The January 28, 2017 (fiscal year 2016) financial statements of Caleres, Inc. reported the following information (in thousands):

The footnotes to the 2016 financial statements of Skechers U.S.A., Inc. reported that the company uses the FIFO method of accounting for inventories. Financial statements reported the following (in thousands):

a.      Calculate the two companies’ days-inventory-outstanding ratios for 2016 to allow for a comparison.

b. Which company is more efficient with its inventory?

c. Suggest two ways that Calares might improve the days-inventory-outstanding.

Meridian Industries manufactures and sells two models of watches, Prime and Luxuria. It expects to sell 3,000 units of Prime and 1,000 units of Luxuria in 2016.The following estimates are given for 2016:

                                                                                  Prime    Luxuria

        Selling price                                                     $200        $500

        Direct materials                                                   20             50

        Direct labor                                                          40          150

        Manufacturing overhead                                  40          100

Meridian had an inventory of 200 units of Prime and 75 units of Luxuria at the end of 2015. It has decided that as a measure to counter stock outages it will maintain ending inventory of 350 units of Prime and 200 units of Luxuria. Each Luxuria watch requires one unit of Crimpson and has to be imported at a cost of $10. There were 100 units of Crimpson in stock at the end of 2015.The management does not want to have any stock of Crimpson at the end of 2016.

How many units of Prime watches must be produced in 2016?

What is the amount budgeted for purchase of Crimpson in 2016?

What is the total budgeted cost of sold for Meridian Industries in 2016?

Exercise 1 (LO 1, 2) Gross profit: separate firms versus consolidated. Sorel is an 80%-owned subsidiary of Pattern Company. The two affiliates had the following separate income statements for 2015 and 2016.

Sorel sells at the same gross profit percentage to all customers. During 2015, Sorel sold goods Pattern for the first time in the amount of $120,000. $30,000 of these sales remained in Pattern's ending inventory. During 2016, sales to Pattern by Sorel were $150,000, of which $25,000 sales were still in Pattern's December 31, 2016, inventory.

Prepare consolidated income statements including the distribution of income to the controlling and noncontrolling interest for 2015 and 2016.

ABC has spend 1.8 million in developing a new software for its payment system for the period of 1 Jan 2015-31 Dec 2016. The company is able to demonstrate that from 1 July 2016 the production process met the criteria for recognition as an intangible asset. The financial year end is 31 Dec. During 2016, the total training cost to improve the employees skill were 300,000£. A focus group of other retail banking providers was invied to a conference of the introduction of the new software in 2016. Cost of the conference was 100,000£. In 2016, ABC acquired another rival company XYZ for a total sum of 200 million. At this date a brand valuation expert valued XYZ brand at 40 million on the basis of useful life of 20 years. Other net assets were deemed to have a fairu value of 125£ million. Explain, how the costs given above should be treated in the financial statement of ABC for the year ending 31 Dec 2016 in relation to intangible assets per IAS38.

On January 4, 2016, Newcrest Gold Co. Ltd. paid $66 million for 3 million shares of Austin Mining Company common stock. The investment represents a 30% interest in the net assets of Austin and gave Newcrest the ability to exercise significant influence over Austin’s operations. Newcrest uses the equity method to record the investment.

Newcrest received dividends of $1.60 per share on December 6, 2016, and Austin reported net income of $32 million for the year ended December 31, 2016. The market value of Austin’s common stock at December 31, 2016, was $23 per share. The book value of Austin’s net assets was $160 million and:

A. The fair market value of Austin’s depreciable assets, with an average remaining useful life of 8 years, exceeded their book value by $16 million.

B. The remainder of the excess of the cost of the investment over the book value of net assets purchased was attributable to goodwill.

Required:

1. Prepare all appropriate journal entries related to the investment during 2016.

2. What is the carrying amount of this investment on Newcrest's balance sheet as of December 31, 2016?

3. What's the effect of this investment on Newcrest's 2016 income before taxes?

The Huff Company presents the following partial list of account balances taken from its December 31, 2016 adjusted trial balance:

The following information is also available for 2016 and is not reflected in the preceding accounts:

The common stock has been outstanding all year. A cash dividend of $1.16 per share was declared and paid.

Land was sold at a pretax gain of $6700.

Division X (a major component of the company) was sold at a pretax gain of $4620. It had incurred a $9460 pretax operating loss during 2016.

A tornado, which is an unusual event in the area, caused a $5330 pretax loss.

The income tax rate on all items of income is 30%.

The average shareholders’ equity is $90000.

Required:

1. Prepare a 2016 multiple-step income statement for Huff. Round earnings per share computations to two decimal places.

2. Prepare a 2016 retained earnings statement.

3. Compute the 2016 return on common equity. Round to one decimal place.

A weekly time ticket for Joyce Caldwell follows:    

Required:
Prepare a journal entry to record Joyce’s wages. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)