Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $80 per unit. Variable expenses are $40.00 per unit, and fixed expenses total $180,000 per year.

Required:

Answer the following independent questions:

1.What is the product's CM ratio?

2. Use the CM ratio to determine the break-even point in dollar sales.

3. Due to an increase in demand, the company estimates that sales will increase by $53,000 during the next year. By how much should net operating income increase (or net loss decrease) assuming that fixed expenses do not change?

4. Assume that the operating results for last year were:

a. Compute the degree of operating leverage at the current level of sales. (Round your answer to 2 decimal places.)

b. The president expects sales to increase by 17% next year. By what percentage should net operating income increase? (Round intermediate calculations and final answer to 2 decimal places.)

Data concerning Ulwelling Corporation's single product appear below:

Fixed expenses are $1,054,000 per month. The company is currently selling 9,800 units per month.

The marketing manager would like to introduce sales commissions as an incentive for the sales staff. The marketing manager has proposed a commission of $8 per unit. In exchange, the sales staff would accept an overall decrease in their salaries of $100,000 per month. The marketing manager predicts that introducing this sales incentive would increase monthly sales by 500 units.

Required:

What should be the overall effect on the company's monthly net operating income of this change? (Negative amount should be indicated by a minus sign.)

Transit Airlines provides regional jet service in the Mid-South. The following is information on liabilities of Transit at December 31, 2018. Transit’s fiscal year ends on December 31. Its annual financial statements are issued in April.

1. Transit has outstanding 7.6% bonds with a face amount of $79 million. The bonds mature on July 31, 2027. Bondholders have the option of calling (demanding payment on) the bonds on July 31, 2019, at a redemption price of $79 million. Market conditions are such that the call option is not expected to be exercised.

2. A $21 million 9% bank loan is payable on October 31, 2024. The bank has the right to demand payment after any fiscal year-end in which Transit’s ratio of current assets to current liabilities falls below a contractual minimum of 1.9 to 1 and remains so for 6 months. That ratio was 1.75 on December 31, 2018, due primarily to an intentional temporary decline in parts inventories. Normal inventory levels will be reestablished during the sixth week of 2019.

3. Transit management intended to refinance $42 million of 7% notes that mature in May of 2019. In late February 2019, prior to the issuance of the 2018 financial statements, Transit negotiated a line of credit with a commercial bank for up to $38 million any time during 2019. Any borrowings will mature two years from the date of borrowing.

4. Transit is involved in a lawsuit resulting from a dispute with a food caterer. On February 13, 2019, judgment was rendered against Transit in the amount of $48 million plus interest, a total of $49 million. Transit plans to appeal the judgment and is unable to predict its outcome though it is not expected to have a material adverse effect on the company.

Required: 1. How should the 7.6% bonds be classified by Transit among liabilities in its balance sheet?

2. How should the 9% bank loan be classified by Transit among liabilities in its balance sheet?

3. How should the 7% notes be classified by Transit among liabilities in its balance sheet? 4. How should the lawsuit be reported by Transit?

5. Calculate the total current liabilities, total long-term liabilities, and total liabilities of a classified balance sheet for Transit Airlines at December 31, 2018. Transit's accounts payable and accruals were $53 million.

Complete this question by entering your answers in the tabs below.

• Req 1 to 4
• Req 5

How should the 7.6% bonds, 9% bank loan and 7% notes be classified by Transit among liabilities in its balance sheet. How should the lawsuit be reported by Transit? (Enter your answers in millions.)

Calculate the total current liabilities, total long-term liabilities, and total liabilities of a classified balance sheet for Transit Airlines at December 31, 2018. Transit's accounts payable and accruals were $53 million. (Enter your answers in millions.)

Mahugh Corporation, which has only one product, has provided the following data concerning its most recent month of operations:

Required:

a. What is the unit product cost for the month under variable costing? (Do not round intermediate calculations.)

b.  What is the unit product cost for the month under absorption costing?

c.  Prepare a contribution format income statement for the month using variable costing.

d.  Prepare an income statement for the month using absorption costing.

Tutorial 3 Question 1 (24 Marks – 43 Minutes) Supp 2013 Nov Jonca CC manufactures a single product in a single process and uses a process costing system. The following information for March 2013 is available: Work in process - 1 March 2013 45 000 units - Material - 100% complete N$180 000 - Conversion costs - 60% complete N$78 750 Material issued for 186 000 units N$651 000 Conversion costs N$381 915 Units completed 160 500 units Work in process - 31 March 2013 27 000 units - Material - 100% complete - Conversion costs - 40% complete I. Material is added at the beginning of the process. Conversion costs are incurred evenly throughout the process. II. Normal spoilage is estimated at 10% of input. III. Losses occur when the process is 50% complete. Page 20 of 66 IV. The first-in-first-out (FIFO) method of inventory valuation is used. REQUIRED: Marks Prepare the following statements for March 2013: 1.1 Quantity statement (inclusive of equivalent units) 11 1.2 Production cost statement per unit 4 1.3 Cost allocation statement 9 TOTAL MARKS 24

Deep Drilling & Boring Inc., which follows IFRS, offers ten-year, 6% convertible bonds (par $1,000). Interest is paid annually on the bonds. Each $1,000 bond may be converted into 50 common shares, which are currently trading at $17 per share. Similar straight bonds carry an interest rate of 8%. One thousand bonds are issued at 91.

Required

1. Assume Deep Drilling & Boring Inc. decides to use the residual method and measures the debt first. Calculate the amount to be allocated to the bond and to the option.

2. Prepare the journal entry at date of issuance of the bonds under IFRS.

3. Assume that after six years, when the carrying amount of the bonds was $933,757, the

   holders of the convertible debt decided to convert their convertible bonds before the

   bond maturity date. Prepare the journal entry to record the conversion.

4. How many shares were issued at the conversion?

Example 6-5

The journal entry to record the payroll from Figure 6.1, on pages 6-2 and 6-3, would be:

Example 6-7

The journal entry to record the payroll tax entry from Figure 6.1 on pages 6-2 and 6-3 would be (assume a SUTA tax rate of 3.0%):

Carmen Santos is owner and sole employee of CS Corporation. He pays himself a salary of $2,400 this week.

Record the payroll entry and payroll tax entry for the pay of the week ended June 7 (his year-to-date pay is $51,500).

If an amount box does not require an entry, leave it blank. Round your answers to the nearest cent.

The accountant of Skywalker Corp. (this is a public company) reviewed the draft of the 2150 year end financial statements and had found that it was missing essential information to find the correct calculations of Basic EPS and Diluted EPS.

On January 1, 2150, Skywalker Corp. started the year with 20,000,000 common shares outstanding.

On February 28, issued 3,000,000 common shares.

On April 31, Skywalker Corp. bought back and retired 5,000,000 common shares.

On December 1, Skywalker Corp. issued a 25% stock dividend.

Prior to 2150, the accountant knew that in the Shareholder's Equity section of 2149, Common Shares had unlimited number of shares authorized, with 10,000,000 shares issued and outstanding.

Preferred shares, 17% cumulative, non-convertible shares, 2,000,000 shares issued and outstanding.

The preferred shares have a par-value of $4 per share.

Other information that was noted:

Skywalker Corp. had 10,000 call options issued. Each option was exercisable for one share at $450

The average market price of Skywalker Corp.'s common shares during 2150 was $650.

Skywalker Corp. had 11% convertible bonds. Each $1,000 bond is convertible into 2 common shares.

The value of the bonds was $10,000,000.

Skywalker Corp. had accounting income (before taxes) of $42,500,000 and taxable income of 34,000,000. The tax rate for Skywalker Corp. was 30%.

Required:

1. Calculate the weighted average number of shares.

2. Calculate the basic earnings per share.

3. Calculate the diluted earnings per share.

Tutorial 2 Question 1 (14 Marks – 25 Minutes) Supp 2013 Nov Dischem CC manufactures three products in a single process. The following are the actual results for April 2013: A B C Units Units Units Production at 100% capacity 20 000 25 000 10 000 Sales 20 000 25 000 10 000 There was no inventory on hand at the beginning of the month and no losses occurred during the month. A B C Selling price per unit N$12.00 N$8.00 N$16.00 The following costs are incurred in the joint process: Direct material N$224 400 Direct labour 93 500 Manufacturing overheads 149 600 Each product can be processed further into a superior product namely A2, B2, and C2. The following information is applicable if products are processed further: A2 B2 C2 N$ N$ N$ Selling price per unit 18.00 12.00 22.00 Additional variable cost per unit: - Direct labour 1.50 2.00 2.00 - Variable overhead 1.00 1.00 2.00 REQUIRED: MARKS Allocation of the joint costs to the three products using the following method of allocation: 1.1 Physical measures method 5 1.2 Net realisable value method 9

Question 4 (20 Marks – 36 Minutes) Nov Sup. 2014 Opuwo Investment CC opened a new manufacturing facility. In the first month the following changes were observed in their inventory: Opening inventory nil Produced 16 000 units Sold 12 000 units Closing inventory 4 000 units Each unit is sold for N$35. The costs incurred are as follows: Materials N$15 per unit produced Labour N$7 per unit produced Indirect manufacturing costs (fixed) N$40 000 Selling cost (fixed) N$15 200 Administration costs (fixed) N$23 600 Page 6 of 66 REQUIRED MARKS 4.1. Prepare a statement of comprehensive income using the marginal costing approach. 8 4.2. Prepare a statement of comprehensive income using the absorption costing approach. 8 4.3 Reconcile the profit of the absorption costing and marginal costing method 2 4.4 Explain the difference in profit between the two approaches. 2 TOTAL MARKS 20

1. Popper Enterprises factors $700,000of its accounts receivables to Third Bank with recourse for a finance charge of 4?%. The finance company retains an amount equal to? 7% of the accounts receivable for possible adjustments. Third Bank will return the hold back to Popper when it collects the receivables. In? addition, the fair value of the recourse liability is estimated at? $20,000. What amount of cash would Popper receive as a result of this? transaction?

A. $623,000 B. $665,000 C. $680,000 D. $700,000

2. Which ratio indicates the effectiveness of a? company's credit extension? policy?

A. inventory turnover B. accounts payable turnover C. days inventory on hand D. days sales outstanding

3. What type of account is Discount on Note? Receivable?

A. asset B. contra?revenue C. revenue D. contra?asset

Some individuals believe that the public sector is so corrupt in certain countries that bribery should just be considered a cost of doing business in those locations. In other words, bribery should be considered an ordinary and necessary business expense. What are your thoughts on this statement?

Beaumont Company enters into a contract to provide a high quality diving-certification preparation package, including goggles, snorkels, air tanks, fins, a wetsuit, and 5 private lessons to get ready for diving certifications. The entire package sells for $2,500.

Other competing sellers in the same region charge an average of $250 for a set of goggles and $750 for the lessons, if sold separately. Beaumont Company usually sells at a 5% discount compared to other shops, since it is a bit farther away from the ocean.

1. Required: What would be Beaumont’s stand-alone selling price of the goggles and the lessons, based on adjusted market assessment approach? Show computations.

2. Typically, Beaumont incurs $375 on compensation and other costs to provide the private lessons, and earns an average of 40% profit over cost on service offerings. Required: Assuming that the diving equipment and the certification lessons are separate performance obligations, estimate the stand-alone selling price of the certified lessons based on the expected cost plus margin approach. Show computations

3. Typically, if Beaumont were to sell the equipment only, it would ask for $2,000. Required: Assuming that the diving equipment and the certification lessons are separate performance obligations, estimate the stand-alone selling price of the lessons based on the residual approach. Show computations.