Question 1

Rick’s Motel has the following monthly costs in the first five months of 2019:

Month                    Rooms Rented                  Costs

January                            150                        $20,250

February                           160                          21,000

March                               130                          18,750

April                                 144                          19,800

May                                  170                          21,750

Instructions

a.    Identify the fixed and variable cost elements using the high-low method.

b.    The hotel management is doing a projection for June 2019. How many rooms should be rented out in order to break even, if the charge is $150 per room rented?

Identifyassumptions you need to make to prepare financial forecasts.

Discuss the risk of leasing hotel rooms to investors.

The Titanic Shipbuilding Company has a noncancelable contract to build a small cargo vessel. Construction involves a cash outlay of $265,000 at the end of each of the next two years. At the end of the third year the company will receive payment of $625,000. Assume the IRR of this option exceeds the cost of capital.

The company can speed up construction by working an extra shift. In this case, there will be a cash outlay of $575,000 at the end of the first year, followed by a cash payment of $625,000 at the end of the second year. Use the IRR rule to show the (approximate) range of opportunity costs of capital at which the company should work the extra shift. (Enter your answers as a percent rounded to 2 decimal places. Enter the smallest percent first.)

The company should work the extra shift if the cost of capital is between  % and  %

Linenpress Limited manufactures pillowcases which it supplies to a major hotel chain. It uses a just-in-time system and holds no inventories. The standard cost for the cotton which is used to make the pillowcases is £5 per m2. Each pillowcase uses 0.5m2 of cotton and production levels for November were as follows: Budgeted production Actual production (units) (units) Pillowcases 190,000 180,000 The actual cost of the cotton in November was £5·80 per m2 and 95,000m2 was used to make the pillowcases. The world commodity prices for cotton increased by 20% in the month of November. At the beginning of the month, the hotel chain made an unexpected request for an immediate design change to the pillowcases. The new design required 10% more cotton than previously. It also resulted in production delays and therefore a shortfall in production of 10,000 pillowcases in total that month. The production manager at Linenpress is responsible for all buying and any production issues which occur, although he is not responsible for the setting of standard costs. Part A

Calculate the following variances for the month of November:

Material price planning variance;

Material price operational variance;

Material usage planning variance;

Material usage operational variance.

Part B Discuss the performance of the production manager for the month of November in the context of your findings in Part A.

Part C Explain how the use of planning and operational variances can lead to more effective performance evaluation in an organisation.

(Solving with excel workbook)

A large corporation must reserve a hotel room block for its annual stockholders' meeting. Based on history, the number of attendees will be normally distributed with mean 4900 and standard deviation 1000. Rooms can be reserved now for a cost of $150/room. If the number of rooms reserved is less than attendance, additional rooms must be reserved at a cost of $250/room. If the number of rooms reserved is greater than attendance, the corporation must indemnify the hotel at the rate of $75 per unused room.

The boss tells you: "I am going to reserve 4300, 4400, 4500, 4600, 4700, 4800, 4900, 5000, 5100, or 5200 rooms, whichever you recommend. Please give me your recommendation." (first number requested)

Redo the problem: The number attending has a triangular distribution with minimum 2000, most likely value 4900, and maximum value 6900. Again, he boss tells you: "I am going to reserve 4300, 4400, 4500, 4600, 4700, 4800, 4900, 5000, 5100, or 5200 rooms, whichever you recommend. Please give me your recommendation." (second number requested)

For the first part of the problem, what is the chance that the random number sampled from the normal is negative, to 3 significant decimal digits? (third number requested)

4. February 1, 2018, Salisbury Company purchased land for the future factory location at a cost of $102,000.  The dilapidated building that was on the property was demolished so that construction could begin on the new factory building. The new factory was completed on November 1, 2018. Costs incurred during this period were:

Using this information, how much should be recorded as the cost of the land?

5. On January 1, 2017, Frostburg Company purchased for $68,500, equipment having a service life of six years and an estimated residual value of $4,000. Frostburg has recorded depreciation of the equipment using the straight-line method. On December 31, 2019, before making any annual adjusting entries, the equipment was exchanged for new machinery having a fair value of $35,000. The transaction has commercial substance. Use this information to prepare all General Journal entries (without explanation) required to record the events for December 31, 2019.

Atif Pharma Bhd (AP Bhd) is a pharmaceutical distributor which purchases prescription medicines and other medical products directly from pharmaceutical manufacturers and distribute across the country. In 2019, the company was involved in several transactions related to the acquisition of property, plant and equipment in order to diversify its operation.

On 2 January 2019, the company purchased a land with an old building for the purpose of self–constructed a new building as a factory by a selected constructed contractor. The price of the land and old building were RM850,000 and RM150,000, respectively. Additional expenditure incurred in relation to the purchase of land and construction of new factory were as follows:

Including in the professional fees was legal fees for the land purchased totalled of RM35,000 and architect’s fee for the factory was of RM45,000. The construction of the factory completed on July 2019. But during the construction, the division manager had specified a low quality of direct material which caused the cost of inefficiency of RM25,000. This cost has been included in the cost of direct material and direct labour.

On 1 July 2019, AP Bhd purchased a specialised machinery for medicine repackaging and laboratories operation that will be used in a new factory. There is no market for this type of machinery in Malaysia, therefore AP Bhd spent of RM20,000 for oversea trip to search for this machinery. The list price of the machinery was RM4,500,000 with a trade discount of 1%. The shipping and handling cost to bring the machinery to the factory was RM180,000. Insurance cost during the shipping was RM30,700. This machinery need a special treatment for the specified area, therefore the company has incurred a cost of RM50,000 for concrete reinforcement; and electrical cabling and wiring totalled of RM33,000 for site preparation. While the Installation and assembly cost was RM42,900. Cost of maintenance of this machinery for three years was RM10,000.  

In addition, AP Bhd has an old equipment. However, this old equipment cannot be used in a new factory since a new factory is made for specified medicine regarding Immunologist while the old machine used for Anesthesiologists. Therefore, on 19 August 2019, AP Bhd decided to exchange its old equipment plus cash for a new equipment from another company. The old equipment was bought on 1 Jun 2015 for RM1,500,000. The old equipment has useful life of 20 years and the company uses straight line method to calculate for depreciation. This old equipment has a market value of RM1,458,000 at the time of trade in. The new equipment has a market value of RM1,420,000. This transaction has a commercial substance.

On 31 August 2019, AP Bhd purchased a furniture for a new factory with a fair value of RM1,200,000 by issuing 60,000 unit of ordinary share. The market value of the share is RM2.50 per unit.

On 30 September 2019, AP Bhd has launched an opening of new factory by inviting the Minister of Health as it becoming the third bumiputera factory and company in pharmaceutical in country. This grand ceremony involved additional cost of RM30,000. On 10 November 2019, AP Bhd entered into contract to acquire the franchise of multivitamin products. AP Bhd paid an amount of RM1,250,000 to the franchisor to produce and sell the product using the formula given by franchisor.

REQUIRED:

2. Prepare the journal entries to record the acquisition of machinery, equipment, furniture and franchise in accordance to MFRS 116 Property, Plant and Equipment and MFRS 138 Intangible Assets. Please show details calculations for each item.

Q1 Capital works deductions are available for _____

Select one:

a. building construction costs

b. All answers are correct

c. the cost of capital improvements to the surrounding property

d. the cost of altering a building

Q2 Capital works deductions are available for _____

Select one:

a. building construction costs

b. All answers are correct

c. the cost of capital improvements to the surrounding property

d. the cost of altering a building

Q3 the tax agent service legislation includes:

Select one:

a. Income Tax Assessment Act 1936

b. All answers are correct

c. Tax Agent Services Regulations 2009

d. Income Tax Assessment Act 1997

Q 4

__is the general anti-avoidance provisions.

Select one:

a. Division 8 ITAA 1997

b. Division 7A ITAA1936

c. Part IVA ITAA1936

d. Division 11 ITAA1997

Can you check if my answer is right for all these questions (my answer are in dark amount big font )

5.17. Consider two undeveloped land sites. At site 1, the highest and best use (HBU) is a warehouse that would cost $1 million to build (exclusive of land cost) and would then generate annual net rents of $150,000, which are expected to grow al 3% per year. At site 2, the HBU is an apartment building that can generate net rents of $800,000, projected to grow at 1% per year, with construction cost of $5 million. Suppose investors buying built properties (that is, properties already developed and in operation) require an initial annual return (in the form of current net income) of 12% minus the expected annual growth rate in the net income, as a percent of the investment cost. For example, they would want an initial yield or cap rate of 9% for the warehouse (12% -- 3% = 9%). Suppose the land value for site | is $1 million and the land value for site 2 is $2 million. On which of these sites (1, 2, both, or neither) is it currently profitable to undertake construction? Show your reasoning.