Costing systems provide information that is used for a large variety of business decisions including planning production of goods and services, pricing products, and controlling associated costs of production. Thus, the choice of an appropriate costing system is a key underlying foundation for good decision making. In a response of 400-600 words address the following questions:

1. In what type of situation would a company use multiple cost accounting systems?
2. What factors should a company take into consideration in deciding whether to use job order costing or process costing?
3. Describe two products or services that might use both process and job order costing methods to determine the cost of a finished unit.

Johnson Controls Corp., a major U.S. auto parts supplier, has a manufacturing subsidiary in Nuevo Laredo, Mexico, which assembles wiring harnesses for auto electrical systems. Quarterly, Johnson Controls must consolidate the financial statements of all its foreign subsidiaries into one overall corporate-wide financial statement as required by U.S. accounting standards. This results in translation gains and losses as exchange rates fluctuate against the U.S. dollar. The Mexican peso has been particularly volatile the last few years so the Treasurer of Johnson Controls has been following the translation exposure of the Mexican subsidiary with unusual interest. Prepare the Translation Exposure Report by both the current rate and temporal methods from the balance sheet information for the Mexican subsidiary presented below (all accounts are in pesos 000’s).

Assets                                                               Liabilities                                  

Cash                             Ps 5400                         Accounts Payable                                    Ps 4600

Accounts Receivable             8750                         Bank loans                                    13800

Inventory                             12860                         Bonds                                           8370

Plant & Equipment              25430                        Common Stock                              24000

                                                                        Retained Earnings                            1670

1. If the exchange rate is Ps 14.2650/$ at the end of the next quarter, what would be the translation gain or loss by the a. current rate method and b. temporal method?
2. If the exchange rate is Ps 16.8455/$ at the end of the next quarter, what would be the translation gain or loss by the a. current rate method and b. temporal method?            

You are considering an investment for which you require a 13.5 percent rate of return. The investment costs $58,900 and will produce cash inflows of $25,000 for 3 years. Should you accept this project based on its internal rate of return? Why or why not?

A. Yes; because the IRR is 13.13 percent
B. Yes; because the IRR is 13.65 percent
C. Yes; because the IRR is 13.67 percent
D. No; because the IRR is 13.13 percent
E. No; because the IRR is 13.65 percent

F. There is no IRR for the project

CH 12 Homework

Question 4 of 5

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Blue Spruce Corp.’s comparative balance sheets are presented below:

Additional information:

Prepare a statement of cash flows for 2019 using the indirect method.

Compute free cash flow

Paula is considering forming her own pool service and supply company. She has decided to incorporate the business to limit her legal liability. She invests $39,000 of her own savings and receive 3,000 shares of common stock. Her first year of operations results in the following amounts at the end of the year December 31, current year: Cash in bank, $13,800; amounts due from customers for services rendered, $4,200; pool supplies inventory, $16,800; equipment, $29,900 ($5,000 in depreciation); amounts owed to a pool supply wholesaler, $5,400; loan

payable to the bank, $6,900 at 10% interest per year. She has $13,400 in retained earnings.

Paula sees next year (Year 2) sales of $71,400, wages (DL) of $25,900, cost of supplies used $10,100, other administrative expenses $6,400, and income tax expense of $5,900. She expects to pay herself a $10,000 dividend as the sole stockholder of the company. See collected all of the outstanding AR and 66,000 of current year sales.

Please make opening (end of year 1) and closing balance sheet, and an income statement.

Rundle Company is a retail company that specializes in selling outdoor camping equipment. The company is considering opening a new store on October 1, 2019. The company president formed a planning committee to prepare a master budget for the first three months of operation. As budget coordinator, you have been assigned the following tasks:

Problem 14-23 Part 1

Required

1. October sales are estimated to be $350,000, of which 35 percent will be cash and 65 percent will be credit. The company expects sales to increase at the rate of 20 percent per month. Prepare a sales budget.

2. The company expects to collect 100 percent of the accounts receivable generated by credit sales in the month following the sale. Prepare a schedule of cash receipts.

3. The cost of goods sold is 70 percent of sales. The company desires to maintain a minimum ending inventory equal to 20 percent of the next month’s cost of goods sold. However, ending inventory of December is expected to be $13,100. Assume that all purchases are made on account. Prepare an inventory purchases budget.

4. The company pays 60 percent of accounts payable in the month of purchase and the remaining 40 percent in the following month. Prepare a cash payments budget for inventory purchases.

5. Budgeted selling and administrative expenses per month follow:

1. *The capital expenditures budget indicates that Rundle will spend $153,400 on October 1 for store fixtures, which are expected to have a $31,000 salvage value and a two-year (24-month) useful life.

Use this information to prepare a selling and administrative expenses budget.

6. Utilities and sales commissions are paid the month after they are incurred; all other expenses are paid in the month in which they are incurred. Prepare a cash payments budget for selling and administrative expenses.

7. Rundle borrows funds, in increments of $1,000, and repays them on the last day of the month. Repayments may be made in any amount available. The company also pays its vendors on the last day of the month. It pays interest of 2 percent per month in cash on the last day of the month. To be prudent, the company desires to maintain a $23,000 cash cushion. Prepare a cash budget.

Rundle Company is a retail company that specializes in selling outdoor camping equipment. The company is considering opening a new store on October 1, 2019. The company president formed a planning committee to prepare a master budget for the first three months of operation. As budget coordinator, you have been assigned the following tasks:

Problem 14-23 Part 2

8. Prepare a pro forma income statement for the quarter.

9. Prepare a pro forma balance sheet at the end of the quarter.

10. Prepare a pro forma statement of cash flows for the quarter.

The cash account for American Medical Co. at April 30 indicated a balance of $14,740. The bank statement indicated a balance of $17,460 on April 30. Comparing the bank statement and the accompanying canceled checks and memos with the records revealed the following reconciling items:

1. Checks outstanding totaled $6,290.
2. A deposit of $6,550, representing receipts of April 30, had been made too late to appear on the bank statement.
3. The bank collected $3,400 on a $3,230 note, including interest of $170.
4. A check for $440 returned with the statement had been incorrectly recorded by American Medical Co. as $400. The check was for the payment of an obligation to Targhee Supply Co. for a purchase on account.
5. A check drawn for $40 had been erroneously charged by the bank as $400.
6. Bank service charges for April amounted to $20.

Problem 12-9 Securities held-to-maturity; securities available for sale, trading securities and equity investments [LO12-1, 12-2, 12-3, 12-4, 12-5]

Amalgamated General Corporation is a consulting firm that also offers financial services through its credit division. From time to time the company buys and sells securities. The following selected transactions relate to Amalgamated’s investment activities during the last quarter of 2018 and the first month of 2019. The only securities held by Amalgamated at October 1 were $55 million of 10% bonds of Kansas Abstractors, Inc., purchased on May 1 at face value and held in Amalgamated’s trading portfolio. The company’s fiscal year ends on December 31.

Required:
Prepare the appropriate journal entry for each transaction or event. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round intermediate calculations. Enter your answers in millions rounded to 1 decimal place, (i.e., 5,500,000 should be entered as 5.5).)

• 1

  Record the purchase of 2 million preferred shares of Millwork Ventures Company for $63 million.

• 2

  Record the receipt of semiannual interest of $3.3 million from the Kansas Abstractors bonds.

• 3

  Record the purchase of 10% bonds of Holistic Entertainment Enterprises at their $120 million face value.

• 4

  Record the entry to adjust to fair value on the date of sale of the Kansas Abstractor bonds.

• 5

  Record the sale of the investment in Kansas Abstractors bonds.

• 6

  Record the purchase of 12% bonds of Household Plastics Corporation at their $40 million face value.

• 7

  Record the purchase of U.S. Treasury bonds for $7.5 million.

• 8

  Record the purchase of 4 million common shares of NXS Corporation for $54 million.

• 9

  Record the entry to adjust to fair value on the date of sale of the U.S. Treasury bonds.

• 10

  Record the sale of the Treasury bonds for $8.1 million.

• 11

  Record the receipt of cash dividends of $3 million from the Millwork Ventures Company preferred shares.

• 12

  Record the accrued interest.

• 13

  Record the entry to adjust to fair value for the Millwork Ventures preferred stock.

• 14

  Record the entry to adjust to fair value for the NXS Corporation common shares.

• 15

  Record the entry to adjust to fair value on the date of sale of the NXS Corporation common shares.

• 16

  Record the sale of the NXS Corporation common shares for $52 million.

Describe the application of cost volume profit analysis to a new restaurant concept as a memo

McCormick & Company is considering a project that requires an initial investment of $24 million to build a new plant and purchase equipment. The investment will be depreciated as a modified accelerated cost recovery system (MACRS) seven-year class asset. The new plant will be built on some of the company's land, which has a current, after-tax market value of $4.3 million. The company will produce bulk units at a cost of $130 each and will sell them for $420 each. There are annual fixed costs of $500,000. Unit sales are expected to be $150,000 each year for the next six years, at which time the project will be abandoned. At that time, the plant and equipment is expected to be worth $8 million (before tax) and the land is expected to be worth $5.4 million (after tax).To supplement the production process, the company will need to purchase $1 million worth of inventory. That inventory will be depleted during the final year of the project. The company has $100 million of debt outstanding with a yield to maturity of 8 percent, and has $150 million of equity outstanding with a beta of 0.9. The expected market return is 13 percent, and the risk-free rate is 5 percent. The company's marginal tax rate is 40 percent.

QUESTION 1- Should the project be accepted? What will be the tax depreciation each year?

What do we have in common or not?

1. Build an argument against requiring current market values on the balance sheet.

Utilizing the historical value on the balance sheet provides a look into the real transactional value of the asset. What the company paid is ultimately what the company paid – there is nothing left for interpretation. Utilizing the historical cost approach maintains consistency in the documentation of assets and liabilities. For example, in today’s COVID climate, a company could decide to report higher valuations of certain assets/liabilities to make their balance sheets look more appealing. Even if the exercise was done in all levels of honesty, the value of assets and liabilities can change daily – especially in a volatile economy, Giving businesses the autonomy to make valuation decisions could lead to a misrepresented balance sheet.

2. Build an argument against using historical cost.

Utilizing current market values can provide a more realistic view of the company’s overall worth. For example, if a company had purchased a building/property in 1970 for $100,000 that building/property would certainly be worth 5 -10 times more than that in 2020. In a situation where a company was trying to sell their business, understanding, and documenting, the current market value of an asset (like a building) would make for a more realistic balance sheet and the company’s overall worth.

3. Which of the two arguments do you find most convincing?

I feel that using historical cost method should still be used in order to properly document. I feel that footnotes in filing paperwork could easily outline the age and potential worth of an asset in question. I believe giving companies the option of noting what they “believe” is a value of an asset could cause them issues down the road on what they truly have as assets in the company.

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What do we have in common or not?

a. If assets will be recorded in the balance sheet at current market value it shall be subject to manipulation of accounts and financial statements . It is not possible in case of every assets to ascertain its current market value exactly in such case possibility of bias arises and it may results in distorted information. Thus chances of manipulation also arises.

b. Historical cost is price paid for asset, with time market cost may change but asset shall be recorded in financial statements at historical cost only. This will result in incomplete information because financial statements are showing historical cost which is not valid for current time.

c The most convincing argument is argument against requiring current market values on balance sheet(option a) because doing so will give rise to manipulation which shall effect users decisions. More over if assets are not shown at current market values which shall result in incomplete information this shortcoming can be eliminated by disclosing current market values in footnotes to financial statements.

Ashby clothing is a female clothing line selling high end winter apparel. The company has four brick and mortar locations in central Pa. All locations share the use of the professional back office staff personnel at the company's headquarters. In 2018 the cost of the marketing department was $133,500. The cost of the accounting department was $184,850. The cost of the information technology department was $61,155. Lastly, the customer service call center had a cost of $77,020. Below you will find information was provided about the operations about each store location. Question: Allocate the cost of the back office departments to each of the stores based on, (A) Total Revenue, (B) Gross Margin, and (C) Quantity of winter coats sold.

In your own words, describe each of the four financial statements. Go online and find the most recent set of financial statements for a publicly traded company that you are interested in and explain what you learned about that company from exploring its financial statements.

It is your first day as an intern at Frank's furniture, a major supplier of tables and chairs to some of the largest restaurants in the world. The Plant Controller has a big meeting tomorrow with the executive team and requests your help in preparing the financial information for the meeting. The Controller asks you to review the General Ledger accounts and prepare (A) an income statement and attach (B) a supporting cost of goods manufactured and sold statement.

The following is a partial audit program for the audit of cash receipts:

1. Review the cash receipts journal for large and unusual transactions.

2. Trace entries from the prelisting of cash receipts to the cash receipts journal to determine if each is recorded.

3. Compare customer name, date, and amount on the prelisting with the data on the cash receipts journal.

4. Examine the related remittance advice for entries selected from the prelisting to determine if cash discounts were approved.

5. Trace entries from the prelisting to the deposit slip to determine if each has been deposited.

Required:

1. Identify which audit procedures could be tested using attribute sampling.

2. What is the appropriate sampling unit for the tests in part (a)?

3. List the attributes for testing in part (a).