Jenny Jinglebell has always wished to own her own French macaroons shop. Ever since she tried

her first macaroon, she thought it would be a brilliant idea to have her own shop where she can

sell a multitude of flavors and colors of French macaroons. She purchased a premium site for

the macaroons shop, right across the street from Campus Martius Park in Downtown Detroit.

After extensive research, Jenny decided that it is best for her to open a franchise at first. The

franchise that best fit Jenny’s criteria is François Patisserie. A François Patisserie franchise costs

$30,000, an amount that is amortized over 15 years. As a franchisee, Jenny needs to adhere to

the company’s building specifications. The building would cost an estimated $450,000 and

would result in a $50,000 salvage value at the end of its 15-year life. The equipment needed is

sold as a package by the corporate office at a cost of $200,000, will have a salvage value of

$10,000 at the end of its 5-year life, equipment and must be replaced every 5 years.

Jenny estimates the annual revenue from a François Patisserie franchise at $950,000. Food

costs typically run 36% of revenue. Annual operating expenses, not including depreciation, total

$425,000. For financial reporting purposes, Jenny will use straight-line depreciation and

amortization. Based on past experience, she uses a 16% discount rate.

*Please no handwriting*

Required:

a.

Calculate the shop’s net present value over the franchise’s 15-year life.

b.

Calculate the restaurant’s payback period.

c.

Calculate the restaurant’s simple rate of return.

d.

Should Jenny open a

François Patisserie? Why or why not? Note: for comparison

purposes, you should know that

using Excel or a similar spreadsheet application Jenny

calculates her IRR to be 22.64%.

e.

What potential shortcomings do you see in Jenny’s estimates? How do you recommend she

adjusts her analysis to address those shortcomings?

The information that follows pertains to Richards Refrigeration, Inc.:

1. At December 31, 2018, temporary differences existed between the financial statement carrying amounts and the tax bases of the following:

	($ in millions)
	Carrying Amount			Tax Basis			Future Taxable (Deductible) Amount
Buildings and equipment (net of accumulated depreciation)	$	142		$	101			$	41
Prepaid insurance		61			0				61
Liability—loss contingency		36			0				(36	)

2. No temporary differences existed at the beginning of 2018.
3. Pretax accounting income was $211 million and taxable income was $145 million for the year ended December 31, 2018. The tax rate is 40%.

Required:
1. Complete the following table given below and prepare the appropriate journal entry to record income taxes for 2018
2. What is the 2018 net income?

Jacob is a member of WCC (an LLC taxed as a partnership). Jacob was allocated $170,000 of business income from WCC for the year. Jacob’s marginal income tax rate is 37 percent. The business allocation is subject to 2.9 percent of self-employment tax and 0.9 percent additional Medicare tax. (Round your intermediate calculations to the nearest whole dollar amount.)

a. What is the amount of tax Jacob will owe on the income allocation if the income is not qualified business income?

b. What is the amount of tax Jacob will owe on the income allocation if the income is qualified business income (QBI) and Jacob qualifies for the full QBI deduction?

1.

Problem 10-35 (Algorithmic) (LO. 3, 9)

The JM Partnership was formed to acquire land and subdivide it as residential housing lots. On March 1, 2019, Jessica contributed land valued at $888,000 to the partnership in exchange for a 50% interest. She had purchased the land in 2011 for $621,600 and held it for investment purposes (capital asset). The partnership holds the land as inventory.

On the same date, Matt contributed land valued at $888,000 that he had purchased in 2009 for $1,065,600. He became a 50% owner. Matt is a real estate developer, but he held this land personally for investment purposes. The partnership holds this land as inventory.

In 2020, the partnership sells the land contributed by Jessica for $932,400. In 2021, the partnership sells the real estate contributed by Matt for $843,600.

a. What is each partner's initial basis in his or her partnership interest?

Jessica's initial basis is $............?. Matt's initial basis is $..............?

b. What is the amount of gain or loss recognized on the sale of the land contributed by Jessica? What is the character of this gain or loss?

The amount of the.................? recognized on the sale of the land contributed by Jessica is $,................? and the type is ...................?.

c. What is the amount of gain or loss recognized on the sale of the land contributed by Matt? What is the character of this gain or loss?

The amount of the ...........? recognized on the sale of the land contributed by Matt is $............?, and the type is........? .

d. How would your answer in (c) change if the property was sold in 2026?

The amount of the..........? recognized on the sale of the land contributed by Matt is $.............?, and the type is ...................?.

How to find CVS Health WACC, Cost of Debt, Cost of Equity using CAPM model (Capital Asset Pricing Model) for year 2017?

Prepare a "draft" Will, Trust or Power of Attorney for yourself or a fictitious person. This is called a Draft because it will not be executed and is intended for you to put into practice what you have learned.

1. Follow the legal requirements in your state of Virginia for the making of a Will ,Trust or Power of Attorney and that you are fairly detailed.

Exercise 17-3 Computation and analysis of trend percents LO P1 2017 2016 2015 2014 2013 Sales $ 441,811 $ 292,590 $ 239,828 $ 168,300 $ 127,500 Cost of goods sold 232,292 153,697 128,061 89,366 66,300 Accounts receivable 21,339 17,146 16,428 9,829 8,708

This year, GHJ Inc. received the following dividends.

- BP Inc. (a taxable California corporation in which GHJ holds a 2% stock interest) $21900

- MN Inc. (a taxable Florida corporation in which GHJ holds a 60% stock interest) $83100

- AB Inc. (a taxable French corporation in which GHJ holds a 26% stock interest) $21900

Compute GHJ's dividends-received deduction.

(I keep getting the answer $81810 and it says it's wrong)

The Walton Toy Company manufactures a line of dolls and a sewing kit. Demand for the company’s products is increasing, and management requests assistance from you in determining an economical sales and production mix for the coming year. The company has provided the following data:

Product	Demand Next year (units)	Selling Price per Unit		Direct Materials		Direct Labor
Debbie	61,000	$	20.00	$	5.40	$	3.60
Trish	53,000	$	6.50	$	2.20	$	1.44
Sarah	46,000	$	33.50	$	8.09	$	6.30
Mike	44,400	$	14.00	$	3.10	$	4.50
Sewing kit	336,000	$	9.10	$	4.30	$	0.99

The following additional information is available:  

1. The company’s plant has a capacity of 113,140 direct labor-hours per year on a single-shift basis. The company’s present employees and equipment can produce all five products.

2. The direct labor rate of $9 per hour is expected to remain unchanged during the coming year.

3. Fixed manufacturing costs total $630,000 per year. Variable overhead costs are $2 per direct labor-hour.

4. All of the company’s nonmanufacturing costs are fixed.

5. The company’s finished goods inventory is negligible and can be ignored.

Required:

1. How many direct labor hours are used to manufacture one unit of each of the company’s five products?

2. How much variable overhead cost is incurred to manufacture one unit of each of the company’s five products?

3. What is the contribution margin per direct labor-hour for each of the company’s five products?

4. Assuming that direct labor-hours is the company’s constraining resource, what is the highest total contribution margin that the company can earn if it makes optimal use of its constrained resource?

Coolbrook Company has the following information available for the past year:   

	River Division			Stream Division
Sales revenue	$	1,216,000		$	1,819,000
Cost of goods sold and operating expenses		890,000			1,292,000
Net operating income	$	326,000		$	527,000
Average invested assets	$	1,080,000		$	1,450,000

   
The company’s hurdle rate is 7.76 percent.

Required:
1. Calculate return on investment (ROI) and residual income for each division for last year. (Enter your ROI answers as a percentage rounded to two decimal places, (i.e., 0.1234 should be entered as 12.34%.))



2. Recalculate ROI and residual income for each division for each independent situation that follows: (Enter your ROI answers as a percentage rounded to two decimal places, (i.e., 0.1234 should be entered as 12.34%.))

a. Operating income increases by 9 percent.



b. Operating income decreases by 9 percent.



c. The company invests $246,000 in each division, an amount that generates $107,000 additional income per division.



d. Coolbrook changes its hurdle rate to 5.76 percent.

The Dauten Toy Corporation uses an injection molding machine that was purchased prior to the new tax legislation. This machine is being depreciated on a straight-line basis, and it has 6 years of remaining life. Its current book value is $2,100, and it can be sold for $2,500 at this time. Thus, the annual depreciation expense is $2,100/6 = $350 per year. If the old machine is not replaced, it can be sold for $500 at the end of its useful life.

Dauten is offered a replacement machine which has a cost of $8,000, an estimated useful life of 6 years, and an estimated salvage value of $800. The replacement machine is eligible for 100% bonus depreciation at the time of purchase. The replacement machine would permit an output expansion, so sales would rise by $1,000 per year; even so, the new machine's much greater efficiency would cause operating expenses to decline by $1,500 per year. The new machine would require that inventories be increased by $2,500, but accounts payable would simultaneously increase by $800. Dauten's marginal federal-plus-state tax rate is 25%, and its WACC is 11%.

What is the NPV of the incremental cash flow stream? Negative value, if any, should be indicated by a minus sign. Round your answer to the nearest cent.
$  

Schedule of Cash Receipts

Rosita Flores owns Rosita's Mexican Restaurant in Tempe, Arizona. Rosita's is an affordable restaurant near campus and several hotels. Rosita accepts cash and checks. Checks are deposited immediately. The bank charges $0.60 per check; the amount per check averages $75. “Bad” checks that Rosita cannot collect make up 4 percent of check revenue.

During a typical month, Rosita's has sales of $49,000. About 80 percent are cash sales. Estimated sales for the next three months are as follows:

April	$32,000
May	49,000
June	59,000

Required:

Prepare a schedule of cash receipts for May and June. Round your intermediate computations and final answers to the nearest whole dollar.

Rosita's Mexican Restaurant
Schedule of Cash Receipts
For the Months of May and June
	May	June
Cash sales:	$	$
Checks
Total	$	$

Beech Corporation is a merchandising company that is preparing a master budget for the third quarter of the calendar year. The company’s balance sheet as of June 30th is shown below:

Beech Corporation Balance Sheet June 30
Assets
Cash	$  72,000
Accounts receivable	128,000
Inventory	60,900
Plant and equipment, net of depreciation	218,000
Total assets	$ 478,900
Liabilities and Stockholders’ Equity
Accounts payable	$  79,000
Common stock	308,000
Retained earnings	91,900
Total liabilities and stockholders’ equity	$ 478,900

Beech’s managers have made the following additional assumptions and estimates:

1. Estimated sales for July, August, September, and October will be $290,000, $310,000, $300,000, and $320,000, respectively.

2. All sales are on credit and all credit sales are collected. Each month’s credit sales are collected 35% in the month of sale and 65% in the month following the sale. All of the accounts receivable at June 30 will be collected in July.

3. Each month’s ending inventory must equal 30% of the cost of next month’s sales. The cost of goods sold is 70% of sales. The company pays for 40% of its merchandise purchases in the month of the purchase and the remaining 60% in the month following the purchase. All of the accounts payable at June 30 will be paid in July.

4. Monthly selling and administrative expenses are always $54,000. Each month $5,000 of this total amount is depreciation expense and the remaining $49,000 relates to expenses that are paid in the month they are incurred.

5. The company does not plan to borrow money or pay or declare dividends during the quarter ended September 30. The company does not plan to issue any common stock or repurchase its own stock during the quarter ended September 30.

Required:

1. Prepare a schedule of expected cash collections for July, August, and September. Also compute total cash collections for the quarter ended September 30.

2-a. Prepare a merchandise purchases budget for July, August, and September. Also compute total merchandise purchases for the quarter ended September 30.

2-b. Prepare a schedule of expected cash disbursements for merchandise purchases for July, August, and September. Also compute total cash disbursements for merchandise purchases for the quarter ended September 30.

3 Prepare an income statement for the quarter ended September 30.

4 Prepare a balance sheet as of September 30.

Stampede Corporation, a Calgary based steak house, used the following data to evaluate their current operating system. The company sells items for $20 each and used a budgeted selling price of $20 per unit.

	Actual	Budgeted
Units Sold	200,000units	203,000
Variable Costs	1,250,000	1,500,000
Fixed Costs	925,000	900,000

Required:

1) Prepare a Level 1 static-budget variance analysis for Stampede Corporation using an income statement in contribution margin format. Use the following three column headings: Actual Results, Static Budget, and Static-budget Variance.

Pearl Products Limited of Shenzhen, China, manufactures and distributes toys throughout South East Asia. Three cubic centimeters (cc) of solvent H300 are required to manufacture each unit of Supermix, one of the company’s products. The company now is planning raw materials needs for the third quarter, the quarter in which peak sales of Supermix occur. To keep production and sales moving smoothly, the company has the following inventory requirements:

The finished goods inventory on hand at the end of each month must equal 3,000 units of Supermix plus 20% of the next month’s sales. The finished goods inventory on June 30 is budgeted to be 17,200 units.

The raw materials inventory on hand at the end of each month must equal one-half of the following month’s production needs for raw materials. The raw materials inventory on June 30 is budgeted to be 108,000 cc of solvent H300.   

The company maintains no work in process inventories.

A monthly sales budget for Supermix for the third and fourth quarters of the year follows.

	Budgeted Unit Sales
July	71,000
August	76,000
September	86,000
October	66,000
November	56,000
December	46,000

Required:

Prepare a production budget for Supermix for the months July, August, September, and October.

Prepare a direct materials budget showing the quantity of solvent H300 to be purchased for July, August, and September, and for the quarter in total.