Wallace Printing prints weekly advertisements for 15 customers. For 2016, Wallace budgeted $1,000,000 of manufacturing overhead cost and 20 million pages printed.

For 2016 Wallace Printing decided to evaluate the use of additional cost pools. After analyzing manufacturing overhead costs, it was determined that number of design changes, setups, and inspections are the primary manufacturing overhead cost drivers. The following information was gathered during the analysis:

Cost pool Manufacturing overhead costs Activity level

Design changes $360,000 300 design changes

Setups 600,000 4,000 setups

Inspections 40,000 1,000 inspections

Total overhead costs $1,000,000

During 2016, two of Wallace’s customers, Wealth Managers and Health Systems, used the following printing services:

Activity Wealth Managers Health Systems

Pages 100,000 125,000

Design changes 1 25

Setups 25 30

Inspections 4 15

Wallace Printing charges its customers $0.10 per page printed and uses normal costing. Total direct costs are $0.04 per page printed.

a. Suppose Wallace considers manufacturing overhead costs as one cost pool and allocates overhead based on the number of pages printed. What is the overhead allocation rate?

b. Using the allocation rate determined in the previous question, what is the manufacturing overhead cost allocated to Health Systems for 2016?

c. If Wallace considers manufacturing overhead costs as one cost pool and allocates overhead based on the number of pages printed, what profit (loss) does Wallace earn from Health Systems for 2016?

d. Now suppose Wallace uses activity cost pools. What is the allocation (activity) rate for the inspections cost pool?

e. If Wallace allocates manufacturing overhead costs using activity cost pools, what is the manufacturing overhead allocation for Wealth Managers during 2016?

f. If manufacturing overhead costs are allocated using activity cost pools, what profit (loss) does Wallace Printing earn from Wealth Managers during 2016?

The table below lists the prices and quantities consumed of three different goods from 2014−2016.

a. For 2014, 2015, and 2016, determine the amount that a typical consumer pays each year to purchase the quantities listed in the table above.

Instructions: Round your answers to the nearest whole number.

Instructions: Round your answers to two decimal places.

b. The percentage change in the amount the consumer paid is  % from 2014 to 2015 and  % from 2015 to 2016.

c. It is problematic to use your answers to part b as a measure of inflation because  (Click to select)  only income is changing  both price and consumption are changing  only consumption is changing  only price is changing  .

Instructions: Round your answers to two decimal places.

d. Suppose we take 2014 as the base year, which implies that the market basket is fixed at 2014 consumption levels. Using 2014 consumption levels, the rate of inflation is % from 2014 to 2015 and  % from 2015 to 2016. (Hint: First calculate the cost of the 2014 market basket using each year's prices and then find the percentage change in the cost of the basket.)

Instructions: Round your answers to two decimal places.

e. Repeat the exercise from part d, now assuming that the base year is 2015. Using 2015 consumption levels, the rate of inflation is  % from 2014 to 2015 and  % from 2015 to 2016. (Hint: First calculate the cost of the 2015 market basket using each year's prices and then find the percentage change in the cost of the basket.)

f. Your answers from parts d and e were different because  (Click to select)  the base years have the same consumption quantities  income has changed  the base years put different weights on the goods  prices have changed

Lopez Company acquires 100% of the stock of Santiago Corporation on January 1, 2016, for $2,280,000 cash. As of that date, Santiago had the following account balances:

In 2016 and 2017, Santiago had net income of $100,000 and 108,000, respectively. In addition, Santiago paid dividends of $27,000 in both years. Inventory is assumed to be sold in 2016.

1.  What was the amount of excess of acquisition price over book value of Santiago's net assets?

2. What is the amount of goodwill at the date of acquisition?

3. What amount of inventory would be added to the parent's inventory balance to get consolidated inventory at the date of acquisition?

4. What amount of Santiago’s building would be included on the consolidated balance sheet at December 31, 2016?

5. What amount of Santiago’s equipment would be included on the consolidated balance sheet at December 31, 2016?

6. Compute the AAP amortization for 2016.

7.  What amount of Santiago's Bonds Payable would appear on the consolidated balance sheet on December 31, 2016?

8.  What amount of Santiago's building would be included on the consolidated balance sheet at December 31, 2017?

9. What amount of Santiago's equipment would be included on the consolidated balance sheet at December 31, 2017?

10. What amount of Santiago's land would be included on the consolidated balance sheet at December 31, 2017?

11. What amount of Santiago’s Bonds Payable would be included on the consolidated balance sheet at December 31, 2017?

12.  Compute the AAP amortization for 2017.

13. What amount of Santiago's stockholders' equity will be included in the consolidated balance sheet at the date of acquisition?

Problem:

Answer each of the following questions related to various short-term liabilities:

a.  

On September 1, 2016, a company borrowed $100,000 from its bank and signed a nine-month note with 8% interest. The principal and interest on the loan are to be paid when the note matures. What is the total amount related to this loan that should be reported under current liabilities on the company's December 31, 2016, statement of financial position?

b.  

The balance in a company's long-term mortgage payable account on December 31, 2016, is $150,000. This is to be repaid at the rate of $25,000 per year for the next six years. How should this liability be reported on the company's statement of financial position on December 31, 2016?

c.  

During the spring and summer of 2016, the Prairie Predators hockey team sold 2,000 season tickets for the 2016-2017 hockey season. Each of the season tickets was sold for $500 and covered 20 games, with 8 to be played in the fall (October to December) and 12 in the winter (January to March). What is the effect on the team's financial statements when the season tickets are sold? What amount of liability (if any) related to the season tickets should be reported on the team's December 31, 2016, statement of financial position?

d.  

Bathurst Beverages Ltd. collects cash deposits on its returnable bottles and other containers. Past experience indicates that virtually all the bottles and containers will be returned and the deposits refunded. During the current year, the company received $150,000 in such deposits and it disbursed $140,000 for bottles and other containers that were returned. How would this information be reflected in the year-end statement of financial position for Bathurst Beverages?

e.  

During the current year, a company sold 10,000 units of a product that was covered by a two-year warranty. Past experience indicates that approximately 3% of the units sold will require warranty repairs, at an average cost of $50 per unit. The actual costs incurred during the year for repairs under the warranty totalled $7,000. What amount of liability (if any) should be reported on the company's statement of financial position at the end of the current year?

Required information

[The following information applies to the questions displayed below.]

Simon Company’s year-end balance sheets follow.

The company’s income statements for the years ended December 31, 2017 and 2016, follow. Assume that all sales are on credit:

(1) Compute days' sales uncollected.

(2) Compute accounts receivable turnover.

(3) Compute inventory turnover.

(4) Compute days' sales in inventory.
  

Problem 4-2 (Essay)

On November 1, 2016, Campbell Corporation management decided to discontinue operation of its Rocketeer Division and approved a formal plan to dispose of the division. Campbell is a successful corporation with earnings of $150 million or more before tax for each of the past five years. The Rocketeer Division, a major part of Campbell’s operations, is being discontinued because it has not contributed to this profitable performance.

The division’s main assets are the land, building, and equipment used to manufacture engine components. The land, building, and equipment had a net book value of $42 million on November 1, 2016.

Campbell’s management has entered into negotiations for a cash sale of the division for $36 million (net of costs to sell). The sale date and final disposal date of the division is expected to be July 1, 2017. Campbell Corporation has a fiscal year ending May 31. The results of operations for the Rocketeer Division for the 2016–17 fiscal year and the estimated results for June 2017 are presented below. The before-tax losses after October 31, 2016, are calculated without depreciation on the building and equipment.

The Rocketeer Division will be accounted for as a discontinued operation on Campbell’s financial statements for the year ended May 31, 2017. Campbell’s tax rate is 25% on operating income and all gains and losses. Campbell prepares financial statements in accordance with IFRS.

(d)
Assume that Campbell Corporation management was debating whether the sale of the Rocketeer Division qualified for discontinued operations accounting treatment under IFRS. List specific factors or arguments that management would use to suggest that the Rocketeer Division should be treated as a discontinued operation. Why might management have a particular preference about which treatment is given? From an external user’s perspective, what relevance does the presentation of the discontinued operation have when interpreting the financial results?

Freese, Inc., is in the process of preparing the fourth quarter budget for 2016, and the following data have been assembled:

• The company sells a single product at a price of $70 per unit. The estimated sales volume for the next six months is as follows:

  September	10,400	units
  October	9,600	units
  November	11,200	units
  December	16,000	units
  January	7,200	units
  February	8,000	units

• All sales are on account. The company's collection experience has been that 30% of a month's sales are collected in the month of sale, 68% are collected in the month following the sale, and 2% are uncollectible. It is expected that the net realizable value of accounts receivable (i.e., accounts receivable less allowance for uncollectible accounts) will be $495,040 on September 30, 2016.
• Management's policy is to maintain ending finished goods inventory each month at a level equal to 30% of the next month's budgeted sales. The finished goods inventory on September 30, 2016, is expected to be 2,880 units.
• To make one unit of finished product, 5 pounds of materials are required. Management's policy is to have enough materials on hand at the end of each month to equal 40% of the next month's estimated usage. The raw materials inventory is expected to be 20,160 pounds on September 30, 2016.
• The cost per pound of raw material is $6, and 70% of all purchases are paid for in the month of purchase; the remainder is paid in the following month. The accounts payable for raw material purchases is expected to be $91,152 on September 30, 2016.

d. Prepare a materials purchases budget in pounds, by month and in total, for the fourth quarter of 2016.

e. Prepare a schedule of cash payments for materials, by month and in total, for the fourth quarter of 2016. (Do not round intermediate calculations.)

The following are BAC Bhd.’s year end statement of financial position and statement of profit and loss for 2016 and 2017:

Related items:

2017 Total dividends paid $70,075 ,   Stock price per share $15.60

2016 Total dividends paid $15.60 ,   Stock price per share $21.80

Required:

1. Calculate the after tax operating income (i.e. after-tax EBIT) for 2016 and 2017.   
2. Calculate the net working capital (NWC) that is supported by non-free sources for 2016 and 2017, and the changes in NWC between these two years.                             
3. What is free cash flow (FCF)? Calculate the FCF for 2017. Is a negative FCF always a bad sign?   
4. Calculate the following for the company for 2017:
   1. Earnings per share   
   2. Dividends per share   
   3. Book value per share

The following are BAC Bhd.’s year end statement of financial position and statement of profit and loss for 2016 and 2017:

Related items:

2017 Total dividends paid $70,075 ,   Stock price per share $15.60

2016 Total dividends paid $15.60 ,   Stock price per share $21.80

Required:

1. Calculate the after tax operating income (i.e. after-tax EBIT) for 2016 and 2017.   
2. Calculate the net working capital (NWC) that is supported by non-free sources for 2016 and 2017, and the changes in NWC between these two years.                             
3. What is free cash flow (FCF)? Calculate the FCF for 2017. Is a negative FCF always a bad sign?   
4. Calculate the following for the company for 2017:
   1. Earnings per share   
   2. Dividends per share   
   3. Book value per share

In the photoelectric effect experiment, a light photon

with a wavelength λ=525 nm hits a metallic cesium

(work function = 3.43 ×10−34 J).\ What is the kinetic energy of the photoelectron produced?