4. Provide the first 5 steps in the McKinney method when building a cash forecasting model. Be brief.

5. Provide 3 reasons companies began in 2005 to hold more cash than before.

The comparative balance sheets for 2018 and 2017 and the income statement for 2018 are given below for Arduous Company. Additional information from Arduous’s accounting records is provided also.

Additional information from the accounting records:

1. Investment revenue includes Arduous Company’s $14 million share of the net income of Demur Company, an equity method investee.
2. Treasury bills were sold during 2018 at a gain of $2 million. Arduous Company classifies its investments in Treasury bills as cash equivalents.
3. A machine originally costing $86 million that was one-half depreciated was rendered unusable by a flood. Most major components of the machine were unharmed and were sold for $15 million.
4. Temporary differences between pretax accounting income and taxable income caused the deferred income tax liability to increase by $11 million.
5. The preferred stock of Tory Corporation was purchased for $33 million as a long-term investment.
6. Land costing $54 million was acquired by issuing $27 million cash and a 15%, four-year, $27 million note payable to the seller.
7. The right to use a building was acquired with a 15-year lease agreement; present value of lease payments, $90 million. Annual lease payments of $7 million are paid at the beginning of each year starting January 1, 2018.
8. $68 million of bonds were retired at maturity.
9. In February, Arduous issued a stock dividend (7.2 million shares). The market price of the $5 par value common stock was $7.50 per share at that time. Also the company paid a cash dividend.
10. In April, 1 million shares of common stock were repurchased as treasury stock at a cost of $17.00 million.

Required:
Prepare the statement of cash flows of Arduous Company for the year ended December 31, 2018. Present cash flows from operating activities by the direct method. (Do not round your intermediate calculations. Enter your answers in millions (i.e., 10,000,000 should be entered as 10.). Amounts to be deducted should be indicated with a minus sign.)

Q1) The Buffet Company produces and sells Parrot-head t-shirts. Income statements for two activity levels are provided below:

Required:

1. Identify the mixed expenses.
2. Use the high-low method to separate the mixed costs into variable and fixed components.
3. Prepare a contribution margin income statement at the 50,000 unit level.

__________________________________________________________________________________________________________________________

Q2) The Mean Cleaning Machine (MCM) Company and the Acme Cleaning Service provide janitorial services to commercial and residential customers in a major metropolitan area. MCM pays its employees $10 per hour for commercial jobs and $12.50 per hour for residential jobs. Acme pays its workers salaries. Acme’s total labor costs run $200,000 per year. Both companies charge their commercial customers an average of $15 per hour and the residential customers $25 per hour.

Required:

1. Prepare a contribution margin income statement for each company assuming they provide 15,000 hours of service to commercial customers and 4,000 hours of service to residential customers during the period and incurred no other expenses than those mentioned above.
2. A new service has recently entered the market specializing in residential cleaning at substantial lower rates. Both MCM and Ace are contemplating getting out of the residential business. Prepare a contribution margin income statement for each company assuming they do exit the residential business.
3. Which company will fare better if the residential business is eliminated? Why?

Predicting the Amount of Money Spent on Insured Customers

For this assignment, we will be analyzing insured customers' data for an insurance company:

Based on a sample data that consists of the profile of insured customers, we want to be able to predict the dollar amount of money spent by the insurance company on insured customers.

Insured ustomers' Data

The insured customers' data is in a csv file. It has information sconsisting of:

1.age

2.sex (female, male)

3.BMI

4.Children

5.Smoker (yes, no)

6.Region (northeast, northwest, southeast, southwest])

7.expenses

The value we want to predict is expenses

Necessary files are in onedrive:

https://1drv.ms/u/s!Al0FoC_cg4VI3r5Y-ORAr_DjO5etwQ

https://1drv.ms/u/s!Al0FoC_cg4VI3r5X-v6AWSBI2zapLw

Engberg Company installs lawn sod in home yards. The company’s most recent monthly contribution format income statement follows: Amount Percent of Sales Sales $ 130,000 100 % Variable expenses 52,000 40 % Contribution margin 78,000 60 % Fixed expenses 18,000 Net operating income $ 60,000 Required: 1. What is the company’s degree of operating leverage? 2. Using the degree of operating leverage, estimate the impact on net operating income of a 27% increase in sales. 3. Construct a new contribution format income statement for the company assuming a 27% increase in sales.

Please don not copy solutions in the text book .

At December 31, 2020, Bouvier Corp. has assets of $10 million, liabilities of $6 million, common shares of $2 million (representing 2 million common shares of $1.00 par), and retained earnings of $2 million. Net sales for the year 2020 were $18 million, and net income was $800,000. As one of the auditors of this company, you are making a review of subsequent events on February 13, 2021, and you find the following.

1)

On February 3, 2021, one of Bouvier's customers declared bankruptcy. At December 31, 2020, this company owed Bouvier $300,000, of which $40,000 was paid in January 2021.

2

On January 18, 2021, one of the client's three major plants burned. Bouvier has fire insurance coverage.

3

On January 23, 2021, a strike was called at one of Bouvier's largest plants and it halted 30% of production. As of today (February 13), the strike has not been settled.

4)

A major electronics enterprise has introduced a line of products that would compete directly with Bouvier's primary line, now being produced in a specially designed new plant. Because of manufacturing innovations, the competitor has been able to achieve quality similar to that of Bouvier's products, but at a price 30% lower. Bouvier officials say they will meet the lower prices, which are barely high enough to cover variable and fixed manufacturing and selling costs.

5)

Merchandise traded in the open market is recorded in the company's records at $1.40 per unit on December 31, 2020. This price held for two weeks after the release of an official market report that predicted vastly excessive supplies; however, no purchases were made at $1.40. The price throughout the preceding year had been about $2.00, which was the level experienced over several years. On January 18, 2021, the price returned to $2.00 after public disclosure of an error in the official calculations of the prior December—the correction erased the expectations of excessive supplies. Inventory at December 31, 2020, was on a lower of cost and net realizable value basis.

6)

On February 1, 2021, the board of directors adopted a resolution to accept the offer of an investment banker to guarantee the marketing of $1.2 million of preferred shares. The company owns equity investments classified as current assets accounted for using the fair value through net income model. The investments have been adjusted to fair value as at December 31, 2020.

7

On January 21, 2021, the annual report of one of the investment companies has been issued for its year ended November 30, 2020. The investee company did not meet its earnings forecasts and the market price of the investment dropped from $49 per share at December 31, 2020, to $27 per share on January 21, 2021

Instructions

For each event, state how it will affect the 2020 financial statements, if at all. The company follows IFRS

Prepare the journal entries for these transactions.

1) Dur Company purchased equipment on January 2, 2013, for $112,000. The equipment had an estimated useful life of 5 years with an estimated salvage value of $12,000. Dur uses straight-line depreciation on all assets. On January 2, 2017, Dur exchanged this equipment plus $12,000 in cash for newer equipment. The old equipment has a fair value of $50,000. (Assume that the exchange has commercial substance.)

2) Same transaction except (The exchange lacks commercial substance).

3) Cheng Company traded a used truck for a new truck. The used truck cost $30,000 and has accumulated depreciation of $27,000. The new truck is worth $37,000. Cheng also made a cash payment of $36,000. Prepare Cheng's entry to record the exchange. (The exchange lacks commercial substance.)

4) Slaton Corporation traded a used truck for a new truck. The used truck cost $20,000 and has accumulated depreciation of $17,000. The new truck is worth $35,000. Slaton also made a cash payment of $33,000. Prepare Slaton's entry to record the exchange. (The exchange lacks commercial substance.)

a. On August 1, 2020, the following were the account balances of Sheffield Repair Services.

During August, the following summary transactions were completed.

Enter the August 1 balances in the ledger accounts.

Journalize the August transactions. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. Record journal entries in the order presented in the problem.)

Post to the ledger accounts.

Prepare a trial balance at August 31.

b. Adjustment data:

Journalize and post adjusting entries. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.)

\Prepare an adjusted trial balance.

Prepare an income statement for August.

Prepare an owner’s equity statement for August.

Prepare a classified balance sheet at August 31. (List Current Assets in order of liquidity.)

Journalize the closing entries. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.)

Post closing entries and complete the closing process. (For accounts that have zero ending balance, the entry should be the balance date and zero for the amount. Post entries in the order of journal entries presented.)

Prepare a post-closing trial balance at August 31.

A company that produces and markets video game systems wishes to assess its customers' level of satisfaction with a relatively new model, the XYZ-Box. In the six months since the introduction of the model, the company has received 73,219 warranty registrations from purchasers. The company will select a random sample of 65 of these registrations and will conduct telephone interviews with the purchasers. Specifically, each purchaser will be asked to state his or her level of agreement with each of the seven statements listed on the survey instrument given in the following table.. Here, the level of agreement for each statement is measured on a 7-point Likert scale. Purchaser satisfaction will be measured by adding the purchaser’s responses to the seven statements. It follows that for each consumer the minimum composite score possible is 7 and the maximum is 49. Furthermore, experience has shown that a purchaser of a video game system is “very satisfied” if his or her composite score is at least 42.

Suppose that when the 65 customers are interviewed, their composite scores are as given in the following table.

Using the data, estimate limits between which most of the 73,219 composite scores would fall. Also, estimate the proportion of the 73,219 composite scores that would be at least 42. (Round your proportion of scores answer to 2 decimal places.)