Steve is a contract carrier for the United States Postal Service. He has been hauling mail for nearly thirty years. His current contract is to haul mail between 20 cities in the eleven western states. Steve currently has a fleet of 16 tractors and employs over 20 drivers. He does not own any trailers as all of the trailers are owned by the Postal Service. Steve’s drivers drive scheduled routes between the cities.

The Postal Service has just awarded Steve an additional contract that will require Steve to purchase six new tractors. He competed aggressively for the contract and spent a total of $45,000 in costs to prepare and submit the bid. Steve has narrowed his decision of which truck to buy down to two choices. He can purchase Volvo tractors or Kenworth tractors. The Volvo tractors would cost $285,000 each where the Kenworth would only cost $255,000 each. Both models would be depreciated to zero over 5 years using straight-line depreciation.

The Postal Service contract pays Steve $2.85 per mile. Costs associated with each new tractor include wages for the drivers at $80,000 per truck per year and regular service and maintenance at a cost of $1,750 per month per truck. Fuel costs vary as Volvo is more fuel-efficient than the Kenworth. Assume the tractors will be driven 105,000 miles per year and diesel costs will average about $3.25 per gallon. The Volvo is expected to get 3.6 miles per gallon while the Kenworth will get 3.3 miles per gallon. Insurance and licensing is expected to cost $6,000 per truck per year and is the same for both trucks.

Both models will require a complete engine overhaul at 300,000 miles and Steve estimates that this will be during the third year of ownership. The cost of an overhaul on the Volvo is estimated at $45,000 per truck while the cost on the Kenworth is estimated at $52,000 per truck. All other maintenance costs are believed to be the same for each tractor.

Steve expects to keep the trucks for six years after which time he will sell them. He will not overhaul the tractors in year 6 as it will not increase their value. He predicts that he will be able to sell the Volvo’s for $60,000 each, but the Kenworth will be worth only $50,000 each. Steve’s cost of capital is 14%. The company is in the 34% tax bracket.

When Steve got started in the business his first truck was a Volvo. While they cost more Steve believes that they are a better truck and he love’s the sleek and powerful look of a Volvo. Because of this he is leaning towards buying the Volvo tractors. But after hearing that you have learned about capital budgeting in your Finance class at UVU he wants to take advantage of your expertise. Steve has asked you to analyze his choices and give him some advice on what he should do.

Prepare an analysis and professional report for Steve that includes the following items:

1.         Determine the cash flows associated with the different trucks for each year of the project.

2.         Calculate the PB period, Discounted PB, IRR, and NPV for the two alternatives. Explain to Steve what the different methods mean and how he can use them to help him make a decision.

Prince Corporation holds 75 percent of the common stock of Sword Distributors Inc., purchased on December 31, 20X1, for $2,220,000. At the date of acquisition, Sword reported common stock with a par value of $950,000, additional paid-in capital of $1,300,000, and retained earnings of $550,000. The fair value of the noncontrolling interest at acquisition was $740,000. The differential at acquisition was attributable to the following items:

During 20X2, Prince sold a plot of land that it had purchased several years before to Sword at a gain of $22,400; Sword continues to hold the land. In 20X6, Prince and Sword entered into a five-year contract under which Prince provides management consulting services to Sword on a continuing basis; Sword pays Prince a fixed fee of $85,000 per year for these services. At December 31, 20X8, Sword owed Prince $21,250 as the final 20X8 quarterly payment under the contract.

On January 2, 20X8, Prince paid $240,000 to Sword to purchase equipment that Sword was then carrying at $280,000. Sword had purchased that equipment on December 27, 20X2, for $420,000. The equipment is expected to have a total 15-year life and no salvage value. The amount of the differential assigned to goodwill has not been impaired.

At December 31, 20X8, trial balances for Prince and Sword appeared as follows:

As of December 31, 20X8, Sword had declared but not yet paid its fourth-quarter dividend of $5,000. Both companies use straight-line depreciation and amortization. Prince uses the fully adjusted equity method to account for its investment in Sword.

Required:
a. Compute the amount of the differential as of January 1, 20X8.
  

b. Verify the balance in Prince’s Investment in Sword Distributors account as of December 31, 20X8.
  

c. Present all consolidation entries that would appear in a three-part consolidation worksheet as of December 31, 20X8. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your answers to nearest whole dollar amount.)
  

d. Prepare and complete a three-part worksheet for the preparation of consolidated financial statements for 20X8. (Values in the first two columns (the "parent" and "subsidiary" balances) that are to be deducted should be indicated with a minus sign, while all values in the "Consolidation Entries" columns should be entered as positive values. For accounts where multiple adjusting entries are required, combine all debit entries into one amount and enter this amount in the debit column of the worksheet. Similarly, combine all credit entries into one amount and enter this amount in the credit column of the worksheet.)
  

In making the adjusting entry for uncollectible accounts, a company may use the percent of sales method or the percent of receivables method. Briefly describe each method and explain which method you would prefer to use and why?

On January 1, 2018, Tennessee Harvester Corporation issued debenture bonds that pay interest semiannually on June 30 and December 31. Portions of the bond amortization schedule appear below:

Required:
1. What is the face amount of the bonds?
2. What is the initial selling price of the bonds?
3. What is the term to maturity in years?
4. Interest is determined by what approach?
5. What is the stated annual interest rate?
6. What is the effective annual interest rate?
7. What is the total cash interest paid over the term to maturity?
8. What is the total effective interest expense recorded over the term to maturity?

Problem:

On November 1, 2019, Norwood borrows $200,000 cash from a bank by signing a five-year installment note bearing 8% interest. The note requires equal payments of $50,091 each year on October 31.

Question:

Record the first installment payment on October 31, 2020. Assume no reversing entries were prepared. (PS i already looked for the answer in chegg and tried them but it keeps saying it's wrong... the two accounts used in this problem are interest expense and interest payable. I got interest expense which is the $13,333, but interest payable isn't the same and I cannot seem to find the right answer)

Aaron Company has a process costing system. All materials are introduced when conversion costs reach 50 percent. The following information is available for physical units during March.

Required

Compute the equivalent units for materials costs and for conversion costs using the weighted-average method.

Compute the equivalent units for materials costs and for conversion costs using the FIFO method.

The company president has been under considerable pressure to increase income. He tells the controller to change the estimated completion for ending work in process to 60 percent (from 40 percent).

What effect will this change have on the unit costs of units transferred to finished goods in March?

Would this be ethical?

Is this likely to be a successful strategy for affecting income over a long period of time?

The ABC Corporation is a large multinational company that has facilities (both manufacturing and distribution) located in many U.S. states and in overseas countries. The corporation’s long-serving chief financial officer (CFO) just retired, and his replacement is reviewing the corporation’s economic balance sheet. She discovers that the corporation leases many of its distribution facilities and relies heavily on long-term debt for financing. She vaguely recalls having heard about implicit taxes and tax clienteles and would like these concepts explained and then applied to her observations to determine if the corporation is bearing implicit taxes and whether the corporation is in the right clientele.

Federal Semiconductors issued 11% bonds, dated January 1, with a face amount of $830 million on January 1, 2018. The bonds sold for $767,557,868 and mature on December 31, 2037 (20 years). For bonds of similar risk and maturity the market yield was 12%. Interest is paid semiannually on June 30 and December 31. Federal determines interest at the effective rate. Federal elected the option to report these bonds at their fair value. On December 31, 2018, the fair value of the bonds was $750 million as determined by their market value in the over-the-counter market. Assume the fair value of the bonds on December 31, 2019 had risen to $756 million.

Required:

Complete the below table to record the following journal entries.
1. & 2. Prepare the journal entry to adjust the bonds to their fair value for presentation in the December 31, 2018, balance sheet, and adjust the bonds to their fair value for presentation in the December 31, 2019, balance sheet. Federal determined that one-half of the increase in fair value was due to a decline in general interest rates.

1.            Why, oh Why . . .

Why are the itemized deductions what they are? Why allow home mortgage interest, but not credit card interest? Why allow medical expense deductions, not school expense deductions? Why allow state and local income and property taxes, but not state and local sales taxes? Why, oh why, oh why? What are your thoughts? Any itemized deductions you think should not be included, or that are not deductible but be? Why? Can you make sense out of the present scheme and the six major groups (medical, local taxes, some interest, casualty, contributions, miscellaneous)?

2.            AGI and "above the line" expenses vs. itemized deductions

The adjusted gross income number (AGI) is an important one. It is said it is always better for a deduction to be "for" AGI, i.e., deductible in arriving at AGI. These are also called "above the line" deductions. Why is it better? Can you name any specific benefits to being deductible above the AGI line?   Discuss one or two "above the line" expenses or adjustments to income from the front page of the 1040. Why policy reason do you think made these above the line deductions instead of as itemized deductions?

You are engaged as an audit senior in the public accounting firm of Millie and Partners. As part of the planning process for the audit of Maxie Ltd for the financial year ended 30 June 2018, you requested the minutes of the Board of Directors meetings for the financial year and noted the following: Date of Meeting Extract from Board of Directors Meetings for the year 2017-18 1/9/2017 The board agreed that in order to attract new customers and therefore increase sales, any new customers from 1/9/2017 would receive three months credit before their debt becomes overdue, rather than the one month credit previously allowed. 1/11/2017 The board agreed that a new ‘bonus scheme’ would be implemented from 1/11/2017, which would provide directors with a 5% bonus on profits if they could exceed last year’s profit by 20%. 1/6/2018 The board agreed to revalue land and buildings upwards by 50% in the financial statements at 30/6/2018, in accordance with a property valuation undertaken at the company’s request. Required: Discuss the potential risk of each of the above items from the board of directors meetings and the impact each would have on your audit plan for 30 June 2018

Lindon Company is the exclusive distributor for an automotive product that sells for $42.00 per unit and has a CM ratio of 30%. The company’s fixed expenses are $264,600 per year. The company plans to sell 24,400 units this year.

Required:

1. What are the variable expenses per unit? (Round your "per unit" answer to 2 decimal places.)

2. What is the break-even point in unit sales and in dollar sales?

3. What amount of unit sales and dollar sales is required to attain a target profit of $138,600 per year?

4. Assume that by using a more efficient shipper, the company is able to reduce its variable expenses by $4.20 per unit. What is the company’s new break-even point in unit sales and in dollar sales? What dollar sales is required to attain a target profit of $138,600?

Q . A company is maufacturing 5000 units for the period. Actual and standard direct materials information are: -

Standard Costs: 1.5 pounds per unit; purchase price is 0.78 per pound. Actual Costs: 8000 pounds purchased and used; purchase price is 0.75 per pound. Find material price variance. Also tell if it's favourable or unfavourable.

Q. A company is maufacturing 5000 units for the period. Actual and standard direct materials information are: -

Standard Costs: 1.5 pounds per unit; purchase price is 0.78 per pound. Actual Costs: 8000 pounds purchased and used; purchase price is 0.75 per pound. Find material usage variance. Also tell if it's favourable or unfavourable.?

Q.  A company is maufacturing 5000 units for the period. The following are actual and standard direct labor information:

Standard Costs: 2.5 hours per unit; hourly rate is $20.25 per hour. Actual Costs: 13000 actual hours worked; hourly rate is $19.75 per hour. Find the total direct labor cost variance. Also tell if it's favorable or unfavorable?

How does England treat special assessment debt compared to the U.S?

You are the owner of a very small business that sells gourmet coffee.

You sell only one product, a 12-ounce bag of whole-bean French roast coffee. You sell each bag of coffee for $14 each, but due to the fluctuation in commodity prices, the price you pay your supplier to stock the product is constantly changing. In your first month of operations, you bought bags of coffee from your supplier in the following order: (a) 1 units at $2 each on January 1, (b) 7 units at $4 each on January 8, and (c) 2 units at $8 each on January 29.

Assuming you sold 6 units during the month, calculate the cost of goods available for sale, ending inventory, and cost of goods sold under the (a) FIFO, (b) LIFO, and (c) weighted average cost flow assumptions. Assume a periodic inventory system is used. (Round "Cost per Unit" to 2 decimal places.)