This case continues following the new project of the WePROMOTE Company, that you and your partner own. WePROMOTE is in the promotional materials business. The project being considered is to manufacture a very unique case for smart phones. The case is very durable, attractive and fits virtually all models of smart phone. It will also have the logo of your client, a prominent, local company and is planned to be given away at public relations events by your client. As we know from prior cases involving this company, more and more details of the project become apparent and with more precision and certainty. The following are the final values to the data that you have been estimating up to this point: • You can borrow funds from your bank at 3%. • The cost to install the needed equipment will be $105,000 and this cost is incurred prior to any cash is received by the project. • The gross revenues from the project will be $25,000 for year 1, then $27,000 for years 2 and 3. Year 4 will be $28,000 and year 5 (the last year of the project) will be $23,000. • The expected annual cash outflows (current project costs) are estimated at being $13,000 for the first year, then $12,000 for years 2, 3, and 4. The final year costs will be $10,000. • Your tax rate is 30% and you plan to depreciate the equipment on a straight-line basis for the life of the equipment. • After 5 years the equipment will stop working and will have a residual (salvage) value of $5,000). • The discount rate you are assuming is now 7%. Requirements of the paper: • Perform the final NPV calculations and provide a narrative of how you calculated the computations and why.

• Then provide a summary conclusion on whether you should continue to pursue this business opportunity.

• Provide the final, accurate NPV calculations.

• A narrative on how the NPVs were calculated. The narrative should include how the data relating to depreciation and its tax consequences affect the cash flow of the project.

• Supporting narrative based on research of sources other than the textbook materials.

• Provide a conclusion on whether this business opportunity should be pursued.

On April 22, 2016, Blossom Enterprises purchased equipment for $130,000. The company expects to use the equipment for 10,500 working hours during its 4-year life and that it will have a residual value of $12,000. Blossom has a December 31 year end and pro-rates depreciation to the nearest month. The actual machine usage was: 1,500 hours in 2016; 2,500 hours in 2017; 3,500 hours in 2018; 2,200 hours in 2019; and 1,000 hours in 2020.
Calculate depreciation expense for the life of the asset under straight-line method.diminshing balance .and unites of production

Summarize the journal entry effects from part 2 using T-accounts.

Which of the following does not provide an accurate description of refundable​ taxes?

A. The basic concept of refundable taxes is that a portion of the corporate tax paid on investment income is refunded to the corporation when the income is distributed to shareholders in the form of dividends.

B. One purpose of refundable taxes is to keep corporate tax rates high to discourage accumulation of investment income in a corporation.

C. The only purpose for refundable taxes is to create perfect integration in the Canadian tax system.

D. There are three different components of tax that can be refunded on the payment of​ dividends: Refundable portion of Part I​ tax, Additional Refundable Tax on Investment​ Income, and Part IV tax.

Terrace Labs produces a drug used for the treatment of arthritis. The drug is produced in batches.

In March​, Terrace​,which had no opening​ inventory, processed one batch of chemicals. It sold 2,100 gallons of product for human use and 500 gallons of the veterinarian product. Terrace uses the net realizable value method for allocating joint production costs.

Chemicals costing $54,000 are mixed and​ heated, then a unique separation process then extracts the drug from the mixture. A batch yields a total of 2,800 gallons of the chemicals. The first 2,200 gallons are sold for human use while the last 600 ​gallons, which contain​ impurities, are sold to veterinarians. The costs of​ mixing, heating, and extracting the drug amount to $153,000 per batch. The output sold for human use is pasteurized at a total cost of $123,200 and is sold for $640 per gallon. The product sold to veterinarians is irradiated at a cost of $15 per gallon and is sold for $480 per gallon.

Requirement 1. How much in joint costs does Terrace allocate to each​ product? ​(Do not round intermediary calculations. Only round the amount you input in the cell to the nearest​ dollar.)

Paynesville Corporation manufactures and sells a preservative used in food and drug manufacturing. The company carries no inventories. The master budget calls for the company to manufacture and sell 104,000 liters at a budgeted price of $105 per liter this year. The standard direct cost sheet for one liter of the preservative follows.

Variable overhead is applied based on direct labor hours. The variable overhead rate is $40 per direct-labor hour. The fixed overhead rate (at the master budget level of activity) is $20 per unit. All non-manufacturing costs are fixed and are budgeted at $1.4 million for the coming year.

At the end of the year, the costs analyst reported that the sales activity variance for the year was $354,000 unfavorable.

The following is the actual income statement (in thousands of dollars) for the year.

During the year, the company purchased 180,000 pounds of material and employed 42,400 hours of direct labor.


Required:
a. Compute the direct material price and efficiency variances.
b. Compute the direct labor price and efficiency variances.
c. Compute the variable overhead price and efficiency variances.

(For all requirements, enter your answers in whole dollars. Indicate the effect of each variance by selecting "F" for favorable, or "U" for unfavorable. If there is no effect, do not select either option.)

Prance, Inc., earns pretax book net income of $800,000 in 2018. Prance acquires a depreciable asset in 2019, and first-year tax depreciation exceeds book depreciation by $80,000.

In 2019, Prance reports $600,000 of pretax book net income, and the book depreciation exceeds tax depreciation that year by $20,000. Prance reports no other temporary or permanent book-tax differences. The pertinent U.S. tax rate is 21%, and Prance earns an after-tax rate of return on capital of 8%.

a. Enter below the 2019 end-of-year balance in Prance's deferred tax asset and deferred tax liability balance sheet accounts. If an amount is zero, enter "0".

b. The value to Prance of the accelerated tax deduction for depreciation, considering the time value of money. Prance earns an after-tax rate of return on capital of 8% is 0.9259.
$

Income Statement
For Year Ended December 31, 2018

Sales revenue $97,200

Expenses  

Cost of goods sold 42,000

Depreciation expense 12,000

Salaries expense 18,000

Rent expense 9,000

Insurance expense 3,800

Interest expense 3,600

Utilities expense 2,800

Net income $6,000

Prepare the cash flows from operating activities section only of the company’s 2018 statement of cash flows using the direct method.

Wang Corporation's capital structure consists of 50,000 ordinary shares. At December 31, 2011 an analysis of the accounts and discussions with company officials revealed the following information:

            Sales                                                                                                       ¥1,100,000

            Purchase discounts                                                                                        18,000

            Purchases                                                                                                     642,000

            Loss on discontinued operations (net of tax)                                                42,000

            Selling expenses                                                                                          128,000

            Cash                                                                                                               60,000

            Accounts receivable                                                                                      90,000

            Share capital                                                                                                200,000

            Accumulated depreciation                                                                          180,000

            Dividend revenue                                                                                            8,000

            Inventory, January 1, 2011                                                                          152,000

            Inventory, December 31, 2011                                                                    125,000

            Unearned service revenue                                                                               4,400

            Accrued interest payable                                                                                 1,000

            Land                                                                                                            370,000

            Patents                                                                                                         100,000

            Retained earnings, January 1, 2011                                                            290,000

            Interest expense                                                                                             17,000

            General and administrative expenses                                                          150,000

            Dividends declared                                                                                        29,000

            Allowance for doubtful accounts                                                                    5,000

            Notes payable (maturity 7/1/14)                                                                 200,000

            Machinery and equipment                                                                           450,000

            Materials and supplies                                                                                   40,000

            Accounts payable                                                                                          60,000

The amount of income taxes applicable to ordinary income was ¥48,600, excluding the tax effect of the discontinued operations loss, which amounted to ¥18,000.

Instructions

(a) Prepare an income statement.

(b)       Prepare a retained earnings statement.

3-11 CVP analysis (LO 3)

Carr Orthotics Company distributes a specialized ankle support that sells for $30. The company’s variable costs are $18 per unit; fixed costs total $360,000 per year.

Required

a.    If sales increase by $39,000 per year, by how much should operating income increase?

b.    Last year, Carr sold 32,000 ankle supports. The company’s marketing manager is convinced that a 10% reduction in the sales price, combined with a $50,000 increase in advertising, will result in a 25% increase in sales volume over last year. Should Carr implement the price reduction? Why or why not?

Goff Corporation acquired stock of Spiegel, Inc., on March 1, 2016, at a cost of $500,000. The stock had a fair value of $550,000 at December 31, 2016, $610,000 at December 31, 2017, and $590,000 at December 31, 2018. Goff sold the stock for $640,000 on July 1, 2019. Spiegel did not pay any dividends during the time Goff held the stock.

When Goff acquired the stock, it classified the investment as available-for-sale. However, Goff transitioned to the new accounting rules for minority-passive equity investments at the beginning of 2018.

Ignore income taxes.

Assume the amount credited to OCI each year was subsequently closed to AOCI during the closing process.

Required:

Prepare the journal entry to record the acquisition of the Spiegel stock at March 1, 2016.

Prepare the journal entry to record the fair value adjustment at December 31, 2016.

Prepare the journal entry to record the fair value adjustment at December 31, 2017.

Prepare the journal entry to record the transition to the new accounting for minority-passive investments at January 1, 2018.

Prepare the journal entry to record the fair value adjustment at December 31, 2018.

Prepare the journal entry to record the sale of the investment at July 1, 2019.

(For all requirements, if no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Andretti Company has a single product called a Dak. The company normally produces and sells 85,000 Daks each year at a selling price of $58 per unit. The company’s unit costs at this level of activity are given below:

A number of questions relating to the production and sale of Daks follow. Each question is independent.

Required:

1-a. Assume that Andretti Company has sufficient capacity to produce 102,000 Daks each year without any increase in fixed manufacturing overhead costs. The company could increase its unit sales by 20% above the present 85,000 units each year if it were willing to increase the fixed selling expenses by $140,000. What is the financial advantage (disadvantage) of investing an additional $140,000 in fixed selling expenses?

1-b. Would the additional investment be justified?

2. Assume again that Andretti Company has sufficient capacity to produce 102,000 Daks each year. A customer in a foreign market wants to purchase 17,000 Daks. If Andretti accepts this order it would have to pay import duties on the Daks of $4.70 per unit and an additional $13,600 for permits and licenses. The only selling costs that would be associated with the order would be $2.20 per unit shipping cost. What is the break-even price per unit on this order?

3. The company has 500 Daks on hand that have some irregularities and are therefore considered to be "seconds." Due to the irregularities, it will be impossible to sell these units at the normal price through regular distribution channels. What is the unit cost figure that is relevant for setting a minimum selling price?

4. Due to a strike in its supplier’s plant, Andretti Company is unable to purchase more material for the production of Daks. The strike is expected to last for two months. Andretti Company has enough material on hand to operate at 25% of normal levels for the two-month period. As an alternative, Andretti could close its plant down entirely for the two months. If the plant were closed, fixed manufacturing overhead costs would continue at 35% of their normal level during the two-month period and the fixed selling expenses would be reduced by 20% during the two-month period.

a. How much total contribution margin will Andretti forgo if it closes the plant for two months?

b. How much total fixed cost will the company avoid if it closes the plant for two months?

c. What is the financial advantage (disadvantage) of closing the plant for the two-month period?

d. Should Andretti close the plant for two months?

5. An outside manufacturer has offered to produce 85,000 Daks and ship them directly to Andretti’s customers. If Andretti Company accepts this offer, the facilities that it uses to produce Daks would be idle; however, fixed manufacturing overhead costs would be reduced by 30%. Because the outside manufacturer would pay for all shipping costs, the variable selling expenses would be only two-thirds of their present amount. What is Andretti’s avoidable cost per unit that it should compare to the price quoted by the outside manufacturer?

I know 1b is yes and 4d is no

Selected comparative financial statements of Haroun Company follow.

Required:
1. Complete the below table to calculate the trend percents for all components of both statements using 2011 as the base year. (Round your percentage answers to 1 decimal place.)

Comp IS

Comp BS

Complete the below table to calculate the trend percents for all components of comparative income statements using 2011 as the base year.

omplete the below table to calculate the trend percents for all components of comparative balance sheets using 2011 as the base year.

Activity-Based Product Costing

Sweet Sugar Company manufactures three products (white sugar, brown sugar, and powdered sugar) in a continuous production process. Senior management has asked the controller to conduct an activity-based costing study. The controller identified the amount of factory overhead required by the critical activities of the organization as follows:

The activity bases identified for each activity are as follows:

The activity-base usage quantities and units produced for the three products were determined from corporate records and are as follows:

Each product requires 0.9 machine hour per unit.

Required:

If required, round all per unit amounts to the nearest cent.

1. Determine the activity rate for each activity.

2. Determine the total and per-unit activity cost for all three products.

3. Why aren’t the activity unit costs equal across all three products since they require the same machine time per unit?

The unit costs are different because the products consume many activities in ratios different from the  

You are the financial accountant for Superstore Ltd, and are in the process of preparing its financial statements for the year ended 30 June 2018.  Whilst preparing the financial statements, you become aware of the following situations:

On 1 July 2017, the directors made a decision, using information obtained over the last couple of years, to revise the useful life of an item of manufacturing equipment.  The equipment was acquired on 1 July 2015 for $800,000, and has been depreciated on a straight-line basis, based on an estimated useful life of 10 years and residual value of nil.  Superstore Ltd uses the cost model for manufacturing equipment.  The directors estimate that as at 1 July 2017, the equipment has a remaining useful life of 6 years and a residual value of nil.  No depreciation has been recorded as yet for the year ended 30 June 2018 as the directors were unsure how to account for the change in the 2018 financial statements, and unsure whether the 2016 and 2017 financial statements will need to be revised as a result of the change.

In June 2018, the accounts payable officer discovered that an invoice for repairs to equipment, with an amount due of $20,000, incurred in June 2017, had not been paid or provided for in the 2017 financial statements.  The invoice was paid on 12 July 2018.  The repairs are deductible for tax purposes.  The accountant responsible for preparing the company’s income tax returns will amend the 2017 tax return, and the company will receive a tax refund of $6,000 as a result (30% x $20,000).  No journal entries have been done as yet in the accounting records of Superstore Ltd, as the directors are unsure how to account for this situation, and what period adjustments need to be made in.

Superstore Ltd holds shares in a listed public company, ABC Ltd, which are valued in the draft financial statements on 30 June 2018 at their market value on that date - $600,000.  A major fall in the stock market occurred on 10 July 2018, and the value of Superstore’s shares in ABC Ltd declined to $250,000.

On 21 July 2018, you discovered a cheque dated 20 April 2018 of $32,000 authorised by the company’s previous accountant, Max. The payment was for the purchase of a swimming pool at Max’s house.  The payment had been recorded in the accounting system as an advertising expense.  You advise the directors of this fraudulent activity, and they will investigate.

Assume that each event is material.

Required:

i) State the appropriate accounting treatment for each situation. Provide explanations and references to relevant paragraphs in the accounting standards to support your answers.  Where adjustments to Superstore Ltd’s financial statements are required, explain which financial statements need to be adjusted (ie. 2016, 2017, 2018 or 2019).  

ii) Prepare any note disclosures and adjusting journal entries that are needed in the 2018 financial statements for each situation