Part A:

Rainbow City had the following transactions during the year.

Required: Prepare the necessary journal entries in the appropriate governmental fund general journal and the government-wide governmental activities general journal for each of the following Rainbow City transactions.

1. The city received a donation of land that is to be used by Parks and Recreation to develop a public park. At the time of the donation, the land had an acquisition value of $4,800,000 and was recorded on the donor’s books at a historical cost of $3,800,000.
2. The Public Works Department sold machinery with a historical cost of $35,100 and accumulated depreciation of $28,700 for $5,000. The machinery had originally been purchased with special revenue funds.
3. A car was leased for the mayor’s use. The first payment was $800, and the present value of the remaining lease payments was $24,000. (Note: the initial cash payment was made by the General Fund.)
4. During the current year, a Capital Projects Fund completed a new public safety building that was started in the prior year. The total cost of the project was $9,720,000. Financing for the project came from a $9,000,000 bond issue that was sold in the prior year and from a $720,000 federal capital grant received in the current year. Current expenditures for the project totaled $1,176,000. The full cost is attributed to the building because it was constructed on city-owned property.
5. The city records a half year of straight-line depreciation on capital assets placed in service during the year. The building in Item 4 has an estimated 30-year life with no salvage value.
6. Due to technological developments, the city determined that the service capacity of some of the technology equipment used by general government has been impaired. The calculated impairment loss due to technology obsolescence was $1,210,000.

Part B:

In the current year, the building occupied by Surf Beach City’s Culture and Recreation Department suffered severe structural damage as a result of a hurricane. It had been 48 years since a hurricane had hit the Rainbow City area, although hurricanes in Rainbow City’s geographic area are not uncommon. The building had been purchased 10 years earlier at a cost of $2,000,000 and had accumulated depreciation of $500,000 as of the date of the hurricane. Based on a restoration cost analysis, city engineers estimate the impairment loss at $230,000; however, the city expects during the next fiscal year to receive insurance recoveries of $120,000 for the damage.

Requirements:

1. Should the estimated impairment loss be reported as an extraordinary item? Explain.
2. Record the estimated impairment loss in the journal for governmental activities at the government-wide level.
3. How should the insurance recovery be reported in the following fiscal year? (You do not need to provide journal entries.)
   • Submit your responses to Part A in Excel format. The answers to Part B can be included on the spreadsheet or be submitted in a Word document.
   • Show calculations for all questions.
   • Support writing portion of the assignment, with credible sources.
   • Use terms, evidence, and concepts from class readings, including professional business language.
   • Review the week’s CT Assignment grading rubric for more information on expectations and how you will be graded.

The Regal Cycle Company manufactures three types of bicycles—a dirt bike, a mountain bike, and a racing bike. Data on sales and expenses for the past quarter follow: Total Dirt Bikes Mountain Bikes Racing Bikes Sales $ 925,000 $ 265,000 $ 402,000 $ 258,000 Variable manufacturing and selling expenses 476,000 115,000 205,000 156,000 Contribution margin 449,000 150,000 197,000 102,000 Fixed expenses: Advertising, traceable 69,500 8,700 40,500 20,300 Depreciation of special equipment 43,600 20,600 7,300 15,700 Salaries of product-line managers 116,200 40,700 38,700 36,800 Allocated common fixed expenses* 185,000 53,000 80,400 51,600 Total fixed expenses 414,300 123,000 166,900 124,400 Net operating income (loss) $ 34,700 $ 27,000 $ 30,100 $ (22,400) *Allocated on the basis of sales dollars. Management is concerned about the continued losses shown by the racing bikes and wants a recommendation as to whether or not the line should be discontinued. The special equipment used to produce racing bikes has no resale value and does not wear out. Required: 1. What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes? 2. Should the production and sale of racing bikes be discontinued? 3. Prepare a properly formatted segmented income statement that would be more useful to management in assessing the long-run profitability of the various product lines.

Problem 4 Cliffhangers Company had the following product information for March 2019: Selling Price Direct Materials Direct Labor Variable Manufacturing Overhead Variable Selling Fixed Manufacturing Overhead Fixed Selling Production Sales (units) $149 per unit $35 per unit $29 per unit $13 per unit $6 per unit $129,000 $164,000 5,800 units 4,400 units REQUIRED: A. What is the product cost per unit under absorption costing? B. What is the product cost per unit under variable costing? C. Prepare an income statement using absorption costing. D. Prepare an income statement using variable costing.

Marvel Parts, Inc., manufactures auto accessories. One of the company’s products is a set of seat covers that can be adjusted to fit nearly any small car. The company has a standard cost system in use for all of its products. According to the standards that have been set for the seat covers, the factory should work 1,065 hours each month to produce 2,130 sets of covers. The standard costs associated with this level of production are:

	Total		Per Set of Covers
Direct materials	$	35,358	$	16.60
Direct labor	$	8,520		4.00
Variable manufacturing overhead (based on direct labor-hours)	$	3,195		1.50
			$	22.10

During August, the factory worked only 1,050 direct labor-hours and produced 2,700 sets of covers. The following actual costs were recorded during the month:

	Total		Per Set of Covers
Direct materials (6,000 yards)	$	43,740	$	16.20
Direct labor	$	11,340		4.20
Variable manufacturing overhead	$	5,670		2.10
			$	22.50

At standard, each set of covers should require 2.0 yards of material. All of the materials purchased during the month were used in production.

Required:

1. Compute the materials price and quantity variances for August.

2. Compute the labor rate and efficiency variances for August.

3. Compute the variable overhead rate and efficiency 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.)

	1. Materials price variance $ (F,U, or None) Materials quantity variance 2. Labor rate variance Labor efficiency variance 3. Variable overhead rate variance Variable overhead efficiency variance

Below is data about 2 companies, please analyze the ratios provided and determine which company YOU think would be a more sound investment. Then give at least THREE reasons why.

Company A Company B

Avg Collection Period 22.1 days 45. 2 days

Inventory Turnover 4.5 3.2

Current Ratio 2.4 1.7

Quick Ratio 1.8 .5

Debt-to -Equity 33% 59%

Gross Profit 42% 45%

Return on Assets 16.3% 15.1%

Return on Equity 18.2% 11.8%

Northwood Company manufactures basketballs. The company has a ball that sells for $25. At present, the ball is manufactured in a small plant that relies heavily on direct labor workers. Thus, variable expenses are high, totaling $15.00 per ball, of which 60% is direct labor cost. Last year, the company sold 30,000 of these balls, with the following results:

Sales (30,000 balls) $ 750,000

Variable expenses 450,000

Contribution margin 300,000

Fixed expenses 210,000

Net operating income $ 90,000

Required: 1. Compute (a) last year's CM ratio and the break-even point in balls, and (b) the degree of operating leverage at last year’s sales level.

2. Due to an increase in labor rates, the company estimates that next year's variable expenses will increase by $3.00 per ball. If this change takes place and the selling price per ball remains constant at $25.00, what will be next year's CM ratio and the break-even point in balls?

3. Refer to the data in (2) above. If the expected change in variable expenses takes place, how many balls will have to be sold next year to earn the same net operating income, $90,000, as last year?

4. Refer again to the data in (2) above. The president feels that the company must raise the selling price of its basketballs. If Northwood Company wants to maintain the same CM ratio as last year (as computed in requirement 1a), what selling price per ball must it charge next year to cover the increased labor costs?

5. Refer to the original data. The company is discussing the construction of a new, automated manufacturing plant. The new plant would slash variable expenses per ball by 40.00%, but it would cause fixed expenses per year to double. If the new plant is built, what would be the company’s new CM ratio and new break-even point in balls?

6. Refer to the data in (5) above. a. If the new plant is built, how many balls will have to be sold next year to earn the same net operating income, $90,000, as last year?

Wellington Chocolate Company uses activity-based costing. The controller identified two activities and budgeted overhead costs based on these activities:

Setting up equipment $280,000

Baking $5,800,000

Setting up equipment is based on setup hours, and baking is based on oven hours. Wellington produces two products, fudge, and cookies. Information on each product is as follows

	fudge	cookies
Units produced	8,000	445,000
Setup hours	4,000	1,000
Oven hours	5,000	35,000

Required (round your answers to the nearest whole dollar, unless otherwise directed):

1. Calculate the activity rate for setting up equipment

2. Calculate the activity rate for baking

3. How much total overhead is assigned to Fudge?

Union Local School District has a bond outstanding with a coupon rate of 3.7% paid semiannually and 16 years to maturity. The yield to maturity is 3.9% and the bond has a par value of $5,000. What is the price of the bond?

The conceptual framework for Financial accounting and reporting plays an important role in the decisions of parties responsible for preparing General Purpose Financial Reports (GPFR) and in the development of financial reporting and accounting generally.

To some extent this question asks about the difference between US GAAP and IFRS. US GAAP is more heavily based on rules and tends to have more requirements spelled out in standards, with less reliance on the conceptual framework. However, all accounting systems combine rules and principles, and all accounting systems have standards that do not conform completely with their conceptual frameworks. You are to answer how important you think principles are and how important you think rules are.（600-800 words）

Suppose you and your friend want to start a business, and the friend suggests to start a movie dvd rental store in the bronx. Is that an attractive market? Discuss using Porter's Five Forces

Depreciation by Three Methods; Partial Years

Perdue Company purchased equipment on April 1 for $270,000. The equipment was expected to have a useful life of three years or 18,000 operating hours, and a residual value of $9,000. The equipment was used for 7,500 hours during Year 1, 5,500 hours in Year 2, 4,000 hours in Year 3, and 1,000 hours in Year 4.

Required:

Determine the amount of depreciation expense for the years ended December 31, Year 1, Year 2, Year 3, and Year 4, by (a) the straight-line method, (b) units-of-activity method, and (c) the double-declining-balance method.

Note: FOR DECLINING BALANCE ONLY, round the answer for each year to the nearest whole dollar.

a. Straight-line method

Year	Amount
Year 1	$
Year 2	$
Year 3	$
Year 4	$

b. Units-of-activity method

Year	Amount
Year 1	$
Year 2	$
Year 3	$
Year 4	$

c. Double-declining-balance Method

Year	Amount
Year 1	$
Year 2	$
Year 3	$
Year 4	$

Intermediate Accounting I Ethics Question (20 pts. for content; 10 pts. for communication): Thank you very much!

In January 2018, Dunder Mifflin Inc. bought property in downtown Scranton. The property contains land, a warehouse, and some limited equipment. Property values in the area have been increasing rapidly over the past decade. The price paid for the property needs to be allocated to the items purchased and the controller and financial vice president are having that discussion. Dunder Mifflen’s controller wants to allocate the largest proportion of the cost to the warehouse and equipment while the financial VP, David Wallace, argues that the allocation should recognize the steadily increasing value of the land by allocating the highest value to the land. Assume that the same depreciation methods are used for financial and tax return purposes.

1. Under generally accepted accounting principles, how should the total cost of the property be determined? (2 pts.)

2. Why is there any question about how much of the purchase cost should be allocated to each of the assets? How should the purchase cost be allocated to each of the assets? (4 pts.)

3. What are the pros and cons of a proportionally higher allocation of the purchase cost to the land and a proportionally lower allocation to building and equipment? (8 pts.)

4. Assume the equipment and warehouse have the same useful life. The company plans to sell the equipment after it has been fully depreciated and the land will be sold after the warehouse is fully depreciate Assuming no change in tax rates over the life of the warehouse, how will this allocation decision affect Retained Earnings in the long-run, after the assets have been sold? Explain in depth. (6 pts.)

Rigby Inc. produces surveillance equipment. Selected data is provided below.

Problem 2

Selling price 129.00 $/unit
Variable costs 73.40$/unit
Fixed costs 32.10 $unit
Units produced and sold 3,850

REQUIRED:
Calculate the following:

1. Contribution margin per unit

2. Contribution margin ratio

3. Breakeven point in units

4. Breakeven point in sales

5. Sales ($) to reach target profit of $55,000

1. Profit Center Responsibility Reporting for a Service Company

   Thomas Railroad Company organizes its three divisions, the North (N), South (S), and West (W) regions, as profit centers. The chief executive officer (CEO) evaluates divisional performance, using income from operations as a percent of revenues. The following quarterly income and expense accounts were provided from the trial balance as of December 31:

   Revenues—N Region	$1,095,000
   Revenues—S Region	1,306,900
   Revenues—W Region	2,356,700
   Operating Expenses—N Region	693,900
   Operating Expenses—S Region	777,800
   Operating Expenses—W Region	1,425,200
   Corporate Expenses—Dispatching	561,600
   Corporate Expenses—Equipment Management	254,200
   Corporate Expenses—Treasurer’s	166,500
   General Corporate Officers’ Salaries	367,800

   The company operates three service departments: the Dispatching Department, the Equipment Management Department, and the Treasurer’s Department. The Dispatching Department manages the scheduling and releasing of completed trains. The Equipment Management Department manages the railroad cars inventories. It makes sure the right freight cars are at the right place at the right time. The Treasurer’s Department conducts a variety of services for the company as a whole. The following additional information has been gathered:

   	North		South		West
   Number of scheduled trains	5,900		7,000		10,500
   Number of railroad cars in inventory	1,000		1,600		1,500

   Required:

   1. Prepare quarterly income statements showing income from operations for the three regions. Use three column headings: North, South, and West. Do not round your interim calculations.

   Thomas Railroad Company
   Divisional Income Statements
   For the Quarter Ended December 31
   	North	South	West
   Revenues	$	$	$
   Operating expenses
   Income from operations before service department charges	$	$	$
   Service department charges:
   Dispatching	$	$	$
   Equipment Management
   Total service department charges	$	$	$
   Income from operations	$	$	$

   Feedback

   2. What is the A component of the rate of return on investment, computed as the ratio of income from operations to sales.profit margin of each division? Round to one decimal place.

   Region	Profit Margin
   North Region	%
   South Region	%
   West Region	%

   Identify the most successful region according to the profit margin.
   

   • North
   • South
   • West

   3. What would you include in a recommendation to the CEO for a better method for evaluating the performance of the divisions?

   1. The method used to evaluate the performance of the divisions should be reevaluated.
   2. A better divisional performance measure would be the rate of return on investment (income from operations divided by divisional assets).
   3. A better divisional performance measure would be the residual income (income from operations less a minimal return on divisional assets).
   4. None of these choices would be included.
   5. All of these choices (a, b & c) would be included.
   • a
   • b
   • c
   • d
   • e

Monticello Company uses a perpetual inventory system and has a highly labour intensive

production process, so it assigns manufacturing overhead based on direct labour cost.

Monticello’s predetermined overhead application rate for 2017 was computed from the

following data:

Total estimated factory overhead $1,232,500

Total estimated direct labour cost $850,000

The following activities took place in the work in process inventory during June:

     Dr                                      WIP Inventory A/C                                              Cr.

June 1 Bal. 25,625                                          

Direct Materials Used 127,400

Other transactions incurred:

§ Indirect material issued to production was $19,000

§ Total manufacturing labour incurred in June was $172,500, 80% of this amount

represented direct labour.

§ Other manufacturing overhead costs incurred for June amounted to $170,375.

§ Two jobs were completed with total costs of $160,000 & $105,000 respectively. They

were sold on account at a mark-up of 75% on cost.

Required:

i) Compute Monticello’s predetermined manufacturing overhead rate for 2017.

ii) State the journal entries necessary to record the above transactions in the general

journal:

a) For direct materials used in June

b) For indirect material issued to production in June

c) For total manufacturing labour incurred in June

d) To assign manufacturing labour to the appropriate accounts

e) For other manufacturing overhead incurred

f) For manufacturing overhead applied for June

g) To move the completed jobs into finished goods inventory

h) To sell the two completed jobs on account

iii) Calculate the manufacturing overhead variance for Monticello and state the journal

entries necessary to dispose of the variance.

iv) What is balance on the Cost of Goods Sold account after the adjustment

v) Determine the balance in work in process inventory on June 30.