ACY Limited (“ACY”) conducted a trading business in Region ONE (“the Region”). The information below is noted for the year ended 31 December 2019 (“the year”):
The Equipment
On 1 April 2019, ACY purchased an equipment at a cost of $30,000, with an estimated useful life of five years and a residual value approximate to zero. This was used in the company’s head office. Cost model and straight-line depreciation method were adopted. The purchase of equipment was recorded by ACY on the same date.
Near the end of December 2019, an accident occurred in the head office, leading to the partial damage of the equipment. Technician inspected the equipment and determined that its productivity has permanently deteriorated due to the physical damage occurred. This was estimated that the equipment could be resold to the market for $18,000; while its value-in-use was around $20,000 as at 31 December 2019.
The Bonds Payable
On 1 January 2019, ACY issued a 10% bond with face value of $30,000 at par, due in 2025. The first interest payment is on 1 January 2020. The issue of bond was recorded immediately
Tax Rules in the Region
A standard income tax rate of 10% is charged for all taxable income, net of deductible expenses, for business (i.e. corporate taxpayers) in the Region. Normally, accounting income/(expense) is taxable/(tax-deductible) when recognised in the period, except for:
(a) The local tax laws allow 100% tax deduction for the costs of all types of office equipment and machines in the year of purchase. This shall be the only tax deduction available related to these equipment and machines, regardless of the corporate taxpayer’s subsequent accounting treatments on these assets.
(b) As a matter of the Region’s tax policy, tax deduction for interest expenses is available only to those arising from bank borrowing. Any other interest expenses, including those from the issue of notes and bonds in any circumstances, are not allowed for tax deduction.
In 2019, ACY recorded an operating profit of $330,000. However, the company has not yet recognized any depreciation, impairment loss, interest, and income tax expense for the year.
Required:
(i) Advise as to whether any impairment loss shall be recognized in respect of the equipment for the year.
(ii) Prepare all the adjusting entries required for the year.
In: Accounting
Cost Behavior Analysis in a Restaurant: High-Low Cost Estimation Assume a Papa John's restaurant has the following information available regarding costs at representative levels of monthly sales: Monthly sales in units 5,000 8,000 10,000 Cost of food sold $10,000 $16,000 $20,000 Wages and fringe benefits 4,200 4,320 4,400 Fees paid delivery help 1,100 1,760 2,200 Rent on building 1,800 1,800 1,800 Depreciation on equipment 700 700 700 Utilities 300 360 400 Supplies (soap, floor wax, etc.) 200 260 300 Administrative costs 1,200 1,200 1,200 Total $19,500 $26,400 $31,000 (a) Identify each cost as being variable, fixed, or mixed. Cost of food sold Answer
Wages and fringe benefits
Answer Fees paid delivery help Answer
Rent on building Answer
Depreciation on equipment Answer
Utilities Answer
Supplies (soap, floor wax, etc.) Answer
Administrative costs Answer
(b) Use the high-low method to develop a schedule identifying the amount of each cost that is fixed per month or variable per unit. Total the amounts under each category to develop an equation for total monthly costs. Round variable cost answers to two decimal places. Fixed Costs Variable Costs Cost of food sold Wages and fringe benefits Fees paid delivery help Rent on building Depreciation on equipment Utilities Supplies (soap, floor wax, etc.) Administrative costs Total costs equation
(c) Predict total costs for a monthly sales volume of 9,100 units
In: Accounting
Reflect on the concepts and differences between benefit, marginal benefit, cost, and marginal cost. We have applied these ideas to several scenarios: tax rates, how many employees should a firm hire, and how many years of education should an individual pursuit. Outside of the examples we have discussed, describe an application of the ideas of marginal benefit/cost to a situation in your personal or professional life. Clearly explain the difference between total benefit and marginal benefit and total cost and marginal cost in the context of your example.
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Total Cost Analysis
The manager of a rival T-shirt stand found that her cost to produce 10 T-shirts is $107.09, while the cost to produce 40 T-shirts is $402.16..
Assume the cost C(x) is a linear function of x, the number of T-shirts produced.
Find the total cost of producing 100 T-shirts.(Round to 2 decimal places)
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A company has a holding cost per unit of $5. Each order has a fixed cost of $8 and the annual demand quantity is 150,000 units. What is the company's optimal order quantity?
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Discuss the concept of cost transformation and how management accountants can contribute towards the cost transformation of an organisation.
In: Accounting
During the month of July, direct labour cost totalled $24,000 and direct labour cost was 30% of prime cost. If total manufacturing costs during June were $105,000, the manufacturing overhead was:
In: Accounting
Computing Cost of Goods Sold and Ending Inventory Under
FIFO, LIFO, and Average Cost
Assume that Madden Company reports the following initial balance
and subsequent purchase of inventory.
| Inventory balance at beginning of year | 1,820 | units @ $150 each | $273,000 |
| Inventory purchased during the year | 2,380 | units @ $180 each | 428,400 |
| Cost of goods available for sale during the year | 4,200 | units | $701,400 |
Assume that 2,800 units are sold during the year. Compute the
cost of goods sold for the year and the inventory on the year‑end
balance sheet under the following inventory costing
methods.
| COGS | Ending Inventory | ||
|---|---|---|---|
| a. | FIFO | Answer | Answer |
| b. | LIFO | Answer | Answer |
| c. | Average Cost | Answer | Answer |
In: Accounting
Explanation of how a firm makes cost minimizing production
decisions and how its cost varies with output is known as
Iso-cost
iso-quant
theory of the firm
production function
Which one of the above is the answer?
In: Economics
Which of the following costs is always constant? a. average variable cost b. average total cost c. average fixed cost d. none of the above
In: Economics