subject: company accounting    

  Consolidation

Indigo Ltd gives $55 000 as an interest-free loan to Violet Ltd on 1 July 2019. Violet Ltd made a $20 000 repayment by 30 June 2020.Violet Ltd owns all the share capital of Indigo Ltd. The following transactions are independent:

1. Indigo Ltd rented a spare warehouse to Violet Ltd starting from 1 July 2019 for 1 year. The total charge for the rental was $3 500, and Violet Ltd paid half of this amount to Indigo Ltd on 1 January 2020 and the rest on 1 July 2020.
2. During March 2020, Indigo Ltd declared a $5000 dividend. The dividend was paid in August 2020.

Required

In relation to the above intragroup transactions:

1.      Prepare adjusting journal entries for the consolidation worksheet at 30 June 2020.

2.     Explain in detail why you made each adjusting journal entry.

For its first year if operations, Altitude Inc. reports pretax GAAP income of $100,000 in 2020. Assume pretax income in 2021 and 2022 of $125,000 and $90,000 respectively. The enacted income tax rate in all years is 25%. The following additional information is available for the first three years of operation (with the exception of the one item in the 4th year).

• Prepaid rent in the amount of $20,000 was recorded on December 21, 2020 for 2021 rent.
• A warranty accrual of 30,000 was recorded on December 31, 2020. The warranty was paid evenly over the years 2021-2023.
• The company recorded interest revenue of $500 each of the three years on municipal bonds.

1. Compute the income tax payable each year for 2020, 2021, 2022
2. Determined the balance of any deferred tax assets or deferred tax liabilities at the end of each year (2020, 2021, 2022)
3. Record the journal entry related to taxes in 2020, 2021, 20222

For its first year of operations, Altitude Inc. reports pretax GAAp income of 100,000 in 2020. Assume pretax GAAP income in 2021 and 2022 of 125,000 and 90,000, respectively. The enacted income tax rate in all years is 25%. The following additional information is available for the first three years of operation (with the exception of the one item in the 4th year): Prepaid rent in the amount of 20,000 was recored on December 31, 2020 for 2021 rent. A warranty accrual of 30,000 was recorded on December 31, 2020. The warranty was paid evenly over the years 2021-2023. The company recorded interest revenue of 500 each of three years on municipal bonds.

1. Compute the income tax payable each year for 2020, 2021, and 2022

2. Determined the balance of any Deferred Tax Assets or Deferred Tax Liabilities at the end of each year (2020, 2021, 2022)

3. Record the journal entries related to taxes in 2020, 2021, 2022

You are the director of international operations for North and South America for Lenovo. In 2015 you developed a five-year marketing plan to aggressively market personal computers in Canada, Mexico and Brazil. A key element of your plan called for meeting the competitive prices of HP and local manufacturers every step of the way. In addition you planned to spend heavily on marketing. Your yearly budget for marketing in the major target markets was set as follows:

                                                Canada             C$                2,000,000

                                                Mexico             Pesos            5,000,000

                                                Brazil                Reals            1,000,000

      Your 2015 price set in U.S.$ for your top selling laptop was $2,000 in each market. Market prices have declined 20% on a U.S$ basis over the years.

   1.      What do your marketing budgets look like in 2015 and today in US$?   

   2.      What do the computer prices look like in local currencies in 2015 and today?

   3.   What actions would you plan to take in each market to fulfill your goals while

addressing current conditions? (Hint: look at the marketing expenditures and the prices together).

You are the director of U.S. operations for Nissan. In 2015, you developed plans for a new sports truck model, the Nissan Minimax to be sold at $30,000. This model can be made in both the U.S. and Japan. Gross margin (meaning margin after all direct costs) is approximately 50%.

1.         What is the cost of the Minimax to Nissan if it is made in

            Japan vs. made in the U.S. in 2015 and 2020, assuming

            no inflation?

2.         What actions would you recommend to the home office in

            Tokyo to address the current situation?

SPOT RATES FOR CURRENCY EXERCISE

Country                       Spot Rates (3-11-15)                           Spot Rates (3-11-20)

Canada C$                              0.7683                                                 0.7282

Mexico pesos                         0.0646                                                 0.0474

Brazil   reals                             0.3315                                                 0.2133

Japan   yen                              0.0083                                                 0.0095

Q.2 ABC Ltd., has been facing cash shortage problem for many years. You have just joined the company and made the proposal to prepare cash budget for controlling of cash shortage problem. Management has given you the green signal to prepare the cash budget and made the projection for requirement of cash through commercial bank channel in the coming period. The following information were gathered for preparing the cash budget. 1. Sales budgets November, 2019…………………………. Rs.200,000 December, 2019…………………………… 300,000 January, 2020…………………………….. 400,000 February, 2020…………………………… 500,000 March, 2020……………………………….. 600,000 All sales are made on credit basis and customers follow the following patter to pay; A) 40 % pay in the month of sales. B) 50 % in the following month of sales. C) 10 % pay in the second month of sales. 2. Purchase budgets 3. Purchases are made equal to 60 % of the respective month sales at beginning of the month. 50% of purchase amount is paid in the month of purchases and 50% in the following month of purchases 4. Cash operating expenses per month is estimated Rs.80,000. 5. Dividend is expected to be paid Rs.100,000 in the month of January, 2020. 6. Tax is to be paid Rs.50,000 in the month of march, 2020. 7. A new plant costing Rs. 250,000 to be purchased in the month of Feb.,2020. 8. Cash on hand on 1st January, 2020 is Rs.100,000. 9. A minimum cash balance of Rs.150,000 to be maintained from 31st January,2020 on ward, company has made arrangement with the local bank a line of credit to meet its cash requirement and if excess cash available it would be paid to bank to pay the loan. Required: Prepare a cash budget for the month of January, February, March, 2020. (Marks-10)

Jen and Larry’s Frozen Yogurt Company

     In 2019, Jennifer (Jen) Liu and Larry Mestas founded Jean and Larry’s Frozen Yogurt Company, which was based on the idea of applying the microbrew or microbatch strategy to the production and sale of frozen yogurt. Jen and Larry began producing small quantities of unique flavors and blends in limited editions. Revenues were $600,000 in 2019 and were estimated to be $1.2 million in 2020.

     Because Jen and Larry were selling premium frozen yogurt containing premium ingredients, each small cup of yogurt sold for $3, and the cost of producing the frozen yogurt averaged $1.50 per cup. Administrative expenses, including Jen and Larry’s salary and expenses for an accountant and two other administrative staff, were estimated at $180,000 in 2020. Marketing expenses, largely in the form of behind-the-counter workers, in-store posters, and advertising in local newspapers, were projected to be $200,000 in 2020.

     An investment in bricks and mortar was necessary to make and sell the yogurt. Initial specialty equipment and the renovation of an old warehouse building in lower downtown (known as LoDo) occurred at the beginning of 2019. Additional equipment needed to make the amount of yogurt forecasted to be sold in 2020 was purchased at the beginning of 2020. As a result, depreciation expenses were expected to be $50,000 in 2020. Interest expenses were estimated at $15,000 in 2020. The average tax rate was expected to be 25% of taxable income.

1. Jen and Larry believe that under a worst-case scenario, yogurt revenues would be at the 2019 level of $600,00 even after plans and expenditures were put in place to increase revenues in 2020. What would happen to the venture’s EBDAT?
2. Jen and Larry also believe that, under optimistic conditions, yogurt revenues could reach $1.5 million in 2020. Show what would happen to the venture’s EBDAT if this were to happen.

For the following independent situations, identify and discuss issues related to external auditor’s ethics and independence under APES110 Code of Ethics for Professional Accountants and Corporations Act. State the main principles/regulations and apply them to each case. Where appropriate, advise the appropriate course of action for the auditor. Hint: In your answer, (a) identify the ethical issue and discuss relevant threats to independence, (b) state applicable rules/regulations and (c) suggest safeguards where applicable.

1.The audit client is satisfied with the audit team’s past work so the audit client asks the same team to perform the audit for the 6th consecutive year.

2.The audit client is a listed company and its Chief Executive Officer (CEO) trusts the audit team’s accounting expertise. The CEO asks the audit team to provide advice on how to value another business which the audit clients intends to takeover.

A CEO wondered if her company received either more or less complaints from its workers on Monday than any other day. She figured that if it were truly random, 20% of the complaints should have been filed on Monday. She randomly selected 50 complaints and checked the day that they were submitted. In those complaints 13 were submitted on a Monday.

The CEO conducts a one-proportion hypothesis test at the 5% significance level, to test whether the true proportion of complaints submitted on a Monday is different from 20%.

(a) H0:p=0.2; Ha:p≠0.2, which is a two-tailed test.

(b) Use Excel to test whether the true proportion of complaints submitted on a Monday is different from 20%. Identify the test statistic, z, and p-value from the Excel output, rounding to three decimal places.

Imagine that you are part of the management team for Econsoft, a computer software company. You are discussing one of your products, “Econblaster,” with the company’s CEO and the other managers. You have made the software available for download on your firm’s website for download for $9.99 and you are trying to figure out how to generate more revenue from the product. Half of the management team suggests increasing the price to $11.99. The other half advocates cutting the price to $7.99. Both sides claim that their idea will increase total revenue generated from the product.

The CEO turns to you to help explain what’s going on. “How can half of the team suggest one thing, and the other half the exact opposite? Who is right? What should we do?”

What do you think? What does the right answer depend on?

Hi , I need with this question.

A delivery truck was acquired on January 1, 2017, at a cost of $65,000. The delivery truck was originally estimated to have a residual value of $5,000 and an estimated life of five years. The truck is expected to be driven a total of 200,000 kilometers during its life, distributed as:

Using the straight-line, units-of-production, and double-diminishing balance methods, answer the following questions.

1. The 2017 depreciation expense using the units-of-production method is:

2. The 2018 depreciation expense using the straight-line method is:

3. The 2018 depreciation expense using the double-diminishing balance method is:

4. The 2019 depreciation expense using the units-of-production method is:

5. The book value on December 31, 2018, using the straight-line method is:

6. The book value on December 31, 2018, using the double-diminishing balance method is:

7. Which method results in the lowest depreciation expense in the first two years?

8. Prepare the adjusting entry to record the 2020 depreciation expense based on the units-of- production method.