P23-8B (L03,6,8) (SCF—Direct and Indirect Methods) Comparative balance sheet accounts of Hamblin Company are impresented below. Additional data: 1. Equipment that cost $20,000 and was 40% depreciated was sold in 2017. 2. Cash dividends were declared and paid during the year. 3. Common stock was issued in exchange for land. 4. Investments that cost $25,000 were sold during the year. 5. There were no write-offs of uncollectible accounts during the year. Hamblin’s 2017 income statement is as follows. Instructions (a) Compute net cash provided by operating activities under the direct method. (b) Prepare a statement of cash flows using the indirect method. HAMBLIN COMPANY COMPARATIVE BALANCE SHEET ACCOUNTS AS OF DECEMBER 31 2017 2016 Debit Balances Cash $ 60,000 $ 71,500 Investments (available-for-sale) 30,000 55,000 Accounts receivable 152,000 136,000 Inventory 118,000 84,000 Land 50,000 15,000 Buidings 160,000 160,000 Equipment 60,000 41,500 Total assets $630,000 $563,000 Totals Credit Balances Allowance for doubtful accounts $ 6,000 $ 3,000 Accumulated depreciation-buildings 40,000 32,000 Accumulated depreciation -equipment 24,000 18,500 Accounts payable 102,000 95,000 Income taxes payable 13,000 8,000 Long-term notes payable 65,000 80,000 Common stock 295,000 236,500 Retained earnings 85,000 90,000 Totals $630,000 $563,000 Sales $750,000 Less: Cost of goods sold 480,000 Gross profi t 270,000 Less: Operating expenses (includes depreciation expense and bad debt expense) 145,000 Income from operations 125,000 Other revenues and expenses Gain on sale of investments $7,000 Loss on sale of equipment (4,000) 3,000 Income before taxes 128,000 Income taxes 52,000 Net income 76,000

answer question #3 The Glory Mountain State Ski Area The Glory Mountain State Ski Area – owned and managed by a state public authority - expects to attract 292,500 skier days during the coming ski season. A skier day represents one skier at the mountain for one day. In addition to a $2,000,000 per year subsidy provided by the state, Glory currently earns its revenue from three sources: lift ticket sales, ski lessons, and food sales in the mountain’s lodges. Forty-five percent of the customers come to the mountain on weekends and pay an average of $60 per day to ski. The remaining 55 percent of the skiers come during the week and pay an average of $45 per day for a lift ticket. On average, 10 percent of the people who visit Glory take ski lessons. An average person taking lessons pays $80 for each lesson. Management also estimates that each skier spends an average of $4 per day on food. Food costs average 40 percent of total food revenue. Glory’s central management staff is paid $1,800,000 per year. The remainder of Glory’s staff is seasonal and is paid on an hourly basis. The table below shows the number of employees by job title, the number of days they work on average, their hourly wages, and the number of hours they work each day. Only ski instructors and patrol costs vary with skier days. Benefits add 30 percent to direct salary costs for all workers including management. Equipment costs and usage are also shown in the table below. For equipment, number refers to the number of pieces of equipment. Equipment costs depend on the number of days the area is open during the season. The hourly fuel cost represents the cost of fuel to operate the equipment for each hour they are open. Number Days Worked Hours Worked Hourly Wage Instructors & Ski Patrol 275 100 7 $20.00 Lift Attendants, Maintenance & Grooming 140 130 10 $18.00 Kitchen Staff 50 130 8 $12.00 Equipment & Fuel Costs 60 130 6 $65.00 Insurance costs are $15,000 per day for each of the 130 days the area expects to be open. Energy costs are $2,240,000 per year and are based on the number of days the area is open. Neither energy nor insurance costs vary based on skier days. Question 1: You are the Glory Mountain State Ski Area’s finance manager. Area Manager Dan Finn has asked you to prepare a base operating budget for the ski area for the coming fiscal year and to show the impact a 5 percent reduction in the number of skier days would have on Glory’s operating results. In planning for the next season, the State Regional Development Authority, which manages the state’s five ski areas, is considering installing a 15-megawatt wind turbine at the top of Glory Mountain. If they do, the ski area will reduce its energy bill by almost 25 percent or $560,000 per year for the next 15 years. It will cost Glory $4,100,000 to complete the environmental assessments, do the necessary engineering studies, and install the turbine. In addition, the ski area will have to invest $750,000 at the end of the seventh year to overhaul the bearings and replace some time-critical components. For depreciation purposes, the wind turbine has a useful life of 10 years with no residual value. Glory uses straight-line depreciation. Question 2: The state uses an 8 percent cost of capital for its ski areas. Based on purely financial analysis, should the state install the turbine? In addition, the snowmaking equipment in the Bear Mountain section of Glory Mountain has been in service for nearly 15 years and has reached the end of its useful life. It will have to be replaced before the next ski season. Management has narrowed its decision down to two options: Big Mouth Snow Guns with a useful life of 15 years and the Whisper Quiet Snowmaking System with a useful life of 10 years. The Big Mouth system will cost Glory $850,000 to acquire and $35,000 per year to operate, while the Whisper Quiet system would only cost $600,000 and $50,000 per year to operate. If the Big Mouth equipment is chosen, there will be no change in Glory’s other operating costs. If the Whisper Quiet system is purchased, Glory’s annual fuel and equipment costs will increase by $15,000. Regardless of the option Glory chooses, the snowmaking system chosen will be depreciated over ten years with an assumed 5 percent residual value. Glory uses straight-line depreciation. Question 3: Based on Glory’s 8 percent cost of capital, which system should management choose? Glory Mountain has never offered any type of day care for younger children of skiing families. Given the changing demographics of its patrons, Dan Finn thinks that the Mountain needs to offer those services. Erika Fossett, Glory’s director of operations, has worked up a proposal for what she is calling the Glory Kids’ Center. She wants it to provide combined day care and ski lessons for children between the ages of 3 and 7. The center would be run by a director who will earn $60,000 per year plus benefits. For every 10 children using the Kids’ Center, the center will employ one full-time instructor. That instructor will provide both day care and skiing instruction. Each instructor will earn $25 per hour including benefits. The center will provide 8 hours of care per day. Instructors will only be paid for the hours the children are at the center. The children are fed lunch and a snack at a cost of $10 per child per day. Supplies for activities the children will be engaged in when they are not skiing will cost an average of $10 per child. Glory plans to charge $70 per day per child. Question 4: As Glory’s finance manager, you have been asked to evaluate the fiscal feasibility of running Glory Kids’ Center. Your first question is how many children will have to be at the center on an average day for it to be profitable on a stand-alone basis. Erika Fossett believes that the Kids’ Center will add 6 percent to overall skier days, and families with children between 3 and 7 will account for 10 percent of total skier days including the expected increase in volume. On average, families with children between 3 and 7 will enroll .25 children in the center each day they ski. She expects to employ an average of 6 instructors each day the ski area is open. Question 5: Prepare a special-purpose budget for the Glory Kids’ Center. Do not include the incremental lift ticket revenue from the expected increase in the volume of skier days in your estimate. After completing these analyses, Dan Finn asks you to update the budget to include the impact of installing the wind turbine, replacing the snowmaking equipment and operating the Glory Kids’ Center. In addition, Glory will have to issue a $6,000,000 bond to finance the acquisition of the equipment. The coupon rate on the bond will be 5 percent. It will require Glory to pay interest every six months and to repay the full $6 million of principal in 20 years. The bonds will be issued on the first day of Glory’s fiscal year, and all equipment will be put in service that same day. Question 6: Using the base budget from Question 1 as a starting point, prepare a revised budget for Glory that incorporates all of these initiatives. At the end of the season, bad weather caused the mountain to be open for only 115 days with an average of 2,600 people per day and an average price per lift ticket of $50.50. Question 7: Starting with the revised budget, calculate the following lift ticket revenue variances and indicate whether they were favorable or unfavorable. Be sure to add up the flexible (partial) variances and check to make sure that sum equals the total variance. a. Glory’s total lift ticket revenue variance for the ski season b. the portion of the lift ticket revenue variance that was due to volume of days c. the portion of the lift ticket revenue variance that was due to quantity of skiers per day d. the portion of the lift ticket revenue variance that was due to price

answer question #1

The Glory Mountain State Ski Area The Glory Mountain State Ski Area – owned and managed by a state public authority - expects to attract 292,500 skier days during the coming ski season. A skier day represents one skier at the mountain for one day. In addition to a $2,000,000 per year subsidy provided by the state, Glory currently earns its revenue from three sources: lift ticket sales, ski lessons, and food sales in the mountain’s lodges. Forty-five percent of the customers come to the mountain on weekends and pay an average of $60 per day to ski. The remaining 55 percent of the skiers come during the week and pay an average of $45 per day for a lift ticket. On average, 10 percent of the people who visit Glory take ski lessons. An average person taking lessons pays $80 for each lesson. Management also estimates that each skier spends an average of $4 per day on food. Food costs average 40 percent of total food revenue. Glory’s central management staff is paid $1,800,000 per year. The remainder of Glory’s staff is seasonal and is paid on an hourly basis. The table below shows the number of employees by job title, the number of days they work on average, their hourly wages, and the number of hours they work each day. Only ski instructors and patrol costs vary with skier days. Benefits add 30 percent to direct salary costs for all workers including management. Equipment costs and usage are also shown in the table below. For equipment, number refers to the number of pieces of equipment. Equipment costs depend on the number of days the area is open during the season. The hourly fuel cost represents the cost of fuel to operate the equipment for each hour they are open. Number Days Worked Hours Worked Hourly Wage Instructors & Ski Patrol 275 100 7 $20.00 Lift Attendants, Maintenance & Grooming 140 130 10 $18.00 Kitchen Staff 50 130 8 $12.00 Equipment & Fuel Costs 60 130 6 $65.00 Insurance costs are $15,000 per day for each of the 130 days the area expects to be open. Energy costs are $2,240,000 per year and are based on the number of days the area is open. Neither energy nor insurance costs vary based on skier days. Question 1: You are the Glory Mountain State Ski Area’s finance manager. Area Manager Dan Finn has asked you to prepare a base operating budget for the ski area for the coming fiscal year and to show the impact a 5 percent reduction in the number of skier days would have on Glory’s operating results. In planning for the next season, the State Regional Development Authority, which manages the state’s five ski areas, is considering installing a 15-megawatt wind turbine at the top of Glory Mountain. If they do, the ski area will reduce its energy bill by almost 25 percent or $560,000 per year for the next 15 years. It will cost Glory $4,100,000 to complete the environmental assessments, do the necessary engineering studies, and install the turbine. In addition, the ski area will have to invest $750,000 at the end of the seventh year to overhaul the bearings and replace some time-critical components. For depreciation purposes, the wind turbine has a useful life of 10 years with no residual value. Glory uses straight-line depreciation. Question 2: The state uses an 8 percent cost of capital for its ski areas. Based on purely financial analysis, should the state install the turbine? In addition, the snowmaking equipment in the Bear Mountain section of Glory Mountain has been in service for nearly 15 years and has reached the end of its useful life. It will have to be replaced before the next ski season. Management has narrowed its decision down to two options: Big Mouth Snow Guns with a useful life of 15 years and the Whisper Quiet Snowmaking System with a useful life of 10 years. The Big Mouth system will cost Glory $850,000 to acquire and $35,000 per year to operate, while the Whisper Quiet system would only cost $600,000 and $50,000 per year to operate. If the Big Mouth equipment is chosen, there will be no change in Glory’s other operating costs. If the Whisper Quiet system is purchased, Glory’s annual fuel and equipment costs will increase by $15,000. Regardless of the option Glory chooses, the snowmaking system chosen will be depreciated over ten years with an assumed 5 percent residual value. Glory uses straight-line depreciation. Question 3: Based on Glory’s 8 percent cost of capital, which system should management choose? Glory Mountain has never offered any type of day care for younger children of skiing families. Given the changing demographics of its patrons, Dan Finn thinks that the Mountain needs to offer those services. Erika Fossett, Glory’s director of operations, has worked up a proposal for what she is calling the Glory Kids’ Center. She wants it to provide combined day care and ski lessons for children between the ages of 3 and 7. The center would be run by a director who will earn $60,000 per year plus benefits. For every 10 children using the Kids’ Center, the center will employ one full-time instructor. That instructor will provide both day care and skiing instruction. Each instructor will earn $25 per hour including benefits. The center will provide 8 hours of care per day. Instructors will only be paid for the hours the children are at the center. The children are fed lunch and a snack at a cost of $10 per child per day. Supplies for activities the children will be engaged in when they are not skiing will cost an average of $10 per child. Glory plans to charge $70 per day per child. Question 4: As Glory’s finance manager, you have been asked to evaluate the fiscal feasibility of running Glory Kids’ Center. Your first question is how many children will have to be at the center on an average day for it to be profitable on a stand-alone basis. Erika Fossett believes that the Kids’ Center will add 6 percent to overall skier days, and families with children between 3 and 7 will account for 10 percent of total skier days including the expected increase in volume. On average, families with children between 3 and 7 will enroll .25 children in the center each day they ski. She expects to employ an average of 6 instructors each day the ski area is open. Question 5: Prepare a special-purpose budget for the Glory Kids’ Center. Do not include the incremental lift ticket revenue from the expected increase in the volume of skier days in your estimate. After completing these analyses, Dan Finn asks you to update the budget to include the impact of installing the wind turbine, replacing the snowmaking equipment and operating the Glory Kids’ Center. In addition, Glory will have to issue a $6,000,000 bond to finance the acquisition of the equipment. The coupon rate on the bond will be 5 percent. It will require Glory to pay interest every six months and to repay the full $6 million of principal in 20 years. The bonds will be issued on the first day of Glory’s fiscal year, and all equipment will be put in service that same day. Question 6: Using the base budget from Question 1 as a starting point, prepare a revised budget for Glory that incorporates all of these initiatives. At the end of the season, bad weather caused the mountain to be open for only 115 days with an average of 2,600 people per day and an average price per lift ticket of $50.50. Question 7: Starting with the revised budget, calculate the following lift ticket revenue variances and indicate whether they were favorable or unfavorable. Be sure to add up the flexible (partial) variances and check to make sure that sum equals the total variance. a. Glory’s total lift ticket revenue variance for the ski season b. the portion of the lift ticket revenue variance that was due to volume of days c. the portion of the lift ticket revenue variance that was due to quantity of skiers per day d. the portion of the lift ticket revenue variance that was due to price

ABC Corporation purchased a land for P500,000 during 2017 and chooses the revaluation model in accounting for its land . The following information relates to that land , which is the only land asset owned by the company , December 31, 2017- Fair value P520,000. Dec 31, ,2018- Fair Value P470,000. December 31 , 2019- Fair Value P510,000.a) What is the amount of unrealized gain on revaluation-land for the year 2017?_______. b.) How much is the accumulated other comprehensive income for the year 2017 to be recognized in the balance sheet?_____accumulated other comprehensive income. c) What is the amount of unrealized gain on realization -land for the year 2018?_____D.)How much is the impairement loss for the year 2018?____impairement loss. e)How much is the accumulated other comprehensive income for the year 2018 to be recognized in the balance sheet?____.f)How much is the recovery of impairement loss and revaluation gain on land for the year 2019?____.g) What is the amount of unrealized gain on revaluation-land for the year 2019?h)If the land was sold on January 10,2020 for Php 515,000 How much is the gain on sale of land?_____.i)How much is the accumulated other comprehensive income to be recycledto the retained earrnings as a result of the gain on sale of land?_____

Last month, Laredo Company sold 580 units for $90 each. During the month, fixed costs were $3,330 and variable costs were $9 per unit.

Required:

1. Determine the unit contribution margin and contribution margin ratio.

2. Calculate the break-even point in units and sales dollars.

3. Compute Laredo’s margin of safety in units and as a percentage of sales.

Write a 1 page recommendation for the pricing strategy necessary to successfully market your health care product or service. Be sure to include an estimate of the costs associated with the product or service, and the profits that are expected with the recommended pricing. You will need to make some “educated estimates” to complete this assignment; please follow a format like this to demonstrate that your recommended pricing will result in profits: New Product Per Unit 20,000 units (1st year sales forecast) Suggested retail price $100.00 $2,000,000 Cost to retailer ** $50.00 $1,000,000 Retailer margin $50.00 $1,000,000 Cost of Goods Sold Components/raw materials $10.00 $200,000 Labor $10.00 $200,000 Overhead $5.00 $100,000 Marketing costs $7.00 $140,000 Manufacturer profit $18.00 $360,000 ** “Cost to retailer” is the same as Manufacturer’s sales revenue New Service Per Day 200 days per year (1st year sales forecast) Service Charges** $250.00 $500,000 Cost of Goods Sold Labor $100.00 $200,000 Materials $20.00 $40,000 Overhead $30.00 $60,000 Marketing costs $10.00 $20,000 Service provider profit $90.00 $180,000 ** Service Charge is the expected sales revenue from the new service As a starting point to estimating costs, visit Bplans and search for a sample plan in a similar line of business to the one you are proposing. Look for the “Pro Forma Profit and Loss” chart within the Financial Plan section of the business plan, and make note of the expected costs in relation to forecasted sales. You can also do an Internet search for “income statement – (insert your product or service here)” and review the samples that you find. Within this section draft, please demonstrate your grasp of the marketing terminology and concepts related to pricing strategy. For example, it would be appropriate to identify whether you have chosen a penetration, skimming, or followership price strategy, and why you believe that strategy is appropriate.

Novak Corporation’s charter authorized issuance of 110,000 shares of $10 par value common stock and 49,300 shares of $50 preferred stock. The following transactions involving the issuance of shares of stock were completed. Each transaction is independent of the others. 1. Issued a $10,700, 9% bond payable at par and gave as a bonus one share of preferred stock, which at that time was selling for $97 a share. 2. Issued 480 shares of common stock for equipment. The equipment had been appraised at $7,500; the seller’s book value was $5,700. The most recent market price of the common stock is $16 a share. 3. Issued 373 shares of common and 107 shares of preferred for a lump sum amounting to $9,800. The common had been selling at $14 and the preferred at $67. 4. Issued 180 shares of common and 51 shares of preferred for equipment. The common had a fair value of $16 per share; the equipment has a fair value of $6,900.

Patrick Corporation issued 5% bonds on January 1, 2018, with a face amount of $1,000,000, the market rate for bonds of similar risk and maturity was 4%. The bonds mature in 20 years and pay interest semi­ annually on June 30 and December 31.

Create an Excel spreadsheet to answer the following requirements and submit a printout of your Excel formulas as well as a handwritten copy of your solutions to the requirements listed below.

Required:

1. Determine the price of the bonds at January 1, 2018.
2. Prepare the journal entry to record the issuance of the bonds on January 1, 2018.
3. Prepare a complete amortization schedule that determines interest at the effective rate each period using the format listed below:

Amortization Schedule

Date      Cash Interest    Effective Interest    Decrease in Balance   Outstanding Balance

4. Prepare the journal entry to record interest on June 30, 2018.
5. Prepare the appropriate journal entry when the bonds mature in 20 years.

Hull Company’s record of transactions concerning part X for the month of April was as follows.

Compute the inventory at April 30 on each of the following bases. Assume that perpetual inventory records are kept in units only. (1) First-in, first-out (FIFO). (2) Last-in, first-out (LIFO). (3) Average-cost. (Round final answers to 0 decimal places, e.g. $6,548.)

One of the most important decisions a person will make in setting up a business is to determine the right business structure that fits the purpose of the business. Enumerate and discuss the various business structures available to individuals setting up a business in Australia and analyse the advantages and disadvantages of using each business structure.        

Chapter 11

Cameron Bly is a sales manager for an automobile dealership. He earns a bonus each year based on revenue from the number of autos sold in the year less related warranty expenses. Actual warranty expenses have varied over the prior 10 years from a low of 3% of an automobile's selling price to a high of 10%. In the past, Bly has tended to estimate warranty expenses on the high end to be conservative. He must work with the dealership's accountant at year-end to arrive at the warranty expense accrual for cars sold each year.

1. Does the warranty accrual decision create any ethical dilemma for Bly?
2. Since warranty expenses vary, what percent do you think Bly should choose for the current year? Justify your response.

Cove’s Cakes is a local bakery. Price and cost information follows:

Required:

1. Calculate Cove’s new break-even point under each of the following independent scenarios:

a. Sales price increases by $1.60 per cake.

b. Fixed costs increase by $465 per month.

c. Variable costs decrease by $0.30 per cake.

d. Sales price decreases by $0.70 per cake.

2. Assume that Cove sold 310 cakes last month. Calculate the company’s degree of operating leverage.

3. Using the degree of operating leverage, calculate the change in profit caused by a 9 percent increase in sales revenue.

Required information

Exercise 5A-2 (Algo) Least-Squares Regression [LO5-11]

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

Bargain Rental Car offers rental cars in an off-airport location near a major tourist destination in California. Management would like to better understand the variable and fixed portions of its car washing costs. The company operates its own car wash facility in which each rental car that is returned is thoroughly cleaned before being released for rental to another customer. Management believes that the variable portion of its car washing costs relates to the number of rental returns. Accordingly, the following data have been compiled:

Exercise 5A-2 Part 2 (Algo)

2. Using least-squares regression, estimate the variable cost per rental return and the monthly fixed cost incurred to wash cars. (Round Fixed cost to the nearest whole dollar amount and the Variable cost per unit to 2 decimal places.)

Depletion On January 2, 2016, Salt Company purchased land for $490000, from which it is estimated that 350000 tons of ore could be extracted. It estimates that the present value of the cost necessary to restore the land is $90000, after which it could be sold for $36000. During 2016, Salt mined 85000 tons and sold 73000 tons. During 2017, Salt mined 111000 tons and sold 112000 tons. At the beginning of 2018, Salt spent an additional $80000, which increased the reserves by 70000 tons. In 2018, Salt mined 144000 tons and sold 138000 tons. Salt uses a FIFO cost flow assumption. Required: If required, round your final answers to the nearest dollar and round the depletion rate per ton to the nearest cent. 1. Calculate the depletion included in the income statement and ending inventory for 2016, 2017, and 2018. Round the depletion rate to the nearest cent. If required, round the final answers to the nearest dollar. 2016 Depletion deducted from income $ Depletion included in inventory $ 2017 Depletion deducted from income $ Depletion included in inventory $ 2018 Depletion deducted from income $ Depletion included in inventory $ 2. Complete the natural resources section of the balance sheet on December 31, 2016, 2017, and 2018, assuming that an accumulated depletion account is used. Round the depletion rate per to the nearest cent. If required, round the final answers to the nearest dollar. Salt Company Balance Sheet (partial) December 31, 2016 - 2018 December 31, 2016 Mineral ore resources $ Less: Accumulated depletion $ December 31, 2017 Mineral ore resources $ Less: Accumulated depletion $ December 31, 2018 Mineral ore resources $ Less: Accumulated depletion $ Feedback 3. Assume Whistler's discount rate was 9%. What is the balance in the asset retirement obligation at 2016, 2017, and 2018? If required, round your answers to the nearest dollar. Salt Company Asset retirement obligation 2016 - 2018 December 31, 2016 $ December 31, 2017 $ December 31, 2018 $ Feedback Check My Work