. A partially completed pension spreadsheet showing the relationships among the elements that constitute Carney, Inc.’s defined benefit pension plan follows. At the end of 2018, Carney revised its pension formula and incurred a prior service cost of $100 million. At the end of 2019, the pension formula was amended again, creating an additional prior service cost of $200 million. At the beginning of 2020, $400 million prior service cost was incurred. At the beginning of 2021, $300 million prior service cost was incurred. In 2018 - 2021, the actuary’s discount rate remained 10%, and the average remaining service life of the active employee group remained 10 years. The expected rate of return on assets was 10% in 2019, and increased by 1% each year.

1. Fill in blanks in the 2019 pension spreadsheet.

2019 Pension spreadsheet ($ in millions)	(PBO)	Plan Assets	Prior Service Cost–AOCI	Net Loss (Gain) –AOCI	Pension Expense	Cash	Net Pension (Liability) / Asset
Balance, Jan. 1, 2019	(25,000)	20,000	100	4,500			(5,000)
Service cost	(800)
Interest cost
Prior Service Cost
Expected return on assets
Adjust for: Gain (loss) on assets
Amortization of: "Prior service cost-AOCI"
Amortization of: "Net Loss (Gain)-AOCI"
Gain (Loss) on PBO	7000
Cash funding						(1,000)
Retiree benefits	950
Bal., Dec. 31, 2019		22,450	290	(3,100)	1,510

The following incorrect income statement was prepared by the accountant of the Axel Corporation:

AXEL CORPORATION Income Statement For the Year Ended December 31, 2021
Revenues and gains:
Sales revenue				$	760,000
Interest revenue					49,000
Gain on sale of investments					96,000
Total revenues and gains					905,000
Expenses and losses:
Cost of goods sold	$	410,000
Selling expense		76,000
Administrative expense		96,000
Interest expense		33,000
Restructuring costs		72,000
Income tax expense		54,500
Total expenses and losses					741,500
Net Income				$	163,500
Earnings per share				$	1.64

Required:
Prepare a multiple-step income statement for 2021 applying generally accepted accounting principles. The income tax rate is 25%. (Amounts to be deducted should be indicated with a minus sign. Round EPS answer to 2 decimal places.)
  

Liabilities can be listed as both long-term and short-term, based on the time frame for paying them. You have a notes payable which was issued to purchase inventory and it was issued on 10/15 and is for 90 days. Determine how to report this on balance sheet and support your reason for this reporting.

The company knows they cannot pay this note in 90 days and is working to convert it to be payable over 15 months. Does this change the method you report on the balance sheet? Why or why not?

What are unsecured notes? Why would they carry a relatively high interest rate? What are convertible securities? Why are they good for the investor and for the company? Why would they carry a relatively low interest rate? What does callable mean? What advantage does this feature give a company?

On February 8, 2018, Holly purchased a residential apartment building. The cost basis assigned to the building is $209,000. Holly also owns another residential apartment building that she purchased on December 15, 2018, with a cost basis of $588,000.

Click here to access the depreciation tables.

If required, round intermediate calculations and final answers to nearest dollar.

a. Calculate Holly's total depreciation deduction for the apartments for 2018 using MACRS.
$

b. Calculate Holly's total depreciation deduction for the apartments for 2019 using MACRS.

$

Calculate the following:

Click here to access the various depreciation tables. If required, round your final answers to the nearest dollar. If your answer is zero, enter "0".

a. The first year of depreciation on a residential rental building costing $200,000 purchased July 2, 2018.
$

b. The second year (2019) of depreciation on a computer costing $5,000 purchased in May 2018, using the half-year convention and accelerated depreciation considering any bonus depreciation taken.
$

c. The first year of depreciation on a computer costing $2,800 purchased in May 2018, using the half-year convention and straight-line depreciation with no bonus depreciation.
$

d. The third year of depreciation on business furniture costing $8,000 purchased in March 2016, using the half-year convention and accelerated depreciation but no bonus depreciation.
$

Your father is 50 years old and will retire in 10 years. He expects to live for 25 years after he retires, until he is 85. He wants a fixed retirement income that has the same purchasing power at the time he retires as $55,000 has today. (The real value of his retirement income will decline annually after he retires.) His retirement income will begin the day he retires, 10 years from today, at which time he will receive 24 additional annual payments. Annual inflation is expected to be 3%. He currently has $65,000 saved, and he expects to earn 8% annually on his savings. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the question below.

Open spreadsheet

Required annuity payments
Retirement income today	$55,000
Years to retirement	10
Years of retirement	25
Inflation rate	3.00%
Savings	$65,000
Rate of return	8.00%
Calculate value of savings in 10 years:			Formulas
Savings at t = 10			#N/A
Calculate value of fixed retirement income in 10 years:
Retirement income at t = 10			#N/A
Calculate value of 25 beginning-of-year retirement payments at t =10:
Retirement payments at t = 10			#N/A
Calculate net amount needed at t = 10:
Value of retirement payments			#N/A
Value of savings			#N/A
Net amount needed			#N/A
Calculate annual savings needed for next 10 years:
Annual savings needed for retirement			#N/A

How much must he save during each of the next 10 years (end-of-year deposits) to meet his retirement goal? Do not round your intermediate calculations. Round your answer to the nearest cent.

$  

Hi-Tek Manufacturing Inc. makes two types of industrial component parts—the B300 and the T500. An absorption costing income statement for the most recent period is shown below:

Hi-Tek Manufacturing Inc. Income Statement
Sales	$	1,704,000
Cost of goods sold		1,218,682
Gross margin		485,318
Selling and administrative expenses		550,000
Net operating loss	$	(64,682)

Hi-Tek produced and sold 60,000 units of B300 at a price of $20 per unit and 12,600 units of T500 at a price of $40 per unit. The company’s traditional cost system allocates manufacturing overhead to products using a plantwide overhead rate and direct labor dollars as the allocation base. Additional information relating to the company’s two product lines is shown below:

	B300				T500				Total
Direct materials	$	400,000			$	162,800			$	562,800
Direct labor	$	121,000			$	42,900				163,900
Manufacturing overhead										491,982
Cost of goods sold									$	1,218,682

The company has created an activity-based costing system to evaluate the profitability of its products. Hi-Tek’s ABC implementation team concluded that $52,000 and $102,000 of the company’s advertising expenses could be directly traced to B300 and T500, respectively. The remainder of the selling and administrative expenses was organization-sustaining in nature. The ABC team also distributed the company’s manufacturing overhead to four activities as shown below:

	Manufacturing				Activity
Activity Cost Pool (and Activity Measure)	Overhead					B300			T500			Total
Machining (machine-hours)	$	212,382				91,000			62,900			153,900
Setups (setup hours)		117,600				74			220			294
Product-sustaining (number of products)		101,200				1			1			2
Other (organization-sustaining costs)		60,800				NA			NA			NA
Total manufacturing overhead cost	$	491,982

Required

1. Compute the product margins for the B300 and T500 under the company’s traditional costing system. (Do not round your overhead rate. Round your other intermediate and final answers to the nearest whole number.)

2. Compute the product margins for B300 and T500 under the activity-based costing system. (Negative product margins should be indicated by a minus sign. Round your intermediate calculations to 2 decimal places.)

3. Prepare a quantitative comparison of the traditional and activity-based cost assignments. (Do not round your overhead rate. Round your other intermediate calculations and final answers to the nearest whole number. Round your "Percentage" answer to 1 decimal place. (i.e. .1234 should be entered as 12.3))

Meca Concrete purchased a mixer on January 1, 2016, at a cost of $39,600. Straight-line depreciation for 2016 and 2017 was based on an estimated eight-year life and $2,400 estimated residual value. In 2018, Meca revised its estimate and now believes the mixer will have a total service life of only six years, and that the residual value will be only $1,400. Compute annual depreciation for 2018 and 2019.

Annual depreciation for 2018 and 2019-

Northwood Company manufactures basketballs. The company has a ball that sells for $25. At present, the ball is manufactured in a small plant that relies heavily on direct labor workers. Thus, variable expenses are high, totaling $15.00 per ball, of which 60% is direct labor cost.

Last year, the company sold 48,000 of these balls, with the following results:

Sales (48,000 balls)	$	1,200,000
Variable expenses		720,000
Contribution margin		480,000
Fixed expenses		319,000
Net operating income	$	161,000

Required:

1. Compute (a) last year's CM ratio and the break-even point in balls, and (b) the degree of operating leverage at last year’s sales level.

2. Due to an increase in labor rates, the company estimates that next year's variable expenses will increase by $3.00 per ball. If this change takes place and the selling price per ball remains constant at $25.00, what will be next year's CM ratio and the break-even point in balls?

3. Refer to the data in (2) above. If the expected change in variable expenses takes place, how many balls will have to be sold next year to earn the same net operating income, $161,000, as last year?

4. Refer again to the data in (2) above. The president feels that the company must raise the selling price of its basketballs. If Northwood Company wants to maintain the same CM ratio as last year (as computed in requirement 1a), what selling price per ball must it charge next year to cover the increased labor costs?

5. Refer to the original data. The company is discussing the construction of a new, automated manufacturing plant. The new plant would slash variable expenses per ball by 40.00%, but it would cause fixed expenses per year to double. If the new plant is built, what would be the company’s new CM ratio and new break-even point in balls?

6. Refer to the data in (5) above.

a. If the new plant is built, how many balls will have to be sold next year to earn the same net operating income, $161,000, as last year?

b. Assume the new plant is built and that next year the company manufactures and sells 48,000 balls (the same number as sold last year). Prepare a contribution format income statement and Compute the degree of operating leverage.

The Spokane Recycling Company (SRC) purchases old water and soda bottles and recycles them to produce plastic covers for outdoor furniture. The company processes the bottles in a special piece of equipment that first​ melts, then reforms the plastic into large sheets that are cut to size. The edges from the cut pieces are sold for use as package filler. The filler is considered a byproduct. SRC can produce 27 table​ covers, 77 chair covers and 9 pounds of package filler from 100 pounds of bottles.

In June, SRC had no beginning inventory. It purchased and processed 110,000 pounds of bottles at a cost of $ 880,000. SRC sold 22,000 table covers for $11 each, 77,000 chair covers for $12 each, and 4,000 pounds of package filler at $0.90 per pound.

Requirement 1. Assume that SRC allocates the joint costs to table and chair covers using the sales value at splitoff method and accounts for the byproduct using the production method. What is the ending inventory cost for each product and gross margin for SRC?

​First, allocate the joint costs. ​(Round the weighting values to two decimal​ places.)

	Table	Chair
	Covers	Covers	Total
Sales values at splitoff
Weighting
Joint costs allocated

Now complete the statement below for SRC.

​(Do not round intermediary calculations. Only round the amount you input in the cell to the nearest​ dollar.)

	Table	Chair
	Covers	Covers	Total
Revenues
Cost of goods sold:
Joint costs allocated
Less: Ending inventory
Cost of goods sold
Gross margin

Requirement 2. Assume that SRC allocates the joint costs to table and chair covers using the sales value at splitoff method and accounts for the byproduct using the sales method. What is the ending inventory cost for each product and gross margin for SRC?

​First, allocate the joint costs. ​(Round the weighting values to two decimal​ places.)

	Table	Chair
	Covers	Covers	Total
Sales values at splitoff
Weighting
Joint costs allocated

Now complete the statement below for SRC

​(If a box is not used in the​ table, leave the box​ empty; do not enter a zero. Do not round intermediary calculations. Only round the amount you input in the cell to the nearest​ dollar.)

	Table	Chair	Plastic
	Covers	Covers	Filler (lbs)	Total
Revenues
Cost of goods sold:
Joint costs allocated
Less: Ending inventory
Cost of goods sold
Gross margin

C&S Marketing (CSM) recently hired a new marketing director, Jeff Otos, for its downtown Minneapolis office. As part of the arrangement, CSM agreed on February 28, 2018, to advance Jeff $50,000 on a one-year, 8 percent note, with interest to be paid at maturity on February 28, 2019. CSM prepares financial statements on June 30 and December 31.

Prepare the journal entry CSM will make when the note is established, accrue interest on June 30 and December 31, and the interest and principal payments on February 28, 2019. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field. Do not round intermediate calculations. Round your final answers to whole dollar amount.)

On January 1, 20X8, Liv Ltd. (LL), a Canadian company, acquired 90% of Marcus Co. (MC), a foreign company for FC 623,200. At the acquisition date, the carrying value of MC’s net assets equaled their fair value except for the equipment, which had a carrying value of FC 800,000 and a fair value of FC 880,000. At the acquisition date, MC’s equipment had a remaining useful life of 10 years. There was an FC 4,000 impairment of the goodwill which occurred evenly throughout 20X8.

Selected financial statements for LL and MC are presented below.

Liv Ltd.

Statement of Financial Position
As of December 31, 20X8

(in $ CDN)

Assets:
Noncurrent assets:
Plant and equipment, net 2,752,000
Investment in Marcus Co. 1,371,040
4,123,040

Current assets:

Inventory   1,376,000
Accounts receivable 700,000
Cash and cash equivalents 562,080

2,638,080
Total assets 6,761,120

Shareholders’ Equity:

Share capital 1,376,000
Retained earnings 2,601,520
3,977,520
Liabilities:
Noncurrent liabilities:

Notes payable 1,860,000

Current liabilities:

Accounts payable and accrued liabilities    923,600
Total liabilities 2,783,600
Total shareholders’ equity and liabilities 6,761,120

Liv Ltd.

Statement of Income

For the year ended December 31, 20X8

(in $ CDN)

Sales 16,472,000

Dividend income   180,080

= 16,652,080

Cost of sales 8,256,000
Other expenses* 7,124,000 (15,380,000)

Net income 1,272,080

*includes depreciation

LL declared and paid dividends of $928,000 CDN on December 31, 20X8.

Marcus Co.

Statement of Financial Position

(in FC)

Dec. 31, Jan. 1
20X8 20X8

Assets:

Noncurrent assets:

Equipment, net 720,000 800,000

Current assets:

Inventory    484,000 364,000

Accounts receivable 408,000 280,000

Cash 360,000 164,000

1,252,000 808,000   

Total assets 1,972,000 1,608,000

Shareholders’ equity:

Share capital 400,000. 400,000
Retained earnings 390,000 146,000

= 790,000 = 546,000

Liabilities:

Noncurrent liabilities:

Notes payable 640,000 640,000

Current liabilities:

Accounts payable 542,000 422,000

Total liabilities 1,182,000. 1,062,000

Total shareholders’ equity and liabilities 1,972,000 1,608,000

Marcus Co.

Statement of Income

For the year ended December 31, 20X8

(in FC)

Sales 8,400,000
Cost of sales 5,304,000
Other expenses* 2,688,000 (7,992,000)

408,000

*includes depreciation

Marcus Co.

Statement of Changes in Equity – Retained Earnings Section

For the year ended December 31, 20X8

(in FC)

Retained earnings, January 1, 20X8 146,000
Net income 408,000

Dividends declared (164,000)

Retained earnings, December 31, 20X8 = 390,000

MC declared and paid FC164,000 in dividends on December 31, 20X8.

Selected Exchange Rates

January 1, 20X8 FC1 = $2.20 CDN
December 31, 20X8 FC1 = $2.44 CDN

Date when ending inventory was purchased FC1 = $2.38 CDN

Average rate for 20X8 FC1 = $2.32 CDN

Required:

1. Prepare consolidated financial statements at December 31, 20X8 under each of the following assumption
   1. The function current is the FC

Menlo Company distributes a single product. The company’s sales and expenses for last month follow:

	Total			Per Unit
Sales	$	320,000		$	20
Variable expenses		224,000			14
Contribution margin		96,000		$	6
Fixed expenses		73,800
Net operating income	$	22,200

Required:

1. What is the monthly break-even point in unit sales and in dollar sales?

2. Without resorting to computations, what is the total contribution margin at the break-even point?

3-a. How many units would have to be sold each month to attain a target profit of $32,400?

3-b. Verify your answer by preparing a contribution format income statement at the target sales level.

4. Refer to the original data. Compute the company's margin of safety in both dollar and percentage terms.

5. What is the company’s CM ratio? If sales increase by $74,000 per month and there is no change in fixed expenses, by how much would you expect monthly net operating income to increase?

Exercise 7-48 (Algorithmic) Depreciation Methods Berkshire Corporation purchased a copying machine for $9,800 on January 1, 2019. The machine's residual value was $1,175 and its expected life was 5 years or 2,000,000 copies. Actual usage was 480,000 copies in the first year and 462,000 in the second year. Required: 1. Compute depreciation expense for 2019 and 2020 using the: a. Straight-line method. Depreciation expense: $fill in the blank 1 per year b. Double-declining-balance method. Depreciation Expense 2019 $fill in the blank 2 2020 $fill in the blank 3 c. Units-of-production method. (Do not round intermediate calculations. Round your final answers to the nearest whole dollar.) Depreciation Expense 2019 $fill in the blank 4 2020 $fill in the blank 5 2. For each depreciation method, what is the book value of the machine at the end of 2019? At the end of 2020? If required, round your answers to the nearest whole dollar. 2019 2020 a. Straight-line method $fill in the blank 6 $fill in the blank 7 b. Double-declining-balance method $fill in the blank 8 $fill in the blank 9 c. Units-of-production method $fill in the blank

10 $fill in the blank 11