QUESTION 12 (Show all workings)

As at 1 July 2014, Mehta Company had a debit balance in their Accounts Receivable Control account of $35,820 and a credit balance in their Allowance for Doubtful Debts account of $7,190.

On 3 October 2014, the business wrote off the account of Rue Pty Ltd for $3,040 after receiving written confirmation that the customer was declared bankrupt.

Required:

1. Prepare the necessary journal entry to write-off the account of Rue Pty Ltd (ignore any GST effects).

At the end of the year, 30 June 2015, Mehta Company needs to estimate and account for future bad debts. Net credit sales for the year were $821,000 and analysis of previous bad debts indicates that 1.5% of net credit sales will prove uncollectable.

Required:

2. Prepare the necessary journal entry at 30 June 2015.

3. Identify the methods for accounting for bad debts and briefly explain how each works.

1. Assets total $100,000 and liabilities total $20,000. What is the equity of the business?  
   1. $800  
   2. $8,000  
   3. $80,000  
   4. $88,000
   5. None of the above
2. If during the accounting period the assets decreased by $10,000, and equity increased by $2,000, then how did liabilities change?  

1. Increased by $12,000  
2. Increased by $8,000  
3. Decreased by $12,000
4. Decreased by $8,000  
5. Decreased by $6,000

3. If during the accounting period the assets increased by $14,000, and equity increased by $4,000, then how did liabilities change?  

1. Increased by $10,000  
2. Increased by $4,000  
3. Decreased by $4,000
4. Decreased by $10,000  
5. Decreased by $18,000

4. Purchasing equipment on account will have what effect on the accounting equation?  

1. Increase in equipment and a decrease in equity  
2. Increase in equipment and an increase in equity  
3. Increase in equipment and an increase in liabilities  
4. Increase in equipment and a decrease in liabilities  
5. None of the above

5. Services rendered for which cash has not yet been received will have what effect on the components of the accounting equation?  

1. Increase in accounts receivable and a decrease in equity  
2. Increase in accounts receivable and an increase in equity  
3. Decrease in accounts receivable and an increase in equity  
4. Increase in fees earned and a decrease in equity  
5. Decrease in accounts receivable and a decrease in equity

6. Problem #1 Professor Quark opens his own company, Electronic Tutorial Services, and completes the following transactions in June:

• 6/1 Quark invests $12,000 into the business.
• 6/3 Purchased $1,800 of equipment on account.
• 6/4 Paid $360 for a two-year insurance policy.
• 6/6 Purchased office supplies for cash, $300.
• 6/9 Purchased a new computer for $7,500. Paid $1,500 cash agreed to pay the remainder in 30 days.
• 6/10 Billed student Fiona Smith $40 for tutorial services that were performed.
• 6/14 Paid for the equipment purchased on June 3rd.
• 6/25 Received $35 cash from student Bert Bantrum for tutorial services performed.
• 6/30 Student billed on June 10 pays the amount due to Quark.
• 6/30 Quark withdraws $500 for personal use.

Required: Prepare the journal entries to record these transactions. How much cash did Professor Quark have at the end of June?

7. Problem #2 Maria Sanchez started the Merry Mowers lawncare business. She began operations on May 1st and completed the following transactions, which included her initial investment of $8,000 cash. After these transactions, the ledger included the following accounts with normal balances.

• Cash $ 9,440     
• Office Supplies 500        
• Equipment 3,000     
• Accounts Payable 500        
• Notes Payable 2,000     
• Maria Sanchez, Capital 8,000     
• Lawncare Revenue 3,200     
• Gas and Oil Expense 210        

Required: Prepare a balance sheet and income statement for this business at the end of May.

8. Problem #3 Below are accounts listed for September for PC Partners, a company that installs/repairs home computers for customers. The business is owned by Ed Connor. The accounts are listed in alphabetical order. For the month of September, prepare an income statement and a balance sheet.

ACCOUNT BALANCE

Accounts Payable 4,200

Accounts Receivable 8,480

Advertising expense 420

Capital (Ed Connor) at 08/31/04 56,000

Cash 35,460

Entertainment Expense 600

Equipment 15,700

Installation Revenue 15,600

Miscellaneous Revenue 800

Photocopying Expense 150

Rent Expense 1,300

Repair Revenue 8,650

Supplies 8,400

Truck 8,500

Unearned Revenue 760

9. At the end of the accounting period, the business had $4,500 of office supplies on hand. At the beginning of the period, the amount of supplies on hand was $3,000. If the business purchased $12,000 of office supplies during the year, what amount of office supplies were used during year?

1. $16,500  
2. $14,250  
3. $10,500  
4. $ 9,750  
5. None of the above

10. Zach LLP wrote a check to pay an advertising bill for services for the next month. What is the entry?
    1. Debit – Loan Note Payable, Credit – Cash
    2. Debit – Cash, Credit – Account Payable
    3. Debit – Prepaid Advertising, Credit – Cash
    4. Debit – Cash, Credit – Advertising Expense

Stellar manufactures and sells swimsuits for $40.00 each. The estimated income statement for 2017 is as follows:

Sales: $2,000,000, Variable costs: 1,090,000, contribution margin: 910,000. Fixed costs: 765,000. Pretax earnings: 145,000

1.Compute the contribution margin per swimsuit and the number of swimsuits that must be sold to break even. (Round contribution margin per swimsuit to 2 decimal places, e.g. 15.25 and break even swimsuits to 0 decimal places, e.g. 125.)

2.What is the margin of safety in the number of swimsuits?
3.Compute the contribution margin ratio and the breakeven point in revenues. (Round contribution margin ratio to 3 decimal places, e.g. 0.256 and breakeven point to 0 decimal places, e.g. 125.)

4.What is the margin of safety in revenues? (Round answer to 0 decimal places, e.g. 125.)

5.Suppose next year’s revenue estimate is $200,000 higher. What would be the estimated pretax earnings?

6.Assume a tax rate of 30%. How many swimsuits must be sold to earn after-tax earnings of $180,000? (Round answer to 0 decimal places, e.g. 125.)

Explain the difference between a training set and a testing set. Why do we need to differentiate them? Can the same set be used for both purposes? Why or why not? explain with your own words please

Lowell Company makes and sells artistic frames for pictures. The controller is responsible for preparing the master budget and has accumulated the following information for 2020.

Lowell has a labor contract that calls for a wage increase to $10 per hour on April 1. New labor-saving machinery has been installed and will be fully operational by March 1.

Lowell expects to begin the year with 16,350 frames on hand and has a policy of carrying an end-of-month inventory of 100% of the following month’s sales, plus 50% of the second following month’s sales.

Prepare a production budget for Lowell Company by month and for the first quarter of the year.

eTextbook and Media

Prepare a direct labor budget for Lowell Company by month and for the first quarter of the year. The direct labor budget should include direct labor hours. (Round Direct labor hours per unit answers to 1 decimal place, e.g. 52.7.)

Mesmerizing Marketers (MM) is a marketing company that offers a variety of marketing offerings to its customers. Specifically:

• MM will create a TV commercial for $1M, build an app for $500K, and build a Facebook page for $250K. These amounts represent MM’s charges for these items when MM sells them separately to customers. The TV commercial, the app, and the Facebook page are not interrelated; that is, each functions independently of the other offerings.

• If a customer purchases all aforementioned items together, the total cost is $1.5M. Payment terms are 50 percent consideration due at contract signing, with the remaining 50 percent due over the rest of the development period (25 percent at mid-point, 25 percent at completion).

• If the app is downloaded 500K times or more in the first month, there is a one-time bonus of $250K payable to MM.

Stone, a customer, approaches MM with the hopes of reinventing its image to a younger customer base. Stone has a verbal agreement with MM that is based on MM’s unsigned quote to Stone on November 30, 20X5, for one TV commercial, one app, and a Facebook page. The agreement creates enforceable rights and obligations pursuant to MM’s customary business practices. None of these items can be redirected by MM to another customer. MM performed a credit check on Stone and has determined that Stone has the intention and ability to pay MM for fulfilling its portion of the contract. Stone is required to pay MM for performance completed to date if Stone cancels the contract with MM for reasons other than MM’s failure to perform under the contract as promised.

Stone makes a payment on November 30, 20X5, in the amount of $750K pursuant to the agreement. From the date of the quote, it takes MM six months to develop and produce the TV commercial, two weeks to complete the Facebook page, and three months to complete a fully functioning app. MM does not think that the app will be downloaded 500K times in the first month because Stone’s customer base does not quickly accept newly developed technology. On the basis of its experience with similar technology, MM has determined that it takes over three months for Stone’s users to begin to download its apps.

Required

MM’s CFO is trying to understand the new revenue recognition model and has asked you to explain how MM would account for the above scenario under the new standard.

1. How should MM account for the above offering with Stone under the new revenue recognition model?

2. How would your conclusions change if: a. The app sold to Stone is actually downloaded more than 500K times in the first month?

Pronghorn produces one single product, a small reading tablet, and sells it at $100 per unit. Its current annual sales are $200,000. Its annual fixed costs include factory rent, $38,000; depreciation expense; equipment, $10,000; utilities, $18,000; insurance, $8,000. Its variable costs include materials, $30 per unit, and direct labour, $40 per unit. Pronghorn’s income tax rate is 20%.

1.What is the contribution margin per unit?

2.What is the contribution margin ratio?

3.How many units must Pronghorn sell to break even?

4.If Pronghorn would like to earn a profit after tax of $11,000, what should the sales be? At this sales level, what is the degree of operating leverage? What is the margin of safety in unit?

5.If Pronghorn would like to earn a profit after tax that is 8% of sales, what should the sales be? How many units does Pronghorn need to increase from the current sales level?

Whitelands, Inc. had $100 of cash and shareholders’ equity as the result of its initial sale of stock on January 1, 2012. During its first month of operations, Whitelands had the following operating transactions:

Required:
Record the journal entries for the above transactions.
Present Whitelands’ income statement for January 2014.
Report Whitelands’ balance sheet on January 31, 2014.
Close the revenue and expense accounts to retained earnings.

1. the chief audit executive has noticed that some staff auditors have become more proficient in the use of personal computers while other auditors want nothing to do with them. the executive should:

A. disregard the differences

B. Provide training for those individuals interested in improving their skills

C. Discipline the individuals who display no self starting abilities

D. Establish a program for developing the capabilities of the entire internal audit department

Case 2.2

Business Case: Data Chaos Creates Risk

Data chaos often runs rampant in service organizations, such as health care and the government. For example, in many hospitals, each line of business, division, and department has implemented its own IT applications, often without a thorough analysis of its relationship with other departmental or divisional systems. This arrangement leads to the hospital having IT groups that specifically manage a particular type of application suite or data silo for a particular department or division.

Data Management

When applications are not well managed, they can generate terabytes of irrelevant data, causing hospitals to drown in such data. This data chaos could lead to medical errors. In the effort to manage excessive and massive amounts of data, there is increased risk of relevant information being lost (missing) or inaccurate—that is, faulty or dirty data. Another risk is data breaches.

• Faulty data By 2015, 96% of health-care organizations had adopted electronic health records, or EHRs (Office of the National Coordinator for HIT, 2016). It is well known that an unintended consequence of EHR is faulty data. According to a study published in the Journal of the American Medical Association, data in EHR systems may not be as accurate and complete as expected (Conn, 2016). Incorrect lab values, imaging results, or physician documentation lead to medical errors, harm patients, and damage the organization’s accreditation and reputation.
• Data breaches More than 25 million people have been affected by health-care system data breaches since the Office for Civil Rights, a division of the U.S. Department of Health and Human Services, began reporting breaches in 2009. Most breaches involved lost or stolen data on laptops, removable drives, or other portable media. Breaches are extremely expensive and destroy trust.

Accountability in health-care demands compliance with strong data governance efforts. Data governance programs verify that data input into EHR, clinical, financial, and operational systems are accurate and complete—and that only authorized edits can be made and logged.

Vanderbilt University Medical Center Adopts EHR and Data Governance

Vanderbilt University Medical Center (VUMC) in Nashville, TN, was an early adopter of EHR and implemented data governance in 2009. VUMC’s experience provides valuable lessons.

VUMC consists of three hospitals and the Vanderbilt Clinic, which have 918 beds, discharge 53,000 patients each year, and count 1.6 million clinic visits each year. On average, VUMC has an 83% occupancy rate and has achieved HIMSS Stage 6 hospital EHR adoption. HIMSS (Healthcare Information and Management Systems Society, himss.org) is a global, nonprofit organization dedicated to better health-care outcomes through IT. There are seven stages of EHR adoption, with Stage 7 being a fully paperless environment. That means all clinical data are part of an electronic medical record and, as a result, can be shared across and outside the enterprise. At Stage 7, the health-care organization is getting full advantage of the health information exchange (HIE). HIE provides interoperability so that information can flow back and forth among physicians, patients, and health networks (NextGen Healthcare, 2016).

VUMC began collecting data as part of its EHR efforts in 1997. By 2009, the center needed stronger, more disciplined data management. At that time, hospital leaders initiated a project to build a data governance infrastructure.

Data Governance Implementation

VUMC’s leadership team had several concerns.

1. IT investments and tools were evolving rapidly, but they were not governed by HIM (Healthcare Information and Management) policies.
2. As medical records became electronic so they might be transmitted and shared easily, they became more vulnerable to hacking.
3. As new uses of electronic information were emerging, the medical center struggled to keep up.

Health Record Executive Committee

Initially, VUMC’s leaders assigned data governance to their traditional medical records committee, but that approach failed. Next, they hired consultants to help develop a data governance structure and organized a health record executive committee to oversee the project. The committee reports to the medical board and an executive committee to ensure executive involvement and sponsorship. The committee is responsible for developing the strategy for standardizing health record practices, minimizing risk, and maintaining compliance. Members include the chief medical information officer (CMIO), CIO, legal counsel, medical staff, nursing informatics, HIM, administration, risk management, compliance, and accreditation. In addition, a legal medical records team was formed to support additions, corrections, and deletions to the EHR. This team defines procedures for removal of duplicate medical record numbers and policies for data management and compliance.

Costs of Data Failure

Data failures incur the following costs:

• Rework
• Loss of business
• Patient safety errors
• Malpractice lawsuits
• Delays in receiving payments because billing or medical codes data are not available.

Benefits Achieved from Data Governance

As in other industries, in health care, data are the most valuable asset. The handling of data is the real risk. EHRs are effective only if the data are accurate and useful to support patient care. Effective ongoing data governance has achieved that goal at VUMC.

Questions

1. What might happen when each line of business, division, and department develops its own IT apps?
2. What are the consequences of poorly managed apps?
3. What two risks are posed by data chaos? Explain why.
4. What are the functions of data governance in the health-care sector?
5. Why is it important to have executives involved in data governance projects?
6. List and explain the costs of data failure.
7. Why are data the most valuable asset in health care?

Sources: Compiled from NextGen Healthcare (2016), Office of the National Coordinator for HIT (2016), and Conn (2016).

Employee #1 Colin Forth, 40 years old

Annual Salary $80,000

Married with a 10-year-old son

Studied part-time at Humber College for 2 months, and paid tuition fees of $1,500.

Spouse, Emma has $65,000 income

Employee #2 Renata Hoover, 45 years old

Annual Salary $70,000

Studied full-time at University of Toronto for 4 months, paid tuition fees of $4,500

Renata’s 75-year-old father lives with her. Her father qualifies for disability tax credit and has no income.

Both employees have been employed since January 1, 2019.

Pay period—Semi-monthly (for example Jan. 2019 is paid on Jan.15, 2019 & Jan.31 2019).

complete the chart below

3.

Morris Industries manufactures and sells three products (AA, BB, and CC). The sales price and unit variable cost for the three products are as follows:

Their sales mix is reflected as a ratio of 5:3:2. Annual fixed costs shared by the three products are $275,000 per year.

A. What are total variable costs for Morris with their current product mix?

Total variable costs $

B. Calculate the number of units of each product that will need to be sold in order for Morris to break even.

C. What is their break-even point in sales dollars?

Break-even point in sales $

D. Using an income statement format, prove that this is the break-even point. If an amount is zero, enter "0".

Smokey and the Bandit produces outdoor activity clothing. The product line consists of pants, jackets, tops, and accessories. Data has been collected related to direct materials and direct labor for the four product lines. Smokey and the Bandit has also collected information on four possible cost drivers (units, batches, machine hours, labor hours). All this information is listed below. Construct a spreadsheet that will allocate overhead for each of these alternative drivers and will calculate the total per unit cost for each product line. Use the VLOOKUP function (show them) when constructing the spreadsheet so that you can determine the effect of different cost drivers on the overhead allocated and the resulting cost per unit.   

Total overhead cost to be allocated: $321,560

After constructing your spreadsheet answer the following questions?

1. What is the total cost per unit of each product line when machine hours are used as the cost driver for overhead allocation?
2. How much overhead is allocated to Jackets when direct labor hours are used as the cost driver for overhead allocation?
3. What is the total cost of Tops when direct labor hours are used as the cost driver for overhead allocation?
4. What is the total cost per unit of Accessories when the number of batches is used as the cost driver for overhead allocation?
5. What is the allocation rate when units are used as the cost driver?
6. If you are the manager of the Jackets product line which cost driver would you prefer? Why?
7. Currently the OH cost are being allocated based on DL hours. If the company decides to use units as the cost driver how would you react if you are the Accessories product line manager?

Pls do not handwritten for easy reading === ===

Question:-
CC Ltd, a company incorporated in Singapore with Dec 31 year ends, acquired a retail shop on 2 Jan 20x1 for $600,000 with the intention of renting it out. The property is leasehold with 20 years remaining on the lease. It has a zero residual value. On 1 Jul 20x1, CC Ltd rented out the retails shop to an unrelated company for a monthly rental of $8,000, payable at the end of each month. After 2 yrs, CC Ltd managed to terminate the lease with the existing tenant on 30 Jun 20x3. CC Ltd used the retail shop for its own operations from 1 Jul 20x3 onwards.
The market value of CC Ltd's retail shop was determined as follows:-
31 Dec 20x1: $800,000
31 Dec 20x2: $700,000
1 Jul 20x3 : $740,000

CC Ltd adopts the fair model under FRS 40 Investment Property and adopts the cost model under FRS 16 Property, Plant and equipment. CC Ltd depreciates all its assets on a straight-line where applicable.

Required:
Illustrate the accounting for the retail shop by preparing the journal entries(with journal narratives) to record the various events relating to CC Ltd's retail shop from 2 Jan 20x1 to 31 Dec 20x3. Please round your answer to the nearest dollar.