of the Leia stock for $54,000.

Assume C only prepares AJEs every December 31. Prepare the entries C should make on:

1. December 31, 2012.
2. December 31, 2013.
3. April 14, 2014.
4. December 31, 2014.

How does one determine a mark-up on a product or service?

Regarding Capital Expenditure Decisions, how does a manager go about evaluating an investment proposal? (from Ch 16 of Managerial Accounting: Creating Value in a Dynamic Business Environment (10th Edition)