Damon, Inc., acquired 25% of Jolie Enterprises for $8,000,000 on October 1, 2018. The total fair value of Jolie's identifiable net assets was $27,000,000 on that date, and the total book value of those net assets was $23,000,000.

The difference between fair value and book value is attributed to equipment that has a remaining useful life of 4 years. During 2018 Jolie recognized net income of $2,000,000 and paid dividends of $1,200,000 ($300,000 per quarter). Jolie had a fair value of $36,000,000 as of December 31, 2018.

Required: Assume Damon accounts for the Jolie investment under the equity method. Indicate the total effect of the Jolie investment on Damon's:

1) Net income for 2018.

2) The balance in Damon's investment account on December 31, 2018.

The unadjusted pre-closing 12/31/20 account balances for the Maloney Company are listed below:

During your audit, you discover the following four items that have yet to be recorded:

1. No depreciation on the building has been recorded in 2020. Depreciation on the building is based on Double-Declining Balance. It was purchased on 1/1/18 and has an estimated useful life of 40 years. The estimated salvage value is $1,000.
2. Maloney exchanged a machine for a similar machine on 12/31/20. The original machine cost $3,429 and had a book value of $2,134. The new machine had a fair value of $1,823; Maloney also received $511 in cash. The exchange lacked commercial substance.
3. Maloney uses the Income Statement approach to record Bad Debts. Bad Debts in 2020 are estimated to be 4% of Sales.
4. Ending Inventory is to be estimated using the Gross Profit Method. The historic Gross Profit percentage is 25%.

Required

1. Record journal entries for items #1-#3 above; show supporting computations. In addition, compute ending inventory per #4 above; show supporting computations. Assume adjusting/closing entries to adjust inventory, close Purchases, and Record CGS were properly made.
2. Draft the 2020 Condensed Income Statement and the 12/31/20 Balance Sheet. Use the Cabrera (Textbook Illustration 4-3 in Chapter 4) and the Uptown Cabinet (Textbook Illustration 3-41 in Chapter 3) format examples in the text. Assume no taxes. Do not include EPS.

Wybock​'s Netballs is a manufacturer of​ high-quality basketballs and volleyballs. Setup costs are driven by the number of batches. Equipment and maintenance costs increase with the number of​ machine-hours, and lease rent is paid per square foot. Capacity of the facility is 15,000 square​ feet, and Wybock is using only 60​% of this capacity. Wybock records the cost of unused capacity as a separate line item and not as a product cost. The following is the budgeted information for Wybock​:

Question:

1. Calculate the budgeted cost per unit of cost driver for each indirect cost pool.

2. What is the budgeted cost of unused​ capacity?

3. What is the budgeted total cost and the cost per unit of resources used to produce​ (a) basketballs and​ (b) volleyballs?

4. Why might excess capacity be beneficial for Wybock​? What are some of the issues Wybock should consider before increasing production to use the​ space?

What are the similarities of non-current assets and depreciation between GAAP and IFRS ?

Jackson Company engaged in the following investment transactions during the current year.   

Required:

Prepare the appropriate journal entries to record the transactions for the year including year-end adjustments. Show calculations.

Amortization and Impairment Testing of Identifiable Intangible Assets

During the year ended July 30, 2016, Cisco Systems, Inc. acquired the following identifiable intangible assets through its purchase of two companies (in thousands):

Cisco acquired Lancope, Inc. in December 2015, and Jasper Technologies, Inc. in March 2016. Cisco separately tests identifiable intangibles acquired from each company for impairment, and collects the following information to conduct impairment tests at the end of fiscal 2016 (in thousands):

Required

a. Calculate amortization expense for the above identifiable intangibles for fiscal 2016. Intangibles are amortized on a straight-line basis starting in the month following acquisition.

• Round answers to the nearest whole number.
• Enter answers in thousands.

b. Calculate impairment losses for fiscal 2016.

• Round answers to the nearest whole number.
• Enter answers in thousands.

c. Determine the amounts reported on Cisco’s fiscal 2016 balance sheet for technology, customer relationships, and in-process R&D.

• Round answers to the nearest whole number.
• Enter answers in thousands.

The following partially completed process cost summary describes the July production activities of Ashad Company. Its production output is sent to its warehouse for shipping. All direct materials are added to products when processing begins. Beginning work in process inventory is 20% complete with respect to conversion.

Zigma purchased 100% of Standard for $450K on January 1st 2XX1. The information below is from the December 31, 2XX1 accounts. At the time of purchase all FMV of all assets and liabilities equal book value, except for the following Description Book Value Fair Value Building $100,000 $175,000 10 Year Life Inventory 10,000 20,000 2 month life Land 5,000 50,000 Any excess from the purchase price will be allocated to goodwill. Requirement: Prepare the appropriate elimination journal entries and complete the worksheet Zigma Standard Income Statement Sales 200,000 470,000 Other Expenses (90,000) (67,000) Depreciation (30,000) (20,000) Income from Standard 365,500 Net Income 445,500 383,000 Statement of Retained Earnings Beginning RE 175,000 150,000 Net Income 445,500 383,000 Less Dividends Declared (32,000) (30,000) Ending Retained Earnings 588,500 503,000 Balance Sheet Current Assets 143,000 285,000 Depreicable Assets 200,000 473,000 Accumulated Depreciation (120,000) (105,000) Investment in Standard 785,500 Land 105,000 5,000 Goodwill Total Assets 1,113,500 658,000 Current Liabilities 50,000 55,000 Long Term Liabilities 375,000 50,000 Common Stock 100,000 50,000 Retained Earnings 588,500 503,000 - - Total Liabilities and Equity 1,113,500 658,000

Selected year-end financial statements of Cabot Corporation follow. (All sales were on credit; selected balance sheet amounts at December 31, 2016, were inventory, $51,900; total assets, $179,400; common stock, $85,000; and retained earnings, $48,534.)

* These are short-term notes receivable arising from customer (trade) sales.

Required:
Compute the following: (1) current ratio, (2) acid-test ratio, (3) days' sales uncollected, (4) inventory turnover, (5) days' sales in inventory, (6) debt-to-equity ratio, (7) times interest earned, (8) profit margin ratio, (9) total asset turnover, (10) return on total assets, and (11) return on common stockholders' equity. (Do not round intermediate calculations.)

Compute the current ratio and acid-test ratio.

Compute the current ratio and acid-test ratio.

Compute the days' sales uncollected.

Compute the inventory turnover.

Compute the days' sales in inventory.

Compute the debt-to-equity ratio.

Narrative 1: Freshplace Grocery At Freshplace Grocery, customers give their purchases to a sales clerk along with cash. The sales clerk enters the sale in a cash register and puts the money in the register drawer. At the end of the day, the sales clerk gives the cash and the register tape to the cashier. The cashier reconciles the cash and the tape to make sure all of the cash is present.

1. Use the narrative to prepare a table of entities and activities.

2. Use the narrative to draw a context diagram.

3. Use narrative to prepare a logical DFD.

12-3
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. The loss on the cash sale of equipment was $5,125 (details in b).
2. Sold equipment costing $46,875, with accumulated depreciation of $30,125, for $11,625 cash.
3. Purchased equipment costing $96,375 by paying $30,000 cash and signing a long-term note payable for the balance.
4. Borrowed $4,000 cash by signing a short-term note payable.
5. Paid $50,125 cash to reduce the long-term notes payable.
6. Issued 2,500 shares of common stock for $20 cash per share.
7. Declared and paid cash dividends of $50,100.

Required:
1. Prepare a complete statement of cash flows; report its operating activities using the indirect method. (Amounts to be deducted should be indicated with a minus sign.)

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.

Additional Information on Year 2017 Transactions

1. The loss on the cash sale of equipment was $5,125 (details in b).
2. Sold equipment costing $46,875, with accumulated depreciation of $30,125, for $11,625 cash.
3. Purchased equipment costing $96,375 by paying $30,000 cash and signing a long-term note payable for the balance.
4. Borrowed $4,000 cash by signing a short-term note payable.
5. Paid $50,125 cash to reduce the long-term notes payable.
6. Issued 2,500 shares of common stock for $20 cash per share.
7. Declared and paid cash dividends of $50,100.

Required:
Prepare a complete statement of cash flows; report its operating activities according to the direct method. (Amounts to be deducted should be indicated with a minus sign.)

  
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.)
  

two issues of securities outstanding: common stock and $5,500,000 face value, 5-year, 3% convertible bonds which were issued January 1, 2019 when the market rate was 4%. Bond interest payments dates are June 30 and December 31. Each Bond is convertible into 40 shares of $20 par value common stock . On July 1, 2019 the holders of $1,100,000 face value exercise the conversion privilege . On the date, the bonds were selling at 110 and the market price of the stock was $35. The company uses the effective interest method for amortization of the of the bond premium.

What is the amount to be "Paid -in-Capital for Common Stock" on July 1, 2019?

Hawkins Engineering’s management wants to prepare budgets for one of its products, GalaxyRS, for July 2019. The firm sells the product for $800 per unit and has the following expected sales (in units) for these months in 2019:

April                       May                       June                      July                        August                  September

6,000                     4,000                     5,600                     6,500                     6,800                     7,800

Typically, cash sales for Hawkins represent 20% of sales while credit sales represent 80%. Hawkins bills customers on the first day of the month following the month of sale. Experience has shown that 85% of the company’s billings will be collected during the month of sale, 10% by the end of the month after the sale and 5% will ultimately be uncollectible.

The production process requires the following:

Standard Costs:

Galaxy-80                                                            4 lbs                       $1.25/lb

RS-360                                                                  2 lbs                       $5.00/lb

Direct labor                                                        

Skill level 1                                                        0.01 hours           $50/hour

Skill level 2                                                        0.10 hours           $20/hour

Variable manufacturing overhead is budgeted at $1,200 per batch (of 100 units) plus $80 per direct labor hour. In addition to variable overhead, the firm has a monthly fixed factory overhead of $60,000, of which $25,000 is depreciation expense. The firm pays all manufacturing labor and factory overhead when incurred.

The firm’s policy is to maintain an ending finished goods inventory each month equal to 10% of the following month’s budgeted sales, but in no case less than 500 units. All materials inventories are to be maintained at 5% of the production needs for the next month, but not to exceed 1,000 pounds. The firm expects all inventories at the end of June to be within the guidelines.

The purchase terms for materials are 3/10, n/30. Hawkings makes all payments within the discount period. Experience has shown that 80% of the purchases are paid in the month of the purchase and the remainder are paid in the month immediately following. In June 2019, the firm budgeted purchases of $30,000 for Galaxy-80 and $20,000 for RS-360.

Total budgeted marketing, distribution, customer service and administrative costs for 2019 are 1,850,000. Of this amount, $1,200,000 is considered fixed and includes depreciation expense of $150,000. The remainder varies with sales. The budgeted total sales for 2019 are $4 million. All marketing and administrative costs are paid in the month incurred.

Additional information follows:

                Cash balance                                                                      $40,000

Management desires to maintain an end-of-month minimum cash balance of $40,000. The firm has an agreement with a local bank to borrow its short-term needs in multiples of $1,000 up to $100,000 at an annual interest rate of 12%. Borrowings are assumed to occur at the end of the month. Bank borrowing at July 1 is $0.

Required:

On the basis of the preceding data and projections, prepare the following budgets:

1. Sales budget for July
2. Production budget for July
3. Production budget for August
4. Direct materials used budget for July (in units and dollars)

Big Company purchased a machine on February 1, 2013, and will make seven semiannual payments of $23,500 beginning five years from the date of purchase. The interest rate will be 12%, compounded semiannually. Determine the purchase price of the machine.

Given the financial statements below for Dragonfly Enterprises, what is the external financing need for a pro forma increase in sales of 12% if the company is operating at full capacity? Enter your answer as the nearest whole (e.g., 123), but do not include the $ sign. Dragonfly Enterprises Income Statement ($ Million) 2011 Sales 370 Cost of Goods Sold 226 Selling, Gen & Admin Exp 62 Depreciation 20 Earnings Before Int & Tax 62 Interest Expense 12 Taxable Income 50 Taxes at 40% 20 Net Income 30 Dividends 9 Addition to Retained Earn. 21 Balance Sheets as of 12-31 Assets 2010 2011 Cash 10 10 Account Receivable 46 50 Inventory 43 45 Total Current Assets 99 105 Net Fixed Assets 166 195 Total Assets 265 300 Liabilities and Owners Equity 2010 2011 Accounts Payable 26 30 Notes Payable 0 0 Total Current Liabilities 26 30 Long-Term Debt 140 150 Common Stock 22 22 Retained Earnings 77 98 Total Liab. and Owners Eq 265 300