During review of the adjusting entries to be recorded on December 31, 20X8, Grand Corporation discovered that it had inappropriately been using the cost method in accounting for its investment in Case Products Corporation. Grand purchased 100 percent ownership of Case Products on January 1, 20X6, for $58,000, at which time Case Products reported retained earnings of $11,000 and capital stock outstanding of $29,000. The differential was attributable to patents with a life of eight years. Income and dividends of Case Products were:

Year	Net Income				Dividends
20X6		$	19,000			$	7,000
20X7			27,000				9,000
20X8			35,000				9,000

Required:
Prepare the correcting entry required on December 31, 20X8, to properly report the investment under the equity method, assuming the books have not been closed. Case Products' dividends were declared in early November and paid in early December each year. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Roller Corporation purchased 100 percent ownership of Steam Company on January 1, 20X5, for $288,000. On that date, the book value of Steam’s reported net assets was $211,000. The excess over book value paid is attributable to depreciable assets with a remaining useful life of 10 years. Net income and dividend payments of Steam in the following periods were   Year Net Income Dividends   20X5 $ 25,000 $ 6,000   20X6 45,000 16,000   20X7 25,000 37,000

Required:

a.

Prepare journal entries on Roller Corporation’s books relating to its investment in Steam Company for each of the three years, assuming it accounts for the investment using the cost method. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

b.

Prepare journal entries on Roller Corporation’s books relating to its investment in Steam Company for each of the three years, assuming it accounts for the investment using the equity-method. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

*Record the purchase of Steam Company stock for 20X5.

*Record the dividend from Steam Company for 20X5.

*Record the equity-method income for 20X5.

*Record the amortization of differential value for 20X5.

*Record the dividend from Steam Company for 20X6.

*Record the equity-method income for 20X6.

*Record the amortization of the differential value for 20X6.

*Record the dividend from Steam Company for 20X7.

*Record the equity-method income for 20X7.

*Record the amortization of the differential value for 20X7.

QUESTION ONE [25]

The following financial information relates to Cams Limited.

Statement of Financial Position as at 31 December 2017 and 2018

		2018                                2017
Ordinary share capital Retained earnings Property, plant and equipment Investments Debentures 12.5%   Inventory Trade debtors Prepaid expenses Trade creditors Bank overdraft SARS (income tax) Shareholders for dividends	400 000                             55 000                            230 000                           165 000                              20 000                           124 000                             37 000                               -                            25 000                             21 000                               5 000                               30 000		295 000                    5 000                195 000                 110 000                   60 000                 120 000                    28 500                      1 500                    42 500                    25 000                      7 500                     20 000

Statement of comprehensive income for the year 31 December 2018                       R
Profit before interest and tax Depreciation on equipment Dividends received on investments Interest on dividends Income tax	149 500 5 000 18 000 7 500 50 000

Statement of changes in equity for the year ended 31 December 2018 R

Dividends on ordinary shares                                             R 60 000

Note no. 1 for the year ended 31 December 2017 and 2018

Property, plant and equipment                                      2018 (R)               2017 (R)

Land and building at cost                                                 200 000                 160 000

Equipment at carrying value                                               30 000                35 000

                                                                                          230 000              195 000

Additional information

1. No equipment was purchased or sold during the financial year ended 31 December 2018

2. Ordinary shares were issued during the year.

Required:

Use the information provided above to prepare the cash flow statement for the year ended 31 December 2018.

What would you pay for a $225,000 debenture bond that matures in 15 years and pays $11,250 a year in interest if you wanted to earn a yield of

a. 3%

B. 4%

C. 5%

Mijka Company was started on January 1, 2018. During 2018, the company experienced the following three accounting events: (1) earned cash revenues of $31,600, (2) paid cash expenses of $14,200, and (3) paid a $2,500 cash dividend to its stockholders. These were the only events that affected the company during 2018.

Required

Record the effects of each accounting event under the appropriate general ledger account headings.

Prepare an income statement, statement of changes in stockholders’ equity, and a balance sheet dated December 31, 2018, for Mijka Company.

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

Req A

	MIJKA COMPANY Accounting Equation for 2018 Event Assets = Liabilities + Stockholders’ Equity Cash = + Common Stock + Retained Earnings 1. = + + 2. = + + 3. = + + Ending balance

Prepare an income statement dated December 31, 2018, for Mijka Company.

	MIJKA COMPANY Income Statement For the Year Ended December 31, 2018

Prepare a statement of changes in stockholders’ equity dated December 31, 2018, for Mijka Company.

	MIJKA COMPANY Statement of Changes in Stockholders’ Equity For the Year Ended December 31, 2018 Beginning common stock Plus: Common stock issued Ending common stock Beginning retained earnings Ending retained earnings Total stockholders’ equity

Prepare a balance sheet dated December 31, 2018, for Mijka Company.

	MIJKA COMPANY Balance Sheet As of December 31, 2018 Assets Total assets Liabilities Stockholders’ equity Common stock Total stockholders’ equity Total liabilities and stockholders’ equity

Typewritten answers, please, no handwritten answers. Thank you.

What AICPA Codes of Professional Conduct were violated in the Waste Management scandal of 1998?

Discuss the real-time audit process for companies and how the IRS can monetize this program.

Since 2011, the IRS has put into place the Compliance Assurance Process, which provides companies the opportunity to be placed into a real-time audit process. This process allows companies to be constantly audited in real time, rather than being audited two or three years in arrears. Surveys have shown that companies love this program, as it relieves a company of stress from going back and remembering items that have happened in prior years. The IRS is considering removing this program, as budget cuts have caused rethinking of this concept.

Review the Compliance Assurance Process article, and comment on whether you think this would be beneficial for the taxpayer. Discuss how the IRS could monetize this process in order to show that it is a valuable program.

1. What revenue control and management policies does your country have in place?

2. If you are an advisor to the Accountant General, what would you advise her to do to enhance your countries revenue control? Why?

Verizox Company uses a job order cost system with manufacturing overhead applied to products based on direct labor hours. At the beginning of the most recent year, the company estimated its manufacturing overhead cost at $172,980. Estimated direct labor cost was $435,240 for 18,600 hours.

Actual costs for the most recent month are summarized here:   

Item Description	Total Cost
Direct labor (1,860 hours)	$	43,525
Indirect costs
Indirect labor		2,430
Indirect materials		3,380
Factory rent		3,240
Factory supervision		4,810
Factory depreciation		5,640
Factory janitorial work		1,150
Factory insurance		1,830
General and administrative salaries		4,250
Selling expenses		5,380

Required:
1. Calculate the predetermined overhead rate. (Round your answer to 2 decimal places.)



2. Calculate the amount of applied manufacturing overhead.



3. Calculate actual manufacturing overhead costs.



4. Compute over- or underapplied overhead. (Input the amount as positive value.)

1.a

The comparative balance sheet of Yellow Dog Enterprises Inc. at December 31, 20Y8 and 20Y7, is as follows:

		Dec. 31, 20Y8		Dec. 31, 20Y7
Assets
Cash		$53,520		$65,930
Accounts receivable (net)		82,240		88,890
Inventories		117,500		110,170
Prepaid expenses		4,790		3,340
Equipment		239,330		197,390
Accumulated depreciation-equipment		(62,230)		(48,410)
	Total assets	$435,150		$417,310
Liabilities and Stockholders' Equity
Accounts payable (merchandise creditors)		$91,380		$87,220
Mortgage note payable		0		125,190
Common stock, $1 par		14,000		9,000
Paid-in capital in excess of par-common stock		213,000		118,000
Retained earnings		116,770		77,900
	Total liabilities and stockholders’ equity	$435,150		$417,310

Additional data obtained from the income statement and from an examination of the accounts in the ledger for 20Y8 are as follows:

1. Net income, $99,510.
2. Depreciation reported on the income statement, $30,200.
3. Equipment was purchased at a cost of $58,320 and fully depreciated equipment costing $16,380 was discarded, with no salvage realized.
4. The mortgage note payable was not due for six years, but the terms permitted earlier payment without penalty.
5. 5,000 shares of common stock were issued at $20 for cash.
6. Cash dividends declared and paid, $60,640.

Required:

Prepare a statement of cash flows, using the indirect method of presenting cash flows from operating activities. Use the minus sign to indicate cash outflows, cash payments, decreases in cash, or any negative adjustments.

Yellow Dog Enterprises Inc.
Statement of Cash Flows
For the Year Ended December 31, 20Y8
Cash flows from (used for) operating activities:
	$
Adjustments to reconcile net income to net cash flow from operating activities:
Changes in current operating assets and liabilities:
Net cash flow from operating activities		$
Cash flows from (used for) investing activities:
	$
Net cash flow used for investing activities
Cash flows from (used for) financing activities:
	$
Net cash flow used for financing activities
		$
Cash balance, January 1, 20Y8
Cash balance, December 31, 20Y8		$

¯ - - - - - - - - - - - - - -

2.a

Sampson Co. sold merchandise to Batson Co. on account, $33,100, terms 2/15, net 45 on December 26. The cost of the goods sold is $24,825. The Batson Co. paid the invoice on December 31, within the discount period. Assume both Sampson and Batson use a perpetual inventory system.

Required:

Prepare the entries that both Sampson and Batson Companies would record for the above. Refer to the Chart of Accounts for exact wording of account titles. If no entry is required, simply skip to the next transaction.

Bank Reconciliation and Entries The cash account for American Medical Co. at April 30 indicated a balance of $10,220. The bank statement indicated a balance of $11,360 on April 30. Comparing the bank statement and the accompanying canceled checks and memos with the records revealed the following reconciling items: Checks outstanding totaled $4,090. A deposit of $4,260, representing receipts of April 30, had been made too late to appear on the bank statement. The bank collected $2,220 on a $2,100 note, including interest of $120. A check for $770 returned with the statement had been incorrectly recorded by American Medical Co. as $700. The check was for the payment of an obligation to Targhee Supply Co. for a purchase on account. A check drawn for $90 had been erroneously charged by the bank as $900. Bank service charges for April amounted to $30. Required: 1. Prepare a bank reconciliation. American Medical Co. Bank Reconciliation April 30 Cash balance according to bank statement $ $ Adjusted balance $ Cash balance according to company' s records $ $ Adjusted balance $ 2. Journalize the necessary entries (a.) that increase cash and (b.) that decrease cash. The accounts have not been closed. For a compound transaction, if an amount box does not require an entry, leave it blank. a. April 30 b. April 30 3. If a balance sheet is prepared for American Medical Co. on April 30, what amount should be reported as cash? $

The auto repair shop of Quality Motor Company uses standards to control the labor time and labor cost in the shop. The standard labor cost for a motor tune-up is given below:

	Standard Hours	Standard Rate	Standard Cost
Motor tune-up	2.50	$35.00	$87.50

The record showing the time spent in the shop last week on motor tune-ups has been misplaced. However, the shop supervisor recalls that 60 tune-ups were completed during the week, and the controller recalls the following variance data relating to tune-ups:

Labor rate variance	$	50	F
Labor spending variance	$	55	U

Required:

1. Determine the number of actual labor-hours spent on tune-ups during the week.

2. Determine the actual hourly rate of pay for tune-ups last week. (Round your answer to 2 decimal places.)

	1. Actual labor hours hours 2. Actual hourly rate per hour

Dawson Toys, Ltd., produces a toy called the Maze. The company has recently established a standard cost system to help control costs and has established the following standards for the Maze toy:

Direct materials: 7 microns per toy at $0.31 per micron

Direct labor: 1.2 hours per toy at $6.70 per hour

During July, the company produced 5,000 Maze toys. The toy's production data for the month are as follows:

Direct materials: 78,000 microns were purchased at a cost of $0.28 per micron. 34,250 of these microns were still in inventory at the end of the month.

Direct labor: 6,400 direct labor-hours were worked at a cost of $46,080.

Required:

1. Compute the following variances for July: (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values. Do not round intermediate calculations. Round final answer to the nearest whole dollar amount.)

a. The materials price and quantity variances.

b. The labor rate and efficiency variances.

	1a. Material price variance Material quantity variance 1b. Labor rate variance Labor efficiency variance

Budgeting allows for a company to set parameters for operations during a specific time period. There are many uses for a budget within a company or department. Provide examples of how a budget might be used in business and how decision making is affected by the use of a budget.

Assume that on January 1, year 1, ABC Inc. issued 5,000 stock options with an estimated value of $10 per option. Each option entitles the owner to purchase one share of ABC stock for $25 a share (the per share price of ABC stock on January 1, year 1, when the options were granted). The options vest at the end of the day on December 31, year 2. All 5,000 stock options were exercised in year 3 when the ABC stock was valued at $31 per share. Identify ABC’s year 1, 2, and 3 tax deductions and book–tax differences (indicate whether permanent and/or temporary) associated with the stock options under the following alternative scenarios:

a) The stock options are incentive stock options and ASC 718 applies to the options.

b) The stock options are nonqualified stock options and ASC 718 applies to the options.

1. The accounting equation is defined as: a. Common Stock + Retained Earnings = Stockholders’ Equity. b. Revenues - Expenses = Net Income. c. Revenues - Expenses - Dividends = Retained Earnings. d. Assets = Liabilities + Stockholders’ Equity.

2. On January 1, Art Inc. started the year with a $492,000 balance in Retained Earnings and a $605,000 balance in Common Stock. During the year, the company earned net income of $92,000, paid a dividend of $15,200, and issued more common stock for $27,500. What is total stockholders' equity at the end of the year? a. $1,231,700. b. $1,097,000. c. $1,201,300. d. $1,588,300.

3. Which financial statement is typically prepared first? a. Balance sheet. b. Income statement. c. Statement of stockholders’ equity. d. Statement of cash flows.

4. Which of the following would increase assets and increase liabilities? a. Provide services to customers on account. b. Purchase office supplies on account. c. Pay dividends to stockholders. d. Receive a utility bill but do not pay it immediately. 2 / 10

5. The Unearned Revenue account is shown in which statement? a. Income statement. b. Statement of cash flows. c. Balance sheet. d. Statement of stockholders’ equity.

6. Consider the following accounts: Utility Expense Accounts Payable Service Revenue Common Stock How many of these accounts are increased with credits? a. One. b. Two. c. Three. d. Four.

7. Schooner Inc. purchased equipment by signing a note payable. This transaction would be recorded as: a. Debit Equipment, credit Cash. b. Debit Cash, credit Notes Payable. c. Debit Notes Payable, credit Equipment. d. Debit Equipment, credit Notes Payable.

8. Air France collected cash on February 4 from the sale of a ticket to a customer on January 26. The flight took place on April 5. According to the revenue recognition principle, in which month should Air France have recognized this revenue? a. January. b. February. c. April. d. Evenly in each of the three months.

9. Which of the following regarding adjusting entries is correct? a. Adjusting entries are recorded for all external transactions. b. Adjusting entries are recorded to make sure all cash inflows and outflows are recorded in the current period. c. Adjusting entries are needed because we use accrual-basis accounting. d. After adjusting entries, all temporary accounts should have a balance of zero. 3 / 10

10. An adjusted trial balance: a. Is a list of all accounts and their balances after adjusting entries. b. Is a list of all accounts and their balances before adjusting entries. c. Is a list of all accounts and their balances after closing entries. d. Is a trial balance adjusted for cash-basis accounting.