Case Incident
Unfriendly Negotiations at Friendly Tires
The United Steelworkers of America (Canada) was certified in 2013 as the bargaining
agent for service and clerical employees of Friendly Tire Stores at two Hamilton, Ontario
locations. Since that time, the union and the employer were able to negotiate two
collective agreements (an agreement covering November 2013–December 2014 and
the current four-year contract, which expires on December 31, 2018). In late 2018, USW
Local 2419 served notice to bargain with the management of Friendly Tires. Business at
the two tire outlets had been good, but management was worried about planned
commercial developments that would introduce one Canadian Tire outlet and a new
Wal-Mart full-service retail store near its outlets over the next two years.
Two initial meetings were held between union and management representatives in late
November and early December. While progress was made on several matters including
vacation scheduling, health and safety inspections, and enhanced dental plan coverage,
the parties were deadlocked on hourly pay rates, COLA adjustments, and uniform
allowances.
At the December 10 bargaining session Omar Said, human resources manager at
Friendly Tires management, advised the union that the company was not able to make
any further concessions and any agreement had to be based upon the employer’s most
recent proposals on the outstanding issues including hourly pay rates, COLA, and
uniform allowance. The union indicated that it was not willing to agree to the employer’s
terms and doubted if there was any point to further talks. The union also stated that in
view of the employer’s position it would be conducting a strike vote. The employer sent
a letter to the union executive setting out the terms of its final proposals as outlined in
the December 10 meeting. In that correspondence, Mr. Said offered to meet with the
union to conduct further talks on the unresolved matters. The union held a meeting with
its members from both stores on December 18to update them on negotiations. The
union advised employees that talks had broken off following last week’s meeting and
provided them with a summary of the union and employer positions on unresolved
issues. The union indicated that the employer’s final offer included removal of the $20
per month uniform allowance to all garage/service job classifications. USW Local 2419
president Marion Stackhouse also noted the employer cost of the living proposal of 2.0
percent over the life of the next agreement was unacceptable. She went on to say that
any pay rate increases, according to the employer, would only be considered in the
second and subsequent years of a renewed agreement; and would likely not exceed
more than $1 per hour in any of the 12 job classifications in the bargaining unit. The
letter concluded by telling the members that the union executive would be seeking a

strike vote and approval from the regional business agent for a possible strike against
the company.
On December 21, the employer-provided all Friendly Tire employees a memo that set
out the employer’s current position in contract negotiations. The memo included the
following statement:

“We want all of our staff to know what the employer has proposed to your union on the remaining
bargaining issues. This is a summary of our offer to settle the contract, which was discussed with the
union on December 10 th . You can also obtain additional information about this offer from the union.
Management is asking for deletion of the current uniform allowance, a realistic cost of living
adjustment given recent COLA trends for municipalities in this area and limited pay classification
raises that would be “back-loaded” in the term of the new collective agreement. Friendly Tires is
facing increased market competition from recognized competitors in the next few years. We do value
your contributions and efforts of our customers. Friendly Tires does wish to reward your efforts and
reflects this in some improvements in the proposed collective agreement. However, management is
being prudent in its financial forecasts to avoid any future negative consequences.”
The letter closed by telling employees that company management remained willing to
re-start talks with the Local 2149 negotiating team at any time.
After the memo was issued, Ms. Stackhouse and members of the local executive
committee received a steady series of questions from their members. Employees asked
why the memo had come from the employer when the union had not provided a written
follow-up on the December 18 special union meeting. There were also questions about
the wage increase and uniform policy. On December 27, the union sent a letter to the
employer noting the following:

“ . . . . and in the opinion of the union executive the December 21st memo to our members is seen
as an attempt to directly negotiate terms and conditions of work with Friendly Tire employees and
not with the USW Local 2149 bargaining team. Based on feedback received by the union local
executive from our members since receipt of Mr. Said’s memo it is our sincere belief that the
Friendly Tire’s management has engaged in an unfair labour practice that has caused Local 2149

members to feel intimidated and threatened. We are in consultation with our business agent and
union legal counsel concerning filing a complaint with the Labour Relations Board. . . . ..”
Upon receiving an e-mail with this attached letter from Ms. Stackhouse, Mr. Said
contacted members of the company’s management group to gather at a hastily called
meeting for the next morning to discuss this matter.
Questions
1. In your opinion, is the management team for Friendly Tires only engaged in
“hardball tactics” as discussed in this chapter? Use an example to support your
viewpoint.
2. In reviewing the excerpt from the December21 management memo to union
members, do you interpret the content of the correspondence as likely to
cause employees to feel intimidated or threatened? Explain why or why not.
Do you believe an unfair labour practice complaint by the union would be
upheld before the Labour Relations Board? Share your views with other
members in the class.

During 2019 (its first year of operations) and 2020, Fieri Foods used the FIFO inventory costing method for both financial reporting and tax purposes. At the beginning of 2021, Fieri decided to change to the average method for both financial reporting and tax purposes.

Income components before income tax for 2019, 2020, and 2021 were as follows:

Dividends of $39 million were paid each year. Fieri’s fiscal year ends December 31.

Required:
1. Prepare the journal entry at the beginning of 2021 to record the change in accounting principle. (Ignore income taxes.)
2. Prepare the 2021–2020 comparative income statements.
3. & 4. Determine the balance in retained earnings at January 1, 2020 as Fieri reported using FIFO method and determine the adjustment of balance in retained earnings as on January 1, 2020 using average method instead of FIFO method.

For financial reporting, Clinton Poultry Farms has used the declining-balance method of depreciation for conveyor equipment acquired at the beginning of 2018 for $2,800,000. Its useful life was estimated to be six years with a $220,000 residual value. At the beginning of 2021, Clinton decides to change to the straight-line method. The effect of this change on depreciation for each year is as follows:

   
Required:
2. Prepare any 2021 journal entry related to the change. (Enter your answers in dollars. If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Sunland Company began operations on January 2, 2019. It employs 11 individuals who work 8-hour days and are paid hourly. Each employee earns 12 paid vacation days and 7 paid sick days annually. Vacation days may be taken after January 15 of the year following the year in which they are earned. Sick days may be taken as soon as they are earned; unused sick days accumulate. Additional information is as follows.

Sunland Company has chosen not to accrue paid sick leave until used, and has chosen to accrue vacation time at expected future rates of pay without discounting. The company used the following projected rates to accrue vacation time.

New attempt is in progress. Some of the new entries may impact the last attempt grading.Your answer is partially correct.

Prepare journal entries to record transactions related to compensated absences during 2019 and 2020. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually. Round answers to 0 decimal places, e.g. 5,125.)Compute the amounts of any liability for compensated absences that should be reported on the balance sheet at December 31, 2019 and 2020. (Round answers to 0 decimal places, e.g. 5,125.)

Steven Black and Christopher Green are seeking funds to support the programmed growth of their deluxe Hot Dog menu-restricted restaurant. First year (2019) Sales were $705,000. Sales are projected to increase to $1,320,000 in 2020. The business operating financial model indicates that each hot dog “meal” will sell for $3; and the variable cost of producing the “meal” (CGS) will be $1.50. The company needed $400,000 in assets to support its 2019 operations and expects to need $100,000 MORE (a total of $ 500,000) to support projected 2020 Sales.

      2019                      2020 (projected)

            Sales                                                   $ 705,000 _________

            COGS (Meals x CGS)                              352,500                    __________    

            Gross Profit                                             352,500 ________

            Fixed Operating Costs (ignore taxes)        200,000                    __________

            Net Profit                                           $152,500                     $ ______

Prepare (fill in) the 2020 projected Income Statement above.

Calculate the company’s Return on Assets (ROA), its asset intensity (asset turnover ratio), and its Gross Profit and Net Profit Ratios for each year

                                                                        2019                                           2020

Return on Assets __________ ____________

Asset Turnover ____________ ________________

Gross Profit Margin _______________ _________________________   

Net Profit Margin ______________ _____________________

Given the 2019 calculations above, and the 2020 projections, use the VOS screening model standards below for profitability and pricing to evaluate the attractiveness of an investment in Steven and Christopher’s business.

                                    High                            Average                                    Low

Gross Margin                >50%                           10%--50%                                 <20%

AT margin                     >20%                           10%--20%                                 <10%

Asset Intensity         3.0+ Turnover                    1.0—3.0 Turnover                    <1.0 Turnover

Return on Assets           >25%                           10%--25%                                 <10%

COMMENTS/EVALUATION (You should include comments about what the company could do to make the investment more attractive to investors)

Margins:

Use of Assets:

How would your EVALUATION change if the 2019 Asset level will support Annual Sales growth of 50% per year in 2020? (That means the company had excess capacity in 2019 and more assets would not be required to support shortterm projected growth.)

PLEASE HELP ME. THANK YOU.

Metlock Company has not yet prepared a statement of cash flows for the 2020 fiscal year. Comparative balance sheets as of December 31, 2019 and 2020, and a statement of income and retained earnings for the year ended December 31, 2020, are presented as follows.

Lala Corporation produces Greek yogurts that pass through three departments – Fermentation Department (Department I), Mixing Department (Department II), and Packaging Department (Department III). The production process in the Mixing Department requires the input of two main types of ingredients. One is the basic ingredients and the other one is the special ingredients. 100% of the basic ingredients are added at the beginning of the process. For the special ingredients, they are added gradually. 30% of these special ingredients are added at the beginning of the process, 50% are added midway through the process and the remainder of the special ingredients are added at the three-quarter way through the process. The following information was available concerning the operation of the Mixing Department for the month of October 2020. Beginning work-in process (WIP) (1 October 2020): 2,500 units were 40% completed with respect to conversion costs (CC). Costs pertaining to the beginning WIP as at 1 October 2020 were: Department I $10,000, Basic Ingredients $30,000, Special Ingredients $15,000 and CC $10,000. Units started in the month were 15,000 units. Costs added to production during the month of October 2020 were: Department I $60,000, Basic Ingredients $188,750, Special Ingredients $203,400, and CC $154,500. Ending WIP as at 31 October 2020 were 3,500 units and 70% completed with respect to CC. Required:

a) Use of the weighted average (WA) process costing method, calculate 1) the units completed in October 2020. 2) the equivalent units for the Special Ingredients. 3) the total costs per equivalent unit. 4) the total costs of completed products transferred to the Packaging Department.

b) Use the first-in-first-out (FIFO) process costing method, calculate 5) the units completed in October 2020. 6) the equivalent units for the Special Ingredients. 7) the total costs per equivalent unit. viii) the total costs of completed products transferred to the Packaging Department.

Question 2: Porter, a public limited company, is the parent of a listed group of companies which have a year end of 30 April 2020. Porter’s functional currency is the pound (£) and presents its individual and consolidated financial statements in £. The statements of financial position for two entities as at 30 April 2020 are presented below:

Additional information

1. Porter acquired 75% of Belobe on 1 May 2019 for £9,150,000 when the retained reserves of Belobe were 3,155,000 Crowns. The functional currency of Belobe is Crowns.

2. The group policy is to value non-controlling interest at the proportionate share of the fair value of the net assets at acquisition.

3. Belobe made a profit of 3,575,000 Crowns for the year ended 30 April 2020.

4. The exchange rates between the £ and Crowns are as follows:

1 May 2019 £1: 0.69 Crowns

30 April 2020 £1: 0.62 Crowns

Average rate for the year ended 30 April 2020: £1: 0.64 Crowns

YOU ARE REQUIRED TO:

(a) Prepare the consolidated statement of financial position for the Porter group as at 30 April 2020.

(b) Prepare a reconciliation of the consolidated retained reserves figure showing the exchange gains and losses.

(c) Explain your calculation of goodwill and the treatment of exchange differences on goodwill for the year ended 30 April 2020. Your answer should refer to the relevant International Financial Reporting Standards (IAS/IFRS).(maximum word count 200 words) TOTAL 50 MARKS

Accounting Cycle Review 11-01 a,b, c1-c3

Morgan Company’s balance sheet at December 31, 2019, is presented below.

During January 2020, the following transactions occurred. (Morgan Company uses the perpetual inventory system.)

Adjustment data:

A)Prepare journal entries for the transactions listed above and the adjusting entries.

B)Prepare an adjusted trial balance at January 31, 2020.

C)Prepare an income statement.

D)Prepare an owner’s equity statement for the month ending January 31, 2020.

E)Prepare a classified balance sheet as of January 31, 2020

On 11 August 2020, Vanya Ho entered into a contract with Diego Toh to renovate her school, The Umbrella Learning Centre and to set up the internet system for the school’s online lessons starting in October. They agreed to the total sum of $100,000 with a 10% deposit of $10,000 to be paid on the signing of the contract. $20,0000 was to be paid upon the design being approved by Vanya Ho. The balance of $70,000 was to be paid on the completion of the renovation works. The contract provided that Diego Toh was to complete the renovation works and handover the school to Vanya Ho not later than 20 September 2020.

The design was approved by Vanya Ho on 18 August 2020. Diego Toh proceeded with the renovation which was completed on 19 September 2020. Vanya inspected the renovation work on 20 September 2020. She was not pleased with the internet system when she tested the wifi connection. The wifi signals were weak and created issues for running the online lessons. Diego Toh explained that his electricians have gone back to Malaysia and would only be back early 2021. He insisted that the renovation works including the setting up of the internet system were in accordance with the design as approved by Vanya.

On 21 September, Vanya Ho called an independent electrician, Klaus Soh, to inspect and advise on internet system. Klaus Soh explained that the internet system was poorly set-up. He quoted $2,000 to rectify the defects which could be completed by 25 September 2020.

On 22 September, Diego Toh contacted Vanya Ho and demanded payment of the balance amount of $70,000. Vanya Ho refused to pay the balance and insisted that Diego Toh rectify the internet system by 26 September 2020.

Advise Diego Toh on the following:

Diego Toh would like to claim the full amount of $70,000. Discuss the LEGAL PRINCIPLES concerning the performance of the contract, APPLY the legal principles, and CONCLUDE on whether Diego Toh could discharge the contract with Vanya Ho and claim the full amount of $70,000.