Wilkins Food Products, Inc., acquired a packaging machine from Lawrence Specialists Corporation. Lawrence completed construction of the machine on January 1, 2019. In payment for the machine Wilkins issued a three-year installment note to be paid in three equal payments at the end of each year. The payments include interest at the rate of 10%. Lawrence made a conceptual error in preparing the amortization schedule, which Wilkins failed to discover until 2021. The error had caused Wilkins to understate interest expense by $45,000 in 2019 and $40,000 in 2020.

Required:

1. Determine which accounts are incorrect as a result of these errors at January 1, 2021, before any adjustments. Explain your answer. (Ignore income taxes.)

2. Prepare a journal entry to correct the error.

3. What other step(s) would be taken in connection with the error?

Peter Russell proposes to sell his business to Tim Jones for $800,000. The business assets to be acquired include:

• trading stock $70,000
• debtors $40,000
• plant and equipment $150,000, and
• premises $400,000.

The balance, $140,000, represents goodwill.

It is proposed that the transfer of ownership will occur on 15 June 2020.

After the sale Peter Russell intends to retire.

Tim Jones is married with two teenage children, aged 14 and 17. Jones’ wife will work part-time in the business. Jones has $600,000 in cash and a house valued at $200,000, on which there is a $100,000 mortgage.

Required:        Advise Peter Russel as to the tax planning considerations involved in the disposal of the business. Please consider three or four issues, including any small business relief effective from 21 September 1999.

Please support your answer with any relevant case law or legislation.

W is an American multinational computer technology company based in Tampa, Florida, United States, that develops, sells, repairs, and supports computers and related products and services. Named after its founder, Michael Wahoo, the company is one of the largest technological corporations in the world, employing more than 103,300 people in the U.S. and around the world.

Wahoo sells personal computers (PCs), servers, data storage devices, network switches, software, computer peripherals, HDTVs, cameras, printers, MP3 players, and electronics built by other manufacturers. The company is well known for its innovations in supply chain managementandelectroniccommerce,particularlyitsdirect-salesmodelandits"build-to-order" or "configure to order" approach to manufacturing—delivering individual PCs configured to customer specifications. Wahoo was a pure hardware vendor for much of its existence, but with the acquisition in 2009 of Mackerel Systems, Wahoo entered the market for IT services. The company has since made additional acquisitions in storage and networking systems, with the aim of expanding their portfolio from offering computers only to delivering complete solutions for enterprisecustomers.

Wahoo was listed at number 51 in the Fortune 500 list, until 2014. After going private in 2013, the newly confidential nature of its financial information prevents the company from being rankedbyFortune.In2015,itwasthethirdlargestPCvendorintheworldafterLenovoandHP. Wahoo is currently the #1 shipper of PC monitors in theworld.

In 2018, Wahoo acquired the enterprise technology firm Marlin Corporation; following the completion of the purchase, Wahoo and Marlin became divisions of Wahoo Technologies.

It is January, 2019, and you have been recently hired by Wahoo as a consultant to evaluate their digital marketing strategy. During your initial meeting January 5th, you wrote down 10 major observations that you wanted to look into deeper. For each observation, please indicate which direction you will take and why, paying close attention to items you learned while listening to a guest speaker in your Digital Marketing class. Your notes are listed below, followed by italicized questions to be answered (by you). You will not receive credit if you do not explain why.

1. WahooCEOisinterestedinstudyingtheimpactthathurricaneshaveontheironlineweb traffic. The CEO recommended running an A/B test on traffic levels during a hurricane in the next month to determine whether or not they need to make a custom online interface to improve traffic during hurricane season. Do you recommend following the CEO’s recommendation? Please explain why or whynot.
2. TheDirectorofMarketinggaveyouastudyrunfor24hoursonBlackFridaywitha sample size of 10,000 unique visitors to the website. Based on this study,he

recommends changing the homepage to focus on products that are on sale as opposed to focusing on the new innovative products Wahoo sells. Do you agree with his conclusion? Please explain why or why not.

3. Wahoo Inc. is currently running an ad campaign on social media to introduce a new product using a last interaction attribution model. The Wahoo Inc. social media intern recommendsswitchingtouseafirstinteractionattributionmodel.Doyourecommend following the Intern’s recommendation? Please explain why or whynot.
4. Thein-housestatisticianmentionedthatwhenitissunnyoutside,onlinesalesdecrease. He recommends running an advertisement on a movie streaming service (such as Hulu) during sunny weather to increase traffic to the website during these low traffic times. Do you recommend following the statistician’s recommendation? Please explain why or why not.
5. The Wahoo Inc. CMO has agreed to increase the advertising budget by 10% the following quarter. Currently, their advertising budget is $1,200,000. She is looking for your guidance as to which advertising campaign to focus on. Based on the data chart below,whichadvertisingplatformwouldyourecommend?Pleaseexplainwhyorwhy not.

Hint: You will need to calculate: Conversions Lost, Revenue Lost, Estimated Cost, and Return on Ad Spend.

Is their estimated increase in advertising budget at an optimal level (i.e. should it be increased or decreased)? Please explain why or why not.

“We’ve got a special order for 10,000 units from XYZ Inc.” said Harry Hope, CEO of Widgets R Us (WRU). If we get this order, this can mean a lot of future business from this customer in the future. WRU has extra capacity and accepting this deal will not impact sales from their current customer base.

XYZ is only willing to pay $10 per unit.

If overhead costs are overapplied, WRU may lose out on a profitable deal.

At the start of the year, XYZ’s Fixed Manufacturing Overhead was estimated at $100,000 for the year, based on capacities of 40,000 machine hours and 50,000 direct labour hours.

The variable costs for this order – including variable overhead, amount to $6 per unit.

Each unit requires 2 machine hours and 1 labour hour to produce.

Required:

Determine what the manufacturing costs would be if machine hours are used as the allocation base.

Determine what the manufacturing costs would be if direct labor hours are used as the allocation base.

Determine which overhead allocation basis would result in the best decision for WRU. Support your decision.

Should WRU accept this special order from XYZ? Make sure you state why or why not.

In recent years, Crane Company has purchased three machines. Because of frequent employee turnover in the accounting department, a different accountant was in charge of selecting the depreciation method for each machine, and various methods have been used. Information concerning the machines is summarized in the table below.

For the declining-balance method, Crane Company uses the double-declining rate. For the units-of-activity method, total machine hours are expected to be 32,000. Actual hours of use in the first 3 years were: 2021, 810; 2022, 6,400; and 2023, 7,900.

(a)

Compute the amount of accumulated depreciation on each machine at December 31, 2023.

University Car Wash built a deluxe car wash across the street from campus. The new machines cost $225,000 including installation. The company estimates that the equipment will have a residual value of $22,500. University Car Wash also estimates it will use the machine for six years or about 12,500 total hours. Actual use per year was as follows:

Required:

1. Prepare a depreciation schedule for six years using the straight-line method. (Do not round your intermediate calculations.)
  

2. Prepare a depreciation schedule for six years using the double-declining-balance method. (Do not round your intermediate calculations.)
  

3. Prepare a depreciation schedule for six years using the activity-based method. (Round your "Depreciation Rate" to 2 decimal places and use this amount in all subsequent calculations.)
  

University Car Wash built a deluxe car wash across the street from campus. The new machines cost $255,000 including installation. The company estimates that the equipment will have a residual value of $22,500. University Car Wash also estimates it will use the machine for six years or about 12,500 total hours. Actual use per year was as follows:

Problem 7-5A Part 1

Required:

1. Prepare a depreciation schedule for six years using the straight-line method. (Do not round your intermediate calculations.)
  

2. Prepare a depreciation schedule for six years using the double-declining-balance method. (Do not round your intermediate calculations.)
  

3. Prepare a depreciation schedule for six years using the activity-based method. (Round your "Depreciation Rate" to 2 decimal places and use this amount in all subsequent calculations.)

1. Pick one hypothetical company from the following choices: Auto repair shop, Retail clothing store, Furniture manufacturer, Restaurant, Landscape maintenance, Website design and maintenance. For whichever type of company, you choose, assume you own the building and have a related loan with the bank, and you sell your goods and services to customers on account (they have 60 days to pay).

State which hypothetical company you chose and provide several sentences to describe the company. You have lots of creative freedom here, so it's important to give all of us some information to help us understand what your company looks like. For example, if you choose the restaurant business, give us a description of your hypothetical restaurant (type of food, level of quality, pricing, location, etc.) so we better understand your business.

2. Pick three of the seven risk factors Credit Risk, Market Risk, Political Risk, IT Risk, Operational Risk, Legal Risk, Reputational Risk, and thoroughly describe each of the three possible risk factors for your company. Please provide at least three sentences for each risk factor for your company.

3. For each risk factor you identified, how would you go about limiting this risk?