Elegant Decor Company’s management is trying to decide whether to eliminate Department 200, which has produced losses or low profits for several years. The company’s 2017 departmental income statements shows the following. ELEGANT DECOR COMPANY Departmental Income Statements For Year Ended December 31, 2017 Dept. 100 Dept. 200 Combined Sales $ 444,000 $ 283,000 $ 727,000 Cost of goods sold 262,000 209,000 471,000 Gross profit 182,000 74,000 256,000 Operating expenses Direct expenses Advertising 15,500 12,000 27,500 Store supplies used 5,000 4,400 9,400 Depreciation—Store equipment 4,400 3,200 7,600 Total direct expenses 24,900 19,600 44,500 Allocated expenses Sales salaries 78,000 46,800 124,800 Rent expense 9,500 4,730 14,230 Bad debts expense 9,500 7,200 16,700 Office salary 21,840 14,560 36,400 Insurance expense 1,900 1,100 3,000 Miscellaneous office expenses 2,400 1,700 4,100 Total allocated expenses 123,140 76,090 199,230 Total expenses 148,040 95,690 243,730 Net income (loss) $ 33,960 $ (21,690 ) $ 12,270 In analyzing whether to eliminate Department 200, management considers the following: The company has one office worker who earns $700 per week, or $36,400 per year, and four sales clerks who each earn $600 per week, or $31,200 per year for each salesclerk. The full salaries of two salesclerks are charged to Department 100. The full salary of one salesclerk is charged to Department 200. The salary of the fourth clerk, who works half-time in both departments, is divided evenly between the two departments. Eliminating Department 200 would avoid the sales salaries and the office salary currently allocated to it. However, management prefers another plan. Two salesclerks have indicated that they will be quitting soon. Management believes that their work can be done by the other two clerks if the one office worker works in sales half-time. Eliminating Department 200 will allow this shift of duties. If this change is implemented, half the office worker’s salary would be reported as sales salaries and half would be reported as office salary. The store building is rented under a long-term lease that cannot be changed. Therefore, Department 100 will use the space and equipment currently used by Department 200. Closing Department 200 will eliminate its expenses for advertising, bad debts, and store supplies; 75% of the insurance expense allocated to it to cover its merchandise inventory; and 23% of the miscellaneous office expenses presently allocated to it. Required: 1. Complete the following report showing total expenses, expenses that would be eliminated by closing Department 200 and the expenses that would continue. The statement should reflect the reassignment of the office worker to one-half time as salesclerk. 2. Prepare a forecasted annual income statement for the company reflecting the elimination of Department 200 assuming that it will not affect Department 100’s sales and gross profit. The statement should reflect the reassignment of the office worker to one-half time as a salesclerk. 3. Reconcile the company’s combined net income with the forecasted net income assuming that Department 200 is eliminated (list both items and amounts). (Amounts to be deducted should be indicated by a minus sign.)

Samtech Manufacturing purchased land and building for $3 million. In addition to the purchase price, Samtech made the following expenditures in connection with the purchase of the land and building:

An independent appraisal estimated the fair values of the land and building, if purchased separately, at $3 and $2 million, respectively. Shortly after acquisition, Samtech spent $89,000 to construct a parking lot and $47,000 for landscaping.

Required:
1. Determine the initial valuation of each asset Samtech acquired in these transactions.
2. Determine the initial valuation of each asset, assuming that immediately after acquisition, Samtech demolished the building. Demolition costs were $320,000 and the salvaged materials were sold for $9,500. In addition, Samtech spent $86,000 clearing and grading the land in preparation for the construction of a new building.

• Required 1

Determine the initial valuation of each asset Samtech acquired in these transactions. (Enter your answers in whole dollars.)

• Required 2

• Determine the initial valuation of each asset, assuming that immediately after acquisition, Samtech demolished the building. Demolition costs were $320,000 and the salvaged materials were sold for $9,500. In addition, Samtech spent $86,000 clearing and grading the land in preparation for the construction of a new building. (Enter your answers in whole dollars.)

  	Assets Initial Valuation Land Building Land improvements

A company constructs a building for its own use. Construction began on January 1 and ended on December 30. The expenditures for construction were as follows: January 1, $580,000; March 31, $680,000; June 30, $480,000; October 30, $840,000. To help finance construction, the company arranged a 7% construction loan on January 1 for $860,000. The company’s other borrowings, outstanding for the whole year, consisted of a $4 million loan and a $6 million note with interest rates of 8% and 6%, respectively.

Assuming the company uses the specific interest method, calculate the amount of interest capitalized for the year. (Do not round intermediate calculations. Round your percentage answers to 2 decimal places (i.e. 0.1234 should be entered as 12.34%).)

Determine the total cash inflows, the total cash outflows, and the expected change in cash for each month from January to July, 2019. Show your work in excel using excel functions. Based the findings, explain in your own words whether the company should borrow/invest and how much and in which months.

The management estimates total sales for the period January, 2019 through June 2019 based on actual sales from the immediate past six months. The following assumptions are made:

The Sales were $125,000 in July 2018 and then the sales grew by 8% each month for the first three months (i.e., August to October 2018) and by 6% for the next two months (i.e., November and December 2018). The sales are expected to grow by 3% each month thereafter.

35% of the Sales are collected in the same month. 33% of the sales are collected in the following month. 31% in collected after and the remainder are not collected.

The Purchases are 60% of each month’s sales and paid in the same month.

Wages and Salaries are $25,000 each month and paid in the same month.

Other administrative expenses are $15,000 and paid in the same month.

Depreciation expense is $5,000 each month.

An electrical device worth $150,000 will be purchased on credit in April 2019. $75,000 will be paid immediately and the balance will be paid in May, 2019.

The company had previously taken a loan of $125,000. The annual interest rate is 5%. The interest is paid twice a year in June and December each year. Assume that no principal repayments are made in this period, only interest payments are made.

The company pays rent of $2,500 quarterly (in March, June, September, and December each year).

Project 2: Review of Merchandising Cycle

[The following information applies to the questions displayed below.]

• WWC decides to use the aging method to estimate uncollectible accounts. WWC determines 8% of the ending balance is the appropriate end of February estimate of uncollectible accounts.

Note: Enter debits before credits.

problem 2.3

the following account balances are available for The Clothing Outlet, Inc., a discount retailer, as of and for the year ended December 31, 20X9, except for the retained earnings balance which is stated below as of January 1, 20X9:Label each of the accounts listed above as an asset (A), liability (L), permanent equity account (PE), or temporary equity account (TE).

Cash .................................................................. $11,600,000

Accounts receivable ...................................................$9,000,000

Marketable securities    ................................................ $4,000,000

Prepaid insurance ....................................................$400,000

Inventory    ............................................................... $8,000,000

Equipment ............................................................... $7,000,000

Accumulated depreciation: equipment ........................... $22,000,000

Buildings ............................................................ $22,000,000

Accumulated depreciation: buildings .............................. $5,000,000

Land    ..................................................................... $6,000,000

Investments (long-term) ............................................. $4,000,000

Accounts payable ...................................................... $9,000,000

Salaries payable......................................................... $1,000,000

Dividends payable ...................................................... $500,000

Interest payable.........................................................$800,000

$Notes payable (long-term) ....................................... $11,000,000

Bonds payable (long term) .......................................$ 14,000,000

Common stock    ......................................................$18,000,000

Retained Earnings (as of Jan. 1, 20X9) ........................ $7,400,000

Dividends declared    ...................................................$500,000

Sales .................................................................. $80,000,000

Cost of goods sold ...................................................    $48,000,000

Interest revenue    ...................................................... $200,000

Interest expense    ......................................................$1,700,000

Income tax expense ................................................... $1,900,000

Selling expenses:

Sales salaries and commissions ................................. $6,900,000

Insurance expense ................................................$2,100,000

Advertising expense    .............................................$300,000,00

Utilities expense ................................................... $3,000,000

Depreciation expense: equipment .............................. $300,000

Delivery expense ...................................................$500,000

General and administrative expenses:

Executive and administrative salaries    ........................ $5,800,000

Utilities expense ................................................... $3,100,000

Rental expense...................................................... $600,000

Depreciation expense: buildings..............................$500,000

Shaftel Ready Mix is a processor and supplier of concrete, aggregate, and rock products. The company operates in the intermountain western United States. Currently, Shaftel has 14 cement-processing plants and a labor force of more than 375 employees. With the exception of cement powder, all materials (e.g., aggregates and sand) are produced internally by the company. The demand for concrete and aggregates has been growing steadily nationally. In the West, the growth rate has been above the national average. Because of this growth, Shaftel has more than tripled its gross revenues over the past 10 years.

Of the intermountain states, Arizona has been experiencing the most growth. Processing plants have been added over the past several years, and the company is considering the addition of yet another plant to be located in Scottsdale. A major advantage of another plant in Arizona is the ability to operate year round, a feature not found in states such as Utah and Wyoming.

In setting up the new plant, land would have to be purchased and a small building constructed. Equipment and furniture would not need to be purchased. These items would be transferred from a plant that opened in Wyoming during the oil boom period and closed a few years after the end of that boom. However, the equipment needs some repair and modifications before it can be used. The equipment has a book value of $200,000, and the furniture has a book value of $30,000. Neither has any outside market value. Other costs, such as the installation of a silo, well, electrical hookups, and so on, will be incurred. No salvage value is expected. The summary of the initial investment costs by category is as follows:

After reviewing these data, Karl Flemming, vice president of operations, argued against the proposed plant. Karl was concerned because the plant would earn significantly less than the normal 8.3% return on sales. All other plants in the company were earning between 7.5 and 8.5% on sales. Karl also noted that it would take more than 5 years to recover the total initial outlay of$582,000. In the past, the company had always insisted that payback be no more than 4 years. The company's cost of capital is 10%. Assume that there are no income taxes.

Required:

1. Prepare a variable-costing income statement for the proposed plant. Compute the ratio of net income to sales.
2. (A) Compute the payback period for the proposed plant.  (B) Suppose you were told that the equipment being transferred from Wyoming could be sold for its book value; what is the payback period?
3. Compute the NPV for the proposed plant.
4. (A)Compute the cubic yards of cement that must be sold for the new plant to break even. Using this break-even volume, compute the NPV.  (B)How can a plant that is breaking even be generating a sufficient NPV?

Please answer number  differently from the answer key

The following transactions occurred during March 2018 for the Wainwright Corporation. The company owns and operates a wholesale warehouse.

1. Issued 50,000 shares of capital stock in exchange for $500,000 in cash.

2.Purchased equipment at a cost of $80,000. $30,000 cash was paid and a note payable was signed for the balance owed.

3.Purchased inventory on account at a cost of $130,000. The company uses the perpetual inventory system.

4.Credit sales for the month totaled $140,000. The cost of the goods sold was $90,000.

5.Paid $7,000 in rent on the warehouse building for the month of March.

6.Paid $8,000 to an insurance company for fire and liability insurance for a one-year period beginning April 1, 2018.

7.Paid $90,000 on account for the merchandise purchased in 3.

8.Collected $75,000 from customers on account.

9.Recorded depreciation expense of $3,000 for the month on the equipment.

Required: Prepare a statement of cash flows, using the direct method to present cash flows from operating activities. Assume the cash balance at the beginning of the month was $60,000.

On May 1, 2018, Hecala Mining entered into an agreement with the state of New Mexico to obtain the rights to operate a mineral mine in New Mexico for $9.9 million. Additional costs and purchases included the following (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.):

After the minerals are removed from the mine, the equipment will be sold for an estimated residual value of $12,000. The structures will be torn down.

Geologists estimate that 790,000 tons of ore can be extracted from the mine. After the ore is removed the land will revert back to the state of New Mexico.

The contract with the state requires Hecala to restore the land to its original condition after mining operations are completed in approximately four years. Management has provided the following possible outflows for the restoration costs:

Hecala’s credit-adjusted risk-free interest rate is 7%. During 2018, Hecala extracted 119,000 tons of ore from the mine. The company’s fiscal year ends on December 31.

Required:

1. Determine the amount at which Hecala will record the mine.(Round your final answer to nearest whole dollar.)

2. Calculate the depletion of the mine and the depreciation of the mining facilities and equipment for 2018, assuming that Hecala uses the units-of-production method for both depreciation and depletion. (Do not round your intermediate calculations. Round "Depreciation" and "Depletion" rates to 4 decimal places. Round your final answers to the nearest whole dollar.)

3. How much accretion expense will the company record in its income statement for the 2018 fiscal year? (Do not round intermediate calculations. Round your final answer to nearest whole dollar.)

4. Are depletion of the mine and depreciation of the mining facilities and equipment reported as separate expenses in the income statement?

5. During 2019, Hecala changed its estimate of the total amount of ore originally in the mine from 790,000 to 990,000 tons. Calculate the depletion of the mine and depreciation of the mining facilities and equipment for 2019 assuming Hecala extracted 149,000 tons of ore in 2019.(Do not round your intermediate calculations. Round "Depreciation" and "Depletion" rates to 4 decimal places. Round your final answers to the nearest whole dollar.)

Foxx Corporation acquired all of Greenburg Company’s outstanding stock on January 1, 2016, for $724,000 cash. Greenburg’s accounting records showed net assets on that date of $560,000, although equipment with a 10-year life was undervalued on the records by $87,500. Any recognized goodwill is considered to have an indefinite life.

Greenburg reports net income in 2016 of $108,500 and $121,000 in 2017. The subsidiary declared dividends of $20,000 in each of these two years.

Account balances for the year ending December 31, 2018, follow. Credit balances are indicated by parentheses.

1. Determine parent's investment income for 2018 under partial equity method and equity method.

2. What would be Foxx’s balance for retained earnings as of January 1, 2018, if each of the following methods had been in use?

• 	d. Investment Income e. Retained Earnings Initial value method $1,236,000 Partial equity method Equity method

Trump, Clinton, and Mueller are forming a partnership.                                                                              

Trump and Clinton are each contributing $100,000 while Mueller is contributing $70,000 and his expertise.                                                                                      

They will be equal partners and each will show the same beginning capital account.             

REQUIRED: A) MAKE THE JOURNAL ENTRY USING THE BONUS METHOD                                                               

                      B) MAKE THE JOURNAL ENTRY USING THE GOODWILL METHOD

The Polaris Company uses a job-order costing system. The following transactions occurred in October:

1. Raw materials purchased on account, $209,000.
2. Raw materials used in production, $192,000 ($153,600 direct materials and $38,400 indirect materials).
3. Accrued direct labor cost of $49,000 and indirect labor cost of $21,000.
4. Depreciation recorded on factory equipment, $104,000.
5. Other manufacturing overhead costs accrued during October, $129,000.
6. The company applies manufacturing overhead cost to production using a predetermined rate of $7 per machine-hour. A total of 76,500 machine-hours were used in October.
7. Jobs costing $514,000 according to their job cost sheets were completed during October and transferred to Finished Goods.
8. Jobs that had cost $450,000 to complete according to their job cost sheets were shipped to customers during the month. These jobs were sold on account at 32% above cost.

Required:

1. Prepare journal entries to record the transactions given above.

2. Prepare T-accounts for Manufacturing Overhead and Work in Process. Post the relevant transactions from above to each account. Compute the ending balance in each account, assuming that Work in Process has a beginning balance of $37,000.

The Accounts Receivable balance for Gold​, Inc. at December​ 31, 2017​, was $27,000. During 2018​, Gold earned revenue of 461,000 on account and collected $326,000 on account. Gold wrote off $6,400 receivables as uncollectible. Industry experience suggests that uncollectible accounts will amount to 2​% of accounts receivable.

1. Assume Gold had an unadjusted $1,800 credit balance in Allowance for Bad Debts at December ​31, 2018. Journalize Gold​'s December ​31, 2018​, adjustment to record bad debts expense using the​ percent-of-receivables method.

2.  Assume Gold had an unadjusted $1,500 debit balance in Allowance for Bad Debts at December ​31, 2018. Journalize Gold​'s December ​31, 2018​, adjustment to record bad debts expense using the​ percent-of-receivables method.

Chaz Corporation has taxable income in 2018 of $312,000 for purposes of computing the §179 expense and acquired the following assets during the year: Placed in Asset Service Basis Office furniture September 12 $ 780,000 Computer equipment February 10 930,000 Delivery truck August 21 68,000 Qualified improvement property September 30 1,500,000 Total $ 3,278,000 What is the maximum total depreciation deduction that Chaz may deduct in 2018?

Lavage Rapide is a Canadian company that owns and operates a large automatic car wash facility near Montreal. The following table provides data concerning the company’s costs:

For example, electricity costs are $1,400 per month plus $0.09 per car washed. The company expects to wash 8,500 cars in August and to collect an average of $6.00 per car washed.

The actual operating results for August appear below.

Required:

Calculate the company's revenue and spending variances for August. (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.)