The following situations should be considered independently. (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.) 1. John Jamison wants to accumulate $63,968 for a down payment on a small business. He will invest $32,000 today in a bank account paying 8% interest compounded annually. Approximately how long will it take John to reach his goal? 2. The Jasmine Tea Company purchased merchandise from a supplier for $32,802. Payment was a noninterest-bearing note requiring Jasmine to make five annual payments of $8,000 beginning one year from the date of purchase. What is the interest rate implicit in this agreement? 3. Sam Robinson borrowed $14,000 from a friend and promised to pay the loan in 12 equal annual installments beginning one year from the date of the loan. Sam’s friend would like to be reimbursed for the time value of money at a 9% annual rate. What is the annual payment Sam must make to pay back his friend?

1. A company has estimated the annual revenues and expenses for a project it is considering (listed above) that will cost a total of $500,000, have a ten-year useful life, and has a salvage value of $40,000. The company requires a payback period of 5 years or less.

1. Using the information above, what is the expected annual cash flow for this company? ______________
2. What is the payback period?    __________________________
   Would the company consider this project?   ______________
3. What is the internal rate of return to the nearest percent?   _______________
4. What is the simple rate of return promised by the project? _____________________________
   If the company requires a simple rate of return of at least 10%, will the games be purchased?    __________

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As a newly hired management accountant, you have been asked to prepare a profit plan for the company for which you work. As part of this task, you’ve been asked to do some what-if analyses. Following is the budgeted information regarding the coming year:

Required:

1. What is the breakeven volume, in units and dollars, for the coming year?

2. Assume that the goal of the company is to earn a pretax (operating) profit of $300,000 for the coming year. How many units would the company have to sell to achieve this goal?

3. Assume that of the $70 variable cost per unit the labor-cost component is $25. Current negotiations with the employees of the company indicate some uncertainty regarding the labor cost component of the variable cost figure presented above. What is the effect on the breakeven point in units if selling price and fixed costs are as planned, but the labor cost for the coming year is 4% higher than anticipated? What if labor costs are 6% higher than anticipated? What if labor costs turn out to be 8% higher than anticipated?

4. Assume now that management is convinced that labor costs will be 5% higher than originally planned when the budget for the year was put together. What selling price per unit must the company charge to maintain the budgeted ratio of contribution margin to sales? (Hint: Use the Goal Seek function in Excel to answer this question.)

• equired 1
• Required 2
• Required 3
• Required 4

What is the breakeven volume, in units and dollars, for the coming year?

Assume that the goal of the company is to earn a pretax (operating) profit of $300,000 for the coming year. How many units would the company have to sell to achieve this goal?

Assume that of the $70 variable cost per unit the labor-cost component is $25. Current negotiations with the employees of the company indicate some uncertainty regarding the labor cost component of the variable cost figure presented above. What is the effect on the breakeven point in units if selling price and fixed costs are as planned, but the labor cost for the coming year is 4% higher than anticipated? What if labor costs are 6% higher than anticipated? What if labor costs turn out to be 8% higher than anticipated? (Round "Per Unit" and "% Change in Breakeven Point" answers to 2 decimal places and other answers to the nearest whoie number.)

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Assume now that management is convinced that labor costs will be 5% higher than originally planned when the budget for the year was put together. What selling price per unit must the company charge to maintain the budgeted ratio of contribution margin to sales? (Round your answer to 2 decimal places.) (Hint: Use the Goal Seek function in Excel to answer this question.)

In Chapter 7, we discussed the differences between preventive, detective, and corrective controls. Chapters 8-10 offer specific types of controls within those categories over information security, confidentiality, privacy, processing integrity, and availability.

Think about controls that you have encountered in your own life (personal, professional, within organizational memberships, etc.). Note that at the time, you may or may not have realized that the answer to “why is this done?” was that a control was being implemented: a control over operations, reporting, and/or compliance.

1. Provide a specific example of a preventive control that you have encountered. Describe what it was and its purpose (i.e., describe the specific organizational objective within one of the three categories that it was implemented to protect – note the category and describe in the context of the situation). As part of the description, note whether it was a control over information security, confidentiality, privacy, processing integrity, availability and/or something else. Explain.

Hutto Corp. has set the following standard direct materials and direct labor costs per unit for the product it manufactures.

During May the company incurred the following actual costs to produce 8,100 units.

AQ = Actual Quantity
SQ = Standard Quantity
AP = Actual Price
SP = Standard Price

AH = Actual Hours
SH = Standard Hours
AR = Actual Rate
SR = Standard Rate

(2) Compute the direct labor rate variance and the direct labor efficiency variance. Indicate whether each variance is favorable or unfavorable.

Oerstman, Inc., uses a standard costing system and develops its overhead rates from the current annual budget. The budget is based on an expected annual output of 125,000 units requiring 500,000 direct labor hours. (Practical capacity is 520,000 hours.) Annual budgeted overhead costs total $815,000, of which $580,000 is fixed overhead. A total of 119,200 units using 498,000 direct labor hours were produced during the year. Actual variable overhead costs for the year were $261,300, and actual fixed overhead costs were $556,150.

1. Compute the fixed overhead spending and volume variances.

2. Compute the variable overhead spending and efficiency variances. Do not round intermediate calculations

Carlsville Company, which began operations in 2017, invests its idle cash in trading securities. The following transactions are from its short-term investments in trading securities.

2017

2018

2019

Required:
Prepare journal entries to record these short-term investment activities for the years shown. On December 31 of each year, prepare the adjusting entry to record any necessary fair value adjustment for the portfolio of trading securities. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round your intermediate calculations.)

Southcott co is a firm of financial consultants which offers short revision courses on taxation and auditing for professional examinations. The firm has budgeted annual overheads totaling $152,625. Until recently the firm has applied overheads on a volume basis, based on the number of course days offered. The firm has no variable costs and the only direct costs are the consultants' own time which they divide equally between their two courses. The following information relates to the past year and is expected to remain the same for the coming year. Course No. of courses sold Duration of course No. of enquiries No. of brochures Auditing 50 2 days 175 300 Taxation 30 3 days 70 200 All courses run with a maximum number of students (30), as it is deemed that beyond this number the learning experience is severely diminished, and the same center is hired for all courses at a standard daily rate. The firm has the human resources to run only one course at any one time. Required 1. Calculate the overhead cost per course for auditing using traditional volume based absorption costing to the nearest dollar. 2. The firm is considering the possibility of adopting an activity-based costing (ABC) system and has identified the overhead costs as shown below. Details of overheads $ Center hire 62,500 Enquiries administration 27,125 Brochures 63,000 Total 152,625 Calculate the overhead cost of center hire which would be allocated to an auditing course under activity based costing to the nearest dollar. 3. Calculate the overhead cost of brochure printing which would be allocated to a taxation course under activity based costing to the nearest dollar. 4. Calculate the overhead cost of enquiries administration which would be allocated to a taxation course under activity based costing. 5. A member of Southcott Co.’s finance team has said that activity based costing (ABC) provides more accurate product costs than a traditional absorption costing system. He gave a number of statements supporting this claim. Which of the following statements does not support his claim?

Describe sustainable income and the importance of sustainable income in the evaluation of the income statement.

Choose at least two (2) items or events that will affect sustainable income of a company.

Propose the manner in which you would disclose these items or events to investors. Justify your response

Carreker, Inc., has a number of divisions, including the Alamosa Division, producer of surgical blades, and the Tavaris Division, a manufacturer of medical instruments. Alamosa Division produces a 2.4 cm steel blade that can be used by Tavaris Division in the production of scalpels. The market price of the blade is $25. Cost information for the blade is: Variable product cost $ 9.40 Fixed cost 5.60 Total product cost $15.00 Tavaris needs 19,000 units of the 2.4 cm blade per year. Alamosa Division is at full capacity (85,000 units of the blade).

1. If Carreker, Inc., has a transfer pricing policy that requires transfer at market price, what would the transfer price be?
$ per unit

Do you suppose that Alamosa and Tavaris divisions would choose to transfer at that price?
Yes

2. Now suppose that Carreker, Inc., allows negotiated transfer pricing and that Alamosa Division can avoid $1.75 of selling and distribution expense by selling to Tavaris Division. Which division sets the minimum transfer price, and what is it? Round your answers to the nearest cent, if needed.
  $ per unit

Which division sets the maximum transfer price, and what is it?
  $ per unit

Do you suppose that Alamosa and Tavaris divisions would choose to transfer somewhere in the bargaining range?

3. What if Alamosa Division plans to produce and sell only 70,000 units of the 2.4 cm blade next year? Which division sets the minimum transfer price, and what is it? Round your answers to the nearest cent, if needed.
  $ per unit

Which division sets the maximum transfer price, and what is it?
  $ per unit

Do you suppose that Alamosa and Tavaris divisions would choose to transfer somewhere in the bargaining range?

ackpot Mining Company operates a copper mine in central Montana. The company paid $1,550,000 in 2018 for the mining site and spent an additional $710,000 to prepare the mine for extraction of the copper. After the copper is extracted in approximately four years, the company is required to restore the land to its original condition, including repaving of roads and replacing a greenbelt. The company has provided the following three cash flow possibilities for the restoration costs (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.):

To aid extraction, Jackpot purchased some new equipment on July 1, 2018, for $249,000. After the copper is removed from this mine, the equipment will be sold for an estimated residual amount of $27,000. There will be no residual value for the copper mine. The credit-adjusted risk-free rate of interest is 10%.

The company expects to extract 11.1 million pounds of copper from the mine. Actual production was 2.7 million pounds in 2018 and 4.1 million pounds in 2019.

Required:
1. Compute depletion and depreciation on the mine and mining equipment for 2018 and 2019. The units-of-production method is used to calculate depreciation. (The expected format for rounding is presented in the appropriate rows of the table. Round your final answers to nearest whole dollar.)

1/ At the beginning of 2016, Robotics Inc. acquired a manufacturing facility for $12.8 million. $9.8 million of the purchase price was allocated to the building. Depreciation for 2016 and 2017 was calculated using the straight-line method, a 25-year useful life, and a $1.8 million residual value. In 2018, the estimates of useful life and residual value were changed to 20 total years and $580,000, respectively.

What is depreciation on the building for 2018? (Round answer to the nearest whole dollar.)
  

2/ Collison and Ryder Company (C&R) has been experiencing declining market conditions for its sportswear division. Management decided to test the assets of the division for possible impairment. The test revealed the following: book value of division’s assets, $27.1 million; fair value of division’s assets, $21.3 million; sum of estimated future cash flows generated from the division’s assets, $28.3 million.

What amount of impairment loss should C&R recognize? (Enter your answer in whole dollars.)
  

On October 1, 2018, the Allegheny Corporation purchased machinery for $314,000. The estimated service life of the machinery is 10 years and the estimated residual value is $6,000. The machine is expected to produce 550,000 units during its life.

Required:
Calculate depreciation for 2018 and 2019 using each of the following methods. Partial-year depreciation is calculated based on the number of months the asset is in service.

1. Straight line.
2. Sum-of-the-years’-digits.
3. Double-declining balance.
4. One hundred fifty percent declining balance.
5. Units of production (units produced in 2018, 28,000; units produced in 2019, 43,000).

Calculate depreciation for 2018 and 2019 using straight line method. Partial-year depreciation is calculated based on the number of months the asset is in service.

Calculate depreciation for 2018 and 2019 using sum-of-the-years’ digits. Partial-year depreciation is calculated based on the number of months the asset is in service.

Calculate depreciation for 2018 and 2019 using double-declining balance. Partial-year depreciation is calculated based on the number of months the asset is in service.

Madrid Corporation has 15,000 shares of $70 par common stock outstanding. On June 8, Madrid Corporation declared a 3% stock dividend to be issued August 12 to stockholders of record on July 13. The market price of the stock was $103 per share on June 8.

Journalize the entries required on June 8, July 13, and August 12. For a compound transaction, if an amount box does not require an entry, leave it blank. If no entry is required, select "No Entry Required" and leave the amount boxes blank.

Estimated Warranty Liability

Cook-Rite Co. sold $541,000 of equipment during January under a one-year warranty. The cost to repair defects under the warranty is estimated at 6% of the sales price. On August 15, a customer required a $348 part replacement, plus $174 of labor under the warranty.

Required:

(a) Provide the journal entry for the estimated warranty expense on January 31 for January sales.

(b) Provide the journal entry for the August 15 warranty work. If an amount box does not require an entry, leave it blank.