Problem #1 Facts: (Question 1 - Question 5)

On December 31, 2019, of the current year Smith Enterprises physically counted $1,500,000 of inventory. The following additional information is also available:

1. Smith Enterprises sold goods for $250,000 to Julia Corp. Smith Enterprises had originally purchased the goods for $175,000. The order was shipped to Julia FOB shipping point on December 28, 2019 and arrived at Julia's facility on January 2, 2020.

2. Smith purchased goods costing $40,000 from vendor Lemon Drop Company. Lemon Drop shipped the goods to Smith FOB shipping point on December 29, 2019 and the order was delivered on January 1, 2020 The shipment was a rush order that was supposed to arrive by December 31.

3. Smith sold goods for $250,000 to Nash Company. Smith had originally purchased the goods for $175,000. The order was shipped to Nash, FOB Destination on December 28, 2019 and arrived at Nash's facility on January 4, 2020.

4. Smith purchased goods costing $30,000 from vendor Razzles Company. Razzles shipped the goods to Smith FOB destination on December 30, 2019 and the order was delivered on January 3, 2020.

Question 1: For letter A, does Smith adjust or not adjust the physical count for the in-transit goods? Explain.

Question 2: For letter B, does Smith adjust or not adjust the physical count for the in-transit goods? Explain.

Question 3: For letter C, does Smith adjust or not adjust the physical count for the in-transit goods? Explain.

Question 4: For letter D, does Smith adjust or not adjust the physical count for the in-transit goods? Explain.

Question 5a: Consider the in-transit items described above and further assume that Smith’s general ledger reports a Merchandise Inventory balance at 12/31/2019 of $1,750,000. What adjusting entry should Smith prepare at 12/31/2019 to record this inventory shrink? (Make sure to provide the calculations for the number you use in your journal entry!)

Date: MM/DD/YY

Dr. Account………...XX

            Cr. Account…………...XX

Question 5b: Consider your entry in 5a, what could have caused this shrink?

XYZ Company’s current equipment, a Neon 89-H, can be sold today for $1,000,000 net. A brand-new Neon 89-H for almost $3,250,000; however, Megan believes she can purchase it for $3,000,000 today. She will fund this purchase in part with proceeds from the sale of the Neon 89-H. In addition, accounts payable are expected to increase by $1,500,000 today, and fully reverse in year 4.

The new equipment will be in operation beginning in year two. As the old equipment will be offline in year 1, Megan forecasts lost revenues of $550,000 in year 1 arising from the idled equipment. The cost savings in years 2, 3 and 4 are estimated at $600,000, $950,000, and $1,000,000, respectively. XYZ Company’s cost of capital and tax-rate remain unchanged. The equipment is depreciated using straight line depreciation (i.e., Equipment Cost – Salvage Value) / Useful Life). Megan assumes the equipment will be worth $5.00 after four years.

The CEO is concerned that the estimated cost of capital for XYZ Co. is too high. He adjusts XYZ’s Beta and computes a new cost of capital of 5 percent. Using this, what is this project’s NPV?

Risk-Free Rate (10-Year U.S. Treasury) = 3%

The Equity Risk Premium = 4.5%

Tax Rate: 40%

beta (β) = 1.2

Market Value of Equity / Total Capital ratio = 100%

Market Value of Debt / Total Capital = 0%

Blue Manufacturing purchased a machine on January 1, 2020 for use in its factory. Blue paid $458,000 for the machine and estimated that it had a useful life of 10 years, at the end of which time the machine was expected to have a residual value of $40,000. During its life, the machine was expected to produce 380,000 units. During 2020, the machine produced 41,800 units, and produced 58,600 in 2021. The machine was subject to a 20% CCA rate, and Blue’s year-end was December 31.

Calculate the annual depreciation amount for 2020 and 2021 under the straight-line method.

eTextbook and Media

Calculate the annual depreciation amount for 2020 and 2021 under the activity method. (Round per unit value to 2 decimal places e.g. 5.75 and final answers to 0 decimal places, e.g. 5,275.)

Calculate the annual depreciation amount for 2020 and 2021 under the double-declining balance method.

eTextbook and Media

Calculate the annual depreciation amount for 2020 and 2021 under the capital cost allowance method.

I can't get my calculations to work out for the last 2?

CASE :
Mary is a 76-year-old former English literature professor with chronic obstructive pulmonary disease (COPD) and is underweight and malnourished. At one of her first homecare visits, her provider gives her an educational pamphlet on breathing exercises that includes text and pictures. The provider also emphasizes the importance of eating more and gives her another pamphlet on nutrition. Mary barely glances over the pamphlets and puts them aside


Q1:Suppose a secondary school student in your area, while sitting for an exam, started to cry uncontrollably? This could be due to their inability to control themselves in the stressful situation. Or could this suggest that they have a deeper emotional health problem?

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Q2:Which of the following examples could be considered to contribute to social health? Explain your answers.
1. Mourning when a close family member dies
2. Going to a football match or involvement in a community meeting
3. Celebrating traditional festivals within your community
4. Shopping in the market
5. Creating and maintaining friendship.

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Q3: From your previous experiences, either as a worker or as a community member, what do you think health education is ?

The following table contains data from 16 former elementary statistics students, where x represents the number of absences a student had for the semester and y represents the student’s final class average.

(a) Draw a scatter plot using one the following website(s): http://www.alcula.com/calculators/statistics/scatter-plot/ or https://www.meta-chart.com/scatter
(b) Estimate the correlation in words (positive, negative, or no correlation)
(c) Calculate the correlation coefficient, r.
(d) Determine whether r is statistically significant at the 0.01 level of significance.
(e) Determine whether r is statistically significant at the 0.05 level of significance.
(f) Calculate the coefficient of determination, r2.
(g) Interpret the meaning of r2 for the given set of data.
(h) Find the equation of the least-squares regression line, if appropriate.

Email from Suresh Batik

I received the following email from a former student.

I hope you are doing well.

I took your Managerial Accounting class ten years ago and have a question on how to do costing in a service-based business. Currently, I am working for a firm that manufactures various products used in pipelines (torque wrenches, flange pullers, bolts and flanges, grinding machines, etc.). Five years ago we began servicing pipelines in refineries, offshore/onshore platforms, nuclear plants, etc. Our services include joint integrity, leak sealing, and leak-free bolted connections. Our service technicians go to customers to service their pipelines and charge the customers an hourly fee. In servicing these customers, our technicians often sell these customers our various manufactured products. The company is organized around functions and not as separate profit centers.

Currently, our cost accounting system only calculates the costs of physical products we manufacture, not the cost of our servicing side of the business. While we charge our customers a fee for our various services, our accounting system does not track the actual costs of providing these services, nor does it track the products our customers purchase because our technicians require these products to complete their servicing functions. Rather, the cost of field technicians is “overhead,” and hence our profitability is all over the place. In slack periods, the utilization of our field technicians is low and our profitability is low, while in peak periods the utilization of our technicians is high and our overall profitability rises. We should (but we don’t) account for time and utilization rate of technicians, cost and utilization of tools used, training costs, and the revenues of the products sold during the servicing. These latter revenues are treated as revenues to the entire corporation, not revenues to the servicing end of the business. We don’t know the profitability of our servicing business, although we are confident it is very profitable.

Before jumping to any conclusions, I would like to know how to proceed about possible changes in our accounting systems and any advice you might offer regarding how to better evaluate the profitability of our new (and growing) service business. Thank you for your time.

Best Regards

Suresh Batik

Concord Corporation leases equipment from Falls Company on January 1, 2020. The lease agreement does not transfer ownership, contain a bargain purchase option, and is not a specialized asset. It covers 3 years of the equipment’s 8-year useful life, and the present value of the lease payments is less than 90% of the fair value of the asset leased.

Prepare Concord’s journal entries on January 1, 2020, and December 31, 2020. Assume the annual lease payment is $48,000 at the beginning of each year, and Concord’s incremental borrowing rate is 7%, which is the same as the lessor’s implicit rate. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to 0 decimal places, e.g. 5,265. Record journal entries in the order presented in the problem.)

Click here to view factor tables.

On December 31, 2020, Pina Colada Corp. estimated that 4% of its net accounts receivable of $455,200 will become uncollectible. The company recorded this amount as an addition to Allowance for Doubtful Accounts. The allowance account had a zero balance before adjustment on December 31, 2020. On May 11, 2021, Pina Colada Corp. determined that the Jeff Shoemaker account was uncollectible and wrote off $2,276. On June 12, 2021, Shoemaker paid the amount previously written off.

Prepare the journal entries on December 31, 2020, May 11, 2021, and June 12, 2021. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Record journal entries in the order presented in the problem.)

(a)Based on MFRS 101 Presentation of Financial Statements, state FOUR (4) criteria where a liability should be classified as a current liability?

(b)Usaha Jaya Bhd has a RM50,000 short-term obligation due on 1 March 2020. The Manager discussed with its lender to extend the payment to 1 March 2022. The company’s reporting date is on 31 December 2019 and the financial statements are authorised for issuance on 1 April 2020.

     REQUIRED:

Discuss how the date of the agreement signed to extend the loan terms of the obligation’s maturity from 1 February 2020, to 1 March 2022 affected the classification of said obligation as current liability or non-current liability.

(c)Sintok Electrical Bhd provides a 2-year warranty for its stand fan. The fan was first sold in 2019 in which the company spent RM30,000 servicing warranty claims. At year-end, Sintok Electrical Bhd estimates that an additional RM50,000 will be spent in the future to service warranty claims related to 2019 sales.

REQUIRED:

Prepare Sintok Electrical Bhd’s related journal entries for 2019. (Assume the company’s financial year ends 31 December).