Explain activity-based costing. Choose two (2) manufacturing companies and explain why these companies would benefit from using an activity based costing system.

Please there is nothing to clarify. Just do what is required.
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Choose at least two concepts from the following: partnership, corporation, liquidation, bankruptcy 7, bankruptcy 11, reorganization, trust, estates, consolidation, parent company, subsidiary, and acquisition.

Required:
Explain how you may use them in your present or future accounting position. Make sure you provide details to include how each concept will help you support the financial goals of the company you currently work for or will work for in the future.

1. Please discuss the concept of "voluntary compliance" as it relates to our federal tax system.

2. Please compare and contrast the differences between civil and criminal penalties.

3. Would you rather work as an IRS agent or as a tax practitioner? Please explain your answer.

(Recognition of Profit on Long-Term Contract
—Overall Loss) Assume the facts given in E6.37 except that
Vaughn's non-cancellable fixed price contract with Atlantis is for $9.5
million. Billings and collections are lower in 2022 by $500,000 each.

2020 2021 2022
Costs for the year $3,825 $4,675 $1,200
Estimated costs to complete 4,675 1,270 –0–
Progress billings for the year (non-refundable) 3,500 4,100 1,900
Cash collected for the year 3,100 4,150 2,250
Instructions
a. Using the percentage-of-completion method, calculate the
percent complete for 2020 and 2021. Round the percent complete
to the nearest whole percentage point.

b. Calculate the amount of revenue to be recognized in 2020 and
2021.

c. Calculate the construction costs to be expensed in 2021.

d. Prepare the journal entry at December 31, 2021, to record longterm
contract revenues, expenses, and losses for 2021.

e. What is the balance in the Contract Asset/Liability account at
December 31, 2020 and 2021?

f. Show how the construction contract would be reported on the
SFP and the income statement for the year ended December 31,
2021.

g. Assume that Vaughn uses the zero-profit or completed-contract
method. What would be the journal entry recorded on December 31, 2021?

You are an expert in the field of forming partnership. Stephen Curry and Dwayne Wade want to establish a partnership to start "Pasta Shop", and they are going to meet with you to discuss their plans. Prior to the meeting you will send them a memo discussing the issues they need to consider before their visit. Write a memo in good form to be sent to Curry and Wade.

Lonergan Company occasionally uses its accounts receivable to obtain immediate cash. At the end of June 2018, the company had accounts receivable of $1,060,000. Lonergan needs approximately $640,000 to capitalize on a unique investment opportunity. On July 1, 2018, a local bank offers Lonergan the following two alternatives:

1. Borrow $640,000, sign a note payable, and assign the entire receivable balance as collateral. At the end of each month, a remittance will be made to the bank that equals the amount of receivables collected plus 9% interest on the unpaid balance of the note at the beginning of the period.
2. Transfer $690,000 of specific receivables to the bank without recourse. The bank will charge a 2% factoring fee on the amount of receivables transferred. The bank will collect the receivables directly from customers. The sale criteria are met.

Required:
1. Prepare the journal entries that would be recorded on July 1 for:
    a. alternative a.
    b. alternative b.

2. Assuming that 80% of all June 30 receivables are collected during July, prepare the necessary journal entries to record the collection and the remittance to the bank for:
    a. alternative a.
    b. alternative b.

Prepare the journal entries that would be recorded on July 1 for alternative b. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

• Record the transfer $690,000 of specific receivables to the bank without recourse. The bank will charge a 2% factoring fee on the amount of receivables transferred.

Note: Enter debits before credits.

Assuming that 80% of all June 30 receivables are collected during July, prepare the necessary journal entries to record the collection and the remittance to the bank for alternative a. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Pam Corporation holds 70 percent ownership of Northern Enterprises. On December 31, 20X6, Northern paid Pam $28,000 for a truck that Pam had purchased for $33,000 on January 1, 20X2. The truck was considered to have a 20-year life from January 1, 20X2, and no residual value. Both companies depreciate equipment using the straight-line method.

Required:

a.

Prepare the worksheet consolidation entry or entries needed on December 31, 20X6, to remove the effects of the intercompany sale. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

*Record the entry to eliminate the gain on the truck and to correct the asset's basis.

b.

Prepare the worksheet consolidation entry or entries needed on December 31, 20X7, to remove the effects of the intercompany sale. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

*Record the entry to eliminate the gain on the truck and to correct the asset's basis.

*Record entry to adjust Accumulated Depreciation.

Clean Air Products owns 80 percent of the stock of Superior Filter Company, which it acquired at underlying book value on August 30, 20X6. At that date, the fair value of the noncontrolling interest was equal to 20 percent of the book value of Superior Filter. Summarized trial balance data for the two companies as of December 31, 20X8, are as follows:

On January 1, 20X8, Clean Air's inventory contained filters purchased for $67,000 from Superior Filter, which had produced the filters for $47,000. In 20X8, Superior Filter spent $107,000 to produce additional filters, which it sold to Clean Air for $157,000. By December 31, 20X8, Clean Air had sold all filters that had been on hand January 1, 20X8, but continued to hold in inventory $47,100 of the 20X8 purchase from Superior Filter.

Required:

a.

Prepare all consolidation entries needed to complete a consolidation worksheet for 20X8. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

*Record the basic consolidation entry.

*Record the entry to reverse last year's deferral.

*Record the entry to defer the current year's unrealized profits on inventory transfers.

b.

Compute consolidated net income and income assigned to the controlling interest in the 20X8 consolidated income statement.

c.

Compute the balance assigned to the noncontrolling interest in the consolidated balance sheet as of December 31, 20X8.

QUESTIONS

1.What are the key procedures you would perform regarding client acceptance? Where would you get the data? Use the format by listing under each:

PROCEDURE                                                       DATA

2. Williams Gens, an audit partner with your firm, has selected you to prepare a memo regarding the acceptance of CBA as an audit client. The audit will, if accepted, occur during the firms’s slow season when there is excess employee capacity.

Consider the following category:

1.      The predecessor auditor explained that, due to disagreements on the application of GAAP, CBA Inc. chose to engage another auditing firm. The auditor, fearing Litigation would not specify the specific area of disagreement.

2.      CBA regularly pays its accounts payable 30-60 days late.

3.      Management turnover has been excessive.

4.      CBA is in a highly regulated, competitive industry.

5.      Account Receivable turnover is 43 days.

Requirement for question 2:

What are the procedures that you would undertake for each of the category 1-5?

Lane Company manufactures a single product that requires a great deal of hand labor. Overhead cost is applied on the basis of standard direct labor-hours. The budgeted variable manufacturing overhead is $3.40 per direct labor-hour and the budgeted fixed manufacturing overhead is $999,000 per year.

The standard quantity of materials is 4 pounds per unit and the standard cost is $6.50 per pound. The standard direct labor-hours per unit is 1.5 hours and the standard labor rate is $12.70 per hour.

The company planned to operate at a denominator activity level of 135,000 direct labor-hours and to produce 90,000 units of product during the most recent year. Actual activity and costs for the year were as follows:

Required:

1. Compute the predetermined overhead rate for the year. Break the rate down into variable and fixed elements.

2. Prepare a standard cost card for the company’s product.

3a. Compute the standard direct labor-hours allowed for the year’s production.

3b. Complete the following Manufacturing Overhead T-account for the year.

4. Determine the reason for the underapplied or overapplied overhead from (3) above by computing the variable overhead rate and efficiency variances and the fixed overhead budget and volume variances.

McCaffy Company uses a periodic inventory system. It sold 1,000 units of Product H. Its beginning inventory and purchases during the month were as follows: April 1 Beginning inventory 200 units @ $1 5 Purchases 200 units @ $2 10 Purchases 200 units @ $3 15 Purchases 200 units @ $4 20 Purchases 200 units @ $5 25 Purchases 200 units @ $6 Compute the cost of the ending inventory under each of three methods: (a) average-cost, (b) LIFO, and (c) FIFO.

The debits to Work in Process—Roasting Department for Morning Brew Coffee Company for August, together with information concerning production, are as follows:

All direct materials are placed in process at the beginning of production.

a. Prepare a cost of production report, presenting the following computations:

Direct materials and conversion equivalent units of production for August.

Direct materials and conversion costs per equivalent unit for August.

Cost of goods finished during August.

Cost of work in process at August 31.

If an amount is zero, enter in "0". For the cost per equivalent unit, round your answer to two decimal places.

b. Compute and evaluate the change in cost per equivalent unit for direct materials and conversion from the previous month (July). If required, round your answers to the nearest cent.

Survey empirical evidence to discuss the impact of government regulations (e.g., Sarbanes–Oxley Act of 2002 and Dodd–Frank Wall Street Reform and Consumer Protection Act of 2010) on corporate operation and financial performance.

Please provide discussion of the above topic and citation of resources.

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Q.2 (Max Marks:90)
Bombera Ltd operates at capacity and makes glass-topped dining tables and wooden chairs, which are then typically sold as sets of four chairs with one table. However, some customers purchase replacement or extra chairs, and others buy some chairs or a table only, so the sales mix is not exactly 4:1. Bombera Ltd is planning its annual budget for the financial year 2018. Information for 2018 follows:

Input prices   Direct materials Wood $5.30 per board metre Glass $11.5 per sheet Direct manufacturing labour $14 per direct manufacturing labour-hour

Input quantities per unit of output


Chairs Tables    Direct materials   Wood 1.2 board metres 1.7 board metres Glass — 2 sheets Direct manufacturing labour 3 hours 6 hours Machine-hours (MH) 2 MH 5 MH

Inventory information, direct materials


Wood Glass    Beginning inventory 27 200 board metres 8 700 sheets Target ending inventory 29 360 board metres 9 500 sheets   

ACT501 Semester 2, 2018 Page 4

Sales and inventory information, finished goods

Chairs Tables    Expected sales in units 172 000 45 000 Selling price $70 $900 Target ending inventory in units 8 400 2 050 Beginning inventory in units 7 500 2 150    Chairs are manufactured in batches of 500 and tables are manufactured in batches of 50. It takes three hours to set up for a batch of chairs and two hours to set up for a batch of tables. Bombera Ltd uses activity-based costing and has classified all overhead costs as shown in the table below:

Cost type
Budgeted variable
Budgeted fixed Cost driver/allocation base Manufacturing:    Materials handling $342 840 $600 000 Number of board metres used Set-up 97 000 300 740 Set-up hours Processing 789 250 5 900 000 Machine-hours Nonmanufacturing:    Marketing 2 011 200 4 500 000 Sales revenue Distribution 54 000 380 000 Number of deliveries

Delivery trucks transport units sold in delivery sizes of 500 chairs or 500 tables.
Required For the year 2018:


5. Prepare the direct materials usage budget and the direct materials purchases budget. 6. Use the direct materials usage budget to find the budgeted allocation rate for materials-handling costs. (2.5 marks) 7. Prepare the direct manufacturing labour cost budget. (1.5 marks) 8. Prepare the manufacturing overhead cost budget for materials handling, set-up and processing. (1.5 marks) 9. Prepare the budgeted unit cost of finished good (16.5 marks) and ending inventories budget. (4.5 marks) 10. Prepare the cost of goods sold budget. 11. Prepare the non-manufacturing overhead costs budget for marketing and distribution. (1 mark) 12. Prepare a budgeted income statement (ignore income taxes). 13. Compare the budgeted unit cost of a chair to its budgeted selling price. Why might Bombera Ltd continue to sell the chairs for only $70?