QUESTION TWO
The following information was extracted from ABC Ltd’s financial statements for the year ended 31 December 2019.

a. Sales on 30 November 2019 were K100 million and K110 million on 31 December 2019. For the year 2020, sales are expected to double at a constant monthly rate.
b. 80% of the sales made are on account; the remainder on cash.
c. From past experience, 5% of the receivables have turned out to be irrecoverable.
d. Credit customers pay as follows:
i. 75% in the month following the sale;
ii. 15% two months after the sale month.
e. Inventory levels are maintained at 20% of the following month’s sales.
f. Accounts payables are at settled at 30 days after purchase.

Required:
i. Prepare a collections schedule for the three-month period from January to March 2020.
[5 Marks]
ii. Prepare a cash forecast for the three-month period from January to March 2020.
[5 Marks]
iii. Assess the Operating Cycle ratios and their implication on the working capital requirements of the company for the forecast period.
        

The Bridgeport Corporation had income from continuing operations of $12 million in 2020. During 2020, it disposed of its restaurant division at a loss of $98,000 (net of tax of $38,000). Before the disposal, the division operated at a loss of $202,000 (net of tax of $135,000) in 2020. Blue Collar also had an unrealized gain-OCI of $44,000 (net of tax of $18,000) related to its FV-OCI equity investments. Bridgeport had 10 million common shares outstanding during 2020.

Prepare a partial statement of financial performance for Bridgeport, beginning with income from continuing operations.

Jacob’s grandfather died on 1 November 2009 and, in her will, left Jacob cash and watches worth $500,000. The watches had been bought by Jacob’s grandmother in August 1985 at a cost of $40,000, and its market value on 1 November 2009 was $150,000.

Jacob used the money from his grandfather and his savings to buy the following assets in January 2010:

• an apartment in Melbourne (cost was $360,000 plus $20,000 legal fees and stamp duty),
• a rare painting (cost was $50,000), and
• 2,000 bank shares (cost was $20 per share, plus $200 brokerage).

In 2019/20, Jacob disposed of these assets as follows:

• on 12 March 2020, he sold the apartment for $470,000 – he had lived in it all the time he owned it,
• on 1 April 2020, the painting was stolen from his apartment – he received $30,000 compensation from his insurance company,
• on 13 May 2020, Jacob sold 1000 bank shares for $30 per share (brokerage cost $150), and
• on 15 June 2020, he lost the watches, which wasn’t insured, when he left his briefcase on a train.

Question 1.

Prepare a report that explains the CGT consequences of these transactions

Company X has the following information:

Inventory at end-of-year prices of $1,300,000 (2018 – base year), $1,450,000 (2019), and $1,350,000 (2020)

The price index is 105 in 2019 and 107 in 2020

Use the dollar-value LIFO method to calculate ending inventory for 2019 and 2020.

Roberto Company makes wooden foot stools and has prepared a sales budget of 15,000 finished units for the first quarter of 2020. The company has an inventory of 450 foot stools on hand at December 31, 2019 and has a target finished goods inventory of 750 foot stools at the end of the first quarter, 2020. It takes five (5) board feet of wood to produce a foot stool. The company has 15,000 board feet of wood on hand at December 31, 2019 and a target ending inventory of 3,750 board feet at the end of the first quarter, 2020. The wood costs $8 per board foot. What is the cost of direct material used in the first quarter of 2020?

Group of answer choices $588,000 $600,000 $522,000 $612,000

The following information is related to Whispering Company for 2020.

Retained earnings balance, January 1, 2020$1,078,000

Sales Revenue27,500,000

Cost of goods sold17,600,000

Interest revenue77,000

Selling and administrative expenses5,170,000

Write-off of goodwill902,000

Income taxes for 2020 1,368,400

Gain on the sale of investments121,000

Loss due to flood damage429,000

Loss on the disposition of the wholesale division (net of tax)484,000

Loss on operations of the wholesale division (net of tax)99,000

Dividends declared on common stock275,000

Dividends declared on preferred stock88,000

Whispering Company decided to discontinue its entire wholesale operations (considered a discontinued operation) and to retain its manufacturing operations. On September 15, Whispering sold the wholesale operations to Rogers Company. During 2020, there were 500,000 shares of common stock outstanding all year.

The following selected transactions relate to investment activities of Ornamental Insulation Corporation during 2021. The company buys debt securities, not intending to profit from short-term differences in price and not necessarily to hold debt securities to maturity, but to have them available for sale in years when circumstances warrant. Ornamental’s fiscal year ends on December 31. No investments were held by Ornamental on December 31, 2020.

• Record the acquisition of 7% Distribution Transformers Corporation bonds costing $520,000 at face value.
• Record the acquisition of $1,080,000 of American Instruments’ 9% bonds at face value.
• Record the entry for the semiannual interest received on the Distribution Transformers bonds.
• Record the entry to adjust to fair value on the date of sale of the Distribution Transformers bonds.
• Record the entry for the reclassification adjustment on the date of sale.
• Record the entry for sale of Distribution Transformers bonds for $557,000.
• Record the acquisition of $1,560,000 of M&D Corporation 5% bonds at face value.
• Record the interest accrual for American Instruments bonds.
• Record the interest accrual for M&D bonds.
• Record the entry to adjust fair value of the investments at year-end.

From public records, individuals were identified as having been charged with drunken driving not less than 6 months or more than 12 months from the starting date of the study. Two random samples from this group were studied. In the first sample of 35 individuals, the respondents were asked in a face-to-face interview if they had been charged with drunken driving in the last 12 months. Of these 35 people interviewed face to face, 17 answered the question accurately. The second random sample consisted of 49 people who had been charged with drunken driving. During a telephone interview, 22 of these responded accurately to the question asking if they had been charged with drunken driving during the past 12 months. Assume the samples are representative of all people recently charged with drunken driving.

(a) Categorize the problem below according to parameter being estimated, proportion p, mean μ, difference of means μ₁ – μ₂, or difference of proportions p₁ – p₂. Then solve the problem.

μ₁ – μ₂

μ

p₁ – p₂

p

(b) Let p₁ represent the population proportion of all people with recent charges of drunken driving who respond accurately to a face-to-face interview asking if they have been charged with drunken driving during the past 12 months. Let p₂ represent the population proportion of all people who respond accurately to the question when it is asked in a telephone interview. Find a 95% confidence interval for p₁ – p₂. (Use 3 decimal places.)

(c) Does the interval found in part (a) contain numbers that are all positive? all negative? mixed? Comment on the meaning of the confidence interval in the context of this problem. At the 95% level, do you detect any differences in the proportion of accurate responses to the question from face-to- face interviews as compared with the proportion of accurate responses from telephone interviews?

Because the interval contains only positive numbers, we can say that there is a higher proportion of accurate responses in face-to-face interviews.

Because the interval contains both positive and negative numbers, we can not say that there is a higher proportion of accurate responses in face-to-face interviews.    

We can not make any conclusions using this confidence interval.

Because the interval contains only negative numbers, we can say that there is a higher proportion of accurate responses in telephone interviews.

From public records, individuals were identified as having been charged with drunken driving not less than 6 months or more than 12 months from the starting date of the study. Two random samples from this group were studied. In the first sample of 35 individuals, the respondents were asked in a face-to-face interview if they had been charged with drunken driving in the last 12 months. Of these 35 people interviewed face to face, 15 answered the question accurately. The second random sample consisted of 50 people who had been charged with drunken driving. During a telephone interview, 28 of these responded accurately to the question asking if they had been charged with drunken driving during the past 12 months. Assume the samples are representative of all people recently charged with drunken driving.

(a) Categorize the problem below according to parameter being estimated, proportion p, mean μ, difference of means μ₁ – μ₂, or difference of proportions p₁ – p₂. Then solve the problem.

μp    p₁ – p₂μ₁ – μ₂

(b) Let p₁ represent the population proportion of all people with recent charges of drunken driving who respond accurately to a face-to-face interview asking if they have been charged with drunken driving during the past 12 months. Let p₂ represent the population proportion of all people who respond accurately to the question when it is asked in a telephone interview. Find a 95% confidence interval for p₁ – p₂. (Use 3 decimal places.)

(c) Does the interval found in part (a) contain numbers that are all positive? all negative? mixed? Comment on the meaning of the confidence interval in the context of this problem. At the 95% level, do you detect any differences in the proportion of accurate responses to the question from face-to- face interviews as compared with the proportion of accurate responses from telephone interviews?

Because the interval contains only positive numbers, we can say that there is a higher proportion of accurate responses in face-to-face interviews.Because the interval contains both positive and negative numbers, we can not say that there is a higher proportion of accurate responses in face-to-face interviews.    We can not make any conclusions using this confidence interval.Because the interval contains only negative numbers, we can say that there is a higher proportion of accurate responses in telephone interviews.