The U.S. government allows firms to subtract many business expenses from their gross income in determining taxes due. This process is relatively straight-forward for some expenses, such as labor and materials, which are “consumed” in the process of producing goods and services. This chapter on depreciation presents what happens when a business purchases a piece of durable equipment, such as a forklift, crane, or computer, which will be used over many years. This equipment is not directly consumed but does deteriorate with time and is clearly a business expense. It does not make sense for firms to be able to subtract the entire equipment cost immediately, when full value has not yet been realized from the equipment and payment may not even be fully complete. Therefore, the government has devised depreciation rules that allow firms to recoup durable equipment and other durable property value over time, much like other business expenses.

Firms can also apply depreciation to durable intangible assets, such as patents, trademarks, or even the estimated value of customer relationships. Like durable equipment, these types of durable intangible property provide value to the business over time, rather than being consumed during production, and also degrade in value or usefulness over time. For instance, patents and most customer relationships have a limited life span. While trademarks do not, the goods and services they are associated with are not generally expected to have indefinite appeal. When depreciation is applied to an intangible asset, this process is typically referred to as amortization.

While amortization of intangible assets may see like it would be a minor concept for most businesses, the value of a Coca-Cola or Nike brand, a major drug or hardware patent, or the customer base of an acquired firm can be in the millions or billions of dollars. For instance, Apple and Samsung have been engaged in an ongoing and highly publicized multinational legal battle over patents, trademarks, and other intangible assets with damages sought totaling in the billions of dollars. While not every firm will have intangible assets worth quite this much, intangible assets are a critical property class in many firms. Recent data indicate that intangible property accounts for around 80% of the total market value of the “typical” U.S. firm. For example, intangible property comprised about 78% of the market value of Alphabet, Inc. (the parent company of Google) circa 2015. Thus, all firms should consider their intangible property in investment decisions, including correctly evaluating tax implications over time through the application of the appropriate amortization procedures.

1. Besides Apple and Samsung, what other examples of legal battles over intangible assets can you identify?
2. If you had to develop a method for amortizing an intangible asset such as a patent, how would you go about doing this? What sorts of parameters would you need to consider in developing this method?
3. Does the percentage of market value tied to intangible assets in U.S. firms surprise you? Why or why not? Do you think this percentage differs in other countries? Why or why not?

Snowbird Inc. (Snowbird) manufactures and sells one model of sleds. Snowbird’s accountant gathered the following information to prepare the budget for 2020:

Snowbird has a policy of maintaining finished goods inventory at the end of each quarter equal to 5% of the following quarter’s projected sales. There were 150 sleds in finished goods inventory at the start of 2020, with a total cost of $45,000. Materials and labour requirements for the sleds are:

Direct materials inventory on the first day of 2020 was 1,000 board-metres. Direct materials were originally purchased at $33 per board-metre. Prices have now risen to

$34 per board-metre. The desired ending materials inventory is 10% of the following quarter’s projected production needs.

Snowbird’s direct labourers are paid $16 per hour. Variable manufacturing overhead is allocated at the rate of $15 per direct labour hour. Fixed manufacturing overhead costs are budgeted at $186,240 for 2020. Snowbird uses first-in, first-out to account for its inventory flow.

Required:

Prepare the following budgets and schedules as part of the master budget for the first quarter of 2020:

1. Production budget
2. Direct materials purchase budget
3. Direct labour budget (
4. Manufacturing overhead budget
5. Ending finished goods inventory budget

Executive officers of Stuart Company are wrestling with their budget for the next year. The following are two different sales estimates provided by two difference sources.

Stuart’s past experience indicates that cost of goods sold is about 65 percent of sales revenue. The company tries to maintain 10 percent of the next quarter’s expected cost of goods sold as the current quarter’s ending inventory. This year’s ending inventory is $24,000. Next year’s ending inventory is budgeted to be $25,000.

Required

1. Prepare an inventory purchases budget using the sales manager’s estimate.

2. Prepare an inventory purchases budget using the marketing consultant’s estimate.

Prepare an inventory purchases budget using the sales manager’s estimate. (Round your final answers to nearest whole dollar amount.)

Prepare an inventory purchases budget using the marketing consultant’s estimate. (Round your final answers to nearest whole dollar amount.)

1. Harwinton, Inc. anticipates sales of 48,000 units, 46,000 units, and 49,000 units in July, August, and September, respectively. Company policy is to maintain an ending finished-goods inventory equal to 40% of the following month's sales. On the basis of this information, how many units would the company plan to produce in July? Multiple Choice 48,800. 47,200. 46,000. 46,800.

2..  

Oxford Industries has the following sales forecasts for its snowshoes next year:

What is Oxford’s estimated sales in units for next year?

Multiple Choice

• 103,450 pairs.

• 95,750 pairs.

• 100,000 pairs.

• 101,200 pairs.

I ONLY need requirements 9&10 on the first set of requirements and then 1 &2 on the second set of requirements please. Thank you!

Endless Mountain Company manufactures a single product that is popular with outdoor recreation enthusiasts. The company sells its product to retailers throughout the northeastern quadrant of the United States. It is in the process of creating a master budget for 2019 and reports a balance sheet at December 31, 2018 as follows:

The company’s chief financial officer (CFO), in consultation with various managers across the organization has developed the following set of assumptions to help create the 2019 budget:

1. The budgeted unit sales are 12,000 units, 37,000 units, 15,000 units, and 25,000 units for quarters 1-4, respectively. Notice that the company experiences peak sales in the second and fourth quarters. The budgeted selling price for the year is $32 per unit. The budgeted unit sales for the first quarter of 2020 is 13,000 units.
2. All sales are on credit. Uncollectible accounts are negligible and can be ignored. Seventy-five percent of all credit sales are collected in the quarter of the sale and 25% are collected in the subsequent quarter.
3. Each quarter’s ending finished goods inventory should equal 15% of the next quarter’s unit sales.
4. Each unit of finished goods requires 3.5 yards of raw material that costs $3.00 per yard. Each quarter’s ending raw materials inventory should equal 10% of the next quarter’s production needs. The estimated ending raw materials inventory on December 31, 2019 is 5,000 yards.
5. Seventy percent of each quarter’s purchases are paid for in the quarter of purchase. The remaining 30% of each quarter’s purchases are paid in the following quarter.
6. Direct laborers are paid $18 an hour and each unit of finished goods requires 0.25 direct labor-hours to complete. All direct labor costs are paid in the quarter incurred.
7. The budgeted variable manufacturing overhead per direct labor-hour is $3.00. The quarterly fixed manufacturing overhead is $150,000 including $20,000 of depreciation on equipment. The number of direct labor-hours is used as the allocation base for the budgeted plantwide overhead rate. All overhead costs (excluding depreciation) are paid in the quarter incurred.
8. The budgeted variable selling and administrative expense is $1.25 per unit sold. The fixed selling and administrative expenses per quarter include advertising ($25,000), executive salaries ($64,000), insurance ($12,000), property tax ($8,000), and depreciation expense ($8,000). All selling and administrative expenses (excluding depreciation) are paid in the quarter incurred.
9. The company plans to maintain a minimum cash balance at the end of each quarter of $30,000. Assume that any borrowings take place on the first day of the quarter. To the extent possible, the company will repay principal and interest on any borrowings on the last day of the fourth quarter. The company’s lender imposes a simple interest rate of 3% per quarter on any borrowings.
10. Dividends of $15,000 will be declared and paid in each quarter.
11. The company uses a last-in, first-out (LIFO) inventory flow assumption. This means that the most recently purchased raw materials are the “first-out” to production and the most recently completed finished goods are the “first-out” to customers.

Required:

The company’s CFO has asked you to prepare the 2019 master budget. To fulfill this request, prepare the following budget schedules and financial statements.

1. Quarterly sales budget including a schedule of expected cash collections.

2. Quarterly production budget.

3. Quarterly direct materials budget including a schedule of expected cash disbursements for purchases of materials.

4. Quarterly direct labor budget.

5. Quarterly manufacturing overhead budget.

6. Ending finished goods inventory budget at December 31, 2019.

7. Quarterly selling and administrative expense budget.

8. Quarterly cash budget.

9. Income statement for the year ended December 31, 2019.

10. Balance sheet at December 31, 2019.

Required:

1. Calculate the following budgeted figures for 2019:

a. The total fixed cost.

b. The variable cost per unit sold.

c. The contribution margin per unit sold.

d. The break-even point in unit sales and dollar sales.

e. The margin of safety.

f. The degree of operating leverage

2. Prepare a budgeted variable costing income statement for 2019. Stop your computations at net operating income.

4. Most goods and services produced at home (e.g. making coffee or assembling a desk bought from Home Depot)

a. and most goods and services produced illegally are included in GDP.

b. are included in GDP while most goods and services produced illegally are excluded from GDP.

c. and most goods and services produced illegally are excluded from GDP.

d. are excluded from GDP while most goods and services produced illegally are included in GDP

5. Suppose GDP in an economy is $3,542 billion. Personal Consumption Expenditures (C) are $2,343 billion, Government Spending (G) is $865 billion, and Gross Private Domestic Investment (I) is $379 billion. Net foreign factor income (NFFI) is $ 10 billion.

What are net exports (NX)?

a. 7049

b. 3587

c. – 45

d. + 45

e. 3532

For the following questions identy Which curve would be affected? is there a Movement Or Shift and is it left or right? PLEASE EXPLAIN WHY THE ANSWERS ARE CORRECT, I have the correct answers listed just need to know why

1. Hourly wages & salaries rose by 1.9% and the non-wage component by 1.4% in the year up to the second quarter of 2012, ? In 2012, the economy’s _________.? Answer: SRAS decreases

2. …a weak reading of German investor sentiment - on concerns about a slowing in U.S. economic momentum and uncertainty around the emerging markets outlook….” ? ______ in Germany _____.? Answer: AD, decreases

3. Thanks to a surge in demand from China, there is an increase in car manufacturing in last quarter in U.S.”? _________ in U.S. _____.

Answer: AD, increases.

4. In U.K., an underlying measure of inflation, which strips out increases in energy, food, alcohol and tobacco, rose by 1.6 percent and factory gate prices rose by 0.9 percent”?

________ in U.K _____.?

Answer: ?AD or SRAS in U.K does not change (movement).?

5. In U.S., Sales of new cars surged 11.4% on quarter, leading to a 17.0% jump in consumption of durable goods due to boost in consumer sentiment.” ?

_________ in U.S. _____.

Answer: AD in U.S. increases.

PLEASER EXPLAIN WHY THE ANSWERS ARE CORRECT, I DO NOT UNDERSTAND THE CONCEPT

Go to the website of the Bureau of Economic Analysis and find the growth rate of real GDP for the most recent quarter, 2019 fourth quarter. Go to the website of the Bureau of Labor Statistics and find the inflation rate over the past year 2019 and the unemployment rate for the most recent month, March 2019.

• How do you interpret these data?

• What do you think will the growth rate of real GDP be for first quarter of 2020? And unemployment rate for April 2020? And inflation rate for April 2020?

On January 1, 2024, Fabrikam Labs issued 1,000 bonds, each with a face value of $1,000, for 102.7323. The stated interest is 3.8%, and the market rate at the time the bonds were issued was 3.2%. The bonds are due on January 1, 2029 (5 year term) with interest payments due annually every January 1st. The company received cash from the sale of the bonds. Using the effective-interest method calculate and record the December 31, 2025 journal entry for the bond interest expense including premium/discount amortization, and the payable.