A report summarized the results of a survey of 309 U.S. businesses. Of these companies, 203 indicated that they monitor employees' web site visits. For purposes of this exercise, assume that it is reasonable to regard this sample as representative of businesses in the United States. (a) Is there sufficient evidence to conclude that more than 60% of U.S. businesses monitor employees' web site visits? Test the appropriate hypotheses using a significance level of 0.01. (Round your test statistic to two decimal places and your P-value to four decimal places.)

z =

State your conclusion

. Reject H0. We have convincing evidence that more than 60% of U.S. businesses monitor employees' web site visits

. Reject H0. We do not have convincing evidence that more than 60% of U.S. businesses monitor employees' web site visits.

Do not reject H0. We do not have convincing evidence that more than 60% of U.S. businesses monitor employees' web site visits.

Do not reject H0. We have convincing evidence that more than 60% of U.S. businesses monitor employees' web site visits.

(b) Is there sufficient evidence to conclude that a majority of U.S. businesses monitor employees' web site visits? Test the appropriate hypotheses using a significance level of 0.01. (Round your test statistic to two decimal places and your P-value to four decimal places.)

z = P-value =

State your conclusion.

Reject H0. We have convincing evidence that a majority of U.S. businesses monitor employees' web site visits.

Do not reject H0. We have convincing evidence that a majority of U.S. businesses monitor employees' web site visits.

Do not reject H0. We do not have convincing evidence that a majority of U.S. businesses monitor employees' web site visits.

Reject H0. We do not have convincing evidence that a majority of U.S. businesses monitor employees' web site visits.

A report summarized the results of a survey of 319 U.S. businesses. Of these companies, 209 indicated that they monitor employees' web site visits. For purposes of this exercise, assume that it is reasonable to regard this sample as representative of businesses in the United States.

(a) Is there sufficient evidence to conclude that more than 60% of U.S. businesses monitor employees' web site visits? Test the appropriate hypotheses using a significance level of 0.01. (Round your test statistic to two decimal places and your P-value to four decimal places.)

State your conclusion.

Do not reject H₀. We do not have convincing evidence that more than 60% of U.S. businesses monitor employees' web site visits.

Do not reject H₀. We have convincing evidence that more than 60% of U.S. businesses monitor employees' web site visits.    

Reject H₀. We do not have convincing evidence that more than 60% of U.S. businesses monitor employees' web site visits.

Reject H₀. We have convincing evidence that more than 60% of U.S. businesses monitor employees' web site visits.

(b) Is there sufficient evidence to conclude that a majority of U.S. businesses monitor employees' web site visits? Test the appropriate hypotheses using a significance level of 0.01. (Round your test statistic to two decimal places and your P-value to four decimal places.)

State your conclusion.

Do not reject H₀. We have convincing evidence that a majority of U.S. businesses monitor employees' web site visits.

Reject H₀. We have convincing evidence that a majority of U.S. businesses monitor employees' web site visits.   

Reject H₀. We do not have convincing evidence that a majority of U.S. businesses monitor employees' web site visits.

Do not reject H₀. We do not have convincing evidence that a majority of U.S. businesses monitor employees' web site visits.

1. On 1 January 2013, Grove Limited acquired and installed a machinery for use in its manufacturing business. When acquired, the machinery cost £1,200,000, had an estimated useful life of 10 years and an expected residual value of £200,000. Grove depreciates machinery on a straight-line basis over its useful life. The company follows a calendar year reporting period.

At 31 December 2014, the annual review of all machinery found that this particular item of machinery had incurred significant damage. As a result, the engineering department estimated the fair value less costs to sell the machinery at this date was £710,000. As the machinery can operate in a limited capacity, it could be expected to provide annual net cash flows of £105,000 for the next 8 years, while the expected residual value will remain unchanged. The relevant discount rate is 8%.

1. Which IFRS standard would you consult to account for the event that occurred on 31 Dec. 2014? (0.5 point)
2. What is the difference between such an event and the depreciation of machinery? (1.5 points)
3. Show the relevant steps to test for the accounting impact of this event, and provide the appropriate journal entry, if necessary. (4 points)

The consolidated financial statements of FMCG Ltd and RG Ltd were presented to the Board. The Board is alarmed that the economic entity’s balance sheet (consolidated balance sheet) shows a deferred tax balance, when the accounts for FMCG Ltd had no deferred tax asset or deferred tax liability.

FMCG management is also planning to acquire another entity ABC Investments Ltd in the near future. Management pointed out to the Board that on acquisition, the financial results of this new subsidiary (ABC Investments Ltd) will also be consolidated in the economic entity financial statements.

One of the Board members noted that the new business to be acquired by FMCG Ltd is an investment company. Its financial statements should not be consolidated because it is involved in investments industry, whereas all of the other companies in the economic entity are involved in retail industry.

Required:

As the financial accountant you are requested to prepare a response to the following questions:

(a) Why does the economic entity have a deferred tax balance? (2.5 marks)

(b) Should the financial statements of proposed acquired business, ABC Investments Ltd, be consolidated into the economic entity and why? (2.5 marks)

2. Cost-Volume-Profit (CVP)                                                                                                               40 points

a. Assignment Question on Cost Volume Profit (CVP)

MMC Nutri Company is a small family fast food restaurant that opened in 2015, serving tropical cuisine to its mainly Afro-American, Asian and African customers. Because of its hot ingredients, few others patronize the food.

This business serves its popular dish Jollof rice, fish or meat stew, and rice flour porridge, as a meal for $9 a serving. Its variable cost per serving is $4.10 and its monthly fixed cost is $4,600 a month. On average, the business sells 60 servings a day, opened every day except Sunday. The highly religious owner takes Sunday off, as a rest day.

During this 2020 year of COVID-19 pandemic, average sales has dropped significantly. In June of this year, the federal government gave a lump sum financial assistance of $10,000 to the business, during a six weeks lockdown. Since then, current sales has dropped by 60% of its pre-COVID level, despite the introduction of take-away opportunity. The business optimistically estimates that sales will slowly increase to a maximum of 80% of pre-COVID level, for the rest of this year.

The owner is considering closing the business, due to uncertainty and depletion of personal savings to finance its operations, and has commissioned you to give advice, based on your knowledge of accounting.

The business is also exploring an available option of a $6,000 investment in machinery that will be used for 5 years and will reduce variable cost by $0.30 a unit. Sales price/unit will not change.

What will be your overall advice to this owner? Justify each option with analysis based on CVP.            

(Points will be awarded for trend of thought and the application of CVP principles. There is no one answer.) 30 points

b. Assignment on Plant-wide Overhead Absorption

Basic Construction Company won a bid to build a gym between January and March 2020. The actual manufacturing overhead for the completed construction was $128,610. On December, 2019, before the start of the construction, the company decided to set an annual overhead rate of $875,000 for all jobs during 2020, to be absorbed by direct labor hours. The actual direct labor hours used for this job was 49,000, and the direct machine hours used was 12,700. The annual direct labor hours estimated for 2020 by the company was 350,000 DLH. Provided there is over or under absorbed overhead, considered not significant, prepare the journal entry to close the manufacturing overhead account, at the end of the contract.                                                                                                                                             10 points

Question 1: Partial year’s depreciation; alternative methods; exchange/disposal of PPE

Videotron Ltee completed the following transactions involving printing equipment.

Machine 6690 was purchased for cash on May 1, 2020, at an installed cost of $72,900. Its useful life was estimated to be four years with an $8,100 trade-in value. Straight-line depreciation was recorded for the machine at the ends of 2020 and 2021.

On August 5, 2020, it was traded for Machine 6691, which had an installed cash price of $54,000. A trade-in allowance of $40,500 was received and the balance was paid in cash. The new machine’s life was estimated at five years with a $9,450 trade-in value. The fair values of Machines 6690 and 6691 were not reliably determined at the time of the exchange. Double-declining-balance depreciation was recorded on each December 31 of Machine 6691’s life. On February 1, 2025, it was sold for $13,500.

Machine 6711 was purchased on February 1, 2025, at an installed cash price of $79,650. It was estimated that the new machine would produce 75,000 units during its useful life, after which it would have an $8,100 trade-in value. Units-of-production depreciation was recorded on the machine for 2025, a period in which it produced 7,500 units of product. Between January 1 and October 3, 2026, the machine produced 11,250 more units. On October 3, 2026, it was sold for $54,000

Required

Prepare journal entries to record:

1. The depreciation expense recorded to the nearest whole month on the first December 31 of each machine’s life. (for units-of-production, round the rate per unit to three decimal places).
2. The purchase/exchange/disposal of each machine.

Question 2: Intangible assets

On February 3, 2020, Secure Software Group purchased the patent for a new software for cash of $220,800. The company expects the software to be sold over the next five years and uses the straight-line method to amortize intangibles.

Required

1. Prepare entries to record the:

1. Purchase of the software patent.
2. Straight-line amortization for the year ended December 31, 2020, calculated to the nearest whole month. Round to the nearest dollar.

2. On December 31, 2020, the company’s adjusted trial balance showed the additional asset accounts shown below. Prepare the asset section of the balance sheet at December 31, 2020, including the patent purchased on February 3, 2020.

Accounts receivable………………………………$285,600

Accumulated depreciation, equipment……………$259,200

Accumulated depreciation, building………………$189,000

Allowance for doubtful accounts……………………$8,400

Cash………………………………………………. $103,200

Equipment…………………………………………$477,600

Building………………………………………… $595,200

Land………………………………………………. $ 110,400

Merchandise inventory…………………………… $ 135,600

Campus Fast is a new audit client. Client Fast uses public WiFi to place and deliver restaurant take out for students at the Up and Coming State University. Campus Fast was founded by three highly ambitious MBA students at the university. The business plan is to find a buyer or place an IPO of the company by graduation in two years. The founders expect to pay off all student loans, take a tour around the world and then start another company. In order for the business plan to work on the timeline for graduation, the business must meet highly ambitious earnings numbers. Additionally, the company is dealing with two situations that the founders would like to keep from the auditors:

1) The company has been using free, unsecured public WiFi to take orders via the Internet. The customer may pay via the Internet. Several students, who all happen to be members of the same student organization on campus, are claiming that using Campus Fast has allowed their identity to be stolen. One student is claiming that she had $12,000 of charges on her credit card to the unsecured Internet site of Campus Fast. Management plans to pay off the complaining students and keep the true liability off the balance sheet. The reason is Campus Fast is concerned that an interested buyer may become concerned about the unsecured site and might get scared by the student complaints.

2) The company guarantees fast delivery. It has offered to pay any speeding or other moving violation tickets to its delivery drivers. Unfortunately, one of the drivers was involved in an accident due to running a red light. The passenger in the other car is in critical condition and the intensive care unit in the hospital. The driver has promised the family of the passenger that the company will make good on any expenses and admitted the company policy on repaying all traffic tickets. Attorneys for the injured party are threatening to sue and publicize the situation. The founders do not have enough cash to take care of this problem but are still trying to keep the situation from the auditors and potential buyer.

Using the internal control framework assess the internal controls at Campus Fast and risk environment.

A $10 000 bond with 5% interest payable quarterly, redeemable at par on November 15, 2030, was bought on July 2, 2014, to yield 9% compounded quarterly. If the bond sells at 92.75 on September 10, 2020, what would the gain or loss on the sale be?

   Face value = 10 000.00; b = 1.25%

                   Principal = 10 000.00; i = 2.25%

                   Interest dates are November 15, February 15, May 15, and August 15.

                   The interest date preceding the date of sale is August 15, 2020.

                   The time period August 15, 2020, to November 15, 2030, is 10.25 years: n = 41.

                   b < i → discount

                   The interest payment interval August 15, 2020, to November 15, 2020, is 92 days

                   The interest period August 15, 2020, to September 10, 2020, is 26 days.

                          January 1, 2020        December 31, 2020
Direct materials               31,000                   50,000
Work in process                38,000                   41,000
Finished goods                 22,000                   34,000

The following information was taken from DTD Company's accounting records
for 2020:

Sales revenue ...........................................   $630,000
Direct materials purchased ..............................       ?
Depreciation, factory equipment .........................     34,000
Prime costs .............................................    250,000
Utilities (60% for factory; 40% for office building) ....     20,000
Sales commissions .......................................     71,000
Indirect materials ......................................       ?
Depreciation, office equipment ..........................     30,000
Rent, factory building ..................................     56,000
Net income ..............................................     10,000
Direct labor ............................................       ?
Advertising .............................................     68,000
Production supervisor's salary ..........................     74,000

Additional information:

1.  Direct labor comprised 35% of the conversion costs for 2020.

2.  The actual overhead cost for 2020 was equal to the overhead applied
    to production. Thus there was no overhead variance for 2020.

Calculate DTD Company's indirect materials cost for 2020.

Assume that the level of capital flows between the U.S. and the country of Krendo is negligible (close to zero) and will continue to be negligible. There is a substantial amount of trade between the U.S. and the country of Krendo and no capital flows. Thus, the inflation effect will be _____ than the interest rate effect in influencing the exchanger rate of Krendo against U.S. dollar.