P15-7 (LO3) (Cash Dividend Entries) The books of Conchita Corporation carried the following account balances as of December 31, 2017. Cash $ 195,000 Preferred Stock (6% cumulative, nonparticipating, $50 par) 300,000 Common Stock (no-par value, 300,000 shares issued) 1,500,000 Paid-in Capital in Excess of Par—Preferred Stock 150,000 Treasury Stock (common 2,800 shares at cost) 33,600 Retained Earnings 105,000 The company decided not to pay any dividends in 2017. The board of directors, at their annual meeting on December 21, 2018, declared the following: “The current year dividends shall be 6% on the preferred and $.30 per share on the common. The dividends in arrears shall be paid by issuing 1,500 shares of treasury stock.” At the date of declaration, the preferred is selling at $80 per share, and the common at $12 per share. Net income for 2018 is estimated at $77,000. Instructions (a) Prepare the journal entries required for the dividend declaration and payment, assuming that they occur simultaneously. (b) Could Conchita Corporation give the preferred stockholders 2 years’ dividends and common stockholders a 30 cents per share dividend, all in cash?

Question 1:

Black Falcon Pty Ltd makes premium range dog biscuits used to provide high level nutrition for dogs, which it introduced to the market in 2016 in the highly competitive premium dog food market. Black Falcon realises that it would be competing against well-known brands that have held market share based on their reputation for many years.  From the feedback received at trade fairs during 2017, Black Falcon has been generally regarded as an equal standard of quality as the other premium providers.  However, the product was initially provided at a low introductory price to encourage customers and retailers to purchase Black Falcon’s dog food. Black Falcon is now seeking to increase the price each year as the firm’s reputation grows.

Black Falcon produces very few defective products and insists upon the highest quality materials from its suppliers. Conversion Costs in each year depend on production capacity defined in terms of units that can be produced, not the actual units produced. Selling and customer-service costs depend on the number of customers that Black Falcon can support, not the actual number of customers it serves. See Table 1 below for information.

REQUIRED:

1. Identify the business strategy adopted by Black Falcon PtyLtdand explain briefly how you reached your decision on the type of business strategy adopted.   
2. Calculate the operating profit for the two accounting years.
3. Prepare the variances for the change in profit between the two years due to the growth strategy.
4. Prepare the variances to reconcile the change in profit between for the two accounting years due to the productivity strategy.
5. Discuss the change in Black Falcon’s operating profitfor the two accounting years.

DOES CVP ANALYSIS APPLY TO SERVICE INDUSTRIES?

Skysong Company sells 10% bonds having a maturity value of $2,550,000 for $2,366,166. The bonds are dated January 1, 2017, and mature January 1, 2022. Interest is payable annually on January 1.

Determine the effective-interest rate. (Round answer to 0 decimal places, e.g. 18%.)

Set up a schedule of interest expense and discount amortization under the effective-interest method. (Round intermediate calculations to 6 decimal places, e.g. 1.251247 and final answer to 0 decimal places, e.g. 38,548.)

Compare the two scenarios for acquiring a machine for a project for 22 years expected operations, at a company with an internal rate of return of i = 16%. Using PW, find which scenario is better. Scenario 1. Buy an initial small machine at $13,000, it cost $2,400/year to run for the first 12 years, buy a second larger machine at $26,000 and run it for 10 years at a cost of $4,000/year. There is no salvage value at the end of service for either machine. Scenario 2. Buy a large machine for $36,000 and run it for 22 years at a cost of $1,000/year. At the end of the 22 years, the machine is assumed to have a salvage value of $5,000.

Given the following pre-closing trial balance, prepare the Balance Sheet

Hamilton Manufacturing Company Direct materials 175,000 Materials handling 35,000 Grinding 300,000 Polishing 100,000 Product Modification 500,000 Providing Power 225,000 System Calibration 400,000 Machine Hours 37,500 units Direct Labor Hours 15,000 Engineering hours 1,200 Batches 200 Materials handling based on direct material cost Grinding based on machine hours Polishing based on machine hours Product Modification based on engineering hours Providing Power based on direct labor hours System Calibration based on batches Job 231 Completed 1,675 units Direct Materials 18,500 Direct labor hours 350 Machine hours 755 Engineering hours 245 Batches 35 Using the ABC Method find the activity overhead rates. Once you have those activity rates find the total cost of Job 231 including materials and the cost per unit

Using the appropriate present value table and assuming a 12% annual interest rate, determine the present value on December 31, 2018, of a five-period annual annuity of $5,600 under each of the following situations: (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.The first payment is received on December 31, 2019, and interest is compounded annually. 2.The first payment is received on December 31, 2018, and interest is compounded annually. 3.The first payment is received on December 31, 2019, and interest is compounded quarterly.

The law of one price states that:

The nominal exchange rates should always be the same as the real exchange rates, both in the short run and in the long run

In ideally efficient markets, the real purchasing power of a currency should be the same regardless of where it is spent

The cost of an individual good should be higher in countries with higher productivity

Which of the following scenarios illustrates why the law of one price may not hold? Check all that apply.

The formation of the European Union creates a custom union among its member states, where internally traded goods are not subject to custom duties, tariffs, or import quotas.

Small electronic devices, such as computer chips, are relatively light and can be shipped in bulk.

Cement is very heavy, and the cost of shipping is measured by weight.

what is meant by the term “Management by exception”? If employees are chronically unable to meet a standard, what effect would you expect this to have on their productivity?

Vinson Co. manufactures and sells one product.  Assume the selling price for each item is $200/per unit.  The following information pertains to the company’s first two years of operation:

Variable Costs Per Unit:

Manufacturing:

                  Direct Materials                                                                        $32/unit

                  Direct Labor                                                              $20/unit

                  Variable Manufacturing Overhead               $4/unit

Variable Selling and Administrative                              $3/unit

Fixed Costs:

Fixed Manufacturing Overhead                                       $660,000

Fixed Selling and Administrative                                    $120,000

Additionally, Vinson Company provides you with the following inventory flow information in terms of units for YEAR 1 & YEAR 2:

                                                                                                            YEAR 1                     YEAR 2                     

Beginning Inventory (units)                                               0                                 20,000                    

Units Produced                                                                         100,000                 75,000                    

Units Sold                                                                                     80,000                    90,000                    

Ending Inventory (units)                                                                        20,000                    5,000     

FOR YEAR 2 PLEASE ANSWER THE FOLLOWING QUESTIONS:

Question 1:   Using the following table, calculate Vinson’s Unit Product Cost/Unit using the Variable Cost Method and Absorption Cost Method.

- Using the Variable Cost Method----Compute Cost Goods Sold:

-Prepare the Company’s YEAR 2 Contribution Margin Income Statement---properly label and show all amounts

-Using the Absorption Cost Method----Compute Cost Goods Sold:

Please describe the circumstances of the following case study and recommend a course of action.

Explain your approach to the problem, perform relevant calculations and analysis, and formulate a recommendation.

Ensure your work and recommendation are thoroughly supported.

Case Study: A vacuum manufacturer has prepared the following cost data for manufacturing one of its engine components based on the annual production of 50,000 units.

Description Cost per Month

Direct Materials $75,000

Direct Labor    $100,000

Total    $175,000

In addition, variable factory overhead is applied at $7.50 per unit. Fixed factory overhead is applied at 150% of direct labor cost per unit. The vacuums sell for $150 each. A third party has offered to make the engines for $60 per unit. 75% of fixed factory overhead, which represents executive salaries, rent, depreciation, and taxes, continue regardless of the decision. Should the company make or buy the engines?

Articulate the approach to solving the problem, including which financial information is relevant and not relevant.

Correctly conclude on whether the company should make or buy the engines.

Propose other factors that should be considered when making this decision and elaborate on whether or not those factors do or do not support the decision.

For each of the following situations involving single amounts, solve for the unknown. Assume that interest is compounded annually. (i = interest rate, and n = number of years) (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.) (Round your final answers to nearest whole dollar amount.)

Present Value Future Value i n

1. $44,000 9.0% 7

2. $37,026 $57,000 2.0% 11

3. $15,901 $41,000 7.0%

4. $35,417 $110,000 10

5. $15,189 6.0% 14