At the end of 2016 in the retail division, Devin runs a report that shows all products that have not sold at all in 2016. This report shows the following three products that have been discontinued by the manufacturer:

Item L78 that cost $226 and 2 are on hand. Retail price $299

Item R56 that cost $65 and 6 are on hand. Retail price $99

Item B86 that cost $148 and 4 are on hand. Retail price $265

While investigating these items, we find out that for all of them, the sales crew has marked them down 25% but that has not resulted in sales. The lack of parts and support for discontinued models concerns most customers. In early January, 2017 - Devin marks down the models listed above at 50% off retail price. They put the items in a more prominent position in the store and promote them in the online catalog. Sales start to trickle in.

Required for 2016:

1. Calculate the loss from the application of LCM for Devin if they apply LCM to individual products as of December 31, 2016.
2. Show the journal entry to record the loss calculated in 1 if necessary.
3. Show the journal entry to sell all of items L78, R56 and B86 for cash in January and February, 2017.

Computing and Assessing Plant Asset Impairment

Zeibart Company purchases equipment for $235,000 on July 1, 2012, with an estimated useful life of 10 years and expected salvage value of $28,000. Straight-line depreciation is used. On July 1, 2016, economic factors cause the market value of the equipment to decline to $97,500. On this date, Zeibart examines the equipment for impairment and estimates $127,500 in future cash inflows related to use of this equipment.

a. Is the equipment impaired at July 1, 2016?
AnswerYesNo

b. Compute the impairment loss (if any) as of 7/1/2016 as well as the depreciation expense for the 12 months from July 1, 2016 to July 1, 2017. Round calculations to the nearest dollar.
Using the financial statement effects template, show how those two entries affect Zeibart Company’s balance sheet and income statement.

On December 31, 2016, Akron, Inc. purchased 5% of Zip’s Company's common shares on the open market in exchange for $18,000. On December 31, 2017, Akron, Inc. acquires an additional 25% of Zip Company's outstanding common stock for $93,000. During the next two years, the following information is available for Zip Company: Net Income Dividends Declared Common Stock Fair Value (12/31) 2015 $268,000 2016 $55,200 $4,800 322,000 2017 69,000 6,000 372,000 2018 82,000 15,600 484,000 At December 31, 2017, Zip reports a net book value of $283,000. Akron attributed any excess of its 30% share of Zip's fair over book value to its share of Zip's franchise agreements. The franchise agreements had a remaining life of 10 years at December 31, 2017. a. Using the appropriate accounting method, prepare all of the journal entries for Akron, Inc. regarding their investment in Zip stock for 2016. b. What is the balance in the Investment in Zip Company account on December 31, 2016? c. How much of Akron Inc.'s consideration for Zip's stock on December 31, 2017 is attributable to revaluation increments and decrements, goodwill or gain on bargain purchase?

Exercise 9-25

Metlock Company began operations late in 2016 and adopted the conventional retail inventory method. Because there was no beginning inventory for 2016 and no markdowns during 2016, the ending inventory for 2016 was $13,818 under both the conventional retail method and the LIFO retail method. At the end of 2017, management wants to compare the results of applying the conventional and LIFO retail methods. There was no change in the price level during 2017. The following data are available for computations.

Compute the cost of the 2017 ending inventory under both:

(a) The conventional retail method. (Round ratios for computational purposes to 0 decimal places, e.g. 78% and final answer to 0 decimal places, e.g. 28,987.)

(b) The LIFO retail method. (Round ratios for computational purposes to 0 decimal places, e.g. 78% and final answers to 0 decimal places, e.g. 28,987.)

Visual Inspection

Noble Company's accounting records provided the following changes in account balances and other information for 2016:

Additional information: Net income was $9,900. Dividends were declared and paid. Land was sold for $1,700. No land was purchased. A building was purchased for $23,000. No buildings and equipment were sold. Bonds payable were issued at the end of the year. Two hundred shares of stock were issued for $15 per share. The beginning cash balance was $4,800.

Required:

Using visual inspection, prepare a 2016 statement of cash flows for Noble. Use a minus sign to indicate cash outflows, a decrease in cash or cash payments.

Saverin Inc. produces and sells outdoor equipment. On July 1, 2016, Saverin Inc. issued $84,100,000 of 10-year, 12% bonds at a market (effective) interest rate of 10%, receiving cash of $94,580,761. Interest on the bonds is payable semiannually on December 31 and June 30. The fiscal year of the company is the calendar year. Required: 1. Journalize the entry to record the amount of cash proceeds from the issuance of the bonds on July 1, 2016.* 2. Journalize the entries to record the following:* a. The first semiannual interest payment on December 31, 2016, and the amortization of the bond premium, using the straight-line method. (Round to the nearest dollar.) b. The interest payment on June 30, 2017, and the amortization of the bond premium, using the straight-line method. (Round to the nearest dollar.) 3. Determine the total interest expense for 2016. 4. Will the bond proceeds always be greater than the face amount of the bonds when the contract rate is greater than the market rate of interest? 5. Compute the price of $94,580,761 received for the bonds by using the tables shown in Present Value Tables. (Round to the nearest dollar.) *Be sure to include the year in the date for the entries. Refer to the Chart of Accounts for exact wording of account titles.

1. Grant Inc. issued $400,000 of 6% bonds on June 30, 2016. The bonds mature in 10 years. For bonds of similar risk and maturity, the market interest rate is 4%. Interest is paid semiannually on December 31 and June 30. (i.e., the first interest payment will be made on December 31, 2016). For all computations, ignore below decimal point.

a) Determine whether the company sold the bond at discount or premium

b) Determine the price of the bonds at June 30, 2016 and prepare the journal entry to record the issuance of the bonds.

c) Prepare the journal entry to record interest on December 31, 2016 by using effective interest method

d) Prepare the journal entry to record interest on June 30, 2017 by using effective interest method

e) Grant Inc. did not hold the bond to maturity and retired the bond on July 1, 2017, at 105 (i.e., 105% of face value). Prepare the journal entry to record the extinguishment of the bonds on July 1, 2017. Ignore one-day interest between June 30 and July 1. In other words, the carrying value of the bonds as of June 30, 2017 (computed in question d) should be eliminated by the extinguishment of the bonds on July 1, 2017.

Problem 12-02
AFN equation

Broussard Skateboard's sales are expected to increase by 25% from $8.2 million in 2016 to $10.25 million in 2017. Its assets totaled $5 million at the end of 2016. Broussard is already at full capacity, so its assets must grow at the same rate as projected sales. At the end of 2016, current liabilities were $1.4 million, consisting of $450,000 of accounts payable, $500,000 of notes payable, and $450,000 of accruals. The after-tax profit margin is forecasted to be 5%, and the forecasted payout ratio is 60%. What would be the additional funds needed? Do not round intermediate calculations. Round your answer to the nearest dollar.
$______

Assume that an otherwise identical firm had $6 million in total assets at the end of 2016. The identical firm's capital intensity ratio (A₀*/S₀) is

Select (only one)-

higher than, lower than, or equal to

Item 2 than Broussard's; therefore, the identical firm is

Select (only one)-

less, more, or the same

Item 3 capital intensive - it would require

Select (only one)-

a smaller, a larger, or the same

Item 4 increase in total assets to support the increase in sales.

Statement of Shareholders' Equity

On January 1, 2016 the Knox Company showed the following alphabetical list of Shareholders' Equity balances:

During 2016, the following events occurred and were properly recorded by the company:

Knox purchased an investment in available-for-sale securities. At year-end, the fair value of the securities had increased by $9,000.

Knox issued 2,000 shares of common stock for $25 per share.

Knox issued 110 shares of preferred stock for $116 per share.

Knox reacquired 400 shares of its common stock as treasury stock at a cost of $26 per share. (Hint: Record the reacquisition cost in a Treasury Stock account.)

Knox earned net income of $57,000.

Knox paid a $7 per share dividend on the preferred stock and a $1.25 per share dividend on the common stock outstanding at the end of 2016 (treasury stock is not entitled to dividends).

Required:

Prepare a statement of shareholders' equity for 2016, including retained earnings.

Wasabi Pte Ltd makes separate journal entries for all cost accounting-related activities. It uses a standard costing system for all manufacturing items. For the month of April 2016, the following activities have taken place:

Actual Direct Manufacturing Materials Purchased $300,000
Direct Manufacturing Materials Used At Standard Price 250,000
Direct Materials Price Variance 10,000 Unfavourable
Direct Materials Efficiency Variance 15,000 Favourable
Direct Manufacturing Labour Rate Variance 6,000 Favourable
Direct Manufacturing Labour Efficiency Variance 4,000 Unfavourable
Direct Manufacturing Labour Payable 172,000

The estimated fixed overhead costs for 2016 is $324,000. The company uses direct labour hours for fixed overhead allocation and anticipates 10,800 hours during the year for 540,000 units. An equal number of units are budgeted for each month. During April 2016, 48,000 units were produced and $28,000 was spent on fixed overhead.

Required:

i. Describe how the above is tracked through the accounting system by posting the necessary journal entries to record all direct cost variances for the month.
ii. Calculate all fixed overhead variances for April 2016