The company provides a reconciliation of the $5.66 EPS figures to the income statement’s reported EPS figure of $8.78. Also referred to as “Core EPS” in a PepsiCo-related press release, this figure, $5.66, is a non-GAAP financial measure many companies choose to report. What does a non-GAAP financial measure mean? What does the terminology “core” suggest to you? What is the reason that many companies provide non-GAAP financial information in their financial reports?

You have been conducting an audit of the financial reports of Rainbow Forest Ltd (Rainbow Forest). Rainbow Forest Ltd is a publishing company, specialising in books and other promotional material for special industry sectors and professional bodies. Over the last three years Rainbow Forest has been experiencing difficult trading conditions resulting in operating losses and deferred dividends. In particular, Rainbow Forest has had difficulty managing its cash flow. Book sales are down on the prior year and longstanding customers are no longer making bulk purchases, but instead they are producing e-books which are emailed to members on the mailing list. Whilst Rainbow Forest can still provide online technical support services and web design advice, they have lost a major source of revenue and 20% of employees have been made redundant. You have been told by different sources that Senior Management is under a lot of pressure to turn this difficult situation around and improve both sales and profitability. You note that some of the reports you have been provided are either incomplete or are not consistent with what you have been told. Based on your initial understanding of the entity and its environment, you have concluded that Rainbow Forest Ltd is a going concern risk.

Dreamtime Jewellers Limited (DJL) is a small network of jewellery stores and DJL is considering building a new store. The new store costs $2.5 million and managers plan to partly fund the store with a $1 million five-year bank loan.

In addition, DJL must spend $150,000 on excavation before they build the new store. Because this expense will reduce the new store’s profitability, managers have suggested that the excavation expense be spread out equally over the five-year analysis period.

The ATO states that excavation qualifies as a business expense in the year incurred. DJL has already spent $100,000 conducting market research to determine the most lucrative location for a new store.

If the directors approve the new store DJL anticipates that it will require an additional $400,000 of inventory today on top of the existing level of $1.5 million, and accounts payable will increase by $270,000. The accounts receivable balance will increase from the current level of $5.4 million to $6.2 million if the new store proceeds.

DJL must dispose of $120,000 of redundant jewellery equipment today if the new store is approved. The equipment initially cost $300,000 four years ago and is fully depreciated for tax purposes. Assume the company tax rate is 30%.

What are the 'cash flows at the start'?

At January 1, 2018, Brant Cargo acquired equipment by issuing a six-year, $200,000 (payable at maturity), 5% note. The market rate of interest for notes of similar risk is 10%.

Prepare necessary journal entries:

1. On Jan 1, 2018

2. On Dec 31, 2018

3. On Dec 31, 2019

Darya McNeil owns and operates Darya’s Day Spa. She has decided to sell the business and retire. She has had discussions with a representative from a regional chain of day spas. The discussions are at the complex stage of agreeing on a price. Among the important factors have been the financial statements of the business. Each year they develop a statement of profits on a cash basis; no balance sheet was prepared. Darya provided the other company with the following statement for 2018:

You have been asked to examine the financial figures for 2018. The other company’s representative said, “I question the figures because, among other things, they appear to be on a 100 percent cash basis.” Your investigations revealed the following additional data at December 31, 2018.

Of the $1,215,000 in total spa fees collected in 2018, $142,000 was for services performed in 2017.

At the end of 2018, spa fees of $89,000 for services performed during the year were on account and should be collected in 2019.

Office equipment owned and used by Darya cost $205,000. Depreciation was estimated at $20,500 annually.

A count of supplies on December 31, 2018, reflected $5,200 worth of items purchased during the year that were still on hand. Also, the records for 2017 indicated that the supplies on hand at the end of 2017 were $3,125.

At the end of 2018, the secretary whose salary is $4,000 per month had not been paid for December because of a long trip that extended into January, 2019.

The December 2018 telephone bill for $1,400 has not been recorded or paid. In addition, the $12,200 amount on the statement of profits includes payment of the December 2017 bill of $1,800 in January 2018.

The $130,000 office rent paid was for 13 months (it included the rent for January 2019).

Required

Complete journal entries for a – g above.

Prepare a corrected income statement for 2018 (ignore income taxes).

Write a memo highlighting important items that should be considered in the pricing decision.

For Questions 1 through 5, use the following information

MVP Corp. issues common stock on 1/1/2018. All Shareholders’ Equity accounts have a $ 0 as of that day. On 1/1/2018, they issue 20,000 shares of $1 par common stock (they are authorized to issue 55,000 shares). The issue price of the shares was $26/share. On 4/5/2018, MVP repurchases 3,000 shares of their common stock at the market price of $29/share. They are not retiring the shares. On 7/19/2018, they sell 1,000 of those shares at the market price of $25/share; on 9/15/2018 they sell an additional 1,000 shares at the new market price of $29/share. During 2018, MVP reports net income of $114,500. They declare a cash dividend of $11,500 on 11/30/2018. MVP’s policy is to pay dividends 60 days after they are declared.

1. As of 1/31/2018, what are the balances in MVP's equity account(s)?

A. Common Stock $20,000 and PIC-Excess of par $ 500,000

B. Common stock $ 55,000 and PIC--Excess of par $ 1,375,000

C. Common stock $ 520,000

D. Common stock $ 1,430,000

E. Common stock $20,000; PIC-Excess of par $ 500,000; Treasury Stock $ 910,000

2. The repurchase of shares on 4/5/2018 has which effect:

A. Increase shareholders' equity by $ 87,000

B. Decrease shareholders' equity by $ 87,000

C. Decrease common stock by $ 3,000

D. Increase common stock by $ 3,000

E. None of the above

3. As of 12/31/2018, the balance in the Treasury stock account is

A. Debit of $ 30,000

B. Credit of $ 30,000

C. Debit of $ 29,000

D. Credit of $ 29,000

E. $ 0

4. When recording the share resale of 9/15/2018, which of the following is part of the journal entry?

A. Debit common stock $ 1,000

B. Credit treasury stock $ 32,000

C. Debit treasury stock $ 29,000

D. Credit paid-in-capital: share repurchase $, 3,000

E. Credit retained earnings $ 3,000

5. How many outstanding shares of common stock will MVP report as of 12/31/2018?

A. 55,000

B. 20,000

C. 17,000

D. 19,000

E. 35,000

Hoo Company sells TVs and it operates a periodic inventory system. On 1 January 2018, the inventory account in firms’ ledger had a balance of 1,200,000. Based on the following information, answer the required questions.

1. 1. Hoo’s accountants conducted a physical counting of inventory on 31 December 2018 and concluded that the value of all the inventories in Hoo’s warehouse was 1,000,000.

1. 2. On 1 May 2018, Hoo purchased more TVs from Kota Inc. at the cost of 600,000. Kota Inc. shipped out the TVs on 5 May 2018 on the terms of FOB shipping point. Hoo received those TVs on 20 May 2018. Hoo will not pay Kota Inc. until 1 January 2019.

1. 3. On 1 June, Hoo found out that some TVs purchased from Kota Inc. were in defect and returned those TVs. The total cost of those returned TVs was 160,000.

1. 4. On 28 December Hoo purchased more TVs from Dato Inc. at the cost of 200,000. Dato Inc. shipped out the TVs on 29 December 2018 on terms of FOB destination. Hoo received the TVs from Dato Inc. on 4 January 2019.

1. 5. One of Hoo’ major customers purchased 240,000 worth of TVs from Hoo, with cost 200,000, on 25 December 2018. Hoo shipped out the TVs on 27 December 2018, on terms of FOB destination. Those TVs arrived at the buyer’s place on 2 January 2019.

1. 6. Among the inventory in Hoo’s warehouse on 31 December 2018 was some TVs on consignment from Zaza Inc., with a cost of 100,000.

Required:

Hoo Inc. has not made any journal entries for all the above transactions yet. Assume that the above are all the transactions related to Hoo’s inventory for the 2018 accounting period.

• • For each of the above 6 transaction information, provide all relevant journal entries, if any, required on 31 December 2018. If no journal entry is needed, please indicate “No Entry” in your answer.

• • Calculate the ending inventory and the cost of goods sold for Hoo Inc.’s 2018 operation. Provide the journal entry for recognition of Hoo’ cost of goods sold.

A medical researcher wants to compare the pulse rates of smokers and non-smokers. He believes that the pulse rate for smokers and non-smokers is different and wants to test this claim at the 0.05 level of significance. A sample of 52 smokers has a mean pulse rate of 78, and a sample of 64 non-smokers has a mean pulse rate of 74. The population standard deviation of the pulse rates is known to be 88 for smokers and 77 for non-smokers. Let μ1 be the true mean pulse rate for smokers and μ2 be the true mean pulse rate for non-smokers.

Step 1 of 5:

State the null and alternative hypotheses for the test.

Step 2 of 5:

Compute the value of the test statistic. Round your answer to two decimal places

Step 3 of 5:

Find the p-value associated with the test statistic. Round your answer to four decimal places.

Step 4 of 5:

Make the decision for the hypothesis test.

Step 5 of 5:

State the conclusion of the hypothesis test.