Use the information for Economy X in the table to answer the question below.

In which year did Economy X have disinflation?  

a. 2018

b. 2017

c. 2015

d. 2016

e. None of the choices shown is correct.

Did Economy X experience stagflation in 2017?

a. Economy X may have experienced stagflation in 2017, but more information is needed to know for sure.

b. Economy X did experience stagflation in 2017.

c. Economy X did not experience stagflation In 2017.

An employee in Economy X received a pay increase of 2% in 2015. Which of the following statements is correct?

a. The employee’s nominal pay increased and the real pay stayed the same.

b. The employee’s nominal pay increased and the real pay increased.

c. The employee’s nominal pay increased but the real pay decreased.

d. The employee’s nominal pay increased but more information is needed to know if there was any change in the real pay.

In which year did Economy X have deflation?

a. 2018

b. 2019

c. 2015

d. 2016

e. 2017

What was the rate of inflation in Economy X in 2016?

a. 2.10%

b. 6.1%

c. 2.01%

d. 1.02%

e. 3.12%

A person in Economy X earned $20 per hour in 2014. How much would the person have to earn in 2018 to adjust for inflation?

a. $22.46

b. $25.31

c. $38.20

d. $21.29

e. $18.78

Which year is the base year for this information?

a. 2014

b. 2015

c. 2018

d. 2016

e. None of the choices shown is correct.

Assignment 2 P4-15

Pro forma income statement???The marketing department of Metroline Manufacturing estimates that its sales in 2016 will be $1.56 million. Interest expense is expected to remain unchanged at $33,000?, and the firm plans to pay $66,000 in cash dividends during 2016. Metroline? Manufacturing's income statement for the year ended December? 31, 2015, is given

Metroline Manufacturing breakdown

of Costs and Expenses into Fixed and

Variable Components for the Year Ending

December 31, 2015

Cost of goods sold  
Fixed cost   $214,000
Variable cost   694,000
Total cost   $908,000
Operating expenses  
Fixed expenses   $35,000
Variable expenses   84,000
Total expenses   $119,000

Metroline Manufacturing Income Statement

for the Year ending Decenver 31, 2015

Sales revenue   $1,403,000
Less: Cost of goods sold   908,000
Gross profits   $495,000
Less: Operating expenses   119,000
Operating profits   $376,000
Less: Interest expense   33,000
Net profits before taxes   $343,000
Less: Taxes (rate = 40%)   137,200
Net profits after taxes   $205,800
Less: Cash dividends   62,000
To retained earnings   $143,800

, along with a breakdown of the? firm's cost of goods sold and operating expenses into their fixed and variable components.

a. Use the ?percent-of-sales method to prepare a pro forma income statement for the year ended December? 31, 2016.

b. Use fixed and variable cost data to develop a pro forma income statement for the year ended December? 31, 2016.

c. Compare and contrast the statements developed in parts a. and b. Which statement probably provides the better estimate of 2016? income? Explain why.

Return on Equity in Presence of Large Treasury Stock Balance

NJ Simpson Inc. reported the following equity accounts in its 2017 balance sheet. Stock prices for the past three year-ends of 2017, 2016, and 2015 are: $244.80, $196.96, and $136.34, respectively.

The income statement for NJ Simpson Inc. reports the following.

a. Compute return on equity for 2017 and 2016, under the following assumptions.

Traditional definition of equity.

With adding back treasury stock to equity.

Using market value of equity instead of book value.

Round answers to one decimal place (ex: 0.2345 = 23.5%)

The shareholders’ equity section of Superior Corporation’s balance sheet as of December 31, 2015, is as follows: Shareholders’ Equity Preferred stock, $100 par value; authorized, 300,000 shares; issued, 25,000 shares $2,500,000 Common stock, $5 par value; authorized, 2,000,000 shares; issued, 416,000 shares 2,080,000 Paid-in capital in excess of par—preferred 81,000 Paid-in capital in excess of par—common 806,000 Retained earnings 3,120,000 $8,587,000 The following events occurred during 2016: Jan. 5 8,500 shares of authorized and unissued common stock were sold for $6 per share. 16 9,500 shares of authorized and unissued preferred stock were sold for $109 per share. Apr. 1 78,000 shares of common stock were repurchased for the treasury at a price of $19 per share. Superior uses the cost method to account for treasury stock. Sept. 1 3,500 shares of preferred stock are issued in exchange for a piece of land. The land has an appraised value of $375,500. The preferred stock currently trades on the New York Stock Exchange at a price of $105 per share. Dec. 1 26,000 shares of treasury stock are reissued at a price of $28 per share. Required: 1. Prepare journal entries for each of the above transactions. 2. Calculate the number of authorized, issued, and outstanding common shares as of December 31, 2016. 3. Calculate Superior’s legal capital at December 31, 2016.Calculate the number of authorized, issued, and outstanding common shares as of December 31, 2016. Authorized common shares shares Issued shares Outstanding shares Calculate Superior’s legal capital at December 31, 2016. Total legal capital $

George Larkham (George) works as an audit partner at a mid-tier firm of Chartered Accountants, and is in the process of finalising the audit of the financial report of Rainbow Resources Limited (Rainbow Resources) for the year ended 31 December 2016. George has been approached by the company’s managing director with the proposal to process a journal entry to recognise an expense and a provision at 31 December 2016: Debit Credit Heavy maintenance expense 1,500,000 Provision for heavy maintenance expense 1,500,000 The managing director explains to George that he expects larger expenditure on heavy maintenance will be incurred in the 2018 financial year and it is prudent to recognise part of the expenditure in the 2016 financial year. George advises the managing director that the proposed entry does not conform with Generally Accepted Accounting Principles as in the 2016 financial year Rainbow Resources does not have a legal or constructive obligation to undertake the heavy maintenance in the 2018 financial year. As such, given the materiality of the expense and provision, if it is recognised, George will be required to modify the audit opinion. The managing director advises George that should he modify the audit opinion his firm will be removed as auditors in the 2017 financial year. George is worried by this as the audit fees generated from the audit of Rainbow Resources are material to the total fees which he generates for his firm. George is considering the managing director’s proposal and allow the journal entry to be processed to recognise an expense and a provision at 31 December 2016 without modifying the audit opinion. Required: (a) Provide three reasons why it is important for George to behave in an ethical manner. (b) Identify and explain the relevant fundamental ethical principles related to George's situation and the threats to these principles.

Total Manufacturing Costs, Income Statement, Unit Cost, and Selling Price. You are consulted by Investors, Inc., a group of investors planning a new product. They have estimates of the costs of materials, labor, overhead, and other expenses for 2016 but need to know how much to charge for each unit to earn a profit in 2016 equal to 10% of their estimated investment of $500,000 (ignore income taxes).

Their plans indicate that each unit of the new product requires the following:

Direct Material

4 lb. of a material costing $6 per lb.

Direct Labor

3 hrs. of a die cutter’s time at $9 per hr.

2 hrs. of an assembler’s time at $8 per hr.

Major items of production overhead would be annual rent of $40,000 on the factory building and $25,000 on machinery as well as indirect material of $21,000. Other production overhead is an estimated 60% of total direct labor costs. Selling expenses are an estimated 20% of total sales, and non-factory administrative expenses are 10% of total sales.

The consensus at Investors is that during 2016 4,000 units of product should be produced for selling and another 1,000 units should be produced for the next year’s beginning inventory. Also, an extra 6,000 pounds of material will be purchased as beginning inventory for the next year. Because of the nature of the manufacturing process, all units started must be completed, so work in process inventories are negligible.

Required

a) Incorporate the above data into a schedule of estimated total manufacturing costs and compute the unit production cost for 2016.

b) Prepare an estimated income statement that would provide the target amount of profit for 2016.

c) What unit sales price should Investors charge for the new product?

Green Landscaping Inc. is preparing its budget for the first quarter of 2017. The next step in the budgeting process is to prepare a cash receipts schedule and a cash payments schedule. To that end the following information has been collected.

Clients usually pay 60% of their fee in the month that service is performed, 30% the month after, and 10% the second month after receiving service.

Actual service revenue for 2016 and expected service revenues for 2017 are November 2016, $94,290; December 2016, $83,720; January 2017, $104,810; February 2017, $122,860; March 2017, $133,740.

Purchases of landscaping supplies (direct materials) are paid 60% in the month of purchase and 40% the following month. Actual purchases for 2016 and expected purchases for 2017 are December 2016, $16,190; January 2017, $13,080; February 2017, $17,510; March 2017, $21,410.

(a)

Prepare the following schedules for each month in the first quarter of 2017 and for the quarter in total:

(1) Expected collections from clients.

(2) Expected payments for landscaping supplies.

(b)

Determine the following balances at March 31, 2017:

Perfect Pizza had the following account balances at December 31, 2015:

During 2016, the following transactions occurred:

1.Purchases of ingredients and supplies (inventory) were $230,000, all on account.

2.Sales of pizzas for cash were $510,000, and sales of pizzas on account were $40,000.

3.The company paid $105,000 for wages and $25,000 for utilities expenses.

4.Payments for ingredients and supplies purchased on account totalled $220,000.

5.Collections from customers for sales on account totalled $50,000.

6.Ingredients and supplies valued at $225,000 were used in making pizzas.

7.A dividend of $15,000 was declared and paid at the end of the year.

Information for adjusting entries:

8.At the end of 2016, the amount of rent paid in advance was $1,500.

9.Wages owed to employees at the end of 2016 were $2,500.

10.The equipment had an estimated useful life of eight years, with no residual value.

11.The delivery vehicles had an estimated useful life of six years with a residual value of $8,000.

Required

a.  

Prepare journal entries for transactions 1 through 7. Create new accounts as necessary.

b.  

Prepare adjusting journal entries for adjustments 8 to 11.

c.  

Set up T accounts, enter the beginning balances from 2015, post the 2016 entries, and calculate the balance in each account.

d.

Prepare a statement of income for 2016.

e.  

Prepare the closing entries

The amounts of the assets and liabilities of Nordic Travel Agency at December 31, 2016, the end of the year, and its revenue and expenses for the year follow. The retained earnings were $600,000 on January 1, 2016, the beginning of the year. During the year, dividends of $42,000 were paid. Accounts payable $ 69,500 Accounts receivable 285,000 Cash 190,500 Common stock 70,000 Fees earned 912,500 Land 544,000 Miscellaneous expense 6,400 Rent expense 36,000 Supplies 5,500 Supplies expense 4,100 Utilities expense 28,500 Wages expense 510,000 Required: 1. Prepare an income statement for the year ended December 31, 2016. Refer to the Accounts given in the Instructions and to the lists of Labels and Amount Descriptions provided for the exact wording of the answer choices for text entries. Be sure to complete the statement heading. If a net loss is incurred, enter that amount as a negative number using a minus sign. A colon (:) will automatically appear if it is required. 2. Prepare a retained earnings statement for the year ended December 31, 2016. Refer to the Accounts given in the Instructions and to the lists of Labels and Amount Descriptions provided for the exact wording of the answer choices for text entries. Be sure to complete the statement heading. Enter all amounts as positive numbers. The word “Less” or “Add” is not needed in the Retained Earnings Statement. 3. Prepare a balance sheet as of December 31, 2016. Refer to the Accounts given in the Instructions and to the lists of Labels and Amount Descriptions provided for the exact wording of the answer choices for text entries. Be sure to complete the statement heading. 4. What item appears on both the retained earnings statement and the balance sheet?

Issued bonds with a face value of $390,000 at 97.63 plus accrued interest from March 1.

Record the payment of semiannual bond interest for the bond issued on June 1.

Record the amortization of the discount for the bond issued on June 1.

Recorded an adjusting entry to accrue the interest and to amortize the discount.

Closed the Bond Interest Expense account to the Income Summary account.

Reversed the adjusting entry made on December 31, 2016.

Paid the semiannual bond interest and amortized the discount on the outstanding bonds.