Fuqua Company’s sales budget projects unit sales of part 198Z of 10,300 units in January, 12,600 units in February, and 13,800 units in March. Each unit of part 198Z requires 3 pounds of materials, which cost $4 per pound. Fuqua Company desires its ending raw materials inventory to equal 40% of the next month’s production requirements, and its ending finished goods inventory to equal 20% of the next month’s expected unit sales. These goals were met at December 31, 2019.

(a)

Prepare a production budget for January and February 2020.

QUE 1a) Discuss what is tolerance for risks in the investment market.

   b) Explain the reasons why stocks are bought in the investment market.

c) Reasons why non- performing companies in the investment market are sold out to performing companies.

Stacey Company operates a small manufacturing facility as a supplement to its regular service activities. At the beginning of 2021, an asset account for the company showed the following balances:

In early January 2021, the following expenditures were incurred for repairs and maintenance:

The equipment is being depreciated on a straight-line basis over an estimated life of 12 years, with a $4,500 estimated residual value. The company’s fiscal year ends on December 31.

Required:

1. Calculate the depreciation expense for the manufacturing equipment for 2020.

2. Prepare the journal entries to record the two expenditures that occurred during 2021. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

3. Prepare the adjusting entry at December 31, 2021, to record the depreciation of the manufacturing equipment, assuming no change in the estimated life or residual value of the equipment. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

4. Indicate the accounts affected and the amount of the effects of the journal entries you prepared for (1) to (3) on the accounting equation. (Enter any decreases to account balances with a minus sign.)

Create a balance sheet and income statement using the following information: WIth proper financial statement formatting

Any missing information, please fill in.

Total Shareholder Equity

Long Term Debt: 3,650,000

Inventories: 350,000

Income Taxes: 85,000

Total Non-Operating Expenses, Net

Common stock: 100,000

Total Assets

Retained Earnings: 3,000,000

Cost of Goods Sold: 2,000,000

Interest Income: 20,000

Accounts Receivable: 1,500,000

General and Administrative Costs: 1,000,000

Accruals: 800,000

Preferred Stock

Net Earnings

Goodwill & Other Intangibles: 1,800,000

Net Revenue: 4,500,000

Earnings Before Income Taxes

Total Liabilities

Interest Expense: 90,000

Cash: 5,000,000

Total Operating Expenses

Treasuring stock: (3,500,000)

Total Liabilities and Shareholder's Equity

Depreciation and Amortization: 100,000

Net, Property, Plant, and Equipment: 300,000

Operating Profit

Additional Paid-in Capital: 2,000,000

Marketing and Advertising: 1,000,000

Prepaid Expenses: 310,000

Total Current Liabilities

Gross Profit  

Accounts Payable: 300,000

total current assets  

Accounting for intangible assets. Discuss relevance versus reliability as they apply to reporting on the intangible assets of the firm.

Condensed financial data of Coronado Industries follow.

Additional information:

Prepare a statement of cash flows using the indirect method. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)

Factor Company is planning to add a new product to its line. To manufacture this product, the company needs to buy a new machine at a $507,000 cost with an expected four-year life and a $19,000 salvage value. All sales are for cash, and all costs are out-of-pocket, except for depreciation on the new machine. Additional information includes the following. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.)

Required:
1. Compute straight-line depreciation for each year of this new machine’s life.
2. Determine expected net income and net cash flow for each year of this machine’s life.
3. Compute this machine’s payback period, assuming that cash flows occur evenly throughout each year.
4. Compute this machine’s accounting rate of return, assuming that income is earned evenly throughout each year.
5. Compute the net present value for this machine using a discount rate of 6% and assuming that cash flows occur at each year-end. (Hint: Salvage value is a cash inflow at the end of the asset’s life.)

PARTE I: Bonos por pagar

A continuación, se presenta una porción de la tabla de amortización relacionada con la emisión de unos bonos de 20 años de la Empresa Zeroz (NO TIENE QUE COMPLETAR LA TABLA). Los bonos fueron emitidos el 1 de enero del 2004. Los bonos pagan intereses dos veces al año en julio 1 y enero 1. La fecha de vencimiento es el 1 de enero de 2024. Al momento de la emisión, la empresa no incurrió en ningún costo incidental (asuma que los costos de emisión fueron cero). La empresa cierra libros el 31 de diciembre de cada año.

REQUERIDO: Basándose en la información provista   

1. Indique el principal (maturity value) de los bonos.

2. Determine el precio de emisión (issuance price) de los bonos el 1 de enero de 2004.

3. ¿Qué método de amortización está utilizando la empresa? Explique brevemente como lo determinó.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

4. Determine la tasa de interés semestral establecida o de cupón (coupon or stated interest rate).

5. Determine el valor en los libros del bono (book value or carrying amount) que se informará en el Estado de Situación Financiera para el periodo que termina el 30 de junio de 2023.

6. Determine la tasa de interés semestral de mercado al 1/1/04 cuando se emitieron los bonos (effective interest rate).

7. Determine el saldo de la Porción Corriente de la Deuda a Largo Plazo (Current Maturity of Long-Term Debt) que se informará en el Estado de Situación Financiera para el periodo que termina el 31 de diciembre de 2022.

8. Determine el gasto de interés que se informará en el Estado de Ingresos y Gastos para el año que termina el 31 de diciembre de 2023.

1. Haga las entradas de diario necesarias (journal entries) al 31/12/23 y el 1/1/24.

Outsourcing (Make-or-Buy) Decision
Mountain Air Limited manufactures a line of room air purifiers. Management is currently evaluating the possible production of an air purifier for automobiles. Based on an annual volume of 10,000 units, the predicted cost per unit of an auto air purifier follows.

These cost predictions include $60,000 in facility-level fixed factory overhead averaged over 10,000 units.

One of the component parts of the auto air purifier is a battery-operated electric motor. Although the company does not currently manufacture these motors, the preceding cost predictions are based on the assumption that it will assemble such a motor. Mini Motor Company has offered to supply an assembled battery-operated motor at a cost of $5.50 per unit, with a minimum annual order of 5,000 units. If Mountain Air accepts this offer, it will be able to reduce the variable labor and variable overhead costs of the auto air purifier by 50 percent. The electric motor's components will cost $2.00 if Mountain Air assembles the motors.

(a) Determine whether Mountain Air should continue to make the electric motor or outsource it from Mini Motor Company.

• Calculate the net advantage (disadvantage) of outsourcing the electric motors from Mini Motor Company.

• Use a negative sign with your answer to indicate a net disadvantage (if applicable).
  $Answer

(b) If it could otherwise rent the motor-assembly space for $24,000 per year, should it make or outsource this component?

• Calculate the net advantage (disadvantage) of outsourcing the motors, assuming the space could be rented.

• Use a negative sign with your answer to indicate a net disadvantage (if applicable).
  $Answer

(c) Management should consider which of the following nonquantitative factors in deciding whether to make or buy the motors.

The quality of their own and the supplier's motors.

The dependability of the supplier.

Whether Mini Motor has a track record of meeting its commitments.

Whether they can depend on Mini Motor to supply motors for a number of years or whether it is attempting to use some temporarily idle capacity.

All of these.

Problem 6-20 CVP Applications: Break-Even Analysis; Cost Structure; Target Sales [LO6-1, LO6-3, LO6-4, LO6-5, LO6-6, LO6-8]

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 36,000 of these balls, with the following results:

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, $97,000, 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, $97,000, as last year?

b. Assume the new plant is built and that next year the company manufactures and sells 36,000 balls (the same number as sold last year). Prepare a contribution format income statement and compute the degree of operating leverage.

ANSWER 5-6B

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? (Round "CM Ratio" to 2 decimal places and "Unit sales to break even" to the nearest whole unit.)

6.

If the new plant is built, how many balls will have to be sold next year to earn the same net operating income, $97,000, as last year? (Round your answer to the nearest whole unit.)

John Fleming, chief administrator for Valley View Hospital, is concerned about the costs for tests in the hospital’s lab. Charges for lab tests are consistently higher at Valley View than at other hospitals and have resulted in many complaints. Also, because of strict regulations on amounts reimbursed for lab tests, payments received from insurance companies and governmental units have not been high enough to cover lab costs. Mr. Fleming has asked you to evaluate costs in the hospital’s lab for the past month. The following information is available: Two types of tests are performed in the lab—blood tests and smears. During the past month, 500 blood tests and 2,500 smears were performed in the lab. Small glass plates are used in both types of tests. During the past month, the hospital purchased 12,500 plates at a cost of $45,000. 1,500 of these plates were unused at the end of the month; no plates were on hand at the beginning of the month. During the past month, 1,500 hours of labor time were recorded in the lab at a cost of $15,825. The lab’s variable overhead cost last month totaled $10,650. Valley View Hospital has never used standard costs. By searching industry literature, however, you have determined the following nationwide averages for hospital labs: Plates: Three plates are required per lab test. These plates cost $3.75 each and are disposed of after the test is completed. Labor: Each blood test should require 0.6 hours to complete, and each smear should require 0.30 hours to complete. The average cost of this lab time is $11.50 per hour. Overhead: Overhead cost is based on direct labor-hours. The average rate for variable overhead is $6.60 per hour. Required: 1. Compute a materials price variance for the plates purchased last month and a materials quantity variance for the plates used last month. 2. For labor cost in the lab: a. Compute a labor rate variance and a labor efficiency variance. b. In most hospitals, one-half of the workers in the lab are senior technicians and one-half are assistants. In an effort to reduce costs, Valley View Hospital employs only one-fourth senior technicians and three-fourths assistants. Would you recommend that this policy be continued? 3-a. Compute the variable overhead rate and efficiency variances. 3-b. Is there any relation between the variable overhead efficiency variance and the labor efficiency variance?

Problem A, Income Taxes Harms Way Company (HWC) provides you with the following information for the year ended October 31, 2020. Your assignment is to calculate income tax expense, income taxes payable, and deferred income tax assets/liabilities. The end result will be a journal entry to record all of that. In addition, you must calculate HWC’s effective tax rate and prepare a reconciliation to the federal statutory rate of 21%. You can explain the difference in words, if you wish.

Information provided:

1. Income before tax, as shown on HWC’s GAAP statement of income = $2,440,000

2. Depreciation calculated under GAAP = $300,000. Depreciation as will be shown on the tax return = $475,000.

3. Interest income on municipal bonds, which is not subject to federal income tax = $150,000.

4. Fines recorded and paid during the year to the EPA for environmental violations = $450,000. Fines are not tax deductible.

5. Meals and entertainment expenses recorded during the year = $375,000. Only one-half (50%) of those expenses may be deducted for tax purposes.

6. At the end of the fiscal year (in October 2020), HWC received a payment of $750,000 from a client for a product to be delivered in November 2020. Under the tax law, that payment is taxable when received, not when the product is delivered.

Your Assignment: Calculate:

1. Income tax expense (GAAP).

2. Income taxes currently payable.

3. Deferred income taxes resulting from this year’s operations.

Be sure to show your work, I give partial credit (full credit, too, of course), but I must be able to see how you calculated amounts used in your answer

Modern Services sells various components to maintain on-shore rigs and derricks. The company has just approached Linden State Bank requesting a $300,000 loan to strengthen the Cash account and to pay certain pressing short-term obligations. The company’s financial statements for the most recent two years follow:
MODERN SERVICES
Comparative Balance Sheet
Assets This Year       Last Year
Current assets:
   Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . .    $ 90,000       $ 200,000
   Marketable Securities . . . . . . . . . . . . . . . . . .     0       50,000
   Accounts Receivable, net . . . . . . . . . . . . . . . .     650,000       400,000
   Inventory . . . . . . . . . . . . . . . . . . . . . . . . . 1,300,000       800,000
   Prepaid Expenses . . . . . . . . . . . . . . . . . . . . 20,000       20,000
Total Current Assets . . . . . . . . . . . . . . . . . . . . . . . 2,060,000       1,470,000
Plant and equipment, net . . . . . . . . . . . . . . . . . . . . 1,940,000       1,830,000
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,000,000       3,300,000

Liabilities and Stockholders’ Equity
Liabilities:
   Current Liabilities . . . . . . . . . . . . . . . . . . . . $ 1,100,000       $ 600,000
   Bonds Payable, 12% . . . . . . . . . . . . . . . . . . 750,000       750,000
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . 1,850,000       1,350,000  
Stockholders’ Equity:
   Preferred Stock, $50 par, 8% . . . . . . . . . . . . . 200,000       200,000
   Common Stock, $10 par . . . . . . . . . . . . . . . .    500,000       500,000
   Retained Earnings . . . . . . . . . . . . . . . . . . . 1,450,000       1,250,000
Total Stockholders’ Equity . . . . . . . . . . . . . . . . . . . 2,150,000       1,950,000
Total Liabilities and Stockholders’ Equity . . . . . . . . . . . 4,000,000       3,300,000

MODERN SERVICES
Comparative Income Statement
Assets This Year       Last Year
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,000,000   $ 6,000,000
Less cost of goods sold . . . . . . . . . . . . . . . . . . . . . .   5,400,000       4,800,000
Gross margin . . . . . . . . . . . . . . . . . . . . . . . . . . .   1,600,000       1,200,000
Less operating expenses . . . . . . . . . . . . . . . . . . . . .     970,000       710,000
Net Operating income . . . . . . . . . . . . . . . . . . . . . .     630,000       490,000
Less interest expense . . . . . . . . . . . . . . . . . . . . . . .     90,000       90,000
Net income before taxes . . . . . . . . . . . . . . . . . . . . .     540,000       400,000
Less income taxes (40%) . . . . . . . . . . . . . . . . . . . . .     216,000       160,000
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . .     324,000       240,000
Dividends paid:
   Preferred dividends . . . . . . . . . . . . . . . . . . .     16,000       16,000
   Common dividends . . . . . . . . . . . . . . . . . . . .   108,000       60,000
Total dividends paid . . . . . . . . . . . . . . . . . . . . . . . .     124,000       76,000
Net income retained . . . . . . . . . . . . . . . . . . . . . . . .     200,000       164,000
Retained earnings, beginning of year . . . . . . . . . . . . . . .   1,250,000       1,086,000
Retained earnings, end of year . . . . . . . . . . . . . . . . . . $ 1,450,000   $ 1,250,000

During the past year, the company has explained the number of lines that is carries in order to stimulate sales and increase profits. It has also moved aggressively to acquire new customers. Sales terms are 2/10, n/30/. All sales are on account.

                Assume that the following ratios are typical of firms in the building supply industry:

                                Current ratio . . . . . . . . . . . . . . . . . . .       2.5 to 1

                                Acid-test ratio . . . . . . . . . . . . . . . . . .      1.2 to 1

                                Average age of receivables . . . . . . . . . . .     18 days

                                Inventory turnover in days . . . . . . . . . . .     50 days

                                Debt-to-equity ratio . . . . . . . . . . . . . . .     0.75 to 1

                                Times interest earned . . . . . . . . . . . . . .    6.0 times

                                Return on total assets . . . . . . . . . . . . . .    10%

                                Price-earnings ratio . . . . . . . . . . . . . . .      9

                                Net income as a percentage of sales . . . . . . 4%

1. Linden State Bank is uncertain whether the loan should be made. To assist it in making a decision, you have been asked to compute the following ratios for both this year and last year:
   1. The amount of working capital
   2. The current ratio
   3. The acid-test ratio
   4. The average age of receivables. (The accounts receivable at the beginning of last year totaled $350,000)
   5. The inventory turnover in days. (The inventory at the beginning of last year totaled $720,000)
   6. The debt-to-equity ratio
   7. The number of times interest was earned
2. For both this year and last year (carry computations to one decimal place)
   1. Present the balance sheet in common-size form              
   2. Present the income statement in common-size form down through net income
3. From your analysis in (1) and (2) above, what problems or strengths do you see existing in Modern Services? Make a recommendation as to whether the loan should be approved.

What do you think about the way in which Starbucks versus Coffee Bean taxes customers on the purchase of coffee?