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Great Adventures Problem AP12-1

[The following information applies to the questions displayed below.]

Income statement and balance sheet data for Great Adventures, Inc., are provided below.

As you can tell from the financial statements, 2022 was an especially busy year. Tony and Suzie were able to use the money received from borrowing and the issuance of stock to buy land and begin construction of cabins, dining facilities, ropes course, and the outdoor swimming pool. They even put in a baby pool to celebrate the birth of their first child.

calculate the following risk ratios for 2022.

Department G had 2,400 units 25% completed at the beginning of the period, 14,000 units were completed during the period, 2,000 units were 20% completed at the end of the period, and the following manufacturing costs debited to the departmental work in process account during the period: Work in process, beginning of period $28,300 Costs added during period: Direct materials (13,600 units at $9) 122,400 Direct labor 78,600 Factory overhead 26,200 All direct materials are placed in process at the beginning of production and the first-in, first-out method of inventory costing is used. What is the total cost of 2,400 units of beginning inventory which were completed during the period (round unit cost calculations to four decimal places and round your final answer to the nearest dollar)? a. $28,300 b. $43,970 c. $39,236 d. $41,970

The debits to Work in Process—Roasting Department for Morning Brew Coffee Company for August, together with information concerning production, are as follows:

All direct materials are placed in process at the beginning of production.

a. Prepare a cost of production report, presenting the following computations:

1. Direct materials and conversion equivalent units of production for August
2. Direct materials and conversion costs per equivalent unit for August
3. Cost of goods finished during August
4. Cost of work in process at August 31

If an amount is zero, enter in "0". For the cost per equivalent unit, round your answer to two decimal places.

b. Compute and evaluate the change in cost per equivalent unit for direct materials and conversion from the previous month (July). If required, round your answers to the nearest cent.

Portsmouth Company makes upholstered furniture. Its only variable cost is direct materials. The demand for the company's products far exceeds its manufacturing capacity. The bottleneck (or constriant) in the production process is upholstery labor-hours. Information concerning three of Portsmouth's upholstered chairs appears below: Recliner Sofa Love Seat Selling price per unit $ 1,400 $ 1,800 $ 1,500 Variable cost per unit $ 800 $ 1,200 $ 1,000 Upholstery labor-hours per unit 8 hours 10 hours 5 hours Required: 1. Portsmouth is considering paying its upholstery laborers additional compensation to work overtime. Assuming that this extra time would be used to produce sofas, up to how much of an overtime premium per hour should the company be willing to pay to keep the upholstery shop open after normal working hours? 2. A small nearby upholstering company has offered to upholster furniture for Portsmouth at a price of $45 per hour. The management of Portsmouth is confident that this upholstering company’s work is high quality and their craftsmen can work as quickly as Portsmouth’s own craftsmen on the simpler upholstering jobs such as the Love Seat. How much additional contribution margin per hour can Portsmouth earn if it provides the raw materials to the nearby company and then hires it to upholster the Love Seats? 3. Should Portsmouth hire the nearby upholstering company?

Jason, a 55-year-old corporate executive, wants advice as to when he can retire. His current salary is

$240,000 and he receives an annual bonus of $300,000; he also has annual stock options and restricted

stock awards valued at $100,000. His employer contributes to a cash balance pension plan as and

matches his contributions to a 401(k). Jason’s Roth IRA has a balance of $240,000. The Roth IRA’s

balance consists of the $100,000 conversion Jason made 3 years ago Jason from an old qualified plan

and $50,000 of contributions (he has paid into over the years since it’s establishment many years ago),

the rest is earnings. Jason, owns a whole life insurance policy with a $500,000 death benefit and is

considering the purchase of a term policy with a $2,000,000 death benefit. He and his wife, Brenda, also

age 55, believe they can live on an after-tax income of $180,000. Assume a federal income tax rate of

35%.

Jason and Brenda come to you because their neighbor has been telling them he must take a certain

amount of his account or he will be tax and penalized 50% on the missed distribution. They are very

concerned because they do not want to incur a 50% penalty.

You explain the mechanics of RMD calculations to them. Then they ask you what their RMD would be at

age 70.

1.

Assuming that Brenda dies in 23 years and that Jason survives her, which of the following

options is correct regarding required minimum distributions from her IRA

?

A. Jason may postpone distributions from Brenda’s IRA until she would have been 70 ½

and the he must take distributions from the IRA over his life expectancy.

B. Jason may postpone distributions from Brenda’s IRA until she would have been 70 ½

and then he must take distributions from the IRA over no more than five years.

C. Jason must begin taking distributions by the end of the year following the year of

Brenda’s death

D. Jason must begin taking distributions by the end of the year of Brenda’s death.

2. Time passes and Jason dies, widowing Brenda at age 53. She comes to you for help deciding

between taking a lump-sum distribution from her husband’s pension plan of $263,500 now or

selecting a life annuity starting when she is age 65 (life expectancy at 65 is 21 years) of $2,479/

month. Current 30yr treasuries are yielding 6 percent annually.

What would you advise her

:

1. If she takes the lump-sum distribution, she will receive $263,500 in cash now and be

able to reinvest for 34yrs, creating an annuity of $4,570/mo.

2. If she takes the lump-sum distribution she will be subject to the 10% early withdrawal

penalty.

A. 1 only

B. 2 only

C. Both 1 & 2

D. Neither 1 nor 2

3 Jason and Brenda are in your office completing their annual review. They tell you they took a

$130,000 distribution from Jason’s Roth IRA in May of this year to go on a dream vacation, make car

repairs and to help their granddaughter pay for school tuition.

They have asked you if there would be any tax or penalty owed on the distribution. What do you

advise them?

A. There would be no tax due and no penalty

B. The entire distribution would be taxed at their ordinary income tax bracket and there

would be a 10% early withdraw penalty

C. $50,000 would be taxed at ordinary income tax levels

D. There would be no tax due, but a penalty of $8,000

4

Brenda wants to contribute to her existing IRA account. What do you advise her?

A. She may contribute to the IRA and deduct her contribution

B. She may not contribute to the IRA because she is an active plan participant

C. She may contribute to the IRA but may not deduct the contribution

D. She may not contribute to the IRA because her earnings are too high

Goodwill is an intangible asset. There are a variety of recommendations about how intangible assets should be included in the financial statements. Discuss the recommendations for proper disclosure of goodwill. Include a comparison with disclosure of other intangible assets

Addai Company has provided the following comparative information:

You have been asked to evaluate the historical performance of the company over the last five years.

Selected industry ratios have remained relatively steady at the following levels for the last five years:

Required:

1. Determine the following for the years 20Y4 through 20Y8. Round to one decimal place:

a. Return on total assets:

b. Return on stockholders’ equity:

c. Times interest earned:

d. Ratio of liabilities to stockholders' equity:

2. Refer to the selected industry ratios provided above.

Both the rate earned on total assets and the rate earned on stockholders' equity have been moving in a positive direction in the last five years. Both measures have moved above  the industry average over the last two years. The cause of this change is driven by a rapid increase  in earnings.

Last year Charlie Brown had $5 million in operating income (EBIT). It’s depreciation expense was $1 million, its interest expense was $1 million, and its corporate tax rate was 40%. At year-end, it had $14 million in current assets, $3 million in accounts payable, $1 million in accruals, $2 million in notes payable, and $15 million in net plant and equipment. Charlie had no other current liabilities. Assume the Charlie’s only noncash item was depreciation.

1. What was the company’s net income?
2. What was its net operating working capital (NOWC)
3. What was its net working capital?
4. Charlie had $12 million in net plant and equipment the prior year. Its net operating working capital has remained constant over time. What is the company’s free cash flow (FCF) for the year that just ended?4
5. Charlie had 500,000 common shares outstanding and the common stock amount on the balance sheet is $5 million. The company has not issued or repurchased common stock during the year. Last year’s balance in retained earnings was $11.2 million and the firm paid out dividends of $1.2 million during the year. Develop Charlie’s end-of-year Statement of Stockholders’ Equity.

At 30 June 2015, the financial statements of McMaster Ltd showed a building with a cost (net of GST) of $312,000 and accumulated depreciation of $158,000. The business uses the straight-line method to depreciate the building. When acquired, the building's useful life was estimated at 30 years and its residual value at $62,000. On 1 January 2016, McMaster Ltd made structural improvements to the building costing $98,000 (net of GST). Although the capacity of the building was unchanged, it is estimated that the improvements will extend the useful life of the building to 40 years, rather than the 30 years originally estimated. No change is expected in the residual value.

1. Calculate the number of years the building had been depreciated to 30 June 2015
2. Prepare the general journal entry to record the cost of the structural improvements on 1 January 2016
3. Prepare the general journal entry to record the building’s depreciation expense for the year ended 30 June 2016. Assume no depreciation had been recorded since 30 June 2018.

Campbell Glass Company makes stained glass lamps. Each lamp that it sells for $315.10 per lamp requires $16.70 of direct materials and $70.30 of direct labor. Fixed overhead costs are expected to be $190,500 per year. Campbell Glass expects to sell 1,000 lamps during the coming year. Selling and administrative expenses were zero.

Required

1. Prepare income statements using absorption costing, assuming that Campbell Glass makes 1,000, 1,250, and 1,500 lamps during the year.

2. Prepare income statements using variable costing, assuming that Campbell Glass makes 1,000, 1,250, and 1,500 lamps during the year.

Prepare income statements using absorption costing, assuming that Campbell Glass makes 1,000, 1,250, and 1,500 lamps during the year. (Do not round intermediate calculations.)

Prepare income statements using variable costing, assuming that Campbell Glass makes 1,000, 1,250, and 1,500 lamps during the year. (Do not round intermediate calculations.)

The following information was drawn from the year-end balance sheets of Jordan Trading Company:

Additional information regarding transactions occurring during 2017:

1. Investment securities that had cost $5,130 were sold. The 2017 income statement contained a loss on the sale of investment securities of $610.

2. Equipment with a cost of $46,000 was purchased.

3. The income statement showed a gain on the sale of equipment of $5,300. On the date of sale, accumulated depreciation on the equipment sold amounted to $8,800.

4. A building that had originally cost $168,000 was demolished.

5. Land that had cost $25,800 was sold for $20,600.

Required

1. Determine the amount of cash flow for the purchase of investment securities during 2017.

2. Determine the amount of cash flow from the sale of investment securities during 2017.

3. Determine the cost of the equipment that was sold during 2017.

4. Determine the amount of cash flow from the sale of equipment during 2017.

5. Determine the amount of cash flow for the purchase of buildings during 2017.

6. Determine the amount of cash flow for the purchase of land during 2017.

7. Prepare the investing activities section of the 2017 statement of cash flows.

Determine the amount of cash flow for the purchase of investment, sale of investment, cost of the equipment that was sold, sale of equipment, purchase of buildings and purchase of land during 2017.

Prepare the investing activities section of the 2017 statement of cash flows. (Cash outflows should be indicated with minus sign.)

Options:

• Gain on sale of equipment
• Loss on sale of buildings
• Paid to purchase buildings
• Paid to purchase equipment
• Paid to purchase investment securities
• Paid to purchase land
• Proceeds from sale of equipment
• Proceeds from sale of investment securities
• Proceeds from sale of land
• Proceeds to purchase investment securities

Benson Brands, Inc. Benson, presents its statement of cash flows using the indirect method. The following accounts and corresponding balances were drawn from Benson’s 2017 and 2016 year-end balance sheets:

The 2017 income statement is shown below:

Required

1. Prepare the operating activities section of the statement of cash flows using the direct method.

2. Prepare the operating activities section of the statement of cash flows using the indirect method.

Prepare the operating activities section of the statement of cash flows using the direct method. (Cash outflows should be indicated with minus sign.)

Prepare the operating activities section of the statement of cash flows using the indirect method. (Amounts to be deducted should be indicated with a minus sign.)

As part of an effort to increase cash and reduce the cash cycle, the connections between the AP and AR processes are often scrutinized to see if the company is fully billing what it is entitled to bill … to this end, folks sometimes ask about "unbilled" and how long that "unbilled" has remained in that state … is number for "unbilled" best derived from what has been declared as revenue under 606 but not yet billed or as what has been billed out to vendors if vendors are involved in the performance?

Bracken, Louden, and Menser, who share profits and losses in a ratio of 5:3:3, respectively are partners in a home decorating business that has not been able to generate the income the partners had hoped for. They have decided to liquidate the business and have sold all assets except for their decorating equipment. All partnership liabilities have been settled and all the partners are personally insolvent. The decorating equipment has a book value of $51,100, and the partners have capital account balances as follows: Bracken, capital $ 35,700 Louden, capital 5,200 Menser, capital 10,200 Required: Determine the amount of cash each partner will receive as a liquidating distribution if the decorating equipment is sold for the amount stated in each of the following independent cases: (Do not round intermediate calculations.)

a. $39,000

b. $29,100

c. $18,100