On January 1, 2017, Pepper purchased 75% of the outstanding shares of Salt for $1,275,000. At that time, Salt’s assets and liabilities had the following book and fair values.

During 2017, Pepper sold goods to Salt for $130,000. These goods cost Pepper $85,000. Salt sold 60% of these goods during 2017. Also, during 2017, Salt sold goods to Pepper for $90,000, earning a gross profit of 40%. Pepper had 20% of these goods in its 2017 ending inventory. The tax rate for both companies is 30%. On December 31, 2017, Pepper determined that there was a $3,000 goodwill impairment.

Required:

Note: The calculations in part 1 are required to earn marks in part 2. Assignments submitted without supporting calculations will receive zero for this question.

Pepper accounts for Salt using the entity theory and cost methods.

1. Calculate the following for consolidated financial statements. (2 marks)
   1. a) Goodwill using fair values
   2. b) Acquisition differential, and prepare the ADA table
   3. c) Unrealized inventory profits before and after tax
   4. d) Consolidated net income and the NCI share
   5. e) Consolidated retained earnings and NCI Balance Sheet

Prepare a consolidated income statement that includes a section below net income attributing income to shareholders of Pepper and NCI shareholders. Prepare a consolidated balance sheet for 2017. Prepare these statements in good form. (18 marks)

Allison Corporation acquired all of the outstanding voting stock of Mathias, Inc., on January 1, 2020, in exchange for $5,998,000 in cash. Allison intends to maintain Mathias as a wholly owned subsidiary. Both companies have December 31 fiscal year-ends. At the acquisition date, Mathias’s stockholders’ equity was $2,030,000 including retained earnings of $1,530,000.

At the acquisition date, Allison prepared the following fair-value allocation schedule for its newly acquired subsidiary:

Post acquisition, Allison employs the equity method to account for its investment in Mathias. During the two years following the business combination, Mathias reports the following income and dividends:

No asset impairments have occurred since the acquisition date.

Individual financial statements for each company as of December 31, 2021, follow. Parentheses indicate credit balances. Dividends declared were paid in the same period

Total liabilities and equity$(15,952,250) $(4,760,000)

1. Determine the fair value in excess of book value for Allison's acquisition date investment in Mathias.

2. Prepare a worksheet to determine the consolidated values to be reported on Allison’s financial statements.

The following cost data for the year just ended pertain to Sentiments, Inc., a greeting card manufacturer:

*All services are provided to manufacturing departments.

§Cost of idle time is an overhead item; it is not included in the direct-labor wages given above.

†The rental of sales space was made necessary when the sales offices were converted to storage space for raw material.

Required:
1. Compute each of the following costs for the year just ended:

Question 3

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Developing a Master Budget
for a Merchandising Organization
Peyton Department Store prepares budgets quarterly. The following information is available for use in planning the second quarter budgets for 2010.

Actual and forecasted sales for selected months in 2010 are as follows:

Monthly operating expenses are as follows:

Cash dividends of $17,000 are declared during the third month of each quarter and are paid during the first month of the following quarter. Operating expenses, except insurance, rent, and depreciation are paid as incurred. Rent is paid during the following month. The prepaid insurance is for five more months. Cost of goods sold is equal to 50 percent of sales. Ending inventories are sufficient for 120 percent of the next month's sales. Purchases during any given month are paid in full during the following month. All sales are on account, with 50 percent collected during the month of sale, 40 percent during the next month, and 10 percent during the month thereafter. Money can be borrowed and repaid in multiples of $1,000 at an interest rate of 12 percent per year. The company desires a minimum cash balance of $4,000 on the first of each month. At the time the principal is repaid, interest is paid on the portion of principal that is repaid. All borrowing is at the beginning of the month, and all repayment is at the end of the month. Money is never repaid at the end of the month it is borrowed.

• Part A
• Part B
• Part C
• Part D
• Part E
• Part F

(c) Prepare a cash disbursements schedule for each month of the second quarter ending June 30, 2010. Do not include repayments of borrowings.

(d) Prepare a cash budget for each month of the second quarter ending June 30, 2010. Include budgeted borrowings and repayments.

Only use negative signs, if needed, for: excess receipts over disbursements, balance before borrowings and cash balances (beginning and ending).

(e) Prepare an income statement for each month of the second quarter ending June 30, 2010.

Only use negative signs to show net losses in income.

(f) Prepare a budgeted balance sheet as of June 30, 2010.

Companies that have a high demand for making copies, both color and black and white, often choose to lease a high-end copier that provides fast and reliable service at a reasonable cost. The lease is usually for 3 to 5 years, and the cost to the user is $0.18 per page for black-and-white copies and typically $0.255 per page for color copies. These are the terms of your current 3-year lease contract with Ricoh Company, which is up for renewal this month; the lease terms are expected to be the same for the next 3 years, if renewed.

Hewlett-Packard Company (HP) developed an innovative copier that can reduce the cost of color copies. The copier measures exactly how much color is used in a color copy so that the price of the copy can be determined by the amount of color used rather than a fixed price per page. The cost could be as low as $0.246 per page for a color copy. HP calls this a “flexible-pricing” approach. Assume for this example that the cost of the leased copier (3-year lease) is only the per-page charge—the initial lease cost is negligible, and the service costs would not differ between the HP copier and the copier you are using now.

Your company is an advertising agency, Tanner and Jones LLC, and the quality of the color copies is critical to your business success. The ability to rely on the copier at any time is also very important because some customer requests require urgent attention. You believe that the Ricoh and HP printers are of the same reliability, but you have not had experience with the HP copier to be sure of the copy quality. The demonstration of the HP copier has shown as good or better copy quality, but you have not had 3 years’ experience with it to know what it would be like day-to-day.

Required:

1. Assume that your company is considering the lease of one of these HP copiers, and you expect that the average price for a color copy for your company would be $0.246 because you would carefully prioritize color copy jobs and reduce the number of copies requiring a large amount of color. You expect that training your copy center staff to properly use the new copier would cost about $2,754 for materials and lost work time. What is the breakeven number of color copies per year that would make you indifferent between the new HP copier and your current copier? (Do not round intermediate calculations. Round your answer to the nearest whole number.)

2. As in requirement 1, assume you expect that your per-copy cost for color copies with the HP copier will be $0.246, the training costs are $2,754, and you expect to make 260,000 copies per year for the next 3 years. In your negotiations with Ricoh concerning the new lease and the cost of color copies, what price would you bargain for? (Round your answer to 4 decimal places.)

Absorption and variable costing
Bird’s Eye View manufactures satellite dishes used in residential and commercial installations for satellite-broadcasted television. For each unit, the following costs apply: $50 for direct material, $100 for direct labor, and $60 for variable overhead. The company’s annual fixed overhead cost is $300,000; it uses expected capacity of 5,000 units produced as the basis for applying fixed overhead to products. A commission of 10 percent of the selling price is paid on each unit sold. Annual fixed selling and administrative expenses are $72,000. The following additional information is available:

a. Prepare pre-tax income statements under absorption and variable costing for Year 1 and Year 2, with any volume variance being charged to Cost of Goods Sold.
Note: Do not use negative signs in your answers.

b. Prepare pre-tax income statements under variable costing for Year 1 and Year 2, with any volume variance being charged to Cost of Goods Sold.
Note: Do not use negative signs in your answers.

c. Reconcile the differences in income for the two methods.

Problem 2-03A a-d (Video)

Tom Zopf owns and manages a computer repair service, which had the following trial balance on December 31, 2019 (the end of its fiscal year).

Summarized transactions for January 2020 were as follows.

Post the journal entries to the accounts in the ledger. (Post entries in the order of journal entries presented in the previous part.)

Problem 8-31 Completing a Master Budget

Hillyard Company, an office supplies specialty store, prepares its master budget on a quarterly basis. The following data have been assembled to assist in preparing the master budget for the first quarter:

1. As of December 31 (the end of the prior quarter), the company’s general ledger showed the following account balances:

2. Actual sales for December and budgeted sales for the next four months are as follows:

3. Sales are 20% for cash and 80% on credit. All payments on credit sales are collected in the month following sale. The accounts receivable at December 31 are a result of December credit sales.

4. The company’s gross margin is 40% of sales. (In other words, cost of goods sold is 60% of sales.)

5. Monthly expenses are budgeted as follows: salaries and wages, $38,000 per month: advertising, $58,000 per month; shipping, 5% of sales; other expenses, 3% of sales. Depreciation, including depreciation on new assets acquired during the quarter, will be $45,780 for the quarter.

6. Each month’s ending inventory should equal 25% of the following month’s cost of goods sold.

7. One-half of a month’s inventory purchases is paid for in the month of purchase; the other half is paid in the following month.

8. During February, the company will purchase a new copy machine for $3,300 cash. During March, other equipment will be purchased for cash at a cost of $81,500.

9. During January, the company will declare and pay $45,000 in cash dividends.

10. Management wants to maintain a minimum cash balance of $30,000. The company has an agreement with a local bank that allows the company to borrow in increments of $1,000 at the beginning of each month. The interest rate on these loans is 1% per month and for simplicity we will assume that interest is not compounded. The company would, as far as it is able, repay the loan plus accumulated interest at the end of the quarter.

Required:

Using the data above, complete the following statements and schedules for the first quarter:

1. Schedule of expected cash collections:

2-a. Merchandise purchases budget:

2-b. Schedule of expected cash disbursements for merchandise purchases:

3. Cash budget:

1. Complete the Schedule of expected cash collections:

2A. Complete the merchandise purchases budget:

2B. Complete the schedule of expected cash disbursements for merchandise purchases.

3. Complete the cash budget. (Cash deficiency, repayments and interest should be indicated by a minus sign.)

TOPIC # 1: Please provide one real world example of a product cost or a period cost that a company like Raytheon or Delta Airlines will have on its income statement or balance sheet. In your own words, and drawing on your professional experience, provide a description of the cost and say why you think it is a product or period cost.

Some things to consider - how does this relate to your job? How does this relate to a business that you know about? If you don't have a job, then try to relate the topic to a business or industry that you are interested in.

You are evaluating the balance sheet for PattyCake’s Corporation. From the balance sheet you find the following balances: cash and marketable securities = $360,000; accounts receivable = $1,280,000; inventory = $2,180,000; accrued wages and taxes = $540,000; accounts payable = $840,000; and notes payable = $680,000. Calculate PattyCakes’ current ratio. (Round your answer to 2 decimal places.) Calculate PattyCakes’ quick ratio. (Round your answer to 2 decimal places.) Calculate PattyCakes’ cash ratio. (Round your answer to 2 decimal places.)

Understand you can only answer 1 question, but if you give the extra effort I will guarantee a thumbs up.

Which of the following is the proper sequence of the cost allocation process?

A. form cost pools, select an allocation base, identify the cost objectives

B. Identify the cost objectives, form cost pools, select an allocation base

C. Select an allocation base, identify the cost objectives, form cost pools

D. Form cost pools, identify the cost objectives, select an allocation base

Which of the following is not a basis for developing a traditional overhead rate?

A. Machine hours

B. Direct labor hours

C. Number of settings

D. Number of units produced

A measure of an activity used to allocate a cost is a:

A. cost object

B. Cost pool

C. cost objective

D. cost Driver

Which of the following is not a primary focus of activity-base management?

A. To measure the cost of producing a product

B. to improve the effectiveness of an activity

C. to improve the efficiency of an activity

D. To reduce the cost of an activity

Which of the following could be used to allocate factory rent?

A. Machine hours

B. Direct labor hours

C. Number of employees

D. Square footage occupied

Service department fixed costs should be allocated to production departments based on:

A. projected long-run needs of production departments

B. Actual use of production departments

C. projected short-term needs of production departments

D. unitized fixed costs and actual usage by production departments

Use the following variable for next two

                                          Personal                      Maintenance                    assembly                  finishing

Cost of operation              $75,000                      $55,000                           

Number of employees       0                                 25                                   35                               45

Machine hours                  0                                 150                                 500                              300

The maintenance costs allocated to the assembly department are

A. $24,062.50

B. $28,947

C. $34,375

D. $16,740

The personal costs allocated to the maintenance department is:

A. $0

B. $17,857

C. $53,571

D. $11,842

Use the variables for the next two questions

Using ABC, the amount of setup cost allocated to job 1234 was:

A. $400

B. $500

C. $600

D. $700

Using ABC, the amount of inspection cost allocated to job 1234 was:

A. $400

B. $200

C. $300

D. $500

How many steps are in an ABM study?

A. 3

B. 4

C. 5

D. 6             

On January 1, 2018, Cardi Corp. had the following balances (all balances are normal):

The following events occurred during 2018:

1. On January 1, Cardi Corp. declared a 3% stock dividend on its common stock when the market value of the common stock was $11 per share. Stock dividends were distributed on January 31 to shareholders as of January 25.
2. On February 15, Cardi Corp. reacquired 500 shares of common stock for $13 each.
3. On March 31, Cardi Corp. reissued 250 shares of treasury stock for $18 each.
4. On July 1, Cardi Corp. reissued 250 shares of treasury stock for $10 each.
5. On October 1, Cardi Corp. declared full year dividends for preferred stock and $2.00 cash dividends for outstanding shares and paid shareholders on October 15.
6.    On December 15, Cardi Corp. split common stock 2 shares for 1.
7. Net Income for 2018 was $300,000.

Requirements:

1. Prepare journal entries for the transactions listed above.
2. Prepare a Stockholders' section of a classified balance sheet as of December 31, 2018 (after taking into consideration your journal entries)

A property contributed by A is subject to a recourse loan of $775,000 that is assumed by the partnership with a tax basis of $1,850,000 and is valued at $2,578,000. The three partners share profits and losses as follows; 45% to A, 45% to B and 10% to C. The balances of their tax basis capital accounts are: (A-$974,531), (B-$1,197,959) and (C-$398,600). Book Value Capital accounts are: (A-$1,793,700), (B-$1,793,700) and (C-$398,600). Create a schedule of the allocation of the recourse loan among each partner.

Assume a closed economy without Government. However, there exists a financial sector that creates an array of financial assets on which both households and firms invest. Let ? denote the average earnings from these financial assets. The consumption expenditure of the households is influenced by their wage income and the financial income and is given by ? = ?(?, ?); ?? > 0, ?? > 0, where ??, ?? are partial derivatives of consumption with respect to income ? and financial earnings ? respectively. Similarly, the real investment expenditure of firms is given by ? = ?(?, ?); ?? > 0, ?? < 0, where ??, ?? are the partial derivatives of the real investment with respect to income and financial earnings. Note that ?? < 0 implies that the real investment falls as financial earnings for the firm rises. Either using the Keynesian cross model or the Multiplier analysis, answer the following questions.

(i) Identify the “wealth effect” in this model? [2]

(ii) Derive the relationship between output ? and financial earnings ?, and examine the analytical conditions under which the relationship is positive ( ?? ??>0) and negative ( ?? ?? < 0). [15]

(iii) Describe why the scenario where the expansion in output driven by rise in financial earnings, i.e. when ?? ??>0, could make the economy unstable and vulnerable to crisis?

Make-or-Buy Decision

Zion Manufacturing had always made its components in-house. However, Bryce Component Works had recently offered to supply one component, K2, at a price of $25 each. Zion uses 10,000 units of Component K2 each year. The cost per unit of this component is as follows:

Assume that 75% of Zion Manufacturing’s fixed overhead for Component K2 would be eliminated if that component were no longer produced.

Required:

1. CONCEPTUAL CONNECTION: If Zion decides to purchase the component from Bryce, by how much will operating income increase or decrease?
Increase $fill in the blank 2

Which alternative is better?

2. CONCEPTUAL CONNECTION: Briefly explain how increasing or decreasing the 75% figure affects Zion’s final decision to make or purchase the component.

As the percentage of avoidable fixed cost increases (above 75%), total relevant costs of making the component increase, causing the “purchase” decision to be   financially appealing (compared to the “make” option) than it was when the percentage was 75%. In other words, as the percentage increases, difference between the “purchase” and “make” options increases resulting in the “purchase” decision being even   attractive. Alternatively, as the percentage of avoidable fixed costs decreases, the “make” option eventually is   costly and   appealing financially as the “purchase” option. Finally, as the percentage of avoidable fixed cost decreases low enough and the total relevant costs of making the component decrease, the   option becomes the more financially appealing option

3. CONCEPTUAL CONNECTION: By how much would the per-unit relevant fixed cost have to decrease before Zion would be indifferent (i.e., incur the same cost) between “making” versus “purchasing” the component?
$fill in the blank 9