A unit of welding machine costs P48,500 with an
estimated life of 5 years. Its salvage value is P2.000.00. Find its
book value after 2 years by sinking fund method if the
rate is 8% annually.
*CASH FLOW Diagram Needed
In: Accounting
Alberta Corp. (Alberta) manufactures hair shampoo using two departments: a mixing department and a bottling department. Shampoo manufacturing starts with the addition of all of the ingredients in the mixing department. Direct labour and overhead are added evenly throughout the month. Alberta uses the first-in, first-out method of process costing and provided the following information for the month of October.
Beginning work-in-process (WIP) inventory in the mixing department consisted of 750 units that were 15% of the way through the process. This beginning inventory included costs of $5,150 for direct materials, direct labour of $6,250 and overhead of $8,315.
During October, direct materials of $28,950 were added to the mixing department, and
$32,650 in direct labour costs and $55,450 in overhead costs were incurred. At the end of October, 13,500 completed units were transferred to the bottling department, and the remaining 1,650 units in the mixing department were 55% complete.
Required:
Calculate the value of WIP inventory in the mixing department at the end of October.
In: Accounting
Miller Company acquired an 80 percent interest in Taylor Company on January 1, 2016. Miller paid $896,000 in cash to the owners of Taylor to acquire these shares. In addition, the remaining 20 percent of Taylor shares continued to trade at a total value of $224,000 both before and after Miller’s acquisition.On January 1, 2016, Taylor reported a book value of $626,000 (Common Stock = $313,000; Additional Paid-In Capital = $93,900; Retained Earnings = $219,100). Several of Taylor’s buildings that had a remaining life of 20 years were undervalued by a total of $83,400.During the next three years, Taylor reports income and declares dividends as follows:YearNet IncomeDividends2016$73,100$10,500201794,50015,8002018105,30021,100Determine the appropriate answers for each of the following questions:A.What amount of excess depreciation expense should be recognized in the consolidated financial statements for the initial years following this acquisition?B.If a consolidated balance sheet is prepared as of January 1, 2016, what amount of goodwill should be recognized?C.If a consolidation worksheet is prepared as of January 1, 2016, what Entry S and Entry A should be included?D.On the separate financial records of the parent company, what amount of investment income would be reported for 2016 under each of the following accounting methods?The equity method.The partial equity method.The initial value method.E. On the parent company’s separate financial records, what would be the December 31, 2018, balance for the Investment in Taylor Company account under each of the following accounting methods?The equity method.The partial equity method.The initial value method.F. As of December 31, 2017, Miller’s Buildings account on its separate records has a balance of $844,000 and Taylor has a similar account with a $316,500 balance. What is the consolidated balance for the Buildings account?G. What is the balance of consolidated goodwill as of December 31, 2018?H.Assume that the parent company has been applying the equity method to this investment. On December 31, 2018, the separate financial statements for the two companies present the following information:Miller CompanyTaylor CompanyCommon stock$527,500$313,000Additional paid-in capital295,40093,900Retained earnings, 12/31/18654,100444,600a.What amount of excess depreciation expense should be recognized in the consolidated financial statements for the initial years following this acquisition?b. If a consolidated balance sheet is prepared as of January 1, 2016, what amount of goodwill should be recognized?a.Amount of excess depreciationb.Amount of goodwillIf a consolidation worksheet is prepared as of January 1, 2016, what Entry S and Entry A should be included?d. On the separate financial records of the parent company, what amount of investment income would be reported for 2016 under each of the following accounting methods?e. On the parent company’s separate financial records, what would be the December 31, 2018, balance for the Investment in Taylor Company account under each of the following accounting methods?Show lessd. Investment Incomee. Investment BalanceThe equity methodThe partial equity methodThe initial value methodf. As of December 31, 2017, Miller’s Buildings account on its separate records has a balance of $844,000 and Taylor has a similar account with a $316,500 balance. What is the consolidated balance for the Buildings account?g. What is the balance of consolidated goodwill as of December 31, 2018?f.Consolidated balanceg.Consolidated balanceAssume that the parent company has been applying the equity method to this investment. On December 31, 2018, the separate financial statements for the two companies present the following information:Miller CompanyTaylor Company Common stock$527,500$313,000 Additional paid-in capital295,40093,900 Retained earnings, 12/31/18654,100444,600
What will be the consolidated balance of each of these accounts?Show lessCommon stockAdditional paid-in capitalRetained earnings, 12/31/18
In: Accounting
Martin Company and Winter Company are each merchandising companies applying for nine-month bank loans in order to finance the acquisition of new equipment. Both companies are seeking to borrow the amount of $210,000 and have submitted the following balance sheets with their loan application.
MARTIN COMPANY | ||||
CURRENT ASSETS: | ASSETS | |||
Cash | $57,000 | |||
Accounts receivable | 153,000 | |||
Inventories | 162,000 | |||
Short-term prepayments | 6,000 | |||
Total current assets | $ 378,000 | |||
PLANT AND EQUIPMENT: | ||||
Land | $150,000 | |||
Building | $600,000 | |||
Less: Accumulated depreciation | 90,000 | 510,000 | ||
Store equipment | 180,000 | |||
Less: Accumulated depreciation | 45,000 | 135,000 | ||
Total plant and equipment | 195,000 | |||
Total assets | $1,173,000 |
LIABILITIES & OWNER'S EQUITY | |||
CURRENT LIABILITIES | |||
Accounts payable | $135,000 | ||
Accrued wages payable | 45,000 | ||
Total current liabilities | $180,000 | ||
Long-term liabilities: | |||
Mortgage payable (due in 13 months) | 330,000 | ||
TOTAL LIABILITIES | $510,000 | ||
Owner’s equity: | |||
Steven Martin, capital | 663,000 | ||
Total liabilities & owner’s equity | $1,173,000 |
WINTER COMPANY BALANCE SHEET | |||
Current Assets | |||
Cash | $384,000 | ||
U.S. government bonds | 210,000 | ||
Accounts receivable | 603,000 | ||
Inventories | 567,000 | ||
Total current assets | $ 1,764,000 | ||
PLANT AND EQUIPMENT: | |||
Land | $180,000 | ||
Building & Equipment | $1,230,000 | ||
Less: Accumulated depreciation | 180,000 | 1,050,000 | |
Total plant & equipment | 1,230,000 | ||
Total assets | $2,994,000 | ||
CURRENT LIABILITIES | |||
Notes payable | $600,000 | ||
Accounts payable | 480,000 | ||
Miscellaneous accrued liabilities | 180,000 | ||
Total current liabilities | $1,260,000 | ||
Long-term liabilities: | |||
Mortgage payable (due in 10 years) | 420,000 | ||
TOTAL LIABILITIES | $1,680,000 | ||
Owner’s equity: | |||
Jack Winter, capital | 1,314,000 | ||
Total liabilities & owner’s equity | $2,994,000 |
Write 600 words analysis and response.
From the viewpoint of a bank loan officer, to which company would you prefer to make a $210,000 nine-month loan? Explain. Include in your answer a discussion of the ability of each company to meet its obligations in the near future
In: Accounting
How can a compensation package, which includes stock options, serve as an incentive to employees?
In: Accounting
Mini Case #1: Capital Budgeting at Rio Negro, Inc.
Assignment Overview Rio Negro, Inc.
(RNI) is in the business of transporting cargo between ports in California and Washington. Its fleet includes a small dry-cargo vessel, the Maracas. The Maracas is 25 years old and badly in need of an overhaul. It is March 2016, and Michael John, the finance director, has just been presented with a proposal that would require the one-time expenditures shown below in Table 1. If the proposal is accepted, these expenditures will be made in the next few days. Mr. John believes that all these outlays could be depreciated for tax purposes in the seven-year MACRS class (see Table 2 below for rates). Overhaul of the Maracas will begin as soon as the expenditures in
Table1 are made, but the vessel will be out of service for several months. The overhauled vessel would resume commercial service in one year. RNI’s chief engineer’s estimates of the post-overhaul operating costs are in
Table 3. In addition to the overhaul described above, the chief engineer suggests installation of a brand- new engine and control system. Installation of this new engine would cost an extra $600,000 (This additional outlay would also qualify for tax depreciation in the seven-year MACRS class.). However, if the additional equipment is installed, it would result in reduced fuel, labor, and maintenance costs as shown in
Table 4. The operating cost estimates in Tables 3 and 4 are current for March 2016. However, these costs will increase with inflation, which is forecasted at 1.25% a year. Depreciation and operating costs attributable to the overhaul of the Maracas will begin one year after the vessel is put back into commercial service. The revenues from operating the vessel will be the same for both types of overhaul. Even with the proposed overhaul, the Maracas cannot continue forever. After the overhaul, its remaining useful life is estimated to be only 12 years. Its salvage value when finally taken out of service will be trivial. Thus, Mr. John feels it is unwise to proceed without also considering the purchase of a new vessel. Racette & Sons (R&S), a Colorado shipyard, has approached RNI with a design incorporating a Kort nozzle, extensively automated navigation and power control systems, and much more comfortable accommodations for the crew. R&S is offering the new vessel for a fixed price of $3,000,000, payable half immediately and half on delivery in one year. Estimated annual operating costs of the new vessel are in Table 5. The operating cost estimates in the table are current for March 2016, but will increase with inflation. The crew would require additional training to handle the new vessel’s more complex and sophisticated equipment. Training would result in a one-time cost of $50,000 payable one year following delivery of the new vessel. This cost is tax deductible. The estimated operating costs for the new vessel assume that it would be operated in the same way as the Maracas. However, the new vessel will be able to handle a larger load on some routes, which is expected to generate additional revenues of approximately $175,000 per year in the first year of operation. These revenues are expected to grow at the rate of inflation. Revenues and operating costs from the new vessel will begin one year after it is delivered. The new vessel is estimated to have a useful service life of 20 years, but it will be depreciated for tax purposes according to the 7-year MACRS schedule. The new vessel is not expected to have any resale value at the end of its 20-year useful life. All revenues and costs (including depreciation) associated with the new vessel will begin one year after it is delivered. The Maracas is carried on RNI’s books at a book value of only $100,000 and the book value of the spare parts is $40,000. The Maracas could probably be sold now “as is,” together with its extensive inventory of spare parts, for $200,000. Mr. John stepped out on the foredeck of the Maracas as she chugged down the Cook Inlet. “A rusty old tub,” he muttered, “but she’s never let us down. I’ll bet we could keep her going until next year while Racette & Sons are building her replacement. We could use up the spare parts ($40,000) to keep her going and we should even be able to sell or scrap her for book value when her replacement arrives.” RNI evaluates capital investments of this type using a 8.5% cost of capital. (This is a nominal, not real, rate.) RCI’s tax rate is 35%.
Table 1: Overhaul Expenditures Overhaul engine and generators $340,000 Replace radar and other electronic equipment 75,000 Repairs to hull and superstructure 310,000 Painting and other repairs 95,000 $820,000 Table 2: Depreciation (in %) for the 7-year Modified Accelerated Cost Recovery System Year 1 14.29 Year 2 24.49 Year 3 17.49 Year 4 12.49 Year 5 8.93 Year 6 8.93 Year 7 8.93 Year 8 4.45 Table 3: Post-overhaul Operating Costs (Basic Overhaul) Fuel $450,000 Labor and benefits 480,000 Maintenance 141,000 Other 110,000 $1,181,000 Table 4: Post-overhaul Operating Costs (Overhaul plus new engine & control system) Fuel $400,000 Labor and benefits 405,000 Maintenance 105,000 Other 110,000 $1,020,000 Table 5: Operating Costs of New Vessel Fuel $380,000 Labor and benefits 330,000 Maintenance 70,000 Other 105,000 $885,000 Guidelines for Case Analysis The following aids are permitted for this analysis: You may use internet sources, books, all posted materials (including Discussion Board Q&A), and your notes. Any other aids are unauthorized and their use constitutes a violation of academic integrity.
1. Introduction
2. Analysis
3. Conclusion
The introduction sets the stage for the work to follow and should consist of a short paragraph of the key problem(s) or issue(s) that your analysis addresses. The analysis will constitute the bulk of the written presentation and will be a direct response to the questions below. Use clear, concise, and complete sentences. Do not use bullet points or numbered paragraphs. The conclusion should be a short paragraph that summarizes the key points of the analysis. Your report should not exceed five pages of double-spaced text with 1 inch margins at the sides, top, and bottom of the page. This does not include exhibits of your computations. You may submit one Excel Spreadsheet that contains all your exhibits, clearly labeled, and appropriately referenced in the text of your report. Your analysis of “Rio Negro, Inc.” should consist of answers to the questions below. Do not write the questions verbatim in your report. Instead, write a brief introductory statement that summarizes the question before you proceed with your analysis.
4. Calculate the present value of the proposed overhaul of the Maracas, with and without the new engine and control system. Should RNI do the basic overhaul or the expanded overhaul with the new engine and control system? For the moment, ignore the option to purchase a new vessel (you will evaluate that option in question 2 below). Write a few paragraphs giving your answer and clearly explaining your reasoning and computations; show detailed computations in your Excel spreadsheet labeled Exhibit 1.
5. Calculate the present value of buying and operating the new vessel. What, if any, additional information would be useful to you in your analysis? Write a few paragraphs giving your answer and clearly explaining your reasoning and computations; show detailed computations in your Excel spreadsheet labeled Exhibit 2.
6. Calculate the equivalent annual costs of (a) overhauling and operating the Maracas for 12 more years (with and without the new engine and control system) and (b) buying and operating the proposed replacement vessel for 20 years. You should use the real discount rate for this analysis. Based on your answer, what should RNI do? Write one to two paragraphs giving your answer and clearly explaining your reasoning and computations; show detailed computations in your Excel spreadsheet labeled Exhibit 3.
7. Why is the equivalent annual cost method potentially useful in decision making in this case? Why would you use the real discount rate to compute the EAC? What problem(s) do you see with using the equivalent annual cost method to evaluate RNI’s options? One to two paragraphs. Your report is intended for the senior management of Rio Negro, Inc., so be sure that you write in a professional style that is easy to follow.
Can you please answer question 5 only? Thanks!
In: Accounting
Interest Expenses must be included in the cash flow statement using indirect method?If yes, in which column?
In: Accounting
What are some unwritten rules for auditors and accountants who plan to engage in forensic accounting and fraud examination, as relates to evaluating the internal controls.
In: Accounting
No phot or handwriting (managerial accounting)
You are also required to compare the Flexible Budget with your Actual Results showing the Variance in a tabular form.
In: Accounting
No handwriting or photo (tax accounting)
a-Explain the different concepts of income from accounting, economics and taxation perspectives
b-What is the difference between deductions for and deductions from adjusted gross income AGI under US tax law? Give two examples of each deduction
In: Accounting
What are the two most common measures of cash?
A. Cash position and accounts payable
B. Cash (and cash equivalents) and cash flow from operations
C. Accounts receivable and working capital
D. Earnings per share and dividends per share
In: Accounting
No handwriting and photo (managerial accounting)
a-To makes income taxable, income must be realized and recognized. Explain in your own words the difference between income realization and income recognition, then provide a short numerical example to indicate the difference
b-Illustrate the concept of ROI with a suitable numerical example. How ROI is different from Residual Income? Explain in your own words
In: Accounting
What does cash on hand measure?
A. The value at which an asset is carried on the company’s financial “books” and shown on the Balance Sheet.
B. The cash generated by a company’s core operations.
C. Highly liquid assets, such as money market funds or government bonds, that are easily converted into cash within 90 days without risk of a change in value.
D. Cash on hand measures the amount of available cash and low-risk, liquid cash-like assets you can convert to cash in 90 days or less.
In: Accounting
No handwriting or photo (tax accounting)
To make income taxable, income must be realized and recognized. Explain in your own words the difference between income realization and income recognition, then provide a short numerical example to indicate the difference
In: Accounting