Carla Vista Company manufactures one product. On December 31, 2019, Carla Vista adopted the dollar-value LIFO inventory method. The inventory on that date using the dollar-value LIFO inventory method was $960,000. Inventory data are as follows:

Compute the inventory at December 31, 2020, 2021, and 2022, using the dollar-value LIFO method for each year.

1. Mercy Sports Shop started operations on 1^st January, 2020. The firm sells sports shoes in shopping malls. The company expects a 20 per cent increase in sales per month for November and December 2020. Mercy has budgeted sales as indicated in the following table:

Required:-

1. Using excel complete the sales budget by filling in the missing amounts.   
2. Determine the amount of sales revenue that will appear on the pro-forma income statement for the company’s fourth quarter 2020.

During 2020, Sweet Company started a construction job with a contract price of $1,620,000. The job was completed in 2022. The following information is available.

(a)

Compute the amount of gross profit to be recognized each year, assuming the percentage-of-completion method is used.

For 2020, prepare a pension worksheet for Brownie Company that shows the journal entry for pension expense and the year-end balances in the related pension accounts.

William Smith, Sr., was the founder of Smith Enterprises, Inc. He owns 60% of the stock of Smith Enterprises (60,000 shares of 100,000 shares outstanding, stock basis $100 per share). The value of the stock was recently determined to be about $500 per share. Over the years, William, Sr., has done a very good job of getting his sons and daughters (and even grandchildren) involved in the business, and the other 40% of the Smith Enterprises stock is owned by is two daughters, his son and his granddaughter. William, Sr., has reached the point in his life where he is ready to retire from the family business that he founded. He has done a sufficiently good job of training up the younger generation in the management of the business that he feels able to completely withdraw from the business.

In a few concise, coherent sentences, advise William, Sr., of what steps he needs to take to assure that the tax consequences of the redemption of all of his stock in Smith Enterprises will be treated as a sale of stock (long-term capital gain/loss), rather than as distribution (dividend income). If William, Sr., cannot understand your advise, he will fire you and you will lose a $600,000-per-year client, so make sure that your advise is both correct and coherently presented.

Adanna Ghany is the founder and manager of Ceramics Unlimited. Adanna has approached the local bank for a loan to expand her business. As part of the loan application, Adanna was asked to prepare Financial Statements for the business. She prepared the following balance sheet and income statement based on the first month of operations (see below).

Ceramics Unlimited.

BALANCE SHEET

November 30, 2018

Ceramics Unlimited.

INCOME STATEMENT

For the Month Ended, November 30, 2018

Adanna stated that she was not pleased with the first month’s results. But she believes she will show a greater profit next month as she will not have large expenses for items such as purchasing a new Kiln (Oven).

In discussions with Adanna and by reviewing the accounting records of Ceramics Unlimited, you discover the following facts

1.    Adanna opened Ceramics Unlimited (a ceramic studio) on November 1st 2018 in leased office space, paying the first month's rent of $300 and a $1,000 security deposit with a check on her personal account.

1.    Ceramics Unlimited sells ceramic pieces as well as offers training courses that teach participants how to make their own ceramics pieces.

2.    Adanna had been making ceramic pieces as a hobby. She took molds and tools, worth about $7,500, from her home in order to start the studio.

3.    Adanna also bought a new firing kiln (oven) to start the business. The new kiln had a list price of $5,000. Adanna wrote a check on her personal checking account.

1.    The first customer of Ceramics Unlimited’s paid a total of $1,400 to attend classes for two months. Adanna opened a checking account in the company's name with the $1,400.

4.    Ceramics Unlimited has conducted classes for one month and has sold some ceramic pieces for $3,000 cash. Cost incurred in making the ceramic pieces was $1,000. Adanna paid these cost with her personal credit card.

As the person to decide whether or not to grant Adanna the requested loan. You have to decide if Adanna prepared the financial statements of Ceramics Unlimited correctly. You need to determine if she violated any accepted accounting principles, assumptions or concepts.

Required

a. Either justify Adanna’s treatment of each event and her preparation of the financial statements based on your understanding of the generally accepted accounting principles

or

b. Identify the generally accepted accounting principles, assumptions or concepts that were violated.

i. Explain how each event should have been handled in accordance with the generally accepted accounting principles.

ii. Prepare a corrected Classified balance sheet and income statement based on your understanding of the generally accepted accounting principles.

Schedule of Cash Receipts

Del Spencer is the owner and founder of Del Spencer's Men's Clothing Store. Del Spencer's has its own house charge accounts and has found from past experience that 10 percent of its sales are for cash. The remaining 90 percent are on credit. An aging schedule for accounts receivable reveals the following pattern:

15 percent of credit sales are paid in the month of sale.
65 percent of credit sales are paid in the first month following the sale.
14 percent of credit sales are paid in the second month following the sale.
6 percent of credit sales are never collected.

Credit sales that have not been paid until the second month following the sale are considered overdue and are subject to a 3 percent late charge.

Del Spencer's has developed the following sales forecast:

Required:

Prepare a schedule of cash receipts for August and September. Round all amounts to the nearest dollar.

One Laptop per Child Nicholas Negroponte is the founder of the MIT Media Lab and has spent his career pushing the edge of the information revolution as an inventor, thinker, and angel investor. His latest project, One Laptop per Child, plans to build $100 laptops that he hopes to put in the hands of millions of children in developing countries around the globe. The XO (the "$100 laptop") is a wireless, Internet-enabled, pedal-powered computer costing roughly $100. What types of competitive advantages could children gain from Negroponte's $100 laptop? What types of issues could result from the $100 laptop? Explain each of the efficiency metrics and effectiveness metrics that are required for each laptop to be considered successful.

A new online auction site specializes in selling automotive parts for classic cars. The founder of the company believes that the price received for a particular item increases with its age (i.e., the age of the car on which the item can be used in years) and with the number of bidders. The Excel multiple regression output is shown below.

(A) Estimate a multiple regression model for the data.

(B) Which of the variables in this model have regression coefficients that are statistically different from 0 at the 5% significance level?

Given your findings in (B), which variables, if any, would you choose to remove from the model estimated in (A)? Explain your decision.