N0PV Corporation is considering buying a cost saving machine. The new machine costs $1 million and will last for 10 years. The new machine will be linearly depreciated over 10 years. Assume that they expect the machine to be worthless after 10 years. If they decide to buy the new machine, they will sell the old machine for $200,000. The current book value of the old machine is $250,000. The old machine has a remaining life of 2 years in which the remaining book value is linearly depreciated. The new machine will result in a cost saving of $130,000 every year before tax. Assume a tax rate of 30%. N0PV uses the company WACC to evaluate the project as it has the same risk as N0PV in general and will be financed with the same mix of equity and debt. The equity beta of N0PV is 1.5. The risk-free rate is 2% and the expected return on the market is 7%. The cost of debt before tax is 4%. The market value of debt to equity is 1. If they decide not to do the project they can use the old machine for another 10 years. If they decide to keep the old machine (and not buy the new one) the old machine will be worthless after 10 years.
Question: What is the present value (after tax) of the annual cost savings?
In: Finance
Predict the number of people arrested for drug possession in 2016 and 2017 from the data Year # of People Arrested 2006 1,519,760 2007 1,361,658 2008 1,321,824 2009 1,387,915 2010 1,179,728 2011 1,143,931 2012 1,237,708 2013 1,203,323 2014 982,169 2015 801,560 2016 2017 2018
In: Statistics and Probability
Do you agree with the High Court's ruling in Sons of Gwalia Ltd v Margaretic (2007) 231 CLR 160 which provides greater protection to shareholders rights? Ordo you prefer the recent amendments to the Corporations Act as provided by the Corporations Amendment (Sons of Gwalia) Act 2010 (Cth)?
In: Accounting
Short Answer - MORAKE
Must Include Supporting Documentation in File Upload portion of
exam. Please label page as "Morake."
The following stockholders' equity section was taken from the books of Morake & Berg, Inc on January 1, 2020.
| Common Stock, $9 par value, 500,000 shares authorized, 300,000 shares issued and outstanding | 2,700,000 |
| Additional paid in capital in excess of par - Common | 1,200,000 |
| Additional paid in capital from Treasury Stock transactions | 0 |
| Additional paid in capital - retired stock | 0 |
| Retained earnings | 1,800,000 |
| Total Stockholders' Equity | 5,700,000 |
| The following transactions occurred in 2020: |
| a) On January 3, 2020, Morake & Berg issued 10,000 new shares of its $9 par value common stock for $20 per share. The company paid the underwriter $7,000 in issue costs. |
| b) On February 5, 2020, Morake & Berg repurchased 50,000 of its shares at a purchase price of $17 per share. |
| c) On April 1, 2020, Morake & Berg reissued 15,000 of its treasury shares at a price of $15 per share. |
| d) On August 1, 2020, Morake & Berg opted to retire 8,000 of the treasury shares. |
| e) On December 31, 2020, Morake & Berg declared a net profit for the year of $1,500,000. |
| f) On December 31, 2020, Morake & Berg declared dividends
of $400,000 to be paid on January 25, 2021. (Note, you are not required to calculate total number shares outstanding since total dollar amount of dividend is given.) |
REQUIRED:
Based on the information above, please answer the following
questions as of December 31, 2020. Your supporting documentation
should clearly show how you arrived at the answers you provide
below given (a) through (f) above. You may opt to show your work
using journal entries, T-accounts, or a clear calculation of what
is increasing/decreasing each account.
1. What is the 12/31/2020 balance of Additional Paid-in-Capital for
Common Stock?
2. What is the 12/31/2020 balance of Treasury Stock?
3. What is the 12/31/2020 balance of Retained Earnings?
In: Accounting
A comparative statement of financial position for Ayayai
Corporation follows:
| AYAYAI CORPORATION Statement of Financial Position |
||||||
| December 31 | ||||||
| Assets | 2020 | 2019 | ||||
| Cash | $48,100 | $21,460 | ||||
| Accounts receivable | 64,380 | 43,660 | ||||
| Inventory | 98,420 | 59,940 | ||||
| FV-OCI investments in shares | 46,620 | 62,160 | ||||
| Land | 48,100 | 76,220 | ||||
| Equipment | 288,600 | 318,200 | ||||
| Accumulated depreciation—equipment | (86,580 | ) | (63,640 | ) | ||
| Goodwill | 91,760 | 128,020 | ||||
| Total | $599,400 | $646,020 | ||||
| Liabilities and Shareholders’ Equity | ||||||
| Accounts payable | $8,880 | $37,740 | ||||
| Dividends payable | 11,100 | 23,680 | ||||
| Notes payable | 162,800 | 247,900 | ||||
| Common shares | 196,100 | 92,500 | ||||
| Retained earnings | 213,120 | 210,160 | ||||
| Accumulated other comprehensive income | 7,400 | 34,040 | ||||
| Total | $599,400 | $646,020 | ||||
Additional information:
| 1. | Net income for the fiscal year ending December 31, 2020, was $14,060. | |
| 2. | In March 2020, a plot of land was purchased for future construction of a plant site. In November 2020, a different plot of land with original cost of $63,640 was sold for proceeds of $70,300. | |
| 3. | In April 2020, notes payable amounting to $103,600 were retired through the issuance of common shares. In December 2020, notes payable amounting to $18,500 were issued for cash. | |
| 4. | FV-OCI investments were purchased in July 2020 for a cost of $11,100. By December 31, 2020, the fair value of Ayayai’s portfolio of FV—OCI investments decreased to $46,620. No FV—OCI investments were sold in the year. | |
| 5. | On December 31, 2020, equipment with an original cost of $29,600 and accumulated depreciation to date of $8,880 was sold for proceeds of $15,540. No equipment was purchased in the year. | |
| 6. | Dividends on common shares of $23,680 and $11,100 were declared in December 2019 and December 2020, respectively. The 2019 dividend was paid in January 2020 and the 2020 dividend was paid in January 2021. Dividends paid are treated as financing activities. | |
| 7. | A loss on impairment was recorded in the year to reflect a decrease in the recoverable amount of goodwill. No goodwill was purchased or sold in the year. |
(a)
Prepare a statement of cash flows using the indirect method for
cash flows from operating activities. (Show amounts
that decrease cash flow with either a - sign e.g. -15,000 or in
parenthesis e.g. (15,000).)
In: Accounting
P5.11 A comparative statement of financial position for Spencer Corporation follows:
Spencer Corporation
Statement of Financial Position
December 31
Assets
2020
2019
Cash
$ 65,000
$ 29,000
Accounts receivable
87,000
59,000
Inventory
133,000
81,000
FV-OCI investments in shares
63,000
84,000
Land
65,000
103,000
Equipment
390,000
430,000
Accumulated depreciation—equipment
(117,000)
(86,000)
Goodwill
124,000
173,000
Total
$810,000
$873,000
Liabilities and Shareholders' Equity
Accounts payable
$ 12,000
$ 51,000
Dividends payable
15,000
32,000
Notes payable
220,000
335,000
Common shares
265,000
125,000
Retained earnings
288,000
284,000
Accumulated other comprehensive income
10,000
46,000
Total
$810,000
$873,000
Additional information:
1. Net income for the fiscal year ending December 31, 2020, was
$19,000.
2. In March 2020, a plot of land was purchased for future
construction of a plant site. In November 2020, a different plot of
land with original cost of $86,000 was sold for proceeds of
$95,000.
3. In April 2020, notes payable amounting to $140,000 were retired
through the issuance of common shares. In December 2020, notes
payable amounting to $25,000 were issued for cash.
4. FV-OCI investments were purchased in July 2020 for a cost of
$15,000. By December 31, 2020, the fair value of Spencer's
portfolio of FV-OCI investments decreased to $63,000. No FV-OCI
investments were sold in the year.
5. On December 31, 2020, equipment with an original cost of $40,000
and accumulated depreciation to date of $12,000 was sold for
proceeds of $21,000. No equipment was purchased in the year.
6. Dividends on common shares of $32,000 and $15,000 were declared
in December 2019 and December 2020, respectively. The 2019 dividend
was paid in January 2020 and the 2020 dividend was paid in January
2021. Dividends paid are treated as financing activities.
7. A loss on impairment was recorded in the year to reflect a
decrease in the recoverable amount of goodwill. No goodwill was
purchased or sold in the year.
Instructions
a. Prepare a statement of cash flows using the indirect method for
cash flows from operating activities along with any necessary note
disclosure.
b. From the perspective of a shareholder, comment in general on the results reported in the statement of cash flows.
In: Accounting
A comparative statement of financial position for Whispering
Winds Corporation follows:
|
WHISPERING WINDS CORPORATION Statement of Financial Position |
||||||
| December 31 | ||||||
| Assets | 2020 | 2019 | ||||
| Cash | $74,100 | $33,060 | ||||
| Accounts receivable | 99,180 | 67,260 | ||||
| Inventory | 151,620 | 92,340 | ||||
| FV-OCI investments in shares | 71,820 | 95,760 | ||||
| Land | 74,100 | 117,420 | ||||
| Equipment | 444,600 | 490,200 | ||||
| Accumulated depreciation—equipment | (133,380 | ) | (98,040 | ) | ||
| Goodwill | 141,360 | 197,220 | ||||
| Total | $923,400 | $995,220 | ||||
| Liabilities and Shareholders’ Equity | ||||||
| Accounts payable | $13,680 | $58,140 | ||||
| Dividends payable | 17,100 | 36,480 | ||||
| Notes payable | 250,800 | 381,900 | ||||
| Common shares | 302,100 | 142,500 | ||||
| Retained earnings | 328,320 | 323,760 | ||||
| Accumulated other comprehensive income | 11,400 | 52,440 | ||||
| Total | $923,400 | $995,220 | ||||
Additional information:
| 1. | Net income for the fiscal year ending December 31, 2020, was $21,660. | |
| 2. | In March 2020, a plot of land was purchased for future construction of a plant site. In November 2020, a different plot of land with original cost of $98,040 was sold for proceeds of $108,300. | |
| 3. | In April 2020, notes payable amounting to $159,600 were retired through the issuance of common shares. In December 2020, notes payable amounting to $28,500 were issued for cash. | |
| 4. | FV-OCI investments were purchased in July 2020 for a cost of $17,100. By December 31, 2020, the fair value of Whispering Winds’s portfolio of FV—OCI investments decreased to $71,820. No FV—OCI investments were sold in the year. | |
| 5. | On December 31, 2020, equipment with an original cost of $45,600 and accumulated depreciation to date of $13,680 was sold for proceeds of $23,940. No equipment was purchased in the year. | |
| 6. | Dividends on common shares of $36,480 and $17,100 were declared in December 2019 and December 2020, respectively. The 2019 dividend was paid in January 2020 and the 2020 dividend was paid in January 2021. Dividends paid are treated as financing activities. | |
| 7. | A loss on impairment was recorded in the year to reflect a decrease in the recoverable amount of goodwill. No goodwill was purchased or sold in the year. |
(a)
Prepare a statement of cash flows using the indirect method for
cash flows from operating activities. (Show amounts
that decrease cash flow with either a - sign e.g. -15,000 or in
parenthesis e.g. (15,000).)
In: Accounting
Martinez Inc. has sponsored a noncontributory, defined benefit pension plan for its employees since 1997. Prior to 2020, cumulative net pension expense recognized equaled cumulative contributions to the plan. Other relevant information about the pension plan on January 1, 2020, is as follows.
| 1. | The company has 200 employees. All these employees are expected to receive benefits under the plan. The average remaining service life per employee is 12 years. | |
| 2. | The projected benefit obligation amounted to $4,948,000 and the fair value of pension plan assets was $2,965,000. The market-related asset value was also $2,965,000. Unrecognized prior service cost was $1,983,000. |
On December 31, 2020, the projected benefit obligation and the
accumulated benefit obligation were $4,772,000 and $4,033,000,
respectively. The fair value of the pension plan assets amounted to
$4,129,000 at the end of the year. A 10% settlement rate and a 10%
expected asset return rate were used in the actuarial present value
computations in the pension plan. The present value of benefits
attributed by the pension benefit formula to employee service in
2020 amounted to $199,000. The employer’s contribution to the plan
assets amounted to $759,000 in 2020. This problem assumes no
payment of pension benefits.
Part 1
Prepare a schedule, based on the average remaining life per employee, showing the prior service cost that would be amortized as a component of pension expense for 2020, 2021, and 2022. (Round answers to 0 decimal places, e.g. 2,525.)
| Prior Service Cost Amortization | ||
| 2020 |
$ |
|
| 2021 |
$ |
|
| 2022 |
$ |
|
Compute pension expense for the year 2020. (Round
answers to 0 decimal places, e.g. 2,525.)
| Pension expense |
$ |
Compute the amount of the 2020 increase/decrease in net gains or
losses and the amount to be amortized in 2020 and 2021.
(Round answers to 0 decimal places, e.g.
2,525.)
| Net gain 12/31/20 |
$ |
|
| Amortization in 2020 |
$ |
|
| Amortization in 2021 |
$ |
Prepare the journal entries required to report the accounting for the company’s pension plan for 2020. (Round answers to 0 decimal places, e.g. 2,525. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)
|
Account Titles and Explanation |
Debit |
Credit |
In: Accounting
1. Angelo uses the equity method to account for its investment in Fischer on January 1. On the date of acquisition, Fischer’s land and buildings were undervalued on its balance sheet. During the year following the acquisition, how do these excesses of fair values over book values affect Angelo's Equity Income from Fischer?
a. Building, Decrease; Land, No Effect
b. Building, Decrease; Land, Decrease
c. Building, Increase; Land, Increase
d. Building, Increase; Land, No Effect
2. On January 2, 2020, Campbell, Inc. purchased a 20% interest in Renner Corp. for $2,000,000 cash. During 2020, Renner's net income was $2,500,000 and it paid dividends of $750,000.
Equity Investment balance should Campbell report at December 31, 2020?
a. $2,500,000
b. $ 500,000
c. $2,350,000
d. $2,150,000
3. On December 31, 2020, Park Inc. paid $500,000 for all of the common stock of Smith Corp. On that date, Smith had assets and liabilities with book values of $400,000 and $100,000; and fair values of $450,000 and $125,000, respectively.
What amount of goodwill will be reported on the December 31, 2020 balance sheet?
a. $ 50,000
b. $100,000
c. $200,000
d. $175,000
4. Francis, Inc. acquired 40% of Park's voting stock on January 1, 2020 for $420,000. During 2020, Park earned $120,000 and paid dividends of $60,000. During 2021, Park earned $160,000 and paid dividends of $50,000 on April 1 and $40,000 on December 1. On July 1, 2021, Francis sold half of its stock in Park for $275,000 cash.
The Equity Investment balance at December 31, 2020 is:
a. $420,000
b. $444,000
c. $408,000
d. $492,000
5. On January 1, 2020, Cracker Co. purchased 40% of Dallas Corp.'s common stock at book value of net assets. The balance in Cracker's Equity Investment account was $820,000 at December 31, 2020. Dallas reported net income of $500,000 for the year ended December 31, 2020, and paid dividends totaling $150,000 during 2020.
How much did Cracker pay for its 40% interest in Dallas?
a. $680,000
b. $500,000
c. $560,000
d. $760,000
In: Accounting
The City of Castleton’s General Fund had the following post-closing trial balance at June 30, 2019, the end of its fiscal year:
|
Debits |
Credits |
||||||
|
Cash |
$ |
418,000 |
|||||
|
Taxes Receivable—Delinquent |
590,000 |
||||||
|
Allowance for Uncollectible Delinquent Taxes |
$ |
196,000 |
|||||
|
Interest and Penalties Receivable |
26,980 |
||||||
|
Allowance for Uncollectible Interest and Penalties |
11,860 |
||||||
|
Inventory of Supplies |
16,800 |
||||||
|
Vouchers Payable |
155,500 |
||||||
|
Due to Federal Government |
66,490 |
||||||
|
Deferred Inflows of Resources—Unavailable Revenues |
402,000 |
||||||
|
Fund Balance—Nonspendable—Inventory of Supplies |
16,800 |
||||||
|
Fund Balance—Unassigned |
203,130 |
||||||
|
$ |
1,051,780 |
$ |
1,051,780 |
||||
Record the effect of the following transactions on the General Fund and governmental activities for the year ended June 30, 2020.
|
Transaction |
Fund / Governmental Activties |
General Journal |
Debit |
Credit |
|
1. The budget for FY 2020 provided for General Fund estimated revenues totaling $3,280,000 and appropriations totaling $3,233,000. |
||||
|
1 |
General Fund |
|||
|
Governmental Activities |
||||
|
2. The city council authorized temporary borrowing of $570,000 in the form of a 120-day tax anticipation note. The loan was obtained from a local bank at a discount of 5 percent per annum (debit Expenditures for the discount in the General Fund journal and Expenses—General Government in the governmental activities journal). |
||||
|
2 |
General Fund |
|||
|
Governmental Activities |
||||
|
3. The property tax levy for FY 2020 was recorded. Net assessed valuation of taxable property for the year was $41,000,000, and the tax rate was $6 per $100. It was estimated that 3 percent of the levy would be uncollectible. |
||||
|
3 |
General Fund |
|||
|
Governmental Activities |
||||
|
4. Purchase orders and contracts were issued to vendors and others in the amount of $2,130,000. |
||||
|
4 |
General Fund |
|||
|
Governmental Activities |
||||
|
5. $2,150,000 of current taxes, $390,270 of delinquent taxes, and $21,270 of interest and penalties were collected. The delinquent taxes and associated interest and penalties were collected more than 60 days after the prior year-end. |
||||
|
Record the $2,150,000 of current taxes, $390,270 of delinquent taxes, and $21,270 of interest and penalties collected. |
||||
|
5a |
General Fund |
|||
|
5b |
Record the delinquent taxes and associated interest and penalties collected more than 60 days after the prior year-end. |
|||
|
5c |
Governmental Activities |
Record the $2,150,000 of current taxes, $390,270 of delinquent taxes, and $21,270 of interest and penalties collected. |
||
|
5d |
Record the delinquent taxes and associated interest and penalties collected more than 60 days after the prior year-end. |
|||
|
6. Additional interest and penalties on delinquent taxes were accrued in the amount of $39,130, of which 30 percent was estimated to be uncollectible. |
||||
|
6 |
General Fund |
|||
|
Governmental Activities |
||||
|
7. Because of a change in state law, the city was notified that it will receive $94,000 less in intergovernmental revenues than was budgeted. |
||||
|
7 |
General Fund |
|||
|
Governmental Activities |
||||
|
8. Delinquent taxes of $13,003 were deemed uncollectible and written off. The associated interest and penalties of $968 also were written off. |
||||
|
8 |
General Fund |
|||
|
Governmental Activities |
||||
|
9. Total payroll during the year was $889,490. Of that amount, $69,690 was withheld for employees’ FICA tax liability, $110,710 for employees’ federal income tax liability, and $35,100 for state taxes; the balance was paid to employees in cash. |
||||
|
9 |
General Fund |
|||
|
Governmental Activities |
||||
|
10. The employer’s FICA tax liability was recorded for $69,690. |
||||
|
10 |
General Fund |
|||
|
Governmental Activities |
||||
|
11. Revenues from sources other than taxes were collected in the amount of $954,000. |
||||
|
11 |
General Fund |
|||
|
Governmental Activities |
||||
|
12. Amounts due the federal government as of June 30, 2020, and amounts due for FICA taxes and state and federal withholding taxes during the year were vouchered. |
||||
|
12 |
General Fund |
|||
|
Governmental Activities |
||||
|
13. Purchase orders and contracts encumbered in the amount of $2,058,040 were filled at a net cost of $2,057,570, which was vouchered. |
||||
|
13a |
General Fund |
Record the encumbrances outstanding for 2020. |
||
|
13b |
Record the total expenditures against vouchers payable for 2020. |
|||
|
13c |
Governmental Activities |
Record the total expenses against vouchers payable for 2020. |
||
|
14. Vouchers payable totaling $2,371,660 were paid after deducting a credit for purchases discount of $8,730 (credit Expenditures). |
||||
|
14 |
General Fund |
|||
|
Governmental Activities |
||||
|
15. The tax anticipation note of $570,000 was repaid. |
||||
|
15 |
General Fund |
|||
|
Governmental Activities |
||||
|
16. All unpaid current year’s property taxes became delinquent. The balances of the current taxes receivables and related uncollectibles were transferred to delinquent accounts. The City uses the 60-day rule for all revenues and does not expect to collect any delinquent property taxes or interest and penalties in the first 60 days of the next fiscal year. |
||||
|
16a |
General Fund |
Record the delinquent amount of unpaid property taxes. |
||
|
16b |
Record the adjustment for the delinquent amount of tax against the allowance. |
|||
|
16c |
Record the deferred inflow of resource |
|||
|
16d |
Governmental Activities |
Record the delinquent amount of unpaid property taxes. |
||
|
16e |
Record the adjustment for the delinquent amount of tax against the allowance. |
|||
|
16f |
Record the deferred inflow of resource |
|||
|
17. A physical inventory of materials and supplies at June 30, 2020, showed a total of $20,500. Inventory is recorded using the purchases method in the General Fund; the consumption method is used at the government-wide level. (Note: A periodic inventory system is used both in the General Fund and at the government-wide level. When inventory was purchased during the year, Expenditures were debited in the General Fund journal and Inventory of Supplies was debited in the governmental activities journal. Recorded entry to reclassify the fund balance.) |
||||
|
17 |
General Fund |
|||
|
Governmental Activities |
||||
In: Accounting