P made a 75% investment of Ksh.20 million in H on 31.12.2006 when the net assets of H were Ksh.24 million (issued capital Ksh.12 million plus retained earnings Ksh.12 million). On 31.12.2007, H made a 60% investment of Ksh.10 million in S when the net assets of S were Ksh.15 million (issued capital Ksh.10 million plus retained earnings Ksh.5 million).None of the entities has issued new shares since 31.12.2006. There has been no impairment of goodwill since the acquisitions. The group policy is to value non-controlling interest at the proportionate share of net assets of the subsidiary. The summarised statement of financial position at 31.12.2008 and income statement of the three entities are shown below:

Statement of financial position

Required:

Prepare consolidated statement of financial position of the P group as at 31:12:2008 and the income statement for the year ended 31.12.2008.

Scoring: Your score will be based on the number of correct matches. There is no penalty for incorrect or missing matches.

Match each of the following formulas and phrases with the term it describes.

Dawson Toys, Ltd., produces a toy called the Maze. The company has recently established a standard cost system to help control costs and has established the following standards for the Maze toy:

Direct materials: 7 microns per toy at $0.30 per micron

Direct labor: 1.3 hours per toy at $6.80 per hour

During July, the company produced 4,900 Maze toys. The toy's production data for the month are as follows:

Direct materials: 76,000 microns were purchased at a cost of $0.29 per micron. 33,125 of these microns were still in inventory at the end of the month.

Direct labor: 6,870 direct labor-hours were worked at a cost of $50,838.

Required:

1. Compute the following variances for July: (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values. Do not round intermediate calculations. Round final answer to the nearest whole dollar amount.)

a. The materials price and quantity variances.

b. The labor rate and efficiency variances.

1. Sequential Method

   Jasmine Company manufactures both pesticide and liquid fertilizer, with each product manufactured in separate departments. Three support departments support the production departments: Power, General Factory, and Purchasing. Budgeted data on the five departments are as follows:

   	Support Departments		Producing Departments
   	Power	General Factory	Purchasing	Pesticide	Liquid Fertilizer
   Overhead	$90,000	$312,000	$165,000	$78,500	$107,700
   Square feet	1,500	—	1,500	4,200	4,800
   Machine hours	—	1,403	1,345	24,000	8,000
   Purchase orders	20	40	—	120	60

   The company does not break overhead into fixed and variable components. The bases for allocation are power—machine hours; general factory—square feet; and purchasing—purchase orders.

   The company has decided to use the sequential method of allocation instead of the direct method. The support departments are ranked in order of highest cost to lowest cost.

   Required:

   1. Allocate the overhead costs to the producing departments using the sequential method. Carry out allocation ratios to four decimal places. Use these numbers for subsequent calculations. Round allocated costs to the nearest dollar. If an amount is zero, enter "0".

   Allocation ratios:

   	Power	General Factory	Purchasing	Pesticide	Liquid Fertilizer
   Square feet
   Machine hours
   Purchase orders

   Cost allocation:

   	Power	General Factory	Purchasing	Pesticide	Liquid Fertilizer
   Direct costs	$	$	$	$	$
   General Factory
   Purchasing
   Power
   Total	$	$	$	$	$

   2. Using machine hours, compute departmental overhead rates. (Round the overhead rates to the nearest cent.)

   	Overhead Rates
   Pesticide	$ per machine hour
   Liquid Fertilizer	$ per machine hour

Direct Method and Overhead Rates

Jasmine Company manufactures both pesticide and liquid fertilizer, with each product manufactured in separate departments. Three support departments support the production departments: Power, General Factory, and Purchasing. Budgeted data on the five departments are as follows:

The company does not break overhead into fixed and variable components. The bases for allocation are power—machine hours; general factory—square feet; and purchasing—purchase orders.

Required:

1. Allocate the overhead costs to the producing departments using the direct method. If required, round your allocation ratios to four decimal places and round allocated costs to the nearest dollar and use the rounded values for the subsequent calculations.

Cost assignment:

2. Using machine hours, compute departmental overhead rates. (Round the overhead rates to the nearest cent.)

On January 1, 2021, Marshall Company acquired 100 percent of the outstanding common stock of Tucker Company. To acquire these shares, Marshall issued $310,000 in long-term liabilities and 20,000 shares of common stock having a par value of $1 per share but a fair value of $10 per share. Marshall paid $24,000 to accountants, lawyers, and brokers for assistance in the acquisition and another $9,000 in connection with stock issuance costs. Prior to these transactions, the balance sheets for the two companies were as follows: Marshall Company Book Value Tucker Company Book Value Cash $ 75,000 $ 38,800 Receivables 354,000 90,000 Inventory 380,000 229,000 Land 246,000 253,000 Buildings (net) 476,000 274,000 Equipment (net) 174,000 50,400 Accounts payable (241,000 ) (41,400 ) Long-term liabilities (480,000 ) (310,000 ) Common stock—$1 par value (110,000 ) Common stock—$20 par value (120,000 ) Additional paid-in capital (360,000 ) 0 Retained earnings, 1/1/21 (514,000 ) (463,800 ) Note: Parentheses indicate a credit balance. In Marshall’s appraisal of Tucker, it deemed three accounts to be undervalued on the subsidiary’s books: Inventory by $9,000, Land by $25,800, and Buildings by $32,200. Marshall plans to maintain Tucker’s separate legal identity and to operate Tucker as a wholly owned subsidiary. Determine the amounts that Marshall Company would report in its postacquisition balance sheet. In preparing the postacquisition balance sheet, any required adjustments to income accounts from the acquisition should be closed to Marshall’s retained earnings. Other accounts will also need to be added or adjusted to reflect the journal entries Marshall prepared in recording the acquisition. To verify the answers found in part (a), prepare a worksheet to consolidate the balance sheets of these two companies as of January 1, 2021.

Problem 18-10

On March 1, 2017, Bridgeport Construction Company contracted to construct a factory building for Fabrik Manufacturing Inc. for a total contract price of $8,340,000. The building was completed by October 31, 2019. The annual contract costs incurred, estimated costs to complete the contract, and accumulated billings to Fabrik for 2017, 2018, and 2019 are given below:

(a) Using the percentage-of-completion method, prepare schedules to compute the profit or loss to be recognized as a result of this contract for the years ended December 31, 2017, 2018, and 2019. (Ignore income taxes.)

(b) Using the completed-contract method, prepare schedules to compute the profit or loss to be recognized as a result of this contract for the years ended December 31, 2017, 2018, and 2019. (Ignore income taxes.)

1. Wight Corporation has provided its contribution format income statement for June. The company produces and sells a single product.

If the company sells 9,700 units, its net operating income should be closest to:

• $57,000

• $55,573

• $58,500

• $55,000

2. Krepps Corporation produces a single product. Last year, Krepps manufactured 34,080 units and sold 28,200 units. Production costs for the year were as follows:

Sales totaled $1,494,600 for the year, variable selling and administrative expenses totaled $163,560, and fixed selling and administrative expenses totaled $224,928. There was no beginning inventory. Assume that direct labor is a variable cost.

Under absorption costing, the ending inventory for the year would be valued at:

• $264,040

• $194,040

• $221,540

• $255,540

In preparing its consolidated financial statements at December 31, 20X7, the following consolidation entries were included in the consolidation worksheet of Powder Corporation:

Powder owns 60 percent of Snow Corporation’s voting common stock. On January 1, 20X7, Snow sold Powder a building it had purchased for $635,000 on January 1, 20X1, and depreciated on a 20-year straight-line basis. Powder recorded depreciation for 20X7 using straight-line depreciation and the same useful life and residual value as Snow.

Required:
a. What amount did Powder pay Snow for the building?

b. What amount of accumulated depreciation did Snow report at January 1, 20X7, prior to the sale?

c. What annual depreciation expense did Snow record prior to the sale?

d. What expected residual value did Snow use in computing its annual depreciation expense?

e. What amount of depreciation expense did Powder record in 20X7?

f. If Snow reported net income of $80,000 for 20X7, what amount of income will be assigned to the noncontrolling interest in the consolidated income statement for 20X7?

g. If Snow reported net income of $61,000 for 20X8, what amount of income will be assigned to the noncontrolling interest in the consolidated income statement for 20X8?

In five years, Kent Duncan will retire. He is exploring the possibility of opening a self-service car wash. The car wash could be managed in the free time he has available from his regular occupation, and it could be closed easily when he retires. After careful study, Mr. Duncan determined the following:

1. A building in which a car wash could be installed is available under a five-year lease at a cost of $5,600 per month.

2. Purchase and installation costs of equipment would total $320,000. In five years the equipment could be sold for about 6% of its original cost.

3. An investment of an additional $8,000 would be required to cover working capital needs for cleaning supplies, change funds, and so forth. After five years, this working capital would be released for investment elsewhere.

4. Both a wash and a vacuum service would be offered. Each customer would pay $1.30 for a wash and $.60 for access to a vacuum cleaner.

5. The only variable costs associated with the operation would be 7.5 cents per wash for water and 10 cents per use of the vacuum for electricity.

6. In addition to rent, monthly costs of operation would be: cleaning, $2,900; insurance, $155; and maintenance, $1,775.

7. Gross receipts from the wash would be about $2,990 per week. According to the experience of other car washes, 60% of the customers using the wash would also use the vacuum.

Mr. Duncan will not open the car wash unless it provides at least a 8% return.

Click here to view Exhibit 13B-1 and Exhibit 13B-2, to determine the appropriate discount factor(s) using tables.

Required:

1. Assuming that the car wash will be open 52 weeks a year, compute the expected annual net cash receipts from its operation.

2-a. Determine the net present value using the net present value method of investment analysis.

2-b. Would you advise Mr. Duncan to open the car wash?

B&B Technologies is considering expanding its operations to include production and sales of high capacity storage devices. The assistant to the CFO has collected a lot of information which is described below. Unfortunately, some of the information may be of questionable relevance, but that is for you to decide. You have asked to present a net present value based analysis to help management decide on the desirability of getting into the storage device business.

The company owns a vacant building near its current manufacturing facility; this building could be used for the expansion, or it could be leased to an interested customer and generate a lease revenue of $250,000, starting this year. The firm could increase the lease charge by 5% every year. The company has some unused equipment that has a book value of $40,000 and a market value of $30,000. This equipment could either be sold or be modified to produce storage devices; the modification would cost $10,000. The old equipment and modification costs would be depreciated straight-line over five years. Producing storage devices would also require the purchase of new equipment costing $900,000. For purposes of depreciation, the new equipment would be in the 7-year MACRS class. This equipment would have a useful life of six years, at the end of which it would have a scrap value of 10% of the purchase price.

Producing storage devices would require an ongoing investment in working capital. Net working capital is expected to be 10% of expected sales for the coming year and would vary with sales, but remain at 10% of expected sales for the coming year. All working capital would be recovered at the end of the six-year life of the investment. The production facility is expected to generate sales revenues of $1,000,000 in the first year; sales are expected to increase at 10% p.a. for three years and then decline by 5% p.a. over the last two years of the project. Operating costs are expected to be 40% of sales. The firm’s effective tax rate of 20% is expected to remain unchanged over the planning period, and the appropriate required rate of return for this investment is 8%.

Tasks:

1. Estimate the net present value and the internal rate of return for this investment.

2. Now suppose the following changes occur: (i) Sales in the first year turn out to be $900,000, (ii) the CGS to sales ratio is 45%, (iii) the NWC to sales ratio is 15%, (iv) the scrap value of the new equipment in year 6 is 5% of the original cost, and (v) the required rate of return is 10%. What is the net present value and the internal rate of return with all of the above changes? Should B&B Technologies get into the storage device business?

On 12/31/18, Company ABC buys 100 share in Walmart for $93.15. The following is a list of share prices for Walmart throughout 2019:

Assuming that ABC classifies the investment as a trading security, what will be the value that it reports on its 12/31/19 balance sheet, the gain/loss that it reports on its Q4 2019 incomes statement, and the gain/loss that it reports on its incomes statement for the year ended 12/31/19?

Question 3 options:

Mikeco wants to prevent an un-friendly take over and on 3/15/18 purchase 1,500,000 shares of its' common stock on the NYSE for $25 per share. The take over failed and on 8/23/18 Mikeco sold 1,000,000 shares of the stock it purchased on 3/15/18 for 32 per shear. On 12/28/18 Mikeco sold and additional 200,000 shears of its' Treasury Stock for 22 per share.

a. Required: Make all the required entries to record the information given above.

On 8/1/18 Allico Inc.s' board of directors declared a .20 cash dividend on all of its common stock.  The ex-dividend date was 8/27/18 and the date of record was 8/31/18.  The date of payment was 9/15/18.  On 8/1/18, Allico Inc. had 16,000,000 shares of common stock authorized with 7,000,000 issued and 500,000 shares held as treasurary stock.

b. Required: Make all the required entries to record the information given above.

On 3/15/18 DomCo Inc. issued 500,000 shares of $8.00 par value preferred stock. The company received $20 per share for the stock. On 3/31/18 company issued 1,000,000 shares of no par value common stock for $35 per share.

c. Required: Make the required Journal entries for both 3/15/18 and 3/31/18 for the issuance of both preferred and common stock.

The Kimm Company had the following assets and liabilities on the dates indicated.
Kimm began business on January 1, 2013, with an investment of $600,000 (60,000 shares, par value = $10).

1. In 2013, Kimm paid $50,000 dividends and no additional investment was made. Other comprehensive income was $1,000
2. In 2014, Kimm paid $100,000 dividends, additional investment of $200,000 (20,000 shares, par value = $10) was made by shareholders on September 1, 2014. Other comprehensive income (loss) was $(2,000).
3. In 2015, Kimm had zero dividends and no additional investment was made. Other comprehensive income (loss) was $(500,000).

P1. Determine net income in 2013, 2014 and 2015. (Show work clearly)

P2. Determine basic earnings per share in 2013, 2014 and 2015. (Show work clearly)

P3. Determine comprehensive income in 2013, 2014 and 2015. (Show work clearly)

P4. Determine the balance of retained earnings at the end of 2015. (Show work clearly)

P5. Determine the balance of common stock at the end of 2015. (Show work clearly)

P6. Determine the balance of accumulated other comprehensive income at the end of 2015. (Show work clearly)

Hint : Use Equity = CS +RE+AOCI, along with A = L + E. No preferred stock (thus no preferred div, net income to common stockholders = net income)

Altira Corporation provides the following information related to its merchandise inventory during the month of August 2021:

Required:
Using calculations based on a periodic inventory system, determine the inventory balance Altira would report in its August 31, 2021, balance sheet and the cost of goods sold it would report in its August 2021 income statement using each of the following cost flow methods.

Determine the inventory balance Altira would report in its August 31, 2021, balance sheet and the cost of goods sold it would report in its August 2021 income statement using the FIFO method. (Round cost per unit to 2 decimal places.)

Determine the inventory balance Altira would report in its August 31, 2021, balance sheet and the cost of goods sold it would report in its August 2021 income statement using the LIFO method. (Round cost per unit to 2 decimal places.)

Determine the inventory balance Altira would report in its August 31, 2021, balance sheet and the cost of goods sold it would report in its August 2021 income statement using the Average cost method. (Round cost per unit to 2 decimal places.)