Brislin Company has four operating divisions. During the first quarter of 2020, the company reported aggregate income from operations of $213,000 and the following divisional results.

		Division
		I		II		III		IV
Sales		$250,000		$200,000		$500,000		$450,000
Cost of goods sold		200,000		192,000		300,000		250,000
Selling and administrative expenses		75,000		60,000		60,000		50,000
Income (loss) from operations		$ (25,000)		$ (52,000)		$140,000		$150,000

Analysis reveals the following percentages of variable costs in each division.

		I			II			III			IV
Cost of goods sold		70	%		90	%		80	%		75	%
Selling and administrative expenses		40			60			50			60

Discontinuance of any division would save 50% of the fixed costs and expenses for that division.

Top management is very concerned about the unprofitable divisions (I and II). Consensus is that one or both of the divisions should be discontinued.

Prepare a columnar condensed income statement for Brislin Company, assuming Division II is eliminated. Division II’s unavoidable fixed costs are allocated equally to the continuing divisions.

Kansas Company uses a standard cost accounting system. In 2020, the company produced 27,700 units. Each unit took several pounds of direct materials and 1.6 standard hours of direct labor at a standard hourly rate of $12.00. Normal capacity was 50,400 direct labor hours. During the year, 131,500 pounds of raw materials were purchased at $0.93 per pound. All materials purchased were used during the year.

If the materials quantity variance was $19,665 unfavorable, what was the standard materials quantity per unit? Standard materials quantity per unit pounds

What were the standard hours allowed for the units produced? Standard hours allowed hours

If the labor quantity variance was $7,200 unfavorable, what were the actual direct labor hours worked? Actual hours worked hours

If the labor price variance was $4,492 favorable, what was the actual rate per hour? (Round answer to 2 decimal places, e.g. 2.75.) Actual rate per hour $

If total budgeted manufacturing overhead was $327,600 at normal capacity, what was the predetermined overhead rate based on direct labor hours? (Round answer to 2 decimal places, e.g. 2.75.) Predetermined overhead rate $

What was the standard cost per unit of product? (Round answer to 2 decimal places, e.g. 2.75.) Standard cost per unit $

How much overhead was applied to production during the year? Overhead applied $

Using one or more answers above, what were the total costs assigned to work in process? (Round standard cost per unit to 2 decimal places, e.g. 2.75 and final answer to 0 decimal places, e.g. 125.) Total costs assigned $

Brislin Company has four operating divisions. During the first quarter of 2020, the company reported aggregate income from operations of $211,800 and the following divisional results.

		Division
		I		II		III		IV
Sales		$253,000		$198,000		$505,000		$445,000
Cost of goods sold		203,000		195,000		295,000		253,000
Selling and administrative expenses		75,200		57,000		61,000		50,000
Income (loss) from operations		$ (25,200)		$ (54,000)		$149,000		$142,000

Analysis reveals the following percentages of variable costs in each division.

		I			II			III			IV
Cost of goods sold		74	%		91	%		80	%		74	%
Selling and administrative expenses		41			58			50			57

Discontinuance of any division would save 50% of the fixed costs and expenses for that division.

Top management is very concerned about the unprofitable divisions (I and II). Consensus is that one or both of the divisions should be discontinued.Compute the contribution margin for Divisions I and II. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

		Division I		Division II
Contribution margin		$		$

  

  

Prepare an incremental analysis concerning the possible discontinuance of Division I. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

		Continue		Eliminate		Net Income Increase (Decrease)
Contribution margin		$		$		$
Fixed costs
Cost of goods sold
Selling and administrative
Total fixed expenses
Income (loss) from operations		$		$		$

  

  

Prepare an incremental analysis concerning the possible discontinuance of Division II. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

		Continue		Eliminate		Net Income Increase (Decrease)
Contribution margin		$		$		$
Fixed costs
Cost of goods sold
Selling and administrative
Total fixed expenses
Income (loss) from operations		$		$		$

  

  

What course of action do you recommend for each division?

Division I		ContinuedEliminated
Division II		ContinuedEliminated

  

  

Prepare a columnar condensed income statement for Brislin Company, assuming Division II is eliminated. Division II’s unavoidable fixed costs are allocated equally to the continuing divisions. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

BRISLIN COMPANY
CVP Income Statement
For the Quarter Ended March 31, 2020
		Divisions
		I		III		IV		Total
Sales		$		$		$		$
Variable costs
Cost of goods sold
Selling and administrative
Total variable costs
Contribution margin
Fixed costs
Cost of goods sold
Selling and administrative
Total fixed costs
Income (loss) from operations		$		$		$		$

  

  

Brislin Company has four operating divisions. During the first quarter of 2020, the company reported aggregate income from operations of $193,000 and the following divisional results.

		Division
		I		II		III		IV
Sales		$250,000		$198,000		$496,000		$443,000
Cost of goods sold		205,000		189,000		297,000		255,000
Selling and administrative expenses		70,000		63,000		61,000		54,000
Income (loss) from operations		$ (25,000)		$ (54,000)		$138,000		$134,000

Analysis reveals the following percentages of variable costs in each division.

		I			II			III			IV
Cost of goods sold		69	%		89	%		80	%		74	%
Selling and administrative expenses		37			61			51			58

Discontinuance of any division would save 50% of the fixed costs and expenses for that division.

Top management is very concerned about the unprofitable divisions (I and II). Consensus is that one or both of the divisions should be discontinued.

(a)

Compute the contribution margin for Divisions I and II. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

		Division I		Division II
Contribution margin		$		$

b

) Prepare an incremental analysis concerning the possible discontinuance of Division I. (Round answers to 0 decimal places, e.g. 1525. Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

C)Prepare an incremental analysis concerning the possible discontinuance of Division II. (Round answers to 0 decimal places, e.g. 1525. Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

D) Prepare a columnar condensed income statement for Brislin Company, assuming Division II is eliminated. Division II’s unavoidable fixed costs are allocated equally to the continuing divisions. (Round answers to 0 decimal places, e.g. 1525. Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

The Wong family incorporated Alberta Wholesale Limited (AWL) on January 1, 20X1 when the company issued common shares to several family members for cash. After obtaining mortgage financing, the company constructed a warehouse and began a food wholesale business.
The company has a small accounting staff that recorded transactions throughout the year. The company’s CEO knows that cash is correct because she has reviewed the bank reconciliation. However, she was unable to hire a professionally trained CFO and is concerned that the draft financial statements prepared by her staff (Exhibit I), which are prepared using IFRS, may have errors including the final calculation of income tax expense based on a 30% income tax rate.
The CEO has hired you to correct any accounting errors made by her staff by:
1. Providing a memo listing any adjusting entries that the company needs to make along with comments explaining why the company recorded items incorrectly and how and why the company should have recorded the transaction along with supporting calculations relating to adjustments. You should have at least one adjusting journal entry (you may need several entries for some issues) for each of the following issues. If an issue deals with more than one transaction, try to have an adjusting entry for each transaction within the issue.

Issue 1
AWL depreciates the warehouse using the straight-line method assuming no residual value and a useful life of 25 years. The company has opted to use the revaluation method (gross not proportional) on real estate and has obtained an appraisal of these assets from an independent appraiser. The appraiser estimated the fair value of the land at $1,800,000 and the warehouse at $13,000,000 as at December 31, 20X1.

Issue 2
The company purchased equipment costing $1,800,000 during the first week of May when the warehouse opened. All equipment has no residual value and an estimated life of 8 years. On October 1, the company sold equipment costing $240,000 for $175,000 cash. AWL bought other equipment costing $200,000 on July 1, 20X1. For equipment, the company uses the straight-line method.

Write a report to your CEO, mentioning the importance of monitoring and controlling in a project .

Question 2

The following are the financial statements for the year ended 30^th June 2020.

Sales (credit)			500,000
Cost of goods sold			(300,00)
Gross profit			200,000
Loss on sale of plant	5,000
Depreciation – buildings	4,000
Depreciation – plant and equipment	8,000
Bad and doubtful debts	2,600
Other administrative and selling expenses	140,000		(159,600)
Profit before tax			40,400
Tax expense			(10,000)
Profit after tax			30,400
Dividend – Ordinary share			(20,750)
Retained profits			9,650

Earth Ltd Balance Sheet as at 30 June
	2020		2019
Current assets
Cash at bank	55,500		34,500
Accounts receivable	228,000		131,000
Provision for doubtful debts	(8,000)		(6,000)
Inventory	55,000		83,000
Non-current assets
Land	80,000		45,000
Buildings	136,000		112,000
Acc. Depreciation - Buildings	(28,000)		(24,000)
Plant and equipment	114,000		100,000
Acc. Depreciation – Plant and equipment	(64,000)		(64,000)
	568,500		411,500
Current liabilities
Accounts payables	112,600		118,000
Accrued expenses: Other administrative expenses	19,000		12,000
Dividend payable	5,250		6,500
Tax payable	3,000		1,000
Non-current liabilities
Debenture	120,000		100,000
Shareholders’ equity
Ordinary shares	225,000		120,000
Asset revaluation reserve	20,000		0
Retained earnings	63,650		54,000
	568,500		411,500

Notes:

1.      A piece of existing land has been revalued upwards. Two pieces of land were acquired during the year. There was no disposal of land during the year.

2.      Plant and equipment costing $33,000 was sold.

3.      No buildings were sold during the year.

Required:

Prepare a cash flow statement for the year ended 30 June 2020 as per AASB107 (show all workings).

Consolidation worksheet, consolidated financial statements

On 1 July 2018, Ghostbusters Ltd acquired all the shares of Bat Ltd for $305 000 on an ex-div. basis. On this date, the equity and liabilities of Bat Ltd included the following balances:

At acquisition date, all the identifiable assets and liabilities of Bat Ltd were recorded at

amounts equal to fair value except for:

Goodwill was not impaired in any period. The plant and equipment had a further 5-year life at acquisition date and was expected to be used evenly over that time. The trademark was considered to have an indefinite life. The machinery, which was estimated to have a further 4-year life at acquisition date, was sold on 1 January 2020. Any adjustments for differences between carrying amounts at acquisition date and fair values are made on consolidation.

During the year ended 30 June 2019, all inventories on hand at acquisition date were sold, and the land was sold on 1 June 2020. Any valuation reserves created are transferred on consolidation to retained earnings when assets are sold or fully consumed.

Additional information

Of the interim dividend paid by Bat Ltd in the current year, $5000 was from profits before acquisition date. All other dividends were from current year profits. Shareholder approval is not required in relation to dividends.

On 1 July 2019, Bat Ltd has on hand inventory worth $12 000, being transferred from Ghostbusters Ltd in June 2019. The inventory had previously cost Ghostbusters Ltd $8000. On 31 March 2020, Bat Ltd transferred an item of plant with a carrying amount of $10 000 to Ghost Ltd for $15 000. Ghostbusters Ltd treated this item as inventory. The item was still on hand at the end of the year. Bat Ltd applied a 20% depreciation rate to this plant.

On 1 January 2020, Bat Ltd acquired $8000 inventory from Ghostbusters Ltd. This inventory originally cost Ghostbusters Ltd $5000. The profit in inventory on hand at 30 June 2020 was $1000.

During the year ending 30 June 2020, Bat Ltd sold inventory costing $12 000 to Ghostbusters Ltd for $18 000. Two-thirds of this was sold to external parties for $9000.

On 1 January 2019, Ghostbusters Ltd sold furniture to Bat Ltd for $8000. This had originally cost Ghostbusters Ltd $12 000 and had a carrying amount at the time of sale of $7000. Both entities charge depreciation at a rate of 10% p.a.

Ghostbusters Ltd sold some land to Bat Ltd in December 2019. The land had originally cost Ghostbusters Ltd $25 000, but was sold to Bat Ltd for only $20 000. To help Bat Ltd pay for the land, Ghostbusters Ltd gave Bat Ltd an interest-free loan of $12 000. Bat Ltd has as yet made no repayments on the loan.

The tax rate is 30%.

On 30 June 2020 the trial balances of Ghostbusters Ltd (Ghost) and Bat Ltd were as follows:

Required

Prepare the consolidation journal / worksheet entries for Ghostbusters Ltd for 30/6/2020.

Update and complete the consolidation worksheet for 30/6/2020. Use the worksheet provided below

Financial Statements	Ghost Ltd	Bat Ltd	Adjustments				Group
				Dr	Cr
Sales revenue	220 000	182 000
Other income	62 000	20 000
	282 000	202 000
Cost of sales	162 000	128 000
Other expenses	53 000	41 000
	215 000	169 000
Trading profit	67 000	33 000
Gains/losses on sale of non-current assets	22 000	25 000
Profit before tax	89 000	58 000
Tax expense	20 000	18 000
Profit	69 000	40 000
Retained earnings (1/7/19)	30 000	45 000
Transfer from BCV reserve	0	0
	99 000	85 000
Dividend paid	12 000	10 000
Dividend declared	6 000	4 000
	18 000	14 000
Retained earnings (30/6/20)	81 000	71 000
Share capital	312 000	200 000
General reserve	20 000	25 000
BCVR	-	-
Total Equity	413 000	296 000
Deferred tax liabilities	-	-
Dividend payable	6 000	4 000
Current tax liability	8 000	2 500
Loan from Ghost Ltd	-	12 000
Provisions	78 000	169 500
Total Liabilities	92 000	188 000
Total Liabilities + Equity	505 000	484 000

Market shares in the U.S. cigarette industry are as follows.

Cigarette Company	Market Share (Percent)
Altria	50
Reynolds	35
Vector	5
Republic	4
three smallest companies	each 2
Total	100

1. 1. Define the four-firm concentration ratio of an industry. Compute the four-firm concentration ratio for the cigarette industry. Show your computation.

2. Define the Herfindahl-Hirschman index (HHI). Compute the HHI for the cigarette industry. Show your computation.

3. The cigarette industry is often described as a “duopoly.” Explain how this description makes sense, even though there are more than two firms in the industry.

4. According to the U.S, government, what is the classification of the cigarette industry in terms of “concentration”? Explain your answer.

5. (a) Suppose that Altria and Reynolds explore a merger of the two companies. Is this merger likely to be approved by the U.S. government? Explain your answer using the HHI concept.

    (b) Instead of Altria and Reynolds merging, suppose that the three smallest companies decide to merge. Is this merger likely to be approved by the U.S. government? Explain your answer using the HHI concept.

Airbus sold an A400 aircraft to Delta Airlines, a U.S. company, and billed $30 million payable in six months. Airbus is concerned about the euro proceeds from international sales and would like to control exchange risk. The current spot exchange rate is $1.05/€ and the six-month forward exchange rate is $1.10/€. Airbus can buy a six-month put option on U.S. dollars with a strike price of €0.95/$ for a premium of €0.02 per U.S. dollar. Currently, six-month interest rate is 2.5 percent in the euro zone and 3.0 percent in the United States.

a. Compute the guaranteed euro proceeds from the American sale if Airbus decides to hedge using a forward contract.

b. If Airbus decides to hedge using money market instruments, what action does Airbus need to take? What would be the guaranteed euro proceeds from the American sale in this case?

c. If Airbus decides to hedge using put options on U.S. dollars, what would be the expected” euro proceeds from the American sale? Assume that Airbus regards the current forward exchange rate as an unbiased predictor of the future spot exchange rate.